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Because the land
is your life.
Incitec Pivot Limited
ABN 42 004 080 264
70 Southbank Boulevard,
Southbank Victoria 3006,
Australia
Postal address
Incitec Pivot Limited
GPO Box 1322
Melbourne Victoria 3001,
Australia
T. + 61 3 8695 4400
F. + 61 3 8695 4419
www.incitecpivot.com.au
Annual Report 2005
In 2005, Incitec Pivot Limited
launched its new market
position, ‘Because the land
is your life’.
The new positioning reflects
the fundamental connection
between primary producers
and the land.
Incitec Pivot shares a similar
connection to the land, as
a major supplier to rural
producers through its extensive
Agent and Dealer network.
Shareholder Information
Annual General Meeting
2.00 pm Monday 23 January 2006
at The Arts Centre, 100 St Kilda Road,
Melbourne Victoria 3000, Australia,
in the ANZ Pavilion
Stock Exchange Listing
Incitec Pivot’s shares are listed on the
Australian Stock Exchange (ASX) and
are traded under the code IPL
Share Registry
Link Market Services
Level 8, 580 George Street,
Sydney New South Wales 2000,
Australia
Locked Bag A14
Sydney South New South Wales 1235
Telephone: 1300 303 780
(for callers within Australia)
International: +61 2 8280 7111
General Facsimile: +61 2 9287 0303
Proxy Facsimile: +61 2 9287 0309
Email: registrars@linkmarketservices.com.au
Website: www.linkmarketservices.com.au
Auditor
KPMG
147 Collins Street,
Melbourne Victoria 3000, Australia
Incitec Pivot Limited
Registered address and head office:
70 Southbank Boulevard,
Southbank Victoria 3006,
Australia
GPO Box 1322
Melbourne Victoria 3001,
Australia
Telephone: +61 3 8695 4400
Facsimile: +61 3 8695 4419
www.incitecpivot.com.au
SuPerfect and Easy Liquids are registered trade marks of Incitec Pivot Limited. Green Urea, Cal Gran and FertTerms Plus are trade
marks of Incitec Pivot Limited. BIG N, Granulock, GranAm and Liquifert are registered trade marks of Incitec Fertilizers Limited.
Nutrient Advantage is a trade mark of Incitec Fertilizers Limited.
As Australia’s leading and largest
supplier, the company is ideally
placed to take advantage of the
growing fertiliser market.
Julian Segal Managing Director and CEO
Contents
Chairman’s Report
Managing Director’s Report
2
3
Board of Directors and Executive Team 6
Review of Performance
Safety, Health & Environment
Financial Report
8
11
14
On behalf of the Board, I am pleased
to report on Incitec Pivot’s second
full financial year, which ended on
30 September 2005.
With workplace safety, the business achieved a recordable case
rate of 0.99 per cent (recordable injuries per 200,000 hours
worked), a 10 per cent improvement on the 2004 rate of 1.09.
This world-class performance reflects sound management,
operational excellence and, crucially, our continuing
commitment to workplace safety by employees and contractors.
The year also saw a substantial reduction in non-compliance
with environmental licence limits, as measured in prescribed
licence tests, reflecting Incitec Pivot’s ongoing endeavours to
improve in this area also.
Executive changes
With the restructure, which led to changes across the company,
it is appropriate for me to recognise the efforts, and in some
cases sacrifices, of all those who have played a part in bringing
about change or have been impacted by it.
Our foundation Managing Director and CEO, Greg Witcombe,
resigned on 3 June 2005 to take up a senior executive position
at Orica. I thank Greg for successfully guiding Incitec Pivot
through its first two years.
His position was taken by Julian Segal, who led the company
through its recent restructure and will head up the company
during the next phase of its development.
On 18 July 2005, as part of the restructure, we announced
the smaller board, for which four non-executive Directors –
Leo Delahunty, Barbara Gibson, Graeme Liebelt and
David Trebeck – resigned. I thank them for their dedication
and contribution to the company.
At that time James Fazzino, Incitec Pivot’s Chief Financial
Officer, joined the Board as Finance Director, and John
Chesterfield became a non-executive Director. I congratulate
both James and John on their appointments.
Finally, I would like to express the Board’s appreciation to all
employees who contributed to the company during 2005.
Our objective is to continue to make Incitec Pivot an employer
of choice so that we can draw on the best available resources
to reinvigorate our enterprise for the benefit of all stakeholders.
John C Watson, AM
Chairman
Chairman’s Report
The year saw the successful completion of the merger and
the bedding in of synergy benefits in the order of $50 million
annually. It was also marked by continuing drought in many
areas and significant changes in the fertiliser market, factors
which led to a disappointing financial result.
There is no doubt, however, that the impact of the seasonal
conditions was mitigated by the wider exposure to market
sectors flowing from the merger. This helped the business
maintain reasonable sales volumes in spite of severe drought
in many areas.
Net profit after tax including significant items after tax of $33.4
million – largely as a result of business restructuring costs - was
unsatisfactory at $4.2 million, compared with $75 million in 2004.
However, the balance sheet at year-end was sound, with net
debt at $9.2 million indicating modest gearing at 1.6 per cent.
This provides the business with a strong base on which to
rebuild earnings and shareholder returns in 2006.
Directors were able to declare fully franked dividends
totalling 71 cents per share. This is in line with the Board’s
policy of distributing surplus funds and franking credits to
shareholders when available and is a strong indication of
Directors’ confidence in the strategy adopted to restore
Incitec Pivot’s profitability.
Company-wide restructure
In the second half of the year, the business was re-engineered
to reduce costs and to improve the company’s ability to manage
changes in the market place.
The restructure was company-wide – from reducing the number
of Directors and the number of senior executives, consolidating
the manufacturing and logistics functions, and reducing the total
workforce by more than 100 positions.
Together, these changes have made Incitec Pivot leaner and
more flexible. Continuous refinement of the business model
will be required to enable the company to manage – and take
advantage of – further dynamic changes anticipated in the
domestic and international fertiliser market.
As well as lowering our fixed cost base, we will also need to
continuously improve our systems and processes to improve
service and create added value for customers and shareholders.
While trading conditions did not permit a satisfactory financial
outcome in 2005, it is pleasing to note that improvements were
recorded in two important areas – safety and the environment.
In every transaction, our focus is on
securing value – not just volume – for
our customers and business partners
as well as for the company.
Multi-channel strategy
On the distribution side of the business, we have adopted a
multi-channel route to market that encompasses selling through
agents, independent dealers and, where it makes commercial
sense, through corporate dealers.
As our channel partners are an extension of our organisation
into the market, we will seek out the channel that supports the
lowest cost distribution path to farmers for the level of product
quality and availability they require. We will also sell direct to
farmers when our channel partners cannot alone deliver the
most effective service to farmers.
In every transaction, our focus is on securing value – not just
volume – for our customers and business partners as well as for
the company.
My relatively short time at Incitec Pivot has convinced me of the
underlying strength of the business, even in a difficult year.
These strengths include its geographical spread across eastern
and southern Australia, its well-established manufacturing base
and distribution network, its strong balance sheet and the
resilience and enterprise of its employees.
All this, combined with a cautiously positive outlook for
seasonal conditions in 2006, provides Incitec Pivot with a sound
foundation on which to build renewed earnings momentum.
Julian Segal
Managing Director and CEO
Managing Director’s Report
In many ways, 2005 has been a watershed year for Incitec
Pivot. Having successfully completed the merger and captured
the resulting synergies, the business was impacted by two
significant external forces – continuing drought and a changed
competitive landscape.
For the year ended 30 September 2005, sales revenue dropped
five per cent to $1,074 million on an eight per cent reduction
in total sales volumes to 2.933 million tonnes. This resulted
in net profit after tax before significant items of $37.6 million,
compared with $80.9 million in 2004.
This is without doubt a disappointing result and it raises the
obvious question: What are you doing about it?
The answer is that management took decisive action when
the impact of the trading situation became clear as the year
progressed. This action was in the form of a major company-
wide restructure to reduce our fixed cost base substantially.
Streamlined processes
Incitec Pivot’s strategy is to build on our position as the supplier
with the lowest cost base in the fertiliser industry, and we are
well on the way to setting this benchmark.
Having the most efficient structure will give us the flexibility
to be competitive on price, while enabling us to deliver a
sustainable level of service and quality products to farmers.
By streamlining our systems and processes, we will be both
lean and responsive.
The weather and the actions of competitors may largely be
beyond the company’s control, but we are tackling costs head-
on. By year-end we were nearly half way to achieving our target
of $30 million in cost savings annually in 2007.
We are doing this through a combination of initiatives, including
consolidating divisions, reducing the size of our workforce
including senior executives, investing in smarter processes
and improving the efficiency of our manufacturing and
logistics operations.
Even when we reach the $30 million savings target we won’t
be happy, because there’s a further element to our strategy.
We express this additional goal by referring to creating an
“unassailable” lowest cost base. By this we mean we will
permanently build-in the efficiency advantages that will
transform the company.
Incitec Pivot Limited is a leading agribusiness
involved in the manufacture and supply of
fertiliser to farmers in Australia’s eastern states.
Who we are
How we do business
Incitec Pivot supports farmers in all of eastern Australia’s major
agricultural industries, from cane growers in north Queensland,
to cotton growers in New South Wales, to dairy farmers in
Tasmania and grain growers in South Australia.
To do this, the company has extensive manufacturing and
distribution facilities in strategic locations from Cairns in the
north to Port Lincoln on the South Australian west coast.
These facilities support our Agent and Dealer network which
comprises over 800 outlets located through eastern Australia.
Contact details of local Agents and Dealers may be found
on the internet at Incitec Pivot’s web address,
www.incitecpivot.com.au.
Incitec Pivot Limited is a leading agribusiness involved in the
manufacture and supply of fertiliser to farmers in Australia’s
eastern states.
Fertiliser plays an essential role in enabling Australian farmers
and producers to achieve sustainable and increased economic
performance.
Supplying more than 50 per cent of Australia’s agricultural plant
nutrient needs, the scale of Incitec Pivot’s operations underpins
its position as a sustainable low cost supplier. The company has
five manufacturing plants, import facilities in strategic locations
and a distribution network stretching from far north Queensland
to Tasmania and South Australia, giving it unequalled capacity
to meet the market’s needs.
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 highly
regarded agronomic services. These services ensure farmers can
identify the most cost-effective nutrient solutions to optimise
their productivity.
Combined with an understanding of customer needs, these
advantages enable the company to supply about three
million tonnes of fertiliser a year, generating sales in excess
of $1 billion annually.
Incitec Pivot was created by the merger of Incitec Fertilizers
Limited and Pivot Limited, in June 2003. However, its
component enterprises have roots going back to the early part
of last century when Australian superphosphate production
was pioneered.
Key:
Major manufacturing
and distribution sites
Distribution sites
tpa: tonnes per annum
(cid:56)(cid:86)(cid:94)(cid:103)(cid:99)(cid:104)
(cid:73)(cid:100)(cid:108)(cid:99)(cid:104)(cid:107)(cid:94)(cid:97)(cid:97)(cid:90)
(cid:61)(cid:100)(cid:98)(cid:90)(cid:21)(cid:61)(cid:94)(cid:97)(cid:97)
(cid:66)(cid:86)(cid:88)(cid:96)(cid:86)(cid:110)
(cid:55)(cid:106)(cid:99)(cid:89)(cid:86)(cid:87)(cid:90)(cid:103)(cid:92)
(cid:55)(cid:71)(cid:62)(cid:72)(cid:55)(cid:54)(cid:67)(cid:58)
(cid:57)(cid:86)(cid:97)(cid:87)(cid:110)
(cid:55)(cid:103)(cid:100)(cid:100)(cid:96)(cid:104)(cid:105)(cid:90)(cid:86)(cid:89)
(cid:60)(cid:100)(cid:100)(cid:99)(cid:89)(cid:94)(cid:108)(cid:94)(cid:99)(cid:89)(cid:94)
(cid:66)(cid:100)(cid:103)(cid:90)(cid:90)
(cid:57)(cid:106)(cid:98)(cid:86)(cid:103)(cid:90)(cid:104)(cid:102)
(cid:70)(cid:106)(cid:94)(cid:103)(cid:94)(cid:99)(cid:89)(cid:94)
(cid:59)(cid:100)(cid:103)(cid:87)(cid:90)(cid:104)
(cid:69)(cid:86)(cid:103)(cid:96)(cid:90)(cid:104)
(cid:67)(cid:58)(cid:76)(cid:56)(cid:54)(cid:72)(cid:73)(cid:65)(cid:58)
(cid:76)(cid:86)(cid:97)(cid:97)(cid:86)(cid:103)(cid:100)(cid:100)
(cid:69)(cid:100)(cid:103)(cid:105)(cid:21)(cid:65)(cid:94)(cid:99)(cid:88)(cid:100)(cid:97)(cid:99)
(cid:66)(cid:86)(cid:99)(cid:100)(cid:100)(cid:103)(cid:86)
(cid:69)(cid:100)(cid:103)(cid:105)(cid:21)(cid:69)(cid:94)(cid:103)(cid:94)(cid:90)
(cid:69)(cid:100)(cid:103)(cid:105)(cid:21)(cid:54)(cid:89)(cid:90)(cid:97)(cid:86)(cid:94)(cid:89)(cid:90)
(cid:64)(cid:90)(cid:94)(cid:105)(cid:93)
(cid:67)(cid:86)(cid:103)(cid:86)(cid:88)(cid:100)(cid:100)(cid:103)(cid:105)(cid:90)
(cid:60)(cid:103)(cid:94)(cid:91)(cid:91)(cid:94)(cid:105)(cid:93)
(cid:63)(cid:106)(cid:99)(cid:90)(cid:90)
(cid:72)(cid:108)(cid:86)(cid:99)(cid:21)(cid:61)(cid:94)(cid:97)(cid:97)
(cid:76)(cid:86)(cid:103)(cid:103)(cid:86)(cid:88)(cid:96)(cid:99)(cid:86)(cid:87)(cid:90)(cid:86)(cid:97)
(cid:58)(cid:88)(cid:93)(cid:106)(cid:88)(cid:86)
(cid:55)(cid:86)(cid:97)(cid:97)(cid:86)(cid:103)(cid:86)(cid:105)
(cid:72)(cid:93)(cid:90)(cid:101)(cid:101)(cid:86)(cid:103)(cid:105)(cid:100)(cid:99)
(cid:60)(cid:58)(cid:58)(cid:65)(cid:68)(cid:67)(cid:60)
(cid:60)(cid:100)(cid:106)(cid:97)(cid:87)(cid:106)(cid:103)(cid:99)
(cid:78)(cid:86)(cid:104)(cid:104)
(cid:76)(cid:100)(cid:89)(cid:100)(cid:99)(cid:92)(cid:86)
(cid:66)(cid:86)(cid:91)(cid:91)(cid:103)(cid:86)
Gibson Island, Brisbane
275,000 tpa
Urea
290,000 tpa
Ammonia
Ammonium sulphate 200,000 tpa
Cockle Creek, NSW
Superphosphate
250,000 tpa
Kooragang Island, NSW
Granulated phosphates 60,000 tpa
(cid:69)(cid:68)(cid:71)(cid:73)(cid:65)(cid:54)(cid:67)(cid:57)
(cid:73)(cid:94)(cid:98)(cid:87)(cid:100)(cid:100)(cid:99)
(cid:78)(cid:86)(cid:103)(cid:103)(cid:86)(cid:98)
(cid:55)(cid:106)(cid:91)(cid:91)(cid:86)(cid:97)(cid:100)
Geelong, Victoria
Superphosphate
450,000 tpa
(cid:56)(cid:94)(cid:103)(cid:88)(cid:106)(cid:97)(cid:86)(cid:103)(cid:21)(cid:61)(cid:90)(cid:86)(cid:89)
(cid:57)(cid:90)(cid:107)(cid:100)(cid:99)(cid:101)(cid:100)(cid:103)(cid:105)
(cid:61)(cid:100)(cid:108)(cid:105)(cid:93)
(cid:57)(cid:90)(cid:97)(cid:100)(cid:103)(cid:86)(cid:94)(cid:99)(cid:90)
Portland, Victoria
Superphosphate
250,000 tpa
(cid:72)(cid:88)(cid:100)(cid:105)(cid:105)(cid:104)(cid:89)(cid:86)(cid:97)(cid:90)
(cid:65)(cid:100)(cid:99)(cid:92)(cid:91)(cid:100)(cid:103)(cid:89)
Board of
Directors
Brian Healey FAICD, FAIM
Non-Executive Director,
Deputy Chairman
Julian Segal BSc, MBA
Managing Director and
Chief Executive Officer
Brian is Chairman of Centro
Properties Group and Centro
Retail Ltd and a Director of
Foster’s 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.
Julian was appointed as
Managing Director and CEO
of Incitec Pivot Limited on 3
June 2005. Immediately prior
to joining Incitec Pivot, he was
Manager of Strategic Market
Planning for the Orica Group.
He joined Orica in 1999 as
General Manager, Australia/Asia
Mining Services, and in 2001
moved to the United States to
take up the role of Senior Vice
President – Marketing for Orica
Mining Services globally.
John Watson AM, MAICD
Non-Executive Chairman,
Chairman of Remuneration and
Appointments Committee
Appointed Chairman of
Incitec Pivot Limited in 2003,
having been a Director of
the Company from 1997 and
Chairman from 1998. John is
Chairman of Primesafe and
of the Co-operative Research
Centre for Innovative Dairy
Products, a Director of Tassal
Group Limited and Rural Press
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. He is also 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.
Executive
Team
Julian Segal BSc, MBA
Managing Director and
Chief Executive Officer
James Fazzino BEc(Hons), CPA
Finance Director and Chief
Financial Officer
Anthony Larkin FCPA, FAICD
Non-Executive Director,
Chairman of Audit and Risk
Management Committee
Allan McCallum
Dip. Ag Science, MAICD
Non-Executive Director, Chairman
of Governance Committee
James Fazzino BEc(Hons), CPA
Finance Director and Chief
Financial Officer
John Chesterfield BBus, MBA
Non-Executive Director
A Director of the Company
since 1997, Allan is a farmer
in northern Victoria. He is
also a Director of Medical
Developments International
Ltd and Chairman of Tassal
Group Limited. He is a
former director of Graincorp
Limited and Grain Growers
Association Limited.
Orica Limited’s Chief Risk Officer,
John was appointed to the
Incitec Pivot Board as a non-
executive Director on 18 July
2005. John has been with Orica
for 17 years and was General
Manager of Chemnet Australia,
its chemicals trading business,
prior to becoming Chief Risk
Officer in 2004.
James was appointed as Chief
Financial Officer of Incitec
Pivot in May 2003 and was
appointed to the Incitec Pivot
Board as Finance Director on
18 July 2005. Before joining
Incitec Pivot, he 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.
Until January 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 Foster’s Brewing Group as
Senior Vice President Finance
and Investor Relations. He is a
Commissioner of the Victorian
Essential Services Commission,
Director of Corporate Express
Australia Limited and Zinifex
Limited, and Chairman of
Ausmelt Limited. He was
Chairman of Incitec Ltd from
July 2000 to April 2003.
Kerry Gleeson LLB(Hons)
General Counsel and
Company Secretary
Abigail Cleland
BCom, BA, MBA
General Manager Strategy and
Business Development
Bernard Walsh
BE(Mech), MIEAust CPEng
General Manager Supply Chain
Daryl Roe BSc
General Manager Commercial
Kerry is a practising solicitor
having been admitted to practice
in England and Wales in 1991,
and in Victoria in 2001. 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,
Halliwell Landau.
Abi was appointed to her
current position in June 2005,
having previously been General
Manager Corporate Strategy at
Orica Limited. Prior to this, Abi
held a variety of commercial and
strategic roles in industrial and
resource companies globally,
her most recent being with
Amcor Ltd as General Manager
Business Development.
Bernard has extensive
manufacturing experience in
petrochemicals, chemicals
and mining services. Bernard
joined Incitec Pivot Limited from
Orica Limited where he held a
variety of roles since 1987, the
most recent being as General
Manager of Initiating Explosives
Systems (IES) Pty Ltd. Bernard
joined the Incitec Pivot Executive
Team in April 2005.
Daryl joined Incitec Pivot Limited
in January 2004 from Orica
Limited where he held various
business management roles.
Daryl was General Manager
Planning before moving to his
current position on 1 June 2005.
00 was a watershed year for Incitec Pivot. Poor seasonal
conditions in key markets and strong competition negatively
impacted earnings. Management responded by embarking
on a major restructuring program to drive a step change in
the business cost base, leaving Incitec Pivot well placed for
the future.
Review of Performance
Key Financials
External Sales Revenue
• Net Profit After Tax (NPAT) excluding significant items for the
year ended 30 September 2005 was down 54% to $37.6M
(2004: $80.9M).
• NPAT including significant items was down by 94% to $4.2M
(2004: $75M).
• 2005 significant items of negative $33.4M after tax, primarily
business restructuring costs.
• Cash returned to shareholders with a fully franked special
dividend declared of 50 cents per share (cps). Total 2005
dividends (including the November 2005 special dividend)
of 71 cps (2004: 129 cps).
• Financial discipline was maintained despite tough seasonal
conditions. 2005 closing net debt was $9.2M (2004: net cash
$20.8M), providing a strong base for rebuilding earnings
in 2006.
Key Business Outcomes
• A major business restructure to reduce costs was announced
in June 2005. The program aims to achieve a 15%
improvement in fixed cost efficiency in the business – equal to
$30M before tax. The 2005 exit rate of savings was $14M.
• East coast market leadership was maintained despite strong
competition.
Outlook – 00
• Total sales revenue was down 5% to $1,074M (2004:
$1,136M) reflecting an 8% decline in sales volume, offset by
higher global fertiliser prices combined with the continued
strength in the global shipping market. Both impacts were
partially dampened by the strength of the Australian dollar.
• 2005 fertiliser sales volume was down 8% to 2.6M tonnes
(2004: 2.9M tonnes), comprised of 2% due to market factors
and 6% due to competition.
• The 6% decline in sales volume due to competition resulted
from increased competition in fertiliser wholesaling with sales
to Elders and Landmark (combined) down by 42% in 2005 to
approximately 500kt (2004: 880kt).
• Sales to new independent channel partners and new direct
farmer accounts were 183kt (exit rate of 400kt pa).
Sales Summary
Year Ended September
2005
2004
Change
000’s
Fertiliser tonnes
Total tonnes
A$M
2,656
2,895
2,933
3,186
Fertiliser sales revenue
1,005.0 1,076.2
Total sales revenue
1,073.9 1,135.6
(8%)
(8%)
(7%)
(5%)
(5%)
47%
• Renewed earnings momentum from the business restructuring
program.
Other
• Above trend global fertiliser prices underpinning
manufacturing profitability.
Average exchange rate ($A/US$)*
75.2
Global Urea price FOB – US$/t*
236
71.3
161
• Early seasonal conditions look promising with a good summer
*lagged by 3 months
crop plant, an improved moisture profile across southern
Australia and minimal nutrient carryover expected into the
2006 season.
Earnings summary
• Net Profit After Tax (NPAT) excluding significant items of $37.6M
was down by $43.3M (2004: $80.9M). NPAT including significant
items of $4.2M was down $70.8M (2004: $75M).
• Earnings before interest and tax, excluding significant items (EBIT)
decreased by $54.4M to $67.5M (2004: $121.9M).
• Positive factors were:
– $7.4M: improved net nitrogen manufacturing margins from
higher global urea prices ($18.1M selling price benefit offset
by $10.7M in increased gas costs).
– $8.4M: reduced rebates paid to Elders (This is subject to a legal
challenge by Elders in the South Australian Supreme Court.
The case was heard in April 2005 and judgment is awaited.)
– $4.9M: reduced depreciation arising from the extension to
2017 of the asset lives of the Gibson Island plant and the
BIG N fertiliser facilities as a result of new gas contracts.
• Negative factors were:
– $26.6M: lower sales volume/change in sales mix.
– $20.9M: impact of strong competition on fertiliser pricing.
This prevented higher import prices being passed on to
customers – particularly in traded urea.
– $17.2M: impact on reverting to a less favourable hedge position
(2005 hedges were at 68 US cents, 2004 hedges were at
58 US cents).
– $10.5M: increased phosphate rock costs with high global
shipping rates compounded by limited product availability
from key suppliers.
• Net interest expense increased by $4M primarily reflecting higher
stock holdings arising from the delayed winter crop and higher
global fertiliser prices.
• 2005 tax expense was $20.5M compared with $35.6M in 2004,
reflecting lower earnings.
Earnings summary
A$million
Year Ended September
2005
2004
Change
EBIT
Net interest
Tax expense
67.5
(9.4)
(20.5)
121.9
(5.4)
(35.6)
(45%)
(74%)
42%
NPAT excluding significant items 37.6
80.9
(54%)
Significant items after tax
(33.4)
NPAT including significant items
4.2
(5.8)
75.0
>100%
(94%)
EBIT/sales
RONA
Significant items
6.3%
10.8%
10.7%
18.6%
2005 significant items after tax were $33.4M comprised of business
restructuring costs of $38.5M offset by an unrealised
mark-to-market gain of $5.1M after tax in relation to Incitec
Pivot’s investment in Queensland Gas Company (QGC).
Dividend
No final dividend will be paid for the 2005 financial year
(2004:100cps).
In November 2005, the Board declared a fully franked special
dividend of 50 cps which will be paid to shareholders on
9 January 2006. This distribution is consistent with the Board’s policy
of distributing surplus funds and franking credits to shareholders
when available.
Total dividends declared in 2005 including the November 2005
special dividend amounted to 71 cps (2004: 90 cps normal, 39 cps
special) representing a yield of 4.5% based on the closing share
price of $15.82 on 30 September 2005.
Dividend
Cents per share
Final Dividend
– normal
– special
– sub-total
– % franked
November Special Dividend
– cps
– % franked
Total Dividend(a)
– normal
– special
– sub-total
– % franked
Yield at:
Year Ended September
2005
2004
Change
–
–
–
–
70
30
100
100%
50
–
100%
100%
15
56
71
90
39
129
(83%)
44%
(45%)
100%
100%
– opening share price on 1 Oct
– closing share price on 30 Sept
3.8%
4.5%
8.2%
6.9%
(a) including November 2005 Special Dividend
Financial position - balance sheet
Notwithstanding difficult trading conditions, Incitec Pivot
maintained financial discipline in the business, which is reflected
in the robust closing balance sheet.
Trade Working Capital (TWC) at $141.1M was $29.3M below 2004.
Careful management of debtors and creditors more than offset the
impact of higher closing stocks. Average TWC to sales was 24.3%
reflecting a higher average inventory carry during the year because
of the abnormal winter cropping season.
Net debt was $9.2M at 30 September 2005 (2004: net cash
$20.8M). This equates to modest gearing of 1.6% providing the
business with a strong base on which to rebuild earnings and
shareholder returns in 2006.
Financial Position
A$million
Trade working capital (TWC)
Net property, plant & equipment
Goodwill
Net other assets
Net assets
Net debt/(cash)
Equity
Total capitalisation
Gearing
Average TWC to sales
Sep 2005
Sep 2004
141.1
283.9
174.0
(24.6)
574.4
9.2
565.2
574.4
1.6%
24.3%
170.4
296.1
183.8
(39.6)
610.7
(20.8)
631.5
610.7
NA
19.0%
Review of Performance – Continued
Cash flow
Strategy
Net operating cash flows were an inflow of $69.6M, down
$71.9M on 2004 (2004: $141.5M). Major factors were:
• EBITDA of $107.8M (2004: $167.2M) down $59.4M reflecting
lower earnings.
Incitec Pivot’s short-term focus is to rebuild earnings to deliver
competitive returns to shareholders. The initial milestone is
to exit the 2007 financial year at an 18% RONA (Return on
Net Assets).
• Tax paid of $23.6M up by $8.2M (2004: $15.4M) reflecting
the final tax payment for the 2004 year.
• Business restructuring project expenditure of $16M
(merger costs in 2004 were $16.6M).
Net investing cash flows were an outflow of $29.1M
(2004: $29.4M). Major items were:
• A reduction in sustenance capital spending by $4.6M
to $26.2M – around the level of depreciation.
• An investment of $5.1M in Queensland Gas Company
underpinning competitive gas supply to the Gibson
Island site.
Financing cash flows include:
• $70.5M of cash returned to shareholders as fully franked
dividends (2004: $16.9M).
• A movement in net debt of $30M, including an $80.5M
reduction in cash on hand and a $50.5M reduction in short-
term borrowings.
“Unassailable lowest cost base”
The overriding principle driving all activity in the business is to
enhance Incitec Pivot’s competitive position of having the lowest
fertiliser cost base delivered to farm. For 2006, execution is
focused on cost and capital:
Cost
• Delivering at least $20M of savings from the business
restructure program in the 2006 year (exit 2006 and 2007
at a rate of $25M and $30M respectively in savings).
• Savings arise mainly on restructuring manufacturing, logistics
and administrative functions while leaving customer-facing
functions largely unchanged.
• Cost savings will result in a further step change in Incitec
Pivot’s cost position following the $50.6M merger synergies
recorded in 2004.
Capital
• Restricting sustenance capital spend to depreciation and
improving working capital management.
Year Ended September
2005
2004 Change
• Optimising assets utilisation (in particular, manufacturing
reliability and the efficiency of major distribution centres)
rather than investing in new assets.
Cash Flow Items
A$million
Net operating cash flows
EBITDA
Net interest paid
Net income tax paid
107.8
(9.4)
(23.6)
Trade working capital movement
29.3
Merger costs (inc. Employee Benefits)
(1.6)
Business restructuring costs
Other
Total
Net investing cash flows
Proceeds from asset sales
Capital spending
QGC Investment
Total
Net financing cash flows
(16.0)
(16.9)
69.6
2.2
(26.2)
(5.1)
(29.1)
167.2
(59.4)
(5.6)
(15.4)
25.4
(16.6)
(3.8)
(8.2)
3.9
15.0
0.0
(16.0)
(13.5)
(3.4)
141.5
(71.9)
1.4
(30.8)
0.0
(29.4)
0.8
4.6
(5.1)
0.3
• Completing the scheduled 2007 Gibson Island shutdown
on budget (total budget $43M, $20M 2006, $23M 2007).
“Multi channel route to market with a focus
on Agents and Dealers”
Incitec Pivot’s principal route to market remains the Agent
and Dealer network (both independent and corporate), which
provides the most efficient services and last-mile logistics
to farmers.
The business is committed to maintaining and building on its
relationship with loyal Agents and Dealers while focussing on:
• Ensuring equitable commercial arrangements are in place,
which recognise the value and cost to serve of each channel.
• Rewarding channel partners for the value they create for
Incitec Pivot through their support in implementing product
and marketing strategies.
• Providing product and service differentiation which ensures
Incitec Pivot remains their business partner of choice.
Movement in short term borrowings (50.5)
(31.0)
(19.5)
Dividends paid
Other
Total
(70.5)
0.0
(16.9)
(53.6)
0.0
0.0
(121.0)
(47.9)
(73.1)
Increase/(decrease) in cash on hand (80.5)
64.2 (144.7)
10
At Incitec Pivot Limited, we believe that all
work-related injuries, illnesses and environmental
incidents are preventable.
Safety, Health & Environment
Incitec Pivot’s strong focus on Safety, Health and Environment
(SH&E) continued in the year to 30 September 2005, with
improved performance in a number of key areas:
• The total number of recordable injuries continued to decline
from 13 in 2004 to 12 in 2005.
• There were no Category 2 losses of containment.
• There was a further decline in non-complying environmental
licence tests, down to 69 from the previous year’s 82.
Incitec Pivot’s operations are managed with concern for
people and the environment. We are committed to meeting
changing environmental, social and community obligations
and expectations in a sustainable manner, ensuring that our
operations today do not compromise the quality of life for
future generations.
As part of this concern for people and the environment, an ISO
14000 accredited Environmental Management System has been
developed for the management of the company’s primary and
regional distribution facilities.
The company also recognises the need for continuous
improvement at its major manufacturing works at Brisbane,
Geelong, Portland and Newcastle. The company is striving
to meet growing community expectations, today and into the
future as well as ensuring regulatory compliance.
In 2005, the following major environmental improvement works
were undertaken:
• At the single superphosphate plant at Portland in Victoria,
$1.9 million was invested to capture and clean fugitive
fluoride emissions at the plant. As a result, fugitive fluorine
emissions have been reduced by 80% and stack emissions
are well within licence limits. Work is continuing to further
optimise these improvements.
• At Geelong, a series of projects totalling $1 million have
significantly reduced dust emissions from the single
superphosphate plant.
Over the past two years, the Gibson Island site in Brisbane
has successfully reduced its consumption of fresh water by
approximately 10% through recycling efforts in the urea and
ammonia plants. Traditionally a large consumer of fresh water in
its manufacturing operations, these reductions have been made
by introducing improved controls to reduce waste and redirect
process water flows in cooling systems.
Trials have also been initiated at this site to further treat
processed water and stormwater for reuse in the plants,
particularly in the cooling systems. This has the potential to
reduce water consumption by a further 10%. In 2006, there will
be a strong focus on making improvements to the management
of stormwater at this site.
SH&E performance summary
2005
2004
2003 2002
Recordable injuries
Lost workday case rate
Recordable case rate
12
0.25
0.99
13
0.50
1.09
23
0.29
1.69
49
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
5
0
2
1
8
1
7
0
69
82
152
265
96.2%
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 Health and Safety Administration.
Definitions
Recordable injuries
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 man hours worked.
Distribution incidents
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.
11
These tools assist farmers to make better decisions on nutrient
management and application rates to minimise any potentially
adverse environmental impact.
Incitec Pivot also addresses product stewardship at an industry
level, through its membership of the Fertilizer Industry
Federation of Australia (FIFA) and its support for Fertcare, the
industry’s national training and accreditation program for all
fertiliser businesses and staff.
A key activity in the past year has been preparing for legislation
controlling the handling and sale of Security Sensitive
Ammonium Nitrate (SSAN) fertilisers, which addresses any
solid fertiliser containing more than 45% ammonium nitrate.
This legislation will affect the company’s product range and the
formulation of a number of fertiliser blends.
The legislation has resulted in the company investigating and
offering alternative formulations so that customers can have
access to fertiliser blends containing up to 45% ammonium
nitrate, which are not classified as SSAN fertilisers.
Distribution centres have been audited and upgraded for
security, and procedures have been developed to allow blend
ingredients classified as SSAN to be stocked at company sites in
Queensland where the legislation took effect from 1 July 2005.
Attention has now turned to other States and Territories.
SSAN legislation will take effect in New South Wales and
Victoria in January 2006.
Safety, Health & Environment – Continued
Losses of containment
Incidents where there is an unplanned release or spill on a
company site of 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.
Product stewardship
Product stewardship is the responsible and ethical design
and management of products, packaging and services
throughout their entire lifecycle to protect public health
and the environment.
While fertilisers are an essential nutrient source in productive
and profitable farming systems, they may impact on the
environment, so it is essential that they are used at appropriate
rates and in a responsible manner.
Incitec Pivot’s SH&E policy addresses product stewardship,
stating 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.
• seek to develop new or improved products and processes to
enhance the contribution we make to the quality of people’s
lives and minimise the impact on the environment.
Soil, plant tissue and water tests are key tools for managing
the soil’s nutrient status and developing fertiliser programs.
Incitec Pivot offers these analytical services and other decision
support tools to farmers and their advisers through its Nutrient
Advantage laboratory at Werribee, near Melbourne.
1
• At Parafield Gardens, preliminary results from trials
undertaken to address contaminated soils have been
good and groundwater decontamination trials have
been completed.
It is expected that remediation action plans will be submitted
and approvals sought from the SA EPA for both sites in 2006.
A remediation program to address redundant rail sidings leased
from the rail authorities and primarily used for transporting
fertiliser in South Australia and Victoria has attracted positive
feedback for Incitec Pivot from local communities. The $350,000
program has allowed the remediation of 26 sites and their
return to rail authorities this year.
This year, the company’s Cockle Creek site near Newcastle
was declared a remediation site by the New South Wales
Department of Environment and Conservation. Extensive work
is under way to understand the nature and extent of land
contamination that has resulted from fill placed on the site from
adjacent smelter operations over many years.
Sustainability
Incitec Pivot is committed to running all of its businesses
in a sustainable manner. The company SH&E policy states:
“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.”
Central to this philosophy is the need to monitor and
measure inputs and outputs such as water, energy and waste.
These measures are recorded in total and on a per tonne
basis, to provide better monitoring of efficiency as production
volumes change from year to year.
Legacy sites
A key requirement in the drive towards a sustainable future is
to ensure that business activities do not degrade the land and
environment and that past activities on a site, whether by the
company or inherited by the company are managed effectively
to minimise impact on the environment.
In South Australia, there has been significant work undertaken
in 2005 to remediate two contaminated sites:
• At Wallaroo, an interim groundwater treatment plant has
been established and investigations completed to understand
the extent of contamination that occurred when fill was
placed on the site from smelter operations by the former site
owners dating back to the 1920s. This work has been done
in full collaboration with the South Australian Environmental
Protection Agency (SA EPA). A total of $2 million has been
spent so far against a provision of $7.1 million.
Incitec Pivot assists young drivers
Incitec Pivot’s commitment to safety and to rural communities
extended to its major corporate sponsorship in 2005, in support
of young driver safety. The company’s Drive for Life program was
designed to help more than 1,000 young men and women from
farming regions to become safer drivers.
Drive for Life gave 18 to 25 year olds the opportunity to learn
potentially life-saving skills through a program of free one-
day training courses from March to July 2005.
Statistics show that young people in their first few years of
being licensed are at the highest risk in their driving careers,
with this risk rising dramatically for rural drivers.
Accredited trainers from Murcotts Driving Excellence took
the program to more than 70 rural towns in Victoria,
Tasmania, South Australia, New South Wales and Queensland.
Drive for Life was launched by Peter Brock, a household
name in Australian motor sport and ambassador for driver
safety, who congratulated Incitec Pivot on its strong safety
culture and its vision of extending this to rural families.
The success of the program was made possible by the
contribution of hundreds of Incitec Pivot Agents and Dealers,
community groups, local police and Incitec Pivot staff.
1
Financial Report
Directors’ Report
KPMG Independence Declaration
Statements of Financial Performance
Statements of Financial Position
Statements of Cash Flows
Notes to the Financial Statements
18ot04segapnotuotesstnemetatSlaicnaniFehtnonoitaralceD’srotceriD
Audit Report
Shareholder Statistics
Five Year Financial Statistics
15
39
40
41
42
43
28
83
85
86
14
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 2005 and the related auditor’s report.
Directors
The directors of the Company during the financial year and up to the date of this report are:
Name, qualification and special
responsibilities
Experience
Current directors
J C Watson AM, MAICD
Non-Executive Director and Chairman
Chairman of the Remuneration and
Appointments Committee
Member of the Governance Committee
J Segal BSc, MBA
Managing Director and Chief Executive
Officer
John was first appointed as a director on 15 December 1997 and as
Chairman in 1998. John is Chairman of Primesafe and of the
Co-operative Research Centre for Innovative Dairy Products, a Director of
Tassal Group Limited and Rural Press 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. He is also 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.
Julian was appointed as Managing Director & CEO on 3 June 2005.
Immediately prior to joining Incitec Pivot he was Manager of Strategic
Market Planning for the Orica Group. He joined Orica in 1999 and has held
various management positions including General Manager, Australia/Asia
Mining Services and Senior Vice President - Marketing for Orica Mining
Services globally.
B Healey, FAICD, FAIM
Non-Executive Director and Deputy Chairman
Member of the Governance Committee
Member of the Remuneration and
Appointments Committee
Brian was appointed as a director on 1 June 2003. He is Chairman of
Centro Properties Group and Centro Retail Ltd and a Director of Foster's
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.
J Chesterfield BBus, MBA
Non-Executive Director
Member of the Remuneration and
Appointments Committee
Member of the Audit and Risk Management
Committee
J E Fazzino BEc(Hons), CPA
Finance Director and Chief Financial Officer
A C Larkin FCPA, FAICD
Non-Executive Director
Chairman of the Audit and Risk Management
Committee
Member of the Remuneration and
Appointments Committee
A D McCallum Dip. Ag Science, MAICD
Non-Executive Director
Chairman of the Governance Committee
Member of the Remuneration and
Appointments Committee
Member of the Audit and Risk Management
Committee
John was appointed as a director on 18 July 2005. John is Orica Limited's
Chief Risk Officer and has been with Orica for 17 years. His previous
position was General Manager of Chemnet Australia, Orica’s chemicals
trading business.
James was appointed as a director on 18 July 2005. James has been
Incitec Pivot’s Chief Financial Officer since May 2003. Before joining Incitec Pivot,
he had many years experience with Orica Limited in several business financial
roles, including Project Leader of Orica's turn around program in 2001 and
Chief Financial Officer for the Orica Chemicals group. Immediately before
joining Incitec Pivot, he was Orica's Investor Relations Manager.
Tony was appointed as a director on 1 June 2003. Until January 2002,
Tony was Executive Director Finance of Orica Limited. He previously held
the position of Group Treasurer BHP Ltd. During his 38 year career with
BHP, Tony held senior finance positions in its steel and minerals
businesses and various senior corporate roles. From 1993 to 1997, he was
seconded to Foster's Brewing Group as Senior Vice President Finance and
Investor Relations. He is a Commissioner of the Victorian Essential
Services Commission, Director of Corporate Express Australia Limited and
Zinifex Limited, and Chairman of Ausmelt Limited. He was Chairman of
Incitec Ltd from July 2000 to April 2003.
Allan was first appointed as a director on 15 December 1997. Allan is a
farmer in northern Victoria and is also a director of Medical Developments
International Ltd and Chairman of Tassal Group Limited. He is a former
director of Graincorp Limited and Grain Growers Association Limited.
Incitec Pivot Limited
15
Directors’ Report
Directors (Continued)
Former directors
G J Witcombe, Managing Director and CEO
L M Delahunty
B J Gibson
G R Liebelt
D B Trebeck
Resignation date
3 June 2005
18 July 2005
18 July 2005
18 July 2005
18 July 2005
Company Secretary
Mrs Kerry Gleeson holds the office of Company Secretary. Kerry is a practising solicitor, having been admitted to practice in England
and Wales in 1991 and in Victoria in 2001. Kerry was appointed as Company Secretary on 16 February 2004, having previously
practised with Blake Dawson Waldron in Melbourne. Prior to emigrating in 1999, Kerry was a partner of an English law firm, Halliwell
Landau.
Directors’ interests in share capital
The relevant interest of each director in the share capital of the Company as notified by the directors to the Australian Stock Exchange
in accordance with s205G(1) of the Corporations Act 2001 (Cth) as at the date of this report is as follows:
Director
J C Watson
J Segal
B Healey
J Chesterfield
J E Fazzino
A C Larkin
A D McCallum
Fully paid
ordinary shares
Incitec Pivot Limited
The Company
Fully paid
ordinary shares
Orica Limited
The ultimate parent entity
2,700
-
-
-
9,649(1)
-
6,818
-
16,412
9,300
28,614
29,808
38,000
-
(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 the remuneration report.
Directors’ meetings
The number of directors’ meetings held (including meetings of committees of directors) and the number of meetings attended by each
of the directors of the Company during the financial year are listed below:
Director
Board
Audit and Risk
Management
Remuneration and
Appointments
Governance
Held (1)
Attended
Held (1)
Attended
Held (1)
Attended
Held (1)
Attended
Current
J C Watson
J Segal
J Chesterfield
J E Fazzino
B Healey
A C Larkin
A D McCallum
Former
G J Witcombe
L M Delahunty
B J Gibson
G R Liebelt
D B Trebeck
18
8
4
4
18
18
18
10
15
15
15
15
17
6
4
4
15
16
18
10
15
15
14
15
2
5
5
2
5
5
3
3
4
1
4
4
4
3
3
3
3
4
1
3
3
4
3
3
3
3
5
2
5
3
5
2
5
3
(1) This column shows the number of meetings held during the period that the director was a member of the Board or Committee.
16
Incitec Pivot Limited
Directors’ Report
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 8 to 10 of the annual report.
Dividends
Dividends declared and paid since the last annual report were:
Type
Declared and paid during the year
2004 final ordinary
2004 final special
2005 interim ordinary
2005 interim special
Fixed redeemable preference(1)
Declared and paid after end of year
November 2005 special dividend
Cents per
share
Total amount
$000
Franked / Unfranked
Date of payment
70
30
15
6
-
50
40,797
17,484
8,742
3,497
737
Franked
Franked
Franked
Franked
Unfranked
9 December 2004
9 December 2004
7 July 2005
7 July 2005
27 November 2004
29,141
Franked
9 January 2006
Dealt with in the financial report as:
Dividends
Subsequent event
Interest(1)
Note
25
39
18, 25
$000
70,520
29,141
737
(1) Dividends paid in respect of the redeemable preference shares were paid by Incitec Fertilizers Limited, a wholly owned subsidiary of the Company
and were paid quarterly at 5.36% per share unfranked. These dividends were charged to the Statements of Financial Performance as borrowing
costs because these shares were classified as liabilities.
Changes in the state of affairs
2005 saw a significant rationalization of the fertiliser industry. ELF Australia Pty Ltd (ELF) was formed in December 2004, and is owned
50% by Landmark Operations Ltd and 50% by Elders Limited. ELF purchased a 66.7% shareholding in Hi-Fert Pty Ltd. At the same
time Elders Limited and Landmark Operations Ltd (who combined, purchased 29% of the fertiliser volume sold by the Company in
2004) announced that they intended to purchase fertiliser exclusively through ELF and that ELF would source product from Hi-Fert Pty
Ltd with the balance from other suppliers in the open market. Incitec Pivot incurred significant expenditure in reacting to the changed
industry dynamics; including developing and implementing a new business model and embarking on a major restructuring of the
business. Significant costs associated with this restructure are set out in note 5, Individually significant items, in the financial report.
There have been no other 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 special dividend for the Company of 50 cents per share. This
dividend is fully franked at the 30% corporate tax rate and is payable on 9 January 2006. (see note 25).
The directors have not become aware of any other significant matter or circumstance that has arisen since 30 September 2005 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 8 to 10 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.
Incitec Pivot Limited
17
Directors’ Report
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 which are
conducted regularly. The individual 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 11 to 13 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.
Auditor
KPMG continues in office in accordance with section 327B(2) of the Corporations Act 2001(Cth).
Non-audit services
KPMG have provided no non-audit services during the year ended 30 September 2005. (See note 6)
Lead Auditor’s Independence Declaration
The lead auditor has provided a written declaration that no professional engagement for the Consolidated entity has been carried out during
the year that would impair KPMG’s independence as auditor.
The lead auditor’s independence declaration is set out on page 39 of the financial report.
Rounding
The Company is of a kind referred to in ASIC Class order 98/100 dated 10 July 1998 and, in accordance with that Class Order, the
amounts shown in this report and in the financial statements have been rounded off, except where otherwise stated, to the nearest
thousand dollars.
18
Incitec Pivot Limited
Directors’ Report
Remuneration Report
The directors of Incitec Pivot Limited (‘the Company’ or ‘Incitec Pivot’) present the Remuneration Report prepared in accordance with
section 300A of the Corporations Act 2001 (Cth) for the Company and its controlled entities for the year ended 30 September 2005.
This Remuneration Report is audited unless otherwise stated.
Contents
A. Non-executive directors’ fees
B. Executives’ remuneration policy
C. Managing Director & Chief Executive Officer’s employment arrangements and remuneration
D. Executives’ employment arrangements and remuneration
E. Equity instruments held by directors and specified executives
The Board comprises 7 directors, 5 of whom are non-executive directors and 2 are executive directors. There are 6 members of the
executive team which includes the executive directors (the details for which are set out in sections B, C and D of this remuneration
report). When used in this report, the term “executives” or “specified executives” means both the executive directors and the executive
team. For the purposes of AASB 1046, the specified executives had the greatest authority for the strategic direction and management
of the Consolidated entity during the financial year.
A. Non-executive directors’ fees
Non-executive directors’ fees are determined by the Board subject to the aggregate limit of $1,000,000 approved by shareholders
at the 2003 Annual General Meeting. Non-executive directors receive a fee for being a director of the Board and additional fees
for either chairing or being a member of a committee. The level of fees paid to directors reflect the time commitments and
responsibilities of non-executive directors.
In determining the level of fees, the Remuneration and Appointments Committee, which makes recommendations to the Board,
takes into account:
(cid:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3)
the current level of fees;
external professional advice;
survey data on fees paid by comparable companies; and
the level of fees considered necessary to attract and retain directors of the appropriate calibre.
In order to maintain independence and impartiality, non-executive directors are not entitled to any form of incentive payments and
the level of their fees is not set with reference to measures of company performance.
The Company is phasing out retirement benefits for all non-executive directors. Directors who joined the Board after 30 May 2003
are not entitled to receive a retirement benefit. Retiring non-executive directors appointed before 1 June 2003 have contractual
rights to a retirement benefit. This entitles them to a retirement benefit after 10 years of service equal to the total of the benefits
they received from the Company in the 3 years immediately preceding their date of retirement. This retirement benefit will be paid
pro-rata for less than 10 years of service. The service period is capped to 31 May 2003.
Details of the nature and amount of each element of non-executive directors’ fees are included in the following table, together with
details of the executive directors’ remuneration (further details of which are set out in sections C and D of this remuneration
report):
Incitec Pivot Limited
19
Directors’ Report
Remuneration Report
A. Non-executive directors’ fees (continued)
Directors’ remuneration
For the year ended 30th September
Primary
Equity
Post
Other
noitasnepmoc
tnemyolpme
noitasnepmoc
Performance
detaler
Total
remuneration
Short term
incentive(A)
$
Non-monetary
benefits (B)
$
Value of
options (C)
$
Superannuation
Retirement
benefits
benefits
$
$
$
%
Non-executive directors
- Current
J C Watson, Chairman (1)
J R Chesterfield (2) (5)
B Healey
A C Larkin
A D McCallum (1)
- Former(3) (4)
L M Delahunty
B J Gibson (5) (6)
G R Liebelt (5)
D B Trebeck
Total non-executive directors
Executive directors
- Current
J Segal (7)
Fees /
base
salary
$
219,670
193,908
19,250
-
82,610
71,500
92,470
84,385
102,093
93,427
65,863
75,344
63,258
71,500
57,750
71,500
68,860
75,344
771,824
736,908
Year
2005
2004
2005
2004
2005
2004
2005
2004
2005
2004
2005
2004
2005
2004
2005
2004
2005
2004
2005
2004
2005
181,669
Managing Director and CEO
2004
J E Fazzino (2)
Finance Director and Chief Financial Officer
2005
2004
-
292,412
273,852
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
68,672
- Former
G J Witcombe (7)
2005
493,633
34,132
Managing Director and CEO
2004
624,353
228,749
Total executive directors
Total of all directors
2005
2004
2005
2004
967,714
34,132
898,205
297,421
1,739,538
34,132
1,635,113
297,421
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
14,077
-
27,927
16,102
85,530
70,609
127,534
86,711
127,534
86,711
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
12,689
12,689
59,524
79,365
72,213
92,054
72,213
92,054
21,726
18,855
-
-
-
3,053
9,145
8,190
10,097
9,067
6,810
7,313
2,228
-
-
-
6,810
7,313
56,816
53,791
3,862
-
11,723
11,147
8,689
11,147
24,274
22,294
81,090
76,085
-
-
-
-
-
-
-
-
-
-
241,396
212,763
19,250
-
82,610
74,553
101,615
92,575
112,190
102,494
81,018
153,691
-
-
-
-
-
-
-
81,018
-
-
-
-
-
-
-
-
-
82,657
65,486
71,500
57,750
71,500
75,670
82,657
909,658
790,699
199,608
-
344,751
382,462
681,508
1,014,223
1,225,867
1,396,685
81,018
2,135,525
-
2,187,384
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4%
21%
14%
30%
9%
28%
5%
18%
(A) No short term incentive (STI) payment or other cash incentive bonus has been paid or accrued for the 30 September 2005 financial year for any of the current directors.
(B) Non monetary benefits include Fringe Benefits Tax paid, rent and mortgage interest subsidy, relocation allowances, other allowances 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.
(C) This relates to the Long Term Incentive Plans (LTIs). The benefit received as a result of participation by JE Fazzino and GJ Witcombe in the LTIs have been treated as options.
There is currently no Australian Accounting requirement to record an expense for the fair value of such options. However AASB 1046: “Director and Executive Disclosures by
Disclosing Entities” requires Incitec Pivot to derive a value for these and include the value in the director and executive remuneration disclosures. The combination of shares and the
loan provided to fund those shares together constitute an immediately vesting option under AASB 1046. Accordingly, an option pricing model was adopted to derive a value. Loan
forgiveness is incorporated into the option valuations. External valuation advice from PricewaterhouseCoopers has been used to determine the fair value of the options at grant date.
The valuation 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. The valuation under the Monte Carlo approach requires inputs such as the expected share price volatility, the expected dividend
yield, price at grant date of the 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. Multiple simulations were performed to determine the mean value. The fair value has been allocated evenly over the period from grant date to the date when
an entitlement to an award, in the form of a loan waiver arises, being 30 September 2005 and 30 September 2006 for the retention plan and performance plan respectively. The value
disclosed in the remuneration tables represents the portion of fair value allocated to this reporting period. Refer to section B of this remuneration report for further details of the LTIs.
The “value of options” column does not include the shares (treated as options for the purposes of remuneration) allocated in October 2005 under the performance plan. Refer to
section E.2 of this remuneration report. The terms and conditions of each award affecting remuneration in this or future reporting periods are as follows:
LTIs
Grant date
Expiry date
Retention plan
Performance plan
1/06/2003
1/10/2003
30/09/2005
30/09/2006
Value per share at
grant date
Date exercisable
$1.95
$5.71
From 1/10/2005
From 1/10/2006
The number of shares (treated as options for the purposes of remuneration) held by each specified director and each specified executive is detailed in section E of this remuneration
report.
20
Incitec Pivot Limited
Directors’ Report
Remuneration Report
A. Non-executive directors’ fees (continued)
Directors’ remuneration (continued)
(1)
If J C Watson or A D McCallum had ceased to be directors on 30 September 2005, the following benefits would have been payable under their respective contracts: Mr Watson
$314,475, Mr McCallum $157,411.
(2)
J R Chesterfield and J E Fazzino were appointed on 18 July 2005. Total remuneration paid to Mr Fazzino whilst he was a specified executive was $280,407, and total
remuneration paid to Mr Fazzino whilst he was an executive director was $64,344.
(3)
L M Delahunty, B J Gibson, G R Liebelt and D B Trebeck resigned as directors on 18 July 2005.
(4) On resignation as a director, L M Delahunty was paid $81,018 as his contractual entitlement for retirement benefit. B J Gibson, G R Liebelt and D B Trebeck were not entitled to,
and were not paid, any retirement benefit.
(5)
The fees were paid to their employer, Orica Limited, the ultimate parent company.
(6)
Fees of $38,500 were paid to Ms Gibson’s employer, Orica Limited, the ultimate parent company, until her resignation from Orica on 31 March 2005. Fees of $26,986 (including
superannuation) were paid directly to Ms Gibson prior to her resignation as a director of Incitec Pivot on 18 July 2005.
(7) On 3 June 2005 Mr Segal was seconded to Incitec Pivot pursuant to his employment agreement with Orica Limited and was appointed as a director of Incitec Pivot. Mr Witcombe
resigned as a director on 3 June 2005. Further details are summarised in sections C and D of this remuneration report.
B. Executives’ remuneration policy
The remuneration of the executives is set by the Board on recommendation from the Remuneration and Appointments
Committee. The Company’s policy and practice for executive remuneration is designed to attract, retain and motivate
appropriately qualified and experienced individuals capable of discharging their respective responsibilities in supporting the
Company’s business and strategy. The remuneration packages for executives include both a fixed component and an incentive or
performance-related component, designed to create a clear link between reward for the executive and the creation of shareholder
value.
The remuneration of executives is set at levels to properly reflect the duties and responsibilities of those executives. The mix
between fixed remuneration and incentive or performance-related remuneration varies according to the duties and responsibilities
of executives and supports the needs of the Company in attracting, retaining and motivating executives.
Remuneration packages are reviewed annually by the Remuneration and Appointments Committee and are benchmarked to
market using information and advice from external consultants.
The following table shows how remuneration for executives is structured:
Table B.1
Remuneration structure by level
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
CEO*
Specified
Executives*
Senior
Management
Other
Long Term Incentive
Short- term Incentive
Fixed Remuneration
"At Risk"
compensation
This table has not been subject to audit. In determining the “at risk” compensation as a proportion of total remuneration, for
each category of employee the maximum entitlement under the LTIs or STIs was taken into account.
*
Participation in a long term incentive plan for Mr Segal, as Managing Director and CEO, and Ms Cleland, as a specified executive, is
under Orica’s Long Term Incentive plan, not Incitec Pivot’s LTIs. Refer to sections C and D of this remuneration report.
Incitec Pivot Limited
21
Directors’ Report
Remuneration Report
B. Executives’ remuneration policy (continued)
Fixed Remuneration
The terms of employment for all executives contain a fixed remuneration component. In general, this is expressed as a total
amount of salary and other benefits that the executive may take in a form agreed with the Company. Executives may receive their
fixed remuneration in a variety of forms including cash, superannuation and fringe benefits, such as motor vehicles. The level of
fixed remuneration is reviewed annually and is determined by the scope of each executive’s role, their level of knowledge, skill
and experience, and individual performance.
Performance based remuneration – Short Term Incentive Plan (STI)
The Short Term Incentive Plan (STI) is an annual “at risk” cash bonus plan which delivers cash bonuses on achievement of
specific performance targets. The Board considers the STI encourages executives to support Incitec Pivot’s strategic objectives
by providing rewards that are significantly differentiated on the basis of achievement against performance targets. STI awards are
not an entitlement but rather a reward for overall Company performance and individual performance or contribution to Company
performance. For the executives, this comprises, in general, an amount equal to 20% of their fixed annual remuneration for target
performance and up to an amount equal to 40% of their fixed annual remuneration for stretch performance well in excess of target
performance. No incentives are awarded where performance falls below the minimum.
The Board sets the criteria for awarding the STI annually. The targets are heavily weighted (60% in 2005) to improving the
financial performance of the business as measured by growth in Net Profit after Tax (NPAT) before individually significant items.
NPAT (before individually significant items) is considered the appropriate financial measure as, in the absence of capital
initiatives, it equates to earnings per share growth, which is the key driver of shareholder value (driving both dividend pay-outs
and share price movements).
15% of the STI is awarded for improving safety performance – one of Incitec Pivot’s core values. Safety performance is
measured by the all worker Recordable Case Rate, which is the internationally recognised benchmark measure of safety. The
balance of the STI is applied to the achievement of key milestones, which support the delivery of the approved strategy for the
Company. The NPAT (before individual significant items) hurdle must be reached before any payment is made for achievement
of the non-financial elements of the STI.
Performance based remuneration – Long Term Incentive Plans (LTIs)
Overview
Long Term Incentive Plans (LTIs) are designed to encourage executives and other senior employees to focus on the key
performance drivers which underpin sustainable growth in shareholder value.
Incitec Pivot has 2 types of LTIs: the retention plan and the performance plan. The LTIs are designed to reward executives for
delivering long term value to the Company and support the Company’s strategy for retention and motivation of executives.
Under the LTIs, Incitec Pivot may grant awards to executives, subject to them satisfying particular conditions relating to the
duration of their employment (retention plan) or individual or Company performance (performance plan). In short, the LTIs
operate by way of the Company providing executives with limited recourse loans, which can be interest free or interest bearing,
and which must be used to purchase Incitec Pivot shares on market. The loans are repayable in a number of circumstances,
including the participant ceasing to be employed by Incitec Pivot, the participant selling his or her shares, or by a “sunset” date.
The loans are repayable from the proceeds of sale of the shares, and are deemed satisfied by the application of the proceeds of
the sale of the shares, including where there is a shortfall against the outstanding loan amount. The Company may forgive
repayment of part of a loan amount depending on, in the case of the retention plan, the satisfaction of a condition as to duration of
employment, and in the case of the performance plan, the achievement of performance measures. Participants receiving shares
under the LTIs hold full voting and dividend rights.
Further details of each of the LTIs are set out below.
Retention Plan
At the time of the merger of Incitec Fertilizers Limited and the Company, the Board recognised that a crucial element to the
success of the merger was the retention of key senior management and certain key employees. This was necessary to ensure
the capture of synergies and the uninterrupted delivery of service to Incitec Pivot’s customers. Accordingly, a one-off long term
incentive was granted in respect of the period from 1 June 2003 to 30 September 2005 by way of interest free, limited recourse,
unsecured loans by the Company. These loans were used in the purchase of shares on market and the shares were registered in
the name of the participants. The participants were restricted from dealing in the shares until 30 September 2005 and, until that
time, the shares could be forfeited if the participant ceased to be employed by Incitec Pivot. The loans are repayable on the
earlier of the participant ceasing to be employed by Incitec Pivot, the participant selling his/her shares or three years after the loan
is made. On repayment, for those participants satisfying the condition by remaining in employment until 30 September 2005,
51.5% of the amount of their outstanding loan will be forgiven by the Company.
Performance Plan
Under the performance plan, awards, by way of forgiveness of loans, are granted only on the achievement of certain performance
measures over a rolling three year period. Adoption of this longer term incentive plan created the opportunity, and provided the
discipline, for executives and other senior employees to contribute to short term performance but with full regard to the delivery of
sustainable growth in shareholder value.
22
Incitec Pivot Limited
Directors’ Report
Remuneration Report
B. Executives’ remuneration policy (continued)
Performance Plan (continued)
For the period from 1 October 2003 to 30 September 2006, participants were each advanced limited recourse, interest bearing,
unsecured loans by the Company, which were used in the purchase of shares in the Company. The shares were allocated in 2
tranches, in September 2004 and October 2005.
The Company may require shares to be forfeited if the relevant participant ceases to be employed by Incitec Pivot prior to
30 September 2006. Subject to the Company achieving certain performance measures, the whole or part of the loan will be
waived on or after 1 October 2006. The Board sets the criteria for the granting of awards under the LTI at the beginning of the
three year performance period covered by the LTI. LTI awards, in the form of waivers of loans, are based on the generation of
targeted cumulative economic profit over the performance period. Economic profit targets are set at levels that equate to top
quartile shareholder returns over the performance period. Cumulative economic profit was chosen as the relevant performance
measure as it recognises:
(cid:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3)
the need to both grow earnings and produce an acceptable return on shareholders funds;
the desire to reward executives for the value they directly create, as opposed to movements in the general level of the share
market which is an issue with share price based incentives; and
the inherent seasonal volatility of the business which can positively or negatively impact any one year but is less likely to
have an influence over a cumulative three year period.
If the Company waives any loan amount, a participant has full, unrestricted ownership of the shares to the value of the loan
waiver. Prior to any loan waiver being awarded, a participant cannot deal in the shares. The loans are immediately repayable on
the earlier of a relevant participant ceasing to be employed by Incitec Pivot, the participant dealing in his or her shares, or
31 December 2007. Participants may directly repay the whole or part of their loan at any time. Interest is charged on the loans at
the FBT benchmark rate (currently 7.05%). Net cash dividends after personal income tax obligations are applied to reduce the
loan balance.
Relationship between Company performance and remuneration
In considering Incitec Pivot’s performance and benefits for shareholders’ wealth, the Board, through its Remuneration and
Appointments Committee, has regard to financial and non-financial indices, including the following indices in respect of the current
financial year and the prevailing four financial years, noting that Incitec Pivot, as the merged entity was formed in 2003.
Table B.2
Net Profit After Tax (before individually significant items) ($m)
Economic Profit ($m)
Dividends paid ($m)
Share price ($) (Year End)
2005
37.6
(18.2)
70.5
15.82
2004 2003 20021 20011
(6.5)
80.9
21.2
35.0
19.1 (15.9)
16.9
24.5
18.8 15.66
(2.4) (30.2)
-
N/A N/A
-
The above table has not been subject to audit.
(1) Indices for 2001 and 2002 are for the Company and pre-date the merger of Incitec Fertilizers Limited and Pivot Limited.
For the STI, Net Profit After Tax (before individually significant items) is the principal measure. In 2004, NPAT, (before
individually significant items) increased by 131% over 2003 to $80.9m which largely reflected the generation of $50.6m before tax
in merger synergies. In 2005, NPAT (before individually significant items) declined by 54% to $37.6m reflecting a combination of
poor seasonal conditions and strong competition. On safety, in 2004 there was excellent progress made with the recordable case
rate of 1.09 compared to 1.69 for 2003 full year which equated to 13 recordable injuries for the Company in 2004, compared to 23
injuries in 2003. In 2005, good progress was made in safety with the recordable case rate declining to 0.99 and most of the
performance measures supporting the delivery of the strategy were delivered.
Notwithstanding the performance in safety and against strategic measures, no STI payments were awarded to the executives in
2005 due to the decline in NPAT (before individually significant items).
In the case of the retention plan, which was designed to retain and motivate high calibre executives in order to deliver the
synergies from the merger, awards in the form of waivers of loans were made to Mr Fazzino and Mrs Gleeson, each of whom
satisfied the conditions for an award to be made, that is, remaining with the Company until 30 September 2005. In accordance
with the rules of the retention plan, notwithstanding their employment ceased prior to 30 September 2005, Mr Witcombe, Mr
Warnock and Mr Elmer were also granted awards in the form of pro rata waivers of loans.
As referred to above, for the performance plan, no awards (in the form of waivers of loans) have been made under the
performance plan, as such are not to be determined until 30 September 2006, when the cumulative three year performance
period concludes.
Incitec Pivot Limited
23
Directors’ Report
Remuneration Report
C. Managing Director and Chief Executive Officer’s Employment
Arrangements and Remuneration
Managing Director & CEO – Mr J Segal
Mr Segal is on secondment to Incitec Pivot from Orica Limited with whom he has been employed pursuant to an agreement dated
22 April 2002. His remuneration arrangements are in accordance with an agreement between Mr Segal and Incitec Pivot Limited
dated 27 June 2005, which supplements his employment agreement with Orica Limited. The details of his remuneration are as
follows (all remuneration is from Incitec Pivot unless otherwise stated):
Fixed Annual Remuneration
Mr Segal’s fixed annual remuneration is $560,000, to be reviewed annually each January having regard to Incitec Pivot’s
executive remuneration policy.
Short Term Incentive
Mr Segal is eligible to participate in Incitec Pivot’s STI. Mr Segal’s STI opportunity is 30% of fixed annual remuneration up to a
maximum of 60% of fixed annual remuneration for over performance against specified measures.
Further details of the STI are set out in section B of this remuneration report.
Long Term Incentive
Mr Segal is not eligible to participate in Incitec Pivot’s LTIs. However, Mr Segal is eligible to participate in Orica’s Long Term
Incentive Plan under which he is entitled to equity compensation from Orica Limited of a value equal to 70% of his fixed annual
remuneration, subject to achievement of long term performance targets related to growth in the Orica Group’s total shareholder
return over a 3 year period.
Former Managing Director & CEO – Mr G J Witcombe
Mr Witcombe resigned as a director of Incitec Pivot on 3 June 2005. Prior to his resignation, while in employment, Mr Witcombe
was entitled to an annual base salary of $682,640 and other benefits on terms commensurate with his position, the industry and
the size of the Company.
Mr Witcombe’s employment agreement also included an entitlement for him to participate in Incitec Pivot’s STI. Mr Witcombe’s
participation was based on 30% of base salary and was subject to achievement of certain performance targets, and for over
performance of such targets, could increase to 60% of base salary. In addition, Mr Witcombe was eligible to participate in Incitec
Pivot’s LTIs. His participation in the retention plan was based on 35% per annum of base salary applied to the period 1 June
2003 to 30 September 2005. His participation in the performance plan was based on 70% per annum of base salary for the
period 1 October 2003 to 30 September 2006, subject to achievement of certain performance targets, and, for over performance
of such targets, could increase to 140% per annum of base salary. Details of the performance measures used for the STI and the
hurdles against which performance is measured for an award under the performance plan are set out in section B of this
remuneration report.
On his resignation, Mr Witcombe’s entitlement to the STI and LTIs were reduced to reflect his actual period of employment with
the Company, and he received:
(cid:120)(cid:3)
a payment on account of his entitlement to a STI of $34,132.
(cid:120)(cid:3)
(cid:120)(cid:3)
a loan forgiveness of $256,550 against the loan granted to Mr Witcombe in 2003 which was applied in the purchase of
shares in the Company in accordance with the rules of the retention plan. The amount of the loan forgiveness was
calculated by reference to his period of employment with the Company up to June 2005.
a loan forgiveness of $133,494 against the loans made under the performance plan, equal to 40.25% of fixed annual
remuneration. The Board determined this amount after assessment of performance against the relevant hurdles up to June
2005, the date Mr Witcombe’s employment with Incitec Pivot ceased.
Mr Witcombe did not receive a retirement benefit.
24
Incitec Pivot Limited
Directors’ Report
Remuneration Report
D. Executives’ employment arrangements and remuneration
Remuneration and other terms of employment for the specified executives (excluding Mr Segal, whose arrangements are set out
in section C of this remuneration report and Ms Cleland, whose arrangements are set out below) are formalised in service
agreements between the executive and the Company, details of which are summarised in the table below. Most executives are
engaged on similar contractual terms with minor variations to address differing circumstances. The Company’s policy is for
service agreements for these executives and senior management to be unlimited in term, but capable of termination in the
manner as described in the table below.
Fixed remuneration
STI Plan
LTI Plan
Fixed remuneration comprising salary paid in cash and mandatory employer
superannuation contributions. This is subject to an annual review.
Participation is at the Board’s discretion. Opportunity is 20% of fixed annual
remuneration up to a maximum of 40% of fixed annual remuneration for over
performance against specified measures.
Participation is at the Board’s discretion. Opportunity is 25% of fixed annual
remuneration up to a maximum of 50% of fixed annual remuneration for over
performance against specified measures.
Termination by Incitec Pivot
Incitec Pivot may terminate the service agreements:
(cid:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3)
immediately for cause, without payment of any separation sum, save as to
accrued fixed annual remuneration, accrued annual leave or long service leave;
on notice in the case of incapacity, and the Company must pay a separation
payment plus accrued annual leave and long service leave;
otherwise, without cause, with or without notice and the Company must pay a
separation payment plus accrued annual leave and long service leave.
The amount of a separation payment is calculated on a ‘capped’ number of weeks,
where the number of weeks is determined by length of any service with the Orica
Group, and is as follows for each Specified Executive (excluding Mr Segal and
Ms Cleland):
Mr James Fazzino
Mrs Kerry Gleeson
Mr Daryl Roe
Mr Bernard Walsh
51.6 weeks
26.0 weeks
70.48 weeks
61.81 weeks
Termination by executive
The executive may terminate his/her employment on 13 weeks’ notice and the
Company may require the executive to serve out the notice period or may make
payment in lieu.
With regard to Abigail Cleland, Ms Cleland is on secondment to Incitec Pivot from Orica Limited pursuant to her employment
agreement with Orica Limited dated 6 December 2004. This secondment commenced 6 June 2005. In addition to her fixed
annual remuneration she is eligible to participate in Incitec Pivot’s STI. This is based on 20% of fixed annual remuneration up to a
maximum of 40% of fixed annual remuneration for over performance against specified measures.
Ms Cleland is not eligible to participate in Incitec Pivot’s LTIs. However, Ms Cleland is eligible to participate in Orica’s Long Term
Incentive Plan under which she is entitled to equity compensation of a value equal to 25% of fixed annual remuneration, subject to
achievement of long term performance targets related to growth in the Orica Group’s total shareholder return over a 3 year period.
In addition, under the terms of her secondment, Ms Cleland was granted a discretionary bonus of up to 50% of her fixed annual
remuneration (pro-rata) against agreed objectives until 1 October 2005, in respect of which Ms Cleland was awarded $42,500
against objectives supporting the delivery of the Company’s strategy.
Details of the nature and amount of each element of remuneration of the executives (excluding the Managing Director & CEO and
the Finance Director & Chief Financial Officer) are included in the following table.
Incitec Pivot Limited
25
Directors’ Report
Remuneration Report
D. Executives’ employment arrangements and remuneration (continued)
Specified executives remuneration
For the year ended 30th September
Primary
Equity
Post
Other
compensation
employment
compensation
Performance
related
Total
remuneration
s300A/
AASB
1046
Year
Base
salary
$
Short term
incentive
or bonus (A)
$
Non-monetary
benefits (B)
$
Value of
options (C)
$
Superannuation
Termination
benefits
$
benefits
$
$
%
Specified executives
- Current
K J Gleeson
General Counsel & Company Secretary
D A Roe
General Manager Commercial
A Cleland (1)
General Manager Strategy & Business Development
B C Walsh (2)
General Manager Supply Chain
- Former
J W Elmer
General Manager Human Resources
R Hoggard
General Manager Manufacturing & SH&E
J M Lloyd
General Manager Commercial
A K Sharma
General Counsel & Company Secretary
J R Warnock
General Manager Logistics & Supply
Total specified executives
a, b
b
a, b
b
b
b
a, b
b
b
a, b
b
a, b
b
a, b
a, b
a, b
b
b
2005
2004
2005
2004
2005
2004
2005
2004
2005
2004
2005
2004
2005
2004
2005
2004
2005
2004
2005
2004
258,027
157,554
253,274
171,603
80,781
-
129,069
-
258,417
268,769
140,583
280,127
201,515
275,622
-
92,002
261,227
247,602
1,582,893
1,493,279
-
29,603
-
31,880
42,500
-
-
-
-
50,438
-
67,133
-
74,592
-
-
-
62,752
42,500
316,398
-
-
9,654
9,254
-
-
3,249
-
-
-
40,799
28,443
13,096
8,799
-
212,144
52,063
19,942
118,861
278,582
7,623
4,838
5,211
5,212
-
-
1,737
-
11,464
12,506
6,251
12,501
9,259
13,888
-
-
11,488
11,488
53,033
60,433
11,723
7,113
11,723
8,397
3,935
-
5,931
-
11,729
11,607
5,792
11,147
13,736
35,635
-
7,083
11,723
11,147
76,292
92,129
-
-
-
-
-
-
-
-
215,239
-
-
-
17,122
-
-
124,521
236,358
-
468,719
124,521
277,373
199,108
279,862
226,346
127,216
-
139,986
-
496,849
343,320
193,425
399,351
254,728
408,536
-
435,750
572,859
352,931
2,342,298
2,365,342
3%
17%
2%
16%
33%
0%
1%
0%
2%
18%
3%
20%
4%
22%
0%
0%
2%
21%
4%
16%
(A) No STI or other cash incentive bonus has been paid or accrued for the 30 September 2005 financial year with the exception of Ms Cleland, who was awarded a discretionary bonus.
(B) Non monetary benefits include Fringe Benefits Tax paid, rent and mortgage interest subsidy, relocation allowances, other allowances 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.
(C) This relates to the LTIs. The benefit received as a result of participation by the relevant specified executives in the LTIs have been treated as options. There is currently no
Australian Accounting requirement to record an expense for the fair value of such options. However AASB1046: “Director and Executive Disclosures by Disclosing Entities” requires
Incitec Pivot to derive a value for these items and include the value in the director and executive remuneration disclosures. The combination of shares and the loan provided to fund
those shares together constitute an immediately vesting option under AASB1046. Accordingly, an option pricing model was adopted to derive a value. Loan forgiveness is
incorporated into the option valuations. External valuation advice from PricewaterhouseCoopers has been used to determine the fair value of the options at grant date. The
valuation 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. The valuation under the Monte Carlo approach requires inputs such as the expected share price volatility, the expected
dividend yield, price at grant date of the 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. Multiple simulations were performed to determine the mean value. The fair value has been allocated evenly over the period from grant date to
the date when an entitlement to an award, in the form of loan waiver arises, being 30 September 2005 and 30 September 2006 for the retention plan and performance plan,
respectively. The value disclosed in the remuneration tables represents the portion of fair value allocated to this reporting period. Refer to section B of this remuneration report for
further details of the LTIs. The “value of options” column does not include the shares allocated in October 2005 under the performance plan. Refer to section E.2 of this
remuneration report. The terms and conditions of each award affecting remuneration in this or future reporting periods are as follows:
LTIs
Grant date
Expiry date
Value per share at grant
Date exerciseable
Retention plan
Performance plan
1/06/2003
1/10/2003
30/09/2005
30/09/2006
date
$1.95
$5.71
From 1/10/2005
From 1/10/2006
The number of shares (treated as options for the purposes of remuneration) held by each specified director and each specified executive is detailed in the section E of this
remuneration report.
(1)
On 6 June 2005, Ms Cleland was seconded to Incitec Pivot Limited pursuant to her employment agreement with Orica Limited.
(2) Mr Walsh was appointed to the executive team on 1 April 2005, following the resignation of Mr Hoggard.
26
Incitec Pivot Limited
Directors’ Report
Remuneration Report
D. Executives’ employment arrangements and remuneration (continued)
Specified executives remuneration (continued)
(a) Executive is included as one of the five named company executives or relevant group executives who receive the highest remuneration in the current financial year in accordance
with Section 300A of the Corporations Act 2001 (Cth). For 2005 and 2004, J E Fazzino is also one of the five named company executives who received the highest remuneration.
Mr Fazzino was appointed an executive director on 18 July 2005, and details of his remuneration are in the table titled “Directors’ Remuneration” set out in section A of this
remuneration report.
(b)
Executive is included as a specified executive in accordance with Accounting Standard AASB 1046 Director and Executive Disclosures for Disclosing Entities for the consolidated
entity. For 2004, J E Fazzino is also one of the specified executives. Mr Fazzino was appointed an executive director on 18 July 2005, and details of his remuneration are in the
table titled “Directors’ Remuneration” set out in section A of this remuneration report.
For details of remuneration paid to executives and their employment arrangements refer to sections C and D of this remuneration
report.
Analysis of bonuses included in remuneration
Details of the vesting profile of the STI payments or other bonuses awarded as remuneration to each executive are set out below.
Short term incentive or bonus
Included in
remuneration
$(A)
% vested in
year
% forfeited
in year(B)
-
-
-
-
100%
100%
Executive directors
- Current
J Segal
J E Fazzino
- Former
G J Witcombe
34,132
11%
89%
Specified executives
- Current
K J Gleeson
D A Roe
A Cleland (C)
B C Walsh
- Former
J W Elmer
R Hoggard
J M Lloyd
J R Warnock
-
-
42,500
-
-
-
-
-
-
-
100%
-
-
-
-
-
100%
100%
0%
100%
100%
100%
100%
100%
(A)
Amounts included in remuneration for the financial year represent the amount that vest in the financial year based on achievement of personal and Company targets and
satisfaction of relevant performance measures. No amounts vest in future financial years in respect of the STI for the 2005 financial year.
(B)
The amounts forfeited are due to the relevant performance measures (under the STI), not being met in relation to the current financial year.
(C)
For further details of the amount paid to Ms Cleland, refer to remuneration arrangements as set out in section D of this remuneration report.
Incitec Pivot Limited
27
Directors’ Report
Remuneration Report
E. Equity instruments held by directors and specified executives
E.1 Shareholdings of directors and specified executives
The movement during the reporting period in the number of ordinary shares (including shares treated as options for the purposes
of remuneration) of Incitec Pivot and the movement during the reporting period in the number of ordinary shares, trust shares and
award rights and options for fully paid ordinary shares of the Ultimate parent entity (Orica Limited) held, directly, indirectly or
beneficially, by each specified director and specified executive (including by their personally-related entities) is as follows:
The Company - Incitec Pivot
Specified non-executive directors
- Current
J C Watson
A D McCallum
- Former
L M Delahunty
D B Trebeck
Specified executive directors
- Current
J E Fazzino (1)
- Former
G J Witcombe
Specified executives
- Current
K J Gleeson
D A Roe
B C Walsh (2)
- Former
J W Elmer
R Hoggard
J M Lloyd
J R Warnock
Ultimate parent entity - Orica Limited
Specified non-executive directors
- Current
J R Chesterfield (1)
B Healey
A C Larkin
- Former
B J Gibson
G R Liebelt
D B Trebeck
Specified executive directors
- Current
J Segal (2)
J E Fazzino
- Former
G J Witcombe
Specified executives
- Current
D A Roe
B C Walsh (3)
- Former
R Hoggard
J R Warnock
Number of Shares
Opening balance
(A)
Acquired
during the
year (B)
Disposed
during the year
(C)
Closing
balance (D)
2,700
6,818
- - 2,700
6,818
- -
6,478
4,000
-
-
(6,478)
(4,000)
-
-
9,581 68
- 9,649
59,778
-
(59,778)
-
2,542 3,395
2,738 68
1,881 52
- 5,937
- 2,806
- 1,933
9,479 52
9,482 38
10,472
8,632 68
-
(9,531)
(9,520)
(10,472)
(8,700)
-
-
-
-
28,614
9,300
38,000
- -
- -
- -
28,614
9,300
38,000
255,600 55,270
423,281
454,778
-
9,000
(310,870)
(878,059)
(9,000)
-
-
-
16,412
18,642
- - 16,412
29,808
-
11,166
103,374
196,962
(300,336)
-
4,534
4,340
11,913
16,447
-
- - 4,340
415 20,378
5,254
1,375
(20,793)
(6,629)
-
-
28
Incitec Pivot Limited
Directors’ Report
Remuneration Report
E. Equity instruments held by directors and specified executives
(continued)
E.1 Shareholdings of directors and specified executives (continued)
The Company
(A) Represents the holding at 1 October 2004 of shares of Incitec Pivot held by specified non-executive and executive directors and
specified executives who were specified directors and specified executives of the Company during the year ended 30 September
2005. This includes fully paid ordinary shares, shares acquired under the Employee Share Ownership Plan (ESOP) and shares
treated as options for the purposes of remuneration as disclosed section E.2 of this remuneration report. Details of the ESOP are set
out in Note 32, Employee Share Plans.
(B) Represents shares acquired by specified directors and specified executives while they are directors or executives of the Company
including:
(cid:120)
(cid:120)
Acquisitions by the specified directors and specified executives who were eligible to participate in the employee share ownership
plan (ESOP) and who participated in the scheme during the year. Details of the ESOP are set out in Note 32, Employee Share
Plans.
Acquisition of shares under the LTIs (treated as options for the purposes of remuneration).
(C) Represents shares disposed of during the year. In the case of specified directors or specified executives who ceased their
directorships or employment during the year, all shares were treated as disposed as at the relevant date of cessation.
(D) Represents the holding at 30 September 2005 of shares of Incitec Pivot, held by specified executive directors and specified
executives who were directors and executives of the Company at 30 September 2005.
(1)
Includes movements and holdings as a specified executive prior to appointment as a specified executive director on 18 July 2005 in
addition to movements and holdings as a specified executive director.
(2) Opening balance represents holdings at appointment date (1 April 2005). Movements are from this date.
The Ultimate parent entity
(A) Represents the holding at 1 October 2004 of shares of Orica Limited (including trust shares and award rights) held by specified non-
executive and executive directors and specified executives who were directors and executives of the Company during the year ended
30 September 2005.
(B) Represents shares, trust shares and award rights of Orica Limited acquired during the year by specified directors and specified
executives while they are directors or executives of the Company. Acquisitions also includes options exercised which were converted
to fully paid ordinary shares of Orica Limited during the year ended 30 September 2005.
(C) Represents shares of Orica Limited disposed of during the year and trust shares converted to ordinary shares or disposed of during
the year and award rights exercised or lapsed during the year. In the case of specified directors or specified executives who ceased
their directorships or employment during the year, all shares were treated as disposed as at the relevant date of cessation.
(D) Represents the holding at 30 September 2005 of shares, trust shares and award rights of Orica Limited, held by specified non-
executive and executive directors and specified executives who were directors and executives of the Company at 30 September
2005.
(1) Opening balance represents holdings at appointment date (18 July 2005). Movements are from this date.
(2) Opening balance represents holdings at appointment date (3 June 2005). Movements are from this date.
(3) Opening balance represents holdings at appointment date (1 April 2005). Movements are from this date.
Incitec Pivot Limited
29
Directors’ Report
Remuneration Report
E. Equity instruments held by directors and specified executives
(continued)
E.1 Shareholdings of directors and specified executives (continued)
Number of Options
Opening
Balance (A)
Acquired during
the year (B)
Exercised
during the year
(C)
Lapsed during
the year (D)
Closing Balance
28,508
-
-
-
28,508
50,000
309,600
-
-
(50,000)
(292,000)
-
(17,600)
-
-
109,634
10,861
-
-
-
(10,861)
- 109,634
-
-
47,550
-
(11,887)
- 35,663
5,254
-
(5,254)
-
-
Ultimate parent entity - Orica Limited
Specified non-executive directors
- Current
J R Chesterfield (1)
- Former
B J Gibson
G R Liebelt
Specified executive directors
- Current
J Segal (2)
J E Fazzino (3)
Specified executives
- Current
D A Roe
- Former
J R Warnock
The Ultimate parent entity
(A) Represents the holding at 1 October 2004 of options for fully paid ordinary shares of Orica Limited (the Ultimate parent en tity) held by specified non-executive
and executive directors and specified executives who were directors and executives of the Company during the year ended 30 Sept ember 2005.
(B) Represents options for fully paid ordinary shares of Orica Limited acquired during the year by specified non-executive and executive directors and specified
executives while they are directors or executives of the Company.
(C) Represents options for fully paid ordinary shares of Orica Limited which were exercised or lapsed during the year by specified non-executive and executive
directors and specified executives while they are directors or executives of the Company. In the case of specified directors o r specified executives who
ceased their directorship or employment during the year, all options of fully paid ordinary shares of Orica Limited were treate d as disposed as at the relevant
date of cessation.
(D) Represents the holding at 30 September 2005 of options for fully paid ordinary shares of Orica Limited (the Ultimate parent entity) held by specified non-
executive and executive directors and specified executives who were directors and executives of the Company during the year end ed 30 September 2005.
(1) Opening balance represents holdings at appointment date (18 July 2005). Movements are from this date.
(2) Opening balance represents holdings at appointment date (3 June 2005). Movements are from this date.
(3) Opening balance includes movements and holdings as a specified executive prior to appointment as a specified executive dire ctor on 18 July 2005, in
addition to movements and holdings as a specified executive director.
30
Incitec Pivot Limited
Directors’ Report
Remuneration Report
E. Equity instruments held by directors and specified executives
(continued)
E.2 Options over equity instruments granted as remuneration
For the purposes of determining director and executive remuneration, the shares granted to the participants under the LTIs are
treated as options. Such shares, which are treated as options, are subject to limited recourse loans, details of which have been
disclosed in Note 35 to the Financial Report.
For the year ended 30th September 2005
Plan
Effective grant
date
Opening
balance
Granted during
the year as
remuneration (A)
Awards (B)
Retirements /
forfeits during
the year (C)
Closing
balance
Status at end
of year(D)
Options
allocated since
year end (E)
Status(D)
Specified executive directors
- Current
J E Fazzino
- Former
Retention
1 June 2003
Performance 1 October 2003
G J Witcombe Retention
1 June 2003
Performance 1 October 2003
Specified executives
- Current
K J Gleeson (1)
D A Roe
B C Walsh
- Former
J W Elmer
R Hoggard
J M Lloyd
J R Warnock
Retention
1 June 2003
Performance 1 October 2003
Performance 1 October 2003
Performance 1 October 2003
Retention
1 June 2003
Performance 1 October 2003
Retention
1 June 2003
Performance 1 October 2003
Retention
1 June 2003
Performance 1 October 2003
Retention
1 June 2003
Performance 1 October 2003
5,101
4,424
32,269
27,509
-
2,542
2,738
1,825
5,091
4,332
5,101
4,325
5,667
4,805
4,534
4,042
-
-
-
-
-
-
(32,269)
(27,509)
3,327
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(5,091)
(4,332)
-
-
-
-
(4,534)
(4,042)
-
-
-
-
-
-
-
-
-
-
(5,101)
(4,325)
(5,667)
(4,805)
-
-
5,101
4,424
Unrestricted
Restricted
-
5,130
Restricted
-
-
Repaid
Repaid
-
-
3,327
2,542
2,738
1,825
-
-
-
-
-
-
-
-
Unrestricted
5,938
Restricted
Restricted
Restricted
Restricted
Repaid
Repaid
Forfeited
Forfeited
Forfeited
Forfeited
Repayable
Repayable
-
6,269
Restricted
3,199
Restricted
-
-
-
-
-
-
-
-
(A) Refers to the number of shares allocated to the participating executive or participating executive director during the financial year. These options are immediately vesting,
meaning they vest upon the shares being allocated to the participant.
(B) Represents awards (in the form of waivers of loans) granted to the applicable executives who satisfied the criteria under the relevant LTI plan. Refer to section B of this
remuneration report for further details of the LTIs.
(C) The applicable executive ceased to be employed by the Company and thus forfeited all rights to the underlying shares. Consequently the Company sold the underlying shares.
(D) "Unrestricted" refers to shares, which are subject to a limited recourse loan, however the participant may sell these shares and repay the loan at any time. All retention shares
became unrestricted on 30 September 2005, as current participating executives satisfied the retention criteria.
"Restricted" refers to those shares that are subject to a limited recourse loan; however the participant is not free to sell or otherwise deal in the underlying shares.
"Repaid" means the underlying loan associated with the shares has been repaid in full.
"Forfeited" means the executive ceased to be employed by the Company and thus forfeited all rights to the underlying shares.
"Repayable" means the loan is repayable within 90 days of the executive's exit from the Company.
(E) Since year end a number of executives were granted additional loans which were used to purchase shares on market. Refer to details of the performance plan under section B of
this remuneration report. These shares, treated as options for the purposes of remuneration, were allocated on 4 October 2005 and will be included in the remuneration report for
year ended 2006.
(1) With respect to Mrs Gleeson, her employment with Incitec Pivot commenced in February 2004 and she was granted pro-rata participation in the retention plan with effect from 1
June 2003.
Incitec Pivot Limited
31
Directors’ Report
Corporate Governance Statement
Since Incitec Pivot's listing on the Australian Stock Exchange (ASX) in July 2003, 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
eciffofosmret’srotceriD
Names of the Remuneration and Appointments Committee
members and attendance at meetings
Composition of Board, Chairman, role of Chairman and
Managing Director & CEO
Code of conduct for directors, executives and employees
ycilopgnidarterahS
thgisrevoksiR
Audit and Risk Management Committee members and
qualifications
Audit and Risk Management Committee meetings and
attendance
slortnoclanretnidnatnemeganamksiR
Financial statements sign off and structure of Audit and Risk
Management Committee
serusolcsidXSArofserudecorP
ygetartssnoitacinummocredloherahS
rotiduafoecnadnettA
weiverecnamrofreP
Company’s remuneration policies and disclosure
Retirement benefits for non-executive directors
Codes of conduct to guide compliance with legal and other
obligations
Reference
Board of Directors on page 33
Information on Directors on pages 6 to 7 and pages 15 to 16
Composition of the Board on pages 33 to 34
Access to information and independent advice on page 33
7ot6segapnosrotceridnonoitamrofnI
Remuneration and Appointments Committee and Board
meetings of directors on page 16
Role and composition of Board on page 33
Codes of conduct on page 38
83egapnognilaeddnapihsrenwoerahS
63dna53segapnoeettimmoCtnemeganaMksiRdnatiduA
Audit and Risk Management Committee on pages 35 and 36
Meetings of directors on page 16
73egapnotnemeganamksirdnalortnoclanretnI
Audit and Risk Management Committee on pages 35 and 36
2 and 33
3esgapnostnemeriuqererusolcsidXSArofserudecorP
dna23egapnostnemeriuqererusolcsidXSArofserudecorP
Incitec Pivot website (www.incitecpivot.com.au)
73egapnorotidualanretxE
43egapnonoitaulavedraoB
The remuneration report and also in note 35,
Director and executive disclosures
The remuneration report
Codes of conduct on page 38
This Corporate Governance Statement outlines the key aspects of the Company's governance framework which was established, and
is 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 the
Corporations Act 2001 (Cth) (Corporations Act). 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 the Company’s 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:
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
market at the same time and in accordance with the requirements of the ASX and the Australian Securities and Investments
32
Incitec Pivot Limited
Directors’ Report
Corporate Governance Statement
(cid:120)(cid:3)
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 & 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:
(cid:120)(cid:3) Direction and objectives - charting and monitoring the direction, policies and financial objectives of the Company;
(cid:120)(cid:3) Compliance - ensuring and monitoring compliance with legal requirements and standards of performance;
(cid:120)(cid:3)
Ethical - implementing procedures and principles to ensure the Company carries on its business ethically, with openness, honesty
and integrity; and
(cid:120)(cid:3) Managing Director & CEO and other Officers - appointing, terminating and reviewing the performance of the Managing Director &
CEO 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 seven directors, including five non-executive directors and two executive directors (the Managing Director & CEO
and Finance Director & Chief Financial Officer).
The Board collectively has 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 set out on pages 6
to 7 of the annual report.
The Listing Rules of the ASX require that no member of the Board (other than the Managing Director & 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 & CEO) must retire and are eligible to be re-elected by the shareholders. In addition, to ensure continuity of directors with
farming experience and agricultural connections following the merger and listing on ASX, the constitution then adopted included
specific retirement provisions regarding such directors. Under these provisions, each of John Watson and Allan McCallum are eligible
to hold office until the third annual general meeting after the constitution was adopted (the constitution was adopted in April 2003) and
then to offer themselves for re-election. Prior to his resignation as a director in July 2005, these provisions also applied to Leo
Delahunty. Thereafter, to avoid a common retirement date for directors with farming experience, the constitution provided for staggered
retirement dates. Given the requirements of the Listing Rules of the ASX, as referred to above, the Company sought and obtained,
from ASX, a waiver from its requirement with regard to terms in excess of three years in relation to each of these directors.
The Managing Director & CEO serves as a director until he ceases to be the Managing Director & CEO.
The roles of Chairman and Managing Director & CEO are separate.
The Board, excluding the director in question, will regularly assess the independence of each director, 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 may reasonably be expected to, interfere with the director's ability to act in
the best interests of the Company. The Board's consideration is undertaken in recognition of its status as a subsidiary of Orica Limited.
A range of factors are considered by the Board in assessing the independence of its directors, including those set out in the ASX
Recommendations.
Incitec Pivot Limited
33
Directors’ Report
Corporate Governance Statement
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
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 and Anthony Larkin are independent when assessed on
the criteria above, taking into account all the relevant interests, matters and relationships of the particular director.
In summary, of the seven directors, the Board considers four directors are independent.
In addition at the merger, Orica Limited and Incitec Pivot entered into a Merger Implementation Deed dated 21 February 2003 under
which Orica Limited agreed that, at any time when Orica is the ultimate listed holding company of Incitec Pivot and while Incitec Pivot is
listed on the official list of ASX, Orica will exercise its power as holding company to support Incitec Pivot being governed in accordance
with certain principles of good corporate governance. This included the Board adopting policies and procedures according to the
principles of good governance consistent with those adopted by a substantial number of ASX 200 companies and for the Board to
include a diversity of experience, expertise and community connections so that no individual or small group of individuals could
dominate it. In this respect, Orica Limited agreed to exercise its power as holding company to support the Company having at least
three members of its nine member Board having at least 10 years practical experience in managing a commercial farming business.
In July 2005, as part of the Company’s restructure, which included the merger of key divisions and a reduction in staffing numbers to
streamline administration and secure cost savings, the Board reviewed its composition and that of the Company’s shareholders and
reduced its number of Directors from nine to seven. On a smaller board, the Board sought to ensure that a good diversity of
experience, expertise and community connections was achieved, reflective of the profile of the shareholder base. Of the board of seven
directors, five are non-executive and, of those, four are independent. Of the four that are independent, John Watson and Allan
McCallum have farming experience and agricultural connections.
Further, Incitec Pivot and Orica agreed at the time of the merger that robust documented protocols be 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. As part of this, Incitec Pivot’s Board has a special Governance Committee which is
responsible for reviewing related party transactions and making appropriate recommendations to the Board.
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 August 2005, the Board undertook its annual performance evaluation by
way of a self assessment which addressed Board structure, processes, people and dynamics.
Board committees
The Board has established three committees (for further information on these committees refer to the section “Committees of the
Board” on pages 35 to 37 of this report). 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 report regularly to the Board as to its activities.
Directors
John Watson and Allan McCallum were first appointed as directors 15 December 1997, Brian Healey and Anthony Larkin were
appointed as directors on 1 June 2003, Julian Segal, on 3 June 2005 and James Fazzino and John Chesterfield were each appointed
as directors on 18 July 2005.
Incitec Pivot recognises the importance of regular performance evaluation of the directors. Assessment of individual director’s
performance and the Board as a whole is a process determined by the Chairman and the Remuneration and Appointments Committee.
As mentioned, a Board operational review took place in August 2005 and individual director’s performance will be reviewed throughout
the 2005/2006 financial year and will include one-on-one interviews with directors and the Chairman, as well as discussions on
succession planning. Each of Brian Healey, John Watson and Allan McCallum who are retiring and standing for re-election at the 2006
Annual General Meeting, together with Julian Segal, John Chesterfield and James Fazzino, who were appointed by the Board and who
are standing for election at the Annual General Meeting, were subject to a specific performance review prior to their nomination for re-
election.
34
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 & 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
in section B and C of the remuneration report.
The Remuneration and Appointments Committee also considers the performance and remuneration of the Managing Director & CEO
and makes recommendations as to his remuneration to the Board.
The performance evaluation of the Managing Director & 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 2004/2005 financial year are set out on page 16 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 & 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 executives and 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. Details of
these fees and payments are in the table titled “Directors’ Remuneration” set out in section A of the remuneration report.
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 2005 was within the maximum amount approved by shareholders.
Details of remuneration paid to the executive directors are in the table titled “Directors’ Remuneration” set out in section A of the
remuneration report.
Committees of the Board
As part of Incitec Pivot’s corporate governance policy, the Incitec Pivot Board has established the following committees:
Audit and Risk Management Committee;
(cid:120)(cid:3)
(cid:120)(cid:3) Remuneration and Appointments Committee; and
(cid:120)(cid:3) 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.
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 control and risk management, 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 6 to 7 of the annual
report.
Incitec Pivot Limited
35
Directors’ Report
Corporate Governance Statement
The current members of the Audit and Risk Management Committee are Anthony Larkin (Chairman), Allan McCallum and John
Chesterfield. Although John Chesterfield is employed by Orica and is not considered independent, the majority of the Committee is
independent, as recommended by the ASX Recommendations.
The attendance of the members of the Audit and Risk Management Committee at each meeting held during the financial year to 30
September 2005 is set out on page 16 of this report.
The primary objectives of the Audit and Risk Management Committee, as set out in its charter, are as follows:
Financial reporting
(cid:120)(cid:3)
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
(cid:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3) Managing Director & CEO and Finance Director & Chief Financial Officer certification - review the certification provided by the
Managing Director & CEO and the Finance Director & Chief Financial Officer on annual and half yearly reports.
Internal control and risk management
(cid:120)(cid:3)
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.
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 its 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 its 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 auditor, 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 of non-audit work.
appointment/replacement - make recommendations to the Board on the selection, evaluation and replacement of 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, under its charter, is to comprise at least 3 independent non-executive
directors.
The Committee comprises all Incitec Pivot Board members except the Managing Director & CEO, Julian Segal and the Finance
Director and Chief Financial Officer, James Fazzino, 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:
(cid:120)(cid:3)
(cid:120)(cid:3)
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);
External audit
(cid:120)(cid:3)
Internal audit
(cid:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3)
36
Incitec Pivot Limited
Directors’ Report
Corporate Governance Statement
(cid:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3)
to recommend the appropriate process for evaluation of the performance of the directors;
to consider the appointment, performance and remuneration of the Managing Director & CEO; and
to review and make recommendations to the Board as to appropriate incentive schemes for senior executives and employees.
The attendance of the members of the Remuneration and Appointments Committee at each meeting held during the financial year to 30
September 2005 is set out on page 16 of this report.
Governance Committee
This Committee was established pursuant to Incitec Pivot's constitution in recognition of the Company's status as a subsidiary of Orica
Limited.
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 Brian Healey.
The primary purposes of the Governance Committee are to ensure:
(cid:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3)
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 & CEO and the Finance Director & Chief Financial Officer will sign off to the Board:
(cid:120)(cid:3)
(cid:120)(cid:3)
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 lead audit partner and review partner of the Company’s external auditor rotate every 5 years. The current lead 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 auditor 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, Auditor’s remuneration.
Since KPMG’s appointment in 2003, KPMG’s lead audit partner and other representatives from KPMG have attended the Company’s
previous annual general meetings and were available to answer questions from shareholders, as appropriate.
For the next Annual General Meeting to be held on 23 January 2006, the lead audit partner will attend. Shareholders now have the
right under the Corporations Act 2001 (Cth) to submit written questions on certain topics to the auditor and the auditor may table
answers to such questions at the Annual General Meeting.
Incitec Pivot Limited
37
Directors’ Report
Corporate Governance Statement
Share ownership and dealing
Details of shares in the Company held by the directors are set out in section E.1 of the remuneration report.
The Board has adopted a share trading policy which regulates dealings in the Company's and Orica’s shares. The policy aims to
ensure that Incitec Pivot's directors, employees, advisors, auditors and consultants (associates) are aware of the legal restrictions on
trading in securities while a person is in possession of inside information.
Under the policy, all associates are prohibited from trading in the Company's securities or Orica's securities, while in possession of
inside information. Also, there are certain 'black out' periods, from the end of the financial year or half year until the relevant financial
results are announced.
In addition, directors, all employees in the legal, finance, commercial and marketing business units and all other associates, who are
not employees, 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 of the dealing taking place.
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 the 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
wellbeing 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
John C Watson, AM
Chairman
Dated at Melbourne this 16th day of November 2005
38
Incitec Pivot Limited
Statements of Financial Performance
For the year ended 30 September 2005
Notes
(3)
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
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
Asset write-downs, clean-up and environmental provisions (significant
items)
Other expenses from ordinary activities (including significant items)
(33)
(4)
(4)
(4)
(5)
Consolidated
Company
2005
2004
2005
2004
$000
1,083,696
$000
1,137,898
$000
991,372
$000
978,275
23,225
40,060
23,225
156,438
(788,525)
(99,502)
-
(40,291)
(10,329)
(57,873)
(26,790)
(931)
(30,995)
(12,316)
(810,573)
(83,524)
-
(45,317)
(5,960)
(51,830)
(26,580)
(673)
(31,044)
(11,534)
(21,155)
(679)
(7,102)
(1,072,584)
11,112
(3,115)
(1,030,769)
107,129
(788,525)
(99,502)
50,437
(11,203)
(9,805)
(57,873)
(26,790)
(931)
(30,995)
(12,316)
(21,155)
(7,102)
(992,535)
(1,163)
(892,585)
(38,617)
24,853
(10,193)
(2,825)
(48,756)
(24,549)
(673)
(31,044)
(11,534)
(679)
(330)
(880,494)
97,781
Profit/(loss) from ordinary activities before income tax expense
Income tax (expense)/benefit attributable to profit/(loss) from ordinary
activities
Profit from ordinary activities after income tax relating to
members of Incitec Pivot Limited
Total changes in equity other than those resulting from
transactions with owners as owners
(7)
(6,952)
(32,090)
10,291
(14,077)
4,160
75,039
9,128
83,704
(24)
4,160
75,039
9,128
83,704
Earnings per share
Basic earnings per share:
Ordinary shares
Diluted earnings per share:
Ordinary shares
cents
cents
(8)
(8)
7
7
129
129
The Statements of Financial Performance are to be read in conjunction with the Notes to the Financial Statements set out on
pages 43 to 81.
40
Incitec Pivot Limited
Statements of Financial Position
As at 30 September 2005
Current assets
Cash assets
Receivables
Other financial assets
Inventories
Other assets
Total current assets
Non-current assets
Receivables
Other financial assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Other assets
Total non-current assets
Total assets
Current liabilities
Payables
Interest bearing liabilities
Current tax 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 /(losses)
Total equity
Consolidated
2005
$000
2004
$000
Notes
Company
2005
$000
2004
$000
(9)
(10)
(13)
(11)
(12)
(10)
(13)
(14)
(15)
(16)
(12)
(17)
(18)
(19)
(20)
(21)
(20)
3,351
75,901
12,341
271,650
6,135
369,378
2,646
-
283,855
174,004
19,885
6,574
486,964
856,342
200,699
12,514
4,101
43,713
261,027
17,335
12,821
30,156
291,183
565,159
(22)
(23)
(23)
(24)
532,445
35,922
(3,208)
565,159
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
3,351
107,901
12,341
271,650
1,638
396,881
383
529,178
116,983
-
19,885
3,201
669,630
1,066,511
394,135
12,514
4,101
43,713
454,463
17,335
12,821
30,156
484,619
581,892
532,445
43,694
5,753
581,892
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
The Statements of Financial Position are to be read in conjunction with the Notes to the Financial Statements set out on
pages 43 to 81.
Incitec Pivot Limited
41
Statements of Cash Flows
For the year ended 30 September 2005
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
Other trading revenue received
Net income taxes paid
Net cash flows from operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Payments for purchase of investments
Proceeds from sale of property, plant and equipment
Net cash flows used in investing activities
Cash flows from financing activities
Net movement in short term financing
Dividends paid
Net cash flows used in financing activities
Net (decrease)/increase in cash held
Cash at the beginning of the financial year
Cash at the end of the financial year
Notes
Consolidated
2005
$000
Inflows/
(Outflows)
2004
$000
Inflows/
(Outflows)
Company
2005
$000
Inflows/
(Outflows)
2004
$000
Inflows/
(Outflows)
1,121,414
(1,019,168)
1,139
(10,575)
-
151
399
(23,619)
69,741
1,121,161
(959,165)
388
(6,038)
-
289
191
(15,351)
141,475
(33)
(26)
994,292
(914,634)
1,139
(9,805)
20,500
151
399
(23,619)
68,423
863,755
(704,217)
531
(446)
16,000
244
-
(8,842)
167,025
(26,234)
(5,105)
2,164
(29,175)
(30,814)
-
1,427
(29,387)
(24,917)
(60,104)
2,164
(82,857)
(28,724)
-
1,431
(27,293)
(50,541)
(70,520)
(121,061)
(31,032)
(16,902)
(47,934)
(80,495)
83,846
3,351
64,154
19,692
83,846
(25)
(26)
4,459
(70,520)
(66,061)
(80,495)
83,846
3,351
(51,847)
(16,902)
(68,749)
70,983
12,863
83,846
The Statements of Cash Flows are to be read in conjunction with the Notes to the Financial Statements set out on pages 43 to 81.
42
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2005
1 Significant accounting policies
2 Segment report
3 Revenue from ordinary activities
4 Profit/(loss) from ordinary activities before income tax expense
5 Individually significant items
6 Auditors' remuneration
7 Income tax expense
8 Earnings per share (EPS)
9 Cash assets
10 Receivables
11 Inventories
12 Other assets
13 Other financial assets
14 Property, plant and equipment
15 Intangible assets
16 Deferred tax assets
17 Payables
18 Interest bearing liabilities
19 Current tax liabilities
20 Provisions
21 Deferred tax liabilities
22 Contributed equity
23 Reserves and retained profits
24 Total equity reconciliation
25 Dividends
26 Notes to the statements of cash flows
27 Commitments
28 Contingent liabilities
29 Standby arrangements and credit facilities
30 Amounts receivable and payable denominated in foreign currencies
31 Additional financial instruments disclosures
32 Employee share plans
33 Related party disclosures
34 Superannuation commitments
35 Director and executive disclosures
36 Investments in controlled entities
37 Deed of Cross Guarantee
38 Impact of adopting AASB equivalent to International Financial Reporting Standards
39 Events subsequent to balance date
Incitec Pivot Limited
44
46
47
47
48
49
49
51
51
52
52
52
53
53
54
54
54
55
55
55
56
57
57
58
58
59
59
60
62
62
62
65
67
68
69
71
71
72
81
43
Notes to the Financial Statements
For the year ended 30 September 2005
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 2005, 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.
Tax consolidation
The Company is the head entity of the tax-consolidated group
comprising all the Australian wholly-owned subsidiaries set
out in Note 36. The implementation date for the tax-
consolidated group is 1 October 2003. The head entity
recognises all the current and deferred tax assets and
liabilities of the tax-consolidated group (after elimination of
intragroup transactions).
The tax-consolidated group has entered into a tax funding
agreement that requires wholly-owned subsidiaries to make
contributions to the head entity for:
(cid:120)(cid:3) deferred tax balances recognised by the head entity on
implementation date, including the impact of any relevant
reset tax cost bases: and
(cid:120)(cid:3) current tax assets and liabilities and deferred tax
balances arising from external transactions occurring
after the implementation of tax consolidation.
Under the tax funding agreement, the contributions are
calculated on a “stand-alone basis” so that the contributions
are equivalent to the tax balances generated by external
transactions entered into by wholly-owned subsidiaries. The
contributions are payable as set out in the agreement and
reflect the timing of the head entity’s obligations to make
payments for tax liabilities to the relevant tax authorities. The
assets and liabilities arising under the tax funding agreement
are recognised as intercompany assets and liabilities with a
consequential adjustment to income tax expense.
(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 plant
in four to five year cycles. This plant operates continuous
production processes twenty-four hours per day, seven days
per week. Major cyclical expenditure, incorporating new
capital expenditure, enables this plant to extend its estimated
useful life and improve its performance. This expenditure is
deferred and amortised over the period to which future
economic benefits relate, which is generally until the
44
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2005
1. Significant accounting policies
(continued)
commencement of the next cycle.
The unamortised expenditure is added to the respective net
book value of the major plant for the purposes of assessing
recoverable value.
(x) Other financial assets (see note 13)
The Company’s interests in financial assets other than
controlled entities are stated at fair value, being quoted market
prices at reporting date. Investment income includes
dividends which are recognised in the statements of financial
performance when declared.
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.
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. 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 able to be
assessed. 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.
For sites where there are uncertainties with respect to what
Incitec Pivot’s remediation obligations might be or what
remediation techniques might be approved, no reliable
estimate can presently be made of regulatory and remediation
costs and no amounts have been capitailsed expensed or
provided for (see note 28)
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.
Incitec Pivot Limited
45
Notes to the Financial Statements
For the year ended 30 September 2005
1. Significant accounting policies
(continued)
Restructuring and employee termination benefits
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.
Onerous contracts
A provision for onerous contracts is recognised after
impairment losses on assets dedicated to the contract have
been recognised and when the expected benefits are less
than the unavoidable costs of meeting the contractual
obligations. A provision is recognised to the extent that the
contractual obligations exceed unrecognised assets.
(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.
(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.
(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
During the years ended 30 September 2005 and 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.
46
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2005
3. Revenue from ordinary activities
External sales
Sales to entities subject to common control
Other revenue from operating activities
Dividend income
wholly-owned controlled entities
Interest income
common controlled entities
wholly-owned controlled entities
external parties – banks
Rental income
Other income (1)
From outside operating activities
Unrealised gain on listed investment
Sale of property, plant and equipment
Total other revenue
Total revenue
(1) Includes unrealised foreign exchange gains and losses.
Consolidated
2005
$000
2004
$000
Company
2005
$000
2004
$000
Notes
1,035,437
38,435
1,107,098
28,490
909,113
38,435
913,084
28,397
(33)
-
-
34,000
34,500
246
-
728
151
38
33
-
521
289
40
246
-
728
151
38
33
56
530
244
-
(5)
7,236
1,425
9,824
1,083,696
-
1,427
2,310
1,137,898
7,236
1,425
43,824
991,372
-
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/(loss) on sale of property, plant and equipment
Amounts withdrawn from provisions for:
doubtful debts – trade debtors
doubtful debts – sundry debtors
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
doubtful debts – sundry debtors
employee entitlements
environmental liabilities
inventory losses and obsolescence
other provisions
restructuring (significant items)
Bad debts written off in respect of trade debtors
Lease payments – operating leases
Research and development
Superannuation contributions
494
2,238
494
2,238
536
247
(361)
-
-
705
536
247
(361)
-
-
597
796,295
770,513
796,295
736,146
8,069
2,260
1,669
4,291
6,235
19,503
8,288
22,336
8,069
1,736
3,234
7,969
1,677
1,148
5,070
5,123
9,805
4,748
490
4,422
-
2,917
424
24,871
37
12,316
602
5,826
9,945
4,748
-
4,137
270
1,276
487
-
95
11,534
277
8,113
-
-
-
-
490
4,422
-
2,917
424
24,871
37
12,316
602
5,826
-
840
270
1,276
487
-
95
11,534
277
3,336
(20)
(5), (20)
(1) The remaining useful lives of certain manufacturing assets were extended in the second half of 2004 to align the depreciation charge with actual
expected remaining useful lives.
Incitec Pivot Limited
47
Notes to the Financial Statements
For the year ended 30 September 2005
Gross
$000
2005
Tax
$000
Net
$000
Gross
$000
2004
Tax
$000
Net
$000
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
Business restructuring costs
Employee redundancies and allowances (1)
Restructuring and other direct costs (1)
Asset write-downs (2)
Total business restructuring
(18,065)
(15,015)
(21,155)
(54,235)
5,420
4,145
6,193
15,758
(12,645)
(10,870)
(14,962)
(38,477)
Other
Unrealised gain from investment held for resale in listed Co (3)
Over provision of income tax in previous years (4)
Total other
7,236
-
7,236
(2,171)
-
(2,171)
5,065
-
5,065
-
-
-
-
-
-
Merger implementation costs
Employee redundancies and allowances
Environmental
Corporate launch
Asset write-downs
Transaction and implementation costs
Total merger implementation costs (5)
Individually significant items
Company
Business restructuring costs
Employee redundancies and allowances (1)
Restructuring and other direct costs (1)
Asset write-downs (2)
Total business restructuring
-
-
-
-
-
-
(46,999)
-
-
-
-
-
-
13,587
-
-
-
-
-
-
(33,412)
(6,255)
(270)
(1,498)
(409)
(895)
(9,327)
(9,327)
(18,065)
(15,015)
(21,155)
(54,235)
5,420
4,145
6,193
15,758
(12,645)
(10,870)
(14,962)
(38,477)
-
-
-
-
-
-
Other
Unrealised gain from investment held for resale in listed Co (3)
Over provision of income tax in previous years (4)
Total other
7,236
-
7,236
(2,171)
-
(2,171)
5,065
-
5,065
Merger implementation costs
Employee redundancies and allowances
Environmental
Corporate launch
Asset write-downs
Transaction and implementation costs
Total merger implementation costs (5)
Individually significant items
-
-
-
-
-
-
(46,999)
-
-
-
-
-
-
13,587
-
-
-
-
-
-
(33,412)
(5,485)
(270)
(1,498)
(409)
(895)
(8,557)
(8,557)
(1) 2005 saw a significant rationalisation of the fertiliser industry. ELF Australia Pty Ltd (ELF) was formed in December 2004 and is owned 50% by
Landmark Operations Ltd and 50% by Elders Limited. ELF purchased a 66.7% shareholding in Hi-Fert Pty Ltd. At the same time Elders Limited and
Landmark Operations Ltd (who combined, purchased 29% of the fertiliser volume sold by Incitec Pivot in 2004) announced that they intended to
purchase fertiliser exclusively through ELF and that ELF would source product from Hi-Fert Pty Ltd with the balance from other suppliers in the open
market. Incitec Pivot incurred significant expenditure in reacting to the changed industry dynamics including developing and implementing a new
(2) Asset write-downs following the reassessment of carrying amounts in light of expected lower sales volumes post ELF.
(3) Unrealised gain in relation to the investment held for resale in the listed gas producer Queensland Gas Company Limited.
(4) Adjustment to income tax expense to reconcile to income tax returns as lodged.
(5) Merger implementation costs in the prior year related to the restructuring and reorganisation activities following the acquisition of Incitec
Fertilizers Limited.
48
Incitec Pivot Limited
-
-
-
-
697
697
1,877
81
449
123
269
2,799
3,496
-
-
-
-
828
828
1,645
81
449
123
269
2,567
3,395
-
-
-
-
697
697
(4,378)
(189)
(1,049)
(286)
(626)
(6,528)
(5,831)
-
-
-
-
828
828
(3,840)
(189)
(1,049)
(286)
(626)
(5,990)
(5,162)
Notes to the Financial Statements
For the year ended 30 September 2005
6. Auditor's remuneration
Total remuneration received, or due and receivable,
by the auditors for:
Audit services
Auditors of the Company - KPMG
Non audit services
Auditors of the Company - KPMG
Consolidated
2004
2005
Company
2005
2004
$
$
$
$
278,400
278,400
200,000
200,000
278,400
278,400
200,000
200,000
taxation services
other services
95,754
8,415
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.
-
-
-
278,400
-
-
-
278,400
95,754
8,415
104,169
304,169
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% (2004 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 (loss)/profit on sale of property, plant and equipment
income tax expense related to current and deferred tax transactions of the
wholly-owned subsidiaries in the tax consolidated group
recovery of income tax expense under a tax funding agreement
sundry items
Consolidated
Company
2005
$000
2004
$000
2005
$000
2004
$000
17,434
34,937
13,751
31,901
479
(433)
-
(111)
2,941
75
-
-
154
450
(287)
-
(2,098)
2,984
(512)
-
-
112
86
(433)
(10,200)
(111)
-
49
17,243
(17,243)
154
41
(287)
(10,350)
(1,853)
-
(592)
-
-
(1,388)
Income tax expense attributable to operating profit before significant items
20,539
35,586
3,296
17,472
Income tax expense attributable to significant items
Prima facie income tax benefit calculated at 30% (2004 at 30%)
on loss from significant items
Tax effect of permanent differences which increase/(reduce) tax expense
(14,100)
(2,798)
(14,100)
(2,567)
business restructuring costs
sundry items
tax under/(over)provided in prior years
net deferred tax balances recognised by head entity in relation to wholly-
owned subsidiaries within the tax consolidated group upon implementation
of Tax Consolidation
recovery of income tax expense under a tax funding agreement at transition
513
-
-
-
-
-
(1)
(697)
-
-
513
-
-
11,145
(11,145)
-
-
(828)
-
-
Income tax benefit attributable to operating
loss from significant items
(13,587)
(3,496)
(13,587)
(3,395)
Incitec Pivot Limited
49
Notes to the Financial Statements
For the year ended 30 September 2005
Consolidated
2005
$000
2004
$000
Company
2005
$000
2004
$000
7.
Income tax expense (continued)
Income tax expense/(benefit) attributable to operating profit
6,952
32,090
(10,291)
14,077
Income tax expense comprises:
provision for income tax
deferred income tax
future income tax benefit
tax related receivable from wholly-owned tax consolidated entities
11,647
(1,714)
(2,981)
-
6,952
18,510
5,478
8,102
-
32,090
11,647
(1,714)
(2,981)
(17,243)
(10,291)
3,594
7,382
3,101
-
14,077
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 (2004 $nil).
Deferred tax balances
As a consequence of the enactment of the Tax Consolidation legislation and the Company, as the head entity in a tax-
consolidated group, implementing tax consolidation from 1 October 2003, the head entity has applied UIG 52 Income Tax
Accounting under the Tax Consolidation System.
Where assets have had their tax value reset under tax consolidation, the subsidiary-related deferred tax balances recognised in
the Company and Consolidated entity have been determined based on the tax-consolidated group carrying amount for the
subsidiaries’ assets less the reset tax bases. For other assets and liabilities, the subsidiary-related deferred tax balances
recognised in the Company and Consolidated entity have been determined based on the previous timing differences at the level
of the tax-consolidated group. The Consolidated entity has reflected all adjustments in income tax expenses as it has elected not
to open past acquisition accounting. Future acquisition accounting will take deferred tax balances into account.
In the Company, the effect of implementing tax consolidation and of applying UIG 52 at 1 October 2003 was:
(cid:120) an increase in deferred tax liabilities transferred from wholly owned subsidiaries in the tax consolidated group of $8,617,000;
and
(cid:120) a corresponding increase in non-current intercompany receivables of $8,617,000.
In the Consolidated entity the effect for the year ended 30 September 2005 is nil.
In the Company, the effect for the year ended 30 September 2005 has been:
(cid:120) an increase in deferred tax liabilities of $2,028,000;
(cid:120) an increase in current tax liabilities of $15,215,000; and
(cid:120) an increase in current intercompany receivables of $17,243,000.
In the Consolidated entity the effect for the year ended 30 September 2005 is nil.
50
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2005
8. Earnings per share (EPS)
Basic and diluted earnings/(loss) per share
including significant items
excluding significant items
Weighted average number of shares used as the
denominator:
Number for basic and diluted earnings per share (1)
Reconciliation of earnings used in the calculation of basic
earnings per share including individually significant items
Consolidated
2005
Cents
per share
2004
Cents
per share
Notes
7
64
129
139
Number
Number
58,281,027
58,281,027
$000
$000
Profit/(loss) from ordinary activities after income tax expense
Earnings used in calculation of EPS including individually significant items
4,160
4,160
75,039
75,039
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
Add back individually significant items after income tax
(5)
Earnings used in calculation of EPS excluding individually significant items
4,160
33,412
37,572
75,039
5,831
80,870
(1) No shares were issued during the year ended 30 September 2005 and 2004, thus the weighted average
number of shares represents issued shares at year end.
The average market price of ordinary shares was $18.25 (2004 $17.33).
9. Cash assets
Cash at bank and on hand
Deposits at call
entity subject to common control
Consolidated
Company
2005
$000
2004
$000
2005
$000
2004
$000
2,785
566
3,351
705
2,785
705
83,141
83,846
566
3,351
83,141
83,846
(26),(31)
Incitec Pivot Limited
51
Notes to the Financial Statements
For the year ended 30 September 2005
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
Consolidated
2005
$000
2004
$000
Company
2005
$000
2004
$000
Notes
63,950
704
98,384
3,892
63,950
704
98,384
3,892
(189)
64,465
(762)
101,514
(189)
64,465
(762)
101,514
(33)
5,862
5,574
-
11,436
75,901
18,988
3,243
-
22,231
123,745
5,862
5,574
32,000
43,436
107,901
18,988
3,243
18,500
40,731
142,245
2,646
2,646
3,248
3,248
383
383
188
188
Significant terms and conditions
Trade debtors are carried at amounts due.
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.
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 from the end of invoicing month and payment compliance is high.
- a risk assessment process is used for all accounts, with a stop credit process for exceding credit limits and 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
(1viii)
(1viii)
20,440
-
20,440
18,775
(468)
18,307
20,440
-
20,440
18,775
(468)
18,307
255,595
(4,385)
251,210
271,650
230,130
(2,145)
227,985
246,292
255,595
(4,385)
251,210
271,650
230,130
(2,145)
227,985
246,292
(1ix)
(1ix)
21,286
(16,789)
4,497
1,638
6,135
5,735
839
6,574
16,789
(12,041)
4,748
2,299
7,047
7,870
2,296
10,166
-
-
-
1,638
1,638
2,362
839
3,201
-
-
-
2,268
2,268
-
2,296
2,296
52
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2005
Consolidated
2005
$000
2004
$000
Company
2005
$000
2004
$000
Notes
13. Other financial assets
Current
Investments in other entities
Listed shares at current market value (5),(1x)
Non-current
Investments in controlled entities
Unlisted shares at cost (36)
12,341
-
12,341
-
-
-
529,178
474,179
14. Property, plant and equipment
Land, buildings and improvements
At cost
Accumulated depreciation
At recoverable amount
Accumulated depreciation
Total net book value (1xi)
206,809
(95,741)
16,289
(1,369)
125,988
202,790
(90,308)
14,028
(693)
125,817
71,591
(35,426)
16,289
(1,369)
51,085
66,763
(31,481)
14,028
(693)
48,617
Machinery, plant and equipment
At cost
Accumulated depreciation
Capital works in progress
Total net book value (1xi)
Total net book value of property, plant and equipment
428,762
(282,352)
11,457
157,867
283,855
414,938
(259,244)
14,621
170,315
296,132
149,545
(95,104)
11,457
65,898
116,983
130,408
(78,728)
14,621
66,301
114,918
Carrying value of freehold land
(included with land, buildings and improvements)
Land held for resale
At cost - current
Total (included in value of freehold land)
46,368
56,135
4,067
7,025
2,416
2,416
9,381
9,381
2,279
2,279
-
-
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
2005
$000
148,271
2004
$000
148,271
Valuations of land and buildings
The valuations were independently determined in 2003 on a market value for existing use basis.
Capital gains tax has not been taken into account in these valuations.
Capitalised borrowing costs
No interest was capitalised during the financial year (2004 $nil).
Incitec Pivot Limited
53
Notes to the Financial Statements
For the year ended 30 September 2005
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 2005
Carrying amount at the beginning of the financial year
Additions
Disposals
Depreciation expense (4)
Write-down to recoverable amount (5)
Carrying amount at the end of the financial year
Company 2005
Carrying amount at the beginning of the financial year
Additions
Disposals
Depreciation expense (4)
Write-down to recoverable amount (5)
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
125,817
6,406
-
(6,235)
-
125,988
48,617
6,097
-
(3,234)
-
(395)
51,085
170,315
19,828
(931)
(19,503)
(11,842)
157,867
66,301
18,820
(931)
(7,969)
(11,842)
1,519
65,898
Total
$000
296,132
26,234
(931)
(25,738)
(11,842)
283,855
114,918
24,917
(931)
(11,203)
(11,842)
1,124
116,983
15.
Intangible assets
Goodwill, at cost
Less accumulated amortisation
Total net book value of goodwill (1xiii)
196,882
(22,878)
174,004
196,882
(13,073)
183,809
-
-
-
-
-
-
Consolidated
2005
$000
2004
$000
Company
2005
$000
2004
$000
16. Deferred tax assets
Future income tax benefit (1vii)
19,885
17,108
19,885
13,730
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
194,067
900
-
5,658
-
74
200,699
177,240
134
-
15,480
-
-
192,854
194,067
900
118,043
5,655
75,396
74
394,135
177,240
134
120,911
15,234
71,500
-
385,019
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.
54
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2005
18.
Interest bearing liabilities
Current
Unsecured
redeemable preference shares
other loans
investment deposit scheme
Consolidated
2005
$000
2004
$000
Company
2005
$000
2004
$000
Notes
-
55,000
-
-
12,514
12,514
8,055
63,055
12,514
12,514
8,055
8,055
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, which
were redeemed 27 November 2004 at face value. Holders received interest of 5.36% per annum. Redemption was in the sum of
$55m funded by the subscription by the Company for ordinary shares in Incitec Fertilizers Limited. This was funded by borrowings
from Orica Finance Limited, a common controlled entity.
Investment deposit scheme
Customers may invest funds with Incitec Pivot by way of unsecured notes in the Investment Deposit Scheme issued under the
prospectus dated 24 December 2004, as lodged with ASIC. The interest rate offered at the date of this report is 5.75%. The
scheme will be closed to new deposits on 24 January 2006.
19. Current tax liabilities
Provision for income tax (1vii)
4,101
16,277
4,101
1,246
20. Provisions
Current
Employee entitlements
Restructuring and rationalisation
Environmental
Other
(1xiv)
Non-current
Employee entitlements
Environmental
(1xiv)
Aggregate employee entitlements
Current
Non-current
6,585
20,218
16,428
482
43,713
8,012
4,809
12,821
6,585
8,012
14,597
7,823
6,130
11,393
1,531
26,877
9,101
12,661
21,762
7,823
9,101
16,924
6,585
20,218
16,428
482
43,713
8,012
4,809
12,821
6,585
8,012
14,597
3,406
6,130
11,393
1,531
22,460
2,711
12,661
15,372
3,406
2,711
6,117
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%
5.2%
10 years
Employees at year end
Full time equivalent
Number
740
Number
801
Number
740
Number
391
Incitec Pivot Limited
55
Notes to the Financial Statements
For the year ended 30 September 2005
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
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
Provisions made during the year
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 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
Payments made during the period
Carrying amount at the end of the financial year
Non-Current Provision - Environmental
Carrying amount at the beginning of the financial year
Transfers to current environmental provision
Carrying amount at the end of the financial year
Notes
Consolidated
$000
Company
$000
(25)
(25)
(4)
70,520
(70,520)
-
70,520
(70,520)
-
6,130
24,871
(10,783)
20,218
6,130
24,871
(10,783)
20,218
11,393
7,852
(2,817)
16,428
11,393
7,852
(2,817)
16,428
(4)
1,531
424
(1,473)
482
1,531
424
(1,473)
482
12,661
(7,852)
4,809
12,661
(7,852)
4,809
21. Deferred tax liabilities
Deferred income tax (1vii)
17,335
19,049
17,335
4,526
Consolidated
2005
$000
2004
$000
Company
2005
$000
2004
$000
Notes
56
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2005
22. Contributed equity
Share capital
Ordinary shares - 58,281,027 (2004 - 58,281,027)
Company/Consolidated
2005
$000
2004
$000
532,445
532,445
532,445 532,445
Movements in issued and fully paid ordinary shares of the Company during the past two years were as follows:
Details
Closing balance
Closing balance
Terms and conditions
Date
30 Sep 04
Number of shares
58,281,027
$000
532,445
30 Sep 05
58,281,027
532,445
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.
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
Balance at end of year
General and other
Balance at beginning of year
Balance at end of year
Movement in retained profits during the financial year
Retained profits at the beginning of the financial year
Operating profit/(loss) after income tax attributable
to members of Incitec Pivot
Less dividends paid:
2004 interim and interim special dividend
2004 final and final special dividend
2005 interim and interim special dividend
Retained profits at the end of the financial year
Nature and purpose of reserves
Consolidated
2005
$000
2004
$000
Company
2005
$000
2004
$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
34,423
34,423
43,686
43,686
43,686
43,686
1,499
1,499
1,499
1,499
8
8
8
8
(25)
63,152
5,015
67,145
343
4,160
75,039
9,128
83,704
-
(58,281)
(12,239)
(3,208)
(16,902)
-
-
63,152
-
(58,281)
(12,239)
5,753
(16,902)
-
-
67,145
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 Australian Accounting Standards.
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.
Incitec Pivot Limited
57
Notes to the Financial Statements
For the year ended 30 September 2005
Consolidated
2005
$000
2004
$000
Company
2005
$000
2004
$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
Total equity at the end of the financial year
631,519
4,160
573,382
75,039
643,284
9,128
576,482
83,704
(25)
(70,520)
565,159
(16,902)
631,519
(70,520)
581,892
(16,902)
643,284
25. Dividends
Dividends paid or declared in respect of the year ended 30 September were:
Ordinary Shares
Interim dividend of 20 cents per share, fully franked at 30%, paid 8 July 2004
Interim special dividend of 9 cents per share, fully franked at 30%, paid 8 July 2004
Final dividend of 70 cents per share, fully franked at 30%, paid on 9 December 2004
Final special dividend of 30 cents per share, fully franked at 30%, paid on 9 December 2004
Interim dividend of 15 cents per share, fully franked at 30%, paid 7 July 2005
Interim special dividend of 6 cents per share, fully franked at 30%, paid 7 July 2005
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
No final 2005 dividend has been declared
November 2005 special dividend of 50 cents per share fully franked at 30% payable on 9 January 2006
Company
2005
$000
2004
$000
11,656
5,246
16,902
737
737
737
737
2,948
19,850
40,797
17,484
8,742
3,497
70,520
737
-
-
-
737
71,257
-
29,141
40,797
17,484
The financial effect of this dividend has not been recognised in the financial report and will be recognised in subsequent financial
reports.
Redeemable preference shares
Dividends paid in respect of the redeemable preference shares were paid by Incitec Fertilizers Limited, a wholly owned subsidiary of
the Company and were paid quarterly at 5.36% per share, unfranked. Dividends on these shares were 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 of $14,267,909 (2004 $2,273,063) at the 30% (2004 at 30%) corporate tax
rate after allowing for tax payable in respect of the current year's profit. The ability to utilise the franking credits is dependent upon
there being sufficient available profits to declare dividends.
Tax consolidation legislation
On 1 October 2003, Incitec Pivot Limited and its wholly-owned subsidiaries adopted the Tax Consolidation legislation which requires a
tax-consolidated group to keep a single franking account. The amount of franking credits available to shareholders of the parent entity
(being the head entity in the tax-consolidated group) disclosed at 30 September 2005 has been measured under the new legislation as
those available from the tax-consolidated group.
The comparative information has not been restated for this change in measurement. Had the comparative information been calculated
on the new basis, the "franking credits available" balance as at 30 September 2004 would have been $32,061,567.
58
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2005
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
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
Unrealised gain on listed investment
Write-down of property, plant and equipment (significant items)
Net (profit)/loss on sale of property, plant and equipment
Changes in assets and liabilities
(increase)/decrease in receivables and other assets
(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
Consolidated
2005
$000
2004
$000
Company
2005
$000
2004
$000
Notes
(9)
3,351
3,351
83,846
83,846
3,351
3,351
83,846
83,846
(4)
(5)
(5)
4,160
40,291
(81)
(7,236)
11,842
(494)
47,298
(25,358)
(4,491)
15,986
(12,176)
69,741
75,039
45,317
(243)
-
-
(2,238)
(8,138)
(40,649)
6,774
55,648
9,965
141,475
9,128
11,203
165
(7,236)
11,842
(494)
32,968
(25,358)
6,654
26,696
2,855
68,423
83,704
10,193
2,291
-
-
(2,238)
(92,956)
(171,926)
3,990
332,721
1,246
167,025
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
3,313
3,313
413
413
3,313
3,313
413
413
10,811
66,814
-
77,625
10,901
24,690
37,520
73,111
10,811
66,814
-
77,625
10,901
24,690
37,520
73,111
77,625
77,625
73,111
73,111
77,625
77,625
73,111
73,111
Incitec Pivot Limited
59
Notes to the Financial Statements
For the year ended 30 September 2005
28. Contingent liabilities
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.
is 100% recourse to 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 2005 amounted to $65.9m (2004 $13.7m).
In the event that bills are not repaid, there
In this circumstance the contingency would crystallise into an actual liability and the Company
Contracts, 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 2005. The total amount drawn down by customers under the terms and
conditions of this facility is $25.6m. The amount guaranteed by Incitec Pivot 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.
Under the terms of a Deed of Cross Guarantee entered into in accordance with the ASIC Class Order 98/1418 dated 30
September 2005, each company which is a party to the Deed has covenanted with the Trustee (or the Alternative Trustee as
applicable) 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.
Incitec Fertilizers Limited, a wholly owned subsidiary of Incitec Pivot, terminated its supply agreement with Elders effective 16
December 2004. This termination and the payment of rebates up to $7.4m are in dispute, the trial for which was held in the
Supreme Court of South Australia in April 2005. Judgment is awaited.
There are a number of other 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.
prejudicial to the interests of the Company.
In the opinion of the directors, any further information about these matters would be
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.
60
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2005
28. Contingent liabilities (continued)
Environmental
I. General
The Company has identified a number of sites as requiring environmental clean up and review. Appropriate
implementation of clean up requirements is ongoing. In accordance with current accounting policy (see note 1 xiv),
provisions have been created for all known environmental liabilities that can be reliably estimated. 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.
II. Environmental matters subject to voluntary requirements with regulatory authority
For sites where the requirements have been assessed and are capable of reliable measurement, estimated regulatory and
remediation costs have been capitalised, expensed as incurred or provided for in accordance with the accounting policy
included in note 1(xiv).
Parafield Gardens (South Australia)
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. An environmental provision has been
recognised in respect of this site.
Wallaroo (South Australia)
Wallaroo has been identified as a site requiring soil and groundwater investigation and clean up. An independent
environmental auditor is working with the Company and community groups in relation to this site including the identification
of the most appropriate future use of this site. An environmental provision has been recognised in respect of this site.
III. Other environmental matters
For sites where there are significant uncertainties with respect to what Incitec Pivot’s remediation obligations might be or
what remediation techniques might be approved, no reliable estimate can presently be made of regulatory and remediation
costs. In accordance with accounting policy included in note 1(xiv), no amounts have been expensed capitalised or
provided for.
The site at Cockle Creek (NSW) (owned by Incitec Fertilizers Limited) was declared and gazetted as a “remediation site”
on 29 July 2005 by the Department of Environment and Conservation under the Contaminated Land Management Act,
1997. The contamination on the site arose from the use of fill material, mainly sourced from the adjacent smelter on the
Pasminco site, by previous owners of the site. The Company is in discussion with the relevant regulatory authority to
develop a voluntary Remediation Action Plan (“RAP”) and has confirmed its position that it intends to work cooperatively
with both the regulatory authority and Pasminco Cockle Creek Smelter Pty Ltd (in administration) in relation to this site.
The regulatory authority has not issued a remediation order as at the date of this report.
Consistent with accounting policy set out in note 1(xiv), no environmental provision has been recognised in respect to this
site on the basis that there are uncertainties surrounding Incitec Pivot’s obligation with respect to the remediation
requirements on the site.
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
61
Notes to the Financial Statements
For the year ended 30 September 2005
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
2005
$000
7,000
7,000
250,000
250,000
2004
$000
7,000
7,000
220,000
220,000
2005
$000
7,000
7,000
250,000
250,000
2004
$000
7,000
7,000
220,000
220,000
The committed bank overdraft facilities are provided by banks and are subject to an annual review. Orica Finance Limited, a
common controlled entity, provides the committed loan facilities on arms-length commercial terms. Repayment terms range from
overnight to 90 days.
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 $103.9m
(2004 $104.4m). 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:
A. Foreign exchange risk
C. Liquidity risk
B.
Interest rate risk
D. Credit risk.
A. 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 are recognised in the
Statements of Financial Performance at the time the underlying transactions occur.
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
2005
$
2004
$
2005
A$000
2004
A$000
0.7609
0.7011
106,025
110,419
62
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2005
31. Additional financial instruments disclosures (continued)
A. Foreign exchange risk management (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 Company has 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 transactions occur. 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
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
Total
Weighted average
AUD/USD strike rate
2004
2005
$
$
0.6824
0.6789
-
0.6827
0.6824
0.6789
Contract amounts
2005
A$000
2004
A$000
30,000
15,000
-
45,000
50,000
30,000
15,000
95,000
(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.
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.
B. 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.
Due to the maturity of the fixed interest redeemable preference share borrowings in November 2004, the Consolidated entity is no
longer exposed to fixed interest rate risk. As a consequence the interest rate swaps, which matured in October 2004, were not
replaced. The notional principal amounts and periods of expiry of prior year interest rate swap contracts are as follows:
Not later than one year
Notional principal
Fixed interest rate range p.a.
Floating interest rate range p.a.
2005
$000
-
-
N/A
5.10% - 5.79%
2004
$000
5,000
5,000
6.47%
4.98% - 5.58%
Incitec Pivot Limited
63
Notes to the Financial Statements
For the year ended 30 September 2005
31. Additional financial instruments disclosures (continued)
B. Interest rate risk management (continued)
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:
Floating
interest rate
Fixed interest rates
1 to
5 years
1 year
or less
5 years
or more
Total
Non-
interest
bearing
Weighted
average
effective
interest
rate (1)
30 September 2005
Cash assets
Trade debtors
Investment in listed entity
Total financial assets
Trade creditors
Other borrowings
Employee entitlements
Total financial liabilities
Net financial assets/(liabilities)
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)
Notes
$000
$000
$000
$000
$000
$000
% p.a.
(9)
(10)
(13)
(17)
(18)
(20)
(9)
(10)
(17)
(18)
(20)
(18)
3,191
-
-
3,191
-
(12,514)
-
(12,514)
(9,323)
-
-
-
-
-
-
-
-
-
83,744
-
83,744
-
(8,055)
-
5,000
-
(3,055)
80,689
-
-
-
-
-
-
(5,000)
(55,000)
(60,000)
(60,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
160
-
64,465
-
12,341
-
-
76,966
- (194,967)
-
-
(14,597)
-
- (209,564)
- (132,598)
102
-
- 101,514
- 101,616
- (177,374)
-
-
(16,924)
-
-
-
-
-
- (194,298)
(92,682)
-
3,351
64,465
12,341
80,157
(194,967)
(12,514)
(14,597)
(222,078)
(141,921)
83,846
101,514
185,360
(177,374)
(8,055)
(16,924)
-
(55,000)
(257,353)
(71,993)
5.53
-
-
-
-
5.54
-
-
-
5.29
-
-
-
5.10
-
6.47
5.36
-
-
(1) Weighted average effective interest rate includes offshore funding at local rates.
(2) Notional principal amount.
C. 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.
D. 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 2005, the sum of all contracts with a positive replacement cost was $2.3m (2004 $4.3m).
64
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2005
31. Additional financial instruments disclosures (continued)
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
2005
$000
-
6,486
2004
$000
(9)
6,627
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
Overview
Long Term Incentive Plans (LTIs) are designed to encourage executives and other senior employees to focus on the key
performance drivers which underpin sustainable growth in shareholder value.
Incitec Pivot has 2 types of LTIs: the retention plan and the performance plan. The LTIs are designed to reward executives and
senior employees for delivering long term value to the Company and support the Company’s strategy for retention and motivation
of executives and senior employees.
Under the LTIs, Incitec Pivot may grant awards to executives and senior employees, subject to them satisfying particular
conditions relating to the duration of their employment (retention plan) or individual or Company performance (performance plan).
In short, the LTIs operate by way of the Company providing executives and senior employees with limited recourse loans, which
can be interest free or interest bearing, and which must be used to purchase Incitec Pivot shares on market. The loans are
repayable in a number of circumstances, including the participant ceasing to be employed by Incitec Pivot, the participant selling
his or her shares, or by a “sunset” date. The loans are repayable from the proceeds of sale of the shares, and are deemed
satisfied by the application of the proceeds of the sale of the shares, including where there is a shortfall against the outstanding
loan amount. The Company may forgive repayment of part of a loan amount depending on, in the case of the retention plan, the
satisfaction of a condition as to duration of employment, and in the case of the performance plan, the achievement of performance
measures. Participants receiving shares under the LTIs hold full voting and dividend rights.
Further details of each of the LTIs are set out below.
Retention Plan
At the time of the merger of Incitec Fertilizers Limited and the Company, the Board recognised that a crucial element to the
success of the merger was the retention of key senior management and certain key employees. This was necessary to ensure
the capture of synergies and the uninterrupted delivery of service to Incitec Pivot’s customers. Accordingly, a one-off Long Term
Incentive was granted in respect of the period from 1 June 2003 to 30 September 2005 by way of interest free, limited recourse,
unsecured loans by the Company. These loans were used in the purchase of shares on market and the shares were registered in
the name of the participants. The participants were restricted from dealing in the shares until 30 September 2005 and, until that
time, the shares could be forfeited if the participant ceased to be employed by Incitec Pivot. The loans are repayable on the
earlier of the participant ceasing to be employed by Incitec Pivot, the participant selling his/her shares or three years after the loan
is made. On repayment, for those participants satisfying the condition by remaining in employment until 30 September 2005,
51.5% of the amount of their outstanding loan will be forgiven by the Company.
Incitec Pivot Limited
65
Notes to the Financial Statements
For the year ended 30 September 2005
32. Employee share plans (continued)
Performance Plan
Under the performance plan, awards, by way of forgiveness of loans, are granted only on the achievement of certain performance
measures over a rolling three year period. Adoption of this longer term incentive plan created the opportunity, and provided the
discipline, for executives and other senior employees 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, participants were each advanced limited recourse, interest bearing,
unsecured loans by the Company, which were used in the purchase of shares in the Company. The shares were allocated in 2
tranches, in September 2004 and October 2005.
The Company may require shares to be forfeited if the relevant participant ceases to be employed by Incitec Pivot prior to
30 September 2006. Subject to the Company achieving certain performance measures, the whole or part of the loan will be
waived on or after 1 October 2006. The Board sets the criteria for the granting of awards under the LTI at the beginning of the
three year performance period covered by the LTI. LTI awards, in the form of waivers of loans, are based on the generation of
targeted cumulative economic profit over the performance period. Economic profit targets are set at levels that equate to top
quartile shareholder returns over the performance period. Cumulative economic profit was chosen as the relevant performance
measure as it recognises:
(cid:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3)
the need to both grow earnings and produce an acceptable return on shareholders funds;
the desire to reward executives and senior employees for the value they directly create, as opposed to movements in the
general level of the share market which is an issue with share price based incentives; and
the inherent seasonal volatility of the business which can positively or negatively impact any one year but is less likely to have
an influence over a cumulative three year period.
If the Company waives any loan amount, a participant has full, unrestricted ownership of the shares to the value of the loan
waiver. Prior to any loan waiver being awarded, a participant cannot deal in the shares. The loans are immediately repayable on
the earlier of a relevant participant ceasing to be employed by Incitec Pivot, the participant dealing in his or her shares, or
31 December 2007. Participants may directly repay the whole or part of their loan at any time. Interest is charged on the loans at
the FBT benchmark rate (currently 7.05%). Net cash dividends after personal income tax obligations are applied to reduce the
loan balance.
Employee Share Ownership Plan
The Board established the Incitec Pivot Employee Share Ownership Plan (ESOP) on 28 October 2003. Administration of the plan
is held with Watson Wyatt Australia Pty Limited who have outsourced to CitiStreet Australia Pty Limited effective 1 November
2004. A sub-committee of the Board determines which employees are eligible to receive invitations to participate in the ESOP.
Invitations are made to eligible employees on the following basis:
(cid:120)(cid:3) shares acquired are either newly issued shares or existing shares acquired on market.
(cid:120)(cid:3) employees are each entitled to acquire shares with a market value to a maximum of $1,000.
(cid:120)(cid:3) employees salary sacrifice the value of the shares by equal deductions through to 30 June the following year.
(cid:120)(cid:3) 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.
(cid:120)(cid:3) employees who leave the Consolidated entity must salary sacrifice any remaining amount prior to departure.
Grant date
Date shares
become
unrestricted
19 Mar 04
19 Mar 07
7 Jun 04
7 Jun 07
9 Sep 04
9 Sep 07
22 Dec 04
22 Dec 07
7 Mar 05
7 Mar 08
30 Jun 05
30 Jun 08
16 Sep 05
16 Sep 08
Total
Number of participants as at
Number of shares held as at
30 Sep 2005
30 Sep 2004
30 Sep 2005
30 Sep 2004
295
295
318
318
319
317
232
232
350
350
368
-
-
-
-
7,681
7,756
4,060
3,641
4,064
4,428
3,672
9,111
9,210
-
-
-
-
-
318
35,302
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.
66
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2005
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 the
remuneration report and in note 35, Director and executive disclosures.
Other directors’ transactions
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:
(cid:120)(cid:3) During the year Mr McCallum purchased fertiliser to the value of $20,132 (2004 $26,779) from the Company, the balance
owing at 30 September 2005 was $nil (2004 $nil).
(cid:120)(cid:3) Mr Trebeck is a director of GrainCorp Limited, to which the Company sold fertiliser products to the value of $37,546,098 (2004
$30,070,255) and purchased services (including shed and site rental) to the value of $2,448,930 (2004 $1,560,080). All
dealings with Graincorp are on normal commercial terms and conditions. Mr Trebeck resigned from the board of Incitec Pivot
on 18 July 2005.
(cid:120)(cid:3) Mr Trebeck is a principal of ACIL Tasman Pty Ltd which provided consulting services to the Company to the value of $17,260
(2004 $6,000). Mr Trebeck resigned from the board of Incitec Pivot on 18 July 2005.
(cid:120)(cid:3) The spouse of Mr Fazzino, the Finance Director and Chief Financial Officer, is a partner in the accountancy and tax firm
PricewaterhouseCoopers from which the Company purchased services of $352,852 during the year (2004 $390,303). Mr
Fazzino’s spouse does not directly provide these services.
Transactions with wholly owned controlled entities
Transactions between Incitec Pivot and entities in the wholly owned group during the year included:
(cid:120)(cid:3) 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 $102,036,700 (2004 $71,500,000). Fixed costs
incurred by the Company in the performance of its obligations amounting to $50,437,000 (2004 $24,853,000) have been
charged to Incitec Fertilizers Limited.
Incitec Fertilizers Limited declared and paid an interim dividend to the Company of $2,000,000 (2004 $16,000,000) and
declared a final dividend on 30 September 2005 of $32,000,000 (2004 $18,500,000). This dividend is eliminated on
consolidation.
(cid:120)(cid:3)
(cid:120)(cid:3) Management fees were received and paid by Incitec Pivot for accounting and administrative assistance on normal commercial
(cid:120)(cid:3)
terms and conditions and in the ordinary course of business.
Incitec Pivot’s tax balances include the wholly-owned controlled entities tax related balances and the net tax balance as at 30
September 2005 was $17,243,000.
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:
(cid:120)(cid:3) Sales of products (mainly urea and sulphuric acid) to the value of $38,434,000 (2004 $28,490,400) to Orica Australia Pty Ltd.
(cid:120)(cid:3) Sulphuric acid is purchased by Incitec Pivot jointly with a common controlled entity, Orica Australia Pty Ltd. Accordingly the
product is transferred to Orica Australia Pty Ltd at a zero margin. Total zero margin sales of sulphuric acid to Orica Australia
Pty Ltd were $6,442,000 (2004 $6,675,000).
(cid:120)(cid:3) Under various service level agreements, fees of $6,337,000 (2004 $11,100,000) were received or receivable by the Company
from Orica Australia Pty Ltd.
(cid:120)(cid:3) Purchases of products and services to the value of $14,606,000 (2004 $10,699,000) from Orica Australia Pty Ltd.
(cid:120)(cid:3) Under a service level agreement, fees of $9,597,000 (2004 $8,000,000) were paid/payable to the ultimate parent entity in
(cid:120)(cid:3)
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 $8,069,000 (2004
$1,669,000).
Interest income received or receivable by the Company for money lent to Orica Finance Limited was $246,000 (2004 $33,000)
(cid:120)(cid:3)
(cid:120)(cid:3) Under the terms and conditions of the merger implementation deed, Orica Limited contributed $1,300,000 (2004 $2,000,000)
to the corporate costs of the Company. The corporate cost contribution agreement ceased 31 May 2005.
Incitec Pivot Limited
67
Notes to the Financial Statements
For the year ended 30 September 2005
33. Related party disclosures (continued)
(cid:120)(cid:3)
(cid:120)(cid:3)
Insurance cover was purchased from Curasalus Pty Limited, a wholly owned subsidiary of the ultimate parent entity on normal
terms and conditions to the value of $13,800,000 for the year ended 30 September 2005 (2004 $13,600,000).
Insurance claims were received or receivable from Curasalus Pty Limited, a wholly owned subsidiary of the ultimate parent
entity on normal terms and conditions to the value of $2,600,000 (2004 $9,700,000).
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
(cid:120)(cid:3) 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.
(cid:120)(cid:3) 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.
(cid:120)(cid:3) The contributions made by the employer companies to defined contribution funds are legally enforceable.
Industry/union plans
(cid:120)(cid:3) These plans operate on an accumulation basis and provide lump sum benefits for members on resignation, retirement,
disability or death.
(cid:120)(cid:3) The employer entity has a legally enforceable obligation to contribute a regular amount for each employee member of these
plans.
(cid:120)(cid:3) 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 $2.5m (2004 $4.1m) to the defined benefit fund.
Employer contributions by the Company to the defined benefit fund during the year were $2.5m (2004 $nil).
The Consolidated entity’s 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
Net surplus
accrued benefits
to plan assets
Vested benefits
Net surplus
vested benefits to
plan assets
The Flexible Benefits Super
Fund
2005
2004
$000
96,200
72,300
$000
101,100
73,100
$000
4,900
800
$000
97,200
72,300
$000
3,900
800
68
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2005
34. Superannuation commitments (continued)
Incitec Fertilizers Limited (which was acquired by the Company 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 a 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 2004. The next full actuarial review is due at 30
June 2006.
Asset values are estimated at 30 September 2005, based on audited values as at 30 June 2005, adjusted to reflect estimated
investment performance between 1 July 2005 and 30 September 2005. The estimate for accrued benefits and vested benefits
has been calculated using membership data as at 30 June 2005, adjusted to reflect estimated investment performance, expected
cash flows and benefit accrual between 1 July 2005 and 30 September 2005.
Differences between accrued benefits to plan assets 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 contribute at rates which are determined after taking into account sound actuarial principles and to
enable all defined benefits to meet retirement expectations and relevant regulatory requirements as and when they fall due.
35. Director and executive disclosures
Remuneration of specified directors and specified executives
Disclosures of remuneration policies, service contracts and details of remuneration are included in the remuneration report on
pages 19 to 31.
Incitec Pivot Limited
69
Notes to the Financial Statements
For the year ended 30 September 2005
35. Director and executive disclosures (continued)
Loans to specified executive directors and specified executive
No loans have been granted to specified directors and specified executives with the exception of loans granted under the terms
and conditions of the Incitec Pivot long term incentive plans. The movement during the year in the value of loans is set out below.
Opening
balance
Loan advanced
during the year
Interest paid
and payable
during the year
Amount repaid
during the year
Amount of loan
forgiven
Closing balance
Highest
indebtedness
$
$
$
$
$
$
$
Specified executive directors
- Current
J E Fazzino
- Former
G J Witcombe (1)
Total specified executive
directors
Specified executives
- Current
K J Gleeson
D A Roe
B C Walsh
Total specified executives
- Current
Specified executives
- Former
J W Elmer
R Hoggard
J M Lloyd
J R Warnock
A K Sharma
Total specified executives
- Former
Total specified executive
directors and executives
2005
2004
2005
2004
2005
2004
2005
2004
2005
2004
2005
2004
2005
2004
2005
2004
2005
2004
2005
2004
2005
2004
2005
2004
2005
2004
2005
2004
150,156
-
-
151,244
942,066
-
1,092,222
-
-
948,951
-
1,100,195
41,656
-
44,868
-
29,907
-
116,431
-
148,496
-
148,534
-
165,016
-
135,264
-
-
-
53,299
41,656
-
44,868
-
-
53,299
86,524
-
149,582
-
149,622
-
166,225
-
136,231
-
72,912
3,718
-
20,946
-
24,664
-
2,136
-
2,301
-
1,534
-
5,971
-
4,478
-
2,497
-
3,616
-
4,498
-
-
-
(11,021)
(1,088)
(40,555)
-
102,298
150,156
150,156
151,244
(572,968)
(6,885)
(583,989)
(7,973)
(390,044)
-
(430,599)
-
-
942,066
102,298
1,092,222
942,066
948,951
1,092,222
1,100,195
(6,689)
-
(4,015)
-
(2,676)
-
(13,380)
-
(92,333)
(1,086)
(151,031)
(1,088)
(168,632)
(1,209)
(9,963)
(967)
-
(72,912)
(27,449)
-
-
-
-
-
(27,449)
-
(60,641)
-
-
-
-
-
(55,665)
-
-
-
62,953
41,656
43,154
44,868
28,765
-
134,872
86,524
-
148,496
-
148,534
-
165,016
74,134
135,264
-
-
74,134
597,310
94,955
41,656
44,868
44,868
29,907
-
169,730
86,524
148,496
149,582
148,534
149,622
165,016
166,225
135,264
136,231
-
72,912
597,310
674,572
597,310
-
15,089
-
674,572
-
(421,959)
(77,262)
(116,306)
-
1,805,963
53,299
45,724
(1,019,328)
(574,354)
311,304
1,859,262
-
1,861,291
-
(85,235)
-
1,776,056
1,861,291
All loans are secured by shares in Incitec Pivot Limited. 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 7.05% (2004: 6.55%).
(1) Upon Mr Witcombe's resignation as a director and cessation of employment with Incitec Pivot Limited, Mr Witcombe received, as part of his
severance payment, loan forgiveness of $256,550 for the retention plan and $133,494 for the performance plan. In addition, Mr Witcombe
repaid the outstanding amount of loans under the retention plan and performance plan.
70
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2005
36.
Investments in controlled entities
Name of Entity
Company
Incitec Pivot Limited
Controlled Entities - operating
detimiLsrezilitreFceticnI
detimiLytPynapmoCnalPITLtoviPceticnI
TOP Australia Ltd
Ownership
interest
Country of
incorporation
Australia
Australia
Australia
Australia
%001
%001
100%
On 30 September 2005 TOP Australia Ltd and Incitec Fertilizers Limited 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. As at 30 September 2004 only TOP Australia Ltd had entered into such a Deed of
Cross Guarantee with Incitec Pivot Limited.
37. Deed of Cross Guarantee
Statement of Financial Position
Current assets
Cash assets
Receivables
Investments
Inventories
Other
Total current assets
Non-current assets
Receivables
Other financial assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Other
stessatnerruc-nonlatoT
Total assets
Current liabilities
Payables
Interest bearing liabilities
Current tax liabilities
Provisions
seitilibailtnerruclatoT
Non-current liabilities
Deferred tax liabilities
Provisions
seitilibailtnerruc-nonlatoT
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained profits
Total equity
Statement of Financial Performance
Profit/(loss) from ordinary activities before income tax expense
Income tax (expense)/benefit attributable to profit/(loss) from ordinary activities
esnepxexatemocniretfaseitivitcayranidromorf)ssol(/tiforP
Retained profits at the beginning of the financial year
Cash dividend paid
raeylaicnanifehtfodneehttastiforpdeniateR
Closed Group
2005
$000
2004
$000
3,351
75,901
12,341
271,650
6,134
369,377
383
-
283,855
174,004
19,885
6,574
107,484
854,078
198,431
12,514
4,101
43,713
957,852
17,335
12,822
751,03
288,916
565,162
532,445
35,923
(3,206)
565,162
11,112
(6,952)
061,4
63,154
(70,520)
)602,3(
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
416,294
4,526
15,370
19,896
436,191
643,759
532,445
35,923
75,391
643,759
97,763
(15,647)
82,116
10,177
(16,902)
75,391
Entities which are party to a Deed of Cross Guarantee, entered into in accordance with ASIC Class Order 98/1418 dated
30 September 2005, 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.
Incitec Pivot Limited
71
Notes to the Financial Statements
For the year ended 30 September 2005
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 (AIFRS). The Company has
allocated internal resources, who together with representatives from Orica Limited, 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 AIFRS. 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 all of the AIFRS 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. The Consolidated entity is
fully prepared for the transition.
The impact of transition to AIFRS, including the transitional adjustments disclosed below, are based on AIFRS standards that
management expect to be in place, or where applicable, early adopted, when preparing the first complete AIFRS financial report
being the half-year ending 31 March 2006. Only a complete set of financial statements and notes together with comparative
balances can provide a true and fair presentation of the Company’s and Consolidated entity’s financial position, results of
operations and cash flows in accordance with AIFRS. Therefore, this note provides only a summary - further disclosure and
explanations will be required in the first complete AIFRS financial report for a true and fair view to be presented under AIFRS.
Revisions to the selection and application of the AIFRS accounting policies may be required as a result of changes in financial
reporting requirements arising from new or revised accounting standards or interpretations issued by the Australian Accounting
Standards Board, additional guidance on the application of AIFRS in a particular industry or to a particular transaction and
changes to the Incitec Pivot’s operations.
There is a significant amount of judgement involved in the preparation of the reconciliations from current Australian GAAP to
AIFRS - therefore the final reconciliations presented in the first financial report prepared in accordance with AIFRS may vary
materially from the reconciliations provided in this Note.
The rules for first time adoption of AIFRS are set out in AASB 1 First Time Adoption of Australian Equivalents to International
Financial Reporting Standards. In general, AIFRS accounting policies must be applied retrospectively to determine the opening
AIFRS balance sheet as at transition date, being 1 October 2004. The Standard allows a number of exemptions and exceptions
to this general principle to assist in the transition to reporting under AIFRS.
The known or reliably estimable impacts on the financial report for the year ended 30 September 2005 had it been prepared using
AIFRS are set out below. The expected financial effects of adopting AIFRS are shown for each line item in the statements of
financial performance and statements of financial position, with descriptions of the differences. No material impacts are expected
in relation to the statements of cash flows.
72
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2005
38. Impact of adopting AASB equivalent to International Financial Reporting Standards
(continued)
Balance Sheets under AIFRS
The following table sets out the expected adjustments to the statements of financial position of Consolidated entity and the
Company at transition to AIFRS on 1 October 2004.
Current assets
Cash assets
Receivables
Inventories
Other assets
Non-current assets held for sale
Total current assets
Non-current assets
Receivables
Other financial assets
Property, plant and equipment
Goodwill
Intangible assets
Deferred tax assets
Other assets
Total non-current assets
Total assets
Current liabilities
Payables
Interest bearing liabilities
Current tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Deferred tax liabilities
Retirement benefit obligations
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained profits
Total equity
Notes
a
m
h
a,f,m
e
e,f
b,j
a
j
b,j
AGAAP
2004
$000
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
Consolidated
Adjustment
$000
-
-
-
(4,748)
9,381
4,633
(3,025)
-
(4,005)
183,809
(176,567)
1,321
(7,870)
(6,337)
(1,704)
-
-
-
-
-
11,160
4,403
-
15,563
15,563
AIFRS
2004
$000
83,846
123,745
246,292
2,299
9,381
465,563
223
-
292,127
183,809
7,242
18,429
2,296
504,126
969,689
192,854
63,055
16,277
26,877
299,063
30,209
4,403
21,762
56,374
355,437
AGAAP
2004
$000
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
Company
Adjustment
$000
-
-
-
-
9,381
9,381
-
-
(16,561)
-
7,180
1,321
-
(8,060)
1,321
-
-
-
-
-
-
4,403
-
4,403
4,403
AIFRS
2004
$000
83,846
142,245
246,292
2,268
9,381
484,032
188
474,179
98,357
-
7,180
15,051
2,296
597,251
1,081,283
385,019
8,055
1,246
22,460
416,780
4,526
4,403
15,372
24,301
441,081
631,519
(17,267)
614,252
643,284
(3,082)
640,202
c,h
b,c,h,j
532,445
35,922
63,152
631,519
-
(38,703)
21,436
(17,267)
532,445
(2,781)
84,588
614,252
532,445
43,694
67,145
643,284
-
(43,694)
40,612
(3,082)
532,445
-
107,757
640,202
Incitec Pivot Limited
73
Notes to the Financial Statements
For the year ended 30 September 2005
38. Impact of adopting AASB equivalent to International Financial Reporting Standards
(continued)
Balance Sheets under AIFRS
The following table sets out the expected adjustments to the statements of financial position of Consolidated entity and the
Company as at 30 September 2005.
Current assets
Cash assets
Receivables
Other financial assets
Inventories
Other assets
Non-current assets held for sale
Total current assets
Non-current assets
Receivables
Other financial assets
Property, plant and equipment
Goodwill
Intangible assets
Deferred tax assets
Retirement benefit surplus
Other assets
Total non-current assets
Total assets
Current liabilities
Payables
Interest bearing liabilities
Current tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Notes
a
m
h
a,f,m
e
e,f
b,h,j
b
a
h
j
AGAAP
2005
$000
3,351
75,901
12,341
271,650
6,135
-
369,378
2,646
-
283,855
-
174,004
19,885
-
6,574
486,964
856,342
200,699
12,514
4,101
43,713
261,027
17,335
12,821
30,156
291,183
Consolidated
Adjustment
$000
-
-
-
-
(4,497)
2,416
(2,081)
(1,013)
-
(625)
183,809
(165,563)
23
618
(5,735)
11,514
9,433
-
-
-
-
-
11,192
-
11,192
11,192
AIFRS
2005
$000
3,351
75,901
12,341
271,650
1,638
2,416
367,297
1,633
-
283,230
183,809
8,441
19,908
618
839
498,478
865,775
200,699
12,514
4,101
43,713
261,027
28,527
12,821
41,348
302,375
AGAAP
2005
$000
3,351
107,901
12,341
271,650
1,638
-
396,881
383
529,178
116,983
-
-
19,885
-
3,201
669,630
1,066,511
394,135
12,514
4,101
43,713
454,463
17,335
12,821
30,156
484,619
Company
Adjustment
$000
-
-
-
-
-
2,416
2,416
-
-
(8,495)
-
8,441
-
618
(2,362)
(1,798)
618
(550)
-
-
-
(550)
32
-
32
(518)
AIFRS
2005
$000
3,351
107,901
12,341
271,650
1,638
2,416
399,297
383
529,178
108,488
-
8,441
19,885
618
839
667,832
1,067,129
393,585
12,514
4,101
43,713
453,913
17,367
12,821
30,188
484,101
Net assets
565,159
(1,759)
563,400
581,892
1,136
583,028
Equity
Contributed equity
Reserves
Retained profits /(losses)
Total equity
c,h
b,c,h,j
532,445
35,922
(3,208)
565,159
-
(37,446)
35,687
(1,759)
532,445
(1,524)
32,479
563,400
532,445
43,694
5,753
581,892
-
(43,694)
44,830
1,136
532,445
-
50,583
583,028
74
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2005
38. Impact of adopting AASB equivalent to International Financial Reporting Standards
(continued)
Income Statement under AIFRS
The following table sets out the expected adjustments to the statements of financial performance of Consolidated entity and the
Company for the year ended 30 September 2005.
Revenue
Other income
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
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
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
profit/(loss) from ordinary activities
Profit/(loss) from ordinary activities
after income tax relating to
members of Incitec Pivot Limited
Notes
c,h
AGAAP
2005
$000
1,073,872
9,824
23,225
(788,525)
Consolidated
Adjustment
$000
-
(1,006)
-
-
AIFRS
2005
$000
1,073,872
8,818
AGAAP
2005
$000
947,548
43,824
Company
Adjustment
$000
-
(1,006)
23,225
23,225
(788,525)
(788,525)
-
-
AIFRS
2005
$000
947,548
42,818
23,225
(788,525)
b,h
(99,502)
4,117
(95,385)
(99,502)
4,117
(95,385)
e
c
-
-
-
50,437
(40,291)
(10,329)
(57,873)
(26,790)
(931)
(30,995)
(12,316)
(21,155)
(7,102)
9,805
-
-
-
931
-
-
-
-
(30,486)
(10,329)
(57,873)
(26,790)
-
(30,995)
(12,316)
(11,203)
(9,805)
(57,873)
(26,790)
(931)
(30,995)
(12,316)
(21,155)
(21,155)
(7,102)
(7,102)
-
-
-
-
-
931
-
-
-
-
50,437
(11,203)
(9,805)
(57,873)
(26,790)
-
(30,995)
(12,316)
(21,155)
(7,102)
11,112
13,847
24,959
(1,163)
4,042
2,879
j
(6,952)
23
(6,929)
10,291
23
10,314
4,160
13,870
18,030
9,128
4,065
13,193
Incitec Pivot Limited
75
Notes to the Financial Statements
For the year ended 30 September 2005
38. Impact of adopting AASB equivalent to International Financial Reporting Standards
(continued)
Summary of impact of transition to AIFRS on retained earnings
The impact of the transition to AIFRS on retained earnings at 1 October 2004 and 30 September 2005 are summarised below:
AIFRS
Consolidated
$000
AIFRS
Company
$000
Retained Earnings at 1 October 2004 under AGAAP
63,152
67,145
AIFRS adjustments:
- Transfer from realisation and revaluation of assets
- Share-based payments adjustments
- Recognise defined benefit fund - net deficit
- Recognise deferred tax liability on pre-merger fair value adjustments for
land and buildings
Retained Earnings at 1 October 2004 under AIFRS
35,922
(244)
(3,082)
43,694
-
(3,082)
(11,160)
-
84,588
107,757
Profit/(loss) from ordinary activities after income tax for the financial year ended
30 September 2005 under AGAAP
4,160
9,128
Less dividends paid:
- 2004 Final dividend and special dividend
- 2005 Interim dividend and special dividend
AIFRS adjustments:
- Increase defined benefit fund
- Reverse goodwill amortisation
- Share-based payments adjustments
- Write down carrying value of Regional Service Centres land and buildings
(58,281)
(12,239)
(58,281)
(12,239)
3,515
9,805
778
153
3,515
-
550
153
Retained Earnings at 30 September 2005 under AIFRS
32,479
50,583
Impact of transition to AIFRS
(a) Reclassifications
On the initial application of AIFRS, Incitec Pivot will reclassify expenditure on major cyclical maintenance from other assets to
property, plant and equipment. Expenditure will then be amortised over the period to the next scheduled major shutdown. The
expected reclassification would result in a decrease in current other assets in the Consolidated entity by $4,748,064, non-current
other assets will also decrease by $7,869,532 and property, plant and equipment will increase by $12,617,596 as at 1 October
2004. As at 30 September 2005, the expected reclassification from other assets to property, plant and equipment will be
$4,748,064 representing the amortisation for the year. There is no effect on the parent entity.
The additional major cyclical maintenance expenditure of $2,362,000 during the financial year ended 30 September 2005 for the
Consolidated entity and the Company will be expected to be reclassified from other assets to property, plant and equipment.
(b) Retirement benefit obligations
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 the Consolidated entity’s
current accounting policy where defined benefit plans are accounted for on a cash basis, with no defined benefit obligations or
plan assets recognised on the balance sheet. Under the new policy, Incitec Pivot will be required to recognise an asset/liability of
the defined benefit fund for the net surplus/deficit based on an actuarial calculation of the position of the fund. On transition, the
net deficit of the defined benefit fund will be debited through retained earnings. As a result the superannuation liabilities for the
Consolidated entity and the Company will increase by $4,403,000 and deferred tax assets of $1,321,000, with a consequential
reduction of $3,082,000 in retained earnings as at 1 October 2004.
76
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2005
38. Impact of adopting AASB equivalent to International Financial Reporting Standards
(continued)
As at 30 September 2005, the defined benefit fund is expected to be a surplus of $433,000 after tax. The impact to the results
would be an increase in profit of $3,515,000 and a decrease in deferred tax assets of $1,506,000. The adjustment is the same for
the Company.
(c) Property, plant and equipment
Property, plant and equipment will be measured at cost under AIFRS. However, as permitted by the election available under
AASB1, at transition date certain items of property, plant and equipment will be recognised at deemed cost, being a revalued
amount prior to transition date that approximates the fair value as at the date of transition.
On initial application of AIFRS, Incitec Pivot will transfer the balance of general and other reserves to retained earnings. This is
expected to result in a reclassification of $35,922,000 for the Consolidated entity and $43,694,000 for the Company as at 1
October 2004.
Under AIFRS, the profit or loss on disposal of property, plant and equipment will be recognised on a net basis in the income
statement rather than separately recognising the consideration as revenue. There is no profit and loss effect of this change.
Consolidated revenue would decrease for 2005 by $931,000 (Company $931,000).
Software assets included in property plant and equipment under Australian GAAP will be reclassified under AIFRS to intangible
assets on transition to AIFRS. Refer to Note (f) below for further details.
(d) Business combinations
An election is available in AASB1 which provides the ability to choose whether the acquisition accounting of business
combinations prior to transition date is restated under AIFRS. Entities can choose to restate all prior business combinations, only
those after a certain date, or none at all. Incitec Pivot currently expects to take advantage of the election available and will not
restate business combinations prior to transition date.
(e)
Intangible assets – Goodwill
Goodwill represents the difference between the cost of a business combination over the net fair value of the identifiable assets,
liabilities and contingent liabilities acquired. Under AASB 138 Intangible Assets, internally generated goodwill is not recognised
as an intangible asset.
Goodwill will be stated at cost less any impairment losses. Goodwill will be tested annually for impairment based on the cash
flows of the total business, rather than being allocated to cash generating units for the purpose of impairment testing. (Refer Note
(g) for further details on impairment testing). Under AASB 3 Business Combinations, amortisation of goodwill will be prohibited.
This will result in a change to the current accounting policy under which goodwill is amortised on a straight-line basis over its
useful life but not exceeding 20 years.
As a result of this, the impact to the Consolidated entity on transition would be an increase in net profit of $9,805,000 (Company
$nil) for the year ended 30 September 2005 following the cessation of the amortisation charge. No impairment adjustments are
required.
In addition, goodwill of $183,809,000 as at 1 October 2004 will be reclassified from Intangible assets to Goodwill on the AIFRS
Balance Sheet.
(f)
Intangible assets – Other intangible assets
Other intangible assets acquired will be stated at cost less accumulated amortisation and impairment losses.
Under AASB 138 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.
On transition other intangible assets have been reviewed to ensure they are capable of recognition under AASB 138 and tested
for impairment. No impairment adjustments are required.
Software assets will be reclassified from property, plant and equipment to intangible assets on transition to AIFRS. This is
expected to result in a reclassification of $7,242 000 in the consolidated entity as at 1 October 2004 and $1,199,000 as at 30
September 2005. For the Company the expected adjustments are $7,180 000 and $1,261,000 respectively.
Incitec Pivot Limited
77
Notes to the Financial Statements
For the year ended 30 September 2005
38. Impact of adopting AASB equivalent to International Financial Reporting Standards
(continued)
(g)
Impairment of assets
AASB 136 Impairment of Assets determines the recoverable amount of an asset as the higher of net selling price and value in
use. This will result in a change in the existing accounting policy that determines the recoverable amount of an asset on the basis
of discounted cash flows. Under AIFRS, the carrying amount of non-current assets (excluding defined benefit assets, deferred tax
assets, goodwill and indefinite life intangible assets) will be reviewed at each reporting date to determine whether there is any
indication of impairment. If any such indication exists, the asset will be tested for impairment.
Goodwill and intangible assets with indefinite life will be tested for impairment annually (refer note (e) and (f)).
The recoverable amount will be estimated for each individual asset or where it is not possible to estimate for individual assets, it
will be estimated for the cash-generating unit (CGU) to which the asset belongs. A CGU is the smallest identifiable group of
assets that generate cash inflows largely independent of the cash inflows of other assets or group of assets, with each CGU being
no larger than a segment. In calculating the recoverable amount, the estimated future cash flows will be discounted to their
present value using a pre-tax discount rate that reflects the current market assessments of the risks specific to the asset or cash-
generating unit. Cash flows will be estimated for each cash-generating unit in its current condition and therefore will exclude cash
inflows and outflows improving or enhancing the asset’s performance.
An impairment loss will be recognised whenever the carrying amount of an asset, or its CGU, exceeds its recoverable amount.
Impairment losses will be recognised in the income statement.
Incitec Pivot has defined its CGUs, reassessed its impairment testing policy and tested all assets for impairment as at transition
date and at 30 September 2005. No impairment write-downs are required.
(h)
Share-based payments
Under current Australian GAAP, no expense is recognised for equity compensation. Under AASB 2 Share-Based Payments,
Incitec Pivot 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 with a corresponding increase in equity. This applies to all
share based payments issued after 7 November 2002 which have not vested as at 1 January 2005. The expected impact to the
Consolidated entity will be to decrease retained earnings as at 1 October 2004 by $288,000 (Company $288,000) and increase
shareholders equity. For the financial year to 30 September 2005, the expense relating to share-based payments is $227,000
(Company $227,000) with a corresponding increase in shareholders’ equity.
In addition, AASB2 will require that shares issued under a long term incentive scheme in conjunction with non-recourse loans be
treated as options. As a result, the receivable from employees in relation to these loans will be credited (Consolidated
$3,025,000, Company $nil), shareholders equity will be debited with the original loan value (Consolidated $3,069,000, Company
$nil) and retained earnings will be credited with the net amount of loan forgiveness and dividends received up to 1 October 2004
(Consolidated $44,000, Company $nil).
(i)
Earnings per share
Under AIFRS basic and diluted earnings per share are calculated using the profit or loss from continuing operations attributable to
ordinary shareholders.
The earnings per share for the year ended 30 September 2005, calculated on the adjusted results and the weighted average
number of shares of 58,281,027 shares, are expected to be:
Basic EPS from continuing operations
Diluted EPS from continuing operations
AGAAP
7 cents
7 cents
AIFRS
31 cents
31 cents
78
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2005
38. Impact of adopting AASB equivalent to International Financial Reporting Standards
(continued)
(j)
Taxation
Under AASB 112 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.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at
reporting date, and any adjustments to tax payable in respect of previous years.
Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying value
amount of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.
The following temporary differences will not be provided for: the initial recognition of assets and liabilities that affect neither
accounting or taxable profit, and differences relating to investments in subsidiaries to the extent that they will probably not reverse
in the foreseeable future. The amount of deferred tax provided would be based on the expected manner of realisation of the
asset or settlement of the liability, using tax rates enacted or substantively enacted at reporting date.
A deferred tax asset will be recognised only to the extent that it is probable that future taxable profits will be available against
which the asset can be utilised. Deferred tax assets will be reduced to the extent it is no longer probable that the related tax
benefit will be realised.
This will result in a change to the existing 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.
The expected impact of the change in basis on the deferred tax balances and the previously reported tax expense at 1 October
2004 is an increase in deferred tax liabilities of $11,160,000 and a decrease in retained earnings of $11,160,000. The
adjustments in respect of the Company are expected to be $nil. In addition, other transition adjustments are likely to result in an
increase in deferred tax assets of $1,321,000 and an increase in retained earnings of $1,321,000 for the Consolidated entity and
the Company.
At 30 September 2005 the expected impact to the deferred tax liabilities is an increase of $11,192,000 for the Consolidated entity
(Company $32,000) as a result of all the AIFRS adjustments. In addition, the deferred tax assets would also increase by $23,000
for the Consolidated entity (Company $nil).
(k) Borrowing costs
Current AGAAP requires borrowing costs relating to qualifying assets to be capitalised as part of the cost of the asset. Under
AIFRS, there is an option to either expense borrowing costs in the period in which they incurred, or to capitalise them as part of
the cost of the asset.
Incitec Pivot did not have any qualifying assets in 2005.
Incitec Pivot expects to apply the allowed alternative treatment under AASB 123 Borrowing Costs and therefore will continue to
capitalise borrowing costs where they are directly attributable to the acquisition, construction or production of a qualifying asset.
(l) Classification of financial instruments and hedge accounting
Incitec Pivot will take advantage of the election available in AASB 1 not to restate comparatives for AASB132 Financial
Instruments: Disclosure and Presentation and AASB 139 Financial Instruments: Recognition and Measurement. This allows
Incitec Pivot to apply previous AGAAP to the comparative information of financial instruments within the scope of AASB 132 and
AASB 139 for the 30 September 2006 financial report.
Under AASB 132, the current classification of financial instruments issued by entities in the Consolidated entity would not change.
(i)
Classification
Under AASB 139, 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:
a)
b)
c)
d)
e)
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.
Incitec Pivot Limited
79
Notes to the Financial Statements
For the year ended 30 September 2005
38. Impact of adopting AASB equivalent to International Financial Reporting Standards
(continued)
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.
As a result of the application of the exemption referred to above, there would have been no adjustment to classification or
measurement of financial assets or liabilities from the application of AIFRS during the year ended 30 September 2005.
Changes in classification and measurement will be recognised from 1 October 2005.
(ii)
Recognition of assets and liabilities
Under AIFRS certain trade finance facilities organised for Incitec Pivot customers are expected to be brought back onto the
balance sheet as Incitec Pivot has guaranteed a portion of these facilities. Currently, the guaranteed portion is disclosed in
note 28 Contingent Liabilities. However under AASB139, the full amount of the facilities will be brought back onto the
balance sheet.
This is expected to result in an increase in receivables and an increase in borrowings for Consolidated entity of $91,526,000
at 1 October 2005. The adjustment is the same for the Company.
(iii)
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:
(cid:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3)
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 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 consolidated entity’s current accounting policy if hedge transactions are designated as a
hedge of:
(cid:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3)
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.
(m) Non-current assets held for resale
Under AASB 5 Non-current assets held for sale and discontinued operations, a non-current asset will be classified as held for sale
if its carrying amount is to be recovered principally through a sale transaction rather than through continued use. The asset will
be measured at the lower of carrying amount and fair value, less costs to sell.
On transition to AIFRS, Incitec Pivot would be expected to recognise non-current assets held for resale of $9,381,000 for the
Consolidated entity and the Company as at 1 October 2004. As at 30 September 2005, the expected non-current assets held for
resale for the Consolidated entity and the Company would be $2,416,000. This would result in a reclassification from property,
plant and equipment to a separate disclosure under non-current assets held for resale on the AIFRS Balance Sheet.
(n) Changes in accounting policies
Under AIFRS, changes in accounting polices will be recognised by restating comparatives rather than making current year
adjustments, with note disclosure of prior year effects, as is the existing practice under Australian GAAP.
80
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2005
39. Events subsequent to balance date
Since the end of the financial year, in November 2005, the directors have declared a special dividend of 50 cents per share. This
dividend is fully franked at the 30% corporate tax rate and is payable on 9 January 2006.
The directors have not become aware of any other significant matter or circumstance that has arisen since 30 September 2005,
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
81
Directors’ Declaration on the Financial Statements set out on
pages 40 to 81
I, John C Watson, being a director of Incitec Pivot Limited (“the Company”), 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 40 to 81, and the remuneration disclosures that are contained in the
Remuneration Report on pages 19 to 31 of the Directors’ Report, 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 2005 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, including AASB 1046 Director and Executive Disclosures by Disclosing
Entities, 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 controlled entities 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).
3. The directors have been given the declaration by the chief executive officer and chief financial officer required by section 295A of
the Corporations Act 2001 (Cth) for the financial year ended 30 September 2005.
John C Watson, AM
Chairman
Dated at Melbourne this 16th day of November 2005
.
82
Incitec Pivot Limited
Shareholder Statistics
As at 7 November 2005
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
33,367
2,601
76
21
12
36,077
92.49%
7.21%
0.21%
0.06%
0.03%
100%
8,761,529
4,542,561
501,236
527,490
43,948,211
58,281,027
15.03%
7.79%
0.86%
0.91%
75.41%
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 76.1% of that class of shares.
Twenty largest ordinary fully paid shareholders
Orica IC Assets Ltd
RBC Global Services Australia Nominees Pty Limited
JP Morgan Nominees Australia Limited
National Nominees Limited
Citicorp Nominees Pty Limited
Australian Foundation Investment Company Limited
Ross Investment (Aust) Pty Ltd
Westpac Custodian Nominees Limited
Gwynvill Trading Pty Limited
Mirrabooka Investments Limited
Ross Investment (Aust) Pty Ltd
Mr Gregory Witcombe
Cogent Nominees Pty Limited
ANZ Nominees Limited
Mr Mark Cubit & Mrs Amanda Cubit (Nenkin Super Fund account)
ICM Agriculture Pty Ltd
Ross Investment (Aust) Pty Ltd
Tallageira Pastoral Co. Pty Ltd
Mrs Amanda Cubitt
Ajay Nominees Pty Ltd
Total
Number of
shares
40,796,719
1,296,879
502,541
319,129
276,502
272,801
151,496
122,853
118,127
115,936
100,159
59,778
46,553
38,157
27,000
25,546
24,534
23,721
18,000
17,285
44,353,716
Percentage
70.00
2.23
0.86
0.55
0.47
0.47
0.26
0.21
0.20
0.20
0.17
0.10
0.08
0.07
0.05
0.04
0.04
0.04
0.03
0.03
76.10
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.
Incitec Pivot Limited
85
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
%
%
86
Incitec Pivot Limited
2005
$000
1,073,872
107,757
(30,486)
(9,805)
67,466
(9,355)
2004
$000
1,135,588
167,179
(35,372)
(9,945)
121,862
(5,406)
(46,999)
(6,952)
4,160
33,412
37,572
70,520
369,378
283,855
-
174,004
29,105
856,342
217,309
43,713
17,335
12,824
291,181
565,161
565,161
565,161
58,281
-
58,281
58,281
64.5
7.1
121
100
$22.50
$15.00
$15.82
922,005
6.71
6.3
9,162
1.6
7.2
24,068
-
6.3
0.7
(9,327)
(32,090)
75,039
5,832
80,870
16,902
460,930
296,132
-
183,809
30,522
971,393
272,186
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
Five Year Financial Statistics
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)
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
(37.4)
(100.1)
-
-
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)
Incitec Pivot Limited
87
88
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In 2005, Incitec Pivot Limited
launched its new market
position, ‘Because the land
is your life’.
The new positioning reflects
the fundamental connection
between primary producers
and the land.
Incitec Pivot shares a similar
connection to the land, as
a major supplier to rural
producers through its extensive
Agent and Dealer network.
Shareholder Information
Annual General Meeting
2.00 pm Monday 23 January 2006
at The Arts Centre, 100 St Kilda Road,
Melbourne Victoria 3000, Australia,
in the ANZ Pavilion
Stock Exchange Listing
Incitec Pivot’s shares are listed on the
Australian Stock Exchange (ASX) and
are traded under the code IPL
Share Registry
Link Market Services
Level 8, 580 George Street,
Sydney New South Wales 2000,
Australia
Locked Bag A14
Sydney South New South Wales 1235
Telephone: 1300 303 780
(for callers within Australia)
International: +61 2 8280 7111
General Facsimile: +61 2 9287 0303
Proxy Facsimile: +61 2 9287 0309
Email: registrars@linkmarketservices.com.au
Website: www.linkmarketservices.com.au
Auditor
KPMG
147 Collins Street,
Melbourne Victoria 3000, Australia
Incitec Pivot Limited
Registered address and head office:
70 Southbank Boulevard,
Southbank Victoria 3006,
Australia
GPO Box 1322
Melbourne Victoria 3001,
Australia
Telephone: +61 3 8695 4400
Facsimile: +61 3 8695 4419
www.incitecpivot.com.au
SuPerfect and Easy Liquids are registered trade marks of Incitec Pivot Limited. Green Urea, Cal Gran and FertTerms Plus are trade
marks of Incitec Pivot Limited. BIG N, Granulock, GranAm and Liquifert are registered trade marks of Incitec Fertilizers Limited.
Nutrient Advantage is a trade mark of Incitec Fertilizers Limited.
®
®
®
™
®
™
Because the land
is your life.
Incitec Pivot Limited
ABN 42 004 080 264
70 Southbank Boulevard,
Southbank Victoria 3006,
Australia
Postal address
Incitec Pivot Limited
GPO Box 1322
Melbourne Victoria 3001,
Australia
T. + 61 3 8695 4400
F. + 61 3 8695 4419
www.incitecpivot.com.au
Annual Report 2005