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
Telephone: +61 3 8695 4400
Facsimile: +61 3 8695 4419
www.incitecpivot.com.au
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Annual Report
2008
The paper used for this Annual Report 2008 is Harvest Recycled Silk.
Harvest Recycled delivers Triple Green Environmental Performance:
60% Recycled Sugar Cane, ECF Bleaching and Sustainable Afforestation.
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Contents
Chairman’s Report
Managing Director’s Report
Board of Directors
Executive Team
Financial Report
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3
4
5
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Chairman’s Report
I am pleased to report the continued strong progress of Incitec
Pivot Limited during 2008. This year has seen the Company’s
transformation into an international company through the
acquisition of Dyno Nobel, as well as the delivery of outstanding
financial performance. The year also saw our inclusion in the
S&P/ASX top 50 index of companies listed on the Australian
Securities Exchange. These achievements were delivered by our
people executing to our well-defined business strategy.
The acquisition of Dyno Nobel was a strategic growth opportunity
which substantially expanded our business, both geographically
into the international arena and also into the global resources
sector. Incitec Pivot is the number 1 supplier of fertilisers in
eastern Australia and, following the acquisition of Dyno Nobel,
the second largest provider in the world of industrial explosives
and related services to the mining, quarrying, seismic and
construction industries. In North America, the biggest market
in the world for industrial explosives, Incitec Pivot is the largest
manufacturer and supplier.
In 2008, Incitec Pivot delivered record financial results. Net Profit
After Tax (NPAT), Earnings Before Interest and Tax (EBIT) and
operating cash flow all increased by three times on the previous
financial year. In addition, we maintained our strong commitment
to financial discipline, with our year-end trade working capital,
excluding Dyno Nobel, at a record low. Our focus on financial
discipline has underpinned our performance in recent years.
Importantly, our shareholders have benefited from the outstanding
result this year with a 98% increase in dividends per share
compared to the previous financial year.
More than 85% of the total earnings came from our manufacturing
operations. This is a clear outcome of one of the key principles of
our strategy, Own The Product. The result also shows the outcome
of another key principle of our strategy, Trade/Diversify, with profits
from our trading business, Southern Cross International, increasing
by over $40 million. Another highlight was Dyno Nobel which
contributed almost $110 million in Earnings Before Interest Tax
Depreciation and Amortisation (EBITDA) in only the 3 ½ months
since we acquired the business.
The contribution of Dyno Nobel demonstrates the success of our
integration program and the commitment of our people. I was able
to witness this personally during the Board’s tour of the explosives
manufacturing operations and other sites in North America in
September. At each of the sites, I was impressed with employees’
commitment to the Incitec Pivot way of “Getting Things Done” and
our three “non-negotiables” of Zero Harm, Customer Focus and
18% Return On Net Assets, which were rolled out as part of the
integration program.
It was with the release of this strong financial performance
that Incitec Pivot went to its shareholders seeking to raise
capital through a pro rata entitlement offer. The entitlement
offer was announced on 12 November 2008 and consists
of an underwritten institutional entitlement offer, which is
now complete, and a retail entitlement offer which closes on
4 December 2008. The institutional entitlement offer received
overwhelming support from Incitec Pivot’s institutional
shareholders and raised approximately $819 million.
The decision to undertake the entitlement offer at this time
continues our approach of prudent financial management,
which is particularly important given the uncertain global
economic environment, and strengthens an already robust balance
sheet. The funds raised by the entitlement offer will be used to
complete the refinancing of the bridge facility entered into in
May 2008 in connection with the acquisition of Dyno Nobel, and
will provide flexibility to pursue planned growth projects, such
as expansion of production at Gibson Island and Phosphate Hill.
I am confident about the ability of the business to continue to
deliver value for Incitec Pivot shareholders into the future. My
confidence in the future stems from the belief that our enlarged
business which services both the agricultural and mining industries
will continue to benefit from the fundamentals underpinning those
industries. We expect to see continuing demand for fertilisers
based on world demand for food, fibre, feed and fuel. In relation
to the mining industry, whom we serve, demand for explosives is
underpinned by the volume of production of key bulk commodities,
such as iron ore and coal. At the core of this lies the world’s
population, which is still increasing at a net rate of over 200,000
people a day.
Finally, I would like to take this opportunity to thank my fellow
directors for their diligent deliberation of the strategic issues and
to also thank Incitec Pivot management who lead an exceptional
team, now extending through North America and the Asia-Pacific.
It is through the efforts of the whole Incitec Pivot team that we
have seen the strong growth of the Company and exceptional
returns to shareholders.
John C Watson, AM
Chairman
2
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Managing Director’s Report
It is with pleasure that I report a record financial result for the
financial year ended 30 September 2008 delivered by an outstanding
team focused on delivering outcomes based upon a sound business
strategy. By any scorecard, this was a great result with key financial
metrics three times higher than last year including Net Profit After
Tax (NPAT) at $657 million.
Incitec Pivot’s business strategy, with its four key principles of Lowest
Cost Base, Own the Product, Trade/Diversify, and Supply Chain, has
been in place since 2005. Since then, profitability has increased by
about 14 times. In 2008, all elements of the strategy contributed to
the result. In this respect, the interaction of the four principles forms
a perpetual cycle. Own The Product, our focus on manufacturing,
delivered some 89% of profit for the year. Our ability to deliver from
manufacturing is underpinned by our continued focus on Lowest Cost
Base. Our strict financial discipline has seen some $150 million in
sustainable cost savings through the Tardis I and Tardis II efficiency
programs, commenced in 2005. A growing contributor to profit is the
focus on trading, through Southern Cross International, our trading
business, which enables us to capitalise on our manufacturing
excellence and low cost culture by diversifying our customer base.
I believe there is a strong future for our trading business which
provides a number of benefits to Incitec Pivot as a whole. It
enables us to “iron out” the seasonal demand “highs and lows” of
the eastern Australia fertiliser market taking some of the cyclicality
out of the fertiliser business. As a consequence, this allows us to
run our plants at capacity throughout the year, exporting in periods
of low domestic demand. Also, on the input side of the business,
we are positioned to take supply from producers and suppliers of
materials vital to our production and which, if necessary, we can
place in a number of markets external to the business. Sulphuric
acid is an example of this. Additionally, we can consolidate logistics
which contributes to another part of our strategy, Supply Chain. An
example is transporting materials to and from the United States.
The Dyno Nobel acquisition has met our expectations, if not exceeded
them. The business contributed $109.5 million in Earnings Before
Interest Tax Depreciation and Amortisation (EBITDA) in only 3 ½
months. In addition, we have initiated the Project Velocity efficiency
program which is designed to optimise the operational and financial
performance of the enlarged Incitec Pivot group, with particular focus
on Dyno Nobel and from which we are expecting a contribution of
US$204 million by 2011.
Project Velocity is based on the proven Tardis blueprint for
business improvement, which is central to our business model
and a core competency of Incitec Pivot. The project has initiatives
across 5 streams, including plant efficiency and global supply
chain optimisation.
The success of the Company, its strategy and its people were reflected
well by the strong support that our institutional shareholders gave to
the recently announced pro rata entitlement offer. Prudent financial
management compelled us to undertake this offer at this time, in
light of the uncertainty in the global economy and financial markets.
In total, Incitec Pivot seeks to raise approximately $1,170
million under the entitlement offer, consisting of $819 million
already raised from the institutional entitlement offer and,
if fully subscribed, $351 million from the retail entitlement
offer, which opened on 17 November 2008.
The capital raised will be used to cover the final portion of the $2.4
billion bridge loan facility taken to fund the cash component of the
Dyno Nobel acquisition and which is due to mature in May 2009.
The capital raising, together with other committed financings,
also provides us with the flexibility to pursue planned growth
opportunities such as the expansion of production at our
Queensland fertiliser plants at Gibson Island, near Brisbane, and
Phosphate Hill, near Mt Isa. The expansion at Phosphate Hill will
take production capacity from 970,000 tonnes a year, to 1.01
million tonnes a year – an increase of 40,000 tonnes a year. At
Gibson Island, urea production will increase by 40,000 tonnes a
year to 340,000 tonnes a year. Both of these projects are close to
the core growth opportunities and are expected to complete in 2010.
Our biggest development project is at Moranbah in Central
Queensland involving the construction of a 330,000 tonnes-a-year
fully-integrated ammonium nitrate complex comprising ammonia,
nitric acid and ammonium nitrate plants. I visited the project in
October 2008, and observed that construction is on-track and
consistent with our expectations when we announced the project
in July 2008. The project, which is based in the heart of Australia’s
largest metallurgical coal region and adjacent to some of the largest
coal mines in the world, is expected to commence production in
2011. Our resource-industry customers are pleased about this new
source of supply and we are looking forward to developing long
term mutually-beneficial relationships. In relation to our agricultural
industry customers, we are looking at the potential to produce the
liquid fertiliser, urea ammonium nitrate, as local demand has been
growing rapidly and is currently being met by imports only.
As a commitment to our corporate value of Zero Harm, Incitec Pivot
has developed a number of initiatives to improve the health and
safety standards at our operational and manufacturing sites for
employees, contractors and visitors. Successful initiatives in 2008
included a series of site safety days where sites were closed for
a day and everyone on site attended safety training. In recent years,
we have achieved a year-on-year advance in our safety performance
in line with our targeted improvement of 20% per year. The challenge
is now greater with the addition of the explosives manufacturing,
sales and marketing businesses, however we are determined to
sustain and better the current level of improvement.
This has been a tremendous year in terms of performance. I have a
strong conviction that the success of an organisation is driven by the
right strategy and executed by the best people. Our “Getting Things
Done” maxim and our Own.Breakout.Deliver values are a reality and
they drive the value we create for our stakeholders. I want to thank
everyone in the global Incitec Pivot team for the contribution to this
year’s result and say that I’m looking forward to the years ahead as
we “get things done” at Incitec Pivot.
Julian Segal
Managing Director & CEO
3
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Board of Directors
John Watson AM, MAICD
Non-executive Chairman
Chairman of the Remuneration
and Appointments Committee
John was appointed as a director
on 15 December 1997 and was
appointed Chairman in January
1998. John is the Chairman of
Tasman Farms Limited and Governor
of Van Diemen’s Land Company,
a director of Tassal Group Limited,
Councillor of the Royal Agricultural
Society of Victoria and a member of
the Rabobank Food and Agribusiness
Advisory Board for Australia and
New Zealand. He is also a past
Deputy President of the National
Farmers’ Federation, a former
Chairman of PrimeSafe and a former
non-executive director of Rural Press
Limited. He was Chairman of the
Export Wheat Commission, which
was replaced by a new authority,
Wheat Exports Australia, on 1 July
2008. In 2004, he was awarded a
Membership in the Order of Australia
for services to the agricultural and
food production sectors.
Brian Healey FAICD, FAIM
Non-executive director,
Deputy Chairman
Brian was appointed as a director
on 1 June 2003. He is a former
director of Orica Limited and Fosters
Group Brewing Limited, a former
Senior Vice President of Nabisco
Inc. and Sara Lee Corporation, a
former Chairman of Biota Holdings
Limited, and a former Chief
Executive of Nicholas Kiwi Limited.
He recently retired as Chairman of
Centro Properties Group and Centro
Retail Limited.
Allan McCallum
Dip. Ag Science, FAICD
Non-executive director
Chairman of the Health,
Safety, Environment and
Community Committee
Allan was appointed as a director
on 15 December 1997. Allan is
Chairman of Tassal Group Limited,
CRF Foods (Vic) Pty Limited and
CRF (Colac Otway) Pty Limited,
and is a director of Medical
Developments International
Limited. He is a former director of
Graincorp Limited and a former
Chairman of Vicgrain Limited.
Anthony Larkin FCPA, FAICD
Non-executive director
Chairman of the Audit and
Risk Management Committee
Tony was appointed as a director
on 1 June 2003. He is a director
of Corporate Express Australia
Limited, OZ Minerals Limited
and Eyecare Partners Limited.
Tony was previously Executive
Director Finance of Orica Limited,
Chairman of Incitec Limited and
Chairman of Ausmelt Limited.
During his career with BHP Limited,
which spanned 38 years, he held
the position of Group Treasurer,
as well as various senior finance
positions in its steel and minerals
businesses and senior corporate
roles. From 1993 to 1997, he was
seconded to Foster’s Group Limited
as Senior Vice President Finance
and Investor Relations. Until early
2006, he was a Commissioner
of the Victorian Essential
Services Commission.
Julian Segal BSc, MBA
Managing Director & Chief Executive
Officer
James Fazzino BEc(Hons), CPA
Finance Director & Chief Financial
Officer
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
held various senior management
positions including General Manager,
Australia/Asia Mining Services and
Senior Vice President - Marketing for
Orica Mining Services globally.
James was appointed as a director
on 18 July 2005, following his
appointment as Chief Financial
Officer in 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
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.
John Marlay BSc, FAICD
Non-executive director
John was appointed to the Board by
the directors on 20 December 2006.
John is a former Chief Executive
Officer and Managing Director of
Alumina Limited, a former director
of Alcoa of Australia Limited, Alcoa
World Alumina LLC and the Business
Council of Australia, the former
Deputy Chairman of Alcoa World
Alumina and Chemicals Strategic
Council, and the former Chairman of
the Australian Aluminium Council.
He has formerly held executive
positions with, and been a director
of, Esso Australia Limited, James
Hardie Industries Limited, Pioneer
International Group Holdings and
Hanson plc. John was a member
of the 2007 Prime Ministerial Task
Group on Emissions Trading and is a
member of the Chairman’s Panel of
the Great Barrier Reef Foundation.
4
4
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Executive Team
Julian Segal BSc, MBA
Managing Director &
Chief Executive Officer
James Fazzino BEc(Hons),
CPA
Finance Director & Chief
Financial Officer
Kerry Gleeson LLB(Hons)
General Counsel &
Company Secretary
Kerry has extensive
experience as a corporate
finance lawyer and joined
Incitec Pivot as General
Counsel and Company
Secretary in February 2004.
Prior to joining Incitec Pivot,
Kerry was in private practice
with Blake Dawson and
advised the Company on its
merger with Incitec Fertilizers
Limited in 2003. Kerry was
previously a partner of
English law firm Halliwell
Landau (now Halliwells
LLP), where she gained
extensive experience in IPOs,
international mergers and
acquisitions, equity markets
financing and restructuring.
Bernard Walsh BE(Mech),
MIEAust CPEng
General Manager
Global Manufacturing
Bernard has extensive
manufacturing experience
in petrochemicals, chemicals
and mining services.
Bernard joined Incitec
Pivot from Orica Limited
where he held a variety of
roles from 1987, including
General Manager of Initiation
Explosives Systems (IES) until
2003. IES was a joint venture
between Orica Limited and
Ensign Bickford Industries
Inc. and manufactured
a full range of initiating
systems at its Helidon,
Queensland, and Deer Park,
Melbourne, sites.
James Whiteside BAgricSc,
GradDipBusAdmin
General Manager Supply
Chain and Trading
James joined Incitec Pivot
(then known as Pivot Limited)
in 1992, following extensive
experience in agricultural
companies and consulting.
Since joining Incitec Pivot,
James has held a number of
senior management roles,
most recently as Group
Procurement Manager.
As General Manager Supply
Chain and Trading, James
is responsible for Southern
Cross International and its
international and domestic
trading business.
Kevin Lynch BSocSc, MBA
General Manager Human
Resources
Don Brinker BS Public
Administration/Business MBA
General Manager Explosives
Kevin joined Incitec Pivot
as General Manager
Human Resources in
February 2008. Kevin has
extensive experience in the
chemicals and explosives
industries. Kevin worked
with ICI Australia, then Orica
Limited for over 14 years,
in senior human resource
roles in the chemicals and
explosives divisions and for
a six year period was the
General Manager of Human
Resources for the Orica
Limited group. At Incitec
Pivot, Kevin is responsible
for human resources across
the Company’s Australian
and international operations.
Don joined Incitec Pivot in
June 2008 and is responsible
for the Company’s global
explosives business. Don has
extensive experience in the
North American explosives
business, having worked
for over 30 years in the
industry. Immediately prior
to joining Incitec Pivot, Don
held the position of President
& CEO Americas at Minova
International and, prior to
that, he was President & CEO
of Orica’s North American
explosives business. Don is
based at the head office of
Dyno Nobel in Salt Lake City,
Utah.
Jamie Rintel BA
General Manager Strategy
Jamie joined Incitec Pivot
in February 2005, following
extensive experience in
consulting across a range
of industries both in Australia
and overseas. Within Incitec
Pivot, Jamie has held a
number of roles including,
most recently, Marketing
Manager for the Company’s
Australian fertiliser business.
Jamie was appointed to
his current role as General
Manager Strategy in
June 2008.
Alan Grace BScChemEng,
MIChemE
General Manager Health,
Safety, Environment &
Major Projects
Alan joined Incitec Pivot
on the Company’s merger
with Incitec Fertilizers
Limited, having commenced
with Incitec Limited in
2000. Alan has extensive
experience in the construction
and operation of chemical and
petrochemical manufacturing
facilities. Alan previously held
the role of General Manager
Chemicals, where he was
responsible for managing
the chemicals business unit.
In June 2008, he was
appointed to the new role
of General Manager Health,
Safety, Environment & Major
Projects, with responsibility for
global engineering standards
and for pursuing nitrogen and
phosphate opportunities in
new geographies.
Gary Brinkworth
General Manager
Australian Fertilisers
The General Manager
Australian Fertilisers is
responsible for domestic
fertiliser sales to Incitec
Pivot’s extensive distribution
network across eastern
Australia. Paul Barber held
this position during the
year. Paul has announced
his resignation from
Incitec Pivot and, as at
the date of this annual
report, a transition period
is underway with Gary
Brinkworth (formerly of BP
and Coles Myer), who has
recently been appointed
to the position of General
Manager Australian
Fertilisers.
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Financial Report
Directors’ Report
Auditor’s Independence Declaration
Income Statements
Statements of Comprehensive Income
Statements of Financial Position
Statements of Cash Flows
Statements of Changes in Equity
Notes to the Financial Statements
Directors’ Declaration on the Financial Statements set out on pages 38 to 3
Audit Report
Shareholder Statistics
Five Year Financial Statistics
7
37
38
39
40
4
42
44
4
5
7
8
6
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Directors’ Report
The directors of Incitec Pivot Limited present the financial report of the Company and its controlled entities (the Consolidated
entity) for the year ended 30 September 2008 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, qualifications and special responsibilities
Experience
Current directors
J C Watson AM, MAICD
Independent non-executive director and Chairman
Chairman of the Remuneration and Appointments Committee
Member of the Health, Safety, Environment and Community
Committee
B Healey FAICD, FAIM
Independent non-executive director and Deputy Chairman
Member of the Remuneration and Appointments Committee (to 5
September 2008)
A C Larkin FCPA, FAICD
Independent non-executive director
Chairman of the Audit and Risk Management Committee
Member of the Remuneration and Appointments Committee (to 5
September 2008)
Member of the Health, Safety, Environment and Community
Committee
A D McCallum Dip. Ag Science, FAICD
Independent non-executive director
Chairman of the Health, Safety, Environment and Community
Committee
Member of the Remuneration and Appointments Committee
Member of the Audit and Risk Management Committee
J Marlay BSc, FAICD
Independent non-executive director
Member of the Remuneration and Appointments Committee
Member of the Audit and Risk Management Committee
J Segal BSc, MBA
Managing Director & Chief Executive Officer
Member of the Health, Safety, Environment and Community
Committee
J E Fazzino BEc(Hons), CPA
Finance Director & Chief Financial Officer
John was appointed as a director on 15 December 1997 and was appointed
Chairman in January 1998. John is the Chairman of Tasman Farms Limited
and Governor of Van Diemen’s Land Company, a director of Tassal Group
Limited, Councillor of the Royal Agricultural Society of Victoria and a
member of the Rabobank Food and Agribusiness Advisory Board for
Australia and New Zealand. He is also a past Deputy President of the
National Farmers’ Federation, a former Chairman of PrimeSafe and a
former non-executive director of Rural Press Limited. Until recently, he was
Chairman of the Export Wheat Commission, which was replaced by a new
authority, Wheat Exports Australia, on 1 July 2008. In 2004, he was
awarded a Membership in the Order of Australia for services to the
agricultural and food production sectors. In 2006, he was the recipient of
the inaugural Rabobank Leadership Award.
Brian was appointed as a director on 1 June 2003. He is a former director
of Orica Limited and Fosters Group Brewing Limited, a former Senior Vice
President of Nabisco Inc. and Sara Lee Corporation, a former Chairman of
Biota Holdings Limited, and a former Chief Executive of Nicholas Kiwi
Limited. He recently retired as Chairman of Centro Properties Group and
Centro Retail Limited.
Tony was appointed as a director on 1 June 2003. He is a director of
Corporate Express Australia Limited, OZ Minerals Limited and Eyecare
Partners Limited. Tony was previously Executive Director Finance of Orica
Limited, Chairman of Incitec Limited and Chairman of Ausmelt Limited.
During his career with BHP Limited, which spanned 38 years, he held the
position of Group Treasurer and, prior to that, he 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 Group Limited as
Senior Vice President Finance and Investor Relations. Until early 2006, he
was a Commissioner of the Victorian Essential Services Commission.
Allan was appointed as a director on 15 December 1997. Allan is Chairman
of Tassal Group Limited, CRF Foods (Vic) Pty Ltd and CRF (Colac Otway)
Pty Ltd, and is a director of Medical Developments International Limited.
He is a former director of Graincorp Limited and a former Chairman of
Vicgrain Limited.
John was appointed to the Board by the directors on 20 December 2006.
John is a former Chief Executive Officer and Managing Director of Alumina
Limited, a former director of Alcoa of Australia Limited, Alcoa World Alumina
LLC and the Business Council of Australia, the former Deputy Chairman of
Alcoa World Alumina and Chemicals Strategic Council, and the former
Chairman of the Australian Aluminium Council. He has formerly held
executive positions with, and been a director of, Esso Australia Limited,
James Hardie Industries Limited, Pioneer International Group Holdings and
Hanson plc. Mr Marlay was a member of the 2007 Prime Ministerial Task
Group on Emissions Trading and is a member of the Chairman’s Panel of
the Great Barrier Reef Foundation.
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 held
various senior management positions including General Manager,
Australia/Asia Mining Services and Senior Vice President - Marketing for
Orica Mining Services globally.
James was appointed as a director on 18 July 2005, following his
appointment as Chief Financial Officer in 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 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.
Incitec Pivot Limited
7
Directors’ Report
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 in Melbourne, and prior to that, Kerry was a partner of an English law firm,
Halliwell Landau (now Halliwell LLP).
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
Securities Exchange in accordance with section 205G(1) of the Corporations Act 2001 (Cth), as at the date of this report is as
follows:
Director
J C Watson
B Healey
A C Larkin
A D McCallum (1)
J Marlay (1)
J Segal (2)
J E Fazzino (2)
Fully paid ordinary shares
Incitec Pivot Limited
74,000
20,000
-
156,360
20,000
2,134,120
1,845,420
(1) Held both directly and indirectly.
(2) This interest includes, in the case of Mr Segal, shares acquired pursuant to his Retention Award and pursuant to the Incitec Pivot long
term incentive plans and, in the case of Mr Fazzino, shares acquired pursuant to Incitec Pivot’s long term incentive plans. Further details
of the Retention Award and long term incentive plans are set out in the remuneration report and Note 35, Share Based Payments.
Further details of directors’ interests in share capital are set out in Note 34, Key Management Personnel disclosures.
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(3)
Health, Safety,
Environment and
Community
Held (1) Attended (2) Held (1) Attended (2) Held (1) Attended (2) Held (1) Attended (2)
Current
J C Watson
B Healey
A C Larkin
A D McCallum
J Marlay
J Segal
J E Fazzino
21
21
21
21
21
21
21
21
20
20
19
20
21
21
4
4
4
4
4
4
6
5
5
6
6
6
3
5
6
6
4
4
4
4
4
4
4
3
(1) This column shows the number of meetings held during the period that the director was a member of the Board or Committee.
(2) This column shows the number of meetings attended during the period that the director was a member of the Board or Committee.
(3) The Remuneration and Appointments Committee was reconstituted on 5 September 2008 to comprise 3 non-executive directors.
Principal activities
The principal activities of the Consolidated entity during the course of the financial year were the manufacture, trading and
distribution of fertilisers, chemicals and, from June 2008, industrial explosives.
During the financial year, the Consolidated entity acquired Dyno Nobel Limited (Dyno Nobel). The principal activities of Dyno
Nobel for the financial year were the manufacture and sale of industrial explosives and related products and services primarily in
North America and Australia. Details of the acquisition of Dyno Nobel are contained in Note 28 to the financial statements.
8
Incitec Pivot Limited
Directors’ Report
Review and results of operations
Financial Highlights
• Net Profit After Tax (NPAT) for the year ended 30 September 2008 was up 199% or $409.0m to $614.3m (2007: $205.3m)
• Net Profit After Tax (excluding individually material items1) for the year ended 30 September 2008 was up 224% or
$454.7m to $657.2m (2007: $202.5m)
• Earnings Before Interest and Tax (EBIT) (excluding individually material items) was up 210.1% or $656.6m to $969.1m
(2007: $312.5m)
• Earnings Per Share (excluding individually material items) were up 206% to 61.4 cents (2007: 20.1 cents)
Business Highlights
• Record EBIT contribution from the Fertiliser business of $900.6m, driven by higher fertiliser prices and growth in trading
margins
• Completion of the acquisition of Dyno Nobel on 16 June 2008, contributing $79.5m EBIT for the financial year
• Project Velocity (Dyno Nobel business efficiency program) is well advanced and integration of the business has been
completed
• Delivery of an additional $47.4m to Cash Flows from trade working capital improvements in the Fertiliser business
External Sales Revenue
•
Total sales revenue was up 113% or $1,545m to $2,918m (2007: $1,373m)
• Sales revenue contributed by the Dyno Nobel business was $571m (2007: $0)
•
•
Total sales revenue of the Fertiliser business was up 71% or $975m to $2,348m (2007: $1,373m)
Fertiliser revenue growth was largely driven by an increase in global fertiliser prices to record levels in response to growing
demand for food, fibre, feed and fuel
• Drought conditions on the east coast of Australia persisted, however higher soft commodity prices generally encouraged an
increase in planted area. The potential volume uplift from the increased planted area was offset by a reduction in
application rates
Earnings Summary
As mentioned, NPAT (excluding individually material items) was up 224% or $454.7m to $657.2m (2007: $202.5m) and EBIT
(excluding individually material items) was up 210.1% or $656.6m to $969.1m (2007: $312.5m)
Positive Factors include:
• Contribution from the Dyno Nobel business of $79.5m (2007: $0)
•
•
Fertiliser business EBIT of $900.6m (2007: $312.5m) up 188.2% or $588.1m
Fertiliser growth was driven by higher average fertiliser price per tonne and higher global fertiliser pricing (priced in US
dollars), partially offset by an appreciation in the Australian dollar against the US dollar
• Higher trading margins for local and exported product
• Savings generated by ‘Tardis’ program efficiencies
Negative Factors include:
• Higher raw material costs (particularly for sulphuric acid)
•
• Costs incurred in pursuing business growth
Lower production volumes due to temporary production outages at Gibson Island and Phosphate Hill
Returns to Shareholders
•
•
•
The Board has declared a final dividend of 19.5 cents per share (cps) fully franked
This brings the total 2008 dividend to 29.7cps, fully franked (2007: 15cps, fully franked)
Total shareholder returns were 25% for 2008 (2007: 242%) assuming shares were held for the full year
Balance Sheet
•
• Net debt increase by $1,618.6m to $2,030.3m at 30 September 2008 (2007: $411.7m), reflecting the cash component of
The acquisition of Dyno Nobel was completed during the financial year for a total enterprise value of $3.9billion
the acquisition
The Net Debt/EBITDA2 ratio is 1.95 at 30 September 2008 (2007: 1.2)
•
1 Individually material items are revenues or expenses that are outside the normal operations of the business and are non-recurring in nature.
2 Net Debt/EBITDA equals interest bearing liabilities less cash and cash equivalents / Earnings Before Interest, Tax, Depreciation and
Amortisation, excluding individually material items.
Incitec Pivot Limited
9
Directors’ Report
Dividends
Dividends declared and paid since the last annual report were:
Type
Declared and paid during the year(1)
2007 final dividend
2008 interim dividend
Declared and paid after end of year
2008 final dividend
Dealt with in the financial
report as:
Dividends
Subsequent event
Note
27
27
Cents per share
Total amount
$000
Franked / Unfranked
Date of payment
116,479
102,865
Franked
Franked
13 December 2007
2 July 2008
237,360
Franked
2 December 2008
11.55
10.2
19.5
$000
219,344
237,360
(1) The dividends (cents per share) declared and paid during the year have been restated as a result of the 20:1 share split approved by
shareholders in September 2008.
Changes in the state of affairs
In August 2007, the Company acquired a 13.2% interest in Dyno Nobel. On 11 March 2008, Dyno Nobel and Incitec Pivot
entered into a Scheme Implementation Agreement. This Scheme Implementation Agreement was amended on 2 April 2008 to
allow Incitec Pivot US Holdings Pty Ltd, a member of the Group, to acquire the shares in Dyno Nobel which Incitec Pivot did not
already own, by way of schemes of arrangement. The acquisition completed on 16 June 2008.
The acquisition of Dyno Nobel has significantly increased the size of the operations of the Consolidated entity and given it
exposure to a new industry and a wider geographical presence. The financial complexity of the Consolidated entity has
increased as a result of the acquisition, with foreign currency denominated operations being accounted for in the consolidated
financial report and higher debt levels.
Events subsequent to balance date
Since the end of the financial year, the directors have declared a final dividend for the Company of 19.5 cents per share. The
dividend is fully franked at the 30% corporate tax rate and is payable on 2 December 2008 (Refer Note 27).
The directors have not become aware of any other significant matter or circumstance that has arisen since 30 September 2008
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
Incitec Pivot will continue to execute on its strategy of growing close to its core nitrogen chemistry manufacturing competence.
This will require further investment in areas such as increasing manufacturing capacity and performance, which are approved
subject to a targeted return on net assets, and business efficiencies under the Velocity program.
Further information on likely developments in the operations of the Consolidated entity and the expected results of the
operations have not been included in this annual financial report because the directors believe it would be likely to result in
unreasonable prejudice to the Group.
10
Incitec Pivot Limited
Directors’ Report
Environmental regulations
Manufacturing licences and consents are in place at each Group 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. When
breaches occur they are reported to the authorities as required and actions taken to prevent recurrences.
Indemnification and insurance of officers
The Company’s Constitution provides that, to the extent permitted by law, the Company must indemnify any person who is, or
has been, a director or secretary of the Company against any liability incurred by that person including any liability incurred as
an officer of the Company or a subsidiary of the Company and legal costs incurred by that person in defending an action.
The Constitution further provides that the Company may enter into an agreement with any current or former director or secretary
or a person who is, or has been, an officer of the Company or a subsidiary of the Company to indemnify the person against
such liabilities. The Company has entered into Deeds of Access, Indemnity and Insurance with each of its officers. Pursuant to
those deeds, the Company has paid a premium in respect of a contract insuring officers of the Company and officers of its
controlled entities against 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 has provided non-audit services to the amount of $5,000 during the year ended 30 September 2008 (Refer Note 7).
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 37 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 one hundred thousand dollars.
Incitec Pivot Limited
11
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 2008. This remuneration report is audited.
This remuneration report is prepared in respect of the Key Management Personnel of the Company, being those persons who
have authority and responsibility for planning, directing and controlling the activities of the Company. The Board has determined
that the Key Management Personnel of the Consolidated entity are the non-executive directors listed in the table in section A,
and the executive directors and the direct reports to the Managing Director & CEO listed in table D.4, which includes the five
most highly remunerated Company executives.
When used in this report, the term “executives” means the executive directors and the direct reports to the Managing Director
& CEO.
This remuneration report forms part of the directors’ report.
This report describes the remuneration arrangements established by the Company for non-executive directors and executives
as well as the performance-based remuneration for the executives as well as senior employees.
Incitec Pivot aims to generate competitive returns for its shareholders through its business strategy. In recent years, the
Company’s execution of its strategy has seen it substantially increase its business and operations, most recently with the
acquisition of Dyno Nobel, which has expanded the Company’s business, internationally positioning it as a leading chemicals
company specialising in the manufacture and distribution of fertilisers, industrial explosives and related products and services.
The realisation of value from this strategy will only be delivered by successful employees that are capable, committed and
motivated. Accordingly, the Company’s remuneration strategy is designed to:
(cid:121)
enable Incitec Pivot to attract, retain and motivate directors, executives and employees who will create value for
shareholders; and
(cid:121)
fairly and appropriately reward executives and employees having regard to the performance of Incitec Pivot and that of the
relevant executive or employee.
The Remuneration and Appointments Committee, established by the Board, assists and advises the Board on remuneration
policies and practices for the Board, Managing Director & CEO, the executives, senior management and other employees.
Details of the Company’s remuneration strategy and arrangements for the 2007/08 financial year are set out in this
remuneration report.
A. Non-executive directors
Non-executive directors’ fees are determined by the Board subject to the aggregate limit of $1,400,000 approved by
shareholders at the 2007 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 non-executive directors reflects their time commitments and responsibilities. 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. Non-executive 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.
Fees are reviewed annually and for the 2008/09 financial year, the Board has recently engaged Godfrey Remuneration Group to
undertake a review of non-executive remuneration taking into account fees paid by comparable companies and the level of fees
considered necessary to attract and retain directors of the appropriate calibre having regard to Incitec Pivot’s market
capitalisation, the increase in its business complexity and international presence following the acquisition of Dyno Nobel and the
Company’s admission to the S&P/ASX 50 index.
12
Incitec Pivot Limited
Directors’ Report
Remuneration Report
Non-executive directors’ remuneration
Details of the non-executive directors’ remuneration for the financial year ended 30 September 2008 are set out in the
following table:
For the year ended 30 September 2008
Non-executive directors
- Current
J C Watson, Chairman (1)
Year
2008
2007
B Healey 2008
2007
A C Larkin 2008
2007
J Marlay (2)
A D McCallum (1)
Total non-executive directors
2008
2007
2008
2007
2008
2007
Short-term benefits
Post-
employment
benefits
Other long
term
benefits (A)
Non-
monetary
benefits (B)
$000
Superannuation
benefits
$000
Fees
$000
$000
Total
$000
330
254
150
126
150
111
131
79
150
118
911
688
26
14
-
-
-
-
-
-
-
-
26
14
33
27
-
-
15
11
4
-
15
12
67
50
81
44
-
-
-
-
-
-
29
15
470
339
150
126
165
122
135
79
194
145
110
59
1,114
811
(A) Consistent with best practice, with the exception of the contractual entitlements for Mr Watson and Mr McCallum who were appointed to
the Board before 1 June 2003, the Company does not pay additional benefits to non-executive directors.
(B) Non-monetary benefits include the taxable value of fringe benefits attributable to the FBT year (2008: 1 April 2007 to 31 March 2008)
(2007: 1 April 2006 to 31 March 2007). In the case of Mr Watson, this relates to travel expenses.
(1)
If Mr Watson or Mr McCallum had ceased to be a director on 30 September 2008, the following benefits would have been payable under
their respective contracts: Mr Watson $513,000, Mr McCallum $225,000.
(2) On 20 December 2006, Mr Marlay was appointed to the Board by the directors as a non-executive director. For the period 1 October 2007
to 31 May 2008, fees of $90,000 (2007: $79,000) were paid to Alumina Limited, Mr Marlay’s then employer.
Incitec Pivot Limited
13
Directors’ Report
Remuneration Report
B.
Executive remuneration
The remuneration of the executives is set by the Board.
Executive remuneration is set at levels to properly reflect the duties and responsibilities of the executives and comprises both a
fixed component and an “at risk” component, which is intended to remunerate executives for increasing shareholder value and
for achieving financial targets and successfully implementing business strategies.
The mix between fixed remuneration and “at risk” or performance-related remuneration varies according to the duties and
responsibilities of executives, and supports the Company’s remuneration strategy.
Remuneration arrangements are reviewed annually by the Board after receiving advice from an appropriately qualified external
consultant, taking into account survey data on remuneration packages for comparable companies, and the duties and
responsibilities of the executives. Mercer Human Resource Consulting Pty Ltd (Mercer) was engaged to assist in the review for
the 2007/08 financial year. As part of this review, and following the recommendations of Mercer, in setting the remuneration
arrangements for the 2007/08 financial year, the Board adopted the following in support of its remuneration strategy:
•
•
the fixed component, fixed annual remuneration, to be referenced to that paid by companies in the S&P/ASX 26-100;
and
the “at risk” component and the total remuneration package for executives, to be referenced to the top 25 performing
companies within the S&P/ASX26-100 and NPAT targets to be used as the performance measure for short term
incentives and total shareholder return (TSR) to be used as the performance measure for long term incentives, thereby
linking executive reward with the creation of shareholder value.
Components of remuneration
As indicated above, remuneration for executives has the following components:
1.
Fixed annual remuneration (FAR); and
2. Performance-based “at-risk” remuneration, comprising:
•
•
Short term incentive – based on annual performance at an individual and Company level;
Long term incentive – based on sustained creation of shareholder value over a performance period, typically
three years.
The Board aims to achieve a balance between fixed and performance-related components of remuneration that reflect market
conditions at each job and seniority level.
The relative proportion of executives’ total remuneration packages that is performance-based is set out in the table below.
Table B.1, Remuneration structure by level
% of Total Remuneration (annualised)
Fixed Remuneration
Performance-based Remuneration
FAR
29%
33%
36%
STI
29%
33%
29%
LTI
42%
34%
35%
CEO
CFO
Executives (1)
In determining the “at risk” compensation as a proportion of total remuneration, for each category of employee the maximum
entitlement under the STI or LTI was taken into account.
(1) For the purpose of the above table, Executives does not include General Manager - Explosives. For the General Manager - Explosives, the
relative proportions are as follows: fixed remuneration - 36%, STI - 35% and LTI - 29%.
Fixed Remuneration
The terms of employment for all executives contain a fixed remuneration component. 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. This amount of remuneration is not dependent upon Company performance and is set by
reference to appropriate benchmark information for each executive’s role, level of knowledge, skill, responsibilities and
experience.
14
Incitec Pivot Limited
Directors’ Report
Remuneration Report
Performance-based remuneration – Short Term Incentive Plan (STI)
The Short Term Incentive Plan (STI) is an annual “at risk” cash bonus which is dependent on achievement of specific target
levels. All executives (as well as other senior employees) participate in the STI. The Board considers the STI is an appropriate
incentive. It is designed to encourage executives to support Incitec Pivot’s strategic objectives by putting a large proportion of
the executive remuneration “at risk” against meeting performance targets linked to the Company’s annual business objectives.
STI awards are not an entitlement, but rather a reward for annual Company performance and individual performance or
contribution to overall Company performance.
The criteria for awarding the STI are set annually with both target and stretch conditions. The STI and the performance
conditions under the STI have been designed to motivate and reward high performance. If performance exceeds the already
challenging targets, the STI will deliver higher rewards to executives. The principal performance condition for the STI is Net
Profit After Tax (NPAT) (before individually material items). NPAT (before individually material 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 dividends and share price growth). Additional conditions may be applied and, if so,
include the performance and execution of business plans in the functional areas.
No STI is awarded if the minimum performance across the Company does not meet the required threshold. In recent years,
this has been linked to a minimum level of NPAT (before individually material items) that must be achieved before any STI
is awarded.
Performance-based remuneration – Long Term Incentive Plan (LTI)
Incitec Pivot’s Long Term Incentive Plans (LTIs) are the long term incentive component of remuneration for executives who are
able to influence the sustained generation of shareholder value through their direct contribution to the Company’s performance.
The LTIs are designed to link executive reward with the key performance drivers which underpin sustainable growth in
shareholder value – which comprises both share price growth and returns to shareholders. The arrangements also support the
Company’s strategy for retention and motivation of its employees.
During 2008, the Board engaged Mercer to review and advise on the design of the Company’s long term incentive scheme to
ensure that its long term incentive arrangements continued to achieve the Company’s remuneration strategy. Mercer’s review
involved an analysis of the structure of long term incentive arrangements adopted by companies in the S&P/ASX 50 index as
well as governance practice. Accordingly, following Mercer’s recommendations, it is proposed that the form of the long term
incentive plan for the three year period 2008/11 will be a performance rights long term incentive plan using TSR as the principal
performance measure. Performance rights are considered to be an effective mechanism to retain and motivate senior
employees and using TSR, as the key performance measure, aligns executives’ performance with the creation of shareholder
value.
The performance rights long term incentive plan will be in place for 2008/11 and currently, the Company has in place the
following LTIs:
- 1 October 2006 to 30 September 2008 (LTI interim performance plan 2006/08);
- 1 October 2006 to 30 September 2009 (LTI performance plan 2006/09); and
- 1 October 2007 to 30 September 2010 (LTI performance plan 2007/10).
Key features of the current LTIs:
•
Loan backed plan: At the commencement of relevant performance periods (typically 3 years) the Company, through
its wholly owned subsidiary, Incitec Pivot LTI Plan Company Pty Ltd, provides to participants limited recourse loans
bearing interest at the fringe benefits tax benchmark rate (currently 9.00%) for the sole purpose of acquiring shares in
Incitec Pivot.
• Shares acquired on market and held under restriction: The loans are applied to acquire shares on market which
avoids dilution of other shareholdings. Australian Securities Exchange Listing Rule 10.14 provides that no shareholder
approval is required. Participants may not deal in the shares while the loan remains outstanding. Net cash dividends
after personal income tax obligations are applied to reduce the loan balance throughout the term of the loan.
•
Loan forgiveness: If, at the end of the performance period, the performance of the Company and the participant
meets or exceeds the performance criteria which were set by the Board at the commencement of the performance
period, part of the loan may be forgiven. The amount of the loan forgiven will be determined according to the
performance achieved and will be net of fringe benefits tax. The balance of the loan must be repaid prior to any dealing
Incitec Pivot Limited
15
Directors’ Report
Remuneration Report
in the shares, on cessation of employment, or at the latest, a sunset date which is 3 months after the expiry of the
performance period, unless extended by the Company.
• Performance Criteria: The Board sets the criteria for the granting of awards at the beginning of the three year
performance period covered by the LTI. The criteria focus on financial performance of the Company and include a
condition relating to duration of employment. The LTI performance measure is based on TSR, being the percentage
increase in the Company’s share price over the three year performance period plus the after tax value of dividends
paid. The Board adopted the Company’s TSR as the performance measure, as opposed to a TSR measure relative to
the TSR of the companies in the S&P/ASX 100 index, because doing so ensures there is a direct link between reward
and actual returns to shareholders thereby aligning executives’ performance with the creation of shareholder value. For
the performance criteria to be satisfied in full, Incitec Pivot’s TSR must be at least 20% per annum compounded over
the three year period (Stretch TSR). In setting the Stretch TSR at 20%, the Board considers it has established an
aggressive target to promote behaviour to achieve superior performance, noting that it referenced TSR for the
S&P/ASX 100 index over the ten year period to 30 September 2006 and that a TSR of 20% reflected top decile
performance over this period. If, at the end of the relevant performance period, TSR is less than 10% per annum
compounded over the three year period, no awards in the form of loan forgiveness will be granted.
Relationship between Company performance and remuneration
Indices
In considering Incitec Pivot’s performance and benefits for shareholders, 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 preceding four financial years.
Table B.2
Net Profit After Tax (before individually material items) ($m)
Dividends - paid - per share (cents)
Dividends - declared - per share (cents)
Share price ($) (Year End)
TSR (Annual) - IPL (%)
Earnings per share (including individually material items) (cents)
2004 (2)
2005 (1)(2)
2006 (1)(2)
2007 (1)(2)
2008 (1)
80.9
1.5
6.5
0.94
28
6.4
47.9
6.1
3.6
0.79
(12)
1.2
82.8
3.6
5.2
1.29
70
4.1
202.5
657.2
7.5
15.0
4.28
242
20.4
21.8
29.7
5.07
25
57.4
(1) Stated on an AIFRS basis.
(2) All indices except for Net Profit After Tax (before individually material items) and TSR (Annual) – IPL (%) have been restated as a result of
the 20:1 share split approved by shareholders in September 2008.
16
Incitec Pivot Limited
Directors’ Report
Remuneration Report
The Board considers that linking executive remuneration to the performance measures of NPAT and TSR has been a key driver
to the strong results of the Company as demonstrated in the charts below.
Charts B.2
s
t
n
e
c
S
P
E
d
e
t
a
t
s
e
R
70
60
50
40
30
20
10
0
EPS and Year End Share price
NPAT and Dividends
6
5
4
3
2
1
0
$
e
c
i
r
p
e
r
a
h
S
E
Y
/
d
e
t
a
t
s
e
R
m
$
T
A
P
N
800
600
400
200
0
40
30
20
10
-
)
d
e
r
a
c
e
d
(
l
s
t
n
e
c
S
P
D
d
e
t
a
t
s
e
R
2004
2005
2006
2007
2008
2004
2005
2006
2007
2008
EPS
Y/E Share Price
NPAT
Dividends
Current LTIs
The LTI performance plan 2006/09 and the LTI performance plan 2007/10 are for three year periods. The performance criteria
for the LTI performance plan 2006/09 and the LTI performance plan 2007/10 will not be tested until 30 September 2009 and 30
September 2010 respectively.
Under the LTI interim performance plan 2006/08, the performance measure is based on cumulative NPAT for the two years
ended 30 September 2008. The LTI award has been made on the basis that the cumulative NPAT target (excluding individually
material items) was equal to or above $227.5m. Each of Mr Fazzino, Mrs Gleeson, Mr Grace, Mr Roe, Mr Rintel, Mr Walsh and
Mr Whiteside received awards by way of loan forgiveness in respect of the two year performance period ended 30 September
2008.
Incitec Pivot Limited
17
Directors’ Report
Remuneration Report
C. Managing Director & Chief Executive Officer’s Employment Arrangements
and Remuneration
Managing Director & CEO – Mr J Segal
Julian Segal was initially appointed as Managing Director & CEO on 3 June 2005 on secondment from Orica Limited, the then
parent company of Incitec Pivot. Pursuant to a service agreement entered into with Incitec Pivot dated 29 May 2006, Mr Segal’s
appointment as Managing Director & CEO continued on the basis of the terms set out in that service agreement which
commenced on 10 May 2006.
The agreement provides that Mr Segal may terminate his employment on 6 months’ notice. The Company may terminate
Mr Segal’s employment:
(cid:121)
immediately for cause, without payment of any separation sum, save as to accrued fixed annual remuneration, accrued
annual leave and long service leave;
(cid:121)
(cid:121)
on notice in the case of incapacity, in which case the Company must pay a separation payment plus accrued annual leave
and long service leave;
otherwise, without cause, with or without notice, in which case the Company must pay a separation payment plus accrued
annual leave and long service leave.
The separation payment will be equal to 52 weeks of fixed annual remuneration as at the date of termination.
The details of his remuneration are as follows:
(cid:121)
(cid:121)
(cid:121)
Fixed Annual Remuneration
Mr Segal’s fixed annual remuneration is $1,700,000, 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 25% of fixed annual remuneration up to a maximum of 100% of fixed annual remuneration for
over performance against specified measures. Given NPAT (before individually material items) for the 2007/08 financial
year is $657.2m, up 224.5% or $454.7m on the 2006/07 result, Mr Segal was awarded a STI payment of $1,700,000 being
100% of the maximum STI opportunity for the period 1 October 2007 to 30 September 2008.
Further details of the STI plan are set out in section B of this remuneration report.
Long Term Incentive
Mr Segal’s LTI opportunity is 37.5% of fixed annual remuneration up to a maximum of 150% of fixed annual remuneration
for over performance against specified measures over a three year period. In addition, given Incitec Pivot’s LTI plans are
three year performance plans with the opportunity falling in the third year, the Board recognised that the retention of key
executives was a crucial element to the success of the Company following Orica Limited ceasing to be a majority
shareholder and the acquisition of Southern Cross Fertilisers. Accordingly, Mr Segal received a Retention Award in the
form of an interest free, limited recourse, unsecured loan by Incitec Pivot for $722,000 which was applied in the purchase
of shares on market. The loan will be forgiven in full if Mr Segal remains in employment until 10 May 2009.
18
Incitec Pivot Limited
Directors’ Report
Remuneration Report
D. Executives’ employment arrangements and remuneration
D.1 Service Contracts and Termination Provisions
Remuneration and other terms of employment for the executives (excluding Mr Segal, whose arrangements are set out in
section C of this remuneration report) 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. For all executives other than Mr Fazzino and Mr Brinker, the
STI opportunity is 40% of fixed annual remuneration up to a maximum of 80% of fixed annual
remuneration for over performance against specified measures. For Mr Fazzino, the STI opportunity is
50% of fixed annual remuneration up to a maximum of 100% of fixed annual remuneration for over
performance against specified measures. For Mr Brinker, commencing from the 2008/09 financial
year, the STI opportunity is 50% of fixed annual remuneration up to a maximum of 100% of fixed
annual remuneration for over performance against specified measures.
Participation is at the Board’s discretion. For all executives other than Mr Brinker, the LTI opportunity
is 50% of fixed annual remuneration up to a maximum of 100% of fixed annual remuneration for over
performance against specified measures. For Mr Brinker, the LTI opportunity is 40% of fixed annual
remuneration, up to a maximum of 80% of fixed annual remuneration for over performance against
specified measures.
Termination by Incitec Pivot
Incitec Pivot may terminate the service agreements:
(cid:121)
immediately for cause, without payment of any separation sum, save as to accrued fixed annual
remuneration, accrued annual leave and long service leave;
(cid:121) on notice in the case of incapacity, and the Company must pay a separation payment plus
accrued annual leave and long service leave;
(cid:121) 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 having regard to the length of any prior service with the Orica group (where
applicable), and is as follows for each executive (excluding Mr Segal):
Mr Paul Barber
Mr Don Brinker
Mr James Fazzino
Mrs Kerry Gleeson
Mr Alan Grace
Mr Kevin Lynch
Mr James Rintel
Mr Daryl Roe
Mr Bernard Walsh
Mr James Whiteside
Current Fixed Annual
Remuneration
Number of Weeks
$’000
375
898 (1)
950
550
450
550
350
400
600
450
26.0 weeks
52.0 weeks
51.6 weeks
26.0 weeks
26.0 weeks
26.0 weeks
26.0 weeks
70.48 weeks
61.81 weeks
45.41 weeks
Separation
Payment
$’000
187.5
898
943
275
225
275
175
542
713
393
Termination by executive
An executive may terminate his/her employment on 13 weeks’ notice (save for Mr Grace and Mr
Lynch, who may terminate on 8 weeks’ notice and Mr Brinker who may terminate without notice) and
the Company may require the executive to serve out the notice period or may make payment in lieu.
Details of the nature and amount of each element of remuneration of the executives are included in table D.4.
(1) US$ converted to A$ at an exchange rate of 0.8015 (closing rate 30 September 2008).
Incitec Pivot Limited
19
Directors’ Report
Remuneration Report
D.2 Grants of STI payments
For the 2007/08 STI, the principal measure used in order to determine whether STI payments were to be made was NPAT
(before individually material items). In addition, for each of Mr Barber, Mr Grace, Mr Rintel, Mr Roe, Mr Walsh and Mr Whiteside,
40% of their available STI opportunity was based on specific objectives in their respective functional areas. For Mr Brinker,
100% of his available STI opportunity was based on specific objectives relating to the successful integration of the Dyno Nobel
business which is now complete, where his available STI opportunity was based on a proportion of his fixed annual
remuneration. In 2008, NPAT (before individually material items) is $657.2m, an increase of 224.5% on the 2007 NPAT (before
individually material items) of $202.5m. Mr Fazzino, Mrs Gleeson, Mr Grace, Mr Lynch, Mr Rintel, Mr Roe and Mr Whiteside,
were awarded STI payments at 100% of their respective maximum STI opportunities. Mr Walsh was awarded a STI payment at
90% of his maximum STI opportunity, and Mr Barber was awarded an STI payment at 98.4% of his maximum STI opportunity.
Mr Brinker was awarded a STI payment at 75% of his maximum STI opportunity pro rata for the period from commencement of
his service contract to 30 September 2008.
D.3 Grants of LTI Plan awards
For the year ended 30 September 2008, each of Mr Fazzino, Mrs Gleeson, Mr Grace, Mr Rintel, Mr Roe, Mr Walsh and Mr
Whiteside were granted awards at 100% of their respective maximum LTI opportunities under the LTI interim performance plan
2006/08.
20
Incitec Pivot Limited
Directors’ Report
Remuneration Report
D.4 Executives’ remuneration
For details of remuneration paid to executives and their employment arrangements refer also to sections C, D.1 and D.2 of this
remuneration report.
For the year ended 30 September 2008
Short-term benefits
Post-
employment
benefits
Other long
term benefits
Termination
benefits
Share-based
payments
Short Term
Incentive &
other
bonuses (A)
Non-
monetary
benefits (B)
Salary &
Fees
Superannuation
benefits
Value of
shares treated
as Options
(C)
Year
$000
$000
$000
$000
$000
$000
$000
Executive
- Current
J Segal
2008
Managing Director & CEO 2007
J E Fazzino
Finance Director &
Chief Financial Officer
K J Gleeson
General Counsel & Company
Secretary
D A Roe (5)
General Manager - Business
Development
B C Walsh
General Manager - Global
Manufacturing
A Grace
General Manager - Health,
Safety & Environment & Major
Projects
J Whiteside
General Manager - Supply
Chain & Trading
P Barber (1)
General Manager - Australian
Fertilisers
K Lynch (2)
General Manager - Human
Resources
J Rintel (3)
General Manager - Strategy
D Brinker (4)
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
General Manager - Explosives 2007
- Former
M Drew (6)
General Manager - Sales &
Customer Service
2008
2007
1,512
962
842
557
489
347
367
307
537
387
394
258
394
267
355
19
333
-
112
-
248
-
-
251
1,700
1,000
950
570
440
288
320
382
432
314
360
218
360
220
295
-
440
-
280
-
701
-
-
224
9
60
-
8
-
-
-
6
2
6
5
8
20
6
147
-
-
-
-
-
49
-
-
-
Total Executive
2008
2007
5,583
3,355
6,278
3,216
232
94
13
13
13
13
13
13
13
13
13
13
13
13
13
13
13
1
9
-
5
-
7
-
-
12
125
104
138
31
137
10
-
-
20
6
86
7
32
5
55
5
-
-
-
-
-
-
-
-
-
-
468
64
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
385
-
385
Proportion of
remuneration
performance
related (4)
Value of shares
treated as
options as
proportion of
remuneration (4)
%
%
60%
59%
55%
56%
55%
53%
54%
59%
49%
52%
52%
51%
50%
51%
40%
0%
57%
0%
71%
0%
24%
0%
0%
32%
54%
53%
19%
21%
12%
13%
15%
15%
17%
12%
15%
15%
14%
14%
14%
15%
6%
0%
3%
0%
2%
0%
4%
0%
0%
9%
14%
15%
Total
$000
4,158
2,618
2,210
1,337
1,111
761
870
814
1,258
853
930
584
974
599
865
20
803
-
407
-
1,018
-
-
954
786
552
268
179
169
113
150
100
188
126
126
82
132
88
55
-
21
-
10
-
14
-
-
82
1,919
1,322
14,605
8,540
Incitec Pivot Limited
21
Directors’ Report
Remuneration Report
(A) Mr Segal, Mr Fazzino, Mrs Gleeson, Mr Grace, Mr Lynch, Mr Rintel, Mr Roe and Mr Whiteside were each awarded their maximum
available STIs. Accordingly, Mr Segal and Mr Fazzino received 100% of their respective fixed annual remuneration as STIs. Mrs
Gleeson, Mr Grace, Mr Lynch, Mr Rintel, Mr Roe and Mr Whiteside received 80% of their respective fixed annual remuneration as STIs,
Mr Walsh received 72% of his fixed annual remuneration as a STI and Mr Barber received 78.7% of his fixed annual remuneration as a
STI. Mr Brinker received 9% of his fixed annual remuneration as a STI, referable to his period of employment. In addition, Mr Brinker’s
employment arrangements include a sign-on payment of A$956,000, of which A$620,000 was paid during the financial year.
(B) Non-monetary benefits include the taxable value of fringe benefits paid attributable to the FBT year (2008: 1 April 2007 to 1 March 2008)
(2007: 1 April 2006 to 31 March 2007), rent and mortgage interest subsidy, relocation allowances and other allowances. 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) For Mr Segal this relates to a Retention Award (refer to section C) and his participation in the LTI performance plan 2007/10 and the LTI
performance plan 2006/09 (refer to sections B and C), and for the other executives this relates to the LTI performance plan 2007/10, the
LTI performance plan 2006/09 and the LTI interim performance plan 2006/08. The benefits received as a result of Mr Segal’s Retention
Award and the executives’ participation in the LTI plans have been treated as options. External valuation advice from
PricewaterhouseCoopers has been used to determine the fair value of these shares treated as options at grant date. The fair value at
grant date is independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of
the share treated as an option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the
expected dividend yield and the risk free interest rate for the term of the share treated as an option. The fair value has been allocated
evenly over the period from grant date to the date when an entitlement to an award arises. The value disclosed in this table represents the
portion of fair value allocated to this reporting period.
Refer to sections B and C of this remuneration report for further details of the LTI performance plan 2007/10, the LTI performance plan
2006/09, the LTI interim performance plan 2006/08 and LTIs generally.
The terms and conditions of each award affecting remuneration in this or future reporting periods are as follows:
Grant date
Expiry date
Fair Value per share treated as
option at grant date(ii)
Date
exercisable
Exercise
Price(ii)
17/11/2006
30/09/2008
$0.22
From 1/10/2008 (i)
$1.25
1/12/2006
30/09/2009
12/11/2007
30/09/2010
$0.83
$1.94
From 1/10/2009 (i)
$1.21
From 1/10/2010 (i)
$4.41
LTI interim
performance plan
2006/08
LTI performance plan
2006/09
LTI performance plan
2007/10
The number of shares (treated as options for the purposes of remuneration) held by each executive director and executive is detailed in
section E of this remuneration report and note 34 to the financial report.
(i) Shares restricted until such time as the loan is repaid. Under the LTI interim performance plan 2006/08, the loan must be repaid
by a “sunset date” which has been determined as 31 March 2009. Under the LTI performance plan 2006/09, the loan must be
repaid by 31 December 2009. Under the LTI performance plan 2007/10, the loan must be repaid by 31 December 2010.
(ii) Amounts have been restated as a result of the 20:1 share split approved by shareholders in September 2008.
(1) Mr Barber was appointed as an executive during the 2007 financial year. The 2007 disclosures are from his appointment
date, 10 September 2007.
(2) Mr Lynch was appointed as an executive during the financial year. These disclosures are from his appointment date,
18 February 2008.
(3) Mr Rintel was appointed as an executive during the financial year. These disclosures are from his appointment date, 1 June 2008.
(4) Mr Brinker was appointed as an executive during the financial year. These disclosures are from his appointment date, 1 June 2008. For
the period 1 June 2008 to 30 September 2008, US$ converted to A$ at an average exchange rate of 0.9046. For the purpose of
calculating the proportion of remuneration that is performance related and, the value of shares, treated as options, as a proportion of
remuneration, Mr Brinker’s sign on payment of A$620,000 has been excluded.
(5) The 2007 disclosures include the sum of $126,000 which was paid to Mr Roe in satisfaction of the agreement between him and Incitec
Pivot relating to his continued entitlement to a long term incentive on his transfer from Orica Limited to Incitec Pivot and the cessation of
his participation in Orica Limited’s LTI plans.
(6) On 7 September 2007, Mr Drew ceased to be employed by the Company. These disclosures are from 1 October 2006 to that date.
22
Incitec Pivot Limited
Directors’ Report
Remuneration Report
D.5 Analysis of incentive compensation included in remuneration
Details of the vesting profile of the STI payments or other incentive compensation awarded as remuneration to each executive
director or executive are set out below:
Executive directors
- Current
J Segal
J E Fazzino
Executives
- Current
K J Gleeson
DA Roe
B C Walsh
A Grace
J Whiteside
P Barber
K Lynch
J Rintel
D Brinker (1)
- STI
- STI
- STI
- STI
- STI
- STI
- STI
- STI
- STI
- STI
- STI
Short term incentive
Included in
remuneration (A)
$000
% vested in
year (B)
% forfeited
in year
1,700
950
440
320
432
360
360
295
440
280
81
100%
100%
100%
100%
90%
100%
100%
98.4%
100%
100%
75%
0%
0%
0%
0%
10%
0%
0%
1.6%
0%
0%
25%
(A)
In relation to the STI, the amounts included in remuneration for the financial year represent the amounts that vest in the financial year
based on achievement of individual and Company targets and satisfaction of relevant performance measures under the STI.
(B) Mr Segal, Mr Fazzino, Mrs Gleeson, Mr Grace, Mr Lynch, Mr Rintel, Mr Roe and Mr Whiteside were each awarded their maximum
available STIs. Mr Walsh was awarded 90% of his maximum STI opportunity and Mr Barber was awarded 98.4% of his maximum STI
opportunity. On that basis, Mr Segal and Mr Fazzino received 100% of their respective fixed annual remuneration as STIs. Mrs Gleeson,
Mr Grace, Mr Lynch, Mr Rintel, Mr Roe and Mr Whiteside received 80% of their respective fixed annual remuneration as STIs, Mr Walsh
received 72% of his fixed annual remuneration as a STI, Mr Barber received 78.7% of his fixed annual remuneration as a STI and
Mr Brinker received 9% of his fixed annual remuneration as a STI.
(1) Mr Brinker’s STI is pro rata for the period from commencement of Mr Brinker’s service contract to 30 September 2008.
Incitec Pivot Limited
23
Directors’ Report
Remuneration Report
E. Equity instruments
E.1 Shares treated as options over equity instruments granted as remuneration
For the purposes of determining Key Management Personnel remuneration, shares granted under the LTI performance plan
2007/10, the LTI performance plan 2006/09 and the LTI interim performance plan 2006/08 are treated as options.
Details of the shares, which are treated as options, that were granted to each Key Management Person and those that vested
during the reporting period are set out in the following table and further details are also set out in sections B and C:
For the year ended 30 September 2008
Number of shares
treated as options
Grant date
Granted during
2008 as
remuneration (A)
Vested during
2008 (B)
Status at end of
year (C)
Key Management Personnel
Executive Directors
- Current
J Segal
Performance Plan 2007/10
12 November 2007
J E Fazzino
Performance Plan 2007/10
12 November 2007
Performance Plan 2006/08
17 November 2006
361,200
137,240
-
-
-
Restricted
Restricted
449,700
Unrestricted
Executives
- Current
K J Gleeson
Performance Plan 2007/10
12 November 2007
86,680
-
Restricted
Performance Plan 2006/08
17 November 2006
-
284,020
Unrestricted
D A Roe
Performance Plan 2007/10
12 November 2007
77,040
-
Restricted
Performance Plan 2006/08
17 November 2006
-
252,460
Unrestricted
B C Walsh
Performance Plan 2007/10
12 November 2007
96,320
-
Restricted
Performance Plan 2006/08
17 November 2006
-
315,560
Unrestricted
A Grace
Performance Plan 2007/10
12 November 2007
67,420
-
Restricted
Performance Plan 2006/08
17 November 2006
-
206,700
Unrestricted
J Whiteside
Performance Plan 2007/10
12 November 2007
67,420
-
Restricted
Performance Plan 2006/08
17 November 2006
-
220,900
Unrestricted
P Barber (1)
Performance Plan 2007/10
12 November 2007
84,280
Performance Plan 2006/08
17 November 2006
-
K Lynch (2)
Performance Plan 2007/10
12 November 2007
53,240
J Rintel (3)
Performance Plan 2007/10
12 November 2007
15,160
Performance Plan 2006/08
17 November 2006
-
-
-
-
-
-
Restricted
-
Restricted
-
Restricted
Performance Plan 2006/08
17 November 2006
-
49,700
Unrestricted
D Brinker (2)
Performance Plan 2007/10
12 November 2007
66,680
Performance Plan 2006/08
17 November 2006
-
-
-
Restricted
-
(A) Refers to the number of shares allocated to the participating executive or participating executive director during the financial year.
These shares are treated as options.
(B) Refers to the number of shares that vested during the reporting period.
(C)
"Restricted" refers to those shares that are subject to a limited recourse loan and the participant is not free to sell or otherwise deal in
the underlying shares.
“Unrestricted” refers to shares that are subject to a limited recourse loan, however the participant may sell these shares and repay the
loan on or before 31 March 2009.
(1) Mr Barber was appointed as an executive during the 2007 financial year and he is not a participant in either the LTI performance plan
2006/09 or the LTI interim performance plan 2006/08.
(2) Mr Lynch and Mr Brinker were appointed as executives during the financial year and they are not participants in either the LTI
performance plan 2006/09 or the LTI interim performance plan 2006/08.
(3) For Mr Rintel, shares (treated as options) were granted under the LTI interim performance plan 2006/08, the LTI performance plan
2006/09 and the LTI performance plan 2007/10 prior to his appointment as an executive.
The number of shares treated as options has been restated as a result of the 20:1 share split approved by shareholders in September 2008.
24
Incitec Pivot Limited
Directors’ Report
Remuneration Report
In respect of the shares that are treated as options for the purposes of remuneration, the following details of the particulars of
the terms and conditions of each grant made during the reporting period are set out in sections B, C and D of this remuneration
report and in Notes 34 and 35 to the financial report:
(cid:121)
(cid:121)
fair value per share at grant date, the exercise price per share, the amount, if any, paid or payable by the recipient,
the expiry date and the date of exercise; and
a summary of the service and performance criteria that must be met before the beneficial interest vests in the person.
E.2 Modification of terms of equity-settled share-based payment transactions
Other than the extension of the sunset date (being the loan repayment date) from 31 December 2008 to 31 March 2009 under
the LTI interim performance plan 2006/08, no terms of equity-settled share-based payment transactions (including shares which
are treated as options) granted to a Key Management Person have been altered or modified by the issuing entity during the
reporting period or the prior period.
Incitec Pivot Limited
25
Directors’ Report
Remuneration Report
E.3 Analysis of shares treated as options over equity instruments granted as remuneration
Details of the vesting profile of the shares treated as options granted as remuneration to each executive director and each of the
named executives is detailed below:
Value yet to Vest
Number of
shares treated
as options
granted
Grant date
% Vested
in year
% Forfeited
in year (A)
Financial
year in which
grant vests Min (B) Max (C)
$
$
Key Management Personnel
Executive Directors
- Current
J Segal
Retention Award
5 July 2006
651,940
Performance Plan 2006/09
1 December 2006
1,120,020
Performance Plan 2007/10
12 November 2007
J E Fazzino
Performance Plan 2006/08
17 November 2006
Performance Plan 2006/09
1 December 2006
Performance Plan 2007/10
12 November 2007
Executives
- Current
K J Gleeson
Performance Plan 2006/08
17 November 2006
Performance Plan 2006/09
1 December 2006
Performance Plan 2007/10
12 November 2007
D A Roe
Performance Plan 2006/08
17 November 2006
Performance Plan 2006/09
1 December 2006
Performance Plan 2007/10
12 November 2007
B C Walsh
Performance Plan 2006/08
17 November 2006
Performance Plan 2006/09
1 December 2006
Performance Plan 2007/10
12 November 2007
A Grace
Performance Plan 2006/08
17 November 2006
Performance Plan 2006/09
1 December 2006
Performance Plan 2007/10
12 November 2007
J Whiteside
Performance Plan 2006/08
17 November 2006
Performance Plan 2006/09
1 December 2006
Performance Plan 2007/10
12 November 2007
P Barber (1)
Performance Plan 2006/08
17 November 2006
Performance Plan 2006/09
1 December 2006
361,200
449,700
472,880
137,240
284,020
298,660
86,680
252,460
265,480
77,040
315,560
331,840
96,320
206,700
217,360
67,420
220,900
232,300
67,420
-
-
Performance Plan 2007/10
12 November 2007
84,280
K Lynch (2)
Performance Plan 2006/08
17 November 2006
Performance Plan 2006/09
1 December 2006
Performance Plan 2007/10
12 November 2007
J Rintel (3)
Performance Plan 2006/08
17 November 2006
Performance Plan 2006/09
1 December 2006
Performance Plan 2007/10
12 November 2007
D Brinker (4)
Performance Plan 2006/08
17 November 2006
Performance Plan 2006/09
1 December 2006
-
-
53,240
49,700
52,260
15,160
-
-
Performance Plan 2007/10
12 November 2007
66,680
-
-
-
100%
-
-
100%
-
-
100%
-
-
100%
-
-
100%
-
-
100%
-
-
-
-
-
-
-
-
100%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2009
2009
2010
2008
2009
2010
2008
2009
2010
2008
2009
2010
2008
2009
2010
2008
2009
2010
2008
2009
2010
-
-
2010
-
-
2010
2008
2009
2010
-
-
2010
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(A) The percentage forfeited in the year represents the reduction from the maximum number of shares treated as options available to vest,
that is, in respect of which awards (in the form of loan waivers) could be made, due to the performance criteria not being achieved.
(B) The minimum value of shares which are treated as options yet to vest is $nil as the performance criteria may not be met and, in such
circumstances, there would be no vesting. This does not apply to shares, which are treated as options, that vested during the reporting
period.
(C) The maximum value of shares which are treated as options yet to vest is not determinable as it depends on the market price of shares
of the Company on the Australian Securities Exchange at the date of exercise. This does not apply to shares, which are treated as
options, that vested during the reporting period.
26
Incitec Pivot Limited
Directors’ Report
Remuneration Report
(1) Mr Barber’s employment commenced on 10 September 2007 and he is not a participant in either the LTI performance plan 2006/09 or the
LTI interim performance plan 2006/08.
(2) Mr Lynch’s employment commenced on 18 February 2008 and he is not a participant in either the LTI performance plan 2006/09 or the
LTI interim performance plan 2006/08.
(3) Mr Rintel’s shares (treated as options) were granted under the LTI performance plan 2007/10, the LTI performance plan 2006/09 and the
LTI interim performance plan 2006/08 prior to his appointment as an executive.
(4) Mr Brinker’s employment commenced on 1 June 2008 and he is not a participant in either the LTI performance plan 2006/09 or the LTI
interim performance plan 2006/08.
The number of shares treated as options have been restated as a result of the 20:1 share split approved by shareholders in September 2008.
Incitec Pivot Limited
27
Directors’ Report
Remuneration Report
E.4 Analysis of movements in shares (which are treated as options)
The movement during the reporting period, by value, of shares (which are treated as options for the purposes of remuneration)
held by each executive director and each of the named executives is detailed below:
For the year ended 30 September 2008
Value of shares treated as options
Granted during
2008 as
Grant date
remuneration (A) Vested in year (B) Forfeited in year (C)
$000
$000
$000
Key Management Personnel
Executive Directors
- Current
J Segal
Performance Plan 2007/10
12 November 2007
J E Fazzino
Performance Plan 2006/08
17 November 2006
Performance Plan 2007/10
12 November 2007
Executives
- Current
K J Gleeson
Performance Plan 2006/08
17 November 2006
Performance Plan 2007/10
12 November 2007
D A Roe
Performance Plan 2006/08
17 November 2006
Performance Plan 2007/10
12 November 2007
B C Walsh
Performance Plan 2006/08
17 November 2006
Performance Plan 2007/10
12 November 2007
A Grace
Performance Plan 2006/08
17 November 2006
Performance Plan 2007/10
12 November 2007
J Whiteside
Performance Plan 2006/08
17 November 2006
Performance Plan 2007/10
12 November 2007
P Barber (1)
Performance Plan 2006/08
17 November 2006
K Lynch (2)
Performance Plan 2006/08
17 November 2006
Performance Plan 2007/10
12 November 2007
Performance Plan 2007/10
12 November 2007
J Rintel (3)
Performance Plan 2006/08
17 November 2006
Performance Plan 2007/10
12 November 2007
D Brinker (4)
Performance Plan 2006/08
17 November 2006
Performance Plan 2007/10
12 November 2007
701
-
266
-
168
-
149
-
187
-
131
-
131
-
164
-
103
-
29
-
129
-
305
-
193
-
171
-
214
-
140
-
150
-
-
-
-
-
34
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(A) The value of shares which are treated as options granted in the year is the fair value of those shares calculated at grant date using a
binominal option-pricing model. The value of these shares is included in the table above. This amount is allocated to the remuneration of
the applicable executive over the vesting period (i.e. in years 2006 to 2008 for the LTI interim performance plan 2006/08 and in years
2007 to 2010 for the LTI performance plan 2007/10).
(B) The value of shares which are treated as options that vested during the year represents awards (in the form of waivers of loans) granted
to the applicable executives who satisfied the criteria under the LTI interim performance plan 2006/08.
(C) The value of the shares which are treated as options that lapsed during the year represents the benefit foregone and is calculated at the
date they lapsed.
(1) Mr Barber’s employment commenced on 10 September 2007 and he is not a participant in the LTI interim performance plan 2006/08.
(2) Mr Lynch’s employment commenced on 18 February 2008 and he is not a participant in the LTI interim performance plan 2006/08.
(3) Mr Rintel’s shares (treated as options) were granted under the LTI performance plan 2007/10 and the LTI interim performance plan
2006/08 prior to his appointment as an executive.
(4) Mr Brinker’s employment commenced on 1 June 2008 and he is not a participant in the LTI interim performance plan 2006/08.
28
Incitec Pivot Limited
Directors’ Report
Corporate Governance Statement
The Board is committed to achieving and demonstrating the highest standards of corporate governance. Since Incitec Pivot's
listing on the Australian Securities 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’s “Principles of Good
Corporate Governance and Best Practice Recommendations” (ASX Recommendations).
The Board continues to review its corporate governance framework and practices to ensure they meet the interests of
shareholders.
This corporate governance statement outlines the key aspects of the Company's corporate governance framework.
The Board considers that Incitec Pivot has been compliant with the ASX Recommendations throughout the year ended
30 September 2008. The Company is currently undertaking a further review of its policies and procedures in light of the ASX
Corporate Governance Principles and Recommendations (2nd edition) which apply to the Company from 1 October 2008 and
which will be reported against in the Annual Report for the 2008/09 financial year.
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 ASX Recommendations
Reference
Board of Directors on page 30
Functions reserved to the Board and those delegated to
management
Skills, experience and expertise relevant to the position
of director
Details of directors considered by Incitec Pivot as
independent and the criteria/thresholds applied
Procedure for independent professional advice
Directors’ terms of office
Names of the Remuneration and Appointments
Committee members and attendance at meetings
Composition of Board, Chairman, role of Chairman and
Managing Director & CEO
Code of conduct for directors, executives and employees Codes of conduct on page 36
Share trading policy
Risk oversight
Audit and Risk Management Committee members and
qualifications
Audit and Risk Management Committee meetings and
attendance
Risk management and internal controls
Financial statements sign off and structure of Audit and
Risk Management Committee
Procedures for ASX disclosures
Shareholder communications strategy
Directors’ meetings on page 8
Information on Directors on page 7
Composition of the Board on pages 30 to 31
Access to information and independent advice on page 33
Information on Directors on page 7
Remuneration and Appointments Committee and Board meetings of directors
on page 8
Composition of the Board on pages 30 to 31
Share ownership and dealing on page 35
Audit and Risk Management Committee on pages 33 to 34
Information on directors on page 7
Internal control and risk management on page 33
Audit and Risk Management Committee on pages 33 to 34
Procedures for ASX disclosure requirements on page 35
Procedures for ASX disclosure requirements on page 35 and the Incitec Pivot
website (www.incitecpivot.com.au)
External auditor on page 35
Performance evaluations on page 31
The remuneration report and also in Note 34, Key Management Personnel
disclosures
Section A of the remuneration report
Codes of conduct on page 36
Attendance of auditor
Performance review
Company’s remuneration policies and disclosure
Retirement benefits for non-executive directors
Codes of conduct to guide compliance with legal and
other obligations
Summaries or copies of the charters, policies and codes referred to in this statement are available on the Incitec Pivot website,
www.incitecpivot.com.au.
Incitec Pivot Limited
29
Directors’ Report
Corporate Governance Statement
Board of directors
The Board of directors of Incitec Pivot is responsible for charting the direction, policies, strategies and financial objectives of the
Company. The Board serves the interests of the Company and its shareholders, as well as Incitec Pivot's other stakeholders
such as employees, customers and the community, in a manner designed to create and continue to build sustainable value
for shareholders.
The Board operates in accordance with the broad principles set out in its charter. The charter sets out the Board’s own tasks
and activities as well as the matters it has reserved for its own consideration and decision-making.
Day-to-day management of Incitec Pivot’s affairs and the implementation of the corporate strategy and policy initiatives
are formally delegated to the Managing Director & CEO. The Delegated and Reserved Powers Policy details the authority
delegated to the Managing Director & CEO, including the limits on the way in which the Managing Director & CEO can exercise
that authority.
The Board has specifically reserved a number of key matters for consideration and decision by the Board. These include:
(cid:121)
(cid:121)
(cid:121)
Direction and objectives – approving the corporate strategy and the Company’s budgets;
Compliance – ensuring and monitoring compliance with all laws, governmental regulations and accounting standards;
Ethical – monitoring and influencing Incitec Pivot’s culture and implementing procedures and principles to promote ethical
and responsible decision-making and confidence in Incitec Pivot’s integrity; and
(cid:121) Managing Director & CEO and direct reports – appointing the Managing Director & CEO and the direct reports to the
Managing Director & CEO, monitoring management’s performance and reviewing executive succession planning.
Each year, as provided for by the charter, the Board undertakes an annual performance evaluation, comparing its performance
against its charter, setting objectives and effecting any improvements to the charter.
Composition of the Board
The Board comprises seven directors, including five non-executive directors and two executive directors (being the Managing
Director & CEO and the Finance Director & Chief Financial Officer).
John Watson and Allan McCallum were each appointed as directors by the shareholders on 15 December 1997, Brian Healey
and Anthony Larkin were appointed as directors on 1 June 2003, Julian Segal on 3 June 2005, James Fazzino on 18 July 2005,
and John Marlay was appointed to the Board by the directors on 20 December 2006.
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 page 7 of this 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.
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. A range of factors is considered by the Board in assessing the
independence of its directors, including those set out in the ASX Recommendations.
30
Incitec Pivot Limited
Directors’ Report
Corporate Governance Statement
In assessing the independence of a director, 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 and 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:
(cid:121)
(cid:121)
(cid:121)
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, Anthony Larkin and John Marlay 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 five directors are independent.
Performance evaluations
Incitec Pivot recognises the importance of regular performance evaluations of its directors. Assessment of individual directors’
performance and the Board as a whole is a process determined by the Chairman and the Remuneration and Appointments
Committee. In the 2007/08 financial year, after the acquisition of Dyno Nobel, to assist the Board in maintaining its effectiveness
having regard to the significant expansion of its activities and markets, the Board engaged Egon Zehnder to undertake an
operational board review on the functioning and effectiveness of the Board. The outcomes of the review are included in the
2008/09 objectives for the Board and will be implemented by the Board throughout the 2008/09 financial year. In addition,
individual director performance will be reviewed throughout the 2008/09 financial year and will include one-on-one interviews
between each director and the Chairman, as well as discussions on succession planning.
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 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 the Board. This evaluation
involves an assessment of a range of performance standards as determined by the Board, including the overall performance of
the Company.
Incitec Pivot Limited
31
Directors’ Report
Corporate Governance Statement
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 included in the table titled “Non-executive 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 $1,400,000 as approved at
the Annual General Meeting held in December 2007. The total remuneration paid to the non-executive directors during the
financial year ended 30 September 2008 was within the maximum amount approved by shareholders.
Details of remuneration paid to the executive directors are included in table D.4 “Executives’ remuneration” in the
remuneration report.
Board processes
To assist the Board in meeting its responsibilities, the Board currently has the following three Committees:
(cid:121)
(cid:121)
(cid:121)
the Audit and Risk Management Committee;
the Remuneration and Appointments Committee; and
the Health, Safety, Environment and Community Committee.
The Board charter provides that the Board may establish other committees of the Board from time to time as may be necessary
to deal with specific matters.
Materials for Board Committee meetings are circulated in advance and minutes are circulated to all directors.
Each of these Committees has its own charter which establishes the Committee’s terms of reference and operating procedures.
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.
The Board has also established a framework for the management of the Company, including a system of internal control, and a
business risk management process. 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 oversees
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 certify
to the Board:
(cid:121)
(cid:121)
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.
The Company Secretary is responsible for assisting the Chairman in developing and maintaining information systems and
processes that are appropriate for the Board to fulfil its role and to achieve Incitec Pivot’s objectives. The Company Secretary is
also responsible to the Board for ensuring that Board procedures and the Constitution are complied with. The Board appoints
and removes the Company Secretary.
32
Incitec Pivot Limited
Directors’ Report
Corporate Governance Statement
Board meetings
Details of the Board meetings held during the 2007/08 financial year are set out on page 8 of this report.
The Board currently holds 10 scheduled meetings during the year plus any extraordinary meetings that may be necessary to
address any significant matters, as and when they arise.
Materials for Board meetings are circulated to directors in advance. The agendas for meetings are 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.
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.
Audit and Risk Management Committee
The Audit and Risk Management Committee has a charter approved by the Board. The Committee assists the Board in its
review of financial reporting principles and policies, controls and procedures, internal control and risk management and internal
audit. The Audit and Risk Management Committee assists the Board in its review of the integrity and reliability of the Company's
financial statements, the external audit and the Company's compliance with legal and regulatory requirements.
The current members of the Audit and Risk Management Committee are Anthony Larkin (Chairman), Allan McCallum and John
Marlay, all of whom are independent non-executive directors.
The qualifications of those directors appointed to the Audit and Risk Management Committee are set out on page 7 of
this report.
The Committee meets as frequently as required but not less than four times a year. The Committee reviews its performance by
self-assessment at least annually.
The attendance of the members of the Audit and Risk Management Committee at each meeting held during the financial year to
30 September 2008 is set out on page 8 of this report.
The internal and external auditors, the Managing Director & CEO and the Finance Director & Chief Financial Officer are invited
to attend Audit and Risk Management Committee meetings. The Committee regularly meets with the internal and external
auditors without management being present.
The primary objectives of the Audit and Risk Management Committee, as set out in its charter, are as follows:
Financial reporting
(cid:121)
(cid:121)
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 prior to release
through the ASX to shareholders and the financial community;
accounting policies – review the critical accounting policies with external auditors and management; and
(cid:121)
(cid:121) 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:121)
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;
compliance – oversee compliance with applicable laws relating to the operation of the Company’s business; and
insurance – monitor the insurance strategy of the Company and recommend approval or variation of insurance policies.
(cid:121)
(cid:121)
(cid:121)
Incitec Pivot Limited
33
Directors’ Report
Corporate Governance Statement
External audit
(cid:121)
appointment/replacement – manage the relationship between the Company and the external auditor including making
recommendations to the Board on the selection, evaluation and replacement of the external auditor;
(cid:121)
(cid:121)
(cid:121)
(cid:121)
terms of engagement – determine the terms of engagement and remuneration of the external auditor and make
recommendations to the Board;
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.
Internal audit
(cid:121)
appointment/replacement – evaluate the expertise and experience of potential internal auditors and make
recommendations to the Board on the selection, evaluation and replacement of the internal auditor;
(cid:121)
(cid:121)
(cid:121)
(cid:121)
terms of engagement – determine the terms of engagement and remuneration of the internal auditor and make
recommendations to the Board;
scope of audit and plan – review and assess the scope of the audit and the internal audit plan;
internal audit findings – receive reports from the internal auditor, management's response and the internal auditor’s
recommendations; and
assessment – conduct an annual assessment of the effectiveness of internal controls and financial reporting procedures.
Remuneration and Appointments Committee
The Remuneration and Appointments Committee has a charter approved by the Board. Under its charter, the Committee:
(cid:121)
(cid:121)
appointments – assists and advises the Board on director selection and appointment policy, performance evaluation,
Board composition and succession planning for the Board and senior management; and
remuneration – assists and advises the Board on remuneration policy for the Board, the Managing Director & CEO and
senior management, for such to be designed to enable Incitec Pivot to attract, retain and motivate its people to create
value for shareholders.
The Committee, which formerly comprised all non-executive directors, was reconstituted on 5 September 2008 to comprise
three non-executive directors, being John Watson, Allan McCallum and John Marlay, and is chaired by the Chairman, John
Watson.
The Committee is to meet as frequently as required but not less than twice a year.
The attendance of the members of the Remuneration and Appointments Committee at each meeting held during the financial
year to 30 September 2008 is set out on page 8 of this report.
Health, Safety, Environment and Community Committee
The Health, Safety, Environment and Community Committee has a charter approved by the Board. The Committee was
established in February 2007 to assist the Board in discharging its overall responsibilities in relation to health, safety,
environment and community matters arising out of the Company’s activities as they may affect employees, contractors, and the
local communities in which it operates. The charter provides for the Committee to comprise at least three independent non-
executive directors. The current members of the Committee are Allan McCallum (Chairman), John Watson, Anthony Larkin and
Julian Segal.
The Committee is to meet as frequently as required but not less than four times a year. The attendance of the members of the
Health, Safety, Environment and Community Committee at each meeting held during the financial year to 30 September 2008
is set out on page 8 of this report.
34
Incitec Pivot Limited
Directors’ Report
Corporate Governance Statement
External auditor
KPMG is the Company's external auditor.
The lead audit partner and review partner of the Company’s external auditor rotate every five years. The current lead audit
partner and review partner were appointed for the 2006/07 audit of the Company, replacing the lead audit partner and review
partner previously appointed for the audits from 2002/03.
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 7,
Auditor’s remuneration.
Since KPMG’s appointment in 2003, KPMG’s lead audit partner and other representatives from KPMG have attended the
Company’s annual general meetings and were available to answer questions from shareholders, as appropriate.
For the next Annual General Meeting to be held on 19 December 2008, the lead audit partner will attend. Shareholders 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.
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). 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:
(cid:121)
(cid:121)
(cid:121)
(cid:121)
in annual reports and financial statements, releases of results to ASX each half and full year, and at the Company's Annual
General Meeting;
releasing price sensitive announcements and other relevant significant announcements directly to the market via ASX;
conducting briefings with analysts and institutions from time to time – in doing so, Incitec Pivot recognises the importance
of ensuring 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 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.
Share ownership and dealing
Details of shares in the Company held by the directors are set out in Note 34, Key Management Personnel Disclosures.
The Board has adopted a share trading policy which regulates dealings in the Company's shares. The policy aims to ensure that
Incitec Pivot's directors, employees, advisors, auditors and consultants (staff) are aware of the legal restrictions on trading in
securities while a person is in possession of inside information.
Under the policy, all staff are prohibited from trading in the Company's shares while in possession of inside information.
Also, there are certain 'black out' periods, from the end of the financial year or half year until two business days after the
relevant financial results are announced, where trading is prohibited.
In addition, certain members of staff (for example, directors, the direct reports to the Managing Director & CEO, and those in the
finance units) are ‘designated employees’ and as such may not deal in shares in the Company outside of ‘black out’ periods
unless, prior to the dealing, the relevant person has notified the Company Secretary and given written confirmation that they are
not in possession of price sensitive information. In the case of the Company Secretary, he/she must notify the Chairman or
Managing Director & CEO and must also give the same written confirmation to the effect that he/she is not in possession of
price sensitive information.
The ASX is notified of any share dealings by a director within five business days of the dealing taking place.
Incitec Pivot Limited
35
Directors’ Report
Corporate Governance Statement
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 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, or on behalf of, the Company.
Health, Safety, Environment and Community policy
Incitec Pivot has adopted a policy in relation to health, safety, environment and the community which sets out the Company’s
commitment to the Company’s values of “Zero Harm for Everyone, Everywhere” and “Care for the Community and the
Environment”. The policy provides that the Company will establish and maintain health and safety management standards and
systems in compliance with relevant industry standards and regulatory requirements, and that the Company will provide a safe
and healthy working environment. The policy also provides for the Company to conduct its operations in compliance with all
relevant environmental licences and regulations, and to strive to be a valued corporate citizen in the communities in which
it operates.
Signed on behalf of the Board.
John C Watson, AM
Chairman
Dated at Melbourne this 12th day of November 2008
36
Incitec Pivot Limited
Income Statements
For the year ended 30 September 2008
Revenue
Other and financial income
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
Costs recovered from subsidiaries under agency agreement
Depreciation and amortisation expense
Financial expenses
Purchased services
Repairs and maintenance
Outgoing freight
Lease payments - operating leases
Profit on share equity accounted investments
Asset write-downs, clean-up and environmental provisions
Other expenses
Profit before income tax
Income tax expense
Profit for the financial year
Earnings per share
Consolidated)
Company)
Notes
2008)
$mill)
2007)
$mill)
2008)
$mill)
(4)
(4)
2,918.2)
17.5)
1,373.2)
34.6)
1,200.1)
219.6)
2007)
$mill)
890.5)
217.2)
243.7)
(59.7)
246.5)
(42.8)
(33)
(5)
(5)
(5)
(16)
(5)
(1,478.1)
(259.8)
-)
(70.3)
(95.2)
(165.9)
(67.7)
(140.6)
(36.2)
6.7)
(5.0)
(17.0)
(2,085.4)
850.3)
(8)
(236.0)
(575.2)
(119.3)
-)
(36.1)
(34.1)
(78.0)
(49.7)
(123.6)
(29.4)
-)
(4.2)
(10.8)
(1,120.1)
287.7)
(82.4)
(1,092.2)
(101.9)
71.5)
(22.3)
(67.6)
(84.2)
(28.0)
(122.3)
(19.3)
-)
(4.8)
(0.1)
(1,224.7)
195.0)
(1.4)
(639.1)
(83.4)
55.2)
(16.3)
(33.5)
(38.0)
(25.8)
(52.7)
(16.1)
-)
(4.2)
(6.8)
(903.5)
204.2)
(0.8)
614.3)
205.3)
193.6)
203.4)
cents)
cents)
Basic earnings per share from continuing operations(1)
Diluted earnings per share from continuing operations(1)
(9)
(9)
57.4)
57.4)
20.4)
20.4)
(1) Earnings per share in the comparative period have been restated following the 20 for 1 share split as approved by shareholders in
September 2008.
The above Income Statements are to be read in conjunction with the Notes to the Financial Statements set out on pages 44 to 113.
Incitec Pivot Limited
38
Statements of Comprehensive Income
For the year ended 30 September 2008
Profit for the financial year
Other comprehensive income
Cash flow hedging reserve
Changes in fair value of cash-flow hedges
Profit in cash-flow hedges transferred to income statement
Income tax on movements in the cash-flow hedging reserve
Fair value reserve
Change in fair value of assets held as available for sale
Income tax on change in fair value of assets held as available for sale
Foreign currency translation reserve
Exchange differences on translation of foreign operations
Exchange differences on non-repayable inter-company loans
Consolidated
2008
$mill
2007
$mill
Company
2008
$mill
2007
$mill
614.3
205.3
193.6
203.4
(15.8)
(1.5)
5.2
(12.1)
(16.9)
5.1
(11.8)
355.1
7.7
362.8
3.4
(2.9)
(0.1)
0.4
35.1
(10.5)
24.6
-
-
-
(13.9)
(1.5)
4.6
(10.8)
(16.9)
5.1
(11.8)
-
-
-
3.4
(2.9)
(0.1)
0.4
35.1
(10.5)
24.6
-
-
-
Actuarial (losses)/gains on defined benefit plans (net of income tax)
(26.1)
1.1
(3.6)
1.1
Total other comprehensive income/(expense)
312.8
26.1
(26.2)
26.1
Total comprehensive income for the financial year
927.1
231.4
167.4
229.5
The above Statements of Comprehensive Income are to be read in conjunction with the Notes to the Financial Statements set out on pages
44 to 113.
Incitec Pivot Limited
39
Statements of Financial Position
As at 30 September 2008
Consolidated
Company
Current assets
Cash and cash equivalents
Trade and other receivables
Other financial assets
Inventories
Other assets
Fixed assets classified as held for sale
Total current assets
Non-current assets
Trade and other receivables
Investments accounted for using the equity method
Other financial assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Retirement benefit surplus
Other assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Interest bearing liabilities
Other financial liabilities
Current tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Trade and other payables
Interest bearing liabilities
Deferred tax liabilities
Retirement benefit obligation
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
Notes
(10)
(11)
(14)
(12)
(13)
(15)
(11)
(16)
(14)
(17)
(18)
(19)
(25)
(13)
(20)
(21)
(22)
(23)
(20)
(21)
(24)
(25)
(23)
(26)
2008
$mill
479.7
625.3
30.3
676.6
51.7
4.8
1,868.4
2.3
311.2
0.6
1,689.2
3,856.2
311.6
-
0.1
6,171.2
8,039.6
1,132.0
2,238.8
16.2
180.4
88.6
3,656.0
474.5
271.2
333.4
66.8
90.8
1,236.7
4,892.7
3,146.9
2,267.7
353.8
525.4
3,146.9
2007
$mill
218.3
167.4
292.1
221.7
4.5
5.0
909.0
0.4
-
1.6
502.1
193.7
28.6
2.7
1.2
730.3
1,639.3
281.4
-
9.1
35.1
31.2
356.8
52.8
630.0
-
-
64.7
747.5
1,104.3
535.0
360.8
17.7
156.5
535.0
2008
$mill
400.4
357.0
30.3
468.5
37.9
2.0
1,296.1
0.2
-
2,897.3
214.3
6.6
33.9
-
0.1
3,152.4
4,448.5
1,169.3
180.5
13.8
211.7
47.7
1,623.0
337.7
-
-
2.4
46.3
386.4
2,009.4
2,439.1
2,267.7
3.1
168.3
2,439.1
2007
$mill
208.0
263.5
292.1
225.6
3.1
2.1
994.4
0.4
-
696.1
178.5
9.9
0.9
2.7
1.2
889.7
1,884.1
551.1
-
9.1
35.1
31.2
626.5
-
630.0
-
-
43.5
673.5
1,300.0
584.1
360.8
25.7
197.6
584.1
The above Statements of Financial Position are to be read in conjunction with the Notes to the Financial Statements set out on pages 44 to
113
40
Incitec Pivot Limited
Statements of Cash Flows
For the year ended 30 September 2008
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Financial expenses paid
Dividends received from wholly-owned controlled entities
Other revenue received
Income taxes paid
Net cash flows from operating activities
Cash flows from investing activities
Payments for property, plant and equipment and intangibles
Payments for purchase of subsidiaries, net of cash acquired
Payments for purchase of share in joint ventures and associates
Payments for purchase of investments
Proceeds from sale of property, plant and equipment
Net cash flows from investing activities
Cash flows from financing activities
Repayments of borrowings
Proceeds from borrowings
Payment of borrowing cost
Repayments of step-up preference shares
Payment of distributions to step-up preference shareholders
Share issuance cost paid
Dividends paid
Net cash flows from financing activities
Consolidated
Company
Notes
2008
$mill
Inflows/
(Outflows)
2007
$mill
Inflows/
(Outflows)
2008
$mill
Inflows/
(Outflows)
2007
$mill
Inflows/
(Outflows)
(33)
(29)
(28)
2,911.1
(1,957.7)
14.9
(77.1)
-
7.7
(76.3)
822.6
1,332.1
(1,015.2)
4.5
(30.4)
-
6.0
(37.8)
259.2
(227.4)
(526.4)
(11.6)
(48.4)
9.8
(804.0)
(1,569.0)
2,395.3
(7.7)
(345.0)
(13.8)
(2.0)
(219.3)
238.5
257.1
218.3
4.3
479.7
(91.6)
-
-
(257.0)
28.7
(319.9)
(182.1)
375.0
-
-
-
-
(75.6)
117.3
56.6
161.7
-
218.3
1,107.0
(569.2)
9.5
(57.5)
190.3
6.8
(68.0)
618.9
(55.2)
-
-
(48.4)
10.2
(93.4)
(759.0)
647.2
-
-
-
(2.0)
(219.3)
(333.1)
192.4
208.0
-
400.4
935.9
(698.3)
4.5
(30.4)
79.7
3.9
(37.8)
257.5
(67.3)
-
-
(267.0)
6.2
(328.1)
(182.1)
375.0
-
-
-
-
(75.6)
117.3
46.7
161.3
-
208.0
Net increase in cash and cash equivalents held
Cash and cash equivalents at the beginning of the financial year
Effect of exchange rate fluctuation on cash and cash equivalents held
Cash and cash equivalents at the end of the financial year
(29)
The above Statements of Cash Flows are to be read in conjunction with the Notes to the Financial Statements set out on pages 44 to 113.
Incitec Pivot Limited
41
Statements of Changes in Equity
For the year ended 30 September 2008
Consolidated
Balance at 1 October 2006
Total comprehensive income for the period
Dividends paid
Share based payment transactions
Dividends received as loan repayment
Option expense
Loan repayments
Employee shareholder loans
Balance at 30 September 2007
Balance at 1 October 2007
Total comprehensive income for the period
Dividends paid
Shares issued during the period
Transaction cost on issuing shares
Share based payment transactions
Dividends received as loan repayment
Option expense
Deferred tax on share based payments
Loan repayments
Employee shareholder loans
Balance at 30 September 2008
Issued
capital
$mill
360.8
-
-
-
-
-
-
360.8
360.8
-
-
1,908.9
(2.0)
-
-
-
-
-
2,267.7
Cash flow
hedging
Reserve
Share-
based
payments
Reserve
Foreign
Currency
Translation
Reserve
Fair Value
Reserve
Retained
earnings
$mill
$mill
$mill
$mill
$mill
0.7
0.4
-
-
-
-
-
1.1
1.1
(12.1)
-
-
-
-
-
-
-
-
(11.0)
(6.5)
-
-
-
1.8
2.2
(5.5)
(8.0)
(8.0)
-
-
-
-
1.8
2.8
0.8
0.4
(8.6)
(10.8)
-
-
-
-
-
-
-
-
-
362.8
-
-
-
-
-
-
-
-
362.8
-
24.6
-
-
-
-
-
24.6
24.6
(11.8)
-
-
-
-
-
-
-
-
12.8
25.0
206.4
(75.6)
0.7
-
-
-
156.5
156.5
588.2
(219.3)
-
-
-
-
-
-
-
525.4
Total
$mill
380.0
231.4
(75.6)
0.7
1.8
2.2
(5.5)
535.0
535.0
927.1
(219.3)
1,908.9
(2.0)
1.8
2.8
0.8
0.4
(8.6)
3,146.9
The Statement of Changes in Equity should be read in conjunction with the notes to the Financial Statements set out on pages 44 to 113.
Cash flow hedging reserve: The cash flow hedging reserve comprises the effective portion of the cumulative net change in the fair value of
cash flow hedging instruments related to hedged transactions that have not yet occurred.
Share-based payments reserve: The share-based payments reserve represents the amount receivable from employees in relation to limited
recourse loans for shares issued under long term incentive plans, as well as the fair value of shares treated as options recognised as an
employee expense over the relevant vesting period.
Foreign currency translation reserve: Exchange differences arising on translation of foreign controlled operations are taken to the foreign
currency translation reserve, as described in note 1(xviii). The relevant position of the reserve is recognised in the income statement when
the foreign operation is disposed of.
Fair value reserve: The fair value reserve represents the cumulative net change in the fair value of available-for-sale financial assets until the
investment is derecognised as available-for-sale.
42
Incitec Pivot Limited
Statements of Changes in Equity
For the year ended 30 September 2008
Company
Balance at 1 October 2006
Total comprehensive income for the period
Dividends paid
Share based payment transactions
Dividends received as loan repayment
Option expense
Loan repayments
Employee shareholder loans
Balance at 30 September 2007
Balance at 1 October 2007
Total comprehensive income for the period
Dividends paid
Shares issued during the period
Transaction cost on issuing shares
Share based payment transactions
Dividends received as loan repayment
Option expense
Deferred tax on share based payments
Loan repayments
Employee shareholder loans
Balance at 30 September 2008
Issued
capital
$mill
360.8
-
-
-
-
-
-
360.8
360.8
-
-
1,908.9
(2.0)
-
-
-
-
-
2,267.7
Cash flow
hedging
Reserve
Share-
based
payments
Reserve
Foreign
Currency
Translation
Reserve
Fair Value
Reserve
Retained
earnings
$mill
$mill
$mill
$mill
$mill
0.7
0.4
-
-
-
-
-
1.1
1.1
(10.8)
-
-
-
-
-
-
-
-
(9.7)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
24.6
-
-
-
-
-
24.6
24.6
(11.8)
-
-
-
-
-
-
-
-
12.8
68.0
204.5
(75.6)
0.7
-
-
-
197.6
197.6
190.0
(219.3)
-
-
-
-
-
-
168.3
Total
$mill
429.5
229.5
(75.6)
0.7
-
-
-
584.1
584.1
167.4
(219.3)
1,908.9
(2.0)
-
-
-
-
-
2,439.1
The Statement of Changes in Equity should be read in conjunction with the notes to the Financial Statements set out on pages 44 to 113.
Cash flow hedging reserve: The cash flow hedging reserve comprises the effective portion of the cumulative net change in the fair value of
cash flow hedging instruments related to hedged transactions that have not yet occurred.
Share-based payments reserve: The share-based payments reserve represents the amount receivable from employees in relation to limited
recourse loans for shares issued under long term incentive plans, as well as the fair value of shares treated as options recognised as an
employee expense over the relevant vesting period.
Foreign currency translation reserve: Exchange differences arising on translation of foreign controlled operations are taken to the foreign
currency translation reserve, as described in note 1(xviii). The relevant position of the reserve is recognised in the income statement when
the foreign operation is disposed of.
Fair value reserve: The fair value reserve represents the cumulative net change in the fair value of available-for-sale financial assets until the
investment is derecognised as available-for-sale.
Incitec Pivot Limited
43
Notes to the Financial Statements
For the year ended 30 September 2008
1
2
3
4
5
6
7
8
9
Significant accounting policies
Critical accounting estimates and judgements
Segment report
Revenue and other income
Expenses
Individually material items
Auditor’s remuneration
Income tax expense
Earnings per share (EPS)
10 Cash and cash equivalents
11 Trade and other receivables
12 Inventories
13 Other assets
14 Other financial assets
15 Fixed assets classified as held for sale
16 Investments accounted for using the equity method
17 Property, plant and equipment
18 Intangible assets
19 Deferred tax assets
20 Trade and other payables
21 Interest bearing liabilities
22 Other financial liabilities
23 Provisions
24 Deferred tax liabilities
25 Retirement benefit obligations
26 Issued capital
27 Dividends
28 Business combination
29 Reconciliation of profit after income tax to net cash inflow from operating activities
30 Commitments
31 Contingent liabilities
32 Financial risk management
33 Related party disclosures
34 Key management personnel disclosures
35 Share based payments
36 Investments in controlled entities
37 Deed of Cross Guarantee
38 Events subsequent to balance date
44
Incitec Pivot Limited
45
51
52
54
54
55
57
58
59
60
61
61
61
61
62
62
65
67
69
70
71
72
72
75
76
78
79
80
82
83
84
85
98
100
105
109
112
113
Notes to the Financial Statements
For the year ended 30 September 2008
1. Significant accounting policies
Incitec Pivot Limited is a company domiciled in Australia. The
consolidated financial statements were authorised for issue by the
directors on 12 November 2008.
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
below to assist in a general understanding of this financial report.
These policies have been consistently applied to all the years
presented, unless otherwise stated.
(i) Basis of preparation
The financial report is a general purpose financial report which has
been prepared in accordance with Australian Accounting Standards,
other authoritative pronouncements of the Australian Accounting
Standards Board and the Corporations Act 2001.
Current net asset deficiency
As at 30 September 2008, the Company and Consolidated entity’s
current liabilities exceeded their current assets by $327.6 million and
$1,787.6 million respectively. The Consolidated entity’s current
liabilities exceeded its current assets as the bridge facility, which was
specifically negotiated for the purchase of Dyno Nobel Limited, is due
and payable in May 2009. As at balance date, the Consolidated entity
has established a 3 year syndicated bank facility of $1.68 billion,
which was available to pay down against the bridge facility. The
balance of the bridge will be paid down by other facilities/funding to
be secured before the due date.
In addition, cashflows from operations will be available to meet
current liabilities as and when they fall due.
The Company’s current liabilities exceeded its current assets due to
the fact that the majority of its trade payables are owed to wholly
owned controlled entities as several controlled entities cash receipts
on sales are collected within the Company. The Company’s current
liabilities will decrease as these wholly owned controlled entities
declare dividends on its profits for the period to the Company. The
wholly owned controlled entities have declared dividends to the
Company since 30 September 2008 which decreases the amount
due to wholly owned controlled entities by $414.4 million.
Compliance with IFRS
Australian Accounting Standards include Australian equivalents to
International Financial Reporting Standards (AIFRS). The
consolidated financial report of the Consolidated entity and the
financial report of the Company comply with the International
Financial Reporting Standards (IFRSs) and interpretations adopted
by the International Accounting Standards Board (IASB).
Historical cost convention
These financial statements have been prepared under the historical
cost convention, except for derivative financial instruments, available-
for-sale financial assets and financial instruments held for trading
which have been measured at fair value. The carrying values of
recognised assets and liabilities that are hedged items in fair value
hedges, and are otherwise carried at cost, are adjusted to record
changes in the fair value attributable to the risks that are being
hedged.
The financial report is presented in Australian dollars.
Critical accounting estimates
The preparation of financial statements in conformity with AIFRS
requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of
applying the Consolidated entity’s accounting policies. Actual results
may differ from these estimates. Estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the period in which the
estimate is revised and in any future periods affected.
The areas involving a higher degree of judgement or complexity, or
areas where assumptions and estimates are significant to the
financial statements, are disclosed in Note 2.
Early adoption of standards
Incitec Pivot Limited has elected to early adopt Australian Accounting
Standards and interpretations which permit early adoption. The
decision to early adopt those standards and interpretations ensures
that policy elections described below, including AIFRS transition
exemptions, are available. The principal standards and interpretations
that have been early adopted are:
• AASB 101 Presentation of Financial Statements
• AASB 2007-8 Amendments to Australian Accounting Standards
arising from AASB 101
• AASB 2007-10 Further Amendments to Australian Accounting
Standards arising from AASB 101
• AASB 123 Borrowing Costs
• AASB 2007-6 Amendments to Australian Accounting Standards
arising from AASB 123
• AASB 1048 Interpretation and Application of Standards (September
2007)
• AASB 2008-1 Amendment to Australian Accounting Standard- Share-
based payments: Vesting Conditions and Cancellations (February
2008)
The early adoption of these standards did not have a material impact
on the year end results of the Company and the Consolidated entity.
Issued Standards not early adopted
The following standards and amendments were available for early
adoption but have not been applied by the Consolidated entity in
these financial statements:
• AASB 8 Operating segments (February 2007) replacing the existing
AASB 114 Segment Reporting and requiring more qualitative
disclosure and also applying to single segment entities. AASB 8 is
applicable for annual reporting periods beginning on or after 1
January 2009.
• AASB 2007-3 Amendments to Australian Accounting Standards
arising from AASB 8 is applicable for annual reporting periods
beginning on or after 1 January 2009.
• AASB 3 Business Combinations (March 2008) requires an acquirer of
a business to recognise the assets acquired and liabilities assumed at
their acquisition-date fair values and disclose information that enables
users to evaluate the nature and financial effects of the acquisition.
AASB 3 is applicable for annual reporting periods beginning on or
after 1 July 2009.
The Consolidated entity plans to adopt AASB 8 and AASB 3 in the
2010 financial year. The initial application of AASB 8 and AASB 3 are
not expected to have a material impact on the financial results of the
Company and the Consolidated entity.
(ii) Consolidation
(i) Subsidiaries
The consolidated financial statements incorporate the assets and
liabilities of all subsidiaries of Incitec Pivot Limited as at 30
September 2008 and the results of all subsidiaries for the year then
ended. Subsidiaries are all those entities (including special purpose
entities) over which the Consolidated entity has the power to govern
the financial and operating policies, generally accompanying a
shareholding of more than one-half of the voting rights. The existence
and effect of potential voting rights that are currently exercisable or
convertible are considered when assessing whether the Consolidated
entity controls another entity. Subsidiaries are fully consolidated from
the date on which control is transferred to the Consolidated entity.
They are de-consolidated from the date that control ceases. The
purchase method of accounting is used to account for the acquisition
of subsidiaries by the Consolidated entity (refer to Note 1(xiv)).
Inter-company transactions, balances and unrealised gains on
transactions between consolidated companies are eliminated.
Unrealised losses are also eliminated unless the transaction provides
Incitec Pivot Limited
45
Notes to the Financial Statements
For the year ended 30 September 2008
1. Significant accounting policies (continued)
(ii) Consolidation (continued)
evidence of the impairment of the asset transferred. Accounting
policies of subsidiaries have been changed where necessary to
ensure consistency with the policies adopted by the Consolidated
entity. Investments in subsidiaries are accounted for at cost in the
individual financial statements of Incitec Pivot Limited.
Associates are those entities in which the Consolidated entity has
significant influence, but not control, over the financial and operating
policies. Significant influence is presumed to exist when the
Consolidated entity holds between 20 and 50 percent of the voting
power of another entity. Jointly controlled entities are those entities
over whose activities the Consolidated entity has joint control,
established by contractual agreement and requiring unanimous
consent for strategic financial and operating decisions.
(ii) Associates and jointly controlled entities
Associates and jointly controlled entities are accounted for using the
equity method (equity accounted investees) and are initially
recognised at cost. The Consolidated entity’s investment includes
goodwill identified on acquisition, net of any accumulated impairment
losses. The consolidated financial statements include the
Consolidated entity’s share of the income and expenses and policies
with those of the Consolidated entity, from the date that significant
influence or joint control commences until the date that signficant
influence or joint control ceases. When the Consolidated entity’s
share of losses exceeds its interest in an equity accounted investee,
the carrying amount of that interest (including any long-term
investments) is reduced to nil and the recognition of further losses is
discontinued except to the extent that the Consolidated entity has an
obligation or has made payments on behalf of the investee.
(iii) Revenue recognition
Revenue is measured at the fair value of the consideration received
or receivable. Amounts disclosed as revenue are net of returns, trade
allowances and amounts collected on behalf of third parties.
Revenue is recognised for the major business activities as follows:
Sales Revenue is recognised when the significant risks and rewards
of ownership have been transferred to the buyer. No revenue is
recognised if there is significant uncertainty regarding recovery of the
consideration due, the costs incurred or to be incurred cannot be
measured reliably, there is a risk of return of goods or there is
continuing management involvement with the goods.
Interest income is recognised as it accrues.
Dividend receivables are recognised in the Income Statement when
declared.
(iv) Borrowing costs
Borrowing costs include interest on borrowings, 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, finance costs are
capitalised using a weighted average interest rate for the purpose of
recognising a qualifying asset.
(v) Share based payments
Under the Long Term Incentive Plan (LTI), Incitec Pivot Limited may
grant awards to employees, subject to individual and Company
performance (the Performance Plan). The LTI operates by way of the
Company providing employees with limited recourse interest bearing
loans which must be used to purchase Incitec Pivot Limited shares on
market.
The value received by the employees as a result of participation in
the LTI plan are treated as options. The fair value of the shares
treated as options is recognised as an employee expense over the
relevant vesting period with a corresponding increase in equity. The
Black Scholes option pricing model is used to derive a fair value at
grant date. Loan forgiveness and other terms and conditions are
incorporated into the option valuation.
The fair value is allocated to the Income Statement evenly over the
period from grant date to the date when an entitlement to an award,
in the form of a loan waiver, arises. The amount recognised as an
expense is adjusted to reflect the actual number of shares treated as
options that vest except where forfeiture occurs.
(vi) Taxation
Income tax on the profit or loss for the year comprises current and
deferred tax. Income tax is recognised in the Income Statement
except to the extent that it relates to items recognised directly in
equity, in which case it is recognised 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
amount of assets and liabilities for financial reporting purposes and
the amounts used for taxation purposes. The following temporary
differences are not provided for; initial recognition of goodwill, the
initial recognition of assets and liabilities that affect neither accounting
nor 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 will 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.
Tax Consolidation
Legislation to allow groups, comprising a parent entity and its
Australian resident wholly-owned entities, to elect to consolidate and
be treated as a single entity for income tax purposes was
substantially enacted on 21 October 2002. This legislation, which
includes both mandatory and elective elements, is applicable to the
Company. Incitec Pivot Limited is the parent entity in the tax
consolidated group comprising all wholly-owned entities. The
implementation date for the tax-consolidated group was 1 October
2003.
Due to the effect of applying Interpretation 1052 Tax Consolidation
Accounting and the existence of a tax funding agreement between
the entities in the tax consolidated group, the parent entity recognises
the tax effects of its own transactions and the current tax liabilities
and the deferred tax assets arising from unused tax losses and
unused tax credits assumed by the subsidiary entities. In accordance
with the tax funding agreement, the subsidiary entities are
compensated for the assets and liabilities assumed by the parent
entity as intercompany receivables and payables and for amounts
which equal the amounts initially recognised by the subsidiary
entities. There is no adjustment for tax consolidation contribution by
(or distribution to) equity participants.
(vii) Inventories
Inventories are valued at the lower of cost and net realisable value.
Net realisable value is the estimated selling price in the ordinary
course of business less the estimated cost of completion and selling
expenses. Cost is based on a weighted average method. For
manufactured goods, cost includes direct material and labour costs
plus an appropriate proportion of fixed and variable overheads based
on normal operating capacity of the production facilities. For
merchanted goods, cost is net cost into store. Engineering spares are
held in inventory and expensed when used.
46
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2008
1. Significant accounting policies (continued)
(viii) Trade and other receivables
Trade and other receivables are recognised at their cost less any
impairment losses.
Collectibility of trade and other receivables is reviewed on an ongoing
basis. Debts which are known to be uncollectible are written off by
reducing the carrying amount directly. An allowance account
(provision for impairment of trade receivables) is used when there is
objective evidence that the Consolidated entity will not be able to
collect amounts due according to the original terms of the
receivables. The amount of the impairment allowance is the
difference between the asset’s carrying amount and the present
value of estimated future cash flows, discounted at the original
effective interest rate. Cash flows relating to short-term receivables
are not discounted if the effect of discounting is immaterial.
The amount of the impairment loss is recognised in the income
statement within other expenses. When a trade receivable for which
an impairment allowance had been recognised becomes uncollectible
in a subsequent period, it is written off against the allowance account.
Subsequent recoveries of amounts previously written off are credited
against other expenses in the income statement.
Where substantially all risks and rewards relating to receivables have
been transferred to a financial institution, the receivable is
derecognised. Where this has not occurred, the receivable and the
equivalent interest bearing liability have been recognised in the
statement of financial position.
(ix) Other financial assets
The Consolidated entity’s interests in financial assets included in
Note 14, other than controlled entities and financial assets classified
as available-for-sale, are stated at fair value, with movement in
market value recognised in the Income Statement. Financial assets
classified as being available-for-sale are stated at fair value with
movements in market value recognised within a Fair Value reserve.
The fair value of available-for-sale financial assets is determined by
reference to their quoted bid price at the reporting date.
Purchases and sales are recognised on trade date – the date on
which the Consolidated entity commits to purchase or sell assets.
Investment income includes dividends which are recognised in the
Income Statement when declared.
(x) Assets (or disposal groups) held for sale
Immediately before classification as held for sale, the measurement
of the assets (and all assets and liabilities in a disposal group) is
reviewed in accordance with applicable accounting standards. Then,
on initial classification as held for sale, non-current assets (or
disposal groups) are recognised at the lower of carrying amount and
fair value less costs to sell.
An impairment loss is recognised for any initial or subsequent write-
down of the asset (or disposal group) to fair value less costs to sell. A
gain is recognised for any subsequent increases in fair value less
costs to sell off an asset (or disposal group), but not in excess of any
cumulative impairment loss previously recognised. A gain or loss not
previously recognised by the date of the sale of the non-current asset
(or disposal group) is recognised at the date of derecognition.
Non-current assets classified as held for sale and the assets of a
disposal group classified as held for sale are presented separately
from the other assets in the statement of financial position.
(xi) Property, plant and equipment and depreciation
Property, plant and equipment is stated at cost or deemed cost less
accumulated depreciation and impairment. Cost includes expenditure
that is directly attributable to the acquisition of the item. The cost of
self-constructed assets includes the cost of materials, direct labour
and an appropriate proportion of overheads. Subsequent costs are
included in the asset’s carrying amount or recognised as a separate
asset, as appropriate, only when it is probable that future economic
benefits associated with the item will flow to the Consolidated entity
and the cost of the item can be measured reliably.
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.
Estimated useful lives of each class of asset are as follows:
Buildings and improvements
Machinery, plant and equipment
20 to 40 years
3 to 30 years
The assets’ residual values and useful lives are reviewed, and
adjusted if appropriate, at each balance sheet date.
Certain items of property, plant and equipment that had been
revalued to fair value on or prior to 1 October 2004, the date of
transition to AIFRS, are measured on the basis of deemed cost,
being the revalued amount at the date of that revaluation.
Profits and losses on disposal of property, plant and equipment are
taken to the Income Statement.
Spare parts purchased for a particular asset or class of assets are
classified as capital spares in property, plant and equipment and
depreciated over the useful life of the asset or class of assets to
which they relate.
(xii) Leased assets
Leases under which the Consolidated entity assumes substantially all
the risks and benefits of ownership of the asset are classified as
finance leases. Other leases are classified as operating leases.
Finance leases are capitalised at the present value of the minimum
lease payments and amortised on a straight-line basis over the period
during which benefits are expected to flow from the use of the leased
assets. A corresponding liability is established and each lease
payment is allocated between finance charges and reduction of the
liability. Operating leases are not capitalised and lease rental
payments are recognised in profit and loss on a straight line basis
over the term of the lease.
(xiii) Intangible assets
(i) Goodwill
Goodwill represents the excess of the cost of an acquisition over the
fair value of the Consolidated entity’s share of the net identifiable
assets of the acquired subsidiary at the date of acquisition. Goodwill
on acquisition of subsidiaries is included in intangible assets.
Goodwill is not amortised. Instead, goodwill is tested for impairment
annually, or more frequently if events or changes in circumstances
indicate that it might be impaired, and is carried at cost less
accumulated impairment losses. Gains and losses on the disposal of
an entity include the carrying amount of goodwill relating to the entity
sold.
(ii) Research and development
Expenditure on research activities, undertaken with the prospect of
gaining new scientific or technical knowledge and understanding, is
recognised in the income statement as an expense as incurred.
Expenditure on development activities, whereby research findings are
applied to a plan or design for the production of new or substantially
improved products and processes, is capitalised if the product or
process is technically and commercially feasible and the
Consolidated entity has sufficient resources to complete
development.
The expenditure capitalised includes the cost of materials, direct
labour and an appropriate proportion of overheads. Other
development expenditure is recognised in the income statement as
an expense as incurred. Capitalised development expenditure is
stated at cost less accumulated amortisation and impairment losses.
(iii) Other intangible assets
Other intangible assets that are acquired by the Consolidated entity
are stated at cost less accumulated amortisation and impairment
losses.
Incitec Pivot Limited
47
Notes to the Financial Statements
For the year ended 30 September 2008
1. Significant accounting policies (continued)
(xiii) Intangible assets (continued)
(iv) Subsequent expenditure
Subsequent expenditure on capitalised intangible assets is
capitalised only when it increases the future economic benefits
embodied in the specific asset to which it relates. All other
expenditure is expensed as incurred.
(v) Amortisation
Amortisation is charged to the income statement on a straight-line
basis over the estimated useful lives of intangible assets unless such
lives are indefinite. Goodwill and intangible assets with an indefinite
useful life are systematically tested for impairment at each annual
balance sheet date. Other intangible assets are amortised from the
date that they are available for use or when received. The estimated
useful lives in the current and comparative periods are as follows:
•
•
Software
Asset Rights
3 – 7 years
1 – 2 years
(xiv) Business combinations
The purchase method of accounting is used to account for all
business combinations, including business combinations involving
entities or businesses under common control, regardless of whether
equity instruments or other assets are acquired. Cost is measured as
the fair value of the assets given, shares issued or liabilities incurred
or assumed at the date of exchange plus costs directly attributable to
the acquisition. Where equity instruments are issued in an
acquisition, the fair value of the instruments is their published market
price as at the date of exchange unless, in rare circumstances, it can
be demonstrated that the published price at the date of exchange is
an unreliable indicator of fair value and that other evidence and
valuation methods provide a more reliable measure of fair value.
Transaction costs arising on the issue of equity instruments are
recognised directly in equity.
Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are measured initially at their fair
values at the acquisition date, irrespective of the extent of any
minority interest. The excess of the cost of acquisition over the fair
value of the Consolidated entity’s share of the identifiable net assets
acquired is recorded as goodwill (refer to Note 1(xiii)). If the cost of
acquisition is less than the Consolidated entity’s share of the fair
value of the identifiable net assets of the subsidiary acquired, the
difference is recognised directly in the income statement, but only
after a reassessment of the identification and measurement of the net
assets acquired.
Where settlement of any part of cash consideration is deferred, the
amounts payable in the future are discounted to their present value
as at the date of exchange. The discount rate used is the entity’s
incremental borrowing rate, being the rate at which a similar
borrowing could be obtained from an independent financier under
comparable terms and conditions. When control is obtained in
successive share purchases, each significant transaction is
accounted for separately and the identifiable assets, liabilities and
contingent liabilities acquired are stated at fair value when control is
obtained.
(xv) Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value less
attributable transaction costs. Subsequent to initial recognition,
interest-bearing borrowings are stated at amortised cost with any
difference between cost and redemption value being recognised in
the Income Statement over the period of the borrowings on an
effective interest basis. Amortised cost is calculated by taking into
account any issue costs, and any discount or premium on issuance.
Gains and losses are recognised in the Income Statement in the
event that the liabilities are derecognised.
(xvi) Provisions
A provision is recognised when there is a legal 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.
Provisions are measured at the present value of management’s best
estimate of the expenditure required to settle the present obligation at
the balance sheet date. The discount rate used to determine the
present value reflects current market assessments of the time value
of money and the risks specific to the liability. The increase in the
provision due to the passage of time is recognised in borrowing costs.
(i) Environmental
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 Income Statement as soon as the need
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.
For sites where there are uncertainties with respect to what Incitec
Pivot Limited’s remediation obligations might be or what remediation
techniques might be approved, and no reliable estimate can presently
be made of regulatory and remediation costs, no amounts have been
capitalised, expensed or provided for.
The provision is the best estimate of the present value of the
expenditure required to settle the restoration obligation at the
reporting date, based on current legal requirements and technology.
Future restoration costs are reviewed annually and any changes are
reflected in the present value of the restoration provision at the end of
the reporting period. The discount rate used to determine the present
value reflects current market assessments of the time value of money
and the risks specific to the liability. The increase in the provision due
to the passage of time is recognised in borrowing costs.
(ii) Decommissioning
The present value of the estimated costs of dismantling and removing
an asset and restoring the site on which it is located are recognised
as an asset within property, plant and equipment and as a provision
where a legal or constructive obligation exists. At each reporting date,
the liability is remeasured in line with changes in discount rates,
timing and estimated cash flows. Any changes in the liability are
added or deducted from the related asset, other than the unwinding
of the discount which is recognised as an interest expense in the
Income Statement.
(iii) Employee entitlements
Annual leave and sick leave
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 undiscounted 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.
Long Service leave
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
approximating to the terms of the Consolidated entity’s obligations.
Profit sharing and bonus plans
A liability is recognised for bonus plans on the achievement of
predetermined bonus targets and the benefit calculations are formally
documented and determined before signing the financial report.
48
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2008
1. Significant accounting policies (continued)
(xvi) Provisions (continued)
(iv) Retirement Benefit Obligation
Contributions to defined contribution superannuation funds are taken
to the Income Statement in the year in which the expense is incurred.
For defined benefit schemes, the cost of providing superannuation is
charged to the Income Statement so as to recognise current and past
service costs, interest cost on defined benefit obligations, and the
effect of any curtailments or settlements, net of expected returns on
plan assets. All actuarial gains and losses as at 1 October 2004, the
date of transition to AIFRS, were recognised in retained earnings. All
actuarial gains and losses that arise subsequent to 1 October 2004
are recognised directly in equity.
The Consolidated entity’s net obligation in respect of defined benefit
superannuation plans is calculated by estimating the amount of future
benefit that employees have earned in return for their service in the
current and prior periods; that benefit is discounted to determine its
present value, and the fair value of any plan assets is deducted. The
discount rate is the yield at the balance sheet date on government
bonds that have maturity dates approximating the terms of the
Consolidated entity’s obligations. The calculation is performed by a
qualified actuary using the projected unit credit method.
(v) 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.
(vi) 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.
(vii) 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.
(xvii) Trade and other payables
Trade and other payables are stated at cost and represent liabilities
for goods and services provided to the Consolidated entity prior to the
end of financial year which are unpaid.
(xviii) Foreign currency transactions
Functional and presentation currency
Items included in the financial statements of each of the Group’s
entities are measured using the currency of the primary economic
environment in which the entity operates (“the functional currency”).
The consolidated financial statements are presented in Australian
dollars, which is Incitec Pivot Limited’s presentation currency.
Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at year end
exchange rates of monetary assets and liabilities denominated in
foreign currencies are recognised in the income statement, except
when they are deferred in equity as qualifying cash flow hedges.
Non-monetary assets and liabilities carried at fair value that are
denominated in foreign currencies are translated at the rates
prevailing at the date when the fair value was determined. Non-
monetary items that are measured in terms of historical cost in a
foreign currency are not retranslated.
Foreign operations
On consolidation, the assets and liabilities of the Consolidated entity’s
overseas operations are translated at exchange rates prevailing at
the reporting date. Income and expense items are translated at the
average exchange rates for the period unless exchange rates
fluctuate significantly. Exchange differences arising, if any, are
recognised in the foreign currency translation reserve, and
recognised in income on disposal of the foreign operation.
Goodwill and fair value adjustments arising on the acquisitions of a
foreign entity are treated as assets and liabilities of the foreign entity
and translated at exchange rates prevailing at the reporting date.
(xix) Derivative financial instruments
The Consolidated entity uses derivative financial instruments to
hedge its exposure to foreign exchange, commodity price and interest
rate risks arising from operational, financing and investment activities.
In accordance with its treasury policy, the Consolidated entity does
not hold or issue derivative financial instruments for trading purposes.
Derivatives that do not qualify for hedge accounting are accounted for
as trading instruments.
Derivative financial instruments are recognised initially at fair value.
Subsequent to initial recognition, derivative financial instruments are
stated at fair value. The gain or loss on remeasurement to fair value
is recognised immediately in the Income Statement. However, where
derivatives qualify for hedge accounting, recognition of any resultant
gain or loss depends on the nature of the item being hedged.
Hedging
On entering into a hedging relationship, the Consolidated entity
formally designates and documents the hedge relationship and the
risk management objective and strategy for undertaking the hedge.
The documentation includes identification of the hedging instrument,
the hedged item or transaction, the nature of the risk being hedged
and how the entity will assess the hedging instrument’s effectiveness
in offsetting the exposure to changes in the hedged item’s fair value
or cash flows attributable to the hedged risk. Such hedges are
expected to be highly effective in achieving offsetting changes in fair
value or cash flows and are assessed on an ongoing basis to
determine that they actually have been highly effective throughout the
financial reporting periods for which they are designated.
Cash flow hedges
Changes in fair value of the derivative hedging instrument designated
as a cash flow hedge are recognised directly in equity to the extent
that the hedge is effective. To the extent that the hedge is ineffective,
changes in fair value are recognised in the income statement.
Amounts accumulated in equity are recycled in the income statement
in the periods when the hedged item affects profit or loss. When the
hedged item is a non-financial asset, the amount recognised in equity
is transferred to the carrying amount of the asset when it is
recognised.
If the hedged transaction is no longer expected to take place, then
the cumulative unrealised gain or loss recognised in equity is
recognised immediately in the Income Statement.
Hedge of monetary assets and liabilities
Hedge accounting is a not applied to derivative instruments that
economically hedge monetary assets and liabilities denominated in
foreign currencies. Changes in the fair value of such derivatives are
recognised in the income statement as part of foreign currency gains
and losses.
(xx) Cash and cash equivalents
For statement of cash flows presentation purposes, 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.
Incitec Pivot Limited
49
Notes to the Financial Statements
For the year ended 30 September 2008
An impairment loss is recognised whenever the carrying amount of
an asset or its cash generating unit exceeds its recoverable amount.
Impairment losses are recognised in the Income Statement.
Impairment losses recognised in respect of cash-generating units
(CGU’s) are allocated first to reduce the carrying amount of any
goodwill allocated to CGU’s and then, to reduce the carrying amount
of the other assets in the unit.
(xxiv) 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
Statement of Financial Position.
Cash flows are included in the Statement 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.
(xxv) Rounding of amounts
The Company is of a kind referred to in Class order 98/0100 (updated
by Class Order 05/641 and Class Order 06/51), issued by the
Australian Securities and Investments Commission, relating to the
''rounding off'' of amounts in the financial report. Amounts in the
financial report have been rounded off in accordance with that Class
Order to the nearest one hundred thousand dollars, or in certain
cases, the nearest one thousand dollars.
1. Significant accounting policies (continued)
(xxi) Share capital
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of new shares or options are shown in equity
as a deduction, net of tax, from the proceeds. Incremental costs
directly attributable to the issue of new shares or options for the
acquisition of a business are not included in the cost of the
acquisition as part of the purchase consideration. If the entity
reacquires its own equity instruments, eg as the result of a share buy-
back, those instruments are deducted from equity and the associated
shares are cancelled. No gain or loss is recognised in the profit or
loss and the consideration paid including any directly attributable
incremental costs (net of income taxes) is recognised directly in
equity.
(xxii) Fair value estimation
The fair value of financial assets and financial liabilities is estimated
for recognition and measurement or for disclosure purposes. The fair
value of financial instruments traded in active markets (such as
publicly traded derivatives, and trading and available-for-sale
securities) is based on quoted market prices at the balance sheet
date.The quoted market price used for financial assets held by the
Consolidated entity is the current bid price; the appropriate quoted
market price for financial liabilities is the current ask price. The fair
value of financial instruments that are not traded in an active market
(for example, over-the counter derivatives) is determined using
valuation techniques. The Consolidated entity uses a variety of
methods and makes assumptions that are based on market
conditions existing at each balance date. Quoted market prices or
dealer quotes for similar instruments are used for long-term debt
instruments held. Other techniques, such as estimated discounted
cash flows, are used to determine fair value for the remaining
financial instruments.
The fair value of interest-rate swaps is calculated as the present
value of the estimated future cash flows. The fair value of forward
exchange contracts is determined using forward exchange market
rates at the balance sheet date. The nominal value less estimated
credit adjustments of trade receivables and payables are assumed to
approximate their fair values. The fair value of financial liabilities is
estimated by discounting the future cash flows at the current market
interest rate that is available to the Consolidated entity for similar
financial instruments.
(xxiii) Impairment of assets
The carrying amount of the Consolidated entity’s assets excluding
defined benefit fund assets, inventories, deferred tax assets, goodwill
and indefinite life intangible assets is reviewed at each reporting date
to determine whether there is any evidence of impairment. If such
indication exists, the asset is tested for impairment by comparing its
recoverable amount to its carrying amount. Goodwill and indefinite life
intangible assets are tested for impairment annually.
The recoverable amount of an asset (excl. receivables – refer to 1
(viii)) is determined as the higher of fair value less cost to sell and
value in use. The recoverable amount is estimated for each individual
asset or where it is not possible to estimate for individual assets, it is
estimated for the cash generating unit to which the asset belongs.
A cash generating unit 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 cash generating unit being
no larger than a segment. In calculating recoverable amount, the
estimated future cash flows are discounted to their present values
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 are estimated for the asset in its present condition and
therefore do not include cash inflows or outflows that improve or
enhance the assets performance or that may arise from future
restructuring.
50
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2008
2. Critical accounting estimates and
judgements
Estimates and judgements are continually evaluated and are based
on historical experience and other factors, including expectation of
future events that may have a financial impact on the Consolidated
entity and that are believed to be reasonable under the
circumstances.
Critical accounting estimates and assumptions
Management makes estimates and assumptions concerning the
future. The resulting accounting estimates will, by definition, seldom
equal the related actual results. The estimates and assumptions that
have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year are
discussed below.
Management believes the following are the critical accounting policies
and estimates used in the preparation of the AIFRS financial
statements:
•
•
•
• provision for environmental and restructuring liabilities;
•
the testing for impairment of assets;
the testing for impairment of goodwill;
income tax related assumptions and estimates;
the calculation of annual superannuation costs and related assets and
liabilities;
valuation of assets and liabilities acquired in a business combination.
•
Impairment of assets
(i)
The determination of impairment for property, plant and equipment,
goodwill and other intangible assets involves the use of estimates
that include, but is not limited to, the cause, timing and amount of the
impairment. Impairment is based on a large number of factors, such
as changes in competitive positions, expectations of growth,
increased cost of capital, current replacement costs, increases in cost
of inputs, and other factors which may indicate impairment. An asset
is considered impaired when the recoverable amount is less than the
carrying value. Recoverable amount is determined as the higher of
fair value less costs to sell and value-in-use. In calculating value-in-
use, the cash flows include projections of cash inflows and outflows
from continuing use of the asset and cash flows associated with
disposal of the asset. The cash flows are estimated for the asset in its
current condition. In assessing value-in-use, the estimated cash flows
are 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 (CGU). The identification of
impairment indicators, the estimation of future cash flows and the
determination of fair values of assets (or groups of assets) requires
management to make significant estimates and judgements
concerning the identification of impairment indicators, earnings before
interest and tax, growth rates, applicable discount rates, useful lives
and residual values. Refer Note 1 (xxiii) for further details regarding
the accounting policy regarding ‘Impairment of assets’.
Management believes that this policy is critical to the financial
statements, particularly when evaluating the Consolidated entity’s
assets for impairment. Varying results from this impairment analysis
are possible due to the significant estimates and judgements
involved.
Impairment of goodwill
(ii)
The Consolidated entity tests annually whether goodwill has suffered
any impairment, in accordance with the accounting policy stated in
Note 1 (xiii). The recoverable amounts of CGU’s have been
determined based on value-in-use calculations. These calculations
require the use of assumptions, including forecast earnings before
interest and tax, growth rates and discount rates. Refer to Note 18 for
details of these assumptions and the potential impact of changes to
the assumptions.
The assumptions are management’s best estimates based on current
and forecast market conditions. Changes in economic and operating
conditions impacting these assumptions could result in additional
impairment charges in future periods. Management believes that this
policy is critical to the financial statements, particularly when
evaluating the Consolidated entity’s goodwill for impairment. Varying
results from this analysis are possible due to the significant estimates
and judgements involved in the Company’s evaluations.
Income taxes
(iii)
The Consolidated entity is subject to income taxes in Australia and
overseas jurisdictions. There are many transactions and calculations
undertaken during the ordinary course of business for which the
ultimate tax determination is uncertain. The Consolidated entity
recognises liabilities for anticipated tax audit issues based on
estimates of whether additional taxes will be due. Where the final tax
outcome of these matters is different from the amounts that were
initially recorded, such differences will impact the current and
deferred tax provisions in the period in which such determination is
made. In addition, deferred tax assets are recognised only to the
extent it is probable that future taxable profits will be available against
which the assets can be utilised. The Consolidated entity’s
assumptions regarding future realisation may change due to future
operating performance and other factors.
(iv) Environmental and Restructuring provisions
Provisions for environmental and restructuring/redundancy liabilities
are based on the Consolidated entity’s best estimate of the outflow of
resources required to settle commitments made by the Consolidated
entity. Where the outcome of these matters is different from the
amounts that were initially recorded, such differences will impact the
income statement in the period in which such determination is made.
Refer Note 1 (xvi) (i) & (vi) to the financial statements for further
details of the accounting policy relating to environmental and
restructuring provisions. Also refer to Note 23 for amounts recognised
for environmental and restructuring provisions.
(v) Retirement Benefit obligations
A liability or asset in respect of defined benefit superannuation plans
is recognised in the statement of financial position, and is measured
as the present value of the defined benefit obligation at the reporting
date plus unrecognised actuarial gains (less unrecognised actuarial
losses) less the fair value of the superannuation fund’s assets at that
date and any unrecognised past service cost. The present value of
the defined benefit obligation is based on expected future payments
which arise from membership of the fund to the reporting date,
calculated annually by independent actuaries. Consideration is given
to expected future wage and salary levels, experience of employee
departures and periods of service.
Expected future payments are discounted using market yields at the
reporting date on national government bonds with terms to maturity
and currency that match, as closely as possible, the estimated future
cash outflows.
Actuarial gains and losses arising from experience adjustments and
changes in actuarial assumptions are charged or credited to equity.
Refer Note 1 (xvi) (iv) to the financial statements for further details of
the accounting policy relating to retirement benefit obligations. Refer
Note 25 of the financial statements for details of the key assumptions
used in determining the accounting for these plans. The following are
the main categories of assumptions used:
• discount rate;
•
• expected return on plan assets; and
•
future salary increases.
rate of inflation;
(vi) Business Combinations
Fair valuing assets and liabilities acquired in a business combination,
involves making assumptions about the timing of cash inflows and
outflows, commodity prices, growth assumptions, discount rates and
cost of debt. Refer to Note 28 for details of acquisitions made during
the period.
Incitec Pivot Limited
51
Notes to the Financial Statements
For the year ended 30 September 2008
3. Segment report
(a) Description of segments
30 September 2007
During the year ended 30 September 2007, the Consolidated entity operated in one business segment, in which the principal activities
were the manufacture, trading and distribution of fertilisers and chemicals, in one geographic location, Australia.
30 September 2008
The acquisition of Dyno Nobel Limited resulted in the Consolidated entity operating with two distinct businesses with distinct reporting
structures. As a result, the Consolidated entity adopted business segments as its primary segment reporting format.
Business segments
The Consolidated entity comprises the following main business segments:
•
•
Fertilisers: the manufacture, trading and distribution of fertilisers and chemicals.
Explosives: the manufacturing and sale of industrial explosives and related products and services to mining, quarrying and
construction industries.
(b) Primary reporting format – business segments
Fertilisers
$mill
Explosives
$mill
adjustments Consolidated
$mill
$mill
Consolidation
External sales
Segment result- Gross margin
Profit before depreciation, amortisation, interest, related income tax
expense and individually material items
Depreciation and amortisation
Profit from ordinary activities before interest, related income tax
expense and individually material items
Individually material items before related income tax expense
Profit before interest and related income tax expense
Interest income
Financial expenses (excluding individually material items)
Profit before income tax
Income tax expense
Profit for the financial year
2,347.5
1,257.2
940.9
(40.3)
900.6
(17.2)
883.4
570.9
271.2
109.5
(30.0)
79.5
(21.0)
58.5
(0.2)
2,918.2
-
1,528.4
(11.0)
-
(11.0)
-
(11.0)
1,039.4
(70.3)
969.1
(38.2)
930.9
8.8
(89.4)
850.3
(236.0)
614.3
52
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2008
3. Segment report (continued)
Segment assets
Investment in associates accounted for using the equity method
Total assets
Segment liabilities
Total liabilities
Share of profits in associates
Acquisition of property, plant and equipment, intangible and other
non-current assets
Impairment losses - inventories
Impairment losses - trade receivables
Fertilisers
$mill
Explosives
$mill
adjustments Consolidated
$mill
$mill
Consolidation
2,175.1
-
2,175.1
1,578.7
1,578.7
5,737.2
311.2
6,048.4
3,497.9
3,497.9
-
6.7
80.6
3.1
1.6
146.8
(1.2)
0.3
(183.9)
-
(183.9)
(183.9)
(183.9)
-
-
-
-
7,728.4
311.2
8,039.6
4,892.7
4,892.7
6.7
227.4
1.9
1.9
(c) Geographical segments – secondary reporting segments
The fertiliser and explosives segments are managed on a worldwide basis, but operate in two principal geographical areas, Australia/Asia
and the Americas (including USA, Mexico and Canada).
In presenting information on the basis of geographical segments, segment revenue is based on geographical locations of customers.
Segment assets are based on the geographical location of the assets.
Australia/Asia
$mill
Americas
$mill
adjustments Consolidated
$mill
$mill
Consolidation
Revenue from external customers
Segment assets
Acquisition of property, plant and equipment, intangibles and other
non-current assets
2,468.0
2,994.9
450.4
4,917.4
(0.2)
(183.9)
2,918.2
7,728.4
196.0
31.4
-
227.4
Incitec Pivot Limited
53
Notes to the Financial Statements
For the year ended 30 September 2008
4. Revenue and other income
Revenue
External sales
Sales to wholly-owned controlled entities
Total revenue
Other income
Dividend income
external parties
wholly-owned controlled entities
Net foreign exchange gains
Other income
Gain from Sale & Leaseback of Big N® Assets
Gain on write back of acquisition provisions
Net gain on sale of property, plant and equipment
Other income
Financial income
Interest income from wholly-owned controlled entities
Interest income on bank deposits
Profit in cash-flow hedges transferred from equity
Total financial income
Total other and financial income
5. Expenses
Profit before income tax includes the following specific expenses:
Depreciation & Amortisation
depreciation
amortisation
Recoverable amount write-down
property, plant and equipment
Amounts set aside to provide for
impairment loss on trade and other receivables
employee entitlements
environmental liabilities
inventory losses and obsolescence
other provisions
restructuring
Lease payments – operating leases
Net foreign exchange losses
Research and development
Defined contribution superannuation expense
Defined benefit superannuation expense
Financial expenses
Write off of borrowing costs
Unwinding of discount on provisions and other payables
Interest expenses on financial liabilities
Interest expenses on financial liabilities with wholly-owned controlled entities
Total financial expenses
54
Incitec Pivot Limited
Consolidated
Company
Notes
2008
$mill
2007
$mill
2008
$mill
2007
$mill
(33)
(33)
(6)
(6)
(17)
(17)
(23)
(23)
(23)
(25)
(6)
(29)
2,918.2
-
2,918.2
1,373.2
-
1,373.2
1,158.9
41.2
1,200.1
-
-
2.2
3.6
-
-
2.9
8.7
-
7.3
1.5
8.8
17.5
60.8
9.5
70.3
0.4
0.4
1.9
11.2
5.0
1.9
21.1
17.7
36.2
-
3.4
7.1
2.1
5.8
16.2
73.2
-
95.2
3.0
-
-
3.2
13.5
2.4
7.2
29.3
-
5.3
-
5.3
34.6
34.1
2.0
36.1
0.2
0.2
0.3
7.2
4.2
0.3
-
3.4
29.4
0.4
0.3
2.3
1.9
-
1.5
32.6
-
34.1
-
190.3
11.0
5.4
-
-
3.0
209.7
2.2
6.2
1.5
9.9
219.6
19.9
2.4
22.3
-
-
1.6
10.5
4.8
3.1
20.8
5.3
19.3
-
0.7
5.3
1.3
5.8
1.4
55.0
5.4
67.6
868.0
22.5
890.5
3.0
198.3
-
3.4
-
-
7.2
211.9
-
5.3
-
5.3
217.2
14.3
2.0
16.3
-
-
0.3
7.2
4.2
0.3
-
3.4
16.1
0.1
0.3
2.3
1.9
-
0.9
32.6
-
33.5
Notes to the Financial Statements
For the year ended 30 September 2008
6.
Individually material items
Profit includes the following revenues and expenses whose
disclosure is relevant in explaining the financial performance
of the entity:
Consolidated
Business restructuring costs (1)
employee redundancies and allowances
restructuring and other direct costs
Total business restructuring
Business restructuring costs - Separation and Integration (2)
restructuring and other direct costs
Total business restructuring
Business restructuring costs - Dyno Nobel Integration(3)
restructuring and other direct costs
employee redundancies and allowances
Total business restructuring
Clean-up and closure costs (4)
environmental clean-up
Total Clean-up and closure costs
Other
write-off of borrowing costs(5)
gain from Sale and Leaseback of Big N® Assets(6)
gain on write back of acquisition provisions(7)
tax on gain of sale of subsidiary(8)
2008
Tax
$mill
Gross
$mill
Net
$mill
Gross
$mill
2007
Tax
$mill
Net
$mill
-
(0.8)
(0.8)
(3.7)
(3.7)
(16.3)
(11.6)
(27.9)
-
-
(5.8)
-
-
-
-
0.2
0.2
1.1
1.1
3.5
1.8
5.3
-
-
-
(0.6)
(0.6)
(2.6)
(2.6)
(12.8)
(9.8)
(22.6)
(2.2)
(0.8)
(3.0)
(6.3)
(6.3)
-
-
-
0.7
0.2
0.9
1.9
1.9
-
-
-
(1.5)
(0.6)
(2.1)
(4.4)
(4.4)
-
-
-
-
-
(2.7)
(2.7)
0.8
0.8
(1.9)
(1.9)
1.7
-
-
(13.0)
(4.1)
-
-
(13.0)
-
13.5
2.4
-
-
(4.0)
(0.7)
-
-
9.5
1.7
-
Total Other
(5.8)
(11.3)
(17.1)
15.9
(4.7)
11.2
Individually material items
(38.2)
(4.7)
(42.9)
3.9
(1.1)
2.8
(1) 2005 saw a significant rationalisation of the fertiliser industry, following which the Consolidated entity 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. During the financial year additional expenditure was recognised
in relation to further business efficiency projects.
(2) Additional expenditure was incurred during the financial year in relation to the separation from Orica Limited and
integration of Southern Cross Fertilisers Pty Limited, including the development of a Standard Operating Environment
(IT Platform).
(3) Following the acquisition of Dyno Nobel Limited, restructuring and integration expenditure has been incurred including
employee redundancy costs as well as IT expenditure in creating common networks and collaboration between sites.
(4) An extra provision was recognised during 2007 in relation to the costs associated with soil and groundwater remediation
and demolition works at the Wallaroo site.
(5) Direct transaction costs in relation to the Bridge loan Facility negotiated in order to acquire the remaining shares in Dyno
Nobel Limited during the year. As the Bridge loan Facility is replaced with new borrowings, its transactions costs are
required to be written off.
(6) As part of a restructuring of the Big N® business during 2007, a sale and leaseback transaction was completed on the
Big N® mobile fleet.
(7) During the previous year provisions recognised as part of the initial accounting for the Southern Cross Fertilisers Pty
Limited acquisition were written back and contingent assets not initially recognised were recovered.
(8) Tax on the sale of Dyno Nobel Nitrogen Inc by Dyno Nobel Holdings USA II to Dyno Nobel Holding ASA. This tax gain is
a result of the integration and tax restructuring activities following the acquisition of Dyno Nobel Limited during the
period.
Incitec Pivot Limited
55
Notes to the Financial Statements
For the year ended 30 September 2008
6.
Individually material items (continued)
Profit includes the following revenues and expenses whose
disclosure is relevant in explaining the financial performance
of the entity:
Company
Business restructuring costs (1)
employee redundancies and allowances
restructuring and other direct costs
Total business restructuring
Business restructuring costs - Separation and Integration (2)
restructuring and other direct costs
Total business restructuring
Business restructuring costs - Dyno Nobel Integration(3)
restructuring and other direct costs
Total business restructuring
Clean-up and closure costs (4)
environmental clean-up
Total Clean-up and closure costs
Other
write-off of borrowing costs(5)
Total Other
Individually material items
Gross
$mill
2008
Tax
$mill
Net
$mill
Gross
$mill
2007
Tax
$mill
Net
$mill
-
(0.8)
(0.8)
(3.7)
(3.7)
(7.0)
(7.0)
-
-
(5.8)
(5.8)
(17.3)
-
0.2
0.2
1.1
1.1
2.1
2.1
-
-
1.7
1.7
5.1
-
(0.6)
(0.6)
(2.6)
(2.6)
(4.9)
(4.9)
-
-
(4.1)
(4.1)
(2.2)
(0.8)
(3.0)
(6.3)
(6.3)
-
-
0.7
0.2
0.9
1.9
1.9
-
-
(1.5)
(0.6)
(2.1)
(4.4)
(4.4)
-
-
(2.7)
(2.7)
0.8
0.8
(1.9)
(1.9)
-
-
-
-
-
-
(12.2)
(12.0)
3.6
(8.4)
(1) 2005 saw a significant rationalisation of the fertiliser industry, following which the Company 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. During the financial year additional expenditure was recognised
in relation to further business efficiency projects.
(2) Additional expenditure was incurred during the financial year in relation to the separation from Orica Limited and
integration of Southern Cross Fertilisers Pty Limited, including the development of a Standard Operating Environment
(IT Platform).
(3) Following the acquisition of Dyno Nobel Limited, integration expenditure has been incurred including IT costs in creating
common networks and collaboration between sites.
(4) An extra provision was recognised during 2007 in relation to the costs associated with soil and groundwater remediation
and demolition works at the Wallaroo site.
(5) Direct transaction costs in relation to the Bridge loan Facility negotiated in order to acquire the remaining shares in Dyno
Nobel Limited during the financial year. As the Bridge loan Facility is replaced with new borrowings, its transactions
costs are required to be written off.
56
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2008
7. Auditor's remuneration
Total remuneration received, or due and receivable,
by the auditors for:
Audit services
Auditors of the Consolidated entity - KPMG Australia
Auditors of the Consolidated entity - KPMG Overseas
Non audit services
Auditors of the Consolidated entity - KPMG Australia
taxation services
other services
Consolidated
2008
$000
2007
$000
Company
2008
$000
2007
$000
997.8
1,248.0
2,245.8
-
5.0
5.0
2,250.8
487.0
-
487.0
40.0
-
40.0
527.0
997.8
-
997.8
-
5.0
5.0
1,002.8
487.0
-
487.0
21.0
-
21.0
508.0
From time to time, the auditors provide other services to the Company/Consolidated entity, which are subject to strict
corporate governance procedures adopted by the Consolidated entity which encompass the selection of service providers
and the setting of their remuneration. The Board Audit and Risk Management Committee must approve individual non
audit services provided by KPMG above a value of $20,000, as well as where the aggregate amount exceeds 15% of the
annual KPMG audit fee.
Incitec Pivot Limited
57
Notes to the Financial Statements
For the year ended 30 September 2008
8. Income tax expense
Income tax expense/(benefit)
(a)
Current tax
Current year
Over provision in prior years
Deferred tax
Origination and reversal of temporary differences
Total income tax expense
(b) Numerical reconciliation of income tax expense
to prima facie tax payable
Profit before income tax
Income tax expense attributable to profit before income tax
Tax at the Australian tax rate of 30% (2007 at 30%)
on profit before income tax
Tax effect of amounts which are not deductible/(taxable)
in calculating taxable income:
Depreciation and amortisation
Profit on sale of property, plant and equipment
Research and development incentive
Dividends from wholly-owned entities
Debt forgiveness within wholly-owned group
Interest deductible in domestic and foreign tax jurisdictions
Share-based payments
Lease payments (net)
Capital gains
Capital losses not previously recognised brought to account
Valuation allowances
Sundry items
Difference in overseas tax rates
Over provision in prior years
Income tax expense attributable to profit
(c) Amounts recognised directly in equity
Aggregate current and deferred tax arising in the reporting period
and not recognised in net profit or loss but directly debited or
credited to equity
Net deferred tax - debited/(credited) directly to equity
Consolidated
Company
2008
$mill
2007
$mill
2008
$mill
2007
$mill
230.6
(8.6)
222.0
14.0
236.0
54.9
(3.4)
51.5
30.9
82.4
23.8
(0.6)
23.2
(21.8)
1.4
(20.5)
(1.8)
(22.3)
23.1
0.8
850.3
287.7
195.0
204.2
255.1
86.3
58.5
61.3
0.8
-
(3.0)
-
-
(4.9)
0.2
(6.1)
11.8
(2.9)
(2.7)
(2.8)
245.5
(0.9)
(8.6)
236.0
0.3
0.1
(1.9)
-
-
-
0.6
-
-
-
-
0.4
85.8
-
(3.4)
82.4
0.1
0.2
(0.7)
(57.1)
-
-
0.8
-
-
-
-
0.2
2.0
-
(0.6)
1.4
0.1
0.1
(0.7)
(59.5)
0.3
-
0.6
-
-
-
-
0.4
2.6
-
(1.8)
0.8
(22.2)
(22.2)
8.8
8.8
(11.1)
(11.1)
8.8
8.8
58
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2008
9. Earnings per share (EPS)
Basic earnings per share
including individually material items
excluding individually material items
Diluted earnings per share
including individually material items
excluding individually material items
Weighted average number of ordinary shares used in the calculation of basic and diluted
earnings per share (1) (2) (3)
Earnings used in the calculation of basic and diluted earnings per share including individually
material items
Consolidated
2008
Cents
per share
2007
Cents
per share (2)
Notes
57.4
61.4
57.4
61.4
20.4
20.1
20.4
20.1
Number
Number
1,069,506,540
1,008,477,700
$mill
$mill
614.3
205.3
Reconciliation of earnings used in the calculation of basic and diluted earnings per
share excluding individually material items
Profit for the financial year
(Deduct)/Add back individually material items after income tax
Earnings used in calculation of basic and diluted EPS excluding individually material items
(6)
614.3
42.9
657.2
205.3
(2.8)
202.5
(1) 10,437,643 shares were issued to the shareholders of Dyno Nobel Limited on 16 June 2008 as part of the purchase
consideration under the schemes’ of arrangement under which Incitec Pivot US Holdings Pty Limited acquired all the
shares in Dyno Nobel Limited that the Incitec Pivot group did not already own.
In September 2008 shareholders approved a share split whereby every fully paid ordinary share was split into 20 fully
paid ordinary shares. Share numbers in the comparative period have been restated following the share split
undertaken.
(2)
(3) There are no potential ordinary shares.
Incitec Pivot Limited
59
Notes to the Financial Statements
For the year ended 30 September 2008
10. Cash and cash equivalents
Cash at bank and on hand
Deposits at call
external
Bank Facilities
Committed bank overdraft facilities available
Amount of facilities unused
Commited standby and loan facilities available
Amount of facilities unused
Notes
(29)
Consolidated
2008
$mill
2007
$mill
Company
2008
$mill
2007
$mill
114.6
365.1
479.7
42.6
31.6
2,480.5
-
14.4
203.9
218.3
10.0
10.0
835.0
205.0
35.3
4.1
365.1
400.4
203.9
208.0
10.0
10.0
2,147.1
-
10.0
10.0
835.0
205.0
Committed bank overdraft facilities are provided to the Consolidated entity both in Australia and internationally. These
facilities are used as a contingency and interest is payable at a Base Rate plus a margin.
During the year the Company entered into a Bridge Facility to finance the acquisition of Dyno Nobel Limited. The Company
is entitled to draw down against the facility up to the amount unused within the Consolidated entity. The $2.4 billion facility
matures in May 2009. It is a multicurrency facility with a portion being revolving which is available to fund the seasonal
trade working capital requirements of the Consolidated entity. Interest is payable at BBSY/LIBOR plus a margin.
In addition, the Company executed a long term unsecured syndicated facility on 18 September 2008 of $1.68 billion, which
will be used to repay a portion of the Bridge Facility. This is a multicurrency facility and matures in September 2011. The
facility does not result in additional borrowing capacity as all amounts drawn must be used to repay the Bridge Facility.
Interest is payable at BBSY/LIBOR plus a margin. The facility is revolving whereby repayments can be redrawn at the
Company’s discretion.
60
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2008
11. Trade and other receivables
Current
Trade debtors
external
receivables from jointly controlled entities
Less impairment losses
external
Sundry debtors/loans
external
receivables from jointly controlled entities
wholly-owned controlled entities
Less impairment losses
external
Non-current
Sundry debtors/loans
external
Less impairment losses
external
12.
Inventories
Raw materials and stores at cost
Work in progress at cost
Finished goods
At cost
Less provision for inventory losses and obsolescence
Finished goods
13. Other assets
Current
Prepayments
Non-current
Prepayments
14. Other financial assets
Current
Investments available for sale - listed shares
Non-current
Investments in controlled entities
Unlisted shares at cost
Derivative financial instruments - cash flow hedges
Interest rate swaps
Forward exchange contracts
Consolidated
Company
Notes
2008
$mill
2007
$mill
2008
$mill
2007
$mill
(32)
(32)
(33)
(32)
455.9
47.9
(13.3)
490.5
132.2
2.6
-
-
134.8
625.3
2.4
(0.1)
2.3
89.1
60.8
539.2
(12.5)
526.7
676.6
51.7
51.7
0.1
0.1
148.9
-
(0.5)
148.4
19.0
-
-
-
19.0
167.4
0.6
(0.2)
0.4
15.3
-
208.5
(2.1)
206.4
221.7
4.5
4.5
1.2
1.2
161.3
0.3
(1.8)
159.8
30.7
-
166.5
-
197.2
357.0
0.3
(0.1)
0.2
8.5
-
463.0
(3.0)
460.0
468.5
37.9
37.9
0.1
0.1
69.8
-
(0.5)
69.3
17.7
-
176.5
-
194.2
263.5
0.6
(0.2)
0.4
12.1
-
215.6
(2.1)
213.5
225.6
3.1
3.1
1.2
1.2
30.3
30.3
292.1
292.1
30.3
30.3
292.1
292.1
(36)
(32)
(32)
-
-
0.6
0.6
-
2,896.7
694.5
1.6
-
1.6
-
0.6
2,897.3
1.6
-
696.1
Sensitivity analysis – equity price risk
Consolidated / Company
All of the equity investments are listed on the Australian Securities Exchange. A 5% increase in the share prices of these
stocks at the reporting date would have increased equity (pre-tax) by $1.5m (2007 - $14.6m); an equal decrease would
have decreased equity (pre-tax) by $1.5m (2007 - $14.6m).
Incitec Pivot Limited
61
Notes to the Financial Statements
For the year ended 30 September 2008
15. Fixed assets classified as held for sale
Land and buildings held for sale
4.8
5.0
2.0
2.1
Fixed assets classified as held for sale consist of various sites which are either vacant land or sites which the
Company/Consolidated entity has already exited or is planning to exit within the next 12 months.
Consolidated
2008
$mill
2007
$mill
Company
2008
$mill
2007
$mill
16. Investments accounted for using the equity method
Name of Entity
Principal Activity
Ownership
interest
Country of
incorporation
Company
Incitec Pivot Limited
Jointly Controlled Entities
Alpha Dyno Nobel
Delivery of explosives and related products
Boren Explosives Co. Inc.
Delivery of explosives and related products
Buckley Powder Company
Delivery of explosives and related products
IRECO Midwest Inc.
Delivery of explosives and related products
Wampum Hardware Company
Delivery of explosives and related products
Pepin-IRECO, Inc
Delivery of explosives and related products
Midland Powder Company
Delivery of explosives and related products
Mine Equipment & Mill Supply
Co.
Delivery of explosives and related products
Controlled Explosives Inc.
Delivery of explosives and related products
Delivery of explosives and related products
Australia
USA
USA
USA
USA
USA
USA
USA
USA
USA
USA
50%
50%
51%
50%
50%
50%
50%
50%
50%
50%
Western Explosives Systems
Company
DetNet Detonadores
Electronico Limitada
Delivery of explosives and related products
50%
Chile
Polar Explosives Ltd
Delivery of explosives and related products
Newfoundland Hard-Rok Inc.
Delivery of explosives and related products
Dyno Labrador Inc.
Delivery of explosives and related products
84%
50%
50%
JASA Distribution Companies
Distribution of explosives and related products
50%
Denesoline Western Explosives
Inc.
Delivery of explosives and related products
49%
Canada
Canada
Canada
Mexico
Canada
1
1
2
DetNet South Africa (Pty) Ltd
Development, manufacture and supply of
50%
South Africa
electronic detonators
DNEX Mexico
Mexican investment holding company
51%
Mexico
1
1) Refer to footnote description on next page.
2) Refer to footnote description on next page.
62
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2008
16. Investments accounted for using the equity method (continued)
Name of Entity
Principal Activity
Queensland Nitrates Pty Ltd
Production of ammonium nitrate
Queensland Nitrates Management
Pty Ltd
Management services
DetNet International Limited
Distribution of electronic detonators
Distribution of explosives and related products
Explosivos De La Region
Lagunera
Explosivos De La Region
Central
Ownership
interest
Country of
incorporation
50%
50%
50%
49%
Australia
Australia
3,7
3
Ireland
Mexico
Distribution of explosives and related products
49%
Mexico
Nitroexplosivos
Distribution of explosives and related products
Explosivos Y Servicios Para La
Construccion
Distribution of explosives and related products
Sasol Dyno Nobel (Pty) Ltd
Distribution of detonators
Delivery of explosives and related products
49%
49%
50%
50%
Mexico
Mexico
South Africa
Turkey
3
5
Manufacture of explosive accessories
50%
Malaysia
Nitro Mak Makine Kimya – Nitro
Nobel Sanayi Anonim Sirketi
Tenaga Kimia Ensign-Bickford Sdn
Bhd
Associates
Fabchem China Ltd
Manufacture of commercial explosives
Valley Hydraulics Ltd
Delivery of explosives and related products
Apex Construction Specialities Ltd Delivery of explosives and related products
Warex Corporation
Delivery of explosives and related products
Warex LLC
Delivery of explosives and related products
St Lawrence Explosives Inc.
Delivery of explosives and related products
30%
25%
25%
25%
25%
33%
Singapore
4,6
Canada
Canada
USA
USA
Canada
1) Due to the contractual and decision making arrangement between the shareholders of the entities, despite the legal ownership
exceeding 50%, these entities are not considered to be subsidiaries.
2) Due to legal requirements in the Canadian Northwest Territories, the Group cannot own more than 49% of the shares in
Denesoline West Explosives Inc. However, under the joint agreement, the Group is entitled to 95% of the assets and profit of
Denesoline Western Explosives Inc.
3) These jointly controlled entities have a 30 June year end. For the purpose of applying the equity method of accounting, the
financial information through to 30 September 2008 has been used.
4) Fabchem China Ltd has a 31 March year end. For the purpose of applying the equity method of accounting, the financial
information through to 30 September 2008 has been used.
5) During 2008 an interest in this entity was acquired. Refer to note 28.
6) Fair value of the Company’s/Consolidated entity’s share at 30 September 2008 was A$17,386,754.
7) No dividend was received from Queensland Nitrates Pty Limited (QNP) during the period to 30 September 2008. This is a
consequence of QNP’s desire to repay interest on shareholder loans as priority, and the nature of loan covenants within the
existing external debt facilities. The original external debt facility was entered in February 1998 to support the construction of
QNP’s ammonia nitrate plant. This debt facility includes covenants that require considerable cash to be retained at all times (via
a debt service reserve account) and do not fully contemplate the impact of planned maintenance shutdowns. These covenants
temporarily limit QNP’s ability to pay dividends to shareholders. The debt facility expires in May 2010 and earlier re-financing
may be considered subject to market conditions.
Incitec Pivot Limited
63
Notes to the Financial Statements
For the year ended 30 September 2008
16. Investments accounted for using the equity method (continued)
Summarised financial information of jointly controlled entities and associates:
Consolidated
2008
$mill
2007
$mill
Notes
Current assets
Non-current assets
Total Assets
Current liabilities
Non-current liabilities
Total Liabilities
Net Assets
Revenue
Net Profit
Share of jointly controlled entities and associates' profit and loss:
Share of jointly controlled entities profit before tax
Share of jointly controlled entities income tax expense
Share of jointly controlled entities and associates' profit
(29)
Carrying amount of investments in jointly controlled entities and associates
Carrying amount at the beginning of the year
Share of Joint ventures acquired during the year
Addition of new investments
Share of net profit from jointly controlled entities and associates
Less: dividends received/receivable
Movement in foreign currency translation reserve of jointly controlled entities and associates
Carrying amount at end of the year
340.3
296.9
637.2
238.3
121.3
359.6
277.6
283.2
20.0
9.6
(2.9)
6.7
-
227.5
46.2
273.7
6.7
(0.3)
31.1
311.2
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The Consolidated entity’s share of the capital commitments, other expenditures and contingent liabilities are disclosed in
Notes 30 and 31.
64
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2008
17. Property, plant and equipment
Freehold land
and buildings
$mill
Machinery, plant
and equipment
$mill
Notes
Consolidated
At 1 October 2006
Cost
Accumulated depreciation
Construction in progress
Net book amount
Year ended 30 September 2007
Opening net book amount
Reclassification (to)/from fixed assets classified as held for sale
Additions
Disposals
Depreciation charge
Impairment of assets
Reclassification
Closing net book amount
(5)
At 1 October 2007
Cost
Accumulated depreciation
Construction in progress
Net book amount
Year ended 30 September 2008
Opening net book amount
Acquisition of business
Reclassification from fixed assets classified as held for sale
Additions
Disposals
Depreciation charge
Impairment of assets
Reclassification
Foreign exchange movement
Closing net book amount
(5)
(5)
At 30 September 2008
Cost
Accumulated depreciation
Construction in progress
Net book amount
242.8
(104.5)
0.6
138.9
138.9
(2.2)
14.0
(0.7)
(6.4)
-
(0.1)
143.5
251.0
(107.5)
-
143.5
143.5
174.0
0.2
12.6
(4.3)
(8.4)
(0.3)
(7.7)
20.9
330.5
438.9
(113.5)
5.1
330.5
557.4
(278.1)
22.9
302.2
302.2
0.1
93.9
(9.8)
(27.7)
(0.2)
0.1
358.6
620.5
(287.3)
25.4
358.6
358.6
740.4
-
212.7
(6.8)
(52.4)
(0.1)
7.7
98.6
1,358.7
1,304.0
(302.2)
356.9
1,358.7
Total
$mill
800.2
(382.6)
23.5
441.1
441.1
(2.1)
107.9
(10.5)
(34.1)
(0.2)
-
502.1
871.5
(394.8)
25.4
502.1
502.1
914.4
0.2
225.3
(11.1)
(60.8)
(0.4)
-
119.5
1,689.2
1,742.9
(415.7)
362.0
1,689.2
Incitec Pivot Limited
65
Notes to the Financial Statements
For the year ended 30 September 2008
17. Property, plant and equipment (continued)
Freehold land
and buildings
$mill
Machinery, plant
and equipment
$mill
Notes
Company
At 1 October 2006
Cost
Accumulated depreciation
Construction in progress
Net book amount
Year ended 30 September 2007
Opening net book amount
Reclassifications to fixed assets classified as held for sale
Additions
Disposals
Depreciation charge
Movement in allocated assets - transfer to related party
Closing net book amount
At 1 October 2007
Cost
Accumulated depreciation
Construction in progress
Net book amount
Year ended 30 September 2008
Opening net book amount
Reclassifications from fixed assets classified as held for sale
Additions
Disposals
Depreciation charge
Movement in allocated assets - transfer to related party
Closing net book amount
(5)
(5)
At 30 September 2008
Cost
Accumulated depreciation
Construction in progress
Net book amount
71.9
(32.6)
-
39.3
39.3
(2.1)
2.0
(0.7)
(2.2)
0.8
37.1
71.5
(34.4)
-
37.1
37.1
0.2
6.7
(1.0)
(2.9)
0.6
40.7
76.1
(36.6)
1.2
40.7
135.2
(74.9)
27.3
87.6
87.6
-
62.5
(0.6)
(12.1)
4.0
141.4
206.7
(80.5)
15.2
141.4
141.4
-
46.5
(0.5)
(17.0)
3.2
173.6
237.1
(90.1)
26.6
173.6
Total
$mill
207.1
(107.5)
27.3
126.9
126.9
(2.1)
64.5
(1.3)
(14.3)
4.8
178.5
278.2
(114.9)
15.2
178.5
178.5
0.2
53.2
(1.5)
(19.9)
3.8
214.3
313.2
(126.7)
27.8
214.3
Non-current assets impairments
During the year ended 30 September 2008, minor impairment of assets occurred to the value of $0.4 million as a result of
the Consolidated entity’s fixed asset verification procedures.
During the year ended 30 September 2007, the Consolidated entity recorded impairments of property, plant and equipment
to the value of $0.2 million relating to additional assets written off as a result of the closure of the Kooragang Island
manufacturing plant during 2006.
Change in estimates
During the 2008 financial year, the asset lives of the Consolidated entity’s manufacturing assets were reviewed. From this
review, the asset life of the Phosphate Hill and Mt Isa sites was increased from 2030 to 2050. This amounted to a
reduction in the depreciation expense of $1.5 million in the current financial year and a reduction of $3.0 million per year in
future financial years.
During the 2007 financial year, the asset lives of the Consolidated entity’s manufacturing assets were reviewed. From this
review, the asset life of the Gibson Island site was increased from 2017 to 2027. This amounted to a reduction in the
depreciation expense of $1.6 million in the previous financial year and a reduction of $3.2 million per annum in current and
future financial years.
Capitalised interest
During the period interest of $2.1 million was capitalised relating to interest bearing liabilities used specifically to fund
expansion projects.
66
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2008
18.
Intangible assets
Consolidated
Software
Goodwill
At 1 October 2006
Cost
Accumulated amortisation
Net book amount
Year ended 30 September 2007
Opening net book amount
Additions
Amortisation charge
Closing net book amount
At 1 October 2007
Cost
Accumulated amortisation
Net book amount
Year ended 30 September 2008
Opening net book amount
Acquisition of business
Additions
Amortisation charge
Foreign exchange movement
Closing net book amount
At 30 September 2008
Cost
Accumulated amortisation
Net book amount
$mill
13.2
(6.6)
6.6
6.6
2.3
(2.0)
6.9
15.5
(8.6)
6.9
6.9
27.6
2.1
(4.2)
3.7
36.1
49.1
(13.0)
36.1
$mill
183.8
-
183.8
183.8
-
-
183.8
183.8
-
183.8
183.8
2,663.0
-
-
454.6
3,301.4
3,301.4
-
3,301.4
Patents,
Trademarks &
Customer
Contracts Brand Name
$mill
$mill
-
-
-
-
-
-
-
-
-
-
-
225.0
-
(5.3)
24.0
243.7
250.1
(6.4)
243.7
-
-
-
-
-
-
-
-
-
-
-
241.5
-
-
33.5
275.0
275.0
-
275.0
Other
$mill
5.9
(0.1)
5.8
5.8
-
(2.8)
3.0
5.9
(2.9)
3.0
3.0
-
-
(3.0)
-
-
5.9
(5.9)
-
Total
$mill
202.9
(6.7)
196.2
196.2
2.3
(4.8)
193.7
205.2
(11.5)
193.7
193.7
3,157.1
2.1
(12.5)
515.8
3,856.2
3,881.5
(25.3)
3,856.2
Incitec Pivot Limited
67
Notes to the Financial Statements
For the year ended 30 September 2008
18.
Intangible assets (continued)
Company
Software
Goodwill
At 1 October 2006
Cost
Accumulated amortisation
Net book amount
Year ended 30 September 2007
Opening net book amount
Additions
Amortisation charge
Closing net book amount
At 1 October 2007
Cost
Accumulated amortisation
Net book amount
Year ended 30 September 2008
Opening net book amount
Additions
Amortisation charge
Closing net book amount
At 30 September 2008
Cost
Accumulated amortisation
Net book amount
$mill
13.1
(6.6)
6.5
6.5
2.5
(2.0)
7.0
15.6
(8.6)
7.0
7.0
2.0
(2.4)
6.6
17.6
(11.0)
6.6
$mill
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Patents,
Trademarks &
Customer
Contracts Brand Name
$mill
$mill
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Other
$mill
5.6
-
5.6
5.6
-
(2.7)
2.9
5.6
(2.7)
2.9
2.9
-
(2.9)
-
5.6
(5.6)
-
Total
$mill
18.7
(6.6)
12.1
12.1
2.5
(4.7)
9.9
21.2
(11.3)
9.9
9.9
2.0
(5.3)
6.6
23.2
(16.6)
6.6
(a) Allocation of goodwill
The Consolidated entity’s business segments as identified in Note 3 forms the basis of allocating goodwill. The goodwill
resulting from the Dyno Nobel Limited acquisition ($2,663.0 million) was provisionally allocated to the Explosives business
unit and provisionally tested for impairment at 30 September 2008. Previously recognised goodwill ($183.8 million) is
allocated to the Fertilisers business unit.
(b) Impairment testing
The carrying amount of intangible assets with indefinite lives are tested for impairment annually at 30 September and all
other assets are tested when there is an indicator that an asset may be impaired. If an asset is deemed to be impaired it is
written down to its recoverable amount. The recoverable amount is based on a value in use calculation using cash flow
projections based on financial forecasts for a period of at least three years as approved by management.
(c) Key assumptions used for value-in-use calculations
Key assumptions used to test for impairment, include:
(cid:121)
(cid:121)
(cid:121)
Management determined growth in budgeted gross margin based on past performance and its expectations for the future.
discount rate of 8.5% - 10.2% representing a market based weighted average cost of capital;
growth rate of 2% - 5% up to 5 years and 2% thereafter; and
growth in budgeted gross margin rate of 2% - 5% for up to 5 years and 2% thereafter.
68
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2008
19. Deferred tax assets
The balance comprises temporary differences attributable to:
Impairment of trade and other receivables
Employee entitlements provision
Retirement benefit obligations
Restructuring and rationalisation provision
Environmental provision
Other provisions
Inventories
Property, plant and equipment
Foreign exchange losses
Share buy-back expenses
Share issue expenses
Cash flow hedges
Unfavourable supplier contracts
Tax losses
Other
Deferred tax assets
Consolidated
2008
$mill
2007
$mill
Company
2008
$mill
2007
$mill
Notes
3.8
17.4
18.7
5.2
22.7
20.1
5.1
25.1
13.1
1.1
2.0
4.2
178.5
14.0
26.5
357.5
0.2
6.5
-
5.8
16.5
-
0.6
18.7
-
1.7
-
2.7
19.4
-
3.3
75.4
0.6
7.3
0.7
4.8
10.0
6.2
0.9
-
13.1
1.1
2.0
4.2
-
-
4.0
54.9
0.2
6.4
-
5.8
10.1
-
0.6
0.1
-
1.7
-
2.7
-
-
3.3
30.9
Set-off of deferred tax liabilities pursuant to set-off provisions (24)
(45.9)
(46.8)
(21.0)
(30.0)
Net deferred tax assets
311.6
28.6
33.9
0.9
Movements:
Opening balance at 1 October
Credited/(charged) to the income statements
Credited to equity
Acquisition of subsidiaries
Foreign exchange movement
Adjustments in respect of prior years
Closing balance at 30 September
75.4
1.8
16.5
247.9
15.2
0.7
357.5
93.8
(20.3)
2.1
-
-
(0.2)
75.4
30.9
19.1
4.9
-
-
-
54.9
36.3
(7.5)
2.1
-
-
-
30.9
Incitec Pivot Limited
69
Notes to the Financial Statements
For the year ended 30 September 2008
20. Trade and other payables
Current
Trade creditors
external
wholly-owned controlled entity
Sundry creditors and accrued charges
external
unfavourable sales / supplier contracts
Non-current
Sundry creditors and accrued charges
wholly-owned controlled entity
unfavourable sales / supplier contracts
Consolidated
Company
Notes
2008
$mill
2007
$mill
2008
$mill
2007
$mill
(33)
785.6
-
785.6
249.7
96.7
346.4
1,132.0
-
474.5
474.5
248.9
-
248.9
20.5
12.0
32.5
281.4
-
52.8
52.8
369.6
623.0
992.6
176.7
-
176.7
1,169.3
337.7
-
337.7
215.8
313.6
529.4
21.7
-
21.7
551.1
-
-
-
Unfavourable contracts
Unfavourable contracts were recognised as part of the Southern Cross Fertilisers Pty Ltd acquisition during 2006 and the
Dyno Nobel Limited acquisition in the current financial year. The liability is measured at acquisition date based on the
unfavourable difference between the market rate and contractual rate with suppliers and customers and multiplying it by
the volumes required to be purchased / supplied that are specified in the contracts. Where contract terms are greater than
one year, cash flows are discounted by applying a pre tax interest rate equivalent to the Consolidated entity’s cost of debt.
The liability is amortised based on contracted volumes determined in measuring the liability at acquisition date over the life
of the contracts.
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 62 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.
70
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2008
Consolidated
Company
Notes
2008
$mill
2007
$mill
2008
$mill
2007
$mill
3.8
11.0
66.2
2,147.1
-
10.7
2,238.8
4.0
267.2
-
-
-
-
-
-
-
-
-
(32)
(32)
-
271.2
630.0
630.0
-
-
-
170.0
10.5
-
180.5
-
-
-
-
-
-
-
-
-
-
-
-
-
630.0
630.0
21.
Interest bearing liabilities
Current
Secured
bank loans
bank overdrafts
other loans
external- participation facility
Unsecured
bank loans- bridge facility
other loans
wholly-owned controlled entity
joint ventures and associates (1)
Non-current
Secured
bank loans
other loans
external - participation facility
Unsecured
other loans
external - term facility
Significant terms and conditions
Interest expense is recognised as interest accrues.
Bank Facilities
Full details of bank facilities are set in note 10.
Bridge Facility
The Bridge Facility of $2.4 billion matures in May 2009 and is fully repayable at the maturity date. Drawings can be made
in both AUD and USD at the discretion of the Company/Consolidated entity. Interest is payable on a floating rate basis and
is calculated using the base rate for the currency borrowed plus a margin. Margins increase after 6 and 9 months to a
maximum margin payable of 0.75% per annum. The majority of the facility is non-revolving in nature, with any repayments
resulting in an equivalent cancellation of the facility limit.
Refinancing of the Bridge Facility
- Syndicated Facility
The Company entered into a long term unsecured syndicated facility of $1.68 billion on 18 September 2008, which will be
used to repay a portion of the Bridge Facility. This is a multicurrency facility and matures in September 2011. The facility
does not result in additional borrowing capacity, as all amounts drawn must be used to repay the Bridge Facility. Interest is
payable at BBSY/LIBOR plus a margin. The facility is revolving whereby repayments can be redrawn at the
Company’s/Consolidated entity’s discretion.
- Participation Facility
During the period the Company/Consolidated entity entered into a Participation Facility which matures in August 2013. The
carrying amount of the the facility is $333.4m and is secured against certain assets operated by Southern Cross Fertilisers
Pty Ltd . The facility is denominated in AUD and has a fixed nominal interest rate of 8.93% for the term of the facility.
- The balance of the Bridge Facility will be paid down by other facilities/funding to be obtained before the due date.
(1) Loans from joint ventures and associates relate to unsecured loans from joint ventures in Wampum Hardware Co and
Alpha Dyno Nobel Inc.
Incitec Pivot Limited
71
Notes to the Financial Statements
For the year ended 30 September 2008
22. Other financial liabilities
Current
Derivative financial instruments
forward exchange contract
option contracts
forward commodity contracts
23. Provisions
Current
Employee entitlements
Restructuring and rationalisation
Environmental
Asset retirement obligation
Other (including onerous contracts)
Non-current
Employee entitlements
Restructuring and rationalisation
Environmental
Asset retirement obligation
Other (including onerous contracts)
Aggregate employee entitlements
Current
Non-current
Notes
(32)
(32)
Consolidated
2008
$mill
2007
$mill
Company
2008
$mill
2007
$mill
-
13.8
2.4
16.2
24.5
13.6
31.5
3.1
15.9
88.6
13.3
10.1
46.2
5.2
16.0
90.8
24.5
13.3
37.8
9.1
-
-
9.1
11.3
9.2
10.7
-
-
31.2
10.2
10.2
44.3
-
-
64.7
11.3
10.2
21.5
-
13.8
-
13.8
12.5
5.7
15.5
-
14.0
47.7
11.9
10.1
17.7
-
6.6
46.3
12.5
11.9
24.4
9.1
-
-
9.1
11.3
9.2
10.7
-
-
31.2
10.2
10.2
23.1
-
-
43.5
11.3
10.2
21.5
The present value of Company 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 (risk free rate)
Settlement term
4.25% + age based scale
6.08%
10 years
Employees at year end
Full time equivalent
2008
Number
5,134
2007
Number
964
2008
Number
1,062
2007
Number
964
72
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2008
23. Provisions (continued)
Reconciliations
Reconciliations of the carrying amounts of provisions from the beginning to the end of the current financial year are set out below.
Current Provision - Dividends
Carrying amount at the beginning of the financial year
Provisions made during the year
Payments made during the year
Carrying amount at the end of the financial year
Current Provision - Restructuring and rationalisation
Carrying amount at the beginning of the financial year
Additions through acquisition of entities
Provisions made during the year
Transfers
Payments made during the year
Provisions written back during the year
Foreign currency exchange differences
Carrying amount at the end of the financial year
Current Provision - Environmental
Carrying amount at the beginning of the financial year
Additions through acquisition of entities
Provisions made during the year
Provisions written back during the year
Transfers
Payments made during the year
Foreign currency exchange differences
Carrying amount at the end of the financial year
Current Provision - Asset retirement obligations
Carrying amount at the beginning of the financial year
Additions through acquisition of entities
Foreign currency exchange differences
Carrying amount at the end of the financial year
Current Provision - Other
Carrying amount at the beginning of the financial year
Additions through acquisition of entities
Provisions made during the year
Payments made during the year
Foreign currency exchange differences
Carrying amount at the end of the financial year
See Note 1(xvi) for further details on each provision noted above.
Consolidated Company
Notes
$mill
$mill
(27)
(5)
(5)
(5)
-
219.3
(219.3)
-
-
219.3
(219.3)
-
9.2
7.0
17.7
(0.3)
(21.7)
(0.1)
1.8
13.6
10.7
13.1
3.0
(0.6)
9.4
(6.3)
2.2
31.5
-
2.7
0.4
3.1
-
1.4
14.4
(0.2)
0.3
15.9
9.2
-
5.3
(0.3)
(8.4)
(0.1)
-
5.7
10.7
-
3.0
(0.6)
8.1
(5.7)
-
15.5
-
-
-
-
-
-
14.2
(0.2)
-
14.0
Incitec Pivot Limited
73
Notes to the Financial Statements
For the year ended 30 September 2008
23. Provisions (continued)
Reconciliations (continued)
Non-Current Provision - Restructuring and rationalisation
Carrying amount at the beginning of the financial year
Unwinding of discount
Carrying amount at the end of the financial year
Non-Current Provision - Environmental
Carrying amount at the beginning of the financial year
Additions through acquisition of entities
Provisions made during the year
Provisions written back during the year
Transfers
Unwinding of discount
Foreign currency exchange differences
Carrying amount at the end of the financial year
Non-Current Provision - Asset retirement obligations
Carrying amount at the beginning of the financial year
Additions through acquisition of entities
Unwinding of discount
Foreign currency exchange differences
Carrying amount at the end of the financial year
Non-Current Provision - Other
Carrying amount at the beginning of the financial year
Additions through acquisition of entities
Provisions made during the year
Foreign currency exchange differences
Carrying amount at the end of the financial year
See Note 1(xvi) for further details on each provision noted above.
Consolidated Company
Notes
$mill
$mill
10.2
(0.1)
10.1
44.3
20.7
2.0
(12.2)
(9.1)
(3.1)
3.6
46.2
-
4.2
0.2
0.8
5.2
-
7.8
6.7
1.5
16.0
10.2
(0.1)
10.1
23.1
-
1.8
(0.2)
(7.8)
0.8
-
17.7
-
-
-
-
-
-
-
6.6
-
6.6
(5)
(5)
74
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2008
24. Deferred tax liabilities
The balance comprises temporary differences attributable to:
Inventories
Property, plant and equipment
Intangible assets
Financial assets at fair value
Cash flow hedges
Foreign exchange (losses) / gains
Retirement benefit obligations
Other
Deferred tax liabilities
Consolidated
2008
$mill
2007
$mill
Company
2008
$mill
2007
$mill
Notes
1.2
209.9
134.0
5.8
5.5
(2.6)
-
25.5
379.3
1.5
27.9
1.4
10.8
0.5
2.7
0.8
1.2
46.8
0.6
13.1
1.0
5.8
0.2
-
-
0.3
21.0
1.5
11.1
1.4
10.8
0.5
2.7
0.8
1.2
30.0
Set-off of deferred tax liabilities pursuant to set-off provisions (19)
(45.9)
(46.8)
(21.0)
(30.0)
Net deferred tax liabilities
333.4
-
-
-
Movements:
Opening balance at 1 October
Charged/(credited) to the income statements
Charged/(credited) to equity
Acquisition of subsidiaries
Foreign exchange movement
Adjustments in respect of prior years
Closing balance at 30 September
46.8
15.8
(6.4)
271.7
51.4
-
379.3
25.2
10.6
10.9
-
-
0.1
46.8
30.0
(2.7)
(6.3)
-
-
-
21.0
3.6
15.6
10.9
-
-
(0.1)
30.0
Incitec Pivot Limited
75
Notes to the Financial Statements
For the year ended 30 September 2008
25. Retirement Benefit Obligations
(a) Information on Plans
The Consolidated entity operates a number of defined benefit plans to provide benefits for employees and their
dependants on retirement, disability or death. In the Americas (comprising Canada, USA and Mexico), several defined
benefit pension plans are in operation. Contributions to the plans are determined by actuarial valuation using the projected
unit credit cost method.
The Company is the sponsoring employer of the Incitec Pivot Employees Superannuation Fund, a defined benefit
superannuation fund which consists of a defined contribution section of membership as well as a defined benefit section.
The Fund also pays pensions to a number of pensioners. The key assumptions and amounts recognised in the income
statements and balance sheets are set out below.
(b) Reconciliation of the present value of the defined benefit obligation
Consolidated
2008
$mill
2007
$mill
Company
2008
$mill
Present value of defined benefit obligations at beginning of the year
Present value of defined benefit obligations acquired
Current service cost
Interest cost
Actuarial (gains)/losses
Contributions by plan participants
Benefits paid
Foreign exchange differences on foreign plans
Present value of defined benefit obligations at end of the year
(c) Reconciliation of the fair value of plan assets
Fair value of plan assets at beginning of the year
Fair value of plan assets acquired
Expected return on plan assets
Actuarial gains/(losses)
Employer contributions
Contributions by plan participants
Benefits paid
Foreign exchange differences on foreign plans
Fair value of plan assets at end of the year
77.5
186.3
3.9
9.4
(5.9)
1.0
(20.1)
35.2
287.3
79.9
163.6
11.2
(43.9)
4.4
1.6
(20.0)
24.1
220.9
75.1
-
2.3
4.5
3.3
2.0
(9.7)
-
77.5
72.2
-
4.9
4.1
6.4
2.0
(9.7)
-
79.9
(d) Reconciliation of assets and liabilities recognised in the balance sheet
Present value of funded defined benefit obligations at end of year
Fair value of plan assets at end of year
(Surplus)/deficit in plan
Tax provision
Net (Asset) / Liability recognised in balance sheets at end of year
287.3
(220.9)
66.4
0.4
66.8
77.5
(79.9)
(2.4)
(0.3)
(2.7)
77.5
-
2.1
4.9
(5.9)
1.0
(15.1)
-
64.5
79.9
-
5.7
(10.8)
1.2
1.6
(15.1)
-
62.5
64.5
(62.5)
2.0
0.4
2.4
2007
$mill
75.1
-
2.3
4.5
3.3
2.0
(9.7)
-
77.5
72.2
-
4.9
4.1
6.4
2.0
(9.7)
-
79.9
77.5
(79.9)
(2.4)
(0.3)
(2.7)
(e) Expense recognised in income statements
Current service cost
Interest cost
Expected return on plan assets
Expense recognised in income statements
3.9
9.4
(11.2)
2.1
2.3
4.5
(4.9)
1.9
2.1
4.9
(5.7)
1.3
2.3
4.5
(4.9)
1.9
76
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2008
25. Retirement Benefit Obligations (continued)
(f) Amounts recognised in the statements of comprehensive income
Actuarial (gains)/losses (before income tax)
(g) Cumulative amount recognised in the statements of comprehensive income
Consolidated
Company
2008
$mill
2007
$mill
2008
$mill
2007
$mill
38.0
#######
(1.6)
4.9
(1.6)
Cumulative amount of actuarial (gains)/losses
35.4
(2.6)
2.4
(2.6)
(h) Plan Assets
The percentage invested in each asset class at the reporting date:
Equities
Fixed Interest Securities
Property
Cash and Net Current Assets
Other
(i) Fair value of plan assets
55%
30%
8%
5%
2%
48%
16%
12%
15%
9%
49%
14%
13%
15%
9%
48%
16%
12%
15%
9%
The fair value of plan assets includes no amounts relating to:
- any of the Company’s/Consolidated entity's own financial instruments
- any property occupied by, or other assets used by, the Company/Consolidated entity.
(j) Expected rate of return on plan assets
The overall expected rate of return on assets assumption is determined by weighting the expected long-term rate of return for each
asset class by the target allocation of assets to each class. The rates of return used for each class are net of investment tax and
investment fees.
(k) Actual return on plan assets
Actual return on plan assets
(l) Principal actuarial assumptions at the reporting date
Discount rate (net of tax)
Expected rate of return on plan assets
Future salary increases
Future inflation
(m) Historical Information
Present value of defined benefit obligation
Fair value of plan assets
(Surplus)/Deficit in plan
Experience adjustment - plan liabilities
Experience adjustment - plan assets
(n) Expected Contributions
(32.7)
8.6
(5.1)
8.6
4.5% - 8.2%
7.0% - 8.5%
2.0% - 5.6%
2.5%
5.2%
7.5%
4%
2.5%
4.5%
7.5%
4.3%
2.5%
5.2%
7.5%
4%
2.5%
2008
2007
2006
2005
287.7
(220.9)
66.8
7.9
(10.9)
77.2
(79.9)
(2.7)
(4.4)
3.7
75.1
(72.2)
2.9
(2.9)
3.3
75.3
(72.0)
3.3
(4.2)
4.6
Expected contributions in year ending 30 September 2009:
Expected employer contributions
Expected contribution by plan participants
15.4
0.8
Incitec Pivot Limited
77
Notes to the Financial Statements
For the year ended 30 September 2008
26. Issued Capital
Share Capital
Ordinary shares authorised and issued - 1,217,230,560 (2007 - 1,008,477,700) (1) (2)
Movements in issued and fully paid ordinary shares of the Company during the financial year:
Date
Details
30 September 2007
16 June 2008
30 September 2008
Balance at the end of the previous financial year
Shares issued during the period
Transaction cost of issued shares
Subtotal prior to 20 for 1 share split
Balance at the end of the financial year after share split
Consolidated/Company
2007
2008
$mill
$mill
2,267.7
2,267.7
360.8
360.8
Number of
Shares
50,423,885
10,437,643
-
60,861,528
1,217,230,560
$mill
360.8
1,908.9
(2.0)
2,267.7
2,267.7
(1) Ordinary shares authorised and issued have no par value.
(2) The number of shares in the comparative period has been restated following the 20 for 1 share split as approved by
shareholders in September 2008.
Terms and conditions
Holders of ordinary shares are entitled to receive dividends from time to time and are entitled to one vote per share at
shareholders’ meetings.
Shares issued – Dyno Nobel Limited acquisition
On 16 June 2008 10,437,643 shares were issued to the shareholders of Dyno Nobel Limited as part of the purchase
consideration under the schemes of arrangement under which Incitec Pivot US Holdings Pty Limited acquired all the
shares in Dyno Nobel Limited that the Consolidated entity did not already own.
Share split – 20 for 1
In September 2008 the shareholders approved a share split whereby every fully paid ordinary share was split into 20 fully
paid ordinary shares. Share numbers in the comparative period have been restated following the share split undertaken.
78
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2008
27. Dividends
Dividends paid or declared in respect of the year ended 30 September were:
Ordinary Shares
Final dividend of 4.05 cents per share(1), fully franked at 30%, paid 13 December 2006
Interim dividend of 3.45 cents per share(1), fully franked at 30%, paid 5 July 2007
Final dividend comprising:
- normal dividend of 9.55 cents per share(1), fully franked at 30%, paid 13 December 2007
- special dividend of 2 cents per share(1), fully franked at 30%, paid 13 December 2007
Interim dividend of 10.2 cents per share(1), fully franked at 30%, paid 2 July 2008
Total ordinary share dividends paid in cash
Company
2008
$mill
2007
$mill
-
-
96.3
20.2
102.8
219.3
40.8
34.8
-
-
-
75.6
Subsequent event
Since the end of the financial year, the directors have declared the following dividend:
- Final dividend of 19.5 cents per share, fully franked at 30% to be paid on 2 December 2008
237.4
Ordinary shares
The financial effect of this dividend has not been recognised in the financial report and will be recognised in subsequent
financial reports.
(1) Dividends per share in the comparative period have been restated following the 20 for 1 share split as approved by
shareholders in September 2008.
Franking credits
Franking credits available to shareholders of the Company amounts to $195.1m (2007 - $45.6m) at the 30% (2007 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.
Future profits earned by the Company will be a mixture of Australian and offshore income. Consequently some tax will be
paid in foreign jurisdictions, and will not be available as franking credits.
Incitec Pivot Limited
79
Notes to the Financial Statements
For the year ended 30 September 2008
28. Business combination
A. Acquisition of Dyno Nobel Limited
(a) Summary of acquisition
On 16 June 2008, the Consolidated entity acquired the remaining shares it did not already own (86.8%) in Dyno Nobel
Limited for $2,460.8 million, including $37.1 million of transaction costs. During 2007 the Company acquired 13.2% of the
shares in Dyno Nobel Limited for $256.2 million. Dyno Nobel Limited manufactures and sells industrial explosives and
related products and services to mining, quarrying and construction industries.
(b) Purchase consideration
Notes
Consolidated
2007
$mill
2008
$mill
Company
2007
$mill
2008
$mill
Consideration paid, satisfied in cash
Less cash acquired
Net cash outflow
Add back cash acquired
Shares issued (26)
Original investment (13.2%)
Purchase consideration
551.9
(25.5)
526.4
25.5
1,908.9
256.2
2,717.0
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(c) Assets and liabilities acquired
The assets and liabilities arising from the acquisition are as follows:
Acquiree's net assets at the acquisition date
Cash and cash equivalents
Trade and other receivables
Inventories
Equity accounted investments
Property, plant and equipment
Intangibles
- Goodwill
- Software
- Non compete
- Patents
- Customer contracts
- Trademarks
- Dyno brand name
Deferred tax assets
Trade payables
Other assets / (liabilities)
Step-up Preference Shares
Tax liabilities
Deferred tax liabilities
Provisions
Interest bearing liabilities
Dyno Nobel
pre acquisition
Fair value
carrying
amounts adjustments
$mill
$mill
25.2
356.4
169.6
123.9
624.1
179.6
-
2.0
22.4
-
-
-
152.3
(67.9)
365.5
(345.0)
3.7
(274.0)
(41.5)
(852.4)
0.3
1.3
8.1
103.6
290.3
(179.6)
27.6
(2.0)
1.7
159.9
41.0
241.5
95.6
(2.6)
(1,069.5)
-
(88.4)
2.3
(15.4)
(5.6)
Fair
Value
$mill
25.5
357.7
177.7
227.5
914.4
-
27.6
-
24.1
159.9
41.0
241.5
247.9
(70.5)
(704.0)
(345.0)
(84.7)
(271.7)
(56.9)
(858.0)
Net identifiable assets and liabilities
443.9
(389.9)
54.0
Less consideration
Goodwill on acquisition recognised
2,717.0
2,663.0
The goodwill recognised on the acquisition is mainly attributable to the skills and technical talent of the acquiree’s
workforce and the synergies expected to be achieved from integrating the acquiree into the Consolidated entity’s existing
business.
80
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2008
28. Business combination (continued)
(d) Contribution of Dyno Nobel Limited
Dyno Nobel Limited contributed revenues of $563.6 million and net profit after tax of $23.8 million for the period from 16
June to 30 September 2008. If the acquisition had occurred on 1 October 2007, consolidated revenue and consolidated
profit/(loss) for the year ended 30 September 2008 would have been $4,064.4 million and $601.2 million respectively. The
table below summarises the pro forma consolidated revenue and profit for the period if the acquisition had occurred on
1 October 2007.
PRO FORMA
Fertilisers
Dyno Nobel Consolidation
Consolidated
$mill
Limited
$mill
Adjustments
$mill
$mill
Total sales revenue
2,347.5
1,717.1
(0.2)
4,064.4
Profit before depreciation, amortisation, interest,
related income tax expense and individually
material items
940.9
307.4
(11.0)
1,237.3
Depreciation & amortisation
(40.3)
(114.9)
-
(155.2)
Profit from ordinary activities before interest,
related income tax expense and individually
material items
Individually material items before income tax
expense
Profit before interest and related income tax
expense
Financial expenses (net)
Profit before income tax
Income tax expense
Profit for the financial year
900.6
192.5
(11.0)
1,082.1
(17.2)
(65.8)
-
(83.0)
883.4
126.7
(11.0)
999.1
(164.4)
834.7
(233.5)
601.2
Fertilisers’ column represents the actual financial performance of the Incitec Pivot base business for the year ended 30 September 2008, as
disclosed in Note 3- Segment Report.
Dyno Nobel Limited pro forma results were determined as follows:
(1) Results for the period ended 30 September 2008 were taken from Dyno Nobel Limited’s unaudited management accounts and
translated from US dollars to Australian Dollars at the average exchange rate for the year.
(2) Certain individually material items were excluded from the pro forma accounts for the period prior to acquisition (16 June 2008),
including costs related to acquisition defence ($39.9m) and fair market value adjustments ($408.1m). Fair market value adjustments
booked prior to the acquisition included the write down of capital expenditure on the Moranbah project to it’s realisable value
($293.5m) after it was abandoned by Dyno Nobel Limited in 2007, fixed asset impairment ($38.8m) and revaluation of investments to
their market value ($16.5m).
(3) The impact of fair value adjustments booked on acquisition were then applied to the result, to reflect the impact this would have had if
the acquisition had occurred on 1 October 2007. This resulted in the following adjustments;
-
-
An increase in Profit before depreciation, amortisation, interest, related income tax expense and individually material items
due to the offset of losses incurred on unfavourable contracts; and
An increase in Depreciation & amortisation to reflect re-valued Property, plant and equipment and Intangibles recognised on
acquisition.
(4) Net financial expenses were increased to reflect the higher interest expense that the business would have incurred if the funding
(5)
arrangement that was in place during the period since acquisition had been in place for the entire year.
Income tax expense was calculated on the revised results pro forma for Dyno Nobel Limited’s full year contribution, using an
estimated effective tax rate of 35% for the period.
Consolidation entries reflect the elimination of transactions that occurred between the businesses since the acquisition date.
There were no inter-company transactions between the parties prior to acquisition that required elimination.
Incitec Pivot Limited
81
Notes to the Financial Statements
For the year ended 30 September 2008
28. Business combination (continued)
B. Other changes in the composition of the Consolidated entity
On 28 August 2008 Incitec Pivot Explosives Holdings Pty Limited acquired 50% of the share capital of Nitro Mak Makine
Kimya – Nitro Nobel Sanayi Anonim Sirketi (Nitromak) for consideration of US$40 million (A$46.2 million). Prior to 30
September 2008, $4.6m had been paid. Nitromak’s principal activity is the delivery of explosives and related products in
Turkey.
29. Reconciliation of profit after income tax to net cash inflow from operating activities
Consolidated
2008
$mill
2007
$mill
Company
2008
$mill
2007
$mill
Notes
Reconciliation of cash
Cash at the end of the financial year as shown in the Cash Flow
Statements is reconciled to the related items in the Statements of
Financial Position as follows:
Cash
Bank overdraft
Reconciliation of profit for the financial year to net cash flows
from operating activities
Profit for the financial year
Depreciation and amortisation
Depreciation of capital spares
Write-down of property, plant and equipment
Profit on share equity accounted associates
Net profit on sale of property, plant and equipment
Gain on transactional contracts
Foreign exchange difference on loans with foreign controlled entities
Non-cash share based payment transactions
Right to receive rock
Amortisation of unfavourable contracts
Unwinding of discount on provisions
Changes in assets and liabilities
(increase)/decrease in receivables and other assets
(increase)/decrease in inventories
increase/(decrease) in deferred tax assets
(increase)/decrease in deferred tax liabilities
increase/(decrease) in net interest payable
increase/(decrease) in financial instruments
increase/(decrease) in payables and provisions
increase/(decrease) in income taxes payable
Net cash flows from operating activities
(10)
(21)
479.7
(11.0)
468.7
218.3
-
218.3
400.4
-
400.4
208.0
-
208.0
(5)
(5)
(16)
(5)
614.3
70.3
1.0
0.4
(6.7)
(2.9)
(9.1)
-
3.0
2.9
(35.9)
16.2
(63.3)
(249.9)
(19.1)
135.8
1.4
-
317.2
47.0
822.6
205.3
36.1
-
0.2
-
(20.7)
-
-
2.3
2.7
-
1.5
(41.2)
63.4
28.2
-
0.8
(7.6)
(27.7)
15.9
259.2
193.6
22.3
1.0
-
-
(3.0)
(9.6)
7.7
-
2.9
-
1.4
(135.5)
(245.9)
(22.5)
0.7
2.4
-
848.2
(44.8)
618.9
203.4
16.3
-
-
-
(7.2)
-
-
2.3
2.7
-
0.9
(71.5)
42.1
-
(53.3)
1.7
(7.6)
111.8
15.9
257.5
82
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2008
30. Commitments
a) Capital expenditure commitments
Capital expenditure on property, plant and equipment contracted but not provided for and payable:
Consolidated
2008
$mill
2007
$mill
Company
2008
$mill
2007
$mill
no later than one year
Share of capital expenditure commitments of the joint venture operation:
no later than one year
b) Lease commitments
26.4
26.4
18.3
18.3
44.7
3.9
3.9
-
-
3.9
0.3
0.3
-
-
0.3
2.1
2.1
-
-
2.1
Non-cancellable operating lease commitments comprise a number of operating arrangements for the provision of certain equipment and
property. These leases have varying durations and expiry dates. The future minimum rental commitments are as follows:
no later than one year
later than one, no later than five years
later than five years
43.1
96.3
62.8
202.2
28.0
75.8
56.7
160.5
17.6
39.0
34.1
90.7
16.5
36.9
31.1
84.5
Finance lease commitments comprise a number of finance arrangements for the provision of certain equipment. These leases have
varying durations and expiry dates. The future minimum rental commitments are as follows:
no later than one year
later than one, no later than five years
Less future finance charges
Present value of minimum lease payments provided for as a liability
3.6
5.4
9.0
(0.9)
8.1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
c) Other expenditure commitments
Commitments for payments to suppliers under long-term executory contracts existing at balance date but not recognised as payable
include:
no later than one year
later than one, no later than five years
later than five years
98.9
115.5
175.5
389.9
31.7
110.3
198.7
340.7
-
-
-
-
-
-
-
-
Incitec Pivot Limited
83
Notes to the Financial Statements
For the year ended 30 September 2008
31. 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.
Contracts, claims, guarantees and warranties
(cid:121)
(cid:121)
(cid:121)
(cid:121)
(cid:121)
(cid:121)
(cid:121)
Under a Deed of Cross Guarantee dated 30 September 2008, entered into in accordance with ASIC Class
Order 98/1418, each company which is 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, Investments in controlled entities.
A consolidated balance sheet and income statement for the 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 level of operations are
expected to remain above those that would trigger minimum payments.
There are a number of legal claims and exposures, which arise from the ordinary course of business.
There is significant uncertainty as to whether a future liability will arise in respect of these items. The
amount of liability, if any, which may arise cannot be reliably measured at this time. In the opinion of the
directors, any further information about these matters would be prejudicial to the interests of the Company.
There are guarantees relating to certain leases of property, plant and equipment and other agreements
arising in the ordinary course of business.
Contracts of sale covering companies and businesses, which were divested in current and prior years
include normal commercial warranties and indemnities to the purchasers. The Company is not aware of
any material exposure under these warranties and indemnities.
From time to time, the Consolidated entity is subject to claims for damages arising from products and
services supplied by the Consolidated entity in the normal course of business. Controlled entities have
received advice of claims relating to alleged failure to supply products and services suitable for particular
applications. The claims in the entities concerned are considered to be either immaterial or the entity is
defending the claim with no expected financial disadvantage. No specific disclosure is considered
necessary.
I
Environmental
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
(xvi)), 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 (xvi).
Taxation
Consistent with other companies of the size of Incitec Pivot Limited, the Consolidated entity 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.
84
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2008
32. Financial risk management
Overview
The Consolidated entity has exposure to the following variety of financial risks:
• Market risk (foreign exchange, interest rate and equity price risk)
•
Liquidity risk
• Credit risk
This note presents information about the Consolidated entity’s exposure to each of the above risks, as well as the
Consolidated entity’s objectives, policies and processes for measuring and managing risk.
The Board of Directors has overall responsibility for the establishment and oversight of the Consolidated entity’s risk
management framework. The Board established the Board Audit and Risk Management Committee (BARMC), which is
responsible for, amongst other things, the monitoring of the Consolidated entity’s risk management plans. The BARMC
reports regularly to the Board of Directors on its activities.
The Consolidated entity’s financial risk management policies are established to identify and analyse the financial risks
faced by the Consolidated entity, to set appropriate financial risk limits and controls, and to monitor financial risks and
adherence to limits. Financial risk management policies and systems are reviewed regularly to reflect changes in market
conditions and the Consolidated entity’s activities.
The BARMC oversees how management monitors compliance with the Consolidated entity’s risk management policies
and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the
Consolidated entity. The BARMC is assisted in its oversight role by the Consolidated entity’s internal auditors, Deloitte.
The Internal Auditors undertake both regular and ad hoc reviews of risk management controls and procedures, the results
of which are reported to the BARMC.
A. Market risk
Market risk is the risk that changes in commodity prices, foreign exchange rates and interest rates will affect the
Consolidated entity’s income or value of its holdings of financial instruments. The objective of market risk management is
to manage and control market risk exposures within acceptable parameters, while optimising the return on risk.
The Consolidated entity transacts in derivative instruments in the ordinary course of business, and also incurs financial
liabilities, in order to manage market risks. All such transactions are carried out within the guidelines set by the Board.
Generally the Consolidated entity seeks to apply hedge accounting in order to manage volatility in profit and loss except
where foreign exchange risk is mitigated with the existence of a natural hedge.
i.
Foreign exchange risk
The Consolidated entity is exposed to foreign exchange movements on sales and purchases denominated, either directly
or indirectly, in foreign currencies (primarily in US Dollars). 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 for short-term commited exposures, forward contracts.
Incitec Pivot Limited
85
Notes to the Financial Statements
For the year ended 30 September 2008
32. Financial risk management (continued)
A. Market risk (continued)
i.
Foreign exchange risk (continued)
The Consolidated entity has foreign operations with non-AUD functional currencies and therefore is exposed to translation
risk resulting from foreign exchange rate movements which impacts on the AUD equivalent value of the self-sustaining
foreign operations.
The Consolidated entity manages the impact of the translation risk by borrowing in the same currency as the net foreign
assets. These borrowings are generally held within the foreign subsidiaries resulting in a reduction in the overall net assets
that are translated. The translation movement of the Consolidated entity’s net assets are recognised within the foreign
currency translation reserve.
The table below outlines the forward foreign exchange contracts taken out to hedge committed 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
0.7941
0.8040
286.4
108.4
2008
$
2007
$
2008
A$mill
2007
A$mill
Buy EUR / sell Australian dollars
Not later than one year
0.5688
-
31.7
-
The profitability of the principal ammonium phosphate manufacturing facility of Southern Cross Fertilisers Pty Limited is
impacted by foreign exchange movements due to the manufacturing inputs (gas, electricity, labour) being Australian dollar
linked, whilst the manufactured outputs (fertiliser products i.e. MAP and DAP) are sold in American dollars.
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 policies established by the Board of Directors. The premiums paid along
with any unrealised gains are carried forward in the Balance Sheet and will be recognised in the Income Statement at the
time the underlying transactions occur. All costs associated with these contracts have been incurred. Favourable outcomes
on the hedge 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 on the underlying exposures resulting from
decreases in the AUD/USD exchange rate, but limit the unfavourable outcomes resulting from AUD/USD exchange rate
increases.
These contracts are timed to mature at monthly intervals to match anticipated sales of product manufactured at this facility
over the coming year 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 month are designated as being hedged until all
hedge contracts are fully utilised.
The table below summarises the vanilla option(1) contracts taken out to hedge sales of the output of Southern Cross
Fertilisers Pty Ltd.
Term
Weighted average
Contract amounts
Not later than one year
AUD/USD strike rate
2008
$
0.8434
2007
2008
2007
$
-
US$mill
US$mill
567.2
-
(1) Vanilla options represent basic foreign currency options where the buyer has the option but no obligation to sell foreign
currency on maturity. The option would only be exercised if the rate was favourable to the strike rate.
86
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2008
32. Financial risk management (continued)
A. Market risk (continued)
i.
Foreign exchange risk (continued)
Exposure to currency risk
The Consolidated entity’s exposure to foreign currency risk was as follows based on notional amounts;
Consolidated
30 September 2008
CAD
$mill
Peso
mill
USD
$mill
Trade receivables
Trade payables
Interest bearing liabilities
137.8
(318.8)
(1,581.1)
75.3
(16.6)
-
24.2
(15.4)
-
EUR
mill
-
(18.6)
-
49.8
(110.1)
-
30 September 2007
Peso
mill
CAD
$mill
USD
$mill
Gross balance sheet exposure
(1,762.1)
58.7
8.8
(18.6)
(60.3)
Forward exchange contracts
(227.4)
-
-
-
(87.1)
Net exposure
(1,989.5)
58.7
8.8
(18.6)
(147.4)
Company
30 September 2008
CAD
$mill
Peso
mill
USD
$mill
Trade receivables
Trade payables
Interest bearing liabilities
-
(265.1)
(1,581.1)
Gross balance sheet exposure
(1,846.2)
Forward exchange contracts
Net exposure
(227.4)
(2,073.6)
-
-
-
-
-
-
-
-
-
-
-
-
EUR
mill
-
(18.0)
-
0.8
(110.1)
-
(18.0)
(109.3)
-
(87.1)
(18.0)
(196.4)
30 September 2007
Peso
mill
CAD
$mill
USD
$mill
EUR
mill
-
-
-
-
-
-
EUR
mill
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Incitec Pivot Limited
87
Notes to the Financial Statements
For the year ended 30 September 2008
32. Financial risk management (continued)
A. Market risk (continued)
i.
Foreign exchange risk (continued)
The following significant exchange rates applied during the year:
Average
rate
2008
Balance
date spot
rate
2008
Average
rate
2007
Balance
date spot
rate
2007
US$ 1
0.9082
0.8015
0.7718
0.8829
Sensitivity analysis- Forward exchange contracts
A 10 cent strengthening in the AUD against the USD at 30 September 2008 would have decreased net assets by $39.7m.
A 10 cent weakening in the AUD against the USD at 30 September 2008 would have increased net assets by $30.9m.
Sensitivity analysis- Investment in foreign entity’s net assets
A 10 cent strengthening in the AUD against the USD at 30 September 2008 would have decreased net assets by $156.9m.
A 10 cent weakening in the AUD against the USD at 30 September 2008 would have increased net assets by $201.6m.
ii.
Interest rate risk
The Consolidated entity adopts a policy of ensuring that a maximum of up to 75% of its exposure to changes in interest
rates on borrowings is on a fixed rate basis. This is achieved by entering into interest rate swaps.
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 Board of Directors.
The Consolidated entity’s interest rate risk arises from long term borrowings. Out of the $271.2m of long term borrowings
existing at the reporting date, $267.2m had a fixed interest rate. During the period, $150.0m of interest rate swaps were
closed out.
The notional principal amounts and periods of expiry of these interest rate swap contracts are as follows:
Not later than one year
Later than one year but no later than five years
Fixed interest rate range p.a.
Floating interest rate p.a.
Consolidated
2008
$mill
-
-
2007
$mill
-
150.0
-
-
6.37% - 6.45%
7.00%
Company
2008
$mill
-
-
2007
$mill
-
150.0
-
-
6.37% - 6.45%
7.00%
88
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2008
32. Financial risk management (continued)
A. Market Risk (continued)
ii.
Interest rate risk (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:
30 September 2008
Cash and cash equivalents
Trade and other receivables
Total financial assets
Weighted average effective interest rate (1)
Trade and other payables
Interest bearing liabilities
Total financial liabilities
Net hedging activity (2)
Fixed interest rates
1 year or
Less
1 to 5
years
5 years
or more
$mill
$mill
$mill
Notes
(10)
(11)
Floating
Interest
rate
$mill
479.7
-
479.7
5.51%
(20)
(21)
-
(2,176.6)
(2,176.6)
-
-
-
-
-
-
-
-
-
-
(66.2)
(66.2)
(267.2)
(267.2)
-
-
-
Net financial liabilities including hedging
activities
(2,176.6)
(66.2)
(267.2)
Weighted average effective interest rate (after
hedging activities)
3.71%
4.49%
8.92%
Net financial assets/(liabilities)
(1,696.9)
(66.2)
(267.2)
30 September 2007
Cash and cash equivalents
Trade and other receivables
Total financial assets
Weighted average effective interest rate (1)
Trade and other payables
Interest bearing liabilities
Total financial liabilities
Net hedging activity (2)
Net financial liabilities including hedging
activities
Weighted average effective interest rate (after
hedging activities)
Net financial assets/(liabilities)
(10)
(11)
(20)
(21)
218.3
-
218.3
6.30%
-
(630.0)
(630.0)
150.0
(480.0)
7.43%
(261.7)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(150.0)(3)
(150.0)(3)
6.41%
(150.0)
Non-
Interest
bearing
$mill
Total
$mill
-
627.6
627.6
479.7
627.6
1,107.3
-
-
(1,606.5)
(1,606.5)
-
(1,606.5)
(2,510.0)
(4,116.5)
-
-
(1,606.5)
(4,116.5)
-
-
(978.9)
(3,009.2)
-
167.8
167.8
218.3
167.8
386.1
-
-
(334.2)
-
(334.2)
(334.2)
(630.0)
(964.2)
-
-
(334.2)
(964.2)
-
-
(166.4)
(578.1)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1) Weighted average effective interest rate includes funding at local rates.
(2) Net hedging activity represents the net impact on the Consolidated entity’s interest exposures from the utilisation of
derivative financial instruments to hedge the Consolidated entity’s interest rate exposures i.e. interest rate swaps.
(3) Interest rate swaps held as at 30 September 2007 matured during August 2008.
Incitec Pivot Limited
89
Notes to the Financial Statements
For the year ended 30 September 2008
32. Financial risk management (continued)
A. Market Risk (continued)
ii.
Interest rate risk (continued)
At the reporting date the interest rate profile of the Consolidated entity interest bearing financial instruments was:
Variable rate instruments
- Financial liabilities
Fixed rate instruments
- Financial liabilities
Consolidated
2008
$mill
2007
$mill
Company
2008
$mill
2007
$mill
2,176.6
630.0
180.5
630.0
333.4
-
-
-
Cash flow sensitivities for variable rate instruments
A change of 100 basis points in interest rates at the reporting date would have increased/(decreased) equity and profit and
loss by $21.7m. This analysis assumes all other variables, in particular foreign exchange rates, remain constant.
iii.
Equity price risk
Equity price risk arises from available-for-sale equity securities being subjected to market volatility. Refer to note 14 for
more information.
B. Liquidity risk
Liquidity risk is the risk that the Consolidated entity will not be able to meet its financial obligations as they fall due. The
Consolidated entity’s approach to managing liquidity is to ensure that there are sufficient committed funding facilities
available to meet Incitec Pivot Limited’s financial commitments in a timely manner. Refer to note 21 for the status on
refinancing the bridge facility.
Typically the Consolidated entity holds a minimum liquidity buffer of $200m in cash forecasts at all times to meet any
unforeseen cashflow requirements including unplanned reduction in revenue, business disruption and unplanned capital
expenditure. This excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as
natural disasters. In addition, the Consolidated entity maintains the following lines of credit:
• Unsecured bank overdraft facilities denominated in AUD and foreign currencies. Interest is payable at a Base
Rate plus a margin.
• A short term $2.4 billion Bridge facility maturing in May 2009. This is a multicurrency facility drawable in AUD and
USD with interest payable at BBSY/LIBOR plus a margin.
• An unsecured syndicated facility agreement of $1.68 billion for 3 years, maturing September 2011. This is a
multicurrency facility and is revolving whereby repayment can be redrawn at the Company’s discretion. Interest is
payable at BBSY/LIBOR plus a margin. Proceeds from this facility are required to be used to pay down and
cancel an equivalent amount under the Bridge facility.
In addition the Consolidated entity manages liquidity risk by continually forecasting capital requirements and taking
appropriate steps to ensure sufficient funding lines is in place to meet forecasted liquidity requirements.
90
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2008
32. Financial risk management (continued)
B. Liquidity risk (continued)
The following are the contractual maturities of financial liabilites, including interest payments and excluding the impact of
netting payments:
Carrying
amount
$mill
Contractual
cash flows (1)
$mill
6 - 12
6 months
or less (1) months (1)
$mill
$mill
1 - 2
years (1)
$mill
2 - 5
years (1)
$mill
more
than 5
years (1)
$mill
Consolidated
30 September 2008
Non-derivative financial liabilities
Interest bearing liabilities
2,510.0
3,019.9
85.3
2,258.9
160.1
515.6
Derivative financial liabilities
Option contracts used for hedging
Forward commodity contracts used for hedging
Total
13.8
2.4
2,526.2
-
2.4
3,022.3
-
1.6
86.9
-
0.8
2,259.7
-
-
160.1
-
-
515.6
30 September 2007
Non-derivative financial liabilities
Interest bearing liabilities
630.0
870.0
15.3
25.0
49.9
779.8
Derivative financial liabilities
Forward exchange contracts used for hedging
9.1
9.7
5.2
4.5
-
-
Total
639.1
879.7
20.5
29.5
49.9
779.8
Company
30 September 2008
Non-derivative financial liabilities
Interest bearing liabilities
Derivative financial liabilities
Option contracts used for hedging
Total
30 September 2007
Carrying
amount
$mill
Contractual
cash flows(1)
$mill
6 months
6 - 12
or less(1) months(1)
$mill
$mill
1 - 2
years(1)
$mill
2 - 5
years(1)
$mill
more
than 5
years(1)
$mill
180.5
183.2
6.6
176.6
13.8
-
-
-
194.3
183.2
6.6
176.6
-
-
-
-
-
-
Non-derivative financial liabilities
Interest bearing liabilities
Derivative financial liabilities
Forward exchange contracts used for hedging
630.0
870.0
15.3
25.0
49.9
779.8
9.1
9.7
5.2
4.5
-
-
Total
639.1
879.7
20.5
29.5
49.9
779.8
(1)
Contractual cash flows are based on exchange rates prevailing at year end. Any subsequent movement in exchange rates will
impact the cash flow required to settle the obligations where those obligations are in a foreign currency.
-
-
-
-
-
-
-
-
-
-
-
-
-
Incitec Pivot Limited
91
Notes to the Financial Statements
For the year ended 30 September 2008
32. Financial risk management (continued)
C. Credit risk
Credit risk is the risk of financial loss to the Consolidated entity if a customer or counterparty to a financial instrument fails
to meet its contractual obligations. The major exposure to credit risk arises from trade receivables, which have been
recognised in the Balance Sheet net of any impairment losses, and from derivative financial instruments.
Trade and other receivables
The Consolidated entity’s exposure to credit risk is influenced mainly by the individual characteristics of each customer.
The demographics of the Consolidated entity’s customer base, including the default risk of the industry and country in
which customers operate currently, have an influence on credit risk. Credit risk on sales to overseas customers is negated
by way of entering into irrevocable letter of credits with financial institutions or by asking customers to pay in advance.
The Consolidated entity has a credit policy under which each new customer is analysed individually for creditworthiness
before the entity enters into any sales transaction on an open credit account with standard payment, delivery terms and
conditions of sale. The creditworthiness review includes analysing the financial information provided by the customer on
application, reports from external ratings agencies, where available, and in some cases bank references. Based on this
financial analysis, credit limits are established for each customer, which represents the projected highest level of exposure,
at any one point in time, which a customer may reach. These limits are reviewed annually for all customers. Customers
that fail to meet the Consolidated Entity’s benchmark creditworthiness or who are in breach of their credit limits, may
transact only on a “Cash Before Delivery” basis.
Furthermore the Consolidated entity reduces its credit risk exposure in relation to extended trading terms by selling, on a
non or limited-recourse basis, the trade receivables of specifically approved customers to financial institutions prepared to
carry the risk.
A substantial amount (> 80%) of the Consolidated entity’s customers have been transacting with the Consolidated entity
for over 4 years, and losses occur infrequently. In monitoring customer credit, customers are grouped into risk categories
based on factors including the output of risk evaluation, trading terms, credit limits and customer group.
Goods are generally sold without any retention to title clauses except where as part of the creditworthiness reviews, it is
recommended to retain security to protect either in full or part the level of debt it will be exposed to at any one time.
The Consolidated entity establishes an allowance for impairment that represents its estimate of incurred losses in respect
of trade and other receivables. The main component of this allowance is a specific loss component that relates to
individually significant exposures.
Financial Instruments
The Group limits its exposure to credit risk created by investing in financial instruments by only investing in liquid securities
and only with counterparties that have a credit rating of at least BBB+.In practice, financial instruments are dealt with
financial institutions with a stronger rating than BBB+.Currently all financial instruments held are with financial institutions
with a long term rating of A or better.
The credit risk exposure arising from derivative financial instruments is the sum of all contracts with a positive replacement
cost. As at 30 September 2008, the sum of all contracts with a positive replacement cost was $2.7m (2007 nil).
Exposure to credit risk
The maximum exposure to credit risk at the reporting date was:
Trade receivables
Other receivables
Cash and cash equivalents
Interest rate swaps used for hedging liabilities
Limited recourse receivables sold
Forward exchange contracts
Consolidated
2008
$mill
490.5
137.1
479.7
-
3.0
0.6
1,110.9
2007
$mill
148.4
19.4
218.3
1.6
0.5
-
388.2
Company
2008
$mill
159.8
30.9
400.4
-
3.0
0.6
594.7
2007
$mill
69.3
18.1
208.0
1.6
0.5
-
297.5
92
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2008
32. Financial risk management (continued)
C. Credit risk (continued)
The maximum exposure to credit risk for trade receivables at the reporting date by country was:
Consolidated
Company
Australia
Pakistan
New Zealand
Europe
USA
Canada
Asia
Other
2008
$mill
232.1
-
-
1.0
153.7
92.9
10.2
0.6
490.5
2007
$mill
96.0
22.6
7.2
22.6
-
-
-
-
148.4
2008
$mill
159.8
-
-
-
-
-
-
-
159.8
The maximum exposure to credit risk for trade receivables at the reporting date by type of customers was:
Wholesale customer
End user customer
167.6
322.9
490.5
102.4
46.0
148.4
139.3
20.5
159.8
As at the end of September 2008, the Consolidated entity and the Company had no individual debtor’s balance
outstanding in excess of 10% of the total of the Trade Receivable balance.
2007
$mill
69.3
-
-
-
-
-
-
-
69.3
60.4
8.9
69.3
As at the end of September 2007, the Consolidated entity had two wholesale customers whose individual outstanding
balance were in excess of 10% of the total of the Trade Receivable balance. These two balances made up 27% of the total
Trade Receivable balance as at the end of September 2007. As at the end of September 2007, the Company had no
individual debtor’s balance outstanding in excess of 10% of the total of the Trade Receivable balance.
Impairment losses
The aging of trade receivables at the reporting date was:
Consolidated
Current
Past due 0 - 30 days
Past due 31 - 120 days
Total
Company
Current
Past due 0 - 30 days
Past due 31 - 120 days
Total
Gross
2008
$mill
Impairment
2008
$mill
Gross
2007
$mill
Impairment
2007
$mill
359.3
96.3
48.2
503.8
142.7
17.8
1.1
161.6
-
2.0
11.3
13.3
-
1.4
0.4
1.8
140.2
8.6
0.1
148.9
62.7
6.9
0.2
69.8
-
0.4
0.1
0.5
-
0.4
0.1
0.5
Incitec Pivot Limited
93
Notes to the Financial Statements
For the year ended 30 September 2008
32. Financial risk management (continued)
C. Credit risk (continued)
The movement in the allowance for impairment in respect of trade receivables during the year was as follows:
Notes
Balance at 1 October
Impairment losses recognised
Write-offs recognised during the year
Balance at 30 Sept (11)
Consolidated
2008
$mill
0.5
12.8
-
13.3
2007
$mill
0.4
0.1
-
0.5
Company
2008
$mill
0.5
1.3
-
1.8
2007
$mill
0.2
0.3
-
0.5
Based on past experience, the Consolidated entity believes that no impairment allowance is necessary in respect of trade
receivables that are not past due.
The allowance accounts in respect of trade receivables are used to record impairment losses unless the Consolidated
entity is satisfied that no recovery of the amount owing is possible; at that point the amount considered irrecoverable is
written off against the financial asset directly.
D. Cash-flow hedges
Cash flow hedges are mainly used to mitigate the entities exposure to commodity price risk, foreign currency risk and
interest rate risk. Forward commodity contracts are entered into to manage the price risk associated with the purchase of
natural gas which is a key raw material input to the production of ammonia and ammonia nitrate.
Forward currency risk associated with sales and purchases denominated in foreign currrency is managed by entering into
forward contracts and options. Interest rate risk is managed by entering into interest rate swaps in order to limit the
exposure to interest rate fluctuations.
The following table indicates the periods in which the cash-flows associated with derivatives that are cash flow hedges are
expected to occur and expected to impact profit & loss:
Consolidated
30 September 2008
Option and forward commodity contracts
- Assets
- Liabilities
Total
30 September 2007
Interest rate swaps
- Assets
- Liabilities
Total
Carrying
amount
$mill
Expected
cash flows
$mill
6 months
or less
$mill
6 - 12
months
$mill
1 - 2
years
$mill
2 - 5
years
$mill
-
16.2
16.2
1.6
-
1.6
-
2.4
2.4
1.6
-
1.6
-
1.6
1.6
0.2
-
0.2
-
0.8
0.8
0.2
-
0.2
-
-
-
1.2
-
1.2
-
-
-
-
-
-
more
than 5
years
$mill
-
-
-
-
-
-
94
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2008
32. Financial risk management (continued)
D. Cash-flow hedges (continued)
Company
30 September 2008
Option contracts
- Assets
- Liabilities
Total
30 September 2007
Interest rate swaps
- Assets
- Liabilities
Total
E. Fair values
Carrying
amount
$mill
Expected
cash flows
$mill
6 months
or less
$mill
6 - 12
months
$mill
1 - 2
years
$mill
2 - 5
years
$mill
-
13.8
13.8
1.6
-
1.6
-
-
-
1.6
-
1.6
-
-
-
0.2
-
0.2
-
-
-
0.2
-
0.2
-
-
-
1.2
-
1.2
-
-
-
-
-
-
more
than 5
years
$mill
-
-
-
-
-
-
Fair values versus carrying amounts
The fair values of financial assets and liabilities, together with the carrying amounts shown in the balance sheet, are as
follows:
Consolidated
Available for sale financial assets
Loans and receivables
Cash and cash equivalents
Interest rates swaps
Option and commodity contracts
Other forward exchange contracts
Trade and other payables
Financial liabilities
Carrying
amount
2008
$mill
30.3
627.6
479.7
-
(16.2)
0.6
(1,608.9)
(2,510.0)
Fair value
2008
$mill
30.3
627.6
479.7
-
(16.2)
0.6
(1,608.9)
(2,510.0)
Carrying
amount
2007
$mill
292.1
167.8
218.3
1.6
-
(9.1)
(334.2)
(630.0)
Fair value
2007
$mill
292.1
167.8
218.3
1.6
-
(9.1)
(334.2)
(630.0)
Total
(2,996.9)
(2,996.9)
(293.5)
(293.5)
Incitec Pivot Limited
95
Notes to the Financial Statements
For the year ended 30 September 2008
32. Financial risk management (continued)
E. Fair values (continued)
Company
Available for sale financial assets
Loans and receivables
Cash and cash equivalents
Interest rates swaps
Investments in controlled entities
Option contracts
Other forward exchange contracts
Trade and other payables
Financial liabilities
Total
Basis for determining fair value
Carrying
amount
2008
$mill
30.3
357.2
400.4
-
2,896.7
(13.8)
0.6
(1,507.0)
(180.5)
1,983.9
Fair value
2008
$mill
30.3
357.2
400.4
-
2,896.7
(13.8)
0.6
(1,507.0)
(180.5)
1,983.9
Carrying
amount
2007
$mill
292.1
263.9
208.0
1.6
694.5
-
(9.1)
(551.1)
(630.0)
269.9
Fair value
2007
$mill
292.1
263.9
208.0
1.6
694.5
-
(9.1)
(551.1)
(630.0)
269.9
The following summarises the significant methods and assumptions used in estimating the fair values of financial
instruments reflected in the table above.
Investments in equity securities
The fair value of financial assets classified as available for sale is determined by reference to their quoted bid price at the
reporting date.
Derivatives
The fair value of forward exchange contracts is based on their listed market price if available. If a listed market price is not
available, then fair value is estimated by discounting the difference between the contractual forward price and the current
forward price.
The fair value of interest rate swaps is calculated as the present value of the estimated future cash-flows.
Trade and other receivables & Trade and other payables
The fair value of trade and other receivables, and trade and other payables are estimated as the present value of future
cash flows, discounted at the market rate of interest at the reporting date.
Financial liabilities designated at Fair value through profit and loss
Fair value is calculated based on the present value of future principal and interest cash flows, discounted at the market
rate of interest at the reporting date.
Method of discounting
In calculating the fair values of financial instruments, the present value of all cash flows greater than 1 year are discounted.
96
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2008
32. Financial risk management (continued)
F. Capital risk management
The key objectives of the Consolidated entity and the Company when managing capital is to safeguard their ability to
continue as a going concern and maintain optimal returns to shareholders and benefits for other stakeholders. “Capital” is
considered to be all sources of funding, whether debt or equity. Management also aims to maintain capital and funding
structure that optimises the cost of capital available to the consolidated entity and the Company over the long term.
The key objectives include:
• maintaining an investment grade credit profile and the requisite financial metrics;
•
•
securing access to diversified sources of debt funding with a spread of maturity dates and sufficient undrawn
committed facility capacity;
optimising over the long term and to the extent practicable the Weighted Average Cost of Capital (WACC) to
reduce the cost of capital to the Consolidated entity while maintaining financial flexibility.
In order to optimise the capital structure, management may alter the amount of dividends paid to shareholders, return
capital to shareholders, issue new shares, draw down additional debt or sell assets to reduce debt in line with the strategic
objectives and operating plans of the Consolidated entity and the Company.
Various financial ratios and internal targets are assessed and reported to the Board on a regular basis by management to
monitor and support the key objectives set out above. These ratios and targets include:
• Gearing ratio; Gross debt to Earning Before Interest, Tax, Depreciation and Amortisation (EBITDA) and interest
cover.
Debt covenants relating to the Bridge Facility ($2.4 billion) have been measured in excess of debt covenant targets for the
year ended 30 September 2008.
Incitec Pivot Limited
97
Notes to the Financial Statements
For the year ended 30 September 2008
33. Related party disclosures
Subsidiaries
Interest in subsidiaries is set out in Note 36.
Key management personnel
Disclosures relating to key management personnel are set out in Note 34.
Transactions with wholly owned controlled entities
Transactions between the Company and entities in the wholly owned group during the year included:
(cid:121)
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 $245,391,000 (2007 - $115,539,000). Fixed costs incurred by the Company in the
performance of its obligations amounting to $71,507,000 (2007 - $55,169,000) have been charged to
Incitec Fertilizers Limited.
Incitec Fertilizers Limited declared and paid an interim dividend to the Company of $35,000,000 (2007 -
$21,800,000) and declared a final dividend in November 2008 of $94,400,000 (2007 - $30,300,000). This
dividend is eliminated on consolidation.
Southern Cross International Pty Limited (SCI) declared and paid an interim dividend to the Company of
$155,259,000 (2007 - $nil). SCI declared a final dividend in November 2008 to the Company of
$320,000,000 (2007 - $1,750,000). Southern Cross Fertilisers Pty Limited (SCF) did not declare a final
dividend in the year ended 30 September 2008 (2007 – $144,400,000). These dividends are eliminated on
consolidation.
(cid:121)
(cid:121)
• Management fees were received and invoiced by the Company for accounting and administrative
(cid:121)
(cid:121)
(cid:121)
(cid:121)
(cid:121)
assistance on normal commercial terms and conditions and in the ordinary course of business.
Effective 1 August 2006, the Company completed the acquisition of SCF. The Company manages the
operations of SCF. For the year ended 30 September 2008, SCF sold fertiliser to the Company to the
value of $274,968,000 (2007 - $176,540,000) and invoiced the Company for salary and travel charges to
the value of $454,000 (2007 - $546,000). For the year ended 30 September 2008 the Company sold
fertilisers to SCF to the value of $nil (2007 - $7,590,000) and invoiced SCF for insurance and corporate
charges to the value of $12,839,000 (2007 - $12,546,000). These are eliminated on consolidation.
For the year ended 30 September 2008 the Company sold fertiliser to SCI to the value of $41,113,000
(2007 - $14,911,000). This is eliminated on consolidation.
Effective 16 June 2008, the Company completed the acquisition of Dyno Nobel Limited (Dyno Nobel).
Since acquisition, the Company sold fertiliser to Dyno Nobel to the value of $71,000 and invoiced Dyno
Nobel for salary and rental costs to the value of $144,000 and $100,000 respectively. Since acquisition,
Dyno Nobel invoiced the Company for project related costs to the value of $83,000. These are eliminated
on consolidation.
For the year ended 30 September 2008 the Company forgave a loan to Incitec Pivot LTI Plan Company
Pty Ltd to the value of $3,579,000 (2007 - $1,462,000) according to the terms and conditions of the
Company’s LTI plans as detailed in Note 35.
Amounts receivable from and payable to wholly-owned subsidiaries are disclosed in the respective notes
to the financial report on normal credit terms.
98
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2008
33. Related party disclosures (continued).
Additional related party disclosures
Additional relevant related party disclosures are shown throughout the Notes to the financial statements as follows:
Interest income and expense
Trade and other receivables
Investments in controlled entities
Trade and other payables
Key management personnel disclosures
Notes 4, 5
Note 11
Notes 14, 36
Note 20
Note 34
Incitec Pivot Limited
99
Notes to the Financial Statements
For the year ended 30 September 2008
34. Key management personnel disclosures
(a) Key Management Personnel
The following were key management personnel of the Consolidated entity at any time during the reporting period and
unless otherwise indicated were key management personnel for the entire period:
Non-executive directors
J C Watson
B Healey
A C Larkin
A D McCallum
J Marlay
Executive directors
J Segal
J E Fazzino
Executives
K J Gleeson
D A Roe
B C Walsh
A Grace
J D Whiteside
P Barber
K Lynch (1)
J Rintel (2)
D Brinker (3)
Chairman
Managing Director & Chief Executive Officer
Finance Director & Chief Financial Officer
General Counsel & Company Secretary
General Manager Business Development
General Manager Global Manufacturing
General Manager Safety & Environment & Major Projects
General Manager Supply Chain & Trading
General Manager Australian Fertilisers
General Manager Human Resources
General Manager Strategy
General Manager Explosives
(1) Mr Lynch was appointed as an executive on 18 February 2008.
(2) Mr Rintel was appointed as an executive on 1 June 2008.
(3) Mr Brinker was appointed as an executive on 1 June 2008.
All of the above persons were also key management persons during the year ended 30 September 2007, except for Mr
Lynch who commenced his appointment in February 2008 and Mr Rintel and Mr Brinker who commenced their
appointment in June 2008. Mr Drew who resigned in 2007 was also a key management person during the year ended 30
September 2007.
(b) Key management personnel compensation
The key management personnel compensation included in the income statement line “Employee Expenses” are as follows:
Short-term employee benefits
Post-employment benefits
Other long-term benefits
Termination benefits
Share-based payments
Consolidated / Company
2008
$000
13,030
192
578
-
1,919
15,719
2007
$000
7,367
154
123
385
1,322
9,351
100
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2008
34. Key management personnel disclosures (continued)
Individual directors and executives compensation disclosures
Information regarding the compensation for individual directors and executives and some disclosures for equity
instruments as permitted by Corporations Regulations 2M.3.03, are provided in the Remuneration Report which is included
in the Directors’ report.
Apart from the details disclosed in this Note, no director has entered into a material contract with the Company or the
Consolidated entity since the end of the previous financial year and there were no material contracts involving directors’
interests existing at year-end.
(c) Other key management personnel 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:
(1) During the year Mr McCallum purchased fertiliser to the value of $1,907 (2007: $15,828) from the Company, the
balance owing at 30 September 2008 was $nil (2007: $nil).
(2) 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 $6,077,920 during the year (2007:
$804,935). Mr Fazzino’s spouse does not directly provide these services.
Incitec Pivot Limited
101
Notes to the Financial Statements
For the year ended 30 September 2008
34. Key management personnel disclosures (continued)
(d) Movements in shareholdings of directors and executives
(1) Movements in shares in the Company
The movement during the reporting period in the numbers of shares in the Company held directly, indirectly or beneficially,
by each key management person, including their related parties, is set out in the table below:
The Company - Incitec Pivot
Non-executive directors
- Current
J C Watson
B Healey
A D McCallum
J Marlay (1)
Executive directors
- Current
J Segal
JE Fazzino
Executives
- Current
K J Gleeson
D A Roe
B C Walsh
A Grace
J Whiteside
P Barber
K Lynch (2)
J Rintel (3)
D Brinker (4)
- Former
M Drew
Number of Shares (E)
Year
Opening
balance (A)
Acquired
during the
year (B)
Disposed
during the
year (C)
Closing
balance (D)
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
100,000
100,000
20,000
20,000
156,360
156,360
20,000
20,000
-
-
-
(26,000)
74,000
- 100,000
- 20,000
-
-
-
-
-
- 20,000
- 156,360
- 156,360
- 20,000
- 20,000
361,300
1,772,820
652,800 1,120,020
1,708,080
137,340
585,240 1,122,840
- 2,134,120
- 1,772,820
- 1,845,420
- 1,708,080
584,840
86,780
171,500 582,940
518,980 77,040
181,180 517,940
700,680
96,420
153,500 647,660
521,000
141,400
96,680 424,320
67,520
457,340
79,020 453,200
- 120,080
- -
- 53,240
- -
101,960
- -
- 66,680
- -
15,160
- 671,620
584,840
(169,600)
- 596,020
518,980
(180,140)
- 797,100
700,680
(100,480)
528,420
(133,980)
- 521,000
- 524,860
457,340
- 120,080
-
-
- 53,240
-
-
- 117,120
-
-
- 66,680
-
-
(74,880)
-
-
860 453,460
-
(454,320)
-
-
Pursuant to the LTI Interim performance plan 2007/10, shares, treated as options, were allocated to certain key
management personnel during the reporting period.
(A)
(B)
Represents the holding at 1 October 2007 of shares of Incitec Pivot held by non-executive directors, executive directors and
executives who were directors and executives of the Company during the year ended 30 September 2008 and their related parties.
This includes fully paid ordinary shares and shares acquired under the Employee Share Ownership Plan (ESOP) and shares
treated as options for the purposes of remuneration which have been disclosed in section E of the Remuneration Report and the
movements disclosed in this Note. Details of the ESOP are set out in Note 35, Share Based Payments.
Represents shares acquired by directors and executives while they are directors or executives of the Company including
acquisitions by the directors and executives who were eligible to participate in the ESOP and who participated in the plan during
the year, as well as the acquisition of shares, treated as options for the purposes of remuneration, under the LTI performance plan
2007/10. Details of the ESOP are set out in Note 35, Share Based Payments.
102
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2008
(C)
(D)
(E)
(1)
(2)
(3)
(4)
Represents shares disposed of during the year. This includes fully paid ordinary shares, shares acquired under the ESOP and
shares, treated as options, under the LTI Performance Plan 2003/06 and in the case of Mr Drew, shares, treated as options, for the
LTI Interim Performance Plan 2006/08 and the LTI Performance Plan 2006/09. In the case of directors or executives who ceased
their directorship or employment during the year ended 30 September 2008 and 2007, all shares were treated as disposed as at
the relevant date of cessation.
Represents the holding at 30 September 2008 and 30 September 2007 of shares of Incitec Pivot.
The number of shares have been restated as a result of the 20:1 share split approved by shareholders on 23 September 2008.
2007 opening balance represents holdings at date of appointment to the Board (20 December 2006).
Opening balance represents holdings at date of appointment to the executive team (18 February 2008). Movements are from this
date.
Opening balance represents holdings at 1 October 2007 prior to Mr Rintel’s appointment to the executive team (1 June 2008).
Amounts acquired during the year represent acquisitions prior to Mr Rintel’s appointment to the executive team.
Opening balance represents holdings at date of appointment to the executive team (1 June 2008). Movements are from this date.
Incitec Pivot Limited
103
Notes to the Financial Statements
For the year ended 30 September 2008
34. Key management personnel disclosures (continued)
(d) Movements in shareholdings of directors and executives (continued)
(2) Movements in shares treated as options over equity instruments in the Company
The movement during the reporting period in the number of shares, treated as options over shares in the Company, for the
purposes of remuneration held, directly, indirectly or beneficially, by each key management person, including their related
parties, is as follows:
The Company - Incitec Pivot
Executive directors
- Current
J Segal
JE Fazzino
Executives
- Current
K J Gleeson
D A Roe
B C Walsh
A Grace
J Whiteside
P Barber
K Lynch
J Rintel (1)
D Brinker
- Former
M Drew
Year
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
2008
2007
Number of Shares treated as Options (F)
Opening
balance (A)
Granted as
compensation
(B)
Exercised
during the
year (C)
Other
Changes (D)
Closing balance
(E)
1,771,960 361,200
651,940 1,120,020
922,580
137,240
- 922,580
- - 2,133,160
- - 1,771,960
- - 1,059,820
- - 922,580
- - 669,360
582,680
86,680
- - 582,680
- 582,680
- - 594,980
517,940 77,040
- - 517,940
- 517,940
- - 743,720
647,400
96,320
- - 647,400
- 647,400
- - 491,480
424,060
67,420
- - 424,060
- 424,060
- - 520,620
67,420
453,200
- - 453,200
- 453,200
- 84,280
- - 84,280
- - - - -
- 53,240
- - 53,240
- - - - -
101,960
- - 117,120
- - - - -
- - 66,680
- 66,680
- - -
-
-
15,160
-
- 453,200
-
- - -
-
-
(453,200)
(A) Represents the holding at 1 October 2007 of shares (treated as options) in Incitec Pivot held by executive directors and
executives who were directors and executives of the Company during the year ended 30 September 2008. Further details
of these shares which are treated as options for the purposes of remuneration have been disclosed in section E of the
Remuneration Report and relate to shares allocated under the LTI plans as referred to in sections B and E of the
Remuneration Report.
(B) Represents shares (treated as options) which were acquired during the year by executive directors and executives while
they are directors or executives of the Company pursuant to the LTI plans, details of which are set out in section B of the
Remuneration Report.
(C) Represents where shares (treated as options) previously granted as compensation, were exercised (by the making of an
award) during the reporting period. Awards (in the form of waivers of loans) were granted in 2008 in relation to the LTI
interim performance plan 2006/08. Refer to sections B and E of the Remuneration Report for further details.
(D) Represents shares treated as options that expired due to the holder ceasing to be eligible to the option of a loan waiver.
Under the relevant plan rules, at the end of a performance period, irrespective of whether a loan waiver is made, the
executive director or executive remains the registered holder of the underlying shares. No person can however deal in the
shares until their loan is repaid. Refer to section B of the Remuneration Report for further details. In the case of directors or
executives who ceased their directorship or employment during the year, all shares treated as options were forfeited as at
the relevant date of cessation.
(E) Represents the holding at 30 September 2008 and 30 September 2007 of shares, treated as options.
(F)
The number of shares treated as options have been restated as a result of the 20:1 share split approved by shareholders
on 23 September 2008.
(1) Opening balance represents holdings at 1 October 2007 prior to Mr Rintel’s appointment to the executive team (1 June
2008). Amounts granted as compensation during the year represent shares, treated as options, granted prior to Mr Rintel’s
appointment to the executive team.
104
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2008
35. Share based payments
(a) Long Term Incentive (LTI) Performance Plans – 2006/08, 2006/09 and 2007/10
During the year, the Company established a further LTI Performance Plan under the LTI Plan Rules, being the LTI
Performance Plan 2007/10. The performance period for this Plan is based on a three year performance cycle from 1
October 2007 to 30 September 2010.
The LTIs are designed to link Executive reward with the key performance drivers which underpin sustainable growth in
shareholder value – which comprises both share price and returns to shareholders. The arrangements also support the
Company’s strategy for retention and motivation of its employees.
These plans have the following features:
(cid:121)
(cid:121)
(cid:121)
Loan backed plan: At the commencement of relevant performance period (typically 3 years) the
Company, through its wholly owned subsidiary, Incitec Pivot LTI Plan Company Pty Ltd, provides to
participants limited recourse loans bearing interest at the fringe benefits tax benchmark rate (currently 9%)
for the sole purpose of acquiring shares in Incitec Pivot.
Shares acquired on market and held under restriction: The loans are applied to acquire shares on
market which avoids dilution of other shareholdings. Australian Securities Exchange Listing Rule 10.14
provides that no shareholder approval is required. Participants may not deal in the shares while the loan
remains outstanding. Net cash dividends after personal income tax obligations are applied to reduce the
loan balance throughout the term of the loan.
Loan forgiveness: If, at the end of the performance period, the performance of the Company and the
participant meets or exceeds the performance criteria which was set by the Board at the commencement
of the performance period, part of the loan may be forgiven. The amount of the loan forgiven will be
determined according to the performance achieved and will be net of fringe benefits tax. The balance of
the loan must be repaid prior to any dealing in the shares, on cessation of employment, or at the latest, a
sunset date which is 3 months after the expiry of the performance period, unless extended by the
Company.
The Board sets the criteria for the granting of awards under all of these LTI Plans at the beginning of the performance
period covered by the LTI Plan and, in the case of the LTI Interim Performance Plan 2006/08, is based on the achievement
at 30 September 2008 of a cumulative Net Profit After Tax (NPAT) target; for the LTI Performance Plan 2006/09, is based
on total shareholder returns (TSR) over the three year period; and for the LTI Performance Plan 2007/10, is based on TSR
over the three year period.
Under all three plans, any LTI award received will be used firstly to pay the interest on the loans. Of the remainder of any
LTI award, part will be provided as a loan waiver amount after the Company’s FBT liability has been paid. A participant will
not be eligible to receive any LTI award if the relevant NPAT target or TSR target is not met.
(b) Retention Award – Mr Segal
The Board recognised that the retention of key executives was a crucial element to the success of the Company following
Orica Limited ceasing to be a majority shareholder and the acquisition of SCF. Accordingly, Mr Segal received a retention
award in the form of a limited recourse, interest free unsecured loan by Incitec Pivot for $722,000 which was applied in the
purchase of shares on market. Mr Segal is restricted from dealing in the shares until 10 May 2009 and, until that time, the
shares could be forfeited if he ceases to be employed by the Company. The loan is repayable on the earlier of Mr Segal
ceasing to be employed by the Company, selling of the shares or three years after the loan is made. If he remains in
service until 10 May 2009, the full loan amount outstanding at that time will be forgiven by the Company.
Incitec Pivot Limited
105
Notes to the Financial Statements
For the year ended 30 September 2008
35. Share based payments (continued)
Set out below are summaries for:
(cid:121)
2008, of shares treated as options, under the LTI Interim Performance Plan 2006/08, the LTI Performance
Plan 2006/09, the LTI Performance Plan 2007/10 and in relation to Mr Segal, in respect of his Retention
Award; and
2007, of shares treated as options, under the LTI Interim Performance Plan 2006/08, the LTI Performance
Plan 2006/09 and in relation to Mr Segal, in respect of his Retention Award.
(cid:121)
Consolidated/Company – 2008*
Grant
date
Expiry date
Exercise
price
Balance
at the
start of
the year
Granted
during
the year
Exercised
during the
year
Forfeited
during the
year
Balance at
the end of
the year
Number
Number
Number
Number
Number
Retention Award – Mr. Segal
5 Jul 06
10 May 09
$0
651,940
Total
651,940
-
-
LTI Interim Performance Plan – 2006/08
17 Nov 06
30 Sept 08
$1.27
Total
LTI Performance Plan – 2006/09
1 Dec 06
30 Sept 09
$1.21
Total
LTI Performance Plan – 2007/10
12 Nov 07
30 Sept 10
$4.41
Total
Weighted average exercise price
-
-
-
-
-
-
-
2,697,640
2,697,640
4,209,900
4,209,900
1,759,120
1,759,120
$1.87
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
651,940
651,940
2,697,640
2,697,640
4,209,900
4,209,900
(14,440)
1,744,680
(14,440)
1,744,680
$4.41
$1.74
Consolidated/Company – 2007*
Grant
date
Expiry date
Exercise
price
Balance
at the
start of
the year
Granted
during
the year
Exercised
during the
year
Forfeited
during the
year
Balance at
the end of
the year
Number
Number
Number
Number
Number
Retention Award – Mr. Segal
5 Jul 06
10 May 09
$0
651,940
Total
651,940
-
-
LTI Interim Performance Plan – 2006/08
17 Nov 06
30 Sept 08
$1.27
Total
LTI Performance Plan – 2006/09
1 Dec 06
30 Sept 09
$1.21
Total
Weighted average exercise price
-
-
-
-
-
3,027,400
3,027,400
4,581,640
4,581,640
$1.23
-
-
-
-
-
-
-
-
-
651,940
651,940
(329,760)
2,697,640
(329,760)
2,697,640
(371,740)
4,209,900
(371,740)
4,209,900
$1.23
$1.12
*
Current year and comparative numbers includes the effect of the 20 for 1 share split approved by shareholders in
September 2008 to enhance comparability.
106
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2008
35. Share based payments (continued)
The weighted average share price at the date of exercise of shares treated as options exercised regularly during the year
ended 30 September 2008 was $nil (2007 - $nil) as no shares treated as options have been exercised.
The weighted average remaining contractual life of shares treated as options outstanding at the end of the period was 1.23
years (2007 – 1.61 years).
Fair value of shares treated as options granted
LTI Performance Plan – 2007/10
In respect of the LTI Performance Plan 2007/10, the assessed fair value at grant date of the shares treated as options
granted during the year ended 30 September 2008 was $1.94 per share treated as an option. The fair value at grant date
is independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the
term of the share treated as an option, the impact of dilution, the share price at grant date and expected price volatility of
the underlying share, the expected dividend yield and the risk free interest rate for the term of the share treated as an
option.
The model inputs for these shares treated as options, granted during the year ended 30 September 2008 included:
(a) shares treated as options are granted at $4.41 per share treated as an option, have a three year life, and
vest after certain cumulative TSR targets are met for the period 1 October 2007 to 30 September 2010 and
are exercisable at the earlier of 31 December 2010 or cessation of employment.
(b) exercise price: $4.41
(c) grant date: 12 November 2007
(d) expiry date: 31 December 2010
(e) share price at grant date: $4.41
(f) expected price volatility of the Company’s shares: 35% per annum
(g) expected dividend yield: 2.5%
(h) risk-free interest rate: Australian Government bond rate with approximately 3 years to maturity.
Incitec Pivot Limited
107
Notes to the Financial Statements
For the year ended 30 September 2008
35. Share based payments (continued)
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 Link Market Services Limited. 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:121)
(cid:121)
(cid:121)
shares acquired are either newly issued shares or existing shares acquired on market.
employees are each entitled to acquire shares with a maximum value of $1,000.
employees salary sacrifice the value of the shares by equal deductions through to 30 June the following
year.
employees cannot dispose of the shares for a period of three years from the date of acquisition or until
they leave their employment with the Company, whichever occurs first.
employees who leave the Company must salary sacrifice any remaining amount prior to departure.
(cid:121)
(cid:121)
Grant date
Date shares become
unrestricted
9 Sep 04
22 Dec 04
7 Mar 05
30 Jun 05
16 Sep 05
13 Jul 06
23 Aug 06
2 Jul 07
11 Jul 08
Total
9 Sep 07
22 Dec 07
7 Mar 08
30 Jun 08
16 Sep 08
13 Jul 09
23 Aug 09
2 Jul 10
11 Jul 11
Number of participants as at
Number of shares held as at
30 Sep 2008
-
-
-
-
-
259
134
360
562
1,315
30 Sep 2007
241
241
240
240
170
285
150
395
-
1,962
30 Sep 2008
-
-
-
-
-
11,137
5,226
4,680
2,810
23,853
30 Sep 2007
3,083
2,763
3,071
3,354
2,729
12,255
5,850
5,135
-
38,240
These shares rank equally with all other fully paid ordinary shares from the date acquired by the employee and are eligible
for dividends.
Expenses arising from share-based payment transactions
Total expenses arising from share-based payment transactions recognised during the period as part of employee benefit
expense were as follows:
Shares, treated as options, issued under Mr Segal’s Retention
Award and the LTI Interim Performance Plan 2006/08, LTI
Performance Plan 2006/09 and LTI Performance Plan 2007/10
Consolidated
Company
2008
$’000
2007
$’000
2008
$’000
2007
$’000
2,776
1,827
2,776
1,827
-
-
-
-
108
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2008
36. Investments in controlled entities
Name of Entity
Company
Incitec Pivot Limited
Controlled Entities – operating
Incitec Fertilizers Limited
Incitec Pivot LTI Plan Company Pty Limited
TOP Australia Ltd
Southern Cross Fertilisers Pty Limited
Southern Cross International Pty Limited
Coltivi Insurance Pte Limited
Incitec Pivot Explosives Holdings Pty Ltd
Incitec Pivot Finance Australia Pty Ltd
Incitec Pivot Holdings Hong Kong Ltd
Dynofert Limited
Tinlinhe Nitrogen Limited
Incitec Pivot Investments 1 Pty Ltd
Incitec Pivot Investments 2 Pty Ltd
Incitec Pivot US Investments
Incitec Pivot US Holdings Pty Ltd
Incitec Pivot Management LLC
Incitec Pivot Finance LLC
Dyno Nobel Holdings ASA
Dyno Nobel Europe Pty Ltd
Dyno Nobel Limited
Dyno Nobel Australia LLC
The Dyno Nobel SPS Trust
Dyno Nobel SPS LLC
Dyno Nobel Holdings USA III Inc.
Dyno Nobel Management Pty Ltd
Industrial Investments Australia Finance Pty Ltd
Te Moana Insurance Limited (NZ)
Dyno Nobel Holdings USA II Inc.
Dyno Nobel Holdings USA I Inc.
Dyno Nobel Inc.
DNX Drilling Inc.
Dyno Nobel Transportation Inc.
ETI Export Inc.
Queensland Operations Pty Ltd
Ownership
interest
Country of
incorporation
Australia
Australia
Australia
Australia
Australia
Australia
Singapore
Australia
Australia
Hong Kong
Hong Kong
Hong Kong
Australia
Australia
USA
Australia
USA
USA
Norway
Australia
Australia
USA
Australia
USA
USA
Australia
Australia
New Zealand
USA
USA
USA
USA
USA
USA
Australia
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
2
2
2
2
2
2
2
2
2
2
2
2
2
1,2
2,3
2
2
2
1
2
(1) These entities were dormant during 2008.
(2) These entities are members of the Australian tax-consolidated group.
(3) On 2 October 2008 the entity changed to a Propriety Limited company.
Incitec Pivot Limited
109
Notes to the Financial Statements
For the year ended 30 September 2008
36 Investments in controlled entities (continued)
Name of Entity
Ownership
interest
Country of
incorporation
Independent Explosives Co of Penna
IR Inc
Simsbury Hopmeadow Street LLC
Tech Real Estate LLC
Tradestar Corporation
DNX Explosivos Chile Limitada
CMMPM, LLC
CMMPM, L.P.
Compania Mexicana de Mecha para Minas S.A. de C.V
Dyno Nobel Canada Inc.
Alberta Ltd
Castonguay Blasting Inc.
Castonguay G.P.
DNX Castonguay Inc.
Dyno Nobel Nitrogen, Inc.
Dyno Nobel Nunavut Inc.
La Groupe Castonguay
Polar Explosives 2000 Inc.
Western Explosives Ltd
Dyno Nobel Asia Pacific Limited
Dampier Ammonia Pty Ltd
Dampier Nitrogen Pty Ltd
Dampier Urea Pty Ltd
DNX Australia Pty Ltd
DNX Canada
DNX Mongolia LLC
DNX Papua New Guinea Ltd
Dyno Nobel Administration Pty Ltd
Dyno Nobel Holding Australia Pty Ltd
Dyno Nobel Moranbah Pty Ltd
Dyno Nobel Moura Pty Ltd
Dyno Nobel Nitrates Pty Ltd
Plenty River Ammonia Holdings Pty Ltd
Prime Manufacturing Ltd
PT DNX Indonesia
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
75%
100%
USA
USA
USA
USA
USA
Chile
Mexico
Mexico
Mexico
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Australia
Australia
Australia
Australia
Australia
Canada
Mongolia
PNG
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
Indonesia
2
1
2,3
1,2
2
1,2
2
1
2
1,2
2
2
1,2
1,2
1
(1) These entities were dormant during 2008.
(2) These entities are members of the Australian tax-consolidated group.
(3) On 2 October 2008 the entity changed to a Propriety Limited company.
110
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2008
36. Investments in controlled entities (continued)
On 30 September 2008, Southern Cross International Pty Ltd, Southern Cross Fertilisers Pty Ltd, TOP Australia Ltd, Incitec
Fertilizers Limited, Dyno Nobel Investments Australia Pty Ltd (now known as as Incitec Pivot Explosives Holdings Pty Ltd),
Incitec Pivot Finance Australia Pty Ltd entered into a Deed of Cross Guarantee with Incitec Pivot Limited for the purposes of
obtaining financial reporting relief under Class Order 98/1418 made by the Australian Securities and Investments Commission
(ASIC).
Incitec Pivot Limited
111
Notes to the Financial Statements
For the year ended 30 September 2008
37. Deed of Cross Guarantee
Closed Group
2008
$mill
2007
$mill
Balance Sheet
Current assets
Cash and cash equivalents
Trade and other receivables
Other financial assets
Inventories
Other assets
Assets classified as held for sale
Total current assets
Non-current assets
Trade and other receivables
Other financial assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Retirement benefit surplus
Other assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Interest bearing liabilities
Other financial liabilities
Current tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Trade and other payables
Interest bearing liabilities
Retirement benefit obligation
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
Income Statement
Profit before income tax
Income tax benefit/(expense)
Profit for the financial year
Retained profits at the beginning of the financial year
Movements in retained earnings
Cash dividend paid
Retained profits at the end of the financial year
400.7
362.6
30.3
483.6
111.9
4.8
1,393.9
0.2
2,299.3
539.6
190.4
49.1
-
0.1
3,078.7
4,472.6
750.8
170.0
13.8
210.8
47.7
1,193.1
42.2
386.9
2.4
51.4
482.9
1,676.0
2,796.6
2,267.7
2.3
526.6
2,796.6
837.9
(233.9)
604.0
148.5
(6.6)
(219.3)
526.6
218.3
167.4
292.1
221.7
4.5
5.0
909.0
0.4
1.6
502.1
193.7
28.6
2.7
1.2
730.3
1,639.3
281.4
-
9.1
35.1
31.2
356.8
52.8
630.0
-
64.7
747.5
1,104.3
535.0
360.8
25.7
148.5
535.0
286.2
(82.4)
203.8
18.5
1.8
(75.6)
148.5
Entities which are party to a Deed of Cross Guarantee dated 30 September 2008, entered into in accordance with ASIC
Class Order 98/1418, are disclosed in note 36, Investments in controlled entities. A consolidated Balance Sheet and
Income Statement for this closed group are shown above.
112
Incitec Pivot Limited
Notes to the Financial Statements
For the year ended 30 September 2008
38. Events subsequent to balance date
Since the end of the financial year, in November 2008, the directors have declared a final dividend of 19.5 cents per share.
These dividends are fully franked at the 30% corporate tax rate and are payable on 2 December 2008.
Other than the matter reported on above, the directors have not become aware of any other significant matter or
circumstance that has arisen since 30 September 2008, 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
113
Directors’ Declaration
on the Financial Statements set out on pages 38 to 113
I, John 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 38 to 113, and the remuneration disclosures
that are contained in the Remuneration Report on pages 12 to 28 of the Directors’ Report, are in
accordance with the Corporations Act 2001, including:
(i)
giving a true and fair view of the financial position of the Company and the Consolidated entity
as at 30 September 2008 and of their performance, for the year ended on that date; and
(ii) complying with Accounting Standards in Australia (including the Australian Accounting
Interpretations) and the Corporations Regulations 2001.
(b)
(c)
the financial report also complies with International Financial Reporting Standards as disclosed in
Note 1; and
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 for the financial year ended 30 September 2008.
John Watson, AM
Chairman
Dated at Melbourne this 12th day of November 2008
114
Incitec Pivot Limited
Shareholder Statistics
As at 10 November 2008
Distribution of ordinary shareholder and shareholdings
Size of holding
–
–
–
–
–
1
1,001
5,001
10,001
50,001
100,001 and over
Total
1,000
5,000
10,000
50,000
100,000
Number of
holders
Percentage
Number of
shares
Percentage
11,335
25,843
7,174
5,684
278
205
50,519
5,809,155
22.44%
76,438,139
51.16%
14.20%
52,638,673
11.25% 107,843,375
19,492,780
0.55%
0.41% 955,008,438
100.00% 1,217,230,560
0.48%
6.28%
4.32%
8.86%
1.60%
78.46%
100.00%
Included in the above total are 1034 shareholders holding less than a marketable parcel of shares.
The holdings of the 20 largest holders of fully paid ordinary shares represent 69.55% of that class of shares.
Twenty largest ordinary fully paid shareholders
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Limited
National Nominees Limited
Citicorp Nominees Pty Limited
RBC Dexia Investor Services Australia Nominees Pty Limited
ANZ Nominees Limited
Cogent Nominees Pty Limited
ANZ Nominees Limited
UBS Nominees Pty Ltd
AMP Life Limited
Australian Foundation Investment Company Limited
Queensland Investment Corporation
Cogent Nominees Pty Limited
Citicorp Nominees Pty Limited
JP Morgan Nominees Australia Limited
RBC Dexia Investor Services Australia Nominees Pty Limited
Tasman Asset Management Ltd
Citicorp Nominees Pty Limited
Pan Australian Nominees Pty Limited
RBC Dexia Investor Services Australia Nominees Pty Limited
Total
Number of
shares
211,737,231
182,107,869
169,658,455
45,638,484
33,834,068
33,188,670
31,421,960
24,961,472
18,666,963
18,643,732
12,956,020
12,141,421
8,267,060
7,927,286
7,244,700
7,077,106
5,746,533
5,490,006
5,289,681
4,530,132
846,528,849
Percentage
17.39%
14.96%
13.94%
3.75%
2.78%
2.73%
2.58%
2.05%
1.53%
1.53%
1.06%
1.00%
0.68%
0.65%
0.60%
0.58%
0.47%
0.45%
0.43%
0.37%
69.55%
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:
10 November 2008
10 November 2008
10 November 2008
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Limited
National Nominees Limited
211,737,231
182,107,869
169,658,455
17.39%
14.96%
13.94%
On-market buy-back
There is no current on-market buy-back.
Incitec Pivot Limited
117
Five Year Financial Statistics
Incitec Pivot Limited and its controlled entities
Sales
Earnings before depreciation, amortisation, net borrowing costs, individually material
items and tax
Depreciation and amortisation (excluding goodwill)
Goodwill amortisation
Earnings before net borrowing costs, individually material items and tax (EBIT)
Net borrowing costs
Individually material items before tax
Taxation revenue / (expense)
Operating profit after tax and individually material items
Individually material items after tax attributable to members of Incitec Pivot
Operating profit after tax before individually material 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 (1)
Investor Shares
Number of shares on issue at year end (1)
Earnings per share (1) (2)
before individually material items
including individually material items
Dividends (declared)
Dividends (paid)
Dividend franking
Share price range – High
Low
Year end
2008
$mill
2,918.2
1,039.4
(70.3)
-
969.1
(80.6)
(38.2)
(236.0)
614.3
(42.9)
657.2
219.3
1,868.4
1,689.2
311.8
3,856.2
314.0
8,039.6
3,567.4
88.6
1,145.9
90.8
4,892.7
3,146.9
3,146.9
3,146.9
2007
$mill
1,373.2
2006
$mill
1,111.2
348.6
(36.1)
-
312.5
(28.8)
3.9
(82.4)
205.3
2.8
202.5
75.6
909.0
502.1
1.6
193.7
32.9
1,639.3
325.6
31.2
682.8
64.7
1,104.3
535.0
535.0
535.0
159.4
(33.1)
-
126.2
(12.9)
(54.1)
(12.6)
46.7
(36.1)
82.8
41.9
597.4
441.1
-
196.2
69.8
1,304.5
315.1
48.2
499.2
62.0
924.5
380.0
380.0
380.0
thousands
thousands
thousands
1,217,231
-
1,217,231
1,008,478
-
1,008,478
1,008,478
-
1,008,478
cents
cents
cents
cents
%
61.4
57.4
29.7
21.8
100
20.1
20.4
15.0
7.5
100
7.3
4.1
5.2
3.6
100
$9.99
$4.11
$5.07
6,171.4
(0.58)
$4.29
$1.19
$4.28
4,313.3
0.34
$1.33
$0.77
$1.29
1,304.5
0.18
$mill
$
%
$mill
%
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 material items
including individually material items
Note:
Financial year ended 30 September 2005, 2006, 2007 and 2008 are reported under AIFRS.
The financial year ended 30 September 2004 is reported under AGAAP.
(1) The number of shares have been restated as a result of the 20:1 share split as approved by shareholders on 23 September 2008.
(2) 10,437,643 shares were issued to the shareholders of Dyno Nobel Limited on 16 June 2008 as part of the purchase consideration.
33.2
2,030.3
39.2
22.8
411.7
43.5
11.4
275.4
42.0
21.4
155.3
62.9
257.0
217.6
586.4
$mill
$mill
35.7
33.4
44.3
44.9
17.6
9.9
times
%
%
10.9
12.0
9.8
118
Incitec Pivot Limited
Weighted average number of shares on issue (investor and ordinary) (1) (2)
thousands
1,069,507
1,008,478
1,130,320
Five Year Financial Statistics
2005
$mill
1,073.9
108.4
(30.5)
-
77.9
(9.4)
(47.0)
(7.0)
14.5
(33.4)
47.9
70.5
358.6
292.0
-
192.3
2.5
845.2
213.2
47.8
-
24.3
285.3
560.0
560.0
560.0
2004
$mill
1,135.6
167.2
(35.4)
(9.9)
121.9
(5.4)
(9.3)
(32.1)
75.0
5.8
80.9
16.9
460.9
296.1
-
183.8
30.5
971.4
272.2
26.9
19.0
21.8
339.9
631.5
631.5
631.5
1,165,621
-
1,165,621
1,165,621
-
1,165,621
1,165,621
1,165,621
4.1
1.2
3.6
6.1
100
$1.13
$0.75
$0.79
922.0
0.32
7.3
9.2
1.6
8.3
26.1
-
8.0
0.0
6.9
6.4
6.5
1.5
100
$0.97
$0.78
$0.94
1,096
0.38
10.7
(20.8)
(3.4)
22.5
29.4
-
13.4
12.5
Incitec Pivot Limited
119
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Shareholder Information
Annual General Meeting
2.00 pm Friday 19 December 2008
The Auditorium,
Level 2, Melbourne Exhibition Centre,
2 Clarendon Street,
Southbank Victoria,
Australia
Securities Exchange Listing
Incitec Pivot’s shares are listed on the
Australian Securities Exchange (ASX) and
are traded under the code IPL
Share Registry
Link Market Services
Level 12, 680 George Street,
Sydney New South Wales 2000,
Australia
Locked Bag A14,
Sydney South New South Wales 1235
Telephone: 1300 554 474
(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
8634-02 cover.03.indd 2
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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
Telephone: +61 3 8695 4400
Facsimile: +61 3 8695 4419
www.incitecpivot.com.au
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Annual Report
2008
The paper used for this Annual Report 2008 is Harvest Recycled Silk.
Harvest Recycled delivers Triple Green Environmental Performance:
60% Recycled Sugar Cane, ECF Bleaching and Sustainable Afforestation.
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