Office of the Company Secretary
ABN 42 004 080 264
Registered Office:
Level 8, 28 Freshwater Place
Southbank Victoria 3006
Tel: (61 3) 8695 4400
Fax: (61 3) 8695 4419
www.incitecpivot.com.au
23 November 2012
ASX Market Announcements Office
Dear Sir or Madam
Electronic Lodgement
2012 Annual Report
In accordance with the listing rules, I attach a copy of Incitec Pivot Limited’s Annual
Report for 2012 for release to the market.
Yours faithfully
Kerry Gleeson
Company Secretary
Attach.
ANNUAL REPORT 2012
2012 Tumbler Ridge
CANADA
Ekati
Diavik
Salt Lake City
Calgary
Biwabik
St Helens
Barry
Cheyenne
Carthage
Louisiana
Wolf Lake
Dinamita
Gomez Palacios
Guadalajara
USA
MEXICO
Meadowbank
North Bay
Mount Wright
Maitland
Boisbriand
Ormstown
Simsbury
Port Ewen
Donora
Duffield
Graham
Brooksville
Lausanne
Tirana
Bucharest
Ankara
Soma
Linyi (Fabchem)
New Delhi
Hong Kong
Muara Tuhup
Tenggarong
Berau
PAPUA NEW GUINEA
Lihir
INDONESIA
AUSTRALIA
Moranbah
Townsville
Moura
(Queensland Nitrates)
Gibson Island
Helidon
Kooragang Island
Melbourne
Geelong
Devonport
LATIN
AMERICA
La Serena
Santiago
TURKEY
CHINA
PAKISTAN
INDIA
SOUTH
AFRICA
Batu Arang (TKEB)
Sibolga
Tanjung Tabalong
Jakarta
Batu Kajang
Port Hedland
Mt Isa
Phosphate Hill
Kalgoorlie
Perth
Port Adelaide
Portland
Johannesburg (SASOL Dyno Nobel)
Johannesburg (DetNet)
Moranbah ammonium nitrate plant
Lausanne
Tirana
Bucharest
Ankara
Soma
Linyi (Fabchem)
New Delhi
Hong Kong
Muara Tuhup
Tenggarong
Berau
PAPUA NEW GUINEA
Lihir
TURKEY
CHINA
PAKISTAN
INDIA
SOUTH
AFRICA
Batu Arang (TKEB)
Sibolga
Tanjung Tabalong
Jakarta
Batu Kajang
Port Hedland
Mt Isa
Phosphate Hill
Kalgoorlie
Perth
Port Adelaide
Portland
Johannesburg (SASOL Dyno Nobel)
Johannesburg (DetNet)
INDONESIA
AUSTRALIA
Moranbah
Townsville
Moura
(Queensland Nitrates)
Gibson Island
Helidon
Kooragang Island
Melbourne
Geelong
Devonport
Ekati
Diavik
Tumbler Ridge
Calgary
Biwabik
St Helens
Barry
Salt Lake City
Cheyenne
Carthage
Louisiana
Wolf Lake
Dinamita
Gomez Palacios
Guadalajara
CANADA
USA
MEXICO
Meadowbank
North Bay
Mount Wright
Maitland
Boisbriand
Ormstown
Simsbury
Port Ewen
Donora
Duffield
Graham
Brooksville
Incitec Pivot Limited
Company Headquarters
Incitec Pivot Fertilisers
Corporate Office
Manufacturing/Distribution
Quantum Fertilisers
Dyno Nobel
Corporate Office
Manufacturing/Distribution
Joint Ventures/Investments
LATIN
AMERICA
La Serena
Santiago
Contents
Chairman’s Report
Managing Director’s Report
Board of Directors
Executive Team
Directors’ Report
– Remuneration Report
– Corporate Governance
Statement
Financial Report
ii
iv
vi
vii
1
9
27
38
VISION STATEMENT
To be the best in our markets,
delivering Zero Harm and
outstanding business performance
through our people, our culture
and our customer focus.
Chairman’s Report
It is particularly pleasing to lead the Board as the
Company completes its biggest-ever development
project, the ammonium nitrate complex at
Moranbah in Queensland
I am delighted to be able to present my
first report as Chairman of Incitec Pivot
Limited. It is particularly pleasing to lead
the Board as the Company completes its
biggest-ever development project, the
ammonium nitrate complex at Moranbah
in Queensland. Watching the final touches
being made to Moranbah has reassured
me that we have a great company with
some tremendous opportunities along
with, inevitably, some interesting
challenges. I have no doubt we have an
extremely strong team and the right
strategy to build on IPL’s success to date.
In terms of financial performance, the
Group’s underlying profit, Net Profit After
Tax (NPAT), excluding Individually Material
Items (IMIs), compared to 2011, was
down to $404.7 million, a decrease
of 24% or $125.4 million on the previous
year. While the financial result was
unsatisfactory, 2012 saw substantial
progress because of actions taken to
respond to strategic business challenges
and the establishment of important
building blocks for the future. Our
Managing Director & CEO, James Fazzino,
covers this in detail in his report, so I will
take the opportunity to reflect personally
upon some of the things that have
impressed me as I have travelled around
some of our major operations, both in
Australia and in the United States, over
the past few months.
The first thing which has been brought
home to me is the relentless obsession
with safety and the pursuit of Zero Harm,
which we must continue to drive in all
parts of the IPL Group. At Board level,
safety is the first item on the agenda of
every meeting and the same applies to
James’ meetings with his Executive Team.
However, it is only when you visit our
various sites that you see examples
of how our people, at all levels of the
organisation, are equally committed to
Zero Harm.
Recently, I was at our Initiating Systems
plant in Graham, Kentucky, where I took
the opportunity to present an award for
exceptional performance in achieving
more than 2000 days without a lost-time
injury. Two elements struck me as being
ii
Incitec Pivot Limited Annual Report 2012
major contributors to this record. The first
is that the people at Graham regard each
other as family members and take a
personal interest in making sure that
friends and colleagues are protected from
injury, not only in the workplace but also
in their home lives. It is a personal thing.
The second factor that struck me was that
all of the people in Graham really believe
that Zero Harm is possible. To put this
another way, they strongly believe that
every safety incident which occurs
throughout our Group could have been
prevented. We must be relentless in
pursuing ‘Zero means zero’ and I believe
a lot of our improvement will come from
replicating the culture that exists at
Graham at other sites right across the
Group. If we need any further evidence of
what is possible, we need look no further
than Moranbah, where the construction
project involved four million hours
without a lost-time injury. We must strive
to emulate that performance across our
entire organisation and, to that end, the
Directors have endorsed a clear five-year
strategy to drive improvement in our
safety performance. The Board’s Health,
Safety, Environment and Community
Committee has had a critical role in
overseeing and reinforcing our progress
towards Zero and, in the coming year,
will maintain its practice of visiting
our operations and engaging with our
people on site.
The calibre and diversity of people in
all parts of our organisation also made
a huge impression on me. Whether it be
at a customer’s site in the Pilbara or at a
manufacturing facility on the other side
of the country at Gibson Island or at
one of our various sites in the United
States, it is impossible not to be
impressed by the enthusiasm of the
many smart people we have working
in our team. A classic example is at our
ammonium nitrate plant at Moranbah in
the Bowen Basin, where the first tonnes
of ammonium nitrate were produced in
early July 2012. Despite the doubts of
some, the project was delivered
essentially on time and close to budget.
The fact that Moranbah is now operating
on schedule is a great tribute to the
talented men and women who never
stopped believing they could do it.
One of the pluses to come from the
Moranbah development is that we have
demonstrated that IPL is capable of
completing major construction projects.
This credibility and, more importantly, the
experience and skills which we developed
at Moranbah, put us in a strong position
to be able to seriously consider other
opportunities which may arise for the
Group. However, in considering
opportunities, you can be assured that we
will continue to apply the highest levels
of financial discipline and pursue only
projects which are consistent with our
strategy and which we believe will give us
an acceptable level of return. As you may
recall, during the year we commenced
two major feasibility studies, one for an
ammonium nitrate plant in the Hunter
Valley, New South Wales, and the other
on a 750,000 tonne ammonia plant in
Louisiana, United States. While the
feasibility study on the ammonia plant in
Louisiana is continuing, with a decision
planned for the second quarter of the
2013 calendar year, we decided to delay
the Hunter Valley study for at least two
years in light of the current market
uncertainty and rising construction
costs in Australia.
When comparing potential projects in
Australia and the United States a significant
difference lies in the price of our major raw
material, gas. The impact of this is currently
being seen in the United States, where the
low gas price is leading to a revival of that
country’s major manufacturing industries.
In our view, it is essential that Australia
has a coherent energy strategy which
recognises the importance of being able to
source gas at a price which will encourage
investment in new manufacturing activity.
I know that we risk being accused of
arguing self-interest in this area, but at the
very least, I believe that this is a subject
that needs to be thoroughly debated in the
national interest and we are committed to
being part of that debate.
Another plus from the completion of
Moranbah is the direct benefit it has had
for our shareholders, in that it has changed
our capacity to pay dividends. Our final
dividend is 9.1 cents per share, bringing
the full year dividend to 12.4 cents per
share, an increase of 8% on the 2011 full
year dividend of 11.5 cents per share.
This dividend is at a payout ratio of 50%
of NPAT excluding IMIs, which reflects the
increased payout ratio endorsed by the
Board – namely 30–60% of NPAT
excluding IMIs, compared to 20–40%
adopted in 2009.
We have a wide range of shareholders
on our register and we are cognisant of
retail shareholders benefitting from
franking credits. Our intention is to
distribute franking credits when they
are available. Pleasingly, for the final
dividend, we were able to increase the
franking to 75% compared to 50% for
the interim dividend.
On the subject of shareholder interests,
I recently met with 15 of IPL’s top
shareholders to better understand their
attitudes and opinions, which I shared
with my fellow Directors and
management. Those shareholders
unanimously acknowledged the
Company’s commitment to its long-term
strategic direction and provided some
valuable insights on various aspects of the
Company from their own perspective as
shareholders. We heard a variety of views
on issues, such as remuneration and the
types of performance measures which
can best drive our Group and individual
performance, as well as on governance
generally. These are areas in which we are
seeking to continuously improve and
hearing the views of our shareholders is
always valuable input to this process.
We continue to progress our
Sustainability Agenda. Its stated aim
is `the creation of long-term economic
value while caring for our people, our
communities and our environment’. I am
pleased to advise that, for the first time,
the Group has been included in the Dow
Jones Sustainability Asia Pacific Index, a
significant milestone and recognition of
our improving sustainability performance.
This is an important credibility tool for
relationships with our customers and
communities. “Zero Harm for Everyone
Everywhere” and “Care for the
Community & our Environment” are two
of our Values, which set the standards by
which all IPL people operate and are the
criteria for meeting the expectations of
our stakeholders.
As a Group, we are committed to building
an inclusive and accessible organisation
through the development of a culture
that embraces diversity. Embracing
diversity is part of our core Values –
in particular, “Value People: Respect,
Recognise and Reward”. During 2012
The DNAP team priming holes with boosters, detonators and leads on a mine site.
who have diligently exercised their
professional duties in guiding the
Company over the past financial year.
I look forward to working with each of
the Directors individually and as a team
to help our management to navigate
IPL through a changing commercial and
political environment.
I would also like to thank James Fazzino,
Managing Director & CEO, and his
Executive Team for their leadership,
commitment and perseverance in
executing on our strategy. The most
important role of this team is serving the
business and empowering a culturally
diverse employee base to deliver on our
promises. I am pleased to say they have
taken on this responsibility with vigour
and I look forward to building on the
relationship between the Board and the
Executive Team in the coming year.
Finally, a massive vote of thanks to all
of our people spread across the diverse
operations which make up IPL. You make
this Company what it is and all of you
should feel proud of your achievements
during 2012.
Looking forward, we are clearly operating
in a challenging environment, both locally
and globally. Many of our customers are
having to drive much harder to achieve
the same results and, in many cases, the
markets into which they sell have slowed
down. I am still very optimistic about
the medium and long term outlook for
those markets and customers. Our
determination is to listen even more
carefully to our customers and to apply
our technical and product advantages by
working with them to drive increased
productivity. I believe we have the
culture, people and expertise to do just
that and I look forward to a rewarding
future for our Company.
particular focus was placed on
establishing a clear diversity strategy
addressing our global operations and,
in Australia, focussing on initiatives
with regards to gender diversity and
indigenous employment. In addition,
during 2012 the Board adopted its
Diversity Policy, which sets out our
approach to diversity, which is
underpinned by three principles:
“respecting our differences”, “shaping
our future organisation” and “building
a flexible organisation”. Our Corporate
Governance Statement includes our
report on progress made in the year
and the objectives we have set for
next year.
At the Board level, we have a diverse
group of Directors who are all active in
seeking to contribute to the strategy
and to the performance of the Group.
We recently established a Nominations
Committee of the Board, whose role is
to ensure that we have the right skills
around the Board table to support our
ever-evolving business and that we plan
for Board succession in a systematic
way. We will also keep the focus on
continuously improving Board
performance in both the short and
the long term. To assist us with this,
I have commissioned an external Board
performance review which will conclude
later this year. The basic thrust will be
to question how we, as a Board, can
contribute most effectively to the
Company and its shareholders.
IPL farewelled a champion of the
business this year with the retirement of
its foundation Chairman, John Watson AM.
John became a Director of the Company
in 1997 and Chairman in 1998. His legacy
is immense: he championed the Pivot-
Incitec merger in 2003, oversaw the exit
from the Orica Group and the acquisitions
of Southern Cross Fertilisers in 2006 and
Dyno Nobel in 2008; each a company-
transforming event. I am fortunate to
have the opportunity to build on the
substantial strategic foundation overseen
by John and his fellow Directors over the
past 15 years.
I would like to take this opportunity
to pay tribute to my fellow Directors
Paul Brasher
Chairman
Incitec Pivot Limited Annual Report 2012
iii
Managing Director’s Report
I am confident about the future because during
2012 we took a range of actions and achieved
milestones which have together established a
strong platform for growth
I’m pleased to present my fourth
report to you as Managing Director &
CEO. This was a challenging year in which
our underlying profit was down on the
previous year, largely because of volatile
fertiliser prices. However, I am confident
about the future because during 2012
we took a range of actions and achieved
milestones which have together
established a strong platform for growth.
Our highest priority is Zero Harm.
Our safety performance this year was
disappointing as shown by our Total
Recordable Injury Frequency Rate, which
increased marginally on the previous
year. While the severity of the incidents
was reduced, we recognise that we must
make positive progress each year if we
are to attain our goal of Zero Harm. In
this context, the Company developed a
comprehensive five-year Health, Safety
and Environment Strategy which is being
implemented across the Group in line
with detailed plans developed in each
of the businesses. This strategy was
approved by both the Board and my
Executive Team, thus reinforcing our
commitment to Zero Harm at the highest
levels in the organisation. I am fully
confident that Zero Harm is achievable
and I look forward to leading an
organisation which is recognised
globally for its safety performance.
In looking at the financial performance
during the year, the underlying profit,
Net Profit After Tax (NPAT), excluding
Individually Material Items (IMIs), was
$404.7 million, a decrease of 24% or
$125.4 million on the 2011 Result.
Earnings Before Interest and Tax (EBIT),
excluding IMIs, decreased by 22% to
$599.1 million, compared with $772.1
million in 2011. Earnings Per Share (EPS),
excluding IMIs, was down 24% to 24.8
cents per share.
NPAT, including IMIs, was $510.7 million.
This was an increase on the 2011 Full
Year NPAT of $463.2 million including
IMIs. EPS of 31.4 cents, including IMIs,
was 11% up on last year.
The IMIs, net of tax, in 2012 were an
income of $106 million. This included
iv
Incitec Pivot Limited Annual Report 2012
$183.1 million for the write back of the
Moranbah unfavourable contract liability
following the start of production at the
Moranbah ammonium nitrate plant in
Queensland; off-set by an impairment
of the goodwill following the acquisition
of Nitromak and also by a number
of provisions raised in relation to
environmental remediation costs for
some of our former operating sites in
Australia and the United States. We
remain confident that we have the right
strategy for the future, an excellent team
to execute that strategy and the financial
discipline to ensure that we deliver to
the satisfaction of our shareholders.
Our strategy is to leverage the
developing economies of Asia through,
in particular, our Dyno Nobel explosives
businesses, supported by our fertiliser
business, Incitec Pivot Fertilisers. The
2012 Result reinforced the shareholder
value of this strategic approach, with
Dyno Nobel contributing approximately
60% of the Group’s earnings.
Since the acquisition of Dyno Nobel
in 2008, the explosives business has
recorded year-on-year revenue growth
emphasising this strategy.
The explosives businesses, Dyno Nobel
Asia Pacific (DNAP) and Dyno Nobel
Americas (DNA), performed well in a
challenging environment. Earnings in
DNAP rose 8% on the back of sales of
initiating systems to Moranbah customers
and recovery from the adverse impact of
the 2011 floods. Earnings for DNA grew
by 9% driven by strong revenue growth
in the Canadian business. In addition,
DNA’s earnings benefitted from the
performance in its agricultural business,
in particular from the higher urea prices
and lower gas costs at the St Helen’s
plant in Oregon, United States. The
performance in DNA was partly offset
by a decline in US coal demand.
The DNA business has been restructured
under a new President, Dan McAtee,
and I’m confident that this strategic
realignment has the business well
placed to meet the changing dynamics
of the industry in North America.
Restructuring was also undertaken in
the fertiliser business and I’m pleased
that the Second Half performance was
significantly better, notwithstanding the
normal Second Half bias. The fertiliser
distribution business was merged with
the trading business under the leadership
of James Whiteside, expanding the scale
and scope of the business and providing
management visibility along the value
chain from fertiliser manufacturer,
internationally or locally, to the distributor
and then to farmers. The Second Half
performance of Incitec Pivot Fertilisers
validates the action we took and confirms
that Incitec Pivot Fertilisers is a good
business with a strong future.
The start of production at our ammonium
nitrate plant at Moranbah in the Second
Half was an outstanding achievement
and Moranbah has continued to meet
initial milestones. To have the project
completed with an excellent safety
performance, essentially on time and
close to budget, is an exceptional
accomplishment, not least because
it was undertaken in a construction
environment when major project cost
over-runs and delays were the norm.
The delivery of this project and its initial
production performance underscores the
fundamental competence in construction
and plant operation within the Group
and is a tribute to the project team
headed by Alan Grace and the production
team led by Kyle Gimpl.
This competence and the initial
performance of the Moranbah plant gives
us confidence in our ability to successfully
deliver future projects. We are currently
undertaking a feasibility study into the
construction of a world-scale ammonia
plant at a brownfield site in Louisiana,
United States. The rationale for the project
is driven by its ability to leverage low-cost
US gas and to integrate the Group’s entire
ammonium nitrate production. While a
final investment decision will not be
made until the second quarter of the
2013 calendar year, I have a strong
conviction that if the project proceeds,
we have a quality team to execute to
our financial and performance criteria.
The commitment to meet demanding
financial criteria has long been a
hallmark of IPL’s culture, and again
it was demonstrated in the decision
to defer the feasibility study for an
ammonium nitrate plant at Newcastle,
New South Wales, for at least two years.
Although this project was closely aligned
to our strategy, it did not meet our
financial metrics at this time, given the
rising costs of construction in Australia
and the market uncertainty.
As well as BEx, our culture is driven
by our seven Values which direct our
approach to everything we do. Two
key Values, “Care for the Community &
our Environment” and “Value People:
Respect, Recognise & Reward”, were
recognised during the year as part
of our first IPL Group-wide Community
Investment Framework which establishes
a number of programs to support and
encourage employees and sites to develop
closer ties with their communities.
Business Excellence (BEx) is a long term
culture change within the IPL business,
which embraces continuous improvement
across all levels. During the year, we
established a solid foundation for BEx
with 16 sites starting to operate to BEx
principles and plans now established
to roll out BEx to Supply Chain and
Logistics during 2013. Implementation
of a process, such as BEx, across a broad
scale is an extraordinary achievement
and further demonstrates the
commitment and expertise of our
people in delivering performance.
The fundamental change being
brought about through BEx is one of
empowerment – to empower everyone
in the Group to create value by
encouraging decision-making at the level
where it is needed: the factory floor, the
mine bench and the farm field. In BEx,
management supports those who create
the value and our leaders will become
facilitators and coaches.
While we are seeing some modest
early gains, it will be some time
before the new culture of continuous
improvement and world-class
productivity is embedded, which is
the nature of culture change.
Also, during the year, we adopted a
Diversity Strategy, designed to lead us
to developing a culture that embraces
diversity. As part of that, we introduced
an Indigenous Employment Strategy, to
build on our investment in working in
partnership with indigenous Australians
thereby improving employment
outcomes and contributing, in a
meaningful way, to closing the gap on
disparity between indigenous and non
indigenous Australians. The need for
focussed and strategic action in this area
became evident to me when late last
year I signed IPL’s commitment to join
our peer companies in Australia in
creating jobs for indigenous Australians.
Whereas the performance of our
business is driven by the three
principles of strategy, execution and
financial discipline, we operate in an
environment heavily influenced by
Government. A critical issue for our
business and also for Australia is
energy. I have taken the opportunity
in meetings, speeches and through
the media to urge both Federal and
State Governments to demonstrate
a vision which harnesses Australia’s
international competitive advantage
in abundant natural gas to sustain and
build value-added manufacturing. Other
nations are showing what can be done,
including the United States, which is
leveraging its plentiful shale gas reserves
to foster manufacturing and employment.
This approach is attracting companies
around the world to invest in the United
States, including potentially IPL with our
project in Louisiana.
Other critical stakeholders for the
business are customers, and again
during 2012, I was pleased to have the
opportunity to spend time with my
counterparts in major resources and
agricultural companies, often at their
operations. One of our core values is
“Think Customer – Everyone, Every Day”
and this is demonstrated by the focus
and commitment of our people to find
cost-effective and expert solutions to
meet our customers’ needs.
In closing, I want to express my
appreciation for the support of my
colleagues in the Executive Team and my
fellow Directors. Most importantly, I want
to recognise the outstanding team of
people who contribute to the day-to-day
running of the Group. I am proud to lead
the team and I have absolute confidence
in the future of IPL because I have
absolute confidence in our people.
James Fazzino
Managing Director &
Chief Executive Officer
Moranbah ammonium nitrate plant.
Incitec Pivot Limited Annual Report 2012
v
Board of Directors
Paul Brasher BEc(Hons), FCA
Non-executive Chairman
Anthony Larkin FCPA, FAICD
Non-executive director
John Marlay BSc, FAICD
Non-executive director
Paul was appointed as a
director on 29 September 2010
and was appointed Chairman
on 30 June 2012. Paul is
Chairman of the Nominations
Committee.
Tony was appointed as a
director on 1 June 2003. Tony is
Chairman of the Audit and Risk
Management Committee and a
member of the Nominations
Committee.
John was appointed as a
director on 20 December 2006.
John is Chairman of the
Remuneration Committee
and a member of the Audit
and Risk Management
Committee.
Allan McCallum Dip. Ag
Science, FAICD
Non-executive director
Allan was appointed as a
director on 15 December 1997.
Allan is Chairman of the Health,
Safety, Environment and
Community Committee and a
member of the Remuneration
Committee.
Rebecca McGrath BTP(Hons),
MASc, FAICD
Non-executive director
Rebecca was appointed as a
director on 15 September 2011.
Rebecca is a member of the
Audit and Risk Management
Committee, Health, Safety,
Environment and Community
Committee and Nominations
Committee.
Graham Smorgon B.Juris, LLB
Non-executive director
James Fazzino BEc(Hons)
Managing Director & CEO
Graham was appointed as a
director on 19 December 2008.
Graham is a member of the
Health, Safety, Environment and
Community Committee,
Nominations Committee and
Remuneration Committee.
James was appointed Managing
Director & CEO on 29 July 2009.
James was first appointed as
a director on 18 July 2005,
following his appointment as
Chief Financial Officer in May
2003. James is a member of
the Health, Safety, Environment
and Community Committee.
vi
Incitec Pivot Limited Annual Report 2012
Executive Team
James Fazzino BEc(Hons)
Managing Director & CEO
Frank Micallef BBus, MAcc, FCPA,
FFTA, FAICD
Chief Financial Officer
Frank was appointed as Chief Financial
Officer on 23 October 2009. Frank joined IPL
in May 2008 as General Manager, Treasury
and Chief Financial Officer, Trading. Prior to
joining IPL, Frank had significant experience
in the explosives and mining industries as
Global Treasurer and Investor Relations
Manager at Orica Limited and General
Manager Accounting at North Limited.
Kerry Gleeson LLB(Hons), FAICD
General Counsel & Company Secretary
Kerry was appointed as General Counsel
and Company Secretary in February 2004.
Prior to joining the Company, Kerry had
extensive private practice experience in
IPOs, international mergers and acquisitions,
equity markets, financing and restructuring,
while practising as a lawyer in Australia,
with Blake Dawson (now Ashurst), and prior
to that, as a partner of an English law firm.
Kerry qualified as a lawyer in 1991, in
England & Wales, and subsequently in
Victoria, Australia in 2001. In 2009, Kerry
received the ALB Australasian Law Award
for In-House Lawyer of the Year.
Jamie Rintel BA
President, Strategy & Business
Development
Jamie joined IPL in February 2005,
following extensive experience in
consulting across a range of industries
both in Australia and overseas. Within IPL,
Jamie has held a number of roles including
Marketing Manager for Incitec Pivot
Fertilisers. Jamie was appointed to his
current role as President, Strategy &
Business Development in June 2008 and
is responsible for major growth initiatives
across the Group, including major capital
projects and mergers and acquisitions, as
well as Business Excellence (BEx).
Bernard Walsh BE(Mech), MIEAust CPEng
President, Global Manufacturing
Bernard joined IPL in 2003 and has
extensive manufacturing experience in
petrochemicals, chemicals and mining
services. Bernard joined IPL from Orica
Limited where he held a variety of roles
from 1987 to 2003, including as General
Manager of Initiation Explosives Systems
(IES), a joint venture between Orica
Limited and Ensign Bickford Industries
Inc. which manufactured a full range
of initiating systems. Bernard has been
responsible for the Group’s Ammonia,
Ammonium Nitrate and Fertiliser
Manufacturing Plants since 2005.
James Whiteside BAgricSc,
GradDipBusAdmin, GAICD
Chief Operating Officer, Incitec Pivot
Fertilisers
James joined IPL (then known as Pivot
Limited) in 1992, following extensive
experience in agricultural companies
and in consulting. Since joining IPL, James
has held a number of senior management
roles including as Group Procurement
Manager. As Chief Operating Officer, Incitec
Pivot Fertilisers, James is responsible for
domestic and international fertiliser sales
and distribution and the global supply
chain process.
Stephen Dawson BSc(Hons) Mining
Engineering, MBA
President, Dyno Nobel Asia Pacific
Stephen joined the Company upon its
acquisition of Dyno Nobel in 2008. Stephen
is responsible for leading the Dyno Nobel
industrial explosives business in the Asia
Pacific region, including Australia, Indonesia
and Papua New Guinea. He commenced his
career with British Coal and subsequently
worked with mining companies Amcoal
Collieries Limited and Randcoal in South
Africa. Stephen has also worked with AECI
Explosives Limited (now AEL) in a variety
of sales and operational roles.
First row (l to r):
James Fazzino,
Frank Micallef,
Kerry Gleeson,
Jamie Rintel,
Bernard Walsh
Second row (l to r):
James Whiteside,
Stephen Dawson,
Daniel McAtee,
Simon Atkinson
Daniel McAtee BE(Chem)
President, Dyno Nobel US & Canada
Daniel joined the Company as DNA Chief
Operating Officer in April 2012 and was
appointed President of Dyno Nobel USA
& Canada in June 2012. Daniel has over
20 years experience across a variety of
international commercial and operational
commodity businesses including more than
15 years with General Electric, as well as
three years as CEO of a Canadian public steel
company. Daniel is a Certified Master Black
Belt in Six Sigma methodologies.
Simon Atkinson BBus, CA
President, Dyno Nobel International
Simon joined the Company on its merger
with Incitec Fertilizers Limited in 2003,
having commenced with Incitec Limited in
2001 and Orica Limited in 1999. He has
extensive finance experience, having been
the Company’s Commercial Finance
Manager for the Australian fertilisers
business. Simon was previously the
Company’s Investor Relations Manager and
the Global CFO for the Group’s explosives
business. Simon was appointed to his
current role as President, Dyno Nobel
International in May 2010 and, in that
role, oversees international operations in
emerging markets. He is also responsible
for the Dyno Nobel Global Marketing &
Technology Group.
Incitec Pivot Limited Annual Report 2012
vii
Directors’ Report
The directors of Incitec Pivot Limited present the directors’ report, together with the financial report, of the Company and its
controlled entities (the Group) for the year ended 30 September 2012 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
Paul Brasher BEc(Hons), FCA
Non-executive Chairman
Chairman of the Nominations
Committee
Experience
Paul was appointed as a director on 29 September 2010 and was appointed Chairman
on 30 June 2012. Paul is a non-executive director of Perpetual Limited and the Essendon
Football Club. From 1982 to 2009, Paul was a partner of PwC, one of the world’s major
chartered accounting and professional services firms, including serving five years as the
Chairman of the Global Board of PwC. Paul is a former Chairman of the Reach Foundation,
and of the National Gallery of Victoria’s Business Council, a former member of the
Committee for Melbourne, a former board member of Asialink and a former trustee of the
Victorian Arts Centre Trust and the Committee for Economic Development of Australia.
Anthony Larkin FCPA, FAICD
Non-executive director
Chairman of the Audit and Risk
Management Committee
Member of the Nominations
Committee
Tony was appointed as a director on 1 June 2003. He is also a non-executive director of
Oakton Limited and MMG Limited. Tony was previously a non-executive director of OZ
Minerals Limited, Corporate Express Australia Limited and Eyecare Partners Limited,
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 Tony 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.
John Marlay BSc, FAICD
Non-executive director
Chairman of the Remuneration
Committee
Member of the Audit and Risk
Management Committee
John was appointed as a director on 20 December 2006. John is a non-executive director
of Boral Limited, Cardno Limited and Alesco Corporation Limited. He is a member of the
Board of the Climate Change Authority. 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. In addition, previously John held
executive positions with Esso Australia Limited, James Hardie Industries Limited, Pioneer
International Group Holdings and Hanson plc.
Allan McCallum Dip. Ag Science,
FAICD
Non-executive director
Chairman of the Health, Safety,
Environment and Community
Committee
Member of the Remuneration
Committee
Allan was appointed as a director on 15 December 1997. Allan is Chairman of Tassal Group
Limited and is a director of Medical Developments International Limited and a member of
the Rabobank Advisory Board. He is a former Chairman of CRF Group Limited, CRF (Colac
Otway) Pty Ltd and Vicgrain Limited and a former director of Graincorp Limited. Allan has
extensive experience across agriculture and agribusiness.
1
Incitec Pivot Limited Annual Report 2012
Name, qualifications and
special responsibilities
Experience
Rebecca McGrath BTP(Hons),
MASc, FAICD
Non-executive director
Member of the Audit and Risk
Management Committee
Member of the Health, Safety,
Environment and Community
Committee
Member of the Nominations
Committee
Graham Smorgon B.Juris, LLB
Non-executive director
Member of the Health, Safety,
Environment and Community
Committee
Member of the Nominations
Committee
Member of the Remuneration
Committee
Rebecca was appointed as a director on 15 September 2011. Rebecca is currently a
non-executive director of OZ Minerals Limited, CSR Limited and Goodman Group. During
her 23 year career with BP plc, Rebecca held a number of senior roles in operations,
marketing and functional leadership including as Chief Financial Officer and Executive
Board member for BP Australia and New Zealand. Rebecca is also a former director of
Big Sky Credit Union Limited.
Graham was appointed as a director on 19 December 2008. Graham is a non-executive
director of Arrium Limited, Chairman of Smorgon Consolidated Investments, the GBM Group
and the Print Mint Group, as well as being a trustee of the Victorian Arts Centre Trust. His
former roles include Chairman of the Victorian Arts Centre Foundation, Chairman of
Smorgon Steel Group Limited, President of the Carlton Football Club, director of Fed Square
Pty Ltd, Deputy Chairman of Melbourne Health, director of the Walter and Eliza Hall
Institute and partner of law firm Barker Harty & Co, where he practised as a commercial
lawyer for 10 years.
James Fazzino BEc(Hons)
Managing Director & CEO
Member of the Health, Safety,
Environment and Community
Committee
James was appointed Managing Director & CEO on 29 July 2009. James was first 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 Investor Relations Manager, Chief Financial Officer
for the Orica Chemicals group and Project Leader of Orica’s group restructure in 2001.
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, Australia, in 2001.
Kerry was appointed as Company Secretary on 16 February
2004, having previously practised as a lawyer with Blake
Dawson (now Ashurst) in Melbourne and, prior to that,
Kerry was a partner of an English law firm.
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 (ASX) in accordance with section 205G(1)
of the Corporations Act 2001 (Cth), as at the date of this report
is as follows:
Director
P V Brasher(1)
A C Larkin
J Marlay(1)
A D McCallum(1)
R J McGrath
G Smorgon
J E Fazzino(1)
Fully paid ordinary shares
Incitec Pivot Limited
20,600
5,000
37,926
216,501
7,000
0
1,708,180
(1) Held both directly and indirectly.
Further details of directors’ interests in share capital are set out
in Note 34 to the financial statements, Key management
personnel disclosures.
Incitec Pivot Limited Annual Report 2012
2
Directors’ Report
Principal activities
The principal activities of the Group during the course of the
financial year were the manufacture, trading and distribution of
fertilisers, industrial explosives and chemicals, and the provision
of related services. No significant changes have occurred in the
nature of these activities during the financial year.
Dividends
Dividends paid since the last annual report were:
Type
Paid during the year
2011 final dividend
2012 interim dividend
Paid after end of year
2012 final dividend
Dealt with in the
financial report as:
Dividends
Subsequent event
Cents
per
share
Total
amount
$mill
Franked/
Unfranked
Date of
payment
8.2
3.3
133.6
Unfranked 16 December 2011
53.7
50% franked
3 July 2012
9.1
148.2
75% franked 14 December 2012
Note
27
27
$mill
187.3
148.2
Changes in the state of affairs
There have been no significant changes to the Group’s state
of affairs during the financial year.
Events subsequent to reporting date
Since the end of the financial year, in November 2012, the
directors determined to pay a final dividend for the Company
of 9.1 cents per share on 14 December 2012. The dividend is
75% franked (refer Note 27 to the financial statements).
On 12 November 2012, the Company announced on the
ASX that, as a result of a failure in the Waste Heat Boiler at its
sulphuric acid plant at Mount Isa, Queensland, the plant had
been taken offline for up to one month to allow for repairs to
be undertaken. The outage will result in reduced production of
ammonium phosphates at the Company’s Phosphate Hill plant
with volumes expected to be reduced to 900,000 tonnes
for the financial year to 30 September 2013. If offline for a
month, the financial impact is estimated to be in the region
of $25 million before tax.
Other than the matters reported on above, the directors have
not become aware of any other significant matter or
circumstance that has arisen since 30 September 2012 that has
affected or may affect the operations of the Group, the results
of those operations, or the state of affairs of the Group in
subsequent years, which has not been covered in this report.
Likely developments
Further information on likely developments in the operations
of the Group and the expected results of the operations has not
been included in this report because the directors believe it
would be likely to result in unreasonable prejudice to the Group.
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:
Board
Audit and
Risk Management
Remuneration(1)
Nominations(2)
Health, Safety,
Environment and
Community
Director – Current
Held
Attended
Held
Attended
Held
Attended
Held
Attended
Held
Attended
P V Brasher(3)
A C Larkin(4)
J Marlay(5)
A D McCallum(6)
R J McGrath(7)
G Smorgon(8)
J E Fazzino
Director – Former
J C Watson(9)
9
9
9
9
9
9
9
6
9
9
9
9
9
9
9
6
3
4
1
3
1
3
4
1
3
1
3
5
2
3
3
5
2
3
2
2
1
1
1
1
1
1
1
1
5
3
5
5
2
5
3
5
5
2
Current Chairman
Former Chairman
Current Member
Former Member
For the purposes of the above table:
‘Held’ indicates the number of meetings held during the period that the director was a member of the Board or Committee.
‘Attended’ indicates the number of meetings attended during the period that the director was a member of the Board or Committee.
(1) The Remuneration and Appointments Committee was reconstituted as the Remuneration Committee on 23 February 2012, and Mr Marlay was appointed as
Chairman of the Remuneration Committee, having previously been the Chairman of the Remuneration and Appointments Committee.
(2) The Nominations Committee was established on 23 February 2012. For this reason, the committee only had one meeting in the 2011/12 financial year.
(3) Mr Paul Brasher was appointed as Chairman of the Board effective 30 June 2012. He was also appointed Chairman of the Nominations Committee effective 1 July 2012.
(4) Mr Tony Larkin was appointed as a member of the Nominations Committee on 23 February 2012.
(5) Mr John Marlay was appointed as a member of the Audit and Risk Management Committee on 1 July 2012.
(6) Mr Allan McCallum was appointed as a member of the Remuneration Committee on 1 July 2012.
(7) Ms Rebecca McGrath was appointed as a member of the Audit and Risk Management Committee and the Health, Safety, Environment and Community Committee
on 23 February 2012 and a member of the Nominations Committee on 1 July 2012.
(8) Mr Graham Smorgon was appointed as a member of the Remuneration Committee on 23 February 2012 and a member of the Nominations Committee on 1 July 2012.
(9) Mr John Watson retired as Chairman and Director on 30 June 2012.
3
Incitec Pivot Limited Annual Report 2012
Review and results of operations
Group Highlights
• Sales Revenue decreased by 1%, or $44.4m, to $3,500.9m
(2011: $3,545.3m), due to lower revenues from the Fertiliser
businesses reflecting lower fertiliser prices and the negative
impact of the higher Australian dollar.
• Net Profit After Tax excluding individually material items
(“NPAT ex IMIs”) decreased by 24%, or $125.4m, to
$404.7m (2011: $530.1m).
• Earnings Before Interest and Tax excluding individually
material items (“EBIT ex IMIs”) decreased by 22% or
$173.0m to $599.1m (2011: $772.1m), due to a 40% fall in
Fertilisers EBIT, partially offset by 8% growth in Explosives.
• Operating cash flows decreased by $98.3m to $620.8m
(2011: $719.1m) reflecting the decline in Fertilisers earnings
and the resumption of tax payments, partially offset by an
improvement in the trade working capital position.
• Net Debt increased by $98.1m to $1.3Bn (30 September
2011: $1.2Bn), as the Group completed the construction of
the ammonium nitrate (“AN”) plant at Moranbah,
Queensland.
• Strong credit metrics were maintained: Net Debt/EBITDA
1.7 times (2011: 1.3 times) and interest cover 7.9 times
(2011: 10.8 times).
Shareholder Returns
• Earnings per share up 11% to 31.4 cents per share (“cps”)
(2011: 28.4 cps).
• Earnings per share excluding individually material items
(EPS ex IMIs) down 24% to 24.8 cps (2011: 32.5 cps).
• Dividends increased 8% to 12.4 cps (2011: 11.5 cps),
which reflected a pay-out ratio of 50% of NPAT ex IMIs.
EBIT Performance
EBIT ex IMIs fell by 22% or $173.0m to $599.1m (2011:
$772.1m), primarily due to:
• Decrease in margins earned by the Fertilisers business;
• Costs associated with the extended turnaround at the
sulphuric acid plant at Mt Isa, Queensland and the impact
of reduced production volumes of ammonium phosphate;
• Negative impact of a higher AUD:USD exchange rate;
• Negative net impact of commodity prices on the Group,
reflecting the impact of lower Di-Ammonium Phosphate
(“DAP”) prices, and increased sulphuric acid costs. This was
partially offset by higher urea prices.
• Corporate costs increased by $26.0m to $71.7m (2011:
$45.7m) as a result of incremental costs in implementing
the Group’s approach to continuous improvement, “Business
Excellence” (“BEx”) in 2012 and the expensed feasibility
costs associated with the proposed ammonium nitrate plant
in New South Wales, which has been deferred for at least 2
years.
This fall in EBIT performance was partially offset by volume
growth in both DNAP and IPF.
A detailed analysis of the business segment performance is
provided in the following pages.
Incitec Pivot Limited Annual Report 2012
4
Group Overview
Highlights summary
The Company reported Net Profit After Tax (“NPAT”) of
$510.7m, up $47.5m from the prior year of $463.2m.
Results summary
GROUP FINANCIALS
Sales Revenue
EBITDA ex IMIs(1)
EBIT ex IMIs(2)
NPAT ex IMIs(3)
IMIs
NPAT
Business Segment EBIT
Southern Cross International (“SCI”)
Incitec Pivot Fertilisers (“IPF”)
Intercompany Elimination
Fertilisers
Dyno Nobel Asia Pacific (“DNAP”)
Dyno Nobel Americas (“DNA”)
Intercompany Elimination
Explosives
Corporate costs
EBIT
Shareholder Returns
EPS ex IMIs(4)
EPS
Dividend per share(5)
Year Ended 30 September
2012
$mill
3,500.9
754.9
599.1
404.7
106.0
510.7
2011
$mill
3,545.3
920.3
772.1
530.1
(66.9)
463.2
Change
%
(1%)
(18%)
(22%)
(24%)
10%
175.3
92.3
3.3
270.9
211.3
190.6
(2.0)
399.9
(71.7)
599.1
24.8
31.4
12.4
323.9
128.8
(3.7)
449.0
195.4
173.8
(0.4)
368.8
(45.7)
772.1
(46%)
(28%)
(40%)
8%
10%
8%
(57%)
(22%)
32.5
28.4
11.5
(24%)
11%
8%
Financing Key Performance Indicators
Operating cash flows
Net Debt
Interest cover (times)(6)
Net Debt/EBITDA (times)(7)
620.8
(1,286.9)
7.9x
1.7x
719.1
(1,188.8)
10.8x
1.3x
(14%)
8%
(1) EBITDA = Earnings Before Interest, Tax, Depreciation and Amortisation,
excluding individually material items
(2) EBIT = Earnings Before Interest and Tax, excluding individually material items
(3) NPAT = Net Profit After Tax attributable to shareholders of the Company,
excluding individually material items
(4) EPS = Earnings Per Share, excluding individually material items
(5) Declared in respect of a financial year
(6) Interest cover = 12 month rolling EBITDA/interest expense before accounting
adjustment
(7) Net Debt/EBITDA is based on Net Debt at point in time / last 12 months
historical EBITDA
FY12 EBIT by Business
IPF, SCI 39.9%
DNAP 31.6%
DNA 28.5%
IPF, SCI 39.9%
DNA 28.5%
DNAP 31.6%
Directors’ Report
Fertilisers (Incitec Pivot Fertilisers and
Southern Cross International)
Performance
IPF’s EBIT decreased by $36.5m or 28% to $92.3m (2011:
$128.8m). Factors impacting the result include the following:
Financial summary
• Lower distribution margins;
Year Ended 30 September
• Unfavourable impact of the higher Australian dollar (AUD) on
2012
$mill
2011
$mill
Change
US dollar (USD) denominated urea sales; and
%
• Costs to restructure the business.
IPF
Revenue
EBIT
SCI
Revenue
EBIT
1,159.1
IPF, SCI 39.9%
92.3
DNAP 31.6%
DNA 28.5%
731.9
175.3
1,185.5
128.8
(2%)
(28%)
877.6
323.9
(17%)
(46%)
FY12 EBIT Contribution – IPF & SCI
IPF, SCI 39.9%
Operations
DNA 28.5%
Incitec Pivot Fertilisers (“IPF”) is Australia’s largest supplier of
fertilisers, despatching around two million tonnes each year for
use in the grain, cotton, pasture, dairy, sugar and horticulture
industries. Bulk and packaged fertiliser products are distributed
to farmers through a network of more than 200 business
partners and agents. IPF supports farmers in eastern Australia,
from tropical fruit growers in north Queensland to dairy
producers in Tasmania. Southern Cross International (“SCI”) sells
manufactured fertiliser and industrial chemicals products to
other importers in Australia and actively markets IPL’s own
product in offshore markets such as South East Asia and Latin
America, via Quantum Fertilisers.
DNAP 31.6%
In the 2012 financial year, IPF and SCI were consolidated under
one management structure. However the performance of the
two operating divisions continues to be reported separately to
provide visibility to users of the financial statements. This
consolidation of the two fertiliser businesses under one
management team has proven successful and the combined
business is positioned to deliver more stable distribution
earnings with improved business execution and risk
management processes.
This was partially offset by:
•
Increased distribution volumes sold (refer to Market
Summary);
•
Increased ammonia and urea production volumes; and
• Stronger global nitrogen prices.
SCI’s EBIT decreased by $148.6m or 46% to $175.3m (2011:
$323.9m). Factors impacting the result include the following:
• Earnings from the plant in Phosphate Hill, Queensland
declined due to:
– Lower average global DAP fertiliser prices;
–
Increased manufacturing costs incurred from the outage
of the sulphuric acid plant at Mt Isa, Queensland which
ran at reduced rates, increased sulphuric acid costs and
higher operating costs;
– Higher AUD:USD exchange rate; and
– Lower volumes sold of manufactured DAP for the 2012
financial year.
• Earnings for Quantum Fertilisers decreased as a result of
incurring a loss in the first half caused by the business
holding long positions when European financial instability
significantly impacted global trade and resulted in a fall in
global fertiliser prices.
• Earnings from the industrial chemicals business (Industrials),
increased as a result of higher sales volumes of
manufactured ammonia and urea-related products sold in
the 2012 financial year and an increase in the volume and
margin on traded products.
Market Summary
IPF sells into the following major markets in Australia:
Winter Crop
While the start of the season was delayed, as a result of falling
fertiliser prices, the second half saw strong demand for both
sowing and topdressing, driven by favourable seasonal
conditions and a stronger soft commodity outlook. IPF’s
volumes sold into this market were flat versus the previous
year, where similar favourable conditions were experienced.
Strategy
Summer Crop
The Fertilisers strategy is to maximise value by leveraging
asset positions and to provide alternate channels to market
to diversify risk: the focus is on optimising operations and
reducing volatility.
Sales into the Cotton and Sugar crops have remained consistent
with the prior year, as favourable cropping conditions prevailed
in the second half.
Pasture
Sales volumes of single superphosphate were higher than the
prior year, as weather conditions in Southern Australia were
more favourable than the prior year.
5
Incitec Pivot Limited Annual Report 2012
Dyno Nobel Americas
IPF, SCI 39.9%
DNAP 31.6%
DNA 28.5%
Financial summary
Market Summary – Explosives
DNA’s explosives business sells product into the following
major markets:
Coal
Year Ended 30 September
2012
$mill
2011
$mill
Change
%
The Coal market accounted for 58% of volumes of Ammonium
Nitrate (“AN”) sold by DNA. In the 2012 financial year, volumes
declined as a result of low gas prices and the unseasonably
warm North American winter, reducing coal production.
A$m
Revenue
EBIT
US$m
Revenue
EBIT
1,172.2
IPF, SCI 39.9%
190.6
1,172.5
173.8
1,203.3
195.7
1,205.2
179.4
(0%)
10%
(0%)
9%
FY12 EBIT Contribution – DNA
DNA 28.5%
Operations
Dyno Nobel Americas (“DNA”) is a leading supplier of industrial
explosives and blasting services to the mining, quarrying and
construction industries. DNA is the market leader in North
America – the largest explosives market in the world.
Additionally, DNA supplies nitrogen based products to selective
agricultural and industrial chemical markets.
DNAP 31.6%
Strategy
DNA’s strategy is to maximise value in the market by
leveraging established infrastructure, brand and channel
strategies, as well as to capitalise on industry size to build scale
and expertise which can be deployed into other markets. DNA’s
focus is on optimising operations and exposure across various
end-markets, allowing it to be well positioned for an economic
recovery in the US.
Performance
DNA’s EBIT increased by US$16.3m or 9% to US$195.7m (2011:
US$179.4m). Factors impacting the result include the following:
• Higher urea and urea ammonium nitrate (“UAN”) prices in
the Agriculture and Industrial Chemicals business which were
supplemented by savings in production costs as a result of
lower US gas prices; and
• Canadian business growth resulting from efficiencies and
savings generated via the Group’s efficiency program
(Velocity), which was completed during 2012.
This was partially offset by:
• The downturn in the coal sector which had the impact of
reducing sales in the segment and incurring freight
dislocation costs in redirecting product to other areas.
Quarries & Construction (“Q&C”)
The Quarries and Construction market accounted for 16%
of the AN volumes sold by DNA. In the 2012 financial year,
sales volumes grew despite activity remaining subdued.
DNA’s Q&C volumes are driven by the road construction,
non-residential construction and the residential construction
industries. While US residential construction is showing positive
signs, DNA’s leverage to this recovery is middle to late cycle,
as volumes are driven by crushed rock use which is used
intensively in residential estate construction.
Metals & Mining
The Metals and Mining market accounted for 25% of the AN
volumes sold by DNA. In the 2012 financial year, AN sales
volumes increased reflecting the overall market growth and,
specifically, Canadian Iron Ore customer growth. Second half
growth was down slightly from the first half as a result of
softness in the US Iron Ore market in the third quarter of the
financial year.
Market Summary – Agriculture and Industrial Chemicals
DNA’s Agriculture and Industrial Chemicals business grew in the
2012 financial year as a result of increases in average urea and
UAN prices, lower US gas prices (gas is purchased on a spot
basis), offset by lower production volumes as a result of the
planned turnaround at the St Helens plant in Oregon, US.
Incitec Pivot Limited Annual Report 2012
6
IPF, SCI 39.9%
DNAP 31.6%
DNA 28.5%
Directors’ Report
IPF, SCI 39.9%
Dyno Nobel Asia Pacific
Market Summary
DNAP sells into the following major markets:
Australian East Coast Coal
The Australian East Coast coal market accounted for 49% of
total AN sold by DNAP during the financial year. In 2012, AN
volumes sold increased reflecting a volume recovery from the
impact of the severe weather conditions in 2011, the
underlying growth of coal customers in the Bowen Basin,
Queensland and the commencement of supply to certain
foundation customers from the plant in Moranbah, Queensland.
Western Australian
The Western Australian market accounted for 31% of the AN
volumes sold by DNAP during the financial year. Sales volumes
increased reflecting growth of DNAP’s largest customer in the
region, partially offset by the loss of a customer contract early
in the financial year.
Hard Rock and Underground
The Hard Rock and Underground market accounted for 8% of
the AN volumes sold by DNAP in the financial year. Volumes
grew in line with the recovery from the impact of the extreme
weather conditions in the first half of 2011 and new business
secured in the Underground market.
Indonesia and PNG
These markets accounted for 12% of the AN volumes sold by
DNAP for the financial year. In 2012, while AN volumes
decreased as a result of increased competition, earnings grew
from increased emulsion tolling services.
Moranbah AN Plant, Queensland
Construction at the site was completed in June 2012 without a
lost time injury during over 4 million construction hours worked.
The Nitric Acid, AN solution, AN prill and emulsion plants (“front
end plants”) commenced operation in July 2012, while the
Ammonia plant commenced operation in September 2012. In
the final quarter of the financial year 25,000 tonnes of AN was
produced from the plant. During the final quarter, the front end
plants experienced interrupted production. All root causes and
corrective actions have been successful.
Financial summary
Revenue
EBIT
Year Ended 30 September
2012
$mill
DNA 28.5%
626.4
211.3
2011
$mill
533.1
195.4
Change
%
18%
8%
FY12 EBIT Contribution – DNAP
DNAP 31.6%
Operations
Dyno Nobel Asia Pacific (“DNAP”) is a leading supplier of
industrial explosives and blasting services to the mining
industry across Australia, Indonesia and Papua New Guinea. In
particular, DNAP supplies industrial explosives and blasting
services to surface and underground mining in the thermal coal,
metallurgical coal, iron ore and other metals sectors. DNAP is
the second largest supplier in Australia – the third largest
explosives market in the world.
Strategy
DNAP’s strategy is to invest in capability to capture a greater
share of the growing markets directly linked to industrialisation
across Asia – the immediate focus is on maximising returns on
the newly constructed ammonium nitrate plant in Moranbah,
Queensland and positioning for further growth in the Asia
Pacific region.
Performance
DNAP’s EBIT increased by $15.9m or 8% to $211.3m (2011:
$195.4m). Factors impacting the result include the following:
• An increase in earnings from the sale of initiating systems to
the foundation customers of the AN plant in Moranbah,
Queensland; and
• An increase in sales volumes (refer to Market Summary).
This was partially offset by:
• An increase in operating costs associated with running the
DNAP business.
7
Incitec Pivot Limited Annual Report 2012
Environmental regulation and performance
The operations of the Group are subject to environmental
regulation under the jurisdiction of the countries in which
those operations are conducted including, Australia, United
States of America, Mexico, Canada, Indonesia, Papua New
Guinea and Turkey.
The environmental laws and regulations generally address
the potential aspects and impacts of the Group’s activities in
relation to, among other things, air and noise quality, soil,
water, biodiversity and wildlife.
The Group operates under a Global Health, Safety and Environment
Management System which sets out guidelines on the Group’s
approach to environmental management, including a requirement
for sites to undertake an Environmental Site Assessment.
In certain jurisdictions, the Group will hold licences for some of
its operations and activities from the relevant environmental
regulator. The Group measures its compliance with such licences
and reports statutory non-compliances as required.
The Group measures its environmental incidents across 4 levels:
• Category 1 – Insignificant or minor
• Category 2 – Moderate
• Category 3 – Major
• Category 4 - Catastrophic
During the 2011/12 financial year, there were no major or
catastrophic incidents. However, there were 13 Category 2
environmental licence non-compliances and 14 Category 2
losses of containment.
For these purposes:
• the Company also reports its environmental release
and discharge data to the National Pollutants Inventory
in Australia.
The Company continues to devote considerable resources to
remediating legacy sites, namely sites at which operations have
ceased, in line with its corporate value “Care for the Community
& our Environment”.
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.
• a Category 2 environmental licence non-compliance is a
moderate excursion outside statutory discharge or emission
limits as set out in the relevant licence and as measured in a
scheduled test; and
Auditor
Deloitte Touche Tohmatsu continues in office in accordance with
section 327B(2) of the Corporations Act 2001 (Cth).
• a Category 2 loss of containment is an incident where
there is an unplanned release or spill on a Company site
of material from a vessel, tank, pipe pump, container or
package in which it was designed to be contained and
such incident causes moderate injury or damage,
impacts the environment or causes concern in the
surrounding community.
The aggregate amount of fines paid by the Group for the
incidents for the financial year amounted to approximately
$60,000.
Annually, the Company publishes a Sustainability Report which
is available on its website at www.incitecpivot.com.au. The
Report provides details of the Group’s environmental
management, performance and initiatives.
In addition, for the purpose of Australian regulations which
apply to the Company itself, as an Australian listed entity:
• the Company reports its annual Australian Greenhouse gas
emissions, energy consumption and production under the
National Greenhouse and Energy Reporting scheme
(“NGERS”). In addition, Incitec Pivot participates in the
Australian Government’s Energy Efficiency Opportunities
program and has been recognised by the Government
as a “Best Practice” participant.
Non-audit services
Deloitte Touche Tohmatsu has provided non-audit services to
the amount of $170,500 during the year ended 30 September
2012 (Refer Note 7 to the financial statements).
Lead Auditor’s Independence Declaration
The lead auditor has provided a written declaration that no
professional engagement for the Group has been carried out
during the year that would impair Deloitte Touche Tohmatsu’s
independence as auditor.
The lead auditor’s independence declaration is set out on
page 37.
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 Annual Report 2012
8
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 (collectively referred to in
this report as the “Group”) for the year ended 30 September
2012. This Remuneration Report is audited.
The structure of this Remuneration Report
is as follows:
Section
Page
This Remuneration Report forms part of the Directors’ Report.
A. Executive Remuneration Overview
10
Details of the Group’s remuneration strategy and
arrangements for the 2011/12 financial year are set out
in this Remuneration Report.
This Remuneration Report is prepared in respect of the Key
Management Personnel, being those persons who have
authority and responsibility for planning, directing and
controlling the activities of the Group.
The Board has determined that the Key Management Personnel
are the non-executive directors of the Company (refer to table
B.1), certain former executives (refer to table C.3) and the
people referred to in the table below.
When used in this Remuneration Report, the term “Executives”
means the people listed in the following table (and certain
former executives, as the context requires).
Name
Position
B. Non-Executive Director
Remuneration
C. Executive Remuneration
Executive remuneration policy and practice
Key features of the components of Executive
remuneration
− Fixed annual remuneration
Mr James Fazzino
Managing Director & CEO
− At risk remuneration – Short Term Incentive
12
13
13
13
13
Mr Frank Micallef
Chief Financial Officer
Mrs Kerry Gleeson
Mr Jamie Rintel
General Counsel &
Company Secretary
President, Strategy &
Business Development
Mr Bernard Walsh
President, Global Manufacturing
Mr James Whiteside
Chief Operating Officer,
Incitec Pivot Fertilisers
Mr Stephen Dawson
President, Dyno Nobel Asia Pacific
Mr Daniel McAtee
President, Dyno Nobel United
States & Canada
Mr Simon Atkinson
President, Dyno Nobel
International
(STI) Plan
− At risk remuneration – Long Term Incentive
16
(LTI) Plans
Analysis of relationship between the Group’s
performance, shareholder wealth and
remuneration
Executives’ remuneration arrangements
− Managing Director &
Chief Executive Officer
− Executive Team
Details of Executive remuneration
− Executive remuneration
− At risk remuneration – Short term incentives
− At risk remuneration – Long term incentives
19
20
20
21
22
22
24
25
9
Incitec Pivot Limited Annual Report 2012
A. Executive Remuneration Overview
Incitec Pivot aims to generate competitive returns for its shareholders through its strategy as a leading global chemicals Group,
manufacturing and distributing industrial explosives, fertilisers and related products and services. Incitec Pivot recognises that, to
achieve this, the Group needs outstanding people who are capable, committed and motivated. The philosophy of Incitec Pivot’s
remuneration strategy is that it should support the objectives of the business and enable the Group to attract, retain and reward
Executives of the necessary skill and calibre. Accordingly, the key principles of Incitec Pivot’s remuneration strategy are as follows:
• to provide market competitive remuneration to attract, retain and reward Executives;
• for the majority of Executive remuneration to be at risk and linked to performance and the creation of sustained shareholder
value;
• to apply demanding financial and non-financial performance objectives for the short term incentive plans; and
• for the long term incentive, to apply demanding financial performance objectives, and on the achievement of those objectives,
to result in share ownership thereby linking remuneration to Company performance as experienced by shareholders.
2011/12 Remuneration in Review
Key Highlights
Commentary
Continued Alignment with
Shareholder Interests
• Consistent strategy
• Strong advisory vote at all annual
general meetings
• Reward only where exceptional
performance
Over the years, the Board has been consistent in the application of the remuneration
strategy, maintaining stability in its practices while annually reviewing executive
remuneration, having regard to the need to offer competitive remuneration packages
and to respond to shareholder sentiment.
The Company has received strong shareholder support for the Company’s remuneration
policy and practices. At the 2011 Annual General Meeting, 98% of the votes registered
by proxy were in favour of the adoption of the Remuneration Report.
The majority of Executive remuneration is at risk, in the form of short term and
long term incentives. Executives are rewarded only where value is delivered to
shareholders, therefore:
STI
The measures for the Short Term Incentive (STI) are:
• Earnings Per Share (EPS) (before individually material items (IMIs)), a profit
based metric;
• where relevant for a particular Executive, the EBIT for a Business Unit; and
non-financial performance measures, linked to the execution of the strategy.
•
No STI payment is made to the Executives unless underlying financial performance
is achieved.
In the 2011/12 financial year, the objectives linked to strategic imperatives such as
completion of the Moranbah Ammonium Nitrate facility were achieved. Refer to
section C for further details.
However, EPS (before IMIs) was 24.8 cents, a decrease of 24% compared to the
previous year. Therefore, no payments to Executives were made under the STI.
LTI
The Long Term Incentive Performance Rights Plan 2009/12 matured on 30 September
2012. In accordance with the rules of the Plan, as the Company’s total shareholder
return for the performance period did not meet the minimum hurdle of 10% per
annum compounded, no performance rights vested.
Responsive to Developments
in Governance
• Creation of separate
committees for nominations
and remuneration
Remuneration Committee & Nominations Committee
To give appropriate focus on remuneration having regard to the changing regulatory
environment, the importance of ensuring strong links between Company performance,
shareholder interests and remuneration and the Board’s commitment to achieving and
demonstrating the highest standards of corporate governance, the Board established
separate Remuneration and Nomination Committees. The Chairman of the
Remuneration Committee is not the Chairman of the Board.
Incitec Pivot Limited Annual Report 2012
10
Directors’ Report
Remuneration Report
2012/13 Remuneration
Key Highlights
STI/LTI Design
• Key financial metrics retained
• Driving improvement in Safety
• Targets based on top quartile
returns
Commentary
Financial Metrics and Performance Conditions
The measures for the STI and the LTI are aligned with the Company’s strategic intent
of delivering top quartile performance as measured against S&P/ASX 100 companies.
For the 2012/13 financial year, the principal measures for the STI and the LTI are
unchanged, with growth in the Company’s EPS (before IMIs) being the principal measure
for the STI, while for the LTI, relative Total Shareholder Returns (TSR) and growth in the
Company’s EPS (before IMIs) remain the dual measures (which are equally weighted).
STI
Introduction of Safety Measure for STI
In line with the Company’s commitment to “Zero Harm for Everyone, Everywhere”,
the Company developed a Global HSE Strategy to drive continued improvement in the
Group’s health, safety and environmental performance over the next 5 years. Consistent
with this, the 2012/13 STI will include a safety measure, All Worker Total Recordable Injury
Frequency Rate (AWTRIFR). In addition, in circumstances where a fatality or life threatening
incident occurs, the extent of the impact of that incident on the achievement of the safety
measure will be assessed by the Board having regard to the particular circumstances of the
incident and may result in part of the STI being forfeited.
Cash conversion measure introduced for STI
In addition to using the principal measure of EPS, for the 2012/13 STI the Company will
continue to use, where appropriate, the EBIT for a relevant business unit as an additional
financial performance measure. However for the 2012/13 STI, included in this EBIT
performance measure will be a cash conversion requirement, whereby relevant Executives
in business units will have part of their STI linked to the percentage of EBIT of their business
unit (before depreciation and amortisation) that is converted into operating cash flow.
STI “gate” must be met for rewards to be paid
Consistent with previous STI Plans, for the 2012/13 STI, if minimum financial
performance across the Group does not meet the required EPS growth threshold (that is,
the STI “gate”) no payments will be made under the STI (save that the “gate” will not
apply to the safety measure).
Targets for STI and LTI linked to Top Quartile Performance
In preparation for the 2012/13 financial year, the Board undertook analysis to ascertain
expectations with regards to top quartile performance post the Global Financial Crisis to
ensure the appropriate risk/reward profile was adopted by the Company in a changing
market environment.
As a result, for the Long Term Incentive Performance Rights Plan 2012/15, the relative TSR
measure remains the same as that used in the Long Term Incentive Performance Rights
Plan 2011/14. However, on the basis of the analysis undertaken, the Board determined
that, in respect of the EPS measure, top quartile performance required compound annual
growth on EPS (before IMIs) to be 12.5%. Accordingly, for the performance rights attached
to the EPS measure (EPS Tranche), if at the end of the performance period, the compound
annual growth on EPS (before IMIs) over the performance period, from the base year
(that is, the financial year ended 30 September 2012), is:
• below 6%, no performance rights in this EPS Tranche will vest;
• equal to or greater than 6% per annum but less than 12.5% per annum, the portion
of performance rights in this EPS Tranche that will vest will be increased on a pro
rata basis between 50% and 100%; and
• 12.5% or greater, all of the performance rights in this EPS Tranche will vest.
For further details as to the operation of the Company’s incentive plans, refer to section C.
Future Considerations
Remuneration Strategy
• STI deferral and clawback
In 2012/13, as part of the Board’s annual review of executive remuneration, the Board
will consider the overall remuneration strategy and design, including the anticipated
legislation addressing the Federal Government’s announcement to amend the
Corporations Act to include provisions on the claw back of bonuses where material
misstatement has occurred in the entity’s financial statements, as well as STI deferral.
The Board intends to consider developments with regard to clawback and STI deferral as
part of the broader remuneration strategy when the detailed legislation is available.
11
Incitec Pivot Limited Annual Report 2012
B. Non-Executive Director Remuneration
Incitec Pivot’s policy is to:
• remunerate non-executive directors by way of fees and
payments which may be in the form of cash, non-cash
benefits and superannuation benefits; and
• set the level of non-executive directors’ fees and payments
to be consistent with the market and to enable Incitec Pivot
to attract and retain directors of an appropriate calibre.
Non-executive directors are not remunerated by way of
options, shares, performance rights, bonuses nor by incentive-
based payments.
Non-executive directors receive a fee for being a director of
the Board and non-executive directors, other than the Chairman
of the Board, receive additional fees for either chairing or being
a member of a Board Committee. The level of fees paid to a
non-executive director is determined by the Board after an
annual review and reflects a non-executive director’s time
commitments and responsibilities. For the 2011/12 financial
year, the fees paid to non-executive directors amounted to
$1,755,000, which was within the $2,000,000 limit approved
by shareholders at the 2008 Annual General Meeting.
For the 2012/13 financial year, the Board has determined that
no increases will be made to non-executive directors’ fees.
Non-executive directors joining the Board after 31 May
2003 are not entitled to receive a retirement benefit.
Mr Allan McCallum, who was appointed as a director prior
to 1 June 2003, has a contractual right to a retirement benefit.
The contract, which was entered into prior to the merger
with Incitec Fertilizers Limited in 2003, provides that on Mr
McCallum’s retirement from the Board, on condition of him
serving 10 years on the Board, he is entitled to receive a
payment calculated as to approximately 54% of the aggregate
remuneration he receives from the Company in the three years
immediately preceding his date of retirement, where the
percentage represents his years of service from the date of
appointment to 31 May 2003, as a proportion of 10 years
service. Mr Watson, who was also appointed as a director
prior to 1 June 2003 had the same contractual entitlement.
Mr Watson retired as a director on 30 June 2012 and, in
accordance with the terms of his contract, received a payment
of $788,737 on his retirement. Details are included in Table B.1.
Table B.1: Non-executive directors’ remuneration
Details of the non-executive directors’ remuneration for the financial year ended 30 September 2012 are set out in the
following table:
For the year ended 30 September 2012
Short-term benefits(A)
Post-employment
benefits
Other long term
benefits(B)
Non-executive directors
– Current
P V Brasher, Chairman(1)
A C Larkin
J Marlay
A D McCallum(2)
G Smorgon
R J McGrath(3)
Non-executive directors
– Former
J C Watson, Chairman(4)
Total non-executive directors
Year
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
Fees
$000
275
173
208
198
195
189
199
187
194
180
196
6
355
453
1,622
1,386
Superannuation
benefits
$000
$000
17
16
18
18
16
18
17
18
17
17
16
1
32
42
133
130
–
–
–
–
–
–
11
22
–
–
–
–
23
62
34
84
Total
$000
292
189
226
216
211
207
227
227
211
197
212
7
410
557
1,789
1,600
(A) Apart from the fees paid or payable to the non-executive directors, no other short term benefits were paid or are payable in respect of the reporting period.
(B) With the exception of the contractual entitlements for Mr Watson and Mr McCallum who were appointed to the Board prior to 1 June 2003, the Company does not
pay additional benefits to non-executive directors. The amount disclosed represents the amount accrued for the 2011/12 financial year in respect of Mr McCallum
and Mr Watson.
(1) Mr Brasher was appointed Chairman effective 30 June 2012.
(2) If Mr McCallum had ceased to be a director on 30 September 2012, Mr McCallum would have received a retirement benefit of $340,421.
(3) The disclosures for the 2010/11 financial year are with effect from Ms McGrath’s appointment to the Board as a non-executive director on 15 September 2011.
(4) Mr Watson retired as a director and Chairman on 30 June 2012. In accordance with the terms of his contract, on his retirement he received a payment of $788,737.
While Mr Watson received this payment in the reporting period, with the exception of $23,000 which was accrued in the 2011/12 financial year, all amounts were
accrued and expensed in prior reporting periods.
Incitec Pivot Limited Annual Report 2012
12
Directors’ Report
Remuneration Report
C. Executive Remuneration
Executive remuneration policy and practice
The remuneration of the Executives is set by the Board.
In alignment with its remuneration strategy, the Board’s policy
on executive remuneration is that it comprises both a fixed
component (fixed annual remuneration (FAR)) and an “at risk”
or performance-related component (being short term and long
term incentives) where:
(i) the majority of executive remuneration is “at risk”; and
(ii) the level of FAR for Executives will be benchmarked against
that paid for similar positions at the median of companies
in a comparator group with a range of market
capitalisations (50%–200% of that of Incitec Pivot).
Remuneration arrangements for Executives are reviewed
annually to ensure the arrangements continue to remain
market competitive and consistent with the strategy of creating
sustained shareholder value and in alignment with the Group’s
business strategy.
For the 2011/12 financial year, the Remuneration Committee
received market data from Ernst & Young. Ernst & Young were
engaged by and reported directly to the Remuneration
Committee. The information did not include a “remuneration
recommendation” (as defined in the Corporations Act 2001).
The Board approved, with effect from 1 October 2011, an
increase of 5% to the FAR of Executives, save for three
Executives who received higher increases to bring them in line
with market benchmark data for their particular roles and to
reflect the scope and complexity of their roles. Refer to table
C.3 for details of the fixed annual remuneration for the
Executives for the year ended 30 September 2012.
The relative proportion of the Executives’ total remuneration
packages for the 2011/12 financial year that was performance-
based is set out in table C.1, and indicates a majority of the
Executives’ total remuneration was “at risk” (64–67%).
Table C.1: Remuneration structures by level
% of Total Remuneration (annualised)
Fixed
Remuneration
Performance-based
Remuneration
FAR
33%
STI
33%
LTI
34%
Managing
Director & CEO
Executives(1)
36%
36%
28%
(1) For the purposes of the above table, the information regarding the Executives
does not include the President, Dyno Nobel US & Canada. For the President,
Dyno Nobel US & Canada, who only became a Key Management Person on
4 June 2012, the relative proportions were as follows: fixed remuneration
85%, STI 0% and LTI 15%. Mr McAtee’s maximum entitlement under the
LTI was calculated by reference to his fixed annual remuneration prior to
becoming a Key Management Person.
In calculating the “at risk” compensation as a proportion of total
remuneration for the 2011/12 year, for each Executive, the
maximum entitlement under the STI or LTI was taken into account.
Key features of the components of Executive
remuneration
The key features of the three components of Executive
remuneration that are relevant to the 2011/12 financial year
are set out below.
Fixed annual remuneration
The terms of employment for all Executives contain a fixed
remuneration component. Executives receive their fixed
remuneration in a variety of forms, including cash,
superannuation, and fringe benefits, such as motor vehicles. The
level of remuneration is reviewed annually with reference to,
among other things, market data provided by an appropriately
qualified and independent external consultant. Fixed annual
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. Increases take effect from 1 October.
Refer to table C.3 for details of the fixed annual remuneration
for the Executives for the year ended 30 September 2012.
At risk remuneration – Short Term Incentive (STI) Plan
STI Plan
What is the STI?
The STI is an annual “at risk” cash incentive which is dependent on the achievement of
particular performance measures in the financial year to 30 September 2012.
Who participates in the STI Plan?
All of the Executives participate in the STI Plan.
Why does the Board consider
the STI to be an appropriate
incentive?
The Board considers the STI is appropriate as it encourages the Executives to support
Incitec Pivot’s strategic objectives by putting a large proportion of the Executives’ annual
remuneration “at risk” against meeting challenging financial performance measures as
well as non-financial performance measures linked to the Group’s annual strategic and
business objectives.
STI awards are not an entitlement, but rather a reward for annual Group performance and
individual performance or contribution to overall Group performance.
13
Incitec Pivot Limited Annual Report 2012
STI Plan
What were the STI
performance measures
for the 2011/12 STI?
Financial performance measures
WEIGHTING
To ensure STI awards are aligned with
business performance, there were
two financial performance targets for
2011/12:
l Growth in EPS (before IMIs)
100%: Managing Director & CEO,
Chief Financial Officer,
President, Strategy & Business
Development
80%: General Counsel & Company Secretary
20%: Chief Operating Officer, Incitec Pivot
Fertilisers
10%: President, Dyno Nobel International,
President, Dyno Nobel Asia Pacific
70%: Chief Operating Officer, Incitec Pivot
Fertilisers,
President, Dyno Nobel Asia Pacific
80%: President, Dyno Nobel International
l Business Unit EBIT
Non-financial performance measures
Non-financial performance measures
for 2011/12 comprised:
l Production outcomes from major
25%: President, Global Manufacturing
65%: President, Global Manufacturing
10%: President, Dyno Nobel Asia Pacific
operations including Phosphate Hill,
Queensland, Ammonium Phosphate
Plant, and Cheyenne, Wyoming
Ammonium Nitrate Plant
l Key strategic and business objectives
for the year including completion
of the Ammonium Nitrate Plant at
Moranbah, Queensland, and the
Emulsion Plant at Port Hedland,
Western Australia and the
implementation of the Group’s
continuous improvement system,
Business Excellence (BEx), to drive
increased efficiency in the Group’s
assets and improvements
in manufacturing costs
l Consolidation of the organisational
development program to underpin
execution of the strategy, building on
the Group’s leadership capability and
engagement
10%: President, Global Manufacturing,
Chief Operating Officer, Incitec Pivot
Fertilisers,
President, Dyno Nobel Asia Pacific,
President, Dyno Nobel International
l Development of Group’s Diversity
Strategy and execution of key
milestones by 30 September 2012
20%: General Counsel & Company Secretary
Incitec Pivot Limited Annual Report 2012
14
Directors’ Report
Remuneration Report
STI Plan
Why were these measures
chosen?
Financial performance measures:
In respect of EPS, this is considered an appropriate financial performance measure
because it aligns Executive reward with the creation of shareholder value. In addition,
the EBIT of a business unit is also used as a measure for Executives in relevant business
segments as it ensures robust alignment of performance in a particular business segment
with reward for the Executive managing that business segment.
Non-financial performance measures:
In respect of the non-financial performance measures, these were chosen to drive
performance and behaviours consistent with achieving the Group’s strategy which is to
leverage the projected global growth in demand for both hard and soft commodities
driven by China, by positioning itself on the input side of the value chain through
vertically integrated manufacturing.
For this reason, measures were set with regards to production outcomes from the Group’s
major operations, such as ammonium phosphate and ammonium nitrate volumes from
Phosphate Hill, Queensland and Cheyenne, Wyoming respectively. For 2011/12, the
strategic imperatives lay in securing the opportunity in Australia with regard to servicing
customers of the Group’s explosives business, Dyno Nobel Asia Pacific, with the
completion of the Ammonium Nitrate Plant at Moranbah, Queensland, and the Emulsion
Plant at Port Hedland, Western Australia, as well as focussing on costs and efficiencies in
the Group through BEx. Further, to underpin BEx, measures were set with regards to the
Group’s organisational development program which, since 2010, has sought to make a
step change in organisational capability, and which includes the Group’s focus on
diversity in its workforce.
When were these measures set?
The measures for the STI were set by the Board prior to the commencement of the
2011/12 financial year.
What is the method for
determining if the measures
are satisfied?
Financial performance measures: based on a review of the audited accounts for the
financial year.
Non-financial performance measures: based on a review by the Board following the
annual performance review process for the Executives.
What STI awards were made to
Executives with respect to the
year ended 30 September 2012?
None. With EPS (before IMIs) for the year ended 30 September 2012 being 24.8 cents,
the financial performance conditions were not met and no awards were made to
Executives under the 2011/12 STI.
This is despite the fact that certain of the non-financial performance measures were
achieved, for example:
• completion of the Ammonium Nitrate Plant at Moranbah, Queensland and the
Emulsion Plant at Port Hedland, Western Australia;
• BEx, which establishes a structured approach to driving continuous improvement and
efficiency, was launched, with 16 sites now participating; and
• the Group’s organisational development program was further consolidated with over
1200 employees participating in leadership training (Executive Leadership Program and
Creating Outstanding Leaders) and the Group’s Diversity Strategy was adopted and the
various diversity initiatives and programs implemented.
15
Incitec Pivot Limited Annual Report 2012
At risk remuneration – Long Term Incentive (LTI) Plans
LTI Plans
Which of the Company’s LTI
Plans matured in the 2011/12
financial year?
What is the purpose of
the LTIs?
What is the design of the
LTI Plans?
What is the method for
determining if the criteria
are satisfied?
The only LTI Plan which matured in the 2011/12 financial year is the Long Term Incentive
Performance Rights Plan for 2009/12 (LTI 2009/12) which matured on 30 September
2012. In addition, there are two other LTI Plans currently in place:
• Long Term Incentive Performance Rights Plan for 2010/13 (LTI 2010/13); and
• Long Term Incentive Performance Rights Plan for 2011/14 (LTI 2011/14).
However, these plans do not mature until 30 September 2013 and 30 September 2014,
respectively.
Details of the Executives’ participation in these plans are set out in tables C.5 and C.6.
The LTIs are the long term incentive component of remuneration for employees, including
the 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 reward with the key performance drivers which underpin
sustainable growth in shareholder value – which comprises EPS, share price growth and
returns to shareholders. By rewards resulting in share ownership on the achievement of
demanding targets, this ties remuneration to Company performance as experienced by
shareholders. The arrangements also support the Company’s strategy for retention and
motivation of the Executives and senior employees.
The LTI 2009/12 is a performance rights plan which has a performance period of three
years and performance conditions based on Incitec Pivot’s 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, assuming the dividends are reinvested in the
Company’s shares (Absolute TSR).
The LTI 2010/13 and LTI 2011/14 are performance rights plans which also have
performance periods of three years. However, the performance conditions are based on
the Company’s TSR relative to a comparator group, the S&P/ASX 100 (Relative TSR) and
growth in EPS (before IMIs).
After the expiry of the performance period, the Board determines whether the
performance conditions are satisfied. The performance conditions are tested once only,
at the end of the relevant performance period. For the LTI 2009/12, this is done by
reviewing the share price over the three year performance period and taking into account
dividends paid. For the LTI 2010/13 and LTI 2011/14, this is done by reviewing both the
Company’s total shareholder returns over the three year performance period relative to
the comparator group and the growth in EPS (before IMIs) over that period. In relation to
the LTI 2010/13 and the LTI 2011/14, in the event there is a merger, demerger or other
capital reconstruction of the Company (or an event affecting the Company or a member
of the comparator group), the Board may, in its discretion, determine whether an
adjustment to the performance condition is required.
Incitec Pivot Limited Annual Report 2012
16
Directors’ Report
Remuneration Report
LTI 2009/12
LTI 2010/13
LTI 2011/14
Who participates in the LTI
2009/12, the LTI 2010/13
and the LTI 2011/14?
Executives and other selected managers participate in the LTI 2009/12, the LTI 2010/13
and the LTI 2011/14.
For details of the Executives’ participation in these Plans refer to tables C.5 and C.6.
What form do the LTI 2009/12,
the LTI 2010/13 and the
LTI 2011/14 take?
The plans are ‘performance rights’ plans which entitle the participant to acquire ordinary
shares in the Company for no consideration at a later date, subject to the satisfaction of
certain conditions. As no shares are issued until exercise, performance rights have no
dividend entitlement.
What is the process for
deciding who will participate
in the LTI plans?
The decision to grant performance rights and to whom they will be granted is made
annually by the Board, noting that the grant of performance rights to the Managing
Director is subject to shareholder approval. Grants of performance rights to participants are
based on a percentage of the relevant participant’s fixed annual remuneration.
Whether or not those performance rights will vest is determined in accordance with the
plan rules for the LTI 2009/12, the LTI 2010/13 and the LTI 2011/14.
What are the performance
periods for these plans?
The performance period for the LTI 2009/12 is 1 October 2009 to 30 September 2012.
The performance period for the LTI 2010/13 is 1 October 2010 to 30 September 2013.
The performance period for the LTI 2011/14 is 1 October 2011 to 30 September 2014.
What are the conditions for the
performance rights under the
plans to vest and who approved
the conditions?
The performance rights will only vest if certain conditions are met. The Board approved
the conditions on the commencement of the relevant plans. The conditions focus on the
performance of the Company and include a condition relating to duration of employment.
For the LTI 2009/12, the performance condition is based on Absolute TSR.
If, at the end of the relevant performance period, Absolute TSR (calculated in accordance
with the plan rules):
•
is equal to or less than 10% per annum compounded over the performance period,
none of the performance rights vest;
is greater than 10% and less than 20% per annum compounded over the
performance period, an increasing proportion of the performance rights will vest from
zero on a straight line basis; and
is 20% or more per annum compounded over the performance period, all of the
performance rights will vest.
•
•
For the LTI 2010/13 and the LTI 2011/14, the performance conditions are based on the
relative Total Shareholder Returns of the Company and Earnings Per Share (before IMIs):
Total Shareholder Return (TSR) Measure: The TSR Measure requires growth in the
Company’s total shareholder returns to be at or above the median of the companies in the
comparator group, being the S&P/ASX 100. If, at the end of the performance period, the
Company’s TSR over the three year performance period is:
• below the 50th percentile of the comparator group of companies ranked by their TSR
performance: no performance rights in this tranche will vest;
• between the 50th and 75th percentile of the comparator group of companies ranked
by their TSR performance: the portion of performance rights in this tranche that will
vest will be increased on a pro rata basis from 50% to 100% (assuming 50% vest at
the 50th percentile); and
• equal to or above the 75th percentile of the comparator group of companies ranked
by their TSR performance: all performance rights in this tranche will vest; and
Earnings Per Share (EPS) Measure: If, at the end of the performance period, the
compound annual growth rate on EPS (before IMIs) over the performance period, from the
base year, is:
• below 7% per annum: no performance rights in this tranche will vest;
• equal to or greater than 7% per annum but less than 15% per annum: the portion of
performance rights in this tranche that will vest will be increased on a pro rata basis
between 50% and 100%; and
• 15% or greater: all performance rights in this tranche will vest.
These performance conditions are equally weighted.
17
Incitec Pivot Limited Annual Report 2012
LTI 2009/12
LTI 2010/13
LTI 2011/14
When do performance rights
lapse?
What happens if a participant
leaves the Group?
Do participants pay for the
performance rights or the
shares issued on exercise of
performance rights?
What performance rights have
vested under the:
l LTI 2009/12
l LTI 2010/13
l LTI 2011/14?
Which Executives have been
granted performance rights
under these plans?
In what circumstances can the
performance rights vest before
the expiry of the performance
period under the LTI 2009/12,
the LTI 2010/13 and the LTI
2011/14?
Performance rights will lapse if the performance conditions are not satisfied during the
performance period or, in certain circumstances, if a participant ceases to be employed
by the Group during the performance period. Performance rights will also lapse if a
participant serves a notice that he or she wishes the rights to lapse. Additionally, under
the LTI 2009/12, the performance rights will lapse if they are not exercised by the expiry
date set out in the plan rules.
The performance rights will lapse on a cessation of employment except where the
participant has died, become totally and permanently disabled, is retrenched or retires.
In those circumstances, the performance rights will be reduced pro rata to the proportion
of days worked during the relevant performance period.
Participants do not pay for the performance rights or shares.
LTI 2009/12: no performance rights vested.
LTI 2010/13 and LTI 2011/14: these plans are each for a three year period and the
performance conditions will not be tested until after 30 September 2013 and
30 September 2014, respectively.
Refer to table C.5 in respect of performance rights granted to Executives.
On the occurrence of the following, which may occur before the expiry of the three year
performance period:
• a takeover bid is made to holders of shares in the Company;
• a statement is lodged with ASX to the effect that a person has become entitled to not
less than 50% of the shares in the Company;
• the Court orders a meeting to be held in relation to a proposed compromise or
arrangement in connection with a scheme for the reconstruction of the Company or its
amalgamation with any other companies;
• the Company passes a resolution for a voluntary wind-up; or
• an order is made for the compulsory winding-up the Company,
the Board may give a notice that the performance rights vest at the time specified by the
Board in the notice.
What are the plan incentive
limits in the LTI 2009/12, the LTI
2010/13 and the LTI 2011/14?
As the LTI Plans are performance rights plans, with participation determined by reference
to the participant’s fixed annual remuneration, there are no plan incentive limits.
Incitec Pivot Limited Annual Report 2012
18
Directors’ Report
Remuneration Report
Analysis of relationship between the Group’s performance, shareholder wealth and
remuneration
In considering the Group’s performance, the benefit to shareholders and appropriate remuneration for the Executives and other
selected senior employees, the Board, through its Remuneration 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 C.2: Indices relevant to the Board’s assessment of the Group’s performance and the benefit
to shareholders
Net Profit After Tax excluding minority interests (before individually material items)
(NPAT (before IMI)) ($m)
Earnings Per Share (before individually material items) (EPS (before IMI)) (cents)
Dividends – paid in the financial year – per share (cents)
Dividends – declared in respect of the financial year – per share (DPS (declared)) (cents)
29.7
2008(1)
2009
2010
2011
2012
647.5
347.8
442.8
530.1
404.7
60.5
21.8
22.6
27.3
32.5
24.8
21.6
4.4
4.1
7.8
9.3
11.5
11.5
12.4
Share price ($) (Year End)
5.07
2.83
3.59
3.27
2.98
TSR (3 Year Compound per annum) (%)
93
42
3
(10)
4
(1) Restated for change in accounting standard. In the financial statements for the year ended 30 September 2009, the Group’s prior year Income Statement (i.e. in
respect of the year ended 30 September 2008) was restated (reduced) by $13.8m ($9.7m net of tax) thereby reducing NPAT (before individually material items)
from $657.2m to $647.5m.
The “at risk” or performance related components of the
Executives’ total remuneration, in the form of short term and
long term incentives, reward Executives only where value is
delivered to shareholders, directly linking the reward to the
Group’s financial results and its overall performance, in the
case of the long term incentive, over a sustained period of
three years.
The Company’s approach is to set challenging targets to
drive the creation of shareholder value with LTI awards being
made only where there is exceptional performance over a
sustained period.
For the 2011/12 financial year, with EPS (before IMIs) being
24.8 cents, a decrease of 24% compared to the previous year,
the financial performance measures under the 2011/12 STI
were not met and, accordingly, no awards were made to
Executives. Similarly, for the LTI 2009/12, as the Company’s
total shareholder return for the performance period did not
meet the minimum hurdle of 10% per annum compounded,
no performance rights vested.
$m
800
600
400
200
0
cents
40
cents
60
30
20
10
40
20
0
0
%
100
80
60
40
20
0
-20
$
6
5
4
3
2
1
0
08
09
10
11
12
08
09
10
11
12
08
09
10
11
12
NPAT (before IMIs)
DPS (declared)
EPS (before IMIs)
TSR (3 Year compound pa)%
Year end share price
Net Profit After Tax excluding minority
interests (before individually
material items) $m and
Dividends Per Share cents declared
Earnings Per Share
(before individually material items) cents
Total Shareholder Return
(3 Year Compound per annum) %
and Year End Share price $
19
Incitec Pivot Limited Annual Report 2012
Executives’ remuneration arrangements
Managing Director & Chief Executive Officer
Termination by Incitec Pivot
Mr James Fazzino was appointed as Managing Director &
CEO on 29 July 2009. The terms of Mr Fazzino’s appointment
as Managing Director & CEO are set out in a single contract of
service dated 29 July 2009.
The Company may terminate Mr Fazzino’s employment:
•
immediately for cause, without payment of any separation
payment, save as to accrued fixed annual remuneration,
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 fixed annual remuneration, 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.
Termination by Managing Director & CEO
The agreement provides that Mr Fazzino may terminate his
employment on six months’ notice.
Effect of termination on long term incentives
For the LTI 2010/13 and LTI 2011/14, generally the
performance rights will lapse except in circumstances of death,
total and permanent disablement, retrenchment or retirement.
In those circumstances, the performance rights will be reduced
pro rata to the proportion of days worked during the relevant
performance period.
Details of the nature and amount of each element of
remuneration of the Managing Director & CEO are included in
table C.3.
The following is a summary of Mr Fazzino’s employment
arrangements and remuneration.
Fixed annual remuneration
For 2011/12, Mr Fazzino’s fixed annual remuneration was
$2,041,200, effective 1 October 2011. His fixed annual
remuneration is reviewed annually having regard to Incitec
Pivot’s executive remuneration policy.
STI
Mr Fazzino is eligible to participate in Incitec Pivot’s STI Plan.
For 2011/12, Mr Fazzino’s maximum STI opportunity was 100%
of his fixed annual remuneration and was determined by
reference to growth in EPS (before IMIs) in the 2011/12
financial year.
Given EPS (before IMIs) in the 2011/12 financial year was 24.8
cents, no award was made to Mr Fazzino in respect of the period
from 1 October 2011 to 30 September 2012.
LTI
Mr Fazzino participated in the LTI 2009/12, the performance
period for which ended on 30 September 2012. On
determination of performance measured against the
performance conditions, in accordance with the LTI 2009/12
plan rules, none of Mr Fazzino’s performance rights vested.
In addition, Mr Fazzino currently participates in the following
LTI Plans:
• the LTI 2010/13 pursuant to which Mr Fazzino was issued
511,364 performance rights as approved by shareholders in
accordance with the ASX Listing Rules at the 2010 Annual
General Meeting held on 21 December 2010; and
• the LTI 2011/14 pursuant to which Mr Fazzino was issued
590,625 performance rights as approved by shareholders in
accordance with the ASX Listing Rules at the 2011 Annual
General Meeting held on 20 December 2011.
The LTI 2010/13 and LTI 2011/14 are each for a three year
period and the performance conditions will not be tested until
after 30 September 2013 and 30 September 2014 respectively.
Incitec Pivot Limited Annual Report 2012
20
Directors’ Report
Remuneration Report
Executive Team
Termination by Incitec Pivot
Remuneration and other terms of employment for the
Executives (excluding Mr Fazzino, whose arrangements are set
out on the previous page) are formalised in service agreements
between the Executive and the Group, details of which are
summarised below. Most Executives are engaged on similar
contractual terms, with minor variations to address differing
circumstances. The Group’s policy is for service agreements for
the Executives to be unlimited in term, but capable of
termination in the manner described below. Details of the
nature and amount of each element of remuneration of the
Executives are included in table C.3.
Fixed annual remuneration
Fixed annual remuneration comprises salary paid in cash and
mandatory employer superannuation contributions. Fixed
annual remuneration may also come in other forms such as
fringe benefits (e.g. motor vehicles).
This component of remuneration is subject to annual review.
For the 2011/12 financial year, the fixed annual remuneration
for the Executives was generally increased by 5% with effect
from 1 October 2011, save for three Executives who received
higher increases to bring their remuneration into line with
market benchmark data for their particular roles and to reflect
the scope and complexity of their roles and duties.
STI
Participation is at the Board’s discretion. For all Executives
(other than Mr McAtee who was not a participant in the
2011/12 STI), for the 2011/12 financial year, the maximum STI
opportunity was 100% of fixed annual remuneration and was
determined with reference to performance measures outlined
on page 14.
LTI
Participation is at the Board’s discretion. For the LTI 2009/12,
for all Executives, the maximum LTI opportunity was 100% of
fixed annual remuneration (save for Mr Atkinson whose
maximum LTI opportunity was 50% of fixed annual
remuneration and Mr McAtee who was not a participant in the
plan) and vesting of rights was determined with reference to
conditions based on Absolute TSR. For the LTI 2010/13 and LTI
2011/14, for all Executives, the maximum LTI opportunity is
80% of fixed annual remuneration (save for Mr McAtee who is
not a participant in the LTI 2010/13 and whose participation in
the LTI 2011/14 was calculated by reference to his fixed annual
remuneration prior to him becoming a KMP) and the vesting of
rights is determined with reference to conditions based on
relative TSR and growth in EPS (before IMIs).
Incitec Pivot may terminate the service agreements:
•
immediately for cause, without payment of any separation
sum, save as to accrued fixed annual remuneration, accrued
annual leave and long service leave;
• on notice in the case of incapacity, and the Company must
pay a separation payment plus accrued fixed annual
remuneration, accrued annual leave and long service leave;
• otherwise, without cause, with or without notice and the
Company must pay a separation payment plus accrued
fixed annual remuneration, accrued annual leave and long
service leave.
The amount of a separation payment is calculated on a ‘capped’
number of weeks basis as set out in the contract with each
Executive and, in the case of Mr Walsh, his contractual
entitlement has regard to the length of prior service with the
Orica group. The following table sets out the ‘capped’ number
of weeks for each Executive.
Mr Frank Micallef
Mrs Kerry Gleeson
Mr Jamie Rintel
Mr Bernard Walsh
Mr James Whiteside
Mr Stephen Dawson(1)
Mr Daniel McAtee(2)
Mr Simon Atkinson
Number of Weeks
26 weeks
26 weeks
26 weeks
61.81 weeks
45.41 weeks
26 weeks
26 weeks
52 weeks
(1) In addition, Mr Dawson’s contract provides that where Mr Dawson is
terminated for reasons not related to performance or conduct, the Company
will also pay Mr Dawson an additional amount of one months’ FAR at the
time of termination for each completed year of continuous service, up to
12 months’ FAR.
(2) Mr McAtee joined the Company on 2 April 2012 and is considered to be a
Key Management Person from 4 June 2012. Mr McAtee’s STI and LTI
participation are as specified.
Termination by the Executive
An Executive may terminate his/her employment on 13 weeks’
notice (save for Mr Atkinson who may terminate on 8 weeks’
notice) and the Company may require the Executive to serve
out the notice period or may make payment in lieu.
Effect of termination on long term incentives
For the LTI 2010/13 and the LTI 2011/14, on cessation of
employment, the performance rights lapse except in
circumstances of death, total and permanent disablement,
retrenchment or retirement. In those circumstances, the
performance rights will be reduced pro rata to the proportion of
days worked during the relevant performance period.
21
Incitec Pivot Limited Annual Report 2012
Details of Executive remuneration
Table C.3 – Executive remuneration
Details of the remuneration paid to each Executive is set out below.
For the year ended 30 September 2012
Short-term benefits
Short Term
Incentive
& other
bonuses(A)
Salary &
Fees
Post-
employment
benefits
Other
long term
benefits(C)
Termination
benefits
Share-based
payments
Other
Short Term
benefits(B)
Super-
annuation
benefits
Accounting
Value(D)
Year
$000
$000
$000
$000
$000
$000
$000
Proportion of
remuneration
performance
related
Share-based
payments as
proportion of
remuneration
%
%
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
Executives – Current
J E Fazzino
Managing Director & CEO
F Micallef
Chief Financial Officer
K J Gleeson
General Counsel &
Company Secretary
J Rintel
President – Strategy &
Business Development
B C Walsh
President –
Global Manufacturing
J Whiteside
Chief Operating Officer –
Incitec Pivot Fertilisers
S Dawson
President – Dyno Nobel
Asia Pacific
D McAtee(1)
President – Dyno Nobel
US and Canada
S Atkinson
President – Dyno Nobel
International
– Former
G Brinkworth(2)
Chief Operating Officer –
Incitec Pivot Fertilisers
& General Manager –
Human Resources
B Wallace(3)
President – Dyno Nobel
Americas
Total Executives
2,041
1,893
840
694
674
614
–
1,944
–
726
–
642
551
525
735
672
700
500
700
497
187
–
472
428
–
525
–
595
–
525
–
472
–
–
–
449
–
499
–
514
2012
2011
339
500
2012
2011
674
492
2012
2011
7,913
6,815
–
6,891
–
–
–
–
–
–
–
48
–
–
–
–
–
–
–
–
116
118
–
–
–
17
116
183
16
15
16
15
16
15
16
15
16
15
16
15
16
15
–
–
16
15
8
15
31
7
167
142
75
89
22
–
17
17
13
4
29
35
74
22
66
26
–
–
12
8
–
–
–
–
308
201
Total
$000
3,463
4,840
1,308
1,720
1,080
1,553
895
1,342
1,186
1,607
1,121
1,279
1,067
1,176
190
–
1,331
899
430
285
373
265
315
225
406
290
331
217
285
166
3
–
224
145
840
1,163
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
38%
59%
33%
59%
34%
58%
35%
56%
34%
55%
30%
58%
27%
54%
2%
0%
27%
51%
271
–
71
205
689
1,219
10%
58%
1,094
–
1,365
–
186
222
1,985
1,252
3,955 13,824
17,151
2,919
9%
59%
29%
57%
38%
19%
33%
17%
34%
17%
35%
17%
34%
18%
30%
17%
27%
14%
2%
0%
27%
12%
10%
17%
9%
18%
29%
17%
Incitec Pivot Limited Annual Report 2012
22
Directors’ Report
Remuneration Report
(A) No Executives were awarded STI payments under the 2011/12 STI.
(B) Other short term benefits include the taxable value of fringe benefits paid attributable to the fringe benefits tax year (2012: 1 April 2011 to 31 March 2012)
(2011: 1 April 2010 to 31 March 2011), rent and mortgage interest subsidies, relocation allowances and other allowances. For Mr Atkinson, this includes rental,
health insurance, education support and home leave travel. 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) Other long term benefits represents long service leave accrued during the reporting period.
(D) In accordance with accounting standards, the share-based payments accounting value included as remuneration represents the fair value of rights that have not
vested. The value disclosed in table C.3 represents the portion of fair value allocated to this reporting period and is not indicative of the benefit, if any, that may be
received by the Executive should the performance conditions with respect to the relevant long term incentive plan be satisfied. In respect of the LTI 2009/12, the
performance conditions have not been satisfied and, while the accounting value is recorded in the table above, no performance rights will vest.
External valuation advice from PricewaterhouseCoopers has been used to determine the fair value at grant date of these rights. 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 right, 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 right.
The fair value has been allocated evenly over the performance period.
Refer to section C of this Remuneration Report for further details of the LTI 2009/12, the LTI 2010/13, the LTI 2011/14 and LTIs generally.
The terms and conditions of each grant affecting remuneration in this or future reporting periods are as follows:
Grant date
Vesting date
LTI 2009/12
16/12/2009
30/09/2012
LTI 2010/13 – TSR
23/12/2010
30/09/2013
LTI 2010/13 – EPS
23/12/2010
30/09/2013
LTI 2011/14 – TSR
02/02/2012
30/09/2014
LTI 2011/14 – EPS
02/02/2012
30/09/2014
Fair Value per share
treated as rights
at grant date
$1.60
$2.77
$3.76
$1.72
$2.90
Date
exercisable
From 1/10/2012
From 1/10/2013
From 1/10/2013
From 1/10/2014
From 1/10/2014
Exercise
Price
$nil
$nil
$nil
$nil
$nil
The number of rights for the purposes of remuneration, held by each Executive is referred to in section C of this Remuneration Report and Note 34 to the
financial statements.
(1) Mr McAtee became a Key Management Person during the 2011/12 financial year. The disclosures for the 2011/12 financial year are from the date he became a
Key Management Person, 4 June 2012.
(2) On 26 March 2012, Mr Brinkworth ceased employment with the Group following a restructure of the domestic fertiliser business. The disclosures for the 2011/12
financial year are from 1 October 2011 to that date. The payments received by Mr Brinkworth during the reporting period include a separation payment and
accrued annual leave. Mr Brinkworth was entitled to these payments under his contract of employment dated 10 November 2008.
(3) On 6 August 2012, Mr Wallace ceased employment with the Group following a restructure of the North American explosives business. The disclosures for the
2011/12 financial year are from 1 October 2011 to that date. The payments received by Mr Wallace during the reporting period include a separation payment,
accrued annual leave and relocation costs. Mr Wallace was entitled to these payments under his contract of employment dated 1 February 2008. Mr Wallace’s
benefits were converted from US$ to A$ at the average rate for 1 October 2011 to 30 September 2012, being 1.02770.
23
Incitec Pivot Limited Annual Report 2012
Details of performance related remuneration: short term incentives
Table C.4 – Short term incentives awarded for the year ended 30 September 2012
Details of the vesting profile of the STI payments awarded for the year ended 30 September 2012 as remuneration to each
Executive are set out below:
Included in remuneration
$000
% vested in year
% forfeited in year
Short term incentive
Executives
– Current
J E Fazzino
F Micallef
K J Gleeson
J Rintel
B C Walsh
J Whiteside
S Dawson
D McAtee
S Atkinson
– Former
G Brinkworth
B Wallace
–
–
–
–
–
–
–
–
–
–
–
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Incitec Pivot Limited Annual Report 2012
24
Directors’ Report
Remuneration Report
Details of performance related remuneration: long term incentives
Table C.5 – Details of long term incentives granted and vested in the year ended 30 September 2012 and the
vesting profile of long term incentives granted as remuneration
Grant date
Number
granted(A)
Number
vested(B)
% Vested
in year
% Forfeited
in year(C)
Financial year
in which
grant vests
Key Management Personnel
Executives
– Current
J E Fazzino
F Micallef
K J Gleeson
J Rintel
B C Walsh
J Whiteside
S Dawson
D McAtee(1)
S Atkinson(2)
– Former
G Brinkworth(3)
B Wallace(4)
Performance Rights Plan 2009/12
Performance Rights Plan 2010/13
Performance Rights Plan 2011/14
Performance Rights Plan 2009/12
Performance Rights Plan 2010/13
Performance Rights Plan 2011/14
Performance Rights Plan 2009/12
Performance Rights Plan 2010/13
Performance Rights Plan 2011/14
Performance Rights Plan 2009/12
Performance Rights Plan 2010/13
Performance Rights Plan 2011/14
Performance Rights Plan 2009/12
Performance Rights Plan 2010/13
Performance Rights Plan 2011/14
Performance Rights Plan 2009/12
Performance Rights Plan 2010/13
Performance Rights Plan 2011/14
Performance Rights Plan 2009/12
Performance Rights Plan 2010/13
Performance Rights Plan 2011/14
Performance Rights Plan 2009/12
Performance Rights Plan 2010/13
Performance Rights Plan 2011/14
Performance Rights Plan 2009/12
Performance Rights Plan 2010/13
Performance Rights Plan 2011/14
23 December 2009
23 December 2010
2 February 2012
16 December 2009
23 December 2010
2 February 2012
16 December 2009
23 December 2010
2 February 2012
16 December 2009
23 December 2010
2 February 2012
16 December 2009
23 December 2010
2 February 2012
16 December 2009
23 December 2010
2 February 2012
16 December 2009
23 December 2010
2 February 2012
16 December 2009
23 December 2010
4 June 2012
16 December 2009
23 December 2010
2 February 2012
600,000
511,364
590,625
220,000
150,000
194,444
198,000
135,000
155,925
140,000
130,948
127,575
216,000
147,273
170,100
162,000
110,455
162,037
79,333
108,182
162,037
–
–
12,997
69,333
94,545
109,200
Performance Rights Plan 2009/12
Performance Rights Plan 2010/13
Performance Rights Plan 2011/14
Performance Rights Plan 2009/12
Performance Rights Plan 2010/13
Performance Rights Plan 2011/14
16 December 2009
23 December 2010
2 February 2012
16 December 2009
23 December 2010
2 February 2012
140,000
110,455
162,037
180,494
111,528
166,368
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0%
–
–
0%
–
–
0%
–
–
0%
–
–
0%
–
–
0%
–
–
0%
–
–
–
–
–
0%
–
–
0%
–
–
0%
–
–
100%
–
–
100%
–
–
100%
–
–
100%
–
–
100%
–
–
100%
–
–
100%
–
–
–
–
–
100%
–
–
100%
50%
84%
100%
38%
72%
2012
2013
2014
2012
2013
2014
2012
2013
2014
2012
2013
2014
2012
2013
2014
2012
2013
2014
2012
2013
2014
2012
2013
2014
2012
2013
2014
2012
2013
2014
2012
2013
2014
(A) This includes the number of rights allocated to the participating Executives during the reporting period.
(B) For the 2011/12 financial year, this refers to the number of rights that vested during the reporting period.
(C) The percentage forfeited in the year represents the reduction in the maximum number of rights available to vest due to the performance conditions or other
conditions not being achieved, noting that the LTI 2010/13 and the LTI 2011/14 are not tested until 30 September 2013 and 30 September 2014, respectively.
(1) Mr McAtee’s rights were granted under the LTI 2011/14 prior to him becoming a Key Management Person on 4 June 2012.
(2) Mr Atkinson’s rights were granted under the LTI 2009/12 prior to him becoming a Key Management Person on 1 January 2010.
(3) On 26 March 2012, Mr Brinkworth ceased employment with the Group following a restructure of the domestic fertiliser business. As a result of ceasing employment
with the Group during the 2011/12 financial year and, in accordance with the relevant plan rules, a portion of Mr Brinkworth’s entitlements under the LTI 2009/12,
the LTI 2010/13 and the LTI 2011/14 were forfeited as at the date of cessation. In addition, as the criteria under the LTI 2009/12 were not satisfied, none of Mr
Brinkworth’s remaining rights under the LTI 2009/12 vested during the 2011/12 financial year and were forfeited.
(4) On 6 August 2012, Mr Wallace ceased employment with the Group following a restructure of the North American explosives business. As a result of ceasing
employment with the Group during the 2011/12 financial year and, in accordance with the relevant plan rules, a portion of Mr Wallace’s entitlements under the LTI
2009/12, the LTI 2010/13 and the LTI 2011/14 were forfeited as at the date of cessation. In addition, as the criteria under the LTI 2009/12 were not satisfied,
none of Mr Wallace’s remaining rights under the LTI 2009/12 vested during the 2011/12 financial year and were forfeited.
Details of the terms and conditions of each grant of rights made during the reporting period are set out in section C of this
Remuneration Report and in Notes 34 and 35 to the financial statements including:
• the fair value per right at grant date, the exercise price per right, 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.
25
Incitec Pivot Limited Annual Report 2012
Modification of terms of equity-settled share-based payment transactions
No terms of equity-settled share-based payment transactions (including rights) granted to a Key Management Person have been
altered or modified by the issuing entity during the reporting period or the prior period.
Table C.6 – Analysis of movements in long term incentives during the year ended 30 September 2012
The movement during the reporting period, by value, of rights for the purposes of remuneration held by each Executive is
detailed below:
For the year ended 30 September 2012
Granted
during 2012 as
remuneration(A)
$000
Vested in
year(B)
$000
Forfeited
in year(C)
$000
Exercised
in year(D)
$000
Key Management Personnel
Executives
– Current
J E Fazzino
Grant date
2 February 2012
23 December 2009
19 December 2008
2 February 2012
16 December 2009
19 December 2008
2 February 2012
16 December 2009
19 December 2008
2 February 2012
16 December 2009
19 December 2008
2 February 2012
16 December 2009
19 December 2008
2 February 2012
16 December 2009
19 December 2008
2 February 2012
16 December 2009
19 December 2008
4 June 2012
16 December 2009
19 December 2008
2 February 2012
16 December 2009
19 December 2008
2 February 2012
23 December 2010
16 December 2009
19 December 2008
2 February 2012
23 December 2010
16 December 2009
19 December 2008
Performance Rights Plan 2011/14
Performance Rights Plan 2009/12
Performance Rights Plan 2008/11
Performance Rights Plan 2011/14
Performance Rights Plan 2009/12
Performance Rights Plan 2008/11
Performance Rights Plan 2011/14
Performance Rights Plan 2009/12
Performance Rights Plan 2008/11
Performance Rights Plan 2011/14
Performance Rights Plan 2009/12
Performance Rights Plan 2008/11
Performance Rights Plan 2011/14
Performance Rights Plan 2009/12
Performance Rights Plan 2008/11
Performance Rights Plan 2011/14
Performance Rights Plan 2009/12
Performance Rights Plan 2008/11
Performance Rights Plan 2011/14
Performance Rights Plan 2009/12
Performance Rights Plan 2008/11
Performance Rights Plan 2011/14
Performance Rights Plan 2009/12
Performance Rights Plan 2008/11
Performance Rights Plan 2011/14
Performance Rights Plan 2009/12
Performance Rights Plan 2008/11
Performance Rights Plan 2011/14
Performance Rights Plan 2010/13
Performance Rights Plan 2009/12
Performance Rights Plan 2008/11
Performance Rights Plan 2011/14
Performance Rights Plan 2010/13
Performance Rights Plan 2009/12
Performance Cash Plan 2008/11
F Micallef
K J Gleeson
J Rintel
B C Walsh
J Whiteside
S Dawson(1)
D McAtee(2)
S Atkinson(3)
– Former
G Brinkworth(4)
B Wallace(5)
1,364
–
–
449
–
–
360
–
–
295
–
–
393
–
–
374
–
–
374
–
30
–
–
252
–
–
374
–
–
–
384
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
960
–
–
352
–
–
317
–
–
224
–
–
346
–
–
259
–
–
127
–
–
–
–
–
111
–
314
182
38
–
275
140
14
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(A) The value of rights granted in the year is the fair value of those rights calculated at grant date using a Black-Scholes option-pricing model. The value of these rights is
included in the table above. This amount is allocated to the remuneration of the applicable Executive over the vesting period (i.e. in financial years 2012 to 2014 for
the LTI 2011/14).
(B) The value of rights that vested during the year represents awards to the applicable executives who satisfied the criteria under the LTI performance plan. As the criteria
under the LTI 2009/12 were not satisfied, no rights vested during the 2011/12 financial year.
(C) The value of rights that were forfeited during the year represents the benefit foregone and is calculated by reference to the fair value of those rights calculated at the
forfeiture date using a Black-Scholes option-pricing model. Please refer to footnote (D) of table C.3 for further details of the fair value of performance rights at grant date.
(D) The value of rights exercised during the year represents where rights, previously granted as compensation, were exercised during the reporting period. No
performance rights vested in relation to the Long Term Incentive Performance Rights Plan 2008/11 (LTI 2008/11), accordingly no rights were exercised during the
2011/12 financial year. Details of the LTI 2008/11 are set out in Note 35 (Share based payments).
(1) Mr Dawson’s rights were granted under the LTI 2008/11 prior to him becoming a Key Management Person on 12 November 2009.
(2) Mr McAtee’s employment commenced on 2 April 2012 and he is not a participant in either the LTI 2008/11 or the LTI 2009/12.
(3) Mr Atkinson’s rights were granted under the LTI 2008/11 and the LTI 2009/12 prior to him becoming a Key Management Person on 1 January 2010.
(4) Mr Brinkworth ceased employment with the Company on 26 March 2012.
(5) Mr Wallace ceased employment with the Company on 6 August 2012. Mr Wallace’s entitlement under the Long Term Incentive Performance Cash Plan 2008/11 was
granted prior to him becoming a Key Management Person on 12 November 2009. Details of the Long Term Incentive Performance Cash Plan 2008/11 are set out in
Note 35 (Share based payments).
The minimum value of rights yet to vest is $nil as the performance criteria may not be met and, in such circumstances, there would be no vesting. The maximum value of
rights yet to vest is not determinable as it depends on the market price of the Company’s shares on the ASX at the date of exercise.
Incitec Pivot Limited Annual Report 2012
26
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 principles which the Board sees as
fundamental to the Company’s continued growth and success
and the achievement of its corporate ambition and strategy.
ethical and responsible decision-making and confidence
in Incitec Pivot’s integrity; and
• Managing Director & CEO and direct reports –
appointing the Managing Director & CEO, approving the
appointment of the direct reports to the Managing Director
& CEO, monitoring management’s performance and
reviewing executive succession planning.
The Board continues to review its corporate governance
framework and practices to ensure they meet the interests
of shareholders and are consistent with the ASX Corporate
Governance Council’s Corporate Governance Principles and
Recommendations, revisions to which were released by the
ASX Corporate Governance Council on 30 June 2010 and
which are applicable to financial years commencing on or
after 1 January 2011 (ASX Recommendations). This Corporate
Governance Statement outlines the key aspects of the
Company’s corporate governance framework. This statement is
structured and numbered in the order of the Principles set out
in the ASX Recommendations. It includes cross-references to
other relevant information in this document and the
Company’s charters, policies and codes, details of which are
available on the corporate governance section of the Company’s
website, www.incitecpivot.com.au/Corporate_Governance.
The Board considers that Incitec Pivot’s corporate
governance framework and practices have complied with
the ASX Recommendations throughout the year ended
30 September 2012.
Summaries or copies of the charters, policies and codes referred
to in this statement, together with a checklist cross-referencing
the ASX Recommendations to the relevant sections of this
statement and elsewhere in this document, are available
on the corporate governance section of the Company’s website,
www.incitecpivot.com.au/Corporate_Governance.
Principle 1: Lay solid foundations for
management and oversight
Role of the Board and management
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
the Company.
The Board operates in accordance with the principles set
out in its Board Charter. A copy of the Board Charter is
available on the corporate governance section of the Company’s
website, www.incitecpivot.com.au/Corporate_Governance.
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.
The Board Charter has specifically reserved a number of key
matters for consideration and decision by the Board. These
responsibilities include:
• Direction and objectives – approving the Company’s
corporate strategy and 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
27
Incitec Pivot Limited Annual Report 2012
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. A summary of the Delegated and Reserved
Powers Policy is set out on the corporate governance section
of the Company’s website, www.incitecpivot.com.au/
Corporate_Governance.
Management performance evaluation
As part of the Board’s oversight of executive management,
the Board is to monitor and evaluate the performance of the
Managing Director & CEO and his direct reports.
All Incitec Pivot executives are subject to annual performance
reviews. The annual review involves each executive being
evaluated by his or her immediate superior, the Managing
Director & CEO. The executive is assessed against agreed
performance objectives, including business/financial/operational
targets, functional/managerial goals and personal accountabilities.
The performance evaluation of the Managing Director & CEO is
conducted by the Chairman. This evaluation involves an assessment
of a range of performance standards as determined by the
Board, including assessing performance with regard to execution
of the strategic objectives and the overall performance of the
Company and also incorporates feedback from the other directors.
Performance evaluations for the 2011/12 financial year were
conducted in the final quarter of the 2012 calendar year in
accordance with the process outlined above.
Principle 2: Structure the Board to add value
Composition of the Board
Incitec Pivot’s Constitution requires that the Company must
have not less than three, and not more than nine, directors.
Under the Company’s Board Charter, the number of directors
and composition of the Board is determined having regard to
what is appropriate for Incitec Pivot to achieve efficient and
prudent decision making. The Board will consist of a majority
of non-executive, independent directors.
The Board comprises seven directors, including six non-
executive directors and one executive director (being the
Managing Director & CEO). The Company engages all non-
executive directors by a letter of appointment setting out the
key terms and responsibilities of their role.
The directors were appointed on the following dates:
• Allan McCallum: 15 December 1997;
• Anthony Larkin: 1 June 2003;
James Fazzino: 18 July 2005;
•
John Marlay: 20 December 2006;
•
• Graham Smorgon: 19 December 2008;
• Paul Brasher: 29 September 2010; and
• Rebecca McGrath: 15 September 2011.
In terms of the mix of skills and diversity which the Board is
looking to achieve, the key objective, as prescribed in the
Board’s Charter, is to have directors with an appropriate range
of skills, experience and expertise and an understanding of, and
competence to deal with, current and emerging issues in the
Company’s business. Further, the Board’s oversight of both its
own succession plan, as well as those for the Managing Director
& CEO and his direct reports, is designed to maintain an
appropriate balance of skills, experience, expertise and
diversity on the Board as well as in management.
The Board considers that, collectively, the directors have
significant commercial, business, operational and financial
experience in a diverse range of industries and geographies,
and that this breadth is appropriate for the Group and its
businesses. As such, the directors bring skills and expertise
which, in aggregate, combine to form a Board which is
equipped to discharge its responsibilities. The directors’
biographies together with details on their term of office and
information about their skills, expertise and experience are
set out on pages 1 and 2.
The ASX Listing Rules 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.
Mr Paul Brasher and Mr Graham Smorgon are retiring by
rotation and standing for re-election at the 2012 Annual
General Meeting.
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’s role is assisted by the Company Secretary. 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 and the Company Secretary is
accountable to the Board, through the Chairman, on all
governance matters.
Board Committees
To assist the Board in meeting its responsibilities, the Board
currently has the following four Committees:
• the Audit and Risk Management Committee;
• the Nominations Committee;
• the Remuneration Committee; and
• the Health, Safety, Environment and Community Committee.
In 2012, as part of the Board’s annual review of committees,
and to give appropriate focus to remuneration having regard to
developments in corporate governance practice, the Board
established separate Remuneration and Nominations
Committees, with the Nominations Committee responsible for
Board composition, succession planning and director selection
and appointment practices, and the Remuneration Committee
responsible for remuneration policies and practices.
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.
Each of the Committees has its own Charter which establishes
the Committee’s terms of reference and operating procedures.
In line with the Board 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.
Nominations Committee
The Nominations Committee was established on 23 February
2012 and has a Charter approved by the Board. A copy of the
Charter for the Nominations Committee is available on the
corporate governance section of the Company’s website,
www.incitecpivot.com.au/Corporate_Governance. Under its
Charter, the Committee assists and advises the Board on Board
composition, director selection and appointment practices,
succession planning for the Board and the executives,
performance evaluation processes, induction training and
development for directors and strategies to address Board
diversity, in each case, to ensure that the Board comprises
individuals able to discharge the responsibilities of directors,
with the benefit of a range of skills, experience, expertise,
perspectives and diversity appropriate for the Company and its
businesses and that appropriate succession plans are in place.
As part of the Nomination Committee’s role, the Committee is
to review and make recommendations to the Board on matters
relating to the size and composition of the Board and will
assess, from time to time as necessary, or at any time on
request of the Board, the appropriate mix of skills, experience,
expertise and diversity required on the Board and the extent to
which such skills are represented on the Board. As and when
necessary, the Nominations Committee will, having regard to
the skills and competencies represented on the Board and the
competencies required, implement a process to identify suitable
candidates, which may include a search being undertaken by
an appropriate third party. The Committee will evaluate
prospective candidates and make recommendations to the
Board for the appointment of new Board members. When the
Board considers that a suitable candidate has been found, that
person is appointed by the Board and, in accordance with
Incitec Pivot’s constitution, must stand for re-election by
shareholders at the next annual general meeting.
The Committee comprises four independent non-executive
directors, being Paul Brasher (Chairman), Anthony Larkin,
Rebecca McGrath and Graham Smorgon.
The Committee is to meet as frequently as required but not
less than two times a year.
The attendance of the members of the Nominations
Committee at each meeting held during the financial year
ended 30 September 2012 is set out on page 3.
Remuneration Committee
The Remuneration Committee has a Charter approved by the
Board. A copy of the Charter for the Remuneration Committee is
available on the corporate governance section of the Company’s
website, www.incitecpivot.com.au/Corporate_Governance.
Under its Charter, the Committee assists and advises the Board
on remuneration policies and practices for the Board, the
Managing Director & CEO, the Executive Team, senior
management and other employees, for such to be designed to
Incitec Pivot Limited Annual Report 2012
28
Directors’ Report
Corporate Governance Statement
enable Incitec Pivot to attract, retain and motivate its people
to create value for shareholders.
The Committee comprises three independent non-executive
directors, being John Marlay (Chairman), Allan McCallum and
Graham Smorgon.
The Committee is to meet as frequently as required but not
less than four times a year.
The attendance of the members of the Remuneration
Committee at each meeting held during the financial year
ended 30 September 2012 is set out on page 3.
Health, Safety, Environment and Community Committee
The Health, Safety, Environment and Community Committee
has a Charter approved by the Board. A copy of the Charter is
available on the corporate governance section of the Company’s
website, www.incitecpivot.com.au/Corporate_Governance.
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 members to comprise
at least four members, three of whom will be non-executive
directors and one will be the Managing Director & CEO. The
current members of the Committee are Allan McCallum
(Chairman), Rebecca McGrath, Graham Smorgon and
James Fazzino.
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 ended 30 September
2012 is set out on page 3.
Audit and Risk Management Committee
Details of the Audit and Risk Management Committee are set
out under the heading “Principle 4: Safeguard integrity in
financial reporting” on page 32.
Board meetings
Details of the Board meetings held during the 2011/12
financial year are set out on page 3.
The Board holds nine scheduled meetings during each 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 meeting. Presentations to the Board
are frequently made by executives and senior management,
and telecommunications technologies may be used to
facilitate participation.
Director independence
The Board comprises a majority of independent
non-executive directors.
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.
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:
• 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 Paul Brasher, Anthony Larkin,
John Marlay, Allan McCallum, Rebecca McGrath and Graham
Smorgon are independent when assessed on the criteria above,
taking into account all the relevant interests, matters and
relationships of the particular director. As Managing Director &
CEO of the Company, James Fazzino is not considered to be an
independent director. In summary, of the seven directors, the
Board considers six directors are independent.
The Board Charter requires that an independent non-executive
director hold the position of Chairman.
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.
Director performance evaluations
Each year, as provided for by the Board Charter, the Board
undertakes an annual performance evaluation, comparing its
performance against its Charter, setting objectives and effecting
any improvements to the Charter. Assessment of individual
directors’ performance and that of the Board is a process
determined by the Chairman and the Nominations Committee.
Performance assessments are intended to assist the Board in
carrying out its responsibilities (as set out in its Charter) and
ensure the Board remains effective. The Board’s annual
performance review took place in August 2011 by way of self-
assessment and, following the appointment of Paul Brasher as
Chairman, the Board has commissioned an external review of
its role, structure and processes, as well as the Board’s
performance in meeting its responsibilities under its Charter.
The outcomes of this review will be included in the 2012/13
objectives for the Board and will be implemented throughout
the Company’s 2012/13 financial year. In addition, as part of
this review, the Chairman has conducted one-on-one interviews
29
Incitec Pivot Limited Annual Report 2012
with each director. For the directors who are retiring by rotation
and standing for re-election at the 2012 Annual General Meeting,
Mr Paul Brasher and Mr Graham Smorgon, their performance was
reviewed as part of their nomination for re-election.
Director induction, training and continuous education
The Nominations Committee is responsible for developing and
reviewing induction procedures for new appointees to the Board
to enable them to effectively discharge their duties. The Charter
for the Committee provides that the induction procedures should
enable new appointees to gain an understanding of the
Company’s financial, strategic, operational and risk management
position, the culture and values of Incitec Pivot, the rights, duties
and responsibilities of the directors, the roles and responsibilities
of senior executives, the role of Board Committees, meeting
arrangements and director interaction.
Additionally, the Committee ensures that continuous education
measures are in place to enhance director competencies, keep
directors up to date and enhance directors’ knowledge and
skills. These measures are to include having access to education
concerning key developments in the Company and in the
industries in which the Company operates.
Principle 3: Promote ethical and responsible
decision-making
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 designed to ensure ethical
conduct is maintained in the interests of shareholders and
other stakeholders.
In particular, Incitec Pivot’s key codes of conduct, copies of
which are available on the corporate governance section of
the Company’s website, www.incitecpivot.com.au/Corporate_
Governance, are:
• Incitec Pivot’s Code of Ethics – Compliance Policies and
Guide, which is a code of conduct for all employees. The
Code’s key principles require employees to comply with the
letter and spirit of the laws affecting Incitec Pivot’s business,
as well as the Company’s policies and codes; to act honestly
and with integrity, and to strive to earn and maintain the
respect and trust of co-employees, customers and the wider
community; to use Incitec Pivot’s resources, including
information systems, in an appropriate and responsible way;
to work safely and with due regard for the safety and well-
being of fellow employees, contractors, customers and all
persons affected by Incitec Pivot’s operations or products; to
avoid situations which involve or may involve a conflict
between their personal interests and the interests of Incitec
Pivot; to have due regard for cultural diversity in the
workplace; and to respect the environment and ensure that
work activities are managed in an acceptable manner so as
to give benefit to society.
• Incitec Pivot’s Code of Conduct for Directors and Senior
Management, which sets out additional ethical standards
for directors and senior management reporting to the
Managing Director & CEO.
• Incitec Pivot’s Health, Safety, Environment & Community
Policy, which sets out the Company’s commitment to its
values of “Zero Harm for Everyone, Everywhere” and “Care
for the Community and our 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.
Anti-bribery and corruption
As part of its commitment to operating to the highest standards
of ethical behaviour, Incitec Pivot has an Anti-Bribery and
Improper Payments Policy which prohibits the making of
unlawful or improper payments to any individual or entity. The
policy also outlines the processes for ensuring that appropriate
controls are implemented in relation to third parties who are
engaged to act on behalf of the Company. The Company has
implemented mandatory and regular compliance training for
relevant persons to ensure compliance with the Policy. The Anti-
Bribery and Improper Payments Policy forms part of, and is
supported by, the Fraud and Corruption Control framework. Anti-
bribery and corruption compliance is monitored and reported
within Incitec Pivot’s key corporate governance structures,
including by the Board’s Audit and Risk Management Committee.
In addition, the Company has adopted a Sanctions Policy, which
outlines the expected standards of conduct relevant to the
Group’s compliance with Australian and international sanctions
laws when engaging in international trade. This includes
engagement in appropriate due diligence in relation to third
parties, transactions or activities that present a potential risk in
relation to sanctions laws compliance. As with the Anti-Bribery
and Improper Payments Policy, the Sanctions Policy is supported
by compliance training and is monitored and reported within the
Company’s key governance structures, including by the Board’s
Audit and Risk Management Committee. Summaries of the Anti-
Bribery and Improper Payments Policy and Sanctions Policy are
available on the corporate governance section of the Company’s
website, www.incitecpivot.com.au/Corporate_Governance.
Whistleblower protection
Employees are encouraged to raise any concerns, including
those arising out of activities or behaviour that may not be in
accordance with Incitec Pivot’s codes of conduct, any of its
other policies, or any other regulatory requirements, with
management, the human resources team or the legal and
compliance team. Employees can also raise concerns about
breaches of the Company’s regulatory obligations or internal
policies or procedures on an anonymous basis through its
whistleblower reporting system. The Group Whistleblower
Protection Policy protects employees who raise concerns about
suspected breaches of Incitec Pivot’s Code of Ethics, policies or
the law. Incitec Pivot’s whistleblower reporting system meets
all relevant Australian legislative requirements and Australian
Standard AS8004 (Whistleblower Protection Programs for
Entities). Reports on the operation of the system are made
to the Audit and Risk Management Committee.
Incitec Pivot Limited Annual Report 2012
30
Directors’ Report
Corporate Governance Statement
Share ownership and dealing
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 are aware of the legal restrictions on trading in
securities while a person is in possession of inside information.
Under the policy, all persons to whom the policy applies 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 individuals (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, given written confirmation that
they are not in possession of price sensitive information and
received an acknowledgement of the confirmation from the
Company Secretary. Additionally, “designated employees” must
not enter into hedging arrangements which operate to limit the
economic risk of their security holding in Incitec Pivot. In the
case of the Company Secretary, she must notify the Chairman
or Managing Director & CEO of her proposed share trading and
must also give the same written confirmation as a “designated
employee” to the effect that she is not in possession of price
sensitive information.
All directors have entered into agreements with Incitec Pivot
under which they agree to provide details of changes in their
notifiable interests in Incitec Pivot’s shares within three business
days after the date of change, enabling the ASX to be notified of
any share dealings by a director within five business days of the
dealing taking place, as required by the ASX Listing Rules.
The Company’s Share Trading Policy is available on the
corporate governance section of the Company’s website,
www.incitecpivot.com.au/Corporate_Governance. The
Company’s Share Trading Policy is in compliance with the
requirements under the relevant ASX Listing Rules.
Details of shares in the Company held by the directors are set
out in Note 34, Key Management Personnel disclosures.
Diversity
Incitec Pivot’s commitment to diversity is key to its corporate
ambition of generating competitive returns for shareholders
through its strategy as a leading global chemicals company.
With operations spanning the globe, Incitec Pivot recognises
that a diverse and inclusive workforce will result in improved
organisational engagement which, in turn, will improve
corporate performance.
Diversity at Incitec Pivot is led by the Company’s Diversity
Council, chaired by the General Counsel and Company Secretary,
which includes senior managers from across the business,
reporting to the Managing Director & CEO. The Diversity
Council’s remit is to promote, influence and support the
implementation of the Company’s Diversity policy and strategy.
The Board maintains oversight and responsibility for the
Diversity Policy and the development and implementation by
management of the Diversity Strategy.
31
Incitec Pivot Limited Annual Report 2012
In the 2011/12 financial year, the Group adopted a Diversity
Policy, a copy of which is available on the corporate governance
section of the Company’s website, www.incitecpivot.com.au/
Corporate_Governance, together with a Diversity Strategy.
The Diversity Policy outlines the Company’s Diversity Vision,
which is to be an inclusive and accessible organisation through
the development of a culture that embraces diversity. The
Policy also provides guidance for the Diversity Strategy and its
relevant policies, programs and initiatives.
The Diversity Strategy, which was endorsed by the Board
during the year, recognises that the Company’s businesses
are at different stages with regards to diversity and face
different challenges in relation to their people strategies. As
such, the Diversity Strategy will be implemented in a phased
approach, starting with Australia and followed by the US and
Canada, with the intention for a whole of Group approach to
be in place by 2014/15.
Underpinning both the Diversity Vision and Strategy are the
Diversity Principles:
• “Respecting our Differences”,
• “Shaping our Future Organisation”,
• “Building a Flexible Organisation”.
The Company’s objectives for 2011/12 financial year
referenced these principles.
In addition to establishing the Company’s Diversity Strategy
and Policy as the foundations to Company’s approach to
diversity, the focus in 2011/12 was on gender diversity and
indigenous employment.
Gender Diversity
In 2011/12, the objectives on gender diversity were threefold:
• to raise awareness of the Company’s approach to diversity
among the Group’s senior leaders. The senior leaders
undertook training on the key diversity principles,
understanding that at the core is the first principle –
respecting our differences – to create a workplace inclusive
of all people, regardless of differences. These differences can
include, but are not limited to, gender, age, ethnicity, cultural
background, disability, sexual orientation or religious belief.
The Company’s Executive Leadership Program now includes
a component on diversity. The initial phase of the Company’s
anti-discrimination and anti-harassment training program
was launched in Australia and an e-learning module was
developed to facilitate training and awareness in some of
the Company’s more remote sites, as well as among the
Company’s contractor workforce;
• to increase the number of women in leadership roles, as
well as in the Company’s talent pipeline, in particular in
engineering and operational roles. During the year, the focus
was on recruitment. As a percentage of total hires, the
number of female employees increased from 17% to 21%.
Emphasis was also on the graduate recruitment program,
with five female graduates to commence in the 2013
program, representing over a third of the total graduate
intake. This was significant as no female graduates were
recruited for the 2012 program. As part of the recruitment
initiatives, phase 1 of the Company’s recruitment practices
review in Australia was completed, with revised guidelines
to be issued in 2012/13 together with appropriate training;
• to establish best practice parental leave arrangements and
flexible work arrangements. In line with this, policies were
revised and a new parental support program developed,
with the new frameworks for parental leave and flexible
work arrangements to be formally launched early in the
2012/13 financial year.
Indigenous Employment
Over the years, through Dyno Nobel’s operations in Canada,
the Group has formed positive relationships with the First
Nations people. Building on this, Incitec Pivot established an
indigenous employment program in Australia, with dedicated
resources and particular focus on the Company’s operations in
Western Australia and Queensland. A number of initiatives
designed to develop sustainable indigenous employment
are underway.
Diversity in 2012/13
For the 2012/13 financial year, each of the Australian business
units and functions will develop and implement diversity plans
based on the Diversity Principles. In North America, the
business units and functions will undertake a diversity
diagnostic so that detailed diversity plans can be developed
and implemented across the North American operations.
Board
Executive
Management
Global
% of Women
30 September 2012
14.3%
12.5%
11.8%
13.6%
Further details of the Company’s Diversity Strategy are available
on the Company’s website, www.incitecpivot.com.au
Principle 4: Safeguard integrity in
financial reporting
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. It also 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.
In relation to gender diversity, the Board has set the following
measurable objectives for the Australian business for the
2012/13 financial year, with progress to be reported in the
2013 Annual Report:
The current members of the Audit and Risk Management
Committee are Anthony Larkin (Chairman), John Marlay
and Rebecca McGrath, all of whom are independent non-
executive directors.
Respecting our differences: Ensure equity in the Company’s
remuneration practices in Australia, in particular to embed
gender pay analytics into remuneration and performance
policies and practices by 30 September 2013.
Shaping our future organisation: Strengthen the talent
pipeline, in particular to increase the number of women in the
Company’s Australian business, focussing on recruitment and
talent development activities - including implementing a
Quarterly Mentoring Program for women and maintaining focus
on the graduate recruitment program.
Building a flexible organisation: Launch the revised parental
leave and flexible work arrangements to increase the number
of women returning to work after family leave and establish
effective employee tools to “keep in touch” while on leave.
The Diversity Council will report to the Board on progress
made against these objectives throughout the year, as well
as more broadly with regards to the Diversity Strategy.
In 2012, as was the case in 2011, the Company received
confirmation from the Australian Government’s Equal
Opportunity for Women in the Workplace Agency that it was
compliant with the Equal Opportunity for Women in the
Workplace Act 1999 (Cth).
During 2011/12, the proportion of women in the Company
remained broadly consistent with the prior year. While the
proportion of women at the Board level increased, this reflects
the retirement of a director during the year. A restructure of the
business in 2012 resulted in an increase in the proportion of
women at Executive level and a decrease in the proportion of
women in management. The following table shows the
proportion of women employed as at 30 September 2012.
The qualifications of those directors appointed to the Audit
and Risk Management Committee are set out on pages 1
and 2.
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 ended 30 September 2012 is set out on page 3.
The Chief Risk Officer, external auditors, the Managing Director
& CEO and the Chief Financial Officer are invited to attend Audit
and Risk Management Committee meetings. The Committee
regularly meets with the Chief Risk Officer and the 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
• 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
• Managing Director & CEO and Chief Financial Officer
certification – review the certification provided by the
Managing Director & CEO and the Chief Financial Officer on
annual and half-yearly reports.
Incitec Pivot Limited Annual Report 2012
32
Directors’ Report
Corporate Governance Statement
Internal control and risk management
• risk management strategies – receive reports from
management, the internal audit function and the external
auditor concerning risk management principles and policies,
strategies, processes and controls and concerning the
processes for determining and monitoring material
business risks;
•
internal audit findings – receive summaries of significant
reports to management from the internal audit function,
management’s response and the internal auditor’s
recommendations;
• monitor internal audit plan – monitor, and review compliance
with, and the effectiveness of implementation of, audit plans
of the internal audit function;
• risk reports and monitoring – receive reports from
• communication – review the level of open communication
management on risk implications from new and emerging
risks, changes in the economic and business environment
and other factors relevant to the Group’s performance and
strategy; receive reports from management and monitor
resolution of significant risk exposures;
• compliance – receive reports from management, monitor
and oversee compliance with applicable laws relating to the
operation of the business and review and monitor policies
and systems to manage compliance risk;
• disclosure – review the form of disclosure to be made in the
Annual Report given by the Managing Director & CEO and
Chief Financial Officer as to the effectiveness of the
Company’s management of material business risks; and
insurance – receive reports from management and monitor
the insurance strategy of the Group and recommend
approval or variation of insurance policies.
•
External audit
• 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;
• 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 the 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
• structure/resources – review and approve the structure of the
internal audit function and resources;
• appointment/replacement – in the event the internal audit
function is fully outsourced, 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, noting that while
internal audit is managed internally, the Committee evaluates
and approves the panel of external consultants to provide
internal audit services within the internal audit plan;
• assessment – evaluate the performance of the internal audit
function together with the financial incentives for personnel
in the internal audit function;
between the internal audit function, the external auditor and
the Board and any restrictions placed on the internal audit
function by management; and
• assessment – conduct an annual assessment of the
effectiveness of internal controls and financial reporting
procedures.
External auditor
The role of the external auditor is to provide an independent
opinion that the Company’s financial reports are true and fair
and comply with the applicable regulations.
Deloitte Touche Tohmatsu is the Company’s external auditor,
appointed at the 2011 Annual General Meeting.
The lead audit partner and review partner of the Company’s
external auditor rotate every five years.
Restrictions are placed on non-audit work performed by the
auditor and projects outside the scope of the audit require the
approval of the Audit and Risk Management Committee. Further
details are set out in Note 7 to the financial statements,
Auditor’s remuneration.
The lead audit partner or appropriate alternates will attend
the Annual General Meeting to be held on 18 December 2012.
Under the Corporations Act 2001 (Cth), shareholders have the
right to submit written questions on certain topics to the
auditor, and the auditor may table answers to such questions
at the Annual General Meeting.
Internal audit
On the appointment of Deloitte Touche Tohmatsu as external
auditor in December 2011, Deloitte Touche Tohmatsu ceased to
be internal auditor. Accordingly, management has established
an internal audit function and appointed the Chief Risk Officer
to oversee the execution of the internal audit plan as approved
by the Audit and Risk Management Committee.
Principle 5: Make timely and
balanced disclosure
The Company is subject to continuous disclosure obligations
under the ASX Listing Rules and Corporations Act 2001 (Cth).
Subject to some limited exceptions, under the continuous
disclosure requirements, the Company must immediately
notify the market, through ASX, of any information which a
reasonable person would expect to have a material effect on
the price or value of the Company’s shares.
To achieve these objectives and satisfy the regulatory
requirements, the Board has implemented a Continuous
Disclosure Policy. The Policy aims to ensure the proper and
timely disclosure of information to shareholders and the
market in several ways, including:
• scope of audit and plan – review and assess the scope of the
•
audit and the internal audit plan;
in annual reports and financial statements, releases of
results to ASX each half and full year, and at the Company’s
Annual General Meeting;
33
Incitec Pivot Limited Annual Report 2012
• 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 Corporations Act 2001 (Cth), 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 Policy appoints the Company Secretary as the Continuous
Disclosure Officer whose role includes providing announcements
to the ASX and ensuring senior management and employees
are kept informed of the Company’s obligations and the
accountability of the Company and its directors, officers and
employees for compliance with the disclosure rules.
The Company’s Continuous Disclosure Policy is available
on the corporate governance section of the Company’s website,
www.incitecpivot.com.au/Corporate_Governance.
Principle 6: Respect the rights
of shareholders
Incitec Pivot is committed to giving all shareholders
comprehensive, timely and equal access to information
about its activities so as to enable shareholders to make
informed investment decisions and effectively exercise
their rights as shareholders.
The Shareholder Communications Policy aims to ensure:
• that the Company’s announcements are presented in a
factual, clear and balanced way;
• that all shareholders have equal and timely access to
material information concerning the Company; and
• shareholder access to information about, and shareholder
participation in, general meetings of the Company.
The Company regularly reviews the methods by which it
communicates with shareholders so as to ensure it can make
best use of new technologies to enhance shareholder
communication. The Company places all relevant announcements
made to the market, and related information, on the Company’s
website after they have been released to the ASX.
The Shareholder Communications Policy is available on the
corporate governance section of the Company’s website,
www.incitecpivot.com.au/Corporate_Governance.
Principle 7: Recognise and manage risk
Risk oversight and management
Risk is present in all aspects of Incitec Pivot’s business.
It has the potential to impact people, the environment,
the community and the reputation, assets and financial
performance of the Group. Incitec Pivot is committed to the
effective management of risk, which is central to its continued
growth and success and the achievement of the Group’s
corporate objective and strategy.
Incitec Pivot has adopted a Group Risk Policy for the oversight
and management of material business risks and manages risk
within a comprehensive risk management process which is
consistent with the Australian/New Zealand Standard for Risk
Management (AS/NZS ISO 31000:2009). A key element of this
risk management process is the Board’s assessment of risk,
which is based on the level of risk Incitec Pivot is able to sustain
in achieving its corporate objective of delivering value to
shareholders. Risks are identified, analysed and prioritised using
common methodologies, and risk controls are designed and
implemented having regard to the overall corporate strategy.
The risk controls adopted by Incitec Pivot are administered
via a Group-wide framework, and include:
•
identifying, evaluating, treating, monitoring, and reporting
on material business risks to the Audit and Risk
Management Committee;
• annual budgeting and monthly reporting systems to monitor
performance;
• delegations of authority;
• policies and procedures for the authorisation of capital
expenditure;
• a compliance program supported by approved guidelines
and standards covering health, safety and environment, and
regulatory compliance;
• policies and procedures for the management of financial risk
and treasury operations, including exposures to foreign
currencies and movements in interest rates;
• a letter of assurance process to provide assurance from
management that all controls are in place and operating
appropriately;
• business continuity plans; and
• the internal audit function.
A summary of the Group Risk Policy is available on the
corporate governance section of Incitec Pivot’s website,
www.incitecpivot.com.au/Corporate_Governance.
Risk management roles and responsibilities
The Board is responsible for reviewing and approving the
overall management of risk and internal control. The Board
monitors the Group’s risk profile, risks and mitigating strategies
primarily through the Audit and Risk Management Committee.
The Audit and Risk Management Committee’s duties with
respect to internal control and risk management have been
summarised under the discussion of Principle 4 on page 33.
The Audit and Risk Management Committee and, through it,
the Board, receive regular reports from management on the
effectiveness of the Group’s risk management process.
The following paragraphs describe the material risks associated
with Incitec Pivot’s business and operations. There may be
additional risks unknown to Incitec Pivot and other risks,
currently believed to be immaterial, which could become
material. These risks, which may occur individually or
concurrently, could significantly affect the Company’s business
and operations. The risks outlined below do not include details
as to how each risk is managed and the mitigation strategies
adopted, or the manner in which those risks may have a
positive or negative impact on the Group. The Group’s process
for managing risk is set out in the above section titled “Risk
oversight and management”.
Incitec Pivot Limited Annual Report 2012
34
Directors’ Report
Corporate Governance Statement
General Economic and Business Conditions
The current global economic business climate and any sustained
downturn in the global, North American, Chinese or Australian
economy may adversely impact Incitec Pivot’s overall
performance. This may affect, among other things, profitability
and demand for fertilisers, industrial chemicals, industrial
explosives and related products and services.
Strategy and Planning
Incitec Pivot operates in a competitive environment. The
domestic and international fertiliser and industrial explosives
industries are highly competitive. The actions of competitors of
Incitec Pivot or the entry of new competitors may result in loss
of sales and market share which could adversely affect Incitec
Pivot’s financial performance.
Product price deteriorations could adversely affect Incitec Pivot’s
business and financial performance:
• fertilisers are internationally traded commodities with pricing
based on international benchmarks and are affected by
global supply and demand forces, as well as fluctuations in
foreign currency exchange rates, particularly the exchange
rate between the Australian dollar and the US dollar;
industrial explosives products, particularly ammonium nitrate
based explosives, are affected more directly by supply and
demand dynamics in industrial explosives markets, such as
quarrying, construction and mining.
•
The appreciation or depreciation of the Australian dollar against
the US dollar may materially affect Incitec Pivot’s financial
performance. A large proportion of Incitec Pivot’s sales are
denominated either directly or indirectly in foreign currencies,
primarily the US dollar. In addition, Incitec Pivot also borrows
funds in US dollars, and the Australian dollar equivalent of these
borrowings will fluctuate with the exchange rate.
Operational Risks
Incitec Pivot operates manufacturing plants and facilities and is
exposed to operational risks associated with the manufacture,
distribution and storage of fertilisers, ammonium nitrate and
industrial chemicals and industrial explosives products and
services. These risks include the need for plant reliability and
timely and economic supply of adequate raw materials, such
as natural gas, ammonia, phosphate rock, sulphur and
sulphuric acid.
Incitec Pivot’s manufacturing and distribution systems are
vulnerable to unforeseen human error, equipment breakdowns,
energy or water disruptions, natural disasters and acts of God,
sabotage, terrorist attacks and other events which may disrupt
Incitec Pivot’s operations and materially affect its financial
performance. In addition, loss from such events may not
be recoverable in whole or in part under Incitec Pivot’s
insurance policies.
A shortage of skilled labour or loss of key personnel could
disrupt Incitec Pivot’s business operations or adversely affect
Incitec Pivot’s business and financial performance. Incitec Pivot’s
manufacturing plants require skilled operators drawn from a
range of disciplines, trades and vocations. In addition, the loss
of services of one or more of Incitec Pivot’s senior management
could impede execution of Incitec Pivot’s business strategy and
result in reduced profitability.
Further, in relation to both its Fertilisers business and its
Explosives business, seasonal conditions, particularly rainfall, are
a key factor for determining demand and sales. Any prolonged
adverse weather conditions could impact the future profitability
and prospects of Incitec Pivot.
Health, Safety and Environment
Incitec Pivot is subject to various operational hazards, including
from the manufacture, processing and transportation of its
fertiliser and explosives products and in the provision of related
services, which could potentially result in injury or incident to
employees, contractors, the public or the environment. Incitec
Pivot has adopted a “Zero Harm” policy to manage its health
and safety risks.
Compliance and Regulatory Risks
Changes in federal or state government legislation, regulations
or policies in any of the countries in which it operates may
adversely impact on Incitec Pivot’s business, financial condition
and results of operations.
Incitec Pivot’s business is subject to environmental laws
and regulations that require specific operating licences
and impose various requirements and standards. Changes in
these laws and regulations, or changes to licence conditions,
may have a detrimental effect on Incitec Pivot’s operations
and financial performance, including the need to undertake
environmental remediation.
Incitec Pivot is exposed to potential legal and other claims or
disputes in the course of its business, including contractual
disputes, property damage and personal liability claims in
connection with operational and health and safety matters.
Risk management and internal controls
Management, through the Managing Director & CEO and the
Chief Financial Officer, is responsible for the overall design,
implementation, management and coordination of the Group’s
risk management and internal control system.
Each business unit has responsibility for identification and
management of risks specific to their business. This is managed
through an annual risk workshop within each business unit.
The risk workshops are facilitated by the Group’s internal audit
function, led by the Chief Risk Officer, and form part of the
annual internal audit program, thereby aligning the internal
audit activities with material business risks. The outcomes of
the business unit risk workshops are assessed as part of the
annual corporate risk workshop. The resultant Corporate Risk
Workbook is presented to the Audit and Risk Management
Committee on an annual basis, and management is required
to present regular updates to the Committee on material
business risks.
The internal audit function monitors the internal control
framework and provides regular reports to the Audit and
Risk Management Committee. The annual internal audit
program is approved by the Audit and Risk Management
Committee. The internal audit function provides written reports
to the Committee on the effectiveness of the management of
risk and internal controls, and the Chief Risk Officer meets
regularly with the Committee without the presence of other
members of management.
35
Incitec Pivot Limited Annual Report 2012
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 $2,000,000 as
approved at the Annual General Meeting held on 19 December
2008. The total remuneration paid to the non-executive
directors during the financial year ended 30 September 2012
was within the maximum amount approved by shareholders.
Details of remuneration paid to the Managing Director & CEO
and other executives are included in table C.3 “Executive
remuneration” in the Remuneration Report on page 22.
The attendance of the members of the Remuneration
Committee at each meeting held during the financial year
to 30 September 2012 is set out on page 3.
Signed on behalf of the Board.
Paul V Brasher
Chairman
Dated at Melbourne
this 12th day of November 2012
The Audit and Risk Management Committee and the Board
have received reports from management on the effectiveness
of the Group’s management of its material business risks for
the financial year ended 30 September 2012.
CEO and CFO Declaration and Assurance
In accordance with the ASX Recommendations, for the
financial year ended 30 September 2012, the Board
received written assurance from the Managing Director
& CEO and the Chief Financial Officer that the declaration
provided by them in accordance with section 295A of the
Corporations Act 2001 (Cth) is founded on a sound system of
risk management and internal control, and that the system is
operating effectively in all material respects in relation to the
reporting of financial risks.
Principle 8: Remunerate fairly
and responsibly
The Board and Remuneration Committee are primarily
responsible in relation to the oversight of the Company’s
remuneration framework and policies. Details of Incitec Pivot’s
remuneration arrangements are set out in the Remuneration
Report. As set out on page 28, the Remuneration Committee
is formed under a Charter approved by the Board, a copy of
which is available on the corporate governance section of
the Company’s website, www.incitecpivot.com.au/Corporate_
Governance. The members of the Committee are three
independent non-executive directors, being John Marlay
(Chairman), Allan McCallum and Graham Smorgon.
The ASX Recommendations provide that a remuneration
committee should be structured so that it consists of a majority
of independent directors, is chaired by an independent director
and has at least three members. The Charter for the
Remuneration Committee provides that each member of the
Committee must be a non-executive director and a majority of
members of the Committee must be independent. The Charter
also provides that the Chairman of the Committee must be an
independent director. As each member of the Remuneration
Committee (including Mr John Marlay, the Chairman of the
Committee) is considered to be an independent non-executive
director, the structure of the Committee fulfils the requirements
under the ASX Recommendations.
Incitec Pivot’s policy is to remunerate non-executive directors
by way of fees and payments which may be in the form of
cash, non-cash benefits and superannuation benefits. Incitec
Pivot’s broad policy in relation to the level of non-executive
directors’ fees and payments is to ensure that these fees and
payments are consistent with the market and 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 B of the Remuneration Report on page 12. The
Company’s policy is that non-executive directors should
not be remunerated by way of options, shares, performance
rights, bonuses nor incentive-based payments.
Incitec Pivot Limited Annual Report 2012
36
37
Incitec Pivot Limited Annual Report 2012
Financial Report
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Cash Flows
Consolidated Statement of Changes in Equity
Notes to the Consolidated Financial Statements
Directors’ Declaration on the Consolidated
Financial Statements set out on pages 39 to 108
Audit Report
Shareholder Statistics
Five Year Financial Statistics
39
40
41
42
43
44
109
110
112
113
Incitec Pivot Limited Annual Report 2012
38
Consolidated Income Statement
For the year ended 30 September 2012
Revenue
Financial and other 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
Depreciation and amortisation expense
Financial expenses
Purchased services
Repairs and maintenance
Outgoing freight
Lease payments - operating leases
Share of profit on equity accounted investments
Asset write-downs, clean-up and environmental provisions
Reversal of Moranbah unfavourable contract liability
Other expenses
Profit before income tax
Income tax expense
Profit for the financial year
Profit attributable to:
Members of Incitec Pivot Limited
Non-controlling interest
Earnings per share
Basic earnings per share
Diluted earnings per share
Consolidated
Notes
2012
$mill
(4)
(4)
3,500.9
40.4
(97.1)
(1,506.5)
(543.3)
(155.8)
(66.6)
(167.4)
(109.4)
(237.8)
(65.3)
27.4
(104.2)
261.6
(65.2)
711.7
(203.7)
508.0
(5)
(5)
(16)
(8)
2011
$mill
3,545.3
46.3
141.2
(1,701.1)
(549.1)
(148.2)
(63.1)
(159.7)
(119.2)
(218.5)
(60.3)
24.2
(23.7)
-
(92.7)
621.4
(154.1)
467.3
510.7
(2.7)
463.2
4.1
cents
cents
(9)
(9)
31.4
31.4
28.4
28.4
The above Consolidated Income Statement is to be read in conjunction with the Notes to the Consolidated Financial Statements set out on
pages 44 to 108.
39
Incitec Pivot Limited Annual Report 2012
Consolidated Statement of Comprehensive Income
For the year ended 30 September 2012
Profit for the financial year
Other comprehensive income / (expense)
Cash-flow hedging reserve
Changes in fair value of cash-flow hedges
Profit in cash-flow hedges transferred to Consolidated Income Statement
Income tax on movements in the cash-flow hedging reserve
Fair value reserve
Change in fair value of equity instruments
Income tax on change in fair value of equity instruments
Foreign currency translation reserve
Exchange differences on translation of foreign operations
Net gain / (loss) on hedge of net investment
Income tax on movements in foreign currency translation reserve
Actuarial losses on defined benefit plans
Actuarial losses on defined benefit plans
Income tax on actuarial losses on defined benefit plans
Total other comprehensive expense
Total comprehensive income for the financial year
Total comprehensive income attributable to:
Members of Incitec Pivot Limited
Non-controlling interest
Notes
Consolidated
2012
$mill
2011
$mill
508.0
467.3
36.7
(22.5)
(4.0)
10.2
(7.5)
2.2
(5.3)
(40.3)
50.3
(10.9)
(0.9)
(16.5)
6.1
(10.4)
51.7
(90.5)
8.1
(30.7)
(20.1)
6.0
(14.1)
(84.6)
(21.8)
(61.3)
(167.7)
(29.5)
10.0
(19.5)
(6.4)
(232.0)
501.6
235.3
504.3
(2.7)
231.2
4.1
(25)
The above Consolidated Statement of Comprehensive Income is to be read in conjunction with the Notes to the Consolidated Financial
Statements set out on pages 44 to 108.
Incitec Pivot Limited Annual Report 2012
40
Consolidated Statement of Financial Position
As at 30 September 2012
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other assets
Other financial assets
Assets classified as held for sale
Total current assets
Non-current assets
Trade and other receivables
Other assets
Other financial assets
Investments accounted for using the equity method
Property, plant and equipment
Intangible assets
Deferred tax assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Interest bearing liabilities
Other financial liabilities
Provisions
Current tax liabilities
Total current liabilities
Non-current liabilities
Trade and other payables
Interest bearing liabilities
Other financial liabilities
Provisions
Deferred tax liabilities
Retirement benefit obligations
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Minority interest
Total equity
Consolidated
2012
$mill
2011
$mill
Notes
(10)
(11)
(12)
(13)
(14)
(15)
(11)
(13)
(14)
(16)
(17)
(18)
(19)
(20)
(21)
(22)
(23)
(20)
(21)
(22)
(23)
(24)
(25)
(26)
154.1
372.9
403.7
57.4
32.2
0.2
1,020.5
24.2
17.7
49.5
292.8
2,738.5
2,845.2
25.0
5,992.9
7,013.4
817.5
125.7
14.8
122.8
11.4
1,092.2
17.1
1,315.3
-
74.5
371.3
111.6
1,889.8
2,982.0
4,031.4
379.7
451.9
477.9
31.2
40.8
6.5
1,388.0
16.1
17.5
52.9
257.1
2,283.3
2,942.3
44.7
5,613.9
7,001.9
875.1
95.7
0.6
98.3
93.5
1,163.2
281.9
1,472.8
2.9
63.8
195.3
115.3
2,132.0
3,295.2
3,706.7
3,265.9
(178.4)
941.6
2.3
4,031.4
3,265.9
(192.8)
628.6
5.0
3,706.7
The above Consolidated Statement of Financial Position is to be read in conjunction with the Notes to the Consolidated Financial Statements
set out on pages 44 to 108.
41
Incitec Pivot Limited Annual Report 2012
Consolidated Statement of Cash Flows
For the year ended 30 September 2012
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Financial expenses paid
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 investments
Proceeds from sale of investments
Proceeds from sale of property, plant and equipment
Amounts advanced / (repayment of loans) to equity-accounted investees
Proceeds from settlement of net investment hedge derivatives
Net cash flows from investing activities
Cash flows from financing activities
Repayments of borrowings
Proceeds from borrowings
Payment of borrowing costs
Realised market value gains on interest rate swaps
Dividends paid
Net cash flows from financing activities
Notes
Consolidated
2011
$mill
Inflows/
(Outflows)
2012
$mill
Inflows/
(Outflows)
3,934.5
(3,218.0)
7.4
(41.3)
24.5
(86.3)
620.8
3,882.2
(3,168.4)
4.8
(22.7)
27.7
(4.5)
719.1
(28)
(626.6)
(35.1)
-
10.0
21.2
29.2
(601.3)
(63.6)
-
-
5.3
(187.3)
(245.6)
(226.1)
379.7
0.5
154.1
(646.6)
(0.2)
1.7
36.2
(15.0)
16.1
(607.8)
(127.2)
509.7
(10.7)
-
(151.4)
220.4
331.7
48.7
(0.7)
379.7
Net increase / (decrease) 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
(10)
The above Consolidated Statement of Cash Flows is to be read in conjunction with the Notes to the Consolidated Financial Statements
set out on pages 44 to 108.
Incitec Pivot Limited Annual Report 2012
42
Consolidated Statement of Changes in Equity
For the year ended 30 September 2012
Consolidated
Cash
flow
hedging
reserve
Share
based
payments
reserve
Foreign
currency
translation
reserve
Issued
capital
Fair
value
reserve
Retained
earnings
$mill
$mill
$mill
$mill
$mill
$mill
Minority
interest
$mill
Total
$mill
Total
equity
$mill
Balance at 1 October 2010
Profit for the financial year
Total other comprehensive expense for
the period
Dividends paid
Share based payment transactions
Dividends received as loan repayment
Option expense
Loan repayments
Balance at 30 September 2011
Balance at 1 October 2011
Profit for the financial year
Total other comprehensive
income/(expense) for the period
Dividends paid
Share based payment transactions
Option expense
Balance at 30 September 2012
3,265.9
-
-
-
-
-
-
3,265.9
3,265.9
-
-
-
-
3,265.9
20.2
-
(30.7)
-
-
-
-
(10.5)
(10.5)
-
10.2
-
-
(0.3)
(0.8)
-
(22.2)
-
9.8
-
336.3
463.2
3,609.2
463.2
2.1
4.1
3,611.3
467.3
-
-
0.1
7.7
4.9
11.9
11.9
-
-
-
(167.7)
-
-
-
-
(189.9)
(189.9)
-
(0.9)
-
10.4
22.3
-
(190.8)
(14.1)
-
(19.5)
(151.4)
(232.0)
(151.4)
-
(1.2)
(232.0)
(152.6)
-
-
-
(4.3)
(4.3)
-
(5.3)
-
-
(9.6)
-
-
-
628.6
0.1
7.7
4.9
3,701.7
-
-
-
5.0
0.1
7.7
4.9
3,706.7
628.6
510.7
3,701.7
510.7
5.0
(2.7)
3,706.7
508.0
(10.4)
(187.3)
(6.4)
(187.3)
-
-
(6.4)
(187.3)
-
941.6
10.4
4,029.1
-
2.3
10.4
4,031.4
The Consolidated Statement of Changes in Equity should be read in conjunction with the Notes to the Consolidated Financial Statements set
out on pages 44 to 108.
Cash flow hedging reserve
The cash flow hedging reserve comprises the cumulative net change in the fair value of cash flow hedging instruments related to the effective
portion of hedged transactions that have not yet occurred.
Share-based payments reserve
The share-based payments reserve comprises the fair value of shares treated as options and of rights recognised as an employee expense
over the relevant vesting period and transactions associated with the 2007/10 and 2008/11 Long Term Incentive plans.
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(xix). The relevant portion of the reserve is recognised in the Consolidated Income Statement when the foreign operation is disposed of.
The foreign currency translation reserve is also used to record gains and losses on hedges of net investments in foreign operations.
Fair value reserve
The fair value reserve represents the cumulative net change in the fair value of equity instruments.
Minority interest
Represents a 35 percent outside equity interest in Quantum Fertilisers Limited, a Hong Kong based fertiliser marketing company.
43
Incitec Pivot Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
1
2
3
4
5
6
7
8
9
Significant accounting policies
Critical accounting estimates and judgments
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 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 Reconciliation of profit after income tax to net cash inflow from operating activities
29 Commitments
30 Contingent liabilities
31 Financial risk management
32 Financial instruments
33 Related party disclosures
34 Key management personnel disclosures
35 Share based payments
36 Investments in controlled entities
37 Deed of cross guarantee
38 Parent entity disclosure
39 Events subsequent to reporting date
45
52
53
56
56
57
58
59
60
60
61
61
61
62
62
63
66
67
69
70
71
72
72
75
76
78
78
79
80
81
82
89
94
95
99
104
106
107
108
Incitec Pivot Limited Annual Report 2012
44
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
1. Significant accounting policies
Incitec Pivot Limited (‘the Company’ or ‘Incitec Pivot’) is a company
domiciled in Australia. The consolidated financial statements were
authorised for issue by the directors on 12 November 2012.
AASB 2010-6 Amendments to Australian Accounting Standards
– Disclosures on Transfers of Financial Assets
AASB 2010-4 Further Amendments to Australian Accounting
Standards arising from the Annual Improvements Project
The significant accounting policies adopted in preparing the
consolidated financial statements of Incitec Pivot and of its controlled
entities (collectively ‘the Group’) are stated below to assist in a general
understanding of the consolidated financial statements. Interests in
jointly controlled entities and associates are equity accounted (recorded
as investments accounted for using the equity method) and do not form
part of the Group (Refer Note 1 (ii) (b)).
The early adoption of these standards did not have a significant impact
on the Group’s results in the current and/or prior year.
Issued Standards not early adopted
The following standards and amendments were available for early
adoption but have not been applied by the Group in these consolidated
financial statements:
These policies have been consistently applied to all the years
presented, unless otherwise stated.
(i) Basis of preparation
The consolidated financial statements are general purpose financial
statements which have been prepared in accordance with Australian
Accounting Standards (AASs) (including Australian Interpretations)
adopted by the Australian Accounting Standards Board (AASB) and the
Corporations Act 2001. The consolidated financial statements of the
Group comply with International Financial Reporting Standards (IFRSs)
and interpretations adopted by the International Accounting Standards
Board (IASB).
Deficiency on Net Current Assets
As at 30 September 2012, the Company and Group's current liabilities
exceeded its current assets by $550.0m and $71.7m respectively. The
Group has un-drawn financing facilities of $900.0m at 30 September
2012 and a cash balance of $154.1m. In addition, the Group's forecast
cash flows for the next twelve months indicate that it will be able to
meet current liabilities as and when they fall due, therefore the
consolidated financial statements have been prepared on a going
concern basis.
Historical cost convention
These consolidated financial statements have been prepared under the
historical cost convention, except for derivative financial instruments,
investments in equity instruments, financial instruments held for trading
and liabilities for cash settled share based payment arrangements, all of
which have been measured at fair value. The carrying values of
recognised assets and liabilities that are hedged items in fair value
hedges, and that would be otherwise carried at amortised cost, are
adjusted to record changes in the fair value attributable to the risks that
are being hedged to match the fair value accounting applied to the
derivative financial instruments used to hedge these items.
The consolidated financial statements are presented in Australian
dollars.
Critical accounting estimates
The preparation of consolidated financial statements in conformity with
IFRS requires the use of certain critical accounting estimates. It also
requires management to exercise its judgment in the process of
applying the Group’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 judgment or complexity, or areas
where assumptions and estimates are significant to the consolidated
financial statements, are disclosed in Note 2.
Early adoption of Standards
Incitec Pivot has elected to early adopt certain 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 IFRS transition exemptions, are
available. The principal standards and interpretations that have been
early adopted are:
45
Incitec Pivot Limited Annual Report 2012
Amendments to AASB 119: Employee Benefits eliminates the
option to apply the ‘corridor method’ when accounting for defined
benefit funds, amends the measurement methodology for
calculating net interest expense in relation to defined benefit funds,
enhances disclosure requirements for defined benefit plans and
changes the measurement methodology for employee entitlements
not expected to be settled in less than 12 months. The amendments
will become mandatory for the Group’s 30 September 2014
consolidated financial statements. The Group has not yet quantified
the potential impact of this Standard.
Amendments to AASB 101: Presentation of Financial Statements
retains the option to present the consolidated statement of
comprehensive income either in a single continuous statement or in
two separate, but consecutive statements, but introduces the
requirement that items that will never be recognised in profit or loss
be presented separately from those that are subject to subsequent
reclassification (recycling). The amendments will become
mandatory for the Group’s 30 September 2013 consolidated
financial statements. The Group is currently in the process of
evaluating the impact of this Standard.
AASB 13: Fair Value Measurement provides a new definition of fair
value based on exit price and additional guidance for measuring fair
value. The amendments also require additional disclosure related to
fair value measurements and valuation techniques. The
amendments will become mandatory for the Group’s 30 September
2014 consolidated financial statements. The Group is currently in
the process of evaluating the impact of this Standard.
AASB 11: Joint Arrangements reduces the ‘types’ of joint
arrangements from three to two and eliminates the option to apply
proportionate consolidation. The amendments will become
mandatory for the Group’s 30 September 2014 consolidated
financial statements. The Group is currently in the process of
evaluating the impact of this Standard.
AASB 10: Consolidated Financial Statements creates a broader
definition of control whereby control is defined as the power to
direct the activities of another entity to generate returns. IFRS 10
will become mandatory for the Group’s 30 September 2014
consolidated financial statements. The Group is currently in the
process of evaluating the impact of this Standard.
AASB 12: Disclosure of Interests in Other Entities requires more
extensive qualitative disclosures around judgment used by
management in determining whether an entity is controlled by the
Group and additional financial disclosures of the Group’s material
non-controlling interest in subsidiaries. AASB 12 will become
mandatory for the Group’s 30 September 2014 consolidated
financial statements. The Group is currently in the process of
evaluating the impact of this Standard.
AASB 127: Separate Financial Statements(2011), requires
that when an entity prepares separate financial statements,
investments in subsidiaries, associates and joint ventures
are accounted for either at cost, or in accordance with AASB 9
‘Financial Instruments’. The amendments will become mandatory
for the Group’s 30 September 2014 consolidated financial
statements. The Group is currently in the process
of evaluating the impact of this Standard.
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
1. Significant accounting policies (continued)
Issued Standards not early adopted (continued)
AASB 128: Investments in Associates and Joint Ventures (2011),
prescribes the accounting for investments in associates and sets
out the requirements for the application of the equity method when
accounting for investments in associates and joint ventures. The
amendments will become mandatory for the Group‟s 30 September
2014 consolidated financial statements. The Group is currently in
the process of evaluating the impact of this Standard.
(ii) Consolidation
(a) Subsidiaries
The consolidated financial statements incorporate the assets and
liabilities of all subsidiaries of Incitec Pivot Limited as at 30 September
2012 and the results of all subsidiaries for the year then ended.
Subsidiaries are all those entities over which the Group 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 Group controls
another entity. Subsidiaries are fully consolidated from the date on
which control is transferred to the Group. 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 Group (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
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 Group.
(b) Associates and jointly controlled entities
Associates are those entities in which the Group has significant
influence, but not control, over the financial and operating policies.
Significant influence is presumed to exist when the Group holds
between 20 and 50 percent of the voting power of another entity. Jointly
controlled entities are those entities over whose activities the Group has
joint control, established by contractual agreement and requiring
unanimous consent for strategic, financial and operating decisions.
Associates and jointly controlled entities are accounted for using the
equity method (equity accounted investees) and are initially recognised
at cost. The Group‟s investment includes goodwill identified on
acquisition, net of any accumulated impairment losses. The
consolidated financial statements include the Group‟s share of the
income and expenses and equity movements of equity accounted
investees, after adjustments to align the accounting policies with those
of the Group, from the date that significant influence or joint control
commences until the date that significant influence or joint control
ceases. When the Group‟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
Group 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, where the costs incurred or to be incurred cannot be
measured reliably, where there is a significant risk of return of goods or
where there is continuing management involvement with the goods.
Commissions are recognised when the Group acts in the capacity of an
agent rather than as the principal in a transaction and therefore the
revenue recognised is the net amount of commission made by the
Group.
Interest income is recognised as it accrues.
Dividends receivable are recognised in the Consolidated Income
Statement when declared, or received, whichever occurs first.
In the 2011 financial report the Group had recognised certain derivative
instruments which did not meet the own use exemption as a gross
revenue and cost of sales, as opposed to recognising gains and losses
on derivatives at fair value. The comparative revenue figures in this
financial report have been restated to align with the treatment applied in
the current year. The impact of the restatement is a reduction of
Revenue and Raw materials and consumables and finished goods
purchased for resale in the comparative year of $360.9m. The
comparative Receipts from customers and Payments to suppliers and
employees have also reduced by the same amount. The restatement
did not affect the comparative profit before tax or the Consolidated
Statement of Financial Position.
(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 12 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, a weighted average interest rate is used
for capitalising interest to qualifying assets.
(v) Share based payments
The fair value of shares (treated as options) and rights, granted to
employees, at the grant date, is recognised as an employee expense,
with a corresponding increase in equity, over the period that employees
become unconditionally entitled to the options or rights. The amount
recognised as an expense is adjusted to reflect the actual number of
options, shares and rights for which the related service and non-market
vesting conditions are met.
The fair value of the amount payable to employees in respect of rights,
which are settled in cash, is recognised as an expense, with a
corresponding increase in liabilities, over the period that the employees
become unconditionally entitled to payment. The liability is remeasured
during each reporting period and at settlement date. Any changes in the
fair value of the liability are recognised as employee expenses in the
Consolidated Income Statement.
(vi) Taxation
Income tax expense comprises current and deferred tax and is
recognised in the Consolidated 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
period, using tax rates enacted or substantively enacted at the reporting
date, and any adjustment to tax payable in respect of previous periods.
Deferred tax is recognised using the balance sheet method in which
temporary differences are calculated based on the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts
used for taxation purposes. Deferred tax is not recognised for the
following temporary differences: the initial recognition of goodwill; the
initial recognition of assets or liabilities in a transaction that is not a
business combination and that affects neither accounting nor taxable
profit; and differences relating to investments in subsidiaries to the
extent that it is probable that they will not reverse in the foreseeable
future.
Incitec Pivot Limited Annual Report 2012
46
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
1. Significant accounting policies (continued)
(vi) Taxation (continued)
Deferred tax is measured at the tax rates that are expected to be
applied when the temporary difference reverses, that is, when the asset
is realised or the liability is settled, based on the laws that have been
enacted or substantively enacted at the reporting date.
Deferred tax assets are recognised for unused tax losses, tax credits
and deductible temporary differences, to the extent that it is probable
that future taxable profits will be available against which the assets can
be utilised. Deferred tax assets are reviewed at each reporting date and
are reduced to the extent that it is no longer probable that the related
tax benefit will be realised.
Current tax assets and liabilities are offset where the Group has a
legally enforceable right to offset and intends either to settle on a net
basis or to realise the asset and settle the liability simultaneously.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to offset and when the deferred tax balances relate to
the same taxation authority.
The assumptions regarding future realisation, and therefore the
recognition of deferred tax assets, may change due to future operating
performance and other factors.
Incitec Pivot provides for income tax in both Australia and overseas
jurisdictions where a liability exists.
Tax consolidation
The Company and its wholly-owned Australian resident entities have
formed a tax-consolidated group and are, therefore, taxed as a single
entity. The head entity within the tax-consolidated group is Incitec Pivot
Limited.
(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 third-party sourced finished
goods, cost is net cost into store. High turnover engineering spares are
held in inventory and expensed when used.
(viii) Trade and other receivables
Trade and other receivables are recognised at their amortised cost less
any impairment losses.
Collectability of trade and other receivables is reviewed on an ongoing
basis. Debts which are known to be uncollectable 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 Group may 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 Consolidated
Income Statement within other expenses. When a trade receivable for
which an impairment allowance has been recognised becomes
uncollectable 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 Consolidated
Income Statement.
Where substantially all risks and rewards relating to receivables have
been transferred to a financial institution, the receivable is de-
recognised. Where this has not occurred, the receivable and the
equivalent interest bearing liability have been recognised in the
Consolidated Statement of Financial Position.
47
Incitec Pivot Limited Annual Report 2012
(ix) Other financial assets
Financial assets are recognised and subsequently measured at either
amortised cost or fair value depending on the entity‟s business model
for managing the financial assets and the contractual cash flow
characteristics of the financial assets.
Investments in equity securities are designated as “fair value through
other comprehensive income”, with all realised and unrealised gains
and losses from the investment portfolio being recognised directly in
equity through “other comprehensive income” in the Consolidated
Statement of Comprehensive Income. Dividend income is recognised in
the Consolidated Income Statement.
(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.
Impairment losses are 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 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 de-recognition.
Non-current assets classified as held for sale and the assets of a
disposal group classified as held for sale are presented separately
in the Consolidated 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 Group 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 Group.
Estimated useful lives in the current and comparative periods of each
class of asset are as follows:
Buildings and improvements
Machinery, plant and equipment 3 to 40 years
The assets‟ residual values and useful lives are reviewed when there
are changes in circumstances, and adjusted if appropriate, at each
balance sheet date.
20 to 40 years
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 IFRS,
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 Consolidated 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 Group assumes substantially all the risks and
benefits of ownership of the asset are classified as finance leases.
Other leases are classified as operating leases.
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
1. Significant accounting policies (continued)
(xii) Leased assets (continued)
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 ofthe 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 the Consolidated Income Statement on a straight line
basis over the term of the lease.
(xiii) Intangible assets
(a) Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair
value of the Group‟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.
(b) Research and development
Expenditure on research activities, undertaken with the prospect of
gaining new scientific or technical knowledge and understanding, is
recognised in the Consolidated 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 Group intends
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 Consolidated Income Statement as an
expense as incurred. Capitalised development expenditure is stated at
cost less accumulated amortisation and impairment losses.
(c) Other intangible assets
Other intangible assets that are acquired by the Group are stated at
cost less accumulated amortisation and impairment losses.
(d) 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 such expenditure is expensed
as incurred.
(e) Amortisation
Amortisation is charged to the Consolidated Income Statement on a
straight-line basis over the estimated useful lives of intangible assets,
unless such lives are indefinite. Goodwill and brand names are
systematically tested for impairment at each annual reporting 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
Product trademarks
Patents
Customer contracts
3 – 7 years
4 – 10 years
13 – 15 years
1 – 17 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. For acquisitions occurring in stages
goodwill is determined at the acquisition date. Goodwill is determined
after the previously held equity interest is adjusted to fair value.
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.
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
Group‟s share of the identifiable net assets acquired is recorded as
goodwill (refer to Note 1(xiii) (a)). If the cost of acquisition is less than
the Group‟s share of the fair value of the identifiable net assets of the
subsidiary acquired, then the difference is recognised directly in the
Consolidated 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) Segment reporting
An operating segment is a component of the Group that engages in
business activities from which it may earn revenues and incur
expenses, including revenues and expenses that relate to transactions
with any of the Group‟s other components. All operating segments‟
operating results are regularly reviewed by the Group‟s Executive Team
to make decisions about resources to be allocated to the operating
segment and assess their performance.
Operating segment results that are reported to the Executive Team
include items directly attributable to a segment as well as those that can
be allocated on a reasonable basis. Unallocated items comprise mainly
corporate assets and head office expenses.
Operating segment capital expenditure is the total cost incurred during
the period to acquire property, plant and equipment, and software.
(xvi) Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value.
Subsequent to initial recognition, interest-bearing borrowings are stated
at amortised cost with any difference between cost and redemption
value being recognised in the Consolidated 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. In the event that the liabilties are derecognised,
any resulting gains and losses are recognised in the Consolidated
Income Statement.
(xvii) 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 reporting 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.
Incitec Pivot Limited Annual Report 2012
48
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
1. Significant accounting policies (continued)
Long term incentive plans
(xvii) Provisions (continued)
(a) Environmental
Estimated costs relating to the remediation of soil, groundwater and
untreated waste that have arisen as a result of past events are usually
recognised in the Consolidated Income Statement as soon as the need
is identified and a reliable estimate of the liability is able to be made.
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.
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.
For sites where there are uncertainties with respect to the remediation
obligations or the remediation techniques that might be approved and
no reliable estimate can presently be made of regulatory and
remediation costs, no amounts have been capitalised, expensed or
provided.
(b) 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
part of the 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 to or deducted from the related asset, other than the
unwinding of the discount which is recognised as an interest expense in
the Consolidated Income Statement.
(c) Self insurance
The Group self-insures for certain insurance risks. Outstanding claims
are recognised when an incident occurs that may give rise to a claim
and are measured at the cost that the entity expects to incur in settling
the claims.
(d) Employee entitlements
Current entitlements
Provisions are made for liabilities to employees for annual leave, sick
leave and other current employee entitlements that represent the
amount for which the Group has a present obligation. These have been
calculated at undiscounted amounts based on the wage and salary
rates that the Group expects to pay as at each reporting date and
include related on-costs.
Non-current entitlements
Liabilities for employee entitlements which are considered non-current,
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 the terms of the Group‟s obligations.
Short term incentive plans
A liability is recognised for short term incentive plans on the
achievement of predetermined short term incentive plan performance
measures and the benefit calculations are formally documented and
determined before signing the consolidated financial statements.
Equity-settled share based payments to employees are measured at
the fair value of the equity instruments at the grant date. The fair value
determined at grant date of the equity settled share based payments is
expensed on a straight-line basis over the vesting period, based on the
Group's estimate of equity instruments that will eventually vest, with a
corresponding increase in equity. In respect of service and non-market
vesting conditions at the end of each reporting period, the Group
revises its estimate of the number of equity instruments expected to
vest. The impact of the revision of the original estimates, if any, is
recognised in profit or loss such that the cumulative expense reflects
the revised estimate, with a corresponding adjustment to the share
based payments reserve. Details regarding the determination of the
fair value of the equity-settled share based transactions are set out
in Note 35.
For cash-settled share based payments, a liability is recognised for
services provided by employees, measured initially at the fair value of
the liability. At the end of each reporting period until the liability is
settled, and at the date of settlement, the fair value of the liability is
remeasured, with any changes in fair value recognised in profit or loss
for the year.
(e) Retirement benefit obligation
Contributions to defined contribution superannuation funds are charged
to the Consolidated Income Statement in the year in which the expense
is incurred.
For defined benefit schemes, the cost of providing superannuation and
pension benefits is charged to the Consolidated 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 IFRS, were recognised in
retained earnings. All actuarial gains and losses that arise subsequent
to 1 October 2004 are recognised directly in equity.
The Group‟s net obligation in respect of defined benefit superannuation
and pension 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 reporting date on government bonds that
have maturity dates approximating the terms of the Group‟s obligations.
The calculation is performed by a qualified actuary using the projected
unit credit method.
(f) Dividends
A provision for dividends payable is recognised in the reporting period
in which the dividends are paid, or a legal right to pay is established, for
the entire undistributed amount, regardless of the extent to which they
will be paid.
(g) 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 has 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.
(h) 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.
49
Incitec Pivot Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
1. Significant accounting policies (continued)
(xviii) Trade and other payables
Trade and other payables are stated at cost and represent liabilities
for goods and services provided to the Group prior to the end of
financial year which are unpaid.
Unfavourable sales/supplier contracts
Liabilities are recognised on acquisition where it is probable that an
outflow of resources embodying economic benefits will be required
to settle an obligation (probable loss) and the fair value of the loss
can be measured reliably. If the terms of a contract are unfavourable
relative to market terms at the acquisition date then a liability is
recognised as part of accounting for the business combination.
(xix) 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”).
Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the relevant date of
the particular transaction. 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
Consolidated Income Statement, except when they are deferred in
equity as qualifying cash flow hedges or net investment 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 re-translated.
Foreign operations
On consolidation the assets and liabilities of the Group‟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. Exchange differences
arising, if any, are recognised in the foreign currency translation
reserve, and recognised in the Consolidated Income Statement on
disposal of the foreign operation.
Goodwill and fair value adjustments arising on the acquisition of a
foreign entity are treated as assets and liabilities of the foreign entity
and translated at exchange rates prevailing at the reporting date.
(xx) Derivative financial instruments
The Group 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 Group does not hold or
issue derivative financial instruments for trading purposes other than
forward sales and purchase physical agreements.
Derivative financial instruments (which include physical contracts to
sell or purchase commodities that do not meet the own use
exemption) 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 Consolidated Income Statement. However, where
derivatives qualify for hedge accounting, the gain or loss is
transferred to the cash flow hedging reserve, the foreign currency
translation reserve or through the Consolidated Income Statement.
Hedging
On entering into a hedging relationship, the Group 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 in actuality they have been highly
effective throughout the financial reporting periods for which they
are designated.
Cash flow hedges
Changes in fair value of derivative hedging instruments designated
as cash flow hedges are recognised directly in equity to the extent
that the particular hedge is effective. To the extent that the hedge is
ineffective, changes in fair value are recognised in the Consolidated
Income Statement.
Amounts accumulated in equity are recycled in the Consolidated
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 Consolidated Income Statement.
Hedges of a net investment
Hedges of a net investment in a foreign operation, including a hedge
of monetary item that is accounted for as part of the net investment,
are accounted for in a similar way as cash flow hedges. Gains or
losses on the hedging instrument relating to the effective portion of
the hedge are recognised directly in equity (foreign currency
translation reserve) while any gains or losses relating to the
ineffective portion are recognised in the Consolidated Income
Statement. On disposal of the foreign operation, the cumulative
value of such gains or losses recognised directly to equity is
transferred to the Consolidated Income Statement based on the
amount calculated using the direct method of consolidation.
Fair value hedges
Changes in the fair value of derivatives that are designated and
qualify as fair value hedges are recognised in profit or loss
immediately, together with any changes in the fair value of the
hedged asset or liability that are attributable to the hedged risk. The
change in the fair value of the hedging instrument and the change in
the hedged item attributable to the hedged risk are recognised in the
line of the Consolidated Income Statement relating to the hedged
item.
Hedge accounting is discontinued when the Group revokes the
hedging relationship, when the hedging instrument expires or is sold,
terminated, or exercised, or when it no longer qualifies for hedge
accounting, The fair value adjustment to the carrying amount of the
hedged item arising from the hedged risk is amortised to profit or
loss from that date.
(xxi) Cash and cash equivalents
For presentation purposes on the Consolidated Statement of Cash
Flows, cash includes cash at bank, cash on hand and deposits at
call which are readily convertible to cash on hand and which are
used in the cash management function, net of bank overdrafts.
Incitec Pivot Limited Annual Report 2012
50
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
1. Significant accounting policies (continued)
(xxii) 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
Consolidated Income Statement and the consideration paid,
including any directly attributable incremental costs (net of income
taxes), is recognised directly in equity.
(xxiii) 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 equity instruments) is based on
quoted market prices at the reporting date. The quoted market price
used for financial assets held by the Group is the current bid price;
the appropriate quoted market price for financial liabilities is the
current ask price. The Group uses a variety of methods and makes
assumptions that are based on market conditions existing at each
reporting 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 contracts is calculated as the present
value of the estimated future cash flows. The fair value of cross
currency interest rate swaps is determined using market based
forward interest and exchange rates and the present value of
estimated future cash flows. The fair value of foreign exchange
options is determined using market rates and a present value
calculation based on the Black Scholes method. The fair value of
forward exchange contracts is determined using forward exchange
market rates at the balance sheet date and the present value of the
estimated future cash flows. 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 Group for similar financial
instruments.
(xxiv) Impairment of assets
The carrying amount of the Group‟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 (excluding receivables – refer to
Note 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.
51
Incitec Pivot Limited Annual Report 2012
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 asset‟s performance or that may arise from future
restructuring.
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 Consolidated Income
Statement.
Impairment losses recognised in respect of cash-generating units
(„CGUs‟) are allocated first to reduce the carrying amount of any
goodwill allocated to CGUs and then, to reduce the carrying amount
of the other assets in the unit.
(xxv) 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
Consolidated Statement of Financial Position.
Cash flows are included in the Consolidated 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.
(xxvi) Accounting for the carbon pricing
mechanism
The Group accounts for carbon emission units (carbon permits) under
the Australian carbon pricing mechanism as follows:
Purchased carbon permits are accounted for as intangible assets in
accordance with AASB 138 Intangible Assets. Accordingly the
permits are carried at cost unless an active market for the permits
exists, in which case these could be carried at fair value. The fair
value movements are recorded within an asset revaluation reserve
within equity.
Carbon permits under the Jobs and Competitiveness Program are
accounted for as intangible assets acquired by way of a
government grant when the permits are received from the
government. In accordance with AASB 120 Accounting for
Government Grants and Disclosure of Government Assistance,
both the permits and the grant are initially recognised at fair value.
The grant is initially recorded as deferred revenue by the entity and
will be recognised in the consolidated income statement on a
systematic basis over the periods in which the entity recognises the
emissions expense.
Carbon emission liabilities are recognised as emissions are
generated and measured at the present value of carbon permits
needed to extinguish the liability.
Carbon expense and deferred income from free carbon permits are
recorded as part of the cost of inventory.
Carbon permit assets and carbon emission liabilities are disclosed on
a gross basis in the consolidated statement of financial position.
(xxvii) Rounding of amounts
The Group 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 consolidated financial statements.
Amounts in the consolidated financial statements 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.
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
2. Critical accounting estimates
and judgments
Estimates and judgments 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 Group 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 subsequent 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 consolidated
financial statements:
the testing for impairment of assets;
the testing for impairment of goodwill;
income tax related assumptions and estimates;
provision for environmental, asset retirement obligation and
restructuring liabilities;
the calculation of annual superannuation and pension costs
and related assets and liabilities; and
employee entitlements.
(i) Impairment of assets
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
judgments concerning the identification of impairment indicators,
earnings before interest and tax, growth rates, applicable discount
rates, useful lives and residual or terminal values.
The determination of impairment for property, plant and equipment,
goodwill and other intangible assets involves the use of estimates
that include, but are 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,
changes in the cost of capital, current replacement costs, changes in
the cost of inputs and other factors. Refer Note 1 (xxiv) for further
details regarding the accounting policy regarding „Impairment of
assets‟.
(ii) Impairment of goodwill
The Group tests annually whether goodwill has incurred any
impairment, in accordance with the accounting policy stated in
Note 1 (xiii) (a). The recoverable amounts of CGUs 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 consolidated financial statements, particularly
when evaluating the Group‟s goodwill for impairment. Varying results
from this analysis are possible due to the significant estimates and
judgments involved in the Group‟s evaluations.
(iii) Income taxes
The Group 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 Group 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 Group‟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 Group‟s best estimate of the outflow of resources
required to settle commitments made by the Group. Where the
outcome of these matters is different from the amounts that were
initially recorded, such differences will impact the Consolidated
Income Statement in the period in which such determination is made.
Refer Note 1 (xvii) (a) & Note 1 (xvii) (g) to the consolidated financial
statements for further details of the accounting policy relating to
environmental and restructuring provisions. Also refer to Notes 6 and
23 for amounts recognised for environmental and restructuring
provisions.
(v) Retirement benefit obligations
A liability or asset in respect of defined benefit superannuation and
pension plans is recognised in the Consolidated 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 (xvii) (e) to the consolidated financial statements for
further details of the accounting policy relating to retirement benefit
obligations. Refer Note 25 of the consolidated 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;
future rate of inflation;
expected return on plan assets; and
future salary increases.
(vi) Employee entitlements
The determination of the provisions required for employee
entitlements is dependent on a number of assumptions including
expected wage increases, length of employee service and bond rates.
Refer to Note 1xvii (d) to the consolidated financial statements for
further details of the accounting policy relating to employee
entitlements. Also refer to Note 23 for amounts recognised for
employee entitlements.
Incitec Pivot Limited Annual Report 2012
52
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
3. Segment report
(a)
Identification of reportable segments
The Group has identified its operating segments based on the internal reports that are reviewed and used by the Group‟s Executive Team
in assessing performance and in determining the allocation of resources.
The operating segments are identified by management and are based on the market and region in which product is sold. Discrete financial
information about each of these operating businesses is reported to the Executive Team on at least a monthly basis.
(b) Description of operating segments
Fertilisers:
Incitec Pivot Fertilisers (IPF): manufactures and distributes fertilisers in Eastern Australia. The products that IPF manufactures include
Urea, Ammonia and Single Super Phosphate. IPF also imports products from overseas suppliers and purchases Ammonium Phosphates
from Southern Cross International for resale.
Southern Cross International (SCI): manufactures Ammonium Phosphates, is a distributor of its manufactured fertiliser product to
wholesalers in Australia (including IPF) and the export market. SCI also has a 65 percent share of the Hong Kong marketing company,
Quantum Fertilisers Limited and operates an Industrial Chemicals business.
Fertilisers Elimination (Elim): represents the elimination of profit in stock arising from SCI sales to IPF.
Explosives:
Dyno Nobel Americas (DNA): principal activity is the manufacture and sale of industrial explosives and related products and services to
the mining, quarrying and construction industries in the Americas (USA, Canada, Mexico and Chile) and Turkey, and the manufacture and
sale of Agricultural chemicals.
Dyno Nobel Asia Pacific (DNAP): principal activity is the manufacture and sale of industrial explosives and related products and services
to the mining industry in the Asia Pacific region.
Explosives Eliminations (Elim): represents eliminations of profit in stock arising from DNA sales to DNAP.
(c) Accounting policies and inter-segment transactions
Corporate (Corp):
Corporate costs include all head office expenses that cannot be directly attributed to the operation of any of the Group's businesses.
Inter-entity sales are recognised based on an arm‟s length transfer price. The price aims to reflect what the business operation could
achieve if they sold their output and services to external parties.
53
Incitec Pivot Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
3. Segment report (continued)
(d) Reportable segments
30 September 2012
Sales to external customers
Share of profits in associates and
joint ventures accounted for by the
equity method
Earnings before interest, related
income tax expense, depreciation
and amortisation and individually
material items
Depreciation and amortisation
Earnings before interest, related
income tax expense and individually
material items
Net interest expense
Income tax expense
Profit after tax (excluding
individually material items)
Non-controlling interest
Individually material items (net of tax)
Profit after tax
IPF
$mill
SCI
$mill
Elim
$mill
Total
Fertilisers
$mill
DNAP
$mill
DNA
$mill
Elim
$mill
Total
Explosives
$mill
Corp/Group
Elim
$mill
Consolidated
Group
$mill
1,159.1 731.9 (160.3)
1,730.7
626.4 1,172.2
(28.4)
1,770.2
-
3,500.9
-
-
-
-
12.7
14.7
-
27.4
-
27.4
124.1 203.6
(28.3)
(31.8)
3.3
-
331.0
(60.1)
232.6
(21.3)
263.2
(72.6)
(2.0)
-
493.8
(93.9)
(69.9)
(1.8)
754.9
(155.8)
92.3
175.3
3.3
270.9
211.3
190.6
(2.0)
399.9
(71.7)
599.1
(55.5)
(141.6)
402.0
2.7
106.0
510.7
30 September 2011
IPF
$mill
SCI
$mill
Elim
$mill
Total
Fertilisers
$mill
DNAP
$mill
DNA
$mill
Elim
$mill
Total
Explosives
$mill
Corp/Group
Elim
$mill
Consolidated
Group
$mill
Sales to external customers
1,185.5 877.6 (193.8)
1,869.3
533.1 1,172.5
(27.5)
1,678.1
(2.1)
3,545.3
Share of profits in associates and
joint ventures accounted for by the
equity method
Earnings before interest, related
income tax expense, depreciation
and amortisation and individually
material items
Depreciation and amortisation
Earnings before interest, related
income tax expense and individually
material items
Net interest expense
Income tax expense
Profit after tax (excluding
individually material items)
Non-controlling interest
Individually material items (net of tax)
Profit after tax
-
-
-
-
12.1
12.1
-
24.2
-
24.2
156.0 353.3
(3.7)
505.6
215.3
244.3
(0.4)
459.2
(27.2)
(29.4)
-
(56.6)
(19.9)
(70.5)
-
(90.4)
(44.5)
(1.2)
920.3
(148.2)
128.8
323.9
(3.7)
449.0
195.4
173.8
(0.4)
368.8
(45.7)
772.1
(58.2)
(179.7)
534.2
(4.1)
(66.9)
463.2
Incitec Pivot Limited Annual Report 2012
54
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
3. Segment report (continued)
(e) Geographical information – secondary reporting segments
The Group operates in four principal countries being Australia (country of domicile), USA, Canada and Turkey.
In presenting information on the basis of geographical information, revenue is based on the geographical location of the
entity making the sale. Assets are based on the geographical location of the assets.
30 September 2012
Revenue from external customers
Non-current assets other than
financial instruments and deferred tax
assets
30 September 2011
Revenue from external customers
Non-current assets other than
financial instruments and deferred tax
assets
Australia
$mill
USA
$mill
Canada
$mill
Turkey Other/Elim Consolidated
$mill
$mill
$mill
2,316.3
803.9
226.9
78.1
75.7
3,500.9
3,659.0
2,016.5
58.4
88.4
99.7
5,992.0
Australia
$mill
USA
$mill
Canada
$mill
Turkey Other/Elim Consolidated
$mill
$mill
$mill
2,303.6
811.0
225.0
82.9
122.8
3,545.3
3,170.2
2,074.8
54.8
129.6
97.0
5,526.4
55
Incitec Pivot Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
4. Revenue and other income
Revenue
External sales
Total revenue
Financial income
Interest income from external parties
Interest income from jointly controlled entities
Total financial income
Other income
Royalty income and management fees
Net gain on sale of property, plant and equipment
Other income
Total other income
Total financial and other income
5. Expenses
Profit before income tax includes the following specific expenses:
Depreciation & Amortisation
depreciation
amortisation
Recoverable amount write-down
property, plant and equipment
intangible assets
Amounts set aside to provide for
impairment loss on trade and other receivables
employee entitlements
environmental liabilities
inventory losses and obsolescence
other provisions
restructuring
Net foreign exchange losses
Research and development expense
Defined contribution superannuation expense
Defined benefit superannuation/pension expense
Financial expenses
Unwinding of discount on provisions and other payables
Interest expenses on financial liabilities
Gain on interest rate swaps designated as fair value hedges
Loss on adjustment to debt attributable to the hedged risk in a fair value hedge relationship
Interest expenses on financial liabilities with jointly controlled entities
Total financial expenses
Consolidated
2012
$mill
2011
$mill
Notes
(1(iii))
3,500.9
3,500.9
3,545.3
3,545.3
(33)
(33)
(28)
9.7
1.4
11.1
21.5
4.8
3.0
29.3
40.4
4.1
0.8
4.9
20.7
18.0
2.7
41.4
46.3
(17)
(18)
(28)
131.5
24.3
155.8
(17),(28)
(18),(28)
(23)
(23)
(23)
(25)
(28)
(33)
6.5
35.7
42.2
1.5
7.7
61.7
1.5
4.1
1.9
0.9
9.0
11.8
5.9
25.3
41.1
(11.0)
11.0
0.2
66.6
124.7
23.5
148.2
7.6
-
7.6
5.9
6.4
7.2
0.9
4.1
15.0
1.8
7.9
15.8
5.0
25.2
37.8
(55.5)
55.5
0.1
63.1
Incitec Pivot Limited Annual Report 2012
56
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
Consolidated
2012
2011
Notes
Gross
$mill
Tax
$mill
Net
$mill
Gross
$mill
Tax
$mill
Net
$mill
6.
Individually material items
Profit includes the following revenues / (expenses) whose
disclosure is relevant in explaining the financial performance
of the Group:
Business restructuring costs - Dyno Nobel Integration (1)
restructuring and other direct costs
employee redundancies and allowances
Total business restructuring - Dyno Nobel Integration
Business restructuring costs - Manufacturing and Distribution (2)
restructuring and other direct costs
employee redundancies and allowances
Total business restructuring - Manufacturing and Distribution
Other
loss on sale and impairment of drilling businesses (3)
profit on sale of property, plant and equipment (4)
environmental costs at various sites (5)
reversal of Moranbah unfavourable contract liability (6)
impairment of intangible assets (7)
Total other
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(58.5)
261.6
(35.0)
168.1
-
-
-
-
16.4
(42.1)
(78.5) 183.1
(35.0)
(62.1) 106.0
-
(25.9)
(28.3)
(54.2)
10.0
9.4
19.4
(15.9)
(18.9)
(34.8)
(11.9)
(4.4)
(16.3)
(41.1)
19.1
-
-
-
(22.0)
3.5
1.2
4.7
(8.4)
(3.2)
(11.6)
1.5
-
-
-
-
1.5
(39.6)
19.1
-
-
-
(20.5)
Individually material items
(9)
168.1
(62.1) 106.0
(92.5)
25.6
(66.9)
(1) Following the acquisition of Dyno Nobel Limited in 2008, restructuring and integration expenditure has been incurred including employee
redundancy costs as well as IT expenditure in creating common networks and collaboration between sites.
(2) The impact of the Global Financial Crisis resulted in the Group changing its strategy in how it manages its manufacturing and distribution
assets. The Group changed from a growth focus to a maintenance focus which resulted in a restructuring of manufacturing and distribution
operations leading to redundancies, termination of capital projects and exiting/idling certain sites (Cockle Creek, Geelong, Maitland, Port
Ewen and Battle Mountain).
(3) During 2011 the Group sold its 100 percent ownership interest in the Canadian drilling business DNX Castonguay Inc (Castonguay) for
$1.5m. A loss on the sale of $35.1m (including foreign exchange losses) was recorded. Additionally, an impairment charge against
property, plant and equipment of $6.0m was recognised in relation to other drilling businesses.
(4) Gain on sale of land.
(5) Environmental costs associated with ground water remediation and soil treatment at the Cockle Creek, Wallaroo and Maitland sites.
(6) Reversal of the Moranbah unfavourable contract liability of $183.1m (net of tax). The commencement of production of ammonium nitrate
(“AN”) at the Moranbah plant in the last quarter of the 2012 financial year replaced the requirement to import AN to service the foundation
customer contracts, therefore removing the obligation to carry the liability for future years.
(7) Goodwill recognised on the acquisition of the 100 percent share of Nitromak DNX Kimya Sanayi A.S. (Nitromak) has been impaired to
reflect lower European economic forecasts.
57
Incitec Pivot Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
7. Auditor's remuneration
Fees payable to the Group's auditor for assurance services
Audit of the Group's annual report (1)
Audit of subsidiaries (2)
Audit-related assurance services (3)
Total current year assurance services
Assurance services related to subsidiary audits of prior periods (4)
Total assurance services
Fees payable to the Group's auditor for other services
Other services relating to taxation
Other services relating to debt issuance
All other services (5)
Total other services
Total fees paid to Group auditor
Fees payable for assurance services to other auditors of the Group
Audit of subsidiaries (2)
Total audit fees
- Payable to Australian Group auditor firm
- Payable to International Group auditor associates
Consolidated
2012
$000
2011
$000
914.9
546.5
180.0
1,641.4
105.5
1,746.9
86.1
-
84.4
170.5
906.9
558.9
221.0
1,686.8
-
1,686.8
7.8
252.0
121.7
381.5
1,917.4
2,068.3
-
62.7
1,917.4
1,672.9
244.5
2,131.0
1,471.3
597.0
From time to time, the auditors provide other services to the Group, which are subject to strict corporate governance procedures
adopted by the Group 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 engagements provided by the Group‟s auditor above a value
of $100,000, as well as where the aggregate amount exceeds $250,000 per annum.
The Group changed its statutory auditor in 2012. References to the Group‟s auditor for 2012 relate to the newly appointed firm
Deloitte Touche Tohmatsu and its overseas associates. KPMG and its overseas associates was the Group‟s auditor in 2011.
(1) Comprises the fee payable to the Group‟s auditors for the audit of the Group‟s financial statements.
(2) Comprises the audits of the Group‟s subsidiaries.
(3) Mainly comprises review of half year reports.
(4) Comprises audits of standalone financial statements for subsidiaries related to prior years.
(5) Comprises non-statutory based assurance procedures.
Incitec Pivot Limited Annual Report 2012
58
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
8.
Income tax expense
(a)
Income tax expense
Current tax
Current year
Under / (Over) provision in prior years
Deferred tax
Origination and reversal of temporary differences
Total income tax expense
(b) Reconciliation of income tax expense
and pre-tax accounting profit
Profit before income tax
Income tax expense attributable to profit before income tax
Tax at the Australian tax rate of 30 percent (2011 at 30%)
on profit before income tax
Tax effect of amounts which are not deductible / (taxable)
in calculating taxable income:
Research and development incentive
Participation facility
Valuation allowances
Impairment of intangible assets
Sundry items
Difference in overseas tax rates
Under / (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
charged to equity
Net deferred tax - debited directly to equity
Consolidated
2012
$mill
2011
$mill
40.2
5.7
45.9
157.8
203.7
105.4
(0.5)
104.9
49.2
154.1
711.7
621.4
213.5
186.4
(2.5)
(14.5)
-
10.5
(12.1)
194.9
3.1
5.7
203.7
(5.5)
(15.6)
7.6
-
(21.4)
151.5
3.1
(0.5)
154.1
6.6
6.6
37.2
37.2
59
Incitec Pivot Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
9. Earnings per share (EPS)
Basic earnings per share
including individually material items
excluding individually material items
Diluted earnings per share (1)
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 (2)
Consolidated
2012
Cents
per share
2011
Cents
per share
Notes
31.4
24.8
31.4
24.8
28.4
32.5
28.4
32.5
Number
Number
1,628,730,107
1,628,730,107
(1) The total number of rights on issue (refer Note 35) are not dilutive to IPL's earnings per share.
(2) No shares were issued during the year ended 30 September 2012 (2011: nil), refer Note 26.
Profit attributable to ordinary shareholders
Reconciliation of earnings used in the calculation of basic and diluted
earnings per share excluding individually material items
Profit attributable to ordinary shareholders
Individually material items after income tax
Profit attributable to ordinary shareholders excluding individually material items
10. Cash and cash equivalents
Cash at bank and on hand
Deposits at call
external
Consolidated
2012
$mill
510.7
510.7
(106.0)
404.7
77.4
76.7
154.1
2011
$mill
463.2
463.2
66.9
530.1
95.5
284.2
379.7
(6)
(28),(32)
Incitec Pivot Limited Annual Report 2012
60
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
11. Trade and other receivables
Current
Trade debtors
external
jointly controlled entities and associates
Less impairment losses
external
Sundry debtors / loans
external
jointly controlled entities and associates
Non-current
Sundry debtors / loans
external
jointly controlled entities and associates
12. Inventories
Raw materials and stores at cost
Work in progress at cost
Finished goods
at cost
less provision for inventory losses, obsolescence and net realisable value
Finished goods
13. Other assets
Current
Prepayments
Other
Non-current
Prepayments
Other
Consolidated
2012
$mill
2011
$mill
Notes
(33)
(32)
(32)
(33)
(32)
(32)
348.1
17.5
(8.5)
357.1
7.6
8.2
15.8
372.9
2.7
21.5
24.2
74.7
44.5
292.7
(8.2)
284.5
403.7
28.0
29.4
57.4
0.4
17.3
17.7
417.1
26.6
(12.2)
431.5
5.0
15.4
20.4
451.9
2.7
13.4
16.1
52.1
45.0
388.1
(7.3)
380.8
477.9
26.3
4.9
31.2
13.0
4.5
17.5
61
Incitec Pivot Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
14. Other financial assets
Current
Derivatives designated and effective as hedging instruments carried at fair value
cross currency swaps
option contracts
forward exchange contracts
Non-current
Financial assets carried at fair value through Other Comprehensive Income
investments - equity instruments
Derivatives designated and effective as hedging instruments carried at fair value
interest rate swaps
cross currency swaps
Consolidated
2012
$mill
2011
$mill
Notes
(32)
(32)
(32)
(32)
(32)
(32)
15.4
9.6
7.2
32.2
35.4
5.4
-
40.8
3.6
10.1
45.4
0.5
49.5
42.8
-
52.9
Sensitivity analysis – equity price risk
Equity investments are listed on the Australian Securities Exchange. A 5 percent increase in the share price of these
equities at the reporting date would have increased equity (pre-tax) by $0.2m (2011: $0.5m); an equal decrease would
have decreased equity (pre-tax) by $0.2m (2011: $0.5m).
15. Assets classified as held for sale
Land and buildings held for sale
Machinery, plant and equipment held for sale
0.2
-
0.2
1.9
4.6
6.5
Assets classified as held for sale consist of various sites which are either vacant land or sites which the Group has already
exited or is planning to dispose of within the next 12 months.
Incitec Pivot Limited Annual Report 2012
62
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
16. Investments accounted for using the equity method
Name of Entity
Principal Activity
Ownership
interest
Country of
incorporation
Jointly controlled entities
Alpha Dyno Nobel Inc
Delivery of explosives and related products
Boren Explosives Co., Inc.
Buckley Powder Co.(1)
IRECO Midwest Inc.
Wampum Hardware Co.
Delivery of explosives and related products
Delivery of explosives and related products
Delivery of explosives and related products
Delivery of explosives and related products
Midland Powder Company
Delivery of explosives and related products
Mine Equipment & Mill Supply Company
Delivery of explosives and related products
Controlled Explosives Inc.
Delivery of explosives and related products
Western Explosives Systems Company
Delivery of explosives and related products
Newfoundland Hard-Rok Inc.
Delivery of explosives and related products
Dyno Nobel Labrador Inc.
Quantum Explosives Inc.
Dene Dyno Nobel Inc.
Qaaqtuq Dyno Nobel Inc.(2)
Denesoline Western Explosives Inc.(3)
Queensland Nitrates Pty Ltd (4)
Queensland Nitrates Management Pty (4)
DetNet International Limited
DetNet South Africa (Pty) Ltd
DNEX Mexico, S. De R.L. de C.V.
Explosivos De La Region Lagunera, S.A.
de C.V.
Explosivos De La Region, Central, S.A.
de C.V.
Nitro Explosivos de Ciudad Guzman,
S.A. de C.V.
Explosivos Y Servicios Para La
Construccion, S.A. de C.V.
Tenaga Kimia Ensign-Bickford Sdn Bhd
Sasol Dyno Nobel (Pty) Ltd (4)
Delivery of explosives and related products
Inactive
Delivery of explosives and related products
Delivery of explosives and related products
Delivery of explosives and related products
Production of ammonium nitrate
Management services
Distribution of electronic detonators
Development, manufacture and supply of
electronic detonators
Mexican investment holding company
Distribution of explosives and related products
Distribution of explosives and related products
Distribution of explosives and related products
Distribution of explosives and related products
Manufacture of explosive accessories
Distribution of detonators
50%
50%
51%
50%
50%
50%
50%
50%
50%
50%
50%
50%
49%
49%
49%
50%
50%
50%
50%
49%
49%
49%
49%
49%
50%
50%
USA
USA
USA
USA
USA
USA
USA
USA
USA
Canada
Canada
Canada
Canada
Canada
Canada
Australia
Australia
Ireland
South Africa
Mexico
Mexico
Mexico
Mexico
Mexico
Malaysia
South Africa
(1) Refer to footnote description on next page
(2) Refer to footnote description on next page
(3) Refer to footnote description on next page
(4) Refer to footnote description on next page
63
Incitec Pivot Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
16. Investments accounted for using the equity method (continued)
Name of Entity
Principal Activity
Ownership
I interest
Country of
incorporation
Associates
Labrador Maskuau Ashini Ltd
Fabchem China Ltd (5)
Valley Hydraulics Inc.
Delivery of explosives and related products
Manufacture of commercial explosives
Delivery of explosives and related products
Apex Construction Specialities Inc.
Delivery of explosives and related products
Innu Namesu Ltd
Warex Corporation
Warex LLC
Maine Drilling and Blasting Group (6)
Delivery of explosives and related products
Delivery of explosives and related products
Delivery of explosives and related products
Drilling and blasting
Independent Explosives
Delivery of explosives and related products
25%
30%
25%
25%
25%
25%
25%
49%
49%
Canada
Singapore
Canada
Canada
Canada
USA
USA
USA
USA
(1) Due to the contractual and decision making arrangement between the shareholders of the entities, despite the legal ownership exceeding
50 percent, this entity is not considered to be a subsidiary.
(2) Due to legal requirements in the Canadian Northwest Territories, the Group cannot own more than 49 percent of the shares in Qaaqtuq
Dyno Nobel Inc. However, under the joint venture agreement, the Group is entitled to 75 percent of the profit of Qaaqtuq Dyno Nobel Inc.
(3) Due to legal requirements in the Canadian Northwest Territories, the Group cannot own more than 49 percent of the shares in Denesoline
Western Explosives Inc. However, under the joint venture agreement, the Group is entitled to 95 percent of the profit of Denesoline
Western Explosives Inc.
(4) These jointly controlled entities have a 30 June financial year end. For the purpose of applying the equity method of accounting, the
unaudited financial information through to 30 September 2012 has been used.
(5) Fabchem China Ltd has a 31 March financial year end. For the purpose of applying the equity method of accounting, the unaudited
financial information through to 30 September 2012 has been used.
(6) A 49 percent interest in the Maine Drilling and Blasting Group was acquired in December 2011.
Incitec Pivot Limited Annual Report 2012
64
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
16. Investments accounted for using the equity method (continued)
Summarised financial information of jointly controlled entities and associates:
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Revenue
Net profit after tax
Share of jointly controlled entities and associates' profit:
Share of jointly controlled entities and associates' profit before tax
Share of jointly controlled entities and associates' income tax expense
Share of jointly controlled entities and associates' profit
Carrying amount of investments in jointly controlled entities and associates
Carrying amount at the beginning of the year
Share of net profit from jointly controlled entities and associates
Share in Joint ventures acquired during the year
Share in Joint ventures transferred to controlled entities
Dividends received / receivable
Elimination of profit on transactions with jointly controlled entities and associates
Foreign exchange movement
Carrying amount at end of the financial year
Consolidated
2012
$mill
2011
$mill
Notes
325.1
356.1
681.2
150.0
90.4
240.4
264.4
297.2
561.6
139.7
81.4
221.1
440.8
340.5
866.9
52.6
723.3
48.8
39.8
(12.4)
27.4
36.5
(12.3)
24.2
(28)
(33)
257.1
27.4
32.7
(8.6)
(6.8)
(1.7)
(7.3)
292.8
256.5
24.2
-
-
(8.6)
(2.4)
(12.6)
257.1
The Group‟s share of capital commitments, other expenditures and contingent liabilities are disclosed in Notes 29 and 30.
65
Incitec Pivot Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
Freehold land
and buildings
Machinery,
plant and
equipment
Construction in
progress
Notes
$mill
$mill
$mill
Total
$mill
17. Property, plant and equipment
Consolidated
At 1 October 2010
Cost
Accumulated depreciation
Net book amount
Year ended 30 September 2011
Opening net book amount
Reclassification (to) / from fixed assets classified as held for sale
Additions
Disposals
Depreciation charge
Impairment of assets
Reclassification
Foreign exchange movement
(5)
(5)
Closing net book amount
At 1 October 2011
Cost
Accumulated depreciation
Net book amount
Year ended 30 September 2012
Opening net book amount
Reclassification from fixed assets classified as held for sale
Additions
Disposals
Depreciation charge
Impairment of assets
Reclassification
Subsidiaries acquired
Foreign exchange movement
Closing net book amount
(5)
(5)
At 30 September 2012
Cost
Accumulated depreciation
Net book amount
449.4
(141.1)
308.3
308.3
2.9
3.9
(10.0)
(13.1)
-
22.9
(2.6)
312.3
1,471.1
(521.3)
949.8
949.8
(0.3)
18.8
(23.2)
(111.6)
(7.6)
126.3
(3.0)
949.2
586.0
-
2,506.5
(662.4)
586.0
1,844.1
586.0
-
589.5
(1.7)
-
-
(149.2)
(2.8)
1,021.8
1,844.1
2.6
612.2
(34.9)
(124.7)
(7.6)
-
(8.4)
2,283.3
461.3
(149.0)
312.3
1,518.7
(569.5)
949.2
1,021.8
-
1,021.8
3,001.8
(718.5)
2,283.3
312.3
2.0
19.1
(2.1)
(14.5)
-
26.7
0.4
(6.4)
337.5
949.2
4.0
40.4
(0.7)
(117.0)
(6.5)
90.2
2.0
(28.1)
933.5
1,021.8
-
566.7
-
-
-
(116.9)
-
(4.1)
1,467.5
2,283.3
6.0
626.2
(2.8)
(131.5)
(6.5)
-
2.4
(38.6)
2,738.5
498.1
(160.6)
337.5
1,569.9
(636.4)
933.5
1,467.5
-
1,467.5
3,535.5
(797.0)
2,738.5
Property, plant and equipment impairment
During the year ended 30 September 2012 impairment of property, plant and equipment occurred to the value of
$6.5m (2011: $7.6m) as a result of the Group‟s fixed asset verification procedures, the abandonment of certain
assets and assets identified where the recoverable amount is less than carrying value.
Capitalised interest
During the year ended 30 September 2012 interest of $65.6m (2011: $52.1m) was capitalised relating to interest
bearing liabilities used specifically to fund qualifying assets (expansion projects) as defined under AASB 123
Borrowing Costs.
Incitec Pivot Limited Annual Report 2012
66
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
18. Intangible assets
Consolidated
At 1 October 2010
Cost
Accumulated amortisation
Net book amount
Notes
Software
$mill
Goodwill
$mill
Patents,
Trademarks &
Customer
Contracts
Brand
Names
$mill
$mill
Total
$mill
60.4
(30.5)
29.9
2,560.9
-
2,560.9
220.6
(39.8)
180.8
238.4
-
238.4
3,080.3
(70.3)
3,010.0
Year ended 30 September 2011
Opening net book amount
Additions
Amortisation charge
Foreign exchange movement
Closing net book amount
29.9
5.2
(7.3)
(0.2)
27.6
(5)
2,560.9
-
-
(44.3)
2,516.6
180.8
-
(16.2)
(2.1)
162.5
238.4
-
-
(2.8)
235.6
3,010.0
5.2
(23.5)
(49.4)
2,942.3
At 1 October 2011
Cost
Accumulated amortisation
Net book amount
65.3
(37.7)
27.6
2,516.6
-
2,516.6
218.3
(55.8)
162.5
235.6
-
235.6
3,035.8
(93.5)
2,942.3
162.5
12.8
-
(0.7)
(16.6)
(6.8)
151.2
221.1
(69.9)
151.2
235.6
-
-
-
-
(12.1)
223.5
2,942.3
12.8
1.8
(35.7)
(24.3)
(51.7)
2,845.2
223.5
-
223.5
2,959.7
(114.5)
2,845.2
Year ended 30 September 2012
Opening net book amount
Acquisition of business
Additions
Impairment of intangible assets
Amortisation charge
Foreign exchange movement
Closing net book amount
27.6
-
1.8
-
(7.7)
(1.0)
20.7
(5)
(5)
2,516.6
-
-
(35.0)
-
(31.8)
2,449.8
At 30 September 2012
Cost
Accumulated amortisation
Net book amount
65.3
(44.6)
20.7
2,449.8
-
2,449.8
67
Incitec Pivot Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
18. Intangible assets (continued)
(a) Allocation of goodwill
The Group‟s indefinite life intangible assets are allocated to CGUs as follows:
Incitec Pivot Fertilisers (IPF)
Southern Cross International (SCI)
Dyno Nobel Asia Pacific (DNAP)
Dyno Nobel Americas (DNA)
Nitromak
Goodwill
2012
$mill
183.8
1.8
1,132.4
1,053.7
78.1
2,449.8
Total Goodwill
Brand
Names
2012
$mill
-
-
2012
$mill
183.8
1.8
40.3
1,172.7
180.2
1,233.9
3.0
223.5
81.1
2,673.3
2011
$mill
183.8
1.9
1,091.0
1,119.8
120.1
2,516.6
Brand
Names
2011
$mill
-
-
Total
2011
$mill
183.8
1.9
40.3
1,131.3
192.3
1,312.1
3.0
235.6
123.1
2,752.2
(b) Impairment testing
The carrying amount of goodwill and intangible assets with indefinite lives is 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 the higher of fair value less costs to sell and
value-in-use. Value-in-use is determined using cash flow projections based on financial forecasts for a period of five years as
approved by the Board and a terminal value calculation. The directors believe that any reasonably possible change in the key
assumptions on which recoverable amount is based would not cause the aggregate carrying amount to exceed the aggregate
recoverable amount of the CGUs.
(c) Key assumptions used for value-in-use calculations
Key assumptions used to test for impairment, include:
IPF
SCI
DNAP
DNA
Nitromak
Terminal Growth Rate Discount Rate*
2011
%
9.0
2012
%
0.0
2012
%
9.0
2011
%
0.0
0.0
2.5
2.5
2.5
0.0
2.5
2.5
2.5
9.0
9.0
9.0
15.5
9.0
9.0
9.0
15.5
* The post-tax discount rate used reflects underlying cost of capital adjusted for market risk.
(d) Intangible asset impairment
As a result of the impairment review, the Group recognised a non-cash impairment charge of $35.0m in the year ended 30
September 2012 (2011: $nil). The charge related to the write-off of goodwill in relation to the Nitromak CGU.
Incitec Pivot Limited Annual Report 2012
68
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
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
Cash flow hedges
Unfavourable supplier contracts
Tax losses
Other
Deferred tax assets
Consolidated
2012
$mill
2011
$mill
Notes
1.3
17.9
37.6
2.0
34.2
10.2
1.3
34.1
4.1
-
6.3
29.1
27.2
205.3
0.5
15.4
37.1
5.3
23.9
13.9
3.4
32.5
3.3
0.2
105.0
44.3
23.9
308.7
Set-off of deferred tax liabilities pursuant to set-off provisions
(24)
(180.3)
(264.0)
Net deferred tax assets
Movements:
Opening balance at 1 October
Credited to the Income Statement
Credited to equity
Foreign exchange movement
Adjustments in respect of prior years
Closing balance at 30 September
25.0
44.7
308.7
(109.7)
8.2
(10.2)
8.3
205.3
364.1
(65.6)
18.0
(1.4)
(6.4)
308.7
69
Incitec Pivot Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
20. Trade and other payables
Current
Trade creditors
external
bill of exchange
jointly controlled entities and associates
Sundry creditors and accrued charges
external
jointly controlled entities and associates
unfavourable sales / supplier contracts
Non-current
Sundry creditors and accrued charges
external
unfavourable sales / supplier contracts
Consolidated
Notes
2012
$mill
2011
$mill
(33)
(33)
453.0
142.5
5.2
600.7
207.1
0.2
9.5
216.8
817.5
5.6
11.5
17.1
463.0
162.6
4.5
630.1
176.3
0.1
68.6
245.0
875.1
0.6
281.3
281.9
Unfavourable contracts
Unfavourable contracts were recognised as part of the acquisition of Southern Cross Fertilisers Pty Ltd in 2006 and the
acquisition of Dyno Nobel Limited in 2008. The liability was 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 as 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 Group‟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.
Amortisation of the Moranbah unfavourable customer contract liability recorded in the Consolidated Income Statement for the
year ended 30 September 2012 was $42.0m (2011: $47.5m). The balance of the unfavourable contract liability ($183.1m)
relating to future years was released at 30 September 2012. Refer to Note 6.
Significant terms and conditions
Trade creditors, including expenditures not yet billed, are recognised when the Group 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.
Incitec Pivot Limited Annual Report 2012
70
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
21. Interest bearing liabilities
Current
Secured
bank loans
participation facilities
Unsecured
bank loans
other loans
jointly controlled entities and associates (1)
Non-current
Secured
bank loans
participation facilities
lease liability
Unsecured
fixed interest rate bonds
Consolidated
2012
$mill
2011
$mill
Notes
104.1
77.0
6.7
14.9
125.7
9.6
9.1
95.7
(32)
24.0
0.1
114.1
0.1
1,291.2
1,315.3
1,358.6
1,472.8
(32)
(1) Loans from jointly controlled entities and associates relate to unsecured loans from joint venture Wampum Hardware Co.
During the year, the Group did not undertake any new financing activities.
Significant terms and conditions
Interest expense is recognised progressively over the life of the facilities.
Fixed Interest Rate Bonds
The Group has on issue the following Fixed Interest Rate Bonds in the US 144A / Regulation S debt capital market:
-
US$800.0m 10 year bond denominated in USD, with a fixed rate semi-annual coupon of 6 percent,
maturing in December 2019.
US$500.0m 5 year bond denominated in USD, with a fixed rate semi-annual coupon of 4 percent,
maturing in December 2015.
-
Bank Facility
The Bank Facility is a A$900.0m three year revolving facility that may be drawn in either AUD or USD with a maturity of
April 2014. At 30 September 2012, the drawn balance was nil.
Participation Facilities
The Participation Facilities mature in June 2013 and September 2014. The carrying amount of the facilities is A$128.1m
and is secured against certain assets operated by Southern Cross Fertilisers Pty Ltd. The facilities are denominated in
AUD and have fixed nominal interest rates of 8.93 percent and 9.63 percent respectively for the term of the facilities.
71
Incitec Pivot Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
22. Other financial liabilities
Current
Derivatives designated and effective as hedging instruments carried at fair value
option contracts
forward exchange contracts
Non-Current
Derivatives designated and effective as hedging instruments carried at fair value
cross currency swaps
23. Provisions
Current
Employee entitlements
Restructuring and rationalisation
Environmental
Asset retirement obligation
Other
Non-current
Employee entitlements
Restructuring and rationalisation
Environmental
Asset retirement obligation
Other
Aggregate employee entitlements
Current
Non-current
Consolidated
Notes
2012
$mill
2011
$mill
(32)
(32)
(32)
9.6
5.2
14.8
-
-
41.9
10.2
64.9
2.0
3.8
122.8
7.4
1.0
45.8
20.3
-
74.5
41.9
7.4
49.3
-
0.6
0.6
2.9
2.9
27.6
21.7
41.0
2.4
5.6
98.3
12.2
2.1
31.6
16.9
1.0
63.8
27.6
12.2
39.8
The present value of the Group‟s employee entitlements not expected to be settled within 12 months of reporting date has been
calculated using the following assumptions:
Assumed rate of increase in wage and salary rates
Average discount rate (risk free rate)
Settlement term
Employees at year end
Full time equivalent
3.5% + age based scale
2.93%
10 years
2012
Number
5,242
2011
Number
4,910
Incitec Pivot Limited Annual Report 2012
72
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
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.
Consolidated
2012
$mill
Notes
(27)
(5)
(5)
(5)
(5)
-
187.3
(187.3)
-
21.7
1.9
(3.2)
(10.8)
1.1
(0.5)
10.2
41.0
39.5
(21.3)
6.6
(0.9)
64.9
2.4
0.8
(0.4)
(0.8)
2.0
5.6
0.5
(3.2)
(0.2)
0.4
1.0
(0.3)
3.8
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
Provisions made during the year
Provisions written back during the year
Payments made during the year
Transfers from non-current
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
Provisions made during the year
Payments made during the year
Transfers from non-current
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
Provisions made during the year
Payments made during the year
Transfers to non-current
Carrying amount at the end of the financial year
Current Provision - Other
Carrying amount at the beginning of the financial year
Provisions made during the year
Provisions written back during the year
Payments made during the year
Subsidiaries acquired
Transfers from non-current
Foreign currency exchange differences
Carrying amount at the end of the financial year
See Note 1(xvii) for further details on the provisions noted above.
73
Incitec Pivot Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
23. Provisions (continued)
Reconciliations (continued)
Non-current Provision - Restructuring and rationalisation
Carrying amount at the beginning of the financial year
Transfers to current
Carrying amount at the end of the financial year
Non-current Provision - Environmental
Carrying amount at the beginning of the financial year
Provisions made during the year
Transfers to current
Discount unwind
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
Provisions made during the year
Transfers from current
Discount unwind
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
Transfers to current
Carrying amount at the end of the financial year
See Note 1(xvii) for further details on the provisions noted above.
Consolidated
2012
$mill
Notes
(5)
(5)
2.1
(1.1)
1.0
31.6
22.2
(6.6)
(0.6)
(0.8)
45.8
16.9
2.8
0.8
(0.1)
(0.1)
20.3
1.0
(1.0)
-
Incitec Pivot Limited Annual Report 2012
74
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
24. Deferred tax liabilities
The balance comprises temporary differences attributable to:
Inventories
Property, plant and equipment
Intangible assets
Foreign exchange gains
Other
Deferred tax liabilities
Consolidated
2012
$mill
2011
$mill
Notes
0.7
265.8
101.0
22.3
161.8
551.6
2.5
210.7
111.5
10.5
124.1
459.3
Set-off of deferred tax liabilities pursuant to set-off provisions
(19)
(180.3)
(264.0)
Net deferred tax liabilities
Movements
Opening balance at 1 October
Credited to the Income Statement
Charged to equity
Foreign exchange movements
Adjustments in respect of prior years
Closing balance at 30 September
371.3
195.3
459.3
48.1
14.8
(21.6)
51.0
551.6
380.3
(16.4)
55.2
(3.1)
43.3
459.3
75
Incitec Pivot Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
25. Retirement benefit obligations
(a) Information on plans
The Group operates a number of defined benefit plans to provide benefits for employees and their dependents 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 method.
The Company is the sponsoring employer of the Incitec Pivot Employees Superannuation Fund („the 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 Consolidated Income Statement and Consolidated Statement of Financial
Position are set out below.
(b) Reconciliation of the present value of the defined benefit obligation
Consolidated
2012
$mill
2011
$mill
Notes
Present value of defined benefit obligations at beginning of the year
Current service cost
Past service benefit
Interest cost
Actuarial 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
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
(d) Reconciliation of assets and liabilities recognised in the Consolidated Statement of Financial Position
Present value of funded defined benefit obligations at end of the year
Tax provision
Total value of funded defined benefit obligations at end of the year
Fair value of plan assets at end of the year
Net liability recognised in the Consolidated Statement of Financial Position at end of the year
(e) Expense recognised in Consolidated Income Statement
Current service cost
Past service benefit
Interest cost
Expected return on plan assets
Expense recognised in Consolidated Income Statement
(5)
304.4
6.7
-
13.1
33.9
1.0
(18.3)
(14.2)
326.6
189.1
13.9
17.4
19.7
1.0
(18.3)
(7.8)
215.0
324.9
1.7
326.6
(215.0)
111.6
6.7
-
13.1
(13.9)
5.9
287.6
6.2
(0.8)
13.4
15.1
1.1
(15.0)
(3.2)
304.4
192.3
13.8
(14.4)
14.5
1.1
(15.0)
(3.2)
189.1
303.4
1.0
304.4
(189.1)
115.3
6.2
(0.8)
13.4
(13.8)
5.0
Incitec Pivot Limited Annual Report 2012
76
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
25. Retirement benefit obligations (continued)
(f) Amounts recognised in the Consolidated Statement of Comprehensive Income
Actuarial losses (before income tax)
(g) Cumulative amount recognised in the Consolidated Statement of Comprehensive Income
Cumulative amount of actuarial losses (before income tax)
(h) Plan assets
The percentage invested in each asset class at the reporting date:
Equities
Fixed Interest Securities
Property
Other
(i) Fair value of plan assets
The fair value of plan assets includes no amounts relating to:
- any of the Group's own financial instruments
- any property occupied by, or other assets used by, the Group
Consolidated
2012
$mill
2011
$mill
16.5
29.5
131.6
115.1
58%
28%
8%
6%
66%
21%
7%
6%
(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
Medical cost trend rate
Future inflation
(m) Expected contributions
Expected contributions in year ending 30 September 2012
Expected employer contributions
Expected contribution by plan participants
(n) Historical information
Present value of defined benefit obligation
Fair value of plan assets
Deficit in plan
Experience adjustment - plan liabilities
Experience adjustment - plan assets
77
Incitec Pivot Limited Annual Report 2012
32.0
(0.6)
%
%
4.2 - 8.0
3.3 - 6.5
7.0 - 7.8
7.0 - 7.8
2.0 - 5.0
2.0 - 5.0
4.0 - 9.5 4.0 - 10.0
2.5 - 4.0
2.5 - 2.8
19.6
0.4
2012
$mill
326.6
(215.0)
111.6
0.3
(11.7)
2011
$mill
304.4
(189.1)
115.3
7.0
6.2
2010
$mill
287.6
(192.3)
95.3
(2.2)
3.0
2009
$mill
288.4
2008
$mill
287.7
(196.8)
(220.9)
91.6
3.7
(2.9)
66.8
7.9
(10.9)
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
26. Issued capital
Share Capital
Ordinary shares authorised and issued - 1,628,730,107 (2011: 1,628,730,107) (1)
(1) Ordinary shares authorised and issued have no par value.
Consolidated
2011
2012
$mill
$mill
3,265.9
3,265.9
3,265.9
3,265.9
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 during financial year
There were no movements in issued and fully paid ordinary shares of the Company during the financial year.
Company
2012
$mill
2011
$mill
Notes
27. Dividends
Dividends paid or declared in respect of the year ended 30 September were:
Ordinary Shares
Final dividend of 6.0 cents per share, unfranked, paid 17 December 2010
Interim dividend of 3.3 cents per share, unfranked, paid 5 July 2011
Final dividend of 8.2 cents per share, unfranked, paid 16 December 2011
Interim dividend of 3.3 cents per share, 50 percent franked at the 30 percent corporate rate, paid 3 July 2012
-
-
97.7
53.7
133.6
53.7
-
-
Total ordinary share dividends
(23)
187.3
151.4
Subsequent event
Since the end of the financial year, the directors have determined to pay the following dividend:
-
Final dividend of 9.1 cents per share, 75 percent franked at the 30 percent corporate tax rate, to be paid on 14 December
2012. The total dividend payment will be $148.2m.
Ordinary shares
The financial effect of this dividend has not been recognised in the Consolidated Financial Statements and will be recognised
in subsequent Consolidated Financial Statements.
Franking credits
Franking credits available to shareholders of the Group amount to $62.6m (2011: $13.8m) at the 30 percent (2011: 30%)
corporate tax rate. The final dividend for 2012 is 75 percent franked at the 30 percent corporate tax rate. Franking credits that will
arise from payment of income tax in the year ending 30 September 2012 have been factored into the franking account balance.
Incitec Pivot Limited Annual Report 2012
78
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
28. Reconciliation of profit after income tax to net cash inflow from operating activities
Reconciliation of cash
Cash at the end of the financial year as shown in the Consolidated Statement of Cash Flows is
reconciled to the related items in the Consolidated Statement of Financial Position as follows:
Cash and cash equivalents
Reconciliation of profit for the financial year to net cash flows
from operating activities
Profit for the financial year
Depreciation and amortisation
Write-down of property, plant and equipment
Impairment of goodwill and other intangible assets
Share of profit on equity accounted investments
Net gain on sale of property, plant and equipment
Non-cash share based payment transactions
Unwinding of discount on provisions
Changes in assets and liabilities
(increase) / decrease in receivables and other operating 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 payables, provisions and other operating liabilities
increase / (decrease) in income taxes payable
Net cash flows from operating activities
Consolidated
2012
$mill
2011
$mill
Notes
(10)
154.1
154.1
379.7
379.7
(5)
(5)
(5)
(16)
(4)
(5)
508.0
155.8
6.5
35.7
(27.4)
(4.8)
10.4
25.3
94.2
66.5
19.7
179.2
0.1
(366.3)
(82.1)
620.8
467.3
148.2
7.6
-
(24.2)
(18.0)
8.0
25.2
58.6
(146.7)
126.1
(48.0)
5.5
38.0
71.5
719.1
79
Incitec Pivot Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
29. Commitments
a) Capital expenditure commitments
Capital expenditure on property, plant and equipment contracted but not provided for and payable:
no later than one year
later than one, no later than five years
later than five years
Share of capital expenditure commitments of the jointly controlled entities:
no later than one year
later than one, no later than five years
b) Lease commitments
Consolidated
2012
$mill
2011
$mill
59.5
2.7
2.3
64.5
20.7
10.8
31.5
119.0
1.3
-
120.3
11.0
0.4
11.4
Non-cancellable operating lease commitments comprise a number of operating lease 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
later than five years
40.6
102.5
54.1
197.2
51.6
110.8
65.7
228.1
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
Present value of minimum lease payments provided for as a liability
0.3
0.4
0.7
-
0.1
0.1
c) Other expenditure commitments
Commitments for payments to suppliers under long-term executory contracts existing at reporting date but not recognised as
payable include:
no later than one year
later than one, no later than five years
later than five years
204.7
340.6
140.2
685.5
198.9
373.3
154.1
726.3
Incitec Pivot Limited Annual Report 2012
80
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
30. Contingent liabilities
Contracts, claims, guarantees and warranties
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.
Under a Deed of Cross Guarantee dated 30 September 2008, entered into in accordance with ASIC
Class Order 98/1418 (as amended), 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 the commentary to Note 36,
Investments in controlled entities.
Consolidated Statement of Financial Position and Consolidated Income Statement for the closed group
are shown in Note 37, Deed of Cross Guarantee.
The Group 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 Group.
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 Group is not aware of any
material exposure under these warranties and indemnities.
From time to time, the Group is subject to claims for damages arising from products and services
supplied by the Group in the normal course of business. Controlled entities have received advice of
claims relating to alleged failure to supply products and services suitable for particular applications. The
claims in the entities concerned are considered to be either immaterial or the entity is defending the
claim with no expected financial disadvantage. No specific disclosure is considered necessary.
Environmental
I General
The Group 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
(xvii)), provisions have been created for all known environmental liabilities that can be reliably estimated. While the
directors believe that, based on 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 (xvii).
Taxation
Consistent with other companies of the size of Incitec Pivot Limited, the Group is subject to periodic information requests,
investigations and audit activities by the Australian Taxation Office. Provisions for such matters will be recognised if a
present obligation in relation to a taxation liability exists which can be reliably estimated.
81
Incitec Pivot Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
31. Financial risk management
Overview
The Group has exposure to the following financial risks:
Market risk (foreign exchange, interest rate, commodity and equity price risk)
Liquidity risk
Credit risk
This note presents information about the Group‟s exposure to each of the above risks, as well as the Group‟s objectives,
policies and processes for measuring and managing these risks.
The Board of Directors has overall responsibility for the establishment and oversight of the Group‟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 Group‟s risk management plans. The BARMC reports regularly to the
Board of Directors on its activities.
The Group‟s financial risk management policies establish a framework for identifying, analysing and managing the
financial risks faced by the Group. These policies set appropriate financial risk limits and controls, identify permitted
derivative instruments and provide guidance on how financial risks and adherence to limits are to be monitored and
reported.
Financial risk management policies and systems are reviewed regularly to ensure they remain appropriate given
changes in market conditions and/or the Group‟s activities.
The BARMC oversees how management monitors compliance with the Group‟s risk management policies and
procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group.
The BARMC is assisted in its oversight role by the Group‟s internal audit function. The internal audit function involves
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 foreign exchange rates, interest rates, commodity prices and equity prices will
affect the Group‟s income, cash flows and/or value of its holdings of derivative instruments. The objective of market risk
management is to manage market risk exposures within acceptable parameters, while optimising the return on risk. To
achieve this objective, an “insurance based” approach is often taken whereby the Group will pay a premium to limit the
impact of unfavourable market movements while allowing at least partial participation in favourable movements. Where
the cost of the premiums is considered to be prohibitive, some upside participation may be foregone to reduce the overall
cost of the structure.
For some market risks, primarily commodity price risks, there is either no specific derivative market available or the
derivative market is illiquid and expensive. In some cases, derivative markets exist but contain unacceptable levels of
basis risk (the risk that the change in price of a hedge may not match the change in price of the item it hedges). In these
circumstances, the Group chooses not to hedge these exposures using derivatives.
Further details of the Group‟s financial risk management structures are outlined below, including information as to
whether hedge accounting has been applied.
i. Foreign exchange risk - transactional
The Group is exposed to foreign exchange movements on sales and purchases denominated, either directly or indirectly,
in foreign currency (primarily in United States dollars). Where these exposures are significant, and cannot be eliminated
by varying contract terms or other business arrangements, formal hedging strategies are implemented within Board
approved policy. The formal hedging strategies involve collating and consolidating exposure levels centrally by Treasury,
and hedging specific transactions, after taking into account offsetting exposures, by entering into derivative contracts with
highly rated financial institutions. The Group‟s principal transactional foreign exchange risks can be split into two main
categories: contractual exposures and forecast exposures.
Incitec Pivot Limited Annual Report 2012
82
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
31. Financial risk management (continued)
(a) Market risk (continued)
i. Foreign exchange risk – transactional (continued)
Contractual exposures: As the Group both imports and exports fertilisers and raw materials in foreign currency, its
profitability is impacted by foreign exchange movements. Timing differences between receipts and payments of foreign
currency are managed using foreign exchange swaps. Where there is a net excess or shortfall of foreign currency, forward
foreign exchange contracts (FECs) are taken out to hedge those exposures. The Group applies hedge accounting for these
derivatives. The table below shows the outstanding FECs as at 30 September 2012:
Term
Weighted average strike rate
AUD mill AUD mill
Forward FX contract
Buy USD / Sell AUD
Buy AUD / Sell USD
Buy EUR / Sell AUD
Buy AUD / Sell CAD
Buy AUD / Sell TRY
2012
1.0066
1.0404
0.7875
1.0154
1.8632
2011
1.0366
1.0170
0.7195
-
-
2012
2011
253.4
213.1
11.5
2.2
6.0
0.5
1.4
5.7
-
-
Forecast exposures: The profitability of Southern Cross International and Incitec Pivot Fertilisers is impacted by foreign
exchange movements due to the manufacturing inputs (gas, electricity, labour) being denominated in Australian dollars,
while the manufactured outputs (phosphate based fertilisers, urea and ammonia) are sold either in United States dollars
or in Australian dollars in each case based on an import parity formula impacted by the rate of exchange.
The amount of anticipated future sales is forecast in light of plant capacities, current conditions in both domestic and
international agricultural and industrial markets, commitments from customers and historical seasonal impacts. Policies
approved by the Board of Directors limit the percentage of forecast sales that can be hedged with the percentage reducing
as the time horizon increases.
The Group has entered into a series of FECs to Sell USD / Buy AUD, to protect a portion of the Group‟s forecast exposure.
The market value of these FECs is recorded in the Consolidated Statement of Financial Position at year end. Any movement
in the market value from contract price to year end price is recorded in the Cash-flow Hedge Reserve in the Consolidated
Statement of Financial Position. Favourable outcomes on the hedge will occur when the AUD appreciates. As FECs do not
offer participation when the AUD depreciates occasionally, options and collar contracts are entered into to allow some
participation.
The table below summarises the outstanding FEC and foreign currency option contracts taken out to hedge sales of the
output of Southern Cross International and Incitec Pivot Fertilisers at 30 September:
Term
USD/AUD
exercise price
Weighted average
AUD/USD strike rate
2012
2011
2012
2011
Buy AUD / Sell USD
Buy USD / Sell CAD
Purchased average rate
AUD call/ USD put, not later
than one year
1.0366
0.9832
-
0.9793
-
-
-
-
-
-
-
Contract
amounts
AUD mill
2012
299.0
29.3
2011
687.2
-
1.0200
-
365.0
From time to time, the Group may look to reduce premium costs by transacting collars or selling floors against existing
bought positions. Board approved policies prevent the Group from selling naked options. At 30 September 2012, all
outstanding bought options had an outstanding matching sold option, effectively cancelling out the economic impact
of the options.
83
Incitec Pivot Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
31. Financial risk management (continued)
(a) Market risk (continued)
i. Foreign exchange risk – transactional (continued)
The following sensitivity is based on the unhedged transactional foreign currency risk exposures in existence at the
reporting date and is calculated based on name plate capacity, average achieved Fertiliser selling prices and exchange
rates in 2012.
Foreign Exchange Sensitivity –
Transactional (unhedged)
USD + 1c
AUD mill
USD - 1c
AUD mill
USD + 1c
AUD mill
USD - 1c
AUD mill
USD Fertiliser sales from Australian plants
2012
(7.8)
2012
7.9
2011
(10.1)
2011
10.3
ii. Foreign exchange risk – translational
The Group has foreign operations with non-AUD functional currencies and is, therefore, exposed to translation risk
resulting from foreign exchange movements which impact on the AUD equivalent value of the foreign operations.
The Group manages the impact of the translation risk by a combination of borrowing in the same currency as the net
foreign assets and by using foreign currency forwards and cross currency swaps to create „synthetic‟ foreign currency
debt. The foreign currency forward rate includes the net fixed interest rate differentail for the period of the contract. The
cross currency swaps pay and receive floating rates of interest with quarterly or monthly rate resets throughout the life of
the swap. The 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 Group‟s net assets is recognised within the foreign currency
translation reserve.
The table below summarises the cross currency swaps outstanding at 30 September:
Term
Receive AUD / Pay USD mill
2012
2011
not later than one year
later than one year, no later than five
years
AUD 114.1 / USD 103.0
AUD 482.6 / USD 449.5
AUD 174.5 / USD 181.5
AUD 114.1 / USD 103.0
The following sensitivity is based on the unhedged translational foreign currency risk exposures in existence at the
reporting date and is calculated based on 2012 USD denominated earnings before interest and tax at the average 2012
translation exchange rate.
Foreign Exchange Sensitivity – Translational
(unhedged)
USD + 1c
AUD mill
USD - 1c
AUD mill
USD + 1c
AUD mill
USD - 1c
AUD mill
North American earnings before interest and tax
2012
(1.8)
2012
1.9
2011
(1.4)
2011
1.4
Incitec Pivot Limited Annual Report 2012
84
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
31. Financial risk management (continued)
(a) Market risk (continued)
iii.
Interest rate risk
The Group is exposed to interest rate risk on outstanding interest bearing liabilities and investments. The mix of floating
and fixed rate debt is managed within policies determined by the Board of Directors using approved derivative
instruments. Interest rate risk is managed by entering into interest rate derivatives in order to balance the Group‟s fixed
and variable interest rate mix. Under interest rate swap contracts, the Group agrees to exchange the difference between
fixed and floating rate interest amounts calculated on agreed notional principal amounts. Such contracts enable the
Group to mitigate the risk of changing interest rates on the fair value of issued fixed rate debt and the cash flow
exposures on the issued variable rate debt. The fair value of interest rate swaps at the end of the reporting period is
determined by discounting future cash flows using the curves at the end of the reporting period.
The Group‟s interest rate risk arises from long term borrowings in Australian and United States dollars. Of the
AUD1,441.0m of Interest Bearing Liabilities at the reporting date, AUD787.2m (55%) were exposed to floating interest
rates.
The following sensitivity analysis is based on the interest rate risk exposures in existence at the reporting date and is
calculated based on the variable interest rate borrowings balance at 30 September 2012 and the average variable
interest rate during the 2012 year.
Interest Rate Sensitivity
Current and non-current borrowings with
variable interest rates
+ 1% LIBOR
AUD mill
- 1% LIBOR
AUD mill
+ 1% LIBOR
AUD mill
- 1%LIBOR
AUD mill
2012
(10.4)
2012
10.4
2011
(11.1)
2011
11.1
Interest Rate Sensitivity
Current and non-current borrowings with
variable interest rates
iv. Commodity risk
+ 1% BBSW
AUD mill
- 1% BBSW
AUD mill
+ 1% BBSW
AUD mill
- 1% BBSW
AUD mill
2012
2.9
2012
(2.9)
2011
2.8
2011
(2.8)
The Group is exposed to changes in commodity prices by virtue of its operations. Where possible the Group manages
some of that risk by negotiating appropriate contractual terms with its suppliers and customers.
Natural gas represents a significant raw material cost for the Group‟s ammonia and nitrogen based manufacturing. In
order to manage the price risk associated with natural gas in Australia, the Group entered into long term fixed price
contracts for the supply of gas. In the United States, the Group aims, where possible, to mitigate some of its exposure to
natural gas price risk by entering into contracts with its customers which pass on the risk of natural gas price movements.
For longer term contracts that do not include a gas price pass-through clause, the Group will typically manage its gas
price risk by entering into a fixed price derivative that matches the term of the customer contract (see the table below for
a list of contracts outstanding as at 30 September 2012). On occasion the Group has used fixed price derivatives during
the year for managing its short term gas price risk for periods shorter than one year.
The table below summarises the fixed price derivatives outstanding as at 30 September 2012:
Months
hedged
Monthly
volume
(MMBTU*)
Fixed
rate USD
Contract
Contract
Contract
Contract
Contract
Contract
Contract
3
3
3
3
3
3
3
* Million Metric British Thermal Units
20,000
10,000
20,000
5,000
20,000
10,000
10,000
3.32
3.32
3.32
3.12
3.12
3.12
3.12
The Group is exposed to price volatility on the commodities it sells. These exposures can be categorised into three main
areas: ammonium nitrate, ammonium phosphate and urea.
The Group aims to manage its price risk exposure to ammonium nitrate by entering into long term contracts with its
customers with sales prices that are adjusted for changes to input costs such as natural gas and for movements in CPI.
85
Incitec Pivot Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
31. Financial risk management (continued)
(a) Market risk (continued)
iv. Commodity risk (continued)
The following sensitivity analysis is based on the gas commodity risk exposures in existence at the reporting date.
Commodity Risk Sensitivity
Henry Hub US$ prices per 1 MMBTU
+ US$1 per
1 MMBTU
AUD mill
- US$1 per
1 MMBTU
AUD mil
+ US$1 per
1 MMBTU
AUD mill
- US$1 per
1 MMBTU
AUD mil
2012
(3.5)
2012
3.5
2011
(3.8)
2011
3.8
The market for ammonium phosphates and urea is generally based on spot prices with minimal ability to contract for
longer terms. For these commodities, no deep and liquid derivative market is available. The following table details the
Group‟s profit sensitivity to price movements for these commodities, based on plant name plate capacity.
Fertiliser Price Sensitivity
Middle East Granular Urea (MEGU) FOB/t
Di-ammonium Phosphate (DAP) Tampa FOB/t
Fertiliser Price Sensitivity
Middle East Granular Urea (MEGU) FOB/t
Di-ammonium Phosphate (DAP) Tampa FOB/t
(1)
Maximum production capacity of the plant
+ USD10
AUD mill
- USD10
AUD mill
Name plate
Tonnes (1)
2012
4.2
9.9
2012
(4.2)
(9.9)
405,000
950,000
+ USD10
AUD mill
- USD10
AUD mill
Name plate
Tonnes (1)
2011
4.5
10.4
2011
(4.5)
(10.4)
405,000
950,000
The Group is also exposed to fluctuations in fertiliser prices as part of the operations of Quantum Fertilisers Limited, the
Group‟s fertiliser trading business. Quantum Fertilisers Limited can hold either „long‟ or „short‟ physical fertiliser positions
which is governed by the Group‟s policy on commodity trading.
The table below summarises the open positions of Quantum Fertilisers Limited outstanding as at 30 September 2012:
Product type
Sulphuric Acid
Position type
Position size
Long
20,000 tonnes
Price
US $190
v. Equity price risk
The Group is exposed to equity price risk on securities held on investments. These securities are not held for trading as
it is the Group‟s objective to hold these in the long term for strategic purposes. Refer to Note 14.
(b) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group‟s
approach to managing liquidity is to ensure that there are sufficient committed funding facilities available to meet the
Group‟s financial commitments in a timely manner. The Group‟s forecast liquidity requirements are continually
reassessed based on regular forecasting of capital requirements including stress testing of critical assumptions such as
input costs, sales prices, production volumes, exchange rates and capital expenditure.
Incitec Pivot Limited Annual Report 2012
86
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
31. Financial risk management (continued)
(b) Liquidity risk (continued)
Typically, the Group aims to hold a minimum liquidity buffer of AUD500.0m in undrawn committed funding 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. The Group maintains the following committed lines of credit:
An unsecured Bank facility agreement of AUD900m for 3 years, maturing April 2014. This is a multi-
currency facility drawable in AUD and USD with interest payable at BBSY/LIBOR plus a margin. This
facility is revolving in nature whereby repayment can be redrawn at the Group‟s discretion.
A USD800.0m 10 year bond completed in the US 144A / Regulation S debt capital market. The bond is
denominated in USD, has a fixed rate semi-annual coupon of 6.00 percent and matures in December
2019.
A USD500.0m 5 year bond completed in the US 144A / Regulation S debt capital market. The bond is
denominated in USD, has a fixed rate semi-annual coupon of 4.00 percent and matures in December
2015.
A participation facility of AUD92.5m (amortising) maturing in June 2013. The carrying amount of the
facility 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 percent for the term of the facility.
A second participation facility of AUD35.6m (amortising) maturing in September 2014. The carrying
amount of the facility 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 9.63 percent for the term of
the facility.
At reporting date, the Group has committed undrawn lines of AUD900.0m and cash of AUD154.1m.
Capital risk management
When managing capital, the key objectives of the Group are to safeguard its 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 a capital and funding structure that optimises the
cost of capital available to the Group 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; and
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 Group while maintaining financial flexibility.
In order to optimise the capital structure, the amount of dividends paid to shareholders may be changed, capital returned
to shareholders or issue new shares, or management may vary discretionary capital expenditure, draw down additional
debt or sell assets to reduce debt in line with the strategic objectives and operating plans of the Group.
To monitor and support the key objectives set out above, various financial ratios and internal targets are assessed and
reported to the Board, on a regular basis, by management. These ratios and targets include: Gearing ratio, Gross debt to
Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) and Interest cover.
Debt covenants relating to the Bank facility (AUD900.0m) have been measured and are within the debt covenant targets
for the year ended 30 September 2012.
The Group self-insures for certain insurance risks under the Australian Reform Act 2011 and the Singapore Insurance
Act. Under these Acts, authorised general insurer, Coltivi Insurance Pte Limited (the Group‟s self-insurance company), is
required to maintain a minimum amount of capital. For the financial year ended 30 September 2012, Coltivi Insurance
Pte Limited maintained capital in excess of the minimum requirements prescribed under these Acts.
87
Incitec Pivot Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
31. Financial risk management (continued)
(c) Credit risk
Credit risk is the risk of financial loss to the Group 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 Consolidated Statement of Financial Position net of any impairment losses, and from derivative financial instruments.
Trade and other receivables
The Group‟s exposure to credit risk is influenced mainly by the individual characteristics of each customer.
The demographics of the Group‟s customer base, including the default risk of the industry and country in which
customers currently operate, have an influence on credit risk. Credit risk on sales to overseas customers is usually
negated by way of entering into irrevocable letters of credit with financial institutions or by asking customers to pay
in advance.
The Group has a credit policy under which each new customer is analysed individually for creditworthiness before the
Group 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, where
applicable, and reports from external ratings agencies. Based on this analysis credit limits are established for each
customer which represent 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 with a limit greater than AUD0.5m and on an as-needed basis if an
increase is required. Customers that fail to meet the Group‟s benchmark creditworthiness, or who are in breach of their
credit limits, may transact only on a “Cash Before Delivery” basis.
The Group establishes an allowance for impairment that represents its estimate of probable losses in respect of trade
and other receivables.
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 “A”. In practice, financial instruments are
usually dealt with financial institutions with a stronger rating than “A”. 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 fair value.
As at 30 September 2012, the sum of all contracts with a positive fair value was AUD76.0m (2011: AUD100.8m).
Incitec Pivot Limited Annual Report 2012
88
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
32. Financial instruments
(a) Foreign exchange risk
The Group‟s exposure to foreign exchange risk at reporting date was:
Consolidated
Trade receivables
Trade payables
Gross statement of financial position
exposure
Forward exchange contracts
Net exposure
The following significant exchange rates applied during the year:
Euro
USD
2012
Euro
mill
0.3
5.1
4.8
4.8
-
2011
Euro
mill
-
4.3
2012
USD
mill
2011
USD
mill
18.1
228.7
5.0
224.1
4.3
210.6
219.1
4.1
0.2
219.6
218.7
(9.0)
0.4
Average
rate
2012
Balance
date spot
rate
2012
Average
rate
2011
Balance
date spot
rate
2011
0.7928
1.0277
0.8083
1.0436
0.7357
1.0265
0.7212
0.9782
Interest rate risk
(b)
At the reporting date the interest rate profile of the Group‟s interest bearing financial instruments was:
Variable rate instruments
- Financial liabilities
Fixed rate instruments
- Financial liabilities
Consolidated
2012
$mill
2011
$mill
Notes
787.2
834.9
(21)
653.8
1,441.0
733.6
1,568.5
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 AUD7.5m assuming all the variables were held constant in particular foreign exchange rates.
(c) Credit risk
The maximum exposure to credit risk at the reporting date was:
Trade receivables
Other receivables
Cash and cash equivalents
Forward exchange contracts
Cross currency swaps
Option contracts
Interest rate swaps
89
Incitec Pivot Limited Annual Report 2012
Notes
(11)
(11)
(10)
(14)
(14)
(14)
(14)
Consolidated
2012
$mill
2011
$mill
357.1
40.0
154.1
7.2
15.9
9.6
45.4
629.3
431.5
36.5
379.7
18.9
33.6
5.4
42.8
948.4
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
32. Financial instruments (continued)
(c) Credit risk (continued)
The maximum exposure to credit risk for trade receivables at the reporting date by country was:
Australia
India
Europe
USA
Canada
Asia
Turkey
Other
Consolidated
2012
$mill
2011
$mill
Notes
145.1
0.5
0.2
56.6
47.1
67.8
31.9
7.9
357.1
172.6
43.8
2.3
102.5
46.5
32.2
20.0
11.6
431.5
(11)
The maximum exposure to credit risk for trade receivables at the reporting date by type of customers was:
Wholesale customers
End user customers
Consolidated
2012
$mill
2011
$mill
148.1
209.0
357.1
210.1
221.4
431.5
Notes
(11)
As at the end of September 2012 and September 2011, the Group had no individual debtor‟s balance outstanding in
excess of 10 percent of the total of the trade receivable balance.
Impairment losses
The ageing of the Group‟s trade receivables at the reporting date was:
Current
Past due 0 - 30 days
Past due 31 - 120 days
Total
Gross
2012
$mill
Impairment
2012
$mill
275.4
42.6
47.6
365.6
-
-
8.5
8.5
Gross
2011
$mill
Impairment
2011
$mill
355.2
42.0
46.5
443.7
-
-
12.2
12.2
The movement in the allowance for impairment in respect of trade receivables during the year was as follows:
Consolidated
2012
$mill
2011
$mill
Notes
Balance at 1 October
Net impairment losses recognised / (released)
Write-offs recognised during the year
Foreign exchange movements
Balance at 30 September
(11)
12.2
(1.8)
(1.2)
(0.7)
8.5
11.9
9.3
(8.4)
(0.6)
12.2
Based on past experience, the Group 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 Group 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.
Incitec Pivot Limited Annual Report 2012
90
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
32. Financial instruments (continued)
(d) Liquidity risk – financial liabilities
The following are the contractual maturities of financial liabilities, including interest payments and excluding the impact of
netting payments.
Consolidated
30 September 2012
Non-derivative financial liabilities
Interest bearing liabilities
Interest payments
Trade and other payables
Derivative financial liabilities
Forward exchange contracts
Option contracts
Total
30 September 2011
Non-derivative financial liabilities
Interest bearing liabilities
Interest payments
Trade and other payables
Derivative financial liabilities
Forward exchange contracts
Cross currency swaps
Total
Carrying Contractual
cash flows (1)
amount
$mill
$mill
6 months
6 - 12
1 - 2
2 - 5
or less (1) months (1)
years (1)
years (1)
more than
5 years (1)
$mill
$mill
$mill
$mill
$mill
1,441.0
-
834.6
5.2
9.6
2,290.4
1,568.5
-
1,157.0
0.6
2.9
2,729.0
1,441.0
463.6
834.6
5.2
9.6
2,754.0
1,568.5
583.9
1,157.0
0.6
2.9
3,312.9
67.5
61.5
768.6
0.5
5.3
903.4
50.2
53.4
819.5
0.6
-
923.7
58.2
46.3
54.2
4.7
4.3
167.7
24.0
74.1
9.6
-
-
107.7
495.5
166.7
2.2
-
-
664.4
795.8
115.0
-
-
-
910.8
45.5
60.2
56.1
89.1
97.0
69.0
547.7
201.5
139.5
836.0
171.8
72.9
-
-
161.8
-
(9.0)
246.1
-
11.9
900.6
-
-
1,080.7
(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.
(e) Liquidity Risk - Cash flow hedges and Net Investment hedges
Cash flow hedges are mainly used to mitigate the Group‟s exposure to commodity price risk, foreign exchange 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 ammonium nitrate. Net investment
hedges are used to mitigate the Groups‟s exposure to foreign exchange risk resulting from controlled entities that have
functional currencies that are different to the Group‟s functional currency.
Foreign currency risk associated with sales and purchases denominated in foreign currency is managed by entering into
forward contracts, cross currency interest rate swaps and options.
The following table indicates the periods in which the cash-flows associated with derivatives, that are cash flow hedges
and net investment hedges, are expected to occur.
91
Incitec Pivot Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
32. Financial instruments (continued)
(e) Liquidity Risk - Cash flow hedges and Net Investment hedges (continued)
Consolidated
30 September 2012
Cash Flow Hedges
Assets
Liabilities
Net Investment Hedges
Assets
Total
30 September 2011
Cash Flow Hedges
Assets
Liabilities
Net Investment Hedges
Assets
Liabilities
Total
(f) Fair values
Carrying
amount
$mill
Expected
cash flows
$mill
6 months
or less
$mill
6 - 12
months
$mill
1 - 2
years
$mill
16.3
24.8
15.9
7.4
8.8
0.8
32.0
2.7
37.3
16.3
24.8
15.9
7.4
8.8
0.8
32.0
2.7
37.3
11.0
8.9
15.4
17.5
8.8
0.8
32.0
(0.2)
40.2
5.3
5.8
-
(0.5)
-
-
-
-
-
-
1.2
0.5
(0.7)
-
-
-
(9.0)
9.0
2 - 5
years
$mill
-
3.3
-
(3.3)
-
-
-
11.9
(11.9)
more
than 5
years
$mill
-
5.6
-
(5.6)
-
-
-
-
-
The fair values of financial assets and liabilities, together with the carrying amounts shown in the balance sheet, are as
follows:
Consolidated
Cash and cash equivalents
Financial assets carried at fair value through Other Comprehensive Income
Investments - equity instruments
Financial assets carried at amortised cost through the profit and loss
Trade and other receivables
Trade and other payables
Financial liabilities
Derivatives designated and effective as hedging instruments carried at fair value
Cross currency interest rate swaps
Option contracts
Forward exchange contracts
Interest rate swaps
Total
Notes
(10)
(14)
(11)
(20)
(21)
(14), (22)
(14), (22)
(14), (22)
(14)
Carrying
amount
2012
$mill
Fair
value
2012
$mill
Carrying
amount
2011
$mill
Fair
value
2011
$mill
154.1
154.1
379.7
379.7
3.6
3.6
10.1
10.1
397.1
(834.6)
(1,441.0)
397.1
(834.6)
(1,507.9)
468.0
(1,157.0)
(1,568.5)
468.0
(1,157.0)
(1,648.7)
15.9
-
2.0
45.4
(1,657.5)
15.9
-
2.0
45.4
(1,724.4)
32.5
5.4
(0.6)
42.8
(1,787.6)
32.5
5.4
(0.6)
42.8
(1,867.8)
Basis for determining fair value
The following summarises the significant methods and assumptions used in estimating the fair values of financial
instruments reflected in the table above.
i.
Investments in equity securities
The fair value of equity instruments is based on the quoted bid price at the reporting date.
ii. 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 commodity contracts is based on their listed market price as quoted on the NYMEX, if available, and,
if a listed market price is not available, then fair value is estimated by discounting the difference between the
contractual price and current market price.
The fair value of interest rate contracts is calculated as the present value of the estimated future cashflows.
iii. Trade and other receivables & Trade and other payables
The fair value of trade and other receivables, and trade and other payables, is estimated as the present value of
future cash flows, discounted at the market rate of interest at the reporting date.
iv. Financial liabilities designated at Fair value through the Income Statement
The fair value is based on the present value of future principal and interest cash flows, discounted at the market rate
of interest at the reporting date.
Incitec Pivot Limited Annual Report 2012
92
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
32. Financial instruments (continued)
(f) Fair values (continued)
Method of discounting
In calculating the fair values of financial instruments the present value of all cash flows greater than 1 year
are discounted.
Fair Value Hierarchy
The table below analyses financial instruments carried at fair value by valuation method. The different levels have been
defined as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
30 September 2012
Listed equity securities
Derivative financial assets
Total
Derivative financial liabilities
Total
30 September 2011
Listed equity securities
Derivative financial assets
Total
Derivative financial liabilities
Total
Level 1
$mill
3.6
-
3.6
-
-
Level 1
$mill
10.1
-
10.1
-
-
Level 2
$mill
-
78.1
78.1
14.8
14.8
Level 2
$mill
-
83.6
83.6
3.5
3.5
Level 3
$mill
-
-
-
-
-
Level 3
$mill
-
-
-
-
-
93
Incitec Pivot Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
33. Related party disclosures
Subsidiaries
Interest in subsidiaries is set out in Note 36.
Jointly controlled entities
Interest in jointly controlled entities is set out in Note 16.
Key management personnel
Disclosures relating to key management personnel are set out in Note 34.
Transactions between Subsidiaries of the Group and Jointly controlled entities are as follows:
Sales of goods / services
Purchase of goods / services
Management fees / royalties
Interest income
Interest expense
Dividend income
Jointly controlled entities (1)
Notes
(4)
(4)
(5)
(16)
2012
$mill
238.6
(28.1)
21.5
1.4
(0.2)
6.8
2011
$mill
191.5
(44.1)
20.7
0.8
(0.1)
8.6
(1) Jointly controlled entities transactions represent amounts which do not eliminate on consolidation.
Outstanding balances arising from sales/purchases of goods and services with jointly controlled entities are on normal
current terms and are as follows:
Amounts owing to related parties
Amounts owing from related parties
Transactions between Jointly controlled entities
Jointly controlled entities
Notes
(20)
(11)
2012
$mill
5.4
25.7
2011
$mill
4.6
42.0
There were no transactions during the year between jointly controlled entities and there are no outstanding balances
between jointly controlled entities of the IPL Group as at 30 September 2012 (2011: nil).
Incitec Pivot Limited Annual Report 2012
94
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
34. Key management personnel disclosures
(a) Key management personnel
Short-term employee benefits
Post-employment benefits
Other long-term benefits
Termination benefits
Share-based payments
Consolidated
2012
$000
9,651
300
342
1,365
3,955
15,613
2011
$000
15,275
272
285
-
2,919
18,751
Determination of key management personnel and detailed remuneration disclosures are provided in the
Remuneration Report.
(b) Loans to key management personnel
In the year ended 30 September 2012, there were no loans to key management personnel and their related parties
(2011: nil).
(c) Other key management personnel transactions
ASSB 124.3
KPMG report- pg 257
The following transactions, entered into during the year and prior year with key management personnel, were on terms
and conditions no more favourable than those available to other customers, suppliers and employees:
(1) The spouse of Mr Fazzino, the Managing Director & Chief Executive Officer, is a partner in the accountancy and tax
firm PricewaterhouseCoopers from which the Group purchased services of $3,860,872 during the year (2011:
$1,368,886). Mr Fazzino‟s spouse does not directly provide these services.
(2) During the year ended 30 September 2012, a related party of Mr Smorgon provided printing services to the value of
$11,245 (2011: $nil) to the Company. The balance owing by the Company at 30 September 2012 was $nil (2011:
$nil).
95
Incitec Pivot Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
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 number 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:
Non-executive directors - Current
P Brasher
A D McCallum
J Marlay
A C Larkin
G Smorgon
R J McGrath (1)
Non-executive directors - Former
J C Watson
Executive directors - Current
J E Fazzino
Executives - Current
F Micallef
K J Gleeson
J Rintel
B C Walsh
J Whiteside
S Dawson
D McAtee (1)
S Atkinson
Executives - Former
G Brinkworth
B Wallace
Year
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
Number of Shares (A)
Opening
balance
Shares
acquired
Shares
disposed (B)
Closing balance
20,600
- 20,600
- - 20,600
- 20,600
216,501
216,501
- - 216,501
- - 216,501
37,926
37,926
- - 37,926
- - 37,926
5,000
5,000
- - 5,000
- - 5,000
-
-
- - -
- - -
400 6,600
400
- 7,000
- - 400
100,000
100,000
- - 100,000
- - 100,000
1,708,180
1,845,420
- - 1,708,180
1,708,180
-
(137,240)
- 3,241
2,891
(86,680)
- - -
-
-
(22,520)
-
22,520
2,891 350
89,313 258
-
117,120
100,360
429,380
58,500
300,920
23,867
23,857 10
-
-
3,380
22,880
(117,120)
- - -
-
-
- - 100,360
-
100,360
- - 58,500
-
58,500
- - 23,867
- 23,867
(329,020)
(242,420)
- - -
- - -
- - 3,380
3,380
-
(19,500)
550
292 258
-
57,480
- - 550
- 550
- - -
-
-
(57,480)
(A)
(B)
(1)
Includes fully paid ordinary shares, 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 C of the Remuneration Report and the
movements disclosed in this Note. Details of the ESOP are set out in Note 35, Share based payments.
In the case of directors or executives who ceased their directorship or employment during the years ended 30 September 2012
and 30 September 2011, all shares were treated as disposed as at the relevant date of cessation unless otherwise stated. In
addition for certain executives shown to be disposing of shares, some of these shares were held by those executives under the
Long Term Incentive Plan 2007/10 (LTI 2007/10), and were forfeited in accordance with the rules of the Plan as the performance
conditions were not met. Refer to Note 34 (d) (2).
The opening balance represents shares held as at the date of becoming a key management person. Movements are from
this date.
Incitec Pivot Limited Annual Report 2012
96
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
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:
Executive directors - Current
J E Fazzino
Executives - Current
F Micallef
K J Gleeson
J Rintel
B C Walsh
J D Whiteside
S Dawson
D McAtee
S Atkinson
Executives - Former
G Brinkworth
B Wallace
Year
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
Number of Shares (treated as options) (A)
Opening
balance
Granted as
compensation
Exercised
Forfeited (B)
Closing balance
-
137,240
- -
- -
- -
-
(137,240)
-
22,520
-
86,680
-
15,160
-
96,320
-
67,420
-
-
-
-
-
19,500
- -
- -
- -
- -
- -
- -
- -
- -
- -
- -
- -
- -
- -
- -
- -
- -
(86,680)
(22,520)
(15,160)
(96,320)
- -
-
- -
-
- -
-
- -
-
- -
-
- -
- -
- -
- -
- -
-
(67,420)
(19,500)
-
-
-
33,280
- -
- -
- -
- -
- -
- -
- -
-
(33,280)
(A) These shares, treated as options, were held by the Executive under the LTI 2007/10 which was a loan-backed plan whereby Incitec
Pivot Plan Company Pty Limited provided executives with limited recourse loans which were applied to acquire shares on market.
At the end of the performance period, as the performance conditions were not met, no awards (in the form of loan forgiveness) were
granted under this Plan and the shares were forfeited and sold on market with the proceeds applied to the outstanding loan amount.
(B) Represents shares, treated as options, that were forfeited by the Executive and sold on market, in accordance with the rules of the
LTI 2007/10.
97
Incitec Pivot Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
34. Key management personnel disclosures (continued)
(d) Movements in shareholdings of directors and executives (continued)
(3) Movements in rights over equity instruments in the Company
The movement during the reporting period in the number of rights over shares in the Company, held directly, indirectly or
beneficially, by each key management person, including their related parties, is as follows:
Executive directors
- Current
J E Fazzino
Executives
- Current
F Micallef
K J Gleeson
J Rintel
B C Walsh
J D Whiteside
S Dawson
D McAtee (1)
S Atkinson
- Former
G Brinkworth
B Wallace
Number of Rights (A)
Year
Opening
balance
Granted as
compensation (B)
Exercised
Forfeited (C)
Closing balance
2012
2011
1,111,364 590,625
822,482 511,364
-
-
(600,000)
(222,482)
1,101,989
1,111,364
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
-
370,000 194,444
-
266,838 150,000
-
333,000 155,925
-
326,806 135,000
-
270,948 127,575
-
221,967 130,948
-
363,273 170,100
-
356,515 147,273
-
272,455 162,037
-
267,386 110,455
-
187,515 162,037
-
135,071 108,182
- 12,997
-
- - -
-
-
163,878 109,200
116,171 94,545
(220,000)
(46,838)
(198,000)
(128,806)
(140,000)
(81,967)
(216,000)
(140,515)
(162,000)
(105,386)
(79,333)
(55,738)
344,444
370,000
290,925
333,000
258,523
270,948
317,373
363,273
272,492
272,455
270,219
187,515
- 12,997
- -
(69,333)
(46,838)
203,745
163,878
250,455 162,037
238,361 110,455
292,022 166,368
281,478 111,528
-
-
-
-
(215,467)
(98,361)
(170,957)
(100,984)
197,025
250,455
287,433
292,022
(A) Further details of these rights have been disclosed in section C of the Remuneration Report and relate to rights allocated under the
LTI plans.
(B) Represents rights which were acquired during the year by the executive director and executives while a director or executive of the
Group pursuant to the Long Term Incentive Performance Rights Plan 2011/14 (LTI 2011/14), details of which are set out in section
C of the Remuneration Report.
(C) Represents rights that were forfeited under the Long Term Incentive Performance Rights Plan 2009/12 (LTI 2009/12). Refer to
section C of the Remuneration Report for further details. In the case of executives who ceased their employment during the year, all
rights held by those executives in the LTI 2009/12 were forfeited as at the relevant date of cessation. In addition, a proportion of
their rights under the Long Term Incentive Performance Rights Plan 2010/13 (LTI 2010/13) and LTI 2011/14 were forfeited as at the
relevant date of cessation in accordance with the relevant plan rules.
(1) The opening balance in the current year represents rights held as at the date of becoming a key management person. Movements
are from this date.
Incitec Pivot Limited Annual Report 2012
98
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
35. Share based payments
(a) Long Term Incentive Plans (LTIs)
The LTIs are designed to link reward with the key performance drivers which underpin sustainable growth in shareholder
value – which comprises EPS, share price growth and returns to shareholders. The arrangements also support the
Company‟s strategy for retention and motivation of its executives and senior employees.
Long Term Incentive Performance Rights Plans
During the year, the Company established the Long Term Incentive Performance Rights Plan 2011/14 (LTI 2011/14). The
performance period for this plan is 1 October 2011 to 30 September 2014.
The LTI 2011/14 has the same features as the Long Term Incentive Performance Rights Plan 2010/13 (LTI 2010/13).
Details of these plans are summarised as follows:
Performance rights: A performance right entitles the participant to be transferred a fully paid ordinary share in the
Company for no consideration at a later date subject to the satisfaction of certain conditions. As no share is issued until
exercise, performance rights have no dividend entitlement.
Allocation: The decision to grant performance rights and to whom they will be granted is made annually by the Board.
Grants of performance rights to participants are based on a percentage of the relevant participant‟s fixed annual
remuneration. A grant of performance rights to the Executive Director is subject to shareholder approval.
Conditions: The performance rights only vest if certain conditions are met, which are approved by the Board on
commencement of the Plan. The conditions focus on the performance of the Company and include a condition relating
to duration of employment. The performance conditions are based on the relative Total Shareholder Returns of the
Company and Earnings Per Share (before IMIs):
Total Shareholder Return (TSR) Measure: The TSR Measure requires growth in the Company’s total shareholder
returns to be at or above the median of the companies in the comparator group, being the S&P/ASX 100. If, at the end
of the performance period, the Company’s TSR over the three year performance period is:
-
-
-
below the 50th percentile of the comparator group of companies ranked by their TSR performance: no
performance rights in this tranche will vest;
between the 50th and 75th percentile of the comparator group of companies ranked by their TSR performance:
the portion of performance rights in this tranche that will vest will be increased on a pro rata basis from
50 percent to 100 percent (assuming 50 percent vest at the 50th percentile); and
equal to or above the 75th percentile of the comparator group of companies ranked by their TSR
performance: all performance rights in this tranche will vest; and
Earnings Per Share (EPS) Measure: If, at the end of the performance period, the compound annual growth rate on
EPS (before IMIs) over the performance period, from the base year, is:
-
-
-
below 7 percent per annum: no performance rights in this tranche will vest;
equal to or greater than 7 percent per annum but less than 15 percent per annum: the portion of performance
rights in this tranche that will vest will be increased on a pro rata basis between 50 percent and 100 percent;
and
15 percent or greater: all performance rights in this tranche will vest.
These performance conditions are equally weighted.
Lapse: Performance rights will lapse if the performance conditions are not satisfied during the performance period or,
in certain circumstances, if a participant ceases to be employed by the Group during the performance period.
Performance rights will also lapse if a participant serves a notice that he or she wishes the rights to lapse.
Long Term Incentive Performance Cash Plans
Certain employees and executives based in some jurisdictions, participate in long term incentive performance cash plans
which are operated by the Group, through its offshore entities. The Long Term Incentive Performance Cash Plan 2011/14
and Long Term Incentive Performance Cash Plan 2010/13 are designed to deliver a similar benefit to executives and
employees on achievement of sustained performance over the relevant three year performance period, and with similar
conditions as the Long Term Incentive Performance Rights Plans. Cash payments to employees upon vesting of the plan
will be determined with reference to the Company‟s share price at the end of the performance period.
99
Incitec Pivot Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
35. Share based payments (continued)
(a) Long Term Incentive Plans (LTIs) (continued)
Long Term Incentive Performance Rights Plans – LTI 2008/11 and LTI 2009/12
The LTI 2008/11 and the LTI 2009/12 are similar to the LTI 2011/14 and LTI 2010/13 in that each of the plans is a
performance rights plan with three year performance periods. Similarly the conditions focus on the performance of the
Company and include a condition relating to duration of employment. However, under the LTI 2008/11 and the LTI
2009/12, the performance condition is based on the Company‟s Total Shareholder Return (Absolute 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, assuming the dividends are reinvested in the Company‟s shares.
If, at the end of the relevant performance period Absolute TSR:
-
-
-
is equal to or less than 10 percent per annum compounded over the performance period, none of the
performance rights will vest;
is greater than 10 percent and less than 20 percent per annum compounded over the performance
period, an increasing proportion of the performance rights will vest from zero on a straight line
basis; and
is 20 percent or more per annum compounded over the performance period, all of the performance
rights will vest.
Long Term Incentive Performance Cash Plans - LTI 2008/11 and LTI 2009/12
Certain employees and executives based in some jurisdictions, participate in Long Term Incentive Performance Cash
Plans which are operated by the Group, through its offshore entities. The Long Term Incentive Performance Cash Plan
2008/11 and Long Term Incentive Performance Cash Plan 2009/12 are designed to deliver a similar benefit to executives
and employees on achievement of sustained performance over the relevant three year performance period, and with
similar conditions as the Long Term Incentive Performance Rights Plans, LTI 2008/11 and LTI 2009/12, however the plans
are settled in cash. Cash payments to employees upon vesting of the plan will be determined with reference to the
Company‟s share price at the end of the performance period.
Incitec Pivot Limited Annual Report 2012
100
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
35. Share based payments (continued)
(a) Long Term Incentive Plans (LTIs) (continued)
Consolidated - 2012
Grant date
Expiry date
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
Vested and
exerciseable at
the end of the
year
Number
Number
Number
Number
Number
Number
Performance Rights
LTI Rights - 2008/11
LTI Cash - 2008/11
LTI Rights - 2009/12
LTI Cash - 2009/12
LTI Rights - 2010/13 - TSR
LTI Rights - 2010/13 - EPS
LTI Cash - 2010/13 - TSR
19 Dec 08
30 Sep 11
19 Dec 08
30 Sep 11
16 Dec 09
16 Dec 09
23 Dec 10
23 Dec 10
23 Dec 10
30 Sep 12
30 Sep 12
30 Sep 13
30 Sep 13
30 Sep 13
LTI Cash - 2010/13 - EPS
23 Dec 10
30 Sep 13
LTI Rights - 2011/14 - TSR
02 Feb 12
30 Sep 14
LTI Rights - 2011/14 - EPS
02 Feb 12
30 Sep 14
LTI Cash - 2011/14 - TSR
02 Feb 12
30 Sep 14
LTI Cash - 2011/14 - EPS
02 Feb 12
30 Sep 14
Total - Performance rights
Weighted average fair value
Fair Value
$0.30
$1.60
$1.60
$1.60
$2.77
$3.76
$2.77
$3.76
$1.72
$2.90
$1.72
$2.90
2,041,620
839,023
5,134,598
234,041
2,257,049
2,257,049
59,177
59,177
-
-
-
-
-
-
24,364
24,364
-
-
-
-
2,767,069
2,767,069
133,135
133,135
12,881,734
5,849,136
$1.17
$2.32
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(2,041,620)
(839,023)
(5,134,598)
(234,041)
(124,760)
(124,760)
(4,540)
(4,540)
(140,702)
(140,702)
(25,654)
(25,654)
(8,840,594)
$0.18
-
-
-
-
2,132,289
2,132,289
79,001
79,001
2,626,367
2,626,367
107,481
107,481
9,890,276
$2.74
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Consolidated - 2011
Grant date
Expiry date
Performance Rights
LTI Rights - 2008/11
LTI Cash - 2008/11
LTI Rights - 2009/12
LTI Cash - 2009/12
LTI Rights - 2010/13 - TSR
LTI Rights - 2010/13 - EPS
LTI Cash - 2010/13 - TSR
LTI Cash - 2010/13 - EPS
Total - Performance rights
Weighted average fair value
19 Dec 08
19 Dec 08
16 Dec 09
16 Dec 09
23 Dec 10
23 Dec 10
23 Dec 10
23 Dec 10
30 Sep 11
30 Sep 11
30 Sep 12
30 Sep 12
30 Sep 13
30 Sep 13
30 Sep 13
30 Sep 13
Fair Value
$0.30
$1.60
$1.60
$1.60
$2.77
$3.76
$2.77
$3.76
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
Vested and
exerciseable at
the end of the
year
Number
Number
Number
Number
Number
Number
2,125,262
933,435
5,315,104
312,039
-
-
-
-
-
-
-
-
2,338,002
2,338,002
85,635
85,635
8,685,840
4,847,274
$1.04
$3.27
-
-
-
-
-
-
-
-
-
-
(83,642)
(94,412)
(180,506)
(77,998)
(80,953)
(80,953)
(26,458)
(26,458)
(651,380)
$1.71
2,041,620
839,023
5,134,598
234,041
2,257,049
2,257,049
59,177
59,177
12,881,734
$1.84
-
-
-
-
-
-
-
-
-
-
101
Incitec Pivot Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
35. Share based payments (continued)
(a) Long Term Incentive Plans (LTIs) (continued)
The weighted average remaining contractual life of shares treated as options and rights outstanding at the end of the
period was 1.03 years (2011 – 1.14 years).
Fair value of performance rights granted
LTI– 2011/14
In respect of the LTI 2011/14, the assessed fair values at grant date of the rights granted during the year for both the TSR
measure and the EPS measure are shown in the table below. The fair value at grant date is independently determined
using an adjusted form of the Black-Scholes option pricing model that takes into account the exercise price, the life of the
performance right, 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 performance rights.
The model inputs for these performance rights granted during the year ended 30 September 2012 included:
Performance rights were granted at $nil per right, have a three year life, and vest after the performance hurdles
are met for the period 1 October 2011 to 30 September 2014.
Grant date
Share price (at grant date)
Exercise price
Expected price volatility of the Company‟s shares
Vesting date
Expected dividends
Risk-free interest rate (based on Australian Government bonds)
with approximately three years to maturity (as at 2 February 2012)
Fair value at grant date: LTI 2011/14 - TSR
Fair value at grant date: LTI 2011/14 - EPS
2 February 2012
$3.14
$nil
35% pa
30 September 2014
3.0% pa
3.21% pa
LTI 2011/14
$1.72
$2.90
Incitec Pivot Limited Annual Report 2012
102
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
35. Share based payments (continued)
(b) 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 generally made annually to eligible employees on the following basis:
shares acquired are either newly issued shares or existing shares acquired on market.
employees are each entitled to acquire shares with a 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.
Grant date
Date shares become
unrestricted
6-Nov-09
9-Sep-10
1-Jul-11
2-Jul-12
6-Nov-12
9-Sep-13
1-Jul-14
2-Jul-15
Number of participants as at
Number of restricted shares held as at
30-Sep-12
334
30-Sep-11
387
405
431
602
462
481
-
30-Sep-12
131,475
123,589
115,903
210,783
30-Sep-11
140,520
132,933
122,868
-
These shares rank equally with all other fully paid ordinary shares from the date acquired by the employee and are eligible
for dividends.
(c) 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, and rights issued under the LTI
performance plans
Consolidated
2012
$’000
2011
$‟000
10,431
7,742
Total carrying amount of liabilities for cash settled arrangements
420
254
103
Incitec Pivot Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
36. Investments in controlled entities
Name of Entity
Company
Incitec Pivot Limited (1)
Controlled Entities - operating
Incitec Fertilizers Limited (1)
(1)
TOP Australia Ltd
Southern Cross Fertilisers Pty Ltd (1)
Southern Cross International Pty Ltd
(1)
Incitec Pivot LTI Plan Company Pty Limited
Incitec Pivot Holdings (Hong Kong) Limited
Incitec Pivot Explosives Holdings Pty Limited (1)
TinLinhe Nitrogen Limited
Quantum Fertilisers Limited
Coltivi Insurance Pte Limited
Queensland Operations Pty Limited
(1)
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
Incitec Pivot Finance Australia Pty Ltd
(1)
Dyno Nobel Pty Limited
Dyno Nobel Australia LLC
Prime Manufacturing Ltd
The Dyno Nobel SPS LLC
Dyno Nobel Europe Pty Ltd
Dyno Nobel Management Pty Limited
Industrial Investments Australia Finance Pty Limited
Dyno Nobel Holdings IV LLC
Dyno Nobel Holdings USA III, Inc.
Dyno Nobel Holdings USA II
Dyno Nobel Holdings USA II, Inc.
Dyno Nobel Holdings USA, Inc.
(1) Party to deed of cross guarantee dated 30 September 2008.
Ownership
Interest
Country of
incorporation
Australia
Australia
Australia
Australia
Australia
Australia
Hong Kong
Australia
Hong Kong
Hong Kong
Singapore
Australia
Australia
Australia
USA
Australia
USA
USA
Australia
Australia
USA
New Zealand
USA
Australia
Australia
Australia
USA
USA
USA
USA
USA
100%
100%
100%
100%
100%
100%
100%
100%
65%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
75%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Incitec Pivot Limited Annual Report 2012
104
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
36. Investments in controlled entities (continued)
Ownership
Interest
Country of
incorporation
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
99%
100%
100%
100%
100%
100%
84%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
USA
USA
USA
USA
USA
USA
USA
Chile
USA
USA
Peru
Mexico
Canada
Canada
Canada
Canada
Canada
Canada
Australia
Australia
Australia
PNG
Australia
Australia
Indonesia
Turkey
Romania
Albania
USA
USA
Name of Entity
Dyno Nobel Inc.
Dyno Nobel Transportation, Inc.
Independent Explosives Co. of Penna.
IR, Inc.
Simsbury Hopmeadow Street LLC
Tech Real Estate Holdings LLC
Tradestar Corporation
Dyno Nobel Explosivos Chile Limitada
CMMPM, LLC
CMMPM Holdings, L.P.
Dyno Nobel Peru S.A.
Dyno Nobel Mexico, S.A. de C.V.
Dyno Nobel Canada Inc.
Dyno Nobel Transportation Canada Inc.
Dyno Nobel Nunavut Inc.
Incitec Pivot Finance Canada Inc.
Polar Explosives 2000 Inc.
Polar Explosives Ltd
Dyno Nobel Asia Pacific Pty Limited (1)
Dampier Nitrogen Pty Ltd
DNX Australia Pty Ltd (1)
DNX Papua New Guinea Ltd
Dyno Nobel Moranbah Pty Ltd (1)
Dyno Nobel Moura Pty Limited (1)
PT DNX Indonesia
Nitromak DNX Kimya Sanayii A.S.
SC Romnitro Explosives Srl.
DNX Nitro Industria Kimike Sh.p.k
Pepin-IRECO, Inc.
Dyno Nobel Louisiana Ammonia, LLC
(1) Party to deed of cross guarantee dated 30 September 2008.
105
Incitec Pivot Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
37. Deed of Cross Guarantee
Closed Group
2012
2011
$mill
$mill
Statement of Financial Position
Current assets
Cash and cash equivalents
Trade and other receivables
Other financial assets
Inventories
Assets classified as held for sale
Other assets
Total current assets
Non-current assets
Trade and other receivables
Other financial assets
Investments accounted for using the equity method
Property, plant and equipment
Intangible assets
Deferred tax assets
Other assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Interest bearing liabilities
Provisions
Other financial liabilities
Current tax liabilities
Total current liabilities
Non-current liabilities
Trade and other payables
Interest bearing liabilities
Other financial liabilities
Retirement benefit obligation
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
Income Statement
Profit / (loss) before income tax
Income tax benefit / (expense)
Profit for the financial year
Retained profits at the beginning of the financial year
Other movements in retained earnings
Dividend paid
Retained profits at the end of the financial year
83.2
186.7
32.2
308.0
0.1
20.6
630.8
7.5
4,165.6
129.0
2,083.2
300.9
114.2
-
6,800.4
7,431.2
630.3
104.1
87.1
14.8
24.5
860.8
452.0
519.9
-
10.7
230.6
49.3
1,262.5
2,123.3
5,307.9
3,265.9
903.0
1,139.0
5,307.9
625.9
(159.2)
466.7
891.8
(32.2)
(187.3)
1,139.0
290.2
236.0
40.8
351.2
0.3
8.6
927.1
123.7
4,059.3
138.7
1,630.6
282.6
140.4
13.0
6,388.3
7,315.4
574.0
80.8
63.1
0.6
49.4
767.9
719.1
637.7
2.9
6.9
108.8
43.5
1,518.9
2,286.8
5,028.6
3,265.9
870.9
891.8
5,028.6
574.5
(149.6)
424.9
471.9
146.4
(151.4)
891.8
Entities which are party to a Deed of Cross Guarantee dated 30 September 2008, entered into in accordance with
ASIC Class Order 98/1418 (as amended), are disclosed in Note 36, Investments in controlled entities. Statement of
Financial Position and Income Statement for this closed group are shown above. During the year Incitec Pivot
Investments 1 Pty Ltd was added to the Deed of Cross Guarantee.
Incitec Pivot Limited Annual Report 2012
106
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
38. Parent entity disclosure
As at, and throughout, the financial year ended 30 September 2012 the parent company of the Group was Incitec Pivot
Limited.
Parent entity guarantees in respect of debts of its subsidiaries
As at 30 September 2012 the Company‟s current liabilities exceeded its current assets by $550.0m. The parent entity is
part of a Deed of Cross Guarantee with the effect that the Group guarantees debts in respect of all members within the
Group. The Group‟s forecasted cash flows for the next 12 months indicate that it will be able to meet current liabilities as
and when they fall due. In addition the Group has undrawn financing facilities of $900m at 30 September 2012 and a cash
balance of $154.1m.
Further details of the Deed of Cross Guarantee and the subsidiaries subject to the deed, are disclosed in Note 37.
Results of the parent entity
Profit for the period
Other comprehensive income
Total comprehensive Income for the period
Financial position of the parent entity at year end
Current assets
Total assets
Current liabilities
Total liabilities
Net Assets
Total equity of the parent entity comprises
Share capital
Cash flow hedging reserve
Foreign currency translation reserve
Fair value reserve
Retained earnings
Total Equity
Parent entity contingencies
Company
2012
$mill
90.8
42.2
133.0
484.8
6,387.1
1,034.8
2,751.1
3,636.0
3,265.9
11.8
46.4
(9.6)
321.5
3,636.0
2011
$mill
259.0
(90.0)
169.0
797.8
6,259.2
974.0
2,576.6
3,682.6
3,265.9
3.0
4.7
(4.3)
413.3
3,682.6
The directors are of the opinion that Incitec Pivot Limited does not have any contingent liabilities that would require
disclosure at 30 September 2012.
Parent entity capital commitments for acquisition of property, plant and equipment
Plant and equipment
Contracted but not yet provided for and payable:
Within one year
Company
2012
$mill
2011
$mill
1.5
3.1
107
Incitec Pivot Limited Annual Report 2012
Notes to the Consolidated Financial Statements
For the year ended 30 September 2012
For the year ended 30 September 2012
39. Events subsequent to reporting date
Dividends
Since the end of the financial year, in November 2012, the directors have determined to pay a final dividend of 9.1 cents
per share on 14 December 2012. This dividend is 75 percent franked at the 30 percent corporate tax rate.
Other
On 12 November 2012, the Company announced on the ASX that, as a result of a failure in the Waste Heat Boiler at its
sulphuric acid plant at Mount Isa, Queensland, the plant had been taken offline for up to one month to allow for repairs to
be undertaken. The outage will result in reduced production of ammonium phosphates at the Company's Phosphate Hill
plant with volumes expected to be reduced to 900,000 tonnes for the financial year to 30 September 2013. If offline for a
month, the financial impact is estimated to be in the region of $25 million before tax.
Other than the matters reported on above, the directors have not become aware of any other significant matter or
circumstance that has arisen since the end of the financial year, that has affected or may affect the operations of the
Group, the result of those operations, or the state of affairs of the Group in subsequent years, which has not been covered
in this report.
Incitec Pivot Limited Annual Report 2012
108
Directors’ Declaration
on the Financial Statements set out on pages 39 to 108
I, Paul Brasher, 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 39 to 108, and the remuneration
disclosures that are contained in the Remuneration Report on pages 9 to 26 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 Group as
at 30 September 2012 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.
3.
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).
The directors have been given the declaration by the Chief Executive Officer and the Chief
Financial Officer as required by section 295A of the Corporations Act 2001 for the financial year
ended 30 September 2012.
Paul Brasher
Chairman
Dated at Melbourne this 12th day of November 2012
109
Incitec Pivot Limited Annual Report 2012
109
Incitec Pivot Limited Annual Report 2012
110
111
Incitec Pivot Limited Annual Report 2012
Shareholder Statistics
As at 12 November 2012
As at 12 November 2012
Distribution of ordinary shareholder and shareholdings
Number of
holders
Size of holding
Percentage
shares Percentage
Number of
–
–
–
–
–
1
1,001
5,001
10,001
50,001
100,001 and over
Total
1,000
5,000
10,000
50,000
100,000
12,917
31,755
10,285
7,487
318
203
62,965
20.51%
50.43%
16.33%
11.89%
0.51%
0.33%
6,369,431
92,759,636
75,615,562
140,310,673
22,039,490
1,291,635,318
100.00% 1,628,730,110
0.39%
5.70%
4.64%
8.61%
1.35%
79.31%
100.00%
Included in the above total are 2,431 shareholders holding less than a marketable parcel of shares.
The holdings of the 20 largest holders of fully paid ordinary shares represent 74.85% 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
J P Morgan Nominees Australia Limited
Citicorp Nominees Pty Limited
BNP Paribas Noms Pty Ltd
AMP Life Limited
Australian Foundation Investment Company Limited
BNP Paribas Noms Pty Ltd
BNP Paribas Noms Pty Ltd
HSBC Custody Nominees (Australia) Limited - GSCO ECA
UBS Wealth Management Australia Nominees Pty Ltd
HSBC Custody Nominees (Australia) Limited
QIC Limited
UBS Nominees Pty Ltd
RBC Investor Services Australia Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited - A/C 2
ARGO Investments Limited
INVA Custodian Pty Limited
Total
Substantial shareholders
The following parties have declared a relevant interest in the number of voting shares
at the date of giving the notice under Part 6C.1 of the Corporations Act.
Number of
shares Percentage
26.05%
14.59%
11.81%
6.95%
3.16%
2.45%
1.70%
1.47%
1.30%
0.87%
0.86%
0.60%
0.55%
0.52%
0.48%
0.39%
0.33%
0.31%
0.24%
0.23%
74.85%
424,219,002
237,709,873
192,317,830
113,202,154
51,478,216
39,899,639
27,611,653
23,876,351
21,209,411
14,202,859
14,032,445
9,810,107
8,992,844
8,413,441
7,738,572
6,317,500
5,410,877
5,033,555
3,895,530
3,672,475
1,219,044,334
Name
Commonwealth Bank of Australia
Schroder Investment Management Australia Limited
Votes / Number of Shares
117,088,006
85,454,643
On-market buy-back
There is no current on-market buy-back.
Incitec Pivot Limited Annual Report 2012
112
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 individually material items)
Earnings before net borrowing costs, individually material
items and tax (EBIT)
Net borrowing costs (excluding individually material items)
Individually material items before tax
Taxation revenue / (expense)
Operating profit / (loss) after tax and individually material items
Operating profit / (loss) after tax and individually material
items attributable to minority interest
Operating profit / (loss) after tax and individually material
items attributable to shareholders of Incitec Pivot Limited
Individually material items after tax
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
2012
$mill
3,500.9
2011(2)
$mill
3,545.3
2010
$mill
2,931.7
2009
$mill
3,418.9
2008
$mill
2,918.2
754.9
920.3
787.3
743.0
1,025.6
(155.8)
(148.2)
(139.0)
(167.3)
599.1
(55.5)
168.1
(203.7)
508.0
772.1
(58.2)
(92.5)
(154.1)
467.3
648.3
(53.0)
(55.4)
(127.7)
412.2
575.7
(107.6)
(782.7)
93.2
(221.4)
(70.3)
955.3
(80.6)
(38.2)
(231.9)
604.6
(2.7)
4.1
1.7
-
-
510.7
463.2
410.5
(221.4)
604.6
106.0
404.7
187.3
1,020.5
2,738.5
292.8
2,845.2
116.4
7,013.4
969.4
122.8
1,815.3
74.5
2,982.0
4,031.4
4,029.1
2.3
4,031.4
(66.9)
530.1
151.4
1,388.0
2,283.3
257.1
2,942.3
131.2
7,001.9
1,064.9
98.3
2,068.2
63.8
3,295.2
3,706.7
3,701.7
5.0
3,706.7
(32.3)
442.8
66.4
979.3
1,844.1
256.5
3,010.0
220.4
6,310.3
832.8
82.6
1,701.0
82.6
2,699.0
3,611.3
3,609.2
2.1
3,611.3
(569.2)
347.8
271.0
1,033.9
1,663.4
254.0
3,153.0
485.4
6,589.7
1,081.8
93.4
1,987.4
87.5
3,250.1
3,339.6
3,339.6
-
3,339.6
(42.9)
647.5
219.3
1,867.0
1,670.6
311.2
3,962.1
374.5
8,185.4
3,612.3
88.6
1,238.4
90.8
5,030.1
3,155.3
3,155.3
-
3,155.3
Equity attributable to minority interests
Total shareholders’ equity
Ordinary Shares (1)
Number of shares on issue at year end (1)
Weighted average number of shares on
issue(investor and ordinary) (1)
Earnings / (losses) per share (1)
before individually material items
including individually material items
Dividends (declared)
Dividends (paid)
Dividend franking
Share price range –
High
Low
Year end
Stockmarket capitalisation at year end
Net tangible assets per share
Profit margin (earnings before net borrowing costs and tax/sales)
Net debt
Gearing (net debt/net debt plus equity)
Interest cover (earnings before net borrowing costs and tax/net
borrowing costs)
Net capital expenditure on plant and equipment (cash flow)
Net capital expenditure on acquisitions/(disposals) (cash flow)
Return on average shareholders funds
before individually material items
including individually material items
thousands
1,628,730 1,628,730 1,628,730
1,612,536 1,217,231
thousands
1,628,730 1,628,730 1,628,730
1,612,536 1,217,231
thousands
1,628,730 1,628,730 1,623,134
1,541,925 1,069,507
cents
cents
cents
cents
%
$mill
$
%
$mill
%
times
$mill
$mill
%
%
24.8
31.4
12.4
11.5
68
$3.68
$2.62
$2.98
4,853.6
0.73
17.1
1,286.9
24.2
10.8
616.6
35.1
10.5
13.1
32.5
28.4
11.5
9.3
-
$4.66
$2.99
$3.27
5,325.9
0.47
21.8
1,188.8
24.3
13.3
610.4
(1.5)
14.5
12.8
27.3
25.3
7.8
4.1
-
$3.78
$2.51
$3.59
5,847.1
0.37
22.1
1,097.1
23.3
12.2
297.3
103.7
12.7
11.9
22.6
(14.4)
4.4
21.6
48
$5.18
$1.74
$2.83
4,563.5
0.12
16.8
1,463.4
30.5
5.4
340.5
2.0
10.7
(6.8)
60.5
56.5
29.7
21.8
100
$9.99
$4.11
$5.07
6,171.4
(0.66)
32.7
2,030.3
39.2
11.9
217.6
586.4
35.1
32.8
(1) The number of shares have been restated as a result of the 20:1 share split as approved by shareholders in September 2008.
(2) Comparative information has been restated to reflect changes made in the financial statements.
113
Incitec Pivot Limited Annual Report 2012
Shareholder Information
Annual General Meeting
2.00 pm (Melbourne time) Tuesday 18 December 2012
The Auditorium,
Level 2, Melbourne Exhibition Centre,
2 Clarendon Street,
Southbank Victoria,
Australia
Securities Exchange Listing
Incitec Pivot Limited’s shares are listed on the
Australian Securities Exchange (ASX) and
are traded under the ASX code IPL
Share Registry
Link Market Services Limited
Level 12, 680 George Street,
Sydney New South Wales 2000,
Australia
Locked Bag A14,
Sydney South New South Wales 1235,
Australia
Telephone: 1300 303 780
(for callers within Australia)
International: +61 2 8280 7765
General Facsimile: +61 2 9287 0303
Proxy Facsimile: +61 2 9287 0309
Email: registrars@linkmarketservices.com.au
Website: www.linkmarketservices.com.au
Auditor
Deloitte Touche Tohmatsu
550 Bourke Street,
Melbourne Victoria 3000,
Australia
Incitec Pivot Limited
Registered address and head office:
Level 8, 28 Freshwater Place,
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
Incitec Pivot Limited
ABN 42 004 080 264
Level 8, 28 Freshwater Place,
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
This publication has been printed in Australia by an ISO 14001 environmental management system (EMS) and ISO 9001 quality
management system (QMS) certified printer using vegetable based inks and a 100% alcohol free printing process. It is manufactured
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