ANNUAL REPORT
2020
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Incitec Pivot Limited
ABN 42 004 080 264
Level 8, 28 Freshwater Place
Southbank, Victoria, Australia, 3006
Telephone: +61 3 8695 4400
Facsimile: +61 3 8695 4419
www.incitecpivot.com.au
CONTENTS
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ABOUT US
Our Operations
Who We Are
Our Values
Our Strategy
PERFORMANCE & OUTLOOK
2020: Responding to the COVID-19 Pandemic
Chairman’s Report
Managing Director & CEO’s Report
Operating & Financial Review
BEING A SUSTAINABLE BUSINESS
Zero Harm: Our License to Operate
Our People
Sustainability Overview
Climate Change Strategy and Governance
Caring for Our Communities
Community Activity Highlights
GOVERNANCE
Corporate Governance
Board of Directors
Executive Team
FINANCIAL & STATUTORY REPORTS
Directors’ Report
Remuneration Report
Financial Report
Independent Auditor’s Report
ADDITIONAL INFORMATION
Shareholder Information
Five Year Financial Statistics
Glossary
Corporate Directory
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Incitec Pivot Limited Annual Report 2020
3
IPL is a recognised
world leader
in the resources and
agricultural sectors.
4
Incitec Pivot Limited Annual Report 2020 ABOUT US
5
Incitec Pivot Limited Annual Report 2020 OUR OPERATIONS
Ankara
Soma
i e
TURKEY
CHINA
PAKISTAN
INDIA
New Delhi
Hong Kong
SOUTH
AFRICA
Sibolga
Tanjung Tabalong
Jakarta
Batu Kajang
i
i
Johannesburg (SASOL Dyno Nobel)
Johannesburg (DetNet)
Port Hedland
Mt Isa
Phosphate Hill
Kalgoorlie
Perth
Port Lincoln
Port Adelaide
Portland
e
e
e
e
a
e
e
Muara Tuhup
Tenggarong
Berau
PAPUA NEW GUINEA
Lihir
e
e
INDONESIA
e
a
Moranbah
Townsville
AUSTRALIA
e
i
e
Moura
(Queensland Nitrates)
Gibson Island
Helidon
Kooragang Island
Warkworth
Melbourne
Geelong
Devonport
Ekati
Diavik
e
e
Flin Flon
e
Tumbler Ridge
Calgary
Biwabik
St Helens
Barry
Salt Lake City
Lincoln
Cheyenne
Carthage
a
e
e
a
i
e
i
a
Louisiana, Missouri
Waggaman, Louisiana
Dinamita
i
Gomez Palacios
Guadalajara
e
CANADA
USA
MEXICO
Mary River
e
Meadowbank
e
e
a
e
i
a
e
e
e
i
i
Ishpeming
North Bay
Maitland
Boisbriand
Ormstown
Simsbury
Donora
Duffield
Van Wyck
Brooksville
Graham
Wolf Lake
LATIN
AMERICA
La Serena
i
e
Santiago
Incitec Pivot Limited
Company Headquarters
Incitec Pivot Fertilisers
Corporate Office
Manufacturing/Distribution
Quantum Fertilisers
Dyno Nobel
Corporate Office
Manufacturing/Distribution
Joint Ventures/Investments
Manufacturing legend
i
e
Initiation
Emulsion
ANa
a Long term AN supplier
2003
Listed on ASX
5000
Employees
60
Manufacturing
facilities
6
Incitec Pivot Limited Annual Report 2020
Ankara
Soma
i e
TURKEY
CHINA
PAKISTAN
INDIA
New Delhi
Hong Kong
e
e
e
Muara Tuhup
Tenggarong
Berau
PAPUA NEW GUINEA
e
Lihir
SOUTH
AFRICA
Sibolga
Tanjung Tabalong
Jakarta
Batu Kajang
e
e
e
a
Port Hedland
e
Mt Isa
Phosphate Hill
Kalgoorlie
Perth
Port Lincoln
Port Adelaide
Portland
INDONESIA
AUSTRALIA
e
a
Moranbah
Townsville
e
Moura
(Queensland Nitrates)
Gibson Island
Helidon
Kooragang Island
Warkworth
i
e
Melbourne
Geelong
Devonport
i
i
Johannesburg (SASOL Dyno Nobel)
Johannesburg (DetNet)
Ekati
Diavik
e
e
CANADA
Flin Flon
Tumbler Ridge
Calgary
Biwabik
St Helens
Barry
Salt Lake City
Lincoln
Cheyenne
Carthage
Louisiana, Missouri
Waggaman, Louisiana
Dinamita
Gomez Palacios
Guadalajara
e
e
a
i
e
i
a
i
e
a
e
USA
MEXICO
Mary River
e
Meadowbank
e
e
a
e
i
a
e
e
e
i
i
Ishpeming
North Bay
Maitland
Boisbriand
Ormstown
Simsbury
Donora
Duffield
Van Wyck
Brooksville
Graham
Wolf Lake
LATIN
AMERICA
La Serena
i
Santiago
e
Incitec Pivot Limited
Company Headquarters
Incitec Pivot Fertilisers
Corporate Office
Manufacturing/Distribution
Quantum Fertilisers
Dyno Nobel
Corporate Office
Manufacturing/Distribution
Joint Ventures/Investments
Manufacturing legend
i
e
Initiation
Emulsion
ANa
a Long term AN supplier
3 million
tonnes of ammonium
nitrate produced
2 million
tonnes of fertiliser
produced
World class
technology
Incitec Pivot Limited Annual Report 2020
7
WHO WE ARE
IPL is a recognised world leader in the resources and agricultural sectors. With 60 manufacturing
facilities and joint ventures across five continents, including Australia, North America, Europe,
Asia, Latin America and Africa, we manufacture ammonium nitrate-based explosives and initiating
systems, nitrogen and phosphorus fertilisers, and nitrogen related industrial and specialty chemicals.
We have two customer facing businesses, Dyno Nobel based in the Americas and in Asia Pacific and the largest fertiliser business in Australia,
Incitec Pivot Fertilisers.
Through these two businesses, we make people’s lives better by unlocking the world’s natural resources through innovation on the ground.
Our advanced and premium technology, manufacturing excellence and world class services are focused on the diverse needs
and aspirations of our customers, ensuring IPL’s continuing key role in developing the efficiency and sustainability of the world’s
resource and agricultural sectors.
Dyno Nobel
Global Manufacturing
Dyno Nobel is IPL’s global explosives business. It is the second
largest industrial explosives distributor in North America and
the second largest industrial explosives distributor in Australia
by volume.
Americas: Dyno Nobel Americas (DNA) provides ammonium nitrate,
initiating systems and services to the Quarry & Construction sector
primarily in the Southern US, Northeast US and Canada; the Base
& Precious Metals sector in the US mid-West, US West and Canada
and the Coal sector in the Powder River Basin, Illinois Basin
and Appalachia.
Asia Pacific: Dyno Nobel Asia Pacific (DNAP), provides ammonium
nitrate based industrial explosives, initiating systems and services
to the Met Coal and Base & Precious Metals sectors in Australia, and
internationally to a number of countries including Indonesia, Papua
New Guinea and Turkey through its subsidiaries and joint ventures.
Incitec Pivot Fertilisers
Incitec Pivot Fertilisers (IPF) is IPL’s fertilisers business. With an
unrivalled position across Eastern Australia, it is the largest domestic
manufacturer and supplier of fertilisers by volume produced from
its strategically positioned manufacturing facilities, including
the ammonium phosphate fertiliser plant in Phosphate Hill,
complemented by the world scale sulphuric acid plant at Mount
Isa. Internationally, the fertilisers business sells to major offshore
agricultural markets in Asia Pacific, the Indian subcontinent, Brazil
and the United States. It also procures fertilisers from overseas
manufacturers to meet domestic seasonal peaks for its customers’
diversified crops.
Americas: In North America, Dyno Nobel manufactures ammonium
nitrate at its Cheyenne, Wyoming and Louisiana, Missouri plants.
The Cheyenne, Wyoming plant is adjacent to the Powder River
Basin, strategically placed for both the Base & Precious Metals
Base sector and North America’s most competitive thermal coal
mining region. The Louisiana, Missouri plant has a competitive
logistic footprint from which to support the Quarry & Construction
sector and mining in both the Illinois Basin and Appalachia.
Initiating Systems are manufactured at Dyno Nobel’s facilities
in Connecticut, Kentucky, Illinois, Missouri, Chile and Mexico,
and are also sourced from DetNet South Africa (Pty) Ltd (DetNet),
an IPL electronics joint venture.
Asia Pacific: In Australia, Dyno Nobel manufactures ammonium
nitrate at its Moranbah plant, which is located in the Bowen Basin,
the world’s premier metallurgical coal region. It also operates its
fully integrated, state of the art joint venture ammonium nitrate
facility near Moura in Central Queensland.
Initiating Systems are manufactured at Dyno Nobel’s Helidon
facility in Queensland, and are also sourced from IPL facilities
in the Americas and its joint ventures.
The business also produces nitrogen-based fertilisers and industrial
chemicals across four locations including its state of the art
ammonia plant in Waggaman Louisiana, that are delivered
to its fertiliser end markets via an integrated supply chain.
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Incitec Pivot Limited Annual Report 2020
OUR VALUES
Our Company values are at the core of the way we work. With a One IPL – One Team mindset
and behaviours, coupled with cross functional and geographical collaboration across our
businesses, we are able to capture diversity of thought in an inclusive environment where
the contribution of everyone is valued.
We Think Safe, Act Safe, Be Safe. This is our license to operate.
We listen, understand and exceed customer expectations.
We are accountable, act with honesty and
integrity to achieve the best outcomes.
We work together across our businesses and
functions with respect, trust and collaboration.
We proactively listen and work in partnership
with the communities in which we operate.
We proactively seek to continually improve
the way we work, embrace change and
pursue innovative solutions.
We do what we say we are going to do.
Incitec Pivot Limited Annual Report 2020
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Fertilisers
Following the strategic review of the fertilisers business undertaken
this year, our long term strategy is to grow IPF from a leading
fertiliser company, manufacturing and distributing a range of
domestic fertilisers, to a sustainable soil health company providing
sustainable plant nutrition solutions to improve soil health.
Our strategy will be leveraged through our expansive distribution
footprint to drive new growth products and services towards
soil health.
OUR STRATEGY
Explosives
Our explosives business strategy leverages our premium technology,
strategically located assets and strong customer relationships.
With the best premium technology offering on the ground, designed
to improve mining efficiencies, safety and reduce environmental
impacts, our Dyno Nobel Differentiated Energy (Delta E) premium
emulsion, delivery systems and 4th Generation Electronic Detonator
Systems offer unparalleled design blast capability with safety
inherent in design. The plug-in, ease of use and adoption explosives
technology portfolio, coupled with strong customer partnerships
underpin our growth strategy and will bring new technology
innovations on the ground.
Our Strategic Drivers
Zero Harm: Zero Harm is good business. Our ambition is
to achieve industry leading performance in occupational
health, personal safety, process safety and the environment.
Talented & Engaged People: Our aim is to make sure
we have the right people with the right skills, in the right
roles working collaboratively. This enables us to gather and
capture the diverse ideas of everyone in our organisation.
Customer Focus: Our focus on deepening our customer
relationships and strategic partnerships across all our
businesses ensures we can innovate and share technologies
and solutions that improve our customers’ businesses.
Leading Technology Solutions: Our technology strategy
is focused on improving safety, reducing environmental
impacts, creating a positive social impact and increasing
productivity and efficiency in our customers’ operations.
Manufacturing Excellence: Our Global Manufacturing vision is to be a world class
manufacturing organisation, delivering personal and business growth. We will
achieve this through Zero Harm, reliable operations and being cost competitive.
Profitable Growth: We will focus on growth opportunities that are distinctive
to our differentiated technology, core markets, core capabilities and advantaged
market segments.
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Incitec Pivot Limited Annual Report 2020
Incitec Pivot Limited Annual Report 2020
11
Our strong operating
performance during
the year delivered
a solid FY20 result.
12
Incitec Pivot Limited Annual Report 2020 PERFORMANCE & OUTLOOK
13
Incitec Pivot Limited Annual Report 2020 2020: RESPONDING TO THE COVID-19 PANDEMIC
2020 has been an extraordinary year for us all. At the time of
finalising this Report, the world is still responding to the COVID-19
pandemic, which has had a profound impact on all our lives and
required us to quickly adapt to new ways of doing things in order
to keep ourselves safe.
Across IPL, we have worked hard to respond to the COVID-19
pandemic threat. Our priority remains to protect the health, safety
and well-being of our people around the world, those we work with
and those in our communities. Because by keeping our people safe,
we are able to continue to operate and serve our customers in the
essential resources and agriculture industries.
Our Global Crisis Management Team (CMT) has proactively worked
across our business to implement new working standards, protocols
and safety measures designed to protect our people, whether
they work on the front line in our field-based operations, in our
manufacturing plants, in the office or in their home environment.
The CMT worked swiftly to implement preventative controls to
keep our workplaces safe and to minimise exposure. These controls
include the implementation of measures to ensure physical
distancing, workers who are unwell staying at home, temperature
and COVID-19 testing, and supportive measures through Telehealth
and mental health programs. The CMT also implemented the Global
Work From Home Workforce Strategy in March 2020, and more
recently has been focused on safely transitioning our people back
to their normal workplace under bifurcation strategies and strict
COVIDSafe plans in line with local government and medical advice.
We have ensured business continuity through the COVID-19
pandemic by adopting new and innovative ways of working,
particularly through the use of technology, across our business:
» A combination of live streaming, video and digital technologies
has enabled us to keep our businesses running with minimal
interruption and to service our customers in real time.
» We provide remote technical support and advice to customers
out in the field, through to undertaking virtual Gemba walks
at our manufacturing plants to ensure continued oversight
of safety practices.
» Site turnarounds and restarts were successfully undertaken
within strict COVID-19 controls.
» We delivered our 2020 Half Year Results briefing in May,
our Investor Briefing in August and our 2020 Full Year
Results briefing in November, all virtually.
» With the current restrictions on indoor gatherings and travel
imposed by governments, we are holding our 2020 Annual
General Meeting for shareholders in December 2020 through
an online (virtual) platform, in the interests of protecting the
well-being of our people and shareholders.
The risk from COVID-19 remains with us and we will continue
to align with advice from the World Health Organisation and the
relevant government authorities in the jurisdictions in which we
operate. We are continually monitoring the status and impacts
of COVID-19 to ensure we keep our people safe and our businesses
operating for our customers. We thank all our people and suppliers
throughout our value chains for helping us continue to service
our essential resources and agricultural customers during this
challenging year.
A
B
C
A
B
C
ctivate a daily routine
e connected
alm the mind
Keeping our People Safe in a Global Pandemic
Our response to COVID-19 was focused on the health, safety and mental wellbeing of
our people and to ensure business continuity to safeguard our services to our customers
around the world. Our response included a number of initiatives that we were able to
develop and implement quickly and efficiently:
» COVIDSafe plans across our sites, offices and workplaces.
» Mobilising rapid on-site COVID-19 testing where high risks of community transfer emerge.
» Close collaboration with the Chief Medical Officer and health officials in countries where we operate.
» A wide range of mental health campaigns to support our people and their families including;
–
the One IPL ABC (Activate, Connect & Calm) Mental Health Campaign with global virtual mental health
sessions for the workforce and family members who wished to participate and separate programs for leaders.
– Mental health workshops and care packs for employees in periods of extended lockdown.
» Digital working from home platform and collaboration forum for people new to working from home.
14
Incitec Pivot Limited Annual Report 2020
As a supplier of products and services
to diverse international end markets
in the essential agriculture, mining
and resources industries, we continued
to safely operate through FY20.
We pro-actively adjusted our
comprehensive business continuity
plans to support continuous operation
at all of our facilities and the ability
to deliver to customers.
Early on in the pandemic we took decisive
steps to ensure the safety of our people,
customers and suppliers, immediately
deploying our Global Crisis Management Team.
Management also responded with mitigating
measures addressing the indirect impacts
from the COVID-19 pandemic on the global
economy, our end markets and commodity
prices. For more information, see the
Operating and Financial Review.
Incitec Pivot Limited Annual Report 2020
15
CHAIRMAN’S REPORT
There is no doubt that 2020 has been a very challenging year with the COVID-19 pandemic
having an unprecedented impact on businesses and communities around the world. The safety
of our people, customers and communities has been our primary focus and we have worked
hard to continue to serve our customers without interruption in the essential resources and
agricultural sectors.
While our business performance has proven to be resilient in 2020,
factors outside of our control have impacted global commodity
pricing and we also saw some softening in demand in North
America, associated with temporary shutdowns of some of our
customers’ mining operations. As a Board we took early, decisive
action to improve our financial position in undertaking an equity
raising in May of this year. We successfully completed a $600m
institutional placement and raised approximately $57.5m from
our Share Purchase Plan. The Board was pleased with the strong
support we received from both institutional investors and retail
shareholders. The equity raising has enabled us to significantly
strengthen our balance sheet, making our business more resilient
in the current environment and giving us the financial flexibility
to continue to deliver our strategic agenda.
We reported Earnings Before Interest and Tax (EBIT) excluding
IMIs of $374.5m for FY20, an increase of 23% compared to FY19.
We reported a Net Profit after Tax of $123.4m after $64.8m of
non-recurring items, compared to $152.4m in FY19. The result
includes a solid performance from our Dyno Nobel explosives
businesses which has high quality, strategically located assets
in two of the best mining markets in the world and a premium
technology offering that our customers value. We reported a
significant improvement in earnings in our Incitec Pivot Fertilisers
business, with the impact of historic low commodity prices being
more than offset by increased demand as weather conditions
improved on the east coast of Australia, as well as the absence
of one-offs reported in FY19.
Our Net Debt/EBITDA ratio is now 1.4x, down from 2.8x, largely
reflecting the proceeds of the equity raising as well as strong
operating cash flows.
The Board has determined, as an exception to its dividend
policy, not to pay a final dividend for FY20 in light of the
ongoing uncertainty due to COVID-19 and IPL’s equity raising
in May 2020. IPL’s dividend policy, which is to pay between
30% – 60% of NPAT, remains unchanged.
Our team has made significant progress on the delivery of our
strategic agenda during 2020, with improvements in manufacturing
performance and the continued adoption of our premium
technology offering by our customers. In April, we concluded the
strategic review of our Fertilisers business which looked at three
possible outcomes – a sale, demerger or retain and invest. Given
the extraordinary market uncertainty, the Board determined
that retaining the fertilisers business was the best outcome for
shareholders. The business has a clear strategic agenda focused
on delivering stable distribution earnings through the cycle, as well
as driving growth from new value-added products and solutions.
We have also made progress on our commitment to manage
climate change. This year the Board endorsed reducing our global
emissions by 5% from our 2020 baseline by 2026, the equivalent
of 200,000 tCO2e. This target recognises the energy intensive nature
of manufacturing nitrogen-based products which require natural gas
as both an energy source and a raw material for hydrogen. We are
also progressing our commitment to increase the diversity of our
workforce. We have a stretch target to increase gender diversity
by 10% year-on-year to reach 25% by FY22. In FY20, women made
up 17.6% of our global workforce, a slight improvement on last year.
I would like to take this opportunity to thank my fellow Board
members for their contribution throughout the 2020 financial year.
Our two most recent Non-executive Director appointments, Xiaoling
Liu and Greg Robinson, served their first full year on the Board in
2020, bringing considerable commercial and operational experience
as well as strong global perspectives. In February Joseph Breunig
resigned from the Board. We also announced that Rebecca McGrath
will retire, at the conclusion of the 2020 Annual General Meeting in
December, after serving nine years on the Board. Both Joseph and
Rebecca have provided an outstanding contribution to our Board
during their tenures and we wish them both the very best for the
future. Further, I am delighted that George Biltz will be joining our
Board as a Non-executive Director on 1 December 2020, bringing
to our Company extensive experience in the industrial chemicals
sector, particularly in North America, which is of significant value
given the Company’s large presence in that market.
As a Board we have adapted to the restrictions imposed by
the COVID-19 pandemic, holding our Board meetings virtually.
We’ve been able to quickly adapt to the new format, while
continuing to make important decisions to shape the future
of the business, as well as endorsing management’s response
to the pandemic.
Operating in a COVID-19 environment has challenged everyone
across the Company and I would like to sincerely thank our
Managing Director & CEO Jeanne Johns, the Executive Team
and all of our people for their hard work and commitment
in these extraordinary times. Our people have worked tirelessly
to keep each other and our customers safe, as well as deliver
our customers reliable supply throughout the pandemic.
Brian Kruger
Chairman
16
Incitec Pivot Limited Annual Report 2020 MANAGING DIRECTOR & CEO’S REPORT
In a year unlike any other, our business has proven its resilience through FY20. Our embedded
safety focus and strong risk management capability has served us well, with additional safety
measures quickly implemented across our global operations when the COVID-19 pandemic hit.
This enabled us to keep our people and customers safe while continuing to operate, ensuring
our ongoing support and supply to the essential resources and agricultural industries.
There has never been a more important time to live our number
one value of Zero Harm and we have seen significant improvements
in key safety measures. In FY18 we set a goal for a step change
in our workforce Total Recordable Injury Frequency Rate (TRIFR)
to achieve a 30% reduction by FY21. In FY20 we reported a TRIFR
of 0.57, delivering our FY21 target of 0.70 a year early. We’ve also
seen a significant improvement in process safety incidents, down
to 24 compared to 33 last year.
Fertilisers EBIT increased to $26.2m, a significant improvement on
the loss reported last year and a positive outcome given historically
low commodity prices. While performance in the first four months
of the year was impacted by severe drought, improved conditions
underpinned a good uplift in demand later in the year. The business
is well placed to benefit from the growth of new value-add products
and services for precision agriculture, as well as an improvement in
commodity prices.
Tragically, a multi-motor vehicle accident in April on a public road
in South Carolina resulted in two fatalities and one serious injury,
including the death of one of our employees. The tragic loss of life
is a stark reminder of the importance of embedding Zero Harm as
the number one value and priority right across our global business.
Zero Harm applies as much to our impact on the environment
as it does to safety, and this has continued to be a focus in FY20,
with a reduction of significant environmental incidents from three
last year to one this year.
We continue to progress our important sustainability agenda.
In August, I became a founding member of the Australian Climate
Leaders Coalition (CLC), joining a range of CEOs supporting the
Paris Agreement commitments and setting public decarbonisation
targets. This follows the adoption of our Climate Change Policy
last year which sets out our commitment to reducing our carbon
footprint through our manufacturing excellence strategy, as well as
helping our customers reduce theirs with our premium technologies.
This year we committed to a 5% absolute reduction in our global
emissions by 2026, approximately 200,000 tCO2e, or the equivalent
of more than 43,000 passenger vehicles driven in a year.
Our business has proven to be resilient during FY20, with EBIT
increasing 23% from last year to $374.5m despite the impact of
weak global commodity prices. Our manufacturing performance was
significantly improved following some major interruptions last year,
with underlying improvements being driven by our manufacturing
excellence strategy.
Our Dyno Nobel explosives business has market leading positions
and technologies and strategically located assets in the attractive US
and Australian explosives markets. EBIT from Dyno Nobel Americas
was down 1% to $230.8m, reflecting structural declines in the coal
market, as well as the temporary impact of COVID-19 on some
customer mining operations. Margins in the US business continue
to be strong, reflecting the value of our premium technology.
Dyno Nobel Asia Pacific delivered EBIT of $149.3m, down 17% on
last year. While volumes in our Australian business held up well,
earnings were impacted by the previously announced re-contracting
of our Moranbah foundation customers as well as lower earnings
from Indonesia. Pleasingly we are seeing good momentum from
technology as our sophisticated mining customers in Australia are
increasingly adopting our technology into their mining operations.
Our broader strategic agenda is progressing well. We are making
good progress with our manufacturing excellence strategy and
are on track to deliver our target uplift in earnings of $40m to
$50m by FY22.
We continue to leverage our premium technology offering to
support our customers. Our technology is designed to be easy for
our customers to adopt, as well as drive meaningful improvements
in mine productivity, safety and environmental impacts. Our 4th
Generation Electronic Detonator Systems combined with our Delta
E technology has underpinned our market leading position in the
US and in Australia, where we attract the highest quality customers.
We are focused on pursuing low capital, high return opportunities to
further leverage our technology platform. A good example of this is
the commissioning of an emulsion plant in Chile, the largest copper
market in the world.
I would like to thank our team around the world for their incredible
hard work, adaptability and resilience during 2020. Working in
a constantly changing environment, our team has navigated
significant change while continuing to offer exceptional support
to our customers.
I also want to acknowledge Frank Micallef whose retirement as our
CFO after 10 years in the role was announced in June. I would like
to sincerely thank Frank for his contribution, leadership and support.
As we look to the year ahead, we have a strong team in place to
lead us into the future, with new CFO Nick Stratford bringing deep
financial background and strong business acumen to the role.
Dr Braden Lusk has stepped into Nick’s previous role as DNA
President and is well credentialled with his extensive experience
with the US mining industry and our differentiated technology
offerings. We also welcome Michele Mauger to the Executive
Team as Chief People Officer, bringing more than 25 years’
international experience.
Finally, I would like to thank Brian Kruger and the Board for
their continued support, wise counsel and leadership during this
unprecedented year. We’ve taken decisive action in response to
the pandemic and your Company is well positioned to be stronger
and more competitive in the future.
During the year we made the decision to retain and invest in our
fertilisers business which is Australia’s leading and only integrated
supplier of premium fertiliser solutions on the east coast.
Jeanne Johns
Managing Director & CEO
17
Incitec Pivot Limited Annual Report 2020 OPERATING & FINANCIAL REVIEW
Waggaman Operations
The Dyno Nobel Americas business manufactures and distributes
ammonia at its Waggaman, Louisiana plant in the United States.
Ammonia produced at Waggaman is used in Dyno Nobel’s
manufacturing process and is also sold to third parties under
long term contractual arrangements.
Dyno Nobel Asia Pacific
Through Dyno Nobel Asia Pacific, IPL provides ammonium nitrate
based industrial explosives, initiating systems and services to the
Metallurgical Coal and Base & Precious Metals sectors in Australia,
and internationally to a number of countries including Indonesia,
Papua New Guinea and Turkey through its subsidiaries and joint
ventures. Ammonium nitrate is often sold in conjunction with
proprietary initiating systems and services.
Dyno Nobel is the second largest industrial explosives distributor
in Australia by volume, which in turn is the world’s third largest
industrial explosives market. In Australia, Dyno Nobel primarily
supplies its products to metallurgical coal mines in the east and
to iron ore mines in the west.
In Australia, Dyno Nobel manufactures ammonium nitrate at its
Moranbah ammonium nitrate plant, which is located in the Bowen
Basin, the world’s premier metallurgical coal region. It also sources
third party ammonium nitrate including in Western Australia to
service the Iron ore and Underground sectors.
Initiating systems are manufactured in Australia at Dyno Nobel’s
Helidon, Queensland facility and are also sourced from IPL facilities
in the Americas and from DetNet (South African joint venture).
Fertilisers Asia Pacific
IPL’s fertilisers business in Australia is the largest domestic
manufacturer and supplier of fertilisers by volume.
Internationally, the fertilisers business sells to major offshore
agricultural markets in Asia Pacific, the Indian subcontinent,
Brazil and the United States. It also procures fertilisers from
overseas manufacturers to meet domestic seasonal peaks.
Much of this activity is conducted through Quantum Fertilisers
Limited, a Hong Kong based subsidiary.
The Fertilisers business manufactures the following fertilisers
at three locations:
» Phosphate Hill: Di/mono-ammonium phosphate (DAP/MAP);
» Gibson Island: Ammonia (Big N), Granulated ammonium
sulphate (GranAm) and Urea; and
» Geelong: Single Super Phosphate (SSP).
Group Overview
Incitec Pivot Limited (IPL) is a leading international explosives and
blasting services company and the largest fertilisers manufacturing
and distribution business in Australia. Its operations are focussed
in Australia, where it operates under the globally recognised Dyno
Nobel and Incitec Pivot Fertilisers brands, and in North America
where it operates under the Dyno Nobel brand.
IPL leverages a common nitrogen manufacturing core,
with engineering synergies achieved through the Global
Manufacturing organisation.
The Company has operations in Australia, North America,
Europe, Asia, Latin America and Africa.
IPL operates through three business units, details of which
are set out in this review:
» Dyno Nobel Americas;
» Dyno Nobel Asia Pacific; and
»
Fertilisers Asia Pacific.
Dyno Nobel Americas
The Dyno Nobel Americas business comprises three businesses:
»
Explosives;
» Agriculture & Industrial Chemicals; and
» Waggaman operations.
Explosives
Dyno Nobel is the second largest industrial explosives distributor in
North America by volume. It provides ammonium nitrate, initiating
systems and services to the Quarry & Construction sector across
the US; the Base & Precious Metals sector in the US mid-West, US
West and Canada; and to the Coal sector in the Powder River Basin,
Illinois Basin and Appalachia.
In North America, Dyno Nobel manufactures ammonium nitrate
at its Cheyenne, Wyoming and Louisiana, Missouri plants. The
Cheyenne, Wyoming plant is adjacent to the Powder River Basin,
North America’s most competitive thermal coal mining region and
well positioned to service Base & Precious Metals in Western US.
The Louisiana, Missouri plant has a competitive logistic footprint
from which to support mining in both the Illinois Basin and
Appalachia, as well as Quarry & Construction in the US mid-West.
Initiating systems are manufactured at Dyno Nobel’s facilities in
Connecticut, Kentucky, Illinois, Missouri, Chile and Mexico, and are
also sourced from DetNet South Africa (Pty) Ltd (DetNet), an IPL
electronics joint venture.
Agriculture & Industrial Chemicals
The Dyno Nobel Americas business manufactures and distributes
nitrogen-based fertilisers in the United States from its St Helens,
Oregon and Cheyenne, Wyoming plants. Nitrogen based fertilisers
and other industrial chemical products are also produced as a
by-product at the Louisiana, Missouri plant.
18
Incitec Pivot Limited Annual Report 2020OPERATING AND FINANCIAL REVIEW Group Summary
Zero Harm
Year ended 30 September
FY20
A$m
FY19
A$m
Change
A$m
Sadly, a tragic double fatality, which included a Dyno Nobel
employee, occurred in the US in April 2020. The incident
involved a Dyno Nobel vehicle on a US public road.
3,942.2
3,918.2
730.5
374.5
605.3
303.7
188.2
152.4
(64.8)
–
24.0
125.2
70.8
35.8
(64.8)
123.4
152.4
(29.0)
IPL’s Total Recordable Injury Frequency Rate (4) (TRIFR) for the
rolling twelve-month period ended 30 September 2020 was
0.57, a 29% improvement from 0.80 at 30 September 2019,
and well ahead of the Group’s FY21 target of 0.70. IPL reported
an improvement in Process Safety Incidents (5) of 24 (pcp: 33)
and Significant Environmental Incidents (6) down to 1 (pcp: 3).
Potential High Severity Incidents (7) increased marginally to
34 (pcp: 33).
Financial Performance
IPL GROUP
Reported Revenue and Earnings
Revenue
EBITDA ex IMIs
EBIT ex IMIs
NPAT ex IMIs
IMIs after tax
NPAT
Shareholder Returns
Cents Per Share
Earnings per share ex IMIs
Total Dividend
Credit Metrics
Net debt (1)
Net debt / EBITDA (ex IMIs) (2)
Interest Cover (3)
10.9
nil
9.5
4.7
30-Sep-20 30-Sep-19
(1,028.7)
(1,691.4)
1.4x
6.1x
2.8x
4.6x
Net Profit After Tax (NPAT) excluding
Individually Material Items (ex IMIs)
IPL reported NPAT ex IMIs of $188m, an increase of 23%
compared to $152m in the prior corresponding period (pcp).
Individually Material Items (IMIs)
NPAT for FY20 includes $65m (FY19: $nil) of after-tax IMIs relating
to the write down of obsolete technology; and software and
implementation costs of IPL’s ‘Response Plan’, a program
designed to reduce costs to mitigate the earnings impacts of softer
commodity prices and COVID-19.
Shareholder Returns and Capital Management
Earnings per share (EPS) ex IMIs of 10.9 cents per share increased
by 1.4 cents per share compared to FY19 of 9.5 cents.
The Company raised $646m of equity during 2H FY20 through
its institutional placement and share purchase plan.
The Board has determined, as an exception to its dividend policy,
not to pay a final dividend for FY20 in light of the ongoing
uncertainty due to COVID-19 and IPL’s equity raising in May 2020.
IPL’s dividend policy, which is to pay between 30% – 60% of
NPAT, remains unchanged.
Net Debt
Net debt decreased by $663m to $1.03bn at 30 September 2020
(pcp: $1.69bn) and Net debt/EBITDA ex IMIs decreased to 1.4x (pcp:
2.8x). The Group’s investment grade credit ratings were maintained.
(1) Net Debt comprises the net of interest bearing liabilities, cash and cash equivalents,
and the fair value of derivative instruments economically hedging the Group’s
interest-bearing liabilities.
(2) Net debt/EBITDA ratio is calculated using 12 month rolling EBITDA ex IMIs.
(3) Interest Cover = 12 month rolling EBITDA ex IMIs/net interest expense before
accounting adjustments.
INCOME STATEMENT
Revenue
Business Revenue
DNA
DNAP
Fertilisers
Eliminations
Group Revenue
EBIT
Business EBIT ex IMIs
DNA
DNAP
Fertilisers
Eliminations
Corporate
Group EBIT ex IMIs
EBIT margin
NPAT
Net borrowing costs
Tax expense ex IMIs
Minority interest
NPAT excluding IMIs
IMIs after tax
Group NPAT
*not meaningful
Year ended 30 September
FY20
A$m
FY19
A$m
Change
%
1,506.5
1,569.0
999.2
990.7
1,502.0
1,419.4
(65.5)
(60.9)
3,942.2
3,918.2
230.8
149.3
26.2
(0.1)
(31.7)
234.0
179.2
(79.7)
(1.7)
(28.1)
374.5
303.7
9.5%
7.8%
(135.7)
(144.1)
(50.6)
–
(7.5)
0.3
188.2
152.4
(64.8)
–
123.4
152.4
(19)%
(4)%
1%
6%
(8)%
1%
(1)%
(17)%
133%
nm*
(13)%
23%
7%
nm
6%
nm
nm
23%
nm
Underlying interest expense (8)
(130.0)
(139.7)
Non-cash unwinding liabilities
(5.7)
(4.4)
(4) TRIFR is calculated as the number of recordable incidents per 200,000 hours worked
and includes contractors. TRIFR results are subject to finalisation of the classification
of any pending incidents.
(5) Tier 1 and Tier 2 Process Safety Incidents as defined by the Centre for Chemical
Process Safety.
(6) Significant Environmental Incidents as assessed against IPL’s internal risk matrix
with actual consequences of 5 or higher on a 6-level scale
(7) Potential High Severity Incidents (excluding near misses and hazards) with potential
consequences of 5 or higher on a 6-level scale. Prior year number was restated due
to finalisation of classification of incidents pending at the time of previous publication
date and further review in FY20.
(8) Underlying interest expense represents total borrowing costs less non-cash interest unwind,
representing the discount unwind on the Group’s long-term liabilities.
19
Incitec Pivot Limited Annual Report 2020OPERATING AND FINANCIAL REVIEW FY20 Business Review
The Group reported FY20 Earnings Before Interest and Tax
(EBIT) ex IMIs of $375m, an increase of $71m compared
to pcp. Major movements for the year were as follows:
Manufacturing Recovery: $186m increase, driven by improved
production performance at Phosphate Hill and Waggaman; and
lower gas cost from improved supply reliability at St Helens.
Commodity Prices & Foreign Exchange: $100m net decrease.
The impact of $123m from lower commodity prices was partially
offset by $23m of benefits from the lower A$:US$ exchange rate.
COVID-19 Response Plan Savings: $20m increase driven by
operational productivity measures, cost efficiency gains and
non-essential spend savings.
Americas Explosives – Markets: $17m (US$12m) net decrease,
mainly due to structural declines in US Coal demand and market
volume declines impacted by the COVID-19 disruption.
Asia Pacific Explosives – Contract Re-basing & Technology Growth:
$25m net decrease, due to the impact of contract re-basing of
$38m; partially offset by $13m of benefits from technology growth
in Australia.
Explosives Market Volumes: $24m decrease as international
customer operations were temporarily closed due to COVID-19
restrictions.
Australian Drought Recovery: $20m increase driven by strong
domestic fertilisers sales volumes and product mix as a result of
favourable weather conditions.
Fertilisers Lower Gas Cost: $22m EBIT increase from lower
contracted gas cost at Phosphate Hill and Gibson Island; and cost
savings from improved supply reliability and operating efficiencies.
Interest
Underlying interest expense of $130m decreased 7%, compared
to pcp. The decrease was mainly due to $16m of benefits from
lower interest rates, as the higher cost US$800m 144A bonds
matured in December 2019. This was partially offset by the $6m
impact from the changes in the accounting for Leases (AASB 16:
Leases).
Tax
Impairment of intangibles: During the year ended 30 September
2020 intangible assets were impaired by $41m (FY19: nil) following
a detailed review of the Group’s technology and software products
and offerings given the continued enhancement of the Group’s
technology portfolio. The review considered factors such as the
timing of the commercial launch of certain technologies, software
versions and products, items which were superseded as a result of
significant enhancements and updated versions, current experience
in regard to the commercial acceptance by customers and the future
economic benefit attributable to the Group.
Business Restructuring Costs: In May 2020, IPL announced a
cost reduction program in response to indirect impacts from the
COVID-19 pandemic on the global economy, including commodity
prices and customer demand.
A detailed response plan was implemented in FY20 and is expected
to deliver $60m (1) of sustainable annual cost savings over a three-
year period to FY22. Benefits of $20m were delivered in FY20, with
an additional $30m of benefits expected in FY21 and $10m in FY22.
The total cost of the plan is $47m of which $30m is cash costs
relating to employee redundancies and site closure & relocation
costs. The remaining $17m consist of non-cash impairment write
downs of several low value assets, including minor sites that were
closed to drive operational efficiencies.
Financial Position
BALANCE SHEET
Assets
TWC - Fertilisers
TWC - Explosives
Group TWC
Net PP&E
Lease assets
Year ended 30 September
FY20
A$m
FY19
A$m
Change
A$m
(151.1)
(137.8)
(13.3)
165.9
141.9
14.8
4.1
24.0
10.7
4,071.7
4,190.0
(118.3)
221.1
–
221.1
Intangible assets
3,019.7
3,179.5
(159.8)
Total Assets
Liabilities
7,327.3
7,373.6
(46.3)
Environmental & restructure liabilities
(161.7)
(134.8)
(26.9)
Tax liabilities
Lease liabilities
(437.0)
(495.9)
58.9
(247.7)
–
(247.7)
Net other liabilities
(248.9)
(363.7)
114.8
Tax expense ex IMIs of $51m increased by $43m due to higher
operational earnings in FY20 and the higher effective tax rate.
The Group’s higher effective tax rate on operating profit of 21.2%
(pcp: 4.7%) was mainly due to increased earnings in higher tax
rate jurisdictions (largely Australia) and financing structures that
unwound in the prior year.
Net debt
Total Liabilities
Net Assets
Equity
(1,028.7)
(1,691.4)
662.7
(2,124.0) (2,685.8)
561.8
5,203.3
4,687.8
515.5
5,203.3
4,687.8
515.5
Individually Material Items
NPAT includes the following items, classified as IMIs:
Key Performance Indicators
Net Tangible Assets per Share
1.12
0.94
Fertilisers - Ave TWC % Rev
(1.6%)
(0.3%)
Gross
A$m
Tax
A$m
Net
A$m
Explosives - Ave TWC % Rev
Group - Average TWC % Rev (2)
10.1%
5.7%
9.2%
5.8%
IMIs
Capital Expenditure
Impairment of intangible assets
41.0
(10.7)
30.3
Business restructuring costs
- Employee redundancies
24.8
(6.8)
18.0
Credit Metrics
Net debt
Net debt / EBITDA (ex IMIs)
Interest Cover
(1,028.7)
(1,691.4)
1.4x
6.1x
2.8x
4.6x
- Impairment of operating assets,
site exit and other direct costs
Total
20
22.1
(5.6)
87.9
(23.1)
16.5
64.8
(1) Sustained incremental earnings uplift by FY22 of $60M per annum, based on expected
cost savings when compared to FY19 cost base.
(2) Average TWC as % of revenue = 13-month average trade working capital/12 months
rolling revenue.
Incitec Pivot Limited Annual Report 2020OPERATING AND FINANCIAL REVIEW Major movements in the Group’s Balance Sheet during
the year include:
Assets
Trade working capital (TWC): Net increase of $11m.
The movement was mainly due to lower utilisation of working
capital facilities of $135m; and strong TWC management that
reduced underlying TWC by $124m compared to pcp.
Property, Plant & Equipment (PP&E): Decrease of $118m was
mainly driven by the depreciation charge for the year of $291m;
the impact of foreign currency translation of non-A$ denominated
assets of $110m; and asset impairments of $17m. This was partially
offset by sustenance and turnaround capital expenditure of $226m;
and minor growth capital spend of $67m.
Lease assets: Increase of $221m due to the adoption of AASB16:
Leases, which resulted in lease assets being brought onto the
Balance Sheet in FY20 offset by a $248m lease liability.
The fair value of Net debt hedges at 30 September 2020 was an
asset of $287m, a decrease of $102m compared to the balance
at 30 September 2019 of $389m. The decrease was mainly due
to the higher closing A$:US$ exchange rate. The fair value hedge
includes derivatives that hedge the foreign exchange rate exposure
of the Group’s USD borrowings. There are also offsetting net
investment hedges for the same amount. These hedges mature
in December 2022.
Credit Metrics
Net debt/EBITDA ex IMIs: The ratio of 1.4x improved substantially
compared to pcp mainly due to $125m of improved EBITDA ex IMIs
in FY20 and $646m of net proceeds from the equity raising in 2H FY20.
Interest Cover: Improved to 6.1x (pcp: 4.6x).
Credit Ratings: Investment grade credit ratings:
S&P: BBB (Stable outlook)
Moody’s: Baa2 (Stable outlook)
Debt Facilities
Intangible assets: Decrease of $160m mainly as a result of the
impact of foreign currency translation of non-A$ denominated assets
of $109m; the $41m impairment write-off of obsolete technology
and software; and the amortisation charge of $25m for the year.
This was partially offset by asset additions of $12m during the year.
Maturing facilities: IPL cancelled $138m and US$111m of Syndicated
facilities following the equity raising during 2H FY20. The Group has
sufficient liquidity and headroom, with the next debt maturity in October
2021 and available undrawn debt facilities of $974m at 30 September
2020. The Company expects to refinance the Syndicated facilities
during the first half of FY21.
As announced on 10 November 2020, subject to market conditions,
IPL is intending to invite the holders of its outstanding notes under
the AMTN and EMTN Programmes to tender their notes for repurchase
by IPL for up to an aggregate amount of approximately $200m.
The repurchase of the notes forms part of the Group’s strategy to
optimise its debt portfolio between fixed rate capital debt markets
and floating rate bank debt markets.
The Group’s average tenor of its debt facilities at 30 September 2020
is 5.1 years.
Trade Working Capital Facilities
IPL uses TWC facilities to effectively manage the Group’s cash flows,
which are impacted by seasonality and demand and supply variability.
The Group has a non-recourse receivable purchasing agreement
to sell certain domestic and international receivables to an unrelated
entity in exchange for cash. As at 30 September 2020, receivables
totalling $116m (pcp: $216m) had been sold under the receivable
purchasing agreement.
IPL also offers suppliers the opportunity to use supply chain financing.
The Group evaluates supplier arrangements against several indicators
to assess whether to classify outstanding amounts as payables or
borrowings. The balance of the supply chain finance program, classified
as payables, at 30 September 2020 was $296m (pcp: $331m).
Liabilities
Environmental & restructure liabilities: Increased $27m largely
due to business restructuring costs incurred during the year.
Tax liabilities: Decreased by $59m mainly due the tax effect on
movements in the market values of financial instruments of $56m;
tax payments of $14m; the impact of foreign currency translation
non-A$ denominated tax balances of $11m; and the recognition of
deferred tax balances on the adoption of AASB 16: Leases of $6m.
This was offset in part by $28m of tax on FY20 earnings.
Net other liabilities: Decreased by $115m mainly due to market
value movements and maturities of derivative hedging instruments
(excluding debt hedges) of $140m; partially offset by movements
in capital and other accruals.
Net debt: Decreased by $663m to $1.03bn at 30 September 2020.
Analysis of year-on-year movements in Net debt is covered in the
Cash flow section.
Net Debt & Debt Hedges
NET DEBT A$m
Syndicated Term Loan
Syndicated Revolver
Maturity
Month
/Year
Facility
Amount
Drawn
Amount
Undrawn
Amount
10/21
274.5
10/21
699.5
–
–
274.5
699.5
EMTN / Regulation S notes
02/26
101.1
101.1
Medium Term Notes
03/26
450.0
450.0
EMTN / Regulation S Notes
08/27
559.6
559.6
US Private Placement Notes
10/28
349.8
349.8
US Private Placement Notes
10/30
349.8
349.8
–
–
–
–
–
Total debt
2,784.3 1,810.3
974.0
Fair value and other adjustments
Loans to JVs, associates/other
short term facilities
Cash and cash equivalents
Fair value of hedges
Net debt
Net debt/EBITDA
33.6
26.4
(554.6)
(287.0)
1,028.7
1.4x
21
Incitec Pivot Limited Annual Report 2020OPERATING AND FINANCIAL REVIEW Lease Buy-out: Decrease of $47m in relation to end-of-term
asset buy-outs in FY19.
Year ended 30 September
FY20
A$m
FY19
A$m
Change
A$m
Payments/Proceeds from derivatives: Increase of $81m mainly
due to maturity of derivatives that were hedging part of the Group’s
USD assets. Most of these hedges matured or were exited in FY20.
730.5
605.3
125.2
Financing Cash Flow
Cash Flow
CASH FLOW
Operating Cash Flow
EBITDA ex IMIs
Net Interest paid
Net income tax paid
TWC movement (excl FX movements)
Profit from JVs and associates
Dividends received from JVs
Environmental and site clean-up
Restructuring costs
Other Non-TWC
Operating Cash Flow
Investing Cash Flow
Minor growth capital
Sustenance
Lease buy-out
Payments - Central Petroleum Joint
operation
Proceeds from asset sales
Loans to JV
Proceeds from sale of equity securities
Acquisition of subsidiaries & non-
controlling interests
(Payments) / proceeds from
derivatives
Investing Cash Flow
Financing Cash Flow
Dividends paid to non-controlling
interest holders
Lease liability payments
Payment for buy-back of shares
Purchase of IPL shares for employees
Proceeds on issue of shares
Realised market value gain on
derivatives
(135.5)
(131.1)
(13.7)
(8.4)
(32.3)
30.9
(8.0)
(8.0)
(10.4)
(20.8)
(12.2)
(44.9)
27.5
(8.8)
(6.7)
6.5
(4.4)
7.1
3.8
12.6
3.4
0.8
(1.3)
(16.9)
545.1
414.8
130.3
(60.2)
(55.2)
(218.2)
(246.3)
–
(46.6)
(9.8)
–
7.4
10.8
–
–
(6.8)
2.3
(5.0)
28.1
46.6
(9.8)
(3.4)
6.8
(2.3)
(23.4)
(5.3)
(18.1)
(75.2)
5.5
(80.7)
(379.4)
(341.6)
(37.8)
–
(5.9)
5.9
(41.9)
–
(1.3)
645.5
10.3
–
(89.7)
(0.6)
–
–
(41.9)
89.7
(0.7)
645.5
10.3
80.8
9.4
Dividends paid to members of IPL
(30.7)
(121.7)
91.0
Net loss on translation of US$ Net Debt
(78.2)
(159.0)
Non-cash movement in Net Debt
(6.7)
(16.1)
Financing Cash Flow
Change to Net debt
497.0
(393.0)
890.0
662.7
(319.8)
982.5
Fertilisers
Opening balance Net debt
(1,691.4)
(1,371.6)
(319.8)
Sustenance
Closing balance Net debt
(1,028.7) (1,691.4)
662.7
Operating Cash Flow
Operating cash inflow of $545m increased by $130m compared
to FY19. Significant movements included:
EBITDA ex IMIs: Increased by $125m, or 21% when compared
to the pcp.
Investing Cash Flow
Net investing cash outflow of $379m increased $38m as compared
to FY19. Significant movements included:
Sustenance: Decrease of $28m in line with the COVID-19 Response
Plan targets and impact of a low turnaround year.
22
Net financing cash inflow of $497m increased $890m as compared
to FY19. Significant movements included:
Dividends: $91m increase due to the lower FY19 final dividend
payment of $31m and IPL not paying an interim dividend in FY20.
Lease liability payments: $42m decrease due to changes
in accounting for leases (AASB 16: Leases). These cash flows
were historically classified under Operating Cash Flows.
Share buy-back: $90m increase following completion
of the Group’s share buy-back program in FY19.
Proceeds on issue of shares: $646m increase from net proceeds
received from IPL’s equity raising during 2H FY20.
Translation of US$ Net debt: Increase of $81m primarily due
to the non-cash impact from movements in foreign exchange
rates and interest rates on the Group’s debt balances.
Capital Allocation
IPL’s capital allocation process is centralised and overseen by
the Group’s Corporate Finance function. Capital is invested on a
prioritised basis and all submissions are assessed against risk factors
including HSE, operational, financial and strategic risks. Capital is
broadly categorised into major growth capital, minor growth capital
and sustenance capital. The table below includes a summary of cash
spend per business on growth, sustenance and lease buy-out of
Property, Plant & Equipment and Intangible assets:
IPL GROUP
Capital Expenditure
DNA
DNAP
Fertilisers
Minor growth capital
DNA
DNAP
Fertilisers
Lease buy-out
Total
Year ended 30 September
FY20
A$m
FY19
A$m
Change
A$m
18.6
34.7
6.9
60.2
50.8
25.5
30.7
21.9
2.6
55.2
73.0
27.5
141.9
145.8
218.2
246.3
–
–
46.6
46.6
278.4
348.1
(12.1)
12.8
4.3
5.0
(22.2)
(2.0)
(3.9)
(28.1)
(46.6)
(46.6)
(69.7)
There was no major growth capital spend items in FY20. Minor
growth spend of $60m in FY20 included plant efficiency projects;
expansion of the Delta E truck fleet; and other projects supporting
Explosives volume growth and technology investment.
Sustenance capital spend in FY20 of $218m was 11% lower than
pcp in line with the Group’s COVID-19 Response plan targets and low
turnaround year. Significant spend items in FY20 included: Gibson
Island turnaround of $60m, planning spend on the FY21 scheduled
turnarounds at Waggaman, St Helens, Mt Isa and Moranbah of
$26m; and Explosives truck fleet sustenance of $9m. The remaining
sustenance spend was made up of various sustenance projects with
project values of less than $5m each.
Incitec Pivot Limited Annual Report 2020OPERATING AND FINANCIAL REVIEW Dyno Nobel Americas
EBIT US$ million
180
175
170
165
160
155
150
145
140
Explosives
Ag & IC
Waggaman
7
(12)
164
3
(2)
(12)
12
(10)
21
(6)
(2)
(8)
155
FY19 EBIT
COVID-19
Response Plan
Savings
Coal
Volumes
Market
Volumes
Manufacturing
- Gas Cost
COVID-19
Response Plan
Savings
Volumes
Commodity
Prices
Manufacturing
Performance
Fixed Costs
Commodity
Prices
FY19
Land Sale
FY20 EBIT
Dyno Nobel Americas
Explosives
Waggaman
Ag & IC
Total Revenue
Explosives
Waggaman
Ag & IC
Other
EBIT
EBIT margin
Explosives
Waggaman
Ag & IC
A$m
Revenue
EBIT
Year ended 30 September
FY20
US$m
768.4
124.5
126.0
FY19
US$m
824.5
147.4
130.9
1,018.9
1,102.8
121.1
136.1
32.4
1.3
–
19.2
0.2
8.0
Change
%
(7)%
(16)%
(4)%
(8)%
(11)%
69%
nm
nm
154.8
163.5
(5)%
15.8% 16.5%
26.0% 13.0%
1.0%
0.2%
1,506.5
1,569.0
230.8
234.0
(4)%
(1)%
Dyno Nobel Americas earnings for FY20 of US$155m decreased 5%
compared to the pcp. FY19 earnings included US$8m of one-off
profit on sale of excess land. Outlined below are the major earnings
movements during FY20 for each business.
Explosives
Business Performance
Explosives earnings for FY20 of US$121m decreased $15m
compared to the pcp due to the following:
COVID-19 Response Plan: US$7m increase driven by operational
productivity measures, including cost efficiency gains and
discretionary spend savings.
Coal Volumes: US$12m decrease due to structural demand declines,
exacerbated by low US natural gas prices; and lower industrial
demand (COVID-19).
Market Volumes: US$10m decrease mainly due to lower volumes
to US iron ore, Arctic and Mexico customers. In addition, the South
African JV’s that are consolidated into DNA’s result experienced a
US$5m decline in earnings, associated with a significant reduction
in mining activity due to COVID-19 related mine closures.
Market Summary
Explosives business performance in FY20 was impacted by structural
demand changes in the Coal sector; and COVID-19 related demand
softness across all sectors primarily in the second half of the year.
Quarry & Construction
43% of Explosives revenue was generated from the Quarry
& Construction sector in FY20.
Volumes were up 1% vs the pcp. Following a strong 1H FY20,
volumes were slightly down in Q3 FY20 due to softer non-residential
construction sector demand that was impacted by COVID-19 related
project deferrals. Demand recovery in Q4 FY20 was driven by
stronger residential construction activity.
Base & Precious Metals
35% of Explosives revenue was generated from the Base & Precious
Metals sector in FY20.
Volumes were down 9% vs pcp as COVID-19 related lower industrial
demand and temporary mine closures in Q3 and Q4 impacted
volumes to US iron ore, Arctic and Mexico customers.
Coal
22% of Explosives revenue was generated from the Coal sector in
FY20.
Volumes were down 24% compared to pcp, but largely in line with
industry volume declines. The lower volumes were driven by the
underlying structural decline of the US Coal industry, exacerbated
by lower US natural gas prices during the first half of the year
(increasing substitution from thermal coal for electricity generation)
and lower industrial demand (COVID-19).
Agriculture & Industrial Chemicals (Ag & IC)
Ag & IC
Total Revenue
EBIT
EBIT margin
Year ended 30 September
FY20
US$m
FY19
US$m
Change
%
126.0
130.9
1.3
0.2
1.0%
0.2%
(4)%
nm
Business Performance
Ag & IC earnings for FY20 of US$1m increased from $0.2m in the
pcp, due to the following:
Manufacturing – Gas Cost: US$12m net benefits from lower gas
cost and improved plant efficiencies, absent third-party gas supply
interruptions that occurred in FY19.
23
Incitec Pivot Limited Annual Report 2020OPERATING AND FINANCIAL REVIEW COVID-19 Response Plan: US$3m increase driven by operational
productivity and efficiency gains.
Commodity Prices: US$12m decrease mainly due to the US$7m
impact from lower Urea prices. Lower global nitrogen prices
also had a US$5m impact on the pricing of products produced at
Cheyenne and St Helens.
Sales Volumes: US$2m decrease as softer industrial demand from
COVID-19 impacted sales volumes.
Waggaman Operations
WAGGAMAN
Thousand metric tonne
Ammonia manufactured at Waggaman
Ammonia sold
External Revenue
Internal Revenue
Total Revenue
EBIT
EBIT margin
Year ended 30 September
FY20
FY19
Change
%
729.0
730.0
634.4
729.6
15%
–
124.5
147.4
40.0
45.6
(16)%
(12)%
164.5
193.0
(15)%
32.4
19.2
69%
26.0% 13.0%
Manufacturing
Manufacturing performance in the Explosives and Ag & IC businesses
during FY20 was as follows:
Cheyenne, Wyoming: Cheyenne Nitric Acid production was
down 3% compared to pcp. Ammonia production was down 7%
compared to pcp due to a planned maintenance outage and
unplanned downtime caused by a third-party power
supply interruption in 1H FY20.
St Helens, Oregon: Urea production from the St Helens plant
increased 20% compared to pcp mainly due to improved uptime
and efficiencies at the plant absent FY19 gas supply interruptions.
The plant’s major 6-week turnaround campaign commenced at the
end of September 2020.
Waggaman, Louisiana: The plant operated in line with expectation
at 91% of nameplate capacity (1) (pcp: 79%), producing 729k mt of
ammonia in FY20, up 15% on pcp. The higher production was driven
by improved plant reliability and efficiencies. The plant recorded its
second longest uninterrupted production run of 210 days through
August 2020.
(1) 800k mt per annum Waggaman plant capacity.
Waggaman Ammonia Production
Thousand metric tonnes
Business Performance
Waggaman earnings for FY20 of US$32m, increased US$13m
compared to the pcp due to the following:
Manufacturing Performance: US$21m increase from improved
production and higher plant efficiencies compared to the pcp.
Fixed Costs: US$6m earnings decrease, with US$3m due to the
temporary cost increase until after the FY21 plant turnaround
to drive plant reliability improvement; and US$3m of additional
operating costs, including higher insurance cost.
Commodity Price: US$2m net decrease from lower ammonia
prices of US$23m, mostly offset by the positive impact from
lower gas pricing of US$21m.
900
750
600
450
300
150
0
824
729
634
540
FY17
FY18
FY19
FY20
24
Incitec Pivot Limited Annual Report 2020
OPERATING AND FINANCIAL REVIEW
Dyno Nobel Asia Pacific
EBIT A$ million
200
180
160
140
120
100
Net Re-contracting
179
(10)
(28)
5
13
(10)
149
FY19 EBIT
FY18 Western Australia
Contracts
Contract Renewals (Gross)
Technology Growth
Australia
Manufacturing
Performance
Market Volumes
FY20 EBIT
Year ended 30 September
Base & Precious Metals
FY20
FY19
Change
%
42% of Dyno Nobel Asia Pacific revenue was generated from
the Base & Precious Metals sector, which comprises iron ore mines
in Western Australia and hard rock and underground
mines throughout Australia.
371.3
762.6
365.0
785.7
2%
(3)%
Volumes from the sector increased 7% compared to pcp, driven
by strong customer demand and new business.
DYNO NOBEL ASIA PACIFIC
Thousand metric tonne
Ammonium Nitrate – manufactured
at Moranbah
Ammonium Nitrate sold
A$m
Australian Coal
Base & Precious Metals
International
Total Revenue
EBIT
EBIT margin
472.4
415.5
111.3
999.2
149.3
14.9%
477.7
381.9
131.1
990.7
179.2
18.1%
(1)%
9%
(15)%
1%
(17)%
Business Performance
Dyno Nobel Asia Pacific earnings for FY20 of $149m, decreased
$30m compared to the pcp due to the following:
Contract Losses: $10m decrease, from contracts lost in FY18
in Western Australia, in line with previous guidance.
International
11% of Dyno Nobel Asia Pacific revenue was generated
internationally in Indonesia, Turkey and Papua New Guinea.
Volumes decreased 21% as compared to pcp, largely due to lower
demand from Indonesian Thermal Coal customers which had their
operations substantially impacted by COVID-19 during the year.
Manufacturing
Moranbah produced 371k mt of ammonium nitrate during FY20, up
2% on the pcp and equalling FY18 record production. Strong plant
reliability continued to deliver plant efficiencies in FY20, the final
year of its four-year turnaround campaign.
Moranbah Ammonium Nitrate Production
Contract Renewals: $15m net decrease. This comprised of $28m
from lower pricing on contract renewals; partially offset by $13m of
earnings growth from technology related cost efficiencies, increased
technology conversion (electronic detonator systems) and market
share gains in Australia.
Thousand metric tonnes
400
300
321
371
365
371
Manufacturing Performance: $5m increase from higher production
and improved plant efficiencies at Moranbah during FY20.
Market Volumes: $10m decrease, largely due to lower demand
from Indonesian customers that were impacted by COVID-19
restrictions at their operations.
Market Summary
Australian Coal
47% of Dyno Nobel Asia Pacific revenue for FY20 was generated
from the Australian Coal sector, most of which was from supply
to Metallurgical Coal mines in the Bowen Basin.
Volumes from the sector decreased 5% compared to pcp mainly due
to planned lower contracted volumes and impacts from weather
events in Queensland through the Australian summer. Ammonium
nitrate production capacity at the Moranbah plant remains fully
contracted to customers.
200
100
0
FY17
FY18
FY19
FY20
25
Incitec Pivot Limited Annual Report 2020OPERATING AND FINANCIAL REVIEW Fertilisers
EBIT A$ million
160
140
120
100
80
60
40
20
0
-20
-40
-60
-80
(80)
FY19 EBIT
Distribution
Manufacturing
Non-controllables
13
9
15
(103)
22
135
26
(5)
20
Distribution Volumes
& Margins
Distribution Costs &
Other
Manufacturing
Performance
Gas Cost & Efficiency
FY19 SSP Plant
Closure
Insurance Proceeds
& COVID-19 Savings
Foreign Exchange
Commodity Prices
FY20 EBIT
FERTILISERS ASIA PACIFIC
Thousand metric tonne
Phosphate Hill production
(ammonium phosphates)
Gibson Island production
(urea equivalent)
A$m
Manufacturing
Distribution
Fertilisers Elimination
Total Revenue
Manufacturing
Distribution
Profit-in-stock elimination
Fertilisers EBIT
EBIT margin
Year ended 30 September
FY20
FY19
Change
%
979.3
674.7
45%
400.5
369.7
8%
766.1
947.6
653.8
908.9
(211.7)
(143.3)
1,502.0
1,419.4
(26.1)
(121.6)
54.6
(2.3)
26.2
39.9
2.0
1.7 % (5.6)%
17%
4%
nm
6%
79%
37%
nm
(79.7)
133%
Business Performance
Fertilisers Asia Pacific earnings for FY20 of $26m, increased $106m
compared to the pcp due to the following:
Market Summary
Domestic fertilisers sales volumes were 14% up in FY20 at 2,212k
mt (pcp: 1,945k mt). The year started slower as 2019-20 summer
crop sales volumes, in particular irrigated cotton, were adversely
impacted by lasting drought conditions at the time. Above average
rainfall through autumn in many key farming areas supported
good winter crop plantings and fertilisers (phosphates) application.
Built up soil moisture reserves and substantial rainfall in late winter
drove strong winter crop top dress fertilisers (nitrogen) application.
Above average rainfall through spring across most cropping regions
supplemented water availability, driving early summer crop
planting (phosphates application).
Manufacturing
Manufacturing performance in the Fertilisers Asia Pacific business
in FY20 was as follows:
Phosphate Hill
Ammonium phosphates production increased to 979k mt, up 45%
on pcp mainly due to improved plant performance and efficiencies
absent extended production outages in FY19 associated with the
Queensland rail outage and the phosphoric acid reactor failure.
The plant operated reliably at 93% (pcp: 75%) during FY20,
with > 1 million tonnes annual equivalent Ammonium Phosphates
production during the second half of the year.
Distribution Volumes: $20m increase driven by strong fertilisers
sales volumes and favourable product mix following much improved
weather conditions across Eastern Australia.
The Phosphate Hill plant received $8m of benefits from a full
twelve months of lower cost gas under the Northern Territory
gas supply agreement (1) that commenced in January 2019.
Distribution Costs/Other: $5m decrease including investment
in distribution network and higher insurance cost.
Manufacturing Recovery: $135m increase from higher production
and improved plant performance at Phosphate Hill, delivering
positive Manufacturing cash earnings (EBITDA) in FY20.
Lower Gas Cost: $22m increase from lower contracted gas cost
at Phosphate Hill and Gibson Island of $13m; and $9m from lower
3rd party charges due to improved gas supply reliability and
operating efficiencies.
FY19 Portland SSP Closure Cost: $13m increase relating to the
permanent closure of the Portland SSP plant in FY19.
Insurance Proceeds & COVID-19 Response Plan: $9m increase.
Insurance payments of $7m received in relation to the FY19
Queensland rail outage; and $2m benefits from COVID-19
Response plan efficiency gains and non-essential spend savings.
Phosphate Hill Phosphates Production
Thousand metric tonnes
941
850
979
675
1000
800
600
400
200
0
FY17
FY18
FY19
FY20
Gibson Island
The plant produced 401k mt of urea equivalent product, up 8%
on pcp. The planned major turnaround was successfully completed
in March 2020. The new gas supply from Australia Pacific LNG,
which commenced in April 2020 and continues through to the end
of December 2022, delivered a reduction in gas cost of $5m in FY20.
Foreign Exchange and Commodity Prices: $88m net decrease, due
to lower global fertilisers prices of $103m, partially offset by $15m
of benefits from the lower A$:US$ exchange rate compared to pcp.
(1) In November 2015, IPL announced that it had entered an agreement providing gas
to Phosphate Hill from the commencement of supply from the Northern Gas Pipeline,
through to 2028.
26
Incitec Pivot Limited Annual Report 2020OPERATING AND FINANCIAL REVIEW OUTLOOK AND SENSITIVITIES
IPL generally does not provide profit guidance, primarily due to the
variability of commodity prices and foreign exchange movements.
Instead, IPL provides an outlook for business performance
expectations and sensitivities to key earnings drivers based on
management’s current view at the time of this report.
Outlook
COVID-19 & Response Plan
The extent of the future impact of COVID-19 on the Group’s
operational and financial performance depends on certain
developments, including the duration and spread of the outbreak,
regulations imposed by governments with respect to the outbreak
response, and the impact of the pandemic on the global economy,
including commodity prices and customer demand.
The Group continues to actively manage the risks arising from
COVID-19 on its people and operations, which includes a financial
response plan that is expected to deliver cost savings of $60m (1)
per annum by FY22, of which $30m will be delivered in FY21,
heavily weighted to Australian Fertiliser manufacturing.
Dyno Nobel Americas
»
»
The operational earnings of Waggaman remain subject
to movements in ammonia and natural gas prices.
Lower 1H FY21 production expected at Waggaman, following
a two-week outage in November 2020 as site operations were
interrupted by hurricane activity that caused widespread power
outages; and the seven-week major turnaround of the Waggaman
plant which is scheduled to commence in January 2021. The FY21
earnings impact of the turnaround is expected to be approximately
US$25m (2) (including depreciation). Plant reliability is expected to
improve following the completion of the turnaround.
» Agriculture & Industrial Chemicals earnings remain subject
to movements in global fertilisers prices, particularly Urea
and by-product Urea Ammonium Nitrate.
» A six-week turnaround of the St Helens plant was successfully
completed in early November 2020. The FY21 earnings
impact of the turnaround is approximately US$5m (2)
(including depreciation).
Dyno Nobel Asia Pacific
» As part of a four-year campaign, a major turnaround of the
Moranbah plant is scheduled to commence in May 2021.
The FY21 earnings impact of the turnaround is expected
to be approximately $15m (2).
»
The FY21 impact from the FY18 contract losses in Western Australia
remain unchanged at $3m. This is expected to be more than offset
by cost savings and operating efficiencies in the business as part
of the Group’s Response plan.
»
Technology growth is expected to offset the $12m
re-contracting impact from foundation customers in FY21.
Fertilisers Asia Pacific
»
»
Fertilisers earnings will continue to be dependent on global
fertilisers prices, the A$:US$ exchange rate and weather conditions.
Increased soil moisture levels in many districts across the East
Coast of Australia, coupled with an outlook from the Australian
Bureau of Meteorology for La Nina conditions (higher summer
rainfall compared to recent years) is expected to drive strong
demand for fertilisers in FY21.
» Distribution margins for FY21 are expected to be largely in line
with FY20, subject to global fertilisers prices and favourable
weather conditions.
» Phosphate Hill production for FY21 is expected to lower due to
the three-week planned maintenance shut down at Mt Isa that
reduced sulphuric acid availability to Phosphate Hill. The shutdown
was successfully completed in October 2020.
»
Expecting additional benefits of approximately $5m in FY21 from
the full year impact of lower gas supply cost to Gibson Island under
the Australia Pacific LNG contract that commenced in April 2020.
Group
Corporate: Corporate costs are expected to be approximately $30m
in FY21.
Borrowing Costs: Net borrowing costs for FY21 are expected to
be approximately $125m, due to lower debt levels, and excludes
the impact from the planned bond repurchase which would be
determined once finalised.
Taxation: IPL’s effective tax rate for FY21 is expected to be between
21% and 23%.
Foreign Exchange Hedging Program: 90% of estimated FY21
US$ linked fertilisers sales are capped at a rate of $0.74, with full
participation down to an average rate of $0.71 and 40% participation
below $0.71.
Gas Hedging Program: 50% of the November 2020 – March 2021
gas price risk associated with ammonia manufacturing at Waggaman
and St Helens is hedged, with protection at US$3.45 and participation
down to US$2.55. The remaining 50% is exposed to fluctuating gas
prices.
Group capital expenditure: Sustenance capital expenditure for
FY21 is expected to range between $280m and $300m, including
turnarounds spend of approximately $150m.
Sensitivities
The table provides sensitivities to key earnings drivers excluding the
impact of hedging.
Commodity
Americas
Ammonia (3)
Proxy Index
EBIT Sensitivities
CFR Tampa
+ / - US$10/mt = +/-US$6.1m
Natural Gas (4)
Henry Hub
+ / - US$0.10/mmbtu = -/+ US$2.1m
Urea (5)
FOB NOLA
+ / - US$10/mt = +/-US$1.8m
FX EBIT Translation (6)
Asia Pacific
DAP (7)
Urea (8)
+ / - A$/US$0.01 = -/+ A$3.3m
FOB Tampa
+ / - US$10/mt = +/-A$14.4m
FOB Middle East
+ / - US$10/mt = +/-A$4.1m
FX EBIT Transactional (7,8)
+ / - A$/US$0.01 = -/+A$7.8m
(1) Sustained incremental earnings uplift by FY22 of $60M per annum, based on expected
cost savings when compared to FY19 cost base.
(2) Estimated FY21 EBIT impact based on FY20 realised commodity prices.
(3) Based on FY20 Waggaman plant production of 729k mt, less FY20 internal sales volumes
of 124k mt.
(4) Based on FY20 Waggaman plant production of 729k mt less FY20 internal
sales volumes of 124k mt, and FY20 gas efficiency of 35 mmbtu per mt of ammonia.
(5) Based on St Helens plant capacity of 175k mt of urea equivalent product.
(6) Based on actual FY20 Dyno Nobel Americas EBIT (ex IMI) of US$155m and FY20 average
foreign exchange rate of A$/US$0.68.
(7) Based on FY20 Phosphate Hill manufactured ammonium phosphate of 979k mt; average
realised FY20 DAP price of US$304; and FY20 average foreign exchange rate of A$/US$0.68.
(8) Based on actual FY20 Gibson Island production sold subject to urea price movement of 280k
mt; average realised FY20 urea price of US$242; and FY20 average foreign exchange rate of
A$/US$0.68
Note: Proxy Index prices are available on Bloomberg.
27
Incitec Pivot Limited Annual Report 2020OPERATING AND FINANCIAL REVIEW Principal Risks
Set out below are the principal risks and uncertainties associated with IPL’s business and operations. These risks, which may occur individually
or concurrently, could significantly affect the Group’s business and operations. The global impacts of the current COVID-19 pandemic have the
potential to exacerbate some of the risks described below. There may be additional risks unknown to IPL and other risks, currently believed
to be immaterial, which could become material. In addition, any loss from such risks may not be recoverable in whole or in part under IPL’s
insurance policies. The treatment strategies noted below are not exhaustive and do not remove the risks; while in some cases they may
either partially or fully mitigate the exposure, residual risk remains.
The Group’s process for managing risk is set out in the Corporate Governance Statement (Principle 7: Recognise and manage risk).
Broad Risk Category
Description and potential consequences
Treatment strategies employed by IPL
Strategy
IPL operates in highly competitive markets with varying
competitor dynamics and industry structures. The actions of
established or potential competitors could have a negative
impact on sales and market share and hence the Group’s
financial performance.
»
»
In respect of IPL’s advanced technologies, there is a risk that the
intellectual property may be replicated or challenged, resulting
in potential loss of business.
IPL’s fertiliser operations compete against global manufacturers
many of whom have lower input costs and may enjoy regulatory
and economic advantages.
A number of entities in the IPL Group currently undertake or are
parties to joint ventures in different jurisdictions. Where IPL does
not have operational control over these joint ventures, there
is a risk that IPL’s financial performance or reputation may be
adversely impacted.
Health, Safety,
Environment,
Community &
Climate Change
IPL’s operations are inherently dangerous. IPL operates 15 key
manufacturing and assembly sites and is exposed to operational
risks associated with the manufacture, transportation and
storage of fertilisers, ammonium nitrate, initiating systems,
industrial chemicals and industrial explosives products.
These operational risks include an unintended detonation
of explosives, or unintended toxic release or fire/explosion
during manufacture, transportation or storage.
IPL’s business, and that of its customers and suppliers, is
subject to environmental laws and regulations that require
specific operating licences and impose various requirements
and standards. Changes in these laws and regulations, failure
to abide by the laws and/or licensing conditions, or changes
to licence conditions, may have a detrimental effect on IPL’s
operations and financial performance. Where IPL vacates a
site, additional environmental remediation obligations may
arise. Depending on the extent and nature of contamination,
remediation obligations could be significant.
The current COVID-19 pandemic has created a risk that an
infection outbreak may occur at one or more manufacturing
and/or distribution sites, which could impact minimum operator
requirements and result in reduced production and/or output
from one or more manufacturing and/or distribution sites.
Additionally, there may be increased downtime due to staggered
shift times and increased cleaning requirements.
The impact of carbon emissions, and governments’ policies and
actions to limit them, may have an impact on IPL’s operations.
The extent of the impacts will be influenced by factors such
as whether there are policies and actions aimed at a rapid
decarbonisation of the global economy, or whether less stringent
approaches are taken. These impacts could include more severe
extreme weather events, such as droughts and floods, changes
to regulations that could result in an increase to the cost base
or operating cost of plants, or a transition away from fossil
fuels which would likely significantly decrease demand for
thermal coal. A detailed discussion of the risks and opportunities
identified through IPL’s comprehensive assessment of both
physical and transitional risks can be found on pages 14-17 of
IPL’s 2019 GRI Index and Data, which supplements the 2019
Sustainability Report available on the IPL website. (1)
IPL seeks to maintain or develop competitive cost positions
in its chosen markets, whilst maintaining quality product
and service offerings.
IPL continues to invest in new technologies and
premium product offerings in order to meet the needs
of our customers while limiting both IPL’s, and our
customers’, carbon footprints.
» Where IPL is a party to a joint venture without having
operational control, oversight of the joint venture’s
operations, governance practices and risk management
activities is maintained through membership on the entity’s
Board of Directors, Audit Committee and/or Committee of
Management. In addition, IPL receives regular operational
and financial reports and conducts periodic audits.
» A comprehensive Health, Safety, Environment and
Community (HSEC) management system is in place.
» Where remedial obligations are identified, an analysis is
undertaken to assess any potential costs. Where applicable,
provisions are made in the accounts in line with relevant
accounting standards.
» HSEC risk identification, mitigation and management
strategies are employed at all times and across all sites.
»
Systems and procedures, including Standard Operating
Procedures and Work Instructions, are established,
documented, implemented and maintained to reduce
HSEC risk in all work activities.
» Appropriate workers’ compensation programs are in place
globally to assist employees who have been injured while
at work, including external insurance coverage.
»
»
»
The Group has strict processes around the stewardship,
movement and safe handling of dangerous goods and
other chemicals.
Crisis Management Teams exist at various levels of
management across the business to monitor the situation
at a local level and escalate concerns as required. Physical
distancing, face masks and staggered shifts have been
introduced as far as practical. Where not practical, alternative
controls such as plexi-glass screens have been implemented
at work stations and employees are encouraged to work
from home where they can. Increased hygiene and cleaning
routines have been implemented and record keeping and
contact tracing procedures are in place across the Group.
Through engagement with an expert third party, a
comprehensive assessment has been completed of IPL’s
physical and transitional risks and opportunities associated
with climate change. The assessment was conducted using
two future climate related scenarios created specifically for
IPL (a two-degree scenario and a four-degree scenario) in
line with TCFD guidelines.
(1) Refer to IPL’s Climate Change Policy (available on IPL’s website) for further details on the Company’s support for the international climate agreement developed at the 2015 Paris Conference of Parties.
28
Incitec Pivot Limited Annual Report 2020OPERATING AND FINANCIAL REVIEW Broad Risk Category
Description and potential consequences
Treatment strategies employed by IPL
Compliance
People
Manufacturing
IPL’s business, and that of its customers and suppliers, is
subject to various laws, policies and regulatory provisions
across the jurisdictions in which it operates, including anti-
bribery and corruption laws, sanctions, anti-trust laws,
domestic or international laws relating to import and export
quotas, tariffs and geopolitical risks relating to countries with
which IPL, or its customers and suppliers, engages to buy or
sell products and materials.
Failure to abide by, or changes in, these laws and regulatory
provisions in any of the countries in which IPL operates or
in which it has dealings may adversely impact its business,
financial condition and operations, or the business, financial
condition and operations of IPL’s customers and suppliers,
including reputational damage to IPL as well as legal action,
and could impact on the willingness of parties, including
financiers, to transact with IPL.
IPL is also exposed to potential legal and other claims
or disputes in the course of its business and in connection
with its operations.
Additionally, IPL manufactures or produces product to specific
customer and industry specifications and statutory parameters.
The Group is exposed to financial and reputational risk if these
standards, requirements and limits are not met.
IPL has operations in regional and remote locations where it
can be difficult to attract and retain critical and diverse talent.
A shortage of skilled labour or loss of key personnel could
disrupt IPL’s business operations or adversely affect IPL’s
business and financial performance.
IPL’s manufacturing systems are vulnerable to equipment
breakdowns, energy or water disruptions, natural disasters,
unforeseen human error, sabotage, terrorist attacks and other
unforeseen events which may disrupt IPL’s operations and
materially affect its financial performance.
Sulphuric acid is a major raw material required for the production
of ammonium phosphates. Approximately 50-60% of Phosphate
Hill’s sulphuric acid comes from processing metallurgical gas
sourced from Glencore’s Mt Isa Mines copper smelting facility.
Sulphuric acid supply into Phosphate Hill would likely be
negatively impacted, from a volume and/or price perspective,
should the Mt Isa Mines copper smelter close.
Natural gas is the major input required for the production of
ammonia and therefore is a critical feedstock for IPL’s nitrogen
manufacturing operations. Competitive and economic availability
of natural gas is key when sourcing supply, as this impacts
the variable cost of production of ammonia and significantly
influences the plants’ overall competitive position.
There is a risk that a reliable, committed source of natural
gas at economically viable prices may not be available for
the Australian manufacturing operations.
»
Corporate functions are in place to provide sufficient support
and guidance to ensure regulatory risks are identified and
addressed, including regular reviews of country regulatory
risk, comprehensive checks of customers and suppliers
for compliance with relevant sanctions laws, and the
undertaking of due diligence processes as required.
» Where possible, IPL appoints local business leaders and
management teams who bring a strong understanding
of the local operating environment and strong customer
relationships.
»
»
»
»
»
IPL engages with governments and other key stakeholders
to ensure potential adverse impacts of regulatory changes
are understood and, where possible, mitigated.
Regular training is provided to relevant staff on their
obligations and reporting requirements under appropriate
anti-bribery and corruption laws.
IPL provides a whistleblower hotline where employees and
third parties can anonymously notify the Group’s General
Counsel and Chief Risk Officer of any suspected fraudulent
or illegal activity.
IPL operates and manufactures products using detailed
quality management systems. Quality assurance plans are
in place for manufactured products intermediaries, procured
products and raw materials.
The Group has policies and procedures, including flexible
working arrangements and competitive compensation
structures, designed to help attract and retain workforce.
» Management identifies critical roles and implements
policies to help ensure that appropriate succession
and retention plans are in place for those roles.
»
IPL undertakes business continuity planning and disaster
preparedness across all sites.
» Global industrial special risk insurance is obtained from a
variety of highly rated insurance companies to ensure the
appropriate coverage is in place with regard to damage to
the Group’s plants and property and the associated costs
arising from business interruptions.
»
»
»
»
»
The Group has several sources of sulphuric acid for supply
for Phosphate Hill including its Mt Isa operations, which
produces sulphuric acid from burning imported elemental
sulphur, and purchasing directly from a domestic smelter.
In addition, Phosphate Hill uses phosphoric acid reclaimed
from its gypsum stacks in place of sulphuric acid.
The Group has medium term gas contracts in place for its
Australian manufacturing sites. The contracts have various
tenures and pricing mechanisms. IPL explores new gas
supply arrangements as an ongoing part of its operations,
including the extraction of natural gas from the tenement
awarded to Central Petroleum Limited (Central) by the
Queensland government in March 2018, in respect of which
IPL has entered into a 50:50 joint venture with Central.
The US natural gas market is a well-supplied and liquid
market. The Americas business has short term gas supply
arrangements in place for its gas needs with market
referenced pricing mechanisms.
In respect of the Americas business, there is an ability to
hedge gas prices in accordance with policies approved by
the Board.
The Group seeks to maintain or achieve low cost positions
in its chosen markets, which helps its businesses to compete
in changing and competitive environments.
29
Incitec Pivot Limited Annual Report 2020OPERATING AND FINANCIAL REVIEW Broad Risk Category
Description and potential consequences
Treatment strategies employed by IPL
IPL has strong relationships with key customers for the
supply of products and services, and these relationships
are fundamental to the Group’s financial performance.
The loss of key customer(s) may have a negative impact
on the Group’s financial performance.
Customer(s)’ inability to pay their accounts when they
fall due, or inability to continue purchasing from the
Group due to financial distress, may expose the Group
to customer credit risks.
Timely and economic supply of key raw materials represents a
potential risk to the Group’s ability to manufacture and supply
products. In some markets in which IPL operates, economic
supply of key raw materials is reliant on only a few external
parties and in some cases, only one.
In some markets, the availability of transportation routes for
moving raw materials and finished product, such as rail, barge,
truck and ship, as well as the methods for transporting key
raw materials directly to sites, such as pipelines, underground
aquifers and electricity networks, are reliant on only a few
external parties. There is a risk that if these transportation
routes or methods are disrupted, IPL’s manufacturing and
distribution capacities may be reduced.
There is a risk that if production is not sold and effectively
moved from site, plant uptime and earnings could be
negatively impacted should storage at site become full.
Pricing for fertilisers, ammonia, ammonium nitrate and certain
other industrial chemicals is linked to internationally traded
commodities (for example, ammonia, ammonium phosphates
and urea). Some raw materials, such as phosphate rock,
is also an internationally traded commodity. The pricing of
internationally traded commodities is based on international
benchmarks and is affected by global supply and demand forces,
therefore price fluctuations in these products, combined with
fluctuations in foreign currency exchange rates, particularly
the A$/US$ rate, could adversely affect IPL’s manufacturing
operations and financial performance.
Weaker hard and soft commodity prices (particularly coal, iron
ore, gold, corn, wheat, cotton and sugar) could have an adverse
impact on the Group’s customers and has the potential to impact
the customers’ demand, impacting volume and market prices.
»
The Group attempts to diversify its customer base to reduce
the potential impact of the loss of any single customer.
» Where practical, for customers in the Explosives sector,
IPL prefers to engage in long term customer contractual
relationships.
»
The Group manages customer credit risks by monitoring and
actively managing overdue amounts within policy guidelines,
and through endeavouring to negotiate contractual terms
that provide protection to address customer non-payment
or financial distress.
» When appropriate, the Group purchases trade credit
insurance to minimise credit risk.
»
Integrated Business Planning (IBP) and inventory processes
assist in optimising inventory to reduce price risk of stock on
hand and provide flexibility to mitigate the impacts of short
term disruptions.
» Where possible, flexible supply chain and alternative sourcing
solutions are explored and maintained as a contingency.
»
»
»
»
»
Reviews of single-point sensitivity exposures within IPL’s
supply chain are undertaken. Where material risks are
identified, contingency plans are developed, including
identification of alternative sources of supply, additional
storage capacity and increased safety stock.
Plants have storage capacity, as well as logistics capability,
that allows for offtake to be distributed via various channels,
including via rail, truck, barge and pipeline.
IPL manages commodity price risk via a trading book
approach which allows the business to better manage
its short and medium-term exposures to commodity price
fluctuations, while taking into account its commercial
obligations and the associated price risks.
To ensure volume and price commitments are upheld, the
Group has firm and enforceable customer supply contracts.
The Group may enter into derivative contracts, where
available on a needs basis, to mitigate commodity price risk.
However, in some instances price risk exposure cannot be
economically mitigated by either contractual arrangements
or derivative contracts.
The current global economic and business climate and any
sustained downturn in the North American, South American,
Asian, European or Australian economies may adversely impact
IPL’s overall performance by affecting demand for industrial
explosives, industrial chemicals and fertilisers and related
products and services, and profitability in respect of them.
The balance between supply and demand of the products
that IPL manufactures and sells can greatly influence prices
and plant utilisation. The structural shift in the North American
energy sector, which has seen a movement away from
coal-fired energy production towards natural gas has increased
competitive pressure on some of IPL’s major existing customers
(giving rise to increased cost pressure on inputs to their supply
such as explosives) and has also resulted in reduced demand
for their outputs.
» Diversification across explosives and fertilisers markets in
numerous geographical locations helps manage exposures:
IPL’s international explosives businesses operate across
geographically diverse locations with exposures to diverse
sectors including coal, iron ore, quarry & construction and
metals mining; IPL’s Australian fertilisers business operates
in all Australian States other than Western Australia and has
diversity across market segments and customers serviced.
»
»
Continuous review of country specific risks helps proactive
management of potential exposures.
The IBP process incorporates forecasting on a rolling
24-month basis which enables scenario planning and some
supply flexibility. Forecasts are based on typical weather
conditions and are reviewed on an ongoing basis as the
seasons progress to help align supply to changing demand.
Reduced demand for steel inputs (in particular iron ore and
metallurgical coal) can lead to a decrease in demand for
explosives in these industries.
Seasonal conditions (particularly rainfall), are a key factor for
determining demand and sales of explosives and fertilisers.
Any prolonged change in weather patterns & severity of
adverse weather conditions could impact the future
profitability and prospects of IPL.
Customer
Supply Chain
Commodity Price
Demand
30
Incitec Pivot Limited Annual Report 2020OPERATING AND FINANCIAL REVIEW Broad Risk Category
Description and potential consequences
Treatment strategies employed by IPL
Finance
Security
Cyber
The appreciation or depreciation of the A$ against the US$
may materially affect IPL’s financial performance through the
translation of US$ denominated sales, borrowings and related
interest payable.
Other financial risks that can impact IPL’s earnings and/or ability
to operate include the cost and availability of funds to meet its
business needs, movements in interest rates and the imposition
or removal of tariffs.
While IPL currently forecasts that it will have sufficient funds to
meet its business needs and to service its debt requirements,
no assurance can be given that, in the future, IPL will continue
to have sufficient funds to meet its financial covenants, debt
repayment obligations, or be able to refinance its debt prior
to its expiry.
Changes in tax legislation or compliance requirements in the
jurisdictions in which IPL operates, or changes in the policy
or practices of the relevant tax authorities in such jurisdictions,
may result in additional compliance costs and/or increased risk
of regulatory action.
IPL’s operations are vulnerable to sabotage, terrorist attacks
and other unforeseen events which may disrupt IPL’s operations
and materially affect its financial performance.
Sensitive data, pertaining to IPL, its employees, associates,
customers or suppliers, may be lost or exposed, resulting in
a negative impact to reputation or competitive advantage,
and potential breach of regulatory compliance obligations.
IPL may be the target of cyber-attacks which could result
in commercial, financial, health and safety, environmental,
community or reputational impacts.
»
»
»
»
»
»
IPL’s capital management strategy is aimed at maintaining
an investment grade credit profile, an appropriate mix of
A$/US$ debt, funding flexibility by accessing different debt
markets and reducing refinancing risk by ensuring a spread
of debt maturities. A detailed discussion of financial risks is
included in Note 17 (Financial Risk Management).
Financial risk management is undertaken in accordance with
policies, including hedging strategies, that are approved by
the Board.
IPL engages with governments and other key stakeholders to
ensure potential adverse impacts of proposed fiscal and/or
tax changes are understood and, where possible, mitigated.
IPL undertakes business continuity planning and disaster
preparedness across all sites.
The Group has strict processes around the stewardship,
movement and safe handling of dangerous goods and
other chemicals.
Policies, procedures and practices are in place regarding
the use of company information, personal storage devices,
IT systems and IT security.
» A data breach response plan has been established to
respond to, and mitigate the effects of, any instances
of sensitive data breaches that may occur.
»
»
»
»
External testing is performed to assess the security controls
of the Group’s IT systems.
Security Operations Centre, threat intelligence, advanced
threat analytics, system/network controls and industry
standard cyber frameworks are collectively leveraged for
the prevention and detection of, and response against,
cyber threats.
Incident Response Plans, including Disaster Recovery
arrangements, are in place to help IPL effectively
respond to and recover from a cyber security incident.
To ensure a degree of risk transfer in the event of
a major cyber security incident, IPL retains a cyber
security insurance policy.
31
Incitec Pivot Limited Annual Report 2020OPERATING AND FINANCIAL REVIEW We are committed
to the long-term
sustainability of
our businesses, the
environment and
the communities in
which we operate.
32
Incitec Pivot Limited Annual Report 2020 BEING A SUSTAINABLE BUSINESS
33
Incitec Pivot Limited Annual Report 2020 ZERO HARM: OUR LICENSE TO OPERATE
Zero Harm is our core Company value and is fundamental to everything
we do – it is essentially our license to operate.
Tragically, a multi-motor vehicle accident in April on a public road
in South Carolina resulted in two fatalities and one serious injury,
including the death of one of our employees. The tragic loss of life
is a stark reminder of the importance of embedding Zero Harm as
our number one value and priority.
Zero Harm applies as much to our impact on the environment as it
does to safety, and this has continued to be a focus in FY20, with a
reduction of significant environmental incidents from three last year
to one this year.
ZERO HARM – Key Metrics
TRIFR
Potential High Severity Incidents
Process Safety Incidents
Significant Environmental Incidents
FY20
FY19
FY18
0.57
0.80
0.94
34
24
1
34
33
3
42
27
1
Our Zero Harm strategy drives the success of the Company. It sets
out our ambition to integrate our approach in achieving an industry
leading performance in personal safety, process safety, occupational
health and reducing our impact on the environment.
Our Zero Harm strategy underpins our global Zero Harm Strategic
Driver and integrates all Health, Safety, Environment and Community
elements under one framework under the themes of Simplify, Get
the Fundamentals Right, Lead and Engage and Strengthen
our Learning Culture.
These all provide a common language and the basic principles
which will guide our effort, reflect the voice of our internal customer
and improve our performance. Our three-year tactical plan targets
the delivery of global Zero Harm initiatives through our collaboration
networks, focusing on specific Health, Safety, Process Safety and
Environment continuous improvement plans.
Driving down TRIFR
In FY18 we set a goal for a step change in our workforce Total
Recordable Injury Frequency Rate (TRIFR) to achieve a 30%
reduction by FY21. This focus has resulted in us achieving our
FY21 target of 0.70 a year early – with an FY20 TRIFR of 0.57.
We’ve also seen a significant improvement in process safety
incidents, down to 24 compared to 33 last year.
2020 Zero Harm Snapshot
2021 Goal
30% improvement in TRIFR (1)
by 2021 TARGET 0.70
29%
DECREASE
TRIFR of 0.57
Achieved
FY21 TARGET
a year early
27%
REDUCTION
in Tier 1
and
Tier 2
events
2021 Goal
Year-on-year reduction
in Tier 1 and Tier 2
Process Safety Incidents (3)
Process Safety
Personal
Safety
Zero Harm
Significant
Event
Management
Environment
2021 Goal
Zero Significant
Environmental
Incidents (2)
66%
reduction
on last year
Stretch ACHIEVED
for both
INVESTIGATIONS and
ACTIONS COMPLETED
2021 Goal
Sustainable year-on-year reduction
in Potential High Severity Incidents
(1) TRIFR is calculated as the number of recordable injuries per 200,000 hours worked and includes contract workers.
(2) Significant Environmental Incidents as assessed against IPL’s internal risk matrix with potential consequences of 5 or higher on a 6-level scale.
(3) Tier 1 and 2 Process Safety Incidents as defined by the Center for Chemical Process Safety.
34
Incitec Pivot Limited Annual Report 2020
Zero Harm Strategic Themes
Simplify
We support people with easy
to understand and easy to
use systems.
Get the
Fundamentals Right
We define our minimum
expectations: we will be
excellent at the fundamentals.
Lead and Engage
We empower, develop
and expect everyone to
be leaders in Zero Harm.
Strengthen our
Learning Culture
We learn, we share and
we fix for good.
IPL Zero Harm
Achievements in FY20
Proactively
responded
to COVID-19
Implemented our
One IPL strategy
for Zero Harm
Established global
collaboration networks
for Process Safety,
Health and Wellbeing, Safety
and Environment
Zero Harm
Developed the
refreshed Global Safety
Behavioural Program
(SafeTEAMS)
Successful
completion of
the enhanced
Operations Risk
Management pilot
Refreshed our
Compliance Management
Framework
(Environmental focus)
Global
Assurance
Process for
Ammonium Nitrate
Storage
Keeping Everyone Safe
from COVID-19
As we continue to respond to the COVID-19
pandemic, our people have come together
to support one another like never before.
At IPL, we are proud of the inspiring
resilience and resourcefulness that has been
exhibited by our people, our customers
and our communities during the COVID-19
pandemic. It is this spirit that will get us
through these unprecedented times and
will allow all of us to come out of this
pandemic stronger than before.
Throughout the COVID-19 pandemic,
our Crisis Management Team has been
focussed on keeping our people safe and
our operations running by implementing
a range of new processes, action plans
and site specific responses, which has
enabled us to safely protect our people,
our customers and our communities.
Development of Global
Standards for Tyre and
Rim Management
Implemented our
Global Event
Management Process
Targeted Mental
Health and Wellbeing
Campaign
E N T A L HEALTH
M
A
B
C
WELLBE I N G
Incitec Pivot Limited Annual Report 2020
35
OUR PEOPLE
Talented, Engaged and Collaborative People
Our People Strategy is focused on developing a diverse and
inclusive company with the right people in the right roles.
It involves building people focused leaders across our
organisation with the skills and capabilities to coach,
develop and inspire using local action plans for an engaging
experience for all employees.
Employees at all levels of our business are encouraged
to think laterally, to share their experiences and ideas,
and to participate in implementing improvements,
resulting in outcomes which are highly valued by
both the Company and our people.
36
Incitec Pivot Limited Annual Report 2020
Strategic Themes
Engaging Leaders
Building engaging leaders across our
Company who create a One IPL culture
and target strategic results.
Talented People
Attracting, retaining and developing
the right people in the right roles,
both now and for the future.
Engaging Leaders in 2020
» Our One IPL Leadership Framework was integrated globally to inspire our people to deliver results that
create value now, and into the future.
» We commenced the rollout of our One IPL Leadership Foundations Program for our frontline leaders.
Built around a core high performance team model, this program is designed to develop common
foundational leadership capabilities, aligned to our One IPL Leadership Framework.
» We designed, developed and piloted the Frontline Management Program to empower our leaders
to manage their people, assets and resources safely and effectively.
» Building on last year’s Your Voice employee survey, a number of pulse surveys were undertaken across
targeted business units and manufacturing sites to drive and track improvements in engagement.
Talented People in 2020
» We launched our digital, multi-lingual One IPL Learning Pathways training suite, making it globally
accessible to all our people anywhere and at any time.
» Our training and application in the competencies that underpin the One IPL Leadership Framework
regarding talent acquisition were launched, including the development of new self-assessment tools
for release in early 2021.
» As part of our continual improvements and global response to the COVID-19 pandemic, we launched our
new ‘working on-site’ video and video interview platform.
» We refreshed our Australian Manufacturing Graduate Program to include a value proposition for diverse
candidates in technical roles.
» We continued our Dyno Nobel Vacation Program, which actively supports Austmine’s ‘Women In STEM:
METS Career Pathway Program’, to attract high potential talent.
Diverse & Inclusive
Ensuring a diverse & inclusive
environment is the everyday
experience for our employees.
Diversity and Inclusion in 2020
Diversity of people and perspectives is an essential enabler of innovation and collaboration across IPL and is
key to our One IPL culture of working together to capture diversity of thought in an inclusive environment,
where the contribution of everyone is valued.
Collaboration
Achieving strong business
outcomes together as One IPL.
» We achieved an increase in gender diversity across all business units, by 6.2% in Australia and 8.7%
across the Asia Pacific region.
» Our IPL Flexible Work Policy and Procedure was refreshed to support better outcomes for our people
and the company.
» We developed and piloted our Upstander Bystander training program across our Global Manufacturing
Leadership Team and the Australian Manufacturing Leadership Team to embed our inclusive culture
and behaviours.
» Australian Indigenous cultural awareness was facilitated through promoting and participating in
Reconciliation Week, NAIDOC Week and celebrating National Aboriginal and Torres Strait Islander
Children’s Day with employee donations to the Indigenous Literacy Foundation.
» We were proud to have continued to be selected for inclusion in the Bloomberg Gender-Equality Index.
Collaboration in 2020
Collaboration is core to our culture and our One IPL Leadership Framework. Our people have collaborated
like never before during the pandemic.
» We found new ways of providing remote technical support to our customers using virtual technologies.
»
»
»
Remote troubleshooting became the norm as we were unable to move around our locations.
Factory testing of a number of new Manufacturing Processing Units was also undertaken safely,
remotely and virtually.
Site turnarounds and restarts were undertaken in a new COVIDSafe world, achieving Zero Harm
and to strict COVID-19 controls.
» We also brought all our global leaders together in a semi-virtual setting for the 2019 One IPL
Leadership forum which focused on developing our leaders’ behaviours and mindsets to lead
people and outcomes in the present and the future.
» We introduced a new Collaboration Competencies self-assessment tool for our leaders
and wider workforce.
» Our Global Information Technology function introduced a new CIO Standing Ovation Award
to recognise and reward team and individual achievements across the IT Group that deliver
outstanding value and innovation.
37
Incitec Pivot Limited Annual Report 2020 SUSTAINABILITY OVERVIEW
Our Sustainability Strategy
To deliver sustainable growth and shareholder
returns while caring for our people, our
communities and our environment.
IPL is committed to operating in a manner which acknowledges and
proactively manages those issues which are most material to the
long term sustainability of our business, the environment and the
communities in which we operate. This commitment is driven by
our Company Values, which are core to our business, and built into
our Strategic Drivers.
In order to identify those issues most material for our stakeholders
and our business, we conduct a biennial materiality review.
The steps in this process follow Global Reporting Initiative (GRI)
guidelines, with our most recent materiality assessment conducted
in 2019. The identified material issues and topics, our strategy and
the 2020 highlights related to each are described in the overview
on the following page.
More detailed information on our materiality assessment,
our stakeholder engagement strategies and our management
strategies is available in IPL’s annual Sustainability Reports
and GRI Index and Data supplements. These reports can be
accessed at https://www.incitecpivot.com.au/sustainability/
sustainability-report.
Benchmarking our Performance
As part of our commitment to transparent reporting, IPL’s
sustainability performance is assessed against leading indices.
This gives us the opportunity to benchmark our performance against
other organisations in our sectors, provides insight into areas for
improvement, and provides investors and other stakeholders with
an objective measure of our environmental, social and governance
(ESG) risk management and business practices.
Dow Jones Sustainability Index (DJSI) is widely recognised as
the leading reference point in the growing field of sustainability
investing due to the robustness of its assessment process.
Since 2010 IPL has been included in the DJSI where performance
is benchmarked against peers in the global Chemicals sector.
The results since 2015 are represented below.
Dimension
Economic
Environmental
Social
Total for IPL
Chemicals sector average
2015
2016
2017
2018
2019
2020
67
51
63
60
58
74
60
65
67
56
73
61
68
68
53
71
64
57
65
44
72
73
60
69
47
78
71
58
69
36
In 2020, the FTSE Group confirmed that IPL has been independently
assessed according to the FTSE4Good criteria, and has satisfied the
requirements to remain a constituent of the FTSE4Good Index Series
for the seventh year running. Companies in the FTSE4Good Index
Series have met stringent environmental, social and governance
criteria. Other indices and membership are shown to the right.
38 Incitec Pivot Limited Annual Report 2020
DJSI Member since 2010
FTSE4Good Member since 2014
CDP Reporter since 2009
IPL has been a voluntary CDP (formerly
Carbon Disclosure Project) reporter since 2009.
Our most recent CDP report can be
downloaded from our website.
CDP Water Reporter since 2014
IPL has been a voluntary CDP water reporter
since its introduction in 2014 and uses WRI
Aqueduct Water Tool to report. Our most
recent CDP Water report can be downloaded
from our website.
Bloomberg GEI 2019 and 2020 Member
EcoVadis Member since 2015
EcoVadis is assessed biennially.
Our next rating will be in 2021.
Our Strategic Approach
2020 Highlights
Material Issues
Ensuring Ethical Conduct
Climate Change Governance
and Strategy
Workplace Safety
Employee Health and Wellbeing
Community Safety
Managing Environmental Impacts:
Environmental Compliance
Sustainable Economic Performance
Climate Change Risks
and Opportunities
Community Engagement
Resource Efficiency and Emissions
Sustainable Products, Services
and Customer Relationships
Innovation and Technology
Strong Governance:
As part of our commitment to operating to the highest
standards of ethical behaviour, our policies and practices
set ethical standards for directors and employees, and
our Supplier Code of Conduct outlines our expectations for
suppliers and contractors.
Our governance framework and practices are consistent
with the ASX Corporate Governance Council’s Corporate
Governance Principles and Recommendations (3rd
Edition). For more detail on governance see the Corporate
Governance and Climate Change Governance sections.
Zero Harm:
We set continuous improvement objectives across
key metrics including health, safety, environment and
process safety as part of ensuring a safe, high performing
workplace through: easy-to-use systems and processes;
non-negotiable safety and environmental standards;
a high level of ownership and accountability; and a
strong supportive safety learning culture. See our Zero
Harm section for more detail.
Profitable Growth:
Focusing on existing and new opportunities that are
distinctive to our differentiated technology, core markets,
core capabilities and market segments to deliver
sustainable returns for our shareholders; and driven by a
focus on continuous improvement, cost efficiency and the
strategic management of climate risks and opportunities.
Building long-term and meaningful relationships with
our local communities through an active and grass-
roots approach to community engagement, and the
economic development that flows from employment
opportunities provided by our business and the natural
resources unlocked by our products. See the Caring
for Our Communities section for more detail.
Manufacturing Excellence:
Driving consistency across the performance of our assets
with a focus on continuous improvement in measurement
and monitoring, the efficient use of energy and water,
and exploring new ways to reduce our greenhouse
gas emissions. See our 2020 Sustainability Summary and
2020 Sustainability Report for more details, including the
key findings of our Solar Hydrogen Feasibility Study.
Customer Focus:
Partnering with our customers to develop new products
and specific, sustainable solutions.
Leading Technology Solutions:
Providing innovation on the ground that our customers
can use to increase profitability and safety, and reduce
environmental and social impacts.
Employee Engagement
Diversity
Talent Attraction and Retention
Talented, Engaged and Diverse People:
Building a One IPL collaborative and high performing
culture with engaged, diverse and inclusive teams through:
strengthening our learning culture; enabling innovation
through diversity of people and perspectives; and attracting
and developing high potential talent. Read more under
‘People’ and ‘Diversity’ in IPL’s 2020 Corporate
Governance Statement.
» Adoption and implementation
of IPL’s Modern Slavery Policy.
»
Completion of a $2.7m Solar Hydrogen
Feasibility Study, supported by ARENA,
for renewable ammonia production at
Moranbah, Queensland.
» Achieving our FY21 TRIFR goal of 0.70
a year early with an FY20 performance
of 0.57.
»
»
»
»
»
»
»
»
»
»
»
»
»
27% reduction in Tier 1 and Tier 2
Process Safety Incidents.
100% compliance with required
Community Safety Communications.
Investing $4.5m in leading environmental
controls at our Townsville IPF Primary
Distribution Centre.
$3,942.2m Revenue for 2020.
$374.5m EBIT for 2020.
$0.5m Community Investment.
$1,826m metric tonnes of resources
mined using our explosives.
32m metric tonnes of food and fibre
grown by Australian farmers using
our fertilisers.
36% reduction in NOx per tonne of nitric
acid produced against a 2015 baseline.
10% reduction in GHG emissions per
tonne of ammonia produced against
a 2015 baseline.
Setting an absolute GHG reduction
target of 5% by 2026 against our
2020 baseline. (1)
24% increase in customer satisfaction
scores.
300+ Agronomists at our industry
accredited IPF Agronomy in Practice
course over the last three years.
»
7 Joint research partnerships.
» Growth in technology based sales
volumes since 2016, with a Compound
Annual Growth Rate of 32% for Electronic
Detonator Systems and 24% for Premium
Emulsions.
»
»
»
2020 pulse surveys show improved
employee engagement scores at
targeted sites.
Increase in global gender diversity,
with an 8% increase across our Asia
Pacific business.
Refresh of our Australian Manufacturing
Graduate Program.
(1) IPL’s total global 2020 emissions were 3,616,740 tCO2e. The 2020 GHG baseline is subject to adjustment due to unforeseen future
expansions and acquisitions/divestments which may occur before the end of the 2026 IPL financial year.
39
Incitec Pivot Limited Annual Report 2020 Our Use of Natural Resources in 2020
Energy and GHG
The manufacture of nitrogen-based products is energy intensive
because it requires natural gas as both an energy source and a raw
material, with carbon dioxide being liberated during manufacturing.
We have reduced our global GHG emissions intensity per tonne of
ammonia by 4% since last year, and by 10% since 2015 through
energy efficiency projects and investment in a new US$820m
highly efficient ammonia plant.
As described above, the production of these essential agricultural
and mining products is currently based on a hard-to-abate chemical
process, however, we continue to invest in abatement
technologies and seek new ways to reduce our impact.
In 2020, we set an ambitious absolute medium-term GHG
reduction target of 5% by 2026, which is approximately
200,000 tCO2e. This reduction is equivalent to the emissions
generated by 43,209 average passenger vehicles being driven
for a year. Meeting this target will require significant financial
investment. New technologies, such as solar hydrogen, will
be required to achieve greater GHG reductions in the long-term,
and we continue to investigate these emerging pathways.
Total direct and indirect greenhouse gas emissions
ENERGY
Million tonnes of CO2e
4
Scope 1 Scope 2 Total GHG emissions
3
2
1
0
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
GHG intensity per tonne of ammonia produced
tCO2e
3.0
Trend
2.5
2.0
1.5
66,383,873 GJ
total global
energy use
*
10%
*
1%
2,063,598 GJ (3.4%)
of which was
purchased electricity
GHG
3.6m tCO2e
Total GHG
*
7%
*
7%
GHG INTENSITY & PRODUCTION
0.3 t Scope 2 GHG
(no change)
3.3m tC02e
of which was
Scope 1 GHG
tCO2e/t
Ammonia
as per
2020 target
4%
14%
Ammonia
Production
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
* Energy and GHG increases were due to increased global production.
Water Use and Discharge
Cooling water is also a key necessity for nitrogen manufacturing.
In addition to IPL’s comprehensive annual risk management process,
the World Resources Institute Aqueduct Water Tool is completed
each year for long term projections and reviewed by IPL’s Chief Risk
Officer. While the majority of IPL’s major manufacturing plants are
located in regions with plentiful natural supplies of water, several
smaller sites in Australia have been identified by the Water Tool as
being located in areas which may experience water stress by 2025.
In North America, water resources are of particular concern at
Cheyenne, Wyoming. IPL engages with key stakeholders, including
the Wyoming State Engineer’s Office, which manages stakeholder
access to the local groundwater aquifer. In other regions, where
there is higher rainfall, IPL recognises that water management
is also important.
Gross Water
Use 43,853 ML
Discharge
29,737 ML
Net Water
Use 14,502 ML
4%
2%
6%
Water Use by Source
Surface water: 74%
Ground water: 15.5%
Municipal water: 10.2%
Recycled water: 1.9%
Storm water: 0.1%
Desal water: 0.002%
Rain water: 0:00003%
Water Discharge
by Destination
Surface water: 98.7%
Ground water: 1.28%
Sewers: 0.002%
98.7% clean water
to surface waters
43,853 ML
Clean water to
surface waters
40
Incitec Pivot Limited Annual Report 2020 Incitec Pivot Limited Annual Report 2020
41
CLIMATE CHANGE
STRATEGY AND
GOVERNANCE
Manage physical
climate change
risks & advocate
for a just transition
The right
people in the
right roles
within a culture
of innovation
Manage climate-
related financial risks
and opportunities
strategically
Reduce emissions,
increase efficiencies
& explore new
technologies
We recognise the challenge of reducing
our own emissions while continuing
to provide products which improve
people’s lives by unlocking the world’s
natural resources on the ground. We
believe that innovative fertiliser and
explosives products and services will
play an increasingly important role in
reducing emissions and land clearing
while increasing yields of food and fibre,
and efficiently and effectively accessing
the minerals and aggregates required
for new technologies and infrastructure
rebuilding in a world impacted by
climate change. Our Climate Change
Policy describes how the management
of the risks, opportunities and impacts
associated with climate change is
integrated into our six strategic drivers,
on which the success of the Company
is built. Download the policy at
www.incitecpivot.com.au.
Develop and deliver
products and services
which reduce
customer GHG
Partner strategically
for customer
solutions &
sustainable
product use
Climate Change Governance
The charters of the IPL Board and its Audit and Risk Management
Committee formally and specifically assign oversight of climate
change policy and strategy, and climate change-related risks and
opportunities to IPL’s directors. Reports on matters relating to
climate change are received directly by the Board and through
the Audit and Risk Management Committee and the Health,
Safety, Environment and Community Committee of the Board.
Assessing Climate Change-related Risks
and Opportunities
In 2018, we engaged an expert third party to complete a
comprehensive assessment of IPL’s physical and transitional (market
based) risks and opportunities associated with climate change.
The assessment was conducted using two future climate related
scenarios created specifically for IPL (a two-degree scenario and
a four-degree scenario) in line with TCFD guidelines. A description
of the scenarios and the methodologies used to create them is
available in the Managing Climate Change section of the 2018
During 2020 IPL set an absolute GHG
reduction target of 5% by 2026 against
our 2020 baseline. (1)
This is supported by our commitment to the
investigation, identification and implementation of
one or more projects to reduce our global emissions
by 200,000 tCO2e which is equal to ~5% of our
global 2020 emissions.
IPL Sustainability Report. Our two and four-degree future climate
related scenarios will be updated during 2021.
Detailed reporting on identified climate-related risks and
opportunities is included in our annual Sustainability Reports
and the TCFD sections of their GRI Index and Data supplements.
Highlights in 2020
» Moving from intensity based GHG targets to our first absolute
GHG reduction target of 5% by 2026.
» Completion of a $2.7m Solar Hydrogen Feasibility Study:
contributing to new pathways for potential long-term GHG
reductions. Key findings from the study are reported in our
2020 Sustainability Summary and 2020 Sustainability Report.
» 28% growth in sales volumes of our new high efficiency
fertiliser eNpower, which helps to reduce nitrogen losses
to the atmosphere as GHG.
»
The continued successful rollout of Delta E (Differential Energy)
technology to the global explosives market. This technology
reduces energy use and GHG for our mining customers while
resulting in increased productivity and safety.
This reduction in GHG is equal to:
OR
43,209
passenger vehicles
being driven for
one year
The average
passenger vehicle
being driven for
798,681,886km (2)
(1) IPL’s total global 2020 emissions were 3,616,740 tCO2e. The 2020 GHG baseline is subject to adjustment due to unforeseen future expansions and acquisitions or divestments which may occur
before the end of the 2026 IPL financial year.
(2) United States Environmental Protection Agency (2020) Greenhouse Gas Equivalencies Calculator.
42
Incitec Pivot Limited Annual Report 2020
Incitec Pivot Limited Annual Report 2020
43
CARING FOR OUR COMMUNITIES
In line with our Care for the Community & our Environment
Value, we are committed to building long term and meaningful
relationships with the communities in which we operate.
Engagement with our communities takes place at a local level with
our people who live or work in the area, which ensures community
needs are best understood. Our people are empowered to engage
with their local community members and representatives of
national and international charities, regulators, Governments and
grass-roots community organisations including resident groups,
councils, farmers, sporting clubs and environmental groups.
We aim to have a positive impact by providing local employment,
selecting local suppliers wherever possible and creating shared
value for our urban, regional, mining and farming communities.
We empower our people to engage with their local communities
and seek to mitigate negative impacts and create positive
perceptions and outcomes for our business.
Our Sustainable Communities Policy defines our approach
to community relations, including commitments to:
»
»
»
listen to and work with the community;
strive to be a valued corporate citizen; and
respect our neighbours, their values and cultural heritage,
and be considerate of them in carrying out our operations.
Community Safety
The nature of our work is hazardous which is why we have robust
safety measures in place to manage any potential risk or impact
on our local communities. Our Site Leaders collaborate and engage
with local community leaders and first responders on many areas,
the most important being community safety planning.
Nothing is more important than the safety of our people, our
communities and the environment, and our priority is to ensure
everyone is clear on emergency plans to follow in the unlikely
event of any incident. To ensure the emergency controls we have
in place are always working, we hold regular Emergency Response
drills involving Emergency Services and first responders. Copies of
the Emergency Response Plans are lodged with regulatory agencies,
with information provided to local community libraries.
Community Investment
Our Dollar for Dollar program, a key component of our Community
Investment Framework, matches employee donations and site
based fundraising efforts that are aligned to our Principles for
Giving. Our Workplace Giving program offers Australian employees
a voluntary Workplace Giving scheme whereby they can donate
to one or more of the company’s nominated not-for-profit charities.
IPL matches our employees’ Workplace Giving to $20,000 each year.
During 2020, almost $540,000 of community investment was made
globally through IPL’s Dollar-for-Dollar program, the Australian
Workplace Giving program and various site-based initiatives.
100% of both local and Group donations were made in line with
our Principles for Giving, with 4% allocated to improving education
26% contributing towards health and sport initiatives, and 70% to
local community development.
Local Sites
We support activities
that provide solutions
to local challenges &
opportunities in the
communities where our
people work and live.
Education
Providing support for
childhood, adult and
indigenous specific
education activities.
Local Initiatives
We support initiatives that
help local organisations
develop skills & resources
to bring positive and lasting
benefits to communities.
OUR
PRINCIPLES
FOR
GIVING
OUR
AREAS
OF FOCUS
Health
Providing support for
activities and organisations
working towards better
physical and mental health.
IPL Values
We fund initiatives that
are aligned to our values
& business strategy,
and are integral to
the sustainability of
our communities.
Community
Development
Supporting activities that
enrich community life &
enhance the environmental,
social & economic
sustainability of local
communities.
IPL COMMUNITY
INVESTMENT FRAMEWORK
Our Framework preferences local approaches,
enabling each IPL business and site to respond
to the distinct needs of their communities.
44
Incitec Pivot Limited Annual Report 2020
COMMUNITY ACTIVITY HIGHLIGHTS
Heavy Lifting for Simsbury Chamber
of Commerce in Connecticut, USA
When we heard Simsbury Chamber of Commerce needed help
with some heavy lifting, we were only too happy to volunteer.
In preparation for the annual 2020 Art Trail, we carefully and
safely unloaded 36 life like sculptures from a world-renowned
sculptor from two 40ft tractor trailers, contributing to this
wonderful annual community event in Simsbury, Connecticut.
Supporting our COVID-19
Front Line Workers
From 3D face mask printing initiatives, donating and transporting
medical grade PPE to medical practices in our communities around
the world, supplying care packs and home-made meals, making
hand-sewn masks for our people and their families, through to a
range of mental health and wellbeing programs and educational
based programs to help reduce the spread of the virus, including
a children’s competition reinforcing good hygiene and physical
distancing – our resilient people have been united in our response
to supporting our communities during the COVID-19 pandemic.
Community events were held around the world to support the
communities in which we live and work, a small selection from
FY20 include:
East Coast of Australia Bushire Appeal
Our people came together from far and wide volunteering
as emergency first responders and to undertake a wide range
of fundraising efforts that were combined with a corporate
donation, bringing a total contribution of $150,000 to the
National Bushfire Disaster Appeal to support emergency response
efforts. Our fertilisers business has also established a Customer
Bushfire Recovery Program to support our farming communities
on the ground.
Gibson Island, Queensland, Australia
Restoration Project
We proudly contribute funding and volunteers to the Gibson Island
Restoration Project – a community, industry and Department
of Natural Resources partnership project aiming to restore and
re-invigorate the Brisbane based Gibson Island Conservation.
Community Clean Up
in Dinamita, Mexico
Our Dinamita team in Mexico sponsored and facilitated a
significant community clean up involving 165 people and
the removal of 18 tonnes of rubbish.
Australian National Aboriginal &
Torres Strait Islander Children’s Day
Supporting indigenous peoples located in the communities in
which we operate is a critical part of our Group Diversity Strategy.
We supported the Indigenous Literacy Foundation to raise funds
during the week of National Aboriginal and Torres Strait Islander
Children’s Day.
Incitec Pivot Limited Annual Report 2020
45
We are committed to
doing business ethically
and in accordance
with high standards of
corporate governance.
46
Incitec Pivot Limited Annual Report 2020 GOVERNANCE
47
Incitec Pivot Limited Annual Report 2020 CORPORATE GOVERNANCE
We are committed to doing business ethically and in accordance with high standards of corporate
governance – which is fundamental to the continued growth and success of IPL, for our shareholders
and other stakeholders.
Corporate Governance Framework
IPL’s Board of Directors is responsible for charting the direction,
policies, strategies and financial objectives of the Company.
The Board serves the interests of IPL and its shareholders,
as well as other stakeholders such as employees, customers
and the community, in a manner designed to create and
continue to build sustainable value.
IPL’s Board operates in accordance with its charter and has
reserved certain powers for itself. The Board has established
four standing Committees to assist the Board with effectively
discharging its responsibilities:
» Audit and Risk Management Committee;
» Nominations Committee;
» Remuneration Committee; and
» Health, Safety, Environment and Community Committee.
The Board has delegated the day-to-day management of IPL,
and the implementation of approved business plans and corporate
strategies, to the Managing Director & CEO, who in turn may further
delegate to senior management.
IPL’s governance framework:
» plays an integral role in helping the business deliver
on its strategy;
» provides the structure through which strategy and business
objectives are set, performance is monitored, and risks are
managed;
» provides guidance on the standards of behaviour that IPL
expects of people; and
» aligns the flow of information and accountability from our
people, through the management levels, to the Board and
ultimately our shareholders and key stakeholders.
Stakeholders
Board
Assurance and
oversight through
reporting
Delegation
Accountability
Managing Director
& CEO
Accountability
Delegation
Independent
Assurance
Audit and Risk
Management
Nominations
Remuneration
Health, Safety,
Environment and
Community
Executive Team
Internal
Audit
External
Auditor
Board Committees
Accountability
Delegation
Our People
48
Incitec Pivot Limited Annual Report 2020
IPL Policies and Practices
As part of our commitment to operating to the highest standards
of ethical behaviour, we have a range of policies and practices that
set ethical standards for directors, employees, contractors and third
parties. These policies describe core principles designed to ensure
ethical conduct is maintained in the interests of shareholders and
other stakeholders.
The IPL Code of Conduct is our global code for business conduct
– it contains principles and standards of conduct which are based
on IPL’s values and represents our commitment to uphold ethical
business practices and meet applicable legal requirements.
This is supported by key policies, including our Anti-bribery and
Improper Payments Policy, Human Rights Policy, Modern Slavery
Policy, Supplier Code of Conduct, Whistleblower Protection Policy;
Continuous Disclosure Policy and Securities Trading Policy (which
are available on our website), together with a number of other
company policies which outline expected standards of behaviour.
Board Composition
Under IPL’s Board Charter, the composition of the Board is
determined having regard to what is appropriate to achieve efficient
and prudent decision making. The Board is committed to ensuring
that it is comprised of individuals with an appropriate range of
skills, experience, expertise and diversity to deal with current and
emerging issues in our business. The Board currently comprises six
directors, including five Non-executive Directors and one executive
Director (being the Managing Director & CEO), and details of their
qualifications and experience is provided under the Board of
Directors section of this Annual Report.
Corporate Governance Statement
Our corporate governance framework and practices have
complied with the ASX Corporate Governance Council’s Corporate
Governance Principles and Recommendations (3rd Edition) (ASX
Recommendations) throughout the 2020 financial year.
The Board continually reviews IPL’s governance policies and
practices to ensure that they remain appropriate in light of corporate
governance developments and changes in expectations, including
as reflected in the revised 4th Edition of the ASX Recommendations.
Many of the new recommendations contained in the 4th Edition are
already embedded in IPL’s existing governance arrangements.
IPL’s 2020 Corporate Governance Statement, which can
be viewed at www.incitecpivot.com.au/about-us/
about-incitec-pivot-limited/corporate-governance,
provides detailed information on IPL’s corporate governance
practices for the year ended 30 September 2020.
49
Incitec Pivot Limited Annual Report 2020 BOARD OF DIRECTORS
Brian Kruger
BEc
Independent Non-executive Chairman
Mr Kruger was appointed as a non-
executive director on 5 June 2017 and
was appointed Chairman on 1 July 2019.
Committee memberships
Chairman of the Nominations Committee
Member of the Remuneration Committee
Member of the Health, Safety,
Environment and Community Committee
Skills and experience
Mr Kruger is the former Managing
Director & Chief Executive Officer of Toll
Holdings Limited, having joined Toll in
2009 as Chief Financial Officer, before
being appointed Managing Director &
Chief Executive Officer in 2012. Prior
to joining Toll, Mr Kruger had a career
spanning 25 years in the resources and
industrial sectors in Australia and the U.S.
Mr Kruger brings to the Board significant
experience in the industrial sector and
a deep knowledge of manufacturing
operations including in North America,
as well as executive leadership
experience in the Australian listed
company environment.
Other directorships/appointments
Racing Victoria Limited – Chairman
50
Rebecca McGrath
BTP(Hons), MASc, FAICD
Independent Non-executive Director
Ms McGrath was appointed as a non-
executive director on 15 September 2011.
Committee memberships
Chairman of the Health, Safety,
Environment and Community Committee
Member of the Nominations Committee
Member of the Audit & Risk Management
Committee
Skills and experience
Ms McGrath had a 23-year career with BP
plc, where she held a number of senior
roles including as Chief Financial Officer and
Executive Board member for BP Australia
and New Zealand.
Ms McGrath brings to the Board over 20
years’ experience in the international oil
industry, senior executive experience in
operations and finance, an operational and
strategic understanding of occupational
health and safety both as an executive and
as a director and experience gained through
significant exposure to manufacturing and
supply chain management.
Other listed company directorships
in the past three years
OZ Minerals Limited – Non-executive
Chairman (from 2017) and Non-executive
Director (from 2010)
Goodman Group – Non-executive Director
(from 2012)
Other directorships/appointments
Investa Commercial Property Fund Holdings
– Non-executive Director
Scania Australia – Independent Chairman
Kilfinan Australia – Chairman
Victorian Council of the Australian Institute
of Company Directors – State President
and Member of National Board
Director Advisory Panel of the Australian
Securities and Investments Commission
– Member
Advisory Council JP Morgan Australia
– Member
Jeanne Johns
B.S. Chemical Engineering, magna cum laude
Managing Director & CEO
Ms Johns was appointed as Managing Director
& CEO on 9 August 2017 and commenced in
the role on 15 November 2017.
Committee memberships
Member of the Health, Safety, Environment
and Community Committee
Skills and experience
Ms Johns is a global executive and chemical
engineer with over 30 years’ experience
in the international refining, petrochemicals,
oil and gas industries.
Ms Johns brings to the Board her broad
experience in the chemicals and energy
sectors, having held executive roles in
North America, UK, China, Europe and Asia.
Her global experience includes a deep
understanding of the strategic and operational
issues facing companies in cyclical and
commodity-based businesses.
Other listed company directorships
in the past three years
Tate & Lyle, plc – Non-executive Director
(2016 - 2017)
Parsons Corporation – Non-executive Director
(2014 - 2017)
Other directorships/appointments
International Fertilizers Association – Director
Australian Climate Leaders Coalition (CLC)
– Founding Member
American Chamber of Commerce in Australia
(AmCham) Council of Governors – Chair, Victoria
Liveris Academy for Innovation and Leadership,
University of Queensland – Advisory Board
Member
Incitec Pivot Limited Annual Report 2020 Bruce Brook
BCom, BAcc, FCA, MAICD
Independent Non-executive Director
Mr Brook was appointed as a non-
executive director on 3 December 2018.
Committee memberships
Chairman of the Audit & Risk
Management Committee
Member of the Nominations Committee
Member of the Remuneration Committee
Skills and experience
Mr Brook was the Chief Financial Officer
of Western Mining Resources Limited
and Deputy Chief Financial Officer of the
Australian & New Zealand Banking Group.
Mr Brook brings to the Board extensive
executive experience in Australia,
America, the UK and Africa, across a
range of industries including mining,
finance, manufacturing
and chemicals.
Other listed company directorships
in the past three years
CSL Limited – Non-executive Director
(from 2011)
Newmont Corporation – Non-executive
Director (from 2011)
Other directorships/appointments
Australian Institute of Company
Directors, Corporate Governance Advisory
Committee – Member
Guide Dogs Victoria – Director
Gregory Robinson
Bsc(Hons), MBA, MAICD
Independent Non-executive Director
Mr Robinson was appointed as a non-
executive director on 25 November 2019.
Committee memberships
Chairman of the Remuneration Committee
Skills and experience
Mr Robinson has held various senior
management and executive roles during
his executive career which spans over
30 years, including as a Director of
Merrill Lynch Investment Banking, CFO/
CDO of BHP Petroleum, Finance Director
and ultimately Managing Director &
Chief Executive Officer of Newcrest
Mining Limited.
Mr Robinson brings to the Board significant
senior executive experience in strategy,
projects, operations, finance, accounting,
capital management and risk management
within the mining, oil and gas industries
in Australia and internationally.
Other directorships/appointments
Royal Automobile Club of Victoria (RACV)
– Deputy Chairman and Non-executive
Director
51
Xiaoling Liu
PhD (Extractive Metallurgy), BEng (Extractive
Metallurgy), GAICD, FAusIMM, FTSE
Independent Non-executive Director
Dr Liu was appointed as a non-executive
director on 25 November 2019.
Committee memberships
Member of the Health, Safety, Environment
and Community Committee
Member of the Audit & Risk Management
Committee
Skills and experience
Dr Liu is a metallurgical engineer and
experienced non-executive director who
has had extensive executive experience
in leading global mining and processing
businesses, including a 26-year career
with Rio Tinto.
Dr Liu brings to the Board her extensive
executive experience in Australia, America,
Asia and Europe, across a range of industries
including global mining and processing
businesses.
Other listed company directorships
in the past three years
South32 Limited – Non-executive Director
(from 2017)
Newcrest Mining Limited - Non-executive
Director (2015-2020)
Iluka Resources Limited – Non-executive
Director (2016-2019)
Other directorships/appointments
Queensland University of Technology
– Chancellor
Incitec Pivot Limited Annual Report 2020 EXECUTIVE TEAM
Jeanne Johns B.S. Chemical Engineering, magna
cum laude
Managing Director & CEO
See Board of Directors page.
Nick Stratford B.Ec, CA
Chief Financial Officer
Nick commenced as Chief Financial Officer in July 2020.
With more than two decades of professional experience
in international finance and business management,
Nick brings a wealth of expertise to the role, including
more than a decade of experience with IPL, most recently
as Dyno Nobel Americas President. This saw Nick based
in the US for seven years where he also served as a
member on seven of the North American business’s joint
venture Board of Directors. Nick’s appointment as CFO
sees him return to his hometown of Melbourne where he
began his career with IPL and worked as the company’s
Group Financial Controller and General Manager Investor
Relations. Nick has previously worked for large firms across
the globe, including Deloitte & Touche where he was based
in Melbourne and Los Angeles and Reckitt Benckiser where
he was based in Europe.
Greg Hayne BComm, MBA
President, Dyno Nobel Asia Pacific
Greg was appointed as President, Dyno Nobel Asia
Pacific in January 2018. With over 20 years’ experience
in international business development, operations and
P&L management, Greg has held a number of senior
leadership positions within IPL, including as Vice President
of Marketing where he led the establishment of the
foundation contracts for Dyno Nobel Moranbah, Vice
President of International Operations responsible for Dyno
Nobel’s Indonesian expansion, and most recently as Senior
Vice President, Retail Sales & Operations for Dyno Nobel
Americas, supporting the growth of the company’s wholly
owned distribution network across the region.
Braden Lusk PhD, P.E.
President, Dyno Nobel Americas
Braden has more than 20 years’ experience in the mining
and explosives industry and was appointed as Dyno Nobel
Americas President in July 2020. Braden has been with
IPL’s Dyno Nobel Americas business since 2018 and prior
to being appointed President, served as Senior Vice
President Corporate Accounts and Tech Services. In that
role, he leveraged expertise in mining and blasting
optimisation to develop outcome-based offerings
that provided significant downstream value for critical
customers. Braden has a combination of practical on-site
skills, including working as a mine supervisor, international
consultant, and trainer, along with extensive academic
experience. Prior to joining Dyno Nobel, Braden was Chair
of Mining and Nuclear Engineering at Missouri University
of Science and Technology where he had previously
earned a PhD in mining engineering, with an emphasis
in explosives engineering.
Stephan Titze Bachelor Applied Science (Rural
Management, Agriculture Marketing)
President, Incitec Pivot Fertilisers
Stephan was appointed as President, Incitec Pivot Fertilisers
in January 2019. Stephan is an Agribusiness professional
with more than 25 years of experience in crop protection,
seeds and irrigation. Stephan has held senior management
positions in Syngenta, Zeneca and ICI Australia in Asia,
including China, Japan, Korea and Indonesia and also in
Europe, East Europe and Australia. Stephan served 5 years
as Chairman of Crop Life China and Vice President for the
Swiss Chamber of Commerce in China and in 2011 was
named China’s Swiss CEO/Entrepreneur of the Year.
In September 2020, Stephan was appointed as the
Deputy Chairperson of Fertilizers Australia.
52
Tim Wall BE(Hons) Electrical Engineering, CPEng, GAICD
President Global Manufacturing & Corporate HSE
Tim was appointed in November 2018. Tim’s previous
role was General Manager, Manufacturing at Caltex
Australia and prior to this he worked across Australia
and the UK for BP. In a career spanning over 30 years,
Tim has held senior executive positions in Operations,
Reliability, Safety & Risk, Strategy and Engineering.
Seth Hobby LL.B (Hons), Juris Doctorate
Executive Commercial Officer
Seth was appointed as IPL’s Executive Commercial
Officer in January 2018. Seth has fifteen years of
international legal and business experience, including
working across the IPL Group, both in Asia Pacific
and the U.S. Seth has led and been involved with
major commercial and strategic projects for IPL and
Dyno Nobel in both corporate, commercial and legal
capacities. Seth has served as the Chairman of the
Institute of Makers of Explosives in the U.S., and for
many years as a director on the boards of each
of IPL’s North American joint venture businesses.
Michele Mauger AHRI, HRINZ
Chief People Officer
Michele commenced as Chief People Officer
in November 2020. Michele has more than 25 years
of international experience in human resources,
working across a range of industries including mining,
construction, government and hospitality. Michele has
held a number of global executive leadership roles,
including the Executive General Manager, People
Capability and Communications at Thiess, the Group
People Director for global engineering company Worley
and most recently the Executive Director, People, at
Metro Trains Melbourne. Michele is a Member of the
Resourcing and Innovation Board Committee at the
Minerals Council of Australia and a Board Member of
Arts Project Australia.
Robert Rounsley
MSc (Chem), BSc Hons (Chem), MBA
Chief Technology Development Officer
Rob was appointed as Chief Technology Development
Officer in January 2018 and leads IPL’s Global
Technology Group, bringing an increased focus on
value creation for IPL’s global explosives and fertiliser
customers through technology and innovation. With
over 20 years’ experience, Rob was previously Senior
Vice President Technology across the Asia Pacific and US
regions.
Margot Sharapova BA
Executive Chief Information Officer
Appointed in April 2019, Margot’s role is to ensure
the IPL Group’s enterprise technology supports
our commitments to customers, employees, and
shareholders. Margot brings experience in large
and complex, multi-site IT transformations, leveraging
technology to engage clients and consumers, and is
pivotal in supporting IPL’s Strategic Value Drivers for
the Group’s performance and growth. With a career
spanning over 25 years, Margot has held senior
executive positions as CIO in large global and regional
matrix organisations.
Incitec Pivot Limited Annual Report 2020 Incitec Pivot Limited Annual Report 2020
53
Our business has
proven to be resilient
during FY20.
54
Incitec Pivot Limited Annual Report 2020 FINANCIAL & STATUTORY REPORTS
55
Incitec Pivot Limited Annual Report 2020 DIRECTORS’ REPORT
The directors of Incitec Pivot Limited (the Company or IPL) present their report together with the financial report of the Company and its
controlled entities (the Group) for the year ended 30 September 2020 and the auditor’s report.
The following sections of the Annual Report form part of, and are to be read in conjunction with, this Directors’ Report: Board of Directors,
Operating and Financial Review (OFR), Remuneration Report and the Auditor’s Independence Declaration.
Directors
Particulars of the qualifications, other directorships, experience and special responsibilities of each Director as at the date of this report
are set out in the Board of Directors section.
During the financial year, the following changes to the composition of the Board of Directors occurred:
» Dr Liu and Mr Robinson were appointed as directors on 25 November 2019;
» Ms Fagg AO retired as a director on 20 December 2019 (at the conclusion of the Company’s 2019 Annual General Meeting); and
» Mr Breunig resigned as a director on 28 February 2020.
Directors’ meetings
The number of Board and Board Committee meetings attended by each of the directors of the Company during the financial year
are listed below:
Board
Audit and Risk
Management
Committee
Remuneration
Committee
Nominations
Committee
Health, Safety,
Environment and
Community
Committee
Additional
Meetings (3)
Director – Current (1,2)
Held
Attended
Held
Attended
Held
Attended
Held
Attended
Held
Attended
Held
Attended
B Kruger (4)
B Brook
X Liu (5)
R McGrath
G Robinson (6)
J Johns
Director – Former
K Fagg AO (7)
J Breunig (8)
8
8
7
8
7
8
2
3
8
8
7
8
7
8
2
3
1
5
4
5
–
–
–
–
5
5
4
5
1
5
–
–
6
6
–
–
5
–
1
–
6
6
2
–
5
6
1
–
3
3
–
3
–
–
–
–
3
3
–
3
–
–
–
–
2
–
3
4
–
4
1
2
2
–
3
4
–
4
1
2
6
6
4
4
4
6
–
–
6
6
4
4
4
6
–
–
Chairman Member
(1) ‘Held’ indicates the number of meetings held during the period that the director was a member of the Board or Committee.
(2) ‘Attended’ indicates the number of meetings attended. Directors who are not members of the Board Committees do attend Committee meetings from time to time (as non-executive directors have
a standing invitation to attend all Committee meetings).
(3) Reflects the number of additional formal meetings attended during the financial year by each director, including Committee meetings (other than the standing Board Committees) where any two
directors are required to form a quorum.
(4) Mr Kruger was appointed Chairman of the Remuneration Committee effective 20 December 2019. Mr Kruger was a member of the Audit and Risk Management Committee until 20 December 2019
and attended one scheduled meeting during the period he was a member.
(5) Dr Liu was appointed as a director on 25 November 2019 and as a member of the Audit and Risk Management Committee and the Health, Safety, Environment and Community Committee with
effect from 20 December 2019.
(6) Mr Robinson was appointed as a director on 25 November 2019 and as a member of the Remuneration Committee with effect from 20 December 2019. Mr Robinson was subsequently appointed
Chairman of the Remuneration Committee from 1 October 2020.
(7) Ms Fagg AO retired as a director on 20 December 2019.
(8) Mr Breunig resigned as a director on 28 February 2020.
56
Incitec Pivot Limited Annual Report 2020DIRECTORS’ REPORT
Directors’ interests in share capital
The relevant interests of each director in the share capital
of the Company as at the date of this report is disclosed
in the Remuneration Report.
Company Secretary
Ms Richa Puri was appointed to the role of Company Secretary
on 8 August 2019. Ms Puri (LLB (Hons). B. Com (Accounting), FGIA)
is a corporate lawyer and governance adviser with over 15 years
relevant professional experience. She has practiced as a lawyer
for legal firms in Australia and has experience in providing
in-house legal, governance and company secretarial advice
to ASX listed companies.
Principal activities
The principal activities of the Group during the course of the
financial year were the manufacture and distribution of industrial
explosives, industrial chemicals and fertilisers, and the provision
of related services. No significant changes have occurred in the
nature of these activities during the financial year.
Dividends
Dividends since IPL’s 2019 Annual Report:
Dividend type
Dividend
per share
Total
amount
$mill
Franked
percentage
Date of
payment
Paid during the financial year
2019 final dividend
3.4 cents
54.6 30% franked
8 January
2020
2020 interim dividend
nil
To be paid after end of the financial year
2020 final dividend
nil
nil
nil
N/A
N/A
N/A
N/A
Review and results of operations
A review of the operations of the Company during the financial
year, the results of those operations and the Company’s financial
position is contained in the OFR.
Significant changes in the state of affairs
FY20 was a year of unpredicted and unexpected events, including
the Australian bushfires and drought during the Australian summer,
as well as the international effect of the COVID-19 pandemic which
impacted the demand of some of the industries we service and our
customers outside Australia. While IPL was impacted by COVID-19,
as a supplier to industries that are deemed as providing “essential
services”, such as Agriculture, Mining and Construction, the impact
was largely limited to our businesses outside Australia and occurred
early in the pandemic as business was determining a safe way
to operate.
IPL proactively adjusted its comprehensive business continuity plans
to support continuous operation at all of its facilities and the ability
to deliver to customers. Early on in the pandemic the Company
took decisive steps to ensure the safety of its people, customers and
suppliers through establishing a Global Crisis Management Team,
which escalated key decisions to the Executive Team. Management
also responded with mitigating measures to address the indirect
impacts from the COVID-19 pandemic on the global economy, our
end markets and commodity prices, implementing a Response Plan
to deliver short term non-essential operational spend savings of
$20m and the deferral of non-essential sustenance capital in FY20.
In May 2020, IPL undertook an institutional placement and share
purchase plan, raising approximately $657.5m ($645.5m net of
costs) in equity, to underpin the financial strength of the business,
to ensure it is well placed to front the impacts of the COVID-19
pandemic and to capitalise on strategic opportunities that may arise.
In August 2020, IPL announced a comprehensive Response Plan
that will deliver sustained incremental cost savings from business
efficiencies of approximately $60m per annum (including the
$20m already delivered in FY20) by FY22.
Further information on these matters is contained in the OFR.
Events subsequent to reporting date
In November 2020, the Board has determined, as an exception to
its dividend policy, not to pay a final dividend for FY20 in light of the
ongoing uncertainty due to COVID-19 and IPL’s equity raising in May
2020. IPL’s dividend policy, which is to pay between 30% – 60% of
NPAT, remains unchanged.
As announced on 10 November 2020, subject to market conditions,
IPL is intending to invite the holders of its outstanding notes
under the AMTN and EMTN Programmes to tender their notes for
repurchase by IPL for up to an aggregate amount of approximately
$200m. The repurchase of the notes forms part of the Group’s
strategy to optimise its debt portfolio between fixed rate capital
debt markets and floating rate bank debt markets.
The Group has and continues to actively manage the risks arising
from COVID-19 on the safety of our people and the business
continuity of our operations. The Group’s operations are in industries
that have been deemed essential by Governments and we are
continuing to run in line with the required safety and health
guidelines in our operations. The company has also implemented
a financial response plan that focuses on sustained cost savings
and improvement of free cash flow. The extent of the future impact
of COVID-19 on the Group’s operational and financial performance
will depend on certain developments, including the containment
strategies imposed by governments and duration of the COVID-19
Pandemic, and the subsequent impact of these strategies on the
operations of customers, employees and vendors.
Likely developments
The OFR contains information on the Company’s 2020 financial
performance and prospects for future financial years, and refers to
likely developments in the Company’s operations and the expected
results of these operations in future financial years. Information on
likely developments in the Company’s operations for future financial
years and the expected results of those operations together
with details that could give rise to material detriment to the
Company (for example, information that is commercially sensitive,
confidential or could give a third party a commercial advantage)
have not been included in this report where the directors believe
it would likely result in unreasonable prejudice to the Company.
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, Chile, Canada, Indonesia, Papua New
Guinea and Turkey. The Group is committed to complying with
environmental legislation, regulations, standards and licences
relevant to its operations.
The environmental laws and regulations generally address
certain aspects and potential 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.
57
Incitec Pivot Limited Annual Report 2020DIRECTORS’ REPORT In certain jurisdictions, the Group holds 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.
Measurement of the Group’s environmental performance,
including determination of areas of focus and assessment
of projects to be undertaken, is based not only on the actual
impact of incidents, but also upon the potential consequence,
consistent with IPL’s risk-based focus.
During the year, the Group has continued to focus on licence
compliance and identification and mitigation of environmental
risks. Remediation works have progressed at a number of sites
in Australia and the United States.
For the 2020 financial year, one prosecution was recorded
in relation to an acid spill at the Phosphate Hill site in 2018.
In May 2020, Southern Cross Fertilisers Pty Ltd (SCF) pleaded
guilty to two charges in relation to proceedings brought by
the Department of Environment and Science due to a breach
of the site Environmental Authority. SCF was fined $45,000
and ordered to pay $3,664 in costs.
In May 2020, Dyno Nobel Inc. entered into a Consent Decree
with the U.S. Environmental Protection Agency (EPA) after reaching
a resolution of a civil matter relating to allegations of Clean Water
Act and hazardous waste violations at its facilities in Carthage,
Missouri and Louisiana, Missouri. The resolution primarily addresses
events that predate 2017, and the civil settlement concludes the
EPA’s investigation and lawsuit. As part of the settlement Dyno
Nobel Inc. paid a civil penalty of $2,900,000 and committed to
ongoing compliance monitoring obligations and implementation
of physical improvements at both facilities.
Indemnities and insurance
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.
In accordance with the Company’s Constitution, the Company has
entered into Deeds of Access, Indemnity and Insurance with each
director of the Company and certain officer’s and members of senior
management. Pursuant to those deeds, the Company has paid a
premium in respect of a contract insuring directors and officers of
the Group against any liability for costs and expenses incurred by
them in defending civil or criminal proceedings involving them
as such officers, with some exceptions. The contract of insurance
prohibits disclosure of the nature of the liability insured against
and the amount of the premium paid.
Auditor independence and non-audit services
Deloitte Touche Tohmatsu (Deloitte) was appointed as the
Company’s external auditor at the 2011 Annual General Meeting
and continues in office in accordance with section 327B(2) of the
Corporations Act 2001. Mr Tim Richards is the Company’s lead
audit partner for the 2020 financial year.
The Group may decide to engage the auditor, Deloitte, for the
provision of non-audit services, where such services are not in
conflict with their role as auditor and their expertise and/or
detailed experience with the Company may allow cost
efficiencies for the work.
58
The Board has considered the position and, in accordance with
advice received by the Audit and Risk Management Committee,
is satisfied that the provision of non-audit services during the
year by Deloitte is compatible with the general standard of
independence for auditors imposed by the Corporations Act 2001
and does not compromise the external auditor’s independence.
The Board also notes:
»
»
the engagements for all non-audit services provided by Deloitte
were reviewed by the Chief Financial Officer, and where relevant,
approved by the Audit and Risk Management Committee, in
accordance with the Committee’s Charter and the Company’s
policy on the engagement of the external auditor for the
provision of non-audit services to ensure they do not impact the
integrity and objectivity of the auditor; and
the non-audit services provided by Deloitte did not undermine
the general principles relating to auditor independence as set
out in APES 110 Code of Ethics for Professional Accountants,
as they did not involve reviewing or auditing the auditor’s
own work, acting in a management or decision making capacity
for the Group, acting as an advocate for the Group or jointly
sharing economic risks or rewards.
Deloitte provided non-audit services to the amount of $50.3k
during the year ended 30 September 2020 (refer to note 23
to the financial statements).
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’s independence as
auditor. A copy of the auditor’s independence declaration is
set out on page 80 and forms part of this report.
Proceedings on behalf of IPL
No application has been made under section 237 of the
Corporations Act 2001 in respect of IPL, and there are no
proceedings that a person has brought or intervened in
on behalf of IPL under that section.
Rounding
As the Company is of a kind referred to in ASIC Corporations
(Rounding in Financial/Directors’ Reports) Instrument 2016/191,
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.
The Directors’ Report, which includes the OFR and the
Remuneration Report, is signed in accordance with
a resolution of the directors of Incitec Pivot Limited.
Brian Kruger
Chairman
Jeanne Johns
Managing Director & CEO
10 November 2020
Incitec Pivot Limited Annual Report 2020DIRECTORS’ REPORT Incitec Pivot Limited Annual Report 2020
59
59
Incitec Pivot Limited Annual Report 2020 REMUNERATION REPORT
Introduction from the Chairman of the Remuneration Committee
Dear Shareholders,
On behalf of Incitec Pivot Limited’s (IPL or the Company)
Remuneration Committee and the Board, I am pleased to present
the Remuneration Report for 2020 which sets out the remuneration
information for the Managing Director & Chief Executive Officer
(MD&CEO), Executive Key Management Personnel (KMP) and
the Non-executive Directors.
Our approach
The Remuneration Committee’s overarching aim is to ensure our
remuneration framework delivers outcomes with a clear link to
company and individual performance, and to IPL’s long-term strategy
and values. We were pleased to again receive strong support for
our Remuneration Report at the 2019 Annual General Meeting,
given 2019 was seen at that time as being a challenging year.
Fast forward 12 months and the COVID-19 pandemic has provided
a new perspective on what we now classify as challenging.
Executive changes during FY20
Nicholas (Nick) Stratford has assumed the role of Chief Financial
Officer (CFO). Nick has returned to Australia, with Braden Lusk
promoted into Nick’s former US-based role of President, Dyno
Nobel Americas (DNA). Both appointments took effect 1 July
2020. It was pleasing to promote from within to fill these two
key Executive roles.
Fixed remuneration
Prior to Nick’s move to the CFO role on a Fixed Annual Remuneration
(FAR) of $900,000, comparable to his US-based role, he received
a 2.8% increase effective 1 October 2019 as President, DNA.
Greg Hayne, President Dyno Nobel Asia Pacific (DNAP) underwent
a FAR review and received an 8.1% increase effective 1 October
2019. Braden Lusk is remunerated via a USD-denominated salary
and was promoted to a FAR of US$550,000 for his appointment to
President, DNA effective 1 July 2020. All other Executives, including
the MD&CEO did not receive an increase to FAR for the 2020
performance period.
Information on fixed remuneration for the 2020 financial year
is provided in section 4.2 of this report.
Short-term incentive
Under the current Executive STI programme, no non-Zero Harm
components of the STI program are paid if a designated Group
financial STI Gate is not achieved. In addition, the Board retains
a discretion to forfeit all or part of the STI award payable for the
Zero Harm performance condition in the event of a fatality or
major safety incident.
With the STI Group financial Gate and Zero Harm performance
condition both failing to be met, no STI awards were paid across
the Executive population for the 2020 performance period.
More information on the Company’s 2020 performance period
and resulting STI outcomes is provided in section 4.3 of this report.
Long-term incentive
For the 2017/20 LTI plan with the performance period ending on
30 September 2020, the performance conditions were relative
Total Shareholder Returns (TSR) (weighted at 50%); Growth in
Return on Equity (ROE) (weighted at 35%); and the delivery of
Strategic Initiatives (weighted at 15%). No performance rights will
vest for the TSR component, as the Company delivered relative
Total Shareholder Return below the median of the S&P/ASX 100
60
for the performance period. No performance rights relating to the
ROE objective component will vest, as the minimum level of ROE
performance was not achieved. There will be partial vesting of
66.7% of performance rights emanating from achievements against
the Strategic Initiatives measures. This will result in 10% of the
performance rights granted under the plan vesting.
More information on the LTI program, including 2017/20
performance period, is provided in section 4.4 of this report.
Strategic Review Performance Bonus
Stephan Titze, President Incitec Pivot Fertilisers (IPF) received
a performance bonus of $487,500 (75% of the total bonus
opportunity available) for his successful running of the Strategic
Review of the Incitec Pivot Fertilisers business unit during
the period.
More information on this Strategic Review Performance Bonus
is provided in section 4.5 of this report.
2021 Remuneration framework
We continue to review market trends to ensure our remuneration
framework supports the execution of our strategies to increase
shareholder value as well as the retention and motivation of our
key talent. No major structural changes are planned for the 2021
financial year, however, some adjustments are to be implemented
that we believe will better help us to navigate through the
challenging period ahead.
Key amongst these are a re-balancing of the LTI program that will
see an increased 10% weighting directed to the Return on Invested
Capital (ROIC) metric (increasing to 40% of the total opportunity
available) and less weighting on the Long Term Value Metrics (LTVM)
(formerly Strategic Initiatives) that will decrease in weighting from
30% to 20%.
We have retained some LTVM metrics in the LTI program as we
believe that management delivering on these metrics will add
considerable sustainable value to our shareholders.
Also, a modified Headline Net Profit After Tax (NPAT) gate approach
will be introduced into the 2021 STI program, that will cap all
non-safety related metrics at a maximum of target payment
if the NPAT gate is not met, rather than reducing them to zero.
The Board believes this approach will strike a better balance
between rewarding and motivating our key talent and shareholder
value alignment. It is important to note that if the NPAT gate is
not met, but executives meet or exceed their targets for all other
objectives, only 43% (for the MD & CEO) and 35% (for other
Executive KMP) of the maximum opportunity can be received.
The strategic measures within the 2021 STI will emphasise cash and
cost control management to align with this year’s Response Plan.
These changes have no impact on the remuneration outcomes for
the 2020 financial year, as presented within this document. More
information on the changes to the 2021 Remuneration framework
can be found in section 5 of this report.
We look forward to ongoing dialogue with, and the support of our
shareholders, and welcome your feedback and comments on any
aspect of this report.
Brian Kruger
Chairman
Incitec Pivot Limited Annual Report 2020REMUNERATION REPORT This document is interactive.
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REMUNERATION REPORT CONTENTS
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1.
Introduction
2. Executive Remuneration & Governance
2.1 Executive remuneration overview
2.2 Executive remuneration strategy
2.3 Executive remuneration governance
3. 2020 Executive Remuneration Framework
3.1 Overview
3.2 Fixed annual remuneration
3.3 Short-term incentive
3.4 Long-term incentive
3.5 LTI performance conditions
3.6 Executive service agreement terms
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4. Remuneration Outcomes in 2020 Financial Year and link
to the 2020 Financial Year Performance
71
4.1 Analysis of relationship between the Company’s performance,
shareholder wealth and remuneration
4.2 2020 Fixed annual remuneration outcomes
4.3 2020 STI outcomes
4.4 LTI 2017/20 outcomes
4.5 Strategic Review Performance Bonus
4.6 Performance related remuneration
4.7 Further details of Executive remuneration
5. Overview of Remuneration changes for the 2021 Financial Year
6. Non-executive Director Remuneration
7. Shareholdings in IPL
8. Other KMP Disclosures
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Incitec Pivot Limited Annual Report 2020
61
REMUNERATION REPORT
1. Introduction
The directors of Incitec Pivot Limited (IPL or the Company) present the Remuneration Report prepared in accordance with the Corporations Act
2001 (Cth) for the Company for the year ended 30 September 2020. This Remuneration Report is audited.
This Remuneration Report sets out remuneration information for Key Management Personnel (KMP) who had authority and responsibility for
planning, directing and controlling the activities of the Company during the 2020 financial year, being each of the Non-executive Directors
and designated Executives. The use of the term “Executives” in this report is a reference to the Managing Director & Chief Executive Officer
(MD&CEO) and certain direct reports during the 2020 financial year. Refer to Table 1 below for all individuals comprising IPL’s KMP for the
2020 financial year. All KMP held their positions for the entirety of the 2020 financial year, unless noted otherwise.
Table 1 – Individuals forming IPL’s KMP for the 2020 reporting period
Non-executive Directors
Current
Mr Brian Kruger
Mr Bruce Brook
Chairman and Independent, Non-executive Director
Independent, Non-executive Director
Dr Xiaoling Liu (1)
Independent, Non-executive Director
Ms Rebecca McGrath
Independent, Non-executive Director
Mr Gregory Robinson (2)
Independent, Non-executive Director
Former
Mr Joseph Breunig (3)
Independent, Non-executive Director
Ms Kathryn Fagg AO (4)
Independent, Non-executive Director
Executives
Current
Ms Jeanne Johns
Managing Director & Chief Executive Officer
Mr Nicholas Stratford (5)
Chief Financial Officer
Mr Tim Wall
Mr Greg Hayne
President, Global Manufacturing
President, Dyno Nobel Asia Pacific
Dr Braden Lusk (6)
President, Dyno Nobel Americas
Mr Stephan Titze
President, Incitec Pivot Fertilisers
Former
Mr Frank Micallef (7)
Chief Financial Officer
(1) Dr Liu commenced as an Independent, Non-executive Director with effect from 25 November 2019.
(2) Mr Robinson commenced as an Independent, Non-executive Director with effect from 25 November 2019.
(3) Mr Breunig resigned as an Independent, Non-executive Director on 28 February 2020.
(4) Ms Fagg retired as an Independent, Non-executive Director on 20 December 2019.
(5) Mr Stratford ceased as President, Dyno Nobel Americas on 30 June 2020, and commenced as Chief Financial Officer with effect from 1 July 2020.
(6) Dr Lusk commenced as President, Dyno Nobel Americas with effect from 1 July 2020.
(7) Mr Micallef retired as Chief Financial Officer on 30 June 2020.
62
Incitec Pivot Limited Annual Report 2020REMUNERATION REPORT 2. Executive Remuneration & Governance
2.1 Executive remuneration overview
In alignment with its remuneration strategy, the Board’s policy on Executive remuneration is that it comprises both a fixed remuneration
component (FAR) and an “at risk” or performance-related component (short term incentive (STI) and long term incentive (LTI)) where:
(i) the majority of Executive remuneration is “at risk”; and
(ii) the level of FAR for Executives is 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 the Company).
A summary of the Company’s approach to Executive remuneration for the 2020 financial year, including performance conditions
and their link to the overall remuneration strategy is set out below:
Performance Conditions
Remuneration Strategy/Performance Link
Considerations
Scope of individual’s role
Individual’s level of knowledge, skills and expertise
Company and individual performance
»
»
»
» Market benchmarking
Set to attract, retain and motivate the right talent
to deliver on IPL’s strategy and contribute to the
Company’s financial and operational performance.
For the Company’s Executives, the aim is to set fixed
remuneration at market relevant levels and link
any future increases to individual performance and
effectiveness whilst continuing to have regard to
market relevance.
Zero Harm
The award payable for the Zero Harm performance
condition may be forfeited in the event of a fatality or
major incident having regard to its circumstances.
To align with the Company’s commitment to
“Zero Harm for Everyone, Everywhere”.
Safety measures
(generally, 10% of STI award)
»
Safety performance balanced scorecard across the
dimensions of behavioural safety and process safety
management comprising input and output measures.
In assessing the safety balanced scorecard, the
Board may, in its discretion, have regard to the
results achieved against the measures comprising
the scorecard without applying a specific
weighting to any particular measure.
Credit Rating ‘gate’
An additional ‘gate’ was introduced this year that applied
to the financial components of the plan. This gate related
to the 2020 financial year only, whereby the Group’s
overall credit rating was required to be maintained for
participants to be eligible to receive payments.
Net Profit After Tax (NPAT) ‘gate’
Minimum NPAT performance level that must be achieved
before any non-safety component of the STI is payable.
»
Requires achievement of a designated Group NPAT as
determined by the Board
Financial measures
(generally, a maximum of 70% of STI award, incorporating
metrics relevant to an Executive’s area of influence)
» Group NPAT
» Group Adjusted NPAT
» Business Unit Adjusted EBIT (earnings before interest
and tax)
To introduce a cashflow-related metric into the STI
that ensures participants focus on both cashflow
management as well as balance sheet strength.
To align with the Company’s strategic intent of
achieving top quartile performance as measured
against S&P/ASX 100 companies.
To ensure robust alignment of performance in a
particular Business Unit with reward for the Executive
managing that business unit.
Performance conditions are designed to support the
financial direction of the Company (the achievement of
which is intended to translate through to shareholder
return) and are clearly defined and measurable.
Strategic objectives
(for most of the Executives, a maximum of 20% of STI
award) aligned to personal strategic objectives.
Key strategic and growth objectives targeted at
delivering ongoing benefit to the Company.
Performance conditions
Distinct categories of performance that are weighted to
align with the Group’s focus over the three-year period
that each tranche of the plan spans.
»
»
»
Relative total shareholder returns
Strategic initiatives
Return on invested capital (ROIC)
Performance conditions designed to encourage
Executives to focus on the key performance drivers
which underpin sustainable growth in shareholder
value. The mix of performance conditions is designed
to ensure the share price growth is supported by the
Company’s absolute ROIC performance as well as
strategic initiatives, and not market factors alone.
Fixed Annual
Remuneration
Salary and other
benefits (including
statutory
superannuation).
Refer section 3.2
for more details
Short Term
Incentive
Annual incentive
opportunity
delivered
50/50 in cash/
restricted shares
for the MD&CEO
(if Minimum
Shareholding
Requirement (MSR)
has yet to be
achieved) or 100%
in cash if MSR has
been achieved. For
all other Executives
opportunity
delivered 75/25
in cash/restricted
shares (if MSR has
yet to be achieved)
or 100% in cash
if MSR has been
achieved.
Refer section 3.3
for more details
Long Term
Incentive
Three-year incentive
opportunity
delivered through
performance rights.
Refer section 3.4 and
3.5 for more details
Total Remuneration
The combination of these elements is designed to attract, retain and motivate appropriately qualified and experienced individuals, encourage a strong
focus on performance, support the delivery of outstanding returns to shareholders and align Executive and stakeholder interests through share ownership.
Incitec Pivot Limited Annual Report 2020
63
REMUNERATION REPORT 2.2 Executive remuneration strategy
IPL’s purpose is to make people’s lives better by unlocking the world’s natural resources through innovation on the ground. IPL embraces a
set of Strategic Value Drivers that underpin the Company’s business and form the platform for the Company’s future earnings growth and
shareholder returns:
Zero Harm – Broadening and setting year-on-year improvement objectives across key metrics including environmental care and process
safety.
Talented and Engaged People – One IPL collaborative culture with engaged, diverse and inclusive teams focused on customers and value
creation.
Customer Focus – Partnering with our customers to create added value and practical solutions for today and the future.
Manufacturing Excellence – Driving consistently high performance across all of our assets.
Leading Technology Solutions – Innovation on the ground with practical innovations that our customers can use today to improve their
operations.
Profitable Growth – Focus on opportunities that are distinctive to our differentiated technology, core markets, core capabilities and market
segments.
Under the Strategic Value Driver of ‘Talented and Engaged People’, IPL recognises that to generate competitive returns for its shareholders, it
requires talented people who are capable, committed and motivated. IPL’s remuneration strategy is designed to support the objectives of the
business and to enable the Company to attract, retain and reward Executives of the requisite skill and calibre.
The key principles of the Company’s remuneration strategy are to:
»
reward strategic outcomes at both the Group and business unit level that create top quartile long term shareholder value;
» encourage integrity and disciplined risk management in business practice;
» drive strong alignment with shareholder interests through delivering part of the reward in the form of equity;
»
structure the majority of executive remuneration to be “at risk” and linked to demanding financial and non-financial performance
objectives;
» attract and retain the best available talent;
»
reward Executives for high performance within their role and responsibilities, and ensure rewards are competitive within the industry and
market for their role in respect of pay level and structure; and
» ensure the remuneration framework is simple, transparent and easily implemented.
2.3 Executive remuneration governance
The remuneration of the Executives is set by the Board, having regard to recommendations from the Remuneration Committee.
Where appropriate, the Remuneration Committee of the Board engages external advisors to provide input to the process of reviewing
Executive and Non-executive Director remuneration. For the 2020 financial year, the Remuneration Committee received market and
benchmarking data from various sources, but this information did not constitute a remuneration recommendation for the purposes of the
Corporations Act 2001 (Cth).
Further information in relation to the Board and the Remuneration Committee can be found in IPL’s Corporate Governance Statement
available on IPL’s website.
3. 2020 Executive Remuneration Framework
3.1 Overview
The charts below set out the theoretical breakdown of the Executives’ total remuneration package for the 2020 financial year. The FAR
component is inclusive of cash and superannuation only, whilst “at risk” compensation is based on maximum entitlement that could
potentially be awarded under the STI and LTI plans.
MD&CEO
Fixed
25%
STI – cash/
restricted shares 38%
FAR
25%
LTI
37%
Other Executives
STI – cash/
restricted shares 40%
At Risk
75%
Fixed
33%
At Risk
67%
FAR
33%
LTI
27%
64
Incitec Pivot Limited Annual Report 2020REMUNERATION REPORT 3.2 Fixed annual remuneration
Executives receive their fixed remuneration in a variety of forms, including cash, superannuation, and any applicable fringe benefits.
The Executives’ FAR is set by reference to appropriate benchmark information for each Executive’s role, level of knowledge, skill,
responsibilities and experience. The level of remuneration is reviewed annually in alignment with the financial year and with reference
to, among other things, Company and individual performance and market data provided by an appropriately qualified and independent
external data specialist.
3.3 Short-term incentive
The STI is an annual “at risk” incentive which is dependent on the achievement of particular performance measures.
The following table summarises the STI plan that applied in the 2020 financial year (2020 STI):
What was the performance
period?
The performance period for the 2020 STI was the financial year from 1 October 2019 to 30 September 2020.
Who was eligible for the STI? The MD&CEO and all other Executives participated in the 2020 STI.
What was the target and
maximum STI opportunity?
Target STI opportunity was 100% of FAR for the MD&CEO, and 60% of FAR for all other Executives. Maximum STI opportunity
(for stretch outcomes) was 150% of FAR for the MD&CEO, and 120% of FAR for all other Executives.
What were the Performance
Conditions and Measures?
Performance conditions under the STI are determined by the Board for each financial year. The performance conditions
for the 2020 STI are set out below:
Performance Conditions
Measures to assess satisfaction of
Performance Condition
Rationale for the Performance Conditions
Group Financial Performance
Group NPAT (Net Profit After Tax).
Group Adjusted NPAT (1)
(Net Profit After Tax).
To align with the Company’s strategic intent of
achieving top quartile performance as measured
against S&P/ASX 100 companies.
Business Unit Financial
Performance
Business Unit Headline EBIT (Earnings
Before Interest and Tax). Business Unit
Adjusted EBIT. (1)
To ensure robust alignment of performance in
a particular business unit with reward for the
Executive managing that business unit.
Zero Harm
Strategic Outcomes
Manufacturing reliability.
Safety performance balanced scorecard
across the dimensions of behavioural
safety and process safety management
comprising input and output measures.(2)
Measures based on performance criteria
for the execution and implementation
of strategic objectives and business
priorities. These include measures
related to environmental and process
safety, product innovation, customers
and organic growth.
To align with the Company’s commitment to
“Zero Harm for Everyone, Everywhere”. In 2017,
the Company adopted its second five-year Global
HSE Strategy to continue to drive improvement
in the Group’s health, safety and environmental
performance.
Tailored to individual Executive’s role, to drive
performance and behaviours consistent with
achieving critical aspects of the Group’s strategy.
(1) Adjusted for foreign exchange and commodity price movements.
(2) In assessing the safety balanced scorecard, the Board may, in its discretion, have regard to the results achieved against the measures comprising
the scorecard without applying a specific weighting to any particular measure.
Where any Individually Material Item (IMI) is separately recognised in the financial report, the Board will have discretion to
include or exclude the IMI for the purpose of determining any STI award, taking into account the nature of the IMI and having
regard to whether, in the circumstances, it would be appropriate for the IMI to be attributable to Management.
Determination of the extent to which each of the above measures was satisfied was based on a review by the Board of the
audited financial report and performance of the Group for the financial year, following the annual performance review process
for the Executives.
Are there minimum
performance levels
which must be achieved
before awards can be
made under the STI?
For the 2020 financial year, to ensure STI awards are aligned with business performance outcomes, the Board determined
that two separate STI Gates are to operate. As well as the “STI Financial Gate” a second gate known as the “STI Credit Gate”
has been introduced specifically for this year. The STI Financial Gate reflects a requirement to exceed a designated level of
the Group’s NPAT performance before any awards can be made. The STI Credit Gate requires that the Group’s overall credit
rating is maintained in order for participants to be eligible to receive payments. If either gate is not met, no awards are to
be made under the STI, save that these two gates do not apply to any awards payable in relation to the Zero Harm
performance condition, reflecting the primacy of safety.
In relation to the Zero Harm performance condition, the Board retains a discretion to forfeit all or part of the award payable
for this performance condition in the event of a fatality or major incident having regard to the circumstances of the incident.
65
Incitec Pivot Limited Annual Report 2020REMUNERATION REPORT What were the weightings
for the STI performance
measures?
The weighting of Executives’ STI performance measures (as a percentage of 100%) for 2020 were:
Table 2
Group NPAT
Financial
Group
Adjusted
NPAT
Business
Unit
Adjusted
EBIT
As a
percentage
of Maximum
opportunity
Non-financial/
Business/Strategic
Safety
Strategic
Outcomes
40%
30%
10%
20%
100%
40%
30%
10%
20%
100%
40%
40%
40%
10%
30%
10%
20%
100%
30%
10%
20%
100%
30%
10%
20%
100%
70%
10%
10%
100%
40%
30%
10%
20%
100%
Executives – Current
J Johns*
Managing Director & CEO
N Stratford*(1)
Chief Financial Officer
T Wall**(2)
President, Global Manufacturing
G Hayne**
President, Dyno Nobel Asia Pacific
B Lusk**
President, Dyno Nobel Americas
S Titze**(3)
President, Incitec Pivot Fertilisers
Executives – Former
F Micallef*(4)
Chief Financial Officer
*Group role **Business Unit role
(1) Mr Stratford spent the first 9 months of the financial year working as the President, Dyno Nobel Americas, pro-rated under the weightings outlined
for Dr Lusk above. The final 3 months of the year were spent as the Chief Financial Officer, pro-rated as outlined.
(2) Mr Wall’s business unit measures are based on manufacturing reliability.
(3) Mr Titze has 40% of his Business Unit EBIT measure dedicated to Headline EBIT.
(4) Mr Micallef spent the first 9 months of the financial year working as the Chief Financial Officer.
Is there an STI deferral
component?
A mandatory 25% STI deferral (50% for the MD&CEO) continues until an Executive’s Minimum Shareholding Requirement (MSR)
is achieved. The MSR is 50% of FAR for Executives (100% for the MD&CEO).
How is the STI delivered?
The STI is delivered partly in cash and partly in the form of restricted shares. The split between cash and restricted shares
is determined based on each participant’s shareholding under the MSR.
Was there a mechanism for
clawback?
The 2020 STI included a clawback provision, which requires the repayment of all or part of any STI awarded within three years
after a payment is made, in the event of a material misstatement or omissions in IPL’s financial statement which results in a
restatement of the audited financial report.
66
Incitec Pivot Limited Annual Report 2020REMUNERATION REPORT 3.4 Long-term incentive
The LTI is the long term incentive component of remuneration for Executives. The LTI is provided in the form of performance rights.
What LTI plans were
applicable for the 2020
financial year?
The LTI Plans applicable to the 2020 financial year were the:
»
»
»
Long Term Incentive Performance Rights Plan for 2017/20 (LTI 2017/20);
Long Term Incentive Performance Rights Plan for 2018/21 (LTI 2018/21); and
Long Term Incentive Performance Rights Plan for 2019/22 (LTI 2019/22) (together, the LTI Plans).
Under the LTI Plans, participants are entitled to acquire ordinary shares in the Company, on a one right to one share basis,
for no consideration at a later date. The performance rights are issued by Incitec Pivot Limited and the entitlement of the
participants to acquire ordinary shares is subject to the satisfaction of certain conditions. As no shares are provided to
participants until vesting, performance rights have no dividend entitlement. Performance rights expire on vesting or lapsing
of the rights.
What is the purpose
of the LTIs?
The LTI is designed to link reward with the key performance drivers which underpin sustainable growth in shareholder value.
As rights under the LTI Plans result in share ownership on the achievement of demanding targets, the LTI ties remuneration
to Company performance, as experienced by shareholders. The arrangements also support the Company’s strategy for retention
and motivation of the Executives.
What is the process for
determining eligibility?
The decision to grant performance rights under the LTI Plans and to whom they will be granted is made annually by the Board,
noting that the grant of performance rights to the MD&CEO is subject to shareholder approval. Grants of performance rights to
participants are based on a percentage of the relevant Executive’s FAR.
What is the maximum
LTI opportunity under
the LTI Plans?
How was the number
of performance rights
calculated under the LTI
Plans?
The maximum LTI opportunities under each LTI Plan are:
»
»
for the MD&CEO, 150% of FAR; and
for all other Executives, 80% of FAR.
For the LTI 2017/20 and LTI 2018/21 the number of performance rights issued to a participant was based on the market
value of the Company’s volume weighted average share price over the 20 business days up to but not including the first day
of the relevant performance period. For LTI 2019/22, the number of performance rights issued to a participant was based on
the market value of the Company’s shares over the 5 business days immediately after the release of the Company’s full year
results in the first year of the performance period, being 10 November 2020. The respective issuances were determined by
dividing the dollar value of the relevant participant’s LTI opportunity by these outcomes.
What are the performance
conditions, performance
period and status of the
LTI Plans?
LTI Plan
Performance Conditions
Performance Period
Status
Weighting of
Performance
Condition
LTI 2017/20
LTI 2018/21
LTI 2019/22
»
»
TSR Condition
Strategic Initiatives
Condition
50%
15%
»
ROE Growth Condition
35%
»
»
TSR Condition
Strategic Initiatives
Condition
40%
30%
»
ROE Growth Condition
30%
»
»
TSR Condition
Strategic Initiatives
Condition
» Absolute ROIC
Condition
40%
30%
30%
1 October 2017 to
30 September 2020
Testing to occur after completion
of performance period.
1 October 2018 to
30 September 2021
Testing to occur after completion
of performance period.
Testing to occur after completion
of performance period.
November 2019 to
November 2022
(TSR condition only)
1 October 2019 to
30 September 2022
(other conditions)
The performance conditions are determined by the Board annually. Refer to section 3.5 for a discussion
of the performance conditions.
67
Incitec Pivot Limited Annual Report 2020REMUNERATION REPORT When are the performance
conditions measured?
After the expiry of the relevant performance period, the Board determines whether the performance conditions of the relevant
LTI Plans are satisfied. The performance conditions are tested once, at the end of the relevant performance period. If the
performance conditions are satisfied and the rights vest, the participant is entitled to receive ordinary shares in the Company.
The participant does not pay for those shares.
To the extent the performance conditions are not satisfied during the performance period, the performance rights will lapse.
What happens if a
participant leaves
the Company?
Generally, the performance rights granted under the LTI Plans will lapse on a cessation of employment except where the
participant has died, becomes totally and permanently disabled, is retrenched, retires or is terminated without cause. In those
circumstances (subject to Board discretion), the number of performance rights retained by the participant will be reduced pro
rata to reflect the proportion of days worked during the relevant performance period and will be tested in the ordinary course.
In what other circumstances
may the performance rights
vest (which may be before
or after the expiry of the
performance period) under
the LTI Plans?
The Board may provide a notice to the participants specifying that the performance rights will vest at a time stipulated
in the notice on the occurrence of one of the following events in relation to the Company:
»
»
»
a takeover bid;
a change of control;
the Court ordering a meeting be held in connection with a scheme for the reconstruction of the Company
or its amalgamation with any other companies; or
»
a voluntary or compulsory winding-up.
3.5 LTI performance conditions
For the LTI 2017/20 and LTI 2018/21, the performance conditions are measured by reference to the TSR Condition, a Strategic Initiatives
Condition and growth in Return on Equity (ROE Growth Condition). For the LTI 2019/22 the ROE Growth Condition has been replaced by
a Return on Invested Capital (Absolute ROIC Condition). Details of the performance conditions for each of the LTI 2017/20, LTI 2018/21
and LTI 2019/22 are set out below.
TSR Condition
The TSR Condition (applicable to each of LTI 2017/20, LTI 2018/21 and LTI 2019/22) requires growth in the Company’s TSR to be at or above
the median of the companies in the comparator group, being the S&P/ASX 100. This condition provides shareholder alignment as it takes
into account the Company’s share price movement as well as dividends paid, relative to other organisations comparable to the Company.
The S&P/ASX 100 has been chosen as the comparator group because, having regard to the business segments in which the Company
operates and, specifically, the absence of a sufficient number of direct comparator companies, the Board considers the S&P/ASX 100 to
represent the most appropriate, and objective, comparator group. It also represents the group of companies against which the Company
competes for shareholder capital. The Board has the discretion to vary the Comparator Group at any time, including to remove companies
from, or include companies in, the Comparator Group.
The table below sets out the TSR Condition, and the percentage of the performance rights that will vest based on satisfaction
of this condition.
Relative TSR ranking of IPL
Less than 50th percentile
% of performance rights subject to the TSR Condition that will vest
Nil
At or greater than 50th percentile but less than 75th percentile
Pro rata from 50% on a straight-line basis
At 75th percentile or greater
100%
Strategic Initiatives Condition
The Strategic Initiatives Condition relates to the delivery of significant aspects of the Board approved strategy. For the LTI 2017/20, the
Strategic Initiatives Condition relates solely to the Business Excellence System (BEx). For the LTI 2018/21 and LTI 2019/22, the Strategic
Initiatives Condition comprises components aligned with the Company’s strategic drivers: Manufacturing Excellence (ME) and Customer,
Practical Technology & Innovation (CPT&I).
68
Incitec Pivot Limited Annual Report 2020REMUNERATION REPORT The table below summarises the Strategic Initiatives Condition components for the LTI 2017/20, the LTI 2018/21 and the LTI 2019/22:
Strategic Initiatives
Condition component
Rationale
Measurement criteria
Performance goals
Scorecard
Business Excellence
(BEx) System and
Manufacturing
Excellence (ME) (1)
BEx and ME are improvement
systems, through which the
Company seeks to enhance
productivity on a sustainable
basis. The LTI performance goals
in relation to BEx focus on
incentivising the delivery
of sustainable productivity
improvements, rather than
one-off benefits. ME performance
goals target delivering sustainable
year on year improvements in
reliability and efficiency.
Performance in relation to this
component of the Strategic
Initiatives Condition comprise
performance goals related to:
» Business system maturity
(practices)
»
Cumulative productivity
benefits (performance)
» Manufacturing volume
(performance)
» Manufacturing unit cost
improvement (performance)
Business system maturity:
For LTI 2017/20 – An absolute improvement in BEx
system maturity over the performance period, or
satisfaction of an exit score requirement at the end
of the performance period.
Cumulative productivity benefits:
For LTI 2017/20 and LTI 2018/21 – Delivery of
cumulative savings over the performance period
against targets approved by the Board.
Manufacturing volume:
For LTI 2017/20, LTI 2018/21 and LTI 2019/22
– Achievement of target volumes of particular
products at specified manufacturing plants.
Manufacturing unit cost:
For LTI 2019/22 – Improvement in the unit cost
of Initiating Systems.
Customer, Practical
Technology &
Innovation (CPT&I) (1)
IPL’s growth strategy includes
providing value added differentiated
products & services, and innovations
to meet the challenges of customers,
to assure sustainable earnings and
maximise shareholder return.
Performance in relation to this
component will be assessed
against a Scorecard comprising
performance goals related to:
Revenues from technologies:
For LTI 2018/21 and LTI 2019/22 – Annual growth in
technology sales from 2018 and 2019 baselines.
»
»
Revenues from technologies
Net Promoter Score (NPS):
Company customer retention
and growth in footprint
For LTI 2018/21 and LTI 2019/22 – Improvement in
NPS over 2019 baseline.
Key customer retention:
For LTI 2018/21 and LTI 2019/22 – Quantitative
targets against 2018 and 2019 baselines assessed
by the Board.
(1) BEx applies to 15% in the LTI 2017/20 grant. The ME and CPT&I components combined apply to 30% of the performance rights in the grants for LTI 2018/21 and LTI 2019/22.
Details of the Scorecards and specific performance goals for each component of the Strategic Initiatives Condition were notified to
Executives on commencement of each applicable LTI plan. These performance goals involve commercial-in-confidence quantitative
targets and, as such, details of the performance goals are disclosed only at the end of the performance period. For the LTI 2017/20,
these details are set out in section 4.4. For the LTI 2018/21 and LTI 2019/22, the relevant details will be set out in the 2021
Remuneration Report and the 2022 Remuneration Report respectively.
The Board will determine the outcome for the relevant component of the Strategic Initiatives Condition under each LTI plan having regard
to the results achieved against the performance goals across the entirety of the Scorecard for that component. If the Board determines that
all of the performance goals in respect of a component of the Strategic Initiatives Condition have been achieved, all of the performance
rights subject to that component will vest.
If not all performance goals in respect of a component of the Strategic Initiatives Condition are met over the performance period, the extent
to which that component of the Strategic Initiatives Condition has been satisfied (if at all) will be determined by the Board. In doing so, the
Board will have regard to the results achieved against the performance goals across all of the components of the relevant Scorecard, without
applying a specific weighting to any particular performance goal.
69
Incitec Pivot Limited Annual Report 2020REMUNERATION REPORT ROE Growth Condition
The ROE Growth Condition was introduced in 2016 and applies to the LTI 2017/20 and LTI 2018/21. The ROE Growth Condition measures
the compound annual growth in ROE over the performance period. ROE was considered an appropriate measure at that time, as it was a
widely recognised and reported metric and reflected the levers required to create shareholder value. It does not however, focus on the
efficient deployment of capital to the extent that the Board requires currently, so has been replaced by a ROIC condition for LTI 2019/22
(see below).
The table below sets out the ROE Growth Condition, and the percentage of performance rights that will vest based on satisfaction
of this condition:
ROE Compound Annual Growth Rate
% of performance rights subject to the ROE Growth Condition that will vest
Less than 7%
Nil
At or above 7% but less than 11%
Pro rata from 50% on a straight-line basis
11% or greater
100%
Absolute ROIC Condition
The Absolute ROIC Condition was introduced for the LTI 2019/22, to replace the ROE Growth Condition. ROIC has been selected
as it is a key determinant of efficient use of the capital entrusted to management by shareholders. It also reflects factors that improve
shareholder value, including operational efficiency, capital efficiency, asset utilisation and profitability.
The table below sets out the Absolute ROIC Condition, and the percentage of performance rights that will vest based on satisfaction
of this condition:
Absolute ROIC Targets
Less than 5.6%
% of performance rights subject to the Absolute ROIC Condition that will vest
Nil
At or above 5.6% but less than 6.0%
Pro rata from 50% on a straight-line basis
6% or greater
100%
3.6 Executive service agreement terms
Remuneration and other terms of employment for the Executives are formalised in service agreements. Most Executives are engaged on
similar contractual terms, with minor variations to reflect differing circumstances. Each agreement is unlimited in term; however, each
agreement provides that the Company may terminate an Executive’s employment immediately for cause without any separation payment,
save for accrued amounts such as leave, or otherwise without cause, with or without notice, in which case the Company must pay a
separation payment plus accrued amounts such as leave.
The notice period to be provided by the Executives is set out in the table below:
Current Executives
Notice period to be provided by the Executive
J Johns
N Stratford
T Wall
G Hayne
B Lusk
S Titze
52 weeks
26 weeks
26 weeks
26 weeks
26 weeks
26 weeks
The separation payment included in each Executive’s contract is capped at an amount equivalent to a specified number of weeks of FAR for
the Executive. Ms Johns’ separation payment is equal to 52 weeks of FAR as at the date of termination (subject to the provisions relating to
termination benefits in Part 2D.2 of the Corporations Act 2001). All other Executives’ contracts provide for a separation payment of 26 weeks
of FAR, save for Mr Stratford’s and Mr Hayne’s contracts which provided for a separation payment equal to 52 weeks of FAR (subject to the
terminations provisions in the Corporations Act).
70
Incitec Pivot Limited Annual Report 2020REMUNERATION REPORT 2020
188.2
10.9
3.4
nil
2.03
(37)
–
645.5
$mill
6
l
l
i
m
$
-
d
e
d
r
a
w
a
I
T
S
l
a
t
o
T
5
4
3
2
1
0
4. Remuneration Outcomes in 2020 Financial Year and link to 2020 Financial
Year Performance
4.1 Analysis of relationship between the Company’s performance, shareholder wealth
and remuneration
In considering the Company’s performance, the benefit to shareholders and appropriate remuneration for the Executives, the Board, through
its Remuneration Committee, has regard to financial and non-financial indices, including the indices shown in the below table in respect of
the current financial year and the preceding four financial years.
Table 3 – Indices relevant to the Board’s assessment of the Company’s performance and the benefit to shareholders.
NPAT before IMIs and excluding non-controlling interests ($m)
EPS before IMIs (cents)
Dividends per share (DPS) paid in the financial year (cents)
DPS declared in respect of the financial year (cents)
Share price ($) (Financial Year End) (1)
TSR (%) (2)
On-market share buyback ($m)
Equity Raising (net of cost) ($m)
2016
295.2
17.5
11.5
8.7
2.82
14
–
–
2017
318.7
18.9
9.1
9.4
3.60
36
–
–
2018
347.4
20.9
9.4
10.7
3.98
14
(210.3)
–
2019
152.4
9.5
7.5
4.7
3.39
30
(89.7)
–
(1) Share Price as at the end of the 2015 financial year was $3.90.
(2) TSR is calculated in accordance with the rules of the LTI 2013/16, LTI 2014/17, LTI 2015/18, LTI 2016/19 and LTI 2017/20 as applicable over the three-year performance period,
having regard to the volume weighted average price of the shares over the 20 business days up to but not including the first and last day of the performance period.
Relationship between the Company’s performance and STI outcomes
The attached graph shows the relationship between the Company’s
performance and STI awards in respect of the current and preceding
four years. For the 2016 financial year, with NPAT (before IMIs and
excluding non-controlling interest) declining by 25.5% to $295.2m,
no awards were made under the 2016 STI, save in relation to the
successful completion of the Louisiana Ammonia Project as well as
the Company’s safety performance. For the 2017 financial year, NPAT
(before IMIs and excluding non-controlling interest) increased 8%
to $318.7m resulting in certain Executives earning partial STI awards
in respect of this measure. For the 2018 financial year, Group NPAT
(before IMIs and excluding non-controlling interest) increased 9.0%
to $347.4m resulting in Executives earning full STI awards in respect
of this measure. For the 2019 financial year, Group NPAT (before
IMIs and excluding non-controlling interest) decreased 56.1% to
$152.4m resulting in Executives earning 0% STI awards in respect
of this measure. For the 2020 financial year, Group NPAT (before IMIs
and excluding non-controlling interest) increased 23.5% to $188.2m,
however the financial gate for the STI did not open, resulting in
Executives earning 0% STI awards in respect of this measure.
Relationship between the Company’s performance and LTI outcomes
The attached graph shows the relationship between IPL’s Absolute
TSR and its percentile ranking relative to its S&P/ASX 100 peer
group. IPL outranked the 50th percentile TSR for the ASX 100 peer
group for the 2014-17 performance period with a 53rd percentile
ranking (Absolute TSR: achieved 36%). The 2015-18 performance
period achieved an Absolute TSR increase of 14%, delivering fourth
quartile performance, the 2016-19 performance period achieved an
Absolute TSR increase of 30%, and the 2017-20 performance period
achieved an Absolute TSR decrease of 37%, delivering 12th percentile
performance. As a consequence, the LTI 2014/17 partially vested, the
LTI 2015/18 and LTI 2016/19 TSR did not vest and the LTI 2017/20
did not vest as outlined in section 4.4 of this report. The performance
rights in LTI 2013/16 plan did not meet the performance conditions
set out in the plans (including a TSR condition) and lapsed. Positive
TSR has been achieved in 4 out of the 5 periods reported.
Note: The absolute TSR for IPL and for the ASX100 has been calculated using the methodology
noted in footnote (2) Table 3.
Group performance and STI outcomes
t
s
e
r
e
t
n
i
$mill
600
g
n
i
l
l
o
r
t
n
o
c
-
n
o
n
g
n
d
u
l
c
x
e
d
n
a
i
s
I
M
I
e
r
o
f
e
b
T
A
P
N
500
400
300
200
100
0
2016
2017
2018
2019
2020
50
40
30
20
10
0
-10
-20
-30
-40
-50
%
-
R
S
T
l
e
t
u
o
s
b
a
L
P
I
Total STI awarded
NPAT before IMIs and excluding
non-controlling interests
IPL Absolute TSR % and ASX 100 Percentile Ranking
60
40
20
0
-20
-40
-60
%
-
0
0
1
X
S
A
n
i
g
n
i
k
n
a
r
e
l
i
t
n
e
c
r
e
p
L
P
I
2016
2017
2018
2019
2020
IPL Absolute TSR
IPL Percentile Ranking in ASX 100
71
Incitec Pivot Limited Annual Report 2020REMUNERATION REPORT
4.2 2020 Fixed annual remuneration outcomes
The former President, DNA received a 2.8% increase to his Fixed Annual Remuneration (FAR) prior to moving to the CFO role on a comparable
FAR of $900,000 to his US-based role. The President, DNAP underwent a FAR review and received an 8.1% increase. The new President, DNA
is remunerated via a USD-denominated salary and was promoted to a FAR of US$550,000. All other Executives, including the MD&CEO did not
receive an increase to FAR for the 2020 period.
4.3 2020 STI outcomes
Performance Condition
Outcome
Group Financial Performance (NPAT)
Group Credit Rating
Group NPAT serves as one of the two “gates” for all Financial and Strategic Outcomes within the STI
Plan.
As performance was below the level necessary for the gate to open, no payment was made for this,
and/or any other Financial or the Strategic Outcomes component.
The Group Credit Rating also serves as one of the two “gates” for all Financial and Strategic Outcomes
within the STI Plan for the 2020 financial year.
Although the requirement to satisfy this gate was achieved, no payment was made for the Financial
and the Strategic Outcomes components due to the Group NPAT gate failing to open.
Group Financial Performance (Adjusted NPAT)
As the Group NPAT Financial gate was not met, no payment was made for this component.
Business Unit Financial Performance
As the Group NPAT Financial gate was not met, no payment was made for this component.
Zero Harm
The balanced scorecard which applies to all Executive KMPs was not met.
Consideration of the gate for this measure was applied by the Board and no payment was made
for this component.
Strategic Outcomes
As the Group NPAT Financial gate was not met, no payment was made for this component.
The Board approved the STI outcomes on 10 November 2020 with the outcomes reflected in the following table:
Table 4 – Short term incentives awarded for the year ended 30 September 2020
Details of the vesting profile of the STI payments awarded for the year ended 30 September 2020 as remuneration to each Executive
are set out below:
Executives – Current
J Johns
N Stratford
T Wall
G Hayne
B Lusk (1)
S Titze
Executives – Former
F Micallef (2)
Executives – Current
J Johns (3)
T Wall (4)
Short term incentive for the year ended 30 September 2020
Cash STI
$000
Minimum share
holding allocation (A)
$000
Included in
remuneration
$000
% earned of
maximum
opportunity
% forfeited
of maximum
opportunity
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Deferred Short term incentive for the year ended 30 September 2020
–
–
175
58
100
100
100
100
100
100
100
100
100
–
–
(A) Under the terms of the 2020 STI, to the extent that Executives have not achieved their Minimum Shareholding Requirement the following applies: 50% of the MD&CEO’s award is delivered in cash
and the remainder is delivered in restricted shares. For all other Executives, 75% of their award is delivered in cash and the remainder is delivered in restricted shares. Cash is generally paid and
shares generally allocated around December.
(1) Dr Lusk received a pro-rata STI for time served pre-KMP. He commenced as the President, Dyno Nobel Americas with effect from 1 July 2020.
(2) Mr Micallef was entitled to a pro-rata amount (if any STI were to be paid) for his time served as a KMP, up until his retirement as Chief Financial Officer on 30 June 2020.
(3) Under the terms of the 2018 STI in which Ms Johns participated the total STI award was $2.09m, of this 50% was paid in cash in 2018. The remaining 50% was awarded in the form of performance
rights of which 25% fully vested in fully paid ordinary shares on 30 November 2019 and the remaining 25% of the award will vest on 30 November 2020 subject to Ms Johns meeting a service
condition. On this date and subject to satisfying the service condition, Ms Johns will receive the remaining 25% award amount in cash or fully paid ordinary shares in the Company as determined
by the Board. The value of the rights is calculated at grant date using the Black Scholes option pricing model as disclosed in the footnotes under Table 7.
(4) Mr Wall received special performance rights related to his employment in 2018, of which 50% fully vested into fully paid ordinary shares following testing in November 2019, with the remaining
50% to vest in November 2020, subject to Mr Wall satisfying individual performance criteria. The value of rights is calculated at grant date using a Black Scholes pricing model as disclosed in the
footnotes under Table 7. Following testing in November 2020, the Board determined that 100% of the performance rights relating to performance period 1 November 2018 to 30 September 2020
will vest. This will be reported in the 2021 Remuneration Report.
72
Incitec Pivot Limited Annual Report 2020REMUNERATION REPORT 4.4 LTI 2017/20 outcomes
The performance period for the LTI 2017/20 ended on 30 September 2020. Following testing against the performance conditions on 10
November, the Board determined that 10% of the performance rights granted under the plan will vest (with the remaining 90% to lapse).
Details in relation to each of the performance conditions are set out below.
The number of rights vested and lapsed will be reported in the 2021 Remuneration Report.
TSR Condition
In relation to the TSR Condition, the Company’s relative TSR performance over the period did not achieve median performance of the
comparator group of S&P/ASX100 companies. Accordingly, 0% of the performance rights granted subject to the TSR Condition will vest
(out of a maximum of 50% of performance rights granted under the plan).
Strategic Initiatives Condition
In relation to the Strategic Initiatives Condition – the Board assessed this component against a balanced scorecard and determined the
outcome partially achieved the performance goals across the entirety of the scorecard. The Board has determined that 66.7% of the
performance rights granted subject to this condition will vest (out of a maximum of 15% of performance rights granted under the plan).
Commentary on the performance against the scorecard is set out in the following table.
Strategic Initiatives
Condition component
Commentary on Performance Against Scorecard
Business Excellence
(BEx) System
The performance goals for the BEx scorecard comprised of non-financial input and financial and non-financial
output measures.
In relation to the input measures, the Business System Maturity outcomes were verified by independent third
parties and whilst full stretch performance was delivered at all the initiating system plants globally, slightly
over half of the continuous manufacturing sites in scope achieved target outcomes, hence the overall
assessment was partial achievement.
Cumulative productivity benefits of $110.6m were delivered, which exceeded the stretch objective
established against this measure.
Manufacturing volume performance was mixed during the period which resulted in an assessment
of partial achievement.
Overall assessment: having regard to the outcomes in relation to the input and output measures, the Board
determined that the performance goals were partially delivered against the balanced scorecard.
Actual
Vesting (%)
66.7% of
Rights for this
component
ROE Growth Condition
In relation to the ROE Growth Condition, the Company’s performance over the period did not achieve a 7% Compound Annual Growth Rate.
Accordingly, 0% of the performance rights granted subject to the ROE Growth Condition will vest (out of a maximum 35% of performance
rights granted under the plan).
4.5 Strategic Review Performance Bonus
A Strategic Review Performance Bonus equal to $487,500 has been awarded to Mr Stephan Titze in the current financial period.
This bonus equates to 75% of the total bonus opportunity available and was driven by performance criteria relating to Mr Titze’s
ongoing role (not covered by the 2020 STI program) as well as criteria relating to the successful running of the Strategic Review
of the Incitec Pivot Fertilisers (IPF) business unit.
Performance criteria for Mr Titze’s ongoing role (50% of bonus opportunity) were focused on leading the continuing operations
of IPF as well as keeping his team motivated and engaged during the uncertainty of the Strategic Review.
The remaining 50% of the bonus opportunity related to conditions specific to the review itself. These conditions were both quantitative
and qualitative in nature and were assessed under three broad categories relating to: the objectives of the review; quality of information
input into the review; and actions resulting from the review.
The bonus recognises the outstanding performance of Mr Titze throughout this process. This payment is reflected in Table 7 of this report,
under the “Short Term Incentive & other bonuses” column.
73
Incitec Pivot Limited Annual Report 2020REMUNERATION REPORT 4.6
Performance related remuneration
Table 5 – Details of performance rights granted and vested in the year ended 30 September 2020 and the vesting profile of
performance rights granted as remuneration
LTI
Details of performance rights vested and forfeited set out in the table below relate to the performance rights granted under the LTI 2016/19
(performance period: 1 October 2016 to 30 September 2019) which, following testing in November 2019 resulted in the Board determining
that 20% vested. In relation to the LTI 2017/20 (performance period: 1 October 2017 to 30 September 2020), following testing in November
2020, the Board determined that 10% of the performance rights will vest. This will be reported in the 2021 Remuneration Report.
STI
Details of performance rights in relation to short term incentive plans are set out in the table below.
Granted
during 2020 as
remuneration (A)
$000
Exercised
in year
$000
Vested
in year
%
Forfeited
in year %
Financial
year in
which
grant
may vest
Maximum
value of
outstanding
rights (B)
$000
Grant date
Key Management Personnel
Executives – Current
J Johns
Long term incentive rewards
LTI 2017/20
LTI 2018/21
LTI 2019/22
Short term incentive rewards
30 January 2018
5 February 2019
13 January 2020
–
–
1,755
–
–
–
–
–
–
Performance period: 23 October 2017 to 30 November 2019
5 February 2019
Performance period: 23 October 2017 to 30 November 2020
5 February 2019
N Stratford
Long term incentive rewards
LTI 2016/19
LTI 2017/20
LTI 2018/21
LTI 2019/22
T Wall
Long term incentive rewards
LTI 2018/21
LTI 2019/22
Short term incentive rewards
19 April 2017
30 January 2018
5 February 2019
13 January 2020
5 February 2019
13 January 2020
Performance period: 1 November 2018 to 30 September 2019
5 February 2019
Performance period: 1 November 2018 to 30 September 2020
5 February 2019
G Hayne
Long term incentive rewards
LTI 2017/20
LTI 2018/21
LTI 2019/22
B Lusk
Long term incentive rewards
LTI 2019/22
S Titze
Long term incentive rewards
LTI 2018/21
LTI 2019/22
Executives – Former
F Micallef (1)
Long term incentive rewards
LTI 2016/19
LTI 2017/20
LTI 2018/21
LTI 2019/22
1 March 2018
5 February 2019
13 January 2020
13 January 2020
5 February 2019
13 January 2020
25 January 2017
30 January 2018
5 February 2019
13 January 2020
–
–
–
–
–
528
–
425
–
–
–
–
382
–
–
371
–
–
–
534
–
–
–
–
–
440
100
–
–
150
20
80
–
–
–
–
–
–
–
–
–
–
114
100
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2020
2021
2022
2020
2021
2019
2020
2021
2022
2021
2022
2019
2020
2020
2021
2022
1,820
1,605
1,755
–
432
-
476
443
528
399
425
–
112
316
332
382
2022
–
2021
2022
314
371
174
20
–
–
–
–
–
–
80
–
80
90
2019
2020
2021
2022
–
567
100
53
(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 footnotes
under Table 7. This amount is allocated to the remuneration of each Executive over the vesting period (that is, in the 2020, 2021 and 2022 financial years).
(B) The maximum value of outstanding rights is based on the fair value of the performance rights at the grant date. This may be different to the value of the rights in the event that they vest. The
minimum value of rights yet to vest is zero, as the performance criteria may not be met.
(1) Mr Micallef ceased being a KMP on 30 June 2020. The outstanding balance represents the value of his performance rights as at 30 September 2020.
74
Incitec Pivot Limited Annual Report 2020REMUNERATION REPORT Modification of terms of equity-settled share-based payment transactions
No terms of equity-settled share-based payment transactions (including rights) granted to a KMP have been altered or modified
by the issuing entity during the reporting period.
Table 6 – 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 KMP, including their related parties, is as follows:
Key Management Personnel
Opening balance
Granted as
compensation (A)
Vested (B)
Forfeited (C)
Closing balance
Number of Rights
Executives – Current
J Johns
Long term incentive rewards
Short term incentive rewards
N Stratford
1,290,189
268,230
723,486
–
–
(134,115)
–
–
2,013,675
134,115
Long term incentive rewards
574,954
217,681
(45,766)
(183,066)
563,803
T Wall
Long term incentive rewards
Short term incentive rewards
G Hayne
152,981
69,302
175,283
–
–
(34,651)
Long term incentive rewards
244,220
157,637
B Lusk
Long term incentive rewards
–
–
S Titze
Long term incentive rewards
120,443
152,932
–
–
–
Executives – Former
F Micallef (1)
–
–
–
–
–
328,264
34,651
401,857
–
273,375
Long term incentive rewards
668,031
220,060
(53,158)
(564,275)
270,658
(A) For the 2020 financial year, this represents the rights granted to Executives during the reporting period under the LTI 2019/22. The grant of rights under the LTI 2019/22 to Ms Johns
was approved by shareholders at the Company’s 2019 Annual General Meeting.
(B) For the 2020 financial year, this represents the number of rights vested during the reporting period under short term incentive rewards and the LTI 2016/19. Each right entitled the
participating Executive to acquire a fully paid ordinary share in IPL for zero consideration.
(C) For the 2020 financial year, this represents rights that were forfeited by Executives during the period under the LTI 2016/19. In addition, in the case of Mr Micallef who ceased employment
during the reporting period, a portion of his rights held under the LTI 2018/21 and the LTI 2019/22 were also forfeited as at the date of cessation, in accordance with the plan rules.
(1) Mr Micallef ceased being a KMP on 30 June 2020. The outstanding balance represents the number of his performance rights as at 30 September 2020.
75
Incitec Pivot Limited Annual Report 2020REMUNERATION REPORT 4.7 Further details of Executive remuneration
Table 7 – Executive remuneration
Details of the remuneration for each Executive for the year ended 30 September 2020 are set out below:
Short-term benefits
Post
employment
benefit
Other
long term
benefits (C)
Termination
benefits
Short term
incentive
& other
bonuses (A)
Other
short term
benefits (B)
Salary
& Fees
Superannuation
benefits
Share-based payments
Accounting values
Prior
periods
expense
write-
back (D)
Current
period
expense (D)
Total share-
based
payments
Total
Year
$000
$000
$000
$000
$000
$000
$000
$000
$000
$000
Executive KMP – Current
J Johns
Managing Director & CEO
N Stratford (1)
Chief Financial Officer
T Wall (2)
President, Global Manufacturing
2020
2019
2020
2019
2020
2019
2020
G Hayne
President, Dyno Nobel Asia Pacific 2019
B Lusk (3)
President, Dyno Nobel Americas
2020
S Titze (4)
President, Incitec Pivot Fertilisers
2020
2019
Executives – Former
F Micallef (5)
Chief Financial Officer
A Grace (6)
President, Global Manufacturing
Total Executives
2020
2019
2019
2020
2019
1,640
1,630
890
825
724
664
649
599
192
629
446
686
915
63
175
331
–
–
58
172
–
62
–
488
–
–
–
–
11
90
312
154
–
–
–
2
226
–
158
–
–
–
–
–
21
21
21
19
21
21
–
21
16
16
21
2
17
15
24
46
6
3
32
12
–
5
2
16
35
1
5,410
5,142
721
565
549
404
100
100
100
114
–
–
–
–
–
–
–
–
–
–
–
468
–
–
468
–
1,458
1,142
451
433
275
125
297
216
–
228
82
202
504
20
(538)
–
(141)
(237)
–
–
(93)
–
–
–
–
920
1,142
310
196
275
125
204
216
–
228
82
2,763
3,208
1,557
1,242
1,084
983
906
912
418
1,371
704
(301)
(360)
(347)
(99)
144
1,087
1,115
(327)
(261)
2,911
2,522
(1,073)
(944)
1,838
1,578
9,186
7,903
(A) For Mr Titze, this amount reflects a Strategic Review Performance Bonus relating to the 2020 financial year as outlined under section 4.5 of this report. For Ms Johns this includes STI rights granted
on 5 February 2019 under the 2018 STI and for Mr Wall this includes special performance rights granted on 5 February 2019 related to his employment.
Grant date
Fair value per share treated as rights at grant date
J Johns
Performance period: 23 October 2017 to 30 November 2019
Performance period: 23 October 2017 to 30 November 2020
T Wall
Performance period: 1 November 2018 to 30 September 2019
Performance period: 1 November 2018 to 30 September 2020
5 February 2019
5 February 2019
5 February 2019
5 February 2019
$3.32
$3.22
$3.34
$3.23
(B) Other short term benefits include rent and mortgage interest subsidies, relocation allowances and other allowances, where applicable.
(C) Other long term benefits represent long service leave accrued during the reporting period.
(D) In accordance with accounting standards, remuneration includes the amortisation of the fair value at grant date of performance rights issued under the LTI Plans that are expected to vest, less
any write-back on performance rights lapsed or expected to lapse as a result of actual or expected performance against non-market hurdles (“Option Accounting Value”). The value disclosed in
the above Table 7 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.
LTI 2016/19 – TSR
LTI 2016/19 – Strategic Initiative
LTI 2016/19 – ROE Growth
LTI 2017/20 – TSR
LTI 2017/20 – Strategic Initiative
LTI 2017/20 – ROE Growth
LTI 2018/21 – TSR
LTI 2018/21 – Strategic Initiative
LTI 2018/21 – ROE Growth
LTI 2019/22 – TSR
LTI 2019/22 – Strategic Initiative
LTI 2019/22 – Absolute ROIC
Grant date
25 January 2017
25 January 2017
25 January 2017
30 January 2018
30 January 2018
30 January 2018
5 February 2019
5 February 2019
5 February 2019
13 January 2020
13 January 2020
13 January 2020
Fair value per share treated as rights at grant date
$2.87
$3.45
$3.45
$1.98
$3.42
$3.42
$1.82
$3.13
$3.13
$1.58
$2.99
$2.99
(1) Mr Stratford spent the first 9 months of the performance year as President, Dyno Nobel Americas (a US-based role) prior to being appointed to the CFO role for the final 3 months of the year.
(2) Mr Wall became a KMP on 1 November 2018 and the disclosures for the 2019 financial year are from that date and do not represent a full financial year.
(3) Dr Lusk became a KMP on 1 July 2020 and the disclosures for the 2020 financial year are from that date and do not represent a full financial year. Fixed remuneration payments were converted
from US$ to A$ at the average rate for 1 July 2020 to 30 September 2020, being $1.3982.
(4) Mr Titze became a KMP on 16 January 2019 and the disclosures for the 2019 financial year are from that date and do not represent a full financial year.
(5) Mr Micallef ceased being a KMP on 30 June 2020. Disclosure for the 2020 year is from 1 October 2019 to 30 June 2020. Termination benefits accrued for Mr Micallef in the 2020 financial year
include a separation payment of $467,657 in accordance with his contract of employment.
(6) Mr Grace ceased being a KMP from 31 October 2018. Disclosure for the 2019 year is from 1 October 2018 to 31 October 2018.
76
Incitec Pivot Limited Annual Report 2020REMUNERATION REPORT
Table 8 – Actual Pay
The table below provides a summary of actual remuneration paid to the Executives in the 2020 financial year (noting that for individuals who
became KMP in the 2020 financial year, only 2020 financial year information is shown in the table). The accounting values of the Executives’
remuneration reported in accordance with the Accounting Standards may not always reflect what the Executives have actually received,
particularly due to the valuation of share based payments. The table below seeks to clarify this by setting out the actual remuneration that
the Executives have been paid over the last twelve months, excluding any STI rights and LTI rights that were exercised during the year.
Executive remuneration details prepared in accordance with statutory requirements and the Accounting Standards are presented in
Table 7 of this report.
Executive KMP – Current
J Johns
Managing Director & CEO
N Stratford (1)
Chief Financial Officer
T Wall
President, Global Manufacturing
G Hayne
President, Dyno Nobel Asia Pacific
B Lusk (2)
President, Dyno Nobel Americas
S Titze
President, Incitec Pivot Fertilisers
Executives – Former
F Micallef (3)
Chief Financial Officer
A Grace (4)
President, Global Manufacturing
Total Executives
Year
2020
2019
2020
2019
2020
2019
2020
2019
2020
2020
2019
2020
2019
2019
2020
2019
Salary
& Fees
$000
1,640
1,630
890
825
724
664
649
599
192
629
446
686
915
63
Short term
incentive &
other bonuses
(A)
Other
short term
benefits (B)
Superannuation
benefits
Other
long term
benefits (C)
Termination
benefits
$000
$000
$000
$000
$000
–
1,045
–
781
–
–
62
332
–
488
–
–
879
626
11
90
312
154
–
–
–
2
226
–
158
–
–
–
549
404
–
–
21
21
21
19
21
21
–
21
16
16
21
2
100
100
–
–
–
–
–
–
121
143
–
–
–
–
–
277
121
420
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
5,410
5,142
550
3,663
Total
$000
1,651
2,765
1,223
1,781
745
683
853
1,097
418
1,138
620
702
1,815
968
6,730
9,729
(A) Represent a special incentive paid during the 2020 financial year to Mr Titze (outlined in Section 4.5 of the report). For Mr Hayne, this includes a special discretionary bonus payment made in
December 2019 as well as a short term incentive payment paid in 2019 prior to him becoming a KMP.
(B) Other short term benefits include rent and mortgage interest subsidies, relocation allowances and other allowances, where applicable.
(C) Other long term benefits include long service leave paid on cessation of employment. For Mr Hayne this includes a cash payment relating to a long term incentive plan for the periods prior
to him becoming a KMP.
(1) Mr Stratford spent the first 9 months of the performance year as President, Dyno Nobel Americas (a US-based role) prior to being appointed to the CFO role for the final 3 months of the year.
(2) Dr Lusk became a KMP on 1 July 2020 and the disclosures for the 2020 financial year are from that date and do not represent a full financial year.
(3) Mr Micallef’s ceased as a KMP on 30 June 2020 and the disclosures for the 2020 financial year are up until that date and do not represent a full financial year
(4) Mr Grace ceased as a KMP on 31 October 2018 and the disclosures for the 2019 financial year are up until that date and do not represent a full financial year.
5. Overview of Remuneration Changes for the 2021 Financial Year
No major structural changes are planned for the 2021 financial year. A number of minor adjustments will be implemented that aim
to better align executive reward with performance and shareholder experience:
»
»
LTI – Long Term Value Metrics (LTVM) which are focused on financially oriented objectives, will replace the previous Strategic
Initiatives Conditions.
LTI – Weightings within the program will be rebalanced. Return on Invested Capital (ROIC) will make up 40% (formerly 30%)
and LTVM will make up 20% (formerly 30%) of the reward opportunity available.
» STI – The Headline Net Profit After Tax (NPAT) gate will be modified to cap all non-safety related metrics at a maximum of target
payment if the gate is not met.
» STI – The Credit Rating gate introduced for the 2020 financial year only, will be removed as planned and replaced with a measure
within the plan that focusses on cashflow management.
» STI – New strategic measures will be introduced that emphasise cash and cost control management to align with this year’s
Response Plan.
The Board will continue to monitor and consider any trends that may become apparent with respect to remuneration (both domestically
and internationally) and look to incorporate changes that may contribute to the efficacy of the Company’s overall remuneration structure.
77
Incitec Pivot Limited Annual Report 2020REMUNERATION REPORT 6. Non-executive Director Remuneration
IPL’s policy is to:
»
»
remunerate Non-executive Directors by way of fees and payments which may be in the form of cash and superannuation benefits; and
set the level of Non-executive Directors’ fees and payments to be consistent with the market and to enable the IPL Group 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 2020 financial year, there were no increases to Non-executive Directors’ fees. Fees paid to Non-executive Directors amounted to
$1,524,000 which was within the $2,000,000 maximum aggregate fee pool approved by shareholders at the 2008 Annual General Meeting.
For the 2021 financial year, the Board has determined that there will be no increase in Non-executive Director fees.
The table below sets out the Board and Committee fees as at 30 September 2020:
Board Fees
Committee Fees
Chairperson
Members
Audit & Risk Management Committee
Chairperson
Members
Remuneration Committee
Chairperson
Members
HSEC Committee
Chairperson
Members
Nominations Committee
Chairperson
Members
$532,500
$177,500
$47,200
$23,600
$35,400
$17,700
$35,400
$17,700
N/A
$8,250
Table 9 – Non-executive Directors’ remuneration
Details of the Non-executive Directors’ remuneration for the financial year ended 30 September 2020 are set out in the following table:
Non-executive Directors – Current
B Kruger, Chairman
B Brook
X Liu (1)
R McGrath
G Robinson (2)
Non-executive Directors – Former
P Brasher, Chairman (3)
J Breunig (4),(5)
K Fagg AO (6)
G Smorgon AM (7)
Total Non-executive Directors
Board and
Committee Fees
Cash allowances
and other short
term benefits (A)
Post-employment
benefits
Other long
term benefits
Year
2020
2019
2020
2019
2020
2020
2019
2020
2019
2020
2019
2020
2019
2019
2020
2019
Fees
$000
512
299
240
173
176
239
224
151
383
81
195
47
210
40
1,446
1,524
Superannuation
benefits
$000
$000
$000
–
–
–
–
–
–
–
–
–
15
30
–
–
–
15
30
21
21
11
16
8
5
21
14
15
–
–
4
21
5
63
99
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
$000
533
320
251
189
184
244
245
165
398
96
225
51
231
45
1,524
1,653
(A) Cash allowances and other short term benefits include travel allowances and the taxable value of fringe benefits paid attributable to the fringe benefits tax year.
(1) Dr Liu was appointed as an Independent, Non-executive Director with effect from 25 November 2019.
(2) Mr Robinson was appointed as an Independent, Non-executive Director with effect from 25 November 2019.
(3) Mr Brasher retired as a Non-executive Director and Chairman on 30 June 2019 and was succeeded by Mr Kruger with effect from 1 July 2019.
(4) Mr Breunig resides in the United States and received a travel allowance of $5,000 per trip to Australia to attend Board and/or Committee meetings.
(5) Mr Breunig resigned from the Board as a Non-executive Director on 28 February 2020.
(6) Ms Fagg retired from the Board as a Non-executive Director on 20 December 2019.
(7) Mr Smorgon retired from the Board as a Non-executive Director on 20 December 2018.
78
Incitec Pivot Limited Annual Report 2020REMUNERATION REPORT 7. Shareholdings in IPL
The 2020 financial year saw the commencement of the MSR for Non-executive Directors. The MSR is an initiative to better align Director and
Shareholder interests and requires each Director to hold the equivalent of 100% of their base Board fee in IPL shares and/or rights to shares
(that have been fully sacrificed for under IPL’s Non-executive Director Fee Sacrifice Plan) at the completion of 5-years of service. As at 30
September 2020, all Directors (excluding those joining the IPL Board during the current financial year) were required to hold 20% of their
base Board fee in IPL shares and/or rights to shares. All Directors satisfied this requirement.
Table 10 – Movements in rights in the Company
IPL’s Non-executive Director Fee Sacrifice Plan (the Plan) commenced in 2019. The first six-monthly tranche of rights issued under the Plan
vested into shares in 2020. Rights issued under the second tranche are scheduled to vest in November 2020. These rights, as well as those
that subsequently convert to shares, combine to form part of the Non-executive Director’s Minimum Shareholding Requirement (MSR) that is
outlined in further detail in the next section of the report.
The movement during the reporting period in the number of rights for each Non-executive Director, including their related parties, is set out
in the table below:
Number of Rights (A)
Opening balance Rights acquired
Vested (B)
Forfeited
Closing balance
$’000
Maximum value of
outstanding rights (C)
Non-executive Directors – Current
B Kruger
B Brook
X Liu
R McGrath
G Robinson
0
0
0
0
0
38,459
22,687
7,239
–
–
(12,397)
(5,313)
–
–
–
–
–
–
–
–
26,062
17,374
7,239
–
–
53
35
15
–
–
(A) Includes movements of rights acquired under the Plan.
(B) For the 2020 financial year, this represents the number of rights vested during the reporting period under the Plan.
(C) Value of outstanding rights based on 20 Day VWAP - 4 March 2020 to 31 March 2020.
Table 11 – 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 KMP, including
their related parties, is set out in the table below:
Opening balance
Shares acquired
Shares disposed
Closing balance (B)
Number of Shares (A)
Non-executive Directors – Current
B Kruger
B Brook
X Liu
R McGrath
G Robinson
Non-executive Directors – Former
J Breunig
K Fagg AO
Executive Director – Current
J Johns
Executives – Current
N Stratford
T Wall
G Hayne
B Lusk
S Titze
Executives – Former
F Micallef
14,620
12,000
–
25,008
–
–
10,000
158,090
19,620
–
8,633
–
–
99,478
27,397
20,313
43,000
15,000
67,020
–
–
459,905
27,459
44,651
15,000
–
–
53,158
–
–
–
–
–
–
–
–
–
–
–
–
–
–
42,017
32,313
43,000
40,008
67,020
–
10,000
617,995
47,079
44,651
23,633
–
–
152,636
(A) Includes fully paid ordinary shares and shares acquired under IPL’s incentive plans. Details of these plans are set out in note 18, Share-based payments.
(B) Where a director or an Executive has ceased to be a KMP during the reporting year, the balance stated in this column represents the number of shares held as at the date the director
or Executive ceased to be a KMP.
8. Other KMP Disclosures
Loans to KMP
In the year ended 30 September 2020, there were no loans to key management personnel and their related parties (2019: nil).
Other KMP transactions
In the year ended 30 September 2020, there were no transactions entered into during the year with key management personnel
(including their related parties).
79
Incitec Pivot Limited Annual Report 2020REMUNERATION REPORT Deloitte Touche Tohmatsu
ABN 74 490 121 060
477 Colins Street
Melbourne VIC 3000
Phone: +61 3 9671 7000
www.deloitte.com.au
The Board of Directors
Incitec Pivot Limited
Level 8, 28 Freshwater Place
Southbank Victoria 3006
10 November 2020
Dear Board Members
Incitec Pivot Limited
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the
following declaration of independence to the directors of Incitec Pivot Limited.
As lead audit partner for the audit of the financial statements of Incitec Pivot Limited for the
financial year ended 30 September 2020, I declare that to the best of my knowledge and
belief, there have been no contraventions of:
(i) the auditor independence requirements of the Corporations Act 2001 in relation to
the audit; and
(ii) any applicable code of professional conduct in relation to the audit.
Yours sincerely
DELOITTE TOUCHE TOHMATSU
A T Richards
Partner
Chartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation
Member of Deloitte Asia Pacific and the Deloitte organisation
80
Incitec Pivot Limited Annual Report 2020
FINANCIAL REPORT CONTENTS
82
82
83
84
85
86
87
119
127
120
128
129
Introduction
Content and Structure of the Financial Report
Consolidated Statement of Profit or Loss
and Other 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 82 to 118
Additional Information
Independent Auditor’s Report
Shareholder Information
Five Year Financial Statistics
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Incitec Pivot Limited Annual Report 2020
81
FINANCIAL REPORT
Introduction
This is the consolidated financial report of Incitec Pivot Limited (the Company, IPL, or Incitec Pivot) a company domiciled in Australia,
and its subsidiaries including its interests in joint ventures and associates (collectively referred to as the Group) for the financial year
ended 30 September 2020.
Content and Structure of the Financial Report
The notes to the financial statements and the related accounting policies are grouped into the following distinct sections in the 2020 financial
report. The accounting policies have been consistently applied to all years presented, unless otherwise stated.
Section
Description
Financial performance
Shareholder returns
Capital structure
Capital investment
Risk management
Other
Provides detail on the Group’s Consolidated Statement of Profit or Loss and Other Comprehensive Income and
Consolidated Statement of Financial Position that are most relevant in forming an understanding of the Group’s
financial performance for the year.
Provides information on the performance of the Group in generating shareholder returns.
Provides information about the Group’s capital and funding structures.
Provides information on the Group’s investment in tangible and intangible assets, and the Group’s future capital
commitments.
Provides information about the Group’s risk exposures, risk management practices, provisions and contingent
liabilities.
Provides information on items that require disclosure to comply with Australian Accounting Standards and the
requirements under the Corporations Act.
Information is included in the notes to the financial report only to the extent it is considered material and relevant to the understanding of
the financial report. A disclosure is considered material and relevant if, for example:
the dollar amount is significant in size (quantitative factor)
the item is significant by nature (qualitative factor)
the Group’s result cannot be understood without the specific disclosure (qualitative factor)
it relates to an aspect of the Group’s operations that is important to its future performance.
»
»
»
»
82
Incitec Pivot Limited Annual Report 2020FINANCIAL REPORT Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the year ended 30 September 2020
Notes
2020 $mill
2019 $mill
Revenue
Financial and other income
Share of profit of equity accounted investments
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
Financial expenses
Purchased services
Repairs and maintenance
Outgoing freight
Lease payments – operating leases
Asset impairment write-downs
Other expenses
Profit before income tax
Income tax expense
Profit for the year
Other comprehensive income, net of income tax
Items that will not be reclassified subsequently to profit or loss
Actuarial losses on defined benefit plans
Gross fair value losses on assets at fair value through other comprehensive income
Income tax relating to items that will not be reclassified subsequently to profit or loss
Items that may be reclassified subsequently to profit or loss
Fair value losses on cash flow hedges
Cash flow hedge gains transferred to profit or loss
Exchange differences on translating foreign operations
Net gains/(losses) on hedge of net investment
Income tax relating to items that may be reclassified subsequently to profit or loss
Other comprehensive income for the year, net of income tax
Total comprehensive income for the year
Profit attributable to:
Members of Incitec Pivot Limited
Non-controlling interest
Profit for the year
Total comprehensive income attributable to:
Members of Incitec Pivot Limited
Non-controlling interest
Total comprehensive income for the year
Earnings per share
Basic (cents per share)
Diluted (cents per share)
(2)
(2)
(14)
(2)
(2)
(2)
(3)
(20)
(17)
(17)
(17)
(17)
(5)
(5)
3,942.2
43.4
32.3
(121.3)
(1,707.4)
(723.8)
(356.0)
(139.6)
(200.0)
(181.2)
(287.6)
(26.7)
(57.3)
(66.1)
150.9
(27.5)
123.4
(9.0)
–
2.5
(6.5)
(4.3)
(19.0)
(354.5)
125.5
49.3
(203.0)
(209.5)
(86.1)
123.4
–
123.4
(86.1)
–
(86.1)
7.1
7.1
3,918.2
58.7
44.9
70.7
(2,028.0)
(686.8)
(301.6)
(149.1)
(185.5)
(172.3)
(283.9)
(60.6)
(11.5)
(53.6)
159.6
(7.5)
152.1
(36.6)
(0.1)
10.2
(26.5)
(72.5)
(18.0)
226.1
(107.8)
14.4
42.2
15.7
167.8
152.4
(0.3)
152.1
168.1
(0.3)
167.8
9.5
9.4
83
Incitec Pivot Limited Annual Report 2020FINANCIAL REPORT
Consolidated Statement of Financial Position
As at 30 September 2020
Notes
2020 $mill
2019 $mill
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other assets
Other financial assets
Total current assets
Non-current assets
Trade and other receivables
Other assets
Other financial assets
Equity accounted investments
Property, plant and equipment
Right-of-use lease assets
Intangible assets
Deferred tax assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Lease liabilities
Interest bearing liabilities
Other financial liabilities
Provisions
Current tax liabilities
Total current liabilities
Non-current liabilities
Trade and other payables
Lease liabilities
Interest bearing liabilities
Other financial liabilities
Provisions
Deferred tax liabilities
Retirement benefit obligation
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
84
(8)
(4)
(4)
(17)
(4)
(17)
(14)
(9)
(10)
(11)
(3)
(4)
(10)
(8)
(17)
(16)
(4)
(10)
(8)
(17)
(16)
(3)
(20)
(7)
554.6
373.9
474.4
47.2
79.8
576.4
316.7
600.9
50.6
6.2
1,529.9
1,550.8
26.9
25.8
56.1
326.3
4,071.7
221.1
3,019.7
13.5
7,761.1
9,291.0
1,049.4
41.5
21.2
93.6
102.3
21.5
47.4
21.6
16.6
357.7
4,190.0
–
3,179.5
15.9
7,828.7
9,379.5
1,152.0
–
1,213.4
39.2
86.1
13.4
1,329.5
2,504.1
16.2
206.2
1,849.1
65.3
125.5
429.0
66.9
2,758.2
4,087.7
5,203.3
3,806.2
(221.8)
1,618.9
5,203.3
17.4
–
1,443.0
45.1
116.5
498.4
67.2
2,187.6
4,691.7
4,687.8
3,136.8
(19.9)
1,570.9
4,687.8
Incitec Pivot Limited Annual Report 2020FINANCIAL REPORT
Consolidated Statement of Cash Flows
For the year ended 30 September 2020
Cash flows from operating activities
Profit after tax for the year
Adjusted for non-cash items
Net finance cost
Depreciation and amortisation
Write-down of property, plant and equipment
Impairment of intangible assets
Share of profit of equity accounted investments
Net gain on sale of property, plant and equipment
Non-cash share-based payment transactions
Income tax expense
Changes in assets and liabilities
(Increase)/decrease in receivables and other operating assets
Decrease/(increase) in inventories
(Decrease)/increase in payables, provisions and other operating liabilities
Adjusted for cash items
Dividends received
Interest received
Interest paid
Income tax paid
Net cash flows from operating activities
Cash flows from investing activities
Payments for property, plant and equipment and intangibles
Proceeds from sale of property, plant and equipment
Payments for acquisition of subsidiaries and non-controlling interests
Payments towards investment in joint arrangement
Proceeds from sale of equity securities
Loans to equity accounted investees
(Payments)/receipts from settlement of net investment hedge derivatives
Net cash flows from investing activities
Cash flows from financing activities
Repayment of borrowings
Proceeds from borrowings
Proceeds from equity raising
Realised market value gain on derivatives
Lease liability payments
Dividends paid
Dividends paid to non-controlling interest holder
Purchased shares for IPL employees
Payment for buy-back of shares
Net cash flows from financing activities
Net decrease in cash and cash equivalents held
Cash and cash equivalents at the beginning of the year
Effect of exchange rate fluctuations on cash and cash equivalents held
Cash and cash equivalents at the end of the year
Notes
2020 $mill
2019 $mill
Inflows (Outflows)
Inflows (Outflows)
123.4
135.7
356.0
16.3
41.0
(32.3)
(1.6)
2.4
27.5
(47.1)
112.3
(70.2)
663.4
30.9
3.9
(139.4)
(13.7)
545.1
(278.4)
7.4
(23.4)
(9.8)
–
–
(75.2)
(379.4)
(1,487.6)
723.0
645.5
10.3
(41.9)
(30.7)
–
(1.3)
–
(182.7)
(17.0)
576.4
(4.8)
554.6
(2)
(9)
(11)
(14)
(2)
(18)
(3)
(14)
(8)
(8)
(7)
(6)
(8)
152.1
144.1
301.6
11.5
–
(44.9)
(12.0)
1.6
7.5
35.5
(81.7)
23.9
539.2
27.5
5.0
(136.1)
(20.8)
414.8
(348.1)
10.8
(5.3)
–
2.3
(6.8)
5.5
(341.6)
(429.7)
553.7
–
–
–
(121.7)
(5.9)
(0.6)
(89.7)
(93.9)
(20.7)
588.5
8.6
576.4
85
Incitec Pivot Limited Annual Report 2020FINANCIAL REPORT
–
(0.3)
–
–
–
–
–
–
–
–
–
–
–
–
(89.7)
(7.9)
(0.6)
1.6
4,687.8
4,687.8
(14.3)
123.4
(209.5)
(54.6)
669.4
(1.3)
2.4
5,203.3
Consolidated Statement of Changes in Equity
For the year ended 30 September 2020
Issued
capital
$mill
Notes
Cash
flow
hedging
reserve
$mill
Share-
based
payments
reserve
$mill
Foreign
currency
translation
reserve
$mill
Fair
value
reserve
$mill
Retained
earnings
$mill
Non-
controlling
interest
$mill
Total
$mill
Total
equity
$mill
Balance at 1 October 2018
3,226.5
15.6
25.0
(84.0)
(12.0)
1,566.6
4,737.7
6.5
4,744.2
Profit for the year
Total other comprehensive income
for the year
Dividends paid
Share buy-back
(6)
Change in non-controlling interest
Purchased shares for IPL employees
Share-based payment transactions
(18)
–
–
–
(89.7)
–
–
–
–
(63.9)
–
–
–
–
–
Balance at 30 September 2019
3,136.8
(48.3)
–
–
–
–
–
(0.6)
1.6
26.0
–
–
152.4
152.4
(0.3)
152.1
106.1
(0.1)
(26.4)
15.7
–
15.7
(121.7)
(121.7)
(5.9)
(127.6)
–
–
–
–
–
–
–
(7.6)
–
–
–
–
–
–
(89.7)
(7.6)
(0.6)
1.6
22.1
(19.7)
1,570.9
4,687.8
Balance at 1 October 2019
3,136.8
(48.3)
26.0
22.1
(19.7)
1,570.9
4,687.8
Adoption of AASB 16 Leases(i)
Profit for the year
Total other comprehensive income
for the year
Dividends paid
Shares issued during the year
Purchased shares for IPL employees
(6)
(7)
Share-based payment transactions
(18)
–
–
–
–
669.4
–
–
–
–
(16.0)
–
–
–
–
–
–
–
–
–
(1.3)
2.4
–
–
(187.0)
–
–
–
–
–
–
–
–
–
–
–
(14.3)
(14.3)
123.4
123.4
(6.5)
(209.5)
(54.6)
(54.6)
–
–
–
669.4
(1.3)
2.4
Balance at 30 September 2020
3,806.2
(64.3)
27.1
(164.9)
(19.7)
1,618.9
5,203.3
(i) Refer note 10 for additional information on the adoption of AASB16 Leases
Cash flow hedging reserve
This reserve comprises the cumulative net change in the fair value of the effective portion of cash flow hedging instruments related
to hedged transactions that have not yet occurred.
Share-based payments reserve
This reserve comprises the fair value of rights recognised as an employee expense under the terms of the 2017/20, 2018/21
and 2019/22 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.
The relevant portion of the reserve is recognised in the profit or loss 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
This reserve represents the cumulative net change in the fair value of equity instruments. The annual net change in the fair value of
investments in equity securities (including both realised and unrealised gains and losses) is recognised in other comprehensive income.
86
Incitec Pivot Limited Annual Report 2020FINANCIAL REPORT
Notes to the Consolidated Financial Statements
For the year ended 30 September 2020
Basis of preparation
Financial performance
1 Segment report
2 Revenue and expenses
3 Taxation
4 Trade and other assets and liabilities
Shareholder returns
5 Earnings per share
6 Dividends
Capital structure
7 Capital management
8 Net debt
Capital investment
9 Property, plant and equipment
10 Leases
11 Intangibles
12 Impairment of goodwill and non-current assets
13 Commitments
14 Equity accounted investments
15 Investments in subsidiaries, joint arrangements and associates
Risk management
16 Provisions and contingencies
17 Financial risk management
Other
18 Share-based payments
19 Key management personnel disclosures
20 Retirement benefit obligation
21 Deed of cross guarantee
22 Parent entity disclosure
23 Auditor’s remuneration
24 Events subsequent to reporting date
88
89
91
92
93
94
94
95
96
98
99
100
101
103
103
104
106
107
115
115
116
117
117
118
118
87
Incitec Pivot Limited Annual Report 2020FINANCIAL REPORT Notes to the Consolidated Financial Statements: Basis of preparation
For the year ended 30 September 2020
Basis of preparation and consolidation
The consolidated financial statements of the Group have been
prepared under the historical cost convention, except for certain
financial instruments that have been measured at fair value.
The resulting accounting estimates will, by definition, seldom equal
the subsequent related actual result. The estimates and judgments
that have a significant risk of causing a material adjustment to
the carrying amounts of the assets and liabilities within the next
financial year are set out in the notes.
Rounding of amounts
The Company is of a kind referred to in ASIC Legislative Instrument,
ASIC Corporations (Rounding in Financial/ Directors’ Reports)
Instrument 2016/191, issued by the Australian Securities and
Investments Commission dated 24 March 2016 and, in accordance
with that Legislative Instrument, the amounts shown in this report
and in the financial statements have been rounded, except where
otherwise stated, to the nearest one hundred thousand dollars.
Accounting standards issued
The Group adopted all amendments to Standards and Interpretations
issued by the Australian Accounting Standards Board (AASB) that
are relevant to its operations and effective for the current year.
The adoption of these revised Standards and Interpretations did
not have a material impact on the Group’s results, except for:
» AASB 16: Leases
Details of the impact of AASB 16 on the Group are included
in note 10.
The following relevant standards were available for early adoption
and were early adopted by the Group:
» AASB 2019-3: Amendments to Australian Accounting Standards –
Interest Rate Benchmark Reform
» AASB 2020-8: Amendments to Australian Accounting Standards
– Interest Rate Benchmark Reform – Phase 2
The global interest rate benchmark reform is resulting in the
replacement of Inter-Bank Offered Rates (IBORs) with alternative
risk-free rates by 1 January 2022. The Interest Rate Benchmark
Reform Accounting Standard amendments modify specific hedging
accounting requirements to allow hedge accounting to continue
during the period of uncertainty relating to the benchmarking
reforms for affected cash flow and fair value hedges.
London Inter-Bank Offered Rate (LIBOR), Hong Kong Inter-Bank
Offered Rate (HIBOR) and Bank Bill Swap Rate (BBSW) are
benchmark rates impacted by the reform and are referenced in
the Group’s debt and derivative contracts. A working group with
representation from different functions across the Group has been
established to monitor the developments in the global reform and
manage the transition of contracts affected. The ‘Interest Rate Risk’
section in note 17 summarises the Group’s derivative instruments in
hedging relationships at 30 September 2020, including the nominal
amounts in those hedge relationships. The adoption of the new
standard had no impact on the Group’s financial results for the year
ended 30 September 2020.
The financial results and financial position of the Group are
expressed in Australian dollars, which is the functional currency of
the Company and the presentation currency for the consolidated
financial statements. Where applicable, comparative disclosures
have been reclassified for consistency with the current period.
The consolidated financial statements were authorised for issue
by the directors on 10 November 2020.
Subsidiaries
Subsidiaries are entities that are controlled by the Group.
The financial results and financial position of the subsidiaries
are included in the consolidated financial statements from
the date control commences until the date control ceases.
A list of the Group’s subsidiaries is included in note 15.
Joint arrangements and associates
A joint venture is an arrangement where the parties have rights
to the net assets of the venture.
A joint operation is an arrangement where the parties each have
rights to the assets and liabilities relating to the arrangement.
Associates are those entities in respect of which the Group has
significant influence, but not control, over the financial and
operating policies of the entities.
Investments in joint ventures and associates are accounted for
using the equity method. They are initially recognised at cost,
and subsequent to initial recognition, the consolidated financial
statements include the Group’s share of the profit or loss and
other comprehensive income of the investees.
The interests in joint operations are brought to account recognising
the Group’s share of jointly controlled assets; liabilities; expenses;
and income from the joint operation.
A list of the Group’s joint arrangements and associates is included
in note 15.
Statement of compliance
The consolidated financial statements are general purpose financial
statements which have been prepared in accordance with Australian
Accounting Standards (including Australian Interpretations) and the
Corporations Act 2001. The consolidated financial statements of
the Group comply with International Financial Reporting Standards
(IFRS) and interpretations. The Company is a for-profit entity.
Key estimates and judgments
Key accounting 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.
88
Incitec Pivot Limited Annual Report 2020FINANCIAL REPORT Notes to the Consolidated Financial Statements: Financial performance
For the year ended 30 September 2020
Asia Pacific Eliminations (APAC Elim): represent elimination of sales
and profit in stock arising from Fertilisers APAC sales to DNAP.
Americas
Dyno Nobel Americas (DNA): manufactures and sells industrial
explosives and related products and services to the mining,
quarrying and construction industries in the Americas (Canada,
Mexico and Chile) and inititating systems to businesses in Australia,
Turkey and South Africa. It also manufactures and sells industrial
chemicals to the agriculture and specialist industries.
Corporate
Corporate costs include all head office expenses that cannot
be directly or reasonably attributed to the operation of any
of the Group’s businesses.
Group Eliminations (Group Elim): represent elimination
of sales and profit in stock arising from intersegment sales.
1. Segment report
The Group operates a number of strategic divisions that offer
different products and services and operate in different markets.
For reporting purposes, these divisions are known as reportable
segments. The results of each segment are reviewed monthly by
the executive management team (the chief operating decision
makers) to assess performance and make decisions about the
allocation of resources.
Following the conclusion of the Fertilisers Strategic Review during
the current financial year, the operating segments were changed
to align with the reports that are used by the Group’s executive
management team. As a result, Incitec Pivot Fertilisers (IPF) and
Southern Cross International (SCI) were combined into one reporting
segment, Fertilisers Asia Pacific. The prior year comparatives have
been restated in line with this change.
Description of reportable segments
Asia Pacific
Fertilisers Asia Pacific (Fertilisers APAC): manufactures and
sells fertilisers in Eastern Australia and the export market.
It also manufactures, imports and sells industrial chemicals
to the agriculture and specialist industries.
Dyno Nobel Asia Pacific (DNAP): manufactures and sells industrial
explosives and related products and services to the mining industry
in the Asia Pacific region and Turkey.
Reportable segments – financial information
Asia Pacific
Americas
Fertilisers
APAC
$mill
DNAP
$mill
APAC
Elim
$mill
Total
$mill
DNA
$mill
Group
Elim
$mill
Corporate(i)
$mill
Consolidated
Group
$mill
1,502.0
999.2
(18.5) 2,482.7
1,506.5
(47.0)
–
11.8
129.0
230.7
–
–
–
–
11.8
20.5
359.7
396.3
(184.2)
(165.5)
175.5
230.8
–
(0.3)
0.2
(0.1)
1,536.0
2,564.9
–
4,100.9
4,436.5
(770.1)
(282.4)
–
(1,052.5)
(639.2)
765.9
2,282.5
–
3,048.4
3,797.3
–
–
–
740.1
9,277.5
(1,967.0)
(3,658.7)
(1,226.9)
5,618.8
30 September 2020
Revenue from external customers
Share of profits of equity accounted investments
EBITDA(ii)
Notes
(2)
(14)
Depreciation and amortisation
(2)
(102.8)
(81.4)
EBIT(iii)
Net interest expense
Income tax expense (excluding IMIs)
Profit after tax(iv)
Individually material items (net of tax)
(2)
Profit attributable to members of IPL
26.2
149.3
Segment assets
Segment liabilities
Net segment assets(v)
Deferred tax balances
Net assets
(3)
(i) Corporate assets and liabilities include the Group’s interest bearing liabilities and derivative assets and liabilities.
(ii) Earnings Before Interest, related income tax expense, depreciation and amortisation and individually material items.
(iii) Earnings Before Interest, related income tax expense and individually material items.
(iv) Profit after tax (excluding individually material items).
(v) Net segment assets exclude deferred tax balances.
–
–
(25.2)
(6.5)
(31.7)
3,942.2
32.3
730.5
(356.0)
374.5
(135.7)
(50.6)
188.2
(64.8)
123.4
(415.5)
5,203.3
89
Incitec Pivot Limited Annual Report 2020FINANCIAL REPORT
Notes to the Consolidated Financial Statements: Financial performance
For the year ended 30 September 2020
30 September 2019
Asia Pacific
Americas
Fertilisers
APAC
$mill
Notes
DNAP
$mill
APAC
Elim
$mill
Total
$mill
DNA
$mill
Group
Elim
$mill
Corporate(i)
$mill
Consolidated
Group
$mill
Revenue from external customers
(2)
1,419.4
990.7
(13.4)
2,396.7
1,569.0
(47.5)
Share of profits of equity accounted investments
(14)
–
13.1
EBITDA(ii)
0.4
255.4
Depreciation and amortisation
(2)
(80.1)
(76.2)
EBIT(iii)
Net interest expense
Income tax expense
Profit after tax
Non-controlling interest
Profit attributable to members of IPL
Segment assets
Segment liabilities
Net segment assets(iv)
Deferred tax balances
Net assets
(79.7)
179.2
1,454.7
2,564.9
(655.5)
(290.5)
799.2
2,274.4
(3)
(3)
–
–
–
–
–
–
–
(i) Corporate assets and liabilities include the Group’s interest bearing liabilities and derivative assets and liabilities.
(ii) Earnings Before Interest, related income tax expense, and depreciation and amortisation.
(iii) Earnings Before Interest and related income tax expense.
(iv) Net segment assets exclude deferred tax balances.
13.1
255.8
31.8
376.6
(156.3)
(142.6)
–
(1.7)
–
99.5
234.0
(1.7)
–
–
(25.4)
(2.7)
(28.1)
3,918.2
44.9
605.3
(301.6)
303.7
(144.1)
(7.5)
152.1
0.3
152.4
4,019.6
4,647.8
(946.0)
(562.0)
3,073.6
4,085.8
–
–
–
696.2
9,363.6
(2,685.3)
(4,193.3)
(1,989.1)
5,170.3
(482.5)
4,687.8
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 2020
Revenue from external customers
Non-current assets other than financial
assets and deferred tax assets
Trade and other receivables
30 September 2019
Revenue from external customers
Non-current assets other than financial
assets and deferred tax assets
Trade and other receivables
Australia
$mil
2,399.0
3,549.2
215.9
Australia
$mil
2,304.8
3,412.8
143.3
USA
$mill
1,237.5
3,942.2
98.6
USA
$mill
1,320.2
4,187.8
89.8
Canada
$mill
249.8
80.6
46.7
Canada
$mill
218.0
66.6
43.4
Turkey
$mill
50.5
2.0
11.2
Turkey
$mill
50.3
1.6
18.1
Other/Elim
$mill
Consolidated
$mill
5.4
3,942.2
117.5
28.4
7,691.5
400.8
Other/Elim
$mill
Consolidated
$mill
24.9
3,918.2
127.4
69.5
7,796.2
364.1
90
Incitec Pivot Limited Annual Report 2020FINANCIAL REPORT
3.9
5.0
Employee redundancies
24.8
(6.8)
18.0
Notes to the Consolidated Financial Statements: Financial performance
For the year ended 30 September 2020
2. Revenue and expenses
Notes
2020
$mill
2019
$mill
3,942.2
3,918.2
3,942.2
3,918.2
Revenue
External sales
Total revenue
Financial income
Interest income
Other income
Royalty income and management fees
Net gain on sale of property, plant and
equipment
Other income from operations
Total financial and other income
Expenses
27.3
1.6
10.6
43.4
33.0
12.0
8.7
58.7
Profit before income tax includes the following specific expenses:
Notes
2020
$mill
2019
$mill
Depreciation and amortisation
Depreciation
property, plant and equipment
leases
Amortisation
Total depreciation and amortisation
Recoverable amount write-down
property, plant and equipment
intangible assets
Total recoverable amount write-down
Amounts set aside to provide for:
impairment losses on trade and other
receivables
inventory losses and obsolescence
employee entitlements
environmental liabilities
legal and other provisions
restructuring and rationalisation costs
Research and development expense
Defined contribution superannuation
expense
(9)
(10)
(11)
(9)
(11)
(4)
(4)
(16)
(16)
(16)
(16)
Defined benefit superannuation expense
(20)
Financial expenses
Interest on lease liabilities
Unwinding of discount on provisions
Net interest expense on defined benefit
obligation
Interest expenses on financial liabilities
Total financial expenses
(10)
(16)
(20)
290.7
277.9
40.7
24.6
356.0
16.3
41.0
57.3
6.1
0.2
8.5
1.9
2.4
29.3
18.9
33.5
2.9
5.9
5.7
1.4
–
23.7
301.6
11.5
–
3.1
3.6
8.3
4.6
6.4
11.7
18.2
31.7
4.6
–
4.4
1.4
126.6
139.6
143.3
149.1
Individually material items
30 September 2020
Profit after tax includes the following expenses whose disclosure
is relevant in explaining the financial performance of the Group:
Gross
$mill
Tax
$mill
Net
$mill
Impairment of intangible assets (1)
41.0
(10.7)
30.3
Business restructuring costs (2)
Impairment of operating assets,
site exit and other direct costs
Total individually material items
22.1
87.9
(5.6)
(23.1)
16.5
64.8
(1) During the year ended 30 September 2020 intangible assets were impaired by $41.0m
(2019: nil). Refer to note 12 for further details.
(2) Costs incurred directly due to the business restructure which include redundancies and
related costs, asset impairment write downs, and site exit and reconfiguration costs.
30 September 2019
There were no individually material items for the year ended 30
September 2019.
Key accounting policies
Revenue
Revenue is measured at the fair value of the consideration received
or receivable by the Group. 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 on
the following basis:
» Sale of goods and services: revenue from the sale of goods and
services is recognised at the point in time when the performance
obligations under the customer contract are satisfied. This is
typically when control of goods or services is transferred to
the customer. The fee for the service component is recognised
separately from the sale of goods.
11.5
»
Take-or-pay revenue: revenue is recognised in line with the sale
of goods policy. In circumstances where goods are not taken by
the customer, revenue is recognised when the likelihood of the
customer meeting its obligation to ‘take goods’ becomes remote.
»
Interest income is recognised as it accrues using the effective
interest method.
The Group disaggregates its revenue per reportable segment
as presented in Note 1, as the revenue within each business
unit is affected by economic factors in a similar manner.
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). The only exception is 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 the asset or as part of the item of expenditure.
Other income
Other income from operations represents gains that are not
revenue. This includes royalty income and management fees
from the Group’s joint ventures and associates, and income from
contractual arrangements that are not considered external sales.
91
Incitec Pivot Limited Annual Report 2020FINANCIAL REPORT
Notes to the Consolidated Financial Statements: Financial performance
For the year ended 30 September 2020
3. Taxation
Income tax expense for the year
Movements in net deferred tax liabilities
The table below sets out movements in net deferred tax balances
for the period ended 30 September:
2020
$mill
2019
$mill
Current tax expense
Current year
Adjustments in respect of prior years
Deferred tax expense
Current year
Total income tax expense
25.1
(1.7)
23.4
4.1
27.5
Income tax reconciliation to prima facie tax payable
Profit before income tax
Tax at the Australian tax rate of 30% (2019: 30%)
Tax effect of amounts which are not deductible/
(taxable) in calculating taxable income:
Other foreign deductions
Joint venture income
Sundry items
Difference in overseas tax rates
Adjustments in respect of prior years
Income tax expense attributable to profit
2020
$mill
150.9
45.3
–
(8.1)
(4.2)
(3.8)
(1.7)
27.5
(17.1)
(3.0)
(20.1)
27.6
7.5
2019
$mill
159.6
47.9
(15.9)
(11.6)
2.9
(12.8)
(3.0)
7.5
Tax amounts recognised directly in equity
The aggregate current and deferred tax arising in the financial year
and not recognised in net profit or loss but directly charged to equity
is $51.9m for the year ended 30 September 2020 (2019: credit of
$24.6m).
Net deferred tax assets/(liabilities)
Deferred tax balances comprise temporary differences attributable
to the following:
Employee entitlements provision
Retirement benefit obligations
Provisions and accruals
Lease liabilities
Tax losses
Property, plant and equipment
Right-of-use lease assets
Intangible assets
Joint venture income
Financial instruments
Other
2020
$mill
21.7
18.4
51.1
70.6
170.3
(554.0)
(62.9)
(91.2)
(13.1)
(12.4)
(14.0)
2019
$mill
17.7
18.0
47.6
–
136.5
(527.4)
–
(99.0)
(10.2)
(64.0)
(1.7)
Net deferred tax liabilities
(415.5)
(482.5)
Presented in the Statement of Financial Position as follows:
Deferred tax assets
Deferred tax liabilities
Net deferred tax liabilities
13.5
(429.0)
(415.5)
15.9
(498.4)
(482.5)
Opening balance at 1 October
Adoption of AASB 16 Leases
Debited to the profit or loss
Charged to equity
Foreign exchange movements
2020
$mill
2019
$mill
(482.5)
(465.9)
6.0
(4.1)
51.8
13.3
–
(27.6)
24.6
(13.6)
Closing balance at 30 September
(415.5)
(482.5)
Key accounting policies
Income tax expense
Income tax expense comprises current tax (amounts payable or
receivable within 12 months) and deferred tax (amounts payable
or receivable after 12 months). Tax expense is recognised in the
profit or loss, unless it relates to items that have been recognised
in equity (as part of other comprehensive income). In this instance,
the related tax expense is also recognised in equity.
Current tax
Current tax is the expected tax payable on the taxable income
for the year. It is calculated using tax rates applicable at the
reporting date, and any adjustments to tax payable in respect
of previous years.
Deferred tax
Deferred tax is recognised for all taxable temporary differences
and is calculated based on the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used
for taxation purposes. Deferred tax is measured at the tax rates
that are expected to be applied 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 only 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 benefits will be realised.
Offsetting tax balances
Tax assets and liabilities are offset when the Group has a legal right
to offset and intends either to settle on a net basis or to realise the
asset and settle the liability simultaneously.
Tax consolidation
For details on the Company’s tax consolidated group refer
to note 22.
Key estimates and judgments
Uncertain tax matters
The Group is subject to income taxes in Australia and foreign
jurisdictions and as a result the calculation of the Group’s
tax charge involves a degree of estimation and judgment in
respect of certain items. In addition, there are transactions
and calculations relating to the ordinary course of business
for which the ultimate tax determination is uncertain. The
Group recognises liabilities for potential tax audit issues in
deferred tax liabilities based on management’s assessment
of whether additional taxes may be payable and calculates
the provision in accordance with the applicable accounting
standards including IFRIC 23 Uncertainty over income tax
treatments. Where the final tax outcome of these matters is
different from the amounts that were initially recorded, these
differences impact the current and deferred tax provisions in
the period in which such determination is made.
92
Incitec Pivot Limited Annual Report 2020FINANCIAL REPORT
Notes to the Consolidated Financial Statements: Financial performance
For the year ended 30 September 2020
4. Trade and other assets and
liabilities
The Group’s total trade and other assets and liabilities consists of
inventory, receivables and payables balances, net of provisions for
any impairment losses.
30 September 2020
Inventories
Receivables
Payables
30 September 2019
Inventories
Receivables
Payables
Inventory by category:
Raw materials and stores
Work-in-progress
Finished goods
Provisions
Total inventory balance
Provision movement:
30 September 2020
Carrying amount at 1 October 2019
Provisions made during the year
Provisions written back during the year
Amounts written off against provisions
Foreign exchange rate movements
Trade
$mill
474.4
338.9
Other
$mill
–
61.9
Total
$mill
474.4
400.8
(798.5)
(267.1)
(1,065.6)
14.8
(205.2)
(190.4)
Trade
$mill
600.9
286.2
Other
$mill
–
77.9
Total
$mill
600.9
364.1
(883.0)
(286.4)
(1,169.4)
4.1
(208.5)
(204.4)
2020
$mill
131.8
62.6
293.5
(13.5)
474.4
2019
$mill
137.1
61.3
416.2
(13.7)
600.9
Trade
receivables
$mill
Inventories
$mill
(28.1)
(6.1)
0.8
6.7
4.4
(13.7)
(0.2)
–
0.3
0.1
Carrying amount at 30 September 2020
(22.3)
(13.5)
Receivables ageing and credit loss provision
Included in the following table is an age analysis of the Group’s
trade receivables, along with credit loss provisions against these
balances at 30 September:
30 September 2020
Current
30–90 days
Over 90 days
Total
30 September 2019
Current
30–90 days
Over 90 days
Total
Gross
$mill
332.3
3.0
25.9
361.2
Gross
$mill
278.7
8.9
26.7
314.3
Credit loss
provision
$mill
(3.1)
(1.0)
(18.2)
(22.3)
Credit loss
provision
$mill
(2.0)
(2.2)
(23.9)
(28.1)
Net
$mill
329.2
2.0
7.7
338.9
Net
$mill
276.7
6.7
2.8
286.2
The graph below shows the Group’s trade working capital (trade
assets and liabilities) performance over a five year period.
13 month rolling average trade working capital*/
Annual net revenue
Explosives (DNA, DNAP) Fertilisers Group
%
12.5
10.0
7.5
5.0
2.5
0.0
-2.5
FY16
FY17
FY18
FY19
FY20
* Trade working capital is reported net of debtor factoring and supply chain financing
arrangements.
Key accounting policies
Inventories
Inventories are valued at the lower of cost and net realisable value.
The cost of manufactured goods is based on a weighted average
costing method. For third party sourced goods, cost is net cost
into store.
Trade and other receivables
Trade and other receivables are initially recognised at fair value
plus any directly attributable transaction costs. Subsequent to
initial measurement they are measured at amortised cost less any
provisions for expected impairment losses or actual impairment
losses. Credit losses and recoveries of items previously written
off are recognised in the profit or loss.
Where substantially all risks and rewards relating to a receivable
are transferred to a third party, the receivable is derecognised.
To manage cash inflows which are impacted by seasonality and
demand and supply variability, the Group has a nonrecourse
receivable purchasing agreement to sell certain receivables to an
unrelated entity in exchange for cash. As at 30 September 2020,
receivables totaling $115.9m (2019: $216.3m) had been sold under
this arrangement. The receivables were derecognised upon sale as
substantially all risks and rewards associated with the receivables
passed to the purchaser.
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 at the reporting date.
To manage the cash flow conversion cycle on some products
procured by the Group, and to ensure that suppliers receive
payment in a time period that suits their business model,
the Group offers some suppliers the opportunity to use supply
chain financing. At 30 September 2020, the balance of the supply
chain finance program was $296.4m (2019: $330.7m). The Group
evaluates supplier arrangements against a number of indicators
to assess if the payable continues to have the characteristics of a
trade payable or should be classified as borrowings. These indicators
include whether the payment terms exceed customary payment
terms in the industry. At 30 September 2020, the Group has
assessed that on balance the payables subject to supplier financing
arrangements did not meet all of the characteristics to be classified
as borrowings and accordingly the balances remained in trade and
other payables.
93
Incitec Pivot Limited Annual Report 2020FINANCIAL REPORT
Notes to the Consolidated Financial Statements: Shareholder returns
For the year ended 30 September 2020
4. Trade and other assets and
liabilities (continued)
The graph below shows the Group’s earnings per share and dividend
payout over the last five years.
Company performance and dividends declared
Key estimates and judgments
The expected impairment loss calculation for trade receivables
considers the impact of past events, and exercises judgment
over the impact of current and future economic conditions
when considering the recoverability of outstanding trade
receivable balances at the reporting date. In establishing the
expected impairment loss provision, the Group also assessed
the impact of COVID-19 and its potential to affect customers’
repayment ability. Subsequent changes in economic and
market conditions may result in the provision for impairment
losses increasing or decreasing in future periods.
Cents
25
20
15
10
5
0
5. Earnings per share
Basic earnings per share
including individually material items
excluding individually material items
Diluted earnings per share
including individually material items
excluding individually material items
Weighted average number of ordinary
shares used in the calculation of basic
earnings per share
Weighted average number of ordinary
shares used in the calculation of diluted
earnings per share
2016
2017
2018
2019
2020
Earnings per share (before individually material items)
Earnings per share (including individually material items)
Dividend declared in respect of the financial year
2020
Cents per
share
2019
Cents
per share
6. Dividends
Dividends paid or declared by the Company in the year ended 30
September were:
7.1
10.9
7.1
10.8
9.5
9.5
9.4
9.4
Number
Number
2020
$000
2019
$000
Ordinary shares
Final dividend of 6.2 cents per share, 20 percent
franked, paid 17 December 2018
Interim dividend of 1.3 cents per share, unfranked,
paid 1 July 2019
–
–
100,848
20,875
Final dividend of 3.4 cents per share, 30 percent
franked, paid 8 January 2020(1)
54,591
–
1,734,434,874
1,610,122,059
Total ordinary share dividends
54,591
121,723
(1) The dividend paid in cash was $30.7m, and $23.9m (2019: nil) was satisfied by the issue of
7,658,312 ordinary shares (2019: nil) under the Company’s Dividend Reinvestment Plan.
In November 2020, the Board has determined, as an exception to
its dividend policy, not to pay a final dividend for FY20 in light of the
ongoing uncertainty due to COVID-19 and IPL’s equity raising in May
2020. IPL’s dividend policy, which is to pay between 30% – 60% of
NPAT, remains unchanged.
1,738,277,711
1,613,569,524
Reconciliation of earnings used in the calculation
of basic and diluted earnings per share
2020
$mill
2019
$mill
Profit attributable to ordinary shareholders
123.4
152.4
Individually material items after income tax
64.8
–
Profit attributable to ordinary shareholders
excluding individually material items
188.2
152.4
94
Incitec Pivot Limited Annual Report 2020FINANCIAL REPORT
Notes to the Consolidated Financial Statements: Capital structure
For the year ended 30 September 2020
6. Dividends (continued)
Franking credits
Franking credits available to shareholders of the Company were
$8.9m (2019: $7.6m).
Key accounting policies
A provision for dividends payable is recognised in the reporting
period in which the dividends are paid. The provision is for the total
undistributed dividend amount, regardless of the extent to which
the dividend will be paid in cash.
7. Capital management
Capital is defined as the amount subscribed by shareholders to
the Company’s ordinary shares and amounts advanced by debt
providers to any Group entity. The Group’s objectives when
managing capital are to safeguard its ability to continue as a going
concern while providing returns to shareholders and benefits to
other stakeholders.
The Group’s key strategies for maintenance of an optimal capital
structure include:
» Aiming to maintain an investment grade credit profile and the
requisite financial metrics.
» Securing access to diversified sources of debt funding with a
spread of maturity dates and sufficient undrawn committed
facility capacity.
» Optimising over the long term, to the extent practicable,
the Group’s Weighted Average Cost of Capital (WACC), while
maintaining financial flexibility.
In order to optimise its capital structure, the Group may undertake
one or a combination of the following actions:
»
change the amount of dividends paid to shareholders and/
or offer a dividend reinvestment plan with or without a
discount and/or with or without an underwriting facility when
appropriate;
»
return capital or issue new shares to shareholders;
» vary discretionary capital expenditure;
»
raise new debt funding or repay existing debt balances; and
» draw down additional debt or sell non-core assets
to reduce debt.
Key financial metrics
The Group uses a range of financial metrics to monitor the efficiency
of its capital structure, including EBITDA interest cover and Net debt/
EBITDA before individually material items. Financial metric targets
are maintained inside debt covenant restrictions. At 30 September
the Group’s position in relation to these metrics was:
Net debt/EBITDA (times)
equal or less than 2.5
Interest cover (times)
equal or more than 6.0
1.4
6.1
2.8
4.6
Target range
2020
2019
These ratios are impacted by a number of factors, including the level
of cash retained from operating cash flows generated by the Group
after paying all of its commitments (including dividends or other
returns of capital), movements in foreign exchange rates, changes
to market interest rates and the fair value of hedges economically
hedging the Group’s net debt.
Self-insurance
The Group also self-insures for certain insurance risks under the
Singapore Insurance Act. Under this Act, 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 2020, Coltivi Insurance Pte
Limited maintained capital in excess of the minimum requirements
prescribed under this Act.
Issued capital
Ordinary shares
Ordinary shares issued are classified as equity and are fully paid,
have no par value and carry one vote per share and the right to
dividends. Incremental costs directly attributable to the issue of
new shares are recognised as a deduction from equity, net of any
related income tax benefit.
Issued capital as at 30 September 2020 amounted to $3,806.2m
(1,942,225,029 ordinary shares). During the financial year ended
30 September 2020, the Company issued 7,658,312 ordinary shares
($23.9m) under its Dividend Reinvestment Plan in relation to
the 2019 final dividend, at an average price per share of $3.118.
The Company also issued 328,782,750 ordinary shares under the
institutional placement and share purchase plan completed during
the year which raised $645.5m in capital, net of related costs.
95
Incitec Pivot Limited Annual Report 2020FINANCIAL REPORT Notes to the Consolidated Financial Statements: Capital structure
For the year ended 30 September 2020
8. Net debt
The Group’s net debt comprises the net of interest bearing
liabilities, cash and cash equivalents, and the fair value of derivative
instruments economically hedging the foreign exchange rate and
interest rate exposures of the Group’s interest bearing liabilities
at the reporting date. The Group’s net debt at 30 September is
analysed as follows:
Interest bearing liabilities
Cash and cash equivalents
Notes
2020
$mill
1,870.3
(554.6)
Fair value of derivatives
(17)
(287.0)
2019
$mill
2,656.4
(576.4)
(388.6)
Net debt
1,028.7
1,691.4
At 30 September 2020, the Group’s Net debt/EBITDA before
individually material items was 1.4 times (2019: 2.8 times).
Refer note 7 for detail on the key financial metrics related
to the Group’s capital structure.
Interest bearing liabilities
The Group’s interest bearing liabilities are unsecured and expose it
to various market and liquidity risks. Details of these risks and their
mitigation are included in note 17.
The following table details the interest bearing liabilities of the
Group at 30 September:
Current
Other loans
Loans from joint ventures
Fixed interest rate bonds
Non-current
Other loans
Bank facilities
Fixed interest rate bonds
Total interest bearing liabilities
2020
$mill
4.8
16.4
–
21.2
5.2
–
1,843.9
1,849.1
1,870.3
2019
$mill
12.6
17.0
1,183.8
1,213.4
7.4
293.0
1,142.6
1,443.0
2,656.4
Fixed Interest Rate Bonds
The Group has on issue the following fixed interest rate bonds:
» USD500m of Notes in the US Private Placement market.
USD250m has a fixed rate semi-annual coupon of 4.03
percent and matures in October 2028 and USD250m has
a fixed rate semi-annual coupon of 4.13 percent and
matures in October 2030.
» HKD560m 7 year bond as a private placement in the Regulation
S debt capital market. The bond has a fixed rate annual coupon
of 4.13 percent and matures in February 2026.
» AUD450m 7 year bond on issue in the Australian debt capital
market. The bond has a fixed rate semi-annual coupon of
4.30 percent and matures in March 2026.
» USD400m 10 year bond on issue in the Regulation S debt capital
market. The bond has a fixed rate semi-annual coupon of 3.95
percent and matures in August 2027.
Bank Facilities
The Group holds the following committed bank facilities:
» 3 year facility domiciled in Australia, entered into in August 2018
consisting of two tranches: Tranche A had a limit of AUD260m
and Tranche B had a limit of USD220m. Following the equity
raising during 2020, the facility limits were reduced resulting
in the following new limits: Tranche A has a limit of AUD122m
and Tranche B has a limit of USD109m. The facility had an initial
maturity of August 2021 which was extended in August 2020 to
October 2021.
» 5 year facility of USD500m domiciled in the US, entered into in
August 2015, with an initial maturity of August 2020. In 2017
the maturity was extended to October 2021.
Tenor of interest bearing liabilities
The Group’s average tenor of its drawn interest bearing liabilities at
30 September 2020 is 7.3 years (2019: 3.4 years) and the average
tenor of its total debt facilities is 5.1 years (2019: 3.9 years)
The table below includes detail on the movements in the Group’s interest bearing liabilities.
Cash flow
Non-cash changes
1 October
2019
$mill
Proceeds from
borrowings
$mill
Repayments
of borrowings
$mill
Acquisition of
Subsidiaries
$mill
Reclassification
$mill
Foreign
exchange
movement
$mill
Funding costs
& fair value
adjustments
$mill
30
September
2020
$mill
30 September 2020
Current
Other loans
Loans from joint ventures
Fixed interest rate bonds
Non-current
Other loans
Bank facilities
Fixed interest rate bonds
Total liabilities from financing activities
Derivatives held to hedge interest bearing
liabilities
12.6
17.0
1,183.8
7.4
293.0
1,142.6
2,656.4
–
0.3
–
–
–
722.7
(13.8)
–
(1,172.6)
–
(301.2)
–
723.0
(1,487.6)
(388.6)
–
–
Debt after hedging
2,267.8
723.0
(1,487.6)
96
1.0
–
–
4.0
–
–
5.0
–
5.0
5.8
–
–
(5.8)
–
–
–
–
–
(0.8)
(0.9)
(10.6)
(0.4)
5.4
(59.4)
(66.7)
136.5
69.8
–
–
(0.6)
–
2.8
4.8
16.4
–
5.2
–
38.0
1,843.9
40.2
1,870.3
(34.9)
(287.0)
5.3
1,583.3
Incitec Pivot Limited Annual Report 2020FINANCIAL REPORT
Notes to the Consolidated Financial Statements: Capital structure
For the year ended 30 September 2020
30 September 2019
Current
Other loans
Loans from joint ventures
Fixed interest rate bonds
Non-current
Other loans
Bank facilities
Fixed interest rate bonds
Total liabilities from financing activities
Derivatives held to hedge interest
bearing liabilities
Debt after hedging
Cash flow
Non-cash changes
1 October
2018
$mill
Proceeds from
borrowings
$mill
Repayments
of borrowings
$mill
Acquisition of
Subsidiaries
$mill
Reclassification
$mill
Foreign
exchange
movement
$mill
Funding costs
& fair value
adjustments
$mill
30
September
2019
$mill
1.3
11.8
199.8
4.5
499.6
1,657.8
2,374.8
(414.7)
1,960.1
2.5
4.3
–
–
–
546.9
553.7
–
553.7
(2.9)
–
(200.0)
–
(210.0)
–
(412.9)
(16.8)
(429.7)
8.3
–
–
5.5
–
–
13.8
–
13.8
2.9
–
1,109.3
(2.9)
–
(1,109.3)
–
–
–
0.5
0.9
73.1
0.3
1.7
40.7
117.2
57.9
175.1
–
–
12.6
17.0
1.6
1,183.8
–
1.7
6.5
9.8
7.4
293.0
1,142.6
2,656.4
(15.0)
(388.6)
(5.2)
2,267.8
Interest rate profile
Cash and cash equivalents
The table below summarises the Group’s interest rate profile of its
interest bearing liabilities, net of hedging, at 30 September:
Fixed interest rate financial instruments
Variable interest rate financial instruments
2020
$mill
1,746.5
123.8
1,870.3
2019
$mill
2,266.8
389.6
2,656.4
Detail on the Group’s interest hedging profile and duration
is included in note 17.
Funding profile
The graph below details the Group’s available funding limits, its
maturity dates and drawn funds at 30 September 2020:
AUDm
800
Available limits Drawn funds
Cash and cash equivalents at 30 September 2020 were $554.6m
(2019: $576.4m) and consisted of cash at bank of $105.1m (2019:
$101.4m) and short term investments of $449.5m (2019: $475.0m).
Key accounting policies
Interest bearing liabilities
Interest bearing liabilities are initially recognised at fair value
less any directly attributable borrowing costs. Subsequent to initial
recognition, interest bearing liabilities are measured at amortised
cost using the effective interest method, with any difference
between cost and redemption value recognised in the profit
or loss over the period of the borrowings.
The Group derecognises interest bearing liabilities when
its obligation is discharged, cancelled or expires. Any gains
and losses arising on derecognition are recognised in the
profit or loss.
Interest bearing liabilities are classified as current liabilities, except
for those liabilities where the Group has an unconditional right to
defer settlement for at least 12 months after the year end, which
are classified as non-current.
Cash and cash equivalents
Bank
facility
AUD122m
Bank
facility
USD109m
Bank
facility
USD500m
Reg
HKD560m
Bond
AUD450m
Reg S
USD400m
USPP
Tranche
1 USD250m
USPP
Tranche
2 USD250m
Cash includes cash at bank, cash on hand and short term
investments, net of bank overdrafts.
Oct 21
Oct 21
Oct 21
Feb 26
Mar 26
Aug 27
Oct 28
Oct 30
Borrowing costs
The Group has undrawn financing facilities of $974.0m (2019:
$1,029.1m) at 30 September 2020.
Borrowing costs include interest on borrowings and the
amortisation of premiums relating to borrowings.
Borrowing costs are expensed as incurred, unless they relate
to qualifying assets (refer note 9). In this instance, the borrowing
costs are capitalised and depreciated over the asset’s expected
useful life.
97
600
400
200
0
Maturity
Date
Incitec Pivot Limited Annual Report 2020FINANCIAL REPORT Notes to the Consolidated Financial Statements: Capital investment
For the year ended 30 September 2020
9. Property, plant and equipment
Notes
Freehold land
and buildings
$mill
Machinery, plant
and equipment
$mill
Work in progress
$mill
Total
$mill
At 1 October 2018
Cost
Accumulated depreciation
Net book amount
Year ended 30 September 2019
Opening net book amount
Additions
Subsidiaries acquired
Disposals
Depreciation
Impairment of assets
Reclassification from work in progress
Foreign exchange movement
Closing net book amount
At 30 September 2019
Cost
Accumulated depreciation
Net book amount
Year ended 30 September 2020
Opening net book amount
Additions
Subsidiaries acquired
Disposals
Depreciation
Impairment of assets
Reclassification from work in progress
Foreign exchange movement
Closing net book amount
At 30 September 2020
Cost
Accumulated depreciation
Net book amount
(2)
(2)
(2)
(2)
969.2
(300.1)
669.1
669.1
9.5
2.0
(7.0)
(29.7)
(0.4)
56.4
18.1
718.0
1,047.2
(329.2)
718.0
718.0
9.5
1.8
(0.5)
(29.8)
(2.6)
8.4
(16.8)
688.0
1,040.7
(352.7)
688.0
4,934.2
(1,707.8)
3,226.4
3,226.4
3.9
2.4
(6.1)
(248.2)
(11.1)
205.0
102.9
3,275.2
5,248.7
(1,973.5)
3,275.2
3,275.2
–
9.0
(4.2)
(260.9)
(8.5)
247.7
(88.5)
3,169.8
5,335.2
(2,165.4)
3,169.8
108.8
–
108.8
108.8
344.7
–
–
–
–
(261.4)
4.7
196.8
196.8
–
196.8
196.8
283.3
0.4
(1.1)
–
(5.2)
(256.1)
(4.2)
213.9
213.9
–
213.9
6,012.2
(2,007.9)
4,004.3
4,004.3
358.1
4.4
(13.1)
(277.9)
(11.5)
–
125.7
4,190.0
6,492.7
(2,302.7)
4,190.0
4,190.0
292.8
11.2
(5.8)
(290.7)
(16.3)
–
(109.5)
4,071.7
6,589.8
(2,518.1)
4,071.7
Key accounting policies
Property, plant and equipment is measured at cost, less
accumulated depreciation and any impairment losses. Subsequent
costs are included in the asset’s carrying amount or recognised as
a separate asset, 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.
Borrowing costs in relation to the funding of qualifying assets
are capitalised and included in the cost of the asset. Qualifying
assets are assets that take more than 12 months to get ready
for their intended use or sale. Where funds are borrowed
generally, a weighted average interest rate is used for the
capitalisation of interest.
Property, plant and equipment is subject to impairment testing.
For details of impairment of assets, refer note 12.
Depreciation
Property, plant and equipment, other than freehold land,
is depreciated on a straight-line basis. Freehold land is not
depreciated. Depreciation rates are calculated to spread the
cost of the asset (less any residual value), over its estimated
useful life. Residual value is the estimated value of the asset
at the end of its useful life.
Estimated useful lives for each class of asset are as follows:
» Buildings and improvements
» Machinery, plant and equipment
20 – 50 years
3 – 50 years
Residual values and useful lives are reviewed and adjusted
where relevant when changes in circumstances impact the
use of the asset.
98
Incitec Pivot Limited Annual Report 2020FINANCIAL REPORT
Notes to the Consolidated Financial Statements: Capital investment
For the year ended 30 September 2020
10. Leases
AASB 16 Leases replaces AASB 117 (including associated guidance)
and specifies how to recognise, measure and disclose leases. Under
AASB 16, the present value of a lease commitment is shown as a
liability on the balance sheet together with a right-of-use asset.
The Group has adopted AASB 16 from 1 October 2019, using the
modified retrospective approach. In accordance with this approach,
the lease liability was calculated using the incremental borrowing
rate at date of transition. The difference between the asset and
liability (net of tax), was recognised as an adjustment to opening
retained earnings on 1 October 2019 with no restatement to
comparative information. The Group has elected to apply the
following practical expedients available on transition:
» Short term (12 months or less) or low value leases will continue
to be expensed to the profit or loss;
» Application of a single discount rate to a portfolio of leases
with reasonably similar characteristics; and
»
The use of hindsight in determining the lease term.
Adoption of AASB 16 resulted in an increase in lease liabilities of
$243.7m; increase in right-of-use assets of $216.0m; increase in
deferred tax asset of $6.0m; decrease in other liabilities of $7.4m
and a decrease to retained earnings of $14.3m at 1 October 2019.
The weighted average incremental borrowing rate applied to the
Group’s lease liabilities at 1 October 2019 is 2.5 percent.
The following table provides a reconciliation of the operating lease
commitments disclosed in the comparative column in note 13 to
the total lease liability recognised at 1 October 2019:
Operating lease commitments as at 30 September 2019
Add: Cost of reasonably certain extension options (undiscounted)
Less: Components excluded from lease liability (undiscounted)
Less: Effect of discounting
Total additional lease liabilities recognised at 1 October 2019
Total
$mill
233.3
82.0
(14.3)
(57.3)
243.7
The carrying value of right-of-use lease assets and lease liabilities
is presented below:
Right-of-use lease assets
Land and
buildings
$mill
Notes
Machinery,
plant and
equipment
$mill
At 1 October 2019
Cost
Accumulated depreciation
Net book amount
Year ended 30 September 2020
Opening net book amount
Adoption of AASB 16 Leases
Additions
Disposals
Depreciation
Foreign exchange movement
Closing net book amount
(2)
At 30 September 2020
Cost
Accumulated depreciation
Net book amount
Lease liabilities
–
–
–
–
156.1
28.0
(0.4)
(17.7)
(0.9)
165.1
180.6
(15.5)
165.1
Carrying amount at 1 October 2019
Adoption of AASB 16 Leases
Additions
Disposals
Payments made during the year
Interest unwind
Foreign exchange movement
Carrying amount at 30 September 2020
Current
Non-current
Total
$mill
–
–
–
–
216.0
50.4
(1.2)
(40.7)
(3.4)
221.1
–
–
–
–
59.9
22.4
(0.8)
(23.0)
(2.5)
56.0
76.4
(20.4)
56.0
257.0
(35.9)
221.1
2020
$mill
–
243.7
50.4
(0.7)
(47.8)
5.9
(3.8)
247.7
41.5
206.2
The Group has lease contracts for various items of property, plant
and equipment used within its operations and office premises.
These assets have lease terms ranging between 1 to 48 years
for land and buildings, and 1 to 8 years for machinery, plant and
equipment.
Refer to Note 17 for the maturity profile of the Group’s committed
lease liabilities before discounting.
Amounts recognised in the income statement
Amounts recognised in the income statement relating to the Group’s
lease arrangements are as follows:
Depreciation
Interest
Total
Notes
(2)
(2)
2020
$mill
40.7
5.9
46.6
99
Incitec Pivot Limited Annual Report 2020FINANCIAL REPORT
Notes to the Consolidated Financial Statements: Capital investment
For the year ended 30 September 2020
Key accounting policies
All leases except for short term or low value leases are recognised
on the balance sheet; as a right-of-use asset and a corresponding
lease liability. Short term (12 months or less) and low value leases
are recognised in the profit or loss as a lease expense.
Right-of-use assets are measured at cost, less any accumulated
depreciation and impairment losses, and adjusted for any
remeasurement of lease liabilities. The cost of right-of-use assets
includes the amount of lease liabilities recognised, initial direct costs
incurred, and lease payments made at or before the commencement
date less any lease incentive received. Right-of-use assets are
depreciated on a straight line basis in the profit or loss over the
lease term.
Lease liabilities are recognised by the Group, at the commencement
date of the lease and are measured at the present value of lease
payments to be made over the lease term. Lease payments include
fixed payments and variable lease payments that depend on an index
or rate.
Key estimates and judgments
Extension options - The Group considers whether an option
to extend a lease is reasonably certain on a lease-by-lease
basis which considers the importance of the lease to the
Group’s operations and its economic incentive to extend the
lease. The lease term is reassessed upon the occurrence of a
significant event or change in circumstance.
Incremental borrowing rate – To calculate the present
value of lease payments, the Group uses an incremental
borrowing rate at the commencement date of the lease.
The incremental borrowing rate reflects the duration and
the financing characteristics of the lease. Where the interest
rate implicit in the lease is not readily available, the Group
uses its incremental borrowing rate applicable to a portfolio
of leases with reasonably similar characteristics.
11. Intangibles
At 1 October 2018
Cost
Accumulated amortisation
Net book amount
Year ended 30 September 2019
Opening net book amount
Additions
Subsidiaries acquired
Amortisation
Foreign exchange movement
Closing net book amount
At 30 September 2019
Cost
Accumulated amortisation
Net book amount
Year ended 30 September 2020
Opening net book amount
Additions
Subsidiaries acquired
Impairment of assets
Amortisation
Foreign exchange movement
Closing net book amount
At 30 September 2020
Cost
Accumulated amortisation
Net book amount
Notes
(2)
(2)
(2)
Software
$mill
136.5
(90.0)
46.5
46.5
22.7
–
(5.5)
3.9
67.6
166.2
(98.6)
67.6
67.6
11.7
–
(41.0)
(6.7)
(3.8)
27.8
129.8
(102.0)
27.8
Goodwill
$mill
Patents, trademarks
& customer contracts
$mill
Brand names
$mill
Total
$mill
2,618.4
–
2,618.4
2,618.4
–
5.6
–
100.5
2,724.5
2,724.5
–
2,724.5
2,724.5
–
1.9
–
–
(88.3)
2,638.1
2,638.1
–
2,638.1
292.3
(211.9)
80.4
80.4
–
2.9
(18.2)
3.8
68.9
309.9
(241.0)
68.9
68.9
–
1.6
–
(17.9)
(2.3)
50.3
298.5
(248.2)
50.3
301.3
–
301.3
301.3
–
–
–
17.2
318.5
318.5
–
318.5
318.5
–
–
–
–
(15.0)
303.5
303.5
–
303.5
3,348.5
(301.9)
3,046.6
3,046.6
22.7
8.5
(23.7)
125.4
3,179.5
3,519.1
(339.6)
3,179.5
3,179.5
11.7
3.5
(41.0)
(24.6)
(109.4)
3,019.7
3,369.9
(350.2)
3,019.7
Allocation of indefinite life intangible assets
The Group’s indefinite life intangible assets are allocated to groups of cash generating units (CGUs) as follows:
30 September 2020
Fertilisers APAC
Dyno Nobel Asia Pacific (DNAP)
Dyno Nobel Americas (DNA)
Goodwill
$mill
Brand names
$mill
Total
$mill
30 September 2019
Goodwill
$mill
Brand names
$mill
Total
$mill
186.4
908.5
1,543.2
2,638.1
–
40.3
263.2
303.5
186.4
948.8
1,806.4
2,941.6
Incitec Pivot Fertilisers (IPF)
Southern Cross International (SCI)
Dyno Nobel Asia Pacific (DNAP)
Dyno Nobel Americas (DNA)
183.8
2.7
908.5
1,629.5
2,724.5
–
–
40.3
278.2
318.5
183.8
2.7
948.8
1,907.7
3,043.0
100
Incitec Pivot Limited Annual Report 2020FINANCIAL REPORT
Notes to the Consolidated Financial Statements: Capital investment
For the year ended 30 September 2020
Key accounting policies
Key assumptions
Goodwill
Goodwill on acquisition of subsidiaries is measured at cost less any
accumulated impairment losses. Goodwill is tested for impairment
annually, or more frequently if events or circumstances indicate that
it might be impaired.
Brand names
Brand names acquired by the Group have indefinite useful lives
and are measured at cost less accumulated impairment. They are
tested annually for impairment, or more frequently if events or
circumstances indicate that they might be impaired.
Other intangible assets
Other intangible assets acquired by the Group have finite lives.
They are stated at cost less accumulated amortisation and
impairment losses.
Details of the key assumptions used in the recoverable amount
calculations at 30 September are set out below:
Key assumptions
1 – 5 years
2020
US$
2019
US$
330 to 441
233 to 311
2.46 to 2.95
252 to 315
0.73 to 0.74
DAP(1)
340 to 455
Urea(2)
275 to 332
Gas (DNA CGU)(3)
2.65 to 3.29
Ammonia(4)
310 to 389
AUD:USD(5)
0.68 to 0.73
(1) Di-Ammonium Phosphate price (FOB Tampa – USD per tonne).
(2) Granular Urea price (FOB Middle East – USD per tonne).
(3) Henry Hub natural gas price (USD per mmbtu).
(4) Ammonia price (CFR Tampa – USD per tonne).
(5) AUD:USD exchange rate.
Terminal value
(after 5 years)
2019
2020
US$
US$
510
352
3.21
435
0.72
518
379
3.11
444
0.73
Subsequent expenditure
Subsequent expenditure on intangible assets is capitalised only
when it increases the future economic benefits of the asset to which
it relates. All other such expenditure is expensed as incurred.
For both DNAP and Fertilisers APAC, the gas price assumption for
the period after the current gas contracts expire, is based on a long
term gas production cost forecast of between $6.70 and $7.00
per gigajoule.
Amortisation
Goodwill and brand names are not amortised.
For intangible assets with finite lives, amortisation is recognised in
the profit or loss on a straight-line basis over their estimated useful
life. The estimated useful lives of intangible assets in this category
are as follows:
» Software
» Product trademarks
» Patents
» Customer contracts
13 – 15 years
10 – 17 years
3 – 10 years
4 – 10 years
Useful lives are reviewed at each reporting date and adjusted
where relevant.
12. Impairment of goodwill and non-
current assets
Impairment testing of goodwill
The Group performs annual impairment testing as at 30 September
for intangible assets with indefinite useful lives. More frequent
reviews are performed of the relevant assets or asset groups where
there are potential indicators of impairment. At 31 March 2020,
the Group had identified the global economic impact of COVID-19
as a potential indicator of impairment. Accordingly, an impairment
assessment was performed for all of the Group’s CGUs, resulting in
no impairment of any CGU. COVID-19 remains a potential indicator of
impairment and impairment testing at 30 September 2020 resulted
in no impairment of any CGU, being Fertilisers APAC, DNAP and DNA.
The previously reported IPF and SCI CGUs were combined into the
Fertilisers APAC CGU which aligns to how the Group manages the
business.
The Group is actively managing the impacts and risks arising from
COVID-19 on its people and operations and to date there are no
known significant long term structural changes that affect the
future cash flows of the CGUs. As a result, the recoverable amounts
of IPL’s CGUs continued to exceed their carrying amounts at 30
September 2020. Sensitivity analyses of the recoverable amounts
of the Group’s CGUs, considering change scenarios relating to key
assumptions and considering the current economic environment
are included below.
Fertiliser prices, foreign exchange rates and natural gas prices are
estimated by reference to external market publications and market
analyst estimates, and are updated at each reporting date.
Discount and growth rates
The post-tax discount rate used in the calculations is 9% (2019: 9%
for IPF and SCI) for the Fertilisers APAC CGU and 8.5% for the DNA
and DNAP CGUs (2019: 8.5%). The rate reflects the underlying cost
of capital adjusted for market and asset specific risks.
The terminal value growth rate represents the forecast consumer
price index (CPI) of 2.5% (2019: 2.5%) for all CGUs. Sensitivity
analyses on the discount and growth rates, considering the current
volatile market conditions, are provided below.
Sensitivity analyses
As part of its COVID-19 response plan, the Group has run several
sensitivity analyses under different scenarios that could impact
operations in the short term. These include but are not limited
to manufacturing plant and distribution centre shut-downs,
customer demand reduction and supply chain interruption scenarios.
These short term scenarios currently have no significant structural
impacts that affect the long term cash flows of the Group’s CGUs.
In addition, the Group prepared sensitivity analyses of the
recoverable amounts of the CGUs relating to key long term
assumptions considering change scenarios in the current economic
environment. The impact of these change scenarios on the
recoverable amount of the CGUs at 30 September 2020 are
included below:
Post-tax
discount
rate
Terminal
value
growth rate
+0.5%
-1.0%
Natural
gas price
+AU$1 per
gigajoule
DNAP
AU$mill
AU$mill
AU$mill
Change in
recoverable amount
Impairment charge
(184.0)
(58.0)
Post-tax
discount
rate
+0.5%
(280.2)
(154.2)
(57.2)
–
Ammonia
price
-US$50
per tonne
Terminal
value growth
rate
-1.0%
Natural gas
price
+US$1
per mmbtu
DNA
US$mill
US$mill
US$mill
US$mill
Change in
recoverable amount
Impairment charge
(327.1)
–
(462.5)
–
(472.3)
–
(301.6)
–
101
Incitec Pivot Limited Annual Report 2020FINANCIAL REPORT Notes to the Consolidated Financial Statements: Capital investment
For the year ended 30 September 2020
Fertilisers APAC
Change in recoverable amount
Impairment charge
Post-tax discount
rate
AUD:USD exchange
rate
Terminal value
growth rate
+0.5%
AU$mill
(152.6)
–
+5c
AU$mill
(489.8)
–
-1.0%
AU$mill
(214.0)
–
DAP
Price
-US$50
per tonne
AU$mill
(626.0)
–
Urea price
-US$50
per tonne
AU$mill
(248.5)
–
Natural gas price
+AUD1 per
gigajoule
AU$mill
(206.0)
–
Each of the sensitivities above assumes that a specific assumption moves in isolation, while all other assumptions are held constant.
A change in one of the aforementioned assumptions could be accompanied by a change in another assumption, which may increase
or decrease the net impact.
Impairment of other property, plant and
equipment
During the year ended 30 September 2020 property, plant and
equipment was impaired by $16.3m (2019: $11.5m) as a result
of the abandonment of certain assets following a strategic review
of the Group’s operating assets.
As at 31 March 2016, the Group recognised a non-cash impairment
charge of $150.8m against the Gibson Island assets largely due
to the impact of lower forecast fertiliser prices and higher cost of
natural gas delivered to the Australian East Coast. In 2018, the
Group announced that it had entered into a joint operation with
Central Petroleum Limited for the development of acreage in
Queensland that could deliver economic gas to the Gibson Island
manufacturing facility in the future. In June 2019, the Group
announced that it had entered into multiple arrangements for the
supply of gas to allow continuation of manufacturing operations at
its Gibson Island plant through to 31 December 2022.
On 27 March 2020, the Group announced that the project for the
development of gas acreage in Queensland has been temporarily
paused at the request of its joint arrangement partner, Central
Petroleum Limited considering the current disruptions in the oil
and gas markets driven by COVID-19. However, IPL and Central
Petroleum Limited remain committed to the project and look
forward to recommencing the project as soon as possible.
There was no significant impact on the assumptions and
sensitivities used in the Fertilisers APAC impairment modelling
as a result of the temporary postponement of the project.
As the long term gas supply of the Gibson Island facility remains
dependent on the outcome of the gas acreage development, or
alternative economic gas supply, there was no reversal of the
previously recognised impairment or any further impairment charge.
Any potential reversal of the previous impairment or any further
impairment charge will be dependent on the result of the drilling
activities and other economic factors at that time.
Impairment of other intangible assets
During the year ended 30 September 2020 intangible assets
were impaired by $41.0m (2019: nil) following a detailed review
of the Group’s technology and software products and offerings
given the continued enhancement of the Group’s technology
portfolio. The review considered factors such as the timing of the
commercial launch of certain technologies, software versions and
products, items which were superseded as a result of significant
enhancements and updated versions, current experience in
regard to the commercial acceptance by customers and the
future economic benefit attributable to the Group.
Key accounting policies
Impairment testing
The Group performs annual impairment testing as at 30 September
for intangible assets with indefinite useful lives. More frequent
reviews are performed for indicators of impairment of all the
Group’s assets, including operating assets. The identification of
impairment indicators involves management judgment. Where
an indicator of impairment is identified, a formal impairment
assessment is performed. The Group’s annual impairment testing
determines whether the recoverable amount of a CGU or group of
CGUs, to which goodwill and/or indefinite life intangible assets are
allocated, exceeds its carrying amount.
A CGU is the smallest identifiable group of assets that generate cash
flows largely independent of cash flows of other groups of assets.
Goodwill and other indefinite life intangible assets are allocated to
CGUs or groups of CGUs which are no larger than one of the Group’s
reportable segments.
Determining the recoverable amount
The recoverable amount of an asset is determined as the higher
of its fair value less cost of disposal and its value-in-use. Value-in-
use is a term that means an asset’s value based on the expected
future cash flows arising from its continued use in its current
condition, discounted to present value. For discounting purposes,
a post-tax rate is used that reflects current market assessments of
the risks specific to the asset. The Group has prepared value-in-use
models for the purpose of impairment testing as at 30 September
2020, using five year discounted cash flow models based on Board
approved forecasts. Cash flows beyond the five year period are
extrapolated using a terminal value growth rate.
Impairment losses
An impairment loss is recognised whenever the carrying amount
of an asset (or its CGU) exceeds its recoverable amount. Impairment
losses are recognised in the profit or loss.
Impairment losses recognised in respect of CGUs are allocated
against assets in the following order:
»
Firstly, against the carrying amount of any goodwill allocated
to the CGU.
» Secondly, against the carrying amount of any remaining assets
in the CGU.
An impairment loss recognised in a prior period for an asset (or
its CGU) other than goodwill may be reversed only if there has
been a change in the estimates used to determine the recoverable
amount of the asset (or its CGU) since the last impairment loss was
recognised. When this is the case, the carrying amount of the asset
(or its CGU) is increased to its recoverable amount.
102
Incitec Pivot Limited Annual Report 2020FINANCIAL REPORT Notes to the Consolidated Financial Statements: Capital investment
For the year ended 30 September 2020
Key estimates and judgments
The Group is required to make significant estimates and
judgments in determining whether the carrying amount
of its assets and/or CGUs has any indication of impairment,
in particular in relation to:
» key assumptions used in forecasting future cash flows;
» discount rates applied to those cash flows; and
the expected long term growth in cash flows.
»
Such estimates and judgments are subject to change as a
result of changing economic, operational, environmental and
weather conditions. Actual cash flows may therefore differ
from forecasts and could result in changes in the recognition
of impairment charges in future periods.
13. Commitments
Capital expenditure commitments
Capital expenditure contracted but not provided for or payable
at 30 September:
no later than one year
Lease commitments
no later than one year
later than one, no later than five years
later than five years
2020
$mill
68.9
68.9
2020
$mill
–
–
–
–
2019
$mill
72.5
72.5
2019
$mill
43.8
98.4
91.1
14. Equity accounted investments
The Group has performed an analysis of the statements of financial
position and the results of each of its joint ventures and associates
(as listed in note 15) at 30 September 2020 and considers them to
be individually immaterial to the Group. As a result, no individual
disclosures are included for the Group’s investments in joint
ventures and associates.
Included in the table below is the summarised financial information
of the Group’s joint ventures and associates at 30 September:
Carrying amount of joint ventures and associates
Carrying amount at 1 October
Share of net profit
Share in joint venture transferred to
controlled entities
Dividends received/receivable
Foreign exchange movement
2020
$mill
357.7
32.3
(6.1)
(30.9)
(26.7)
2019
$mill
336.1
44.9
(5.7)
(27.5)
9.9
Carrying amount at 30 September
326.3
357.7
Carrying amount of investments in:
Joint ventures
Associates
Carrying amount of investments in joint
ventures and associates
254.5
71.8
287.8
69.9
326.3
357.7
Transactions between subsidiaries of the Group and joint
ventures and associates
Sales of goods/services
233.3
Purchase of goods/services
From 1 October 2019, the Group recognises lease commitments
as lease liabilities under the requirements of AASB 16 Leases.
Lease commitments as at 30 September 2019 have been reconciled
to the opening lease liability adjustment. Refer to note 10 for
details of the Group’s transition to AASB 16 Leases.
Management fees/royalties
Interest income
Interest expense
Dividend income
2020
$mill
391.1
(55.6)
27.3
0.3
(0.4)
30.9
2019
$mill
418.8
(43.8)
33.0
0.5
(0.4)
27.5
Joint ventures and associates transactions represent amounts that
do not eliminate on consolidation.
Outstanding balances arising from transactions with joint
ventures and associates
Amounts owing to related parties
Amounts owing from related parties
Loans with joint ventures and associates
Loans to joint ventures and associates
Loans from joint ventures and associates
2020
$mill
3.1
59.7
19.9
16.4
2019
$mill
6.3
53.6
19.9
17.0
Outstanding balances arising from transactions with joint ventures
and associates are on standard market terms.
103
Incitec Pivot Limited Annual Report 2020FINANCIAL REPORT
Notes to the Consolidated Financial Statements: Capital investment
For the year ended 30 September 2020
15. Investments in subsidiaries, joint arrangements and associates
The following list includes the Group’s principal operating subsidiaries and subsidiaries that are party to the Deed of Cross Guarantee
dated 30 September 2008. Other than as noted below, there were no changes in the Group’s existing shareholdings in its subsidiaries,
joint ventures and associates in the financial year.
Ownership
interest
Name of entity
Ownership
interest
Controlled Entities – operating (continued)
Incorporated in Canada
Dyno Nobel Canada Inc.
Dyno Nobel Transportation Canada Inc.
Dyno Nobel Nunavut Inc.
Incitec Pivot Finance Canada Inc.
Polar Explosives 2000 Inc.
Dene Dyno Nobel (Polar) Inc.
Dyno Nobel Waggaman Inc.
Newfoundland Hard-Rok Inc.
Dyno Nobel Labrador Inc.
Dyno Nobel Baffin Island Inc.
Incorporated in Hong Kong
Incitec Pivot Holdings (Hong Kong) Limited
Quantum Fertilisers Limited
Incorporated in Singapore
Coltivi Insurance Pte Limited
Incorporated in Chile
Dyno Nobel Explosivos Chile Limitada
Incorporated in Peru
Dyno Nobel Peru S.A.
Incorporated in Mexico
Dyno Nobel Mexico, S.A. de C.V. (3)
Incorporated in Papua New Guinea
DNX Papua New Guinea Ltd (3)
Incorporated in Indonesia
PT DNX Indonesia
Incorporated in Turkey
Nitromak DNX Kimya Sanayii A.S.
Incorporated in Romania
SC Romnitro Explosives Srl.
Incorporated in Albania
DNX Nitro Industrial Kimike Sh.p.k
(1) A party to Deed of Cross Guarantee dated 30 September 2008.
(2) The remaining 50 percent interest in Alpha Dyno Nobel Inc. was acquired
in the 2020 financial year.
(3) This entity has a 31 December financial year end.
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
99%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Subsidiaries
Name of entity
Company
Incitec Pivot Limited (1)
Controlled Entities – operating
Incorporated in Australia
Incitec Fertilizers Pty Limited (1)
TOP Australia Pty Limited (1)
Southern Cross Fertilisers Pty Ltd (1)
Southern Cross International Pty Ltd (1)
Incitec Pivot LTI Plan Company Pty Limited
Incitec Pivot Explosives Holdings Pty Limited (1)
Queensland Operations Pty Limited
Incitec Pivot Investments 1 Pty Ltd (1)
Incitec Pivot Investments 2 Pty Ltd
Incitec Pivot US Holdings Pty Ltd
Incitec Pivot Finance Australia Pty Ltd (1)
Dyno Nobel Pty Limited
Dyno Nobel Europe Pty Ltd
Dyno Nobel Management Pty Limited
Industrial Investments Australia Finance Pty Limited
Dyno Nobel Asia Pacific Pty Limited (1)
Dampier Nitrogen Pty Ltd
DNX Australia Pty Ltd (1)
Dyno Nobel Moranbah Pty Ltd (1)
Dyno Nobel Moura Pty Limited (1)
Incited Pivot Queensland Gas Pty Ltd
Incorporated in USA
Incitec Pivot US Investments
Incitec Pivot Management LLC
Incitec Pivot Finance LLC
Dyno Nobel Australia LLC
The Dyno Nobel SPS LLC
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.
Dyno Nobel Inc.
Dyno Nobel Transportation Inc.
Simsbury Hopmeadow Street LLC
Dyno Nobel Holdings V LLC
Tradestar Corporation
CMMPM, LLC
CMMPM Holdings L.P.
Dyno Nobel Louisiana Ammonia, LLC
Dyno Nobel Labs, LLC
Midland Powder LLC
Mine Equipment & Mill Supply Company
Controlled Explosives Inc.
Drisk Insurance Inc.
Boren Explosives Co., Inc.
Alpha Dyno Nobel Inc. (2)
104
Incitec Pivot Limited Annual Report 2020FINANCIAL REPORT
Notes to the Consolidated Financial Statements: Capital investment
For the year ended 30 September 2020
Joint arrangements and associates
Name of entity
Associates
Incorporated in USA
Maine Drilling and Blasting Group
Independent Explosives
Incorporated in Canada
Labrador Maskuau Ashini Ltd
Innu Namesu Ltd
Joint operations
Ownership
interest
49%
49%
49%
49%
IPL has a 50% interest in an unincorporated joint operation with Central
Petroleum Limited for the development of gas acreage in Queensland,
Australia, which commenced in the 2018 financial year.
(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 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 shares in Dene Dyno Nobel (DWEI) Inc. However, under
the joint venture agreement, the Group is entitled to 95 percent of the profit of Dene
Dyno Nobel (DWEI) Inc.
Name of entity
Joint ventures
Incorporated in USA
Buckley Powder Co. (1)
IRECO Midwest Inc.
Wampum Hardware Co.
Western Explosives Systems Company
Warex Corporation
Warex LLC
Warex Transportation LLC
Vedco Holdings, Inc.
Virginia Explosives & Drilling Company Inc.
Austin Sales LLC
Virginia Drilling Company, LLC
Incorporated in Canada
Quantum Explosives Inc.
Dene Dyno Nobel Inc.
Qaaqtuq Dyno Nobel Inc. (2)
Dene Dyno Nobel (DWEI) Inc. (3)
Incorporated in Australia
Queensland Nitrates Pty Ltd
Queensland Nitrates Management Pty Ltd
Incorporated in South Africa
DetNet South Africa (Pty) Ltd
Sasol Dyno Nobel (Pty) Ltd
Incorporated in Mexico
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 Servicos Para LA Construccion, S.A. de C.V.
Ownership
interest
51%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
49%
49%
49%
50%
50%
50%
50%
49%
49%
49%
49%
49%
105
Incitec Pivot Limited Annual Report 2020FINANCIAL REPORT Notes to the Consolidated Financial Statements: Risk management
For the year ended 30 September 2020
16. Provisions and contingencies
Provisions at 30 September 2020 are analysed as follows:
30 September 2020
Carrying amount at 1 October 2019
Provisions made during the year
Provisions written back during the year
Payments made during the year
Interest unwind
Foreign exchange movement
Carrying amount at 30 September 2020
Current
Non-current
Employee
entitlements
$mill
Restructuring and
rationalisation
$mill
Environmental
$mill
Asset retirement
obligations
$mill
Legal
and other
$mill
Total
provisions
$mill
58.9
8.5
(0.6)
(4.4)
0.6
(0.1)
62.9
58.2
4.7
6.9
29.3
–
(8.0)
–
(0.1)
28.1
23.2
4.9
45.9
1.9
–
(6.6)
1.4
(1.5)
41.1
16.1
25.0
82.0
9.4
–
(1.4)
3.7
(1.2)
92.5
1.6
90.9
8.9
2.4
–
(8.1)
–
–
3.2
3.2
–
202.6
51.5
(0.6)
(28.5)
5.7
(2.9)
227.8
102.3
125.5
Key accounting policies
Legal and other
Provisions are measured at management’s estimate of the
expenditure required to settle the obligation. This estimate is based
on a “present value” calculation, which involves the application of
a discount rate to the expected future cash flows associated with
settlement. The discount rate takes into account factors such as risks
specific to the liability and the time value of money.
There are a number of legal claims and other exposures, including
claims for damages arising from products and services supplied
by the Group, that arise from the ordinary course of business. A
provision is only made where it is probable that a payment or
restitution will be required and the costs involved can be reliably
estimated.
Employee entitlements
Key estimates and judgments
Provisions are made for liabilities to employees for annual leave,
long service leave and other employee entitlements. Where the
payment to employees is expected to take place in 12 months time
or later, a present value calculation is performed. In this instance,
the corporate bond rate is used to discount the liability to its present
value.
Provisions are based on the Group’s estimate of the timing
and value of outflows of resources required to settle or satisfy
commitments and liabilities known to the Group at the
reporting date.
Restructuring and rationalisation
Contingencies
Provisions for restructuring or rationalisation are only recognised
when a detailed plan has been approved and the restructuring or
rationalisation has either commenced or been publicly announced.
The following contingent liabilities are considered unlikely. However
the directors consider they should be disclosed:
» Under the terms of the ASIC Legislative Instrument, ASIC
Environmental
Provisions relating to the remediation of soil, groundwater,
untreated waste and other environmental contamination are
made when the Group has an obligation to carry out the clean-up
operation as a result of a past event. In addition, a provision will
only be made where it is possible to reliably estimate the costs
involved.
Asset retirement
In certain circumstances, the Group has an obligation to dismantle
and remove an asset and to restore the site on which it is
located. The present value of the estimated costs of this process
is recognised as part of the asset that is depreciated and also as a
provision.
At each reporting date, the provision is remeasured in line with
changes in discount rates and the timing and amount of future
estimated cash flows. Any changes in the provision are added to
or deducted from the related asset, other than changes associated
with the passage of time. This is recognised as a borrowing cost in
the profit or loss.
Corporations (Wholly-owned Companies) Instrument 2016/785,
issued by the Australian Securities and Investments Commission
dated 17 December 2016, which relieved certain wholly-owned
subsidiaries from the requirement to prepare audited financial
statements, IPL and certain wholly-owned subsidiaries (identified
in note 15) have entered into an approved deed for the cross
guarantee of liabilities. No additional liabilities subject to the
Deed of Cross Guarantee at 30 September 2020 are expected to
arise to IPL or the relevant subsidiaries.
»
The Group is regularly subject to investigations and audit
activities by the revenue authorities of jurisdictions in which
the Group operates. The outcome of these investigations and
audits depends upon several factors which may result in further
tax payments or refunds of tax payments already made by the
Group over and above existing provisions. Refer to note 3 for
further details.
» Contingent liabilities arise in the normal course of business
and include a number of legal claims, environmental cleanup
requirements and bank guarantees.
The Directors are of the opinion that no additional provisions are
required in respect of these matters, as it is either not probable
that a future sacrifice of economic benefits will be required or the
amount is not capable of reliable measurement.
106
Incitec Pivot Limited Annual Report 2020FINANCIAL REPORT
Notes to the Consolidated Financial Statements: Risk management
For the year ended 30 September 2020
17. Financial risk management
The Group is exposed to financial risks including liquidity risk, market risk and credit risk. This note explains the Group’s financial risk
exposures and its objectives, policies and processes for measuring and managing these risks.
The Board of Directors (the Board) has overall responsibility for the establishment and oversight of the Group’s risk management framework.
The Board established the Audit and Risk Management Committee (ARMC) which is responsible for, amongst other things, the monitoring
of the Group’s risk management plans. The ARMC is assisted in its oversight role by the Group’s Risk Management function. The Risk
Management function performs reviews of the Group’s risk management controls and procedures, the results of which are reported to the
ARMC. The ARMC reports regularly to the Board on its activities.
The Group’s financial risk management framework includes policies to identify, analyse and manage the Group’s financial risks. These policies
set appropriate financial risk limits and controls, identify permitted derivative instruments and provide guidance on how to monitor and
report financial risks and adherence to set limits. Financial risk management policies, procedures and systems are reviewed regularly to
ensure they remain appropriate given changes in market conditions and/or the Group’s activities.
Financial risks
Liquidity risk: The risk that the Group is not able to refinance its debt obligations or meet other cash
outflow obligations when required.
Source of risk
capital requirements.
Exposure to liquidity risk derives from the Group’s operations
and from the external interest bearing liabilities that it holds.
Risk mitigation
Liquidity risk is managed by ensuring 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 earnings and
Outstanding financial instruments
This includes stress testing of critical assumptions such as input
costs, sales prices, production volumes, exchange rates and
capital expenditure.
The Group aims to hold a minimum liquidity buffer of at least
$500m in undrawn non-current committed funding to meet
any unforeseen cash flow requirements. Details on the Group’s
committed finance facilities, including the maturity dates of
these facilities, are included in note 8.
The Group’s exposures to liquidity risk are set out in the tables below:
Contractual
cash flows(1)
$mill
0 – 12
months
$mill
1 – 5
years
$mill
more than
5 years
$mill
30 September 2020
Non-derivative financial
liabilities
30 September 2019
Non-derivative financial
liabilities
Contractual
cash flows(1)
$mill
0 – 12
months
$mill
1 – 5
years
$mill
more than
5 years
$mill
Interest bearing liabilities
1,870.3
21.2
4.0
1,845.1
Interest bearing liabilities
2,656.4
1,213.4
300.4
1,142.6
Interest payments
541.4
55.3
299.3
186.8
Interest payments
357.5
57.9
191.7
107.9
Trade and other payables
1,065.6
1,049.4
–
Trade and other payables
1,169.4
1,152.0
17.4
235.4
134.2
41.1
43.5
16.2
95.8
10.0
98.5
80.7
External lease liabilities
–
–
–
Bank guarantees
146.4
44.3
21.4
80.7
–
–
Forward exchange contracts
61.1
61.1
Lease liabilities
Bank guarantees
Total non-derivative cash
outflows
Derivative financial
(assets)/liabilities
Cross currency interest rate
swaps
Interest rate swaps
Interest rate options
Commodity swaps
Commodity options
Net derivative cash
outflows
3,846.9
1,210.5
425.3
2,211.1
Total non-derivative
cash outflows
Derivative financial
(assets)/liabilities
–
–
–
Forward exchange contracts
(1.2)
Cross currency interest
rate swaps
18.0
(14.2)
Interest rate swaps
(46.8)
13.4
(48.0)
17.2
–
(3.2)
0.1
–
–
(3.1)
(0.1)
0.1
–
–
–
–
27.2
24.7
17.9
(15.4)
Interest rate options
Commodity swaps
Commodity options
Net derivative cash
outflows
4,329.7
2,467.6
530.9
1,331.2
(5.6)
37.1
6.0
23.0
0.7
–
(5.6)
46.7
–
–
(9.5)
(0.1)
8.0
–
0.7
–
7.6
23.0
–
–
(9.6)
–
–
–
61.2
49.8
21.1
(9.7)
(1) Contractual cash flows are not discounted, and are based on foreign exchange rates at year end. Any subsequent movements in foreign exchange rates could impact the actual cash flows
on settlement of these assets and liabilities.
107
Incitec Pivot Limited Annual Report 2020FINANCIAL REPORT
Notes to the Consolidated Financial Statements: Risk management
For the year ended 30 September 2020
Market risk: The risk that changes in foreign exchange rates, interest rates and commodity prices
will affect the Group’s earnings, cash flows and the carrying values of its financial instruments.
Foreign exchange risk
Source of risk
Risk mitigation
The Group is exposed to changes in foreign exchange rates
(primarily in USD) on the following transactions and balances:
» Sales and purchases
»
»
Trade receivables and trade payables
Interest bearing liabilities
The Group is also exposed to foreign exchange movements
(primarily in USD) on the translation of the earnings, assets and
liabilities of its foreign operations.
Outstanding financial instruments and sensitivity analysis
Foreign exchange exposure to sales and purchases is managed by
entering into formal hedging arrangements.
The Group hedges both specific transactions and net exposures by
entering into foreign exchange rate derivative contracts.
The translation risk of USD denominated interest bearing liabilities
and net investments in foreign operations and their earnings is also
managed by entering into foreign exchange rate derivative financial
instruments.
The table below summarises the Group’s exposure to movements in the AUD:USD exchange rate and the derivative financial instruments that
are in place to hedge these exposures at 30 September:
2020
AUD:USD
USD mill
2019
AUD:USD
USD mill
5.8
41.9
(378.5)
(253.9)
(1,200.0)
(1,400.0)
(1,572.7)
(1,612.0)
–
(18.5)
352.3
242.9
1,200.0
–
1,552.3
–
800.0
1,024.4
(20.4)
(587.6)
2020
AUD:USD
USD mill
2019
AUD:USD
USD mill
(138.8)
(300.0)
(438.8)
2020
AUD:USD
USD mill
70.4
–
70.4
2019
AUD:USD
USD mill
2,520.4
2,520.4
2,006.4
2,006.4
(373.0)
(930.0)
(1,303.0)
(1,244.4)
271.4
(973.0)
1,217.4
1,033.4
Foreign exchange options
Net contract
amounts
mill
2020
Strike(1)
2020
Net contract
amounts
mill
2019
Strike(1)
2019
Contracts maturing between 1 and 5 years
Sold AUD Call
USD 60
Bought AUD Call
Sold AUD Put
(1) AUD:USD foreign exchange rate
USD 300
USD 160
Foreign exchange rates
0.78
0.74
0.71
–
–
–
–
–
–
The AUD:USD foreign exchange rates used by the Group to translate
its foreign denominated earnings, assets and liabilities are set
out below:
30 September foreign exchange rate
Average foreign exchange rate for the year
2020
AUD:USD
0.7148
0.6783
2019
AUD:USD
0.6762
0.7037
Foreign exchange rate sensitivity on outstanding financial
instruments
The table below shows the impact of a 1 cent movement (net of
hedging) in the AUD:USD exchange rate on the Group’s profit and
equity before tax in relation to foreign denominated assets and
liabilities at 30 September:
+ 1c
AUD:USD
AUD mill
2020
- 1c
AUD:USD
AUD mill
2020
+ 1c
AUD:USD
AUD mill
2019
- 1c
AUD:USD
AUD mill
2019
Foreign exchange sensitivity – (net of hedging)
Trade and other
receivables and payables
– (profit or loss)
Hedge of forecast
transactions – (equity)
Interest bearing
liabilities (equity)
Investments in foreign
operations – (equity)
(0.4)
0.4
(0.3)
8.5
(8.7)
(1.5)
0.3
1.6
–
–
12.9
(13.3)
(23.5)
24.2
(22.3)
22.9
Transactional exposures
Trade and other receivables
Trade and other payables
Interest bearing liabilities
Gross exposure (before hedging)
Hedge of transactional exposures
Trade and other receivables
Forward exchange contracts
Trade and other payables
Forward exchange contracts
Interest bearing liabilities
Forward exchange contracts
Cross currency interest rate swaps
Total hedge contract values
Net exposure (after hedging)
Hedge of forecast sales and purchases
Forward exchange contracts
Foreign exchange options
Total hedge contract values
Translational exposures
Net investment in foreign operations
Gross exposure (before hedging)
Hedge of translational exposures
Cross currency interest rate swaps
Forward exchange contracts
Total hedge contract values
Net exposure (after hedging)
108
Incitec Pivot Limited Annual Report 2020FINANCIAL REPORT
Notes to the Consolidated Financial Statements: Risk management
For the year ended 30 September 2020
The fertiliser sales sensitivity calculation is based on actual tonnes
manufactured by the Australian fertiliser plants and sold during the
year, the average AUD:USD exchange rate for the year, and
the average USD fertiliser price.
The North American earnings translation sensitivity calculation
is based on the earnings before interest and tax from the North
American business for the year and the average AUD:USD exchange
rate for the year.
Sensitivity to foreign exchange rate movements during the year
(unhedged)
The table below shows the impact of a 1 cent movement in
the AUD:USD foreign exchange rate on the Group’s profit before
tax, in relation to sales and earnings during the year that were
denominated in USD.
+ 1c
AUD:USD
AUD mill
2020
- 1c
AUD:USD
AUD mill
2020
+ 1c
AUD:USD
AUD mill
2019
- 1c
AUD:USD
AUD mill
2019
(7.8)
(3.3)
8.1
3.4
(6.3)
(3.3)
6.4
3.3
USD Fertiliser sales from
Australian plants
North American USD
earnings
Market risk
Interest rate risk
Source of risk
Risk mitigation
Exposure to interest rate risk is a result of the effect of changes in
interest rates on the Group’s outstanding interest bearing liabilities
and derivative instruments.
The exposure to interest rate risk is mitigated by maintaining a mix
of fixed and variable interest rate borrowings and by entering into
interest rate derivative instruments.
Outstanding financial instruments and sensitivity analysis
The tables below include the Group’s derivative contracts that are exposed to changes in interest rates at 30 September:
Average
pay/(rec)
fixed rate
LIBOR
Average
pay/(rec)
fixed rate
BBSW
Average
pay/(rec)
fixed rate
HIBOR
Duration
(years)
Net contract
amounts
mill
Interest rate
options
Net contract
amounts
USD mill
2020
Strike(1)
2020
Duration
(years)
Net contract
amounts
USD mill
2019
Strike(1)
2019
Duration
(years)
0.2 USD 500
Contracts maturing later than 5 years
–
Sold cap
–
2.0 AUD 200
Bought cap
2.7 USD 600
Sold floor
1.6 USD 600
Bought floor
–
–
–
–
–
–
–
–
–
–
350 3.75%
350 2.58%
350 2.58%
350 0.01%
0.2
0.2
0.2
0.2
Interest rate swaps
2020
Less than 1 year
1 to 5 years
1 to 5 years
1 to 5 years
Later than 5 years
Later than 5 years
2019
Less than 1 year
Less than 1 year
Less than 1 year
1 to 5 years
1 to 5 years
Later than 5 years
Later than 5 years
3.58%
–
–
(0.20%)
3.14%
(1.70%)
(2.02%)
–
3.54%
(3.11%)
–
–
–
–
–
–
(4.30%)
2.51%
(1.77%)
(2.02%)
–
–
–
–
–
–
–
–
–
(4.13%)
–
–
–
–
–
–
(4.13%)
6.2 USD 200
5.4 HKD 560
0.2
0.2
1.0
1.8
2.8
6.2
6.4
USD 400
USD 300
AUD 250
USD 900
USD 500
USD 200
HKD 560
Interest rate
options
Net contract
amounts
USD mill
2020
Strike(1)
2020
Duration
(years)
Net contract
amounts
USD mill
2019
Strike(1)
2019
Duration
(years)
Contracts maturing between 1 and 5 years
Sold cap
–
–
Bought cap
Sold floor
Bought floor
(1) LIBOR
–
–
–
–
–
–
–
–
–
–
350 3.75%
350 2.58%
350 2.58%
350 0.01%
3.8
3.8
3.8
3.8
(1) LIBOR
Interest rate sensitivity on outstanding financial instruments
The following table shows the sensitivity of the Group’s profit
before tax to a 1 per cent change in interest rates. The sensitivity
is calculated based on the Group’s interest bearing liabilities and
derivative financial instruments that are exposed to interest rate
movements and the AUD:USD exchange rate at 30 September:
Interest rate sensitivity
LIBOR
BBSW
+ 1%
AUD mill
2020
- 1%
AUD mill
2020
+ 1%
AUD mill
2019
- 1%
AUD mill
2019
(0.7)
0.1
0.7
(0.1)
(2.6)
(1.3)
2.6
1.3
The sensitivity above is also representative of the Group’s interest
rate exposures during the year.
109
Incitec Pivot Limited Annual Report 2020FINANCIAL REPORT
Notes to the Consolidated Financial Statements: Risk management
For the year ended 30 September 2020
Market risk
Commodity price risk
Source of risk
Risk mitigation
Exposure to changes in commodity prices is by virtue of the
products that the Group sells and its manufacturing operations,
and can be categorised into six main commodities, namely:
Ammonia, Ammonium Nitrate, Ammonium Phosphate, Urea,
Oil and Natural Gas.
Where possible, commodity price risk exposure is managed by
entering into long term contracts with customers (i.e Ammonium
Nitrate and Ammonia) or derivative contracts for input cost (i.e US
natural gas). However, in some instances price risk exposure cannot
be economically mitigated by either contractual arrangements or
derivative contracts by virtue of the products that the Group sells.
Outstanding financial instruments and sensitivity analysis
The table below includes the Group’s derivative contracts that are
exposed to changes in natural gas and oil prices at 30 September:
Total
volume
(MMBTU)(1)
2020
Price/
Strike
USD(2)
2020
Total
volume
(MMBTU)(1)
2019
Price/
Strike
USD(2)
2019
Natural gas
Contracts maturing within 1 year
Natural gas swaps
fixed payer
Natural gas options
961,800 USD 2.54
1,307,800
2.58
Bought Call
5,150,000 USD 3.44
Sold Put
5,150,000 USD 2.56
–
–
–
–
Contracts maturing between 1 and 5 years
Natural gas swaps
fixed payer
680,000 USD 2.53
1,421,200
2.53
(1) Million Metric British Thermal Units
(2) Nymex Henry Hub gas price
Oil(2)
Total
volume
(barrels)
2020
Price
USD
2020
Total
volume
(barrels)
2019
Price
USD(1)
2019
Contracts maturing within 1 year
Oil swaps fixed payer
–
–
100,035
58.48
Sensitivity to natural gas price movements during the year
The table below shows the sensitivity of the Group’s profit before
tax to a change of US$1 per MMBTU in the US Henry Hub natural gas
price. The sensitivity is based on the average natural gas price, the
average AUD:USD exchange rate (excluding the impact of hedging)
and the current annual natural gas consumption of the Group’s
manufacturing operations in the Americas that are exposed to
changes in natural gas prices:
Natural gas price
sensitivity
+ US$1 per
1 MMBTU
AUD mill
2020
- US$1 per
1 MMBTU
AUD mill
2020
+ US$1 per
1 MMBTU
AUD mill
2019
- US$1 per
1 MMBTU
AUD mill
2019
Henry Hub USD
(31.3)
31.3
(32.2)
32.2
Sensitivity to fertiliser price and ammonia movements during
the year
The table below shows the sensitivity of the Group’s profit before
tax to a US$10 per tonne change in Ammonium Phosphates, Urea
and Ammonia prices. The sensitivity is based on actual tonnes
manufactured and sold by the Group that is sensitive to commodity
price changes and the average AUD:USD exchange rate (excluding
the impact of hedging) for the year:
+ US$10
per tonne
AUD mill
- US$10
per tonne
AUD mill
4.1
14.4
1.8
8.9
3.5
9.6
2.7
7.0
(4.1)
(14.4)
(1.8)
(8.9)
(3.5)
(9.6)
(2.7)
(7.0)
(1) Oil-Brent (DTD)-Platts Marketwire
(2) The Group had a gas supply agreement in Australia in 2019 with pricing referenced to the
USD Brent oil price. As a result, the Group held Brent oil fixed price swaps to eliminate the
exposure to changes in the Brent oil price.
Price sensitivity
2020
Granular Urea (FOB Middle East)
Natural gas price sensitivity on outstanding financial instruments
The table below shows the sensitivity of the Group’s equity before
tax to a change of US$1 per MMBTU in the US Henry Hub natural
gas price. The sensitivity is based on natural gas derivative contracts
held by the Group at 30 September. Gains or losses recognised in
equity will be reclassified to the profit or loss as the underlying
forecast transaction occurs:
Natural gas price
sensitivity
+ US$1 per
1 MMBTU
AUD mill
2020
- US$1 per
1 MMBTU
AUD mill
2020
+ US$1 per
1 MMBTU
AUD mill
2019
- US$1 per
1 MMBTU
AUD mill
2019
Henry Hub USD
7.0
(7.0)
4.0
(4.0)
DAP/MAP (FOB Tampa)
Urea (FOB NOLA)
Ammonia (FOB Tampa)
2019
Granular Urea (FOB Middle East)
DAP/MAP (FOB Tampa)
Urea (FOB NOLA)
Ammonia (FOB Tampa)
110
Incitec Pivot Limited Annual Report 2020FINANCIAL REPORT Notes to the Consolidated Financial Statements: Risk management
For the year ended 30 September 2020
Included in the table below are details of the Group’s derivative instruments at 30 September 2020, classified by hedge accounting type and
market risk category:
30 September 2020
Cash flow hedges
Foreign exchange risk on forecast sales & purchases
Forward exchange contracts
Foreign exchange options
Discontinued hedge(3)
Commodity price risk on forecast purchases
Commodity swaps
Commodity options
Discontinued hedge(3)
Interest rate risk on highly probable debt
Interest rate swaps
Interest rate options
Cross currency interest rate swaps
Discontinued hedge(3)
Total cash flow hedges
Net investment hedges
Foreign exchange risk on foreign operation
Cross currency interest rate swaps
Forward exchange contracts
Discontinued hedge(3)
Total net investment hedges
Fair value hedges
Foreign exchange risk on USD and HKD borrowings(4)
Cross currency interest rate swaps
Forward exchange contracts
Interest rate risk on fixed USD, HKD and AUD bonds(5)
Interest rate swaps
Cross currency interest rate swaps
Discontinued hedge
Total fair value hedges
Held for trading(6)
Forward exchange contracts
Cross currency interest rate swaps
Total held for trading
Offsetting contracts(1)
Equity instruments
Total net
Balance at 30 September 2020
During the period
Carrying
amount of
hedging
instrument
asset(1)
Carrying amount
of hedging
instrument
liability(1)
Fair value
hedge
adjustment of
hedged item(8)
Balance
of gains/
(losses) in
reserves
before tax
Gains/
(losses)
recognised in
reserves(2)
Reclassification
of (gains)/
losses from
reserves to
profit or loss(2,7)
Note
31.8
1.1
–
4.3
0.5
–
0.1
–
0.1
–
(54.8)
–
–
(0.9)
–
–
(69.5)
–
–
–
37.9
(125.2)
37.9
75.3
–
–
(339.0)
–
113.2
(339.0)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1.6)
(0.3)
(2.7)
3.2
0.4
(4.4)
(19.8)
–
0.1
(63.7)
(88.8)
(1.8)
(0.3)
16.3
3.9
0.4
(1.0)
2.4
19.2
(0.4)
(43.0)
(4.3)
73.3
90.5
(771.8)
(608.0)
73.3
90.5
(38.3)
125.5
10.8
300.9
51.9
0.1
–
(1.4)
(75.3)
–
(245.5)
–
–
–
(45.7)
–
1.0
(8)
363.7
(76.7)
(290.2)
0.1
0.1
0.2
(0.1)
–
(0.1)
(382.1)
382.1
3.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(17.0)
–
–
–
–
–
–
–
–
–
–
–
–
–
(20.7)
–
–
0.2
–
–
–
1.5
(19.0)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
135.9
(158.9)
(290.2)
(713.8)
121.2
(19.0)
(1) Balances are included in other financial assets/liabilities in the Statement of Financial Position. Financial assets and financial liabilities that are subject to enforceable master netting
arrangements are offset in the Statement of Financial Position.
(2) Gains or losses recognised in the reserves will be reclassified to the same line item in the profit or loss as the underlying hedged item when the underlying forecast transaction occurs.
(3) Gains or losses on discontinued hedges that were in cash flow hedge or net investment hedge relationships remain in the reserves until the underlying transactions occur or upon disposal
of the underlying net investment. Any changes in the market value of the discontinued hedges are recognised in the profit or loss from discontinuation.
(4) The total fair value of derivatives hedging the Group’s interest bearing liabilities is $287.0m. The derivatives hedging the foreign currency exposure of the Group’s USD
and HKD borrowings have a contract value of USD1,200m and HKD560m, and are economic hedges of an equivalent amount of the Group’s USD and HKD borrowings.
(5) Interest rate swap contracts effectively convert USD500m, HKD560m and AUD450m of the Group’s fixed interest rate borrowings to floating interest rates. The fair value hedge adjustment
of a hedged item where the hedging instrument is discontinued remains in the carrying amount of the hedged item and is amortised to the profit or loss over the life of the hedged item.
(6) Derivatives which are classified as held for trading are in economic hedge relationships that do not qualify for hedge accounting. These hedges are effective economic hedges or offsetting
hedges based on contractual amounts and cash flows over the life of the underlying item.
(7) At 30 September 2020, there were no gains/losses that were transferred from reserves to profit or loss in relation to ineffective hedges.
(8) Fair value adjustment of hedged items includes the revaluation of debt that was refinanced during the year.
111
Incitec Pivot Limited Annual Report 2020FINANCIAL REPORT
Notes to the Consolidated Financial Statements: Risk management
For the year ended 30 September 2020
Included in the table below are details of the Group’s derivative instruments at 30 September 2019, classified by hedge accounting type and
market risk category:
Balance at 30 September 2019
During the period
Carrying
amount of
hedging
instrument
asset(1)
Carrying
amount of
hedging
instrument
liability(1)
Fair value hedge
adjustment of
hedged item
Balance
of gains/
(losses) in
reserves
before tax
Gains/
(losses)
recognised in
reserves(2)
Reclassification
of (gains)/
losses from
reserves to
profit or loss(2,7)
Note
30 September 2019
Cash flow hedges
Foreign exchange risk on forecast sales & purchases
Forward exchange contracts
Discontinued hedge(3)
Commodity price risk on forecast purchases
Commodity swaps
Discontinued hedge(3)
Interest rate risk on highly probable debt
Interest rate swaps
Interest rate options
Cross currency interest rate swaps
Discontinued hedge(3)
Total cash flow hedges
Net investment hedges
Foreign exchange risk on foreign operation
Cross currency interest rate swaps
Forward exchange contracts
Discontinued hedge(3)
Total net investment hedges
Fair value hedges
Foreign exchange risk on USD and HKD borrowings(4)
Cross currency interest rate swaps
Interest rate risk on fixed USD, HKD and AUD bonds(5)
Interest rate swaps
Cross currency interest rate swaps
Discontinued hedge
Total fair value hedges
Held for trading(6)
Forward exchange contracts
Cross currency interest rate swaps
Total held for trading
Offsetting contracts(1)
Equity instruments
Total net
0.2
–
0.2
–
–
–
0.5
–
0.9
–
4.4
–
4.4
371.2
15.6
1.8
–
388.6
0.5
0.1
0.6
(0.1)
–
(0.9)
–
(22.4)
(24.1)
–
–
(47.5)
(408.2)
(0.2)
–
(408.4)
–
–
–
–
–
(0.1)
–
(0.1)
(371.7)
371.7
(8)
–
22.8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(369.2)
(8.9)
(1.9)
2.8
(377.2)
–
–
–
–
–
0.2
1.7
(0.7)
(3.6)
(22.2)
(19.2)
0.5
(22.2)
(65.5)
(0.8)
8.8
(12.2)
11.8
(34.0)
(25.9)
0.5
(20.7)
(72.5)
–
(10.0)
–
(9.8)
–
–
–
1.8
(18.0)
(405.5)
(114.2)
4.1
(332.1)
(733.5)
4.1
2.3
(107.8)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(17.0)
(0.1)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(84.3)
(377.2)
(816.0)
(180.4)
(18.0)
(1) Balances are included in other financial assets/liabilities in the Statement of Financial Position. Financial assets and financial liabilities that are subject to enforceable master netting
arrangements are offset in the Statement of Financial Position.
(2) Gains or losses recognised in the reserves will be reclassified to the same line item in the profit or loss as the underlying hedged item when the underlying forecast transaction occurs.
(3) Gains or losses on discontinued hedges that were in cash flow hedge or net investment hedge relationships remain in the reserves until the underlying transactions occur or upon disposal
of the underlying net investment. Any changes in the market value of the discontinued hedges are recognised in the profit or loss from discontinuation.
(4) The total fair value of derivatives hedging the Group’s interest bearing liabilities is $388.6m. The cross currency interest rate swaps hedging the foreign currency exposure of the Group’s USD
and HKD borrowings have a contract value of USD800m and HKD560m, and are economic hedges of an equivalent amount of the Group’s USD and HKD borrowings.
(5) Interest rate swap contracts effectively convert USD800m, HKD560m and AUD250m of the Group’s fixed interest rate borrowings to floating interest rates. The fair value hedge adjustment
of a hedged item where the hedging instrument is discontinued remains in the carrying amount of the hedged item and is amortised to the profit or loss over the life of the hedged item.
(6) Derivatives which are classified as held for trading are in economic hedge relationships that do not qualify for hedge accounting. These hedges are effective economic hedges or offsetting
hedges based on contractual amounts and cash flows over the life of the underlying item.
(7) At 30 September 2019, there were no gains/losses that were transferred from reserves to profit or loss in relation to ineffective hedges.
112
Incitec Pivot Limited Annual Report 2020FINANCIAL REPORT Notes to the Consolidated Financial Statements: Risk management
For the year ended 30 September 2020
Credit risk: The risk of financial loss to the Group as a result of customers or counterparties to financial
assets failing to meet their contractual obligations.
Source of risk
Credit risk exposure
The Group is exposed to counterparty credit risk from trade and
other receivables and financial instrument contracts that are
outstanding at the reporting date.
The Group’s maximum exposure to credit risk at 30 September is
the carrying amount, net of any provision for impairment, of the
financial assets as detailed in the table below:
Risk mitigation
The Group minimises the credit risk associated with trade and
other receivables balances by undertaking transactions with a large
number of customers in various countries.
The creditworthiness of customers is reviewed prior to granting
credit, using trade references and credit reference agencies. Credit
limits are established and monitored for each customer, and these
limits represent the highest level of exposure that a customer can
reach. Trade credit insurance is purchased when required.
The Group mitigates credit risk from financial instrument contracts
by only entering into transactions with counterparties that have
sound credit ratings and, where applicable, with whom the Group
has a signed netting agreement. Given their high credit ratings,
the Group does not expect any counterparty to fail to meet its
obligations.
Trade and other receivables
Cash and cash equivalents
Derivative assets
2020
$mill
400.8
554.6
132.9
1,088.3
2019
$mill
364.1
576.4
22.8
963.3
Financial assets and financial liabilities that are subject to
enforceable master netting arrangements and are intended to
be settled on a net basis are offset in the Statement of Financial
Position. At 30 September 2020, the amount netted in other
financial assets and other financial liabilities is $382.1m
(2019: $371.7m).
Fair value
Fair value of the Group’s financial assets and liabilities is calculated
using a variety of techniques depending on the type of financial
instrument as follows:
»
»
»
»
»
The fair value of financial assets and financial liabilities traded
in active markets (such as equity securities and fixed interest
rate bonds) is the quoted market price at the reporting date.
The fair value of financial assets and financial liabilities not
traded in active markets is calculated using discounted cash
flows. Future cash flows are calculated based on observable
forward interest rates and foreign exchange rates.
The fair value of forward exchange contracts, interest rate
swaps, cross currency interest rate swaps, commodity swaps
and forward contracts is calculated using discounted cash flows,
reflecting the credit risk of various counterparties. Future cash
flows are calculated based on the contract rate, observable
forward interest rates and foreign exchange rates.
The fair value of option contracts is calculated using the contract
rates and observable market rates at the end of the reporting
period, reflecting the credit risk of various counterparties.
The valuation technique is consistent with the Black-Scholes
methodology and utilises Monte Carlo simulations.
The fair value of commodity swaps and commodity forward
contracts is calculated using their quoted market price, where
available. If a quoted market price is not available, then fair
value is calculated using discounted cash flows. Future cash flows
are estimated based on the difference between the contractual
price and the current observable market price, reflecting the
credit risk of various counterparties. These future cash flows
are then discounted to present value.
»
The nominal value less expected credit losses of trade
receivables and payables are assumed to approximate
their fair values due to their short term maturity.
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).
2020
Derivative financial assets
Derivative financial liabilities
Investment in Equity Instrument
2019
Derivative financial assets
Derivative financial liabilities
Level 1
$milll
–
–
–
Level 1
$milll
–
–
Level 2
$mill
132.9
(158.9)
–
Level 2
$mill
22.8
(84.3)
Level 3
$mill
–
–
3.0
Level 3
$mill
–
–
Fair value of financial assets and liabilities carried at amortised cost
Cash and cash equivalents, trade and other receivables, and trade
and other payables are carried at amortised cost which equals their
fair value.
Interest bearing liabilities are carried at amortised cost and have
a carrying value of $1,870.3m (2019: $2,656.4m) – refer to note
8. The fair value of the interest bearing financial liabilities at 30
September 2020 was $1,949.2m (2019: $2,709.9m) and was based
on the level 2 valuation methodology.
113
Incitec Pivot Limited Annual Report 2020FINANCIAL REPORT Notes to the Consolidated Financial Statements: Risk management
For the year ended 30 September 2020
Key accounting policies
Foreign currency transactions and balances
Cash flow hedges
The Group presents its accounts in Australian dollars. Foreign
currency transactions are translated into Australian dollars using the
exchange rates at the date the transaction occurs.
Monetary assets (such as trade receivables) and liabilities (such as
trade creditors) denominated in foreign currencies are translated
into Australian dollars using the exchange rate at 30 September.
Non-monetary items (for example, plant and machinery) that
are measured at historical cost in a foreign currency are not re-
translated.
Foreign exchange gains and losses relating to transactions are
recognised in the profit or loss with the exception of gains and
losses arising from cash flow hedges and net investment hedges
that are recognised in other comprehensive income.
Foreign operations
The assets and liabilities of the Group’s foreign operations are
translated at applicable exchange rates at 30 September. Income
and expense items are translated at the average exchange rates for
the period.
Foreign exchange gains and losses arising on translation are
recognised in the foreign currency translation reserve (FCTR). If and
when the Group disposes of the foreign operation, these gains and
losses are transferred from the FCTR to the profit or loss.
Derivatives and hedging
The Group uses contracts known as derivative financial instruments
to hedge its financial risk exposures.
On entering into a hedging relationship, the Group formally
designates and documents details of the hedge, risk management
objective and strategy for entering into the arrangement. The Group
applies hedge accounting to hedging relationships that are expected
to be highly effective in offsetting changes in fair value, i.e. where
the cash flows arising from the hedge instrument closely match the
cash flows arising from the hedged item.
Hedge accounting is discontinued when:
»
»
The hedging relationship no longer meets the risk
management objective.
The hedging instrument expires or is sold, terminated
or exercised.
»
The hedge no longer qualifies for hedge accounting.
Derivatives are measured at fair value. The accounting
treatment applied to specific types of hedges is set out below.
Changes in the fair value of effective cash flow hedges are
recognised in equity, in the cash flow hedge reserve. To the
extent that the hedge is ineffective, changes in fair value are
recognised in the profit or loss.
Fair value gains or losses accumulated in the reserve are taken
to profit or loss when the hedged item affects profit or loss.
When the hedged item is a non-financial asset, the amount
recognised in the reserve is transferred to the carrying amount
of the asset when the asset is purchased.
Net investment hedges
Hedges of a net investment in a foreign operation are accounted
for in a similar way as cash flow hedges. Gains or losses on the
effective portion of the hedge are recognised directly in equity
(in the FCTR) while any gains or losses relating to the ineffective
portion are recognised in the profit or loss.
On disposal of the foreign operation, the cumulative value of gains
or losses recognised in the FCTR are transferred to profit or loss.
Fair value hedges
The change in the fair value of the hedging instrument and the
change in the hedged item are recognised in the profit or loss.
Hedge ineffectiveness
The Group aims to transact only highly effective hedge relationships,
and in most cases the hedging instruments have a 1:1 hedge
ratio with the hedged items. However, at times, some hedge
ineffectiveness can arise and is recognised in profit or loss in the
period in which it occurs. Key sources of hedge ineffectiveness for
the Group are as follows:
» Maturity dates of hedging instruments not matching the maturity
dates of the hedged items.
» Credit risk inherent within the hedging instrument not matching
the movement in the hedged item.
»
Interest rates of the Group’s financing facilities not matching
the interest rates of the hedging instrument.
»
Forecast transactions not occurring.
Classification of financial instruments
Financial instruments are classified into the following categories:
» Amortised cost (cash and cash equivalents, interest bearing
liabilities and trade and other receivables and payables).
»
»
Fair value through other comprehensive income
(listed equity securities).
Fair value through profit or loss (derivative financial instruments
except those that are in a designated hedge relationship).
114
Incitec Pivot Limited Annual Report 2020FINANCIAL REPORT Notes to the Consolidated Financial Statements: Other
For the year ended 30 September 2020
18. Share-based payments
19. Key management personnel
Incentive Plans
The Long Term Incentive Plans (LTIs) are designed to link reward
with the key performance drivers that underpin sustainable growth
in shareholder value. With regard to the 2017/20, 2018/21 and
2019/22 Long Term Incentive Plans, the performance conditions
comprise relative total shareholder return, the delivery of certain
strategic initiatives and growth in return on equity.
Certain Executives have been awarded performance rights under
Short Term Incentive Plans (STIs) based on financial, safety and
strategic outcomes.
disclosures
Key management personnel remuneration
Short-term employee benefits
Post-employment benefits
Other long-term benefits
Termination benefits
Share-based payments
2020
$000
8,141
163
100
468
1,838
10,710
2019
$000
7,665
199
114
–
1,578
9,556
These arrangements support the Company’s strategy for retention
and motivation of its executives.
Determination of key management personnel and detailed
remuneration disclosures are provided in the Remuneration Report.
Loans to key management personnel
In the year ended 30 September 2020, there were no loans to
key management personnel and their related parties (2019: nil).
Other key management personnel transactions
In the year ended 30 September 2020, there were no transactions
entered into during the year with key management personnel
(including their related parties).
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:
Accounting value of performance rights issued
under the LTI and STI performance plans
2020
$mill
2019
$mill
2.4
1.6
2020
Number
2019
Number
Number of performance rights outstanding
under the LTI and STI performance plans
5,082,644
4,881,245
Details of the movements in LTI and STI performance rights are
disclosed in the Remuneration Report.
Key accounting policies
The rights to shares granted to employees under the terms
of the plans are measured at fair value. The fair value is
recognised as an employee expense over the period that
employees become unconditionally entitled to the rights.
There is a corresponding increase in equity, which is reflected
in the share based payments reserve.
The amount recognised as an expense is adjusted to reflect the
actual number of rights taken up, once related service and other
non-market conditions are met.
115
Incitec Pivot Limited Annual Report 2020FINANCIAL REPORT
Notes to the Consolidated Financial Statements: Other
For the year ended 30 September 2020
20. Retirement benefit obligation
The Group operates a number of defined benefit plans in the
Americas and Asia Pacific to provide benefits for employees
and their dependants on retirement, disability or death.
The Group also makes contributions to defined contribution
schemes.
Financial position and performance
Net defined benefit obligation at 30 September
Present value of obligations
Fair value of plan assets
Net defined benefit obligation
2020
$mill
321.9
(255.0)
66.9
2019
$mill
356.6
(289.4)
67.2
Maturity profile of the net defined benefit obligation
The expected maturity analysis of the undiscounted defined benefit
obligation is as follows:
Within next 10 years
Within 10 to 20 years
In excess of 20 years
2020
$mill
207.2
127.8
41.8
Return on plan assets for the year ended 30 September
Actual return on plan assets
Composition of plan assets at 30 September
2020
$mill
15.1
2019
$mill
221.3
142.6
43.6
2019
$mill
17.7
The percentage invested in each asset class:
Equities
Fixed interest securities
Property
Other
2020
2019
43%
42%
7%
8%
39%
47%
6%
8%
Movements in plan assets/liabilities
Amounts recognised in Other Comprehensive Income
Losses arising from changes
in actuarial assumptions
Return on plan assets greater
than discount rate
Total losses recognised in other
comprehensive income
Notes
2020
$mill
2019
$mill
(16.2)
(43.8)
7.2
7.2
(9.0)
(36.6)
Amounts recognised in Profit or Loss
Net interest expense
Defined benefit superannuation expense
(2)
(2)
(1.4)
(2.9)
(1.4)
(4.6)
Key assumptions and sensitivities
Principal actuarial assumptions
Discount rate (gross of tax)
Future salary increases
Sensitivity analysis
2020
2019
2.0% – 6.9% 2.7% – 7.6%
2.0% – 5.0% 2.5% – 5.0%
The sensitivity analysis is based on a change in a significant
actuarial assumption while holding all other assumptions constant.
The following table summarises how the defined benefit obligation
as at 30 September 2020 would have increased/(decreased)
as a result of a change in the respective assumption by
1 percentage point:
Discount rate
Rate of salary increase
Key accounting policies
1 percent
increase
1 percent
decrease
(29.3)
1.6
35.5
(1.4)
All employees of the group are entitled to benefits from the Group’s
superannuation plan on retirement, disability or death or can direct
the group to make contributions to a defined contribution plan of
their choice. The Group’s superannuation plan has a defined benefit
section and a defined contribution section. The defined benefit
section provides defined lump sum benefits based on years of
service and final average salary. The defined contribution section
receives fixed contributions from group companies and the Group’s
legal or constructive obligation is limited to these contributions.
The liability or asset recognised in the Consolidated Statement
of Financial Position in respect of defined benefit superannuation
plans is the present value of the defined benefit obligation at the
end of the reporting period less the fair value of plan assets.
Remeasurement gains and losses arising from experience
adjustments and changes in actuarial assumptions are recognised
in the period in which they occur, directly in other comprehensive
income. They are included in retained earnings in the Consolidated
Statement of Changes in Equity and in the Consolidated Statement
of Financial Position.
Changes in the present value of the defined benefit obligation
resulting from plan amendments or curtailments are recognised
immediately in profit or loss as past service costs.
Contributions to the defined contribution section of the Group’s
superannuation fund and other independent defined contribution
superannuation funds are recognised as an expense as they
become payable.
Key estimates and judgments
The present value of the defined benefit obligation at the
reporting date is based on expected future payments arising
from membership of the fund. This is calculated annually by
independent actuaries considering the expected future wage
and salary levels of employees, experience of employee
departures and employee periods of service.
Expected future payments are discounted using market yields
on corporate bonds at the reporting date, which have terms
to maturity and currency that match, as closely as possible,
the estimated future cash outflows.
116
Incitec Pivot Limited Annual Report 2020FINANCIAL REPORT
Notes to the Consolidated Financial Statements: Other
For the year ended 30 September 2020
21. Deed of cross guarantee
Entities that are party to a Deed of Cross Guarantee are included in
note 15. The Statement of Profit or Loss and Other Comprehensive
Income and the Statement of Financial Position for this closed group
are shown below:
Statement of Profit or Loss and Other
Comprehensive Income
Profit before income tax
Income tax benefit
Profit for the year
2020
$mill
9.1
29.3
38.4
2019
$mill
95.3
1.7
97.0
22. Parent entity disclosure
Throughout the financial year ended 30 September 2020 the parent
company of the Group was Incitec Pivot Limited.
Parent entity guarantees in respect of debts
of its subsidiaries
The parent entity is part of a Deed of Cross Guarantee, under which
each entity guarantees the debt of the others.
Statement of Profit or Loss and Other
Comprehensive Income
Retained profits at 1 October
1,437.1
1,470.0
Profit for the year
Other movements in retained earnings
Dividend paid
Retained profits at 30 September
38.4
(19.5)
(54.6)
1,401.4
97.0
(8.2)
(121.7)
1,437.1
Statement of Financial Position
Results of the parent entity
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Statement of Financial Position
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other assets
Other financial assets
Total current assets
Non-current assets
Other financial assets
Property, plant and equipment
Right-of-use lease assets
Intangible assets
Deferred tax assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Lease liabilities
Other financial liabilities
Provisions
Current tax liabilities
Total current liabilities
Non-current liabilities
Trade and other payables
Lease liabilities
Interest bearing liabilities
Other financial liabilities
Provisions
Deferred tax liabilities
Retirement benefit obligation
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
2020
$mill
2019
$mill
495.0
86.2
294.3
18.3
76.6
970.4
5,063.1
2,159.9
132.1
246.2
200.6
7,801.9
8,772.3
963.2
20.5
93.2
67.6
16.8
1,161.3
272.2
135.2
1,290.6
65.3
84.4
389.3
26.8
2,263.8
3,425.1
5,347.2
3,806.2
139.6
1,401.4
5,347.2
478.5
285.4
404.9
18.0
5.4
1,192.2
3,535.6
2,132.2
–
246.4
181.8
6,096.0
7,288.2
1,213.4
–
38.8
60.2
10.8
1,323.2
227.9
–
556.4
45.1
72.6
438.1
23.3
1,363.4
2,686.6
4,601.6
3,136.8
27.7
1,437.1
4,601.6
2020
$mill
66.1
(23.8)
42.3
2019
$mill
452.6
(72.9)
379.7
2020
$mill
2019
$mill
538.3
8,406.6
779.2
4,232.7
4,173.9
866.7
7,255.2
856.5
3,650.7
3,604.5
3,806.2
3,136.8
(153.1)
520.8
(57.0)
524.7
4,173.9
3,604.5
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
Share capital
Reserves
Retained earnings
Total equity
Parent entity contingencies and commitments
Contingent liabilities of Incitec Pivot Limited are disclosed
in note 16.
Capital expenditure – commitments
Contracted but not yet provided for and payable:
2020
$mill
2019
$mill
Within one year
2.4
5.4
Tax consolidation
The Company and its wholly-owned Australian resident entities
have formed a tax consolidated group. As a result it is taxed
as a single entity. The head entity of the tax consolidated group
is Incitec Pivot Limited.
117
Incitec Pivot Limited Annual Report 2020FINANCIAL REPORT
Notes to the Consolidated Financial Statements: Other
For the year ended 30 September 2020
23. Auditor’s remuneration
Deloitte and related network firms
Audit or review of financial reports
Group
Subsidiaries and joint operations
Other assurance and agreed upon
procedures under other legislation
or contractual arrangements
Other services:
Tax compliance services
Other consulting services
Total remuneration
Non-Deloitte audit firms
Audit services
Other non-audit services
Total remuneration of non-Deloitte audit firms
2020
$000
2019
$000
1,183.1
1,203.0
550.8
639.0
1,733.9
1,842.0
40.0
156.0
10.3
-
10.3
231.1
101.4
332.5
1,784.2
2,330.5
28.4
26.8
55.2
24.7
36.1
60.8
From time to time, the auditors provide other services to the Group.
These services are subject to strict corporate governance procedures
which encompass the selection of service providers and the setting
of their remuneration. The 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.
24. Events subsequent to reporting date
In November 2020, the Board has determined, as an exception to
its dividend policy, not to pay a final dividend for FY20 in light of the
ongoing uncertainty due to COVID-19 and IPL’s equity raising in May
2020. IPL’s dividend policy, which is to pay between 30% – 60% of
NPAT, remains unchanged.
As announced on 10 November 2020, subject to market conditions,
IPL is intending to invite the holders of its outstanding notes
under the AMTN and EMTN Programmes to tender their notes for
repurchase by IPL for up to an aggregate amount of approximately
$200m. The repurchase of the notes forms part of the Group’s
strategy to optimise its debt portfolio between fixed rate capital
debt markets and floating rate bank debt markets.
The Group has and continues to actively manage the risks arising
from COVID-19 on the safety of our people and the business
continuity of our operations. The Group’s operations are in industries
that have been deemed essential by Governments and we are
continuing to run in line with the required safety and health
guidelines in our operations. The company has also implemented
a financial response plan that focuses on sustained cost savings
and improvement of free cash flow. The extent of the future impact
of COVID-19 on the Group’s operational and financial performance
will depend on certain developments, including the containment
strategies imposed by governments and duration of the COVID-19
Pandemic, and the subsequent impact of these strategies on the
operations of customers, employees and vendors.
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 results of those
operations, or the state of affairs of the Group in subsequent years,
which has not been covered in this report.
118
Incitec Pivot Limited Annual Report 2020FINANCIAL REPORT
Directors’ Declaration
on the Consolidated Financial Statements set out on pages 82 to 118
In accordance with a resolution of the directors of Incitec Pivot Limited (the Company), we state that:
1.
In the opinion of the directors:
(a) the consolidated financial statements and notes, set out on pages 82 to 118, 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 2020 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) the financial report also complies with International Financial Reporting Standards as disclosed on page 88; and
(c) there are reasonable grounds to believe the Company will be able to pay its debts as and when they become due and payable.
2.
There are reasonable grounds to believe that the Company and the controlled entities identified in note 15 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 Corporations (Wholly-owned Companies) Instrument 2016/785.
3.
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 2020.
Brian Kruger
Chairman
Jeanne Johns
Managing Director & CEO
Melbourne, 10 November 2020
Melbourne, 10 November 2020
119
Incitec Pivot Limited Annual Report 2020FINANCIAL REPORT
Deloitte Touche Tohmatsu
ABN 74 490 121 060
477 Colins Street
Melbourne VIC 3000
Phone: +61 3 9671 7000
www.deloitte.com.au
Independent Auditor’s Report to the members of
Incitec Pivot Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Incitec Pivot Limited (the “Company”) and its subsidiaries
(the “Group”), which comprises the consolidated statement of financial position as at 30 September
2020, the consolidated statement of profit or loss and other comprehensive income, the consolidated
statement of changes in equity and the consolidated statement of cash flows for the year then ended,
and notes to the financial statements, including a summary of significant accounting policies and
other explanatory information, and the directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations
Act 2001, including:
(i)
giving a true and fair view of the Group’s financial position as at 30 September 2020 and of
its financial performance for the year then ended; and
(ii)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional & Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (including Independence Standards) (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with
the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has
been given to the directors of the Company, would be in the same terms if given to the directors as
at the time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance
in our audit of the financial report for the current period. These matters were addressed in the context
of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
Liability limited by a scheme approved under Professional Standards Legislation
Member of Deloitte Asia Pacific and the Deloitte organisation
120
Incitec Pivot Limited Annual Report 2020INDEPENDENT AUDITOR’S REPORT
Key Audit Matter
How the scope of our audit responded to the
Key Audit Matter
Carrying value of goodwill and non-
current assets
Refer to Note 9 Property, plant and
equipment, Note 11 Intangibles and Note 12
Impairment of goodwill and non-current
assets
As at 30 September 2020, the Group held
goodwill of $2,638.1 million, intangible
assets of $381.6 million and property, plant
and equipment of $4,071.7 million, allocated
to its group of cash generating units (CGUs).
The assessment of the recoverable amount
is subject to a high level of judgement and is
based on management’s view of key
variables and market conditions. The Group
has prepared a value-in-use model to
determine the recoverable amount of each
CGU.
The Group’s Dyno Nobel Asia Pacific (‘DNAP’)
model is highly sensitive to changes in
terminal value assumptions,
including
natural gas prices, commodity prices,
terminal value growth rate and discount
rate.
Our procedures included, but were not limited to:
• Understanding
the relevant controls and
process that management has undertaken to
assess the recoverable amount
• In conjunction with our valuation specialists:
o Evaluating the appropriateness of the
model used by management to calculate
the value-in-use of the CGU
o Assessing and challenging the key inputs to
the DNAP terminal value by:
§ Corroborating the key independent
market based assumptions built into
the terminal value to external analysts’
reports, published
industry growth
rates and industry reports;
§ Corroborating the key non-market
based assumptions by comparing
Board approved forecasts to historical
performance to test the accuracy of
management’s projections; and
the
§ Comparing the discount rates applied
terminal value with an
to
independently developed rate
• Agreeing contracted volumes and pricing
assumptions in the model to the Board
approved forecasts
• Performing a range of sensitivity analysis on
the terminal value with other assumptions
including discount rates, natural gas prices,
commodity prices and foreign exchange rates
• Assessing
the
the
disclosures included in the Notes to the
financial statements.
appropriateness
of
121
Incitec Pivot Limited Annual Report 2020INDEPENDENT AUDITOR’S REPORT
Provisions for uncertain tax positions
Refer to Note 3 Taxation and Note 16
Provisions and contingencies
is
subject
jurisdictions and
The Group operates across a large number
of
to
investigations and audit activities by
revenue authorities on a range of tax
matters during the normal course of
business,
transfer pricing,
indirect taxes and transaction related tax
matters.
including
The outcomes of these investigations and
audits depend upon several factors and as
a result management exercise judgement
in the determination of the tax position and
the estimates and assumptions, including
the probability of potential outcomes, in
relation to the provision for taxes.
Our procedures included, but were not limited to:
• Understanding the relevant controls and process
that management has undertaken to identify and
assess uncertain tax positions, including the
monitoring and consideration of guidance issued
by regulatory authorities
• In conjunction with our tax specialists:
o Understanding the current status of tax
assessments and investigations and the
process to monitor developments in ongoing
investigations and tax audit activities;
o Assessing how the Group has accounted for
uncertain tax positions in accordance with
IFRIC 23 Uncertainty over income tax
treatments;
o Reviewing external tax and legal advice
where available;
o Challenging the probabilities management
has applied in determining the tax position
and the estimates and assumptions in
relation to the provision for taxes; and
recent
and
correspondence with local tax authorities, to
assess that the tax provisions have been
appropriately recorded or adjusted to reflect
the latest external developments.
o Reviewing
rulings
• Assessing the appropriateness of the disclosures
included in the Notes to the financial statements
Other Information
The directors are responsible for the other information. The other information comprises the
information included in the Group’s annual report for the year ended 30 September 2020, but does
not include the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If,
based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due
to fraud or error.
122
Incitec Pivot Limited Annual Report 2020INDEPENDENT AUDITOR’S REPORT
In preparing the financial report, the directors are responsible for assessing the ability of the Group
to continue as a going concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors either intend to liquidate the Group or to
cease operations, or has no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgement and maintain professional scepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the financial report, whether due
to fraud or error, design and perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk
of not detecting a material misstatement resulting from fraud is higher than for one resulting
from error, as
intentional omissions,
involve collusion,
fraud may
misrepresentations, or the override of internal control.
forgery,
• Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the Group’s internal control.
•
Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the directors.
• Conclude on the appropriateness of the director’s use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Group’s ability to
continue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report to the related disclosures in the financial
report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the Group to cease to continue as a going concern.
•
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and
events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Group to express an opinion on the financial report. We are
responsible for the direction, supervision and performance of the Group’s audit. We remain
solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing
of the audit and significant audit findings, including any significant deficiencies in internal control that
we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, actions
taken to eliminate threats or safeguards applied.
123
Incitec Pivot Limited Annual Report 2020INDEPENDENT AUDITOR’S REPORT
From the matters communicated with the directors, we determine those matters that were of most
significance in the audit of the financial report of the current period and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 60 to 79 of the Director’s Report for the
year ended 30 September 2020.
In our opinion, the Remuneration Report of the Incitec Pivot Limited, for the year ended 30
September 2020, complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
DELOITTE TOUCHE TOHMATSU
A T Richards
Partner
Chartered Accountants
Melbourne, 10 November 2020
Genevra Cavallo
Partner
Chartered Accountants
Melbourne, 10 November 2020
124
Incitec Pivot Limited Annual Report 2020INDEPENDENT AUDITOR’S REPORT
Incitec Pivot Limited Annual Report 2020
125
INDEPENDENT AUDITOR’S REPORT Our team has made
significant progress
on the delivery of
our strategic agenda
during 2020.
126
Incitec Pivot Limited Annual Report 2020 ADDITIONAL INFORMATION
127
Incitec Pivot Limited Annual Report 2020 Shareholder Information
As at 11 November 2020
Distribution of ordinary shareholder and shareholdings
Size of holding
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Number of holders
10,162
20,605
6,688
Percentage
of holders
23.02%
46.68%
15.15%
Number
of shares
4,721,971
60,812,302
49,160,608
6,532
153
44,140
14.80%
0.35%
142,213,850
1,686,505,521
100.00%
1,943,414,252
Percentage
of shares
0.24%
3.13%
2.53%
7.32%
86.78%
100.00%
Included in the above total are 3087 shareholders holding less than a marketable parcel of shares.
The holdings of the 20 largest holders of fully paid ordinary shares represent 85.26% of that class of shares.
Twenty largest ordinary fully paid shareholders
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Pty Limited
Citicorp Nominees Pty Limited
National Nominees Limited
BNP Paribas Nominees Pty Ltd
BNP Paribas Noms Pty Ltd
Citicorp Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited
HSBC Custody Nominees (Australia) Limited - A/C 2
AMP Life Limited
BNP Paribas Noms (NZ) Ltd
HSBC Custody Nominees (Australia) Limited
UBS Nominees Pty Ltd
Sandhurst Trustees Ltd
Netwealth Investments Limited
Pershing Australia Nominees Pty Ltd
Woodross Nominees Pty Ltd
Gwynvill Trading Pty Ltd
National Nominees Limited
BNP Paribas Nominees Pty Ltd HUB24 Custodial Serv Ltd
Total
Substantial shareholders
Number
of shares
768,520,379
408,721,189
182,487,136
154,162,052
46,201,261
40,837,895
19,823,694
7,280,213
6,209,631
4,596,072
3,812,438
2,956,153
2,936,216
1,723,300
1,548,106
1,002,396
902,597
783,000
714,386
703,578
Percentage of
issued capital
39.57%
21.04%
9.40%
7.94%
2.38%
2.10%
1.02%
0.37%
0.32%
0.24%
0.20%
0.15%
0.15%
0.09%
0.08%
0.05%
0.05%
0.04%
0.04%
0.04%
1,655,921,692
85.26%
The number of shares to which each substantial holder and the substantial holders’ associates have a relevant interest, as disclosed
in substantial holding notices given to IPL under the Corporations Act, are as follows:
Name
Harris Associates L.P.
Schroder Investment Management Australia Limited
Perpetual Limited
Allan Gray Australia Pty Ltd
The Vanguard Group, Inc.
Date Notice
Received
20 April 2020
21 April 2020
19 May 2020
25 May 2020
9 July 2018
Votes/Number
of shares
153,545,019
132,401,072
155,158,981
95,945,001
83,268,074
Percentage of
issued capital
9.52%
8.21%
8.11%
5.01%
5.013%
Voting Rights for Ordinary Shares
Votes of shareholders are governed by the Company’s Constitution. In broad summary, but without prejudice to the provisions of these rules,
the Constitution provides for votes to be cast:
(a) on a show of hands, one vote for each shareholder; and
(b) on a poll, one vote for each fully paid share.
Unquoted Equity Securities
As at 11 November 2020, there were 5,133,319 of rights on issue, comprising of:
» 5,082,644 performance rights with 12 holders were on issue pursuant to Incitec Pivot employee incentive plans; and
» 50,675 share rights with 3 holders were on issue pursuant to Non-executive Director minimum shareholding plan.
Performance rights and share rights do not carry any voting rights.
On-market share purchases
During the 2020 financial year, 395,000 ordinary shares were purchased on-market at an average price of $3.2793 per share for the purposes
of awards under IPL employee incentive plans and the Non-executive Director minimum shareholding plan.
128
Incitec Pivot Limited Annual Report 2020ADDITIONAL INFORMATION Five Year Financial Statistics
Incitec Pivot Limited and its controlled entities
2020
$mill
2019
$mill
2018
$mill
2017
$mill
2016
$mill
Sales
3,942.2
3,918.2
3,856.3
3,473.4
3,353.7
Earnings before depreciation, amortisation, net borrowing costs, individually
material items (IMIs) and tax
Depreciation and amortisation (excluding IMI's)
Earnings before net borrowing costs, IMIs and tax (EBIT)
Net borrowing costs (excluding IMIs)
IMIs before tax
Taxation (expense) / benefit
Operating profit after tax and IMIs
Operating profit/(loss) after tax and IMIs attributable to non-controlling interest
Operating profit after tax and IMIs attributable to shareholders of Incitec Pivot Limited
IMIs after tax
Operating profit after tax before IMIs (net of tax)
Dividends paid
Current assets
Property, plant and equipment
Equity accounted investments
Intangible assets
Other non-current assets
Total assets
Current borrowings, payables and other liabilities
Current provisions
730.5
(356.0)
374.5
(135.7)
(87.9)
(27.5)
123.4
–
123.4
(64.8)
188.2
54.6
1,529.9
4,071.7
326.3
605.3
(301.6)
303.7
(144.1)
–
(7.5)
152.1
(0.3)
152.4
–
152.4
121.7
851.0
(294.3)
556.7
(128.0)
(236.0)
18.1
210.8
2.9
207.9
(139.5)
347.4
157.4
774.5
(273.3)
501.2
(108.7)
–
(70.9)
321.6
2.9
318.7
–
318.7
153.5
672.6
(244.5)
428.1
(50.2)
(241.3)
(7.2)
129.4
1.3
128.1
(167.1)
295.2
194.0
1,550.8
1,471.5
1,453.0
1,141.9
4,190.0
4,004.3
3,854.8
3,892.7
357.7
336.1
316.9
318.0
3,019.7
3,179.5
3,046.6
3,121.0
3,182.5
343.4
101.5
95.5
76.0
143.9
9,291.0
9,379.5
8,954.0
8,821.7
8,679.0
1,227.2
2,418.0
1,331.8
1,087.0
102.3
86.1
75.6
78.0
955.8
114.4
Non-current borrowings, payables and other liabilities
2,632.7
2,071.1
2,698.4
2,802.5
2,944.4
Non-current provisions
Total liabilities
Net assets
Shareholders’ equity
Equity attributable to non-controlling interest
Total shareholders’ equity
125.5
116.5
104.0
95.1
88.1
4,087.7
4,691.7
4,209.8
4,062.6
4,102.7
5,203.3
4,687.8
4,744.2
4,759.1
4,576.3
5,203.3
4,687.8
4,737.7
4,753.1
4,572.0
–
–
6.5
6.0
4.3
5,203.3
4,687.8
4,744.2
4,759.1
4,576.3
Ordinary Shares
thousands
1,942,225
1,605,784
1,630,214
1,687,171
1,687,171
Number of shares on issue at year end
thousands
1,942,225
1,605,784 1,630,214 1,687,171 1,687,171
Weighted average number of shares on issue (investor and ordinary)
thousands
1,734,435
1,610,122
1,664,617
1,687,171
1,686,971
Earnings per share
before IMIs
including IMIs
Dividends (declared)
Dividends (paid)
Dividend franking
Share price range
Stockmarket capitalisation at year end
Net tangible assets per share
Net Debt/EBITDA
Interest Cover
Net capital expenditure on plant and equipment (cash flow)
Net capital expenditure on acquisitions (cash flow)
Return on average shareholders funds
before IMIs
including IMIs
cents
cents
cents
cents
%
High
Low
Year end
10.9
7.1
–
3.4
–
$3.63
$1.67
$2.03
9.5
9.5
4.7
7.5
22
$4.24
$3.05
$3.39
20.9
12.5
10.7
9.4
12
$4.03
$3.34
$3.98
18.9
18.9
9.4
9.1
–
$3.89
$2.78
$3.60
17.5
7.6
8.7
11.5
47
$4.07
$2.67
$2.82
$mill
3,942.7
5,443.6
6,488.3
6,073.8
4,757.8
$
1.12
0.94
1.04
0.97
0.83
times
times
$mill
$mill
%
%
1.4
6.1
271.0
23.4
3.8
2.5
2.8
4.6
337.3
5.3
3.2
3.2
1.6
7.3
319.1
5.8
7.3
4.4
1.7
7.9
279.9
2.5
6.8
6.8
2.1
7.9
434.3
–
6.4
2.8
129
Incitec Pivot Limited Annual Report 2020ADDITIONAL INFORMATION
Glossary
Our Company
Board
DNA
DNAP
IPF
Board of directors of Incitec Pivot Limited
Dyno Nobel Americas
Dyno Nobel Asia Pacific
Incitec Pivot Fertilisers
IPL or the Company
Incitec Pivot Limited
The Group, We, Us or Our
Incitec Pivot Limited and its subsidiaries
Financial and Remuneration
AASB
DRP
EBIT
EBITDA
EPS
FAR
KMP
LTI
NPAT
ROE
ROIC
STI
TSR
Other
ASIC
ASX
Australian Accounting Standards Board
Dividend Reinvestment Plan
Earnings before interest and tax
Earnings before interest, tax, depreciation and amortisation
Earnings per share
Fixed annual remuneration
Key Management Personnel
Long term incentive
Net profit after tax for the financial year
Return on equity
Return on invested capital
Short term incentive
Total Shareholder Return
Australian Securities and Investments Commission
Australian Securities Exchange
Corporations Act
Corporations Act 2001 (Cth)
GHG
LTIFR
TRIFR
tCO2e
Greenhouse gas
Lost Time Injury Frequency Rate
Total Recordable Injury Frequency Rate
Metric tonnes of carbon dioxide equivalent
130
Incitec Pivot Limited Annual Report 2020ADDITIONAL INFORMATION Corporate Directory
Registered Office
Incitec Pivot Limited
Level 8, 28 Freshwater Place,
Southbank Victoria 3006,
Australia
Telephone: +61 3 8695 4400
Facsimile: +61 3 8695 4419
www.incitecpivot.com.au
Company Secretary: Richa Puri
Auditor
Deloitte Touche Tohmatsu
477 Collins Street,
Melbourne Victoria 3000,
Australia
Securities Exchange Listing
Incitec Pivot Limited shares are listed on the
Australian Securities Exchange (ASX: IPL).
Notes issued under Incitec Pivot’s
US$1,500,000,000 Euro Medium Term
Note Programme are listed on the
Singapore Stock Exchange.
Incitec Pivot Limited ordinary shares are
traded in the US in the form of American
Depository Receipts (ADR) issued by the
Bank of New York Mellon as Depositary.
Share Registry and Other Enquiries
If you have any enquiries in relation to your
shareholding, share transfers or dividends,
please contact our share registry:
Link Market Services Limited
Locked Bag A14,
Sydney South
New South Wales 1235,
Australia
Telephone: +61 1300 303 780
General Facsimile: +61 2 9287 0303
Proxy Facsimile: +61 2 9287 0309
Email: registrars@linkmarketservices.com.au
Website: www.linkmarketservices.com.au
For enquiries about American Depositary Receipts:
Computershare Investor Services
150 Royall Street
Canton, MA 02021
United States of America
Telephone: 1-888-269-2377
International: +1-201-680-6825
Email: shrrelations@cpushareownerservices.com
Website: www-us.computershare.com/investor
ADDITIONAL INFORMATION
For enquiries about the operations of the Company,
please contact our Investor Relations team:
Incitec Pivot Limited
Level 8, 28 Freshwater Place,
Southbank Victoria 3006,
Australia
Email: investor.relations@incitecpivot.com.au
Website: www.incitecpivot.com.au
Electronic Communications
The Company has an online share registry facility,
where shareholders can:
»
check their current and previous holding balances;
» update their address details;
» update their bank details;
»
»
review their transaction and dividend history;
confirm whether they have lodged a TFN/ABN exemption;
» elect to receive electronic communciations and
Company information eletroncially and change
their Annual Report election;
» download commonly used forms; and
»
subscribe to email announcements.
The online share registry can be accessed at https://investors.
incitecpivot.com.au/shareholder-information/shareholder-services.
For security reasons, shareholders will be required to verify their
identity before being able to access their records.
Annual General Meeting
Incitec Pivot Limited’s 2020 Annual General Meeting
will be held virtually on Friday, 18 December 2020
at 11.00am (AEDT).
Incitec Pivot Limited Annual Report 2020
131
ABN: 42 004 080 264
Level 8, 28 Freshwater Place
Southbank Victoria 3006, Australia
This publication is printed on ecoStar+, a carbon neutral environmentally
responsible paper, manufactured from 100% post-consumer waste,
chlorine free environment using the ISO14001 environmental
management system.
The fibre source is certified by the Forestry Stewardship Council.
132
Incitec Pivot Limited Annual Report 2020