ANNUAL
REPORT
2021
MAIN
MENU
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
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CONTENTS
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130
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ABOUT US
Our Operations
Who We Are
IPL Strategy Snapshot
PERFORMANCE & OUTLOOK
Year in Review
Chairman’s Report
Managing Director & CEO’s Report
Operating & Financial Review
BEING A SUSTAINABLE BUSINESS
Zero Harm: Our Number One Priority
Our People
Sustainability Overview
Our Climate Change Strategy
Caring for Our Communities
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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3
Incitec Pivot Limited Annual Report 2021 S
U
T
U
O
B
A
4
IPL has
iconic brands,
leading technology
solutions &
great customers
Incitec Pivot Limited Annual Report 2021
Donna Willis, an Indigenous artist of the Yindjibarndi
tribe from Roebourne, Western Australia, with her
artwork ‘Grandfather’s Country’ on our Dyno Nobel
mobile processing unit (MPU).
5
Incitec Pivot Limited Annual Report 2021 OUR OPERATIONS
Ankara
Soma
i e
Kayseri
TURKEY
CHINA
Hong Kong
SOUTH
AFRICA
Sibolga
Tanjung Tabalong
Jakarta
Batu Kajang
Port Hedland
Mt Isa
Phosphate Hill
e
e
e
i
i
Johannesburg (SASOL Dyno Nobel)
Johannesburg (DetNet)
Kalgoorlie
e
Perth a
Port Lincoln
Port Adelaide
Portland
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
Rainy River
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
North Bay
Maitland
Boisbriand
Ormstown
Simsbury
Donora
Duffield
Van Wyck
Brooksville
Graham
Wolf Lake
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
CHILE
La Serena
i
e
Santiago
2003
Listed on ASX
Over 5000
Employees
60
Manufacturing
facilities
6
Incitec Pivot Limited Annual Report 2021
Ankara
Soma
i e
Kayseri
TURKEY
CHINA
Hong Kong
e
e
e
Muara Tuhup
Tenggarong
Berau
PAPUA NEW GUINEA
e
Lihir
SOUTH
AFRICA
i
i
Johannesburg (SASOL Dyno Nobel)
Johannesburg (DetNet)
Sibolga
Tanjung Tabalong
Jakarta
Batu Kajang
e
e
Port Hedland
e
Mt Isa
Phosphate Hill
Kalgoorlie
e
Perth a
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
Ekati
Diavik
Flin Flon
Tumbler Ridge
Calgary
Rainy River
Biwabik
St Helens
Barry
Salt Lake City
Lincoln
Cheyenne
Carthage
Louisiana, Missouri
Waggaman, Louisiana
Dinamita
Gomez Palacios
Guadalajara
e
e
e
e
a
i
e
i
a
i
e
a
e
CANADA
USA
MEXICO
Mary River
e
Meadowbank
e
e
a
e
i
a
e
e
e
i
i
North Bay
Maitland
Boisbriand
Ormstown
Simsbury
Donora
Duffield
Van Wyck
Brooksville
Graham
Wolf Lake
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
CHILE
La Serena
i
Santiago
e
Zero Harm
Our number 1
priority
World class
technology
A$4.3 Billion
revenue
7
Incitec Pivot Limited Annual Report 2021
WHO WE ARE
IPL is a leading supplier to the resources and agricultural sectors. With a team of 5000 plus
dedicated employees, we have a strong safety culture that we’re committed to building on.
With iconic brands, leading technology solutions and great customers, we operate in the
resilient markets of agriculture, mining and quarry and construction. And of course, we are
committed to a greener, more sustainable world.
We’re proud that so many of the significant
breakthroughs in explosives technology
history are connected to our business.
And to this day, we remain dedicated to
advanced technology through practical
innovation.
Dyno Nobel is IPL’s leading international explosives and blasting
services business and one of the largest industrial explosives
distributors in North America and Australia. Blasting is an essential
step in extracting the minerals required to meet the world’s
demand for power, infrastructure and consumer goods. Construction,
mines, quarries and seismic explorers use Dyno Nobel products to
achieve safety goals and improve operational efficiency.
We’re proud to provide a full range of reliable explosives products
from manufacturing plants around the world and extensive blasting
services. In fact, we boast some of the most highly trained blasters
and technical experts in the industry, and operate in Australia,
Canada, the United States, Indonesia, Mexico, Chile, Papua
New Guinea and Turkey. Our research & development focuses
on practical ways to use new technologies to benefit our customers
and include EZShot®, DigiShot®Plus.4G, DIFFERENTIAL ENERGY®
and CyberDet I®.
An ASX100 listed company, we are an international business with
world-scale explosives and fertiliser manufacturing, marketing and
servicing operations. IPL has two customer facing businesses, Dyno
Nobel based in the Americas and Asia Pacific and Incitec Pivot
Fertilisers, Australia’s largest integrated supplier of fertilisers. We
are proud to be considered a trusted partner by customers
and suppliers.
Our explosives and fertiliser products are used to unlock resources
ranging from gold, iron ore and quarry and construction materials
to barley, wheat and cotton. Those resources contribute to new
technologies to build electric vehicles, wind turbines and critical
infrastructure and play an important role in enabling sustainable
food production to meet the rapidly rising demand for food around
the world.
The challenge for us at IPL is to continue
to help unlock the world’s natural resources
while reducing our environmental footprint
and working towards a long-term Net Zero
future.
With 60 manufacturing facilities and joint ventures across six
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 major manufacturing sites across Australia and the US,
with key sites in Cheyenne (Wyoming, USA), Louisiana (Missouri,
USA), Waggaman (Louisiana, USA), Moranbah (QLD, Australia) and
Phosphate Hill (Qld, Australia) – see page 20 for further detail.
IPL leverages its nitrogen manufacturing expertise with a
global approach to standards and processes, complemented
and enhanced by regional oversight and operational discipline.
8
Incitec Pivot Limited Annual Report 2021 So look forward, but remember, glance
down, for the soil beneath your feet is your
future. Nurture it. Protect it. And seek out
others who understand it.
Incitec Pivot Fertilisers is transitioning from Australia’s leading
fertiliser manufacturer and distributor to the nation’s leading soil
health business. Our people, products and services support farming
communities and contribute to our growers’ production, which in
turn helps feed millions around the globe. Resilient, diverse and
proud, we are driven by science, innovation and maximising soil
potential.
With a dedicated network of suppliers and agents across the
east coast of Australia, as well as our NATA-accredited Nutrient
Advantage Laboratory, IPF supports farmers with the crop nutrition
insights and products they need to maximise yield potential in an
efficient way. Further afield, we sell to major offshore agricultural
markets in Asia Pacific, the Indian subcontinent, Brazil and the
United States. Some of our leading brands include Granulock®,
SuPerfect® and our patented de-nitrification inhibitor eNpower®.
Steeped in history but forward looking. IPL – through its business
Dyno Nobel – can be traced right back to Englishman William
Bickford, who invented the safety fuse for explosives in 1831.
Dyno Nobel founder Alfred Nobel would change the world with his
invention of dynamite and detonators in 1865. To this day, we have
an extensive Intellectual Property (IP) portfolio with many valuable
patents. In recent times some of our biggest advancements include
bulk products like DIFFERENTIAL ENERGY® and initiation systems
such as DigiShot®Plus.4G.
Our fertiliser history goes back to 1919 with the formation of the
Phosphate Co-operative Company of Australia Limited. Many years
later Pivot Limited and Incitec Fertilisers would merge (2003) to
create IPL and three years later the Company’s fertiliser production
capacity more than doubled with the purchase of Southern Cross
Fertilisers. Incitec Pivot Fertilisers now boasts Australia’s oldest soil
testing service and back in 2013 celebrated 50 years of providing
continuous nutritional analytical services for farmers.
With a rich technology heritage, IPL’s key technology drivers today
are to improve safety, productivity & efficiency, and sustainability.
And we continue to invest in the development of new technologies
and our service offering.
Today we’re also excited by the opportunities presented by
renewable hydrogen for our business and our customers.
We have partnered with global green energy company, Fortescue
Future Industries (FFI) on a feasibility study into industrial-scale
production of green ammonia at the company’s existing Gibson
Island fertiliser manufacturing facility. We are also partnering
with Keppel Infrastructure and Temasek to investigate green
ammonia production at Newcastle and Gladstone in Australia.
9
Incitec Pivot Limited Annual Report 2021 10
Incitec Pivot Limited Annual Report 2021 IPL STRATEGY SNAPSHOT
With our newly refreshed purpose and ambition at the heart of our IPL
strategy, we strive to be a safe, efficient and industry leading company.
And of course, bringing our strategy to life, counts on our people living
our values every day, in every way.
This means we want to be industry leader by our safety performance.
Nothing matters more than ensuring people get home safely every day.
We go further by actively shaping the safety performance of the industries
in which we operate. Efficient is having a sound operating model that
is simple and enables our people to be their very best and deliver on
our strategy. We want the most talented workforce, proud to call us
their employer.
IPL’s Net Zero Pathway has now been developed and includes a Net Zero
by 2050 ambition with short and medium term targets. Supporting these
targets is a pipeline of decarbonisation initiatives to materially reduce GHG
emissions from our major manufacturing facilities. We’re also working
to leverage our leading technology and manufacturing excellence in
collaborative and innovative ways to produce sustainable products with
lower emissions for our customers.
Our strategic objectives are underpinned by six strategic drivers and
these direct our focus, effort and resources. The activities – necessary
to deliver our strategy – are expressed as yearly milestones.
The key to our future growth is a strategy that builds on IPL’s technology
strengths – we have that strategy in place – and we will deliver it for
all our stakeholders. Future growth will come by selling that value and
leveraging our expertise into our existing and new markets.
IPL IS A LEADING SUPPLIER TO THE RESOURCES AND AGRICULTURAL SECTORS,
COMMITTED TO A GREENER, MORE SUSTAINABLE WORLD.
PURPOSE
Unlocking the Potential in the Earth to Help People Grow.
AMBITION
IPL will be a safe, efficient and industry leading company.
VALUES
Zero Harm
for Everyone
Everywhere
Think Customer.
Everyone.
Every day.
Treat the
Business as
our Own
Value people
– Respect,
Recognise &
Reward
Care for the
Community
& our
Environment
Challenge &
Improve the
Status Quo
Deliver on
our Promises
STRATEGIC DRIVERS
Zero Harm
Zero Harm is
good business.
It’s achieved
through
industry leading
performance in
occupational health,
personal safety,
process safety and
the environment.
Talented &
Engaged People
Customer
Focus
The right people
with the right
skills, in the right
roles working
collaboratively. This
enables us to gather
and capture diverse
ideas across our
organisation.
Deepening
our customer
relationships
and strategic
partnerships across
our businesses
ensures we can
innovate and
share technologies
and solutions
that improve
our customers’
businesses.
Leading
Technology
Solutions
Improve
safety, reduce
environmental
impacts and
create a positive
social impact,
whilst increasing
productivity and
efficiency in
our customers’
operations.
Manufacturing
Excellence
Profitable
Growth
Be a world class
manufacturing
organisation,
delivering personal
and business
growth. Achieved
through Zero Harm,
reliable operations
and being cost
competitive.
Focussed on growth
opportunities that
are distinctive to
our differentiated
technology, core
markets, core
capabilities and
advantaged market
segments.
11
Incitec Pivot Limited Annual Report 2021 K
O
O
L
T
U
O
&
E
C
N
A
M
R
O
F
R
E
P
12
IPL delivered
a strong
performance with
good momentum
for FY22
Incitec Pivot Limited Annual Report 2021
13
Incitec Pivot Limited Annual Report 2021 YEAR IN REVIEW
COVID-19 response
Continued focus on keeping our people and customers safe and supported. We refreshed COVID-19 safe plans, actively
encouraged vaccination and maintained robust supply chains.
SafeTEAMS
Company-wide refreshed safety training program launched, with expanded focus on creating a safe culture,
nurturing psychological safety and ‘safe ground’.
People strategy
New global strategy to build our next generation of leaders and continue our focus on talent development.
R U OK Day?
Month long campaign across global business to focus on our people’s mental health and wellbeing.
Innovate Reconciliation Action Plan
2021-2023 Innovate Reconciliation Action Plan published, setting out the actions we will take to recognise, respect
and embrace Aboriginal and Torres Strait Islander histories and cultures. We also updated our Refusal to Work Policy
to explicitly include any instance where an employee believes an unacceptable risk is presented to Indigenous
cultural heritage.
Climate Change Report published
Published IPL’s Net Zero Pathway with refreshed GHG reduction targets as part of our first stand-alone (TCFD aligned)
Climate Change report.
Wireless technology first
Completed first ever underground wireless detonator blast in Western Australia, using Dyno Nobel’s ground-breaking
CyberDet I®.
Diversification into base & precious metals and quarry & construction
The Explosives business continues to successfully diversify into quality markets with premium technology,
offsetting coal declines.
Smart Fertilisers Hub
Partnered with The University of Melbourne to develop a new class of more sustainable ‘smart fertilisers’
as part of Australian Research Council Hub.
Feasibility Studies into industrial-scale production of green ammonia
We formed two significant partnerships – with Fortescue Future Industries and two of Singapore’s leading companies
– Keppel Infrastructure & Temasek – to investigate the commercial feasibility of manufacturing green ammonia from
renewable hydrogen.
NH3
14
Incitec Pivot Limited Annual Report 2021 15
Incitec Pivot Limited Annual Report 2021 CHAIRMAN’S REPORT
As our business successfully navigated another year of the global pandemic, we produced a strong
overall performance and advanced our strategic agenda.
Crucially, this has included a significant emphasis on sustainability, reflecting the growing focus in
this area by our shareholders and other key stakeholders. We have embedded our sustainability
agenda into our strategy and established our pathway to Net Zero.
Our business proved resilient during 2021, with our core focus
on the safety of our people, customers and communities.
We reported a 51% increase in Earnings Before Interest and Tax
(EBIT) excluding individually material items (IMIs) to A$566m.
Our Net Profit after Tax (excluding IMIs) of A$359m, is up 91%
compared to FY20, as the business benefited from a significant
improvement in commodity pricing during the year.
Our Dyno Nobel explosives business has shown resilience with
the reduction in EBIT from A$380m last year to A$330m in FY21,
largely reflecting the heavy manufacturing turnaround schedule and
challenges we experienced with the restart of our Waggaman plant
in the US. Pleasingly our premium technology offering is continuing
to gain traction with our customers.
We have been saying for some time that our Fertilisers business is
well placed for improved commodity pricing and a strong agricultural
season, and this really came to life in FY21. EBIT in our Fertilisers
business increased from A$26m last year to A$268m in FY21.
Consistent with our priority to reduce our net debt and maintain an
investment grade credit profile, our Net Debt/EBITDA ratio reduced
from 1.4x to 1.1x at year end.
With the improved earnings performance,
strong cash generation and balance sheet
strength, the Board is pleased to announce a
final dividend of 8.3 cents per share, taking
our total dividend to 9.3 cents per share.
We continue to focus on improving our return on invested capital
(ROIC), which increased to 5.8% this year. The business is prioritising
capital light, high return investment opportunities.
We reluctantly decided to cease manufacturing at our Gibson Island
facility, after being unable to secure an affordable long-term gas
supply. Looking to the future, we’re excited about the potential to
transition the facility to green ammonia production, which we’re
investigating in partnership with Fortescue Future Industries.
Sustainability and climate change have
been a significant area of focus for the
Board and management team.
Over the past 12 months we have had many meetings with
stakeholders, taking into account their views and input. We are
responding by accelerating our efforts in exploring opportunities
to help create a greener, more sustainable world.
Our first Climate Change Report aligned to TCFD guidelines sets out
our long-term ambition to achieve Net Zero emissions by 2050,
or sooner if practicable. Our short term 5% by 2025, and medium
term 25% by 2030 absolute GHG reduction targets (against a
2020 baseline) demonstrate our commitment to decarbonising
our manufacturing assets. This will ensure a just transition that
continues to provide employment opportunities to the communities
in which we operate.
Our climate change management strategy includes a critical focus
on leveraging our leading technology and manufacturing expertise
to produce sustainable products with lower emissions for our
customers.
The Board will continue to focus on ensuring we have an
appropriate capital structure to support the opportunities ahead for
the business, as well as delivering strong returns for shareholders.
As we continue to unlock the world’s natural resources, our strategic
decisions will be guided by the need to meet our targets and
deliver shareholder returns.
16
Incitec Pivot Limited Annual Report 2021 Alongside this, we will continue to listen and respond to the
valuable input of our stakeholders, including in relation to the ‘Say
on Climate’ initiative, and we intend to put our climate-related
disclosures to an advisory vote at our 2022 Annual General Meeting.
This will support our continued transparency regarding IPL’s
contribution to a lower-carbon future.
The strong progress we have made across
our strategic agenda positions us well
for the future.
This has given us a great opportunity to gain more insights into
the business, our people and our customers.
I would like to thank my fellow Board members for their
contribution throughout the year, during which we welcomed
Tonianne Dwyer as a Non-executive Director. Appointed in May,
Tonianne has been a valuable addition, bringing to the Board
extensive international experience as a company director and
executive working in corporate finance, corporate strategy and
mergers and acquisitions.
Once again, our people have risen to the many challenges of
COVID-19 and been outstanding in their response.
Our people’s commitment to live our
number one value, zero harm, kept
everyone safe as we continued to
operate and service our customers.
I want to thank all our people for their incredible hard work and
dedication to our great company.
I also want to sincerely thank our Managing Director & CEO Jeanne
Johns and the Executive Team for their impressive leadership.
Brian Kruger
Chairman
In our Explosives business, our world-class blasting technology
DeltaE continues to help our customers reduce their carbon footprint
and this year we established a customer partnership to quantify the
GHG reductions associated with the use of this technology.
Our Fertilisers business is well positioned to benefit from favourable
commodity prices and conditions as it grows to a sustainable soil
health company. Our farming customers are benefiting from our soil
health services and Precision Agriculture which lead to improved
efficiency and effectiveness of fertiliser application.
We see a lot of potential upside in our business from a step change
in our manufacturing reliability following the heavy turnaround
schedule that will be completed this year, as well as the pull
through into our earnings from the continued growth of our
premium technology in our explosives and fertilisers businesses.
We are continuing to progress our commitment to increase the
diversity of our workforce.
Gender diversity remains above industry averages within our major
regions and there have been increases in female representation
at the Board and Executive levels and a talent pipeline build in
Management and Professional roles. Diversity, equity and inclusion
will be a core priority for the Board and the Executive Team in FY22.
Across our global operations, all of us have had to adapt to
the challenges of COVID-19 during 2021. For the Board this has
unfortunately meant fewer opportunities to visit our people on
the ground. While we will certainly make up for this when we
can, we have continued to embrace technology to connect,
including virtual site tours.
17
Incitec Pivot Limited Annual Report 2021 MANAGING DIRECTOR
& CEO’S REPORT
Throughout 2021, safely manufacturing products that are vital to build cities and grow food, has
never been more important.
As the world continues to navigate the challenges of COVID-19, our strict protocols and resilient
supply chains have enabled us to continue to safely operate and provide our resources and
agricultural customers with the high-quality products, solutions and support they need for their
businesses. At the same time, we have delivered strong financial results and continued to progress
our strategy.
While safety is our number one priority, the increased complexity
and fatigue associated with COVID-19, coupled with improved
reporting discipline at our sites, has negatively impacted our key
safety metrics. We have responded by increasing our focus on safety
improvements including targeted, site specific safety programs.
I’m proud of our strong safety culture
which is embedded in our refreshed
company-wide safety training program,
SafeTEAMS.
Maintaining our business continuity and supporting our people
has been a key focus during 2021 as they continue to manage
the implications of COVID-19 across their work and personal lives.
We have increased our global and localised wellbeing programs,
rolled out vaccination support initiatives and invested in our
Employee Assistance Program to provide ongoing support to
our people and their families.
Progressing our sustainability agenda and embedding sustainability
in our strategy and operations has also been a significant area of
focus and we were pleased to welcome Sunil Salhotra during the
year as our new Chief Strategy and Sustainability Officer.
During the year we released our first
stand-alone Climate Change Report which
sets out our long-term ambition to achieve
Net Zero by 2050 or sooner if practicable.
We have accelerated our short term greenhouse gas reduction
target announced last year and committed to a medium term
25% absolute reduction in greenhouse gas emissions by 2030,
against a 2020 baseline.
18
Investigation of alternative hydrogen feedstocks for nitrogen-based
products is part of our Net Zero pathway and we are partnering with
Fortescue Future Industries (FFI) on a feasibility study at our Gibson
Island fertiliser manufacturing facility.
Considered one of Australia’s best near-term opportunities to
produce green ammonia at an industrial scale, the recently
announced partnership aligns with our vision to provide domestic
and international customers with sustainable, low emissions
products. It also provides the potential to transition Gibson Island
to a renewable manufacturing future, following our recent decision
to cease ammonia manufacturing because we have been unable
to secure long term, affordable gas supply.
Across our manufacturing portfolio, we will be focused on
performance and executing our manufacturing excellence strategy
across our high-quality plants.
We are pleased to report that we delivered
a strong financial performance in FY21.
Earnings Before Interest and Tax (excluding individually material
items) increased by 51% from last year to A$566m, reflecting a
solid performance from our Explosives business and a dramatic
improvement in our Fertilisers business.
Our Dyno Nobel explosives business serves two highly attractive
mining markets in the Americas and Australia.
For our Dyno Nobel Americas business, EBIT was down 9% to
US$141m, largely due to planned and unplanned outages at
our Waggaman manufacturing facility. Our explosives business
performed well, especially in the second half with earnings up
27% on second half last year, as our leading technology continues
to underpin growth in the Base & Precious Metals markets.
As the world responds to climate change, we continue to manage
our exposure to coal, with the attractive base and precious metals
and quarry and construction sectors now representing more than
80% of our business in the Americas.
Incitec Pivot Limited Annual Report 2021 Our Dyno Nobel Asia Pacific business performed well, with strong
growth from premium technology for the first time outpacing the
last impacts of our recontracting cycle. EBIT was down A$9m to
A$140m as the business absorbed the A$15m impact from the
planned turnaround at Moranbah in the second half.
Technology will continue to drive future growth in our Explosives
business as our customers look to improve productivity
and safety while reducing their environmental footprint.
We continue to see strong demand for DeltaE and our premium
emulsions, and we are also starting to see the benefits of our
technology development work over the last couple of years with
new products being used in the field. In June, we completed the
first ever underground wireless detonator blast in Western Australia,
using our new wireless offering, Dyno Nobel’s ground-breaking
CyberDet I™.
Our Fertilisers business delivered EBIT of A$268m in FY21, a
significant increase from A$26m last year. The business benefited
from an upswing in commodity prices which has supported farmer
profitability, in turn driving demand across all agricultural inputs.
We expect strong fertiliser volumes to continue due to favourable
conditions across key agricultural markets on the east coast of
Australia.
As part of our strategy to transform our Fertilisers business into a
soil health company, we continue to invest in Precision Agriculture
and this year launched a new soil health testing package to farmers
to improve the health and productivity of their soil.
Four manufacturing turnarounds were completed across our
operations in FY21. This included our first ever turnaround at our
Waggaman plant. While we encountered more challenges than
anticipated upon restart, Waggaman has since performed strongly
and is well positioned to capture the ongoing commodity upcycle.
In FY22, we have two turnarounds planned which will complete
the current cycle and establish a platform for sustained reliable
manufacturing performance.
In July, we transitioned to a regional manufacturing structure
which provides the regions greater accountability and oversight
and ensures operational resources are available locally to deliver
technical support. As part of the transition, President – Global
Manufacturing & HSE Tim Wall left the company and I’d like to
sincerely thank Tim for his considerable contribution to IPL.
Our strategy is progressing well.
Our premium technology continues to enable us to grow high
quality revenue in attractive explosives sectors and markets, and
we are ahead of our target to deliver technology driven earnings
growth of 10% by FY22. Our manufacturing excellence strategy
is well progressed with our new regional structure now in place,
our response plan has been completed ahead of schedule and
our investment in precision agriculture is gaining traction in our
Fertilisers business.
I would like to take this opportunity to thank our Chief Financial
Officer Nick Stratford who leaves us at the end of the year. Nick has
made significant contributions to the business over his 12 years with
the company and we wish him all the best in his future endeavours.
It is our people who make our company
great, and I want to thank all our people
across our global operations for their
incredible hard work over the past year.
I have admired how our people have overcome the challenges
of COVID-19 and provided impressive service and support to
our customers.
Finally, I want to thank Brian Kruger and the Board for their
leadership, support and wise counsel over the past 12 months.
Looking ahead, your company is in a strong position as we enter
FY22 with our Explosives and Fertilisers businesses well positioned
to benefit from the continued execution of our strategy, as well as
continued strength in commodity pricing.
We have strong momentum and the right strategy to take full
advantage of the positive conditions ahead.
Jeanne Johns
Managing Director & CEO
19
Incitec Pivot Limited Annual Report 2021 OPERATING & FINANCIAL REVIEW
Group Overview
IPL is a leading supplier in the resources and agricultural sectors
with an unrelenting focus on Zero Harm. With a team of 5000 plus
dedicated employees, the Company adds value to its customers
through manufacturing excellence, leading technology solutions,
innovation and world class services focused on the needs of its
customers. Sustainability is interlinked with IPL’s strategy which
is aimed at delivering sustainable growth and shareholder returns,
while proactively managing those issues most material to the
long-term sustainability of our business, the broader environment,
and the communities in which we operate.
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.
Through Dyno Nobel, the Company plays a critical role in releasing
the worlds natural resources, to help build infrastructure and
generate the energy we need to live in a modern world.
Through Incitec Pivot Fertilisers’ 100-year heritage in Australian
agriculture, IPL plays an important role in enabling sustainable
food production to meet the rapidly rising demand for food
around the world.
IPL leverages its nitrogen manufacturing expertise with a global
approach to standards and processes, complemented and enhanced
by regional oversight and operational discipline.
The Company has operations in Australia, North America, Europe,
Asia, Latin America and Africa.
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
is 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.
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 (manufacturing to cease from the end of
December 2022): Ammonia (Big N), Granulated ammonium
sulphate (GranAm) and Urea; and
» Geelong: Single Super Phosphate (SSP).
20
OPERATING & FINANCIAL REVIEWIncitec Pivot Limited Annual Report 2021 GROUP SUMMARY
Zero Harm
Year ended 30 September
FY21
A$m
FY20
A$m
Change
A$m
4,348.5
3,942.2
934.9
566.4
730.5
374.5
406.3
204.4
191.9
358.6
188.2
170.4
(209.5)
(64.8)
(144.7)
149.1
123.4
25.7
IPL’s Company values are at the core of how it operates, with the
health, safety and wellbeing of its people being the most important
of its values. IPL’s Total Recordable Injury Frequency Rate (4) (TRIFR)
for the rolling twelve-month period ended 30 September 2021
was 0.87, which is above IPLs target of 0.70, and an increase from
0.58 at 30 September 2020. The Company maintained its strong
environmental safety record with zero Significant Environmental
Incidents (5) during the year (pcp: 1). There were 38 Process Safety
Incidents (6) recorded in FY21 (pcp:24). IPL recorded a small increase
in Potential High Severity Incidents (7) with 36 (pcp: 34). IPL has
refreshed its safety programs to drive improvement in FY22.
FINANCIAL PERFORMANCE
IPL GROUP
Reported Revenue and Earnings
Revenue
EBITDA ex IMIs
EBIT ex IMIs
NPAT ex IMIs
IMIs after tax
Group 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)
18.5
9.3
10.9
–
30-Sep-21 30-Sep-20
(1,004.2)
(1,028.7)
1.1x
9.7x
1.4X
6.1x
Net Profit After Tax (NPAT) excluding Individually
Material Items (ex IMIs)
IPL reported NPAT ex IMIs of $359m, an increase of 91% compared
to $188m in the pcp.
Individually Material Items (IMIs)
NPAT for FY21 includes $209m (FY20: $65m) of after-tax IMIs
relating to the closure of IPLs manufacturing facilities at Gibson
Island, Queensland, and the non-cash impairment of manufacturing
assets at IPLs plant in Cheyenne, Wyoming. The cash costs of these
items (pre-tax) are $84m.
Shareholder Returns and Dividends
Earnings per share (EPS) ex IMIs of 18.5 cents per share increased
by 7.6 cents per share compared to FY20 EPS of 10.9 cents.
A final dividend of 8.3 cents per share 14% franked has been
declared, representing a 50 percent payout ratio of NPAT ex IMIs.
Net Debt
Net debt decreased by $25m to $1,004m at 30 September 2021
(pcp: $1,029m) and Net Debt/EBITDA ex IMIs decreased to 1.1x
(pcp: 1.4x). The Group’s investment grade credit ratings were
maintained:
» S&P: BBB (stable outlook)
» Moody’s: Baa2 (stable outlook)
INCOME STATEMENT
Revenue
Business Revenue
DNA
DNAP
Fertilisers APAC
Eliminations
Group Revenue
EBIT
Business EBIT ex IMIs
DNA
DNAP
Fertilisers APAC
Eliminations
Corporate
Year ended 30 September
FY21
A$m
FY20
A$m
Change
%
1,588.7
1,506.5
937.8
999.2
1,894.6
1,502.0
(72.6)
(65.5)
4,348.5
3,942.2
5%
(6%)
26%
(11%)
10%
189.9
140.2
268.4
(1.8)
(30.3)
230.8
149.3
(18%)
(6%)
26.2
924%
(0.1)
(31.7)
nm*
4%
Group EBIT ex IMIs
566.4
374.5
51%
EBIT margin
NPAT
13.0%
9.5%
Underlying interest expense (8)
(107.4)
(130.0)
Non-cash unwinding liabilities
(5.4)
(5.7)
Net borrowing costs
Tax expense ex IMIs
NPAT excluding IMIs
IMIs after tax
Group NPAT
Financial Key Performance Indicators
ROIC
Free Cashflow (9)
* not meaningful
17%
5%
17%
(88%)
91%
(112.8)
(135.7)
(95.0)
(50.6)
358.6
188.2
(209.5)
(64.8)
(223%)
149.1
123.4
21%
5.8%
267
3.6%
199
61%
34%
(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 and
excludes lease liabilities.
(2) Net debt/EBITDA ratio (for debt covenant purposes). EBITDA is calculated using 12 month rolling EBITDA ex IMIs, minus lease depreciation. Net Debt is translated at the 12 month average AUD:USD
FX rate.
(3) Interest Cover = 12 month rolling EBITDA (minus lease depreciation) ex IMIs/net interest expense before accounting adjustments.
(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.
Prior year end number was restated due to finalisation of classification of incidents pending at the time of previous publication date.
(5) Significant Environmental Incidents as assessed against IPL’s internal risk matrix with actual consequences of 5 or higher on a 6-level scale.
(6) Tier 1 and Tier 2 Process Safety Incidents as defined by the Center for Chemical Process Safety.
(7) Potential High Severity Incidents (excluding near misses and hazards) with potential safety consequences of 5 or higher on a 6-level scale.
(8) Underlying interest expense represents total borrowing costs less non-cash interest unwind, representing the discount unwind on the Group’s long-term liabilities.
(9) Free cashflow = operating cashflows less investing cashflows (excluding investing cashflows from derivatives) less lease liability principal payments.
21
OPERATING & FINANCIAL REVIEWIncitec Pivot Limited Annual Report 2021 FY21 Business Review
The Group reported FY21 Earnings Before Interest and Tax (EBIT) of
$566m, an increase of $191m compared to pcp. Major movements
for the year were as follows:
Manufacturing Performance: The $47m net decrease was primarily
incurred due to unplanned outages in North America. FY21 production
rates in Australia were largely in line with nameplate.
Hurricanes: Production at the Waggaman, LA, plant was impacted
by two separate hurricanes. In order to protect staff and equipment,
in anticipation of Hurricane Ida, the Waggaman plant was
proactively brought down and secured. Despite Hurricane Ida being
the second-most damaging and intense hurricane on record to make
landfall in the U.S. State of Louisiana, the site suffered only minor
physical damage. Once power was restored to the Waggaman site,
the plant was quickly brought back to full production.
Manufacturing Plant Turnarounds: FY21 was a heavy period
for turnarounds, with the impact of COVID-19 causing some activity
to be deferred from FY20 into FY21. The 4 turnarounds undertaken
during the year had a negative impact on earnings of $122m.
The planned turnarounds were undertaken at Mt. Isa, Qld,
St. Helens, OR, Waggaman, LA and Moranbah, Qld.
Americas Explosives: $20m net increase (excluding Response
Plan benefits and the negative impact from manufacturing).
Customer growth (principally in metals), COVID-19 demand recovery
and increased earnings from technology was partially offset by
a $7m earnings decline from soft US thermal coal demand.
Asia Pacific Explosives: $3m net decrease (excluding Response
Plan savings and the impact of the Moranbah turnaround).
Increased earnings from technology and premium product sales
were offset by the impacts of contract re-basing (now complete),
loss of a metals customer and lower international earnings
(largely COVID-19 related).
Asia Pacific Fertilisers: $8m net decrease (excluding Response
Plan savings and negative impacts related to planned turnarounds
and a non-repeat insurance recovery received in FY20). A 2.7%
increase in total fertiliser volumes sold was offset by costs related
to an increased investment in distribution assets ($5m) and higher
depreciation charges ($10m) as a result of the FY20 turnaround at
Gibson Island.
Commodity Prices & Foreign Exchange: $350m net increase.
The favourable impact of $446m from higher commodity prices
was partially offset by a $96m negative impact from a higher
average A$:US$ exchange rate.
Response Plan: $40m net benefit from sustainable cost savings
(pcp: $20m). The full Response Plan target of $60m has been
delivered 12 months early and is now complete.
Interest
Underlying interest expense (1) of $107m decreased $23m, or 17%,
compared to pcp. The decrease was mainly due to lower debt
following the $646m equity raising in 2020 having a favourable
impact of $20m. This was partially offset by a $14m increase
relating to the buyback of long-term bonds. A favourable movement
in the A$:US$ exchange rate and lower interest rates compared
to pcp benefited interest expense by approximately $8m and
$9m respectively. Interest expense also includes Lease interest,
Amortisation of line fees and Provision discount unwind expense.
Tax
The Group’s effective tax rate on operating profit of 21% is
unchanged from the 21% reported in the pcp. Tax expense
(excluding IMIs) of $95m was $44m higher than the pcp,
consistent with higher earnings.
Individually Material Items
NPAT includes the following items, classified as IMIs:
IMIs
Non-cash impairment of Cheyenne
manufacturing assets
Gibson Island gas manufacturing plant closure
Gross
A$m
Tax
A$m
Net
A$m
107.4
(28.0)
79.4
– Cash cost of closure
83.5
(25.1)
58.4
– Non-cash impairment of assets
102.5
(30.8)
71.7
Total
293.4
(83.9)
209.5
Cheyenne Impairment
The further structural decline in thermal coal markets has been
identified as an indicator of impairment that impacts DNA’s
Cheyenne manufacturing plant, and specifically the nitric acid
production utilisation rates. The future reconfiguration of the plant
to reduce Nitric acid production capacity in line with lower market
volumes, resulted in an impairment of $107.4m.
Gibson Island manufacturing plant closure
Despite extensive efforts, IPL had been unable to secure an
economically viable long-term gas supply for its Gibson Island
plant beyond its current contract. As a result, IPL decided to cease
manufacturing operations at the site at the end of the current gas
supply arrangements, which expire in December 2022. The majority
of the cash costs associated with the closure ($58m after tax) are
expected to be incurred in FY23. IPL’s Brisbane fertiliser distribution
capability will continue beyond the closure of the manufacturing
operations.
(1) Underlying interest expense represents total borrowing costs less non-cash interest unwind, representing the discount unwind on the Group’s long-term liabilities.
22
OPERATING & FINANCIAL REVIEWIncitec Pivot Limited Annual Report 2021 FINANCIAL POSITION
Liabilities
BALANCE SHEET
A$m
Assets
TWC – Fertilisers APAC
TWC – Explosives
Group TWC
Net PP&E
Lease assets
Year ended 30 September
30 Sep
2021
30 Sep
2020
Change
A$m
(120.6)
(151.1)
241.3
165.9
30.5
75.4
120.7
14.8
105.9
3,928.9
4,071.7
(142.8)
214.5
221.1
(6.6)
Intangible assets
3,000.9
3,019.7
(18.8)
» Environmental & restructure liabilities: Increase of $81m.
Largely due to Gibson Island manufacturing closure provisions.
» Net Other assets/(liabilities): Decrease of $257m. Mainly due
to market value movements and maturities of derivative hedging
instruments (excluding debt hedges) of $293m, partially offset
by an increase in capital accruals of $21m.
» Net Debt: Decrease of $25m. Mainly due to strong cash
generation driven by rising commodity prices offset by a
reduction in the use of trade working capital financing facilities
(-$80m), payments related to sustenance capital expenditure
(-$304m) and a $274m decrease in balance sheet derivatives.
Further details of movements in Net Debt are provided in the
Cashflow section of this report.
Total Assets
Liabilities
7,265.0
7,327.3
(62.3)
Net Debt & Debt Hedges
Environmental & restructure liabilities
(242.7)
(161.7)
(81.0)
Tax liabilities
Lease liabilities
(415.0)
(437.0)
22.0
(242.5)
(247.7)
5.2
Net other asset/(liabilities)
8.0
(248.9)
256.9
Net debt
Total Liabilities
Net Assets
Equity
(1,004.2)
(1,028.7)
24.5
(1,896.4) (2,124.0)
227.6
5,368.6
5,203.3
165.3
5,368.6
5,203.3
165.3
Key Performance Indicators
Net Tangible Assets per Share
1.22
1.12
Fertilisers APAC – Ave TWC % Rev (1)
15.3%
19.1%
Explosives – Ave TWC % Rev (1)
16.9%
17.2%
Group – Average TWC % Rev (1)
16.2%
18.1%
Credit Metrics
Net debt
Net debt / EBITDA (ex IMIs)
Interest Cover
(1,004.2)
(1,028.7)
1.1x
9.7x
1.4x
6.1x
Major movements in the Group’s Balance Sheet during the year
include:
Assets
NET DEBT
A$m
Maturity
Month/Year
Facility
Amount
Drawn
Amount
Undrawn
Amount
Syndicated Term Loan
EMTN / Regulation S notes
Medium Term Notes
EMTN / Regulation S Notes
US Private Placement Notes
US Private Placement Notes
Total Debt
04/24
02/26
03/26
08/27
10/28
10/30
768.6
100.2
431.3
425.8
348.2
348.2
–
768.6
100.2
431.3
425.8
348.2
348.2
–
–
–
–
–
2,422.3
1,653.7
768.6
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
(4.4)
19.5
(651.8)
(12.8)
1,004.2
1.1x
The fair value of Net debt hedges at 30 September 2021 was an
asset of $13m, a decrease of $274m compared to the balance at
30 September 2020 of $287m. The decrease was mainly due to
the unwind of derivatives that hedged the foreign exchange rate
exposure of the Group’s USD borrowings.
FINANCIAL INDEBTEDNESS
30 Sep
2021
A$m
30 Sep
2020
A$m
Change
A$m
Net debt (excluding hedges)
1,017
1,316
(299)
» Trade Working Capital (TWC): Net increase of $106m.
Lease liabilities
The movement was mainly due to the lower utilisation of trade
working capital financing facilities of $80m and increases in the
Australian dollar equivalent of US dollar denominated inventory.
Underlying trade working capital (excluding the impact of
financing facilities) as a percentage of sales decreased by 2%
compared with the pcp, reflecting strong cash flow focus.
» Net Property, Plant & Equipment (PP&E): Decrease of
$143m. Mainly driven by the depreciation charge for the year
of $303m and impairment of assets of $213m. This is partially
offset by accrual spend on sustenance and turnaround capital
expenditure of $318m and minor growth capital expenditure of
$52m.
»
Intangible Assets: Decrease of $19m. Mainly driven by the
amortisation charge for the year of $23m and the impact of
foreign currency translation of non-A$ denominated assets
of $8m. These movements were partially offset by additions
(including goodwill) of $12m.
Trade working capital financing facilities
Total Financial Indebtedness
1,592
1,976
243
332
248
412
(5)
(80)
(384)
Financial indebtedness reduced by $384m through the year. Net
debt (excluding hedges) reduced by $299m mainly due to strong
operating cashflows ($730m - excluding $80m of trade working
capital facilities reduction) offset by sustenance capital expenditure
($304m) and growth capital expenditure ($51m). Reliance on trade
working capital financing facilities has been reduced by over $300m
since March 2020 to a sustainable level of $332m at year end.
(1) Average TWC as % of revenue = 13-month average trade working capital excluding financing facilities/12 months rolling revenue.
23
OPERATING & FINANCIAL REVIEWIncitec Pivot Limited Annual Report 2021 Credit Metrics
Capital Allocation
IPL’s capital allocation process is centralised and overseen by
the Group’s Corporate Finance function. Capital is invested on
a prioritised basis and all submissions are assessed against risk
factors including HSE, sustainability, operational, financial and
other strategic risks. Capital is broadly categorised into major
growth capital, minor growth capital and sustenance capital.
The table below includes a summary of cash spend per business
on growth and sustenance capital:
IPL GROUP
Capital Expenditure
DNA
DNAP
Fertilisers
Minor growth capital
DNA
DNAP
Fertilisers
Sustenance
Total
Year ended 30 September
FY21
A$m
FY20
A$m
Change
A$m
24.6
18.6
8.0
51.2
165.5
75.8
62.5
303.8
355.0
18.6
34.7
6.9
60.2
50.8
25.5
141.9
218.2
278.4
6.0
(16.1)
1.1
(9.0)
114.7
50.3
(79.4)
85.6
76.6
There were no major growth capital spend items in FY21. Minor
growth spend of $51m in FY21 included plant efficiency projects
and other projects supporting volume growth and technology
investments.
Sustenance capital spend in FY21 of $304m was $86m higher than
pcp, largely due to the heavy turnaround program in FY21 plus the
additional costs previously disclosed related to the post turnaround
issues at Waggaman, LA. Turnaround spend across the Group for
FY21 was $150m. The remaining sustenance spend was made up of
various sustenance projects with the vast majority of project values
being less than $5m each.
Net Debt/EBITDA: The ratio of 1.1x improved by 0.3x compared
with the pcp. The improvement is primarily a result of higher
earnings in FY21 with EBITDA (ex IMIs) improving 28% over the pcp.
Interest Cover: Improved to 9.7x (pcp: 6.1x).
Credit Ratings: Investment Grade credit ratings remained
unchanged:
» S&P: BBB (stable outlook)
» Moody’s: Baa2 (stable outlook)
Debt Facilities
IPL has sufficient liquidity and headroom with $769m of available
undrawn committed debt facilities at 30 September 2021.
The average tenor of the Group’s debt facilities at 30 September
2021 is 5.1 years (September 2020: 5.1 years). No committed debt
facilities are due to mature until April 2024.
In March 2021, IPL cancelled its US domiciled Syndicated Term
facility (US$500m) and its Australian domiciled Syndicated Term
facility (A$122m and US$109m). Both facilities were due to mature
in October 2021. These cancelled facilities were replaced by a
Syndicated Term facility domiciled in Australia and consisting of two
tranches: Tranche A has a limit of A$490m and Tranche B has a limit
of US$200m. The facility matures in April 2024.
In November 2020, following invitations to the holders of the
Group’s outstanding notes under the EMTN and AMTN programmes
to tender their notes, IPL repurchased US$94m of its US$400m
Reg-S bond and A$19m of its A$450m AMTN bond.
Trade Working Capital Facilities
IPL uses TWC facilities to effectively manage the Group’s cash flows,
which are impacted by seasonality, 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 2021, receivables
totalling $124m (30 September 2020: $116m) 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 2021 was $208m
(30 September 2020: $296m).
24
OPERATING & FINANCIAL REVIEWIncitec Pivot Limited Annual Report 2021 CASH FLOW
Operating Cash Flow
CASH FLOW
Operating Cash Flow
EBITDA ex IMIs
Net Interest paid
Net income tax paid
Year ended 30 September
FY21
A$m
FY20
A$m
Change
A$m
934.9
730.5
204.4
(108.7)
(135.5)
(33.1)
(13.7)
26.8
(19.4)
TWC movement (excl FX movements)
(126.1)
(8.4)
(117.7)
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
Payments – Central Petroleum Joint
operation
Proceeds from asset sales
Repayments from JV
Acquisition of subsidiaries
& non-controlling interests
(41.9)
44.6
(4.8)
(19.1)
(32.3)
30.9
(8.0)
(8.0)
4.4
(10.4)
(9.6)
13.7
3.2
(11.1)
14.8
650.2
545.1
105.1
(51.2)
(60.2)
9.0
(303.8)
(218.2)
(85.6)
(4.4)
(9.8)
5.4
5.7
19.9
7.4
–
(1.7)
19.9
(8.5)
(23.4)
14.9
Payments for settlement of derivatives
(0.1)
(75.2)
Investing Cash Flow
Financing Cash Flow
(342.4)
(379.4)
Dividends paid to members of IPL
Lease liability payments
Purchase of IPL shares for employees
(19.4)
(41.4)
(1.0)
(30.7)
(41.9)
(1.3)
75.1
37.0
11.3
0.5
0.3
Proceeds on issue of shares
–
645.5
(645.5)
Realised market value gain on
derivatives
Non-cash loss on translation of US$
Net Debt
8.5
10.3
(1.8)
(225.9)
(78.2)
(147.7)
Non-cash movement in Net Debt
(4.1)
(6.7)
2.6
Operating cash flows of $650m increased by $105m compared
to the pcp. Significant movements included:
EBITDA: Increased by $204m driven by favourable realised
commodity price movements ($446m) partially offset by
unfavourable movements in the A$:US$ exchange rate ($96m).
Reduced manufacturing volumes resulting from planned
turnarounds ($122m), extreme weather events ($32m) and
unplanned plant outages ($47m) negatively impacted earnings.
Downstream business earnings (excluding manufacturing,
Response Plan savings and non-controllables) remained relatively
flat compared with the pcp. The Response Plan delivered an
additional $40m of sustainable cost savings, $10m ahead of
the FY21 target.
Net Interest Paid: Decreased by $27m, principally as a result of
lower average drawn debt levels following the Group’s $646m
equity raising in 2020, favourable foreign exchange movements
and lower interest rates. This was partially offset by one-off interest
payments relating to bond repurchases.
TWC Movement: $118m increase compared to the pcp largely as
a result of lower usage of trade working capital financing facilities
(down $80m on pcp).
Dividends received from JV’s: Increased by $14m as a result of
timing of payments and increased profits from JVs.
Restructuring costs: Increased $11m due to payments against the
Group’s Response Plan provisions raised in the FY20 financial year.
Other Non-TWC: Improved $15m compared to the pcp largely
as a result of timing of payments and accruals.
Investing Cash Flow
Net investing cash outflows of $342m decreased $37m as compared
to the pcp. Significant movements included:
Capital spend: Higher sustenance spend reflecting the heavy
turnaround program in FY21 plus the additional costs previously
disclosed related to the post turnaround issues at Waggaman, LA.
Financing Cash Flow
Change to Net debt
(283.3)
497.0
(780.3)
24.5
662.7
(638.2)
Loan repayment from JV: Cash inflow of $20m reflects the
repayment of a loan provided to Queensland Nitrates Pty Ltd.
Opening balance Net debt
(1,028.7)
(1,691.4)
662.7
Closing balance Net debt
(1,004.2) (1,028.7)
24.5
Financing Cash Flow
Net financing cash outflow of $283m was $780m unfavourable
compared with the pcp. Significant movements included:
Proceeds on issue of shares: The $646m unfavourable movement
reflects the FY20 equity issue. No new equity was issued in FY21.
Foreign Exchange on Net Debt: The year on year movement of
$148m mainly reflects the net impact of the unwind of Net Debt
hedges. The unwinding of the hedges was undertaken to simplify
the balance sheet and align reported Net Debt with the Group’s
cash position.
25
OPERATING & FINANCIAL REVIEWIncitec Pivot Limited Annual Report 2021 DYNO NOBEL AMERICAS
Dyno Nobel Americas
Explosives
Waggaman
Ag & IC
Total Revenue
Explosives
Waggaman
Ag & IC
EBIT
EBIT margin
Explosives
Waggaman
Ag & IC
A$m
Revenue
EBIT
Year ended 30 September
Change
%
15
41
6
17
5
(89)
738
(9)
FY21
US$m
883.3
175.9
133.5
FY20
US$m
768.4
124.5
126.0
1,192.7
1,018.9
126.7
121.1
3.6
10.9
32.4
1.3
141.2
154.8
14.3% 15.8%
2.0% 26.0%
8.2%
1.0%
1,588.7
1,506.5
189.9
230.8
5
(18)
Dyno Nobel Americas FY21 earnings of US$141m decreased US$14m
or 9% compared to the pcp. Outlined below are the major earnings
movements during the year for each business.
Explosives
Business Performance
Explosives earnings for FY21 of US$127m was US$6m higher than
the pcp. principally due to the following:
EBIT Margins: The pass through of higher US gas prices on sales of
bulk ammonium nitrate has a negative impact on explosives EBIT
margins. After adjusting for the impact of manufacturing outages
and gas pass throughs, EBIT margins were 16%.
Customer Growth: $11m growth in volumes, primarily driven by
customer growth in Canada (Gold) and metals mining in western
USA. Chile continues to see incremental volume increases through
successful trials of premium products. Quarry & Construction
volumes in the second half recovered from a slow first half
to leave the full year just 1% down on the pcp.
COVID-19 Recoveries: US$10m from increased international and
domestic sales of initiating systems as a result of general recoveries
from the COVID-19 lows of FY20.
Coal Volumes: US$7m decline (unchanged from the first half). As
forecast at the half year, coal volumes in the second half improved
and were 2% above the pcp. This was a significant improvement on
the first half where the business was impacted by bankruptcies in
this sector.
Response Plan: US$4m benefit from sustainable operational
productivity measures, including cost efficiency gains.
Manufacturing: The negative earnings impact of US$12m reflects
the previously announced outages at the Cheyenne, WY. and
Louisiana, MO plants. These plants recovered well and performed to
plan in the second half.
Market Summary
Quarry & Construction
43% of Explosives revenue was generated from the Quarry &
Construction sector in FY21 (43% pcp). After a slow, weather
impacted first half, where volumes were down 5% on the pcp.,
volumes recovered through the second half to finish down just
1% on a full year basis.
Base & Precious Metals
39% of Explosives revenue was generated from the Base & Precious
Metals sector in FY21 (35% pcp). Volumes grew by 22% during the
year with revenues growing 27% compared to the pcp. The primary
drivers of these increases were gold volumes in Canada and sales
into the metals markets in western regions of the US. Product trials
in Chile continue to be successful with volumes increasing over
the pcp.
Coal
18% of Explosives revenue was generated from the Coal sector in
FY21 (22% pcp). Volumes were down 12% versus the pcp. with
customer closures in the Illinois coal basin adversely impacting DNA
volumes compared to the overall market, which was flat year on
year. Excluding the impact of the bankruptcies, DNA volumes into
the coal sector were down 1% on the pcp.
26
OPERATING & FINANCIAL REVIEWCOVIDRecovery155EBIT US$m(21)(77)70(12)(7)10114(11)20141FY20EBITHurricanesManufacturing/TurnaroundsCommoditiesManufacturing/TurnaroundsCoalCustomerGrowthResponsePlanManufacturing/TurnaroundsCommoditiesFY21EBIT020406080100120140160180IncreaseDecreaseTotalWaggamanExplosivesAG & ICIncitec Pivot Limited Annual Report 2021 Agriculture & Industrial Chemicals (Ag & IC)
AG & IC
US$m
Total Revenue
EBIT
EBIT margin
Year ended 30 September
FY21
US$m
FY20
US$m
Change
%
133.5
126.0
10.9
8.2%
1.3
1.0%
6
738
Business Performance
Ag & IC FY21 earnings of US$11m was US$10m more than the pcp.,
due to the following:
Manufacturing/Turnaround: Earnings were negatively impacted by
US$11m in FY21 because of the planned outage at the St. Helens,
OR plant (US$5m), minor production issues (US$2m) and additional
depreciation (US$3m).
Commodity Prices: Favourable Urea and UAN pricing improved
earnings by US$20m versus the pcp.
Waggaman Operations
WAGGAMAN
Thousand metric tonne
Ammonia manufactured at Waggaman
Ammonia sold
US$m
External Revenue
Internal Revenue
Total Revenue
EBIT
EBIT margin
Year ended 30 September
FY21
FY20
Change
%
437.2
563.5
729.0
730.0
175.9
124.5
39.0
40.0
214.9
164.5
(40)
(23)
41
(3)
31
3.6
32.4
(89)
2.0% 26.0%
Business Performance
Waggaman earnings of US$4m, decreased US$29m compared to the
pcp due to the following:
Turnaround – Planned: As previously disclosed, the FY21
turnaround negatively impacted earnings by US$58m.
Adverse Weather: As previously announced, the Waggaman site
was proactively shut ahead of Hurricane Ida in order to protect site
personnel and the plant. Despite the intensity of the storm, the site
only suffered minor physical damage. Once power was restored, the
plant was brought back to full production as per plan. The negative
earnings impact of this outage, and a minor hurricane related
outage from earlier in the year, was US$21m.
Manufacturing Reliability: In total, the Waggaman plant produced
437k metric tonnes of Ammonia which was 40% lower than the
pcp. Sales of Ammonia reduced by 23% compared to the pcp,
with shortfalls in produced ammonia being replaced by third party
supplies. Gas efficiency was adversely impacted by the plant
outages, with gas usage per metric tonne of ammonia produced
averaging 40 mmbtu/mt (35 pcp).
Pre-turnaround, the plant had interruptions to production that
resulted in 4 weeks of total downtime, the most consequential of
which was caused by the failure of the regional power grid in the
New Orleans area from Hurricane Zeta.
As previously disclosed, the plant went through its first major
turnaround during FY21. The plant entered the planned turnaround
with several known maintenance issues, all of which were
addressed as part of the turnaround activities. During the discovery
phase and subsequent re-start process, a number of unexpected
issues emerged including issues with the ammonia cooler, dry gas
seals and the induced draft fan. These issues caused a further
6.5-week delay to full production.
While the ammonia cooler (heat exchanger) was repaired during
the turnaround, the initial fabrication issues prevented a permanent
repair, requiring a replacement of the cooler in the next 6-18
months. An outage of up to 3 weeks is expected during FY22 or
FY23 to allow installation. To date, the cooler has performed well
with no signs of accelerated deterioration.
The plant operated at nameplate production until it was deliberately
brought down to protect the site personnel and the plant ahead
of Hurricane Ida. Once power was restored to the site, the plant
was re-started and brought back to full production as per plan.
The disclosed estimate of a 4 week outage from Hurricane Ida
was shortened by 4 days due to a flawless re-start.
Post turnaround, and post the outage for Hurricane Ida, the plant
has been operating reliably and in line with nameplate capacity.
Gas efficiency has improved to efficiency levels previously achieved.
Excluding the impact of the planned turnaround and adverse
weather events, the additional outages referenced above had
a negative earnings impact of US$19m.
Ammonia Price: A strong upswing in ammonia prices in the second
half favourably impacted full year earnings by US$70m.
Discount to Tampa Ammonia price: The average discount to the
Tampa benchmark, allowing for the one-month lag embedded in
sales contracts, was approximately 5% in FY21. The FY21 average
discount has been impacted by timing differences in the lost
production and the rapid increase of the ammonia price, particularly
in the second half of the financial year. “through the cycle” pricing
for internal sales to the DNA Explosives business impacts the
calculated average discount to the benchmark, particularly when
ammonia prices are elevated.
Approximately 20% of nameplate production is sold to the DNA
Explosives business at prices that are not linked to movements
in the Tampa benchmark. The remaining sales are priced at the
Tampa benchmark price, less a discount that ranges between 6%
and 8%, with the higher end of the range applying to prices above
US$500/t.
Other Manufacturing
Manufacturing performance in the Explosives and Ag & IC businesses
during FY21 was as follows:
Cheyenne, Wyoming: Cheyenne ammonia operations were
impacted by an unplanned outage caused by a bearing failure on
the reciprocal compressor. As a result, ammonia production was
down 5% compared to pcp. Nitric Acid production increased by 4%
compared to pcp.
Louisiana, Missouri: Louisiana operations were impacted by an
unplanned outage caused by blade failure on the axial compressor.
As a result, Nitric Acid production decreased by 14% compared with
pcp.
St Helens, Oregon: Urea and ammonia production from the
St Helens plant decreased 19% and 16% respectively, compared
to the pcp., mainly due to the planned turnaround.
27
OPERATING & FINANCIAL REVIEWIncitec Pivot Limited Annual Report 2021 DYNO NOBEL ASIA PACIFIC
DYNO NOBEL ASIA PACIFIC
Thousand metric tonne
Ammonium Nitrate – manufactured
at Moranbah
Ammonium Nitrate sold
A$m
Australian Coal
Base & Precious Metals
International
Total Revenue
EBIT
EBIT margin
Year ended 30 September
FY21
FY20
Change
%
346.5
683.7
371.3
762.6
471.6
377.3
88.9
937.8
140.2
15.0%
472.4
415.5
111.3
999.2
149.3
14.9%
(7)
(10)
(0)
(9)
(20)
(6)
(6)
Business Performance
Dyno Nobel Asia Pacific FY21 earnings of $140m, decreased $9m
compared to the pcp. due to the following:
Technology: $14m increase on the pcp, in line with guidance
provided in FY20, technology growth has more than offset
recontracting impacts.
Contract Renewals: $12m net decrease, driven by the loss of a
metals customer and lower ammonium nitrate pricing on contract
renewals in Australia, offset in part by new metals business.
Turnaround: As per previous guidance, the impact of the Moranbah
turnaround was $15m.
Response Plan: $9m increase, driven by sustainable cost savings,
mainly across the Commercial business and the Moranbah plant.
W.A. Contracts: $3m decrease, final impact from contracts lost
in FY18 in Western Australia, in line with previous guidance.
International: $2m net decrease. The Indonesian business was
impacted by lower demand which was mainly a result of COVID-19.
The Turkish business was impacted by a slowdown in construction
activity and a weaker Turkish Lira.
Market Summary
Australian Metallurgical Coal
50% of Dyno Nobel Asia Pacific revenue for the year was generated
from the Australian Metallurgical Coal sector, most of which was
from supply to mines in the Bowen Basin.
Volumes from the Metallurgical Coal sector were flat year on year
as miners successfully diversified their customer base (primarily
to India) in response to bans imposed by China on imports of
Australian coal from November 2020.
Base & Precious Metals
40% of Dyno Nobel Asia Pacific revenue was generated from the
Base & Precious Metals sector, which comprises iron ore mines in
Western Australia and hard rock and underground mines throughout
Australia.
Volumes from the sector decreased 13% compared to pcp, mainly
due to the previously disclosed loss of a metals customer.
International
10% of Dyno Nobel Asia Pacific revenue was generated
internationally in Indonesia, Turkey and Papua New Guinea.
Volumes decreased by 30% compared to the pcp. Volumes in the
Indonesian business were significantly impacted due to mining
activity being disrupted by COVID-19. Volumes in the Turkish
business (Nitromak) have been impacted by reduced construction.
Manufacturing
Allowing for the impact of the planned turnaround, Moranbah
performed well producing 347k mt of ammonium nitrate during
the year. Although the plant was in the last phase of its operating
cycle, the plant produced at nameplate (excluding the outage for
the turnaround).
28
OPERATING & FINANCIAL REVIEW149(3)(12)14(15)(2)9140FY20Actual EBITW.A. Contracts(Previously Disclosed)ContractRenewalsTechnologyTurnaroundInternationalResponsePlanFY21Actual EBIT120125130135140145150IncreaseDecreaseTotalEBIT A$mIncitec Pivot Limited Annual Report 2021 FERTILISERS ASIA PACIFIC
FERTILISERS ASIA PACIFIC
Thousand metric tonne
Phosphate Hill production
(ammonium phosphates)
Gibson Island production
(urea equivalent)
A$m
Manufacturing
Distribution
Fertilisers APAC Revenue
Manufacturing
Distribution
Fertilisers APAC EBIT
EBIT margin
* Not meaningful
Year ended 30 September
FY21
FY20
Change
%
958.4
979.3
(2)
498.5
400.5
24
836.4
1,058.2
554.4
947.6
1,894.6
1,502.0
208.8
59.6
268.4
14.2%
(28.4)
54.6
26.2
1.7%
53
11
26
nm*
9
924
Business Performance
Fertilisers Asia Pacific earnings of $268m was $242m higher than
the pcp. Major movements for the year were due to the following:
Volumes and Margins: Increased distribution volumes more than
offset a slight decline in EBIT margins for a net improvement of
$7m for the year.
PDC Upgrades: Upgrades to primary distribution centres, primarily
at Gibson Island, resulted in increased costs ($5m) being incurred
for the sourcing of alternative storage facilities and associated
logistics costs.
Manufacturing Reliability: $3m net increase at last years
pricing, largely due to higher production volume at Phosphate
Hill (excluding planned Ammonia shutdown).
Planned Plant Shutdowns: $7m decrease. A planned shutdown
of Ammonia production at Phosphate Hill (aligned with Mt. Isa’s
Sulphuric Acid plant shut, which coincided with Glencore’s copper
smelter shut) negatively impacted earnings by $13m compared
to the pcp. This was partially offset (+$5m) by higher production
of Urea at the Gibson Island plant compared to FY20 which was
impacted by a turnaround in that period.
1H19 Queensland Rail Outage – Insurance recovery: The FY20
result included a non-recurring insurance receipt of $7m in relation
to losses incurred from the 2019 Queensland rail outage.
Depreciation: The FY20 turnaround at Gibson Island and the FY21
turnaround at Mt. Isa resulted in higher depreciation charges of
approximately $10m.
Response Plan: Savings of $25m predominantly from sustainable
reductions in operational expenses at Phosphate Hill and Gibson
Island.
Foreign Exchange and Commodity Prices: $237m net increase,
due to higher global fertiliser prices improving the result by $312m
(after allowing for a negative $5m impact from tiered gas pricing
at Gibson Island), partially offset by unfavourable movements in
the A$:US$ exchange rate impacting the result by $75m.
Market Summary
Total Fertilisers Asia Pacific sales volumes of 3,220k metric tonnes
was 3% higher than FY20 sales of 3,136k metric tonnes. Agronomic
conditions have been generally favourable with La Nina rain events
increasing soil moisture and water storage levels, producing the
highest sales volume since 2005.
The favourable water levels supported good sales of liquid fertilisers
which were up 30% year on year.
Global fertilisers prices traded significantly higher in FY21 with
realised Ammonium Phosphate prices improving by more than 72%
compared with the pcp. The supply and demand dynamic remains
broadly favourable to support strong prices in the near term.
Progress on the soil health strategy continues, highlighted by the
introduction of Precision Ag and an increase in Nutrient Advantage
earnings.
Manufacturing
Manufacturing performance in the Fertilisers Asia Pacific business in
FY21 was as follows:
Phosphate Hill
Ammonium phosphates production decreased to 958k mt, down
2% on pcp mainly due to a planned shutdown at Mt. Isa which
impacted the supply of Sulphur. Plant reliability for the year was
96%, an improvement of 3% over the prior year.
Ammonium phosphates cost per tonne was impacted by a number
of factors, the most consequential being the increased cost of
sulphur. Increased freight, gas (CPI) and depreciation costs were
partially offset by Response Plan savings.
Gibson Island
The plant produced 499k mt of urea equivalent product, up 24%
on pcp. The majority of this improvement is due to FY20 being
impacted by a planned major turnaround.
29
OPERATING & FINANCIAL REVIEW2674(5)3(7)(7)21(10)312(75)26802550400FY19 Qld Rail Outage – Insurance Recovery in FY20Volumes & MarginsResponsePlanPDC Upgrades TurnaroundsManufacturing ReliabilityResponsePlanDepreciationCommoditiesForeignExchangeFY21Actual EBITFY20Actual EBITIncreaseDecreaseTotalManufacturingNon-ControllablesEBIT A$mDistributionIncitec Pivot Limited Annual Report 2021 OUTLOOK AND SENSITIVITIES
IPL does not generally 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
To date, IPL has not been materially impacted by COVID-19.
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
(including the impact of variants), regulations imposed by
governments with respect to ongoing management of the pandemic,
and the impact of the pandemic on the global economy, including
commodity prices, customer demand, supply chains and inflation.
Capital Expenditure
Subject to currency fluctuations, underlying sustenance capital
spend for FY22 is expected to be approximately $320m with the
final two large manufacturing turnarounds scheduled for FY22.
A further $50m of one-off sustenance expenditure is expected
to be spent on:
» upgrades of Brisbane area distribution assets ($25m); and
installation of equipment to provide steam independence
»
at Waggaman, Louisiana ($25m).
Land sales to the value of $50m are expected to offset sustenance
expenditure for a net total spend of $320m.
Explosives Technology
»
Targeting technology driven Explosives EBIT growth of 10%
between FY20 and FY22.
Dyno Nobel Americas
» Apart from a potential outage of up to 3 weeks to allow
installation of a replacement cooler (if required), the Waggaman
plant is expected to produce at nameplate capacity in FY22.
The operational earnings of Waggaman remain subject to
movements in ammonia and natural gas prices.
» Agriculture & Industrial Chemicals earnings remain subject to
movements in global fertilisers prices, particularly Urea.
» Coal demand is expected to decline by 5% through FY22.
Potential carbon legislation could pose further risk to coal
demand going forward.
» A planned turnaround at Cheyenne in the second half of FY22
is expected to result in 6-8 weeks of lost production.
» Quarry and Construction is expected to continue a slow
recovery driven by residential and infrastructure. Growth from
the US Federal Government infrastructure bill is likely to take
time to filter through to volumes and may not produce material
upside in FY22. Volume growth of 3% to 5% is expected.
»
Elevated commodity prices should support demand in the Base
and Precious Metals sector. Dyno volume growth expected to
be slightly above market growth.
» Recovery in earnings from the International businesses is
expected but remains subject to customer demand and COVID-19
management within the offshore markets.
»
In line with previous disclosure, the unfavourable Western
Australian supply arrangements cease in FY22 resulting in a
boost to earnings (compared to FY21) of approximately $11m.
Investments in capital required to support customer needs and
future growth, combined with Moranbah turnaround expenditure
will result in depreciation increasing by approximately $6m in
FY22 compared with FY21.
Fertilisers Asia Pacific
»
Fertilisers earnings will continue to be dependent on global
fertilisers prices, the A$:US$ exchange rate and weather
conditions.
» Weather conditions across Eastern Australia remain favourable,
with many cropping and pasture districts receiving above
average rainfall. Increased soil moisture levels in most districts
on the East Coast, coupled with high dam levels is expected
to drive demand for fertiliser.
»
Farm economics are expected to remain favourable through FY22
with farmer cashflows supportive of strong fertiliser demand.
» A planned turnaround at Phosphate Hill in the second half of
FY22 is expected to result in 6-8 weeks of lost production.
» Phosphate Hill is expected to run at 90% of nameplate capacity
through to the May 2022 turnaround, and at 100% namplate
capacity thereafter.
» Based on FY21 realised DAP price and average AUD:USD
exchange rate, the earnings impact from the 6-8 week FY22
turnaround is approximately $73m.
» Gibson Island is expected to produce at rates in line with FY21.
The forecast costs of closure have been included as an IMI in the
FY21 result. The majority of the cashflow related to the closure
will occur in FY23.
Group
Corporate: Corporate costs are expected to be approximately $37m
in FY22, which includes investments in Energy Transition ($2m),
International business development ($3m) and HR Organisational
Development and Diversity.
Borrowing Costs: Net borrowing costs for FY22 are expected to
be approximately $104m, due to the impact of lower average
borrowings.
Taxation: IPL’s effective tax rate for FY22 is expected to be between
23% and 25%.
Hedging Program: 67% of estimated FY22 US$ linked fertilisers
sales are hedged at a rate of $0.77 with full participation down to
$0.725. The remaining 33% is unhedged.Sensitivities
The table provides sensitivities to key earnings drivers excluding the
impact of hedging.
Commodity
Americas
Ammonia (1)
Natural Gas (2)
Urea (3)
Proxy Index
EBIT Sensitivities
CFR Tampa
Henry Hub
FOB NOLA
+/- US$10/mt = +/-U$6.6m
+/- US$0.10/mmbtu = -/+ US$2.2m
+/- US$10/mt = +/-U$1.8m
+/- A$/US$0.01 = -/+ A$3.5m
Dyno Nobel Asia Pacific
» Moranbah is expected to operate at nameplate capacity post
FX EBIT Translation (4)
Asia Pacific
the FY21 turnaround.
» With Moranbah foundation customer contracts having been
renegotiated, the negative earnings impact (compared to prior
periods) resulting from contract re-basing is not expected to
impact DNAP earnings going forward.
AP (5)
Urea(6)
FOB China/Saudi
+/- US$10/mt = +/-A$11.5m
FOB Middle East
+/- US$10/mt = +/-A$3.6m
FX EBIT Transactional (5)(6)
+/- A$/US$0.01 = -/+A$10.3m
Note: Proxy Index prices are available on Bloomberg.
(1) Based on 800k mt Waggaman plant nameplate production less internal sales volumes of 143k mt.
(2) Based on 800k mt Waggaman plant nameplate production less internal sales volumes of 143k mt.and gas efficiency of 33.6 mmbtu/tonne of ammonia.
(3) Based on St Helens plant capacity of 175k mt of urea equivalent product.
(4) Based on actual FY19 Dyno Nobel Americas EBIT (excluding Non-Recurring Items) of US$200m and an average foreign exchange rate of A$/U$ 0.75.
(5) Based on Phosphate Hill plant nameplate production of 1 million tonnes less an allowance for 7 weeks lost production resulting from the planned turnaround; average market forecast price DAP
price of US$524; and an average foreign exchange rate of A$/U$ 0.75.
(6) Based on actual FY21 Gibson Island production sold subject to urea price movement of 364k mt; average realised FY21 urea price of US$373; an average foreign exchange rate of A$/U$ 0.75;
and tiered pricing on Gibson Island gas contracts.
30
OPERATING & FINANCIAL REVIEWIncitec Pivot Limited Annual Report 2021 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 ongoing impacts of the 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.
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.
The global energy transition that is occurring in response to climate
change is changing market dynamics and presents strategic risks
and opportunities for IPL. These may include a rapid transition away
from fossil fuels, which would likely significantly decrease demand
for thermal coal, and a shift to new technologies, such as renewable
hydrogen.
Health, Safety,
Environment &
Community
IPL’s operations are inherently high risk. 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.
Due to the nature of industrial and agricultural chemicals, IPL’s
operations have the potential to impact on local communities.
This may include unintended chemical releases, or noise, dust
and/or odour pollution.
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 its customers while
limiting both IPL’s, and its 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, Board Audit
and Risk Management Committee and/or Committee of
Management. In addition, IPL receives regular operational
and financial reports and conducts periodic audits.
»
IPL monitors long term growth trends in the mining sector
through industry forecasts of commodities demand, which
are shifting away from thermal coal towards the metals
required for the energy transition. These trends have been
incorporated into IPL’s business strategy through aligning its
explosives business growth with predicted customer demand
profiles by segment and the delivery of technology solutions
to leverage these. The IPL Decarbonisation and Energy Steering
Committee provides ongoing focus and executive sponsorship
of projects and strategic opportunities as it seeks to leverage
key decarbonisation megatrends to exploit new profitable
markets in its core geographies.
»
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.
IPL has measures in place to monitor, manage and prevent
potential negative impacts on local communities which may
arise. Where required by law, sites communicate regularly with
the community regarding Community Safety Plans which describe
the emergency procedures that should be followed to keep the
community safe in the unlikely event of a potential incident.
31
OPERATING & FINANCIAL REVIEWIncitec Pivot Limited Annual Report 2021 Broad Risk Category
Description and potential consequences
Treatment strategies employed by IPL
Climate Change
COVID-19
Compliance
IPL acknowledges the mainstream science on the existence of
climate change. The Company has developed a Net Zero Pathway and
has set an ambition to achieve Net Zero emissions by 2050, or sooner
if practicable. Climate change is a material and strategic issue for the
business and IPL faces a number of transitional and physical risks
across the Group that will require ongoing and active management.
The impact of carbon emissions, and governments’ policies and
actions to limit them, may have an impact on IPL’s operations and
supply chains. The extent of the physical and transitional 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. Physical impacts could
include more severe extreme weather events, such as droughts,
floods and hurricanes. Transitional impacts may include changes
to regulations that could result in an increase to the cost base or
operating cost of plants, and market shifts. A detailed discussion
of the risks and opportunities identified through IPL’s comprehensive
assessment can be found in the IPL Climate Change Report (2021). (1)
The COVID-19 pandemic has presented a range of challenges across
the IPL Group. At all times the focus has been on the health and
safety of the Group’s employees, including their mental well-being
while still ensuring business continuity. The 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.
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, modern slavery, 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 been increasing its disclosures against the Task Force
on Climate-Related Financial Disclosures (TCFD) guidelines
since 2018. The risks and opportunities faced by the Group,
including the physical risks associated with climate change,
have informed IPL’s climate change strategy. Like other business
risks and opportunities, those associated with the physical
impacts of climate change and the global energy transition
require strong oversight and strategic management. Risks and
opportunities have been incorporated into the Group’s strategy,
and comprehensive governance structures are in place to manage
them. These are described in Chapter 1 of the IPL Climate Change
Report (2021).
Through engagement with an expert third party in 2021,
a comprehensive assessment has been completed of IPL’s
physical and transitional risks and opportunities associated
with climate change. The assessment was conducted in line
with TCFD guidelines using four future climate related scenarios
created specifically for IPL. These were 1.5º, 2º, Inevitable Policy
Response (IPR) and Current Trajectory (3º+) scenarios. These
scenarios, the risks and opportunities identified, their materiality
and the management strategies for each are reported in detail
in Chapter 4 of the IPL Climate Change Report (2021).
Employee health and welfare has been at the core of IPL’s
COVID-19 response. Flexible work arrangements have been put
in place, where practical. Mental health awareness sessions
have been held for employees and the Employee Assistance
Program continues to be available globally for those who require
additional assistance.
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.
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 and modern slavery laws, and the
undertaking of due diligence processes as required.
»
IPL has dedicated resources to manage and monitor business
processes against the compliance requirements for ethical
procurement, including modern slavery.
» 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 has a compliance management module in its primary HSEC-
management software system which is used to actively monitor
compliance and licence requirements across the business.
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, illegal or unethical
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.
(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.
32
OPERATING & FINANCIAL REVIEWIncitec Pivot Limited Annual Report 2021 Broad Risk Category
Description and potential consequences
Treatment strategies employed by IPL
People
Despite the initial impact on employment from the COVID-19
pandemic, labour markets for highly-skilled roles remain challenging,
particularly in Australia and the United States, where IPL’s main
manufacturing assets are located.
»
Manufacturing
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 people 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 (including high baseline
water stress, resulting from climate change), natural disasters and
severe weather events, unforeseen human error, sabotage, terrorist
attacks and other unforeseen events which may disrupt IPL’s
operations and materially affect its financial performance.
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.
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.
IPL moved from a global manufacturing model to a new regional
model during 2021 which has required management of significant
business change which may result in some short term risks in relation
to operating efficiencies, resourcing constraints and project execution.
IPL’s People Strategy is focused on developing a diverse and
inclusive business with the right people in the right roles, who
are inspired and engaged. This includes controls such as building
leadership capability aligned to an IPL culture that supports IPL’s
employee value proposition, market competitive STI and LTI
programs and inclusion and diversity strategies.
»
The Group has policies and procedures, including flexible
working arrangements and competitive compensation structures,
designed to help attract and retain the workforce.
» Management identifies critical roles and implements policies
to help ensure that appropriate succession and retention plans
are in place for those roles.
»
»
»
»
»
»
»
»
»
»
The Group continues to make manufacturing reliability a key
strategic driver for the business. The objectives are to achieve
safe, reliable and cost competitive operations underpinned by
High Reliability Organisation (HRO) mindsets. Key priorities
include stabilising production at Waggaman, Louisiana through a
Reliability Taskforce and specific tactical plans to deliver reliability
improvement and build capability across US Nitrogen plants.
Focused improvements are underway to improve the consistency
and efficiency of Turnaround and Capital Project execution.
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 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
through exploration activities on 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 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 started a life of mine project at Phosphate Hill
with one leg of the work specifically looking at alternative
sources of sulphuric acid for the Phosphate Hill operation to
mitigate any potential loss of sulphuric acid from a Glencore
smelter closure.
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.
The new regional manufacturing model is designed to enhance
operational efficiencies in the medium to longer term by
integrating manufacturing sites with their regional supply chains,
frontline operations and customer facing functions. However, a
global reliability and asset strategy will remain in place to ensure
that manufacturing standards, reliability improvements and
capital investments are optimised across the Group.
33
OPERATING & FINANCIAL REVIEWIncitec Pivot Limited Annual Report 2021 Broad Risk Category
Description and potential consequences
Treatment strategies employed by IPL
Customer
Supply Chain
Commodity Price
Demand
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.
»
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.
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. Additionally, severe weather
events, such as flooding and significant storms, in addition to the
continued impacts of COVID-19 on global supply chain logistics,
can also impact IPL’s supply chains, plant uptime and earnings.
»
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.
» More detail on management strategies to mitigate the impacts
of future extreme weather events on IPL’s supply chains can
be found in the IPL Climate Change Report (2021).
»
»
»
»
»
»
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 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.
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 and severity of adverse weather
conditions, as well as changes to growing regions in the Fertiliser
business, could impact the future profitability and prospects of IPL.
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.
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.
34
OPERATING & FINANCIAL REVIEWIncitec Pivot Limited Annual Report 2021 Broad Risk Category
Description and potential consequences
Treatment strategies employed by IPL
Finance
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.
Security
IPL’s operations are vulnerable to sabotage, terrorist attacks
and other unforeseen events which may disrupt IPL’s operations
and supply chain and materially affect its financial performance.
Cyber
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’s information technology and/or operating technology
may be the target of cyber-attacks which could result in
commercial, financial, health and safety, environmental,
community or reputational impacts. The potential consequences
include harm to personnel or the environment, loss of business
or customer, financial loss, interference with compliance with
regulations, interruption to operational business or processes,
interruption to the ability to make, sell and ship product and
damage to plant operating equipment.
»
»
»
»
»
»
»
»
»
»
»
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.
IPL’s explosives and fertiliser storage facilities are fit-for-purpose
and appropriately secured to minimise the risk of an unknown
loss of product.
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.
35
OPERATING & FINANCIAL REVIEWIncitec Pivot Limited Annual Report 2021 S
S
E
N
I
S
U
B
I
E
L
B
A
N
A
T
S
U
S
A
G
N
I
E
B
36
We are
committed to the
long-term sustainability
of our businesses, the
environment and the
communities in
which we operate
Incitec Pivot Limited Annual Report 2021
37
Incitec Pivot Limited Annual Report 2021 ZERO HARM: OUR NUMBER ONE PRIORITY
The safety of our people, customers and community is our number one priority at IPL, with Zero
Harm deeply ingrained in our culture. Nothing matters more than ensuring people get home safely
every day. Zero Harm is integral to the way we work and is essential to our ability to operate as a
responsible organisation.
This year, we continued to shape the safety performance of the
industries in which we operate and were guided by our ambition
to achieve industry leading performance in occupational health,
personal safety, process safety and environmental compliance.
Our strong Zero Harm culture is underpinned by our Zero Harm
strategic driver, which integrates the elements of health, safety,
environment, and community in one framework. Expressed as
four key themes — Simplify, Get the Fundamentals Right, Lead
and Engage and Strengthen our Learning Culture — they act as
principles and provide a common language that guides our efforts
to achieve Zero Harm.
Our safety performance is tracked against our three-year strategic
plan which targets the delivery of global Zero Harm initiatives
and is supported by our global collaboration networks.
2021 Safety Performance
The Total Recordable Incidents Frequency Rate (TRIFR)
improvement trend experienced over previous years did
not continue, with a FY21 TRIFR of 0.87.
In response to this we have enacted several interventions
to reverse the trend including safety stand downs, refreshed
Take 5! training, and beginning to roll out the re-designed
SafeTEAMS training throughout our workforce. We also identified
the need to increase focus on visible leadership in the field and
engagement to improve personal safety performance in the
COVID-19 operating environment.
Our Environmental performance experienced a substantial
improvement with zero Significant Environmental Incidents
reported. The achievement of our target performance in significant
event management for both investigations and actions completed
was also achieved.
Process Safety Incidents increased with 38 in FY21 compared to
24 last year. This increase is not due solely to an increase in the
number of events occurring, but also reflects improved reporting of
events. The importance of maintaining focus on loss of containment
process safety events, and monitoring progress against completion
of process safety improvement plans for both group and business
units, will drive the improvement of performance which we are
committed to. (1)
Zero Harm Snapshot
IPL TRIFR (2) (Number of recordables)
TARGET
ZERO HARM – Key Metrics
TRIFR
Significant Environmental Incidents
Potential High Severity Incidents
Process Safety Incidents
FY21
FY20
FY19
0.87
0.58
0.80
0
36
38
1
34
24
3
33
33
Environment
Zero
Significant Environmental Incidents (3)
2021 Goal
Zero Significant Environmental
Incidents
Target
Achieved
Significant Event Management
2021 Target
Target achieved for both investigations
and actions completed
Target
Achieved
(1) Tier 1 and 2 Process Safety Incidents as defined by the Centre for Chemical Process Safety.
(2) TRIFR is calculated as the number of recordable incidents per 200,000 hours worked and includes contract workers.
(3) Significant Environmental Incidents as assessed against IPL’s internal risk matrix with consequences of 5 or higher on a 6-level scale.
38
1.381.210.970.730.820.950.940.800.580.870.000.200.400.600.801.001.201.401.60FY12FY13FY14FY15FY16FY17FY18FY19FY20FY21(109)(92)(76)(58)(65)(66)(68)(59)(41)(64)Incitec Pivot Limited Annual Report 2021 Keeping Everyone Safe from COVID-19
As we continue to operate in a COVID-19 environment, our key
focus at IPL is the health and safety of our people. Both physical
and mental health awareness and support for our employees
are key focus areas, as we continue to face new challenges
and uncertainties. We are proud of our people, customers, and
communities who have demonstrated remarkable resilience
throughout the pandemic.
Our Crisis Management Team has remained in place and effectively
monitors the changing situation in all the areas we operate in
globally and responds accordingly to the unexpected changes
brought on by the pandemic. Our COVID-19 response team is also
working to support and encourage the vaccination of our workforce.
Theme
Snapshot of IPL’s Zero Harm key achievements in FY21
Simplify
We support people with
easy to understand and
use systems.
Integrated HSEC Assurance
and Governance activities
throughout the global
business by developing a
Global Layered
Assurance Procedure.
Simplified systems
by transitioning all
environmental licenses,
permits and regulatory order
compliance management
requirements to our global
online systems platform.
Developed a Global
Manufacturing Operations
Risk Management process.
Get the Fundamentals
Right
We define our minimum
expectations: we will
be excellent at the
fundamentals.
Implemented improved
Transportation Standards
for heavy vehicles to improve
industry safety standards.
Increased visibility and
ownership of Environmental
Compliance Management
through improved
automation, systems,
practices, and continued
awareness training.
Revised and implemented
Take 5! personal risk
assessment across all sites.
Lead and Engage
We empower, develop
and expect everyone to
be leaders in Zero Harm.
Standardised our company
Health and Wellbeing
Program by developing
and implementing a health
calendar with monthly topics,
mental health workshops,
psychosocial risk assessments
and global campaigns
such as World Safety Day
and R U OK? Day.
Embedded Global Functional
Collaboration Networks
for Process Safety, Health
and Wellbeing, Safety and
Environment.
Refreshed and implemented
the SafeTEAM’s training
content (plus development of
supporting embedding tools)
to link improving personal
safety performance and the
continued improvement in
reporting culture.
Strengthen our
Learning Culture
We learn, we share
and we fix for good.
Focused on creating an
environment to optimise
HSEC Learning from High
Consequence Events to
ensure that we continue to
have appropriate safety
systems in place.
Developed a dashboard to
visually communicate the
environmental compliance
status of sites and continued
to focus on key sites for
risk of environmental
non compliance.
Strengthened our safety
learning culture by
implementing the
IPL Rules to Live By Guide
across all sites.
39
Incitec Pivot Limited Annual Report 2021 OUR PEOPLE
Our FY21 – 23 ‘People First’ Strategy has been developed around
four strategic themes: Engaging Leaders, Talented People, Inclusive
Workplace and Partnership.
Delivering on our People First strategic commitments provides
employees with a leadership experience grounded in a set of
human principles that brings meaning and purpose to the work
they fulfil, performed in inclusive, collaborative environments,
offering growth opportunities that inspire and engage.
We encourage our People to participate through partnering with
teams across our global footprint to share experiences and ideas
at all levels of our organisation. We believe the whole is greater
than the sum of its parts and it’s through this principle that we
build a strong sustainable future for all stakeholders.
40
Incitec Pivot Limited Annual Report 2021 Strategic focus area Highlights
Engaging leaders
Talented People
Inclusive workplace
Partnerships
Launched a management skills development program within DNAP and IPF. This program rounds out a
comprehensive approach to developing practical skills in our frontline leaders across the following areas:
safety leadership skills via the Safe Teams program; management skills via the Frontline Management
program and team leadership skills via the Leadership Foundations program.
Delivered our biennial global employee engagement survey and our operating model survey
incorporating critical feedback into our global leadership conference. Further work is planned across the
business in FY22 to progress our culture of care and safe ground, our leader capability, alignment and
employee development opportunities.
Refreshed our global approach to our talent and succession practices to ensure we have a strong
pipeline of capability for future roles.
In Australia, we strengthened our partnerships with universities and revamped our Graduate, Vacation
and Workplace Integrated Learning Programs to allow us to recruit highly capable new talent into the
business to support growth and future proof the organisation. A global roll-out is planned.
The Nobel Academy (in the Americas) developed internship and graduate partner relationships with
universities across the United States, including University of Utah, Brigham Young University, Colorado
School of Mines, Missouri University of Science & Technology, University of Kentucky, Tuskegee University,
University of Connecticut, Saint Louis University and Weber State University.
The DNAP Indonesian business launched a culturally relevant leadership program called Engage &
Grow. The program is multifaceted and aims to develop leadership skills, employment law knowledge
and drive engagement activities within the workforce. This has been implemented in our Berau region
and is planned to be rolled out across our Indonesia operations in FY22.
The Salt Lake City regional office strengthened inclusion action planning with the launch of a team to
address the role of women in our business. The team includes diverse individuals from across corporate
and operational roles. Together they formulate action plans linked to strategy and take on goals to move
the needle on increasing diversity in recruiting, retaining diverse employees and ensuring those diverse
employees have equal opportunities for promotion to leadership roles in the company. As part of this work
an inclusion event program has been launched to encourage networking and connectivity.
At our Helidon (Australia) operations, we partnered with a local community organisation called TRAMS
to recruit candidates for whom English is not their first language. Additionally, we commenced a program
with Indigenous Workstars and Job Trail to improve indigenous employment outcomes in our Australian
business units.
Undertook the integration of Alpha Explosives (California), former JV Partner and Hermitage Explosives
(Tennessee), former distributor into the DNA U.S. business. Focused on Zero Harm and cultural integration
action plans.
Across all parts of the Americas business, we heavily promoted mental wellbeing topics – with leaders
sharing personal stories throughout the business. We also continued to promote our Americas Employee
Assistance Program to further normalise its use. Pleasingly, this resulted in an increase in program use.
Across DNA we completed a comprehensive review of our employee benefits and improved
vacation entitlements, provided transportation of breast milk for travelling parents, updated our tuition
reimbursement program and provided enhanced employee discount programs for all employees
in the Americas.
We continued our American Australian Association scholarship program providing education
opportunities for veterans with future employment possibility.
The IPL Reconciliation Action Plan was developed and launched across all Australian based business units.
To support its implementation, we hosted education and awareness sessions for employees partnering
with an external organisation specialising in indigenous engagement. Our Mt Isa Manufacturing plant
held a NAIDOC week celebration including a Welcome to Country and smoking ceremony with their local
community indigenous elders. All our manufacturing plants in Australia display an Acknowledgement of
Country plaque.
To support bifurcation within shift rosters, employees at Gibson Island operations (Australia) agreed
to vary the Enterprise Agreement. This was one of the first Covid-19 enterprise agreement variations
of this type to be approved by Fair Work Australia.
41
Incitec Pivot Limited Annual Report 2021 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 2021. This year, we
designed our materiality assessment to identify the broader megatrends that are currently shaping our operating environment and impacting
on the ways in which we create value. These are shown on the following page along with 2021 highlights and our 2023 Ambition for each.
Our 2021 Sustainability Report will be released in March 2022 and will describe in more detail these megatrends, our identified material
issues and topics, our materiality assessment process, our stakeholders and engagement process and how we are leveraging key ESG trends
to create value. Our annual Sustainability Reports and GRI Index and Data supplements can be accessed at https://www.incitecpivot.com.au/
sustainability/sustainability-report.
Creating Shared Value Sustainably
The natural resources our products unlock are
central to modern life and essential nutrition.
We are committed to unlocking the potential
in the Earth to help people grow, by sustainably
delivering these products to our mining, quarry
& construction, and farming customers into the
future. During 2021, our products were used to
help our customers unlock approximately:
IRON ORE
499
million
tonnes
DIAMONDS
11.8
million
carats
HORTICULTURE
(CARROTS, ONIONS,
POTATOES,
TOMATOES)
0.9
million
tonnes
OTHER
BROADACRE
GRAINS
7
million
tonnes
COTTON
0.2
million
tonnes
COPPER
721
kilotonnes
GOLD
9.6
million
ounces
QUARRY &
CONSTRUCTION
MATERIALS
673
million
tonnes
MET COAL
110
million
tonnes
THERMAL
COAL
160
million
tonnes
SUGAR
CANE
3
million
tonnes
PASTURE
(BEEF,
LAMB &
DAIRY)
6
million
tonnes
WHEAT
12
million
tonnes
FA S H I O N
S U P E R M A R K E T
J E W E L L E R Y
42
Incitec Pivot Limited Annual Report 2021 2021 Highlights and 2023 Ambition
Megatrends
Shaping How
We Create Value
2021 Highlights
2023 Ambition
» Releasing our first stand-alone TCFD aligned IPL Climate
Change Report.
» Updating our climate-related financial risks & opportunities using
1.5º, 2º, IPR (Inevitable Policy Response) and 3º+ Scenarios.
» Developing Our Net Zero Pathway and a pipeline of decarbonisation
To have capital project/s
underway to achieve
our short-term
5% absolute GHG
reduction by 2025.
Transitioning to a low
carbon economy
initiatives to materially reduce GHG emissions from our major
manufacturing facilities.
» Connecting our Gibson Island manufacturing facility
to a recycled water source.
» Working with the Department of Environment & Science (QLD)
to repurpose first-flush high nutrient rainwater from waste to
beneficial reuse at our Townsville PDC.
To achieve a 25% reduction
in Australian Municipal
Water Use by 2023.
Water Stewardship
» Modern Slavery Questionnaires sent to 2,700 suppliers via the
ethiXbase platform.
» Projects to reduce the impact of physical supply chain disruptions at
our Phosphate Hill and Waggaman, Louisiana manufacturing sites.
» Significant work to reduce reliance on single source suppliers
Supply Chain Resilience
globally.
»
»
Introduction of the IPL Talent Ambition to increase the contribution
from diverse talent.
Launch of the IPL ‘People First’ Strategy. For more details see
our ‘People’ section.
» Conducting the 2021 IPL Global Employee Engagement Survey.
» Release of our second Reconciliation Action Plan to ensure a
workplace culture that understands, values and respects the
histories, cultures and contributions of Australian Aboriginal
and Torres Strait Islander peoples.
Future of Work
Soil Health
Innovation and
Technology
»
Launch of the IPF Soil Health Package.
» A new research partnership to develop sustainable ‘smart fertilisers’.
»
Transitioning our fertiliser bag recovery and recycling program to
Big Bag Recovery, a new Australian Government accredited product
stewardship scheme.
To be the leading soil
health business in Australia
connected to channels and
growers with a globally
competitive supply.
» Partnering with Fortescue Future Industries to investigate green
ammonia production at our Gibson Island manufacturing site.
» Partnering with Keppel Infrastructure and Temasek to
investigate green ammonia production at Newcastle
and Gladstone in Australia.
» Customer partnership to quantify the GHG reductions associated
with using our DeltaE explosives technology.
» Appointing a Chief Strategy and Sustainability Officer to the
IPL Executive Team.
» Achieving our 2021 target of Zero Significant Environmental
Incidents.
Broader awareness of
the importance of ESG
» Reviewing our policies to ensure the protection of sites
of cultural significance to our Indigenous employees
and communities.
To be leveraging our
leading technology and
manufacturing expertise
in a collaborative and
innovative way to produce
sustainable products with
lower emissions for
our customers.
Greater leveraging of key
ESG considerations to create
long-term value through
further integration into
our business strategy.
43
To ensure resilient
and competitive
supply chain solutions
are in place to support
new products and business
growth objectives.
To be a globally
recognised and respected
safety leader with
the best people in
the right roles through
execution of our
‘People First’ Strategy.
Incitec Pivot Limited Annual Report 2021 Our Use of Natural Resources in 2021
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.
For this reason, the production of these essential agricultural and
mining products is currently based on a hard-to-abate chemical
process. During 2021, we focused on investigating the new
technologies required to decarbonise and developed a potential
Net Zero Pathway to 2050. This allowed us to accelerate our GHG
reduction targets and set:
» a short-term absolute reduction target of 5% of operational
(Scope 1 & 2) GHG by 2025;
»
a medium-term absolute reduction target of 25%
of operational (Scope 1 & 2) GHG by 2030; and
» an ambition to achieve net zero GHG by 2050
or sooner if practicable.
To support these targets, we have identified the technologies and
key enablers required to achieve net zero by 2050 and developed
a pipeline of decarbonisation initiatives to materially reduce our
operational emissions. We have also identified opportunities to
reduce our Scope 3 emissions and will continue to focus on these
in 2022. See the IPL Climate Change Report (2021) for more details.
Our 2021 global energy use decreased by 14% since 2020 due
to an 18% decrease in ammonia production associated with major
plant outages. This also decreased our Scope 1 GHG emissions by
14%. Lower plant efficiencies due to restarts increased our GHG per
tonne of ammonia by 2% on last year, which is an 8% reduction
against our 2015 baseline. Our purchased electricity and Scope 2
GHG emissions remained stable (increasing by less than 0.5% and
0.8% respectively), as did our Scope 3 Value Chain emissions, which
increased by 1%. This data is shown graphically below.
Total direct and indirect greenhouse gas emissions
Million tonnes of CO2e
Scope 1 Scope 2 Total GHG emissions
TOTAL GLOBAL ENERGY USE
60,629,371 GJ
PURCHASED ELECTRICITY
2,074,639 GJ
14%
0.5%
(3.6% of total global energy use)
SCOPE 1 GHG
3.1m tCO2e
SCOPE 2 GHG
0.3m tCO2e
SCOPE 3 GHG
6.0m tCO2e
14%
0.8%
0.1%
Total Operational GHG: 3.4m tCO2e
Value Chain Emissions
OPERATIONAL GHG INTENSITY & PRODUCTION
8%
18%
tCO2e/tAmmonia
against 2015 baseline
Ammonia Production
against 2020
Our 2021 total global water withdrawal decreased by 5% on 2020
withdrawal, to 41,859 megalitres (ML). We discharged 25,501 ML
to the environment, 98.5% of which was clean cooling water
returned under EPA licence to the US rivers from which it was
taken. This brings our net water use to 16,690 ML in 2021.
Gross Water
Use 41,859 ML
Discharge
25,501 ML
5%
14%
GHG intensity per tonne of ammonia produced
tCO2e
Trend
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 (WRI) 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 WRI Water
Tool as being located in areas which may experience water stress
by 2025.
One high-use water site, Gibson Island in Brisbane, Australia, is
in a catchment identified as currently experiencing high baseline
water stress (40-80%) and this is projected to double by 2030.
During 2021, we completed construction of a pipeline to bring
recycled water into the site. This will leave around 6,000 kL per day
in Brisbane dams for use by our local communities. This underpins
our target of 25% reduction in municipal water by 2023 for our
Australian businesses. For more details on this management plan,
see the Case Study in the IPL Climate Change Report (2021).
44
0123452010201120122013201420152016201720182019202020211.502.002.503.00201020112012201320142015201620172018201920202021Incitec Pivot Limited Annual Report 2021 Water Withdrawal
by Source
Surface water: 69.3%
Ground water: 18.2%
Municipal water: 11.7%
Recycled water: 0.5%
Storm water: 0.5%
Desal water: 0.003%
Water Discharge
by Destination
Surface water: 99.1%
Ground water: 0.9%
Sewers: 0.003%
98.5% clean water
to surface waters
41,859 ML
Clean
water to
surface
waters
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 sector, 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.
The 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 2016 are represented below.
Dimension
Economic
Environmental
Social
Total for IPL
Chemicals sector average
2016
2017
2018
2019
2020
2021
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
81
69
65
72
30
In 2021, 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 eighth year running. Companies in the FTSE4Good Index
Series have met stringent environmental, social and governance
criteria. Other indices and memberships are shown to the right.
Y
k
2021
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 the
WRI Water Tool to assess and report on
water risks. Our most recent CDP Water Security
report can be downloaded from our website.
Bloomberg GEI Member since 2019
EcoVadis Member since 2015
EcoVadis is assessed biennially.
45
Incitec Pivot Limited Annual Report 2021 OUR CLIMATE CHANGE STRATEGY
We recognise the challenge of reducing our own emissions while continuing to provide products which help people grow by unlocking the
potential in the Earth. We believe that innovative fertiliser and explosives products and services will play an increasingly important role in
reducing GHG 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.
Together with our policy commitments, these strategic driver components form the four pillars of our Climate Change Strategy.
ENSURING STRONG
GOVERNANCE
Talented and Engaged People: The right people
in the right roles within a culture of innovation, with
climate change management roles, responsibilities
and accountabilities clearly defined, and with regular
reporting through to the Board.
REDUCING OPERATIONAL
EMISSIONS
Manufacturing Excellence: Reduce emissions, increase
efficiencies and explore new technologies.
DELIVERING PRODUCTS THAT
REDUCE CUSTOMER EMISSIONS
Leading Technology Solutions: Develop and deliver
products and services which reduce customer GHG.
Customer Focus: Partner strategically for customer
solutions and sustainable product use.
2021 HIGHLIGHTS
Formed the IPL Decarbonisation and Energy
Transition Steering Committee.
Updated KPIs relating to climate change
in executive remuneration.
Released the IPL Climate Change Report (2021).
Appointed a Chief Strategy and Sustainability
Officer to the IPL Executive Team.
Developed our Net Zero Pathway
and Net Zero 2050 ambition.
Brought our 5% absolute reduction
target forward to 2025.
Set a medium-term absolute
reduction target of 25% by 2030.
Partnered with Fortescue Future
Industries to investigate green
ammonia production at our Gibson
Island manufacturing site.
Partnered with the University of
Melbourne to develop a new class
of more sustainable ‘smart fertilisers’
as part of an Australian Research
Council industry transformation Hub.
Established a customer partnership to quantify
the GHG reductions associated with the use of
our DeltaE explosives technology.
Reassessed our climate-related financial risks and
opportunities using new 1.5º and IPR (Inevitable
Policy Response) scenarios and updated 2º
and 4º scenarios.
Built our resilience to physical climate risks through
projects at our Phosphate Hill, Waggaman and Gibson
Island sites.
1
2
3
4
46
Incitec Pivot Limited Annual Report 2021 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.
The MD & CEO and Executive Team, develop the Group’s business
strategy, planning, investment decisions and risk management
processes. The MD & CEO is responsible for delivering the climate
change strategy approved by the Board.
The MD & CEO is Chair of the IPL Decarbonisation and Energy
Transition (DET) Steering Committee, which comprises selected
executives and other senior management. The MD & CEO and
the DET Steering Committee are responsible for the development
of the Company’s Net Zero Pathway and the strategic management
of business risks and opportunities related to climate change,
including the incorporation of opportunities and key trends into
business strategy.
Building Climate Change into our
Business Strategy
The DET Steering Committee provides ongoing focus and executive
sponsorship of projects and strategic opportunities as we seek to
leverage key decarbonisation megatrends to exploit new profitable
markets in our core geographies. We recognise that the global
energy transition associated with climate change is increasingly
impacting on our two customer facing businesses. For example,
long term growth trends in the mining sector are shifting away from
thermal coal towards the metals required for the transition and this
is reflected in industry forecasts of commodities demand. These
trends have been incorporated into our business strategy through
aligning our explosives business growth with predicted customer
demand profiles by segment and the delivery of technology
solutions to leverage these.
Trends in agricultural markets include not only high efficiency, low
GHG fertilisers and soil carbon solutions, but a broader focus on
more sustainable growing practices, precision agriculture and soil
health. Following the strategic review of the fertilisers business
undertaken in 2020, our long term strategy is to grow our IPF
business 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. This strategy will be leveraged through our
expansive distribution footprint to drive new growth products and
services towards soil health.
The energy transition also presents new opportunities for business
growth for IPL. Australia’s abundant renewable resources make
it a prime location for the rapid development of renewable
hydrogen. IPL has a core competency in the manufacture, storage
and transportation of ammonia and is well placed to play a
role in ‘green hydrogen’, and green ammonia for a low-carbon
economy. We aim to be an early participant in these new industry
opportunities, and we will achieve this by proactively identifying
projects, products and partnerships that align with our existing
competencies and enhance our core business.
(1) Our short and medium-term targets are absolute reductions against our 2020 baseline year
operational (Scope 1 and Scope 2) emissions of 3,961,222 tCO2e.
(2) Subject to economic feasibility of CCUS at Waggaman, Louisiana.
(3) Our ambition to achieve net zero emissions by 2050 is based on the assumptions that; green
hydrogen reaches economic parity with natural gas for hydrogen production by 2040; US grid
decarbonisation is achieved by 2035-2040; Australian grid decarbonisation is achieved by
2040; and carbon offsets are available for residual emissions that are not practical to abate.
OUR TARGETS
SHORT TERM TARGET
5% absolute reduction (1)
2025
MEDIUM TERM TARGET
25% absolute reduction (2)
2030
LONG TERM AMBITION
NET ZERO (3)
2050
Why our Net Zero Pathway is not linear
IPL’s manufacturing processes are considered to
be ‘hard-to-abate’ processes. This means that
not all of the technologies required to reduce
our GHG emissions are currently available. For
example, we own and operate six ammonia
plants globally, for which no abatement
technology currently exists. Since they are
wholly owned and domestically operated close
to our markets, we have the opportunity to
decarbonise these assets while maintaining
employment for a just transition, and vertically
integrated secure supply chains for ammonium
nitrate and fertiliser manufacture.
Our Climate Change Report (2021) describes
the work we have done to identify the required
technologies to decarbonise and to estimate, as
accurately as we can, the time frames in which
these will be available for implementation.
Based on the results of this work, it is unlikely
that our trajectory towards Net Zero will
be linear - it will begin more slowly and
then accelerate after 2030, with the greater
reductions required to reach net zero by 2050
occurring towards and after 2040.
In line with this work, we have set current
short and medium term targets which
transparently reflect our expected pathway
and are underpinned by a pipeline of actual
decarbonisation initiatives. While these are
at varying levels of development, they are
all considered technologically ready. See the
footnotes to the left.
For details on our Net Zero Pathway see
the IPL Climate Change Report (2021)
47
Developed our Net Zero Pathway
and Net Zero 2050 ambition.
Brought our 5% absolute reduction
target forward to 2025.
Set a medium-term absolute
reduction target of 25% by 2030.
Partnered with Fortescue Future
Industries to investigate green
ammonia production at our Gibson
Island manufacturing site.
Incitec Pivot Limited Annual Report 2021 CARING FOR OUR COMMUNITIES
At IPL, we are committed to building long lasting and meaningful relationships with our local
communities and are guided by our company value of “Care for the Community & our Environment”.
We believe that we have a responsibility to make a positive social
and economic contribution to the communities in which we operate,
by providing local employment, prioritising local suppliers whenever
possible, and creating shared value for our urban, regional, mining
and farming communities.
We encourage our site-based teams to engage with their local
community members, business representatives, charities,
governments, and community organisations to ensure that
engagement decisions are made locally and at the site level,
where community needs are best understood.
Guiding our approach to community engagement, social
investment, cultural heritage and working with Indigenous
communities is our Sustainable Communities Policy, which
outlines our commitment 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 safety of our people and the communities in which we
operate must always come first, which is why IPL has robust safety
measures in place to monitor, manage, and prevent any potential
risk or impact to our workforce and the local communities in which
we operate.
Due to the potentially hazardous nature of industrial and agricultural
chemicals, our site leaders are well trained to cooperate and engage
with local community leaders and first responders on how to keep
the community safe in the unlikely event of an accident.
To ensure our high safety standards are maintained we hold regular
emergency response drills involving Emergency Services and first
responders across certain sites that are required to do so by law or
are listed as Major Hazard Facilities. 19% of our sites in Asia Pacific
and 53% of our sites in the Americas are listed as Major Hazard
Facilities. In addition, our sites regularly engage with communities
and first responders to share community safety plans and
emergency procedures in the event of a potential incident.
Community Investment
There are two key components of our Community Investment
Framework. The first is our Dollar-for-Dollar program. It matches
employee donations and site-based fundraising efforts (up to
A$20,000 annually) where they align with our Principles for Giving.
The second is our Workplace Giving program. This is a voluntary
workplace giving scheme for Australian employees whereby they
can donate to one or more of the company’s nominated not-
for-profit charities with the assurance that IPL will match these
donations up to A$20,000 each year.
During 2021, A$440,970 of community investment was made
globally through IPL’s Dollar-for-Dollar program, the Australian
Workplace Giving program and various site-based initiatives,
including in-kind donations and employee volunteer hours.
100% of both local and Group donations were made in line
with our Principles for Giving, with 7% allocated to improving
education, 39% contributing towards health and sport initiatives,
and 54% to local community development.
Local Sites
Education
OUR
PRINCIPLES
FOR
GIVING
OUR
AREAS
OF FOCUS
Local
Initiatives
Health
IPL Values
Community
Development
48
IPL COMMUNITY
INVESTMENT FRAMEWORK
Our Framework preferences local approaches,
enabling each IPL business and site to respond
to the distinct needs of their communities.
Education: Providing support for childhood, adult
and indigenous specific education activities.
Health: Providing support for activities and
organisations working towards better physical
and mental health.
Community Development: Supporting activities
that enrich community life & enhance the
environmental, social & economic sustainability
of local communities.
IPL Values: We fund initiatives that are aligned
to our values & business strategy, and are integral
to the sustainability of our communities.
Local Initiatives: We support initiatives that help
local organisations develop skills & resources to
bring positive and lasting benefits to communities.
Local Sites: We support activities that provide
solutions to local challenges & opportunities in
the communities where our people work and live.
Incitec Pivot Limited Annual Report 2021 COMMUNITY ACTIVITY HIGHLIGHTS
Community events were held around the world to support the communities in which we live and work. A small selection from FY21 include:
Community Tree Planting at Geelong Operations,
Australia
Dyno Nobel Americas Annual support
of For The Kids, USA
Each week “For The Kids” supplies and delivers over 3,000 food
items to inner-city kids of Salt Lake City, Utah. Every year, Dyno Nobel
conducts a food-drive event where our Utah based employees from
Lehi, Tradestar and the corporate office donate Thanksgiving dinner
food items to over 300 families in the community. The dinners are
assembled and delivered to the families the day before the holiday.
Cheyenne Frontier Days Foundation, USA
Cheyenne Frontier Days is a major Rocky Mountain regional event
that takes place in Cheyenne, Wyoming with numerous Western
heritage activities and experiences. The Foundation was established
to support the charitable and educational aspects of the community
and provides scholarships for the volunteers and their dependents
of Frontier Days. Dyno Nobel’s Cheyenne Nitrogen Plant employees
participate, volunteer, and contribute to the success of the event
every year. Dyno Nobel donations have directly provided emergency
monetary assistance to help volunteers cope with bills during serious
illness or accident, death of a volunteer or member of their family.
Our Geelong operations team came together with their community
to organise a COVID-safe tree planting activity with staff and local
residents. Following a regular meeting with the local community,
the IPF team contributed funding and volunteers to help enhance
some of the land holdings opposite our plant, by planting 1000
indigenous trees to create a wildlife corridor and space that the
community can enjoy.
Dajarra Rodeo and Campdraft in Mt Isa, Australia
The Dajarra Rodeo is one of the biggest bush and social events in Mt
Isa, it attracts competitors from all-around North-Western Australia.
The popular action-packed weekend was this year sponsored by
IPL and was held with the help of Cloncurry Shire Council and local
volunteers. All funds raised from the weekend go to help local
community groups in Mt Isa.
Water Supply Boost at Moranbah, Australia
In Australia, water supply is a critical issue for many of our local
communities, particularly those inland. During the year, our Dyno
Nobel site in Moranbah donated 50,000 kL of water from its site
allocation to the township’s water supply. The 50,000 kL of water
is the equivalent of five to six days’ worth of water for the local
Moranbah community and is worth approximately A$133,000.
This gesture was welcomed by the Isaac Regional Council and the
Moranbah community.
Big Grassy River First Nation, Canada
Supporting indigenous peoples located in the communities in
which we operate is a critical part of our Community Engagement
Strategy. This year our Canadian operations donated over A$10,000
for community development to the Big Grassy River First Nation
community of 285 residents in Northwest Ontario, Canada.
49
Incitec Pivot Limited Annual Report 2021 E
C
N
A
N
R
E
V
O
G
50
We are
committed to doing
business ethically and
in accordance with
high standards
of corporate
governance
Incitec Pivot Limited Annual Report 2021 51
Incitec Pivot Limited Annual Report 2021 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
52
Incitec Pivot Limited Annual Report 2021 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 seven directors, including six 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 (4th Edition)
(ASX Recommendations) throughout the 2021 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.
IPL’s 2021 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 2021.
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.
The Code of Conduct applies to all directors and employees of the
Company and each subsidiary, partnership, venture and business
association, including agents and other contractors that are
effectively controlled by the Company or act on its behalf.
The Code of Conduct is supported by a number of governance
policies to guide how IPL does business and outline expected
standards of behaviour, including:
» Continuous Disclosure Policy – establishes IPL’s procedure for
compliance with its continuous disclosure obligations and
provides guidance for the identification of material information
and timely disclosure of IPL’s activities to the market.
» Securities Trading Policy – prohibits IPL directors, employees and
contractors and their related parties from dealing in IPL securities
if they are in possession of price sensitive information, provides
for blackout periods during which directors and employees must
not trade in IPL securities, and sets out the procedure for
obtaining required approvals to trade in IPL securities.
» Anti-bribery Policy – prohibits the making of unlawful or
improper payments to any individual or entity with the
intent of securing a business advantage for IPL.
» Human Rights Policy – articulates the fundamental elements of
IPL’s approach to human rights and how IPL demonstrates its
commitment to respect human rights in line with the Universal
Declaration of Human Rights and other international frameworks.
» Modern Slavery Policy – defines the processes that identify and
address modern slavery risks in IPL’s supply chains and within
IPL’s own operations.
» Supplier Code of Conduct – illustrates the guiding principles
that IPL has adopted as part of its sourcing and procurement
processes.
» Risk Management Policy and Group Risk Framework – provides
guidance and direction on the management of risk in IPL and
states IPL’s commitment to the effective management of risk.
» Whistleblower Protection Policy – encourages IPL directors,
employees and contractors to confidentially report unethical or
illegal conduct and raise concerns regarding actual or suspected
contraventions of ethical or legal standards, without fear of
victimisation, reprisal or harassment.
53
Incitec Pivot Limited Annual Report 2021 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 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
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 directorships/appointments
International Fertilizers Association – Chair
Market Intelligence Committee and Executive
Board Member
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,
the University of Queensland – Advisory Board
Member
Melbourne Business School – Board Member
Chemistry Australia – Board Member
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 and 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)
Djerriwarrh Investments Limited
– Non-executive Director (from 2021)
Other directorships/appointments
Australian Institute of Company Directors,
Corporate Governance Advisory Committee
– Member
Guide Dogs Victoria – Director
54
Incitec Pivot Limited Annual Report 2021 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
Chairman of the Health, Safety,
Environment and Community
Committee
Member of the Audit and 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
Gregory Robinson
Bsc(Hons), MBA, MAICD
George Biltz
BChE, MBA, NACD
Independent Non-executive
Director
Mr Biltz was appointed as a non-
executive director on 1 December
2020.
Committee memberships
Member of the Health, Safety,
Environment and Community
Committee
Skills and experience
Mr Biltz is a chemical engineer
and an experienced non-executive
director who has extensive
global executive experience
in the industrial chemicals
manufacturing sector. Mr Biltz
is based in the United States.
Mr Biltz brings to the Board
significant skills and expertise
in strategy, governance and
risk, operations, capital projects,
acquisitions and integration,
finance, industrial chemicals and
engineering in the United States
and internationally.
Other directorships/
appointments
Kymera International – Executive
Chair of the Board
Independent Non-executive
Director
Mr Robinson was appointed as
a non-executive director on 25
November 2019.
Committee memberships
Chairman of the Remuneration
Committee
Member of the Audit and Risk
Management Committee
Member of the Nominations
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 listed company
directorships in the past three
years
Rex Minerals Limited – Non-
executive Director (from 2021)
Other directorships/
appointments
Royal Automobile Club of Victoria
(RACV) – Deputy Chairman and
Non-executive Director
Tonianne Dwyer
BJuris (Hons), LLB (Hons),
GAICD
Independent Non-executive
Director
Ms Dwyer was appointed as a non-
executive director on 20 May 2021.
Committee memberships
Member of the Audit and Risk
Management Committee
Member of the Remuneration
Committee
Skills and experience
Ms Dwyer has extensive executive
experience in investment banking,
funds management, real estate
and corporate strategy and is
an experienced non-executive
director. Ms Dwyer brings to the
Board her international executive
experience and extensive non-
executive director experience
within the Australia listed company
environment.
Other listed company
directorships in the past three
years
DEXUS Property Group – Non-
executive Director (from 2011)
DEXUS Wholesale Property Fund –
Non-executive Director (from 2011)
ALS Group Limited – Non-executive
Director (from 2016)
OZ Minerals Limited – Non-
executive Director (from 2017)
Metcash Limited – Non-executive
Director (2014-2021)
Other directorships/
appointments
The University of Queensland –
Deputy Chancellor and Senate
Member
Sir John Monash Foundation –
Director
55
Incitec Pivot Limited Annual Report 2021 EXECUTIVE TEAM
Jeanne Johns B.S. Chemical Engineering, magna cum laude
Managing Director & CEO
See Board of Directors page.
Chris Opperman BCom (Hons), CA
Interim Chief Financial Officer
Chris commenced as interim Chief Financial Officer on
15 November 2021. During Chris’ 20 year career, he has
worked as an auditor at PwC and EY, where he provided
advice and audit services to large global organisations,
including BHP and Toyota. Chris joined IPL in 2010 and
during this time has held a number of senior leadership
positions within the finance team, including as the Group
Financial Controller where he was responsible for the
Group’s Financial Reporting, Australian Shared Services
and Property functions; General Manager, Group Finance
and Investor Relations where he led the investor relations
team; and most recently as the Chief Financial Officer for
the Dyno Nobel Asia Pacific business unit.
Greg Hayne BCom, 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 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.
56
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 2021,
Stephan was elected as the Chair of Fertiliser Australia, the
fertiliser industry association.
Sunil Salhotra BCom, MBA
Chief Strategy & Sustainability Officer
Sunil commenced as Chief Strategy & Sustainability
Officer on 1 October 2021. With more than 30 years
international experience, Sunil has worked across a range
of industries including energy and resources, oil and gas,
telecommunications and management consulting for
leading private and listed companies across Australia
and Asia. Prior to joining IPL, Sunil held a number of
executive and strategy leadership roles including as Chief
Executive of Pangaea Resources, Group Executive Strategy
and Planning at Santos, and Vice President, Planning
& Regional Development at Unocal South ASEAN.
Michele Mauger AHRI, HRINZ
Chief People Officer
Michele commenced as Chief People Officer in November
2020. Michele has more than 30 years of international
experience in human resources, communications and HSE
working across a range of industries including mining,
construction 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 AHRI and a Board Member at Arts Project Australia.
Robert Rounsley
MSc (Chem), BSc Hons (Chem), MBA
Chief Technology Officer
Robert was appointed as Chief Technology 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 30 years corporate experience, Robert has worked
in many technical and commercial roles across the global
breadth of IPL and the former Dyno Nobel businesses. Prior
to being appointed as the Chief Technology Officer, Robert
was the SVP Global Marketing and Technology for the Dyno
Nobel business.
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 2021 57
Incitec Pivot Limited Annual Report 2021 S
T
R
O
P
E
R
Y
R
O
T
U
T
A
T
S
&
L
A
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N
A
N
I
F
I
58
We advanced
our strategic
agenda and delivered
a strong second
half in FY21
Incitec Pivot Limited Annual Report 2021
59
Incitec Pivot Limited Annual Report 2021 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 2021 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
» 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:
» Mr Biltz was appointed as a director on 1 December 2020
» Ms McGrath retired as a director on 18 December 2020 (at the conclusion of the Company’s 2020 Annual General Meeting)
» Ms Dwyer was appointed as a director on 20 May 2021
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)
G Biltz (5)
B Brook
T Dwyer (6)
X Liu (7)
G Robinson (8)
J Johns
Director – Former
R McGrath (9)
8
7
8
3
8
8
8
2
8
7
8
3
8
8
8
2
–
–
5
2
5
4
–
1
5
–
5
2
5
4
5
1
2
–
4
2
–
4
–
–
4
–
4
2
4
4
4
–
2
–
2
–
–
2
–
–
2
–
2
1
–
2
–
–
6
5
–
–
6
–
6
2
6
5
3
2
6
4
5
2
5
2
5
–
3
3
5
1
5
2
5
–
3
3
5
1
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 Board meetings attended by each director during the financial year, and includes attendance at Board Sub-Committee meetings where any two directors
are required to form a quorum.
(4) Mr Kruger was a member of the Remuneration Committee until 20 May 2021 and attended two scheduled meetings during the period he was a member.
(5) Mr Biltz was appointed as a director on 1 December 2020 and as a member of the Health, Safety, Environment and Community Committee with effect from
18 December 2020.
(6) Ms Dwyer was appointed as a director on 20 May 2021 and as a member of the Audit and Risk Management Committee and the Remuneration Committee with effect from 20 May 2021.
(7) Dr Liu was appointed Chairman of the Health, Safety, Environment and Community Committee with effect from 18 December 2020.
(8) Mr Robinson was appointed as a member of the Audit and Risk Management Committee and the Nominations Committee with effect from 18 December 2020.
(9) Ms McGrath retired as a director on 18 December 2020.
60
Incitec Pivot Limited Annual Report 2021DIRECTORS’ 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,
GAICD) 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 2020 Annual Report:
Dividend type
Dividend
per share
Total
amount
$mill
Franked
percentage
Date of
payment
Paid during the financial year
2020 final dividend
Nil
Nil
N/A
N/A
2021 interim dividend
1.0 cent
19.4 100% franked
2 Jul 2021
To be paid after end of the financial year
2021 final dividend
8.3 cents
161.2
14% franked
16 Dec 2021
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
There have been no significant changes to the Group’s state
of affairs during the financial year other than the position with
respect to Gibson Island. On 8 November 2021, IPL announced
that it was unable to secure an economically viable long-term gas
supply for its Gibson Island plant beyond its current gas supply
arrangements which expire at the end of December 2022 and
accordingly manufacturing operations at the site will cease at that
date. The financial impact of the closure has been accounted for in
the 2021 financial year. Further details are provided in the OFR and
note 12 to the financial statements.
Events subsequent to reporting date
In November 2021, the Board determined to pay a final dividend
for the Company of 8.3 cents per share, 14% franked, to be paid on
16 December 2021. The record date for entitlement to this dividend
is 2 December 2021. The total dividend payment will be $161.2m.
On 8 November 2021, IPL announced that manufacturing operations
at Gibson Island will cease at the end of December 2022.
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.
Likely developments
The OFR contains information on the Company’s 2021 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.
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.
Environmental performance has seen a substantial improvement
with zero Significant Environmental Incidents reported in the
2021 financial year. This result has highlighted the importance of
delivering specific environmental improvement plans to achieve
sustainable improvement. The implementation of our Compliance
Management Framework, with a continued focus on environmental
compliance across the organisation through automation, increased
controls, and improved practices has delivered significant
improvement in our environmental performance.
During the 2021 financial year, a Penalty Infringement Notice
(PIN) for $13,345 was issued to Phosphate Hill operations on
18 December 2020 by the Department of Environment and
Science (DES) for an incident that occurred in the 2020 financial
year. This fine was issued for the contravention of a condition of
the site environmental licence relating to the capacity of a gypsum
storage facility spillway. The DES was advised proactively of this
situation in September 2020. Construction works to rectify the
spillway capacity are underway.
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Incitec Pivot Limited Annual Report 2021DIRECTORS’ REPORT Deloitte provided non-audit services to the amount of $70.4k during
the year ended 30 September 2021 (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 85 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
15 November 2021
In the United States, ongoing compliance monitoring and
implementation of physical improvements at both the Carthage
and Louisiana, Missouri sites is progressing to plan. Both sites
submit quarterly reports to the Environmental Protection Agency
(EPA) documenting the status of this progression and to date
have met all Consent Decree milestones.
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 2021 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.
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.
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DIRECTORS’ REPORT
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 2021 which sets out the
remuneration information for the Managing Director & Chief
Executive Officer, Executive Key Management Personnel (KMP)
and the Non-executive Directors.
Our approach
The Remuneration Committee’s objective 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 2020 Annual
General Meeting.
Financial Year 2021 in review
Setting financial targets for 2021 was challenging. Volatility in
commodity markets combined with the ongoing impact of Covid-19
introduced more potential variability in expected results. During
the year, business results were lifted by a substantial upturn in
commodity prices and strong operating performance at Phosphate
Hill. These factors more than compensated for substantial reliability
issues encountered at Waggaman during the plant’s first major
maintenance shutdown. Unlike the prior two financial years, better
than expected economic conditions for our products had an overall
positive impact for Executive KMP incentive plan outcomes, as
outlined below and in more detail throughout this report.
Health, Safety & Environment (HSE) outcomes for the year were
mixed. Very positive outcomes were achieved in both Environment
Incidents and Significant Event Management, however, these were
somewhat offset by below expectation results for Personal Safety
(TRIFR) and Process Safety. HSE remains a critical focus for our
license to operate and ensuring the safety of all employees and
the communities we work with.
Headline NPAT of $358.6 million was a positive result and was
driven by strong commodity prices. Whilst the Adjusted NPAT (1)
results collectively did not reach threshold, the Waggaman
performance outcomes weighed heavily on what were otherwise
around threshold across all three major business units.
Overall performance on strategy areas, as outlined in the report,
has been solid.
Executive changes for FY21 & FY22
There will be changes to people and structure of the Executive
Team during 2022. Sunil Salhotra has recently joined in the role of
Chief Strategy and Sustainability Officer and brings with him deep
strategy and planning experience from within the resources sector.
A new CFO will be announced in the new calendar year, and the
new Manufacturing structure will be settled in time for the AGM.
Decisions on the Executive KMP representation for the 2022 report
will be made once the final structure is in place.
Tim Wall, President – Global Manufacturing & HSE ceased being
a KMP on 16 July 2021 and left the company on 15 October 2021.
The duties for this role were reassigned geographically to the
President – Dyno Nobel Americas, and the President – Dyno Nobel
Asia Pacific for the remainder of the financial year.
Long serving executive and current CFO, Nick Stratford, has
resigned and will leave the company during the 2022 financial
year. Nick will exit the organisation according to his contractual
terms outlined in section 3.6 of this report.
Fixed remuneration
There were no adjustments to fixed remuneration during the 2021
financial year.
A new regional manufacturing model will be introduced in the 2022
financial year that may result in fixed remuneration adjustments to
some Executive KMP.
Short-term incentive
After two years of no STI payments to Executive KMP, 2021 resulted
in payments of slightly above half of the maximum levels. This was
driven by a stretch Headline NPAT result, a target result for HSE and
positive executive personal strategic metrics. The Adjusted NPAT
result did not reach threshold due mainly to lower production from
Waggaman. The CEO’s STI result also was lower than other KMP,
primarily due to the influence of Waggaman. For perspective and
aligned with the better Executive STI outcomes in 2021, was the
Company’s share price increased in excess of 40% during the 2021
financial year.
Section 4.1 outlines additional information on the Company’s 2021
performance and resulting STI outcomes are provided in section 4.3
of this report.
Long-term incentive
For the 2018/21 LTI plan with the performance period ended on
30 September 2021, the performance conditions were relative Total
Shareholder Returns (TSR) (weighted at 40%); Growth in Return
on Equity (ROE) (weighted at 30%); and the delivery of Long Term
Value Metrics (formerly Strategic Initiatives) (weighted at 30%).
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 for the performance period.
No performance rights relating to the ROE objective will vest,
as the minimum level of ROE performance was not achieved.
There will be partial vesting of 50% of performance rights
emanating from achievements against the Long Term Value
Metrics measures, which delivers an overall outcome of 15%
across all measures.
More information on the LTI program, including the 2018 – 2021
performance, is provided in sections 3.3 and 4.4 of this report.
2022 Remuneration framework
Environment, Social & Governance (ESG) outcomes including
objectives relating to safety, diversity, energy efficiency and
greenhouse gas emissions have been included in relevant
Executive KMP remuneration outcomes for several years now.
This focus will be increased in the 2022 financial year, with
relevant Executive KMP having a separate ESG element to their
STI measures addressing the challenges and opportunities
associated with greenhouse gas emissions and climate change.
Additionally, the LTI 2021/24 Plan will include a new ESG metric
focused on climate change and the reduction of greenhouse gas
emissions in our operations.
Also, as a result of the 2021 manufacturing performance and the
change to a regional manufacturing model, the MD&CEO and the
Regional Presidents will have a new 2022 STI objective dedicated
to manufacturing reliability for our operations.
We continue to review market trends to ensure our remuneration
framework supports the execution of our strategies to increase
shareholder value as well as retaining and motivating our key
talent and ensuring alignment with our shareholders and other key
stakeholders. We believe these adjustments for 2022 will assist the
Company navigating through the dynamic and uncertain business
conditions ahead. More information on the changes to the 2022
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.
Greg Robinson
Chairman
(1) Adjusted NPAT means that results have been normalised to remove the impact of foreign exchange and commodity price movements
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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. 2021 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 2021 Financial Year & Link
to the 2021 Financial Year Performance
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4.1 Analysis of relationship between the Company’s performance,
shareholder wealth and remuneration
4.2 2021 Fixed annual remuneration outcomes
4.3 2021 STI outcomes
4.4 LTI 2018/21 outcomes
4.5 Performance related remuneration
4.6 Further details of Executive remuneration
5. Overview of Remuneration Changes for the 2022 Financial Year
6. Non-executive Director Remuneration
7. Shareholdings in IPL
8. Other KMP Disclosures
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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 2021. 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 2021 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 2021 financial year. Refer to Table 1 below for all individuals comprising IPL’s KMP for the
2021 financial year. All KMP held their positions for the entirety of the 2021 financial year, unless noted otherwise.
Table 1 – Individuals forming IPL’s KMP for the 2021 reporting period
Non-executive Directors
Current
Mr Brian Kruger
Chairman and Independent, Non-executive Director
Mr George Biltz (1)
Independent, Non-executive Director
Mr Bruce Brook
Independent, Non-executive Director
Ms Tonianne Dwyer (2)
Independent, Non-executive Director
Dr Xiaoling Liu
Independent, Non-executive Director
Mr Gregory Robinson
Independent, Non-executive Director
Former
Ms Rebecca McGrath (3)
Independent, Non-executive Director
Executives
Current
Ms Jeanne Johns
Managing Director & Chief Executive Officer
Mr Nicholas Stratford
Chief Financial Officer
Mr Greg Hayne
Dr Braden Lusk
President, Dyno Nobel Asia Pacific
President, Dyno Nobel Americas
Mr Stephan Titze
President, Incitec Pivot Fertilisers
Former
Mr Tim Wall (4)
President, Global Manufacturing & HSE
(1) Mr Biltz commenced as an Independent, Non-executive Director with effect from 1 December 2020.
(2) Ms Dwyer commenced as an Independent, Non-executive Director with effect from 20 May 2021.
(3) Ms McGrath retired as an Independent, Non-executive Director on 18 December 2020.
(4) Mr Wall ceased as a KMP on 16 July 2021. The duties for this role were reassigned geographically to the President – Dyno Nobel Americas, and the President – Dyno Nobel Asia Pacific for the
remainder of the financial year.
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 “at risk” or performance-
related components (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 comparator groups
of ASX companies:
Comparator groups
– S&P ASX listed companies with market capitalisation between
50% and 200% of IPL market capitalisation.
– S&P ASX 100 listed companies.
– A select group of 21 S&P ASX listed companies from the
Industrials, Materials and Energy Sectors, consisting of: Adelaide
Brighton, AGL Energy, ALS, Ampol Australia, Atlas Arteria, Aurizon,
BlueScope Steel, Boral, Brickworks, CIMIC Group, Cleanaway, CSR,
Downer EDI, Fletcher Building, Orica, Origin Energy, Orora, Qube,
Reliance Worldwide, Seven Group and Sims.
For roles located outside Australia, market-specific data is used
as an additional reference point for benchmarking purposes.
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REMUNERATION REPORTIncitec Pivot Limited Annual Report 2021Incitec Pivot Limited Annual Report 2021
A summary of the Company’s approach to Executive remuneration for the 2021 financial year, including performance conditions and their link
to the overall remuneration strategy is set out below:
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
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 ‘gate’
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.
Net Profit After Tax (NPAT) ‘gate’
Requires achievement of a designated Group NPAT as
determined by the Board
» A minimum NPAT performance level must be achieved
for the gate to open. If the NPAT performance level gate
is not achieved, all non-safety components of the STI will
be capped at target.
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)
» Manufacturing Reliability
Strategic objectives
(generally, a maximum of 20% of STI award) aligned to
personal strategic objectives. Examples include:
» Greenhouse gas reduction targets
»
»
»
Cost reduction initiatives
Cash conversion requirements
Product innovation
To ensure awarded STI aligns not only with underlying
performance, but also with the overall profitability of the
business. Commodity price impacts could result in poor
profitability which would be inconsistent with stretch bonus
payouts.
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.
Key strategic and growth objectives targeted at delivering
ongoing benefit to the Company.
Long Term
Incentive
Three-year incentive
opportunity
delivered through
performance rights.
Refer section 3.4 and
3.5 for more details
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 return (TSR)
Long Term Value Metrics (formerly 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 long term value metrics, and not
market factors alone.
Minimum Shareholding
Executive KMP are required to attain and maintain a Minimum Shareholding Requirement to better align Executive and Shareholder interests. It requires
the MD&CEO to defer 50% of any STI awarded until holding the equivalent of 100% of Fixed Annual Remuneration (FAR) in IPL shares. This must be
achieved within 5-years, or direct purchases of shares would be required. Other Executive KMP must defer 25% of any STI awarded until holding the
equivalent of 50% of FAR in IPL shares.
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.
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REMUNERATION REPORTIncitec Pivot Limited Annual Report 2021 2.2 Executive remuneration strategy
IPL’s purpose is to unlock the potential in the Earth to help people grow. 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. The company’s commitment
to addressing climate change challenges and looking for opportunities in the decarbonization of the world’s energy systems is at the heart
of the business strategy and integrated across all the Strategic Value Drivers:
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 and investigating ways to address our
greenhouse gas emissions.
Leading Technology Solutions – Innovation on the ground with practical innovations that our customers can use today to improve
their operations and environmental outcomes.
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;
require integrity and encourage 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 into the process of reviewing
Executive and Non-executive Director remuneration. For the 2021 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. 2021 Executive Remuneration Framework
3.1 Overview
The charts below set out the theoretical breakdown of the Executives’ total remuneration package for the 2021 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.
The restricted shares component of the STI (50% for the MD&CEO, 25% for other Executive KMP) must be deferred until an Executive’s
Minimum Shareholding Requirement is attained.
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%
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REMUNERATION REPORTIncitec Pivot Limited Annual Report 2021Incitec Pivot Limited Annual Report 2021 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 2021 financial year (2021 STI):
What was the performance
period?
The performance period for the 2021 STI was the financial year from 1 October 2020 to 30 September 2021.
Who was eligible for the STI? The MD&CEO and all other Executives participated in the 2021 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 2021 STI are set out below:
Performance Conditions
Measures to assess satisfaction
of Performance Conditions
Rationale for the Performance Conditions
Group Financial Performance
Group NPAT (Net Profit After Tax).
Group Adjusted NPAT (1)
To align with the Company’s strategic intent of
achieving top quartile performance as measured
against S&P/ASX listed 100 companies.
Business Unit Financial
Performance
Business Unit Adjusted EBIT (Earnings
Before Interest and Tax) (1)
Zero Harm
Strategic Outcomes
Manufacturing reliability.
Safety performance balanced
scorecard across the dimensions
of behavioural 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 greenhouse gas reduction
targets, cost reduction initiatives, cash
conversion requirements and product
innovation.
To ensure robust alignment of performance in
a particular business unit with reward for the
Executive managing that business unit.
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 means that results have been normalised to remove the impact of 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. The balanced scorecard category measures include: Personal Safety, Process
Safety; Environmental; Significant Event Management and the Zero Harm Plan.
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 2021 financial year, to ensure STI awards are aligned with business performance outcomes, the Board determined that
an “STI Financial Gate” would operate. The STI Financial Gate reflects a requirement to exceed a designated level of the Group’s
NPAT performance, or all non-safety components of the STI will be capped at a maximum of target payment.
The STI Financial Gate does 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.
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REMUNERATION REPORTIncitec Pivot Limited Annual Report 2021 What were the weightings
for the STI performance
measures?
The weighting of Executives’ STI performance measures (as a percentage of 100%) for 2021 were:
Table 2
Financial
Non-financial/
Business/Strategic
Group NPAT
Group
Adjusted NPAT
Business Unit
Adjusted EBIT
Safety
Strategic
Outcomes
40%
30%
10%
20%
40%
30%
10%
20%
40%
40%
40%
40%
30%
10%
20%
30%
10%
20%
30%
10%
20%
30%
10%
20%
Executives – Current
J Johns*
Managing Director & CEO
N Stratford*
Chief Financial Officer
G Hayne**
President, Dyno Nobel Asia Pacific
B Lusk**
President, Dyno Nobel Americas
S Titze**
President, Incitec Pivot Fertilisers
Executives – Former
T Wall** (1)(2)
President, Global Manufacturing
*Group role **Business Unit role
(1) Mr Wall’s business unit measures were based on manufacturing reliability and turnaround execution.
(2) Mr Wall ceased as a KMP on 16 July 2021. The duties for this role were reassigned geographically to the President - Dyno Nobel Americas, and the
President - Dyno Nobel Asia Pacific for the remainder of the financial year.
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 2021 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 statements which results in a
restatement of the audited financial report, on where a participant has materially breached their obligations to the Company.
7070
REMUNERATION REPORTIncitec Pivot Limited Annual Report 2021Incitec Pivot Limited Annual Report 2021 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 2021
financial year?
The LTI Plans applicable during the 2021 financial year were the:
»
»
»
Long Term Incentive Performance Rights Plan for 2018/21 (LTI 2018/21);
Long Term Incentive Performance Rights Plan for 2019/22 (LTI 2019/22); and
Long Term Incentive Performance Rights Plan for 2020/23 (LTI 2020/23) (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?
The maximum LTI opportunities under each LTI Plan are:
»
»
for the MD&CEO, 150% of FAR; and
for all other Executives, 80% of FAR.
How was the number
of performance rights
calculated under the
LTI Plans?
For the 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 and LTI 2020/23, 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 12 November 2019 and 10 November 2020 respectively.
Each issuance was determined by dividing the dollar value of the relevant participant’s LTI opportunity by these outcomes.
What are the performance
conditions, performance
periods and status of
current LTI Plans?
LTI Plan
Performance Conditions
LTI 2018/21
»
»
TSR Condition
Long Term Value
Metrics Condition
(formerly Strategic
Initiatives)
Weighting of
Performance
Condition
40%
30%
Performance Period
Status
1 October 2018 to
30 September 2021
Testing to occur after completion
of performance period.
»
ROE Growth Condition
30%
LTI 2019/22
»
»
TSR Condition
Long Term Value
Metrics Condition
» Absolute ROIC
Condition
LTI 2020/23
»
»
TSR Condition
Long Term Value
Metrics Condition
» Absolute ROIC
Condition
40%
30%
30%
40%
20%
40%
November 2019 to
November 2022
(TSR condition only)
1 October 2019 to
30 September 2022
(other conditions)
November 2020 to
November 2023
(TSR condition only)
1 October 2020 to
30 September 2023
(other conditions)
Testing to occur after completion
of performance period.
Testing to occur after completion
of performance period.
The performance conditions are determined by the Board annually. Refer to section 3.5 for a discussion
of the performance conditions.
71
REMUNERATION REPORTIncitec Pivot Limited Annual Report 2021
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.
Is there a mechanism for
clawback?
The LTI Plan includes a clawback provision, which requires the repayment of vested awards where payment has exceeded the
restated position. This includes overpayments resulting from a material misstatement or omissions in IPL’s financial statements
on where a participant has materially breached their obligations to the Company.
3.5 LTI performance conditions
For the LTI 2018/21, the performance conditions are measured by reference to the TSR Condition, a Long Term Value Metrics (formerly
Strategic Initiatives) Condition and growth in Return on Equity (ROE Growth Condition). For the LTI 2019/22 and LTI 2020/23, 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 2018/21, LTI 2019/22 and LTI 2020/23 are set out below.
TSR Condition
The TSR Condition (applicable to each of LTI 2018/21, LTI 2019/22 and LTI 2020/23) 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%
Long Term Value Metrics (formerly Strategic Initiatives) Condition
The Long Term Value Metrics Condition relates to the delivery of significant aspects of the Board approved strategy. For the LTI 2018/21,
LTI 2019/22 and LTI 2020/23, the Long Term Value Metrics Condition comprises components aligned with the Company’s strategic drivers:
Manufacturing Excellence, Profitable Growth and Customer, Practical Technology & Innovation. Each of these strategic drivers has a direct
impact on financial outcomes.
7272
REMUNERATION REPORTIncitec Pivot Limited Annual Report 2021Incitec Pivot Limited Annual Report 2021 The table below summarises the Long Term Value Metrics components for the LTI 2018/21, the LTI 2019/22 and the LTI 2020/23:
Long Term Value
Metrics Condition
Manufacturing
Excellence (1)
Profitable Growth (1)
Customer, Practical
Technology &
Innovation (1)
Rationale
Measurement criteria
Performance goals
Scorecard
Manufacturing Excellence is an
improvement system, through which
the Company seeks to enhance
productivity on a sustainable basis.
The LTI performance goals in relation
to Manufacturing Excellence target
delivering sustainable year on year
improvements in reliability and
efficiency.
Profitable Growth focuses on
opportunities that include capitalising
on our core capabilities. LTI
performance goals in relation to
this item focus on incentivising the
delivery of sustainable productivity
improvements.
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 comprise performance
goals related to:
» Manufacturing volume
» Manufacturing unit cost
improvement
Manufacturing volume:
For LTI 2018/21, LTI 2019/22 and LTI 2020/23
– 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.
Performance in relation to this
component comprise performance
goals related to:
»
Cumulative productivity
benefits
Cumulative productivity benefits:
For LTI 2018/21 – Delivery of cumulative savings
over the performance period against targets
approved by the Board.
Performance in relation to this
component is 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
Margin from technologies:
» Margin from technologies
» Net Promoter Score
»
Key customer retention
For LTI 2020/23 – Measured on an underlying
explosives operating margin basis from 2020 baseline.
Net Promoter Score (NPS):
For LTI 2018/21 and LTI 2019/22 – Improvement
in NPS over 2020 baseline.
Key customer retention:
For LTI 2018/21, LTI 2019/22 and LTI 2020/23 –
Quantitative targets against 2018, 2019 and 2020
baselines assessed by the Board.
(1) The Long Term Value Metrics Condition applies to 30% of the performance rights in the grants for LTI 2018/21 and LTI 2019/22, and 20% in the grant for LTI 2020/23.
Details of the scorecards and specific performance goals for each component of the Long Term Value Metrics Condition were notified to
Executives on commencement of each applicable LTI plan. These performance goals involve commercial-in-confidence quantitative targets
and, as such, detailed performance goals are not disclosed, but performance against the goals is disclosed at the end of the performance
period. For the LTI 2018/21, these details are set out in section 4.4. For the LTI 2019/22 and LTI 2020/23, the relevant details will be set
out in the 2022 Remuneration Report and the 2023 Remuneration Report respectively.
The Board will determine the outcome for the relevant component of the Long Term Value Metrics 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 Long Term Value Metrics 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 Long Term Value Metrics Condition are met over the performance period, the
extent to which that component of the Long Term Value Metrics 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.
73
REMUNERATION REPORTIncitec Pivot Limited Annual Report 2021 ROE Growth Condition
The ROE Growth Condition was introduced in 2016 and applies to the 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 was replaced by a ROIC condition for LTI 2019/22 and LTI 2020/23 (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 for the LTI 2020/23, and the percentage of performance rights that will vest based
on satisfaction of this condition:
Absolute ROIC Targets
Less than 6.0%
% of performance rights subject to the Absolute ROIC Condition that will vest
Nil
At or above 6.0% but less than 6.4%
Pro rata from 50% on a straight-line basis
6.4% 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
G Hayne
B Lusk
S Titze
Former Executives
T Wall (1)
(1) Mr Wall ceased as a KMP on 16 July 2021.
52 weeks
26 weeks
26 weeks
26 weeks
26 weeks
Notice period provided by the Executive
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).
7474
REMUNERATION REPORTIncitec Pivot Limited Annual Report 2021Incitec Pivot Limited Annual Report 2021 4. Remuneration Outcomes in 2021 Financial Year & Link to the 2021 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 ($) (Financial Year End) (1)
TSR (%) at Financial Year End
TSR (%) over 3 years (2)
On-market share buyback ($m)
Equity Raising (net of cost) ($m)
2017
318.7
18.9
9.1
9.4
3.60
28
36
–
–
2018
347.4
20.9
9.4
10.7
3.98
11
14
(210.3)
–
2019
152.4
9.5
7.5
4.7
3.39
(15)
30
(89.7)
–
2020
188.2
10.9
3.4
–
2.03
(40)
(37)
–
645.5
2021
358.6
18.5
1.0
9.3
2.94
45
(25)
–
–
(1) Share Price as at the end of the 2016 financial year was $2.82.
(2) TSR is calculated in accordance with the rules of the LTI 2014/17, LTI 2015/18, LTI 2016/19, LTI 2017/20 and LTI 2018/21 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 for Executive KMP
Relationship between the Company’s performance and
Executive KMP LTI outcomes
The below graph shows the relationship between the Company’s
performance and STI awards for Executive KMP in respect of the
year. For the 2021 financial year, Group NPAT (before IMIs and
excluding non-controlling interest) increased by 90.5% to $358.6m.
The financial gate for the STI opened as outlined in section 4.3 of
this report, resulting in Executives earning on average, 58.9% of
Maximum 2021 STI awards.
The below graph shows the relationship between IPL’s Absolute
TSR, its percentile ranking relative to its S&P/ASX 100 peer group
over the three years that each tranche operated, and the overall LTI
vesting percentage that occurred for each tranche. The LTI 2017/20
that vested in the 2021 financial year delivered 0% of the 50% TSR
opportunity and 10% of total opportunity available for that tranche.
Note: The absolute TSR for IPL and for the ASX 100 has been calculated using the methodology
noted in footnote (2) Table 3.
Group performance and STI outcomes
IPL Absolute TSR %, LTI Vesting %,
ASX 100 Percentile Ranking
Total STI awarded
NPAT before IMIs and excluding
non-controlling interests
IPL Absolute TSR (1)
IPL Percentile Ranking in ASX 100
LTI Vesting
(1) IPL Absolute TSR is based on 3-year outcomes
4.2 2021 Fixed annual remuneration outcomes
There were no adjustments made to Executive KMP Fixed Annual Remuneration (FAR) levels for the 2021 period.
75
REMUNERATION REPORT-1.02.03.04.05.06.0-10020030040050060020172018201920202021Total STI awardedNPAT before IMIs and excluding non-controlling interests$mill$mill-70-50-30-1010305070-50-40-30-20-100102030405020172018201920202021%%IPL Absolute TSRIPL Percentile Ranking in ASX 100 LTI VestingIncitec Pivot Limited Annual Report 2021 4.3 2021 STI outcomes
The following table outlines detailed STI outcomes for the MD&CEO.
Measure
Weighting
(at Target)
Weighted
Outcome
Health, Safety & Environment
Balanced
Scorecard
10%
100%
Headline Financial
Group
Headline
NPAT
40%
150%
Adjusted Financial
Group
Adjusted
NPAT
30%
0%
Individual Objectives
Balanced
Scorecard
20%
40%
Threshold
Target
Stretch
Commentary
Personal Safety (TRIFR) and Process Safety (CCPS Tier 1 & Tier 2) results
were below expectations this year. This was offset somewhat with very
positive outcomes across both Environmental Incidents and Significant Event
Management. The overall outcome was assessed as being on-target for FY21.
Headline NPAT (excluding individually material items) delivered a result
well above the stretch target. This result was assisted strongly by favourable
commodity price movements that helped to deliver 100% of maximum
opportunity for this metric.
The Adjusted NPAT outcome fell short of the budgeted threshold for this
metric. The major contributor to this result was the below budget result
delivered by the Waggaman ammonia plant in Louisiana. The final result
was 0% of the maximum opportunity available for this metric.
This year’s objectives covered five key categories: 1) Greenhouse Gas
Emissions Reductions; 2) Explosives Growth Agenda; 3) Gas Strategy;
4) Manufacturing Excellence Implementation; and 5) Technology Strategy.
Performance against the balanced scorecard was assessed as delivering
8% of the maximum opportunity available for this metric.
Overall STI Outcome
52%
% of Maximum Opportunity Awarded
Stretch
Between Target & Stretch
Target
Between Threshold & Target
Threshold
Below Threshold
The Board approved STI outcomes for all Executive KMP on 12 November 2021. The CEO received a target result for Health, Safety &
Environment, a stretch result for Group Headline NPAT and no reward for Group Adjusted NPAT. Notwithstanding a strong performance
against her personal strategic objectives, the Board exercised its discretion and moderated this component to reflect challenges during
the year including the manufacturing performance at Waggaman.
Other Executive KMP also received a stretch result for their 40% Group Headline NPAT component. All except the President – Dyno Nobel
Asia Pacific also received no reward for their Adjusted NPAT/EBIT component. The President – Dyno Nobel Asia Pacific received between
threshold and target for his Adjusted EBIT component. The main negative factor on Group Adjusted NPAT was the sub optimal manufacturing
performance of Waggaman during the financial year. Health, Safety & Environment outcomes were above target for the President – Dyno
Nobel Asia Pacific, and between threshold and target for the President – Dyno Nobel Americas, and President – Global Manufacturing & HSE,
and Individual Strategic Objectives delivered a range of outcomes that are reflected in the differentiated results in table 4.
Table 4 – Short term incentives awarded for the year ended 30 September 2021
Details of the vesting profile of the STI payments awarded for the year ended 30 September 2021 as remuneration to each Executive are set
out below:
Executives – Current
J Johns
N Stratford
G Hayne
B Lusk (1)
S Titze
Executives – Former
T Wall (2)
Executives – Current
J Johns (3)
Short term incentive for the year ended 30 September 2021
Minimum share
holding allocation (A)
$000
Included in
remuneration
$000
% earned of
maximum
opportunity
% forfeited
of maximum
opportunity
–
–
134
144
117
–
1,279
648
534
576
468
469
52
60
66
63
60
53
Deferred Short term incentive for the year ended 30 September 2021
–
23
100
48
40
34
37
40
47
–
Cash STI
$000
1,279
648
400
432
351
469
–
(A) Under the terms of the 2021 STI, to the extent that Executives have not achieved their Minimum Shareholding Requirement the following applies: 50% of the MD&CEO’s award is delivered in cash
and the remainder is delivered in restricted shares. For all other Executives, 75% of their award is delivered in cash and the remainder is delivered in restricted shares. Cash is generally paid and
shares generally allocated around December.
(1) Dr Lusk’s STI payment was converted from US$ to A$ at the year-end rate 30 September 2021, being $1.3971.
(2) Mr Wall ceased as a KMP on 16 July 2021. The duties for this role were reassigned geographically to the President – Dyno Nobel Americas, and the President – Dyno Nobel Asia Pacific
for the remainder of the financial year.
(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% vested in fully paid ordinary shares on 30 November 2019 and the remaining 25% of the award vested in fully paid ordinary shares on 30 November 2020. In both cases,
vesting was subject to Ms Johns meeting a service condition determined by the Board. The value of the rights was calculated at grant date using the Black Scholes option pricing model as disclosed
in the footnotes under Table 7.
7676
REMUNERATION REPORTIncitec Pivot Limited Annual Report 2021Incitec Pivot Limited Annual Report 2021 4.4 LTI 2018/21 outcomes
The performance period for the LTI 2018/21 ended on 30 September 2021. Following testing against the performance conditions, the Board
determined that 15% of the performance rights granted under the plan will vest (with the remaining 85% 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 2022 Remuneration Report.
TSR Condition
In relation to the TSR Condition, the Company’s relative TSR performance over the period did not achieve median percentile performance of
the comparator group of S&P/ASX 100 companies. Accordingly, 0% of the performance rights granted subject to the TSR Condition will vest
(out of a maximum of 40% of performance rights granted under the plan).
Long Term Value Metrics (formerly Strategic Initiatives) Condition
In relation to the Long Term Value Metrics 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 50% of the
performance rights granted subject to this condition will vest (out of a maximum of 30% of performance rights granted under the plan).
Commentary on the performance against the scorecard is set out in the following table.
Long Term Value
Metric Condition
Performance Goals
Threshold
Target
Stretch
Commentary
Manufacturing
Excellence
Achievement of Manufacturing
Production Rates across six
major facilities within IPL’s
US and Australian operations.
Profitable
Growth
Customer,
Practical
Technology &
Innovation
The goal for cumulative
productivity benefits was to
deliver a minimum aggregate
dollar saving over the three-
year performance period.
Revenues from Technologies:
cumulative growth in total
margin from sales of certain
technologies.
Net Promoter Score:
improvement in NPS
over the initial baseline.
Key Customer Retention:
the retention of IPL’s top
10 customers by size and/or
strategic importance, whilst
not sacrificing margin above
forward outlook.
Phosphate Hill and Gibson Island achieved target rates
of production throughout 2021. Two other sites delivered
production rates of between threshold and target, and
two sites operated below threshold levels, Waggaman
and Cheyenne.
A stretch level of cumulative productivity benefits was
delivered across the measurement period.
The stretch target for this metric was cumulative
improvement over the 2018 baseline which was achieved.
The stretch objective for this measure was improvement over
the 2018 baseline. Noticeable improvement was delivered
which equated to a target level of achievement.
Target objective of retention was achieved at a margin level
no worse than the expected forecast.
Vesting for this
component (%)
50%
Having regard to the outcomes in relation to the input
and output measures, the Board determined that 50%
of the performance goals were delivered against the
balanced scorecard.
Stretch
Between Target & Stretch
Target
Between Threshold & Target
Threshold
Below Threshold
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 30% of performance
rights granted under the plan).
77
REMUNERATION REPORTIncitec Pivot Limited Annual Report 2021
4.5 Performance related remuneration
Table 5 – Details of performance rights granted and vested in the year ended 30 September 2021 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 2017/20
(performance period: 1 October 2017 to 30 September 2020) which, following testing in November 2020 resulted in the Board determining
that 10% vested. In relation to the LTI 2018/21 (performance period: 1 October 2018 to 30 September 2021), following testing in November
2021, the Board determined that 15% of the performance rights will vest. This will be reported in the 2022 Remuneration Report.
STI
Details of performance rights in relation to short term incentive plans are set out in the table below.
Granted
during 2021 as
remuneration (A)
$000
Exercised
in year
$000
Vested
in year
%
Forfeited
in year %
Grant date
Financial
year in
which
grant
vested
or could
vest
Maximum
value of
outstanding
rights (B)
$000
Key Management Personnel
Executives – Current
J Johns
Long term incentive rewards
LTI 2017/20
LTI 2018/21
LTI 2019/22
LTI 2020/23
30 January 2018
5 February 2019
13 January 2020
14 January 2021
Short term incentive rewards
Performance period: 23 October 2017 to 30 November 2020
5 February 2019
N Stratford
Long term incentive rewards
LTI 2017/20
LTI 2018/21
LTI 2019/22
LTI 2020/23
G Hayne
Long term incentive rewards
LTI 2017/20
LTI 2018/21
LTI 2019/22
LTI 2020/23
B Lusk
Long term incentive rewards
LTI 2020/23
S Titze
Long term incentive rewards
LTI 2018/21
LTI 2019/22
LTI 2020/23
Executives – Former
T Wall (1)
Long term incentive rewards
LTI 2018/21
LTI 2019/22
LTI 2020/23
Short term incentive rewards
30 January 2018
5 February 2019
13 January 2020
14 December 2020
1 March 2018
5 February 2019
13 January 2020
14 December 2020
14 December 2020
5 February 2019
13 January 2020
14 December 2020
5 February 2019
13 January 2020
14 December 2020
–
–
–
2,386
–
–
–
–
698
–
–
–
520
593
–
–
504
–
–
578
156
10
90
–
–
–
–
–
–
311
100
41
10
–
–
–
–
–
–
–
–
–
–
90
–
–
–
27
10
90
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
32
65
2020
2021
2022
2023
2021
2020
2021
2022
2023
2020
2021
2022
2023
–
1,605
1,755
2,386
–
–
443
528
698
–
332
382
520
2023
593
2021
2022
2023
2021
2022
2023
314
371
504
399
289
201
–
Performance period: 1 November 2018 to 30 September 2020 5 February 2019
–
80
100
–
2020
(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 2021, 2022 and 2023 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 Wall ceased as a KMP on 16 July 2021. Mr Wall’s balance of rights represents the performance rights pro-rated according to his exit date of 15 October 2021.
7878
REMUNERATION REPORTIncitec Pivot Limited Annual Report 2021Incitec Pivot Limited Annual Report 2021 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)
2,013,675
134,115
1,164,111
–
(67,415)
(134,115)
(606,742)
2,503,629
–
–
Long term incentive rewards
563,803
340,715
(17,629)
(158,668)
728,221
G Hayne
Long term incentive rewards
401,857
253,643
(11,690)
(105,217)
538,593
B Lusk
Long term incentive rewards
–
289,187
S Titze
Long term incentive rewards
273,375
246,072
Executives – Former
T Wall (2)
Long term incentive rewards
Short term incentive rewards
328,264
34,651
282,036
–
–
–
–
(34,651)
–
–
(240,135)
–
289,187
519,447
370,165
–
(A) For the 2021 financial year, this represents the rights granted to Executives during the reporting period under the LTI 2020/23. The grant of rights under the LTI 2020/23 to Ms Johns
was approved by shareholders at the Company’s 2020 Annual General Meeting.
(B) For the 2021 financial year, this represents the number of rights vested during the reporting period under short term incentive rewards and the LTI 2017/20. Each right entitled
the participating Executive to acquire a fully paid ordinary share in IPL for zero consideration.
(C) For the 2021 financial year, this represents rights that were forfeited by Executives during the period under the LTI 2017/20. In addition, in the case of Mr Wall who ceased as a KMP
on 16 July 2021, this represents a portion of his rights held under the LTI 2019/22 and LTI 2020/23.
(1) Mr Stratford will cease as a KMP during the 2022 financial year. His balance of rights will be forfeited on exiting the Company.
(2) Mr Wall ceased as a KMP on 16 July 2021. His balance of rights represents the performance rights pro-rated according to his exit date of 15 October 2021.
79
REMUNERATION REPORTIncitec Pivot Limited Annual Report 2021 4.6 Further details of Executive remuneration
Table 7 – Executive remuneration
Details of the remuneration for each Executive for the year ended 30 September 2021 in accordance with Accounting Standards
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
Chief Financial Officer
2021
2020
2021
2020
G Hayne
2021
President, Dyno Nobel Asia Pacific 2020
B Lusk (1)
President, Dyno Nobel Americas
S Titze
President, Fertilisers
Executives – Former
T Wall (2)
President, Global Manufacturing
F Micallef (3)
Chief Financial Officer
Total Executives
2021
2020
2021
2020
2021
2020
2020
2021
2020
1,640
1,640
1,302
175
878
890
648
649
741
192
628
629
573
724
686
648
–
534
–
576
–
468
488
469
58
–
43
11
1
312
1
–
67
226
–
–
1
–
–
5,108
5,410
3,997
721
113
549
–
–
22
21
22
21
–
–
22
21
17
21
16
83
100
25
17
16
24
13
32
–
–
6
5
7
6
16
67
100
1,723
1,458
503
451
372
297
198
–
359
228
(501)
(538)
(136)
(141)
(100)
(93)
–
–
1,222
920
367
310
272
204
198
–
4,232
2,763
1,932
1,557
1,490
906
1,582
418
(75)
–
284
228
1,408
1,371
248
275
(96)
–
152
275
1,402
1,084
202
(301)
(99)
1,087
3,403
2,911
(908)
(1,073)
2,495
1,838
12,046
9,186
–
–
–
–
–
–
183
–
468
183
468
(A) For Ms Johns this includes STI rights granted on 5 February 2019 under the 2018 STI.
J Johns
Performance period: 23 October 2017 to 30 November 2020
Fair value per share treated as rights at grant date
$3.22
(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.
Fair value per share treated as rights at grant date
LTI 2017/20 – TSR
LTI 2017/20 – Long Term Value Metrics (formerly Strategic Initiatives)
LTI 2017/20 – ROE Growth
LTI 2018/21 – TSR
LTI 2018/21 – Long Term Value Metrics (formerly Strategic Initiatives)
LTI 2018/21 – ROE Growth
LTI 2019/22 – TSR
LTI 2019/22 – Long Term Value Metrics (formerly Strategic Initiatives)
LTI 2019/22 – Absolute ROIC
LTI 2020/23 – TSR
LTI 2020/23 – Long Term Value Metrics
LTI 2020/23 – Absolute ROIC
$1.98
$3.42
$3.42
$1.82
$3.13
$3.13
$1.58
$2.99
$2.99
$1.69
$2.29
$2.29
(1) Dr Lusk became a KMP on 1 July 2020 and the disclosures for the 2020 financial year are from that date and do not represent a full financial year. Fixed remuneration payments were converted
from US$ to A$ at the average rate for 1 July 2020 to 30 September 2020, being $1.3982, and 1 October 2020 to 30 September 2021, being $1.3296.
(2) Mr Wall ceased being a KMP on 16 July 2021. Disclosure for the 2021 year is from 1 October 2020 to 16 July 2021. Termination benefits accrued for Mr Wall in the 2021 financial year include
a separation payment of $183,314 in accordance with his contract of employment.
(3) 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
included a separation payment of $467,657 in accordance with his contract of employment.
8080
REMUNERATION REPORTIncitec Pivot Limited Annual Report 2021Incitec Pivot Limited Annual Report 2021
Table 8 – Actual Pay
The table below provides a summary of actual remuneration paid to the Executives in the 2021 financial year. 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 and rights that vested over the last twelve months.
Executive remuneration details prepared in accordance with statutory requirements and the Accounting Standards are presented in Table 7
of this report.
Short term
incentive
& other
bonuses (A)
Salary
& Fees
Other
short term
benefits (B)
Superannuation
benefits
Other
long term
benefits (C)
Termination
benefits
Year
$000
$000
$000
$000
$000
$000
Executive KMP – Current
J Johns
Managing Director & CEO
N Stratford (1)
Chief Financial Officer
G Hayne
President, Dyno Nobel Asia Pacific
B Lusk (2)
President, Dyno Nobel Americas
S Titze
President, Incitec Pivot Fertilisers
Executives – Former
T Wall (3)
President, Global Manufacturing
F Micallef (4)
Chief Financial Officer
Total Executives
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2020
2021
2020
1,640
1,640
878
890
648
649
741
192
628
629
573
724
686
5,108
5,410
311
–
–
–
–
62
42
–
–
488
80
–
–
433
550
28
11
1
312
1
–
67
226
-
–
1
–
–
98
549
–
–
22
21
22
21
–
–
22
21
17
21
16
156
–
41
–
27
121
–
–
–
–
–
–
–
83
100
224
121
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
$000
2,135
1,651
942
1,223
698
853
850
418
650
1,138
671
745
702
5,946
6,730
(A) For Mr Titze, this represents a special incentive paid during the 2020 financial year. For Mr Hayne, this represents a special discretionary bonus payment made in December 2019. For Dr Lusk,
this represents a short-term incentive relating to the 2020 financial year prior to him becoming a KMP. For Ms Johns and Mr Wall, this represents rights that vested under short-term incentive
awards in the 2021 financial year.
(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 and from 2021 financial year, the value of shares that vested under the Group’s LTI plans. Long Term
Incentives include all plan-related instruments that vested during the year. The theoretical cash price is based on the IPL share price on the day that shares were purchased. For Mr Hayne
in prior year, this includes a cash payment relating to long term incentive plan for the periods prior to him becoming a KMP.
(1) Mr Stratford spent the first 9 months of the 2020 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 2020 financial 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 Wall ceased as a KMP on 16 July 2021 and the disclosures for the 2021 financial year are up until that date and do not represent a full financial year.
(4) Mr Micallef 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.
81
REMUNERATION REPORTIncitec Pivot Limited Annual Report 2021 5. Overview of Remuneration Changes for the 2022 Financial Year
Some important changes have been made to the STI and LTI programs for the 2022 financial year. The changes reflect strategic business
priorities over the coming years. Emphasis will be on aligning to the new manufacturing regional management model being initiated and
increasing focus on ESG, particularly the reduction of greenhouse gas emissions.
Fixed salary increases for some Executive KMP may result from the move to the regional manufacturing model. This would be as recognition
of additional complexity that will impact some roles under this new structure.
The STI has an adjusted Manufacturing Reliability metric in response to the 2021 manufacturing results and the change to a regionally
led manufacturing model. The MD&CEO as well as the Regional Presidents in North America and Asia Pacific will share responsibility for
improving Manufacturing Reliability under this metric.
Targeted climate change objectives, previously incorporated within the Strategic Objectives section of STI scorecards, will now be incorporated
under a separate Environmental, Social & Governance (ESG) category that will extend to all Executive KMP. All Executive KMP will have 10%
allocated to this new ESG metric. The CEO’s scorecard will include reinvigoration of the leadership, objectives and culture for IPL, particularly
as COVID restrictions are expected to reduce. The new weightings for each Executive KMP for the 2022 financial year are outlined in the
following table:
Financial
Non-financial/Business/Strategic
Group NPAT
Group Adjusted
NPAT
Business Unit
Adjusted EBIT
Manufacturing
Reliability
Safety
Managing Director & CEO
Chief Financial Officer
President, Dyno Nobel Asia Pacific
President, Dyno Nobel Americas
President, Incitec Pivot Fertilisers
30%
30%
30%
30%
30%
20%
40%
15%
10%
20%
10%
10%
10%
10%
10%
10%
30%
20%
30%
ESG
10%
10%
10%
10%
10%
Strategic
Outcomes
15%
10%
10%
10%
10%
With the increasing practical and technological challenges to reduce greenhouse gas emissions both in the short term and longer term, the
LTI 2021/24 will also have a new 10% ESG component. This component will target IPL achieving its 2025 and 2030 targets on climate change
and focus on investing in new technologies to create other meaningful opportunities for IPL to decrease greenhouse gas emissions in the
longer term. Introducing the new 10% ESG component results in a reduction in the ROIC component from 40% to 35% and Long Term Value
Metric from 20% to 15%.
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.
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 2021 financial year, there were no increases to Non-executive Directors’ fees. Fees paid to Non-executive Directors amounted to
$1,549,000 which was within the $2,000,000 maximum aggregate fee pool approved by shareholders at the 2008 Annual General Meeting.
For the 2022 financial year, the Board has determined that there will be no increase in Non-executive Director fees, which have remained
unchanged since 1 October 2014.
The table below sets out the Board and Committee fees as at 30 September 2021:
Board Fees
Committee Fees
Chairperson
Members
Audit and 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
8282
REMUNERATION REPORTIncitec Pivot Limited Annual Report 2021Incitec Pivot Limited Annual Report 2021 Table 9 – Non-executive Directors’ remuneration
Details of the Non-executive Directors’ remuneration for the financial year ended 30 September 2021 are set out in the following table:
Non-executive Directors – Current
B Kruger, Chairman
G Biltz (1)
B Brook
T Dwyer (2)
X Liu (3)
G Robinson (4)
Non-executive Directors – Former
R McGrath (5)
J Breunig (6),(7)
K Fagg AO (8)
Total Non-executive Directors
Board and
Committee Fees
Cash allowances
and other short
term benefits (A)
Post-employment
benefits
Other long
term benefits
Year
2021
2020
2021
2021
2020
2021
2021
2020
2021
2020
2021
2020
2020
2020
2021
2020
Fees
$000
511
512
162
245
240
73
227
176
217
151
53
239
81
47
1,488
1,446
Superannuation
benefits
$000
$000
$000
–
–
–
–
–
–
–
–
–
–
–
–
15
–
–
15
22
21
–
6
11
7
5
8
21
14
–
5
–
4
61
63
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
$000
533
533
162
251
251
80
232
184
238
165
53
244
96
51
1,549
1,524
(A) Cash allowances and other short term benefits include travel allowances.
(1) Mr Biltz was appointed as an Independent, Non-executive Director with effect from 1 December 2020. The disclosures for the 2021 financial year do not represent a full financial year.
(2) Ms Dwyer was appointed as an Independent, Non-executive Director with effect from 20 May 2021. The disclosures for the 2021 financial year do not represent a full financial year.
(3) Dr Liu was appointed as an Independent, Non-executive Director with effect from 25 November 2019. The disclosures for the 2020 financial year do not represent a full financial year.
(4) Mr Robinson was appointed as an Independent, Non-executive Director with effect from 25 November 2019. The disclosures for the 2020 financial year do not represent a full financial year.
(5) Ms McGrath retired from the Board as an Independent, Non-executive Director on 18 December 2020.
(6) 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.
(7) Mr Breunig resigned from the Board as an Independent, Non-executive Director on 28 February 2020.
(8) Ms Fagg retired from the Board as an Independent, Non-executive Director on 20 December 2019.
7. Shareholdings in IPL
The Minimum Shareholding Requirement for Non-executive Directors 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 2021, all
Directors (excluding those joining the IPL Board during the current financial year) were required to hold 20% of their base Board fee per
annum 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. Three six-monthly tranches of rights issued under the Plan has
so far vested into shares. The next tranche of rights are scheduled to vest in November 2021. 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
Non-executive Directors – Current
B Kruger
G Biltz
B Brook
T Dwyer
X Liu
G Robinson
26,062
–
17,374
–
7,239
–
44,264
–
23,201
–
17,908
–
(51,401)
–
(34,267)
–
(15,685)
–
–
–
–
–
–
–
18,925
–
6,308
–
9,462
–
(A) Includes movements of rights acquired under the Plan.
(B) For the 2021 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 2021 to 31 March 2021.
$’000
Maximum value of
outstanding rights (C)
53
–
18
–
27
–
83
REMUNERATION REPORTIncitec Pivot Limited Annual Report 2021 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 (B)
Closing balance (C)
Number of Shares (A)
Non-executive Directors – Current
B Kruger
G Biltz
B Brook
T Dwyer
X Liu
G Robinson
Non-executive Directors – Former
R McGrath
Executive Director – Current
J Johns
Executives – Current
N Stratford (1)
G Hayne
B Lusk
S Titze
Executives – Former
T Wall (2)
42,017
–
32,313
–
43,000
67,020
40,008
51,401
100,000
34,267
–
15,685
–
–
617,995
201,530
47,079
23,633
–
–
44,651
17,629
11,690
–
–
34,651
–
–
–
–
–
–
–
–
(6,376)
–
–
–
–
93,418
100,000
66,580
–
58,685
67,020
40,008
819,525
58,332
35,323
–
–
79,302
(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) Shares disposed include withholding tax payments.
(C) 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.
(1) Mr Stratford had 6,376 shares sold on his behalf to fulfill United States withholding tax obligations associated with his 17,629 shares acquired under IPL’s Long Term Incentive Plan.
(2) Mr Wall ceased as a KMP on 16 July 2021.
8. Other KMP Disclosures
Loans to KMP
In the year ended 30 September 2021, there were no loans to key management personnel and their related parties (2020: nil).
Other KMP transactions
In the year ended 30 September 2021, there were no transactions entered into during the year with key management personnel
(including their related parties).
8484
REMUNERATION REPORTIncitec Pivot Limited Annual Report 2021Incitec Pivot Limited Annual Report 2021 Deloitte Touche Tohmatsu
A.B.N. 74 490 121 060
477 Collins Street
Melbourne VIC 3000
Tel: +61 3 9671 7000
www.deloitte.com.au
The Board of Directors
Incitec Pivot Limited
Level 8, 28 Freshwater Place
Southbank Victoria 3006
15 November 2021
Dear Board Members
IInncciitteecc PPiivvoott LLiimmiitteedd
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 2021, 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
85
Incitec Pivot Limited Annual Report 2021
FINANCIAL REPORT CONTENTS
87
87
88
89
90
91
92
124
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 87 to 123
125
Independent Auditor’s Report
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86
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 2021.
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 2021 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. 2001.
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.
87
FINANCIAL REPORTIncitec Pivot Limited Annual Report 2021 Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the year ended 30 September 2021
Notes
2021 $mill
2020 $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 and site exit costs
Other expenses
Profit before income tax
Income tax expense
Profit for the year attributable to members of Incitec Pivot Limited
Other comprehensive income, net of income tax
Items that will not be reclassified subsequently to profit or loss
Actuarial gain/(loss) on defined benefit plans
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 loss on cash flow hedges
Cash flow hedge loss/(gain) transferred to profit or loss
Exchange differences on translating foreign operations
Net gain 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 attributable to members of Incitec Pivot Limited
Earnings per share
Basic (cents per share)
Diluted (cents per share)
(2)
(2)
(14)
(2)
(2)
(3)
(20)
(17)
(17)
(17)
(5)
(5)
4,348.5
3,942.2
33.4
41.9
104.2
(2,158.5)
(701.5)
(368.5)
(114.7)
(198.6)
(181.5)
(286.6)
(25.9)
(270.5)
(61.5)
160.2
(11.1)
149.1
30.8
(8.3)
22.5
(20.8)
22.4
(22.9)
25.3
6.9
10.9
33.4
182.5
7.7
7.7
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)
7.1
7.1
88
FINANCIAL REPORTIncitec Pivot Limited Annual Report 2021
Consolidated Statement of Financial Position
As at 30 September 2021
Notes
2021 $mill
2020 $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
(8)
(4)
(4)
(17)
(4)
(17)
(14)
(9)
(10)
(11)
(3)
(4)
(10)
(8)
(17)
(16)
(4)
(10)
(8)
(17)
(16)
(3)
(20)
(7)
651.8
487.6
577.7
46.9
55.4
554.6
373.9
474.4
47.2
79.8
1,819.4
1,529.9
29.4
27.1
33.6
324.8
3,928.9
214.5
3,000.9
12.0
7,571.2
9,390.6
26.9
25.8
56.1
326.3
4,071.7
221.1
3,019.7
13.5
7,761.1
9,291.0
1,229.3
1,049.4
45.0
18.8
47.2
101.3
86.8
41.5
21.2
93.6
102.3
21.5
1,528.4
1,329.5
21.0
197.5
1,650.0
46.3
209.0
340.2
29.6
2,493.6
4,022.0
5,368.6
3,806.2
(208.7)
1,771.1
5,368.6
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
89
FINANCIAL REPORTIncitec Pivot Limited Annual Report 2021
Consolidated Statement of Cash Flows
For the year ended 30 September 2021
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 in receivables and other operating assets
(Increase)/decrease in inventories
Increase/(decrease) 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, non-controlling interest and equity investments
Payments towards investment in joint arrangement
Loan payments from equity accounted investees
Payments 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
Dividends paid to members of Incitec Pivot Limited
Lease liability payments
Realised market value gain on derivatives
Purchased shares for IPL employees
Net cash flows from financing activities
Net increase/(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
2021 $mill
2020 $mill
Inflows (Outflows)
Inflows (Outflows)
149.1
112.8
368.5
213.1
–
(41.9)
(0.3)
3.2
11.1
(127.4)
(100.6)
159.8
747.4
44.6
1.9
(110.6)
(33.1)
650.2
(355.0)
5.7
(8.5)
(4.4)
19.9
(0.1)
(342.4)
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)
(157.9)
(1,487.6)
–
–
(19.4)
(41.4)
8.5
(1.0)
(211.2)
96.6
554.6
0.6
651.8
723.0
645.5
(30.7)
(41.9)
10.3
(1.3)
(182.7)
(17.0)
576.4
(4.8)
554.6
(2)
(9)
(11)
(14)
(2)
(18)
(3)
(14)
(8)
(8)
(6)
(8)
90
FINANCIAL REPORTIncitec Pivot Limited Annual Report 2021
Consolidated Statement of Changes in Equity
For the year ended 30 September 2021
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
Total
equity
$mill
Balance at 1 October 2019
Adoption of AASB 16 Leases
Profit for the year
Total other comprehensive income for the year
Dividends paid
(6)
Shares issued during the year
Purchased shares for IPL employees
Share-based payment transactions
(18)
3,136.8
(48.3)
26.0
22.1
(19.7)
1,570.9
4,687.8
–
–
–
–
669.4
–
–
–
–
(16.0)
–
–
–
–
–
–
–
–
–
(1.3)
2.4
27.1
–
–
(187.0)
–
–
–
–
–
–
–
–
–
–
–
(14.3)
123.4
(14.3)
123.4
(6.5)
(209.5)
(54.6)
–
–
–
(54.6)
669.4
(1.3)
2.4
(164.9)
(19.7)
1,618.9
5,203.3
Balance at 30 September 2020
3,806.2
(64.3)
Balance at 1 October 2020
Profit for the year
Total other comprehensive income for the year
Dividends paid
Purchased shares for IPL employees
Share-based payment transactions
(6)
(18)
3,806.2
(64.3)
27.1
(164.9)
(19.7)
1,618.9
5,203.3
–
–
–
–
–
–
0.9
–
–
–
–
–
–
(1.0)
3.2
–
10.0
–
–
–
–
–
–
–
–
149.1
149.1
22.5
(19.4)
–
–
33.4
(19.4)
(1.0)
3.2
Balance at 30 September 2021
3,806.2
(63.4)
29.3
(154.9)
(19.7)
1,771.1
5,368.6
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 2018/21, 2019/22
and 2020/23 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.
91
FINANCIAL REPORTIncitec Pivot Limited Annual Report 2021
Notes to the Consolidated Financial Statements
For the year ended 30 September 2021
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
92
93
94
96
97
98
99
99
100
101
103
104
105
106
108
108
109
111
112
120
120
121
122
122
123
123
FINANCIAL REPORTIncitec Pivot Limited Annual Report 2021 Notes to the Consolidated Financial Statements: Basis of preparation
For the year ended 30 September 2021
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.
Impact of COVID-19 pandemic
The Group continues to actively manage the risks arising from
COVID-19 on the health and safety of its people and the business
continuity of the Group’s operations. The Group’s operations are in
industries that have been deemed as providing ‘essential services’
by governments and continue to run in line with the required
safety and health guidelines. IPL has also implemented a financial
Response Plan that commenced in FY20 to deliver sustained cost
savings from business efficiencies and improvement of free cash
flow by FY22. 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.
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 result.
Certain new accounting Standards and Interpretations have
been issued that are not mandatory for the 30 September 2021
reporting period and have not been early adopted by the Group.
These Standards and Interpretations are not expected to have a
material impact on the Group in the current or future reporting
periods or on foreseeable future transactions.
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 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 15 November 2021.
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.
93
FINANCIAL REPORTIncitec Pivot Limited Annual Report 2021 Notes to the Consolidated Financial Statements: Financial performance
For the year ended 30 September 2021
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.
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 initiating systems to businesses in Australia,
Turkey and South Africa. It also manufactures and sells industrial
chemicals to the agricultural sector and other specialist industries.
Description of reportable segments
Corporate
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 agricultural sector and other specialist industries.
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.
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.
Asia Pacific Eliminations (APAC Elim): represent elimination of sales
and profit in stock arising from Fertilisers APAC sales to DNAP.
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
30 September 2021
Revenue from external customers
Share of profits of equity accounted investments
EBITDA(ii)
Notes
(2)
(14)
Depreciation and amortisation
(2)
(113.7)
(79.3)
268.4
140.2
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
1,894.6
937.8
(25.8) 2,806.6
1,588.7
(46.8)
–
14.5
382.1
219.5
–
–
–
–
14.5
27.4
601.6
359.9
(193.0)
(170.0)
408.6
189.9
–
(2.1)
0.3
(1.8)
–
–
(24.5)
(5.8)
(30.3)
4,348.5
41.9
934.9
(368.5)
566.4
(112.8)
(95.0)
358.6
(209.5)
149.1
Segment assets
Segment liabilities
Net segment assets(v)
Deferred tax balances
Net assets
1,558.4
2,588.1
(1,059.9)
(236.4)
498.5
2,351.7
–
–
–
4,146.5
4,450.4
(1,296.3)
(669.0)
2,850.2
3,781.4
–
–
–
781.7
9,378.6
(1,716.5)
(3,681.8)
(934.8)
5,696.8
(3)
(328.2)
5,368.6
(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.
94
FINANCIAL REPORTIncitec Pivot Limited Annual Report 2021
Notes to the Consolidated Financial Statements: Financial performance
For the year ended 30 September 2021
Asia Pacific
Americas
Fertilisers
APAC
$mill
DNAP
$mill
APAC
Elim
$mill
Total
$mill
DNA
$mill
Group
Elim
$mill
Corporate(i)
$mill
Consolidated
Group
$mill
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
1,502.0
999.2
(18.5)
2,482.7
1,506.5
(47.0)
–
11.8
129.0
230.7
–
–
–
–
11.8
359.7
20.5
396.3
(184.2)
(165.5)
175.5
230.8
–
(0.3)
0.2
(0.1)
–
–
(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
Segment assets
Segment liabilities
Net segment assets(v)
Deferred tax balances
Net assets
1,536.0
2,564.9
(770.1)
(282.4)
765.9
2,282.5
–
–
–
4,100.9
4,436.5
(1,052.5)
(639.2)
3,048.4
3,797.3
–
–
–
740.1
9,277.5
(1,967.0)
(3,658.7)
(1,226.9)
5,618.8
(3)
(415.5)
5,203.3
(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.
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 2021
Revenue from external customers
Non-current assets other than financial
assets and deferred tax assets
Trade and other receivables
30 September 2020
Revenue from external customers
Non-current assets other than financial
assets and deferred tax assets
Trade and other receivables
Australia
$mill
2,739.7
3,435.3
258.9
Australia
$mill
2,399.0
3,549.2
215.9
USA
$mill
1,278.3
3,863.0
142.6
USA
$mill
1,237.5
3,942.2
98.6
Canada
$mill
285.7
99.1
73.5
Canada
$mill
249.8
80.6
46.7
Turkey
$mill
38.9
2.4
12.5
Turkey
$mill
50.5
2.0
11.2
Other/Elim
$mill
Consolidated
$mill
5.9
4,348.5
125.8
29.5
7,525.6
517.0
Other/Elim
$mill
Consolidated
$mill
5.4
3,942.2
117.5
28.4
7,691.5
400.8
95
FINANCIAL REPORTIncitec Pivot Limited Annual Report 2021
Notes to the Consolidated Financial Statements: Financial performance
For the year ended 30 September 2021
2. Revenue and expenses
Individually material items
Notes
2021
$mill
2020
$mill
Profit after tax includes the following expenses whose disclosure
is relevant in explaining the financial performance of the Group:
30 September 2021
4,348.5
3,942.2
4,348.5
3,942.2
Cheyenne manufacturing plant impairment
107.4
(28.0)
Gross
$mill
Tax
$mill
Gibson Island manufacturing plant closure
- Impairment of assets
1.9
3.9
- Closure costs (1)
102.5
(30.8)
83.5
(25.1)
Net
$mill
79.4
71.7
58.4
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
29.5
0.3
1.7
33.4
27.3
1.6
10.6
43.4
Profit before income tax includes the following specific expenses:
Notes
2021
$mill
2020
$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:
(9)
(10)
(11)
(9)
(11)
303.0
42.5
23.0
368.5
213.1
–
213.1
impairment losses on trade and other
receivables
(4)
0.4
1.4
7.7
4.1
0.5
83.5
20.7
32.8
2.7
5.6
5.4
1.8
inventory losses and obsolescence
employee entitlements
environmental liabilities
legal and other provisions
restructuring and rationalisation costs
Research and development expense
Defined contribution superannuation
expense
(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)
96
101.9
114.7
126.6
139.6
Total individually material items (2)
293.4
(83.9)
209.5
(1) Closure costs include employee redundancies ($26.1m) and decommission and other closure
related costs ($57.4m).
(2) Refer to note 12 for further details surrounding the individually material items.
30 September 2020
Impairment of intangible assets (3)
Business restructuring costs (4)
Employee redundancies
Impairment of operating assets, site exit
and other direct costs
Total individually material items
Gross
$mill
Tax
$mill
41.0
(10.7)
Net
$mill
30.3
24.8
(6.8)
18.0
22.1
87.9
(5.6)
(23.1)
16.5
64.8
(3) During the year ended 30 September 2020 intangible assets were impaired by $41.0m
following a detailed review of the Group’s technology and software products and offerings
given the continued enhancement of the Group’s technology portfolio.
(4) Costs incurred directly due to the business restructure which include redundancies and
related costs, asset impairment write downs, and site exit and reconfiguration costs.
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.
»
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.
290.7
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
FINANCIAL REPORTIncitec Pivot Limited Annual Report 2021
Notes to the Consolidated Financial Statements: Financial performance
For the year ended 30 September 2021
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:
2021
$mill
2020
$mill
Current tax expense
Current year
Adjustments in respect of prior years
Deferred tax expense
Current year
Total income tax expense
96.7
1.8
98.5
(87.4)
11.1
Income tax reconciliation to prima facie tax payable
Profit before income tax
Tax at the Australian tax rate of 30% (2020: 30%)
Tax effect of amounts which are not deductible/
(taxable) in calculating taxable income:
Joint venture income
Sundry items
Difference in overseas tax rates
Adjustments in respect of prior years
Income tax expense attributable to profit
2021
$mill
160.2
48.1
(11.7)
(17.7)
(9.4)
1.8
11.1
25.1
(1.7)
23.4
4.1
27.5
2020
$mill
150.9
45.3
(8.1)
(4.2)
(3.8)
(1.7)
27.5
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 $1.4m for the year ended 30 September 2021
(2020: credit of $51.8m).
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
2021
$mill
19.7
8.7
95.1
69.1
188.4
(565.7)
(60.8)
(87.2)
(12.7)
18.2
(1.0)
2020
$mill
21.7
18.4
51.1
70.6
170.3
(554.0)
(62.9)
(91.2)
(13.1)
(12.4)
(14.0)
Net deferred tax liabilities
(328.2)
(415.5)
Presented in the Statement of Financial Position as follows:
Deferred tax assets
Deferred tax liabilities
Net deferred tax liabilities
12.0
(340.2)
(328.2)
13.5
(429.0)
(415.5)
Opening balance at 1 October
Adoption of AASB 16 Leases
Credited/(debited) to the profit or loss
Charged to equity
Foreign exchange movements
2021
$mill
2020
$mill
(415.5)
(482.5)
–
87.4
(1.4)
1.3
6.0
(4.1)
51.8
13.3
Closing balance at 30 September
(328.2)
(415.5)
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. Certain long standing matters
across the Group were resolved during the year and are
reflected in the “Sundry items” disclosure line above.
97
FINANCIAL REPORTIncitec Pivot Limited Annual Report 2021
Notes to the Consolidated Financial Statements: Financial performance
For the year ended 30 September 2021
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.
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
30 September 2021
Inventories
Receivables
Payables
30 September 2020
Inventories
Receivables
Payables
Inventories by category:
Raw materials and stores
Work-in-progress
Finished goods
Provisions
Total inventories balance
Provision movement:
30 September 2021
Carrying amount at 1 October 2020
Provisions made during the year
Provisions written back during the year
Amounts written off against provisions
Foreign exchange rate movements
Carrying amount at 30 September 2021
Trade
$mill
577.7
470.8
Other
$mill
–
46.2
Total
$mill
577.7
517.0
(927.8)
(322.5)
(1,250.3)
120.7
(276.3)
(155.6)
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)
2021
$mill
130.9
77.9
382.2
(13.3)
577.7
2020
$mill
131.8
62.6
293.5
(13.5)
474.4
Trade
receivables
$mill
Inventories
$mill
(22.3)
(0.4)
0.9
3.4
1.2
(17.2)
(13.5)
(1.4)
1.0
0.7
(0.1)
(13.3)
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:
Gross
$mill
455.3
18.4
14.3
488.0
Gross
$mill
332.3
3.0
25.9
361.2
Credit loss
provision
$mill
(0.7)
(2.2)
(14.3)
(17.2)
Credit loss
provision
$mill
(3.1)
(1.0)
(18.2)
(22.3)
Net
$mill
454.6
16.2
–
470.8
Net
$mill
329.2
2.0
7.7
338.9
30 September 2021
Current
30–90 days
Over 90 days
Total
30 September 2020
Current
30–90 days
Over 90 days
Total
98
Explosives (DNA, DNAP) Fertilisers Group
* Trade working capital is reported gross 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 2021,
receivables totalling $124.2m (2020: $115.9m) 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 2021, the balance of the supply
chain finance program was $207.9m (2020: $296.4m). 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 2021, 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.
0.0%2.5%5.0%7.5%10.0%12.5%15.0%17.5%20.0%22.5%25.0%27.5%FY17FY18FY19FY20FY21FINANCIAL REPORTIncitec Pivot Limited Annual Report 2021
Notes to the Consolidated Financial Statements: Shareholder returns
For the year ended 30 September 2021
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.
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
2021
Cents
per share
2020
Cents
per share
Earnings per Share (including individually material items)
Earnings per Share (before individually material items)
Dividend declared in respect of the financial year
7.7
18.5
7.7
18.4
7.1
10.9
7.1
10.8
6. Dividends
Dividends paid or declared by the Company in the year ended 30
September were:
2021
$000
2020
$000
Ordinary shares
Number
Number
Final dividend of 3.4 cents per share, 30 percent
franked, paid 8 January 2020(1)
–
54,591
1,942,225,029
1,734,434,874
Interim dividend of 1.0 cents per share, fully
franked, paid 2 July 2021
19,422
–
Total ordinary share dividends
19,422
54,591
1,946,321,171
1,738,277,711
(1) The dividend paid in the 2020 financial year in cash was $30.7m, and $23.9m was satisfied
by the issue of 7,658,312 ordinary shares under the Company’s Dividend Reinvestment Plan.
Reconciliation of earnings used in the calculation
of basic and diluted earnings per share
Notes
2021
$mill
2020
$mill
Profit attributable to ordinary shareholders
149.1
123.4
Individually material items after income tax
(2)
209.5
64.8
Profit attributable to ordinary shareholders
excluding individually material items
358.6
188.2
Since the end of the financial year, the directors have determined
to pay a final dividend of 8.3 cents per share, 14% franked, to be
paid on 16 December 2021. The record date for entitlement to this
dividend is 2 December 2021. The total dividend payment
will be $161.2m.
The financial effect of this dividend has not been recognised in
the 2021 Consolidated Financial Statements and will be recognised
in subsequent Financial Reports.
The dividend reflects a payout ratio of approximately 50 percent
of net profit after tax (before individually material items).
99
05101520253035FY17FY18FY19FY20FY21CentsFINANCIAL REPORTIncitec Pivot Limited Annual Report 2021
Notes to the Consolidated Financial Statements: Capital structure
For the year ended 30 September 2021
Franking credits
Key financial metrics
Franking credits available to shareholders of the Company were
$10.1m (2020: $8.9m).
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.
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:
Target range
2021
2020
Net debt/EBITDA (times)
equal or less than 2.5
Interest cover (times)
equal or more than 6.0
1.1
9.7
1.4
6.1
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 2021, 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 2021 amounted to $3,806.2m
(1,942,225,029 ordinary shares).
100
FINANCIAL REPORTIncitec Pivot Limited Annual Report 2021 Notes to the Consolidated Financial Statements: Capital structure
For the year ended 30 September 2021
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
2021
$mill
1,668.8
(651.8)
Fair value of derivatives
(17)
(12.8)
2020
$mill
1,870.3
(554.6)
(287.0)
Net debt
1,004.2
1,028.7
At 30 September 2021, the Group’s Net debt/EBITDA before
individually material items was 1.1 times (2020: 1.4 times).
Refer to 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 current loans
Loans from joint ventures
Non-current
Other non-current loans
Fixed interest rate bonds
Total interest bearing liabilities
2021
$mill
2.2
16.6
18.8
0.7
1,649.3
1,650.0
1,668.8
2020
$mill
4.8
16.4
21.2
5.2
1,843.9
1,849.1
1,870.3
Fixed Interest Rate Bonds
The Group has on issue the following fixed interest rate bonds:
» USD500m of Notes as a private placement in the US
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.
» AUD431.3m 7 year bond on issue in the Australian debt capital
market. The bond was issued in March 2019 for AUD450m and
reduced by AUD18.7m as a result of the buy-back in November
2020. The bond has a fixed rate semi-annual coupon of 4.30
percent and matures in March 2026.
» USD305.7m 10 year bond on issue in the Regulation S
debt capital market. The bond was issued in August 2017
for USD400m and reduced by USD94.3m as a result of the
buy-back in November 2020. The bond has a fixed rate semi-
annual coupon of 3.95 percent and matures in August 2027.
Bank Facilities
In March 2021, IPL cancelled its US domiciled Syndicated Term
facility (USD500m) and its Australian domiciled Syndicated Term
facility (AUD122m and USD109m). Both facilities were due to
mature in October 2021. These cancelled facilities were replaced
by a Syndicated Term facility domiciled in Australia and consisting
of two tranches: Tranche A has a limit of AUD490m and Tranche B
has a limit of USD200m. The facility matures in April 2024.
As at 30 September 2021, the Group has committed undrawn
financing facilities of $768.6m.
Tenor of interest bearing liabilities
The Group’s average tenor of its drawn interest bearing liabilities at
30 September 2021 is 6.3 years (2020: 7.3 years) and the average
tenor of its total debt facilities is 5.1 years (2020: 5.1 years).
The table below includes detail on the movements in the Group’s interest bearing liabilities.
30 September 2021
Current
Other loans
Loans from joint ventures
Non-current
Other loans
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
2020
$mill
Proceeds from
borrowings
$mill
Repayments
of borrowings
$mill
Reclassification
$mill
Foreign
exchange
movement
$mill
Funding costs
& fair value
adjustments
$mill
30 September
2021
$mill
4.8
16.4
5.2
1,843.9
1,870.3
(287.0)
1,583.3
–
–
–
–
–
–
–
(7.2)
–
–
(150.7)
(157.9)
–
(157.9)
4.5
–
(4.5)
–
–
–
–
0.1
0.2
–
(8.1)
(7.8)
233.6
225.8
–
–
–
(35.8)
(35.8)
40.6
4.8
2.2
16.6
0.7
1,649.3
1,668.8
(12.8)
1,656.0
101
FINANCIAL REPORTIncitec Pivot Limited Annual Report 2021
Notes to the Consolidated Financial Statements: Capital structure
For the year ended 30 September 2021
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
Debt after hedging
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
12.6
17.0
1,183.8
7.4
293.0
1,142.6
2,656.4
(388.6)
2,267.8
–
0.3
–
–
–
722.7
723.0
(13.8)
–
(1,172.6)
–
(301.2)
–
(1,487.6)
–
–
723.0
(1,487.6)
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
38.0
40.2
4.8
16.4
–
5.2
–
1,843.9
1,870.3
(34.9)
(287.0)
5.3
1,583.3
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
2021
$mill
942.2
726.6
1,668.8
2020
$mill
1,746.5
123.8
1,870.3
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 2021:
Available limits Drawn funds
Maturity
Date
Apr 24
Apr 24
Feb 26
Mar 26
Aug 27
Oct 28
Oct 30
The Group has undrawn financing facilities of $768.6m (2020:
$974.0) at 30 September 2021.
Cash and cash equivalents at 30 September 2021 were $651.8m
(2020: $554.6m) and consisted of cash at bank of $251.9m (2020:
$105.1m) and short term investments of $399.9m (2020: $449.5m).
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
Cash includes cash at bank, cash on hand and short term
investments, net of bank overdrafts.
Borrowing costs
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.
102
0200400600Bank facilityAUD490mBank facilityUSD200mReg S HKD560mBondAUD431.3mReg SUSD305.7mUSPP Tranche 1USD250mUSPP Tranche 2USD250mAUDmFINANCIAL REPORTIncitec Pivot Limited Annual Report 2021
Notes to the Consolidated Financial Statements: Capital investment
For the year ended 30 September 2021
9. Property, plant and equipment
Notes
Freehold land
and buildings
$mill
Machinery, plant
and equipment
$mill
Work in progress
$mill
Total
$mill
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
Year ended 30 September 2021
Opening net book amount
Additions
Disposals
Depreciation
Impairment of assets
Reclassification from work in progress
Foreign exchange movement
Closing net book amount
At 30 September 2021
Cost
Accumulated depreciation
Net book amount
(2)
(2)
(2)
(2)
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
688.0
2.3
(1.1)
(28.4)
–
26.9
(0.3)
687.4
1,067.3
(379.9)
687.4
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
3,169.8
2.2
(4.3)
(274.6)
(213.1)
331.0
(5.2)
3,005.8
4,860.0
(1,854.2)
3,005.8
196.8
–
196.8
196.8
283.3
0.4
(1.1)
–
(5.2)
(256.1)
(4.2)
213.9
213.9
–
213.9
213.9
377.8
–
–
–
(357.9)
1.9
235.7
235.7
–
235.7
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
4,071.7
382.3
(5.4)
(303.0)
(213.1)
–
(3.6)
3,928.9
6,163.0
(2,234.1)
3,928.9
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.
103
FINANCIAL REPORTIncitec Pivot Limited Annual Report 2021
Notes to the Consolidated Financial Statements: Capital investment
For the year ended 30 September 2021
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)
2021
$mill
42.5
5.6
48.1
2020
$mill
40.7
5.9
46.6
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.
10. Leases
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.
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
(2)
–
156.1
28.0
(0.4)
(17.7)
(0.9)
165.1
180.6
(15.5)
165.1
165.1
15.8
(1.1)
(2)
(19.7)
(0.1)
160.0
–
59.9
22.4
(0.8)
(23.0)
(2.5)
56.0
76.4
(20.4)
56.0
56.0
22.1
(0.5)
(22.8)
(0.3)
54.5
Total
$mill
–
216.0
50.4
(1.2)
(40.7)
(3.4)
221.1
257.0
(35.9)
221.1
221.1
37.9
(1.6)
(42.5)
(0.4)
214.5
192.2
(32.2)
160.0
93.1
(38.6)
54.5
285.3
(70.8)
214.5
Year ended 30 September 2020
Opening net book amount
Adoption of AASB 16 Leases
Additions
Disposals
Depreciation
Foreign exchange movement
Closing net book amount
At 30 September 2020
Cost
Accumulated depreciation
Net book amount
Year ended 30 September 2021
Opening net book amount
Additions
Disposals
Depreciation
Foreign exchange movement
Closing net book amount
At 30 September 2021
Cost
Accumulated depreciation
Net book amount
Lease liabilities
Opening carrying amount at 1 October
Adoption of AASB 16 Leases
Additions
Disposals
Payments made during the year
Interest unwind
Foreign exchange movement
Carrying amount at 30 September
Current
Non-current
2021
$mill
247.7
–
37.9
(1.4)
(47.0)
5.6
(0.3)
242.5
45.0
197.5
2020
$mill
–
243.7
50.4
(0.7)
(47.8)
5.9
(3.8)
247.7
41.5
206.2
Refer to note 17 for the maturity profile of the Group’s committed
lease liabilities before discounting.
104
FINANCIAL REPORTIncitec Pivot Limited Annual Report 2021
Notes to the Consolidated Financial Statements: Capital investment
For the year ended 30 September 2021
11. Intangibles
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
Year ended 30 September 2021
Opening net book amount
Additions
Amortisation
Foreign exchange movement
Closing net book amount
At 30 September 2021
Cost
Accumulated amortisation
Net book amount
Notes
Software
$mill
Goodwill
$mill
Patents, trademarks
& customer contracts
$mill
Brand names
$mill
Total
$mill
(2)
(2)
(2)
166.2
(98.6)
67.6
67.6
11.7
–
(41.0)
(6.7)
(3.8)
27.8
129.8
(102.0)
27.8
27.8
6.5
(7.0)
0.2
27.5
107.1
(79.6)
27.5
2,724.5
–
2,724.5
2,724.5
–
1.9
–
–
(88.3)
2,638.1
2,638.1
–
2,638.1
2,638.1
4.6
–
(5.9)
2,636.8
2,636.8
–
2,636.8
309.9
(241.0)
68.9
68.9
–
1.6
–
(17.9)
(2.3)
50.3
298.5
(248.2)
50.3
50.3
0.8
(16.0)
(0.8)
34.3
298.4
(264.1)
34.3
318.5
–
318.5
3,519.1
(339.6)
3,179.5
318.5
3,179.5
–
–
–
–
(15.0)
303.5
303.5
–
303.5
11.7
3.5
(41.0)
(24.6)
(109.4)
3,019.7
3,369.9
(350.2)
3,019.7
303.5
3,019.7
–
–
(1.2)
302.3
302.3
–
302.3
11.9
(23.0)
(7.7)
3,000.9
3,344.6
(343.7)
3,000.9
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 2021
Fertilisers APAC
Dyno Nobel Asia Pacific (DNAP)
Goodwill
$mill
Brand names
$mill
Total
$mill
30 September 2020
Goodwill
$mill
Brand names
$mill
Total
$mill
186.4
908.5
–
186.4
Fertilisers APAC
40.3
948.8
Dyno Nobel Asia Pacific (DNAP)
186.4
908.5
–
186.4
40.3
948.8
Dyno Nobel Americas (DNA)
1,541.9
262.0
1,803.9
Dyno Nobel Americas (DNA)
1,543.2
263.2
1,806.4
2,636.8
302.3
2,939.1
2,638.1
303.5
2,941.6
105
FINANCIAL REPORTIncitec Pivot Limited Annual Report 2021
Notes to the Consolidated Financial Statements: Capital investment
For the year ended 30 September 2021
Key accounting policies
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.
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.
Amortisation
Goodwill and brand names are not amortised.
Impairment testing of assets
DNA Cheyenne manufacturing plant
The further structural decline in thermal coal markets has been
identified as an indicator of impairment that impacts DNA’s
Cheyenne manufacturing plant, and specifically the nitric acid
production utilisation rates. The future reconfiguration of the plant
to reduce Nitric acid production capacity in line with lower market
volumes, resulted in an impairment of $107.4m.
Gibson Island
IPL was unable to secure an economically viable long-term gas
supply for its Gibson Island plant beyond its current contract. As a
result, IPL decided to cease manufacturing operations at the site
at the end of the current gas supply arrangements which expire in
December 2022. IPL’s Brisbane fertiliser distribution capability will
continue beyond the closure of the manufacturing operations.
The financial impact of the closure of the manufacturing operations
are as follows:
» Cash costs of closure: $83.5m (pre-tax);
» Non-cash impairment of assets: $102.5m.
Key assumptions
Details of the key assumptions used in the recoverable amount
calculations at 30 September are set out below:
Key assumptions
1 – 5 years
2021
US$
2020
US$
DAP(1)
Gas (DNA CGU)(2)
Ammonia(3)
AUD:USD(4)
427 to 541
330 to 441
3.00 to 3.50
2.46 to 2.95
356 to 480
252 to 315
0.74 to 0.76
0.73 to 0.74
(1) Di-Ammonium Phosphate price (FOB Tampa – USD per tonne).
(2) Henry Hub natural gas price (USD per mmbtu).
(3) Ammonia price (CFR Tampa – USD per tonne).
(4) AUD:USD exchange rate.
Terminal value
(after 5 years)
2021
US$
520
3.50
454
0.74
2020
US$
510
3.21
435
0.72
For both DNAP and Fertilisers APAC, the gas price assumption for
impairment testing purposes for the period after the current gas
contracts expire, is based on external long term gas production cost
forecasts of between $6.90 and $8.00 per gigajoule.
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% for the
Fertilisers APAC CGU (2020: 9%) and 8.5% for the DNA and DNAP
CGUs (2020: 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% (2020: 2.5%) for all CGUs. Sensitivity
analyses on the discount and growth rates, considering the current
volatile market conditions, are provided below.
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
4 – 10 years
3 – 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 for indicators of impairment of all the
Group’s assets, including operating assets.
Since 30 September 2020, the Group announced the impact of the
extension of turnaround activities and one-off outages at some
of its US manufacturing facilities. In addition, the Group is actively
managing the risks arising from COVID-19. To date there are no
known significant long term structural changes that affect the future
cash flows of the CGUs as a result of these events. As a result,
the recoverable amounts of IPL’s CGUs continued to exceed their
carrying amounts at 30 September 2021.
106
FINANCIAL REPORTIncitec Pivot Limited Annual Report 2021
Notes to the Consolidated Financial Statements: Capital investment
For the year ended 30 September 2021
Sensitivity analyses
Included in the table below is a sensitivity analysis of the recoverable amounts of the CGUs and, where applicable, the impairment
charge considering reasonable change scenarios relating to key assumptions at 30 September 2021.
Each of the sensitivities below assumes that a specific assumption moves in isolation, while all other assumptions are held constant.
A change in one assumption could be accompanied by a change in another assumption, which may increase or decrease the
net impact.
Post-tax
discount
rate
Terminal
value
growth rate
+0.5%
-1.0%
Natural
gas price
+AU$1 per
gigajoule
Post-tax
discount
rate
+0.5%
Ammonia
price
-US$50
per tonne
Terminal
value growth
rate
-1.0%
Natural gas
price
+US$1
per mmbtu
DNAP
AU$mill
AU$mill
AU$mill
DNA
US$mill
US$mill
US$mill
US$mill
Change in
recoverable amount
(194.5)
Impairment charge
–
(295.3)
(55.4)
(61.7)
–
Change in
recoverable amount
(319.7)
(391.0)
(486.5)
(268.2)
Impairment charge
–
–
–
–
Fertilisers APAC
Change in recoverable amount
Impairment charge
Post-tax
discount rate
AUD:USD
exchange rate
Terminal value
growth rate
+0.5%
AU$mill
(110.2)
–
+5c
AU$mill
(360.9)
–
-1.0%
AU$mill
(154.2)
–
DAP
Price
-US$50
per tonne
AU$mill
(629.5)
–
Natural gas
price
+AUD1 per gigajoule
AU$mill
(45.4)
–
Transition of the world’s energy systems and sustainability forms
part of our strategy and these have been considered in the market
data utilised to assess growth rates for each CGU.
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.
Impairment of other property, plant and
equipment
During the year ended 30 September 2021 other property, plant
and equipment was impaired by $3.2m (2020: $16.3m) as a
result of the Group’s fixed asset verification procedures and the
abandonment of certain assets following a strategic review of
the Group’s operating assets.
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 2021,
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.
107
FINANCIAL REPORTIncitec Pivot Limited Annual Report 2021 Notes to the Consolidated Financial Statements: Capital investment
For the year ended 30 September 2021
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
2021
$mill
39.1
39.1
2020
$mill
68.9
68.9
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 2021 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
Foreign exchange movement
Carrying amount at 30 September
Carrying amount of investments in:
Joint ventures
Associates
Carrying amount of investments in joint
ventures and associates
2021
$mill
326.3
41.9
–
(44.6)
1.2
324.8
2020
$mill
357.7
32.3
(6.1)
(30.9)
(26.7)
326.3
250.0
74.8
254.5
71.8
324.8
326.3
Transactions between subsidiaries of the Group and joint
ventures and associates
Sales of goods/services
Purchase of goods/services
Management fees/royalties
Interest income
Interest expense
Dividend income
2021
$mill
348.9
(53.2)
29.5
–
(0.4)
44.6
2020
$mill
391.1
(55.6)
27.3
0.3
(0.4)
30.9
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
2021
$mill
6.4
72.1
–
16.6
2020
$mill
3.1
59.7
19.9
16.4
Outstanding balances arising from transactions with joint ventures
and associates are on standard market terms.
108
FINANCIAL REPORTIncitec Pivot Limited Annual Report 2021
Notes to the Consolidated Financial Statements: Capital investment
For the year ended 30 September 2021
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.
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
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
Nobel Labs, LLC
Mine Equipment & Mill Supply Company
Controlled Explosives, Inc.
Drisk Insurance Inc.
Falconi Construction, Inc
Alpha Dyno Nobel
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.
Incorporated in Hong Kong
Incitec Pivot Holdings (Hong Kong) Limited
Quantum Fertilisers Limited
Incorporated in Singapore
Coltivi Insurance Pte Ltd
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. (2)
Incorporated in Papua New Guinea
DNX Papua New Guinea Ltd (2)
Incorporated in Indonesia
PT DNX Indonesia
Incorporated in Turkey
Nitromak Dnx Kimya Sanayii Anonim Sirketi
Ş
Incorporated in Romania
RomNitro Explosives SRL
Incorporated in Albania
Nitro Industria Kimike Shpk
(1) A party to Deed of Cross Guarantee dated 30 September 2008.
(2) This entity has a 31 December financial year end.
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%
109
FINANCIAL REPORTIncitec Pivot Limited Annual Report 2021
Notes to the Consolidated Financial Statements: Capital investment
For the year ended 30 September 2021
Joint arrangements and associates
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
DetNet Americas, Inc.
Incorporated in Canada
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 Guzmán, S.A. de C.V.
Explosivos y Servicios Para la Construcción, S.A. de C.V.
Ownership
interest
51%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
49%
49%
50%
50%
50%
50%
49%
49%
49%
49%
49%
Name of entity
Associates
Incorporated in USA
Maine Drilling and Blasting Group
Independent Explosives
Maine Drilling and Blasting, Inc.
MD & B, Inc.
MD Drilling and Blasting, Inc.
Incorporated in Canada
Labrador Maskuau Ashini Ltd
Innu Namesu Ltd
Joint operations
Ownership
interest
49%
49%
49%
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 100 percent of the profit of Dene
Dyno Nobel (DWEI) Inc.
110
FINANCIAL REPORTIncitec Pivot Limited Annual Report 2021 Notes to the Consolidated Financial Statements: Risk management
For the year ended 30 September 2021
16. Provisions and contingencies
Provisions at 30 September 2021 are analysed as follows:
30 September 2021
Carrying amount at 1 October 2020
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 2021
Current
Non-current
Employee
entitlements
$mill
Restructuring and
rationalisation
$mill
Environmental
$mill
Asset retirement
obligations
$mill
Legal
and other
$mill
Total
provisions
$mill
62.9
7.7
(1.0)
(6.3)
0.6
–
63.9
59.1
4.8
28.1
83.5
–
(19.1)
0.1
(0.5)
92.1
17.3
74.8
41.1
4.1
–
(4.2)
1.1
0.1
42.2
20.2
22.0
92.5
12.5
–
(0.6)
3.6
0.4
108.4
1.0
107.4
3.2
0.5
–
–
–
–
3.7
3.7
–
227.8
108.3
(1.0)
(30.2)
5.4
–
310.3
101.3
209.0
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.
Restructuring and rationalisation
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.
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.
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.
Contingencies
The following contingent liabilities are considered unlikely. However
the directors consider they should be disclosed:
» Under the terms of the ASIC Legislative Instrument, ASIC
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 2021 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.
111
FINANCIAL REPORTIncitec Pivot Limited Annual Report 2021
Notes to the Consolidated Financial Statements: Risk management
For the year ended 30 September 2021
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
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.
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 forecast liquidity requirements are continually
reassessed based on regular forecasting of earnings and
capital requirements.
Outstanding financial instruments
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 2021
Non-derivative financial
liabilities
30 September 2020
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
1,668.8
18.8
531.8
1,118.2
Interest bearing liabilities
1,870.3
21.2
4.0
1,845.1
Interest payments
462.8
55.0
286.0
121.8
Interest payments
541.4
55.3
299.3
186.8
Trade and other payables
1,250.3
1,229.3
223.0
127.5
44.6
22.7
21.0
87.2
23.8
–
Trade and other payables
1,065.6
1,049.4
91.2
81.0
Lease liabilities
Bank guarantees
235.4
134.2
41.1
43.5
16.2
95.8
10.0
–
98.5
80.7
Lease liabilities
Bank guarantees
Total non-derivative cash
outflows
Derivative financial
(assets)/liabilities
Foreign exchange options
Cross currency interest
rate swaps
Interest rate swaps
Commodity swaps
Commodity options
Net derivative cash
outflows/(inflows)
Forward exchange contracts
(25.6)
(13.1)
(12.5)
3,732.4
1,370.4
949.8
1,412.2
Total non-derivative
cash outflows
Derivative financial
(assets)/liabilities
3,846.9
1,210.5
425.3
2,211.1
Forward exchange contracts
61.1
61.1
Foreign exchange options
_
_
7.9
7.9
–
0.6
17.1
7.1
–
(0.8)
3.5
7.1
–
1.4
11.9
–
–
–
–
–
Cross currency interest
rate swaps
1.7
Interest rate swaps
–
–
Commodity swaps
Commodity options
–
_
–
18.0
(0.1)
–
–
_
(1.2)
(14.2)
–
–
(48.0)
17.2
(3.2)
0.1
(46.8)
13.4
(3.1)
0.1
7.1
4.6
0.8
1.7
Net derivative cash
outflows/(inflows)
27.2
24.7
17.9
(15.4)
(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.
112
FINANCIAL REPORTIncitec Pivot Limited Annual Report 2021
Notes to the Consolidated Financial Statements: Risk management
For the year ended 30 September 2021
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:
Transactional exposures
Trade and other receivables
Trade and other payables
Interest bearing liabilities
Gross exposure (before hedging)
Hedge of transactional exposures
Trade and other payables
Forward exchange contracts
Interest bearing liabilities
Forward exchange contracts
Total hedge contract values
Net exposure (after hedging)
Hedge of forecast sales and purchases
Forward exchange contracts
Cross currency interest rate swaps
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
Interest bearing liabilities
Total hedge contract values
Net exposure (after hedging)
2021
USD mill
2020
USD mill
0.4
5.8
(376.2)
(378.5)
–
(1,200.0)
(375.8)
(1,572.7)
372.1
352.3
–
372.1
(3.7)
1,200.0
1,552.3
(20.4)
2021
USD mill
2020
USD mill
(139.3)
(151.6)
(400.0)
(690.9)
(138.8)
–
(300.0)
(438.8)
2021
USD mill
2020
USD mill
2,195.7
2,195.7
2,520.4
2,520.4
(251.4)
–
(500.0)
(373.0)
(930.0)
–
(751.4)
(1,303.0)
1,444.3
1,217.4
Net contract
amounts
mill
2021
Net contract
amounts
mill
2020
Strike(1)
2020
Strike(1)
2021
–
USD 400
USD 89
–
0.81
0.77
USD 60
USD 300
USD 160
0.78
0.74
0.71
Foreign exchange options
Contracts maturing within 1 year
Sold AUD Call
Bought AUD Call
Sold AUD Put
(1) AUD:USD foreign exchange rate
Foreign exchange rates
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
2021
AUD:USD
0.7180
0.7521
2020
AUD:USD
0.7148
0.6783
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
2021
- 1c
AUD:USD
AUD mill
2021
+ 1c
AUD:USD
AUD mill
2020
- 1c
AUD:USD
AUD mill
2020
Foreign exchange sensitivity – (net of hedging)
Trade and other
receivables and payables
– (profit or loss)
Hedge of forecast
transactions – (equity)
Investments in foreign
operations – (equity)
0.1
(0.1)
7.3
(7.5)
0.4
8.5
(0.4)
(8.7)
(27.6)
28.4
(23.5)
24.2
113
FINANCIAL REPORTIncitec Pivot Limited Annual Report 2021
Notes to the Consolidated Financial Statements: Risk management
For the year ended 30 September 2021
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
2021
- 1c
AUD:USD
AUD mill
2021
+ 1c
AUD:USD
AUD mill
2020
- 1c
AUD:USD
AUD mill
2020
USD Fertiliser sales from
Australian plants
North American USD
earnings
(11.0)
11.3
(7.8)
(2.5)
2.5
(3.3)
8.1
3.4
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:
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
2021
- 1%
AUD mill
2021
+ 1%
AUD mill
2020
- 1%
AUD mill
2020
(7.7)
0.7
7.7
(0.7)
(0.7)
0.1
0.7
(0.1)
The sensitivity above is also representative of the Group’s interest
rate exposures during the year.
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 swaps
2021
Less than 1 year
Less than 1 year
Less than 1 year
1 to 5 years
1 to 5 years
1 to 5 years
1 to 5 years
2.00%
(1.64%)
–
–
–
–
(0.20%)
(0.25%)
2.36%
(0.52%)
–
Later than 5 years
(2.02%)
2020
Less than 1 year
3.58%
1 to 5 years
1 to 5 years
1 to 5 years
Later than 5 years
3.14%
(1.70%)
(2.02%)
–
(0.20%)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.2
USD 50
0.7
1.0
USD 600
AUD 181
2.0 AUD 181
1.9 USD 550
3.1 USD 600
(4.13%)
4.4 HKD 560
–
–
–
–
–
–
6.2 USD 200
0.2
USD 500
2.0 AUD 200
2.7
1.6
6.2
USD 600
USD 600
USD 200
(4.13%)
5.4 HKD 560
Later than 5 years
–
114
FINANCIAL REPORTIncitec Pivot Limited Annual Report 2021
Notes to the Consolidated Financial Statements: Risk management
For the year ended 30 September 2021
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 five main commodities, namely:
Ammonia, Ammonium Nitrate, Ammonium Phosphate, Urea
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 prices at 30 September:
Total
volume
(MMBTU)(1)
2021
Price/
Strike
USD(2)
2021
Total
volume
(MMBTU)(1)
2020
Price/
Strike
USD(2)
2020
Natural gas
Contracts maturing within 1 year
Natural gas swaps
fixed payer
Natural gas options
Bought Call
Sold Put
610,000
2.52
961,800
2.54
–
–
–
–
5,150,000
5,150,000
3.44
2.56
Contracts maturing between 1 and 5 years
Natural gas swaps
fixed payer
70,000
2.58
680,000
2.53
(1) Million Metric British Thermal Units
(2) Nymex Henry Hub gas price
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
2021
- US$1 per
1 MMBTU
AUD mill
2021
+ US$1 per
1 MMBTU
AUD mill
2020
- US$1 per
1 MMBTU
AUD mill
2020
Henry Hub USD
0.9
(0.9)
7.0
(7.0)
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
2021
- US$1 per
1 MMBTU
AUD mill
2021
+ US$1 per
1 MMBTU
AUD mill
2020
- US$1 per
1 MMBTU
AUD mill
2020
Henry Hub USD
(16.7)
16.7
(31.3)
31.3
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:
Price sensitivity
2021
Granular Urea (FOB Middle East)
DAP/MAP (FOB China/Saudi)
Urea (FOB NOLA)
Ammonia (FOB Tampa)
2020
Granular Urea (FOB Middle East)
DAP/MAP (FOB Tampa)
Urea (FOB NOLA)
Ammonia (FOB Tampa)
+ US$10
per tonne
AUD mill
- US$10
per tonne
AUD mill
4.9
12.6
1.6
4.2
4.1
14.4
1.8
8.9
(4.9)
(12.6)
(1.6)
(4.2)
(4.1)
(14.4)
(1.8)
(8.9)
115
FINANCIAL REPORTIncitec Pivot Limited Annual Report 2021 Notes to the Consolidated Financial Statements: Risk management
For the year ended 30 September 2021
Included in the table below are details of the Group’s derivative instruments at 30 September 2021, classified by hedge accounting type and
market risk category:
Balance at 30 September 2021
During the period
Carrying
amount of
hedging
instrument
asset
Carrying
amount of
hedging
instrument
liability
Fair value
hedge
adjustment of
hedged item
Balance
of gains/
(losses) in
reserves
before tax
Gains/
(losses)
recognised in
reserves(1)
Reclassification
of (gains)/
losses from
reserves to
profit or loss(1,5)
Note
30 September 2021
Cash flow hedges
Foreign exchange risk on forecast sales & purchases
Forward exchange contracts
Foreign exchange options
Cross currency interest rate swaps
Discontinued hedge(2)
Commodity price risk on forecast purchases
Commodity swaps
Commodity options
Discontinued hedge(2)
Interest rate risk on highly probable debt
Interest rate swaps
Cross currency interest rate swaps
Discontinued hedge(2)
Total cash flow hedges
Net investment hedges
Foreign exchange risk on foreign operation
Cross currency interest rate swaps
Forward exchange contracts
Interest bearing liabilities
Discontinued hedge(2)
Total net investment hedges
Fair value hedges
42.3
16.7
0.8
–
1.9
–
–
0.1
0.1
–
61.9
–
–
–
–
–
(16.8)
(24.4)
–
–
(9.0)
–
–
(30.8)
–
–
(81.0)
(1.5)
–
–
–
(1.5)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(7.8)
–
2.9
(4.9)
–
–
–
8.7
(12.5)
(4.8)
(7.9)
(6.9)
–
(4.2)
8.8
0.1
(68.5)
(87.2)
(25.0)
–
(49.4)
(508.3)
(582.7)
–
–
–
–
–
–
–
(17.0)
10.3
(12.2)
(4.8)
(17.7)
(10.1)
(0.4)
2.4
28.6
–
(16.9)
(20.8)
(98.3)
(90.5)
(49.4)
263.5
25.3
–
–
–
–
–
–
–
–
4.5
–
–
–
12.5
–
–
(2.2)
–
–
12.1
22.4
–
–
–
–
–
–
–
–
–
–
–
–
–
22.4
Foreign exchange risk on HKD borrowings
Cross currency interest rate swaps
Interest rate risk on fixed USD, HKD and AUD bonds(3)
0.1
–
Interest rate swaps
Cross currency interest rate swaps
Discontinued hedge
Total fair value hedges
Held for trading(4)
Cross currency interest rate swaps
Total held for trading
Equity instruments
Total net
23.7
–
–
(8)
23.8
0.3
0.3
3.0
89.0
(10.7)
(0.3)
–
(11.0)
–
–
–
(93.5)
(4.9)
(686.9)
(1) 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.
(2) 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.
(3) Interest rate swap contracts effectively convert USD500m, AUD181m and HKD560m 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.
(4) 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.
(5) At 30 September 2021, there were no gains/losses that were transferred from reserves to profit or loss in relation to ineffective hedges.
116
FINANCIAL REPORTIncitec Pivot Limited Annual Report 2021
Notes to the Consolidated Financial Statements: Risk management
For the year ended 30 September 2021
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:
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
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
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)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(8)
10.8
300.9
51.9
0.1
–
363.7
0.1
0.1
0.2
(382.1)
3.0
135.9
(1.4)
(75.3)
–
–
–
–
(245.5)
(45.7)
–
1.0
(76.7)
(290.2)
(0.1)
–
(0.1)
382.1
–
–
–
–
–
–
(1.6)
(0.3)
(2.7)
3.2
0.4
(4.4)
(19.8)
–
0.1
(63.7)
(88.8)
73.3
90.5
(771.8)
(608.0)
–
–
–
–
–
–
–
–
–
–
(17.0)
(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
(38.3)
125.5
–
–
–
–
–
–
–
–
–
–
–
–
–
(20.7)
–
–
0.2
–
–
–
1.5
(19.0)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(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.
117
FINANCIAL REPORTIncitec Pivot Limited Annual Report 2021
Notes to the Consolidated Financial Statements: Risk management
For the year ended 30 September 2021
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
2021
$mill
517.0
651.8
86.0
2020
$mill
400.8
554.6
132.9
1,254.8
1,088.3
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 2021, the amount netted in other
financial assets and other financial liabilities is nil (2020: $382.1m).
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).
2021
Derivative financial assets
Derivative financial liabilities
Investment in Equity Instrument
2020
Derivative financial assets
Derivative financial liabilities
Investment in Equity Instrument
Level 1
$mill
–
–
–
Level 1
$mill
–
–
–
Level 2
$mill
86.0
(93.5)
–
Level 2
$mill
132.9
(158.9)
–
Level 3
$mill
–
–
3.0
Level 3
$mill
–
–
3.0
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 $1,668.8m (2020: $1,870.3m) – refer to note 8.
The fair value of the interest bearing financial liabilities at 30
September 2021 was $1,763.5m (2020: $1,949.2m) and was based
on the level 2 valuation methodology.
118
FINANCIAL REPORTIncitec Pivot Limited Annual Report 2021 Notes to the Consolidated Financial Statements: Risk management
For the year ended 30 September 2021
Key accounting policies
Foreign currency transactions and balances
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.
Cash flow hedges
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).
119
FINANCIAL REPORTIncitec Pivot Limited Annual Report 2021 Notes to the Consolidated Financial Statements: Other
For the year ended 30 September 2021
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 2018/21, 2019/22 and
2020/23 LTIs, the performance conditions comprise relative total
shareholder return, the delivery of certain long term value metrics
and growth in return on equity for the LTI 2018/21 plan and
absolute return on invested capital for the LTI 2019/22 and
LTI 2020/23 plans.
Certain Executives have been awarded performance rights under
Short Term Incentive Plans (STIs) based on financial, safety and
strategic outcomes.
These arrangements support the Company’s strategy for retention
and motivation of its executives.
disclosures
Key management personnel remuneration
Short-term employee benefits
Post-employment benefits
Other long-term benefits
Termination benefits
Share-based payments
2021
$000
10,706
144
67
183
2,495
13,595
2020
$000
8,141
163
100
468
1,838
10,710
Determination of key management personnel and detailed
remuneration disclosures are provided in the Remuneration Report.
Loans to key management personnel
Expenses arising from share-based payment
transactions
In the year ended 30 September 2021, there were no loans to
key management personnel and their related parties (2020: nil).
Other key management personnel transactions
In the year ended 30 September 2021, there were no transactions
entered into during the year with key management personnel
(including their related parties).
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
2021
$mill
2020
$mill
3.2
2.4
2021
Number
2020
Number
Number of performance rights outstanding
under the LTI and STI performance plans
6,285,054
5,082,644
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.
120
FINANCIAL REPORTIncitec Pivot Limited Annual Report 2021
Notes to the Consolidated Financial Statements: Other
For the year ended 30 September 2021
Key assumptions and sensitivities
Principal actuarial assumptions
Discount rate (gross of tax)
Future salary increases
Sensitivity analysis
2021
2020
2.3% – 7.7% 2.0% – 6.9%
2.0% – 5.0% 2.0% – 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 2021 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
(26.8)
1.3
32.2
(1.2)
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.
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
2021
$mill
307.2
(277.6)
29.6
2020
$mill
321.9
(255.0)
66.9
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
2021
$mill
200.3
116.4
43.0
Return on plan assets for the year ended 30 September
Actual return on plan assets
Composition of plan assets at 30 September
2021
$mill
33.9
2020
$mill
207.2
127.8
41.8
2020
$mill
15.1
The percentage invested in each asset class:
Equities
Fixed interest securities
Property
Other
2021
2020
8%
85%
3%
4%
43%
42%
7%
8%
Movements in plan assets/liabilities
Amounts recognised in Other Comprehensive Income
Gains/(losses) arising from changes
in actuarial assumptions
Return on plan assets greater
than discount rate
Total profit/(losses) recognised in other
comprehensive income
Amounts recognised in Profit or Loss
Notes
2021
$mill
2020
$mill
1.9
(16.2)
28.9
30.8
Net interest expense
Defined benefit superannuation expense
(2)
(2)
(1.8)
(2.7)
7.2
(9.0)
(1.4)
(2.9)
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.
121
FINANCIAL REPORTIncitec Pivot Limited Annual Report 2021
Notes to the Consolidated Financial Statements: Other
For the year ended 30 September 2021
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
2021
$mill
177.5
5.7
183.2
2020
$mill
9.1
29.3
38.4
22. Parent entity disclosure
Throughout the financial year ended 30 September 2021 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
1,401.4
1,437.1
Profit for the year
Other movements in retained earnings
Dividend paid
183.2
4.5
(19.4)
38.4
(19.5)
(54.6)
Retained profits at 30 September
1,569.7
1,401.4
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
2021
$mill
76.5
10.3
86.8
2020
$mill
66.1
(23.8)
42.3
2021
$mill
2020
$mill
930.2
8,847.2
1,003.7
4,531.3
4,315.9
538.3
8,406.6
779.2
4,232.7
4,173.9
3,806.2
3,806.2
(72.4)
582.1
(153.1)
520.8
4,315.9
4,173.9
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:
2021
$mill
2020
$mill
Within one year
6.5
2.4
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.
2021
$mill
566.4
235.3
385.3
20.3
64.6
1,271.9
5,045.4
2,066.0
123.9
240.2
229.7
7,705.2
8,977.1
1,051.0
21.4
52.9
77.2
82.4
1,284.9
204.2
125.6
1,236.4
46.3
165.4
348.0
17.0
2,142.9
3,427.8
5,549.3
3,806.2
173.4
1,569.7
5,549.3
2020
$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
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
122
FINANCIAL REPORTIncitec Pivot Limited Annual Report 2021
Notes to the Consolidated Financial Statements: Other
For the year ended 30 September 2021
23. Auditor’s remuneration
Deloitte and related network firms
Audit or review of financial reports
Group
Subsidiaries and joint operations
2021
$000
2020
$000
1,218.5
583.8
1,802.3
1,183.1
550.8
1,733.9
24. Events subsequent to
reporting date
Dividend
In November 2021, the Board has determined to pay a final
dividend for the Company of 8.3 cents per share,14% franked,
to be paid on 16 December 2021. The record date for entitlement
to this dividend is 2 December 2021. The total dividend payment
will be $161.2m.
Other assurance and agreed-upon procedures
under other legislation or contractual
arrangements not required to be provided
by the auditor
Gibson Island manufacturing plant
70.4
40.0
On 8 November 2021, IPL announced that manufacturing
operations at Gibson Island will cease at the end of December
2022. Further details are provided in note 12.
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.
Other services:
Tax compliance services
Total remuneration
Non-Deloitte audit firms
Audit services
Other non-audit services
Total remuneration of non-Deloitte audit firms
–
–
10.3
10.3
1,872.7
1,784.2
8.3
–
8.3
28.4
26.8
55.2
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.
123
FINANCIAL REPORTIncitec Pivot Limited Annual Report 2021
Directors’ Declaration
on the Consolidated Financial Statements set out on pages 87 to 123
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 87 to 123, 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 2021 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 93; 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 2021.
Brian Kruger
Chairman
Jeanne Johns
Managing Director & CEO
Melbourne, 15 November 2021
Melbourne, 15 November 2021
124
FINANCIAL REPORTIncitec Pivot Limited Annual Report 2021
Deloitte Touche Tohmatsu
A.B.N. 74 490 121 060
477 Collins Street
Melbourne VIC 3000
Tel: +61 3 9671 7000
www.deloitte.com.au
IInnddeeppeennddeenntt AAuuddiittoorr’’ss RReeppoorrtt ttoo tthhee mmeemmbbeerrss ooff IInncciitteecc PPiivvoott LLiimmiitteedd
RReeppoorrtt oonn tthhee AAuuddiitt ooff tthhee FFiinnaanncciiaall RReeppoorrtt
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 2021, 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 2021 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
125
FINANCIAL REPORTIncitec Pivot Limited Annual Report 2021
KKeeyy AAuuddiitt MMaatttteerr
HHooww tthhee ssccooppee ooff oouurr aauuddiitt rreessppoonnddeedd ttoo tthhee
KKeeyy AAuuddiitt MMaatttteerr
GGiibbssoonn IIssllaanndd mmaannuuffaaccttuurriinngg ppllaanntt cclloossuurree
Refer to Note 2 Individually material items
and Note 12 Impairment of goodwill and non-
current assets
recorded material
The Group
asset
impairment write-downs and closure costs
relating to the Gibson Island manufacturing
plant.
The determination and recognition of the
asset impairment write-downs and closure
costs were
to management’s
estimates and assumptions.
subject
PPrroovviissiioonnss ffoorr uunncceerrttaaiinn ttaaxx ppoossiittiioonnss
Refer to Note 3 Taxation and Note 16
Provisions and contingencies
The Group operates across a large number of
jurisdictions and is subject to investigations
and audit activities by revenue authorities on
a range of tax matters during the normal
course of business, including transfer pricing,
indirect taxes and transaction related tax
matters.
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 determine the asset
impairment write-downs and closure costs
• Assessing and challenging the treatment of closure costs
and impairment of Gibson Island assets by:
o Assessing management’s estimation of closure costs
by agreeing costs on a sample basis to external
information, employment contracts and cost build-
ups;
o Assessing whether the provisions were appropriately
recognised in accordance with IAS 37 Provisions,
Contingent Liabilities and Contingent Assets; and
o Agreeing the carrying value of manufacturing plant
assets impaired to the asset register at 30 September
2021.
• Assessing the appropriateness of the disclosures included
in the Notes to the financial statements.
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 Challenging
the probabilities management has
applied in determining the tax position and the
estimates and assumptions
in relation to the
provision for taxes; and
o Reviewing recent rulings and correspondence with
local tax authorities, to assess that the tax provisions
have been appropriately recorded or adjusted to
reflect the latest external developments.
• Assessing the appropriateness of the disclosures included in
the Notes to the financial statements.
126
FINANCIAL REPORTIncitec Pivot Limited Annual Report 2021
CCaarrrryyiinngg vvaalluuee ooff ggooooddwwiillll aanndd nnoonn--ccuurrrreenntt
aasssseettss
Our procedures included, but were not limited to:
Refer to Note 2 Individually material items,
Note 9 Property, plant and equipment, Note
11 Intangibles and Note 12 Impairment of
goodwill and non-current assets
• Understanding the relevant controls and process that
management has undertaken to assess the recoverable
amount
• In conjunction with our valuation specialists:
As at 30 September 2021, the Group held
goodwill of $2,636.8 million, intangible assets
of $364.1 million and property, plant and
equipment of $3,928.9 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.
is highly sensitive to changes
The Group’s Dyno Nobel Asia Pacific (‘DNAP’)
in
model
terminal value assumptions, including natural
gas prices, commodity prices, terminal value
growth rate and discount rate.
The Group also recorded material asset
impairment write-downs relating to the
Cheyenne plant during the current period
to management’s
which was
relation
in
estimates and assumptions
determining the impairment amount.
subject
o Evaluating the appropriateness of the model used by
management to calculate the value-in-use of the CGUs
and Cheyenne manufacturing assets.
o Assessing and challenging the key inputs to the DNAP
terminal value and Cheyenne impairment model 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;
§ Agreeing contracted volumes and pricing
assumptions in the model to the Board approved
forecasts;
§ Comparing the discount rates applied to the
terminal value with an independently developed
rate; and
§ 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 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 Directors’ Report,
which we obtained prior to the date of the auditor’s report, and also includes the following information which will
be included in the Group’s annual report (but does not include the financial report and our auditor’s report
thereon): About Us company information, Performance and Outlook, Sustainability, Corporate Governance and
additional securities exchange information, which is expected to be made available to us after that date.
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.
127
FINANCIAL REPORTIncitec Pivot Limited Annual Report 2021
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.
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 fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• 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.
128
FINANCIAL REPORTIncitec Pivot Limited Annual Report 2021
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.
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.
RReeppoorrtt oonn tthhee RReemmuunneerraattiioonn RReeppoorrtt
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 64 to 84 of the Director’s Report for the year ended
30 September 2021.
In our opinion, the Remuneration Report of the Incitec Pivot Limited, for the year ended 30 September 2021,
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, 15 November 2021
Terry Ludeman
Partner
Chartered Accountants
Melbourne, 15 November 2021
129
FINANCIAL REPORTIncitec Pivot Limited Annual Report 2021
N
O
I
T
A
M
R
O
F
N
I
L
A
N
O
I
T
I
D
D
A
130
The safety
of our people,
customers and
community is our
number one
priority at IPL
Incitec Pivot Limited Annual Report 2021
131
Incitec Pivot Limited Annual Report 2021 Shareholder Information
As at 15 November 2021
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
Total
Number of
shareholders
10,095
19,658
6,570
Number
of shares
4,605,372
58,091,510
48,390,144
6,189
152
133,726,540
1,697,411,463
42,664
1,942,225,029
Percentage of
issued capital
0.24%
2.99%
2.49%
6.89%
87.40%
100%
The number of shareholders holding less than a marketable parcel of shares ($500) was 1,870 (based on the closing market price
on 15 November 2021 of $3.240).
The holdings of the 20 largest holders of fully paid ordinary shares represent 85.65% 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
UBS Nominees Pty Ltd
HSBC Custody Nominees (Australia) Limited - A/C 2
BNP Paribas Nominees Pty Ltd Six Sis Ltd
Merrill Lynch (Australia) Nominees Pty Limited
First Samuel Ltd ACN 086243567
Navigator Australia Ltd
Warbont Nominees Pty Ltd
BNP Paribas Noms(NZ) Ltd
UBS Nominees Pty Ltd
HSBC Custody Nominees (Australia) Limited - GSCO ECA
Netwealth Investments Limited
BNP Paribas Nominees Pty Ltd Hub24 Custodial Serv Ltd
Total
Substantial shareholders
Number
of shares
678,766,890
423,716,168
258,048,380
144,558,209
38,060,986
33,247,269
20,305,468
18,167,686
12,455,964
9,368,327
6,994,984
3,940,326
3,088,830
2,069,628
1,864,972
1,847,494
1,838,235
1,793,635
1,715,886
1,575,550
Percentage of
issued capital
34.95%
21.82%
13.29%
7.44%
1.96%
1.71%
1.05%
0.94%
0.64%
0.48%
0.36%
0.20%
0.16%
0.11%
0.10%
0.10%
0.09%
0.09%
0.09%
0.08%
1,663,424,887
85.65%
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
Schroder Investment Management Australia Limited
Allan Gray Australia Pty Ltd
Harris Associates L.P.
Date Notice
Received
16 April 2021
13 July 2021
16 November 2021
Votes/Number
of shares
157,357,595
138,540,228
125,888,820
Percentage of
issued capital
8.10%
7.13%
6.482%
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 15 November 2021, there were 6,319,749 of rights on issue, comprising of:
» 6,285,054 performance rights with 12 holders were on issue pursuant to Incitec Pivot employee incentive plans; and
» 34,695 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 2021 financial year, 463,913 ordinary shares were purchased on-market at an average price of $2.3370 per share for the purposes
of awards under IPL employee incentive plans and the Non-executive Director minimum shareholding plan. Please note that this is the
average price per security at which the securities were purchased during the financial year as required under the Listing Rules, not the
actual price.
132
ADDITIONAL INFORMATIONIncitec Pivot Limited Annual Report 2021 Five Year Financial Statistics
Incitec Pivot Limited and its controlled entities
2021
$mill
2020
$mill
2019
$mill
2018
$mill
2017
$mill
Sales
4,348.5
3,942.2
3,918.2
3,856.3
3,473.4
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
934.9
(368.5)
566.4
(112.8)
(293.4)
(11.1)
149.1
–
149.1
(209.5)
358.6
19.4
1,819.4
3,928.9
324.8
730.5
(356.0)
374.5
(135.7)
(87.9)
(27.5)
123.4
–
123.4
(64.8)
188.2
54.6
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
1,529.9
1,550.8
1,471.5
1,453.0
4,071.7
4,190.0
4,004.3
3,854.8
326.3
357.7
336.1
316.9
3,000.9
3,019.7
3,179.5
3,046.6
3,121.0
316.6
343.4
101.5
95.5
76.0
9,390.6
9,291.0
9,379.5
8,954.0
8,821.7
1,427.1
1,227.2
2,418.0
1,331.8
1,087.0
101.3
102.3
86.1
75.6
78.0
Non-current borrowings, payables and other liabilities
2,284.6
2,632.7
2,071.1
2,698.4
2,802.5
Non-current provisions
Total liabilities
Net assets
Shareholders’ equity
Equity attributable to non-controlling interest
Total shareholders’ equity
209.0
125.5
116.5
104.0
95.1
4,022.0
4,087.7
4,691.7
4,209.8
4,062.6
5,368.6
5,203.3
4,687.8
4,744.2
4,759.1
5,368.6
5,203.3
4,687.8
4,737.7
4,753.1
–
–
–
6.5
6.0
5,368.6
5,203.3
4,687.8
4,744.2
4,759.1
Ordinary Shares
thousands
1,942,225
1,942,225
1,605,784
1,630,214
1,687,171
Number of shares on issue at year end
thousands
1,942,225
1,942,225 1,605,784 1,630,214 1,687,171
Weighted average number of shares on issue (investor and ordinary)
thousands
1,942,225
1,734,435
1,610,122
1,664,617
1,687,171
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
18.5
7.7
9.3
1.0
24
$2.94
$1.92
$2.94
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
$mill
5,710.1
3,942.7
5,443.6
6,488.3
6,073.8
$
1.22
1.12
0.94
1.04
0.97
times
times
$mill
$mill
%
%
1.1
9.7
349.3
8.5
6.8
2.8
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
133
ADDITIONAL INFORMATIONIncitec Pivot Limited Annual Report 2021
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
TCFD
TRIFR
tCO2e
Greenhouse gas
Lost Time Injury Frequency Rate
Task Force on Climate-Related Financial Disclosures
Total Recordable Injury Frequency Rate
Metric tonnes of carbon dioxide equivalent
134
ADDITIONAL INFORMATIONIncitec Pivot Limited Annual Report 2021 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
Shareholder Information
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 2021 Annual General Meeting will be held
virtually on Friday, 17 December 2021 at 11.00am (AEDT).
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 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
462 South 4th Street, Suite 1600
Louisville, KY 40202
United States of America
Telephone: 1-888-269-2377
International: +1-201-680-6825
Email: shrrelations@cpushareownerservices.com
Website: www-us.computershare.com/investor
135
ADDITIONAL INFORMATIONIncitec Pivot Limited Annual Report 2021 Incitec Pivot Limited
ABN: 42 004 080 264
Level 8, 28 Freshwater Place,
Southbank Victoria 3006, Australia