Incitec Pivot Limited Annual Report 2023

Plain-text annual report

Annual Report 2023 S T N E T N O C 2 Incitec Pivot Limited Annual Report 2023ABOUT US 4 Key Operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Who We Are. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 IPL Strategy Snapshot . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 PERFORMANCE AND OUTLOOK 12 2023 Year in Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Chairman's Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 CEO's Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Operating and Financial Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 BEING A SUSTAINABLE BUSINESS 34 Keeping People and the Environment Safe . . . . . . . . . . . . . . . . . . . . . . 36 Our People and Culture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Sustainability Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Climate Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Caring for Our Communities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 GOVERNANCE 48 Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Executive Team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 FINANCIAL AND STATUTORY REPORTS 56 Directors’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Remuneration Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 Financial Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 Independent Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125 ADDITIONAL INFORMATION 130 Shareholder Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132 Five Year Financial Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134 Corporate Directory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135 C O N T E N T S 3 This document is interactive. Click any heading above to be taken to that page. Click the home icon at the bottom of any page to return to this menu. Incitec Pivot Limited Annual Report 2023 About Us 4 ABOUT USIncitec Pivot Limited Annual Report 2023IPL’s two industry leading businesses safely deliver high quality products and professional services to our mining and agricultural customers across six continents. About Us 5 ABOUT USIncitec Pivot Limited Annual Report 2023Key Operations Rainy River Cheyenne Calgary St Helens Salt Lake City (WESCO) Littleton (Buckley Powder) Lincoln Mojave Carthage Dinamita Gomez Palacio Louisiana CANADA US MEXICO Coquimbo Copiapó Santiago CHILE Biwabik Wolf Lake Evansville (Warex) Graham Ormstown Augusta (Maine Drilling and Blasting) Simsbury New Galilee (Wampum Hardware) Grundy (Vedco) Waggaman Pontailler Vonges Amailloux FRANCE Dakar Cotonou Douala SENEGAL BENIN CAMEROON Incitec Pivot Limited Dyno Nobel Incitec Pivot Fertilisers Company Headquarters Corporate Office Decarbonisation Project Ammonium Nitrate Corporate Office Feedstock Fertiliser Services Agricultural Products Industrial Chemicals Manufacturing/Distribution Joint Ventures/Investments Emulsions Initiation Systems Explosive Services Agricultural Products Industrial Chemicals Manufacturing/Distribution Joint Ventures/Investments TURKEY MONGOLIA SINGAPORE INDONESIA Martabe Singapore Jakarta Tujuh Bukit Mt Isa Phosphate Hill Perth Geelong Werribee Melbourne (Australian Bio Fert) Pretoria (SASOL Dyno Nobel) (Enviro Blasting Services) Johannesburg (Det Net) SOUTH AFRICA Ulaanbaatar (Titanobel Mongolia) Ankara Kayseri Soma Berau Toka Tindung PAPUA NEW GUINEA AUSTRALIA NEW CALEDONIA Lihir Moranbah Blackwater & Curragh Moura (Queensland Nitrates QNP) Dawson Noumea (Katiramona Explosif SAS) (Nord Sud Dynamitage Sofiter) Gibson Island Helidon Hunter Valley 1.4 million tonnes ammonium nitrate produced 2.7 million tonnes fertiliser sold 4 major decarbonisation projects globally 6 ABOUT USIncitec Pivot Limited Annual Report 2023Rainy River Cheyenne Calgary St Helens Salt Lake City (WESCO) Littleton (Buckley Powder) Lincoln Mojave Carthage Dinamita Gomez Palacio Louisiana CANADA US MEXICO Biwabik Wolf Lake Evansville (Warex) Graham Ormstown Augusta (Maine Drilling and Blasting) Simsbury New Galilee (Wampum Hardware) Grundy (Vedco) Waggaman Pontailler Vonges Amailloux FRANCE Dakar Cotonou Douala SENEGAL BENIN CAMEROON Coquimbo Copiapó Santiago CHILE Incitec Pivot Limited Dyno Nobel Incitec Pivot Fertilisers Company Headquarters Corporate Office Decarbonisation Project Ammonium Nitrate Emulsions Initiation Systems Explosive Services Agricultural Products Industrial Chemicals Manufacturing/Distribution Joint Ventures/Investments Corporate Office Feedstock Fertiliser Services Agricultural Products Industrial Chemicals Manufacturing/Distribution Joint Ventures/Investments TURKEY MONGOLIA Martabe Singapore Jakarta Tujuh Bukit SINGAPORE INDONESIA Ulaanbaatar (Titanobel Mongolia) Ankara Kayseri Soma Berau Toka Tindung PAPUA NEW GUINEA Mt Isa Phosphate Hill Perth Pretoria (SASOL Dyno Nobel) (Enviro Blasting Services) Johannesburg (Det Net) SOUTH AFRICA AUSTRALIA NEW CALEDONIA Geelong Werribee Melbourne (Australian Bio Fert) Lihir Moranbah Blackwater & Curragh Moura (Queensland Nitrates QNP) Dawson Noumea (Katiramona Explosif SAS) (Nord Sud Dynamitage Sofiter) Gibson Island Helidon Hunter Valley operations across 6 continents 5,814 employees worldwide 2.9% Australian First Nations employees in our Australian workforce 7 ABOUT USIncitec Pivot Limited Annual Report 2023Who We Are Incitec Pivot Limited (IPL) is a leading manufacturer and supplier to the resources and agricultural sectors. With iconic brands, leading technology solutions and great customers, we operate in the resilient markets of agriculture, mining and quarry and construction. With a team of just over 5,800 dedicated employees, we have a strong safety culture that we’re committed to building on. “Zero Harm for Everyone, Everywhere” is our core IPL value and what we strive for daily. And we are committed to a sustainable and decarbonised world. An ASX100 company, IPL has two industry leading businesses, Dyno Nobel based in the Americas, Asia Pacific and Europe, Middle East and Africa (EMEA) regions and Incitec Pivot Fertilisers (IPF), a leading integrated manufacturer and distributor of fertilisers across the east coast of Australia. We are an international business with world-scale explosives and fertiliser manufacturing, leading technology solutions, marketing and servicing operations. We are proud to be considered a trusted partner by customers and suppliers. Serving high quality customers with technological solutions across six continents - Australia, North America, Europe, Asia, South 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 embraced the challenge of reducing our greenhouse gas emissions while continuing to provide products which help increase yields of food and fibre and access the minerals and aggregates required for new technologies and infrastructure rebuilding. Our ambition is to reach Net Zero operational emissions by 2050, or sooner if practicable. Our Net Zero Pathway shows the enablers and technologies required to reduce our own emissions, along with the expected timeframe for each. Our scope 3 Pathway shows the management strategies and key enablers identified to date to reduce the GHG from each value chain category. Our climate change management strategy is focused on four key pillars: Ensuring strong governance; Reducing operational emissions; Delivering products and strategies that reduce scope 3 emissions; and Managing strategic business risks and opportunities. IPL’s focus is building our businesses so they thrive and prosper in the long term, at the same time caring for our people, communities, customers and environment. Dyno Nobel Dyno Nobel is IPL’s international explosives and technical 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 energy, infrastructure and consumer goods. Construction, mines, quarries and seismic explorers use Dyno Nobel products to achieve safety goals and improve operational efficiency. With major manufacturing sites across Australia and the US, including key sites in Cheyenne (Wyoming, US), Louisiana (Missouri, US), Waggaman (Louisiana, US) and Moranbah (Queensland, Australia), we provide a full range of reliable explosives products from 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, Turkey and France. With a rich technology heritage, IPL’s key technology drivers are to improve safety, productivity & efficiency, and sustainability. As mining becomes more complex and regulated, customer needs are refining and changing. With a long history of technical innovation, and excellence in collaborative partnerships, Dyno Nobel understands what our customer’s needs are today and the solutions they need for their mining operations of tomorrow. The energy transition and need for decarbonisation, are driving the significant demand for battery minerals and metals. In addition, miners are having to go deeper and target lower grade orebodies, which increases cost and makes safe access more difficult. New and innovative mining methods are required to extract these valuable products. Future technologies utilising automation that enables remote loading and firing, will play an increasing role in mineral extraction. It will also remove people from hazardous situations. Our research & development focuses on practical ways to use new technologies to benefit our customers. During 2023 we built an electric Mobile Processing Unit (MPU) complete with solar charging station. Our offer includes DIFFERENTIAL ENERGY®, DigiShot®(1) Plus.4G, Advanced Vibration Prediction Model, Fracture Density Model and our advanced electronic detonators. (1) DigiShot® is a registered trademark of DetNet South Africa (Pty) Limited. 8 ABOUT USIncitec Pivot Limited Annual Report 2023Advantage® Laboratory, Incitec Pivot Fertilisers supports farmers with the crop nutrition insights and products they need to maximise yield potential in an efficient way. Further afield, through our global trading business Southern Cross Fertilisers, we sell and trade in major offshore agricultural markets including Asia Pacific, the Indian subcontinent, the United States, Latin America and other international locations. Smart fertilisers Incitec Pivot Fertilisers is the lead industry partner in the Australian Research Council funded Hub for Smart Fertilisers (the Hub). The multidisciplinary Hub is applying plant and soil science, chemistry and chemical engineering to develop new biochemical nitrogen inhibitors and the next generation of ‘smart fertilisers’ to increase the efficiency of nitrogen use by up to 20 per cent, meaning farmers can apply less fertiliser. Based at the University of Melbourne, the work of the Hub is aimed at saving farmers money whilst reducing impacts on the environment, including reducing losses to the air as GHG and to waterways through leaching, resulting in better tools for agriculture businesses to manage their fertiliser use. Food and agribusiness are critical to Australia’s economy and is on track to contribute $92 billion to the national economy in 2022-23 and aims to achieve a $100 billion farm gate output by 2030. The agricultural industry directly employs around 239,000 people and is a major source of jobs in rural and regional Australia.(2) The Hub is a partnership between the University of Melbourne, La Trobe University, Incitec Pivot Fertilisers and Elders Rural Services Australia, and involves representatives from key agricultural businesses and development corporations. Growth in first ever tagging and hole identification using DGPS Dyno Nobel commercialised the first ever tagging and hole identification using Differential Global Positioning System (DGPS) technology in 2021. In the last 12 months, its use at key Australian sites has grown significantly. Paired with DigiShot® Plus.4G, DGPS technology allows individual blastholes to be identified via the system’s high location accuracy of less than one metre. This revolutionises the deployment and tagging of detonators, with the potential to positively impact overall mining outcomes. Customers directly benefit through proven improvements in productivity during the blasting process. A recent time and motion study at a customer site conducted by IPL has shown a 40 per cent reduction in the tagging process when using DGPS compared to conventional systems. The flexible tagging path also enables shotfirers to start at any hole and tag in any sequence. Automatic hole identification helps eliminate out of sequence firing (due to incorrect hole identification and marking), which has the potential to improve safety outcomes. This technology is capable of integration into fully autonomous deployment and tagging, which is set to revolutionise the industry. Incitec Pivot Fertilisers IPF is the leading fertiliser manufacturer and distributor on the east coast of Australia. Our people, products and services support farming communities and contribute to maximising growers’ yields, which in turn helps feed millions around the globe. Resilient, diverse and proud, we are driven by science, innovation and maximising soil potential. The business has integrated operating assets including Australia’s largest fertiliser manufacturing infrastructure – Phosphate Hill and our Geelong plant. Our fertiliser products are distributed via IPF’s network of 17 strategically placed primary distribution centres with the majority (11) at key deep-water ports. As part of our commitment to a sustainable future, our Gibson Island facility has the potential to become the world’s first existing ammonia plant to be retrofitted to use renewable hydrogen. We continue to work with our partners at Fortescue Future Industries on the exciting potential transformation of the Gibson Island manufacturing plant to a green ammonia facility. A final investment decision is planned before the end of this calendar year. Through our comprehensive “Agronomy in Practice” training course we help educate and develop the capability of Australian agronomists. Using an interactive and engaging program with hands-on activities and assessments at every step of the way, it’s the ultimate course in soil, plant tissue and water sampling. It delivers practical interpretation analysis enabling great stewardship and productivity increases from our fertiliser plus soil health recommendations. Our Enhanced Efficiency Fertiliser range helps growers maintain yields while reducing the GHG emissions associated with nitrogen fertilisation. When it comes to liquid fertilisers, easier storage, more sustainable, precise applications and expanded application windows make them an increasingly popular choice, and we’re pleased to be bringing these products to growers, who are looking to capitalise on the significant productivity and sustainability benefits delivered. IPF’s leading brands include Granulock®, SuPerfect® and our patented nitrification inhibitor eNpower®. With a dedicated network of suppliers and agents across the east coast of Australia, as well as our NATA-accredited Nutrient (2) Source: Department of Australian Agriculture, Fisheries and Forestry. 9 ABOUT USIncitec Pivot Limited Annual Report 2023IPL Strategy Snapshot IPL’s strategy sets the long-term direction of the company including how we will build the future of our two leading businesses – Incitec Pivot Fertilisers and Dyno Nobel. Underpinned by our values and strategic drivers, the strategy details how we will maintain and grow our core business and pursue growth opportunities. Considered against a backdrop of global market trends and competitive insights, it articulates our aspirations and the deliverables to achieve them. The opportunities and challenges presented by the energy transition feature strongly. Outlined are key markets, required product & service offers and the capabilities required to successfully deliver for our investors, customers, employees and the local communities we support. 10 ABOUT USIncitec Pivot Limited Annual Report 2023IPL is a leading manufacturer and supplier to the resources and agricultural sectors. Purpose Unlocking the potential in the earth to help people grow. Ambition IPL will be a safe, efficient and industry leading company. Our Values 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. Customer Focus Deepening our customer relationships and strategic partnerships across our businesses ensures we can innovate and share technologies and solutions that improve our customers’ businesses. Manufacturing Excellence Be a world class manufacturing organisation, delivering personal and business growth. Achieved through Zero Harm, reliable operations and being cost competitive. Talented & Engaged People 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. Leading Technology Solutions Improve safety, reduce environmental impacts and create a positive social impact, whilst increasing productivity and efficiency in our customers’ operations. Profitable Growth Focused on growth opportunities that are distinctive to our differentiated technology, core markets, core capabilities and advantaged market segments. To be #1 or #2 (by earnings) in North America, Asia Pacific and the markets we choose to expand into; and the leading global manufacturer of detonators (by earnings) » Win through security of supply of ammonium nitrate based explosives with technology a key enabler of our customer value proposition. » Select the right participation model for growth markets. » Continue to grow in market segments such as Quarry & Construction and Base & Precious Metals. To be #1 manufacturer and supplier of sustainable plant nutrient solutions in Australia » Support Australasian food security. » Leverage distribution footprint to provide best in class products to agricultural markets, including specialty blends, enhanced efficiency fertilisers and liquid fertilisers. » Improve customer results through soil testing and lab services. » Transform Gibson Island to a major Primary Distribution Centre and a potential Green Energy Hub. 11 ABOUT USIncitec Pivot Limited Annual Report 2023Performance and Outlook 12 PERFORMANCE AND OUTLOOKIncitec Pivot Limited Annual Report 2023Performance and Outlook IPL is in a strong position as we enter FY24. Our two industry leading businesses are operating in attractive markets with significant opportunities ahead for growth. 13 PERFORMANCE AND OUTLOOKIncitec Pivot Limited Annual Report 20232023 Year in Review EBIT(1) $880m NPAT(1) $582m 0 Fatalities & Significant Environmental Incidents 81% of IPL sites had zero recordable injuries Achieved target of 25% reduction in Australian municipal water use by 2023 Built electric mobile processing unit, complete with solar charging station 95% of Dyno Nobel's North American customers using Nobel Fire Significant growth in first ever tagging and hole identification using Differential Global Positioning System IPF partners in ARC research hub to develop next-gen smart fertilisers (1) Excludes IMIs. 14 PERFORMANCE AND OUTLOOKIncitec Pivot Limited Annual Report 2023Key Business Announcements and Highlights Two industry leading businesses delivered high quality products and professional services to our mining and agricultural customers across six continents. Exceptional turnaround performances at our US manufacturing plants (Cheyenne and St Helens) significantly improved Health, Safety & Environment results. Agreement for the sale of Waggaman Ammonia Production Plant, Louisiana facility to CF Industries Holdings, Inc. for a total value of US$1.675bn. Long term supply agreement (commencing April 2026) for Ammonium Nitrate plant at Moranbah Queensland will sustain the long-term competitive advantage of the plant and security of supply for mining customers in the footprint. Urea offtake agreement with Perdaman Chemicals & Fertilisers (PCF) in Western Australia is expected to add an estimated incremental EBIT of approximately $45m(1) per annum to our IPF business, when fully operational, expected in mid-2027. Dyno Nobel’s decarbonisation capability helps secure Fortescue contract supplying Fortescue’s Western Australian mining operations with explosives technology as part of a long term extension. Recognised World Environment Day for the first time and reinforced our collective commitment to protect the environment. Innovate Reconciliation Action Plan (2021 – 2023) progressed and raised funds for The Westerman Jilya Institute for Indigenous Mental Health. IPL partners with global asset manager and operator Keppel to investigate building a green ammonia production facility in Gladstone. (1) Refer to IPL's ASX release dated 21 April 2023. 15 PERFORMANCE AND OUTLOOKIncitec Pivot Limited Annual Report 2023Chairman's Report Across the IPL Group during 2023 we have renewed our focus on safety and delivering improved and more predictable operating business results. As we work towards our ambition to be Net Zero by 2050, or sooner if practical, we are progressing a number of decarbonisation projects across each of our businesses. Backed by a A$100-$120m sustainability capital investment to 2030, together they provide a potential 42% reduction in operational GHG emissions by 2030. Leadership We have had key leadership changes during the year, including the departure of the MD&CEO, Jeanne Johns. We acknowledge and thank Jeanne for all her efforts and commitment to our company during her five and half years in the role. The Board appointed Paul Victor Interim CEO while a comprehensive search process for a permanent CEO takes place. Earlier this month, our Board Chairman Brian Kruger stepped down due to personal reasons. Brian commenced as Chairman in mid-2019 and has led our Company through the challenging COVID-19 pandemic, steered our strategy to separate our two industry leading businesses, and delivered a record profit cycle, as well as our decarbonisation roadmap. Together with the Board, I would like to acknowledge Brian’s effective leadership and his outstanding commitment and contribution to our Company. On Brian’s departure, the Board appointed me as his successor, from my position as non-executive director. I’m grateful for the trust the Board has placed in me with this appointment. In other changes at Board level this year, the appointments of Michael Carroll and John Ho as non-executive directors were announced in March. At this year’s AGM George Biltz will be stepping down from the Board, having been a very valuable Board member over the past three years. We wish him the very best for the future. In conclusion, I look forward to continuing working alongside our Board and Management team to deliver the Company’s strategy into FY24 and beyond. Your Company has committed and capable people and we are well-positioned to deliver a sustainable, long-term, and competitive business performance. Greg Robinson Chairman We have progressed key strategic projects, delivered a better second half FY23 underlying earnings result and, subject to completion of the Waggaman sale, have announced our intent to reward shareholders with significant capital returns. Our achievements were made possible by our talented and highly skilled people, of whom we are very proud. We thank them for their sustained efforts and ability to deliver valuable outcomes for our customers, shareholders and other stakeholders. Financial performance We reported Earnings Before Interest and Tax (EBIT) of $880m, excluding individually material items (IMIs). This was our second highest EBIT since 2008 and comes after a record result last year. Net Profit After Tax (NPAT), excluding IMIs, was $582m and our $701m operating cash flow remains strong off last year’s record result. The Board was pleased to announce a final dividend of 5 cents per share, taking our total dividend for the financial year to 15 cents per share. We retain a strong balance sheet whilst planning to deliver up to $1.4 billion of capital returns to shareholders, subject to completion of the Waggaman sale. This represents returning approximately 25% of capital to our shareholders. In FY24 the Board will continue to focus on delivering strong financial results and returns to shareholders while maintaining our balance sheet strength. Reshaping the portfolio We continue to work on reshaping our business portfolio to best position our company for sustainable, long-term financial returns. We remain committed to separating our two operating businesses, inevitably exiting our fertiliser business and refocusing our efforts on the Dyno Nobel explosives business. Engagement on a potential sale for our fertilisers business continues. In March, we were pleased to announce the sale of the Waggaman ammonia manufacturing facility to CF Industries, alongside a 25-year cost competitive ammonia supply agreement. Subject to the sale receiving regulatory approvals, we expect the transaction to close on 1 December 2023. It is intended that the funds received will be returned to shareholders, whilst maintaining a suitably conservative balance sheet. Sustainability With more resources and investment in innovation, we have continued to prioritise the urgent challenge of climate change. Our Net Zero Strategy was overwhelmingly supported by almost 90% of shareholders who voted at our 2022 AGM in February, and we continue to engage on climate change with our investors, shareholders and other stakeholders. 16 PERFORMANCE AND OUTLOOKIncitec Pivot Limited Annual Report 2023CEO's Report Throughout FY23, our two industry leading businesses have made significant progress and we enter FY24 with good momentum. Strong underlying earnings growth in the second half of FY23 was underpinned by our continued focus on delivering industry leading technology and services for our customers. Safety Safety will always be our number one priority and our Zero Harm value guides our people across everything we do. During FY23, we recorded a number of improvements, including a reduction in recordable injury severity, the most serious incidents possible. However, our rate of recordable injuries has not significantly improved on our FY22 results and is above our 0.70 target for FY23. We owe it to our people, customers, shareholders and other stakeholders to deliver a much-improved safety culture and to help us get there, in November we initiated a company wide safety breakthrough campaign. All our people are safety leaders, and we will continue to support each other to take greater ownership and accountability for the safety and wellbeing of each other. To support this safety breakthrough, myself, our Executive Team and all of us within the IPL Group are committed to a 20% yearly improvement for FY24. Business performance Across our businesses we have focused on safety, maintained customer pricing discipline, and improved margins. During FY23 our Dyno Nobel business exceeded expectations and delivered solid results. Dyno Nobel Americas reported EBIT of US$390m, with customer growth in quarry & construction, metals and our operations in Chile. In North America, our product offering continued to yield the best returns when compared to our competitors, with a strong dollar per tonne margin. The business completed customer repricing and a cost out initiative and the full benefits of these two initiatives are expected to flow in the first half of FY24. Dyno Nobel Asia Pacific reported EBIT of $188m, with the execution of several key customer contracts and a strong year for the international business. The business is also benefiting from record AN production at Moranbah. Incitec Pivot Fertilisers reported EBIT of $153m. IPF’s strong brands and unrivalled distribution network helped increase domestic fertiliser sales by 9% however, overall earnings were impacted by a challenging market and disappointing manufacturing performance. In response, we have deployed a Reliability Taskforce at Phosphate Hill to address and implement key actions. Strategic progress We have made good progress on a number of strategic projects and initiatives central to the current and future success of our two industry leading businesses. In May, our Dyno Nobel Asia Pacific business announced a gas supply agreement for its ammonia nitrate plant in Moranbah, locking in the plant’s competitive advantage for the next decade. The first sod was turned on Perdaman Chemical and Fertilisers' $6.5 billion urea plant in Western Australia which will provide long term urea supply for Incitec Pivot Fertiliser customers, with expected commencement of supply from mid-2027. It will be the largest downstream industrial investment in Australia’s history and IPF has an exclusive 20 year offtake agreement for up to 2.3 million tonnes of urea per year. Improving our manufacturing reliability continues to be a key strategic focus for our senior management, with a mixed manufacturing performance during FY23. Our teams worked hard to achieve record AN production at Moranbah, record performance at Waggaman and a successful, safe, major turnaround at our Cheyenne plant in the USA and we will take these learnings and apply to our other plants. We are focused on delivering safe, reliable and cost competitive operations across all our plants and have implemented a manufacturing reliability plan. This will include a holistic external review of our major manufacturing assets, including Phosphate Hill which will also benefit from an internal taskforce providing additional resources and expertise to drive required reliability improvements. Our people Since I stepped into the role of Interim CEO in June, a highlight has been getting out to more sites and meeting as many people as possible across the business. I’ve been able to see in action our highly skilled, hard working people delivering for our customers and stakeholders day in, day out. This has been the driver of our success in FY23, and I want to thank all our people across the business for their exceptional work throughout the year. We owe it to our people to create a culture where they can perform at their very best, and during FY23 we made changes to the way we work. This followed a review of our people strategy, which puts people at the centre of everything we do. Our aspiration is to create a safe, inclusive, high-performance culture. Our leaders have been empowered to build trust and transparency within their teams and create environments where deliverables are focused, realistic, and promises are kept. This approach will continue into 2024. Looking ahead Our company is in a strong position as we enter FY24. Our two industry leading businesses are operating in attractive markets with significant opportunities ahead for growth. As we progress our strategic initiatives with more determination than ever before, we will continue to create value for our shareholders and other stakeholders over the coming 12 months. Paul Victor Interim CEO 17 PERFORMANCE AND OUTLOOKIncitec Pivot Limited Annual Report 2023Operating and 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 5,800 plus dedicated employees, the Company adds value to its customers through leading technology solutions, innovation, world class services focused on the needs of its customers and manufacturing reliability. 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 has an ambition of achieving Net Zero greenhouse gas emissions by 2050, or sooner if practical. 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 world’s 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. 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 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, Canada and Chile; 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, where it is the market leader. 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. 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. On 20 March 2023, IPL entered into an agreement for the sale of the Waggaman plant to CF Industries Holdings, Inc. for a total value of US$1.675bn. The sale remains subject to US anti-trust regulatory clearance and the completion of other customary closing conditions. 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, France, 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). The Titanobel business, which was acquired in FY22, is highly complementary to Dyno Nobel’s existing operations and provides access to new markets where Dyno Nobel can leverage its premium technology offering. Titanobel is a leading industrial explosives manufacturer and drilling, blasting and technical services provider based in France. 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 Southern Cross Fertilisers Pte. Ltd., a Singapore based subsidiary. The Fertilisers business manufactures the following fertilisers at two locations: » Phosphate Hill: Di/mono-ammonium phosphate (DAP/MAP); » Geelong: Single Super Phosphate (SSP). In January 2023, IPL ceased production of ammonia at its Gibson Island plant. IPL continues to investigate alternative purposes for the site, including the potential production of green ammonia. 18 OPERATING AND FINANCIAL REVIEWIncitec Pivot Limited Annual Report 2023Group Summary IPL Group Reported Revenue and Earnings Revenue EBITDA ex IMIs EBIT ex IMIs NPAT ex IMIs IMIs after tax Group NPAT Return On Invested Capital(1) Including Goodwill Excluding Goodwill Shareholder Returns Cents Per Share Earnings per share ex IMIs Total Dividend Credit Metrics Net debt(2) Net Debt incl TWC facilities / EBITDA(3) Net debt / EBITDA(4) Interest Cover (5) Year ended 30 September FY23 A$m FY22 A$m Change A$m 6,008.1 6,315.3 (307.2) 1,215.4 1,857.7 (642.3) 879.8 1,485.2 (605.4) 582.1 1,027.1 (445.0) (22.1) (13.4) (8.7) 560.0 1,013.7 (453.7) 7.5% 11.3% 13.8% 20.9% 30.0 15.0 52.9 27.0 30-Sep-23 30-Sep-22 (1,415.0) (1,036.2) 1.4x 1.2x 9.9x 0.7x 0.5x 20.3x Due to IPL being in the possession of market sensitive information relating to asset sale transactions, the Company was unable to commence the previously announced on-market share buyback of up to $400 million. IPL remains committed to executing the $400m on-market buyback and aims to get the program underway as soon as it has the next permissible trading window. IPL has sufficient cash reserves and committed bank facilities to complete the buyback. The share buyback will be conducted in the ordinary course of trading and the exact amount and timing of share purchases will be dependent on regulatory requirements and market conditions. Should the sale of the Waggaman facility complete successfully, IPL would seek to return an additional $1bn to shareholders via a combination of a $500m pro-rata capital return and an additional $500m on-market share buyback. It is expected that a portion of the proposed pro-rata capital return would be in the form of an unfranked dividend. Final confirmation of the size of the dividend component remains subject to confirmation by the Australian Tax Office. These additional returns of capital, if they are to occur, would require shareholder approval. IPL intends to include resolutions in the notice of meeting for the upcoming Annual General Meeting scheduled for 20 December 2023 requesting approval to undertake these proposed returns of capital should the sale of Waggaman successfully complete. These capital returns are in line with IPL’s Capital Allocation Framework which aims to enhance shareholder value through optimising its weighted average cost of capital while retaining an appropriately strong credit profile in support of its investment grade credit ratings. Net Profit After Tax (NPAT) excluding Individually Material Items (ex IMIs) Net Debt IPL reported NPAT (excl. IMIs) of $582m, a decrease of 43% compared to $1,027m in the pcp. Refer to the FY23 Business Review section for an analysis of business performance. Individually Material Items (IMIs) NPAT for FY23 includes $22m (FY22 $13m) of after-tax IMIs relating to: » costs incurred to optimally position IPF for standalone operation, whether this be in preparation for sale, demerger or as a separately managed business within the IPL Group ($13m): and, » costs incurred to effect the sale of the WALA operations, including advisory fees, legal, accounting and tax advice ($9m). Capital Management Earnings per share (EPS) ex IMIs of 30.0 cents per share decreased by 22.9 cents per share compared to FY22 EPS of 52.9 cents. A final dividend of 5 cents per share (unfranked) has been announced. When combined with the FY23 interim dividend of 10 cents per share, this represents a 50% payout ratio of NPAT (excl. IMIs) on a full year basis. Net debt increased by $379m to $1,415m at 30 September 2023 (pcp: $1,036m) and Net Debt/EBITDA ex IMIs increased to 1.2x (pcp: 0.5x). Net debt increased during the year mainly as a result of investments in sustenance (including turnarounds) and minor growth projects ($470m) and dividends paid to shareholders ($524m) offsetting $701m of operating cashflows. The Group’s investment grade credit ratings were maintained: » S&P: BBB (stable outlook) » Moody’s: Baa2 (stable outlook) Zero Harm IPL’s Total Recordable Injury Frequency Rate(6) (TRIFR) for the rolling twelve-month period ended 30 September 2023 was 0.91, largely in line with the 0.92(7) at 30 September 2022. There were 14 Process Safety Incidents(8) recorded in FY23 (pcp:25). The Company maintained its strong environmental safety record with FY23 being the third year in a row without a Significant Environmental Incident(9). (1) Return in invested capital, calculated as 12 month rolling Net Operating Profit After Tax, excluding individually material items/13 month rolling average operating fixed assets, intangible assets, operating net working capital, and assets classified as held-for-sale. (2) 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. (3) Net debt incl TWC facilities (adjusted for average exchange rate for the year)/EBITDA ratio is calculated using 12 month rolling EBITDA ex IMIs, minus lease depreciation. Net debt for this ratio has been adjusted to include the usage of trade working capital facilities. (4) Net debt (adjusted for average exchange rate for the year)/EBITDA ratio is calculated using 12 month rolling EBITDA ex IMIs, minus lease depreciation. (5) Interest Cover = 12 month rolling EBITDA ex IMIs/net interest expense before accounting adjustments. (6) 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. (7) FY22 TRIFR has been restated due to the reclassification of two injuries. (8) Tier 1 and Tier 2 Process Safety Incidents as defined by the Center for Chemical Process Safety. (9) Significant Environmental Incidents as assessed against IPL’s internal risk matrix with actual consequences of 5 or higher on a 6-level scale. 19 OPERATING AND FINANCIAL REVIEWIncitec Pivot Limited Annual Report 2023Financial Performance Year ended 30 September FY23 A$m FY22 A$m Change % Income Statement Revenue Business Revenue DNA DNAP Fertilisers APAC Eliminations Group Revenue EBIT Business EBIT ex IMIs DNA DNAP Fertilisers APAC Eliminations Corporate Group EBIT ex IMIs EBIT margin NPAT 2,380.8 2,532.9 1,500.6 1,200.4 2,203.4 2,647.8 (76.7) (65.8) 6,008.1 6,315.3 587.8 188.3 153.2 0.6 759.3 162.5 613.7 0.8 (50.1) (51.1) 879.8 1,485.2 14.6 % 23.5 % (6) 25 (17) (17) (5) (23) 16 (75) (25) 2 (41) (41) 2 (39) 57 nm* (43) (65) (45) Underlying interest expense(1) (143.0) (101.4) Non-cash unwinding liabilities (5.7) (5.8) Net borrowing costs Tax expense ex IMIs Minority interest NPAT excluding IMIs IMIs after tax Group NPAT (148.7) (107.2) (149.2) (350.8) 0.2 (0.1) 582.1 1,027.1 (22.1) (13.4) 560.0 1,013.7 Note: The Group Summary is inclusive of the contribution from the Waggaman operations which have been presented as discontinued operations in the full year financial report. Refer to page 25 of this report for a summary of the contribution from the Waggaman operations. * nm = not meaningful FY23 Business Review The Group reported FY23 Earnings Before Interest and Tax excluding IMI’s (EBIT) of $880m, a decrease of $605m (mostly commodity price driven) compared to pcp. Earnings in the Dyno Nobel Explosives businesses grew strongly in the second half, benefiting from customer price increases, higher margin technology uptake and improved cost control. Volumes in the Fertiliser Distribution business recovered well from a weather impacted first half with margins also improving. Major movements for the year were as follows: Gibson Island Closure: As previously disclosed, the Gibson Island plant ceased manufacturing activities in January 2023 and no further manufacturing activity is expected from this asset in its current state. As a result of very high commodity prices in the prior year (FY22) the year on year movement in earnings from the closure of the plant is $144m. Depreciation – WALA sale: Per the market announcement in March 2023, IPL reached an agreement for the sale of its ammonia manufacturing facility located in Waggaman, Louisiana, USA (Waggaman). For accounting purposes, the Waggaman assets were classified as Held-for-sale at the end of November 2022. As such, depreciation on the asset base ceased at this point, resulting in a depreciation benefit of $56m compared to the pcp. Commodity Prices & Foreign Exchange: The majority of the $612m impact on earnings from movements in commodity prices and foreign exchange movements related to the Fertiliser business and Waggaman ammonia facility. DAP, Urea and Ammonia prices all fell significantly during the year with falls between 27% and 34% compared to pcp. The positive translation impact on the DNA earnings driven by a lower AUD:USD exchange rate during the year was $44m. Americas Explosives: The $10m improvement in earnings was the result of customer and technology growth in the higher margin Q&C and Metals markets, which was partially offset by reduced demand in the coal sector. Cost management initiatives and customer price increases more than offset increased costs from above average inflation. The full benefit of these initiatives is expected to realise in FY24. The improved customer mix, increased customer uptake of technology and services and cost management initiatives contributed to significant margin expansion in the second half with margins improving to 12.8% in 2H compared to 10.6% in 1H. Asia Pacific Explosives: Dyno Nobel’s premium technology suite, particularly electronic detonators and Differential Energy emulsions, generated a $13m earnings improvement compared to the pcp. The positive customer response to Dyno Nobel’s premium technology was clearly demonstrated by the 5-year renewal of Dyno’s contract with FMG which includes a unique technology alliance. Positive customer re-contracting outcomes and favourable market conditions in Turkey and Indonesia contributed a further $15m to the FY23 result. The Titanobel acquisition continues to deliver against the acquisition business case with an additional $6m contribution from this business compared to the pcp. Asia Pacific Fertilisers: Despite a slow first half, domestic fertiliser sales volumes increased 9% year on year as strong demand in the second half was driven by lower fertiliser prices and favourable farming conditions. However, earnings in the Distribution business were down $6m compared to the pcp. The rapidly falling price of fertilisers during the year adversely impacted EBIT margin per tonne as product was being sold into a declining market. The recovery in sales volumes seen in the second half has provided good momentum going into FY24. Phosphate Hill Cost of Gas: As was the case for a large portion of FY22, Phosphate Hill’s contracted gas supply was disrupted throughout the year due to the underperformance of a third-party provider. As a result, gas was purchased through optimising across short term contract arrangements and spot purchases. The incremental cost of these purchases, when compared to the pcp was $38m bringing the total FY23 impact to $79m which is at the lower end of the range previously announced (FY22 included an incremental gas cost of $41m). IPL expects that shortfall gas will be required in FY24, with the cost expected to be approximately $45m lower than the cost in FY23. Reliability: Phosphate Hill AP production for FY23 was impacted by a number of unplanned outages during the year (refer to Manufacturing Reliability section below for overall EBIT impact). This includes an incident within the ammonia plant’s pressure swing adsorption unit during the final weeks of FY23. As a result, planned maintenance work originally scheduled for FY24 was brought forward to be conducted with the repair works from the September 2023 incident. The plant is expected to return to full production rates at the end of November with FY24 production estimated to be between 810kmt and 840kmt. Similar to when we resolved the Waggaman reliability issues, a taskforce has been established at Phosphate Hill which will be focused on ensuring the plant meets these expectations and returns to safe and reliable operations. (1) Underlying interest expense represents total borrowing costs less non-cash discount unwind on the Group’s long-term liabilities. 20 OPERATING AND FINANCIAL REVIEWIncitec Pivot Limited Annual Report 2023 Turnarounds: Year on year manufacturing performance includes a production benefit ($74m) due to the prior year including the planned turnaround at Phosphate Hill. Planned Turnarounds were completed during FY23 at the St Helens, Oregon plant, the Louisiana, Missouri facility and Cheyenne, Wyoming with a combined earnings impact of $17m. There are no major turnarounds planned in FY24. However, planned maintenance is scheduled at Phosphate Hill for 1H24 to conduct required maintenance activities that will benefit longer term reliability. Manufacturing Reliability: Manufacturing reliability improvements were largely driven by an excellent operating performance by the Waggaman facility ($91m), partially offset by manufacturing interruptions at Phosphate Hill ($47m). Moranbah achieved record annual production in FY23 which underpinned a strong DNAP result. Several improvement actions will be implemented in FY24 to further improve overall reliability on all IPL plants, including implementing a taskforce at Phosphate Hill. Financial Position Balance Sheet A$m Assets TWC – Fertilisers APAC TWC – Dyno Nobel Group TWC Net PP&E Lease assets Intangible assets Year ended 30 September 30 Sep 2023 30 Sep 2022 Change A$m 69.8 503.9 104.6 511.3 (34.8) (7.4) 573.7 615.9 (42.2) 3,191.4 4,246.9 (1,055.5) 209.3 221.0 (11.7) 2,394.4 3,281.4 (887.0) Net Assets classified as held for sale 2,207.3 – 2,207.3 Net other assets Total Assets Liabilities 197.1 144.6 52.5 8,773.2 8,509.8 263.4 Environmental & restructure liabilities (154.7) (248.7) 94.0 Tax liabilities Lease liabilities Net debt Total Liabilities Net Assets Equity (542.1) (689.3) 147.2 (234.7) (245.9) 11.2 (1,415.0) (1,036.2) (378.8) (2,346.5) (2,220.1) (126.4) 6,426.7 6,289.7 137.0 6,426.7 6,289.7 137.0 Key Performance Indicators Net Tangible Assets per Share 1.60 1.55 Fertilisers APAC – Ave TWC % Rev(1) Dyno Nobel – Ave TWC % Rev(1) Group – Ave TWC % Rev(1) ROIC (including Goodwill) ROIC (excluding Goodwill) Credit Metrics Net debt(2) Net debt incl TWC facilities / EBITDA(3) Net debt / EBITDA(4) Interest Cover(5) 20.8% 18.9% 19.6% 7.5% 11.3% 17.2% 16.0% 16.5% 13.8% 20.9% (1,415.0) (1,036.2) 1.4x 1.2x 9.9x 0.7x 0.5x 20.3x Major movements in the Group’s Balance Sheet during the year include: Assets Trade Working Capital (TWC): Net decrease of $42m. The movement was mainly due to lower commodity prices in both the Fertilisers and Dyno Nobel businesses, partially offset by international business growth. The Dyno Nobel business average trade working capital (excluding the impact of financing facilities) as a percentage of sales increased from 16.0% in FY22 to 18.9% in FY23 largely driven by international business growth and elevated commodity prices in FY22 resulting in a temporarily lower ratio in the prior year with higher revenue balances in the AG&IC business and Waggaman operations compared to inventory balances. The FY23 working capital to revenue ratio in the Dyno Nobel business is more aligned to FY21 levels with international business growth being offset by working capital initiatives. The Fertilisers business average trade working capital (excluding the impact of financing facilities) as a percentage of sales increased from 16.5% in FY22 to 19.6% in FY23 largely driven by the Gibson Island closure (circa 1.2% percentage point change); the impact of selling high-cost product into a falling commodity price market and lower export revenue in FY23 driven by lower commodity prices. Several initiatives are underway to continue to optimise trade working capital metrics during FY24. Net Property, Plant & Equipment (PP&E): Decrease of $1,056m. Mainly driven by the reclassification of WALA assets to held-for- sale of $1,247m and depreciation of $263m. This was partially offset by sustenance and turnaround capital expenditure of $302m and growth, sustainability and strategic capital spend of $193m. Intangible Assets: Decrease of $887m. Mainly driven by the reclassification of WALA intangibles to held-for-sale of $881m (primarily goodwill allocated to the WALA operations). Amortisation charges for the year were mostly offset by minor additions. Net other assets: Increase of $53m. Mainly due to a reduction in short-term and long-term incentive accruals ($23m), an increase in equity accounted investments given improved profitability ($23m) and a reduction in capital creditors ($8m). Liabilities Environmental & restructure liabilities: Decrease of $94m. Mainly driven by spend against provisions for the year of $76m, associated with the cessation of manufacturing at Gibson Island. Net Debt: Increase of $379m. Mainly due to payments related to sustenance, turnaround and strategic sustenance capital expenditure ($359m), growth and sustainability capital ($136m), lease liability payments ($51m) and dividends paid during the year ($524m). This was partially offset by operating cash inflows of $701m for the year and proceeds from sales of surplus assets. Further details of movements in Net Debt are provided in the Cashflow section of this report. (1) Average TWC as % of revenue = 13-month average trade working capital/12 months rolling revenue. FY23 metrics include trade working captial balances classified as held-for-sale. FY22 metrics have been restated due to a reclassification of Precious Metals from PPE to Inventory in March 2022. (2) Net debt comprises the net of interest-bearing liabilities, cash and cash equivalents, and the fair value of derivative instruments economically hedging the Group’s interest-bearing liabilities. (3) Net debt incl TWC facilities (adjusted for average exchange rate for the year)/EBITDA ratio is calculated using 12 month rolling EBITDA ex IMIs, minus lease depreciation. Net debt for this ratio has been adjusted to include the usage of trade working capital facilities. (4) Net debt (adjusted for average exchange rate for the year)/EBITDA ratio is calculated using 12 month rolling EBITDA ex IMIs, minus lease depreciation. (5) Interest Cover = 12 month rolling EBITDA ex IMIs/net interest expense before accounting adjustments. 21 OPERATING AND FINANCIAL REVIEWIncitec Pivot Limited Annual Report 2023Net Debt A$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 10/24 02/26 03/26 08/27 10/28 10/30 801.2 111.3 431.3 475.6 389.0 389.0 – 801.2 111.3 431.3 475.6 389.0 389.0 – – – – – 2,597.4 1,796.2 801.2 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(1) Financial Indebtedness A$m Net debt(2) Lease Liabilities Trade working capital financing facilities (106.3) 41.8 (399.4) 82.7 1,415.0 1.2x 30 Sep 2023 30 Sep 2022 Change A$m 1,415 1,036 235 266 246 268 379 (11) (2) 366 Total Financial Indebtedness 1,916 1,550 Financial indebtedness increased by $366m as explained in the cashflow section of this report. Credit Metrics Net Debt/EBITDA(2): The ratio of 1.2x increased by 0.7x compared with the pcp. The increase is primarily a result of lower earnings in FY23 with EBITDA decreasing 35% over the pcp. Interest Cover: Decreased to 9.9x (pcp: 20.3x). 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 $801m of available undrawn committed debt facilities at 30 September 2023. The average tenor of the Group’s debt facilities at 30 September 2023 is 3.4 years (September 2022: 4.2 years). No committed debt facilities are due to mature until October 2024. Trade Working Capital Facilities IPL uses trade working capital 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 2023, receivables totaling $118m (30 September 2022: $95m) 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 2023 was $148m (30 September 2022: $173m). Capital Allocation – Capital Expenditure 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 first order capital (sustenance, turnaround, strategic, sustainability and minor growth) and second order capital (major growth where the total project is expected to cost greater than $5m). The table below includes a summary of cash spend per business on growth and sustenance capital: IPL Group Capital Expenditure DNA DNAP Fertilisers Sustenance DNA DNAP Fertilisers Turnaround DNA DNAP Fertilisers Strategic Sustenance DNA DNAP Fertilisers Year ended 30 September FY23 A$m FY22 A$m Change A$m 87.1 (85.0) 100.0 112.9 (12.9) 103.6 100.4 39.8 58.2 19.5 46.6 201.6 166.5 20.5 5.3 97.9 – 2.1 27.8 3.2 26.0 57.0 19.7 5.6 25.2 17.9 – 17.7 35.6 22.9 4.9 – 3.2 20.3 11.6 35.1 77.4 (5.3) 9.9 3.2 8.3 21.4 (3.2) 0.7 25.2 22.7 10.3 (2.3) (13.2) (5.2) Sustainability 50.5 27.8 DNA DNAP Fertilisers 39.0 31.0 16.0 28.7 33.3 29.2 1st and 2nd Order Growth 86.0 91.2 Total 495.1 434.0 61.1 The FY23 sustenance spend was within the guidance previously provided of $180m to $220m and is used to ensure reliable operations at our manufacturing and distribution facilities in line with long term asset plans. The turnaround spend in FY23 mainly relates to LOMO, St Helens and Cheyenne. Strategic one-off spend largely includes upgrades of Gibson Island distribution assets, the relocation of a research and development facility in the DNA business and Phosphate Hill mine life investment. Subject to currency fluctuations, sustenance spend in FY24 is expected to be in the range of $180m to $200m. Turnaround spend is expected to be approximately $50m to $60m with spending on sustainability targeted to be between $20m to $30m. These amounts don’t include Waggaman spend post 1 December 2023 (considering the potential sale of the assets) and one-off strategic sustenance expenditure on Phosphate Hill mine life and Gibson Island distribution assets in order to return volumes to historical market share levels. Sustenance spend is influenced by asset management plans and strategies. IPL is focussed on improving capital effectiveness and efficiency to ensure we deliver asset reliability and optimal returns. (1) Net debt incl TWC facilities (adjusted for average exchange rate for the year)/EBITDA ratio is calculated using 12 month rolling EBITDA ex IMIs, minus lease depreciation. Net debt for this ratio has been adjusted to include the usage of trade working capital facilities. (2) Net debt comprises the net of interest-bearing liabilities, cash and cash equivalents, and the fair value of derivative instruments economically hedging the Group’s interest-bearing liabilities. 22 OPERATING AND FINANCIAL REVIEWIncitec Pivot Limited Annual Report 2023Cash Flow Cash Flow Operating Cash Flow EBITDA ex IMIs Net Interest paid Year ended 30 September FY23 A$m FY22 A$m Change A$m 1,215.4 1,857.7 (642.3) (125.4) (83.4) (42.0) Net income tax paid (313.9) (117.0) (196.9) TWC movement (excl FX movements) 20.1 (397.9) 418.0 Profit from JVs and associates (61.4) (43.4) (18.0) Dividends received from JVs Environmental and site clean-up Restructuring costs Other Non-TWC 37.7 (53.8) (22.3) 7.9 (6.4) (13.7) 29.8 (47.4) (8.6) 4.4 (110.5) 114.9 Operating Cash Flow 700.8 1,093.3 (392.5) Operating Cash Flow Operating cash flows of $701m decreased by $392m compared to the pcp. Significant movements included: EBITDA: Decreased by $642m primarily driven by net unfavourable realised commodity price and A$:US$ exchange rate movements ($612m); the cessation of manufacturing at Gibson Island ($144m) and the impact of the Phosphate Hill gas supply disruption ($38m). This was partially offset by the recovery from turnarounds that occurred in FY22 compared to FY23 ($74m) and growth in the Explosives businesses ($45m). Net Interest Paid: Increased by $42m, principally as a result of higher interest rates, and lower exchange rates which were partially offset by lower average borrowings. TWC Movement: Improved $418m compared to the pcp largely as a result of lower commodity prices compared to FY22. Dividends received from JV’s: Increased by $30m largely due to the timing of payment of dividends by joint ventures and growth in earnings from joint ventures. Investing Cash Flow Minor growth capital (86.0) (91.2) 5.2 Environmental and site clean-up: Relates largely to payments against the Gibson Island closure provision. Sustenance and strategic capital (358.6) (315.0) Sustainability capital (50.5) (27.8) Payments – Central Petroleum Joint operation – (3.4) Proceeds from asset sales 13.3 5.7 (43.6) (22.7) 3.4 7.6 Other Non-TWC: Improved by $115m compared to the pcp. FY22 Non-TWC included the WALA insurance proceeds receivable of $35m which was paid in FY23 (representing a $70m year on year differential). The remaining favourable movement was largely due to the timing of the receipt of gas security deposits. Acquisition of subsidiaries & non-controlling interests Receipts / (Payments) relating to derivatives Investing Cash Flow Financing Cash Flow – – (143.9) 143.9 0.9 (0.9) (481.8) (574.7) 92.9 Dividends paid to members of IPL (524.4) (355.4) (169.0) Lease liability payments (50.5) (42.9) (7.6) Purchase of IPL shares for employees Realised market value gain / (loss) on derivatives Non-cash gain on translation of foreign currency Net Debt – – (9.0) (3.9) 9.0 3.9 (17.5) (106.6) 89.1 Non-cash movement in Net Debt (5.4) (32.8) 27.3 Financing Cash Flow Change to Net Debt (597.8) (550.6) (47.3) (378.8) (32.0) (346.9) Opening balance Net Debt (1,036.2) (1,004.2) (32.0) Closing balance Net Debt (1,415.0) (1,036.2) (378.9) Investing Cash Flow Net investing cash outflows of $482m decreased $93m as compared to the pcp. Significant movements included: Sustenance capital: Higher sustenance spend is mainly driven by spend on key strategic one-off projects; incremental spend in the Titanobel business given a full year of ownership and the DNAP MPU upgrade program during the year. Sustainability capital: Sustainability spend in FY23 primarily reflects spend progressing decarbonisation projects at WALA and the Moranbah abatement project. Acquisition of subsidiaries and non-controlling interests: FY22 outflow represents the acquisition of Titanobel ($124m) and Yara Nipro ($20m). Financing Cash Flow Net financing cash outflow of $598m was $47m higher compared with the pcp. Significant movements included: Dividends paid to members of IPL: Higher dividend of $524m in line with increased earnings in the second half of FY22. Foreign Exchange on Net Debt: The non-cash increase of $18m reflects the impact from translating US dollar denominated debt at a lower exchange rate. 23 OPERATING AND FINANCIAL REVIEWIncitec Pivot Limited Annual Report 2023Dyno Nobel Americas EBIT US$m 533 6 5 3 4 Ag & IC WALA 37 (8) (4) 61 (7) (10) (53) 390 (177) Increase Decrease Total FY22 Customer Technology Cost Management /Inflation (Net) Manufacturing Reliability Weather (1H23)/Coal FY23 Turnaround FY23 Turnaround Manufacturing Reliability Commodities Manufacturing Reliability Depreciation – WALA Sale Commodities FY23 Dyno Nobel Americas Explosives Waggaman Ag & IC Total Revenue Explosives Waggaman Ag & IC EBIT EBIT margin Explosives Waggaman Ag & IC A$m Revenue EBIT Notes Year ended 30 September Change % 4 (28) (35) (12) 6 (23) (89) (27) FY23 US$m 999.0 403.1 181.1 FY22 US$m 956.7 560.9 279.4 1,583.2 1,797.0 117.1 264.0 8.9 110.3 343.8 78.7 390.0 532.8 11.7 % 65.5 % 4.9 % 11.5 % 61.3 % 28.2 % 2,380.8 2,532.9 587.8 759.3 (6) (23) Average realised A$/US$ exchange rate Urea (FOB NOLA) Index Price (US$/mt) 0.66 439 0.70 713 Dyno Nobel Americas FY23 earnings of US$390m decreased US$143m, or 27%, compared to the pcp. Outlined below are the major earnings movements during the year for each business segment. Explosives Business Performance Explosives earnings for FY23 of US$117m was US$7m higher than the pcp principally due to the following: EBIT Margins: EBIT margins (as a percentage of revenue) grew marginally during the year despite weather impacts and coal demand impacts. Margins grew materially in the back half of the year with 2H margins being 12.8%, up from 10.6% in 1H. When measured on an EBIT per tonne basis, margins grew 8% in the year primarily due to a change in the sales mix away from coal and into Metals and Q&C. This second half margin expansion is creating earnings momentum into FY24. Customer Growth: US$6m growth comes from increased demand in the higher margin Q&C and Metals markets. The 9% volume growth in Q&C in the prior year carried forward into FY23 with a further 4% growth. Metals volumes were up 2% on pcp with the largest increases in the Chilean and Canadian operations. Technology: Incremental earnings of US$5m came from higher sales of Dyno’s premium technology products, primarily specialised emulsions in Q&C and Metals markets. Cost Management / Inflation: The net result of pricing increases and cost management initiatives (including the cost of implementation) and the negative impacts of inflationary forces had a favourable earnings impact of US$3m. Full realisation of cost saving initiatives is expected in FY24. Weather / Coal demand: Weather impacts in the first half impacted earnings by US$4m. Declines in natural gas prices led to a reduction in end market coal demand (volumes down 5%) causing a further earnings impact of US$4m. Manufacturing: Turnarounds at the Cheyenne, WY. and Louisiana, MO, plants during the year impacted earnings by US$4m. Excluding turnarounds, manufacturing performance improved year on year, contributing an earnings benefit of US$4m. Market Summary Quarry & Construction 43% of Explosives revenue was generated from the Quarry & Construction sector in FY23 (42% pcp). DNA’s market leading position was maintained during the period, primarily through DNA’s joint venture partners and independent distributors. Base & Precious Metals 37% of Explosives revenue was generated from the Base & Precious Metals sector in FY23 (36% pcp). Volumes increased by 2% during the year with revenues (in dollar terms) up approximately 7% compared to the pcp. The largest increases in volumes came from operations in Chile and Eastern Canada, with some of those gains offset by decreased volumes in the US Iron Range which was impacted by severe weather in the first half and the idling of a key mine as previously noted. 24 OPERATING AND FINANCIAL REVIEWIncitec Pivot Limited Annual Report 2023ExplosivesCommodity Prices: Global ammonia prices reduced during the year from the historically high levels seen in FY22. Lower natural gas prices partially offset this unfavourable movement resulting in a net unfavourable earnings impact of US$177m. The discount realised on sales priced at the Tampa benchmark in FY23 was approximately 10%. The net discount on sales, including internal sales to Dyno Nobel, Louisiana, MO facility was approximately 14%. Coal 20% of Explosives revenue was generated from the Coal sector in FY23 (22% pcp). Volumes were down 5% versus the pcp as lower natural gas prices incentivised the power sector to switch to gas- generated power. Agriculture & Industrial Chemicals (Ag & IC) Business Performance Ag & IC FY23 earnings of US$9m was US$70m lower than the pcp, primarily due to the following: Turnaround: A turnaround at the St. Helens Urea plant in the first half reduced earnings by US$4m. The major turnaround at Cheyenne in the second half resulted in a further US$3m negative impact on earnings. Manufacturing Reliability: The US$10m earnings decline related to manufacturing reliability was the result of minor production issues at Cheyenne (prior to its major turnaround) combined with the previously reported equipment failure at St. Helens in the first half (US$8m). Commodity Prices: Unfavourable movements in Urea and UAN pricing reduced earnings by US$53m versus the pcp. Waggaman Operations WAGGAMAN Thousand metric tonne Year ended 30 September FY23 FY22 Change % 17 11 (28) (21) (27) (23) Ammonia manufactured at Waggaman 822.5 700.6 Ammonia sold US$m External Revenue Internal Revenue Total Revenue EBIT EBIT margin Notes Ammonia Realised Price (US$/mt)(1) Realised Gas Cost (US$/mmbtu) (delivered) Ammonia Tampa Index Price (US$/mt)(1) Index Gas Cost (US$/mmbtu)(2) Gas efficiency (mmbtu/mt) Business Performance 829.6 745.9 403.1 560.9 53.5 67.9 456.6 628.8 264.0 343.8 65.5 % 61.3 % 550 3.66 653 3.58 34 843 6.86 1,049 6.54 35 Waggaman earnings of US$264m, decreased US$80m compared to the pcp due to the following: Manufacturing Reliability: Production at the Waggaman plant exceeded nameplate capacity for the year with production of 823kmt. This was approximately 122kmt higher than the prior year which had been impacted by an incident in the first half of that year. The additional production resulted in higher earnings of US$61m. Depreciation – WALA sale: Per the market announcement in March 2023, IPL reached an agreement for the sale of its ammonia manufacturing facility located in Waggaman, Louisiana, USA (Waggaman). For accounting purposes, the Waggaman assets were classified as Held-for-sale at the end of November 2022. As such, depreciation on the asset base ceased at this point, resulting in a depreciation benefit of US$37m compared to the pcp. (1) Waggaman’s ammonia sales prices are based on a combination of index Ammonia Tampa prices and 1-month lagged index Ammonia Tampa prices. The index price shown in the table represents the average index price for the financial year adjusted for the one-month lag. (2) Average closing price of Nymex Henry Hub 1-month futures. 25 OPERATING AND FINANCIAL REVIEWIncitec Pivot Limited Annual Report 2023Dyno Nobel Asia Pacific EBIT A$m 15 163 6 13 (9) 188 Increase Decrease Total FY22 Customer Technology Titanobel Moranbah Plant (GI closure impact) FY23 Year ended 30 September Market Summary FY23 FY22 Change % Australian Coal 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 Business Performance 372.1 756.9 556.4 550.4 393.8 370.9 720.0 499.2 489.5 211.7 1,500.6 1,200.4 188.3 12.5% 162.5 13.5% 0 5 11 12 86 25 16 Dyno Nobel Asia Pacific FY23 earnings of $188m, increased $25m compared to the pcp. due to the following: Customer Growth: $15m growth on the pcp, mostly driven by positive customer re-contracting outcomes in Australia and capitalising on favourable market conditions in Indonesia and Turkey. Recontracting is ahead of schedule with pricing discipline maintained. Technology Growth: $13m growth on the pcp, driven by strong electronics and Differential Energy emulsion volumes. Titanobel: $6m growth on the pcp, mostly driven by annualisation benefit with a full year of earnings in FY23. Business integration and synergy realisation progressing in line with the acquisition plan. Moranbah Plant: Production was 1kmt higher than pcp. with the impact of the closure of Gibson Island being offset by increased plant reliability and gas efficiencies. The $9m earnings impact is largely driven by higher manufacturing cost due to the closure of Gibson Island. The EBIT margin decline versus pcp is due to the proportional increase in earnings of the lower margin Titanobel business, included for a full year for the first time. 26 37% of Dyno Nobel Asia Pacific revenue for the year was generated from the Australian Coal sector, most of which was from supply to the metallurgical coal mines in the Bowen Basin. Volumes from the Australian Coal sector remained relatively flat compared to the pcp. Metallurgical Coal volumes recovered in the second half of the year after a weather impacted first half. Base & Precious Metals 37% of Dyno Nobel Asia Pacific revenue was generated from the Base & Precious Metals sector, which comprises iron ore mines in Western Australia and hard rock and underground mines throughout Australia. Volumes from the sector increased 4% compared to the pcp as a result of the increased adoption of Differential Energy emulsion. International 26% of Dyno Nobel Asia Pacific revenue was generated internationally in Indonesia, Turkey, Papua New Guinea and France. Volumes increased by 32% compared to the pcp, mainly driven by the annualisation of the acquisition of the Titanobel business, and stronger volumes in the Indonesia business. Titanobel Following the business acquisition In May 2022, the primary focus for 2023 has been on successfully integrating Titanobel into the Group. The growth trajectory of the business remains consistent with the acquisition plan and several synergy opportunities have been identified. Manufacturing A record-breaking volume year for Moranbah, producing 372k mt of ammonium nitrate during the year despite the Gibson Island closure. Ammonia Plant reliability improved to 96% following a strong second half performance. OPERATING AND FINANCIAL REVIEWIncitec Pivot Limited Annual Report 2023Fertilisers Asia Pacific EBIT A$m 614 (135) Distribution 74 (309) (38) (47) (6) 153 Increase Decrease Total FY22 GI Closure Commodities Cost of Gas - Phos Hill Recovery from FY22 Turnaround Manufacturing Reliability Commodity Volatility FY23 Year ended 30 September Business Performance FY23 FY22 Change % Fertilisers Asia Pacific earnings of $153m was 75% lower than the pcp. Major movements for the year were due to the following: Fertilisers Asia Pacific Thousand metric tonne Phosphate Hill production (ammonium phosphates) Gibson Island production (urea equivalent) A$m Manufacturing Distribution Fertilisers APAC Revenue Manufacturing Distribution Fertilisers APAC EBIT EBIT margin EBIT margin Manufacturing Distribution Notes Fertilisers APAC Realised A$/US$ Exchange Rate(1) Total Fertilisers APAC volumes sold (k mt) Domestic Fertilisers APAC volumes sold (k mt) Phosphate Hill Realised AP Price (US$/mt) Phosphate Hill production sold (k mt) Realised AP Freight Margin (US$/mt) Realised Cost per Tonne of AP (A$/mt)* Gibson Island 864.4 735.9 17 138.9 404.5 (66) (35) (6) (17) (81) (10) (75) 648.8 991.3 1,554.6 1,656.5 2,203.4 2,647.8 107.5 563.1 45.7 50.6 153.2 613.7 7.0 % 23.2 % 16.6% 56.8% 2.9% 3.1% 0.72 0.72 2,703.7 2,575.9 2,035.8 1,868.7 591 825 5.1 723 851 747 14.1 705 Realised Urea Price (US$/mt) 519 710 Gibson Island production sold subject to urea price movement (k mt) 183 336 * Weighted Average of AP including port costs. Gibson Island Closure: As previously disclosed, the Gibson Island plant ceased manufacturing activities in January 2023. The resulting decrease in production resulted in a year on year decrease in earnings of approximately $135m. Commodity Prices: $309m net decrease, primarily driven by lower DAP prices. Phosphate Hill Cost of Gas: Gas supply disruptions at Phosphate Hill increased FY23 gas costs by $38m compared with the prior year (FY22 included increased gas costs of ~A$41m as a result of gas supply disruptions) bringing the total FY23 impact to $79m which is at the lower end of the previously announced range. IPL expects that shortfall gas will be required in FY24, with the cost expected to be approximately $45m lower than the cost in FY23. Reliability: Manufacturing reliability was impacted by manufacturing interruptions at Phosphate Hill ($47m). IPL has implemented a Taskforce at Phosphate Hill to address and implement recommendations to improve reliability. Year on year manufacturing performance includes a production benefit ($74m) due to the prior year including the planned turnaround at Phosphate Hill. Volumes and Margins: Distribution volumes increased in the second half, primarily due to higher demand led by lower fertiliser pricing and favourable farming conditions. Distribution EBIT margin per tonne was impacted by a falling commodity price market in FY23. The focus for FY24 is on accretive market share growth. Market Summary Total Fertilisers Asia Pacific domestic sales volumes of 2,036k metric tonnes (mt) was 9% higher than FY22 sales of 1,869k mt. Volume growth reflects the strong trading conditions in the second half of FY23. Global fertiliser prices retracted from unprecedented levels in the prior year. Realised Ammonium Phosphate (AP) prices declined by 31% and realised Urea prices were down 27% over the pcp. (1) This rate is after allowing for the impact of hedging and is therefore different to the average spot rate for the year. 27 OPERATING AND FINANCIAL REVIEWIncitec Pivot Limited Annual Report 2023ManufacturingRe-basing from FY22Manufacturing AG&IC Manufacturing performance in the Fertilisers Asia Pacific business in FY23 was as follows: Phosphate Hill AP production increased to 864k mt, up 17% on pcp. The higher production reflects the recovery from the planned turnaround in the prior year, partially offset by unplanned outages in FY23. Ammonium Phosphate cost per tonne increased marginally in FY23 largely due to higher gas costs, partially offset by a reduction in the cost of sulphur. Outlook and Sensitivities IPL does not generally provide profit guidance, primarily due to the earnings variability resulting from commodity price 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 Dyno Nobel Asia Pacific » Positive market conditions expected to remain in Australia including firm, short-term demand outlook for coal and iron ore, and a tightening AN market. » Customer recontracting is progressing well in Australia with some key contracts executed during FY23 (e.g. FMG) and the remainder of the customer book to be renewed or to expire in FY24 and 1H FY25. Recontracting is expected to support the base DNAP business to return to peak earnings by 1H FY25 with further upside expected from the delivery of the Titanobel business case. » Moranbah production forecast expected to be approximately 330kmt in FY24 compared to 372kmt in FY23 largely due to the closure of Gibson Island resulting in a reduction of available Ammonia (~$11m impact) and the N2O abatement project scheduled for 1HFY24 (~$5m impact). » Continuation of Titanobel earnings growth, consistent with the acquisition business case and synergy realisation opportunities. » Technology growth expected through the expansion of premium Differential Energy emulsion and continued uptake of premium electronic detonator technology. » The first half / second half earnings split is again expected to be weighted towards the second half (historic split of circa 45%/55%). Dyno Nobel Americas Explosives » Within the context of a highly competitive market, the base Explosives business (excluding any impact from the WALA offtake agreement) expects mid to high single digit earnings growth. The following factors contribute to this outcome: › The full flow through of price increases, underlying market growth (net of coal decline) and technology driven market share gains is expected to generate year on year earnings improvements in the base explosives business. › Expected higher AN production, principally resulting from not having any planned turnaround activities in FY24. › Depreciation expense will be approximately US$12m higher in FY24, mainly as a result of the capital expenditure associated with the Cheyenne, WY turnaround in FY23. › The first half / second half earnings split for FY24 is expected to be in line with prior years at approximately 45% / 55%. » Agriculture & Industrial Chemicals earnings (excluding any impact from the WALA offtake agreement) are expected to be largely in line with FY23 with expected positive manufacturing impacts being offset by lower UAN and Urea prices. Commodity prices are subject to market volatility and could result in a different outcome. WALA » The WALA sale remains contingent on US anti-trust regulatory clearance. A decision of the regulator is expected before the end of the 2023 calendar year. » Apart from a potential outage of up to 4 weeks to allow the installation of a replacement cooler the Waggaman plant is expected to produce at nameplate capacity in FY24. The operational earnings of Waggaman remain subject to movements in ammonia and natural gas prices. » Tampa Discount – Until the sale of the Waggaman facility is completed, third party ammonia sales from the plant will continue to be sold under the existing contracts. The average discount to Tampa for third party sales is expected to be between 8% and 10%. When factoring in “internal” sales, which are not priced based off the Tampa benchmark, the overall discount is expected to be between 12% and 15% in FY24. WALA offtake agreement » Following the completion of the sale of the Waggaman facility, an asset representing the value of the 25-year ammonia offtake agreement will be recognised on the day of the sale. The value of this asset is currently estimated to be approximately US$300m. This asset will be amortised via a non-cash charge to the P&L annually, partially offsetting the uplift in margin which is expected to be captured in the Explosives and AG&IC result. » The manufacturing margin associated with the sale of 150k short tonnes of ammonia to LOMO will transfer to the DNA Explosives business (estimated annual benefit of ~$8m, net of amortisation) and the benefit of an additional 50k short tonnes of ammonia is expected to be captured in the AG&IC business (estimated annual benefit of ~$6m, net of amortisation), replacing previous purchased tonnes at Cheyenne (this is subject to the volumes manufactured). This margin remains subject to movements in ammonia and natural gas prices. Refer to slide 35 of IPL’s FY23 Investor Presentation for further information on the P&L impact of the WALA offtake agreement. Fertilisers Asia Pacific » Fertiliser’s earnings will continue to be dependent on global fertiliser prices, the A$:US$ exchange rate and weather conditions. » Distribution is forecasting value accretive market share gains for FY24. » With the Australian Bureau of Meteorology (BOM) recently announcing that “Oceanic indicators firmly exhibit an El Niño state”, expectations are for reduced spring rainfall in Eastern Australia. This may lead to lower demand for fertiliser in this region and potentially impact the overall market size. » Phosphate Hill production was impacted by interruptions that occurred in late FY23 and carried forward into October 2023. The FY24 production range for Phosphate Hill is forecasted between 810k mt to 840k mt principally as a result of planned maintenance activities in 1H24 required to conduct repairs and other work to increase site reliability over the period and into the future. Depreciation is expected to increase by approximately $5m as a result of reliability capital investment. 28 OPERATING AND FINANCIAL REVIEWIncitec Pivot Limited Annual Report 2023 » As a result of the planned outages, production at Phosphate Hill in FY24 is expected to be lower in the first half with approximately 35% to 40% of the full year production forecast to be delivered during this period. » Phosphate Hill gas – during the three months to the end of September 2023, Phosphate Hill used a mix of supply sources including; gas supplied under the current contract from Power and Water Corporation (PWC), and shortfall gas from Northern Territory and East Coast suppliers. The diversity in gas supply ensured Phosphate Hill production was not affected by the reduction of contracted gas supply from PWC. The price of these shortfall gas volumes is expected to be approximately $45m lower than the cost incurred in FY23 (which was $79m). A further update will be provided at half year. » Production of fertilisers at Gibson Island ceased in early January 2023. Earnings from Gibson Island manufacturing in FY23 was approximately $20m. Group Corporate: Corporate costs are expected to be approximately $42m in FY24. Borrowing Costs: Net borrowing costs for FY24 will be impacted by the timing of potential proceeds from the sale of the Waggaman facility and/or the sale of the Fertilisers business. Borrowing costs will also be impacted by the size and timing of any returns of capital to shareholders. Based on an assumption that the WALA sale completes in December 2023 and that $1.4bn of capital returns take place across FY24 and FY25, interest expense in FY24 is forecast to be $115m. Taxation: IPL’s effective tax rate for FY24, excluding IMI’s and assuming the sale of the Waggaman ammonia facility completes during the year, is expected to be between 12% and 17%. The lower range compared to FY23 is largely due to the potential sale of Waggaman which results in permanent difference deductions (for example JV income) representing a higher portion of profits compared to FY23. The tax rate range is highly sensitive to earnings mix movements across jurisdictions. Hedging: Approximately 85% of the FY24 US$ linked fertilisers sales remain unhedged, with 15% hedged at 73 cents with full participation down to 60 cents. Sensitivities The table provides sensitivities to key earnings drivers and should be read in conjunction with the footnotes found below. Commodity Proxy Index EBIT Sensitivities WALA Ammonia(1) Natural Gas(2) FX EBIT Translation(3) CFR Tampa + / - US$10/mt = +/-U$6.0m Henry Hub + / - US$0.10/mmbtu = -/+ US$2.0m + / - A$/US$0.01 = -/+ A$6.0m Americas excluding WALA Urea(4) FX EBIT Translation(5) FOB NOLA + / - US$10/mt = +/-U$1.8m + / - A$/US$0.01 = -/+ A$2.8m Asia Pacific AP(6) FOB China/Saudi + / - US$10/mt = +/-A$13.1m FX EBIT Transactional(6) + / - A$/US$0.01 = -/+A$11.6m Sustainability IPL’s commitment to operating sustainably is driven by the Company’s values which are core to the way it does business. IPL’s strategy is to deliver sustainable growth and shareholder returns while proactively managing those issues most material to the long-term sustainability of its business. Issues considered material to the sustainability of the Company are included in its 2023 Annual Report, 2023 Corporate Governance Statement, 2023 Climate Change Report, and 2023 Sustainability Report. IPL is committed to respecting human rights and addressing modern slavery risks in its operations and supply chains and will release its fourth annual Modern Slavery Statement in February 2024. This Statement sets out the actions taken in FY23 as well as future management plans. Sustainability Performance Benchmarking IPL has been included in the S&P Global CSA (formerly the Dow Jones Sustainability Index -DJSI) since 2010. Selection for the index is made each year following a review of IPL’s sustainability reporting as well as a comprehensive Corporate Sustainability Assessment questionnaire. IPL’s performance is benchmarked against peers in the global Chemicals sector. During 2023, IPL was again selected for inclusion in S&P Global Sustainability Yearbook 2023 after ranking in the top 15 per cent of industry peers and achieving a S&P Global Environmental, Social, and Governance (ESG) score within 30 per cent of the industry’s top performing companies. S&P Global DJSI Corporate Sustainability Assessment Calendar Year DJSI Dimension Economic Environmental Social Total for IPL Chemicals sector average 2022 2021 2020 2019 2018 2017 70 61 63 65 23 78 72 69 73 26 81 69 65 72 30 78 71 58 69 36 72 73 60 69 47 71 64 57 65 44 The Company is also a member of the FTSE4Good Index, completes the CDP Climate Change and Water Security reports each year and the EcoVadis questionnaire biennially, and is rated by MSCI, Moody’s VE Connect, Sustainalytics, CGI Glass Lewis and the CSR Hub. During 2023, IPL was admitted to the Bloomberg Gender-Equality Index (GEI) for the fifth consecutive year. The GEI is a modified market capitalization-weighted index that aims to track the performance of public companies committed to transparency in gender-data reporting. The reference index measures gender equality across five pillars: female leadership & talent pipeline, equal pay & gender pay parity, inclusive culture, anti-sexual harassment policies, and pro-women brand. (1) Based on 800k mt Waggaman plant nameplate production less an allowance for a potential 4-week outage to allow for the installation of a replacement cooler (if required) and internal sales volumes of 140k mt. The sensitivity is based on IPL retaining WALA for all of FY24. The sensitivity will change should the Waggaman sale complete prior to 30 September 2024. (2) Based on 800k mt Waggaman plant nameplate production less an allowance for a potential 4-week outage to allow for the installation of a replacement cooler and internal sales volumes of 140k mt. and gas efficiency of 34 mmbtu/tonne of ammonia (the efficiency achieved in FY23). The sensitivity is based on IPL retaining WALA for all of FY24. The sensitivity will change should the Waggaman sale complete prior to 30 September 2024. (3) Based on actual FY23 Dyno Nobel Americas EBIT of US$264m and an average foreign exchange rate of A$/U$ 0.66. (4) Based on St Helens plant capacity of 175k mt of urea equivalent product. (5) Based on actual FY23 Dyno Nobel Americas (excluding WALA) EBIT of US$126.1m and an average foreign exchange rate of A$/U$ 0.66. (6) Based on actual FY23 Phosphate Hill production of 864k mt; average FY23 realised AP price of US$591; and an average foreign exchange rate of A$/U$ 0.66. 29 OPERATING AND FINANCIAL REVIEWIncitec Pivot Limited Annual Report 2023Principal 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. 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. Risk Categories Description and potential consequences Treatment strategies employed by IPL Macroeconomic Factors Geopolitical uncertainty borne out of current economic and supply chain challenges in China, impacts from Russia’s invasion of Ukraine and global inflationary pressures could have a negative impact on IPL’s cost base, sales and market share. » IPL monitors long term trends in the mining and fertiliser sectors through industry forecasts of commodities demand. » In the mining sector 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. » In the fertiliser sector analysis of customer demand, climate and seasonal forecasts and supply chain reliability inform strategy development and product offerings. » Continuous review of country specific risks helps proactive management of potential exposures. Continuing consolidation in the explosives industry could lead to heightened competition and pricing pressures. 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. The execution of IPL’s strategy to separate its fertilisers and explosive business is contingent on a number of external factors, including receiving relevant approvals, that could delay the execution of this strategic initiative and disrupt the normal business operations. » IPL seeks to maintain or develop competitive cost positions in its chosen markets, whilst maintaining quality product and service offerings. » IPL continues to invest in new technologies and premium product offerings in order to meet the needs of our customers while limiting and improving both IPL’s, and our customers’, carbon footprints. » IPL has implemented business separation governance processes designed to minimise cost and disruption to normal operations and meet market expectations of the proposed structural separation process. Strategy Climate Change The global energy transition presents strategic risks and opportunities for IPL. These may include a rapid transition away from fossil fuels, which could significantly decrease demand for thermal coal, and a shift to new technologies, such as renewable hydrogen. The impact of carbon emissions, and governments’ policies and actions to limit them, may also have an impact on IPL’s operations and supply chains. In addition, there are physical risks associated with climate change which could impact on IPL’s operations, supply chains and customers. A detailed discussion of the risks and opportunities identified through IPL’s assessment of both physical and transitional risks can be found in IPL’s 2023 Climate Change Report.(1) Health, Safety, Environment, Community IPL is exposed to operational risks associated with the manufacture, transportation and storage of hazardous and inherently dangerous products and materials. IPL, its customers and suppliers, are required to comply with various environmental laws and regulations and have specific operating licences in place. Failure to abide by the laws and/ or licensing conditions may have a detrimental effect on IPL’s operations and financial performance. » IPL is progressing a number of decarbonisation projects across its manufacturing sites, including the initial engineering and design study into industrial-scale production of green ammonia at Gibson Island. Significant site decommissioning works have been completed and the project team is continuing to manage the decommissioning of natural gas-based manufacturing and potential transition to green ammonia, with a final investment decision expected before the end of the 2023 calendar year. » Through engagement with an expert third party in 2021, a comprehensive assessment of the physical and transitional risks and opportunities associated with climate change was completed for IPL using four future climate-related scenarios. The scenarios used and the identified risks and opportunities, along with management strategies for each, are included in IPL’s 2023 Climate Change Report. » A comprehensive Health, Safety, Environment and Community (HSEC) management system is in place. » HSEC risk identification, mitigation and management strategies are consistently employed across all sites. » The Group continues to foster and encourage a Zero Harm culture with a focus on leadership development and creating an atmosphere of “Safe Ground” through programs such as SafeTeams. » Systems and procedures are established, documented, implemented and maintained to reduce HSEC risk in all work activities. » The Group has strict processes around the stewardship, movement and safe handling of dangerous goods and other chemicals. (1) Refer to IPL’s Climate Change Policy (available on IPL’s website) for further details. We support the international climate agreement developed at the 2015 Paris Conference of Parties, as well as the Nationally Determined Contributions of the countries in which we operate. 30 OPERATING AND FINANCIAL REVIEWIncitec Pivot Limited Annual Report 2023Risk Categories Description and potential consequences Treatment strategies employed by IPL Compliance 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 risk. Failure to abide by these laws and regulatory provisions may adversely impact its business, financial condition and operations. IPL is also exposed to potential regulatory actions, legal claims or other disputes in the course of its business and in connection with its operations. » Corporate functions are in place 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 business processes to monitor and manage the compliance requirements for ethical procurement, including modern slavery. » 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’s whistleblower hotline allows employees and third parties to anonymously notify the Company of any suspected fraudulent, illegal or unethical activity. IPL operates in regional and remote locations where it can be difficult to attract and retain critical and diverse talent. A shortage of skilled labour or loss of key personnel could disrupt IPL’s business operations or adversely affect financial performance. Changes in employment and workplace relations laws across several jurisdictions within which IPL operates is increasing the coverage of collective agreements, placing upward pressure on remuneration and creating the need for new methods of workplace engagement. There is a possibility of increased industrial action as a result of these changes. » Critical roles are identified and policies implemented to help ensure that appropriate succession and retention plans are in place for those roles. » Employee remuneration and benefits are actively monitored and benchmarked to ensure competitive offerings to attract and retain staff. » Active monitoring is in place to ensure compliance with employment laws and industrial instruments. » IPL has capable leaders who engage directly with their teams, experienced internal employee relations specialists, and constructive relationships with relevant trade unions. People Manufacturing 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, legacy design issues, sabotage, terrorist attacks and other unforeseen events which may disrupt operations and materially affect financial performance. There is a risk that a reliable, committed source of natural gas (a major input required for ammonia production) at economically viable prices may not be available for IPL’s global manufacturing operations. Sulphuric acid is a major raw material required to produce ammonium phosphates. Sulphuric acid supply into Phosphate Hill could be negatively impacted, should the Mt Isa Mines copper smelter close. Failure to access suitable ore reserves, due to a lack of resource verification or resulting from cultural heritage considerations, may result in a shortening of Phosphate Hill’s operational life. » The Group continues to implement its Operations Risk Management (ORM) Program designed to effectively manage process safety risks. » The Group has implemented global engineering standards and processes to prevent reliability related events. » IPL undertakes business continuity planning and disaster preparedness across all sites. » Insurance is obtained to ensure the appropriate coverage is in place with regard to damage to the Group’s plants, property and related business interruption costs. » Medium term gas contracts are in place for the Australian manufacturing sites. The contracts have various tenures and pricing mechanisms. IPL sources replacement gas, when required, from a mix of third-party sources and explores new gas supply arrangements as part of ongoing operations. » A life of mine project is currently underway at Phosphate Hill. Discussions with traditional owners in relation to access to potential mine areas are also ongoing. » Glencore recently confirmed operation of the smelter to 2030 pending capital approvals and we are continuing to work on alternative sources to mitigate the loss of sulphuric acid due to potential closure or reduced production. » 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. Customer IPL has strong relationships with key customers 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. Supply Chain Disruption to the timeliness 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 materials is 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, impacting plant uptime and earnings. » 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. » 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 are described in IPL’s 2023 Climate Change Report. 31 OPERATING AND FINANCIAL REVIEWIncitec Pivot Limited Annual Report 2023Risk Categories Description and potential consequences Treatment strategies employed by IPL Commodity Price The pricing of internationally traded commodities is based on international benchmarks and is affected by global supply and demand forces. 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 could have an adverse impact on customers’ demand, impacting volume and market prices. » 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. » 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. » To ensure volume and price commitments are upheld, the Group has firm customer supply contracts. Demand The current global economic and business climate, energy situation, 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. 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. » Diversification across explosives and fertilisers markets, including across numerous geographically diverse locations and through exposure to, and diversity across, varied market segments, helps manage exposures. » Continuous review of country specific risks helps proactive management of potential exposures. » The Company’s Integrated Business Planning 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. Finance Foreign exchange movements against the Australian dollar, movements in interest rates and imposition or removal of tariffs may materially affect IPL’s financial performance. Changes in tax legislation or compliance requirements in the jurisdictions in which IPL operates may result in additional compliance costs and/or increased risk of regulatory action. » 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 18 (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. Security IPL’s operations are exposed to sabotage, terrorist attacks and other unforeseen events which may disrupt IPL’s operations and supply chain and materially affect its financial performance. » The Group has strict processes around the stewardship, movement and safe handling of dangerous goods and other chemicals. Cyber Loss or exposure of sensitive data relating to IPL or its internal or external stakeholders may result in a negative impact to reputation or competitive advantage, and potential breach of regulatory compliance obligations. IPL may be the target of cyber-attacks which could result in commercial, financial, health and safety, environmental, community or reputational impacts. » IPL undertakes business continuity planning and disaster preparedness across all sites. » 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. » 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. » To ensure a degree of risk transfer in the event of a major cyber security incident, IPL retains a cyber insurance policy. 32 OPERATING AND FINANCIAL REVIEWIncitec Pivot Limited Annual Report 2023This image to be approved 33 OPERATING AND FINANCIAL REVIEWIncitec Pivot Limited Annual Report 202334 BEING A SUSTAINABLE BUSINESSIncitec Pivot Limited Annual Report 2023We aim to deliver sustainable growth and shareholder returns while caring for our people, communities and our environment. Being a Sustainable Business 35 BEING A SUSTAINABLE BUSINESSIncitec Pivot Limited Annual Report 2023Keeping People and the Environment Safe At IPL we are committed to Zero Harm for Everyone, Everywhere. It’s a commitment we make to employees, contractors, customers, shareholders, and the community. Our Zero Harm strategy enshrines our approach to keeping people and the environment safe. Our four strategic themes – Simplify, Get the Fundamentals Right, Lead & Engage and Strengthen our Learning Culture – underpin our annual execution plans and focus our efforts. Whilst robust health and safety management standards and systems are set at a global level, accountability for safety outcomes is owned by local teams. We empower, develop, and expect everyone to be leaders in Zero Harm. Employees are empowered to stop work or speak-up if they believe something is unsafe. It is our belief that we all share the responsibility for safety. The wellbeing of our people also continued as a focus with emphasis on occupational and mental health. Safety performance In FY23 we continued to progress our ambition to achieve industry leading performance in occupational health, personal safety, process safety and reducing our impact on the environment. Our overall performance included a number of positive results however some critical areas need continued focus, and we remain committed to pursuing year on year improvement in our Zero Harm Ambition. The Total Recordable Injury Frequency Rate (TRIFR)(1) has plateaued (over the last three years) with a Group TRIFR of 0.91 in FY23, above the target of 0.7. The Group has achieved zero serious harm(2) injuries in FY23, zero fatalities for the past three years and a 36% reduction in the lost workday case severity rate over the last two years. Integration of key IPL systems and processes has continued for Titanobel and with baseline reporting now established, Titanobel's inclusion in Group reporting will commence in FY24. The Group focus continues to be on improving personal safety performance through maintaining operating discipline of our safety fundamentals, creating a mentally healthy workplace, effective visible safety leadership with powerful safety conversations, and targeted injury reduction programs such as our Line of Fire campaign. Our global leadership and behavioural SafeTEAMS program - as part of our overall safety program – has also continued to enable improvements in personal safety performance and creating SafeGround. This supports psychological safety and enables our people to “stop the job” and improve reporting. Excellent safety performance has been achieved throughout our FY23 plant major turnarounds and Gibson Island manufacturing plant closure. We have been able to sustain our excellent environmental performance with Zero Significant Environmental Incidents(3). This has been achieved through continued embedding of key environmental compliance initiatives and the launch of our inaugural World Environment Day campaign focused on raising awareness of our environmental fundamentals. Process Safety Incidents have significantly decreased with 14 Tier 1 and Tier 2 events(4) reported in FY23 compared to 25 last year, delivering a year-on-year improvement of 44%. There were two Tier 1 events in FY23 (compared to six in FY22) resulting in a 67% year-on-year reduction. This substantial improvement reflects an increased and structured focus on the prevention of significant process safety events through the implementation of Operations Risk Management (ORM) and through the effective sharing and embedding of learnings from internal and external events. The targeted performance in significant event management for investigations completed and actions closed out on time was achieved. The quality of our investigations continues to improve with a focus on investigation competency and embedding learnings into our systems through our Global Significant Event Governance Forum. We have continued to demonstrate a strong reporting culture of significant events including hazards and near misses to strengthen our learning culture. Rules to Live By related Significant Events have also reduced as a result of implementation of controls and intervention strategies during FY23. Zero Harm snapshot IPL TRIFR1 (number of recordables) 1.0 0.8 0.6 0.4 0.2 0.0 TARGET 0.89 (66) 0.92 (66) 0.91 (66) 0.80 (59) 0.58 (41) FY19 FY20 FY21 FY22 FY23 IPL Process Safety Incidents (number of Tier 1 & Tier 2 events)(4) FY23 2 12 FY22 FY21 6 6 FY20 3 19 21 32 FY19 9 24 0 5 10 15 20 25 30 35 40 CCPS Tier 1 CCPS Tier 2 (1) TRIFR is calculated as the number of recordable injuries per 200,000 hours worked and includes contract workers. (2) Serious Harm / Hurt includes any multiple fatalities, fatality or injuries / illnesses causing severe body damage with probable long-term and / or significant life altering complications (permanent disabling). (3) Significant Environmental Incidents as assessed against IPL’s internal risk matrix with consequences of 5 or higher on a 6-level scale. (4) Tier 1 and 2 Process Safety Incidents as defined by the Centre for Chemical Process Safety. 36 BEING A SUSTAINABLE BUSINESSIncitec Pivot Limited Annual Report 2023Safety metrics call outs Zero fatalities for 3 years Zero Significant Environmental Incidents Significant improvement for Process Safety Management - Tier 1 and Tier 2 Process Safety incidents Significant Event Management targets achieved Zero Harm key activities Simplify We support people with easy to understand and use systems. Revised HSE Operating Model defined to drive critical HSE decision outcomes and improve key HSE communications. Refreshed Global Crisis and Emergency Management Framework post COVID-19 to identify, assess, prepare, respond and recover from events. Pilot of online ergonomics risk assessment tool for hazardous manual tasks. The development of IPL’s Mental Health Framework is progressing. A standardised, systemic risk-based model for managing mental health and wellbeing, it will shift the business to a more proactive, preventative approach. Get the Fundamentals Right We define our minimum expectations: we will be excellent at the fundamentals. 81% of all IPL sites had zero recordable injuries in FY23. Operations Risk Management is setting the standard of how process safety risks are managed resulting in significant improvement in process safety performance, hazard awareness and critical control management. Inaugural World Environment Day campaign delivered across the group to promote the focus on our environmental fundamentals. Our occupational health hygiene program helped to prevent adverse effects from occupational exposures. Lead and Engage We empower, develop and expect everyone to be leaders in Zero Harm. Strengthen our Learning Culture We learn, we share and we fix for good. Increased safety leadership and engagement in the field including significant event management has improved operating discipline, reporting, visibility and learning from incidents. World Safety Day campaign promoted the importance of powerful conversations to support the “why” behind the fundamentals of safety. SafeTEAMS program focused on improving personal safety performance and creating Safe Ground to support psychological safety and enable our people to “stop the job”. Establishment of a Global Cross Functional Mental Health & Wellbeing Steering Committee to develop a global framework including psychosocial risk management to embed processes and systems. Focused Turnaround Safety Management and plant closure governance has significantly improved HSE performance. Line of Fire campaign delivered to identify and monitor controls when planning and executing work to target injury reduction. 37 BEING A SUSTAINABLE BUSINESSIncitec Pivot Limited Annual Report 2023Our People and Culture Passionate and driven, our team of just over 5,800 employees work together across IPL's global operations. We believe what we achieve and how we achieve it, are equally important. Our Values are the cultural glue that hold the organisation together and guide our everyday attitudes, decisions and actions. 38 BEING A SUSTAINABLE BUSINESSIncitec Pivot Limited Annual Report 2023Safe, Inclusive and High-Performance Culture Our approach to building our culture is multifaceted and includes the continuous alignment of behaviours, management systems, and symbols. Safe Culture High-Performance Culture IPL commenced work to enhance a culture of high-performance, with the aim of aligning everything we do to delivering our safety, business and strategic objectives. This work is guided by four principles of being safe, focused, realistic and delivering. The Executive Team and senior leaders have begun aligning how we behave, our management systems and our symbols to these guiding principles. Behaviours To support a safe, inclusive, and high-performance culture, having leaders capable of leading our culture is key. Our first global leadership program, Leadership Foundations, continued and was extended to more senior leaders to support the embedding of fundamental leadership tools consistently across all levels of the organisation. There is work planned on a globally aligned leadership program to build capability for more senior levels in the organisation. Management systems The team identified the need to align a number of core business processes and systems to enable a high-performance culture across safety, people management, financial and stakeholder systems. For example, aligning our performance and reward processes to the company’s overall safety, business and strategic objectives. Symbols We implemented a number of communication channels within our business to ensure the culture we are building is well understood and highly visible. This has included increased frequency of townhalls where performance against our objectives is clearly communicated along with expectations of how we work to our guiding principles of being safe, focused, realistic and delivering. At the heart of our culture is the physical and psychological safety of our people. In support of this we have: » Continued the rollout of our behavioural safety program – SafeTEAMS. SafeTEAMS is a game changing program, with psychological safety - known as Safe Ground – as one of its core concepts. » In partnership with the People and HSEC functions, created a psychosocial risk management program, which is a proactive approach to creating a mentally healthy workplace. The program explores factors in work design and social conditions that may lead to psychological harm. » Updated our Upstander program to reflect changes from the Respect at Work bill. » Continued our work on diversity, equity and inclusion, a key aspect of creating a mentally healthy workplace. Inclusive Culture At IPL we believe we are stronger with a diverse group of employees working in an environment that is equitable and inclusive. Our aim is to foster a workplace where our people’s differences are respected, valued and leveraged and, in turn, strengthens individual and team performance. In 2023, our Diversity, Equity and Inclusion (DEI) strategy was refreshed to take a broader and more holistic view of DEI. Three key focus areas were established in the refreshed strategy to accelerate DEI: 1. People: increasing diverse representation through deliberate, fit for purpose actions that improve recruitment and retention outcomes 2. Leaders: equipping our leaders to lead DEI by having clear expectations, building their capability and holding them accountable for outcomes 3. Culture: leveraging the diversity of our workforce through an equitable and inclusive culture where we align behaviours, our management systems, and symbols Actions to support a more diverse, equitable and inclusive culture are below: Facilities review Established a review process to identify and improve the safety, equity and inclusiveness of our physical work environments. This involves reviewing areas such as equitable bathroom facilities, ensuring protective personal equipment (PPE) accommodates physical and cultural differences, and physical accessibility. Reviews have been completed across a number of our operational sites, with further reviews planned in FY24. Equity and Inclusion Reviews of core people processes Commenced a review to identify and implement improvements to equity and inclusion in our core people processes. This involved a review of our recruitment and performance & reward processes. This work is planned to continue in FY24. Defined expectations of an inclusive leader Our leaders play a critical role in creating an inclusive workplace. It’s important that they understand DEI, its drivers and the value it brings to a company. Work was completed to define what it means to be an inclusive leader at IPL. Next steps are to educate our leaders on these expectations and embed them in our people processes. 39 BEING A SUSTAINABLE BUSINESSIncitec Pivot Limited Annual Report 2023Sustainability 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, our people, the environment and the communities in which we operate. This commitment is driven by our Company Values, which are core to our business, and is built into our six 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 and are designed to identify the broader megatrends that are currently shaping our operating environment and impacting the ways in which we create value. These are shown on the following page along with 2023 highlights. Last year we reviewed our materiality assessment in terms of each of our business units, Dyno Nobel and IPF, and in 2023 we conducted an initial assessment of the nature-related risks and opportunities for our IPF business, in line with the Taskforce on Nature-related Financial Disclosures (TNFD). Our 2023 Sustainability Report, released concurrently with this Annual Report, describes in detail the megatrends and identified material issues and topics for each of these businesses, as well as the preliminary results of the TNFD assessment. It also describes the materiality assessment process, our key stakeholders and our stakeholder engagement process. Our annual Sustainability Reports and the 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. Our businesses are committed to unlocking the potential in the Earth, by sustainably delivering products to our mining, quarry & construction, and farming customers into the future. During 2023, our products were used to help our customers unlock approximately: IRON ORE 505 million tonnes DIAMONDS 9.1 million carats HORTICULTURE (CARROTS, ONIONS, POTATOES, TOMATOES) 0.5 million tonnes OTHER BROADACRE GRAINS 6.5 million tonnes COTTON 0.4 million tonnes COPPER 633 kilotonnes GOLD 10.8 million ounces QUARRY & CONSTRUCTION MATERIALS 758 million tonnes MET COAL 106 million tonnes THERMAL COAL 176 million tonnes SUGAR CANE 2.9 million tonnes PASTURE (BEEF, LAMB & DAIRY) 5.5 million tonnes WHEAT 13.5 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 40 BEING A SUSTAINABLE BUSINESSIncitec Pivot Limited Annual Report 2023ESG megatrends shaping how we create value 2023 highlights » Development of the IPL Energy Policy. » Projects progressed which support a >42% GHG reduction pathway to 2030, including: › Progress of Moranbah Tertiary N2O Abatement towards installation in 2024, to support our short term absolute GHG reduction target of 5% by 2025(1). › Completion of FEED(2) stage for the Gibson Island Green Ammonia project, with a final investment decision expected before the end of the 2023 calendar year. › Completion of FEED study, for a Carbon Capture Facility at our Waggaman, Louisiana ammonia plant, with recommendation for selection of the final partner for transport and permanent geological sequestration of the captured CO2.(3) » Scope 3 GHG fully mapped across our explosives and fertiliser business’ value chains, with strategies and key enablers identified to reduce each source. » 42% reduction in Australian municipal water use, achieving our target of a 25% reduction by 2023. » A further 2,788 ML of water recycled at on-site treatment facilities. » 4,442kL high nutrient waste-water repurposed for use as fertiliser. » 2 comprehensive, ‘deep dive’ ESG supplier audits completed, including Modern Slavery. » Extension, to our Americas business, of the requirement to use the Dow Jones Risk and Compliance screening tool as part of vendor set up processes. » Diversification of suppliers and geographies to mitigate risk and strengthen global supply chains. Transitioning to a low carbon economy Water stewardship Supply chain resilience » My Potential program for female leaders run across the Americas and Asia Pacific regions. » Implementation of new Frontline Management Training for frontline managers. » Reviewed core people processes to identify and improve equity and inclusion aspects. » Began work on our second Innovate Reconciliation Action Plan focused on Australian First Nations people and communities. » Reviewed our People Strategy to ensure a continued focus on enabling the delivery of our business strategy through a safe, diverse and high performance culture in 2024. Future of work » Active promotion and customer trials of our Enhanced Efficiency Fertiliser (EEF) range, which are designed to improve nitrogen use efficiency and reduce losses to waterways and the air as GHG. » Continued work with the Australian Research Council-funded Hub for Smart Fertilisers. » Increased uptake of our soil health test to further support our promotion of responsible and sustainable fertiliser use. Soil health Innovation and technology » Completion of third-party assurance on the GHG reductions for a customer in the 12 months following a switch from standard ANFO to our DeltaE explosives technology. » Release of our larger, three-bin DYNOBULK Flex MPU, which reduces the number of turnarounds needed to achieve the same volumes of explosives loading. » Building of our first Electric Mobile Processing Unit (MPU) complete with its own solar charging station. » Release of Alternate Sensitisation – Repump for Quarries, a mechanical sensitisation technology which removes the use of hazardous chemicals in explosives sensitisation. » Achieving our 2023 Target of Zero Significant Environmental Incidents. » Review of our Memberships of Associations and development of an internal procedure to manage these. » Completion of an initial assessment of the nature-related risks and opportunities for our IPF business, in line with the Taskforce on Nature-related Financial Disclosures (TNFD). Broader awareness of the importance of ESG (1) Our short and medium-term absolute GHG reduction targets are set against our 2020 operational scope 1&2 baseline, which has been adjusted, in line with best practice, to 2,813,273 tCO2e for the anticipated sale of the Waggaman facility. We have a medium-term absolute reduction target of 25% by 2030 and we have identified projects which establish a pathway to a reduction of greater than 42% of operational (scope 1&2) GHG by 2030. (2) FEED represents the Front End Engineering Design phase of a project. (3) IPL reached an agreement for the sale of WALA to CF Industries Holdings, Inc. in March 2023. CF Industries states that its mission is to provide clean energy to feed and fuel the world sustainably and has announced that it anticipates implementing this CCS project at the site on an accelerated timeline. 41 BEING A SUSTAINABLE BUSINESSIncitec Pivot Limited Annual Report 2023Our use of natural resources in 2023 Energy and GHG Changes in energy and GHG since 2022(4) The manufacture of nitrogen-based products is energy intensive as it requires natural gas as both an energy source and a raw material for hydrogen, 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 2023, we progressed four key projects which support our Net Zero Pathway. These are discussed in the Climate Change section. We also made significant progress on managing our scope 3 GHG emissions. We have now fully mapped the scope 3 GHG across the value chains of each of our businesses and have identified management strategies and key enablers to reduce each source. For more detail on our decarbonisation projects and our scope 3 management strategies, see the 2023 IPL Climate Change Report. Our 2023 global energy use has decreased by 11% since 2022 due to scheduled maintenance shutdowns at our St Helens and Cheyenne plants in the US, and the cessation of natural gas based manufacturing at our Gibson Island site in Australia during the year. Our scope 1 GHG emissions also decreased by 11%. Our purchased electricity and scope 2 GHG emissions decreased by 20% and 28% respectively. Our scope 3 value chain emissions decreased by 11%. This data is shown graphically to the right. Our GHG intensity per tonne of ammonia decreased by 3% on last year, which is an 11% reduction against our 2015 intensity baseline. Our GHG data and ammonia intensities over time are shown graphically below. Total direct and indirect greenhouse gas emissions Million tonnes of CO2e 5 Scope 1 Scope 2 Total GHG emissions 4 3 2 1 0 2009 2009 2011 2011 2013 2013 2015 2015 2017 2017 2019 2019 2021 2021 2023 2023 GHG intensity per tonne of ammonia produced tCO2e/tNH3 3.0 Trend 2.5 2.0 1.5 2009 2009 2011 2011 2013 2013 2015 2015 2017 2017 2019 2019 2021 2021 2023 2023 (4) IPL's 2022 global Scope 1 and 2 GHG emissions have been restated from 3,889,184 tCO2e to 4,389,184 tCO2e due to final calibration, using stack testing conducted in 2023, of the N2O continuous process emissions monitoring (CPEM) unit installed at LOMO. 42 Total global energy use 61,580, 676 GJ -11% Purchased Electricity 1,669,140 GJ -20% (3.1% of total global energy use) Scope 1 GHG 3.6m tCO2e Scope 2 GHG 0.2m tCO2e Scope 3 GHG 8.1m tCO2e -11% -28% -11% Total Operational GHG: 3.8m tCO2e Value Chain Emissions Operational GHG Intensity & Production -11% tCO2e/tAmmonia against 2015 baseline -4% Ammonia Production against 2022 Water use Cooling water is a key necessity for nitrogen manufacturing. In addition to IPL’s comprehensive annual risk management process and climate scenarios, the World Resources Institute (WRI) Water Tool is completed each year for long term projections and reviewed by IPL’s Chief Risk Officer. Our 2023 total global water withdrawal decreased by 8% on 2022, to 44,629 megalitres (ML). We discharged 26,813 ML to sewers and the environment, with 95.2% of this discharge being clean cooling water returned under EPA licence to the US rivers from which it was taken. This brings our net water use to 17,816 ML in 2023, which is 5% less than our 2022 water use. For more details on our assessment of water risks and our water management strategies, see the 2023 IPL Climate Change Report and 2023 Sustainability Report, both currently available on IPL’s website. Water withdrawal by source Surface water: Ground water: Municipal water: Recycled water: Storm water: Desal water: 2023 2022 76.0% 71.8% 17.4% 18.8% 7.6% 1.6% 0.2% – 0.006% 5.6% 0.8% 0.2% Water discharge by destination Surface water: Ground water: Sewers: 2023 2022 99.0% 99.0% 0.999% 0.999% 0.001% 0.001% 95.2% clean water to surface waters 44,629 ML 26,813 ML BEING A SUSTAINABLE BUSINESSIncitec Pivot Limited Annual Report 2023Benchmarking our performance FTSE4Good Member since 2014 CDP Reporter since 2009 EcoVadis Member since 2015 EcoVadis is assessed biennially. Bloomberg GEI Member since 2019 As part of our commitment to transparent reporting, IPL’s sustainability is assessed against leading indices. This gives us the opportunity to benchmark our performance against other organisations in our sector, gain 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 our performance is benchmarked against peers in the global Chemicals sector. The results since 2018 are represented to the right. In 2023, 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 Dimension Economic Environmental Social Total for IPL Chemicals sector average 2018 2019 2020 2021 2022 2023 71 64 57 65 44 72 73 60 69 47 78 71 58 69 36 81 69 65 72 30 78 72 69 73 26 71 61 64 65 23 the FTSE4Good Index Series for the ninth consecutive year. Companies in the FTSE4Good Index Series have met stringent environmental, social and governance criteria. IPL has been a voluntary CDP (formerly Carbon Disclosure Project) Climate Change reporter since 2009 and a voluntary CDP Water Security reporter since its introduction in 2014. Our most recent CDP reports can be downloaded from our website. Other indices and memberships are shown above. Collaborating on ESG As part of our commitment to corporate sustainability, IPL became a participant in the United Nations Global Compact (UNGC) in August 2022. The UNGC is the world’s largest corporate sustainability initiative. We will be reporting annually on our progress towards implementing the UNGC’s Ten Principles on human rights, labour, environment and anti-corruption. We are also participating in the Global Compact Network Australia’s(UNGCNA) Modern Slavery Community of Practice (CoP). We are committed to The UNGC’s 10 Principles: Principle 1 Businesses should support and respect the protection of internationally proclaimed human rights; and Principle 2 Make sure that they are not complicit in human rights abuses. Principle 3 Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining; Principle 4 The elimination of all forms of forced and compulsory labour; Principle 5 The effective abolition of child labour; and Principle 6 The elimination of discrimination in respect of employment and occupation. Principle 7 Businesses should support a precautionary approach to environmental challenges; Principle 8 Undertake initiatives to promote greater environmental responsibility; and Principle 9 Encourage the development and diffusion of environmentally friendly technologies. Principle 10 Businesses should work against corruption in all its forms, including extortion and bribery. 43 BEING A SUSTAINABLE BUSINESSIncitec Pivot Limited Annual Report 2023Climate Change We recognise the challenge of reducing our own emissions while continuing to provide explosives and fertiliser products, through our Dyno Nobel and IPF businesses, which help people grow by unlocking the potential in the Earth. We believe that innovative products and services will play an increasingly important role in reducing GHG, while increasing yields of food and fibre, and efficiently accessing the minerals and aggregates required for renewable 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, shown in the diagram below, form the four pillars of our Climate Change Strategy. Our climate change strategy 1 2 3 4 OUR CLIMATE STRATEGY PILLARS IPL’S SIX STRATEGIC DRIVERS 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. REDUCING OPERATIONAL EMISSIONS Manufacturing Excellence: Reduce emissions, increase efficiencies and explore new technologies. DELIVERING PRODUCTS AND STRATEGIES THAT REDUCE SCOPE 3 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. MANAGING STRATEGIC BUSINESS RISKS AND OPPORTUNITIES Profitable Growth: Manage climate-related financial risks and opportunities strategically. Zero Harm: Build resilience to physical climate change risks and advocate for a just transition. Our operational GHG absolute reduction targets 5% Short Term Target Net Zero Long Term Ambition 2025(5) 2030(5) 2050(6) MOR N2O Abatement (~7%) Clear Pathway To >42% Gibson Island Green Ammonia (~17%) Waggaman CCS (Permanent Geological Squestration)(7) LOMO N2O Abatement (~19%) (5) Absolute GHG reduction targets are set against IPL’s 2020 operational scope 1&2 baseline which has been adjusted, in line with best practice, to 2,813,273 tCO2e for the anticipated sale of the Waggaman facility. IPL has identified a pathway to >42% reduction in operational (scope 1&2) GHG emissions by 2030. Refer to Chapter 2 of IPL’s 2023 Climate Change Report for further details on key projects. (6) Our ambition to achieve net zero emissions by 2050 is based on the following assumptions: (a) green hydrogen reaches economic parity with natural gas for hydrogen production by 2040; and (b) carbon offsets are available for residual emissions that are not practical to abate. (7) There is no percentage reduction reported for the Waggaman CCS project against IPL's baseline because both the total operational GHG released from the facility, and the estimated GHG reductions associated with this project, will pass to the purchaser. The adjustment of IPL's baseline for the sale of the Waggaman facility has increased the percentage reductions associated with our other GHG reduction projects, as IPL's adjusted baseline is lower with the Waggaman facility's GHG removed. 44 BEING A SUSTAINABLE BUSINESSIncitec Pivot Limited Annual Report 2023Our GHG reduction projects In 2023, we worked to deliver installation of a project that will deliver our 5% by 2025 reduction target, progressed a range of proposed decarbonisation projects to support a pathway to more than 42% by 2030, and identified the management strategies and key enablers to move towards setting scope 3 targets. Pathway to 42% operational GHG reduction(5) Baseline Emissions MOR N2O Abatement -7% >42% reduction against 2020 baseline 2.813 million tonne CO2e GI Green NH3 -17% LOMO N2O Abatement -19% 2020 2030 Moranbah Tertiary N2O Abatement Dyno Nobel’s Moranbah ammonium nitrate manufacturing facility was built in 2012 with secondary N2O abatement on the nitric acid plant. This has reduced GHG emissions by ~400,000 tCO2e each year for the past 10 years. In 2022, IPL approved the installation of tertiary N2O abatement, which will provide even greater reductions. A further ~200,000 tCO2e will be abated annually, which equates to a 7% reduction against IPL’s 2020 baseline(5). During 2023, work progressed to support the aim of installation being completed in 2024. This project will underpin the achievement of IPL’s 5% by 2025 reduction target. LOMO Tertiary N2O Abatement Dyno Nobel’s Louisiana, Missouri (LOMO) AN manufacturing facility is the company’s only nitric acid plant without some form of abatement already installed. For this reason, abatement of N2O at LOMO has been under investigation for some time. In 2021, we installed Continuous Process Emissions Monitoring (CPEM) technology at the plant to improve measurement and allow a more accurate 2020 baseline to be established. During 2022-23, stack testing confirmed that the measurement is now fully calibrated and resulted in a restatement of our 2020, 2021 and 2022 GHG emissions from this source(4). This project passed through Front End Loading (FEL) stage in 2023 with $2.8m invested. It was approved by the Board in August 2023 with installation targeted for 2025. Once installed, ~500,000 tCO2e will be abated annually at LOMO. This will equate to a 19% reduction against IPL’s 2020 baseline(5). Gibson Island Green Ammonia The Gibson Island Green Ammonia project is a partnership between IPL and Fortescue Future Industries (FFI) to investigate green ammonia production at Gibson Island. The site has used natural gas to produce hydrogen (H2) for the manufacture of ammonia (NH3) since it was built in 1969 (obtaining the nitrogen (N) required from the air). The current model under consideration would involve FFI constructing an on-site water electrolysis plant to produce hydrogen from the electrolysis of water (H2O) using renewable electricity, thereby dramatically reducing GHG emissions. FFI would develop and operate the hydrogen manufacturing facility, with IPL operating the ammonia manufacturing facility. We are excited to report that the project completed FEED(8) stage in 2023 and a final investment decision is expected before the end of the 2023 calendar year. Should it proceed, it would be Australia’s first industrial scale green ammonia production facility, demonstrating existing infrastructure can be retrofitted to utilise zero-emissions energy sources. If adopted, the new water electrolysis facility would produce up to 70,000 tonnes of renewable hydrogen per year and replace all of Gibson Island’s current gas feedstock and 99% of its natural gas energy use. This would result in a 17% reduction against IPL’s 2020 baseline(5). Investigating science based and scope 3 targets During 2023, we continued to work across our business units to develop management strategies and identify key enablers to reduce scope 3. These are presented for each of our businesses in Chapter 3 of the 2023 IPL Climate Change Report, which is available on our website. We now have scope 3 GHG sources fully mapped throughout our value chains, and aim to have systems in place to track and manage scope 3, just as effectively as we track and manage other supplier information, by 2025. We will continue to Investigate Science Based Targets with the release of the SBTi methodology for the Chemicals sector in 2024. Sale of the Waggaman ammonia plant During 2023, the FEED(8) study was completed for the proposed Carbon Capture Facility (CCF) at our Waggaman Louisiana (WALA) ammonia manufacturing facility. The CCF is designed to capture the pure stream of CO2 created during the ammonia manufacturing process before transport via pipeline to a permanent geological sequestration site. Following Memorandums of Understanding (MOU’s) established in 2022 with several shortlisted parties to work through the options for transport and deep well injection of the CO2, recommendation for selection of a final partner was made in 2023. This partner is currently working through the approval process for the Class VI injection well operation. This CCS project would reduce CO2 emissions from the plant by ~800,000 tCO2 per annum and the targeted commissioning date of the CCF facility is currently 2026. IPL reached an agreement for the sale of WALA to CF Industries Holdings, Inc. (CF) in March 2023(9). In its announcement of this agreement, CF Industries states that its mission is to provide clean energy to feed and fuel the world sustainably, and that it anticipates implementing CCS at the site on an accelerated timeline(10). For this reason, WALA's emissions and the expected GHG reduction associated with this project have been removed from IPL's baseline and targets respectively. (8) FEED represents the Front End Engineering Design phase of a project. (9) The divestment of Waggaman remains subject to US anti-trust regulatory clearance and the completion of other customary closing conditions. Under the terms of the sale agreement, these conditions must be satisfied within 24 months of execution of the agreement. (10) See https://www.cfindustries.com/newsroom/2023/cf-industries-ipl-waggaman. 45 BEING A SUSTAINABLE BUSINESSIncitec Pivot Limited Annual Report 2023Caring for Our Communities We are committed to building long lasting and meaningful relationships with our local communities. At IPL we believe in making 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. Our dedicated site-based teams engage with local community members, business representatives, charities, governments, indigenous suppliers, and community organisations - to ensure that decisions are made locally and at 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. Keeping our communities safe 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, IPL’s on-site staff 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 incident. In addition to our robust safety measures, many of our sites are required by law to communicate regularly with our communities regarding safety plans and emergency procedures. In the Americas, 74 per cent of our sites fall into this category. These sites regularly engage with communities and first responders to share community safety plans and emergency procedures in the event of a potential incident. In the Asia Pacific region, 23 per cent of sites also fall into this category. Some of these sites are classified as Major Hazard Facilities and these follow Safe Work Australia guidelines in communicating with their communities. Giving back IPL has two key Corporate Giving programs that help bring our Community Investment Framework to life. The first is our Dollar-for-Dollar program. It matches employee donations and site-based fundraising efforts (up to $25,000 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 total of $25,000 each year. During 2023, $928,315 of community investment was made globally through IPL’s Corporate Giving programs and many site-based initiatives, including in-kind donations and employee volunteer hours. All donations were made in line with our Principles for Giving, with 11% allocated to improving education, 30% contributing towards health and sport initiatives, and 59% to local community development, including emergency and disaster relief. Our principles for giving Our areas of focus Local Sites Education 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: Childhood, adult and Indigenous specific education activities. Health: Activities and organisations working towards better physical and mental health. Community Development: Enrich community life and enhance the environmental, social & economic sustainability of local communities. Local Initiatives Health IPL Values: Initiatives that align to our values & business strategy and are integral to the sustainability of our communities. Local Initiatives: Helping local organisations develop skills & resources to bring positive and lasting benefits to communities. Local Sites: Solutions to local challenges & opportunities in the communities where our people work and live. IPL Values Community Development 46 BEING A SUSTAINABLE BUSINESSIncitec Pivot Limited Annual Report 2023Community support in action In support of earthquake relief efforts in Türkiye & Syria Customer golf day raises funds for Beyond Blue Australia IPL donated A$50,000 and DNAP’s Nitromak operation (located in Türkiye) donated US$10,000 in goods to the Ankara Municipality Disaster Support Center, following the devastating earthquakes that impacted Türkiye and Syria in 2023. Thanks to these donations, members of our Nitromak team were able to deliver essential items to the people and communities affected by the earthquakes including blankets, food, water, pet food and diapers. Alongside this, as part of IPL’s Dollar-for-Dollar donation matching program, we raised $26,092 for the Australian Red Cross and Centre for Disaster Philanthropy in support of relief efforts. The Dyno Nobel Asia Pacific Hard Rock and Iron Ore teams hosted a day of fun with a purpose, a customer golf day in support of Beyond Blue Australia. Around 100 participants joined the event including representatives from some of Australia’s premier mining and mining services companies. With the generous support of sponsors, DNAP managed to raise over $50,000 for Beyond Blue on the day, putting the event in the Top Ten Fundraising events for Beyond Blue for the financial year. Beyond Blue is one of Australia’s best known suicide prevention organisations, who run dedicated programs suited to the needs of FIFO workers. IPL’s Veteran Scholarship & Internship program This year marked our final contribution to the American Australian Association education scholarships for defense force veterans between Australia and the United States. Over five years IPL contributed US$250,000 to support both American and Australian veterans to undertake innovative research, fostering cultural exchange and research collaborations between the two countries. Over the course of the program, IPL has supported four veterans to complete further study with our final scholar undertaking their degree in 2024. Research areas funded, as a result of the scholarship, have included democratic governance, international security, engineering and risk management, with our scholars travelling between the US and Australia to attend university and college. Mount Isa and Phosphate Hill teams join forces to support the Royal Flying Doctors Service Our Mount Isa and Phosphate Hill plants donated $10,500 in support of the Mount Isa Hangar Ball. As one of the largest aeromedical organisations in the world, the Royal Flying Doctors Service (RFDS) delivers health care in Australia where mainstream health services are not available - providing a lifeline for those that live, work and travel in rural and remote Australia. Alongside raising much needed funds for this critical service, the Ball provided attendees with the opportunity to see one of the RFDS’ longest standing operational bases, as well as an up-close experience with an RFDS aircraft. A look at more of our community engagement activities can be found in IPL’s 2023 Sustainability Report. 47 BEING A SUSTAINABLE BUSINESSIncitec Pivot Limited Annual Report 2023Governance 48 GOVERNANCEIncitec Pivot Limited Annual Report 2023Governance We are committed to doing business ethically and in accordance with high standards of corporate governance. 49 GOVERNANCEIncitec Pivot Limited Annual Report 2023Corporate 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 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. Shareholders Board Assurance and oversight through reporting Nominations Remuneration CEO Executive Team Health, Safety, Environment and Community Audit and Risk Management Company Secretary Board Committees Our People Assurance Internal Audit External Auditor Accountability Delegation of Authority 50 GOVERNANCEIncitec Pivot Limited Annual Report 2023Board 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 Non-executive Directors. 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 2023 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 2023 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 2023. 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 Management 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. 51 GOVERNANCEIncitec Pivot Limited Annual Report 2023Board of Directors Gregory Robinson Bsc(Hons), MBA, MAICD Independent Non-executive Director Mr Robinson was appointed as a Non-executive Director on 25 November 2019 and was appointed as Chairman on 11 November 2023. Committee memberships Chairman of the Nominations Committee, Member of the Remuneration Committee, Member of the Audit and Risk Management 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, CEO of Lattice Energy Limited, Finance Director and ultimately MD & CEO 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 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 CFO of Western Mining Resources Limited and Deputy CFO of the Australian & New Zealand Banking Group. Mr Brook brings to the Board extensive executive experience in Australia, the US, the UK and Africa, across a range of industries including mining, finance, manufacturing and chemicals. Other listed company directorships in the past three years Newmont Corporation – Non-executive Director (from 2011) Djerriwarrh Investments Limited – Non-executive Director (from 2021) CSL Limited – Non-executive Director (from 2011 - 2023) Other directorships/appointments Australian Institute of Company Directors, Corporate Governance Advisory Committee – Member Guide Dogs Victoria – Director 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 extensive executive experience in leading global mining and processing businesses, as well as managing complex manufacturing operations in metals and industrial chemicals during her 26-year career with Rio Tinto. Dr Liu is a Fellow of the Australian Academy of Technology and Engineering, a Fellow of the Australasian Institute of Mining and Metallurgy and a member of Chief Executive Women. Dr Liu brings to the Board her extensive executive experience in Australia, the US, 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) George Biltz BChE, MBA, NACD.DC 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, including as President & CEO of Traverse Advisors, President & CEO of PQ Corporation, Executive Vice President at Axiall Corporation and a 35 year career with The Dow Chemical Company. Mr Biltz is based in the US. 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 US and internationally. Other directorships/appointments Kymera International – Executive Chair of the Board Ergon, Inc – Advisory Board Director 52 GOVERNANCEIncitec Pivot Limited Annual Report 2023Tonianne 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 Chairman of the Remuneration Committee, Member of the Audit and Risk Management Committee, Member of Nominations 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. During Ms Dwyer’s executive career, she held senior management roles with Hambros Bank Limited, Societe Generale and Quintan Estates & Development plc. Ms Dwyer is a fellow of the Australian Institute of Company Directors. Ms Dwyer brings to the Board her international executive experience and extensive non-executive director experience in the Australian listed company environment. Other listed company directorships in the past three years ALS Group Limited – Non-executive Director (from 2016) Metcash Limited – Non-executive Director (2014-2021) DEXUS Property Group – Non-executive Director (2011-2022) DEXUS Wholesale Property Fund – Non-executive Director (2011-2022) OZ Minerals Limited – Non-executive Director (from 2017 - 2023) Other directorships/appointments The University of Queensland – Deputy Chancellor and Senate Member Sir John Monash Foundation – Director Australian Institute of Company Directors, Queensland Council – Council Member Michael Carroll BAgSc, MBA, FAICD Independent Non-executive Director Mr Carroll was appointed as a Non-executive Director on 6 March 2023. Committee memberships Member of the Health, Safety, Environment and Community Committee Skills and experience Mr Carroll has extensive non-executive experience having served on over 20 boards including six ASX listed companies. During his executive career, Mr Carroll had an 18-year career with the National Australia Bank (NAB) with positions in NAB’s internal Investments and Advisory team and as General Manager, Agribusiness Financial Services. Prior to this Mr Carroll worked in the animal health and crop care sectors having commenced his career as an agronomist with Monsanto. Mr Carroll brings to the Board his significant knowledge and expertise within the Australian agricultural sector. Other listed company directorships in the past three years Rural Funds Management Limited – Non-executive Director (from 2010) Other directorships/appointments Paraway Pastoral Company – Non-executive Director Viridis Ag Pty Ltd – Chairman and Non-executive Director John Ho BSc(Math), BCom (First Class Honours & University Medal) Non – Independent Non-executive Director Mr Ho was appointed as a Non-executive Director on 6 March 2023. Skills and experience Mr Ho is the Founder and Chief Industrialist Investor of Janchor Partners, an industrialist investor based in Hong Kong, with experience as a non-executive director and long-term investor in Australia and across the globe. Before founding Janchor Partners in 2009, Mr Ho acquired global experience including with the Boston Consulting Group in Australia, Citadel Investment Group in the US and as Head of Asian Investing at The Children’s Investment Fund (Asia). Mr Ho brings to the Board his experience in the international and Australian investment markets. Other listed company directorships in the past three years Avepoint Inc – Non-executive Director (from 2021) Vocus Group Limited – Non-executive Director (from 2018 – 2021) Other directorships/appointments Janchor Partners Limited – Director ROKT Pte Limited – Non-executive Director 53 GOVERNANCEIncitec Pivot Limited Annual Report 2023Executive Team Paul Victor BCompt (Hons), CA (SA), International Tax Law (Hons) Interim Chief Executive Officer Paul commenced as Interim CEO on 6 June 2023, he joined the company as CFO in July 2022. Paul brings more than 30 years international experience to IPL, including working in a multinational company. He has a wealth of experience across regional, divisional, enterprise and Group CFO roles, working across functions including finance, treasury, tax, financial planning and analysis, control, merger & acquisitions (M&A), investor relations and IT functions. Prior to his appointment as CFO at IPL, Paul gained invaluable experience during his ten-year tenure at Sasol, where he was Acting CFO, Group Financial Controller and CFO of Sasol Synfuels, a subsidiary of Sasol Limited. Paul was also the Financial Manager for Harmony Gold Mining for four years. Paul is a qualified Chartered Accountant and is also recognised by the Australian Chartered Accountant Board as a practising CA in Australia. He completed his articles at PriceWaterhouseCoopers in 1996. Liza Somers BCom (Hons), CA Interim Chief Financial Officer Liza commenced as Interim CFO on 6 June 2023. She has held a number of senior finance leadership positions within the IPL Group over a 10-year period including Group Financial Controller and as a Business Manager in the IPF business. Most recently Liza was in the role of Chief of Staff at IPL. Liza brings a wealth of experience across finance, treasury, tax, risk, audit, financial planning and analysis and M&A. Prior to her career at IPL, Liza was an audit director at Deloitte. Liza is a qualified Chartered Accountant registered with Chartered Accountants Australia and New Zealand. Greg Hayne BCom, MBA, MAICD President, Dyno Nobel Asia Pacific Greg was appointed as President, Dyno Nobel Asia Pacific in January 2018. With over 25 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 distribution network across the region. Braden Lusk PhD, P.E. President, Dyno Nobel Americas Braden has more than 25 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. Chris Opperman BCom (Hons), CA Interim President, Incitec Pivot Fertilisers Chris commenced as Interim President for IPF in June 2023. Over a career spanning 22 years, he commenced his professional journey as an auditor at PriceWaterhouseCoopers and Ernst & Young, where he provided advisory and audit services to both large global and local organisations. In 2010, Chris joined IPL, where he held several senior leadership positions within the Finance team. These roles included Group Financial Controller overseeing the Financial Reporting, Financial Planning & Analysis, Group Shared Services and Property functions. He also managed the Finance and Investor Relations teams as General Manager Group Finance and Investor Relations. Chris’s roles extended to serving as Interim CFO for the IPL Group, CFO for the Dyno Nobel Asia Pacific business unit and most recently as the CFO for IPF. 54 GOVERNANCEIncitec Pivot Limited Annual Report 2023Stephenie De Nichilo BEng(Mech)(Hons), MBA Chief HSE & Operations Excellence Officer Stephenie was appointed Chief HSE & Operations Excellence Officer in December 2021 and has over 25 years’ experience in manufacturing, mining and oil and gas industries. Stephenie commenced with IPL in 2018 as the Group’s Vice President of Corporate HSE and most recently, was IPL’s Vice President Global Asset Management, Technology & HSE. Before joining IPL, Stephenie spent 16 years at Santos where she held a number of senior leadership positions where she drove sustainable change in business performance and team culture through the development and operationalisation of strategic business plans in the fields of Maintenance, Reliability, Asset Management, Operations Management for Onshore and Offshore Hazardous Facilities and Corporate Health and Safety. 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. Rob Mill Psychologist (Psychology Board of Australia), BSc Honours (Physiol. & Psych.), BAppSc (Physiol. & Psych.) Chief People Officer Rob leads IPL’s People Function. He has more than twenty years of experience in senior human resources and psychology roles including with BHP and over a decade with Rio Tinto. He joined IPL in 2018. Prior to commencing as IPL’s Chief People Officer in December 2021, Rob was the Vice President of Human Resources for Dyno Nobel Asia Pacific, IPF, Australian Manufacturing and the Global Technology Group. Rob is a Registered Psychologist with the Australian Health Practitioner Regulation Agency’s Psychology Board of Australia and has held roles within the Organisational Psychology Unit of Queensland Rail and as a Senior Psychologist in management consulting. 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. 55 GOVERNANCEIncitec Pivot Limited Annual Report 2023Financial and Statutory Reports 56 FINANCIAL AND STATUTORY REPORTSIncitec Pivot Limited Annual Report 2023Financial and Statutory Reports IPL's achievements were made possible by our talented and highly skilled people, of whom we are incredibly proud. 57 FINANCIAL AND STATUTORY REPORTSIncitec Pivot Limited Annual Report 2023Directors’ 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 2023 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 M Carroll was appointed as a director on 6 March 2023 » Mr J Ho was appointed as a director on 6 March 2023 » Ms J Johns ceased as Managing Director & CEO on 6 June 2023. In addition, Brian Kruger ceased as Chairman and Non-executive Director, and Gregory Robinson was appointed as Chairman, on 11 November 2023. 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(1) Director – Current(2)(3)(4) Held Attended Held Attended Held Attended Held Attended Held Attended Held Attended B Kruger(5) G Biltz(6) B Brook(7) T Dwyer(8) X Liu(9) G Robinson M Carroll(10) J Ho(11) Former: J Johns(12) 9 9 9 9 9 9 5 5 6 9 9 9 9 9 9 5 3 6 – – 5 5 5 5 – – – 5 4 5 5 5 5 3 1 3 – – 6 6 – 6 – – – 6 1 6 5 6 6 4 2 3 2 – 2 – – 2 – – – 2 1 2 2 2 2 2 1 – 4 4 – – 4 – 3 – 3 4 4 1 3 4 4 3 – 3 16 14 16 14 14 14 8 8 14 16 13 15 14 13 14 7 8 14 Chairman Member (1) 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 (2) (3) (4) any two directors are required to form a quorum. ‘Held’ indicates the number of meetings held during the period that the director was a member of the Board or Committee. ‘Attended’ indicates the number of meetings attended by a director. A director is deemed to have attended a meeting if they were present for more than half of the duration of the meeting. In addition to the Board and Committee meetings held during the year, directors attended site visits at Phosphate Hill, Mt Isa, Geelong SSP, Werribee Laboratory, Salt Lake City, Lehi and St Helens. (5) Mr Kruger ceased as Chairman and Non-executicve Director on 11 November 2023. (6) Mr Biltz was an apology for an additional Board meeting that was convened at short notice. (7) Mr Brook was an apology for an additional Board meeting that was convened at short notice. (8) Ms Dwyer was an apology for a Remuneration Committee meeting due to a pre-existing commitment. (9) Dr Liu was an apology for an additional Board meeting that was convened at short notice. (10) Mr Carroll was appointed as a director on 6 March 2023 and as a member of the Health, Safety, Environment and Community Committee with effect from 1 April 2023. Mr Carroll was an apology for an additional Board meeting that was convened at short notice. (11) Mr Ho was appointed as a director on 6 March 2023. (12) Ms Johns ceased as Managing Director & CEO and as a member of the Health, Safety, Environment and Community Committee on 6 June 2023. 58 DIRECTORS’ REPORTIncitec Pivot Limited Annual Report 2023Directors’ 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 2022 Annual Report: Dividend type Dividend per share Total amount $mill Franked percentage Date of payment Paid during the financial year 2022 final dividend 17.0 cents 330.2 100% franked 21 Dec 2022 2023 interim dividend 10.0 cents 194.2 60% franked 4 Jul 2023 To be paid after end of the financial year 2023 final dividend 5.0 cents 97.1 0% franked 19 Dec 2023 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 as noted in the OFR. Events subsequent to reporting date On 13 November 2023, IPL announced a final dividend of 5.0 cents per share unfranked, to be paid on 19 December 2023. The record date for entitlement to this dividend is 5 December 2023. The total dividend payment will be $97.1m. 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 2023 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, US, Mexico, Chile, Canada, Indonesia, Papua New Guinea, Turkey and France. 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 environmental risk assessments identifying controls for our significant risks and improvements plans. In certain jurisdictions, the Group holds licences for some of its operations and activities from the relevant environmental regulator. The Group Environmental Licence Compliance Procedure requires sites with permits or licences to set up actions to maintain compliance, the completion of which are tracked monthly at Business Unit and Group levels. The Group also 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 US. Environmental performance has maintained last year’s improvement with zero Significant Environmental Incidents reported in the 2023 financial year. Improved performance was evident in lower consequence environmental events, in particular those categorised as actual consequence 4. This is predominantly due to site management’s focus on environmental incidents as well as Gibson Island management’s ongoing engagement with the regulator, improved management of potentially contaminated stormwater and operating in compliance with three Environmental Protection Orders during FY23. In Australia, two incidents at Phosphate Hill (one in 2022 and one in 2023) led to two Penalty Infringement Notices (PIN) being issued by the Queensland Department of Environment and Science (DES) during the 2023 financial year, amounting to a total of AU$28,750. These incidents involved losses of containment from pipe networks to ground or to surface water. 59 DIRECTORS’ REPORTIncitec Pivot Limited Annual Report 2023These incidents are repeat incidents of a similar nature and as a result several additional corrective actions have been implemented, including increased frequency of decant water network inspections, improved quality of permit to work activities and face to face environmental compliance training for team leaders. At Gibson Island, the obligations and associated milestones under the two Environmental Protection Orders (EPOs) issued in 2021 relating to stormwater release quality and groundwater contamination were consistently met during the year and have both been completed. A new EPO was issued in June 2023 covering both groundwater and surface water actions up to mid- 2024. This order enforces commitments made by the operations to carry out further environmental studies, improve infrastructure, systems and materials handling to significantly reduce the risk of unacceptable releases to the environment.To avoid further regulatory action by the DES, Gibson Island management has entered into an Enforceable Undertaking (EU) arrangement with the Department. The commitments made under the EU include improvement actions identified in the current EPO as well as broader community focused funding (A$180,000) of university research and local catchment management activities. In the US, implementation of the regulatory commitments associated with the US Consent Decree in force at St Helens (Oregon) has been completed with the USEPA granting a termination of the Consent Decree in April 2023. The Consent Decree related to Carthage and Louisiana (Missouri) continued in line with the required milestone timings. The remaining tasks for Louisiana have been completed and one remaining requirement is in progress for Carthage. Once this remaining requirement has been met (expected during FY24), compliance with existing permits and regulations takes effect and continues for 3 years before a request for termination of the Consent Decree can be submitted. Following a 2019 Notice of Potential Violation from the USEPA for our Cheyenne facility, agreement was reached in FY23 on breaches of the Clean Air Act (CAA) and the Emergency Planning and Community Right to Know Act (EPCRA). Under the CAA a fine of US$394,906 and an Administrative Order on Consent (AOC) was agreed for process safety and mechanical integrity violations. The requirements of the AOC are expected to be completed by end December 2023 when the fine becomes due. In addition, a fine of US$20,352 was received for failing to provide a written follow up as required under the EPRCA after having provided immediate notification of two ammonia releases in 2019. Two other fines were received in the US with a US$20,000 fine from the Federal Railroad Administration for release of ammonium nitrate liquid during transportation (Cheyenne, Wyoming) and a US$4,788 fine for the release of reverse osmosis water without a permit in place (Biwabik, Minnesota). 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 was appointed as the Company’s lead audit partner commencing for the 2019 financial year. IPL has worked with Deloitte to transition Mr Richards and on-board his successor, Ms Suzana Vlahovic, during the 2023 financial year. Ms Vlahovic will be IPL’s lead audit partner for the 2024 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 Interim Chief Financial Officer, and where relevant, approved by the Audit and Risk Management Committee, in accordance with the Committee’s Charter and the Company’s policy on the engagement of the external auditor for the provision of non- audit services to ensure they do not impact the integrity and objectivity of the auditor; and » the non-audit services provided by Deloitte did not undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own work, acting in a management or decision making capacity for the Group, acting as an advocate for the Group or jointly sharing economic risks or rewards. Deloitte provided non-audit services to the amount of $186.2k during the year ended 30 September 2023 (refer to note 24 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 83 and forms part of this report. 60 DIRECTORS’ REPORTIncitec Pivot Limited Annual Report 2023Proceedings 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 IPL. Greg Robinson Chairman 13 November 2023 61 DIRECTORS’ REPORTIncitec Pivot Limited Annual Report 2023Introduction from the Chairman of the Remuneration Committee Dear Shareholders, On behalf of IPL’s Remuneration Committee and the Board, I am pleased to present the Remuneration Report for 2023 which sets out the remuneration information for the Executive Key Management Personnel (KMP) and the Non-executive Directors. Our approach The Remuneration Committee’s objective is to ensure our remuneration framework provides a bridge between shareholder value and individual performance, whilst ensuring alignment with our other key stakeholders. We ensure individual performance is measured using targets that align to IPL’s values, long-term strategy and metrics, shorter term financial targets and relevant individual goals. Financial Year 2023 in review Health, Safety & Environment (HSE) outcomes for the year were mixed. TRIFR(1) plateaued compared to the previous financial year but the severity of injuries recorded decreased. There was a significant improvement in Process Safety with a 44% reduction of Tier 1 and Tier 2 incidents compared to FY22. We have been able to sustain our excellent environmental performance with Zero Significant Environmental Incidents. Zero Harm key activities were implemented aligned with pursuing year-on-year improvement in our Zero Harm Ambition. Climate change initiatives delivered strong results with significant progress made on the Gibson Island Green Ammonia Project, in partnership with Fortescue Future Industries (FFI), the tertiary nitrous oxide (N₂O) abatement at the nitric acid plants at our Moranbah, Queensland and Louisiana, Missouri (LOMO) ammonium nitrate manufacturing facilities, and Carbon Capture and Storage (CCS) at our Waggaman, Louisiana (WALA) ammonia plant. The 2023 financial year was characterised by a resilient earnings performance from the Dyno Nobel businesses and mixed manufacturing reliability. Overall Group financial performance was impacted by unplanned plant outage and gas supply interruptions at Phosphate Hill and the impact of a lower commodity price cycle across the Fertilisers business. Executive changes in FY23 During financial year 2023, Ms Jeanne Johns stepped down from the role of Managing Director & Chief Executive Officer (MD&CEO) and ceased to be KMP on 6 June 2023. We thank Jeanne for her significant contribution to the Company. The Board is undertaking a comprehensive search process for a permanent MD&CEO. Mr Paul Victor, Chief Financial Officer, was appointed as Interim CEO, effective 6 June 2023. Paul received a higher duties allowance equivalent to 40% of his fixed annual remuneration and an increase to his target STI opportunity (equivalent to 100% of his fixed remuneration) on a pro-rated basis for the period he was Interim CEO during financial year 2023. Fixed remuneration in FY23 The former MD&CEO received a fixed remuneration increase of 3.9% effective 1 January 2023, the first increase since January 2019 (refer section 2.2). No other Executive KMP received a fixed remuneration increase during financial year 2023. Short-term incentive outcomes in FY23 The Interim CEO achieved an STI outcome of 41.8% of maximum and the average Executive KMP STI outcome was 35.8% of maximum. Overall STI outcomes reflect target HSE performance, Headline Group NPAT at below threshold in financial year 2023 and adjusted NPAT being achieved between threshold and target. Strong financial performance in the DNAP business resulted in an Adjusted EBIT outcome of between target and stretch performance for the President, DNAP. The DNA and IPF businesses did not reach threshold Adjusted EBIT levels. Progress on Climate Change (Sustainability) measures and positive performance against strategic initiatives including agreeing the proposed WALA sale resulted in outcomes ranging between target and stretch for these measures. Section 2.1 outlines additional information on the Company’s financial year 2023 performance and resulting STI outcomes are provided in section 2.3 of this report. Long-term incentive The three metrics for the LTI 2020/23 plan are Relative TSR, Return on Invested Capital and Long-Term Value Metrics. The non-TSR performance conditions are commented on in section 2.5 of this report. The Relative TSR will be tested following IPL’s full year results in November 2023 and the final vesting outcome will be commented on in the 2024 Remuneration Report. We anticipate an overall level of vesting between 65% to 88.5%. For the LTI 2019/22 plan where the testing of performance period for the Relative TSR condition occurred in November 2022, 78.34% of performance rights vested (refer to section 2.4 of this report). FY24 remuneration framework During financial year 2023, the Board undertook a comprehensive review of the Executive Remuneration Framework. This review was undertaken to determine whether the existing framework remains appropriate to best support the execution of our strategies, to increase shareholder value, retain and motivate our key talent and ensure alignment with our other key stakeholders. With key business transactions due for completion in financial year 2024 and the anticipated appointment of a permanent MD&CEO to drive a transformation of future business performance, the Board determined that changes to the existing remuneration framework to support this business transformation will be aligned to the appointment of a new MD&CEO. The Board will consult with shareholders and details of the remuneration package for the new permanent MD&CEO will be provided at the relevant time. The Board has determined to provide a fixed remuneration increase in FY24 to existing KMPs of 3.2% together with making changes to the financial year 2024 STI program. These changes include reducing the number of scorecard measures within the STI scorecard and increasing the weighting to adjusted financial performance measures which are better controlled by each KMP. In addition, a moderator will also be applied to the Strategic Objectives component of the STI which can vary the overall outcome for Strategic Objectives based on each KMP’s performance in leading a safe, inclusive and high performing team. Further detail on these changes are outlined 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) Total Recordable Injury Frequency Rate. 62 REMUNERATION REPORT Incitec Pivot Limited Annual Report 2023Remuneration Report Contents 1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 2. Remuneration Outcomes in 2023 Financial Year & Link to the 2023 Financial Year Performance . . . . . . . . . . . . . . . . . 66 2.1 Analysis of relationship between the Company’s performance, shareholder wealth and remuneration . . . . . . . 66 2.2 2023 Fixed annual remuneration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 2.3 2023 STI outcomes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 2.4 LTI 2019/22 outcomes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 2.5 LTI 2020/23 outcomes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 2.6 Executive Movements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 3. Executive Remuneration and Governance . . . . . . . . . . . . . . . . . . . . . . . . . 72 3.1 Executive remuneration overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 3.2 Executive remuneration strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 3.3 Executive remuneration governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 4. 2023 Executive Remuneration Framework . . . . . . . . . . . . . . . . . . . . . . . . 73 4.1 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 4.2 Fixed annual remuneration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 4.3 Short-term incentive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 4.4 Long-term incentive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 4.5 LTI performance conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 4.6 Executive service agreement terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 4.7 Performance related remuneration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 4.8 Further details of Executive remuneration . . . . . . . . . . . . . . . . . . . . . . . 79 5. Overview of Remuneration Changes for the 2024 Financial Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 6. Non-executive Director Remuneration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 7. Shareholdings in IPL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 8. Other KMP Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 63 REMUNERATION REPORT Incitec Pivot Limited Annual Report 2023 1. Introduction The directors of IPL present the Remuneration Report prepared in accordance with the Corporations Act 2001 (Cth) for the Company for the year ended 30 September 2023. This Remuneration Report is audited. This Remuneration Report sets out remuneration information for KMP who had authority and responsibility for planning, directing and controlling the activities of the Company during the 2023 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 former MD&CEO and certain direct reports during the 2023 financial year. Refer to Table 1 below for all individuals comprising IPL’s KMP for the 2023 financial year. All KMP held their positions for the entirety of the 2023 financial year, unless noted otherwise. Table 1 – Individuals forming IPL’s KMP for the 2023 reporting period Non-executive Directors Current Mr Brian Kruger (1) Mr George Biltz Mr Bruce Brook Mr Michael Carroll(2) Ms Tonianne Dwyer Mr John Ho(3) Dr Xiaoling Liu Chairman and Independent, Non-executive Director Independent, Non-executive Director Independent, Non-executive Director Independent, Non-executive Director Independent, Non-executive Director Non-Independent, Non-executive Director Independent, Non-executive Director Mr Gregory Robinson Independent, Non-executive Director Executives Current Mr Paul Victor Mr Greg Hayne Dr Braden Lusk Former Interim Chief Executive Officer President, Dyno Nobel Asia Pacific President, Dyno Nobel Americas Ms Jeanne Johns(4) Managing Director & Chief Executive Officer (1) Mr Kruger ceased to be a Non-executive Director with effect from 11 November 2023. (2) Mr Carroll commenced as an Independent, Non-executive Director with effect from 6 March 2023. (3) Mr Ho commenced as a Non-Independent, Non-executive Director with effect from 6 March 2023. (4) Ms Johns ceased as a KMP on 6 June 2023. From that date, Mr Victor was appointed as Interim CEO. Ms Liza Somers was appointed as Interim CFO from 6 June 2023. 64 REMUNERATION REPORT Incitec Pivot Limited Annual Report 2023A summary of the Company’s approach to Executive remuneration for the 2023 financial year, including performance conditions and their link to the overall remuneration strategy is set out below: Performance Conditions Remuneration Strategy/Performance Link Fixed Annual Remuneration Salary and other benefits (including statutory superannuation). Refer section 4.2 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 4.3 for more details Considerations » Scope of individual’s role » Individual’s level of knowledge, skills and expertise » Company and individual performance » Market benchmarking 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. 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. 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 both Group metrics and relevant to an Executive’s area of influence. Refer section 4.3 for more details. Sustainability (Climate change) measures (generally 10% of STI award) » Climate change measures targeted at an Executive’s area of influence » Greenhouse gas reduction targets Strategic objectives Generally, a maximum of 20% of STI award aligned to personal strategic objectives. Examples include: » Portfolio review and growth initiatives » Input to the delivery of key strategic projects » Product innovation 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. Long Term Incentive Three-year incentive opportunity delivered through performance rights. Refer section 4.4 and 4.5 for more details 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. To align with the Company’s commitment to “Zero Harm for Everyone, Everywhere”. 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. 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 Group performance and 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. Performance conditions are designed to align with the overall climate change strategy of the business and focuses an Executive on the key short-term objectives within their area of influence, that contribute towards the Company’s longer-term milestones. Key strategic and growth objectives targeted at delivering ongoing benefit to the Company. 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 average ROIC performance, long-term value metrics aligned to strategic priorities as well as progress on sustainability initiatives, and not market factors alone. Minimum Shareholding Requirement Executive KMP are required to attain and maintain a MSR 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. 65 REMUNERATION REPORT Incitec Pivot Limited Annual Report 20232. Remuneration Outcomes in 2023 Financial Year & Link to the 2023 Financial Year Performance 2.1 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 2 – 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 ($) (Financial Year End)(1) TSR (%) over 3 years(2) ROIC (%) On-market share buyback ($m) Equity Raising (net of cost) ($m) 2019 152.4 9.5 7.5 4.7 3.39 30 3.3 (89.7) – 2020 188.2 10.9 3.4 – 2.03 (37) 3.6 – 645.5 2021 358.6 18.5 1.0 9.3 2.94 (25) 5.8 – – 2022 1,027.1 52.9 18.3 27.0 3.51 24 13.8 – – 2023 582.1 30.0 27.0 15.0 3.14 – 7.5 – – (1) Share Price as at the end of the 2018 financial year was $3.98. (2) TSR is calculated in accordance with the rules of the LTI 2016/19, LTI 2017/20, LTI 2018/21 as applicable over the three-year performance period, having regard to the volume weighted average price (VWAP) of the shares over the 20 business days up to but not including the first and last day of the performance period. For the LTI 2019/22, LTI 2020/23 the VWAP performance period is over the 5 business days immediately following the day that IPL’s annual results are released in November. The TSR for LTI 2020/23 was not known at the time of printing and will be disclosed in next year’s report. Relationship between the Company’s performance and Executive KMP STI outcomes 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 2023 financial year, Group NPAT (before IMIs and excluding non-controlling interests) decreased by 43.3% to $582m reflecting the downturn in commodity prices. The financial gate for the STI opened as outlined in section 4.3 of this report, resulting in Executives earning on average, 35.8% of Maximum 2023 STI awards. The below graph shows the relationship between IPL’s TSR percentile ranking relative to its S&P/ASX 100 peer group over the three years that each plan operated, and the overall LTI vesting percentage that occurred for each plan. The LTI 2019/22 that vested in the 2023 financial year delivered 78.34% of total opportunity available for that plan. The LTI 2020/23 outcomes will be outlined in next year’s report (refer to footnote (2) under Table 2 above). Group performance and STI outcomes ASX 100 Percentile TSR Ranking and LTI Vesting % $mill 8 6 4 2 0 2019 2020 2021 2022 2023 Total STI awarded NPAT before IMIs and excluding non-controlling interests $mill 1200 1000 800 600 400 200 0 % 80 70 60 50 40 30 20 10 0 2019 2020 2021 2022 IPL Percentile Ranking in ASX 100 LTI Vesting LTI Vesting outcomes are based on 3 year averages 2.2 2023 Fixed annual remuneration The current policy for reviewing Executive remuneration is to use a primary benchmark against the market median of ASX companies with market capitalisation of 50% to 200% of IPL’s, with support references against other benchmarking sources including the ASX100, and a select group of 20 S&P ASX listed companies from the Industrials, Materials and Energy Sectors (refer to section 3.1 for more detail). Market surveying specialist, HR Ascent, was engaged to source listed company remuneration data. The primary benchmarking was undertaken based on IPL’s market capitalisation of $7.7 billion at 31 March 2022, which covered all ASX companies with market capitalisation of $3.85 billion to $14 billion as at 31 March 2022. For roles located outside Australia, market-specific information sourced from US data providers Korn Ferry, Mercer and Equilar was used for benchmarking purposes. Following a salary review, the fixed remuneration of the former MD&CEO, Ms Johns, was increased by 3.9% in January 2023, the first increase since January 2019. No other KMP received a fixed remuneration increase during financial year 2023. Mr Victor was appointed Interim CEO, effective 6 June 2023. Mr Victor received a higher duties allowance equivalent to 40% of his fixed annual remuneration ($360,000) on a pro-rated basis for the period he was Interim CEO during financial year 2023. 66 REMUNERATION REPORT Incitec Pivot Limited Annual Report 2023Total STI awardedNPAT before IMIs and excluding non-controlling interests2.3 2023 STI outcomes The following table outlines detailed STI outcomes for the Interim CEO. The measures outlined in the table reflect the objectives set for Mr Victor in his role as CFO. Following his appointment as Interim CEO, in assessing Mr Victor’s overall STI outcome the Board took into consideration his performance against these objectives and also his contribution to the STI objectives set for the former MD&CEO. On appointment as Interim CEO on 6 June 2023, Mr Victor’s target STI opportunity was increased to 100% of his fixed remuneration (including the higher duties allowance) and maximum STI opportunity to 150% of his fixed remuneration (including the higher duties allowance) until the end of financial year 2023. The overall STI outcome for Mr Victor reflects his STI opportunities as both CFO and Interim CEO calculated on a pro-rated basis. Outcomes have been determined on the basis that both the Zero Harm Gate and the STI Financial Gate of $490.5m NPAT was met. Refer to section 4.3 for detail on the STI Financial Gate. Measure Weighting (at Target) Objective (at Target) Health, Safety & Environment Lag Indicators: Personal Safety; Process Safety; Environmental Incidents. Leading Indicators: Significant Event Management; Zero Harm Plan. $818m (excluding individually significant items). $818m (excluding individually significant items) Progress demerger of the fertiliser and explosives businesses and other strategic initiatives. Balanced Scorecard 10% Headline Financial Group Headline NPAT (1) Adjusted Financial Group Adjusted NPAT (1) Project Initiatives(2) Completion of key projects 30% 20% 6.8% Manufacturing Reliability(2) Output Tonnes 3.2% WALA (50%) Phos Hill (50%) Sustainability (Climate change) Delivery of various Climate change related projects 10% Develop and implement investment criteria for ESG decisions. Embed effective capital allocation framework in line with ESG objectives. Individual Objectives Strategic objectives(3) 20% Progress Waggaman strategic option review. Improvements in operational efficiency of Finance function, including improvement in longer-term capital planning. Develop investors’ strategy, managing sustainable Trade Working Capital (TWC) balances. Performance Outcome Threshold Target Stretch Performance against Objective Weighted Outcome Commentary Scorecard achieved Target result 10% TRIFR has plateaued in FY23, however there was significant improvement in High Severity Incidents and Process Safety Management. There was also no significant Environmental Incidents for the third year running. Zero Harm key activities were implemented aligned with pursuing year-on-year improvement in our Zero Harm Ambition. $581.9m 0% The threshold objective for this measure was not met. $734.8m 6.6% An outcome between threshold and target was achieved. Projects achieved target result 6.8% With the proposed demerger being deferred part way through the financial year, the outcome reflects key contributions to the formal sales process for the Fertiliser business and other strategic projects. Achieved between threshold and target result 2.4% WALA achieved a stretch outcome, Phos Hill achieved below threshold. Projects achieved between target and stretch result 15% Projects achieved between target and stretch result 31.9% ESG criteria have been approved and incorporated into the financial analysis of capital projects, including carbon price. Capital allocation criteria approved and applied for all sustainability projects. In assessing the overall outcome the Board also considered Mr Victor’s contribution to the achievement of key milestones on operating emission reduction projects in the STI objectives of the former MD&CEO. This includes CCS at Waggaman, Lousiana ammonia plant and the tertiary nitrous oxide (N2O) abatement projects at LOMO and Moranbah ammonium nitrate manufacturing facilities. WALA sale has been agreed with a prospective purchaser and remains subject to regulatory approval. An investors’ strategy has been developed and presented to the Board. Underlying TWC has been mostly in line with budget targets. In addition, when assessing Mr Victor’s achievement against the Strategic objectives, the Board also took into consideration his leadership and engagement with the organisation since his appointment as Interim CEO, engagement with key stakeholders and measures to improve organisational culture. Overall STI Outcome % of Target Opportunity Awarded % of Maximum Opportunity Awarded 72.7% 41.8% Stretch Between Target & Stretch Target Between Threshold & Target Threshold Below Threshold (1) Adjusted means that results have been normalised to remove the impact of foreign exchange and commodity price movements. (2) Weighting represents the pro-rated period during the year in which the measure was assessed, reflecting Mr Victor's roles as both CFO and Interim CEO. (3) The overall outcome for Strategic objectives reflects the different maximum STI opportunities that were available to Mr Victor during the year as CFO and Interim CEO. 67 REMUNERATION REPORT Incitec Pivot Limited Annual Report 2023Individual STI outcomes for the former MD&CEO are summarised below: Measure Health, Safety & Environment (HSE) Group Headline NPAT Group Adjusted NPAT Manufacturing Reliability Project Initiatives Sustainability (Climate change) Individual Strategic Objectives Performance Outcome Weighting (at Target) Threshold Target Stretch Weighted Outcome Result % Target / % Max Commentary 10% 30% 20% 10% 10% 10% 10% 10% 0% 6.6% 7.5% 0% 10% 5% 39.1% (Target) 26.1% (Max) HSE was delivered at target, Headline NPAT was below threshold and Adjusted NPAT was between threshold and target. Ms Johns’ financial year 2023 STI outcome reflects her performance as MD&CEO for the period from 1 October 2022 to 6 June 2023 and also took into account her role in the successful transition of responsibilities to Mr Victor as Interim CEO. Individual STI outcomes for other Executive KMP are summarised below: Executive KMP Objectives Weighting (at Target) Threshold Target Stretch Performance Outcome Weighted Outcome Result % Target / % Max Commentary Health, Safety & Environment (HSE) Group Headline NPAT G Hayne Business Unit Adjusted EBIT Manufacturing Reliability Sustainability (Climate change) Individual Strategic Objectives Health, Safety & Environment (HSE) Group Headline NPAT B Lusk Business Unit Adjusted EBIT Manufacturing Reliability Sustainability (Climate change) Individual Strategic Objectives 10% 30% 30% 10% 10% 10% 10% 30% 20% 15% 10% 15% 10% 0% 42.8% 20% 2% 10.4% 10% 0% 0% 20% 20% 15% A stretch outcome was delivered against Manufacturing Reliability, reflecting record ammonium nitrate production levels at the Moranbah plant. Adjusted EBIT delivered a result between target and stretch reflecting the strong earnings performance of the Dyno Nobel Asia Pacific business. Individual strategic objectives were delivered on target. Progress has been made against individual climate change objectives and delivered a threshold outcome. Dr Lusk delivered outstanding outcomes against his individual climate change metrics, achieving a stretch outcome. Strong reliability performance at the Waggaman plant contributed to an above target outcome for Manufacturing reliability across the portfolio. Adjusted EBIT delivered a result that was below threshold. 85.2% (Target) 42.6% (Max) 65% (Target) 32.5% (Max) Stretch Between Target & Stretch Target Between Threshold & Target Threshold Below Threshold Table 3 – Short-term incentives awarded for the year ended 30 September 2023 Details of the vesting profile of the STI payments awarded for the year ended 30 September 2023 as remuneration to each Executive are set out below: Executives – Current P Victor(1) G Hayne B Lusk(2) Executives – Former J Johns(3) Short-term incentive for the year ended 30 September 2023 Cash STI $000 Minimum share holding allocation (A) $000 Included in remuneration $000 % earned of maximum opportunity % forfeited of maximum opportunity 420 393 291 666 140 – 97 – 560 393 388 666 42 43 33 26 58 57 67 74 (A) Under the terms of the 2023 STI, to the extent that Executives have not achieved their MSR the following applies: 50% of the MD&CEO’s award is delivered in cash and the remainder is delivered in restricted shares. For all other Executives, 75% of their award is delivered in cash and the remainder is delivered in restricted shares. Cash is generally paid and shares generally allocated around December. (1) Mr Victor was appointed Interim CEO, effective 6 June 2023. Mr Victor received an increase to his target STI opportunity (equivalent to 100% of his fixed annual remuneration) on a pro-rated basis for the period he was Interim CEO during financial year 2023. Deferral of Mr Victor's STI will be at 25% of the total STI paid. (2) Dr Lusk’s STI payment was converted from US$ to A$ at the year-end rate of 30 September 2023, being $1.5561. (3) Ms Johns ceased as a KMP on 6 June 2023. Ms Johns remained eligible to receive a payment under the financial year 2023 STI plan based on the Board’s assessment of Ms Johns’ performance during financial year 2023. The Board has determined that no part of Ms Johns’ financial year 2023 STI will be subject to further deferral. 68 REMUNERATION REPORT Incitec Pivot Limited Annual Report 20232.4 LTI 2019/22 outcomes The performance period for the LTI 2019/22 ended on 30 September 2022. The performance period for the Absolute ROIC and Long- Term Value Metrics conditions of the LTI 2019/22 ended on 30 September 2022. The performance period for the Relative TSR Condition ended five days following the Company’s full year results in November 2022. In the 2022 Remuneration Report, the Relative TSR component of the LTI 2019/22 was not known at the time and we expected vesting to be around 60% to 80%. Following testing against all performance conditions, the Board determined that 78.34% of the performance rights granted under the plan vested (with the remaining 21.66% lapsing). This is in line with the estimated vesting outlined to shareholders in the 2022 Remuneration Report. Details in relation to each of the performance conditions are set out below. Relative TSR Condition – 40% of award In relation to the Relative TSR Condition, the Company’s relative TSR performance over the period achieved 66.67% percentile performance of the comparator group of S&P/ASX 100 companies. Accordingly, 83.34% of the performance rights granted subject to the Relative TSR Condition vested. Long-Term Value Metrics Condition – 30% of award 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 determined that 50% of the performance rights granted subject to this condition vested. Commentary on the performance against the scorecard is set out in the following table. Long-Term Value Metric Condition Manufacturing Excellence Customer, Practical Technology & Innovation Objectives Threshold Target Stretch Commentary Performance Outcome Improvement in the average Reliability across IPL’s key manufacturing plants against the historical baseline average (85%). Reduction in the unit cost of electronic detonators and harness assemblies, for products manufactured by the IPL Group. 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. Vesting for this component (%) Overall outcome of 87% was achieved. Moranbah achieved manufacturing reliability rates above stretch throughout financial year 2022. Waggaman and Cheyenne delivered reliability rates above threshold and Phosphate Hill performed below threshold due to an unplanned outage in the 2H FY22. Measure required a cost reduction of between US$1.25 (threshold) and US$2.50 (stretch) against a baseline weighted average cost. The outcome was US$1.50 which equated to an outcome between threshold and target. The stretch target for this metric was cumulative improvement over the 2019 baseline of above $45 million, which was achieved. All businesses remained within the target NPS range, with DNAP improving at the top end, resulting in an overall target outcome. All major customers were retained with the upgrade of technology and addition of new business to selected key customers. Overall target outcome. 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 Absolute ROIC Condition – 30% of award In relation to the Absolute ROIC Condition, the Company’s ROIC Performance over the period achieved stretch performance of 13%. Accordingly, 100% of the performance rights granted subject to the Absolute ROIC Condition vested. 69 REMUNERATION REPORT Incitec Pivot Limited Annual Report 20232.5 LTI 2020/23 outcomes The performance period for the Absolute ROIC and Long-Term Value Metrics conditions of the LTI 2020/23 ended on 30 September 2023. The performance period for the Relative TSR condition will end after the disclosure of the Company’s full year results in November 2023 and therefore after the date of this report. In relation to the conditions that can be reported for the LTI 2020/23 to date, 40% allocated to Absolute ROIC will vest in full as the Company’s ROIC Performance over the period achieved stretch performance of 7.5%. The Board determined 42.5% of the 20% allocated to Long-Term Value Metrics will vest. Commentary on the performance against the Long-Term Value Metric Condition is set out in the following table. Long-Term Value Metric Condition Manufacturing Excellence Customer, Practical Technology & Innovation Objectives Threshold Target Stretch Commentary Performance Outcome Improvement in the average Reliability across IPL’s major ammonia manufacturing plants against the historical baseline average (85%). Margin from Technologies: margin expansion from sales of certain technologies. Key Customer Retention: the retention of IPL’s top 10 customers by size and/or strategic importance, whilst not sacrificing margin above forward outlook. The threshold level of reliability performance of 90% weighted average was not met with the overall outcome of 89.3% achieved. Moranbah and Waggaman achieved manufacturing reliability rates above stretch throughout financial year 2023. Cheyenne and Phosphate Hill delivered reliability below threshold. The stretch target for this metric was 6% compound annual growth rate (CAGR) over the 2020 baseline fully absorbed margin per metric tonne for DNA and DNAP. An outcome of 5.15% CAGR was attained which was between target and stretch. All major customers were retained with growth in gross margin across the Group compared to the 2020 baseline resulting in a target outcome. Vesting for this component (%) 42.5% Having regard to the outcomes in relation to the input and output measures, the Board determined that 42.5% of the performance goals were delivered against the balanced scorecard. Stretch Between Target & Stretch Target Between Threshold & Target Threshold Below Threshold Current projections are for the Relative TSR component (worth 40%) to vest as a result of surpassing 50th percentile performance against the ASX 100 index. Total vesting of the LTI 2020/23 is therefore currently expected to be in the range of 65% - 88.5% of maximum opportunity. Details on the number of rights vested and lapsed in relation to each of the performance conditions attached to this tranche, will be updated at the coming Annual General Meeting and reported in full in the 2024 Remuneration Report. Table 4 – Face value of equity granted to Executive KMP during FY23 The table below presents the equity granted at face value to Executive KMP during financial year 2023. Equity granted in the year ended 30 September 2023 Executive KMP – Current P Victor G Hayne B Lusk Executives – Former J Johns(1) LTI 2022/25(A) $000 FY22 STI Deferred Shares(B) $000 720 616 701 2,556 – 36 161 – Other $000 – – – – Totals $000 720 652 862 2,556 (A) Due to vest in November 2025 subject to satisfaction of performance conditions. VWAP at allocation (November 16th - 22nd 2022 inc.) was $3.9339. (B) STI deferred shares awarded are subject to a maximum deferral period of 15 years from the STI offer date. VWAP at allocation (November 16th - 22nd 2022 inc.) was $3.9339. (1) Represents the value of Performance Rights granted to Ms Johns under the 2022/25 LTI. Following cessation of employment Ms Johns will retain a pro-rated number of Rights calculated up to her cessation date (39.8% of total number of Rights retained). 70 REMUNERATION REPORT Incitec Pivot Limited Annual Report 2023Table 5 – Actual pay The table below provides a summary of actual remuneration paid to the Executives in the 2023 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 during the 2023 financial year. The STI shown in the table below relates to the STI awarded in the 2022 financial year and paid in the 2023 financial year. STI awarded in relation to the 2023 financial year will be paid during the 2024 financial year. Executive remuneration details prepared in accordance with statutory requirements and the Accounting Standards are presented in Table 9 of this report. Short term incentive & other bonuses(A) Salary & Fees Other short-term benefits(B) Superannuation / Pension benefits Other long-term benefits(C) Termination benefits Total Year $000 $000 $000 $000 $000 $000 $000 Executive KMP – Current P Victor(1) Interim Chief Executive Officer G Hayne(2) President, Dyno Nobel Asia Pacific B Lusk(3) President, Dyno Nobel Americas Executives – Former J Johns(4) Managing Director & CEO S Titze(5) President, Incitec Pivot Fertilisers N Stratford(6) Chief Financial Officer T Wall(7) President, Global Manufacturing Total Executives 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 984 256 898 766 973 902 1,139 1,640 – 559 – 113 – – 3,994 4,236 161 – 644 534 643 576 1,574 1,279 410 468 – 648 – 469 3,432 3,974 170 27 1 2 30 30 59 40 – 2 – 2 – – 260 103 32 – 26 24 24 21 – – – 20 – – – – 82 65 – – 463 62 176 16 2,127 298 – 58 – 282 – – 2,766 716 – – – – – – 51 – 360 _ – 143 – – 1,347 283 2,032 1,388 1,846 1,545 4,950 3,257 770 1,107 – 1,188 – 469 411 143 10,945 9,237 (A) Disclosure for Mr Victor represents the value of the first tranche of rights granted to Mr Victor on commencement of employment as outlined in Table 7. (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 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. (1) Remuneration for Mr Victor reflects his remuneration as Chief Financial Officer from the period 1 October 2022 to 5 June 2023. Mr Victor commenced as Interim CEO from 6 June 2023 and from that date, Mr Victor received a higher duties allowance equivalent to 40% of his fixed annual remuneration. Other short-term benefits for Mr Victor represent the value of a travel allowance and the costs of visa application fees paid on Mr Victor's behalf by the Company. (2) Mr Hayne acted as Interim President, Incitec Pivot Fertilisers in addition to his current role from 1 July 2022 to 31 December 2022. Mr Hayne received a one-off payment of 40% of his fixed annual remuneration (pro-rated for 6 months) in January 2023 to recognise the additional responsibilities undertaken during this period. (3) Dr Lusk’s 2022 financial year comparative amounts have been corrected to reclassify the company matching 401(k) contribution from Salary & Fees to Pension benefits. (4) Ms Johns ceased as a KMP on 6 June 2023. Disclosures for the 2023 financial year are up until that date, with the exception of the STI which represents a full financial year and the repatriation costs incurred after Ms Johns ceased as a KMP as part of the termination arrangements. (5) Mr Titze ceased as a KMP on 27 July 2022. Termination benefits for Mr Titze in the 2023 financial year include all contractual entitlements. (6) Mr Stratford ceased as a KMP on 14 November 2021. Termination benefits for Mr Stratford in the 2022 financial year include all contractual entitlements. (7) Mr Wall ceased as a KMP on 16 July 2021 and the disclosures for the 2022 financial year represent payment of the 2021 financial year short-term incentive plan. 2.6 Executive Movements Ms Jeanne Johns remuneration Ms Johns stepped down as MD&CEO on 6 June 2023 and will cease employment with IPL on 31 December 2023. In line with her separation agreement and her contractual arrangements (as disclosed in section 4.6 of the Remuneration Report), the following treatment will apply: » Ms Johns will receive her fixed annual remuneration for the period 6 June 2023 to 31 December 2023. Following cessation of her employment Ms Johns will receive a payment equal to the balance of 12 months fixed remuneration (severance) less the amount of fixed annual remuneration paid in the period 6 June 2023 to 31 December 2023; » Ms Johns remained entitled to a full financial year 2023 STI with a maximum opportunity of $2,556,000, of which she was awarded $666,264 (26.1% of her maximum STI). The financial year 2023 STI will be paid wholly in cash; » Ms Johns will retain her full LTI 2020/23 award scheduled to vest in November 2023; and pro-rated entitlement to the LTI 2021/24 and LTI 2022/25 awards which will remain subject to their original performance conditions; » Ms Johns is not eligible for a financial year 2024 STI or LTI 2023/26; and » Ms Johns will be subject to a non-compete agreement until 30 June 2024. 71 REMUNERATION REPORT Incitec Pivot Limited Annual Report 20233. Executive Remuneration and Governance 3.1 Executive remuneration overview In alignment with its remuneration strategy, the Board’s policy on Executive remuneration is that it comprises both a fixed annual 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 (Primary Benchmark). S&P/ASX 100 listed companies. A select group of 20 S&P/ASX listed companies from the Industrials, Materials and Energy Sectors, selected on the basis of market capitalisation and related industry exposure, consisting of: Adelaide Brighton, AGL Energy, ALS, Ampol Australia, Atlas Arteria, Aurizon, BlueScope Steel, Boral, Brickworks, 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. 3.2 Executive remuneration strategy 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 decarbonisation of the world’s energy systems is an important constituent 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 executives for outcomes at both the Group and business unit level that create sustained value for shareholders; » require behaviours aligned to Company values, culture and code of conduct; » drive strong alignment with shareholder interests; » majority of executive remuneration to be ‘at risk’ and subject to demanding financial and non-financial performance objectives; » be globally competitive to attract and retain the talent; » reward individual high performance and encourage a one team culture; and » ensure the remuneration framework is equitable, transparent, simple to understand, communicate and implement. 3.3 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 2023 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. 72 REMUNERATION REPORT Incitec Pivot Limited Annual Report 20234. 2023 Executive Remuneration Framework 4.1 Overview The charts below set out the theoretical breakdown of the Executives’ total remuneration package for the 2023 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 MSR is attained. Former MD&CEO Other Executives 38% STI – cash/ restricted shares At Risk 75% 37% LTI 33% Fixed 33% FAR 40% STI – cash/ restricted shares 67% At Risk 27% LTI Fixed 25% 25% FAR 4.2 Fixed annual remuneration Executives receive their fixed annual remuneration (FAR) 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. 4.3 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 2023 financial year (2023 STI): What was the performance period? The performance period for the 2023 STI was the financial year from 1 October 2022 to 30 September 2023. Who was eligible for the STI? All Executives (including the former MD&CEO) participated in the 2023 STI. What was the target and maximum STI opportunity? Target STI opportunity was 100% of FAR for the former MD&CEO, and 60% of FAR for all other Executives. Maximum STI opportunity (for stretch outcomes) was 150% of FAR for the former 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 2023 STI are set out below: Performance Conditions Measures to assess satisfaction of Performance Conditions Rationale for the Performance Conditions Zero Harm Safety performance balanced scorecard across the dimensions of behavioural and process safety management comprising input and output measures(1). Group Financial Performance Group NPAT (Net Profit After Tax). Group Adjusted NPAT(2). Business Unit Financial Performance Business Unit Adjusted EBIT (Earnings Before Interest and Tax)(2). 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. To align Executive KMP with targeted profits that would contribute to shareholder returns. To ensure robust alignment of performance in a particular business unit with reward for the Executive managing that business unit. 73 REMUNERATION REPORT Incitec Pivot Limited Annual Report 2023Are there minimum performance levels which must be achieved before awards can be made under the STI? What were the weightings for the STI performance measures? Sustainability (Climate change) measures Climate change related measures targeted at an Executive’s area of influence. Strategic Outcomes Measures based on performance criteria for the execution and implementation of strategic objectives and business priorities. These include measures related to portfolio review and growth initiatives, product innovation and input to the delivery of key strategic projects. Performance conditions are designed to align with the overall climate change strategy of the business and focuses an Executive on the key short-term objectives within their area of influence, that contribute towards the Company’s longer-term milestones. Tailored to individual Executive’s role, to drive performance and behaviours consistent with achieving critical aspects of the Group’s strategy. (1) 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. (2) Adjusted means that results have been normalised to remove the impact of foreign exchange and commodity price movements. 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. For the 2023 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 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. The weighting of Executives’ STI performance measures (as a percentage of 100%) for 2023 were: Table 6 – Weighting of Executive STI performance measures Financial Non-financial/ Business/Strategic Group NPAT Group Adjusted NPAT Business Unit Adjusted EBIT Manufacturing Reliability Safety Sustainability Strategic Outcomes(A) Executives – Current P Victor*(1) Interim Chief Executive Officer 30% 20% G Hayne** President, Dyno Nobel Asia Pacific B Lusk** President, Dyno Nobel Americas 30% 30% 10% 10% 30% 30% 20% 10% 10% 10% 10% 15% 10% 10% 15% Executives – Former J Johns*(2) Managing Director & CEO 30% 20% 10% 10% 10% 20% *Group role **Business Unit role (A) Includes objectives for the Interim CEO and former MD&CEO, relating to the planned demerger of the explosives and fertiliser businesses. (1) Mr Victor began acting as Interim CEO from 6 June 2023. His target STI opportunity increased to 100% of his fixed annual remuneration and higher duties allowance (on a pro-rata basis) during the period he was appointed Interim CEO. (2) Ms Johns ceased as a KMP on 6 June 2023. Is there an STI deferral component? A mandatory 25% STI deferral (50% for the former MD&CEO) continues until an Executive’s MSR is achieved. The MSR is 50% of FAR for Executives (100% for the former MD&CEO). All deferred shares are subject to a maximum 15-year sale restriction. 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 2023 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, or where a participant has materially breached their obligations to the Company. 74 REMUNERATION REPORT Incitec Pivot Limited Annual Report 20234.4 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 granted for the 2023 financial year? The LTI Plan granted during the 2023 financial year was the: » Long-Term Incentive Performance Rights Plan for 2022/25 (LTI 2022/25). Under the LTI Plan, 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 IPL 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 LTI? The LTI is designed to link reward with the key performance drivers which underpin sustainable growth in shareholder value. As rights under the LTI Plans result in share ownership on the achievement of demanding targets, the LTI ties remuneration to Company performance, as experienced by shareholders. The arrangements also support the Company’s strategy for retention and motivation of the Executives. What is the process for determining eligibility? The decision to grant performance rights under the LTI Plans and to whom they will be granted is made annually by the Board, noting that the grant of performance rights to the MD&CEO is subject to shareholder approval. Grants of performance rights to participants are based on a percentage of the relevant Executive’s FAR. What is the maximum LTI opportunity under the LTI Plans? How was the number of performance rights calculated under the LTI Plans? What are the performance conditions, performance periods and status of current LTI Plans? The maximum LTI opportunities under each LTI Plan are: » for the former MD&CEO, 150% of FAR; and » for all other Executives, 80% of FAR. For the LTI 2022/25 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 23 November 2022. Each issuance was determined by dividing the dollar value of the relevant participant’s LTI opportunity by these outcomes. LTI Plan Performance Conditions LTI 2022/25 Relative TSR Condition Long-Term Value Metrics Condition Average ROIC Condition Sustainability Condition Weighting of Performance Condition 40% 15% 35% 10% Performance Period Status Testing to occur after completion of performance period November 2022 to November 2025 (Relative TSR Condition only) 1 October 2022 to 30 September 2025 (other conditions) 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. 75 REMUNERATION REPORT Incitec Pivot Limited Annual Report 20234.5 LTI performance conditions Details of the performance conditions for the LTI 2022/25 are set out below. Relative TSR Condition (40%) The Relative TSR Condition 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 Condition (15%) The Long-Term Value Metrics Condition relates to the delivery of significant aspects of the Board approved strategy. The Long-Term Value Metrics Condition comprises components aligned with the Company’s strategic drivers: Leading Technology Solutions; and Profitable Growth. Both of these strategic drivers has a direct impact on financial outcomes. The table below summarises the Long-Term Value Metrics components for the LTI 2022/25: Long Term Value Metrics Condition Rationale Leading Technology Solutions By focusing on differentiated products and services and innovations to meet the challenges of customers, this metric aims to incentivise participating executives to assure sustainable earnings and maximise shareholder return. Measurement criteria Performance goals Scorecard Margin from technologies. Margin growth enabled by technology sales. Profitable Growth Focuses on opportunities that include capitalising on our core capabilities. Execution of strategy to grow recurring earnings. Fertilisers: Increase in distribution business EBITDA above FY22 baseline Dyno Nobel: EBITDA growth in Explosives business above FY22 baseline 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 the LTI 2022/25 plan. Some of the performance goals involve commercial-in-confidence quantitative targets and, as such, some detailed performance goals are not disclosed, but performance against the goals is disclosed at the end of the performance period. For the LTI 2019/22, these details are set out in section 2.4. For the LTI 2020/23, these details are set out in section 2.5. For the LTI 2022/25, the relevant details will be set out in the 2026 Remuneration Report. 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. Average ROIC Condition (35%) The Return on Invested Capital (ROIC) condition for LTI 2022/25 has been updated from being calculated via a point-to-point methodology, to being calculated via a three-year average over the performance period. This adjustment will accomodate intra-year movements in ROIC aligned with the impacts of commodity price volatility. ROIC has been selected as it is a key determinant of efficient use of the capital entrusted to management by shareholders. It also reflects all of the levers to create shareholder value, including operational efficiency, capital efficiency, asset utilisation and profitability. ROIC is defined as Net Profit After Tax, excluding interest and individually material items, divided by total invested capital (on a rolling 13 month average basis). 76 REMUNERATION REPORT Incitec Pivot Limited Annual Report 2023The table below sets out the Average ROIC Condition for the LTI 2022/25, and the percentage of performance rights that will vest based on satisfaction of this condition: Average ROIC Targets Less than 10% % of performance rights subject to the Average ROIC Condition that will vest Nil At or above 10% but less than 12% Pro rata from 50% on a straight-line basis 12% or greater 100% The average ROIC range of 10% to 12% has been selected as it reflects the Board’s expectations considering IPL’s long-term strategy and current market cycle. The targets have also been determined in the context of the goodwill recognised on the Company’s balance sheet for the acquisition of Dyno Nobel in 2008. Sustainability Condition (10%) The Sustainability Condition will measure the Company’s organisational performance against the Climate Change Management strategy, progress towards IPL’s 2030 absolute GHG reduction targets, and its development of a scope 3 GHG emissions reduction strategy. Key successes during this 3-year period will be driven by demonstrating material progress on implementation of the Moranbah N2O tertiary abatement project, the Waggaman Carbon Capture and Sequestration (CCS) MoU/project, the Louisiana, Missouri N2O abatement project, and Gibson Island Green Ammonia Project in partnership with Fortescue Future Industries (FFI). The Board has the discretion to determine the vesting outcome between 0% and 100% for this Condition as it considers appropriate. 4.6 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 P Victor G Hayne(1) B Lusk Former Executives Notice period to be provided by the Executive Notice period to be provided by the Company 26 weeks 26 weeks 26 weeks 26 weeks 52 weeks 26 weeks Notice period provided by the Executive Notice period provided by the Company J Johns(2) 52 weeks 52 weeks (1) Mr Hayne operates under an historical contract which provides for a separation payment equal to 52 weeks of FAR (subject to the termination provisions in the Corporations Act). (2) Ms Johns’ separation payment is equal to 52 weeks of FAR as at the date of termination (subject to the provisions relating to the terminations benefits in Part 2D.2 of the Corporations Act 2001). 77 REMUNERATION REPORT Incitec Pivot Limited Annual Report 20234.7 Performance related remuneration Table 7 – Details of performance rights granted and vested in the year ended 30 September 2023 and the vesting profile of performance rights granted as remuneration Details of performance rights vested and forfeited set out in the table below relate to the performance rights granted under the LTI 2019/22 (refer to section 2.4 of this Report) and medium term incentive rewards previously granted to Mr Victor. The performance period for the Relative TSR condition in the LTI 2020/23 plan is November 2023, therefore only non-TSR performance conditions attached to the LTI 2020/23 can be commented on in this year’s report (refer to section 2.5 of this Report), with detailed reporting on the LTI 2019/22 tranche included under section 2.4. Key Management Personnel Executives – Current P Victor(1) Medium-term incentive rewards Granted during 2023 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 (A) $000 Performance period: 1 July 2022 to 30 June 2023 Performance period: 1 July 2022 to 30 June 2024 1 July 2022 1 July 2022 Long-term incentive rewards LTI 2022/25 G Hayne Long-term incentive rewards LTI 2019/22 LTI 2020/23 LTI 2021/24 LTI 2022/25 B Lusk Long-term incentive rewards LTI 2020/23 LTI 2021/24 LTI 2022/25 Executives – Former J Johns(2) Long-term incentive rewards LTI 2019/22 LTI 2020/23 LTI 2021/24 LTI 2022/25 23 November 2022 13 January 2020 14 December 2020 17 January 2022 23 November 2022 14 December 2020 17 January 2022 23 November 2022 13 January 2020 14 January 2021 17 January 2022 – – 447 – – – 382 – – 435 – – – 161 100 – – – – – – – 463 78 22 – – – 2,127 – – – – – – 78 – – – – – – 22 – 27 60 2023 2024 2025 2022 2023 2024 2025 2023 2024 2025 2022 2023 2024 2025 – 130 447 – 520 455 382 593 491 435 – 2,386 1,327 630 23 November 2022 1,585 (A) For the long-term incentive awards, 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 9. This amount is allocated to the remuneration of each Executive over the vesting period (that is, in the 2023, 2024 and 2025 financial years). 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 Victor commenced as CFO and was appointed a KMP on 1 July 2022. On commencement, he received performance rights with a fair value of $269,000 in recognition of incentives forgone upon joining IPL. The first tranche of performance rights vested on 1 July 2023 and the shares received at vesting remain subject to a disposal restriction in line with IPL’s Minimum Shareholding Requirement, up to a maximum of 15 years from the grant date of the performance rights. The second tranche will vest upon achievement of the performance hurdle on 1 July 2024. (2) Ms Johns ceased as a KMP on 6 June 2023. Ms Johns’ balance of rights represents the performance rights pro-rated according to her exit date of 31 December 2023. 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. 78 REMUNERATION REPORT Incitec Pivot Limited Annual Report 2023Table 8 – 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 P Victor Medium-term incentive rewards G Hayne Long-term incentive rewards B Lusk Long-term incentive rewards Executives – Former J Johns(1) Long-term incentive rewards 86,946 183,024 (43,473) – 226,497 599,498 156,587 (123,492) (34,145) 598,448 492,357 178,288 – – 670,645 2,639,246 649,736 (566,778) (750,542) 1,971,662 (A) For the 2023 financial year, this represents the rights granted to Executives during the reporting period under the LTI 2022/25. The grant of rights under the LTI 2022/25 to Ms Johns was approved by shareholders at the Company’s 2022 Annual General Meeting. (B) For the 2023 financial year, this represents the number of rights vested during the reporting period under medium-term incentive rewards and the LTI 2019/22. Each right entitles the participating Executive to acquire a fully paid ordinary share in IPL for zero consideration. (C) For the 2023 financial year, for Mr Hayne this represents rights that were forfeited by Executives during the period under the LTI 2019/22. For Ms Johns this represents rights that were forfeited under the LTI 2019/22 and the rights forfeited under the LTI 2021/24 and LTI 2022/25 pro-rated to her exit date of 31 December 2023. (1) Ms Johns ceased as a KMP on 6 June 2023. Ms Johns’ balance of rights represents the performance rights pro-rated to her exit date of 31 December 2023. Under the LTI 2020/23, 1,164,111 performance rights are retained. Under the LTI 2021/24, 549,198 performance rights are retained. Under the LTI 2022/25, 258,353 performance rights are retained. Rights vest only on determination of perfomance at the end of the relevant performance periods. 4.8 Further details of Executive remuneration Table 9 – Executive remuneration Details of the remuneration for each Executive for the year ended 30 September 2023 in accordance with Accounting Standards are set out below: Short-term benefits Post employment benefit Other long term benefits(B) Termination benefits Short term incentive & other bonuses Other short term benefits(A) Salary & Fees Superannuation /Pension benefits Share-based payments Accounting values Prior periods expense write- back(C) Total share- based payments Current period expense(C) Total Year $000 $000 $000 $000 $000 $000 $000 $000 $000 $000 Executive KMP – Current P Victor(1) Interim Chief Executive Officer 2023 2022 2023 G Hayne President, Dyno Nobel Asia Pacific 2022 B Lusk(2) President, Dyno Nobel Americas 2023 2022 984 256 898 766 973 902 Executives – Former J Johns(3) Managing Director & CEO S Titze(4) President, Incitec Pivot Fertilisers N Stratford(5) Chief Financial Officer Total Executives 2023 1,139 1,640 2022 2023 2022 2023 2022 – 559 – 113 560 – 393 644 388 643 666 1,574 – 410 – – 170 27 1 2 30 30 59 40 – 2 – 2 2023 3,994 4,236 2022 2,007 3,271 260 103 26 6 26 24 24 21 – – – 20 – – 76 71 6 1 15 56 – – 37 32 – 11 – 2 58 102 – – – – – – 922 – – 360 – 143 922 503 253 51 333 452 374 361 1,172 1,986 135 372 – – – – (134) (62) (68) – (508) (298) (86) (58) – (667) 253 51 199 390 306 361 664 1,688 49 314 – (667) 1,999 341 1,532 1,882 1,721 1,957 3,487 4,974 49 1,676 – (407) 2,267 3,222 (796) (1,085) 1,471 2,137 8,788 10,423 (A) Other short-term benefits include medical insurance benefits, travel allowances and other allowances, where applicable. (B) Other long-term benefits represent long service leave accrued during the reporting period. (C) 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 9 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. 79 REMUNERATION REPORT Incitec Pivot Limited Annual Report 2023LTI 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 LTI 2021/24 – TSR LTI 2021/24 – Long-Term Value Metrics LTI 2021/24 – Absolute ROIC LTI 2021/24 – Sustainability LTI 2022/25 – TSR LTI 2022/25 – Long-Term Value Metrics LTI 2022/25 – Average ROIC LTI 2022/25 – Sustainability Fair value per share treated as rights at grant date $1.58 $2.99 $2.99 $1.69 $2.29 $2.29 $1.75 $2.86 $2.86 $2.86 $1.48 $3.08 $3.08 $3.08 (1) Mr Victor commenced as Interim CEO from 6 June 2023 and from that date, Mr Victor received a higher duties allowance equivalent to 40% of his fixed annual remuneration. (2) Fixed remuneration payments for Dr Lusk were converted from US$ to A$ at the average rate for 1 October 2022 to 30 September 2023, being $1.5014. Dr Lusk’s FY2022 comparative amounts have been corrected to reclassify the company matching 401(k) contribution from Salary & Fees to Pension benefits. (3) Ms Johns ceased being MD&CEO on 6 June 2023. Disclosure for the 2023 year is from 1 October 2022 to 6 June 2023. Termination benefits accrued for Ms Johns in the 2023 financial year include a separation payment of $871,364 in accordance with her contract of employment. (4) Mr Titze ceased being a KMP on 27 July 2022. Disclosure for the 2022 year is from 1 October 2021 to 27 July 2022. Termination benefits accrued for Mr Titze in the 2022 financial year include a separation payment of $360,000 in accordance with his contract of employment. (5) Mr Stratford ceased being a KMP on 14 November 2021. Disclosure for the 2022 year is from 1 October 2021 to 14 November 2021. Termination benefits for Mr Stratford in the 2022 financial year include a separation payment of $142,954 in accordance with his contract of employment. 5. Overview of Remuneration Changes for the 2024 Financial Year The Board has undertaken a review of the objectives of the Executive Remuneration Framework to ensure the existing framework remains appropriate to best support the execution of our strategies to increase shareholder value, retains and motivates our key talent and ensures alignment with our other key stakeholders. With key business transactions due for completion in financial year 2024 and the anticipated appointment of a permanent MD&CEO, to drive a transformation of business performance, the Board determined that changes to the existing remuneration framework will be aligned to the appointment of a new MD&CEO. The Board will consult with shareholders and details of the remuneration package for the new permanent MD&CEO will be provided at the relevant time. Full details of the remuneration arrangements applicable to financial year 2024 will be disclosed in the 2024 Remuneration Report. Fixed annual remuneration A fixed annual remuneration increase of 3.2% for the Interim CEO and other KMP has been approved for financial year 2024, effective 1 January 2024. This will be the first fixed annual remuneration increase for Mr Victor since his appointment on 1 July 2022 and for Mr Hayne and Dr Lusk since 1 July 2021. Short-Term Incentive The proposed weightings of Executives’ STI performance measures have been updated to ensure a focus on business performance and greater alignment with an Executives’ area of control in financial year 2024. This has resulted in an overall increase in financial metrics for the Interim CEO from 50% in financial year 2023 to 60% in financial year 2024 and reduction in project initiatives. The updated financial year 2024 STI weightings for each Executive KMP are outlined below: Financial Non-Financial/Business/Strategic Group NPAT Group Adjusted NPAT Business Unit Adjusted EBIT Safety Climate Change(1) Strategic Outcomes(2) P Victor Interim Chief Executive Officer G Hayne President, Dyno Nobel Asia Pacific B Lusk President, Dyno Nobel Americas 20% 20% 20% 40% 10% 10% 10% 10% 10% 10% 20% 20% 20% 40% 40% (1) Formerly referred to as Sustainability. Climate Change is considered a more appropriate overall categorisation of applicable STI measures. (2) Strategic Objectives outcome will be moderated by an assessment of performance in leading a safe, inclusive, high-performance culture. In addition: » The NPAT gateway performance in the STI will be adjusted to align with the achievement of the Group NPAT threshold. If this gate is not achieved, all non-safety components of the STI will be subject to Board discretion. » A moderator will be applied to the Strategic Objectives within the financial year 2024 STI scorecard based on an assessment of each KMP’s performance in leading a safe, inclusive, and high performance culture. This moderator can adjust the assessed outcome of the Strategic Objectives measure up or down by up to 50% but no higher than the maximum outcome for the Strategic Objectives measure. 80 REMUNERATION REPORT Incitec Pivot Limited Annual Report 20236. 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 2023 financial year, as outlined in the 2022 Remuneration Report, there was a minor uplift in fees paid to the Chairperson and Members of the Remuneration Committee (effective 1 October 2022). Fees paid to Non-executive Directors amounted to $1,820,000 which was within the $2,000,000 maximum aggregate fee pool approved by shareholders at the 2008 Annual General Meeting. For the 2024 financial year, the Board has determined that there will be no increase in Non-executive Director fees. The table below sets out the Board and Committee fees that will be effective as at 1 October 2023: Board Fees Committee Fees Chairperson Members Audit and Risk Management Committee Chairperson Members Remuneration Committee Chairperson Members Health, Safety, Environment and Community Committee Chairperson Members Nominations Committee Chairperson Members $532,500 $177,500 $47,200 $23,600 $40,000 $20,000 $35,400 $17,700 N/A $8,250 Table 10 – Non-executive Directors’ remuneration Details of the Non-executive Directors’ remuneration for the financial year ended 30 September 2023 are set out in the following table: Board and Committee Fees Cash allowances and other short- term benefits(A) Post-employment benefits Other long term benefits Non-executive Directors – Current B Kruger, Chairman(1) G Biltz B Brook M Carroll(2) T Dwyer J Ho(3) X Liu G Robinson Total Non-executive Directors Year 2023 2022 2023 2022 2023 2022 2023 2023 2022 2023 2023 2022 2023 2022 2023 2022 Fees $000 508 510 195 195 241 239 100 200 199 – 237 237 226 222 1,707 1,602 Superannuation benefits $000 $000 $000 – – 20 10 – – – – – – – – – – 20 10 25 23 – – 12 12 11 21 20 – – – 24 23 93 78 – – - – – – – – – – – – – – – – Total $000 533 533 215 205 253 251 111 221 219 – 237 237 250 245 1,820 1,690 (A) Cash allowances and other short-term benefits include travel allowances. (1) Mr Kruger ceased to be a Non-executive Director with effect from 11 November 2023. (2) Mr Carroll was appointed as an Independent, Non-executive Director with effect from 6 March 2023. The disclosures for the 2023 financial year do not represent a full financial year. (3) Mr Ho was appointed as a Non-Independent, Non-executive Director with effect from 6 March 2023. Mr Ho is the founder and Chief Industrialist Investor of Janchor Partners, which has indirectly (through Janchor Partners’ investment funds) a 10.3% interest in IPL (including a relevant interest of 8.9% in IPL’s voting shares and an economic interest through cash settled equity derivatives in a further 1.4%). Mr Ho has elected to waive his entitlement to the receipt of Non-executive Director fees from IPL. 81 REMUNERATION REPORT Incitec Pivot Limited Annual Report 20237. Shareholdings in IPL The MSR 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. Table 11 – Movements in rights in the Company IPL’s Non-executive Director Fee Sacrifice Plan (the Plan) commenced in 2019. The next tranche of rights is scheduled to vest in November 2023. These rights, as well as those that subsequently convert to shares, combine to form part of the Non-executive Director’s MSR that is outlined in further detail below. 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: B Kruger G Biltz B Brook M Carroll T Dwyer J Ho X Liu G Robinson Opening balance Rights acquired 14,438 – 4,812 – 9,625 – – – 30,924 – 10,308 – 15,155 – – 10,307 Number of Rights (A) Vested (B) (28,979) – (9,659) – (19,319) – – (4,846) Forfeited Closing balance – – – – – – – – 16,383 – 5,461 – 5,461 – – 5,461 (A) Includes movements of rights acquired under the Plan. (B) For the 2023 financial year, this represents the number of rights vested during the reporting period under the Plan. Table 12 – Movements in shares in the Company The movement during the reporting period in the number of shares in the Company held directly, indirectly or beneficially, by each KMP, including their related parties, is set out in the table below: Opening balance Shares acquired Shares disposed Closing balance(B) Number of Shares(A) Non-executive Directors – Current B Kruger(1) G Biltz B Brook M Carroll(2) T Dwyer J Ho(3) X Liu G Robinson Executives – Current P Victor G Hayne B Lusk Executives – Former J Johns(4) 171,272 100,000 79,198 58,758 7,000 173,065,979 77,612 67,020 – 95,209 43,888 911,930 28,979 – 9,659 – 19,319 – – 4,846 43,473 132,725 40,875 566,778 – – – – – – – – – – – – 200,251 100,000 88,857 58,758 26,319 173,065,979 77,612 71,886 43,473 227,934 84,763 1,478,708 (A) Includes fully paid ordinary shares and shares acquired under IPL’s incentive plans. Details of these plans are set out in note 19, Share-based payments. (B) Where a director or an Executive has ceased to be a KMP during the reporting year, the balance stated in this column represents the number of shares held as at the date the Director or Executive ceased to be a KMP. (1) Mr Kruger ceased to be a Non-executive director with effect from 11 November 2023. (2) Mr Carroll commenced as an Independent Non-executive Director from 6 March 2023. (3) Mr Ho commenced as a Non-Independent, Non-executive Director with effect from 6 March 2023. Mr Ho is the founder and Chief Industrialist Investor of Janchor Partners, which has indirectly (through Janchor Partners’ investment funds) a 10.3% interest in IPL (including a relevant interest of 8.9% in IPL’s voting shares and an economic interest through cash settled equity derivatives in a further 1.4%). (4) Ms Johns ceased as a KMP on 6 June 2023. 8. Other KMP Disclosures Loans to KMP In the year ended 30 September 2023, there were no loans to key management personnel and their related parties (2022: nil). Other KMP transactions In the year ended 30 September 2023, there were no transactions entered into during the year with key management personnel (including their related parties). 82 REMUNERATION REPORT Incitec Pivot Limited Annual Report 2023Deloitte 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 13 November 2023 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 2023, 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 A U D I T O R ’ S I N D E P E N D E N C E D E C L A R A T I O N 83 Incitec Pivot Limited Annual Report 2023 Financial Report Contents Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 Content and Structure of the Financial Report . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 Consolidated Statement of Profit or Loss and Other Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 Consolidated Statement of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 Consolidated Statement of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . 90 Directors’ Declaration on the Consolidated Financial Statements set out on pages 84 to 123 . . . . . . . . . . . . . . . . . . . . . 124 Independent Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125 84 FINANCIAL REPORTIncitec Pivot Limited Annual Report 2023Introduction 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 2023. 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 2023 financial report. The accounting policies have been consistently applied to all years presented, unless otherwise stated. Section Description Financial performance 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. Shareholder returns Provides information on the performance of the Group in generating shareholder returns. Capital structure Provides information about the Group’s capital and funding structures. Capital investment Provides information on the Group’s investment in tangible and intangible assets, and the Group’s future capital commitments. Risk management Provides information about the Group’s risk exposures, risk management practices, provisions and contingent liabilities. Other 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. 85 FINANCIAL REPORTIncitec Pivot Limited Annual Report 2023Consolidated Statement of Profit or Loss and Other Comprehensive Income For the year ended 30 September 2023 Notes 2023 $mill 2022 $mill Continuing operations 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 expenses Asset impairment write-downs Other expenses Profit before income tax Income tax expense Profit for the year from continuing operations Discontinued operations Profit for the year from discontinued operations Profit for the year Other comprehensive income, net of income tax Items that will not be reclassified subsequently to profit or loss Actuarial (loss)/gain 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 gain/(loss) on cash flow hedges Cash flow hedge loss transferred to profit or loss Exchange differences on translating foreign operations Net loss on hedge of net investment Income tax relating to items that may be reclassified subsequently to profit or loss Other comprehensive income for the year, net of income tax Total comprehensive income for the year Profit attributable to: Members of Incitec Pivot Limited from continuing operations Members of Incitec Pivot Limited from discontinued operations Non-controlling interest Profit for the year Total comprehensive income attributable to: Members of Incitec Pivot Limited from continuing operations Members of Incitec Pivot Limited from discontinued operations(1) Non-controlling interest Total comprehensive income for the year Earnings per share Basic (cents per share) Diluted (cents per share) Earnings per share from continuing operations Basic (cents per share) Diluted (cents per share) (2) (2) (15) (2) (2) (3) (14) (21) (18) (18) (18) (5) (5) (5) (5) 5,403.5 5,521.6 67.5 61.4 50.3 43.4 (155.7) 289.4 (2,773.3) (3,024.9) (889.4) (324.7) (156.4) (258.7) (214.2) (331.7) (34.0) (4.9) (72.0) 317.4 (40.9) 276.5 283.3 559.8 (1.7) 0.3 (1.4) 16.2 62.1 54.1 (9.7) (22.6) 100.1 98.7 658.5 276.7 283.3 (0.2) 559.8 355.6 303.1 (0.2) 658.5 28.8 28.8 14.2 14.2 (766.5) (310.8) (107.8) (220.8) (190.0) (313.3) (25.6) (4.5) (75.0) 865.5 (216.8) 648.7 365.1 1,013.8 17.2 (4.9) 12.3 (39.1) 20.1 344.1 (70.3) 1.5 256.3 268.6 1,282.4 648.6 365.1 0.1 1,013.8 722.1 560.2 0.1 1,282.4 52.2 52.1 33.4 33.3 (i) The total comprehensive income attributable to members of Incitec Pivot Limited from discontinued operations includes the impact of exchange differences on translating Waggaman operations during the period. 86 FINANCIAL REPORTIncitec Pivot Limited Annual Report 2023 Consolidated Statement of Financial Position As at 30 September 2023 Notes 2023 $mill 2022 $mill Current assets Cash and cash equivalents Trade and other receivables Inventories Other assets Other financial assets Current tax asset Assets classified as held for sale 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 Liabilities directly associated with assets classified as held for sale 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 Non-controlling interest Total equity (8) (4) (4) (18) (14) (4) (18) (15) (9) (10) (11) (3) (4) (10) (8) (18) (17) (14) (4) (10) (8) (18) (17) (3) (21) (7) 399.4 570.1 817.4 80.2 5.6 117.6 2,262.9 4,253.2 27.8 43.4 11.3 404.8 3,191.4 209.3 2,394.4 9.7 6,292.1 10,545.3 763.5 756.6 993.6 111.4 29.2 – – 2,654.3 28.7 35.9 8.1 379.4 4,246.9 221.0 3,281.4 8.0 8,209.4 10,863.7 1,059.3 1,393.4 41.3 21.1 9.7 108.8 11.6 55.6 1,307.4 10.8 193.4 1,710.6 87.1 132.7 657.8 18.8 2,811.2 4,118.6 6,426.7 3,806.2 144.7 2,475.9 (0.1) 6,426.7 42.1 21.1 57.6 166.7 144.4 – 1,825.3 23.0 203.8 1,690.9 95.0 170.6 552.9 12.5 2,748.7 4,574.0 6,289.7 3,806.2 41.7 2,441.7 0.1 6,289.7 87 FINANCIAL REPORTIncitec Pivot Limited Annual Report 2023Consolidated Statement of Cash Flows For the year ended 30 September 2023 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 Share of profit of equity accounted investments Net (gain)/loss on sale of property, plant and equipment Non-cash share-based payment transactions Income tax expense Changes in assets and liabilities Decrease/(Increase) in receivables and other operating assets Decrease/(Increase) 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 Receipts from settlement of net investment hedge derivatives Net cash flows from investing activities Cash flows from financing activities Repayment of borrowings Proceeds from borrowings Dividends paid to members of Incitec Pivot Limited Lease liability payments Realised market value loss on derivatives Purchased shares for IPL employees Net cash flows from financing activities Net (decrease)/increase 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 2023 $mill 2022 $mill Inflows (Outflows) Inflows (Outflows) 559.8 1,013.8 (2) (9) (15) (2) (19) (3) (15) (8) (8) (6) (8) 148.7 335.6 4.9 (61.4) (11.5) 2.9 140.5 178.6 169.4 (365.1) 1,102.4 37.7 8.5 (133.9) (313.9) 700.8 (495.1) 13.3 – – – (481.8) (9.7) – (524.4) (50.5) – – (584.6) (365.6) 763.5 1.5 399.4 107.2 372.5 4.5 (43.4) 0.8 3.1 345.0 (254.9) (323.8) 61.0 1,285.8 7.9 1.6 (85.0) (117.0) 1,093.3 (434.0) 5.7 (143.9) (3.4) 0.9 (574.7) (5.4) 3.4 (355.4) (42.9) (3.9) (9.0) (413.2) 105.4 651.8 6.3 763.5 The above Consolidated Statement of Cash Flows includes cash flows from both continuing and discontinued operations. Refer to note 14 for the cash flows relating to discontinued operations. 88 FINANCIAL REPORTIncitec Pivot Limited Annual Report 2023 Consolidated Statement of Changes in Equity For the year ended 30 September 2023 Issued capital $mill Notes Cash flow hedging reserve $mill Share- based payments reserve $mill Foreign currency translation reserve $mill Fair value reserve $mill Retained earnings $mill Non- controlling interest $mill Total equity $mill Balance at 1 October 2021 3,806.2 (63.4) 29.3 (154.9) (19.7) 1,771.1 – 5,368.6 Profit for the year Total other comprehensive income for the year Dividends paid Purchased shares for IPL employees Share-based payment transactions Balance at 30 September 2022 Balance at 1 October 2022 Profit for the year Total other comprehensive income for the year Dividends paid Share-based payment transactions – – – – – 3,806.2 3,806.2 – – – – (6) (19) (6) (19) – (13.0) – – – (76.4) (76.4) – 54.5 – – Balance at 30 September 2023 3,806.2 (21.9) – – – (9.0) 3.1 23.4 23.4 – – – 2.9 26.3 1,013.7 0.1 1,013.8 – 269.3 – – – 114.4 114.4 – 45.6 – – – – – – – 12.3 (355.4) – – (19.7) 2,441.7 (19.7) 2,441.7 – – – – 560.0 (1.4) (524.4) – – – – – 268.6 (355.4) (9.0) 3.1 0.1 0.1 6,289.7 6,289.7 (0.2) 559.8 – – – 98.7 (524.4) 2.9 160.0 (19.7) 2,475.9 (0.1) 6,426.7 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 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. Refer to note 14 for other comprehensive income relating to the assets classified as held for sale. 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. Non-controlling interest This represents equity interest outside the Incitec Pivot Limited Group. Refer to Note 16 for the list of subsidiaries that are not 100% owned by the Group. 89 FINANCIAL REPORTIncitec Pivot Limited Annual Report 2023 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 SEPTEMBER 2023 Basis of preparation Financial performance 1 Segment report 2 Revenue and expenses 3 Taxation 4 Trade and other receivables and payables 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 Discontinued operations 15 Equity accounted investments 16 Investments in subsidiaries, joint arrangements and associates Risk management 17 Provisions and contingencies 18 Financial risk management Other 19 Share-based payments 20 Key management personnel disclosures 21 Retirement benefit obligation 22 Deed of cross guarantee 23 Parent entity disclosure 24 Auditor’s remuneration 25 Events subsequent to reporting date 90 91 92 94 95 97 98 98 99 100 102 103 104 105 107 107 108 109 111 112 120 120 121 122 122 123 123 FINANCIAL REPORTIncitec Pivot Limited Annual Report 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: BASIS OF PREPARATION FOR THE YEAR ENDED 30 SEPTEMBER 2023 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. 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. Structural Separation On 12 July 2023, IPL confirmed that it had received a number of approaches for the potential acquisition of its Fertilisers business. Discussions are progressing. IPL will keep the market informed of any material developments as, and when, required. There has been no impact on the financial statements for FY23 other than the costs incurred to date which have been classified as an individually material item and disclosed in the notes to the financial statements. Accounting standards issued The Group adopted any 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 2023 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 if material. As a result of the Waggaman sale agreement, the assets and liabilities directly attributable to Waggaman have been reclassified to held-for-sale and the earnings presented as attributable to discontinued operations. Refer to note 14 of the financial statements for the earnings, cash flow and statement of financial position of the Waggaman operations. 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 13 November 2023. 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 16. 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 16. 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. 91 FINANCIAL REPORTIncitec Pivot Limited Annual Report 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: FINANCIAL PERFORMANCE FOR THE YEAR ENDED 30 SEPTEMBER 2023 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. Description of reportable segments Asia Pacific Fertilisers Asia Pacific (Fertilisers APAC): manufactures and sells fertilisers in Eastern Australia and the export market. It also manufactures, imports and sells industrial chemicals to the agricultural sector and other specialist industries. Dyno Nobel Asia Pacific (DNAP): manufactures and sells industrial explosives and related products and services to the mining industry mainly in the Asia Pacific region, Turkey and France. Asia Pacific Eliminations (APAC Elim): represent elimination of sales and profit in stock arising from Fertilisers APAC sales to DNAP. Americas Dyno Nobel Americas (DNA): manufactures and sells industrial explosives and related products and services to the mining, quarrying and construction industries in the Americas (Canada, Mexico and Chile) and 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. Group eliminations/Corporate Group Eliminations (Group Elim): represent elimination of sales and profit in stock arising from intersegment sales. Corporate costs include all head office expenses that cannot be directly or reasonably attributed to the operation of any of the Group’s businesses. Reportable segments – financial information Asia Pacific Americas 30 September 2023 Fertilisers APAC $mill DNAP $mill APAC Elim $mill Notes Total $mill Group Elim $mill DNA $mill Corporate(i) $mill Revenue from external customers (2) 2,203.4 1,500.6 (22.2) 3,681.8 1,776.2 (54.5) – – – – 15.5 45.9 – 544.4 307.4 (202.9) (116.1) 341.5 191.3 0.1 0.5 0.6 Share of profits of equity accounted investments (15) – 15.5 EBITDA(ii) 255.3 289.1 Depreciation and amortisation (2) (102.1) (100.8) 153.2 188.3 EBIT(iii) Net interest expense Income tax expense (excluding IMIs) Profit after tax(iv) Non-controlling interest Individually material items (net of tax) (2) Profit attributable to members of IPL Total Continuing Operations $mill Discontinued Operations $mill Cosolidated Group $mill 5,403.5 604.6 6,008.1 61.4 – 61.4 – – (43.9) 808.0 407.4 1,215.4 (6.2) (324.7) (10.9) (335.6) (50.1) 483.3 396.5 879.8 (148.7) (149.2) 581.9 0.2 (22.1) 560.0 Segment assets Segment liabilities 1,756.8 2,856.3 – 4,613.1 3,047.6 (678.3) (355.1) – (1,033.4) (726.1) Net segment assets(v) 1,078.5 2,501.2 – 3,579.7 2,321.5 – – – 612.0 8,272,7 2,262.9 10,535.6 (1,634.5) (3,394.0) (66.8) (3,460.8) (1,022.5) 4,878.7 2,196.1 7,074.8 Deferred tax balances (3) Net assets (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. (648.1) 6,426.7 92 FINANCIAL REPORTIncitec Pivot Limited Annual Report 20231,857.7 (372.5) 1,485.2 (107.2) (350.8) 1,027.2 (0.1) (13.4) 1,013.7 10,855.7 (4,021.1) 6,834.6 (544.9) 6,289.7 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: FINANCIAL PERFORMANCE FOR THE YEAR ENDED 30 SEPTEMBER 2023 30 September 2022 Fertilisers APAC $mill DNAP $mill APAC Elim $mill Notes Total $mill DNA $mill Group Elim $mill Corporate(i) $mill Asia Pacific Americas Revenue from external customers (2) 2,647.8 1,200.4 (27.8) 3,820.4 1739.2 (38.0) Share of profits of equity accounted investments (15) – 15.1 EBITDA(ii) 709.0 251.0 Depreciation and amortisation (2) (95.3) (88.5) 613.7 162.5 – – – – 15.1 28.3 960.0 383.8 (183.8) (118.8) 776.2 265.0 – 0.4 0.4 0.8 Total Continuing Operations $mill Discontinued Operations $mill Cosolidated Group $mill 5,521.6 793.7 6,315.3 – 43.4 – – (42.5) (8.6) (51.1) 43.4 1,301.7 (310.8) 990.9 556.0 (61.7) 494.3 EBIT(iii) Net interest expense Income tax expense (excluding IMIs) Profit after tax(iv) Non-controlling interest Individually material items (net of tax) (2) Profit attributable to members of IPL Segment assets Segment liabilities Net segment assets(v) Deferred tax balances Net assets (3) 2,000.7 2,878.2 – 4,878.9 3,705.4 (1,122.2) (326.5) – (1,448.7) (913.2) 878.5 2,551.7 – 3,430.2 2,792.2 – – – 848.9 9,433.2 (1,633.3) (3,995.2) (784.4) 5,438.0 1,422.5 (25.9) 1,396.6 (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. Geographical information – secondary reporting segments The Group operates in two principal countries being Australia and the USA. 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 2023 Australia $mill USA $mill Other/Elim $mill Continuing Operations $mill Discontinued Operations (USA) $mill Consolidated $mill Revenue from external customers 3,345.8 1,388.6 669.1 5,403.5 604.6 6,008.1 30 September 2022 Revenue from external customers 3,639.0 1,405.3 477.3 5,521.6 793.7 6,315.3 30 September 2023 Non-current assets other than financial assets and deferred tax assets Trade and other receivables 30 September 2022 Non-current assets other than financial assets and deferred tax assets Trade and other receivables Australia $mill USA(1) $mill Other/Elim $mill Consolidated $mill 3,542.0 2,279.0 261.6 151.2 450.1 185.1 6,271.1 597.9 3,544.2 378.2 4,277.8 255.6 371.3 151.5 8,193.3 785.3 (1) The Waggaman non-current assets and trade and other receivables were transferred to held for sale in November 2022. Refer to note 14 for further disclosure on discontinued operations. 93 FINANCIAL REPORTIncitec Pivot Limited Annual Report 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: FINANCIAL PERFORMANCE FOR THE YEAR ENDED 30 SEPTEMBER 2023 2. Revenue and expenses Revenue External sales from continuing operations External sales from discontinued operations Total revenue Financial income Interest income Other income Royalty income and management fees Net (loss)/gain on sale of property, plant and equipment Government grant income Other income from continuing operations Total financial and other income from continuing operations Notes 2023 $mill 2022 $mill 5,403.5 5,521.6 793.7 604.6 6,008.1 6,315.3 8.5 1.6 (15) 37.0 31.0 11.5 7.4 3.1 (0.8) 15.1 3.4 67.5 50.3 Other income from discontinued operations(1) 0.2 99.0 Individually material items Profit after tax includes the following expenses whose disclosure is relevant in explaining the financial performance of the Group: 30 September 2023 Fertilisers separation costs (1) WALA sale transaction costs (2) Total individually material items 30 September 2022 Fertilisers separation costs (1) Gibson Island manufacturing plant closure (3) Gross $mill Tax $mill Net $mill 18.0 12.8 30.8 (5.4) (3.3) (8.7) 12.6 9.5 22.1 9.2 (2.8) 6.4 - Closure costs Total individually material items 10.0 19.2 (3.0) (5.8) 7.0 13.4 (1) Separation costs, primarily advisor fees and IT transition costs, were incurred to optimally position IPF for standalone operation, whether this be in preparation for sale, demerger or as a separately managed business within the IPL Group. (2) Costs incurred to effect the sale of the WALA operations. These costs include advisory fees, legal, accounting and tax advice incurred during 2023. If clearance is provided by the Federal Trade Commission and the sale completes in 2024 the resultant gain or loss on sale will also be disclosed as an individually material item. (1) Other income in 2022 includes insurance proceeds of $99m in relation to the incident at (3) The Gibson Island closure provision was increased by $10m in 2022 following a detailed the Waggaman, Louisiana plant in February 2022. Expenses Profit before income tax includes the following specific expenses: Notes 2023 $mill 2022 $mill Depreciation and amortisation continuing operations Depreciation property, plant and equipment leases Amortisation Total depreciation and amortisation (9) (10) (11) 251.8 242.7 52.4 20.5 44.6 23.5 324.7 310.8 Depreciation and amortisation discontinued operations Depreciation property, plant and equipment leases Amortisation Total depreciation and amortisation Assets impairment write downs property, plant and equipment Total assets impairment write downs Amounts set aside to provide for: impairment losses on trade and other receivables inventory losses and obsolescence employee entitlements environmental liabilities legal and other provisions restructuring and rationalisation costs Research and development expense Defined contribution superannuation expense Defined benefit superannuation expense Financial expenses Interest on lease liabilities Unwinding of discount on provisions Net interest expense on defined benefit obligation Interest expenses on financial liabilities (9) (10) (11) (14) (9) (4) (4) (17) (17) (17) (21) (10) (17) (21) 10.7 60.5 0.1 0.1 0.4 0.8 10.9 61.7 4.9 4.9 3.6 4.1 6.9 5.5 2.5 4.5 30.6 38.4 7.1 6.1 5.2 1.0 4.5 4.5 0.7 4.6 9.3 0.1 18.5 8.7 25.7 35.8 3.0 5.0 5.2 1.1 144.1 96.5 Total financial expenses continuing operations 156.4 107.8 Interest on lease liabilities Unwinding of discount on provisions Interest expenses on financial liabilities (10) (16) Financial expenses discontinued operations 0.3 0.5 – 0.8 0.3 0.6 0.1 1.0 review. The increase was primarily a result of contractor rate escalations since the provision was recognised. 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. » 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 represents gains that are not revenue. This includes royalty income and management fees from the Group’s joint ventures and associates, income from contractual arrangements that are not considered external sales and government grants. IPL received Government grants during the year of $6.2m (2022: $48.0m) to fund the increased production of AdBlue at the Gibson Island facility given the shortage in the domestic market. Grant income is recognised as a deduction from the related expense with any excess income reported as other income. Government grants received in advance are recognised in the statement of financial position as deferred income and released to the profit and loss once the related expense is incurred. 94 FINANCIAL REPORTIncitec Pivot Limited Annual Report 2023 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: FINANCIAL PERFORMANCE FOR THE YEAR ENDED 30 SEPTEMBER 2023 3. Taxation Income tax expense for the year Current tax expense Current year Adjustments in respect of prior years Deferred tax expense Current year Total income tax expense 2023 2022 Continuing Operations $mill Discontinued Operations $mill Consolidated Group $mill Continuing Operations $mill Discontinued Operations $mill Consolidated Group $mill (39.3) – (39.3) 80.2 40.9 103.1 – 103.1 (3.5) 99.6 63.8 – 63.8 76.7 140.5 26.0 (1.6) 24.4 192.4 216.8 139.4 – 139.4 (11.2) 128.2 165.4 (1.6) 163.8 181.2 345.0 Income tax reconciliation to prima facie tax payable 2023 2022 Continuing Operations $mill Discontinued Operations $mill Consolidated Group $mill Continuing Operations $mill Discontinued Operations $mill Consolidated Group $mill 317.4 95.2 (14.3) (17.0) (23.0) – 40.9 382.9 114.9 – – (15.3) – 99.6 700.3 210.1 (14.3) (14.5) (40.8) – 140.5 865.5 259.6 (10.9) (15.8) (14.5) (1.6) 216.8 493.3 148.0 – – (19.8) – 128.2 1,358.8 407.6 (10.9) (15.8) (34.3) (1.6) 345.0 Profit before income tax Tax at the Australian tax rate of 30% (2022: 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 Total income tax expense 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 a debit of $22.3m for the year ended 30 September 2023 (2022: debit of $3.4m). 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 Net deferred tax liabilities Presented in the Consolidated Statement of Financial Position as follows: Deferred tax assets Deferred tax liabilities Net deferred tax liabilities 2023 $mill 19.1 4.2 74.3 64.7 29.2 (671.2) (61.0) (93.1) (17.5) (0.1) 3.3 (648.1) 2023 $mill 9.7 (657.8) (648.1) 2022 $mill 19.5 2.8 112.3 66.3 0.6 (616.4) (60.3) (91.6) (15.5) 38.7 (1.3) (544.9) 2022 $mill 8.0 (552.9) (544.9) 95 FINANCIAL REPORTIncitec Pivot Limited Annual Report 2023 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: FINANCIAL PERFORMANCE FOR THE YEAR ENDED 30 SEPTEMBER 2023 Movements in net deferred tax liabilities The table below sets out movements in net deferred tax balances for the period ended 30 September: Opening balance at 1 October (Debited)/credited to the profit or loss Charged to equity Foreign exchange movements Adjustments in respect of prior years Closing balance at 30 September Key accounting policies 2023 $mill (544.9) (76.7) (22.3) (4.2) – (648.1) 2022 $mill (328.2) (181.2) (3.4) (33.1) 1.0 (544.9) 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. As at 30 September 2023, the Group is in a current tax asset position which represents expected refunds in relation to current and prior year tax returns. 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. The Group has and will continue to apply the temporary exception in AASB 112 Income Taxes not to recognise or disclose information about deferred tax assets and liabilities that could arise from OECD Pillar Two model rules. 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 23. 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. 96 FINANCIAL REPORTIncitec Pivot Limited Annual Report 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: FINANCIAL PERFORMANCE FOR THE YEAR ENDED 30 SEPTEMBER 2023 4. Trade and other receivables and payables The Group’s total trade and other receivables and payables 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 from continuing operations 30 September 2023 Inventories Receivables Payables 30 September 2022 Inventories Receivables Payables Inventories by category: Raw materials and stores Work-in-progress Finished goods Provisions Total inventories balance Provision movement: 30 September 2023 Carrying amount at 1 October 2022 Provisions made during the year Provisions written back during the year Amounts written off against provisions Foreign exchange rate movements Trade $mill 817.4 538.4 Other $mill – 59.5 Total $mill 817.4 597.9 (782.1) (288.0) (1,070.1) 573.7 (228.5) 345.2 Trade $mill 993.6 696.1 Other $mill – 89.2 Total $mill 993.6 785.3 (1,073.8) 615.9 (342.6) (253.4) (1,416.4) 362.5 2023 $mill 246.0 94.9 495.9 (19.4) 817.4 2022 $mill 251.8 117.3 641.6 (17.1) 993.6 Trade receivables $mill Inventories $mill (16.0) (3.6) 1.6 0.7 0.6 (17.1) (4.1) 1.8 – – Carrying amount at 30 September 2023 (16.7) (19.4) Receivables ageing and credit loss provision Included in the following table is an age analysis of the Group’s trade receivables, along with credit loss provisions against these balances at 30 September: 30 September 2023 Current 30–90 days Over 90 days Total 30 September 2022 Current 30–90 days Over 90 days Total Gross $mill 518.1 21.4 15.6 555.1 Gross $mill 670.8 20.4 20.9 712.1 Credit loss provision $mill (2.3) (2.2) (12.2) (16.7) Credit loss provision $mill (1.8) (1.3) (12.9) (16.0) Net $mill 515.8 19.2 3.4 538.4 Net $mill 669.0 19.1 8.0 696.1 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 warehouse. 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 2023, receivables totalling $117.9m (2022: $94.9m) 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 2023, the balance of the supply chain finance program was $148.3m (2022: $173.1m). 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 2023, 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. 97 FINANCIAL REPORTIncitec Pivot Limited Annual Report 20230.0%2.5%5.0%7.5%10.0%12.5%15.0%17.5%20.0%22.5%25.0%27.5%FY19FY20FY21FY22FY23 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: SHAREHOLDER RETURNS FOR THE YEAR ENDED 30 SEPTEMBER 2023 Key estimates and judgments The graph below shows the Group’s earnings per share and dividend payout over the last five years. 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 the global economic challenges 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. Company performance and dividends paid 5. Earnings per share Earnings used in the calculation of earnings per share attributable to ordinary shareholders Profit from continuing operations attributable to ordinary shareholders Profit from discontinued operations attributable to ordinary shareholders Individually material items after tax Profit attributable to ordinary shareholders 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 Basic earnings per share Continuing operations including individually material items Discontinued operations Total basic earnings per share Diluted earnings per share Continuing operations including individually material items Discontinued operations Total diluted earnings per share Excluding individually material items Basic earnings per share Diluted earnings per share 2023 $mill 2022 $mill Earnings per Share (including individually material items) Earnings per Share (before individually material items) Dividend paid in respect of the financial year 276.7 648.6 283.3 22.1 365.1 13.4 582.1 1,027.1 Number Number 1,942,225,029 1,942,225,029 6. Dividends Dividends paid or declared by the Company in the year ended 30 September were: Ordinary shares Final dividend of 8.3 cents per share, 14 percent franked, paid 16 December 2021 Interim dividend of 10.0 cents per share, fully franked, paid 5 July 2022 Final dividend of 17.0 cents per share, fully franked, paid 21 December 2022 Interim dividend of 10.0 cents per share, 60 percent franked, paid 4 July 2023 2023 $mill 2022 $mill – – 161.2 194.2 330.2 194.2 – – 1,946,428,912 1,946,332,645 Total ordinary share dividends 524.4 355.4 2023 Cents per share 2022 Cents per share 14.2 14.6 28.8 14.2 14.6 28.8 30.0 29.9 33.4 18.8 52.2 33.3 18.8 52.1 52.9 52.8 Since the end of the financial year, the directors have determined to pay a final dividend of 5.0 cents per share, unfranked, to be paid on 19 December 2023. The record date for entitlement to this dividend is 5 December 2023. The total dividend payment will be $97.1m. The financial effect of this dividend has not been recognised in the 2023 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). Franking credits Franking credits available to shareholders of the Company were $3.9m (2022: $7.3m). 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. 98 FINANCIAL REPORTIncitec Pivot Limited Annual Report 202305101520253035404550556020192020202120222023CentsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: CAPITAL STRUCTURE FOR THE YEAR ENDED 30 SEPTEMBER 2023 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 2023, 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 2023 amounted to $3,806.2m (1,942,225,029 ordinary shares). 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 and invest in business growth, while providing returns to shareholders and benefits to other stakeholders. The Group’s key strategies for maintenance of an optimal capital structure include: » Aiming to maintain an investment grade credit profile and the requisite financial metrics. » Securing access to diversified sources of debt funding with a spread of maturity dates and sufficient undrawn committed facility capacity. » Optimising over the long term, to the extent practicable, the Group’s Weighted Average Cost of Capital (WACC), while maintaining financial flexibility. In order to optimise its capital structure, the Group may undertake one or a combination of the following actions: » change the amount of dividends paid to shareholders and/or offer a dividend reinvestment plan with or without a discount and/or with or without an underwriting facility when appropriate; » return capital or issue new shares to shareholders; » vary discretionary capital expenditure; » raise new debt funding or repay existing debt balances; and » draw down additional debt or sell non-core assets to reduce debt. Key financial metrics The Group uses a range of financial metrics to monitor the efficiency of its capital structure, including EBITDA interest cover and Net debt/ EBITDA before individually material items. Financial metric targets are maintained inside debt covenant restrictions. At 30 September the Group’s position in relation to these metrics was: Target range 2023 2022 Net debt/EBITDA (times) (1) equal or less than 1.5 Interest cover (times) equal or more than 6.0 1.2 9.9 0.5 20.3 (1) Consistent with IPL debt covenants, net debt does not include trade working capital facilities. 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. 99 FINANCIAL REPORTIncitec Pivot Limited Annual Report 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: CAPITAL STRUCTURE FOR THE YEAR ENDED 30 SEPTEMBER 2023 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 Fair value of derivatives Net debt Notes 2023 $mill 2022 $mill 1,731.7 1,712.0 (399.4) (763.5) (18) 82.7 87.7 1,415.0 1,036.2 At 30 September 2023, the Group’s Net debt/EBITDA before individually material items was 1.2 times (2022: 0.5 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 18. The following table details the interest bearing liabilities of the Group at 30 September: Current Loans from joint ventures Non-current Other non-current loans Fixed interest rate bonds Total interest bearing liabilities 2023 $mill 21.1 21.1 2022 $mill 21.1 21.1 20.7 28.0 1,689.9 1,710.6 1,731.7 1,662.9 1,690.9 1,712.0 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 The Group holds committed 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 had an initial maturity of April 2024 which was extended in September 2023 to October 2024. Tenor of interest bearing liabilities The Group’s average tenor of its drawn interest bearing liabilities at 30 September 2023 is 4.4 years (2022: 5.4 years) and the average tenor of its total debt facilities is 3.4 years (2022: 4.2 years). The table below includes detail on the movements in the Group’s interest bearing liabilities. 30 September 2023 Current 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 2022 $mill Repayments of borrowings $mill Foreign exchange movement $mill Funding costs & fair value adjustments $mill 30 September 2023 $mill 21.1 28.0 1,662.9 1,712.0 87.7 1,799.7 (0.2) (9.5) – (9.7) – (9.7) 0.2 2.2 16.9 19.3 (1.6) 17.7 – – 10.1 10.1 (3.4) 6.7 21.1 20.7 1,689.9 1,731.7 82.7 1,814.4 100 FINANCIAL REPORTIncitec Pivot Limited Annual Report 2023 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: CAPITAL STRUCTURE FOR THE YEAR ENDED 30 SEPTEMBER 2023 Cash flow Non-cash changes 1 October 2021 $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 2022 $mill 2.2 16.6 0.7 1,649.3 1,668.8 (12.8) 1,656.0 0.2 3.2 – – 3.4 – 3.4 (2.8) (0.6) (2.0) – (5.4) – (5.4) – – 29.9 – 29.9 – 29.9 0.7 – (0.7) – – – – (0.3) 1.9 0.1 120.9 – – – (107.3) – 21.1 28.0 1,662.9 122.6 (107.3) 1,712.0 (7.3) 115.3 107.8 87.7 0.5 1,799.7 30 September 2022 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 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 2023 $mill 894.1 837.6 2022 $mill 936.8 775.2 1,731.7 1,712.0 Detail on the Group’s interest hedging profile and duration is included in note 18. Funding profile The graph below details the Group’s available funding limits, its maturity dates and drawn funds at 30 September 2023: The Group has undrawn financing facilities of $801.2m (2022: $797.3m) at 30 September 2023. Available limits Drawn funds Cash and cash equivalents at 30 September 2023 were $399.4m (2022: $763.5m) and consisted of cash at bank of $209.5m (2022: $264.5m) and short term investments of $189.9m (2022: $499.0m). Key accounting policies Interest bearing liabilities Interest bearing liabilities are initially recognised at fair value less any directly attributable borrowing costs. Subsequent to initial recognition, interest bearing liabilities are measured at amortised cost using the effective interest method, with any difference between cost and redemption value recognised in the profit or loss over the period of the borrowings. The Group derecognises interest bearing liabilities when its obligation is discharged, cancelled or expires. Any gains and losses arising on derecognition are recognised in the profit or loss. Interest bearing liabilities are classified as current liabilities, except for those liabilities where the Group has an unconditional right to defer settlement for at least 12 months after the year end, which are classified as non-current. Cash and cash equivalents 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. 101 FINANCIAL REPORTIncitec Pivot Limited Annual Report 20230200400600AUDmBank facilityAUD490mBank facilityUSD200mReg S HKD560mBondAUD431.3mReg SUSD305.7mUSPP Tranche 1USD250mUSPP Tranche 2USD250mOct 24MaturityDateOct 24Feb 26Mar 26Aug 27Oct 28Oct 30 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: CAPITAL INVESTMENT FOR THE YEAR ENDED 30 SEPTEMBER 2023 9. Property, plant and equipment Freehold land and buildings $mill Machinery, plant and equipment $mill Work in progress $mill Notes At 30 September 2021 Cost Accumulated depreciation Net book amount Year ended 30 September 2022 Opening net book amount Additions Subsidiaries acquired Disposals Depreciation Impairment of assets Reclassification from work in progress Transfers to Inventory Foreign exchange movement Closing net book amount At 30 September 2022 Cost Accumulated depreciation Net book amount Year ended 30 September 2023 Opening net book amount Adjustment due to change in discount rates (1) Additions Reclassification to held for sale (2) Disposals Depreciation Impairment of assets Reclassification from work in progress Foreign exchange movement Closing net book amount At 30 September 2023 Cost Accumulated depreciation Net book amount (2) (2) (2) (2) 1,067.3 (379.9) 687.4 687.4 9.0 17.0 (0.5) (35.0) – 20.0 – 24.6 722.5 1,169.4 (446.9) 722.5 722.5 (22.1) 0.7 (120.9) (1.8) (31.2) – 49.4 3.4 600.0 1,034.0 (434.0) 600.0 4,860.0 (1,854.2) 3,005.8 3,005.8 3.2 13.8 (6.0) (268.2) (4.5) 241.0 – 141.3 3,126.4 5,433.7 (2,307.3) 3,126.4 3,126.4 (1.8) 24.6 (1,050.6) – (231.3) (4.9) 379.5 (22.0) 2,219.9 4,429.4 (2,209.5) 2,219.9 235.7 – 235.7 235.7 422.3 1.1 – – – (261.0) (12.3) 12.2 398.0 398.0 – 398.0 398.0 – 467.5 (75.1) – – – (428.9) 10.0 371.5 371.5 – 371.5 Total $mill 6,163.0 (2,234.1) 3,928.9 3,928.9 434.5 31.9 (6.5) (303.2) (4.5) – (12.3) 178.1 4,246.9 7,001.1 (2,754.2) 4,246.9 4,246.9 (23.9) 492.8 (1,246.6) (1.8) (262.5) (4.9) – (8.6) 3,191.4 5,834.9 (2,643.5) 3,191.4 (1) Movement in site retirement obligation assets is driven by changes in long-term Government bond rates. The net present value of these assets are adjusted at each reporting period to reflect current rates. (2) The Waggaman property, plant and equipment was transferred to held for sale at November 2022 at an exchange rate of 0.6684. Refer to note 14 for further disclosure on discontinued operations. Key accounting policies Depreciation 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. 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. 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. Estimated useful lives for each class of asset are as follows: » Buildings and improvements 20 – 50 years » Machinery, plant and equipment 3 – 50 years Residual values and useful lives are reviewed and adjusted where relevant when changes in circumstances impact the use of the asset. 102 FINANCIAL REPORTIncitec Pivot Limited Annual Report 2023 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: CAPITAL INVESTMENT FOR THE YEAR ENDED 30 SEPTEMBER 2023 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) 2023 $mill 52.5 6.4 58.9 2022 $mill 45.0 5.3 50.3 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 from 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 Machinery, plant and equipment $mill Notes Year ended 30 September 2022 Opening net book amount Additions Subsidiaries acquired Disposals Depreciation Foreign exchange movement Closing net book amount At 30 September 2022 Cost Accumulated depreciation Net book amount Year ended 30 September 2023 Opening net book amount Additions Reclassification to held for sale Disposals Depreciation Foreign exchange movement Closing net book amount At 30 September 2023 Cost Accumulated depreciation Net book amount Lease liabilities (2) (2) 160.0 9.5 2.1 (0.5) (20.9) 4.2 154.4 191.5 (37.1) 154.4 154.4 12.9 – (1.4) (21.7) 0.7 144.9 204.7 (59.8) 144.9 Opening carrying amount at 1 October Additions Disposals Reclassification to held for sale Payments made during the year Subsidiaries acquired Interest unwind Foreign exchange movement Carrying amount at 30 September Current Non-current Total $mill 214.5 28.2 16.1 (1.3) 54.5 18.7 14.0 (0.8) (24.1) (45.0) 4.3 8.5 66.6 221.0 146.1 337.6 (79.5) (116.6) 66.6 221.0 66.6 221.0 37.4 50.3 (9.9) (0.3) (9.9) (1.7) (30.8) (52.5) 1.4 2.1 64.4 209.3 137.5 342.2 (73.1) (132.9) 64.4 209.3 2023 $mill 245.9 50.3 (3.0) (9.9) (56.9) – 6.4 1.9 234.7 41.3 193.4 2022 $mill 242.5 28.2 (1.2) – (48.2) 12.5 5.3 6.8 245.9 42.1 203.8 Refer to note 18 for the maturity profile of the Group’s committed lease liabilities before discounting. 103 FINANCIAL REPORTIncitec Pivot Limited Annual Report 2023 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: CAPITAL INVESTMENT FOR THE YEAR ENDED 30 SEPTEMBER 2023 11. Intangibles At 30 September 2021 Cost Accumulated amortisation Net book amount Year ended 30 September 2022 Opening net book amount Additions Subsidiaries acquired Amortisation Foreign exchange movement Closing net book amount At 30 September 2022 Cost Accumulated amortisation Net book amount Year ended 30 September 2023 Opening net book amount Additions Reclassification to held for sale(1) Amortisation (2) Foreign exchange movement Closing net book amount At 30 September 2023 Cost Accumulated amortisation Net book amount Notes Software $mill Goodwill $mill Patents, trademarks & customer contracts $mill Brand names $mill Total $mill (2) 107.1 (79.6) 27.5 27.5 22.7 0.7 (9.8) 2.4 43.5 116.2 (72.7) 43.5 43.5 17.7 (1.5) (7.9) 0.2 52.0 119.7 (67.7) 52.0 2,636.8 – 2,636.8 2,636.8 – 77.5 – 158.7 2,873.0 2,873.0 – 2,873.0 2,873.0 – (879.1) – (8.7) 1,985.2 1,985.2 – 1,985.2 298.4 (264.1) 34.3 34.3 – 13.7 (14.5) 2.1 35.6 338.1 (302.5) 35.6 35.6 – – (12.7) 1.3 24.2 342.8 (318.6) 24.2 302.3 3,344.6 – (343.7) 302.3 3,000.9 302.3 3,000.9 – – – 27.0 329.3 22.7 91.9 (24.3) 190.2 3,281.4 329.3 3,656.6 – (375.2) 329.3 3,281.4 329.3 3,281.4 – – – 3.7 17.7 (880.6) (20.6) (3.5) 333.0 2,394.4 333.0 2,780.7 – (386.3) 333.0 2,394.4 (1) The Waggaman intangibles were transferred to held for sale at November 2022 at an exchange rate of 0.6684. Refer to note 14 for further disclosure on discontinued operations. Allocation of indefinite life intangible assets The Group’s indefinite life intangible assets are allocated to groups of cash generating units (CGUs) as follows: Goodwill $mill Brand names $mill Total $mill 195.9 73.4 30 September 2022 Fertilisers APAC Titanobel Goodwill $mill Brand names $mill 196.3 68.0 – – – – 40.3 948.8 Dyno Nobel Asia Pacific (DNAP) 908.5 40.3 292.7 1,100.1 Dyno Nobel Americas (DNA) 1,700.2 2,873.0 289.0 1,989.2 329.3 3,202.3 1,985.2 333.0 2,318.2 195.9 73.4 908.5 807.4 Total $mill 196.3 68.0 948.8 30 September 2023 Fertilisers APAC Titanobel Dyno Nobel Asia Pacific (DNAP) Dyno Nobel Americas (DNA) 104 FINANCIAL REPORTIncitec Pivot Limited Annual Report 2023 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: CAPITAL INVESTMENT FOR THE YEAR ENDED 30 SEPTEMBER 2023 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. 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 3 – 10 years » Product trademarks 4 – 10 years » Patents 13 – 15 years » Customer contracts 10 – 17 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. The 30 September impairment testing resulted in no impairment of any CGU as the recoverable amounts of the CGU’s, being Fertilisers APAC, DNAP, DNA continuing operations and Titanobel exceeded their carrying amounts. The Group has assessed the discontinued WALA operations for impairment by comparing the assets held for sale carrying amount against the proceeds expected from the sale. No impairment was noted. 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 Terminal value (after 5 years) For both DNAP and Fertilisers APAC, the gas price assumption for impairment testing purposes for the first period after the current gas contracts expire, is based on external long term gas production cost forecasts of between $8.50 and $9.51 per gigajoule. Fertiliser prices and foreign exchange rates are estimated by reference to external market publications and market analyst estimates where available, 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 (2022: 9%), 8.5% for the DNA and DNAP CGUs (2022: 8.5%) and 9% for the Titanobel CGU (2022: 9%). 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% (2022: 2.5%) for all CGUs. Sensitivity analyses on the discount and growth rates, considering the current volatile market conditions, are provided below. Climate Related Risks IPL considers climate change and other sustainability risks when determining the recoverable amount of each CGU. The Group has greenhouse gas emission reduction targets for its manufacturing facilities which are disclosed in the annual Sustainability Report. Capital forecasts in the cash flows used in the impairment models include investment in sustainability related projects that have either commenced or are committed, including the earnings attributable to these capital projects. The commodity forecast assumptions used in the impairment models were obtained from external sources which include the impacts of sustainability and carbon costs. For both DNAP and Fertilisers APAC, the estimated impact of the Safeguard Mechanism (SGM) 2.0 policy was included in the recoverable amount assessment of each CGU. Refer below, for further information on SGM estimates and assumptions. Safeguard Mechanism (SGM) For the Fertilisers CGU, the Phosphate Hill facility is in scope. A cost to comply with the SGM has been included in cash flow forecasts supporting the carrying value of Fertilisers net assets. This cost reflects the assumed cost of purchasing Australian Carbon Credit Units to offset emissions above the baseline set by the SGM. In forecasting this cost, assumptions have been developed with respect to future emissions, future production levels, the market value of carbon credits and baseline decline rates (including an assessment of Phosphate Hill as a Trade Exposed facility). For the DNAP CGU, the Moranbah manufacturing facility is in scope of the SGM given the plant’s historical level of emissions. The Moranbah N2O abatement project which has been approved for installation in 2024 is anticipated to reduce emissions to a level below the baseline in the near term. As the baseline of the facility declines, this benefit will reduce. This outlook has been factored into cash flow forecasts for the DNAP CGU. 2023 2022 2023 US$ 451 to 668 US$ 467 to 786 US$ 688 0.72 DAP (1) AUD:USD (2) 0.70 to 0.72 (1) Di-Ammonium Phosphate price (FOB China/Saudi – USD per tonne). (2) AUD:USD exchange rate. 0.71 to 0.74 2022 US$ 560 0.73 105 FINANCIAL REPORTIncitec Pivot Limited Annual Report 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: CAPITAL INVESTMENT FOR THE YEAR ENDED 30 SEPTEMBER 2023 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 2023. 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$1 per gigajoule DNAP AU$mill AU$mill AU$mill Change in recoverable amount Impairment charge (200.6) – (303.6) (73.7) (69.9) – DNA continuing operations Change in recoverable amount Impairment charge Post-tax discount rate AUD:USD exchange rate Terminal value growth rate +0.5% +5c -1.0% DAP Price -US$50 per tonne Natural gas price +AUD1 per gigajoule Post-tax discount rate Terminal value growth rate +0.5% US$mill (207.6) – -1.0% US$mill (314.8) – Post-tax discount rate Terminal value growth rate +0.5% -1.0% Fertilisers APAC AU$mill AU$mill AU$mill AU$mill AU$mill Titanobel EUR €mill EUR €mill Change in recoverable amount Impairment charge(1) (118.4) – (525.0) (142.7) (179.9) – (641.7) (259.4) (74.1) – Change in recoverable amount Impairment charge (14.0) (21.1) – – (1) The carrying value of net assets subject to impairment assessment for the Fertilisers CGU of $1.25b, excludes trade working capital facilities of $171m (liability) which are managed at the Group level. The Fertilisers CGU recoverable amount is based on a value-in-use methodology which may be higher than the value realised through the ongoing sale process. Impairment of other property, plant and equipment Impairment losses During the year ended 30 September 2023 other property, plant and equipment was impaired by $4.9m (2022: $4.5m) as a result of the Group’s fixed asset verification procedures. 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. Key accounting policies Impairment testing 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 2023, 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. 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 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. 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. 106 FINANCIAL REPORTIncitec Pivot Limited Annual Report 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: CAPITAL INVESTMENT FOR THE YEAR ENDED 30 SEPTEMBER 2023 13. Commitments Capital expenditure commitments Capital expenditure contracted but not provided for or payable at 30 September: No later than one year Other commitments 2023 $mill 78.5 78.5 2022 $mill 102.3 102.3 In May 2023, IPL entered into a long-term gas supply agreement with Queensland Pacific Metals (QPM) commencing in April 2026 upon expiry of the existing gas supply agreement. As part of the arrangement, Dyno Nobel will provide initial development funding facility of up to $80m. This facility will be used to accelerate development of the Moranbah gas pipeline by funding the capital costs of new infill production wells. It is anticipated that approximately $40m of the funding will be provided during the 2024 financial year, with the remainder to be provided in the 2025 financial year. Dyno Nobel will recognise the cash outflow as a prepayment which will be amortised over the duration of the gas supply agreement with QPM. 14. Discontinued operations In March 2023, the Group announced that it had reached an agreement for the sale of its ammonia manufacturing facility located in Waggaman, Louisiana, USA (WALA) to CF Industries Holdings Inc (CF) for a total value of US$1.675bn. IPL also announced that it had secured a 25-year ammonia supply agreement with CF for up to 200,000 short tonnes of ammonia per annum to support the Dyno Nobel Americas (DNA) explosives business. The ammonia supply agreement secures ammonia at producer cost for the DNA business. The original value allocated to the ammonia supply agreement was US$425m which will be offset from the cash proceeds of the sale agreement for Waggaman resulting in expected net cash proceeds (after transaction costs, purchase price adjustments and tax) of approximately US$850m. For accounting purposes, the off-take agreement will be valued based on the outlook for ammonia prices at the time of recognising the asset. Based on the current ammonia and gas price outlook, the value of the offtake agreement for accounting purposes is estimated to be approximately US$300m. As a result of the agreement, IPL retains access to 25% of the equivalent WALA volumes and associated financial and strategic benefits. The profit margin on the 200,000 short tonnes previously reported as part of the WALA result will transfer to the DNA Explosives and AG&IC businesses. The divestment remains subject to US anti-trust regulatory clearance. The results of Waggaman and the detail of the operating assets and liabilities held for sale are presented below: Profit for the year from discontinued operations Revenue Financial and other income(2) Depreciation and amortisation(3) Expenses Profit before income tax Income tax Profit for the year from discontinued operations 2023 $mill 2022 $mill 604.6 0.2 (10.9) (211.0) 382.9 (99.6) 793.7 99.0 (61.7) (337.7) 493.3 (128.2) 283.3 365.1 Cash flows from/(used in) discontinued operations Net cash flows from operating activities Net cash from investing activities Net cash from financing activities Total cash flows from discontinued operations 2023 $mill 2022 $mill 373.3 (56.6) (0.5) 316.2 417.1 (26.8) (0.3) 390.0 The cumulative foreign currency translation reserve gain attributable to the Waggaman assets classified as held for sale is $302.3m at the end of September 2023. This balance will be released to the consolidated statement of profit or loss and other comprehensive income upon completion of the sale along with future foreign currency translation reserve movements prior to completion date. Assets held for sale Trade and other receivables Inventories Property, plant and equipment Right-of-use asset Intangible assets(1) Other assets Total assets held for sale 2023 $mill 24.0 7.4 1,296.5 10.3 915.8 8.9 2,262.9 (1) As the Waggaman assets contributed to the future cashflows of the DNA CGU, which includes goodwill, a relative share of that goodwill has been reallocated to the assets held for sale and will be included as part of the gain or loss on sale if the sale is approved. Liabilities directly associated with assets classified as held for sale 2023 $mill Trade and other payables Lease liabilities Provisions Total liabilities directly associated with assets classified as held for sale 33.6 10.4 11.6 55.6 A discontinued operation represents a separate major line of operations within the Group where the cash flows can be clearly identified and there is a plan to dispose. Classification as a discontinued operation occurs at the earlier of disposal date or when the operation meets the criteria to be classified as held for sale. In the case of the Waggaman operations, the re-classification was made in November 2022 when the assets and liabilities met the definition as held for sale. The comparative income statement and statement of comprehensive income has been presented as if the operation had been discontinued from the start of the comparative year. Once classified as held for sale, the disposal group is measured at the lower of carrying amount and fair value less costs to sell and intangible assets and property, plant and equipment are no longer amortised or depreciated. (1) This means that the pricing under the offtake agreement is linked to gas based pricing at a level commensurate with Waggaman’s cost of production. (2) Other income in 2022 includes insurance proceeds of $99m in relation to the incident at the Waggaman, Louisiana plant in February 2022. (3) Depreciation and amortisation for 2023 represents the two months ended November 2022 at which point the assets were reclassified to held for sale. 2022 represents a full year of depreciation and amortisation. 107 FINANCIAL REPORTIncitec Pivot Limited Annual Report 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: CAPITAL INVESTMENT FOR THE YEAR ENDED 30 SEPTEMBER 2023 15. 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 16) at 30 September 2023 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 ventures acquired during the year Dividends received Foreign exchange movement 2023 $mill 379.4 61.4 – (37.7) 1.7 2022 $mill 324.8 43.4 2.5 (7.9) 16.6 Carrying amount at 30 September 404.8 379.4 Carrying amount of investments in: Joint ventures Associates Carrying amount of investments in joint ventures and associates 298.9 286.2 105.9 93.2 404.8 379.4 Transactions between subsidiaries of the Group and joint ventures and associates Sales of goods/services Purchase of goods/services Management fees/royalties Interest income/(expense) Dividend income 2023 $mill 2022 $mill 495.6 453.9 (75.1) (70.7) 37.0 1.2 37.7 31.0 (0.4) 7.9 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 2023 $mill 9.4 85.7 2022 $mill 3.2 63.5 Loans from joint ventures and associates 21.1 21.1 Outstanding balances arising from transactions with joint ventures and associates are on standard market terms. 108 FINANCIAL REPORTIncitec Pivot Limited Annual Report 2023 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: CAPITAL INVESTMENT FOR THE YEAR ENDED 30 SEPTEMBER 2023 16. Investments in subsidiaries, joint arrangements and associates The following list includes the Group’s principal operating subsidiaries. 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 Fertilisers Operations Pty Ltd (1) TOP Australia Pty Limited (1) Incitec Pivot Fertilisers Limited (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) Incitec Pivot Queensland Gas Pty Ltd Easy Liquids Pty Ltd (2) Australian Bio Fert Pty Ltd OZBIOFERT Pty Ltd Incorporated in USA Dyno Nobel US Investments Dyno Nobel Management LLC Dyno Nobel 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. Dyno Nobel 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 Southern Cross Fertilisers 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 Incorporated in Romania RomNitro Explosives SRL Incorporated in Albania Nitro Industria Kimike Shpk Incorporated in Switzerland Dyno Nobel Holdings Europe SA Incorporated in France Dyno Nobel Holdings France Sas Explinvest SASU (2) Titanobel SASU (2) Société Civile Immobilière des Champs Chanaux (2) C.E.M.E SARL (2) Société d’Explosifs du Centre-Est SA (2) Société Financière de Terrassement SAS (2) Groupement Forestier Minez Clegueric (2) Titanobel-NPGM Equipment SAS (2) Incorporated in South Africa Titanobel Southern Africa (Pty) Limited (2) Enviro Blasting Services (Pty) Limited (2) Incorporated in New Caledonia Nord-Sud Dynamitage-Sofiter SARL (2) Incorporated in Benin Titanobel Benin SASU (2) Incorporated in Cameroon Titanobel Cameroun SASU (2) Incorporated in Senegal Afrique Ouest Drilling Sofiter SARL (2) (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% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 64% 64% 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% 99% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 99.9% 99.51% 66% 51% 100% 74% 51% 100% 100% 100% 109 FINANCIAL REPORTIncitec Pivot Limited Annual Report 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: CAPITAL INVESTMENT FOR THE YEAR ENDED 30 SEPTEMBER 2023 Joint arrangements and associates Name of entity Associates Incorporated in USA Maine Drilling and Blasting Group Independent Explosives Maine Drilling and Blasting, Inc. MD Drilling and Blasting, Inc. Incorporated in Canada Labrador Maskuau Ashini Ltd Innu Namesu Ltd Incorporated in French Guiana Guyanexplo Société en Nom collectif (1) Joint operations Ownership interest 49% 49% 49% 49% 49% 49% 35% 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) This entity has a 31 December year end. (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. Name of entity Joint ventures Incorporated in USA Buckley Powder Co. 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. Incorporated in France Newcomat SARL (1) Incorporated in New Caledonia Katiramona Explosifs SAS (1) Incorporated in Mongolia Titanobel Mongolia LLC (1) Nitrosibir Mongolia LLC (1) Incorporated in Nigeria Titanobel & Dynatrac Limited (1) Ownership interest 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 49% 49% 50% 50% 50% 50% 49% 49% 49% 49% 49% 10% 50% 49% 49% 55% 110 FINANCIAL REPORTIncitec Pivot Limited Annual Report 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: RISK MANAGEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2023 17. Provisions and contingencies Provisions at 30 September 2023 are analysed as follows: 30 September 2023 Carrying amount at 1 October 2022 Adjustment due to change in discount rates Provisions made during the year Provisions written back during the year Payments made during the year Reclassification to held for sale Interest unwind Foreign exchange movement Carrying amount at 30 September 2023 Current Non-current Employee entitlements $mill Restructuring and rationalisation $mill Environmental $mill Asset retirement obligations $mill Legal and other $mill Total provisions $mill 65.0 – 6.9 (0.6) (10.7) – 0.7 – 61.3 58.7 2.6 86.8 – 4.5 – (70.4) – – (0.3) 20.6 20.4 0.2 39.2 – 7.0 – (5.7) – 0.3 (0.3) 40.5 19.8 20.7 122.6 (23.9) – – (0.1) (11.0) 4.7 1.3 93.6 3.8 89.8 23.7 – 2.5 – (0.9) – – 0.2 25.5 6.1 19.4 337.3 (23.9) 20.9 (0.6) (87.8) (11.0) 5.7 0.9 241.5 108.8 132.7 Key accounting policies 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. Employee entitlements 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 which is recognised as a borrowing cost in the profit or loss. Legal and other 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. Key estimates and judgments 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 16) 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 2023 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. » In May 2023, IPL announced entry into a new long-term gas supply agreement for the Moranbah ammonium nitrate plant with wholly owned subsidiaries of Queensland Pacific Metals Ltd (QPM). IPL have provided QPM with a corporate guarantee until February 2025 to guarantee performance of contracts relating to operations of the Moranbah gas project. The value of the guarantee reduces on a monthly basis until the obligations of QPM have been satisfied. 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 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: RISK MANAGEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2023 18. 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. 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: 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. 30 September 2023 Contractual cash flows (1) $mill 0 – 12 months $mill 1 – 5 years $mill More than 5 years $mill 30 September 2022 Contractual cash flows (1) $mill 0 – 12 months $mill 1 – 5 years $mill More than 5 years $mill Non-derivative financial liabilities Non-derivative financial liabilities Interest bearing liabilities 1,731.7 21.1 976.4 734.2 Interest bearing liabilities 1,712.0 21.1 963.5 Interest payments 325.7 57.0 220.7 48.0 Interest payments 396.8 56.6 261.4 Trade and other payables 1,070.1 1,059.3 224.9 89.1 42.0 71.0 10.8 95.0 17.8 – Trade and other payables 1,416.4 1,393.4 87.9 0.3 Lease liabilities Bank guarantees 236.8 55.9 42.6 31.3 23.0 96.3 24.4 727.4 78.8 – 97.9 0.2 3,441.5 1,250.4 1,320.7 870.4 Total non-derivative cash outflows 3,817.9 1,545.0 1,368.6 904.3 Lease liabilities Bank guarantees Total non-derivative cash outflows Derivative financial (assets)/liabilities Derivative financial (assets)/liabilities Forward exchange contracts(2) Cross currency interest rate swaps(2) Interest rate swaps Commodity swaps Net derivative cash outflows/(inflows) (4.1) (4.1) – (10.7) – (10.7) 102.9 36.4 66.3 0.5 0.5 – 88.6 32.8 55.6 – – 0.2 – 0.2 Forward exchange contracts Cross currency interest rate swaps(2) Interest rate swaps Commodity swaps Net derivative cash outflows/(inflows) 6.2 6.2 – (8.1) – 122.5 44.2 – – (8.1) 73.7 – 120.6 50.4 65.6 – – 4.6 – 4.6 (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. (2) The forward exchange contracts and cross currency interest rate swaps asset positions have been added for completeness and there is no material liability positions associated with these instruments. 112 FINANCIAL REPORTIncitec Pivot Limited Annual Report 2023 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: RISK MANAGEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2023 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. The Group adopted a new hedging philosophy in 2023, whereby hedging is only considered in the context of preventing an unacceptable balance sheet event such as potential for unacceptable impacts on the Group’s credit ratings and/or the possibility for debt covenant breaches. Any hedging performed in these circumstances would be executed using instruments that allow as much participation in favourable movements while limiting downside risk to an acceptable level. An exception to this principle is related to foreign exchange exposures on specific or bespoke transactions where managing the exposure is important for margin management. 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: Foreign exchange exposure to sales and purchases is managed by entering into formal hedging arrangements. » 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 The Group hedges both specific transactions and net exposures by entering into foreign exchange rate derivative contracts. 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 2023 USD mill 2022 USD mill Foreign exchange options Net contract amounts mill 2023 Net contract amounts mill 2022 Strike (1) 2023 Strike (1) 2022 46.1 1.1 Contracts maturing within 1 year Gross exposure (before hedging) (90.5) (274.9) Sold AUD Put (136.6) (276.0) Bought AUD Call USD 60 USD 60 0.73 0.60 USD 240 USD 240 0.75 0.62 Hedge of transactional exposures Trade and other receivables Forward exchange contracts (45.3) – Trade and other payables Forward exchange contracts Total hedge contract values Net exposure (after hedging) Hedge of forecast sales and purchases Forward exchange contracts Foreign exchange options Total hedge contract values 133.7 88.4 (2.1) 269.3 269.3 (5.6) 2023 USD mill 2022 USD mill (36.1) (350.0) (60.0) (240.0) (96.1) (590.0) 2023 USD mill 2022 USD mill Translational exposures Net investment in foreign operations 2,219.8 2,293.7 Gross exposure (before hedging) 2,219.8 2,293.7 Hedge of translational exposures Interest bearing liabilities Total hedge contract values Net exposure (after hedging) (500.0) (500.0) (500.0) (500.0) 1,719.8 1,793.7 (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 2023 AUD:USD 2022 AUD:USD 0.6427 0.6661 0.6508 0.7127 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 2023 - 1c AUD:USD AUD mill 2023 + 1c AUD:USD AUD mill 2022 - 1c AUD:USD AUD mill 2022 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) (0.2) 0.2 0.9 (0.9) 0.1 8.1 (0.1) (8.4) (41.0) 42.3 (41.7) 43.0 113 FINANCIAL REPORTIncitec Pivot Limited Annual Report 2023 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: RISK MANAGEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2023 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 2023 - 1c AUD:USD AUD mill 2023 + 1c AUD:USD AUD mill 2022 - 1c AUD:USD AUD mill 2022 (12.9) 13.3 (17.0) (8.7) 8.9 (10.3) 17.5 10.6 USD Fertiliser sales from Australian plants North American USD earnings Market risk Interest rate risk Source of risk 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. Risk mitigation Exposure to interest rate risk is a result of the effect of changes in interest rates on the Group’s outstanding interest bearing liabilities and derivative instruments. The exposure to interest rate risk is mitigated by maintaining a mix of fixed and variable interest rate borrowings and by entering into interest rate derivative instruments. Outstanding financial instruments and sensitivity analysis The tables below include the Group’s derivative contracts that are exposed to changes in interest rates at 30 September: Average pay/(rec) fixed rate LIBOR/ SOFR (1) Average pay/(rec) fixed rate BBSW Average pay/(rec) fixed rate HIBOR Duration (years) Net contract amounts mill Interest rate swaps 2023 Less than 1 year – (0.25%) 1 to 5 years 1 to 5 years (0.71%) – Later than 5 years (2.02%) 2022 Less than 1 year 2.02% Less than 1 year (0.27%) 1 to 5 years 1 to 5 years 1 to 5 years 1 to 5 years 2.58% (0.59%) – – Later than 5 years (2.02%) – – – – – – – (0.25%) – – – – 1.0 AUD 181 3.8 USD 200 (4.13%) 2.4 HKD 560 – – – – – – 5.1 USD 200 0.2 USD 350 0.2 USD 300 2.2 USD 200 3.5 USD 400 2.0 AUD 181 (4.13%) 3.4 HKD 560 – 6.1 USD 200 (1) SOFR replaced LIBOR as the USD benchmark rate in 2023. 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/SOFR (1) BBSW + 1% AUD mill 2023 - 1% AUD mill 2023 + 1% AUD mill 2022 - 1% AUD mill 2022 (6.4) (2.8) 6.4 2.8 (5.6) (2.8) 5.6 2.8 (1) SOFR replaced LIBOR as the USD benchmark rate in 2023. The sensitivity above is also representative of the Group’s interest rate exposures during the year. 114 FINANCIAL REPORTIncitec Pivot Limited Annual Report 202380,000 3.80 – – Henry Hub USD (3.8) 3.8 (2.7) 2.7 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: RISK MANAGEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2023 Market risk Commodity price risk Source of risk 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. 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: Natural gas Total volume (MMBTU)(1) 2023 Price/Strike USD (2) 2023 Total volume (MMBTU)(1) 2022 Price/ Strike USD (2) 2022 Contracts maturing within 1 year Natural gas swaps fixed payer 480,000 3.80 – – Contracts maturing between 1 and 5 years Natural gas swaps fixed payer (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 10c 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 Henry Hub USD +US 10c per 1 MMBTU AUD mill 2023 -US 10c per 1 MMBTU AUD mill 2023 +US 10c per 1 MMBTU AUD mill 2022 -US 10c per 1 MMBTU AUD mill 2022 0.1 (0.1) – – Risk mitigation 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. 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 10c 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 10c per 1 MMBTU AUD mill 2023 -US 10c per 1 MMBTU AUD mill 2023 +US 10c per 1 MMBTU AUD mill 2022 -US 10c per 1 MMBTU AUD mill 2022 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 2023 Granular Urea (FOB Middle East)(1) DAP/MAP (FOB China/Saudi) Urea (FOB NOLA) Ammonia (FOB Tampa)(2) 2022 Granular Urea (FOB Middle East)(1) DAP/MAP (FOB China/Saudi) Urea (FOB NOLA) Ammonia (FOB Tampa)(2) + US$10 per tonne AUD mill - US$10 per tonne AUD mill 2.4 12.4 1.9 10.4 3.4 10.5 2.4 7.9 (2.4) (12.4) (1.9) (10.4) (3.4) (10.5) (2.4) (7.9) (1) The Group’s price sensitivity to Granular Urea (FOB Middle East) is expected to be nil from 2024 due to the Gibson Island manufacturing closure in 2023. (2) The price sensitivity to Ammonia (FOB Tampa) relates to the Waggaman operations, which have been disclosed as discontinued. 115 FINANCIAL REPORTIncitec Pivot Limited Annual Report 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: RISK MANAGEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2023 Included in the table below are details of the Group’s derivative instruments at 30 September 2023, classified by hedge accounting type and market risk category: 30 September 2023 Cash flow hedges Foreign exchange risk on forecast sales & purchases Forward exchange contracts Foreign exchange options Discontinued hedge (2) Commodity price risk on forecast purchases Commodity swaps Discontinued hedge (2) Interest rate risk on highly probable debt Interest rate swaps Discontinued hedge (2) Total cash flow hedges Net investment hedges Foreign exchange risk on foreign operation Interest bearing liabilities Discontinued hedge (2) Total net investment hedges Fair value hedges Foreign exchange risk on HKD borrowings Cross currency interest rate swaps Interest rate risk on fixed USD, HKD and AUD bonds (3) Interest rate swaps Discontinued hedge Total fair value hedges Equity instruments Total net Balance at 30 September 2023 During the period Carrying amount of hedging instrument asset $mill Carrying amount of hedging instrument liability $mill Fair value hedge adjustment of hedged item $mill Balance of gains/ (losses) in reserves before tax $mill Gains/ (losses) recognised in reserves(1) $mill Reclassification of (gains)/ losses from reserves to profit or loss(1,4) $mill Note 5.5 – – 0.1 – – – (1.5) (0.8) – (0.5) – – – 5.6 (2.8) – – – 11.3 – – 11.3 – 16.9 – – – – (94.0) – (94.0) – (96.8) – – – – – – – – – – – (10.7) 98.4 2.7 90.4 (0.6) (0.8) 0.7 (0.5) 0.2 – (26.9) (27.9) (131.0) (531.7) (662.7) – – – – – (17.0) 2.8 5.9 11.8 (0.6) (3.4) (12.4) 12.1 16.2 (9.7) – (9.7) – – – – – – – 45.5 – 3.4 – 13.2 62.1 – – – – – – – – 90.4 (707.6) 6.5 62.1 (8) (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. Gains or losses on net investment hedges offset the gains or losses on translation of foreign owned subsidiaries into AUD. A portion of the discontinued net investment hedges will be released to the profit or loss upon completion of the sale of Waggaman. (3) Interest rate swap contracts effectively convert USD400m, 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) At 30 September 2023, 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 2023 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: RISK MANAGEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2023 Included in the table below are details of the Group’s derivative instruments at 30 September 2022, classified by hedge accounting type and market risk category: Balance at 30 September 2022 During the period Carrying amount of hedging instrument asset $mill Carrying amount of hedging instrument liability $mill Fair value hedge adjustment of hedged item $mill Balance of gains/ (losses) in reserves before tax $mill Gains/ (losses) recognised in reserves(1) $mill Reclassification of (gains)/ losses from reserves to profit or loss(1,4) $mill Note 30 September 2022 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 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 Interest bearing liabilities Discontinued hedge (2) Total net investment hedges Fair value hedges Foreign exchange risk on HKD borrowings Cross currency interest rate swaps Interest rate risk on fixed USD, HKD and AUD bonds (3) Interest rate swaps Discontinued hedge Total fair value hedges Equity instruments Total net (8) 16.3 – – – – – (22.5) (6.7) – – – – 12.9 (27.6) – – – – 29.2 (56.8) – – – – 8.1 – – 8.1 – 37.3 – – – – – (95.8) – (95.8) – – – – – – – – – – – – – – – (9.0) 102.6 6.2 99.8 – (3.4) (6.7) – (12.1) 5.8 4.8 – – (56.6) (52.6) 3.9 0.1 0.2 12.4 – (52.2) (106.2) – (121.3) (531.7) (653.0) – – – – (17.0) 7.0 4.4 3.6 (0.1) 0.1 (39.1) 25.0 (71.9) (23.4) (70.3) – – – – – – – – – 16.2 20.1 – – – – – – – – – (152.6) 99.8 (776.2) (109.4) 20.1 (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. Gains or losses on net investment hedges offset the gains or losses on translation of foreign owned subsidiaries into AUD. (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) At 30 September 2022, there were no gains/losses that were transferred from reserves to profit or loss in relation to ineffective hedges. 117 FINANCIAL REPORTIncitec Pivot Limited Annual Report 2023 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: RISK MANAGEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2023 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 2023 $mill 597.9 399.4 16.9 2022 $mill 785.3 763.5 37.3 1,014.2 1,586.1 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 2023, the amount netted in other financial assets and other financial liabilities is nil (2022: $79.8m). Fair value Fair value hierarchy 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 table below analyses financial instruments carried at fair value by valuation method. The different levels have been defined 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. » 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). 2023 Derivative financial assets Derivative financial liabilities 2022 Derivative financial assets Derivative financial liabilities Level 1 $mill – – Level 1 $mill – – Level 2 $mill 16.9 (96.8) Level 2 $mill 37.3 (152.6) Level 3 $mill – – Level 3 $mill – – Fair value of financial assets and liabilities carried at amortised cost Cash and cash equivalents, trade and other receivables, and trade and other payables are carried at amortised cost which equals their fair value. Interest bearing liabilities are carried at amortised cost and have a carrying value of $1,731.7m (2022: $1,712.0m) – refer to note 8. The fair value of the interest bearing financial liabilities at 30 September 2023 was $1,693.3m (2022: $1,655.0m) and was based on the level 2 valuation methodology. 118 FINANCIAL REPORTIncitec Pivot Limited Annual Report 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: RISK MANAGEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2023 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 2023NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: OTHER FOR THE YEAR ENDED 30 SEPTEMBER 2023 19. Share-based payments 20. Key management personnel disclosures Key management personnel remuneration Short-term employee benefits Post-employment benefits Other long-term benefits Termination benefits Share-based payments 2023 $000 7,988 169 58 922 2022 $000 9,222 149 102 503 1,471 10,608 2,137 12,113 Determination of key management personnel and detailed remuneration disclosures are provided in the Remuneration Report. Loans to key management personnel In the year ended 30 September 2023, there were no loans to key management personnel and their related parties (2022: nil). Other key management personnel transactions In the year ended 30 September 2023, there were no transactions entered into during the year with key management personnel (including their related parties). 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 2020/23, 2021/24 and 2022/25 LTIs, the performance conditions comprise relative total shareholder return, the delivery of certain long term value metrics and return on invested capital. Additionally, the 2021/24 and 2022/25 LTIs include sustainability conditions. 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. Expenses arising from share-based payment transactions Total expenses arising from share-based payment transactions recognised during the period as part of employee benefit expense were as follows: Accounting value of performance rights issued under the LTI and STI performance plans 2023 $mill 2022 $mill 2.9 3.1 2023 Number 2022 Number Number of performance rights outstanding under the LTI and STI performance plans 5,302,195 5,887,136 Details of the movements in LTI and STI performance rights are disclosed in the Remuneration Report for key management personnel. 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 2023 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: OTHER FOR THE YEAR ENDED 30 SEPTEMBER 2023 21. 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. Key assumptions and sensitivities Principal actuarial assumptions Discount rate (gross of tax) 5.3% - 9.4% 5.0% - 7.7% Future salary increases 3.5% - 5.0% 3.5% - 5.0% 2023 2022 Financial position and performance Sensitivity analysis Net defined benefit obligation at 30 September Present value of obligations Fair value of plan assets Net defined benefit obligation 2023 $mill 78.0 2022 $mill 249.9 (59.2) (237.4) 18.8 12.5 Maturity profile of the 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 2023 $mill 61.6 54.8 42.4 2022 $mill 198.2 113.8 39.7 Return on plan assets for the year ended 30 September Actual return on plan assets Composition of plan assets at 30 September The percentage invested in each asset class: Equities Fixed interest securities Property Other 2023 $mill 12.7 2022 $mill (43.7) 2023 2022 40% 32% 18% 10% 11% 79% 4% 6% Movements in plan assets/liabilities Amounts recognised in Other Comprehensive Income Gains arising from changes in actuarial assumptions Return on plan assets (less than)/ greater than discount rate Total profit recognised in other comprehensive income Amounts recognised in Profit or Loss Notes 2023 $mill 2022 $mill (4.9) 67.4 3.2 (50.2) (1.7) 17.2 Net interest expense Defined benefit superannuation expense (2) (2) (1.0) (7.1) (1.1) (3.0) 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 2023 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 (7.0) 1.0 8.4 (0.8) All employees of the group are entitled to benefits from the Group’s superannuation plan on retirement, disability or death or can direct the group to make contributions to a defined contribution plan of their choice. The Group’s superannuation plan has a defined benefit section and a defined contribution section. The defined benefit section provides defined lump sum benefits based on years of service and final average salary. The defined contribution section receives fixed contributions from group companies and the Group’s legal or constructive obligation is limited to these contributions. The liability or asset recognised in the Consolidated Statement of Financial Position in respect of defined benefit superannuation plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the period in which they occur, directly in other comprehensive income. They are included in retained earnings in the Consolidated Statement of Changes in Equity and in the Consolidated Statement of Financial Position. Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognised immediately in profit or loss as past service costs. Contributions to the defined contribution section of the Group’s superannuation fund and other independent defined contribution superannuation funds are recognised as an expense as they become payable. Key estimates and judgments The present value of the defined benefit obligation at the reporting date is based on expected future payments arising from membership of the fund. This is calculated annually by independent actuaries considering the expected future wage and salary levels of employees, experience of employee departures and employee periods of service. Expected future payments are discounted using market yields on corporate bonds at the reporting date, which have terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. 121 FINANCIAL REPORTIncitec Pivot Limited Annual Report 2023 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: OTHER FOR THE YEAR ENDED 30 SEPTEMBER 2023 22. Deed of cross guarantee Entities that are party to a Deed of Cross Guarantee are included in note 16. 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 23. Parent entity disclosure Throughout the financial year ended 30 September 2023 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. Profit before income tax(1) Income tax expense Profit for the year Retained profits at 1 October Profit for the year Other movements in retained earnings Dividend paid Retained profits at 30 September 2023 $mill 79.5 (29.0) 50.5 2022 $mill 870.4 (164.8) 705.6 1,926.1 1,569.7 50.5 1.3 705.6 6.2 (524.4) (355.4) 1,453.5 1,926.1 Statement of Profit or Loss and Other Comprehensive Income Results of the parent entity Profit/(loss) for the year(1) Other comprehensive income/(loss) Total comprehensive income for the year 2023 $mill (139.8) 63.4 (76.4) 2022 $mill 962.8 (20.9) 941.9 (1) The 2022 profit for the year includes dividend income from subsidiaries of $1,233.1m. (1) The 2022 profit before income tax includes dividend income from subsidiaries of $257.8m. Statement of Financial Position Statement of Financial Position Current assets Total assets Current liabilities Total liabilities Net assets Share capital Reserves Retained earnings Total equity 2023 $mill 2022 $mill 673.8 1,214.7 8,777.3 9,219.5 576.8 1,110.0 4,445.2 4,317.6 4,332.1 4,901.9 3,806.2 3,806.2 (6.4) (99.5) 532.3 1,195.2 4,332.1 4,901.9 Parent entity contingencies and commitments Contingent liabilities of Incitec Pivot Limited are disclosed in note 17. Capital expenditure – commitments Contracted but not yet provided for and payable: Within one year Tax consolidation 2023 $mill 2022 $mill 4.7 7.6 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. Current assets Cash and cash equivalents Trade and other receivables Inventories Other assets Other financial assets Current tax 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 2023 $mill 2022 $mill 197.4 453.7 480.4 25.3 5.6 90.7 1,253.1 5,249.4 2,185.4 104.3 251.6 175.4 7,966.1 9,219.2 897.5 16.4 9.3 84.2 – 1,007.4 895.7 111.0 1,261.3 87.1 86.1 405.2 0.9 2,847.3 3,854.7 5,364.5 3,806.2 104.8 1,453.5 5,364.5 548.2 470.7 671.7 23.0 23.6 – 1,737.2 5,221.2 2,165.6 111.3 249.7 235.6 7,983.4 9,720.6 1,097.3 18.5 57.7 148.9 118.9 1,441.3 574.0 115.6 1,242.5 95.0 97.0 388.2 2.3 2,514.6 3,955.9 5,764.7 3,806.2 32.4 1,926.1 5,764.7 FINANCIAL REPORTIncitec Pivot Limited Annual Report 2023 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS: OTHER FOR THE YEAR ENDED 30 SEPTEMBER 2023 25. Events subsequent to reporting date On 13 November 2023, IPL announced a final dividend of 5.0 cents per share, unfranked, to be paid on 19 December 2023. The record date for entitlement to this dividend is 5 December 2023. The total dividend payment will be $97.1m. 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. 24. Auditor’s remuneration Deloitte and related network firms Audit or review of financial reports Group Subsidiaries and joint operations Other assurance and agreed-upon procedures under other legislation or contractual arrangements not required to be provided by the auditor Other services: Other consulting services Total remuneration Non-Deloitte audit firms Audit services Total remuneration of non-Deloitte audit firms 2023 $000 2022 $000 1,410.2 1,422.5 650.2 579.9 2,060.4 2,002.4 111.2 649.3 75.0 80.9 2,246.6 2,732.6 3.5 3.5 2.6 2.6 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 assurance 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 2023 Directors’ Declaration on the Consolidated Financial Statements set out on pages 84 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 84 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 2023 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 91; 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. 3. There are reasonable grounds to believe that the Company and the controlled entities identified in note 16 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. The directors have been given the declaration by the Interim Chief Executive Officer and the Interim Chief Financial Officer as required by section 295A of the Corporations Act 2001 for the financial year ended 30 September 2023. Greg Robinson Chairman Melbourne, 13 November 2023 124 FINANCIAL REPORTIncitec Pivot Limited Annual Report 2023 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 2023, 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 2023 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 INDEPENDENT AUDITOR’S REPORTIncitec Pivot Limited Annual Report 2023 KKeeyy AAuuddiitt MMaatttteerr HHooww tthhee ssccooppee ooff oouurr aauuddiitt rreessppoonnddeedd ttoo tthhee KKeeyy AAuuddiitt MMaatttteerr CCaarrrryyiinngg vvaalluuee ooff ggooooddwwiillll aanndd nnoonn--ccuurrrreenntt aasssseettss Refer to Note 9 Property, plant and equipment, Note 11 Intangibles and Note 12 Impairment of goodwill and non-current assets in the financial statements. As at 30 September 2023, excluding assets classified as held for sale, the Group held goodwill of $1,985.2 million, intangible assets of $409.2 million and property, plant and equipment of $3,191.4 million, which is allocated to the Group’s 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 the value-in-use model recoverable amount of each CGU. determine to The Group’s Fertilisers APAC (‘Fertilisers’) model is highly sensitive to changes in terminal value assumptions, including natural gas prices, commodity prices, foreign exchange rates, growth rate and discount rate. The Group’s Dyno Nobel Asia Pacific (‘DNAP’) model is highly sensitive to changes in terminal value assumptions, including natural gas prices, growth rate and discount rate. Forecast assumptions used in assessing the recoverable amount incorporate management’s estimates of the potential impacts of climate change through sustainability projects, de- carbonisation initiatives and consideration of the estimated impact of the Safeguard Mechanism 2.0, which are subject to judgement. Given the sensitivities of the terminal value assumptions in the DNAP and Fertilisers models, we consider this to be a Key Audit Matter. Our procedures included, but were not limited to: • Understanding the relevant controls and process that management has undertaken to assess the recoverable amounts • In conjunction with our valuation specialists: o Evaluating the appropriateness of the models used by management to calculate the value-in-use of the CGUs. o Assessing and challenging the key inputs to the DNAP and Fertilisers models and terminal values by: § Corroborating the key independent market based assumptions built into the terminal value to external analysts’ reports, published industry growth rates and industry reports, considering the potential impacts of climate change, including the Safeguard Mechanism 2.0, where applicable; flows including cash the projects, § Corroborating the key non-market based from assumptions, Safeguard sustainability Mechanism 2.0 and other Board approved climate and de-carbonation initiatives, by comparing Board approved forecasts to historical performance to test the accuracy of management’s forecasts; § Agreeing contracted volumes and pricing assumptions in the model to the Board approved forecasts; § Comparing the discount rates applied to the independently terminal value with an developed rate; and § Performing a range of sensitivity analysis on the key assumptions in the terminal value including discount rates, natural gas prices, commodity prices and foreign exchange rates used in the cash flow forecasts. We have also assessed the adequacy of the disclosures included in Notes 9,11 and 12 in 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. 126 INDEPENDENT AUDITOR’S REPORTIncitec Pivot Limited Annual Report 2023 Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. 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. 127 INDEPENDENT AUDITOR’S REPORTIncitec Pivot Limited Annual Report 2023 • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group’s audit. We remain solely responsible for our audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. 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 62 to 82 of the Director’s Report for the year ended 30 September 2023. In our opinion, the Remuneration Report of the Incitec Pivot Limited, for the year ended 30 September 2023, 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, 13 November 2023 Terry Ludeman Partner Chartered Accountants Melbourne, 13 November 2023 128 INDEPENDENT AUDITOR’S REPORTIncitec Pivot Limited Annual Report 2023 129 INDEPENDENT AUDITOR’S REPORTIncitec Pivot Limited Annual Report 2023130 ADDITIONAL INFORMATIONIncitec Pivot Limited Annual Report 2023Nothing matters more than ensuring our people get home safely every day. Additional Information 131 ADDITIONAL INFORMATIONIncitec Pivot Limited Annual Report 2023Shareholder Information As at 13 November 2023 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 Number of shares Percentage of issued capital 12,120 21,256 7,224 6,448 167 47,215 5,569,135 61,926,052 53,334,800 142,204,704 1,679,190,338 1,942,225,029 0.29 3.19 2.74 7.32 86.46 100% The number of shareholders holding less than a marketable parcel of shares ($500) was 2,401 (based on the closing market price on 13 November 2023 of $2.94). The holdings of the 20 largest holders of fully paid ordinary shares represent 84.47% of that class of shares. Twenty largest ordinary fully paid shareholders Size of holding Number of shares Percentage of issued capital HSBC Custody Nominees (Australia) Limited J P Morgan Nominees Australia Pty Limited Citicorp Nominees Pty Limited Merrill Lynch (Australia) Nominees Pty Limited National Nominees Limited BNP Paribas Noms Pty Ltd HSBC Custody Nominees (Australia) Limited – A/C 2 BNP Paribas Nominees Pty Ltd HSBC Custody Nominees (Australia) Limited BNP Paribas Noms Pty Ltd UBS Nominees Pty Ltd Citicorp Nominees Pty Limited HSBC Custody Nominees (Australia) Limited HSBC Custody Nominees (Australia) Limited HSBC Custody Nominees (Australia) Limited-GSCO ECA BNP Paribas Noms (NZ) LTD Netwealth Investments Limited BNPP Noms Pty Ltd HUB24 Custodial Serv Ltd Morgan Stanley Australia Securities (Nominee) Pty Limited Nekon Pty Ltd Total Substantial shareholders 587,782,027 326,302,638 282,083,449 181,836,868 105,627,247 43,670,381 22,509,900 22,388,423 13,256,052 9,044,799 7,584,960 7,100,297 6,679,895 6,141,210 4,564,480 3,262,866 3,167,902 3,138,197 2,260,000 2,200,000 1,640,601,591 30.26 16.80 14.52 9.36 5.44 2.25 1.16 1.15 .68 .47 .39 .37 .34 .32 .24 .17 .16 .16 .12 .11 84.47 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 Firetrail Investments Pty Ltd Janchor Partners Limited Vanguard Group Date Notice Received Votes/Number of shares Percentage of issued capital 29 May 2023 16 January 2023 23 June 2022 99,460,806 173,065,979 99,903,739 5.12 8.91 5.14 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 13 November 2023, there were 5,928,795 of rights on issue, comprising of: » 5,896,029 performance rights with 12 holders were on issue pursuant to Incitec Pivot employee incentive plans; and » 32,766 share rights with 4 holders were on issue pursuant to Non-executive Director minimum shareholding plan. Performance rights and share rights do not carry any voting rights. Performance rights and share rights do not carry any voting rights. On-Market Share Purchases During the 2023 financial year, zero ordinary shares were purchased on-market for the purposes of awards under IPL employee incentive plans and the Non-executive Director minimum shareholding plan. On-Market Share Buyback On 15 November 2022, IPL announced its intention to undertake an on-market share buyback of up to $400m, to be conducted over the subsequent twelve months. On 13 November 2023, IPL confirmed its intention to extend the period to undertake this on-market share buyback for another twelve months. 132 ADDITIONAL INFORMATIONIncitec Pivot Limited Annual Report 2023Five Year Financial Statistics Incitec Pivot Limited and its controlled entities(1) Sales Earnings before depreciation, amortisation, net borrowing costs, individually material items (IMIs) and tax Depreciation and amortisation (excluding IMI's) 2023 $mill 2022 $mill 2021 $mill 2020 $mill 2019 $mill 6,008.1 6,315.3 4,348.5 3,942.2 3,918.2 1,215.4 1,857.7 934.9 730.5 605.3 (335.6) (372.5) (368.5) (356.0) (301.6) Earnings before net borrowing costs, IMIs and tax (EBIT) 879.8 1,485.2 566.4 374.5 303.7 Net borrowing costs (excluding IMIs) IMIs before tax Taxation (expense) / benefit Operating profit after tax and IMIs (148.7) (30.8) (140.5) (107.2) (19.2) (345.0) 559.8 1,013.8 Operating profit/(loss) after tax and IMIs attributable to non-controlling interest (0.2) 0.1 (112.8) (293.4) (11.1) 149.1 – Operating profit after tax and IMIs attributable to shareholders of Incitec Pivot Limited 560.0 1,013.7 149.1 (135.7) (144.1) (87.9) (27.5) 123.4 – 123.4 (64.8) 188.2 54.6 – (7.5) 152.1 (0.3) 152.4 – 152.4 121.7 (22.1) (13.4) (209.5) 582.1 1,027.1 524.4 355.4 358.6 19.4 4,253.2 2,654.3 1,819.4 1,529.9 1,550.8 3,191.4 4,246.9 3,928.9 4,071.7 4,190.0 404.8 379.4 324.8 326.3 357.7 2,394.4 3,281.4 3,000.9 3,019.7 3,179.5 301.5 301.7 316.6 343.4 101.5 10,545.3 10,863.7 9,390.6 9,291.0 9,379.5 1,198.6 1,658.6 1,427.1 1,227.2 2,418.0 108.8 166.7 101.3 102.3 86.1 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 Non-current borrowings, payables and other liabilities 2,678.5 2,578.1 2,284.6 2,632.7 2,071.1 Non-current provisions Total liabilities Net assets Shareholders’ equity Equity attributable to non-controlling interest Total shareholders’ equity Ordinary Shares 132.7 170.6 209.0 125.5 116.5 4,118.6 4,574.0 4,022.0 4,087.7 4,691.7 6,426.7 6,289.7 5,368.6 5,203.3 4,687.8 6,426.8 6,289.6 5,368.6 5,203.3 4,687.8 (0.1) 0.1 – – – 6,426.7 6,289.7 5,368.6 5,203.3 4,687.8 thousands 1,942,225 1,942,225 1,942,225 1,942,225 1,605,784 Number of shares on issue at year end thousands 1,942,225 1,942,225 1,942,225 1,942,225 1,605,784 Weighted average number of shares on issue (investor and ordinary) thousands 1,942,225 1,942,225 1,942,225 1,734,435 1,610,122 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 (1) The above results include continuing and discontinued operations for the consolidated Group. cents cents cents cents % High Low Year end 30.0 28.8 15.0 27.0 40 $4.14 $2.62 $3.14 52.9 52.2 27.0 18.3 100 $4.06 $2.97 $3.51 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 $mill 6,098.6 6,817.2 5,710.1 3,942.7 5,443.6 $ times times $mill $mill % % 1.60 1.2 9.9 418.8 – 9.2 8.8 1.55 0.5 20.3 428.3 143.9 17.6 17.4 1.22 1.12 0.94 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 3.2 133 ADDITIONAL INFORMATIONIncitec Pivot Limited Annual Report 2023 Glossary Our Company Board DNA DNAP IPF IPL or the Company Board of directors of Incitec Pivot Limited Dyno Nobel Americas Dyno Nobel Asia Pacific Incitec Pivot Fertilisers Incitec Pivot Limited The Group, We, Us or Our Incitec Pivot Limited and its subsidiaries Titanobel Titanobel, France Financial and Remuneration AASB BBSW CGU CPI DAP DRP EBIT EBITDA EPS FAR FCTR HIBOR IMI KMP LIBOR LTI MAP MSR NPAT PCP PP&E ROE ROIC STI TSR TWC Other ARENA ASIC ASX CCS CDP CO2 Australian Accounting Standards Board Bank bill swap rate Smallest identifiable group of assets that generate independent cash flows Consumer price index Diammonium phosphate Dividend Reinvestment Plan Earnings before interest and tax Earnings before interest, tax, depreciation and amortisation Earnings per share Fixed annual remuneration Foreign currency translation reserve Hong Kong Interbank Offered Rate Individually material items Key Management Personnel London Inter-Bank Offered Rate Long term incentive Mono-ammonium phosphate Minimum Shareholding Requirement Net profit after tax Previous calendar period Property Plant and Equipment Return on equity Return on invested capital Short term incentive Total Shareholder Return Trade working capital Australian Renewable Energy Agency Australian Securities and Investments Commission Australian Securities Exchange Carbon Capture and Storage Carbon disclosure project Carbon dioxide Corporations Act Corporations Act 2001 (Cth) DJSI ESG EEF FEED GHG GRI IBP LTIFR N2O TRIFR TCFD 134 Dow Jones Sustainability Index Environmental, social and governance Enhanced Efficiency Fertiliser Front end engineering design Greenhouse gas Global reporting initiative Integrated business planning Lost Time Injury Frequency Rate Nitrous Oxide Total Recordable Injury Frequency Rate Task Force on climate-related financial disclosures ADDITIONAL INFORMATIONIncitec Pivot Limited Annual Report 2023For 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 2023 Annual General Meeting will be held on 20 December 2023. 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 150 Royall St., Suite 101 Canton, MA 02021 United States of America Telephone: 1-888-269-2377 International: +1-201-680-6825 Email: shrrelations@cpushareownerservices.com Website: www-us.computershare.com/investor 135 ADDITIONAL INFORMATIONIncitec Pivot Limited Annual Report 2023Incitec Pivot Limited ABN: 42 004 080 264 Level 8, 28 Freshwater Place, Southbank, Victoria 3006, Australia This report is printed on Monza Recycled stock which contains 100% recycled fibre and is FSC® Mix Certified, which ensures that pulp is derived from well-managed forests and recycled wood of fibre. Monza Recycled is manufactured by an ISO 14001 certified mill.

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