2018
ANNUAL
REPORT
NAMOI COTTON LIMITED
2018 ANNUAL REPORT | a
Namoi Cotton Limited
ABN 76 010 485 588
CONTENTS
1. Namoi Cotton Limited Profile .......................................................................................................... 3
2.
The 2018 Financial Year in Review ................................................................................................... 4
3. Chairman & Chief Executive Officer Report .................................................................................... 6
4. Board of Directors .......................................................................................................................... 12
5. Executive Management Team ........................................................................................................ 14
Financial Report ............................................................................................................................. 15
6.
7. ASX Additional Information ...........................................................................................................100
8. Directory ........................................................................................................................................103
2018 ANNUAL REPORT | 1
2018 ANNUAL REPORT | 2
NAMO I COTTON LIMITE D PROFI LE
Namoi Cotton was established in 1962 as a co-operative. On the 10 October 2017 Namoi Cotton transitioned from a
co-operative with grower members to a company listed on the ASX with ordinary shareholders. Namoi Cotton is Australia’s
leading cotton processing and marketing organisation. Namoi Cotton has an extensive network of origination, ginning,
marketing and logistics operations throughout the cotton growing regions of New South Wales and southern Queensland.
As part of its business operations Namoi Cotton is a participant in the Namoi Cotton Alliance joint venture, which owns and
operates warehouse and commodity packing facilities in Wee Waa, Warren and Goondiwindi.
NAMO I COTTON LIMITE D OBJE CT IV ES
Our Vision – To be the leading processor, marketer and service provider to cotton farmers and customers of the Australian
cotton industry.
Our Mission – To deliver quality products and services to our customers.
OU R VALUES
OUR LOCATIONS
Shareholder Value – To deliver superior financial
results and build wealth for our shareholders.
Quality – Continuously improve the reliability
and consistency of our processes, products and
services.
People – Create an environment where people are
satisfied and motivated to achieve high levels of
performance.
Safety – Working safely is more important than
time, production and costs.
Customer Service – Deliver products and services
that meet and exceed customer expectations.
Environment – Ensure we respect and protect the
environment.
Emerald
N o g o a Riv er
N
Warrego River
QUEENSLAND
i
F
t zroy Riv
er
Moura
Biloela
Theodore
Daws o n
e r
R i v
n
C o
d a mine River
Dalby
n i e R i v e r
Mo o
Toowoomba
(CORPORATE)
BRISBANE
nne River
alo
B
Paroo River
Menindee
g R iv e r
a rlin
D
NEW
SOUTH
WALES
Hillston
r
e
Culg o a R i v
Mungindi
Wathagar
Walgett
Moomin
St George
M a c intye River
Ashley
Goondiwindi
MacIntyre
2
Moree
Gwydir Riv
e
r
Glenlyon Dam
Pindari Dam
Merah North
Yarraman
Namoi
Wee Waa
Boggabri
Gunnedah
Narrabri
Split Rock
Dam
Keepit Dam
Copeton Dam
Bourke
North Bourke
(HEAD OFFICE)
M
a
c
q
u
a
ri
e Riv
er
Warren
Trangie
Dubbo
Condoblin
Lachlan River
Burredong Dam
Namoi Cotton Offices
Namoi Cotton Gins
Namoi Cotton Joint
Venture Gins
NCA Joint Venture
Warehouse
NCA Commodities
Packing Site
Hay
Griffith
Wyangala Dam
SYDNEY
Public Irrigation Dams
Murrumbidgee River
River Murray
VICTORIA
Marjo
Major cotton growing centres
Murray-Darling Basin
0
125
250 km
2018 ANNUAL REPORT | 3
THE 2018 FINANCIAL YEAR IN R EV IEW
F Y 2 0 1 8 S U M M A R Y
Financial Summary
Revenue from continuing operations
EBITDA1
EBIT2
Income Tax Benefit/(Expense)
Net profit/(loss) after tax
Earnings per Namoi Capital Stock
Diluted earnings per Ordinary Share
Distribution per Namoi Capital Stock (unfranked)
Distribution per Ordinary Shares
Rebate payable to Grower Members
Total assets
Interest bearing debt
Term (core) debt
Stakeholders equity
Net tangible assets per Namoi Capital Stock
Diluted net tangible assets per Ordinary Share
Capital expenditure3
FY2018
($,000)
483,938
20,181
12,232
(2,905)
6,769
N/A
4.7 cents
N/A
1.9 cents
N/A
205,823
50,002
42,000
131,756
N/A
103 cents
6,654
FY2017
($,000)
355,344
8,855
2,649
245
283
FY2016
($,000)
279,713
(1,877)
(8,048)
3,140
(7,558)
0.3 cents
(6.9) cents
N/A
Nil
N/A
Nil
210,713
59,920
47,480
123,828
N/A
Nil
N/A
Nil
199,852
60,679
47,481
123,545
113 cents
112 cents
N/A
5,267
N/A
6,093
1EBITDA defined as earnings before interest, tax, depreciation and amortisation.
2EBIT defined as earnings before interest and tax.
Both of the above terms are non IFRS financial information.
3Includes $1,203k (FY2018), $821k (FY2017) and $418k (FY2016) acquisitions by means of finance leases.
General note Namoi Cotton restructured from a co-operative with Namoi Capital Stock and Grower Members to a public
listed company with Ordinary Shareholders on 10 October 2017
2018 ANNUAL REPORT | 4
A U S T R A L I A N C O T T O N P R O D U C T I O N
Region
NSW
Upper Namoi
Lower Namoi
Gwydir
Mungindi
Walgett
Macquarie
Bourke
Lachlan
Tandou
Murray
Murrumbidge
TOTAL NSW
QLD
MacIntyre Valley
Central Queensland
Dawson-Callide
Darling Downs
St George
Dirranbandi
TOTAL QLD
GRAND TOTAL
2018 Season
Forecast(1) Production
Bales
2017 Season
Actual(2) Production
Bales
2016 Season
Actual(3) Production
Bales
241,000
477,500
672,000
106,500
140,250
456,500
49,350
209,000
66,000
51,750
798,000
3,267,850
536,800
183,500
50,100
433,750
146,400
36,300
1,386,850
4,654,700
233,500
429,000
580,000
86,000
163,500
254,000
90,000
124,000
-
-
425,500
2,385,500
504,000
162,500
42,000
490,000
177,000
139,250
1,514,750
239,030
238,375
327,120
94,050
37,970
146,505
32,003
118,020
-
-
513,172
1,746,245
232,358
132,561
33,005
407,380
126,000
35,000
966,304
3,900,250
2,712,548
(1) Namoi Cotton’s estimate of the total Australian production for 2018 as at 1st June 2017
(2) 2017 Adjusted Figures from The Australian Cotton Grower, Cotton Yearbook 2017
(3) 2016 Adjusted Figures from The Australian Cotton Grower, Cotton Yearbook 2016
2018 ANNUAL REPORT | 5
CHAIRMAN & CHIEF EXECUTIVE
OFFICER REPORT
RESULT IN RE VIEW
FO R 2 0 17/18
SEASON OPERATIONS IN
REV IEW
Namoi Cotton recorded a consolidated net profit after tax
from continuing operations of $6.8 million for the full year
ended 28 February 2018, compared to a net profit of $0.3
million for the year ending 28 February 2017. Positive cash
flows from operating activities were recorded at $17.3
million. The consolidated net profit after tax and positive
cash flow from operating activities result included $1.6
million in pre-tax costs associated with the Restructure.
The consolidated net profit after tax also includes the
$0.7 million non-cash fair value increment to the Grower
Member Share liability.
Financial performance improved by $6.5 million year on
year underpinned by a 38% increase in the 2017 Australian
crop size. Namoi Cotton’s ginning and cotton seed volumes
increased by 47% and 54% respectively, whilst Namoi Cotton
Alliance’s (NCA) lint procurement volumes increased by
25%. Cotton seed trading margins improved considerably
through effective risk and position management, market
volatility related trading opportunities and contractual
seed yield management. Ginning margins were pressured
through increased unit variable costs associated with
reduced productivity from poorer quality seed cotton. The
contribution from NCA improved from the prior year due
to increased volumes and enhanced derivative position
management. NCA’s commodity packing volumes declined
from the previous record year primarily due to reduced
chickpea yields. Management of fixed costs remained a
priority for the business throughout the financial year.
These factors all combined to deliver a $11.8 million
improvement from the prior year in net cash flows from
operating activities.
2017 AUSTRALIAN COTTON PRODUCTION
The overall 2017 Australian cotton crop production was
recorded at 3.75 million bales representing a 38% increase
from the 2.71 million bales 2016 crop. Sufficient cotton was
planted to yield an estimated 4.5 million bales however,
the exceptionally hot conditions in January and February
2017 combined with limited in-crop rainfall resulted in
significant negative impacts to dryland crops and reduced
yields of irrigated crops. Irrigated yields have averaged
approximately 10 bales per hectare compared with 11.5
bales per hectare, the previous year. The quality of the
2017 crop was adversely impacted by the wet planting
conditions, end of growing period weather and challenging
defoliation parameters.
2017 Ginning Season
Namoi Cotton ginned 1,015,000 bales, including 100% of
joint venture bales of the 2017 crop compared to 689,000
bales of the 2016 crop. The 47% increase in ginning
volumes was directly related to the larger crop size. The
quality of the cotton crop resulted in a reduction in ginning
throughput rates to maximize cotton quality output and
limit discounts for the grower. The slower throughput rates
have been the primary driver of a 11% increase in unit
ginning variable costs from the prior year reducing ginning
gross margins. Overall, ginning contribution improved by
32%. Ginning achievements for 2017 included:
•
•
•
•
•
•
•
a $1 million upgrade to the Merah North gin yard,
doubling its static storage capacity;
an upgrade to the hydraulic press system at Merah
North;
the installation of a fourth gin stand and associated
line of cleaning and processing equipment and
press upgrade at Boggabri;
the installation of a third gin stand and associated
line of cleaning and processing equipment at North
Bourke;
installation of a new gin stand and associated
Australian industry first cleaning equipment at the
Ashley gin;
a 35% improvement in our health and safety
performance through our lost time injury frequency
rate; and
extensive offseason maintenance and efficiency
improvement related projects.
The continued investment in our ginning network and
infrastructure is critical to delivering industry leading
ginning services for the Australian cotton grower and
improved economic returns for our business.
Cotton Seed Business and Cargill Oilseeds
Australia Partnership
Our cotton seed business traded 266,000Mt compared
with 172,000Mt the previous year this reflects the larger
Australian crop size. The seed business was a strong
contributor to the overall results increasing by $8.0 million
from the previous year. Seed prices remained firm into the
commencement of ginning supported by the dry conditions
and Chinese demand. Market prices in China along with a
slowing of Chinese demand associated with the continuing
Bollgard III cotton seed import restrictions resulted in
cotton seed being sold back into the domestic market. This
slowed the movement of cotton seed from gin sites. Whilst
placing downward pressure on prices in the second half of
the ginning period and through to the end of the financial
year. Effective risk management combined with contractual
yield management have significantly widened cotton seed
trading margins from the previous year.
2018 ANNUAL REPORT | 6
Namoi Cotton’s 15% interest in the Cargill Oilseeds
Australia business contributed a loss of $1.4 million
compared to a loss of $0.8 million in the preceding year.
Whilst year on year volumes improved for both the Narrabri
(cotton seed) and Footscray (canola) crush facilities,
margins were significantly impacted. Early year high priced
cotton seed combined with competing market challenges
in the feed sector for meal and hulls reduced cotton seed
crush margins. Aggressive origination competition for
canola seed combined with soybean meal imports and
oil price reductions due to alternate stocks and supplies
lowered canola crushing margins.
Cotton Market Review
The cotton market opened the financial year with the spot
May 2017 cotton futures contract trading above 76 US cents
per pound. This was well above the 56 US cents per pound
one-year prior. Once combined with the Australian dollar
(AUD), grower harvest prices of $540 AUD per bale could
be achieved. This compares to the previous year when
Australian growers could only achieve $430 AUD per bale.
Growers achieved between $470 and $570 AUD per bale for
the 2017 season.
Cotton drifted sideways in the last month of the 1st
quarter, as speculative buying took futures to their highest
level since 2014. The second quarter started with a sharp
selloff, though grower pricing remained unchanged as the
Australian basis and AUD held prices around $540 AUD per
bale. The growing number of certified bales against the US
cotton futures board, the large speculative long and order
flow associated with the May contract moving into its notice
period pressured cotton futures lower. The speculator then
proceeded to once again increase their long position with
the back drop of tight US ending stocks and a large mill
on call position. The July contract then posted its high for
the season above 87 US cents per pound. This was short
lived as the back drop of a big US new crop combined with a
large US carry out saw the speculative community liquidate
their position and cotton futures posted their lows for the
year with the December contract finding support just above
66 US cents per pound.
Cotton drifted sideways for most of the third quarter as the
bigger US crop and favourable growing conditions weighed
on prices. The new crop Australian grower prices spent
most of the quarter trading around $475 AUD per bale,
except for the three-week rally at the start of September.
The US had two hurricanes hit two of their growing regions
and cotton futures quickly priced in a weather premium.
This gave the Australian cotton growers an opportunity to
market new crop bales above $500 AUD per bale just before
the new crop planting was about to begin.
The fourth quarter saw futures steadily move higher. The
US crop continued to progress well under favourable
conditions, though the US sales pace was such that the
large carry out was coming under pressure as the USDA
updated its monthly export forecast. Over this period
Australian growers watched new crop prices firm $70 AUD
per bale and could achieve $550 AUD per bale by Christmas.
Cotton made a final push higher in the first three weeks of
the 1st quarter calendar year with new crop grower pricing
reaching $565 AUD per bale or 84 US cents per pound,
before the growing speculative long weighed on futures
and eased back just below 83 US cents per pound (May
2018 contract) at the end of February 2018.
The Australian Dollar (AUD) started March trading at
76 cents against the USD and spent the month trading
sideways. April and May saw the AUD slide lower as
commodities and more particularly oil slid lower. May saw
the AUD post its lows for the year below 74 cents. June
through to September saw commodities firm and the USD
index drift lower, which supported the AUD above 80 cents.
The USD index then found some support and the AUD
drifted lower as the market adjusted to the expectations of
the Federal reserve and their interest rate guidance. The
AUD then spent December and January moving higher as
the Australian government forecasted a narrower budget
deficit and the US congress struggled to move pro-growth
policies through the houses. The AUD then posted its
high for the year at the end of January above 81 cents and
finished February at 77.5 cents.
Namoi Cotton Alliance (NCA)
NCA’s total cotton lint marketing volumes procured for
the 2017 season reflected 636,000 bales compared with
507,000 bales for the 2016 season. The increased Australian
crop size provided an opportunity for NCA to increase its
marketing volumes by 25% from the prior year.
Lint marketing gross margins continued to be pressured
through stiff competition to secure cotton. Improved
derivative position management throughout the year
however, ensured this margin pressure was more than
offset in overall marketing contributions. This resulted in
a $0.45 million improvement in Namoi Cotton’s share of
NCA’s lint business in the financial results over the prior
year.
2018 ANNUAL REPORT | 7
NCA’s commodity packing business packed 168,000Mt in
2017 compared to 226,000Mt in 2016. Packing included
principally chickpeas and cotton seed. Packing volumes
declined from the record volumes achieved
in the
preceding year impacted by the slowdown in cotton seed
demand from China, reduced chickpea yields impacted by
adverse agronomic conditions and the Indian government’s
import policy decisions implementing a 60% import tariff
restriction on Australian chickpeas. Chickpea packing
volumes were supported by carryover 2016 crop packing
and new 2017 crop Bangladesh and Pakistan chickpea
demand. The Indian situation however leaves more than
30,000Mt of chickpeas in stock to be packed in the FY 2019.
Strategy
During the year we continued implementation of our
strategic plan to grow the Namoi Cotton business including
completing the acquisition of Twynam Agricultural Group
Pty Ltd’s 50% participating interest in the Australian
Classing Services joint venture for $0.7 million and PJ & JM
Harris Pty Ltd’s 25% participating interest in the Moomin
Ginning Company joint venture for $2.0 million. These
acquisitions are anticipated to deliver increased earnings
before interest, taxation and depreciation of $0.4 million in
the year ending 28 February 2019.
LOOKING FORWARD
2018 Season
The final cotton area planted was 371,000 hectares irrigated
and 81,000 hectares dryland. Since planting through late
February/early March 2018 the rainfall normally associated
with La Niña conditions has not eventuated. The weather
conditions in the early part of 2018 have been more
favourable than those of the same period in 2017 with not
as prolonged excessive heat periods and cooler overnight
temperatures and as a result the fruit retention of irrigated
crops was very encouraging. Water shortages for irrigated
cotton in the St George, Dirranbandi areas and some parts
of the Gwydir valley will impact overall production yield to
conserve irrigation water supplies. The dryland planting
has been more heavily impacted due to no rainfall. Early
ginning results would suggest an improvement upon the
poor yields associated with the 2017 crop. Considering all
these factors, we estimate the 2018 Australian cotton crop
will at this stage still produce approximately 4.7 million
bales.
Namoi Cotton anticipates it will gin between 1.15 million
and 1.2 million bales of the 2018 crop, including 100%
of joint venture gins. This represents an improvement of
between 13% and 18% from the 2017 crop. In preparation
for 2018 season ginning operations, Namoi Cotton has
committed to delivery of the following projects:
•
•
•
•
installation of new pre-cleaning, drying and
moisture equipment at Wathagar Ginning Company
to provide improved service levels and more
rounded capacity;
a $1 million installation of a fourth gin stand
and associated line of cleaning and processing
equipment and press upgrade at Trangie providing
greater throughput and volume capacity;
construction of 8,000Mt cotton seed sheds at both
Hillston and Trangie gins to provide support to our
trading business, improved margin opportunities
and storage options for growers in this lower seed
price environment; and
construction of a mote bale storage shed at
Yarraman to facilitate greater volumes, supply chain
efficiencies and improved economic returns in mote
processing.
It is expected that our cotton seed business will trade
approximately an equivalent amount of tonnage to the
2017 crop. The industry carryover of 2017 crop cotton seed
combined with the inability to export Bollgard III cotton
seed to China from the middle of 2017, the lower value of
cotton seed and likely reduced 2018 crop seed yields will
likely pressure cotton seed contributions over the course
of the 2018 crop.
NCA’s lint marketing volumes are estimated to be
between 700,000 and 800,000 bales from the 2018 crop,
representing an increase of between 10% and 26% from the
prior crop. Significant competition for marketing volumes
is anticipated to continue to pressure marketing gross
2018 ANNUAL REPORT | 8
margins in 2018 albeit they remain supported by strong
demand from Bangladesh and healthy forward Chinese
sales. Gross margin recovery is expected to be achieved
through improved supply chain organization and logistics.
NCA’s containerized commodity packing volumes are now
forecast to be down on the 2017 year with a lack of Autumn/
Winter rainfall significantly impacting winter crop and
pulse plantings.
Namoi Cotton’s operations in 2018 are predicted to deliver
another strong financial result from incremental volume
increases. Improved unit contributions are also expected
to flow from the commissioning of key gin upgrades and
the assumption of improved seed cotton quality from the
2018 crop. Consistent earnings are anticipated from Namoi
Cotton’s 51% investment in NCA, whilst lower contribution
is forecast from the cotton seed trading business.
2019 Season and Beyond
The lack of general rainfall since planting of the 2018 crop
stretched water supplies with some production areas
being short of water and sacrificing crop. Other areas have
significantly drawn down on farm storage water reserves
and public storage water allocations resulting particularly
in the Northern basin of the Murray Darling System low
current levels of available irrigation water. In the Southern
basin, significant water has also been utilised, however,
public storages are better placed than their Northern
Basin counterparts and will benefit from the winter snow
conditions. Based on the current available irrigation water,
our current estimate of the 2019 Australian cotton crop
would reflect 2.5 million bales of production underpinned
by strong production in the Lachlan, Murrumbidgee and
Murray valleys. There remains time for a rainfall event to
significantly change the production outlook particularly
when you consider the current forward price of 2019 crop
cotton at more than AUD$600/bale.
With the northern cotton valleys current water availability
more negatively impacted than the southern cotton valleys,
the present outlook would reflect lower ginning volumes in
2019 for Namoi Cotton given most infrastructure is in the
central and northern cotton valleys. Namoi Cotton will be
focused on maximising market share in both ginning and
cotton seed trading volumes along with further operational
efficiencies. NCA will be targeting increased market share
through greater competitive focus in the southern valleys,
effective position management and a proactive export sales
management campaign. The commodity packing business
will be looking to increase volumes and broader commodity
exposure. A strong focus will be on maximising financial
performance in the 2019 season.
BOARD AND STR AT EGY
On 26 September 2017 Grower Members and Namoi Capital
Stockholders overwhelmingly approved the proposed
restructure of Namoi Cotton from a Co-operative to an
ASX listed public company with a single class of quoted
ordinary shares for Grower Members and Namoi Capital
Stockholders to be named Namoi Cotton Limited. The NSW
Supreme Court approved the restructure on 3 October 2017
and on 10 October 2017 Namoi Cotton was incorporated
as Namoi Cotton Limited, a fully listed public company
(Restructure). The Board continues to work through the
details of a capital raising to enable full implementation of
Namoi Cotton’s strategic plan.
CORPORATE GOV ERNA NCE
AND BOARD
The Board is committed to achieving and demonstrating
the highest standards of corporate governance.
Namoi Cotton complies with the Australian Securities
Exchange Corporate Governance Principles
and
Recommendations 3rd Edition (the ‘ASX Principles‘).
Namoi Cotton’s corporate governance practices are
outlined in the Corporate Governance Statement available
on the Namoi Cotton website www.namoicotton.com.au
In developing the governance framework for Namoi Cotton
the Board has considered the Corporate Governance
Principles and Recommendations
(“ASX Governance
Principles”) published by the ASX Corporate Governance
Council (“ASX CGC”). Copies of all the Namoi Cotton Key
Policies and Charters for Namoi Cotton and the Board
and its current Board Sub Committees referred to in the
statement are available in the Corporate Governance
section of Namoi Cotton’s website at www.namoicotton.
com.au (collectively such policies are known as the
“Corporate Governance Documents”). A copy of the 2018
Annual Report is available on the Namoi Cotton website.
The Board during 2018 undertook a skills matrix process,
which identified areas of expertise which would strengthen
the existing Directors and Board.
The Nomination and Remuneration Committee with
the oversight of the Board, undertook a search for new
Directors to fill casual vacancies and the additional director
position eventuating from the corporatisation. On 7 June
2018, the Chairman and the existing Directors welcomed
Mr James Jackson, Mrs Juanita Hamparsum and Mr
Joseph Di Leo to the Board. Each of the new Directors were
appointed following an extensive recruitment process.
Each new Director is standing for election at the Namoi
Cotton Limited Annual General Meeting to be held on 31
July 2018 at 10.00am in Toowoomba.
2018 ANNUAL REPORT | 9
OUR PE OPLE
Namoi Cotton has a strategy to attract and retain top talent
who can make a positive contribution to the operations of
Namoi Cotton, which are innovative, dynamic and focused to
implement the Namoi Cotton strategy. We strive to employ
people who hold health and safety highly, and which are
culturally minded to working in a team environment and
willing to learn about the cotton industry.
We have a permanent workforce of 150 employees and our
casual employees can range from 350 employees to 400
employees at peak operating times. Our employees bring
a wealth of knowledge and innovation and expertise to the
operations daily.
The health and safety of our staff is paramount and we are
committed to a values-based health and safety culture that
harmonises with our overall organisational culture.
At the completion of the 2018 Financial Year (28 February
2018), women represented 31% of
the Company’s
permanent workforce.
Namoi Cotton’s focus (as opportunities arise) and the
company’s aim is to increase the percentage of women at
all levels of management.
The Namoi Cotton culture and values as an organisation
has been developed over 56 years of operations.
Namoi Cotton’s employees are integral to achieving its
business goals and longevity.
We believe in our people, and the cotton ginning, commodity
packing, cotton marketing and logistics management
expertise they bring to the organisation.
Namoi Cotton openly promotes innovation, productivity,
efficiency, inclusiveness and ideas generation across all
levels of the business.
Onboarding, Professional Development Frameworks and
Continuing Professional Development Programs have
commenced their implementation phase at Namoi Cotton.
CORP ORATE SOCIAL
RESPON SIBI LI TY
Namoi Cotton being a regionally based Australian operation,
holds highly the value of corporate social responsibility, and
remains committed to conducting business ethically while
contributing to the social, environmental and economic
wellbeing of such regional communities.
We acknowledge the commitments we make in these three
key areas can have on our employees, residents of regional
communities and our shareholders.
We are committed to being a responsible member of the
international business community, our operations utilise
strong governance practices to comply with the various
international standards and laws when undertaking and
completing sales of cotton and cottonseed to foreign
counterparties.
2018 ANNUAL REPORT | 10
Namoi Cotton assists its employees to become active
participants of charitable, sporting and social organisations
outside the workplace.
ENVIR ONMENTAL, SOCIA L
AND GOVERNANCE
Namoi Cotton has focussed on improving yearly on it’s
Environmental, Social and Governance responsibilities
within its ginning, cotton seed and joint venture marketing,
warehousing and packing operations. The Company
conducts annual audits and improvements to raise the
standards of Namoi Cotton’s Environmental, Social and
Governance responsibilities internally and throughout its
community interaction.
WORKPLACE H EALTH ,
SAFETY AND THE
ENVIR ONMENT
Safety before all else is the commitment Namoi Cotton
makes to its employees, contractors and visitors. Through
the “Cotton on to Safety” initiative Namoi Cotton has
rebranded its safety and environmental focus within the
organisation to coincide with the release of the Work
Health Safety and Environment (“WHSE”) Application, a
mobile device platform utilised by all staff to manage daily
WHSE tasks ranging from compliance recording, incident
reporting and environmental monitoring to ongoing safety
and environmental improvement programs.
Alongside the industry leading WHSE Kiosk, which captures
daily digital records of Personal Protective Equipment
(“PPE”) compliance, Fatigue Management and Respiratory
Management Plans, Namoi Cotton
implemented an
initiative to commence installation of Medical and Fatigue
centres at all operational ginning sites and the adoption
of defibrillation devices in those same facilities is class
leading.
Reporting on safety performance and communicating
Namoi Cotton safety and environmental messages is
performed utilising daily “tool box talks”, site safety
meetings, digital notifications of incidents, fatigue risks,
respiratory risks, driver safety alerts and our Continuous
Action Improvement Plan (“CIAP”) which drives safety
improvement and expenditure from the ground up right
through to Board analysis utilising Injury Illness Statistical
Index (“IISI”) data and Lost Time Injury Frequency Rate
(“LTIFR”) analysis, recording and reporting. Namoi Cotton
incorporates both internal and external safety audits on
an annual and bi-annual basis to ensure our continuing
improvement and adoption of industry leading practices.
Alongside the safety based initiatives, Namoi Cotton
undertakes a program of seasonal environmental internal
audits at all operational sites and undertakes recycling of
knowledge, gender and experience. The Namoi Cotton
recruitment process is structured to provide equality
in recruitment and unbiased selection and promotion
decisions
A workplace that values and respects its diversity and is free
from discrimination or bias is more productive. The Namoi
Cotton existing diversity policies include the recruitment
policy, paid parental leave, carer’s leave, flexible work
arrangements and mentoring programs.
COMMUNITY E NGAGE ME NT
Namoi Cotton is an active supporter of efforts to raise
money, support charitable events and causes in regional
Australia. During the 2017 and 2018 Namoi Cotton has
supported the Cancer Council of Australia, Westpac Rescue
Helicopter Service, Wee Waa Community Hospital, Wee
Waa Public and Private Schools and Regional and District
sporting clubs.
Namoi Cotton encourages employees to participate in
charity causes and within regional locations participates in
local, state and national charity events.
Each year Namoi Cotton hosts a charity golf day in Wee
Waa, NSW as its signature charity event for the distribution
of funds to local communities.
RETIR EMENT OF BE N
COU LTON AND MICHAEL
BOYCE
In January 2018 Mr Ben Coulton retired from the Namoi
Cotton Board. The Chairman and his fellow Directors thank
Mr Coulton for his services of 12 plus years. His contribution
from a cotton industry prospective was outstanding and
his long tenure should be recognised highly. Mr Coulton
contributed heavily on industry matters to ensure Namoi
Cotton remained a leader in the ginning and marketing of
Australian cotton.
In April 2018 Mr Michael Boyce retired from the Namoi
Cotton Board. During his tenure of 16 plus years Mr Boyce
served on the Audit and Compliance Committee overseeing
the yearly and half yearly audit and financial results. Mr
Boyce’s financial skills and acumen and cotton industry
knowledge served the organisation well.
all round module wrap, waste cotton bale strap, waste oil
recycling, scrap steel recycling and where available within
the local community, general waste recycling. Namoi
Cotton’s focus on energy savings has seen the gradual
conversion of operational sites to energy saving lighting
options, variable speed drive adoption, low energy bale
press installations and the recent commissioning of gas
efficiency technology utilising a grant from the Office of
Environment and Heritage based on an in house designed
and constructed moisture monitoring and gas efficiency
system.
Namoi Cotton is committed to providing a safe and healthy
working place as set out in the WHSE Policy for all persons
in the workplace, including employees, contractors and
visitors, and to minimising our environmental impact.
The requirements and goals in the Namoi Cotton WHSE are
achieved by:
•
•
•
•
all levels of management and employees working
together to identify, assess and suitably control
hazards that may cause injury and may adversely
impact the environment;
daily reporting of the WHSE performance to Senior
Management;
monthly reporting of the WHSE performance to the
Board; and
annual WHSE presentations for all employees of the
Company.
As the agricultural industry is evolving with a heavy focus on
technology in agriculture, Namoi Cotton is monitoring how
it can undertake activities to minimise the environmental
impact of its activities.
DIVE RS ITY
Namoi Cotton has a diversity and inclusiveness strategy.
Diversity within Namoi Cotton is created by an inclusive
working environment. Namoi Cotton has a publicly released
Diversity Policy on its website which promotes gender,
cultural and leadership diversity.
Namoi Cotton appointed Mrs Juanita Hamparsum to the
Namoi Cotton Board, as its first female Non-Executive
Director.
The intention is to achieve the objectives over time as
employment positions become available.
Namoi Cotton’s Workplace Gender Equality Act public
report is available on its website.
Namoi Cotton at the time of this report has 31% of women
employed on a full-time basis across all sites and locations.
Namoi Cotton is committed to a diversity strategy aimed
to promote the appointment of qualified, experienced and
diverse Directors, Management and Employees to achieve
Namoi Cotton’s objectives on diversity. Namoi Cotton
supports equal opportunity in the recruitment, selection
and promotion of employees from different backgrounds,
2018 ANNUAL REPORT | 11
Robert Green – Non-Executive
Director – 61
B Bus (QAC), MAICD
Mr Green was appointed to the Namoi
Cotton Board as a Non-Grower
Director on 24 May 2013. He was most
recently re-elected at the 2016 general
meeting. Mr Green has considerable
board relevant experience working as
a Senior Executive and General Manager in the Australian
and International agricultural industry over the past
30 years. Key areas of experience include operations
management and business development, including his
current role as Chief Executive Officer of Louis Dreyfus
Company.
Tim Watson – Non-Executive
Director – 56
GAICD
Mr Watson joined the Namoi Cotton
Board in December 2014 as a Grower
Director. He was most recently re-
elected at the 2015 general meeting. He
grows cotton in the Hillston Region and
has been involved in the cotton industry since 2000 and is a
member of the Hillston District Irrigators Association and
the Lachlan River Customer Service Committee. Currently
he is also a representative of the Lachlan Valley Water
Users Association. He brings with him extensive industry
and commercial expertise for the cotton and general
agricultural industry. He was also recognised by the cotton
industry by being the recipient of the 2014 Australian
Cotton Grower of the Year Award.
BOARD OF DIRECTORS
Stuart Boydell – Chairman, Non-
Executive Director – 71
Mr Boydell joined the Namoi Cotton
Board as a Grower Director in June
1994 and has been Chairman since
December 1995. He was most recently
re-elected at the 2017 general meeting.
He has grown cotton on “Cooma” near
Moree, New South Wales for over 20
years and is Chairman of the nomination and remuneration
committee, a member of the audit and compliance
committee and MFRM committee.
Richard Anderson – Non-
Executive Director – 72
OAM, B.Com, FCA, FCPA
Mr Anderson joined the Namoi Cotton
Board as a Non-Grower Director in
July 2001. He was most recently re-
elected at the 2016 general meeting.
Mr Anderson previously held
the
position of managing partner of
PricewaterhouseCoopers in Queensland. Mr Anderson
is a member of the audit and compliance committee, the
MFRM committee and the nomination and remuneration
committee. During the past three years Mr Anderson has
held ASX listed company directorships at Data#3 Limited
(current), Lindsay Australia Ltd (current) and Villa World
Limited (current). He is also currently president of the
Guide Dogs for the Blind Association of Queensland.
Glen Price – Non-Executive
Director – 62
B Rural Science (Hons), GAICD
Mr Price joined the Namoi Cotton Board
in July 2009 as a Grower Director. Mr
Price has previously grown cotton in
the Mungindi region for 34 years and
in the St
continues to grow cotton
George region and has done so for 28 years. He has been
involved in the cotton industry since 1978. He brings with
him extensive industry and commercial expertise. Mr
Price is a member of the MFRM committee. He was most
recently re-elected at the 2015 general meeting. Mr Price
is a member of the Mungindi Cotton Growers and Water
Users Association.
2018 ANNUAL REPORT | 12
2016 ANNUAL REPORT | 12
Juanita Hamparsum – Non-
Executive Director – 47
B Bus (UTS), CA, FPCT, GAICD
Mrs Hamparsum was appointed to the
board as a Grower Director on 7 June
2018. She grows cotton and grains in
the Upper Namoi region and has been
involved in the cotton industry since
1998. Mrs Hamparsum has extensive financial, agricultural
and natural resource management experience. She is a
chartered accountant and currently a director and chair
of board audit committee of Cotton Seed Distributors Ltd
and Chair of Great Artesian Basin Coordinating Committee.
Her former positions include chair of Cotton Innovation
Network, director of Cotton Research and Development
Corporation and Deputy Chair of Namoi Catchment
Management Authority.
James Jackson – Non-Executive
Director – 56
B. COM, FAICD
Mr Jackson was appointed to the board
on June 7, 2018 as a Non-Executive
Director. He has more than 25 years
in capital markets and
experience
in Australia and
agribusiness, both
overseas. He held a Senior Vice President role with
investment bank SG Warburg (now part of UBS) in New York.
He was a director of MSF Sugar Limited from 2004 to 2012
and was Chairman from 2008 to 2012. He also served as the
Deputy Chairman of Elders Limited (ASX: ELD) from 2014 to
2017, and is currently Chairman of Australian Rural Capital
Limited, (ASX:ARC) an
investment company focussed
on Agriculture. Mr Jackson has experience and skills in
capital markets, agricultural supply chains, financial risk
management, the development and implementation of
strategy and public company corporate governance.
Joseph Di Leo – Non-Executive
Director – 61
M.Bus.Acct. & Fin., FAICD
Mr Di Leo was appointed to the Board
as a Non – Executive Director on 7 June
2018. Mr Di Leo has an extensive career
in Agriculture, and is a former Managing
Director of Allied Mills Pty Ltd, a national
manufacturer of flour and bakery products. He is also a
former Chief Operating Officer of GrainCorp Limited, and
previously held a number of executive freight positions with
the NSW State Rail Authority. Mr Di Leo has also previously
been a Non – Executive Director of the Port Kembla Port
Corporation and Teys Australia Pty Ltd. He is currently a
Director of LUCRF Super.
Retired Directors
Mr Michael Boyce a Non-Executive Director
resigned on 24 April 2018.
Mr Ben Coulton a Non-Executive Director
resigned on 31 January 2018.
2018 ANNUAL REPORT | 13
EXECUTIVE MANAGEMENT TEAM
Bailey Garcha - Company
Secretary / General Counsel
BLLB, BFA, GAICD, ACIS, FACIS
Bailey joined Namoi Cotton in 2003. He
has previously held legal and corporate
positions with Sparke Helmore Lawyers,
Minter Ellison Lawyers and the New
South Wales Treasury. His duties include
major contract negotiations, management of litigation,
ASIC and ASX compliance, insurance, superannuation,
employment law management, joint venture, board and
investor relations, corporate governance, internal legal
advice, commercial law and management of transactions
for Namoi Cotton. Bailey is involved in the implementation of
commercial, corporate and operational projects for Namoi
Cotton. Bailey brings over 20 years of legal, corporate and
commercial experience to the senior management team.
David Lindsay - General Manager
Grower Services and Marketing
BAppSci, Dip Exp Man, MBA
in
David joined Namoi Cotton in 1991. David
has previously held a number of positions
with Namoi Cotton
the Grower
Services and Trading departments. Prior
to joining Namoi Cotton, David held an
agricultural management position with National Mutual
Rural Enterprises. David is responsible for domestic
marketing, grower finance, risk management with
growers, pool management and joint venture management.
David brings over 25 years of specialised cotton industry
experience to the senior management team.
Shane McGregor - Chief
Operations Officer
MBA - Master Business Admin, MPM -
Masters of Project Management, USDA
Accredited Cotton Classifier
Shane joined Namoi Cotton in 1999.
Shane has previously held cotton and
cottonseed management positions with
Cotton Trading Corporation Pty Ltd and has been involved
in the cotton industry in various management capacities
since 1991. He has significant management experience in
domestic marketing, commodities exports, logistics, cotton
classing and commodities packing operations and brings
over 20 years of specialised cotton industry experience
to the senior management team. Shane was previously
the General Manager Commodities for Namoi Cotton and
in November 2013 became the Chief Operations Officer
with responsibility for the performance of the ginning,
ginning technical support services, cotton seed trading,
occupational health and safety and environmental business
functions.
Jeremy Callachor – Chief
Executive Officer
BFA (Hons), CA, MAICD
Appointed Chief Executive Officer
in November 2010 and responsible
for all of Namoi Cotton’s business
operations. Between January 2008 and
November 2010, Jeremy held the role
of General Manager – Operations & Human Resources
and was responsible for Namoi Cotton ginning operations,
occupational health & safety and human resources
management. Between June 2003 and January 2008
Jeremy was Chief Financial Officer managing financial,
taxation, treasury and statutory reporting activities. Jeremy
has had previous financial management experience
with Harvest Haul Australia and Rolls Royce Marine in
Scotland, UK. Jeremy has been involved with Namoi Cotton
for more than 20 years and brings a strong knowledge of
Namoi Cotton’s various business operations and strategic
capability to Namoi Cotton Limited. Jeremy is also on the
board of Cotton Australia, a NCA Joint Venture Committee
member and a Director of CPL.
Stuart Greenwood – Chief
Financial Officer
B.FIN. Admin, CA
Stuart joined Namoi Cotton in 2001. He
was appointed Chief Financial Officer
in January 2008, following four years
as Financial Controller, prior to this
various senior accounting
holding
positions within Namoi Cotton. Stuart has previously
held financial management positions within the cotton
industry for CSD and Pursehouse Rural. Stuart oversees
and manages all financial, taxation, treasury and statutory
reporting activities for Namoi. Stuart brings over 20 years
of agricultural financial and management experience to
the senior management team. Stuart is also a NCA Joint
Venture Committee member.
2018 ANNUAL REPORT | 14
NAMOI C OTTON LIMITE D
(Formerly Namoi Cotton Co-Operative Ltd)
ABN 76 010 485 588
FINANCIAL REPORT –
Y E A R EN DED
28 FEBRUARY 2018
2018 ANNUAL REPORT | 15
FINAN CIAL REPORT – CON TE NT S
Appendix 4E .......................................................................................................................... 17
Directors’ Report .................................................................................................................. 18
Auditor’s Independence Declaration .................................................................................... 33
Independent Auditor’s Report .............................................................................................. 34
Directors’ Declaration .......................................................................................................... 39
Statement of Profit and Loss and Other Comprehensive Income ......................................... 40
Balance Sheet ....................................................................................................................... 41
Statement of Cash Flows ...................................................................................................... 42
Statement of Changes in Equity ............................................................................................ 43
Notes to the Financial Statements ....................................................................................... 44
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
Summary of Significant Accounting Policies ............................................................. 44
Revenue and Expenses.............................................................................................. 56
Income Tax ................................................................................................................ 57
Acquisitions ............................................................................................................... 59
Earnings per Share ................................................................................................... 62
Distributions Paid or Provided on Ordinary Shares/Co-operative Capital Units ....... 63
Cash and Cash Equivalents ....................................................................................... 64
Trade and Other Receivables..................................................................................... 66
Inventories ................................................................................................................ 68
Derivative Financial Instruments .............................................................................. 68
Investments in Associates and Joint Ventures using the equity method .................. 69
Interest in Joint Operations ....................................................................................... 72
Interest in Jointly Controlled Assets ......................................................................... 72
Intangible Assets ....................................................................................................... 72
Property, Plant and Equipment ................................................................................. 73
Trade and Other Payables ......................................................................................... 75
Interest Bearing Liabilities ........................................................................................ 76
Provisions .................................................................................................................. 78
Co-operative Grower Member Shares ...................................................................... 78
Contributed Equity .................................................................................................... 79
Nature and Purpose of Reserves .............................................................................. 81
Segment Information ................................................................................................ 81
Commitments and Contingencies ............................................................................. 84
Significant Events after Balance Date ....................................................................... 85
Related Party Disclosures ......................................................................................... 86
Directors’ and Executive Disclosure .......................................................................... 87
Remuneration of Auditors ......................................................................................... 88
Financial Risk Management Objectives and Policies ................................................ 88
Other Non-Financial Information .............................................................................. 99
2018 ANNUAL REPORT | 16
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Appendix 4E
The information contained in this report is for the full-year ended 28 February 2018 and the previous
corresponding period, 28 February 2017.
RESULTS FOR ANNOUNCEMENT TO MARKET
Revenues from ordinary activities
Profit/(Loss) from ordinary activities after tax attributable to members
Net profit/(loss) for the period attributable to members
Dividends (distributions)
Final distribution - (Refer Note 6)
Interim distribution
% Change
$'000
Up 36%
to
483,938
Up 2292%
Up 2292%
6,769
6,769
Amount
Unfranked Amount
per Security
per Security
1.90c
-
1.53c#
-
Record date for determining entitlements to the final dividend
03 July 2018
# Provisional amount pending conversion of remaining residual capital stock
Brief explanation of any of the figures reported above and short details of any bonus or cash issue or
other item(s) of importance not previously released to the market:
Financial performance has improved significantly by $6.5 million year on year underpinned by a 38% increase in
the 2017 Australian crop size. Namoi Cotton’s ginning and cotton seed volumes increased by 47% and 54%
respectively year on year whilst Namoi Cotton Alliance’s (NCA) lint procurement volumes increased by 25%.
Cotton seed trading margins improved considerably through effective risk and position management, market
volatility related trading opportunities and contractual seed yield management. Ginning margins were pressured
through increased unit variable costs associated with reduced productivity from poorer quality seed cotton. The
contribution from NCA improved from the prior year due to increased volumes and enhanced derivative position
management. NCA’s commodity packing volumes declined from the previous record year primarily due to
reduced chickpea yields. Management of fixed costs remained a priority for the business throughout the
financial year. These factors all combined to deliver a $11.8m improvement from the prior year in net cash flows
For further explanation of the annual financial results please refer to the Review of Operations
from operating activities.
shown in Page 4 of this report.
Earnings per share
Basic earnings per ordinary security
Diluted earnings per ordinary security
28 February 2018
28 February 2017
5.3 cents*
0.2 cents*
4.7 cents*
0.2 cents*
Net tangible assets per security
28 February 2018
28 February 2017
Net tangible asset backing per ordinary security
103 cents*
97 cents*
* Adjusted retrospectively for conversion of grower member shares and Namoi capital stock for both periods.
The above specific requirements of Appendix 4E should be read in conjunction with the complete
final report. This financial report has been audited.
Year Ended 28 February 2018
Appendix 4E
Page 3
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Appendix 4E
The information contained in this report is for the full-year ended 28 February 2018 and the previous
corresponding period, 28 February 2017.
RESULTS FOR ANNOUNCEMENT TO MARKET
Revenues from ordinary activities
Profit/(Loss) from ordinary activities after tax attributable to members
Net profit/(loss) for the period attributable to members
Dividends (distributions)
Final distribution - (Refer Note 6)
Interim distribution
% Change
$'000
Up 36%
to
483,938
Up 2292%
Up 2292%
6,769
6,769
Amount
per Security
Unfranked Amount
per Security
1.90c
-
1.53c#
-
Record date for determining entitlements to the final dividend
03 July 2018
# Provisional amount pending conversion of remaining residual capital stock
Brief explanation of any of the figures reported above and short details of any bonus or cash issue or
other item(s) of importance not previously released to the market:
Financial performance has improved significantly by $6.5 million year on year underpinned by a 38% increase in
the 2017 Australian crop size. Namoi Cotton’s ginning and cotton seed volumes increased by 47% and 54%
respectively year on year whilst Namoi Cotton Alliance’s (NCA) lint procurement volumes increased by 25%.
Cotton seed trading margins improved considerably through effective risk and position management, market
volatility related trading opportunities and contractual seed yield management. Ginning margins were pressured
through increased unit variable costs associated with reduced productivity from poorer quality seed cotton. The
contribution from NCA improved from the prior year due to increased volumes and enhanced derivative position
management. NCA’s commodity packing volumes declined from the previous record year primarily due to
reduced chickpea yields. Management of fixed costs remained a priority for the business throughout the
financial year. These factors all combined to deliver a $11.8m improvement from the prior year in net cash flows
from operating activities.
For further explanation of the annual financial results please refer to the Review of Operations
shown in Page 4 of this report.
Page 19 of this report.
Earnings per share
28 February 2018
28 February 2017
Basic earnings per ordinary security
Diluted earnings per ordinary security
5.3 cents*
0.2 cents*
4.7 cents*
0.2 cents*
Net tangible assets per security
28 February 2018
28 February 2017
Net tangible asset backing per ordinary security
103 cents*
97 cents*
* Adjusted retrospectively for conversion of grower member shares and Namoi capital stock for both periods.
The above specific requirements of Appendix 4E should be read in conjunction with the complete
final report. This financial report has been audited.
Year Ended 28 February 2018
Appendix 4E
Page 3
2018 ANNUAL REPORT | 17
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
DIRECTORS’ REPORT
Financial report for the year ended 28 February 2018
Your directors present their report on the consolidated entity consisting of Namoi Cotton Limited and the
entities it controlled at the end of or during the year ended 28 February 2018.
Principal activities
Namoi Cotton is a public company listed on the Australian Stock Exchange Ltd that is domiciled in Australia. The
principal activities of the entities in the economic entity during the course of the year were ginning and
marketing cotton.
Restructure
On 26 September 2017 Grower Members and Namoi Capital Stockholders overwhelmingly approved the
proposed restructure of Namoi Cotton from a Co-operative to an ASX listed public company with a single class
of quoted ordinary shares for Grower Members and Namoi Capital Stockholders to be named Namoi Cotton
Limited. The NSW Supreme Court approved the restructure on 3 October 2017 and on 10 October 2017 Namoi
Cotton was incorporated as Namoi Cotton Limited, a fully listed public company. Refer to Note 20 for further
details. The Board is now working through the details of a capital raising to enable implementation of Namoi
Cotton’s strategic plan.
2017-2018 full year financial results
Namoi Cotton recorded a consolidated net profit after tax from continuing operations of $6.8 million for the full
year ended 28 February 2018 (2017: a net profit of $0.3 million). Positive cash flows from operating activities
were recorded at $17.3 million (2017: positive $5.5 million). The consolidated net profit after tax and positive
cash flow from operating activities result include $1.6 million in pre-tax costs associated with the Restructure.
The consolidated net profit after tax also includes the $0.7 million non-cash fair value increment to the Grower
Member Share liability (Refer Note 20).
Financial performance has improved significantly by $6.5 million year on year underpinned by a 38% increase in
the 2017 Australian crop size. Namoi Cotton’s ginning and cotton seed volumes increased by 47% and 54%
respectively year on year whilst Namoi Cotton Alliance’s (NCA) lint procurement volumes increased by 25%.
Cotton seed trading margins improved considerably through effective risk and position management, market
volatility related trading opportunities and contractual seed yield management. Ginning margins were pressured
through increased unit variable costs associated with reduced productivity from poorer quality seed cotton. The
contribution from NCA improved from the prior year due to increased volumes and enhanced derivative position
management. NCA’s commodity packing volumes declined from the previous record year primarily due to
reduced chickpea yields. Management of fixed costs remained a priority for the business throughout the
financial year. These factors all combined to deliver a $11.8m improvement from the prior year in net cash flows
from operating activities.
Net assets during the period have increased by $7.9 million (2017: increased by $0.3 million) representing a net
tangible asset backing of $1.03 per ordinary share (2017: $0.97 per ordinary share adjusted retrospectively due
page 31).
to the Restructure, refer table on page 17).
Dividends
The directors have announced that Namoi Cotton will pay a final dividend of 1.9 cents per ordinary share on 24
July 2018 which, assuming full conversion of Residual Capital Stock by the proposed record date of 3 July 2018,
will equate to $2.7 million and would represent a payout ratio of 40% of the net profit after tax. The dividend is
expected to be franked to 19.6%. In the prior year, no distributions were declared per unit of Namoi Capital
Stock. No interim dividend was declared in respect of ordinary shares (2017: no interim distribution was declared
in respect of Namoi Capital Stock).
Review of operations
The overall 2017 Australian cotton crop production was recorded at 3.75 million bales (2016 crop: 2.71 million
bales) representing a 38% increase. Sufficient cotton was planted to yield an estimated 4.5 million bales
however, the exceptionally hot conditions in January and February 2017 combined with limited in-crop rainfall
resulted in significant negative impacts to dryland crops and reduced yields of irrigated crops. Irrigated yields
have averaged approximately 10 bales per hectare compared with 11.5 the previous year. In addition to the
lower yields, the quality of the 2017 crop has been negatively impacted by the wet planting conditions, end of
growing period weather and challenging defoliation parameters.
Namoi Cotton ginned 1,015,000 bales (including 100% of joint venture bales) of the 2017 crop (2016 crop:
689,000 bales) representing a 47% increase from the 2016 crop. The increased ginning volumes are directly
related to the larger crop size. The quality of the cotton crop resulted in a reduction in ginning throughput rates
to maximize cotton quality output and limit discounts for the grower. The slower throughput rates have been
the primary driver of a 11% increase in unit ginning variable costs from the prior year reducing ginning gross
margins. Overall, ginning contribution improved by 32%.
Namoi Cotton has continued to invest in its ginning network to improve service offerings to growers and drive
productivity improvements in the ginning business completing significant projects prior to the commencement
of ginning of the 2017 crop. These projects included a $1m upgrade of the Merah North gin yard doubling its
static storage capacity combined with a press upgrade, the addition of a fourth gin stand and associated cleaning
equipment combined with a press upgrade at Boggabri catering for the expanding southern upper Namoi valley
production, the addition of a third gin stand and associated cleaning equipment at North Bourke and an upgrade
to lint cleaning equipment at the Ashley gin. Post the ginning season, Namoi Cotton has commenced significant
projects at its Trangie gin with the addition of a fourth gin stand and associated cleaning equipment combined
with a press upgrade to support incremental volumes along with a significant upgrade to the cleaning and
moisture capacity equipment of the Wathagar cotton gin. Namoi Cotton’s continued commitment to workplace
health and safety as a priority has resulted in a 35% improvement in our lost time injury frequency rate compared
to the previous year.
Our cotton seed trading business shipped and handled 266,000Mt (2016 crop: 172,000Mt) with contribution
from the seed business a strong contributor to the overall results increasing by $8.0 million from the previous
year. Seed prices remained firm into the commencement of ginning supported by the dry conditions and Chinese
demand. Market prices in China along with a slowing of Chinese demand associated with the continuing Bollgard
III cotton seed import restrictions resulted in cotton seed being sold back into the domestic market and slowed
the movement of cotton seed from gin sites pressuring prices in the second half of the ginning period and
through to the end of the financial year. The lower prices have slowed contracting of 2018 crop ginning volumes
as growers wait for improved price levels. Effective risk management combined with contractual yield
management have significantly widened cotton seed trading margins from the previous year. In the second half
of the financial year Namoi Cotton has invested in a significant increase in cotton seed storage capacity at its
Hillston and Trangie gins to provide support to our trading business, improved margin opportunities and storage
options for growers in this lower priced environment.
Namoi Cotton’s 15% interest in the Cargill Oilseeds Australia business contributed a loss of $1.4 million (2017:
loss of $0.8 million). Whilst year on year volumes improved for both the Narrabri (cotton seed) and Footscray
(canola) crush facilities, margins were significantly impacted. Early year high priced cotton seed combined with
competing market challenges in the feed sector for meal and hulls reduced cotton seed crush margins.
Aggressive origination competition for canola seed combined with soybean meal imports and oil price reductions
due to alternate stocks and supplies lowered canola crushing margins.
NCA’s total cotton lint marketing volumes procured for the 2017 season were 636,000 bales (2016 season:
507,000 bales). This reflects a 25% improvement in volume traded which was largely associated with larger
Australian production. Lint marketing gross margins continued to be under pressure through competition to
secure cotton. Improved derivative position management throughout the year however ensured this margin
pressure was more than offset in overall marketing contributions. This resulted in a $0.45 million improvement
in Namoi Cotton’s share of NCA’s lint business in the financial results over the prior year.
NCA’s commodity packing business packed 168,000Mt in 2017 (2016 crop: 226,000Mt) including principally
chickpeas and cotton seed. Packing volumes declined from the record volumes achieved in the preceding year
impacted by the slowdown in cotton seed demand from China, reduced chickpea yields impacted by adverse
agronomic conditions and the Indian government’s import policy decisions implementing a 60% import tariff
restriction on Australian chickpeas. Chickpea packing volumes were supported by carryover 2016 crop packing
and new 2017 crop Bangladesh and Pakistan demand. The Indian situation however leaves more than 30,000Mt
of chickpeas in stock to be packed in the FY 2018/19 financial year.
Year Ended 28 February 2018
Directors’ Report
2018 ANNUAL REPORT | 18
Page 4
Year Ended 28 February 2018
Directors’ Report
Page 5
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
DIRECTORS’ REPORT
Financial report for the year ended 28 February 2018
Your directors present their report on the consolidated entity consisting of Namoi Cotton Limited and the
entities it controlled at the end of or during the year ended 28 February 2018.
Namoi Cotton is a public company listed on the Australian Stock Exchange Ltd that is domiciled in Australia. The
principal activities of the entities in the economic entity during the course of the year were ginning and
Principal activities
marketing cotton.
Restructure
On 26 September 2017 Grower Members and Namoi Capital Stockholders overwhelmingly approved the
proposed restructure of Namoi Cotton from a Co-operative to an ASX listed public company with a single class
of quoted ordinary shares for Grower Members and Namoi Capital Stockholders to be named Namoi Cotton
Limited. The NSW Supreme Court approved the restructure on 3 October 2017 and on 10 October 2017 Namoi
Cotton was incorporated as Namoi Cotton Limited, a fully listed public company. Refer to Note 20 for further
details. The Board is now working through the details of a capital raising to enable implementation of Namoi
Cotton’s strategic plan.
2017-2018 full year financial results
Namoi Cotton recorded a consolidated net profit after tax from continuing operations of $6.8 million for the full
year ended 28 February 2018 (2017: a net profit of $0.3 million). Positive cash flows from operating activities
were recorded at $17.3 million (2017: positive $5.5 million). The consolidated net profit after tax and positive
cash flow from operating activities result include $1.6 million in pre-tax costs associated with the Restructure.
The consolidated net profit after tax also includes the $0.7 million non-cash fair value increment to the Grower
Member Share liability (Refer Note 20).
Financial performance has improved significantly by $6.5 million year on year underpinned by a 38% increase in
the 2017 Australian crop size. Namoi Cotton’s ginning and cotton seed volumes increased by 47% and 54%
respectively year on year whilst Namoi Cotton Alliance’s (NCA) lint procurement volumes increased by 25%.
Cotton seed trading margins improved considerably through effective risk and position management, market
volatility related trading opportunities and contractual seed yield management. Ginning margins were pressured
through increased unit variable costs associated with reduced productivity from poorer quality seed cotton. The
contribution from NCA improved from the prior year due to increased volumes and enhanced derivative position
management. NCA’s commodity packing volumes declined from the previous record year primarily due to
reduced chickpea yields. Management of fixed costs remained a priority for the business throughout the
financial year. These factors all combined to deliver a $11.8m improvement from the prior year in net cash flows
from operating activities.
Net assets during the period have increased by $7.9 million (2017: increased by $0.3 million) representing a net
tangible asset backing of $1.03 per ordinary share (2017: $0.97 per ordinary share adjusted retrospectively due
to the Restructure, refer table on page 17).
Dividends
The directors have announced that Namoi Cotton will pay a final dividend of 1.9 cents per ordinary share on 24
July 2018 which, assuming full conversion of Residual Capital Stock by the proposed record date of 3 July 2018,
will equate to $2.7 million and would represent a payout ratio of 40% of the net profit after tax. The dividend is
expected to be franked to 19.6%. In the prior year, no distributions were declared per unit of Namoi Capital
Stock. No interim dividend was declared in respect of ordinary shares (2017: no interim distribution was declared
in respect of Namoi Capital Stock).
Review of operations
The overall 2017 Australian cotton crop production was recorded at 3.75 million bales (2016 crop: 2.71 million
bales) representing a 38% increase. Sufficient cotton was planted to yield an estimated 4.5 million bales
however, the exceptionally hot conditions in January and February 2017 combined with limited in-crop rainfall
resulted in significant negative impacts to dryland crops and reduced yields of irrigated crops. Irrigated yields
have averaged approximately 10 bales per hectare compared with 11.5 the previous year. In addition to the
lower yields, the quality of the 2017 crop has been negatively impacted by the wet planting conditions, end of
growing period weather and challenging defoliation parameters.
Namoi Cotton ginned 1,015,000 bales (including 100% of joint venture bales) of the 2017 crop (2016 crop:
689,000 bales) representing a 47% increase from the 2016 crop. The increased ginning volumes are directly
related to the larger crop size. The quality of the cotton crop resulted in a reduction in ginning throughput rates
to maximize cotton quality output and limit discounts for the grower. The slower throughput rates have been
the primary driver of a 11% increase in unit ginning variable costs from the prior year reducing ginning gross
margins. Overall, ginning contribution improved by 32%.
Namoi Cotton has continued to invest in its ginning network to improve service offerings to growers and drive
productivity improvements in the ginning business completing significant projects prior to the commencement
of ginning of the 2017 crop. These projects included a $1m upgrade of the Merah North gin yard doubling its
static storage capacity combined with a press upgrade, the addition of a fourth gin stand and associated cleaning
equipment combined with a press upgrade at Boggabri catering for the expanding southern upper Namoi valley
production, the addition of a third gin stand and associated cleaning equipment at North Bourke and an upgrade
to lint cleaning equipment at the Ashley gin. Post the ginning season, Namoi Cotton has commenced significant
projects at its Trangie gin with the addition of a fourth gin stand and associated cleaning equipment combined
with a press upgrade to support incremental volumes along with a significant upgrade to the cleaning and
moisture capacity equipment of the Wathagar cotton gin. Namoi Cotton’s continued commitment to workplace
health and safety as a priority has resulted in a 35% improvement in our lost time injury frequency rate compared
to the previous year.
Our cotton seed trading business shipped and handled 266,000Mt (2016 crop: 172,000Mt) with contribution
from the seed business a strong contributor to the overall results increasing by $8.0 million from the previous
year. Seed prices remained firm into the commencement of ginning supported by the dry conditions and Chinese
demand. Market prices in China along with a slowing of Chinese demand associated with the continuing Bollgard
III cotton seed import restrictions resulted in cotton seed being sold back into the domestic market and slowed
the movement of cotton seed from gin sites pressuring prices in the second half of the ginning period and
through to the end of the financial year. The lower prices have slowed contracting of 2018 crop ginning volumes
as growers wait for improved price levels. Effective risk management combined with contractual yield
management have significantly widened cotton seed trading margins from the previous year. In the second half
of the financial year Namoi Cotton has invested in a significant increase in cotton seed storage capacity at its
Hillston and Trangie gins to provide support to our trading business, improved margin opportunities and storage
options for growers in this lower priced environment.
Namoi Cotton’s 15% interest in the Cargill Oilseeds Australia business contributed a loss of $1.4 million (2017:
loss of $0.8 million). Whilst year on year volumes improved for both the Narrabri (cotton seed) and Footscray
(canola) crush facilities, margins were significantly impacted. Early year high priced cotton seed combined with
competing market challenges in the feed sector for meal and hulls reduced cotton seed crush margins.
Aggressive origination competition for canola seed combined with soybean meal imports and oil price reductions
due to alternate stocks and supplies lowered canola crushing margins.
NCA’s total cotton lint marketing volumes procured for the 2017 season were 636,000 bales (2016 season:
507,000 bales). This reflects a 25% improvement in volume traded which was largely associated with larger
Australian production. Lint marketing gross margins continued to be under pressure through competition to
secure cotton. Improved derivative position management throughout the year however ensured this margin
pressure was more than offset in overall marketing contributions. This resulted in a $0.45 million improvement
in Namoi Cotton’s share of NCA’s lint business in the financial results over the prior year.
NCA’s commodity packing business packed 168,000Mt in 2017 (2016 crop: 226,000Mt) including principally
chickpeas and cotton seed. Packing volumes declined from the record volumes achieved in the preceding year
impacted by the slowdown in cotton seed demand from China, reduced chickpea yields impacted by adverse
agronomic conditions and the Indian government’s import policy decisions implementing a 60% import tariff
restriction on Australian chickpeas. Chickpea packing volumes were supported by carryover 2016 crop packing
and new 2017 crop Bangladesh and Pakistan demand. The Indian situation however leaves more than 30,000Mt
of chickpeas in stock to be packed in the FY 2018/19 financial year.
Year Ended 28 February 2018
Directors’ Report
Page 4
Year Ended 28 February 2018
Directors’ Report
Page 5
2018 ANNUAL REPORT | 19
With the northern cotton valleys water availability more negatively impacted than the southern cotton valleys,
the current outlook would reflect lower ginning volumes in 2019 for Namoi Cotton given most infrastructure is
in the central and northern cotton valleys. Namoi Cotton will be focused on maximising market share in both
ginning and cotton seed trading volumes along with further operational efficiencies. NCA will be targeting
increased market share through greater competitive focus in the southern valleys, effective position
management and a proactive export sales management campaign. The commodity packing business will be
looking to increase volumes and broader commodity exposure. A strong focus will be on maximising financial
performance in the 2019 season.
Significant events after balance date
There have been no significant events after balance date other than as disclosed in Note 24 in this report.
There has been no significant change in the state of affairs of the consolidated entity during the year other than
Significant changes in the state of affairs
as disclosed elsewhere in this report.
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Finance costs have reduced by $0.05 million, with the continuing low interest rate environment prevailing
throughout the period and further reductions to term debt. Namoi Cotton completed a term debt repayment of
$5.5 million during the financial year. Term debt at balance date stands at $42 million with further amortisation
anticipated from free cash flow from operating activities in FY 2018/19.
During the year we continued implementation of our strategic plan to grow the Namoi Cotton business including
completing the acquisition of Twynam Agricultural Group Pty Ltd’s 50% participating interest in the Australian
Classing Services joint venture for $0.7 million and PJ & JM Harris Pty Ltd’s 25% participating interest in the
Moomin Ginning Company joint venture for $2.0 million. These acquisitions are anticipated to deliver increased
earnings before interest, taxation and depreciation of $0.4 million in the year ending 28 February 2019.
Likely developments
2018 Season
The final cotton area planted was 371,000 hectares irrigated and 81,000 hectares dryland. Since planting through
late February/early March 2018 the rainfall normally associated with La Niña conditions has not eventuated. The
weather conditions in the early part of 2018 have been more favourable than those of the same period in 2017
with not as prolonged excessive heat periods and cooler overnight temperatures and as a result the fruit
retention of irrigated crops looks very encouraging. Water shortages for irrigated cotton in the St George,
Dirranbandi areas and some parts of the Gwydir valley will impact overall production yield to conserve irrigation
water supplies. The dryland planting has been more heavily impacted due to no rainfall. Early ginning results
would suggest an improvement upon the poor yields associated with the 2017 crop. Considering all these
factors, we estimate the 2018 Australian cotton crop will at this stage still produce approximately 4.6 million
bales.
Namoi Cotton anticipates that it will gin between 1.10 million and 1.20 million bales from the 2018 crop,
including 100% of joint venture gins, representing an improvement of between 8% and 18% from the previous
year.
It is expected that our cotton seed trading volumes will increase proportionally in line with the increase in ginning
volumes. The industry carryover of 2017 crop cotton seed combined with the inability to export Bollgard III
cotton seed to China from the middle of 2017, the lower value of cotton seed and likely reduced 2018 crop seed
yields will likely to pressure cotton seed contributions over the course of the 2018 crop.
NCA’s lint marketing volumes are estimated to be between 700,000 and 800,000 bales from the 2018 crop,
representing an increase of between 10% and 26% from the prior crop. Significant competition for marketing
volumes is anticipated to continue to pressure marketing gross margins in 2018 albeit they remain supported by
strong demand from Bangladesh and healthy forward Chinese sales. Gross margin recovery is expected to be
achieved through improved supply chain organization and logistics. NCA’s containerized commodity packing
volumes are forecast to be consistent with the current year, supported by Autumn/Winter rainfall and a return
to improved yields in chickpea production.
Namoi Cotton’s operations in 2018 are predicted to deliver another strong financial result from incremental
volume increases. Improved unit contributions are also expected to flow from the commissioning of key gin
upgrades and the assumption of improved seed cotton quality from the 2018 crop. Consistent earnings are
anticipated from Namoi Cotton’s 51% investment in NCA, whilst lower contribution is forecast from the cotton
seed trading business.
2019 Season
The lack of general rainfall since planting of the 2018 crop stretched water supplies with some production areas
being short of water and sacrificing crop. Other areas have significantly drawn down on farm storage water
reserves and public storage water allocations resulting particularly in the Northern basin of the Murray Darling
System low current levels of available irrigation water. In the Southern basin, significant water has also been
utilised, however, public storages are better placed than their Northern Basin counterparts and will benefit from
the looming winter snow conditions. Based on the current available irrigation water, our current estimate of the
2019 Australian cotton crop would reflect 3.0 million bales of production underpinned by strong production in
the Lachlan, Murrumbidgee and Murray valleys. It is anticipated a repeat of the dry winter conditions from 2017
will not be repeated in 2018 and winter rainfall will improve this outlook.
Year Ended 28 February 2018
Directors’ Report
2018 ANNUAL REPORT | 20
Page 6
Year Ended 28 February 2018
Directors’ Report
Page 7
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
With the northern cotton valleys water availability more negatively impacted than the southern cotton valleys,
the current outlook would reflect lower ginning volumes in 2019 for Namoi Cotton given most infrastructure is
in the central and northern cotton valleys. Namoi Cotton will be focused on maximising market share in both
ginning and cotton seed trading volumes along with further operational efficiencies. NCA will be targeting
increased market share through greater competitive focus in the southern valleys, effective position
management and a proactive export sales management campaign. The commodity packing business will be
looking to increase volumes and broader commodity exposure. A strong focus will be on maximising financial
performance in the 2019 season.
Significant events after balance date
There have been no significant events after balance date other than as disclosed in Note 24 in this report.
Significant changes in the state of affairs
There has been no significant change in the state of affairs of the consolidated entity during the year other than
as disclosed elsewhere in this report.
Finance costs have reduced by $0.05 million, with the continuing low interest rate environment prevailing
throughout the period and further reductions to term debt. Namoi Cotton completed a term debt repayment of
$5.5 million during the financial year. Term debt at balance date stands at $42 million with further amortisation
anticipated from free cash flow from operating activities in FY 2018/19.
During the year we continued implementation of our strategic plan to grow the Namoi Cotton business including
completing the acquisition of Twynam Agricultural Group Pty Ltd’s 50% participating interest in the Australian
Classing Services joint venture for $0.7 million and PJ & JM Harris Pty Ltd’s 25% participating interest in the
Moomin Ginning Company joint venture for $2.0 million. These acquisitions are anticipated to deliver increased
earnings before interest, taxation and depreciation of $0.4 million in the year ending 28 February 2019.
Likely developments
2018 Season
The final cotton area planted was 371,000 hectares irrigated and 81,000 hectares dryland. Since planting through
late February/early March 2018 the rainfall normally associated with La Niña conditions has not eventuated. The
weather conditions in the early part of 2018 have been more favourable than those of the same period in 2017
with not as prolonged excessive heat periods and cooler overnight temperatures and as a result the fruit
retention of irrigated crops looks very encouraging. Water shortages for irrigated cotton in the St George,
Dirranbandi areas and some parts of the Gwydir valley will impact overall production yield to conserve irrigation
water supplies. The dryland planting has been more heavily impacted due to no rainfall. Early ginning results
would suggest an improvement upon the poor yields associated with the 2017 crop. Considering all these
factors, we estimate the 2018 Australian cotton crop will at this stage still produce approximately 4.6 million
bales.
year.
Namoi Cotton anticipates that it will gin between 1.10 million and 1.20 million bales from the 2018 crop,
including 100% of joint venture gins, representing an improvement of between 8% and 18% from the previous
It is expected that our cotton seed trading volumes will increase proportionally in line with the increase in ginning
volumes. The industry carryover of 2017 crop cotton seed combined with the inability to export Bollgard III
cotton seed to China from the middle of 2017, the lower value of cotton seed and likely reduced 2018 crop seed
yields will likely to pressure cotton seed contributions over the course of the 2018 crop.
NCA’s lint marketing volumes are estimated to be between 700,000 and 800,000 bales from the 2018 crop,
representing an increase of between 10% and 26% from the prior crop. Significant competition for marketing
volumes is anticipated to continue to pressure marketing gross margins in 2018 albeit they remain supported by
strong demand from Bangladesh and healthy forward Chinese sales. Gross margin recovery is expected to be
achieved through improved supply chain organization and logistics. NCA’s containerized commodity packing
volumes are forecast to be consistent with the current year, supported by Autumn/Winter rainfall and a return
to improved yields in chickpea production.
Namoi Cotton’s operations in 2018 are predicted to deliver another strong financial result from incremental
volume increases. Improved unit contributions are also expected to flow from the commissioning of key gin
upgrades and the assumption of improved seed cotton quality from the 2018 crop. Consistent earnings are
anticipated from Namoi Cotton’s 51% investment in NCA, whilst lower contribution is forecast from the cotton
seed trading business.
2019 Season
The lack of general rainfall since planting of the 2018 crop stretched water supplies with some production areas
being short of water and sacrificing crop. Other areas have significantly drawn down on farm storage water
reserves and public storage water allocations resulting particularly in the Northern basin of the Murray Darling
System low current levels of available irrigation water. In the Southern basin, significant water has also been
utilised, however, public storages are better placed than their Northern Basin counterparts and will benefit from
the looming winter snow conditions. Based on the current available irrigation water, our current estimate of the
2019 Australian cotton crop would reflect 3.0 million bales of production underpinned by strong production in
the Lachlan, Murrumbidgee and Murray valleys. It is anticipated a repeat of the dry winter conditions from 2017
will not be repeated in 2018 and winter rainfall will improve this outlook.
Year Ended 28 February 2018
Directors’ Report
Page 6
Year Ended 28 February 2018
Directors’ Report
Page 7
2018 ANNUAL REPORT | 21
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Directors
The names, qualifications and experience of the company’s directors that held office throughout the financial
year and up to the date of this report, unless otherwise indicated, are as follows.
Stuart C Boydell, Chairman, Non-executive Director, 71
Mr. Boydell joined the board of directors as a grower director in June 1994 and has been chairman since
December 1995. He was most recently re-elected at the 2017 general meeting. He has grown cotton on “Cooma”
near Moree, NSW for over 20 years and is chairman of the remuneration committee and a member of the audit
and compliance committee and marketing and financial risk management committee.
Richard Anderson, Non-executive Director, 72, OAM, B. Com, FCA, FCPA
Mr. Anderson joined the board as a non-grower director in July 2001. He was most recently re-elected at the
2016 general meeting. Mr Anderson previously held
the position of Managing Partner of
PricewaterhouseCoopers in Queensland. He is the chairman of both the audit and compliance committee and
the marketing and financial risk management committee and is a member of the remuneration committee.
During the past three years Mr Anderson has held ASX listed company directorships at Data#3 Limited (current
– appointed 27 October 1997) and Lindsay Australia Ltd (current – appointed 16 December 2002). He is also
currently president of the Guide Dogs for the Blind Association of Queensland.
Michael Boyce, Non-executive Director, 75, FCA, FAICD, B Com, HDA
Mr. Boyce joined the board as a non-grower director in October 2002. He was most recently re-elected at the
2015 general meeting. He was the founding partner of BOYCE Chartered Accountants. He is currently a director
of Monbeef Pty Ltd, Hazeldean Pty Ltd, Fugen Hardware Group and Birdnest Pty Ltd. Mr. Boyce is a member of
the audit and compliance committee and the remuneration committee.
Ben Coulton, Non-executive Director, 63
Mr Coulton joined the board of directors in July 2006 as a grower director. He was most recently re-elected at
the 2015 general meeting. Mr Coulton has been growing cotton in the MacIntyre region since 1976. He brings
with him extensive industry and commercial expertise. Mr Coulton resigned from the board on 31 January 2018.
Glen Price, Non-executive Director, 62, B Rural Science (Hons), GAICD
Mr Price joined the board of directors in July 2009 as a grower director. He was most recently re-elected at the
2015 general meeting. Mr Price grows cotton in both the Mungindi and St George regions and has been involved
in the cotton industry since 1978. He brings with him extensive industry and commercial expertise. Mr. Price is
a member of the marketing and financial risk management committee.
Robert L Green, Non-executive Director, 61, B Bus (QAC), MAICD
Mr Green was appointed to the Board as a non-grower director on 27 May 2013. He was most recently re-elected
to the Board at the 2016 general meeting. Mr Green has considerable board relevant experience working as a
Senior Executive and General Manager in the Australian and International agricultural industry for more than 28
years. Key areas of experience include trading, marketing, operations management and business development,
including his current role as Chief Executive Officer of Louis Dreyfus Commodities Australia Pty Ltd. Mr Green is
a member of the audit and compliance committee and the remuneration committee. He has been past President
of the Australian Oilseeds Federation and Australian Grain Exporters Association.
Tim Watson, Non-executive Director, 56, GAICD
Mr Watson joined the Board in December 2014 as a grower director. He was elected to the Board at the 2015
general meeting. He grows cotton in the Hillston Region and has been involved in the cotton industry since 2000
and is a member of the Hillston District Irrigators Association and the Lachlan River Customer Service Committee.
Currently he is also a representative of the Lachlan Valley Water Users Association. He brings with him extensive
industry and commercial expertise for the cotton and general agricultural industry. He was also recognised by
the cotton industry as the recipient of the 2014 Australian Cotton Grower of the Year Award.
Company secretary
Bailey Garcha, 44, BLLB, BFA, Dip Legal Studies, Dip Legal Practice, ACIS, GAICD
Mr Garcha joined Namoi Cotton in July 2003 and has previously held legal and commercial positions with Minter
Ellison Lawyers, Sparke Helmore Lawyers and NSW Treasury.
Board & committee meeting attendance
Meetings held and attended by each of the directors during the financial year were as follows:
Directors'
Meetings1
Audit and
Financial Risk
Compliance
Management Remuneration
Committee Meetings1
Marketing
and
4
4
3
-
-
4
-
4
4
4
4
-
-
-
-
4
4
4
3
-
-
4
-
4
SC Boydell (Chairman)
RA Anderson
M Boyce
B Coulton (resigned 31 January 2018)
G Price
R Green
T Watson
Total number of meetings held
22
19
18
20
21
22
22
22
1 All board members were available to attend directors’ meetings and relevant committee meetings. Prior to resigning
B Coulton was available to attend 20 meetings of 20 Directors’ meetings held.
Committee membership
As at the date of this report, the company had an audit and compliance committee, a marketing and financial
risk management committee and a remuneration committee.
Members acting on the committees of the Board during the year were:
Audit and Compliance
Marketing and Financial Risk
Remuneration
RA Anderson (Chairman)
RA Anderson (Chairman)
SC Boydell (Chairman)
Management
SC Boydell
G Price
RA Anderson
R Green
M Boyce
M Boyce
SC Boydell
R Green
There have been no changes to the CEO or other KMP in the period after the reporting date and prior to the
date when this financial report was authorised for issue.
Year Ended 28 February 2018
Directors’ Report
2018 ANNUAL REPORT | 22
Page 8
Year Ended 28 February 2018
Directors’ Report
Page 9
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Directors
The names, qualifications and experience of the company’s directors that held office throughout the financial
year and up to the date of this report, unless otherwise indicated, are as follows.
Stuart C Boydell, Chairman, Non-executive Director, 71
Mr. Boydell joined the board of directors as a grower director in June 1994 and has been chairman since
December 1995. He was most recently re-elected at the 2017 general meeting. He has grown cotton on “Cooma”
near Moree, NSW for over 20 years and is chairman of the remuneration committee and a member of the audit
and compliance committee and marketing and financial risk management committee.
Richard Anderson, Non-executive Director, 72, OAM, B. Com, FCA, FCPA
Mr. Anderson joined the board as a non-grower director in July 2001. He was most recently re-elected at the
2016 general meeting. Mr Anderson previously held
the position of Managing Partner of
PricewaterhouseCoopers in Queensland. He is the chairman of both the audit and compliance committee and
the marketing and financial risk management committee and is a member of the remuneration committee.
During the past three years Mr Anderson has held ASX listed company directorships at Data#3 Limited (current
– appointed 27 October 1997) and Lindsay Australia Ltd (current – appointed 16 December 2002). He is also
currently president of the Guide Dogs for the Blind Association of Queensland.
Michael Boyce, Non-executive Director, 75, FCA, FAICD, B Com, HDA
Mr. Boyce joined the board as a non-grower director in October 2002. He was most recently re-elected at the
2015 general meeting. He was the founding partner of BOYCE Chartered Accountants. He is currently a director
of Monbeef Pty Ltd, Hazeldean Pty Ltd, Fugen Hardware Group and Birdnest Pty Ltd. Mr. Boyce is a member of
the audit and compliance committee and the remuneration committee.
Ben Coulton, Non-executive Director, 63
Mr Coulton joined the board of directors in July 2006 as a grower director. He was most recently re-elected at
the 2015 general meeting. Mr Coulton has been growing cotton in the MacIntyre region since 1976. He brings
with him extensive industry and commercial expertise. Mr Coulton resigned from the board on 31 January 2018.
Glen Price, Non-executive Director, 62, B Rural Science (Hons), GAICD
Mr Price joined the board of directors in July 2009 as a grower director. He was most recently re-elected at the
2015 general meeting. Mr Price grows cotton in both the Mungindi and St George regions and has been involved
in the cotton industry since 1978. He brings with him extensive industry and commercial expertise. Mr. Price is
a member of the marketing and financial risk management committee.
Robert L Green, Non-executive Director, 61, B Bus (QAC), MAICD
Mr Green was appointed to the Board as a non-grower director on 27 May 2013. He was most recently re-elected
to the Board at the 2016 general meeting. Mr Green has considerable board relevant experience working as a
Senior Executive and General Manager in the Australian and International agricultural industry for more than 28
years. Key areas of experience include trading, marketing, operations management and business development,
including his current role as Chief Executive Officer of Louis Dreyfus Commodities Australia Pty Ltd. Mr Green is
a member of the audit and compliance committee and the remuneration committee. He has been past President
of the Australian Oilseeds Federation and Australian Grain Exporters Association.
Tim Watson, Non-executive Director, 56, GAICD
Mr Watson joined the Board in December 2014 as a grower director. He was elected to the Board at the 2015
general meeting. He grows cotton in the Hillston Region and has been involved in the cotton industry since 2000
and is a member of the Hillston District Irrigators Association and the Lachlan River Customer Service Committee.
Currently he is also a representative of the Lachlan Valley Water Users Association. He brings with him extensive
industry and commercial expertise for the cotton and general agricultural industry. He was also recognised by
the cotton industry as the recipient of the 2014 Australian Cotton Grower of the Year Award.
Company secretary
Bailey Garcha, 44, BLLB, BFA, Dip Legal Studies, Dip Legal Practice, ACIS, GAICD
Mr Garcha joined Namoi Cotton in July 2003 and has previously held legal and commercial positions with Minter
Ellison Lawyers, Sparke Helmore Lawyers and NSW Treasury.
Board & committee meeting attendance
Meetings held and attended by each of the directors during the financial year were as follows:
Committee Meetings1
Marketing
and
Financial Risk
Management Remuneration
Audit and
Compliance
Directors'
Meetings1
SC Boydell (Chairman)
RA Anderson
M Boyce
B Coulton (resigned 31 January 2018)
G Price
R Green
T Watson
Total number of meetings held
22
19
18
20
21
22
22
22
4
4
3
-
-
4
-
4
4
4
-
-
4
-
-
4
4
4
3
-
-
4
-
4
1 All board members were available to attend directors’ meetings and relevant committee meetings. Prior to resigning
B Coulton was available to attend 20 meetings of 20 Directors’ meetings held.
Committee membership
As at the date of this report, the company had an audit and compliance committee, a marketing and financial
risk management committee and a remuneration committee.
Members acting on the committees of the Board during the year were:
Audit and Compliance
RA Anderson (Chairman)
M Boyce
SC Boydell
R Green
Marketing and Financial Risk
Management
RA Anderson (Chairman)
SC Boydell
G Price
Remuneration
SC Boydell (Chairman)
RA Anderson
R Green
M Boyce
There have been no changes to the CEO or other KMP in the period after the reporting date and prior to the
date when this financial report was authorised for issue.
Year Ended 28 February 2018
Directors’ Report
Page 8
Year Ended 28 February 2018
Directors’ Report
Page 9
2018 ANNUAL REPORT | 23
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Remuneration report (audited)
This remuneration report outlines the director and executive remuneration arrangements of the company and
the consolidated entity in accordance with the requirements of the Corporations Act 2001 and its Regulations.
For the purposes of this report Key Management Personnel (KMP) of the group are defined as those having the
authority and responsibility either directly or indirectly for planning, directing and controlling the major activities
of the company and the group, including any director of the company.
a) Details of Directors and Executives
Directors
Mr S C Boydell
Mr R A Anderson
Mr M Boyce
Mr B Coulton
Mr G Price
Mr R Green
Mr T J Watson
Executives
Mr J Callachor
Mr S Greenwood
Mr D Lindsay
Mr B Garcha
Mr S McGregor
Chairman, non-executive
Director, non-executive
Director, non-executive
Director, non-executive (resigned 31 January 2018)
Director, non-executive
Director, non-executive
Director, non-executive
Chief Executive Officer (CEO)
Chief Financial Officer (CFO)
General Manager – Grower Services and Marketing
General Counsel and Company Secretary
Chief Operations Officer (COO)
b) Compensation of KMP
Compensation Policy
The performance of Namoi Cotton depends upon the quality of its directors and executives. To prosper and
deliver maximised stakeholder returns, Namoi Cotton must attract, motivate and retain highly skilled and
qualified directors and executives.
To this end, Namoi Cotton embodies the following principles in its compensation framework:
•
•
• A portion of executive compensation is ‘at risk’, dependent upon the company and individual executive
Provide competitive rewards to attract high calibre executives;
Link executive rewards to company performance and shareholder value;
meeting pre-determined performance benchmarks; and
Establish performance hurdles in relation to variable executive compensation.
•
Remuneration Committee
The remuneration committee of the board of directors of Namoi Cotton is responsible for determining and
reviewing compensation arrangements for all KMP, including the directors, the CEO and other members of the
senior executive team.
The remuneration committee assesses compensation arrangements of KMP annually, by reference to relevant
employment market conditions and available independent external remuneration data. The overall objective of
this assessment is to ensure maximisation of stakeholder returns from the retention of a high quality board and
executive team employees.
Compensation Structure
In accordance with best practice corporate governance, the structure of non-executive director and executive
compensation is separate and distinct.
i) Non-executive Director Compensation
Objective
Structure
The board seeks to set aggregate compensation at a level that provides the company with the ability to attract
and retain directors of the highest calibre, whilst incurring a cost that is acceptable to shareholders.
The previous co-operative rules specified that the Members at each general meeting shall determine
compensation of non-executive directors. The latest amendment was at the general meeting held on 27 July
2005 when the Members approved an aggregate compensation of $310,000 per year plus applicable committee
fees. The new Constitution for Namoi Cotton Limited provides for aggregate directors’ fees of up to $850,000
per annum to be paid to Directors. It is proposed following the Restructure the current fees paid to the Directors
will be reviewed to determine if they are consistent with market rates for an ASX listed company of the size and
complexity of Namoi Cotton under its new governance structure. Any increase in fees paid to the Directors
following the review will be accommodated within the aggregate cap set out in the Constitution.
The amount of compensation and the manner in which it is apportioned amongst directors is reviewed annually.
The board may consider advice from external consultants as well as the fees paid to non-executive directors of
comparable companies when undertaking the annual review process.
Each director receives a fee for being a director of the company. An additional fee ($2,500 per committee, $7,500
to chair a committee) is also paid for each board committee on which a director sits. The payment of additional
fees for serving on a committee recognises the additional time commitment required by directors who serve on
one or more sub-committees.
director on market.
Non-executive directors have been encouraged by the board to hold shares in the company purchased by the
Any Director in office at 10 October 2017 which has or will serve two terms is entitled to a retirement benefit
equivalent to two year’s remuneration based on their remuneration for the 2017-18 financial year.
The compensation of non-executive directors for the period ending 28 February 2018 is detailed on page 14 of
ii) Executive Compensation
this report.
Objective
•
•
•
•
Structure
The company aims to reward executives with a level and mix of compensation commensurate with their position
and responsibilities within the company so as to:
reward executives for performance against targets set by reference to appropriate benchmarks;
align the interest of executives with those of shareholders;
link rewards with the strategic goals and performance of the company; and
ensure total compensation is competitive by market standards.
Employment agreements have been negotiated with the CEO and other KMP. Details of these contracts are
provided on pages 12 and 13 of this report.
Each KMP agreement includes compensation which consists of the following key elements:
•
Fixed Compensation;
• Variable Compensation comprising Short Term Incentives (STI)
The remuneration committee establishes the proportion of fixed and variable (potential STI) compensation for
KMP.
Year Ended 28 February 2018
Directors’ Report
2018 ANNUAL REPORT | 24
Page 10
Year Ended 28 February 2018
Directors’ Report
Page 11
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
i) Non-executive Director Compensation
Objective
The board seeks to set aggregate compensation at a level that provides the company with the ability to attract
and retain directors of the highest calibre, whilst incurring a cost that is acceptable to shareholders.
Structure
The previous co-operative rules specified that the Members at each general meeting shall determine
compensation of non-executive directors. The latest amendment was at the general meeting held on 27 July
2005 when the Members approved an aggregate compensation of $310,000 per year plus applicable committee
fees. The new Constitution for Namoi Cotton Limited provides for aggregate directors’ fees of up to $850,000
per annum to be paid to Directors. It is proposed following the Restructure the current fees paid to the Directors
will be reviewed to determine if they are consistent with market rates for an ASX listed company of the size and
complexity of Namoi Cotton under its new governance structure. Any increase in fees paid to the Directors
following the review will be accommodated within the aggregate cap set out in the Constitution.
The amount of compensation and the manner in which it is apportioned amongst directors is reviewed annually.
The board may consider advice from external consultants as well as the fees paid to non-executive directors of
comparable companies when undertaking the annual review process.
Each director receives a fee for being a director of the company. An additional fee ($2,500 per committee, $7,500
to chair a committee) is also paid for each board committee on which a director sits. The payment of additional
fees for serving on a committee recognises the additional time commitment required by directors who serve on
one or more sub-committees.
Non-executive directors have been encouraged by the board to hold shares in the company purchased by the
director on market.
Any Director in office at 10 October 2017 which has or will serve two terms is entitled to a retirement benefit
equivalent to two year’s remuneration based on their remuneration for the 2017-18 financial year.
The compensation of non-executive directors for the period ending 28 February 2018 is detailed on page 14 of
this report.
page 28
To this end, Namoi Cotton embodies the following principles in its compensation framework:
ii) Executive Compensation
Objective
The company aims to reward executives with a level and mix of compensation commensurate with their position
and responsibilities within the company so as to:
•
•
•
•
reward executives for performance against targets set by reference to appropriate benchmarks;
align the interest of executives with those of shareholders;
link rewards with the strategic goals and performance of the company; and
ensure total compensation is competitive by market standards.
Remuneration report (audited)
This remuneration report outlines the director and executive remuneration arrangements of the company and
the consolidated entity in accordance with the requirements of the Corporations Act 2001 and its Regulations.
For the purposes of this report Key Management Personnel (KMP) of the group are defined as those having the
authority and responsibility either directly or indirectly for planning, directing and controlling the major activities
of the company and the group, including any director of the company.
a) Details of Directors and Executives
Directors
Mr S C Boydell
Mr R A Anderson
Mr M Boyce
Mr B Coulton
Mr G Price
Mr R Green
Mr T J Watson
Executives
Mr J Callachor
Mr S Greenwood
Mr D Lindsay
Mr B Garcha
Mr S McGregor
b) Compensation of KMP
Compensation Policy
Director, non-executive (resigned 31 January 2018)
Chairman, non-executive
Director, non-executive
Director, non-executive
Director, non-executive
Director, non-executive
Director, non-executive
Chief Executive Officer (CEO)
Chief Financial Officer (CFO)
General Manager – Grower Services and Marketing
General Counsel and Company Secretary
Chief Operations Officer (COO)
The performance of Namoi Cotton depends upon the quality of its directors and executives. To prosper and
deliver maximised stakeholder returns, Namoi Cotton must attract, motivate and retain highly skilled and
qualified directors and executives.
Provide competitive rewards to attract high calibre executives;
Link executive rewards to company performance and shareholder value;
• A portion of executive compensation is ‘at risk’, dependent upon the company and individual executive
meeting pre-determined performance benchmarks; and
Establish performance hurdles in relation to variable executive compensation.
•
•
•
The remuneration committee of the board of directors of Namoi Cotton is responsible for determining and
reviewing compensation arrangements for all KMP, including the directors, the CEO and other members of the
Remuneration Committee
senior executive team.
The remuneration committee assesses compensation arrangements of KMP annually, by reference to relevant
employment market conditions and available independent external remuneration data. The overall objective of
this assessment is to ensure maximisation of stakeholder returns from the retention of a high quality board and
executive team employees.
Compensation Structure
compensation is separate and distinct.
In accordance with best practice corporate governance, the structure of non-executive director and executive
Each KMP agreement includes compensation which consists of the following key elements:
Fixed Compensation;
•
• Variable Compensation comprising Short Term Incentives (STI)
The remuneration committee establishes the proportion of fixed and variable (potential STI) compensation for
KMP.
Year Ended 28 February 2018
Directors’ Report
Page 10
Year Ended 28 February 2018
Directors’ Report
Page 11
2018 ANNUAL REPORT | 25
Structure
Employment agreements have been negotiated with the CEO and other KMP. Details of these contracts are
provided on pages 12 and 13 of this report.
26
27
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Fixed Compensation
Objective
The remuneration committee reviews fixed compensation annually. The process consists of a review of
companywide, business unit and
internal and market comparative
individual performance, relevant
compensation and, where appropriate, independent external remuneration data of equivalent industry sectors.
Structure
Executives are given the opportunity to receive their fixed remuneration in a variety of forms including cash,
superannuation, remote rent, motor vehicles, housing, income protection insurance and any associated fringe
benefits. The form chosen will be optimal for the recipient without creating undue cost for the company.
iii) Variable Compensation – STI
Objective
The objective of the STI program is to link the achievement of the company’s operational and financial targets
with the compensation received by the executives charged with meeting those targets.
Structure
Actual STI payments depend on the achievement of specific operating targets set at the beginning of the financial
year. The operational targets consist of a number of Key Performance Indicators (KPI’s) covering both financial
and non-financial measures of performance.
STI compensation includes an ‘at risk’ element which constitutes fifty percent of the executives’ overall available
STI compensation. This element is wholly dependent on Namoi Cotton achieving a pre-determined level of
financial performance, is discretionary, is additional to the fixed compensation noted below and is not subject
to any predefined KPI’s.
The remaining fifty percent of each executive’s STI compensation was dependent upon the achievement of
financial and non-financial KPI’s in the prior year. The review of individual performance usually occurs within
two months of the balance date. The financial and non-financial KPI’s include but are not limited to critical
operational, profit, safety and developmental targets.
KMP STI payments are ultimately subject to the discretion of the remuneration committee. However, when
taking into account this discretion, the remuneration committee considers the above criteria in determining the
appropriate allocation.
The senior management team in aggregate are entitled to a short-term incentive payment of $100,000 due to
the successful completion of the Restructure, this is by virtue of a portion of the normal short-term incentive
program. The incentive payments included in the 2018 cash bonus payable to senior management are: J
Callachor $60,000, B Garcha $18,000 and S Greenwood $20,000.
For the 2018 financial year, 78% (2017: 0% amounting to $nil) of the STI compensation (both components) was
accrued in the financial statements.
iv) Contract for Services
Major provisions of KMP employment agreements are set out below.
Mr Jeremy Callachor, Chief Executive Officer
•
•
Term of agreement - open
Fixed compensation, inclusive of superannuation, for the year ended 28 February 2018 of $450,000 (28
February 2017: $450,000)
Term of agreement – open
February 2017: $265,423)
fixed compensation
Term of agreement – open
February 2017: $286,307)
fixed compensation
Mr Stuart Greenwood, Chief Financial Officer
Term of agreement – open
Fixed compensation, inclusive of superannuation, for the year ended 28 February 2018 of $266,500 (28
• Variable compensation, for the year ended 28 February 2018 of $37,500 (28 February 2017: $nil)
Payment of a retention benefit in the event of takeover, acquisition or merger, equal to 1.1 times annual
February 2017: $260,595)
fixed compensation
Payment of a termination benefit on termination equal to 50% of annual fixed compensation
Period of notice to be given by employee or employer – 4 weeks
Mr Bailey Garcha, General Counsel and Company Secretary
Fixed compensation, inclusive of superannuation, for the year ended 28 February 2018 of $271,500 (28
• Variable compensation, for the year ended 28 February 2018 of $35,000 (28 February 2017: $nil)
Payment of a retention benefit in the event of takeover, acquisition or merger, equal to 1.1 times annual
Payment of a termination benefit on termination equal to 50% annual fixed compensation
Period of notice to be given by employee or employer – 4 weeks
Mr David Lindsay, General Manager - Grower Services and Marketing
Fixed compensation, inclusive of superannuation, for the year ended 28 February 2018 of $292,500 (28
• Variable compensation, for the year ended 28 February 2018 of $30,000 (28 February 2017: $nil)
Payment of a retention benefit in the event of takeover, acquisition or merger, equal to 1.1 times annual
Payment of a termination benefit on termination equal to 50% of annual fixed compensation
Period of notice to be given by employee or employer – 4 weeks
Mr Shane McGregor, Chief Operations Officer
Term of Agreement - open
Fixed compensation, inclusive of superannuation, for the year ended 28 February 2018 of $300,111 (28
• Variable compensation, for the year ended 28 February 2018 of $50,000 (28 February 2017: $nil)
Payment of a retention benefit in the event of takeover, acquisition or merger, equal to 1.1 times annual
February 2017: $293,725)
fixed compensation
Payment of a termination benefit on termination equal to 50% of annual fixed compensation
Period of notice to be given by employee or employer – 4 weeks
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
• Variable compensation, for the year ended 28 February 2018 of $120,000 (28 February 2017: $nil)
•
Payment of a retention benefit in the event of takeover, acquisition or merger, equal to 50% of annual
commencing fixed compensation
Payment of a termination benefit on termination equal to 50% of annual commencing fixed compensation
Period of notice to be given by employee or employer - 12 weeks
•
•
Year Ended 28 February 2018
Directors’ Report
2018 ANNUAL REPORT | 26
Page 12
Year Ended 28 February 2018
Directors’ Report
Page 13
•
•
• Variable compensation, for the year ended 28 February 2018 of $35,000 (28 February 2017: $nil)
•
Payment of a retention benefit in the event of takeover, acquisition or merger, equal to 1.1 times annual
fixed compensation
Payment of a termination benefit on termination equal to 50% annual fixed compensation
Period of notice to be given by employee or employer – 4 weeks
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Mr Stuart Greenwood, Chief Financial Officer
•
•
Term of agreement – open
Fixed compensation, inclusive of superannuation, for the year ended 28 February 2018 of $266,500 (28
February 2017: $260,595)
• Variable compensation, for the year ended 28 February 2018 of $37,500 (28 February 2017: $nil)
•
Payment of a retention benefit in the event of takeover, acquisition or merger, equal to 1.1 times annual
fixed compensation
Payment of a termination benefit on termination equal to 50% of annual fixed compensation
Period of notice to be given by employee or employer – 4 weeks
•
•
Mr Bailey Garcha, General Counsel and Company Secretary
•
•
Term of agreement – open
Fixed compensation, inclusive of superannuation, for the year ended 28 February 2018 of $271,500 (28
February 2017: $265,423)
Fixed Compensation
Objective
Structure
Objective
Structure
The remuneration committee reviews fixed compensation annually. The process consists of a review of
companywide, business unit and
individual performance, relevant
internal and market comparative
compensation and, where appropriate, independent external remuneration data of equivalent industry sectors.
Executives are given the opportunity to receive their fixed remuneration in a variety of forms including cash,
superannuation, remote rent, motor vehicles, housing, income protection insurance and any associated fringe
benefits. The form chosen will be optimal for the recipient without creating undue cost for the company.
iii) Variable Compensation – STI
The objective of the STI program is to link the achievement of the company’s operational and financial targets
with the compensation received by the executives charged with meeting those targets.
Actual STI payments depend on the achievement of specific operating targets set at the beginning of the financial
year. The operational targets consist of a number of Key Performance Indicators (KPI’s) covering both financial
and non-financial measures of performance.
STI compensation includes an ‘at risk’ element which constitutes fifty percent of the executives’ overall available
STI compensation. This element is wholly dependent on Namoi Cotton achieving a pre-determined level of
financial performance, is discretionary, is additional to the fixed compensation noted below and is not subject
to any predefined KPI’s.
The remaining fifty percent of each executive’s STI compensation was dependent upon the achievement of
financial and non-financial KPI’s in the prior year. The review of individual performance usually occurs within
two months of the balance date. The financial and non-financial KPI’s include but are not limited to critical
operational, profit, safety and developmental targets.
KMP STI payments are ultimately subject to the discretion of the remuneration committee. However, when
taking into account this discretion, the remuneration committee considers the above criteria in determining the
appropriate allocation.
The senior management team in aggregate are entitled to a short-term incentive payment of $100,000 due to
the successful completion of the Restructure, this is by virtue of a portion of the normal short-term incentive
program. The incentive payments included in the 2018 cash bonus payable to senior management are: J
Callachor $60,000, B Garcha $18,000 and S Greenwood $20,000.
For the 2018 financial year, 78% (2017: 0% amounting to $nil) of the STI compensation (both components) was
accrued in the financial statements.
iv) Contract for Services
Major provisions of KMP employment agreements are set out below.
Mr Jeremy Callachor, Chief Executive Officer
Term of agreement - open
February 2017: $450,000)
Fixed compensation, inclusive of superannuation, for the year ended 28 February 2018 of $450,000 (28
• Variable compensation, for the year ended 28 February 2018 of $120,000 (28 February 2017: $nil)
Payment of a retention benefit in the event of takeover, acquisition or merger, equal to 50% of annual
commencing fixed compensation
Payment of a termination benefit on termination equal to 50% of annual commencing fixed compensation
Period of notice to be given by employee or employer - 12 weeks
•
•
•
•
•
Mr David Lindsay, General Manager - Grower Services and Marketing
•
•
Term of agreement – open
Fixed compensation, inclusive of superannuation, for the year ended 28 February 2018 of $292,500 (28
February 2017: $286,307)
• Variable compensation, for the year ended 28 February 2018 of $30,000 (28 February 2017: $nil)
•
Payment of a retention benefit in the event of takeover, acquisition or merger, equal to 1.1 times annual
fixed compensation
Payment of a termination benefit on termination equal to 50% of annual fixed compensation
Period of notice to be given by employee or employer – 4 weeks
•
•
Mr Shane McGregor, Chief Operations Officer
•
•
Term of Agreement - open
Fixed compensation, inclusive of superannuation, for the year ended 28 February 2018 of $300,111 (28
February 2017: $293,725)
• Variable compensation, for the year ended 28 February 2018 of $50,000 (28 February 2017: $nil)
•
Payment of a retention benefit in the event of takeover, acquisition or merger, equal to 1.1 times annual
fixed compensation
Payment of a termination benefit on termination equal to 50% of annual fixed compensation
Period of notice to be given by employee or employer – 4 weeks
•
•
Year Ended 28 February 2018
Directors’ Report
Page 12
Year Ended 28 February 2018
Directors’ Report
Page 13
2018 ANNUAL REPORT | 27
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Details of the nature and amount of each element of the emoluments of each director and each of the executive
officers of Namoi Cotton and the consolidated entity for the financial year are as follows:
c)
Shareholdings of KMP1
v) Compensation of Key Management Personnel for the Year Ended 28 February 2018
Year ended 28 February 2018
Year ended 28 February 2018
CCU's
Shares
CCU's
Shares
CCU's
Shares Ordinary
CCU's
Shares Ordinary
Short-term Employee benefits
Post-employment Benefits
Salary & Fees Cash Bonus4
Non-
Monetary
Benefits
Superannuation
Retirement
Benefits 1
75,288
60,231
47,683
102,442
37,644
47,683
35,135
430,941
266,548
254,544
228,645
289,772
1,876,556
-
-
-
-
-
-
-
-
-
-
-
-
-
-
120,000
30,000
35,000
37,500
50,000
272,500
(941)
608
1,771
31,974
5,423
38,835
7,152
5,722
4,530
3,082
3,576
4,530
3,338
22,465
21,010
16,993
16,637
23,238
-
-
-
(70,000)
-
4,750
10,500
-
-
-
-
-
132,273
(54,750)
Long-term
Benefits
Employee
Leave
Benefits 2
-
-
-
-
-
-
-
9,302
5,181
4,750
4,173
(2,101)
21,305
Directors
SC Boydell
RA Anderson
M Boyce
B Coulton 3
G Price
R Green
T Watson
Executives
J Callachor
D Lindsay
B Garcha
S Greenwood
S McGregor 2
1. Movement in accrued retirement benefits for the year ended 28 February 2018.
2. Negatives relate to the taking of accumulated leave greater than one year's entitlement.
3. Resigned on 31 January 2018 and was paid previously accrued retirement benefits.
4. Includes Restructure bonus as per variable compensation disclosure in Directors' Report.
Termination
Benefits
Total
%
Performance
Related
-
-
-
-
-
-
-
-
-
-
-
-
-
82,440
65,953
52,213
35,524
41,220
56,963
48,973
581,767
323,347
313,058
318,929
366,332
2,286,719
-
-
-
-
-
-
-
20.6%
9.3%
11.2%
11.8%
13.6%
vi) Compensation of Key Management Personnel for the Year Ended 28 February 2017
Year ended 28 February 2017
Short-term Employee benefits
Post-employment Benefits
Salary & Fees
Cash Bonus
Non-
Monetary
Benefits
Superannuation
Retirement
Benefits 1
Directors
SC Boydell
RA Anderson
M Boyce
B Coulton
G Price
R Green
T Watson
Executives
J Callachor 2
D Lindsay 2
B Garcha
S Greenwood
S McGregor
75,288
60,231
47,683
35,135
37,644
47,683
35,135
432,803
257,863
249,482
223,874
270,305
1,773,126
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(2,044)
14,884
816
17,763
4,047
35,466
7,152
5,722
4,530
3,338
3,576
4,530
3,338
17,974
24,176
16,599
14,825
25,283
-
-
-
-
-
14,250
7,000
-
-
-
-
-
131,043
21,250
1. Movement in accrued retirement benefits for the year ended 28 February 2017.
2. Negatives relate to the taking of accumulated leave greater than one year's entitlement.
Long-term
Benefits
Employee
Leave
Benefits 2
-
-
-
-
-
-
-
(12,312)
(1,730)
7,522
4,515
4,960
2,955
Termination
Benefits
Total
%
Performance
Related
-
-
-
-
-
-
-
-
-
-
-
-
-
82,440
65,953
52,213
38,473
41,220
66,463
45,473
436,421
295,193
274,419
260,977
304,595
1,963,840
-
-
-
-
-
-
-
-
-
-
-
-
Directors
SC Boydell (Chairman)
RA Anderson
M Boyce
B Coulton
G Price
R Green
T Watson
Executives
J Callachor
D Lindsay
B Garcha
S Greenwood
S McGregor
terms.
d)
Loans to KMP
Balance held
1 March 2017
Net Change
Other
Grower
Member
Grower
Member
Net Change
Restructure
Grower
Member
Balance held
28 February 2018
Grower
Member
-
-
-
-
-
4,000
25,000
6,000
2,000
-
-
-
-
-
-
-
-
555,883
800
(555,883)
(800)
714,387
775,272
373,292
800
1,600
(775,272)
(373,292)
(800)
(1,600)
775,272
158,504
690,300
407,720
800
141,405
(549,125)
(800)
707,629
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(4,000)
(25,000)
(6,000)
(2,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,000
25,000
6,000
2,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
714,387
775,272
158,504
690,300
707,629
4,000
25,000
6,000
2,000
2,149,167
4,000
141,405
(2,290,572)
(4,000) 3,083,092
- 3,083,092
No Ordinary Shares, CCU's or Grower Member Shares were granted as remuneraton or issued on exercise of an option.
1Includes CCU/shares/ordinary shares that are held directly, indirectly and beneficially by KMP.
All shares above are held in the disclosing parent entity Namoi Cotton Limited.
All ordinary share transactions by the company with KMP are made through the ASX on normal commercial
The following loans remain outstanding from KMP as part of the Employee Incentive Scheme that was suspended
in August 2004 (refer to note 20 to the financials). The amounts owed by KMP at year end were D. Lindsay
$2,630 (2017: $2,630) and S. McGregor $nil (2017: $30). These amounts will be repaid by 31 May 2018.
e) Marketing and ginning transactions and balances with KMP
Transactions with directors and their related parties were in accordance with the constitution, under terms and
conditions applicable to all members. Under the former Co-operative Rules, grower directors were required to
conduct a minimum of 20% of their total cotton business with Namoi Cotton. In accordance with that rule,
Directors entered into marketing contracts and ginning contracts with Namoi Cotton. Amounts paid/received or
payable/receivable from/to directors and their respective related parties were as follows:
Name
Mr SC Boydell
Mr B Coulton
Mr G Price
Mr T Watson
Consolidated and Parent entity
Cotton Purchases
Ginning Charges Levied
Grain & Seed Purchases
28 Feb
2018
$
1,381,884
6,810,479
2,915,452
614,611
28 Feb
2017
$
308,479
3,489,599
2,120,215
752,413
28 Feb
2018
$
157,433
1,134,241
353,515
610,211
28 Feb
2017
$
38,633
569,508
267,297
543,066
28 Feb
2018
$
183,672
1,477,306
452,466
252,951
28 Feb
2017
$
64,388
899,036
395,138
455,345
11,722,426
6,670,706
2,255,400
1,418,504
2,366,395
1,813,907
Year Ended 28 February 2018
Directors’ Report
2018 ANNUAL REPORT | 28
Page 14
Year Ended 28 February 2018
Directors’ Report
Page 15
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Details of the nature and amount of each element of the emoluments of each director and each of the executive
officers of Namoi Cotton and the consolidated entity for the financial year are as follows:
c)
Shareholdings of KMP1
v) Compensation of Key Management Personnel for the Year Ended 28 February 2018
Short-term Employee benefits
Post-employment Benefits
Salary & Fees Cash Bonus4
Superannuation
Non-
Monetary
Benefits
Long-term
Benefits
Employee
Leave
Benefits 2
Retirement
Benefits 1
Termination
Benefits
%
Performance
Total
Related
Year ended 28 February 2018
Directors
SC Boydell
RA Anderson
M Boyce
B Coulton 3
G Price
R Green
T Watson
Executives
J Callachor
D Lindsay
B Garcha
S Greenwood
S McGregor 2
75,288
60,231
47,683
102,442
37,644
47,683
35,135
430,941
266,548
254,544
228,645
289,772
Year ended 28 February 2017
Directors
SC Boydell
RA Anderson
M Boyce
B Coulton
G Price
R Green
T Watson
Executives
J Callachor 2
D Lindsay 2
B Garcha
S Greenwood
S McGregor
75,288
60,231
47,683
35,135
37,644
47,683
35,135
432,803
257,863
249,482
223,874
270,305
1,773,126
(70,000)
4,750
10,500
9,302
5,181
4,750
4,173
(2,101)
21,305
120,000
30,000
35,000
37,500
50,000
(941)
608
1,771
31,974
5,423
38,835
1,876,556
272,500
132,273
(54,750)
1. Movement in accrued retirement benefits for the year ended 28 February 2018.
2. Negatives relate to the taking of accumulated leave greater than one year's entitlement.
3. Resigned on 31 January 2018 and was paid previously accrued retirement benefits.
4. Includes Restructure bonus as per variable compensation disclosure in Directors' Report.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,152
5,722
4,530
3,082
3,576
4,530
3,338
22,465
21,010
16,993
16,637
23,238
7,152
5,722
4,530
3,338
3,576
4,530
3,338
17,974
24,176
16,599
14,825
25,283
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
14,250
7,000
(12,312)
(1,730)
7,522
4,515
4,960
2,955
(2,044)
14,884
816
17,763
4,047
35,466
1. Movement in accrued retirement benefits for the year ended 28 February 2017.
2. Negatives relate to the taking of accumulated leave greater than one year's entitlement.
131,043
21,250
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
82,440
65,953
52,213
35,524
41,220
56,963
48,973
581,767
323,347
313,058
318,929
366,332
2,286,719
82,440
65,953
52,213
38,473
41,220
66,463
45,473
436,421
295,193
274,419
260,977
304,595
1,963,840
20.6%
9.3%
11.2%
11.8%
13.6%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
vi) Compensation of Key Management Personnel for the Year Ended 28 February 2017
Short-term Employee benefits
Post-employment Benefits
Salary & Fees
Cash Bonus
Superannuation
Non-
Monetary
Benefits
Long-term
Benefits
Employee
Leave
Benefits 2
Retirement
Benefits 1
Termination
Benefits
%
Performance
Total
Related
Balance held
1 March 2017
Year ended 28 February 2018
CCU's
Grower
Member
Shares
Net Change
Other
Grower
Member
Shares
CCU's
Net Change
Restructure
Grower
Member
Balance held
28 February 2018
Grower
Member
CCU's
Shares Ordinary
CCU's
Shares Ordinary
Directors
SC Boydell (Chairman)
RA Anderson
M Boyce
B Coulton
G Price
R Green
T Watson
Executives
J Callachor
D Lindsay
B Garcha
S Greenwood
S McGregor
555,883
-
775,272
-
373,292
-
407,720
-
4,000
25,000
-
6,000
2,000
800
-
-
800
1,600
-
800
-
-
-
-
-
-
141,405
-
-
-
-
-
-
-
-
-
-
-
2,149,167
4,000
141,405
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(555,883)
-
(775,272)
-
(373,292)
-
(549,125)
-
(4,000)
(25,000)
-
(6,000)
(2,000)
(800)
-
-
(800)
(1,600)
-
(800)
-
-
-
-
-
-
-
714,387
-
775,272
158,504
690,300
-
707,629
-
4,000
25,000
-
6,000
2,000
(2,290,572)
(4,000) 3,083,092
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
714,387
-
775,272
158,504
690,300
-
707,629
-
4,000
25,000
-
6,000
2,000
- 3,083,092
No Ordinary Shares, CCU's or Grower Member Shares were granted as remuneraton or issued on exercise of an option.
1Includes CCU/shares/ordinary shares that are held directly, indirectly and beneficially by KMP.
All shares above are held in the disclosing parent entity Namoi Cotton Limited.
All ordinary share transactions by the company with KMP are made through the ASX on normal commercial
terms.
d)
Loans to KMP
The following loans remain outstanding from KMP as part of the Employee Incentive Scheme that was suspended
in August 2004 (refer to note 20 to the financials). The amounts owed by KMP at year end were D. Lindsay
$2,630 (2017: $2,630) and S. McGregor $nil (2017: $30). These amounts will be repaid by 31 May 2018.
e) Marketing and ginning transactions and balances with KMP
Transactions with directors and their related parties were in accordance with the constitution, under terms and
conditions applicable to all members. Under the former Co-operative Rules, grower directors were required to
conduct a minimum of 20% of their total cotton business with Namoi Cotton. In accordance with that rule,
Directors entered into marketing contracts and ginning contracts with Namoi Cotton. Amounts paid/received or
payable/receivable from/to directors and their respective related parties were as follows:
Name
Mr SC Boydell
Mr B Coulton
Mr G Price
Mr T Watson
Cotton Purchases
Consolidated and Parent entity
Ginning Charges Levied
Grain & Seed Purchases
28 Feb
2018
$
1,381,884
6,810,479
2,915,452
614,611
11,722,426
28 Feb
2017
$
308,479
3,489,599
2,120,215
752,413
6,670,706
28 Feb
2018
$
157,433
1,134,241
353,515
610,211
2,255,400
28 Feb
2017
$
38,633
569,508
267,297
543,066
1,418,504
28 Feb
2018
$
183,672
1,477,306
452,466
252,951
2,366,395
28 Feb
2017
$
64,388
899,036
395,138
455,345
1,813,907
Year Ended 28 February 2018
Directors’ Report
Page 14
Year Ended 28 February 2018
Directors’ Report
Page 15
2018 ANNUAL REPORT | 29
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
The nature of the terms and conditions of the above other transactions with directors and director related
entities are consistent with the terms of Namoi Cotton’s standard products, and are as follows:
• Marketing contracts require delivery of a quantity of lint cotton. The contract price per bale may be fixed
in Australian or United States dollars, determined under a pool arrangement, set as a guaranteed minimum
price or by way of basis fixations, cotton futures and foreign currency hedging. Price is adjusted for grade.
Payment may be made by Namoi Cotton either within 14 days of ginning, or on a deferred schedule. The
actual sales to spinning mills are made by the NCA joint venture.
• Ginning contracts require the delivery of a quantity or acreage of seed cotton gin landed. The price is a fixed
amount per bale. Payment is either effected by the grower as an offset against marketing proceeds, or
collected from the marketing merchant in the case of contract ginning with Namoi Cotton.
Seed contracts require the delivery of a quantity or acreage of seed gin landed. The price is a fixed amount
per bale. Payment is either made by Namoi Cotton in conjunction with marketing proceeds, or in
conjunction with ginning costs in the case of contract ginning with Namoi Cotton. Growers have the option
of retaining their seed for a handling fee.
•
f) Other transactions with KMP
Directors and director related entities also entered into transactions with the economic entity which occurred
within a normal customer or supplier relationship on terms and conditions no more favourable than those which
it is reasonable to expect the entity would have adopted if dealing with the director or director-related entity at
arm's length in the same circumstances, which do not have the potential to adversely affect decisions about the
allocation of scarce resources made by users of the financial report, or the discharge of accountability by the
directors. These transactions include:
• Buybacks of marketing contracts as a result of production shortfalls;
• Currency, cotton futures, options and brokerage costs, losses and profits charged or credited directly to the
account of the director;
•
Purchase of grower supplies;
• Marketing and ginning rebate;
• Costs associated with the provision of crop finance; and
• Grower member share fixed capital entitlement in aggregate $nil (2017: $10,800).
g)
Compensation Options
Namoi Cotton does not currently and has not historically offered any options over its shares. As such, no options
have either been granted or exercised during the period or are on offer at the end of the period.
Year Ended 28 February 2018
Directors’ Report
2018 ANNUAL REPORT | 30
Page 16
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
The nature of the terms and conditions of the above other transactions with directors and director related
entities are consistent with the terms of Namoi Cotton’s standard products, and are as follows:
Group financial performance and position
The following table highlights key components of the group’s financial performance for the last 5 years.
• Marketing contracts require delivery of a quantity of lint cotton. The contract price per bale may be fixed
in Australian or United States dollars, determined under a pool arrangement, set as a guaranteed minimum
price or by way of basis fixations, cotton futures and foreign currency hedging. Price is adjusted for grade.
Payment may be made by Namoi Cotton either within 14 days of ginning, or on a deferred schedule. The
actual sales to spinning mills are made by the NCA joint venture.
• Ginning contracts require the delivery of a quantity or acreage of seed cotton gin landed. The price is a fixed
amount per bale. Payment is either effected by the grower as an offset against marketing proceeds, or
collected from the marketing merchant in the case of contract ginning with Namoi Cotton.
•
Seed contracts require the delivery of a quantity or acreage of seed gin landed. The price is a fixed amount
per bale. Payment is either made by Namoi Cotton in conjunction with marketing proceeds, or in
conjunction with ginning costs in the case of contract ginning with Namoi Cotton. Growers have the option
of retaining their seed for a handling fee.
f) Other transactions with KMP
Directors and director related entities also entered into transactions with the economic entity which occurred
within a normal customer or supplier relationship on terms and conditions no more favourable than those which
it is reasonable to expect the entity would have adopted if dealing with the director or director-related entity at
arm's length in the same circumstances, which do not have the potential to adversely affect decisions about the
allocation of scarce resources made by users of the financial report, or the discharge of accountability by the
directors. These transactions include:
• Buybacks of marketing contracts as a result of production shortfalls;
• Currency, cotton futures, options and brokerage costs, losses and profits charged or credited directly to the
account of the director;
•
Purchase of grower supplies;
• Marketing and ginning rebate;
g)
Compensation Options
• Costs associated with the provision of crop finance; and
• Grower member share fixed capital entitlement in aggregate $nil (2017: $10,800).
Namoi Cotton does not currently and has not historically offered any options over its shares. As such, no options
have either been granted or exercised during the period or are on offer at the end of the period.
2018
2017
0.2
-
49.0
N/a
Earnings per CCU (cents)
Distribution per CCU (cents) 1
CCU/share price at year end (cents)
CCU buyback average (cents)
Earnings per Ordinary Share (diluted)
Dividend per Ordinary Share (cents/share)
Share price at year end (cents)
Net assets ($m)
Net assets per CCU (cents)
Net assets per ordinary share (cents) - basic2
Net assets per ordinary share (cents) - diluted3
1 Represents amounts paid during the financial year (refer note 6).
2 Ordinary shares on issue at balance date. Calculated retrospectively for 2017 (127.4m).
3 Diluted for conversion of residual capital stock to ordinary shares. Calculated
retrospectively for 2017 (142.7m).
123.8
112.7
97.2
86.8
5.3
-
53.0
131.8
103.4
92.4
2016
5.7
0.5
34.0
N/a
2015
(0.1)
-
31.0
N/a
2014
(70.7)
-
29.0
N/a
124.6
112.5
118.8
113.4
109.9
110.4
Directors’ interests in ordinary shares of the company
As at the date of this report, the interest of the directors and their related parties in the ordinary shares of the
29.
company were as set out on page 15.
Environmental performance & regulation
The directors regularly review the business activities of the company to ensure it operates within the
environmental laws established by regulatory authorities.
Indemnification and insurance of directors and officers
Under the Constitution, every person who is or has been a director of the company is indemnified, to the
maximum extent permitted by law, out of the property of the company against any liability to another person
(other than the company) as such a director unless the liability arises out of conduct involving any negligence,
default, breach of duty or breach of trust of which that person may be guilty in relation to the company.
During the financial year, Namoi Cotton has paid a premium in respect of a contract providing insurance for
every person who is or has been a director or officer against losses arising from any actual or alleged breach of
duty, breach of trust, neglect, error, misstatement, misleading statement, omission, breach of warranty of
authority, or other act done or wrongfully attempted, or any liability asserted against them solely because of
their status as directors or officers of the economic entity. Disclosure of the premium paid is not permitted under
the terms of the insurance contract.
Indemnification of auditors
To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young, as part of the
terms of its audit engagement agreement against claims by third parties arising from the audit (for an
unspecified amount). No payment has been made to indemnify Ernst & Young during or since the financial year.
Risk management
The board includes a marketing and financial risk management committee (MFRMC), which identifies and
monitors the company’s risk profile on a timely basis in addition to reviewing management of portfolio
exposures. The MFRMC ensures Namoi Cotton’s financial and risk management policies are aligned to its
corporate philosophies and principles. The MFRMC regularly reports to the full board.
Given the nature of our business, Namoi Cotton has a potential exposure to a number of business risks, including
movements in commodity and currency markets. To prudently manage these exposures, the MFRMC has
developed comprehensive policies and procedures to monitor, assess and manage all our major business risks.
Year Ended 28 February 2018
Directors’ Report
Page 16
Year Ended 28 February 2018
Directors’ Report
Page 17
2018 ANNUAL REPORT | 31
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Key responsibilities of the MFRMC include:
• Monitoring and reviewing the policies and limits in the Risk Management Policy;
• Monitoring and reviewing the performance of management’s marketing committee;
• Monitoring and reviewing procedures for treasury and hedging functions;
• Monitoring and reviewing marketing products;
• Monitoring and reviewing hedging strategies;
• Monitoring and reviewing company-wide value at risk results;
• Receiving external reports relative to risk management activities;
• Monitoring and reviewing funding and liquidity structure and management; and
• Monitoring the development of long-term strategic initiatives for marketing and risk management.
Corporate governance
In recognising the need for the highest standards of corporate behaviour and accountability, the directors of
Namoi Cotton support and have complied with the principles of corporate governance. The company’s corporate
governance statement is to be published in the 2018 Annual Report due in June 2018 and is also available on
Namoi Cotton’s public website at www.namoicotton.com.au
Non-audit services
Non-audit services were provided by the entity’s auditor, Ernst & Young, as described in Note 25 of the financial
report. The directors are satisfied that the provision of non-audit services is compatible with the general
standard of independence for auditors imposed by the Corporations Act 2001. The nature and scope of each
type of non-audit service provided means that auditor independence was not compromised.
Auditor’s independence declaration
The auditor’s independence declaration is included on page 19 of the financial report.
33
Rounding
The amounts contained in this report and in the financial statements have been rounded to the nearest thousand
dollars (where rounding is applicable) in accordance with ASIC Corporations (Rounding in Financial Directors
Reports) Instrument 2016/191. The company is an entity to which this legislative instrument applies.
Signed in accordance with a resolution of the directors on behalf of the board.
On behalf of the board
S C BOYDELL
Director
Brisbane
24 April 2018
Year Ended 28 February 2018
Directors’ Report
2018 ANNUAL REPORT | 32
Page 18
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Key responsibilities of the MFRMC include:
• Monitoring and reviewing the policies and limits in the Risk Management Policy;
• Monitoring and reviewing the performance of management’s marketing committee;
• Monitoring and reviewing procedures for treasury and hedging functions;
• Monitoring and reviewing marketing products;
• Monitoring and reviewing hedging strategies;
• Monitoring and reviewing company-wide value at risk results;
• Receiving external reports relative to risk management activities;
• Monitoring and reviewing funding and liquidity structure and management; and
• Monitoring the development of long-term strategic initiatives for marketing and risk management.
Corporate governance
In recognising the need for the highest standards of corporate behaviour and accountability, the directors of
Namoi Cotton support and have complied with the principles of corporate governance. The company’s corporate
governance statement is to be published in the 2018 Annual Report due in June 2018 and is also available on
Namoi Cotton’s public website at www.namoicotton.com.au
Non-audit services
Non-audit services were provided by the entity’s auditor, Ernst & Young, as described in Note 25 of the financial
report. The directors are satisfied that the provision of non-audit services is compatible with the general
standard of independence for auditors imposed by the Corporations Act 2001. The nature and scope of each
type of non-audit service provided means that auditor independence was not compromised.
Auditor’s independence declaration
The auditor’s independence declaration is included on page 19 of the financial report.
Rounding
The amounts contained in this report and in the financial statements have been rounded to the nearest thousand
dollars (where rounding is applicable) in accordance with ASIC Corporations (Rounding in Financial Directors
Reports) Instrument 2016/191. The company is an entity to which this legislative instrument applies.
Signed in accordance with a resolution of the directors on behalf of the board.
On behalf of the board
S C BOYDELL
Director
Brisbane
24 April 2018
Year Ended 28 February 2018
Directors’ Report
Page 18
2018 ANNUAL REPORT | 33
Ernst & Young
111 Eagle Street
Brisbane QLD 4000 Australia
GPO Box 7878 Brisbane QLD 4001
Tel: +61 7 3011 3333
Fax: +61 7 3011 3100
ey.com/au
Ernst & Young
111 Eagle Street
Brisbane QLD 4000 Australia
GPO Box 7878 Brisbane QLD 4001
Tel: +61 7 3011 3333
Fax: +61 7 3011 3100
ey.com/au
Independent auditor's report to the members of Namoi Cotton Limited
report on the audit of the financial report
Opinion
Independent auditor's report to the members of Namoi Cotton Limited
We have audited the financial report of Namoi Cotton Limited (the Company) and its subsidiaries
(collectively the Group), which comprises:
report on the audit of the financial report
►
the Group consolidated and Company statements of financial position as at 28 February 2018;
Opinion
►
the Group consolidated and Company statements of comprehensive income, statements of
changes in equity and statements of cash flows for the year then ended
We have audited the financial report of Namoi Cotton Limited (the Company) and its subsidiaries
►
(collectively the Group), which comprises:
notes to the financial statements, including a summary of significant accounting policies; and
a)
►
the directors' declaration.
the Group consolidated and Company statements of financial position as at 28 February 2018;
►
►
In our opinion, the accompanying financial report is in accordance with the Corporations Act 2001 ,
►
including:
the Group consolidated and Company statements of comprehensive income, statements of
changes in equity and statements of cash flows for the year then ended
giving a true and fair view of the Company’s and the Group's financial position as at 28 February
notes to the financial statements, including a summary of significant accounting policies; and
2018 and of their financial performance for the year ended on that date; and
the directors' declaration.
complying with Australian Accounting Standards and the Corporations Regulations 2001 .
►
b)
In our opinion, the accompanying financial report is in accordance with the Corporations Act 2001 ,
including:
Basis for opinion
a)
giving a true and fair view of the Company’s and the Group's financial position as at 28 February
2018 and of their financial performance for the year ended on that date; and
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
b)
complying with Australian Accounting Standards and the Corporations Regulations 2001 .
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 and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Basis for opinion
Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
fulfilled our other ethical responsibilities in accordance with the Code.
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
Report section of our report. We are independent of the Group in accordance with the auditor
for our opinion.
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also
Key audit matters
fulfilled our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
Key audit matters are those matters that, in our professional judgement, were of most significance in
for our opinion.
our audit of the financial report of the current year. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide
a separate opinion on these matters. For each matter below, our description of how our audit
addressed the matter is provided in that context.
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 of the current year. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide
a separate opinion on these matters. For each matter below, our description of how our audit
addressed the matter is provided in that context.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
2018 ANNUAL REPORT | 34
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of
material misstatement of the financial report. The results of our audit procedures, including the
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the
procedures performed to address the matters below, provide the basis for our audit opinion on the
Financial Report section of our report, including in relation to these matters. Accordingly, our audit
accompanying financial report.
included the performance of procedures designed to respond to our assessment of the risks of
material misstatement of the financial report. The results of our audit procedures, including the
procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying financial report.
Fair value of ginning assets
1.
Fair value of ginning assets
Why significant
1.
The Company and the Group measure ginning
infrastructure assets (“ginning assets”) at fair
Why significant
value as disclosed in Note 1(n) to the financial
statements. Ginning assets represent 60.4% of
The Company and the Group measure ginning
total assets of the Company and 58.88% of total
infrastructure assets (“ginning assets”) at fair
assets of the Group.
value as disclosed in Note 1(n) to the financial
statements. Ginning assets represent 60.4% of
The Group uses an internally generated
total assets of the Company and 58.88% of total
discounted cash flow model to determine the fair
assets of the Group.
value of the ginning assets supported by periodic
valuations conducted by external experts on a
The Group uses an internally generated
three year rolling basis. The latest external
discounted cash flow model to determine the fair
valuation was performed as at 29 February
value of the ginning assets supported by periodic
2016. The valuation of the ginning assets at fair
valuations conducted by external experts on a
value is highly dependent on estimates and
three year rolling basis. The latest external
assumptions, such as sustainable bales, discount
valuation was performed as at 29 February
rates, market knowledge, bale contributions and
2016. The valuation of the ginning assets at fair
revenue growth rates.
value is highly dependent on estimates and
assumptions, such as sustainable bales, discount
The assumptions relating to the valuations are
rates, market knowledge, bale contributions and
disclosed in Note 15 and Policy Note 1(n). Given
revenue growth rates.
the quantum and complexity of the valuation of
ginning assets and the level of the disclosures
The assumptions relating to the valuations are
relating to the assumptions used in the
disclosed in Note 15 and Policy Note 1(n). Given
valuation, this was determined to be a key audit
the quantum and complexity of the valuation of
matter.
ginning assets and the level of the disclosures
relating to the assumptions used in the
valuation, this was determined to be a key audit
matter.
How our audit addressed the key audit matter
We evaluated the input assumptions and estimates
made by the Group in the valuation methodology
How our audit addressed the key audit matter
including sustainable bales and earnings against
average production and earnings over the previous
We evaluated the input assumptions and estimates
six years (covering a broad spread of high and low
made by the Group in the valuation methodology
production seasons) to take into account the
including sustainable bales and earnings against
seasonal variations. We also evaluated any changes
average production and earnings over the previous
or lack of changes in assumptions or estimates since
six years (covering a broad spread of high and low
the prior year and since the last external valuation
production seasons) to take into account the
including growth rates and discount rates.
seasonal variations. We also evaluated any changes
We involved our valuation specialists to assist in
or lack of changes in assumptions or estimates since
assessing the modelling used by the Group to support
the prior year and since the last external valuation
the valuation, by evaluating the model calculation
including growth rates and discount rates.
methodology and discount rates used. Our evaluated
We involved our valuation specialists to assist in
the competence, capabilities and objectivity of the
assessing the modelling used by the Group to support
valuation expert and evaluated the appropriateness
the valuation, by evaluating the model calculation
of the expert’s work.
methodology and discount rates used. Our evaluated
We also assessed the adequacy of the disclosures
the competence, capabilities and objectivity of the
relating to the assumptions utilised and related
valuation expert and evaluated the appropriateness
of the expert’s work.
sensitivity disclosures.
We also assessed the adequacy of the disclosures
relating to the assumptions utilised and related
sensitivity disclosures.
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A member firm of Ernst & Young Global Limited
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2018 ANNUAL REPORT | 35
2.
Investment in Namoi Cotton Alliance Joint Venture
Why significant
2.
Investment in Namoi Cotton Alliance Joint Venture
How our audit addressed the key audit matter
At 28 February 2018 the Group held a 51% stake
Why significant
in the Namoi Cotton Alliance joint venture
(“NCA)”.
At 28 February 2018 the Group held a 51% stake
in the Namoi Cotton Alliance joint venture
As explained in Note 1 to the financial
(“NCA)”.
statements, this investment was accounted for
using the equity method of accounting in
As explained in Note 1 to the financial
accordance with Australian Accounting
statements, this investment was accounted for
Standards. An investment of $40.5m was
using the equity method of accounting in
recorded on the Group’s consolidated balance
accordance with Australian Accounting
sheet. This is reflected in the Company balance
Standards. An investment of $40.5m was
sheet in Trade and Other Receivables where a
recorded on the Group’s consolidated balance
loan was made to a controlled entity which holds
sheet. This is reflected in the Company balance
the interest in NCA. An equity accounted profit
sheet in Trade and Other Receivables where a
of $0.6m contributed to the overall result of the
loan was made to a controlled entity which holds
Group.
the interest in NCA. An equity accounted profit
of $0.6m contributed to the overall result of the
The carrying value of NCA in the Group and the
Group.
recoverability of the associated receivable in the
Company was a key audit matter due to the
The carrying value of NCA in the Group and the
significance of the investment, NCA’s
recoverability of the associated receivable in the
contribution to Group profit, and its significance
Company was a key audit matter due to the
to the valuation of assets referred to in Key
significance of the investment, NCA’s
Audit Matter #1 above. Details of the Group’s
contribution to Group profit, and its significance
investment in this joint venture are outlined in
to the valuation of assets referred to in Key
note 11 to the consolidated financial statements.
Audit Matter #1 above. Details of the Group’s
investment in this joint venture are outlined in
note 11 to the consolidated financial statements.
Our audit procedures related to the carrying value of
How our audit addressed the key audit matter
Namoi Cotton’s investment in NCA and the equity
accounted result included the following:
Our audit procedures related to the carrying value of
Namoi Cotton’s investment in NCA and the equity
► We audited the financial statements of NCA for
accounted result included the following:
the year ending 28 February 2018 and issued a
separate audit report to the joint venturers.
► We audited the financial statements of NCA for
In the context of the audit of the Company and
the year ending 28 February 2018 and issued a
►
the Group, we evaluated the scope of the NCA
separate audit report to the joint venturers.
audit and the execution of audit procedures,
In the context of the audit of the Company and
significant areas of estimation and judgement
the Group, we evaluated the scope of the NCA
and audit findings.
audit and the execution of audit procedures,
Enquired of NCA management in relation to
significant areas of estimation and judgement
areas of judgement and movements in the
and audit findings.
balance sheet and income statement at year end
Enquired of NCA management in relation to
and through to the date of this report
areas of judgement and movements in the
Considered the monthly results reported by NCA
balance sheet and income statement at year end
to the group during the year.
and through to the date of this report
►
►
►
►
►
►
►
►
►
Recalculated the Group’s share of the equity-
Considered the monthly results reported by NCA
accounted result with reference to the audited
to the group during the year.
financial statements of NCA for the year ended
Recalculated the Group’s share of the equity-
28 February 2018 and ensured these were
accounted result with reference to the audited
correctly reflected in the carrying value of NCA.
financial statements of NCA for the year ended
Considered whether any indicators of
28 February 2018 and ensured these were
impairment were present with respect to the
correctly reflected in the carrying value of NCA.
Group’s carrying value of the investment in NCA
Considered whether any indicators of
or in the Company’s carrying value of the related
impairment were present with respect to the
receivable balance in the Company.
Group’s carrying value of the investment in NCA
or in the Company’s carrying value of the related
receivable balance in the Company.
Information other than the financial report and auditor’s report thereon
The directors are responsible for the other information. The other information comprises the
information included in the Company’s 2018 Annual Report other than the financial report and our
Information other than the financial report and auditor’s report thereon
auditor’s report thereon. We obtained the Directors’ Report that is to be included in the Annual
The directors are responsible for the other information. The other information comprises the
Report, prior to the date of this auditor’s report, and we expect to obtain the remaining sections of the
information included in the Company’s 2018 Annual Report other than the financial report and our
Annual Report after the date of this auditor’s report.
auditor’s report thereon. We obtained the Directors’ Report that is to be included in the Annual
Our opinion on the financial report does not cover the other information and we do not and will not
Report, prior to the date of this auditor’s report, and we expect to obtain the remaining sections of the
express any form of assurance conclusion thereon.
Annual Report after the date of this auditor’s report.
In connection with our audit of the financial report, our responsibility is to read the other information
Our opinion on the financial report does not cover the other information and we do not and will not
and, in doing so, consider whether the other information is materially inconsistent with the financial
express any form of assurance conclusion thereon.
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
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.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
2018 ANNUAL REPORT | 36
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
If, based on the work we have performed on the other information obtained prior to the date of this
auditor’s report, 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.
If, based on the work we have performed on the other information obtained prior to the date of this
auditor’s report, we conclude that there is a material misstatement of this other information, we are
Responsibilities of the directors for the financial report
required to report that fact. We have nothing to report in this regard.
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
Responsibilities of the directors for the financial report
financial report that gives a true and fair view and is free from material misstatement, whether due to
The directors of the Company are responsible for the preparation of the financial report that gives a
fraud or error.
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
In preparing the financial report, the directors are responsible for assessing the Company’s and
and for such internal control as the directors determine is necessary to enable the preparation of the
Group’s ability to continue as a going concern, disclosing, as applicable, matters relating to going
financial report that gives a true and fair view and is free from material misstatement, whether due to
concern and using the going concern basis of accounting unless the directors either intend to liquidate
fraud or error.
the Company or Group or to cease operations, or have no realistic alternative but to do so.
In preparing the financial report, the directors are responsible for assessing the Company’s and
Group’s ability to continue as a going concern, disclosing, as applicable, matters relating to going
concern and using the going concern basis of accounting unless the directors either intend to liquidate
Auditor's responsibilities for the audit of the financial report
the Company or Group or to cease operations, or have no realistic alternative but to do so.
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
Auditor's responsibilities for the audit of the financial report
audit conducted in accordance with the Australian Auditing Standards will always detect a material
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
if, individually or in the aggregate, they could reasonably be expected to influence the economic
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
decisions of users taken on the basis of this financial report.
audit conducted in accordance with the Australian Auditing Standards will always detect a material
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
judgement and maintain professional scepticism throughout the audit. We also:
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.
►
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
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
judgement and maintain professional scepticism throughout the audit. We also:
detecting a material misstatement resulting from fraud is higher than for one resulting from
Identify and assess the risks of material misstatement of the financial report, whether due to
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
override of internal control.
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
Obtain an understanding of internal control relevant to the audit in order to design audit
detecting a material misstatement resulting from fraud is higher than for one resulting from
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
opinion on the effectiveness of the Company’s or the Group’s internal control.
override of internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
Obtain an understanding of internal control relevant to the audit in order to design audit
estimates and related disclosures made by the directors.
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s or the Group’s internal control.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
events or conditions that may cast significant doubt on the Company’s or Group’s ability to
estimates and related disclosures made by the directors.
continue as a going concern. If we conclude that a material uncertainty exists, we are required
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting
to draw attention in our auditor’s report to the related disclosures in the financial report or, if
and, based on the audit evidence obtained, whether a material uncertainty exists related to
such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
events or conditions that may cast significant doubt on the Company’s or Group’s ability to
evidence obtained up to the date of our auditor’s report. However, future events or conditions
continue as a going concern. If we conclude that a material uncertainty exists, we are required
may cause the Company or the Group to cease to continue as a going concern.
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 Company or the Group to cease to continue as a going concern.
►
►
►
►
►
►
►
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
2018 ANNUAL REPORT | 37
2018 ANNUAL REPORT | 38
Namoi Cotton Co-operative Limited (formerly Namoi Cotton Co-operative Ltd)
DIRECTORS’ DECLARATION
In accordance with a resolution of the directors of Namoi Cotton Limited, I state that:
In the opinion of the directors:
a)
the financial statement, notes and the additional disclosures included in the directors’ report
designated as audited, of the company and of the consolidated entity are in accordance with the
Corporations Act 2001, including:
i)
giving a true and fair view of the company’s and consolidated entity’s financial position as at 28
February 2018 and of their performance for the year ended on that date; and
ii)
complying with Accounting Standards and Corporations Regulations 2001;
b)
c)
the financial statements and notes also comply with International Financial Reporting Standards as
disclosed in note 1(a);
there are reasonable grounds to believe that the company will be able to pay its debts as and when
they become due and payable.
This declaration has been made after receiving the declarations required to be made to the directors in
accordance with section 295A of the Corporations Act 2001 for the financial year ended 28 February 2018.
On behalf of the board
S C BOYDELL
Director
Brisbane
24 April 2018
Year Ended 28 February 2017
Directors’ Declaration
Page 25
2018 ANNUAL REPORT | 39
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME
for the year ended 28 February 2018
BALANCE SHEET
as at 28 February 2018
Consolidated
$'000
Parent
$'000
Note
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
Revenue
2a
483,938
355,344
483,711
355,043
Financial instrument gains/(losses)
Currency derivatives
Cottonseed purchase contracts
Cottonseed sales contracts
Net financial instrument gains/(losses)
Other income
Share of profit/(loss) of associates
and joint ventures
Changes in inventories of finished goods
Raw materials and consumables used
Employee benefits expense
Depreciation
Finance costs
Other expenses
Profit/(loss) before income tax
Income tax (expense)/benefit
Profit/(loss) attributable to the members
of Namoi Cotton Limited
Profit/(loss) and total comprehensive income
attributable to the members of
Namoi Cotton Limited
323
(22,614)
22,548
257
557
19,400
(18,471)
1,486
323
(22,614)
22,548
257
557
19,400
(18,471)
1,486
470
60
(697)
(90)
(734)
(422,333)
(25,618)
(7,949)
(2,558)
(15,102)
9,674
993
(320,203)
(18,309)
(6,206)
(2,611)
(10,426)
38
470
54
60
56
(734)
(422,304)
(25,604)
(7,942)
(2,586)
(15,027)
10,295
1,011
(320,169)
(18,309)
(6,206)
(2,639)
(10,424)
(91)
(2,905)
245
(3,158)
6,769
283
7,137
26
(65)
2b
11
2c
2d
2e
3
6,769
283
7,137
(65)
Total assets
205,823
210,713
211,598
215,943
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Prepayments
Derivative financial instruments
Total current assets
Non-current assets
Trade and other receivables
Intangibles
Property, plant and equipment
Total non-current assets
Investments in associates and joint ventures
Current liabilities
Trade and other payables
Interest bearing liabilities
Provisions
Derivative financial instruments
Total current liabilities
Non-current liabilities
Interest bearing liabilities
Provisions
Deferred tax liabilities (net)
Co-operative grower member shares
Total non-current liabilities
Total liabilities
NET ASSETS
Equity
Parent entity interest
Contributed equity
Reserves
Retained earnings
Total parent entity interest in equity
TOTAL EQUITY
Consolidated
$'000
Parent
$'000
Note
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
7
8
9
10
8
11
14
15
16
17
18
10
17
18
3
19
20
21
1,493
4,012
9,521
1,292
8,493
24,811
-
40,969
961
139,082
181,012
7,845
6,776
2,791
8,556
25,968
43,226
874
3,999
-
2,256
5,288
7,614
541
14,665
30,364
-
-
41,876
138,473
180,349
8,401
16,590
1,979
14,141
41,111
43,330
863
1,134
447
1,352
9,266
9,506
1,289
8,493
29,906
41,820
1,380
-
138,492
181,692
25,551
6,776
2,707
8,556
43,590
45,275
865
3,553
-
2,135
10,540
7,614
541
14,665
35,495
41,820
155
-
138,473
180,448
26,131
16,590
1,979
14,141
58,841
45,379
863
394
447
48,099
45,774
49,693
47,083
74,067
86,885
93,283
105,924
131,756
123,828
118,315
110,019
37,639
66,463
27,654
131,756
1,098
101,845
20,885
123,828
37,639
66,463
14,213
118,315
1,098
101,845
7,076
110,019
131,756
123,828
118,315
110,019
The above statement of profit and loss and other comprehensive income should be read
in conjunction with the accompanying notes.
The above balance sheet should be read in conjunction with the accompanying notes.
Year Ended 28 February 2018
Statement of Profit and Loss and Other Comprehensive Income
2018 ANNUAL REPORT | 40
Page 26
Year Ended 28 February 2018
Balance Sheet
Page 27
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME
for the year ended 28 February 2018
BALANCE SHEET
as at 28 February 2018
Consolidated
$'000
Parent
$'000
Note
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
Revenue
2a
483,938
355,344
483,711
355,043
Financial instrument gains/(losses)
Currency derivatives
Cottonseed purchase contracts
Cottonseed sales contracts
Net financial instrument gains/(losses)
Other income
Share of profit/(loss) of associates
and joint ventures
Changes in inventories of finished goods
Raw materials and consumables used
Employee benefits expense
Depreciation
Finance costs
Other expenses
Profit/(loss) before income tax
Income tax (expense)/benefit
Profit/(loss) attributable to the members
of Namoi Cotton Limited
Profit/(loss) and total comprehensive income
attributable to the members of
Namoi Cotton Limited
323
557
323
557
(22,614)
19,400
(22,614)
19,400
22,548
(18,471)
22,548
(18,471)
257
470
(697)
(734)
1,486
60
(90)
993
257
470
54
1,486
60
56
(734)
1,011
(422,333)
(320,203)
(422,304)
(320,169)
(25,618)
(18,309)
(25,604)
(18,309)
(7,949)
(2,558)
(6,206)
(2,611)
(7,942)
(2,586)
(6,206)
(2,639)
(15,102)
(10,426)
(15,027)
(10,424)
9,674
(2,905)
6,769
38
245
283
10,295
(3,158)
7,137
(91)
26
(65)
2b
11
2c
2d
2e
3
6,769
283
7,137
(65)
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Prepayments
Derivative financial instruments
Total current assets
Non-current assets
Trade and other receivables
Investments in associates and joint ventures
Intangibles
Property, plant and equipment
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Interest bearing liabilities
Provisions
Derivative financial instruments
Total current liabilities
Non-current liabilities
Interest bearing liabilities
Provisions
Deferred tax liabilities (net)
Co-operative grower member shares
Total non-current liabilities
Total liabilities
NET ASSETS
Equity
Parent entity interest
Contributed equity
Reserves
Retained earnings
Total parent entity interest in equity
TOTAL EQUITY
Consolidated
$'000
Parent
$'000
Note
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
7
8
9
10
8
11
14
15
16
17
18
10
17
18
3
19
20
21
1,493
4,012
9,521
1,292
8,493
24,811
-
40,969
961
139,082
181,012
2,256
5,288
7,614
541
14,665
30,364
-
41,876
-
138,473
180,349
1,352
9,266
9,506
1,289
8,493
29,906
41,820
1,380
-
138,492
181,692
2,135
10,540
7,614
541
14,665
35,495
41,820
155
-
138,473
180,448
205,823
210,713
211,598
215,943
7,845
6,776
2,791
8,556
25,968
43,226
874
3,999
-
48,099
8,401
16,590
1,979
14,141
41,111
43,330
863
1,134
447
45,774
25,551
6,776
2,707
8,556
43,590
45,275
865
3,553
-
49,693
26,131
16,590
1,979
14,141
58,841
45,379
863
394
447
47,083
74,067
86,885
93,283
105,924
131,756
123,828
118,315
110,019
37,639
66,463
27,654
131,756
1,098
101,845
20,885
123,828
37,639
66,463
14,213
118,315
1,098
101,845
7,076
110,019
131,756
123,828
118,315
110,019
The above statement of profit and loss and other comprehensive income should be read
in conjunction with the accompanying notes.
The above balance sheet should be read in conjunction with the accompanying notes.
Year Ended 28 February 2018
Statement of Profit and Loss and Other Comprehensive Income
Page 26
Year Ended 28 February 2018
Balance Sheet
Page 27
2018 ANNUAL REPORT | 41
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
STATEMENT OF CASH FLOWS
for the year ended 28 February 2018
Cash flows from operating activities
Receipts from customers
Currency derivative flows
Payments to suppliers and employees
Payments to growers
Interest received
Borrowing costs
Net cash inflow from operating
activities
Cash flows from investing activities
Payments for property, plant and equipment
Proceeds from sale of
property, plant and equipment
Purchase of business and JV assets
(net of cash acquired)
Loans advanced
Proceeds from loans receivable
Net cash outflow from investing
activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Loans advanced to growers
Proceeds from repayment of grower loans
Repayment of finance lease and hire purchase
Net cash inflow from financing
activities
Consolidated
$'000
Parent
$'000
Note
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
534,688
761
(101,309)
(414,420)
23
(2,426)
391,605
165
(66,742)
(316,437)
1
(3,114)
534,275
765
(100,778)
(414,402)
23
(2,453)
391,300
165
(66,507)
(316,455)
1
(3,142)
7b
17,317
5,478
17,430
5,362
(5,451)
(3,648)
(5,365)
(3,648)
203
195
203
195
(1,701)
(18)
14
-
(23)
16
(1,916)
(17)
13
-
(23)
16
(6,953)
(3,460)
(7,082)
(3,460)
10,553
(19,539)
(360)
360
(1,340)
28,530
(28,027)
(2,287)
2,287
(802)
10,553
(19,539)
(360)
360
(1,344)
28,530
(28,026)
(2,287)
2,287
(803)
7c
(10,326)
(299)
(10,330)
(299)
Net increase in cash
Add cash at the beginning of the financial year
Cash at end of the financial year
7a
38
1,437
1,475
1,719
(282)
1,437
18
1,316
1,334
1,603
(287)
1,316
STATEMENT OF CHANGES IN EQUITY
for the year ended 28 February 2018
CCU
Asset
Premium Revaluation
Issued
Capital
Reserve
(Note 21)
Reserve
(Note 21)
Retained
Earnings
Total
Equity
Consolidated $'000
Total equity at 1 March 2017
1,098
35,382
66,463
20,885
123,828
Net profit for the period
CCU's converted to residual capital stock
Residual Capital Stock/Ordinary Shares
Equity dividends
Total equity at 28 February 2018
(35,382)
(1,098)
37,639
37,639
6,769
6,769
(36,480)
37,639
-
66,463
27,654
131,756
Total equity at 1 March 2017
1,098
35,382
66,463
-
-
-
-
1,098
-
1,098
1,098
-
1,098
-
-
-
-
-
-
7,076
7,137
Total
Equity
110,019
7,137
(36,480)
37,639
-
CCU
Asset
Premium Revaluation
Issued
Capital
Reserve
(Note 21)
Reserve
(Note 21)
Retained
Earnings
(35,382)
(1,098)
37,639
37,639
66,463
14,213
118,315
CCU
Asset
Premium Revaluation
Issued
Capital
Reserve
(Note 21)
Reserve
(Note 21)
Retained
Earnings
Total
Equity
35,382
66,463
20,602
123,545
35,382
66,463
283
20,885
283
123,828
CCU
Asset
Premium Revaluation
Issued
Capital
Reserve
(Note 21)
Reserve
(Note 21)
Retained
Earnings
Total
Equity
35,382
66,463
7,141
110,084
35,382
66,463
(65)
7,076
(65)
110,019
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Parent $'000
Net profit for the period
CCU's converted to residual capital stock
Residual Capital Stock/Ordinary Shares
Equity dividends
Total equity at 28 February 2018
Consolidated $'000
Total equity at 1 March 2016
Net profit for the period
Total equity at 28 February 2017
Parent $'000
Total equity at 1 March 2016
Net profit for the period
Total equity at 28 February 2017
The above statement of cash flows should be read in conjunction with the accompanying notes.
The above statement of changes in equity should be read in conjunction with the accompanying notes.
Year Ended 28 February 2018
Statement of Cash Flows
2018 ANNUAL REPORT | 42
Page 28
Year Ended 28 February 2018
Statement of Changes in Equity
Page 29
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
STATEMENT OF CHANGES IN EQUITY
for the year ended 28 February 2018
Consolidated $'000
Issued
Capital
CCU
Asset
Premium Revaluation
Reserve
(Note 21)
Reserve
(Note 21)
Total equity at 1 March 2017
1,098
35,382
Net profit for the period
CCU's converted to residual capital stock
Residual Capital Stock/Ordinary Shares
Equity dividends
Total equity at 28 February 2018
-
(1,098)
37,639
-
37,639
-
(35,382)
-
-
-
66,463
-
-
-
-
66,463
Parent $'000
Issued
Capital
CCU
Asset
Premium Revaluation
Reserve
(Note 21)
Reserve
(Note 21)
Total equity at 1 March 2017
1,098
35,382
Net profit for the period
CCU's converted to residual capital stock
Residual Capital Stock/Ordinary Shares
Equity dividends
Total equity at 28 February 2018
-
(1,098)
37,639
-
37,639
-
(35,382)
-
-
-
66,463
-
-
-
-
66,463
STATEMENT OF CASH FLOWS
for the year ended 28 February 2018
Cash flows from operating activities
Receipts from customers
Currency derivative flows
Payments to suppliers and employees
Payments to growers
Interest received
Borrowing costs
Net cash inflow from operating
activities
Cash flows from investing activities
Payments for property, plant and equipment
Proceeds from sale of
property, plant and equipment
Purchase of business and JV assets
(net of cash acquired)
Loans advanced
Proceeds from loans receivable
Net cash outflow from investing
activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Loans advanced to growers
Proceeds from repayment of grower loans
Repayment of finance lease and hire purchase
Net cash inflow from financing
activities
Net increase in cash
Consolidated
$'000
Parent
$'000
Note
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
534,688
391,605
534,275
391,300
761
165
765
165
(101,309)
(66,742)
(100,778)
(66,507)
(414,420)
(316,437)
(414,402)
(316,455)
23
1
23
1
(2,426)
(3,114)
(2,453)
(3,142)
7b
17,317
5,478
17,430
5,362
(5,451)
(3,648)
(5,365)
(3,648)
203
195
203
195
(1,701)
(18)
14
-
(23)
16
(1,916)
(17)
13
-
(23)
16
(6,953)
(3,460)
(7,082)
(3,460)
10,553
28,530
10,553
28,530
(19,539)
(28,027)
(19,539)
(28,026)
(360)
360
(1,340)
(2,287)
2,287
(802)
(360)
360
(1,344)
(2,287)
2,287
(803)
7c
(10,326)
(299)
(10,330)
(299)
Add cash at the beginning of the financial year
Cash at end of the financial year
7a
38
1,437
1,475
1,719
(282)
1,437
18
1,316
1,334
1,603
(287)
1,316
Consolidated $'000
Total equity at 1 March 2016
Net profit for the period
Total equity at 28 February 2017
Parent $'000
Total equity at 1 March 2016
Net profit for the period
Total equity at 28 February 2017
Issued
Capital
1,098
-
1,098
Issued
Capital
1,098
-
1,098
CCU
Asset
Premium Revaluation
Reserve
(Note 21)
Reserve
(Note 21)
35,382
-
35,382
66,463
-
66,463
20,602
123,545
283
20,885
283
123,828
CCU
Asset
Premium Revaluation
Reserve
(Note 21)
Reserve
(Note 21)
35,382
-
35,382
66,463
-
66,463
Retained
Earnings
Total
Equity
7,141
110,084
(65)
7,076
(65)
110,019
Retained
Earnings
Total
Equity
20,885
123,828
6,769
-
-
-
27,654
6,769
(36,480)
37,639
-
131,756
Retained
Earnings
Total
Equity
7,076
110,019
7,137
-
-
-
14,213
7,137
(36,480)
37,639
-
118,315
Retained
Earnings
Total
Equity
The above statement of cash flows should be read in conjunction with the accompanying notes.
The above statement of changes in equity should be read in conjunction with the accompanying notes.
Year Ended 28 February 2018
Statement of Cash Flows
Page 28
Year Ended 28 February 2018
Statement of Changes in Equity
Page 29
2018 ANNUAL REPORT | 43
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
NOTES TO THE FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
The principal accounting policies adopted in the preparation of the financial report are set out below. These
policies have been consistently applied to all the years presented, unless otherwise stated. The financial report
includes separate financial statements for Namoi Cotton Limited as an individual entity (under CO 10/654) and
the consolidated entity consisting of Namoi Cotton Limited and its subsidiaries.
For the purposes of disclosure of events occurring after balance date the Directors have authorised this financial
report for issue on 24 April 2018 in accordance with a resolution of the Board of Directors.
The nature of the operations and principal activities of the group are described in the Directors’ Report.
a) Basis of preparation
The financial report is a general purpose financial report, which has been prepared in accordance with standards,
other authoritative pronouncements of the Australian Accounting Standards Board and Corporations Act 2001.
The financial statements have been prepared on a going concern basis under the historical cost convention,
except for ginning assets, derivative financial instruments, and cotton seed inventory which are measured at fair
value.
Deficiency of Current Assets to Current Liabilities
The Group’s current liabilities exceed current assets. The net current liability position is mainly caused by the
classification of the working capital finance facility as current. This facility is renewed each year for seasonal
reasons and is not required to be repaid in the next 12 months.
After balance date Namoi Cotton completed execution of its 2018 finance facility renewal. The renewal included
the extension of the working capital finance facility from March 2018 to March 2019 and other minor reporting
obligations (refer to note 17).
Statement of compliance
The financial report complies with Australian Accounting Standards and International Financial Reporting
Standards as issued by the International Accounting Standards Board.
Significant accounting judgments, estimates and assumptions
The preparation of the financial statements requires management to make judgments, estimates and
assumptions that affect the reported amounts in the financial statements over the following primary areas:
• Determination of fair value on cotton seed inventory (refer to Note 1k) and derivative financial instruments
(refer to Note 1l);
Fair value of ginning assets (refer Note 1n);
Impairment testing of property plant and equipment (refer to Note 1n);
Classification of associates (refer to Note 1c);
Treatment of deferred tax balances including tax loss recognition (refer to Note 1g); and
•
•
•
•
• Assessment of the useful lives of assets (refer to Note 1n)
New accounting standards and interpretations
New standards and amendments to standards that are mandatory for the first time for the financial year
beginning 1 March 2017 have been adopted by the Group. The adoption of these standards had no material
financial impact on the current period or any prior period and is not likely to affect future periods.
• AASB 2016-1 Amendments to Australian Accounting Standards – Recognition of Deferred Tax Assets for
Unrealised Losses [AASB 112] effective 1 March 2017;
• AASB 2016-2 Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB
107 Statement of Cash Flows effective 1 March 2017;
Certain new accounting standards and interpretations have been published that are not mandatory for 28
February 2018 reporting periods and have not yet been applied in the consolidated Financial statements. These
new Standards are as follows and where appropriate commentary as to their likely impact has been included:
• AASB 9 Financial Instruments effective 1 March 2018;
• AASB 15 Revenue from Contracts with Customers effective 1 March 2018;
• AASB 2014-10 Amendments to Australian Accounting Standards – Sale or Contribution of Assets between
an Investor and its Associate or Joint Venture effective 1 March 2018;
• AASB 16 Leases effective 1 March 2019.
Review of Standards
AASB 9 Financial Instruments.
AASB 9 contains changes to the principal classification categories for financial assets: amortised cost, Fair value
through Other Comprehensive Income (FVOCI) and fair value through profit and loss (FVTPL). The standard
eliminates the existing AASB 139 categories of held to maturity, loans and receivables. The Group is currently
assessing the implications on adoption particularly for the Parent entity which may impact the receivables due
from other group entities and the subsequent classification. This assessment has not yet been finalised.
AASB 9 replaces the ‘incurred loss’ model in AASB 139 with a forward looking ‘expected credit loss’ (ECL) model.
This will require considerable judgement about how changes in economic factors affect ECLs, which will be
determined on a probability-weighted basis. The new impairment model will apply to financial assets measured
at amortised cost or FVOCI except for investment in equity instruments and to contract assets. Based on its
preliminary assessment, the Group has identified that the application of the new guidance requires an earlier
assessment of the likelihood of ECLs rather than its existing losses for its financial assets. However, the Group
has not yet quantified the potential impact.
The full impact of the disclosures required by the standard remains in progress.
AASB 15 Revenue from Contracts with Customers.
AASB 15 introduces a five step process for revenue recognition with the core principle of the new Standard being
for entities to recognise revenue to depict the transfer of goods or services to customers in amounts that reflect
the consideration (that is, payment) to which the entity expected to be entitled in exchange for those goods or
services. Accounting policy changes will arise in timing of revenue recognition, treatment of contract costs and
contracts which contain a financing element.
AASB 15 will also result in enhanced disclosures about revenue, provide guidance for transactions that were not
previously addressed comprehensively (for example, service revenue and contract modifications) and improve
guidance for multiple-element arrangements.
The group has undertaken a high level review of the current recognition practices for individual revenue streams.
This indicated there may be limited impacts to the existing recognition practices. However, a detailed analysis
of the underlying contracts has yet to be completed and, therefore, the Group are unable to determine if there
is a material impact.
The full impact of the disclosures required by the standard remains in progress.
b)
Seasonality of operations
Cotton Ginning, one of Namoi Cottons business segments, operates on a seasonal basis whereby ginning
normally occurs between March to July each year. Accordingly, that segment traditionally generates profits in
the first half year and incurs losses in the second half year during the ensuing maintenance period.
Namoi Cotton’s marketing segment, represented by sales to NCA and its residual 51% share in the joint venture,
generally takes delivery of lint cotton from growers in the first half of the year predominately from March to
Year Ended 28 February 2018
Notes to the Financial Statements
2018 ANNUAL REPORT | 44
Page 30
Year Ended 28 February 2018
Notes to the Financial Statements
Page 31
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
NOTES TO THE FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
The principal accounting policies adopted in the preparation of the financial report are set out below. These
policies have been consistently applied to all the years presented, unless otherwise stated. The financial report
includes separate financial statements for Namoi Cotton Limited as an individual entity (under CO 10/654) and
the consolidated entity consisting of Namoi Cotton Limited and its subsidiaries.
For the purposes of disclosure of events occurring after balance date the Directors have authorised this financial
report for issue on 24 April 2018 in accordance with a resolution of the Board of Directors.
The nature of the operations and principal activities of the group are described in the Directors’ Report.
a) Basis of preparation
The financial report is a general purpose financial report, which has been prepared in accordance with standards,
other authoritative pronouncements of the Australian Accounting Standards Board and Corporations Act 2001.
The financial statements have been prepared on a going concern basis under the historical cost convention,
except for ginning assets, derivative financial instruments, and cotton seed inventory which are measured at fair
value.
Deficiency of Current Assets to Current Liabilities
The Group’s current liabilities exceed current assets. The net current liability position is mainly caused by the
classification of the working capital finance facility as current. This facility is renewed each year for seasonal
reasons and is not required to be repaid in the next 12 months.
obligations (refer to note 17).
Statement of compliance
The financial report complies with Australian Accounting Standards and International Financial Reporting
Standards as issued by the International Accounting Standards Board.
Significant accounting judgments, estimates and assumptions
The preparation of the financial statements requires management to make judgments, estimates and
assumptions that affect the reported amounts in the financial statements over the following primary areas:
• Determination of fair value on cotton seed inventory (refer to Note 1k) and derivative financial instruments
(refer to Note 1l);
Fair value of ginning assets (refer Note 1n);
•
•
•
•
Impairment testing of property plant and equipment (refer to Note 1n);
Classification of associates (refer to Note 1c);
Treatment of deferred tax balances including tax loss recognition (refer to Note 1g); and
• Assessment of the useful lives of assets (refer to Note 1n)
New accounting standards and interpretations
New standards and amendments to standards that are mandatory for the first time for the financial year
beginning 1 March 2017 have been adopted by the Group. The adoption of these standards had no material
financial impact on the current period or any prior period and is not likely to affect future periods.
• AASB 2016-1 Amendments to Australian Accounting Standards – Recognition of Deferred Tax Assets for
Unrealised Losses [AASB 112] effective 1 March 2017;
• AASB 2016-2 Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB
107 Statement of Cash Flows effective 1 March 2017;
Certain new accounting standards and interpretations have been published that are not mandatory for 28
February 2018 reporting periods and have not yet been applied in the consolidated Financial statements. These
new Standards are as follows and where appropriate commentary as to their likely impact has been included:
• AASB 9 Financial Instruments effective 1 March 2018;
• AASB 15 Revenue from Contracts with Customers effective 1 March 2018;
• AASB 2014-10 Amendments to Australian Accounting Standards – Sale or Contribution of Assets between
an Investor and its Associate or Joint Venture effective 1 March 2018;
• AASB 16 Leases effective 1 March 2019.
Review of Standards
AASB 9 Financial Instruments.
AASB 9 contains changes to the principal classification categories for financial assets: amortised cost, Fair value
through Other Comprehensive Income (FVOCI) and fair value through profit and loss (FVTPL). The standard
eliminates the existing AASB 139 categories of held to maturity, loans and receivables. The Group is currently
assessing the implications on adoption particularly for the Parent entity which may impact the receivables due
from other group entities and the subsequent classification. This assessment has not yet been finalised.
AASB 9 replaces the ‘incurred loss’ model in AASB 139 with a forward looking ‘expected credit loss’ (ECL) model.
This will require considerable judgement about how changes in economic factors affect ECLs, which will be
determined on a probability-weighted basis. The new impairment model will apply to financial assets measured
at amortised cost or FVOCI except for investment in equity instruments and to contract assets. Based on its
preliminary assessment, the Group has identified that the application of the new guidance requires an earlier
assessment of the likelihood of ECLs rather than its existing losses for its financial assets. However, the Group
has not yet quantified the potential impact.
The full impact of the disclosures required by the standard remains in progress.
After balance date Namoi Cotton completed execution of its 2018 finance facility renewal. The renewal included
the extension of the working capital finance facility from March 2018 to March 2019 and other minor reporting
AASB 15 Revenue from Contracts with Customers.
AASB 15 introduces a five step process for revenue recognition with the core principle of the new Standard being
for entities to recognise revenue to depict the transfer of goods or services to customers in amounts that reflect
the consideration (that is, payment) to which the entity expected to be entitled in exchange for those goods or
services. Accounting policy changes will arise in timing of revenue recognition, treatment of contract costs and
contracts which contain a financing element.
AASB 15 will also result in enhanced disclosures about revenue, provide guidance for transactions that were not
previously addressed comprehensively (for example, service revenue and contract modifications) and improve
guidance for multiple-element arrangements.
The group has undertaken a high level review of the current recognition practices for individual revenue streams.
This indicated there may be limited impacts to the existing recognition practices. However, a detailed analysis
of the underlying contracts has yet to be completed and, therefore, the Group are unable to determine if there
is a material impact.
The full impact of the disclosures required by the standard remains in progress.
b)
Seasonality of operations
Cotton Ginning, one of Namoi Cottons business segments, operates on a seasonal basis whereby ginning
normally occurs between March to July each year. Accordingly, that segment traditionally generates profits in
the first half year and incurs losses in the second half year during the ensuing maintenance period.
Namoi Cotton’s marketing segment, represented by sales to NCA and its residual 51% share in the joint venture,
generally takes delivery of lint cotton from growers in the first half of the year predominately from March to
Year Ended 28 February 2018
Notes to the Financial Statements
Page 30
Year Ended 28 February 2018
Notes to the Financial Statements
Page 31
2018 ANNUAL REPORT | 45
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
August. Under NCA’s accounting policies, profits on lint marketing occur when the joint venture takes delivery
of the lint cotton from the grower.
The considerations made in determining significant influence or joint control are similar to those necessary to
determine control over subsidiaries. Namoi’s investments in its associate and joint venture are accounted for
c) Basis of consolidation
The consolidated financial statements comprise the financial statements of Namoi and its subsidiaries as at 28
February 2018. Control is achieved when Namoi is exposed, or has rights, to variable returns from its
involvement with the investee and has the ability to affect those returns through its power over the investee.
Specifically, Namoi controls an investee if and only if the group has:
•
•
•
Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of
the investee);
Exposure, or rights, to variable returns from its involvement with the investee; and
The ability to use its power over the investee to affect its returns.
When Namoi has less than a majority of the voting or similar rights of an investee, Namoi considers all relevant
facts and circumstances in assessing whether it has power over an investee, including:
The contractual arrangement with the other vote holders of the investee;
•
• Rights arising from other contractual arrangements; and
•
The Namoi’s voting rights and potential voting rights.
Namoi re-assesses whether or not it controls an investee if facts and circumstances indicate that there are
changes to one or more of the three elements of control. Consolidation of a subsidiary begins when Namoi
obtains control over the subsidiary and ceases when Namoi loses control of the subsidiary. Assets, liabilities,
income and expenses of a subsidiary acquired or disposed of during the year are included in the statement of
comprehensive income from the date Namoi gains control until the date Namoi ceases to control the subsidiary.
Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of
the parent of Namoi and to the non-controlling interests, even if this results in the non-controlling interests
having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to
bring their accounting policies into line with Namoi’s accounting policies. All intra-group assets and liabilities,
equity, income, expenses and cash flows relating to transactions between members of Namoi are eliminated in
full on consolidation.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity
transaction. If Namoi loses control over a subsidiary, it:
• De-recognises the assets (including goodwill) and liabilities of the subsidiary;
• De-recognises the carrying amount of any non-controlling interests;
• De-recognises the cumulative translation differences recorded in equity;
• Recognises the fair value of the consideration received;
• Recognises the fair value of any investment retained;
• Recognises any surplus or deficit in profit or loss; and
• Reclassifies the parent’s share of components previously recognised in OCI to profit or loss or retained
earnings, as appropriate, as would be required if Namoi had directly disposed of the related assets or
liabilities.
Investment in associates and joint ventures
An associate is an entity over which Namoi has significant influence. Significant influence is the power to
participate in the financial and operating policy decisions of the investee, but is not control or joint control over
those policies. A joint venture is a type of joint arrangement whereby the parties that have joint control of the
arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing
of control of an arrangement, which exists only when decisions about the relevant activities require unanimous
consent of the parties sharing control.
using the equity method.
Under the equity method, the investment in an associate or a joint venture is initially recognised at cost. The
carrying amount of the investment is adjusted to recognise changes in Namoi’s share of net assets of the
associate or joint venture since the acquisition date. Goodwill relating to the associate or joint venture is
included in the carrying amount of the investment and is neither amortised nor individually tested for
impairment.
The statement of profit or loss reflects Namoi’s share of the results of operations of the associate or joint
venture. Any change in OCI of those investees is presented as part of the Namoi’s OCI. In addition, when there
has been a change recognised directly in the equity of the associate or joint venture, Namoi recognises its share
of any changes, when applicable, in the statement of changes in equity. Unrealised gains and losses resulting
from transactions between Namoi and the associate or joint venture are eliminated to the extent of the interest
in the associate or joint venture.
The aggregate of Namoi’s share of profit or loss of an associate and a joint venture is shown on the face of the
statement of profit or loss outside operating profit and represents profit or loss after tax and non-controlling
interests in the subsidiaries of the associate or joint venture.
The financial statements of the associate or joint venture are prepared for the same reporting period as Namoi.
When necessary, adjustments are made to bring the accounting policies in line with those of Namoi.
After application of the equity method, Namoi determines whether it is necessary to recognise an impairment
loss on its investment in its associate or joint venture. At each reporting date, Namoi determines whether there
is objective evidence that the investment in the associate or joint venture is impaired. If there is such evidence,
Namoi calculates the amount of impairment as the difference between the recoverable amount of the associate
or joint venture and its carrying value, then recognises the loss as ‘Share of profit of an associate and a joint
venture’ in the statement of profit or loss.
Upon loss of significant influence over the associate or joint control over the joint venture, Namoi measures and
recognises any retained investment at its fair value. Any difference between the carrying amount of the
associate or joint venture upon loss of significant influence or joint control and the fair value of the retained
investment and proceeds from disposal is recognised in profit or loss.
Joint operations
Namoi determines its interest in the assets and liabilities relating to each joint operation on the basis of its rights
and obligations in a specified proportion in accordance with the contractual arrangement.
Namoi recognises the following at its share:
• Assets, including its share of any assets held jointly
Liabilities, including its share of any liabilities incurred jointly
• Revenue from the sale of its share of the output arising from the joint operation
Share of the revenue from the sale of the output by the joint operation
Expenses, including its share of any expenses incurred jointly.
•
•
•
Interests in jointly controlled assets have been incorporated in the financial statements under the appropriate
Jointly controlled assets
headings.
d) Business combinations and goodwill
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured
as the aggregate of the consideration transferred, which is measured at acquisition date fair value, and the
amount of any non-controlling interests in the acquiree. For each business combination, the Group elects
whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of
Year Ended 28 February 2018
Notes to the Financial Statements
2018 ANNUAL REPORT | 46
Page 32
Year Ended 28 February 2018
Notes to the Financial Statements
Page 33
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
The considerations made in determining significant influence or joint control are similar to those necessary to
determine control over subsidiaries. Namoi’s investments in its associate and joint venture are accounted for
using the equity method.
Under the equity method, the investment in an associate or a joint venture is initially recognised at cost. The
carrying amount of the investment is adjusted to recognise changes in Namoi’s share of net assets of the
associate or joint venture since the acquisition date. Goodwill relating to the associate or joint venture is
included in the carrying amount of the investment and is neither amortised nor individually tested for
impairment.
The statement of profit or loss reflects Namoi’s share of the results of operations of the associate or joint
venture. Any change in OCI of those investees is presented as part of the Namoi’s OCI. In addition, when there
has been a change recognised directly in the equity of the associate or joint venture, Namoi recognises its share
of any changes, when applicable, in the statement of changes in equity. Unrealised gains and losses resulting
from transactions between Namoi and the associate or joint venture are eliminated to the extent of the interest
in the associate or joint venture.
The aggregate of Namoi’s share of profit or loss of an associate and a joint venture is shown on the face of the
statement of profit or loss outside operating profit and represents profit or loss after tax and non-controlling
interests in the subsidiaries of the associate or joint venture.
The financial statements of the associate or joint venture are prepared for the same reporting period as Namoi.
When necessary, adjustments are made to bring the accounting policies in line with those of Namoi.
After application of the equity method, Namoi determines whether it is necessary to recognise an impairment
loss on its investment in its associate or joint venture. At each reporting date, Namoi determines whether there
is objective evidence that the investment in the associate or joint venture is impaired. If there is such evidence,
Namoi calculates the amount of impairment as the difference between the recoverable amount of the associate
or joint venture and its carrying value, then recognises the loss as ‘Share of profit of an associate and a joint
venture’ in the statement of profit or loss.
Upon loss of significant influence over the associate or joint control over the joint venture, Namoi measures and
recognises any retained investment at its fair value. Any difference between the carrying amount of the
associate or joint venture upon loss of significant influence or joint control and the fair value of the retained
investment and proceeds from disposal is recognised in profit or loss.
Joint operations
Namoi determines its interest in the assets and liabilities relating to each joint operation on the basis of its rights
and obligations in a specified proportion in accordance with the contractual arrangement.
Namoi recognises the following at its share:
August. Under NCA’s accounting policies, profits on lint marketing occur when the joint venture takes delivery
of the lint cotton from the grower.
c) Basis of consolidation
The consolidated financial statements comprise the financial statements of Namoi and its subsidiaries as at 28
February 2018. Control is achieved when Namoi is exposed, or has rights, to variable returns from its
involvement with the investee and has the ability to affect those returns through its power over the investee.
Specifically, Namoi controls an investee if and only if the group has:
Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of
the investee);
Exposure, or rights, to variable returns from its involvement with the investee; and
The ability to use its power over the investee to affect its returns.
When Namoi has less than a majority of the voting or similar rights of an investee, Namoi considers all relevant
facts and circumstances in assessing whether it has power over an investee, including:
The contractual arrangement with the other vote holders of the investee;
• Rights arising from other contractual arrangements; and
The Namoi’s voting rights and potential voting rights.
•
•
•
•
•
Namoi re-assesses whether or not it controls an investee if facts and circumstances indicate that there are
changes to one or more of the three elements of control. Consolidation of a subsidiary begins when Namoi
obtains control over the subsidiary and ceases when Namoi loses control of the subsidiary. Assets, liabilities,
income and expenses of a subsidiary acquired or disposed of during the year are included in the statement of
comprehensive income from the date Namoi gains control until the date Namoi ceases to control the subsidiary.
Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of
the parent of Namoi and to the non-controlling interests, even if this results in the non-controlling interests
having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to
bring their accounting policies into line with Namoi’s accounting policies. All intra-group assets and liabilities,
equity, income, expenses and cash flows relating to transactions between members of Namoi are eliminated in
full on consolidation.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity
transaction. If Namoi loses control over a subsidiary, it:
• De-recognises the assets (including goodwill) and liabilities of the subsidiary;
• De-recognises the carrying amount of any non-controlling interests;
• De-recognises the cumulative translation differences recorded in equity;
• Recognises the fair value of the consideration received;
• Recognises the fair value of any investment retained;
• Recognises any surplus or deficit in profit or loss; and
• Reclassifies the parent’s share of components previously recognised in OCI to profit or loss or retained
earnings, as appropriate, as would be required if Namoi had directly disposed of the related assets or
liabilities.
Investment in associates and joint ventures
An associate is an entity over which Namoi has significant influence. Significant influence is the power to
participate in the financial and operating policy decisions of the investee, but is not control or joint control over
those policies. A joint venture is a type of joint arrangement whereby the parties that have joint control of the
arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing
of control of an arrangement, which exists only when decisions about the relevant activities require unanimous
consent of the parties sharing control.
Year Ended 28 February 2018
Notes to the Financial Statements
Page 32
Year Ended 28 February 2018
Notes to the Financial Statements
Page 33
2018 ANNUAL REPORT | 47
Jointly controlled assets
Interests in jointly controlled assets have been incorporated in the financial statements under the appropriate
headings.
d) Business combinations and goodwill
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured
as the aggregate of the consideration transferred, which is measured at acquisition date fair value, and the
amount of any non-controlling interests in the acquiree. For each business combination, the Group elects
whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of
• Assets, including its share of any assets held jointly
•
• Revenue from the sale of its share of the output arising from the joint operation
•
•
Share of the revenue from the sale of the output by the joint operation
Expenses, including its share of any expenses incurred jointly.
Liabilities, including its share of any liabilities incurred jointly
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred and included in
administrative expenses.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose
of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to
each of the Group’s cash-generating units that are expected to benefit from the combination, irrespective of
whether other assets or liabilities of the acquiree are assigned to those units.
e)
Foreign currency translation
Items included in the financial statements of each of the group’s entities are measured using the currency of the
primary economic environment in which the entity operates (“the functional currency”). The consolidated
financial statements are presented in Australian dollars, which is Namoi Cotton Limited’s functional and
presentation currency.
Transactions denominated in foreign currencies are initially recorded in the functional currency at the exchange
rates prevailing at the date of the transaction. Foreign exchange gains and losses resulting from the settlement
of such transactions and from the translation of foreign currency denominated monetary assets and liabilities
using rates of exchange applicable at balance date are recognised in the statement of comprehensive income.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the
exchange rate as at the date of the initial transaction. Non-monetary items measured at fair value in a foreign
currency are translated using the exchange rates at the date when the fair value was determined.
f)
Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity and the
revenue can be reliably measured. The following specific recognition criteria must also be met before revenue
is recognised.
Namoi Cotton Limited is the head entity of the tax consolidated group comprising all wholly owned controlled
entities. The group has applied the group allocation method in determining the appropriate amount of current
and deferred taxes to allocate to the members of the tax consolidated group.
Sale of lint cotton, cotton seed and grain commodities
Sales revenue is brought to account when the terms of delivery under the sales contract have been satisfied.
Goods and services tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST except:
Fair value of forward cotton seed commodity sale contracts is determined with reference to prevailing prices at
reporting date.
Derivatives
Derivatives including forward cotton seed commodity purchase and sale contracts and forward exchange
contracts are stated at fair value with any gains or losses arising from changes in fair value taken directly to the
statement of comprehensive income.
The fair value of forward exchange contracts is calculated by reference to current forward exchange rates for
contracts with similar maturity profiles.
Ginning revenue
Ginning charges are invoiced to growers for services connected with the processing of seed cotton to lint cotton.
Revenue is brought to account on all production performed during the period.
Interest revenue
Interest revenue is brought to account when entitlement to interest occurs using the effective interest method.
Dividend revenue
Dividend revenue is brought to account when the group’s right to receive is established.
Rental revenue
Rental income is brought to account when received.
g)
Taxes
Income Tax
The income tax expense or revenue for the period is the tax payable on the current period’s taxable income
based upon the prevailing income tax rate adjusted by changes in deferred tax assets and liabilities attributable
to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the
financial statements, and as to available carried forward taxation losses.
The carrying amount of deferred income tax assets is reviewed at each balance date and reduced to the extent
that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred
income tax asset to be utilised.
Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the
extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year
when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted at balance date.
Deferred tax assets and deferred tax liabilities are offset only where such offset is enforceable and where the
asset and liability relate to the same taxpaying entity and the same taxation authority.
Income taxes relating to items recognised directly in equity are recognised in equity and not in the statement of
comprehensive income.
Tax consolidation legislation
• where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority,
in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense
item as applicable; and
•
receivables and payables are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables
or payables in the statement of financial position. Cash flows are included in the statement of cash flows on a
gross basis and the GST component of cash flows arising from investing and financing activities, which is
recoverable from, or payable to, the taxation authority, are classified as operating cash flows. Commitments and
contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.
h)
Leases
Leases are classified at their inception as either operating or finance leases based on the economic substance of
the agreement so as to reflect the risks and benefits incidental to ownership.
Finance leases, which transfer to the group substantially all the risks and benefits incidental to ownership of the
leased item, are capitalised at the inception of the lease at the fair value of the leased property or, if lower, at
the present value of the minimum lease payments. Lease payments are apportioned between the finance
charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance
of the liability. Finance charges are charged directly against income.
Capitalised leased assets are depreciated in accordance with the depreciation methodology applicable for the
type of asset subject to the lease. However, if no reasonable certainty exists to indicate the asset will be acquired
Year Ended 28 February 2018
Notes to the Financial Statements
2018 ANNUAL REPORT | 48
Page 34
Year Ended 28 February 2018
Notes to the Financial Statements
Page 35
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose
of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to
each of the Group’s cash-generating units that are expected to benefit from the combination, irrespective of
whether other assets or liabilities of the acquiree are assigned to those units.
e)
Foreign currency translation
Items included in the financial statements of each of the group’s entities are measured using the currency of the
primary economic environment in which the entity operates (“the functional currency”). The consolidated
financial statements are presented in Australian dollars, which is Namoi Cotton Limited’s functional and
presentation currency.
Transactions denominated in foreign currencies are initially recorded in the functional currency at the exchange
rates prevailing at the date of the transaction. Foreign exchange gains and losses resulting from the settlement
of such transactions and from the translation of foreign currency denominated monetary assets and liabilities
using rates of exchange applicable at balance date are recognised in the statement of comprehensive income.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the
exchange rate as at the date of the initial transaction. Non-monetary items measured at fair value in a foreign
currency are translated using the exchange rates at the date when the fair value was determined.
f)
Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity and the
revenue can be reliably measured. The following specific recognition criteria must also be met before revenue
is recognised.
reporting date.
Derivatives
Ginning revenue
Interest revenue
Dividend revenue
Fair value of forward cotton seed commodity sale contracts is determined with reference to prevailing prices at
Derivatives including forward cotton seed commodity purchase and sale contracts and forward exchange
contracts are stated at fair value with any gains or losses arising from changes in fair value taken directly to the
statement of comprehensive income.
The fair value of forward exchange contracts is calculated by reference to current forward exchange rates for
contracts with similar maturity profiles.
Ginning charges are invoiced to growers for services connected with the processing of seed cotton to lint cotton.
Revenue is brought to account on all production performed during the period.
Interest revenue is brought to account when entitlement to interest occurs using the effective interest method.
Dividend revenue is brought to account when the group’s right to receive is established.
Rental revenue
Rental income is brought to account when received.
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred and included in
g)
Taxes
administrative expenses.
Income Tax
The income tax expense or revenue for the period is the tax payable on the current period’s taxable income
based upon the prevailing income tax rate adjusted by changes in deferred tax assets and liabilities attributable
to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the
financial statements, and as to available carried forward taxation losses.
The carrying amount of deferred income tax assets is reviewed at each balance date and reduced to the extent
that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred
income tax asset to be utilised.
Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the
extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year
when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted at balance date.
Deferred tax assets and deferred tax liabilities are offset only where such offset is enforceable and where the
asset and liability relate to the same taxpaying entity and the same taxation authority.
Income taxes relating to items recognised directly in equity are recognised in equity and not in the statement of
comprehensive income.
Tax consolidation legislation
Namoi Cotton Limited is the head entity of the tax consolidated group comprising all wholly owned controlled
entities. The group has applied the group allocation method in determining the appropriate amount of current
and deferred taxes to allocate to the members of the tax consolidated group.
Sale of lint cotton, cotton seed and grain commodities
Sales revenue is brought to account when the terms of delivery under the sales contract have been satisfied.
Goods and services tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST except:
• where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority,
in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense
item as applicable; and
receivables and payables are stated with the amount of GST included.
•
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables
or payables in the statement of financial position. Cash flows are included in the statement of cash flows on a
gross basis and the GST component of cash flows arising from investing and financing activities, which is
recoverable from, or payable to, the taxation authority, are classified as operating cash flows. Commitments and
contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.
h)
Leases
Leases are classified at their inception as either operating or finance leases based on the economic substance of
the agreement so as to reflect the risks and benefits incidental to ownership.
Finance leases, which transfer to the group substantially all the risks and benefits incidental to ownership of the
leased item, are capitalised at the inception of the lease at the fair value of the leased property or, if lower, at
the present value of the minimum lease payments. Lease payments are apportioned between the finance
charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance
of the liability. Finance charges are charged directly against income.
Capitalised leased assets are depreciated in accordance with the depreciation methodology applicable for the
type of asset subject to the lease. However, if no reasonable certainty exists to indicate the asset will be acquired
Year Ended 28 February 2018
Notes to the Financial Statements
Page 34
Year Ended 28 February 2018
Notes to the Financial Statements
Page 35
2018 ANNUAL REPORT | 49
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
at the end of the lease term the asset is depreciated over the shorter of the estimated useful life of the asset or
the lease term.
The minimum lease payments of operating leases, where the lessor effectively retains substantially all of the
risks and benefits of ownership of the leased item, are recognised as an expense on a straight-line basis over the
period of the operating lease.
i)
Cash and cash equivalents
Cash on hand and in banks and short-term deposits are stated at nominal value.
For the purposes of the statement of cash flows, cash includes cash on hand and in banks and investments in
money market instruments readily convertible to cash within two working days, net of outstanding bank
overdrafts. Bank overdrafts are carried at the principal amount. Interest is recognised as an expense as it accrues.
j)
Trade and other receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest method, less an allowance for impairment for any uncollectible debts. Trade receivables are
generally due for settlement within 30 days. They are presented as current assets unless collection is not
expected for more than 12 months after the reporting date. The recoverability of trade and grower loans is
reviewed on an ongoing basis. An estimate for doubtful debts is made when collection of the full nominal
amount is no longer probable. Bad debts are written off as incurred.
k)
Inventories
Cotton seed
Cotton seed inventory is carried at fair value less costs to sell.
Fair value reflects the price at which an orderly transaction to settle same inventory in the principle (or most
advantageous) market for that inventory would take place between market participants at the measurement
date. Costs to sell incorporate anticipated future delivery costs, commissions and brokerage.
Fair value less costs to sell may be higher or lower than cost with any differences taken to the statement of
comprehensive income.
Grain commodities and consumables
Grain commodities and consumables (operating supplies and spares) are carried at the lower of average cost
and net realisable value.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of
completion and the estimated costs necessary to make the sale.
l)
Derivative financial instruments
The group uses derivative financial instruments such as foreign exchange contracts to manage the risks
associated with foreign currency contracts to manage the risks associated with foreign currency. Such derivative
financial instruments are stated at fair value with any gains or losses arising from changes in fair value taken
directly to the statement of comprehensive income.
The fair value of forward exchange contracts is calculated by reference to current forward exchange rates for
contracts with similar maturity profiles. The fair value of cotton futures and options contracts is determined by
reference to commodity prices with similar maturity profiles.
Forward commodity purchase and sale contracts are classified as derivatives measured at fair value. Fair value
is determined with reference to prevailing prices at reporting date.
The group uses interest rate derivatives to manage its risks associated with interest rate fluctuations. These
derivatives have not been designated as hedging instruments and are accordingly initially recognised at fair value
on the date on which the contract is entered into and are subsequently remeasured to fair value. Changes in fair
value are recognised directly in the statement of comprehensive income as finance costs. Fair value is
determined by reference to market values for similar instruments.
m) Recoverable amounts of assets
At each reporting date, the group assesses whether there is any indication that an asset may be impaired. Where
an indicator of impairment exists, the group makes a formal estimate of recoverable amount. Where the carrying
amount of an asset exceeds its recoverable amount the asset is considered impaired and is written down to its
recoverable amount.
Recoverable amount is the greater of fair value less costs to sell and value in use. It is determined for an
individual asset, unless the asset’s value in use cannot be estimated to be close to its fair value less costs to sell
and it does not generate cash inflows that are largely independent of those from other assets or groups of assets,
in which case, the recoverable amount is determined for the cash-generating unit to which the asset belongs.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the
n) Property, plant and equipment
Cost and valuation
Gin, warehouse, other infrastructure and major equipment assets are measured at fair value (refer to Note 1n)
less accumulated depreciation and any impairments recognised after the date of revaluation. Valuations are
performed frequently to ensure that the fair value of revalued assets does not differ materially from its carrying
Any revaluation surplus is recorded in other comprehensive income and hence, credited to the asset revaluation
reserve in equity (less the income tax effect), except to the extent that it reverses a revaluation decrease of the
same asset previously recognized in the income statement, in which case, the increase is recognized in the
income statement. A revaluation deficit is recognized in the income statement, except to the extent that it
offsets an existing surplus on the same asset recognized in the asset revaluation reserve. Upon disposal or
derecognition, any revaluation reserve relating to the particular asset being sold is transferred to retained
Other assets are carried at cost less accumulated depreciation and any accumulated impairments in value.
Ginning infrastructure assets are depreciated on a units of production basis over their rolling estimated
remaining useful lives of 20 years of sustainable bales (2017: 20 years). All other property, plant and equipment,
other than freehold land, is depreciated on a straight-line basis at rates calculated to allocate the cost less
estimated residual value at the end of the useful lives of the assets against revenue over their estimated useful
asset.
value.
earnings.
Depreciation
lives.
Major depreciation rates are:
Ginning assets
Other assets
Impairment
events.
20 years (2017: 20 years)
3 to 44 years
The recoverable amounts of plant and equipment are compared to carrying values when indicators of potential
impairment exist. These indicators include but are not limited to significant industry, economic and agronomic
Year Ended 28 February 2018
Notes to the Financial Statements
2018 ANNUAL REPORT | 50
Page 36
Year Ended 28 February 2018
Notes to the Financial Statements
Page 37
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
at the end of the lease term the asset is depreciated over the shorter of the estimated useful life of the asset or
the lease term.
The minimum lease payments of operating leases, where the lessor effectively retains substantially all of the
risks and benefits of ownership of the leased item, are recognised as an expense on a straight-line basis over the
The group uses interest rate derivatives to manage its risks associated with interest rate fluctuations. These
derivatives have not been designated as hedging instruments and are accordingly initially recognised at fair value
on the date on which the contract is entered into and are subsequently remeasured to fair value. Changes in fair
value are recognised directly in the statement of comprehensive income as finance costs. Fair value is
determined by reference to market values for similar instruments.
period of the operating lease.
i)
Cash and cash equivalents
Cash on hand and in banks and short-term deposits are stated at nominal value.
For the purposes of the statement of cash flows, cash includes cash on hand and in banks and investments in
money market instruments readily convertible to cash within two working days, net of outstanding bank
overdrafts. Bank overdrafts are carried at the principal amount. Interest is recognised as an expense as it accrues.
j)
Trade and other receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest method, less an allowance for impairment for any uncollectible debts. Trade receivables are
generally due for settlement within 30 days. They are presented as current assets unless collection is not
expected for more than 12 months after the reporting date. The recoverability of trade and grower loans is
reviewed on an ongoing basis. An estimate for doubtful debts is made when collection of the full nominal
amount is no longer probable. Bad debts are written off as incurred.
k)
Inventories
Cotton seed
Cotton seed inventory is carried at fair value less costs to sell.
Fair value reflects the price at which an orderly transaction to settle same inventory in the principle (or most
advantageous) market for that inventory would take place between market participants at the measurement
date. Costs to sell incorporate anticipated future delivery costs, commissions and brokerage.
Fair value less costs to sell may be higher or lower than cost with any differences taken to the statement of
comprehensive income.
Grain commodities and consumables
and net realisable value.
l)
Derivative financial instruments
Grain commodities and consumables (operating supplies and spares) are carried at the lower of average cost
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of
completion and the estimated costs necessary to make the sale.
The group uses derivative financial instruments such as foreign exchange contracts to manage the risks
associated with foreign currency contracts to manage the risks associated with foreign currency. Such derivative
financial instruments are stated at fair value with any gains or losses arising from changes in fair value taken
directly to the statement of comprehensive income.
The fair value of forward exchange contracts is calculated by reference to current forward exchange rates for
contracts with similar maturity profiles. The fair value of cotton futures and options contracts is determined by
reference to commodity prices with similar maturity profiles.
Forward commodity purchase and sale contracts are classified as derivatives measured at fair value. Fair value
is determined with reference to prevailing prices at reporting date.
m) Recoverable amounts of assets
At each reporting date, the group assesses whether there is any indication that an asset may be impaired. Where
an indicator of impairment exists, the group makes a formal estimate of recoverable amount. Where the carrying
amount of an asset exceeds its recoverable amount the asset is considered impaired and is written down to its
recoverable amount.
Recoverable amount is the greater of fair value less costs to sell and value in use. It is determined for an
individual asset, unless the asset’s value in use cannot be estimated to be close to its fair value less costs to sell
and it does not generate cash inflows that are largely independent of those from other assets or groups of assets,
in which case, the recoverable amount is determined for the cash-generating unit to which the asset belongs.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the
asset.
n) Property, plant and equipment
Cost and valuation
Gin, warehouse, other infrastructure and major equipment assets are measured at fair value (refer to Note 1n)
less accumulated depreciation and any impairments recognised after the date of revaluation. Valuations are
performed frequently to ensure that the fair value of revalued assets does not differ materially from its carrying
value.
Any revaluation surplus is recorded in other comprehensive income and hence, credited to the asset revaluation
reserve in equity (less the income tax effect), except to the extent that it reverses a revaluation decrease of the
same asset previously recognized in the income statement, in which case, the increase is recognized in the
income statement. A revaluation deficit is recognized in the income statement, except to the extent that it
offsets an existing surplus on the same asset recognized in the asset revaluation reserve. Upon disposal or
derecognition, any revaluation reserve relating to the particular asset being sold is transferred to retained
earnings.
Other assets are carried at cost less accumulated depreciation and any accumulated impairments in value.
Depreciation
Ginning infrastructure assets are depreciated on a units of production basis over their rolling estimated
remaining useful lives of 20 years of sustainable bales (2017: 20 years). All other property, plant and equipment,
other than freehold land, is depreciated on a straight-line basis at rates calculated to allocate the cost less
estimated residual value at the end of the useful lives of the assets against revenue over their estimated useful
lives.
Major depreciation rates are:
Ginning assets
Other assets
20 years (2017: 20 years)
3 to 44 years
Impairment
The recoverable amounts of plant and equipment are compared to carrying values when indicators of potential
impairment exist. These indicators include but are not limited to significant industry, economic and agronomic
events.
Year Ended 28 February 2018
Notes to the Financial Statements
Page 36
Year Ended 28 February 2018
Notes to the Financial Statements
Page 37
2018 ANNUAL REPORT | 51
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
The recoverable amounts of plant and equipment are the greater of fair value less costs to sell and value in use.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the
asset.
u)
Share-based payment transactions
The group has provided benefits to permanent employees (not including directors) in the form of participation
in the employee share plan after a qualifying period. Shares are issued under the plan at a 5% discount to the
average market price of the five days preceding the offer. The plan was suspended in August 2004.
For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for
the cash-generating unit to which the asset belongs.
v)
Employee benefits
Where the carrying values exceed the estimated recoverable amount, the assets or cash-generating units are
written down to their recoverable amount.
Disposal
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits
are expected from its use or disposal.
Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal
proceeds and the carrying amount of the asset) is included in the statement of comprehensive income in the
year the asset is derecognised.
o)
Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets
acquired in a business combination is their fair value at the date of acquisition. Following initial recognition,
intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses.
p)
Trade and other payables
Liabilities for trade creditors and accruals are carried at cost, which is the fair value of the consideration to be
paid in the future for goods and services received, whether or not billed to the entity.
q)
Interest-bearing loans and borrowings
All interest-bearing liabilities are initially measured at fair value of the consideration received less attributable
transaction costs and subsequently at amortised cost using the effective interest method. Interest is charged on
non-related party borrowings as an expense as it accrues.
r)
Provisions
Provisions are recognised when the economic entity has a legal, equitable or constructive obligation to make a
future sacrifice of economic benefits to other entities as a result of past transactions or other past events, it is
probable that a future sacrifice of economic benefits will be required and a reliable estimate can be made of the
amount of the obligation.
A provision for distribution is recognised as a liability when the dividends are declared, determined or publicly
recommended on or before the reporting date.
s)
Capital stock
On 10 October 2017 a Restructure was completed and capital stock were initially converted to residual capital
stock and upon receipt of a valid conversion notice converted to ordinary shares. Refer Note 20.
t) Grower member share capital
On 10 October 2017 a Restructure was completed and capital stock and grower member shares were converted
to ordinary shares. Refer Note 19.
Provision is made for employee benefits accumulated as a result of employees rendering services up to the
reporting date. These benefits include wages and salaries, annual leave, sick leave and long service leave.
Liabilities arising in respect of wages and salaries, annual leave and any other employee benefits expected to be
settled within twelve months of the reporting date are measured at their nominal amounts based on
remuneration rates which are expected to be paid when the liability is settled. All other employee benefit
liabilities are measured at the present value of the estimated future cash outflow to be made in respect of
services provided by employees up to the reporting date. In determining the present value of future cash
outflows, the interest rates attaching to high quality corporate bonds that have terms to maturity approximating
the terms of the related liability are used.
Employee benefits are recognised against profits when they are respectively paid or payable.
w) Finance costs
Finance costs are recognised as expenses in the periods in which they are incurred with the exception of interest
rate derivatives recognised at fair value and the amortisation of ancillary costs incurred with the arrangement
of borrowings, which are amortised over the period of the facility. Finance costs include:
interest on bank overdrafts and short term and long-term borrowings using the effective interest method;
•
•
and
x)
Earnings per share
fair value movements in interest rate derivatives.
Basic earnings per share is determined by dividing the profit attributable to members, adjusted to exclude costs
of servicing equity (other than distributions) by the weighted average number of shares.
Diluted earnings per share is determined by dividing the profit attributable to members, adjusted to exclude
costs of servicing equity (other than distributions) by the weighted average number of shares and potential
dilutive shares.
y)
Segment reporting
An operating segment is a component of an entity that engages in business activities from which it may earn
revenues and incur expenses (including revenues and expenses relating to transactions with other components
of the same entity), whose operating results are regularly reviewed by the CEO as the entity’s chief operating
decision maker to make decisions about resources to be allocated to the segment and assess its performance
and for which discrete financial information is available. This includes start-up operations which are yet to earn
revenues. Management considered other factors in determining operating segments such as the existence of a
line manager and the level of segment information presented to the board of directors.
The group aggregates two or more operating segments when they have similar economic characteristics, and
the segments are similar in each of the following respects:
• Nature of the products and services;
• Nature of the production processes;
•
Type or class of customer for the products and services;
• Methods used to distribute the products or provide the services; and if applicable
• Nature of the regulatory environment.
Year Ended 28 February 2018
Notes to the Financial Statements
2018 ANNUAL REPORT | 52
Page 38
Year Ended 28 February 2018
Notes to the Financial Statements
Page 39
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
The recoverable amounts of plant and equipment are the greater of fair value less costs to sell and value in use.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the
u)
Share-based payment transactions
The group has provided benefits to permanent employees (not including directors) in the form of participation
in the employee share plan after a qualifying period. Shares are issued under the plan at a 5% discount to the
average market price of the five days preceding the offer. The plan was suspended in August 2004.
For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for
the cash-generating unit to which the asset belongs.
v)
Employee benefits
Provision is made for employee benefits accumulated as a result of employees rendering services up to the
reporting date. These benefits include wages and salaries, annual leave, sick leave and long service leave.
Liabilities arising in respect of wages and salaries, annual leave and any other employee benefits expected to be
settled within twelve months of the reporting date are measured at their nominal amounts based on
remuneration rates which are expected to be paid when the liability is settled. All other employee benefit
liabilities are measured at the present value of the estimated future cash outflow to be made in respect of
services provided by employees up to the reporting date. In determining the present value of future cash
outflows, the interest rates attaching to high quality corporate bonds that have terms to maturity approximating
the terms of the related liability are used.
Employee benefits are recognised against profits when they are respectively paid or payable.
w) Finance costs
Finance costs are recognised as expenses in the periods in which they are incurred with the exception of interest
rate derivatives recognised at fair value and the amortisation of ancillary costs incurred with the arrangement
of borrowings, which are amortised over the period of the facility. Finance costs include:
•
•
interest on bank overdrafts and short term and long-term borrowings using the effective interest method;
and
fair value movements in interest rate derivatives.
q)
Interest-bearing loans and borrowings
x)
Earnings per share
Basic earnings per share is determined by dividing the profit attributable to members, adjusted to exclude costs
of servicing equity (other than distributions) by the weighted average number of shares.
Diluted earnings per share is determined by dividing the profit attributable to members, adjusted to exclude
costs of servicing equity (other than distributions) by the weighted average number of shares and potential
dilutive shares.
y)
Segment reporting
An operating segment is a component of an entity that engages in business activities from which it may earn
revenues and incur expenses (including revenues and expenses relating to transactions with other components
of the same entity), whose operating results are regularly reviewed by the CEO as the entity’s chief operating
decision maker to make decisions about resources to be allocated to the segment and assess its performance
and for which discrete financial information is available. This includes start-up operations which are yet to earn
revenues. Management considered other factors in determining operating segments such as the existence of a
line manager and the level of segment information presented to the board of directors.
The group aggregates two or more operating segments when they have similar economic characteristics, and
the segments are similar in each of the following respects:
• Nature of the products and services;
• Nature of the production processes;
•
• Methods used to distribute the products or provide the services; and if applicable
• Nature of the regulatory environment.
Type or class of customer for the products and services;
asset.
Disposal
Where the carrying values exceed the estimated recoverable amount, the assets or cash-generating units are
written down to their recoverable amount.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits
are expected from its use or disposal.
Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal
proceeds and the carrying amount of the asset) is included in the statement of comprehensive income in the
year the asset is derecognised.
o)
Intangible assets
p)
Trade and other payables
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets
acquired in a business combination is their fair value at the date of acquisition. Following initial recognition,
intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses.
Liabilities for trade creditors and accruals are carried at cost, which is the fair value of the consideration to be
paid in the future for goods and services received, whether or not billed to the entity.
All interest-bearing liabilities are initially measured at fair value of the consideration received less attributable
transaction costs and subsequently at amortised cost using the effective interest method. Interest is charged on
non-related party borrowings as an expense as it accrues.
r)
Provisions
Provisions are recognised when the economic entity has a legal, equitable or constructive obligation to make a
future sacrifice of economic benefits to other entities as a result of past transactions or other past events, it is
probable that a future sacrifice of economic benefits will be required and a reliable estimate can be made of the
amount of the obligation.
A provision for distribution is recognised as a liability when the dividends are declared, determined or publicly
recommended on or before the reporting date.
s)
Capital stock
t) Grower member share capital
to ordinary shares. Refer Note 19.
On 10 October 2017 a Restructure was completed and capital stock were initially converted to residual capital
stock and upon receipt of a valid conversion notice converted to ordinary shares. Refer Note 20.
On 10 October 2017 a Restructure was completed and capital stock and grower member shares were converted
Year Ended 28 February 2018
Notes to the Financial Statements
Page 38
Year Ended 28 February 2018
Notes to the Financial Statements
Page 39
2018 ANNUAL REPORT | 53
The Directors, in conjunction with reports from external valuers, also compares changes in the fair value of each
asset and liability with relevant external sources to determine whether the change is reasonable.
The Directors present the valuation results to the Audit and Compliance Committee and Namoi’s independent
auditors. This includes a discussion of the major assumptions used in the valuations.
For the purpose of fair value disclosures, Namoi has determined classes of assets and liabilities on the basis of
the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained
above.
aa) Rounding of amounts
This financial report is presented in Australian dollars and all values have been rounded to the nearest thousand
dollars (where rounding is applicable) in accordance with ASIC Corporations (Rounding in Financial Directors
Reports) Instrument 2016/191. The company is an entity to which this legislative instrument applies.
bb) Changes to comparatives
Changes to comparative figures are made where there is a conflict with the current-year accounts.
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Operating segments that meet the quantitative criteria as prescribed by AASB 8 are reported separately.
However, an operating segment that does not meet the quantitative criteria is still reported separately where
information about the segment would be useful to users of the financial statements.
Information about other business activities and operating segments that are below the quantitative criteria are
combined and disclosed in a separate category “unallocated segment”.
z)
Fair value measurement
Namoi measures financial instruments, such as, derivatives, and non-financial assets, at fair value at each
balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. The fair value measurement is based on the
presumption that the transaction to sell the asset or transfer the liability takes place either:
•
•
In the principal market for the asset or liability; or
In the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible to Namoi.
The fair value of an asset or a liability is measured using the assumptions that market participants would use
when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant's ability to generate
economic benefits by using the asset in its highest and best use or by selling it to another market participant
that would use the asset in its highest and best use.
Namoi uses valuation techniques that are appropriate in the circumstances and for which sufficient data are
available to measure fair value, maximising the use of relevant observable inputs and minimising the use of
unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised
within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair
value measurement as a whole:
•
•
•
Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities;
Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value
measurement is directly or indirectly observable; and
Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value
measurement is unobservable.
For assets and liabilities that are recognised in the financial statements on a recurring basis, Namoi determines
whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the
lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting
period.
Namoi’s Directors determine the policies and procedures for both recurring fair value measurement, such as
property, plant and equipment and derivatives, and for non-recurring measurement. External valuers are
involved for valuation of significant assets, such as ginning assets and derivatives, and significant liabilities, such
as derivatives. Involvement of external valuers is decided upon annually by the Directors after discussions with
and approval by the Company’s Audit and Compliance Committee. Selection criteria include market knowledge,
reputation, independence and whether professional standards are maintained. The committee decides, after
discussions with the Group’s external valuers, which valuation techniques and inputs to use for each case.
At each reporting date, the Directors analyse the movements in the values of assets and liabilities which are
required to be re-measured or re-assessed as per Namoi’s accounting policies.
For this analysis, the Directors verify the major inputs applied in the latest valuation by agreeing the information
in the valuation computation to contracts and other relevant documents.
Year Ended 28 February 2018
Notes to the Financial Statements
2018 ANNUAL REPORT | 54
Page 40
Year Ended 28 February 2018
Notes to the Financial Statements
Page 41
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
The Directors, in conjunction with reports from external valuers, also compares changes in the fair value of each
asset and liability with relevant external sources to determine whether the change is reasonable.
The Directors present the valuation results to the Audit and Compliance Committee and Namoi’s independent
auditors. This includes a discussion of the major assumptions used in the valuations.
For the purpose of fair value disclosures, Namoi has determined classes of assets and liabilities on the basis of
the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained
above.
aa) Rounding of amounts
This financial report is presented in Australian dollars and all values have been rounded to the nearest thousand
dollars (where rounding is applicable) in accordance with ASIC Corporations (Rounding in Financial Directors
Reports) Instrument 2016/191. The company is an entity to which this legislative instrument applies.
bb) Changes to comparatives
The principal or the most advantageous market must be accessible to Namoi.
Changes to comparative figures are made where there is a conflict with the current-year accounts.
•
•
•
•
•
Operating segments that meet the quantitative criteria as prescribed by AASB 8 are reported separately.
However, an operating segment that does not meet the quantitative criteria is still reported separately where
information about the segment would be useful to users of the financial statements.
Information about other business activities and operating segments that are below the quantitative criteria are
combined and disclosed in a separate category “unallocated segment”.
z)
Fair value measurement
balance sheet date.
Namoi measures financial instruments, such as, derivatives, and non-financial assets, at fair value at each
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. The fair value measurement is based on the
presumption that the transaction to sell the asset or transfer the liability takes place either:
In the principal market for the asset or liability; or
In the absence of a principal market, in the most advantageous market for the asset or liability
The fair value of an asset or a liability is measured using the assumptions that market participants would use
when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant's ability to generate
economic benefits by using the asset in its highest and best use or by selling it to another market participant
that would use the asset in its highest and best use.
Namoi uses valuation techniques that are appropriate in the circumstances and for which sufficient data are
available to measure fair value, maximising the use of relevant observable inputs and minimising the use of
unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised
within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair
value measurement as a whole:
Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities;
Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value
measurement is directly or indirectly observable; and
Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value
measurement is unobservable.
For assets and liabilities that are recognised in the financial statements on a recurring basis, Namoi determines
whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the
lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting
period.
Namoi’s Directors determine the policies and procedures for both recurring fair value measurement, such as
property, plant and equipment and derivatives, and for non-recurring measurement. External valuers are
involved for valuation of significant assets, such as ginning assets and derivatives, and significant liabilities, such
as derivatives. Involvement of external valuers is decided upon annually by the Directors after discussions with
and approval by the Company’s Audit and Compliance Committee. Selection criteria include market knowledge,
reputation, independence and whether professional standards are maintained. The committee decides, after
discussions with the Group’s external valuers, which valuation techniques and inputs to use for each case.
At each reporting date, the Directors analyse the movements in the values of assets and liabilities which are
required to be re-measured or re-assessed as per Namoi’s accounting policies.
For this analysis, the Directors verify the major inputs applied in the latest valuation by agreeing the information
in the valuation computation to contracts and other relevant documents.
Year Ended 28 February 2018
Notes to the Financial Statements
Page 40
Year Ended 28 February 2018
Notes to the Financial Statements
Page 41
2018 ANNUAL REPORT | 55
Statement of Comprehensive Income
Accounting profit from continuing operations
before income tax expense
At the Group's statutory income tax rate of 30%
(2017: 30%)
Non-assessable income
Non-allowable expenditure
Tax loss incurred - not recognised
Filing differences
Tax losses previously not recognised 1
Income tax expense/(benefit) recorded in the
statement of comprehensive income
1 Tax losses previously unrecognised for individual entities outside the tax consolidated group.
Consolidated
$'000
Parent
$'000
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
9,674
38
10,295
(91)
2,902
(203)
295
-
2
(91)
2,905
11
(20)
52
-
(8)
(280)
(245)
3,089
(144)
211
-
2
-
3,158
(27)
28
-
-
(8)
(19)
(26)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
2. Revenue and Expenses
3. Income Tax
a) Revenue from continuing operations
Sale of goods at fair value
Rendering of services
Rental revenue
Financial service provider revenue
Finance revenue
Breakdown of finance revenue:
Interest revenue from grower finance
Interest revenue from non-related entities
b) Other income
Net gain on disposal of property, plant
and equipment
Business combination revaluation gain1
c) Employee benefits expense
Salaries, wages, on-costs and other
employee benefits
Defined contribution benefits expense
d) Finance costs
Interest on bank loans and overdrafts
Interest expense - interest rate derivatives
e) Other expenses
Maintenance
Insurance
Motor vehicle
Consulting
Safety
Travel
Minimum operating lease payments
Strategic restructuring-consulting 2
Other
Consolidated
$'000
Parent
$'000
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
426,529
56,952
212
222
23
483,938
315,310
39,620
213
200
1
355,344
426,302
56,952
212
222
23
483,711
315,009
39,620
213
200
1
355,043
-
23
23
(10)
480
470
(2)
3
1
60
-
60
-
23
23
(10)
480
470
(2)
3
1
60
-
60
24,173
1,445
25,618
17,116
1,193
18,309
24,160
1,444
25,604
17,116
1,193
18,309
2,465
93
2,558
4,861
714
1,449
856
699
497
571
2,307
3,148
15,102
2,596
15
2,611
3,681
725
964
368
447
403
554
620
2,664
10,426
2,493
93
2,586
4,856
711
1,448
852
699
497
561
2,307
3,096
15,027
2,624
15
2,639
3,681
725
964
368
447
403
554
620
2,662
10,424
1 Gain on revaluation of existing associate investment in Australian Classing Services P/L prior to
acquisition of the remaining 50%.
2 Includes the engagement of external corporate, legal, accounting and taxation advisors in relation to the
corporate Restructure and fair value increment to grower member shares (Refer Note 20).
Year Ended 28 February 2018
Notes to the Financial Statements
2018 ANNUAL REPORT | 56
Page 42
Year Ended 28 February 2018
Notes to the Financial Statements
Page 43
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
3. Income Tax
Statement of Comprehensive Income
Accounting profit from continuing operations
before income tax expense
At the Group's statutory income tax rate of 30%
(2017: 30%)
Non-assessable income
Non-allowable expenditure
Tax loss incurred - not recognised
Filing differences
Tax losses previously not recognised 1
Income tax expense/(benefit) recorded in the
statement of comprehensive income
Consolidated
$'000
Parent
$'000
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
9,674
38
10,295
(91)
2,902
(203)
295
-
2
(91)
2,905
11
(20)
52
-
(8)
(280)
(245)
3,089
(144)
211
-
2
-
3,158
(27)
-
28
-
(8)
(19)
(26)
1 Tax losses previously unrecognised for individual entities outside the tax consolidated group.
Year Ended 28 February 2018
Notes to the Financial Statements
Page 43
2018 ANNUAL REPORT | 57
a)
b)
realised;
2 The benefits in respect of tax losses will only be obtained if:
future assessable income is derived of a nature and of an amount sufficient to enable the benefit to be
the conditions for deductibility imposed by tax legislation continue to be complied with; and
c) no changes in tax legislation adversely affect the consolidated entity in realising the benefit.
Tax consolidated group and tax sharing arrangements
Namoi Cotton Limited is the head entity of the tax consolidated group comprising all wholly owned controlled
entities. The group has applied the group allocation method in determining the appropriate amount of current
and deferred taxes to allocate to the members of the tax consolidated group. Members of the group have
entered into a tax sharing agreement that provides for the allocation of income tax liabilities between the
entities should the head entity default on its tax payment obligations. No amounts have been recognised in
these financial statements in respect of this agreement on the basis that the possibility of default is remote.
4. Acquisitions
Two acquisitions arose from transactions settling within the financial year.
a) Australian Classing Services Pty Ltd (“ACS”) – business combination
Namoi Cotton Limited acquired the remaining 50% interest in the shares of ACS taking its ownership interest to
100%. ACS is a company based in Australia which provides cotton classing services to the Australian cotton
industry. The transaction was effected by a share transfer dated 6 February 2018 with cash consideration of
$690,000 paid to the non-controlling shareholders.
b) Moomin Ginning Company (“MGC”)
Namoi Cotton Limited acquired an additional 25% interest in the MGC partnership taking its ownership interest
to 75%. MGC owns and operates the cotton ginning facility at Merrywinebone via Rowena in north west New
South Wales. The transaction was effected by a Joint Venture Participation Interest and Ginning Commitment
Agreement which was executed on 22 December 2017 with a cash consideration of $2.0m paid on 25 January
2018.
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
3. Income Tax
1 Tax losses recognised for individual entities in the tax consolidated group
Deferred Tax Liabilities
Accelerated depreciation for tax purposes and revaluations
Timing of Joint Venture and Investments Income recognition
Statement of Comprehensive Income
Accounting profit from continuing operations
before income tax expense
Deferred Tax Assets
Deferred costs
Provisions and accruals
Recognised losses available for offsetting against future taxable income 1, 2
At the Group's statutory income tax rate of 30%
(2017: 30%)
Non-assessable income
Non-allowable expenditure
Tax loss incurred - not recognised
Filing differences
Tax losses previously not recognised 1
Income tax expense/(benefit) recorded in the
statement of comprehensive income
Net deferred tax assets/(liabilities)
Deferred tax expense/(income)
Unrecognised deferred tax assets
Unrecognised deferred tax liabilities
Unrecognised tax losses
Unrecognised net deferred tax assets
Consolidated
$'000
28 Feb
2018
28 Feb
2017
(27,913)
(548)
(28,461)
(28,532)
(897)
(29,429)
649
1,655
22,118
24,422
419
1,658
26,218
28,295
(4,039)
(1,134)
20
(47)
1,061
1,034
18
(76)
1,182
1,124
Balance Sheet
Consolidated
$'000
Parent
$'000
28 Feb
2018
28 Feb
2018
28 Feb
2017
28 Feb
2017
Parent
$'000
Statement of Profit and Loss
and Other Comprehensive Income
Parent
$'000
Consolidated
28 Feb
$'000
2018
28 Feb
2018
28 Feb
2017
28 Feb
2017
28 Feb
2018
28 Feb
2017
187
66
253
(130)
529
(195)
204
457
(27,875)
(531)
9,674
(28,406)
639
1,655
2,902
22,560
(203)
24,854
295
-
(3,552)
2
(91)
-
-
2,905
-
-
(28,532)
(352)
(28,884)
38
619
349
968
10,295
419
1,658
26,413
28,490
(394)
11
(20)
52
-
(8)
(280)
-
-
(245)
-
-
229
(3)
4,084
4,310
5,278
3,089
(144)
211
-
2
-
3,158
187
(756)
(569)
(130)
529
(499)
(100)
(669)
845
(114)
731
(91)
90
526
(27)
(443)
-
173
28
-
(8)
904
(19)
(26)
1 Tax losses previously unrecognised for individual entities outside the tax consolidated group.
Reconciliation of net deferred tax assets/(liabilities)
Opening balance as of 1 March
Tax income/(expense) during the period recognised in profit or loss
Tax income/(expense) during the period recognised in other comprehensive income
Closing balance as at 28 February
Consolidated
$'000
Parent
$'000
28 Feb
2018
(1,134)
(2,905)
-
(4,039)
28 Feb
2017
(1,379)
245
-
(1,134)
28 Feb
2018
(394)
(3,158)
-
(3,552)
28 Feb
2017
(420)
26
-
(394)
Year Ended 28 February 2018
Notes to the Financial Statements
Page 44
Year Ended 28 February 2018
Notes to the Financial Statements
2018 ANNUAL REPORT | 58
Page 43
Year Ended 28 February 2018
Notes to the Financial Statements
Page 45
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
3. Income Tax
Statement of Comprehensive Income
Accounting profit from continuing operations
before income tax expense
At the Group's statutory income tax rate of 30%
(2017: 30%)
Non-assessable income
Non-allowable expenditure
Tax loss incurred - not recognised
Filing differences
Tax losses previously not recognised 1
Income tax expense/(benefit) recorded in the
statement of comprehensive income
Consolidated
$'000
Parent
$'000
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
9,674
38
10,295
(91)
2,902
(203)
295
-
2
(91)
2,905
11
(20)
52
-
(8)
(280)
(245)
3,089
(144)
211
-
2
-
3,158
(27)
28
-
-
(8)
(19)
(26)
1 Tax losses previously unrecognised for individual entities outside the tax consolidated group.
1 Tax losses recognised for individual entities in the tax consolidated group
2 The benefits in respect of tax losses will only be obtained if:
a)
future assessable income is derived of a nature and of an amount sufficient to enable the benefit to be
realised;
the conditions for deductibility imposed by tax legislation continue to be complied with; and
b)
c) no changes in tax legislation adversely affect the consolidated entity in realising the benefit.
Tax consolidated group and tax sharing arrangements
Namoi Cotton Limited is the head entity of the tax consolidated group comprising all wholly owned controlled
entities. The group has applied the group allocation method in determining the appropriate amount of current
and deferred taxes to allocate to the members of the tax consolidated group. Members of the group have
entered into a tax sharing agreement that provides for the allocation of income tax liabilities between the
entities should the head entity default on its tax payment obligations. No amounts have been recognised in
these financial statements in respect of this agreement on the basis that the possibility of default is remote.
4. Acquisitions
Two acquisitions arose from transactions settling within the financial year.
a) Australian Classing Services Pty Ltd (“ACS”) – business combination
Namoi Cotton Limited acquired the remaining 50% interest in the shares of ACS taking its ownership interest to
100%. ACS is a company based in Australia which provides cotton classing services to the Australian cotton
industry. The transaction was effected by a share transfer dated 6 February 2018 with cash consideration of
$690,000 paid to the non-controlling shareholders.
b) Moomin Ginning Company (“MGC”)
Namoi Cotton Limited acquired an additional 25% interest in the MGC partnership taking its ownership interest
to 75%. MGC owns and operates the cotton ginning facility at Merrywinebone via Rowena in north west New
South Wales. The transaction was effected by a Joint Venture Participation Interest and Ginning Commitment
Agreement which was executed on 22 December 2017 with a cash consideration of $2.0m paid on 25 January
2018.
Year Ended 28 February 2018
Notes to the Financial Statements
Page 43
Year Ended 28 February 2018
Notes to the Financial Statements
Page 45
2018 ANNUAL REPORT | 59
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Assets acquired and liabilities assumed
The contribution made to the group by the acquired business from the date of acquisition was:
The fair values of the identifiable assets and liabilities of the above transactions as at the effective date of the
transactions were provisionally:
Assets
Cash at bank
Trade receivables
Inventory
Other current assets
Property, plant and equipment
Deferred tax asset
Liabilities
Trade creditors
Borrowings
Provisions
Goodwill arising on acquisition
Total fair value
Consideration paid
Carrying value of existing 50% interest
Revaluation gain on exisiting 50% investment
Existing investment at fair value
Consideration paid for remaining 50%
Fair value of 100% of ACS
Consideration paid net of 100% of cash acquired
ACS
(100%)
$'000
MGC
(25%)
$'000
774
-
-
-
2,057
-
2,831
(831)
-
-
(831)
-
2,000
214
5
15
15
512
40
801
(40)
(250)
(92)
(382)
961
1,380
ACS
$'000
210
480
690
690
1,380
476
No separately identifiable intangibles were identified and it is not expected that the goodwill will be deductible
for income tax purposes. Transaction costs incurred of $53,528 were expensed into other expenses.
The contribution made to the group by the acquired business had it been acquired from the beginning of the
Revenue
Profit/(Loss) after tax
period (1 March 2017):
Revenue
Profit after tax
Analysis of cash flows on acquisition:
Net cash acquired with the acquisition
Cash paid
Impairment
Net cash flow on acquisition
ACS
$'000
-
(24)
ACS
$'000
712
158
ACS
$'000
214
(690)
(476)
The goodwill arising from the ACS business combination has been derived from applying the discounted earnings
technique to the revenue stream from the continuing operation of the classing business. The carrying value and
impairment assessment criteria are based upon:
• An assumed discount rate of 12.5%
• A ten-year cash flow period including a six times multiple allowed as a terminal value and
• Indexation of costs at 2.2% per annum and income at 1.65% per annum
Goodwill
For the purpose of impairment testing, goodwill is allocated to each of the consolidated entity’s cash generating
units (CGU), or groups of CGUs, that are expected to benefit from the synergies of the combinations. Each unit
or groups of units to which goodwill is allocated represents the lowest level at which assets are monitored for
internal management purposes.
Goodwill acquired through the business combination during the financial year was allocated to the ACS CGU
which is part of the marketing segment.
Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested annually
(at year end) for impairment, or more frequently if events or changes in circumstances indicate that it might be
impaired, and is carried at cost less accumulated impairment losses. Impairment losses on goodwill are taken
to profit or loss and are not subsequently reversed.
Year Ended 28 February 2018
Notes to the Financial Statements
Page 46
Year Ended 28 February 2018
Notes to the Financial Statements
Page 47
2018 ANNUAL REPORT | 60
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Assets acquired and liabilities assumed
The contribution made to the group by the acquired business from the date of acquisition was:
The fair values of the identifiable assets and liabilities of the above transactions as at the effective date of the
transactions were provisionally:
ACS
(100%)
$'000
MGC
(25%)
$'000
Revenue
Profit/(Loss) after tax
ACS
$'000
-
(24)
The contribution made to the group by the acquired business had it been acquired from the beginning of the
period (1 March 2017):
Revenue
Profit after tax
Analysis of cash flows on acquisition:
Net cash acquired with the acquisition
Cash paid
Net cash flow on acquisition
ACS
$'000
712
158
ACS
$'000
214
(690)
(476)
Impairment
The goodwill arising from the ACS business combination has been derived from applying the discounted earnings
technique to the revenue stream from the continuing operation of the classing business. The carrying value and
impairment assessment criteria are based upon:
• An assumed discount rate of 12.5%
• A ten-year cash flow period including a six times multiple allowed as a terminal value and
• Indexation of costs at 2.2% per annum and income at 1.65% per annum
Goodwill
For the purpose of impairment testing, goodwill is allocated to each of the consolidated entity’s cash generating
units (CGU), or groups of CGUs, that are expected to benefit from the synergies of the combinations. Each unit
or groups of units to which goodwill is allocated represents the lowest level at which assets are monitored for
internal management purposes.
Goodwill acquired through the business combination during the financial year was allocated to the ACS CGU
which is part of the marketing segment.
Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested annually
(at year end) for impairment, or more frequently if events or changes in circumstances indicate that it might be
impaired, and is carried at cost less accumulated impairment losses. Impairment losses on goodwill are taken
to profit or loss and are not subsequently reversed.
Assets
Cash at bank
Trade receivables
Inventory
Other current assets
Property, plant and equipment
Deferred tax asset
Liabilities
Trade creditors
Borrowings
Provisions
Goodwill arising on acquisition
Total fair value
Consideration paid
Carrying value of existing 50% interest
Revaluation gain on exisiting 50% investment
Existing investment at fair value
Consideration paid for remaining 50%
Fair value of 100% of ACS
Consideration paid net of 100% of cash acquired
774
-
-
-
-
-
-
-
2,057
2,831
(831)
(831)
2,000
214
5
15
15
512
40
801
(40)
(250)
(92)
(382)
961
1,380
ACS
$'000
210
480
690
690
1,380
476
No separately identifiable intangibles were identified and it is not expected that the goodwill will be deductible
for income tax purposes. Transaction costs incurred of $53,528 were expensed into other expenses.
Year Ended 28 February 2018
Notes to the Financial Statements
Page 46
Year Ended 28 February 2018
Notes to the Financial Statements
Page 47
2018 ANNUAL REPORT | 61
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Intangibles
The recoverable amount of the ACS CGU has been determined based on the discounted earning technique being
applied to revenue.
The calculation of fair value in use is most sensitive to the following assumptions (level three assumptions):
• Forecast Revenue;
• Discount rates; and
• Growth rates (revenue and expenses)
Based on these calculations, the recoverable amount is in excess of the carrying value of the ACS CGU and
therefore, no impairment was recorded.
5. Earnings per Share
Basic earnings per share is calculated by dividing the consolidated net profit after tax for the year by the number
of ordinary shares at year end.
The following reflects the income and equity data used in the basic and diluted earnings per share computations:
Consolidated Profit attributable to ordinary share holders
of the parent
Weighted average number of ordinary shares - basic
Earnings per share - basic (cents)
Weighted average number of ordinary shares - diluted
Earnings per share - diluted (cents)
Consolidated
$'000
28 Feb
2018
28 Feb
2017
6,769
283
No.
127,427,307 1
No.
127,427,307 1
5.3
0.22
142,653,607 1
142,653,607 1
4.7
0.20
1 Retros pecti vel y a djus ted a s i f the res tructure ha d occurred from the begi nni ng of ea ch peri od.
6. Distributions Paid or Provided on Ordinary Shares/Co-operative Capital Units
Distributions declared and paid during the year (unfranked)
Interim distribution for the year ended 28 February 2018 of 0.0 cents
per ordinary share (2017: 0.0 cents)
Final distribution for the year ended 28 February 2017 of 0.0 cents
per unit of Capital Stock (2016: 0.0 cents)
Net distributions during the year
-
-
-
Consolidated
$'000
Parent
$'000
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
Franking credits available for subsequent financial
years based on a tax rate of 30% (2017: 30%)
530
-
530
Franking account credits have arisen from the acquisition of subsidiary (ACS) and the tax payable from its final
return prior to entering the tax consolidated group.
Consolidated
$'000
28 Feb
2018
28 Feb
2017
-
-
-
-
Year Ended 28 February 2018
Notes to the Financial Statements
Page 48
Year Ended 28 February 2018
Notes to the Financial Statements
Page 49
2018 ANNUAL REPORT | 62
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
6. Distributions Paid or Provided on Ordinary Shares/Co-operative Capital Units
Distributions declared and paid during the year (unfranked)
Interim distribution for the year ended 28 February 2018 of 0.0 cents
per ordinary share (2017: 0.0 cents)
Final distribution for the year ended 28 February 2017 of 0.0 cents
per unit of Capital Stock (2016: 0.0 cents)
Net distributions during the year
Consolidated
$'000
28 Feb
2018
28 Feb
2017
-
-
-
-
-
-
Consolidated
$'000
Parent
$'000
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
Franking credits available for subsequent financial
years based on a tax rate of 30% (2017: 30%)
530
-
530
-
Franking account credits have arisen from the acquisition of subsidiary (ACS) and the tax payable from its final
return prior to entering the tax consolidated group.
The recoverable amount of the ACS CGU has been determined based on the discounted earning technique being
Intangibles
applied to revenue.
The calculation of fair value in use is most sensitive to the following assumptions (level three assumptions):
• Forecast Revenue;
• Discount rates; and
• Growth rates (revenue and expenses)
Based on these calculations, the recoverable amount is in excess of the carrying value of the ACS CGU and
therefore, no impairment was recorded.
5. Earnings per Share
of ordinary shares at year end.
Basic earnings per share is calculated by dividing the consolidated net profit after tax for the year by the number
The following reflects the income and equity data used in the basic and diluted earnings per share computations:
Consolidated Profit attributable to ordinary share holders
of the parent
Weighted average number of ordinary shares - basic
Earnings per share - basic (cents)
Weighted average number of ordinary shares - diluted
Earnings per share - diluted (cents)
1 Retros pecti vel y a djus ted a s i f the res tructure ha d occurred from the begi nni ng of ea ch peri od.
Consolidated
$'000
28 Feb
2018
6,769
No.
5.3
4.7
28 Feb
2017
283
No.
0.22
0.20
127,427,307 1
127,427,307 1
142,653,607 1
142,653,607 1
Year Ended 28 February 2018
Notes to the Financial Statements
Page 48
Year Ended 28 February 2018
Notes to the Financial Statements
Page 49
2018 ANNUAL REPORT | 63
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
7. Cash and Cash Equivalents
(c) Disclosure of financing activities
(a) Reconciliation to Statement of Cash Flows
For the purposes of the Statement of Cash Flows,
cash comprises the following items:
Cash at bank and in hand
Bank Overdraft
(b) Reconciliation of net cash provided by operating
activities to operating profit after income tax.
Operating profit/(loss) after income tax
Adjustments for non-cash items:
Depreciation
(Gain)/loss on sale of property, plant and equipment
Provision for bad debts
Provision for employee benefits
Provision other
Fair value increment on revaluation of
grower member shares
Revaluation gain on acquisition
Share of associates (profits)/losses
Changes in operating assets and liabilities
(Increase)/decrease in accounts receivable
(Increase)/decrease in inventories
(Increase)/decrease in other assets
(Increase)/decrease in derivatives
Increase/(decrease) in creditors
Increase/(decrease) in other liabilities
Increase/(decrease) in deferred tax asset
Net cash inflow/(outflow) from operating activities
Consolidated
$'000
Parent
$'000
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
1,493
(18)
1,475
2,256
(819)
1,437
1,352
(18)
1,334
2,135
(819)
1,316
6,769
283
7,137
(65)
7,949
10
67
731
-
712
(480)
697
9,686
751
(1,892)
(285)
587
(1,086)
(118)
2,905
17,317
6,206
(60)
(449)
(19)
(200)
-
-
90
5,568
(272)
(1,513)
(169)
(1,635)
3,329
132
(245)
5,478
7,942
10
20
730
-
712
(480)
(54)
8,880
1,058
(1,892)
(297)
587
(1,083)
(118)
3,158
17,430
6,206
(60)
(449)
(20)
(200)
-
-
(56)
5,421
(92)
(1,532)
(169)
(1,635)
3,328
132
(26)
5,362
1 March
2017
$'000
Cash
flows
$'000
Foreign
exchange
movement
$'000
New
leases
$'000
28
February
2018
$'000
Other
$'000
Current interest-bearing loans
15,000
(8,980)
(20)
6,000
Current obligations under
finance leases
Current other borrowings
Non-current interest bearing
loans
Non-current obligations under
finance leases
771
38
(774)
(6)
204
557
758
32
41,980
-
20
42,000
1,350
(566)
59,139
(10,326)
999
1,203
(557)
1,226
1 March
2016
$'000
Cash
flows
$'000
Foreign
exchange
movement
$'000
New
leases
$'000
Other
$'000
-
-
-
-
-
-
-
-
-
-
50,016
28
February
2017
$'000
771
38
(5,500)
41,980
686
798
(639)
1,350
59,139
-
-
-
-
-
-
-
-
-
-
-
-
Current interest-bearing loans
9,000
500
5,500
15,000
(697)
112
639
Current obligations under
finance leases
Current other borrowings
Non-current interest bearing
loans
Non-current obligations under
finance leases
717
34
47,480
1,409
58,640
4
-
(106)
(299)
(d) Disclosure of non-cash financing and investing activities
(i) Equipment Finance Transactions
During the financial year, the consolidated entity acquired plant and equipment with an aggregate
fair value of $1,203,050 (2017: $798,081) by means of finance leases.
(ii) Distribution Reinvestment Plan
No distributions were paid via the issue of units/shares in 2018 (2017: nil). Refer note 6
and note 20.
(e) Fair Value
All cash balances are reflective of fair value based on observable market data.
Year Ended 28 February 2018
Notes to the Financial Statements
Page 50
Year Ended 28 February 2018
Notes to the Financial Statements
Page 51
2018 ANNUAL REPORT | 64
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
7. Cash and Cash Equivalents
(c) Disclosure of financing activities
(a) Reconciliation to Statement of Cash Flows
For the purposes of the Statement of Cash Flows,
cash comprises the following items:
Cash at bank and in hand
Bank Overdraft
(b) Reconciliation of net cash provided by operating
activities to operating profit after income tax.
Operating profit/(loss) after income tax
Adjustments for non-cash items:
Depreciation
(Gain)/loss on sale of property, plant and equipment
Provision for bad debts
Provision for employee benefits
Provision other
Fair value increment on revaluation of
grower member shares
Revaluation gain on acquisition
Share of associates (profits)/losses
Changes in operating assets and liabilities
(Increase)/decrease in accounts receivable
(Increase)/decrease in inventories
(Increase)/decrease in other assets
(Increase)/decrease in derivatives
Increase/(decrease) in creditors
Increase/(decrease) in other liabilities
Increase/(decrease) in deferred tax asset
Net cash inflow/(outflow) from operating activities
Consolidated
$'000
Parent
$'000
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
1,493
(18)
1,475
2,256
(819)
1,437
1,352
(18)
1,334
2,135
(819)
1,316
6,769
283
7,137
(65)
7,949
6,206
7,942
6,206
9,686
5,568
10
67
731
-
712
(480)
697
751
(1,892)
(285)
587
(1,086)
(118)
2,905
17,317
(60)
(449)
(19)
(200)
-
-
90
(272)
(1,513)
(169)
(1,635)
3,329
132
(245)
5,478
10
20
730
-
712
(480)
(54)
8,880
1,058
(1,892)
(297)
587
(1,083)
(118)
3,158
17,430
(60)
(449)
(20)
(200)
-
-
(56)
5,421
(92)
(1,532)
(169)
(1,635)
3,328
132
(26)
5,362
1 March
2017
$'000
Cash
flows
$'000
Foreign
exchange
movement
$'000
New
leases
$'000
28
February
2018
$'000
Other
$'000
Current interest-bearing loans
15,000
(8,980)
Current obligations under
finance leases
Current other borrowings
Non-current interest bearing
loans
Non-current obligations under
finance leases
771
38
(774)
(6)
41,980
-
1,350
(566)
59,139
(10,326)
-
-
-
-
-
-
-
(20)
6,000
204
-
-
557
-
758
32
20
42,000
999
1,203
(557)
1,226
-
50,016
1 March
2016
$'000
Cash
flows
$'000
Foreign
exchange
movement
$'000
New
leases
$'000
28
February
2017
$'000
Other
$'000
Current interest-bearing loans
9,000
500
Current obligations under
finance leases
Current other borrowings
Non-current interest bearing
loans
Non-current obligations under
finance leases
717
34
47,480
1,409
58,640
(697)
4
-
(106)
(299)
-
-
-
-
-
-
-
5,500
15,000
112
-
-
686
798
639
-
771
38
(5,500)
41,980
(639)
1,350
-
59,139
(d) Disclosure of non-cash financing and investing activities
(i) Equipment Finance Transactions
During the financial year, the consolidated entity acquired plant and equipment with an aggregate
fair value of $1,203,050 (2017: $798,081) by means of finance leases.
(ii) Distribution Reinvestment Plan
No distributions were paid via the issue of units/shares in 2018 (2017: nil). Refer note 6
and note 20.
(e) Fair Value
All cash balances are reflective of fair value based on observable market data.
Year Ended 28 February 2018
Notes to the Financial Statements
Page 50
Year Ended 28 February 2018
Notes to the Financial Statements
Page 51
2018 ANNUAL REPORT | 65
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
8. Trade and Other Receivables
Current
Trade debtors1
Less: allowance for impairment loss
Trade debtors from an associate
Loans to growers2
Less: allowance for impairment loss
Funds due from futures brokers3
Less: allowance for impairment loss
Loans to associates 4
Loans to employees5
Loans to controlled entities 6
Non-current
Loans to controlled entities 6
Consolidated
$'000
Parent
$'000
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
4,030
(71)
4
3,963
12
-
12
-
-
-
-
37
-
4,012
-
-
4,955
(5)
-
4,950
302
-
302
-
-
-
3
33
-
5,288
3,949
(20)
4
3,933
12
-
12
-
-
-
4,955
-
-
4,955
302
-
302
-
-
-
265
37
5,019
9,266
3
33
5,247
10,540
-
-
41,820
41,820
41,820
41,820
1 Trade debtors arise from the following:
Domestic sales of white cotton seed, grain commodities and ginning by-products. These debtors are settled
under a range of agreed payment terms. These debtors are non-interest bearing.
The group maintains trade credit insurance over non-related party domestic debtors to minimise credit risk.
2 Grower loans represent interest bearing crop finance facilities offered to growers secured by crop mortgage.
Interest rate margins are determined based on the level of risk associated with the individual loan.
As at 28 February 2018 Namoi Cotton had committed $nil (2017: $nil) in credit term facilities to growers which
had not been drawn.
3 Funds due from futures brokers represent funds on deposit to offset unfavourable futures mark-to-market
values and futures contract maintenance margins. Funds are denominated in United States dollars and bear a
nominal rate of interest.
4 Loans to associates represent working capital financing provided to Australian Classing Services Pty Ltd. The
loan bears interest at a fixed rate of 7.0% (2017: 7.0%) and is repayable on demand.
5 Loans to employees represent non-interest-bearing loans advanced under the Namoi Cotton employee
incentive share plan (refer note 20) and other staff advances.
Year Ended 28 February 2018
Notes to the Financial Statements
2018 ANNUAL REPORT | 66
Page 52
Page 53
6 Loans to controlled entities that are participants in joint ventures, are non-interest-bearing and are repayable
from the proceeds generated by the joint venture. The loans are carried at amortised cost, however, have not
been discounted given that the loan has an undefined term.
Allowance for impairment loss
An allowance for impairment loss is recorded where objective evidence exists that an individual receivable is
impaired taking into account the likelihood of recovery of any collateral and/or trade credit insurance. Individual
receivables are written off only upon exhaustion of all means of recovery and only with Board approval.
Impairment losses have been recognised in the current year by the group of $71,240 (2017: $nil) and the parent
entity of $19,685 (2017: $nil). These amounts were included in the other expenses item in the statement of
profit and loss and other comprehensive income.
At balance date the ageing analysis of trade and other receivables is as follows:
At 1 March 2017
Charge for the year
Foreign exchange translation
Amounts written off
Recoveries
At 28 February 2018
Total outstanding
Unimpaired
Within terms
Past Due 1 - 30 days
Past Due 31 - 60 days
Past Due 60+ days
Impaired
Past Due 60+ days
Consolidated
$'000
Parent
$'000
28 Feb
2018
28 Feb
2017
28 Feb
2018
5
67
-
-
-
71
454
-
(22)
(427)
-
5
28 Feb
2017
450
(450)
-
-
-
-
20
-
-
-
-
20
Consolidated
$'000
Parent
$'000
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
4,083
5,000
51,106
52,067
3,759
77
15
161
4,525
355
5
110
71
5
50,905
51,592
56
15
110
20
355
5
115
-
Receivables past due but not considered impaired are: Group $252,679 (2017: $470,115); Parent $180,677
(2017: $474,650). Payment terms on these debts have not been renegotiated however discussions with the
counterparties and/or receipts subsequent to reporting date reflect that payment will be received in full.
Other balances within trade and other receivables do not contain impaired assets and are not past due. It is
expected these other balances will be received when due.
Fair value, foreign exchange and credit risk
All receivables are carried at fair value based on observable market data. Details regarding foreign exchange and
interest rate risk are disclosed in Note 28. The maximum exposure to credit risk is the fair value of receivables
less insurance recoverable.
Year Ended 28 February 2018
Notes to the Financial Statements
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
8. Trade and Other Receivables
Current
Trade debtors1
Less: allowance for impairment loss
Trade debtors from an associate
Loans to growers2
Less: allowance for impairment loss
Funds due from futures brokers 3
Less: allowance for impairment loss
Loans to associates 4
Loans to employees5
Loans to controlled entities 6
Non-current
Loans to controlled entities 6
Consolidated
$'000
Parent
$'000
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
4,030
4,955
3,949
4,955
3,963
4,950
3,933
4,955
(20)
4
12
12
-
-
-
-
302
302
-
-
-
-
-
-
37
3
33
4,012
5,288
265
37
5,019
9,266
3
33
5,247
10,540
41,820
41,820
41,820
41,820
(71)
4
12
12
-
-
-
-
-
-
-
-
(5)
302
302
-
-
-
-
-
-
-
-
1 Trade debtors arise from the following:
Domestic sales of white cotton seed, grain commodities and ginning by-products. These debtors are settled
under a range of agreed payment terms. These debtors are non-interest bearing.
The group maintains trade credit insurance over non-related party domestic debtors to minimise credit risk.
2 Grower loans represent interest bearing crop finance facilities offered to growers secured by crop mortgage.
Interest rate margins are determined based on the level of risk associated with the individual loan.
As at 28 February 2018 Namoi Cotton had committed $nil (2017: $nil) in credit term facilities to growers which
had not been drawn.
nominal rate of interest.
3 Funds due from futures brokers represent funds on deposit to offset unfavourable futures mark-to-market
values and futures contract maintenance margins. Funds are denominated in United States dollars and bear a
4 Loans to associates represent working capital financing provided to Australian Classing Services Pty Ltd. The
loan bears interest at a fixed rate of 7.0% (2017: 7.0%) and is repayable on demand.
5 Loans to employees represent non-interest-bearing loans advanced under the Namoi Cotton employee
incentive share plan (refer note 20) and other staff advances.
6 Loans to controlled entities that are participants in joint ventures, are non-interest-bearing and are repayable
from the proceeds generated by the joint venture. The loans are carried at amortised cost, however, have not
been discounted given that the loan has an undefined term.
Allowance for impairment loss
An allowance for impairment loss is recorded where objective evidence exists that an individual receivable is
impaired taking into account the likelihood of recovery of any collateral and/or trade credit insurance. Individual
receivables are written off only upon exhaustion of all means of recovery and only with Board approval.
Impairment losses have been recognised in the current year by the group of $71,240 (2017: $nil) and the parent
entity of $19,685 (2017: $nil). These amounts were included in the other expenses item in the statement of
profit and loss and other comprehensive income.
At 1 March 2017
Charge for the year
Foreign exchange translation
Amounts written off
Recoveries
At 28 February 2018
Consolidated
$'000
Parent
$'000
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
5
67
-
-
-
71
454
-
(22)
(427)
-
5
-
20
-
-
-
20
450
-
-
(450)
-
-
At balance date the ageing analysis of trade and other receivables is as follows:
Total outstanding
Unimpaired
Within terms
Past Due 1 - 30 days
Past Due 31 - 60 days
Past Due 60+ days
Impaired
Past Due 60+ days
Consolidated
$'000
Parent
$'000
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
4,083
5,000
51,106
52,067
3,759
77
15
161
4,525
355
5
110
50,905
56
15
110
51,592
355
5
115
71
5
20
-
Receivables past due but not considered impaired are: Group $252,679 (2017: $470,115); Parent $180,677
(2017: $474,650). Payment terms on these debts have not been renegotiated however discussions with the
counterparties and/or receipts subsequent to reporting date reflect that payment will be received in full.
Other balances within trade and other receivables do not contain impaired assets and are not past due. It is
expected these other balances will be received when due.
Fair value, foreign exchange and credit risk
All receivables are carried at fair value based on observable market data. Details regarding foreign exchange and
interest rate risk are disclosed in Note 28. The maximum exposure to credit risk is the fair value of receivables
less insurance recoverable.
Year Ended 28 February 2018
Notes to the Financial Statements
Page 52
Year Ended 28 February 2018
Notes to the Financial Statements
Page 53
2018 ANNUAL REPORT | 67
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
9. Inventories
Cotton seed (at fair value less costs to sell)
Operating supplies and spares (at cost)
Consolidated
$'000
Parent
$'000
28 Feb
2018
1,077
8,444
9,521
28 Feb
2017
1,792
5,822
7,614
28 Feb
2018
1,077
8,429
9,506
28 Feb
2017
1,792
5,822
7,614
Refer to Note 28 for further information relating to the valuation techniques for determining the fair value of
Cotton Seed.
10. Derivative Financial Instruments
Current assets
Foreign exchange contracts
Cotton seed sale contracts
Cotton seed purchase contracts
Current liabilities
Foreign exchange contracts
Interest rate swap contracts
Cotton seed sale contracts
Cotton seed purchase contracts
Consolidated
$'000
Parent
$'000
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
86
8,407
-
8,493
111
52
-
8,393
8,556
444
-
14,221
14,665
-
-
14,141
-
14,141
86
8,407
-
8,493
111
52
-
8,393
8,556
444
-
14,221
14,665
-
-
14,141
-
14,141
Derivatives are used by the group to manage trading and financial risks as detailed in note 28.
Fair value of foreign exchange contracts are determined by comparing the contracted rate to the market rates
for contracts with the same term to maturity. All movements in fair value are recognised in the profit within the
statement of comprehensive income in the period they occur. The net fair value loss on foreign exchange
contracts at year end was $25,125 for the group (2017: $444,464) and $25,125 (2017: $444,464) for the parent
entity.
Cotton seed sales contracts are forward dated and deliverable contracts with customers. The fair value of cotton
seed commodity contracts is determined by reference to market prices and foreign exchange rates. The fair
value of the open cotton seed sale contracts at year end was a derivative asset (unrealised gain) of $8,406,942
for the group (2017: Loss $14,141,183) and $8,406,942 (2017: Loss $14,141,183) for the parent entity.
Cotton seed commodity purchase contracts are forward dated and deliverable contracts with cotton growers or
brokers. The fair value of cotton seed commodity contracts is determined by reference to market prices and
foreign exchange rates. The fair value of the open cotton seed purchase contracts at year end was a derivative
liability (unrealised loss) of $8,393,213 for the group (2017: Gain $14,220,718) and $8,393,213 (2017: Gain
$14,220,718) for the parent entity.
Interest bearing loans of the group incurred an average variable interest rate of 3.0% (2017: 3.1%). Swaps in
place at the comparative reporting date accounted for approximately 41.7% (2017: nil%) of the principal
outstanding. The average fixed interest rates were 2.1% (2017: nil%) and the average variable rates were 1.98%
(2017: nil%) at balance date. The net fair value loss on interest rate swaps was $51,780 (2017: $nil).
11. Investments in Associates and Joint Ventures using the equity method
Investment in associates (material)
Investment in joint ventures (material)
Investment in joint ventures (non material)
(a) Ownership interest
Investments in Associates
Cargill Oilseeds Australia Partnership (COA)
Cargill Processing Ltd (CPL) 1
Investments in Joint Ventures
Australian Classing Services Pty Ltd (ACS) 1, 2
Namoi Cotton Alliance (NCA)
NC Packing Services Pty Ltd (NCPS) 1
1 Incorporated in Australia
Consolidated
$'000
28 Feb
2018
1,292
40,521
(844)
28 Feb
2017
2,671
40,010
(805)
40,969
41,876
Parent
$'000
28 Feb
2018
28 Feb
2017
-
-
1,380
1,380
-
-
155
155
% Ownership
interest held by
28 Feb
2018
28 Feb
2017
15%
15%
-
51%
51%
15%
15%
50%
51%
51%
31 May
31 May
28 February
28 February
28 February
Name
Balance Date
consolidated entity
2 The remaining 50% of ACS was acquired as at 31 January 2018 and therefore became a subsidiary (Refer Note 4)
(b) The principal activities of the associates and joint ventures are:
COA processes and markets cotton seed, canola and other oilseeds.
•
•
CPL owns facilities used in the processing and marketing of cotton seed, canola and other oilseeds by COA.
• ACS provides independent classing services to the Australian cotton industry.
• NCA markets Australian lint cotton and owns significant up-country warehousing and logistics facilities to
• NCPS operates containerised commodity packing facilities primarily packing cottonseed, coarse grains and
support the marketing operations
pulses.
NCA and NCPS are 51% owned, however, the two entities are jointly controlled due to the joint venture
agreement terms in relation to committee decision making etc.
Year Ended 28 February 2018
Notes to the Financial Statements
Page 54
Year Ended 28 February 2018
Notes to the Financial Statements
Page 55
2018 ANNUAL REPORT | 68
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
9. Inventories
Cotton seed (at fair value less costs to sell)
Operating supplies and spares (at cost)
Consolidated
$'000
Parent
$'000
28 Feb
2018
1,077
8,444
9,521
28 Feb
2017
1,792
5,822
7,614
28 Feb
2018
1,077
8,429
9,506
28 Feb
2017
1,792
5,822
7,614
Refer to Note 28 for further information relating to the valuation techniques for determining the fair value of
Cotton Seed.
10. Derivative Financial Instruments
Current assets
Foreign exchange contracts
Cotton seed sale contracts
Cotton seed purchase contracts
Current liabilities
Foreign exchange contracts
Interest rate swap contracts
Cotton seed sale contracts
Cotton seed purchase contracts
Consolidated
$'000
Parent
$'000
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
86
8,407
-
8,493
111
52
-
8,393
8,556
444
-
14,221
14,665
-
-
-
14,141
14,141
86
8,407
-
8,493
111
52
-
8,393
8,556
444
-
14,221
14,665
-
-
-
14,141
14,141
Derivatives are used by the group to manage trading and financial risks as detailed in note 28.
Fair value of foreign exchange contracts are determined by comparing the contracted rate to the market rates
for contracts with the same term to maturity. All movements in fair value are recognised in the profit within the
statement of comprehensive income in the period they occur. The net fair value loss on foreign exchange
contracts at year end was $25,125 for the group (2017: $444,464) and $25,125 (2017: $444,464) for the parent
entity.
Cotton seed sales contracts are forward dated and deliverable contracts with customers. The fair value of cotton
seed commodity contracts is determined by reference to market prices and foreign exchange rates. The fair
value of the open cotton seed sale contracts at year end was a derivative asset (unrealised gain) of $8,406,942
for the group (2017: Loss $14,141,183) and $8,406,942 (2017: Loss $14,141,183) for the parent entity.
Cotton seed commodity purchase contracts are forward dated and deliverable contracts with cotton growers or
brokers. The fair value of cotton seed commodity contracts is determined by reference to market prices and
foreign exchange rates. The fair value of the open cotton seed purchase contracts at year end was a derivative
liability (unrealised loss) of $8,393,213 for the group (2017: Gain $14,220,718) and $8,393,213 (2017: Gain
$14,220,718) for the parent entity.
Interest bearing loans of the group incurred an average variable interest rate of 3.0% (2017: 3.1%). Swaps in
place at the comparative reporting date accounted for approximately 41.7% (2017: nil%) of the principal
outstanding. The average fixed interest rates were 2.1% (2017: nil%) and the average variable rates were 1.98%
(2017: nil%) at balance date. The net fair value loss on interest rate swaps was $51,780 (2017: $nil).
11. Investments in Associates and Joint Ventures using the equity method
Investment in associates (material)
Investment in joint ventures (material)
Investment in joint ventures (non material)
(a) Ownership interest
Consolidated
$'000
Parent
$'000
28 Feb
2018
1,292
40,521
(844)
40,969
28 Feb
2017
2,671
40,010
(805)
41,876
28 Feb
2018
28 Feb
2017
-
-
1,380
1,380
-
-
155
155
Name
Balance Date
% Ownership
interest held by
consolidated entity
28 Feb
2018
28 Feb
2017
Investments in Associates
Cargill Oilseeds Australia Partnership (COA)
Cargill Processing Ltd (CPL) 1
Investments in Joint Ventures
Australian Classing Services Pty Ltd (ACS) 1, 2
Namoi Cotton Alliance (NCA)
NC Packing Services Pty Ltd (NCPS) 1
31 May
31 May
28 February
28 February
28 February
15%
15%
-
51%
51%
15%
15%
50%
51%
51%
1 Incorporated in Australia
2 The remaining 50% of ACS was acquired as at 31 January 2018 and therefore became a subsidiary (Refer Note 4)
(b) The principal activities of the associates and joint ventures are:
COA processes and markets cotton seed, canola and other oilseeds.
CPL owns facilities used in the processing and marketing of cotton seed, canola and other oilseeds by COA.
•
•
• ACS provides independent classing services to the Australian cotton industry.
• NCA markets Australian lint cotton and owns significant up-country warehousing and logistics facilities to
support the marketing operations
• NCPS operates containerised commodity packing facilities primarily packing cottonseed, coarse grains and
pulses.
NCA and NCPS are 51% owned, however, the two entities are jointly controlled due to the joint venture
agreement terms in relation to committee decision making etc.
Year Ended 28 February 2018
Notes to the Financial Statements
Page 54
Year Ended 28 February 2018
Notes to the Financial Statements
Page 55
2018 ANNUAL REPORT | 69
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
(c) Significant influence
Significant influence exists over the Cargill associate’s, despite less than 20% ownership, due to the agreed one
third representation upon the Board of Directors and management committees. Namoi Cotton is also a
significant supplier of the primary input product for the Narrabri cotton seed crushing facility.
(d) Material Investments in Associates
(i) Associates results
Revenue
Profit/(Loss)
Consolidated
$'000
28 Feb 2018
COA
CPL
28 Feb 2017
COA
CPL
315,085
(10,097)
24,441
911
250,872
(5,777)
23,417
670
Group share of associates profit/(loss)
(1,515)
137
(867)
101
(ii) Associates assets and liabilities:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Associates net assets
55,935
-
(71,067)
-
(15,133)
5,703
19,061
(1,016)
-
23,749
52,731
-
(57,629)
-
(4,899)
5,640
19,152
(1,955)
-
22,837
Group share of associates net assets
(2,270)
3,562
(735)
3,426
(iii) Carrying amount of investments in associates:
Balance at the beginning of the financial year
Distribution paid out of retained earnings
Share of associates profits/(losses) for the financial year
(755)
-
(1,515)
3,425
-
137
117
-
(872)
3,355
-
70
Carrying amount of investment in associates at the
end of the financial year
(2,270)
3,562
(755)
3,425
(iv) Share of contingent liabilities of associate:
(iv) Share of associates commitments:
-
-
-
-
-
-
-
-
Consolidated
$'000
28 Feb
2018
28 Feb
2017
365,467
281,989
(2,530)
(1,468)
229
1,001
-
1,001
511
(2,315)
(995)
186
118
-
118
60
32,856
57,838
58,799
11,755
58,093
62,027
(64,330)
(47,028)
(4,013)
(4,276)
(1,630)
(2,027)
(67)
(92)
79,453
40,521
78,452
40,011
40,011
39,950
-
-
-
-
-
-
-
-
-
-
(e) Material Investments in Joint Ventures: NCA
(i) Joint Venture results (for the period since inception)
Revenue
Depreciation and Amortisation
Interest Expense
Interest Income
Profit/(loss) before income tax expense
Income tax expense(a)
Joint Venture net profit/(loss)
(a) The Joint Venture is a partnership for tax puposes accordingly is not a taxable entity
Group share of joint venture net profit/(loss)
(ii) Joint venture assets and liabilities:
Current assets
Cash and cash equivalents
Other
Non-current assets
Current liabilities
Financial liabilities
Non-current liabilities
Financial liabilities
Other
Other
Joint Venture net assets
Group share of joint venture net assets
(iii) Carrying amount of investments in joint ventures:
Balance at the beginning of the financial year
Acquisition of joint venture
Contribution to working capital
Distribution paid out of retained earnings
(iv) Share of contingent liabilities of joint venture:
(v) Share of joint venture commitments:
Share of joint venture profits/(losses) for the financial year
511
60
Carrying amount of investments in joint ventures at the
end of the financial year
40,521
40,011
(f) Share of Non Material Investments in joint venture entities: ACS 1 and NCPS
(i) Non Material Joint Venture Results
Profits/(Losses) and total comprehensive income from continuing operations
170
652
1 Includes share of ACS profit before acquisition of remaining 50% interest from joint venture partner.
Year Ended 28 February 2018
Notes to the Financial Statements
Page 56
Year Ended 28 February 2018
Notes to the Financial Statements
Page 57
2018 ANNUAL REPORT | 70
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
(c) Significant influence
Significant influence exists over the Cargill associate’s, despite less than 20% ownership, due to the agreed one
third representation upon the Board of Directors and management committees. Namoi Cotton is also a
significant supplier of the primary input product for the Narrabri cotton seed crushing facility.
(d) Material Investments in Associates
(i) Associates results
Revenue
Profit/(Loss)
Group share of associates profit/(loss)
(ii) Associates assets and liabilities:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Associates net assets
Consolidated
$'000
28 Feb 2018
COA
CPL
28 Feb 2017
COA
CPL
315,085
(10,097)
(1,515)
24,441
250,872
23,417
911
137
(5,777)
(867)
670
101
55,935
52,731
5,703
19,061
(71,067)
(1,016)
(57,629)
5,640
19,152
(1,955)
-
(15,133)
23,749
(4,899)
22,837
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Group share of associates net assets
(2,270)
3,562
(735)
3,426
(iii) Carrying amount of investments in associates:
Balance at the beginning of the financial year
Distribution paid out of retained earnings
Share of associates profits/(losses) for the financial year
(1,515)
Carrying amount of investment in associates at the
(755)
3,425
-
137
117
-
(872)
3,355
-
70
(iv) Share of contingent liabilities of associate:
(iv) Share of associates commitments:
(e) Material Investments in Joint Ventures: NCA
(i) Joint Venture results (for the period since inception)
Revenue
Depreciation and Amortisation
Interest Expense
Interest Income
Profit/(loss) before income tax expense
Income tax expense(a)
Joint Venture net profit/(loss)
(a) The Joint Venture is a partnership for tax puposes accordingly is not a taxable entity
Group share of joint venture net profit/(loss)
(ii) Joint venture assets and liabilities:
Current assets
Cash and cash equivalents
Other
Non-current assets
Current liabilities
Financial liabilities
Other
Non-current liabilities
Financial liabilities
Other
Joint Venture net assets
Group share of joint venture net assets
end of the financial year
(2,270)
3,562
(755)
3,425
(iii) Carrying amount of investments in joint ventures:
Balance at the beginning of the financial year
Acquisition of joint venture
Contribution to working capital
Distribution paid out of retained earnings
Share of joint venture profits/(losses) for the financial year
Carrying amount of investments in joint ventures at the
end of the financial year
(iv) Share of contingent liabilities of joint venture:
(v) Share of joint venture commitments:
Consolidated
$'000
28 Feb
2018
28 Feb
2017
365,467
(2,530)
(1,468)
229
1,001
-
1,001
511
281,989
(2,315)
(995)
186
118
-
118
60
32,856
57,838
58,799
11,755
58,093
62,027
(64,330)
(4,013)
(47,028)
(4,276)
(1,630)
(67)
79,453
(2,027)
(92)
78,452
40,521
40,011
40,011
-
-
-
511
39,950
-
-
-
60
40,521
40,011
-
-
-
-
(f) Share of Non Material Investments in joint venture entities: ACS 1 and NCPS
(i) Non Material Joint Venture Results
Profits/(Losses) and total comprehensive income from continuing operations
170
652
1 Includes share of ACS profit before acquisition of remaining 50% interest from joint venture partner.
Year Ended 28 February 2018
Notes to the Financial Statements
Page 56
Year Ended 28 February 2018
Notes to the Financial Statements
Page 57
2018 ANNUAL REPORT | 71
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
12. Interest in Joint Operations
15. Property, Plant and Equipment
(a) Ownership interest
Name
Wathagar Ginning Company (WGC)
Moomin Ginning Company (MGC)
Balance Date
28 February
28 February
% Ownership
interest held by
consolidated entity
28 Feb
2018
50%
75%
28 Feb
2017
50%
50%
(b) Principal activities
The joint operations provide ginning services to cotton growers in the Gwydir valley located in NSW.
(c) Impairment
No assets employed in the jointly controlled operation were impaired during the year (2017: $nil).
(d) Accounting for joint operations
The joint operations have been accounted for using the share of rights to assets and obligations for liabilities
method.
13. Interest in Jointly Controlled Assets
Namoi Cotton holds a 40% joint ownership interest in the white cotton seed handling and storage facilities at
Mungindi, NSW with a book carrying value of $2.22m at 28 February 2018 (2017: $2.28m).
Namoi Cotton pays for its proportion of the operating costs of the facility. There were no material contingent
liabilities or capital expenditure commitments in respect of jointly controlled assets at balance date.
14. Intangible Assets
Goodwill
Written down value - 1 March 2017
Acquisition of a subsidiary1
Written down value - 28 February 2018
1Acquisition during the year
Consolidated
$'000
Parent
$'000
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
-
961
961
-
-
-
-
-
-
-
-
-
The remaining 50% of shares in Australian Classing Services Pty Ltd were acquired effective 31 January 2018
valuing the company at $1.38m. (Refer Note 4). Goodwill is carried at cost. No amortisation or impairment of
goodwill has been recorded for the year.
Closing written down value at fair value
118,570
122,694
118,570
122,694
Ginning infrastucture and major equipment
Gin Assets
at fair value
Provision for depreciation and impairment
Revaluation to fair value
Other ginning equipment
Cost
Provision for depreciation and impairment
Closing written down value at cost
Net Gin Assets
Other Assets
at fair value
Other infrastucture and major equipment
Provision for depreciation and impairment
Revaluation to fair value
Other equipment
Cost
Net Other Assets
Provision for depreciation and impairment
Closing written down value at cost
Capital work in progress ('CWIP') at cost
Total written down value at fair value
Total written down value at cost
Total written down value for property,
plant & equipment
Consolidated
$'000
Parent
$'000
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
129,353
(10,783)
118,570
127,388
(4,694)
122,694
129,353
(10,783)
118,570
127,388
(4,694)
122,694
-
-
-
-
14,040
(5,081)
8,959
9,002
(4,430)
4,572
14,040
(5,081)
8,959
9,002
(4,430)
4,572
127,529
127,266
127,529
127,266
6,353
(487)
5,866
-
6,353
(243)
6,110
-
6,353
(487)
5,866
-
6,353
(243)
6,110
-
10,568
(8,173)
2,395
8,261
3,292
10,183
(8,420)
1,763
7,873
3,334
9,426
(7,621)
1,805
7,671
3,292
10,183
(8,420)
1,763
7,873
3,334
124,437
14,646
128,804
9,669
124,437
14,056
128,804
9,669
139,082
138,473
138,492
138,473
Closing written down value at fair value
5,866
6,110
5,866
6,110
Year Ended 28 February 2018
Notes to the Financial Statements
Page 58
Year Ended 28 February 2018
Notes to the Financial Statements
Page 59
2018 ANNUAL REPORT | 72
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
12. Interest in Joint Operations
(a) Ownership interest
% Ownership
interest held by
28 Feb
2018
50%
75%
28 Feb
2017
50%
50%
Name
Balance Date
consolidated entity
Wathagar Ginning Company (WGC)
Moomin Ginning Company (MGC)
28 February
28 February
The joint operations provide ginning services to cotton growers in the Gwydir valley located in NSW.
(b) Principal activities
(c) Impairment
No assets employed in the jointly controlled operation were impaired during the year (2017: $nil).
The joint operations have been accounted for using the share of rights to assets and obligations for liabilities
(d) Accounting for joint operations
method.
13. Interest in Jointly Controlled Assets
Namoi Cotton holds a 40% joint ownership interest in the white cotton seed handling and storage facilities at
Mungindi, NSW with a book carrying value of $2.22m at 28 February 2018 (2017: $2.28m).
Namoi Cotton pays for its proportion of the operating costs of the facility. There were no material contingent
liabilities or capital expenditure commitments in respect of jointly controlled assets at balance date.
14. Intangible Assets
Goodwill
Written down value - 1 March 2017
Acquisition of a subsidiary1
Written down value - 28 February 2018
1Acquisition during the year
Consolidated
$'000
Parent
$'000
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
-
961
961
-
-
-
-
-
-
-
-
-
The remaining 50% of shares in Australian Classing Services Pty Ltd were acquired effective 31 January 2018
valuing the company at $1.38m. (Refer Note 4). Goodwill is carried at cost. No amortisation or impairment of
goodwill has been recorded for the year.
15. Property, Plant and Equipment
Gin Assets
Ginning infrastucture and major equipment
at fair value
Provision for depreciation and impairment
Revaluation to fair value
Closing written down value at fair value
Other ginning equipment
Cost
Provision for depreciation and impairment
Closing written down value at cost
Net Gin Assets
Other Assets
Other infrastucture and major equipment
at fair value
Provision for depreciation and impairment
Revaluation to fair value
Closing written down value at fair value
Other equipment
Cost
Provision for depreciation and impairment
Closing written down value at cost
Net Other Assets
Capital work in progress ('CWIP') at cost
Total written down value at fair value
Total written down value at cost
Total written down value for property,
plant & equipment
Consolidated
$'000
Parent
$'000
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
129,353
(10,783)
118,570
-
118,570
127,388
(4,694)
122,694
-
122,694
129,353
(10,783)
118,570
-
118,570
127,388
(4,694)
122,694
-
122,694
14,040
(5,081)
8,959
9,002
(4,430)
4,572
14,040
(5,081)
8,959
9,002
(4,430)
4,572
127,529
127,266
127,529
127,266
6,353
(487)
5,866
-
5,866
10,568
(8,173)
2,395
8,261
3,292
6,353
(243)
6,110
-
6,110
10,183
(8,420)
1,763
7,873
3,334
6,353
(487)
5,866
-
5,866
9,426
(7,621)
1,805
7,671
3,292
6,353
(243)
6,110
-
6,110
10,183
(8,420)
1,763
7,873
3,334
124,437
14,646
128,804
9,669
124,437
14,056
128,804
9,669
139,082
138,473
138,492
138,473
Year Ended 28 February 2018
Notes to the Financial Statements
Page 58
Year Ended 28 February 2018
Notes to the Financial Statements
Page 59
2018 ANNUAL REPORT | 73
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
If the above categories of assets were still measured using the cost model, the carrying amount (WDV) would
be as follows:
the carrying values exceed the estimated recoverable amount (refer to Note 1), the assets or cash-generating
units are written down to their recoverable amount.
Ginning infrastucture and major equipment
Other infrastucture and major equipment
Consolidated and Parent
$'000
$'000
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
63,552
3,638
67,190
59,891
3,422
63,313
63,552
3,638
67,190
59,891
3,422
63,313
Revaluation of Ginning Assets
Effective 29 February 2012, the group changed its accounting policy for the measurement of ginning assets from
deemed cost to fair value.
The methodology used in determining the fair value of the relevant properties and assets was the Discounted
Cash Flow (DCF) approach as the primary method and the Net Maintainable Earnings approach as the secondary
method. The DCF method provides a valuation based on the formulation of projected future cash flows over a
ten-year period (plus a terminal value), which was then discounted at an appropriate discount rate. The Net
Maintainable Earnings approach was used to support the DCF method results.
Effective 29 February 2016 an independent valuation of the ginning assets was commissioned by the Group to
provide external support for the Directors assessment of fair value for financial reporting purposes. Colliers
International (“Colliers”) were engaged for this purpose. The methodology applied by Colliers to value the
ginning assets was a net maintainable earnings approach. An assessed sustainable EBITDA was multiplied by an
appropriate earnings multiple derived from market sources. The external valuation obtained for the ginning
assets was then used to support the results of a DCF model for the prior year. The directors continue to utilise
this DCF method to determine the fair value of ginning assets. Management calculated the fair value as at 28
February 2018 and determined that the carrying value of the assets is in line with the fair value and, therefore,
no further revaluations were recorded.
The fair value measurement of ginning assets outlined above uses significant unobservable inputs and are
classified as level 3 in the financial reporting fair value measurement hierarchy. Significant unobservable
valuation inputs as at 28 February 2018 included:
•
Sustainable bales. The average annual sustainable ginning bales have been included following a grower by
grower assessment of production areas, seasonal rotation, estimated yields and reliability of contracting.
The measure is inclusive of Namoi’s respective shares of throughputs of the joint venture cotton gins. The
number being approximately a 28 % (2017: 28%) market share of an Australian sustainable crop size of 3.2
million bales (2017: 3.2 million bales) which also approximates the average number of bales achieved over
the last 7 years, noting that individual seasons can fluctuate significantly dependent upon water availability;
• Growth rate - revenues 1.65% (2017 - 1.65%)
• Growth rate - expenses 2.20% (2017 - 2.20%)
•
Pre-tax discount rate of 16% (2017 – 16.0 %)
Any significant increases/(decreases) in sustainable bales volumes, changes to EBITDA from ginning revenue per
bale, or throughput rate (production cost impact) or changes to the discount rate, in isolation, would result in a
significantly higher/(lower) fair value.
Impairment of Assets at Cost
Impairment losses are determined with reference to the items recoverable amount calculated as the greater of
fair value less costs to sell or its value in use. For an asset that does not generate largely independent cash
inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Where
Reconciliations
Reconciliations of the carrying amounts of each class of property, plant and equipment at the beginning and end
of the current financial year are set out below.
Year Ended 28 February 2018 ($'000)
Gins
Other
CWIP
Year Ended 28 February 2017 ($'000)
Gins
Other
CWIP
Consolidated and parent entity
Written down value - 1 March 2017
Acquisition of subsidiary
Additions and Transfer to/(from) CWIP
Disposals
Depreciation1
Written down value - 28 February 2018
Consolidated and parent entity
Written down value - 1 March 2016
Additions and Transfer to/(from) CWIP
Disposals
Depreciation
Written down value - 28 February 2017
16. Trade and Other Payables
Current
Trade creditors and accruals 1
Grower deposits
Customer deposits
Trade creditors to an associate
Funds due to futures brokers 2
Loans from controlled entities
127,266
-
7,321
(65)
(6,993)
127,529
7,873
511
981
(149)
(955)
8,261
3,334
(42)
3,292
130,657
1,968
(39)
(5,320)
127,266
8,565
290
(96)
(886)
7,873
1,688
1,646
3,334
-
-
-
-
-
Consolidated
$'000
Parent
$'000
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
7,799
7,938
7,773
7,936
32
14
-
-
-
38
132
293
-
-
32
14
-
-
38
132
293
-
7,845
8,401
17,732
25,551
17,732
26,131
1 Ginning infrastructure assets are depreciated on a units of production basis over their rolling estimated remaining useful
lives of 20 years of sustainable bales.
1 Trade and other payables are non-interest bearing and are settled under a variety of terms dependent upon the transaction
arrangements and the counterparty. The carrying amount of trade and other payables approximates their fair value.
Year Ended 28 February 2018
Notes to the Financial Statements
Page 60
Year Ended 28 February 2018
Notes to the Financial Statements
Page 61
2018 ANNUAL REPORT | 74
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
If the above categories of assets were still measured using the cost model, the carrying amount (WDV) would
be as follows:
the carrying values exceed the estimated recoverable amount (refer to Note 1), the assets or cash-generating
units are written down to their recoverable amount.
Consolidated and Parent
$'000
$'000
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
63,552
3,638
67,190
59,891
3,422
63,313
63,552
3,638
67,190
59,891
3,422
63,313
Ginning infrastucture and major equipment
Other infrastucture and major equipment
Revaluation of Ginning Assets
deemed cost to fair value.
Effective 29 February 2012, the group changed its accounting policy for the measurement of ginning assets from
The methodology used in determining the fair value of the relevant properties and assets was the Discounted
Cash Flow (DCF) approach as the primary method and the Net Maintainable Earnings approach as the secondary
method. The DCF method provides a valuation based on the formulation of projected future cash flows over a
ten-year period (plus a terminal value), which was then discounted at an appropriate discount rate. The Net
Maintainable Earnings approach was used to support the DCF method results.
Effective 29 February 2016 an independent valuation of the ginning assets was commissioned by the Group to
provide external support for the Directors assessment of fair value for financial reporting purposes. Colliers
International (“Colliers”) were engaged for this purpose. The methodology applied by Colliers to value the
ginning assets was a net maintainable earnings approach. An assessed sustainable EBITDA was multiplied by an
appropriate earnings multiple derived from market sources. The external valuation obtained for the ginning
assets was then used to support the results of a DCF model for the prior year. The directors continue to utilise
this DCF method to determine the fair value of ginning assets. Management calculated the fair value as at 28
February 2018 and determined that the carrying value of the assets is in line with the fair value and, therefore,
no further revaluations were recorded.
The fair value measurement of ginning assets outlined above uses significant unobservable inputs and are
classified as level 3 in the financial reporting fair value measurement hierarchy. Significant unobservable
valuation inputs as at 28 February 2018 included:
•
Sustainable bales. The average annual sustainable ginning bales have been included following a grower by
grower assessment of production areas, seasonal rotation, estimated yields and reliability of contracting.
The measure is inclusive of Namoi’s respective shares of throughputs of the joint venture cotton gins. The
number being approximately a 28 % (2017: 28%) market share of an Australian sustainable crop size of 3.2
million bales (2017: 3.2 million bales) which also approximates the average number of bales achieved over
the last 7 years, noting that individual seasons can fluctuate significantly dependent upon water availability;
• Growth rate - revenues 1.65% (2017 - 1.65%)
• Growth rate - expenses 2.20% (2017 - 2.20%)
Pre-tax discount rate of 16% (2017 – 16.0 %)
•
significantly higher/(lower) fair value.
Impairment of Assets at Cost
Any significant increases/(decreases) in sustainable bales volumes, changes to EBITDA from ginning revenue per
bale, or throughput rate (production cost impact) or changes to the discount rate, in isolation, would result in a
Reconciliations
Reconciliations of the carrying amounts of each class of property, plant and equipment at the beginning and end
of the current financial year are set out below.
Year Ended 28 February 2018 ($'000)
Gins
Other
CWIP
Consolidated and parent entity
Written down value - 1 March 2017
Acquisition of subsidiary
Additions and Transfer to/(from) CWIP
Disposals
Depreciation1
Written down value - 28 February 2018
127,266
-
7,321
(65)
(6,993)
127,529
7,873
511
981
(149)
(955)
8,261
3,334
-
(42)
-
-
3,292
Year Ended 28 February 2017 ($'000)
Gins
Other
CWIP
Consolidated and parent entity
Written down value - 1 March 2016
Additions and Transfer to/(from) CWIP
Disposals
Depreciation
Written down value - 28 February 2017
130,657
1,968
(39)
(5,320)
127,266
8,565
290
(96)
(886)
7,873
1,688
1,646
-
-
3,334
1 Ginning infrastructure assets are depreciated on a units of production basis over their rolling estimated remaining useful
lives of 20 years of sustainable bales.
16. Trade and Other Payables
Current
Trade creditors and accruals 1
Grower deposits
Customer deposits
Trade creditors to an associate
Funds due to futures brokers 2
Loans from controlled entities
Consolidated
$'000
Parent
$'000
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
7,799
32
14
-
-
-
7,845
7,938
38
132
293
-
-
8,401
7,773
32
14
-
-
17,732
25,551
7,936
38
132
293
-
17,732
26,131
Impairment losses are determined with reference to the items recoverable amount calculated as the greater of
fair value less costs to sell or its value in use. For an asset that does not generate largely independent cash
inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Where
1 Trade and other payables are non-interest bearing and are settled under a variety of terms dependent upon the transaction
arrangements and the counterparty. The carrying amount of trade and other payables approximates their fair value.
Year Ended 28 February 2018
Notes to the Financial Statements
Page 60
Year Ended 28 February 2018
Notes to the Financial Statements
Page 61
2018 ANNUAL REPORT | 75
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
17. Interest Bearing Liabilities
The extent to which the economic entity’s finance facilities provided by Commonwealth Bank of Australia (CBA)
were utilised at 28 February 2018 is listed below.
Current
AUD Facility Use
Short term
Working capital finance 1
Term debt 2
Lease liability
Non Current
Loans from controlled entities
Term debt 2
Lease liability
Facility Use - AUD $'000
Consolidated
28 Feb
2018
28 Feb
2017
Parent
28 Feb
2018
28 Feb
2017
18
6,000
-
6,018
758
758
819
9,500
5,500
15,819
771
771
18
6,000
-
6,018
758
758
819
9,500
5,500
15,819
771
771
6,776
16,590
6,776
16,590
-
42,000
1,226
43,226
-
41,980
1,350
43,330
2,049
42,000
1,226
45,275
2,049
41,980
1,350
45,379
Total Current and Non-Current
50,002
59,920
52,051
61,969
1 Working capital lines are utilised to fund day to day expenses of the business including specific funding needs for cotton
seed inventory and debtors.
2 Term debt lines are utilised to fund capital projects relating to the plant, property and equipment of the business.
Other liabilities
Interest bearing liabilities are carried at amortised cost.
Hire purchase contracts on equipment have an average term of 2.2 years with the average interest rate implicit
in the contracts of 4.7% (2017: 4.9%).
Details of interest rate risk, foreign exchange risk and liquidity risk are disclosed in Note 28.
Facility limits
The seasonal finance facilities limit, excluding term debt, at 28 February 2018 was $12.5 million (2017: $12.5
million) including operating overdrafts. In the current year a higher limit of $17.5 million applied from 1 March
2017 to 30 June 2017.
At balance date CBA had provided Namoi Cotton with a secured $42.0 million (2017: $47.5 million) debt facility
with core components maturing on 28 February 2020. Security is provided by a fixed and floating charge over
the assets and undertakings of the group.
Facility Limit - AUD $'000
Consolidated
28 Feb
2018
28 Feb
2017
Parent
28 Feb
2018
28 Feb
2017
2,500
10,000
35,000
7,000
54,500
2,500
10,000
35,000
12,480
59,980
2,500
10,000
35,000
7,000
54,500
2,500
10,000
35,000
12,480
59,980
AUD Facility Limit
Short term
Working capital finance 3
Term debt - A 1
Term debt - B 2
Financing arrangements
capital facility to 31 March 2019.
The Seventh Variation Deed was executed on 26 March 2018 extending the facility end date of the working
Finance renewal
Finance facility limits negotiated with CBA as per above:
1Committed term debt facility (non-amortising) - facility limit of AUD$35 million (2017: AUD$35 million) with a
2Committed term debt facility (non-amortising) - facility limit of AUD$7.0 million (2017: AUD$12.5 million) with
facility end date of 28 February 2020;
a facility end date of 28 February 2020; and
3Committed cotton seed, ginning consumables and general working capital needs under a multi option working
capital facility (non-amortising) - facility limit of AUD$10 million (2017: AUD$10 million) with a facility end date
of 31 March 2019.
previous facilities.
With the exception of the maturity of the facilities, the terms and conditions are materially consistent with the
The group has agreed to certain financial covenants with CBA under the new finance facilities at what are
considered appropriate levels to meet the needs of the business. Financial covenants under the previous
agreements were complied with during the year.
The Directors at the date of this report expect the working capital facility will be renewed thereafter and at
appropriate levels for FY 2019/20 operations.
Year Ended 28 February 2018
Notes to the Financial Statements
Page 62
Year Ended 28 February 2018
Notes to the Financial Statements
Page 63
2018 ANNUAL REPORT | 76
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
17. Interest Bearing Liabilities
The extent to which the economic entity’s finance facilities provided by Commonwealth Bank of Australia (CBA)
were utilised at 28 February 2018 is listed below.
Current
AUD Facility Use
Short term
Working capital finance 1
Term debt 2
Lease liability
Loans from controlled entities
Non Current
Term debt 2
Lease liability
Facility Use - AUD $'000
Consolidated
28 Feb
2018
28 Feb
2017
Parent
28 Feb
2018
28 Feb
2017
18
6,000
758
758
-
-
42,000
1,226
43,226
6,018
15,819
6,018
15,819
819
9,500
5,500
771
771
18
6,000
-
758
758
819
9,500
5,500
771
771
6,776
16,590
6,776
16,590
-
41,980
1,350
43,330
2,049
42,000
1,226
45,275
2,049
41,980
1,350
45,379
Total Current and Non-Current
50,002
59,920
52,051
61,969
1 Working capital lines are utilised to fund day to day expenses of the business including specific funding needs for cotton
seed inventory and debtors.
2 Term debt lines are utilised to fund capital projects relating to the plant, property and equipment of the business.
Other liabilities
Interest bearing liabilities are carried at amortised cost.
Hire purchase contracts on equipment have an average term of 2.2 years with the average interest rate implicit
in the contracts of 4.7% (2017: 4.9%).
Details of interest rate risk, foreign exchange risk and liquidity risk are disclosed in Note 28.
The seasonal finance facilities limit, excluding term debt, at 28 February 2018 was $12.5 million (2017: $12.5
million) including operating overdrafts. In the current year a higher limit of $17.5 million applied from 1 March
Facility limits
2017 to 30 June 2017.
At balance date CBA had provided Namoi Cotton with a secured $42.0 million (2017: $47.5 million) debt facility
with core components maturing on 28 February 2020. Security is provided by a fixed and floating charge over
the assets and undertakings of the group.
AUD Facility Limit
Short term
Working capital finance 3
Term debt - A 1
Term debt - B 2
Facility Limit - AUD $'000
Consolidated
28 Feb
2018
28 Feb
2017
Parent
28 Feb
2018
28 Feb
2017
2,500
10,000
35,000
7,000
54,500
2,500
10,000
35,000
12,480
59,980
2,500
10,000
35,000
7,000
54,500
2,500
10,000
35,000
12,480
59,980
Financing arrangements
The Seventh Variation Deed was executed on 26 March 2018 extending the facility end date of the working
capital facility to 31 March 2019.
Finance renewal
Finance facility limits negotiated with CBA as per above:
1Committed term debt facility (non-amortising) - facility limit of AUD$35 million (2017: AUD$35 million) with a
facility end date of 28 February 2020;
2Committed term debt facility (non-amortising) - facility limit of AUD$7.0 million (2017: AUD$12.5 million) with
a facility end date of 28 February 2020; and
3Committed cotton seed, ginning consumables and general working capital needs under a multi option working
capital facility (non-amortising) - facility limit of AUD$10 million (2017: AUD$10 million) with a facility end date
of 31 March 2019.
With the exception of the maturity of the facilities, the terms and conditions are materially consistent with the
previous facilities.
The group has agreed to certain financial covenants with CBA under the new finance facilities at what are
considered appropriate levels to meet the needs of the business. Financial covenants under the previous
agreements were complied with during the year.
The Directors at the date of this report expect the working capital facility will be renewed thereafter and at
appropriate levels for FY 2019/20 operations.
Year Ended 28 February 2018
Notes to the Financial Statements
Page 62
Year Ended 28 February 2018
Notes to the Financial Statements
Page 63
2018 ANNUAL REPORT | 77
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
18. Provisions
Current
Employee leave entitlements
Employee variable compensation
Provision for tax
Non-current
Employee leave entitlements
19. Co-operative Grower Member Shares
Grower member shares - fixed capital entitlement
1 cent Grower member shares (fully paid)
Shares at the beginning of the financial year
Shares issued during the year
Shares converted to residual capital stock1
Shares at the end of the financial year
Consolidated
$'000
Parent
$'000
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
2,235
578
60
2,873
874
874
1,979
-
-
1,979
863
863
2,226
563
-
2,789
865
865
1,979
-
-
1,979
863
863
Consolidated
$'000
28 Feb
2017
447
28 Feb
2018
-
No.
Parent
$'000
28 Feb
2018
-
No.
28 Feb
2017
447
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
165,600
-
(165,600)
-
165,600
-
-
165,600
165,600
-
(165,600)
-
165,600
-
-
165,600
1 Each grower member holding 800 grower member shares converted to 158,504 residual capital stock and
subsequently to ordinary shares on a one-for-one basis under the Restructure. Total ordinary shares issued to
grower members was 32,810,328.
Terms and conditions (previously):
• Grower shares may only be held by active members;
• Grower shareholders have one vote at member meetings, regardless of the number of grower shares held;
• Grower shares can be issued and are redeemable for a fixed amount of $2.70 per share, but have no
entitlement to surplus repayments;
• Grower shares have no dividend entitlement;
• Grower shareholders appoint the directors of Namoi Cotton, subject to the stockholders right to nominate
up to three non-grower directors;
• Grower shareholders are entitled to a rebate, if applicable, for each bale of cotton ginned and/or marketed
with Namoi Cotton.
Minimum holding and forfeiture rules (previously):
Rule 6 of the rules of the co-operative required active members to hold 800 shares, produce cotton from a
minimum 40 hectares and conduct a minimum 20% of the member’s cotton business with the co-operative in
order to be eligible for a rebate of ginning and marketing charges levied by the co-operative. The board could
declare membership of a member cancelled where the grower was inactive for two years, whereby grower
shares were forfeited and the grower was repaid an amount equal to the initial issue price.
20. Contributed Equity
Ordinary Shares/Capital Stock
37,639
1,098
37,639
1,098
Consolidated
$'000
Parent
$'000
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
Consolidated and Parent
No. '000
$'000
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
1 cent Capital Stock (fully paid)
Capital stock at the beginning of the financial year
109,843
109,843
Capital stock converted as part of restructure
Capital stock at the end of the financial year
(109,843)
109,843
1,098
(1,098)
1,098
1,098
1 cent Residual Capital Stock (fully paid)
Residual capital stock at the beginning
of the financial year
Grower member shares converted
as part of restructure
Residual capital stock at the end
of the financial year
Ordinary Shares (fully paid)
Capital stock converted as part of restructure
Residual capital stock converted to ordinary shares
(127,427)
Ordinary shares at the beginning of the financial year
Residual capital stock converted to ordinary shares
Ordinary shares at the end of the financial year
127,427
127,427
-
-
-
32,810
109,843
15,226
-
-
-
-
-
-
-
-
-
-
328
1,098
(1,274)
152
-
1,274
1,274
-
-
-
-
-
-
-
-
On 26 September 2017 Namoi Cotton Co-operative Ltd grower members and co-operative capital unit holders
voted in favour of schemes of arrangement to convert the Co-operative (registered under the Co-operatives
National Law) to a company limited by shares (registered under the Corporations Act).
The vote received final regulatory approval and became effective on 10 October 2017.
The Restructure also resulted in the grower member shares (previously recorded as a financial liability) being
settled via the issuance of ordinary shares. In accordance with accounting standards, the financial liability was
revalued to fair value prior to being settled with ordinary shares. The fair value of the grower member shares
was determined to be $7.00 per share at the restructure date, by an Independent Expert. The increase in the
Year Ended 28 February 2018
Notes to the Financial Statements
Page 64
Year Ended 28 February 2018
Notes to the Financial Statements
Page 65
2018 ANNUAL REPORT | 78
Consolidated
$'000
Parent
$'000
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
2,235
578
60
2,873
874
874
1,979
-
-
2,226
563
-
1,979
-
-
1,979
2,789
1,979
863
863
865
865
863
863
Consolidated
$'000
28 Feb
2018
28 Feb
2017
447
Parent
$'000
28 Feb
2018
28 Feb
2017
447
No.
No.
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
-
-
-
-
-
-
18. Provisions
Current
Employee leave entitlements
Employee variable compensation
Provision for tax
Non-current
Employee leave entitlements
19. Co-operative Grower Member Shares
Grower member shares - fixed capital entitlement
grower members was 32,810,328.
Terms and conditions (previously):
entitlement to surplus repayments;
• Grower shares have no dividend entitlement;
up to three non-grower directors;
with Namoi Cotton.
1 cent Grower member shares (fully paid)
Shares at the beginning of the financial year
165,600
165,600
165,600
165,600
Shares issued during the year
Shares converted to residual capital stock1
Shares at the end of the financial year
(165,600)
(165,600)
165,600
165,600
-
-
-
-
1 Each grower member holding 800 grower member shares converted to 158,504 residual capital stock and
subsequently to ordinary shares on a one-for-one basis under the Restructure. Total ordinary shares issued to
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Minimum holding and forfeiture rules (previously):
Rule 6 of the rules of the co-operative required active members to hold 800 shares, produce cotton from a
minimum 40 hectares and conduct a minimum 20% of the member’s cotton business with the co-operative in
order to be eligible for a rebate of ginning and marketing charges levied by the co-operative. The board could
declare membership of a member cancelled where the grower was inactive for two years, whereby grower
shares were forfeited and the grower was repaid an amount equal to the initial issue price.
20. Contributed Equity
Ordinary Shares/Capital Stock
37,639
1,098
37,639
1,098
Consolidated
$'000
Parent
$'000
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
Consolidated and Parent
No. '000
$'000
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
109,843
(109,843)
-
109,843
-
109,843
1,098
(1,098)
-
1,098
-
1,098
1 cent Capital Stock (fully paid)
Capital stock at the beginning of the financial year
Capital stock converted as part of restructure
Capital stock at the end of the financial year
1 cent Residual Capital Stock (fully paid)
Residual capital stock at the beginning
of the financial year
Grower member shares converted
as part of restructure
Capital stock converted as part of restructure
Residual capital stock converted to ordinary shares
Residual capital stock at the end
of the financial year
-
32,810
109,843
(127,427)
15,226
Ordinary Shares (fully paid)
Ordinary shares at the beginning of the financial year
Residual capital stock converted to ordinary shares
Ordinary shares at the end of the financial year
-
127,427
127,427
-
-
-
-
-
-
-
-
328
1,098
(1,274)
152
-
1,274
1,274
-
-
-
-
-
-
-
• Grower shares may only be held by active members;
• Grower shareholders have one vote at member meetings, regardless of the number of grower shares held;
• Grower shares can be issued and are redeemable for a fixed amount of $2.70 per share, but have no
On 26 September 2017 Namoi Cotton Co-operative Ltd grower members and co-operative capital unit holders
voted in favour of schemes of arrangement to convert the Co-operative (registered under the Co-operatives
National Law) to a company limited by shares (registered under the Corporations Act).
• Grower shareholders appoint the directors of Namoi Cotton, subject to the stockholders right to nominate
The vote received final regulatory approval and became effective on 10 October 2017.
• Grower shareholders are entitled to a rebate, if applicable, for each bale of cotton ginned and/or marketed
The Restructure also resulted in the grower member shares (previously recorded as a financial liability) being
settled via the issuance of ordinary shares. In accordance with accounting standards, the financial liability was
revalued to fair value prior to being settled with ordinary shares. The fair value of the grower member shares
was determined to be $7.00 per share at the restructure date, by an Independent Expert. The increase in the
Year Ended 28 February 2018
Notes to the Financial Statements
Page 64
Year Ended 28 February 2018
Notes to the Financial Statements
Page 65
2018 ANNUAL REPORT | 79
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
carrying value of the grower member shares from $2.70 to $7.00 per share resulted in a fair value decrement to
profit and loss of $0.712 million.
The grower share liability of $1.16 million, co-operative capital unit premium reserve of $35.38 million and the
contributed equity of $1.098 million were reclassified to share capital in accordance with the Restructure
subsequent to 31 August 2017.
At balance date some 15.2m Residual Capital Stock had not been converted to ordinary shares. Under the terms
of the Restructure in October 2017 and the Constitution of Namoi Cotton Limited the redemption of Residual
Capital Stock is permitted. The conditions of such redemption include that redemption cannot occur until the
earlier of a minimum of 90% of Residual Capital Stock have being converted to Ordinary Shares or the 30th June
2018.
The number of residual capital stock available to redeem is expected to be immaterial given the redemption is
at market price less a 10% discount, they are not entitled to any dividends, are non-transferrable and are not
listed on the ASX. The Board has discretion in determining whether, and if so when, to redeem the outstanding
residual capital stock.
Capital stock terms and conditions (previously):
Capital stock holders are entitled to distributions as declared by the directors;
Capital stock holders have no right to vote at any general meeting of Namoi Cotton;
•
•
• Matters relating to the appointment of the non-grower directors must be approved by capital stock holders
prior to submission to a general meeting of Namoi Cotton for approval;
• On winding up, capital stock holders are entitled to the proceeds from surplus assets after payment of
grower paid up share capital.
Ordinary shares terms and conditions:
• Ordinary shareholders are entitled to dividends as declared by the directors;
•
• On winding up, ordinary shareholders are entitled to the proceeds from surplus assets.
Each ordinary shareholder is entitled to one vote per one share;
Namoi Cotton Employee Incentive Share Plan
The Employee Incentive Share Plan was suspended in August 2004. All full-time employees who were
continuously employed by Namoi Cotton for a period of one year were eligible to participate in the plan after
the finalisation of the full year results for the year ended 29 February 2004. The issue price was at a 5% discount
to the average market price of Namoi capital stock over the 5 trading days preceding the offer date.
Under the terms of the plan, employees are provided with an interest free loan to finance the issue price of the
units. A minimum of 75% of the amount of all distributions paid in relation to units issued under the plan must
be applied as a repayment of the loan. In any event, the loan must be repaid on the earlier to occur of
termination of employment and 10 years. At the end of the financial year employee loans totalled $24,411
(2017: $24,441).
Units issued under the plan are placed in escrow until the later to occur of three years from issue and when the
employee loan has been fully repaid. At the end of the financial year there were 141,000 residual capital stock
(2017: 141,000 units) under escrow.
Capital management
Namoi Cotton manages capital through the payment of dividends and participation in the buy back or issuance
of ordinary shares. Decisions on capital management are made having regard to compliance with externally
imposed capital requirements principally through maintaining a minimum level of net assets.
21. Nature and Purpose of Reserves
Capital stock (CCU) premium reserve (previously)
By virtue of rule 15.2 of the co-operative rules, the capital stock premium reserve is used to record amounts
received in respect of capital stock issued at a premium and are to be regarded as paid up capital of the co-
operative.
operative;
•
•
•
The balance standing to the credit of this account may be applied in any one or more of the following ways:
In the payment of dividends if those dividends are satisfied by the issue of shares to the members of the co-
In writing off the preliminary expenses of the co-operative; or
In providing for the premium payable on redemption of shares, debentures or co-operative capital units.
Asset revaluation reserve
The asset revaluation reserve is used to record increases in the fair value of ginning assets and decreases to the
extent that such decreases relates to an increase on the same asset previously recognised in equity. The reserve
can only be used to pay dividends in limited circumstances.
22. Segment Information
Identification of reportable segments
The group has identified its operating segments based on the internal reports that are reviewed and used by the
chief executive officer (the chief operating decision maker) with the executive management team in assessing
performance and in determining the allocation of resources.
The operating segments are identified by management based on the manner in which the product is sold,
whether retail or wholesale, and the nature of the services provided, the identity of service line manager and
country of origin. Discrete financial information about each of these operating businesses is reported to the
executive management team on at least a monthly basis.
The reportable segments are based on aggregated operating segments determined by the similarity of the
products and sold and/or the services provided, as these are the sources of the group’s major risks and have the
most effect on the rates of return.
Types of products and services
Ginning
The ginning business operates 12 cotton gins (incorporating 2 joint venture gins, referred to in note 12) located
in the key growing areas of NSW and Queensland. The ginning service provided to the growers during the
production process includes the separation of lint cotton from seed and other foreign matter and the conversion
of cotton in module form to bale form. Grower customers are also able to sell the white cotton seed by-product
to Namoi Cotton or elect to retain their white cotton seed.
Marketing
The marketing business involves the purchase of lint cotton from Australian growers using a variety of forward
contracts that offer differing combinations of price, delivery and risk characteristics. Subsequent to the
formation of NCA, bales procured by Namoi from growers are on-sold to NCA with approximately 99% of NCA
sales ultimately being to Asia. The NCA joint venture manages its marketing risks by utilising cotton futures and
options and foreign currency contracts under strict risk management policies. The controlled entity ACS provides
classing services for the NCA joint venture and other cotton merchants.
Year Ended 28 February 2018
Notes to the Financial Statements
Page 66
Year Ended 28 February 2018
Notes to the Financial Statements
Page 67
2018 ANNUAL REPORT | 80
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
carrying value of the grower member shares from $2.70 to $7.00 per share resulted in a fair value decrement to
21. Nature and Purpose of Reserves
profit and loss of $0.712 million.
The grower share liability of $1.16 million, co-operative capital unit premium reserve of $35.38 million and the
contributed equity of $1.098 million were reclassified to share capital in accordance with the Restructure
subsequent to 31 August 2017.
At balance date some 15.2m Residual Capital Stock had not been converted to ordinary shares. Under the terms
of the Restructure in October 2017 and the Constitution of Namoi Cotton Limited the redemption of Residual
Capital Stock is permitted. The conditions of such redemption include that redemption cannot occur until the
earlier of a minimum of 90% of Residual Capital Stock have being converted to Ordinary Shares or the 30th June
2018.
•
•
•
The number of residual capital stock available to redeem is expected to be immaterial given the redemption is
at market price less a 10% discount, they are not entitled to any dividends, are non-transferrable and are not
listed on the ASX. The Board has discretion in determining whether, and if so when, to redeem the outstanding
residual capital stock.
Capital stock terms and conditions (previously):
Capital stock holders are entitled to distributions as declared by the directors;
Capital stock holders have no right to vote at any general meeting of Namoi Cotton;
• Matters relating to the appointment of the non-grower directors must be approved by capital stock holders
prior to submission to a general meeting of Namoi Cotton for approval;
• On winding up, capital stock holders are entitled to the proceeds from surplus assets after payment of
grower paid up share capital.
Ordinary shares terms and conditions:
• Ordinary shareholders are entitled to dividends as declared by the directors;
Each ordinary shareholder is entitled to one vote per one share;
• On winding up, ordinary shareholders are entitled to the proceeds from surplus assets.
Namoi Cotton Employee Incentive Share Plan
The Employee Incentive Share Plan was suspended in August 2004. All full-time employees who were
continuously employed by Namoi Cotton for a period of one year were eligible to participate in the plan after
the finalisation of the full year results for the year ended 29 February 2004. The issue price was at a 5% discount
to the average market price of Namoi capital stock over the 5 trading days preceding the offer date.
Under the terms of the plan, employees are provided with an interest free loan to finance the issue price of the
units. A minimum of 75% of the amount of all distributions paid in relation to units issued under the plan must
be applied as a repayment of the loan. In any event, the loan must be repaid on the earlier to occur of
termination of employment and 10 years. At the end of the financial year employee loans totalled $24,411
(2017: $24,441).
Units issued under the plan are placed in escrow until the later to occur of three years from issue and when the
employee loan has been fully repaid. At the end of the financial year there were 141,000 residual capital stock
(2017: 141,000 units) under escrow.
Capital management
Namoi Cotton manages capital through the payment of dividends and participation in the buy back or issuance
of ordinary shares. Decisions on capital management are made having regard to compliance with externally
imposed capital requirements principally through maintaining a minimum level of net assets.
Capital stock (CCU) premium reserve (previously)
By virtue of rule 15.2 of the co-operative rules, the capital stock premium reserve is used to record amounts
received in respect of capital stock issued at a premium and are to be regarded as paid up capital of the co-
operative.
The balance standing to the credit of this account may be applied in any one or more of the following ways:
•
•
•
In the payment of dividends if those dividends are satisfied by the issue of shares to the members of the co-
operative;
In writing off the preliminary expenses of the co-operative; or
In providing for the premium payable on redemption of shares, debentures or co-operative capital units.
Asset revaluation reserve
The asset revaluation reserve is used to record increases in the fair value of ginning assets and decreases to the
extent that such decreases relates to an increase on the same asset previously recognised in equity. The reserve
can only be used to pay dividends in limited circumstances.
22. Segment Information
Identification of reportable segments
The group has identified its operating segments based on the internal reports that are reviewed and used by the
chief executive officer (the chief operating decision maker) with the executive management team in assessing
performance and in determining the allocation of resources.
The operating segments are identified by management based on the manner in which the product is sold,
whether retail or wholesale, and the nature of the services provided, the identity of service line manager and
country of origin. Discrete financial information about each of these operating businesses is reported to the
executive management team on at least a monthly basis.
The reportable segments are based on aggregated operating segments determined by the similarity of the
products and sold and/or the services provided, as these are the sources of the group’s major risks and have the
most effect on the rates of return.
Types of products and services
Ginning
The ginning business operates 12 cotton gins (incorporating 2 joint venture gins, referred to in note 12) located
in the key growing areas of NSW and Queensland. The ginning service provided to the growers during the
production process includes the separation of lint cotton from seed and other foreign matter and the conversion
of cotton in module form to bale form. Grower customers are also able to sell the white cotton seed by-product
to Namoi Cotton or elect to retain their white cotton seed.
Marketing
The marketing business involves the purchase of lint cotton from Australian growers using a variety of forward
contracts that offer differing combinations of price, delivery and risk characteristics. Subsequent to the
formation of NCA, bales procured by Namoi from growers are on-sold to NCA with approximately 99% of NCA
sales ultimately being to Asia. The NCA joint venture manages its marketing risks by utilising cotton futures and
options and foreign currency contracts under strict risk management policies. The controlled entity ACS provides
classing services for the NCA joint venture and other cotton merchants.
Year Ended 28 February 2018
Notes to the Financial Statements
Page 66
Year Ended 28 February 2018
Notes to the Financial Statements
Page 67
2018 ANNUAL REPORT | 81
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Commodities
The controlled entity Namoi Cotton Commodities Pty Ltd procures various grain and pulse crops from Australian
growers and sells these into various domestic and international markets.
Accounting policies
The accounting policies used by the group in reporting segments internally are the same as those contained in
note 1 to the accounts and in the prior period.
The following items (or a portion thereof) of income and expenditure are not allocated to operating segments
as they are not considered part of the core operations of any segment:
Share of profit from associate (other than NCA and Cargill);
Finance costs;
•
Interest Revenue;
• Rental Revenue;
•
•
• Corporate employee benefits expense;
• Corporate depreciation; and
• Other corporate administrative expenses.
A segment balance sheet and cashflow is not reported to the chief operating decision makers and are, therefore,
not disclosed as part of this report.
Business Segments
Year ended 28 February 2018
Revenue
Sales to external customers
Other revenues from external customers
Total consolidated revenue
Non-segment revenues
Interest revenue
Rental revenue
Results
Profit/(loss) before tax and finance costs
Finance costs
Share of profit from associates
Net Profit before tax
Other segment information
Depreciation
Ginning Marketing 1,2 Commodities Unallocated Consolidated
$'000
$'000
$'000
$'000
$'000
158,495
222
158,717
-
-
158,717
19,620
(2,540)
(1,378)
15,702
324,759
-
324,759
-
-
324,759
2,543
-
681
3,224
227
-
227
-
-
227
16
28
-
44
-
-
-
23
213
236
(9,250)
(46)
-
(9,296)
483,481
222
483,703
23
213
483,939
12,929
(2,558)
(697)
9,674
(7,385)
(52)
(134)
(378)
(7,949)
Included in the unallocated results for the period are:
Interest Revenue
Rental Revenue
Total Unallocated Revenue
Share of profit/(loss) of other associates
Employee benefits expense
Depreciation
Finance costs
Other corporate administrative expenses
Total Unallocated Result
1 Marketing revenue remains inclusive of lint sales values upon transfer of bales from Namoi to NCA.
2 Marketing results include the net result for the NCA joint venture.
Year Ended 28 February 2018
Notes to the Financial Statements
2018 ANNUAL REPORT | 82
23
213
236
-
(3,673)
(378)
(46)
(5,435)
(9,296)
Page 68
Business Segments
Year ended 28 February 2017
Ginning
$'000
Marketing Commodities Unallocated Consolidated
$'000
$'000
$'000
$'000
Revenue
Sales to external customers
Other revenues from external customers
Total consolidated revenue
Non-segment revenues
Interest revenue
Rental revenue
Results
Profit/(loss) before tax and finance costs
Finance costs
Share of profit from associates
Net Profit before tax
Other segment information
Depreciation
Included in the unallocated results for the period are:
Interest Revenue
Rental Revenue
Total Unallocated Revenue
Share of profit/(loss) of associates
Employee benefits expense
Depreciation
Finance costs
Other corporate administrative expenses
Total Unallocated Result
112,222
200
112,422
242,407
242,407
112,422
242,407
-
-
-
-
1,291
712
2,003
-
-
8,054
(2,556)
(802)
4,696
301
301
-
-
-
301
105
28
-
133
-
-
-
1
213
214
(6,710)
(84)
-
(6,794)
(5,684)
(35)
(142)
(345)
(6,206)
354,930
200
355,130
1
213
355,344
2,740
(2,612)
(90)
38
1
213
214
-
(3,426)
(345)
(84)
(3,153)
(6,794)
Geographic Area
The economic entity operates in two separate geographic areas.
Namoi Cotton procures lint cotton and white cotton seed and provides cotton ginning activities to and from
growers located solely within Australia. A portion of cotton seed sales are made to a variety of countries in Asia
with similar trading terms and conditions and risk profiles. As such for the purposes of this note Namoi Cotton’s
geographic areas are considered to be Australia and Asia with consolidated revenues as follows:
Geographic Areas
Year ended 28 February 2018
Revenue
Sales to external customers
Other revenues from external customers
Total consolidated revenue
Geographic Areas
Year ended 28 February 2017
Revenue
Sales to external customers
Other revenues from external customers
Total consolidated revenue
Australia
$'000
Asia
$'000
Consolidated
$'000
465,057
222
465,279
18,425
18,425
483,482
222
483,704
Australia
$'000
Asia
$'000
Consolidated
$'000
338,109
200
338,309
16,821
16,821
354,930
200
355,130
-
-
Year Ended 28 February 2018
Notes to the Financial Statements
Page 69
The controlled entity Namoi Cotton Commodities Pty Ltd procures various grain and pulse crops from Australian
growers and sells these into various domestic and international markets.
Commodities
Accounting policies
The accounting policies used by the group in reporting segments internally are the same as those contained in
note 1 to the accounts and in the prior period.
The following items (or a portion thereof) of income and expenditure are not allocated to operating segments
as they are not considered part of the core operations of any segment:
Share of profit from associate (other than NCA and Cargill);
Interest Revenue;
• Rental Revenue;
Finance costs;
•
•
•
• Corporate employee benefits expense;
• Corporate depreciation; and
• Other corporate administrative expenses.
Business Segments
Year ended 28 February 2018
Ginning Marketing 1,2 Commodities Unallocated Consolidated
$'000
$'000
$'000
$'000
$'000
not disclosed as part of this report.
Revenue
Sales to external customers
Other revenues from external customers
Total consolidated revenue
Non-segment revenues
Interest revenue
Rental revenue
Results
Profit/(loss) before tax and finance costs
Finance costs
Share of profit from associates
Net Profit before tax
Other segment information
Depreciation
Included in the unallocated results for the period are:
Interest Revenue
Rental Revenue
Total Unallocated Revenue
Share of profit/(loss) of other associates
Employee benefits expense
Depreciation
Finance costs
Other corporate administrative expenses
Total Unallocated Result
158,495
222
158,717
324,759
324,759
-
-
158,717
324,759
19,620
(2,540)
(1,378)
15,702
2,543
681
3,224
-
-
-
-
227
227
-
-
-
227
16
28
-
44
-
-
-
23
213
236
(9,250)
(46)
-
(9,296)
(7,385)
(52)
(134)
(378)
(7,949)
483,481
222
483,703
23
213
483,939
12,929
(2,558)
(697)
9,674
23
213
236
-
(3,673)
(378)
(46)
(5,435)
(9,296)
Page 68
1 Marketing revenue remains inclusive of lint sales values upon transfer of bales from Namoi to NCA.
2 Marketing results include the net result for the NCA joint venture.
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Business Segments
Year ended 28 February 2017
Ginning
$'000
Marketing Commodities Unallocated Consolidated
$'000
$'000
$'000
$'000
Revenue
Sales to external customers
Other revenues from external customers
Total consolidated revenue
Non-segment revenues
Interest revenue
Rental revenue
Results
Profit/(loss) before tax and finance costs
Finance costs
Share of profit from associates
Net Profit before tax
Other segment information
Depreciation
112,222
200
112,422
-
-
112,422
8,054
(2,556)
(802)
4,696
242,407
-
242,407
-
-
242,407
1,291
-
712
2,003
301
-
301
-
-
301
105
28
-
133
-
-
-
1
213
214
(6,710)
(84)
-
(6,794)
354,930
200
355,130
1
213
355,344
2,740
(2,612)
(90)
38
(5,684)
(35)
(142)
(345)
(6,206)
A segment balance sheet and cashflow is not reported to the chief operating decision makers and are, therefore,
Included in the unallocated results for the period are:
Interest Revenue
Rental Revenue
Total Unallocated Revenue
Share of profit/(loss) of associates
Employee benefits expense
Depreciation
Finance costs
Other corporate administrative expenses
Total Unallocated Result
1
213
214
-
(3,426)
(345)
(84)
(3,153)
(6,794)
Geographic Area
The economic entity operates in two separate geographic areas.
Namoi Cotton procures lint cotton and white cotton seed and provides cotton ginning activities to and from
growers located solely within Australia. A portion of cotton seed sales are made to a variety of countries in Asia
with similar trading terms and conditions and risk profiles. As such for the purposes of this note Namoi Cotton’s
geographic areas are considered to be Australia and Asia with consolidated revenues as follows:
Geographic Areas
Year ended 28 February 2018
Revenue
Sales to external customers
Other revenues from external customers
Total consolidated revenue
Geographic Areas
Year ended 28 February 2017
Revenue
Sales to external customers
Other revenues from external customers
Total consolidated revenue
Australia
$'000
Asia
$'000
Consolidated
$'000
465,057
222
465,279
18,425
-
18,425
483,482
222
483,704
Australia
$'000
Asia
$'000
Consolidated
$'000
338,109
200
338,309
16,821
-
16,821
354,930
200
355,130
Year Ended 28 February 2018
Notes to the Financial Statements
Year Ended 28 February 2018
Notes to the Financial Statements
Page 69
2018 ANNUAL REPORT | 83
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Future minimum lease payments under finance leases and hire purchase contracts together with the present
value of the net minimum lease payments are as follows:
After one year but within five years
Within one year
After five years
Total minimum lease payments
Unexpired finance charges
Present value of minimum lease payments
Consolidated
$'000
Parent
$'000
28 Feb
2018
825
1,301
-
2,126
(142)
1,984
28 Feb
2017
844
1,379
44
2,267
(146)
2,121
28 Feb
2018
825
1,301
-
2,126
(142)
1,984
28 Feb
2017
844
1,379
44
2,267
(146)
2,121
The weighted average interest rate implicit in the contracts for both the group and parent is 4.7% (2017: 4.9%).
Contingent liabilities
Namcott Investments Pty Ltd, a controlled entity of the company, is a partner of the COA, Namcott Investments
Pty Ltd is jointly and severally liable for the COA liabilities. At 28 February 2018 the liabilities of COA exceeded
its assets. Refer to Note 11, Investments in Associates and Joint Ventures.
24. Significant Events after Balance Date
No events of a material nature have occurred between balance date and the date of this report, other than as
disclosed elsewhere in this report.
23. Commitments and Contingencies
Commitments for capital expenditure
Consolidated
$'000
Parent
$'000
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
Property, plant and equipment
Estimated capital expenditure contracted for at
balance date but not provided for:
Payable within one year
9,931
5,870
9,931
5,870
Operating lease commitments – group as lessee
The group has entered into commercial leases in respect of land and buildings which have an average life of less
than 1 year. Options to renew are included in the contracts for commercial buildings only. There are no
restrictions placed upon the lessee by entering into these leases.
The future minimum rentals payable under the non-cancellable operating leases are as follows:
Operating lease commitments - Group as lessee
Not later than 1 year
Later than 1 year and not later than 5 years
Operating lease commitments receivable – group as lessor
66
-
66
307
-
307
66
-
66
307
-
307
The group has entered into non-cancellable commercial property leases on its surplus office building and into
cancellable residential accommodation leases for certain employees in remote areas. The commercial lease
allows for an annual increase in line with Consumer Price Index movements while residential leases are subject
to periodic market assessment.
Future minimum rentals receivable under non-cancellable operating leases as at 28 February 2018 are as
follows:
Operating lease commitments receivable - Group as lessor
Not later than 1 year
Later than 1 year and not later than 5 years
5
-
5
44
-
44
5
-
5
44
-
44
Finance lease and hire purchase commitments – group as lessee
The group has finance leases and hire purchase contracts for gin packaging and logistics supply chain equipment
with a carrying value of $2,330,645 (2017: $2,701,735) for both the group and the company. The equipment is
mainly presented in Gin Assets in Note 15. Property, Plant and Equipment.
Year Ended 28 February 2018
Notes to the Financial Statements
Page 70
Year Ended 28 February 2018
Notes to the Financial Statements
Page 71
2018 ANNUAL REPORT | 84
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Future minimum lease payments under finance leases and hire purchase contracts together with the present
value of the net minimum lease payments are as follows:
Within one year
After one year but within five years
After five years
Total minimum lease payments
Unexpired finance charges
Present value of minimum lease payments
Consolidated
$'000
Parent
$'000
28 Feb
2018
825
1,301
-
2,126
(142)
1,984
28 Feb
2017
844
1,379
44
2,267
(146)
2,121
28 Feb
2018
825
1,301
-
2,126
(142)
1,984
28 Feb
2017
844
1,379
44
2,267
(146)
2,121
The weighted average interest rate implicit in the contracts for both the group and parent is 4.7% (2017: 4.9%).
Contingent liabilities
Namcott Investments Pty Ltd, a controlled entity of the company, is a partner of the COA, Namcott Investments
Pty Ltd is jointly and severally liable for the COA liabilities. At 28 February 2018 the liabilities of COA exceeded
its assets. Refer to Note 11, Investments in Associates and Joint Ventures.
24. Significant Events after Balance Date
No events of a material nature have occurred between balance date and the date of this report, other than as
disclosed elsewhere in this report.
23. Commitments and Contingencies
Commitments for capital expenditure
Property, plant and equipment
Estimated capital expenditure contracted for at
balance date but not provided for:
Payable within one year
Operating lease commitments – group as lessee
Consolidated
$'000
Parent
$'000
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
9,931
5,870
9,931
5,870
The group has entered into commercial leases in respect of land and buildings which have an average life of less
than 1 year. Options to renew are included in the contracts for commercial buildings only. There are no
restrictions placed upon the lessee by entering into these leases.
The future minimum rentals payable under the non-cancellable operating leases are as follows:
Operating lease commitments - Group as lessee
Not later than 1 year
Later than 1 year and not later than 5 years
Operating lease commitments receivable – group as lessor
66
-
66
307
-
307
66
-
66
307
-
307
The group has entered into non-cancellable commercial property leases on its surplus office building and into
cancellable residential accommodation leases for certain employees in remote areas. The commercial lease
allows for an annual increase in line with Consumer Price Index movements while residential leases are subject
to periodic market assessment.
Future minimum rentals receivable under non-cancellable operating leases as at 28 February 2018 are as
follows:
Operating lease commitments receivable - Group as lessor
Not later than 1 year
Later than 1 year and not later than 5 years
5
-
5
44
-
44
5
-
5
44
-
44
Finance lease and hire purchase commitments – group as lessee
The group has finance leases and hire purchase contracts for gin packaging and logistics supply chain equipment
with a carrying value of $2,330,645 (2017: $2,701,735) for both the group and the company. The equipment is
mainly presented in Gin Assets in Note 15. Property, Plant and Equipment.
Year Ended 28 February 2018
Notes to the Financial Statements
Page 70
Year Ended 28 February 2018
Notes to the Financial Statements
Page 71
2018 ANNUAL REPORT | 85
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
25. Related Party Disclosures
The consolidated financial statements include the financial statements of Namoi Cotton Limited and the
subsidiaries listed in the following table. All subsidiaries were incorporated in Australia. Namoi Cotton Limited
is the ultimate parent entity of the group.
Ownership and investment
Name of entity
Equity Interest
%
Investment
$'000
28 Feb
2018
28 Feb
2017
28 Feb
2018
Australian Classing Services Pty Ltd 1
Australian Raw Cotton Marketing Corp. Pty Ltd
Namcott Investments Pty Limited
Namoi Cotton Superannuation Pty Ltd
Namoi Cotton Pty Ltd
Namcott Marketing Pty Ltd
Namoi Cotton Commodities Pty Ltd
Namoi Cotton Finance Pty Ltd
Cotton Trading Corporation Pty Limited
1,380
-
-
-
-
-
-
-
1,830
3,210
(3,210)
-
1 Formerl y di s cl os ed a s a n a s s oci a te the a cqui s i ti on bei ng di s cl os ed i n the Bus i nes s Combi na ti ons Note 4.
50%
100%
100%
100%
100%
100%
96%
100%
100%
100%
100%
100%
100%
100%
100%
96%
100%
100%
Investments held in controlled entities eliminated
28 Feb
2017
-
-
-
-
-
-
-
-
1,830
1,830
(1,830)
-
Principal activities:
• Namcott Investments Pty Ltd, a subsidiary of Namoi Cotton, is the beneficial owner of the interests in CPL
and COA Partnership. Namoi Oilseeds Trust formerly held the interest in the partnership.
• Namoi Cotton Superannuation Pty Ltd is trustee of the company’s former superannuation fund, which was
wound up in June 2000.
• Namoi Cotton Pty Ltd is a non-trading company.
• Namcott Marketing Pty Ltd, a subsidiary of Namoi Cotton, is the beneficial owner of the interests in NCPS
shares and NCA Partnership.
• Namoi Cotton Finance Pty Ltd secures funding for the group.
• Namoi Cotton Commodities Pty Ltd has main trading activities of sale and logistics of plastic waste from
ginning activities.
Cotton Trading Corporation Pty Limited is controlled by Namcott Investments Pty Ltd.
•
• Australian Raw Cotton Marketing Corp Pty Ltd is a non-trading company.
• Australian Classing Services Pty Ltd trading activities are mainly the provision of classing services.
Transactions with subsidiaries
Transactions between members of the wholly owned group were minimal. Amounts receivable by and payable
to the parent entity are included in the respective notes to this financial report.
Transactions with other related parties
ACS leased HVI machines from the parent during the period for $35,906 (2017: $35,906).
Sales of white cotton seed to the COA Partnership were $33,007,226 (2017: $19,454,562) and purchases of white
cotton seed from the COA Partnership were $2,205,890 (2017: $nil).
Year Ended 28 February 2018
Notes to the Financial Statements
Page 72
Year Ended 28 February 2018
Notes to the Financial Statements
Page 73
2018 ANNUAL REPORT | 86
Management fees received by Namoi for services provided to Namoi Cotton Alliance $3.3m (inclusive of bale
Transactions with NCA
handling fees) (2017: $2.5m).
Lint Cotton Sales from Namoi to Namoi Cotton Alliance $321.2m (2017: $239.9m).
Insurance on-charged by Namoi to Namoi Cotton Alliance $0.6m (2017: $0.4m).
Contingent liabilities
Namcott Investments Pty Ltd, a controlled entity of the company, is a partner of the COA, Namcott Investments
Pty Ltd is jointly and severally liable for the COA liabilities. At 28 February 2018 the liabilities of COA exceeded
its assets and therefore has contributed to a negative investment in COA. Refer to Note 11. Investments in
Associates and Joint Ventures.
26. Directors’ and Executive Disclosure
Compensation by category of KMP
Short-term
Post Employment
Other Long-term
Consolidated
Parent
28 Feb
2018
$
28 Feb
2017
$
28 Feb
2018
$
28 Feb
2017
$
2,187,891 1,808,592 2,187,891 1,808,592
77,523
21,305
152,293
2,955
77,523
21,305
152,293
2,955
2,286,719 1,963,840 2,286,719 1,963,840
Marketing and ginning transactions and balances with KMP
Transactions with directors and their related parties were in accordance with the rules of the co-operative, under
terms and conditions applicable to all members and the Constitution of Namoi Cotton Limited. Under the rules
of the co-operative, grower directors were required to conduct a minimum of 20% of their total cotton business
with Namoi Cotton. In accordance with that rule, directors entered into marketing contracts and ginning
contracts with Namoi Cotton. Amounts paid/received or payable/receivable from/to directors and their
respective related parties were as follows:
Consolidated and Parent entity
Cotton Purchases
Ginning Charges Levied
Grain & Seed Purchases
28 Feb
2018
$
28 Feb
2017
$
28 Feb
2018
$
28 Feb
2017
$
28 Feb
2018
$
28 Feb
2017
$
11,722,426
6,670,706
2,255,400
1,418,504
2,366,395
1,813,907
The nature of the terms and conditions of the above other transactions with directors and director related
entities are consistent with the terms of Namoi Cotton’s standard products.
Refer to the Remuneration Report within the Directors’ Report for more information.
The consolidated financial statements include the financial statements of Namoi Cotton Limited and the
subsidiaries listed in the following table. All subsidiaries were incorporated in Australia. Namoi Cotton Limited
25. Related Party Disclosures
is the ultimate parent entity of the group.
Ownership and investment
Name of entity
Australian Classing Services Pty Ltd 1
Australian Raw Cotton Marketing Corp. Pty Ltd
Namcott Investments Pty Limited
Namoi Cotton Superannuation Pty Ltd
Namoi Cotton Pty Ltd
Namcott Marketing Pty Ltd
Namoi Cotton Commodities Pty Ltd
Namoi Cotton Finance Pty Ltd
Cotton Trading Corporation Pty Limited
Investments held in controlled entities eliminated
Equity Interest
%
28 Feb
2018
28 Feb
2017
100%
100%
100%
100%
100%
100%
96%
100%
100%
50%
100%
100%
100%
100%
100%
96%
100%
100%
Investment
$'000
28 Feb
2018
1,380
28 Feb
2017
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,830
3,210
1,830
1,830
(3,210)
(1,830)
1 Formerl y di s cl os ed a s a n a s s oci a te the a cqui s i ti on bei ng di s cl os ed i n the Bus i nes s Combi na ti ons Note 4.
Principal activities:
• Namcott Investments Pty Ltd, a subsidiary of Namoi Cotton, is the beneficial owner of the interests in CPL
and COA Partnership. Namoi Oilseeds Trust formerly held the interest in the partnership.
• Namoi Cotton Superannuation Pty Ltd is trustee of the company’s former superannuation fund, which was
wound up in June 2000.
• Namoi Cotton Pty Ltd is a non-trading company.
• Namcott Marketing Pty Ltd, a subsidiary of Namoi Cotton, is the beneficial owner of the interests in NCPS
shares and NCA Partnership.
• Namoi Cotton Finance Pty Ltd secures funding for the group.
• Namoi Cotton Commodities Pty Ltd has main trading activities of sale and logistics of plastic waste from
ginning activities.
•
Cotton Trading Corporation Pty Limited is controlled by Namcott Investments Pty Ltd.
• Australian Raw Cotton Marketing Corp Pty Ltd is a non-trading company.
• Australian Classing Services Pty Ltd trading activities are mainly the provision of classing services.
Transactions with subsidiaries
Transactions between members of the wholly owned group were minimal. Amounts receivable by and payable
to the parent entity are included in the respective notes to this financial report.
Transactions with other related parties
Sales of white cotton seed to the COA Partnership were $33,007,226 (2017: $19,454,562) and purchases of white
cotton seed from the COA Partnership were $2,205,890 (2017: $nil).
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Transactions with NCA
Management fees received by Namoi for services provided to Namoi Cotton Alliance $3.3m (inclusive of bale
handling fees) (2017: $2.5m).
Lint Cotton Sales from Namoi to Namoi Cotton Alliance $321.2m (2017: $239.9m).
Insurance on-charged by Namoi to Namoi Cotton Alliance $0.6m (2017: $0.4m).
Contingent liabilities
Namcott Investments Pty Ltd, a controlled entity of the company, is a partner of the COA, Namcott Investments
Pty Ltd is jointly and severally liable for the COA liabilities. At 28 February 2018 the liabilities of COA exceeded
its assets and therefore has contributed to a negative investment in COA. Refer to Note 11. Investments in
Associates and Joint Ventures.
26. Directors’ and Executive Disclosure
Compensation by category of KMP
Short-term
Post Employment
Other Long-term
Consolidated
28 Feb
2018
$
28 Feb
2017
$
Parent
28 Feb
2018
$
28 Feb
2017
$
2,187,891 1,808,592 2,187,891 1,808,592
152,293
2,955
2,286,719 1,963,840 2,286,719 1,963,840
152,293
2,955
77,523
21,305
77,523
21,305
Marketing and ginning transactions and balances with KMP
Transactions with directors and their related parties were in accordance with the rules of the co-operative, under
terms and conditions applicable to all members and the Constitution of Namoi Cotton Limited. Under the rules
of the co-operative, grower directors were required to conduct a minimum of 20% of their total cotton business
with Namoi Cotton. In accordance with that rule, directors entered into marketing contracts and ginning
contracts with Namoi Cotton. Amounts paid/received or payable/receivable from/to directors and their
respective related parties were as follows:
Cotton Purchases
28 Feb
2018
$
11,722,426
28 Feb
2017
$
6,670,706
Consolidated and Parent entity
Ginning Charges Levied
Grain & Seed Purchases
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
$
2,255,400
$
1,418,504
$
2,366,395
$
1,813,907
The nature of the terms and conditions of the above other transactions with directors and director related
entities are consistent with the terms of Namoi Cotton’s standard products.
ACS leased HVI machines from the parent during the period for $35,906 (2017: $35,906).
Refer to the Remuneration Report within the Directors’ Report for more information.
Year Ended 28 February 2018
Notes to the Financial Statements
Page 72
Year Ended 28 February 2018
Notes to the Financial Statements
Page 73
2018 ANNUAL REPORT | 87
Risk Exposure and Responses
Price risk
sale contracts.
Financial Assets
Derivatives
Financial Liabilities
Derivatives
Net Exposure
Consolidated
$'000
Parent
$'000
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
8,407
8,407
14,221
14,221
8,407
8,407
14,221
14,221
(8,393)
(8,393)
(14,141)
(14,141)
(8,393)
(8,393)
(14,141)
(14,141)
14
80
14
80
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
27. Remuneration of Auditors
Consolidated and
Parent Entity
28 Feb
2018
28 Feb
2017
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the
basis of measurement and the basis on which income and expenses are recognised, in respect of each derivative
financial instrument are disclosed in note 1e to the financial statements.
Remuneration for the audit and review of the financial reports of the
parent entity and the consolidated entity
222,100
173,900
Namoi Cotton is potentially exposed to movements in the price of lint cotton as a result of fixed price purchases
and sales of lint cotton respectively in contracts with growers and mills principally through its investment in the
NCA JV. The company is also exposed to movements to price of cotton seed through fixed price purchases and
Remuneration for other services provided to the parent entity and
the consolidated entity:
- Other assurance services
28. Financial Risk Management Objectives and Policies
191,500
27,000
413,600
200,900
Cotton seed price risk is managed principally through imposition of physical trading limits. It is a risk
management requirement to utilise foreign currency derivatives to minimise the impact of USD/AUD
fluctuations on fixed price sales contracts.
It is the risk management policy that no derivatives will be entered into until such time as a fixed price purchase
or sale commitment exists.
Lint cotton, cotton seed and grains commodities price risk;
The nature of Namoi Cotton’s business involves the potential exposure to a number of major financial and non-
financial risks. The major financial market business risks exposed to by Namoi or later by the NCA joint venture
are:
•
• Cotton basis risk;
• Cotton spread risk;
•
•
• Credit risk;
•
Foreign exchange risk;
Interest rate risk;
Funding and liquidity risk.
Accordingly, Namoi Cotton conducts its business with a focus on risk management in order to ensure the
alignment of returns achieved from its business activities for stakeholders with the risk capital applied to fund
these activities. The key elements of Namoi Cotton’s risk management policy that facilitate the management of
these risks include various derivative financial instruments, physical risk position limits and techniques and Value
at Risk modelling.
Namoi Cotton is exposed to price risks through entering commodity purchase and sale transactions. To limit
potential impacts upon the trading margin achieved on those transactions Namoi Cotton and later NCA enters
into derivative transactions, including principally cotton futures and options contracts and forward currency
contracts. Where derivatives instruments do not exist for a particular commodity the risk management policy
sets physical limits over trading positions.
Forward rate agreements and interest rate swaps are entered into to manage interest rate risks that exist in
Namoi Cotton’s financing activities.
The MFRMC ensures the effective management of each of these risks through the implementation and
adherence to a risk management policy. The risk management policy of Namoi Cotton requires all risk to be
managed at a crop (i.e. season) level. The key extracts from the risk management policy for managing Namoi
Cotton’s major financial market business risks are summarised below.
Year Ended 28 February 2018
Notes to the Financial Statements
Page 74
Year Ended 28 February 2018
Notes to the Financial Statements
Page 75
2018 ANNUAL REPORT | 88
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the
basis of measurement and the basis on which income and expenses are recognised, in respect of each derivative
financial instrument are disclosed in note 1e to the financial statements.
Risk Exposure and Responses
Price risk
Namoi Cotton is potentially exposed to movements in the price of lint cotton as a result of fixed price purchases
and sales of lint cotton respectively in contracts with growers and mills principally through its investment in the
NCA JV. The company is also exposed to movements to price of cotton seed through fixed price purchases and
sale contracts.
Cotton seed price risk is managed principally through imposition of physical trading limits. It is a risk
management requirement to utilise foreign currency derivatives to minimise the impact of USD/AUD
fluctuations on fixed price sales contracts.
It is the risk management policy that no derivatives will be entered into until such time as a fixed price purchase
or sale commitment exists.
Financial Assets
Derivatives
Financial Liabilities
Derivatives
Net Exposure
Consolidated
$'000
Parent
$'000
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
8,407
8,407
14,221
14,221
8,407
8,407
14,221
14,221
(8,393)
(8,393)
(14,141)
(14,141)
(8,393)
(8,393)
(14,141)
(14,141)
14
80
14
80
27. Remuneration of Auditors
Remuneration for the audit and review of the financial reports of the
parent entity and the consolidated entity
222,100
173,900
Remuneration for other services provided to the parent entity and
the consolidated entity:
- Other assurance services
Consolidated and
Parent Entity
28 Feb
2018
28 Feb
2017
191,500
27,000
413,600
200,900
28. Financial Risk Management Objectives and Policies
The nature of Namoi Cotton’s business involves the potential exposure to a number of major financial and non-
financial risks. The major financial market business risks exposed to by Namoi or later by the NCA joint venture
Lint cotton, cotton seed and grains commodities price risk;
are:
•
•
•
•
• Cotton basis risk;
• Cotton spread risk;
Foreign exchange risk;
Interest rate risk;
• Credit risk;
Funding and liquidity risk.
Accordingly, Namoi Cotton conducts its business with a focus on risk management in order to ensure the
alignment of returns achieved from its business activities for stakeholders with the risk capital applied to fund
these activities. The key elements of Namoi Cotton’s risk management policy that facilitate the management of
these risks include various derivative financial instruments, physical risk position limits and techniques and Value
at Risk modelling.
Namoi Cotton is exposed to price risks through entering commodity purchase and sale transactions. To limit
potential impacts upon the trading margin achieved on those transactions Namoi Cotton and later NCA enters
into derivative transactions, including principally cotton futures and options contracts and forward currency
contracts. Where derivatives instruments do not exist for a particular commodity the risk management policy
sets physical limits over trading positions.
Forward rate agreements and interest rate swaps are entered into to manage interest rate risks that exist in
Namoi Cotton’s financing activities.
The MFRMC ensures the effective management of each of these risks through the implementation and
adherence to a risk management policy. The risk management policy of Namoi Cotton requires all risk to be
managed at a crop (i.e. season) level. The key extracts from the risk management policy for managing Namoi
Cotton’s major financial market business risks are summarised below.
Year Ended 28 February 2018
Notes to the Financial Statements
Page 74
Year Ended 28 February 2018
Notes to the Financial Statements
Page 75
2018 ANNUAL REPORT | 89
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Cotton seed price risk
Cotton seed price risk potentially arises when Namoi Cotton enters into a forward commitment to purchase or
sell physical cotton seed without simultaneously entering into the opposing transaction. Namoi Cotton managed
cotton seed price risk by adhering to physical limits in respect of its cotton seed open positions.
The following sensitivity analysis is based upon seed pricing that existed at 28 February 2018 and 28 February
2017, whereby if the cotton seed price had moved, as illustrated in the table below, with all other variables held
constant, post-tax profit and equity (excluding the effect of net profit) would have changed as follows:
Consolidated
+$10/Mt (cotton seed)
-$5/Mt (cotton seed)
Parent entity
+$10/Mt (cotton seed)
-$5/Mt (cotton seed)
Post Tax Profit
Higher/(Lower)
$'000
Equity
Higher/(Lower)
$'000
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
(234)
117
(234)
117
51
(25)
51
(25)
-
-
-
-
-
-
-
-
Consolidated
+100 basis points
-50 basis points
Parent entity
+100 basis points
-50 basis points
Interest rate risk
At reporting date, the group had the following financial assets and liabilities exposed to Australian variable
interest rate risk.
Financial Assets
Cash and cash equivalents
Trade and other receivables
Financial Liabilities
Interest bearing loans and borrowings
Derivatives
Net Exposure
Consolidated
$'000
Parent
$'000
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
1,493
65
1,558
2,176
349
2,525
1,352
65
1,417
2,055
349
2,404
(50,002)
(52)
(50,054)
(59,840)
-
(59,840)
(50,002)
(52)
(50,054)
(59,840)
-
(59,840)
(48,496)
(57,315)
(48,637)
(57,436)
Interest rate swap contracts, with a fair value loss of $51,780 (2017 $nil) at reporting date to both the group and
parent, are exposed to value movements if interest rates change.
At reporting date, after taking into account the effect of interest rate swaps, 41.7% (2017: nil%) of the group’s
borrowings are at a fixed rate of interest 2.1% (2017: nil%). The group continually monitors its interest rate
exposure with regard to existing and forecast working capital and term debt requirements.
The following sensitivity analysis is based upon interest rate exposures that existed at 28 February 2018 and 28
February 2017, whereby if interest rates had moved, as illustrated in the table below, with all other variables
held constant, post tax profit and equity (excluding the effect of net profit) would have changed as follows:
Post Tax Profit
Higher/(Lower)
$'000
Higher/(Lower)
Equity
$'000
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
(280)
140
(280)
140
(576)
288
(576)
288
-
-
-
-
-
-
-
-
The movements in post-tax profit and equity are due to higher/lower finance costs from variable rate debt offset
by fixed rate derivatives and interest bearing financial assets.
Sensitivity analysis was performed by applying a 100-basis point movement in interest rates to all non-fixed
interest-bearing assets and liabilities at reporting date. As a result of recent global market volatility, 100 basis
points has been utilised in the absence of reliable data predicting reasonably possible movements of interest
rates. Year end balances are not reflective of interest bearing assets and liabilities throughout the year, due to
the seasonal nature of the business.
Foreign exchange risk
Namoi Cotton has transactional currency exposures predominantly arising from some cotton seed sales being
denominated in United States dollars (USD) as opposed to the group’s functional Australian dollar (AUD)
currency, which denominates all payments to growers. Potentially foreign currency denominated financial assets
and liabilities may be adversely affected by a change in the value of foreign exchange rates.
Namoi Cotton requires all net foreign exchange exposures to be managed with either forward currency contracts
or foreign exchange options contracts.
The group’s policy is to enter into forward exchange contracts at the time it enters into a firm purchase
commitment for lint cotton (through NCA) or a US dollar cotton seed sale commitment.
Year Ended 28 February 2018
Notes to the Financial Statements
Page 76
Year Ended 28 February 2018
Notes to the Financial Statements
Page 77
2018 ANNUAL REPORT | 90
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Cotton seed price risk
Cotton seed price risk potentially arises when Namoi Cotton enters into a forward commitment to purchase or
sell physical cotton seed without simultaneously entering into the opposing transaction. Namoi Cotton managed
cotton seed price risk by adhering to physical limits in respect of its cotton seed open positions.
The following sensitivity analysis is based upon seed pricing that existed at 28 February 2018 and 28 February
2017, whereby if the cotton seed price had moved, as illustrated in the table below, with all other variables held
constant, post-tax profit and equity (excluding the effect of net profit) would have changed as follows:
At reporting date, the group had the following financial assets and liabilities exposed to Australian variable
Consolidated
+$10/Mt (cotton seed)
-$5/Mt (cotton seed)
Parent entity
+$10/Mt (cotton seed)
-$5/Mt (cotton seed)
Interest rate risk
interest rate risk.
Financial Assets
Cash and cash equivalents
Trade and other receivables
Financial Liabilities
Interest bearing loans and borrowings
Derivatives
Net Exposure
Post Tax Profit
Higher/(Lower)
$'000
Higher/(Lower)
Equity
$'000
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
(234)
117
(234)
117
51
(25)
51
(25)
-
-
-
-
-
-
-
-
Consolidated
$'000
Parent
$'000
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
1,493
65
1,558
2,176
349
2,525
1,352
65
1,417
2,055
349
2,404
(50,002)
(59,840)
(50,002)
(59,840)
(52)
-
(52)
-
(50,054)
(59,840)
(50,054)
(59,840)
(48,496)
(57,315)
(48,637)
(57,436)
Interest rate swap contracts, with a fair value loss of $51,780 (2017 $nil) at reporting date to both the group and
parent, are exposed to value movements if interest rates change.
At reporting date, after taking into account the effect of interest rate swaps, 41.7% (2017: nil%) of the group’s
borrowings are at a fixed rate of interest 2.1% (2017: nil%). The group continually monitors its interest rate
exposure with regard to existing and forecast working capital and term debt requirements.
The following sensitivity analysis is based upon interest rate exposures that existed at 28 February 2018 and 28
February 2017, whereby if interest rates had moved, as illustrated in the table below, with all other variables
held constant, post tax profit and equity (excluding the effect of net profit) would have changed as follows:
Consolidated
+100 basis points
-50 basis points
Parent entity
+100 basis points
-50 basis points
Post Tax Profit
Higher/(Lower)
$'000
Equity
Higher/(Lower)
$'000
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
(280)
140
(280)
140
(576)
288
(576)
288
-
-
-
-
-
-
-
-
The movements in post-tax profit and equity are due to higher/lower finance costs from variable rate debt offset
by fixed rate derivatives and interest bearing financial assets.
Sensitivity analysis was performed by applying a 100-basis point movement in interest rates to all non-fixed
interest-bearing assets and liabilities at reporting date. As a result of recent global market volatility, 100 basis
points has been utilised in the absence of reliable data predicting reasonably possible movements of interest
rates. Year end balances are not reflective of interest bearing assets and liabilities throughout the year, due to
the seasonal nature of the business.
Foreign exchange risk
Namoi Cotton has transactional currency exposures predominantly arising from some cotton seed sales being
denominated in United States dollars (USD) as opposed to the group’s functional Australian dollar (AUD)
currency, which denominates all payments to growers. Potentially foreign currency denominated financial assets
and liabilities may be adversely affected by a change in the value of foreign exchange rates.
Namoi Cotton requires all net foreign exchange exposures to be managed with either forward currency contracts
or foreign exchange options contracts.
The group’s policy is to enter into forward exchange contracts at the time it enters into a firm purchase
commitment for lint cotton (through NCA) or a US dollar cotton seed sale commitment.
Year Ended 28 February 2018
Notes to the Financial Statements
Page 76
Year Ended 28 February 2018
Notes to the Financial Statements
Page 77
2018 ANNUAL REPORT | 91
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
At reporting date, the group had the following exposure to USD foreign currency that is not designated as cash
flow hedges:
Financial Assets
Cash and cash equivalents
Trade and other receivables
Derivatives
Financial Liabilities
Trade and other payables
Interest bearing loans and borrowings
Derivatives
Consolidated
$'000
Parent
$'000
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
177
127
86
390
(14)
(349)
(111)
(474)
464
659
444
1,567
(118)
(379)
-
(497)
177
127
86
390
(14)
(349)
(111)
(474)
464
659
444
1,567
(118)
(379)
-
(497)
Net Exposure
(84)
1,070
(84)
1,070
The group has USD denominated leasing contracts of USD $272,392 (2017: USD $291,061) over certain ginning
equipment supplied from the United States. Foreign exchange contracts that are subject to fair value
movements through the statement of comprehensive income as foreign exchange rates move.
Notional Amount
AUD $'000
Average Exchange
Rate
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
rates.
Credit risk
Foreign exchange contracts held at balance date
Group
Sell US$/Buy AUD$ maturity 0-12 months
Buy US$/Sell AUD$ maturity 0-12 months
Parent
Sell US$/Buy AUD$ maturity 0-12 months
Buy US$/Sell AUD$ maturity 0-12 months
5,838
(3,335)
24,878
(7,925)
0.7794
0.7796
0.7658
0.7670
5,838
(3,335)
24,878
(7,925)
0.7794
0.7796
0.7658
0.7670
Priced cotton seed sales contracts are treated as financial instruments under AASB 139.
The following sensitivity analysis is based upon foreign currency exposures that existed at 28 February 2018 and
28 February 2017, whereby if the AUD had moved (relative to the USD), as illustrated in the table below, with
all other variables held constant, post tax profit and equity (excluding the effect of net profit) would have
changed as follows:
Consolidated
AUD/USD +100 basis points
AUD/USD -50 basis points
Parent entity
AUD/USD +100 basis points
AUD/USD -50 basis points
Post Tax Profit
Higher/(Lower)
$'000
Higher/(Lower)
Equity
$'000
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
(42)
21
(42)
21
(34)
17
(34)
17
-
-
-
-
-
-
-
-
The sensitivity results in the table are considered immaterial to the group. It is the group’s risk management
policy to maintain foreign exchange contracts to a 95% to 105% band relative to exposures.
Management believe the reporting date risk exposures are representative of the risk exposure inherent in the
financial instruments.
Sensitivity analysis was performed by taking the USD foreign exchange rate as at balance date, moving this rate
by 100 basis points and then converting all USD denominated assets and liabilities. This calculation reflects the
translation methodology undertaken by the group. As a result of recent global market volatility, 100 basis points
has been utilised in the absence of reliable data predicting reasonably possible movements in foreign exchange
Namoi Cotton and later NCA exports the majority of lint cotton and some cotton seed to international
counterparties. These export sales are concluded under contract and the potential risk exists for a counterparty
to default on its contractual obligations and expose Namoi Cotton (seed) or NCA (lint cotton) to a financial loss.
Trade receivables outstanding from international counterparties are settled through high-ranking credit
instruments such as irrevocable letters of credit and cash against documents.
In respect of its cotton seed and grain commodity sales to major domestic counterparties, Namoi Cotton has
trade credit indemnity insurance policies for non-related parties.
The group is normally entitled to recover loans to growers and deferred costs through an offset to lint cotton,
seed proceeds and other credits to a growers account. Where a formal finance facility has been established, the
exposures are typically covered by crop mortgage and in some cases by real estate mortgages and/or guarantee.
In addition, trade debtor balances are monitored frequently, minimising Namoi Cotton’s exposure to bad debts.
Namoi Cotton’s maximum exposure to credit risk at balance date in relation to each class of recognised financial
asset is the carrying amount of these assets as indicated in the balance sheet less relevant trade credit insurance
recoverable.
The group utilises only recognised and creditworthy third parties in respect to derivative transactions. These
parties are regularly reviewed by the Board.
Year Ended 28 February 2018
Notes to the Financial Statements
Page 78
Year Ended 28 February 2018
Notes to the Financial Statements
Page 79
2018 ANNUAL REPORT | 92
Financial Assets
Cash and cash equivalents
Trade and other receivables
Derivatives
Financial Liabilities
Trade and other payables
Interest bearing loans and borrowings
Derivatives
Net Exposure
Consolidated
$'000
Parent
$'000
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
177
127
86
390
(14)
(349)
(111)
(474)
464
659
444
1,567
(118)
(379)
-
(497)
177
127
86
390
(14)
(349)
(111)
(474)
464
659
444
1,567
(118)
(379)
-
(497)
(84)
1,070
(84)
1,070
The group has USD denominated leasing contracts of USD $272,392 (2017: USD $291,061) over certain ginning
equipment supplied from the United States. Foreign exchange contracts that are subject to fair value
movements through the statement of comprehensive income as foreign exchange rates move.
Notional Amount
Average Exchange
AUD $'000
Rate
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
Foreign exchange contracts held at balance date
Group
Parent
Sell US$/Buy AUD$ maturity 0-12 months
Buy US$/Sell AUD$ maturity 0-12 months
5,838
(3,335)
24,878
(7,925)
0.7794
0.7796
0.7658
0.7670
Sell US$/Buy AUD$ maturity 0-12 months
Buy US$/Sell AUD$ maturity 0-12 months
5,838
(3,335)
24,878
(7,925)
0.7794
0.7796
0.7658
0.7670
Priced cotton seed sales contracts are treated as financial instruments under AASB 139.
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
At reporting date, the group had the following exposure to USD foreign currency that is not designated as cash
flow hedges:
The following sensitivity analysis is based upon foreign currency exposures that existed at 28 February 2018 and
28 February 2017, whereby if the AUD had moved (relative to the USD), as illustrated in the table below, with
all other variables held constant, post tax profit and equity (excluding the effect of net profit) would have
changed as follows:
Consolidated
AUD/USD +100 basis points
AUD/USD -50 basis points
Parent entity
AUD/USD +100 basis points
AUD/USD -50 basis points
Post Tax Profit
Higher/(Lower)
$'000
Equity
Higher/(Lower)
$'000
28 Feb
2018
28 Feb
2017
28 Feb
2018
28 Feb
2017
(42)
21
(42)
21
(34)
17
(34)
17
-
-
-
-
-
-
-
-
The sensitivity results in the table are considered immaterial to the group. It is the group’s risk management
policy to maintain foreign exchange contracts to a 95% to 105% band relative to exposures.
Management believe the reporting date risk exposures are representative of the risk exposure inherent in the
financial instruments.
Sensitivity analysis was performed by taking the USD foreign exchange rate as at balance date, moving this rate
by 100 basis points and then converting all USD denominated assets and liabilities. This calculation reflects the
translation methodology undertaken by the group. As a result of recent global market volatility, 100 basis points
has been utilised in the absence of reliable data predicting reasonably possible movements in foreign exchange
rates.
Credit risk
Namoi Cotton and later NCA exports the majority of lint cotton and some cotton seed to international
counterparties. These export sales are concluded under contract and the potential risk exists for a counterparty
to default on its contractual obligations and expose Namoi Cotton (seed) or NCA (lint cotton) to a financial loss.
Trade receivables outstanding from international counterparties are settled through high-ranking credit
instruments such as irrevocable letters of credit and cash against documents.
In respect of its cotton seed and grain commodity sales to major domestic counterparties, Namoi Cotton has
trade credit indemnity insurance policies for non-related parties.
The group is normally entitled to recover loans to growers and deferred costs through an offset to lint cotton,
seed proceeds and other credits to a growers account. Where a formal finance facility has been established, the
exposures are typically covered by crop mortgage and in some cases by real estate mortgages and/or guarantee.
In addition, trade debtor balances are monitored frequently, minimising Namoi Cotton’s exposure to bad debts.
Namoi Cotton’s maximum exposure to credit risk at balance date in relation to each class of recognised financial
asset is the carrying amount of these assets as indicated in the balance sheet less relevant trade credit insurance
recoverable.
The group utilises only recognised and creditworthy third parties in respect to derivative transactions. These
parties are regularly reviewed by the Board.
Year Ended 28 February 2018
Notes to the Financial Statements
Page 78
Year Ended 28 February 2018
Notes to the Financial Statements
Page 79
2018 ANNUAL REPORT | 93
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Funding and liquidity risk
The group’s objective in managing liquidity is to maintain a balance between continuity of funding, competitive
pricing and flexibility so as to ensure sufficient liquidity exists to meet all short, medium and long term financial
obligations. This is achieved through the utilisation of working capital facilities, term debt and bank overdrafts.
Year ended 28 February 2018
$'000
$'000
≤6 Months 6-12 Months
1-5 Years
$'000
>5 Years
$'000
Total
$'000
Consolidated
Financial Assets
Cash and cash equivalents
Trade and other receivables
Derivatives1
Financial Liabilities
Trade and other payables
Interest bearing loans
and borrowings 2
Derivatives1
Co-operative grower member
shares
Net Exposure
1,493
3,900
5,550
10,943
-
24
2,942
2,966
(7,513)
(237)
-
-
-
-
-
(6,437)
(5,618)
-
(19,568)
(8,625)
(339)
(2,938)
-
(3,514)
(43,226)
-
-
(43,226)
(548)
(43,226)
Year ended 28 February 2017
$'000
$'000
≤6 Months 6-12 Months
1-5 Years
$'000
>5 Years
$'000
Consolidated
Financial Assets
Cash and cash equivalents
Trade and other receivables
Derivatives1
Financial Liabilities
Trade and other payables
Interest bearing loans
and borrowings 2
Derivatives1
Co-operative grower member
shares
2,256
5,264
14,566
22,086
-
24
99
123
(8,244)
(157)
-
-
-
-
-
(10,736)
(9,192)
-
(28,172)
(5,853)
(4,949)
-
(10,959)
(43,288)
-
-
(43,288)
Net Exposure
(6,086)
(10,836)
(43,288)
Year Ended 28 February 2018
Notes to the Financial Statements
2018 ANNUAL REPORT | 94
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(43)
-
(447)
(490)
(490)
1,493
3,924
8,492
13,909
(7,750)
(50,002)
(8,556)
-
(66,308)
(52,399)
Total
$'000
2,256
5,288
14,665
22,209
(8,401)
(59,920)
(14,141)
(447)
(82,909)
(60,700)
Page 80
Year ended 28 February 2018
$'000
$'000
$'000
≤6 Months 6-12 Months
1-5 Years
>5 Years
$'000
Total
$'000
Net Exposure
(3,486)
(18,280)
(43,226)
-
-
(19,542)
(21,246)
(43,226)
(2,049)
(2,049)
Year ended 28 February 2017
$'000
$'000
$'000
≤6 Months 6-12 Months
1-5 Years
>5 Years
$'000
Total
$'000
Parent
Financial Assets
Cash and cash equivalents
Trade and other receivables
Derivatives1
Financial Liabilities
Trade and other payables
Interest bearing loans
and borrowings 2
Derivatives1
Co-operative grower member
shares
Parent
Financial Assets
Cash and cash equivalents
Trade and other receivables
Derivatives1
Financial Liabilities
Trade and other payables
Interest bearing loans
and borrowings 2
Derivatives1
Co-operative grower member
shares
1,352
9,154
5,550
16,056
-
24
2,942
2,966
(7,487)
(17,969)
(6,437)
(5,618)
(339)
(2,938)
(43,226)
(2,049)
2,135
10,516
14,566
27,217
-
24
99
123
(8,242)
(17,889)
(10,736)
(9,192)
(5,853)
(4,949)
(43,288)
(2,092)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Net Exposure
(953)
(28,568)
(43,288)
-
-
(28,170)
(28,691)
(43,288)
(447)
(2,539)
(2,539)
(447)
(102,688)
(75,348)
1 Derivatives reflect the actual cashflow and are net settled.
2 In addition to the maturity profile of interest bearing loans and borrowings, there are actual cashflows in relation to interest
for the 6-month period of $1.03 million (2017: $1.32 million), for the 6-12 month period of $0.90 million (2017: $1.09 million)
and for the 1-5 year period $3.52 million (2017: $3.77 million).
Namoi Cotton’s risk management policy in respect to funding and liquidity risk reflects actual and forecast
seasonal borrowing requirements not exceeding 95% of the group’s total approved banking facilities.
Namoi Cotton is unable at this time to provide guidance on individual components of liquidity for the financial
year ended 28 February 2019 due to the cash flow components being contingent on forward crop commodity
purchase and sale contracts.
Year Ended 28 February 2018
Notes to the Financial Statements
-
-
-
-
-
-
-
-
-
-
-
-
-
1,352
9,178
8,492
19,022
(25,456)
(52,051)
(8,556)
-
(86,063)
(67,041)
2,135
10,540
14,665
27,340
(26,131)
(61,969)
(14,141)
Page 81
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Funding and liquidity risk
The group’s objective in managing liquidity is to maintain a balance between continuity of funding, competitive
pricing and flexibility so as to ensure sufficient liquidity exists to meet all short, medium and long term financial
obligations. This is achieved through the utilisation of working capital facilities, term debt and bank overdrafts.
Year ended 28 February 2018
$'000
$'000
$'000
≤6 Months 6-12 Months
1-5 Years
>5 Years
$'000
Total
$'000
1,493
3,900
5,550
10,943
-
24
2,942
2,966
(7,513)
(237)
(6,437)
(5,618)
(339)
(2,938)
(43,226)
-
-
(19,568)
(3,514)
(43,226)
Consolidated
Financial Assets
Cash and cash equivalents
Trade and other receivables
Derivatives1
Financial Liabilities
Trade and other payables
Interest bearing loans
and borrowings 2
Derivatives1
Co-operative grower member
shares
Consolidated
Financial Assets
Cash and cash equivalents
Trade and other receivables
Derivatives1
Financial Liabilities
Trade and other payables
Interest bearing loans
and borrowings 2
Derivatives1
Co-operative grower member
shares
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,493
3,924
8,492
13,909
(7,750)
(50,002)
(8,556)
-
(66,308)
(52,399)
2,256
5,288
14,665
22,209
(8,401)
(59,920)
(14,141)
(447)
(82,909)
(60,700)
Net Exposure
(8,625)
(548)
(43,226)
Year ended 28 February 2017
$'000
$'000
$'000
≤6 Months 6-12 Months
1-5 Years
>5 Years
$'000
Total
$'000
2,256
5,264
14,566
22,086
-
24
99
123
(8,244)
(157)
(10,736)
(9,192)
(5,853)
(4,949)
(43,288)
(43)
Net Exposure
(6,086)
(10,836)
(43,288)
-
-
(28,172)
(10,959)
(43,288)
(447)
(490)
(490)
Year ended 28 February 2018
$'000
$'000
≤6 Months 6-12 Months
1-5 Years
$'000
>5 Years
$'000
Total
$'000
Parent
Financial Assets
Cash and cash equivalents
Trade and other receivables
Derivatives1
Financial Liabilities
Trade and other payables
Interest bearing loans
and borrowings 2
Derivatives1
Co-operative grower member
shares
1,352
9,154
5,550
16,056
-
24
2,942
2,966
(7,487)
(17,969)
(6,437)
(5,618)
(339)
(2,938)
-
(19,542)
-
(21,246)
-
-
-
-
-
(43,226)
-
-
(43,226)
Net Exposure
(3,486)
(18,280)
(43,226)
-
-
-
-
-
(2,049)
-
-
(2,049)
(2,049)
1,352
9,178
8,492
19,022
(25,456)
(52,051)
(8,556)
-
(86,063)
(67,041)
Year ended 28 February 2017
$'000
$'000
≤6 Months 6-12 Months
1-5 Years
$'000
>5 Years
$'000
Total
$'000
Parent
Financial Assets
Cash and cash equivalents
Trade and other receivables
Derivatives1
Financial Liabilities
Trade and other payables
Interest bearing loans
and borrowings 2
Derivatives1
Co-operative grower member
shares
2,135
10,516
14,566
27,217
-
24
99
123
(8,242)
(17,889)
-
-
-
-
-
(10,736)
(9,192)
-
(28,170)
(5,853)
(4,949)
-
(28,691)
(43,288)
-
-
(43,288)
Net Exposure
(953)
(28,568)
(43,288)
-
-
-
-
-
(2,092)
-
(447)
(2,539)
(2,539)
2,135
10,540
14,665
27,340
(26,131)
(61,969)
(14,141)
(447)
(102,688)
(75,348)
1 Derivatives reflect the actual cashflow and are net settled.
2 In addition to the maturity profile of interest bearing loans and borrowings, there are actual cashflows in relation to interest
for the 6-month period of $1.03 million (2017: $1.32 million), for the 6-12 month period of $0.90 million (2017: $1.09 million)
and for the 1-5 year period $3.52 million (2017: $3.77 million).
Namoi Cotton’s risk management policy in respect to funding and liquidity risk reflects actual and forecast
seasonal borrowing requirements not exceeding 95% of the group’s total approved banking facilities.
Namoi Cotton is unable at this time to provide guidance on individual components of liquidity for the financial
year ended 28 February 2019 due to the cash flow components being contingent on forward crop commodity
purchase and sale contracts.
Year Ended 28 February 2018
Notes to the Financial Statements
Page 80
Year Ended 28 February 2018
Notes to the Financial Statements
Page 81
2018 ANNUAL REPORT | 95
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Fair value hierarchy
The group uses various methods in estimating the fair value of a financial instrument. The methods comprise:
in the table below:
The fair value of the financial instruments as well as the methods used to estimate the fair value are summarised
Level 1
The fair value is calculated using quoted prices in active markets. Quoted market price represents the fair value
determined based on quoted prices on active markets as at the reporting date without any deduction for
transaction costs.
Level 2
The fair value is estimated using inputs other than quoted prices included in Level 1 that are observable for the
asset or liability, either directly (as prices) or indirectly (derived from prices). For financial instruments not
quoted in active markets, the group uses various valuation techniques that compare to other similar instruments
for which market observable prices exist and also other relevant models used by market participants. These
valuation techniques use both observable and unobservable market inputs.
Level 3
The fair value is estimated using inputs for the asset or liability that are not based on observable market data.
Application of fair value hierarchy to Namoi’s financial statements
The carrying amounts of cash and cash equivalents, trade and other receivables, trade and other payables, and
interest-bearing liabilities approximate their fair value.
The fair value of Cotton Seed Contracts (Purchase and Sale) and Cotton Seed Inventory (at fair value less cost to
sell) is determined with reference to an observable market, reports and adjustments for freight premiums and
discounts which are unobservable. During the period there has not been a change in unobservable inputs (i.e.
freight premiums, discounts and cost to sell), accordingly no gains or losses have been recognised as a result in
changes of unobservable inputs during the year. (2017: nil). The nature of the market used to determine the
Cotton Seed Price is assessed as being illiquid given the low volume of transactions, accordingly the contracts
are classified as level 3.
The fair value of unlisted debt securities is based on valuation techniques using market data that is not
observable.
Year ended 28 February 2018
Consolidated
Current assets
Foreign exchange contracts
Cotton seed sale contracts
Current liabilities
Foreign exchange contracts
Interest rate swap contracts
Cotton seed purchase contracts
Year ended 28 February 2017
Consolidated
Current assets
Foreign exchange contracts
Cotton seed purchase contracts
Current liabilities
Cotton seed sale contracts
Level 1
Quoted
market
prices
$'000
Level 2
Market
observable
Level 3
Non-market
observable
inputs
$'000
inputs
$'000
Total
$'000
86
-
86
(111)
(52)
-
(163)
8,407
8,407
-
-
-
(8,393)
(8,393)
86
8,407
8,493
(111)
(52)
(8,393)
(8,556)
Level 1
Quoted
market
prices
$'000
Level 2
Market
observable
Level 3
Non-market
observable
inputs
$'000
inputs
$'000
Total
$'000
444
444
-
-
-
-
14,221
14,221
444
14,221
14,665
(14,141)
(14,141)
(14,141)
(14,141)
-
-
-
-
-
-
-
-
-
-
-
-
Year Ended 28 February 2018
Notes to the Financial Statements
Page 82
Year Ended 28 February 2018
Notes to the Financial Statements
Page 83
2018 ANNUAL REPORT | 96
Fair value hierarchy
Level 1
transaction costs.
Level 2
The fair value is calculated using quoted prices in active markets. Quoted market price represents the fair value
determined based on quoted prices on active markets as at the reporting date without any deduction for
The fair value is estimated using inputs other than quoted prices included in Level 1 that are observable for the
asset or liability, either directly (as prices) or indirectly (derived from prices). For financial instruments not
quoted in active markets, the group uses various valuation techniques that compare to other similar instruments
for which market observable prices exist and also other relevant models used by market participants. These
valuation techniques use both observable and unobservable market inputs.
Level 3
The fair value is estimated using inputs for the asset or liability that are not based on observable market data.
Application of fair value hierarchy to Namoi’s financial statements
The carrying amounts of cash and cash equivalents, trade and other receivables, trade and other payables, and
interest-bearing liabilities approximate their fair value.
The fair value of Cotton Seed Contracts (Purchase and Sale) and Cotton Seed Inventory (at fair value less cost to
sell) is determined with reference to an observable market, reports and adjustments for freight premiums and
discounts which are unobservable. During the period there has not been a change in unobservable inputs (i.e.
freight premiums, discounts and cost to sell), accordingly no gains or losses have been recognised as a result in
changes of unobservable inputs during the year. (2017: nil). The nature of the market used to determine the
Cotton Seed Price is assessed as being illiquid given the low volume of transactions, accordingly the contracts
are classified as level 3.
observable.
The fair value of unlisted debt securities is based on valuation techniques using market data that is not
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
The group uses various methods in estimating the fair value of a financial instrument. The methods comprise:
The fair value of the financial instruments as well as the methods used to estimate the fair value are summarised
in the table below:
Year ended 28 February 2018
Consolidated
Current assets
Foreign exchange contracts
Cotton seed sale contracts
Current liabilities
Foreign exchange contracts
Interest rate swap contracts
Cotton seed purchase contracts
Year ended 28 February 2017
Consolidated
Current assets
Foreign exchange contracts
Cotton seed purchase contracts
Current liabilities
Cotton seed sale contracts
Level 1
Quoted
market
prices
$'000
Level 2
Market
observable
inputs
$'000
Level 3
Non-market
observable
inputs
$'000
Total
$'000
-
-
-
-
-
-
-
-
-
-
-
-
86
-
86
(111)
(52)
-
(163)
-
8,407
8,407
-
-
(8,393)
(8,393)
86
8,407
8,493
(111)
(52)
(8,393)
(8,556)
Level 2
Market
observable
inputs
$'000
Level 3
Non-market
observable
inputs
$'000
Total
$'000
444
-
444
-
-
-
14,221
14,221
444
14,221
14,665
(14,141)
(14,141)
(14,141)
(14,141)
Level 1
Quoted
market
prices
$'000
Year Ended 28 February 2018
Notes to the Financial Statements
Page 82
Year Ended 28 February 2018
Notes to the Financial Statements
Page 83
2018 ANNUAL REPORT | 97
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Year ended 28 February 2018
Parent
Current assets
Foreign exchange contracts
Cotton seed sale contracts
Current liabilities
Foreign exchange contracts
Interest rate swap contracts
Cotton seed purchase contracts
Year ended 28 February 2017
Parent
Current assets
Foreign exchange contracts
Cotton seed purchase contracts
Current liabilities
Cotton seed sale contracts
Level 1
Quoted
market
prices
$'000
Level 2
Market
observable
inputs
$'000
Level 3
Non-market
observable
inputs
$'000
Total
$'000
-
-
-
-
-
-
-
-
-
-
-
-
86
-
86
(111)
(52)
-
(163)
-
8,407
8,407
-
-
(8,393)
(8,393)
86
8,407
8,493
(111)
(52)
(8,393)
(8,556)
Level 2
Market
observable
inputs
$'000
Level 3
Non-market
observable
inputs
$'000
Total
$'000
444
-
444
-
-
-
14,221
14,221
444
14,221
14,665
(14,141)
(14,141)
(14,141)
(14,141)
Level 1
Quoted
market
prices
$'000
Year Ended 28 February 2018
Notes to the Financial Statements
Page 84
2018 ANNUAL REPORT | 98
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Namoi Cotton Limited (formerly Namoi Cotton Co-operative Ltd)
Year ended 28 February 2018
Parent
Current assets
Foreign exchange contracts
Cotton seed sale contracts
Current liabilities
Foreign exchange contracts
Interest rate swap contracts
Cotton seed purchase contracts
Year ended 28 February 2017
Parent
Current assets
Foreign exchange contracts
Cotton seed purchase contracts
Current liabilities
Cotton seed sale contracts
Level 1
Quoted
market
prices
$'000
Level 2
Market
observable
Level 3
Non-market
observable
inputs
$'000
inputs
$'000
Total
$'000
86
-
86
(111)
(52)
-
(163)
8,407
8,407
-
-
-
(8,393)
(8,393)
86
8,407
8,493
(111)
(52)
(8,393)
(8,556)
Level 1
Quoted
market
prices
$'000
Level 2
Market
observable
Level 3
Non-market
observable
inputs
$'000
inputs
$'000
Total
$'000
444
444
-
-
-
-
14,221
14,221
444
14,221
14,665
(14,141)
(14,141)
(14,141)
(14,141)
-
-
-
-
-
-
-
-
-
-
-
-
29. Other Non-Financial Information
Namoi Cotton Limited
ABN 76 010 485 588
AFSL 267863
Registered Office
Pilliga Road
Wee Waa NSW 2388
Principal place of business
Pilliga Road
Wee Waa NSW 2388
Phone:
Facsimile:
61 2 6790 3000
61 2 6790 3087
Share Register
Computershare Investor Services Pty Ltd
GPO Box 7045
Sydney NSW 1115
Investor Inquiries: 1300 855 080
Bankers
Commonwealth Bank of Australia
Auditors
Ernst & Young
Brisbane, Australia
Year Ended 28 February 2018
Notes to the Financial Statements
Page 84
Year Ended 28 February 2018
Notes to the Financial Statements
Page 85
2018 ANNUAL REPORT | 99
ASX ADD ITION AL IN FO RMATION FOR T HE YE A R E ND ED
28 F EBRUARY 2018
Additional information required by the Australian Stock Exchange. This information is current as at 1 June 2018.
DIS TRIBUTIO N OF SHAREH OLDE R S
1 -1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Total
Number of holders
70
325
180
385
332
1,292
Number of Namoi Capital Stock
35,053
988,723
1,478,968
14,232,075
121,662,210
138,397,029
%
0.03
0.71
1.07
10.28
87.91
100.00
TOP 2 0 SHAREHO LDERS
Rank
Name
Number of
Namoi Capital Stock
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
LOUIS DREYFUS COMMODITIES ASIA PTE LTD
AUSTRALIAN RURAL CAPITAL LIMITED
NATIONAL NOMINEES LIMITED
CITICORP NOMINEES PTY LIMITED
JVH COTTON PTY LIMITED
BRAZIL FARMING PTY LTD
MR ROSS ALEXANDER MACPHERSON
MR MARK JOSEPH PANIZZA + MRS SUSAN KATHLEEN
PANIZZA ‹SUMA SUPER FUND A/C›
MR ALBERT JOHN PANIZZA + MS KIM DIANNA BROADFOOT
‹ALKIRA SUPER FUND A/C›
MRS FRANCES CLAIRE FOX ‹THOMAS J BERESFORD WILL
A/C›
BELFORT INVESTMENT ADVISORS LIMITED
GRANTULLY INVESTMENTS PTY LIMITED
BRUCE CLYDE BAILEY + JANET BEATRICE SHAFIK BAILEY
DUDDY MANAGEMENT PTY LTD
AVENUE 8 PTY LIMITED ‹GAN SUPER FUND A/C›
BOYCE FAMILY SUPERANNUATION FUND PTY LIMITED
‹BOYCE FAMILY S/F A/C›
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
GIBBS FAMILY SUPER PTY LTD ‹MICHAEL GIBBS FAMILY S/F
A/C›
RATHVALE PTY LIMITED
MR FRANKLIN C HADLEY
14,327,384
13,471,111
8,915,981
5,473,335
4,110,353
2,018,265
1,250,000
1,200,225
1,063,089
1,009,386
840,929
839,000
820,122
809,720
800,000
775,272
745,500
740,291
669,172
642,605
% held
10.35
9.73
6.44
3.95
2.97
1.46
0.90
0.87
0.77
0.73
0.61
0.61
0.59
0.59
0.58
0.56
0.54
0.53
0.48
0.46
Total
60,521,740
43.73
2018 ANNUAL REPORT | 100
RESTRICTED SECURITIES
Namoi Cotton Employee Incentive Plan
The Board of Namoi Cotton suspended the Namoi Cotton Employee Incentive Plan indefinitely from 28 August 2004. Namoi
Capital Stock previously issued under the Plan is subject to a three year restriction period from the date of allotment (or
until the interest free loan provided under the Plan to acquire the Namoi Capital Stock has been repaid in full). The Namoi
Capital Stock has been converted to ordinary shares in this category with the ordinary shareholders with outstanding loans
restricted from trading. There are 135,000 ordinary shares with employee loans of $24,411. The employee share loans
are due and payable by 1 October 2018. The following Namoi Capital Stock was allotted pursuant to offers made under
Employee Incentive Plan and quoted on the ASX.
No. of Namoi Capital
Stock allotted and
issued
Issue Price - $
Allotment Date
141,000
151,000
140,000
99,500
104,000
69,000
55,000
50,000
34,000
57,000
TOTAL 900,500
0.8000
0.7500
0.6700
0.5024
0.3700
0.2213
0.2480
0.2150
0.2906
0.3895
31 March 1998
31 December 1998
31 January 2000
6 December 2000
19 June 2001
End of restriction
date*
31 March 2001
31 January 2001
31 January 2003
6 December 2003
19 June 2004
13 December 2001
13 December 2004
12 June 2002
4 December 2002
29 May 2003
18 June 2004
12 June 2005
4 December 2005
29 May 2006
18 June 2007
OTHER SHAREH OLDER INFORMAT ION
Distribution - lodge your tax file number (TFN), Australian Business Number (ABN) or exemption
You are strongly recommended to lodge your TFN, ABN or exemption with our Share Registry. If you choose not to provide
these details to the Share Registry, then we are required to deduct tax at the highest marginal tax rate (plus the Medicare
levy) from any distribution payment. To lodge your details, you should contact our Share Registry or download a form from
the Computershare website at www.computershare.com.au (under investors/investorservices/downloadableforms).
Change of Address
Changes of address of shareholders or other key details should be notified to the Share Registry in writing without delay.
Change of address and other forms can be downloaded from the Computershare website at www.computershare.com.au
(under investors/investorservices/downloadableforms). Shareholdings, which are broker sponsored on the CHESS sub-
register, should contact their broker without delay.
Distribution Payments
Dividend and distribution payments can be credited directly into any nominated bank, building society or credit union account
in Australia. To request this service, you should contact our Share Registry or download a form from the Computershare
website at www.computershare.com.au (under investors/investorservices/downloadableforms).
2018 ANNUAL REPORT | 101
MA JOR ASX ANN OUN CEMENTS FOR 2 01 7 - 20 1 8
Date
ASX Releases
Date
ASX Releases
08/06/2018
Initial Director’s Interest Notice - James
Andrew Jackson
10/10/2017
Change of Director’s Interest Notice - G
Price
08/06/2018
Initial Director’s Interest Notice - Joseph
Di Leo
10/10/2017
Change of Director’s Interest Notice - B
Coulton
08/06/2018
Initial Director’s Interest Notice - Juanita
Hamparsum
10/10/2017
Change of Director’s Interest Notice - S
Boydell
07/06/2018 Non-Executive Director Appointment -
10/10/2017
Share Trading Policy
Joseph Di Leo
07/06/2018 Non-Executive Director Appointment -
Juanita Hamparsum
07/06/2018 Non- Executive Director Appointment -
James Andrew Jackson
01/06/2018
Appendix 3B
01/05/2018
Appendix 3B
10/10/2017
Constitution
10/10/2017
AGM Results
10/10/2017
AGM Meeting
10/10/2017
Company Certificate
10/10/2017
Top 20 securityholders
10/10/2017
Appendix 3B
27/04/2018
Final Director’s Interest Notice
10/10/2017 Namoi Cotton Restructure Completed
27/04/2018
Final Director’s Interest Notice
24/04/2018
Director Appointment/Resignation
24/04/2018
Dividend/Distribution - NAM
24/04/2018
FY2018 Financial Results Release
24/04/2018
Full Year Statutory Accounts
05/04/2018
Change in substantial holding
04/04/2018
Change in substantial holding
04/04/2018
Appendix 3B
01/03/2018
Appendix 3B
02/02/2018
Appendix 3B
06/10/2017
Conversion of Namoi Capital Stock &
Trading Ordinary Shares
05/10/2017
ASX Notice - Restructure
04/10/2017
Lodgement of Court Approval Co-ops
Registrar
03/10/2017 Namoi Cotton Obtains Court Approval
27/09/2017 Namoi Cotton Investor Presentation
26/09/2017 Namoi Cotton Restructure Results
26/09/2017
Order of Meeting Slides
26/09/2017
Order of Meeting - Namoi Cotton
Restructure
31/01/2018
Director Appointment/Resignation
16/08/2017
Proxy Forms
16/01/2018
Change in substantial holding from ARC
16/08/2017 Namoi Cotton Report on Affairs
04/01/2018
Appendix 3B
04/12/2017
Appendix 3B
06/11/2017
Change in substantial holding
03/11/2017
Capital Raising Update
02/11/2017
Change in substantial holding
02/11/2017
Change in substantial holding from ARC
01/11/2017
Appendix 3B
24/10/2017 Namoi Cotton Limited records strong half
year results
24/10/2017 Half Yearly Report and Accounts
17/10/2017 Notice of Initial Substantial Holder - WCM
12/10/2017
Becoming a substantial holder from ARC
12/10/2017
Becoming a substantial holder Louis
Dreyfus Company Asia
16/08/2017
Certified Namoi Cotton Final Report - 28
February 2017
16/08/2017
Proposed Constitution - Namoi Cotton
Limited
16/08/2017
Implementation Deed
16/08/2017
Restructure Booklet
16/08/2017
Restructure Update & Booklet
28/07/2017
AGM Results 2017
28/07/2017
CEO AGM Presentation
28/07/2017
Chairman’s Address to Shareholders
14/07/2017
Letter to Grower Members - Update
12/07/2017
Business and Restructure Update
30/06/2017
Appendix 4G Corporate Governance
23/06/2017
Annual Report to shareholders
11/10/2017
Tax Ruling Namoi Cotton Capital Stock
23/06/2017 Notice of Annual General Meeting/Proxy
11/10/2017
Grower Member Tax Ruling
11/10/2017
Becoming a substantial holder
10/10/2017
Change of Director’s Interest Notice - T
Watson
10/10/2017
Change of Director’s Interest Notice - M
Boyce
Form
22/06/2017
Investor Presentation June 2017
30/05/2017
Change of Director’s Interest Notice
17/05/2017
2017 AGM DETAILS
27/04/2017
FY2017 Media Release
27/04/2017
Full Year Statutory Accounts
22/02/2017 Market Update and Restructure Update
2018 ANNUAL REPORT | 102
DIRE CTORY
OFFICES
Wee Waa (Head Office)
Pilliga Road
Wee Waa NSW 2388
Telephone: 02 6790 3000
Fax: 02 6790 3087
Goondiwindi
139 Marshall St
Goondiwindi QLD 4390
Telephone: 07 4671 6900
Fax: 07 4671 6999
Moree
49 Greenbah Rd
Moree NSW 2400
Telephone: 02 6752 5599
Fax: 02 6752 5357
Trangie
Trangie Gin
Old Warren Road
Trangie NSW 2823
Telephone: 02 6888 9611
Fax: 02 6888 9678
Toowoomba
(Corporate Office)
1B Kitchener St
Toowoomba QLD 4350
Telephone: 07 4631 6100
Fax: 07 4631 6184
GINS
Ashley Cotton Gin
Mungindi Road
Ashley NSW 2400
Telephone: 02 6754 2150
Boggabri Cotton Gin
Blairmore Road
Boggabri NSW 2382
Telephone: 02 6743 4084
Hillston Cotton Gin
Roto Road
Hillston NSW 2675
Telephone: 02 6967 2951
Macintyre Cotton Gin
Kildonan Road
Goondiwindi QLD 4390
Telephone: 07 4671 2277
Merah North Cotton Gin
Middle Route
Merah North NSW 2385
Telephone: 02 6795 5124
Mungindi Cotton Gin
Boomi Road
Mungindi NSW 2406
Telephone: 02 6753 2145
North Bourke Cotton Gin
Wanaaring Road
North Bourke NSW 2840
Telephone: 02 6872 1453
Trangie Cotton Gin
Old Warren Road
Trangie NSW 2823
Telephone: 02 6888 9729
Yarraman Cotton Gin
Burren Road
Wee Waa NSW 2388
Telephone: 02 6795 5196
NAMOI COTTON
ALLIANCE
JOINT VENTURE
Macintyre Warehouse
Kildonan Road
Goondiwindi QLD 4390
Telephone: 07 4671 1449
Warren Warehouse
Red Hill, Warren NSW 2824
Telephone: 02 6847 3746
Wee Waa Warehouse
Pilliga Road
Wee Waa NSW 2388
Telephone: 02 6790 3139
Jakarta, Indonesia
Jakarta Representative Office
Gedung Manggala Wanabakti
Blok IV, Lantai 5, Ruang no. 511 B
Jln. Gatot Subroto, Senayan
Jakarta 10270
Indonesia
Telephone: 62 21 5790 2977
Fax: 62 21 5790 2945
JOINT VENTURE GINS
Moomin Cotton Gin
Moomin Ginning Co (Namoi Cotton/Harris
Joint Venture)
Merrywinebone
Via Rowena NSW 2387
Telephone: 02 6796 5102
Wathagar Cotton Gin
Wathagar Ginning Co (Namoi Cotton/
Sundown Pastoral Co Pty Ltd)
Collarenebri Road
Moree NSW 2400
Telephone: 02 6752 5200
CLASSING ROOMS
Australian Classing Services
Pilliga Road
Wee Waa NSW 2388
Telephone: 02 6790 3053
Fax: 02 6790 3030
2018 ANNUAL REPORT | 103
REGISTE RED OFF ICE
Registered Office
Namoi Cotton Limited
ABN 76 010 485 588
AFSL 267863
Pilliga Road
Wee Waa NSW 2388
Australia
Telephone: 61 2 6790 3000
Facsimile: 61 2 6790 3087
www.namoicotton.com.au
Share Registry
Computershare Investor Services Pty Ltd
GPO Box 7045
Sydney NSW 1115
Investor inquiries: 1300 855 080
Facsimile: 61 2 8234 5050
Auditors
Ernst & Young
Key Bankers
Commonwealth Bank of Australia
Namoi Cotton’s Shareholding Limit and Grower
Director Representation Rule
The Constitution of Namoi Cotton contains provisions
that limit a person’s shareholdings until at least Namoi
Cotton’s 2021 AGM (and thereafter, subject to renewal).
If a shareholder acquires ordinary shares in excess of
the Shareholding Limit, all rights (including voting rights,
dividend rights and rights in a winding up) in respect of the
excess shares are suspended and the excess shares are
subject to divestment. The shareholder must also refund
a dividend or distribution to which the shareholder is not
entitled to as a result of its holding of the excess shares.
The Constitution of Namoi Cotton also contains provisions
that require the Board to be comprised of an equal number
of Grower Directors and Non-Grower Directors until at
least Namoi Cotton’s 2022 AGM (and thereafter, subject to
renewal).
For a summary of these provisions please refer to Namoi
Cotton’s website. The provisions can also be found in the
Constitution.
2018 ANNUAL REPORT | 104
2018 ANNUAL REPORT | 106