NAMOI COTTON LIMITED
ANNUAL
REPORT
2019
NAMOI COTTON LIMITED
ABN 76 010 485 588
2019 ANNUAL REPORT | a
2019 ANNUAL REPORT | b
CONTENTS
1. Namoi Cotton Limited Profile .......................................................................................................... 3
The 2019 Financial Year in Review ................................................................................................... 4
2.
3. Chairman Letter .............................................................................................................................. 6
Interim Chief Executive Officer Report ............................................................................................ 8
4.
5. Board of Directors .......................................................................................................................... 14
6. Executive Management Team ........................................................................................................ 16
7. Consolidated Financial Report ....................................................................................................... 17
8. ASX Additional Information ...........................................................................................................102
9. Directory ........................................................................................................................................105
2019 ANNUAL REPORT | 1
2019 ANNUAL REPORT | 2
NAMO I COTTON LIMITE D PROFI LE
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
2019 ANNUAL REPORT | 3
T HE 2 019 F INANCI AL Y EAR IN REV IE W
F Y 2 0 1 9 S U M M A R Y
Financial Summary
Revenue1
Trading margin gains1
EBITDA2
EBIT3
Income Tax Benefit/(Expense)
Net profit/(loss) after tax
Earnings per Namoi Capital Stock5
Diluted earnings per Ordinary Share
Distribution per Ordinary Shares
Total assets
Interest bearing debt
Term (core) debt
Stakeholders equity
Net tangible assets per Namoi Capital Stock5
Diluted net tangible assets per Ordinary Share
Capital expenditure4
FY2019
($,000)
FY2018
($,000)
FY2017
($,000)
5,948
83,534
17,163
2,304
(680)
(556)
N/A
(0.4) cents
Nil
215,051
44,691
42,000
129,819
N/A
93 cents
9,391
4,205
79,535
20,181
12,232
(2,905)
6,769
N/A
4.7 cents
1.9 cents
241,208
50,002
42,000
131,756
N/A
103 cents
6,654
2,366
51,254
8,855
2,649
245
283
0.3 cents
N/A
N/A
210,713
59,920
47,480
123,828
113 cents
N/A
5,267
1Net gains and losses from ginning/seed and marketing contracts have been re-classification as trading margin gains
on the adoption of AASB 9 and AASB 15 for the year including restatement of comparatives, noting no change to the net
results. The FY2017 revenue and trading margin gains in the table above have been included to allow comparability with
these changes however are unaudited.
2EBITDA defined as earnings before interest, tax, depreciation, amortization and impairments of investments and fair value
decrements.
3EBIT defined as earnings before interest and tax.
Both of the above terms are non IFRS financial information.
4Includes $1,780k (FY2019), $1,203k (FY2018) and $821k (FY2017) acquisitions by means of finance leases.
5Namoi 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
2019 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
Nth Qld
TOTAL QLD
Other (WA & NT)
GRAND TOTAL
2019 Season
Forecast(1) Production
Bales
2018 Season
Actual(2) Production
Bales
2017 Season
Actual(3) Production
Bales
115,050
185,450
192,000
30,000
10,400
209,630
0
149,000
0
32,000
467,250
1,390,780
264,000
148,650
54,140
278,000
96,000
2,700
19,000
862,930
2,900
2,256,610
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
10,400
1,392,240
0
4,662,420
233,500
429,000
580,000
86,000
163,500
254,000
90,000
124,000
0
0
425,500
2,385,500
504,000
162,500
42,000
490,000
177,000
139,250
1,514,750
0
3,900,250
(1) Namoi Cotton’s estimate of the total Australian production for 2019 as at 21 May 2019
(2) 2018 Adjusted Figures from The Australian Cotton Grower, Cotton Yearbook 2018
(3) 2017 Adjusted Figures from The Australian Cotton Grower, Cotton Yearbook 2017
2019 ANNUAL REPORT | 5
CHAIRMAN LETTER
Dear Fellow Shareholder,
This is my first year as Chairman of Namoi Cotton and I am
honoured to lead the Board in a challenging and exciting
period of transformation for the company. Your company
has a proud heritage and history as a pioneer in the
provision of services to the Australian Cotton Industry since
formation in 1962 in Wee Waa.
I am proud to report that we continue to be the largest
ginner of cotton in Australia having ginned 1,202,000 bales
in the 2018 season or 26 % of the Australian Crop. We also
marketed and shipped over 800,000 bales of lint cotton for
our growers in our 51% owned Namoi Cotton Alliance Joint
Venture.
These facts demonstrate the solid platform our network
and business has within the Australian Cotton Industry.
SAFETY AND THE ENVIRONMENT
Our commitment to Workplace, Health, Safety and
Environment continues to be a key area of focus of your
Board and the company.
Nothing is more important than the safety of our workforce.
Namoi Cotton has recently conducted an extensive external
review of safety and continues to implement further
refinements in our continued commitment to achieve the
highest level of safety for all our staff. This includes the
adoption within the organisation and the use of industry
leading digital technology devices to manage safety,
compliance checks, reporting, safety audits and training.
This includes the adoption within the organisation the use
of industry leading technology devices to manage safety,
compliance checks, reporting, safety audits and training.
Namoi Cotton is currently working towards achieving the
highest level of ISO certification in respect to occupational,
health & safety and environmental management.
We understand we still have a long way to go to achieve
acceptable levels of safety statistic’s however I am pleased
to report our current LTIFR ( Lost Time Injury Frequency
Ratio) is now approximately 14 .
Namoi Cotton is reviewing how to undertake activities
to minimise its impact on the environment, initiatives
implemented to date include recycling of plastics, re-
use of cotton gin trash in various forms, recycling for site
rubber, cardboard and metal. Environmental initiatives
to investigate for the future include operating sites to
energy saving lighting and development of gas efficiency
technology.
FINANCIAL RESULTS
For the 2018 season, with a financial year end of 28
February 2019, Namoi Cotton Limited’s Ginning operations
again performed well contributing strongly to positive
cashflows of $21m.
However, the reported financial result of a pre-tax profit
of $124,000 and a net after tax loss of $600,000 heavily
impacted by the operating performance of the Cargill
Oilseeds Australia joint venture Interests and the non cash
impairment charges to the company’s interests in the
2019 ANNUAL REPORT | 6
Namoi Cotton Alliance and some fair value adjustments to
Ginning plant.
The underlying Profit before tax was $12,041,000 slightly
down on the previous period. Further detail as to these
results is outlined in page 7 of this report.
NAMOI COTTON ALLIANCE (NCA)
The Namoi Cotton Alliance (NCA) joint venture business
has underperformed in this period and since inception in
both volumes, market share and profitability. This point is
well understood by your Board and the NCA Joint Venture
Committee. Following an extensive internal review of
the business along with our joint venture partners Louis
Dreyfus Company Asia Pte Ltd, several structural changes
and significant steps are being taken in order to facilitate
a recovery in the performance of this business. The first
being the appointment of a fulltime time General Manager
who is charged with the responsibility of managing and
improving the profitability of NCA.
A competitive and profitable marketing business is a key
offering to our grower customers to help to ensure we
capture ginning and seed business to drive our business
volumes.
CARGILL OILSEEDS JOINT VENTURE
As previously advised to the market we are currently in
a commercial dispute with Cargill Australia Limited in
relation to the financial performance of our partnership
interest in Cargill Oilseeds Australia and shareholding
in Cargill Process Limited. We advise the pre-discovery
hearing was undertaken at the Federal Court of Australia
on 13 and 14 June 2019. We are awaiting judgement on pre-
discovery.
CAPITAL EXPENDITURE
We continued to invest in our business operations in the
period with total expenditures of $9.3m in the period. This
comprised of Gin efficiency upgrades, the construction of
2 new cotton seed storage facilities, increased capability
in information technology. Your board is mindful of our
responsibility to achieve a return for shareholders on
our capital expenditure in order to serve our growers
and provide sustainable returns and create value for our
shareholders. To this end we have undertaken several
reviews of our existing asset base and resources in order
to evaluate and configure the business in a more efficient
and effective manner.
PEOPLE
In March 2019 the Board accepted the resignation of the
CEO Mr Jeremy Callachor, on behalf of the Board I thank
Jeremy for his significant contribution over a long period
of time.
The Board has engaged a recruiting firm and is well
advanced in the process securing a new CEO.
I would also on behalf of the Board like to thank Mr Stuart
Greenwood our CFO for accepting the role as Interim Acting
CEO whilst this search process has been conducted.
The Board would also like to acknowledge the efforts
and contributions of all the Namoi Cotton Group staff and
employees in the large operational 2018 season and the
current smaller and difficult 2019 season to date.
THE BOARD
The Board continues the renewal process following our
successful restructure and conversion from a co-operative
to a public company in October 2017.
In April 2018, Mr Michael Boyce retired from the Namoi
Cotton Board after 16 years. Mick served on the Audit and
Compliance Committee overseeing the yearly and half
yearly audit and financial results. Mick’s financial skills,
cotton industry knowledge and general practical financial
business acumen served the organisation well.
At the AGM in July 2018, we welcomed three new directors
to the Board.
Mrs Juanita Hamparsum became our first female Non-
Executive Director. Juanita brings a combination of
Cotton farming knowledge as a Grower coupled with her
accounting background and qualifications and experience
as an Audit Committee Chairperson. Juanita also brings
a deep understanding of water and irrigation having been
heavily involved in water politics.
Mr Joe Di Leo was elected as a Non-Executive Director. Joe
has a deep understanding of agribusiness and operations
having run some significant grains and processing
businesses. He also chairs an industry superannuation
fund.
Mr James Jackson was also elected to the Board bringing
extensive corporate agribusiness experience, in sugar,
beef and rural services along with corporate finance
expertise. He has been a public company director for over
15 years and has a strong understanding of public company
governance.
farmers and
The Australian cotton
agribusinesses associated with
face
commercially and financially a difficult 2019 season and
2020 season.
industry will
industry,
its
The 2019 crop has commenced ginning and early indications
for irrigated cotton are for average yields, however dryland
cotton yields are severely impacted due to a lack of rain
during the growing season.
For the 2020 Crop to be planted between September 2019
to December 2019 unless we see significant rain within the
growing regions and associated river catchment systems,
this crop could also be significantly impacted.
To put this into perspective recent BOM analysis indicates
that the current drought in Northern NSW is unprecedented.
The Board’s and Management’s key focus will be to closely
monitor and manage operational and capital expenditure.
The Board’s objective is to place the Namoi Cotton business
platform in the optimal position for financial success when
the drought breaks.
To that end the Board has engaged a management
consultant to assist in focusing on current costs and
potential strategic review.
Namoi Cotton is fortunate to have passionate and committed
staff with great industry knowledge, who contribute to the
direction of the company.
I thank them for the dedication and contribution.
I would also like to thank you our shareholders for your
patience and belief in Namoi Cotton.
As Chairman I thank my fellow Board members and
previous board members for their commitment and
support for Namoi Cotton.
Tim Watson
Chairman
Namoi Cotton Limited
Finally, I would like to acknowledge Mr Richard Anderson
who has served as a director of Namoi Cotton for 18 years
and will be retiring at our upcoming 2019 Annual General
Meeting.
Richard has contributed significantly to Namoi cotton in
both as a Non-Executive Director and in his role as Chair
of the Audit Committee and Chair of the NCA Joint Venture
Committee.
On behalf of my fellow directors I would like to thank
Richard for his tireless effort.
OUTLOOK
As most of Australia is aware 2018 has been a difficult
year for the cotton industry and the agricultural industry in
general in New South Wales and southern Queensland. The
severe drought conditions continued during the 2018 cotton
planting season and unfortunately have worsened during
the first half of the 2019 calendar year.
2019 ANNUAL REPORT | 7
INTERIM ACTING CHIEF EXECUTIVE OFFICER REPORT
MR STUART GREENWOOD
RESULT IN RE VIEW FO R 2018/1 9
Namoi Cotton recorded a consolidated net loss after tax
from continuing operations of $0.6 million for the full year
ended 28 February 2019, compared to a net profit after
tax of $6.8 million for the year ending 28 February 2018.
Positive cash flows from operating activities were recorded
at $21.0 million an increase of $3.7 million or 21% on the
prior year.
Financial performance of the core ginning activities has been
positive with a 25% improvement through a 20% increase
in the 2018 Australian crop size. Namoi Cotton’s ginning
volumes increased by 18% and cottonseed trading volumes
remained unchanged whilst Namoi Cotton Alliance’s (NCA)
lint procurement volumes increased by 28%. Namoi Cotton’s
seed trading business shipped and handled 260,000Mt (2017
crop: 266,000Mt), with a positive contribution recorded.
Ginning margins recovered lost ground from the reduced
productivity experienced in the prior year as seed cotton
quality improved significantly from that of the year prior.
The contribution from NCA through improved volumes was
impacted by finance costs due to delayed shipments of
cotton lint and low packing volumes due to adverse seasonal
conditions. Packing volumes declined from the previous year
primarily due to reduced chickpea plantings through drought
conditions. The Cargill Oilseeds Australia (“COA”) and Cargill
Processing Limited (“CPL”) joint venture negatively impacted
results with closure of the Narrabri crush facility occurring
within the year.
The consolidated net profit before tax of $0.1m is reconciled
to the underlying profit before tax of $12.0m in the following
table:
Consolidated
$’000 28 Feb 2019
$’000 28 Feb 2018
Profit/(Loss) before Income Tax
Associated and Joint Ventures
Net profit/(loss) from Namoi Cotton Alliance
Net profit/(loss) from NC Packing Services Pty Ltd
Net profit/(loss) from Cargill Oilseeds Australia
Net profit/(loss) from Cargill Processing Pty Ltd
Impairments
Namoi Cotton’s interest in Namoi Cotton Alliance
Fair Value adjustments
Ginning property, plant and equipment
Grower member shares
Corporate Restructure Costs
Underlying Profit before tax
124
(443)
(639)
(3,058)
(1,742)
(3,563)
(2,018)
-
(454)
(11,917)
12,041
9,674
511
116
(1,515)
137
-
-
(712)
(1,595)
(3,058)
12,732
2018 AUSTRALIAN COTTON PRODUCTION
The quality of the 2017 crop was adversely impacted by the
wet planting conditions, end of growing period weather and
challenging defoliation parameters.
The overall 2018 Australian cotton crop production was
recorded at 4.54 million bales (representing a 20% increase
from the 2017 crop recorded at 3.77 million bales). Early
season forecasts estimated the crop at 4.2 million bales,
however, a favourable growing season and harvest period
resulted in positive yields in the main growing areas which
elevated total production. Irrigated yields have averaged
11.5 bales per hectare compared to 10.0 bales per hectare
2017 crop and 11.5 bales in the 2016 crop.
2019 ANNUAL REPORT | 8
INTERIM ACTING CHIEF EXECUTIVE OFFICER REPORT
MR STUART GREENWOOD
SEASO N OP ERATION S IN
REVIE W
2018 Ginning Season
Namoi Cotton ginned 1,202,000 bales (including 100% of
joint venture bales) of the 2018 crop compared to 1,015,000
bales of the 2017 crop. The 18% increase in ginning volumes
was directly related to the larger crop size. The dry growing
conditions dominating the majority of grower areas during
the 2018 crop season led to low incoming moisture levels
at the majority of gins during the season. Throughput rates,
whilst greatly improved from the previous season, were
still impacted by the necessity to run gins slower to ensure
adequate moisture reconstitution. Despite this the overall
ginning contribution improved by 25%.
Namoi Cotton has continued to invest in its ginning
network; to improve service offerings to growers and
drive productivity improvements in the ginning business.
Significant projects that were completed prior to the
commencement of ginning of the 2018 crop; included the
installation of a fourth gin stand at Trangie and upgrades
to cleaning and moisture equipment of the Wathagar gin.
Strategic investments included cottonseed storage sheds
at Trangie and Hillston at a cost of $1.5 million each which
are complete and available for the 2019 crop. Financier
support was confirmed with renewal and extension of term
debt facilities to 30 April 2021.
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 (LTIFR)
from 23 down to 15 compared to the previous year. The
improvement in LTIFR can be attributed to the continuing
roll out of Namoi Cotton’s technology-based Work Health
and Environment systems which enhances compliance
reporting and management in the areas of Fatigue,
Respiratory management and application of appropriate
PPE across all facets of the business.
Cotton Seed Business and Cargill Oilseeds
Australia Partnership
Namoi Cotton’s seed trading business shipped and
handled 260,000Mt (2017 crop: 266,000Mt), with a positive
contribution recorded.
Namoi Cotton’s 15% interest in the COA and CPL recorded
a loss of $4.8 million compared to a loss of $1.4 million
in the preceding year. This loss includes the closure of
the Narrabri crush facility in late 2018, with an embedded
impairment of the assets, associated staff redundancy
costs and trading losses.
Namoi Cotton has requested further detailed information
from Cargill Australia Ltd, as the manager of the
partnership, to consider its next steps as a minority
partner and shareholder. This matter remains subject to
a continuing commercial dispute process. Pre-discovery
hearings have been scheduled.
Cotton Market Review
The cotton market opened at the 2018 financial year with the
spot price of 82 US cents/lb. During the 2018-2019 period
the first four months between 1 March 2018 to 15 June 2019
the cotton futures rallied to a high of 95 US cents/lb. Then
from this period the US trade war with China commenced
2019 ANNUAL REPORT | 9
and the cotton futures fell 10 US cents lb sharply (within a
week). The cotton futures market stabilised between 83 US
cents lb – 90 US cents lb for the next 6 weeks, from then
we saw an uplift back to 90 US cents lb. Then in August
2018 the USDA Report was released suggesting a larger
US cotton crop than previously forecasted which saw the
cotton futures fall again to around 82 US cents/lb. The
tropical storm “Gordon” in the United States supported
the market at these levels, however the ongoing trade war
between the US and China pressured cotton futures pricing
downwards. The trend lead to cotton futures closing around
72 US cent lb at the end of Namoi Cotton’s financial year of
28 February 2019.
For the financial year 1 March 2018 to 28 February 2019 the
AUD compared to the US dollar ranged between 79 cents to
67.50 cents. Over the year it depreciated 8 cents down to 71
cents at the end of the 2019 financial year.
During the financial year grower pricing remained strong
ranging between $500 AUD per bale to $650 AUD per bale.
Namoi Cotton Alliance (NCA)
NCA’s total cotton lint marketing volumes procured for the
2018 season were 817,000 bales compared with 636,000
bales for the 2017 season. This reflects a 28% 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 and distribution costs were unfavourable
due to limited opportunity to efficiently share rail services
with reduced packing volumes. The impact of delayed
shipments led to a significant increase in inventory funding
levels through the second half where associated working
capital funding lines would normally have been significantly
reduced. An increase in finance costs of $1.56m (Namoi
Cotton share) has ensued. This has contributed to a $0.95
million deterioration in Namoi Cotton’s share of NCA’s lint
business in the financial results over the prior year.
NCA’s commodity packing business packed 55,000Mt in
2018 compared to 168,000Mt in 2017 principally chickpeas.
Packing volumes declined from the favourable volumes
achieved in the preceding year through adverse dry
agronomic conditions. The volumes of chickpea packed in
the year was supported by carryover 2017 crop and reflects
a decline in the total chickpea crop to 300,000Mt from
1,100,000Mt the year prior.
The Board has considered the historical performance of the
joint venture over its 6 years of operation to be insufficient
to support the carrying value under the equity method at
which Namoi Cotton has been carrying the investment in
the joint venture. While measures have been enacted to
provide greater potential for returns when better seasonal
conditions return and through
improved operational
efficiency, our assessment has resulted in the booking of
an impairment loss in the amount of $3.6m (in respect to
our 51% interest) in the current year.
LOOKING FORWARD
2019 Season
The area finally planted to cotton for the 2019 season
was 201,000 hectares irrigated or semi-irrigated (2018:
371,000 hectares), and 165,000 ha of dryland (2018:
131,000 hectares). The ensuing growing season has been
one of the driest on record for many regions, resulting in
increased irrigation cycles, water shortages, and eventual
yield pressure. For those with sufficient water to complete
the crop yields look promising, however, many irrigated
crops ran short of the final waterings and have lost much
yield potential and may have quality impacts. Likewise the
dryland crop, the largest area for many years, suffered
under the prolonged dry summer and a large portion was
abandoned in the February-March period. Considering all
these factors, we estimate the 2019 Australian cotton crop
will at this stage be approximately 2.3 million bales.
Namoi Cotton anticipates that it will gin between 450,000
and 500,000 bales from the 2019 crop, including 100% of
joint venture gins, representing a reduction of between
37% and 42% of the prior crop volumes. The impact of the
ongoing drought upon water storage levels and associated
allocations has had the greatest impact upon central
growing regions where the majority of Namoi Cotton’s
ginning infrastructure is located.
It is expected that our cotton seed trading volumes will
reduce proportionally in line with ginning volumes. Strong
domestic prices continued at the commencement of the
2019 crop due to livestock industry demand.
NCA’s lint marketing volumes are estimated to be between
300,000 and 400,000 bales from the 2019 crop, representing
a decrease of between 51% and 63% from the prior crop. The
lower crop size has seen competition for marketing volumes
and is anticipated to continue to pressure marketing gross
margins in 2019. Improved distribution costs savings per
unit is expected to be achieved through improved supply
chain logistics contracts executed in advance of the crop.
NCA’s containerised commodity packing volumes remain
subdued as a result of the on-going drought and is largely
dependent upon 2019 Autumn/Winter rainfall.
Namoi Cotton’s operations in 2019 will be impacted by
the lower volumes predicted. The business is focused on
operation of the network in the most efficient manner to
deliver per unit labour utilisation and energy consumption
savings despite operating at sub-optimal levels.
Commissioning of key projects
including latest bale
strapping technology at the Trangie gin and the installation
of a new press at the MacIntyre II site are expected to deliver
productivity based savings. The seed sheds constructed at
Trangie and Hillston will assist commercial operations,
storage and logistics.
2020 Season and Beyond
At present public water storages from Queensland to
Southern NSW are at historically very low levels. The
current general water availability for next year is expected
to be at or near zero unless significant rain events occur
2019 ANNUAL REPORT | 10
prior to planting. At the same time on-farm storages are
low to empty. In general available bore water allocations
are expected to remain unchanged.
The continuing very dry conditions have led to record-
low sub-soil moisture levels representing a significant
agronomic challenge to reasonable volumes being achieved
for the 2020 crop (FY 2020/21).
Forward cotton prices for the 2020 season however remain
very strong, and given the ability to produce, cotton would
be expected to remain the summer crop of choice. The
outlook for rainfall, whilst not currently promising for the
short term, can influence planting acreages if received up
to end November 2019. In the intervening period the Board
and management are working towards drought planning
strategies and implementing cost controls.
Strategy
During the year strategic measures taken for Namoi Cotton
included:
•
•
•
•
•
•
the appointment of a dedicated Chief Information
Officer to lead Information Technology
transformation;
the Directors have interacted with staff of all levels
within the organisation to assist in the identification
of opportunities to contribute to results and/or
mitigate earnings volatility;
the engagement of an external consultant to
consider end to end supply chain costs to support a
least cost ginning operation;
an engagement has been initiated surrounding the
review of corporate culture and human resources
across the group; and the recruitment of a Chief
Executive Officer is continuing;
the renewal of the term debt facilities to 30 April
2021; and
investment in seed storage and handling at the
Hillston Gin and the Trangie Gin;
Former CEO & Staff
The Namoi Cotton Board accepted the resignation of Mr
Jeremy Callachor as Chief Executive Officer from the
company, effective 8 March 2019. The Board wishes to
acknowledge Jeremy for his significant contribution and
services to Namoi Cotton over a long period of time.
The Board thanked Mr Jeremy Callachor for his services
and leadership to Namoi Cotton and for the many key
achievements during his tenure, including stabilizing the
business over the 2012 financial year and the successful
project to transform Namoi Cotton from a grower co-
operative to a company listed on the ASX.
2019 ANNUAL REPORT | 11
GOVERNANCE
CORP ORATE GOV ERNANCE
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 2019
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.
WORKPLACE HE ALTH,
SA F ET Y AND THE
ENVIRONM EN T
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 world 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
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
work 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.
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 (including
Namoi Cotton Alliance) and our casual employees can
range from 350 employees to 400 employees (including
2019 ANNUAL REPORT | 12
Namoi Cotton Alliance) 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 2019 Financial Year (28 February
the Company’s
2019), women represented 18% of
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.
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.
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.
Namoi Cotton assists its employees to become active
participants of charitable, sporting and social organisations
outside the workplace.
ENVIRONM EN TAL, SO CIAL
AND GOV ERNAN CE
Namoi Cotton has focused 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.
DIV ERSITY
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.
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 18% 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,
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. In the past three years 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.
2019 ANNUAL REPORT | 13
BOARD OF DIRECTORS
Tim Watson – Chairman – Non-
Executive Director – 57
GAICD
Robert Green – Non-Executive
Director – 62
B Bus (QAC), MAICD
Mr Watson was appointed as Chairman
for Namoi Cotton Limited from 29 August
2018. He was re- elected to the Board at
the 2018 general meeting. Mr Watson
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. Mr Watson is a member
of the Nominations and Remuneration Committee and the
Safety Committee.
Stuart Boydell – Non-Executive
Director – 72
Mr. Boydell joined the board of directors
as a grower director in June 1994 and
was chairman between December 1995
and August 2018. 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 a
member of the Nominations and Remuneration Committee,
the Audit Committee and the Safety Committee.
Richard Anderson – Non-
Executive Director – 73
OAM, B.Com, FCA, FCPA
Mr Anderson joined the Namoi Cotton
Board in July 2001. He was re-elected at
the 2016 general meeting. Mr Anderson
previously held the position of managing
partner of PricewaterhouseCoopers in
Queensland. During the past three years
Mr Anderson has held ASX listed company directorships
at Data#3 Limited (current) and Lindsay Australia Ltd
(current). He is also currently president of the Guide Dogs
for the Blind Association of Queensland. Mr Anderson is
the Chairman of the Audit Committee and a member of the
Safety Committee.
considerable board
Mr Green joined the Namoi Cotton
Board in May 2013. He was re-elected
at the 2016 general meeting. Mr Green
has
relevant
experience working as a Senior
in
Executive and General Manager
the Australian and International agricultural industry
over many years. Key areas of experience
include
Business Management, Operations Management and
Business Development. His most recent role was Chief
executive Officer of Louis Dreyfus in Australia. Mr Green
is Chairman of the Financial Risk Committee and the
Safety Committee and a member of the Nominations and
Remuneration Committee.
Glen Price – Non-Executive
Director – 63
B Rural Science (Hons), GAICD
Mr Price joined the Namoi Cotton Board
in July 2009 as a Grower Director. He
was re-elected at the 2018 general
meeting. Mr Price has previously grown
cotton in the Mungindi region for 34
years and continues to grow cotton in the St George region
and has done so for 28 years. Mr Price has been involved
in the cotton industry since 1978. Mr Price is a member of
the Mungindi Cotton Growers and Water Users Association
and brings with him extensive industry and commercial
expertise. Mr Price is a member of the Financial Risk
Committee and the Safety Committee.
Joseph Di Leo – Non-Executive
Director – 62
M.Bus.Acct. & Fin., FAICD
Mr Di Leo was appointed to the Board
in June 2018 as a casual director
appointment. He was elected at the
2018 general meeting. Mr Di Leo has
an extensive career in agriculture and
is a former Managing Director of Allied Mills Australia Pty
Ltd. He is a former Chief Operating Officer of GrainCorp
Limited, and previously held a number of senior roles
in the rail freight sector. 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 the
Chair of LUCRF Super. Mr Di Leo is a member of the Audit
Committee, the Financial Risk Committee and the Safety
Committee.
2019 ANNUAL REPORT | 14
Juanita Hamparsum – Non-
Executive Director – 48
B Bus (UTS), CA, FPCT, GAICD
Mrs Hamparsum was appointed to
the Board in June 2018 as a casual
director appointment. She was elected
at the 2018 general meeting. 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,
corporate governance, 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. Mrs
Hamparsum is a member of the Audit Committee and the
Safety Committee.
James Jackson – Non-Executive
Director – 56
B.Com., FAICD
Mr Jackson was appointed to the
Board in June 2018 as a casual director
appointment. He was elected at the 2018
general meeting. He has more than 25
years’ experience in capital markets
and agribusiness, both in Australia and 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 focused 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. Mr Jackson is
the Chairman of the Nominations and Remuneration
Committee and a member of the Financial Risk Committee
and the Safety Committee.
Michael Boyce – Non-Executive
Director – 76
FCA, FAICD, B.Com., HDA
Mr Boyce resigned from the board on 24
April 2018.
2019 ANNUAL REPORT | 15
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.
EXECUTIVE
MANAGEMENT
TEAM
Stuart Greenwood – Interim
Acting CEO and Chief Financial
Officer
B.FIN. Admin, CA
Stuart is currently acting as the Interim
Acting CEO. Stuart joined Namoi Cotton
in 2001. He was appointed Chief Financial
Officer in January 2008, following four
years as Financial Controller, prior to this holding various
senior accounting 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.
Alex Mehl – Chief Information
Officer
BIS, MBA
Alex joined Namoi Cotton in 2018. He
was previously responsible for the IT
function of Golding, one of Queensland’s
largest civil and mining contractors.
Alex has experience across a diverse
range of sectors including resources, civil engineering,
management consulting and financial services. Alex leads
Namoi Cotton’s digital business strategy and is charged
with building technology capabilities that enhance Namoi
Cotton’s competitive advantage in all business operations.
Alex brings nearly 20 years of experience delivering
technology-enabled business results.
2019 ANNUAL REPORT | 16
NAMOI COTTON LIMITED
(Formerly Namoi Cotton Co-Operative Ltd)
ABN 76 010 485 588
CONSOLIDATED
FINANCIAL
REPORT
YEAR ENDED 28 FEBRUARY 2019
2019 ANNUAL REPORT | 17
CONSOLIDATED FINANCIAL REPORT CONTENTS
Appendix 4E .......................................................................................................................... 19
Directors’ Report .................................................................................................................. 20
Auditor’s Independence Declaration .................................................................................... 32
Independent Auditor’s Report .............................................................................................. 33
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.
Summary of Significant Accounting Policies ............................................................. 44
Revenue and Expenses.............................................................................................. 59
Income Tax ................................................................................................................ 60
Acquisitions ............................................................................................................... 62
Earnings per Share ................................................................................................... 65
Distributions Paid or Provided on Ordinary Shares/Co-operative Capital Units ....... 66
Cash and Cash Equivalents ....................................................................................... 67
Trade and Other Receivables..................................................................................... 69
Inventories ................................................................................................................ 71
Derivative Financial Instruments .............................................................................. 71
Investments in Associates and Joint Ventures using the equity method .................. 72
Interest in Joint Operations ....................................................................................... 75
Interest in Jointly Controlled Assets ......................................................................... 75
Intangible Assets ....................................................................................................... 75
Property, Plant and Equipment ................................................................................. 76
Trade and Other Payables ......................................................................................... 79
Interest Bearing Liabilities ........................................................................................ 79
Provisions .................................................................................................................. 81
Contributed Equity .................................................................................................... 81
Nature and Purpose of Reserves .............................................................................. 83
Segment Information ................................................................................................ 83
Commitments and Contingencies ............................................................................. 86
Significant Events after Balance Date ....................................................................... 87
Related Party Disclosures ......................................................................................... 88
Directors’ and Executive Disclosure .......................................................................... 89
Remuneration of Auditors ......................................................................................... 90
Financial Risk Management Objectives and Policies ................................................ 90
Other Non-Financial Information ............................................................................ 101
2019 ANNUAL REPORT | 18
Namoi Cotton Limited
Appendix 4E
The information contained in this report is for the full-year ended 28 February 2019 and the previous
corresponding period, 28 February 2018.
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)
% Change
Up 41%
to
Down 108%
Down 108%
$'000
5,948
(556)
(556)
Amount
per Security
Unfranked Amount
per Security
Final distribution - (Refer Note 6)
0.0 cent
0.0 cent
Interim distribution
-
-
Record date for determining entitlements to the final dividend
-
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 of the core ginning activities has been positive with a 25% improvement through a 20%
increase in the 2018 Australian crop size. Namoi Cotton’s ginning volumes increased by 18% and cottonseed trading
volumes remained unchanged whilst Namoi Cotton Alliance’s (NCA) lint procurement volumes increased by 28%.
Namoi Cotton’s seed trading business shipped and handled 260,000Mt (2017 crop: 266,000Mt), with a positive
contribution recorded. Ginning margins recovered lost ground from the reduced productivity experienced the prior
year as seed cotton quality improved significantly from that of the year prior. The contribution from NCA through
improved volumes was impacted by finance costs due to delayed shipments of cotton lint and low packing volumes
from adverse seasonal conditions. Packing volumes declined from the previous year primarily due to reduced
chickpea plantings through drought conditions. The Cargill Oilseeds Australia (“COA”) and Cargill Processing Limited
(“CPL”) joint venture impacted upon results with closure of the Narrabri crush facility occurring within the year.
For further explanation of the annual financial results please refer to the Review of Operations
shown in Page 4 of this report.
Earnings per share
28 February 2019
28 February 2018
Basic earnings per ordinary security
Diluted earnings per ordinary security
(0.4 cents*)
5.3 cents*
(0.4 cents*)
4.7 cents*
Net tangible assets per security
28 February 2019
28 February 2018
Net tangible asset backing per ordinary security
93 cents*
103 cents*
* Adjusted for conversion of grower member shares and Namoi capital stock in prior period and conversion of
Namoi capital stock in current period.
Associates and joint ventures - refer to notes 11 and 12 of the financial statements.
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 2019
Directors’ Report
Page 3
2019 ANNUAL REPORT | 19
Namoi Cotton Limited
DIRECTORS’ REPORT
Financial report for the year ended 28 February 2019
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 2019.
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.
2018-2019 full year financial results
Namoi Cotton recorded a consolidated net loss after tax from continuing operations of $0.6 million for the full
year ended 28 February 2019 (2018: a net profit of $6.8 million). Positive cash flows from operating activities
were recorded at $21.0 million (2018: positive $17.3 million) which reflects a strong outcome from the core
activity in cotton ginning and associated cottonseed trading business.
The key items impacting the profit before tax are presented in the table below:
Profit/(Loss) before Income Tax
Associates and Joint Ventures
Net profit/(loss) from Namoi Cotton Alliance
Net profit/(loss) from NC Packing Services Pty Ltd
Net profit/(loss) from Cargill Oilseeds Australia
Net profit/(loss) from Cargill Processing Pty Ltd
Impairments
Namoi Cotton's interest in Namoi Cotton Alliance
Fair Value adjustments
Ginning property, plant and equipment
Grower member shares
Corporate Restructure Costs
Consolidated
$’000
28 Feb
2019
$’000
28 Feb
2018
124
9,674
(443)
(639)
(3,058)
(1,742)
(3,563)
(2,018)
-
(454)
(11,917)
511
116
(1,515)
137
-
(712)
(1,595)
(3,058)
Underlying Profit before tax
12,041
12,732
Financial performance of the core ginning activities has been positive with a 25% improvement through a 20%
increase in the 2018 Australian crop size. Namoi Cotton’s ginning volumes increased by 18% and cottonseed
trading volumes remained unchanged whilst Namoi Cotton Alliance’s (NCA) lint procurement volumes
increased by 28%. Namoi Cotton’s seed trading business shipped and handled 260,000Mt (2017 crop:
266,000Mt), with a positive contribution recorded. Ginning margins recovered lost ground from the reduced
productivity experienced the prior year as seed cotton quality improved significantly from that of the year
prior. The contribution from NCA through improved volumes was impacted by finance costs due to delayed
shipments of cotton lint and low packing volumes from adverse seasonal conditions. Packing volumes declined
from the previous year primarily due to reduced chickpea plantings through drought conditions. The Cargill
Oilseeds Australia (“COA”) and Cargill Processing Limited (“CPL”) joint venture impacted upon results with
closure of the Narrabri crush facility occurring within the year.
Namoi Cotton’scash flows from operating activities improved by $3.7 million to $21.0 million.
Net assets during the period have decreased by $1.9 million (2018: increased by $7.9 million) representing a
net asset backing of $0.93 per ordinary share (2018: $1.03 per ordinary share).
Dividends
The directors have announced that Namoi Cotton will not pay a final dividend (2018: 1.9 cents per ordinary
share). No interim dividend was declared in respect of ordinary shares (2018: nil).
Year Ended 28 February 2019
Directors’ Report
2019 ANNUAL REPORT | 20
Page 4
Namoi Cotton Limited
Namoi Cotton Limited
2020 Season
development and implementation of strategy and public company corporate governance. Mr Jackson is the
At present public water storages from Queensland to Southern NSW are at historically very low levels. The
Chairman of the Nominations and Remuneration Committee and a member of the Financial Risk Committee
current general water availability for next year is expected to be at or near zero unless significant rain events
and the Safety Committee.
occur prior to planting. At the same time on-farm storages are low to empty. In general available bore water
allocations are expected to remain unchanged.
Juanita Hamparsum, Non-Executive Director, 48, B.Bus. (UTS), CA, FPCT, GAICD
Mrs Hamparsum was appointed to the Board in June 2018 as a casual director appointment. She was elected
The continuing very dry conditions have led to record-low sub-soil moisture levels representing a significant
Namoi Cotton Limited
at the 2018 general meeting. She grows cotton and grains in the Upper Namoi region and has been involved in
agronomic challenge to reasonable volumes being achieved for the 2020 crop (FY 2020/21).
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
Forward cotton prices for the 2020 season however remain very strong, and given the ability to produce,
committee of Cotton Seed Distributors Ltd and Chair of Great Artesian Basin Coordinating Committee. Her
cotton would be expected to remain the summer crop of choice. The outlook for rainfall, whilst not currently
Review of operations
Review of operations
promising for the short term, can influence planting volumes if received up to end November 2019. In the
former positions include chair of Cotton Innovation Network, director of Cotton Research and Development
The overall 2018 Australian cotton crop production was recorded at 4.54 million bales (2017 crop: 3.77 million
A review of operations and results of the consolidated entity during the financial year is contained on pages 7
intervening period the Board and management work towards drought planning strategies and implementing
Corporation and Deputy Chair of Namoi Catchment Management Authority. Mrs Hamparsum is a member of
bales) representing a 20% increase. Early season forecasts estimated the crop at 4.2 million bales, however, a
to 10 of this report.
the Audit Committee and the Safety Committee.
cost controls.
favourable growing season and harvest period resulted in positive yields in the main growing areas which
elevated total production. Irrigated yields have averaged 11.5 bales per hectare compared to 10.0 bales the
Joseph Di Leo, Non-Executive Director, 62, M.Bus.Acct. & Fin., FAICD
Significant events after balance date
previous and 11.5 bales in the 2016 crop.
Mr Di Leo was appointed to the Board in June 2018 as a casual director appointment. He was elected at the
There have been no significant events after balance date other than as disclosed in Note 24 in this report.
2018 general meeting. Mr Di Leo has an extensive career in agriculture and is a former Managing Director of
Namoi Cotton ginned 1,202,000 bales (including 100% of joint venture bales) of the 2018 crop (2017 crop:
Allied Mills Australia Pty Ltd. He is a former Chief Operating Officer of GrainCorp Limited, and previously held a
Significant changes in the state of affairs
1,015,000 bales) representing an 18% increase from the 2017 crop. The increased ginning volumes are directly
There has been no significant change in the state of affairs of the consolidated entity during the year other
number of senior roles in the rail freight sector. Mr Di Leo has also previously been a Non -Executive Director
related to the larger crop size. The dry growing conditions dominating the majority of grower areas during the
than as disclosed elsewhere in this report.
of the Port Kembla Port Corporation and Teys Australia Pty Ltd. He is currently the Chair of LUCRF Super. Mr Di
2018 crop season led to low incoming moisture levels at the majority of gins during the season. Throughput
Leo is a member of the Audit Committee, the Financial Risk Committee and the Safety Committee.
rates, whilst greatly improved from the previous season, were still impacted by the necessity to run gins
Directors
slower to ensure adequate moisture reconstitution. Despite this the overall ginning contribution improved by
Company secretary
The names, qualifications and experience of the company’s directors that held office throughout the financial
25%.
Bailey Garcha, 45, BLLB., BFA., Dip. Legal Studies, Dip. Legal Practice, ACIS, GAICD
year and up to the date of this report, are set out on pages 14 to 15.
Mr Garcha joined Namoi Cotton in July 2003 and has previously held legal and commercial positions with
Namoi Cotton has continued to invest in its ginning network to improve service offerings to growers and drive
Minter Ellison Lawyers, Sparke Helmore Lawyers and NSW Treasury.
productivity improvements in the ginning business completing significant projects prior to the commencement
of ginning of the 2018 crop. These projects included the installation of a fourth gin stand at Trangie and
Board & committee meeting attendance
upgrades to cleaning and moisture equipment of the Wathagar gin.
Meetings held and attended by each of the directors during the financial year were as follows:
-
1
22
Audit
Safety
MFRM 2
-
-
1
-
1
1
-
1
1
1
1
1
1
1
1
1
4
3
1
-
3
3
-
-
Financial
Risk
-
2
2
-
2
1
1
2
2
20
22
18
22
21
16
17
17
Directors'
Meetings1
Committee Meetings1
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 (LTIFR) from 23 down to 15 compared to the previous year.
The improvement in LTIFR can be attributed to the continuing roll out of Namoi Cotton’s technology-based
Nominations
Work Health and Environment systems which enhances compliance reporting and management in the areas of
&
Remuneration
Fatigue, Respiratory management and application of appropriate PPE across all facets of the business.
-
T Watson (Chairman)
Namoi Cotton’s seed trading business shipped and handled 260,000Mt (2017 crop: 266,000Mt), with a positive
4
SC Boydell
contribution recorded.
4
RA Anderson
-
G Price
2
R Green
Joint Ventures and Associates
J Jackson 3
-
NCA’s total cotton lint marketing volumes procured for the 2018 season were 817,000 bales (2017 season:
J Hamparsum 3
2
636,000 bales). This reflects a 28% improvement in volume traded which was largely associated with larger
J Di Leo 3
2
Australian production. Lint marketing gross margins continued to be under pressure through competition to
-
2
M Boyce (resigned 24 April 2018)
secure cotton and distribution costs were unfavourable due to limited opportunity to efficiently share rail
services with reduced packing volumes. The impact of delayed shipments led to a significant increase in
Total number of meetings held
inventory funding levels through the second half where associated working capital funding lines would
normally have been significantly reduced. An increase in finance costs of $1.56m (Namoi share) has ensued.
1 All board members were available to attend directors’ meetings and relevant committee meetings. Prior to resigning
This has contributed to a $0.95 million deterioration in Namoi Cotton’s share of NCA’s lint business in the
M Boyce was available to attend 1 meeting of 2 Directors’ meetings held.
2 MFRM refers to the Marketing and Financial Risk Management Committee now called the Financial Risk Committee.
financial results over the prior year.
3 Appointed Directors on 7 June 2018.
NCA’s commodity packing business packed 55,000Mt in 2018 (2017 crop: 168,000Mt) principally chickpeas.
Committee membership
Packing volumes declined from the favourable volumes achieved in the preceding year through adverse
As at the date of this report, the company had an Audit Committee, Financial Risk Committee, Safety
agronomic conditions. The volumes of chickpea packed in the year was supported by carryover 2017 crop and
Committee and Nominations & Remuneration Committee. Set out below is the representatives for the various
reflects a decline in the total chickpea crop to 300,000Mt (2017: 1,100,000Mt).
Committees.
The Board has considered the historical performance of the joint venture over its 6 years of operation to be
insufficient to support the carrying value under the equity method at which Namoi Cotton has been carrying
the investment in the joint venture. While measures have been enacted to provide greater potential for
Page 7
returns when better seasonal conditions return and through improved operational efficiency, our assessment
has resulted in the booking of an impairment loss in the amount of $3.6m (in respect to our 51% interest) in
Page 9
the current year.
Namoi Cotton’s 15% interest in the COA and CPL recorded a loss of $4.8 million (2018: loss of $1.4 million).
This loss includes the closure of the Narrabri crush facility in late 2018, (with an embedded impairment of the
assets), associated staff redundancy costs and trading losses.
Year Ended 28 February 2019
Directors’ Report
Year Ended 28 February 2019
Directors’ Report
4
2
1
1
4
-
-
Year Ended 28 February 2019
Directors’ Report
Page 5
2019 ANNUAL REPORT | 21
Namoi Cotton Limited
Notes:
·
26 February 2019 the Marketing and Financial Risk Management Committee was changed to the Financial
Risk Committee.
26 February 2019 a new Safety Committee was established.
22 October 2018 the Audit & Compliance Committee, changed its title to Audit Committee.
·
·
Members acting on the committees of the Board during the year were:
Audit
RA Anderson (Chairman)
J Di Leo
J Hamparsum
SC Boydell
R Green
M Boyce
Financial Risk
R Green (Chairman)
G Price
RA Anderson
J Jackson
J Di Leo
SC Boydell
Nominations and
Remuneration
J Jackson (Chairman)
SC Boydell
T Watson
R Green
RA Anderson
M Boyce
Safety
R Green (Chairman)
SC Boydell
RA Anderson
G Price
T Watson
J Hamparsum
J Jackson
J Di Leo
Notes:
Mr R Green ceased being on the Audit Committee effective 28 August 2018
Mr R Anderson ceased to be on the Nominations and Remuneration Committee 28 August 2018
Mr SC Boydell ceased to be on the Financial Risk Committee effective 28 August 2018
Mr M Boyce resigned from the Board and Committees effective 24 April 2018.
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.
Changes to KMP
The following changes in KMP occurred in the year ended 28 February 2019.
Non-Executive Directors
Michael Boyce resigned as a Non-Executive Director effective 24 April 2018.
James Jackson joined Namoi Cotton as Non-Executive Director effective 7 June 2018 (re-elected at the 2018
AGM).
Juanita Hamparsum joined Namoi Cotton as Non-Executive Director effective 7 June 2018 (re-elected at the
2018 AGM).
Joseph Di Leo joined Namoi Cotton as Non-Executive Director effective 7 June 2018 (re-elected at the 2018
AGM).
Tim Watson appointed Chairman 29 August 2018.
Stuart Boydell resigned as Chairman 29 August 2018.
Senior Executives
There has been one change to KMP in the period after the reporting date and prior to the date when this
financial report was authorised for issue.
Jeremy Callachor, Chief Executive Officer, ceased employment with Namoi Cotton effective 8 March 2019.
Stuart Greenwood was appointed to the position of Interim Acting CEO effective from close of business 8
March 2019.
Year Ended 28 February 2019
Directors’ Report
2019 ANNUAL REPORT | 22
Page 10
Namoi Cotton Limited
a) Details of Directors and Executives
Key Management Personnel for the 2019 Financial Year include the following persons:
Directors
Mr T J Watson
Mr S C Boydell
Mr R A Anderson
Mr G Price
Mr R Green
Mr J Jackson
Ms J Hamparsum
Mr J Di Leo
Mr M Boyce
Executives
Mr J Callachor
Mr S Greenwood
Mr D Lindsay
Mr B Garcha
Mr S McGregor
Mr A Mehl
Chairman, non-executive
Director, non-executive
Director, non-executive
Director, non-executive
Director, non-executive
Director, non-executive (appointed 7 June 2018)
Director, non-executive (appointed 7 June 2018)
Director, non-executive (appointed 7 June 2018)
Director, non-executive (resigned 24 April 2018)
Chief Executive Officer (resigned 8 March 2019)
Chief Financial Officer (appointed Interim Acting CEO - 8 March 2019)
General Manager – Grower Services and Marketing
General Counsel and Company Secretary
Chief Operations Officer
Chief Information Officer (appointed 28 May 2018)
b) Compensation of KMP
Compensation Policy
For Namoi Cotton the following principles in its compensation framework apply:
·
·
·
Provide market competitive remuneration;
Link executive rewards to company performance and to align with the interests of shareholders; and
A portion of executive compensation is ‘at risk’, dependent upon the financial performance of the
company and the individual executive meeting pre-determined performance benchmarks (individual key
performance indicators KPI’s);
Nominations and Remuneration Committee
The Nominations and 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 Nominations and 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 team of executive employees.
In considering the impact of the Group’s performance on shareholder wealth, the Directors have regard to
various factors including the table of metrics detailed on page 30 – Group financial performance and position.
Compensation Structure
In accordance with best practice corporate governance, the structure of non-executive director and executive
compensation is separate and distinct.
Year Ended 28 February 2019
Directors’ Report
Page 11
2019 ANNUAL REPORT | 23
Namoi Cotton Limited
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 with the appropriate qualifications, experience and skills and compensate directors for the
time required to exercise its duties as a director.
Structure
The Constitution for Namoi Cotton Limited provides for aggregate directors’ fees of up to $850,000 per annum
to be paid to Directors. For the 2019 financial year the aggregate directors’ fees paid was $621,232.
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.
Any director in office at 10 October 2017 who has or will serve two terms (6 years) 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 2019 is detailed on page 27 of
this report.
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 in order to:
·
·
·
reward executives for performance against targets set by reference to appropriate benchmarks;
align the interests, actions and behaviors of executives with those of shareholders;
link rewards with the strategic goals and performance of the company to drive long term sustainable
growth; and
ensure total compensation is competitive by market standards and aligned to impact and accountability.
·
Structure
Employment agreements have been agreed with the Interim Acting CEO and other KMP. Details
of these contracts are provided on page 25 to 26 of this report.
Each KMP agreement includes compensation which consists of the following key elements:
·
·
Fixed Compensation; and
Variable Compensation comprising Short Term Incentives (STI).
The Nominations and Remuneration Committee establishes the proportion of fixed and variable (potential STI)
compensation for KMP.
Fixed Compensation
Objective
The Nominations and 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.
At the start of the 2019 Financial Year, as part of the annual company fixed remuneration review, the CEO and
Senior Executive KMP had their remuneration reviewed. As part of this annual review Senior Executives
received a fixed remuneration increase ranging from 1.5% to 1.7% and the CEO received a fixed remuneration
increase of 5.5% effective from 12 June 2018. The increases were in line with standard consumer price index
movements and on the basis the CEO had not been reviewed since 25 June 2013 for the fixed compensation of
his contract of employment.
Year Ended 28 February 2019
Directors’ Report
2019 ANNUAL REPORT | 24
Page 12
Namoi Cotton Limited
Effective from 8 March 2019, the fixed remuneration for Mr Stuart Greenwood, for the period in which he acts
as Interim Acting CEO for the Company has increased by $100,000 per annum (pro-rata for lesser period) plus
superannuation legislation requirements.
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.
For the 2019 financial year the STI compensation included an ‘at risk bonus’ element or hurdle which
constitutes forty percent of the executives’ overall available STI compensation.
The remaining sixty percent of each executive’s STI compensation was dependent upon the achievement of
financial and non-financial individual KPI’s in the 2019 financial year. The review of Executives KPI’s, excluding
the former CEO, was undertaken in March 2019. 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 Nominations and Remuneration committee.
However, when taking into account this discretion, the committee considers the above criteria in determining
the appropriate allocation.
For the 2019 financial year 69% (2018: 78% amounting to $272,500) of the STI compensation (both
components) was accrued in the financial statements which amount to $252,500. In March 2019 (excluding
the former CEO) the board approved to pay 70.6% to 80% of the STI compensation for the KMP Executives, the
total payment for Executive STI’s (excluding the former CEO) for the 2019 financial year was $177,500.
iv) Contract for Services
Employment Contracts
Major provisions of KMP employment agreements are set out below.
Mr Jeremy Callachor, Chief Executive Officer (resigned 8 March 2019)
·
·
Term of agreement - open
Fixed compensation, inclusive of superannuation, for the year ended 28 February 2019 of $475,000 (28
February 2018: $450,000)
Variable compensation, for the year ended 28 February 2019 of $75,000 (28 February 2018: $120,000)
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 fixed compensation
Period of notice to be given by employee or employer - 12 weeks
As part of Mr Jeremy Callachor’s resignation he was paid a severance payment of $578,470, which
included statutory entitlements for annual leave and long service leave. This amount was paid on 8 March
2019.
·
·
·
·
·
Year Ended 28 February 2019
Directors’ Report
Page 13
2019 ANNUAL REPORT | 25
Namoi Cotton Limited
Mr Stuart Greenwood, Chief Financial Officer (and Acting Interim CEO from 8 March 2019)
·
·
Term of agreement – open
Fixed compensation, inclusive of superannuation, for the year ended 28 February 2019 of $271,000 (28
February 2018: $266,500)
Variable compensation, for the year ended 28 February 2019 of $38,500 (28 February 2018: $37,500)
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
As part of Mr Stuart Greenwood undertaking the role of Acting Interim CEO and Chief Financial Officer he
will be paid $100,000 plus superannuation per annum on a pro-rata basis in addition to his base salary
from 8 March 2019 during the interim period.
·
·
·
·
·
Mr Balhar Garcha, General Counsel and Company Secretary
·
·
Term of agreement – open
Fixed compensation, inclusive of superannuation, for the year ended 28 February 2019 of $276,000 (28
February 2018: $271,500)
Variable compensation, for the year ended 28 February 2019 of $35,000 (28 February 2018: $35,000)
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
·
·
·
·
Mr David Lindsay, General Manager - Grower Services and Marketing
·
·
Term of agreement – open
Fixed compensation, inclusive of superannuation, for the year ended 28 February 2019 of $297,000 (28
February 2018: $292,500)
Variable compensation, for the year ended 28 February 2019 of $30,000 (28 February 2018: $30,000)
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 2019 of $304,610 (28
February 2018: $300,111)
Variable compensation, for the year ended 28 February 2019 of $50,000 (28 February 2018: $50,000)
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 Alex Mehl, Chief Information Officer (appointed 28 May 2018)
·
·
Term of Agreement – open
Fixed compensation, inclusive of superannuation, for the year ended 28 February 2019 of $260,000 (28
February 2018: $nil)
Variable compensation, for the year ended 28 February 2019 of $24,000 prorated from date of
appointment (28 February 2018: $nil)
Period of notice to be given by employee or employer – 4 weeks
·
·
Year Ended 28 February 2019
Directors’ Report
2019 ANNUAL REPORT | 26
Page 14
Namoi Cotton Limited
The table below sets out the remuneration paid or payable to the Directors, CEO and Senior Executive KMP for
the financial year ended 28 February 2019:
v) Compensation of Key Management Personnel for the Year Ended 28 February 2019
Short-term Employee benefits
Post-employment Benefits
Long-term
Benefits
Salary & Fees Cash Bonus
Annual
Leave 2
Superannuation
Retirement
Benefits 1
Long Service
Leave 2
Termination
Benefits
Total
%
Performance
Related
90,577
70,269
90,115
105,500
70,269
70,269
51,154
51,154
51,154
464,954
279,737
259,944
253,819
293,795
180,822
-
-
-
-
-
-
-
-
-
75,000
30,000
35,000
38,500
50,000
24,000
2,383,532
252,500
-
-
-
-
-
-
-
-
-
2,137
(3,485)
19,766
7,551
6,270
7,167
39,406
8,605
6,676
8,561
997
6,676
6,676
4,860
4,860
4,860
22,480
17,951
18,667
19,108
22,006
17,917
3,500
-
-
(95,000)
-
9,500
-
-
-
-
-
-
-
-
-
170,900
(82,000)
-
-
-
-
-
-
-
-
-
4,548
(252)
6,831
7,925
(8,412)
-
10,640
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
102,682
76,945
98,676
11,497
76,945
86,445
56,014
56,014
56,014
569,119
323,951
340,208
326,903
363,659
229,906
2,774,978
-
-
-
-
-
-
-
-
-
16.8%
9.3%
10.3%
11.8%
13.7%
10.4%
Directors
T Watson
RA Anderson
SC Boydell
M Boyce 3
G Price
R Green
J Jackson
J Hamparsum
J Di Leo
Executives
J Callachor 4
D Lindsay 2
B Garcha
S Greenwood
S McGregor 2
A Mehl 5
1. Movement in accrued retirement benefits for the year ended 28 February 2019.
2. Negatives relate to the taking of leave within the period greater than entitlements accrued during the period.
3. Resigned on 24 April 2018 and was paid previously accrued retirement benefits.
4. Resigned subsequent to year end on 8 March 2019.
5. Appointed 28 May 2019.
vi) Compensation of Key Management Personnel for the Year Ended 28 February 2018
Short-term Employee benefits
Post-employment Benefits
Long-term
Benefits
Salary & Fees Cash Bonus 4
Annual
Leave 2
Superannuation
Retirement
Benefits 1
Long Service
Leave 2
Termination
Benefits
Total
%
Performance
Related
75,288
60,231
47,683
102,442
37,644
47,683
35,135
430,079
272,592
255,866
251,511
288,521
1,904,675
-
-
-
-
-
-
-
-
-
-
-
-
-
-
120,000
30,000
35,000
37,500
50,000
272,500
1,601
(5,436)
(825)
9,108
7,377
11,825
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
-
-
-
-
-
-
-
-
-
-
-
-
7,622
5,181
6,024
4,173
(2,804)
132,273
(54,750)
20,196
-
-
-
-
-
-
-
-
-
-
-
-
-
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%
Directors
SC Boydell
RA Anderson
M Boyce
B Coulton 3
G Price
R Green
T Watson
Executives
J Callachor
D Lindsay 2
B Garcha 2
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 leave within the period greater than entitlements accrued during the period.
3. Resigned on 31 January 2018 and was paid previously accrued retirement benefi ts.
4. Includes Restructure bonus as per variable compensation disclosure in Directors' Report.
Year Ended 28 February 2019
Directors’ Report
Page 15
2019 ANNUAL REPORT | 27
Namoi Cotton Limited
c)
Shareholdings of KMP1
Balance held
Granted as
On Exercise
1 March 2018
Remuneration
of Option
Net Change
Other 2
Balance held
28 February 2019
Year ended 28 February 2019
Ordinary Shares
Ordinary
Shares
Ordinary
Shares
Ordinary
Shares
Ordinary Shares
Directors
T Watson (Chairman)
SC Boydell
RA Anderson
M Boyce
G Price
R Green
J Jackson
J Hamparsum
J Di Leo
Executives
J Callachor
D Lindsay
B Garcha
S Greenwood
S McGregor
A Mehl
707,629
714,387
-
775,272
690,300
-
-
-
-
4,000
25,000
-
6,000
2,000
-
2,924,588
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(775,272)
-
-
13,471,111
158,504
-
-
-
-
-
-
-
707,629
714,387
-
-
690,300
-
13,471,111
158,504
-
4,000
25,000
-
6,000
2,000
-
12,854,343
15,778,931
1 Includes ordinary shares that are held di rectly, indirectly and beneficially by KMP.
2 Net Change Other includes shares held at appointment and retirement.
All shares above are held in the 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 (2018: $2,630). This amount was repaid subsequent to year end.
e) Marketing and ginning transactions and balances with KMP
Transactions with directors and their related parties were in accordance with the eligibility criteria to be
appointed as a Grower Director. Grower directors are required to:
·
have ginned at least 1,500 cotton bales in aggregate per cotton season at a Namoi Cotton gin in at least
three out of the last five cotton seasons; and
sell at least 50% of their seed cotton production at any Namoi Cotton gin in at least three out of the last
five cotton seasons; or
sell at least 50% of their seed cotton production which is grown within 100km of any Namoi Cotton gin at
a Namoi Cotton gin in at least three out of the last five cotton seasons; and
is the registered owner or lessee of cotton farming property which annually can plant a minimum of 150
hectares of seed cotton and is capable of producing 1,500 cotton bales in aggregate per cotton season to
be ginned at a Namoi Cotton gin.
·
·
·
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:
Year Ended 28 February 2019
Directors’ Report
2019 ANNUAL REPORT | 28
Page 16
Namoi Cotton Limited
Name
Mr T Watson
Mr SC Boydell
Mr G Price
Ms J Hamparsum
Cotton Purchases
Consolidated and Parent entity
Ginning Charges Levied
Grain & Seed Purchases
28 Feb
2019
$
2,142,079
3,136,449
2,117,930
235,264
7,631,722
28 Feb
2018
$
614,611
1,381,884
2,915,452
-
4,911,947
28 Feb
2019
$
930,783
336,209
243,596
28 Feb
2018
$
610,211
157,433
353,515
139,896
1,650,484
-
1,121,159
28 Feb
2019
$
200,000
338,768
202,452
128,614
869,834
28 Feb
2018
$
252,951
183,672
452,466
-
889,089
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 Namoi Cotton Alliance (“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;
Costs associated with the provision of crop finance;
Grower member share fixed capital entitlement in aggregate $nil (2018: $nil).
Cotton seed sales; and
Travel expense reimbursements.
·
·
·
·
·
g) Compensation Options
Namoi Cotton does not currently and has not historically offered any options over its shares. As such, no
options have either been granted or exercised during the period or are on offer at the end of the period.
Year Ended 28 February 2019
Directors’ Report
Page 17
2019 ANNUAL REPORT | 29
Namoi Cotton Limited
h) Group financial performance and position
The following table highlights key components of the group’s financial performance for the last 5 years.
Earnings per CCU (cents)
Distribution per CCU (cents) 1
CCU/share price at year end (cents)
CCU buyback average (cents)
Earnings per Ordinary Share (diluted)
Dividend per Ordinary Share (cents/share) 1
Share price at year end (cents)
Net assets ($m)
Net assets per CCU (cents)
Net assets per ordinary share (cents) - basic 2
Net assets per ordinary share (cents) - diluted 3
2019
2018
2017
2016
0.2
-
49.0
N/a
5.7
0.5
34.0
N/a
2015
(0.1)
-
31.0
N/a
(0.4)
1.9
40.0
132.4
99.0
92.8
4.7
-
53.0
131.8
103.4
92.4
123.8
112.7
124.6
112.5
118.8
113.4
1 Represents amounts paid during the financial year (refer note 6).
2 Ordinary shares on issue at balance date. Calculated retrospectivel y for 2017 (127.4m).
3 Diluted for conversion of residual capital stock to ordi nary shares. Calculated
retrospectively for 2017 (142.7m).
End of Remuneration Report
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
company were as set out on page 28.
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 Financial Risk Committee, which identifies and monitors the company’s risk profile on a
timely basis in addition to reviewing management of portfolio exposures. The Financial Risk Committee
ensures Namoi Cotton’s financial and risk management policies are aligned to its corporate philosophies and
principles. The Financial Risk Committee regularly reports to the full board.
Year Ended 28 February 2019
Directors’ Report
2019 ANNUAL REPORT | 30
Page 18
Namoi Cotton Limited
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
Financial Risk Committee has developed comprehensive policies and procedures to monitor, assess and
manage all our major business risks.
Key responsibilities of the Financial Risk Committee 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;
·
· Monitoring and reviewing funding and liquidity structure and management; and
· Monitoring the development of long-term strategic initiatives for marketing and risk management.
Receiving external reports relative to risk management activities;
The Audit Committee oversees the audit function and to ensure compliance with risk management policies
and the development of a risk register to identify and monitor potential risks of the company.
The Safety Committee is tasked with monitoring workplace health, safety and environment risks identified
as part of the risk register.
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 2019 Annual Report due in June 2019 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 26 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 32 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
Tim Watson
Director
Brisbane
30 April 2019
Year Ended 28 February 2019
Directors’ Report
Page 19
2019 ANNUAL REPORT | 31
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
Auditor’s independence declaration to the directors of Namoi Cotton
Limited
As lead auditor for the audit of the financial report of Namoi Cotton Limited for the financial year ended
28 February 2019, I declare to the best of my knowledge and belief, there have been:
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Namoi Cotton Limited and the entities it controlled during the financial
year.
Ernst & Young
Paula McLuskie
Partner
30 April 2019
2019 ANNUAL REPORT | 32
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
We have audited the financial report of Namoi Cotton Limited (the Company) and its subsidiaries
(collectively the Group), which comprises:
•
•
•
•
the Group consolidated and Company statements of financial position as at 28 February 2019;
the Group consolidated and Company statements of comprehensive income, statements of
changes in equity and statements of cash flows for the year then ended;
notes to the financial statements, including a summary of significant accounting policies; and
the directors' declaration.
In our opinion, the accompanying financial report is in accordance with the Corporations Act 2001,
including:
a)
b)
giving a true and fair view of the Company’s and the Group's financial position as at 28 February
2019 and of their financial performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional 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
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
for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report 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.
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2019 ANNUAL REPORT | 33
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
procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying financial report.
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
procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying financial report.
How our audit addressed the key audit matter
1. Fair value of ginning assets
Why significant
Our audit procedures included the following:
►
►
►
►
►
►
►
►
How our audit addressed the key audit matter
Our audit procedures included the following:
Evaluated the input assumptions and estimates made
by the Group in applying its valuation methodology
including sustainable bales and earnings against
average production and earnings over the previous six
years (covering a broad spread of high and low
production seasons) to take into account the seasonal
variations and considered any changes or lack of
Evaluated the input assumptions and estimates made
changes in other assumptions or estimates since the
by the Group in applying its valuation methodology
prior year including growth rates and discount rates;
including sustainable bales and earnings against
average production and earnings over the previous six
Examined the independent valuation obtained in the
years (covering a broad spread of high and low
current year and evaluated the competence,
production seasons) to take into account the seasonal
capabilities and objectivity of the external valuation
variations and considered any changes or lack of
expert and evaluated the appropriateness of the
changes in other assumptions or estimates since the
external expert’s work;
prior year including growth rates and discount rates;
Involved our valuation specialists to assist in assessing
Examined the independent valuation obtained in the
the modelling used by the Group to support its
current year and evaluated the competence,
valuation, by evaluating the model calculation
capabilities and objectivity of the external valuation
methodology and discount rates used; and
expert and evaluated the appropriateness of the
Assessed the adequacy of the related financial report
external expert’s work;
disclosures.
Involved our valuation specialists to assist in assessing
the modelling used by the Group to support its
valuation, by evaluating the model calculation
methodology and discount rates used; and
Assessed the adequacy of the related financial report
disclosures.
The Company and the Group measure ginning
infrastructure assets (“ginning assets”) at fair value as
1. Fair value of ginning assets
disclosed in Note 1(n) to the financial statements.
Ginning assets represent 57.1% of total assets of the
Company and 55.6% of total assets of the Group.
Why significant
The Group uses an internally generated discounted
The Company and the Group measure ginning
cash flow model to determine the fair value of the
infrastructure assets (“ginning assets”) at fair value as
ginning assets supported by periodic valuations
disclosed in Note 1(n) to the financial statements.
conducted by external experts on a three-year rolling
Ginning assets represent 57.1% of total assets of the
basis.
Company and 55.6% of total assets of the Group.
The Group commissioned an independent valuation of
The Group uses an internally generated discounted
ginning assets to provide external support for the
cash flow model to determine the fair value of the
assessment of fair value as at 28 February 2019.
ginning assets supported by periodic valuations
The valuation of the ginning assets at fair value is
conducted by external experts on a three-year rolling
highly dependent on estimates and assumptions, such
basis.
as sustainable bales, discount rates, market
The Group commissioned an independent valuation of
knowledge, bale contributions and revenue growth
ginning assets to provide external support for the
rates.
assessment of fair value as at 28 February 2019.
The assumptions relating to the valuations are
The valuation of the ginning assets at fair value is
disclosed in Note 15 and Policy Note 1(n).
highly dependent on estimates and assumptions, such
Given the quantum and complexity of the valuation of
as sustainable bales, discount rates, market
ginning assets and the level of the disclosures relating
knowledge, bale contributions and revenue growth
to the assumptions used in the valuation, this was
rates.
determined to be a key audit matter.
The assumptions relating to the valuations are
disclosed in Note 15 and Policy Note 1(n).
Given the quantum and complexity of the valuation of
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.
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2. Investment in Namoi Cotton Alliance Joint Venture
Why significant
How our audit addressed the key audit matter
►
►
At 28 February 2019 the Group held a 51% stake in
the Namoi Cotton Alliance joint venture (“NCA)”.
2. Investment in Namoi Cotton Alliance Joint Venture
As explained in Note 1 to the financial statements, this
investment was accounted for using the equity
Why significant
method of accounting in accordance with Australian
Accounting Standards. An investment of $40.5m was
At 28 February 2019 the Group held a 51% stake in
recorded on the Group’s consolidated balance sheet.
the Namoi Cotton Alliance joint venture (“NCA)”.
This is reflected in the Company balance sheet in
Trade and Other Receivables where a loan was made
As explained in Note 1 to the financial statements, this
to a controlled entity which holds the interest in NCA.
investment was accounted for using the equity
An equity accounted loss of $1.1m contributed to the
method of accounting in accordance with Australian
financial performance of the Group.
Accounting Standards. An investment of $40.5m was
recorded on the Group’s consolidated balance sheet.
The Group also assesses the carrying amount of its
This is reflected in the Company balance sheet in
equity accounted investment in NCA for impairment at
Trade and Other Receivables where a loan was made
each balance date. The Group’s impairment
assessment is based NCA’s fair value less costs of
to a controlled entity which holds the interest in NCA.
disposal (FVLCD) and is determined with reference to
An equity accounted loss of $1.1m contributed to the
a discounted cash flow forecast. The cash flow
financial performance of the Group.
forecast is based on assumptions as to NCA’s future
The Group also assesses the carrying amount of its
operating and financial performance. These
equity accounted investment in NCA for impairment at
assumptions include judgements and estimates
each balance date. The Group’s impairment
relating to growth rates, operational efficiency
assessment is based NCA’s fair value less costs of
improvements, forecast market conditions and
disposal (FVLCD) and is determined with reference to
discount rates. The Group’s impairment testing
a discounted cash flow forecast. The cash flow
resulted in the recognition of an impairment loss of
forecast is based on assumptions as to NCA’s future
$3.6 million for the year ended 28 February 2019.
operating and financial performance. These
assumptions include judgements and estimates
The significant of the carrying amount of the Group’s
relating to growth rates, operational efficiency
investment in NCA to its financial position, NCA’s
improvements, forecast market conditions and
contribution to the Group’s financial performance and
discount rates. The Group’s impairment testing
judgements and estimates involved in impairment
resulted in the recognition of an impairment loss of
testing, mean this was a key audit matter.
$3.6 million for the year ended 28 February 2019.
►
►
►
►
►
►
►
►
►
Details of the Group’s investment in this joint venture
The significant of the carrying amount of the Group’s
are outlined in Note 11 to the consolidated financial
investment in NCA to its financial position, NCA’s
contribution to the Group’s financial performance and
statements.
judgements and estimates involved in impairment
testing, mean this was a key audit matter.
►
►
Our audit procedures related to the carrying value of
Namoi Cotton’s investment in NCA and the equity
accounted result included the following:
►
How our audit addressed the key audit matter
Audited the financial statements of NCA for the year
ending 28 February 2019 and issued a separate audit
report to the participants of the joint venturer;
Our audit procedures related to the carrying value of
►
Namoi Cotton’s investment in NCA and the equity
accounted result included the following:
In the context of the audit of the Company and the
Group, we evaluated the scope of the NCA audit and
the execution of audit procedures, significant areas of
Audited the financial statements of NCA for the year
estimation and judgement and audit findings;
ending 28 February 2019 and issued a separate audit
Enquired of NCA management in relation to areas of
report to the participants of the joint venturer;
judgement and movements in the balance sheet and
In the context of the audit of the Company and the
income statement at year end and through to the date
Group, we evaluated the scope of the NCA audit and
of this report;
the execution of audit procedures, significant areas of
Considered the monthly results reported by NCA to
estimation and judgement and audit findings;
the Group during the year;
Enquired of NCA management in relation to areas of
Recalculated the Group’s share of the equity-
judgement and movements in the balance sheet and
accounted result with reference to the audited
income statement at year end and through to the date
financial statements of NCA for the year ended 28
of this report;
February 2019 and ensured these were correctly
Considered the monthly results reported by NCA to
reflected in the carrying value of NCA;
the Group during the year;
Involved our valuation specialist to test the
Recalculated the Group’s share of the equity-
mathematical accuracy of the impairment model,
accounted result with reference to the audited
evaluate the appropriateness of the methodology
financial statements of NCA for the year ended 28
used to measure FVLCD and assess the discount rate
February 2019 and ensured these were correctly
used;
reflected in the carrying value of NCA;
Assessed future cash flow assumptions through
Involved our valuation specialist to test the
comparison with current trading performance, impact
mathematical accuracy of the impairment model,
of new contractual arrangements, externally derived
evaluate the appropriateness of the methodology
data (where applicable) and other evidence and
used to measure FVLCD and assess the discount rate
enquiry with the Group in respect of key growth and
used;
trading assumptions; and
Assessed future cash flow assumptions through
Assessed the adequacy of the related financial report
comparison with current trading performance, impact
disclosures.
of new contractual arrangements, externally derived
data (where applicable) and other evidence and
enquiry with the Group in respect of key growth and
trading assumptions; and
►
Assessed the adequacy of the related financial report
disclosures.
Details of the Group’s investment in this joint venture
are outlined in Note 11 to the consolidated financial
statements.
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3. AASB 9 Financial instruments and AASB 15 Revenue from contracts with customers
3. AASB 9 Financial instruments and AASB 15 Revenue from contracts with customers
transition disclosure adjustments relating to commodity contracts
transition disclosure adjustments relating to commodity contracts
Why significant
How our audit addressed the key audit matter
Why significant
How our audit addressed the key audit matter
The transition disclosure adjustments recorded in
respect of the initial application of AASB 9 Financial
instruments and AASB 15 Revenue from contracts
with customers during the period was a key audit
matter because of the significance of the impact on
the disclosure of income from commodity contracts
designated as derivatives in the Statement of profit
and loss and other comprehensive income.
Details of the Group’s transition adjustments are
outlined in Note 1(a) to the consolidated financial
statements.
►
Our audit procedures included the following:
The transition disclosure adjustments recorded in
respect of the initial application of AASB 9 Financial
Assessed the Group and Company’s processes and
instruments and AASB 15 Revenue from contracts
controls to determining the impact of the transition to
with customers during the period was a key audit
AASB 9 and AASB 15;
matter because of the significance of the impact on
the disclosure of income from commodity contracts
► We reviewed the Group’s assessment of the exclusion
designated as derivatives in the Statement of profit
and loss and other comprehensive income.
of commodity contracts from AASB 15 and application
of the requirements of AASB 9 and conclusions
reached, with respect to revenue recognition;
Details of the Group’s transition adjustments are
outlined in Note 1(a) to the consolidated financial
statements.
Assessed the transition adjustments recorded were
compliant with the requirements of AASB 9 and AASB
15; and
Our audit procedures included the following:
►
Assessed the Group and Company’s processes and
controls to determining the impact of the transition to
AASB 9 and AASB 15;
► We reviewed the Group’s assessment of the exclusion
of commodity contracts from AASB 15 and application
of the requirements of AASB 9 and conclusions
reached, with respect to revenue recognition;
►
Assessed the transition adjustments recorded were
compliant with the requirements of AASB 9 and AASB
15; and
Assessed the adequacy of the related financial report
disclosures.
►
Assessed the adequacy of the related financial report
disclosures.
►
►
Information other than the financial report and auditor’s report thereon
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 2019 Annual Report other than the financial report and our
auditor’s report thereon. We obtained the Directors’ Report that is to be included in the Annual
Report, prior to the date of this auditor’s report, and we expect to obtain the remaining sections of the
Annual Report after the date of this auditor’s report.
The directors are responsible for the other information. The other information comprises the
information included in the Company’s 2019 Annual Report other than the financial report and our
auditor’s report thereon. We obtained the Directors’ Report that is to be included in the Annual
Report, prior to the date of this auditor’s report, and we expect to obtain the remaining sections of the
Annual Report after the date of this auditor’s report.
Our opinion on the financial report does not cover the other information and we do not and will not
express any form of assurance conclusion thereon.
Our opinion on the financial report does not cover the other information and we do not and will not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed 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
required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the financial report
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the 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
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
the Company or Group or to cease operations, or have no realistic alternative but to do so.
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Auditor's responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgement and maintain professional scepticism throughout the audit. We also:
•
•
•
•
•
•
Identify and assess the risks of material misstatement of the financial report, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s or the Group’s internal control
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Company’s or Group’s ability to
continue as a going concern. If we conclude that a material uncertainty exists, we are required
to draw attention in our auditor’s report to the related disclosures in the financial report or, if
such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditor’s report. However, future events or conditions
may cause the Company or the Group to cease to continue as a going concern
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events
in a manner that achieves fair presentation
Obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Group to express an opinion on the financial report. We are
responsible for the direction, supervision and performance of the Group audit. We remain solely
responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
2019 ANNUAL REPORT | 37
From the matters communicated to the directors, we determine those matters that were of most
significance in the audit of the financial report of the current year and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
From the matters communicated to the directors, we determine those matters that were of most
significance in the audit of the financial report of the current year and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
Report on the audit of the remuneration report
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
Opinion on the remuneration report
From the matters communicated to the directors, we determine those matters that were of most
significance in the audit of the financial report of the current year and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
From the matters communicated to the directors, we determine those matters that were of most
From the matters communicated to the directors, we determine those matters that were of most
significance in the audit of the financial report of the current year and are therefore the key audit
significance in the audit of the financial report of the current year and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
reasonably be expected to outweigh the public interest benefits of such communication.
Report on the audit of the remuneration report
Opinion on the remuneration report
We have audited the Remuneration Report included in pages 10 to 18 of the directors' report for the
year ended 28 February 2019.
Report on the audit of the remuneration report
We have audited the Remuneration Report included in pages 10 to 18 of the directors' report for the
year ended 28 February 2019.
Report on the audit of the remuneration report
Report on the audit of the remuneration report
Opinion on the remuneration report
Opinion on the remuneration report
In our opinion, the Remuneration Report of Namoi Cotton Limited for the year ended 28 February
Opinion on the remuneration report
2019, complies with section 300A of the Corporations Act 2001.
We have audited the Remuneration Report included in pages 10 to 18 of the directors' report for the
Responsibilities
year ended 28 February 2019.
In our opinion, the Remuneration Report of Namoi Cotton Limited for the year ended 28 February
2019, complies with section 300A of the Corporations Act 2001.
We have audited the Remuneration Report included in pages 10 to 18 of the directors' report for the
year ended 28 February 2019.
We have audited the Remuneration Report included in pages 10 to 18 of the directors' report for the
year ended 28 February 2019.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
In our opinion, the Remuneration Report of Namoi Cotton Limited for the year ended 28 February
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
2019, complies with section 300A of the Corporations Act 2001.
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
Responsibilities
In our opinion, the Remuneration Report of Namoi Cotton Limited for the year ended 28 February
2019, complies with section 300A of the Corporations Act 2001.
In our opinion, the Remuneration Report of Namoi Cotton Limited for the year ended 28 February
2019, complies with section 300A of the Corporations Act 2001.
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
The directors of the Company are responsible for the preparation and presentation of the
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
accordance with Australian Auditing Standards.
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
Responsibilities
Responsibilities
Ernst & Young
Ernst & Young
Paula McLuskie
Partner
Brisbane
30 April 2019
Paula McLuskie
Partner
Brisbane
30 April 2019
Ernst & Young
Ernst & Young
Ernst & Young
Paula McLuskie
Partner
Brisbane
30 April 2019
Paula McLuskie
Paula McLuskie
Partner
Partner
Brisbane
Brisbane
30 April 2019
30 April 2019
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
2019 ANNUAL REPORT | 38
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
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Namoi Cotton Limited
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 2019 and of their performance for the year ended on that date; and
ii)
complying with Accounting Standards and Corporations Regulations 2001;
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.
b)
c)
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 2019.
On behalf of the board
T WATSON
Director
Brisbane
30 April 2019
Year Ended 28 February 2019
Directors’ Declaration
Page 27
2019 ANNUAL REPORT | 39
Namoi Cotton Limited
STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME
for the year ended 28 February 2019
Revenue from customers
Revenue - other
Revenue
Trading margin gains
Other income/(loss)
Share of profit/(loss) of associates
and joint ventures
Processing and distribution costs
Employee benefits expense
Depreciation
Fair value decrement - ginning assets
Impairment - joint venture
Finance costs
Other expenses
Profit/(loss) before income tax
Income tax (expense)/benefit
Profit/(loss) attributable to the members
of Namoi Cotton Limited
Consolidated
$'000
Parent
$'000
28 Feb
2019
5,350
598
5,948
28 Feb
2018
3,588
617
4,205
28 Feb
2019
3,089
610
3,699
28 Feb
2018
3,362
616
3,978
83,534
79,535
83,534
79,535
-
480
(5,882)
(697)
(22,891)
(28,046)
(9,278)
(2,018)
(3,563)
(2,180)
(15,500)
124
(22,612)
(25,618)
(7,949)
-
-
(2,558)
(15,112)
9,674
-
-
(22,794)
(27,300)
(9,197)
(2,018)
-
(2,227)
(14,802)
8,895
480
54
(22,583)
(25,604)
(7,942)
-
-
(2,586)
(15,037)
10,295
(680)
(2,905)
(2,692)
(3,158)
(556)
6,769
6,203
7,137
Note
2a
2a
2a
2b
11
2c
15
11
2d
2e
3
Other comprehensive income items that will not
be reclassified subsequently to profit and loss:
Increment/(decrement) to asset revaluation
reserve (net of tax)
Profit/(loss) and other comprehensive income
attributable to the members of
Namoi Cotton Limited
1,258
-
1,258
-
702
6,769
7,461
7,137
Earnings per ordinary share
Basic earnings per share
Diluted earnings per share
Cents
28 Feb
2019
28 Feb
2018
(0.4)
(0.4)
5.3
4.7
Note
5
5
The above statement of profit and loss and other comprehensive income should be read
in conjunction with the accompanying notes.
Year Ended 28 February 2019
Statement of Profit and Loss and Other Comprehensive Income
Page 28
2019 ANNUAL REPORT | 40
Namoi Cotton Limited
BALANCE SHEET
as at 28 February 2019
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
Available-for-sale financial assets
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)
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
2019
28 Feb
2018
28 Feb
2019
28 Feb
2018
7
8
9
10
8
24
11
14
15
16
17
18
10
17
18
3
19
20
5,827
3,974
10,048
304
18,796
38,949
-
-
36,851
961
138,290
176,102
1,493
4,012
9,521
1,292
41,608
57,926
-
-
43,239
961
139,082
183,282
5,541
4,757
10,014
298
7,773
28,383
41,820
1,380
-
-
137,774
180,974
1,352
5,372
9,506
1,289
8,493
26,012
41,820
1,380
-
-
138,492
181,692
215,051
241,208
209,357
207,704
13,226
1,061
2,964
18,261
35,512
43,630
831
5,259
49,720
10,115
6,776
2,791
41,671
61,353
43,226
874
3,999
48,099
23,091
1,061
2,961
7,238
34,351
45,679
822
6,783
53,284
23,073
6,776
2,707
8,556
41,112
45,275
865
3,553
49,693
85,232
109,452
87,635
90,805
129,819
131,756
121,722
116,899
37,639
67,721
24,459
129,819
37,639
66,463
27,654
131,756
37,639
67,721
16,362
121,722
37,639
66,463
12,797
116,899
129,819
131,756
121,722
116,899
The above balance sheet should be read in conjunction with the accompanying notes.
Year Ended 28 February 2019
Balance Sheet
Page 29
2019 ANNUAL REPORT | 41
Namoi Cotton Limited
STATEMENT OF CASH FLOWS
for the year ended 28 February 2019
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
Dividends paid
Net cash inflow from financing
activities
Consolidated
$'000
Parent
$'000
Note
28 Feb
2019
28 Feb
2018
28 Feb
2019
28 Feb
2018
679,779
(371)
(102,723)
(553,524)
44
(2,176)
534,688
761
(101,309)
(414,420)
23
(2,426)
677,479
(370)
(100,601)
(553,464)
56
(2,223)
534,275
765
(100,778)
(414,402)
23
(2,453)
7b
21,029
17,317
20,877
17,430
(7,611)
(5,451)
(7,604)
(5,365)
653
203
653
203
-
(43)
61
(1,701)
(18)
14
-
(43)
61
(1,916)
(17)
13
(6,940)
(6,953)
(6,933)
(7,082)
5,557
(11,548)
(1,048)
1,048
(1,108)
(2,638)
10,553
(19,539)
(360)
360
(1,340)
-
5,557
(11,548)
(1,048)
1,048
(1,108)
(2,638)
10,553
(19,539)
(360)
360
(1,344)
-
7c
(9,737)
(10,326)
(9,737)
(10,330)
Net increase in cash
Add cash at the beginning of the financial year
Cash at end of the financial year
7a
4,352
1,475
5,827
38
1,437
1,475
4,207
1,334
5,541
18
1,316
1,334
The above statement of cash flows should be read in conjunction with the accompanying notes.
Year Ended 28 February 2019
Statement of Cash Flows
2019 ANNUAL REPORT | 42
Page 30
Namoi Cotton Limited
STATEMENT OF CHANGES IN EQUITY
for the year ended 28 February 2019
Consolidated $'000
Total equity at 1 March 2018
Net profit for the period
Other comprehensive income
Equity dividends
Total equity at 28 February 2019
Parent $'000
Total equity at 1 March 2018
Net profit for the period
Other comprehensive income
Equity dividends
Total equity at 28 February 2019
Consolidated $'000
Total equity at 1 March 2017
Net profit for the period
Other comprehensive income
CCU's converted to residual capital stock
Residual Capital Stock/Ordinary Shares
Equity dividends
Total equity at 28 February 2018
Parent $'000
Total equity at 1 March 2017
Net profit for the period
Other comprehensive income
CCU's converted to residual capital stock
Residual Capital Stock/Ordinary Shares
Equity dividends
Total equity at 28 February 2018
CCU
Asset
Premium Revaluation
Reserve
Reserve
(Note 20)
-
-
-
-
-
-
66,463
-
1,258
1,258
-
67,721
CCU
Asset
Premium Revaluation
Reserve
Reserve
(Note 20)
-
-
-
-
-
-
66,463
-
1,258
1,258
-
67,721
CCU
Asset
Premium Revaluation
Reserve
Reserve
(Note 20)
Issued
Capital 1
37,639
-
-
-
-
37,639
Issued
Capital 1
37,639
-
-
-
-
37,639
Issued
Capital 1
1,098
35,382
-
-
-
(1,098)
37,639
-
37,639
-
-
-
(35,382)
-
-
-
66,463
-
-
-
-
-
-
66,463
CCU
Asset
Premium Revaluation
Reserve
Reserve
(Note 20)
Issued
Capital 1
1,098
35,382
66,463
-
-
-
(35,382)
-
-
-
-
-
-
-
(1,098)
37,639
-
37,639
Retained
Earnings
Total
Equity
27,653
131,755
(556)
-
(556)
(2,638)
24,459
(556)
1,258
702
(2,638)
129,819
Retained
Earnings
Total
Equity
12,797
116,899
6,203
-
6,203
(2,638)
16,362
6,203
1,258
7,461
(2,638)
121,722
Retained
Earnings
Total
Equity
20,884
123,828
6,769
-
6,769
-
-
-
27,653
Retained
Earnings
5,660
7,137
-
7,137
-
6,769
-
6,769
(36,480)
37,639
-
131,756
Total
Equity
108,603
7,137
-
7,137
(36,480)
37,639
-
116,899
-
-
-
66,463
-
12,797
1 The shares of Namoi Cotton Limited have no par value.
The above statement of changes in equity should be read in conjunction with the accompanying notes.
Year Ended 28 February 2019
Statement of Changes in Equity
Page 31
2019 ANNUAL REPORT | 43
Namoi Cotton Limited
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 30 April 2019 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 Parent’s current liabilities exceed current assets. The net current liability position is mainly caused by loans
from controlled entities (refer to note 16).
At balance date Namoi Cotton completed execution of its 2019 finance facility renewal. The renewal included
the extension of the working capital finance facility from April 2019 to April 2020 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 1l and Note 27) and derivative
·
financial instruments (refer to Note 1m and Note 10);
Fair value of ginning assets (refer Note 1o and Note 15);
Impairment testing of property plant and equipment (refer to Note 1o and Note 15);
Classification of associates and joint ventures (refer to Note 1c and Note 11);
Treatment of deferred tax balances including tax loss recognition (refer to Note 1h and Note 3); and
Assessment of the useful lives of assets (refer to Note 1o)
·
·
·
·
·
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 2018 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 9 Financial Instruments effective 1 March 2018 (Refer to Note 1m);
AASB 15 Revenue from Contracts with Customers effective 1 March 2018 (Refer to Note 1f);
IFRIC Interpretation 22 Foreign Currency Transactions and Advance Consideration;
Year Ended 28 February 2019
Notes to the Financial Statements
2019 ANNUAL REPORT | 44
Page 32
Namoi Cotton Limited
As a result of the clarified scoping in AASB 15, Namoi has reassessed the classification of its contracts with
suppliers and customers and has concluded its Ginning and Seed Contracts and Marketing Contracts to be in
scope of AASB 9 in their entirety, with no components accounted for under AASB 15. Furthermore, since being
entirely out of scope of AASB 15, instead of only changes in the fair value of financial assets and financial
liabilities or their disposals being explicitly out of scope under AASB 118, the Group has retrospectively
changed the presentation of income and expense from realised sales and purchases to reflect only the trading
margin in the statement of profit or loss.
No changes were made in presentation of respective payables and receivables in the statement of financial
position, with the exception of lint marketing contracts which have been grossed up in the balance sheet and
retrospectively changed (refer note 10) since Namoi is still the one to bear the primary responsibility for
meeting its contractual obligations and the contracts are negotiated and signed separately with different
counterparties. Therefore, gross presentation in the statement of financial position is appropriate. Similarly,
the presentation of cash inflows and outflows in the statement of cash flows remained unchanged since the
criteria for net presentation under AASB 107 Cash flow statement are not met.
Please refer to the table below to illustrate the impacts on the statement of profit and loss (consolidated and
parent):
$'000
Disclosure
Under
AASB 139
28 Feb
2019
72,854
543,720
616,574
(342)
16,166
(15,588)
236
-
-
(5,882)
(474)
(549,745)
-
(28,046)
(9,278)
(2,018)
(3,563)
(2,180)
(15,500)
124
Revenue from customers
Revenue - other
Revenue
Financial instrument gains/(losses)
Currency derivatives
Purchase contracts
Sales contracts
Net financial instrument gains/(losses)
Other income/(loss)
Trading margin gains
Share of profit/(loss) of associates
and joint ventures
Changes in inventories of finished goods
Raw materials and consumables used
Processing and distribution costs
Employee benefits expense
Depreciation
Fair value decrement - ginning assets
Impairment - joint venture
Finance costs
Other expenses
Profit/(loss) before income tax
Consolidated
$'000
$'000
$'000
Disclosure Disclosure
Under
Transition AASB 9
Consolidated
$'000
$'000
Disclosure
Under
Transition AASB 9
28 Feb
2018
(56,594)
(423,139)
(479,733)
(323)
22,614
(22,548)
(257)
28 Feb
2018
3,588
617
4,205
-
-
-
-
-
480
Under
AASB 139
28 Feb
2018
60,183
423,755
483,938
28 Feb
2019
5,350
598
5,948
-
-
-
-
-
323
(22,614)
22,548
257
480
28 Feb
2019
(67,504)
(543,122)
(610,626)
342
(16,166)
15,588
(236)
-
83,534
83,534
-
79,535
79,535
-
(5,882)
(697)
-
(697)
474
549,745
(22,891)
-
-
-
-
-
-
-
-
-
(22,891)
(28,046)
(9,278)
(2,018)
(3,563)
(2,180)
(15,500)
124
(734)
(422,333)
(25,618)
(7,949)
-
-
(2,558)
(15,112)
9,674
734
422,333
(22,612)
-
-
-
-
-
-
-
-
-
(22,612)
(25,618)
(7,949)
-
-
(2,558)
(15,112)
9,674
Year Ended 28 February 2019
Notes to the Financial Statements
Page 33
2019 ANNUAL REPORT | 45
Namoi Cotton Limited
Revenue from customers
Revenue - other
Revenue
Financial instrument gains/(losses)
Currency derivatives
Purchase contracts
Sales contracts
Net financial instrument gains/(losses)
Other income/(loss)
Trading margin gains
Share of profit/(loss) of associates
and joint ventures
Changes in inventories of finished goods
Raw materials and consumables used
Processing and distribution costs
Employee benefits expense
Depreciation
Fair value decrement - ginning assets
Impairment - joint venture
Finance costs
Other expenses
Profit/(loss) before income tax
$'000
Disclosure
Under
AASB 139
28 Feb
2019
70,593
543,732
614,325
(342)
16,166
(15,588)
236
-
-
-
(608)
(549,514)
-
(27,300)
(9,197)
(2,018)
-
(2,227)
(14,802)
8,895
Parent
$'000
$'000
$'000
Disclosure Disclosure
Under
Transition AASB 9
Under
AASB 139
28 Feb
2018
59,956
423,755
483,711
28 Feb
2019
3,089
610
3,699
28 Feb
2019
(67,504)
(543,122)
(610,626)
342
(16,166)
15,588
(236)
-
-
-
-
-
-
323
(22,614)
22,548
257
480
Parent
$'000
$'000
Disclosure
Under
Transition AASB 9
28 Feb
2018
(56,594)
(423,139)
(479,733)
(323)
22,614
(22,548)
(257)
28 Feb
2018
3,362
616
3,978
-
-
-
-
-
480
83,534
83,534
-
79,535
79,535
-
-
54
-
54
608
549,514
(22,794)
-
-
-
-
-
-
-
-
-
(22,794)
(27,300)
(9,197)
(2,018)
-
(2,227)
(14,802)
8,895
(734)
(422,304)
(25,604)
(7,942)
-
-
(2,586)
(15,037)
10,295
734
422,304
(22,583)
-
-
-
-
-
-
-
-
-
(22,583)
(25,604)
(7,942)
-
-
(2,586)
(15,037)
10,295
Please also refer to the note 8 for the impact of the introduction of AASB 9 on intercompany receivables within
the Parent.
Certain new accounting standards and interpretations have been published that are not mandatory for 28
February 2019 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 16 Leases effective 1 March 2019 (Refer to Note 1i)
IFRIC Interpretation 23 Uncertainty over Income Tax Treatments
Prepayment Features with Negative Compensation – Amendments to IFRS 9
Long-term Interests in Associates and Joint Ventures – Amendments to IAS 28
AIP IFRS 3 Business Combination – Previously held Interests in a joint operation
AIP IFRS 11 Joint Arrangements – Previously held interests in a joint operation
AIP IAS 23 Borrowing Costs – Borrowing cost eligible for capitalization.
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.
The ginning segment takes delivery of cottonseed from growers largely in the first half of the year between
March and August. Under Namoi Cotton’s accounting policies, profits on cottonseed are recognised when
delivery occurs.
Year Ended 28 February 2019
Notes to the Financial Statements
2019 ANNUAL REPORT | 46
Page 34
Namoi Cotton Limited
The lint cotton marketing business is undertaken by the Namoi Cotton Alliance (NCA) associate. Namoi
continues to purchase bales from growers which it on-sells to NCA. NCA normally takes delivery of lint cotton
from Namoi in the first half of the year and under NCA’s accounting policies, profits from this activity arise on
receipt of the lint cotton. Namoi equity accounts for its share of the NCA joint venture net result (refer Note
11) which is reflected in the share of profits from joint ventures and associates in the Statement of Profit and
Loss and Other Comprehensive Income.
c) Basis of consolidation
The consolidated financial statements comprise the financial statements of Namoi and its subsidiaries as at 28
February 2019. 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
Year Ended 28 February 2019
Notes to the Financial Statements
Page 35
2019 ANNUAL REPORT | 47
Namoi Cotton Limited
sharing of control of an arrangement, which exists only when decisions about the relevant activities require
unanimous consent of the parties sharing control.
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 within share of profit/(loss) of associates and joint ventures 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 Impairment – 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.
Jointly controlled assets
Interests in jointly controlled assets have been incorporated in the financial statements under the appropriate
headings.
Year Ended 28 February 2019
Notes to the Financial Statements
2019 ANNUAL REPORT | 48
Page 36
Namoi Cotton Limited
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
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 from contracts with customers
The Group’s core business is the provision of cotton ginning services to cotton farmers and participation in the
marketing of the resultant cotton lint bales and cotton seed as products of the ginning process.
Revenue from contracts with customers is recognised when control of the goods or services are transferred to
the customer at an amount that reflects the consideration to which the Group expects to be entitled in
exchange for those goods or services. The Group has generally concluded that it is the principal in its revenue
arrangements because it typically controls the goods or services before transferring them to the customer.
The Group apportions the transaction price to the separate performance obligations. The Group considers the
effects of variable consideration, the existence of significant financing components, noncash consideration,
and consideration payable to the customer where relevant.
Contract Balances
Contract assets
A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If
the Group performs by transferring goods or services to a customer before the customer pays consideration or
before payment is due, a contract asset is recognised for the earned consideration that is conditional.
Trade receivables
A receivable represents the Group’s right to an amount of consideration that is unconditional (i.e., only the
passage of time is required before payment of the consideration is due).
Year Ended 28 February 2019
Notes to the Financial Statements
Page 37
2019 ANNUAL REPORT | 49
Namoi Cotton Limited
Contract liabilities
A contract liability is the obligation to transfer goods or services to a customer for which the Group has
received consideration (or an amount of consideration is due) from the customer. If a customer pays
consideration before the Group transfers goods or services to the customer, a contract liability is recognised
when the payment is made or the payment is due (whichever is earlier). Contract liabilities are recognised as
revenue when the Group performs under the contract.
g) Revenue recognition
Revenue from customers
Sale of Byproducts
The performance obligation is satisfied upon transfer of control under the terms of sale. This is a combination
of delivered container terminal and ex-gin. Payment is due 30 days end of week from shipping.
Classing Revenue
Classing is the process of mechanically and visually inspecting cotton to determine grade characteristics.
Classing is provided to both related (NCA joint venture) and non-related cotton merchants and has been
treated as revenue from contracts with customers under AASB15. The Group recognises revenue from classing
services at the point in time.
The performance obligation is satisfied upon provision of results to the lint marketer or customer. Payment is
due within 30 days of the date of issue of the classing invoice.
Revenue - other
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.
Trading margin
Ginning revenue
Ginning is the mechanical process of separating raw seed cotton into resultant lint cotton bales and cotton
seed for cotton growers.
The Group provides ginning services that are bundled together with the purchase of cotton seed. As these
contracts are accounted for under AASB 9 they are excluded from the treatment as a sale to a customer under
AASB 15.
Sale of lint cotton
Sales revenue is brought to account when the terms of delivery under the sales contract have been satisfied.
As lint sales between the Group and NCA (Associate) are accounted for under AASB 9 they are excluded from
treatment as a sale to a customer under AASB 15.
There are no fair value adjustments required for forward lint cotton sales due to the contractual relationship
between the Group and NCA.
Sale of cotton seed
Sales revenue is brought to account when the terms of delivery under the sales contract have been satisfied.
As cotton seed sales (to feedlots, graziers, other traders and the COA Associate) are accounted for under AASB
9 they are not treated as a sale to a customer under AASB 15.
Year Ended 28 February 2019
Notes to the Financial Statements
2019 ANNUAL REPORT | 50
Page 38
Namoi Cotton Limited
The 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 profit and loss and other comprehensive income.
The fair value of forward exchange contracts is calculated by reference to current forward exchange rates for
contracts with similar maturity profiles.
h) 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
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.
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.
Year Ended 28 February 2019
Notes to the Financial Statements
Page 39
2019 ANNUAL REPORT | 51
Namoi Cotton Limited
i)
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 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.
Adoption of AASB 16
AASB 16 provides a new lessee accounting model which requires a lessee to recognise assets and liabilities for
all leases with a term of more than 12 months, unless the underlying asset is of low value. At the
commencement date of a lease, a lessee will recognise a liability to make lease payments (i.e., the lease
liability) and an asset representing the right to use the underlying asset during the lease term (i.e., the right of
use asset).
Assets and liabilities arising from a lease are initially measured on a present value basis. The measurement
includes payments to be made in optional periods if the lessee is reasonably certain to exercise an option to
extend the lease, or not to exercise an option to terminate the lease. AASB 16 also contains new disclosure
requirements for lessees.
This standard applies to annual reporting periods beginning on or after 1 January 2019. The Group will adopt
the standards from 1 March 2019 using the modified retrospective approach and will not restate comparative
amounts for the period ended 28 February 2019.
A comprehensive analysis has been commenced of all current contracts within the Group to determine the
eligibility to be classified as a lease under AASB 16. It is expected upon adoption of AASB 16 the impact of the
new standard on the Group’s financial position will only be an increase in lease liabilities and a corresponding
increase in property, plant and equipment for the right of use asset for the same amount. The amount of this
adjustment has not yet been finalised. This will be unwound and amortised to the statement of comprehensive
income over the remaining term of the leases or the useful life of the asset. The consolidated statement of
comprehensive income will no longer include operating lease or rent expenditure but will be impacted by the
recognition of interest and depreciation expense. The above has no cash effect to the Group and the changes
are for financial reporting purposes only.
The Group has availed itself of the exemptions within AASB 16 paragraph 5 relating to short-term leases and
leases for which the underlying asset is low value.
j)
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.
Year Ended 28 February 2019
Notes to the Financial Statements
2019 ANNUAL REPORT | 52
Page 40
Namoi Cotton Limited
k)
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.
The simplified method is utilised to determine expected credit losses. In applying this method, the expected
credit losses are calculated by reference to not only historical collection history but rely on forward
estimations and the expected lifetime credit loss is recognised. The methodology applies to trade debtors,
grower loans and certain intercompany balances which are eliminated within consolidated balances.
l)
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.
Operating supplies and spares
Operating supplies and spares are carried at the lower of 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.
m) Financial instruments
AASB 9 replaces the existing guidance in AASB 139 Financial Instruments: Recognition and Measurement. AASB
9 includes revised guidance on the classification and measurement of financial instruments, a new expected
credit loss model for calculating impairment on financial assets, and new general hedge accounting
requirements. It also carries forward the guidance on recognition and derecognition of financial instruments
from AASB 139.
AASB 9 contains three 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 receivable.
Debt financial instruments are subsequently measured at amortised cost, FVOCI or FVTPL. The classification is
based upon two criteria:
• The Group’s business model for managing the assets;
• Whether the instruments’ contractual cash flows represent solely payments of principal and interest on the
principal amount outstanding (‘the SPPI criterion’).
From 1 March 2017, the classification and measurement of the Group’s financial assets are as follows:
• Debt instruments at amortised cost for financial assets that are held within a business model with the
objective to hold financial assets to collect contractual cash flows that meet the SPPI criterion. This category
includes the Group’s Cash and cash equivalents and Trade & other receivables.
• Financial assets at FVTPL comprise derivative instruments. This category would also include debt
instruments whose cash flow characteristics fail SPPI criterion or are not held within a business model whose
objective is either to collect contractual cash flows, or to both collect contractual cash flows and sell. This
category includes the Group’s Foreign exchange contracts, interest rate derivatives and also forward
commodity purchase and sales contracts.
Year Ended 28 February 2019
Notes to the Financial Statements
Page 41
2019 ANNUAL REPORT | 53
Namoi Cotton Limited
The assessment of the Group’s business models was made as of the date of initial application, 1 March 2017,
and then applied retrospectively to those financial assets that were not derecognised before 1 March 2017.
The assessment of whether contractual cash flows on debt instruments met the SPPI criterion was made based
on the facts and circumstances as at initial recognition of the assets.
The new classification requirements of the standard did not have any significant impact on the Group’s existing
financial assets, being cash and cash equivalents, trade and other receivables or derivative financial
instruments.
At initial recognition, the Group measures a financial asset at its fair value. Measurement of cash and cash
equivalents and trade and other receivables remain at amortised cost consistent with the comparative period.
Purchases or sales of financial assets that require delivery of assets with a time frame established by regulation
or market convention (regular trades) are recognised on the trade date i.e. the date that the group commits to
purchase or sell the asset. AASB 9 requires financial liabilities to be measured on the same basis as AASB 139,
with the only change being gains or losses on financial liabilities designated at inception to be measured at fair
value are recognised in profit or loss, except that the effects of changes in the liability’s credit risk are
recognised in other comprehensive income.
The accounting for the Group’s financial liabilities remains largely the same as it was under AASB 139. All loans
and borrowings are initially recognised at fair value, being the amount received less attributable transaction
costs. After initial recognition, interest bearing liabilities are stated at amortised cost with any difference
between cost and redemption value being recognised in the statement of profit or loss over the period of the
borrowings on an effective interest basis.
The Group recognises gains or losses on financial liabilities, designated at inception to be measured at fair
value, in profit or loss. The Group has had no material change in the credit risk of these financial liabilities
during the period.
Trade and other payables are recognised for amounts to be paid for goods or services received. Trade payables
are settled on terms aligned with the normal commercial terms.
n) Recoverable amounts of non-financial 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.
o) 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
Year Ended 28 February 2019
Notes to the Financial Statements
2019 ANNUAL REPORT | 54
Page 42
Namoi Cotton Limited
decrease of the same asset previously recognised in the statement of comprehensive income, in which case,
the increase is recognized in the statement of comprehensive income. A revaluation deficit is recognised in
the statement of comprehensive income, except to the extent that it offsets an existing surplus on the same
asset recognised 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 (2018: 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 (2018: 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.
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.
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 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.
p)
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.
q) 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.
Year Ended 28 February 2019
Notes to the Financial Statements
Page 43
2019 ANNUAL REPORT | 55
Namoi Cotton Limited
r)
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.
s)
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.
t)
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 19.
u) 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.
v)
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.
w) 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.
x)
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;
fair value movements in interest rate derivatives.
y)
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.
Year Ended 28 February 2019
Notes to the Financial Statements
2019 ANNUAL REPORT | 56
Page 44
Namoi Cotton Limited
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.
z)
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:
·
·
·
· Methods used to distribute the products or provide the services; and if applicable
·
Nature of the products and services;
Nature of the production processes;
Type or class of customer for the products and services;
Nature of the regulatory environment.
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”.
aa) Fair value measurement
Namoi measures financial instruments, such as derivatives, at fair value at each balance sheet date and non-
financial assets at revalued 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
Year Ended 28 February 2019
Notes to the Financial Statements
Page 45
2019 ANNUAL REPORT | 57
Namoi Cotton Limited
·
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 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.
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 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.
bb) Cash Dividends
Namoi recognises a liability when the dividends are declared, determined or publicly recommended on or
before the reporting date
cc) 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.
dd) Changes to comparatives
Changes to comparative figures are made where there is a conflict with the current-year accounts.
Year Ended 28 February 2019
Notes to the Financial Statements
2019 ANNUAL REPORT | 58
Page 46
Namoi Cotton Limited
2. Revenue and Expenses
a) Revenue
i) Revenue from customers
By type of goods or service
Sale of byproducts
Classing services
Moss
Other
ii) Other revenue
Rental revenue
Other service revenue
Finance revenue
Consolidated
$'000
Parent
$'000
28 Feb
2019
28 Feb
2018
28 Feb
2019
28 Feb
2018
568
1,693
3,085
4
5,350
154
400
44
598
227
-
3,089
273
3,588
212
381
23
617
-
-
3,085
4
3,089
154
400
56
610
-
-
3,089
273
3,362
212
381
23
616
Total revenue
5,948
4,205
3,699
3,977
iii) Trading margin gains
Ginning services and seed sales
Lint Handling
b) Other income
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
83,124
410
83,534
79,201
335
79,535
83,124
410
83,534
79,201
335
79,535
-
-
480
480
-
-
480
480
26,464
1,582
28,046
24,173
1,445
25,618
25,764
1,536
27,300
24,160
1,444
25,604
2,142
38
2,180
2,465
93
2,558
2,189
38
2,227
2,493
93
2,586
Year Ended 28 February 2019
Notes to the Financial Statements
Page 47
2019 ANNUAL REPORT | 59
Balance Sheet
Statement of Profit and Loss
and Other Comprehensive Income
Consolidated
$'000
Parent
$'000
Consolidated
$'000
Parent
$'000
28 Feb
2019
28 Feb
2018
28 Feb
2019
28 Feb
2018
28 Feb
2019
28 Feb
2018
Deferred Tax Liabilities
Accelerated depreciation for tax purposes and revaluations
Timing of Joint Venture and Investments Income recognition
Deferred Tax Assets
Deferred costs
Provisions and accruals
Other
Recognised losses available for offsetting against future taxable income
(25,664)
155
(25,509)
(27,913)
(548)
(28,461)
(26,733)
(291)
(27,024)
(27,875)
(531)
(28,406)
551
1,786
-
17,913
20,250
649
1,655
-
22,118
24,422
551
1,786
-
17,904
20,241
639
1,655
-
22,560
24,854
2,249
702
2,951
(98)
131
-
4,205
4,238
619
349
968
229
(3)
-
4,084
4,310
28 Feb
2019
1,986
126
2,112
657
1
-
9
668
28 Feb
2018
845
(114)
731
90
526
-
(443)
173
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
(5,259)
(4,039)
(6,783)
(3,552)
7,189
5,278
2,780
904
-
(44)
1,091
1,047
20
(47)
1,061
1,034
-
-
-
-
-
-
-
-
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
Year Ended 28 February 2019
Notes to the Financial Statements
Consolidated
$'000
Parent
$'000
28 Feb
2019
(4,040)
(680)
(539)
(5,259)
28 Feb
2018
(1,135)
(2,905)
-
(4,040)
28 Feb
2019
(3,552)
(2,692)
(539)
(6,783)
28 Feb
2018
(394)
(3,158)
-
(3,552)
Page 49
Namoi Cotton Limited
Namoi Cotton Limited
e) Other expenses
Maintenance
Net loss on disposal of property, plant
and equipment
Insurance
Motor vehicle related
Consulting fees
Audit fees
Restructure costs 1
Business travel
Minimum operating lease payments
Strategic restructuring-consulting 2
Other
Consolidated
$'000
Parent
$'000
28 Feb
2019
28 Feb
2018
28 Feb
2019
28 Feb
2018
5,091
4,861
5,032
4,856
31
910
1,766
1,159
292
692
564
454
4,541
15,500
10
714
1,449
644
260
497
571
2,307
3,799
15,112
31
876
1,763
1,114
291
692
449
454
4,100
14,802
10
711
1,448
640
260
497
561
2,307
3,747
15,037
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 in the prior year (Refer Note 21).
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%
(2018: 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
2019
28 Feb
2018
28 Feb
2019
28 Feb
2018
124
9,674
8,895
10,295
37
-
613
191
-
(161)
2,902
(203)
295
-
2
(91)
680
2,905
2,669
-
23
-
-
-
2,692
3,089
(144)
211
-
2
-
3,158
1 Tax losses previously unrecogni sed for individual enti ties outside the tax consoli dated group.
Year Ended 28 February 2019
Notes to the Financial Statements
2019 ANNUAL REPORT | 60
Page 48
Statement of Profit and Loss
and Other Comprehensive Income
Consolidated
$'000
28 Feb
2019
28 Feb
2018
2,249
702
2,951
(98)
131
-
4,205
4,238
619
349
968
229
(3)
-
4,084
4,310
Parent
$'000
28 Feb
2019
1,986
126
2,112
657
1
-
9
668
28 Feb
2018
845
(114)
731
90
526
-
(443)
173
7,189
5,278
2,780
904
Consolidated
$'000
Parent
$'000
28 Feb
2019
(4,040)
(680)
(539)
(5,259)
28 Feb
2018
(1,135)
(2,905)
-
(4,040)
28 Feb
2019
(3,552)
(2,692)
(539)
(6,783)
28 Feb
2018
(394)
(3,158)
-
(3,552)
Page 49
Namoi Cotton Limited
Namoi Cotton Limited
Balance Sheet
Consolidated
$'000
28 Feb
2019
28 Feb
2018
Deferred Tax Liabilities
Accelerated depreciation for tax purposes and revaluations
Timing of Joint Venture and Investments Income recognition
Deferred Tax Liabilities
Accelerated depreciation for tax purposes and revaluations
Timing of Joint Venture and Investments Income recognition
Deferred Tax Assets
Deferred costs
Provisions and accruals
Other
Recognised losses available for offsetting against future taxable income
(25,664)
155
(25,509)
(27,913)
(548)
(28,461)
Deferred Tax Assets
Deferred costs
Provisions and accruals
Other
Net deferred tax assets/(liabilities)
(6,783)
Recognised losses available for offsetting against future taxable income
Deferred tax expense/(income)
(5,259)
(4,039)
649
1,655
-
22,118
24,422
551
1,786
-
17,913
20,250
551
1,786
-
17,904
20,241
Unrecognised deferred tax assets
Unrecognised deferred tax liabilities
Unrecognised tax losses
Unrecognised net deferred tax assets
Net deferred tax assets/(liabilities)
Deferred tax expense/(income)
-
(44)
1,091
1,047
20
(47)
1,061
1,034
-
-
-
-
-
-
-
(5,259)
-
Reconciliation of net deferred tax assets/(liabilities)
Unrecognised deferred tax assets
Unrecognised deferred tax liabilities
Unrecognised tax losses
Unrecognised net deferred tax assets
Opening balance as of 1 March
Tax income/(expense) during the period recognised in profit or loss
-
(44)
1,091
1,047
Tax income/(expense) during the period recognised in other comprehensive income
Closing balance as at 28 February
Year Ended 28 February 2019
Notes to the Financial Statements
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
Year Ended 28 February 2019
Notes to the Financial Statements
Parent
$'000
28 Feb
2019
(26,733)
(291)
(27,024)
Statement of Profit and Loss
and Other Comprehensive Income
Parent
$'000
Balance Sheet
Consolidated
$'000
Consolidated
28 Feb
$'000
2018
28 Feb
2019
(27,875)
(531)
(28,406)
(25,664)
155
639
1,655
(25,509)
-
22,560
551
24,854
1,786
-
(3,552)
17,913
20,250
28 Feb
2019
28 Feb
2018
2,249
702
2,951
(27,913)
(548)
(98)
131
(28,461)
-
4,205
649
4,238
1,655
-
22,118
7,189
24,422
Parent
28 Feb
$'000
2019
28 Feb
2018
28 Feb
2019
619
349
968
(26,733)
(291)
229
(3)
(27,024)
-
4,084
4,310
551
1,786
-
17,904
20,241
5,278
1,986
126
2,112
1
657
-
9
668
2,780
28 Feb
2018
28 Feb
2018
845
(114)
731
(27,875)
(531)
90
526
(28,406)
-
(443)
173
639
1,655
-
22,560
904
24,854
(4,039)
(6,783)
(3,552)
28 Feb
2019
Consolidated
$'000
20
(47)
1,061
(4,040)
1,034
(680)
(539)
(5,259)
28 Feb
2018
(1,135)
(2,905)
-
(4,040)
Parent
$'000
-
-
-
-
28 Feb
2019
(3,552)
(2,692)
(539)
(6,783)
-
28 Feb
2018
-
-
(394)
-
(3,158)
-
(3,552)
Page 49
2019 ANNUAL REPORT | 61
Namoi Cotton Limited
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
no changes in tax legislation adversely affect the consolidated entity in realising the benefit.
b)
c)
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 previous financial year. The purchase price
accounting for Australian Classing Services Pty Ltd and Moomin Ginning Company have been finalised with no
significant changes.
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 2019
Notes to the Financial Statements
2019 ANNUAL REPORT | 62
Page 50
Namoi Cotton Limited
Assets acquired and liabilities assumed
The fair values of the identifiable assets and liabilities of the above transactions as at the effective date of the
transactions were:
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 in prior
year.
Year Ended 28 February 2019
Notes to the Financial Statements
Page 51
2019 ANNUAL REPORT | 63
Namoi Cotton Limited
The contribution made to the group by the acquired business from the date of acquisition was:
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 cash
flow method 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 2019
Notes to the Financial Statements
2019 ANNUAL REPORT | 64
Page 52
Namoi Cotton Limited
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 below the profit/(loss):
Consolidated Profit attributable to ordinary share holders
of the parent
Weighted number of Ordinary Shares for Basic EPS
Earnings per share - basic (cents)
Consolidated
$'000
28 Feb
2019
(556)
No.
137,044,276
(0.4)
28 Feb
2018
6,769
No.
127,427,307 1
5.3
Weighted number Unconverted residual Grower shares
5,609,331
15,226,300
Weighted average number of Ordinary Shares
adjusted for the effect of Dillution
Earnings per share - diluted (cents)
142,653,607
(0.4)
142,653,607 1
4.7
1 Retrospectively adjusted as if the restructure had occurred from the beginning of the period.
There have been no other transactions involving ordinary shares or potential ordinary shares between the
reporting date and the date of authorisation of these financial statements.
Year Ended 28 February 2019
Notes to the Financial Statements
Page 53
2019 ANNUAL REPORT | 65
Namoi Cotton Limited
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 2019 of 0.0 cents
per ordinary share (2018: 0.0 cents)
Final distribution for the year ended 28 February 2018 of 1.90 cents
per ordinary share (2017: 0.0 cents)
Net distributions during the year
Consolidated
$'000
28 Feb
2019
28 Feb
2018
-
2,638
2,638
-
-
-
Consolidated
$'000
Parent
$'000
28 Feb
2019
28 Feb
2018
28 Feb
2019
28 Feb
2018
Franking credits available for subsequent financial
years based on a tax rate of 30% (2018: 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.
Year Ended 28 February 2019
Notes to the Financial Statements
2019 ANNUAL REPORT | 66
Page 54
Namoi Cotton Limited
7. Cash and Cash Equivalents
(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
Impairment
Foreign exchange (gain)/loss on finance leases
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
2019
28 Feb
2018
28 Feb
2019
28 Feb
2018
5,827
-
5,827
1,493
(18)
1,475
5,541
-
5,541
1,352
(18)
1,334
(556)
6,769
6,203
7,137
9,279
31
5,581
34
(71)
189
(60)
-
-
5,883
20,866
4
(528)
989
(598)
(58)
190
720
21,029
7,949
10
-
-
67
731
-
712
(480)
697
9,686
751
(1,892)
(285)
587
(1,086)
(118)
2,905
17,317
9,197
31
2,018
34
(20)
211
-
-
-
-
11,471
528
(507)
992
(599)
(93)
190
2,692
20,877
7,942
10
-
-
20
730
-
712
(480)
(54)
8,880
1,058
(1,892)
(297)
587
(1,083)
(118)
3,158
17,430
Year Ended 28 February 2019
Notes to the Financial Statements
Page 55
2019 ANNUAL REPORT | 67
Namoi Cotton Limited
(c) Disclosure of financing activities
1 March
2018
$'000
Cash
flows
$'000
Foreign
exchange
movement
$'000
New
leases
$'000
28
February
2019
$'000
Other
$'000
Current interest-bearing loans
6,000
(6,000)
Current obligations under
finance leases
Current other borrowings
Non-current interest bearing
loans
Non-current obligations under
finance leases
Dividends paid
758
32
42,000
1,226
-
50,016
(1,108)
9
-
-
(2,638)
(9,737)
-
16
-
-
19
-
35
-
-
-
503
893
1,062
-
-
-
-
41
42,000
1,278
(893)
1,630
-
1,781
2,638
2,638
-
44,733
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
-
-
999
1,203
557
-
758
32
20
42,000
(557)
1,226
-
50,016
(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 $1,780,525 (2018: $1,203,050) by means of finance leases.
(ii) Distribution Reinvestment Plan
No distributions were paid via the issue of units/shares in 2019 (2018: 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 2019
Notes to the Financial Statements
2019 ANNUAL REPORT | 68
Page 56
Namoi Cotton Limited
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
Loans to employees3
Loans to controlled entities4
Non-current
Loans to controlled entities4
Consolidated
$'000
Parent
$'000
28 Feb
2019
28 Feb
2018
28 Feb
2019
28 Feb
2018
3,012
-
930
3,942
12
-
12
20
-
3,974
-
-
4,030
(71)
4
3,963
12
-
12
37
-
4,012
2,967
-
930
3,897
12
-
12
20
828
4,757
3,949
(20)
4
3,933
12
-
12
37
1,390
5,372
-
-
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 2019 Namoi Cotton had committed $nil (2018: $nil) in credit term facilities to growers which
had not been drawn.
3 Loans to employees represent non-interest-bearing loans advanced under the Namoi Cotton employee
incentive share plan (refer note 20) and other staff advances.
4 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 fair value of these loans approximate their carry
amounts due to the short-term maturities.
Expected Credit Losses
An impairment analysis is performed at each reporting date. The simplified method has been used to
determine expected credit losses. In applying this method, the expected credit losses are calculated by
reference to not only historical collection history but rely on forward estimations and the expected lifetime
credit loss is recognised.
As part of the assessment required under AASB 9 the loan to the controlled entity Namoi Cotton Commodities
Pty Ltd from the parent was considered using the expected credit loss model. A provision of $1,415,000 was
taken at 1st March 2017 as an opening transition adjustment to retained earnings of the parent. This provision
is eliminated on consolidation thus does not impact the consolidated balance sheet or profit and loss.
Year Ended 28 February 2019
Notes to the Financial Statements
Page 57
2019 ANNUAL REPORT | 69
Namoi Cotton Limited
Individual receivables are written off only upon exhaustion of all means of recovery and only with Board
approval. Expected credit losses have been recognised in the current year by the group of $nil (2018: $71,240)
and the parent entity of $nil (2018: $19,685). These amounts were included in the other expenses item in the
statement of profit and loss and other comprehensive income.
At 1 March 2018
Charge for the year
Amounts written off
Recoveries
At 28 February 2019
Consolidated
$'000
Parent
$'000
28 Feb
2019
28 Feb
2018
28 Feb
2019
28 Feb
2018
71
-
(71)
-
-
5
67
-
-
71
20
-
(20)
-
-
-
20
-
-
20
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
2019
28 Feb
2018
28 Feb
2019
28 Feb
2018
3,974
4,083
50,472
51,106
3,783
124
48
19
3,759
77
15
161
50,320
124
9
19
50,905
56
15
110
-
71
-
20
Receivables past due but not considered impaired are: Group $190,819 (2018: $252,679); Parent $151,664
(2018: $180,677). 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.
All receivables are carried at amortised cost. Details regarding foreign exchange and interest rate risk are
disclosed in Note 27. The maximum exposure to credit risk is the carrying amount of the receivables less
insurance recoverable.
Year Ended 28 February 2019
Notes to the Financial Statements
2019 ANNUAL REPORT | 70
Page 58
Namoi Cotton Limited
9.
Inventories
Seed cotton and moss (at cost)
Cotton seed (at fair value less costs to sell)
Operating supplies and spares (at cost)
Consolidated
$'000
Parent
$'000
28 Feb
2019
28 Feb
2018
28 Feb
2019
28 Feb
2018
259
326
9,463
10,048
-
1,077
8,444
9,521
259
326
9,429
10,014
-
1,077
8,429
9,506
Refer to Note 27 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
Lint Cotton purchase contracts
Current liabilities
Foreign exchange contracts
Interest rate swap contracts
Cotton seed sale contracts
Cotton seed purchase contracts
Lint Cotton sales contracts - NCA
Consolidated
$'000
Parent
$'000
28 Feb
2019
28 Feb
2018
28 Feb
2019
28 Feb
2018
-
-
7,773
11,023
18,796
-
57
7,181
-
11,023
18,261
86
8,407
-
33,115
41,608
111
52
-
8,393
33,115
41,671
-
-
7,773
-
7,773
-
57
7,181
-
-
7,238
86
8,407
-
-
8,493
111
52
-
8,393
-
8,556
Derivatives are used by the group to manage trading and financial risks as detailed in note 27.
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 $nil for the group (2018: Loss $25,125) and $nil for the parent entity (2018: Loss
$25,125).
Cotton lint purchase contracts are forward dated and deliverable contracts from growers. The fair value of
cotton lint commodity contracts is determined by reference to market prices and foreign exchange rates. The
fair value of the open cotton lint purchase contracts at year end was a derivative asset (unrealised gain) of
$11,022,523 for the group (2018: Gain $33,115,381) and lint sales contracts are a derivative liability
(unrealised loss) of $11,022,523 for the group as back-to-back sales contracts with NCA.
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 liability (unrealised loss) of
Year Ended 28 February 2019
Notes to the Financial Statements
Page 59
2019 ANNUAL REPORT | 71
Namoi Cotton Limited
$7,181,065 for the group (2018: Gain $8,406,942) and $7,181,065 for the parent entity (2018: Gain
$8,406,942).
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
asset (unrealised gain) of $7,773,102 for the group (2018: Loss $8,393,213) and $7,773,102 for the parent
entity (2018: Loss $8,393,213).
Interest bearing loans of the group incurred an average variable interest rate of 3.2% (2018: 3.0%). Swaps in
place at the comparative reporting date accounted for approximately 47.6% (2018: 41.7%) of the principal
outstanding. The average fixed interest rates were 2.1% (2018: 2.1%) and the average variable rates were
1.65% (2018: 1.98%) at balance date. The net fair value loss on interest rate swaps was $91,270 (2018:
$51,780).
11. Investments in Associates and Joint Ventures using the equity method
Consolidated
$'000
Parent
$'000
28 Feb
2019
1,820
36,514
(1,483)
36,851
28 Feb
2018
3,562
40,521
(844)
43,239
28 Feb
2019
28 Feb
2018
-
-
-
-
-
-
-
-
Investment in associates (material) 11d
Investment in joint ventures (material) 11e
Investment in joint ventures (non material) 11f
(a) Ownership interest
Name
Balance Date
% Ownership
interest held by
consolidated entity
28 Feb
2019
28 Feb
2018
Investments in Associates
Cargill Oilseeds Australia Partnership (COA)
Cargill Processing Ltd (CPL) 1
Investments in Joint Ventures
Namoi Cotton Alliance (NCA)
NC Packing Services Pty Ltd (NCPS) 1
1 Incorporated in Australia
31 May
31 May
28 February
28 February
15%
15%
51%
51%
15%
15%
51%
51%
(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.
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 2019
Notes to the Financial Statements
2019 ANNUAL REPORT | 72
Page 60
Namoi Cotton Limited
(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 2019
COA
CPL
28 Feb 2018
COA
CPL
257,525
(20,389)
17,327
(11,615)
315,085
(10,097)
24,441
911
Group share of associates profit/(loss)
(3,058)
(1,742)
(1,515)
137
(ii) Associates assets and liabilities:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Associates net assets
30,619
-
(66,141)
-
(35,522)
1,339
12,937
(2,142)
-
12,134
55,935
-
(71,067)
-
(15,133)
5,703
19,061
(1,016)
-
23,749
Group share of associates net assets
(5,328)
1,820
(2,270)
3,562
(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
(2,270)
-
(3,058)
3,562
-
(1,742)
(755)
-
(1,515)
3,425
-
137
Carrying amount of investment in associates at the
end of the financial year
(5,328)
1,820
(2,270)
3,562
Less liability transferred to accounts payable
(Refer to Note 16)
(iv) Share of contingent liabilities of associate:
(iv) Share of associates commitments:
5,328
-
-
1,820
2,270
-
-
3,562
-
-
-
-
-
-
-
-
The COA results have been negatively impacted by a challenging trading environment with rising cottonseed
prices relative to forward sales values. In addition to these trading results CPL has mothballed the cottonseed
crushing facility located at Narrabri, NSW owned by CPL and operated by COA. Therefore, in addition to the
trading impacts COA/CPL period results have been further negatively impacted by the recognition of
impairment losses in respect to this facility and its associated spare parts inventory and redundancy costs.
Year Ended 28 February 2019
Notes to the Financial Statements
Page 61
2019 ANNUAL REPORT | 73
Namoi Cotton Limited
(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
Less impairment
(iii) Carrying amount of investments in joint ventures:
Balance at the beginning of the financial year
Impairment of joint venture
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:
(f) Share of Non Material Investments in joint venture entities: NCPS
(i) Carrying amount of non materal investments in joint ventures:
Balance at the beginning of the financial year
Non Material Joint Venture Results
Carrying amount of non material investments in joint ventures at the
end of the financial year
Consolidated
$'000
28 Feb
2019
28 Feb
2018
517,268
(2,547)
(4,526)
294
(869)
-
(869)
365,467
(2,530)
(1,468)
229
1,001
-
1,001
(444)
511
9,309
78,583
56,008
32,856
57,838
58,799
(45,851)
(17,203)
(64,330)
(4,013)
(1,068)
(1,194)
78,584
40,077
(3,563)
36,514
40,521
(3,563)
(444)
(1,630)
(67)
79,453
40,521
-
40,521
40,010
-
511
36,514
40,521
-
-
-
-
(844)
(639)
(960)
116
(1,483)
(844)
NCA has been subject to an impairment test using the following key parameters. The business achieving
market share between 18% and 20% of the Australian crop and the utilisation of a discount rate of 17%. No CPI
has been applied to the revenue stream to Namoi Cotton Limited from NCA with costs incurred by NCL in
servicing the joint venture incremented by 2.2% p.a. Based on these parameters a 10 year discounted cash
flow forecast inclusive of an estimated terminal value, at a six times multiple, has been utilised to calculate the
estimated value at 28 February 2019. As a consequence of this impairment test an impairment loss of $3.56m
has been recognised in the current year.
Year Ended 28 February 2019
Notes to the Financial Statements
2019 ANNUAL REPORT | 74
Page 62
Namoi Cotton Limited
12. Interest in Joint Operations
(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
2019
50%
75%
28 Feb
2018
50%
75%
(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 (2018: $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 $2.19m at 28 February 2019 (2018: $2.22m).
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 2018
Acquisition of a subsidiary
Written down value - 28 February 2019
Consolidated
$'000
Parent
$'000
28 Feb
2019
28 Feb
2018
28 Feb
2019
28 Feb
2018
961
-
961
-
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. Goodwill is carried at cost. No impairment of goodwill has been recorded for
the year.
Year Ended 28 February 2019
Notes to the Financial Statements
Page 63
2019 ANNUAL REPORT | 75
Namoi Cotton Limited
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
Consolidated
$'000
Parent
$'000
28 Feb
2019
28 Feb
2018
28 Feb
2019
28 Feb
2018
137,800
(18,266)
119,534
(914)
118,620
129,353
(10,783)
118,570
-
118,570
137,800
(18,266)
119,534
(914)
118,620
129,353
(10,783)
118,570
-
118,570
9,878
(5,151)
4,727
14,040
(5,081)
8,959
9,878
(5,151)
4,727
14,040
(5,081)
8,959
Net Gin Assets
123,347
127,529
123,347
127,529
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
6,402
(739)
5,663
692
6,355
12,051
(9,004)
3,047
9,402
5,541
6,353
(487)
5,866
-
5,866
10,568
(8,173)
2,395
8,261
3,292
6,402
(739)
5,663
692
6,355
10,917
(8,381)
2,536
8,891
5,536
6,353
(487)
5,866
-
5,866
9,426
(7,621)
1,805
7,671
3,292
124,975
13,315
124,436
14,646
124,975
12,799
124,436
14,056
138,290
139,082
137,774
138,492
Year Ended 28 February 2019
Notes to the Financial Statements
2019 ANNUAL REPORT | 76
Page 64
Namoi Cotton Limited
If the above categories of assets were still measured using the cost model, the carrying amount (WDV) would
be as follows:
Ginning infrastucture and major equipment
Other infrastucture and major equipment
Consolidated and Parent
$'000
$'000
28 Feb
2019
28 Feb
2018
28 Feb
2019
28 Feb
2018
63,825
4,287
68,112
63,552
3,638
67,190
63,825
4,287
68,112
63,552
3,638
67,190
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 28 February 2019 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. CBRE
Australia (“CBRE”) were engaged for this purpose. The methodology applied by CBRE to value the ginning
assets was an in-one-line discount rate of 14% (implied multiple of 7). Colliers (in 2016) utilised an earnings
based multiple approach whereby a multiple of 6.5 was applied to the future maintainable EBITDA. 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.
The internal valuation methodology applies a DCF methodology to a 10 year cash flow from earnings with a 6
year terminal yield. A discount rate of 15.4% resulted in the internal methodology and CBRE methodology
producing the same result at that time.
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 2019 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 29 % (2018: 29%) market share of an Australian sustainable crop size of 3.2
million bales (2018: 3.2 million bales) which also approximates the average number of bales achieved over
the last 8 years, noting that individual seasons can fluctuate significantly dependent upon water
availability;
Growth rate - revenues 1.65% (2018 - 1.65%)
Growth rate - expenses 2.20% (2018 - 2.20%)
Pre-tax discount rate of 15.4% (2018 – 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.
Based on the above fair value methodology there were a number of increments and decrements (reversals of
previous increments) adjustments posted to the asset revaluation reserve at yearend. In addition, where a
decrement was not covered by a previous increment the excess was posted to the profit and loss statement as
a fair value decrement - ginning assets.
Year Ended 28 February 2019
Notes to the Financial Statements
Page 65
2019 ANNUAL REPORT | 77
Namoi Cotton Limited
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
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.
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 2019 ($'000)
Gins
Other
CWIP
Consolidated and parent entity
Written down value - 1 March 2018
Additions and Transfer to/(from) CWIP
Disposals
Depreciation1
Revaluation increments/(decrements)
Written down value - 28 February 2019
127,529
5,409
(675)
(8,002)
(914)
123,347
8,261
1,734
(9)
(1,276)
692
9,402
3,292
2,249
-
-
-
5,541
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
Depreciation
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
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.
Year Ended 28 February 2019
Notes to the Financial Statements
2019 ANNUAL REPORT | 78
Page 66
Namoi Cotton Limited
16. Trade and Other Payables
Current
Trade creditors and accruals1
Grower deposits
Customer deposits
Liability for associate losses 2
Loans from controlled entities
Consolidated
$'000
Parent
$'000
28 Feb
2019
28 Feb
2018
28 Feb
2019
28 Feb
2018
7,652
41
205
5,328
-
13,226
7,799
32
14
2,270
-
10,115
7,591
41
205
-
15,254
23,091
7,773
32
14
-
15,254
23,073
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.
2 The Cargill Oilseeds Australia Partnership Agreement provides for partners to contribute to partnership losses
to the extent of our interest in the partnership (15%).
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 2019 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
2019
28 Feb
2018
Parent
28 Feb
2019
28 Feb
2018
-
-
-
-
1,061
1,061
1,061
-
42,000
1,630
43,630
18
6,000
-
6,018
758
758
6,776
-
42,000
1,226
43,226
-
-
-
-
1,061
1,061
1,061
2,049
42,000
1,630
45,679
18
6,000
-
6,018
758
758
6,776
2,049
42,000
1,226
45,275
Total Current and Non-Current
44,691
50,002
46,740
52,051
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.
Year Ended 28 February 2019
Notes to the Financial Statements
Page 67
2019 ANNUAL REPORT | 79
Namoi Cotton Limited
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 2.0 years (2018: 2.2) with the average interest
rate implicit in the contracts of 4.8% (2018: 4.7%).
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 2019 was $12.5 million (2018: $12.5
million) including operating overdrafts.
At balance date CBA had provided Namoi Cotton with a secured $42.0 million (2018: $42.0 million) debt facility
with core components maturing on 30 April 2021. 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
2019
28 Feb
2018
Parent
28 Feb
2019
28 Feb
2018
2,500
10,000
35,000
7,000
54,500
2,500
10,000
35,000
7,000
54,500
2,500
10,000
35,000
7,000
54,500
2,500
10,000
35,000
7,000
54,500
Financing arrangements
The Eighth Variation Deed was executed on 28 February 2019 extending the facility end date of the working
capital facility to 30 April 2020.
Finance renewal
Finance facility limits negotiated with CBA as per above:
1Committed term debt facility (non-amortising) - facility limit of AUD$35 million (2018: AUD$35 million) with a
facility end date of 30 April 2021;
2Committed term debt facility (non-amortising) - facility limit of AUD$7.0 million (2018: AUD$7.0 million) with
a facility end date of 30 April 2021; 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 (2018: AUD$10 million) with a facility
end date of 30 April 2020.
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 2020/21 operations.
Year Ended 28 February 2019
Notes to the Financial Statements
2019 ANNUAL REPORT | 80
Page 68
Namoi Cotton Limited
18. Provisions
Current
Employee leave entitlements
Employee variable compensation
Provision for tax
Non-current
Employee leave entitlements
19. Contributed Equity
Ordinary Shares
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
Consolidated
$'000
Parent
$'000
28 Feb
2019
28 Feb
2018
28 Feb
2019
28 Feb
2018
2,511
453
-
2,964
831
831
2,235
496
60
2,791
874
874
2,508
453
-
2,961
822
822
2,226
481
-
2,707
865
865
Consolidated
$'000
Parent
$'000
28 Feb
2019
28 Feb
2018
28 Feb
2019
28 Feb
2018
37,639
37,639
37,639
37,639
Consolidated and Parent
No. '000
$'000
28 Feb
2019
28 Feb
2018
28 Feb
2019
28 Feb
2018
-
-
-
109,843
(109,843)
-
-
-
-
1,098
(1,098)
-
15,226
-
152
-
-
-
(12,669)
32,810
109,843
(127,427)
-
-
(127)
328
1,098
(1,274)
2,558
15,226
26
152
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
12,669
140,096
-
127,427
127,427
1,274
127
1,401
Year Ended 28 February 2019
Notes to the Financial Statements
-
1,274
1,274
Page 69
2019 ANNUAL REPORT | 81
Namoi Cotton Limited
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
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.
In the previous period 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 15.2 million 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 $19,173
(2018: $24,411).
Year Ended 28 February 2019
Notes to the Financial Statements
2019 ANNUAL REPORT | 82
Page 70
Namoi Cotton Limited
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 97,000 residual capital
stock (2018: 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.
20. Nature and Purpose of Reserves
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.
21. 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 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.
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.
Year Ended 28 February 2019
Notes to the Financial Statements
Page 71
2019 ANNUAL REPORT | 83
Namoi Cotton Limited
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:
·
·
·
·
·
·
· Other corporate administrative expenses.
Interest Revenue;
Rental Revenue;
Share of profit from associate (other than NCA and Cargill);
Finance costs;
Corporate employee benefits expense;
Corporate depreciation; and
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 2019
Ginning
$'000
Marketing
$'000
Commodities Unallocated Consolidated
$'000
$'000
$'000
Revenue
Other revenues
Total consolidated revenue
Non-segment revenues
Interest revenue
Rental revenue
Trading margin gains
Results
Profit/(loss) before tax and finance costs
Finance costs
Share of profit from associates
Net Profit before tax
Other segment information
Depreciation
3,656
400
4,056
-
-
83,124
19,189
(2,204)
(4,800)
12,185
1,693
-
1,693
-
-
410
(2,200)
-
(1,082)
(3,282)
-
-
-
-
-
-
266
47
-
313
-
-
-
44
154
-
(9,069)
(23)
-
(9,092)
5,349
400
5,749
44
154
83,534
8,186
(2,180)
(5,882)
124
(10,570)
(132)
(137)
(457)
(11,296)
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
Year Ended 28 February 2019
Notes to the Financial Statements
2019 ANNUAL REPORT | 84
44
154
198
-
(4,283)
(457)
(23)
(4,527)
(9,092)
Page 72
Namoi Cotton Limited
Business Segments
Year ended 28 February 2018
Ginning
$'000
Marketing
$'000
Commodities Unallocated Consolidated
$'000
$'000
$'000
Revenue
Other revenues
Total consolidated revenue
Non-segment revenues
Interest revenue
Rental revenue
Trading margin gains
Results
Profit/(loss) before tax and finance costs
Finance costs
Share of profit from associates
Net Profit before tax
Other segment information
Depreciation
3,588
381
3,969
-
-
-
-
-
-
-
79,201
335
19,620
(2,540)
(1,378)
15,702
2,543
-
681
3,224
-
-
-
-
-
-
16
28
-
44
-
-
-
23
212
3,588
381
3,969
23
212
-
79,536
(9,250)
(46)
-
(9,296)
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 associates
Employee benefits expense
Depreciation
Finance costs
Other corporate administrative expenses
Total Unallocated Result
23
212
235
-
(3,673)
(378)
(46)
(5,435)
(9,297)
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 2019
Revenue
Sales
Other revenues
Total consolidated revenue
Geographic Areas
Year ended 28 February 2018
Revenue
Sales
Other revenues
Total consolidated revenue
Australia
$'000
Asia
$'000
Consolidated
$'000
2,265
400
2,665
3,085
-
3,085
5,350
400
5,750
Australia
$'000
Asia
$'000
Consolidated
$'000
500
381
881
3,089
-
3,089
3,589
381
3,970
Year Ended 28 February 2019
Notes to the Financial Statements
Page 73
2019 ANNUAL REPORT | 85
Namoi Cotton Limited
22. Commitments and Contingencies
Commitments for capital expenditure
Consolidated
$'000
Parent
$'000
28 Feb
2019
28 Feb
2018
28 Feb
2019
28 Feb
2018
Property, plant and equipment
Estimated capital expenditure contracted for at
balance date but not provided for:
Payable within one year
1,414
9,931
1,414
9,931
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
387
762
1,149
66
-
66
387
762
1,149
66
-
66
Operating lease commitments receivable – group as lessor
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 2019 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
11
-
11
5
-
5
11
-
11
5
-
5
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 $3,484,187 (2018: $2,330,645) 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 2019
Notes to the Financial Statements
2019 ANNUAL REPORT | 86
Page 74
Namoi Cotton Limited
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
2019
1,145
1,728
-
2,873
(182)
2,691
28 Feb
2018
825
1,301
-
2,126
(142)
1,984
28 Feb
2019
1,145
1,728
-
2,873
(182)
2,691
28 Feb
2018
825
1,301
-
2,126
(142)
1,984
The weighted average interest rate implicit in the contracts for both the group and parent is 4.6% (2018:
4.7%).
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 2019 the liabilities of
COA exceeded its assets. Refer to Note 11, Investments in Associates and Joint Ventures.
23. 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.
Year Ended 28 February 2019
Notes to the Financial Statements
Page 75
2019 ANNUAL REPORT | 87
Namoi Cotton Limited
24. 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
2019
28 Feb
2018
28 Feb
2019
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
(1,830)
1,380
1 Formerly dis clos ed a s a n a s s ocia te the a cquis i ti on being dis clos ed i n the Bus i nes s Combina ti ons Note 4.
100%
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
2018
1,380
-
-
-
-
-
-
-
1,830
3,210
(1,830)
1,380
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 (2018: $35,906).
Sales of white cotton seed to the COA Partnership were $6,454,626 (2018: $33,007,226) and purchases of
white cotton seed from the COA Partnership were $1,085,579 (2018: $2,205,890).
Transactions with NCA
Management fees received by Namoi for services provided to Namoi Cotton Alliance $2.5m (inclusive of bale
handling fees) (2018: $3.3m).
Lint Cotton Sales from Namoi to Namoi Cotton Alliance $455.9m (2018: $321.2m).
Year Ended 28 February 2019
Notes to the Financial Statements
2019 ANNUAL REPORT | 88
Page 76
Namoi Cotton Limited
Insurance on-charged by Namoi to Namoi Cotton Alliance $0.6m (2018: $0.6m).
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 2019 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.
25. Directors’ and Executive Disclosure
Compensation by category of KMP
Consolidated
28 Feb
2019
$
28 Feb
2018
$
Parent
28 Feb
2019
$
28 Feb
2018
$
Short-term
Post Employment
Other Long-term
Marketing and ginning transactions and balances with KMP
2,666,546 2,187,891 2,666,546 2,187,891
77,523
88,900
77,523
88,900
44,531
21,305
2,799,977 2,286,719 2,799,977 2,286,719
21,305
44,531
Transactions with directors and their related parties were in accordance with the eligibility criteria to be
appointed as a Grower Director. Under the Constitution Grower Directors are required to:
·
have ginned at least 1,500 cotton bales in aggregate per cotton season at a Namoi Cotton gin in at least
three out of the last five cotton seasons; and
at least 50% of their seed cotton production at any Namoi Cotton gin in at least three out of the last five
cotton seasons; or
at least 50% of their seed cotton production which is grown within 100km of any Namoi Cotton gin at a
Namoi Cotton gin in at least three out of the last five cotton seasons; and
is the registered owner or lessee of cotton farming property which annually can plant a minimum of 150
hectares of seed cotton and is capable of producing 1,500 cotton bales in aggregate per cotton season to
be ginned at a Namoi Cotton gin.
·
·
·
In accordance with the rules, 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
2019
$
7,631,722
28 Feb
2018
$
4,911,947
Consolidated and Parent entity
Ginning Charges Levied
28 Feb
2019
$
1,650,484
28 Feb
2018
$
1,121,159
Grain & Seed Purchases
28 Feb
2019
$
869,834
28 Feb
2018
$
889,089
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.
Year Ended 28 February 2019
Notes to the Financial Statements
Page 77
2019 ANNUAL REPORT | 89
Namoi Cotton Limited
26. Remuneration of Auditors
Consolidated and
Parent Entity
$
$
28 Feb
28 Feb
2018
2019
Remuneration for the audit and review of the financial reports of the
parent entity and the consolidated entity
220,000
222,100
Remuneration for other services provided to the parent entity and
the consolidated entity:
- Other assurance services
60,000
191,500
280,000
413,600
27. 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 are:
·
·
·
·
·
·
·
Lint cotton, cotton seed and grains commodities price risk;
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 Financial Risk Committee 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.
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.
Year Ended 28 February 2019
Notes to the Financial Statements
2019 ANNUAL REPORT | 90
Page 78
Namoi Cotton Limited
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
2019
28 Feb
2018
28 Feb
2019
28 Feb
2018
7,773
7,773
8,407
8,407
7,773
7,773
8,407
8,407
(7,181)
(7,181)
(8,393)
(8,393)
(7,181)
(7,181)
(8,393)
(8,393)
592
14
592
14
Year Ended 28 February 2019
Notes to the Financial Statements
Page 79
2019 ANNUAL REPORT | 91
Namoi Cotton Limited
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 2019 and 28 February
2018, 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
2019
28 Feb
2018
28 Feb
2019
28 Feb
2018
100
(50)
100
(50)
(234)
117
(234)
117
-
-
-
-
-
-
-
-
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
2019
28 Feb
2018
28 Feb
2019
28 Feb
2018
5,827
51
5,878
1,493
65
1,558
5,541
51
5,592
1,352
65
1,417
(44,692)
(57)
(44,749)
(50,002)
(52)
(50,054)
(44,692)
(57)
(44,749)
(50,002)
(52)
(50,054)
(38,871)
(48,496)
(39,157)
(48,637)
Interest rate swap contracts, with a fair value loss of $91,270 (2018 $51,780) 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, 47.6% (2018: 41.7%) of the
group’s borrowings are at a fixed rate of interest 2.1% (2018: 2.1%). 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 2019 and 28
February 2018, 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:
Year Ended 28 February 2019
Notes to the Financial Statements
2019 ANNUAL REPORT | 92
Page 80
Namoi Cotton Limited
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
2019
28 Feb
2018
28 Feb
2019
28 Feb
2018
(189)
95
(189)
95
(280)
140
(280)
140
-
-
-
-
-
-
-
-
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 2019
Notes to the Financial Statements
Page 81
2019 ANNUAL REPORT | 93
Namoi Cotton Limited
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
Net Exposure
Consolidated
$'000
Parent
$'000
28 Feb
2019
28 Feb
2018
28 Feb
2019
28 Feb
2018
163
-
-
163
(1,575)
(523)
-
(2,098)
(1,935)
177
127
86
390
(14)
(349)
(111)
(474)
163
-
-
163
(1,575)
(523)
-
(2,098)
(84)
(1,935)
177
127
86
390
(14)
(349)
(111)
(474)
(84)
The group has USD denominated leasing contracts of USD $373,533 (2018: USD $272,392) over certain ginning
equipment supplied from the United States. Foreign exchange contracts are subject to fair value movements
through the statement of comprehensive income as foreign exchange rates move.
Foreign exchange contracts held at balance date
Group
Sell US$/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
Notional Amount
AUD $'000
Average Exchange
Rate
28 Feb
2019
28 Feb
2018
28 Feb
2019
28 Feb
2018
-
-
-
-
5,838
(3,335)
5,838
(3,335)
-
-
-
-
0.7794
0.7796
0.7794
0.7796
Priced cotton seed sales contracts are treated as financial instruments under AASB 9.
Year Ended 28 February 2019
Notes to the Financial Statements
2019 ANNUAL REPORT | 94
Page 82
Namoi Cotton Limited
The following sensitivity analysis is based upon foreign currency exposures that existed at 28 February 2019
and 28 February 2018, 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
2019
28 Feb
2018
28 Feb
2019
28 Feb
2018
27
(14)
28
(14)
(42)
21
(42)
21
-
-
-
-
-
-
-
-
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 2019
Notes to the Financial Statements
Page 83
2019 ANNUAL REPORT | 95
Namoi Cotton Limited
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 2019
$'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 borrowings2
Derivatives1
Co-operative grower member
shares
Net Exposure
5,827
3,954
7,773
17,554
-
19
-
19
(7,875)
(324)
-
-
-
-
-
(618)
(4,724)
-
(13,217)
4,337
(444)
(2,513)
-
(3,281)
(3,262)
(43,630)
-
-
(43,630)
(43,630)
Year ended 28 February 2018
$'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 borrowings2
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 2019
Notes to the Financial Statements
2019 ANNUAL REPORT | 96
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,827
3,973
7,773
17,573
(8,199)
(44,692)
(7,237)
-
(60,128)
(42,555)
Total
$'000
1,493
3,924
8,492
13,909
(7,750)
(50,002)
(8,556)
-
(66,308)
(52,399)
Page 84
Namoi Cotton Limited
Year ended 28 February 2019
$'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 borrowings2
Derivatives1
Co-operative grower member
shares
5,541
8,632
7,773
21,946
-
19
-
19
(7,814)
(18,056)
(567)
(4,724)
(444)
(2,513)
-
(13,105)
-
(21,013)
-
-
-
-
-
-
-
-
-
-
(43,507)
-
-
(43,507)
(2,049)
-
-
(2,049)
5,541
8,651
7,773
21,965
(25,870)
(46,567)
(7,237)
-
(79,674)
Net Exposure
8,841
(20,994)
(43,507)
(2,049)
(57,709)
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 borrowings2
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)
(2,049)
-
-
(2,049)
1,352
9,178
8,492
19,022
(25,456)
(52,051)
(8,556)
-
(86,063)
Net Exposure
(3,486)
(18,280)
(43,226)
(2,049)
(67,041)
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 $0.96 million (2018: $1.03 million), for the 6-12 month period of
$0.94 million (2018: $0.90 million) and for the 1-5 year period $3.67 million (2018: $3.52 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.
Year Ended 28 February 2019
Notes to the Financial Statements
Page 85
2019 ANNUAL REPORT | 97
Namoi Cotton Limited
Fair value hierarchy
The group uses various methods in estimating the fair value of a financial instrument. The methods comprise:
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. (2018: 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 2019
Notes to the Financial Statements
2019 ANNUAL REPORT | 98
Page 86
Namoi Cotton Limited
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 2019
Consolidated
Current assets
Foreign exchange contracts
Cotton seed purchase contracts
Current liabilities
Foreign exchange contracts
Interest rate swap contracts
Cotton seed sale contracts
Year ended 28 February 2019
Parent
Current assets
Foreign exchange contracts
Cotton seed purchase contracts
Current liabilities
Foreign exchange contracts
Interest rate swap contracts
Cotton seed sale contracts
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 2019
Notes to the Financial Statements
Level 1
Quoted
market
prices
$'000
Level 2
Market
observable
inputs
$'000
Level 3
Non-market
observable
inputs
$'000
Total
$'000
Level 1
Quoted
market
prices
$'000
Level 1
Quoted
market
prices
$'000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(57)
-
(57)
-
7,773
7,773
-
-
(7,181)
(7,181)
-
7,773
7,773
-
(57)
(7,181)
(7,238)
Level 2
Market
observable
inputs
$'000
Level 3
Non-market
observable
inputs
$'000
Total
$'000
-
-
-
-
(57)
-
(57)
-
7,773
7,773
-
-
(7,181)
(7,181)
Level 2
Market
observable
inputs
$'000
Level 3
Non-market
observable
inputs
$'000
86
-
86
(111)
(52)
-
(163)
-
8,407
8,407
-
-
(8,393)
(8,393)
-
7,773
7,773
-
(57)
(7,181)
(7,238)
Total
$'000
86
8,407
8,493
(111)
(52)
(8,393)
(8,556)
Page 87
2019 ANNUAL REPORT | 99
Namoi Cotton Limited
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
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)
Year Ended 28 February 2019
Notes to the Financial Statements
2019 ANNUAL REPORT | 100
Page 88
Namoi Cotton Limited
28. 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
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
Bankers
Commonwealth Bank of Australia
Auditors
Ernst & Young
Brisbane, Australia
Year Ended 28 February 2019
Notes to the Financial Statements
Page 89
2019 ANNUAL REPORT | 101
ASX ADD ITION AL IN FO RMATION FOR T HE YE A R E ND ED
28 F EBRUARY 2019
Additional information required by the Australian Stock Exchange. This information is current as at 21 May 2019.
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
73
317
184
395
329
1,298
Number of Namoi Capital Stock
37,090
973,962
1,493,144
14,461,533
123,212,939
140,178,668
%
0.03
0.69
1.07
10.32
87.90
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 COMPANY ASIA PTE LTD
AUSTRALIAN RURAL CAPITAL LIMITED
NATIONAL NOMINEES LIMITED
CITICORP NOMINEES PTY LIMITED
JVH COTTON PTY LIMITED
MR ROSS ALEXANDER MACPHERSON
BRAZIL FARMING PTY LTD
MR MARK JOSEPH PANIZZA + MRS SUSAN KATHLEEN
PANIZZA ‹SUMA SUPER FUND A/C›
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
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›
ESTATE LATE PETER SINCLAIR GURNER ‹GIT 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›
14,327,384
13,471,111
8,915,981
5,578,650
4,110,353
1,490,500
1,435,119
1,300,225
1,082,881
1,063,089
1,009,386
840,929
839,000
820,122
809,720
800,000
790,041
775,272
745,500
740,291
% held
10.22
9.61
6.36
3.98
2.93
1.06
1.02
0.93
0.77
0.76
0.72
0.60
0.60
0.59
0.58
0.57
0.56
0.55
0.53
0.53
Total
60,945,554
43.48
2019 ANNUAL REPORT | 102
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 at the date of this Annual Report. There are 113,000 ordinary shares with employee loans of
$16,542. The employee share loans were required by formal notice to be paid by 30 June 2019. 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).
2019 ANNUAL REPORT | 103
MA JOR ASX ANN OUN CEMENTS FOR 2 01 8 - 20 1 9
Date
ASX Releases
Date
ASX Releases
01/05/2019 Namoi Cotton FY2019 Results
24/04/2018
Dividend/Distribution - NAM
01/05/2019
Preliminary Final Report
24/04/2018
FY2018 Financial Results Release
08/04/2019
Appendix 3B
07/03/2019
CEO Resignation and Appointment of
Interim CEO
05/03/2019
Appendix 3B
04/03/2019 Namoi Cotton Finance Renewal 2019-2021
27/02/2019 Namoi Cotton Revises Guidance for
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
FY2019
08/02/2019
Appendix 3B
10/01/2019
Appendix 3B
21/12/2018 Namcott Lodges Court Application
10/12/2018
Appendix 3B
07/11/2018
Appendix 3B
23/10/2018 Namoi Cotton HY Financial Results
Presentation
23/10/2018 Namoi Cotton Half Year Financial Results
23/10/2018 Namoi Cotton FY19 Half Year Financial
Report
03/10/2018
Appendix 3B
03/09/2018
Appendix 3B
29/08/2018
Resignation and Appointment of Chairman
02/08/2018
Appendix 3B
31/07/2018
Results of Meeting
31/07/2018
AGM Presentation 2018
31/07/2018
Chairman’s Address to Shareholders
02/07/2018
Appendix 3B
28/06/2018
Corporate Goverance Appendix 4G
28/06/2018
Annual Report to shareholders
28/06/2018
Proxy Form
28/06/2018 Notice of Annual General Meeting/Proxy
Form
08/06/2018
Initial Director’s Interest Notice - James
Andrew Jackson
08/06/2018
Initial Director’s Interest Notice - Joseph
Di Leo
08/06/2018
Initial Director’s Interest Notice - Juanita
Hamparsum
07/06/2018 Non-Executive Director Appointment -
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
27/04/2018
Final Director’s Interest Notice
27/04/2018
Final Director’s Interest Notice
24/04/2018
Director Appointment/Resignation
2019 ANNUAL REPORT | 104
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
2019 ANNUAL REPORT | 105
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.
2019 ANNUAL REPORT | 106
2019 ANNUAL REPORT | 107
2019 ANNUAL REPORT | 108