NUFARM LIMITED 2002 ANNUAL REPORT GROWING IN PARTNERSHIP CONTENTS NUFARM IS, FACTS IN BRIEF, KEY EVENTS AND COMPARATIVE DATA MANAGING DIRECTOR’S REVIEW BUSINESS REVIEW: Crop protection Industrial, fine and performance chemicals Research and development and new technologies Health, safety and environment BOARD OF DIRECTORS CORPORATE GOVERNANCE MANAGEMENT TEAM 02 08 10 14 18 22 26 28 32 GROWING IN PARTNERSHIP Nufarm’s commitment to working in partnership is a key to our success. During 2002 we continued to build sustainable partnerships with our customers, suppliers, industry colleagues, research collaborators, employees and shareholders, as well as with the local communities where we operate around the world. Through this co-operation, Nufarm benefits from a shared commitment to successful outcomes – and so do our partners. We rely on those partners to assist us in identifying ways to improve our products and services, to help set priorities and to find new opportunities for future growth. As we report a year of record growth, we acknowledge the support and contribution of all of Nufarm’s partners and look forward to strengthening those relationships over the next 12 months and beyond. Front cover: Nufarm product development officer, Pak Andi, inspects a crop at the Ciater plantation in Bandung, Indonesia. Inside front cover: Jeremy Whiting, Nufarm’s business manager UK and Ireland, discusses a winter milling wheat crop in Oxfordshire with Simon Bath, an agronomist with Dalgety Arable. Nufarm Limited ACN 091 323 312 103–105 Pipe Road Laverton North Victoria 3026 Australia Telephone: (61) 3 9282 1000 Facsimile: (61) 3 9282 1001 Website: http://www.nufarm.com DIRECTORS’ REPORT STATEMENT OF FINANCIAL PERFORMANCE STATEMENT OF FINANCIAL POSITION STATEMENT OF CASH FLOWS NOTES TO THE FINANCIAL STATEMENTS DIRECTORS’ DECLARATION INDEPENDENT AUDIT REPORT TREND STATEMENT SHAREHOLDER AND STATUTORY INFORMATION DIRECTORY 34 38 39 40 41 74 75 76 77 80 NUFARM IS Nufarm Limited is one of the world’s leading crop protection companies. We produce products which help farmers protect their crops against damage caused by weeds, pests and disease. With manufacturing and marketing operations based in Australia, New Zealand, Asia, Europe, Africa and the Americas, Nufarm employs almost 2,500 people, all of whom make a vital contribution to the company’s reputation for quality products, innovation and first class marketing and technical support. Using our strengths in chemical synthesis, Nufarm also manufactures and supplies a range of industrial, performance and fine chemicals which are used in products and industries as diverse as pharmaceuticals, motor vehicles, explosives and construction. Proudly based in Australia, Nufarm is listed on the Australian Stock Exchange (symbol NUF). Its head office is located at Laverton in Melbourne. NUFARM 2002 ANNUAL REPORT 02 Facts in brief Key events 12 months ended 31.7.2002 12 months ended 31.7.2001 ● Record operating profit is $56.8 million for the 12 months to 31 July 2002 Trading results $000 $000 ● Total sales revenues grow 8 per cent Operating profit after tax 56,834 51,138 to $1.43 billion ● Sales and profit growth in all key crop protection markets ● Nufarm takes over Australian and New Zealand Roundup* business ● NZ$225 million raised in capital notes issue ● Shareholders approve delisting in New Zealand *Roundup is a registered trademark of Monsanto Company Net profit (loss) attributable to members of the parent entity 56,834 (4,526) Sales revenue 1,429,275 1,323,232 Total equity 391,039 352,801 Capital notes 192,885 138,448 Total assets 1,326,222 1,191,881 Ratios Earnings per ordinary share (weighted average, excluding non-operating items) 36.7¢ 33.1¢ Operating profit after tax to average shareholders’ equity 15.4% 13.8% Net tangible assets per ordinary share $1.57 $1.42 Distribution to shareholders Dividend per ordinary share 18.0¢ 18.0¢ Staff employed 2,345 2,203 NUFARM 2002 ANNUAL REPORT 03 Beijing Tokyo Kuala Lumpur Singapore Jakarta Kwinana Kemerton Lytton Sydney Laverton Auckland NUFARM MANUFACTURING SITES CROP PROTECTION INDUSTRIAL CHEMIC Nufarm operates manufacturing and formulation facilities in 13 countries and employs almost 2,500 people. We provide our customers with a networked production capability to supply the many markets around the world. Similarly, Nufarm global sales and marketing operations are located strategically to service those markets and give the necessary technical support to our customers. GLOBALISING THE BUSINESS 13% 53% 1995 Australasia 87% Europe and North America Total sales: NZ$484.5 million 2002 Australasia Europe and North America 47% Total sales: A$1.43 billion NUFARM 2002 ANNUAL REPORT 04 Calgary Chicago Lobeco Houston Belvedere Botlek Gaillon Beuvry-la-Forét Meaux Linz Mulhouse Paris Barcelona Cairo Durban ALS FINE AND PERFORMANCE CHEMICALS Nufarm uses the economic value added (EVA) concept to measure the financial performance 27% Divisional revenues of its various businesses and to evaluate new acquisition opportunities. EVA is defined as the corporate return on capital less the charge for the cost of that capital provided by shareholders and lenders. EVA measures the annual progress in adding value to the total capital invested in the business. In 2002, the EVA from operations was $17.3 million compared to $22.9 million for the 12 months to 31 July 2001 (excluding non-operating items). The reduction in EVA in 2002 is a direct result of higher levels of working capital employed in the business. The company has a strong commitment to reducing working capital in future periods. 30% 73% 70% 2002 Crop protection Industrial, fine and performance chemicals Total: $1.43 billion 2001 Crop protection Industrial, fine and performance chemicals Total: $1.32 billion Divisional operating profit (before tax, interest and corporate charges) 19% 22% 81% 78% 2002 Crop protection Industrial, fine and performance chemicals and other Total: $146.7 million 2001 Crop protection Industrial, fine and performance chemicals and other Total: $132.3 million NUFARM 2002 ANNUAL REPORT 05 MISSION STATEMENT Nufarm Limited manufactures and markets a wide range of quality crop protection, industrial, fine and performance chemicals. Our mission is to meet the interests of all stakeholders in a manner that shows we care about: ● the growth and success of the business ● the well-being of our employees ● the environment and the communities in which we operate ● our customers and suppliers and ● the reputation and performance of our products and service Opposite: Cory Habberfield (right), a field agronomist with United Farmers of Alberta, shares a joke with Darryl Matthews, Nufarm’s commercial manager, outside the Airdrie retail store in Calgary, Canada. Above left: Tatiana Vassilieff, a second year chemistry student at CPE Lyons, spent the summer working at Nufarm’s laboratory at Gennevillliers, near Paris, France. Above centre: In Jakarta, Indonesia, Alwi Assagaf (left), Nufarm’s national sales manager, and Nurmah (right), Nufarm’s sales administration officer, are taking an order from Joni Wong, from PT Mekarindo Prima Lestari, a Nufarm distributor. Above right: Gerry Eckman (left), from Ackers Packaging Supplies is in discussion with Natalie Tsimberg, Nufarm’s purchasing officer in Nufarm’s Chicago Heights office, USA. MANAGING DIRECTOR’S REVIEW NUFARM 2002 ANNUAL REPORT 07 MANAGING DIRECTOR’S REVIEW In a challenging business environment, the company’s record tax paid profit of $56.8 million for the year ended 31 July 2002 is a very satisfactory outcome. The result represents an 11 per cent increase on the previous year’s operating profit of $51.1 million and was achieved on group sales revenues of $1.43 billion, an increase of eight per cent on the corresponding period last year. In 2001, the company reported a group loss of $4.5 million, after accounting for non-operating items, the most significant of which was the $59.2 million write-off associated with the Sulfer Works business in Canada. That business has since been sold. The strong 2002 result is attributable to a combination of sales growth and margin improvements in the group’s key businesses. Earnings per share were 36.7 cents, an increase of 11 per cent on last year’s 33.1 cents (from operating profit adjusted for the Sulfer Works loss). Climatic conditions during the year were variable and sales in the last two months of the financial year were some $40 million in excess of the previous year and $60 million above budget. Inventories associated with businesses acquired late in the financial year also contributed to closing working capital being significantly higher than forecast. The operating cash flow of the business has improved since balance date as these higher debtor levels have been recovered. Final dividend Directors declared a fully franked final dividend of 11.0 cents per share (2001: 11.0 cents), resulting in a full year dividend of 18.0 cents (the same as the previous year). The dividend will be paid on 8 November 2002 to the holders of all fully paid ordinary shares in the company as at the close of business on 25 October 2002. “...THE STRONG 2002 RESULT IS ATTRIBUTABLE TO A COMBINATION OF SALES GROWTH AND MARGIN IMPROVEMENTS” Operation Reviews of the key business operations – in both the crop protection division and the industrial, fine and performance chemicals division – are included as separate sections in this report. Also included is a report on progress associated with Nufarm’s various research and development activities and new technology areas, as well as our performance on health, safety and environment. The increase in group sales reflects growth in the crop protection business (sales up 13 per cent to $1.04 billion) and a five per cent reduction in sales (to $385 million) associated with the industrial, fine and performance chemicals business. This reduction is in part due to the sale of the timber treatment business (January 2001), which recorded six months of sales in the previous year. In the 2002 financial year, Australasia accounted for 47 per cent of total sales, the Americas 27 per cent and Europe 26 per cent. Consistent with the company’s long term strategy to focus on its crop protection operations, 73 per cent of the group’s total revenues were generated in this area of the business. Crop protection also recorded a 15 per cent increase in pre tax operating profit (up from $103.1 million to $118.3 million). There was a reduction in pre tax profit (adjusted for Sulfer Works) for the industrial chemicals division, down from $36.1 million to $31.3 million, again partly due to the absence of any contribution from the timber treatment operations, which were sold the year before. Corporate activity In August 2001, Nufarm shareholders approved a proposal to delist the company in New Zealand and focus the trading of Nufarm’s stock on the Australian Stock Exchange (ASX). The resulting increased liquidity in Nufarm’s shares has contributed to the return of the company to the benchmark S&P ASX top 200 index, effective from 1 October 2002. In November 2001, the Nufarm subsidiary Fernz Corporation (NZ) Limited completed an issue of new capital notes, raising NZ$225 million. This represented an over subscription to the NZ$210 million initially on offer. The proceeds from the issue were used to refinance notes, which matured in April 2002, and to provide additional working capital for the group. NUFARM 2002 ANNUAL REPORT 08 Events after balance date Nufarm announced in August that it would acquire Queensland-based Crop Care Australasia Pty Ltd from Orica Limited and Incitec Ltd for $75 million. This is an important acquisition for Nufarm, facilitating growth into key sectors of the Australian crop protection market. The Crop Care products are largely complementary to Nufarm’s range of products and the business combination provides opportunities for considerable cost rationalisation. Nufarm also announced the sale – to Orica Limited – of the Fernz chemicals business in Australia and New Zealand and the New Zealand-based process chemicals business. These businesses generated some $200 million in revenues during 2002 and contributed an EBIT (earnings before interest and tax) of just over $5 million. The decision to sell these businesses reflects our desire to concentrate on crop protection activities and those industrial chemical businesses where we can leverage our core strengths in chemical synthesis and formulation. Management and staff Nufarm employees made a major contribution to the record profit outcome for 2002. They showed a strong commitment to improve efficiencies in the business, to strengthen customer relationships and to identify and secure opportunities for growth. We welcomed new employees in several areas of the business and these people have quickly become valuable members of the Nufarm team. Outlook promising Directors are confident that the company’s strong performance in 2002 will continue into 2003 and beyond. Having achieved a record profit in a period of difficult trading conditions, the company is fundamentally well placed to take advantage of any improvement in those conditions. While there remains some uncertainty about the ongoing impact of the drought in Australia, the increasingly global nature of the business will lessen the impact of unfavourable seasonal conditions in any specific markets, as it did in 2002. The crop protection operations will benefit from a full year’s contribution from the Roundup business and the additional sales and synergies associated with the Crop Care acquisition. There will, of course, be some restructuring costs associated with the integration of Crop Care but we expect the transaction to be earnings per share positive in 2003. The company anticipates a marginal improvement in demand for fine and performance chemicals over the 2003 reporting period. The sale of the Fernz chemicals distribution business, however, will lead to a reduction in overall revenues and profit from the industrial chemicals operations. We continue to focus on cost control, manufacturing efficiencies and margin improvement across all areas of the business. Due to anticipated further growth in our crop protection business – and the fact that key cropping seasons coincide in both the southern and northern hemispheres – there will again be a strong weighting of profit to the second half of the financial year. At the time of preparing this report, there is significant world uncertainty but the directors are budgeting for continued revenue and profit growth in 2003 and we believe the longer-term outlook for the company remains very positive. We have chosen a theme of partnership in this year's annual report. I want to pay tribute to the contribution of all Nufarm's partners – employees, suppliers, distributors and end users of our products, individuals, companies and organisations with whom we are involved all around the world. These partnerships add considerable value to Nufarm and are an important foundation for our ongoing global growth and success ■ DJ Rathbone Managing Director Melbourne 10 October 2002 NUFARM 2002 ANNUAL REPORT 09 Nufarm is a major supplier of agricultural chemicals, used by farmers to protect their crops against damage caused by weeds, pests and disease. Products sold under the Nufarm brand are recognised consistently as being high quality with innovative formulations and product improvements, backed by the highest standards of technical and marketing support. The company is a global leader in the manufacture and marketing of phenoxies, a class of widely used herbicides that control and eradicate broad-leafed weeds. These products are manufactured in globally networked facilities in Australia, England, Austria and the Netherlands. A large range of other crop protection products are produced in manufacturing facilities in Australia, New Zealand, Asia, Europe, Africa and North America. With more than 2,100 product registrations, Nufarm products are sold in more than 100 countries around the world. The company has also developed a valuable position in the turf and specialty markets (lawn care, golf courses, municipal parks, aquatic and forestry weed control). Nufarm’s Riverdale division, in the USA, is a leading supplier of products into these markets. Opposite: Wayne Pace (left) an apple grower in North Carolina, USA, shows off his crop to Jerry Miller, Nufarm regional account manager (centre) and Richard Carver, United AgriProducts branch manager. Above left: members of the Argo High School marching band in Chicago back Bob from TruGreen ChemLawn. Above centre: Emeric Oudin (left), Nufarm’s regional agrochemical manager in France, samples the end result of good grape management with Alain Reverdy, the owner of Domaine Reverdy-Ducroux Vins Sancerre. Above right, left to right: Nufarm’s Jason Pitts and agronomist Ashley Perkins with farmers John and Stuart Hamilton at Inverleigh, Victoria, Australia. Roundup based weed control helped ensure a good quality canola crop. BUSINESS REVIEW CROP PROTECTION NUFARM 2002 ANNUAL REPORT 11 CROP PROTECTION “...AN INCREASE IN BOTH SALES AND MARKET SHARE IN ALL OF THE KEY MARKETS IN WHICH NUFARM IS REPRESENTED” Crop protection sales increased 13 per cent to $1.04 billion, with some 66 per cent of Nufarm’s crop protection sales achieved in markets outside of Australia. Pre tax operating profit increased by 15 per cent, from $103.1 million in 2001 to $118.3 million. Trading conditions for the crop protection business were difficult in the 2002 reporting period. Extensive drought in Australia and unfavourable seasonal conditions in parts of the USA and Europe prevented Nufarm from taking full advantage of its increased sales and marketing presence and expanded product range. Strong performance Despite these challenges, our crop protection operations performed very strongly, with an increase in both sales and market share in all of the key markets in which Nufarm is represented. The Australian business recorded a 15 per cent increase in sales for the period and an improved level of profitability. In response to the competitive nature of the market, Nufarm Australia made a concerted effort to lower its cost base and to review the product mix to maximise margins. Sales in drought-affected states were down on budget but we increased sales in those regions where conditions allowed normal cropping activity. We announced an important new arrangement with Monsanto for Nufarm to assume exclusive marketing and sales responsibility (Australia and New Zealand) for Monsanto’s Roundup product, the world’s biggest selling herbicide. Nufarm also acquired a range of selective herbicides from Monsanto. These developments will improve the profitability of the Australian business in 2003 and beyond. The New Zealand-based health and science business had an excellent result. Record levels of Captec controlled release capsules were manufactured and toll manufacturing for animal health business customers increased substantially. New Zealand sales of crop protection products were also very strong. Nufarm announced in February 2002 that it had entered into an agreement with Monsanto to supply the Roundup family of glyphosate herbicides in Australia and New Zealand. Roundup is the world’s biggest selling crop protection product and the world’s most recognised crop protection brand. Since being introduced in 1974, Roundup has been registered in more than 130 countries and approved for weed control in more than 100 crop types. Much of its success is based on its effectiveness against a large number of weeds and the fact that glyphosate has a very low relative toxicity. Roundup helped revolutionise farming practices by encouraging the use of conservation tillage techniques. By reducing the amount of tillage required, valuable top-soils are conserved, and runoff into streams is reduced. Nufarm, with the support of Monsanto, will now supply Roundup products to the Australian and New Zealand markets. It’s a partnership which will see new Roundup products introduced and the highest level of ongoing technical, sales and marketing support maintained. NUFARM 2002 ANNUAL REPORT 12 Asia – where sales increased by some 60 per cent – recorded an excellent outcome for the year, particularly in Indonesia where Nufarm has achieved strong market shares in both its core phenoxy herbicide and glyphosate products. The business in Japan, where we established a sales and marketing presence in the previous year, continued to develop and there is a considerable amount of registration activity underway to facilitate the introduction of additional products into that market. In North America, Nufarm sales in both Canada and the US increased. The seasonal influences on both markets were adverse, with drought conditions across the Canadian prairies and dry weather conditions in parts of the US reducing both herbicide and fungicide applications. We still improved sales of our core phenoxy herbicides range, reflecting further progress in establishing the Nufarm brand. Sound growth strategy The impact of a full year of costs for the Agtrol acquisition (May 2001) and further investment in resources and registrations to support long term growth of the US business reduced the profit from these operations. The strategy for successfully growing Nufarm’s presence in the world’s largest crop protection market remains sound, with further profit growth anticipated in coming years. The Riverdale business, which sells into the turf and specialty markets, grew sales by some seven per cent although depressed US economic conditions had an impact on the turf market, in particular, with a turndown in both the golf course and home lawn care sectors. The combined European-based businesses increased sales and profit. France, which remains our largest market, benefited from the full integration of the former Agtrol fungicides business but there was strong price-based competition. There was good growth in Spain, where a number of new products were launched, and in Portugal, where we acquired a small business, which is now managed by the Nufarm operation in Spain. Business results in Italy and Greece were ahead of budget due to a favourable product mix and additional sales of fungicides. Branded product sales in other markets such as the UK and Germany also expanded. From left to right: Bambang in Nufarm’s Merak plant in Indonesia; prime North Carolina produce; Suheti at Nufarm Merak, Indonesia; Stephanie Hutnick, Nufarm’s communications coordinator, and Bradley Harper, quality control chemist at Nufarm in Chicago Heights. Croplands now exporting Nufarm subsidiary, Croplands Equipment, introduced a number of new spray models and products during the year and expanded sales from its traditional Australia and New Zealand base to the US. This new export business will expand during the next 12 months with developments in application technology and geographic positioning system mapping capabilities. Positive opportunity Eastern Europe, particularly markets such as Poland and the Ukraine, are a positive opportunity for Nufarm and we initiated activity to boost sales and business development activity in those markets during the year. Overall, we continued to expand both our geographic markets and product portfolio and are firmly established as a leading global crop protection manufacturer and supplier ■ NUFARM 2002 ANNUAL REPORT 13 Nufarm is a global leader in the manufacture and supply of a range of specialty chemicals, which meet important needs in other manufacturing industries. Using the group’s strengths in chemical synthesis and formulation, Nufarm works with major customers around the world to provide key intermediates and performance enhancing additives. The Galoryl brand is recognised as a market leader in additives and coatings that help prevent caking, dust emissions and moisture pick up in fertiliser and explosives manufacture. The Lobeco subsidiary, based in South Carolina in the USA, also manufactures innovative products for the automotive paint industry and other manufacturing sectors. Multi-step synthesis capabilities have established SEAC, a subsidiary based in France, as a leading supplier of intermediates to the pharmaceutical industry. SEAC is able to meet customers’ needs from bench top and pilot batch scale through to full scale commercial production. Nufarm – via the 80 per cent owned Nufarm-Coogee joint venture – operates two chlor alkali plants in Western Australia, feeding chlorine to titanium dioxide producers. Opposite: John Mines (left) from Millennium with Jeff Fogg from Nufarm Kemerton chlor alkali plant, which supplies Millennium with chlorine gas for the manufacture of titanium dioxide in Western Australia. Above left: Nufarm’s Galoryl process additives and coatings combat physical product deficiencies such as poor crystalline structure, softness, caking, dust emissions and moisture pick up. Above centre: John Sulkowski (left), Jacobs Engineering Savannah, and Ken Smith, Lobeco’s engineering manager, at the new reactor module under construction at Lobeco in South Carolina, USA Above right: Anthony Cooper is Lobeco’s environmental operator on the water treatment plant in South Carolina, USA. BUSINESS REVIEW INDUSTRIAL FINE AND PERFORMANCE CHEMICALS NUFARM 2002 ANNUAL REPORT 15 INDUSTRIAL, FINE AND PERFORMANCE CHEMICALS “...PERFORMANCE CHEMICALS WAS REORGANISED TO PROVIDE MORE FOCUSED MANAGEMENT...AND CUSTOMER TIES WERE STRENGTHENED” The conditions in the technical grade ammonium nitrate (explosives) market were more positive and this market will grow further in the immediate future. Over coming months, we will launch a number of new additives for fertiliser manufacture and pursue new growth opportunities in the Asia-Pacific region. Nufarm’s 80 per cent owned chlor alkali plants, which supply chlorine to titanium dioxide producers in Western Australia, performed strongly but the reduced world indicator prices for caustic soda – a key by product sold into the mining sector – minimised any improvement in profit. The cyclic nature of caustic pricing will mean reduced profit from these operations in 2003. With focused management attention and a global view of the business, our challenge is now to grow other branded products in the same way as Galoryl, while making manufacturing assets more efficient. Fernz chemicals sold Nufarm announced on 23 September 2002 that the Fernz chemicals business (chemicals distribution in Australia and New Zealand) and the New Zealand-based process chemicals business were to be sold to Orica Limited for $60 million. While these businesses made a contribution to earnings in recent years, they were neither strategically important for Nufarm nor platforms from which the group could achieve further growth. We do, however, acknowledge the efforts of people employed in those businesses and wish them well for the future ■ Industrial, fine and performance chemicals accounted for 27 per cent of group sales ($385 million) and 19 per cent of pre tax operating profits. Sales were five per cent down on the previous year, due mainly to the absence of any revenues from the timber treatment business, which was sold in the 2001 reporting period. The US-based fine chemicals business (Lobeco Products, South Carolina) suffered a 30 per cent reduction in sales over the period as key customers elected to run down inventory levels in a depressed market. Aggressive cost containment An aggressive cost containment program minimised the profit impact of these developments but the net result was down on the previous year. A number of new products were added at the end of the financial year and these will contribute to an improved performance in 2003. Similarly, the European fine chemicals market was tight; however, budgeted sales were achieved and a number of new products are also being introduced to help fuel future growth. The 2002 reporting period saw a very positive contribution made by the pharmaceutical intermediates business, SEAC, based in France. This business increased profit significantly; revenues were up 28 per cent. We also completed a considerable amount of work to ensure this facility continues to meet various regulatory standards. The recently commissioned acid compatible filter dryer at the Gaillon plant in France and the multi-purpose reactor series at Lobeco in the US are already working ahead of capacity projections. Reorganisation The performance chemicals business, which includes the market leading Galoryl brand, was reorganised to provide more focused management. We also strengthened ties with a number of large customers. Despite over capacity in global fertiliser supplies (a major market for Galoryl products), the business achieved a minor profit increase in 2002. NUFARM 2002 ANNUAL REPORT 16 KWINANA INDUSTRIES EDUCATION PARTNERSHIP Two of Nufarm’s Australian manufacturing plants, Nufarm-Coogee chlor alkali and the regional Nufarm crop protection operations, are located at Kwinana, the premier heavy industrial area of Western Australia. In 1991, Nufarm, together with 13 other companies, formed the Kwinana Industries Council (KIC) to, among other things, coordinate a range of intra-industry activities such as water and air quality, monitoring and emergency management, as well as liaise effectively with local communities and governments. One of KIC’s long term initiatives is the Kwinana Industries Education Partnership, a formal agreement and commitment between KIC and local high schools, Murdoch University and the broader community. Consistently, the partnership has been recognised for the high standard of its vocational education and training programs. ■ Murdoch University student, Aleta Shyrock, who recently received the Nufarm Thermo Dynamics Engineering Achievement Award, with Christopher Lee, Nufarm’s Kwinana manufacturing manager, visit the university’s pilot plant. From left to right: Andy Browning from Nufarm-Coogee at Kemerton, Western Australia; Melvin Graham, materials handler at Lobeco, South Carolina, USA; Brian Bevans, maintenance operator at Nufarm-Coogee, Kemerton, Western Australia; Chad Gay, mechanic in Lobeco’s store room, South Carolina, USA. $m 100 200 300 400 500 NUFARM 2002 ANNUAL REPORT 17 A key competitive advantage for Nufarm is our ability to develop and introduce new products and innovative formulations. These are an important aspect of product differentiation and add value to the Nufarm brand. We are also involved in a number of strategic partnerships aimed at taking advantage of new technologies that are finding a valuable place in crop protection. Opposite: George Jallet, analytical chemist at Nufarm’s laboratory in Gennevilliers, France, with Mustapha Kireche, a chemistry student at Paris VI. Above left: RMIT University post graduate students Chitra Raghavan (left) and Priya Madhou (right) are working on 2, 4-D related genomics and micro-array gene expression with Dr Trevor Stevenson, Associate Professor of Plant Biotechnology, Department of Biotechnology & Environmental Biology. Above centre: Florigene’s commercial manager, Steve Chandler (left), with genetically enhanced cut flowers grown by Frank Baguley in Clayton, Victoria, Australia. Above right: Katie Coolong in Lobeco’s laboratory, South Carolina, USA BUSINESS REVIEW RESEARCH AND DEVELOPMENT AND NEW TECHNOLOGIES NUFARM 2002 ANNUAL REPORT 19 RESEARCH AND DEVELOPMENT AND NEW TECHNOLO “...SEVERAL THOUSAND EXTRACTS SCREENED... A NUMBER OF LEAD CANDIDATES SHOW HERBICIDAL ACTIVITY” 2,4-D related gene expression Herbicides such as 2,4-D and MCPA, two core products for Nufarm, were some of the first compounds to be used as successful and efficient herbicides. Despite many years of research, we need to learn more about the molecular detail of how these herbicides kill plants. This will lead to improved product formulation, the optimising of application rates and the development of strategies to help avoid and overcome resistance issues. Working in partnership with the Department of Biotechnology and Environmental Biology at RMIT University in Melbourne, we are using the latest advances in genomics and micro-array gene expression analysis to determine changes in gene expression following the application of these herbicides. This work is helping to define the exact molecular mechanism of these herbicides and will be expanded to include other products in the Nufarm range. It also has the potential to identify new gene targets against which more effective crop protection products can be developed. There was positive progress on several fronts relating to new product innovations and our ongoing collaborative research in 2002. Product launches Nufarm, in partnership with Bayer Crop Science, the world’s largest crop protection company, is a global leader in the manufacture and supply of bromoxynil, an important herbicide used in corn and cereal crops. We commercially released Nufarm branded bromoxynil products in Germany, Canada and the USA during the year. Canada and the US are two of the largest bromoxynil markets in the world and there is considerable scope for sales growth. Nufarm’s glyphosate was registered and launched in Argentina and a series of new amitrole mixtures continued to be rolled out in southern Europe. We also expanded the Champ DP copper fungicide range into several new markets, including Australia. Novel herbicide discovery Our primary collaborators on the project to develop novel herbicides based on compounds produced by marine organisms are the Australian Institute of Marine Science and the James Cook University, both based in Townsville, Queensland. An AusIndustry R&D Start Grant supports the project. Several thousand extracts have been screened, identifying a number of promising lead candidates, which show herbicidal activity. We are using our capabilities to establish the chemical identity of those compounds and to investigate the viability of synthesising commercial products. NUFARM 2002 ANNUAL REPORT 20 OGIES From left to right: crushing petals to extract colour for analysis; laboratory supervisor Terry Tsang testing product at Nufarm, Calgary; Galoryl product; Bernard Guyenet, chemist, Gennevilliers, France. Florigene Registration activity Nufarm holds more than 2,100 product registrations in over 100 global markets. The crop protection industry is highly regulated, with companies having to generate considerable data on safety, product efficacy and environmental impact to achieve marketing approvals. These approvals, or product registrations, are reviewed periodically by regulatory agencies so that the data can be updated to meet new standards. During 2002, the European authorities reviewed – and accepted for ongoing registration – one of Nufarm’s key herbicide compounds, 2,4-D. This will stabilise the European market for 2,4-D and underpin Nufarm’s position for at least the next five years. The regulatory approval of Nufarm’s bromoxynil products led to their commercial launch. We registered two new glyphosate formulations in the US, together with a range of other products, including several new phenoxy herbicide compounds. We also submitted a substantial number of other product registrations in markets such as Latin America, North America and Europe. The commercial opportunities from these new product registrations are considerable ■ The Australian-based Florigene business (90 per cent owned by Nufarm) is concerned with the genetic enhancement of plants and has successfully commercialised a number of new cut flowers. During the 2002 reporting period, Florigene’s sales of novel coloured carnations increased significantly. The carnations are sold in the US, Japan and Australia. Florigene’s research, regulatory and commercial experience with genetically modified plants will help Nufarm become involved in other biotechnology developments, which are having an impact on agricultural production methods around the world. Nugrain Shareholders in Nugrain include Nufarm, Wesfarmers Landmark and Australia’s major grain bulk handlers – Graincorp, Ausbulk and CBH. Nufarm established the company in 1999 to enhance the development of broadacre farming in Australia. Nugrain has invested in plant breeding, the acquisition and testing of new germ plasm from international sources, the trialing and commercialisation of new crop varieties and the development of quality control systems and end point royalty mechanisms. During the 2002 financial year, Nugrain formed an alliance with PlantTech Pty Ltd and NSW Agriculture to accelerate the breeding and delivery of improved canola varieties to Australian farmers. The first two canola varieties from this initiative have now been released. Progress was also made in new breeding and development programs across a range of other broadacre crops, particularly wheat. NUFARM 2002 ANNUAL REPORT 21 Nufarm is committed to ensure that its activities present a high level of protection for the health and safety of its employees, customers, the public and the environment. A personal commitment from all employees is essential in promoting and achieving this objective. The company will ensure it has safe working conditions, will define safe work practices, train its employees and provide information for the control of hazards in the workplace and for the protection of the environment. Supervisors and managers will be held accountable for the safety and occupational health of their people and for the environment protection measures in activities over which they have control. The company’s objective is to carry out its business with no adverse effect on its people, the community and the environment, and to strive for sustainable development and continual improvement. Opposite: Shawn Rawls, Nufarm’s traffic manager at Chicago Heights, USA, with Pete from Standard Forwarding. Above left: Thierry Launay and Gilles Corbin, both from CFPI Nufarm Departement Developpement Unite Experimentale et Developpement Nord, testing products in a Champagne vineyard in France. Above centre: Goo Boon Sing (left) and Murugam at the Mastra factory stores department in Malaysia. Above right: Nufarm chlor alkali plant manager, John Kalbfell (left), enlisted the support of industry neighbours and local and state governments to work together to add a 3.5 kilometre safe cycleway to what was a dangerously narrow stretch of road to the Kemerton industrial park. Jim Offer (right), Harvey shire president, opened the cycleway in May. BUSINESS REVIEW HEALTH, SAFETY AND ENVIRONMENT NUFARM 2002 ANNUAL REPORT 23 HEALTH, SAFETY AND ENVIRONMENT “...PLACING A HIGH PRIORITY ON DEVELOPING A CULTURE OF SAFETY AND RESPONSIBILITY IN MANUFACTURING” PROGRESS ON NUFARM CORPORATE SAFETY TARGETS 2000 actual 2001 actual 2002 progress seven months to 31 July LTIFR1 14.3 12.5 6.4 Severity rate2 0.158 0.125 0.078 1: number of lost time injuries per million hours worked. 2: number of days lost per thousand hours worked. 2003 target 7.15 0.079 Working in partnership with the community to deal with odour problems Nufarm’s largest French manufacturing plant is at Gaillon, an historic area in Normandy, France. The plant manufactures a range of agricultural, performance, automotive and intermediate chemicals and has developed an innovative partnership with the community. During a Responsible Care® meeting on site in 2001, the community raised concerns about perceptions of odours coming from the plant. In an effort to encourage participation, accurately identify the odours and improve our performance, we suggested that members of the community become our ‘external noses’. Since then, we have trained several neighbours to improve their sensitivity to and knowledge of odours and they quickly supply us with information that enables us to track down and stop any releases from the Gaillon plant. It is a win-win situation on both sides: the community is helping us to improve and we are receiving better feedback that enables us to upgrade our performance. Last year, Nufarm set tough corporate targets for key health, safety and environmental performance and we are seeing progress towards achieving them. We take our commitment to meeting these targets very seriously and a continued effort and constant vigilance are needed from all areas of the group’s operations. This year, we published Nufarm’s third annual health, safety and environment (HSE) report, together with 26 site HSE reports, several of which were in languages other than English. They all contain calendar year data on the company’s performance across a range of parameters and reflect our success in improving the overall standard of our HSE related activities. The group and site reports, including case studies and specific achievements and initiatives, are available for download from our website: www.nufarm.com. Public reporting This public reporting of Nufarm’s HSE performance reflects an important message to all of our stakeholders: employees, shareholders, customers, suppliers and the local communities in which we operate. By setting – and reporting against – clearly visible goals, we are placing a high priority on developing a culture of safety and responsibility in relation to our manufacturing activities. It is clear that such an approach is translating into improved performance. Overall improvement In 2001, the overall safety performance, as measured by the lost time injury frequency rate (LTIFR) was 12.5. This compares with the LTIFR of 14.3 for the previous year. Similarly, there was improvement in the severity of injury measurement, 0.135 for 2001 against 0.158 for the year 2000. The result for the first seven months of calendar year 2002 is both heartening and marked: the LTIFR is 6.4 and the severity rate 0.078, but there is little room for error if the 2003 corporate targets are to be met (2003 targets: LTIFR 7.15, severity 0.079). Manufacturing operations in Australia, New Zealand and South East Asia reported considerable improvements in safety performance, with the North American operations also doing better than in the previous year. The European operations – which represent a substantial level of manufacturing activity – were unable to report progress in performance and this is now being addressed via close attention to training and other initiatives. NUFARM 2002 ANNUAL REPORT 24 From left to right: Jose Mendoza, Chicago Heights, USA; Winston Smith plant operator at Kemerton, Western Australia; Fathona in the production area of Nufarm’s plant at Merak, Indonesia; Ange-Claude Guerin, formulations engineer, Gennevilliers, France. Meeting compliance standards ENVIRONMENT EXPENDITURE Our efforts in meeting the various environmental compliance standards and waste and emission targets generally produced good results. A major increase in environment related expenditure – particularly in relation to the Chicago facility – will bring substantial benefits in this area of our operations over coming years. A noticeable trend in recent environment-related expenditure is higher internal monitoring and training costs as we improve awareness and track the effect of our operations across all our sites. Rehabilitation costs are down as we complete work on cleaning-up problems sometimes inherited with acquisitions. We are working hard to bring newly acquired locations into line with our standards. The company was fined NLG5000 in relation to odour complaints received while a tar vessel was being cleaned at the Botlek plant, The Netherlands. Action has been taken to prevent any reocurrence. Eight Nufarm manufacturing sites are classified as major hazard facilities under various regulations around the world. Since construction, both the Australian chlor alkali plants at Kemerton and Kwinana have operated under hazard management plans similar to the present legislation and these plans have been upgraded to meet the safety case regime. Belvedere’s safety case was accepted on first submission and is being used by other UK industries as a benchmark example of best practice. Laverton’s safety case was submitted and the site issued with an unconditional licence, the only one to be awarded in Victoria, Australia. Focused management attention During calendar year 2001, 11 Nufarm locations achieved 100 per cent compliance with environmental tests (2000: eight). Some other sites did not do as well as previously and management attention is focused firmly on recovery. We should be satisfied with no less than a consistent record of constant improvement across the range of HSE performance measurements. The commitment we display at the corporate level must be reinforced at the individual businesses and operating sites and for the various activities in which those sites are involved. And critically, we as individuals must commit to contributing to that progress every day of every year ■ Capital Capital for rehabilitation Clean-up costs Monitoring costs – internal Monitoring costs – external Environment training Licences Other costs Total 2001 A$ 13,730,346 119,637 8,271 1,419,992 1,651,701 160,027 232,155 1,957,010* 19,279,139 *Increase due to destruction of accumulated waste Key HSE indicators ● Lost time injury frequency rate (LTIFR1) down to 12.5 in 2001 (2000: 14.3) ● Medical treatment injury frequency rate (MTIFR2) down to 24.3 in 2001 (2000: 30.4) ● Severity rate3 down to 0.125 in 2001 (2000: 0.158) ● 11 manufacturing sites free of LTIs in 2001 (2000: seven) ● Safety expenditure 2001: A$10.079 million (2000: A$9.457 million) ● Environment expenditure 2001: A$19.279 million (2000: A$12.06 million) ● Total estimated CO2 release 2001: 247,669 equivalent tonnes (2000: 255,332 equivalent tonnes) ● Total waste generated 2001: 48,885 tonnes (2000: 50,018 tonnes) ● Total waste excluding salt 2001: 19,104 tonnes (2000: 18,075) ● Environmental complaints 2001: 40 (2000: 35) 1. number of lost time injuries per million hours worked. 2. number of days lost per thousand hours worked. 3. number of lost time and medical treatment injuries per million hours worked. NUFARM 2002 ANNUAL REPORT 25 BOARD OF DIRECTORS KM (KERRY) HOGGARD CHAIRMAN DJ (DOUG) RATHBONE MANAGING DIRECTOR AND CHIEF EXECUTIVE GDW (DOUG) CURLEWIS DR WB (BRUCE) GOODFELLOW GW (GRAEME) MCGREGOR AO SIR DRYDEN SPRING DR JW (JOHN) STOCKER AO RFE (RICHARD) WARBURTON NUFARM 2002 ANNUAL REPORT 26 KM (KERRY) HOGGARD CHAIRMAN Kerry Hoggard, aged 61 years, joined the board in 1987. He has a financial background, beginning his career with the company in 1957 as office junior and rising, through a number of accounting, financial and commercial promotions to be Chief Executive Officer in 1987. On his retirement in October 1999, he was appointed Chairman of the board. DJ (DOUG) RATHBONE MANAGING DIRECTOR AND CHIEF EXECUTIVE Doug Rathbone, aged 56 years, joined the board in 1987. His background is chemical engineering and commerce and he has worked for Nufarm Australia Limited for over 28 years. Doug was appointed managing director of Nufarm Australia in 1982 and managing director of Nufarm Limited in October 1999. GDW (DOUG) CURLEWIS Doug Curlewis, aged 61 years, joined the board in January 2000. He has a Master of Business Administration and was formerly Managing Director of National Consolidated Limited. He is also a director of Pacifica Group Limited, Hamilton Island Ltd, National Foods Ltd, Remunerator Australia Pty Limited and Loomis Limited. GW (GRAEME) MCGREGOR AO Graeme McGregor, aged 63 years, joined the board in January 2000. He is a Bachelor of Economics and was formerly an executive director with BHP Co Limited. He is a director of Foster’s Group Limited, Santos Limited and Were Securities Limited. Graeme is also on the board of Community Foundation Network Limited, is National Treasurer of the Australian Institute of Company directors and a member of The Financial Reporting Council. DR JW (JOHN) STOCKER AO Dr John Stocker, aged 57 years, joined the board in 1998. He has a medical, scientific and management background and was formerly Chief Scientist of the Commonwealth of Australia. He is a principal of Foursight Associates Pty Limited and Chairman of Sigma Company Limited and the Grape and Wine Research and Development Corporation. He is a director of Telstra Corporation Ltd, Cambridge Antibody Technology Group plc and Circadian Technologies Limited. DR WB (BRUCE) GOODFELLOW Bruce Goodfellow, aged 50 years, joined the board representing the holders of the ‘C’ shares in 1991. Following the conversion of the ‘C’ shares into ordinary shares, he was elected a director in 1999. He has a Doctorate in Chemical Engineering and experience in the chemical trading business. He is a director of Sulkem Co Limited (Group), Refrigeration Engineering Co Limited (Group), Cambridge Clothing Company Ltd and SH Lock (NZ) Limited. SIR DRYDEN SPRING Sir Dryden Spring, aged 63 years, joined the board in 1981. He has a farming background and is Chairman of Fletcher Challenge Forests Limited, Wel Energy Limited and Ericsson Communications (NZ) Ltd, and Deputy Chairman of Goodman Fielder Limited. He is a director of Ericsson-Synergy Ltd, Fletcher Building Limited, Maersk New Zealand Limited and The National Bank of New Zealand Limited. Sir Dryden is also Chairman of the New Zealand delegation to the APEC Business Advisory Council (ABAC) and Chairman of Asia 2000 Foundation of New Zealand. RFE (RICHARD) WARBURTON Richard Warburton, aged 61 years, joined the board in 1993. He has a business background and is a member of the board of the Reserve Bank of Australia. He is also Chairman of David Jones Limited, Caltex Australia Ltd, AurionGold Ltd and HIH Claims Support Ltd, as well as a director of Southcorp Ltd and Tabcorp Holdings Ltd. He is Chairman of the Board of Taxation and a past National President of the Australian Institute of Company Directors. NUFARM 2002 ANNUAL REPORT 27 CORPORATE GOVERNANCE “...NUFARM’S BUSINESS IS CARRIED OUT IN THE BEST INTERESTS OF ALL SHAREHOLDERS AND WITH RESPONSIBILITY TO OTHER STAKEHOLDERS” Board of directors The board is the governing body of the company with primary responsibility to oversee all corporate governance matters. It has clearly defined policies detailing its individual and collective responsibilities and describing those responsibilities delegated to management. The general principles are to ensure that the business of Nufarm Limited is carried out in the best interests of all shareholders and with proper regard to corporate responsibility to other stakeholders. The board has specific responsibility for adopting all business plans and budgets, approving strategic plans for the company and its business units and authorising major capital expenditure, acquisitions, divestments and corporate funding, as well as overseeing audit and compliance. The board also is responsible for the appointment and remuneration of the managing director and for the remuneration policy of senior executives. Review of the performance of the board and individual directors is completed regularly. The board is comprised of individuals with an appropriate range of proficiencies, experience and skills to ensure that all governance responsibilities are completed in a manner consistent with the best possible management of the business. Profiles of each board member are set out on page 27 of this report. The company’s constitution specifies that: • the number of directors may be not less than three nor more than 11; • at each annual general meeting, one third of directors (other than the managing director and directors who have been appointed to fill casual vacancies since the previous annual general meeting) are required to retire and may stand for re-election; and • directors who have filled casual vacancies are required to be elected at the first annual general meeting following their appointment by the board. At present, there are seven non-executive directors and one executive director. The board has currently determined that, apart from the incumbent managing director, no other company executive will be invited to join the board. The board reviews the composition and terms of reference for the board, chairman, board committees and managing director annually. The chairman also assesses the effectiveness of the board and its committees each year. The board supports the separation of the roles of chairman and managing director. The processes by which the board operates and aims to achieve best practice in matters of governance, include: • monthly reports by senior executives covering the financial standing, operating results and business risks of the group; • a continuous disclosure protocol detailing the company’s disclosure obligations. This is communicated to business unit managers and requires them to provide regular reports pursuant to the protocol; • formal policies and charters on issues such as: – treasury activities; and – dealing in company securities; • board committees. Board committees The board has three sub-committees: the audit committee, the remuneration and nominations committee and the scientific review committee. The company's decision to expand the remuneration committee's role to include the nominations function is effective for the 2003 financial year. All directors are entitled to attend any meetings of the sub-committees. The company chairman is not permitted to chair any of the board sub-committees. Details of the attendances at meetings of the board and committees of the board are detailed on page 34 of this report. The board of directors of Nufarm Limited has adopted the following set of principles for the corporate governance of the company. These principles, together with the following committees, establish the framework of how the board carries out its duties and obligations on behalf of the shareholders. NUFARM 2002 ANNUAL REPORT 28 From left to right: Cindy Jacobs from Nufarm accounts at Chicago Heights, USA; Mick Rose, Nufarm charge hand, Belvedere, UK; Ian Campbell, Nufarm storeman, Laverton, Australia; Richard Rose, Nufarm general manager at the warehouse of supplier, Univar Canada Inc. The charter clearly identifies those services that the external auditor may provide, those that may not be supplied and those that require specific audit committee approval. These have been revised and changes implemented in line with contemporary best practice. The board has also agreed that it will not invite any former lead engagement audit partner of the firm involved in the company’s external audit to fill a vacancy on the board and the lead engagement audit partners will be required to rotate off the audit after their involvement for a maximum of five years and there will be a period of at least three years before that partner can again be involved in the company’s audit. The audit committee charter provides that the committee shall consist of at least two members although any board members may attend any meeting. Only independent non-executive directors may be appointed members of the audit committee. An independent non-executive director is a director who is free from any management role, or business or other relationship that could materially interfere with the ability to act with a view to the best interests of the group as a whole. At the date of this report, GW McGregor AO (committee chairman), KM Hoggard and Sir Dryden Spring are members of the audit committee. Audit committee The audit committee operates under a formal charter from the board. Its primary function is to review the financial information to be provided to shareholders, and others, the systems of internal control and the audit process. Conducting its duties, the committee will: • meet privately, at least annually, with the company’s general manager–global risk management and the external auditor to discuss any matters that the audit committee or these groups believe should be discussed with the committee without the presence of management; • self-assess annually whether the audit committee has carried out the responsibilities defined in the audit committee charter; • self-assess annually whether the audit committee complies with its membership requirements; • review and evaluate the effectiveness of the group’s processes for assessing significant risks or exposures; • review the group’s internal controls with the support of management, the external auditors and internal risk management function; • ensure that all financial statements released to share holders and others comply with accounting standards and are true and fair and are not misleading; • review the dividend proposal and supporting information provided to the committee to ensure that it complies with board guidelines and that the franking status is consistent with Australian taxpaying capacity; • review the annual audit plan; • review that the taxation position of the group is in compliance with relevant tax law; and • require the external auditor to confirm in writing that it has complied with all professional and regulatory requirements relating to auditor independence prior to the completion of each year’s accounts. The committee also annually reviews the audit committee charter. NUFARM 2002 ANNUAL REPORT 29 CORPORATE GOVERNANCE “...ALL DIRECTORS AND EMPLOYEES TO ADOPT ETHICAL BUSINESS CONDUCT STANDARDS AND COMPLY WITH LEGISLATION” Remuneration and nominations committee Remuneration of directors and executives The functions of the remuneration and nominations committee are: • to define the levels at which the managing director must make recommendations to the committee on proposed changes to remuneration and employee benefit policies; • remuneration (including incentive schemes and any other forms of reward) for the managing director and his direct reports and annual review of those arrangements; and • to formulate policies and criteria for the appointment of directors to the board and to provide the board with recommendations for appointments to the board. The committee reports to the board on all matters and all decisions are made by the board, except when power to act is delegated expressly to the committee. At the date of this report, RFE Warburton (committee chairman), GDW Curlewis and KM Hoggard, are members of the remuneration committee. Scientific review committee The scientific review committee reviews all research and development programs, testing each project for scientific application, progress against objectives and potential commercial viability. At the date of this report, Dr JW Stocker AO (committee chairman), Dr WB Goodfellow and KM Hoggard are members of the scientific review committee. Remuneration of non-executive directors The board determines the fees payable to non-executive directors, within the aggregate annual amount of $750,000 approved by shareholders at the Nufarm Limited 2000 Annual General Meeting. Effective 1 August 2002, base fees paid to a director are $60,000 per annum and, for the chairman, $160,000 per annum. Board committee chairmen are paid an additional $10,000 per annum. Directors (other than the company chairman) are paid an additional $2,500 for membership of board committees. Non-executive directors are entitled to retirement benefits, with an escalating scale of benefits up to a maximum – after 10 years of service – of three times average annual emoluments in the three years preceding retirement. The board remuneration committee reviews the total remuneration reward for the managing director and senior executives and engages external human resource consultants to assist in the review of strategies and frameworks that reflect and support Nufarm’s values and business direction. The company has a fully integrated global reward strategy. It establishes specific frameworks and principles – across all reward components – to apply in deciding individual reward levels. This ensures Nufarm is well positioned, from a reward perspective, to attract and retain the talent needed to achieve its business objectives. Reward is structured in three components: • fixed reward – of cash and benefits that reflect local market conditions and individual contribution. The level of reward for the role is set relative to relevant and prevailing executive employment market conditions for high calibre talent in the respective geographies in which the company operates; • short-term variable reward – reflects performance over specific business outcomes over six to 12-month periods and is paid in cash. Variable reward opportunity levels are set with reference to relevant market conditions; and • long-term variable reward – reflects the returns on funds employed in the business in excess of the cost of those funds. This reward is delivered through shares or a mixture of shares and options and is subject to performance indicators linked to meeting the company’s financial targets. Risk identification and management The company is committed to identifying, monitoring and managing risks associated with its business activities. It has a number of management procedures to deal with risks including financial, business, interest rate, foreign exchange, regulatory and environmental. Nufarm also closely monitors international risks associated with its global activities. NUFARM 2002 ANNUAL REPORT 30 From left to right: Bruce Nicolaides and Luis Ayala at Nufarm, Chicago Heights, USA; Nufarm Envirodrums; Belvedere instrument fitters Charlie Haydon and Terry Jeal, England; Roup Purohim, Nufarm market development discussing material promotion samples with PT Karya Indah Collection’s Neni Kunaeni and Khusnul. Management limits of authority Purchase and sale of company shares The board has set specific limits to management’s ability to incur expenditure, enter contracts or acquire or dispose of assets or businesses without full board approval. Reporting procedures ensure that the full board reviews these limits monthly. Treasury policy Exposure to foreign exchange and interest rate risks is managed in accordance with a comprehensive board-approved treasury policy, which sets limits of management authority. Derivative instruments are used by the company to manage specific business risk. They are not used for speculative purposes. Health, safety and environment The board receives management reports covering compliance with environmental policy and health and safety issues. Any variance with legislative or corporate policy is reported to the board immediately. Corporate policy and compliance are audited regularly with a full report to the board. Ethical standards All directors and employees are required to adopt standards of business conduct that are ethical and comply with all legislative requirements. Where there are no legislative requirements, the company endeavours to ensure appropriate standards through policy statements as they relate to stakeholders in the business and by careful selection and promotion of employees. The board endorses the principles of the Code of Conduct for Directors issued by the Australian Institute of Company Directors. Conflicts of interest Board members are required to identify any conflict of interest they may have in dealing with the company’s affairs and subsequently to refrain from participating in any discussion or voting on these matters. Directors and senior executives are required to disclose in writing any related party transactions. Executives are obliged to disclose to an executive director any activities in which they are involved that might be in conflict with the company’s activities or interests. The company has a share trading policy that prohibits directors and management from dealing in the company’s shares at any time the directors or employees are aware of unpublished, price-sensitive information. In addition, directors and senior management may only buy or sell shares during the six week period commencing 48 hours after the respective release of the company’s half year and annual results to the ASX. Political activities The company maintains a position of political impartiality except in circumstances where there is deemed to be an obligation to make a statement because of major impact on the company’s stakeholders. Nufarm operates in accordance with the social and cultural beliefs appropriate in each country of operation. It does not fund any political group. Directors’ access to independent advice Directors have the right, with the approval of the chairman or by resolution of the board, to seek independent legal or financial advice at the company’s expense. Shareholder relations The company’s shareholders are responsible for voting on the appointment of directors. The board seeks to inform shareholders of all major developments affecting the company by: • preparing half yearly financial reports and making these available to all shareholders; • advising shareholders of the key issues affecting the company; • submitting proposed major changes in the company’s affairs to a vote of shareholders, as required by the Corporations Act 2001; and • holding an annual general meeting each year to enable shareholders to receive reports by the board of the company’s activities. All shareholders who are unable to attend these meetings are encouraged to communicate issues or ask questions by writing to the company ■ NUFARM 2002 ANNUAL REPORT 31 MANAGEMENT TEAM JOHN ALLEN GROUP GENERAL MANAGER CROP PROTECTION JOINED 1984 DR MIKE DALLING GROUP GENERAL MANAGER RESEARCH AND DEVELOPMENT JOINED 1999 BRIAN BENSON GROUP GENERAL MANAGER MARKETING JOINED 2000 RODNEY HEATH GROUP GENERAL MANAGER CORPORATE SERVICES AND COMPANY SECRETARY JOINED 1980 KEVIN MARTIN CHIEF FINANCIAL OFFICER JOINED 1994 BOB OOMS GROUP GENERAL MANAGER CHEMICALS JOINED 1999 DAVID PULLAN GROUP GENERAL MANAGER OPERATIONS JOINED 1985 ROBERT REIS GROUP GENERAL MANAGER CORPORATE AFFAIRS JOINED 1991 NUFARM 2002 ANNUAL REPORT 32 ABOVE: DENNIS PERRY, TRIANGLE STAINLESS CONTRACT WELDER, ON CALGARY’S REACTOR TRAIN UPGRADE WITH NUFARM PLANT MANAGER, DALE WINTER. NUFARM 2002 ANNUAL REPORT 33 Nufarm Limited Directors’ report The board of directors of Nufarm Limited (Nufarm) submits its report for the financial year ended 31 July 2002. Names of directors The names of the directors of the company in office during the period are: KM Hoggard (Chairman) DJ Rathbone (Managing Director) GDW Curlewis Dr WB Goodfellow GW McGregor AO Sir Dryden Spring Dr JW Stocker AO RFE Warburton All directors held their position as a director throughout the entire period and up to the date of this report. Directors’ interests Relevant interests of the directors in the shares or capital notes of the company and related bodies corporate are: Nufarm Limited Ordinary shares 5,848,181 Fernz Corporation (NZ) Limited Capital notes KM Hoggard1 DJ Rathbone1,2,3 31,629,265 GDW Curlewis Dr WB Goodfellow GW McGregor AO Sir Dryden Spring4 Dr JW Stocker AO RFE Warburton Directors’ meetings 3,000 70,000 20,000 9,676 10,000 28,300 Board Directors’ meetings The number of directors’ meetings and meetings of committees of directors held in the financial year and the number of meetings attended by each director are shown in the table of directors’ meetings. Other meetings of committees of directors are convened as required to discuss specific issues or projects. All directors are entitled to attend any meetings of committees of directors. At the date of this report, the company had an audit committee of the board of directors, which met four times during the period. The details of the functions and membership of the committees of the board are presented in the statement of corporate governance on pages 28 to 31. 1 KM Hoggard and DJ Rathbone have a non-beneficial interest in 525,450 shares as trustees of Nufarm Limited executive and staff share plans. 2 The shareholding of DJ Rathbone includes his relevant interests in entities owned and controlled by him. Refer substantial shareholder information on page 77 of this report. 25,000 3 Entities owned and controlled by DJ Rathbone have pre-emptive rights over 5,503,750 shares held by Lawrence Holdings, an entity controlled by KM Hoggard. Refer substantial shareholder information on page 77 of this report. 4 Witham Trust, an entity controlled by an associate of Sir Dryden Spring, is the holder of 20,000 capital notes. Director Audit KM Hoggard DJ Rathbone GDW Curlewis Dr WB Goodfellow GW McGregor AO Sir Dryden Spring Dr JW Stocker AO RFE Warburton A 12 12 12 12 12 12 12 12 B 11 12 12 12 12 8 11 10 A 4 4 4 B 3 4 4 Committees Remuneration B A 3 3 3 3 3 3 Scientific Review A 3 3 3 B 3 3 3 Column A indicates the number of meetings held during the period the director was a member of the board and/or committee. Column B indicates the number of meetings attended during the period the director was a member of the board and/or committee. NUFARM 2002 ANNUAL REPORT 34 Nufarm Limited Directors’ report continued Principal activities and changes Events after end of financial year Nufarm is an Australian-based company with core capabilities in chemical synthesis, marketing and sales. Through a global network of manufacturing and formulation facilities, the company operates in two key areas of business activity: • crop protection; and • industrial, fine and performance chemicals. Nufarm employs 2,345 people at its various locations in Australasia, Africa, the Americas and Europe. Products manufactured and supplied by the company are used to help farmers protect crops from damage caused by weeds, insects and disease, as well as in a variety of other industries such as manufacturing, pharmaceuticals and consumer products. Nufarm is listed on the Australian Stock Exchange (symbol NUF). Its head office is located at Laverton in Melbourne. Results The net profit attributable to members of the consolidated entity for the 12 months to 31 July 2002 is $56.834 million. The comparable figure for the 12 months to 31 July 2001 was a net loss of $4.526 million. Dividends The following dividends have been paid, declared or recommended since the end of the preceding financial year. The final dividend for 2000/2001 of 11.0 cents paid 9 November 2001 The interim dividend for 2001/2002 of 7.0 cents paid 26 April 2002 The final dividend for 2001/2002 of 11.0 cents as declared and recommended by the directors is payable 8 November 2002. $000 17,000 10,870 17,082 Review of operations The review of the operations during the financial year and the results of those operations, are set out in the managing director’s review on pages 7 to 9 and the business review on pages 11 to 25. State of affairs The state of the company’s affairs is set out in the managing director’s review on pages 7 to 9 and the business review on pages 11 to 25. In August 2002, the company announced an agreement to acquire Crop Care Australasia Pty Ltd from Orica Limited and Incitec Ltd for $75 million. The clearance of the Australian Competition and Consumer Commission to such acquisition was obtained on 9 October 2002. Closing will occur on 1 November 2002. In September 2002, the company announced an agreement to sell the Fernz specialty chemical business to Orica Limited for $60 million. Closing will occur on 1 November 2002. Future developments and results Other than matters referred to in the managing director’s review and the business review, the directors believe no further reference is required to likely developments in the company’s operations and the expected results of those operations. Environmental performance Details of Nufarm’s performance in relation to environmental regulations are set out on pages 23 to 25. Directors’ and executives’ emoluments The purpose of Nufarm’s reward strategies and philosophies is to more closely align individual rewards with corporate performance and increased shareholder value. The remuneration levels of the managing director and other senior executives are recommended by the remuneration committee and approved by the board, having taken advice from independent external advisors. Each year, the board establishes performance hurdles for the short term variable reward (STVR) and long term variable reward (LTVR) programs. These hurdles reflect targets for specific objectives and increasing company value consistent with the business and investment strategies. STVR is paid in cash. LTVR is provided via the executive share plan (ESP). Annual offers of shares or a mixture of shares and options (equities) will be made under the ESP. Any shares offered are at no cost to the executive. Any options offered and granted to executives will have an exercise price based on the weighted average share price of shares traded over the five day period immediately following the preliminary final announcement of the company’s annual results. Any options granted may only be exercised on or after the period of 36 months after the date of grant. In determining the value of options, the company uses the Black Scholes methodology. STVR and equities offered under LTVR are subject to performance-based conditions linked to company financial targets at the end of a performance period. The performance condition is based on return on funds employed. The board assesses company performance against the performance condition to determine the percentage of any offer to be made for both STVR and LTVR. NUFARM 2002 ANNUAL REPORT 35 Nufarm Limited Directors’ report continued Directors’ and executives’ emoluments continued In the case of the managing director, the STVR and LTVR may represent 50 per cent of his total remuneration. For other senior executives, it may represent 40 per cent of total remuneration. Details of the nature and amount of each element of the emoluments of each director of Nufarm and each of the five officers of the company and the consolidated entity receiving the highest emoluments are set out in the following tables. Non-executive directors of Nufarm Limited Name Base fee Committee fees Superannuation KM Hoggard GDW Curlewis Dr WB Goodfellow GW McGregor AO Sir Dryden Spring Dr JW Stocker AO RFE Warburton $ 150,000 50,000 50,000 50,000 50,000 50,000 50,000 Executives of Nufarm Limited and the consolidated entity Base salary and benefits1 $ $ 2,500 2,500 10,000 2,500 10,000 10,000 STVR $ $ 12,125 4,243 4,243 4,850 4,243 4,850 4,850 LTVR $ Total $ 162,125 56,743 56,743 64,850 56,743 64,850 64,850 Total $ 761,361 352,500 506,400 1,620,261 405,764 393,868 391,942 372,452 295,227 147,350 146,350 138,083 135,044 125,346 136,863 136,863 128,205 128,205 87,920 689,977 677,081 658,230 635,701 508,493 Name Managing director DJ Rathbone Other executives DA Pullan JA Allen RF Ooms KP Martin B Benson 1 Benefits include, where applicable, superannuation contributions, motor vehicle costs, allowances and fringe benefits tax (FBT). Options and shares under option (1) The company’s ESP provides for annual offers of ordinary shares, or a mix of both ordinary shares and options to senior executives, including the managing director. In 2001, 1,437,692 options were granted to executives under the ESP. Details of options granted to the five most highly remunerated officers are set out in the table on the following page. (2) A United Kingdom Saving-Related Share Options Scheme (1997) enables the issue of ordinary share options to eligible staff in the United Kingdom who had completed two years service with the company. The scheme has two parts. Firstly, it is an agreement between the employee and a savings institution to save a fixed amount every month for five years. At the end of the period, the savings institution adds a tax free interest bonus to the employee’s savings. Secondly, the scheme provides the employee with an option to buy Nufarm shares from the proceeds of the amount with the savings institution. The share options are issued at a 10 per cent discount on market price at the date of the offer. Share options do not rank for dividends or carry voting rights. Two offers have been made under the scheme. NUFARM 2002 ANNUAL REPORT 36 Nufarm Limited Directors’ report continued Directors’ and executive’ options During the financial year the company granted options over unissued ordinary shares to the managing director and to the five most highly remunerated executives as part of their remuneration. Number of options granted Exercise price $ Expiry date Managing director DJ Rathbone Other executives DA Pullan JA Allen RF Ooms KP Martin B Benson 566,443 153,091 153,091 143,406 143,406 98,345 2.70 2.70 2.70 2.70 2.70 2.70 13 December 2011 26 October 2011 26 October 2011 26 October 2011 26 October 2011 26 October 2011 All options were granted during the year. Using the Black Scholes methodology, each option had a value of 44.7¢. At the date of this report, unissued ordinary shares under option are: Number of options 114,9031 116,3301 871,249 566,443 Exercise price $ 3.55 3.08 2.70 2.70 Expiry date 1 November 2002 1 March 2005 26 October 2011 3 December 2011 1 Options issued to eligible staff under the United Kingdom Savings-Related Share Option Scheme (1997). No more issue will be made under this scheme. Insurance and indemnities for directors and officers The company has entered into insurance contracts, which indemnify directors and officers of the company and its controlled entities against liabilities. In accordance with normal commercial practices under the terms of the insurance contracts, the nature of the liabilities insured against and the amount of premiums paid are confidential. An indemnity agreement has been entered into between the company and each of the directors named earlier in this report. Under the agreement, the company has agreed to indemnify the directors against any claim or for any expenses or costs, which may arise as a result of the performance of their duties as directors. There are no monetary limits to the extent of this indemnity. Rounding of amounts The parent entity is a company of the kind specified in Australian Securities and Investments Commission Class Order 98/0100. In accordance with that class order, amounts in the financial statements and the directors’ report have been rounded to the nearest thousand dollars unless specifically stated to be otherwise. This report has been made in accordance with a resolution of directors. KM Hoggard Director Melbourne 10 October 2002 DJ Rathbone Director NUFARM 2002 ANNUAL REPORT 37 Nufarm Limited Statement of financial performance For the 12 months ended 31 July 2002 Sales revenue Cost of sales Consolidated earnings from trading Interest income Other revenue Expenses Depreciation and amortisation Borrowing costs Operating expenses Total expenses Share of net profits of associates Profit from ordinary activities before income tax expense Income tax expense relating to ordinary activities Net profit (loss) Net profit attributable to outside equity interest Consolidated Parent Note 31.7.2002 $000 31.7.2001 $000 31.7.2002 $000 31.7.2001 $000 2 2 2 2 2 9 6 a) 1,429,275 (824,323) 1,323,232 (772,005) 604,952 1,011 13,993 551,227 2,655 62,224 (56,719) (42,450) (442,256) (90,284) (37,000) (460,563) (541,425) (587,847) 78,531 28,259 109,809 (75,558) 34,251 7,634 35,507 (1,617) (8,118) (23,513) (33,248) 44,144 81,744 (54,864) 26,880 39 41,648 (363) (2,204) (21,816) (24,383) 44,184 3,651 3,447 – – 82,182 24,405 57,777 943 31,706 35,657 44,144 5,093 44,184 3,392 (3,951) 575 39,051 – 40,792 – Net profit (loss) attributable to members of the parent entity 56,834 (4,526) 39,051 40,792 Net exchange differences arising on translation of opening net investment in foreign operations, net of related hedges Total revenues, expenses and valuation adjustments attributable to members of the parent entity and recognised directly in equity Total changes in equity other than those resulting from transactions with owners as owners 20 a) 2,381 (4,524) 2,381 (4,524) – – – – 59,215 (9,050) 39,051 40,792 Basic earnings per share (cents per share) Diluted earnings per share (cents per share) 3 3 36.7 36.4 (2.9) (2.9) The accompanying notes form an integral part of these financial statements. NUFARM 2002 ANNUAL REPORT 38 Nufarm Limited Statement of financial position At 31 July 2002 Current assets Cash assets Receivables Inventories Tax assets Total current assets Non-current assets Receivables Equity accounted investments Other financial assets Property, plant and equipment Intangible assets Deferred tax assets Other Total non-current assets TOTAL ASSETS Current liabilities Payables Interest bearing liabilities Tax liabilities Provisions Total current liabilities Non-current liabilities Interest bearing liabilities Deferred tax liabilities Provisions Total non-current liabilities TOTAL LIABILITIES NET ASSETS Equity Contributed equity Reserves Retained profits Equity attributable to members of the parent entity Outside equity interest TOTAL EQUITY Consolidated Parent Note 31.7.2002 $000 31.7.2001 $000 31.7.2002 $000 31.7.2001 $000 7 8 6 b) 7 9 10 11 12 6 b) 13 15,780 354,034 333,406 7,756 23,615 282,568 309,339 2,657 710,976 618,179 3,013 28,005 8,053 385,692 146,647 25,324 18,512 – 23,431 10,991 368,603 132,382 32,918 5,377 752 76,168 21,321 – 98,241 686 – 437,321 8,331 – 11,948 – 109 57,637 13,869 – 71,615 – – 245,212 430 – 14,209 – 615,246 573,702 458,286 259,851 1,326,222 1,191,881 556,527 331,466 14 15 16 241,598 297,790 14,296 36,366 226,168 320,082 11,496 35,011 590,050 592,757 44,035 4,582 815 17,512 66,944 26,806 7,699 – 17,375 51,880 15 6 c) 16 313,590 22,904 8,639 220,222 18,382 7,719 196,412 705 41 345,133 246,323 197,158 – – – – 935,183 839,080 264,102 51,880 391,039 352,801 292,425 279,586 19 20 21 22 23 147,333 24,751 212,670 384,754 6,285 145,593 22,437 183,721 351,751 1,050 147,333 40,074 105,018 292,425 – 145,593 40,074 93,919 279,586 – 391,039 352,801 292,425 279,586 The accompanying notes form an integral part of these financial statements. NUFARM 2002 ANNUAL REPORT 39 Nufarm Limited Statement of cash flows For the 12 months ended 31 July 2002 Consolidated Parent Note 31.7.2002 $000 31.7.2001 $000 31.7.2002 $000 31.7.2001 $000 Cash flows from operating activities Receipts from customers Dividends received Interest received Payments to suppliers and employees Borrowing costs paid GST paid Income tax paid 1,455,526 2,924 1,879 (1,324,471) (42,747) (25,089) (17 ,313) 1,297,551 2,667 2,655 (1,154,401) (35,656) (19,298) (28,322) 122,595 27,615 3,595 (106,604) (2,764) (1,961) (158) Net operating cash flows 24 b) 50,709 65,196 42,318 82,545 28,504 39 (77,503) (177) 1,377 (91) 34,694 89 11,905 10,047 – (99) – – – – 195 1 686 – (9,723) – – – (5,983) (14,824) 21,942 1,512 664 2,359 – – – – – – – (27,870) (23,335) 4,159 (7,590) (399) (3,830) – 644 – – – (115) (24,337) – – – (27,787) (51,595) 5,041 (12,117) (514) (7,590) Cash flows from investing activities Proceeds from sale of property, plant and equipment Proceeds from sale of investments Proceeds from business sale Sulfer Works closure costs, net of disposal proceeds Payments for plant and equipment Payments for investments Payments for major project development expenditure, trademarks and technology rights Foreign currency investments hedges Purchase of businesses, net of cash acquired Net investing cash flows 24 c) 24 c) 24 d) 2,935 1,889 686 (3,998) (48,667) (9,350) (2,223) 12,467 (22,412) (68,673) Cash flows from financing activities 1,512 Proceeds from issue of shares 664 Proceeds from call on partly paid shares – Advances repaid by controlled entities (net) – Proceeds of short term debt (net) 167,797 Proceeds from borrowings Share buy-back – Advances to controlled entities (net) – (41,574) Repayment of short term debt (net) (85,925) Repayment of borrowings (3,241) Foreign currency loans hedges (27,870) Dividends paid Net financing cash flows 11,363 2,646 40,878 41,380 – (62,453) (6,024) – (38,366) (58,065) (80,004) – 644 – 22,281 11,318 (115) – – (48,382) (4,242) (27,787) (46,283) Net increase (decrease) in cash held Cash at the beginning of the period Exchange rate fluctuations on foreign cash balances Cash at the end of the period (6,601) (31,162) (61,091) 28,255 (2,465) 1,674 24 a) (40,228) (31,162) The accompanying notes form an integral part of these financial statements. NUFARM 2002 ANNUAL REPORT 40 Nufarm Limited Notes Notes to the financial statements 1 Statement of significant accounting policies Basis of accounting The financial statements have been prepared as a general purpose financial report which complies with the requirements of the Corporations Act 2001, Australian Accounting Standards and Urgent Issues Group Consensus Views and other authoritative pronouncements. The financial statements have also been prepared on a historical cost basis except for certain land and buildings, which are stated at deemed cost (Note 11). Changes in accounting policies The accounting policies adopted are consistent with those of the previous year except for the accounting with respect to earnings per share (EPS). The consolidated entity has adopted the revised Accounting Standard AASB 1027 Earnings per share for the first time. The effect of the revised policy has been to decrease basic EPS by 0.6 cents and 0.3 cents for 2002 and 2001 respectively. Diluted EPS is disclosed for the first time. Principles of consolidation The consolidated financial statements include the financial statements of the parent entity, Nufarm Limited, and its controlled entities, referred to collectively throughout these financial statements as the ‘consolidated entity’. All inter-entity balances and transactions have been eliminated. Where an entity either began or ceased to be controlled during the year, the results are included only from the date control commenced or up to the date control ceased. Financial statements of foreign controlled entities presented in accordance with overseas accounting principles are, for consolidation purposes, adjusted to comply with group policy and generally accepted accounting principles in Australia. Foreign currency transactions Foreign currency items are translated to Australian currency on the following bases: • transactions are converted at exchange rates approximating those in effect at the date of each transaction; • amounts payable and receivable are translated at the exchange rates at the close of business at balance date. Revaluation gains and losses are brought to account as they occur; and • the financial statements of all foreign operations are translated using the current rate method as they are considered self-sustaining. Exchange differences relating to monetary items are included in the statement of financial performance, as exchange gains or losses, in the period when the exchange rates change, except where: • the exchange difference relates to hedging part of the net investment in a self-sustaining foreign operation, in which case the exchange difference is transferred to the foreign currency translation reserve on consolidation; or • the exchange difference relates to a transaction intended to hedge the purchase or sale of goods or services, in which case the exchange difference is included in the measurement of the purchase or sale. Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity and the revenue can be reliably measured. Sales of goods occur when economic control of the goods has passed to the buyer. Income tax The financial statements apply the principles of tax effect accounting. The income tax expense in the statement of financial performance represents the tax on the pre tax accounting profit adjusted for income and expenses, which will never be assessed or allowed for taxation purposes. Deferred tax liabilities and deferred tax assets include the tax effect of differences between income and expense items recognised in different accounting periods for book and tax purposes, calculated at the tax rates expected to apply when the differences reverse. The benefit arising from estimated carry forward tax losses is recorded as a deferred tax asset where realisation of such benefit is considered to be virtually certain. NUFARM 2002 ANNUAL REPORT 41 Nufarm Limited Notes Notes to the financial statements continued 1 Statement of significant accounting policies continued Inventories Other financial assets Inventories are valued at the lower of cost and net realisable value. Raw materials cost is direct acquisition cost and is assigned on a first-in, first-out basis. For manufactured inventories, full absorption costing is used, taking into account raw material costs, direct manufacturing costs and all factory overheads, including depreciation. Due allowance is also provided for obsolete and slow moving inventories Recoverable amounts of non-current assets The book values of all non-current assets are reviewed at least annually and, to the extent that they exceed the recoverable amounts, are written off to the statement of financial performance. In determining recoverable amount, the expected net cash flows have been discounted to their present value using a market determined risk adjusted discount rate of 9.0 per cent. Equity accounted investments Interests in associated entities are included in non-current equity investments and brought to account using the equity method. Under this method, the investment in associates is initially recognised at its cost of acquisition and its carrying value is subsequently adjusted for increases or decreases in the investor’s share of post-acquisition results and reserves of the associate. The investment in associated entities is decreased by the amount of dividends received or receivable. Joint ventures Interests in joint venture operations are brought to account by including in the respective financial statement categories: • the consolidated entity’s share in each of the individual assets employed in the joint venture; • liabilities incurred by the consolidated entity in relation to the joint venture including the consolidated entity’s share of any liabilities for which the consolidated entity is jointly and/or severally liable; and • the consolidated entity’s share of revenues and expenses of the joint venture. Interests in non-subsidiary, non-associated corporations are included in other financial assets at the lower of cost or recoverable amount. Dividend income is brought to account when declared. Leased assets Assets acquired under finance leases are capitalised and amortised over the life of the relevant lease or, where ownership is likely to be obtained on expiration of the lease, over the expected useful life of the asset. Lease payments are allocated between interest expense and reduction in the lease liability. Operating lease assets are not capitalised. Rental payments are charged against profit in the period in which they are incurred. Property, plant and equipment Land and buildings are carried at cost or deemed cost. Deemed cost relates to land and buildings that were revalued prior to 1992. Property, plant and equipment, excluding freehold land, are depreciated over their useful economic lives using the straight line methods as follows: buildings leasehold improvements owned plant and equipment leased plant and equipment Goodwill on acquisition Life 15-20 years 5 years 3-20 years term of the lease On acquisition of a controlled entity, the difference between the purchase consideration plus related expenses and the fair value of identifiable net assets acquired is initially brought to account as goodwill on acquisition. Acquired goodwill is amortised on a straight line basis over the period in which the benefits are expected to arise, up to 20 years. The unamortised balance of goodwill is reviewed at each balance date and charged against profit to the extent that applicable future benefits are no longer probable. NUFARM 2002 ANNUAL REPORT 42 NUFARM 2002 ANNUAL REPORT 42 Nufarm Limited Notes Notes to the financial statements continued 1 Statement of significant accounting policies continued Patents and trademarks • Borrowing costs Costs associated with patents and trademarks, which provide a benefit for more than one financial year, are deferred and amortised over the period of expected benefits up to 15 years. The unamortised balance is reviewed each balance date and charged against profit to the extent that future benefits are no longer probable. Major projects development expenditure These costs relate to the development of major new business. Such research and development costs are deferred to future periods to the extent that future benefits are expected, beyond any reasonable doubt, to equal or exceed those costs and any future costs necessary to give rise to the benefits. Such deferred costs are amortised over future accounting periods not exceeding five years in order to match the costs with related benefits on the basis of expected future sales, commencing with of the commercial operations of the business. The unamortised deferred research and development costs are reviewed annually at each balance date and to the extent that they exceed the recoverable amount are written off to the statement of financial performance. Other non-current assets Deferred expenditure is included in other non-current assets. These expenditures are primarily of two categories: • Product development costs Product development costs are charged against profit as incurred, except where they relate to the development of new products, formulations or registrations. Such development costs are deferred to subsequent periods to the extent that future benefits are expected, beyond any reasonable doubt, to equal or exceed those costs and any future costs necessary to give rise to the benefits. Such deferred costs are amortised over future accounting periods not exceeding five years in order to match the costs with related benefits on the basis of expected future sales, commencing with the commercial production of the product. The unamortised deferred development costs are reviewed annually at each balance date and to the extent that they exceed the recoverable amount are written off to the statement of financial performance. Borrowing costs are expensed as incurred, except where: (i) they relate to the financing of major projects under construction where they are capitalised to property, plant and equipment up to the date of commissioning; and (ii) for large structured finance transactions where they are accounted for in deferred expenditure and amortised over the period of the structured finance, not exceeding five years. Payables Liabilities for trade payables and other amounts are carried at cost which is the fair value of the consideration to be paid in the future for goods or services received, whether or not billed to the consolidated entity. Interest bearing liabilities All loans are recorded at the principal amount, or in the case of the capital notes, at the face value of the note. Borrowing costs, including interest, are charged as they accrue. Provisions • Provision for employee entitlements Provision has been made in the financial statements for benefits accruing to employees in relation to annual leave, and long service leave. No provision is made for non-vesting sick leave as the anticipated pattern of future sick leave taken indicates that accumulated non-vesting leave will never be paid. All on-costs are included in the determination of provisions. Vested sick leave, annual leave and the current portion of long service leave and workers’ compensation provisions are measured at their nominal amounts. The non-current portions of long service leave provisions are measured at the present value of estimated future cash flows. • Dividends Provision is made for dividends declared in respect of the year end financial accounts. NUFARM 2002 ANNUAL REPORT 43 Nufarm Limited Notes Notes to the financial statements continued 1 Statement of significant accounting policies continued Earnings per share Basic earnings per share are calculated as net profit attributable to members, divided by the weighted average number of ordinary shares. Diluted earnings per share are calculated as net profit attributable to members, divided by the weighted average number of ordinary shares and the number of ordinary shares that may be issued upon the future exercising of options that have been granted. Employee share and option ownership schemes All employees are entitled to participate in share and option ownership schemes after a qualifying period. The remuneration costs associated with the new share plans (see Note 33) will be expensed as incurred. Financial instruments • Included in equity – ordinary share capital bears no special terms or conditions affecting income or capital entitlements of the shareholders. • Included in liabilities – capital notes are recorded at their issue price. Interest on borrowings (including capital notes) is recognised in the period in which it is incurred. • Included in assets – trade debtors are initially recorded at the amount of contracted sale proceeds. Provision for doubtful debts is recognised to the extent that recovery of the outstanding receivable balance is considered unlikely, based on a review of all outstanding amounts at balance date. The company uses financial instruments with ‘off balance sheet’ risks to reduce exposure to fluctuations in foreign exchange and interest rates. Forward foreign exchange contracts, foreign currency swaps and option contracts are arranged to hedge major foreign currency sales and purchases, foreign currency loans and the translation of foreign currency earnings and investments. Interest rate swap agreements, options and forward rate agreements are arranged to hedge against adverse movements in interest rates on both long term and short term loans. Financial instruments are used to hedge specific underlying positions only and are accounted for using the same basis as the underlying position. Counterparties to financial instruments are several major international financial institutions with high credit ratings. The company does not request security to support financial instruments entered into. Possible losses arising from non-performance by these counterparties are adequately provided. For interest rate swap agreements entered into in connection with the management of interest rate exposure, the differential to be paid or received quarterly is accrued as interest rate changes and is recognised as a component of interest expense or income over the pricing period. Premiums paid for interest rate options and net settlement on maturity of forward rate agreements, futures and options are amortised over the period of the underlying liability hedged by the instrument. Comparatives Where necessary, comparatives have been reclassified and repositioned for consistency with current year disclosures as a result of the first time application of revised Accounting Standards AASB 1005 Segment reporting and AASB 1027 Earnings per share. NUFARM 2002 ANNUAL REPORT 44 Nufarm Limited Notes Notes to the financial statements continued 2 Financial performance disclosures Profit from ordinary activities is after charging the following revenues Interest income Wholly owned controlled entities Partly owned controlled entities Associated entities Other Total interest income Other revenue Dividends from Wholly owned controlled entities Other Total dividends Management fees from controlled entities Sundry income Gross proceeds from sale of non-current assets Total other revenue Profit from ordinary activities is after charging the following expenses Depreciation and amortisation Amortisation of goodwill Technology rights and trademarks Accelerated amortisation of Sulfer Works intellectual property Plant and equipment under lease Deferred expenditure Depreciation of Buildings and improvements Plant and equipment Accelerated depreciation of Sulfer Works plant and equipment Total depreciation and amortisation Borrowing costs Interest paid or payable to Wholly owned controlled entities Other unrelated parties Finance lease charges Total borrowing costs Operating expenses Carrying cost of non-current assets disposed of Staff expenses Occupancy expenses Plant related expenses Sales and distribution expenses Research and development costs Travel Other operating expenses Consolidated Parent 2002 $000 2001 $000 2002 $000 2001 $000 – – – 1,011 1,011 – – – – 3,577 10,416 13,993 12,508 871 – 669 1,128 5,188 36,355 – 56,719 – – 419 2,236 2,655 – 98 98 – 1,581 60,545 62,224 10,639 211 975 285 660 5,105 36,088 36,321 90,284 – 42,128 322 42,450 – 36,793 207 37,000 (10,667) (201,582) (26,858) (60,485) (56,470) (9,328) (21,467) (55,399) (52,871) (182,546) (25,260) (60,145) (47,167) (11,447) (20,118) (61,009) 7,397 31 – 206 7,634 27,615 – 27,615 5,305 2,392 195 35,507 – – – – – 55 1,562 – 1,617 8,118 – – 8,118 (228) (7,059) (3,596) (3,169) (4,363) (678) (1,191) (3,229) – – – 39 39 28,033 471 28,504 6,833 8 6,303 41,648 41 – – – – – 322 – 363 – 2,204 – 2,204 (464) (6,010) (3,461) (2,946) (3,398) (602) (917) (4,018) Total operating expenses (442,256) (460,563) (23,513) (21,816) NUFARM 2002 ANNUAL REPORT 45 Nufarm Limited Notes Notes to the financial statements continued 2 Financial performance disclosures continued Operating expenses include: Net foreign exchange gains (losses) from Hedges on foreign currency earnings for year Unhedged receivables and payables Bad debts written off Net charge to provision for doubtful debts Donations Operating lease rentals Other disclosures Loss on disposal of plant and equipment Gain on sale of investment Gain on sale of businesses (refer Note 6) 3 Earnings per share Net profit/ (loss) Net profit attributable to outside equity interest Earnings used in the calculations of basic and diluted earnings per share Add back non-operating losses (refer Note 5) Consolidated Parent 2002 $000 2001 $000 2002 $000 2001 $000 436 4,005 (765) (988) (230) (7,131) (4,088) 1,077 (1,184) (1,176) (64) (6,507) (251) – (238) 421 – (970) 126 128 (9) (119) (33) – – (1,386) (136) (91) – (1,127) (376) – Consolidated 2002 $000 57,777 (943) 56,834 – 2001 $000 (3,951) (575) (4,526) 55,664 51,138 Earnings excluding non-operating items used in the calculations of alternative earnings per share 56,834 Number of shares Weighted average number of ordinary shares used in calculation of basic earnings per share 155,054,565 154,414,425 Weighted average number of ordinary share options used in calculation of diluted earnings per share 1,280,453 257,598 Weighted average number of ordinary shares used in calculation of diluted earnings per share 156,335,018 154,672,023 There have been no conversions to, calls of, or subscriptions for ordinary shares or issues of potential ordinary shares since the reporting date and before the completion of this financial report. Basic earnings per share (cents per share) Diluted earnings per share (cents per share) Alternative earnings measure Basic earnings per share excluding non-operating items (cents per share) Diluted earnings per share excluding non-operating items (cents per share) 36.7 36.4 36.7 36.4 (2.9) (2.9) 33.1 33.1 4 Segments The consolidated entity's operating companies are largely organised and managed according to the nature of the products and services they provide, with each business segment offering different products and serving different markets: – the crop protection segment manufactures and distributes a range of herbicides, fungicides and other products that are sold into the agricultural, turf and specialty markets; – the industrial chemicals segment manufactures and distributes a range of industrial, fine and performance chemicals which draw on Nufarm's core strengths in chemical synthesis and formulation; – the other segment includes other minor businesses and investments which are separately managed from the above segments. Geographically the group operates globally with operations in many countries and sales being made in over 100 countries, which are split into three segments. Australasia covers Australia, New Zealand and Asia. The Americas cover North, South and Latin America. Europe covers United Kingdom, continental Europe and Africa. The geographic sales reflect the domicile of the company's customers. All inter segment sales are at market prices. The operating result shown in this note is operating profit before tax, interest and centralised cost allocations. Segment accounting policies are consistent with the consolidated entity's policies described in Note 1. NUFARM 2002 ANNUAL REPORT 46 Nufarm Limited Notes Notes to the financial statements continued 4 Segments continued Business segments Revenue Sales to outside customers Inter segment sales Sales revenue Other revenue Share of net profits of associates Total segment revenue Unallocated revenue Total consolidated revenue Results Operating result Segment result Unallocated expenses Profit from ordinary activities before taxation Income tax expense Net profit Assets Segment assets Unallocated assets Total assets Liabilities Segment liabilities Unallocated liabilities Total liabilities Crop protection $000 Industrial chemicals $000 Other Eliminations Consolidated $000 $000 $000 1,041,719 275 1,041,994 4,329 3,651 385,579 2,102 387,681 6,728 – 1,049,974 394,409 2002 1,977 – 1,977 2,936 – 4,913 – (2,377) (2,377) – – 1,429,275 – 1,429,275 13,993 3,651 (2,377) 1,446,919 118,396 118,396 31,315 31,315 (3,033) (3,033) – – 1,011 1,447,930 146,678 146,678 (64,496) 82,182 24,405 57,777 984,778 271,011 37,353 – 1,293,142 33,080 1,326,222 189,029 68,998 28,576 – 286,603 Other segment information Equity accounted investments included in segment assets Acquisition of property, plant and equipment, intangible assets and other non-current assets Depreciation Amortisation Other non-cash expenses 27,253 752 – 66,984 30,529 12,014 3,754 13,252 11,064 1,975 104 193 265 872 26 648,580 935,183 28,005 80,429 41,858 14,861 3,884 – – – – – Geographic segments Revenue Sales to outside customers Interest and other revenue Total segment revenue Assets Segment assets Other segment information Acquisition of property, plant and equipment, intangible assets and other non-current assets Australasia $000 Europe $000 Americas $000 Consolidated $000 672,597 6,915 372,880 5,950 383,798 4,779 1,429,275 17,644 679,512 378,830 388,577 1,446,919 504,005 525,763 296,454 1,326,222 43,421 26,340 10,668 80,429 NUFARM 2002 ANNUAL REPORT 47 Nufarm Limited Notes Notes to the financial statements continued 4 Segments continued Business segments Revenue Sales to outside customers Intersegment sales Sales revenue Other revenue Share of net profits of associates Total segment revenue Unallocated revenue Total consolidated revenue Results Operating result Non-operating loss Segment result Unallocated expenses Profit from ordinary activities before taxation Income tax expense Net loss Assets Segment assets Unallocated assets Total assets Liabilities Segment liabilities Unallocated liabilities Total liabilities Crop protection $000 Industrial chemicals $000 919,243 582 919,825 2,124 3,907 403,282 963 404,245 1,386 (460) Other Eliminations Consolidated $000 2001 707 – 707 717 – $000 $000 – (1,545) (1,545) – – 1,323,232 – 1,323,232 4,227 3,447 925,856 405,171 1,424 (1,545) 1,330,906 103,120 (1,969) 101,151 36,098 (43,990) (7,892) (6,949) (1,180) (8,129) – – – 60,652 1,391,558 132,269 (47,139) 85,130 (53,424) 31,706 35,657 (3,951) 830,136 302,827 23,343 – 1,156,306 35,575 1,191,881 166,610 71,843 30,445 – 268,898 Other segment information Equity accounted investments included in segment assets Acquisition of property, plant and equipment, intangible assets and other non-current assets Depreciation Amortisation Other non-cash expenses 22,679 752 113,141 28,045 9,410 2,825 13,155 49,345 3,010 1,917 – 246 124 350 (16) 570,182 839,080 23,431 126,542 77,514 12,770 4,726 – – – – – Geographic segments Revenue Sales to outside customers Interest and other revenue Total segment revenue Assets Segment assets Other segment information Acquisition of property, plant and equipment, intangible assets and other non-current assets NUFARM 2002 ANNUAL REPORT 48 Australasia $000 Europe $000 Americas $000 Consolidated $000 612,739 1,767 614,506 344,697 5,447 365,796 460 1,323,232 7,674 350,144 366,256 1,330,906 443,868 433,363 314,650 1,191,881 21,883 70,715 33,944 126,542 Nufarm Limited Notes Notes to the financial statements continued 5 Non-operating income and expenses Gain on sale businesses Write down of Sulfer Works business Other non-operating expenses Non-operating items before tax Tax benefit (expense) thereon Non-operating items after tax During the current period the Sulfer Works business and assets were sold. The Sulfer Works asset disposals, write downs and closure costs are as follows: Accelerated amortisation of plant and equipment Accelerated amortisation of intellectual property Inventory write downs and disposal of off spec inventories Redundancies Closure and other costs Tax assets written off Consolidated Parent 2002 $000 2001 $000 2002 $000 2001 $000 – – – – – – 4,963 (48,952) (3,150) (47,139) (8,525) (55,664) – – – – – – – – (851) (851) 281 (570) 2002 $000 2001 $000 – – – – – – – – (36,321) (975) (5,243) (1,607) (4,806) (48,952) (10,264) (59,216) 6 Taxation a) Income tax expense Reconciliation to income tax expense provided in the financial statements Profit from ordinary activities Prima facie tax thereon at 30% (2001: 34%) Tax effect of permanent and other differences Depreciation and amortisation not deductible Research and development allowances Other items not deductible Exempt dividends received Other non-assessable income Share of results of associates (net of tax) Amounts (over) under provided in prior years Write off of tax assets – Sulfer Works Restatement of deferred tax balances due to income tax rate changes Effect of different rates of tax on overseas income Consolidated Parent 2002 $000 2001 $000 2002 $000 2001 $000 82,182 24,654 31,706 10,780 44,144 13,243 44,184 15,023 1,781 (1,120) 2,643 – (1,889) (1,274) (1,516) – (173) 1,299 14,433 – 5,441 (37) (3,325) (1,172) 453 10,264 (397) (783) 2 – 88 (8,285) (165) – (153) – – 363 13 – 86 (9,686) (2,394) – 522 – (49) (123) 3,392 Income tax expense relating to ordinary activities 24,405 35,657 5,093 NUFARM 2002 ANNUAL REPORT 49 Nufarm Limited Notes Notes to the financial statements continued 6 Taxation continued b) Tax assets Attributable to carry forward tax losses that have accumulated in several tax jurisdictions. These losses will be utilised against future profits in those jurisdictions. Tax losses offset against current tax liabilities and deferred tax liabilities Attributable to timing differences Depreciation Provision for employee entitlements Provision for doubtful debts Provision for stock obsolescence Other Tax instalments paid Current portion Non-current portion c) Deferred tax Attributable to timing differences Depreciation Prepayments and deferred expenses Other Tax asset offset Total deferred tax 7 Receivables Trade debtors and other receivables are non-interest bearing and are generally for less than 90 day terms Trade debtors Provision for doubtful debts Amounts owing by Wholly owned controlled entities Partly owned controlled entities Associated entities Other Prepayments Proceeds receivable from sale of businesses Total receivables Current portion Non-current portion 8 Inventories Raw materials Work in progress Finished goods Provision for stock obsolescence Total inventories NUFARM 2002 ANNUAL REPORT 50 Consolidated Parent 2002 $000 2001 $000 2002 $000 2001 $000 31,222 32,116 10,275 14,051 (15,820) (11,419) 15,402 20,697 1,109 3,855 227 338 7,242 4,907 33,080 7,756 25,324 19,981 5,099 3,129 (5,305) 22,904 130 3,626 314 1,104 7,763 1,941 35,575 2,657 32,918 22,552 318 3,524 (8,012) 18,382 315,224 (3,378) 254,205 (4,130) 311,846 250,075 – – 860 31,044 6,806 6,491 – – 2,880 22,451 6,086 1,076 357,047 282,568 354,034 3,013 282,568 – 116,386 3,905 218,662 338,953 (5,547) 112,607 4,098 197,012 313,717 (4,378) 333,406 309,339 (6,265) 4,010 125 155 39 – 7,619 – 11,948 – 11,948 – – 705 – 705 18,307 (119) 18,188 49,018 – – 7,940 336 1,372 76,854 76,168 686 2,324 158 19,347 21,829 (508) 21,321 (371) 13,680 14 124 89 302 – – 14,209 – 14,209 – – 371 (371) – 12,262 (269) 11,993 42,678 2 – 2,747 217 – 57,637 57,637 – 2,206 144 12,221 14,571 (702) 13,869 Nufarm Limited Notes Notes to the financial statements continued 9 Equity accounted investments Aggregate carrying amount of associates Balance at the beginning of the period Exchange adjustment Share of net result New investment Investments in which a controlling interest was acquired Investments written off Dividends received Balance at the end of the period Balance at the beginning of the period Exchange adjustment Share of net result Investments sold Investments written off Dividends received Balance at the end of the period Share of associates' profits Operating profits before income tax Amortisation of goodwill on acquisition Income tax expense Share of net profits of associates (refer Note 27 for other disclosures of associated companies) 10 Other financial assets Investment in controlled entities Balance at the beginning of the period Buy-back of shares in controlled entity Balance at the end of the period Investment in other companies (at cost) Balance at the beginning of the period Exchange adjustment New investments during the period Investments in which a controlling interest was acquired Investments disposed of during the period Balance at the end of the period Other loans including loans to the staff share purchase schemes (refer Note 33). Balance at the beginning of the period Exchange adjustment Loans to wholly owned controlled entities New investments during the period Loans repaid during the period Balance at the end of the period Total other financial assets Retained profits $000 10,072 153 3,651 – (1,119) – – 12,757 5,997 628 4,190 (737) (6) – 10,072 Cost $000 2002 13,359 294 – 9,291 (4,700) (72) (2,924) 15,248 2001 14,769 1,545 – (140) 200 (3,015) 13,359 Carrying value $000 23,431 447 3,651 9,291 (5,819) (72) (2,924) 28,005 20,766 2,173 4,190 (877) 194 (3,015) 23,431 Consolidated 2002 $000 5,733 (262) (1,820) 3,651 2001 $000 5,986 (195) (2,344) 3,447 Consolidated Parent 2002 $000 2001 $000 2002 $000 2001 $000 – – – 397 2 – (173) – 226 10,594 91 – 41 (2,899) 7,827 8,053 – – – 245,210 – 245,210 257,115 (11,905) 245,210 32,872 273 5,907 – (38,655) 397 11,752 143 – – (1,301) 10,594 10,991 – – – – – – – – – – – – 2 – 192,110 – (1) 192,111 437,321 2 – – – – 2 245,212 NUFARM 2002 ANNUAL REPORT 51 Nufarm Limited Notes Notes to the financial statements continued Consolidated Freehold land and improvements $000 Buildings Plant and machinery $000 $000 Leased plant and machinery $000 Capital work in progess $000 Total $000 – – 43 – 27,617 2,680 11 Property, plant and equipment continued 11 Property, plant and equipment Cost Cost At cost Balance at the beginning of the period At deemed cost Exchange adjustment Balance at the beginning of the period Additions Exchange adjustment Disposals Additions Balance at the end of the period Disposals Transfers Accumulated depreciation Balance at the end of the period Balance at the beginning of the period Exchange adjustment Accumulated depreciation Depreciated during the period Balance at the beginning of the period Disposals Exchange adjustment Balance at the end of the period Depreciated during the period Disposals Total property, plant and equipment, net Transfers 30,297 436 3,232 (387) 1,481 35,059 (151) 5 (32) – 43 – – – – – 43 – 2002 2002 114,555 8,250 122,805 1,153 18,835 (328) 1,533 – – 1,224 – 1,224 536,202 – 536,202 6,401 27,499 (14,860) 24,033 1,968 103 7,326 (376) 9,021 4,893 – 4,893 162 826 – (271) 35,030 67 – 4 35,030 – (914) 1,129 16,002 – (26,776) 1,200 143,998 579,275 5,610 – – (55) (305,738) – (5,061) (36,355) 7,411 (1,146) (55) (52,949) (1,126) (5,156) 71 1,169 978 (1,605) (84) (1,562) 149 (3,102) 5,919 (1,786) (55) (669) – 168 23,342 – – – – – 1,200 – – – – – 718,297 2,035 10,930 107 729,227 8,593 7,238 753 66,394 11,488 (15,574) – 787,284 (1,605) (84) (1,617) (360,624) 149 (6,237) (3,157) (42,212) 7,482 8,331 – Balance at the end of the period Cost Total property, plant and equipment, net Balance at the beginning of the period Exchange adjustment Additions Cost Disposals At cost Balance at the end of the period At deemed cost Accumulated depreciation Balance at the beginning of the period Exchange adjustment Balance at the beginning of the period Additions Exchange adjustment Disposals Depreciated during the period Transfers Disposals Balance at the end of the period Balance at the end of the period Total property, plant and equipment, net Accumulated depreciation Balance at the beginning of the period Exchange adjustment Depreciated during the period Disposals Balance at the end of the period (178) (58,182) (340,890) (2,342) – (401,592) 34,881 85,816 238,385 2001 3,268 – – – – – – – – 2001 3,867 164 99 (2,162) 27,989 2,680 – 30,669 2,186 350 (1,179) (1,729) – – – – 30,297 – – 104,472 8,250 – 485,107 – 1,968 4,714 – 112,722 8,449 4,591 (4,780) 1,823 485,107 34,383 14,547 (22,132) 24,297 – – – – 4,714 372 – (109) (84) (2,859) (121) (322) 1,697 122,805 536,202 – (1,605) 4,893 – 363 23,342 64 3 – – 14,544 67 – 14,544 1,217 – 43,588 – (12) – (24,307) – 35,030 – 67 385,692 3,931 167 99 (2,162) 636,826 2,035 10,930 647,756 46,607 (2,859) 63,076 (121) (28,212) (322) – 1,697 729,227 (1,605) 430 (134) (13) (4) – (151) (45,565) (4,893) (5,101) 2,610 (232,611) (16,897) (72,409) 16,179 (52,949) (305,738) (1,484) (105) (285) 88 (1,786) 3,107 – – – – – (279,794) (21,908) (77,799) 18,877 (360,624) 35,030 368,603 Total property, plant and equipment, net 30,146 69,856 230,464 Jones Lang LaSalle valued the land and buildings portfolio, excluding the Sulfer Works assets in 2001, on an existing use valuation at $96.9 million. NUFARM 2002 ANNUAL REPORT 52 Nufarm Limited Notes Notes to the financial statements continued Freehold land and improvements $000 Parent Buildings Plant and machinery $000 $000 Capital work in progess $000 Total $000 11 Property, plant and equipment continued 2002 Cost Balance at the beginning of the period Exchange adjustment Additions Disposals Balance at the end of the period Accumulated depreciation Balance at the beginning of the period Exchange adjustment Depreciated during the period Disposals Balance at the end of the period – – 43 – 43 – – – – – – – 1,224 – 1,224 – – (55) – (55) Total property, plant and equipment, net 43 1,169 1,968 103 7,326 (376) 9,021 (1,605) (84) (1,562) 149 (3,102) 5,919 Cost Balance at the beginning of the period Exchange adjustment Additions Disposals Balance at the end of the period Accumulated depreciation Balance at the beginning of the period Exchange adjustment Depreciated during the period Disposals Balance at the end of the period Total property, plant and equipment, net 2001 3,867 164 99 (2,162) 1,968 (2,859) (121) (322) 1,697 (1,605) 363 – – – – – – – – – – – – – – – – – – – – – – 67 4 – 1,129 1,200 – – – – – 1,200 64 3 – – 67 – – – – – 67 2,035 107 8,593 753 11,488 (1,605) (84) (1,617) 149 (3,157) 8,331 3,931 167 99 (2,162) 2,035 (2,859) (121) (322) 1,697 (1,605) 430 NUFARM 2002 ANNUAL REPORT 53 Nufarm Limited Notes Notes to the financial statements continued 12 Intangible assets Goodwill Balance at the beginning of the period Exchange adjustment Acquired during the period Attached to investments disposed of Written off during the period Amortised during the period Balance at the end of the period Trademarks and technology rights Balance at the beginning of the period Exchange adjustment Acquired during the period Written off during the period Amortised during the period Balance at the end of the period Major projects development expenditure Balance at the beginning of the period Expenditure capitalised during the period Written off during the period Balance at the end of the period Total intangible assets 13 Other non-current assets Deferred product development expenditure Balance at the beginning of the period Exchange adjustment Expenditure capitalised during the period Amortised during the period Balance at the end of the period Borrowing costs Expenditure capitalised during the period Amortised during the period Balance at the end of the period Total other non-current assets 14 Payables Trade creditors and other accruals are non-interest bearing and are generally for less than 90 day terms Trade creditors – unsecured Amounts owing to Wholly owned controlled entities Other accruals Total payables NUFARM 2002 ANNUAL REPORT 54 Consolidated Parent 2002 $000 2001 $000 2002 $000 2001 $000 130,491 (4,233) 13,094 – – (12,508) 105,161 11,417 27,120 (2,095) (473) (10,639) 126,844 130,491 445 (57) 17,230 – (871) 16,747 1,446 1,610 – 3,056 1,488 125 75 (57) (1,186) 445 1,446 – – 1,446 146,647 132,382 5,377 240 8,345 (606) 13,356 5,678 (522) 5,156 – – 6,037 (660) 5,377 – – – 18,512 5,377 – – – – – – – – – – – – – – – – – – – – – – – – – – – 39 2 – – – (41) – – – – – – – – – – – – – – – – – – – – – 156,989 153,772 9,328 4,015 – 84,609 – 72,396 241,598 226,168 27,543 7,164 44,035 17,764 5,027 26,806 Nufarm Limited Notes Notes to the financial statements continued 15 Interest bearing liabilities Capital notes Face value NZD 225,000,000 (2001: NZD 170,000,000) Long term unsecured subordinated fixed interest debt security with an election date of 15 October 2006. Coupon rate 8.56% (2001: 9.8%) On the election date, noteholders may elect to retain their capital notes for a further five year period on the terms and conditions, which will be advised, or to convert some or all of their capital notes to ordinary shares in Nufarm Limited at 97.5% of the then current price of ordinary shares. On the relevant election date, the group may at its option purchase some or all of the capital notes for cash at their principal amount plus any accrued interest. Bank loans – unsecured (average interest rate 4.3%) Bank loans – secured (average interest rate 4.5%) Other loans – unsecured (average interest rate 6.8%) Other loans from wholly owned controlled entities (average interest rate 9.2%) Finance lease liabilities – secured (average interest rate 8.1%) Consolidated Parent 2002 $000 2001 $000 2002 $000 2001 $000 192,885 138,448 – – 391,393 17,212 3,504 393,696 798 4,439 4,582 – – – 6,386 – 2,923 196,412 – 7,699 – – – – 611,380 540,304 200,994 7,699 Less current portion Capital notes – unsecured and subordinated Bank loans – unsecured – secured Other loans – unsecured Finance lease liabilities – secured – 281,060 14,362 977 1,391 138,448 178,790 798 1,588 458 Total current interest bearing liabilities 297,790 320,082 – 4,582 – – – 4,582 – 7,699 – – – 7,699 Total non-current interest bearing liabilities 313,590 220,222 196,412 Repayment of borrowings (excluding finance leases) Periods ending 31 July 2003 2004 2005 2006 2007 No specified repayment date 296,399 96,414 6,431 10,264 192,885 2,601 168,706 26,722 4,226 15,251 – 2,851 4,582 – – – 196,412 – – – – – – – – The obligations with no specified repayment date are repayable upon certain contingent events, which the directors believe will not occur in the foreseeable future. All unsecured bank borrowings are provided by banks that are parties to the group negative pledge deed. The assets of all the entities included in the negative pledge deed (refer Note 25) are in excess of their related borrowings. Secured bank borrowings and finance lease liabilities are secured over certain plant of controlled entities. NUFARM 2002 ANNUAL REPORT 55 Nufarm Limited Notes Notes to the financial statements continued 16 Provisions Dividends Employee entitlements Other Less current portion Dividends Employee entitlements Other Total current provisions Total non-current provisions Dividends payable represent a final dividend of 11.0 cents (2001: 11.0 cents) per ordinary share for the financial year ended 31 July 2002. These dividends will be fully ranked at the tax rate of 30%. 17 Contingent liabilities The parent entity has entered into a deed of cross guarantee (refer Note 26) in accordance with a class order issued by the Australian Securities and Investments Commission. The parent entity and all the Australian controlled entities, which are a party to the deed, have guaranteed the repayment of all current and future creditors in the event any of these companies are wound up. The parent entity together with all the material wholly owned controlled entities have entered into a negative pledge deed with the group's lenders whereby all group entities, which are a party to the deed, have guaranteed the repayment of all liabilities in the event that any of these companies are wound up. Guarantees for the payment of liabilities: – for the repayment of borrowings of partly owned controlled entities that are not a party to the negative pledge deed – other Receivables sold to financiers for which there is either partial or full recourse to the company in the event that the debt is not collected from the customer. Receivables sold that have come due for payment since year end have been collected by the financiers (refer Note 29). The parent entity has guaranteed with the noteholders the issuers' obligations under the capital notes. Environmental claim warranty Guarantee upon sale of a business limited to EUR 6.1 million on account of possible remediation costs for soil and groundwater contamination. This guarantee decreases from 2003 progressively to nil in 2011. The directors do not believe that any material costs will be incurred as a result of this guarantee. NUFARM 2002 ANNUAL REPORT 56 Consolidated Parent 2002 $000 2001 $000 2002 $000 2001 $000 17,082 25,393 2,530 45,005 17,082 16,754 2,530 36,366 8,639 17,000 23,570 2,160 42,730 17,000 15,851 2,160 35,011 7,719 17,082 454 17 17,553 17,082 413 17 17,512 41 17,000 349 26 17,375 17,000 349 26 17,375 – – 2,143 – 2,036 – 2,143 8,235 2,036 6,250 13,565 – – – – 192,885 138,448 10,987 19,380 10,563 26,164 – – 195,028 148,719 Nufarm Limited Notes Notes to the financial statements continued 18 Commitments Capital expenditure Estimated cost of capital work covering buildings and plant authorised by the board of directors and contracted for but not yet provided for in the financial statements, together with capital work required to meet regulatory consents. All these commitments are expected to be completed within 12 months. Investments In February 2002, the company acquired a further 30 per cent of the Australian and Malaysian chemical formulating businesses of Mastra Holdings, which are now controlled entities. The company has a commitment to acquire the remaining shares by December 2005. The cost will be USD 3.0 million. The company has committed to buying 14 per cent of the shares in the Agchem business of Excel Industries Ltd, an Indian company listed on the Mumbai Stock Exchange. The cost is INR 190.0 million and is expected to be settled in late 2002. For commitments entered into since reporting date refer to Note 36 (Subsequent events) Leases Operating leases are generally entered to access the use of shorter term assets such as motor vehicles, mobile plant and some office equipment. Rentals are fixed for the duration of these leases. There are also a small number of leases for office properties. These rentals have regular reviews based on market rentals at the time of review. Lease commitments for non-cancellable operating leases are payable as follows: Not later than one year Later than one year but not later than two years Later than two years but not later than five years Later than five years Finance leases are entered to fund the acquisition of minor items of plant and equipment, mainly by partly-owned entities of the group. Rentals are fixed for the duration of these leases. Lease commitments for capitalised finance leases are payable as follows: Not later than one year Later than one year but not later than two years Later than two years but not later than five years Later than five years Less future finance charges Consolidated Parent 2002 $000 2001 $000 2002 $000 2001 $000 4,480 7,231 1,136 – 5,496 7,129 7,221 12,717 – 7,129 – – – 7,515 5,016 10,949 1,901 25,381 5,261 4,252 9,192 4,975 23,680 1,509 1,362 2,324 1,660 6,855 1,549 1,421 3,312 1,783 8,065 (1,679) 6,386 427 452 1,662 1,333 3,874 (951) 2,923 – – – – – – – – – – – – – – – – – – – – – – NUFARM 2002 ANNUAL REPORT 57 Nufarm Limited Notes Notes to the financial statements continued 19 Contributed equity Ordinary shares issued and fully paid Balance at the beginning of the period Issue of shares Share buy-back Partly paid shares fully paid up during the period Balance at the end of the period Ordinary shares issued and partly paid to 1.0 cent Balance at the beginning of the period Partly paid shares fully paid up during the period Balance at the end of the period Total contributed equity 20 Reserves a) Foreign currency translation This reserve records exchange differences arising from the translation of the financial statements of self-sustaining foreign operations together with the net result of hedging the foreign currency exposures arising from the net investment in those foreign operations. Balance at the beginning of the period Exchange fluctuation on opening net investment in overseas controlled entities Hedging of net investment in overseas controlled entities Transferred to retained profits Balance at the end of the period b) Asset revaluation This reserve records increments in the value of land and buildings that were revalued prior to 1992 when the company implemented a policy of recording assets at cost unless there is a permanent diminution in carrying values. Balance at the beginning of the period Transferred to retained profits Balance at the end of the period c) Capital profits reserve This reserve is used to accumulate realised capital profits Balance at the beginning of the period Transferred from retained profits Transferred to retained profits Balance at the end of the period Total reserves NUFARM 2002 ANNUAL REPORT 58 Number of shares 2002 $000 2001 $000 154,545,607 560,000 – 184,600 145,587 1,076 – 665 145,058 – (115) 644 155,290,207 147,328 145,587 710,050 (184,600) 525,450 6 (1) 5 8 (2) 6 155,815,657 147,333 145,593 Consolidated Parent 2002 $000 2001 $000 2002 $000 2001 $000 (13,315) (8,791) (6,521) 8,902 (8) (10,942) 20,978 (25,502) – (13,315) 2,039 (198) 1,841 2,039 – 2,039 – – – – – – – – – – – – – – – – 33,713 139 – 33,852 24,751 33,860 – (147) 33,713 22,437 40,074 – – 40,074 40,074 40,074 – – 40,074 40,074 Nufarm Limited Notes Notes to the financial statements continued 21 Retained profits Balance at the beginning of the period Net profit attributable to members of the parent entity Aggregate amounts transferred from reserves Dividends paid and provided Aggregate amounts transferred to reserves Balance at the end of the period Retained profits and reserves that could be distributed as dividends and franked out of existing franking credits or out of franking credits arising from income tax payable As of 1 July 2002, the new imputation system requires franking credits to be expressed on a tax paid basis. The franking account surplus existing at 31 July 2001 has been restated to a tax paid amount by multipying the franking surplus by 30/70. 22 Outside equity interests Share capital Retained profits 23 Equity Balance at the beginning of the period Total changes in equity recognised in the statement of financial performance Transactions with owners as owners Contributed equity Dividends Movement in outside equity interest Balance at the end of the period 24 Statement of cash flows a) Reconciliation of cash For the purposes of the statement of cash flows, cash includes cash on hand and in banks and deposits at call, net of outstanding overdrafts. The statements of cash flows are reconciled to respective items in the statement of financial position as follows: Cash assets Bank overdrafts Consolidated Parent 2002 $000 2001 $000 2002 $000 2001 $000 183,721 56,834 206 (27,952) (139) 212,670 215,908 (4,526) 147 (27,808) – 93,919 39,051 – (27,952) – 183,721 105,018 80,935 40,792 – (27,808) – 93,919 3,912 488 124 521 7,300 (1,015) 6,285 5,342 (4,292) 1,050 – – – – – – 352,801 388,512 279,586 266,075 59,215 (9,050) 39,051 40,792 1,740 (27,952) 5,235 527 (27,808) 620 1,740 (27,952) – 527 (27,808) – 391,039 352,801 292,425 279,586 15,780 (56,008) (40,228) 23,615 (54,777) (31,162) 752 (4,582) (3,830) 109 (7,699) (7,590) NUFARM 2002 ANNUAL REPORT 59 Nufarm Limited Notes Notes to the financial statements continued Consolidated Parent 2002 $000 2001 $000 2002 $000 2001 $000 24 Statement of cash flows continued b) Reconciliation of net profit (loss) after income tax to net operating cash flows Net profit (loss) after income tax Dividend from associated company Less non-operating items net of tax Sulfer Works costs prior to sale Non-cash items Amortisation Depreciation Losses on disposal of fixed assets Foreign currency gain arising on migration translation Unrealised foreign currency (gains) losses Movement in provisions for Deferred tax Tax assets Deferred product development expenses Exchange rate change on foreign controlled entities provisions Movements in working capital items: (Increase) decrease in receivables (Increase) in inventories Increase (decrease) in payables Increase (decrease) in income tax payable Exchange rate change on foreign controlled entities working capital items Share of profits of associates net of tax Group tax setoff Movements in intercompany balances relating to cash transactions 57,777 2,924 – 2,284 14,861 41,858 251 – – 4,084 45 (8,345) 447 (3,951) 2,175 (7,756) – 12,770 77,514 238 – – 9,048 4,589 (6,037) 2,012 53,201 100,134 (45,765) (17,119) 2,430 2,784 (4,156) (3,651) – (45,342) (27,447) 46,403 (7,457) 11,884 (3,447) – – – (65,477) (25,406) 39,051 – – – – 1,617 33 – (1,669) 705 2,276 – 798 3,760 1,785 (2,541) (1,016) 815 1,029 – 341 (906) (493) Net operating cash flows 50,709 65,196 42,318 c) Businesses sold The company sold the business and assets of Fernz Sulfer Works in Canada. Net assets disposed of were Receivables Inventory Investments Property, plant and equipment Intangibles Payables Gain on disposal Amount settled for businesses sold in prior years Total consideration Cash deferred Cash consideration received Cash paid for closure costs Net cash effect – 2,307 – 4,906 – – – 686 7,899 (5,119) 2,780 (6,092) (3,312) 20,944 4,899 870 6,566 2,094 (1,484) 7,491 – 41,380 – 41,380 – 41,380 Shown as Proceeds from business sale Sulfer Works closure costs net of disposal proceeds 686 (3,998) 41,380 – NUFARM 2002 ANNUAL REPORT 60 – – – – – – – 686 686 – 686 – 686 686 – 40,792 – (7,254) – 41 322 375 – 34 368 1,122 – 699 2,961 3,783 (2,765) (1,230) – 921 – 1,112 (3,626) (1,805) 34,694 – 2,793 – – – – 7,254 – 10,047 – 10,047 – 10,047 10,047 – Nufarm Limited Notes Notes to the financial statements continued 24 Statement of cash flows continued d) Businesses acquired The company acquired a further 30 per cent of the share capital of the Mastra group of companies, resulting in them becoming controlled entities. It also acquired the selective chemistry business in Australia and New Zealand from Monsanto, and 100 per cent of the share capital of Agro Permutadora in Portugal, an agricultural chemicals distribution business. The aggregate amounts of net assets acquired were Cash Receivables Inventory Tax assets Investments Property, plant and equipment Intangibles Bank overdraft Payables Borrowings Outside equity interests Total consideration Cash deferred Cash consideration paid Cash included in net assets acquired Bank overdraft included in net assets acquired Net cash effect Consolidated Parent 2002 $000 2001 $000 2002 $000 2001 $000 3,841 16,905 11,183 84 (5,993) 17,725 29,977 (1,268) (15,509) (19,375) (4,537) 33,033 (8,048) 24,985 (3,841) 1,268 22,412 138 394 29,833 – 79 618 27,179 – (38) – – 58,203 – 58,203 (138) – 58,065 – 7,213 4,911 15 – – – – (6,156) – – 5,983 – 5,983 – – 5,983 – – – – – – – – – – – – – – – – – The deferred cash settlement represents the value of the remaining consideration payable. 25 Controlled entities The consolidated financial statements at 31 July 2002 include the following controlled entities. All controlled entities have the same financial year end as the parent entity. Abel Lemon and Company Pty Ltd Agcare Biotech Pty Ltd Agro Permutadora Produtos Agroquimicos LDA Agrow Australia Pty Ltd Agryl Holdings Limited Allrad No 1 Pty Ltd Australis Services Pty Ltd Bioclip NZ Pty Limited Biotech Innovations Pty Ltd Camper Vertriebs Captec (NZ) Limited Captec Pty Limited CFPI GmbH CFPI Italia SRL Chemicca Limited Notes (a) (c) (c) (a),(b) (a),(b) (a) (c) (c) (c) (b) (a),(b) (c) (c) (a) Place of incorporation Percentage of shares held 2002 2001 Australia Australia Portugal Australia Australia Australia Australia New Zealand Australia Germany New Zealand Australia Germany Italy Australia 100 70 100 100 100 90 100 100 90 100 100 100 100 100 100 100 40 – 100 100 90 100 100 90 100 100 100 100 100 100 NUFARM 2002 ANNUAL REPORT 61 Nufarm Limited Notes Notes to the financial statements continued 25 Controlled entities continued Chemicca Limited Chemturf Pty Ltd Chloral Investment Trust Chloral Unit Trust No1 Chloral Unit Trust No2 Compagnie D'Applications Chimiques a L'Industrie CNG Holdings BV Croplands Equipment Limited Croplands Equipment Pty Ltd Danestoke Pty Limited Davco New Zealand Limited Eltrick Pty Ltd Electronic Agriculture Limited Esorblue Pty Ltd Fernz Australia Limited Fernz Canada Limited Fernz Chemicals (NZ) Limited Fernz Construction Materials Ltd Fernz Corporation (NZ) Limited Fernz Health & Sciences Limited Fernz Holdings (NZ) Limited Fernz Insurance Pte Ltd Fernz Singapore Pte Ltd Fernz Sulfer Works Inc Fernz Timber Protection Limited Fernz Timber Protection (M) Sdn Bhd Fidene Limited Finotech BV Florigene Europe BV Florigene Flowers Pty Ltd Florigene International BV Florigene Investments Pty Ltd Florigene Investments No 2 Pty Ltd Florigene Limited Florigene Marketing Pty Ltd Framchem SA Galpro SA Ichem Limited International Flower Developments Pty Ltd Laboratoire Europeen de Biotechnologie Lobeco Products Inc Manaus Holdings Sdn Bhd Marman Holdings LLC Marman de Centroamerica Sociedad Anomima Marman del Ecuador Sociedad Anomima Marman de Mexico Sociedad Anomima Marman Sociedad Anomima Marman USA Inc Mastra Corporation Pty Limited Mastra Corporation USA Pty Limited Mastra Corporation Sdn Bhd Mastra Holdings Sdn Bhd Mastra Industries Sdn Bhd MCFI International (SA) Pty Ltd Medisup Securities Limited Medisup International NV Mequab Pty Ltd NUFARM 2002 ANNUAL REPORT 62 Notes (c) (a) (c) (b) (a),(b) (c) (c) (a),(c) (a),(b) (b) (b) (a),(b) (b) (b) (b) (b) (b) (c) (c) (b),(c) (c) (c) (c) (c) (b) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (c) (a),(b) (c) Place of incorporation Percentage of shares held 2002 2001 New Zealand Australia Australia Australia Australia France Netherlands New Zealand Australia Australia New Zealand Australia Australia Australia Australia Canada New Zealand Australia New Zealand New Zealand New Zealand Singapore Singapore Canada New Zealand Malaysia New Zealand Netherlands Netherlands Australia Netherlands Australia Australia Australia Australia Egypt Belgium New Zealand Australia France USA Malaysia USA Costa Rica Ecuador Mexico Guatemala USA Australia Australia Malaysia Malaysia Malaysia South Africa Australia N. Antillies Australia 100 100 80 80 80 100 100 100 100 80 100 90 100 90 100 100 100 100 100 100 100 100 100 100 100 51 100 100 90 90 90 90 90 90 90 100 100 100 90 100 100 100 70 70 70 70 70 70 70 70 70 70 70 100 100 100 90 100 100 80 80 80 100 100 100 100 80 100 90 100 90 100 100 100 100 100 100 100 100 100 90 100 51 100 100 90 90 90 90 90 90 90 100 100 100 90 100 100 100 40 40 40 40 40 40 40 40 40 40 40 100 100 100 90 Nufarm Limited Notes Notes to the financial statements continued 25 Controlled entities continued Neuchatel Pty Ltd New Zealand Chemicca (HK) Limited Nufarm Agriculture Inc Nufarm Agriculture (Pty) Ltd Nufarm Agriculture Zimbabwe (Pvt) Ltd Nufarm Americas Holding Company (formerly Nufarm Americas Inc) Nufarm Americas Inc (formerly Riverdale Chemical Co) Nufarm Argentina SRL Nufarm Asia Pte Ltd Nufarm Australia Limited Nufarm BV Nufarm Chile Limiteda Nufarm Coogee Pty Ltd Nufarm Columbia Ltda Nufarm de Costa Rica Nufarm de Guatemala SA Nufarm de Mexico Sa de CV Nufarm do Brazil Nufarm Energy Pty Ltd Nufarm Espana SA Nufarm GmbH Nufarm GmbH Nufarm GmbH & Co KG Nufarm Holdings BV Nufarm Inc. Nufarm Ireland Limited Nufarm KK Nufarm Malaysia Sdn Bhd Nufarm NZ Limited Nufarm Panama SA Nufarm Phillipines Inc Nufarm Platte Pty Ltd Nufarm SA (formerly CFPI Nufarm SA) Nufarm SC Nufarm Technologies USA Nufarm Technologies USA Pty Limited Nufarm (Thailand) Ltd Nufarm Treasury Pty Ltd Nufarm UK Limited Nufarm USA Inc. Nuturf Pty Ltd Opti-Crop Systems Pty Ltd Pacific Raw Materials Australia Pty Ltd Pacific Raw Materials Limited Interferon NZ Limited (formerly Pharma Pacific Management Limited) Interferon Ltd (formerly Pharma Pacific Management Pty Ltd) Pharma Pacific Pty Limited PT Nufarm Indonesia Resfun Pty Ltd Rockmere Pty Ltd Safepak Industries Sdn Bhd SC Inpar Selchem Pty Limited Societe d'Etudes et Applications Chimiques Societe Civile Mobiliere Clama Societe des Ecluses de la Garenne Notes (a) (c) (b) (c) (c) (b) (b) (c) (b) (a),(b) (b) (c) (c) (c) (c) (c) (c) (a) (b),(c) (b) (b) (b) (b) (b) (c) (c) (b) (c) (c) (c) (b),(c) (b) (c) (a),(b) (b) (c) (a),(b) (b) (a) (c) (b) (a) (a),(b) (a) (c) (c) (a) (b) (c) (c) Place of incorporation Percentage of shares held 2002 2001 Australia Hongkong Canada South Africa Zimbabwe USA USA Argentina Singapore Australia Netherlands Chile Australia Columbia Costa Rica Guatemala Mexico Brazil Australia Spain Germany Austria Austria Netherlands USA Ireland Japan Malaysia New Zealand Panama Phillipines Australia France France New Zealand Australia Thailand Australia United Kingdom USA Australia Australia Australia New Zealand 100 100 100 100 100 100 100 100 100 100 100 100 80 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 80 100 100 100 100 100 100 100 100 100 100 75 100 100 New Zealand 100 Australia Australia Indonesia Australia Australia Malaysia France Australia France France France 100 100 70 90 100 70 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 80 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 – 51 100 100 – – 100 100 100 100 100 100 100 100 100 100 100 70 90 100 40 100 100 100 100 100 NUFARM 2002 ANNUAL REPORT 63 Nufarm Limited Notes Notes to the financial statements continued 25 Controlled entities continued Note (a): These entities have entered into a deed of cross guarantee dated 10 July 2000 with Nufarm Limited which provides that all parties to the deed will guarantee to each creditor payment in full of any debt of each company participating in the deed on winding-up of that company. As a result of a class order issued by the Australian Securities and Investment Commission (dated 14 July 2000), these companies are relieved from the requirement to prepare financial statements. Note (b): These entities have entered into a deed of negative pledge dated 26th October 1996 with the group lenders which provides that all parties to the deed will guarantee to each creditor payment in full of any debt of each company participating in the deed. Note (c): These entities have not been audited by Ernst & Young. With the exception of Nufarm SA in France, these companies are mostly dormant or immaterial to the group. 26 Closed group The class order closed group consists of Nufarm Limited and wholly-owned Australian entities as designated with an (a) in Note 25. Consolidated 31.7.2002 $000 31.7.2001 $000 Statement of financial position Current assets Cash and bank Receivables Inventories Tax assets Total current assets Non-current assets Property, plant and equipment Related company investments Other financial assets Intangible assets Deferred tax assets Total non-current assets TOTAL ASSETS Current liabilities Accounts payable Interest bearing liabilities Income tax liabilities Provisions Total current liabilities Non-current liabilities Interest bearing liabilities Deferred tax liabilities Provisions Total non-current liabilities TOTAL LIABILITIES NET ASSETS Equity Contributed equity Reserves Retained profits TOTAL EQUITY NUFARM 2002 ANNUAL REPORT 64 4,851 178,546 131,378 2,909 8,119 156,934 116,200 – 317,684 281,253 101,680 215,167 199,264 9,665 18,510 601 96,016 213,255 9,199 8,918 25,971 – 544,887 353,359 862,571 634,612 139,251 65,366 218 22,852 105,185 104,371 5,341 22,189 227,687 237,086 321,012 705 5,504 103,966 4,867 – 327,221 108,833 554,908 345,919 307,663 288,693 147,333 20,697 139,633 145,593 11,120 131,980 307,663 288,693 Nufarm Limited Notes Notes to the financial statements continued 26 Closed group continued Statement of financial performance Profit from ordinary activities before income tax expense Income tax expense relating to ordinary activities Net profit attributable to members of the closed group Retained profits at the beginning of the period Dividends paid and provided Aggregate amounts transferred from reserves Retained profits at the end of the period Balance date of associate Ownership and voting interest 2002 2001 27 Associated entities Details of material interests in associated entities are as follows: Consolidated 31.7.2002 $000 31.7.2001 $000 47,462 (11,857) 35,605 17,087 (16,774) 313 131,980 (27,952) – 159,475 (27,808) – 139,633 131,980 Carrying Amount 2002 $000 2001 $000 31.12.2001 25% 25% 17,435 16,318 30.6.2002 50% – 9,718 – Aventis Nufarm Limited UK agricultural chemical manufacturer Artfern Pty Ltd Australian agricultural chemical manufacturer Mastra Holdings Group (became controlled entities during the period) Financial summary of material associates Total assets Total liabilities Share of profits of associates Associated entities have the following commitments. Nufarm's share of capital commitments is $112,000 and share of finance lease commitments is $2,029,000. There are no contingent liabilities. – 40% – 6,190 Aventis Nufarm Limited 2001 2002 $000 $000 25,124 8,330 3,564 26,109 9,800 3,083 Artfern Pty Ltd 2002 $000 6,844 241 427 2001 $000 – – – 28 Interests in joint venture operations The company has an 80 per cent interest in the Nufarm-Coogee Joint Venture representing its two chlor alkali plants in Western Australia. Assets employed Cash Receivables Inventory Property, plant and equipment Total assets employed Capital expenditure commitments 2002 $000 2001 $000 1,239 2,211 966 17,894 22,310 221 823 1,949 197 19,851 22,820 396 NUFARM 2002 ANNUAL REPORT 65 Nufarm Limited Notes Notes to the financial statements continued 29 Financing arrangements The consolidated entity has access to the following facilities with a number of financial institutions and vendors of acquired businesses: Bank loan facilities Other facilities Subordinated debt facility On-balance sheet financing facilities Off-balance sheet receivables securitisation-type facilities Total financing facilities Bank loan facilities Other facilities Subordinated debt facility On-balance sheet financing facilities Off-balance sheet receivables securitisation-type facilities Total financing facilities Consolidated Parent Accessible $000 Drawn down $000 Accessible $000 Drawn down $000 2002 601,368 3,578 192,885 797,831 66,866 408,351 3,578 192,885 604,994 13,613 864,697 618,607 2001 568,147 4,515 138,448 711,110 64,330 775,440 394,418 4,515 138,448 537,381 28,144 565,525 – – – – – – – – – – – – – – – – – – – – – – – – 30 Foreign currency exposures a) Current assets Amounts receivable in foreign currency which are not effectively hedged US dollars Canadian dollars Euros Other b) Current liabilities Amounts payable in foreign currency which are not effectively hedged US dollars Euros British pounds Other Consolidated 2002 $000 2001 $000 42,975 9,574 15,147 3,734 71,430 30,881 20,800 7,073 1,198 59,952 29,258 2,467 4,217 1,016 36,958 18,088 370 – 4,477 22,935 Non-current assets and liabilities are substantially hedged against the Australian dollar through balance sheet hedges whereby the company hedges its net investment in the foreign operations of controlled entities. 31 Financial instruments a) Objectives for holding derivative financial instruments The consolidated entity uses derivative financial instruments to manage specifically identified interest rate and foreign currency risks. The consolidated entity does not trade derivatives. The group is primarily exposed to the risk of movements in the value of the Australian dollar relative to certain foreign currencies, including the US dollar, the Euro and the British pound, and the movement in interest rates. The consolidated entity hedges a portion of its anticipated sales and purchases as well as forecast foreign currency earnings of controlled entities. A comprehensive board-approved treasury policy sets limits for management to hedge such exposures. NUFARM 2002 ANNUAL REPORT 66 Nufarm Limited Notes Notes to the financial statements continued 31 Financial instruments continued b) Foreign exchange The following table summarises by currency the Australian dollar value of all forward foreign exchange agreements and foreign exchange options. Foreign currency amounts are translated at rates current at the reporting date. Currency US dollars Less than 12 months Over 12 to 60 months Canadian dollars Less than 12 months Over 12 to 60 months Euros Less than 12 months Over 12 to 60 months British pounds Less than 12 months Over 12 to 60 months Others Less than 12 months Average exchange rate 2002 2001 2002 2001 Buy $000 Sell $000 Buy $000 Sell $000 0.5407 0.5419 0.5061 0.5393 30,909 – 181,705 46,083 32,602 – 241,190 19,802 0.8585 0.8597 0.7710 0.7672 – – 17,061 9,308 – – 26,504 6,473 0.5581 0.5550 0.5763 – 10,501 – 72,384 117,117 15,777 – 210,073 – 0.3611 0.3470 0.3532 – 4,329 – 114,231 28,818 4,372 – 117,755 – – – 4,283 6,429 1,923 1,951 50,021 593,136 54,674 623,748 c) Net fair value of financial assets and liabilities The carrying amounts of financial assets and financial liabilities (including derivatives) are considered to equate to their fair values, except as disclosed in the table below. Net fair values are determined using market rates that existed at the end of the period for similar instruments with similar maturities. Financial liabilities Capital notes – less than one year Capital notes – one to five years Derivatives Forward exchange contracts Receivables – less than one year Receivables – more than one year Payables – less than one year Foreign investments and advances – less than one year – one to five years Interest rate swaps Payable maturities – less than one year – one to five years Carrying amount 2002 $000 Consolidated Net fair value 2002 $000 Carrying amount 2001 $000 Net fair value 2001 $000 – 192,885 – 193,707 138,448 – 137,112 – 26,460 9,266 49,041 367,457 192,101 25,538 9,547 49,996 370,537 204,724 50,945 25,060 53,772 546,076 – 50,750 26,695 54,606 548,357 – 30,000 30,000 30,213 30,321 10,000 60,000 10,010 60,309 NUFARM 2002 ANNUAL REPORT 67 Nufarm Limited Notes Notes to the financial statements continued 31 Financial instruments continued d) Interest rate risk exposures The following table summarises interest rate risk for the consolidated entity. Interest rate swaps had an average effective interest rate of 5.9% (2001: 5.6%). Financial assets Cash on deposit Financial liabilities Capital notes Bank loans Other loans Finance leases Interest rate swaps Financial assets Cash on deposit Financial liabilities Capital notes Bank loans Other loans Finance leases Interest rate swaps Floating interest rate $000 Fixed interest maturing in < 1 year $000 1 to 5 years $000 Non interest bearing $000 Total $000 2,652 – 408,605 3,504 – (60,000) 352,109 2002 – 192,885 – – – – – – 1,391 30,000 31,391 4,995 30,000 227,880 2001 859 – – 138,448 394,494 4,439 – – – – – – – 458 (70,000) 10,000 328,933 148,906 2,465 60,000 62,465 – – – – – – – – – – – – – – 2,652 192,885 408,605 3,504 6,386 – 611,380 859 138,448 394,494 4,439 2,923 – 540,304 The weighted average interest rate for cash on deposit was 4.3% (2001: 4.0%) All other assets and liabilities are non-interest bearing. e) Hedges of anticipated future transactions The following table summarises unrealised gains and losses on forward exchange contracts entered as hedges of future anticipated sales, purchases and foreign currency earnings of overseas controlled entities: Expected recognition period Less than one year More than one year 2002 2001 $000 Gains 584 – $000 Losses – 243 $000 Gains 439 – $000 Losses 312 1,635 f) Credit risk exposure The consolidated entity's exposures to on balance sheet risk are as indicated by the carrying amounts of its financial assets. It does not have a significant exposure to any individual counterparty, as transactions are undertaken with a large number of debtors in various markets. NUFARM 2002 ANNUAL REPORT 68 Nufarm Limited Notes Notes to the financial statements continued 32 Remuneration of officers a) Income of directors of Nufarm Limited For non-executive directors income includes base directors' fees, committee fees and superannuation contributions made by the company. The managing director’s renumeration includes salary, bonuses, company superannuation contributions and other quantifiable fringe benefits. The numbers of directors of the parent entity who were paid (excluding retirement benefits) directly and indirectly from the company as shown in the following bands, were: 40,001 50,001 60,001 160,001 1,300,001 1,620,001 $ 50,000 – 60,000 – 70,000 – 170,000 – – 1,310,000 – 1,630,000 The aggregate income of the directors above b) Income of executives Income includes salary, bonuses, company superannuation contributions and other quantifiable fringe benefits. The number of executive officers domiciled in Australia whose total income for the year falls within the following bands, were (the parent company does not pay remuneration): 100,000 110,001 120,001 130,001 140,001 150,001 160,001 170,001 180,001 190,001 200,001 210,001 220,001 250,001 270,001 280,001 300,001 320,001 360,001 370,001 450,001 490,001 $ 110,000 – 120,000 – 130,000 – 140,000 – 150,000 – 160,000 – 170,000 – 180,000 – 190,000 – 200,000 – 210,000 – 220,000 – 230,000 – 260,000 – 280,000 – 290,000 – 310,000 – 330,000 – – 370,000 – 380,000 460,000 – – 500,000 Parent 2002 2001 – 3 3 1 – 1 1 3 3 1 1 – $000 $000 2,147 1,865 Consolidated 2002 2001 13 8 9 7 2 7 7 4 3 2 – 2 2 1 1 1 – – 1 – 1 1 14 5 9 7 6 6 4 1 6 1 1 1 2 – – – 1 1 – 1 – – NUFARM 2002 ANNUAL REPORT 69 Nufarm Limited Notes Notes to the financial statements continued 32 Remuneration of officers b) Income of executives continued $ 500,001 – 510,000 520,001 – 530,000 550,001 – 560,000 570,001 – 580,000 590,001 – 600,000 630,001 – 640,000 650,001 – 660,000 670,001 – 680,000 680,001 – 690,000 – 1,310,000 – 1,630,000 1,300,001 1,620,001 The aggregate income of the executives above Retirement benefits No prescribed benefits were paid in connection with the retirement of officers domiciled in Australia during the period. Consolidated 2002 2001 1 – – – – 1 1 1 1 – 1 – 1 1 1 1 – – – – 1 – $000 $000 15,975 13,649 c) Number of full-time equivalent staff employed by the consolidated entity at the end of the period 2,345 2,203 33 Employee share purchase schemes The Nufarm Limited Staff Share Purchase Scheme No.2 (1990) enabled the issue of partly paid ordinary shares to all staff who had completed two years service with the company, issued at a 10 per cent discount on market price at the date of the offer. The shares have been issued partly paid with 1.0 cent per share paid on acceptance and the balance payable over four calls which are made at the end of the second, third, fourth and fifth years. Once the call is paid to the company, one quarter of the total shares allocated will vest directly to the employee as fully paid shares. Partly paid shares do not rank for dividends until fully paid and voting rights are exercised by the trustees in proportion to the amount paid up on the shares, while the shares remain partly paid. At 31 July 2002, the trustees of the Staff Share Purchase Scheme No.2 held 525,450 (2001: 710,050) ordinary shares paid to 1.0 cent per share, with $1,733,000 (2001: $2,630,000) remaining uncalled. The Nufarm Limited Executive Share Purchase Scheme (1984) enabled the issue of fully paid ordinary shares to executive directors and senior executives, issued at a price equal to 70 per cent of the market price at the date of the offer. There is an eight year restrictive period during which time the allocated shares are held by the trustees and the consideration will be paid over the restrictive period with all dividends, net of tax, being applied in reduction of the advances by the company to the trustees which total $6,291,269 at 31 July 2002 (2001: $8,213,404). Each executive is entitled to exercise voting rights attached to the shares allocated. At 31 July 2002 the trustees of the Executive Share Purchase Scheme (1984) held 2,854,400 (2001: 3,241,100) ordinary shares, all of which were allocated (2001: 112,500 were unallocated). There are 159 participants (2001: 188 participants) in total in the above two schemes. NUFARM 2002 ANNUAL REPORT 70 Nufarm Limited Notes Notes to the financial statements continued 33 Employee share purchase schemes continued A UK Savings Related Share Options Scheme (1997) enabled the issue of ordinary share options to eligible staff in the United Kingdom who had completed two years service with the company. Share options were issued at a 10 per cent discount on market price at the date of the offer. Share options do not rank for dividends or carry voting rights. At 31 July 2002 and at 10 October 2002 231,233 (2001: 257,598) share options were outstanding allowing the 35 participants to exercise each option into one fully paid ordinary share. 114,903 options mature on 1 November 2002 at an exercise price of $3.55 and 116,330 options mature on 1 March 2005 at an exercise price of $3.08. During the year, 26,365 of the above options expired upon the resignation of the related employees. The above plans have been replaced by the plans below. The Nufarm Executive Share Plan (2000) offers shares at no cost to executives. The executives may select an alternative mix of shares (at no cost) and options at a cost determined under the Black Scholes methodology. These benefits are only given when a predetermined return on capital employed is achieved over the relevant period. The shares and options are subject to forfeiture and dealing restrictions. The executive cannot deal in the shares or options for a period of between three and 10 years without board approval. An independent trustee holds the shares and options on behalf of the executives. At 31 July 2002 there were 57 participants (2001: 55 participants) in the scheme and 1,015,736 (2001: 147,500) shares have been allocated, and 1,437,692 (2001: nil) options granted, under the plan. The 1,437,692 options were granted for a term of 10 years, for 44.7 cents each, and are exercisable for $2.70 each from the third anniversary of the grant. The options will not be quoted on the ASX. The cost of issuing shares is expensed in the year of issue and the cost of granting options is expensed in the year they are exercised. The Global Share Plan commenced in 2001, and is available to all permanent employees. Participants contribute a proportion of their salary to purchase shares. The company will contribute an amount equal to 10 per cent of the value of the ordinary shares acquired with a participant's contribution in the form of additional ordinary shares. Amounts over 10 per cent of the participant's salary can be contributed but will not be matched. For each year the shares are held, up to a maximum of five years, the company contributes a further 10 per cent of the value of the shares acquired with the participant's contribution. An independent trustee holds the shares on behalf of the participants. There are 696 participants at 31 July 2002 (2001: 630 participants). The cost of issuing shares is expensed in the year of issue. The power of appointment and removal of the trustees for the share purchase schemes is vested in the company. NUFARM 2002 ANNUAL REPORT 71 Nufarm Limited Notes Notes to the financial statements continued 34 Related party disclosures a) Transactions with related parties in the wholly-owned group In addition to those transactions disclosed in Note 2, the parent entity entered into the following transactions during the year with related parties in the wholly–owned group: – loans were advanced and repayments received on short term intercompany accounts – proceeds of the capital notes issue have been on-lent through the parent entity to fund group investments and working capital – market rates have been charged for these fixed term subordinated loans and – management fees were received from several wholly–owned controlled entities These transactions were undertaken on commercial terms and conditions. b) Transactions with other related parties Aventis Nufarm Limited Artfern Pty Ltd Mastra Group (to date of becoming controlled entities 1.2.2002) Nufarm-Whytes Agriculture Ltd sales to purchases from sales to purchases from sales to purchases from sales to purchases from interest income c) Transactions with directors The following persons who have been directors during the Number of shares period (and associated persons) bought or sold ordinary shares in which they held a beneficial interest: KM Hoggard DJ Rathbone GDW Curlewis Dr WB Goodfellow GW McGregor AO Sir Dryden Spring Dr JW Stocker AO RFE Warburton – 261,517 – 24,500 – – – – Bought Consolidated 2002 $000 2001 $000 11,714 15,024 9,049 1,481 3,422 1,075 2,923 135 – 10,093 16,308 – – 2,979 672 3,005 – 419 Shareholding Sold 2002 2001 5,848,181 – 5,848,181 – 31,629,265 31,367,748 – 3,000 45,500 – 20,000 – – 9,676 10,000 – 28,300 – 3,000 70,000 20,000 9,676 10,000 28,300 KM Hoggard, DJ Rathbone and R Heath, as non-beneficial trustees, acquired and disposed of shares pursuant to the company’s Staff Share Purchase Scheme No. 2. KM Hoggard, DJ Rathbone and RFE Warburton, as non-beneficial trustees, acquired and disposed of shares pursuant to the company’s Executive Share Purchase Scheme. d) Ultimate controlling entity The ultimate controlling entity of the consolidated entity is Nufarm Limited ACN 091 323 312. NUFARM 2002 ANNUAL REPORT 72 Nufarm Limited Notes Notes to the financial statements continued 35 Auditors' remuneration Amounts due and receivable for the audit or review of the financial statements Ernst & Young Arthur Andersen Ernst & Young affiliates Others Total audit fees Amounts due and receivable for other services Tax Capital notes prospectus review Other Total fees for other services Consolidated Parent 2002 $000 2001 $000 2002 $000 2001 $000 213 50 265 161 689 304 185 – 489 – 635 – 153 788 270 – 194 464 80 17 – – 97 41 – – 41 – 76 – – 76 10 – – 10 36 Subsequent events Purchase of Crop Care Australasia Pty Ltd On 28 August 2002 the group announced the above purchase subject to the clearance by the Australian Competition and Consumer Commission. Crop Care manufactures and supplies crop protection products in both the Australian and New Zealand markets. The business currently generates $140 million in revenue. Sale of specialty and process chemicals businesses On 23 September 2002 the group announced the sale of its specialty chemical business in Australia and New Zealand and its process chemicals business in New Zealand to Orica Limited for $60 million. The effective date of the transaction is expected to be 31 October 2002. Fixed assets and inventory will be sold to Orica and any goodwill attached to these operations will be written off. The carrying value of these assets at 31 July 2002 was $58.2 million. In 2002, these operations had revenue of $197 million, profit before tax of $4.9 million and profit after tax of $2.6 million, which was recorded in the industrial chemicals business segment and Australasian geographic segment. NUFARM 2002 ANNUAL REPORT 73 Nufarm Limited Directors’ declaration The directors declare that the financial statements and associated notes set out on pages 38 to 73: 1. comply with accounting standards and the urgent issues consensus views; 2. give a true a fair view of the financial position as at 31 July 2002 and performance of the company and consolidated entity for the 12 months then ended; and 3. in the directors’ opinion: 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 and the company and the entities which are party to the Deed of Cross Guarantee described in Note 26 will together be able to meet any obligations or liabilities to which they are or may become subject by virtue of that deed; and b) the financial statements and notes are in accordance with the Corporations Act 2001. Signed in accordance with a resolution of directors: KM Hoggard Director Melbourne 10 October 2002 DJ Rathbone Director NUFARM 2002 ANNUAL REPORT 74 NUFARM 2002 ANNUAL REPORT 75 Nufarm Limited Trend statement Supplementary information The year 2002, 2001 and 2000 figures are for the 12 month periods ended 31 July. The prior years are for the 12 month periods ended 31 May. Operating results Sales revenue Operating profit after tax and minority interests Non-operating profit (loss) and extraordinary items after tax Profit (loss) attributable to members of the parent entity Dividends paid and provided Retained profits Total equity Contributed equity Retained profits and reserves Represented by Current assets Current liabilities Net current assets Non-current assets Non-current liabilities Capital notes Net assets Statistics Operating earnings after tax to average equity attributable to members of the parent entity Dividend rate per share Net tangible asset backing per share 2002 $000 2001 $000 2000 $000 1999 $000 1998 $000 1,429,275 1,323,232 1,213,042 1,122,597 1,123,733 56,834 51,138 51,984 43,949 39,279 – (55,664) 4,206 8,778 22,379 56,834 27,952 28,882 (4,526) 27,808 (32,334) 56,190 26,818 29,372 52,727 21,834 30,894 61,658 21,381 40,277 147,333 237,706 145,593 207,208 145,066 243,446 129,150 224,980 391,039 352,801 388,512 354,129 710,976 590,050 120,926 615,246 618,179 454,309 163,870 573,702 560,170 420,088 140,082 578,766 524,825 374,035 150,790 532,540 736,172 737,572 718,848 683,330 152,248 192,885 246,323 138,448 197,524 132,812 189,121 140,080 345,133 384,771 330,336 329,201 391,039 352,801 388,512 354,129 108,840 203,203 312,043 553,451 399,081 154,371 516,658 671,029 218,905 140,080 358,985 312,043 15.4% 18.0c $1.57 13.8% 18.0c $1.42 14.0% 17.2c $1.62 13.2% 14.8c $1.61 14.2% 14.8c $1.48 NUFARM 2002 ANNUAL REPORT 76 Nufarm Limited Shareholder and statutory information Details of shareholders, shareholdings and top 20 shareholders Listed securities – 10 October 2002 Fully paid ordinary shares Partly paid (unquoted) Twenty largest shareholders Number of holders Number of securities Percentage held by top 20 10,585 155,290,207 525,450 62.36% Ordinary shares as at 10.10.02 Percentage of issued capital as at 10.10.02 Falls Creek No 2 Pty Ltd Amalgamated Dairies Ltd RBC Global Services Australia Nominees Pty Ltd (PIPOOLED a/c) Invia Custodian Pty Ltd Lawrence Holdings Grantali Pty Ltd AMP Life Limited JP Morgan Custodial Services Challenge Investment Company Ltd Trustees Nufarm Executive Share Purchase Scheme Custodial Services Limited The Avalon Investment Trust Ltd ANZ Nominees Limited Citicorp Nominees Pty Ltd Australian Foundation Investment Company Limited National Nominees Ltd Queensland Investment Corporation Cogent Nominees Pty Limited RBC Global Services Australia Nominees Pty Ltd (RA a/c) First NZ Securities Nominees Limited (Client Securities a/c) Distribution of shareholders Size of holding 1,000 1 – 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over 25,680,200 14,950,815 7,684,888 7,182,438 5,543,750 5,036,616 3,764,391 3,236,021 2,982,081 2,854,400 2,498,051 2,490,661 2,200,624 2,003,951 1,799,998 1,661,635 1,567,956 1,274,426 1,215,967 1,210,740 16.54 9.63 4.95 4.63 3.57 3.24 2.42 2.08 1.92 1.84 1.61 1.60 1.42 1.29 1.16 1.07 1.01 0.82 0.78 0.78 Number of holders as at 10.10.02 Ordinary shares held as at 10.10.02 3,687 5,034 1,097 695 72 2,326,079 13,114,385 8,188,297 15,159,178 116,502,268 Of these, 193 shareholders held less than a marketable parcel of shares of $500 worth of shares (140 shares). In accordance with the ASX Listing Rules, the last sale price of the company’s shares on the ASX on 10 October 2002 was used to determine the number of shares in a marketable parcel. NUFARM 2002 ANNUAL REPORT 77 Nufarm Limited Shareholder and statutory information Stock exchanges on which securities are listed Ordinary shares: Australian Stock Exchange Limited. Substantial shareholders In accordance with section 671B of the Corporations Act, as at 10 October 2002, the substantial shareholders set out below have notified the company of their respective relevant interest in voting shares in the company shown adjacent to their respective names as follows: Amalgamated Dairies Ltd Khyber Pass Ltd1 Glade Building Ltd2 Hauraki Trading Ltd3 Oxford Trustees (Paul Gerard Keeling and Allan Cameron Rattray)4 Douglas John Rathbone5 Perpetual Trustees Australia Ltd Date of notice 24 August 2000 24 August 2000 24 August 2000 24 August 2000 24 August 2000 28 June 2001 19 September 2002 Number and percentage of shares in which interest held at date of notice Interest % Number 14,950,815 14,968,110 15,329,898 15,685,712 15,347,193 37,664,048 10,545,464 9.69 9.70 9.93 10.16 9.94 24.05 6.79 1 Khyber Pass Ltd has a relevant interest in Amalgamated Dairies Ltd and, as a result, the number of shares disclosed by it includes the shares held by Amalgamated Dairies Ltd. 2 Glade Building Ltd has a relevant interest in Amalgamated Dairies Ltd and, as a result, the number of shares disclosed by it includes the shares held by Amalgamated Dairies Ltd. 3 Hauraki Trading Ltd has a relevant interest in Amalgamated Dairies Ltd and, as a result, the number of shares disclosed by it includes the shares held by Amalgamated Dairies Ltd. 4 Oxford Trustees has a relevant interest in Glade Building Ltd, Khyber Pass Ltd and Amalgamated Dairies Ltd and, as a result, the number of shares disclosed by it includes the shares held by Glade Building Ltd, Khyber Pass Ltd and Amalgamated Dairies Ltd. 5 The shareholding of DJ Rathbone includes his relevant interests in Falls Creek No 2 Pty Ltd and Falls Creek Investment (Aust) Pty Ltd (Falls Creek). Falls Creek has a relevant interest in 5,503,750 shares held by Lawrence Holdings, an entity controlled by KM Hoggard. DJ Rathbone has a non-beneficial interest in 792,550 shares as trustee of the Nufarm Limited executive and staff share plans. Voting rights Ordinary shares On a show of hands, every shareholder present in person or represented by a proxy or representative shall have one vote and on a poll every shareholder who is present in person or represented by a proxy or representative shall have one vote for every fully paid share held by the shareholder. Employee share scheme Partly paid ordinary shares These shares are held in trust by the scheme trustees and carry voting rights in proportion to the amount of the issue price paid up on each share only. Shareholder information Annual general meeting The annual general meeting of Nufarm Limited will be held on Thursday 12 December 2002 at 10.00am in the Ballroom at the Duxton Hotel, 328 Flinders Street, Melbourne, Victoria. Full details are contained in the Notice of Meeting sent to all shareholders. Voting rights Shareholders are encouraged to attend the annual general meeting. However, when this is not possible, they are encouraged to use the form of proxy by which they can express their views. Every shareholder, proxy or shareholder’s representative has one vote on a show of hands. In the case of a poll, each share held by every shareholder, proxy or representative is entitled to: (a) one vote for each fully paid share; and (b) voting rights in proportion to the paid up amount of the issue price for partly paid shares. Stock exchange listings Nufarm shares are listed under the symbol NUF on the ASX. The securities of the company are traded on the ASX under CHESS (Clearing House Electronic Sub-register System), which allows settlement of on-market transactions without having to reply on paper documentation. Shareholders seeking more information about CHESS should contact their stockbroker or the ASX. NUFARM 2002 ANNUAL REPORT 78 Nufarm Limited Shareholder and statutory information Share register and other enquiries If you have any questions in relation to your shareholding, share transfers or dividends, please contact our share registrar: Key dates • 25 October 2002 Record date (books closing) for 2001/2002 final dividend • 8 November 2002 Final dividend for 2001/2002 payable • 4 November 2002* Annual report sent to shareholders • 12 December 2002 Annual general meeting • 27 March 2003* Announcement of profit result for half year ending 31 January 2003 • 31 July 2003 End of financial year • 9 October 2003* Announcement of profit result for 2002/2003 * Subject to confirmation Nufarm Limited ACN 091 323 312 Company Secretary Rodney Heath Registered Office 103–105 Pipe Road Laverton North Victoria 3026 Australia Telephone: (61) 3 9282 1000 Facsimile: (61) 3 9282 1001 Computershare Investor Services Pty Ltd Level 12 565 Bourke Street Melbourne Victoria 3000 Australia Please include your shareholder reference number (SRN) in all correspondence to the share registry. For enquiries relating to the operations of the company, please contact the Nufarm Corporate Affairs Office on: Telephone: (61) 3 9282 1177 Facsimile: (61) 3 9282 1111 email: robert.reis@au.nufarm.com Written correspondence should be directed to: Corporate Affairs Office Nufarm Limited PO Box 103 Laverton North Victoria 3028 Australia Dividends A final dividend of 11.0 cents per share will be paid on 8 November 2002 to shareholders registered on 25 October 2002. For Australian tax purposes, the dividend will be 100 per cent franked at the 30 per cent tax rate. Australian and New Zealand shareholders can elect to have dividends paid directly into a bank account anywhere in Australia. Forms for this purpose are available on request from the share registry. Tax file numbers Australian taxpayers who do not provide details of their tax file number will have dividends subjected to the top marginal personal tax rate plus Medicare levy. It may be in the interests of shareholders to ensure that tax file numbers have been supplied to the share registry. Forms are available from the share registry should you wish to notify us of your tax file number or tax exemption details. Change of address It is important for shareholders to notify the share registry in writing promptly of any change of address. As a security measure, the old address should also be quoted as well as your SRN. NUFARM 2002 ANNUAL REPORT 79 Nufarm Limited Directory Directors KM Hoggard (Chairman) Share registrar Australia DJ Rathbone (Managing Director) Computershare Investor Services Pty Ltd GDW Curlewis Dr WB Goodfellow GW McGregor AO Sir Dryden Spring Dr JW Stocker AO RFE Warburton Company Secretary R Heath Solicitors Arnold Bloch Leibler & Co 333 Collins Street GPO Box 2975EE Melbourne Victoria 3001 Australia Telephone: (61) 3 9611 5711 Capital notes registrar New Zealand Computershare Registry Services Limited Private Bag 92119 Auckland NZ 1020 Telephone: (64) 9 488 8777 Registered office 103–105 Pipe Road Melbourne Victoria 3000 Australia Laverton North Victoria 3026 Australia Sylvia Miller & Associates Locked Bag 50 Toorak Victoria 3142 Australia Auditors Ernst & Young The Tower Melbourne Central 360 Elizabeth Street Melbourne Victoria 3000 Australia Trustee for capital note holders New Zealand Permanent Trustees Ltd Telephone: (61) 3 9282 1000 Facsimile: (61) 3 9282 1001 New Zealand branch office 2 Sterling Avenue Manurewa Auckland NZ Telephone: (64) 9 268 2920 Facsimile: (64) 9 267 8444 Website: http://www.nufarm.com Nufarm Limited ACN 091 323 312 NUFARM 2002 ANNUAL REPORT 80 P r o d u c e d b y R e p o r t i n g R e p u t a t i o n D e s i g n e d b y l B u e B o a t D e s i g n