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NUFARM LIMITED 2004 ANNUAL REPORT
DIRECTORY
Directors
KM Hoggard – Chairman
DJ Rathbone – Managing Director
GDW Curlewis
Dr WB Goodfellow
GA Hounsell
DG McGauchie AO
GW McGregor AO
Dr JW Stocker AO
RFE Warburton
Company secretary
R Heath
Solicitors
Arnold Bloch Leibler & Co
333 Collins Street
Melbourne Victoria 3000 Australia
Sylvia Miller & Associates
Locked Bag 50
Toorak Victoria 3142 Australia
Auditors
Ernst & Young
120 Collins Street
Melbourne Victoria 3000 Australia
Trustee for capital note holders
New Zealand Permanent Trustees Ltd
Share registrar
Australia
Computershare Investor Services Pty Ltd
GPO Box 2975EE
Melbourne Victoria 3001 Australia
Telephone: 1300 85 05 05
Outside Australia: 61 3 9415 4000
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
Laverton North Victoria 3026 Australia
Telephone: 61 3 9282 1000
Facsimile: 61 3 9282 1001
NZ 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
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CONTENTS
MANAGING DIRECTOR’S REVIEW
HEALTH SAFETY AND ENVIRONMENT
CROP PROTECTION
INDUSTRIAL CHEMICALS
MANAGEMENT TEAM
BOARD OF DIRECTORS
CORPORATE GOVERNANCE
DIRECTORS’ REPORT
10
16
18
22
26
28
30
34
STATEMENT OF FINANCIAL PERFORMANCE
STATEMENT OF FINANCIAL POSITION
STATEMENT OF CASH FLOWS
NOTES TO FINANCIAL STATEMENTS
DIRECTORS’ DECLARATION
INDEPENDENT AUDIT REPORT
TREND STATEMENT
40
41
42
43
86
87
89
SHAREHOLDER AND STATUTORY INFORMATION 90
growth + focus + results = value
NUFARM LIMITED 2004 ANNUAL REPORT
FACTS IN BRIEF
Trading results
Operating profit after tax
Sales revenue
Total equity
Total assets
Ratios
Earnings per ordinary share (weighted
average, excluding non-recurring item)
Net debt to equity (gearing ratio)
Net tangible assets per ordinary share
Distribution to shareholders
12 months
ended
31.7.2004
$000
76,202
1,576,815
560,494
1,431,578
12 months
ended
31.7.2003
$000
64,269
1,458,811
462,321
1,357,814
47.1c
61.0%
$2.17
41.3¢
98.0%
$2.05
Annual dividend per ordinary share
23.0¢
20.0¢
People
Staff employed
2,613
2,566
FOCUS + GROWTH + RESULTS = VALUE
FOCUS++
Focus = crop protection + experienced
management + shareholder returns.
Focus on crop protection is a fundamental
part of Nufarm’s business strategy. With
an experienced, hands-on management
team and a proficient board of directors,
we are focused on strengthening brands,
expanding our product range and delivering
maximum returns for shareholders.
02
NUFARM LIMITED
ANNUAL REPORT 2004
FOCUS + GROWTH + RESULTS = VALUE
NUFARM LIMITED
ANNUAL REPORT 2004
05
FOCUS + GROWTH + RESULTS = VALUE
GROWTH++
Growth = geographic expansion +
product range + market share + profitability.
Growth is integral to Nufarm’s success.
In 50 years, we have grown from a small
regional operation to one of the world’s leading
crop protection companies. Nufarm is growing
its market share positions in key products and
continuing to expand into new global markets.
NUFARM LIMITED
ANNUAL REPORT 2004
05
FOCUS + GROWTH + RESULTS = VALUE
RESULTS==
Results = reliable outcomes + delivering
on guidance + quality earnings growth.
Results are what count. Nufarm customers expect
and receive reliable results from quality products,
with top technical support and flexible supply.
And getting it right with our customers means
consistently better results for our shareholders.
06
NUFARM LIMITED
ANNUAL REPORT 2004
FOCUS + GROWTH + RESULTS = VALUE
NUFARM LIMITED
ANNUAL REPORT 2004
09
FOCUS + GROWTH + RESULTS = VALUE
VALUE
Value = strategic relationships +
people + efficiencies + strong brands.
Value is found in solid investments.
Nufarm invests in strategic relationships
and alliances, people, product development
and manufacturing improvements. We create
value by improving business efficiencies that
drive stronger margins. At Nufarm we
understand the value of a strong brand.
NUFARM LIMITED
ANNUAL REPORT 2004
09
NUFARM
BUSINESS
SPLIT
ECONOMIC
VALUE
ADDED
KEY
EVENTS
Industrial
Chemicals
Crop
Protection
Crop
Protection
Industrial
Chemicals
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2004
1997
Fertilisers
Nufarm uses the economic value added (EVA) concept to measure the financial
performance 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.
The EVA in 2004 was $43.4 million, due largely to an improved working capital position.
����
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• OPERATING PROFIT INCREASES BY 18%
TO $76.2 MILLION
• CROP PROTECTION BUSINESS ACHIEVES
GROWTH IN MAJOR MARKETS
• BASF BRANDS ACQUISITION MAKES
STRONG CONTRIBUTION
• MAJOR INVESTMENT PROPOSED FOR BRAZIL
• PROPOSED DIVESTMENT OF NON-CORE BUSINESSES
MANAGING
DIRECTOR’S
REVIEW
10
NUFARM LIMITED
ANNUAL REPORT 2004
managing
director’s
review
focus + growth + results = value
The 2004 financial year saw a very solid
performance from the company’s core crop
protection business. The tax paid profit of
$76.2 million represents an increase of more
than 18 per cent on the previous year’s net
operating profit ($64.3m).
Total group sales were $1.58 billion, up by
eight per cent on the 2003 year.
Earnings per share were 47.1 cents, an
increase of 14 per cent on last year’s 41.3
cents. This was achieved on a higher capital
base following the issuing of some 11 million
new shares associated with a capital raising
in January – February 2004.
The company’s balance sheet at year-end
shows a further substantial reduction in
net debt to equity, down by some 38 per
cent to 61 per cent. This improvement in
the balance sheet builds on the significant
gains made in the previous year and
reflects strong cash flow ($202.7 million), an
improved working capital position (reduced
by $65m), and the repayment of $109
million in debt.
Other balance sheet ratios also
strengthened. Return on funds employed
increased from 13.9 per cent to 15.7 per
cent at the EBIT level, and interest cover
increased to 4.4 times from 3.4 times.
Business review
The crop protection business achieved a
17 per cent increase in sales to $1,441
million and represented 91 per cent of group
sales. This reflects a key strategic objective
to focus our efforts in the crop protection
sector and gradually exit those businesses
where Nufarm does not have core strengths
and competitive advantage.
Crop protection is an industry in which the
company has a 50-year history and is clearly
the area where Nufarm has the potential to
add most value in terms of future growth.
We have sought to strengthen our position
via a combination of geographic and
product portfolio expansion and made
excellent progress on both fronts in the
2004 financial year.
The core business also generated
stronger profit growth (up by 20 per cent),
compensating for a lower contribution from
Nufarm’s industrial chemicals businesses.
The company achieved stronger sales
and profit results in all of its major global
crop protection markets except France,
where the business is being realigned to
achieve additional higher margin branded
product sales. To date, Nufarm has been
predominantly a third party supplier of
technical product in France. This is a
major agricultural inputs market and we
will achieve better results going forward
by establishing a stronger branded
products business.
In 2004, Australasia accounted for 48 per
cent of total sales, the Americas 28 per cent
and Europe 24 per cent. Our larger global
presence helps protect the company from
the impact of adverse seasonal conditions
in any one market. In 2004, seasonal
conditions were average to good in the
various geographies where Nufarm
products are sold.
Higher sales of premium branded
products and enhanced operational
efficiencies resulted in stronger margins
in most markets.
In January 2004, we announced the
acquisition of the global phenoxy herbicides
business from the German company, BASF.
This acquisition saw Nufarm assume control
of a number of leading brands in various
markets, with particularly strong positions
in Europe.
Sales of these brands were approximately
$25 million and generated a net profit of
some $5 million. Margins achieved on these
sales were stronger than those assumed at
the time of the acquisition.
NUFARM LIMITED
ANNUAL REPORT 2004
11
Group sales
+
8.0%
7
7
5
1
8
5
4
1
9
2
4
1
3
2
3
1
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EBITDA*
+
4.0%
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Operating profit
+
18.0%
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Return on average
funds employed
15.7%
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Net debt to equity
Earnings per share
61.0%
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47.1¢
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12
12
NUFARM LIMITED
NUFARM LIMITED
ANNUAL REPORT 2004
ANNUAL REPORT 2004
managing
director’s
review
The considerable effort
we have maintained in
communicating
Nufarm’s performance
and prospects to the
broader investment
market undoubtedly
has helped the stronger
share price.
focus + growth + results = value
This acquisition also contributed to an
improvement in the company’s methyls
business, which grew in both volume and
price and incorporated a higher proportion
of branded product sales versus lower
margin third party technical sales. While
further initiatives are required to achieve
increased and sustainable profitability from
the methyls business, the 2004 result marks
a welcome turn-around in its performance.
The BASF acquisition was partly funded by
equity raising with strong support by both
institutional investors and Nufarm’s retail
shareholders that participated via a share
purchase plan. The institutional placement
was completed at a discount of less than
two per cent to the previous closing share
price, with a subsequent strengthening of
the share price that has been sustained
through the balance of the year.
The considerable effort we have maintained
in communicating Nufarm’s performance
and prospects to the broader investment
market undoubtedly has helped the stronger
share price.
During the period in review, Nufarm also
reached agreement to distribute the full
BASF crop protection product range in
Australia. These products have proven to
be a valuable addition to our portfolio and
have enhanced our position in higher value
sectors such as horticulture.
Nufarm’s global manufacturing facilities
achieved record throughput to meet higher
sales demand, leading to stronger labour
and overhead recoveries and lower unit
costs. Changes were made in a number of
facilities to make better use of assets and
improve efficiencies in synthesis, formulation
and packaging.
In summary, Nufarm continued to grow
both sales and brand share in key
geographies and strengthened its global
position and market shares in its major core
products, including phenoxy herbicides
and glyphosate. A very active product
registration program resulted in a number
of new product launches during the year,
and – despite a very competitive pricing
environment – the company was able to
strengthen margins across the business.
A more detailed overview on the business
performance is included on pages 18 to 23
in this report.
Non-operating items
The net impact of various restructuring
initiatives, sale of assets and other non-
operating items during the 2004 reporting
period was not material.
The major restructuring activity was
in France and included the closure and
sale of a manufacturing facility in Mulhouse;
the sale of the Paris based administration
building; and a reorganisation aimed at
reducing manufacturing overheads and
strengthening marketing and sales functions.
Directors have also taken the opportunity
to write-off carrying values associated with
a number of non-core or discontinued
research and development programs.
The after tax impact of all non-operating
items was a loss of $0.4 million.
Final dividend
Directors have declared a fully franked
dividend of 15 cents per share (last year
13 cents per share) resulting in a full year
dividend payment of 23 cents per share, an
increase of three cents (15 per cent) on the
previous year.
The increased dividend encompasses a
slightly higher payout ratio in respect of the
2004 results, but reflects the company’s
confidence that retained profits will be used
to help the continued profitable expansion of
the business.
The dividend will be paid on 12 November
2004 to the holders of all fully paid shares in
the company as at the close of business on
27 October 2004.
NUFARM LIMITED
NUFARM LIMITED
ANNUAL REPORT 2004
ANNUAL REPORT 2004
13
13
managing
director’s
review
focus + growth + results = value
Subsequent events
The company announced on 30 September
that it has signed a memorandum of
understanding to acquire 49.9 per cent
of the share capital in the Brazilian crop
protection company, Agripec.
This investment will provide Nufarm with
a strong future earnings stream tied to
ongoing growth in one of the world’s
largest markets for crop protection sales.
Agripec is a leading locally owned supplier
of agricultural chemicals in Brazil with
extensive production facilities and a strong
sales network.
The proposed equity interest in Agripec
involves a total consideration of USD120
million (approximately AUD170 million)
and will be debt funded. The transaction
is subject to final due diligence and board
approval and we expect it to be completed
by the end of November.
We have also signalled our intention to
divest the pharmaceutical intermediates
business (SEAC), and the Nufarm Specialty
Products subsidiary. Discussions are at an
advanced stage with prospective buyers of
these businesses and we hope to finalise
contracts by calendar year end.
SEAC, based in France, provides contract
synthesis and manufacturing services
to major pharmaceutical companies. It
generated sales of some $26 million in 2004
($31 million in 2003).
Nufarm Specialty Products is based in
South Carolina, USA and manufactures a
range of fine and performance chemicals for
other manufacturing companies. 2004 sales
were approximately $50 million.
These include the continued expansion
of the product portfolio; the ability to
successfully compete with other suppliers
in large overseas markets; and a focus on
driving further efficiencies and subsequent
margin improvement in various parts of
the business.
While the business will need to absorb
higher costs in raw materials in the 2005
reporting period, the company is confident
of achieving further growth in sales in both
existing markets and developing markets
such as South America.
There will be a continued focus on
generating improved shareholder returns
and on the efficient use of capital employed
in the business.
The company targets a three-year average
annual net profit growth of approximately
10 per cent and this looks very achievable
in the foreseeable future.
Based on an assumption that the Agripec
investment is completed and makes its
forecast contribution in the current financial
year – and factoring in the expected loss
of earnings from non-core businesses likely
to be divested within the period – 2005 net
profit growth is forecast to be at least
15 per cent.
Doug Rathbone
Managing Director
Melbourne, Australia
7 October 2004
Total proceeds from these divestments
is expected to be in the order of $80
million and will be used to partially offset
the borrowing costs associated with the
proposed Agripec investment.
Our people
On behalf of the board of directors, I would
like to take this opportunity to thank Nufarm
employees around the world for the very
significant contribution they have made to
the performance of the company during
financial year 2004.
The commitment, loyalty and capabilities
of our people – more than 60 per cent
of whom are Nufarm shareholders – are
a major strength of the business and an
essential factor in our success.
We have new management teams in
place in several of our global businesses
and I have every confidence that these
changes will help those businesses reach
their full potential.
Nufarm places the highest priority on
the health and safety of our people and
we must continue to push for further
improvements in this area across every part
of the business in all locations. Pleasingly,
our performance in achieving ambitious
safety targets has been very positive over
the past 12 months.
Board changes
Since our last annual report, two new
independent directors have been appointed
to the Nufarm board. Both Donald
McGauchie AO (appointed in December
2003) and Garry Hounsell (appointed in
October 2004) bring a great deal of relevant
experience and expertise to the company.
Looking ahead
Directors believe the 2004 results reflect
a number of factors, which place the
company in a strong position to achieve
ongoing profitable growth.
NUFARM LIMITED
NUFARM LIMITED
ANNUAL REPORT 2004
ANNUAL REPORT 2004
15
15
LTIFR1
MTIFR2
Severity3
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1 LTIFR or lost time injury frequency rate
is the number of lost time injuries per
million hours worked that need one or
more day’s absence from work.
2 MTIFR or medical treatment injury
rate is the number of lost time and
medical treatment injuries per million
hours worked.
3 Severity rate is the number of days
lost per thousand hours worked.
Sites with 100%
environmental
tests compliance
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16
NUFARM LIMITED
ANNUAL REPORT 2004
health
safety and
environment
Nufarm sites free
of lost time
injuries in 2003
Agrow*
Botlek, The Netherlands
Calgary, Canada
Chicago Heights, USA
Chicago office, USA
Crop Care, Queensland
Crop Care, Western Australia
Croplands, Australia
Croplands, New Zealand
Deutschland GmbH, Germany
Florigene, Australia*
Houston, USA
Indonesia
Kemerton chlor alkali, Australia
Kwinana chlor alkali, Australia
Lobeco, USA
Malaysia
Manurewa, New Zealand
New South Wales, Australia
Nufarm New Zealand
Nuturf, Australia
Queensland, Australia
South Australia
* sold in 2004
Nufarm safety awards 2003
Agrow*
Botlek, The Netherlands
Calgary, Canada
Chicago Heights, USA
Chicago office, USA
Crop Care, Western Australia
Croplands, Australia
Croplands, New Zealand
Gennevilliers, France
Indonesia
Laverton, Australia
Lobeco, USA
Manurewa, New Zealand
Malaysia
Nufarm New Zealand
Nuturf, Australia
Queensland, Australia
South Australia
* sold in 2004
focus + growth + results = value
On the broader front, Nufarm continues
to see strong growth in its various crop
protection businesses. This has resulted in
increased demand on production facilities
and on the logistics of how efficiently we
can move product to customers.
Against this background, it is pleasing
that the company met two out of three
of the tough ‘headline’ safety targets we
established in the HSE area during the 2003
calendar year and Nufarm was not fined for
any environmental breaches. We have set
ambitious continuous improvement hurdles
within Nufarm on the basis that no Nufarm
employee should be injured at work.
We must continue the push for further
improvements across every part of
the business and in all locations. It is
disappointing that our European operations
will not meet 2004 injury severity targets.
Every member of the board and the
management team is personally committed
to seeing consistent improvements in all our
safety performance measurements and to
working towards an injury free workplace.
We expect to see additional management
attention and employee commitment to this
area in Europe so that those operations
quickly come into line with the general
Nufarm performance.
It is a joint responsibility – one taken very
seriously from board level to factory floor.
We need to ensure that the success we
achieve on the financial performance front
is mirrored with ongoing progress towards
minimising injuries, safeguarding the general
health and wellbeing of all employees, and
conducting business in a manner which
poses no undue environmental impacts.
Note: Nufarm HSE results are calendar
year not financial year.
Nufarm operates in an industry in which
attention to detail in areas such as safety
and environmental management are
embedded in the way we do business.
Through a combination of various company
specific operational procedures, industry
self-regulation and a stringent government
regulatory environment – all supported by
regular training – Nufarm employees are
intrinsically aware of and directly involved
in the management of risks associated
with health, safety and the protection of
the environment.
The agricultural chemical industry is,
in relative terms, a safe industry.
Ultimately, however, the test of how well
we manage these critical areas comes down
to the vigilance and response of individual
employees. Despite the best procedures
and the highest levels of regulation,
circumstances will often result in having
to use initiative and good judgment when
faced with the unexpected.
In February this year, when a team of
Nufarm employees were visiting another
company’s production facility in Germany,
our Botlek production manager, Ton Herfst,
unexpectedly collapsed. Thanks to the
quick thinking of his colleagues and, in
particular, the resuscitation techniques
employed by Corina van Veen-Hermans,
Ton survived the ordeal and is progressing
well with his recovery.
Such initiative is to be commended, and
underlines the fact that individuals – not
organisations – ultimately determine how
well we manage and respond to the
challenges of maintaining a safe and
environmentally sound workplace.
A flash fire in the Mulhouse facility
in France (July 2003) could also
have been more serious but for the
immediate and professional response
of employees and local authorities.
This again underlines the value of
regular emergency response training.
NUFARM LIMITED
NUFARM LIMITED
ANNUAL REPORT 2004
ANNUAL REPORT 2004
17
17
2004 crop protection global sales
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Three factors drove the sales increase:
strong organic growth in markets such as
the United States, Germany and the UK;
new products resulting from the company’s
registration and acquisition activities;
and new distribution arrangements.
CROP
PROTECTION
18
18
NUFARM LIMITED
NUFARM LIMITED
ANNUAL REPORT 2004
ANNUAL REPORT 2004
crop
protection
focus + growth + results = value
Total crop protection sales increased by
17 per cent to $1,441 million, with profit
before tax, interest and head office charges
up by 20 per cent at $161.9 million.
Three factors drove the sales increase:
strong organic growth in markets such as
the United States, Germany and the UK;
new products resulting the company’s
registration and acquisition activities; and
new distribution arrangements.
Nufarm’s acquisition of the market
leading phenoxy herbicide brands
from BASF – acquired in January 2004
– contributed strongly to the performance
of the crop protection business in a
number of global markets.
Australia and New Zealand
Australia experienced mixed seasonal
conditions, with parts of the country
receiving good and timely rains while other
areas – particularly in NSW and Queensland
– remaining drought declared. Despite a
later than usual autumn rain break in the
southern regions, Australian winter crop
plantings, overall, were at similar high levels
to the year before.
The company’s Australian crop protection
sales increased by almost 15 per cent.
This included some $24 million in sales
associated with the BASF range of
products, which transferred to Nufarm
under a new distribution deal at the
beginning of March and enhanced Nufarm’s
market penetration in the higher value
horticulture segment.
The total Australian glyphosate market saw
double-digit growth in the reporting period,
with Nufarm maintaining its strong molecule
share, in particular in the ‘Roundup’
branded product range. An increased share
of sales under the premium ‘Roundup
PowerMax’ brand – launched the previous
year – contributed to stronger margins in the
glyphosate business.
Crop Care recorded its first full 12 months
of sales since being acquired from Orica
in the 2003 financial year (nine months of
sales). Sales under the Crop Care brand
were up by some 30 per cent year on
year. Nufarm’s Croplands subsidiary, which
supplies chemical application machinery,
also generated a stronger sales and profit
performance, assisted by an expanded
product range, improved brand awareness
and broader dealership coverage.
Agricultural chemical sales in
New Zealand were also strong during
the year, particularly in light of flooding
that had an adverse impact on crops
and pastures in several regions. An
unbudgeted order for a biological insecticide
used in a major urban pest eradication
program contributed to the better than
expected outcome in this business. The
New Zealand based health and sciences
division – which contract manufactures
products for major animal health companies
– reported lower sales and earnings due to
reduced livestock numbers in the wake of
the Australian drought.
Overall, Nufarm continued to consolidate its
leadership position in the Australian market,
with a number of new products helping
sales in niche sectors and providing a
platform for future growth.
Asia
Nufarm products achieved higher market
shares in Indonesia and Malaysia and
– together with additional sales to Japan
– helped the Asian business deliver a
stronger sales and profit performance.
Total Asian sales increased from $50 million
to $71 million or five per cent of total crop
protection revenues.
Restricted supply of glyphosate from
Chinese sources contributed to a
substantial increase in Nufarm sales of
glyphosate in Malaysia.
Americas
The US business performed very strongly,
with total branded sales up by more than 37
per cent in local currency (up 25 per cent in
Australian dollars) over the previous year.
Seasonal conditions were generally
favourable, although hot and dry weather in
California reduced demand for fungicides.
Sales of the company’s phenoxy herbicides
continued to grow, in part driven by
the increased use of these products in
genetically modified (GM) crops. There
was substantial growth in volume sales of
glyphosate, however margins on a per unit
basis were lower than the previous year due
to reduced prices.
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19
20
NUFARM LIMITED
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crop
protection
focus + growth + results = value
The Agripec acquisition
will secure Nufarm a
strong position in one
of the world’s largest
and fastest growing
markets for crop
protection products.
In the US turf and vegetative
management sector, Nufarm sales grew
by more than 50 per cent. An expanding
product portfolio was a key contributor to
the very strong performance, as Nufarm
increased its business with all existing
distribution customers.
Sales in Canada were flat year on year,
with seasonal conditions not conducive
to heavy demand for herbicides. But a
more profitable product mix and close
attention to cost controls resulted in an
improved profit performance.
The key South American markets saw
increased sales of Nufarm products.
The company launched branded 2,4-D
and glyphosate in the rapidly growing
Brazilian market and generated increased
sales in Argentina. To help capture future
opportunities in the region, Nufarm has
expanded its sales, registration and
business development resources there.
Europe
The European businesses saw an overall
increase in sales of 20 per cent. This was
driven largely by very strong results in
Germany, where the previous year’s sales
increased by almost 70 per cent to just over
$43 million, and in the UK.
The German business added a number
of new products to the portfolio, including
several fungicides, which have been
licensed from BASF, and the former
BASF phenoxy herbicide brands. Portfolio
expansion and strong seasonal pressures
were the key drivers of the excellent
performance of the UK branded business.
Spain also recorded very good results.
As expected, the reorganisation of the
French business and a decision to move
away from a predominantly third party sales
structure held sales below the previous year.
The reorganisation will improve efficiencies
in the business and support the company’s
objective to increase Nufarm’s direct
distribution of branded products, particularly
in the large cereals segment.
Agripec investment
On 30 September 2004, the company
announced its intention to acquire 49.9
per cent of Agripec Quimica e Farmaceutica
SA (Agripec), Brazil’s largest locally owned
crop protection company.
The acquisition will secure Nufarm a
strong position in one of the world’s
largest and fastest growing markets for
crop protection products.
The proposed US$120 million acquisition is
expected to be completed within calendar
year 2004 and will make a positive earnings
contribution in Nufarm’s 2005 financial year.
Agripec was established in 1961 and
employs 365 people. The company
operates a major production facility in
Fortaleza and has an extensive sales
network that services all of Brazil’s major
farming regions.
The company’s sales grew strongly in
recent years, reflecting the substantial
growth in agricultural production in Brazil
and the subsequent increase in crop
protection sales.
With total crop protection sales of USD3.1
billion in 2003, Brazil now ranks behind the
United States and Japan as the third largest
country market in the world. It is also one
of very few markets in which crop area is
expected to increase over the next 10 years.
The equity interest in Agripec will be a
key element of Nufarm’s expansion into
South America.
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21
21
Industrial chemicals
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The industrial chemicals division generated
revenues of just over $135 million (down
40 per cent on the previous year) during the
2004 financial reporting period, representing
nine per cent of total group revenues.
INDUSTRIAL
CHEMICALS
22
22
NUFARM LIMITED
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ANNUAL REPORT 2004
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industrial
chemicals
focus + growth + results = value
The West Australian
based chlor alkali plants
(80 per cent owned)
were again the major
profit contributors
in the industrial
chemicals division.
Sales in the SEAC pharmaceutical
intermediates subsidiary (France) were
again lower than in the previous period,
with a project budgeted for the last quarter
deferred until the new financial year. Costs
were also up last year.
Proposed divestments
On 30 September 2004, Nufarm
announced that it intends to divest the
pharmaceutical intermediates business
(SEAC) and the Nufarm Specialty Products
subsidiary, based in South Carolina, USA.
At the date of writing, negotiations relating
to the sale of both businesses are at an
advanced stage and the divestments
should be completed within the 2004
calendar year.
The industrial chemicals division
generated revenues of just over
$135 million (down 40 per cent on the
previous year) during the 2004 financial
reporting period, representing nine per
cent of total group revenues.
The lower sales reflected – in part –
the divestment of the Fernz specialty
chemicals business last year when it
generated $51 million in sales for the
three months before its divestment to
Orica Ltd in November 2003.
The West Australian based chlor
alkali plants (80 per cent owned)
were again the major profit contributors
in the industrial chemicals division.
Both facilities performed well during the
year, with stable caustic soda prices.
As the first 15-year contract for the
Kemerton facility expired, a new
long-term contract was negotiated.
The chlor alkali plants use synthesis
technology, which is also employed
in Nufarm’s phenoxy herbicide
manufacturing operations.
Sales in the remaining industrial
chemical businesses fell by just over
20 per cent. Pre-tax segment profit
declined to $15.3 million from $23.6
million in the previous year.
Nufarm Specialty Products (South
Carolina, USA) generated a lower profit
contribution – on slightly lower sales
– than in 2003. The loss of a major tolling
contract was offset partially by a number
of new, smaller contracts.
The French fine and performance
chemicals business had lower sales,
with increased competition restricting
prices and delivering an overall below
expectation contribution. A reorganisation
of the production facilities will improve
future operating margins.
NUFARM LIMITED
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ANNUAL REPORT 2004
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23
23
Nufarm
has an
experienced
hands-on
management
team
Doug Rathbone
Managing Director
and Chief Executive
John Allen
Group General
Manager Crop
Protection
Brian Benson
Group General
Manager Marketing
Brian Benson joined
Nufarm in 2000,
bringing with him
extensive experience
in international
marketing and
strategy. He has
degrees in agricultural
science and business
administration.
Brian is responsible
for Nufarm global
marketing and strategy
development ■
John Allen trained
as an agronomist
and then gained
a post-graduate
degree in marketing.
He joined Nufarm
in 1984 and has 30
years experience in
the industry. John
has held a variety
of positions in the
commercial side of
the business,
starting as a sales
representative.
He is now responsible
for the commercial
side of Nufarm’s crop
protection activities ■
MANAGEMENT
TEAM
26
NUFARM LIMITED
ANNUAL REPORT 2004
Rodney Heath
Group General
Manager Corporate
Services and
Company Secretary
Rod Heath is a
bachelor of laws and
joined the company in
1980, initially as legal
officer, later becoming
assistant company
secretary. In 1989,
Rod moved from New
Zealand to Australia
to become company
secretary of Nufarm
Australia Limited.
Upon migration of the
company to Australia
in 2000, Rod was
appointed company
secretary of Nufarm
Limited ■
Kevin Martin
Chief Financial Officer
Bob Ooms
Group General
Manager Chemicals
David Pullan
Group General
Manager Operations
Kevin is a chartered
accountant, with over
25 years experience
in the professional
and commercial
arena. After joining
Nufarm in 1994,
he was responsible
initially for the financial
control of the crop
protection business.
Since migration in
2000, Kevin has been
responsible for all
financial, treasury and
taxation matters for
the group ■
Bob Ooms joined the
company in 1999.
An industrial chemist
by training, Bob has
more than 40 years
experience in the
chemical industry
working in a variety
of positions, including
many years in senior
management. Bob
is responsible for the
group’s industrial
chemical businesses
and has executive
management
responsibility for global
supply chain issues ■
David Pullan joined
the company in
1985. A mechanical
engineer, David has
extensive experience
in chemical synthesis
and manufacturing,
having held a variety
of operational
and management
positions in the oil and
chemical industries.
He is responsible for
all of Nufarm’s global
manufacturing and
production sites ■
Robert Reis
Group General
Manager Corporate
Affairs
A former journalist,
political adviser and
lobbyist, Robert joined
Nufarm in 1991 and is
responsible for global
issues management,
investor relations,
media, government
and stakeholder
relations ■
NUFARM LIMITED
ANNUAL REPORT 2004
27
Kerry Hoggard
Chairman
Doug Rathbone
Managing Director
and Chief Executive
Doug Curlewis
Bruce Goodfellow
Garry Hounsell
Kerry Hoggard, 62,
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 ■
Doug Rathbone,
58, joined the
board in 1987.
His background is
chemical engineering
and commerce and
he has worked for
Nufarm Australia
Limited for over 30
years. Doug was
appointed managing
director of Nufarm
Australia in 1982 and
managing director
of Nufarm Limited in
October 1999 ■
GDW (Doug) Curlewis,
63, joined the board in
January 2000. He has
a master of business
administration and was
formerly managing
director of National
Consolidated Ltd. He
is also a director of
Pacifica Group Ltd,
National Foods Ltd,
GUD Holdings Ltd and
Remunerator Australia
Pty Ltd.In the past
three years Doug has
been a director of
Hamilton Island Ltd
(5 years) ■
Dr WB (Bruce)
Goodfellow, 52, 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 and financial
and commercial
business management
experience. He is a
director of Sulkem
Co Ltd, Refrigeration
Engineering Co Ltd,
SH Lock (NZ) Ltd and
Cambridge Clothing
Co. Ltd ■
GA (Garry) Hounsell,
49, was appointed to
the board in October
2004. He has a
bachelor of business
(accounting) and
is a former senior
partner with Ernst &
Young and a former
Australian country
managing partner
with Arthur Andersen.
He has extensive
experience across a
range of areas relating
to management and
corporate finance
and has worked with
some of Australia’s
leading companies in
consulting and audit
roles, with a particular
emphasis in the
manufacturing sector.
He is also a director of
Orica Limited ■
BOARD OF
DIRECTORS
28
NUFARM LIMITED
ANNUAL REPORT 2004
Donald McGauchie
Graeme McGregor
John Stocker
Dick Warburton
DG (Donald)
McGauchie AO, 54,
joined the board
in 2003. He has a
farming background
and has been
extensively involved
in agricultural trade,
policy and market
reform. He is currently
chairman of Telstra
Limited; a member
of the board of the
Reserve Bank of
Australia; deputy
chairman of Ridley
Corporation and a
director of National
Foods Limited
and James Hardie
Industries NV.
In the prior three
years Donald has
been a director of
Graincorp Limited
(8 years), Woolstock
Australia Limited (3
years), Rural Finance
Corporation (2 years)
and Sinclair Knight
Merz Management
Ltd (2 years) ■
GW (Graeme)
McGregor AO, 65,
joined the board in
January 2000. He is a
bachelor of economics
and was formerly an
executive director with
BHP Co Ltd. He is a
director of Foster’s
Group Ltd, Santos
Ltd, WMC Resources
Ltd and Goldman
Sachs JB Were
Managed Funds Ltd.
Graeme is also on the
board of Community
Foundation Network
Ltd and a past
national president of
CPA Australia and
is a member of the
Financial Reporting
Council ■
Dr JW (John) Stocker
AO, 59, 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 Ltd
and chairman of
Sigma Company
Ltd. He is a
director of Telstra
Corporation Ltd,
Cambridge Antibody
Technology Group
plc and Circadian
Technologies Ltd ■
RFE (Dick) Warburton,
63, joined the board
in 1993. He has a
business management
background and is
chairman of Caltex
Australia Ltd, HIH
Claims Support Ltd
and Tandou Ltd. He is
a director of Tabcorp
Holdings Ltd, Note
Printing Australia Ltd,
NM Rothschild &
Sons ( Australia) Ltd
and NM Rothschild
Australia Holding Pty
Ltd. Dick is chairman
of the Board of
Taxation and a past
national president of
the Australian Institute
of Company Directors.
In the prior three
years Dick has been
a director of Reserve
Bank of Australia (10
years), David Jones
Ltd (8 years), Aurion
Gold Ltd (1 year),
Southcorp Ltd (10
years) and Goldfields
Ltd (6 years) ■
NUFARM LIMITED
ANNUAL REPORT 2004
29
CORPORATE GOVERNANCE STATEMENT
Management and oversight of Nufarm
The board
The board is the governing body of the company and is responsible
for overseeing the company’s operations, ensuring that Nufarm’s
business is carried out in the best interests of all shareholders and
with proper regard to the interests of all other stakeholders. The
board charter has clearly defined policies detailing the board’s
individual and collective responsibilities and describing those
responsibilities delegated to senior management.
The board’s specific responsibility is to: ratify strategic plans for the
company and its business units; review the company’s accounts;
approve and review operating budgets; approve major capital
expenditure, acquisitions, divestments and corporate funding;
oversee risk management and internal compliance; and control
codes of conduct and legal compliance.
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.
The board is also responsible for the appointment and remuneration
of the managing director, ratifying the appointment of the chief
financial officer and the company secretary, reviewing remuneration
policy for senior executives and Nufarm’s general remuneration
policy framework.
Each year the board reviews the board composition and terms
of reference for the board, chairman, board committees and
managing director.
Board committees
At 31 July 2004, the board had three committees: audit;
remuneration; and nomination.
The board resolved to disband the scientific review committee in
December 2003.
The company chairman can only chair the nomination commitee.
All directors are entitled to attend any committee meeting. Details
of the attendances at meetings of board and committees are
detailed on page 35 of this report.
The manner in which the company is managed is consistent with
the recommendations of ASX Principle 1.
A summary of the board charter has been posted to the corporate
governance section of the company’s website.
Board of directors
The board
Composition
The board has a majority of independent non-executive directors
with an appropriate range of proficiencies, experience and skills to
ensure that its responsibilities are discharged in a manner consistent
with the best possible management of the company.
The company’s constitution specifies that the number of directors
may not be less than three, nor more than 11.
30
NUFARM LIMITED
ANNUAL REPORT 2004
At present there are eight 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.
Independence
Directors are expected to bring independent views and judgment to
the board. In determining the independence of directors, the board
applies the tests set out in ASX Principle 2 and, in considering
whether a director has a material relationship with the company
that may compromise independence, the board considers all
relevant circumstances. Having reviewed the ASX Principles and the
circumstances of individual directors, the board does not believe
it necessary to define any specific materiality limits, other than
defining a substantial shareholder as one who holds or is associated
directly with a shareholder controlling in excess of five per cent of
the company’s equity.
Tenure
The board is aware of commentary relating to the tenure of directors
and the relationship between length of service and independence.
Ultimately, the board considers that the independence of directors,
and justification for their positions in general, is determined by
the manner in which they discharge their responsibilities and their
contribution to the success of the company.
However, the board has determined that any director who has
served as a non-executive director on the board for a continuous
10 year period should seek only one further re-election and then
voluntarily retire before the date scheduled for any subsequent
re-election. Any variation to this policy would involve exceptional
circumstances and require the unanimous support of the full board.
Directors seeking to offer themselves for re-election at a company
annual general meeting (AGM) are subjected to a performance
review by the remaining directors before any such re-election.
At the date of this statement, the board determined that the status
of directors is characterised as follows:
Independent non-executive directors
GDW Curlewis
GA Hounsell
GW McGregor
DG McGauchie
Dr JW Stocker
RFE Warburton
Non-independent non-executive directors
KM Hoggard
Dr WB Goodfellow
Executive director
DJ Rathbone
Graeme McGregor has advised the board of his intention to retire
in July 2005. Garry Hounsell was appointed a director from
1 October 2004 and will replace Graeme McGregor, on his
retirement, as chairman of the audit committee.
Profiles of each board member are set out on page 28 of this report,
including their terms in office.
NUFARM LIMITED
ANNUAL REPORT 2004
31
CORPORATE GOVERNANCE STATEMENT CONTINUED
Access to independent advice
With the prior approval of the chairman or by resolution of the
board, any director can appoint legal, financial or other professional
consultants, at the expense of the company, to assist directors in
discharging their responsibilities. The board charter provides that
non-executive directors may meet without management present.
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.
Chairman of the board
The chairman is elected annually at the directors’ meeting
immediately following the company’s AGM.
Our board chairman is Kerry Hoggard. Both Kerry and the board
acknowledge that he is not an independent director in accordance
with the tests set out in ASX Principle 2 .
Notwithstanding, the board unanimously supports Kerry’s
continuation as chairman, believing this to be in the best interests of
all our stakeholders.
Kerry joined the company in 1957 as office junior and, through
a number of accounting, financial and commercial promotions,
became chief executive officer in 1987 when he also joined the
board. In the 1980s, Kerry played a major role in the restructure
of the New Zealand fertiliser industry and was responsible for
the acquisition of Nufarm Australia Ltd in 1983. In the 1990s, he
recommended selling the group’s fertiliser operations and migrating
Nufarm to Australia. On his retirement as chief executive officer in
1999, Kerry was appointed chairman of the board. He served as
an executive director from 1987 to 1999 and as a non-executive
director since 1999.
Kerry’s accounting, financial and commercial background – and
his intimate knowledge of the industry within which the company
operates – provides him with unique skills and experience, which
are invaluable to Nufarm. The board believes that Kerry has made
the transition from chief executive officer to chairman by applying
judgment independent of management in all decision-making and
discharges his role with a strong commitment to considerations of
governance and disclosure.
The board has stipulated that the same person will not exercise the
role of chairman and chief executive officer.
The nomination committee
The nomination committee was formed on 1 August 2003.
The three members are Kerry Hoggard (chairman),
Dick Warburton and Donald McGauchie. The committee has
a majority of independent directors.
The committee has a formal charter setting out its membership
requirements and responsibilities. These responsibilities include:
the assessment of competencies of board members; review
of board succession plans; evaluation of board performance;
and recommendations for appointment of new directors
when appropriate.
Save as to the independence of the chairman referred to above, the
structure of the board is consistent with ASX Principle 2.
A copy of the nomination committee charter and a summary of the
policy and procedure for appointment of directors has been posted
to the corporate governance section of the company’s website.
Ethical and responsible decision-making
Ethical standards
All directors and employees shall adopt standards of business
conduct that are ethical and comply with all legislation. Where
there are no legislative requirements, the company endeavours to
ensure appropriate standards by 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.
During the course of the 2003–2004 financial year, the company
established a formal code of conduct which has been posted to
the corporate governance section of the company’s website.
Purchase and sale of company shares
The company has longstanding policies about the purchase
and sale of company shares by directors and key executives.
The current share trading policy prohibits directors and key
executives from dealing in the company’s shares at any
time the directors or employees are aware of unpublished,
price-sensitive information.
Subject to this prohibition, directors and key executives may buy or
sell shares at any time except during the following periods:
• six weeks before the release of the company’s half year results
to the ASX, ending 24 hours after such release;
• six weeks before the release of the company’s year end results
to the ASX, ending 24 hours after such release; and
• two weeks before the company’s AGM, ending 24 hours after
the AGM.
Before any trading in company shares, directors and key executives
must complete an application form, which contains a declaration
confirming they have no relevant knowledge pertaining to the
company that is not available to the public. On receipt of the
application form the company secretary will discuss the application
with the chairman to obtain approval to trade. No trading can be
undertaken before the application receives the written approval of
the company secretary.
A copy of the trading policy has been posted to the corporate
governance section of the company’s website.
The company’s code of conduct and share trading policy is
consistent with ASX Principle 3.
30
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ANNUAL REPORT 2004
NUFARM LIMITED
ANNUAL REPORT 2004
31
CORPORATE GOVERNANCE STATEMENT CONTINUED
Safeguard integrity in financial reporting
Financial reports
The board procedures to safeguard the integrity of the company’s
financial reporting require the managing director and the chief
financial officer to state, in writing to the board, that:
• the company’s financial reports present a true and fair view,
in all material respects, of the company’s financial condition
and operational results and are in accordance with relevant
accounting standards; and
Disclosure
The company has a detailed written policy and procedure to ensure
compliance with both the ASX Listing Rules and Corporations Act.
This policy is reviewed regularly with the company’s legal advisers,
in line with contemporary best practice.
The company secretary prepares a schedule of compliance and
disclosure matters for directors to consider at each board meeting.
A copy of the disclosure policy has been posted to the corporate
governance section of the company’s website.
• the statement is founded on a sound system of risk management
The company’s disclosure policy is consistent with ASX Principle 5.
and internal compliance and control, which are operating
efficiently and effectively.
Audit committee
The board audit committee has three members: Graeme McGregor
(chairman); Doug Curlewis; and Kerry Hoggard. The committee has
a majority of independent non-executive directors and is chaired by
an independent director.
Graeme McGregor is a bachelor of economics and former chief
financial officer and executive director of BHP Co Ltd. He is a past
national president of CPA Australia and is a member of the financial
reporting council. In that capacity, Graeme has been closely
associated with best practice recommendations relating to the
provision of audit services, including CLERP 9.
Kerry Hoggard has extensive accounting and financial experience,
referred to earlier in this report, Doug Curlewis is a bachelor of arts
and MBA and former managing director of National Consolidated
Limited, chief executive (Europe) of ICI Paints and managing director
of Dulux Australia. Doug is currently a director of National Foods
Limited, GUD Holdings Limited and Pacifica Group Ltd. Doug is
chairman of the Pacifica audit committee.
The committee reviews the audit committee charter annually.
The charter sets out membership requirements for the committee,
its responsibilities and provides that the committee shall annually
assess the external auditor’s actual or perceived independence
by reviewing the services provided by the auditor. The charter
identifies those services that the external auditor may provide,
those that may not be supplied and those that require specific
audit committee approval.
The committee has further recommended that any former lead
engagement partner of the firm involved in the company’s external
audit should not be invited to fill a vacancy on the board and the
lead engagement audit partners will be required to rotate off the
audit after a maximum five years involvement and it will be at
least three years before that partner can again be involved in the
company’s audit.
A copy of the audit committee charter, which includes procedures
for the selection and appointment of the external auditors,
has been posted to the corporate governance section of the
company’s website.
The financial reporting system of the company is consistent with
ASX Principle 4.
32
NUFARM LIMITED
ANNUAL REPORT 2004
Rights of shareholders
Communication
The company is mindful of the importance of maintaining
effective communications with shareholders and, during the year,
the company established a formal communications policy, which
has been posted to the corporate governance section of the
company’s website.
External auditor
The board requires the external auditor to attend the company’s
AGM in order that shareholders may question the auditor about
the conduct of the audit and the preparation and content of the
auditor’s report.
The company’s policy in relation to the rights of shareholders is
consistent with ASX Principle 6.
Identifying and managing risk
The board is committed to identifying, assessing, monitoring, and
managing its major business risks at a level appropriate to its global
business activities. To support and maintain this objective, the
audit committee has established detailed policies on risk oversight
and management by approving a global risk management charter
that specifies the responsibilities of the general manager, global
risk management (which includes responsibility for the internal
audit function). This charter also provides comprehensive global
authority to conduct internal audits, risk reviews, and systems-
based analyses of the internal controls in major business systems
operating within all significant company entities worldwide.
The general manager, global risk management reports directly to
the managing director and provides a written report of his activities
at each meeting of the audit committee. In doing so he will have
direct and continual access to the chairman of the audit committee
and its members.
In addition, the company has implemented a range of global
systems, programs, and policies with the objective of risk
identification and management, which include the following:
• a comprehensive occupational health, safety and environmental
(HSE) program. The company publishes an annual HSE report
on its performance across a range of environment, health and
safety parameters, including specific targets for continuous
improvement;
• a comprehensive annual insurance program including external
risk management surveys;
NUFARM LIMITED
ANNUAL REPORT 2004
33
CORPORATE GOVERNANCE STATEMENT CONTINUED
• a board approved treasury policy to manage foreign
exchange risks;
• guidelines and limits for approval of capital expenditure and
investments;
• annual budgeting and monthly reporting systems for all
business units which monitor performance against budget
targets;
• a planning process involving the preparation of five year strategic
plans;
• appropriate due diligence systems for acquisitions and
divestments; and
• risk self-assessment surveys of all major business units
worldwide.
Integrity of financial statements
The procedures to safeguard the integrity of financial statements are
set out on page 32 of this statement.
A summary of the company’s risk management policy and internal
compliance system has been posted to the corporate governance
section of the company’s website.
The management of risk is consistent with ASX Principle 7
Board and management performance
The board
The performance of the board, individual directors and key
executives is reviewed annually.
The board has adopted a process to facilitate its performance
assessment and an evaluation of the performance of the board
was completed in the 2003–2004 year. This process included the
completion by directors of a detailed questionnaire, an individual
interview of each director by an external consultant and discussion
by the board.
The board ensures that new directors are introduced to the
company appropriately and acquainted with relevant industry
knowledge, including visits to specific company operations and
briefings by key executives.
Remuneration of executives
The board’s policy for determining the nature and amount of the
remuneration of executives is set out in the remuneration report
section of the directors’ report on pages 36 to 38.
Under the company’s executive and employee share plans the
number of shares provided to employees and executives in the
preceding five years will not exceed five per cent of the company’s
issued capital.
The company has an employment contract with the managing
director, which formalises the terms and conditions of appointment,
including termination payments.
Remuneration committee
The three members of the remuneration committee are Dick
Warburton (chairman), Donald McGauchie and Kerry Hoggard.
The committee has a majority of independent directors.
The committee’s formal charter includes responsibility to review and
recommend to the board the remuneration packages and policies
applicable to key executives and directors.
The committee reports to the board on all matters and the board
makes all decisions, except when power to act is delegated
expressly to the committee.
A copy of the remuneration committee charter has been posted to
the company’s website.
Remuneration of non-executive directors
The board’s policy with regard to non-executive director
remuneration is set out in the remuneration report section of the
directors’ report on pages 36 to 38.
The company’s remuneration policies are consistent with ASX
Principle 9.
Interests of stakeholders
Code of conduct
The company is politically impartial except when, because of
a perceived major impact on the company, its business or any
of its stakeholders, it is deemed to be obliged to make political
statements.
All directors may obtain independent professional advice (refer page
31) and have direct access to the company secretary.
Nufarm operates in accordance with the social and cultural beliefs
appropriate in each country of operation.
The manner in which the performance of the board is assessed is
consistent with ASX Principle 8.
A summary of the process for performance evaluation has
been posted to the corporate governance section of the
company’s website.
During the 2003–2004 financial year, Nufarm established a
formal code of conduct, which has been posted to the corporate
governance section of the company’s website.
The manner in which the company recognises the interests of
shareholders is consistent with ASX Principle 10.
Remuneration
The board has procedures to ensure that the level and structure of
remuneration for executives and directors is appropriate.
32
NUFARM LIMITED
ANNUAL REPORT 2004
NUFARM LIMITED
ANNUAL REPORT 2004
33
DIRECTORS’ REPORT
The board of directors of Nufarm Limited (Nufarm) submits its report
for the period ended 31 July 2004.
Directors’ interests
Relevant interests of the directors in the shares or capital notes
of the company and related bodies corporate are:
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
DG McGauchie AO (appointed 19 December 2003)
GW McGregor AO
Sir Dryden Spring (retired 11 December 2003)
Dr JW Stocker AO
RFE Warburton
Unless otherwise indicated, all directors held their position as
a director throughout the entire period and up to the date of
this report.
The company secretary is R Heath.
Details of the qualifications and experience of the directors and
company secretary are set out on pages 26 to 29.
Nufarm Ltd
Ordinary shares
Fernz Corporation
(NZ) Ltd
Capital notes
KM Hoggard1,4
DJ Rathbone1,2
GDW Curlewis
Dr WB Goodfellow4,5
DG McGauchie
GW McGregor4
Sir Dryden Spring3
Dr JW Stocker4
RFE Warburton4
5,869,837
30,696,167
24,787
1,464,528
3,817
32,418
8,463
26,546
61,513
2,270,000
25,000
1 KM Hoggard and DJ Rathbone have a non-beneficial interest in 286,603 shares as
trustees of the Nufarm Limited staff share plan.
2 The shareholding of DJ Rathbone includes his relevant interests in Falls Creek
No 2 Pty Ltd. Refer substantial shareholder information on page 91 of this report.
3 Witham Trust, an entity controlled by an associate of Sir Dryden Spring, is the holder
of 20,000 Capital Notes.
4 The shareholdings of KM Hoggard, Dr WB Goodfellow, GW McGregor,
Dr JW Stocker and RFE Warburton include shares issued under the company’s
non-executive director share plan and held by ASX Perpetual Registrars Limited as
trustee of the plan.
5 The shareholding of Dr WB Goodfellow includes his relevant interest in:
(i) St Kentigern Trust Board (429,855 shares and 2,270,000 capital notes) –
Dr Goodfellow is chairman of the trust board;
(ii) three trusts of which he is a non beneficial trustee (807,039 shares);
(iii) Waikato Investment Company Limited (113,616 shares).
34
NUFARM LIMITED
ANNUAL REPORT 2004
NUFARM LIMITED
ANNUAL REPORT 2004
35
DIRECTORS’ REPORT CONTINUED
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 below.
Directors’ meetings
Director
Board
Audit
KM Hoggard
DJ Rathbone
GDW Curlewis
Dr WB Goodfellow2
DG McGauchie
GW McGregor
Sir Dryden Spring
Dr JW Stocker1
RFE Warburton
A
8
8
8
8
5
8
2
8
8
B
8
8
8
8
3
8
2
7
8
A
4
2
4
2
B
4
2
1
4
2
Committees
Remuneration
B
A
2
2
2
2
2
2
Nomination
A
2
2
2
B
2
2
2
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.
1 Dr J Stocker tendered an apology for the meeting of directors held on 12 May 2004. On 12 May 2004 Dr Stocker attended a board meeting of a group subsidiary
company in France.
2 All non-executive directors are entitled to attend any meetings of committees of directors. Where a director has attended a committee meeting, the attendance is noted in the
relevant column in the table of directors’ meetings.
Other meetings of committees of directors are convened as required to discuss specific issues or projects.
The details of the functions and membership of the committees of the board are presented in the statement of corporate governance on
pages 30 to 33.
Results
The net profit attributable to members of the consolidated entity
for the 12 months to 31 July 2004 is $76.2 million. The comparable
figure for the 12 months to 31 July 2003 was $77.1 million, which
included a one-off taxation benefit of $12.8 million resulting from
the company adopting the Australian consolidation taxation regime.
Operating profit for the 12 months to 31 July 2003 was
$64.3 million.
Principal activities and changes
Nufarm manufactures and supplies a range of products used by
farmers to protect crops from damage caused by weeds, pests
and disease.
The company has production and marketing operations throughout
the world and sells products in more than 100 countries.
Nufarm’s crop protection products enjoy a reputation for high quality
and reliability and are supported by strong brands, a commitment to
innovation and a focus on close customer relationships.
Nufarm also produces a range of other chemicals used in various
manufacturing industries, including construction, explosives and
fertilisers, as well as pharmaceuticals.
Nufarm employs 2,613 people at its various locations in Australasia,
Africa, the Americas and Europe.
The company is listed on the Australian Stock Exchange (symbol
NUF). Its head office is located at Laverton in Melbourne.
34
NUFARM LIMITED
ANNUAL REPORT 2004
NUFARM LIMITED
ANNUAL REPORT 2004
35
DIRECTORS’ REPORT CONTINUED
Dividends
The following dividends have been paid, declared or recommended
since the end of the preceding financial year.
The final dividend for 2002–2003 of
13 cents paid 7 November 2003
The interim dividend for 2003–2004 of
8 cents paid 28 April 2004
The final dividend for 2003–2004 of
15 cents as declared and recommended
by the directors is payable 12 November 2004
$000
$20,470
$13,186
$25,160
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
and the business review on pages 10 to 23.
State of affairs
The state of the company’s affairs are set out in the managing
director’s review and the business review on pages 10 to 23.
Events after end of financial year
On 29 September 2004, Nufarm signed a memorandum of
understanding, subject to due diligence and board approval,
to acquire 49.9 per cent of Agripec, a Brazilian crop protection
company. The consideration is expected to be USD120 million.
The company is in advanced discussions relating to the sale of
its pharmaceutical intermediate business (SEAC) and its Nufarm
Specialty Products subsidiary. The expected proceeds will be in
excess of their carrying values.
Garry Hounsell was appointed a director from 1 October 2004
Future developments and results
The directors believe that likely developments in the company’s
operations and the expected results of those operations are
contained in the managing director’s review and the business
review on pages 10 to 23.
Environmental performance
Details of Nufarm’s performance in relation to environmental
regulations are set out on pages 16 to 18.
The company publishes an annual HSE report. This report can be
viewed on the company’s website or a copy made available upon
request to the company secretary.
Remuneration report
Group executive
The Nufarm remuneration policy has been developed to ensure
the company attracts and retains the calibre of people required to
successfully manage a large diversified international company.
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.
The company has adopted a remuneration policy based on total
target reward (TTR), which comprises two components:
• fixed reward (TEC) – cash and benefits that reflect local market
conditions and individual contribution. The reward level is set
relative to pertinent and prevailing executive employment market
conditions for high calibre talent in the geographies where Nufarm
operates. The company’s policy position for TEC for Australian
executives is at the 50th percentile of the Mercer Survey of
Australian Major Corporates,
• an incentive program – the first half of the incentive program
reflects achievement of specific business objectives over six
monthly periods and is paid in cash. The second half is linked to
meeting predetermined financial objectives for the full year and is
delivered in a mixture of shares and options. The exception is the
current managing director who is paid in cash because of the very
substantial shareholding he currently controls in the company. For
the remaining executives this payment is made in equity which
ensures a longer term focus to achieve benefit consistent with
increases in sustained shareholder value.
Each year, the board establishes performance hurdles for the
incentive program. These hurdles reflect targets for specific
objectives and increasing company value, consistent with the
company’s business and investment strategies.
36
NUFARM LIMITED
ANNUAL REPORT 2004
DIRECTORS’ REPORT CONTINUED
Non-executive directors
The board’s policy with regard to non-executive director
remuneration is to position board remuneration at the market
median with comparable sized listed entities.
The board determines the fees payable to non-executive directors
within the aggregate amount approved from time to time by
shareholders. At the company’s 2003 annual general meeting,
shareholders approved an aggregate of $900,000.
Set out below are details of the annual fees payable from
1 November 2004.
Chairman
Director board fee
Chairman audit committee
Chairman other board committees1,2
Member audit committee
Member other board committees3
$ 240,000
$ 95,000
$ 15,000
$ 10,000
$ 5,000
$ 2,500
1 The chairman, KM Hoggard, receives no fees for either his role as chairman
of the nomination committee and/or membership of other committees.
2 Dr J Stocker receives a fee of $10,000 for his role in providing scientific,
research and development analysis for a group subsidiary company in France.
3 The members of the remuneration committee and nomination committee are
common. Only one fee is paid for membership of these two committees.
The board has created a non-executive director share plan whereby
a director can elect to commit a proportion of director fees to
acquire company shares. The number of shares available in the plan
will be calculated quarterly, using the weighted average of the price
at which shares were traded on the ASX in the five days up to and
including the day when shares are allocated to a director. Shares in
the plan will not vest until the earlier of three years or retirement.
On 31 October 2003, directors resolved unanimously to discontinue
the directors retirement benefit plan and benefits accrued under
the plan were calculated and, at the option of the relevant director,
have been converted into shares or have been paid to the director’s
superannuation fund.
If the financial objectives are achieved and the incentives are paid
in full, the TTR will meet the company’s TTR policy position of the
upper quartile of the Mercer Survey of Australian Major Corporates.
In the case of the managing director, the incentives may represent
50 per cent of his total remuneration. For other group executives, it
may represent 40 per cent of total remuneration.
The performance hurdle for the incentive program is based on
return on funds employed (ROFE) in the business. Return is
calculated on the group’s earnings before interest and taxation
and adjusted for any non-operating items. Funds employed are
represented by shareholders funds plus total interest bearing debt.
At the end of each financial year the board:
• assesses company performance against the performance
condition to determine the percentage of any offer to be made
under the incentive program; and
• reviews target ROFE for the incentive program for the following
financial period.
The remuneration committee and the board review the choice
of the performance condition on an annual basis. The company
believes ROFE is an appropriate performance condition for the
following reasons.
For many years the board has measured the company’s
performance using ‘economic value added’ methodology. It is
believed that if the company can consistently add economic value
(a satisfactory margin above the cost of capital), then this will be
recognised in share value.
This measurement ensures management is focused on the efficient
use of capital and the measure remains effective regardless of the
mix of equity and debt which may change from time to time.
Since migration of the company to Australia in January 2000, the
ROFE hurdles have been increased progressively for the first half
of the incentive program from 12 per cent to 13.25 per cent, and
for the second half from 13.5 per cent to 14.25 per cent. Over that
period the payment of total incentives has been: 2001 – 100 per
cent; 2002 – 77.4 per cent; 2003 – 100 per cent; 2004 – 100 per
cent. The ROFE hurdles for 2005 have been set at 14 per cent
and 14.75 per cent respectivley. Shareholder returns comprising
dividend and share value have been as follows.
Year
Dividend rate Share price at 31 July
2001
2002
2003
2004
18
18
20
23
$2.85
$3.35
$4.39
$6.09
NUFARM LIMITED
ANNUAL REPORT 2004
37
DIRECTORS’ REPORT CONTINUED
Details of the nature and amount of each element of the
emoluments of each director of Nufarm Limited 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
KM Hoggard
GDW Curlewis
Dr WB Goodfellow
DG McGauchie
GW McGregor
Sir Dryden Spring
Dr JW Stocker
RFE Warburton
Fees
$
Super-
annuation
$
155,200
63,200
58,825
45,763
73,200
25,177
68,200
68,200
16,560
17,460
6,266
4,119
7,560
2,266
7,110
7,110
Equity
Retirement
Total
benefit plan1
$
$
28,8002
10,8002
10,8002
10,8002
10,8002
155,550
50,360
150,588
48,190
149,7923
68,500
150,500
$
356,110
131,020
226,479
49,882
139,750
177,235
154,610
236,610
1 During the financial period directors resolved to discontinue the retirement benefit plan. Accrued benefits under the retirement benefit plan were calculated and
paid to directors, as set out below.
KM Hoggard
GDW Curlewis
WB Goodfellow
GW McGregor
Dr JW Stocker
RFE Warburton
Base fee
Superannuation
Equity
Total
73109
50,360
82,441
150,588
48,190
68,500
150,500
155,550
50,360
150,588
48,190
68,500
150,500
2 During the course of the financial period the company created a non-executive director share plan, which enables directors to elect to sacrifice 20 per cent of base director
fees to accquire company shares. The value of such shares is disclosed as equity.
3 Upon his retirement as a director, Sir Dryden Spring was paid a retirement benefit of $149,792. This was the amount accrued under the retirement benefit plan,
which was discontinued on 31 October 2003.
Executives of Nufarm Limited and the consolidated entity
Name
Managing Director
DJ Rathbone
Other executives
DA Pullan
RF Ooms
KP Martin
JA Allen
B Benson
Salary Cash bonus
Non-
Super-
Equity
Total
$
$
monetary
benefit1
$
annuation
$
$
$
832,769
953,140
69,995
12,075
1,867,979
351,219
349,717
346,140
318,394
311,865
159,000
149,000
146,468
92,832
119,999
46,331
11,716
25,327
21,758
15,529
65,373
63,574
38,318
102,000
38,676
151,200
141,736
141,736
150,000
109,989
773,123
715,743
697,989
684,984
596,058
1 Benefits include, where applicable, motor vehicle costs, allowances and FBT.
38
NUFARM LIMITED
ANNUAL REPORT 2004
DIRECTORS’ REPORT CONTINUED
Options and shares under option
(1) The company’s executive share plan (ESP) provides for annual
offers of ordinary shares, or a mix of both ordinary shares and
options to senior executives.
In the 2004 financial year, no options were granted to executives
under the ESP.
(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’s 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. No employee chose to exercise his/her
option under the first offer and the options granted under that
offer have now expired.
At the date of this report unissued ordinary shares under option are:
Number
of options price $
Exercise Earliest exercise
date
Expiry date
Indemnities and insurance 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 Investment 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.
77,5141
871,2492
566,4432
3.08
2.70
2.70
1 March 2005
1 March 2005
26 October 2011
26 October 2004
13 December 2004 13 December 2011
KM Hoggard
Director
1 Options issued to eligible staff under the second offer under the United Kingdom
savings-related share option scheme (1997). No further issues will be made under
this scheme.
2 Options issued under the ESP, using the ‘black scholes’ methodology. Each option
had a value of 0.447¢ per option.
DJ Rathbone
Director
Melbourne
29 September 2004
NUFARM LIMITED
ANNUAL REPORT 2004
39
STATEMENT OF FINANCIAL PERFORMANCE
12 MONTHS ENDED 31 JULY 2004
Consolidated
Parent
Note
31.7.2004
$000
31.7.2003
$000
31.7.2004
$000
31.7.2003
$000
Revenue from sale of goods
Cost of sales
Gross profit
Interest income
Other revenue from ordinary activities
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)/credit relating to ordinary activities
1,576,815
(890,003)
686,812
1,265
37,828
725,905
(64,807)
(33,603)
(521,013)
(619,423)
106,482
3,415
109,897
(31,621)
2
2
2
2
2
9
6(a)
1,458,811
(822,614)
636,197
1,220
21,034
658,451
(67,264)
(39,545)
(461,787)
(568,596)
89,855
3,797
93,652
(14,733)
Net profit
Net profit attributable to outside equity interest
78,276
(2,074)
78,919
(1,826)
70,085
(35,173)
34,912
20,645
40,871
96,428
(2,444)
(21,451)
(22,696)
(46,591)
49,837
–
49,837
(3,691)
46,146
–
95,852
(54,972)
40,880
15,323
41,424
97,627
(2,454)
(15,777)
(31,601)
(49,832)
47,795
–
47,795
7,592
55,387
–
Net profit attributable to members of the parent entity
76,202
77,093
46,146
55,387
Net exchange differences arising on translation of
opening net investment in foreign operations, net of related hedges
Share issue costs
Capital profit reserve decrease
Decrease in retained profits on adoption of revised
accounting standard AASB 1028: Employee benefits
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)
(6,749)
(450)
(6)
3,460
–
–
–
(450)
–
–
(616)
–
(7,205)
2,844
(450)
–
–
–
(6)
(6)
68,997
79,937
45,696
55,381
Earnings per share
Statutory earnings per share
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Operating earnings per share
after excluding the non–recurring item described in note 5.
Basic operating earnings per share (cents per share)
Diluted operating earnings per share (cents per share)
3
3
47.1
46.7
47.1
46.7
49.5
49.0
41.3
40.9
The accompanying notes form an integral part of these financial statements
40
NUFARM LIMITED
ANNUAL REPORT 2004
NUFARM LIMITED
ANNUAL REPORT 2004
41
STATEMENT OF FINANCIAL POSITION
AT 31 JULY 2004
Current assets
Cash assets
Receivables
Inventories
Tax assets
Prepayments
Total current assets
Non–current assets
Receivables
Equity accounted investments
Other financial assets
Property, plant and equipment
Deferred tax assets
Intangible 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
31.7.2004
$000
31.7.2003
$000
31.7.2004
$000
31.7.2003
$000
56,826
232,518
432,139
6,858
7,951
736,292
28,507
311,607
356,943
6,625
7,774
711,456
38,535
24,953
3,713
376,632
34,302
196,021
21,130
695,286
1,431,578
37,775
18,281
6,172
382,266
36,632
144,551
20,681
646,358
1,357,814
397,939
112,411
15,401
25,111
550,862
287,180
22,673
10,369
320,222
871,084
560,494
210,530
17,854
324,401
552,785
7,709
560,494
336,460
126,850
25,711
17,904
506,925
353,670
25,347
9,551
388,568
895,493
462,321
149,219
25,671
280,793
455,683
6,638
462,321
7
8
6(b)
7
9
10
11
6(b)
12
13
14
15
16
15
6(c)
16
19
20
21
22
23
654
197,963
15,610
1,583
388
216,198
34,180
6,341
421,467
19,310
21,374
–
–
502,672
718,870
71,045
19,645
–
544
91,234
212,969
2,018
50
215,037
306,271
412,599
210,530
40,074
161,995
412,599
–
412,599
507
129,837
15,455
–
325
146,124
27,792
–
421,961
20,166
28,106
–
–
498,025
644,149
63,015
15,963
10,459
622
90,059
210,802
4,432
58
215,292
305,351
338,798
149,219
40,074
149,505
338,798
–
338,798
The accompanying notes form an integral part of these financial statements
40
NUFARM LIMITED
ANNUAL REPORT 2004
NUFARM LIMITED
ANNUAL REPORT 2004
41
STATEMENT OF CASH FLOWS
12 MONTHS ENDED 31 JULY 2004
Inflows/ (outflows)
Cash flows from operating activities
Receipts from customers
Dividends received
Interest received
Payments to suppliers and employees
Borrowing costs paid
Income tax paid
Net operating cash flows
Cash flows from investing activities
Proceeds from sale of non-current assets
Proceeds from sale of businesses
Payments for plant and equipment
Payments for investments
Payments for major project development expenditure,
trademarks and technology rights
Proceeds from foreign currency investment hedges (net)
Purchase of businesses, net of cash acquired
Net investing cash flows
Cash flows from financing activities
Proceeds from issue of shares
Proceeds from call on partly paid shares
Proceeds from borrowings
Advances to controlled entities (net)
Repayment of short term debt (net)
Repayment of borrowings
Repayment of finance lease principal
Proceeds from foreign currency loans hedges (net)
Dividends paid
Net financing cash flows
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
Consolidated
Parent
Note
31.7.2004
$000
31.7.2003
$000
31.7.2004
$000
31.7.2003
$000
1,747,974
3,099
1,182
(1,471,392)
(33,603)
(44,586)
202,674
1,565,431
2,979
6,064
(1,287,718)
(44,871)
(21,777)
220,108
18,399
6,692
(46,693)
(6,399)
(4,617)
4,894
(86,309)
(114,033)
57,759
93
–
–
(41,089)
(68,626)
(1,080)
(34,457)
(87,400)
1,241
(15,880)
(833)
(15,472)
1,153
57,644
(49,305)
(202)
(636)
44,000
(108,812)
(56,158)
–
463
10,428
–
(98,524)
(23,103)
(1,233)
342
(28,658)
(140,285)
23,665
(40,228)
683
(15,880)
24(b)
24(c)
24(d)
24(a)
87,956
34,699
16,271
(68,807)
(15,834)
(5,509)
48,776
154
724
(1,626)
(6,341)
–
–
–
(7,089)
57,759
93
–
(69,257)
–
–
–
–
(33,656)
(45,061)
(3,374)
(15,456)
(161)
(18,991)
122,817
29,383
14,626
(99,067)
(10,452)
(2,385)
54,922
62
22,269
(4,056)
–
–
–
(4,952)
13,323
–
463
–
(52,187)
–
–
–
–
(27,976)
(79,700)
(11,455)
(3,830)
(171)
(15,456)
The accompanying notes form an integral part of these financial statements
42
NUFARM LIMITED
ANNUAL REPORT 2004
NUFARM LIMITED
ANNUAL REPORT 2004
43
NOTES
NOTES TO THE FINANCIAL STATEMENTS
1 Statements of significant accounting policies
payment. Dividend income is recognised when the entity acquires
control of the right to receive the dividend payment.
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 an historical cost basis.
Changes in accounting policies
The accounting policies adopted are consistent with those of the
previous year.
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 the
exchange difference is included in the measurement of the
purchase or sale.
The practice of hedging net investments in self-sustaining foreign
operations was discontinued in June 2004.
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. Interest income is recognised
when the entity acquires control of the right to receive the interest
Taxes
• Income tax
Tax-effect accounting is applied using the liability method
whereby income tax is regarded as an expense and is calculated
on the accounting profit after allowing for permanent differences.
To the extent timing differences occur between the time items
are recognised in the financial statements and when items are
taken into account in determining taxable income, the net related
taxation benefit or liability, calculated at current rates, is disclosed
as a deferred tax asset or deferred tax liability.
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.
• Indirect taxes (GST and VAT)
Revenues, expenses and assets are recognised net of the
amount of GST or VAT except:
• where the indirect tax incurred on a purchase of goods and
services is not recoverable from the taxation authority, in
which case the indirect tax is recognised as part of the cost
of acquisition of the asset or as part of the expense item as
applicable; and
• receivables and payables are stated with the amount of indirect
tax included.
The net amount of indirect tax recoverable from, or payable to, the
taxation authority is included as part of receivables or payables in
the Statement of Financial Position.
Cash flows are included in the Statement of Cash Flows on a
gross basis and the indirect taxes component of cash flows arising
from investing and financing activities are classified as operating
cash flows.
Cash and cash equivalents
Cash on hand and in banks and short term deposits are stated at
nominal values.
For the purposes of the Statement of Cash Flows, cash includes
cash on hand and in banks, and money market investments on call,
net of outstanding bank overdrafts.
Receivables
Trade receivables are recognised and carried at original invoice
amount less provisions for rebates and any other uncollectible
debts. An estimate for doubtful debts is made when collection for
the full amount is no longer probable. Bad debts are written off
as incurred. Receivables from related parties are recognised and
carried at the nominal amount due.
Inventories
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.
NUFARM LIMITED
ANNUAL REPORT 2004
43
42
NUFARM LIMITED
ANNUAL REPORT 2004
NOTES
NOTES TO THE FINANCIAL STATEMENTS
1 Statements of significant accounting policies continued
In the statement of financial performance, the cost of sales is
shown as a direct cost with overhead expenses included in the
operating expenses on a gross basis in the financial performance
disclosures note.
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 joint venture entities are carried at the lower of
the equity-accounted amount and recoverable amount in the
consolidated financial report.
Other financial assets
Interests in non-subsidiary, non-associated corporations are
included in other financial assets at the lower of cost or
recoverable amount.
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.
44
NUFARM LIMITED
ANNUAL REPORT 2004
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
Life
15–20 years
5 years
3–20 years
term of the lease
Goodwill on acquisition
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, of 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.
Patents and trademarks
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, of 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, from the
commencement 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.
NUFARM LIMITED
ANNUAL REPORT 2004
45
NOTES
NOTES TO THE FINANCIAL STATEMENTS
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.
Earnings per share
Basic earnings per share is calculated as net profit attributable
to members, divided by the weighted average number of
ordinary shares.
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.
Diluted earnings per share is 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.
• Borrowing costs
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;
(ii) for large structured finance transactions where the costs 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. Payables to related parties are carried at the
principal amount.
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 benefits
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, based on remuneration rates
which are expected to be paid when the liability is settled.
The non-current portions of long service leave provisions are
measured at the present value of estimated future cash flows.
In respect of defined benefits superannuation plans, any
contributions made to the superannuation plans by entities within
the consolidated entity are expensed.
Other provisions include amounts for royalties, indirect taxes, real
estate taxes, subsidiaries risk, social costs and other miscellaneous
provisions.
Contributed equity
Issued and paid up capital is recognised at the fair value of the
consideration received by the company. Any transaction costs
arising on the issue of ordinary shares are recognised directly in
equity as a reduction of the share proceeds received. Ordinary
share capital bears no special terms or conditions affecting
income or capital entitlements of the shareholders.
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 32) are
expensed as incurred.
Derivative financial instruments
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 (FRAs) are arranged to hedge against adverse
movements in interest rates on both long term and short
term loans.
• Cross currency interest rate swaps agreements hedge the
foreign currency, interest rate and cash flow exposures between
the capital notes issued in New Zealand and the group funding to
several jurisdictions to which the funds were advanced.
Under the terms of the swap agreement, the company agrees
with the counter-party banks to exchange the difference between
the fixed interest rates of various currencies of advances made
and to exchange the principal at an agreed rate of foreign
currency conversion. Amounts receivable under the cross
currency interest rate swap agreement are netted against
interest expense as they accrue.
• Financial instruments are used to hedge specific underlying
positions only and are accounted for using the same basis as
the underlying position.
Counter-parties 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 counter-parties 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 income or expense 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.
NUFARM LIMITED
ANNUAL REPORT 2004
45
44
NUFARM LIMITED
ANNUAL REPORT 2004
NOTES
NOTES TO THE FINANCIAL STATEMENTS
2 Financial performance disclosures
Profit from ordinary activities is after charging the following revenues
Interest Income
Interest
Wholly owned controlled entities
Other
Total interest income
Other revenue
Dividends from
Wholly owned controlled entities
Total dividends
Management fees from controlled entities
Sundry income
Gross proceeds from sale of businesses
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 Fernz Specialty Chemicals intangibles
Plant and equipment under lease
Deferred expenditure
Depreciation of
Buildings and improvements
Plant and equipment
Total depreciation and amortisation
Borrowing costs
Interest paid or payable to
Wholly owned controlled entities
Other unrelated parties
Costs of securitisation program
Finance lease charges
Total borrowing costs
Consolidated
Parent
2004
$000
2003
$000
2004
$000
2003
$000
–
1,265
1,265
–
1,220
1,220
14,544
6,101
20,645
15,282
41
15,323
–
–
–
5,138
11,672
21,018
37,828
–
–
–
3,708
–
17,326
21,034
34,699
34,699
4,125
1,893
–
154
40,871
29,383
29,383
2,665
384
–
8,992
41,424
(10,173)
(6,692)
–
(274)
(3,884)
(3,771)
(40,013)
(64,807)
(11,198)
(2,956)
(6,194)
(330)
(4,324)
(6,520)
(35,742)
(67,264)
–
–
–
–
–
–
–
–
–
–
(364)
(2,080)
(2,444)
(1,433)
(1,021)
(2,454)
–
(29,766)
(3,593)
(244)
(33,603)
–
(37,357)
(1,829)
(359)
(39,545)
(21,451)
–
–
–
(21,451)
(21,084)
5,307
–
–
(15,777)
46
NUFARM LIMITED
ANNUAL REPORT 2004
NUFARM LIMITED
ANNUAL REPORT 2004
47
NOTES
NOTES TO THE FINANCIAL STATEMENTS
2 Financial performance disclosures continued
Operating expenses
Carrying cost of disposed non-current assets
Other costs associated with disposal of non-current assets
Carrying cost of disposed businesses
Staff expenses
Occupancy expenses
Plant related expenses
Sales and distribution expenses
Research and development costs
Travel
Insurance
Operating lease expenses
Provision for doubtful debts expense
Other operating expenses
Total operating expenses
Expenses include
Net foreign exchange gains (losses) from
Hedges on foreign currency earnings for year
Unhedged receivables and payables
Customer bad debts written off
Net charge to provision for stock obsolescence
Donations
Operating lease rentals
Other disclosures
Gain (loss) on disposal of non-current assets (see note 39)
Gain (loss) on sale of businesses (see note 39)
Gain (loss) on sale of investment
Superannuation contributions – defined benefit fund
Redundancy costs (see note 39)
Consolidated
Parent
2004
$000
2003
$000
2004
$000
2003
$000
(5,864)
(3,566)
(10,321)
(223,032)
(24,984)
(61,992)
(88,775)
(14,132)
(16,701)
(22,872)
(9,992)
(4,060)
(34,722)
(521,013)
1,419
884
(724)
961
(92)
(9,992)
11,588
1,351
–
(2,913)
(10,750)
(19,727)
–
–
(206,750)
(24,640)
(59,259)
(68,113)
(12,183)
(16,545)
(14, 843)
(8,394)
(983)
(30,350)
(461,787)
1,847
3,312
(657)
(1,027)
(59)
(8,394)
(2,022)
(454)
(379)
(2,976)
–
(248)
–
–
(8,788)
(929)
(1,900)
(5,229)
(1,038)
(702)
(1,181)
–
–
(2,681)
(22,696)
–
(444)
32
(80)
–
(18)
(94)
–
–
–
–
(9,633)
–
–
(9,696)
(1,656)
(2,372)
(5,073)
(885)
(931)
(860)
–
–
(495)
(31,601)
–
40
(11)
–
–
(61)
(641)
114
–
–
–
3 Earnings per share
Net profit
Net profit attributable to outside equity interest
Earnings used in the calculations of basic and diluted earnings per share
Subtract non-recurring item (refer note 5)
Earnings excluding non-recurring item used in the calculations of operating earnings per share
Consolidated
2004
$000
2003
$000
78,276
(2,074)
76,202
–
76,202
78,919
(1,826)
77,093
(12,824)
64,269
NUFARM LIMITED
ANNUAL REPORT 2004
47
46
NUFARM LIMITED
ANNUAL REPORT 2004
NOTES
NOTES TO THE FINANCIAL STATEMENTS
Number of shares
2004
2003
3 Earnings per share continued
Weighted average number of ordinary shares used in calculation of basic earnings per share
Weighted average number of shares options used in calculation of diluted earnings per share
Weighted average number of ordinary shares used in calculation of diluted earnings per share
161,842,546 155,660,979
1,564,115
163,280,238 157,225,094
1,437,692
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)
Operating earnings per share
Basic earnings per share excluding non-recurring tax consolidation item (cents per shares)
Diluted earnings per share excluding non-recurring tax consolidation item (cents per shares)
47.1
46.7
47.1
46.7
49.5
49.0
41.3
40.9
Crop
protection
$000
Industrial
chemicals
$000
Other Eliminations Consolidated
$000
$000
$000
1,441,381
2,026
1,443,407
25,634
3,279
1,472,320
134,972
3,045
138,017
1,367
136
139,520
2004
462
–
462
10,827
–
11,289
–
(5,071)
(5,071)
–
–
(5,071)
161,922
15,275
(7,282)
–
1,172,433
161,470
24,098
–
385,472
37,482
5,354
–
24,000
953
–
122,223
34,732
18,851
9,918
15,898
8,844
488
1,930
318
208
1,684
4,070
–
–
–
–
–
1,576,815
–
1,576,815
37,828
3,415
1,618,058
1,265
1,619,323
169,915
(60,018)
109,897
(31,621)
78,276
1,358,001
73,577
1,431,578
428,308
442,776
871,084
24,953
138,439
43,784
21,023
15,918
4 Segments
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
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
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
48
NUFARM LIMITED
ANNUAL REPORT 2004
NUFARM LIMITED
ANNUAL REPORT 2004
49
NOTES
NOTES TO THE FINANCIAL STATEMENTS
Australasia
$000
Europe
$000
Americas Consolidated
$000
$000
4 Segments continued
2004
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 equipiment,
intangible assets and other non-current assets
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
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
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
762,003
16,037
778,040
374,485
24,739
399,224
440,327
467
440,794
1,576,815
41,243
1,618,058
582,723
610,338
238,517
1,431,578
31,938
85,502
20,999
138,439
Crop
protection
$000
Industrial
chemicals
$000
Other Eliminations Consolidated
$000
$000
$000
1,233,789
4,008
1,237,797
2,503
3,744
1,244,044
222,297
1,378
223,675
16,380
53
240,108
2003
2,725
–
2,725
2,151
–
4,876
–
(5,386)
(5,386)
–
–
(5,386)
134,856
23,552
(1,821)
–
1,076,835
178,336
26,996
–
311,437
42,370
4,987
–
16,854
1,427
–
87,350
33,145
15,276
9,201
16,797
8,949
8,080
3,914
10
168
1,646
420
–
–
–
–
–
1,458,811
–
1,458,811
21,034
3,797
1,483,642
1,220
1,484,862
156,587
(62,935)
93,652
14,733
78,919
1,282,167
75,647
1,357,814
358,794
536,699
895,493
18,281
104,157
42,262
25,002
13,535
48
NUFARM LIMITED
ANNUAL REPORT 2004
NUFARM LIMITED
ANNUAL REPORT 2004
49
NOTES
NOTES TO THE FINANCIAL STATEMENTS
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 equipiment,
intangible assets and other non-current assets
Australasia
$000
Europe
$000
Americas Consolidated
$000
$000
2003
729,423
19,639
749,062
358,432
4,727
363,159
370,956
465
371,421
1,458,811
24,831
1,483,642
533,304
524,694
299,816
1,357,814
49,988
48,067
6,102
104,157
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, insecticides 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 corporate cost allocations.
Segment accounting policies are consistent with the consolidated entity’s policies described in note 1.
5 Non-recurring item
Non-recurring items before tax
Tax benefit arising from increased depreciation allowances
upon entering into Australian tax consolidation regime
Non-recurring items after tax
Consolidated
Parent
2004
$000
2003
$000
2004
$000
2003
$000
–
–
–
–
12,824
12,824
–
–
–
–
12,824
12,824
50
NUFARM LIMITED
ANNUAL REPORT 2004
NUFARM LIMITED
ANNUAL REPORT 2004
51
NOTES
NOTES TO THE FINANCIAL STATEMENTS
Consolidated
Parent
2004
$000
2003
$000
2004
$000
2003
$000
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%
109,897
32,969
93,652
28,096
49,837
14,951
47,795
14,339
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-assessible income
Share of results of associates (net of tax)
Amounts over-provided in prior years
Unrecognised tax losses utilised
Restatement of deferred tax balances due
to income tax rate changes
Permanent uplift for depreciation allowances upon
entering into the tax consolidation regime
Effect of different rates of tax on overseas income
Income tax expense relating to ordinary activities
1,668
(138)
3,802
–
(5)
(1,025)
(2,085)
(3,767)
1,686
(117)
1,082
–
(3,638)
(1,139)
(850)
(1,799)
–
–
454
(10,410)
–
–
(1,575)
–
–
–
52
(8,815)
(559)
–
–
–
(815)
–
–
–
–
1,017
31,621
(12,824)
4,236
14,733
–
271
3,691
(12,824)
215
(7,592)
Tax consolidation
Nufarm Limited and its wholly-owned Australian entities formed a consolidated tax group effective 1 August 2002 and formally notified the
ATO when lodging its 2003 consolidated tax return. At 31 July 2003 this resulted in an increase in the taxable values of Australian depreciable
assets, which has reversed an existing deferred tax liability and created a new future tax benefit. The resulting adjustment has been credited to
income tax expense. This uplift in tax values has no impact on historical costs shown in the statement of financial position. The creation of the
tax consolidation group was reflected in the 2003 year.
Members of the group have entered into a tax sharing arrangement in order to allocate income tax expense to the wholly-owned subsidiaries
on a pro-rata basis. In addition, the agreement provides for the allocation of income tax liabilities between the entities should the head entity,
Nufarm Limited, default on its tax payment obligations.
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
Balances of tax consolidation group entities transferred to parent entity
Other
Current portion
Non-current portion
25,607
26,350
3,791
11,917
(9,718)
15,889
10,713
4,936
1,342
548
–
7,732
41,160
6,858
34,302
(8,219)
18,131
11,022
4,536
365
240
–
8,963
43,257
6,625
36,632
–
3,791
835
196
27
121
16,439
(35)
21,374
–
21,374
(5,039)
6,878
696
189
74
94
19,929
246
28,106
–
28,106
50
NUFARM LIMITED
ANNUAL REPORT 2004
NUFARM LIMITED
ANNUAL REPORT 2004
51
NOTES
NOTES TO THE FINANCIAL STATEMENTS
6 Taxation continued
Income tax losses
Deferred tax benefits arising from tax losses of a controlled
entity have not been recognised as realisation of the
benefit is not considered virtually certain.
c) Deferred tax
Attributable to timing differences
Depreciation and amortisation
Prepayments and deferred expenses
Balances of tax consolidation group entities
transferred to parent entity
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
Other amounts owing by
Wholly owned controlled entities
Hedge receivables (refer notes 1 and 30)
Other receivables owing by associated entities
Other
Proceeds receivable from sale of businesses and
non-current assets
Provision for non-collectibility of sale proceeds
Total receivables
Current portion
Non-current portion
8 Inventories
Raw materials
Work in progress
Finished goods
Provision for obsolescence of finished goods
Total inventories
52
NUFARM LIMITED
ANNUAL REPORT 2004
Consolidated
Parent
2004
$000
2003
$000
2004
$000
2003
$000
22,277
26,044
–
31,010
(70)
–
1,451
(9,718)
22,673
25,540
2,656
–
2,475
(5,324)
25,347
–
–
2,018
–
–
2,018
–
–
–
4,432
–
–
4,432
146,438
(3,237)
143,201
253,258
(3,142)
250,116
–
32,417
56,202
31,551
–
32,326
35,944
26,990
8,670
(82)
8,588
188,750
34,180
–
625
9,180
(224)
8,956
117,538
27,792
–
2,626
10,895
4,006
–
717
(3,213)
271,053
232,518
38,535
–
349,382
311,607
37,775
–
232,143
197,963
34,180
–
157,629
129,837
27,792
111,851
11,906
314,706
438,463
(6,324)
432,139
86,613
7,765
269,996
364,374
(7,431)
356,943
2,332
728
12,916
15,976
(366)
15,610
3,050
590
12,099
15,739
(284)
15,455
NUFARM LIMITED
ANNUAL REPORT 2004
53
NOTES
NOTES TO THE FINANCIAL STATEMENTS
9 Equity accounted investments
Aggregate carrying amount of associates
Balance at the beginning of the year
Exchange adjustment
Share of net result
New investment
Dividends received
Balance at the end of the year
Balance at the beginning of the year
Exchange adjustment
Share of net result
New investment
Investments in which a controlling interest was acquired
Dividends received
Balance at the end of the year
Share of associates profits
Operating profits before income tax
Income tax expense
Share of net profits of associates
Financial summary of material associate
Bayer CropScience Nufarm Limited
Total assets
Total liabilities
Share of profits of associate
Agchem Receivables Corp
Total assets
Total liabilities
Share of profits of associate
Retained
earnings
$000
Cost
$000
Carrying
value
$000
15,365
452
3,415
–
(3,469)
15,763
12,757
(1,897)
3,797
–
708
–
15,365
2004
2,916
(67)
–
6,341
–
9,190
2003
15,248
(287)
–
85
(9,151)
(2,979)
2,916
18,281
385
3,415
6,341
(3,469)
24,953
28,005
(2,184)
3,797
85
(8,443)
(2,979)
18,281
Consolidated
2004
$000
5,075
(1,660)
3,415
2003
$000
4,332
(535)
3,797
27,814
10,289
3,001
26,436
10,931
4,102
53,174
52,945
35
33,703
33,551
55
52
NUFARM LIMITED
ANNUAL REPORT 2004
NUFARM LIMITED
ANNUAL REPORT 2004
53
NOTES
NOTES TO THE FINANCIAL STATEMENTS
Balance date
of associate
Ownership and
voting interest
2004
2003
Carrying amount
2004
$000
2003
$000
9 Equity accounted investments continued
Details of material interests in associated entities are as follows:
Bayer CropScience Nufarm Limited
(formerly Aventis Nufarm Limited)
UK agricultural chemical manufacturer
Agchem Receivables Corp
US Securitisation special purpose vehicle
Timber Preservatives Sdn Bhd
Malaysian timber preservative manufacturer
SRFA LLC
US agricultural chemical distributor
Jiangxi–Fernz Timber Protection Ltd
Chinese agricultural chemical distributor
Excel Crop Care Ltd
Indian agricultural chemical manufacturer
31.12.2003
25%
25%
17,158
16,629
31.7.2003
40%
40%
92
61
31.5.2003
49%
49%
433
846
31.12.2003
50%
–
224
–
31.12.2003
50%
50%
519
581
31.3.2004
14%
–
6,341
–
Associated entities have the following commitments. Nufarm’s share of capital commitments is $nil (2003: $nil) and share of finance lease
commitments is $nil (2003: $nil). There are no contingent liabilities.
Consolidated
Parent
2004
$000
2003
$000
2004
$000
2003
$000
–
–
–
–
–
–
245,210
2,002
247,212
245,210
–
245,210
1,083
(10)
1,073
1,085
(2)
1,083
–
–
–
–
–
–
5,089
(44)
58
–
(2,463)
2,640
3,713
6,968
(2)
151
510
(2,538)
5,089
6,172
176,751
(2,496)
–
–
–
174,255
421,467
192,111
(15,360)
–
–
–
176,751
421,961
10 Other financial assets
Investment in controlled entities
Balance at the beginning of the year
Transfer of subsidiary to parent entity
Balance at the end of the year
Investment in other companies (at cost)
Balance at the beginning of the year
Exchange adjustment
Balance at the end of the year
Other loans including loans to the staff share
purchase schemes (refer note 32)
Balance at the beginning of the year
Exchange adjustment
New investments during the year
Reclassified from receivables
Loans repaid during the year
Balance at the end of the year
Total other financial assets
54
NUFARM LIMITED
ANNUAL REPORT 2004
NUFARM LIMITED
ANNUAL REPORT 2004
55
NOTES
NOTES TO THE FINANCIAL STATEMENTS
Consolidated
Freehold
land and
improvements
$000
Buildings
Plant and
machinery
$000
$000
Leased
plant and
machinery
$000
Capital
work in
progess
$000
Total
$000
2004
556,312
(3,952)
11,907
(9,900)
(4,030)
24,033
574,370
(319,436)
2,161
(39,819)
9,282
3,803
(45)
(344,054)
230,316
2003
579,275
(26,305)
18,679
34,108
(47,430)
(14,838)
12,823
556,312
(340,890)
13,134
(35,549)
(11,152)
46,705
7,213
1,103
(319,436)
236,876
5,404
(64)
15
(81)
–
(68)
5,206
(2,086)
26
(274)
–
–
45
(2,289)
2,917
5,610
(216)
519
–
–
(509)
–
5,404
(2,342)
77
(330)
–
–
509
–
(2,086)
3,318
143,715
(3,042)
1,926
(16,823)
(127)
14,670
140,319
(61,503)
1,044
(3,771)
14,626
31
–
(49,573)
90,746
143,998
(8,749)
3,376
315
(208)
(953)
5,936
143,715
(58,182)
3,035
(6,520)
–
183
51
(70)
(61,503)
82,212
35,153
(270)
182
(803)
–
776
35,038
(1,381)
(23)
(194)
–
–
–
(1,598)
33,440
35,059
(1,754)
319
–
–
(370)
1,899
35,153
(178)
16
(193)
–
–
7
(1,033)
(1,381)
33,772
26,088
(127)
32,663
–
–
(39,411)
19,213
–
–
–
–
–
–
–
19,213
23,342
(1,528)
25,551
–
(619)
–
(20,658)
26,088
–
–
–
–
–
–
–
–
26,088
766,672
(7,455)
46,693
(27,607)
(4,157)
–
774,146
(384,406)
3,208
(44,058)
23,908
3,834
–
(397,514)
376,632
787,284
(38,552)
48,444
34,423
(48,257)
(16,670)
–
766,672
(401,592)
16,262
(42,592)
(11,152)
46,888
7,780
–
(384,406)
382,266
11 Property, plant and equipment
Cost
Balance at the beginning of the year
Exchange adjustment
Additions
Disposals
Disposals through sale of entities
Transfers
Balance at the end of the year
Accumulated depreciation
Balance at the beginning of the year
Exchange adjustment
Depreciated during the year
Disposals
Disposals through sale of entities
Transfers
Balance at the end of the year
Total property, plant and equipment, net
Cost
Balance at the beginning of the year
Exchange adjustment
Additions
Additions through acquisition of entities
Disposals
Disposals through sale of entities
Transfers
Balance at the end of the year
Accumulated depreciation
Balance at the beginning of the year
Exchange adjustment
Depreciated during the year
Additions through acquisition of entities
Disposals
Disposals through sale of entities
Transfers
Balance at the end of the year
Total property, plant and equipment, net
Jones Lang LaSalle valued the land and buildings portfolio on an existing use valuation at $127.4 million at 31 July 2004.
Assets pledged as security for finance leases $2.9 million (2003: $7.4 million ).
54
NUFARM LIMITED
ANNUAL REPORT 2004
NUFARM LIMITED
ANNUAL REPORT 2004
55
NOTES
NOTES TO THE FINANCIAL STATEMENTS
11 Property, plant and equipment continued
Cost
Balance at the beginning of the year
Exchange adjustment
Additions
Disposals
Transfers
Balance at the end of the year
Accumulated depreciation
Balance at the beginning of the year
Exchange adjustment
Depreciated during the year
Disposals
Transfers
Balance at the end of the year
Total property, plant and equipment, net
Cost
Balance at the beginning of the year
Exchange adjustment
Additions
Disposals
Transfers
Balance at the end of the year
Accumulated depreciation
Balance at the beginning of the year
Exchange adjustment
Depreciated during the year
Disposals
Transfers
Balance at the end of the year
Total property, plant and equipment, net
Freehold
land and
improvements
$000
Buildings
Parent
Plant and
machinery
$000
$000
Capital
work in
progess
$000
Total
$000
1,809
19
–
–
1,828
(13)
–
(18)
–
–
(31)
1,797
43
1
1,809
(370)
326
1,809
–
–
(13)
7
(7)
(13)
1,796
12,870
134
363
–
–
13,367
(1,420)
(15)
(346)
–
–
(1,781)
11,586
1,224
55
12,870
(953)
(326)
12,870
(55)
(3)
(1,420)
51
7
(1,420)
11,450
2004
11,175
116
1,263
(431)
60
12,183
(4,455)
(46)
(2,080)
183
–
(6,398)
5,785
2003
9,021
405
8,845
(8,150)
1,054
11,175
(3,102)
(139)
(1,021)
(193)
–
(4,455)
6,720
200
2
–
–
(60)
142
–
–
–
–
–
–
142
1,200
54
–
–
(1,054)
200
–
–
–
–
–
–
200
26,054
271
1,626
(431)
–
27,520
(5,888)
(61)
(2,444)
183
–
(8,210)
19,310
11,488
515
23,524
(9,473)
–
26,054
(3,157)
(142)
(2,454)
(135)
–
(5,888)
20,166
56
NUFARM LIMITED
ANNUAL REPORT 2004
NUFARM LIMITED
ANNUAL REPORT 2004
57
NOTES
NOTES TO THE FINANCIAL STATEMENTS
12
Intangible assets
Goodwill
Balance at the beginning of the year
Exchange adjustment
Acquired during the year
Disposals during the year
Amortised during the year
Balance at the end of the period
Intellectual property
Balance at the beginning of the year
Exchange adjustment
Acquired during the year
Disposals during the year
Amortised during the year
Balance at the end of the year
Major projects development expenditure
Balance at the beginning of the year
Expenditure capitalised during the year
Disposals during the year
Balance at the end of the year
Total intangible assets
13 Other non-current assets
Deferred product development expenditure
Balance at the beginning of the year
Exchange adjustment
Expenditure capitalised during the year
Disposals during the year
Amortised during the year
Balance at the end of the year
Borrowing costs
Balance at the beginning of the year
Exchange adjustment
Expenditure capitalised during the year
Amortised during the year
Balance at the end of the year
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 and accruals – unsecured
Amounts owing to
Wholly owned controlled entities
Associated entities
Total payables
Consolidated
Parent
2004
$000
2003
$000
2004
$000
2003
$000
103,835
(3,873)
–
(4,383)
(10,173)
85,406
37,023
(163)
80,490
(43)
(6,692)
110,615
3,693
240
(3,933)
–
196,021
16,285
(283)
4,539
(38)
(2,255)
18,248
4,396
37
78
(1,629)
2,882
21,130
126,844
(14,073)
8,478
(22)
(17,392)
103,835
18,401
(1,178)
22,756
–
(2,956)
37,023
3,056
637
–
3,693
144,551
11,702
(663)
10,604
(2,516)
(2,842)
16,285
5,156
231
491
(1,482)
4,396
20,681
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
396,262
335,096
9,866
11,188
–
1,677
397,939
–
1,364
336,460
61,179
–
71,045
51,827
–
63,015
NUFARM LIMITED
ANNUAL REPORT 2004
57
56
NUFARM LIMITED
ANNUAL REPORT 2004
NOTES
NOTES TO THE FINANCIAL STATEMENTS
15
Interest bearing liabilities
Capital notes
Face value NZD 225,000,000 (2003: NZD 225,000,000)
Long term unsecured subordinated fixed interest debt
security with an election date of 15 October 2006.
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
Other loans – unsecured
Subordinated loans from wholly owned controlled entities
Finance lease liabilities – secured
Less current portion
Bank loans – unsecured
Other loans – unsecured
Finance lease liabilities – secured
Total current interest bearing liabilities
Total non-current interest bearing liabilities
Repayment of borrowings (excluding finance leases)
Periods ending 31 July, 2005
2006
2007
No specified repayment date
The obligations with no specified repayment date are repayable
upon certain contingent events, which the directors believe will not
occur in the foreseeable future.
Average interest rates
Capital notes coupon
Bank loans
Other loans
Subordinated loans from wholly owned controlled entities
Finance lease liabilities – secured
Consolidated
Parent
2004
$000
2003
$000
2004
$000
2003
$000
203,620
201,523
–
–
189,627
2,355
–
3,989
399,591
111,099
23
1,289
112,411
287,180
271,277
2,304
–
5,416
480,520
125,407
37
1,406
126,850
353,670
19,645
–
212,969
–
232,614
19,645
–
–
19,645
212,969
15,963
–
210,802
–
226,765
15,963
–
–
15,963
210,802
111,122
78,528
203,620
2,332
44,736
101,134
201,523
2,267
–
19,645
212,969
–
–
–
210,802
–
%
8.6
3.5
3.1
–
7.7
%
8.6
4.5
3.1
–
7.7
%
–
9.0
–
9.2
–
%
–
7.9
–
9.2
–
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 (Note 25) are in excess of their related borrowings.
Finance lease liabilities are secured over relevant leased plant.
58
NUFARM LIMITED
ANNUAL REPORT 2004
NUFARM LIMITED
ANNUAL REPORT 2004
59
NOTES
NOTES TO THE FINANCIAL STATEMENTS
16 Provisions
Employee entitlements
Restructuring
Other
Less current portion
Employee entitlements
Restructuring
Other
Total current provisions
Total non-current provisions
Other provisions
Balance at the beginning of the year
Exchange adjustment
Additional provision
Amounts utilised during the year
Balance at the end of the year
Provision for redundancy and restructuring costs
Balance at the beginning of the year
Exchange adjustment
Additional provision
Amounts utilised during the year
Balance at the end of the year
Consolidated
Parent
2004
$000
2003
$000
2004
$000
2003
$000
26,352
7,025
2,103
35,480
15,983
7,025
2,103
25,111
10,369
3,148
(9)
1,843
(2,879)
2,103
–
–
11,789
(4,764)
7,025
24,307
–
3,148
27,455
14,756
–
3,148
17,904
9,551
2,530
(74)
1,477
(785)
3,148
–
–
–
–
–
594
–
–
594
544
–
–
544
50
107
(1)
–
(106)
–
–
–
–
–
–
573
–
107
680
515
–
107
622
58
17
1
107
(18)
107
–
–
–
–
–
58
NUFARM LIMITED
ANNUAL REPORT 2004
NUFARM LIMITED
ANNUAL REPORT 2004
59
Consolidated
Parent
2004
$000
2003
$000
2004
$000
2003
$000
NOTES
NOTES TO THE FINANCIAL STATEMENTS
17 Contingent Liabilities
The parent entity has entered into a deed of cross
guarantee (refer note 25) 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.
Guarantee facility for Eastern European joint ventures.
5,379
–
–
–
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.
The parent entity has guaranteed with the noteholders the
issuers’ obligations under the capital notes.
Environmental claim warranty
Environmental guarantee given to the purchaser of land
and buildings at Genneviliers for EUR 8.5 million. The
guarantee will end 18 months after the expiry of the
business tenancy contract. The directors do not believe
that any material costs will be incurred as a result of this guarantee.
Guarantee upon sale of a business limited to EUR 5.34 million
on account of possible remediation costs for soil and
groundwater contamination. This guarantee decreases
from 2004 progressively to nil in 2011. The directors
do not believe that any material costs will be incurred as a
result of this guarantee.
5,490
–
–
–
–
–
203,620
201,523
14,552
–
–
–
9,142
34,563
10,550
10,550
–
203,620
–
201,523
60
NUFARM LIMITED
ANNUAL REPORT 2004
NUFARM LIMITED
ANNUAL REPORT 2004
61
NOTES
NOTES TO THE FINANCIAL STATEMENTS
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 commitments are expected to be completed within 12 months.
Investments
The company owns 70% of the Australian and Malaysian
chemical formulating businesses of Mastra Holdings, which
are controlled entities. The company has a commitment to
acquire the remaining shares by December 2007. The cost
will be between USD 2.7 million and USD 4.5 million.
The company was committed to buying 14% of the shares
in Excel Crop Care Ltd, an Indian company listed on the
Mumbai Stock Exchange. This transaction was completed
for $6.3 million in April 2004.
The company was committed to buying from Bayer product
registration rights in Europe. This transaction was completed
for €2.0 million in January 2004.
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
2004
$000
2003
$000
2004
$000
2003
$000
17,224
9,999
–
–
min 3,845
max 6,408
4,615
–
–
6,348
–
3,460
14,423
–
–
–
–
–
–
7,195
6,306
11,073
6,936
31,510
5,725
4,811
7,101
2,651
20,288
330
301
280
–
911
890
777
1,939
1,170
4,776
1,392
1,736
1,180
–
4,308
(319)
3,989
1,636
1,363
2,908
–
5,907
(491)
5,416
–
–
–
–
–
–
–
–
–
–
–
–
–
–
NUFARM LIMITED
ANNUAL REPORT 2004
61
60
NUFARM LIMITED
ANNUAL REPORT 2004
NOTES
NOTES TO THE FINANCIAL STATEMENTS
19 Contributed equity
Ordinary shares issued and fully paid
Balance at the beginning of the year
Issue of shares
Partly paid shares fully paid up during the year
Balance at the end of the year
Ordinary shares issued and partly paid to 1.0 cent
Balance at the beginning of the year
Partly paid shares fully paid up during the year
Balance at the end of the year
Total contributed equity
Number
of shares
2004
$000
2003
$000
155,823,293
11,758,999
153,475
167,735,767
149,216
60,662
650
210,528
147,328
1,423
465
149,216
386,800
(153,475)
233,325
167,969,092
3
(1)
2
210,530
5
(2)
3
149,219
On 21 January 2004, 7,692,308 ordinary shares were placed with institutional investors at $5.20 per share. On 25 February 2004, 3,501,712
ordinary shares were placed with existing shareholders at $5.20 per share. Other issues, totaling 564,979 fully paid ordinary shares at an average
price of $5.14 per share, were made in accordance with the Nufarm executive share plan (2000) and the employee global share plan.
Consolidated
Parent
2004
$000
2003
$000
2004
$000
2003
$000
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 year
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 year
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 year
Transferred to retained profits
Balance at the end of the year
c) Capital profits reserve
This reserve is used to accumulate realised capital profits
Balance at the beginning of the year
Adjustment
Balance at the end of the year
Total reserves
62
NUFARM LIMITED
ANNUAL REPORT 2004
(9,590)
(10,942)
(5,478)
(1,271)
–
(16,339)
(30,985)
34,445
(2,108)
(9,590)
1,409
(1,061)
348
1,841
(432)
1,409
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
33,852
(7)
33,845
17,854
33,852
–
33,852
25,671
40,074
–
40,074
40,074
40,074
–
40,074
40,074
NUFARM LIMITED
ANNUAL REPORT 2004
63
NOTES
NOTES TO THE FINANCIAL STATEMENTS
21 Retained profits
Balance at the beginning of the year
Increase in retained profits on adoption of revised
accounting standards
AASB 1028: Employee benefits
AASB 1044: Provision for dividend
Net profit attributable to members of the parent entity
Aggregate amounts transferred from reserves
Dividends paid
Balance at the end of the year
Franking credit balance
The amount of franking credits available for the subsequent
financial year are:
Franking account balance as at the end of the year at 30%
(2003: 30%)
Franking credits that will arise from the payment of income
tax payable as at the end of the year
Balance at the end of the year
22 Outside equity interests
Balance at the beginning of the year
Exchange adjustment
Investments in which a controlling interest was disposed
Share of operating profit
Decrease in outside equity interests on adoption of
revised accounting standards
Dividends paid
Balance at the end of the year
23 Equity
Balance at the beginning of the year
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 year
Consolidated
Parent
2004
$000
2003
$000
2004
$000
2003
$000
280,793
212,670
149,505
105,018
–
–
76,202
1,062
(33,656)
324,401
(616)
17,082
77,093
2,540
(27,976)
280,793
–
–
46,146
–
(33,656)
161,995
(6)
17,082
55,387
–
(27,976)
149,505
17,436
2,285
17,436
2,285
(2,048)
15,388
3,076
5,361
(2,048)
15,388
3,076
5,361
6,638
(557)
356
2,074
–
(802)
7,709
6,285
(735)
–
1,826
(56)
(682)
6,638
–
–
–
–
–
–
–
–
–
–
–
–
–
–
462,321
391,039
338,798
292,425
68,997
79,937
45,696
55,381
61,761
(33,656)
1,071
560,494
1,886
(10,894)
353
462,321
61,761
(33,656)
–
412,599
1,886
(10,894)
–
338,798
62
NUFARM LIMITED
ANNUAL REPORT 2004
NUFARM LIMITED
ANNUAL REPORT 2004
63
NOTES
NOTES TO THE FINANCIAL STATEMENTS
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
tems in the statement of financial position as follows:
Cash assets
Bank overdrafts
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 cash profit on disposal of Fernz Specialty Chemicals
Non-cash items:
Amortisation
Depreciation
Losses on disposal of fixed assets
Unrealised foreign currency gains
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)/decrease 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
Net operating cash flows
Consolidated
Parent
2004
$000
2003
$000
2004
$000
2003
$000
56,826
(72,298)
(15,472)
28,507
(44,387)
(15,880)
654
(19,645)
(18,991)
507
(15,963)
(15,456)
78,276
3,099
–
20,749
44,058
(100)
–
(2,674)
119
72
(49)
62,175
63,228
(72,683)
88,007
(10,830)
(5,183)
(3,415)
–
–
59,124
202,674
78,919
2,979
(5,740)
24,672
42,592
2,401
–
2,372
(7,854)
(8,578)
1,132
56,737
38,909
347
82,602
(3,346)
(27,502)
(3,797)
–
–
87,213
220,108
46,146
–
–
–
2,444
95
–
2,018
(9,357)
–
83
(4,717)
2,361
(155)
(1,471)
5,437
169
–
–
1,006
7,347
48,776
55,387
–
–
–
2,454
641
(209)
3,727
(15,405)
–
535
(8,257)
5,670
736
(6,930)
6,534
1,410
–
455
(83)
7,792
54,922
64
NUFARM LIMITED
ANNUAL REPORT 2004
NUFARM LIMITED
ANNUAL REPORT 2004
65
NOTES
NOTES TO THE FINANCIAL STATEMENTS
24 Statement of cash flows continued
c) Businesses sold
Businesses sold during 2004 include the Florigene group,
Agrow, MCFI, Pharma Pacific and the Wettasoil trademark.
The 2003 business sold was the Fernz specialty chemical
business in Australia and New Zealand.
Net assets disposed of were:
Receivables
Inventory
Property, plant and equipment
Intangibles
Cash assets
Tax assets
Payables
Other
Cash gain on disposal
Amounts settled for businesses sold in prior years
Total consideration
Cash deferred
Cash consideration received
Cash paid for closure costs
Cash included in assets sold
Net cash effect
Consolidated
Parent
2004
$000
2003
$000
2004
$000
2003
$000
882
397
323
6,936
642
1,978
(1,724)
887
1,351
724
12,396
(5,062)
7,334
–
(642)
6,692
–
41,165
8,890
–
–
–
(403)
–
8,200
2,252
60,104
–
60,104
(2,460)
57,644
–
–
–
–
–
–
–
–
–
724
724
–
724
–
–
724
–
12,714
7,271
–
–
–
(120)
–
1,687
717
22,269
–
22,269
–
–
22,269
64
NUFARM LIMITED
ANNUAL REPORT 2004
NUFARM LIMITED
ANNUAL REPORT 2004
65
NOTES
NOTES TO THE FINANCIAL STATEMENTS
24 Statement of cash flows continued
d) Businesses acquired
The 2004 acquisitions include the BASF global phenoxy
herbicide business, various cereal fungicides in Germany,
Australian distribution rights to BASF products and antibiotics
product rights from Syngenta for the USA.
In 2003, the company acquired 100% of the share capital of
Crop Care Australasia Pty Ltd, the German crop protection
business and the 50% shareholding of Artfern Pty Ltd not
already owned.
The aggregate amounts of net assets acquired were
Cash
Receivables
Inventory
Tax assets
Investments
Property, plant and equipment
Intangibles
Bank overdraft
Payables
Tax liabilities
Provisions
Borrowings
Outside equity interests
Total consideration
Amount paid for businesses acquired in prior years
Cash deferred
Cash consideration paid
Cash included in net assets acquired
Bank overdraft included in net assets acquired
Net cash effect
Consolidated
Parent
2004
$000
2003
$000
2004
$000
2003
$000
–
–
18,661
–
–
–
80,488
–
–
–
–
–
–
99,149
–
(12,840)
86,309
–
–
86,309
8,464
10,395
65,303
2,252
(9,349)
23,271
31,569
–
(20,629)
–
–
–
–
111,276
6,000
–
117,276
(8,464)
–
108,812
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
937
4,176
7,584
753
–
19,469
–
–
(5,523)
(3,110)
(399)
(17,998)
–
5,889
–
–
5,889
(937)
–
4,952
The deferred cash settlement represents the value of the remaining consideration payable.
e) Non-cash financing and investing activities
During the financial year plant and equipment with an aggregate value of $15,000 (2003: $519,000) was acquired by means
of finance leases.
During the financial year 564,979 ordinary shares were issued under the executive share plan, the global share plan and the
non-executive directors share plan.The deemed value of the shares, $2,902,636 (2003: $1,423,000) was expensed in the
statement of financial performance.
66
NUFARM LIMITED
ANNUAL REPORT 2004
NUFARM LIMITED
ANNUAL REPORT 2004
67
NOTES
NOTES TO THE FINANCIAL STATEMENTS
25 Controlled entities
The consolidated financial statements at 31 July 2004 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
Agrow Australia Pty Ltd
Agryl Holdings Limited
Allrad No1 Pty Ltd
Artfern Pty Ltd
Australis Services Pty Ltd
Bioclip NZ Pty Limited
Biotech Innovations Pty Ltd
Camper Vertriebs
Captec (NZ) Limited
Captec Pty Limited
CFPI GmbH
Chemicca Limited
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
Crop Care Australasia Pty Ltd
Crop Care Holdings Limited
Croplands Equipment Limited
Croplands Equipment Pty Ltd
Danestoke Pty Limited
Davco New Zealand Limited
Eltrick Pty Ltd
Electronic Agriculture Limited
Esorblue Pty Ltd
Fchem (Aust) Limited
Fchem Limited
Fernz Canada Limited
Fernz Corporation (NZ) Limited
Fernz Singapore Pte Ltd
Nufarm Technologies (M) Sdn Bhd
(formerly 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 No2 Pty Ltd
Florigene Limited
Florigene Marketing Pty Ltd
Notes
Place of
incorporation
Percentage of shares held
2004
2003
(a)
(a),(b)
(a)
(a)
(b)
(a)
(a)
(a)
(a),(b)
(b)
(a),(b)
(a)
(a),(b)
(b)
(b)
(b)
(b)
(b)
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
Germany
New Zealand
Australia
Germany
Australia
New Zealand
Australia
Australia
Australia
Australia
France
Netherlands
Australia
New Zealand
New Zealand
Australia
Australia
New Zealand
Australia
Australia
Australia
Australia
New Zealand
Canada
New Zealand
Singapore
Malaysia
New Zealand
Netherlands
Netherlands
Australia
Netherlands
Australia
Australia
Australia
Australia
100
70
–
100
–
100
100
100
–
100
100
100
100
100
–
100
80
80
80
100
100
100
100
100
100
80
–
–
100
–
100
100
100
100
100
51
100
100
–
–
–
–
–
–
–
100
70
100
100
90
100
100
100
90
100
100
100
100
100
100
100
80
80
80
100
100
100
100
100
100
80
100
90
100
90
100
100
100
100
100
51
100
100
90
90
90
90
90
90
90
66
NUFARM LIMITED
ANNUAL REPORT 2004
NUFARM LIMITED
ANNUAL REPORT 2004
67
NOTES
NOTES TO THE FINANCIAL STATEMENTS
25 Controlled entities continued
Framchem SA
Health & Sciences Limited
Interferon Ltd
Interferon NZ Limited
International Flower Developments Pty Ltd
Laboratoire Europeen de Biotechnologie
Ladino NV
Manaus Holdings Sdn Bhd
Marman Holdings LLC
Marman de Centroamerica Sociedad Animima
Marman de Mexico Sociedad Anomima De Capital Variable
Marman de Guatemala Sociedad Anomima
Marman del Ecuador Sociedad Anomima
Marman (Nufarm) 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
Neuchatel Pty Ltd
Nufarm Agriculture Inc
Nufarm Agriculture (Pty) Ltd
Nufarm Agriculture Zimbabwe (Pvt) Ltd
Nufarm Americas Holding Company
Nufarm Americas Inc
Nufarm Argentina SRL
Nufarm (Asia) Pte Ltd
Nufarm Asia Sdn Bhd
Nufarm Australia Limited
Nufarm BV
Nufarm Chile Limitada
Nufarm Coogee Pty Ltd
Nufarm Columbia Ltda
Nufarm Crop Products UK Ltd
Nufarm de Costa Rica
Nufarm de Guatemala SA
Nufarm de Mexico Sa de CV
Nufarm del Ecuador SA
Nufarm Deutschland GmbH
Nufarm do Brazil LTDA
Nufarm Energy Pty Ltd
Nufarm Espana SA
Nufarm GmbH
Nufarm GmbH
Nufarm GmbH & Co KG
Nufarm Holdings BV
68
NUFARM LIMITED
ANNUAL REPORT 2004
Notes
Place of
incorporation
Percentage of shares held
2004
2003
(b) Egypt
(b) New Zealand
(a) Australia
(b) New Zealand
Australia
France
N. Antilles
(b) Malaysia
USA
Costa Rica
Mexico
Guatemala
Ecuador
USA
(b) Australia
Australia
(b) Malaysia
(b) Malaysia
(b) Malaysia
South Africa
(a),(b) Australia
N. Antillies
Australia
(a) Australia
(b) Canada
South Africa
Zimbabwe
(b) USA
(b) USA
Argentina
(b) Singapore
Malaysia
(a),(b) Australia
(b) Netherlands
Chile
Australia
Columbia
UK
Costa Rica
Guatemala
Mexico
Ecuador
(b) Germany
Brazil
(a) Australia
(b) Spain
(b) Germany
(b) Austria
(b) Austria
(b) Netherlands
100
100
100
100
–
100
100
100
100
–
70
70
–
70
70
70
70
70
70
–
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
100
90
100
100
100
100
70
70
70
70
70
70
70
70
70
70
100
100
100
90
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
NUFARM LIMITED
ANNUAL REPORT 2004
69
NOTES
NOTES TO THE FINANCIAL STATEMENTS
25 Controlled entities continued
Nufarm Holdings (NZ) Limited
Nufarm Inagro Manufacturing Sdn Bhd
Nufarm Inc.
Nufarm Insurance Pte Ltd
Nufarm Investments Cooperatie WA
Nufarm Ireland Limited
Nufarm KK
Nufarm Malaysia Sdn Bhd
Nufarm Materials Ltd
Nufarm NZ Limited
Nufarm de Panama SA
Nufarm Phillipines Inc
Nufarm Platte Pty Ltd
Nufarm Portugal LDA
Nufarm SA
Nufarm SA
Nufarm SC
Nufarm Specialty Products Inc
Nufarm Technologies USA
Nufarm Technologies USA Pty Limited
Nufarm (Thailand) Ltd
Nufarm Treasury Pty Ltd
Nufarm UK Limited
Nufarm USA Inc.
Nufarm de Venezuela SA
Nuturf Pty Ltd
Opti–Crop Systems Pty Ltd
Pacific Raw Materials Australia Pty Ltd
Pacific Raw Materials Limited
Pharma Pacific Pty Ltd
PT Nufarm Indonesia
Resfun Pty Ltd
Rockmere Pty Ltd
Safepak Industries Sdn Bhd
Societe Civile Inpar
Selchem Pty Ltd
Societe d’Etudes et Applications Chimiques
Societe Civile Mobiliere Clama
Societe des Ecluses de la Garenne
TPL Limited
Notes
Place of
incorporation
Percentage of shares held
2004
2003
(b) New Zealand
Malaysia
(b) USA
Singapore
Netherlands
Ireland
Japan
(b) Malaysia
(a),(b) Australia
(b) New Zealand
Panama
Phillipines
Australia
Portugal
Argentina
France
France
(b)
(b)
(b) USA
New Zealand
Australia
Thailand
(a),(b) Australia
(b) United Kingdom
USA
Venezuela
(a),(b) Australia
(b) Australia
(a) Australia
New Zealand
(a) Australia
Indonesia
Australia
(a) Australia
Malaysia
France
(b)
(a) Australia
(b)
France
France
France
(b) New Zealand
100
100
100
100
100
100
100
100
100
100
100
–
100
100
100
100
100
100
100
100
–
100
100
–
100
100
75
100
100
100
70
–
100
70
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
75
100
100
100
70
90
100
70
100
100
100
100
100
100
68
NUFARM LIMITED
ANNUAL REPORT 2004
NUFARM LIMITED
ANNUAL REPORT 2004
69
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.
NOTES
NOTES TO THE FINANCIAL STATEMENTS
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.
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
Increase in retained profits on adoption of revised
accounting standards
AASB 1028: Employee benefits
AASB 1044: Provision for dividend
Include new members to the closed group
Dividends paid
Dividends provided
Retained profits at the end of the period
Statement of financial position
Current Assets
Cash assets
Receivables
Inventories
Tax assets
Prepayments
Total current assets
Non-current Assets
Receivables
Property, plant and equipment
Related company investments
Other financial assets
Intangible assets
Deferred tax assets
Other
Total non-current assets
TOTAL ASSETS
Consolidated
31.07.2004
$000
31.7.2003
$000
57,057
(17,993)
39,064
186,726
–
–
6,549
(33,656)
–
198,683
2,328
325,208
193,412
3,841
2,819
527,608
34,180
138,261
258,256
7,294
15,095
22,366
2,073
477,525
1,005,133
62,755
(4,317)
58,438
139,633
(451)
17,082
–
(10,894)
(17,082)
186,726
4,134
332,952
154,321
–
3,237
494,644
–
136,529
176,750
123,191
11,487
28,106
3,814
479,877
974,521
70
NUFARM LIMITED
ANNUAL REPORT 2004
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ANNUAL REPORT 2004
71
NOTES
NOTES TO THE FINANCIAL STATEMENTS
26 Closed group continued
Statement of financial position
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
TOTAL EQUITY
27
Interests in joint venture operations
The company has an 80% interest in the Nufarm–Coogee Joint Venture
representing its two chlor alkali plants in Western Australia.
Assets employed
Cash
Receivables
Inventory
Prepayments
Property, plant and equipment
Total assets employed
Capital expenditure commitments
Group’s share of joint venture operations profit:
Profit from ordinary activities before tax
Income tax on ordinary activities
Net profit after tax
Consolidated
31.07.2004
$000
31.7.2003
$000
471,784
33,586
–
7,472
512,842
10,000
2,018
6,840
18,858
531,700
473,433
217,730
57,020
198,683
473,433
204,513
68,114
10,459
7,289
290,375
281,302
4,432
6,504
292,238
582,613
391,908
149,219
55,963
186,726
391,908
2004
$000
2003
$000
1,668
2,275
825
150
14,518
19,436
829
8,692
(2,608)
6,084
1,276
1,954
614
115
13,253
17,212
1,201
9,888
(2,969)
6,919
70
NUFARM LIMITED
ANNUAL REPORT 2004
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ANNUAL REPORT 2004
71
NOTES
NOTES TO THE FINANCIAL STATEMENTS
28 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
2004
2003
647,804
3,997
203,620
855,421
162,410
1,017,831
189,627
2,355
203,620
395,602
138,661
534,263
621,657
2,304
201,523
825,484
183,846
1,009,330
271,277
2,304
201,523
475,104
75,697
550,801
–
–
–
–
–
–
–
–
–
–
–
–
19,645
–
–
19,645
–
19,645
15,963
–
–
15,963
–
15,963
Receivables Securitisation
Receivables from Nufarm Australia Limited, Crop Care Australasia Pty Ltd, Nufarm Americas Inc and Nufarm Agriculture Inc are sold to an
unrelated third party, in which the consolidated entity has no ownership interest. The consolidated entity does not have the capacity to control
the unrelated third party and accordingly does not consolidate the entity. At 31 July 2004, $138.6 million of receivables sold to the third party
remain uncollected (2003: $75.7 million).
29 Foreign currency exposures
a) Current assets
Amounts receivable in foreign currency which are not effectively hedged
US dollars
Euros
Other
b) Current liabilities
Amounts payable in foreign currency which are not effectively hedged
US dollars
Euros
British pounds
Other
Consolidated
2004
$000
2003
$000
11,898
5,693
1,343
18,934
20,299
12,946
3,669
36,914
30,893
17,445
2,703
169
51,210
43,482
5,089
4,479
2,718
55,768
During 2004, the company discontinued its previous practice of using balance sheet hedges to protect its net offshore
investment from currency fluctuations.
72
NUFARM LIMITED
ANNUAL REPORT 2004
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ANNUAL REPORT 2004
73
NOTES
NOTES TO THE FINANCIAL STATEMENTS
30 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.
b) Credit risk exposure
The consolidated entity’s exposures to on balance sheet risk are as indicated by the carrying amounts of its financial assets as indicated in the
statement of financial position. It does not have a significant exposure to any individual counterparty, as transactions are undertaken with a
large number of customers in various markets.
In relation to derivative financial instruments, whether recognised or unrecognised, credit risk arises from the potential failure of counterparties
to meet their obligations under the contract or arrangement. Total derivatives are disclosed in note 30(d).
c) 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
2004
2003
Buy
$000
Sell
$000
Average exchange rate
2004
2003
Buy
$000
Sell
$000
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
0.7046
0.7022
0.6394
0.6500
73,040
–
5,174
28,481
20,734
–
174,103
30,768
0.9234
0.9336
0.9123
0.9120
–
–
992
8,569
2,280
–
33,591
8,772
0.5811
0.5841
0.5772
0.5780
26,694
–
15,408
111,282
25,113
–
121,626
112,454
0.3919
0.3858
0.4041
0.4040
666
–
–
25,923
2,805
–
85,149
24,756
–
–
4,278
104,678
1,097
196,926
504
51,436
9,303
600,522
72
NUFARM LIMITED
ANNUAL REPORT 2004
NUFARM LIMITED
ANNUAL REPORT 2004
73
NOTES
NOTES TO THE FINANCIAL STATEMENTS
Carrying
amount
2004
$000
Consolidated
Net fair
value
2004
$000
Carrying
amount
2003
$000
Net fair
value
2003
$000
30 Financial instruments continued
d) 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 year for similar instruments with similar maturities.
Financial liabilities
Capital notes – one to five years
Derivatives
Forward exchange contracts are being used to hedge the
following foreign currency exposures.
Receivables – less than one year
Receivables – more than one year
Payables – less than one year
Forward exchange contracts, currency options and
cross currency interest rate swaps are being used to hedge
the following foreign currency exposures.
Foreign investments and advances – less than one year
Interest rate swaps are being used to hedge the following
interest rate exposures
– one to five years
Payable maturities – less than one year
– one to five years
203,620
203,156
201,523
205,475
7,262
–
101,150
7,242
–
100,816
52,869
333
51,436
51,191
328
51,564
15,408
174,255
15,408
187,600
370,569
176,750
371,269
202,444
–
178,481
–
177,253
–
179,204
–
179,314
74
NUFARM LIMITED
ANNUAL REPORT 2004
NUFARM LIMITED
ANNUAL REPORT 2004
75
NOTES
NOTES TO THE FINANCIAL STATEMENTS
30 Financial instruments continued
e) 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 4.2%
(2003: 4.2%)
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 Non-interest
bearing
1 to 5 years
$000
$000
< 1 year
$000
Total
$000
2004
31,534
–
–
–
189,627
2,355
–
(178,481)
13,501
–
–
–
1,289
–
1,289
203,620
–
–
2,700
178,481
384,801
2003
2,820
–
–
–
271,277
2,304
–
(179,204)
94,377
–
–
–
1,406
–
1,406
201,523
–
–
4,010
179,204
384,737
–
–
–
–
–
–
–
–
–
–
–
–
–
–
31,534
203,620
189,627
2,355
3,989
–
399,591
2,820
201,523
271,277
2,304
5,416
–
480,520
The weighted average interest rate for cash on deposit was 2.6% (2003: 2.0%). All other assets and liabilities are non-interest bearing.
f) 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
2004
2003
$000
Gains
$000
Losses
$000
Gains
$000
Losses
35
–
1
–
254
–
166
–
74
NUFARM LIMITED
ANNUAL REPORT 2004
NUFARM LIMITED
ANNUAL REPORT 2004
75
NOTES
NOTES TO THE FINANCIAL STATEMENTS
31 Director and executive disclosures
b) Remuneration of specified directors and specified executives
a) Details of specified directors and specified executives
(i) Specified directors
KM Hoggard
DJ Rathbone
GDW Curlewis
Dr WB Goodfellow
DG Mc Gauchie
GW McGregor
Dr JW Stocker
RFE Warburton
Sir Dryden Spring
Chairman
Managing director and chief executive
(Appointed 19 December 2003)
(Retired 11 December 2003)
(ii) Specified executives
JA Allen
B Benson
KP Martin
RF Ooms
DA Pullan
Group general manager crop protection
Group general manager marketing
Chief financial officer
Group general manager chemicals
Group general manager operations
(i) Remuneration policy
The board’s policy with regard to non-executive director
remuneration is to position board remuneration at the market
median with comparable sized listed companies. The board
determines the fees payable to non-executive directors within the
aggregate amount approved from time to time by shareholders.
At the company’s 2003 AGM, shareholders approved an aggregate
of $900,000. The board has created a non-executive share plan
whereby a director can elect to commit a proportion of director’s
fees to acquire company shares. The number of shares available
in the plan will be calculated quarterly using the weighted average
of the price at which shares traded on the ASX in the five days up
to and including the day when shares are allocated to a director.
Shares in the plan will not vest until the earlier
of three years or retirement.
The Nufarm remuneration policy has been developed to ensure
the company attracts and retains the calibre of people required
to successfully manage and create shareholder value from a
large diversified internationally based company. 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.
The company has adopted a remuneration policy based on total
target reward (TTR) which comprises two components:
• fixed reward (TEC) – cash and benefits that reflect local market
conditions and individual contribution. The reward level is set
relative to pertinent and prevailing executive employment market
conditions for high calibre talent in the geographies where Nufarm
operates. The company’s policy position for TEC for Australian
executives is the 50th percentile of the Mercer Survey of Australian
Major Corporates.
• an incentive program – the first half of the incentive program
reflects achievement of specific business objectives over six
monthly periods and is paid in cash. The second half is linked to
meeting predetermined financial objectives for the full year and is
delivered in a mixture of shares and options. The exception is the
current managing director who is paid in cash because of the very
substantial shareholding he currently controls in the company. For
the remaining executives, this payment is made in equity which
ensures a longer term focus to achieve benefits consistent with
increases in sustained shareholder value.
Each year, the board establishes performance hurdles for the incentive
program. These hurdles reflect targets for specific objectives and
increasing company value, consistent with the company’s business
and investment strategies.
76
NUFARM LIMITED
ANNUAL REPORT 2004
NUFARM LIMITED
ANNUAL REPORT 2004
77
NOTES
NOTES TO THE FINANCIAL STATEMENTS
Primary
Salary
and fees
Cash
bonus
Non-
monetary
benefits
Post-
employment
Super-
annuation
Equity
Other
Total
Retirement
benefit
plan1
(ii) Remuneration of specified directors and specified executives
Specified directors
KM Hoggard
DJ Rathbone
GDW Curlewis
Dr WB Goodfellow
DG Mc Gauchie
GW McGregor
Dr JW Stocker
RFE Warburton
Sir Dryden Spring
2004
2003
2004
2003
2004
2003
2004
2003
2004
2003
2004
2003
2004
2003
2004
2003
2004
2003
155,200
160,000
–
–
–
–
832,769
789,524
953,140
372,210
69,995
51,459
63,200
62,500
58,825
62,500
45,763
–
73,200
70,000
68,200
70,000
68,200
70,000
25,177
62,500
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
16,560
14,400
12,075
11,323
17,460
5,625
6,266
5,625
4,119
–
7,560
6,300
7,110
6,300
7,110
6,300
2,266
5,625
28,8002
–
155,550
–
356,110
174,400
–
291,004
–
–
1,867,979
1,515,520
–
–
50,360
–
131,020
68,125
10,8002
–
150,588
–
226,479
68,125
–
–
–
–
49,882
–
10,8002
–
48,190
–
139,750
76,300
10,8002
–
68,500
–
154,610
76,300
10,8002
–
150,500
–
236,610
76,300
–
–
149,7923
–
177,235
68,125
Total remuneration: specified directors
2004
2003
1,390,534
1,347,024
953,140
372,210
69,995
51,459
80,526
61,498
72,000
291,004
773,480
–
3,339,675
2,123,195
1 During the financial period, directors resolved to discontinue its retirement benefit plan.
Accrued benefits under the plan were calculated and paid to directors as set out below:
KM Hoggard
GDW Curlewis
Dr WB Goodfellow
GW McGregor
Dr JW Stocker
RFE Warburton
Base
fee
73,109
–
–
–
–
–
Super-
annuation
–
50,360
–
–
–
–
Equity
82,441
–
150,588
48,190
68,500
150,500
Total
155,550
50,360
150,588
48,190
68,500
150,500
2 During the course of the financial period the company created a non-executive directors share plan, which enables directors to elect to sacrifice 20% of base director fees for
the acquisition of company shares. The value of such shares is disclosed as equity.
3 Upon his retirement as a director, Sir Dryden Spring was paid a retirement benefit of $149,792. This was the amount accrued under the retirement benefit plan, which was
discontinued on 31 October 2003.
76
NUFARM LIMITED
ANNUAL REPORT 2004
NUFARM LIMITED
ANNUAL REPORT 2004
77
NOTES
NOTES TO THE FINANCIAL STATEMENTS
Primary
Cash
bonus
Non-
monetary
Post-
employment
Super-
annuation
plan
Salary
and fees
benefits
Equity
Other
Total
Retirement
benefit
31 Director and executive disclosures continued
Specified executives
DA Pullan
RF Ooms
KP Martin
JA Allen
B Benson
2004
2003
2004
2003
2004
2003
2004
2003
2004
2003
351,219
329,042
159,000
151,185
349,717
335,184
149,000
141,736
346,140
313,471
146,468
141,736
46,331
47,377
11,716
16,744
25,327
28,395
65,373
60,540
63,574
59,962
38,318
57,404
151,200
78,768
141,736
73,845
141,736
73,845
318,394
345,034
92,832
150,000
21,758
8,291
102,000
61,302
150,000
77,674
311,865
218,999
119,999
109,989
15,529
18,202
38,676
44,360
109,989
54,700
Total remuneration: specified executives
2004
2003
1,677,335
1,541,730
667,299
694,646
120,661
119,009
307,941
283,568
694,661
358,832
–
–
–
–
–
–
–
–
–
–
–
–
773,123
666,912
715,743
627,471
697,989
614,851
684,984
642,301
596,058
446,250
3,467,897
2,997,785
(c) Remuneration options: granted and vested during the year
During the year there were no options granted to directors or executives. There were also no options that vested during the year.
(d) Shares issued on exercise of remuneration options
During the year there were no options exercised by directors or executives.
(e) Option holdings of specified directors and specified executives
Granted as
remuneration
Options
exercised
Balance at
beginning
of period
1 Aug 2003
Net change
other
Balance at
end of
period
31 July 2004
Vested at 31 July 2004
Not
exercisable
Total
Exercisable
Specified directors
DJ Rathbone
566,443
Specified executives
JA Allen
B Benson
KP Martin
RF Ooms
DA Pullan
Total
153,091
98,345
143,406
143,406
153,091
1,257,782
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
566,443
566,443
566,443
–
–
–
–
–
–
153,091
98,345
143,406
143,406
153,091
1,257,782
153,091
98,345
143,406
143,406
153,091
1,257,782
153,091
98,345
143,406
143,406
153,091
1,257,782
–
–
–
–
–
–
–
As described in note 32, the options can be exercised within the next twelve months.
78
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ANNUAL REPORT 2004
79
NOTES
NOTES TO THE FINANCIAL STATEMENTS
Shares held
in Nufarm Ltd
Balance
at 1 Aug
2003
Granted
as
remuneration
Exercise
of options
Net
change
other
Balance
at 31July
2004
31 Director and executive disclosures continued
(f) Shareholdings of specified directors and specified executives
Specified Directors
KM Hoggard1,2
DJ Rathbone
GDW Curlewis
Dr WB Goodfellow1,2,3
DG Mc Gauchie
GW McGregor1,2
Dr JW Stocker1,2
RFE Warburton1,2
Sir Dryden Spring
Specified Executives
JA Allen
B Benson
KP Martin
RF Ooms
DA Pullan
Total
5,848,181
31,709,739
10,000
80,000
–
20,000
10,000
28,300
9,676
307,415
61,392
207,026
148,173
296,962
38,736,864
4,900
–
–
1,837
–
1,837
1,837
1,837
–
28,902
21,195
27,312
27,312
29,133
146,102
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
16,756
(1,013,572)
14,787
1,382,691
3,817
10,581
14,709
31,376
(1,213)
5,869,837
30,696,167
24,787
1,464,528
3,817
32,418
26,546
61,513
8,463
(140,000)
787
(5,000)
(20,000)
(140,000)
155,719
196,317
83,374
229,338
155,485
186,095
39,038,685
All equity transactions with specified directors and executives other than those arising from the exercise of remuneration options have been
entered into under terms and conditions no more favourable than those the entity would have adopted if dealing at arm’s length
1 During the financial period directors resolved to discontinue the non-executive retirement benefit plan. Accrued benefits for
Messrs Hoggard, Goodfellow, McGregor, Stocker and Warburton were converted into shares pursuant to rules of the non-executive directors share plan.
The directors cannot deal in these shares before the earlier of 10 years after acquisition or when the director retires.
2 Messrs Hoggard, Goodfellow, McGregor, Stocker and Warburton are participants in the non-executive share plan which enables participants to sacrifice 20%
of their base director fees to the acquisition of company shares.
3 The shareholding of Dr WB Goodfellow includes his relevant interest in:
(i) St Kentigern Trust Board (429,855 shares) – Dr Goodfellow is Chairman of the Trust Board;
(ii) three trusts of which he is a non-beneficial trustee (807,039 shares); and
(iii) Waikato Investment Company Limited (113,616 shares).
78
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ANNUAL REPORT 2004
79
NOTES
NOTES TO THE FINANCIAL STATEMENTS
31 Director and executive disclosures continued
(g) Loans to specified directors and specified executives
There were no loans to directors and specified executives
at July 31 2004.
(h) Other transactions and balances with specified directors and
specified executives
During the year there were no other transactions with specified
directors and specified executives.
32 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%
discount on market price at the date of the offer. The shares have
been issued partly paid with one 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 2004, the trustees of the Staff
Share Purchase Scheme No.2 held 218,600 (2003: 386,800) ordinary
shares paid to one cent per share, with $684,218 (2003: $1,265,000)
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% 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 $2,027,657 at 31 July 2004
(2003: $4,490,842). Each executive is entitled to exercise voting
rights attached to the shares allocated. At 31 July 2004 the trustees
of the Executive Share Purchase Scheme (1984) held 522,000 (2003:
2,116,200) ordinary shares, all of which were allocated.
There are 72 participants (2003: 114 participants) in total in the
above two schemes.
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. 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’s shares from the proceeds of
the amount with the savings institution. The share options are issued
at a 10% discount on market price at the date of offer. Share options
do not rank for dividends or carry voting rights. No employee chose
to exercise his/her option under the first offer and the options granted
under that offer have now expired. At 31 July 2004, 77,514 (2003:
90,587) share options were outstanding allowing the 21 participants to
exercise each option into one fully paid ordinary share.
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 ten years without board approval. An independent
trustee holds the shares and options on behalf of the executives.
At 31 July 2004 there were 65 participants (2003: 57 participants)
in the scheme and 1,572,401 shares (2003: 1,361,280) have been
allocated, and 1,437,692 (2003: 1,437,692) options granted, under
the plan. The 1,437,692 options were granted for a term of ten 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% of the number of the ordinary shares acquired with a
participant’s contribution in the form of additional ordinary shares.
Amounts over 10% 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% of
the value of the shares acquired with the paricipant’s contribution. An
independent trustee holds the shares on behalf of the participants.
There are 761 participants at 31 July 2004 (2003: 764 participants).
The cost of issuing shares is expensed in the year of issue.
80
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ANNUAL REPORT 2004
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ANNUAL REPORT 2004
81
NOTES
NOTES TO THE FINANCIAL STATEMENTS
Weighted
average
exercise
price
2004
Number
of options
2003
Weighted
average
exercise
price
2003
Number
of options
2004
32 Employee share purchase schemes continued
The power of appointment and removal of the trustees for the share purchase schemes is vested in the company
Balance at the beginning of the period
Granted
Expired
Balance at the end of the period
1,528,279
–
(13,073)
1,515,206
2.72
–
3.08
2.72
1,668,925
–
(140,646)
1,528,279
2.79
–
3.46
2.72
Number
of options
Grant
date
Exercise
date
Expiry
date
2004
77,514
871,249
566,443
31.01.2000
26.10.2001
3.12.2001
28.02.2005
26.10.2004
13.12.2004
1.3.2005
26.10.2011
13.12.2011
2003
90,587
871,249
566,443
31.01.2000
26.10.2001
3.12.2001
28.02.2005
26.10.2004
13.12.2004
1.3.2005
26.10.2011
13.12.2011
Weighted
average
exercise
price
3.08
2.70
2.70
3.08
2.70
2.70
80
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ANNUAL REPORT 2004
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ANNUAL REPORT 2004
81
NOTES
NOTES TO THE FINANCIAL STATEMENTS
33 Superannuation commitments
The company operates a defined benefit pension scheme in the United Kingdom, where the benefits are based on estimates of final pensionable
pay. Under this scheme, contributions to the scheme are charged to the statement of financial performance so as to spread the cost of pensions
over employees’ working lives with the company. The contributions are determined by the scheme’s qualified actuaries on the basis of regular
contributions. The pensions costs are determined with the advice of independent qualified actuaries using the projected unit method.
Details of superannuation funds as extracted from
their most recent financial report
Accrued benefits
Net market value of plan assets
Deficit
The above amounts were measured at 31 July 2004.
2004
$000
34,528
20,391
14,137
2003
$000
28,079
17,319
10,760
The company operates a defined benefit pension scheme in the Netherlands, where the benefits are based on pensionable salary. Under
this scheme, contributions to the scheme are charged to the statement of financial performance so as to spread the cost of pensions over
employees’ working lives with the company. The first full actuarial valuation of the scheme was completed as at 31 July 2004.
Liabilities have been calculated using the projected unit method with the advice of independent qualified actuaries.
Details of superannuation funds as extracted from
their most recent financial report
Accrued benefits
Net market value of plan assets
Deficit
The above amounts were measured at 31 July 2004.
2004
$000
12,816
8,375
4,441
2003
$000
–
–
–
In France, a payments system exists whereby the employees receive a payment upon retirement based on their final salary and years of service
with their final employer. This system has some similarity to a defined benefit superannuation scheme.
At July 2004, an actuarial assessment of the future potential liability was EUR 5.9 million (AUD$10.1 million)
82
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ANNUAL REPORT 2004
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ANNUAL REPORT 2004
83
NOTES
NOTES TO THE FINANCIAL STATEMENTS
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
• 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
Bayer CropScience Nufarm Limited
Agchem Receivables Corp
SRFA LLC
Consolidated
2004
$000
11,200
11,182
52,769
2,388
1,424
2003
$000
10,976
8,553
32,127
–
–
sales to
purchases from
loan payable
sales to
loan payable
c) Ultimate controlling entity
The ultimate controlling entity of the consolidated entity is Nufarm Limited (ABN 37 091 323 312).
35 Auditors’ remuneration
Amounts received or due and receivable by
Ernst & Young Australia for
Audit services
Tax compliance services
IFRS conversion advice
Tax – assistance
Tax consolidation advice
Receivables securitisation program review
Total fees – Ernst & Young Australia
Amounts received or due and receivable by
Ernst & Young affiliates for
Audit services
Tax compliance services
Receivables securitisation program review
Corporate structure advice
Other services
Total fees – Ernst & Young affiliates
Amounts received or due and receivable by other
audit firms for
Audit services
Consolidated
Parent
2004
$000
2003
$000
2004
$000
2003
$000
394
315
43
178
176
–
1,106
705
208
–
120
21
1,054
378
225
–
–
–
84
687
641
141
56
122
–
960
58
–
–
–
–
–
58
–
–
–
–
–
–
148
117
–
96
34
–
–
–
–
130
–
–
–
–
–
–
–
82
NUFARM LIMITED
ANNUAL REPORT 2004
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ANNUAL REPORT 2004
83
NOTES
NOTES TO THE FINANCIAL STATEMENTS
36 Discontinuing operation
Businesses sold during 2004 include the Florigene group (Oct 2003), Agrow (Mar 2004),
MCFI (Aug 2003), Pharma Pacific (July 2004) and the Wettasoil trademark (July 2004).
The Florigene business is included in the other product segment and Agrow and MCFI are
in the Crop Protection segment. The 2003 business sold was the Fernz specialty chemical
business in Australia and New Zealand. The disposal of fixed assets and inventories gave
rise to the following items of revenue and expense during the year.
Financial performance information
Revenues from ordinary activities
Expenses
Profit from ordinary activities before income tax expense
Income tax expense relating to ordinary activities
Net profit
Asset disposals
Total assets
Total liabilities
Net assets
Proceeds from divestment of business
Carrying value of assets sold in divestment
Amortisation of intellectual property
Other costs of divestment
Loss on divestment
Related income tax
Loss on divestment (net of income tax expense)
Cash flows
Operating
Investing
Financing
Net cash flows
37 Subsequent events
Consolidated
2004
$000
2003
$000
2,917
3,475
(558)
(71)
(487)
12,045
1,724
10,321
11,672
(10,321)
–
–
1,351
–
1,351
(411)
(23)
(1,310)
(1,744)
50,922
51,445
(523)
(287)
(236)
50,055
403
49,652
57,852
(49,652)
(6,194)
(2,460)
(454)
1,722
(2,176)
17,542
(134)
(16,096)
1,312
On 29 September 2004, the directors declared a final dividend of 15 cents per share, fully franked, payable 12 November 2004.
On 29 September, Nufarm signed a memorandum of understanding, subject to due diligence and board approval, to acquire 49.9% of Agripec,
a Brazilian crop protection company. The consideration is expected to be USD 120 million.
The company is in advanced discussions relating to the sale of its pharmaceutical intermediate business (SEAC) and its Nufarm Specialty
Products subsidiary. The expected proceeds will be in excess of their carrying values.
84
NUFARM LIMITED
ANNUAL REPORT 2004
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ANNUAL REPORT 2004
85
NOTES
NOTES TO THE FINANCIAL STATEMENTS
38
Impact of adopting AASB equivalents to IASB standards
The Australian Accounting Standards Board (AASB) is adopting
International Financial Reporting Standards (IFRS) for application to
reporting periods beginning on or after 1 January 2005. This means
that Nufarm will be required to prepare financial statements for the
year ending 31 July 2006 that comply with Australian equivalents of
IFRS and their related pronouncements as issued and recognised
by the AASB.
Nufarm will report its compliance with IFRS for the first time for the
half-year ended 31 January 2006. The transitional rules for the first
time adoption of IFRS require entities to restate their comparative
financial statements using all Australian equivalents of IFRS. The
majority of the adjustments required on transition will be made to
opening retained earnings in the opening IFRS balance sheet as at
1 August 2004. Comparatives restated under IFRS will not be
reported in the financial statements until 31 January 2006, being the
first half year reported in compliance with IFRS.
Nufarm has commenced transitioning its accounting policies and
financial reporting from current Australian standards to Australian
equivalents of IFRS. The company has allocated internal resources
and engaged external consultants to perform diagnostics and
conduct impact assessments to isolate key areas that will be
impacted by the transition to IFRS. As a result of these procedures,
Nufarm has graded the impact of each change in standard as either
high, medium or low.
Set out below are the key areas where accounting policies may
change and have an impact on the financial reports of Nufarm. It
should be noted that at this stage Nufarm has not fully quantified
the impact of each area on the financial statements.
Goodwill
Under AASB 3 Business Combinations, goodwill will no longer be
amortised but instead will be subject to annual impairment testing
focusing on the cash flows of related cash generating units. This will
result in a change in the group’s current accounting policy which
amortises goodwill on a straight line basis over the period in which
benefits are expected to arise, not exceeding 20 years.
Impairment of assets
Under AASB 136 Impairment of Assets, the recoverable amount of an
asset is determined as the higher of net selling price and value in use.
This will result in a change in the group’s current accounting policy
which determines the recoverable amount of an asset on the basis of
discounted cash flows. Under the new policy, if there is impairment of
assets, it will likely be recognised sooner and the amount of write-
downs will be greater.
Employee benefits
Nufarm does not currently recognise an asset or liability for the net
position of the defined benefit schemes it sponsors. Under AASB
119 Employee Benefits, Nufarm will be required to recognise the net
surplus or deficit in their employer sponsored defined benefit funds as
an asset or liability, respectively, based on actuarial valuations of each
scheme. The initial adjustment on transition will be recognised
through retained earnings and subsequent adjustments will be to the
statement of financial performance.
Income taxes
Under AASB112 Income Taxes, a new method of accounting for
income taxes, known as the ‘balance sheet liability method’, will
be adopted, replacing the current ‘tax effect income statement’
approach. The new method recognises deferred tax balances in the
statement of financial position when there is a difference between the
carrying value of an asset or liability and its tax base. Adoption of this
new method may result in increased deferred tax assets and liabilities
in the balance sheet.
Hedging and financial instruments
AASB 139 Financial Instruments: Recognition and Measurement, is
required to be adopted by Nufarm prospectively from 1 August 2005.
This standard requires all financial instruments to be recognised in the
statement of financial position and most financial assets to be carried
at fair value. AASB 139 recognises fair value hedge accounting,
cash flow hedge accounting and hedges of investments in foreign
operations. Fair value and cash flow hedge accounting can only be
considered where effectiveness tests are met on both a prospective
and retrospective basis. Ineffectiveness outside the prescribed range
precludes the use of hedge accounting and may result in amounts
recognised in the statement of financial performance, which had not
been recognised previously.
Intangible assets
Under AASB 138 Intangible Assets, costs incurred in the research
phase of the development of an internally generated intangible must
be expensed. This will result in a change to the group’s current
accounting policy which allows capitalisation of the research and
development costs of major new businesses to the extent that future
benefits are expected beyond reasonable doubt. Under the new policy
all research costs will be expensed.
39 Significant non–operating items
The company completed several transactions in 2004 which,
collectively, did not have a material impact on the final results.
1. Intellectual property
The intellectual property associated with several non-core and
discontinued development projects was either sold or written off.
The net impact was a loss of $0.7 million.
2. Sale of operations
Florigene Limited, Nufarm’s South African operations and Agrow,
a small importing business, were sold. The net impact was nil.
3. European structural changes
The plant at Mulhouse (France) was closed, the Paris head office
building was sold and a reorganisation of the French and English
workforces was initiated in 2004. The net impact was a loss of
$0.3 million.
These initiatives combined to generate an after-tax loss of $1.0 million,
which was further offset by an approximate $0.6 million taxation
adjustment relating to prior years.
84
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ANNUAL REPORT 2004
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ANNUAL REPORT 2004
85
DIRECTORS’ DECLARATION
The directors declare that the financial statements and
associated notes:
1. comply with Accounting Standards and Corporations
Regulations 2001;
2. give a true a fair view of the financial position as at 31 July 2004
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
DJ Rathbone
Director
Melbourne
29 September 2004
86
NUFARM LIMITED
ANNUAL REPORT 2003
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ANNUAL REPORT 2004
89
TREND STATEMENT
SUPPLEMENTARY INFORMATION
2004
$000
2003
$000
2002
$000
2001
$000
2000
$000
1999
$000
Operating results
Sales revenue
Operating profit after tax and minority interests
Non-recurring item after tax
Profit 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
1,576,815
76,202
–
1,458,811
64,269
12,824
1,429,275
56,834
–
1,323,232
51,138
(55,664)
1,213,042
51,984
4,206
1,122,597
43,949
8,778
76,202
33,656
42,546
77,093
10,894
66,199
56,834
27,952
28,882
(4,526)
27,808
(32,334)
56,190
26,818
29,372
52,727
21,834
30,893
210,530
349,964
560,494
149,219
313,102
462,321
147,333
243,706
391,039
145,593
207,208
352,801
145,066
243,446
388,512
129,150
224,980
354,130
736,292
550,862
185,430
695,286
880,716
116,602
203,620
320,222
560,494
711,456
506,925
204,531
646,358
850,889
187,045
201,523
388,568
462,321
710,976
590,050
120,926
615,246
736,172
152,248
192,885
345,133
391,039
618,179
454,309
163,870
573,702
737,572
246,323
138,448
384,771
352,801
560,170
420,088
140,082
578,766
718,848
197,524
132,812
330,336
388,512
524,826
374,035
150,791
532,540
683,331
189,121
140,080
329,201
354,130
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
15.1%
23.0c
$2.17
15.3%
20.0c
$2.05
15.4%
18.0c
$1.57
13.8%
18.0c
$1.42
14.0%
17.2c
$1.62
13.2%
14.8c
$1.61
NUFARM LIMITED
ANNUAL REPORT 2004
89
SHAREHOLDER AND STATUTORY INFORMATION
Details of shareholders, shareholdings and top 20 shareholders
Listed securities – 8 October 2004
Fully paid ordinary shares
Partly paid (unquoted)
Twenty largest shareholders
Falls Creek No 2 Pty Ltd
Amalgamated Dairies Limited
JP Morgan Nominees Australia
National Nominees Limited
Lawrence Holdings Limited
ANZ Nominees Limited
RBC Global Services Australia
Grantali Pty Ltd
Citicorp Nominees Pty Limited
Westpac Custodian Nominees
Challenge Investment Company
The Avalon Investment Trust
Suncorp Custodian Services Pty Limited
AMP Life Limited
Cogent Nominees Pty Limited
Australian Foundation Investment Company Limited
Trustee Nufarm Global Share Plan
Trustee Nufarm Executive Share Plan
RBC Global Services Australia Nominees Pty Limited
First NZ Capital Custodians Limited
Distribution of shareholders
Size of holding
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Number of
holders
10,625
Number of Percentage
held by
securities
top 20
64.72%
167,735,767
233,325
Ordinary shares
as at 8.10.04
25,680,987
14,951,602
14,328,368
7,657,272
5,743,750
5,455,531
4,525,148
4,037,403
3,266,511
3,134,815
2,982,868
2,491,448
2,322,177
2,294,209
1,945,561
1,910,785
1,625,211
1,547,401
1,503,629
1,148,246
Number of
Holders as at
8.10.04
3,181
5,349
1,224
793
78
Percentage of issued
capital as at 8.10.04
15.31
8.91
8.54
4.57
3.42
3.25
2.70
2.41
1.95
1.87
1.78
1.49
1.38
1.37
1.16
1.14
0.97
0.92
0.90
0.68
Ordinary
shares held
as at 8.10.04
1,924,673
13,591,802
8,542,790
15,698,915
127,977,587
Of these, 80 shareholders held less than a marketable parcel of shares of $500 worth of shares (71 shares).
In accordance with the ASX Listing Rules, the last sale price of the company’s shares on the ASX on 8 October 2004 was used to
determine the number of shares in a marketable parcel.
90
NUFARM LIMITED
ANNUAL REPORT 2004
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ANNUAL REPORT 2004
91
SHAREHOLDER AND STATUTORY INFORMATION CONTINUED
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 8 October 2004, 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
ING Australia Holdings Ltd
(and related companies)
Date of notice
24 August 2000
24 August 2000
24 August 2000
24 August 2000
24 August 2000
25 February 2004
30 September 2004
Number and percentage of shares in
which interest held at date of notice
Number
14,950,815
14,968,110
15,329,898
15,685,712
Interest %
9.69
9.70
9.93
10.16
15,347,193
32,004,125
8,640,409
9.94
19.08
5.15
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 DJ Rathbone has a non-beneficial interest in 286,603 shares as trustee of the Nufarm Limited staff share plan.
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 9 December 2004 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 rely on
paper documentation.
Shareholders seeking more information about CHESS should
contact their stockbroker or the ASX.
Share register and other enquiries
Gain access to your shareholding information in a number of ways.
The details are managed via our registrar, Computershare Investor
Services and can be accessed as outlined below.
Please note: Your Shareholder Reference Number (SRN) or Holder
Identification Number (HIN) is required for access.
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ANNUAL REPORT 2004
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ANNUAL REPORT 2004
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SHAREHOLDER AND STATUTORY INFORMATION CONTINUED
Internet account access
Shareholders have been requesting the opportunity to have access
to their details via the Internet. We have been able to provide two
levels of access: read only and online portfolio updating capability.
■ View shareholding (read only access)
Step 1 Go to www.computershare.com/au/investors
Step 2 Select view shareholding and enter NUF or Nufarm Limited
InvestorPhone (Australian shareholders only)
InvestorPhone provides telephone access 24 hours a day seven
days a week.
Step 1 Call 1300 85 05 05
Step 2 Enter the company (ASX) code – NUF
Step 3
Enter your securityholder reference number (SRN) or
holder identification number (HIN)
Step 3
Enter shareholder reference number (SRN) or holder
identification number (HIN)
Step 4
Step 4 Read only access to:
– Account balance – Transaction history
– Payment instructions – Payment history
– Sign up for electronic securityholder communications
■ Investor Centre (online portfolio updating capability)
Step 1 Go to www.computershare.com/au/investors
Follow the prompts to gain secure, immediate
access to your:
- holding details
- registration details
- payment information
Dividends
A final dividend of 15 cents per share will be paid on 12 November
2004 to shareholders registered on 29 October 2004. For Australian
tax purposes, the dividend will be 100 per cent franked at the 30
per cent tax rate.
Step 2 Enter user ID and PIN or access the ‘register here’ button
Step 3
Follow the prompts to register. For security purposes,
Computershare will generate a PIN and mail it to your
registered address.
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.
Step 4
Enjoy the access to Investor Centre to view, evaluate
and manage your portfolio
Key dates
• 29 October 2004
Record date (books closing) for 2003–2004 final dividend
User you PIN and user ID to:
Manage
■ view portfolio of all securities managed by Computershare
■ add securities not managed by Computershare to your portfolio
■ view and set up payment instructions
■ sign up for electronic securityholder communications
■ retrieve holding statement
■ request statements
• 12 November 2004
Final dividend for 2003–2004 payable
• 29 October 2004*
Annual report sent to shareholders
• 9 December 2004
Annual general meeting
• 29 March 2005*
Update
■ change of address (company or portfolio)
■ add/change Tax File Reference Number *
View
■ view account balances and transaction history
■ view payment history
Evaluate
■ company news, profiles and charts
* 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.
Announcement of profit result for half year ending
31 January 2005
• 31 July 2005
End of financial year
* Subject to confirmation
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 Victoria 3028 Australia
92
NUFARM LIMITED
ANNUAL REPORT 2004
DIRECTORY
Directors
KM Hoggard – Chairman
DJ Rathbone – Managing Director
GDW Curlewis
Dr WB Goodfellow
GA Hounsell
DG McGauchie AO
GW McGregor AO
Dr JW Stocker AO
RFE Warburton
Company secretary
R Heath
Solicitors
Arnold Bloch Leibler & Co
333 Collins Street
Melbourne Victoria 3000 Australia
Sylvia Miller & Associates
Locked Bag 50
Toorak Victoria 3142 Australia
Auditors
Ernst & Young
120 Collins Street
Melbourne Victoria 3000 Australia
Trustee for capital note holders
New Zealand Permanent Trustees Ltd
Share registrar
Australia
Computershare Investor Services Pty Ltd
GPO Box 2975EE
Melbourne Victoria 3001 Australia
Telephone: 1300 85 05 05
Outside Australia: 61 3 9415 4000
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
Laverton North Victoria 3026 Australia
Telephone: 61 3 9282 1000
Facsimile: 61 3 9282 1001
NZ 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
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MANAGING DIRECTOR’S REVIEW
HEALTH SAFETY AND ENVIRONMENT
CROP PROTECTION
INDUSTRIAL CHEMICALS
MANAGEMENT TEAM
BOARD OF DIRECTORS
CORPORATE GOVERNANCE
DIRECTORS’ REPORT
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STATEMENT OF FINANCIAL PERFORMANCE
STATEMENT OF FINANCIAL POSITION
STATEMENT OF CASH FLOWS
NOTES TO FINANCIAL STATEMENTS
DIRECTORS’ DECLARATION
INDEPENDENT AUDIT REPORT
TREND STATEMENT
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NUFARM LIMITED 2004 ANNUAL REPORT