nufarm limited
ANNUAL REPORT
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1 KEY EVENTS
1 FACTS IN BRIEF
2 MANAGING DIRECTOR’S REVIEW
8 CORPORATE STRATEGY
14 BUSINESS REVIEW
14 HEALTH, SAFETY AND ENVIRONMENT
16 CROP PROTECTION
26 MANAGEMENT TEAM
28 BOARD OF DIRECTORS
30 CORPORATE GOVERNANCE
36 DIRECTORS’ REPORT
44 LEAD AUDITOR’S
INDEPENDENCE DECLARATION
45 INCOME STATEMENT
46 BALANCE SHEET
47 STATEMENT OF CASH FLOWS
48 STATEMENT OF RECOGNISED
INCOME AND EXPENSE
49 NOTES
104 DIRECTORS’ DECLARATION
105 INDEPENDENT AUDIT REPORT
107 SHAREHOLDER AND STATUTORY
INFORMATION
112 DIRECTORY
1
key events
• wholly owned businesses generate
26% net profit growth
• challenging conditions in brazil have negative
impact on agripec contribution
• substantial benefits from reorganisation of
manufacturing assets in europe
• futher acquisitions consolidate position in
australian seeds business
facts in brief
12 months
ended 31.07.06
12 months
ended 31.07.05
$000
121,106
1,676,746
709,366
1,927,125
$000
121,660
1,573,988
617,314
1,748,731
Trading results
Operating profit after tax
Crop protection sales revenue
Total equity
Total assets
Ratios
Net debt to equity
Net tangible assets per ordinary share
81%
2.41
78%
2.45
Distribution to shareholders
Annual dividend per ordinary share
30 c
26 c
People
Staff employed
2,315
2,279
Front cover: Maize {corn} is the world’s largest crop. The top four producers are USA, China, Brazil and Mexico.
nufarm limited 2006
operating profit
group sales
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7
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2006
2005
2004
2003
2002
2006
2005
2004
2003
2002
ebitda
return on funds employed
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2006
2005
2004
2003
2002
2006
2005
2004
2003
2002
net debt to equity
earnings per share –
excluding discontinued operations
%
2
5
1
%
8
9
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1
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8
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2006
2005
2004
2003
2002
2006
2005
2004
2003
2002
Nufarm made the transition to the new Australian Accounting Standards (AIFRS) in 2006 from the previous accounting standard known
as AGAAP. For comparison, the 2005 data has been restated under AIFRS. Data relating to earlier years is according to AGAAP.
�
3
managing director’s review
The 2006 financial year was challenging on a number of fronts for Nufarm
and for the global crop protection industry in general. Despite those challenges,
the company generated 26 per cent net profit growth from its wholly owned
businesses and is very well positioned to achieve additional growth over future years.
The company achieved a net profit of $121.2 million for the year ended 31 July,
2006. After allowing for non-operating items, the tax paid operating profit of $121.1
million is slightly below the previous year’s net operating profit of $121.7 million.
Total group sales from continuing operations were $1.68 billion, up just over
6.5 per cent on the 2005 year.
The excellent performance from Nufarm’s wholly owned crop protection
businesses was offset by a substantially lower contribution from Nufarm’s 49.9
per cent equity interest in Brazilian crop protection company, Agripec.
Negative farm sector economics in Brazil and a conservative risk management
approach resulted in Agripec making a net profit contribution of $1.9 million,
after financing costs of $9.7 million (2005: $5.1 million). This is well below
the $26.9 million contribution booked from this investment in the 2005 year.
Additional detail relating to the business conditions in Brazil and Agripec’s
performance are contained in the business review section of this report.
While conditions in Brazil remain uncertain in the immediate future,
I remain very confident that our investment there will generate excellent
returns over the medium to longer term.
Nufarm’s North American and European operations posted strong growth
in revenues and profit, with the European businesses also benefiting from
efficiency gains in several manufacturing locations.
The company’s Australian business capitalised on sales of new products into
higher margin segments and was able to achieve a solid performance despite
very mixed seasonal conditions across Australia’s major cropping regions in
the last few months of the financial year.
Australasia accounted for 45 per cent of total sales; the Americas 32 per cent
and Europe 23 per cent. Nufarm’s interest in Agripec is equity accounted and
the sales are therefore not included in the above revenue splits.
Earnings per share (excluding discontinued operations) were 60.3 cents, in line
with last year’s 60.5 cents.
Net debt to equity was up slightly at year end (81 per cent versus 78 per cent at
31 July 2005), due to an increase of $108 million in working capital requirements.
Opposite: Approximately 27% of the conventional crop protection market is for fruit and vegetables,
grown for human consumption throughout the world.
nufarm limited 2006
4
managing director’ s review
crop pr o
t
c
e
t
i o n sales by regio
38%
n
2
0
0
6
32%
t
c
e
t
crop pr o
i o n sales by regio
41%
n
2
0
0
5
28%
australia
americas
europe
asia
new zealand
3%
4%
23%
$1.677 mil l i o n
australia
americas
europe
asia
new zealand
4%
4%
23%
$1.574 mil l i o n
rop pr o t e
c
o
r
y
2
0
0
6
i o n s ales by categ
t
c
4%
10%
herbicides
fungicides
insecticides
t
c
rop pr o t e
c
o
r
y
2
0
0
5
i o n s ales by categ
4%
8%
herbicides
fungicides
insecticides
86%
88%
nufarm limited 2006
5
managing director’s review
Trading receivables were $42 million higher due to increased June/July sales in
North America and Europe (June/July group sales up $61 million on the previous
year). Trade creditors were some $59 million lower in 2006, associated with
earlier purchasing of inventory to meet anticipated sales demand in Australia.
Seasonal conditions meant that demand was lower than expected.
Return on average funds employed was 17.8 per cent.
Net interests costs increased from $38.3 million to $49.2 million due to a full
year of interest on debt associated with the Agripec investment (an additional
$5 million in interest) and a combination of higher debt utilisation for working
capital and increased interest rates in the USA and Australia.
While the overall tax rate was consistent with the previous year, total taxes were
higher due to the increased profitability of the wholly owned businesses.
non-operating items
The company booked a small net profit ($47,000) from the combination of the
sale of non-core businesses, costs associated with various restructuring initiatives
and other non-operating items during the 2006 reporting period.
final dividend
Directors have declared a fully franked final dividend of 20 cents per share (last
year 17 cents per share), which will be paid on 10 November to the holders of all
fully paid shares in the company as at the close of business on 20 October.
The resulting full year dividend payment of 30 cents per share is an increase of
four cents (15 per cent) on the previous year.
subsequent events
Acquisition of Roundup Ready® canola program
The company announced on 6 September that it had acquired a licence to develop
and commercialise Roundup Ready® canola in Australia. Nufarm paid Monsanto
a total of $10 million for Monsanto’s Roundup Ready® canola germ plasm and a
licence to the Roundup Ready® canola trait.
The agreement complements Nufarm’s recent acquisitions of several seed
businesses in Australia and allows Nufarm to accelerate the development and
introduction of new seed technologies.
Roundup Ready® is a genetic trait that allows farmers to use Roundup herbicide
over the top of their crops, offering broad spectrum and efficient weed control
and simplifying production of those crops.
Proposed divestment of chlor-alkali interests
The company has reached agreement to sell its 80 per cent interest in the Nufarm
Coogee joint venture to its joint venture partner, Coogee Chemicals Pty Ltd.
Opposite: Cereal grains, such as barley, are grown in greater quantities world wide than any other type of crop.
nufarm limited 2006
6
managing director’s review
The joint venture operates two chlor-alkali plants in Western Australia,
supplying chlorine as a feedstock for the manufacture of titanium dioxide.
In the 2006 period, this business generated an operating profit contribution
to Nufarm of $9.1 million (reported as profit on discontinued operations in
the profit and loss statement), up from $6.9 million in the previous year.
The improvement was attributable to higher sales of chlorine and an increase
in the world indicator price for caustic soda.
The transaction involves the sale of Nufarm’s interest, with completion scheduled
for 31 July 2007. Nufarm will book a full 12 months earnings contribution from
the joint venture in 2007, albeit with lower profit expectations due to an expected
downturn in caustic soda prices.
The consideration on the sale will be at least $48 million, with the final price
determined as at completion date. The profit on sale will be approximately
$24 million.
Acquisition in Italy
The company announced on 28 September that it has reached agreement to
acquire a crop protection business in Italy for €6.4 million. This will provide
Nufarm with an operational base from which to grow our sales in this important
West European market.
Replacement of capital notes
The company has announced a public offer of a new hybrid security.
The proposed offer is for A$250 million of Nufarm Step-up Securities (‘NSS’),
with the ability to accept oversubscriptions of up to A$50 million. This offer
will effectively ‘replace’ the capital notes that are currently on issue.
our people
Nufarm’s employees continue to demonstrate tremendous loyalty and
commitment to the company and have again worked very hard to drive profitable
growth in the various businesses around the world.
Directors and the senior management team would like to acknowledge
those efforts.
The company has developed and nurtured a strong culture that empowers
employees and recognises that the people in our organisation are fundamental
to Nufarm’s overall success.
During the 2006 financial year, we have progressed our talent development
programs and worked with managers to ensure future leaders are identified and
encouraged. As the company continues to expand, there will be an ongoing need
to ensure we retain and attract quality people in all areas of the business.
nufarm limited 2006
7
managing director’s review
outlook
The company will continue to pursue profitable growth via the expansion of its
geographic platform and an accelerated program of new product introductions.
Nufarm remains in a strong position to achieve ongoing revenue and profit
growth in established overseas markets such as North America and Western
Europe and will be adding to its product portfolio in those markets during the
current financial year.
While seasonal conditions remain challenging in Australia, the business is
anticipating some growth in certain segments and further progress with the
recently established seeds business.
Additional expansion into emerging growth markets such as Eastern Europe
will be approached with a high regard for appropriate risk management.
The immediate outlook for the farm sector in Brazil remains uncertain.
Nufarm’s focus will be to work with Agripec management to further expand
the product range and continue the diversification of selling opportunities
into new crop segments. This will ensure that Agripec is well positioned to
take advantage of any improvement in trading conditions in Brazil.
Despite a substantial reduction in the earnings contribution from Agripec in
2006, Nufarm is confident of some growth in the Agripec contribution in the
current year. However, management remains cautious and forecasts have again
been prepared on a very conservative basis.
More broadly, the company continues to evaluate additional acquisition
opportunities on both a market specific and regional basis.
On a like-for-like basis, the company is forecasting net profit growth of
approximately eight per cent in 2007, with that forecast taking due regard to
the current outlook for unfavourable seasonal conditions in Australia, the
uncertainty in the Brazilian farm sector, and a competitive international
market for our products.
The long-term objective of achieving an average of 10 per cent growth in net
operational earnings has been maintained and the directors are of the opinion
that the future of the company remains positive.
Doug Rathbone
Managing Director
29 September 2006
nufarm limited 2006
8
corporate strategy
a consistent strategy
in 2000, nufarm
adopted a number
of clear strategic
objectives and set
about ensuring that
the direction and
management of the
business reflected
those objectives:
• to be a focused crop
protection company
• to build a strong
geographic platform
• to expand the
product portfolio
nufarm limited 2006
9
corporate strategy
focused on crop protection
With a continuing requirement
for improved efficiencies in global
food production and new growth
drivers – such as the emerging bio-
fuels sector – we see significant
future opportunities in the crop
protection business.
Above left: Australian subsidiary Crop Care
launched suSCon Maxi granules in 2006, using
patented sustained release technology to control
grubs in newly planted sugar cane.
Above right: Application of Regalis, Nufarm’s
new Australian bio-regulator, helps orchardists
manage the correct balance between apple
production and tree growth.
Opposite: The world’s major commercial citrus
growing areas include southern China, the
Mediterranean region, South Africa, Australia,
the United States and South America.
For more than 50 years Nufarm has
been manufacturing and supplying
crop protection products. While
it has also owned – and profitably
operated – businesses in other
industry segments, it recognised
that the greatest potential to create
sustainable growth in shareholder
value was to be a focused crop
protection company.
In the past five years, Nufarm has
divested a number of businesses –
in a way that maximised the returns
on the sale of those assets – and
redeployed the capital realised into
the core crop protection business.
Nufarm is now one of the world’s top
10 crop protection companies, with
leadership positions in a number of
markets and products.
As well as competing with other
global crop protection companies
in various markets around the
world, Nufarm also has supply
arrangements, joint ventures and
other commercial relationships that
combine to form a valuable network
with detailed market knowledge.
nufarm limited 2006
10
corporate strategy
Nufarm has manufacturing and marketing
operations throughout Australia, New Zealand,
Asia, the Americas and Europe and sells products
in more than 100 countries around the world
Nufarm has a clear leadership position in the crop
protection industry in Australia and New Zealand
Nufarm is achieving strong growth in the USA –
the world’s largest crop protection market –
with important new products being introduced
With an operational presence now established in the
major markets of Western Europe, Nufarm is looking at
future expansion opportunities in Eastern Europe
Some emerging markets – such as Brazil –
have proven to be more volatile in terms of business
conditions, but have the potential for excellent
medium to long term growth
nufarm limited 2006
11
corporate strategy
building a strong geographic platform
Nufarm’s geographic diversification
reduces the company’s exposure
to adverse impacts from poor
seasonal conditions in any one
market, and provides new
profitable growth opportunities.
Nufarm’s crop protection business
was founded in Melbourne more
than 50 years ago. After establishing
a strong position in the Australian
and New Zealand markets, the
company set about building a global
platform in key agricultural markets
around the world.
This geographic diversification
reduces the company’s exposure
to adverse impacts from poor
seasonal conditions in any one
market, and provides new profitable
growth opportunities.
While Nufarm has a clear leadership
position in crop protection in
Australia and New Zealand, the
company is still a relatively small
‘player’ in many larger overseas
markets. However, with an
operational presence now in place
in North America, South America
and the major markets of Western
Europe, Nufarm is well placed to
secure additional business within
these regions.
In the USA – the world’s largest
crop protection market – Nufarm
is achieving strong growth and is
now recognised as an important
and reputable supplier.
Emerging markets in Asia and
Eastern Europe are also being
addressed, with Nufarm building
relationships and investing in
countries like India and the newer
European Union accession
countries such as Hungary,
Poland and Romania.
In 2006, Nufarm acquired a crop
protection business in Colombia
and will use this as a base for further
expansion into nearby Andean
Region markets. And – on September
28 – the company announced the
acquisition of a business in Italy.
From left to right:
Grapes are grown in almost every part of Italy,
the world’s oldest wine producing region and
an emerging market for Nufarm.
Soybean or soya bean is an annual legume grown
for its oil and protein. Soybean products appear
in a variety of processed food.
One of Nufarm’s emerging target markets is
India, which plants nine million hectares of
cotton each year.
The top soybean producers in 2005 were
USA, Brazil, Argentina, China, India,
Paraguay, Canada, Bolivia and Italy.
nufarm limited 2006
12
corporate strategy
nufarm’s new
products come
from internal
registration
activities, access
to products
coming off patent,
partnering and
co-marketing
arrangements
with other
suppliers and from
specific product
and business
acquisitions.
nufarm limited 2006
13
corporate strategy
expanding product portfolio
With most of the geographic
platform in place, the key emphasis
is now to generate additional sales
opportunities by expanding Nufarm’s
product portfolio in markets around
the world.
As an Australian-based company,
Nufarm’s product range is dominated
by herbicides (by far the major
category of crop protection products
used in Australian agriculture).
Development programs are in place
to diversify the product range by
achieving strong positions in both
fungicides and insecticides. This
will facilitate Nufarm’s entry into
additional crops and markets where
these products are more important.
Nufarm is a global leader in the
manufacture and supply of branded
phenoxy herbicides and is the world’s
second largest supplier of glyphosate
(the world’s largest selling crop
protection product). These positions
have been instrumental in Nufarm
achieving access to distribution in
markets around the world.
During the 2006 financial year,
the company also achieved
registration approvals in the USA
for the world’s largest selling
insecticide, imidacloprid. This
product will provide a platform
for Nufarm’s insecticide portfolio.
Important fungicide positions are
also being established, particularly
in the European markets where
these products command a valuable
part of the total business.
New products will be generated
via Nufarm’s internal registration
efforts; by securing access to products
coming off patent; by entering
into partnering and co-marketing
arrangements with other suppliers;
and from specific product and
business acquisitions.
From left to right: Recently released Nufarm
products include Roundup Transorb (a premium
glyphosate formulation, New Zealand), Olando
Set (cereal herbicide combination, Germany),
Sherpa (broad spectrum insecticide, France),
Hornet (fungicide, Australia) and Razorburn
(differentiated glyphosate formulation, USA)
Opposite: Nufarm’s formulation laboratory at
Research Triangle Park in North Carolina is
developing new products for the US business
and elsewhere.
nufarm limited 2006
14
business review - health, safety
and environment
ltifr
1999-2005
mtifr
1999-2005
nufarm severity
1999-2005
2006 target 3.07
2006 target 7.14
2006 target 0.043
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LTIFR or lost time injury
frequency rate is the number of
lost time injuries per million
hours worked that results in one
or more day’s absence from work.
MTIFR or medical treatment
injury frequency rate is the
number of lost time and medical
treatment injuries per million
hours worked.
SEVERITY is the number
of days lost per thousand
hours worked.
product
volume tonnes
1999-2005
water use
1999-2005
co2
released
1999-2005
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nufarm limited 2006
15
business review - health, safety
and environment
nufarm group unusual incident report/
injury report (uri/ir) vs ltifr 2000 – 2005
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Generating sustainable value from a
business means more than just profit
on sales. Just as Nufarm sets ambitious
targets in terms of annual financial
performance and shareholder returns,
we also strive to achieve continuous
improvement across a wide range of
health, safety and environmental
(HSE) parameters.
Our performance in calendar year
2005 (all other data in the annual
report is for the 2006 financial
year) is explained in detail in the
Nufarm Limited Health, Safety and
Environment Report 2006, together
with site specific HSE reports. The
corporate HSE report and the site
reports are available on request by
mail or by download from
www.nufarm.com
The graphs of our performance on
lost time injuries (LTI), medical
treatment injuries (MTI) and severity
clearly show that we are making progress
against the ambitious targets we set each
year. Those health and safety targets for
2006 are LTIFR: 3.07, MTIFR: 7.14
and Severity: 0.043.
One powerful tool that is driving HSE
improvement where it is used is unusual
incident reporting (UIR). This system
of identifying and addressing potential
causes of injury before it occurs has
resulted in significant reductions in
LTIs, MTIs and severity.
By encouraging employees at all levels
of the company to recognise and
report these incidents – so the system
is fixed early and no blame is attached
to those who report the incident – we
are reinforcing the fact that all Nufarm
people have an important role to play
in helping us meet and exceed our
performance targets.
The UIR system has been operating
for some years in Australia where it
has already led to major improvements.
Nufarm’s European operations have
made a concerted effort to use this tool
and already there is a steady drop in the
number of major injuries and a steady
rise in the reporting of minor injuries
that previously slipped through the net
or went unnoticed.
Despite production increases, our
long term focus on waste minimisation
has meant that the total quantities
of waste generated in recent years
have changed little. The number of
environmental complaints the company
receives continues to fall and, due
to extensive conservation programs,
both water use and overall energy use
continue to decline.
nufarm limited 2006
16
business review - crop protection
nufarm limited 2006
17
business review - crop protection
overview
Total crop protection sales increased
by 6.5 per cent to $1,676 million,
with operating profit before tax,
interest and head office charges up by
just over 23 per cent to $215.7 million.
Excluding Brazil, Nufarm’s crop
protection businesses generated net
profit growth of some 26 per cent.
This was achieved via a combination of
increased revenues and a strengthening
in gross margins in the company’s
major markets.
Price increases were implemented in
an effort to recover margin lost in the
2005 financial year, brought about
by the limited ability to pass through
higher costs due to late seasonal factors.
An ongoing program aimed at
improving the efficiency of Nufarm’s
manufacturing operations and reducing
costs in other parts of the business also
contributed to improved margins and
helped the company absorb additional
cost increases in some areas.
Business conditions for the crop
protection industry during the
12 months were challenging in
a number of markets. Despite a
contraction in total industry sales
in several key regions, Nufarm has
achieved revenue growth and
continued to win market share gains.
Increased sales of core products,
including phenoxy herbicides and
glyphosate, have been complemented
with the introduction of a number
of new products and improved
penetration into distribution channels.
australasia
Seasonal conditions in Australia were
mixed. Summer cropping conditions
were positive, generating very good sales
in the period up until Christmas 2005.
Early rains in Western Australia also
resulted in large sales of pre-emergent
and knockdown herbicides. After some
encouraging rainfalls in early May,
however, conditions remained very
dry until mid July, with distribution
customers then taking the opportunity
to stock up on post emergent products.
Full year sales for the Australian
businesses were slightly down on the
previous year. Dry autumn conditions
had an adverse impact on sales into
broadacre cereal crops and strong
competition for sales in this segment
also constrained margins.
The businesses generated an excellent
performance in the horticulture
segment – assisted by the introduction
of several new products – and increased
sales of higher margin products into
forestry and industrial segments. Initial
sales of seed treatments, through the
Crop Care business, were also positive.
General operating expenses
were contained and a number of
other initiatives led to increased
manufacturing efficiencies. Export
sales of 2,4-D were higher and
generated stronger margins than in
the previous year.
Opposite: Cereal crops, an important part of
the economy of Eastern Europe, are machine-
harvested, typically using a combine harvester,
which cuts, threshes and winnows the grain during
a single pass across the field.
nufarm limited 2006
18
business review - crop protection
nufarm limited 2006
19
business review - crop protection
During the year, Nufarm made two
acquisitions aimed at consolidating
its position in the Australian seeds
business. The purchase of Australia’s
leading canola seed production and
marketing company, Dovuro Seeds,
and the specialty canola seed breeding
company, Nutrihealth Pty Ltd,
gives Nufarm a leadership position
in canola.
The seed business is a logical extension
of Nufarm’s strong position in the
Australian crop protection market
whereby the company is able to utilise
its existing distribution channels and
achieve linkages with the company’s
chemistry business via seed treatment
solutions and the herbicide tolerant
‘Clearfield’ system (BASF technology
distributed in Australia by Nufarm).
Total New Zealand sales were in
line with the previous year. After a
positive first half, seasonal conditions
deteriorated in the second six months
– an early cold snap slowed down
sales. The New Zealand apple industry
was adversely affected by low prices,
with many orchards removed or left
unmanaged, reducing Nufarm’s sales
to that key segment. The launch of
‘Roundup Transorb’ – a new premium
formulation of glyphosate – was very
successful and several other herbicide
products performed strongly.
The company sold its New Zealand
based animal health toll manufacturing
business to Argenta Manufacturing
Limited.
This animal health business was a
division of Nufarm Health & Sciences,
located at Manurewa, near Auckland.
The business manufactured animal
health products on behalf of leading
animal health companies.
Sales in the Asian based businesses were
up by 10 per cent (to $96 million).
Together with lower expenses, and an
improved gross margin in markets such
as Japan, this contributed to a stronger
profit performance overall.
Indonesia, in particular, performed
above expectations, with both sales and
profit growth in a very competitive
market. Additional sales were also made
to a number of smaller, but expanding,
Asian markets.
americas
Nufarm’s crop protection businesses
in North America recorded strong
revenue growth, up some 20 per cent
on the previous year. Net profit was
also up strongly, driven by new
higher margin product introductions,
price rises on key products, and
further improvements in
manufacturing efficiencies.
Seasonal influences in the USA were
varied, with good growing conditions
in the mid-west, dry conditions in
Texas and Kansas, and wet weather
(with relatively low disease pressure) in
coastal regions. Total industry sales in
the USA are estimated to have fallen
by more than five per cent during the
year, highlighting Nufarm’s excellent
performance in this market.
Opposite: Sugar cane is grown in 200 countries
to produce sugar, molasses, rum and ethanol.
Brazil is the world’s largest producer of sugar
cane, followed by India.
nufarm limited 2006
20
20
business review - crop protection
managing director’s review
nufarm limited 2006
nufarm limited 2006
21
business review - crop protection
Glyphosate volumes were higher, due
in part to increased penetration of
Monsanto’s Roundup Ready® corn.
Nufarm achieved market share gains in
a bigger overall market. Price increases
on phenoxy herbicides improved the
profitability of those products despite
no significant increase in sales volumes.
The business successfully launched a
number of new products, reinforcing
Nufarm’s strong relationships with key
US distributors. The copper fungicide
market was unsettled, with historically
high input costs.
Nufarm USA achieved several
registration approvals for new
products based on the industry leading
insecticide, imidacloprid. An initial
sale of product was also made prior to
year-end. Imidacloprid is the world’s
largest selling insecticide and provides
Nufarm with a platform position in this
important product category.
Trading conditions in the US turf,
forestry and industrial vegetative
management segments were
challenging, however, an expanded
product portfolio enabled Nufarm to
generate a solid result for the full year
in those markets.
Sales in Canada were up by almost
50 per cent over the previous year,
following the acquisition of the
selective grass herbicide ‘Assert’ from
BASF. Nufarm achieved an overall
market share gain against a backdrop
of below average seasonal conditions
and downward pressure on margins as
the market adjusts to lower US pricing
across a range of products.
In South America, strong top line
growth was driven by Nufarm’s new
acquisition in Colombia, Agroquímicos
Genéricos SA (Agrogen) in December
2005. Sales in Colombia increased
from approximately $2 million to
almost $20 million in the 12 months
and the business achieved strong gross
margins. Five new products were
introduced and the integration of
Nufarm’s existing operations with the
Agrogen business was well executed,
with positive support from the
customer base.
Increased sales in Argentina were
offset by continued margin pressure
on core products such as glyphosate.
Sales of differentiated products
achieved stronger margins, however,
and good progress was made on
expanding the product portfolio.
While sales in Chile were also up
on the previous year, the business did
not meet its budgeted result due to
delays in the registration approvals of
several products.
agripec – brazil
Nufarm’s 49.9 per cent interest in
Agripec generated an equity accounted
net profit of $1.9 million in the 2006
financial year. This is significantly
below the contribution booked from
this investment in 2005 ($26.9
million) and also below Nufarm’s most
recent guidance on Agripec issued in
early August ($5 –$7 million).
Net Agripec sales for the period
were down some 18 per cent in
local currency.
Opposite: Canola is widely cultivated throughout
the world for the production of vegetable oil for
human consumption, as well as biodiesel. The
leading producers include the European Union,
North America and Australia.
nufarm limited 2006
22
managing director’s review
nufarm limited 2006 �
23
business review - crop protection
The Brazilian farm sector has
experienced extremely difficult
conditions during the period spanning
Nufarm’s 2006 financial year. Adverse
currency impacts, tighter availability of
credit, issues relating to collection of
payments and lower prices generated
by stronger competition for reduced
sales have all contributed to a lower
profit outcome for crop protection
companies and other suppliers of
agricultural inputs.
Nufarm and Agripec management
responded to these challenges with
measures to reduce exposure to future
bad debts. Some sales have been
retrieved (reversed) from the market;
incentives have been offered to ensure
outstanding payments are received; and
Agripec has elected to not make sales to
certain customers until accounts have
been fully settled.
In July, Agripec also increased
provisions for doubtful debts and
recognised some discounts.
This decision resulted in a lower
final result but is consistent with
Nufarm’s conservative risk management
policies relating to current business
conditions in Brazil.
While the market conditions have been
very tough, with a subsequent negative
impact on the business results, Agripec
continues to make progress towards
expanding its product portfolio.
New registrations and co-marketing
arrangements with other suppliers have
provided increased opportunities to s
ell into sugar, citrus and corn segments
as opposed to the badly affected
soybean crop.
Given the continued uncertainty
relating to business conditions in
Brazil, the company is forecasting only
marginal earnings growth from the
Agripec investment within the 2007
financial year.
europe
Europe experienced a long winter,
leading to both a delay and reduction
in overall crop protection selling
activity. Parts of Spain were again
affected by drought, as were important
cropping regions in Southern France.
Industry sales in most of the key
Western European markets dropped
from the previous year.
Nufarm European crop protection
sales were up by some five per cent
on last year. Operating profit rose
sharply as a result of improved margins
in most markets and the positive
impact of restructuring initiatives in
manufacturing operations.
The reorganisation of manufacturing
activities associated with Nufarm’s
industry leading methyls business
resulted in strong gains in production
and logistics efficiencies. Synthesis
activity was consolidated at the
company’s Botlek facility in Holland,
improving overhead recoveries at that
plant. This facilitated an expansion of
formulation and packaging of finished
products at the UK plant at Belvedere.
This reorganisation program was
initiated two years ago and has involved
Opposite: Over 70 per cent of the world’s grapes
are used to make wine. Spain has the largest area
devoted to vineyards, followed by France and Italy.
nufarm limited 2006
24
24
business review - crop protection
managing director’s review
nufarm limited 2006
nufarm limited 2006
25
business review - crop protection
Drought conditions affected industry
sales in Spain for the second
consecutive year. The negative impact
on cereal crops and depressed fruit
and vegetable prices also reduced sales
opportunities in that segment. In
challenging circumstances, Nufarm
generated a solid result with good sales
of the U-46 phenoxy herbicide brands,
insecticides, and copper fungicides.
There was additional sales growth in a
number of Eastern European markets
and Nufarm continues to pursue new
product registrations to develop closer
relationships with the local distribution
base in markets such as Poland,
Hungary, Ukraine and Romania, where
a new marketing operation has recently
been established.
Opposite: Wheat is the world’s most important
human food grain and ranks second in total
production behind maize. It is used to make flour
and can be fermented into alcohol or biofuel.
significant non-operating charges (last
year $16.2 million). We will continue
to evaluate further efficiencies but
the major elements of the program
are complete and profit gains of some
$12.7 million have been achieved in the
2006 financial year, reflected in the
improved European results.
In France, the prolonged winter was
followed by generally hot and dry
conditions, which had an impact
on sales opportunities in the major
segments of cereals and vines. Nufarm
achieved slightly higher sales in a falling
market. The French specialty and
industrial business generated good
sales growth.
Sales in Germany were up by 15 per
cent on the previous year. This was
mainly attributable to higher sales of
fungicides and several new product
registrations. Seasonal conditions
were not positive for herbicide sales,
but Nufarm increased its position in
corn herbicides with new bromoxynil
mixtures. Price increases for glyphosate
and a number of growth regulator
products also improved profitability.
Branded sales in the UK were again
strong, with Nufarm continuing to
win market share. Again, growth was
driven by the introduction of new
products in a number of crop segments
and strong support from the customer
base and market.
nufarm limited 2006
26
management team
DOUG RATHBONE
BRIAN BENSON
RODNEY HEATH
KEVIN MARTIN
managing director and
chief executive
group general manager
agriculture
Doug Rathbone AM, 60,
joined the board in 1987.
His background is chemical
engineering and commerce
and he has worked for
Nufarm for 32 years.
Doug was appointed
managing director of
Nufarm Australia in 1982
and managing director
of Nufarm Limited in
October 1999.
Brian Benson joined
Nufarm in 2000 and
has degrees in agricultural
science and business
administration.
Brian has extensive
experience in the crop
protection industry in
the areas of international
marketing and strategy and
is responsible for Nufarm’s
regional sales operations
and commercial strategy.
group general manager
corporate services and
company secretary
Rod Heath is a bachelor
of law 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.
In 2000, Rod was
appointed company
secretary of Nufarm
Limited.
chief financial officer
Kevin Martin is a chartered
accountant with over
26 years of 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 2000, Kevin
has been responsible
for all financial, treasury
and taxation matters
for the group.
{ management team }
nufarm limited 2006
27
management team
DALE MELLODY
BOB OOMS
DAVID PULLAN
ROBERT REIS
group general manager
global marketing
group general
manager chemicals
group general
manager operations
group general manager
corporate affairs
Dale Mellody joined
Nufarm as a territory
manager in 1995, having
completed his bachelor of
agricultural science.
Promoted to head office
in 1997, he has had
various roles in the global
marketing group and has
assisted with a number of
company acquisitions.
Dale was promoted to the
senior management group
in July 2005 and is now
responsible for Nufarm’s
strategy development and
implementation.
Bob Ooms joined the
company in 1999.
An industrial chemist
by training, he has more
than 40 years experience
in the chemical industry
in a variety of positions,
including many years in
senior management.
Bob is responsible for
the company’s industrial
chemicals business 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.
David is responsible for
all of Nufarm’s global
manufacturing and
production sites.
A former journalist,
political adviser and
lobbyist, Robert joined
Nufarm in 1991.
Robert is responsible for
global issues management,
investor relations,
media, government and
stakeholder relations.
He also has executive
management responsibility
for human resources
and organisational
development.
nufarm limited 2006
28
board of directors
KERRY HOGGARD
DOUG CURLEWIS
DOUG RATHBONE
BRUCE GOODFELLOW
chairman
deputy chairman
Kerry Hoggard, 65, 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.
Kerry is a member of the
audit and remuneration
committees.
GDW (Doug) Curlewis,
65, 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,
GUD Holdings Ltd and
Graincorp Limited. In the
past three years Doug has
been a director of National
Foods Ltd (six years) and
Hamilton Island Ltd
(five years).
Doug is deputy chairman
of the board, chairman of
the nomination committee,
and a member of the
audit and remuneration
committees.
managing director
and chief executive
Doug Rathbone AM, 60,
joined the board in 1987.
His background is chemical
engineering and commerce
and he has worked for
Nufarm Australia Limited
for 33 years.
Doug was appointed
managing director of
Nufarm Australia in 1982
and managing director of
Nufarm Limited in
October 1999.
Dr WB (Bruce) Goodfellow,
54, 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 Sanford
Ltd, Sulkem Co Ltd,
Refrigeration Engineering
Co Ltd, SH Lock (NZ) Ltd
and Cambridge Clothing
Co. Ltd.
{ board of directors }
nufarm limited 2006
29
board of directors
GARRY HOUNSELL
DON MCGAUCHIE
JOHN STOCKER
DICK WARBURTON
GA (Garry) Hounsell,
51, joined the board in
October 2004.
DG (Donald) McGauchie
AO, 56, joined the
board in 2003.
Dr JW (John) Stocker
AO, 61, joined the board
in 1998.
RFE (Dick) Warburton
AO, 65, joined the
board in 1993.
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 Pharmaceuticals Ltd.
He is a director of Telstra
Corporation Ltd and
Circadian Technologies Ltd.
In the past three years John
has been a director of Sigma
Company Limited (eight
years) and Cambridge
Antibody Technology Group
plc (11 years).
John is a member of both
the remuneration and
nomination committees.
He has a business
management background
and is chairman of Caltex
Australia Ltd and Tandou
Ltd. He is a director of
Tabcorp Holdings Ltd,
Note Printing Australia
Ltd and Citibank Pty Ltd.
Dick is chairman of the
Board of Taxation and a
past national president of
the Australian Institute of
Company Directors.
In the past three years
Dick has been a director
of Southcorp limited
(10 years).
Dick is chairman of the
remuneration committee
and a member of the
nomination committee.
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 chairman of e-mitch
Ltd and a director of
Qantas Airways Limited
and Orica Ltd.
Garry is chairman of the
audit committee
He has wide commercial
experience within the food
processing, commodity
trading, finance and
telecommunication sectors.
He also has extensive public
policy experience, having
previously held several high-
level advisory positions to
the government including
the Prime Minister’s
Supermarket to Asia
Council, the Foreign Affairs
Council and the Trade
Policy Advisory Council.
He is currently chairman of
Telstra Limited, a member
of the Board of the Reserve
Bank of Australia, and a
director of James Hardie
Industries NV.
In the past three years
Donald has been a director
of National Foods Ltd (five
years), Ridley Corporation
Limited (six years) and
Graincorp Limited
(four years).
Donald is a member of
both the remuneration and
nomination committees.
nufarm limited 2006
30
corporate governance statement
introduction
Nufarm’s board processes are under constant
review to ensure our systems protect the interests
of all stakeholders.
As part of this review, we consider the Principles of Good
Corporate Governance and Best Practice Recommendations
(‘the ASX principles’), published in March 2003 by
the Australian Stock Exchange Limited’s Corporate
Governance Council, and the amendments to the
Corporations Act 2001 known as CLERP 9, and practice
early adoption before actual compliance is required.
Copies of our corporate governance practices are
publicly available in the corporate governance section of
our website: www.nufarm.com
compliance with asx principles
The ASX Listing Rules require Nufarm to disclose in our
annual report the extent to which we have adopted the
28 best practice recommendations during our reporting
period and, where we do not comply, to explain why not.
Nufarm believes it complies with all the ASX principles
with two exceptions:
• Recommendation 2.2 recommends that the chairman
should be an independent director.
Our chairman is elected annually at the directors’
meeting immediately following the annual general
meeting (AGM).
Kerry Hoggard is board chairman, and is not deemed
an independent director in accordance with the tests
set out in principle 2 of the ASX principles.
This corporate governance report reaffirms the
statements contained in our governance reports
since 2003 that the board unanimously continues to
support Kerry as chairman, believing this to be clearly
in the best interest of all stakeholders.
Kerry’s history with the company, including his
detailed knowledge of the industry where the company
operates and his extensive accounting, financial
and commercial background, brings invaluable
experience and unique skills to Nufarm.
Kerry continues to apply judgement independent of
management in all decision making. He discharges his
role with a strong commitment to considerations of
governance and disclosure.
Doug Curlewis, an independent director, has been
appointed deputy chairman of the board.
• Recommendation 9.4 recommends that companies
seek shareholder approval of equity based reward
schemes for executives.
We currently have one equity based reward plan,
introduced in 2000 before the release of the
ASX principles.
The plan did not need shareholder approval under
the Corporations Act or the Listing Rules and
therefore was not put to shareholders for approval.
However, in 2000, 2001 and 2002 shareholders’
approval was sought for offers of shares to the
managing director under the plan. The notices of
the annual general meetings and the annual reports
for those years detail the nature of the plan. Each
year shareholders approved the issue of shares to
the managing director under the plan. No shares
have issued to the managing director under the plan
since 2002.
management and oversight of nufarm
the board
The governing body of the company is the board
of directors. Its clear responsibility is to oversee the
company’s operations and ensure that Nufarm carries
out its business in the best interests of all shareholders
and with proper regard to the interests of all other
stakeholders.
The board charter clearly defines the board’s
individual and collective responsibilities and describes
those delegated to senior management.
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’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.
31
corporate governance statement cont
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; and
• reviewing remuneration policy for senior executives
and Nufarm’s general remuneration policy framework.
The board annually reviews its composition and terms
of reference for the board, chairman, board committees
and managing director.
There are seven scheduled meetings each year.
When necessary, additional meetings are convened to
deal with specific issues that require attention before the
next scheduled meeting. Each year the board also reviews
the strategic plan and direction of the company.
At 31 July 2006, there are three board committees:
audit; remuneration; and nomination. All directors are
entitled to attend any committee meeting.
Details of the attendances at meetings of board and
committees during the reporting period appear on page
37 of this report.
The company is managed according to the
recommendations of ASX Principle 1.
A summary of the board charter is available from the
corporate governance section of the company’s website.
board of directors
composition
There are eight members of the board with a majority
of independent non-executive directors who have an
appropriate range of proficiencies, experience and skills
to ensure that it discharges its responsibilities with the
best possible management of the company in mind.
The company’s constitution specifies that the number
of directors may be neither less than three, nor more
than 11. At present there are seven non-executive
directors and one executive director, namely the
managing director, and the board has decided at this
time that no other company executive will be invited
to join the board.
independence
Directors are expected to bring independent views
and judgement to the board. The board applies the
tests set out in ASX Principle 2 to determine the
independence of directors. To decide whether a director
has a material relationship with the company that may
compromise independence, the board considers all
relevant circumstances.
The board reviewed the ASX principles and the
circumstances of individual directors and believes
it is unnecessary to define any specific materiality
limits, except that a substantial shareholder is defined
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 believes that the way directors discharge their
responsibilities and their contribution to the success
of the company determines their independence and
justifies their positions.
However, in accordance with best Australian practice,
the board has determined that any director who has
served on the board as a non-executive director for
10 continuous years 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.
The nomination committee reviews the performance of
directors who seek to offer themselves for re-election at
the company’s AGM. That committee then recommends
to the board whether or not it should continue to
support the nomination of the retiring directors.
At the date of this report, the board has determined that
the status of directors is as follows:
Independent non-executive directors
GDW Curlewis
GA Hounsell
DG McGauchie
Dr JW Stocker
RFE Warburton
Non-independent non-executive directors
KM Hoggard
Dr WB Goodfellow
Executive director
DJ Rathbone
Profiles of each board member, including terms in
office, are on pages 28 to 29 of this report.
access to independent advice
To help directors discharge their responsibilities,
any director can appoint legal, financial or other
professional consultants, at the expense of the company
with the chairman’s prior approval, which may not be
unreasonably withheld.
32
corporate governance statement cont
The board charter provides that non-executive directors
may meet without management present.
ethical and responsible
decision-making
conflicts of interest
Board members must identify any conflict of interest
they may have in dealing with the company’s affairs and
then refrain from participating in any discussion or
voting on these matters. Directors and senior executives
must disclose any related party transactions in writing.
chairman of the board
The chairman is elected annually at the directors’
meeting immediately following the company’s annual
general meeting.
According to the tests set out in ASX Principle 2,
Nufarm’s chairman, Kerry Hoggard, is not an
independent director. The reasons why we unanimously
support Kerry’s appointment are set out on page 30
of this report. Doug Curlewis, an independent director,
has been appointed deputy chairman.
The Nufarm board has stipulated that the role of the
chairman and chief executive officer may not be filled by
the same person.
With the exception of the independence of the
chairman, the board structure is consistent with
ASX Principle 2.
the nomination committee
Doug Curlewis is chairman of the nomination
committee and Donald McGauchie, John Stocker
and Dick Warburton are members. All are
independent directors.
The formal charter setting out the committee’s
membership requirements includes the responsibilities to:
ethical standards
We require directors and employees to adopt
standards of business conduct that are ethical and in
compliance with all legislation. Where there are no
legislative requirements, the company develops policy
statements relating to the business stakeholders and
carefully selects and promotes employees to ensure
appropriate standards.
The board endorses the principles of the Code
of Conduct for Directors, issued by the Australian
Institute of Company Directors.
Our formal code of conduct is available on the
corporate governance section of the company’s website.
purchase and sale of company shares
The Nufarm board has longstanding policies about the
purchase and sale of company shares by directors and
key executives.
The current share trading policy prohibits directors
and management from dealing in the company’s shares
at any time the directors or employees are aware of
unpublished, price-sensitive information.
Subject to this prohibition, directors and senior
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 the release;
• six weeks before the release of the company’s year
end results to the ASX, ending 24 hours after the
release; and
• assess competencies of board members;
• two weeks before the company’s AGM, ending
• review board succession plans;
• evaluate board performance; and
• recommend the appointment of new directors
when appropriate.
A copy of the nomination committee charter and a
summary of the policy and procedure for appointment
of directors is available on the corporate governance
section of the company’s website.
24 hours after the AGM.
Before any trading activity in company shares,
directors and senior 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 approval of the
company secretary.
A copy of the trading policy is available on 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.
33
corporate governance statement cont
safeguard integrity in financial
reporting
financial reports
The board procedures to safeguard the integrity of the
company’s financial reporting require the chief executive
officer 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
• the statement is founded on a sound system of risk
management and internal compliance and control,
which is operating effectively.
audit committee
Garry Hounsell is chairman of the board audit
committee with Doug Curlewis and Kerry Hoggard
as members. The committee has a majority of
independent non-executive directors and is chaired by
an independent director.
Details of attendances at meetings of the audit committee
are set out on page 37.
Garry Hounsell 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
on the manufacturing sector. He is chairman of emitch
Limited and a director of Qantas Airways Limited
and Orica Limited. Gary is also chairman of the audit
committee at Qantas.
Kerry Hoggard has extensive accounting and financial
experience. Kerry began his career with the company in
1957 and after a number of accounting, financial and
commercial promotions, was chief executive officer from
1987 to 1999.
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 GUD Holdings Limited, Graincorp Limited and
Pacifica Group Ltd.
The committee reviews its 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 also identifies those services that:
• the external auditor may and may not provide; and
• require specific audit committee approval.
The committee has 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, is available on the corporate
governance section of the company’s website.
The financial reporting system of the company is
consistent with ASX Principle 4.
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 is available on the
corporate governance section of the company’s website.
The company’s disclosure policy is consistent with
ASX Principle 5.
rights of shareholders
communication
We are committed to timely, open and effective
communication with our shareholders and the general
investment community.
Our communication policy aims to:
• ensure that shareholders and the financial markets
are provided with full and timely information about
our activities;
• comply with our continuous disclosure obligations;
• ensure equality of access to briefings, presentations
and meetings for shareholders, analysts and media;
and
• encourage attendance and voting at shareholder
meetings.
34
corporate governance statement cont
Postal and electronic communication with
shareholders includes:
• half year and annual reports;
• notices of AGM;
• a summary of AGM proceedings, including the
chairman’s and chief executive officer’s addresses
and voting results; and
• information whenever there are significant
developments to report.
Our formal communications policy is available on the
corporate governance section of the company’s website.
external auditor
Nufarm requires the external auditor to attend
the company’s AGM so 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 identify, assess, monitor and
manage 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 chief executive officer and provides
a written report of his activities at each meeting of
the audit committee. In doing so he has direct and
continual access to the chairman and members of the
audit committee.
In addition, the company has implemented a range of
global systems, programs and policies to identify and
manage risk. These include:
• a comprehensive occupational health, safety and
environmental 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;
• a board approved treasury policy to manage exposure
to foreign policy and exchange rate risks;
• guidelines and approval limits for capital expenditure
and investments.
• annual budgeting and monthly reporting systems
for all business units to 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 33 of this statement.
A summary of the company’s risk management policy
and internal compliance system is available on 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.
To facilitate the performance assessment, in 2003–
2004, the board directors completed a detailed
questionnaire, an external consultant interviewed each
director individually and there was a general board
discussion. In the year under review, the chairman
conducted the performance evaluation.
The board ensures that new directors are introduced to
the company appropriately, including relevant industry
knowledge, visits to specific company operations and
briefings by key executives.
All directors may obtain independent professional
advice (page 31) and have direct access to the
company secretary.
A summary of the performance evaluation process is
available on the corporate governance section of the
company’s website.
The manner in which the performance of the board is
assessed is consistent with ASX Principle 8.
35
corporate governance statement cont
interests of stakeholders
code of conduct
Nufarm seeks to conduct its business in a way
that recognises and adheres to all relevant laws
and regulations and meets high standards of honesty
and integrity.
To meet this commitment, we require all Nufarm
directors, employees, contractors and consultants to
be familiar with and uphold the company’s code of
conduct in all business dealings.
The company is politically impartial except when the
board believes it is necessary to comment due to a
perceived major impact on the company, its business
or any of its stakeholders.
As Nufarm operates in many countries, it does so
in accordance with the each country’s social and
cultural beliefs.
Our formal code of conduct is available on the
corporate governance section of the company’s website.
Nufarm’s recognition of the interests of stakeholders
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.
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 on page 39-43.
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 chief executive officer. This formalises the
terms and conditions of appointment, including
termination payments.
remuneration committee
Dick Warburton is chairman of the remuneration
committee and Doug Curlewis, Kerry Hoggard,
Donald McGauchie and John Stocker are members,
with 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 is
available on the corporate governance section of 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 on
page 41.
Except for compliance with recommendation 9.4, which
is discussed on page 30, our remuneration policies are
consistent with ASX Principle 9.
36
directors’ report
The directors present their report together with the
financial report of Nufarm Limited (‘the company’) and
of the consolidated entity, being the company and its
controlled entities, for the financial year ended 31 July
2006 and the auditor’s report thereon.
directors
The directors of the company at any time during or since
the end of the financial year are:
KM Hoggard (chairman)
GDW Curlewis (deputy chairman)
DJ Rathbone, AM (managing director)
Dr WB Goodfellow
GA Hounsell
DG McGauchie, AO
Dr JW Stocker, AO
RFE Warburton, AO
All directors held their position as a director
throughout the entire period and up to the date of this
report. Details of the qualifications, experience and
responsibilities and other directorships of the directors
are set out on pages 28 and 29.
company secretary
The company secretary is R Heath.
Details of the qualifications and experience of the
company secretary are set out on page 26.
directors’ interests in shares and
capital notes
Relevant interests of the directors in the shares or
capital notes issued by the company and related bodies
corporate are, at the date of this report, as notified
by the directors to the Australian Stock Exchange in
accordance with S205G(1) of the Corporations Act
2001, as follows:
nufarm ltd Nufarm Finance
(NZ) Ltd3
capital notes
KM Hoggard1
GDW Curlewis
DJ Rathbone
Dr WB Goodfellow 1 2
G A Hounsell1
DG McGauchie1
Dr JW Stocker1
RFE Warburton1
ordinary shares
2,379,426
42,787
29,912,610
1,468,296
60,302
14,719
30,314
65,281
2,270,000
1 The shareholdings of KM Hoggard, Dr WB Goodfellow,
GA Hounsell, DG McGauchie, Dr JW Stocker and RFE
Warburton include shares issued under the company’s non-
executive director share plan and held by Pacific Custodians
Pty Ltd as trustee of the plan.
2 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. Dr Goodfellow does not have a beneficial interest
in these shares or Capital Notes;
(ii)
Three trusts of which he is a non-beneficial trustee
(807,039 shares); and
(iii) Waikato Investment Company Limited (113,616 shares).
3 Nufarm Finance (NZ) Ltd was formerly Fernz Corporation
(NZ) Ltd
37
directors’ report cont
directors’ meetings
The number of directors’ meetings (including meetings
of committees of directors) and number of meetings
attended by each of the directors of the company during
the financial year are:
director board
KM Hoggard2
GDW Curlewis
DJ Rathbone9
Dr WB Goodfellow2
GA Hounsell
DG McGauchie
Dr JW Stocker
RFE Warburton1
a
9
9
9
9
9
9
9
9
committees
audit remuneration nomination
B
a
b
2
2
9
2
2
9
-
-
9
2
-
9
-
-
8
2
2
9
2
2
8
a
5
5
-
-
5
-
-
b
5
5
-
4
5
-
-
b
2
2
-
2
-
2
2
a
-
2
-
-
-
2
2
6
-
-
2
1
2
1
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.
Other meetings of committees of directors are convened as required to discuss specific issues or projects.
1 During the financial year, two unscheduled board meetings were convened. RFE Warburton was unable to attend either of these
unscheduled meetings because of prior commitments.
2 All non-executive directors are entitled to attend any committee meetings.
principal activities and changes
Nufarm Limited manufactures and supplies a range of
agricultural chemicals 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 employs 2,315 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.
results
The net profit attributable to members of the
consolidated entity for the 12 months to 31 July 2006
is $121.2 million. The comparable figure for the
12 months to 31 July 2005 was $125.0 million.
38
directors’ report cont
reconciliation of statutory profit
to operating profit
The following table is provided to enable a proper
comparison of the operating profit, which excludes
material non-operating items.
The restructuring items in 2006 primarily related to
structural reorganisation in France, whilst the prior
year’s figures primarily relate to costs associated with
closing parts of our manufacturing operations in the
United Kingdom.
reconciliation of statutory profit to operating profit consolidated – 2006
Profit after tax but before profit and loss of discontinued
operation and gain on sale of discontinued operation
Discontinued businesses
Other restructuring items
Profit for the year
Minority interest
Operating profit attributable to equity holders of the parent
Profit after tax but before profit and loss of discontinued
operation and gain on sale of discontinued operation
Discontinued businesses
Other restructuring items
Profit for the year
Minority interest
Operating profit attributable to equity holders of the parent
dividends
The following dividends have been paid, declared
or recommended since the end of the preceding
financial year:
The final dividend for 2004/2005
of 17 cents paid 11 November 2005
$000
$28,885
The interim dividend for 2005/2006
of 10 cents paid 28 April 2006
$16,994
The final dividend for 2005/2006
of 20 cents as declared and
recommended by the directors
is payable 10 November 2006.
$34,298
review of operations
The review of the operations during the financial year
and the results of those operations are set out in the
managing director’s review on pages 2 to 7 and the
business review on pages 14 to 25.
state of affairs
The state of the company’s affairs are set out in the
managing director’s review on pages 2 to 7 and the
business review on pages 14 to 25.
operating
$000
103,165
10,152
8,368
121,685
(579)
121,106
$000
103,822
10,076
9,351
123,249
(1,589)
121,660
material (non-
operating) items
$000
–
8,415
(8,368)
47
–
47
consolidated – 2005
$000
–
12,736
(9,351)
3,385
–
3,385
total
$000
103,165
18,567
–
121,732
(579)
121,153
$000
103,822
22,812
–
126,634
(1,589)
125,045
operations, financial position, business
strategies and prospects
The directors believe that information on the company,
which enables an informed assessment of its operations,
financial position, strategies and prospects, is contained
in the managing director’s review and the business review.
events subsequent to reporting date
Nufarm has reached agreement to sell its 80 per cent
interest in the Nufarm Coogee joint venture to its joint
venture partner, Coogee Chemicals Pty Ltd. The joint
venture operates two chlor-alkali plants in Western
Australia. The transaction involves the sale of Nufarm’s
interest, with completion scheduled for 31 July 2007.
The consideration on the sale will be approximately
$48 million, with the final price determined
at completion date. The profit on sale will be
approximately $24 million.
On 29 September 2006, the directors declared a final
dividend of 20 cents per share, fully franked, payable
10 November 2006.
On 6 September 2006, Nufarm acquired a license
to develop and commercialise Roundup Ready®
39
directors’ report cont
canola in Australia. Nufarm has paid Monsanto a
total of $10 million for Monsanto’s Roundup
Ready® canola germplasm and a licence to the
Roundup Ready® canola trait.
On 28 September, Nufarm announced it had reached
agreement to acquire a crop protection business in Italy
for €6.4 million.
Nufarm Finance (NZ) Limited (the ‘issuer’ and
formerly Fernz Corporation (NZ) Limited), a wholly
owned subsidiary of Nufarm Limited (‘Nufarm’),
intends to make a public offer of a new hybrid security.
The proposed offer is for A$250 million of Nufarm
Step-up Securities (‘NSS’), with the ability to accept
oversubscriptions of up to A$50 million.
A prospectus in relation to the proposed offer will
be made available once it has been lodged with the
Australian Securities and Investments Commission
(‘ASIC’). If you wish to acquire NSS, you will need
to complete the application form that will be in or
will accompany the prospectus. Once the prospectus
has been lodged with ASIC, Nufarm will make an
announcement to the ASX. You may obtain a copy of
the prospectus on Nufarm’s Australian corporate
website: www.nufarm.com
NSS are perpetual, subordinated, unsecured,
redeemable, exchangeable notes and offer semi-annual,
floating rate, non-cumulative distribution payments,
based on the six month bank bill swap rate plus a margin.
likely developments
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.
environmental performance
Details of Nufarm’s performance in relation to
environmental regulations are set out on pages 14 to 15.
The company did not incur any prosecutions or fines
in the financial period relating to environmental
performance.
The company publishes annually a health, safety and
environment report. This report can be viewed on the
company’s website, or a copy will be made available upon
request to the company secretary.
non-audit services
During the year KPMG, the company’s auditor, has
performed certain other services in addition to their
statutory duties.
Details of the audit fee and non-audit services are set
out on page 60 of the financial report.
The board has considered the non-audit services
provided during the year by the auditor and, in
accordance with written advice provided by resolution
of the audit committee, is satisfied that the provision of
those non-audit services during the year by the auditor
is compatible with, and did not compromise, the auditor
independence requirements of the Corporations Act
2001 for the reason that all non-audit services were
subject to the corporate governance procedures adopted
by the company and have been reviewed by the audit
committee to ensure they do not impact the integrity and
objectivity of the auditor.
The auditor’s independence declaration as required
under Section 307C of the Corporations Act forms part
of the directors’ report and is included on page 44.
remuneration report
remuneration committee
The remuneration committee reviews and makes
recommendations to the board on remuneration
policies and packages applicable to key management
personnel and directors and ensures that remuneration
policies and packages retain and motivate high calibre
executives and that remuneration policies demonstrate a
clear relationship between executive remuneration and
company performance.
Key management personnel includes the five most highly
remunerated executives in accordance with S300A of the
Corporations Act.
The remuneration levels of the managing director and
key management personnel are recommended by the
remuneration committee and approved by the board,
having taken advice from independent external advisors.
principles of compensation – audited
Executives
The Nufarm remuneration policy has been developed
to ensure the company attracts and retains the highly
skilled people required to successfully manage and create
shareholder value from a large diversified internationally
based company.
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
40
directors’ report cont
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, and
Each year, the board reviews and establishes the
performance hurdles for each part of the incentive
program. The hurdles reflect targets for specific
objectives and increasing company value, consistent
with the company’s business and investment strategies.
• an incentive program – the first part of the incentive
program reflects performance of specific business
objectives over six monthly periods and is paid in cash.
The second part of the incentive program is linked
to meeting predetermined financial objectives for
the full year and is delivered in a mixture of shares
or 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 key management
personnel this payment is made in equity, which
ensures a longer-term focus to achieve benefits
consistent with the delivery of sustained growth of
shareholder value.
If the financial objectives are achieved and each part of
the incentive program is paid at 100%, the TTR will
meet the company’s TTR policy position of the upper
quartile of the Mercer Survey of Australian Major
Corporates. Set out below are details of the maximum
payment for each part of the incentive program where
there has been above target achievement of the incentive
program performance condition.
The performance condition for the incentive program
is based on return on average 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 net interest bearing debt.
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 recognized in share value.
ROFE 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.
The remuneration committee and the board review the
choice of the performance condition on an annual basis.
Whilst it believes ROFE is an appropriate performance
condition for the company’s incentive program, the
board also reviews the company’s total shareholder
return (TSR) with relevant comparator groups.
Since migration of the company to Australia in
January 2000, the ROFE hurdles (target ROFE)
for the first part of the incentive program have been
progressively increased from 12 per cent to the current
16.5 per cent, and for the second part of the incentive,
from 13.5 per cent to 17.25 per cent.
At the end of each financial year the board:
• assesses company performance against the ROFE
hurdles to determine the percentage of any offer to
be made under each part of the incentive program;
and
• reviews target ROFE for each part of the incentive
program for the following financial period.
For both parts of the incentives, 25 per cent of the
incentives will be payable on achievement of 90 per
cent of target ROFE with a linear progression to 100
per cent of the incentives on achievement of target
ROFE and a maximum of 175 per cent of the incentives
on achievement of 110 per cent of target ROFE.
If less than 90 per cent of target ROFE is achieved, no
incentives will be paid.
The following table shows the proportion of incentives
as a percentage of TTR.
% target rofe achieved
<90
Managing director 0
90
20
100
50
110
64
>110
64
Key management
personnel
0
14
40
54
54
The board believes the following table demonstrates:
• the consequences of the company’s performance on
shareholder wealth; and
• the remuneration policy is generating the desired
increase in shareholder wealth.
Consequences of performance on
shareholders’ wealth
In considering the consolidated entity’s performance
and benefits for shareholders’ wealth, the
remuneration committee have regard to the following
indices in respect of the current financial year and the
previous four financial years.
41
directors’ report cont
operating
ebit*
rofe
achieved*
eps*
dividend
rate
dividends
paid
change
in share
price**
total
share
holder
31 july return***
share
price
$M
%
cents per
share
$000
$
$
%
2002
2003
2004
2005
2006
123.6
131.9
142.2
196.6
211.2
13.5
14.0
15.7
19.8
17.8
36.7
41.3
47.1
60.5
60.3
18
20
23
26
27
27,952
27,976
33,656
40,548
45,879
0.45
0.99
1.72
4.08
(1.37)
3.35
4.39
6.09
10.15
8.80
32
21
54
63
(2.3)
*Numbers for 2005 and 2006 calculated in accordance with AIFRS. Numbers for 2002–2004 calculated in accordance with AGAAP.
** This column reflects the change in share price from 1 August to 31 July in the relevant financial year.
*** Source: Goldman Sachs JB Were: Total Shareholder Return as at 30 June.
Service contracts
The company has an employment contract with the
managing director. This contract formalises the terms
and conditions of employment. The contract is for an
indefinite term.
The company may terminate the contract upon 12
months notice, in which case a termination payment
equivalent to 24 months total employment cost (base
salary plus value of benefits such as motor vehicle and
superannuation and any fringe benefits tax in relation to
those benefits) will be paid. The company may terminate
the contract immediately for serious misconduct.
Non-executive directors (NED)
The board’s policy with regard to NED 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
AGM, shareholders approved an aggregate of $900,000
per year (excluding superannuation costs).
Set out below are details of the annual fees payable at 31
July 2006 (excluding superannuation costs)
Chairman1
Deputy chairman 1,2
Director board fee
Chairman audit committee
$ 240,000
$140,000
$ 95,000
$ 15,000
Chairman other board committees
$ 10,000
Member audit committee
Member other board committees 3
$ 5,000
$ 2,500
The board has created a non-executive 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. Other than in this respect, non-executive
director remuneration is paid in cash. No element of
remuneration is performance related, i.e. linked to
short term or long term incentives.
On 31 October 2003, directors unanimously
resolved to discontinue the directors’ retirement
benefit plan and benefits accrued under the plan
were calculated and, at the option of the relevant
director, converted into shares, or paid to the
director’s superannuation fund.
1 The chairman, KM Hoggard and the deputy chairman, GDW
Curlewis, receive no fees as members of any committee.
2 GDW Curlewis was appointed deputy chairman with effect from 1
February 2006.
3 There is some common membership on the remuneration
committee and nomination committee. Only one fee is paid
where a director is a member of both committees.
42
directors’ report cont
remuneration of directors and executives
Details of the nature and amount of each major element of remuneration of each director of the company and each
of the five named company executives and relevant group executives who receive the highest remuneration are:
short term
non-
salary cash bonus monetary
beneffits
& fees (vested)
$
$
$
post-
employment
share
based
payments
total
super-
total annuation
$
$
$
$
directors
non-executive
KM Hoggard
(Chairman)
GDW Curlewis
Dr WB Goodfellow
GA Hounsell
DG McGauchie
GW McGregor
Dr JW Stocker
RFE Warburton
executive
DJ Rathbone
(Managing Director)
DA Pullan (Group
General Manager
Operations)
RF Ooms (Group
General Manager
Chemicals)
KP Martin, (Chief
Financial Officer)
BF Benson (Group
General Manager
Agriculture)
RG Reis (Group
General Manager
Corporate Affairs)
R Heath
(Company Secretary)
DA Mellody (Group
General Manager
Global Marketing)
Total
compensation:
key management
personnel
(consolidated)
Total
compensation:
key management
personnel
(company)
2006
2005
2006
2005
2006
2005
2006
2005
2006
2005
2006
2005
2006
2005
2006
2005
2006
2005
192,000
182,400
101,500
82,233
76,000
71,400
91,000
67,166
78,500
77,500
–
91,150
39,250
77,025
86,000
81,400
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
192,000
182,400
101,500
82,233
76,000
71,400
91,000
67,166
78,500
77,500
–
91,150
39,250
77,025
86,000
81,400
24,000
22,800
36,000
27,858
9,500
8,925
11,000
8,141
9,750
9,175
–
10,425
49,000
9,487
10,500
9,925
48,000
45,600
–
–
19,000
17,850
19,000
14,250
19,000
14,250
–
13,100
19,000
17,850
19,000
17,850
264,000
250,800
137,500
110,091
104,500
98,175
121,000
89,557
107,250
100,925
–
114,675
107,250
104,362
115,500
109,175
950,797
890,011
1,598,540
1,322,500
35,880
58,834
2,585,217
2,271,345
13,804
12,860
– 2,599,021
– 2,284,205
2006
2005
410,156
374,990
258,710
294,576
2006
2005
2006
2005
393,103
369,943
389,262
380,852
241,840
277,076
240,392
277,076
2006
2005
337,265
320,462
211,977
227,500
2006
2005
2006
2005
2006
2005
272,367
256,260
202,470
196,136
198,642
109,350
164,317
185,500
129,520
151,666
130,488
20,776
38,414
27,930
32,067
8,109
22,501
12,767
11,467
19,435
49,230
57,035
28,639
25,925
17,437
8,703
707,280
697,496
80,970
73,649
294,585
159,000
1,082,835
930,145
667,010
655,128
652,155
670,695
560,709
567,397
485,914
498,795
360,629
373,727
346,567
138,829
76,992
70,973
63,325
38,702
277,084
149,000
277,084
149,000
1,021,086
875,101
992,564
858,397
39,405
38,702
227,497
120,000
827,611
726,099
36,554
31,670
39,854
37,729
10,577
11,596
185,500
100,013
151,665
83,346
707,968
630,478
552,148
494,802
28,578
17,975
385,722
168,400
2006 3,818,312
2005 3,628,278
2,975,784
2,756,670
235,635
218,738
7,029,731
6,603,686
511,231
422,617
1,584,993 9,125,955
919,084 7,945,387
2006
2005
664,250
730,274
–
–
–
–
664,250
730,274
149,750
106,736
143,000
140,750
957,000
977,760
43
directors’ report cont
remuneration options: granted and
vested during the year
During the year there were no options granted to
directors or executives nor were any options vested and
exercised by the specified executives.
shares issued as a result of the exercise
of options
There were no shares issued as a result of the exercise of
options during the year.
In the prior financial year
(a) 1,437,692 shares were issued to group executives at
an exercise price of $2.70, and
(b) 61,336 shares were issued to participants in the
UK Savings Related Share Options Scheme (1997)
at an exercise price of $3.66. This scheme is now
discontinued.
unissued shares under option
There are no unissued shares under option.
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.
lead auditor’s independence declaration
The lead auditor’s independence declaration is set out
on page 44 and forms part of the directors’ report for
the financial year ended 31 July 2006.
rounding of amounts
The company is of a kind referred to in Australian
Securities and Investment Commission Class Order
98/100 dated 10 July 1998 and in accordance with that
class order, amounts in the financial statements and the
directors’ report have been rounded off to the nearest
thousand dollars, unless otherwise stated.
This report has been made in accordance with a
resolution of directors.
KM Hoggard
Director
DJ Rathbone
Director
Melbourne
29 September 2006
44
directors’ report cont
Lead Auditor’s Independence Declaration under Section 307C of the Corporations
Act 2001
To: the directors of Nufarm Limited
I declare that, to the best of my knowledge and belief, in relation to the audit for the
financial year ended 31 July 2006 there have been:
i. no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
ii. no contraventions of any applicable code of professional conduct in relation to
the audit.
KPMG
Paul J McDonald
Partner
Melbourne
29 September 2006
KPMG, an Australian partnership, is part of the KPMG International network.
KPMG International is a Swiss cooperative.
45
45
income statement
for the year ended 31 july 2006
consolidated the company
2005
$000
2006
$000
2006
$000
2005
$000
note
Revenue
Cost of sales
Gross Profit
Other income
Other operating expenses
Profit from operating activities
Financial income
Financial expenses
Net financing costs
1,676,746
(1,049,849)
626,897
1,573,988
(1,003,762)
570,226
9,914
(460,486)
176,325
8,366
(443,407)
135,185
34,313
(15,837)
18,476
47,803
(8,865)
57,414
35,752
(16,475)
19,277
44,764
(11,938)
52,103
7,995
(57,241)
(49,246)
8,278
(46,579)
(38,301)
20,215
(21,796)
(1,581)
20,592
(22,386)
(1,794)
4
5
7
7
Share of net profits of associates
15
10,545
33,402
1,013
997
Profit before tax
Income tax expense
Profit after tax but before profit and loss of discontinued
operations and gain on sale of discontinued operations
Profit and loss of discontinued operations and gain on sale
of discontinued operations (after tax)
Profit for the year
Attributable to:
Equity holders of the parent
Minority interest
Profit for the year
137,624
130,286
56,846
51,306
8
(34,459)
(26,464)
(2,710)
(2,051)
103,165
103,822
54,136
49,255
9
18,567
22,812
6,624
992
121,732
126,634
60,760
50,247
121,153
579
125,045
1,589
60,760
–
50,247
–
121,732
126,634
60,760
50,247
Earnings per share attributable to the ordinary equity
holders of the company
Statutory earnings per share
Basic earnings per share from continuing operations
Diluted earnings per share from continuing operations
10
10
60.3
60.3
60.5
60.5
The income statement is to be read in conjunction with the attached notes.
46
balance sheet at 31 july 2006
consolidated the company
2005
$000
2006
$000
2006
$000
2005
$000
note
current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Income tax receivable
Assets classified as held for sale
Total current assets
non-current assets
Receivables
Equity accounted investments
Other investments
Deferred tax assets
Property, plant and equipment
Intangible assets
Other
Total non-current assets
TOTAL ASSETS
current liabilities
Bank overdraft
Trade and other payables
Interest bearing loans and borrowings
Employee benefits
Income tax payable
Provisions
Liabilities classified as held for sale
Total current liabilities
non-current liabilities
Interest bearing loans and borrowings
Deferred tax liabilities
Employee benefits
Payables
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
equity
Issued capital
Reserves
Retained earnings
Equity attributable to equity holders of the parent
Minority interest
TOTAL EQUITY
11
12
13
14
9
12
15
17
18
19
20
21
11
22
23
24
14
25
9
23
18
24
25
26
26
26
26
26
51,269
524,164
432,023
6,172
23,909
1,037,537
55,791
402,473
421,438
8,425
5,480
893,607
10,739
452,112
13,598
377
–
476,826
4,265
216,462
15,924
175
–
236,826
17,738
228,130
503
61,073
285,738
296,406
–
889,588
1,927,125
19,940
474,762
495,807
14,389
9,999
3,700
13,425
1,032,022
107,012
28,088
38,738
11,899
185,737
1,217,759
709,366
240,760
23,891
443,707
708,358
1,008
709,366
66,409
218,057
1,943
55,479
310,138
201,531
1,567
855,124
1,748,731
10,398
498,847
250,006
14,964
12,348
4,752
1,408
792,723
280,155
20,124
37,870
545
338,694
1,131,417
617,314
219,049
23,395
368,904
611,348
5,966
617,314
–
7,724
247,213
1,137
3,892
17
–
259,983
736,809
207,390
7,140
247,213
1,818
20,693
40
–
484,294
721,120
23,574
62,357
190,258
358
8,199
–
–
284,746
24,762
64,065
–
521
4,359
–
–
93,707
–
56
31
–
87
284,833
451,976
211,655
120
56
–
211,831
305,538
415,582
240,760
39,799
171,417
451,976
–
451,976
219,049
39,997
156,536
415,582
–
415,582
The balance sheet is to be read in conjunction with the attached notes.
47
statement of cash flows
for the year ended 31 july 2006
consolidated the company
2005
$000
2006
$000
2006
$000
2005
$000
note
cash flows from operating activities
Cash receipts from customers
Cash paid to suppliers and employees
Cash generated from operations
Interest received
Dividends received
Interest paid
Income tax paid
Net cash from operating activities
cash flows from investing activities
Proceeds from sale of property, plant and equipment
Proceeds from business sale
Payments for plant and equipment
Purchase of businesses, net of cash acquired
Payments for investments in associates
Payments for acquired intangibles and major
product development expenditure
Net investing cash flows
cash flows from financing activities
Proceeds from issue of shares
Proceeds from call on partly paid shares
Proceeds from borrowings
Repayment of borrowings
Advances to controlled entities
Repayment of finance lease principal
Dividends paid
Net financing cash flows
Net increase (decrease) in cash and cash equivalents
Cash at the beginning of the year
Exchange rate fluctuations on foreign cash balances
Movement in cash reclassified as assets held for sale
Cash and cash equivalents at the end of the year
1,750,257
(1,605,543)
144,714
8,132
2,599
(57,325)
(35,221)
62,899
1,836,426
(1,683,511)
152,915
8,469
2,964
(46,821)
(54,915)
62,612
41,066
(23,565)
17,501
20,215
46,042
(21,796)
1,410
63,372
84,506
(72,677)
11,829
14,802
40,713
(15,417)
(1,634)
50,293
34
573
8,797
(40,156)
(37,408)
–
772
75,066
(58,505)
(21,715)
(162,469)
96
–
(2,416)
–
–
238
247
(3,848)
–
–
(44,583)
(112,777)
(5,823)
(172,674)
–
(2,320)
–
(3,363)
–
–
402,539
(318,858)
–
(897)
(46,429)
36,355
(13,523)
45,393
426
(967)
31,329
226
44
490,293
(278,152)
–
(1,578)
(41,044)
169,789
59,727
(15,472)
1,594
(456)
45,393
–
–
–
–
(9,582)
–
(45,879)
(55,461)
5,591
(20,497)
2,071
–
(12,835)
226
44
–
–
(8,278)
–
(40,548)
(48,556)
(1,626)
(18,991)
120
–
(20,497)
11
The statement of cash flows is to be read in conjunction with the attached notes.
48
statement of recognised income and expense
for the year ended 31 july 2006
consolidated the company
2005
$000
2006
$000
2006
$000
2005
$000
note
items recognised directly in equity
Foreign exchange translation differences
Actuarial gains (losses) on defined benefit plans
Cash flow hedges:
Amounts taken to equity
Foreign exchange movement taken to income statement
26
26
26
26
693
(11,008)
(248)
(77)
(713)
568
(594)
574
–
–
–
(8)
58
–
–
–
Net expense recognised directly in equity
(40)
(10,440)
(198)
(77)
Profit for the year
121,732
126,634
60,760
50,247
Total recognised income and expense
for the year
Attributable to:
Equity holders of the parent
Minority interest
Total recognised income and expense
for the year
Effects of change in accounting policy – financial instruments:
Equity holders of the parent
Minority interest
121,692
116,194
60,562
50,170
121,154
538
115,163
1,031
60,562
–
50,170
–
121,692
116,194
60,562
50,170
574
–
574
–
–
–
58
–
58
–
–
–
Other movements in equity arising from transactions with owners as owners are set out in note 26.
The amounts recognised directly in equity are disclosed net of tax – see note 8 for tax effect.
The statements of recognised income and expense are to be read in conjunction with the attached notes.
49
notes to the financial statements
1 significant accounting policies
Nufarm Limited (the ‘company’) is domiciled in
Australia. The consolidated financial report of the
company for the financial year ended 31 July 2006
comprises the company and its subsidiaries (together
referred to as the ‘consolidated entity’) and the
consolidated entity’s interest in associates and jointly
controlled entities.
The consolidated financial report was authorised for
issue by the directors on 29 September 2006.
(a) statement of compliance
The financial report is a general purpose financial
report which has been prepared in accordance with
Australian Accounting Standards adopted by the
Australian Accounting Standards Board (‘AASB’) and
the Corporations Act 2001. International Financial
Reporting Standards (‘IFRS’) form the basis of the
Australian Accounting Standards adopted by the AASB,
and for the purpose of this report are called Australian
equivalents to IFRS (‘AIFRS’) to distinguish from
previous Australian GAAP. The financial reports of
the consolidated entity and the company comply with
IFRS and interpretations adopted by the International
Accounting Standards Board.
This is the consolidated entity’s first annual financial
report prepared in accordance with Australian
Accounting Standards, being AIFRS and IFRS, and
AASB 1 First-Time Adoption of Australian Equivalents to
International Financial Reporting Standards has been applied.
An explanation of how the transition to AIFRS has
affected the reported financial position, financial
performance and cash flows of the consolidated entity
and the company is provided in note 38.
(b) basis of preparation
The financial report is presented in Australian dollars.
The entity has elected to early adopt the following
accounting standards and amendments as at transition
date:
• AASB 119 Employee Benefits (December 2004);
• AASB 2004-3 Amendments to Australian Accounting
Standards (December 2004), amending AASB 1First Time
Adoption of Australian Equivalents to International Financial
Reporting Standards (July 2004), AASB 101 Presentation of
Financial Statements and AASB 124 Related Party Disclosures;
• AASB 2005-1 Amendments to Australian Accounting Standards
(May 2005), amending AASB 139 Financial Instruments:
Recognition and Measurement;
• AASB 2005-3 Amendments to Australian Accounting
Standards (June 2005), amending AASB 119 Employee
Benefits (either July or December 2004);
• AASB 2005-4 Amendments to Australian Accounting
Standards (June 2005), amending AASB 139 Financial
Instruments: Recognition and Measurement, AASB 132
Financial Instruments: Disclosure and Presentation, and AASB
1 First-Time Adoption of Australian Equivalents to International
Financial Reporting Standards (July 2004);
• AASB 2005-5 Amendments to Australian Accounting
Standards (June 2005), amending AASB 1 First-
Time Adoption AASB 1 First-Time Adoption of Australian
Equivalents to International Financial Reporting Standards (July
2004), and AASB 139 Financial Instruments: Recognition
and Measurement; and
• AASB 2005-6 Amendments to Australian Accounting
Standards (June 2005), amending AASB 3 Business
Combinations.
Issued standards not early adopted
The following standards and amendments were available
for early adoption but have not been applied by the
consolidated entity in these financial reports:
• AASB 7 Financial Instruments: Disclosure (August 2005),
replacing the presentation requirements of financial
instruments in AASB 132. AASB 7 is applicable for
annual reporting periods beginning on or after
1 January 2007;
• AASB 2005-9 Amendments to Australian Accounting
Standards (September 2005) requires that liabilities
arising from the issue of financial guarantee contracts
are recognised in the balance sheet. AASB 2005-9 is
applicable for annual reporting periods beginning on
or after 1 January 2006;
• AASB 2005-10 Amendments to Australian Accounting
Standards (September 2005) makes consequential
amendments to AASB 132 Financial Instruments: Disclosures
and Presentation, AASB 101 Presentation of Financial
Statements, AASB 114 Segment Reporting, AASB 117
Leases, AASB 133 Earnings per Share, AASB 139 Financial
Instruments: Recognition and Measurement, AASB 1 First-Time
Adoption of Australian Equivalents to International Financial
Reporting Standards, AASB 4 Insurance Contracts, AASB
1023 General Insurance Contracts and AASB 1038 Life
Insurance Contracts, arising from the release of AASB 7.
AASB 2005-10 is applicable for annual reporting
periods beginning on or after 1 January 2007.
50
notes to the financial statements cont
1 significant accounting policies (cont)
The consolidated entity plans to adopt AASB 7, AASB 2005-9
and AASB 2005-10 in the 2007 financial year. The initial
application of AASB 7 and AASB 2005-10 is not expected
to have an impact on the financial results of the company and
the consolidated entity as the standard and the amendment are
concerned with disclosures only.
The initial application of AASB 2005-9 could have an impact
on the financial results of the company and the consolidated
entity as the amendment could result in liabilities being
recognised for financial guarantee contracts that have been
provided by the company and the consolidated entity. However,
quantification of the impact is not known or reasonably estimable
in the current financial year as an exercise to quantify the
financial impact has not been undertaken by the company and
the consolidated entity to date.
The following standards and amendments have been issued and
are available for early adoption at reporting date. However, they
have not been early adopted as they are not applicable to the
company and the consolidated entity and have no impact on their
financial results:
• AASB 2006-1 Amendments to Australian Accounting Standards
(January 2006) amending AASB 121 The Effects of Changes in
Foreign Exchange Rates (July 2004);
• AASB 2006-2 Amendments to Australian Accounting Standards
(March 2006);
• UIG 4 Determining whether an Arrangement contains a Lease;
• UIG 5 Rights to Interests arising from Decommissioning, Restoration and
Environmental Rehabilitation Funds;
• UIG 6 Liabilities arising from participating in a Specific Market-Waste
Electrical & Electronic Equipment;
• UIG 7 Applying the Restatement Approach under AASB 129 Financial
Reporting in Hyperinflationary Economies;
• UIG 8 Scope of AASB 2; and
• UIG 9 Assessing Embedded Derivatives.
The financial report is prepared on the historical cost basis,
except for derivative financial instruments, which are stated at
their fair value.
The company is a kind referred to in ASIC Class Order 98/
100 dated 10 July 1998 and in accordance with the Class
Order, amounts in the financial report and directors’ report
have been rounded off to the nearest thousand dollars,unless
otherwise stated.
The preparation of a financial report in conformity with
Australian Accounting Standards requires management to make
judgements, estimates and assumptions that affect the application
of policies and reported amounts of assets, liabilities, income and
expenses. The estimates and associated assumptions are based on
historical experience and various other factors that are believed to
be reasonable under the circumstances, the results of which form
the basis of making the judgements about carrying values of assets
and liabilities that are not readily apparent from other sources.
These accounting policies have been consistently applied by each
entity in the consolidated entity.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised
in the period in which the estimate is revised if the revision affects
only that period, or in the period of revision and future periods
if the revision affects both current and future periods.
Judgements made by management in the application of
Australian Accounting Standards that have a significant effect
on the financial report and estimates with a significant risk of
material adjustment in the next year are discussed in note (x).
The accounting policies set out below have been applied
consistently to all periods presented in the consolidated financial
report and in preparing an opening AIFRS balance sheet at
1 August 2004 for the purposes of the transition to Australian
Accounting Standards – AIFRS, except for the adoption of AASB
132 Financial Instruments: Disclosure and AASB 139 Financial
Instruments: Recognition and Measurement. The company
and the consolidated entity have applied the AASB 1.36A
exemption and elected not to apply AASB 132 and AASB 139 to
the comparative period. A reconciliation of opening balances
impacted by AASB 132 and AASB 139 at 1 July 2005 has been
provided in Note 39.
(c) basis of consolidation
(i) Subsidiaries
Subsidiaries are entities controlled by the company. Control
exists when the company has the power, directly or indirectly, to
govern the financial and operating policies of an entity so as to
obtain benefits from its activities. In assessing control, potential
voting rights that presently are exercisable or convertible are
taken into account. The financial statements of subsidiaries are
included in the consolidated financial statements from the date
that control commences until the date that control ceases.
(ii) Associates
Associates are those entities for which the consolidated entity
has significant influence, but not control, over the financial
and operating policies. The consolidated financial statements
include the consolidated entity’s share of the total recognised
gains and losses of associates on an equity accounted basis, from
the date that significant influence commences until the date that
significant influence ceases. When the consolidated entity’s share
of losses exceeds its interest in an associate, the consolidated
entity’s carrying amount is reduced to nil and recognition
of further losses is discontinued except to the extent that the
consolidated entity has incurred legal or constructive obligations
or made payments on behalf of an associate.
(iii) Joint ventures
Joint ventures are those entities over whose activities the
consolidated entity has joint control, established by
contractual agreement.
The interest of the company and of the consolidated entity in
unincorporated joint ventures and jointly controlled assets are
brought to account by recognising in its financial statements
the assets it controls, the liabilities that it incurs, the expenses it
incurs and its share of income that it earns from the sale of goods
and services by the joint venture.
51
notes to the financial statements cont
1 significant accounting policies (cont)
(iv) Transactions eliminated on consolidation
Intra-group balances, and any unrealised gains and
losses or income and expenses arising from intra-group
transactions, are eliminated in preparing the consolidated
entity’s financial statements.
Unrealised gains arising from transactions with associates and
jointly controlled entities are eliminated to the extent of the
consolidated entity’s interest in the entity with adjustments
made to the ‘Investment in associates’ and ‘Share of associates
net profit’ accounts. Unrealised losses are eliminated in the
same way as unrealised gains, but only to the extent that there
is no evidence of impairment. Gains and losses are recognised
as the contributed assets are consumed or sold by the associates
and jointly controlled entities or, if not consumed or sold by
the associate or jointly controlled entity, when the consolidated
entity’s interest in such entities is disposed of.
(d) foreign currency
(i) Foreign currency transactions
Transactions in foreign currencies are translated at the foreign
exchange rate ruling at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies at the
balance date are translated to Australian dollars at the foreign
exchange rate ruling at that date. Foreign exchange differences
arising on translation are recognised in the income statement.
Non-monetary assets and liabilities that are measured in terms
of historical cost in a foreign currency are translated using the
exchange rate at the date of the transaction. Non-monetary
assets and liabilities denominated in foreign currencies that are
stated at fair value are translated to Australian dollars at foreign
exchange rates ruling at the dates the fair value was determined.
(ii) Financial statements of foreign operations
The assets and liabilities of foreign operations are translated to
Australian dollars at foreign exchange rates ruling at the balance
sheet date. The revenue and expenses of foreign operations are
translated to Australian dollars at rates approximating the foreign
exchange rates ruling at the date of the transactions.
(iii) Net investment in foreign operations
Exchange differences arising from the translation of the net
investment in foreign operations are taken to translation reserve.
They are released into the income statement upon disposal.
In respect of all foreign operations, any differences that have
arisen after 1 August 2004, the date of transition to AIFRS, are
presented as a separate component of equity.
(e) derivative financial instruments
Current accounting policy
The consolidated entity uses derivative financial instruments
to hedge its exposure to foreign exchange and interest rate risks
arising from operational, financing and investment activities. In
accordance with its treasury policy, the consolidated entity does
not hold derivative financial instruments for trading purposes.
However, derivatives that do not qualify for hedge accounting are
accounted for as trading instruments.
Derivative financial instruments are initially recognised at fair
value. Subsequent to initial recognition, derivative financial
instruments are stated at fair value. The gain or loss on
remeasurement to fair value is recognised immediately in profit
or loss. However, where derivatives qualify for hedge accounting,
recognition of any resultant gain or loss depends on the nature of
the item being hedged (see accounting policy (f)).
The fair value of interest rate swaps is the estimated amount that
the consolidated entity would receive or pay to terminate the swap
at the balance sheet date, taking into account current interest
rates and the current creditworthiness of the swap counterparties.
The fair value of forward exchange contracts is their quoted
market price at the balance sheet date, being the present value of
the quoted forward price.
Comparative accounting policy
The consolidated entity is exposed to changes in interest rates and
foreign exchange rates from its activities. The consolidated entity
uses the following derivative financial instruments to hedge these
risks: interest rate swaps, forward rate agreements and forward
foreign exchange contracts. Derivative financial instruments are
not held for speculative purposes. The quantitative effect of the
change in accounting policy is set out in note 39.
Cross currency interest rate swap agreements hedge the foreign
currency, interest 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 counterparty
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.
Counter-parties to financial instruments are major international
financial institutions with excellent 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.
(f) hedging
Current accounting policy
On entering into a hedging relationship, the consolidated entity
formally designates and documents the hedge relationship and
the risk management objective and strategy for undertaking
the hedge. The documentation includes identification of the
hedging instrument, the hedged item or transaction, the nature
of the risk being hedged and how the entity will assess the hedging
instrument’s effectiveness in offsetting the exposure to changes
in the hedged item’s fair value or cash flows attributable to the
hedged risk. Such hedges are expected to be highly effective in
achieving offsetting changes in fair value or cash flows and are
assessed on an ongoing basis to determine that they actually have
been highly effective throughout the financial reporting periods
for which they are designated.
52
notes to the financial statements cont
1 significant accounting policies (cont)
(i) Cash flow hedges
Where a derivative financial instrument is designated as a hedge
of the variability in cash flows of a recognised asset or liability, or
a highly probably forecasted transaction, the effective part of any
gain or loss on the derivative financial instrument is recognised
directly in equity. When the forecasted transaction subsequently
results in the recognition of a non-financial asset or non-
financial liability, or the forecast transaction for a non-financial
asset or non-financial liability becomes a firm commitment
for which fair value hedge accounting is applied, the associated
cumulative gain or loss is removed from equity and recognised
in the initial cost or other carrying amount of the non-financial
asset or liability.
If a hedge of a forecasted transaction subsequently results
in the recognition of a financial asset or a financial liability,
the associated gains and losses that were recognised directly in
equity are reclassified into profit or loss in the same period or
periods during which the asset acquired or liability assumed
affects profit or loss.
For cash flow hedges, other than those described above, the
associated cumulative gain or loss is removed from equity
and recognised in the income statement in the same period
or periods during which the hedged forecast transaction
affects profit or loss. The ineffective part of any gain or loss is
recognised immediately in the income statement.
When a hedging instrument expires or is sold, terminated
or exercised, or the entity revokes designation of the hedge
relationship, but the hedged forecast transaction is still expected
to occur, the cumulative gain or loss to that point remains in
equity and is recognised in accordance with the above policy
when the transaction occurs. If the hedged transaction is no
longer expected to take place, the cumulative unrealised gain or
loss recognised in equity is recognised immediately in the
income statement.
(ii) Hedge of monetary assets and liabilities
Where a derivative financial instrument is used to hedge
economically the foreign exchange exposure of a recognised
monetary asset or liability, no hedge accounting is applied and
any gain or loss on the hedging instrument is recognised in the
income statement.
The quantitative effect of the change in accounting policy is set
out in note 39.
Comparative period policy
Derivative financial instruments
The company uses the following financial instruments with ‘off
balance sheet’ risks to reduce exposure to fluctuations in foreign
exchange and interest rates:
• forward foreign exchange contracts are arranged to hedge
major foreign currency sales and purchases, foreign currency
loans and the translation of foreign currency earnings and
investments; and
• interest rate swap agreements are arranged to hedge against
adverse movements in interest rates on both long term and
short term loans.
Financial instruments are used to hedge specific underlying
positions only and are accounted for using the same basis as the
underlying position.
For interest rate swap agreements entered into in connection with
the management of interest rate exposures, the differential to be
paid or received quarterly is accrued as interest rates change, 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.
(i) Cash flow hedges
Where a hedge transaction is terminated early and the anticipated
transaction is still expected to occur as designated, the deferred
gains or losses that arose on the hedge prior to its termination
continue to be deferred and are included in the measurement of
the purchase or sale or interest transaction when it occurs. Where
a hedge transaction is terminated early because the anticipated
transaction is no longer expected to occur as designated, deferred
gains and losses that arose on the hedge prior to its termination
are included in the income statement for the period.
Where a hedge is redesignated as a hedge of another transaction,
gains or losses arising on the hedge prior to its redesignation are
only deferred where the original anticipated transaction is still
expected to occur as designated. Any gains or losses relating to
the hedge instrument are included in the income statement for
the period.
Gains or losses that arise prior to and upon the maturity of
transactions entered into under hedge rollover strategies are
deferred and included in the measurement of the hedged
anticipated transaction if the transaction is still expected to
occur as designated. If the anticipated transaction is no longer
expected to occur as designated, the gains or losses are recognised
immediately in the income statement.
(ii) Hedge of monetary assets and liabilities
All other hedge transactions are initially recorded at the relevant
rate at the date of the transaction. Hedges at reporting date are
valued at the rates ruling on that date and any gains or losses are
brought to account in the income statement. Gains or losses
arising at the time of entering into the hedge are deferred and
amortised over the life of the hedge.
(g) property, plant and equipment
(i) Owned assets
Items of property, plant and equipment are stated at cost less
accumulated depreciation (see below) and impairment losses
(see accounting policy (l)). Certain items of property, plant and
equipment that had been revalued to fair value on or prior to 1
August 2004, the date of transition to AIFRS, are measured on
the basis of deemed cost, being the revalued amount at the date
of that revaluation. Where parts of an item of property, plant and
equipment have different useful lives, they are accounted for as
separate items of property, plant and equipment.
53
notes to the financial statements cont
1 significant accounting policies (cont)
(ii) Leased assets
Leases in terms of which the consolidated entity assumes
substantially all of the risks and rewards of ownership are
classified as finance leases. The property acquired by way of a
finance lease is stated at an amount equal to the lower of its fair
value and the present value of the minimum lease payments
at inception of the lease, less accumulated depreciation (see
below) and impairment losses (see accounting policy (l)). Lease
payments are accounted for as described in accounting policy (s).
(iii) Subsequent costs
The consolidated entity recognises in the carrying amount of an
item of property, plant and equipment the cost of replacing part
of such an item when that cost is incurred if it is probable that the
future economic benefits embodied within the item will flow to
the consolidated entity and the cost of the item can be measured
reliably. All other costs are recognised in the income statement as
an expense as incurred.
(iv) Depreciation
Depreciation is charged to the income statement on a straight-
line basis over the estimated useful lives of each part of an item
of property, plant and equipment. Land is not depreciated. The
estimated useful lives in the current and comparative periods are
as follows:
• buildings
• leasehold improvements
• plant and equipment
• leased plant and
15–20 years
5 years
10–15 years
over the term of the lease
equipment
5 years
• motor vehicles
• computer equipment
3 years
The residual value, the useful life and the depreciation method
applied to an asset are reassessed at least annually.
(h) intangibles assets
(i) Goodwill
Business combinations
Business combinations prior to 1 August 2004
Goodwill is included on the basis of its deemed cost, which
represents the amount recorded under previous AGAAP. The
classification and accounting treatment of business combinations
that occurred prior to 1 August 2004 has not been reconsidered
in preparing the consolidated entity’s opening AIFRS balance
sheet at 1 August 2004 (see note 38).
Business combinations since 1 August 2004
All business combinations are accounted for by applying the
purchase method. Goodwill represents the difference between the
cost of the acquisition and the fair value of the net identifiable
assets acquired.
Goodwill is stated at cost less any accumulated impairment losses.
Goodwill is allocated to cash-generating units and is no longer
amortised but is tested annually for impairment (see accounting
policy (l)). In respect of associates, the carrying amount of
goodwill is included in the carrying amount of the investment
in associate.
Negative goodwill arising on an acquisition is recognised directly
in profit or loss.
(ii) Research costs
Expenditure on research activities, undertaken with the
prospect of gaining new scientific or technical knowledge and
understanding, is recognised in the income statement as an
expense as incurred.
(iii) Development costs
Expenditure on development activities, whereby research findings
are applied to a plan or design for the production of new or
substantially improved products and processes, is capitalised if
the product or process is technically and commercially feasible
and the consolidated entity has sufficient resources to complete
development. The expenditure capitalised includes the cost of
materials and direct labour. Other development expenditure is
recognised in the income statement as an expense as incurred.
Capitalised development expenditure is stated at cost less
accumulated amortisation (see accounting policy h(vi)) and
impairment losses (see accounting policy (l)).
(iv) Intellectual property
Intellectual property consists of product registrations,
product access rights, trademarks, task force seats, product
distribution rights and product licences acquired from third
parties. Generally, product registrations, product access rights,
trademarks and task force seats, if purchased outright, are
considered to have an indefinite life as there are minimal annual
fees to maintain the assets. Other items of acquired intellectual
property are considered to have a finite life in accordance with
the terms of the acquisition agreement. Intellectual property
intangibles acquired by the consolidated entity are stated at cost
less accumulated amortisation (see below) and impairment losses
(see accounting policy (l)). Expenditure on internally generated
goodwill and brands is expensed as incurred.
(v) Subsequent expenditure
Subsequent expenditure on capitalised intangible assets is
capitalised only when it increases the future economic
benefits embodied in the specific asset to which it relates.
All other expenditure is expensed as incurred.
(vi) Amortisation
For those intangibles with a finite life, amortisation is charged
to the income statement on a straight-line basis over the
estimated useful live of the asset. Goodwill and intangible assets
with an indefinite life are not subject to amortisation, but are
systematically tested for impairment at each annual balance sheet
date. The estimated useful life for intangible assets with a finite
life, in the current and comparative periods, are as follows:
• capitalised development costs
• intellectual property -
5 years
over the useful life
in accordance with
the acquisition
agreement terms
3 to 7 years
finite life
• computer software
54
notes to the financial statements cont
1 significant accounting policies (cont)
(i) trade and other receivables
Trade and other receivables are stated at face value, less a discount
for the time value of money where applicable.
(j) inventories
Inventories are stated at the lower of cost and net realisable value.
Net realisable value is the estimated selling price in the ordinary
course of business, less the estimated costs of completion and
selling expenses.
The cost of inventories is based on the first-in first-out principle
and includes expenditure incurred in acquiring the inventories
and bringing them to their existing location and condition. In
the case of manufactured inventories and work in progress, cost
includes an appropriate share of overheads based on normal
operating capacity.
(k) cash and cash equivalents
Cash and cash equivalents comprises cash balances, short term
bills and call deposits. Bank overdrafts that are repayable on
demand and form an integral part of the consolidated entity’s
cash management are included as a component of cash and cash
equivalents for the purpose of the statement of cash flows.
(l) impairment
The carrying amounts of the consolidated entity’s assets, other
than inventories and deferred tax assets, are reviewed at each
balance sheet date to determine whether there is any indication of
impairment. If any such indication exists, the asset’s recoverable
amount is estimated.
For goodwill, assets that have an indefinite useful life and
intangible assets that are not yet available for use, the recoverable
amount is estimated semi-annually.
An impairment loss is recognised whenever the carrying amount
of an asset or its cash generating unit exceeds its recoverable
amount. Impairment losses are recognised in the income
statement. Impairment losses recognised in respect of cash-
generating units are allocated first to reduce the carrying amount
of any goodwill allocated to the cash-generating unit and then, to
reduce the carrying amount of the other assets in the unit on a
pro-rata basis.
Goodwill and indefinite-life intangible assets were tested for
impairment at 1 August 2004, the date of transition to AIFRS,
even though no indication of impairment existed.
(i) Calculation of recoverable amount
The recoverable amount of the consolidated entity’s receivables,
carried at face value, is calculated as the present value of estimated
future cash flows, discounted at the original effective interest
rate. Receivables with a short duration are not discounted.
Impairment of receivables is not recognised until objective
evidence is available that a loss event has occurred.
The recoverable amount of other assets is the greater of their fair
value less costs to sell and value in use. Fair value less costs to sell
is the amount obtainable from the sale of an asset in an arm’s
length transaction between knowledgeable, willing parties. For
most of Nufarm’s assets, the fair value less costs to sell, is not
obtainable or applicable. Therefore, the value in use is utilised
to calculate the recoverable amount. In assessing value in use,
the estimated future cash flows are discounted to their present
value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to
the asset. For an asset that does not generate largely independent
cash inflows, the recoverable amount is determined for the cash-
generating unit to which the asset belongs.
(ii) Reversals of impairment
Impairment losses, other than in respect to goodwill, are
reversed when there is an indication that the impairment loss no
longer exists and there has been a change in the estimate used to
determine the recoverable amount.
An impairment loss in respect of goodwill is not reversed.
An impairment loss is reversed only to the extent that the asset’s
carrying amount does not exceed the carrying amount that would
have been determined, net of depreciation or amortisation, if no
impairment loss had been recognised.
(iii) Derecognition of financial assets and liabilities
Current accounting policy
A financial asset is derecognised when:
• the rights to receive cash flows from the asset have expired;
• the consolidated entity retains the right to receive
cash flows from the asset, but has assumed an obligation to pay
them in full without material delay to a third party; or
• the consolidated entity has transferred its rights to receive cash
flows from the asset and either (a) has transferred all the risks
and rewards of the asset, or (b) has neither transferred nor
retained substantially all the risks and rewards of the asset, but
has transferred control of the asset.
A financial liability is derecognised when the obligation under
the liability is discharged, cancelled or expired. When an existing
financial liability is replaced by another from the same lender on
substantially different terms, or the terms of an existing liability
are substantially modified, such an exchange or modification
is treated as a derecognition of the original liability and the
recognition of a new liability. The difference in the respective
carrying amounts is recognised in profit and loss.
(m) share capital
(i) Ordinary capital
Issued and paid up capital is recognised at the fair value of the
consideration received by the company. Ordinary share capital
bears no special terms or conditions affecting the income or
capital entitlements of the shareholders.
(ii) Dividends
Dividends on ordinary capital are recognised as a liability in the
period in which they are declared.
55
notes to the financial statements cont
1 significant accounting policies (cont)
(iii) Transaction costs
Transaction costs of an equity transaction are accounted for as a
deduction from equity, net of any related income tax benefit.
(n) interest-bearing borrowings
Current accounting policy
Interest-bearing borrowings are initially recognised at the
principal amount less attributable transaction costs.
Comparative period policy
Bank loans are recorded at the principal amount, or in the case
of capital notes, at the face value of the notes. Borrowing costs,
including interest at the contracted rate, are charged against
profit as they accrue.
(o) employee benefits
(i) Defined contribution superannuation funds
Obligations for contributions to defined contribution
pension plans are recognised as an expense in the income
statement as incurred.
(ii) Defined benefit plans
The consolidated entity’s net obligation in respect of defined
benefit pension plans, is calculated separately for each plan by
estimating the amount of future benefit that employees have
earned in return for their service in the current and prior
periods; that benefit is discounted to determine its present
value, and the fair value of any fund assets is deducted.
The discount rate is the yield at the balance sheet date on
government bonds that have maturity dates approximating
the terms of the consolidated entity’s obligations. The calculation
is performed by a qualified actuary using the projected unit
credit method.
When the benefits of a fund are improved, the portion of
the increased benefit relating to past service by employees is
recognised as an expense in the income statement on a straight-
line basis over the average period until the benefits become
vested. To the extent that the benefits vest immediately, the
expense is recognised immediately in the income statement.
All actuarial gains and losses are recognised directly in
retained earnings.
Where the calculation results in a benefit to the consolidated
entity, the recognised asset is limited to the net total of any
unrecognised actuarial losses and past service costs and the
present value of any future refunds from the fund or reductions
in future contributions to the fund. Past service cost is the
increase in the present value of the defined benefit obligation
for employee services in prior periods, resulting in the
current period from the introduction of, or changes to, post-
employment benefits or other long-term employee benefits.
(iii) Long-term service benefits
The consolidated entity’s net obligation in respect of long-term
service benefits, other than defined benefit superannuation
funds, is the amount of future benefit that employees have earned
in return for their service in the current and prior periods.
The obligation is calculated using expected future increases in
salary rates including related on-costs and expected settlement
dates, and is discounted using the rates attached to the
Commonwealth Government bonds at the balance sheet date
which have maturity dates approximating the terms of the
consolidated entity’s obligations.
(iv) Wages, salaries, annual leave, sick leave and non-
monetary benefits
Liabilities for employee benefits for wages, salaries, annual leave
and sick leave that are expected to be settled within 12 months of
the reporting date represent present obligations resulting from
employees’ services provided to reporting date, are calculated
at undiscounted amounts based on remuneration salary rates
that the consolidated entity expects to pay as at reporting date
including related on-costs, such as, workers compensation
insurance and payroll tax.
(v) Share-based payment transactions
The consolidated entity has a global share plan for employees
whereby matching and loyalty shares are granted to employees.
The value of matching and loyalty shares granted is recognised as
personnel expenses in the income statement over the respective
service period with a corresponding increase in equity, rather
than as the matching and loyalty shares are issued. Refer note 24
for details of the global share plan.
(p) provisions
A provision is recognised in the balance sheet when the
consolidated entity has a present legal or constructive obligation
as a result of a past event, and it is probable that an outflow
of economic benefits will be required to settle the obligation.
Provisions are determined by discounting the expected
future cash flows at a pre-tax rate that reflects current market
assessments of the time value of money and, where appropriate,
the risks specific to the liability.
(i) Restructuring
A provision for restructuring is recognised when the consolidated
entity has approved a detailed and formal restructuring plan, and
the restructuring either has commenced or has been announced
publicly. Future operating costs are not provided for.
(q) trade and other payables
Trade and other payables are stated at face value, less a discount
for the time value of money where applicable.Trade payables are
non-interest bearing and are normally settled on an average of
60-day terms.
56
notes to the financial statements cont
1 significant accounting policies (cont)
(r) revenue
Goods sold
Revenue from the sale of goods is recognised in the income
statement when the significant risks and rewards of ownership
have been transferred to the buyer. No revenue is recognised
if there are significant uncertainties regarding recovery of the
consideration due, the costs incurred or to be incurred cannot
be measured reliably, or there is continuing management
involvement with the goods.
(s) expenses
(i) Operating lease payments
Payments made under operating leases are recognised in the
income statement on a straight-line basis over the term of the
lease. Lease incentives received are recognised in the income
statement as an integral part of the total lease expense and spread
over the lease term.
(ii) Finance lease payments
Minimum lease payments are apportioned between the finance
charge and the reduction of the outstanding liability. The finance
charge is allocated to each period during the lease term so as to
produce a constant periodic rate of interest on the remaining
balance of the liability.
(iii) Net financing costs
Net financing costs comprise interest payable on borrowings
calculated using the effective interest method, interest receivable
on funds invested, foreign exchange gains and losses and losses
on hedging instruments that are recognised in the income
statement. Borrowing costs are expensed as incurred and
included in net financing costs.
Interest income is recognised in the income statement as it
accrues, using the effective interest method. The interest
expense component of finance lease payments is recognised in
the income statement using the effective interest method.
(t) income tax
Income tax on the profit or loss for the year comprises current
and deferred tax. Income tax is recognised in the income
statement except to the extent that it relates to items recognised
directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for
the year, using tax rates enacted or substantively enacted at the
balance sheet date, and any adjustment to tax payable in respect
of previous years.
Deferred tax is provided using the balance sheet liability
method, providing for temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for tax purposes. The following
temporary differences are not provided for: initial recognition of
goodwill; the initial recognition of assets and liabilities that affect
neither accounting or taxable profit; and differences relating to
investments in subsidiaries to the extent that they will probably
not reverse in the foreseeable future.
The amount of deferred tax provided is based on the expected
manner of realisation or settlement of the carrying amount
of assets and liabilities, using tax rates enacted or substantively
enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against which
the asset can be utilised. Deferred tax assets are reduced to the
extent that it is no longer probable that the related tax benefit
will be realised.
Additional income taxes that arise from the distribution of
dividends are recognised at the same time as the liability to pay
the related dividend.
Tax consolidation
The company and its wholly-owned Australian resident
entities have formed a tax-consolidated group with effect from
1 August 2002 and are therefore taxed as a single entity from
that date. The head entity within the tax consolidated group is
Nufarm Limited.
Current tax expense/income, deferred tax liabilities and
deferred tax assets arising from temporary differences of the
members of the tax-consolidated group are recognised in
the separate financial statements of the members of the tax-
consolidated group using the ‘separate taxpayer within group’
approach by reference to the carrying amounts in the separate
financial statements of each entity and the tax values applying
under tax consolidation.
Any current tax liabilities (or assets) and deferred tax assets
arising from unused tax losses of the subsidiaries is assumed by
the head entity in the tax-consolidated group and are recognised
as amounts payable (receivable) to (from) other entities in the
tax-consolidated group in conjunction with any tax funding
arrangement amounts (refer below). Any difference between
these amounts is recognised by the company as an equity
contribution or distribution.
The company recognises deferred tax assets arising from unused
tax losses of the tax-consolidated group to the extent that it is
probable that future taxable profits of the tax-consolidated group
will be available against which the asset can be utilised.
Any subsequent period adjustments to deferred tax assets arising
from unused tax losses as a result of revised assessments of the
probability of recoverability is recognised by the head entity only.
Nature of tax funding arrangements
and tax sharing agreements
The head entity, in conjunction with other members of the tax-
consolidated group, has entered into a tax funding arrangement
which sets out the funding obligations of members of the tax-
consolidated group in respect of tax amounts. The tax funding
arrangements require payments to/from the head entity equal to
the current tax liability (asset) assumed by the head entity and any
tax-loss deferred tax asset assumed by the head entity, resulting
in the head entity recognising an inter-entity receivable (payable)
equal in amount to the tax liability (asset) assumed. The inter-
entity receivable (payable) are at call.
57
notes to the financial statements cont
Receivables and payables are stated with the amount of GST
included. The net amount of GST recoverable from, or payable
to, the ATO is included as a current asset or liability in the
balance sheet.
Cash flows are included in the statement of cash flows on a gross
basis. The GST components of cash flows arising from investing
and financing activities which are recoverable from, or payable
to, the ATO are classified as operating cash flows.
(x) accounting estimates and judgements
Management discussed with the audit committee the
development, selection and disclosure of the consolidated entity’s
critical accounting policies and estimates and the application of
these policies and estimates. The estimates and judgements that
have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial
year are discussed below.
Impairment of goodwill and intangibles with indefinite
useful lives
Semi-annually the consolidated entity assesses whether the
goodwill and intangible assets with indefinite lives are impaired.
These calculations involved estimating the recoverable amount
of the cash-generating units (CGUs) to which the goodwill
and intangible assets with indefinite lives are allocated. The
assumptions used in the estimation of recoverable amount and
the carrying amount of goodwill and intangibles with indefinite
useful lives are discussed in note 20.
Defined benefit fund assumptions
Various actuarial assumptions are utilised in the determination
of the consolidated entities defined benefit fund obligations.
These assumptions are disclosed in note 24.
Provision for doubtful debts
A provision for doubtful debts is only recognised when it is
considered unlikely that the full amount of the receivable will be
collected. No general provision for doubtful debts is recognised
due to the tight credit control procedures and the history of very
low bad debt write offs.
1 significant accounting policies (cont)
Contributions to fund the current tax liabilities are payable as
per the tax funding arrangement and reflect the timing of the
head entity’s obligation to make payments for tax liabilities to the
relevant tax authorities.
The head entity, in conjunction with other members of the tax-
consolidated group, has also entered a tax sharing agreement.
The tax sharing agreement provides for the determination of the
allocation of the income tax liabilities between the entities should
the head entity default on its tax payment obligations.
No amounts have been recognised in the financial statements in
respect of this agreement as payment of any amounts under the
tax sharing agreement is considered remote.
(u) segment reporting
A segment is a distinguishable component of the consolidated
entity that is engaged either in providing products or services
(business segment), or in providing products or services within a
particular economic environment (geographic segment), which is
subject to risks or rewards that are different from those of other
segments. The consolidated entity’s primary reporting segment is
by geography.
(v) non-current assets held for sale and discontinued
operations
Immediately before classification as held for sale, the
measurement of the assets (and all assets and liabilities in
a disposal group) is brought up to date in accordance with
applicable accounting standards. Then, on initial classification
as held for sale, non-current assets and disposal groups are
recognised at the lower of carrying value and fair value less
costs to sell.
Impairment losses on initial classification as held for sale are
included in profit or loss, even when there is a revaluation.The
same applies to gains or losses on subsequent remeasurement.
A discontinued operation is a component of the consolidated
entity’s business that represents a separate major line of business
or geographical area of operations or is a subsidiary acquired
exclusively with a view to resale.
Classification as a discontinued operation occurs upon disposal
or when the operation meets the criteria to be classified as held
for sale, if earlier. A disposal group that is to be abandoned may
also qualify.
(w) goods and services tax
Revenue, expenses and assets are recognised net of the amount
of goods and services tax (GST), except where the GST incurred
is not recoverable from the taxation authority.
In these circumstances, the GST is recognised as part of the cost
of acquisition of the asset or as part of the expense.
58
notes to the financial statements cont
2 segment reporting
Segment information is presented in respect of the consolidated
entity’s business and geographic segments. The primary format,
geographic segments, is based on the consolidated entity’s
management and internal reporting structure.
The consolidated entity operates predominantly in one business
segment, being the crop protection industry. The business
is managed on a worldwide basis, with the major geographic
segments for reporting being Australasia, Europe and Americas.
In presenting information on the basis of geographic segments,
segment revenue is based on the geographic location of
customers. Segment assets are based on the geographic location
of the assets.
Segment results, assets and liabilities include items directly
attributable to a segment as well as those that can be allocated
on a reasonable basis. Unallocated items comprise mainly
interest-bearing loans, borrowings and expenses, and corporate
assets and expenses. Inter-segment pricing is determined on an
arm’s length basis. Segment capital expenditure is the total cost
incurred during the period to acquire segment assets that are
expected to be used for more than one period.
geographic segments
revenue
Total segment revenue
results
Segment result
Unallocated corporate expenses
Profit from operating activities
Net financing costs
Share of profit of associates
Income tax expense
Profit/(loss) of discontinued operations
and gain on sale of discontinued operations
Profit for the year
assets
Segment assets
Investment in associates
Unallocated assets
Total assets
liabilities
Segment liabilities
Unallocated liabilities
Total liabilities
other segment information
Capital expenditure
Depreciation
Amortisation
Other non-cash expenses
australasia
$000
europe
$000
americas consolidated
$000
$000
2006
749,558
392,947
534,241
1,676,746
122,023
35,056
48,058
731,226
8,784
499,792
14,168
331,334
205,178
266,551
132,173
158,188
205,137
(28,812)
176,325
(49,246)
10,545
(34,459)
18,567
121,732
1,562,352
228,130
136,643
1,927,125
556,912
660,847
1,217,759
74,883
14,855
3,179
5,817
17,286
14,562
6,081
6,078
50,698
4,409
527
45
142,867
33,826
9,787
11,940
59
notes to the financial statements cont
2 segment reporting (continued)
revenue
Total segment revenue
results
Segment result
Unallocated corporate expenses
Profit from operating activities
Net financing costs
Share of profit of associates
Income tax expense
Profit/(loss) of discontinued operations and
gain on sale of discontinued operations
Profit for the year
assets
Segment assets
Investment in associates
Unallocated assets
Total assets
liabilities
Segment liabilities
Unallocated liabilities
Total liabilities
other segment information
Capital expenditure
Depreciation
Amortisation
Other non-cash expenses
australasia
$000
europe
$000
americas consolidated
$000
$000
2005
753,852
375,192
444,944
1,573,988
122,458
1,055
37,048
661,705
7,907
459,921
13,448
243,762
196,702
291,457
131,767
130,069
31,938
13,709
2,445
6,025
85,502
12,366
5,449
2,083
20,999
3,811
470
553
160,561
(25,376)
135,185
(38,301)
33,402
(26,464)
22,812
126,634
1,365,388
218,057
165,286
1,748,731
553,293
578,124
1,131,417
138,439
29,886
8,364
8,661
3 items of material income and expense
the following material items were included in the period result:
Gain on sale of businesses – after tax
Other restructuring items – after tax
Material items after tax
consolidated
2005
2006
$000
$000
8,415
(8,368)
47
12,736
(9,351)
3,385
consolidated the company
2006
$000
2005
$000
2006
$000
2005
$000
4 other income
Dividends from wholly owned controlled entities
Management fees from controlled entities
Sundry income
Total other income
–
–
9,914
9,914
–
–
8,366
8,366
45,861
1,733
209
47,803
40,592
3,134
1,038
44,764
60
notes to the financial statements cont
consolidated the company
2005
$000
2006
$000
2006
$000
2005
$000
5 other operating expenses
Personnel expenses
Sales and distribution expenses
Plant related expenses
Other operating expenses
Occupancy expenses
Insurance expense
Depreciation and amortisation
Closure costs UK property, plant & equipment
Travel expense
Research and development expense
Operating lease expenses
Total operating expenses
other expenses included above
Impairment loss on trade receivables
Movement in stock obsolescence provision (increase)/decrease
Restructuring costs
Superannuation contributions – defined benefit
fund (increase)/decrease
6 auditors’ remuneration
audit services
KPMG Australia
Audit and review of financial reports
Audit of AIFRS disclosures
Overseas KPMG firms
Audit and review of financial reports
other auditors
Audit and review of financial reports
other services
KPMG Australia
AIFRS conversion advice
Accounting advice
Other assurance services
Overseas KPMG firms
Due diligence services
(190,103)
(78,160)
(47,881)
(37,377)
(28,818)
(18,973)
(18,827)
–
(16,982)
(14,615)
(8,750)
(460,486)
(181,973)
(68,870)
(47,806)
(30,847)
(23,571)
(18,020)
(16,512)
(15,967)
(15,486)
(14,962)
(9,393)
(443,407)
(823)
631
(8,990)
(921)
(215)
(2,761)
1,679
(1,404)
377
43
823
1,243
105
1,348
10
–
96
–
106
301
25
563
889
111
1,000
25
20
–
31
76
(2,644)
(3,790)
(224)
(469)
(414)
(392)
(319)
–
(381)
(226)
(6)
(8,865)
(4,037)
(3,965)
(281)
(1,647)
(470)
(480)
(322)
–
(466)
(262)
(8)
(11,938)
–
–
–
–
56
–
–
56
–
56
–
–
–
–
–
1
(79)
–
–
49
–
–
49
–
49
–
–
–
–
–
61
notes to the financial statements cont
consolidated the company
2005
$000
2006
$000
2006
$000
2005
$000
7 net financing costs
Interest income – controlled subsidiaries
Interest income – external
Financial income
Interest expense – controlled entities
Interest expense – external
Costs of securitisation program
Finance lease charges
Financial expenses
–
(7,995)
(7,995)
–
52,756
4,476
9
57,241
–
(8,278)
(8,278)
–
43,132
3,422
25
46,579
(14,023)
(6,192)
(20,215)
(13,623)
(6,969)
(20,592)
21,695
101
–
–
21,796
22,386
–
–
–
22,386
Net financing costs
49,246
38,301
1,581
1,794
8 income tax expense
recognised in the income statement
current tax expense
Current year
Adjustments for prior years
deferred tax expense
Origination and reversal of temporary differences
Reduction in tax rates
Benefit of tax losses recognised
41,499
(976)
40,523
46,898
257
47,155
2,940
(120)
2,820
3,654
(1,069)
2,585
4,142
585
(7,434)
(2,707)
(1,716)
16
(7,149)
(8,849)
620
–
–
620
(41)
–
–
(41)
Total income tax expense in income statement
37,816
38,306
3,440
2,544
Attributable to:
Continuing operations
Discontinuing operations
numerical reconciliation between tax expense
and pre-tax net profit
Profit before tax – continuing operations
Profit before tax – discontinuing operations
Profit before tax
34,459
3,357
37,816
26,464
11,842
38,306
2,710
730
3,440
2,051
493
2,544
137,624
21,924
159,548
130,286
34,654
164,940
56,846
7,354
64,200
51,306
1,485
52,791
62
notes to the financial statements cont
consolidated the company
2005
$000
2006
$000
2006
$000
2005
$000
8 income tax expense (continued)
Income tax using the local corporate tax rate of 30%
Increase in income tax expense due to:
Non-deductible expenses
Effect on tax rate in foreign jurisdictions
Effect of changes in the tax rate
Decrease in income tax expense due to:
Effect of tax losses derecognised/recognised
Tax exempt income
Tax incentives not recognised in the income statement
Under/(over) provided in prior years
47,864
49,482
19,260
15,837
2,718
983
585
(4,383)
(8,078)
(897)
38,792
(976)
2,205
3,523
16
(4,801)
(11,547)
(829)
38,049
257
190
136
–
201
212
–
–
(16,026)
–
3,560
(120)
–
(12,638)
–
3,612
(1,068)
Income tax expense on pre–tax net profit
37,816
38,306
3,440
2,544
Deferred tax recognised directly in equity
Relating to actuarial gains on defined benefit plans
Relating to cost of issuing equity
(29)
–
(29)
(876)
–
(876)
–
–
–
–
–
–
9 non-current assets held for sale and discontinued operations
discontinued operations
Effective 1 August 2005, the consolidated entity sold the Nuturf turf/specialty business. On 30 June 2006, Nufarm sold the CACI
business. CACI manufactured and sold industrial chemical products in France. Effective 31 July 2006, Nufarm sold its New Zealand
based animal health toll manufacturing business to Argenta Manufacturing Ltd. The Nufarm-Coogee joint venture, which owns and
operates two industrial chlor-alkali plants in Western Australia, has been classified as assets held for sale and a discontinued business at
31 July as Nufarm is in advanced negotiations for the sale of its stake in the joint ventures. Also included in the assets held for sale is the
land and buildings at the Granollers site in Spain, as Nufarm is currently negotiating the sale of this site. The comparative year assets
held for sale related to the Nuturf business.
In the prior period, the group sold the Nufarm Specialty Products business, SEAC, Pacific Raw Materials, Biological Wool Harvesting
and the Nufarm Brazil business. The Nufarm Brazil business was sold to the associated company Agripec.
effect of the disposals on the income statement
of the consolidated entity
Revenue
Cost of sales
Gross profit
Other income
Depreciation and amortisation expense
Operating expense
Profit before financing costs
Financial income
Financial expense
Net financing costs
Profit before tax
Income tax expense
Profit after tax of discontinued operations
consolidated
2006
$000
2005
$000
67,777
(32,470)
35,307
1,829
(2,750)
(19,966)
14,420
137
(83)
54
111,552
(52,019)
59,533
3,246
(7,313)
(41,409)
14,057
192
(241)
(49)
14,474
(4,322)
10,152
14,008
(3,932)
10,076
63
notes to the financial statements cont
consolidated
2006
$000
2005
$000
9 non-current assets held for sale and discontinued operations (continued)
effect of the disposals on the balance sheet
of the consolidated entity
Receivables
Inventories
Property, plant and equipment
Intangibles
Deferred tax asset
Other assets
Trade payables
Employee benefits
Borrowings
Finance lease liability
Deferred tax liability
Net identifiable assets and liabilities
2,330
3,317
19,735
499
1,948
–
(2,640)
(731)
–
(881)
(397)
23,180
Consideration received, satisfied in cash
Deferred consideration
Cash disposed of
Net cash (inflow)
Other costs associated with disposal
Gain on sale of discontinued operations after tax
Income tax benefit/(expense)
Gain on sale of discontinued operations after tax
Profit after tax of discontinued operations
Gain on sale of discontinued operations after tax
Profit and loss of discontinued operations (per income statement)
net cash flows attributable to discontinuing operations
Operating
Investing
Financing
Net cash flows attributable to discontinuing operations
assets held for sale
Included in the assets held for sale at 31 July 2006 are the chlor-alkali joint
ventures and the land and buildings at the Granollers site in Spain ($1,137,076).
11,677
15,626
47,677
755
–
703
(9,180)
(1,173)
(7,517)
–
–
58,568
69,921
11,900
(164)
81,657
8,138
25,061
(418)
32,781
(2,151)
(2,443)
7,450
965
8,415
10,152
8,415
18,567
12,809
(3,892)
(3,510)
5,407
20,646
(7,910)
12,736
10,076
12,736
22,812
16,920
(8,979)
(8,270)
(329)
64
notes to the financial statements cont
consolidated
2006
$000
2005
$000
456
2,087
2,508
66
218
–
145
5,480
925
483
–
–
1,408
9 non-current assets held for sale and discontinued operations (continued)
assets classified as held for sale
Cash and cash equivalents
Trade and other receivables
Inventories
Income tax receivable
Property, plant and equipment
Intangible assets
Deferred tax asset
1,423
3,510
523
–
14,681
–
3,772
23,909
liabilities classified as held for sale
Trade and other payables
Employee entitlements
Provision for tax
Deferred tax liability
10 earnings per share
Net profit
Net profit attributable to minority interest
Earnings used in the calculations of basic and diluted earnings per share
Earnings from continuing operations
Earnings from discontinuing operations
Add/subtract material items of profit/(loss) (refer note 3)
Earnings excluding material items used in the calculation
of operating earnings per share
Weighted average number of ordinary shares used in calculation of
basic earnings per share
Weighted average number of ordinary shares used in calculation of
diluted earnings per share
There have been no conversions to, calls of, or subscriptions for ordinary shares or
issues of ordinary shares since the reporting date and before the completion of this financial report.
earnings per share for continuing
and discontinued operations
Basic earnings per share
From continuing operations
From discontinuing operations
Diluted earnings per share
From continuing operations
From discontinuing operations
Earnings per share (excluding material items of profit/loss – see note 3)
Basic earnings per share
Diluted earnings per share
7,881
816
4,175
553
13,425
121,732
(579)
121,153
126,634
(1,589)
125,045
102,586
18,567
121,153
102,233
22,812
125,045
47
3,385
121,106
121,660
number of shares
2005
2006
170,224,284
169,043,745
170,224,284
169,043,745
cents per share
2005
2006
60.3
10.9
71.2
60.3
10.9
71.2
71.1
71.1
60.5
13.5
74.0
60.5
13.5
74.0
72.0
72.0
65
notes to the financial statements cont
consolidated the company
2005
$000
2006
$000
2006
$000
2005
$000
11 cash and cash equivalents
Bank balances
Call deposits
Cash and cash equivalents
Bank overdrafts repayable on demand
Cash and cash equivalents in the statement of cash flows
12 trade and other receivables
current
Trade receivables
Provision for impairment losses
Receivables due from controlled entities
Loans due from controlled entities
Receivables due from associates
Receivables due from securitisation program
Hedge receivables
Proceeds receivable from sale of businesses
Other trade receivables and prepayments
non-current
Receivables due from associates
Loans due from controlled entities
Hedge receivables
Other receivables
Proceeds receivable from sale of businesses
Provision for non-collectibility of sale proceeds
12,483
38,786
51,269
(19,940)
31,329
15,323
40,468
55,791
(10,398)
45,393
10,739
–
10,739
(23,574)
(12,835)
4,265
–
4,265
(24,762)
(20,497)
371,898
(3,243)
368,655
–
–
444
52,836
18,286
33,763
50,180
524,164
602
–
–
754
19,850
(3,468)
17,738
296,072
(2,423)
293,649
–
–
121
48,828
–
13,157
46,718
402,473
–
–
45,592
8,917
15,105
(3,205)
66,409
8,379
–
8,379
9,180
–
9,180
228,937
170,618
–
–
18,048
25,061
1,069
452,112
203,494
2,805
–
–
–
–
983
216,462
–
–
–
–
–
–
–
–
161,798
45,592
–
–
–
207,390
Total trade and other receivables
541,902
468,882
452,112
423,852
13 inventories
Raw materials
Work in progress
Finished goods
82,421
21,563
332,177
436,161
105,062
6,492
315,497
427,051
–
323
13,480
13,803
3,464
708
12,220
16,392
Provision for obsolescence of finished goods
Total inventories
(4,138)
432,023
(5,613)
421,438
(205)
13,598
(468)
15,924
14 current tax assets and liabilities
The current tax asset for the consolidated entity of $6,171,517 (2005: $8,424,506) and for the company of $376,750 (2005:
$174,464) represent the amount of income taxes recoverable in respect of prior periods and that arise from payments in excess of the
amounts due to the relevant tax authority. The current tax liability for the consolidated entity of $9,999,276 (2005: $12,348,260)
and the company of $8,198,985 (2005: $4,359,189) represent the amount of income taxes payable in respect of current and
prior financial periods. In accordance with the tax consolidation legislation, the company as the head entity of the Australian tax-
consolidated group has assumed the current tax liability (asset) initially recognised by the members in the tax-consolidated group.
66
notes to the financial statements cont
15 investments accounted for using the equity method
The consolidated entity accounts for investments in associates using the equity method.
The consolidated entity has the following investments in associates:
Agripec Quimica e Farmaceutica SA
Bayer CropScience Nufarm Limited
Excel Crop Care Ltd
Crop protection
company
Agricultural
chemicals
manufacturer
Agricultural
chemicals
manufacturer
ownership and
balance date voting interest
2005
49.9%
2006
49.9%
country of associate
31.12.2005
Brazil
UK
31.12.2005
25%
25%
India
31.3.2006
14.69%
14.69%
The 14.69% investment in Excel Crop Care Ltd is equity accounted as Nufarm has two directors on the board and, together with
an unrelated partner, has significant influence over nearly 35% of the shares of the company. The relationship also extends to
manufacturing and marketing collaborations.
financial summary of material associates
revenues
(100%)
profit
after tax
(100%)
total
assets
(100%)
net assets
share of
as reported associates’
by net assets
equity
(100%) accounted
associates
total
liabilities
(100%)
2006
Agripec Quimica e Farmaceutica SA
Bayer CropScience Nufarm Limited
Excel Crop Care Ltd
2005
Agripec Quimica e Farmaceutica SA
Bayer CropScience Nufarm Limited
Excel Crop Care Ltd
carrying value by major associate
Agripec Quimica e Farmaceutica SA
Bayer CropScience Nufarm Ltd
Excel Crop Care Ltd
Others
Carrying value of associates
share of associates profits
Profit before income tax
Income tax benefit/(expense)
Share of net profits of associates
229,282
86,289
123,777
439,348
249,616
94,477
126,521
470,614
17,146
2,130
6,898
26,174
313,088
77,970
74,983
466,041
114,275
17,167
48,993
180,435
198,813
60,803
25,990
285,606
99,208
15,201
3,818
118,227
60,970
8,286
6,787
76,043
273,614
74,575
79,154
427,343
129,474
15,868
57,035
202,377
144,140
58,707
22,119
224,966
71,925
14,677
3,249
89,851
consolidated
2006
$000
2005
$000
204,875
13,998
7,724
1,533
228,130
193,659
14,509
7,140
2,749
218,057
4,771
5,774
10,545
42,125
(8,723)
33,402
67
notes to the financial statements cont
consolidated
2006
$000
2005
$000
15 investments accounted for using the equity method (continued)
share of profit by major associate
Agripec Quimica e Farmaceutica SA
Bayer CropScience Nufarm Ltd
Excel Crop Care Ltd
Others
Share of net profits of associates
8,556
863
1,013
113
10,545
30,424
2,001
997
(20)
33,402
financial summary of material associate
agripec quimica e farmaceutica sa
Group’s share of profit from ordinary activities before tax
Income tax on ordinary activities
Profit share of associate in equity income
Financing expense (after tax)
Profit share of associate in net profit after tax
1,726
6,830
8,556
(6,673)
1,883
37,523
(7,099)
30,424
(3,519)
26,905
Associated entities have the following commitments. Nufarm’s share of capital commitments is $226,672 (2005: $533,100) and share
of finance lease commitments is $303,933 (2005: $nil). Nufarm’s share of contingent liabilities is $3,025,110 (2005: $954,000).
16 interest in joint venture operation
At 31 July 2006, Nufarm is in advanced negotiations for the sale of its interest in the chlor-alkali joint ventures. Therefore, the assets
and liabilities have been classified as held for sale at 31 July 2006. Details of the assets and liabilities classified as held for sale are
included in note 9.
consolidated
2006
$000
2005
$000
the company
2006
$000
2005
$000
17 other investments
investment in controlled entities
Balance at the beginning of the year
Balance at the end of the year
investment in other companies (at cost)
Balance at the beginning of the year
Exchange adjustment
Reclassification to other receivables
Balance at the end of the year
other investments including loans to the staff
share purchase schemes
Balance at the beginning of the year
Exchange adjustment
New investments during the year
Disposals
Loans repaid during the year
Balance at the end of the year
Total other investments
–
–
–
–
247,213
247,213
247,213
247,213
1,013
36
(816)
233
930
5
100
–
(765)
270
503
1,073
(60)
–
1,013
2,640
(46)
15
(481)
(1,198)
930
1,943
–
–
–
–
–
–
–
–
–
–
–
–
–
–
247,213
–
–
–
–
–
–
247,213
68
notes to the financial statements cont
18 deferred tax assets and liabilities
recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
assets
2006
$000
liabilities
2006
$000
2005
$000
2005
$000
net
consolidated
Property, plant and equipment
Intangibles assets
Other investments
Employee benefits
Provisions
Other items
Tax value of losses carried forward
Tax assets/(liabilities)
Set off of tax
Net tax assets/(liabilities)
the company
Property, plant and equipment
Intangibles assets
Other investments
Employee benefits
Provisions
Other items
Tax value of losses carried forward
Tax assets/(liabilities)
Set off of tax
Net tax assets/(liabilities)
12,403
6,370
–
14,543
3,872
1,505
32,391
71,084
(10,011)
61,073
2
–
–
121
67
947
–
1,137
–
1,137
14,802
6,385
–
14,349
3,225
639
24,403
63,803
(8,324)
55,479
819
–
–
190
155
654
–
1,818
–
1,818
(12,780)
(18,991)
(41)
–
(45)
(6,242)
–
(38,099)
10,011
(28,088)
(12,813)
(11,600)
(177)
–
(136)
(3,722)
–
(28,448)
8,324
(20,124)
(52)
(4)
–
–
–
–
–
(56)
–
(56)
–
–
(120)
–
–
–
–
(120)
–
(120)
2006
$000
(377)
(12,621)
(41)
14,543
3,827
(4,737)
32,391
32,985
–
32,985
(50)
(4)
–
121
67
947
–
1,081
–
1,081
2005
$000
1,989
(5,215)
(177)
14,349
3,089
(3,083)
24,403
35,355
–
35,355
819
–
(120)
190
155
654
–
1,698
–
1,698
At 31 July 2006, a deferred tax liability of $9,813,599 (2005: $7,749,675) relating to investments in subsidiaries has not been
recognised because the company controls whether the liability will be incurred and it is satisfied that it will not be incurred in the
foreseeable future.
unrecognised deferred tax assets
Deferred tax assets have not been recognised in respect of the following items:
consolidated
Deductible temporary differences
Tax losses
2006
$000
1,292
2,878
4,170
the company
2006
$000
–
–
–
2005
$000
–
–
–
2005
$000
3,650
3,614
7,264
The deductible temporary differences and tax losses do not expire under current tax legislation. Deferred tax assets have not been
recognised in respect of these items because it is not probable that future taxable profit will be available against which the consolidated
entity can utilise the benefits from.
69
notes to the financial statements cont
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70
notes to the financial statements cont
plant and
land
and machinery
leased
plant and
machinery
$000
$000
buildings
$000
19 property, plant, and equipment
consolidated
2006
cost
Balance at 1 August 2005
Additions
Additions through business combinations
Disposals
Disposals through sale of entities
Transfer to assets held for sale
Other transfers
Exchange adjustment
Balance at 31 July 2006
depreciation and impairment losses
Balance at 1 August 2005
Depreciation charge for the year
Depreciation transfer to discontinued businesses
Additions through business combinations
Disposals
Disposals through sale of entities
Transfer to assets held for sale
Other transfers
Exchange adjustment
Balance at 31 July 2006
156,416
627
1,940
–
(13,460)
(2,702)
7,679
1,290
151,790
(45,868)
(4,912)
(323)
(203)
91
2,909
1,420
949
(1,021)
(46,958)
464,818
6,892
1,587
(6,863)
(14,991)
(45,638)
27,272
7,542
440,619
(291,524)
(28,728)
(2,254)
(441)
7,832
8,072
33,855
(921)
(4,836)
(278,945)
5,078
–
527
–
(4,350)
–
95
186
1,536
(2,366)
(186)
(156)
(268)
–
2,304
–
(28)
(76)
(776)
capital
work in
progress
$000
total
$000
23,584
31,873
–
(464)
–
(1,616)
(35,046)
141
18,472
649,896
39,392
4,054
(7,327)
(32,801)
(49,956)
–
9,159
612,417
–
–
–
–
–
–
–
–
–
–
(339,758)
(33,826)
(2,733)
(912)
7,923
13,285
35,275
–
(5,933)
(326,679)
Net property, plant and equipment at 31 July 2006
104,832
161,674
760
18,472
285,738
cost
Balance at 1 August 2004
Additions
Additions through business combinations
Disposals
Disposals through sale of entities
Transfer to assets held for sale
Other transfers
Exchange adjustment
Balance at 31 July 2005
depreciation and impairment losses
Balance at 1 August 2004
Depreciation charge for the year
Depreciation transfer to discontinued businesses
Disposals
Disposals through sale of entities
Transfer to assets held for sale
Other transfers
Exchange adjustment
Balance at 31 July 2005
175,357
1,590
–
(8,930)
(20,367)
(16)
17,169
(8,387)
156,416
(51,171)
(2,384)
(881)
4,738
8,275
5
(7,542)
3,092
(45,868)
564,824
9,431
621
(47,990)
(66,595)
(519)
29,255
(24,209)
464,818
(337,337)
(27,429)
(6,177)
31,679
31,006
312
1,477
14,945
(291,524)
2005
5,206
261
–
(34)
–
–
(22)
(333)
5,078
(2,289)
(73)
(172)
20
–
–
2
146
(2,366)
19,213
45,556
–
(8)
–
–
(40,339)
(838)
23,584
764,600
56,838
621
(56,962)
(86,962)
(535)
6,063
(33,767)
649,896
–
–
–
–
–
–
–
–
–
(390,797)
(29,886)
(7,230)
36,437
39,281
317
(6,063)
18,183
(339,758)
Net property, plant and equipment at 31 July 2005
110,548
173,294
2,712
23,584
310,138
Assets pledged as security for finance leases $0.8 million (2005: $2.7 million).
There were no impairment losses in the consolidated entity in the current financial year or the comparative year.
71
notes to the financial statements cont
plant and
land
and machinery
leased
plant and
machinery
$000
$000
capital
work in
progress
$000
total
$000
buildings
$000
19 property, plant, and equipment (continued)
the company
2006
cost
Balance at 1 August 2005
Additions
Disposals
Disposals through sale of entities
Other transfers
Exchange adjustment
Balance at 31 July 2006
depreciation and impairment losses
Balance at 1 August 2005
Depreciation charge for the year
Depreciation transferred to discontinued businesses
Disposals
Disposals through sale of entities
Exchange adjustment
Balance at 31 July 2006
15,132
3
(2)
(11,394)
–
(1,530)
2,209
(2,184)
(53)
(298)
2
2,084
251
(198)
11,529
737
(134)
(11,926)
4,134
(1,162)
3,178
(6,837)
(264)
(853)
79
5,502
790
(1,583)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,053
1,676
–
–
(4,134)
(309)
286
29,714
2,416
(136)
(23,320)
–
(3,001)
5,673
–
–
–
–
–
–
–
(9,021)
(317)
(1,151)
81
7,586
1,041
(1,781)
Net property, plant and equipment at 31 July 2006
2,011
1,595
–
286
3,892
cost
Balance at 1 August 2004
Additions
Disposals
Disposals through sale of entities
Other transfers
Exchange adjustment
Balance at 31 July 2005
depreciation and impairment losses
Balance at 1 August 2004
Depreciation charge for the year
Depreciation transferred to discontinued businesses
Disposals
Disposals through sale of entities
Exchange adjustment
Balance at 31 July 2005
15,195
33
–
–
–
(96)
15,132
(1,812)
(29)
(358)
–
–
15
(2,184)
11,213
860
(478)
(8)
10
(68)
11,529
(5,473)
(294)
(1,421)
273
4
74
(6,837)
2005
–
–
–
–
–
–
–
–
–
–
–
–
–
–
142
2,922
–
–
(10)
(1)
3,053
26,550
3,815
(478)
(8)
–
(165)
29,714
–
–
–
–
–
–
–
(7,285)
(323)
(1,779)
273
4
89
(9,021)
Net property, plant and equipment at 31 July 2005
12,948
4,692
–
3,053
20,693
There were no impairment losses in the company in the current financial year or the comparative year.
72
notes to the financial statements cont
consolidated
intellectual property capitalised
definite development
costs
$000
indefinite
life
$000
life
$000
goodwill
$000
computer
software
$000
total
$000
20 intangible assets
cost
Balance at 1 August 2005
Additions
Additions through business combinations
Disposals
Disposals through sale of entities
Other transfers
Exchange adjustment
Balance at 31 July 2006
amortisation and impairment losses
Balance at 1 August 2005
Amortisation charge for the year
Transferred to discontinued businesses
Disposals
Disposals through sale of entities
Other transfers
Exchange adjustment
Balance at 31 July 2006
130,360
–
28,581
–
–
1,473
1,531
161,945
(60,945)
–
–
–
–
63
(1,035)
(61,917)
94,928
34,513
19,808
–
–
428
950
150,627
(8,545)
–
–
–
–
(1,964)
(97)
(10,606)
2006
41,050
1,652
1,150
–
–
(547)
2,051
45,356
(17,166)
(3,207)
–
–
–
547
(1,237)
(21,063)
25,467
7,771
–
–
–
884
799
34,921
(6,726)
(3,408)
–
–
–
(884)
(279)
(11,297)
10,905
7,315
–
(349)
(830)
(748)
251
16,544
302,710
51,251
49,539
(349)
(830)
1,490
5,582
409,393
(7,797)
(1,896)
(17)
210
827
748
(179)
(8,104)
(101,179)
(8,511)
(17)
210
827
(1,490)
(2,827)
(112,987)
Intangibles carrying
amount at 31 July 2006
cost
Balance at 1 August 2004
Additions
Disposals
Other transfers
Exchange adjustment
Balance at 31 July 2005
amortisation and impairment losses
Balance at 1 August 2004
Amortisation charge for the year
Disposals
Disposals through sale of entities
Other transfers
Exchange adjustment
Balance at 31 July 2005
Intangibles carrying
amount at 31 July 2005
100,028
140,021
24,293
23,624
8,440
296,406
2005
29,155
89,456
88
295
(3,457)
–
14,261 12,466
(659)
(5,627)
41,050
94,928
(5,784)
–
(2,368)
–
(840)
447
(8,545)
(3,796)
(3,056)
–
–
(10,573)
259
(17,166)
158,195
8,791
(2,336)
(24,417)
(9,873)
130,360
(74,870)
–
483
755
8,346
4,341
(60,945)
22,279
5,482
(2,528)
1,297
(1,063)
25,467
(4,311)
(2,477)
345
–
(540)
257
(6,726)
9,546
1,667
–
–
(308)
10,905
308,631
16,323
(8,321)
3,607
(17,530)
302,710
(6,717)
(1,201)
–
–
–
121
(7,797)
(95,478)
(6,734)
(1,540)
755
(3,607)
5,425
(101,179)
69,415
86,383
23,884
18,741
3,108
201,531
The amortisation and impairment charge for the year of $8,511,000 (2005: $6,734,000) is included in the depreciation and
amortisation line in the income statement.
The major intangibles with an indefinite economic life are the product registrations that Nufarm owns. These registrations are
considered to have an indefinite life because, based on past experience, there is no evidence that they will not be renewed by the
relevant regulatory authorities. There is no evidence that the company will not satisfy all of the conditions necessary for renewal and
the cost of renewal is minimal. In determining that the registrations have indefinite useful life, the principal factor that influenced this
determination is the expectation that the existing registration will not be subject to significant amendment in the foreseeable future.
73
notes to the financial statements cont
20 intangible assets (continued)
The consolidated entity has determined that legal entity by country is the appropriate method for determining the cash-generating
units (CGU) of the business. This level of CGU aligns with the cash flows of the business and with the management structure of the
group. The goodwill and intellectual property with an indefinite life are CGU specific, as the acquisitions generating goodwill and the
product registrations that are the major indefinite intangible are country specific in nature. There is no allocation of goodwill between
CGUs. There are two significant items included in the indefinite life intangibles: the Assert product registrations acquired from BASF
in September 2005 and the phenoxy business of BASF acquired in January 2004. The Assert intangible is included in the Canada
CGU at a value of $22 million and the phenoxy intangibles is included in the methyls business CGU at a value of $46 million.
For the impairment testing of these assets, the carrying amount of the asset is compared to its recoverable amount at a CGU level. The
consolidated entity uses the value-in-use method to estimate the recoverable amount. In assessing value-in-use, the estimated future
cash flows are derived from the five year plan for each cash-generating unit with a growth factor applied to extrapolate a cash flow over a
20 year period. The 20 year period has been selected on the basis that this period most closely aligns with the product registration life
in most geographies. The growth rate assumed for each CGU is the average growth achieved over the last five years, with a cap of 10%.
The 10% growth cap is the average growth achieved by the group over its recent history. The cash flow is then discounted to a present
value using a discount rate of 11.4%. At 31 July 2006, the recoverable amount exceeded the carrying amount for all CGUs.
the company
goodwill
$000
intellectual property capitalised
definite development
costs
$000
2006
indefinite
life
$000
life
$000
cost
Balance at 1 August 2005
Disposals through sale of entities
Exchange adjustment
Balance at 31 July 2006
Amortisation and impairment losses
Balance at 1 August 2005
Amortisation charge for the year
Disposals through sale of entities
Exchange adjustment
Balance at 31 July 2006
Intangibles carrying amount
at 31 July 2006
cost
Balance at 1 August 2004
Additions
Exchange adjustment
Balance at 31 July 2005
amortisation and impairment losses
Balance at 1 August 2004
Amortisation charge for the year
Exchange adjustment
Balance at 31 July 2005
Intangibles carrying amount
at 31 July 2005
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2005
–
–
–
–
–
–
–
–
–
computer
software
$000
total
$000
997
(830)
(101)
66
(957)
(17)
828
97
(49)
997
(830)
(101)
66
(957)
(17)
828
97
(49)
17
17
970
33
(6)
997
(925)
(38)
6
(957)
970
33
(6)
997
(925)
(38)
6
(957)
40
40
74
notes to the financial statements cont
consolidated the company
2005
$000
2006
$000
2006
$000
2005
$000
21 other non-current assets
borrowing costs
Balance at the beginning of the year
Offset against borrowings on initial application
of AASB 132 and AASB 139
Amortisation charge for the year
Exchange adjustment
Balance at the end of the year
22 trade and other payables
Trade creditors and other accruals are non–interest
bearing and are generally for less than 90 day terms
Trade creditors and accruals – unsecured
Payables due to controlled entities
Loans due to controlled entities
Payables due to associated entities
Securitisation payables
Total payables
1,567
(1,567)
–
–
–
2,882
–
(1,297)
(18)
1,567
–
–
–
–
–
–
–
–
–
–
287,031
–
–
850
186,881
474,762
330,989
–
–
438
167,420
498,847
9,253
19,396
33,708
–
–
62,357
7,816
18,752
37,497
–
–
64,065
The group sells receivables to an unrelated third party for which Nufarm acts as the collection agent. The securitisation payables above
represent the sum payable in respect of those sales and are offset by an amount in trade receivables that is expected to be collected on
their behalf.
23 interest-bearing loans and borrowings
consolidated the company
2005
$000
2006
$000
2006
$000
2005
$000
This note provides information about the contractual terms of
the consolidated entity’s interest-bearing loans and borrowings.
current liabilities
Bank loans – unsecured
Other loans – unsecured
Subordinated loans from controlled entities
Capital notes
Finance lease liabilities – secured
non–current liabilities
Bank loans – unsecured
Other loans – unsecured
Subordinated loans from controlled entities
Capital notes
Finance lease liabilities – secured
313,898
–
–
181,649
260
495,807
106,539
248
–
–
225
107,012
249,491
9
–
–
506
250,006
76,695
–
–
202,338
1,122
280,155
–
–
190,258
–
–
190,258
–
–
–
–
–
–
–
–
–
–
–
–
–
–
211,655
–
–
211,655
75
notes to the financial statements cont
consolidated the company
accessible
$000
utilised
$000
accessible
$000
utilised
$000
23 interest-bearing loans and borrowing (continued)
financing facilities
The consolidated entity has access to the following
facilities with a number of financial institutions.
Bank loan facilities
Other facilities
Subordinated debt facility
Receivables securitisation-type facilities
Total financing facilities
931,353
248
181,649
227,800
1,341,050
Bank loan facilities
Other facilities
Subordinated debt facility
Receivables securitisation-type facilities
Total financing facilities
857,685
188
202,338
220,694
1,280,905
2006
440,377
248
181,649
132,564
754,838
2005
336,405
188
202,338
133,130
672,061
23,574
–
–
–
23,574
23,574
–
–
–
23,574
24,762
–
–
–
24,762
24,762
–
–
–
24,762
financing arrangements
Capital notes
The capital notes have a face value NZD$225,000,000 (2005: NZD$225,000,000). They are long term unsecured subordinated
fixed interest debt security with an election date of 15 October 2006. On the election date, note holders 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. Immediately prior to the 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
All unsecured bank borrowings, including bank overdraft facilities, 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 32) are in excess of their related borrowings.
Finance leases
Finance lease liabilities are secured over the relevant leased plant.
consolidated the company
2005
$000
2006
$000
2006
$000
2005
$000
repayment of borrowings (excluding finance leases)
Period ending 31 July, 2006
Period ending 31 July, 2007
Period ending 31 July, 2008
Period ending 31 July, 2009
No specified repayment date
–
515,730
44,847
61,692
248
259,898
221,507
57,347
–
179
–
–
–
–
–
24,762
211,655
–
–
–
The obligations with no specified repayment date are repayable upon certain contingent events, which the directors believe will not
occur in the foreseeable future.
76
notes to the financial statements cont
consolidated the company
2005
$000
2006
$000
2006
$000
2005
$000
23 interest-bearing loans and borrowing (continued)
finance lease liabilities
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
Less future finance charges
average interest rates
Capital notes coupon
Bank loans
Other loans
Subordinated loans from controlled entities
Finance lease liabilities – secured
24 employee benefits
current
Liability for annual leave
non-current
Present value of wholly unfunded obligations
Present value of wholly funded obligations
Fair value of fund assets – funded
Recognised liability for defined benefit obligations
Liability for long service leave
Total employee benefits
280
200
42
522
(37)
485
%
8.6
5.2
3.0
–
7.8
535
616
571
1,722
(94)
1,628
%
8.6
4.8
3.2
–
5.8
14,389
14,389
14,964
14,964
8,543
54,044
(35,477)
27,110
11,628
38,738
53,127
10,167
47,714
(30,534)
27,347
10,523
37,870
52,834
–
–
–
–
–
–
%
–
–
–
9.2
–
358
358
–
–
–
–
31
31
389
–
–
–
–
–
–
%
–
–
–
9.2
–
521
521
–
–
–
–
56
56
577
(a) liability for defined benefit obligation
The consolidated entity makes contributions to defined benefit pension funds, in the UK, Holland and France,
that provide defined benefit amounts for employees upon retirement. The company has no defined benefit
pension plans.
movements in the net liability for defined benefit
obligations recognised in the balance sheet
Net liability for defined benefit obligations at 1 August
Contributions received
Expense recognised in the income statement
Actuarial (gains)/losses
Liability in disposed entity
Exchange adjustment
Net liability for defined benefit obligations at 31 July
defined benefit pension funds
Amounts in the balance sheet
Liabilities
Net liability
consolidated
2006
$000
2005
$000
27,347
(3,483)
1,804
346
(196)
1,292
27,110
28,773
(3,601)
5,005
(275)
–
(2,555)
27,347
27,110
27,110
27,347
27,347
77
notes to the financial statements cont
24 employee benefits (continued)
amounts for the current and previous periods are as follows:
Defined benefit obligation
Fund assets
Surplus/(deficit)
consolidated
2006
$000
2005
$000
2004
$000
(62,587)
35,477
(27,110)
(57,881)
30,534
(27,347)
(56,466)
27,693
(28,773)
The consolidated entity has used the AASB 1.20A exemption and disclosed amounts under AASB 1.20A(p) above for each annual
reporting period prospectively from the transition date. This exemption allows the disclosure of the fund assets and obligations since
transition to AIFRS, rather then the four periods required by AASB 119.
changes in the present value of the defined benefit obligation are as follows:
Opening defined benefit obligation
Service cost
Interest cost
Actuarial losses/(gains)
Plan changes
Past service cost
Losses/(gains) on curtailment
Contributions
Benefits paid
Liability in disposed business
Exchange differences on foreign funds
Closing defined benefit obligation
changes in the fair value of fund assets are as follows:
Opening fair value of fund assets
Expected return
Actuarial gains
Contributions by employer
Distributions
Exchange differences on foreign funds
Closing fair value of fund assets
The actual return on plan assets is the sum of the expected return and the actuarial gain.
the major categories of fund assets as a percentage of total fund assets are as follows:
European equities
European bonds
Property
Cash
consolidated
2006
$000
57,881
2,726
2,657
932
(631)
–
(1,261)
(1,253)
(1,219)
(196)
2,951
62,587
30,534
1,687
586
1,404
(393)
1,659
35,477
2005
$000
56,466
1,949
2,878
3,550
–
1,858
–
(1,084)
(2,229)
–
(5,507)
57,881
27,693
1,680
3,825
1,761
(1,473)
(2,952)
30,534
consolidated
2006
%
60.8
30.1
2.8
6.3
2005
%
57.7
40.0
2.3
–
78
notes to the financial statements cont
expense recognised in the income statement
Current service costs
Interest on obligation
Expected return on fund assets
Past service cost
Plan changes
Losses/(gains) on curtailment
consolidated
2006
$000
2,726
2,657
(1,687)
–
(631)
(1,261)
1,804
2005
$000
1,949
2,878
(1,680)
1,858
–
–
5,005
The expense is recognised under personnel expenses (see note 5) and is included in other operating expense
in the income statement.
The cumulative loss taken to retained earnings from actuarial gains/losses is $145,484 (2005: $567,812 gain).
Principal actuarial assumptions at the balance sheet date (as weighted averages):
Discount rate at 31 July
Expected return on fund assets at 31 July
Future salary increases
Future pension increases
consolidated
2006
%
4.9
6.0
3.4
2.8
2005
%
4.6
5.2
3.1
2.5
The overall expected long-term rate of return on assets is 6.0%. The expected rate of return on plan assets reflects the average rate of
earnings expected on the funds invested to provide for the benefits included in the projected benefit obligation.
(b) surplus/(deficit) for each defined benefit pension fund on a funding basis
funds sponsored by entities in the
consolidated entity
UK defined benefit plan
Holland defined benefit plan
France unfunded plan
fund
assets
accrued
benefit
$000
$000
consolidated 2006
excess
con-
fund tribution
recomm-
(deficit) endations
(pa)
$000
$000
25,385
10,092
–
37,366
16,678
8,543
(11,981)
(6,586)
(8,543)
1,544
1,360
–
Total for funds sponsored by the consolidated entity
35,477
62,587
(27,110)
2,904
UK defined benefit plan
Holland defined benefit plan
France unfunded plan
CACI unfunded plan
consolidated 2005
21,365
9,169
–
–
32,120
15,594
9,971
196
(10,755)
(6,425)
(9,971)
(196)
1,308
1,184
–
–
Total for funds sponsored by the consolidated entity
30,534
57,881
(27,347)
2,492
The fund assets have been measured as at 31 July for each year.
Contribution recommendations are based on a funding methodology that will result in adequate funding for payments expected to be
made over the next five years. The level of the contributions to the funds is reassessed annually.
Accrued benefits are benefits which the funds are presently obliged to pay at some future date, as a result of the membership of the
funds and calculated in accordance with AAS 25.
79
notes to the financial statements cont
24 employee benefits (continued)
The consolidated entity has a legal liability to make up the deficit in the funds but no legal right to benefit from any surplus
in the funds.
the principal economic assumptions used in
making the recommendations above include:
Expected return on fund assets
Future salary increases
consolidated
2006
2005
6.0%
3.4%
5.2%
3.1%
(c) defined contribution pension funds
The consolidated entity makes contributions to defined contribution pension funds. The amount recognised as an expense was
$5,638,000 for the financial year ended 31 July 2006 (2005: $5,899,000).
(d) share based payments
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 $65,341 at 31 July 2006
(2005: $149,748). Each executive is entitled to exercise voting rights attached to the shares allocated. At 31 July 2006 the trustees of
the Executive Share Purchase Scheme (1984) held 50,000 (2005: 100,000) ordinary shares, all of which were allocated. There are
four remaining participants (2005: six participants) in the scheme.
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 2006 there were 58 participants
(2005: 60 participants) in the scheme and 1,512,224 shares (2005: 1,492,327) were allocated and held by the trustee on behalf of the
participants. The cost of issuing shares is expensed in the year of issue.
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 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 participant’s contribution. An independent trustee holds the shares on behalf
of the participants. At 31 July 2006 there were 824 participants (2005: 769 participants) in the scheme and 1,703,775 shares (2005:
1,492,327) were allocated and held by the trustee on behalf of the participants. The cost of issuing shares is expensed in the year of
issue and for the year ended 31 July 2006 was $2,647,798 (2005: $2,016,074).
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
Exercised
Expired
Balance at the end of the period
weighted
average
exercise
price
2006
weighted
average
exercise
price
2005
number
of options
2005
number
of options
2006
–
–
–
–
–
–
–
–
1,515,206
(1,499,028)
(16,178)
–
2.72
2.72
3.66
–
80
notes to the financial statements cont
24 employee benefits (continued)
number of options
All outstanding options were exercised during 2005.
77,514
871,249
566,443
25 provisions
current
Restructuring
Other
non-current
Other
Total provisions
movement in provisions
Balance at 1 August 2005
Provisions made during the year
Provisions used during the year
Provisions reversed during the year
Provisions disposed with sold businesses
Exchange adjustment
Balance at 31 July 2006
grant
date
exercise
date
2006
–
–
2005
31.01.2000 28.02.2005
26.10.2001 26.10.2004
13.12.2004
3.12.2001
weighted
average
exercise
price
expiry
date
–
–
1.03.2005
26.10.2011
13.12.2011
3.56
2.70
2.70
consolidated
the company
2006
$000
3,700
–
3,700
11,899
11,899
15,599
2005
$000
3,014
1,738
4,752
545
545
5,297
2006
$000
–
–
–
–
–
–
consolidated
restructuring provisions
$000
$000
3,014
6,766
(6,211)
–
–
131
3,700
2,283
11,898
(1,535)
(590)
(194)
37
11,899
2005
$000
–
–
–
–
–
–
other
total
$000
5,297
18,664
(7,746)
(590)
(194)
168
15,599
The restructuring provision relates to the French operations and includes redundancy provisions from the French social plan ($1.6
million) and the remaining provision for the closure of the Mulhouse manufacturing site ($2.1 million). The other provision consists
of deferred payments for business acquisitions.
the company
26 capital and reserves
share capital
Balance at 1 August
Issue of shares
Share options exercised
Partly paid shares fully paid up during the year
Balance at 31 July
number
number
of ordinary of ordinary
shares
2005
shares
2006
169,671,874
1,820,377
–
–
171,492,251
167,735,767
265,090
1,437,692
233,325
169,671,874
On 19 October 2005 185,439 fully paid ordinary shares at an average price of $10.39 per share, were issued in accordance with
the Nufarm executive share plan (2000), the employee global share plan and the non-executive directors share plan. On 1 May
2006, 1,634,938 fully paid ordinary shares were issued at an average price of $10.99 as partial consideration for the purchase of the
Nutrihealth specialty canola business.
Effective 1 July 1998, the Company Law Review Act abolished the concept of par value shares and the concept of authorised capital.
Accordingly, the company does not have authorised capital or par value in respect of its issued shares.
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share
at meetings of the company.
81
notes to the financial statements cont
26 capital and reserves (continued)
reconciliation of movements in capital and reserves attributable to equity holders of parent
share
capital
$000
trans-
lation
reserve
$000
capital
profit hedging
reserve
$000
reserve
$000
other retained minority
reserve earnings interest
$000
$000
$000
total
equity
$000
consolidated
Balance at
1 August 2004
Foreign exchange
translation differences
Actuarial gains/(losses)
on defined benefit plans
Share issued to employees
Shares issued under employee
global share plan
Tax benefit on share issue costs
Profit for the period
Dividends paid to shareholders
Minority interest acquired
211,801
–
33,603
–
(10,450)
–
5,192
2,016
40
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Balance at 31 July 2005
219,049
(10,450)
33,603
Balance at 1 August 2005
219,049
(10,450)
33,603
Foreign exchange
translation differences
Change in accounting policy
for financial instruments
Foreign exchange movement
taken to hedging reserve
Actuarial gains/(losses) on
defined benefit plans
Share issued to employees
Shares issued under employee
global share plan
Shares issued as consideration
for business acquisition
Tax benefit on share issue costs
Transfer to current year
income statement
Transfer to/from reserves
Profit for the period
Dividends paid to shareholders
Minority interest acquired
–
–
–
–
1,065
2,647
17,972
27
–
–
–
–
–
734
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
24
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
574
(594)
–
–
–
–
–
–
–
–
–
–
242 283,866
7,838
537,350
–
–
–
–
–
–
–
–
–
(558)
(11,008)
568
(27)
–
–
568
5,165
–
–
125,045
(40,548)
–
–
–
1,589
(496)
(2,407)
2,016
40
126,634
(41,044)
(2,407)
242 368,904
5,966
617,314
242 368,904
5,966
617,314
–
–
–
–
–
–
–
–
–
–
–
(713)
–
–
–
–
(41)
–
–
–
–
–
–
–
693
574
(594)
(713)
1,065
2,647
17,972
27
–
(242)
–
–
–
–
242
121,153
(45,879)
–
–
–
579
(551)
(4,945)
24
–
121,732
(46,430)
(4,945)
Balance at 31 July 2006
240,760
(9,716)
33,627
(20)
– 443,707
1,008
709,366
82
notes to the financial statements cont
reconciliation of movements in capital and reserves attributable to equity holders of parent
share
capital
$000
trans-
lation
reserve
$000
capital
profit hedging
reserve
$000
reserve
$000
26 capital and reserves (continued)
the company
Balance at 1 August 2004
211,801
–
40,074
Foreign exchange
translation differences
Share issued to employees
Shares issued under employee
global share plan
Tax benefit on share issue costs
Profit for the period
Dividends paid to shareholders
–
5,192
2,016
40
–
–
(77)
–
–
–
–
–
–
–
–
–
–
–
Balance at 31 July 2005
219,049
(77)
40,074
Balance at 1 August 2005
219,049
(77)
40,074
Foreign exchange
translation differences
Change in accounting policy
for financial instruments
Foreign exchange movement
taken to hedging reserve
Share issued to employees
Shares issued under employee
global share plan
Shares issued as consideration
for business acquisition
Tax benefit on share issue costs
Profit for the period
Dividends paid to shareholders
–
–
–
1,065
2,647
17,972
27
–
–
(248)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
58
(8)
–
–
–
–
–
–
Balance at 31 July 2006
240,760
(325)
40,074
50
other retained minority
reserve earnings interest
$000
$000
$000
total
equity
$000
–
146,864
–
398,739
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(27)
–
–
50,247
(40,548)
156,536
156,536
–
–
–
–
–
–
–
60,760
(45,879)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(77)
5,165
2,016
40
50,247
(40,548)
415,582
415,582
(248)
58
(8)
1,065
2,647
17,972
27
60,760
(45,879)
171,417
–
451,976
translation reserve
The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign
operations where their functional currency is different to the presentation currency of the reporting entity.
capital profit reserve
This reserve is used to accumulate realised capital profits.
hedging reserve
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments
related to hedged transactions that have not yet occurred.
83
notes to the financial statements cont
26 capital and reserves (continued)
dividends
Dividends recognised in the current year by the company are:
2006
Interim 2006 Ordinary
Final 2005 Ordinary
Total Amount
2005
Interim 2005 Ordinary
Final 2004 Ordinary
Total Amount
cents
per
share
10.0
17.0
9.0
15.0
total
amount
franked/
$000 unfranked
payment
date
16,994
28,885
45,879
15,255
25,293
40,548
Franked 28.Apr.06
11.Nov.05
Franked
Franked 29.Apr.05
15.Nov.04
Franked
Dividends paid during the year were franked at the tax rate of 30%.
subsequent events
On 29 September 2006, the directors declared a final dividend of 20 cents per share, fully franked, payable 10 November 2006. The
financial effect of this dividend has not been brought to account in the financial statements for the year ended 31 July 2006 and will be
recognised in subsequent financial reports.
consolidated the company
2005
$000
2006
$000
2006
$000
2005
$000
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%
(2005: 30%)
Franking credits that will arise from the payment of income
tax payable as at the end of the year
Balance at 31 July
22,800
19,647
22,800
19,647
3,893
26,693
5,881
25,528
3,893
26,693
5,881
25,528
The ability to utilise the franking credits is dependent upon there being sufficient available profits to declare dividends. The impact
on the dividend franking account of dividends proposed after the balance sheet date but not recognised as a liability is to reduce it by
$14,699,336 (2005: $12,375,000). In accordance with the tax consolidation legislation, the company as the head entity in the tax-
consolidated group has also assumed the benefit of $26,693,000 (2005: $25,528,000) franking credits.
84
notes to the financial statements cont
27 financial instruments
Exposure to credit, interest rate and currency risks arises in the normal course of the consolidated entity’s business.
Derivative financial instruments are used to hedge exposure to fluctuations in foreign exchange rates and interest rates.
credit risk
Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are
performed on all customers requiring credit over a certain amount.
Investments are allowed only in liquid securities and only with counterparties that have a credit rating equal to or better than the
consolidated entity. Transactions involving derivative financial instruments are with counterparties who have sound credit ratings.
Given their high credit ratings, management does not expect any counterparty to fail to meet its obligations.
At the balance sheet date, there were no significant concentrations of credit risk. The maximum exposure to credit risk is represented
by the carrying amount of each financial asset, including derivative financial instruments, in the balance sheet.
interest rate risk
The consolidated entity uses derivative financial instruments to manage specifically identified interest rate risks. Interest rate swaps,
denominated in AUD, have been entered into to achieve an appropriate mix of fixed and floating rate exposures. The swaps mature
over the next 12 months following the maturity of the related loans and have fixed swap rates ranging from 4.76 per cent to 4.98
per cent.
The consolidated entity measures interest rate swaps at fair value, with the movements in fair value reflected in the income statement.
At 31 July 2006, the consolidated entity had interest rate swaps with a notional contract amount of $20,000,000 (2005:
$167,508,000). The net fair value of swaps at 31 July 2006 recognised as fair value derivatives was $238,000 (2005: nil).
In respect of income-earning financial assets and interest-bearing financial liabilities, the following table indicates their effective
interest rates at the balance sheet date and the periods in which they reprice.
consolidated
financial assets
Cash and cash equivalents
financial liabilities
Unsecured debt
Bank overdrafts
Bank loans – unsecured
Other loans – unsecured
Interest rate swaps
Capital notes
Finance lease liabilities – secured
financial assets
Cash and cash equivalents
Financial liabilities
Unsecured debt
Bank overdrafts
Bank loans – unsecured
Other loans – unsecured
Interest rate swaps
Capital notes
Finance lease liabilities – secured
effective
interest
rate
note
total
$00o
less than
1 year
$000
2006
1–2 more than
2 years
$000
years
$000
11
4.4%
51,269
51,269
–
–
11
23
23
23
23
5.4%
5.2%
3.0%
5.0%
8.6%
7.8%
19,940
400,437
248
20,000
181,649
485
622,759
19,940
293,898
–
20,000
181,649
260
515,747
2005
–
44,847
–
–
–
186
45,033
–
61,692
248
–
–
39
61,979
11
3.2%
55,791
55,791
–
–
11
23
23
23
23
7.6%
4.8%
3.2%
4.5%
8.6%
5.8%
10,398
158,499
188
167,508
202,338
1,628
540,559
10,398
101,983
9
147,508
–
506
260,404
–
(831)
–
20,000
202,338
582
222,089
–
57,347
179
–
–
540
58,066
85
notes to the financial statements cont
effective
interest
rate
note
total
$00o
less than
1 year
$000
1–2 more than
2 years
$000
years
$000
27 financial instruments (continued)
the company
financial assets
Cash and cash equivalents
financial liabilities
Bank overdrafts
Subordinated loans from
controlled entities
financial assets
Cash and cash equivalents
financial liabilities
Bank overdrafts
Subordinated loans from
controlled entities
11
11
23
11
11
23
2006
7.25%
10,739
10,739
9.5%
23,574
23,574
9.2%
190,258
213,832
190,258
213,832
2005
6.75%
4,265
4,265
24,762
24,762
9.5%
9.2%
211,655
236,417
–
24,762
211,655
211,655
–
–
–
–
–
–
–
–
–
–
–
–
–
foreign currency risk
The consolidated entity uses derivative financial instruments to manage specifically identified foreign currency risk on sales, purchases
and borrowings that are denominated in a currency other than AUD. The currencies giving rise to this risk are primarily the US
Dollar, the Euro and the British Pound. The consolidated entity uses forward exchange contracts to hedge its foreign currency risk.
Most of the forward exchange contracts have maturities of less than three months after the balance sheet date. Where necessary, the
forward exchange contracts are rolled over at maturity.
The consolidated entity uses cross currency interest rate swap agreements to 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 the principal at an agreed rate of foreign
currency conversion.
forecasted transactions
The consolidated entity classifies its forward exchange contracts hedging forecasted transactions as cash flow hedges and states them
at fair value. The net fair value of forward exchange contracts in the consolidated entity used as hedges of forecast transactions at 31
July 2006 was $353,309 comprising assets of $194,164 and liabilities of $547,472 that were recognised as derivatives measured at fair
value. The net fair value of forward exchange contracts in the company used as hedges of forecast transactions at 31 July 2006
was $194,164 comprising assets of $194,164 that were recognised as derivatives measured at fair value.
fair values
The fair values together with the carrying amounts shown in the balance sheet are as follows:
86
notes to the financial statements cont
27 financial instruments (continued)
consolidated
Cash and cash equivalents
Trade and other receivables
Interest rate swaps:
Payable maturities – less than one year
Forward exchange contracts:
Receivables – less 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 advances
– less than one year
– one to five years
Bank overdraft
Unsecured bank loans
Other loans
Capital notes – one to five years
Finance leases
Unrecognised (losses)/gains
the company
Cash and cash equivalents
Trade and other receivables
Receivables due from controlled entities
Loans due from controlled entities
Forward exchange contracts:
Receivables – 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 advances
– less than one year
– one to five years
Bank overdraft
Subordinated loans from controlled entities
Unrecognised (losses)/gains
carrying
amount
2006
$000
fair
value
2006
$000
carrying
amount
2005
$000
fair
value
2005
$000
note
11
12
12
12
12
11
23
23
23
23
11
12
12
12
12
12
11
23
51,269
523,616
51,269
523,616
55,791
423,290
55,791
423,290
238
238
194
(547)
194
(547)
–
–
–
–
–
–
17,854
–
(19,940)
(420,437)
(248)
(181,649)
(485)
(30,135)
17,854
–
(19,940)
(420,437)
(248)
(181,351)
(485)
(29,837)
(298)
–
45,592
(10,398)
(326,007)
(188)
(202,338)
(1,628)
(15,886)
–
45,592
(10,398)
(326,007)
(188)
(201,681)
(1,628)
(15,229)
(657)
10,739
34,509
228,937
170,618
10,739
34,509
228,937
170,618
4,265
10,163
203,494
164,603
4,265
10,163
203,494
164,603
194
194
–
–
17,854
–
(23,574)
(190,258)
249,019
17,854
–
(23,574)
(190,258)
249,019
–
–
45,592
(24,762)
(211,655)
191,700
–
45,592
(24,762)
(211,655)
191,700
–
estimation of fair values
The following summarises the major methods and assumptions used in estimating the fair values of financial instruments reflected in
the table.
derivatives
Forward exchange contracts are either marked to market using listed market prices or by discounting the contractual forward price and
deducting the current spot rate. For interest rate swaps broker quotes are used. These quotes are back tested using pricing models or
discounted cash flow techniques. The fair value for the capital notes is determined using a year end forward rate to maturity compared
to the fixed coupon rate of the note.
interest-bearing loans and borrowings
Fair value is calculated based on discounted expected future principal and interest cash flows.
87
notes to the financial statements cont
27 financial instruments (continued)
finance lease liabilities
The fair value is estimated as the present value of future cash flows, discounted at market interest rates for homogenous lease
agreements. The estimated fair values reflect change in interest rates.
trade and other receivables/payables
For receivables/payables with a remaining life of less than one year, the notional amount is deemed to reflect the fair value.
All other receivables/payables are discounted to determine the fair value.
interest rates used for determining fair value
The average interest rates used for determining fair value are:
Derivatives
Capital notes
28 operating leases
Non-cancellable operating lease rentals are payable as follows:
2006
5.0%
9.43%
2005
4.5%
8.86%
consolidated the company
2005
$000
2006
$000
2006
$000
2005
$000
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
7,390
5,133
9,520
10,415
32,458
7,538
6,660
10,146
5,365
29,709
214
104
92
–
410
355
192
120
–
667
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.
29 capital and other commitments
consolidated
2006
$000
the company
2006
$000
2005
$000
2005
$000
capital expenditure commitments
Plant and equipment
Contracted but not provided for and payable:
Within one year
joint venture commitments
Share of capital commitments of the chlor–alkali joint ventures:
Within one year
10,005
17,027
–
922
267
219
–
–
88
notes to the financial statements cont
30 contingencies
The directors are of the opinion that provisions are not required in respect of these matters, as it is not probable that a future sacrifice
of economic benefits will be required or the amount is not capable of reliable measurement.
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 repayment of all liabilities in the event that
any of these companies are wound up.
consolidated the company
2005
$000
2006
$000
2006
$000
2005
$000
Guarantee facility for Eastern European joint ventures
with FMC Corporation.
7,312
7,827
–
–
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. For 2006, these receivables remain on balance
sheet under the financial instruments standard AASB 139.
–
16,241
–
–
The parent entity has guaranteed with the note holders the
issuers’ obligations under the capital notes.
–
–
181,892
202,338
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.
Guarantee upon sale of a business limited to EUR 3.51 million on
account of possible remediation costs for soil and groundwater
contamination.This guarantee decreases from 2004 progressively
to nil in 2011.
A non-trading subsidiary of Nufarm Limited, Fchem (Aust.) Limited,
is one of a number of parties served with an application and statement of
claim on behalf of the ACCC. The application relates to alleged price
fixing and other activities involving the timber protection industry in the
period 1998 – 2000. The Nufarm group is no longer involved in the
timber protection industry, having sold its timber treatment business
in 2001. Nufarm and its legal advisers are examining the application
and statement of claim and will conduct a thorough investigation of
the allegations made.
14,167
13,578
–
–
5,850
7,300
–
–
–
27,329
–
44,946
–
181,892
–
202,338
31 deed of cross guarantee
Pursuant to ASIC Class Order 98/1418 dated 13 August 1998, the wholly-owned subsidiaries referred to in note 32 are relieved from
the Corporations Act 2001 requirements for preparation, audit and lodgement of financial reports and directors reports.
It is a condition of the Class Order that the company and each of the subsidiaries enter into a deed of cross guarantee. The parent
entity and all the Australian controlled entities have entered into a deed of cross guarantee dated 10 July 2000 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.
89
notes to the financial statements cont
31 deed of cross guarantee (continued)
A consolidated income statement and consolidated balance sheet, comprising the company and controlled entities which are a party to
the Deed, after eliminating all transactions between parties to the deed of cross guarantee, at 31 July 2006 is set out as follows:
summarised income statement and retained profits
Profit before income tax expense
Income tax expense
Net profit attributable to members of the closed group
Retained profits at the beginning of the period
Include new members to the closed group
Dividends paid
Retained profits at the end of the period
statement of financial position
current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Income tax receivable
Assets classified as held for sale
Total current assets
non-current assets
Receivables
Equity accounted investments
Other investments
Deferred tax assets
Property, plant and equipment
Intangible assets
Other
Total non-current assets
TOTAL ASSETS
current liabilities
Bank overdraft
Trade and other payables
Interest bearing loans and borrowings
Employee benefits
Income tax payable
Provisions
Liabilities classified as held for sale
Total current liabilities
non-current liabilities
Interest bearing loans and borrowings
Deferred tax liabilities
Employee benefits
Payables
Total non–current liabilities
TOTAL LIABILITIES
NET ASSETS
Equity
Issued capital
Reserves
Retained earnings
TOTAL EQUITY
consolidated
2006
$000
102,431
(18,014)
84,417
2005
$000
104,871
(24,038)
80,833
244,102
1,020
(45,879)
283,660
202,108
1,709
(40,548)
244,102
11,480
417,592
182,392
2,094
22,772
636,330
1,240
173,424
263,334
21,372
128,351
70,728
–
658,449
1,294,779
26,794
500,290
116,068
7,662
3,533
–
13,425
667,772
31,607
3,562
7,844
–
43,013
710,785
583,994
247,960
52,374
283,660
583,994
5,570
409,800
194,346
1,564
5,480
616,760
48,096
125,827
258,849
23,226
150,406
26,066
–
632,470
1,249,230
35,986
592,796
48,300
7,718
3,805
58
1,408
690,071
31,000
3,239
7,438
545
42,222
732,293
516,937
228,418
44,417
244,102
516,937
90
notes to the financial statements cont
32 consolidated entities
parent entity
Nufarm Limited – ultimate controlling entity
subsidiaries
Abel Lemon and Company Pty Ltd
Access Genetics Pty Ltd
Agcare Biotech Pty Ltd
Agchem Receivables Corporation
Agroquimicos Genericos S.A. (Agrogen)
Agryl Holdings Limited
Ag–seed Research Pty Ltd
Artfern Pty Ltd
Australis Services Pty Ltd
Captec (NZ) Limited
Captec Pty Ltd
CFPI GmbH
Chemicca Limited
Chemturf Pty Ltd
Chloral Investment Trust
Chloral Unit Trust No1
Chloral Unit Trust No2
Clama s.a.s
CNG Holdings BV
Compagnie d’Applications Chimiques a l’Industrie s.a.s
(sold June 2006)
Crop Care Australasia Pty Ltd
Crop Care Holdings Limited
Croplands Equipment Limited
Croplands Equipment Pty Ltd
Danestoke Pty Ltd
Electronic Agriculture Limited
Fada S.A.
Fchem (Aust) Limited
Fchem Limited
Fernz Canada Limited
Fernz Corporation (NZ) Limited
Fernz Singapore Pte Ltd
Fidene Limited
Finotech BV
Framchem SA
Frost Technology Corporation
Health & Science Limited
Inpar s.a.s
Interferon Limited
Interferon NZ Limited
Laboratoire European de Biotechnologie s.a.s
Le Moulin des Ecluses s.a
Les Ecluses de la Garenne s.a.s
Manaus Holdings Sdn Bhd
Marman (Nufarm) Inc
notes
(a)
(a),(b)
(a)
(a)
(a)
(b)
(a)
(a)
(a)
(a),(b)
(b)
(a),(b)
(a)
(a),(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(a)
(b)
(b)
(b)
percentages
place of of shares held
2005
2006
incorporation
Australia
Australia
Australia
USA
Colombia
Australia
Australia
Australia
Australia
New Zealand
Australia
Germany
Australia
Australia
Australia
Australia
Australia
France
Netherlands
France
Australia
New Zealand
New Zealand
Australia
Australia
Australia
Colombia
Australia
New Zealand
Canada
New Zealand
Singapore
New Zealand
Netherlands
Egypt
USA
New Zealand
France
Australia
New Zealand
France
France
France
Malaysia
USA
100
100
70
40
100
100
100
100
100
100
100
100
100
100
80
80
80
100
100
–
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
20
70
40
–
100
100
100
100
100
100
100
100
100
80
80
80
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
70
91
notes to the financial statements cont
percentages
32 consolidated entities (continued)
Marman de Guatemala Sociedad Anomima
Marman de Mexico Sociedad Anomima De Capital Variable
Marman Holdings LLC
Mastra Corporation Pty Ltd
Mastra Corporation Sdn Bhd
Mastra Corporation USA Pty Ltd
Mastra Holdings Sdn Bhd
Mastra Industries Sdn Bhd
Medisup International NV
Medisup Securities Limited
Neuchatel Pty Ltd
Nufarm (Asia) Pte Ltd
Nufarm Agriculture (Pty) Ltd
Nufarm Agriculture Inc
Nufarm Agriculture Inc (USA)
Nufarm Agriculture Zimbabwe (Pvt) Ltd
Nufarm Americas Holding Company
Nufarm Americas Inc
Nufarm Asia Sdn Bhd
Nufarm Australia Limited
Nufarm BV
Nufarm Chemical (Shanghai) Co Ltd
Nufarm Chile Limitada
Nufarm Colombia Ltda
Nufarm Coogee Pty Ltd
Nufarm Crop Products UK Limited
Nufarm de Costa Rica
Nufarm de Guatemala SA
Nufarm de Mexico Sa de CV
Nufarm de Panama SA
Nufarm de Venezuela SA
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 (NZ) Limited
Nufarm Holdings BV
Nufarm Holdings s.a.s
Nufarm Inc
Nufarm Insurance Pte Ltd
Nufarm Investments Cooperatie WA
Nufarm Ireland Limited (Liquidated)
Nufarm KK
Nufarm Labuan Pte Ltd
Nufarm Malaysia Sdn Bhd
Nufarm Materials Limited
Nufarm NZ Limited
notes
(b)
(b)
(b)
(b)
(a),(b)
(a)
(b)
(b)
(b)
(b)
(a),(b)
(b)
(b)
(b)
(a)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(a),(b)
(b)
place of of shares held
2005
2006
incorporation
Guatemala
Mexico
USA
Australia
Malaysia
Australia
Malaysia
Malaysia
N. Antillies
Australia
Australia
Singapore
South Africa
Canada
USA
Zimbabwe
USA
USA
Malaysia
Australia
Netherlands
China
Chile
Colombia
Australia
UK
Costa Rica
Guatemala
Mexico
Panama
Venezuela
Ecuador
Germany
Brazil
Australia
Spain
Germany
Austria
Austria
New Zealand
Netherlands
France
USA
Singapore
Netherlands
Ireland
Japan
Malaysia
Malaysia
Australia
New Zealand
100
100
100
70
70
70
70
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
100
100
100
100
100
100
100
100
–
100
100
100
100
100
70
70
100
70
70
70
70
70
100
100
100
100
100
100
100
100
100
100
100
100
100
–
100
100
80
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
–
100
100
100
92
notes to the financial statements cont
percentages
notes
place of of shares held
2005
2006
incorporation
32 consolidated entities (continued)
Nufarm Platte Pty Ltd
Nufarm Portugal LDA
Nufarm s.a.s
Nufarm SA
Nufarm Specialty Products Inc
Nufarm Technologies (M) Sdn Bhd
Nufarm Technologies USA
Nufarm Technologies USA Pty Ltd
Nufarm Treasury Pty Ltd
Nufarm UK Limited
Nugrain Pty Ltd
Nuseed Pty Ltd
Nutrihealth Pty Ltd
Nutrihealth Grains Pty Ltd
Nuturf Pty Ltd
Opti–Crop Systems Pty Ltd
Pacific Raw Materials Australia Pty Ltd
Pacific Raw Materials Limited
Pharma Pacific Pty Ltd
PT Crop Care
PT Nufarm Indonesia
Rockmere Pty Ltd
Safepak Industries Sdn Bhd
Selchem Pty Ltd
TPL Limited
(b)
(b)
(b)
Australia
Portugal
France
Argentina
USA
Malaysia
New Zealand
Australia
(a),(b)
Australia
(b) United Kingdom
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
Indonesia
Indonesia
Australia
Malaysia
Australia
New Zealand
(a),(b)
(b)
(a)
(a)
(b)
(a)
(a)
100
100
100
100
100
51
100
100
100
100
100
100
100
100
100
75
100
100
100
100
100
100
70
100
100
100
100
100
100
100
51
100
100
100
100
40
40
–
–
100
75
100
100
100
–
70
100
70
100
100
Note (a). These entities have entered into a deed of cross guarantee date 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.
93
notes to the financial statements cont
33 acquisition of subsidiaries
Acquisitions during the year include:
• the remaining 50% of Nugrain was acquired in September 2005. Nugrain is involved in canola seed breeding.
• the remaining 50% of Access Genetics was acquired in December 2005. Access Genetics is involved in wheat seed breeding.
• Agrogen and FADA crop protection businesses in Colombia were acquired in December 2005.
• The Nutrihealth business was acquired in May 2006. Nutrihealth specialises in the development, field production and marketing of
specialty canola oils.
• The Dovuro business was acquired in May 2006. Dovuro is Australia’s leading canola seed production and marketing company.
In the period to 31 July 2006, these businesses contributed profits of $431,029 to the consolidated group after tax profit.
If the above acquisitions had occurred on 1 August 2005, their full-year contribution to group revenues would have been
$35,205,000 and to the consolidated entity’s profit after tax of $794,000, on a pro-rata basis.
acquiree’s net assets at acquisition date
Cash and cash equivalents
Receivables
Inventory
Property, plant and equipment
Other assets
Trade and other payables
Employee benefits
Finance lease liability
Interest bearing loans and borrowings
Net identifiable assets and liabilities
Reversal of equity investment
Prior period investment
Intangibles acquired on acquisition
Goodwill on acquisition
Consideration paid, satisfied in cash
Consideration satisfied by issue of shares
Deferred consideration
Cash (acquired)
Net cash outflow
recognised
values
$000
145
10,682
7,411
3,142
2,461
(9,415)
(74)
(175)
(8,892)
5,285
1,244
(2,000)
20,558
29,570
54,657
(17,971)
(99)
(179)
36,408
fair value
adjust-
ments
$000
–
–
702
–
–
–
–
–
–
702
–
–
–
(702)
–
–
–
–
–
carrying
amounts
$000
145
10,682
8,113
3,142
2,461
(9,415)
(74)
(175)
(8,892)
5,987
1,244
(2,000)
20,558
28,868
54,657
(17,971)
(99)
(179)
36,408
Goodwill has arisen on the acquisitions above, mainly resulting from the synergies that these acquisitions bring to the Nufarm group.
These synergies do not meet the criteria for recognition as a separately identifiable intangible asset at the date of acquisition.
94
notes to the financial statements cont
consolidated the company
2005
$000
2006
$000
2006
$000
2005
$000
121,732
2,599
9,806
36,556
(512)
219
(10,545)
34 reconciliation of cash flows from operating activities
cash flows from operating activities
Profit for the period
Dividend from associated company
Non-cash items:
Amortisation
Depreciation
Gain on disposal of non current assets
Write-down of non current assets
Share of profits of associates net of tax
Movement in provisions for:
Deferred tax
Tax assets
Deferred product development expenses
Exchange rate change on foreign controlled entities provisions
Operating profit before changes in working
capital and 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
Movements in intercompany balances relating
to cash transactions
(36,583)
(3,804)
(59,479)
1,826
8,914
(8,852)
–
348
160,265
674
–
(97,366)
62,899
Net operating cash flows
126,634
2,964
60,760
181
50,247
121
8,447
37,116
(393)
21,693
(33,402)
(8,253)
(11,815)
–
432
–
319
(359)
–
(1,013)
(64)
479
–
(136)
–
322
(33)
–
(997)
(286)
5,241
–
(21)
143,423
60,167
54,594
(184)
(7,433)
(55,186)
(3,053)
5,538
165
(4,357)
3,840
(643)
(313)
(2,410)
(1,706)
(14,955)
(1,981)
(93)
–
(80,811)
62,612
–
3,205
63,372
864
(4,301)
50,293
35 key management personnel disclosures
The following were key management personnel of the consolidated entity at any time during the reporting period and were key
management personnel for the entire period.
non-executive directors
KM Hoggard (Chairman)
GDW Curlewis
Dr WB Goodfellow
GA Hounsell
DG McGauchie
Dr JW Stocker
RFE Warburton
executive directors
DJ Rathbone
executives
BF Benson
R Heath
KP Martin
DA Mellody
RF Ooms
DA Pullan
RG Reis
Group general manager agriculture
Group general manager corporate services
and company secretary
Chief financial officer
Group general manager global marketing
Group general manager chemicals
Group general manager operations
Group general manager corporate affairs
Managing director and chief executive
95
notes to the financial statements cont
35 key management personnel disclosures (continued)
key management personnel compensation
The key management personnel compensation included in personnel expenses (see note 5) are as follows:
Short term employee benefits
Other long term benefits
Post employment benefits
Termination benefits
Equity compensation benefits
consolidated the company
2005
$
6,603,686
–
422,617
–
919,084
7,945,387
2006
$
7,029,731
–
511,231
–
1,584,993
9,125,955
2006
$
664,250
–
149,750
–
143,000
957,000
2005
$
730,274
–
106,736
–
140,750
977,760
individual directors and executives compensation disclosures
Information regarding individual directors and executives compensation is provided in the remuneration report section of the
directors’ report on pages 42 to 43.
Apart from the details disclosed in this note, no director has entered into a material contract with the company or the consolidated
entity since the end of the previous financial year and there were no material contracts involving director’s interest existing at year-end.
loans to key management personnel and their related parties
There were no loans to key management personel at July 31 2006.
other key management personnel transactions with the company or its controlled entities
A number of key management persons, or their related parties, hold positions in other entities that result in them having control or
significant influence over the financial or operating policies of those entities.
A number of these entities transacted with the Company or its subsidiaries in the reporting period. The terms and conditions of
the transactions with management persons and their related parties were no more favourable than those available, or which might
reasonably be expected to be available, on similar transactions to non-director related entities on an arms- length basis.
In May 2006, Nufarm acquired the shares of Nutrihealth Pty Ltd (see note 33). Dr John Stocker, a director of Nufarm, was a minority
shareholder of Nutrihealth. In accordance with the purchase agreement, Dr Stocker has been allocated 9,002 ordinary shares in
respect of his Nutrihealth shares. The issue of the shares will only take place after it is approved by the shareholders at the company’s
2006 annual general meeting. The allocation of the Nufarm shares as consideration for Dr Stocker’s Nutrihealth holding was in
accordance with the same terms and conditions as other shareholders of Nutrihealth.
From time to time, key management personnel of the company or its controlled entities, or their related entities, may purchase goods
from the consolidated entity. These purchases are on the same terms and conditions as those entered into by other consolidated entity
employees or customers and are trivial or domestic in nature. Any other transactions with key management persons are considered
trivial or domestic in nature and are on terms and conditions no more favourable than other third parties.
options and rights over equity instruments granted as compensation
No options or other equity instruments were granted to key management personnel during the reporting period as compensation.
movements in shares
The movement during the reporting period in the number of ordinary shares in Nufarm Limited held, directly, indirectly or
beneficially, by each key management person, including their related parties, is as follows:
96
notes to the financial statements cont
shares held
in nufarm ltd
balance
at 1 august
granted as
2005 remunation
exercise
of options
35 key management personnel disclosures (continued)
net
balance
change at 31 july
2006
other
directors
KM Hoggard
DJ Rathbone
GDW Curlewis
Dr WB Goodfellow
GA Hounsell
DG McGauchie
Dr JW Stocker
RFE Warburton
executive
BF Benson
R Heath
KP Martin
DA Mellody
RF Ooms
DA Pullan
RG Reis
Total
directors
KM Hoggard
DJ Rathbone
GDW Curlewis
Dr WB Goodfellow
GA Hounsell
DG McGauchie
GW McGregor
Dr JW Stocker
RFE Warburton
executives
BF Benson
R Heath
KP Martin
DA Mellody
RF Ooms
DA Pullan
RG Reis
former executive
JA Allen
Total
1
1 2
1
1
1
1
2,374,749
29,912,610
40,787
1,466,446
11,452
8,269
28,464
63,431
152,145
223,482
355,470
2,500
319,617
229,423
188,596
4,677
–
–
1,850
1,850
1,850
1,850
1,850
21,462
14,308
26,140
2,696
26,140
27,791
17,500
35,377,441
149,964
1
1 2
1
1
1
1
5,869,837
30,696,167
24,787
1,464,528
–
3,817
32,418
26,546
61,513
83,374
188,826
229,338
–
155,485
186,095
77,840
4,912
–
–
1,918
1,452
1,452
1,461
1,918
1,918
16,692
11,592
20,726
2,500
20,726
22,117
13,910
2006
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2005
– 2,379,426
– 29,912,610
42,787
1,468,296
60,302
14,719
30,314
65,281
2,000
–
47,000
4,600
–
–
(15,913)
(40,000)
–
–
(10,000)
(25,082)
(40,000)
157,694
197,790
381,610
5,196
335,757
232,132
166,096
(77,395) 35,450,010
566,443
–
–
–
–
– (3,500,000) 2,374,749
(1,350,000) 29,912,610
40,787
1,466,446
11,452
8,269
33,879
28,464
63,431
16,000
–
10,000
3,000
–
–
–
–
–
98,345
83,064
143,406
–
143,406
153,091
96,846
(46,266)
(60,000)
(38,000)
–
–
(131,880)
–
152,145
223,482
355,470
2,500
319,617
229,423
188,596
196,317
22,094
153,091
(145,936)
225,566
39,296,888
145,388
1,437,692
(5,243,082) 35,636,886
All equity transactions with key management personnel 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 Messrs Hoggard, Goodfellow, Hounsell, McGauchie, 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. These shares do
not vest until the earlier of three years or retirement.
2 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
97
notes to the financial statements cont
35 key management personnel disclosures (continued)
(iii) Waikato Investment Company Limited (113,616 shares).
St Kentigern Trust Board also hold 2,270,000 Capital Notes issued by Fernz Corporation (NZ) Ltd, a related body corporate.
36 non-key management personnel disclosures
a) transactions with related parties in the wholly-owned group
The parent entity entered into the following transactions during the year with subsidiaries of the group:
• loans were advanced and repayments received on short term intercompany accounts (see note 22)
• proceeds of the capital notes issue have been on-lent through the parent entity to fund group investments and working capital (see
note 23). 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 associated parties
Bayer CropScience Nufarm Limited
SRFA LLC
Agripec Quimica e Farmaceutica SA
These transactions were undertaken on commercial terms and conditions.
consolidated
sales to
purchases from
trade receivable
trade payable
sales to
loan receivable
i nterest received
trade payable
trade receivable
sales to
2006
$000
8,309
11,517
740
2,704
326
754
20
110
20,939
17,079
2005
$000
10,723
11,181
835
3,681
1,821
658
28
–
19,035
8,569
37 subsequent events
Nufarm has reached agreement to sell its 80% interest in the Nufarm-Coogee joint venture to its joint venture partner, Coogee
Chemicals Pty Ltd. The joint venture operates two chlor-alkali plants in Western Australia. The transaction involves the sale of
Nufarm’s interest, with completion scheduled for 31 July 2007. The consideration on the sale will be approximately $48 million,
with the final price determined at completion date. The profit on sale will be approximately $24 million.
On 29 September 2006, the directors declared a final dividend of 20 cents per share, fully franked, payable 10 November 2006.
On 6 September 2006, Nufarm acquired a license to develop and commercialise Roundup Ready canola in Australia.
Nufarm has paid Monsanto a total of $10 million for Monsanto’s Roundup Ready canola germ plasm and a licence to the
Roundup Ready canola trait.
On 28 September, Nufarm announced it had reached agreement to acquire a crop protection business in Italy for €6.4 million.
Nufarm Finance (NZ) Limited (the’issuer’ and formerly Fernz Corporation (NZ) Limited), a wholly owned subsidiary of Nufarm
Limited (‘Nufarm’), intends to make a public offer of a new hybrid security. The proposed offer is for A$250 million of Nufarm
Step-up Securities (‘NSS’), with the ability to accept oversubscriptions of up to A$50 million.
A prospectus in relation to the proposed offer will be made available once it has been lodged with the Australian Securities and
Investments Commission (‘ASIC’). If you wish to acquire NSS, you will need to complete the application form that will be in or will
accompany the Prospectus. Once the Prospectus has been lodged with ASIC, Nufarm will make an announcement to the ASX.
You may obtain a copy of the Prospectus on Nufarm’s Australian corporate website www.nufarm.com
NSS are perpetual, subordinated, unsecured redeemable, exchangeable notes and offer semi-annual, floating rate, non-cumulative
distribution payments, based on the six month bank bill swap rate plus a margin.
98
notes to the financial statements cont
38 explanation of transition to aifrs
As stated in significant accounting policies note 1(a), these are the consolidated entity’s first consolidated financial statements prepared
in accordance with AIFRS.
The policies set out in the significant accounting policies section of this report have been applied in preparing the financial statements
for the financial year ended 31 July 2006, the comparative information presented in these financial statements for the year ended 31
July 2005 and in the preparation of an opening AIFRS balance sheet at 1 August 2004 (the consolidated entity’s date of transition).
In preparing its opening AIFRS balance sheet, the consolidated entity has adjusted amounts reported previously in financial statements
prepared in accordance with its old basis of accounting (previous GAAP). An explanation of how the transition from previous GAAP
to AIFRS has affected the consolidated entity’s financial position, financial performance and cash flows is set out in the following
tables and the notes that accompany the tables.
reconciliation of equity
consolidated
$000
assets
Cash and cash equivalents
Trade and other
receivables
Inventories
Income tax receivable
Assets classified as
held for sale
Total current assets
Receivables
Equity accounted
investments
Other financial assets
Deferred tax assets
Property, plant
and equipment
Intangible assets
Other
Total non–
current assets
TOTAL ASSETS
liabilities
Bank overdraft
Trade and other payables
Interest bearing loans
and borrowings
Employee benefits
Income tax payable
Provisions
Liabilities classified
as held for sale
Total current liabilities
note
previous
agaap
effect of
transition
to aifrs
aifrs
previous
agaap
effect of
transition
to aifrs
aifrs
1 august 2004
31 july 2005
a
a,b
a
c
a
c
f, g
a, d
a, d, e
a
56,826
(922)
55,904
56,233
(442)
55,791
240,469
432,139
6,858
168,706
(13,067)
(491)
409,175
419,072
6,367
238,048
423,946
8,138
164,425
(2,508)
287
402,473
421,438
8,425
–
78,344
78,344
–
5,480
5,480
736,292
232,570
968,862
726,365
167,242
893,607
–
38,535
66,409
–
66,409
38,535
24,953
3,713
34,302
(85)
(522)
10,799
24,868
3,191
45,101
376,632
196,021
21,130
(52,254)
(836)
(280)
324,378
195,185
20,850
210,420
1,943
44,836
313,535
164,605
20,309
7,637
–
10,643
(3,397)
36,926
(18,742)
218,057
1,943
55,479
310,138
201,531
1,567
695,286
(43,178)
652,108
822,057
33,067
855,124
1,431,578
189,392
1,620,970
1,548,422
200,309
1,748,731
a
a, b
72,298
397,939
(4,553)
173,160
67,745
571,099
10,398
333,183
–
165,664
10,398
498,847
a
a
a
a
40,113
15,983
15,401
9,128
(1,221)
(1,254)
156
(27)
38,892
14,729
15,557
9,101
250,006
15,196
12,348
4,752
–
(232)
–
–
250,006
14,964
12,348
4,752
–
550,862
22,004
188,265
22,004
739,127
–
625,883
1,408
166,840
1,408
792,723
99
notes to the financial statements cont
note
previous
agaap
effect of
transition
to aifrs
aifrs
previous
agaap
effect of
transition
to aifrs
aifrs
38 explanation of transition to aifrs (continued)
Interest bearing loans
and borrowings
Deferred tax liabilities
Employee benefits
Provisions
Total non-current liabilities
TOTAL LIABILITIES
a
f
g
287,180
22,673
10,369
–
320,222
871,084
(896)
(3,173)
28,340
–
24,271
212,536
286,284
19,500
38,709
–
344,493
1,083,620
280,155
14,420
10,774
545
305,894
931,777
-
5,704
27,096
–
32,800
199,640
280,155
20,124
37,870
545
338,694
1,131,417
NET ASSETS
560,494
(23,144)
537,350
616,645
669
617,314
equity
Issued capital
Reserves
Retained earnings
Equity attributable to
equity holders of the parent
Minority interest
TOTAL EQUITY
the company
assets
Cash and cash
equivalents
Trade and other
receivables
Inventories
Income tax receivable
Assets classified as
held for sale
Total current assets
Receivables
Equity accounted
investments
Other financial assets
Deferred tax assets
Property, plant
and equipment
Intangible assets
Other
Total non-current assets
h
i, j
g, i, j
210,530
17,854
324,401
1,271
15,991
(40,535)
211,801
33,845
283,866
216,827
5,871
388,150
2,222
17,524
(19,246)
219,049
23,395
368,904
c
552,785
7,709
(23,273)
129
529,512
7,838
610,848
5,797
560,494
(23,144)
537,350
616,645
500
169
669
611,348
5,966
617,314
1 august 2004
31 july 2005
a
a,b
a
c
a
c
f, g
a, d
a, d, e
a
654
–
654
4,265
–
4,265
198,351
15,610
1,583
–
216,198
350
–
640
–
990
198,701
15,610
2,223
–
217,188
213,137
15,924
–
–
233,326
3,325
–
175
216,462
15,924
175
–
3,500
–
236,826
208,435
–
208,435
207,390
–
207,390
–
253,553
21,374
19,310
–
–
502,672
6,341
(6,341)
(19,815)
(46)
45
–
(19,816)
6,341
247,212
1,559
19,264
45
–
482,856
–
253,355
22,648
20,733
–
–
504,126
7,140
(6,142)
(20,830)
7,140
247,213
1,818
(40)
40
–
(19,832)
20,693
40
–
484,294
TOTAL ASSETS
718,870
(18,826)
700,044
737,452
(16,332)
721,120
100
notes to the financial statements cont
note
previous
agaap
effect of
transition
to aifrs
aifrs
previous
agaap
effect of
transition
to aifrs
aifrs
a
a, b
38 explanation of transition to aifrs (continued)
liabilities
Bank overdraft
Trade and other payables
Interest bearing loans
and borrowings
Employee benefits
Income tax payable
Provisions
Liabilities classified
as held for sale
–
–
2,359
–
–
544
–
–
–
(5,293)
19,645
71,045
a
a
–
–
a
a
19,645
65,752
24,762
67,162
–
(3,097)
24,762
64,065
–
544
2,359
–
–
521
3,226
–
–
–
1,133
–
–
521
4,359
–
–
–
–
–
Total current liabilities
91,234
(2,934)
88,300
95,671
(1,964)
93,707
Interest bearing loans
and borrowings
Deferred tax liabilities
Employee benefits
Provisions
Total non–current liabilities
TOTAL LIABILITIES
a
f
g
NET ASSETS
Equit
Issued capital
Reserves
Retained earnings
Equity attributable
to equity holders
of the parent
Minority interest
TOTAL EQUITY
212,969
2,018
50
–
215,037
306,271
–
(2,018)
–
–
(2,018)
(4,952)
212,969
–
50
–
213,019
301,319
211,655
1,731
55
–
213,441
309,112
–
(1,611)
1
–
211,655
120
56
–
(1,610)
211,831
(3,574)
305,538
412,599
(13,874)
398,725
428,340
(12,758)
415,582
h
i, j
g, i, j
210,530
40,074
161,995
1,257
–
(15,131)
211,787
40,074
146,864
216,827
39,997
171,516
2,222
–
(14,980)
219,049
39,997
156,536
c
412,599
–
(13,874)
–
398,725
–
428,340
–
(12,758)
–
415,582
–
412,599
(13,874)
398,725
428,340
(12,758)
415,582
notes to the reconciliation of equity
(a)
Consistent with AIFRS, the assets and liabilities associated with discontinued businesses have been reclassified to assets and
liabilities held for sale. At July 2004, the group disclosed as a subsequent event that it was in advanced negotiations relating to the
sale of its pharmaceutical intermediate business (SEAC) and its Nufarm Specialty Products (NSP) business. The NSP business was
sold in December 2004 and the SEAC business was sold effective February 2005. Both businesses were classified as discontinued
at July 2004. At July 2005, the Nuturf business has been classified as a discontinued business. The assets and liabilities of this
business have been reclassified to assets and liabilities held for sale. Under AIFRS, the discontinued businesses classification has
affected the income statement whereby the discontinued businesses profit or loss for the current year has been reclassified to show
a net profit or loss on the discontinued operations and the sale of such businesses below the operating results of the group.
(b) Under AIFRS, securitised receivables and payables are brought back onto the balance sheet as AIFRS considers the probability
of risks and benefits in determining control, not just the possibility. The effect is to increase receivables and payables by $182.7
million at July 2004 and $167.4 million at July 2005.
Under the AIFRS consolidation standard AASB127, the securitisation receivable entity is consolidated on the balance sheet.
Previously, it had been equity accounted. The impact of this change is an increase in net assets of $130,546 at 31 July 2005.
(d) Under the AIFRS Intangible Assets standard, computer software that is not integral to the operation of a manufacturing facility is
classified as an intangible asset rather than property, plant and equipment. This change resulted in a reduction to property, plant
and equipment of $3.1 million at 31 July 2005, with a corresponding increase in intangibles.
(c)
101
notes to the financial statements cont
38 explanation of transition to aifrs (continued)
(e) Under AIFRS, goodwill and intangible assets with an indefinite life are not amortised but instead are subject to impairment
testing on a semi-annual basis. The impairment testing confirms that the future cash flows derived from these assets exceeds
their carrying values. The amortisation of goodwill and indefinite intangibles under previous AGAAP amounted to $15.4
million for the full year ending 31 July 2005. The notional goodwill amortisation on the equity-accounted investment in
Agripec acquisition also ceases under AIFRS. This amount is reflected in the equity income and increases equity income by
$7.8 million in the year to 31 July 2005.
(f)
Under AIFRS, the balance sheet method of tax effect accounting is adopted, rather than the liability method applied currently
under Australian GAAP. Under the balance sheet approach, income tax in the profit and loss statement for the year comprises
current and deferred taxes. Current tax is the expected tax payable on the taxable income for the year. Deferred tax is provided
using the balance sheet liability method, providing for temporary differences between the carrying amount of assets and liabilities
for financial reporting purposes and the amounts used for tax purposes. A deferred tax asset will be recognised only to the extent
that future taxable profits are probable. The impact of this change at 31 July 2005 is an increase in deferred tax assets of
$10.6 million and an increase in deferred tax liabilities of $5.7 million, with an offsetting adjustment to retained earnings.
(g) Under AIFRS, the group recognises the net deficit in its employer sponsored defined benefit pension funds as a liability.
Under Australian GAAP, defined benefit plans were accounted for on a cash basis, with no defined benefit obligation or plan
assets recognised in the balance sheet. This change has resulted in an increase in liabilities of $28.8 million at 31 July 2004 and
$27.3 million at 31 July 2005. The recognition of the liability has resulted in an increase in deferred tax assets as a tax deduction
will result when the liability is incurred. The deferred tax asset recognised is $9.1 million at 31 July 2004 and $9.3 million at 31
July 2005. The net after-tax amount in each period has been taken as a reduction in earnings in the income statement.
(h) Under AIFRS, the group recognises the fair value of shares or options granted to employees as an expense on a pro-rata basis over
the vesting period in the income statement with a corresponding adjustment to equity. Share-based payment costs were generally
not recognised under previous AGAAP. At transition date, the group did not have any options granted to employees that fall
under the scope of the standard. However, the group does have a global share program whereby matching and loyalty shares are
granted to employees over five years after a one year qualifying period. Under AIFRS, the expense of the matching and loyalty
shares is recognised over the vesting period, rather than as the matching and loyalty shares are issued. This has resulted in
a increase to issued capital of $2.0 million and an expense to the income statement for $2.0 million for the full year ending
31 July 2005.
On the transition to AIFRS, the group has taken the option to reset the existing foreign currency translation reserve balance
to zero. This has resulted in an increase to reserves of $16.3 million and a reduction to retained earnings of the same amount.
On the transition to AIFRS, the group has taken the option to recognise property, plant and equipment at deemed cost, being
the revalued amount prior to transition date that approximates the fair value as at the date of transition. This has resulted in the
asset revaluation reserve balance of $0.3 million being reclassified to retained earnings.
(i)
(j)
(k) Under AIFRS, revenue from the disposal of non-current assets is recognised on a net basis as income or expense, rather than
separately recognising the consideration received on sale as revenue. This has resulted in a reduction to other operating income
of $96.0 million at 31 July 2005, with an offsetting reduction in operating expenses.
102
notes to the financial statements cont
reconciliation of profit
note
previous
agaap
effect of
transition
to aifrs
aifrs
previous
agaap
effect of
transition
to aifrs
aifrs
consolidated
the company
for the year ended 31 july 2005 for the year ended 31 july 2005
38 explanation of transition to aifrs (continued)
a
Revenue
Cost of sales
a
Gross profit
1,671,029
(1,019,105)
651,924
(97,041)
15,343
(81,698)
1,573,988
(1,003,762)
570,226
64,664
(32,972)
31,692
(28,912)
16,497
(12,415)
35,752
(16,475)
19,277
Other income
Depreciation and
amortisation expense
Other operating expenses
Profit before
financing costs
Financial income
Financial expenses
Net financing costs
Share of net profits/
(losses) of associates
Profit before tax
Income tax
expense/(benefit)
Profit after tax but before
profit and loss of
discontinued operation
and gain on sale of
discontinued operation
Profit and loss of
discontinued operation
and gain on sale of
discontinued operation
k
106,570
(98,204)
8,366
47,052
(2,288)
44,764
e
a, k
(61,199)
(545,222)
61,199
101,815
–
(443,407)
(2,140)
(22,077)
2,140
10,139
–
(11,938)
152,073
(16,888)
135,185
54,527
(2,424)
52,103
a
a
1,501
(40,011)
(38,510)
6,777
(6,568)
209
8,278
(46,579)
(38,301)
20,748
(22,542)
(1,794)
(156)
156
–
20,592
(22,386)
(1,794)
a, c
25,617
7,785
33,402
–
997
997
139,180
(8,894)
130,286
52,733
(1,427)
51,306
a, e
33,333
(6,869)
26,464
2,664
(613)
2,051
105,847
(2,025)
103,822
50,069
(814)
49,255
a
–
22,812
22,812
–
992
992
Profit for the period
105,847
20,787
126,634
50,069
178
50,247
Attributable to:
Equity holders
of the parent
Minority interest
104,297
1,550
20,748
39
125,045
1,589
50,069
–
178
–
50,247
–
Profit for the period
105,847
20,787
126,634
50,069
178
50,247
Statutory earnings
per share
Basic earnings per share
(cents per share)
Diluted earnings per share
(cents per share)
61.7
61.7
12.3
12.3
74.0
74.0
103
notes to the financial statements cont
39 change in accounting policy
In the current financial year the consolidated entity adopted AASB 132: Financial Instruments: Disclosure and Presentation
and AASB 139: Financial Instruments: Recognition and Measurement. This change in accounting policy has been adopted in
accordance with the transition rules contained in AASB 1, which does not require the restatement of comparative
information for financial instruments within the scope of AASB 132 and AASB 139.
The adoption of AASB 139 has resulted in the consolidated entity recognising all derivative financial instruments
as assets or liabilities at fair value. This change has been accounted for by adjusting the opening balance of equity
(hedging reserve and fair value reserve) at 1 August 2005.
The impact on the balance sheet in the comparative period is set out below as an adjustment to the opening balance
sheet at 1 August 2005. The impact on the income statement of the comparative period would have been to increase
financial expenses and decrease profit for the period to the extent that cash flow hedges were not 100% effective. The
transitional provisions will not have any effect in future reporting periods.
Under AASB 139, the deferred borrowing costs ($1.567 million) associated with the capital notes program have been
reclassified from non-current assets and netted against the capital notes debt.
Under AASB 139, the receivables sold to financiers for which there is recourse to the company, have been reclassified
from receivables to securitised payables as at 1 August 2005 ($16.2 million). In the prior year, the receivables sold
reduced trade receivables directly and was disclosed as a contingent liability.
application of aasb 132 and aasb 139 prospectively from 1 august 2005
$000
consolidated
Fair value derivatives – asset
Fair value derivatives – liability
Hedging reserve
the company
Fair value derivatives – asset
Hedging reserve
impact of
change in
previous account-
ing policy
agaap
aifrs
45,592
–
–
1,348
(92)
(574)
46,940
(92)
(574)
45,592
–
159
(58)
45,751
(58)
104
104
directors’ declaration
1 In the opinion of the directors of Nufarm Limited
(‘the company’):
(a) the financial statements and notes, including the
remuneration disclosures that are contained in
the remuneration report in the directors’ report,
are in accordance with the Corporations Act,
including:
(i) giving a true and fair view of the financial
position of the company and
consolidated entity as at 31 July 2006 and of
their performance, as represented by the results
of their operations and their cash flows, for the
year ended on that date; and
(ii) complying with Australian Accounting
Standards and the Corporations Regulations
2001; and
(b) the remuneration disclosures that are contained in
the Remuneration report in the directors’ report
comply with Australian Accounting Standard AASB
124 Related Party Disclosures:
(c) there are reasonable grounds to believe that the
company will be able to pay its debts as and when
they become due and payable.
2 There are reasonable grounds to believe that the
company and the controlled entities identified
in note 32 will be able to meet any obligations or
liabilities to which they are or may become subject
to by virtue of the deed of cross guarantee between
the company and those controlled entities pursuant
to ASIC Class Order 98/1418.
3 The directors have been given the declarations
required by Section 295A of the Corporations
Act 2001 from the chief executive officer and
chief financial officer for the financial year ended
31 July 2006.
Signed in accordance with a resolution of the directors:
KM Hoggard
Director
DJ Rathbone
Director
Melbourne
29 September 2006
105
independent audit report
Independent audit report to members of Nufarm Limited
Scope
The financial report, remuneration disclosures and directors’ responsibilities
The financial report comprises the income statements, statements of recognised income and
expense, balance sheets, statements of cash flows, accompanying notes 1 to 39 to the financial
statements and the directors’ declaration for both Nufarm Limited (the ‘company’) and the
consolidated entity (the ‘Nufarm group’), for the year ended 31 July 2006. The Nufarm
group comprises both the company and the entities it controlled during that year.
As permitted by the Corporations Regulations 2001, the company has disclosed information
about the remuneration of directors and executives (‘remuneration disclosures’),
required by Australian Accounting Standard AASB 124 Related Party Disclosures, under the
heading ‘remuneration report’ on pages 39 to 43 of the directors’ report and not in the
financial report.
The remuneration report also contains information on pages 39 to 43 not required by
Australian Accounting Standard AASB 124, which is not subject to our audit.
The directors of the company are responsible for the preparation and true and fair
presentation of the financial report in accordance with the Corporations Act 2001. This includes
responsibility for the maintenance of adequate accounting records and internal controls
that are designed to prevent and detect fraud and error, and for the accounting policies and
accounting estimates inherent in the financial report. The directors are responsible for
preparing the relevant reconciling information regarding adjustments required under the
Australian Accounting Standard AASB 1 First-time Adoption of Australian equivalents to International
Financial Reporting Standards. The directors are also responsible for the remuneration disclosures
contained in the directors’ report.
Audit approach
We conducted an independent audit in order to express an opinion to the members of the
company. Our audit was conducted in accordance with Australian Auditing Standards in
order to provide reasonable assurance as to whether the financial report is free of material
misstatement and that the remuneration disclosures comply with AASB 124. The nature of
an audit is influenced by factors such as the use of professional judgement, selective testing,
the inherent limitations of internal control, and the availability of persuasive rather than
conclusive evidence. Therefore, an audit cannot guarantee that all material misstatements
have been detected.
We performed procedures to assess whether in all material respects the financial report
presents fairly, in accordance with the Corporations Act 2001, Australian Accounting
Standards and other mandatory financial reporting requirements in Australia, a view which
is consistent with our understanding of the company’s and the Nufarm group’s financial
position, and of their performance as represented by the results of their operations and
cash flows and whether the remuneration disclosures comply with Australian Accounting
Standard AASB 124.
KPMG, an Australian partnership, is part of the KPMG International network.
KPMG International is a Swiss cooperative.
106
independent audit report cont
We formed our audit opinion on the basis of these procedures, which included:
•
•
examining on a test basis, information to provide evidence supporting the amounts
and disclosures in the financial report; and
assessing the appropriateness of the accounting policies and disclosures used and the
reasonableness of significant accounting estimates made by the directors.
While we considered the effectiveness of management’s internal controls over financial
reporting when determining the nature and extent of our procedures, our audit was not
designed to provide assurance on internal controls.
Audit opinion
In our opinion:
(1) the financial report of Nufarm Limited is in accordance with:
a) the Corporations Act 2001, including:
i) giving a true and fair view of the company’s and Nufarm group’s financial
position as at 31 July 2006 and of their performance for the financial year
ended on that date; and
ii) complying with Australian Accounting Standards and the Corporations
Regulations 2001; and
b) other mandatory financial reporting requirements in Australia; and
(2) the remuneration disclosures that are contained on pages 39 to 43 of the remuneration
report in the directors’ report comply with Australian Accounting Standard AASB 124
Related Party Disclosures.
KPMG
Paul J McDonald
Partner
Melbourne
29 September 2006
107
shareholder and statutory information
details of shareholders, shareholdings and top 20 shareholders
listed securities – 2 october 2006
number of holders number of securities
held by top 20
171,492,251
9,826
percentage
70.64
Fully paid ordinary shares
twenty largest shareholders
ordinary percentage of
issued capital
as at 02.10.06
Falls Creek No 2 Pty Ltd
J P Morgan Nominees Australia Limited
Amalgamated Dairies Limited
National Nominees Limited
Westpac Custodian Nominees
ANZ Nominees Limited
Citicorp Nominees Pty Limited
AMP Life Limited
Cogent Nominees Pty Limited
Challenge Investment Company Limited
Grantali Pty Limited
Citicorp Nominees Pty Limited
Mr Edgar William Preston & Mr Paul Gerard Keeling
RAM Custodian Limited & GBH Trustee Services Limited
Queensland Investment Corporation
Australian Foundation Investment Company Limited
ASX Perpetual Registrars Ltd
CPU Share Plans Pty Ltd
Cogent Nominees Pty Limited
Douglas Industries 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
shares as at
02.10.06
25,680,987
17,512,606
15,110,737
10,841,573
10,182,360
8,873,807
4,349,541
3,071,709
3,050,210
2,982,868
2,887,403
2,768,697
2,491,448
2,243,750
1,967,699
1,910,785
1,863,529
1,502,306
941,842
916,565
14.98
10.21
8.81
6.32
5.94
5.17
2.54
1.79
1.78
1.74
1.68
1.61
1.45
1.31
1.15
1.11
1.09
0.88
0.55
0.53
number of
holders as at
ordinary
shares held
02.10.06 as at 02.10.06
3,462
4,696
970
622
76
2,039,466
11,710,813
6,787,993
12,686,511
138,267,468
Of these, 85 shareholders held less than a marketable parcel of shares of $500 worth of shares (51 shares).
In accordance with the ASX Listing Rules, the last sale price of the company’s shares on the ASX on 2 October 2006
was used to determine the number of shares in a marketable parcel.
stock exchanges on which securities are listed
Ordinary shares: Australian Stock Exchange Limited.
108
shareholder and statutory information cont
substantial shareholders
In accordance with section 671B of the Corporations Act, as at 2 October 2006, 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 Edgar William Preston)4
Douglas John Rathbone
Wallara Asset Management Pty Ltd
Australia and New Zealand
Banking Group Limited (ANZ) 5
IOOF Holdings Limited
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
8 November 2004
8 May 2006
1 August 2006
11 August 2006
18 September 2006
number and percentage of shares in
which interest held at date of notice
interest %
9.69
9.70
9.93
10.16
number
14,950,815
14,968,110
15,329,898
15,685,712
15,347,193
29,346,867
8,607,017
10,309,215
9,563,350
11,773,337
9.94
17.38
5.02
6.01
5.577
6.87
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 ANZ is taken under section 608(3)(a) of the Corporations Act to have the same relevant interests as ING Australia Limited and consequently
has acquired relevant interests in the shares held by ING Australia Ltd.
109
shareholder and statutory information cont
shareholder information
annual general meeting
The annual general meeting of Nufarm Limited will be held on Thursday 7 December 2006 at 10.00 am in
the Ballroom at the Rendezvous 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. Proxy voting can be done online via
www.nufarm.com or via post by completing the proxy form and sending it back in the return envelope.
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 listing
Nufarm shares are listed under the symbol NUF on the ASX. The securities of the company are traded on
the ASX under CHESS (Clearing House Electronic Sub-register System) which allows settlement of on-market
transactions without having to reply on paper documentation. Shareholders seeking more information about
CHESS should contact their stockbroker or the ASX.
electronic shareholder communication
You can choose to receive shareholder information electronically.
Register for this initiative at www.eTree.com.au/nufarm and a donation of $2 will go to Landcare
Australia to support urgent reforestation projects in Australia and New Zealand.
Printing and posting paper publications such as annual reports are costly. By electing to receive this
information electronically you will help the environment and reduce our costs.
This initiative is being run in conjunction with Computershare Investor Services.
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.
110
shareholder and statutory information cont
Internet Account Access
Shareholders can access their details via the Internet by following the below prompts.
Step 1
Step 2
Go to www.computershare.com / au / investors
Enter User ID and Password
Please Note – If you are not a current member of Investor Centre, then click on register now to become a member.
Step 3
Enjoy the access to Investor Centre to view, evaluate and manage your portfolio.
Investor Phone (Australian shareholders only)
Investor Phone provides telephone access 24 hours a day 7 days a week.
Step 1
Step 2
Step 3
Step 4
Call 1300 85 05 05
Enter the company (ASX) code – NUF
Enter your Securityholder Reference Number (SRN) or Holder Identification Number (HIN)
Follow the prompts to gain secure, immediate access to your:
- Holding details
- Registration details
- Payment information
dividends
A final dividend of 20 cents per share will be paid on 10 November 2006 to shareholders registered on 20 October
2006. For Australian tax purposes, the dividend will be 100 per cent franked at the 30 per cent tax rate.
Australian and New Zealand shareholders can elect to have dividends paid directly into a bank account anywhere
in Australia and New Zealand.
Forms for this purpose are available on request from the share registry.
111
shareholder and statutory information cont
key dates
• 20 October 2006
Record date (books closing) for 2005/2006 final dividend
• 10 November 2006
Final dividend for 2005/2006 payable
• 2 November 2006 *
Annual report sent to shareholders
• 7 December 2006
Annual general meeting
• 26 March 2007*
Announcement of profit result for half year ending 31 January 2007
• 31 July 2007
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
Nufarm Limited
This report is printed, using soy-based inks, on environmentally responsible paper manufactured
using elemental chlorine free pulp sourced from sustainable, well-managed forests.
112
112
directory
directors
KM Hoggard – Chairman
GDW Curlewis – Deputy Chairman
DJ Rathbone AM – Managing Director
Dr WB Goodfellow
GA Hounsell
DG McGauchie AO
Dr JW Stocker AO
RFE Warburton AO
company secretary
R Heath
solicitors
Arnold Bloch Leibler & Co
333 Collins Street
Melbourne Victoria 3000 Australia
Sylvia Miller & Associates
131 Orrong Road
Elsternwick Victoria 3185 Australia
auditors
KPMG
161 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 850 505
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
6 Manu Street
Otahuhu, Auckland NZ
Telephone: 64 9 270 4157
Facsimile: 64 9 267 8444
website
http://www.nufarm.com
nufarm limited
ACN 091 323 312
produced by gillian sweetland, design by blue boat
1 KEY EVENTS
1 FACTS IN BRIEF
2 MANAGING DIRECTOR’S REVIEW
8 CORPORATE STRATEGY
14 BUSINESS REVIEW
14 HEALTH, SAFETY AND ENVIRONMENT
16 CROP PROTECTION
26 MANAGEMENT TEAM
28 BOARD OF DIRECTORS
30 CORPORATE GOVERNANCE
36 DIRECTORS’ REPORT
44 LEAD AUDITOR’S
INDEPENDENCE DECLARATION
45 INCOME STATEMENT
46 BALANCE SHEET
47 STATEMENT OF CASH FLOWS
48 STATEMENT OF RECOGNISED
INCOME AND EXPENSE
49 NOTES
104 DIRECTORS’ DECLARATION
105 INDEPENDENT AUDIT REPORT
107 SHAREHOLDER AND STATUTORY
INFORMATION
112 DIRECTORY
nufarm limited
ANNUAL REPORT
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