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Highfield Resources LtdNufarm Limited | Annual Report 2007
FOOD, FEED AND FUEL
– SEIZING OUR OPPORTUNITIES
IN A GROWING GLOBAL INDUSTRY
CONTENTS
01
01
02
06
Key events
Facts in brief
Food, feed and fuel
Seeds of growth
08 Managing director’s review
16
Business review
41 Directors’ report
53
54
55
56
57
Lead auditor’s independence declaration
Income statements
Balance sheets
Statements of cash flows
Statements of recognised income and expense
17
22
Crop protection
58 Notes to the financial statements
Health, safety and environment
128 Directors’ declaration
26 Management team
28
32
Board of directors
Corporate governance
129 Independent audit report
131 Shareholder and statutory information
136 Directory
KEY EVENTS
– Group reports flat operating profit, year on year
– Drought in Australia has a significant impact on results
– North American operations continue to generate positive sales
and profit growth
– Acquisition of 100 per cent of Agripec in Brazil
– Good progress on expansion into central and eastern Europe
FACTS IN BRIEF
Trading results $000
Operating profit after tax
Sales revenue
Total equity
Total assets
Ratios
Earnings per ordinary share
Net debt to equity
Net tangible assets per ordinary share
Distribution to shareholders
Annual dividend per ordinary share
People
Staff employed
12 months
ended 31 July 2007
12 months
ended 31 July 2006
120,861
1,764,384
1,029,151
2,438,911
121,106
1,676,746
702,189
1,919,948
59.2c
36%
2.61
32c
2,488
60.3c
81%
2.41
30c
2,315
Nufarm Limited – Annual Report 2007
1
NUFARM IS IDEALLY PLACED TO
LEVERAGE ITS STRONG MARKETING
SKILLS AND VALUABLE BRAND
POSITIONS
2
Nufarm Limited – Annual Report 2007
FOOD, FEED AND FUEL
Strong global demand for agricultural products is
driving major changes in the level of technology invested
in cropping systems throughout the world. Food for
people, feed for stock and fuel for transport are the
future for agriculture.
A growing world population can increasingly afford to eat
a higher protein diet and aggressive, mandated targets for
crop-based biofuels – the use of crops to make energy –
are creating competing needs for agricultural production.
Improved living standards in developing economies,
such as China, India and eastern Europe, mean a higher
demand for animal based protein and this increased
meat, dairy and egg consumption is lifting the need to
produce grains for animal feed substantially and often from
the same crop sources used for food or food products.
More recently, there has been a surge in the demand
for biofuels such as ethanol and biodiesel. Ambitious
government production targets are creating a relatively
new – but competing – demand on the crops that
provide feedstock for these fuels, predominantly corn,
sugarcane and palm oil.
The area of land available for farming continues to
decline per head of population with the result that there
is a greater need to produce healthy crops and maximise
yields. Global stocks of many grains have also run down
to historically low levels.
In this demand driven environment, farmers are receiving
good prices for their crops, with some soft commodities
trading at or near record levels.
All these pressures are combining to create a positive
business environment for agricultural input companies.
As a leading global supplier of value-added off-patent
crop protection products, Nufarm is pursuing a strategy
to realise the benefits of these opportunities. We have
established an operating presence in the major global
agricultural markets and are developing and introducing
additional products across that platform.
Some regions are well placed to meet increased
demand for agricultural products and Nufarm has made
important strategic investments in South America – in
particular Brazil – and continues to expand its business
in central and eastern Europe.
Brazil is uniquely positioned to bring additional land into
production. With generally reliable seasonal conditions
and good soils, continued medium to long-term growth
is forecast in crops such as soybeans, corn, wheat,
cotton and sugar.
And in central and eastern Europe, there is substantial
scope to improve yields by increasing use of agricultural
inputs and technology.
As the global crop protection industry continues to see
more products move into the off patent segment of the
market, Nufarm is ideally placed to leverage its strong
marketing skills and valuable brand positions to seize
growth opportunities and create more value for the
company’s shareholders.
Nufarm Limited – Annual Report 2007
3
THE AREA OF LAND AVAILABLE FOR
FARMING CONTINUES TO DECLINE PER
HEAD OF POPULATION RESULTING IN A
GREATER NEED TO PRODUCE HEALTHY
CROPS AND MAXIMISE YIELDS
4
Nufarm Limited – Annual Report 2007
Nufarm Limited – Annual Report 2007
5
NEW BREEDING TECHNIQUES ARE
ACCELERATING THE DEVELOPMENT
OF HYBRID AND SPECIALTY SEEDS
6
Nufarm Limited – Annual Report 2007
SEEDS OF GROWTH
The selection of a new variety and the purchase of seed
is becoming an increasingly important decision for farmers
and one that involves a greater number of options.
New breeding techniques are accelerating the
development of hybrid and specialty seeds and
biotechnology is delivering a variety of value-adding
traits that can be incorporated into seeds.
Seed purchase now represents a large investment for
the farmer and incorporates decisions relating to how
the crop will be managed, the specific properties or
features of the end product and the market segments
into which it can be sold.
Crop protection companies are extending their reach
from the chemistry associated with protecting crops,
increasing yields and achieving maximum value, to the
biology involved in determining those same outcomes.
The emerging opportunities relating to the development
and marketing of varieties – and seed treatments –
provide important new growth platforms for Nufarm.
In Australia, Nufarm has established a seeds business,
under the NuSEED brand and now has a market leading
position in canola, as well as development programs
involving wheat, beans and a variety of other crops.
The NuSEED business encompasses the value chain
in seed and varieties from plant breeding through to the
post-farmgate use of finished commodities, giving the
business control over its own destiny.
Relationships have also been established with several
overseas breeding programs and research efforts,
with a view to expanding Nufarm’s seed interests
into other markets.
Ongoing development of a portfolio of seed treatment
products is also allowing Nufarm to compete in what
is a fast growing, high value segment of the market.
Nufarm’s strengths in market driven innovation, its
access to distribution and our regulatory and marketing
skills can all be leveraged to develop an exciting and
valuable growth opportunity.
Nufarm Limited – Annual Report 2007
7
NUFARM HAS ESTABLISHED OPERATIONS
IN THE MAJOR GLOBAL AGRICULTURAL
MARKETS
8
Nufarm Limited – Annual Report 2007
MANAGING DIRECTOR’S REVIEW
Severe drought conditions in Australia had a significant
impact on the company’s overall result in financial year
2007. Given these conditions, the result is satisfactory.
Nufarm generated a net profit of $148.8 million for
the year ended 31 July 2007. This included $27.9 million
in non-operating items, resulting in the operating profit
of $120.9 million after tax gains. The operating result is
slightly below last year’s net operating profit of $121.1
million and some seven per cent below the company’s
previous guidance.
We had expected to recover the position in Australia
during the second half but, while climatic conditions
improved in some areas of the country, this improvement
was not sufficient to deliver on previous guidance.
Seasonal conditions – and registration issues in the UK
– also had an adverse impact on the profitability of the
European businesses.
Nufarm’s North American operations again performed
very strongly and the company’s continued expansion
into the growing markets of central and eastern Europe
has shown excellent early progress.
Total group sales were $1.76 billion, an increase of
five per cent on last year’s revenues of $1.68 billion.
This included some $60 million in sales recorded by
Agripec in Brazil in June and July after Nufarm assumed
100 per cent control of that business.
Australasia generated $685 million in sales (39 per cent
of total sales) and remains the company’s largest region
both for revenues and profit contribution. The Americas
recorded $640 million in sales (36 per cent of total) and
Europe $440 million (25 per cent).
Earnings per share (on an operating basis, excluding
discontinued operations,) were 59.2 cents, compared
with last year’s 60.3 cents.
Nufarm Limited – Annual Report 2007
9
Doug Rathbone AM
Managing director and
chief executive
MANAGING DIRECTOR’S REVIEW CONTINUED
Operating profit
Group sales
121.7
121.1 120.9
76.5
64.3
1,764
1,677
1,596
1,574
1,458
n
o
i
l
l
i
m
$
n
o
i
l
l
i
m
$
2003
2004
2005
2006
2007
2003
2004
2005
2006
2007
EBITDA
199.8
207.0
260.0
252.0
245.0
Return on funds employed
19.8
17.8
16.6
15.7
14.0
n
o
i
l
l
i
m
$
e
g
a
t
n
e
c
r
e
P
2003
2004
2005
2006
2007
2003
2004
2005
2006
2007
e
g
a
t
n
e
c
r
e
P
Net debt to equity
98
78
81
61
36
Earnings per share
60.5
60.3
59.2
47.3
41.3
2003
2004
2005
2006
2007
2003
2004
2005
2006
2007
s
t
n
e
C
10
Nufarm Limited – Annual Report 2007
MANAGING DIRECTOR’S REVIEW CONTINUED
Non-operating items
The company’s total net profit of $148.8 million included
some $27.9 million associated with non-operating items.
The previously announced sale of Nufarm’s 80 per cent
interest in the Nufarm Coogee chlor alkali plants in
Western Australia was completed on 31 July with the
result of an after tax gain of $32.6 million.
A small profit was also booked on the closure and sale
of a warehouse facility in Spain.
The non-operating profit was offset by some restructuring
costs and one off legal expenses. Upon Nufarm’s move
to 100 per cent ownership of Agripec, a detailed review
was undertaken of previous years’ debtors. Following
this review, additional provisions were made, consistent
with Nufarm’s conservative policy relating to the treatment
of doubtful debts.
Final dividend
Directors declared a fully franked final dividend of 21 cents
per share, resulting in a full year dividend of 32 cents.
This is seven per cent or two cents higher than the
dividend paid in the previous year.
The final dividend will be paid on 9 November 2007
to the holders of all fully paid shares in the company
as at the close of business on 10 October 2007.
Treasury
Net debt to equity was 36 per cent, compared with
81 per cent at July 31, 2006. The lower gearing level
largely results from the issue of a hybrid equity instrument
(Nufarm Step-up Securities) in place of capital notes.
The debt associated with the acquisition of the balance
of Agripec is not reflected in the 2007 accounts as
settlement did not take place until mid August. Had it
been incurred before 31 July, the impact of this additional
debt would have been a gearing level of 57 per cent.
Net working capital, after allowing for the acquisition
of Agripec, increased $67 million over the previous year.
June and July sales in 2007 (excluding Agripec) were
some $65 million higher than in 2006, leading to a
substantial increase in receivables.
Inventories were some $12 million higher, offset by
increased trade payables of nearly $40 million.
Agripec had approximately $137 million in trade working
capital, which was offset by recording the purchase price
of the business ($218 million) in August 2007 as a current
liability in the July 31 accounts.
The high level of relatively late sales in the 2007 financial
year had a significant impact on cash generated from
operations in the period. As a consequence, the cash
flow outcome was similar to that recorded in 2006.
Interest costs were up on the previous year due to the
higher levels of working capital and increases in base
interest rates in various markets around the world.
Nufarm Step-up Securities
Nufarm issued $251 million of Nufarm Step-up Securities
in November 2006. These securities are recorded as a
component of equity and replaced the capital notes that
had been issued over the past 10 years.
The Nufarm Step-up Securities have a floating distribution
rate, being 190 points above the 180 day BBSW on the
15 October and 15 April each year. The distributions, net
of the applicable tax benefit, are recorded in equity, and
are not included in the calculation of profit.
Our people
A critical component of Nufarm’s success is its people:
the board of directors and senior management appreciate
their loyalty, commitment and hard work. These people
are spread across every continent in the world and, as we
Nufarm Limited – Annual Report 2007
11
DEMAND DRIVERS IN GLOBAL
AGRICULTURE ARE STRONG AND
THE COMPANY BELIEVES THAT
THESE WILL BE SUSTAINED
12
Nufarm Limited – Annual Report 2007
MANAGING DIRECTOR’S REVIEW CONTINUED
continue to grow, there will be new challenges to our
culture, behaviour and way of working as we extend our
reputation for innovation, first class marketing, quality
products and technical support.
Dick Warburton AO will retire from the Nufarm board
in December 2007 after more than 14 years of service
to the company and shareholders. Dick has made a
significant contribution at board level, not only in his role
as chairman of the remuneration committee and member
of the nomination committee but also as the company
has expanded internationally. Dick has been very
supportive of management and its business development
plans and the company acknowledges that contribution
and wishes him well in the future.
Outlook
Given normal climatic conditions in the major markets,
the outlook for Nufarm’s business in financial year 2008
is positive.
Demand drivers in global agriculture are strong and the
company believes that these factors will be sustained
for the medium to long term as competing uses for food
crops maintain their impact on commodity prices, planting
intentions and pressure to improve yields.
Glyphosate supply will continue to be tight globally,
maintaining pressure on raw material costs. The company
is confident, however, of being able to pass through those
cost increases in the form of higher prices to maintain
margins in this important product. Management is actively
securing access to additional glyphosate capacity.
Nufarm has established operations in the major global
agricultural markets and, in the 2008 financial year, will
deliver a number of important new products to those
businesses.
A continued strong performance is anticipated in
the USA; margin improvement is forecast in a number
of European markets; and the Australian business is
positioned to take full advantage of any improvement
in climatic conditions.
Business conditions in Brazil are expected to keep
strengthening, with predictions of increased soybean
and corn plantings and a higher spending capacity for
Brazilian farmers. New products will also be introduced
in a number of key crop segments. The company’s first
full year of 100 per cent ownership of Agripec is expected
to generate between $25 million and $30 million in
operating profit.
In the 2008 financial year, Nufarm is forecasting a group
operating profit of approximately $145 million. Comparing
this to 2007 and excluding the net $9.2 million profit from
the divested chlor alkali interests, this represents profit
growth of almost 30 per cent for the company’s ongoing
crop protection businesses.
This forecast profit growth assumes that seasonal
conditions in Australia will remain difficult.
Directors remain confident in the ability of the company
to take advantage of new growth opportunities.
Doug Rathbone AM
Managing Director
Nufarm Limited – Annual Report 2007
13
IT IS A CREDIT TO THE INNOVATION
AND HARD WORK OF OPERATIONAL
EMPLOYEES THAT NUFARM HAS
INCREASED PRODUCTION
CONTINUOUSLY
14
Nufarm Limited – Annual Report 2007
Nufarm Limited – Annual Report 2007
15
BUSINESS REVIEW
16
Nufarm Limited – Annual Report 2007
CROP PROTECTION
The company’s 12 month reporting period was
characterised by a number of adverse weather effects,
particularly in Australia. Some European markets also
experienced seasonal conditions that had a negative
impact on sales, with warm, dry conditions reducing
fungicide applications.
The second half of the year saw demand drivers
strengthen in global agriculture and increases in
many soft commodity prices. This provided a positive
environment for crop protection sales, particularly in
North America.
The farm economy strengthened in Brazil, with adverse
currency impacts offset by higher commodity prices and
a good harvest. Nufarm acquired the balance of Agripec
and fully consolidated the final two months (June and July)
of results from the Agripec business.
Agrosol, the newly purchased business in Italy, also made
an initial contribution this year.
Australasia
The Australasian business generated $685 million in
sales and a segment profit of $103.7 million in the 2007
financial year.
Widespread and severe drought conditions had a severe
impact on the business in Australia during the first eight
months of the year: this was only partly recovered in
the next four months. While there were good and early
season opening rains in South Australia, Victoria and
parts of New South Wales, important cropping regions
in Queensland, northern New South Wales and Western
Australia remained dry throughout autumn and early winter.
Water allocations for irrigators were very restricted with
subsequent sales in higher value market segments such
as horticulture, cotton and rice, markedly lower.
Strong global demand for glyphosate increased raw
material costs dramatically and, while a number of price
increases were implemented in Australia during the
2007 financial year, the difficult climatic conditions
restricted our ability to maintain margins on glyphosate
sales. Glyphosate is Nufarm’s largest selling product in
Australia, and globally.
Australian sales were more than seven per cent down
on the previous year. Limited demand, lower sales
of higher value products and pricing pressure all had
a negative impact on margins and, combined with
higher costs in some areas, there were repercussions
on profitability.
New Zealand crop protection sales were slightly
up on the previous year but increased competition
affected margins adversely, resulting in a slightly
lower profit contribution.
Sales in Asia were also higher than in the previous
year, with the company’s Indonesian business
performing strongly. Less competition from Chinese
sourced glyphosate products and several new product
registrations provided additional selling opportunities
for Nufarm in a number of Asian markets.
Americas
The Americas region recorded $640 million in total
sales – a 20 per cent increase on the previous year –
and a segment profit of $80 million, up more than
65 per cent on 2006. Excluding the impact of Agripec
in Brazil, regional profit increased by 39 per cent.
Seasonal conditions in both North America and South
America were generally favourable.
Nufarm Limited – Annual Report 2007
17
CROP PROTECTION CONTINUED
In the USA, agricultural producers saw relatively high
moisture levels maintained for most of the season.
Unseasonably cool and wet conditions – and a late
freeze in April – affected the turf segment, while dry
conditions in parts of the southeast were not conducive
to strong forestry sales.
New mandated production targets for crop based biofuels
drove very strong corn plantings and contributed to a
generally buoyant agriculture sector.
While sales and pricing competition remained strong,
Nufarm’s US business grew revenues by some 20 per
cent in local currency. An improved product mix, plus
the introduction of new higher margin products such
as ‘Nuprid’ (imidacloprid), helped generate an excellent
profit performance.
In Canada, sales increased by approximately 18 per cent
(local currency), with gross margins also improving. Early
and dry spring conditions meant a higher than average
use of pre-plant herbicides but subsequent in crop
treatments were reduced.
Argentina had an excellent year with sales increasing
some 22 per cent (local currency). Gross margins were
also up on the previous period. Nufarm introduced a
number of new higher value formulations and strong
corn and soybean prices encouraged increased use
of crop protection products.
Chile also generated an improved performance. Despite
some ongoing delays in the local regulatory system,
several new products were launched, contributing to
good growth in sales.
Europe
Total European sales were $440 million (2006: $393
million). Excluding the impact of non-operating items,
the 2007 profit generated in Europe was $34.4 million,
some $9 million lower than in the previous year.
Nufarm’s European businesses achieved target results
in most markets despite mixed seasonal and business
conditions throughout the region.
A generally mild winter and early spring provided good
early planting conditions across the continent. In the
northern European markets, unseasonably warm and
dry weather led to lower fungicide applications in the
early cereal growing period, with later rains also affecting
cereal herbicide sales.
Southern Europe experienced a return to colder weather
patterns and this led to crop damage and lower yields in
a number of markets.
Nufarm’s German business generated a 15 per cent
increase in revenues but gross margins were affected
by reduced sales opportunities for the company’s
proprietary spring herbicides.
Both France and Spain also increased sales and profit,
however the UK business suffered from the withdrawal
of a product registration and delays in the introduction
of planned new products. These happened very late in
the financial year and had a substantial negative impact
on the UK results.
Lower MCPA sales from the company’s Botlek (the
Netherlands) facility also had a negative impact on the
European results.
Nufarm’s acquisition of the Agrosol business in Italy
(completed in October 2006,) provided a platform for
significant sales growth in that market.
The company’s expansion into central and eastern Europe
also saw very positive progress, with the new business
in Romania generating excellent first year sales (and
eight new product registrations) plus new opportunities
emerging in other regional markets.
18
Nufarm Limited – Annual Report 2007
CROP PROTECTION CONTINUED
Crop protection sales by region 2007
Crop protection sales by region 2006
32%
36%
3%
4%
25%
Australia
Americas
Europe
Asia
New Zealand
38%
32%
3%
4%
23%
Australia
Americas
Europe
Asia
New Zealand
2007 total revenue $1.76 billion
2006 total revenue $1.68 billion
Seeds
Nufarm continued its expansion into the growing seeds
segment in Australia with the September 2006 acquisition
of Monsanto’s Roundup Ready® canola germ plasm and
a licence to the Roundup Ready® canola trait.
Business conditions in Brazil improved as the year
progressed with a more stable currency and higher
commodity prices helping to ease the credit related
issues that had a negative impact the previous year.
The full benefit of these improved conditions will not
be seen until the 2008 financial year.
The acquisition strengthens Nufarm’s existing position
in seeds and allows the company 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
thus simplifying production of those crops.
Australia’s adverse seasonal conditions in the reporting
period had a negative impact on the seed business,
with lower canola plantings and a restricted capacity
to bulk up new seed varieties.
Agripec – Brazil
An agreement to acquire the outstanding 50.1 per cent
of Agripec was announced in May 2007, with Nufarm
moving to 100 per cent control on 1 June. Nufarm’s
2007 results include 10 months of Agripec earnings
calculated on an equity accounted basis (49.9 per cent
owned subsidiary) and two months of consolidated
results (June and July).
Agripec generated a total profit contribution – before
financing costs and including the impact of additional
provisioning for doubtful debts – of $17.2 million
($8.5 million in 2006). This was made up of a $7.8 million
equity accounted profit for the ten months to the end
of May and a $9.4 million profit for the final two months
of the financial year, fully consolidated.
Agripec implemented a more restricted credit policy
over the past year and, as part of its risk management
policy, increased its use of barter trading. Collections
relating to the most recent selling season have met
target but a number of outstanding payments remain
from 2006 and 2005.
The introduction of new products helped the business
increase its penetration in the horticulture, cotton and
corn segments and a strong sales campaign for Agripec’s
insecticides portfolio was a major contributor to the high
overall sales outcome. For the full year, Agripec net
sales were R$459 million, compared to R$383 million
the previous year, an increase of 20 per cent.
Nufarm Limited – Annual Report 2007
19
AGRIPEC WAS ESTABLISHED SOME
40 YEARS AGO AND HAS BUILT
STRONG CUSTOMER RELATIONSHIPS
20
Nufarm Limited – Annual Report 2007
As a developing economy, business in Brazil is not
without risk. Appropriate credit controls and other risk
management policies are in place.
Agripec was established some 40 years ago and has
built strong customer relationships. As the business
makes the transition to the Nufarm brand, care will
be taken to preserve and enhance those relationships.
CROP PROTECTION CONTINUED
Brazil in focus
Recognising the substantial growth opportunities in Brazil,
Nufarm reached agreement during the 2007 financial year
to acquire the balance of locally based crop protection
company, Agripec Quimica e Farmaceutica S.A. and
assumed management control on 1 June.
Nufarm’s initial investment in Agripec (49.9 per cent equity
stake) was made in August 2004 after a comprehensive
review of suitable acquisition opportunities in the world’s
fastest growing – and second largest – crop protection
market.
Agripec’s manufacturing operations are located in
Fortaleza, in the northeast of Brazil and the company
has an administrative base in Sao Paolo, with an extensive
sales network extending into the key farming regions.
The company generated net sales of some R$460 million
in Nufarm’s 2007 financial year, giving it an approximate
five to seven per cent market share.
Brazil is an increasingly important agricultural market and
is ranked as the leading global producer of a number of
important agricultural commodities. With a large arable
landmass, generally reliable climatic conditions and good
soils, Brazil is uniquely placed to take advantage of
strong global demand for crops to meet food, animal
feed and energy (biofuels) needs.
The market in Brazil is also seeing change as technology
and agricultural inputs are used to maximise production.
Increased adoption of genetically modified crops is
leading to changes in the use patterns of certain
crop protection products.
Following its acquisition of Agripec, Nufarm has a
strong platform to take advantage of the opportunities
that will flow from these changes. The company is now
developing new products to access a variety of crop
segments and broaden its sales base. The global product
development resources of Nufarm and its strategic
relationships, will add strength and value to the business.
Nufarm Limited – Annual Report 2007
21
HEALTH, SAFETY AND ENVIRONMENT
Achieving industry-leading growth in the global crop
protection business means a dedication to always
improving our health, safety and environment
performance.
Nufarm continues to emphasise the proper management
of these issues and its annual calendar year health, safety
and environment corporate and site reports contain
the detailed data. The reports are available at
www.nufarm.com/healthsafetyreports
In the 2006 calendar year, the lost time injury
frequency rate did not meet the improvement target
but the unusual incident reporting system continues
to show improvement. This system is being expanded
throughout the company and behavioural training has
been rolled out across Australasia.
Fifteen sites that achieved 200,000 hours work or
five years – or both – received safety awards during
the year and 20 locations operated without recording
any injuries serious enough to require one or more
days away from work.
In the reporting period, Nufarm was neither fined nor
prosecuted for any breaches of environment regulations
at its 21 manufacturing sites plus offices and regional
centres. Eleven of its sites achieved 100 per cent
compliance in environmental testing and, due to
demonstrated continual compliance, reduced testing
has been authorised at some sites.
Greenhouse gas reduction and water conservation
initiatives are underway at most sites. It is a credit to
the innovation and hard work of operational employees
that Nufarm has increased production continuously
while making substantial decreases in energy use and
developing transforming water efficiency measures.
One of the environmental challenges Nufarm now
faces is due to its basic chlorine chemistry synthesis
and production: the bi-product is salt. Even though
production has increased substantially in recent years,
the increase in the amount of salt to be treated and
discharged is marginal. The search continues for new
technical advances to capture salt for re-use.
22
Nufarm Limited – Annual Report 2007
HEALTH, SAFETY AND ENVIRONMENT CONTINUED
Nufarm Limited – Annual Report 2007
23
ACHIEVING INDUSTRY-LEADING GROWTH
IN THE GLOBAL CROP PROTECTION
BUSINESS MEANS A DEDICATION TO
ALWAYS IMPROVING OUR HEALTH, SAFETY
AND ENVIRONMENT PERFORMANCE
24
Nufarm Limited – Annual Report 2007
Nufarm Limited – Annual Report 2007
25
MANAGEMENT TEAM
Doug Rathbone AM
Brian Benson
Rodney Heath
Kevin Martin
Managing director and
chief executive
Group general manager
agriculture
Brian Benson joined
Nufarm in 2000, bringing
with him extensive
experience in the crop
protection industry in
the areas of international
marketing and strategy.
He has degrees in
agricultural science and
business administration.
Brian is responsible for
Nufarm’s regional sales
operations and commercial
strategy.
Doug Rathbone’s
background is chemical
engineering and commerce
and he has worked for
Nufarm Australia Limited
for 32 years.
Doug was appointed
managing director of
Nufarm Australia in 1982
and managing director of
Nufarm Limited in October
1999. He joined the board
of directors in 1987.
He was appointed
to the board of the
Commonwealth Scientific
and Industrial Research
Organisation (CSIRO)
in 2007.
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.
26
Nufarm Limited – Annual Report 2007
MANAGEMENT TEAM CONTINUED
Dale Mellody
Bob Ooms
David Pullan
Robert Reis
Group general manager
chemicals
Group general manager
operations
Bob Ooms joined the
company in 1999.
David Pullan joined the
company in 1985.
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.
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.
Group general manager
corporate strategy and
external affairs
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.
Robert also has executive
management responsibility
for corporate strategy,
human resources and
organisational development.
Group general manager
marketing and product
development
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
responsible for Nufarm’s
global marketing and
product development
group. Now based in
the USA, Dale also heads
Nufarm’s North American
regional operations.
Nufarm Limited – Annual Report 2007
27
BOARD OF DIRECTORS
Kerry Hoggard
Chairman
Doug Curlewis
Deputy chairman
Kerry Hoggard, 66, joined
the board in 1987.
GDW (Doug) Curlewis,
66, joined the board in
January 2000.
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.
He has a master of
business administration
and was formerly managing
director of National
Consolidated Ltd. He is
also a director of GUD
Holdings Ltd, Graincorp
Limited and Sigma
Pharmaceuticals Limited.
In the past three years
Doug has been a director
of Pacifica Group Ltd
(nine years), National
Foods Ltd (six years) and
Remunerator Australia Pty
Ltd (seven years).
Doug is deputy chairman
of the board, chairman of
the nomination committee
and a member of the
audit and remuneration
committees.
Doug Rathbone AM
Bruce Goodfellow
Managing director and
chief executive
Doug Rathbone AM, 61,
joined the board in 1987.
His background is chemical
engineering and commerce
and he has worked for
Nufarm Australia Limited
for 32 years.
Doug was appointed
managing director of
Nufarm Australia in 1982
and managing director
of Nufarm Limited in
October 1999.
He was appointed
to the board of the
Commonwealth Scientific
and Industrial Research
Organisation (CSIRO)
in 2007.
Dr WB (Bruce) Goodfellow,
55, 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.
Bruce is a director of
Sanford Ltd, Sulkem
Co Ltd, Refrigeration
Engineering Co Ltd and
Cambridge Clothing
Co Ltd.
28
Nufarm Limited – Annual Report 2007
BOARD OF DIRECTORS CONTINUED
Garry Hounsell
Donald McGauchie AO
John Stocker AO
Dick Warburton AO
GA (Garry) Hounsell, 52,
joined the board in
October 2004.
DG (Donald) McGauchie
AO, 57, joined the board
in 2003.
Dr JW (John) Stocker
AO, 62, joined the board
in 1998.
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.
Garry is deputy chairman of
Mitchell Communications
Ltd and a director of
Qantas Airways Limited
and Orica Ltd.
Garry is chairman of the
audit committee.
He has a medical,
scientific and management
background and was
formerly chief scientist
of the Commonwealth
of Australia and is now the
chairman of the Australian
Commonwealth Scientific
and Research Organisation.
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 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) and Ridley
Corporation Limited
(six years).
Donald is a member of
both the remuneration and
nomination committees.
RFE (Dick) Warburton AO,
66, joined the board in 1993.
He has a business
management background
and is chairman of Tandou
Ltd and Magellan Flagship
Fund Limited. He is a
director of Caltex Australia
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 Tabcorp Holdings
Limited (six years).
Dick is chairman of the
remuneration committee
and a member of the
nomination committee.
After more than 14 years
as a member of the board
of directors, Dick will retire
at the annual general
meeting in December.
In a critical phase of
our development, his
contribution to and support
of Nufarm has been
substantial and we
wish him well.
Nufarm Limited – Annual Report 2007
29
THE COMPANY’S EXPANSION INTO
CENTRAL AND EASTERN EUROPE
ALSO SAW VERY POSITIVE PROGRESS
30
Nufarm Limited – Annual Report 2007
Nufarm Limited – Annual Report 2007
31
CORPORATE GOVERNANCE
Introduction
Nufarm’s board processes are under constant review
to ensure our systems protect the interests of all
stakeholders.
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.
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 provisions of
the Corporations Act 2001. We practice early adoption
before actual compliance is required.
This report is referable to the ASX Principles as
published in 2003. We intend to report against the
recent amendments to the ASX Principles in our 2008
annual report.
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.
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 been issued to the
managing director under the plan since 2002.
Management and oversight of Nufarm
Nufarm believes it complies with all the ASX principles
with two exceptions.
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.
• 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.
The board unanimously continues to support Kerry
as chairman, believing this to be clearly in the best
interest of all stakeholders.
32
Nufarm Limited – Annual Report 2007
CORPORATE GOVERNANCE CONTINUED
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 company is managed according to the
recommendations of ASX Principle 1.
The board’s specific responsibility is to:
• ratify strategic plans for the company and its
business units;
• review the company’s accounts;
• approve and review operating budgets;
• approve major capital expenditure, acquisitions,
divestments and corporate funding;
• oversee risk management and internal compliance; and
• control codes of conduct and legal compliance.
The board 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 2007, 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 42 of this report.
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.
Nufarm Limited – Annual Report 2007
33
CORPORATE GOVERNANCE CONTINUED
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
a company 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 may 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.
The board charter provides that non-executive directors
may meet without management present.
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 32 of this
report. Doug Curlewis, an independent director, has
been appointed deputy chairman.
The Nufarm board has stipulated that the same
person may not fill the roles of the chairman and
chief executive officer.
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:
• assess competencies of board members;
• review board succession plans;
• evaluate board performance; and
• recommend the appointment of new directors
when appropriate.
34
Nufarm Limited – Annual Report 2007
CORPORATE GOVERNANCE CONTINUED
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.
Ethical and responsible decision-making
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 to ensure
appropriate standards and carefully selects and
promotes employees.
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
• two weeks before the company’s AGM, ending 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.
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 42.
Nufarm Limited – Annual Report 2007
35
CORPORATE GOVERNANCE CONTINUED
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 deputy
chairman of Mitchell Communications Group 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 Sigma
Pharmaceuticals Limited.
The committee reviews its charter annually.
The charter sets out membership requirements for
the committee, its responsibilities and provides that
the committee shall assess the external auditor’s actual
or perceived independence annually by reviewing the
services provided by the auditor.
The charter also identifies those services that:
• the external auditor may and may not provide; and
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.
• require specific audit committee approval.
Our communication policy aims to:
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
• ensure that shareholders and the financial markets are
provided with full and timely information about our
activities;
• comply with our continuous disclosure obligations;
36
Nufarm Limited – Annual Report 2007
CORPORATE GOVERNANCE CONTINUED
• ensure equality of access to briefings, presentations
and meetings for shareholders, analysts and media; and
• encourage attendance and voting at shareholder
meetings.
Postal and electronic communication with shareholders
includes:
• half year and annual reports;
• notices of AGM;
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 summary of AGM proceedings, including the
• a comprehensive occupational health, safety and
chairman’s and chief executive officer’s addresses
and voting results; and
• information whenever there are significant
developments to report.
environmental program. The company publishes an
annual health, safety and environment report on its
performance across a range of environment, health
and safety parameters, including specific targets for
continuous improvement;
Our formal communications policy is available on the
corporate governance section of the company’s website.
• a comprehensive annual insurance program including
external risk management surveys;
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.
• 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 pages 35 to 36
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.
Nufarm Limited – Annual Report 2007
37
CORPORATE GOVERNANCE CONTINUED
Board and management performance
Remuneration of executives
The board
The performance of the board, individual directors and
key executives is reviewed annually.
The board’s policy for determining the nature and amount
of the remuneration of executives is set out in the
remuneration report on pages 45 to 47.
In 2003–2004, directors completed a detailed
questionnaire, an external consultant interviewed
each director individually and there was a general board
discussion. The chairman conducted the subsequent
performance evaluation and, in the current reporting
period, the board completed a purpose-designed
questionnaire, the results of which were discussed
with the chairman, the chairman of the nomination
committee and then by the board as a team.
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 34) 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.
Remuneration
The board has procedures to ensure that the level and
structure of remuneration for executives and directors
is appropriate.
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,
Don 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
pages 45 to 52.
38
Nufarm Limited – Annual Report 2007
CORPORATE GOVERNANCE CONTINUED
Except for compliance with recommendation 9.4, which
is discussed on page 32, our remuneration policies are
consistent with ASX Principle 9.
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 shareholders
is consistent with ASX Principle 10.
Nufarm Limited – Annual Report 2007
39
40
Nufarm Limited – Annual Report 2007
DIRECTORS’ REPORT
The directors present their report together with the financial report of Nufarm Limited (‘the company’) and of the group,
being the company and its subsidiaries and the group’s interests in associates and jointly controlled entities, for the
financial year ended 31 July 2007 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 Mr R Heath.
Details of the qualifications and experience of the company secretary are set out on page 26.
Directors’ interests in shares and step-up securities
Relevant interests of the directors in the shares or step-up securities 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:
KM Hoggard1
GDW Curlewis
DJ Rathbone
Dr WB Goodfellow1, 2
G A Hounsell1
DG Mc Gauchie1
Dr JW Stocker1
RFE Warburton1
Nufarm Ltd
Ordinary shares
Nufarm Finance
(NZ) Ltd
Step-up securities
2,383,614
43,787
29,912,610
662,914
61,959
16,376
40,973
66,938
_
_
_
45,189
_
_
_
_
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 holding of Dr WB Goodfellow includes his relevant interest in:
(i) St Kentigern Trust Board (429,855 shares and 19,727 step-up securities) – Dr Goodfellow is Chairman of the Trust Board. Dr Goodfellow
does not have a beneficial interest in these shares or step-up securities;
(ii) Sulkem Company Limited (113,616 shares);
(iii) Auckland Medical Research Foundation (25,462 step-up securities). Dr Goodfellow does not have a beneficial interest in these step-up
securities.
Nufarm Limited – Annual Report 2007
41
DIRECTORS’ REPORT CONTINUED
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
Audit
Remuneration
Nomination
Committees
KM Hoggard 1, 2
GDW Curlewis
DJ Rathbone 2
Dr WB Goodfellow 2
GA Hounsell
DG McGauchie
Dr JW Stocker
RFE Warburton
A
7
7
7
7
7
7
7
7
B
6
7
7
7
7
7
7
6
A
4
4
–
–
4
–
–
–
B
4
4
3
1
3
–
–
–
A
3
3
–
–
–
3
3
3
B
3
3
3
1
–
3
3
3
A
–
3
–
–
–
3
3
3
B
3
3
3
1
–
3
3
3
Column A: indicates the number of meetings held during the period the director was a member of the board and/or
committee.
Column B: indicates the number of meetings attended during the period the director was a member of the board
and/or committee.
Other meetings of committees of directors are convened as required to discuss specific issues or projects.
1 Due to illness, KM Hoggard was unable to attend the 2006 Annual General Meeting of the company and the meeting of directors held
in December 2006.
2 All 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 2,488 people at its various locations in Australasia, Asia, 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.
42
Nufarm Limited – Annual Report 2007
DIRECTORS’ REPORT CONTINUED
Results
The net profit attributable to members of the consolidated entity for the 12 months to 31 July 2007 is $148.8 million.
The comparable figure for the 12 months to 31 July 2006 was $117.2 million.
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 main significant item in the current year is the impairment loss associated with old Brazilian receivables as a result
of applying Nufarm’s more conservative approach to provisioning. The 2006 number is primarily related to structural
reorganisation in France.
Profit from continuing operations
Discontinued operations
Other significant items
Profit for the year
Minority interest
Operating profit attributable to equity holders of the parent
Profit from continuing operations
Discontinued operations
Other restructuring items
Profit for the year
Minority interest
Operating profit attributable to equity holders of the parent
Consolidated
– 2007 material
(non-operating)
items
$000
–
32,675
(4,740)
27,935
–
27,935
Consolidated
– 2006 material
(non-operating)
items
$000
–
4,482
(8,368)
(3,886)
–
(3,386)
Operating
$000
107,323
9,165
4,740
121,228
(367)
120,861
Operating
$000
103,165
10,152
8,368
121,685
(579)
121,106
Total
$000
107,323
41,840
–
149,163
(367)
148,796
Total
$000
103,165
14,634
–
117,799
(579)
117,220
Nufarm Limited – Annual Report 2007
43
DIRECTORS’ REPORT CONTINUED
Dividends
The following dividends have been paid, declared or recommended since the end of the preceding financial year:
The final dividend for 2005–06 of 20 cents paid 10 November 2006
The interim dividend for 2006–07 of 11 cents paid 27 April 2007
The final dividend for 2006–07 of 21 cents as declared and recommended
by the directors is payable 9 November 2007
Nufarm Step-up Securities distribution payment
The following Nufarm Step-up Securities distribution payment has been paid since the
end of the preceding financial year:
Distribution payment for the period 24 November 2006 – 15 April 2007
at the rate of 8.35 per cent per annum paid 16 April 2007
$000
34,251
18,894
36,015
8,184
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 8 to 13 and the business review on pages 16 to 23.
State of affairs
The state of the company’s affairs are set out in the managing director’s review on pages 8 to 13 and the business
review on pages 16 to 23.
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
On 26 September 2007 the directors declared a final dividend of 21c per share, fully franked, payable 9 November 2007.
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 22 to 23.
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.
44
Nufarm Limited – Annual Report 2007
DIRECTORS’ REPORT CONTINUED
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 in note 42 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 as the final page of this report.
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 include 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.
Since 2000, the company has adopted a remuneration policy based on total target reward (TTR), which comprises
two components:
• fixed reward (TEC) – cash and benefits that reflect local market conditions and individual contribution. The reward
level is set relative to pertinent and prevailing executive employment market conditions for high calibre talent in
the geographies where Nufarm operates. The company’s policy position for TEC for Australian executives, is at the
50th percentile of the Mercer Survey of Australian Major Corporates; and
• 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 by way of shares under the Nufarm Executive Share Plan (2000).
The exception is the managing director who is paid in cash because of the very substantial shareholding he currently
controls in the company.
Nufarm Limited – Annual Report 2007
45
DIRECTORS’ REPORT CONTINUED
For the remaining executives this payment is made in shares, which ensures a longer term focus to achieve benefits
consistent with the delivery of sustained growth of shareholder value. Share issues under the Nufarm Executive
Share Plan (2000) are subject to forfeiture and dealing restrictions.
Executives cannot deal on the shares for the period of between three and 10 years without board approval. An independent
trustee holds the shares on behalf of the executives.
Executives are not permitted to hedge any shares issued to them under the incentive program whilst they remain
held in trust.
If the financial objectives are achieved and each part of the incentive program is paid at 100 per cent, 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 funds employed (ROFE) in the business.
Return is calculated on the group’s earnings before interest and taxation and adjusted for any non-operating items.
Funds employed are represented by shareholders’ funds plus total interest bearing debt.
The company believes ROFE is an appropriate performance condition for the following reasons:
• for many years the board has measured the company’s performance using ‘economic value added’ methodology. It
is believed that if the company can consistently add economic value (a satisfactory margin above the cost of capital),
then this will be recognised in share value; and
• 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 level 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 with relevant comparator groups.
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.
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.
46
Nufarm Limited – Annual Report 2007
DIRECTORS’ REPORT CONTINUED
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.
Managing director
Key management personnel
Percentage (%) target ROFE achieved
<90
0
0
90
20
14
100
50
40
110
64
54
>110
64
54
Consequences of performance on shareholders’ wealth
The board believes the following table demonstrates:
• the consequences of the company’s performance on shareholder wealth; and
• that the remuneration policy is generating the desired increase in shareholder wealth.
In considering the consolidated entity’s performance and benefits for shareholders’ wealth, the remuneration
committee and the board have regard to the following indices in respect of the current financial year and the previous
four financial years.
*Operating
EBIT
$m
*ROFE
achieved
*EPS
cents
% per share
rate Dividends
paid
$000
cents
per share
Dividend
**Change
in share
price
$
Share
price
31 July
***Total
shareholder
return
%
2003
2004
2005
2006
2007
131.9
142.2
196.6
211.2
217.8
14.0
15.7
19.8
17.8
16.6
41.3
47.1
60.5
60.3
59.2
20
23
26
27
31
27,976
33,656
40,548
45,879
53,145
0.99
1.72
4.08
(1.37)
4.31
4.39
6.09
10.15
8.80
13.10
21
54
63
(2.3)
40
*
Numbers for 2005, 2006 and 2007 calculated in accordance with AIFRS. Numbers for 2003 and 2004 calculated in accordance with
previous AGAAP.
**
This column reflects the change in share price from 1 August to 31 July in the relevant financial year.
*** Source: Goldman Sachs JBWere – Total Shareholder Return as at 30 June.
Nufarm Limited – Annual Report 2007
47
DIRECTORS’ REPORT CONTINUED
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 2006 AGM, shareholders approved an aggregate of $1,200,000 per year
(excluding superannuation costs).
Set out below are details of the annual fees payable at 31 July 2007 (excluding superannuation costs).
Chairman1
Deputy chairman1
Director board fee
Chairman audit committee
Chairman other board committees
Member audit committee
Member other board committees2
$240,000
$140,000
$ 95,000
$ 25,000
$10,000
$5,000
$2,500
1 The chairman, KM Hoggard and the deputy chairman, GDW Curlewis, receive no fees as members of any committee.
2 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.
48
Nufarm Limited – Annual Report 2007
DIRECTORS’ REPORT CONTINUED
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.
Remuneration of directors and executives
Details of the nature and amount of each major element of remuneration in respect of key management personnel,
which includes each director of the company and each of the five named company executives and relevant group
executives who receive the highest remuneration are:
Nufarm Limited – Annual Report 2007
49
DIRECTORS’ REPORT CONTINUED
In AUD
Directors
Non-executive
KM Hoggard (Chairperson)
GDW Curlewis (Deputy chairman)
Dr WB Goodfellow
GA Hounsell
DG McGauchie
Dr JW Stocker
RFE Warburton
Executive Director
DJ Rathbone (Managing director)
Executive Officers
DA Pullan (Group general manager operations)
RF Ooms (Group general manager chemicals)
KP Martin (Chief financial officer)
B Benson (Group general manager marketing)
RG Reis (Group general manager corporate strategy and external affairs)
R Heath (Company secretary)
DA Mellody (Group general manager global marketing)
Total compensation: key management personnel (consolidated)
Total compensation: key management personnel (company)
50
Nufarm Limited – Annual Report 2007
Salary and fees
$
Short term
Cash bonus
(vested)
$
2007
2006
2007
2006
2007
2006
2007
2006
2007
2006
2007
2006
2007
2006
2007
2006
2007
2006
2007
2006
2007
2006
2007
2006
2007
2006
2007
2006
2007
2006
2007
2006
2007
2006
192,000
192,000
112,000
101,500
76,000
76,000
94,333
91,000
78,500
78,500
–
39,250
21,500
86,000
1,015,250
950,797
435,450
410,156
416,483
393,103
398,928
389,262
406,158
337,265
300,405
272,367
209,086
202,470
246,350
198,642
4,002,443
3,818,312
574,333
664,250
–
–
–
–
–
–
–
–
–
–
–
–
–
–
992,920
1,598,540
70,439
258,710
66,396
241,840
66,067
240,392
63,710
211,977
45,979
164,317
34,610
129,520
37,529
130,488
1,377,650
2,975,784
–
–
DIRECTORS’ REPORT CONTINUED
Short term
Non-monetary
benefits
$
Post-employment
Share based
payments
Other long term
Total
Total
$
Superannuation
$
Equity settled
$
$
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
33,077
35,880
39,552
38,414
10,704
32,067
14,750
22,501
16,998
11,467
39,931
49,230
24,396
28,639
21,026
17,437
200,434
235,635
–
–
192,000
192,000
112,000
101,500
76,000
76,000
94,333
91,000
78,500
78,500
–
39,250
21,500
86,000
2,041,247
2,585,217
545,441
707,280
493,583
667,010
479,745
652,155
486,866
560,709
386,315
485,914
268,092
360,629
304,905
346,567
5,580,527
7,029,731
574,333
664,250
24,000
24,000
42,000
36,000
9,500
9,500
11,333
11,000
9,750
9,750
88,250
49,000
75,000
10,500
14,709
13,804
85,960
80,970
67,919
76,992
74,530
63,325
40,852
39,405
39,102
36,554
41,151
39,854
23,557
10,577
647,613
511,231
259,833
149,750
48,000
48,000
–
–
19,000
19,000
19,000
19,000
19,000
19,000
19,000
19,000
19,000
19,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
264,000
264,000
154,000
137,500
104,500
104,500
124,666
121,000
107,250
107,250
107,250
107,250
115,500
115,500
–
–
65,311
59,625
2,121,267
2,658,646
219,451
294,585
206,414
277,084
206,414
277,084
196,780
227,497
139,386
185,500
109,869
151,665
110,689
28,578
1,332,003
1,584,993
143,000
143,000
19,530
22,478
14,790
13,104
9,568
15,899
25,344
7,537
16,842
10,796
8,357
7,928
10,482
15,891
170,224
153,257
–
–
870,382
1,105,313
782,706
1,034,190
770,257
1,008,463
749,842
835,148
581,645
718,764
427,469
560,076
449,633
401,613
7,730,367
9,279,212
977,166
957,000
Nufarm Limited – Annual Report 2007
51
DIRECTORS’ REPORT CONTINUED
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.
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 53 and forms part of the directors’ report for the
financial year ended 31 July 2007.
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
26 September 2007
52
Nufarm Limited – Annual Report 2007
LEAD AUDITOR’S INDEPENDENCE DECLARATION
U N D E R S E C T I O N 3 0 7 C O F T H E C O R P O R AT I O N S A C T 2 0 0 1
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 2007 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
26 September 2007
KPMG, an Australian partnership and a member firm of the KPMG network
of independent member films affiliated with KPMG International, a Swiss cooperative.
Nufarm Limited – Annual Report 2007
53
INCOME STATEMENTS
F O R T H E Y E A R E N D E D 3 1 J U LY 2 0 0 7
Consolidated
Company
Note
2007
$000
2006
$000
2007
$000
2006
$000
Continuing operations
Revenue
Cost of sales
Gross profit
Other income
Sales, marketing and distribution expenses
General and administrative expenses
Research and development expenses
Results from operating activities
Financial income
Financial expenses
Net financing costs
Share of net profits of associates
Profit before income tax
Income tax expense
7
10
10
19
11
1,764,384
(1,268,723)
495,661
1,676,746
(1,193,455)
483,291
8,567
(186,019)
(93,357)
(30,000)
194,852
5,336
(59,770)
(54,434)
9,914
(188,482)
(95,835)
(32,563)
176,325
7,995
(57,241)
(49,246)
46,209
(31,018)
15,191
60,065
(5,502)
(3,516)
(529)
65,709
6,801
(8,736)
(1,935)
34,313
(15,837)
18,476
47,803
(5,164)
(3,196)
(505)
57,414
20,215
(21,796)
(1,581)
8,056
10,545
788
1,013
148,474
137,624
64,562
56,846
(41,151)
(34,459)
(1,448)
(2,710)
Profit from continuing operations
107,323
103,165
63,114
54,136
Discontinued operations
Profit and loss of discontinued operations
and gain on sale of discontinued operations
(after tax)
12
41,840
14,634
–
6,624
Profit for the year
149,163
117,799
63,114
60,760
Attributable to:
Equity holders of the parent
Minority interest
148,796
367
117,220
579
63,114
–
60,760
–
Profit for the year
149,163
117,799
63,114
60,760
Earnings per share
Basic earnings per share
Diluted earnings per share
Continuing operations
Basic earnings per share
Diluted earnings per share
31
31
31
31
83.6
83.6
59.2
59.2
68.9
68.9
60.3
60.3
The income statements are to be read in conjunction with the attached notes.
54
Nufarm Limited – Annual Report 2007
BALANCE SHEETS
A S AT 3 1 J U LY 2 0 0 7
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Current tax assets
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
Current 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
Provisions
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
Equity
Share capital
Reserves
Retained earnings
Equity attributable to equity holders
of the company
Nufarm Step-up Securities
Minority interest
TOTAL EQUITY
Consolidated
Company
Note
2007
$000
2006
$000
2007
$000
2006
$000
15
16
17
18
13
16
19
20
21
23
24
22
15
25
26
27
18
29
13
26
21
27
29
30
30
30
30
30
30
92,377
787,909
477,404
27,348
–
1,385,038
51,269
524,164
432,023
6,172
23,909
1,037,537
15,336
22,966
271
93,577
333,777
580,721
7,225
1,053,873
2,438,911
12,716
812,336
360,061
15,328
23,956
11,983
–
1,236,380
92,092
34,893
31,742
14,653
173,380
1,409,760
1,029,151
240,886
9,192
531,124
781,202
246,932
1,017
1,029,151
17,738
224,886
503
57,140
285,738
296,406
–
882,411
1,919,948
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
702,189
240,760
23,891
436,530
701,181
–
1,008
702,189
15,034
235,182
14,721
11,651
–
276,588
–
8,341
307,214
1,079
5,034
24
–
321,692
598,280
2,667
119,217
–
317
14,096
–
–
136,297
–
2
52
–
54
136,351
461,929
240,886
39,657
181,386
461,929
–
–
461,929
10,739
452,112
13,598
377
–
476,826
–
7,724
247,213
1,137
3,892
17
–
259,983
736,809
23,574
62,357
190,258
358
8,199
–
–
284,746
–
56
31
–
87
284,833
451,976
240,760
39,799
171,417
451,976
–
–
451,976
The balance sheets are to be read in conjunction with the attached notes.
Nufarm Limited – Annual Report 2007
55
STATEMENTS OF CASH FLOWS
F O R T H E Y E A R E N D E D 3 1 J U LY 2 0 0 7
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 acquired intangibles and major
product development expenditure
Net cash from investing activities
Cash flows from financing activities
Proceeds from issue of Nufarm
Step-up Securities (NSS)
Proceeds from borrowings
Repayment of borrowings
Repayment of capital notes
Advances to controlled entities
Payment for interest rate cap on NSS
Distribution to NSS holders
Repayment of finance lease principal
Dividends paid
Net cash from financing activities
Net increase (decrease) in cash and
cash equivalents
Cash and cash equivalents 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
Consolidated
Company
Note
2007
$000
2006
$000
2007
$000
2006
$000
1,692,095
(1,539,715)
152,380
5,336
171
(59,770)
(35,519)
62,598
1,750,257
(1,605,543)
144,714
8,132
2,599
(57,325)
(35,221)
62,899
38
1,378
67,327
(63,231)
37,106
573
8,797
(40,156)
(37,408)
(22,866)
19,714
(44,583)
(112,777)
244,915
409,977
(426,383)
(195,228)
–
(3,755)
(8,184)
–
(53,451)
(32,109)
–
402,539
(318,858)
–
–
–
–
(897)
(46,429)
36,355
79,130
(47,314)
31,816
6,801
53,335
(8,736)
(6,766)
76,450
133
25,061
(1,433)
–
–
23,761
–
–
–
–
(20,498)
–
–
–
(53,145)
(73,643)
41,066
(23,565)
17,501
20,215
46,042
(21,796)
1,410
63,372
96
–
(2,416)
–
–
(2,320)
–
–
–
–
(9,582)
–
–
–
(45,879)
(55,461)
50,203
(13,523)
26,568
5,591
31,329
45,393
(12,835)
(20,497)
(1,871)
–
426
(967)
(1,366)
2,071
–
–
15
79,661
31,329
12,367
(12,835)
The statements of cash flows are to be read in conjunction with the attached notes.
56
Nufarm Limited – Annual Report 2007
STATEMENTS OF RECOGNISED INCOME AND EXPENSE
F O R T H E Y E A R E N D E D 3 1 J U LY 2 0 0 7
Items recognised directly in equity
Foreign exchange translation differences
for foreign operations
Actuarial gains (losses) on defined
benefit plans
Cash flow hedges:
Amounts taken to equity
Foreign exchange movements taken
to income statement
Income tax on income and expense
recognised directly in equity
Income and expense recognised directly
in equity
Consolidated
Company
Note
2007
$000
2006
$000
2007
$000
2006
$000
30
30
30
30
30
(14,680)
693
(1)
(248)
4,093
(713)
–
20
27
(594)
574
–
–
–
(50)
–
–
(8)
58
–
(10,540)
(40)
(51)
(198)
Profit for the year
149,163
117,799
63,114
60,760
Total recognised income and expense for
the year
138,623
117,759
63,063
60,562
Attributable to:
Equity holders of the parent
Minority interest
Total recognised income and expense for
the year
Prior period adjustment
Impact of correction of prior period
error on retained earnings
Effects of change in accounting policy –
financial instruments
Equity holders of the parent
Minority interest
138,308
315
117,221
538
63,063
–
60,562
–
138,623
117,759
63,063
60,562
43
–
(7,177)
–
–
–
574
–
574
–
–
–
–
–
58
–
58
Other movements in equity arising from transactions with owners are set out in note 30.
The amounts recognised directly in equity are disclosed net of tax – see note 11 for tax effect.
The statements of recognised income and expense are to be read in conjunction with the attached notes.
Nufarm Limited – Annual Report 2007
57
NOTES TO THE FINANCIAL STATEMENTS
1. Reporting entity
Nufarm Limited (the ‘company’) is domiciled in Australia. The consolidated financial statements of the company as at
and for the year ended 31 July 2007 comprise the company and its subsidiaries (together referred to as the ‘group’)
and the group’s interest in associates and jointly controlled entities.
2. Basis of preparation
(a) Statement of compliance
The financial report is a general purpose financial report which has been prepared in accordance with Australian
Accounting Standards (AASBs) (including Australian interpretations) adopted by the Australian Accounting Standards
Board (AASB) and the Corporations Act 2001. The consolidated financial report of the group also complies with IFRS
and interpretations adopted by the International Accounting Standards Board.
The company’s financial report does not comply with IFRS as the company has elected to apply the relief provided
to parent entities by AASB 132 Financial Instruments: Presentation and Disclosure in respect of certain disclosure
requirements.
The financial statements were approved by the board of directors on 26 September 2007.
(b) Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis except for the following:
• derivative financial instruments are measured at fair value; and
• financial instruments at fair value through profit or loss are measured at fair value.
The methods used to measure fair values are discussed further in note 4.
(c) Functional and presentation currency
These consolidated financial statements are presented in Australian dollars, which is the company’s functional currency.
The company is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance with that
Class Order, all financial information presented in Australian dollars has been rounded to the nearest thousand unless
otherwise stated.
(d) Use of estimates and judgements
The preparation of financial statements requires management to make judgements, estimates and assumptions that
affect the application of policies and reported amounts of assets, liabilities, income and expenses. Actual results may
differ from these estimates. 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.
58
Nufarm Limited – Annual Report 2007
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
2. Basis of preparation continued
(d) Use of estimates and judgements continued
In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting
policies that have the most significant effect on the amount recognised in the financial statements are described in the
following notes:
• note 14 – business combinations;
• note 21 – utilisation of tax losses;
• note 24 – measurement of the recoverable amounts of cash-generating units and impairment of goodwill
and indefinite life intangibles; and
• notes 29 and 35 – provisions and contingencies.
3. Significant accounting policies
The accounting policies set out below have been applied consistently to all periods presented in these consolidated
financial statements, and have been applied consistently by group entities.
The entity has elected to early adopt the following accounting standards and amendments:
• AASB 101 Presentation of Financial Statements (October 2006); and
• AASB 2007-4 Australian Additions to, and Deletions from, IFRS.
In the prior year the group adopted AASB 132: Financial Instruments: Disclosure and Presentation and AASB 139:
Financial Instruments: Recognition and Measurement in accordance with the transitional rules of AASB 1: First-time
Adoption of Australian Equivalents to International Financial Reporting Standards. The change has been accounted for
by adjusting the opening balance of retained earnings and reserves at 1 August 2005, as disclosed in the reconciliation
of movements in equity (note 30).
Certain comparative amounts have been reclassified to conform with the current year’s presentation. In addition, the
comparative income statement has been re-presented as if an operation discontinued during the current period has
been discontinued from the start of the comparative period (see note 12).
(a) Basis of consolidation
Subsidiaries
Subsidiaries are entities controlled by the group. Control exists when the group has the power 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 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.
In the company’s financial statements, investments in subsidiaries are carried at cost.
Nufarm Limited – Annual Report 2007
59
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
3. Significant accounting policies continued
(a) Basis of consolidation continued
Associates
Associates are those entities for which the group has significant influence, but not control, over the financial and
operating policies. Associates are accounted for using the equity method. The consolidated financial statements
include the group’s share of the income and expenses of associates, after adjustments to align the accounting policies
with those of the group, from the date that significant influence commences until the date that significant influence
ceases. When the group’s share of losses exceeds its interest in an associate, the carrying amount of that interest
is reduced to nil and the recognition of further losses is discontinued except to the extent that the group has an
obligation or has made payments on behalf of the associate.
Joint controlled operations
Joint ventures are those entities over whose activities the group has joint control, established by contractual agreement.
The interest of the company and of the group in unincorporated joint ventures is 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.
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 financial statements. Unrealised gains arising from transactions with
associates and jointly controlled entities are eliminated against the investment to the extent of the group’s interest
in the entity. 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 when 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 group’s interest in such entities is disposed of.
(b) Foreign currency
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 reporting 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.
Foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are
translated to Australian dollars at exchange rates at the reporting date. The income and expenses of foreign operations
are translated to Australian dollars at exchange rates at the dates of the transactions.
Foreign currency translation differences are recognised directly in equity. Since 1 August 2004, the group’s date of
transition to AASBs, such differences have been recognised in the foreign currency translation reserve (FCTR). When
a foreign operation is disposed of, in part or in full, the relevant amount in FCTR is transferred to profit or loss.
60
Nufarm Limited – Annual Report 2007
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
3. Significant accounting policies continued
(b) Foreign currency continued
Hedge of net investment in foreign operation
Foreign currency differences arising on the re-translation of a financial liability designated as a hedge of a net investment
in foreign operation are recognised directly in FCTR, to the extent that the hedge is effective. To the extent that the
hedge is ineffective, such differences are recognised in profit or loss. When the hedge net investment is disposed
of, the cumulative amount in equity is transferred to profit or loss as an adjustment to the profit or loss on disposal.
(c) Financial instruments
Non-derivative financial instruments
Non-derivative financial instruments comprise investments in equity securities, trade and other receivables, cash and
cash equivalents, loans and borrowings, and trade and other payables.
Non-derivative financial instruments are recognised initially at fair value plus any directly attributable transaction costs,
except as described below. Subsequent to initial recognition non-derivative financial instruments are measured as
described below.
A financial instrument is recognised if the group becomes a party to the contractual provisions of the instrument.
Financial assets are derecognised if the group’s contractual rights to the cash flows from the financial assets expire or
if the group transfers the financial asset to another party without retaining control or substantially all risks and rewards
of the asset. Regular way purchases and sales of financial assets are accounted for at trade date (i.e. the date the
group commits itself to purchase or sell the asset). Financial liabilities are derecognised if the group’s obligations
specified in the contract expire or are discharged or cancelled.
Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand
and form an integral part of the group’s cash management are included as a component of cash and cash equivalents
for the purpose of the statement of cash flows.
Accounting for finance income and expense is discussed in note 3(n).
Other non-derivative financial instruments are measured at amortised cost using the effective interest method, less
any impairment losses.
Derivative financial instruments
The group holds derivative financial instruments to hedge its foreign currency and interest rate risk exposures.
Embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics
and risks of the host contract and the embedded derivative are not closely related.
Derivatives are recognised initially at fair value; attributable transaction costs are recognised in profit or loss when
incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted
for as described below.
Cash flow hedges
Changes in the fair value of the derivative hedging instrument designated as a cash flow hedge are recognised directly
in equity, to the extent that the hedge is effective. To the extent that the hedge is ineffective, changes in fair value are
recognised in profit or loss.
Nufarm Limited – Annual Report 2007
61
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
3. Significant accounting policies continued
(c) Financial instruments continued
If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised,
then hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognised in equity
remains there until the forecast transaction occurs.
When the hedged item is a non-financial asset, the amount recognised in equity is transferred to the carrying amount
of the asset when it is recognised. In other cases the amount recognised in equity is transferred to profit or loss in
the same period that the hedged item affects profit or loss.
Economic hedges
Hedge accounting is not applied to derivative instruments that economically hedge monetary assets and liabilities
denominated in foreign currencies. Changes in the fair value of such derivatives are recognised in profit or loss as
part of foreign currency gains and losses.
Share capital
Ordinary shares
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. Incremental
costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any related
income tax benefit.
Hybrid securities
The group has on issue a hybrid security called Nufarm Step-up Securities (NSS). The NSS are classified as equity
instruments and distributions thereon are recognised as distributions within equity.
Dividends
Dividends on ordinary capital are recognised as a liability in the period in which they are declared.
(d) Property, plant and equipment
Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation and impairment losses.
The cost of property, plant and equipment at 1 August 2004, the date of transition to AIFRS, was determined on the
basis of deemed cost, being the revalued amount at the date of that revaluation.
Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed
assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to
a working condition for its intended use, and the costs of dismantling and removing the items and restoring the site
on which they are located.
Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate
items (major components) of property, plant and equipment.
62
Nufarm Limited – Annual Report 2007
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
3. Significant accounting policies continued
(d) Property, plant and equipment continued
Subsequent costs
The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item
if it is probable that the future economic benefits embodied within the part will flow to the group and its cost can be
measured reliably. The costs of day-to-day servicing of property, plant and equipment are recognised in profit or loss
as incurred.
Depreciation
Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of an
item of property, plant and equipment. Lease assets are depreciated over the shorter of the lease term and their
useful lives. Land is not depreciated.
The estimated useful lives for the current and comparative periods are as follows:
Buildings
15–20 years
Leasehold improvements
5 years
Plant and equipment
10–15 years
Motor vehicles
Computer equipment
5 years
3 years
Depreciation methods, useful lives and residual values are reassessed at each reporting date.
(e) Intangible assets
Goodwill
Goodwill arises on the acquisition of subsidiaries, associates and joint ventures.
Acquisitions prior to 1 August 2004
As part of its transition to AASBs, the group elected not to restate those business combinations that occurred prior to
1 August 2004. In respect of acquisitions prior to 1 August 2004, goodwill represents the amount recognised under
the group’s previous accounting framework, Australian GAAP.
Acquisitions since 1 August 2004
For acquisitions since 1 August 2004, goodwill represents the excess of the cost of the acquisition over the group’s
interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree.
Subsequent measurement
Goodwill is measured at cost less accumulated impairment losses. In respect of equity investments, the carrying
amount of goodwill is included in the carrying amount of the investment.
Research and development
Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and
understanding, is recognised in the income statement when incurred.
Nufarm Limited – Annual Report 2007
63
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
3. Significant accounting policies continued
(e) Intangible assets continued
Research and development continued
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 group has sufficient resources to complete development. The expenditure capitalised
includes the cost of materials and direct labour. Other development expenditure is recognised in profit or loss when
incurred. Capitalised development expenditure is measured at cost less accumulated amortisation and impairment losses.
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 group are measured at cost less accumulated amortisation and impairment losses. Expenditure on internally
generated goodwill and brands is expensed when incurred.
Subsequent expenditure
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific
asset to which it relates. All other expenditure is recognised in profit or loss when incurred.
Amortisation
For those intangibles with a finite life, amortisation is recognised in profit or loss on a straight-line basis over the estimated
useful lives of the assets. The estimated useful life for intangible assets with a finite life, in the current and comparative
periods, are as follows:
Capitalised development costs
5 years
Intellectual property – finite life
Over the useful life in accordance with the acquisition agreement terms
Computer software
3 to 7 years
(f) Leased assets
Leases in terms of which the group assumes substantially all of the risks and rewards of ownership are classified as
finance leases. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value
and the present value of the minimum lease payments.
Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that
asset. Other leases are operating leases and, except for investment property, the leased assets are not recognised on
the group’s balance sheet.
(g) Inventories
Inventories are measured at the lower of cost and net realisable value. 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. Net realisable value is the estimated selling price in the
ordinary course of business, less the estimated costs of completion and selling expenses.
64
Nufarm Limited – Annual Report 2007
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
3. Significant accounting policies continued
(h) Impairment
Financial assets
A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative
effect on the estimated future cash flows of that asset.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between
its carrying amount, and the present value of estimated future cash flows discounted at the original effective interest
rate. An impairment loss in respect of an available-for-sale financial asset is calculated by reference to its current fair value.
Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets
are assessed collectively in groups that share similar credit risk characteristics.
All impairment losses are recognised in profit or loss. Any cumulative loss in respect of an available-for-sale financial
asset recognised previously in equity is transferred to profit or loss.
An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss
was recognised. For financial assets measured at amortised cost and available-for-sale financial assets that are debt
securities, the reversal is recognised in profit or loss. For available-for-sale financial assets that are equity securities,
the reversal is recognised directly in equity.
Non-financial assets
The carrying amounts of the group’s non-financial assets, other than inventories and deferred tax assets, are reviewed
at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the
asset’s recoverable amount is estimated.
For goodwill and intangible assets that have indefinite lives or that are not yet available for use, the recoverable
amount is estimated at each reporting date.
An impairment loss is recognised if the carrying amount of an asset or its cash generating unit exceeds its recoverable
amount. A cash generating unit is the smallest identifiable asset group that generates cash flows that are largely
independent from other assets and groups. Impairment losses are recognised in profit or loss. Impairment losses
recognised in respect of cash generating units are allocated first to reduce the carrying amount of any goodwill
allocated to the units and then to reduce the carrying amount of other assets in the unit on a pro-rata basis.
The recoverable amount of an asset or cash generating unit is the greater of its value in use and its fair value less
costs to sell. 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.
An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised
in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists.
An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount.
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.
Nufarm Limited – Annual Report 2007
65
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
3. Significant accounting policies continued
(i) Non-current assets held for sale
Non-current assets (or disposal groups comprising assets and liabilities) that are expected to be recovered primarily
through sale rather than continuing use are classified as held for sale. Immediately before classification as held for
sale, the assets (or components of a disposal group) are remeasured in accordance with the group’s accounting policies.
Thereafter the assets (or disposal group) are measured at the lower of their carrying amount and fair value less cost to
sell. Any impairment loss on a disposal group is allocated first to goodwill, and then to the remaining assets and liabilities
on a pro-rata basis, except that no loss is allocated to inventories, financial assets, employee benefit assets and investment
property, which continue to be measured in accordance with the group’s accounting policies. Impairment losses on
initial classification as held for sale and subsequent gains or losses on remeasurement are recognised in profit or loss.
Gains are not recognised in excess of any cumulative impairment loss.
(j) Employee benefits
Defined contribution superannuation funds
Obligations for contributions to defined contribution superannuation plans are recognised as an expense in profit or
loss when they are due.
Defined benefit superannuation plans
The group’s net obligation in respect of defined benefit superannuation 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 then reduced by any unrecognised past service
costs and the fair value of any plan assets.
The discount rate is the yield at the balance sheet date on government bonds that have maturity dates approximating
the terms of the group’s obligations. The calculation is performed by a qualified actuary using the projected unit credit
method. When the calculation results in a benefit to the group, the recognised asset is limited to the net total of any
unrecognised past service costs and the present value of any future refunds from the plan or reductions in future
contributions to the fund.
When the benefits of a fund are improved, the portion of the increased benefit relating to past service by employees
is recognised in profit or loss 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 profit or loss.
All actuarial gains and losses are recognised directly in retained earnings.
Other long term employee benefits
The group’s net obligation in respect of long term employee 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
plus related on costs; that benefit is discounted to determine its present value, and the fair value of any related assets
is deducted. The discount rate is the yield at the reporting date on government bonds that have maturity dates
approximating the terms of the group’s obligations.
66
Nufarm Limited – Annual Report 2007
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
3. Significant accounting policies continued
(j) Employee benefits continued
Termination benefits
Termination benefits are recognised as an expense when the group is demonstrably committed, without a realistic
possibility of withdrawal, to a formal detailed plan to terminate employment before the normal retirement date.
Termination benefits for voluntary redundancies are recognised if the group has made an offer encouraging voluntary
redundancy, it is probable that the offer will be accepted and the number of acceptances can be estimated reliably.
Short term benefits
Liabilities for employee benefits for wages, salaries, annual leave and sick leave represent present obligations resulting
from employees’ services provided to reporting date and are calculated at undiscounted amounts based on remuneration
wage and salary rates that the group expects to pay as at reporting date including related on-costs, such as, workers
compensation insurance and payroll tax. Non-accumulating non-monetary benefits, such as medical care, housing, cars
and free or subsidised goods and services are expensed based on the net marginal cost to the group as the benefits
are taken by employees.
An accrual is recognised for the amount expected to be paid under short term cash bonus or profit sharing plans if
the group has a present legal or constructive obligation to pay this amount as a result of past service provided by the
employee and the obligation can be estimated reliably.
Share-based payment transactions
The group has a global share plan for employees whereby matching and loyalty shares are granted to employees.
The fair value of matching and loyalty shares granted is recognised as personnel expenses in the profit or loss over the
respective service period, with a corresponding increase in equity, rather than as the matching and loyalty shares are
issued. Refer note 28 for details of the global share plan.
(k) Provisions
A provision is recognised if, as a result of a past event, the group has a present legal or constructive obligation that can
be estimated reliably, 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.
A provision for restructuring is recognised when the group 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.
(l) Revenue
Goods sold
Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of
returns and allowances, trade discounts and volume rebates. Revenue is recognised when the significant risks and
rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated
costs and possible return of goods can be estimated reliably, and there is no continuing management involvement
with the goods.
Nufarm Limited – Annual Report 2007
67
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
3. Significant accounting policies continued
(m) Lease payments
Payments made under operating leases are recognised in profit or loss on a straight line basis over the term of the
lease. Lease incentives received are recognised as an integral part of the total lease expense in the income statement
and are spread over the term of the lease.
Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction
of the outstanding liability. The finance expense 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. Contingent lease payments are accounted for
by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed.
(n) Finance income and expense
Finance income comprises interest income on funds invested, dividend income, available-for-sale financial assets,
changes in the fair value of financial assets, changes in the fair value of financial assets classified as fair value through
profit or loss, foreign exchange gains, and gains on hedging instruments that are recognised in profit or loss. Interest
income is recognised as it accrues, using the effective interest method.
Dividend income is recognised on the date that the group’s right to receive payment is established.
Finance expense comprises interest expense on borrowings, unwinding of the discount on provisions, foreign currency
losses, changes in the fair value of financial assets classified as fair value through profit or loss, impairment losses
recognised on financial assets and losses on hedging instruments that are recognised in profit or loss. All borrowing
costs are recognised in profit or loss using the effective interest method.
(o) Income tax
Income tax expense comprises current and deferred tax. Income tax expense is recognised in profit or loss 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 substantially
enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred
tax is not recognised for the following temporary differences: the initial recognition of goodwill, the initial recognition
of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable
profit, and differences relating to investments in subsidiaries and jointly controlled entities to the extent that they will
probably not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be
applied to the temporary differences when they reverse, based on the laws that have been enacted or substantially
enacted at the reporting date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available
against which temporary differences can be utilised. Deferred tax assets are reviewed at each reporting date and
are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
68
Nufarm Limited – Annual Report 2007
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
3. Significant accounting policies continued
(o) Income tax continued
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 receivables/(payables) are at call.
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.
(p) Goods and services tax
Revenue, expenses and assets are recognised net of the amount of goods and services tax (GST or equivalent),
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.
Nufarm Limited – Annual Report 2007
69
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
3. Significant accounting policies continued
(p) Goods and services tax continued
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 relevant tax authorities are
classified as operating cash flows.
(q) Discontinued operations
A discontinued operation is a component of the group’s business that represents a separate major line of business
or geographical area of operations that has been disposed of or is held for sale, 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. When an operation is classified as a discontinued operation,
the comparative income statement is restated as if the operation had been discontinued from the start of the
comparative period.
(r) Earnings per share
The group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated
by dividing the profit or loss attributable to ordinary shareholders of the company by the weighted average number
of ordinary shares outstanding during the period.
Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average
number of ordinary shares outstanding for the effects of all potential dilutive ordinary shares, which comprise convertible
notes and share options granted to employees.
(s) Segment reporting
A segment is a distinguishable component of the group that is engaged either in providing related 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 group’s primary format for
reporting segment is based on geographic segments.
(t) New standards and interpretations not yet adopted
The following standards, amendments to standards and interpretations have been identified as those which may impact
the entity in the period of initial application. They are available for early adoption at 31 July 2007, but have not been
applied in preparing this financial report:
• 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
and will require additional disclosures with respect to the group’s financial instruments and share capital.
70
Nufarm Limited – Annual Report 2007
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
3. Significant accounting policies continued
(t) New standards and interpretations not yet adopted continued
• 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 and is expected to only impact disclosures contained within the consolidated
financial report.
• AASB 8 Operating Segments replaces the presentation requirements of segment reporting in AASB 114 Segment
Reporting. AASB 8 is applicable for annual reporting periods beginning on or after 1 January 2009 and is not expected
to have an impact on the financial results of the company and the group as the standard is only concerned with
disclosures.
• AASB 2007-3 Amendments to Australian Accounting Standards arising from AASB 8 makes amendments to AASB 5
Non-current Assets Held for Sale and Discontinued Operations, AASB 6 Exploration for and Evaluation of Mineral
Resources, AASB 102 Inventories, AASB 107 Cash Flow Statements, AASB 119 Employee Benefits, AASB 127
Consolidated and Separate Financial Statements, AASB 134 Interim Financial Reporting, AASB 136 Impairment
of Assets, AASB 1023 General Insurance Contracts and AASB 1038 Life Insurance Contracts. AASB 2007-3 is
applicable for annual reporting periods beginning on or after 1 January 2009 and must be adopted in conjunction
with AASB 8 Operating Segments. This standard is only expected to impact disclosures contained within the
financial report.
• Interpretation 10 Interim Financial Reporting and Impairment prohibits the reversal of an impairment loss recognised
in a previous interim period in respect of goodwill, an investment in an equity instrument or a financial asset carried
at cost. Interpretation 10 will become mandatory for the group’s 2008 financial statements, and will apply to goodwill,
investments in equity instruments and financial assets carried at cost prospectively from the date that the group first
applied the measurement criteria of AASB 136 and AASB 139 respectively. The adoption of Interpretation 10 will not
impact the group’s financial statements as no impairment losses have been recorded to date.
• Interpretation 11 AASB 2 Share-based payment – Group and Treasury Share Transactions addresses the classification
of a share-based payment transaction (as equity or cash settled), in which equity instruments of the parent or another
group entity are transferred, in the financial statements of the entity receiving the services. Interpretation 11 will
become mandatory for the group’s 2008 financial report. Interpretation 11 is not expected to have any impact
on the financial report. The potential effect of the Interpretation on the company’s financial report has not yet
been determined.
• AASB 2007-1 Amendments to Australian Accounting Standards arising from AASB Interpretation 11 amends AASB 2
Share-based Payments to insert the transitional provisions of IFRS 2, previously contained in AASB 1 First-time
Adoption of Australian Equivalents to International Financial Reporting Standards. AASB 2007-1 is applicable for
annual reporting periods beginning on or after 1 March 2007 and is not expected to have any impact on the
consolidated financial report. The potential impact on the company has not yet been determined.
• Revised IAS 1 has been issued by the IASB but not by the AASB, and for the purposes of compliance is a standard
on issue but not yet adopted. The impact of revised IAS 1 is not reasonably estimable at the reporting date.
Nufarm Limited – Annual Report 2007
71
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
4. Determination of fair values
A number of the group’s accounting policies and disclosures require the determination of fair value, for both financial
and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes
based on the following methods. Where applicable, further information about the assumptions made in determining
fair values is disclosed in the notes specific to that asset or liability.
(i) Property, plant and equipment
The fair value of property, plant and equipment recognised as a result of a business combination is based on market
values. The market value of property is the estimated amount for which a property could be exchanged on the date
of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein
the parties had each acted knowledgeably, prudently and without compulsion. The market value of items of plant,
equipment, fixtures and fittings is based on the quoted market prices for similar items.
(ii) Intangibles assets
The fair value of patents and trademarks acquired in a business combination is based on the discounted estimated
royalty payments that have been avoided as a result of the patent or trademark being owned. The fair value of other
intangible assets is based on the discounted cash flows expected to be derived from the use and eventual sale of
the assets.
(iii) Inventories
The fair value of inventory acquired in a business combination is determined based on its estimated selling price in the
ordinary course of business less the estimated costs of completion and sale, and a reasonable profit margin based on
effort required to complete and sell the inventory.
(iv) Investments in equity securities
The fair value of financial assets at fair value through profit or loss, held-to-maturity investments and available-for-sale
financial assets is determined by reference to their quoted bid price at the reporting date. The fair value of held-to-maturity
investments is determined for disclosure purposes only.
(v) Trade and other receivables
The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the
market rate of interest at the reporting date. A provision for impairment of trade receivables 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 low bad debts write-offs.
72
Nufarm Limited – Annual Report 2007
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
4. Determination of fair values continued
(vi) Derivatives
The fair value of forward exchange contracts is based on their listed market price, if available. If a listed market price
is not available, then fair value is estimated by discounting the difference between the contractual forward price and
the current forward price for the residual maturity of the contract using a risk-free interest rate (based on government
bonds).
The fair value of interest rate swaps is based on broker quotes. Those quotes are tested for reasonableness by discounting
estimated future cash flows based on the terms and maturity of each contract and using market interest rates for a
similar instrument at the measurement date.
(vii) Non-derivative financial liabilities
Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal
and interest cash flows, discounted at the market rate of interest at the reporting date. For finance leases, the market
rate of interest is determined by reference to similar lease agreements.
(viii) Financial guarantees
For financial guarantee contract liabilities, the fair value at initial recognition is determined using a probability weighted
discounted cash flow approach. This method takes into account the probability of default by the guaranteed party over
the term of the contract, the loss given default (being the proportion of the exposure that is not expected to be recovered
in the event of default) and exposure at default (being the maximum loss at time of default).
5. Segment reporting
Segment information is presented in respect of the group’s geographic segments. This the primary format of segment
reporting based on the group’s management and internal reporting structure. The group 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,
corporate assets and expenses and income tax assets and liabilities. Inter-segment pricing is determined on an arm’s
length basis. Segment capital expenditure is the total cost incurred during the period to acquire property, plant and
equipment, and intangible assets other than goodwill.
Nufarm Limited – Annual Report 2007
73
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
5. Segment reporting continued
Geographic segments 2007
Revenue
Total segment revenue
Results
Segment result
Unallocated corporate expenses
Results 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 (net of tax)
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
Australasia
$000
Europe
$000
Americas
$000
Consolidated
$000
685,043
439,615
639,726
1,764,384
103,731
37,325
80,150
797,017
9,407
556,272
13,207
834,240
352
276,168
154,006
455,867
56,533
15,983
2,742
26,989
13,114
5,044
265,391
4,495
831
221,206
(26,354)
194,852
(54,434)
8,056
(41,151)
41,840
149,163
2,187,529
22,966
228,416
2,438,911
886,041
523,719
1,409,760
348,913
33,592
8,617
Capital expenditure includes the goodwill and intangibles resulting from the Agripec acquisition. These are included in
the Americas region.
74
Nufarm Limited – Annual Report 2007
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
5. Segment reporting continued
Geographic segments 2006
Revenue
Total segment revenue
Results
Segment result
Unallocated corporate expenses
Results 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
Australasia
$000
Europe
$000
Americas
$000
Consolidated
$000
749,558
392,947
534,241
1,676,746
122,023
35,056
48,058
731,226
8,784
495,859
14,168
331,334
201,934
266,551
132,173
158,188
74,883
14,855
3,179
17,286
14,562
6,081
50,698
4,409
527
205,137
(28,812)
176,325
(49,246)
10,545
(34,459)
14,634
117,799
1,558,419
224,886
136,643
1,919,948
556,912
660,847
1,217,759
142,867
33,826
9,787
Nufarm Limited – Annual Report 2007
75
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
6. Items of material income and expense
The following material items, net of tax,were
included in the period result:
Gain on sale of businesses
Agripec impairment loss on trade receivables
Other items, including restructuring
CACI prior period tax
Material items
7. Other income
Dividends from wholly owned controlled entities
Management fees from controlled entities
Sundry income
Total other income
8. Other expenses
The following expenses were included
in the period result:
Depreciation and amortisation
Impairment gain/(loss) on trade receivables
Movement in stock obsolescence provision
(increase)/decrease
Restructuring costs
9. Personnel expenses
Wages and salaries
Other associated personnel expenses
Contributions to defined contribution
superannuation funds
Expenses related to defined benefit
superannuation funds
Increase in liability for annual leave
Increase in liability for long-service leave
Consolidated
2007
$000
2006
$000
35,547
(4,606)
(3,006)
–
27,935
8,415
–
(8,368)
(3,933)
(3,886)
Consolidated
Company
2007
$000
–
–
8,567
8,567
2006
$000
–
–
9,914
9,914
2007
$000
53,164
6,194
707
60,065
2006
$000
45,861
1,733
209
47,803
(42,209)
251
(43,613)
(823)
(138)
(412)
631
(8,990)
(595)
–
–
–
(319)
–
–
–
(146,156)
(26,424)
(151,167)
(26,064)
(4,474)
(333)
(2,065)
(188)
(6,133)
(5,637)
(604)
(311)
(3,122)
(4,513)
(1,891)
(188,239)
(1,804)
(3,596)
(1,835)
(190,103)
–
(119)
–
(5,530)
–
(59)
(21)
(2,644)
76
Nufarm Limited – Annual Report 2007
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
10. 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
Consolidated
Company
2007
$000
–
5,336
5,336
–
(54,666)
(5,103)
(1)
(59,770)
2006
$000
–
7,995
7,995
–
(52,756)
(4,476)
(9)
(57,241)
2007
$000
4,485
2,316
6,801
(8,727)
(9)
–
–
(8,736)
2006
$000
14,023
6,192
20,215
(21,695)
(101)
–
–
(21,796)
Net financing costs
(54,434)
(49,246)
(1,935)
(1,581)
11. 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
73,187
306
73,493
(10,135)
(1,341)
(12,427)
(23,903)
41,499
2,957
44,456
4,142
585
(7,434)
(2,707)
1,428
1
1,429
19
–
–
19
2,940
(120)
2,820
620
–
–
620
Total income tax expense in income statement
49,590
41,749
1,448
3,440
Attributable to:
Continuing operations
Discontinued operations
41,151
8,439
49,590
34,459
7,290
41,749
1,448
–
1,448
2,710
730
3,440
Nufarm Limited – Annual Report 2007
77
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
11. Income tax expense continued
Numerical reconciliation between tax expense
and pre-tax net profit
Profit before tax – continuing operations
Profit before tax – discontinued operations
Profit before tax
Income tax using the local corporate tax rate of 30 per cent
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
Income tax expense on pre-tax net profit
Income tax recognised directly in equity
Relating to actuarial gains on defined benefit plans
Relating to cost of issuing equity
NSS distribution
Consolidated
Company
2007
$000
2006
$000
2007
$000
2006
$000
148,474
50,279
198,753
137,624
21,924
159,548
64,562
–
64,562
56,846
7,354
64,200
59,626
47,864
19,369
19,260
3,302
1,171
(1,064)
(3,489)
(9,602)
(660)
49,284
306
49,590
1,157
(1,928)
(2,700)
(3,471)
2,718
983
585
(4,383)
(8,078)
(897)
38,792
2,957
41,749
(29)
–
–
(29)
(139)
101
–
–
(17,884)
–
1,447
1
1,448
–
–
–
–
190
136
–
–
(16,026)
–
3,560
(120)
3,440
–
–
–
–
12. Discontinued operations
Effective 31 July 2007, the group sold its stake in the Nufarm Coogee joint venture, which owns and operates two
industrial chlor alkali plants in Western Australia.
In the prior period, the group sold the Nuturf turf/specialty business, the French CACI industrial chemical business and
the New Zealand based animal health business.
78
Nufarm Limited – Annual Report 2007
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
12. Discontinued operations continued
Results of discontinued operation
Revenue
Expenses
Results from operating activities
Income tax expense
Results from operating activities, net of income tax
Gain on sale of discontinued operation
Income tax expense
Gain on sale of discontinued operations after tax
Profit and loss of discontinued operations
(per income statement)
Cash flows from discontinuing operations
Operating
Investing
Financing
Net cash flows attributable to discontinuing operations
Effect of the disposals on the financial
position of the group
Receivables
Inventories
Property, plant and equipment
Intangibles
Deferred tax asset
Trade payables
Employee benefits
Income tax payable
Finance lease liability
Deferred tax liability
Net identifiable assets and liabilities
Consideration received, satisfied in cash
Deferred consideration
Cash disposed of
Net cash (inflow)
Other costs associated with disposal
Gain on sale of discontinued operations before tax
Consolidated
2007
$000
2006
$000
29,806
(16,703)
13,103
(3,938)
9,165
37,176
(4,501)
32,675
67,777
(53,303)
14,474
(4,322)
10,152
7,450
(2,968)
4,482
41,840
14,634
9,165
(384)
(934)
7,847
2,824
403
13,917
–
3,914
(1,449)
(742)
(5,285)
–
(328)
13,254
51,000
–
(489)
50,511
(81)
37,176
12,809
(3,892)
(3,510)
5,407
2,330
3,317
19,735
499
1,948
(2,640)
(731)
–
(881)
(397)
23,180
8,138
25,061
(418)
32,781
(2,151)
7,450
Nufarm Limited – Annual Report 2007
79
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
13. Non-current assets held for sale
There were no assets held for sale at the end of
the financial period.
The prior year included the chlor alkali business
and the land and buildings at the Granollers
site in Spain ($1,137,076).
Assets classified as held for sale
Cash and cash equivalents
Trade and other receivables
Inventories
Property, plant and equipment
Deferred tax asset
Liabilities classified as held for sale
Trade and other payables
Employee entitlements
Provision for tax
Deferred tax liability
14. Acquisition of subsidiaries
Consolidated
2007
$000
2006
$000
–
–
–
–
–
–
–
–
–
–
–
1,423
3,510
523
14,681
3,772
23,909
7,881
816
4,175
553
13,425
Acquisitions during the year include the Agrosol crop protection business in Italy for 6.4 million (19 October 2006),
and the remaining 50.1 per cent of Agripec Quimica e Farmaceutica SA (1 June 2007), a crop protection company
based in Brazil. Agripec had previously been accounted for as an equity investment.
In the period to 31 July 2007, these businesses contributed profits of $11,427,736 to the consolidated group after tax
profit. If the above acquisitions had occurred on 1 August 2006, their full-year contribution to group revenues would
have been $306,151,363 and to the consolidated entity’s profit after tax would have been $25,984,871.
80
Nufarm Limited – Annual Report 2007
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
14. Acquisition of subsidiaries continued
Recognised
values
$000
Fair value
adjustments
$000
Carrying
amounts
$000
Acquiree’s net assets at acquisition date
50,540
150,586
41,613
21,384
14,842
37,290
11,707
(88,927)
(583)
(34,585)
(16,714)
187,153
Cash and cash equivalents
Receivables
Inventory
Property, plant and equipment
Intangibles
Deferred taxes
Other assets
Trade and other payables
Employee benefits
Interest bearing loans and borrowings
Other liabilities
Net identifiable assets and liabilities
Reversal of equity investment
Acquisition costs
Identifiable intangibles (registrations and trademarks) acquired on acquisition
Goodwill on acquisition
Consideration satisfied in cash
Deferred consideration at balance date
Cash (acquired)
Net cash outflow/(inflow)
2007
–
(448)
1,209
6,451
(29)
–
–
–
(19)
–
(5,488)
1,676
50,540
150,138
42,822
27,835
14,813
37,290
11,707
(88,927)
(602)
(34,585)
(22,202)
188,829
(216,331)
(570)
128,488
128,768
229,184
(218,750)
(50,540)
(40,106)
Pre-acquisition carrying values were determined based on applicable accounting standards immediately before the
acquisition. The value of assets, liabilities and contingent liabilities recognised on acquisition are their estimated fair
values (see note 4 for methods used in determining fair values).
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 assets at
the date of acquisition.
Acquisitions during the prior year include: the remaining 50 per cent of Nugrain Pty Ltd, the remaining 50 per cent of
Access Genetics Ltd, the Agrogen and FADA crop protection businesses in Colombia, the Nutrihealth business and the
Dovuro business.
Nufarm Limited – Annual Report 2007
81
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
14. Acquisition of subsidiaries continued
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 at balance date
Cash (acquired)
Net cash outflow
15. 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
Recognised
values
$000
Fair value
adjustments
$000
2006
Carrying
amounts
$000
145
10,682
7,411
3,142
2,461
(9,415)
(74)
(175)
(8,892)
5,285
–
–
702
–
–
–
–
–
–
702
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
Consolidated
Company
2007
$000
8,704
83,673
92,377
(12,716)
2006
$000
12,483
38,786
51,269
(19,940)
2007
$000
15,034
–
15,034
(2,667)
2006
$000
10,739
–
10,739
(23,574)
79,661
31,329
12,367
(12,835)
82
Nufarm Limited – Annual Report 2007
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
16. Trade and other receivables
Consolidated
Company
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
Other receivables
Proceeds receivable from sale of businesses
Provision for non-collectibility of sale proceeds
Total trade and other receivables
17. Inventories
Raw materials
Work in progress
Finished goods
Provision for obsolescence of finished goods
Total inventories
2007
$000
2006
$000
666,617
(21,806)
644,811
–
–
375
57,338
15,114
3,210
67,061
787,909
344
5,909
12,387
(3,304)
15,336
803,245
112,473
15,714
350,971
479,158
(1,754)
477,404
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
541,902
82,421
21,563
332,177
436,161
(4,138)
432,023
2007
$000
4,877
–
4,877
50,390
177,256
–
–
–
–
2,659
235,182
–
–
–
–
–
235,182
–
271
14,459
14,730
(9)
14,721
2006
$000
8,379
–
8,379
228,937
170,618
–
–
18,048
25,061
1,069
452,112
–
–
–
–
–
452,112
–
323
13,480
13,803
(205)
13,598
18. Current tax assets and liabilities
The current tax asset for the group of $27,347,565 (2006: $6,171,517) and for the company of $11,650,621 (2006:
$376,750) 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 group of $23,955,941 (2006:
$9,999,276) and the company of $14,096,247 (2006: $8,198,985) 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.
Nufarm Limited – Annual Report 2007
83
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
19. Investments accounted for using the equity method
The group accounts for investments in associates using the equity method. Effective 1 June 2007, Nufarm acquired
the remaining 50.1 per cent of Agripec. Agripec’s results have been equity accounted from August 2006 through to
May 2007, and are consolidated in the group results for the months of June and July 2007.
The group had the following significant investments in associates during the year:
Agripec Quimica e Farmaceutica SA Crop protection company
Bayer CropScience Nufarm Limited
Agricultural chemicals
manufacturer
Agricultural chemicals
manufacturer
Excel Crop Care Ltd
Country
Balance date
of associate
Ownership and
voting interest
2007
2006
Brazil
UK
31.12.2006
31.12.2006
100.0%
25%
49.9%
25%
India
31.3.2007
14.69%
14.69%
The 14.69 per cent 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 per cent of the shares of the company.
The relationship also extends to manufacturing and marketing collaborations.
Financial summary of material associates
2007
Bayer CropScience Nufarm Limited
Excel Crop Care Ltd
2006
Agripec Quimica e Farmaceutica SA
Bayer CropScience Nufarm Limited
Excel Crop Care Ltd
Revenues
(100%)
Profit
after tax
(100%)
Total
assets
(100%)
Total
liabilities
(100%)
Net assets
as reported
by
associates
(100%)
Share of
associate’s
net assets
equity
accounted
92,556
125,821
218,377
(3,876)
5,584
1,708
105,264
86,311
191,575
39,059
55,669
94,728
66,205
30,642
96,847
16,551
4,501
21,052
229,282
86,289
123,777
439,348
17,146
2,130
6,898
26,174
313,088
77,970
74,983
466,041
120,776
17,167
48,993
186,936
192,312
60,803
25,990
279,105
95,964
15,201
3,818
114,983
84
Nufarm Limited – Annual Report 2007
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
19. Investments accounted for using the equity method continued
Consolidated
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 profit by major associate
Agripec Quimica e Farmaceutica SA (to 31 May 2007)
Bayer CropScience Nufarm Ltd
Excel Crop Care Ltd
Others
Share of net profits of associates
20. Other investments
2007
$000
2006
$000
–
12,640
8,341
1,985
22,966
7,799
(969)
788
438
8,056
201,631
13,998
7,724
1,533
224,886
8,556
863
1,013
113
10,545
Investment in controlled entities
Balance at the beginning of the year
New investments during the year
Balance at the end of the year
Investment in other companies (at cost)
Balance at the beginning of the year
Exchange adjustment
Disposals
Reclassification to equity investment
Reclassification to other receivables
Balance at the end of the year
Other investments
Share purchase schemes
Balance at the beginning of the year
Exchange adjustment
Movements in investments during the year
Loans repaid during the year
Balance at the end of the year
Total other investments
Consolidated
Company
2007
$000
2006
$000
2007
$000
2006
$000
–
–
–
233
(3)
(167)
(63)
–
–
270
–
1
–
271
271
–
–
–
1,013
36
–
–
(816)
233
930
5
100
(765)
270
503
247,213
60,001
307,214
247,213
–
247,213
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
307,214
–
–
–
–
–
247,213
Nufarm Limited – Annual Report 2007
85
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
21. Deferred tax assets and liabilities
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
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)
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)
Assets
Liabilities
Net
2007
$000
15,731
8,829
–
11,917
3,977
17,576
43,970
102,000
(8,423)
93,577
2006
$000
12,403
6,370
–
14,543
3,872
1,505
28,458
67,151
(10,011)
57,140
2007
$000
(11,376)
(22,296)
–
–
(69)
(9,575)
–
(43,316)
8,423
(34,893)
2006
$000
(12,780)
(18,991)
(41)
–
(45)
(6,242)
–
(38,099)
10,011
(28,088)
2007
$000
4,355
(13,467)
–
11,917
3,908
8,001
43,970
58,684
–
58,684
Assets
Liabilities
Net
2007
$000
–
–
–
369
9
701
–
1,079
–
1,079
2006
$000
2
–
–
121
67
947
–
1,137
–
1,137
2007
$000
2006
$000
(2)
–
–
–
–
–
–
(2)
–
(2)
(52)
(4)
–
–
–
–
–
(56)
–
(56)
2007
$000
(2)
–
–
369
9
701
–
1,077
–
1,077
2006
$000
(377)
(12,621)
(41)
14,543
3,827
(4,737)
28,458
29,052
–
29,052
2006
$000
(50)
(4)
–
121
67
947
–
1,081
–
1,081
86
Nufarm Limited – Annual Report 2007
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
21. Deferred tax assets and liabilities continued
Movement in temporary differences during the year
Consolidated 2007
Property, plant and equipment
Intangible assets
Other investments
Employee benefits
Provisions
Other items
Tax value of losses carried forward
Consolidated 2006
Property, plant and equipment
Intangible assets
Other investments
Employee benefits
Provisions
Other items
Tax value of losses carried forward
Company 2007
Property, plant and equipment
Intangible assets
Employee benefits
Provisions
Other items
Company 2006
Property, plant and equipment
Intangible assets
Other investments
Employee benefits
Provisions
Other items
Balance Recognised Recognised
in income
31.07.06
$000
$000
Other
Currency
in equity adjustment movement
$000
$000
$000
(377)
(12,621)
(41)
14,543
3,827
(4,737)
28,458
29,052
3,785
(182)
41
(1,472)
(291)
7,042
16,766
25,689
–
–
–
(1,157)
–
1,928
–
771
555
1,283
–
(255)
(127)
81
(985)
552
392
(1,947)
–
258
499
3,687
(269)
2,620
Balance Recognised Recognised
in income
31.07.05
$000
$000
Other
Currency
in equity adjustment movement
$000
$000
$000
1,989
(5,215)
(177)
14,349
3,089
(3,083)
24,403
35,355
1,068
(6,842)
136
(177)
935
(2,045)
3,854
(3,071)
–
–
–
90
–
–
–
90
(371)
(252)
–
234
68
(199)
798
278
(3,063)
(312)
–
47
(265)
590
(597)
(3,600)
Balance Recognised Recognised
in income
31.07.06
$000
$000
Other
Currency
in equity adjustment movement
$000
$000
$000
(50)
(4)
121
67
947
1,081
53
4
214
(59)
(230)
(18)
–
–
–
–
–
–
(5)
–
34
1
(16)
14
–
–
–
–
–
–
Balance Recognised Recognised
in income
31.07.05
$000
$000
Other
Currency
in equity adjustment movement
$000
$000
$000
819
–
(120)
190
155
654
1,698
(786)
(4)
120
(50)
(72)
293
(499)
–
–
–
–
–
–
–
(83)
–
–
(19)
(16)
–
(118)
–
–
–
–
–
–
–
Balance
31.07.07
$000
4,355
(13,467)
–
11,917
3,908
8,001
43,970
58,684
Balance
31.07.06
$000
(377)
(12,621)
(41)
14,543
3,827
(4,737)
28,458
29,052
Balance
31.07.07
$000
(2)
–
369
9
701
1,077
Balance
31.07.06
$000
(50)
(4)
–
121
67
947
1,081
Nufarm Limited – Annual Report 2007
87
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
21. Deferred tax assets and liabilities continued
At 31 July 2007, a deferred tax liability of $23,789,596 (2006: $9,813,599) 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:
Deductible temporary differences
Tax losses
Consolidated
Company
2007
$000
–
–
–
2006
$000
1,292
2,878
4,170
2007
$000
2006
$000
–
–
–
–
–
–
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.
22. Other non-current assets
Balance at the beginning of the year
Offset against borrowings on initial application
of AASB 132 and AASB 139
Other
Hedge asset
Balance at the end of the year
Consolidated
Company
2007
$000
2006
$000
–
1,567
–
9
7,216
7,225
(1,567)
–
–
–
2007
$000
2006
$000
–
–
–
–
–
–
–
–
–
–
The hedge asset is the market value of the interest rate cap relating to the NSS distribution base rate.
88
Nufarm Limited – Annual Report 2007
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
23. Property, plant and equipment
Consolidated
Cost
Balance at 1 August 2006
Additions
Additions through business combinations
Disposals
Other transfers
Exchange adjustment
Balance at 31 July 2007
Depreciation and impairment losses
Balance at 1 August 2006
Depreciation charge for the year
Additions through business combinations
Disposals
Other transfers
Exchange adjustment
Balance at 31 July 2007
Land
and
Leased
plant and
Plant and
buildings machinery machinery
$000
$000
$000
151,790
1,080
22,408
(846)
15,466
(4,742)
185,156
(46,958)
(4,952)
(3,274)
340
(329)
1,587
(53,586)
440,619
10,226
9,647
(8,501)
30,389
(10,535)
471,845
(278,945)
(28,650)
(3,781)
8,692
162
5,118
(297,404)
2007
1,536
360
–
–
(548)
13
1,361
(776)
(153)
167
–
167
(35)
(630)
Capital
work in
progress
$000
18,472
51,565
2,668
–
(45,307)
(363)
27,035
–
–
–
–
–
–
–
Total
$000
612,417
63,231
34,723
(9,347)
–
(15,627)
685,397
(326,679)
(33,755)
(6,888)
9,032
–
6,670
(351,620)
Net property, plant and equipment at 31 July 2007
131,570
174,441
731
27,035
333,777
Nufarm Limited – Annual Report 2007
89
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
23. Property, plant and equipment continued
Land
and
Leased
plant and
Plant and
buildings machinery machinery
$000
$000
$000
Consolidated
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)
2006
5,078
–
527
–
(4,350)
–
95
186
1,536
(2,366)
(186)
(156)
(268)
–
2,304
–
(28)
(76)
(776)
Capital
work in
progress
$000
23,584
31,873
–
(464)
–
(1,616)
(35,046)
141
18,472
–
–
–
–
–
–
–
–
–
–
Total
$000
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
Assets pledged as security for finance leases $0.7 million (2006: $0.8 million).
There were no impairment losses in the consolidated entity in the current financial year or the comparative year.
90
Nufarm Limited – Annual Report 2007
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
23. Property, plant and equipment continued
Land
and
Leased
plant and
Plant and
buildings machinery machinery
$000
$000
$000
Company
Cost
Balance at 1 August 2006
Additions
Disposals
Other transfers
Exchange adjustment
Balance at 31 July 2007
Depreciation and impairment losses
Balance at 1 August 2006
Depreciation charge for the year
Disposals
Other transfers
Exchange adjustment
Balance at 31 July 2007
2,209
564
(6)
131
235
3,133
(198)
(74)
6
13
(22)
(275)
3,178
550
(549)
187
338
3,704
(1,583)
(511)
434
(13)
(173)
(1,846)
Net property, plant and equipment at 31 July 2007
2,858
1,858
2007
–
–
–
–
–
–
–
–
–
–
–
–
–
Land
and
Leased
plant and
Plant and
buildings machinery machinery
$000
$000
$000
Company
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)
Net property, plant and equipment at 31 July 2006
2,011
1,595
2006
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Capital
work in
progress
$000
286
319
–
(318)
31
318
–
–
–
–
–
–
Total
$000
5,673
1,433
(555)
–
604
7,155
(1,781)
(585)
440
–
(195)
(2,121)
318
5,034
Capital
work in
progress
$000
3,053
1,676
–
–
(4,134)
(309)
286
–
–
–
–
–
–
–
Total
$000
29,714
2,416
(136)
(23,320)
–
(3,001)
5,673
(9,021)
(317)
(1,151)
81
7,586
1,041
(1,781)
286
3,892
There were no impairment losses in the company in the current financial year or the comparative year.
Nufarm Limited – Annual Report 2007
91
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
24. Intangible assets
Consolidated
Cost
Balance at 1 August 2006
Additions
Additions through business
combinations
Disposals
Other transfers
Exchange adjustment
Balance at 31 July 2007
Goodwill
$000
Indefinite
life
$000
161,945
376
150,627
13,158
128,768
–
15,625
(7,426)
299,288
128,488
(5)
(431)
(6,087)
285,750
Amortisation and impairment losses
Balance at 1 August 2006
Amortisation charge for the year
Additions through business
combinations
Disposals
Other transfers
Exchange adjustment
Balance at 31 July 2007
(61,917)
–
(10,606)
–
–
–
(15,194)
2,863
(74,248)
–
1
–
342
(10,263)
Intellectual Property
Capitalised
Definite development
costs
$000
life
$000
Computer
software
$000
Total
$000
2007
45,356
10
10,682
–
839
(1,014)
55,873
(21,063)
(3,448)
–
–
(1,004)
498
(25,017)
34,921
16,062
6,512
(1,582)
–
(1,207)
54,706
(11,297)
(2,585)
–
793
67
456
(12,566)
16,544
868
409,393
30,474
82
(74)
131
(421)
17,130
274,532
(1,661)
16,164
(16,155)
712,747
(8,104)
(2,162)
(112,987)
(8,195)
(55)
54
(33)
368
(9,932)
(55)
848
(16,164)
4,527
(132,026)
Intangibles carrying amount
at 31 July 2007
225,040
275,487
30,856
42,140
7,198
580,721
92
Nufarm Limited – Annual Report 2007
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
24. Intangible assets continued
Intellectual Property
Capitalised
Definite development
costs
$000
life
$000
Computer
software
$000
Total
$000
Consolidated
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
Goodwill
$000
Indefinite
life
$000
130,360
–
94,928
34,513
28,581
–
–
1,473
1,531
161,945
19,808
–
–
428
950
150,627
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
(60,945)
–
–
–
–
63
(1,035)
(61,917)
(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
302,710
51,251
–
(349)
(830)
(748)
251
16,544
(7,797)
(1,896)
(17)
210
827
748
(179)
(8,104)
49,539
(349)
(830)
1,490
5,582
409,393
(101,179)
(8,511)
(17)
210
827
(1,490)
(2,827)
(112,987)
Intangibles carrying amount
at 31 July 2006
100,028
140,021
24,293
23,624
8,440
296,406
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, they will be renewed by the relevant
regulatory authorities and the underlying products will continue to be commercialised and available for sale in the
foreseeable future. The company will 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.
Nufarm Limited – Annual Report 2007
93
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
24. Intangible assets continued
The group 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 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.
The most significant item in goodwill and indefinite life intangibles relates to the Agripec business and amounts to
$250 million. The balance of goodwill and indefinite life intangibles is spread across multiple CGUs, with no individual
amount being material relative to the total intangibles at balance date.
For the impairment testing of these assets, the carrying amount of the asset is compared to its recoverable amount at
a CGU level. The group 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 per cent. The 10 per cent growth cap is
the average growth achieved by the group in recent years. The cash flow is then discounted to a present value using
a discount rate of 11.4 per cent. At 31 July 2007, the recoverable amount exceeded the carrying amount for all CGUs.
Intellectual Property
Capitalised
Definite development
costs
$000
life
$000
Computer
software
$000
Total
$000
2007
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
66
16
2
84
(49)
(11)
(60)
66
16
2
84
(49)
(11)
(60)
24
24
Goodwill
$000
Indefinite
life
$000
Company
Cost
Balance at 1 August 2006
Additions
Exchange adjustment
Balance at 31 July 2007
Amortisation and impairment losses
Balance at 1 August 2006
Amortisation charge for the year
Balance at 31 July 2007
Intangibles carrying amount
at 31 July 2007
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
94
Nufarm Limited – Annual Report 2007
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
24. Intangible assets continued
Goodwill
$000
Indefinite
life
$000
Intellectual Property
Capitalised
Definite development
costs
$000
life
$000
Computer
software
$000
Total
$000
Company
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
25. 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
Payable in respect of Agripec acquisition
Payables due to associated entities
Hedge payables
Securitisation payables
Total payables
2006
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
997
(830)
(101)
66
(957)
(17)
828
97
(49)
997
(830)
(101)
66
(957)
(17)
828
97
(49)
17
17
–
–
–
–
–
–
–
–
–
–
Consolidated
Company
2007
$000
2006
$000
2007
$000
2006
$000
386,950
–
–
218,750
961
2,274
203,401
812,336
287,031
–
–
–
850
–
186,881
474,762
8,310
4,228
106,339
–
–
340
–
119,217
9,253
19,396
33,708
–
–
–
–
62,357
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. Amount that are to be collected on their behalf
are included as part of trade receivables. Refer note 16.
Nufarm Limited – Annual Report 2007
95
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
26 . Interest-bearing loans and borrowings
This note provides information about the contractual
terms of the group’s and the company’s
interest-bearing loans and borrowings.
Current liabilities
Bank loans – unsecured
Subordinated loans from controlled entities
Capital notes
Finance lease liabilities – secured
Non-current liabilities
Bank loans – unsecured
Other loans – unsecured
Finance lease liabilities – secured
2007
Financing facilities
The group has access to the following facilities
with a number of financial institutions.
Bank loan facilities
Other facilities
Receivables securitisation-type facilities
Total financing facilities
2006
Bank loan facilities
Other facilities
Subordinated debt facility
Receivables securitisation-type facilities
Total financing facilities
Consolidated
Company
2007
$000
2006
$000
2007
$000
2006
$000
359,662
–
–
399
360,061
313,898
–
181,649
260
495,807
90,955
854
283
92,092
106,539
248
225
107,012
–
–
–
–
–
–
–
–
–
–
190,258
–
–
190,258
–
–
–
–
Consolidated
Company
Accessible
$000
Utilised
$000
Accessible
$000
Utilised
$000
1,266,860
208
203,401
1,470,469
463,333
208
203,401
666,942
931,353
248
181,649
227,800
1,341,050
440,377
248
181,649
186,881
809,155
2,667
–
–
2,667
23,574
–
–
–
23,574
2,667
–
–
2,667
23,574
–
–
–
23,574
96
Nufarm Limited – Annual Report 2007
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
26 . Interest-bearing loans and borrowings continued
Financing arrangements
Capital notes
The capital notes, with a face value of NZD$225,000,000 (2006: NZD$225,000,000), were repaid on 24 November 2006.
The capital notes were repaid from the proceeds of the Nufarm Step-up Securities (see note 30).
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 36) are in excess of
their related borrowings.
Repayment of borrowings (excluding finance leases)
Period ending 31 July, 2007
Period ending 31 July, 2008
Period ending 31 July, 2009
Period ending 31 July, 2010
No specified repayment date
Consolidated
Company
2007
$000
–
372,661
62,748
27,924
208
2006
$000
515,730
44,847
61,692
–
248
2007
$000
2006
$000
–
–
–
–
–
–
–
–
–
–
The obligations with no specified repayment date are repayable upon certain contingent events, which the directors
believe will not occur in the foreseeable future.
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
Consolidated
Company
2007
$000
452
302
19
773
(91)
682
2006
$000
280
200
42
522
(37)
485
2007
$000
2006
$000
–
–
–
–
–
–
–
–
–
–
–
–
Finance lease liabilities are secured over the relevant leased plant.
Nufarm Limited – Annual Report 2007
97
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
26 . Interest-bearing loans and borrowings continued
Average interest rates
Capital notes coupon
Nufarm Step-up Securities
Bank loans
Other loans
Subordinated loans from controlled entities
Finance lease liabilities – secured
27. 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 fund obligations
Liability for long-service leave
Total employee benefits
Consolidated
Company
2007
%
2006
%
2007
%
2006
%
–
8.35
6.6
3.0
–
13.2
8.6
–
5.2
3.0
–
7.8
–
–
–
–
–
–
–
–
–
–
9.2
–
$000
$000
$000
$000
15,328
15,328
14,389
14,389
8,440
50,847
(39,732)
19,555
12,187
31,742
47,070
8,543
54,044
(35,477)
27,110
11,628
38,738
53,127
317
317
–
–
–
–
52
52
369
358
358
–
–
–
–
31
31
389
The consolidated entity makes contributions to defined benefit pension funds, in the UK, Holland, France and Indonesia,
that provide defined benefit amounts for employees upon retirement. The company has no defined benefit pension funds.
Historical information
Present value of defined benefit obligation
Fair value of plan assets
Surplus/(deficit)
Experience adjustments arising on plan liabilities
Experience adjustments arising on plan assets
Consolidated
2007
$000
(59,287)
39,732
(19,555)
321
1,687
2006
$000
(62,587)
35,477
(27,110)
961
586
2005
$000
(57,881)
30,534
(27,347)
3,640
4,086
2004
$000
(56,466)
27,693
(28,773)
58
(433)
98
Nufarm Limited – Annual Report 2007
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
27. Employee benefits continued
Changes in the present value of the defined benefit
obligation are as follows:
Opening defined benefit obligation
Indonesia defined benefit plan inclusion
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
Consolidated
2007
$000
2006
$000
62,587
382
2,696
3,109
(5,087)
404
6
(932)
(808)
(1,166)
–
(1,904)
59,287
35,477
2,161
1,687
2,018
(409)
(1,202)
39,732
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
The actual return on plan assets is the sum of the expected return and the actuarial gain.
Nufarm Limited – Annual Report 2007
99
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
27. Employee benefits continued
Expense recognised in profit or loss
Current service costs
Interest on obligation
Expected return on fund assets
Past service cost
Plan changes
Losses/(gains) on curtailment
The expense is recognised in the following line
items in the income statement:
Cost of sales
Sales, marketing and distribution expenses
General and administrative expenses
Research and development expenses
Actuarial gains/(losses) recognised directly in equity
(net of tax)
Cumulative amount at 1 August
Recognised during the period
Cumulative amount at 31 July
The major categories of fund assets as a percentage
of total fund assets are as follows:
European equities
European bonds
Property
Cash
Consolidated
2007
$000
2006
$000
2,696
3,109
(2,161)
6
404
(932)
3,122
1,776
617
583
146
3,122
(713)
4,093
3,380
2,726
2,657
(1,687)
–
(631)
(1,261)
1,804
911
455
382
56
1,804
–
(713)
(713)
58.7%
31.3%
2.8%
7.2%
60.8%
30.1%
2.8%
6.3%
100
Nufarm Limited – Annual Report 2007
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
27. Employee benefits continued
Principal actuarial assumptions at the reporting
date (expressed as weighted averages):
Discount rate at 31 July
Expected return on fund assets at 31 July
Future salary increases
Future pension increases
Consolidated
2007
%
2006
%
5.5%
6.6%
3.4%
2.9%
4.9%
6.0%
3.4%
2.8%
The overall expected long term rate of return on assets is 6.6 per cent. 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.
The group expects to pay $3,273,000 in contributions to defined benefit plans in 2008.
28. 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 per cent of the market price at the date of
the offer. There is an eight year restrictive period during which time the allocated shares are held by the trustees and
the consideration will be paid over the restrictive period with all dividends, net of tax, being applied in reduction of
the advances by the company to the trustees which total $21,740 at 31 July 2007 (2006: $65,341). Each executive is
entitled to exercise voting rights attached to the shares allocated. At 31 July 2007 the trustees of the Executive Share
Purchase Scheme (1984) held 25,000 (2006: 50,000) ordinary shares, all of which were allocated. There are four
remaining participants (2006: four 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 2007 there were 63 participants (2006: 58 participants) in the scheme and 1,635,832
shares (2006: 1,512,224) were allocated and held by the trustee on behalf of the participants. The cost of issuing
shares is expensed in the year of issue.
Nufarm Limited – Annual Report 2007
101
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
28. Share-based payments continued
The Global Share Plan commenced in 2001, and is available to all permanent employees. Participants contribute
a proportion of their salary to purchase shares. The company will contribute an amount equal to 10 per cent of the
number of ordinary shares acquired with a participant’s contribution in the form of additional ordinary shares. Amounts
over 10 per cent of the participant’s salary can be contributed but will not be matched. For each year the shares are held,
up to a maximum of five years, the company contributes a further 10 per cent of the value of the shares acquired with the
participant’s contribution. An independent trustee holds the shares on behalf of the participants. At 31 July 2007 there
were 751 participants (2006: 824 participants) in the scheme and 1,527,135 shares (2006: 1,703,775) were allocated
and held by the trustee on behalf of the participants. The cost of the Global Share Plan expensed for the year ended
31 July 2007 was $1,241,729 (2006: $2,647,798).
The power of appointment and removal of the trustees for the share purchase schemes is vested in the company.
102
Nufarm Limited – Annual Report 2007
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
–
–
–
–
–
–
–
Total
$000
15,599
8,751
(4,228)
(1,746)
–
9,350
(1,090)
26,636
29. Provisions
Current
Restructuring
Other
Provision for dividends
Non-current
Other
Total provisions
Consolidated
Company
2007
$000
2006
$000
2007
$000
128
7,083
4,772
11,983
14,653
14,653
26,636
2006
$000
3,700
–
–
3,700
11,899
11,899
15,599
–
–
–
–
–
–
–
Movement in provisions
Balance at 1 August 2006
Provisions made during the year
Provisions used during the year
Provisions reversed during the year
Transfer
Provisions acquired through business combinations
Exchange adjustment
Balance at 31 July 2007
Consolidated
Dividends Restructuring
$000
$000
Other
provisions
$000
–
–
–
–
–
4,772
–
4,772
3,700
2,751
(4,228)
–
(1,958)
–
(137)
128
11,899
6,000
–
(1,746)
1,958
4,578
(953)
21,736
The provision for dividends is for Agripec dividends declared prior to the purchase of the remaining 50.1 per cent.
The restructuring provision relates to taxes to be paid on the sale of the Granollers site in Spain. The other provisions
consist of deferred payments for business acquisitions ($15.2 million), contingent liabilities recognised with the Agripec
acquisition ($4.6 million) and provisions for employee litigation in France ($1.9 million).
Nufarm Limited – Annual Report 2007
103
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
30. Capital and reserves
Reconciliation of movements in capital and reserves attributable to equity holders of the parent
Share
capital
$000
Translation
reserve
$000
Capital profit
reserve
$000
219,049
(10,450)
33,603
Consolidated
Balance at 1 August 2005
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
–
–
–
–
–
–
–
–
–
–
–
–
Balance at 31 July 2006
240,760
(9,716)
Balance at 1 August 2006
240,760
(9,716)
Foreign exchange translation differences
Foreign exchange movement taken to hedging reserve
Actuarial gains/(losses) on defined benefit plans
Share issued to employees
Accrual and issue of shares under 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
Issue of Nufarm Step-up Securities
Distributions to Nufarm step-up security holders
–
–
–
–
–
99
27
–
–
–
–
–
–
(14,628)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
24
–
–
–
–
33,627
33,627
–
–
–
–
–
–
–
–
–
–
–
–
–
Balance at 31 July 2007
240,886
(24,344)
33,627
104
Nufarm Limited – Annual Report 2007
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
30. Capital and reserves continued
Hedging
reserve
$000
Other
reserve
$000
Retained
earnings
$000
Nufarm Step-up
Securities
$000
–
–
574
(594)
–
–
–
–
–
–
–
–
–
–
(20)
(20)
–
20
–
–
–
–
–
–
–
–
–
–
–
–
242
–
–
–
–
–
–
–
–
–
(242)
–
–
–
–
–
–
–
–
–
(91)
–
–
–
–
–
–
–
–
365,660
–
–
–
(713)
–
–
–
–
–
242
117,220
(45,879)
–
436,530
436,530
–
–
4,093
–
–
–
–
–
334
148,796
(53,145)
–
(5,484)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
246,932
–
Minority
interest
$000
Total
equity
$000
5,966
614,070
(41)
–
–
–
–
–
–
–
–
–
693
574
(594)
(713)
1,065
2,647
17,972
27
24
–
579
117,799
(551)
(4,945)
(46,430)
(4,945)
1,008
702,189
1,008
702,189
(52)
–
–
–
–
–
–
–
–
(14,680)
20
4,093
–
(91)
99
27
–
334
367
149,163
(306)
–
–
(53,451)
246,932
(5,484)
(91)
531,124
246,932
1,017
1,029,151
Nufarm Limited – Annual Report 2007
105
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
30. Capital and reserves continued
Reconciliation of movements in capital and reserves attributable to equity holders of the parent
Company
Balance at 1 August 2005
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
Balance at 31 July 2006
Balance at 1 August 2006
Foreign exchange translation differences
Change in accounting policy for financial instruments
Foreign exchange movement taken to hedging reserve
Share issued to employees
Accrual and issue of shares under global share plan
Shares issued as consideration for business acquisition
Tax benefit on share issue costs
Profit for the period
Dividends paid to shareholders
Share
capital
$000
219,049
–
–
–
1,065
2,647
17,972
27
–
–
240,760
240,760
–
–
–
–
–
99
27
–
–
Translation
reserve
$000
(77)
(248)
–
–
–
–
–
–
–
–
(325)
(325)
(1)
–
–
–
–
–
–
–
–
Capital profit
reserve
$000
40,074
–
–
–
–
–
–
–
–
–
40,074
40,074
–
–
–
–
–
–
–
–
–
Balance at 31 July 2007
240,886
(326)
40,074
106
Nufarm Limited – Annual Report 2007
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
30. Capital and reserves continued
Hedging
reserve
$000
Other
reserve
$000
Retained
earnings
$000
Nufarm Step-up
Securities
$000
Minority
interest
$000
–
–
58
(8)
–
–
–
–
–
–
50
50
–
–
(50)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(91)
–
–
–
–
156,536
–
–
–
–
–
–
–
60,760
(45,879)
171,417
171,417
–
–
–
–
–
–
–
63,114
(53,145)
(91)
181,386
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
equity
$000
415,582
(248)
58
(8)
1,065
2,647
17,972
27
60,760
(45,879)
451,976
451,976
(1)
–
(50)
–
(91)
99
27
63,114
(53,145)
461,929
Nufarm Limited – Annual Report 2007
107
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
30. Capital and reserves continued
Share capital
Balance at 1 August
Issue of shares
Balance at 31 July
Company
Number
of ordinary
shares
2007
Number
of ordinary
shares
2006
171,492,251 169,671,874
1,820,377
171,492,251
9,002
171,501,253
In May 2006, Nufarm acquired the shares of Nutrihealth Pty Ltd. Dr John Stocker, a director of Nufarm, was a minority
shareholder of Nutrihealth. In accordance with the purchase agreement, Dr Stocker was allocated 9,002 ordinary
shares in respect of his Nutrihealth shares. These shares were issued on 8 December 2006, after the issue was
approved by the shareholders at the company’s 2006 annual general meeting.
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.
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.
Nufarm Step-up Securities
In the year ended 31 July 2007 Nufarm Finance (NZ) Limited, a wholly owned subsidiary of Nufarm Limited, issued
a new hybrid security called Nufarm Step-up Securities (NSS). The NSS are perpetual step up securities and on
24 November 2006, 2,510,000 NSS were allotted at an issue price of $100 per security raising $251 million. The
NSS are listed on the ASX under the code ‘NFNG’ and on the NZDX under the code ‘NFFHA’. The after-tax costs
associated with the issue of the NSS, totalling $4.1 million, have been deducted from the proceeds.
Distributions on the NSS are at the discretion of the directors and are floating rate, unfranked, non-cumulative and
subordinated. However, distributions of profits and capital by Nufarm Limited are restricted if distributions to NSS
holders are not made, until such time that Nufarm Finance (NZ) Limited makes up the arrears. The first distribution
date for the NSS was 16 April 2007 and on a six-monthly basis after this date. The floating rate is the average mid-rate
for bills with a term of six months plus a margin of 1.90 per cent. The step-up date is five years from issue date, and
provides the issuer with the following options: (a) keep the NSS on issue whereby the margin will be reset or step up
by the step-up margin; or (b) redeem the NSS for face value, or exchange them for a number of ordinary shares in
Nufarm. The exchange ratio is calculated based on the average market price of Nufarm ordinary shares for 20 business
days prior to exchange date less a 2.5 per cent discount.
108
Nufarm Limited – Annual Report 2007
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
30. Capital and reserves continued
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.
Dividends
Dividends recognised in the current year by the company are:
2007
Interim 2007 ordinary
Final 2006 ordinary
Total amount
2006
Interim 2006 ordinary
Final 2005 ordinary
Total amount
Cents
per share
Total
amount
$000
Franked/
unfranked
Payment
date
11.0
20.0
10.0
17.0
18,894
34,251
53,145
16,994
28,885
45,879
Franked
Franked
27-Apr-07
10-Nov-06
Franked
Franked
28-Apr-06
11-Nov-05
Dividends paid on ordinary shares during the year were franked at the tax rate of 30 per cent.
Distributions recognised in the current year by Nufarm Finance (NZ) Ltd on the Nufarm Step-up Securities are:
Distribution
rate
Total
amount
$000
Payment
date
Nufarm Step-up Securities distribution
8.35%
8,184
16-Apr-07
The distribution on the Nufarm Step-up Securities reported on the equity movement schedule has been reduced by the
tax benefit on the gross distribution, giving an after-tax amount of $5.484 million.
Nufarm Limited – Annual Report 2007
109
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
30. Capital and reserves continued
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 per cent (2006: 30 per cent)
Franking credits that will arise from the payment
of income tax payable as at the end of the year
Balance at 31 July 2007
Consolidated
Company
2007
$000
2006
$000
2007
$000
2006
$000
13,163
22,800
13,163
22,800
(2,769)
10,394
3,893
26,693
(2,769)
10,394
3,893
26,693
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 $15,435,113 (2006: $14,699,336). In accordance with the tax consolidation legislation,
the company as the head entity in the tax consolidated group has also assumed the benefit of $10,394,000 (2006:
$26,693,000) franking credits.
31. Earnings per share
Net profit for the year
Net profit attributable to minority interest
Net profit attributable to equity holders of the parent
Nufarm Step-up Securities distribution
Earnings used in the calculations of basic and
diluted earnings per share
Earnings from continuing operations
Earnings from discontinued operations
Consolidated
2007
$000
149,163
(367)
148,796
(5,484)
2006
$000
117,799
(579)
117,220
–
143,312
117,220
101,472
41,840
143,312
102,586
14,634
117,220
Subtract items of material income/(expense)
(refer note 6)
Earnings excluding items of material income/(expense)
used in the calculation of operating earnings per share
27,935
(3,886)
115,377
121,106
For the purposes of determining basic and diluted earnings per share, the after tax distributions
on NSS are deducted from net profit.
110
Nufarm Limited – Annual Report 2007
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
31. Earnings per share continued
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
Number of shares
2007
2006
171,498,071
170,224,284
171,498,071
170,224,284
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 discontinued operations
Diluted earnings per share
From continuing operations
From discontinued operations
Earnings per share (excluding items of material income/expense – see note 6)
Basic earnings per share
Diluted earnings per share
Cents per share
2007
2006
59.2
24.4
83.6
59.2
24.4
83.6
67.3
67.3
60.3
8.6
68.9
60.3
8.6
68.9
71.1
71.1
32. Financial instruments
Exposure to credit, interest rate and currency risks arises in the normal course of the group’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 group. 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 derivatives in the balance sheet.
Nufarm Limited – Annual Report 2007
111
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
32. Financial instruments continued
In Brazil, Agripec uses barter transactions to partially offset the customer credit risk by allowing settlement through the
delivery of soybeans from the customer’s crop. Options are taken out on the soybean price to hedge movements in
the soybean price between the date of sale and the date of settlement.
Interest rate risk
The group 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. There
were no interest rate swaps in place at 31 July 2007.
The group measures interest rate swaps at fair value, with the movements in fair value reflected in the profit or loss.
At 31 July 2007, the group had no interest rate swaps in place (2006: $20,000,000). The net fair value of swaps at 31
July 2006, recognised as fair value derivatives, was $238,000.
Cash flow risk on Nufarm Step-up Securities
The group uses interest rate caps to protect the cash flow impact of a movement in the distribution base rate. The
distribution rate is the average mid-rate for bank bills with a term of six months plus a margin of 1.90 per cent.
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
Effective
interest rate
%
Note
Total
$000
Less than
1 year
$000
1–2
years
$000
More than
2 years
$000
2007
15
6.8
92,377
92,377
–
–
Financial liabilities
Unsecured debt
Bank overdrafts
Bank loans – unsecured
Other loans – unsecured
Finance lease liabilities – secured
15
26
26
26
7.3
6.6
3.0
13.2
12,716
450,617
854
682
464,869
12,716
359,662
–
399
372,777
–
62,748
–
266
63,014
–
28,207
854
17
29,078
112
Nufarm Limited – Annual Report 2007
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
32. Financial instruments continued
Consolidated
Financial assets
Cash and cash equivalents
Effective
interest rate
%
Note
Total
$000
Less than
1 year
$000
1–2
years
$000
More than
2 years
$000
2006
15
4.4
51,269
51,269
–
–
Financial liabilities
Unsecured debt
Bank overdrafts
Bank loans – unsecured
Other loans – unsecured
Interest rate swaps
Capital notes
Finance lease liabilities – secured
15
26
26
26
26
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
–
44,847
–
–
–
186
45,033
–
61,692
248
–
–
39
61,979
Effective
interest rate
%
Note
Total
$000
Less than
1 year
$000
1–2
years
$000
More than
2 years
$000
Company
Financial assets
Cash and cash equivalents
Financial liabilities
Bank overdrafts
15
15
2007
8.25
15,034
15,034
9.5
2,667
2,667
2,667
2,667
–
–
–
–
–
–
Effective
interest rate
%
Note
Total
$000
Less than
1 year
$000
1–2
years
$000
More than
2 years
$000
Company
Financial assets
Cash and cash equivalents
Financial liabilities
Bank overdrafts
Subordinated loans from
controlled entities
15
15
26
2006
7.25
10,739
10,739
9.5
23,574
23,574
9.2
190,258
213,832
190,258
213,832
–
–
–
–
–
–
–
–
Nufarm Limited – Annual Report 2007
113
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
32. Financial instruments continued
Foreign currency risk
The group 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
reporting date.
The group uses foreign exchange contracts to hedge the foreign currency exposures between the Nufarm Step-up
Securities issued in Australia and New Zealand, and related group funding to several jurisdictions to which the funds
were advanced. The foreign exchange contracts cover the exposure on the principal advanced to group companies
in US Dollars, the Euro, the British Pound and the Canadian Dollar.
In the current year, the group discontinued cash flow hedging with all movements in fair value recognised in profit
or loss during the period. The net fair value of forward exchange contracts in the group used as hedges of forecasted
transactions at 31 July 2007 was $2,187,491 (2006: $353,309) comprising assets of $95,294 (2006: $194,164) and
liabilities of $2,282,785 (2006: $547,472) that were recognised as derivatives measured at fair value. The net fair value
of forward exchange contracts in the company at 31 July 2007 was $340,150 (2006: $194,164) comprising liabilities
of $340,150 (2006: $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:
Consolidated
Cash and cash equivalents
Trade and other receivables
Interest rate cap:
Carrying
amount
2007
$000
Note
Fair
value
2007
$000
15
16
92,377
788,131
92,377
788,131
Payable maturities – one to five years
22
7,225
7,225
Forward exchange contracts:
Receivables – less than one year
Payables – less than one year
Forward exchange contracts 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
114
Nufarm Limited – Annual Report 2007
16
25
86
(2,274)
86
(2,274)
16
15
26
26
26
26
–
15,028
(12,716)
(450,617)
(854)
–
(683)
435,703
–
15,028
(12,716)
(450,617)
(854)
–
(683)
435,703
–
Carrying
amount
2006
$000
51,269
523,616
238
194
(547)
17,854
–
(19,940)
(420,437)
(248)
(181,649)
(485)
(30,135)
Fair
value
2006
$000
51,269
523,616
238
194
(547)
17,854
–
(19,940)
(420,437)
(248)
(181,351)
(485)
(29,837)
(298)
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
32. Financial instruments continued
Company
Note
Cash and cash equivalents
Trade and other receivables
Receivables due from controlled entities
Loans due from controlled entities
Forward exchange contracts:
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
Bank overdraft
Subordinated loans from controlled entities
Unrecognised (losses)/gains
Estimation of fair values
15
16
16
16
25
16
15
26
Carrying
amount
2007
$000
15,034
7,536
50,390
177,256
Fair
value
2007
$000
15,034
7,536
50,390
177,256
Carrying
amount
2006
$000
10,739
34,509
228,937
170,618
Fair
value
2006
$000
10,739
34,509
228,937
170,618
(340)
(340)
194
194
–
(2,667)
–
247,209
–
(2,667)
–
247,209
–
17,854
(23,574)
(190,258)
249,019
17,854
(23,574)
(190,258)
249,019
–
The methods used in determining the fair values of financial instruments are discussed in note 4.
Interest rates used for determining fair value
The average interest rates used for determining fair value are:
Derivatives
Capital notes
33. Operating leases
Non-cancellable operating lease rentals are payable as follows:
Not later than one year
Later than one year but not later than two years
Later than two years but not later than five years
Later than five years
2007
6.0%
–
2006
5.0%
9.4%
Consolidated
Company
2007
$000
5,726
4,560
9,801
4,664
24,751
2006
$000
7,390
5,133
9,520
10,415
32,458
2007
$000
–
–
–
–
–
2006
$000
214
104
92
–
410
Nufarm Limited – Annual Report 2007
115
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
33. Operating leases continued
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.
34. Capital and other commitments
Capital expenditure commitments
Plant and equipment
Contracted but not provided for and payable:
Within one year
35. Contingencies
Consolidated
Company
2007
$000
2006
$000
2007
$000
2006
$000
17,717
10,005
–
–
The directors are of the opinion that provisions are not required in respect of the following 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.
Guarantee facility for Eastern European joint ventures
with FMC Corporation.
5,680
7,312
–
–
Consolidated
Company
2007
$000
2006
$000
2007
$000
2006
$000
The parent entity has provided a guarantee to note
holders in respect of the issuers’ obligations under
the capital notes.
Environmental claim warranty:
Environmental guarantee given to the purchaser of
land and buildings at Genneviliers for EUR 8.5 million.
The guarantee expires in 2014, 18 months after the
expiry of the business tenancy contract.
Guarantee upon sale of a business limited to
EUR 2.74 million on account of possible remediation
costs for soil and groundwater contamination.
This guarantee decreases from 2004 progressively
to nil in 2011.
–
–
–
181,892
13,710
14,167
4,419
23,809
5,850
27,329
–
–
–
–
–
181,892
116
Nufarm Limited – Annual Report 2007
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
36. Group entities
Parent entity
Nufarm Limited – ultimate controlling entity
Subsidiaries
Abel Lemon and Company Pty Ltd (liquidated)
Access Genetics Pty Ltd
ACN000425927 Pty Ltd (formerly Nuturf Pty Ltd)
Agcare Biotech Pty Ltd
Agchem Receivables Corporation
Agripec Quimica e Farmaceutica SA
Agrogen Nufarm de Colombia S.A. (formerly Nufarm Colombia Ltda)
Agroquimicos Genericos S.A. (merged into Agrogen
Nufarm de Colombia S.A.)
Agryl Holdings Limited
Ag-seed Research Pty Ltd
Artfern Pty Ltd
Australis Services Pty Ltd
Bestbeech Pty Ltd (formerly Captec Pty Ltd)
CFPI GmbH (liquidated) Germany
Chemicca Limited
Chemturf Pty Ltd (liquidated)
Chloral Investment Trust (sold July 2007)
Chloral Unit Trust No1 (sold July 2007)
Chloral Unit Trust No2 (sold July 2007)
Clama s.a.s (merged into Nufarm Holdings s.a.s)
CNG Holdings BV
CNZL Limited (formerly Captec (NZ) Limited and later amalgamated
into Nufarm Holdings (NZ) Limited)
Crop Care Australasia Pty Ltd
Crop Care Holdings Limited
Croplands Equipment Limited
Croplands Equipment Pty Ltd
CSRPAR Participacoes LTDA
Danestoke Pty Ltd
Electronic Agriculture Limited (liquidated)
Fada S.A. (merged into Agrogen Nufarm de Colombia S.A.)
Fchem (Aust) Limited
Fchem Limited (amalgamated into Nufarm Holdings (NZ) Limited)
Fernz Canada Limited
Notes
Place of
incorporation
Percentage
of shares held
2006
2007
(a)
(a),(b)
(b)
(a),(b)
(a)
(a)
(a)
(a)
(a)
(a)
(b)
(a),(b)
(b)
(a),(b)
(a)
(a),(b)
(b)
(b)
Australia
Australia
Australia
Australia
USA
Brazil
Colombia
Colombia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
France
Netherlands
New Zealand
Australia
New Zealand
New Zealand
Australia
Brazil
Australia
Australia
Colombia
Australia
New Zealand
Canada
–
100
100
70
40
100
100
–
100
100
100
100
100
–
100
–
–
–
–
–
100
–
100
100
100
100
100
100
–
–
100
–
100
100
100
100
70
40
49.9
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
Nufarm Limited – Annual Report 2007
117
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
36. Group entities continued
Fernz Singapore Pte Ltd
Fidene Limited
Finotech BV
Framchem SA
Frost Technology Corporation
Health & Science Limited (amalgamated into Nufarm
Holdings (NZ) Limited)
Inpar s.a.s (merged into Nufarm Holdings s.a.s)
Interferon Limited (liquidated)
Interferon NZ Limited (amalgamated into Nufarm
Holdings (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
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 N.
Medisup Securities Limited
Neuchatel Pty Ltd (liquidated)
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 Coogee Pty Ltd (sold July 2007)
Nufarm Crop Products UK Limited
118
Nufarm Limited – Annual Report 2007
Notes
Place of
incorporation
Percentage
of shares held
2006
2007
(b)
(b)
(b)
(b)
(b)
(a)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(a),(b)
(a)
(b)
(b)
(b)
(b)
(a),(b)
(b)
(b)
Singapore
New Zealand
Netherlands
Egypt
USA
New Zealand
France
Australia
New Zealand
France
France
France
Malaysia
USA
Guatemala
Mexico
USA
Australia
Malaysia
Australia
Malaysia
Malaysia
Antillies
Australia
Australia
Singapore
South Africa
Canada
USA
Zimbabwe
USA
USA
Malaysia
Australia
Netherlands
China
Chile
Australia
UK
100
100
100
100
100
–
–
–
–
100
100
100
100
100
100
100
100
70
70
70
70
70
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
100
100
100
100
70
70
70
70
70
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
80
100
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
36. Group entities continued
Notes
Place of
incorporation
Percentage
of shares held
2006
2007
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 (liquidated)
Nufarm Espana SA
Nufarm Finance (NZ) Limited (formerly Fernz Corporation (NZ) Limited)
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 Italia srl
Nufarm Italia Holding srl
Nufarm KK
Nufarm Labuan Pte Ltd
Nufarm Malaysia Sdn Bhd
Nufarm Materials Limited
Nufarm NZ Limited
Nufarm Platte Pty Ltd
Nufarm Portugal LDA
Nufarm s.a.s
Nufarm SA
Nufarm Specialty Products Inc (liquidated)
Nufarm Srl
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 Grains Pty Ltd
(b)
(a)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(b)
(a),(b)
(b)
(b)
(b)
(b)
(b)
(a),(b)
(b)
Costa Rica
Guatemala
Mexico
Panama
Venezuela
Ecuador
Germany
Brazil
Australia
Spain
New Zealand
Germany
Austria
Austria
New Zealand
Netherlands
France
USA
Singapore
Netherlands
Italy
Italy
Japan
Malaysia
Malaysia
Australia
New Zealand
Australia
Portugal
France
Argentina
USA
Romania
Malaysia
New Zealand
Australia
Australia
United Kingdom
Australia
Australia
Australia
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
100
100
–
100
51
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
100
100
100
100
100
100
100
100
100
–
51
100
100
100
100
100
100
100
Nufarm Limited – Annual Report 2007
119
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
36. Group entities continued
Nutrihealth Pty Ltd
Opti-Crop Systems Pty Ltd
Pacific Raw Materials Australia Pty Ltd (liquidated)
Pacific Raw Materials Limited (liquidated)
Pharma Pacific Pty Ltd
PT Crop Care
PT Nufarm Indonesia
Rockmere Pty Ltd (liquidated)
Safepak Industries Sdn Bhd
Selchem Pty Ltd
TPL Limited
Notes
Place of
incorporation
Percentage
of shares held
2006
2007
(b)
(a)
(a)
(b)
(a)
(a)
(b)
Australia
Australia
Australia
New Zealand
Australia
Indonesia
Indonesia
Australia
Malaysia
Australia
New Zealand
100
75
–
–
100
100
100
–
70
100
100
100
75
100
100
100
100
100
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 24 October 1996 (as amended on
26 April 1999, 26 January 2000 and 9 October 2003) 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.
37. Deed of cross guarantee
Pursuant to ASIC Class Order 98/1418 dated 13 August 1998, the wholly owned subsidiaries referred to in note 37
are relieved from the Corporations Act 2001 requirements for preparation, audit and lodgement of financial reports
and director’s 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.
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 2007 is set out as follows:
120
Nufarm Limited – Annual Report 2007
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
37. Deed of cross guarantee continued
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
Current tax assets
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
Current tax payable
Liabilities classified as held for sale
Total current liabilities
Non-current liabilities
Interest bearing loans and borrowings
Deferred tax liabilities
Employee benefits
Provisions
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
Equity
Share capital
Reserves
Retained earnings
TOTAL EQUITY
Consolidated
2007
$000
2006
$000
81,236
(12,021)
69,215
283,660
–
(53,145)
299,730
12,543
238,460
185,590
23,677
–
460,270
102,431
(18,014)
84,417
244,102
1,020
(45,879)
283,660
11,480
417,592
182,392
2,094
22,772
636,330
–
9,408
620,190
25,028
154,244
85,296
–
894,166
1,354,436
1,240
173,424
263,334
21,372
128,351
70,728
–
658,449
1,294,779
5,584
611,963
57,800
7,674
28,294
–
711,315
23,500
7,918
8,605
6,000
46,023
757,338
597,098
248,086
49,282
299,730
597,098
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
Nufarm Limited – Annual Report 2007
121
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
38. 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
Gain on sale of discontinued operation
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
Net operating cash flows
Consolidated
Company
2007
$000
2006
$000
2007
$000
2006
$000
149,163
171
121,732
2,599
63,114
171
60,760
181
8,454
33,755
(1,063)
(37,176)
–
(8,056)
6,804
(16,390)
–
9,806
36,556
(512)
–
219
(10,545)
8,914
(8,852)
–
10
585
(18)
–
–
(788)
(53)
(11,216)
–
–
319
(359)
–
–
(1,013)
(64)
479
–
589
348
54
(136)
136,251
160,265
51,859
60,167
(136,362)
(2,559)
56,848
14,742
(36,583)
(3,804)
(59,479)
1,826
19,911
(1,123)
(578)
5,897
5,538
165
(4,357)
3,840
(6,322)
674
484
(1,981)
–
(73,653)
62,598
–
(97,366)
62,899
–
24,591
76,450
–
3,205
63,372
122
Nufarm Limited – Annual Report 2007
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
39. 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
Executives
BF Benson – Group general manager agriculture
R Heath – Group general manager corporate services and company secretary
KP Martin – Chief financial officer
DA Mellody – Group general manager global marketing
RF Ooms – Group general manager chemicals
DA Pullan – Group general manager operations
RG Reis – Group general manager corporate strategy and external affairs
Executive directors
DJ Rathbone – Managing director and chief executive
Key management personnel compensation
The key management personnel compensation included in personnel expenses (see note 9) are as follows:
Short term employee benefits
Post employment benefits
Equity compensation benefits
Other long term benefits
Consolidated
Company
2007
$
2006
$
5,580,527
647,613
1,332,003
170,224
7,730,367
7,029,731
511,231
1,584,993
153,257
9,279,212
2007
$
574,333
259,833
143,000
–
977,166
2006
$
664,250
149,750
143,000
–
957,000
Individual directors and executives compensation disclosures
Information regarding individual directors and executives compensation is provided in the remuneration report section
of the director’s report.
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 personnel at July 31 2007.
Nufarm Limited – Annual Report 2007
123
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
39. Key management personnel disclosures continued
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.
From time to time, key management personnel of the company or its controlled entities, or their related entities,
may purchase goods from the group. These purchases are on the same terms and conditions as those entered into
by other group employees or customers and are trivial or domestic in nature.
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:
Shares held
in Nufarm Ltd
2007
Directors
KM Hoggard1
GDW Curlewis
DJ Rathbone
Dr WB Goodfellow1, 2
GA Hounsell1
DG McGauchie1
Dr JW Stocker1
RFE Warburton1
Executives
BF Benson
R Heath
KP Martin
DA Mellody
RF Ooms
DA Pullan
RG Reis
Total
Balance
at 1 August
2006
Granted as
remuneration
Exercise
of options
Net
change
other
Balance
at 31 July
2007
2,379,426
42,787
29,912,610
1,468,296
60,302
14,719
30,314
65,281
157,694
197,790
381,610
5,196
335,757
232,132
166,096
35,450,010
4,188
–
–
1,657
1,657
1,657
1,657
1,657
20,080
11,211
21,063
11,295
21,063
22,393
14,223
133,801
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,000
–
(807,039)
–
–
9,002
–
(18,345)
–
–
–
–
(29,133)
–
(844,515)
2,383,614
43,787
29,912,610
662,914
61,959
16,376
40,973
66,938
159,429
209,001
402,673
16,491
356,820
225,392
180,319
34,739,296
124
Nufarm Limited – Annual Report 2007
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
39. Key management personnel disclosures continued
Shares held
in Nufarm Ltd
2006
Directors
KM Hoggard1
GDW Curlewis
DJ Rathbone
Dr WB Goodfellow1, 2
GA Hounsell1
DG McGauchie1
Dr JW Stocker1
RFE Warburton1
Executives
BF Benson
R Heath
KP Martin
DA Mellody
RF Ooms
DA Pullan
RG Reis
Total
Balance
at 1 August
2005
Granted as
remuneration
Exercise
of options
Net
change
other
Balance
at 31 July
2006
2,374,749
40,787
29,912,610
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
35,377,441
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
149,964
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,000
–
–
47,000
4,600
–
–
(15,913)
(40,000)
–
–
(10,000)
(25,082)
(40,000)
(77,395)
2,379,426
42,787
29,912,610
1,468,296
60,302
14,719
30,314
65,281
157,694
197,790
381,610
5,196
335,757
232,132
166,096
35,450,010
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, Stocker and Warburton are participants in the non-executive share plan which enables
participants to sacrifice 20 per cent 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 and 19,727 Nufarm Step-up Securities) – Dr Goodfellow is Chairman of the Trust
Board. Dr Goodfellow does not have a beneficial interest in these shares or step-up securities.
(ii) Sulkem Company Limited (113,616 shares).
(iii) Auckland Medical Research Foundation (25,462 step-up securities). Dr Goodfellow does not have a beneficial interest in the
step-up securities.
Nufarm Limited – Annual Report 2007
125
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
40. 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; and
– management fees were received from several wholly owned controlled entities.
These transactions were undertaken on commercial terms and conditions.
(b) Transactions with associated parties
Consolidated
Bayer CropScience Nufarm Limited
SRFA LLC
Excel Crop Care Ltd
sales to
purchases from
trade receivable
trade payable
sales to
loan receivable
interest received
trade payable
trade receivable
purchases from
trade payable
2007
$000
11,734
14,342
41
3,949
2,159
582
19
–
60
2,610
573
2006
$000
8,309
11,517
740
2,704
326
754
20
110
–
–
–
These transactions were undertaken on commercial terms and conditions.
41. Subsequent events
On 26 September 2007, the directors declared a final dividend of 21 cents per share, fully franked, payable
9 November 2007.
The financial effect of this dividend has not been brought to account in the financial statements for the year ended
31 July 2007 and will be recognised in the subsequent financial reports. The declaration and subsequent payment
of dividends has no income tax consequences for the company.
126
Nufarm Limited – Annual Report 2007
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
42. Auditors’ remuneration
Audit services
KPMG Australia
Audit and review of group financial report
Audit of superannuation fund
Audit of AIFRS disclosures
Overseas KPMG firms
Audit and review of group financial report
Audit and review of local statutory reports
Other auditors
Audit and review of financial reports
Other services
KPMG Australia
AIFRS conversion advice
Transaction due diligence services
Other assurance services
Overseas KPMG firms
Other assurance services
43. Correction of error
Consolidated
Company
2007
$000
2006
$000
2007
$000
2006
$000
384
65
–
670
166
1,285
87
1,372
–
120
6
46
172
377
–
43
823
–
1,243
105
1,348
10
–
96
–
106
–
–
–
44
47
91
–
91
–
–
–
9
9
–
–
–
56
–
56
–
56
–
–
–
–
–
In the current period, two errors have been detected requiring adjustments to prior period comparatives.
The first error is in respect of the calculation of the tax impact of the sale of the French CACI business in the year
ended 31 July 2006. The prior period error was caused by a misinterpretation of the tax position in respect of the
CACI sale. The amount of the error is 2.42 million ($3.93 million), and has been reflected in the financial report
as an increase in income tax expense on discontinued operations and a reduction in deferred tax assets.
The second error relates to a revaluation gain on foreign currency denominated payables accrued in July 2005, that had
not been reversed when the gains were realised. The amount of the error is $3.24 million, and has been reflected in
the financial report as a decrease in prior period retained earnings and a reduction in the equity accounted investment.
Nufarm Limited – Annual Report 2007
127
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 2001 including:
(i) giving a true and fair view of the company’s and the group’s financial position as at 31 July 2007 and of their
performance, for the financial year ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the
Corporations Regulations 2001;
(b) the financial report also complies with International Financial Reporting Standards as disclosed in note 2(a);
(c) the remuneration disclosures contained in the remuneration report in the directors’ report comply with Australian
Accounting Standard 124 Related Party Disclosures; and
(d) 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 group entities identified in
note 38 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 group 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 2007.
Signed in accordance with a resolution of the directors:
Dated at Melbourne this 26th day of September 2007
KM Hoggard
Director
DJ Rathbone
Director
128
Nufarm Limited – Annual Report 2007
INDEPENDENT AUDIT REPORT
Independent auditor’s report to the members of Nufarm Limited
Report on the financial report and AASB 124 remuneration disclosures contained in the directors’ report
We have audited the accompanying financial report of Nufarm Limited (the ‘company’), which comprises the balance
sheets as at 31 July 2007, and the income statements, statements of recognised income and expense and cash flow
statements for the year ended on that date, a description of significant accounting policies and other explanatory notes
I to 43 and the directors’ declaration of the group comprising the company and the entities it controlled at the year’s
end or from time to time during the financial 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 45 to 52 of the directors’ report and not in the
financial report. We have audited these remuneration disclosures.
Directors’ responsibility for the financial report and the AASB 124 remuneration disclosures contained in the
directors’ report
The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance
with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001.
This responsibility includes establishing and maintaining internal control relevant to the preparation and fair presentation
of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying
appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In note 2(a),
the directors also state, in accordance with Australian Accounting Standard AASB 101 Presentation of Financial
Statements, that the financial report of the group, comprising the financial statements and notes, complies with
International Financial Reporting Standards but that the financial report of the company does not comply.
The directors of the company are also responsible for the remuneration disclosures contained in the directors’ report.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in
accordance with Australian Auditing Standards. These auditing standards require that we comply with relevant ethical
requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether
the financial report is free from material misstatement. Our responsibility is also to express an opinion on the
remuneration disclosures contained in the directors’ report based on our audit.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
report and the remuneration disclosures contained in the directors’ report. The procedures selected depend on the
auditor’s judgement, including the assessment of the risks of material misstatement of the financial report and the
remuneration disclosures contained in the directors’ report, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair
presentation of the financial report and the remuneration disclosures contained in the directors’ report in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control.
Nufarm Limited – Annual Report 2007
129
INDEPENDENT AUDIT REPORT CONTINUED
An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by the directors, as well as evaluating the overall presentation of the financial report and the remuneration
disclosures contained in the directors’ report.
We performed the procedures to assess whether in all material respects the financial report presents fairly, in accordance
with the Corporations Act 2001 and Australian Accounting Standards (including the Australian Accounting Interpretations),
a view which is consistent with our understanding of the company’s and the group’s financial position and of their
performance and whether the remuneration disclosures are in accordance with Australian Accounting Standard AASB 124.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Auditor’s opinion on the financial report
In our opinion:
(a) the financial report of Nufarm Limited is in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the company’s and the group’s financial position as at 31 July 2007 and of their
performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the
Corporations Regulations 2001;
(b) the financial report of the group also complies with International Financial Reporting Standards as disclosed in note 2(a).
Auditor’s opinion on AASB 124 remuneration disclosures contained in the directors’ report
In our opinion the remuneration disclosures that are contained on pages 45 to 52 of the directors’ report comply with
Australian Accounting Standard AASB 124 Related Party Disclosures.
KPMG
Paul J McDonald
Partner
Melbourne
26 September 2007
KPMG, an Australian partnership and a member firm of the KPMG network
of independent member films affiliated with KPMG International, a Swiss cooperative.
130
Nufarm Limited – Annual Report 2007
SHAREHOLDER AND STATUTORY INFORMATION
Details of shareholders, shareholdings and top 20 shareholders
Listed securities – 28 September 2007
Number
of holders
Number Percentage held
by top 20
of securities
Fully paid ordinary shares
10,040
171,501,253
70.38
Twenty largest shareholders
Ordinary
shares as at
28.09.07
Percentage of
issued capital
as at 28.09.07
Falls Creek No 2 Pty Ltd
JP Morgan Nominees Australia Limited
Amalgamated Dairies Limited
National Nominees Limited
HSBC Custody Nominees (Australia) Limited
ANZ Nominees Limited
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