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Diversity
places, products and people
Annual Report 2013
Special thanks to Gillian Sweetland who has
produced Nufarm’s annual and interim reports
since 2000. Gillian has been an invaluable
contributor and a highly valued colleague.
Contents
01 About Nufarm
02 Key events
02 Facts in brief
04 Managing director’s review
11 Business review
16 Health, safety and environment
18 Executive management
20 Board of directors
22
Information on the company
25 Corporate governance
32 Financial report
33 Directors’ report
47 Lead auditor’s independence declaration
48
Income statement
49 Statement of comprehensive income
50 Balance sheet
51 Statement of cash flows
52 Statement of changes in equity
54 Notes to the financial statements
117 Directors’ declaration
118
Independent auditor’s report
120 Shareholder and statutory information
124 Directory
Produced by Gillian Sweetland. Photographers include Lynton Crabb, Danielle Moore and Melissa Powell. Designed by MDM Design.
About Nufarm
Nufarm is expanding its reach.
» We have a strong and growing global platform, with sales in more than
100 countries.
» We have an expanding range of products that provide solutions and improved
yield in a broad range of crops and market segments.
» We have talented and committed people working with our customers and
partners across all continents.
This expanding reach provides us with more opportunities. It also helps protect
the business against risks from adverse climatic and market conditions. These
risks are an inevitable part of the business of agriculture.
Global headquarters
Regional headquarters
Crop protection production
Seeds production
Sales countries
Nufarm Limited Annual Report 2013 | 01
Key events
» Tough Australian conditions affect regional results
» Strong earnings growth in overseas businesses
» Seeds business continues to expand
» Higher working capital and net debt
» Increased dividend payment
Facts in brief
Trading results
Profit attributable to shareholders
Material (gain)/loss
Underlying net profit after tax
Sales revenue
Total equity
Total assets
Ratios
Earnings per ordinary share
Gearing ratio (%)
Net tangible assets per ordinary share ($)
Distribution to shareholders
12 months ended
31 July 2013
$000
12 months ended
31 July 2012
$000
80,999
2,224
83,223
2,277,292
1,664,745
3,371,669
25.5
27.6
3.04
72,594
42,846
115,440
2,181,551
1,476,802
2,801,268
22.3
24.1
2.88
Annual dividend per ordinary share (cents)
8.0
6.0
People
Staff employed
3,458
3,401
The financial information contained within our financial statements has been prepared in accordance with IFRS. Refer to page 7 for definitions of the non-IFRS measures used
in the annual report. All references to the prior period are to the year ended 31 July 2012 unless otherwise stated. Non-IFRS measures have not been subject to audit or review.
02 | Nufarm Limited Annual Report 2013
Nufarm Limited Annual Report 2013 | 03
Managing director’s review
While underlying profitability in financial year 2013 was down on
the previous year, our results reinforce the importance of building
a strong global platform and being diversified across our product
and market segments.
Underlying earnings before interest and
tax (EBIT) was $186.8 million, down nine
per cent on the $206.0 million recorded
in the 2012 financial year.
Doug Rathbone AM
Managing director and
chief executive
With hot and dry climatic conditions
in Australia having a significant impact
on demand for crop protection products,
our ’home-base’ results were very
disappointing. Australia is our largest
country market and we have secured
a leadership position in Australia with
a full service business model, backed by
extensive investment in manufacturing
and distribution assets, product
development activity and a large sales
team. While we are committed to
maintaining our leadership position
in Australia, a high fixed cost base
weighed heavily on the performance
of the business when volumes were
down and margins were lower.
In contrast to the Australian results,
our performance in other parts of the
world – and in our expanding seeds
business – was very strong.
The group generated a statutory
profit after tax of $81.0 million for
the 12 months to 31 July 2013. This
compares to a statutory profit after
tax of $72.6 million in the previous
financial year.
Group revenues increased by just
over four per cent to $2.28 billion
(2012: $2.18 billion).
Profit/loss attributable to shareholders
9
.
9
7
0
.
1
8
6
.
2
7
0
.
4
2
-
8
.
9
4
-
n
o
i
l
l
i
m
$
9
0
0
2
0
1
0
2
1
1
0
2
2
1
0
2
3
1
0
2
Higher interest costs and foreign
exchange losses contributed to a larger
relative fall in underlying net profit,
which fell from $115.4 million in 2012
to $83.2 million in financial year 2013.
Foreign exchange losses included within
net financing expenses amounted to
$10.7 million in financial year 2013,
contrasting with a foreign exchange
gain of $8.2 million in 2012. The foreign
exchange impact on the proceeds of
Nufarm’s step-up securities (NSS) has
been included in net foreign exchange
gains and losses rather than being
treated as a material item as in the
previous year (FY12: a net pre-tax
gain of $11.1 million).
Material items amounted to a net loss
of $2.2 million, representing the balance
of the settlement of a class action
brought against the company in 2011.
Earnings per share were 25.5 cents
(2012: 22.3 cents). Excluding material
items, earnings per share were
26.4 cents (2012: 38.7 cents).
The gross profit margin of 27.4 per cent
in financial year 2013 was slightly lower
than the 28.0 per cent recorded in 2012.
Excluding the Australian business from
both years, the aggregate gross profit
margin of other regions improved year
on year.
Net working capital at 31 July was
$1.01 billion (constant currency basis:
$915 million), up on the $771 million
recorded at 31 July 2012. Net debt
increased to $633 million (31 July
2012: $468 million). On a constant
currency basis, net debt at year end
was $552 million. Average net debt
was $753 million, compared to
$650 million in 2012.
The company will pay a fully franked
final dividend of five cents per share,
resulting in a full year dividend of eight
cents. A full year dividend of six cents
per share was paid in the previous year.
04 | Nufarm Limited Annual Report 2013
Group revenues increased
by just over four per cent
to $2.28 billion
Nufarm Limited Annual Report 2013 | 05
Managing director’s review continued
Interest/tax/cash flow
Net external interest costs were
$50.5 million, up on the $40.9 million
in the previous year and driven by higher
average net debt due to higher levels
of working capital, the funding of
acquisitions (total consideration
of $30.7 million) and the payment
associated with settlement of the class
action ($46.7 million). Higher interest
costs also reflected increased funding
costs associated with the seven year
senior unsecured notes issued by the
company in October 2012.
The reported effective tax rate is
27.6 per cent, which is lower than the
34 per cent, which applied in the previous
financial year. Excluding material items,
the underlying effective tax rate is
27.7 per cent (2012: 31.7 per cent).
The effective tax rate has benefitted
from the reversal of over-provisions
booked in the previous year.
The business generated net operating
cash inflows of $62.8 million, compared
to $166.5 million in the prior period.
Balance sheet management
Net debt at year end was $633 million,
considerably higher than the $468 million
recorded on 31 July of the previous year.
On a constant currency basis, however,
net debt at balance date was $552 million.
Average net debt was $753 million,
compared to $650 million in 2012.
Higher debt levels were the result of
higher working capital, acquisition-
related activity, and the payment
of the class action settlement.
Net working capital at 31 July increased
to $1.01 billion from $771 million at the
end of the previous year. The higher year
end working capital was affected by
excess inventory due to a poor season
in Australia and a last quarter inventory
build in Brazil to support strong sales
activity in the early part of the new
financial year. There was also an
adverse translation impact on
overseas inventory balances.
Average net working capital as a
proportion of sales was 46.8 per cent,
representing an increase on the
corresponding measurement of
45.3 per cent in 2012.
Gearing (net debt to net debt plus equity)
was 27.6 per cent (2012: 24.1 per cent).
Capital expenditure (property, plant and
equipment) in 2013 was $44.3 million,
slightly lower than the $47.6 million
expended in 2012. Capital expenditure
on intellectual property and product
development was $45.2 million versus
$29.6 million in the previous year,
reflecting a higher investment in
US data compensation payments in
support of new product introductions.
People and organisation
The talent and commitment of Nufarm
employees around the world continues
to be a key driver of the company’s
success. As the business has expanded
into new markets and has acquired new
businesses, we have benefitted from a
diversity of skills, ideas and cultures.
Over the 2013 reporting period, we
continued to strengthen the organisation
and implement changes to management
structures in some parts of our business.
These changes will align management
teams with the specific strategic growth
strategies that have been implemented
in certain regions.
On behalf of all shareholders, I express
my appreciation to our employees for
their continued efforts.
Outlook
With average seasonal conditions in
Nufarm’s major markets, the company
expects to generate an improved
underlying EBIT result in the 2014
financial year.
Despite increased competition,
the company is forecasting a strong
improvement in its Australian results,
given a return to more normal seasonal
conditions and demand patterns. It
is anticipated, however, that excess
inventory in the channel resulting from
last year’s poor season may place
pressure on margins in some segments.
Several regulatory-based product
withdrawals in Europe will result
in the loss of sales that contributed
some $4 million in EBIT in financial
year 2013. Nevertheless Nufarm’s
European business is well positioned
to capitalise on growth opportunities,
driven by a number of new products
scheduled to be launched, and increased
market penetration in existing segments.
06 | Nufarm Limited Annual Report 2013
Managing director’s review continued
The company’s North American business
is also expecting to generate sales and
earnings growth in the current year.
Given the strong recent growth in
Nufarm’s Brazil business, further
investments will be made to both
consolidate this growth and build a
stronger platform to secure additional
revenue and earnings expansion in
this fast growing market. Sales activity
in Brazil has been very strong in the
initial months of the financial year.
The Asian business is forecast to be
slightly down, with additional pricing
pressure anticipated in the glyphosate
segment. Expansion into new crop
segments such as rice and vegetables
is expected to drive growth in Asia over
the longer term.
The company’s seed technologies
business is expected to achieve an
improved result in financial year 2014,
with expanded penetration in a number
of geographies and the benefit of
a number of new varieties and
downstream products being brought
to market. There will be an increased
spend in relation to the long chain
omega-3 canola project as it continues
to meet key development milestones.
A strong focus will be maintained
on balance sheet management, with
working capital, net debt and cash
flow metrics expected to improve over
the course of the year. Interest costs
are forecast to be in line with the 2013
financial year with the full year impact
of interest rates associated with the
company’s US high yield notes and
a higher net debt level at the start of
the year being offset by lower base
rates in Australia.
IFRS and non-IFRS financial information
Nufarm results are reported under International Financial Reporting Standards (IFRS) including underlying EBIT and
underlying EBITDA, which are used to measure segment performance. This release also includes certain non-IFRS
measures including underlying net profit after tax and gross profit margin. These measures are used internally by
management to assess the performance of our business, make decisions on the allocation of our resources and
assess operational management. Non-IFRS measures have not been subject to audit or review.
The following notes explain the terms used throughout this profit release:
1. Underlying EBIT is earnings before net finance costs, taxation and material items. Underlying EBITDA is underlying
EBIT before depreciation and amortisation of $73.986 million for the year ended 31 July 2013 and $61.781 million for
the year ended 31 July 2012. We believe that underlying EBIT and underlying EBITDA provide useful information, but
should not be considered as an indication of, or an alternative to, profit/(loss) for the period as an indicator of operating
performance or as an alternative to cash flow as a measure of liquidity.
2. Underlying EBIT is used to reflect the underlying performance of Nufarm’s operations. Underlying EBIT is reconciled
to operating profit below;
Year ended 31 July
Underlying EBIT
Material items
Operating profit
2013
$000
205,973
(61,001)
144,972
2012
$000
186,803
(3,177)
183,626
3. Non-IFRS measures are defined as follows:
• underlying net profit after tax – comprises profit/(loss) for the period attributable to the equity holders of Nufarm
Limited less material items as described on page 2;
• average gross margin – defined as average gross profit as a percentage of revenue;
• average gross profit – defined as revenue less a standardised estimate of production costs excluding material
items and non-product specific rebates and other pricing adjustments;
• net external interest expense – comprises interest income – external, interest expense – external and lease
expense – finance charges as described in note 10 to the 31 July 2013 Nufarm Limited financial report; and
• constant currency – reconciled in the table below – whereby ’(a)’ represents the impact from the fluctuation in
exchange rates between all foreign currency denominated amounts and the Australian dollar. Constant currency
results exclude any benefit or loss caused by foreign exchange fluctuations between foreign currencies and the
Australian dollar, which would not have occurred if there had been a constant exchange rate.
Year ended 31 July
FY 2012 as reported
Foreign currency translation impact (a)
Constant currency adjusted
FY 2013 as reported
Net working capital
$000
770,759
144,686
915,445
1,011,004
Net debt
$000
467,804
84,575
552,379
633,113
The longer term outlook shows strong
revenue and earnings growth as the
company continues to execute on its
strategic growth plans. Those plans
involve further diversification and
expansion into overseas markets
and accelerated growth into higher
value and more defendable product
and market segments.
Doug Rathbone AM
Managing director and
chief executive
25 September 2013
Nufarm Limited Annual Report 2013 | 07
Managing director’s review continued
Underlying net profit after tax
6
.
9
5
1
4
.
5
1
1
3
.
8
9
2
.
3
8
6
.
8
5
9
0
0
2
0
1
0
2
1
1
0
2
2
1
0
2
3
1
0
2
Underlying EBITDA
1
.
0
8
3
8
.
7
6
2
8
.
0
6
2
8
.
1
3
2
3
.
6
0
2
9
0
0
2
0
1
0
2
1
1
0
2
2
1
0
2
3
1
0
2
Gearing ratio
5
.
6
3
7
.
5
2
9
.
2
2
1
.
4
2
6
.
7
2
9
0
0
2
0
1
0
2
1
1
0
2
2
1
0
2
3
1
0
2
n
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l
i
m
$
n
o
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l
i
m
$
e
g
a
t
n
e
c
r
e
P
08 | Nufarm Limited Annual Report 2013
Group sales
7
7
6
,
2
9
6
1
,
2
4
8
0
,
2
2
8
1
,
2
7
7
2
,
2
n
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l
i
m
$
e
g
a
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n
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c
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P
s
t
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C
9
0
0
2
0
1
0
2
1
1
0
2
2
1
0
2
3
1
0
2
Return on funds employed
1
.
3
1
4
.
0
1
8
.
8
7
.
7
0
.
6
9
0
0
2
0
1
0
2
1
1
0
2
2
1
0
2
3
1
0
2
Earnings per share
5
.
3
3
5
.
5
2
3
.
2
2
0
.
5
1
-
7
.
3
2
-
9
0
0
2
0
1
0
2
1
1
0
2
2
1
0
2
3
1
0
2
Nufarm Limited Annual Report 2013 | 09
Australia is Nufarm’s largest
country market and represents a
substantial fixed cost investment
10 | Nufarm Limited Annual Report 2013
Business review
The 2013 financial year was characterised by very challenging
seasonal conditions and a poor result in Australia, with positive
earnings growth in all other regions, as well as the company’s
seed technologies business.
The results underline the importance of
a geographically diverse business, where
adverse climatic and business conditions
in certain markets can be offset with
exposure to more positive conditions
and growth opportunities in other
geographies.
Good progress was achieved on the
development and implementation
of regional strategies, with a clearer
focus on supporting growth in certain
product and market segments.
Nufarm’s crop protection business
accounted for 94 per cent of group
revenues and grew sales by just over
four per cent to $2.15 billion. These sales
generated an average gross margin
of 26 per cent, slightly lower than the
27 per cent gross margin recorded in
2012 and reflecting higher sales of lower
value products in some markets and
margin pressure associated with the
weaker market conditions in Australia.
The seed technologies segment generated
revenues of $132 million, up nine per cent
on the previous year and contributing
a higher average gross margin of
55 per cent (2012: 53 per cent).
Corporate (head office) costs were
slightly lower in 2013 at $40.6 million,
compared to $41.4 million in 2012.
Total expenses were up by just under
10 per cent on the previous year,
reflecting higher depreciation and
amortisation costs, increased head
count – particularly in the South
American and seeds businesses –
and higher selling and distribution
costs. Underlying selling, general
and administrative (SG&A) expenses
to sales were 18.2 per cent compared
to 17.3 per cent in the previous year.
Operating segments summary
The table on the right provides a summary
of the performance of the operating
segments for the 2013 financial year
and the prior corresponding period.
Australia/New Zealand
The Australian and New Zealand
businesses generated sales of
$604.4 million, 14 per cent down on
segment sales in the previous year
($701.0 million). This represented
28 per cent of total crop protection
revenues (2012: 34 per cent). Underlying
EBIT was well down on the previous year
at $35.4 million (2012: $106.0 million),
reflecting very difficult conditions in the
Australian market.
Unusually dry weather conditions
persisted in most Australian cropping
regions from early in the financial year
until the last quarter of the financial
period. These conditions resulted in
the need for very little summer weed
control and exceptionally low levels of
insect and fungal disease pressure.
Sales of relatively higher value products
into summer crops were significantly
down on normal levels. It remained
dry through the pre-plant period ahead
of the major winter crop, resulting in
low levels of demand for fallow and
pre-emergent herbicide applications.
While rains in May and June helped drive
demand for post-emergent herbicides,
lost opportunities over the balance of
the year had a very negative impact
on the business.
Year ended 31 July
Revenue
2012
2013
($000s)
Crop protection
Australia and
701,022
New Zealand
125,586
Asia
431,095
Europe
470,243
North America
South America
332,636
Total crop protection 2,145,604 2,060,582
Seed technologies
– global
Corporate
Nufarm group
120,969
–
2,277,292 2,181,551
604,432
125,201
468,253
516,278
431,440
131,688
–
Crop protection sales in Australia were
down some 17 per cent on the previous
year and with additional competition
for fewer sales opportunities, margins
also were affected negatively. Lower
production volumes also affected
the efficiency of the Australian
manufacturing plants.
Australia is Nufarm’s largest country
market and represents a substantial
fixed cost investment, which supports
our clear market leadership position.
While a return to more normal seasonal
conditions is expected to see a strong
earnings recovery in Australia, an
extensive review of the business has
been undertaken to identify areas for
improvement.
Substantial work was also completed
to prepare the Australian business for
changes to distribution arrangements
involving the BASF portfolio (which cease
in March 2014) and a transition to new
branding for the company’s glyphosate
portfolio (effective August 2013).
The New Zealand business generated
slightly higher sales, despite dry
summer and autumn conditions, which
reduced demand for herbicides. Insect
pressure was above average. The
manufacturing division, which produces
insecticide and fungicide products for
Nufarm businesses in other parts of
the world, performed strongly.
Change
(%)
2013
Underlying EBIT
Change
(%)
2012
35,352
-13.8
19,580
-0.3
57,245
8.6
42,153
9.8
40,595
29.7
4.1 194,925
105,982
16,735
43,223
33,327
17,526
216,793
32,449
8.9
N/A (40,571)
4.4 186,803
30,589
(41,409)
205,973
-66.6
17.0
32.4
26.5
131.6
-10.1
6.1
-2.0
-9.3
Nufarm Limited Annual Report 2013 | 11
Business review continued
Asia
Asian crop protection sales were
$125.2 million, in line with the previous
year ($125.6 million) and again
representing six per cent of total
crop protection revenues. Underlying
EBIT was $19.6 million, up from
$16.7 million in 2012.
The business performed solidly despite
lower demand for crop protection
products in the plantation segment
due to a lower palm oil commodity
price. This is a major segment for
Nufarm in Indonesia and Malaysia.
Nufarm opened a new office in South
Korea to support increased sales into
that market and launched several
products that will help secure growth
in target crop segments including rice
and vegetables.
North America
North American crop protection sales
increased by 10 per cent to $516.3 million.
Measured in local currency, the increase
in US sales was approximately two per
cent, with Canadian sales up 26 per
cent on the previous year. The region
generated 24 per cent of total crop
protection revenues (2012: 23 per cent).
Underlying EBIT was up by more than
26 per cent, increasing to $42.2 million
(2012: $33.3 million).
A late winter in the US reduced
opportunities in the burndown (pre-plant)
segment, with the large soy and corn
crops being planted later than usual and
over a more concentrated period. Cotton
plantings were down resulting in lower
demand for Nufarm’s portfolio of plant
growth regulators in that segment. Sales
of phenoxy herbicides were strong and
the US agriculture business was able
to increase total sales despite
some challenging market conditions.
The business also performed strongly
in the industrial vegetative management
segment with both increased sales
and stronger margins. The company
completed the acquisition of Cleary
Chemical Corporation midway through
the period, which has strengthened
Nufarm’s fungicide and insecticide
portfolio in the high value turf and
ornamental market, reinforcing
Nufarm’s top three position in
that segment.
A new manufacturing facility was
commissioned at Alsip (Chicago),
specialising in the formulation of
insecticides, fungicides and custom
seed treatment applications.
The strong Canadian result was
supported by growth in the western
cereals and pulse markets and increased
sales into the horticulture segment.
Several new products launched during
the year had outstanding success.
South America
South American crop protection sales
increased by almost 30 per cent to
$431.4 million (2012: $332.6 million).
Underlying EBIT was $40.6 million,
a substantial improvement on the
previous year ($17.5 million). Regional
sales comprised 20 per cent of total
crop protection revenues, up from
16 per cent in the previous period.
Seasonal conditions in Brazil and
Argentina were generally average,
albeit some dry weather affected sales
in the important pasture segment in
Brazil. Dry weather in Colombia and
Chile also had an impact on demand
in the last quarter of the year.
Market conditions in Brazil were
favourable, with increased plantings
and an expansion in the use of crop
protection inputs. In local currency,
sales in Brazil were R$686 million,
up almost 41 per cent on the previous
year. Brazilian EBIT more than doubled,
in local currency, to R$67.8 million,
from R$29.8 million in 2012.
Nufarm strengthened its position in each
of its target segments and continued to
diversify its product offering with several
new product introductions during
the year. A new high load glyphosate
formulation, ’Crucial’, was very
successful, resulting in both increased
volumes and margins in the glyphosate
segment. An expansion of the sales force
provided reach into additional regions.
The business in Argentina also performed
very strongly, with sales up by some
34 per cent in local currency and a
significant improvement in profitability,
driven by higher sales of differentiated
products at improved margins.
Europe
European sales were up by more
than eight per cent to $468.3 million
(2012: $431.1 million). This represented
22 per cent of total crop protection
revenues (2012: 21 per cent). Underlying
EBIT improved strongly to $57.2 million
from $43.2 million in the previous year.
12 | Nufarm Limited Annual Report 2013
Business review continued
Seasonal conditions in Europe were
mixed, with a relatively cold and wet
autumn and a long winter having a
negative impact on selling opportunities
in a number of markets. The UK
experienced difficult climatic conditions,
with total industry sales estimated to be
down by up to 20 per cent in that market.
Fungicide demand was strong in some
markets and Nufarm’s more diversified
portfolio enabled the company to take
advantage of those conditions. Growth in
Europe was also driven by the successful
introduction of new products and strong
sales of phenoxy herbicides.
Nufarm’s business in central/eastern
Europe grew strongly. Sales in Germany,
Spain and Portugal were also higher
than in the previous year.
The company strengthened its position
in the non-crop home and garden
market in France, despite unhelpful
climatic conditions during the high
demand season. Nufarm is now the
market leader in this segment and has
expanded both its product range and
distribution network.
The European manufacturing units
performed very strongly, with increased
volumes of phenoxy herbicides produced
to meet strong demand in global
markets. Overhead recoveries in
these manufacturing facilities made
an important contribution to the
regional result.
The European management structure
was changed during the year, with the
appointment of a single head of Europe
in place of the previous multi-regional
structure. This is resulting in additional
focus and efficiencies across the
business.
Major product segments
Crop protection
Nufarm’s crop protection business
accounted for 94 per cent of group
revenues and grew sales by four per cent
to $2.15 billion. These sales generated
an average gross margin of 26 per cent
(2012: 27 per cent).
Herbicide sales were $1.48 billion,
slightly up on the previous year, with
the average gross margin down slightly
at 25 per cent. Very dry conditions and
lower demand in both Australia and
in the pasture segment in Brazil,
where Nufarm has a substantial
position, affected both volumes
and pricing in those markets.
While glyphosate volumes were in line
with the previous year, sales were higher
and represented 26 per cent of total
crop protection revenues. This reflected
higher input costs and higher selling
prices for glyphosate products. Margins
improved slightly, driven by the
successful launch of a differentiated
formulation in Brazil. Phenoxy herbicide
sales were down with demand in key
markets adversely affected by seasonal
factors. Sales of several other herbicides
increased, including dicamba and
bromoxynil.
Nufarm’s insecticide portfolio generated
a 17 per cent increase in sales to
$215 million, but a lower value product
mix saw margins decline in comparison
to the 2012 financial period (32 per cent
versus 35 per cent). Insect pressure in
Brazil’s major crops generated strong
demand for chlorpyrifos and Nufarm’s
sales of this chemistry were nearly
double that of the previous year.
Increased competition in the
imidacloprid segment resulted in
pricing pressure in some markets
and new regulatory restrictions in
some crop segments in Europe also
affected sales, which were down
compared to the prior year. Some higher
value insecticide products were not
required in Australia due to unusually
low insect pressure in summer crops.
Fungicide sales were up slightly to
$219 million, with average margins in
line with the previous year. New product
launches and relatively high disease
incidence at times of the year in Brazil
and Europe helped offset the very dry
conditions and subsequent low demand
for fungicide products, in Australia.
While sales of plant growth regulators
(PGRs) were in line with the previous
year, margins improved. Demand in the
cotton segment was down but Nufarm’s
expanded portfolio in the cereals market
in Europe and additional sales of
PGRs in distribution arrangements
with Sumitomo Chemical helped drive
an improved performance.
Nufarm Limited Annual Report 2013 | 13
Business review continued
Seed technologies
The company’s seed technologies
business, which includes the global
Nuseed business and Nufarm’s seed
treatment applications, grew sales by
nine per cent to $131.7 million and
generated an average gross margin
of 55 per cent, which was an
improvement on the previous year
(53 per cent). Underlying EBIT was
up six per cent to $32.4 million.
Seed technologies markets faced below
average conditions, with extreme drought
in the lead-up to canola, sunflower
and seed treatment selling periods
in Australia and a very wet and cold
spring affecting planting conditions in
the USA sunflower segment and the
soybean seed treatment market. These
challenges were offset by another record
sorghum year within most markets and
contributions from recent acquisitions.
A hot, dry summer in Australia resulted
in limited subsoil moisture and reduced
canola plantings. Growers in marginal
areas elected to plant retained open
pollinated seed rather than purchase
Nuseed hybrid and elite varieties.
Nuseed successfully launched its
‘Wholis’ gluten free premium food grade
sorghum product and announced an
important downstream partnership with
ADM, one of the world’s largest food
processing companies. Important
technical milestones were also achieved
on Nuseed’s omega-3 DHA project
in partnership with CSIRO and the
Australian Grains Research and
Development Corporation (GRDC).
This project – which aims to express
DHA rich canola oil – now enters
significant development and regulatory
phases, with a commensurate increase
in funding support from Nufarm.
The 2013 financial year saw increased
investment in Nuseed’s global platform
to help position the business for future
strong growth. This included the
establishment of stronger European
breeding and product development
capabilities and the recruitment of
additional management, research
and development and finance resources.
Nuseed completed the acquisition
of 51 per cent of the Atlantica seeds
business in Brazil at a cost of
R$25 million in January 2013. This
acquisition allows Nuseed to supply its
sorghum and sunflower seeds through
the Atlantica distribution network and
leverage other development programs
in Australia, Argentina and the USA.
Seed treatment sales were slightly
down on the previous year. This reflected
adverse climatic conditions in some
markets, particularly Australia and the
USA. Some applications, involving
neonicotinoid chemistry, were withdrawn
in Europe due to regulatory authority
concerns about impacts on bees. These
restrictions also affected the company’s
seed treatment sales.
Several new products were launched,
positioning the business for growth
with a return to more normal seasonal
demand. The company’s new Alsip
(Chicago) seed treatment facility was
commissioned and has helped secure
new business from US customers.
Sales revenue by region 2013
Total business
Sales by product segment 2013
Crop protection segment
Sales by product segment 2013
Seed technologies
Australia/New Zealand
North America
South America
Europe
Asia
$2,277.3 million
28%
25%
20%
21%
6%
Herbicides
Fungicides
Insecticides
Other*
69%
10%
10%
11%
Seed
Seed treatment
$131.7 million
69%
31%
$2,145.6 million
* Other includes machinery, adjuvants,
PGRs and industrial.
14 | Nufarm Limited Annual Report 2013
Nufarm Limited Annual Report 2013 | 15
Health, safety and environment
As a company engaged in the development, production and supply of inputs to agriculture, Nufarm
works in an industry where sustainability principles are entrenched. Farmers – and other users of
our products – have followed and refined sustainable practices for many years and know that these
principles are all-important in maintaining the productive capacity of their land.
Nufarm’s commitment to these same
principles is very strong – sustainability
is a cornerstone of the way we do
business, so we are moving to more
comprehensive reporting of our
efforts and performance across key
sustainability measures and activity.
Part of that progress is to communicate
our initiatives across a broader range of
stakeholder engagement indicators and
the company’s first sustainability report
may be downloaded from our website,
together with 17 individual site reports.
Notwithstanding that broader view,
our performance against various health,
safety and environmental parameters
remains critically important. In the
2012 calendar year we improved our
performance in certain measures of
safety but did not meet our objectives for
continuous improvement in other areas.
The health and safety data includes
permanent and casual employees and
contractors with data collected from
manufacturing sites, offices and regional
service centres. As yet, it does not
include data from eight offices
in Asia and South America.
Overall, our 2012 health and safety
performance improved from 2011
but we failed to meet the target limits
set by the board for 2012, which were:
• LTIFR <1.16;
• MTIFR : <2.31; and
• severity: <0.014.
The improvements in 2012 over 2011 were:
• LTIFR 27 per cent;
• MTIFR 40 per cent; and
• severity rate 46 per cent.
LTIFR 2007–2012
Severity 2007–2012
4.0
3.5
3.0
2.5
2.0
1.5
1.0
8
7
6
5
4
3
2
0.06
0.05
0.04
0.03
0.03
0.02
0.01
7
0
0
2
8
0
0
2
9
0
0
2
0
1
0
2
1
1
0
2
2
1
0
2
7
0
0
2
8
0
0
2
9
0
0
2
0
1
0
2
1
1
0
2
2
1
0
2
Target
Actual
Target
Actual
MTIFR 2007–2012
Unusual incident report/injury report
versus LTIFR 2007–2012
14
12
10
8
6
4
2
0
2
0
0
2
4
0
0
2
6
0
0
2
8
0
0
2
0
1
0
2
2
1
0
2
14
12
10
8
6
4
2
0
7
0
0
2
8
0
0
2
9
0
0
2
0
1
0
2
1
1
0
2
2
1
0
2
Target
Actual
LTIFR
UIR/IR ratio
16 | Nufarm Limited Annual Report 2013
Health, safety and environment continued
The data on our environmental
management and performance is
collected from our manufacturing
plants, all of which have environmental
management systems in place in varying
degrees of complexity and development.
Each country where we operate has
different regulatory requirements
and Nufarm has established specific
environmental management systems
to ensure compliance.
During 2012, due to an increase in
production and changes in product
mix at some sites, total greenhouse
emissions increased while emissions
per tonne of product remained
consistent. The majority of greenhouse
gas is generated from electricity and
gas used in the production process
with the Laverton, Australia plant
being the largest emitter, followed
by Wyke in the UK.
Water is an essential component of
most of our production processes and,
again, production volumes and the
product mix affect the amount of water
used and the waste water generated.
Nufarm remains vigilant in its
commitment to strive for further
improvement and better outcomes.
LTIFR or lost time injury frequency rate
is the number of lost time injuries per
million hours worked that result in one
or more day’s absence from work.
MTIFR or medical treatment injury
frequency rate is the number of lost
time injuries plus those that did
not result in lost time but required
treatment by a qualified medical
practitioner per million hours worked.
Severity is the number of days lost due
to injuries per thousand hours worked.
2.5
2.0
1.5
t
c
u
d
o
r
p
s
e
n
n
o
t
/
r
e
t
a
w
s
e
n
n
o
t
160
130
s
e
n
n
o
t
0
0
0
‘
100
Water efficiency 2007–2012
Production volume 2007–2012
500
s
e
n
n
o
t
0
0
0
‘
400
7
0
0
2
8
0
0
2
9
0
0
2
0
1
0
2
1
1
0
2
2
1
0
2
7
0
0
2
8
0
0
2
9
0
0
2
0
1
0
2
1
1
0
2
2
1
0
2
CO2 released from energy use
and processes 2007–2012
7
0
0
2
8
0
0
2
9
0
0
2
0
1
0
2
1
1
0
2
2
1
0
2
Nufarm Limited Annual Report 2013 | 17
Elbert Prado
Group executive manufacturing
(from 1 August 2013)
Elbert Prado, a chemical engineer,
joined Nufarm on 1 July 2013 after
extensive international experience
in senior operations roles within the
chemical industry. He has a very
strong skills set in crop protection
manufacturing and related areas,
particularly safety. He was global
manufacturing and supply chain
director for the Rohm and Haas
process chemicals and biocides
business, with responsibility for
11 manufacturing sites in Europe,
Asia and the Americas and global
supply chain.
David Pullan
Group executive operations
(retired 31 July 2013)
David Pullan joined the company
in 1985. A mechanical engineer,
David has extensive experience in
chemical synthesis and manufacturing,
having held a variety of operational
and management positions in the oil
and chemical industries. David was
responsible for all of Nufarm’s global
manufacturing and production sites.
Robert Reis
Group executive corporate
strategy and external affairs
A former journalist, political adviser
and lobbyist, Robert joined Nufarm in
1991. Robert has executive management
responsibility for corporate strategy
and is responsible for global issues
management, investor relations, media,
government and stakeholder relations.
Executive management
Doug Rathbone AM
Managing director and
chief executive
Doug Rathbone’s background is
chemical engineering and commerce
and he has worked for Nufarm Australia
Ltd for 40 years. Doug was appointed
managing director of Nufarm Australia
in 1982 and managing director of Nufarm
Ltd in October 1999. He joined the board
of directors in 1987. He also served as a
non-executive director on the board of
CSIRO (2007–2010).
Brian Benson
Group executive 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.
Paul Binfield
Chief financial officer
Paul Binfield joined Nufarm in
November 2011. He has held senior
strategic financial roles at Coles
Liquor and Hotels, a major division of
Wesfarmers Ltd, and at Mayne Group.
Paul has extensive experience in publicly
listed and private company finance
functions, both in Australia and the UK.
Bonita Croft
Group executive human resources
and organisation development
Bonita joined Nufarm in December
2010 in a newly created role responsible
for people and organisation structure.
She is a very experienced professional
who has had previous human resources
executive roles in large companies with
international operations, including
Brambles.
Rodney Heath
Group executive corporate services
and company secretary
Rod Heath has a bachelor of law and
joined the company in 1980, initially as
legal officer, later becoming assistant
company secretary. In 1989, Rod moved
18 | Nufarm Limited Annual Report 2013
from New Zealand to Australia to
become company secretary of Nufarm
Australia Ltd. In 2000, Rod was appointed
company secretary of Nufarm Ltd.
Greg Hunt
Group executive global marketing
and business development
Greg joined Nufarm in February 2012.
He has had considerable executive
and agribusiness experience with a
successful career at Elders Australia
Limited where he held a number of
management positions focused on
both the Australian and international
operations of Elders. Greg was
appointed chief executive officer of
Elders in 2001, a position he held
until 2007, leading the company’s
operations across a broad range of
activity, including rural merchandising
and product distribution. After leaving
Elders, Greg worked with a number of
organisations in business development
and agribusiness related advisory roles.
He is a director of Tandou Limited.
Dale Mellody
Group executive global supply
chain and strategic procurement
Dale Mellody joined Nufarm as a
territory manager in 1995, having
completed his bachelor of agricultural
science. Promoted to the senior
management group in July 2005, he
has had various global roles including
group executive global marketing,
general manager NAFTA and has
assisted with a number of company
acquisitions. Dale is now responsible
for global supply chain and strategic
procurement.
Mike Pointon
Group executive innovation
and development
Mike Pointon joined Nufarm in 2001 and
was responsible for Nufarm’s southern
European business based in France.
He has a degree in agricultural science
and over 25 years’ experience in the crop
protection industry. Most recently based
in Melbourne with responsibility for
Nufarm’s global glyphosate business,
Mike was appointed to the executive
team in July 2008. He is responsible
for the group’s product development
and regulatory affairs activities.
Executive management continued
Doug Rathbone AM
Bonita Croft
Dale Mellody
David Pullan
Brian Benson
Rodney Heath
Mike Pointon
Robert Reis
Paul Binfield
Greg Hunt
Elbert Prado
Nufarm Limited Annual Report 2013 | 19
Board of directors
Doug Rathbone AM
Managing director and
chief executive
Doug Rathbone AM, 67,
joined the board in 1987.
His background is chemical
engineering and commerce
and he has worked for
Nufarm Australia Limited
for 40 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 CSIRO in 2007
and retired from that board
in September 2010.
Doug has been named as
one of Australia’s top 100
most influential engineers
by Engineers Australia. The
list includes 12 chemical
engineers, five of whom are
IChemE Fellows, of which
Doug is one.
Donald McGauchie AO
(Chairman)
Donald McGauchie AO, 63,
joined the board in 2003 and
was appointed chairman
on 13 July 2010.
He has wide commercial
experience within the
agricultural, 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 a former
member of the board of the
Reserve Bank of Australia.
Donald is chairman of
Australian Agricultural
Company Limited and
a director of James
Hardie Industries plc
and Graincorp Ltd.
Donald is chairman of the
nomination and governance
committee and a member
of the human resources
committee.
Anne Brennan
Gordon Davis
Anne Brennan, 53, joined the
board on 10 February 2011.
Gordon Davis, 57, joined
the board on 31 May 2011.
He has a bachelor of forest
science (hons), master of
agricultural science and
holds a master of business
administration.
Gordon was managing
director of AWB Limited
between 2006 and 2010.
Prior to this, he held various
senior executive positions
with Orica Limited, including
general manager of Orica
Mining Services (Australia,
Asia) and general manager of
Incitec Fertilizers. He has also
served in a senior capacity on
various industry associations.
Gordon is chairman of
the health, safety and
environment committee
and a member of the audit
committee and the human
resources committee.
She has a bachelor of
commerce (hons) from
University College Galway
and is a fellow of the Institute
of Chartered Accountants
in Australia and a fellow
of the Australian Institute
of Company Directors.
She was formerly the
executive finance director
for the Coates Group and
chief financial officer for
CSR. Prior to this Anne was
a partner in professional
services firms Ernst & Young,
Andersen and KPMG.
Anne is deputy chairperson
of Echo Entertainment Group
Limited and a director of
Myer Limited, Charter Hall
Group and Argo Investments
Limited. She is also a director
of Rabobank Australia Limited
and Rabobank New Zealand
Limited. In the past three
years, Anne was a director
of Cuscal Limited.
Anne is a member of the audit
committee and health, safety
and environment committee.
20 | Nufarm Limited Annual Report 2013
Board of directors continued
Frank Ford
Bruce Goodfellow
Peter Margin
Toshikazu Takasaki
Frank Ford, 67, joined the
board on 10 October 2012.
He has a master of taxation
from the University of
Melbourne and a bachelor
of business, accounting from
RMIT University and is a fellow
of the Institute of Chartered
Accountants. Frank is a
former managing partner of
Deloitte Victoria after a long
and successful career as a
professional advisor spanning
some 35 years. During that
period, he was also a member
of the Deloitte global board,
global governance committee
and national management
committee.
He is a director of Toll
Holdings Limited, Citigroup
Pty Limited, Tarrawarra
Museum of Art Limited and a
former non-executive director
of Manassen Foods Group.
Frank is the chairman of
the audit committee and a
member of the nomination
and governance committee.
Bruce Goodfellow, 61, 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.
Dr Goodfellow is a director
of Sanford Ltd, a public
company registered in
New Zealand and listed on
NZX Limited, chairman of
Refrigeration Engineering
Co. Ltd and a director of
Sulkem Co. Ltd and
Cambridge Clothing Co.
Ltd, all privately owned
companies.
Bruce is a member of the
nomination and governance
committee.
Peter Margin, 53, joined the
board on 3 October 2011.
Toshikazu Takasaki, 66,
joined the board in 2012
Mr Takasaki represents
the interests of 23 per cent
shareholder Sumitomo
Chemical Company (SCC).
He is a former executive
of SCC who held senior
management positions in
businesses relating to crop
protection, both within Japan
and in the US. He is now
a business consultant.
He brings broad industry
and international experience
to the board.
He has a bachelor of science
(hons) from the University
of NSW and holds a master
of business administration
from Monash University.
Peter has many years of
leadership experience
in major Australian and
international food companies.
His most recent role was as
chief executive of Goodman
Fielder Ltd and, before that
Peter was chief executive
and chief operating officer
of National Foods Ltd. He has
also held senior management
roles in Simplot Australia Pty
Ltd, Pacific Brands Limited
(formerly known as Pacific
Dunlop Limited), East Asiatic
Company and HJ Heinz
Company Australia Limited.
Peter is currently a director
of Bega Cheese Ltd, PMP
Limited and Ricegrowers
Limited. Over the past
three years Peter has been
a director of Goodman
Fielder Ltd.
Peter is chairman of the
human resources committee
and a member of the health,
safety and environment
committee.
Nufarm Limited Annual Report 2013 | 21
Information on the company
Our business
Nufarm is a leading global crop
protection company and has operated
in the industry for almost 60 years. We
develop, manufacture and sell a wide
range of crop protection products,
including herbicides, insecticides and
fungicides that help protect crops
against damage caused by weeds, pests
and disease. We operate primarily in the
off-patent segment of the crop protection
market, which consists of products using
technical active ingredients for which
the patent has expired. Our focus is on
creating products that use off-patent
active ingredients within a differentiated
formulation, delivery system or other
enhancements that provide additional
benefits to crop producers. We also
have a proprietary seed technologies
business with a portfolio covering canola,
sorghum and sunflower crops and we
are developing a global presence in
the fast growing and high value seed
treatment segment.
We have crop protection manufacturing
and/or seeds facilities in 16 countries
and marketing operations in more than
30 countries. We distribute our products
in more than 100 countries across
Australia and New Zealand, Asia, North
America, South America and Europe.
Our competitive strengths
We believe our leading position in the
crop protection industry is based on
a combination of innovative product
development, comprehensive product
registration expertise and an integrated
global manufacturing, marketing and
distribution platform, which combine
to create a resilient business with
defendable market positions.
Leading positions in targeted markets
and segments across a range of
geographies: we have a diversified
global business with an established
presence in major cropping regions
throughout the world, including
Australia, New Zealand, Asia, North
America, South America and Europe.
Diversified business across geographies
and by products: our geographic and
product diversification mitigates our
exposure to adverse weather conditions
or commercial pressures in any single
cropping region or for any single type
of crop or chemistry. We offer a wide
22 | Nufarm Limited Annual Report 2013
range of products across all crop
protection segments, including
herbicides, fungicides and insecticides,
as well as a range of seeds and seed
treatment products. Our diverse portfolio
contains products designed to be used
at various stages of the cropping cycle,
from pre-planting to pre-harvest.
Differentiated product portfolio with
proven expertise in bringing new
products to market: we have significant
product development expertise, which
enables us to create a portfolio of
value-added off-patent products sold
under a variety of reputable brand
names. We believe this expertise, along
with our ability to respond quickly to
evolving customer needs with new,
differentiated products represents
one of our key competitive strengths.
Global manufacturing, marketing and
distribution platform: our ability to
deliver sufficient quantities of crop
protection products to end users with
short lead time is critical, particularly
given the seasonal nature of cropping.
We have established a global platform
across Australia, New Zealand, Asia,
North America, South America and
Europe that enables us to service our
existing customer base and support
the continued growth of our business.
Established strategic alliance and
commercial relationships with major
crop protection companies: we have a
history of successful collaborations with
other major crop protection companies
that provides opportunities for expansion
into new products and geographic
markets. Our strategic alliance with
Sumitomo Chemical, which includes
distribution agreements in a number
of geographic markets, and our other
commercial relationships encompass
a range of research and development,
manufacturing, supply and distribution
agreements.
Highly experienced management
team supported by strong board of
directors: we have a highly experienced
management team with extensive
chemical engineering, scientific and
industry experience, the majority of
whom have worked for us for at least
a decade. Our board combines a mix
of long-serving directors and more
recent appointees with industry,
financial, accounting, management
and governance expertise.
Our strategies
Our goal is to leverage our strong
product development, manufacturing
and distribution platform as well as our
established market positions to be a
leading global provider of innovative,
off-patent crop protection products,
seeds and seed traits. We aim to achieve
this through the following strategies:
• leverage our product development
and regulatory skills to generate
accelerated growth in higher value
products and market segments: we
believe we have substantial potential
to expand our business and grow our
market share in many of our markets.
We intend to continue growing our
sales and optimising our product mix
through new product development and
commercial partnering, which will be
focused on developing value-added
off-patent products that generate
higher margins. As part of this
strategy, we intend to continue to
grow our Nuseed business, which
is one of our fastest growing and
highest margin businesses;
• optimise route to market strategies:
we constantly evaluate our route to
market strategies, which are designed
to ensure the delivery of the right
product to the right market anywhere
in our global operations. Our global
manufacturing, formulation and
logistics capabilities complemented
by our network of distribution
relationships are key to implementing
this strategy;
• use strategic alliances and other
commercial arrangements with
industry leaders to maximise the
value of our platform: we have an
important strategic alliance with
Sumitomo Chemical as well as a
range of business relationships
with other major companies in
the sector, ranging from supply
agreements, licensing arrangements,
toll manufacturing and distribution
arrangements. We believe these
arrangements provide opportunities
to maximise the value of our product
development, manufacturing and
distribution platforms as well as
increasing our customer base by
providing access to additional
products or new markets or creating
supply chain efficiencies; and
Information on the company continued
• continue to maximise free cash flow
and strengthen our balance sheet:
we are focused on maximising our
free cash flow through our continued
disciplined approach to financial
management. In particular, we are
focused on further improving our
working capital management as it
relates to procurement as well as
management of inventory and
receivables.
Our risks
Due to the scope of our operations and
the industry in which we are engaged,
there are numerous factors that may
have an effect on our results and
operations. The following describes the
material risks that could affect Nufarm.
External risks
Weather conditions may significantly
affect our results of operations and
financial condition.
Fluctuations in commodity prices,
foreign currency exchange rates and in
currency values could have a material
adverse effect on our results of operation
and financial condition.
We are subject to extensive regulation
and stringent environmental, health
and safety laws that may adversely affect
our operational and financial position.
Business, operational and financial risks
We sell our products in competitive
markets, and the success of our
competitive strategy depends on
developing new products and retaining
customers and distributors.
Our collaboration relationships with
other major crop protection companies
may change or be terminated.
We may not be able to obtain funding
on acceptable terms, or at all, due to
a deterioration of the credit and capital
markets. This may hinder or prevent
us from meeting our future capital
needs and from refinancing our existing
indebtedness.
We are dependent on effective
procurement strategies and on the
continuing efficient operation of our
manufacturing plants to be able to deliver
cost competitive products to market.
We may become involved in future
legal proceedings, which may result
in substantial expense and may divert
our attention from our business.
Management of principal risks
Our approach to managing key
risks is outlined below.
Principal risk area
Risk management approach
External risks
Risks arise from variable weather conditions, fluctuations
in commodity prices and currency rates, actions by
governments or regulators.
Business, operational and financial risks
Risks arise from a competitive marketplace, identifying
and developing innovative solutions, legal proceedings,
accessing and sourcing capital from financial markets,
management of manufacturing facilities and supply chain.
In addition, relationships with commercial counterparties
we transact with may change.
The diversification of our portfolio of products, geographies and
currencies is a key strategy for reducing volatility. The managing
director’s review and business review describe external factors
and trends affecting our results and note 31 to the financial
statements outlines the group’s financial risk management
strategy, including market and currency risk. We engage with
government authorities and other key stakeholders to ensure
the potential impacts of proposed regulatory changes are
understood and where possible mitigated.
We support our growth strategy through established
investment approval and review processes that apply to
all major capital decisions and we invest in new product
development and innovation projects that help keep our
businesses competitive. We seek to establish a capital
structure that is appropriate for our business model and
provides a platform to support our growth strategy. We analyse
risks to monitor volatilities and key financial ratios. Credit
limits and review processes are established for all customers
and financial counterparties. Note 31 to the financial
statements outlines our financial risk management strategy.
We engage expert advisers to ensure our intellectual
property is protected and potential impacts of legal
proceedings are mitigated.
We seek to ensure that adequate operating margins are
maintained through operating cost effective manufacturing
facilities. Global sourcing arrangements have been established
to ensure continuity of supply and competitive costs for key
supply inputs. Through the application of our risk management
processes, we identify material catastrophic operational risks
and implement appropriate risk management controls and
business continuity plans.
Nufarm Limited Annual Report 2013 | 23
24 | Nufarm Limited Annual Report 2013
Corporate governance
Nufarm’s board processes have been reviewed to ensure they represent and protect the interests
of all stakeholders including detailed consideration of the Corporate Governance Principles and
Recommendations (‘the ASX principles’), published by the Australian Securities Exchange Limited’s
(ASX) Corporate Governance Council.
Nufarm’s corporate governance
practices can be viewed 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 30 best
practice ASX recommendations during
our reporting period. Nufarm complies
with all the ASX principles.
Management and oversight
of Nufarm
The board
The governing body of the company
is the board of directors. The board’s
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 the managing director
and senior executives.
The board has set specific limits
to management’s ability to incur
expenditure, enter contracts or acquire
or dispose of assets or businesses
without full board approval.
The board’s specific responsibility is to:
• ratify, monitor and review strategic
plans for the company and its business
units;
• approve financial and dividend policy;
• review the company’s accounts;
• review and approve operating budgets;
• approve major capital expenditure,
acquisitions, divestments and
corporate funding;
• oversee risk management and internal
compliance; and
• review 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 board
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 2013, there are four board
committees: audit; human resources;
nomination and governance; and health
safety and environment. 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 34
of this report.
Evaluating the performance
of senior executives
The performance of the senior executive
team is reviewed by the managing
director, and then the human resources
committee and the board, as part of the
annual remuneration review. In the case
of the managing director, the human
resources committee and the board
conduct his review.
A performance evaluation of
senior executives was undertaken
in accordance with this process in
the reporting period. The executive
compensation principles and
remuneration mix are set out in
detail in the remuneration report
on pages 36 to 46 of this report.
The company is managed according to
the recommendations of ASX Principle 1.
A summary of the board charter is
available on 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
properly discharges its responsibilities.
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 judgment to the
board. The board applies the framework
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.
Nufarm Limited Annual Report 2013 | 25
Corporate governance continued
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.
The Nufarm board has stipulated
that the role of the chairman and
chief executive officer may not be
filled by the same person.
The board structure is consistent
with ASX Principle 2.
• reviewing and approving the company’s
corporate governance policies
for continuous disclosure
and securities trading; and
• reviewing the company’s code of
conduct and other ethical standards.
Nufarm recognises the valuable
contribution made by each board
member to the effective running of
the company. When board positions
become available the opportunity is
taken to review the mix of skills and
experience on the board in considering
the skills and experience sought in
new directors.
The nomination and governance
committee
Donald McGauchie is chairman of the
nomination and governance committee
and Bruce Goodfellow and Frank Ford
are members with a majority of
independent directors. The committee
is chaired by an independent director.
The formal charter setting out the
committee’s membership requirements
includes the following responsibilities:
This analysis forms the basis of selection
criteria, which includes diversity, both as
to gender and experience.
• considering the appropriate size
and composition of the board;
• developing criteria for board
membership selection, composition
and assessing the skills required on
the board;
• reviewing the skills represented on
the board and determining whether
those skills meet the required skills;
• developing a process for the evaluation
of the performance of the board, its
committees and directors;
• recommending changes to the
membership of the board;
• making recommendations to the
board on candidates it considers
appropriate for appointment;
• reviewing board succession plans;
• in conjunction with the human
resources committee, ensuring the
application of the diversity policy to
the selection of board members;
• reviewing the time required from
non-executive directors and whether
those requirements are met;
• reviewing any retiring non-executive
director’s performance and making
recommendations to the board as to
whether the board should continue to
support the nomination of a retiring
non-executive director;
• managing the process of managing
director recruitment and transition
on behalf of the board;
The board is committed to reviewing its
performance and ensuring the board
has the skills and knowledge to provide
appropriate leadership and governance
for the company.
For some years now the board has
undertaken an annual internal survey
of its performance, the results of
which are used to monitor and improve
performance and identify ongoing
development to ensure directors
have a suitable level of knowledge
of the business.
In the current period, this formal internal
review was undertaken together with
the chairman’s assessment of board
members against the skills and
experience matrix.
It is anticipated an external assessment
will be undertaken in 2013/2014.
In line with ASX Principle 2.6 Nufarm
applies a capability matrix to assess
the collective capability of the board.
This matrix covers qualifications,
strategic and functional expertise,
industry knowledge, business and
board experience and diversity. Prior
to initiating a search for a new board
member, these areas of capability are
reviewed in light of Nufarm’s strategy
and the prevailing and expected market
conditions. The collective capability of
The nomination and governance
committee reviews the performance
and governance of directors who seek
to offer themselves for re-election at
the company’s annual general meeting.
That committee then recommends
to the board whether or not it should
continue to support the nomination
of the retiring directors.
The board conducts an annual review
of the independence of directors and, at
the date of this report, it has determined
that all directors are independent with
the exception of Dr WB Goodfellow and
T Takasaki (non-executive directors)
and DJ Rathbone (managing director
and chief executive officer).
Profiles of each board member,
including terms in office, are on
pages 20 and 21 of this report.
Access to independent advice
To help directors discharge their
responsibilities, any director can appoint
legal, financial or other professional
consultants at the expense of the company
with the chairman’s prior approval which
may not be unreasonably withheld.
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.
Nufarm’s chairman, Donald McGauchie,
is an independent director.
26 | Nufarm Limited Annual Report 2013
Corporate governance continued
the current board is assessed against
requirements and the search then
focuses on finding a board member
who will best complement the current
mix of capability on the board.
compliance with all legislation. Where
there are no legislative requirements,
the company develops policy statements
to ensure appropriate standards and
carefully selects and promotes employees.
The capability matrix is also used to
select induction, development and
education activities for the board and
to articulate the ongoing relevance
of a board member’s expertise prior
to recommending re-election of that
board member.
In 2012 the board reviewed and updated
the capability matrix and determined
that all the criteria remained relevant
and were free of gender bias.
The board ensures that new directors are
inducted 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 and have direct
access to the company secretary, who
is appointed by, and accountable to,
the board on all governance matters.
The operation of the board is in
accordance with the recommendations
of ASX Principle 2.
A copy of the nomination and
governance 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
Nufarm operates in many countries and
does so in accordance with the social
and cultural beliefs of each country.
It is politically impartial except where
the board believes it is necessary to
comment due to any perceived major
impact on the company, its business
or any of its stakeholders.
We require directors, senior executives
and all employees to adopt standards of
business conduct that are ethical and in
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.
Diversity and inclusion
Nufarm is committed to building a
diverse and inclusive workplace.
Diversity of gender, sexual orientation,
age, ethnicity and religion increase our
capability to develop and maintain a high
performing workforce, and to better take
advantage of the diverse challenges and
opportunities we face around the globe.
To this end opportunities are provided for
our people to work in different countries
and regions as part of their development.
Leadership teams are representative of
the countries and regions within which
they work resulting in global
representation across the business.
In 2012 Nufarm confirmed cultural and
gender diversity as areas for specific
focus within the overall commitment
to inclusion of all employees. A formal
diversity policy was adopted (see the
corporate governance section of our
website www.nufarm.com). Human
resources policies and practices and the
board selection processes were reviewed
to ensure they were free of bias and
supportive of diverse candidates and
employees.
In 2013 our focus was in the three
key areas:
1. build a deeper understanding of
our gender diversity profile through
improved reporting and the Nufarm
employee survey;
2. create an employee value proposition,
targeted at a diverse range of candidates
including gender, culture and
experience, to attract them to
our industry and company; and
3. continue to encourage gender and
cultural diversity while maintaining
inclusion for all employees.
Cultural diversity
Nufarm supplies products in more than
100 countries across five regions. Each
region represents a sizeable percentage
of our employees. This global footprint
provides the opportunity to encourage a
culturally diverse workforce in five ways:
• local leadership and teams are
representative of local cultures;
• functions such as operations,
supply chain, finance, procurement,
marketing, information technology and
human resources participate in global
teams to share information and ideas;
• cross-regional and cross-functional
teams are formed to undertake major
business improvement projects;
• key individuals work in different
regions to gain broader knowledge;
and
• senior regional leaders meet regularly
to discuss global and cross-regional
strategic and operational matters.
These and other activities ensure that
Nufarm is benefitting from the inclusion
of its diverse workforce.
Nufarm employee representation
% Employees
South America
Asia
North America
Europe
15 510
16 560
19 640
25 863
Australia/New Zealand 25 860
Total
100 3,433*
* At 31 May 2013.
Nufarm Limited Annual Report 2013 | 27
Corporate governance continued
Board and executive diversity
Every board and executive position which
becomes available is an opportunity to
bring further diversity to the business. In
December 2012 Toshikazu Takasaki was
appointed to the board. This year Elbert
Prado (born in Columbia and now a USA
citizen) was appointed as group executive
manufacturing. Both bring a different
perspective to the business based on
their unique cultural and business
experience.
Women in Nufarm
In 2013 data was collected to gain
a more detailed picture of our gender
diversity across the globe.
Women work in every area of our
business. The highest percentage
is in administrative roles, which are
traditionally often staffed by women.
Twenty-eight per cent are in professional
Female representation
Executive/senior management 6%
People managers/team leaders 9%
Professionals
Manufacturing
Administration
28%
15%
42%
Regions
All Nufarm
Australia/New Zealand
Asia
North America
Europe
South America
Percentage
of women
22
27
15
23
21
21
roles including scientific, sales,
engineering, marketing, finance, human
resources and information technology.
Fifteen per cent are in manufacturing
working in our plants largely on day
shift. Fifteen per cent work in a range of
people management and executive roles.
a clear impact on business outcomes;
working in a collegiate atmosphere;
working in a role closely aligned to
personal interests; the health and
wellbeing benefits offered by Nufarm;
and the company’s reputation for
quality product and services.
One aspect of retaining women in
Nufarm is the ability to encourage them
back into the workforce after maternity
leave. In the last year 90 per cent of
maternity leavers returned to work –
55 per cent full-time and 45 per cent
in a part-time capacity. This high
percentage is encouraged through
‘keep in touch’ conversations during
the period of leave and flexibility in
working arrangements on their return.
Employee survey feedback
Nufarm conducts an employee survey
every two years and uses the feedback
from that survey to assist in refining
our practices for both retaining and
attracting talented people to the business.
• Eighty per cent of Nufarm employees
responded to the survey conducted in
October 2012. The overall engagement
score was in the top quartile with no
notable difference in the engagement
levels of men and women or in the
factors they found more or less
engaging.
• The employee value proposition
attributes do not vary notably for
our people regardless of gender
or nationality. The work attributes
emerging as being most valued in
Nufarm include: having a job with
Distribution women in full
and part-time employment
Part-time
Full-time
10%
90%
14%
86%
0%
100%
8%
92%
13%
87%
8%
92%
Diversity and inclusion 2014
Our objectives for 2014 build on our
past accomplishments and findings.
In 2014 we will:
1. carry out a detailed study of
remuneration and turnover to
determine if there is any difference
based on gender or other non-work
related factors;
2. ensure involvement of women
in management and leadership
development activities to encourage
their ambitions to take on managerial
roles; and
3. increase the number of people
involved in cross-regional projects
and assignments.
Safeguard integrity in
financial reporting
Financial reports
The company has put in place a
structure of review and authorisation
to independently verify and safeguard
the integrity of financial reporting.
The audit committee reviews the
company’s financial statements and the
independence of the external auditors.
Audit committee
Frank Ford is chairman of the board
audit committee with Anne Brennan
and Gordon Davis as members. The
committee comprises 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 34.
Frank Ford has a master of taxation
from the University of Melbourne and
a bachelor of business, accounting from
RMIT University and is a fellow of the
Institute of Chartered Accountants.
Frank is a former managing partner
of Deloitte Victoria after a long and
Twenty-two per cent of Nufarm’s permanent full-time or part-time employees
are women. The table above shows the percentages by region with a breakdown
of full-time and part-time employment.
28 | Nufarm Limited Annual Report 2013
Corporate governance continued
successful career as a professional
advisor spanning some 35 years.
During that period, he was also a
member of the Deloitte global board,
global governance committee and
national management committee.
Frank is a director of Toll Holdings
Limited, Citigroup Pty Limited,
Tarrawarra Museum of Art Limited.
Anne Brennan has a bachelor of
commerce (hons) from University
College Galway and is a fellow of the
Institute of Chartered Accountants in
Australia and a fellow of the Australian
Institute of Company Directors.
She was formerly the executive finance
director for the Coates Group and chief
financial officer for CSR. Prior to this
Anne was a partner in professional
services firms Ernst & Young, Andersen
and KPMG.
Anne is deputy chairperson of Echo
Entertainment Group Limited and a
director of Myer Limited, Charter Hall
Group and Argo Investments Ltd. She
is also a director of Rabobank Australia
Limited and Rabobank New Zealand
Limited.
Gordon Davis has a bachelor of forest
science (hons), master of agricultural
science and holds a master of business
administration.
Gordon was managing director of
AWB Limited between 2006 and 2010.
Prior to this, he held various senior
executive positions with Orica Limited,
including general manager of Orica
Mining Services (Australia, Asia) and
general manager of Incitec Fertilizers.
He has also served in a senior capacity
on various industry associations.
The committee has a formal charter
which is reviewed annually.
The charter sets out membership
requirements for the committee, its
responsibilities and provides that the
committee shall annually assess the
external auditor’s actual or perceived
independence by reviewing the services
provided by the auditor.
The charter also identifies those
services that:
• the external auditor may and
may not provide; and
• require specific audit committee
approval.
The committee has recommended that
any former lead engagement partner
of the firm involved in the company’s
external audit should not be invited to
fill a vacancy on the board and the lead
engagement audit partner will be
required to rotate off the audit after a
maximum five years involvement and
it will be at least two years before that
partner can again be involved in the
company’s audit.
A copy of the audit committee
charter and its duties 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 and was most recently
amended in May 2013.
The company secretary prepares a
schedule of compliance and disclosure
matters for directors to consider at each
board meeting.
A summary 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
Nufarm is committed to timely, open
and effective communication with its
shareholders and the general investment
community.
Nufarm’s communication policy aims to:
• ensure that shareholders and the
financial markets are provided with
full and timely information about our
activities;
• comply with its continuous disclosure
obligations;
• ensure equality of access to briefings,
presentations and meetings for
shareholders, analysts and media; and
• encourage attendance and voting at
shareholder meetings.
Postal and electronic communication
with shareholders includes:
• half year and annual reports;
• proxy voting; and
• notices of AGM.
Copies of:
• relevant market announcements
and related information; and
• presentations made to analysts
and investor briefings;
are also immediately made available
on the company’s website.
Nufarm’s formal communications policy
is available on the corporate governance
section of the company’s website.
The company’s policy in relation to
the rights of shareholders is consistent
with ASX Principle 6.
Identifying and managing risk
The board is committed to identifying,
assessing, monitoring and managing
its material business risks.
In 2012 Nufarm introduced a risk
management framework, policies and
procedures, which set out the roles,
responsibilities and guidelines for
managing financial and operational
risks associated with the business.
The framework, policies and procedures
have been designed to provide effective
management of material risks at a level
appropriate to Nufarm’s global business.
Nufarm Limited Annual Report 2013 | 29
Corporate governance continued
During the year, Nufarm’s group risk
management department initiated the
implementation of this framework across
the group and commenced the process
of developing detailed risk profiles for
key operational business units. These
risk profiles identify the:
• nature and likelihood of specific
material risks;
• key controls in place to mitigate
and manage the risk;
• sources and level of assurance
provided on the effective operation
of key controls; and
• responsibilities for managing
these risks.
Nufarm’s key operational and financial
risks are set out on page 23 in the
information on the company section
of this report.
Nufarm’s risk management framework
is based on concepts and principles
identified in the Australian/New Zealand
Standard on Risk Management (AS/NZ
ISO 31000:2009). The risk framework,
policies and procedures will continue to
be enhanced as the group’s operations
develop and its range of activities expand.
The board annually, at its strategy review
meeting, comprehensively reviews the
material strategic risks faced by the
company. In so doing, it considers the
interests of all relevant stakeholders.
The managing director and the
company’s senior management (group
executives who report directly to the
managing director) are responsible for
the management of material risks in
their respective areas of responsibility.
At each board meeting, management
report on specific issues of risk and
compliance, including legal compliance,
health safety and environmental
compliance and financial reporting.
These regular reports, submitted for
review to each board meeting, will
include relevant commentary on any
material risk.
The board is responsible for the
oversight of the company’s risk
management system. The board ensures
that appropriate policies are in place
to ensure compliance with risk
management controls and requires
management to monitor, manage and
report on business risks. The board
delegates certain responsibilities to
board committees. All board committees
report to the board on risk management
issues within their area of responsibility.
The nomination and governance
committee is responsible for ensuring
the company has appropriate governance
policies and practices and appropriate
ethical standards.
The health safety and environment
(HSE) committee assists the board in
respect of the company’s responsibilities
in relation to health, safety and
environment matters arising out of
activities within the Nufarm group
as they affect employees, contractors,
visitors, customers and the communities
in which the Nufarm group operates.
Gordon Davis is chairman of the
HSE committee with Anne Brennan
and Peter Margin members of the
committee. All members of the
committee are independent directors.
The audit committee assists the board
in regard to financial reporting, audit
and risk management, including
oversight of the preparation of Nufarm’s
financial reporting, compliance with legal
and regulatory obligations, oversight
of the effectiveness of the Nufarm’s
enterprise-wide risk management and
internal control framework and oversight
of the relationship with the external and
internal auditors. The general manager
global risk and assurance reports at
each audit committee meeting on the
implementation and management of
the enterprise risk management policy.
The audit committee has specific
oversight of financial and treasury risk,
including credit, liquidity and market
risks and will refer any relevant matters
to the board. The year-end exposure
to these risks is described in note 31
of the financial statements.
The Nufarm audit committee charter
specifies the roles and responsibilities
of the committee and the general
manager global risk and assurance
and requires the committee to:
• evaluate the effectiveness of the
group’s process for assessing,
monitoring and managing significant
risks or exposures and the steps
management has taken to minimise
such risks to the group as required
by ASX Principle 7.2;
• assess the effectiveness of, or
weaknesses in, the group’s internal
control framework including
computerised information system
controls and security, the overall
control environment, and accounting,
treasury and financial controls;
• consider significant findings and
recommendations of the external
auditors and internal auditors, together
with management’s responses thereto,
and the timetable for implementation of
recommendations to correct identified
weaknesses in internal controls; and
• review, with the general manager
global risk and assurance and the
external auditors, the coordination
of audit effort to assure completeness
of coverage of key business controls
and risk areas, reduction of redundant
effort, and the effective use of risk
management and audit resources.
30 | Nufarm Limited Annual Report 2013
Corporate governance continued
Local and regional financial controllers
complete half yearly certificates, which
are reviewed by the chief financial officer
and the audit committee as part of the
company’s half year reporting to the
market and to achieve compliance with
section 295A of the Corporations Act. In
accordance with Section 295A, 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 in
all material respects in relation
to financial reporting risks.
The board received in the current
reporting period an assurance from
the chief executive officer and chief
financial officer that the declaration
relating to the company’s financial
reports has been made with
due regard to appropriate risk
management controls.
A summary of the company’s policies
on risk oversight and management of
material business risks is available
in the corporate governance section
of the company’s website.
Nufarm’s management of risk is
consistent with ASX Principle 7.
Remuneration
The board has procedures to ensure
that the level and structure of
remuneration for executives and
directors is appropriate. Full details
of the executive remuneration structure
are set out in the remuneration report
on pages 36 to 46 of this report.
Human resources committee
Peter Margin is chairman of the human
resources committee and Gordon Davis
and Donald McGauchie are members.
The committee comprises independent
non-executive directors and is chaired
by an independent director.
The committee’s formal charter
includes responsibility to review and
make recommendations to the board
in relation to Nufarm’s board and
executive remuneration strategy,
structure and practice with regard to:
• Nufarm’s strategic objectives;
• corporate governance principles; and
• competitive practice.
The specific matters the committee may
consider include the review of:
• executive management and directors’
remuneration, including the link
between company and individual
performance;
• current industry best practice;
• the outcome of the annual vote on the
adoption of the remuneration report;
• different methods for remunerating
senior management and directors
including superannuation
arrangements;
• existing or proposed
incentive schemes;
• retirement and termination
benefits and payments for
senior management; and
• professional indemnity and
liability Insurance policies.
The committee is responsible for
seeking and approving independent
remuneration advisers who will provide
independent remuneration advice, as
appropriate, on board, chief executive
officer and other key management
personnel remuneration strategy,
structure, practice and disclosure.
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.
The company distinguishes the structure
of non-executive directors’ remuneration
from that of senior executives. Details
of senior executive and non-executive
directors’ remuneration are set out
in the remuneration report on pages
36 to 46 of this report.
A copy of the human resources
committee charter and the company
policy on prohibiting senior executives
from hedging any shares offered under
the executive share plan are available
on the corporate governance section
of the company’s website. Nufarm’s
remuneration policies are consistent
with ASX Principle 8.
Nufarm Limited Annual Report 2013 | 31
Financial report
32 | Nufarm Limited Annual Report 2013
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 2013 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:
DG McGauchie AO (Chairman)
DJ Rathbone AM (Managing director)
AB Brennan
GR Davis
FA Ford (appointed 10 October 2012)
Dr WB Goodfellow
GA Hounsell (retired 8 October 2012)
PM Margin
T Takasaki (appointed 6 December 2012)
Unless otherwise indicated, 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 20 and 21.
Company secretary
The company secretary is R Heath.
Details of the qualifications and experience of the company secretary are set out on page 18.
Directors’ interests in shares and step-up securities
Relevant interests of the directors in the shares and 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 Securities Exchange in accordance with S205G(1) of the
Corporations Act 2001, as follows:
AB Brennan
GR Davis
FA Ford
Dr WB Goodfellow 1,2
DG McGauchie1
PM Margin
DJ Rathbone
T Takasaki
Nufarm Ltd
ordinary shares
Nufarm Finance (NZ) Ltd
step-up securities
10,000
40,000
–
1,143,416
46,239
2,458
11,726,031
–
–
–
–
48,423
–
–
1,500
–
Note: at the date of his retirement GA Hounsell owned 43,723 shares.
1. The shareholdings of Dr WB Goodfellow and DG McGauchie 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 (430,434 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 (120,000 shares);
(iii) 531 Trust (400,861 shares). Dr Goodfellow and EW Preston are trustees of 531 Trust.
(iv) Auckland Medical Research Foundation (26,558 step-up securities). Dr Goodfellow does not have a beneficial interest in these step-up securities.
(v) Trustees of the Goodfellow Foundation (33,854 shares and 1,338 step-up securities). Dr Goodfellow is chairman of the Foundation and does not have a beneficial interest
in these shares or step-up securities.
(vi) Archem Trading (NZ) Ltd (700 step-up securities).
Nufarm Limited Annual Report 2013 | 33
Directors’ report continued
Directors’ meetings
The number of directors’ meetings (including meetings of board committees) and number of meetings attended by each of the
directors of the company during the financial year are:
Director
Board
Audit
AB Brennan
GR Davis
FA Ford1
Dr WB Goodfellow
GA Hounsell1
DG McGauchie
PM Margin
DJ Rathbone
T Takasaki1
Meetings
held 2
12
12
9
12
1
12
12
12
7
Meetings
attended
12
12
9
12
1
12
12
11
7
Meetings
held 2
4
4
3
–
1
–
–
–
Meetings
attended
4
4
3
–
1
–
–
–
Committees
Human
resources
Nomination and
governance
Health safety
and environment
Meetings
held2
–
5
Meetings
attended
–
5
–
–
5
5
–
–
–
5
5
–
Meetings
held2
–
–
2
3
–
3
–
–
Meetings
attended
–
–
2
3
–
3
–
–
Meetings
held2
4
4
Meetings
attended
4
4
–
–
–
4
–
–
–
–
4
–
1. FA Ford was appointed a director on 10 October 2012. T Takasaki was appointed a director on 6 December 2012. GA Hounsell retired as a director on 8 October 2012.
2. Number of meetings held during the period the director held office.
Principal activities and changes
Details of Nufarm’s principal activities and changes are set out in the information on the company section on pages 22 to 23 of the
financial report.
Nufarm employs approximately 3,458 people at its various locations in Australasia, Africa, the Americas and Europe. The company
is listed on the Australian Securities Exchange (symbol NUF). Its head office is located at Laverton in Melbourne.
Results
The net profit attributable to members of the group for the 12 months to 31 July 2013 is $81.0 million. The comparable figure for
the 12 months to 31 July 2012 was $72.6 million.
Dividends
The following dividends have been paid declared or recommended since the end of the preceding financial year.
The final dividend for 2011–2012 of 3 cents paid 16 November 2012.
The interim dividend for 2012–2013 of 3 cents paid 10 May 2013.
The final dividend for 2012–2013 of 5 cents as declared and recommended by the directors is payable 15 November 2013.
Nufarm step-up securities distributions
The following Nufarm step-up securities distributions have been paid since the end of the preceding financial year:
Distribution for the period 16 April 2012 – 15 October 2012
at the rate of 8.1067% per annum paid 15 October 2012
Distribution for the period 15 October 2012 – 15 April 2013
at the rate of 7.03% paid 15 April 2013
34 | Nufarm Limited Annual Report 2013
$000
7,817
7,884
$000
10,146
8,798
Directors’ report continued
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 4 to 8 and the business review on pages 11 to 14.
State of affairs
The state of the group’s affairs are set out in the managing director’s review on pages 4 to 8 and the business review on
pages 11 to 14.
Operations, financial position, business strategies and prospects
Information on the group, which enables an informed assessment of its operations, financial position, strategies and prospects,
is contained in the financial accounts, managing director’s review, the business review, and the information on the company section
on pages 22 and 23 of the financial report.
Events subsequent to reporting date
On 25 September 2013, the directors declared a final franked dividend of 5 cents per share payable 15 November 2013.
Likely developments
Likely developments in the group’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 16 and 17. The group did not
incur any prosecutions or fines in the financial period relating to environmental performance. The group publishes annually
a sustainability report (formerly called health, safety and environment report). This report can be viewed on the group’s website
or a copy will be made available upon request to the company secretary.
Non-audit services
During the year KPMG, the company’s auditor, has performed certain other services in addition to their statutory duties. Details
of the audit fee and non-audit services are set out in note 41 to 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.
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 47 and forms part of the directors’ report for the financial year
ended 31 July 2013.
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.
Nufarm Limited Annual Report 2013 | 35
Directors’ report continued
Remuneration report
A message from the chairman of the human resources committee (unaudited)
Nufarm’s success is delivered through the efforts of our global teams of people and their commitment and passion to make
Nufarm a better company. The best way to focus those efforts is to balance our deep company and industry knowledge with
new thinking and ideas on both an individual and shared basis. This drives the sustainable innovation that is key to delivering our
growth strategy. The remuneration structure for key management personnel (KMP) at Nufarm has been designed to support these
principles. The short and long term incentive plans combine shared accountability for financial results with individual reward for
strategic changes and improvements within the individual’s function or business unit. Each year the board reviews the financial
metrics and individual objectives to ensure they remain appropriate as a basis of reward given the objectives of the business
strategy and the interests of shareholders.
Nufarm’s remuneration report is for the year ended 31 July 2013. The report details remuneration information as it applies to
Nufarm non-executive directors (NED) and Nufarm’s executives (referred to as KMP).
KMP include the managing director and the group executives who have the authority and responsibility for successfully planning,
directing and controlling Nufarm’s business.
Peter Margin
Remuneration governance
The human resources (HR) committee is responsible for reviewing and making recommendations to the board on remuneration
policies and packages applicable to KMP. The committee is comprised of three independent non-executive directors and is tasked
with ensuring that remuneration policies and packages retain and motivate high calibre executives and have a clear relationship
between company performance and executive remuneration. The committee charter can be found at www.nufarm.com
The board measures financial performance under the short term incentive (STI) and long term incentive plan, (LTIP) using audited
numbers. The relative total shareholder return (TSR) will be measured by an independent external advisor.
Within the remuneration framework the board has discretion to ‘clawback’ LTIP and deferred STI prior to vesting where: payment is
contrary to the financial soundness of the company; in circumstances where the financial performance of Nufarm over the relevant
period (including the initial STI performance period) has been misstated; and/or for individual gross misconduct.
KMP are not permitted to hedge any shares issued to them under the STI while those shares remain held in trust.
Key outcomes for the 2013 year detailed in this report include:
• fixed remuneration increases for KMP;
• STI awards to KMP in line with performance; and
• LTIP awards to KMP.
Remuneration advice
The human resources committee engaged Godfrey Remuneration Group (GRG) as advisors to provide executive remuneration
benchmarking data through comparisons to organisations of similar size and complexity to Nufarm and through detailed analysis
of KMP compensation trends. This advice covered both fixed and variable components of compensation.
GRG was paid $36,300 for the provision of this advice. No other services were provided by GRG during the year.
36 | Nufarm Limited Annual Report 2013
Directors’ report continued
The human resources committee appointed GRG with a set of clear criteria including the requirement for all reporting to be
delivered directly to the chairman of the human resources committee. A process was established to ensure that GRG would be
able to carry out its work, including information capture and the formation of its recommendations, free from undue influence
from KMP to whom the recommendations would apply. The human resources committee undertook a full and independent review
of the advice.
The board was satisfied that the remuneration recommendations made by GRG were free from undue influence by members
of the KMP to whom the recommendations would apply.
The remuneration recommendations were provided to the Nufarm board as an input into decision-making only. The board
considered the recommendations, along with other factors such as company performance, individual performance and the
motivation and retention of key individuals, in making its remuneration decisions.
Principles of remuneration for the period ended 31 July 2013
The company’s remuneration policy for the period ended 31 July 2013 was based on total target reward (TTR) structured to align
overall remuneration spend with business performance.
TTR was composed of total fixed remuneration (TFR), a variable component of STI linked to current year performance and a LTIP
linked to longer term performance and business outcomes.
Remuneration mix
The TTR for the majority of the KMP (excluding the managing director) will have a mix at target of 55 per cent fixed, 25 per cent
STI (50 per cent paid cash and 50 per cent retained in equity) and 20 per cent LTIP (retained in performance rights). New KMP
are employed on this basis. For longer serving KMP a case-by-case transition plan is being implemented to arrive at the target
remuneration mix. Individual plans are necessary given different salary levels and contractual arrangements.
The effect of this transition is that an increasing percentage of the KMP’s remuneration is ‘at risk’ and is directly linked to company
performance in the short, medium and longer term.
Fixed remuneration
The company’s policy for the fixed reward was benchmarked against Australian executives with reference to the 62.5th percentile
of companies of similar size and complexity excluding retail, utilities, financial and resources companies.
The 62.5th percentile positioning reflects the reality that while the current KMP are Australian based they have significant
international responsibility and operate in a globally competitive employment market where remuneration levels are often
higher than in the Australian market.
Short term incentive
Nufarm’s strategy focuses on growth and increased participation in high value markets with sustainable returns. Therefore our
STI program is heavily biased to growth in profitability and a strong focus on balance sheet management. Eighty per cent of STI
potential was attached to the achievement of key financial outcomes for which KMP have shared accountability. Twenty per cent
of STI potential was attached to individual strategic objectives depending on the role and function of the executive. Each of these
objectives was focused on the contribution of the individual to the development of innovation capability and increased business
discipline, both of which the company sees as integral to delivering targeted financial outcomes and returning the company to
acceptable returns for shareholders.
The board reviews the measures each year to ensure they remain relevant for the company and shareholders. For the 2013 year
the financial measures were changed. Underlying NPAT replaced underlying EBIT while average net working capital (ANWC)/sales
replaced return on assets (ROA). These changes resulted in greater alignment with shareholder interests and rewards and better
alignment within the business where ANWC as a percentage of sales is a standard measure across the business units.
In 2013 the STI, which rewards annual performance, was delivered through a combination of cash incentive and shares which were
retained and will vest in 2015 on the second anniversary.
Nufarm Limited Annual Report 2013 | 37
Directors’ report continued
Who participates in the STI? Plan participants include KMP and senior managers globally.
When are awards made?
What measures are used
in the plan?
Awards under the plan are made at the end of the financial year.
The board sets measures at the start of each year focused on profitability, balance sheet
management and overall return. Noted below are the measures used in 2013.
80% of the potential was based on underlying net
profit after tax (NPAT) and average net working
capital (ANWC)/sales.
20% of the potential was based on individual
strategic and business improvement
objectives aligned to the role and
contribution of the executive.
When and how are the STI
payments determined?
This structure reflects Nufarm’s strong focus on the use of capital and ensures alignment of
reward to business outcomes and shareholder returns.
Awards are assessed annually at the end of the financial year. Awards are based on the percentage
achievement against the budget and strategic measures.
Percentage budget achievement
<85
100
85
Percentage of STI Target award realised
Straight-line vesting between 85% and budget and between budget (target) and 120% budget
achievement (stretch).
100
nil
25
120 Underlying NPAT
110 ANWC/Sales
150
Are payments in cash or
shares?
When do the shares vest?
Is there a clawback
provision in the plan?
Strategic and business improvement objectives are assessed on a merit basis against stated objectives.
50% of STI is paid in cash at the time of performance testing and 50% deferred into shares in the
company for nil consideration.
Vesting will occur on the second anniversary subject to continued employment.
The rules of the plan provide for clawback of deferred STI prior to vesting where: payment
is contrary to the financial soundness of the company; in circumstances where the financial
performance of Nufarm over the relevant period (including the initial STI performance period)
has been misstated; and/or for individual gross misconduct.
Long term incentive plan
Nufarm’s LTIP commenced in 2011 and is based on the principle of aligning executive interests and rewards with those of
shareholders. Return on funds employed (ROFE) has long been held as an important metric for Nufarm and it was considered
important to include a return measure in the LTIP. Relative TSR recognises that investors will choose to invest their money in
industries and companies with acceptable returns. This plan rewards executives to the degree the company performs against
these two hurdles over three years.
Why have a LTIP?
Who participates
in the LTIP
Are the awards cash
or shares?
This plan aligns executive interests and earnings with the longer term Nufarm strategy and the
interests of shareholders.
The current participants in the plan are KMP and other selected senior managers (together, the
LTIP participants).
Awards are granted to Australian executives in the form of performance rights, which comprise
rights to acquire ordinary shares in the company for nil consideration, subject to the achievement
of global performance hurdles.
When are the awards
made?
The plan rules provide the flexibility to use other instruments to comply with local regulations and
sound practice.
Under the plan, Australian LTIP participants receive an annual award of performance rights as
soon as practical after the announcement of results for the preceding year.
In the case of the managing director the award is delayed until after shareholder approval is gained
at an annual general meeting.
The initial awards were made to LTIP participants (excluding the managing director) in the first
quarter of 2012 in line with the individual transition plans mentioned above under ‘remuneration mix’.
How are the number of
rights calculated?
The awards for the 2012 financial year were made to the LTIP participants in the first quarter of the
2013 year.
The number of rights for the 2011 and 2012 awards were calculated at ‘face value’ using the five
day VWAP post the announcement of annual results for FY12:
• the board will review the efficacy of a fair value methodology annually; and
• to be eligible the LTIP participant needs to be employed by Nufarm on the vesting date.
38 | Nufarm Limited Annual Report 2013
Directors’ report continued
When do the awards vest?
The performance/vesting period for awards is three years. Awards will vest in two equal tranches
as follows:
• 50% of the LTIP grant will vest subject to the achievement of a relative TSR performance hurdle
measured against a selected comparator group of companies; and
• the remaining 50% of the LTIP grant will vest subject to the three year average of an absolute
ROFE target.
Why have ROFE and
relative TSR been chosen
as the hurdles?
What is the comparator
group for the assessment
of relative TSR?
How is relative TSR
measured?
What is the relative TSR
performance required for
vesting?
How is the ROFE target
set?
How is ROFE measured?
What ROFE result is
required for vesting?
What was the result
for the 2013 year?
What happens if the
awards do not vest?
Is there a clawback
provision in the plan?
Proportion of TSR grant vesting
ROFE is used to track progress towards the goal to return long term results back to acceptable
levels for Nufarm (ROFE). Strong relative TSR performance ensures Nufarm is an attractive
investment for shareholders.
Based on the results of research and modelling carried out by Ernst and Young, the board approved
the adoption of the ‘S&P ASX 200 excluding those companies in the Financial, Materials and
Energy groups’ as the TSR comparator group. This provides a group which is large enough for
sound measurement with exclusions that reduce the volatility by removing companies which are in
significantly different industries to Nufarm. This comparator group is also seen as an appropriate
representation of Nufarm’s competitors for investment.
TSR will be measured over the performance period. For the purposes of this measurement, each
company’s share price will be measured using the average closing price over 60 days up to (but
excluding) the first day of the performance period, and the average closing price over 60 days
up to and including the last day of the performance period.
TSR of Nufarm relative to the TSR of comparator
group companies
Less than 50th percentile
50th percentile
Between 51st percentile and 75th percentile
75th percentile
ROFE objectives are set by the board at the beginning of each year. There is both a ‘target’ and a
‘stretch’ hurdle. These numbers are based on the budget and growth strategy. ‘Target’ represents a
sustainable return to acceptable ROFE levels. ‘Stretch’ recognises achievement well above budget.
This ensures that full vesting of the LTIP is truly reliant on outstanding performance.
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. For the purposes of measuring ROFE performance in the LTIP, ROFE will be averaged
over the life of the plan.
Percentage of ROFE target achieved
Less than target
Target
Between target and stretch
Stretch
There is no partial vesting of the LTIP before the third anniversary which will be 31 July 2014 for the
first awards under the plan. The table below shows the performance against target for the first two
years of the plan.
Proportion of ROFE grant vesting
0%
50%
Straight-line vesting between 50% and 100%
100%
0%
50%
Straight-line vesting between 50% and 100%
100% vesting
Target %
10.00
10.90
10.45
Outcome %
10.40
8.8
9.6
2012
2013
Cumulative average
This means that at the second anniversary of the 2012 award that the results are tracking below
the hurdle rate necessary to trigger vesting on this metric of the LTIP.
To the extent that the TSR and ROFE performance hurdles are not met at the end of the three year
performance period and vesting is not achieved, performance will not be re-tested and the award
will lapse.
The rules of the plan provide for clawback of unvested LTIP rights where: payment is contrary to the
financial soundness of the company; in circumstances where the financial performance of Nufarm
over the relevant period has been misstated; and/or for individual gross misconduct.
Nufarm Limited Annual Report 2013 | 39
Directors’ report continued
Link between performance and KMP remuneration outcomes
• Fixed and variable remuneration review: given the financial performance of the group and the contribution to the continued
recovery of the business, KMP were granted increases in fixed remuneration and short term incentive potential of between
three per cent and 10 per cent. Percentage increases reflected changes in the scope and responsibility of the role, individual
performance and alignment to market comparators. Salary benchmarking carried out by Godfrey Remuneration Group
confirmed that these increases were in line with market comparisons and movement in executive salaries.
• STI: based on an underlying NPAT result of $83.2 million, an ANWC/Sales result at 46.8 per cent and performance against
individual strategic and business improvement objectives, KMP were awarded a limited incentive in accordance with the rules
of the plan.
– Individual objectives were driven by Nufarm’s strategy and the goals to deliver on sustainable innovation and business
discipline across the business. These objectives were specific to the role of each executive and included organisation
restructuring, management and board renewal, business process and systems improvements and the implementation
of initiatives to support growth in higher value segments.
• LTIP: the LTIP vests on the third anniversary. While both measures are tested on the third anniversary, the ROFE results
for 2012 and 2013 are currently tracking below the hurdle rate necessary to trigger any payment against this metric.
The table below summarises the company’s performance and shareholder wealth statistics which influence KMP variable
remuneration. These are listed over the last five years with the exception of ANWC/Sales and Underlying NPAT which were
used for calculation of the 2013 STI.
Underlying
EBIT*
$M
312.5
148.4
171.8
206.0
186.8
ANWC/Sales***
%
–
N/A
N/A
45.3
46.8
Underlying
NPAT**
$M
–
N/A
N/A
115.4
83.2
ROFE
achieved
%
13.0
6.0
7.6
10.4
8.8
Closing
share price
31 July
$
10.84
3.82
4.34
5.47
4.50
Total
shareholder
return****
%
(33.8)
(62.7)
13.6
26.8
(16.5)
2009
2010
2011
2012
2013
*
And ** Underlying EBIT is earnings before net finance costs, taxation and material items. Underlying NPAT is net profit after tax before material items. Underlying NPAT and
Underlying EBIT are used internally by management to assess performance of our business and make decisions on the allocation of our resources. NPAT, rather than EBIT,
is used to assess management’s STI to ensure rewarded business outcomes are aligned with shareholder returns.
*** Average net working capital/sales is used throughout the business and highlights the strong business-wide focus on the management of working capital over the full year.
**** Source: Credit-Suisse.
40 | Nufarm Limited Annual Report 2013
Directors’ report continued
2013 STI outcomes
2013 STI Potential
KMP
Doug Rathbone*
Paul Binfield
David Pullan**
Brian Benson
Robert Reis
Greg Hunt
Dale Mellody
Mike Pointon
Bonita Croft
Rodney Heath
At target $ At maximum $
2,452,500
468,600
790,703
756,324
661,004
420,240
567,567
415,650
355,830
347,027
1,638,000
312,400
527,135
504,216
440,669
280,160
378,378
277,100
237,220
231,351
* Deferred STI is retained in cash.
Total award as
a % of target
potential $ Total award $
501,294
103,418
174,504
166,916
145,880
92,744
125,258
91,732
78,530
76,586
30.6
33.1
33.1
33.1
33.1
33.1
33.1
33.1
33.1
33.1
To be paid in cash
in October 2013 $
200,518
51,709
87,252
83,458
72,940
46,372
62,629
45,866
39,265
38,293
Retained in shares
vesting on 2nd
anniversary $
300,776
51,709
87,252
83,458
72,940
46,372
62,629
45,866
39,265
38,293
** David Pullan retired on 31 July 2013 as a qualifying leaver. Therefore his award remains in the plan and is subject to the same vesting measurements and timing as if he had
remained an employee.
2013 LTIP allocations
KMP
Doug Rathbone
Paul Binfield
David Pullan
Brian Benson
Robert Reis
Greg Hunt
Dale Mellody
Mike Pointon
Bonita Croft
Rodney Heath
Value of award $
787,500
249,700
156,724
149,910
133,536
224,540
114,660
95,420
71,885
70,106
Number of performance rights*
134,282
42,578
26,724
25,562
22,770
38,288
19,552
16,271
12,258
11,954
* Rights were valued at $5.8645 being the five day VWAP post the announcement of 2012 annual results.
Note: To the degree that the ROFE and relative TSR hurdles are met, rights will vest on 31 July 2016.
Nufarm Limited Annual Report 2013 | 41
Directors’ report continued
Service contracts
The company has employment contracts with the KMP. These contracts formalise the terms and conditions of employment.
The contracts are for an indefinite term. The contracts of the managing director and several other KMP named in this report
were entered into prior to the announcement of legislation to change termination payment limits for executives.
The company may terminate the contract of the managing director, either immediately or by giving 12 months’ notice, in which
case the managing director will be paid a termination payment equivalent to 24 months TFR (base salary plus value of benefits
such as motor vehicle and superannuation and any fringe benefits tax in relation to those benefits). The contract also provides
for the company to be able to make a payment in lieu of notice should it wish, for payment of any entitlements due under existing
STI and LTI plans and for payment of applicable statutory entitlements.
The managing director may terminate the contract by giving the company 12 months’ notice. In this event, the contract provides an
entitlement for the managing director to a termination payment equal to any part of the notice period, paid in lieu, by the company.
In addition, the managing director will be paid any entitlements due under existing STI and LTI plans and all applicable statutory
entitlements.
In certain limited circumstances, the managing director may also terminate his contract on immediate notice. This includes where
there is a change of duties or responsibilities without the managing director’s agreement, which has the effect of material change
in status and in certain other limited circumstances. If the contract is terminated in these circumstances, the managing director
will, in general, be entitled to the payments outlined above where the company terminates on immediate notice. In extremely
limited circumstances, the managing director may also be entitled to an additional amount equal to 24 months’ entitlement
under the STI and LTI plans.
The company may terminate the contract of other KMP by six months’ notice in which case a termination payment equivalent to
12 months’ total employment cost will be paid. In addition, the contracts provide for payment of any part of the applicable notice
period paid in lieu, plus any entitlements due under existing STI and LTI plans (including any entitlements which would have been
payable under the STI and LTI plans in the period ending on the later of (i) the last day of the financial year following notice of
termination or (ii) six months following notice of termination) and applicable statutory entitlements.
The company may terminate the employment contracts immediately for serious misconduct.
Termination benefits
Under the rules of the STI plan if a KMP leaves before the vesting anniversary under ‘qualifying leaver’ provisions the equity will
remain in the plan until the vesting date. If the KMP leaves under other than qualifying leaver circumstances the equity will be
forfeited.
To be eligible under the LTI plan the KMP must be employed by Nufarm on the first anniversary of the allocation. If the executive
leaves before this date the allocation is forfeited. If the executive leaves under qualifying leaver provisions after the first anniversary
and before the third anniversary of the plan the allocation will be pro-rated and the pro-rated allocation will remain ‘on foot’ in
the plan subject always to certain overriding discretions set out in the plan, and to supervening provisions in certain executive
contracts, which extend or alter the manner in which the pro-rating is undertaken. Qualifying leaver provisions include participants
who cease employment due to retirement, death, ill health/disability, redundancy, or contract severance without cause by Nufarm.
The rules of the plans provide the flexibility, in special circumstances (for example, health or severe personal hardship), to
accelerate the vesting. In the case of the STI this would result in the shares being released from the trust to the KMP. In the
case of the LTI plan the qualifying allocation will be tested against the hurdles to determine the value (if any) of the allocation.
42 | Nufarm Limited Annual Report 2013
Directors’ report continued
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 2009 AGM, shareholders approved an aggregate of $1,600,000 per year (excluding superannuation costs).
Set out below are details of the annual fees payable for the year ended 31 July 2013 (including superannuation costs). These fees
were effective from 1 February 2012. There was no change to fees during the 2013 year.
The total fees for year remained well within the approved cap. The board has determined there is no need to seek an increase in
the cap for the 2014 year.
Chairman1
General board
Audit committee chair
Audit committee member
Health, safety, environment and risk committee chair
Health, safety, environment and risk committee member
Human resources committee chair
Human resources committee member
Nominations and governance committee chair
Nominations and governance committee member
1. The chairman receives no fees as a member of any committee.
Fees applicable from 1 February 2012 to 31 July 2013 $
330,000
135,000
27,500
11,000
16,500
5,500
22,000
8,250
11,000
1,375 per meeting
Board fees are reviewed every 18 months. After consideration of general market data all board and committee fees will increase by
five per cent effective 1 August 2013. These fees will be reviewed again in January 2015.
Nufarm Limited Annual Report 2013 | 43
Directors’ report continued
Remuneration of directors and executives
Details follow of the nature and amount of each major element of remuneration in respect of the non-executive directors and
key management personnel, which includes the managing director and group executives.
In AUD
Directors’ non-executive
AB Brennan
GR Davis
Dr RJ Edgar3
Dr WB Goodfellow
GA Hounsell 4
DG McGauchie
P Margin
Dr JW Stocker 5
F Ford 2
T Takasaki6
Sub total non-executive directors’ remuneration
Executive director DJ Rathbone (managing director)
Total directors’ remuneration
Group executives
DA Pullan8 (group executive operations)
P Binfield (chief financial officer)
BF Benson (group executive marketing)
G Hunt (group executive global marketing)
RG Reis (group executive corporate strategy and external affairs)
DA Mellody (group executive global marketing)
MJ Pointon (group executive innovation and development)
BJ Croft (group executive human resources and organisation development)
R Heath (company secretary)
RF Ooms7 (group executive chemicals)
E Prado9 (group executive manufacturing)
Sub total – total executives’ remuneration
Total directors’ and executives’ remuneration
Salary and
fees
$
Cash bonus
(vested)
$
Short term
Non-
monetary
benefits
$
Post-
employment
Share-based
payments
Other
long term
Total1
Total Superannuation
benefits Equity settled
Termination
Percentage of
Value of options
remuneration
as a proportion
Total
performance
of total
remuneration
based
remuneration
$
%
%
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
151,500
128,864
170,750
135,025
–
84,833
139,125
121,364
30,625
155,114
330,000
295,000
162,500
110,310
–
40,455
134,625
–
88,788
–
1,207,913
1,070,965
1,522,303
1,451,451
2,730,216
2,522,416
778,558
702,458
639,588
449,875
682,937
624,858
587,303
270,310
610,707
542,504
498,339
475,262
346,351
298,261
324,974
285,629
281,498
245,157
–
604,812
55,078
–
4,805,333
4,499,126
7,535,549
7,021,542
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
840,247
1,141,795
840,247
1,141,795
87,252
259,987
51,709
309,226
83,458
248,683
46,372
100,545
72,940
215,310
62,629
182,991
45,866
129,179
39,265
114,832
38,293
113,038
–
–
–
–
527,784
1,673,791
1,368,031
2,815,586
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
47,172
51,508
47,172
51,508
–
–
–
–
37,638
22,030
14,160
–
43,511
22,829
35,219
31,612
35,416
35,468
33,519
–
32,746
38,096
–
13,293
–
–
232,209
163,328
279,381
214,836
$
151,500
128,864
170,750
135,025
–
84,833
139,125
121,364
30,625
155,114
330,000
295,000
162,500
110,310
40,455
134,625
88,788
–
–
–
1,207,913
1,070,965
2,409,722
2,644,754
3,617,635
3,715,719
865,810
962,445
691,297
759,101
804,033
895,571
647,835
370,855
727,158
780,643
596,187
689,865
427,633
462,908
397,758
400,461
352,537
396,291
618,105
55,078
–
–
5,565,326
6,336,245
9,182,961
10,051,964
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
799,000
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
439,683
233,393
439,683
233,393
210,500
145,844
175,934
102,024
201,346
139,504
162,636
96,166
175,405
120,784
150,335
103,432
109,715
72,830
93,820
64,418
92,085
63,412
–
–
–
–
$
13,772
12,886
15,522
13,482
–
8,483
12,647
12,136
2,784
14,511
30,000
29,500
14,772
11,031
4,045
12,238
–
–
–
8,071
109,806
106,074
22,341
24,102
132,147
130,176
30,828
45,854
23,606
13,311
23,725
48,800
22,917
16,667
24,000
34,646
24,150
24,300
24,000
46,791
25,833
47,917
24,833
45,890
28,992
2,040
–
–
225,932
353,168
358,079
483,344
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
94,909
178,174
94,909
178,174
17,400
25,364
19,671
29,644
20,455
17,265
13,969
15,080
8,520
18,009
9,316
165,272
141,750
186,272
148,507
–
93,316
151,772
133,500
33,409
169,625
360,000
324,500
177,272
121,341
44,500
146,863
96,859
–
–
–
1,317,719
1,177,039
2,966,655
3,080,423
4,284,374
4,257,462
1,906,138
1,171,543
890,837
874,436
1,054,468
1,103,546
833,388
483,688
956,207
956,528
787,937
831,566
576,428
591,049
517,411
512,796
487,464
514,909
2,172,097
57,118
–
–
8,067,396
9,212,158
12,351,770
13,469,620
1,525,000
799,000
1,525,000
799,000
1,525,000
1,371,776
908,414
1,811,459
1,141,807
105,362
89,331
200,271
267,505
43
45
16
35
26
24
27
35
25
41
26
35
27
34
27
34
26
35
27
34
0
0
0
0
15
8
13
13
11
4
3
6
7
3
6
3
7
3
7
3
6
3
7
3
0
0
0
0
1. Represents total remuneration in the financial year.
2. F Ford appointed as a director 10 October 2012.
3. Dr RJ Edgar retired as a director 27 March 2012.
4. GA Hounsell retired as a director on 8 October 2012.
5. Dr JW Stocker retired as a director 1 December 2011.
6. T Takasaki appointed as a director 6 December 2012.
7. R Ooms left Nufarm on 29 February 2012.
8. D Pullan retired from Nufarm 31 July 2013. Payments to Mr. Pullan comprised his entitlements and termination payment under the conditions of his employment contract.
9. E Prado was appointed to the role of group executive manufacturing on 1 July 2013.
Note: KMP were granted increases in fixed remuneration and short term incentive potential of between three per cent and 10 per cent. Percentage increases reflected changes in the scope and
responsibility of the role, individual performance and alignment to market comparators.
44 | Nufarm Limited Annual Report 2013
Remuneration of directors and executives
Details follow of the nature and amount of each major element of remuneration in respect of the non-executive directors and
key management personnel, which includes the managing director and group executives.
In AUD
Directors’ non-executive
AB Brennan
GR Davis
Dr RJ Edgar3
Dr WB Goodfellow
GA Hounsell 4
DG McGauchie
P Margin
Dr JW Stocker 5
F Ford 2
T Takasaki6
Sub total non-executive directors’ remuneration
Executive director DJ Rathbone (managing director)
Total directors’ remuneration
Group executives
DA Pullan8 (group executive operations)
P Binfield (chief financial officer)
BF Benson (group executive marketing)
G Hunt (group executive global marketing)
RG Reis (group executive corporate strategy and external affairs)
DA Mellody (group executive global marketing)
MJ Pointon (group executive innovation and development)
BJ Croft (group executive human resources and organisation development)
R Heath (company secretary)
RF Ooms7 (group executive chemicals)
E Prado9 (group executive manufacturing)
Sub total – total executives’ remuneration
Total directors’ and executives’ remuneration
1. Represents total remuneration in the financial year.
2. F Ford appointed as a director 10 October 2012.
3. Dr RJ Edgar retired as a director 27 March 2012.
4. GA Hounsell retired as a director on 8 October 2012.
5. Dr JW Stocker retired as a director 1 December 2011.
6. T Takasaki appointed as a director 6 December 2012.
7. R Ooms left Nufarm on 29 February 2012.
fees
$
151,500
128,864
170,750
135,025
–
84,833
139,125
121,364
30,625
155,114
330,000
295,000
162,500
110,310
40,455
134,625
88,788
–
–
–
1,207,913
1,070,965
1,522,303
1,451,451
2,730,216
2,522,416
778,558
702,458
639,588
449,875
682,937
624,858
587,303
270,310
610,707
542,504
498,339
475,262
346,351
298,261
324,974
285,629
281,498
245,157
604,812
55,078
–
–
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
87,252
259,987
51,709
309,226
83,458
248,683
46,372
100,545
72,940
215,310
62,629
182,991
45,866
129,179
39,265
114,832
38,293
113,038
–
–
–
–
4,805,333
4,499,126
7,535,549
7,021,542
527,784
1,673,791
1,368,031
2,815,586
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
37,638
22,030
14,160
–
43,511
22,829
35,219
31,612
35,416
35,468
33,519
32,746
38,096
13,293
–
–
–
–
232,209
163,328
279,381
214,836
840,247
1,141,795
840,247
1,141,795
47,172
51,508
47,172
51,508
8. D Pullan retired from Nufarm 31 July 2013. Payments to Mr. Pullan comprised his entitlements and termination payment under the conditions of his employment contract.
9. E Prado was appointed to the role of group executive manufacturing on 1 July 2013.
Note: KMP were granted increases in fixed remuneration and short term incentive potential of between three per cent and 10 per cent. Percentage increases reflected changes in the scope and
responsibility of the role, individual performance and alignment to market comparators.
Directors’ report continued
Salary and
Cash bonus
(vested)
Short term
Non-
monetary
benefits
Post-
employment
Share-based
payments
Other
long term
Total1
Total Superannuation
$
$
benefits Equity settled
$
$
Termination
Total
remuneration
$
$
Percentage of
remuneration
performance
based
%
Value of options
as a proportion
of total
remuneration
%
151,500
128,864
170,750
135,025
–
84,833
139,125
121,364
30,625
155,114
330,000
295,000
162,500
110,310
–
40,455
134,625
–
88,788
–
1,207,913
1,070,965
2,409,722
2,644,754
3,617,635
3,715,719
865,810
962,445
691,297
759,101
804,033
895,571
647,835
370,855
727,158
780,643
596,187
689,865
427,633
462,908
397,758
400,461
352,537
396,291
–
618,105
55,078
–
5,565,326
6,336,245
9,182,961
10,051,964
13,772
12,886
15,522
13,482
–
8,483
12,647
12,136
2,784
14,511
30,000
29,500
14,772
11,031
–
4,045
12,238
–
8,071
–
109,806
106,074
22,341
24,102
132,147
130,176
30,828
45,854
23,606
13,311
23,725
48,800
22,917
16,667
24,000
34,646
24,150
24,300
24,000
46,791
25,833
47,917
24,833
45,890
–
28,992
2,040
–
225,932
353,168
358,079
483,344
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
799,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,525,000
–
–
799,000
1,525,000
799,000
1,525,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
439,683
233,393
439,683
233,393
210,500
145,844
175,934
102,024
201,346
139,504
162,636
96,166
175,405
120,784
150,335
103,432
109,715
72,830
93,820
64,418
92,085
63,412
–
–
–
–
1,371,776
908,414
1,811,459
1,141,807
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
94,909
178,174
94,909
178,174
–
17,400
–
–
25,364
19,671
–
–
29,644
20,455
17,265
13,969
15,080
8,520
–
–
18,009
9,316
–
–
–
–
105,362
89,331
200,271
267,505
165,272
141,750
186,272
148,507
–
93,316
151,772
133,500
33,409
169,625
360,000
324,500
177,272
121,341
–
44,500
146,863
–
96,859
–
1,317,719
1,177,039
2,966,655
3,080,423
4,284,374
4,257,462
1,906,138
1,171,543
890,837
874,436
1,054,468
1,103,546
833,388
483,688
956,207
956,528
787,937
831,566
576,428
591,049
517,411
512,796
487,464
514,909
–
2,172,097
57,118
–
8,067,396
9,212,158
12,351,770
13,469,620
43
45
16
35
26
24
27
35
25
41
26
35
27
34
27
34
26
35
27
34
0
0
0
0
15
8
4
3
13
6
7
3
13
11
6
3
7
3
7
3
6
3
7
3
0
0
0
0
Nufarm Limited Annual Report 2013 | 45
Directors’ report continued
Remuneration options: granted and vested during the year
During the year 350,239 (2012: 465,677) performance rights were granted to executives under the LTIP. No options vested or were
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.
This report has been made in accordance with a resolution of directors.
DG McGauchie
Director
DJ Rathbone
Director
Melbourne
25 September 2013
46 | Nufarm Limited Annual Report 2013
Lead auditor’s independence declaration
Under section 307C of the corporations act 2001
To: the directors of Nufarm Limited
I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended 31 July 2013 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
BW Szentirmay
Partner
Melbourne
25 September 2013
KPMG, an Australian partnership and a member
firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative
(KPMG International), a Swiss entity.
Liability limited by a scheme approved
under Professional Standards Legislation.
Nufarm Limited Annual Report 2013 | 47
Income statement
For the year ended 31 July 2013
Continuing operations
Revenue
Cost of sales
Gross profit
Other income
Sales, marketing and distribution expenses
General and administrative expenses
Research and development expenses
Share of net profits/(losses) of equity accounted investees
Operating profit
Financial income excluding foreign exchange gains/(losses)(a)
Net foreign exchange gains/(losses)(a)
Net financing income
Financial expenses(a)
Net financing costs
Profit/(loss) before income tax
Income tax benefit/(expense)
Consolidated
2013
$000
2012
$000
Note
2,277,292
(1,653,991)
623,301
2,181,551
(1,570,657)
610,894
20,677
(269,582)
(148,012)
(42,698)
(60)
183,626
5,491
(10,734)
(5,243)
(65,460)
(70,703)
10,124
(240,543)
(198,007)
(37,874)
378
144,972
7,910
19,237
27,147
(61,796)
(34,649)
7
19
10
10
10
112,923
110,323
11
(31,173)
(37,501)
Profit/(loss) for the period from continuing operations
81,750
72,822
Attributable to:
Equity holders of the company
Non-controlling interest
Profit/(loss) for the period
Earnings per share
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
The income statement is to be read in conjunction with the attached notes.
(a) Comparative amounts have been reclassifed to align with current classification. Refer to note 2(e) for details.
80,999
751
72,594
228
81,750
72,822
30
30
25.5
25.4
22.3
22.3
48 | Nufarm Limited Annual Report 2013
Statement of comprehensive income
For the year ended 31 July 2013
Profit/(loss) for the period
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Foreign exchange translation differences for foreign operations
Effective portion of changes in fair value of cash flow hedges
Effective portion of changes in fair value of net investment hedges
Items that will not be reclassified to profit or loss:
Actuarial gains/(losses) on defined benefit plans
Income tax on share-based payment transactions
Note
Consolidated
2013
$000
81,750
2012
$000
72,822
166,767
(3,625)
(23,071)
(135,859)
–
–
(683)
252
(5,494)
93
Other comprehensive profit/(loss) for the period, net of income tax
139,640
(141,260)
Total comprehensive profit/(loss) for the period
221,390
(68,438)
Attributable to:
Equity holders of the company
Non-controlling interest
Total comprehensive profit/(loss) for the period
The amounts recognised directly in equity are disclosed net of tax.
The statement of comprehensive income is to be read in conjunction with the attached notes.
220,639
751
(68,666)
228
221,390
(68,438)
Nufarm Limited Annual Report 2013 | 49
Balance sheet
As at 31 July 2013
Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Current tax assets
Assets held for sale
Total current assets
Non-current assets
Trade and other receivables
Investments in equity accounted investees
Other investments
Deferred tax assets
Property, plant and equipment
Intangible assets
Other financial assets
Total non-current assets
TOTAL ASSETS
Current liabilities
Bank overdraft
Trade and other payables
Loans and borrowings
Employee benefits
Current tax payable
Provisions
Total current liabilities
Non-current liabilities
Payables
Loans and borrowings
Deferred tax liabilities
Employee benefits
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
Non-controlling interest
TOTAL EQUITY
The balance sheet is to be read in conjunction with the attached notes.
50 | Nufarm Limited Annual Report 2013
Consolidated
2013
$000
2012
$000
Note
15
16
17
18
13
16
19
20
18
22
23
21
15
24
25
26
18
28
24
25
18
26
264,972
758,534
802,789
33,866
–
1,860,161
191,317
730,496
515,254
37,664
–
1,474,731
36,191
6,197
448
200,219
402,698
865,755
–
1,511,508
3,371,669
41,095
4,126
6,213
181,633
370,780
722,690
–
1,326,537
2,801,268
–
550,319
316,365
19,783
16,677
3,279
906,423
–
474,991
292,323
18,167
14,834
6,742
807,057
48,871
581,720
119,691
50,219
800,501
1,706,924
1,664,745
10,246
366,798
95,823
44,542
517,409
1,324,466
1,476,802
1,063,992
(198,670)
547,302
1,412,624
246,932
5,189
1,664,745
1,059,522
(326,915)
496,663
1,229,270
246,932
600
1,476,802
Statement of cash flows
For the year ended 31 July 2013
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
Class action settlement
Net cash from operating activities
Cash flows from investing activities
Proceeds from sale of property, plant and equipment
Proceeds from sales of businesses and investments
Payments for plant and equipment
Payment for investments
Purchase of businesses, net of cash acquired
Payments for acquired intangibles and major product development expenditure
Net investing cash flows
Cash flows from financing activities
Debt establishment transaction costs
Proceeds from borrowings
Repayment of borrowings
Distribution to Nufarm step-up security holders
Dividends paid
Net financing cash flows
Net increase/(decrease) in cash and cash equivalents
Cash at the beginning of the year
Exchange rate fluctuations on foreign cash balances
Cash and cash equivalents at 31 July
The statement of cash flows is to be read in conjunction with the attached notes.
Consolidated
2013
$000
2012
$000
Note
2,464,521
(2,296,316)
168,205
5,491
73
(49,958)
(14,347)
(46,677)
62,787
2,163,049
(1,927,654)
235,395
7,910
151
(48,824)
(28,127)
–
166,505
38
1,036
12,630
(44,229)
–
(30,706)
(51,874)
591
4,915
(47,569)
–
(53,914)
(34,320)
(113,143)
(130,297)
(16,569)
1,244,168
(1,094,345)
(19,275)
(14,727)
99,252
48,896
191,317
24,759
264,972
(26,960)
832,466
(863,406)
(19,082)
(7,614)
(84,596)
(48,388)
246,825
(7,120)
191,317
15
Nufarm Limited Annual Report 2013 | 51
Statement of changes in equity
For the year ended 31 July 2013
Consolidated
Balance at 1 August 2011
Profit/(loss) for the period
Other comprehensive income
Actuarial gains/(losses) on defined benefit plans
Foreign exchange translation differences
Gains/(losses) on cash flow hedges taken to equity
Gains/(losses) on net investment hedges taken to equity
Income tax on share-based payment transactions
Total comprehensive income/(loss) for the period
Transactions with owners, recorded directly in equity
Accrued employee share award entitlement
Issuance of shares under employee share plans
Dividends paid to shareholders
Dividend reinvestment plan
Distributions to Nufarm step-up security holders
Acquisition of non-controlling interest
Balance at 31 July 2012
Balance at 1 August 2012
Profit/(loss) for the period
Other comprehensive income
Actuarial gains/(losses) on defined benefit plans
Foreign exchange translation differences
Gains/(losses) on cash flow hedges taken to equity
Gains/(losses) on net investment hedges taken to equity
Income tax on share-based payment transactions
Total comprehensive income/(loss) for the period
Transactions with owners, recorded directly in equity
Accrued employee share award entitlement
Issuance of shares under employee share plans
Dividends paid to shareholders
Dividend reinvestment plan
Distributions to Nufarm step-up security holders
Acquisition of non-controlling interest
Share
capital
$000
Translation
reserve
$000
Capital profit
reserve
$000
1,058,151
(227,551)
33,627
–
–
–
–
–
–
–
–
768
–
603
–
–
–
–
(135,859)
–
–
–
(135,859)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,059,522
(363,410)
33,627
2,868
496,663
1,229,270
246,932
1,059,522
(363,410)
33,627
2,868
496,663
1,229,270
246,932
–
–
–
–
–
–
–
–
–
166,767
–
–
–
166,767
–
3,494
–
976
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
67,100
(68,666)
228
(68,438)
Other
reserve
$000
714
Retained
earnings
$000
451,472
Total
$000
1,316,413
Nufarm
step-up
securities
$000
246,932
Non-controlling
interest
$000
Total
equity
$000
773
1,564,118
72,594
72,594
228
72,822
2,829
(768)
–
–
–
–
–
93
93
–
–
–
–
–
–
–
(3,625)
(23,071)
252
(26,444)
4,528
(3,494)
–
–
–
(13,112)
(5,494)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(7,865)
(14,044)
(683)
80,316
(15,703)
(13,974)
(5,494)
(135,859)
–
–
93
2,829
–
(7,865)
603
(14,044)
–
(683)
166,767
(3,625)
(23,071)
252
220,639
4,528
–
(15,703)
976
(13,974)
(13,112)
80,999
80,999
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(351)
(50)
600
600
751
751
3,838
(5,494)
(135,859)
–
–
93
2,829
–
(8,216)
603
(14,044)
(50)
1,476,802
1,476,802
81,750
(683)
166,767
(3,625)
(23,071)
252
221,390
4,528
–
(15,703)
976
(13,974)
(9,274)
Balance at 31 July 2013
1,063,992
(196,643)
33,627
(35,654)
547,302
1,412,624
246,932
5,189
1,664,745
The statement of changes in equity is to be read in conjunction with the attached notes.
52 | Nufarm Limited Annual Report 2013
Statement of changes in equity continued
For the year ended 31 July 2013
Translation
Capital profit
Share
capital
$000
reserve
$000
reserve
$000
33,627
1,058,151
(227,551)
Other
reserve
$000
714
Retained
earnings
$000
451,472
Total
$000
1,316,413
Nufarm
step-up
securities
$000
246,932
Non-controlling
interest
$000
Total
equity
$000
773
1,564,118
–
–
–
–
–
93
93
2,829
(768)
–
–
–
–
72,594
72,594
(5,494)
–
–
–
–
(5,494)
(135,859)
–
–
93
67,100
(68,666)
–
–
(7,865)
–
(14,044)
–
2,829
–
(7,865)
603
(14,044)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
228
72,822
–
–
–
–
–
(5,494)
(135,859)
–
–
93
228
(68,438)
–
–
(351)
–
–
(50)
2,829
–
(8,216)
603
(14,044)
(50)
1,059,522
(363,410)
33,627
2,868
496,663
1,229,270
246,932
600
1,476,802
1,059,522
(363,410)
33,627
2,868
496,663
1,229,270
246,932
–
80,999
80,999
–
–
(3,625)
(23,071)
252
(26,444)
4,528
(3,494)
–
–
–
(13,112)
(683)
–
–
–
–
80,316
–
–
(15,703)
–
(13,974)
–
(683)
166,767
(3,625)
(23,071)
252
220,639
4,528
–
(15,703)
976
(13,974)
(13,112)
–
–
–
–
–
–
–
–
–
–
–
–
–
600
751
–
–
–
–
–
751
–
–
–
–
–
3,838
1,476,802
81,750
(683)
166,767
(3,625)
(23,071)
252
221,390
4,528
–
(15,703)
976
(13,974)
(9,274)
Consolidated
Balance at 1 August 2011
Profit/(loss) for the period
Other comprehensive income
Actuarial gains/(losses) on defined benefit plans
Foreign exchange translation differences
Gains/(losses) on cash flow hedges taken to equity
Gains/(losses) on net investment hedges taken to equity
Income tax on share-based payment transactions
Total comprehensive income/(loss) for the period
Transactions with owners, recorded directly in equity
Accrued employee share award entitlement
Issuance of shares under employee share plans
Dividends paid to shareholders
Dividend reinvestment plan
Distributions to Nufarm step-up security holders
Acquisition of non-controlling interest
Balance at 31 July 2012
Balance at 1 August 2012
Profit/(loss) for the period
Other comprehensive income
Actuarial gains/(losses) on defined benefit plans
Foreign exchange translation differences
Gains/(losses) on cash flow hedges taken to equity
Gains/(losses) on net investment hedges taken to equity
Income tax on share-based payment transactions
Total comprehensive income/(loss) for the period
Transactions with owners, recorded directly in equity
Accrued employee share award entitlement
Issuance of shares under employee share plans
Dividends paid to shareholders
Dividend reinvestment plan
Distributions to Nufarm step-up security holders
Acquisition of non-controlling interest
768
603
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,494
976
(135,859)
(135,859)
166,767
166,767
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Balance at 31 July 2013
1,063,992
(196,643)
33,627
(35,654)
547,302
1,412,624
246,932
5,189
1,664,745
The statement of changes in equity is to be read in conjunction with the attached notes.
Nufarm Limited Annual Report 2013 | 53
Notes to the financial statements
1. Reporting entity
Nufarm Limited (the ‘company’) is a company limited by shares and domiciled in Australia that is listed on the Australian Securities
Exchange. The address of the company’s registered office is 103-105 Pipe Road, Laverton North, Victoria, 3026. The consolidated
financial statements of the company as at and for the year ended 31 July 2013 comprise the company and its subsidiaries (together
referred to as the 'group' and individually as ‘group entities’) and the group’s interest in associates and jointly controlled entities.
The group is a for-profit entity and is primarily involved in the manufacture and sale of crop protection products used by farmers
to protect crops from damage caused by weeds, pests and disease, and seed treatment products.
2. Basis of preparation
(a) Statement of compliance
The consolidated financial statements are general purpose financial statements which have been prepared in accordance with
Australian Accounting Standards (AASBs) adopted by the Australian Accounting Standards Board (AASB) and the Corporations
Act 2001. The consolidated financial statements comply with International Financial Reporting Standards (IFRSs) adopted by
the International Accounting Standards Board (IASB).
The consolidated financial statements were authorised for issue by the board of directors on 25 September 2013.
(b) Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis except for derivative financial instruments
which are measured at fair value. The methods used to measure fair values are discussed further in note 4.
The group’s financial report has been prepared on the going concern basis, which assumes the realisation of assets and
extinguishment of liabilities in the ordinary course of business. The going concern basis is considered appropriate by the directors
having regard to the group’s access to appropriate lines of credit to support the group’s working capital and general corporate
financing requirements through its three year $406 million syndicated bank facility, entered into in November 2011, a debtors'
securitisation facility, entered into in August 2011, and the completion of a US$325 million senior unsecured notes offering in
October 2012.
(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 in conformity with AASBs requires management to make judgements, estimates and
assumptions that affect the application of accounting policies and the 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 estimates are revised and in any future periods affected.
Information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have
the most significant impact on the amount recognised in the financial statements are described below.
(i) Business combinations
Fair valuing assets and liabilities acquired in a business combination involves making assumptions about the timing of cash inflows
and outflows, growth assumptions, discount rates and cost of debt. Refer to note 14 for details of acquisitions made during the period.
(ii) Impairment testing
The group determines whether goodwill and intangibles with indefinite useful lives are impaired on an annual basis or at each reporting
date if required. This requires an estimation of the recoverable amount of the cash-generating units, using a value in use discounted cash
flow methodology. The estimation of future cash flows requires management to make significant assumptions concerning the
identification of impairment indicators, earnings before interest and tax, growth rates, applicable discount rates and useful lives.
Further details can be found in note 23 on intangibles. Other non-current assets are also assessed for impairment indicators.
54 | Nufarm Limited Annual Report 2013
Notes to the financial statements continued
2. Basis of preparation (continued)
(d) Use of estimates and judgements (continued)
(iii) Income taxes
The group is subject to income taxes in Australia and overseas jurisdictions. There are many transactions and calculations
undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. Where the final tax
outcome of these matters is different from the amounts initially recorded, such differences will impact the current and deferred
tax provisions in the period in which the tax determination is made. Deferred tax assets are recognised only to the extent that it
is probable that future taxable profits will be available against which the assets can be utilised. The assessment of probability
involves estimation of a number of factors including future taxable income.
(iv) Defined benefit plans
A liability in respect of defined benefit pension plans is recognised in the balance sheet, and is measured as the present value of
the defined benefit obligation at the reporting date less the fair value of the pension plan’s assets. The present value of the defined
benefit obligation is based on expected future payments which arise from membership of the fund at the reporting date, calculated
annually by independent actuaries. Consideration is given to expected future salary levels, experience of employee departures and
periods of service. Refer note 26 for details of the key assumptions used in determining the accounting for these plans.
(v) Valuation of inventories
Inventories of finished goods, raw materials and work in progress are valued at lower of cost and net realisable value. The net
realisable value of inventories is the estimated market price less costs to sell at the time the product is expected to be sold.
(vi) Capitalised development costs
Development expenditures are recognised as an intangible asset when the group judges and is able to demonstrate:
(a) the technical feasibility of completing the intangible asset so that it will be available for use;
(b) intention to complete;
(c) ability to use the asset; and
(d) how the asset will generate future economic benefits and the ability to measure reliably the expenditure during development.
(e) Reclassification
Net foreign exchange gains/losses on proceeds from Nufarm step-up securities financing (2012: gain $11.505 million) are
now classified within net foreign exchange gains/losses, having previously been disclosed separately on the face of the income
statement as part of net financing costs.
Comparatives have been adjusted to present them on the same basis as current period figures.
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.
(a) Basis of consolidation
(i) Business combinations
Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which
control is transferred to the group. Control is the power to govern the financial and operating policies of an entity so as to obtain
benefits from its activities. In assessing control, the group takes into consideration potential voting rights that currently are
exercisable.
Acquisitions on or after 1 July 2009
For acquisitions on or after 1 July 2009, the group measures goodwill at the acquisition date as:
• the fair value of the consideration transferred; plus
• the recognised amount of any non-controlling interests in the acquiree; plus if the business combination
is achieved in stages, the fair value of the existing equity interest in the acquiree; less
• the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.
Nufarm Limited Annual Report 2013 | 55
Notes to the financial statements continued
3. Significant accounting policies (continued)
(a) Basis of consolidation (continued)
Acquisitions on or after 1 July 2009 (continued)
When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.
The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are
generally recognised in profit or loss.
Costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the group incurs in
connection with a business combination are expensed as incurred.
Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classified
as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the
contingent consideration are recognised in profit or loss.
Acquisitions between 1 July 2004 and 1 July 2009
For acquisitions between 1 July 2004 and 1 July 2009, goodwill represents the excess of the cost of the acquisition over the group’s
interest in the recognised amount (generally fair value) of the identifiable assets, liabilities and contingent liabilities of the acquiree.
When the excess was negative, a bargain purchase gain was recognised immediately in profit and loss.
Transaction costs, other than those associated with the issue of debt or equity securities, that the group incurred in connection
with business combinations were capitalised as part of the cost of the acquisition.
Acquisitions prior to 1 July 2004 (date of transition to IFRSs)
As part of its transition to IFRSs, the group elected to restate only those business combinations that occurred on or after 1 July
2003. In respect of acquisitions prior to 1 July 2003, goodwill represents the amount recognised under the group’s previous
accounting framework, Australian GAAP.
Acquisitions of non-controlling interests are accounted for as transactions with owners in their capacity as owners and therefore
no goodwill is recognised as a result of such transactions. The adjustments to non-controlling interests are based on a
proportionate amount of the net assets of the subsidiary.
(ii) Subsidiaries
Subsidiaries are entities controlled by the group. The financial statements of subsidiaries are included in the consolidated financial
statements from the date that control commences until the date that control ceases.
The accounting policies of subsidiaries have been changed where necessary to align them with the policies adopted by the group.
Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so
causes the non-controlling interests to have a deficit balance.
(iii) Investments in equity accounted investees
Associates are those entities in which the group has significant influence, but not control, over the financial and operating policies.
Significant influence is presumed to exist when the group holds between 20 and 50 per cent of the voting power of another entity.
Jointly controlled entities are those entities over whose activities the group has joint control, established by contractual agreement
and requiring unanimous consent for strategic financial and operating decisions.
Investments in associates and jointly controlled entities are accounted for using the equity method and are initially recognised
at cost. The group’s investment includes goodwill identified on acquisition, net of any accumulated impairment losses. The
consolidated financial statements include the group’s share of the income and expenses and equity movements of equity
accounted investees, after adjustments to align the accounting policies with those of the group, from the date that significant
influence or joint control commences until the date that significant influence or joint control ceases. When the group’s share
of losses exceeds its interest in an equity accounted investment, the carrying amount of that interest, including any long term
investments, 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 investee.
56 | Nufarm Limited Annual Report 2013
Notes to the financial statements continued
3. Significant accounting policies (continued)
(a) Basis of consolidation (continued)
(iv) Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are
eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with equity accounted
investees are eliminated against the investment to the extent of the group’s interest in the investee. Unrealised losses are
eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.
(b) Foreign currency
(i) Foreign currency transactions
Transactions in foreign currencies are translated to the respective functional currencies of group entities at exchange rates at the
dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated
to the functional currency at the foreign exchange rate at that date. Non-monetary assets and liabilities denominated in foreign
currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the
fair value was determined. Foreign currency differences arising on retranslation are recognised in profit or loss. Non-monetary
items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of
the transaction. Foreign currency gains and losses are included in net financing costs as they are mostly derived from financing
arrangements.
The group has on issue a hybrid security called Nufarm step-up securities (NSS). Proceeds from the NSS (note 29) have been
utilised to provide funding throughout the group. This creates a foreign currency exposure when the funding currency denomination
differs from the respective entity’s functional currency.
(ii) 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 differences are recognised in other comprehensive income. Since 1 August 2004, the group’s date of transition
to IFRS, 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 the FCTR is transferred to profit or loss as part of the profit or loss on disposal.
When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the
foreseeable future, foreign exchange gains and losses arising from such a monetary item are considered to form part of a net
investment in a foreign operation and are recognised in other comprehensive income, and are presented within equity in the FCTR.
(c) Financial instruments
(i) Non-derivative financial assets
The group initially recognises loans and receivables on the date that they are originated. All other financial assets (including assets
designated at fair value through profit or loss) are recognised initially on the trade date at which the group becomes a party to the
contractual provisions of the instrument.
The group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the
rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risk and rewards
of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the
group is recognised as a separate asset or liability.
Financial assets and liabilities are offset and the net amount presented in the balance sheet when, and only when, the group has the
legal right to offset the amounts and intends to settle on a net basis or to realise the asset and settle the liability simultaneously.
The group has the following non-derivative financial assets: financial assets at fair value through profit or loss, loans and
receivables and available-for-sale financial assets.
Nufarm Limited Annual Report 2013 | 57
Notes to the financial statements continued
3. Significant accounting policies (continued)
(c) Financial instruments (continued)
(i) Non-derivative financial assets (continued)
Financial assets at fair value through profit or loss
A financial asset is classified as at fair value through profit or loss if it is classified as held for trading or is designated as such
upon initial recognition. Financial assets are designated at fair value through profit or loss if the group manages such investments
and makes purchase and sale decisions based on their fair value in accordance with the group’s documented risk management
or investment strategy. Upon initial recognition attributable transaction costs are recognised in profit and loss when incurred.
Financial assets at fair value through profit or loss are measured at fair value, and changes therein are recognised in profit or loss.
Financial assets designated at fair value through profit or loss comprise equity securities that otherwise would have been classified
as available-for-sale.
Loans and receivables
Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such
assets are recognised initially at fair value plus any direct attributable transaction costs. Subsequent to initial recognition loans
and receivables are measured at amortised cost using the effective interest method, less any impairment losses. Loans and
receivables comprise trade and other receivables.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or less. 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 purposes of the statement of cash flows.
Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale or are not classified
as another category of financial asset. Available-for-sale financial assets are recognised initiallly at fair value plus any directly
attributable transaction costs. Subsequent to initial recognition, they are measured at fair value and any changes other than
impairment losses are recognised in other comprehensive income and presented in the fair value reserve in equity. When an
investment is derecognised, the cumulative gain or loss in equity is reclassified to profit or loss.
(ii) Non-derivative financial liabilities
The group initially recognises debt securities and subordinated liabilities on the date they are originated. All other financial
liabilities (including liabilities designated at fair value through profit or loss) are recognised initially on the trade date at which
the group becomes a party to the contractual provisions of the instrument. The group derecognises a financial liability when
its contractual obligations are discharged or cancelled or expired. Financial assets and liabilities are offset and the net amount
presented in the balance sheet when, and only when, the group has the legal right to offset the amounts and intends to settle
on a net basis or to realise the asset and settle the liability simultaneously.
The group has the following non-derivative financial liabilities: loans and borrowings, bank overdrafts and trade and other payables.
Such financial liabilities are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial
recognition these financial liabilities are measured at amortised cost using the effective interest rate method.
(iii) Share capital
Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised
as a deduction from equity, net of any related income tax benefit. Dividends on ordinary shares are recognised as a liability in
the period in which they are declared.
Hybrid securities
The NSS are classified as equity instruments but as non-controlling interests as they are issued by a subsidiary.
After-tax distributions thereon are recognised as distributions within equity. Further details can be found in note 29.
58 | Nufarm Limited Annual Report 2013
Notes to the financial statements continued
3. Significant accounting policies (continued)
(c) Financial instruments (continued)
(iv) Derivative financial instruments, including hedge accounting
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured
to their fair value at the end of each reporting period. The accounting for subsequent changes in fair value depends on whether
the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The group designates certain
derivatives as either:
• hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedges);
• hedges of a particular risk associated with the cash flows of recognised assets and liabilities and highly probable forecast
transactions (cash flow hedges); or
• hedges of a net investment in a foreign operation (net investment hedges).
The group documents at the inception of the hedging transaction the relationship between hedging instruments and hedged items,
as well as its risk management objective and strategy for undertaking various hedge transactions. The group also documents its
assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions
have been and will continue to be highly effective in offsetting changes in fair values or cash flows of hedged items.
The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the
hedged item is more than 12 months; it is classified as a current asset or liability when the remaining maturity of the hedged
item is less than 12 months. Trading derivatives are classified as a current asset or liability.
Fair value hedge
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in profit or loss, together
with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. The gain or loss relating
to the effective portion of interest rate swaps hedging fixed rate borrowings is recognised in profit or loss within finance costs,
together with changes in the fair value of the hedged fixed rate borrowings attributable to interest rate risk. The gain or loss
relating to the ineffective portion is recognised in profit or loss within other income or other expenses.
If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which the
effective interest method is used is amortised to profit or loss over the period to maturity using a recalculated effective interest rate.
Cash flow hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in
other comprehensive income and accumulated in reserves in equity. The gain or loss relating to the ineffective portion is recognised
immediately in profit or loss within other income or other expense.
Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss (for
instance when the forecast sale that is hedged takes place). The gain or loss relating to the effective portion of interest rate swaps
hedging variable rate borrowings is recognised in profit or loss within ‘finance costs’. The gain or loss relating to the effective
portion of forward foreign exchange contracts hedging export sales is recognised in profit or loss within ‘sales’. However, when
the forecast transaction that is hedged results in the recognition of a non-financial asset (for example, inventory or fixed assets)
the gains and losses previously deferred in equity are reclassified from equity and included in the initial measurement of the cost
of the asset. The deferred amounts are ultimately recognised in profit or loss as cost of goods sold in the case of inventory, or as
depreciation or impairment in the case of fixed assets.
When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting,
any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is
ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss
that was reported in equity is immediately reclassified to profit or loss.
Nufarm Limited Annual Report 2013 | 59
Notes to the financial statements continued
3. Significant accounting policies (continued)
(c) Financial instruments (continued)
(iv) Derivative financial instruments, including hedge accounting (continued)
Net investment hedges
Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges.
Any gain or loss on the hedging instrument relating to the effective portion of the hedge is recognised in other comprehensive
income and accumulated in reserves in equity. The gain or loss relating to the ineffective portion is recognised immediately in
profit or loss within other income or other expenses.
Gains and losses accumulated in equity are reclassified to profit or loss when the foreign operation is partially disposed of or sold.
Derivatives that do not qualify for hedge accounting
Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instrument that does
not qualify for hedge accounting are recognised immediately in profit or loss and are included in other income or other expenses.
(d) Property, plant and equipment
(i) Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation and impairment losses.
Cost includes expenditure that is 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, and capitalised borrowing
costs. 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.
Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal
with the carrying amount of property, plant and equipment and are recognised net in general and administrative expenses.
(ii) 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 carrying amount of the replaced part is derecognised. The costs of day-to-day servicing of property, plant and equipment are
recognised in profit or loss as incurred.
(iii) Depreciation
Depreciation is calculated over the depreciable amount, which is the cost of an asset, less its residual value. 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, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the
asset. Leased assets are depreciated over the shorter of the lease term and their useful lives, unless it is reasonably certain that
the group will obtain ownership by the end of the lease term. Land is not depreciated.
The estimated useful lives for the current and comparative periods are as follows:
• buildings
15 – 50 years
• leasehold improvements 5 years
• plant and equipment
10 –15 years
• motor vehicles
5 years
• computer equipment
3 years
Depreciation methods, useful lives and residual values are reassessed at each reporting date.
60 | Nufarm Limited Annual Report 2013
Notes to the financial statements continued
3. Significant accounting policies (continued)
(e) Intangible assets
(i) Goodwill
Goodwill that arises upon the acquisition of business combinations is included in intangible assets. Subsequent to initial
recognition, goodwill is measured at cost less accumulated impairment losses. In respect of equity accounted investees, the
carrying amount of goodwill is included in the carrying amount of the investment, and an impairment loss on such an investment
is not allocated to any asset, including goodwill, that forms part of the carrying amount of the equity accounted investee.
(ii) Research and development
Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and
understanding, is recognised in profit or loss when incurred.
Development activities involve a plan or design for the production of new or substantially improved products and processes.
Development expenditure is capitalised only if development costs can be measured reliably, the product or process is technically
and commercially feasible, future economic benefits are probable and the group has sufficient resources to complete development
and to use or sell the asset. The expenditure capitalised includes the cost of materials, direct labour and overhead costs that are
directly attributable to preparing the asset for its intended use and capitalised borrowing costs. Development expenditure that does
not meet the above criteria is recognised in profit or loss as incurred.
Capitalised development expenditure is measured at cost less accumulated amortisation and accumulated impairment losses.
(iii) 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. 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.
(iv) Other intangible assets
Other intangible assets that are acquired by the group, which have finite useful lives, are measured at cost less accumulated
amortisation and accumulated impairment losses.
(v) 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.
(vi) Amortisation
Amortisation is calculated over the cost of the asset, less its residual value. With the exception of goodwill, intangibles with a finite
life are amortised on a straight-line basis in profit and loss over the estimated useful lives of the intangible assets from the date
that they are available for use, since this most closely reflects the expected pattern of consumption of the future economic benefits
embodied in the asset. The estimated useful life for intangible assets with a finite life, in the current and comparative periods, are
as follows:
• capitalised development costs
5 –10 years
• intellectual property – finite life
over the useful life in accordance with the acquisition agreement terms
• computer software
3–7 years
Amortisation methods, useful lives and residual values are reassessed at each reporting date.
(f) Leased assets
Leases where 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 the leased assets are not recognised in the group’s balance sheet.
Nufarm Limited Annual Report 2013 | 61
Notes to the financial statements continued
3. Significant accounting policies (continued)
(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, production or conversion costs and other costs incurred
in 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.
(h) Impairment
(i) Non-derivative financial assets
A financial asset, not carried at fair value through profit or loss, is assessed at each reporting date to determine whether there is
any objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred
after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that
asset that can be estimated reliably.
Objective evidence of impairment includes default or delinquency by a debtor, indications that a debtor will enter bankruptcy,
and, in the case of an investment in an equity security, a significant or prolonged decline in its fair value.
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 on an available-for-sale financial asset is recognised by reclassifying the losses accumulated in the fair value
reserve in equity to profit and loss. The cumulative loss that is reclassified from equity to profit and loss is the difference between the
acquisition cost and the current fair value less any impairment loss previously recognised in profit and loss. If, in a subsequent period,
the fair value of an impaired available-for-sale financial asset increases and the increase relates to an event occurring after the
impairment loss was recognised then the impairment loss is reversed, with the amount of the reversal recognised in profit and loss.
(ii) 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, then 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.
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 and the risks specific to the asset. For the purpose of impairment
testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are
largely independent of the cash inflows of other assets or groups of assets (the ‘cash-generating unit’). The goodwill acquired in
a business combination, for the purpose of impairment testing, is allocated to cash-generating units that are expected to benefit
from the synergies of the combination.
An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable
amount. 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.
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.
Goodwill that forms part of the carrying amount of an investment in an associate is not recognised separately, and therefore is not
tested for impairment separately. Instead, the entire amount of the investment in an associate is tested for impairment as a single
asset when there is objective evidence that the investment in an associate may be impaired.
62 | Nufarm Limited Annual Report 2013
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 generally the
assets, or disposal group, are measured at the lower of their carrying amount and fair value less costs 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, deferred tax assets and employee benefit assets, 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.
Intangible assets and property, plant and equipment once classified as held for sale or distribution are not amortised or
depreciated. In addition, equity accounting of equity accounted investees ceases once classified as held for sale or distribution.
(j) Employee benefits
(i) Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity
and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution plans
are recognised as an employee benefit expense in profit or loss in the periods during which services are rendered by employees.
Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available.
(ii) Defined benefit plans
A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The group’s net obligation in
respect of defined benefit 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.
Any unrecognised past service costs and the fair value of any plan assets are 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 and that are
denominated in the same currency in which the benefits are expected to be paid. The calculation is performed annually 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 plan. In order to calculate the present value of economic benefits, consideration is
given to any minimum funding requirements that may apply to any plan in the group. An economic benefit is available to the
group if it is realisable during the life of the plan, or on settlement of the plan liabilities.
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.
The group recognises all actuarial gains and losses arising from the defined benefit plans directly in other comprehensive income.
The group recognises gains and losses on the curtailment or settlement of a defined benefit plan when the curtailment or settlement
occurs. The gain or loss on curtailment comprises any resulting change in the fair value of plan assets, change in the present value
of defined obligation and any related actuarial gains and losses and past service cost that had not previously been recognised.
(iii) Other long term employee benefits
The group’s net obligation in respect of long term employee benefits, other than defined benefit plans, 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. The calculation
is performed using the projected unit credit method. Any actuarial gains or losses are recognised in profit or loss in the period in
which they arise.
Nufarm Limited Annual Report 2013 | 63
Notes to the financial statements continued
3. Significant accounting policies (continued)
(j) Employee benefits (continued)
(iv) 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 either terminate employment before the normal retirement date, or to provide termination
benefits as a result of an offer made to encourage voluntary redundancy. Termination benefits for voluntary redundancies are
recognised as an expense 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. If benefits are payable more than 12 months after the reporting
period, then they are discounted to their present value.
(v) Short term benefits
Short term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.
A liability 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.
(vi) 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 expense 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 27 for details of the
global share plan.
The group has a short term incentive plan (STI) available to key executives, senior managers and other managers globally.
A pre-determined percentage of the STI is paid in cash with the remainder deferred into shares which have either a one or
two year vesting period. The cash portion is recognised immediately as an expense at the time of performance testing. The
expense relating to deferred shares is expensed over the vesting period. Refer to note 27 for further details on this plan.
The group has a long term incentive plan (LTIP) which is available to key executives and certain selected senior managers.
Peformance rights have been granted to acquire ordinary shares in the company subject to the achievement of global performance
hurdles. The expense in relation to the LTIP is recognised over the vesting period of three years. Refer note 27 for further details on
this 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 and the risks specific to the liability. The unwinding of the discount is recognised as a finance cost.
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 losses are not provided for.
(l) Revenue
(i) Goods sold
Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns, trade
discounts and volume rebates. Revenue is recognised when persuasive evidence of an arrangement exists, usually in the form of
an executed sales agreement, that 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, there is no continuing
management involvement with the goods and the amount of revenue can be measured reliably. If it is probable that discounts will
be granted and the amount can be measured reliably, then the discount is recognised as a reduction of revenue as the sales are
recognised.
(ii) Dividend income
Dividend income is recognised when the right to receive the payment is established. This is generally at the point the dividend
has been formally declared.
64 | Nufarm Limited Annual Report 2013
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, 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.
Determining whether an arrangement contains a lease
At the inception of an arrangement, the group determines whether such an arrangement is or contains a lease. A specific asset is
the subject of a lease if fulfilment of the arrangement is dependent on the use of that specified asset. An arrangement conveys the
right to use the asset if the arrangement conveys to the group the right to control the use of the underlying asset. At inception or
upon reassessment of the arrangement, the group separates payments and other consideration required by such an arrangement
into those for the lease and those for other elements on the basis of their relative fair values. If the group concludes for a finance
lease that it is impracticable to separate the payments reliably, an asset and liability are recognised at an amount equal to the fair
value of the underlying asset. Subsequently the liability is reduced as payments are made and an imputed finance charge on the
liability is recognised using the group’s incremental borrowing rate.
(n) Finance income and finance costs
Finance income comprises interest income on funds invested, changes in the fair value of financial assets at fair value through
profit or loss, and gains on hedging instruments that are recognised in profit or loss. Interest income is recognised as it accrues
in profit or loss, using the effective interest method.
Finance costs comprise interest expense on borrowings, transaction costs, unwinding of the discount on provisions, changes
in the fair value of financial assets classified as fair value through profit or loss, dividends on preference shares classified as
liabilities, impairment losses recognised on financial assets and losses on hedging instruments that are recognised in profit
or loss. Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset
are recognised in profit or loss using the effective interest rate method.
(o) Income tax
Income tax expense comprises current and deferred tax. Current and deferred taxes are recognised in profit or loss except
to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or
substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognised in respect of 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 assets or liabilities in a transaction that is not a business combination and that affects neither
accounting nor taxable profit or loss, and differences relating to investments in subsidiaries and jointly controlled entities to the
extent that they will probably not reverse in the foreseeable future. In addition, deferred tax is not recognised for taxable temporary
differences arising on the initial recognition of goodwill. 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 substantively enacted by the reporting
date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets,
and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they
intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.
A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that
it is probable that future taxable profits will be available against which they 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.
Additional income taxes that arise from the distribution of cash dividends are recognised at the same time as the liability
to pay the related dividend is recognised. The group does not distribute non-cash assets as dividends to its shareholders.
Nufarm Limited Annual Report 2013 | 65
Notes to the financial statements continued
3 Significant accounting policies (continued)
(o) Income tax (continued)
(i) Tax consolidation
The company and its wholly-owned Australian resident entities are part of a tax-consolidated group. As a consequence, all members
of the tax-consolidated group are taxed as a single entity. 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 of assets and liabilities 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 are assumed
by the head entity in the tax-consolidated group and are recognised by the company as amounts payable/(receivable) to/(from)
other entities in the tax-consolidated group in conjunction with any tax funding arrangement (refer below). Any difference
between these amounts is recognised by the company as an equity contribution amounts 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.
(ii) 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.
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) 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.
66 | Nufarm Limited Annual Report 2013
Notes to the financial statements continued
3 Significant accounting policies (continued)
(r) Segment reporting
Determination and presentation of operating segments
An operating segment is a component of the group that engages in business activities from which it may earn revenues and incur
expenses, including revenues and expenses that relate to transactions with any of the group’s other components. All operating
segments’ results are reviewed regularly by the group’s chief executive to make decisions about resources to be allocated to the
segment and to assess its performance.
Segment results that are reported to the chief executive include items directly attributable to a segment as well as those that can
be allocated on a reasonable basis. Unallocated items comprise mainly loans and borrowings and related expenses, corporate
assets and head office expenses, and income tax assets and liabilities.
Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment and intangible
assets other than goodwill.
(s) New standards and interpretations not yet adopted
A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after
1 August 2012, and have not been applied in preparing these consolidated financial statements. Those which may be relevant
to the group are set out below. The group does not plan to adopt these standards early.
(i) AASB 9 Financial Instruments (2010), AASB 9 Financial Instruments (2009)
AASB 9 (2009) introduces new requirements for the classification and measurement of financial assets. Under AASB 9 (2009),
financial assets are classified and measured based on the business model in which they are held and the characteristics of their
contractual cash flows. AASB 9 (2010) introduces additions relating to financial liabilities. The IASB currently has an active project
that may result in limited amendments to the classification and measurement requirements of AASB 9 and add new requirements
to address the impairment of financial assets and hedge accounting.
AASB 9 (2010 and 2009) are effective for annual periods beginning on or after 1 January 2015 with early adoption permitted.
The extent of the impact upon adoption of these standards has not been determined.
(ii) AASB 10 Consolidated Financial Statements, AASB 11 Joint Arrangements, AASB 12 Disclosure of Interests in Other Entities (2011)
AASB 10 introduces a single control model to determine whether an investee should be consolidated. As a result, the group may
need to change its consolidation conclusion in respect of its investees, which may lead to changes in the current accounting for
these investees.
Under AASB 11, the structure of the joint arrangement, although still an important consideration, is no longer the main factor in
determining the type of joint arrangement and therefore the subsequent accounting:
• the group’s interest in a joint operation, which is an arrangement in which the parties have rights to the assets and obligations
for the liabilities, will be accounted for on the basis of the group’s interest in those assets and liabilities; and
• the group’s interest in a joint venture, which is an arrangement in which the parties have rights to the net assets,
will be equity accounted.
The group may need to reclassify its joint arrangements, which may lead to changes in current accounting for these interests.
AASB 12 brings together into a single standard all the disclosure requirements about an entity’s interests in subsidiaries, joint
arrangements, associates and unconsolidated structured entities. The group is currently assessing the disclosure requirements for
interests in subsidiaries, interests in joint arrangements and associates and unconsolidated structured entities in comparison with
the existing disclosures. AASB 12 requires the disclosure of information about the nature, risks and financial effects of these interests.
These standards are effective for annual periods beginning on or after 1 January 2013 with early adoption permitted. The extent
of the impact upon adoption of these standards has not been determined.
Nufarm Limited Annual Report 2013 | 67
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. When 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, and willingly. The market value of items of plant, equipment, fixtures and fittings is based on the market
approach and cost approaches quoted market prices for similar items when available and replacement cost when appropriate.
(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 inventories 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 inventories.
(iv) 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. This fair value is determined for disclosure purposes.
(v) 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 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.
68 | Nufarm Limited Annual Report 2013
Notes to the financial statements continued
4. Determination of fair values (continued)
(vi) 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.
(vii) Share-based payment transactions
The fair value of the performance rights issued under the Nufarm long term incentive plan have been measured using Monte Carlo
Simulation and the Binomial Tree. The fair value of the deferred shares granted to participants under the Nufarm Short Term
Incentive will be measured using the volume weighted average price for the five day period subsequent to year end results
announcement. Measurement inputs include the share price on the measurement date, the exercise price of the instrument,
expected volatility, expected term of the instruments, dividends, and the risk-free rate (based on government bonds).
5. Operating segments
Segment information is presented in respect of the group’s key operating segments. The operating segments are based
on the group’s management and internal reporting structure.
Operating segments
The group operates predominantly along two business lines, being crop protection and seed technologies.
The crop protection business deals in the manufacture and sale of crop protection products used by farmers to protect
crops from damage caused by weeds, pests and disease. It is managed by major geographic segments, being Australia and
New Zealand, Asia, Europe, North America and South America. The North America region includes Canada, US, Mexico and
the Central American countries. The South America region includes Brazil, Argentina, Chile, Uruguay, Paraguay, Bolivia,
Columbia and the Andean countries.
The seed technologies business deals in the sale of seeds and seed treatment products. The seed technologies business is
managed on a worldwide basis.
Information regarding the results of each operating segment is included below. Performance is measured based on underlying
EBIT as included in the internal management reports that are reviewed by the group’s chief executive. Underlying EBIT is used
to measure performance as management believes that such information is the most relevant in evaluating the results of each
segment. Segment revenue is based on the geographic location of customers. Segment results include items directly attributable
to a segment as well as those that can be allocated on a reasonable basis. The corporate segment comprises mainly corporate
expenses, interest-bearing loans, borrowings and corporate assets.
Nufarm Limited Annual Report 2013 | 69
Notes to the financial statements continued
5. Operating segments (continued)
Operating
segments
2013
Revenue
Total segment revenue
Results
Underlying EBITDA (a)
Crop protection
technologies Corporate
Group
Australia and
New Zealand
$000
Asia
$000
Europe
$000
North
America
$000
South
America
$000
Total
$000
Global
$000
$000
Total
$000
Seed
604,432 125,201 468,253
516,278
431,440 2,145,604
131,688
– 2,277,292
57,765
23,640
84,023
55,366
43,482
264,276
36,024
(39,511)
260,789
Depreciation and
amortisation excluding
material items
Underlying EBIT(a)
Material items
included in operating
profit (refer note 6)
Material items included
in net financing costs
(refer note 6)
Net financing costs
(excluding material
items)
Profit/(loss) before tax
Assets
Segment assets
Investment in associates
Total assets
Liabilities
Segment liabilities
Total liabilities
Other segment
information
Capital expenditure
(22,413)
35,352
(4,060) (26,778)
57,245
19,580
(13,213)
42,153
(2,887)
40,595
(69,351)
194,925
(3,575)
32,449
(1,060)
(40,571)
(73,986)
186,803
(3,177)
–
(70,703)
112,923
545,034
–
545,034
86,364 749,453
1,992
90,246 751,445
3,882
527,147
–
527,147
672,960 2,580,958
5,874
672,960 2,586,832
–
287,647
323
287,970
496,867 3,365,472
6,197
496,867 3,371,669
–
144,996
144,996
48,888 214,159
48,888 214,159
90,307
90,307
126,072
126,072
624,422
624,422
29,677
29,677
1,052,825 1,706,924
1,052,825 1,706,924
17,322
1,629
35,491
24,839
8,168
87,449
5,356
1
92,806
70 | Nufarm Limited Annual Report 2013
Notes to the financial statements continued
5. Operating segments (continued)
Crop protection
technologies Corporate
Group
Seed
Australia and
New Zealand
$000
Asia
$000
Europe
$000
North
America
$000
South
America
$000
Total
$000
Global
$000
$000
Total
$000
701,022
125,586 431,095
470,243
332,636 2,060,582
120,969
– 2,181,551
127,036
19,387
65,801
43,501
19,365
275,090
32,721
(40,057)
267,754
(21,054)
105,982
(2,652) (22,578)
43,223
16,735
(10,174)
33,327
(1,839)
17,526
(58,297)
216,793
(2,132)
30,589
(1,352)
(41,409)
(61,781)
205,973
(61,001)
2,072
(36,721)
110,323
560,976
62,128 618,347
416,170
500,660 2,158,281
224,038
414,823 2,797,142
–
560,976
2,658
1,167
64,786 619,514
–
416,170
–
3,825
500,660 2,162,106
301
224,339
–
4,126
414,823 2,801,268
158,070
158,070
40,548 173,894
40,548 173,894
36,291
36,291
79,150
79,150
487,953
487,953
18,534
18,534
817,979 1,324,466
817,979 1,324,466
21,013
1,392
30,440
9,504
6,707
69,056
3,457
3
72,516
Operating
segments
2012
Revenue
Total segment revenue
Results
Underlying EBITDA(a)
Depreciation and
amortisation excluding
material items
Underlying EBIT(a)
Material items included
in operating profit
(refer note 6)
Material items included
in net financing costs
(refer note 6)
Net financing costs
(excluding material
items)
Profit/(loss) before tax
Assets
Segment assets
Investment in
associates
Total assets
Liabilities
Segment liabilities
Total liabilities
Other segment
information
Capital expenditure
(a) Underlying EBIT is earnings before net finance costs, taxation and material items. Underlying EBITDA is Underlying EBIT, before depreciation, amortisation and impairments.
Nufarm Limited Annual Report 2013 | 71
Notes to the financial statements continued
5. Operating segments (continued)
Geographical information
Australia
New Zealand
Asia
Europe
USA
Rest of North America
Brazil
Rest of South America
Unallocated(b)
Total
Revenue by location of customer
2012
$000
672,504
54,412
139,213
444,624
449,158
70,850
253,789
97,001
–
2,181,551
2013
$000
567,235
59,480
138,603
488,711
460,295
106,751
341,802
114,415
–
2,277,292
Non-current assets by location
2012
$000
269,150
14,443
30,289
304,895
265,653
29,776
214,281
16,417
181,633
1,326,537
2013
$000
257,186
15,999
39,831
369,692
333,481
30,736
245,419
18,945
200,219
1,511,508
(b) Unallocated assets predominately include deferred tax assets.
6. Items of material income and expense
Material items are those items where their nature and/or amount is considered material to the financial statements. Such items
included within the group’s profit for the year are detailed below.
Material items by category:
Class action settlement
Restructuring costs
Debt refinancing costs
Due diligence and litigation costs
Investment in associate write down
Intangibles write-off – Brazil
Net foreign exchange gains/(losses) on Nufarm step-up securities financing
Consolidated
Consolidated
2013
$000
Pre-tax
2013
$000
After-tax
2012
$000
Pre-tax
2012
$000
After-tax
(3,177)
–
–
–
–
–
–
(3,177)
(2,224)
–
–
–
–
–
–
(2,224)
(43,500)
(7,295)
(9,931)
(3,552)
(1,993)
(3,708)
11,050
(58,929)
(30,450)
(5,013)
(6,952)
(2,427)
(1,993)
(3,708)
7,697
(42,846)
Class action settlement
In 2013 the Federal Court gave final approval to the settlement of the class action brought against the company in early 2011. The
settlement agreement was amended to cover an expanded number of claims, with Nufarm agreeing to pay a total of $46.6 million
(previously $43.5 million). Consistent with previous treatment, the additional settlement amount and related costs have been
reported as a material item.
Restructuring costs
No material restructuring costs were incurred during the year ended 31 July 2013. The prior year costs related to the
reorganisation of the European business.
Debt refinancing costs
Whilst we have incurred and capitalised material debt establishment transaction costs associated with the US$325 million bond
issuance, debt establishment transaction costs expensed during the year ended 31 July 2013 were not material or unusual in
nature. The prior year debt refinancing costs relate to the establishment of a 12 month facility that was put in place in December
2010. These costs were treated as a material item and were partially recognised in the year ended 31 July 2011 with the balance
recognised in the year ended 31 July 2012 ($6.952 million).
72 | Nufarm Limited Annual Report 2013
Notes to the financial statements continued
6. Items of material income and expense (continued)
Due diligence and litigation costs
No material due diligence and litigation costs were incurred during the year ended 31 July 2013. The 2012 financial year due diligence
and litigation costs largely relate to the class action proceedings, the Seeds 2000 acquisition and arbitration proceedings against the
previous owner of the Brazilian business.
Investment in associate write down
No material write down on investment in associate occurred during the year ended 31 July 2013. The 2012 $1.993 million
write-off was related to the value of a minor equity investment in an Indian crop protection company Excel Crop Care Ltd.
Intangibles write-off – Brazil
Several older insecticide products have been phased out of the Brazilian product portfolio due to regulatory requirements. The
company took a write down in the carrying value of the intangible assets associated with these products in the prior year ($3.708 million)
with the balance written down as at 31 July 2012. No further charges were incurred during the year ended 31 July 2013.
Net foreign exchange gains/(losses) on Nufarm step-up securities financing
No material foreign exchange gains/(losses) on the Nufarm step-up securities were incurred during the year ended 31 July 2013.
In 2012, the company benefitted from a net after tax gain of $7.697 million associated with the mark-to-market revaluation of
proceeds from Nufarm step-up securities.
Material items are classified by function as follows
Year ended 31 July 2013
$’000
Class action settlement
Restructuring costs
Debt refinancing costs
Due diligence and legal costs
Investment in associate write down
Intangibles write-off – Brazil
Net foreign exchange gains/(losses)
on Nufarm step-up securities financing
Total material items included operating profit
Year ended 31 July 2012
$’000
Class action settlement
Restructuring costs
Debt refinancing costs
Due diligence and legal costs
Investment in associate write down
Intangibles write-off – Brazil
Net foreign exchange gains/(losses)
on Nufarm step-up securities financing
Total material items included operating profit
Selling,
marketing and
distribution
expense
–
–
–
–
–
–
General and
administrative
expense
(3,177)
–
–
–
–
–
Cost of sales
–
–
–
–
–
–
-
–
–
–
–
–
–
(3,177)
(3,177)
Selling,
marketing and
distribution
expense
–
(4,846)
–
–
–
–
General and
administrative
expense
(43,500)
(1,644)
(953)
(3,552)
(1,993)
(3,708)
Cost of sales
–
(805)
–
–
–
–
-
(805)
(805)
–
(4,846)
(4,846)
–
(55,350)
(55,350)
Net
financing
costs
–
–
–
–
–
–
–
–
–
Net
financing
costs
–
–
(8,978)
–
–
–
11,050
2,072
–
Total
Pre-tax
(3,177)
–
–
–
–
–
–
(3,177)
(3,177)
Total
Pre-tax
(43,500)
(7,295)
(9,931)
(3,552)
(1,993)
(3,708)
11,050
(58,929)
(61,001)
Nufarm Limited Annual Report 2013 | 73
Notes to the financial statements continued
7. Other income
Dividend income
Rental income
Sundry income
Total other income
8. Other expenses
The following expenses were included in the period result:
Depreciation and amortisation
Inventory write down
9. Personnel expenses
Wages and salaries
Other associated personnel expenses
Contributions to defined contribution superannuation funds
Expenses related to defined benefit superannuation funds
Short term employee benefits
Other long term employee benefits
Restructuring expense
Personnel expenses
No material restructuring costs were incurred in the year ended 31 July 2013. (2012: Restructuring
of the group’s European operations). The prior year restructuring expenses are included in material
items in note 6.
10. Finance income and expense
Financial income excluding foreign exchange gains/(losses)(a)
Net foreign exchange gains/(losses)(a)(b)
Financial income
Interest expense – external
Interest expense – debt establishment transaction costs
Lease expense – finance charges
Financial expenses
Net financing costs
(a) Refer note 2(e) for an explanation of the prior year reclassification.
(b) In 2012, net foreign exchange gains on Nufarm step-up securities financing totalled $11.050 million. Refer to note 6.
74 | Nufarm Limited Annual Report 2013
Consolidated
2013
$000
1
199
20,477
20,677
2012
$000
24
318
9,782
10,124
(73,986)
(5,773)
(65,489)
(2,966)
(219,754)
(37,370)
(13,809)
(3,311)
(8,081)
(3,319)
–
(285,644)
(212,306)
(32,520)
(13,371)
(1,813)
(7,976)
(2,252)
(4,847)
(275,085)
5,491
(10,734)
(5,243)
(54,537)
(9,447)
(1,476)
(65,460)
7,910
19,237
27,147
(47,405)
(12,972)
(1,419)
(61,796)
(70,703)
(34,649)
Notes to the financial statements continued
11. Income tax expense
Recognised in the income statement
Current tax expense
Current period
Adjustments for prior periods
Current tax expense
Deferred tax expense
Origination and reversal of temporary differences and tax losses
Reduction in tax rates
Initial (recognition)/derecognition of tax assets
Deferred tax expense/(benefit)
Consolidated
2013
$000
2012
$000
29,383
(2,189)
27,194
3,446
(30)
563
3,979
46,782
(690)
46,092
(8,801)
10
200
(8,591)
Total income tax expense/(benefit) in income statement
31,173
37,501
Attributable to:
Continuing operations
Total income tax expense/(benefit) in income statement
Numerical reconciliation between tax expense and pre-tax net profit
Profit/(loss) before tax
Income tax using the local corporate tax rate of 30%
Increase in income tax expense due to:
Non-deductible expenses
Other taxable income
Effect of changes in the tax rate
Initial (recognition)/derecognition of tax assets
Decrease in income tax expense due to:
Effect on tax rate in foreign jurisdictions
Tax exempt income
Tax incentives not recognised in the income statement
Under/(over) provided in prior years
Income tax expense/(benefit)
Income tax recognised directly in equity
Nufarm step-up securities distribution
Income tax recognised directly in equity
Income tax recognised in other comprehensive income
Relating to actuarial gains/(losses) on defined benefit plans
Relating to equity based compensation
Income tax recognised in other comprehensive income
31,173
31,173
37,501
37,501
112,924
110,323
33,877
33,097
2,676
1,388
(30)
563
(2,838)
(382)
(1,892)
33,362
(2,189)
31,173
7,121
887
10
200
(1,476)
(385)
(1,267)
38,187
(686)
37,501
(4,970)
(4,970)
(5,038)
(5,038)
269
(252)
17
(1,596)
(93)
(1,689)
Nufarm Limited Annual Report 2013 | 75
Notes to the financial statements continued
12. Discontinued operations
There were no discontinued operations in the current or prior period.
13. Non-current assets held for sale
There were no assets held for sale in the current or prior period.
Assets classified as held for sale
Property, plant and equipment including costs incurred in preparing site for sale
Total assets held for sale
Consolidated
2013
$000
–
–
2012
$000
–
–
14. Acquisition of businesses and acquisition of non-controlling interests
Business acquisitions – 2013
On 1 January 2013, the group purchased the turf and ornamental business of USA based Cleary Chemical Corporation for US$10 million
plus working capital adjustments of US$2.5 million (A$12.0 million). The acquisition has provided a wider product offering for the group
and is expected to complement and result in synergies with the existing turf and ornamental business in the region.
On 23 January 2013, the group acquired 51 per cent of the equity in Atlantica Sementes Ltda., a Brazilian business specialising in
sorghum and sunflower seeds. The 51 per cent stake, purchased at a cost of 25 million Brazilian reais (A$12.0 million), will allow
Nuseed to supply a number of existing Nuseed hybrids through the Atlantica distribution network and leverage other development
programs in Australia, Argentina and the USA. The acquisition has been made to expand the seeds business in South America and
is expected to complement the existing seeds business and grow our market share.
On 19 April 2013, the group purchased the pelletising business of Masmart Pty Ltd based in New South Wales, Australia for
$4.8 million. Masmart is a supplier to the Australian Nufarm Crop Care business and also provides pelletising tolling services.
The acquisition is expected to complement and result in synergies with the crop protection business in the region.
On 4 July 2013, the group purchased the Australian based sorghum seed business of the HSR Group for $2.5 million. The acquisition
has sourced the breeding and germplasm assets of the HSR’s sorghum seed business and is expected to complement Nufarm’s
existing global sorghum business.
Business acquisitions – 2012
On 1 December 2011, the group acquired 100 per cent of the shares in Seeds 2000 Inc. at a total cost of US$55.2 million. Seeds
2000 is a sunflower seed research and production company based in Minnesota, USA and has activities in the USA, Canada, China,
Argentina, and a number of European markets.
On 31 March 2012 the group acquired 100 per cent of the shares in Seeds 2000 Argentina SRL, a related company of Seeds 2000
Inc, at a total cost of US$1.4 million. On 24 October 2011, the group acquired the breeding and germplasm assets of the Super
Seeds sunflower business in Serbia. The Seeds 2000 Argentina SRL and Super Seeds acquisitions are individually immaterial.
76 | Nufarm Limited Annual Report 2013
Notes to the financial statements continued
14. Acquisition of businesses and acquisition of non-controlling interests (continued)
Fair value on acquisition(a) Fair value on acquisition(a)
Acquiree’s net assets at acquisition date
Cash and cash equivalents
Receivables
Inventory
Property, plant and equipment
Deferred tax asset
Pre-acquistion intangibles assets
Other assets
Trade and other payables
Interest bearing loans and borrowings
Deferred tax liability
Other liabilities
Net identifiable assets and liabilities
Intangibles acquired on acquisition
Non-controlling interest
Goodwill on acquisition
Consideration paid
Cash acquired
Net cash outflow
31 Jul 2013
$000
643
9,137
6,205
1,102
–
52
72
(4,224)
–
(3,173)
(275)
9,539
10,034
(3,837)
15,613
31,349
(643)
30,706
31 Jul 2012
$000
1,844
1,967
13,182
1,749
400
1,879
164
(1,275)
(2,074)
(14,400)
(4,321)
(885)
37,287
–
19,355
55,757
(1,844)
53,913
(a) Fair values established at acquisition date are provisional through to 12 months post-acquisition date.
Total goodwill of $15,613,000 (2012: $19,355,000) from business acquisitions is attributable mainly to the synergies expected to
be achieved from integrating the respective businesses into the group’s existing business.
Acquisition of non-controlling interest
On 1 May 2012, the group acquired an additional 49 per cent interest in the voting shares of Nufarm Technologies (M) Sdn Bhd,
increasing its ownership interest to 100 per cent. A cash consideration of $50,000 was paid to the non-controlling interest
shareholders. The carrying value of the net assets of Nufarm Technologies (M) Sdn Bhd at the acquisition date was $102,000,
and the carrying value of the additional interest acquired was $50,000. The group recognised a decrease in non-controlling
interests of $50,000.
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
Consolidated
2013
$000
230,750
34,222
264,972
–
264,972
2012
$000
103,522
87,795
191,317
–
191,317
Nufarm Limited Annual Report 2013 | 77
Notes to the financial statements continued
16. Trade and other receivables
Current
Trade receivables
Provision for impairment losses
Receivables due from associates
Derivative financial instruments
Proceeds receivable from sale of businesses
Prepayments
Other receivables
Current receivables
Non-current
Receivables due from associates
Other receivables
Proceeds receivable from sale of businesses
Non-current receivables
Total trade and other receivables
17. Inventories
Raw materials
Work in progress
Finished goods
Provision for obsolescence of finished goods
Total inventories
Consolidated
2013
$000
2012
$000
701,560
(24,172)
677,388
–
2,161
2,153
19,199
57,633
758,534
688,059
(22,278)
665,781
–
7,196
3,363
11,484
42,672
730,496
–
36,191
–
36,191
38
39,420
1,637
41,095
794,725
771,591
213,880
16,702
578,609
809,191
(6,402)
802,789
138,018
13,991
368,172
520,181
(4,927)
515,254
18. Tax assets and liabilities
Current tax assets and liabilities
The current tax asset for the group of $33,865,619 (2012: $37,664,065) represents the amount of income taxes recoverable in respect
of prior periods and that arose from the payment of tax in excess of the amounts due to the relevant tax authority. The current tax
liability for the group of $16,677,067 (2012: $14,833,945) represents the amount of income taxes payable in respect of current and
prior financial periods.
78 | Nufarm Limited Annual Report 2013
Notes to the financial statements continued
18. Tax assets and liabilities (continued)
Deferred tax assets and liabilities
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Assets
Liabilities
Net
Consolidated
Property, plant and equipment
Intangible assets
Employee benefits
Provisions
Other items
Tax value of losses carried forward
Tax assets/(liabilities)
Set off of tax
Net tax assets/(liabilities)
2013
$000
5,274
9,123
14,613
10,654
27,500
138,888
206,052
(5,833)
200,219
2012
$000
4,507
8,511
14,265
25,951
28,319
103,346
184,899
(3,266)
181,633
2013
$000
(11,808)
(98,113)
–
–
(15,603)
–
(125,524)
5,833
(119,691)
2012
$000
(8,215)
(75,510)
–
–
(15,364)
–
(99,089)
3,266
(95,823)
Movement in temporary differences during the year
Consolidated 2013
Property, plant and equipment
Intangibles assets
Employee benefits
Provisions
Other items
Tax value of losses carried forward
Consolidated 2012
Property, plant and equipment
Intangibles assets
Employee benefits
Provisions
Other items
Tax value of losses carried forward
Balance
31.07.12
$000
(3,708)
(66,999)
14,265
25,951
12,955
103,346
85,810
Balance
31.07.11
$000
(2,051)
(53,596)
13,778
11,174
36,468
99,831
105,604
Recognised
in income
$000
(571)
(10,671)
(668)
(15,852)
(3,946)
27,729
(3,979)
Recognised
in equity
$000
–
–
(269)
–
252
–
(17)
Recognised
in income
$000
(1,917)
(2,131)
(1,109)
17,110
3,862
(7,223)
8,592
Recognised
in equity
$000
–
–
1,596
–
93
–
1,689
Currency
adjustment
$000
(2,255)
(10,836)
1,285
555
2,636
12,830
4,215
Currency
adjustment
$000
260
3,128
–
(2,333)
(5,313)
(10,956)
(15,214)
2013
$000
(6,534)
(88,990)
14,613
10,654
11,897
138,888
80,528
–
80,528
Other
movement
$000
–
(484)
–
–
–
(5,017)
(5,501)
Other
movement
$000
–
(14,400)
–
–
(22,155)
21,694
(14,861)
2012
$000
(3,708)
(66,999)
14,265
25,951
12,955
103,346
85,810
–
85,810
Balance
31.07.13
$000
(6,534)
(88,990)
14,613
10,654
11,897
138,888
80,528
Balance
31.07.12
$000
(3,708)
(66,999)
14,265
25,951
12,955
103,346
85,810
Nufarm Limited Annual Report 2013 | 79
Notes to the financial statements continued
18. Tax assets and liabilities (continued)
Deferred tax assets and liabilities (continued)
The carrying value of deferred tax assets relating to tax losses and tax credits is largely dependent on the generation of sufficient
future taxable income. The Brazilian business carries total deferred tax assets of $56.3 million (2012: $59.1 million). Based on the
group’s accounting policy of recouping tax losses and tax credits within a maximum time frame of eight years, the carrying value
of the deferred tax asset would be impaired if aggregate earnings over the eight year period are 44 per cent below management’s
forecasts.
The carrying value of this asset will continue to be assessed at each reporting date.
Unrecognised deferred tax liability
At 31 July 2013, a deferred tax liability of $25,200,672 (2012: $17,589,702) relating to investments in subsidiaries has not been recognised
because the company controls the repatriation of retained earnings and it is satisfied that it will not be incurred in the foreseeable future.
This amount represents the theoretical withholding tax payable if all overseas retained earnings were paid as dividends.
Unrecognised deferred tax assets
At 31 July 2013, there are unrecognised tax losses and timing differences of $29,590,667 (2012: $30,805,379). These losses do not
have an expiry date.
19. Investments accounted for using the equity method
The group accounts for investments in associates using the equity method.
The group had the following significant investments in associates during the year:
Country
Balance date
of associate
Ownership and voting interest
2012
2013
Excel Crop Care Ltd
F&N joint ventures
Lotus Agrar GmbH
Agricultural chemicals manufacturer
Agricultural chemicals distributor
Agricultural chemicals distributor
India
Eastern Europe
Germany
31 March
31 December
31 December
14.69%
50.00%
50.00%
14.69%
50.00%
-
The 14.69 per cent investment in Excel Crop Care Ltd is equity accounted as Nufarm has the ability to appoint two directors to the
board and, together with an unrelated partner, has significant influence over nearly 34 per cent of the shares of the company. The
relationship also extends to manufacturing and marketing collaborations.
The F&N joint ventures represents the group’s interest in three joint ventures with FMC Corporation, which operate in Poland, Czech
Republic and Slovakia. The joint ventures sell Nufarm and FMC products within their country.
Lotus Agrar GmbH is a joint venture established in Germany to sell generic agrochemicals.
Financial summary of material associates (at reporting date)
Revenues
(100%)
$000
140,177
57,633
–
197,810
130,561
49,948
180,509
Profit/(loss)
after-tax
(100%)
$000
3,817
(1,686)
–
2,131
2,766
668
3,434
Total
assets
(100%)
$000
94,238
65,134
2,972
162,344
97,755
51,158
148,913
Total
liabilities
(100%)
$000
48,333
64,122
–
112,455
58,151
48,824
106,975
Net assets
as reported
by associates
(100%)
$000
Share of
associates’
net assets
equity
accounted
$000
45,905
1,012
2,972
49,889
39,604
2,334
41,938
6,743
506
1,486
8,735
5,818
1,167
6,985
2013
Excel Crop Care Ltd
F&N joint ventures
Lotus Agrar GmbH
2012
Excel Crop Care Ltd
F&N joint ventures
The financial summary information is as per the latest management accounts.
80 | Nufarm Limited Annual Report 2013
Notes to the financial statements continued
19. Investments accounted for using the equity method (continued)
Financial summary of material associates (at reporting date) (continued)
Carrying value by major associate
Excel Crop Care Ltd
F&N joint ventures
Lotus Agrar GmbH
Others
Carrying value of associates
Consolidated
2013
$000
3,882
506
1,486
323
6,197
2012
$000
2,658
1,167
–
301
4,126
No write down on the Excel Crop Care Ltd investment occurred during the year ended 31 July 2013. (2012: $1.993 million).
Refer to note 6.
Share of profit by major associate
Excel Crop Care Ltd
F&N joint ventures
Others
Share of net profits of associates
796
(897)
41
(60)
202
254
(78)
378
The share of net profits has been derived from the latest management reports as at 31 July 2013 for the F&N joint ventures.
The Excel Crop Care share of net profits is from the 30 June 2013 management accounts.
20. Other investments
Investments – available-for-sale
Balance at the beginning of the year
New investments during the year
Disposals during the year
Exchange adjustment
Balance at the end of the year
Other investments
Other investments
Total other investments
The group’s investment in an unlisted entity is classified as available-for-sale.
21. Other non-current assets
Derivative financial instruments
5,568
–
(5,616)
48
–
5,324
–
–
244
5,568
448
645
448
6,213
–
–
–
–
Nufarm Limited Annual Report 2013 | 81
Notes to the financial statements continued
22. Property, plant and equipment
Consolidated 2013
Cost
Balance at 1 August 2012
Additions
Additions through business combinations
Disposals
Other transfers
Exchange adjustment
Balance at 31 July 2013
Depreciation and impairment losses
Balance at 1 August 2012
Depreciation charge for the year
Additions through business combinations
Disposals
Other transfers
Exchange adjustment
Balance at 31 July 2013
Land
and
buildings
$000
Plant and
machinery
$000
Leased
plant and
machinery
$000
Capital
work in
progress
$000
188,982
802
617
(1,131)
4,572
20,279
214,121
(61,919)
(6,075)
(189)
385
–
(9,540)
(77,338)
568,129
17,303
3,074
(4,033)
4,555
58,115
647,143
(358,657)
(34,830)
(2,411)
3,501
5,732
(35,721)
(422,386)
15,641
1,910
–
(244)
–
1,330
18,637
(820)
(659)
–
244
–
(102)
(1,337)
Total
$000
792,176
44,232
3,702
(5,412)
(13,785)
82,846
903,759
19,424
24,217
11
(4)
(22,912)
3,122
23,858
–
–
–
–
–
–
–
(421,396)
(41,564)
(2,600)
4,130
5,732
(45,363)
(501,061)
Net property, plant and equipment at 31 July 2013
136,783
224,757
17,300
23,858
402,698
Consolidated 2012
Cost
Balance at 1 August 2011
Additions
Additions through business combinations
Disposals
Other transfers
Exchange adjustment
Balance at 31 July 2012
Depreciation and impairment losses
Balance at 1 August 2011
Depreciation charge for the year
Additions through business combinations
Disposals
Other transfers
Exchange adjustment
Balance at 31 July 2012
Land
and
buildings
$000
Plant and
machinery
$000
Leased
plant and
machinery
$000
Capital
work in
progress
$000
192,698
2,328
1,303
(125)
3,677
(10,899)
188,982
(60,619)
(4,763)
(376)
75
(78)
3,842
(61,919)
554,660
22,075
2,283
(4,221)
11,329
(17,997)
568,129
(340,140)
(33,056)
(1,461)
3,855
48
12,097
(358,657)
9,644
6,048
–
–
(31)
(20)
15,641
(640)
(215)
–
–
30
5
(820)
18,202
17,124
–
(4)
(14,975)
(923)
19,424
–
–
–
–
–
–
–
Total
$000
775,204
47,575
3,586
(4,350)
–
(29,839)
792,176
(401,399)
(38,034)
(1,837)
3,930
–
15,944
(421,396)
Net property, plant and equipment at 31 July 2012
127,063
209,472
14,821
19,424
370,780
Assets pledged as security for finance leases amount to $10.063 million (2012: $8.8 million).
82 | Nufarm Limited Annual Report 2013
Notes to the financial statements continued
23. Intangible assets
Consolidated 2013
Cost
Balance at 1 August 2012
Additions
Additions through business combinations
Disposals and write-offs
Other transfers
Exchange adjustment
Balance at 31 July 2013
Amortisation and impairment losses
Balance at 1 August 2012
Amortisation charge for the year
Impairment loss
Disposals and write-offs
Other transfers
Exchange adjustment
Balance at 31 July 2013
Goodwill
$000
300,453
10,520
15,644
–
–
31,289
357,906
(110,590)
–
–
–
–
(10,189)
(120,779)
Intellectual
Indefinite
life
$000
property
Finite
life
$000
Capitalised
development
costs
$000
Computer
software
$000
Total
$000
368,749
11,789
374
(489)
(9,919)
49,247
110,685
412
9,661
(1,872)
9,919
17,936
419,751 146,741
(14,894)
(53,348)
(560) (14,450)
–
1,872
(1,919)
(9,257)
(16,673) (77,102)
(1,191)
77
1,919
(2,024)
145,966
32,992
–
(3,179)
(1,238)
20,801
195,342
(34,100)
(13,633)
–
2,353
(6,130)
(51,510)
28,699
2,904
20
(165)
2,071
3,249
954,552
58,617
25,699
(5,705)
833
122,522
36,778 1,156,518
(18,930)
(3,778)
–
36
–
(2,027)
(231,862)
(32,421)
(1,191)
4,338
–
(29,627)
(24,699) (290,763)
Intangibles carrying amount at 31 July 2013
237,127
403,078
69,639
143,832
12,079
865,755
Consolidated 2012
Cost
Balance at 1 August 2011
Additions
Additions through business combinations
Disposals and write-offs
Other transfers
Exchange adjustment
Balance at 31 July 2012
Amortisation and impairment losses
Balance at 1 August 2011
Amortisation charge for the year
Impairment loss
Disposals and write-offs
Other transfers
Exchange adjustment
Balance at 31 July 2012
Intellectual
Indefinite
life
$000
property
Finite
life
$000
Capitalised
development
costs
$000
Computer
software
$000
Total
$000
391,948
13
28,724
(183)
(20,953)
(30,800)
368,749
77,063
548
8,563
–
25,730
(1,219)
110,685
(12,916)
(3,708)
–
–
–
1,730
(14,894)
(44,508)
(10,422)
–
–
(222)
1,804
(53,348)
124,151
29,029
1,857
(87)
(646)
(8,338)
145,966
(38,630)
(10,272)
–
(3)
10,314
4,491
(34,100)
27,357
2,052
22
(15)
–
(717)
28,699
948,129
31,642
58,521
(285)
(10,178)
(73,277)
954,552
(16,679)
(3,053)
–
–
86
716
(18,930)
(242,318)
(27,455)
–
(3)
10,178
27,736
(231,862)
Goodwill
$000
327,610
–
19,355
–
(14,309)
(32,203)
300,453
(129,585)
–
–
–
–
18,995
(110,590)
Intangibles carrying amount at 31 July 2012
189,863
353,855
57,337
111,866
9,769
722,690
Nufarm Limited Annual Report 2013 | 83
Notes to the financial statements continued
23. Intangible assets (continued)
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,
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.
The group has determined that operating unit 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 intangibles are country specific in nature. There is no allocation of goodwill
between CGUs.
The major CGUs and their intangible value is as follows: US$188 million (2012: $146 million), Brazil $170 million (2012:
$158 million), Seeds business $200 million (2012: $166 million), UK and Holland $90 million (2012: $76 million) and Australia
$58 million (2012: $57 million). The balance of intangibles is spread across multiple CGUs, with no individual amount being
material relative to the total intangibles balance at balance date.
Impairment testing for cash-generating units containing goodwill
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 beyond year five. A perpetuity factor is then applied to the normalised cash flow beyond year five in order to include a terminal
value in the value-in-use calculation. The terminal growth rate assumed for each CGU is generally a long term inflation estimate.
The cash flow is then discounted to a present value using a discount rate which is the company’s weighted average cost of capital,
but then adjusted for country risk and asset-specific risk associated with each CGU.
The range of terminal growth rates and nominal post-tax discount rates applied for impairment testing purposes is as follows:
Material crop protection CGU’s (USA, Brazil, UK/Holland and Australia)
Seed CGU
Brazil cash-generating unit (CGU)
The Brazil CGU has the following intangible assets:
Goodwill
Indefinite life intangibles
Capitalised development costs
Computer software
Total
Terminal growth rate
2012
2013
2012
2.0% to 3.5% 2.0% to 3.5% 9.2% to 11.4% 9.1% to 12.8%
9.1%
2.0%
8.9%
2013
2.0%
Discount rate
2013
$000
50,025
108,685
10,556
561
169,827
2012
$000
47,374
102,908
7,619
397
158,298
The indefinite life intangibles relates to the product registrations and trade marks acquired in June 2007.
In 2013, the company has assessed the recoverable amount of the Brazil CGU and determined the CGU’s recoverable amount
exceeds its carrying value.
84 | Nufarm Limited Annual Report 2013
Notes to the financial statements continued
23. Intangible assets (continued)
Should the Brazil CGU fail to meet its forecast operating result going forward, this may necessitate a revision to the future
forecasts or alternatively a further increase in the discount rate used in the value-in-use modelling. By way of sensitivity and
all other things being equal: (a) a 1 per cent increase in the discount rate would result in a reduction in recoverable amount
of approximately $91 million; or (b) a 5 per cent decrease in EBITDA compared to budget for all years in the forecast period
and also in the terminal value calculation would result in a reduction in recoverable amount of approximately $58 million.
24. Trade and other payables
Current payables – unsecured
Trade creditors and accruals – unsecured
Payables due to associated entities
Derivative financial instruments
Payables – acquisitions
Current payables
Non-current payables – unsecured
Creditors and accruals
Derivative financial instruments
Payables – acquisitions
Non-current payables
25. Interest-bearing loans and borrowings
Current liabilities
Bank loans– secured
Bank loans – unsecured
Deferred debt establishment costs
Other loans – unsecured
Finance lease liabilities – secured
Loans and borrowings – current
Non-current liabilities
Bank loans – secured
Bank loans – unsecured
Senior unsecured notes
Deferred debt establishment costs
Other loans – unsecured
Finance lease liabilities – secured
Loans and borrowings – non-current
Net cash and cash equivalents
Net debt
Consolidated
2013
$000
2012
$000
525,846
–
19,984
4,489
550,319
9,633
22,313
16,925
48,871
231,002
93,793
(9,218)
386
402
316,365
225,674
4,834
350,146
(11,892)
1,104
11,854
581,720
467,121
–
2,129
5,741
474,991
8,343
–
1,903
10,246
215,321
82,268
(5,995)
557
172
292,323
359,441
4,134
–
(7,993)
816
10,400
366,798
(264,972)
(191,317)
633,113
467,804
Nufarm Limited Annual Report 2013 | 85
Notes to the financial statements continued
25. Interest-bearing loans and borrowings (continued)
Financing facilities
On 23 August 2011, Nufarm executed a A$300 million trade receivables securitisation facility. Subsequent to execution, the
facility size was reduced to A$250 million to reflect the value of trade receivables being used to secure funding under the program
at that time. On 13 June 2013 the facility size was increased to A$300 million to reflect the increase in the current value of trade
receivables being used to secure funding under this program. As at 31 July 2013, the amount of funding drawn under the
securitised facility by the participating Nufarm entities was A$208 million (2012: A$202 million).
On 22 November 2011, the company executed a A$625 million senior secured syndicated bank facility (SFA) with a term of three
years. On 8 October 2012, the group completed a US$325 million senior unsecured notes offering due in October 2019 (the ‘notes’).
Concurrent with the issuance of the notes, US$250 million of the commitments under the A$625 million senior secured syndicated
bank facility was cancelled. Subsequently, upon the admission of an additional financial institution to the syndicate on 25 January
2013, the SFA was increased by A$25 million. As at 31 July 2013, the amount of funding drawn under the SFA of A$406 million was
A$164 million (2012: A$336 million) with loans being advanced in multiple currencies.
The SFA and trade receivables securitisation facility provide access to committed lines of credit to support the group’s seasonal
working capital demands and general corporate financing requirements. The SFA includes covenants of a type normally associated
with facilities of this kind, and the group was in compliance with these covenants throughout the financial year.
The majority of debt facilities that reside outside the notes, the SFA and the trade receivables securitisation facility are regional
working capital facilities, primarily located in Brazil and Europe totalling A$343 million (2012: A$152 million).
Total net debt at 31 July 2013 is A$633.1 million (2012: A$467.8 million).
2013
Bank loan facilities and senior unsecured notes
Other facilities
Total financing facilities
2012
Bank loan facilities and senior unsecured notes
Other facilities
Total financing facilities
Financing arrangements
Repayment of borrowings (excluding finance leases)
Period ending 31 July 2013
Period ending 31 July 2014
Period ending 31 July 2015
Period ending 31 July, 2016 or later
Finance lease liabilities
Finance leases are entered into to fund the acquisition of plant and equipment.
Lease commitments for capitalised finance leases are payable as follows:
Not later than one year
Later than one year but not later than two years
Later than two years but not later than five years
Later than five years
Less future finance charges
Finance lease liabilities
Finance lease liabilities are secured over the relevant leased plant.
86 | Nufarm Limited Annual Report 2013
Accessible
$000
Utilised
$000
1,320,116
1,490
1,321,606
905,449
1,490
906,939
1,027,218
1,373
1,028,591
661,164
1,373
662,537
Consolidated
2013
$000
–
325,181
194,684
387,074
2012
$000
298,146
816
363,575
–
1,732
1,657
4,462
90,333
98,184
(85,928)
12,256
1,382
1,493
3,696
80,587
87,158
(76,586)
10,572
Notes to the financial statements continued
25. Interest-bearing loans and borrowings (continued)
Average interest rates
Nufarm step-up securities (refer note 29)
Syndicated bank facility
Securitisation program facility
Other bank loans
Finance lease liabilities – secured
Senior unsecured notes
26. Employee benefits
Current
Liability for short term employee benefits
Liability for current portion of other long term employee benefits
Current employee benefits
Non-current
Defined benefit fund obligations
Present value of unfunded obligations
Present value of funded obligations
Fair value of fund assets – funded
Recognised liability for defined benefit fund obligations
Liability for other long term employee benefits
Non-current employee benefits
Total employee benefits
Consolidated
2013
%
6.95
5.06
3.32
5.66
12.48
6.38
2012
%
7.60
3.79
3.61
5.63
12.13
–
Consolidated
2013
$000
2012
$000
16,400
3,383
19,783
15,066
3,101
18,167
6,079
140,505
(111,361)
35,223
14,996
50,219
70,002
4,768
112,005
(84,971)
31,802
12,740
44,542
62,709
The group makes contributions to defined benefit pension funds in the UK, Holland, France and Indonesia that provide defined
benefit amounts for employees upon retirement.
Historical information
Present value of defined benefit obligation
Fair value of plan assets
Surplus/(deficit)
2013
$000
(146,584)
111,361
(35,223)
2012
$000
(116,773)
84,971
(31,802)
Consolidated
2011
$000
(108,817)
80,630
(28,187)
2010
$000
(117,766)
87,900
(29,866)
2009
$000
(121,657)
89,829
(31,828)
Experience adjustments arising on plan liabilities
Experience adjustments arising on plan assets
2,597
1,821
(1,541)
(1,191)
(550)
3,591
1,103
6,013
(1,223)
(8,058)
Nufarm Limited Annual Report 2013 | 87
Notes to the financial statements continued
26. Employee benefits (continued)
Changes in the present value of the defined benefit obligation are as follows:
Opening defined benefit obligation
Service cost
Interest cost
Actuarial loss
Past service cost
Losses/(gains) on curtailment
Contributions
Benefits paid
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/(losses)
Surplus taken to retained earnings
Contributions by employer
Distributions
Exchange differences on foreign funds
Closing fair value of fund assets
The actual return on plan assets is the sum of the expected return and the actuarial gain/(loss).
Expense recognised in profit or loss
Current service costs
Interest on obligation
Expected return on fund assets
Past service cost
Losses/(gains) on curtailment
Expense recognised in profit or loss
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
Expense recognised in profit or loss
Consolidated
2013
$000
2012
$000
116,773
2,580
5,090
5,647
4
–
50
(4,965)
21,405
146,584
84,971
4,363
2,679
2,554
4,531
(4,752)
17,015
111,361
2,580
5,090
(4,363)
4
–
3,311
2,013
720
427
151
3,311
108,817
2,260
5,858
8,391
25
(1,066)
172
(5,067)
(2,617)
116,773
80,630
5,264
1,492
(191)
4,632
(4,876)
(1,980)
84,971
2,260
5,858
(5,264)
25
(1,066)
1,813
1,436
263
36
78
1,813
Actuarial gains/(losses) recognised in other comprehensive income (net of tax)
Cumulative amount at 1 August
Recognised during the period
Cumulative amount at 31 July
(16,998)
(683)
(17,681)
(11,504)
(5,494)
(16,998)
88 | Nufarm Limited Annual Report 2013
Notes to the financial statements continued
26. Employee benefits (continued)
The major categories of fund assets as a percentage of total fund assets are as follows:
Equities
Bonds
Property
Cash
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
2013
%
60.9
37.0
1.3
0.8
4.5
5.8
3.0
2.6
2012
%
48.0
46.6
1.5
3.9
4.2
6.3
2.8
2.2
The overall expected long term rate of return on assets is 5.8 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 $4,571,000 in contributions to defined benefit plans in 2014.
27. Share-based payments
Nufarm executive share plan (2000)
The Nufarm executive share plan (2000) offers shares 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 granted when a
predetermined return on capital employed is achieved over the relevant period. The shares and options are subject to forfeiture
and dealing restrictions. The executive cannot deal in the shares or options for a period of between three and 10 years without
board approval. An independent trustee holds the shares and options on behalf of the executives. At 31 July 2013 there were
48 participants (2012: 61 participants) in the scheme and 764,616 shares (2012: 989,830) were allocated and held by the trustee
on behalf of the participants. The cost of issuing shares is expensed in the year of issue. From 1 August 2011, it was decided that
there will be no further awards under this share plan and that it would be replaced by the Nufarm Short Term Incentive plan (refer
below). Any unvested equities held in the executive share plan will remain and be subject to the vesting conditions under the rules
of the plan.
Nufarm short term incentive plan (STI)
The STI is available to key executives, senior managers and other managers globally. The first awards under the plan were issued
in October 2012. The STI is measured as follows:
• 80 per cent of the potential is based on budget measures of EBIT and return on operating assets (ROA); and
• 20 per cent of the potential is based on strategic and business improvement objectives.
A predetermined percentage of the STI is paid in cash at the time of performance testing and the balance is deferred into
shares in the company for nil consideration. The number of shares granted is based on the volume weighted average price
(VWAP) of Nufarm Limited shares in the five days subsequent to the results announcement. Vesting will occur after a two year
period, although for the first year only (FY12) 50 per cent of the shares will vest on the first anniversary and 50 per cent of the
shares will vest on the second anniversary.
Nufarm Limited Annual Report 2013 | 89
Notes to the financial statements continued
27. Share-based payments (continued)
Nufarm executive long term incentive plan (LTIP)
On 1 August 2011, the LTIP commenced and is available to key executives and certain selected senior managers. Awards are
granted to individuals in the form of performance rights, which comprise rights to acquire ordinary shares in the company for nil
consideration, subject to the achievement of global performance hurdles. Under the plan, individuals will receive an annual award
of performance rights as soon as practical after the announcement of results in the preceding year. The initial awards were granted
to executives (excluding the managing director) on 9 February 2012. The performance and vesting period for the awards will be
three years. Awards will vest in two equal tranches as follows:
• 50 per cent of the LTIP grant will vest subject to the achievement of a relative total shareholder return (TSR) performance hurdle
measured against a selected comparator group of companies; and
• the remaining 50 per cent will vest subject to meeting an absolute return on funds employed (ROFE) target.
Global share plan (2001)
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 2013 there were 948 participants (2012: 722 participants) in the scheme
and 1,925,656 shares (2012: 1,783,289) were allocated and held by the trustee on behalf of the participants.
The power of appointment and removal of the trustees for the share purchase schemes is vested in the company.
Employee expenses
Total expense arising from share-based payment transactions
2013
$000
2012
$000
4,528
2,829
Measurement of fair values
The fair value of performance rights granted through the LTIP and deferred shares granted through the STIP were measured as follows:
Plan
Weighted average fair value at grant date
Share price at grant date
Grant date
Earliest vesting date
Exercise price
Expected life
Volatility
Risk free interest rate
Dividend yield
Nufarm STI
2013
deferred
shares
$5.86
$5.96
9 Oct 2012
31 Jul 2013
–
1 year
N/A
N/A
N/A
Nufarm LTI
2013
performance
rights
Dec 2012
$4.40
$5.62
6 Dec 2012
31 Jul 2015
–
2.7 years
30%
2.60%
2.3%
Nufarm LTI
2013
performance
rights
Oct 2012
$4.73
$5.96
9 Oct 2012
31 Jul 2015
–
2.8 years
30%
2.41%
2.3%
Nufarm LTI
2012
performance
rights
Feb 2012
$3.71
$4.86
9 Feb 2012
31 Jul 2014
–
2.5 years
35%
3.59%
3.0%
The fair values of awards granted were estimated using a Monte Carlo simulation methodology and a Binomial Tree methodology.
90 | Nufarm Limited Annual Report 2013
Notes to the financial statements continued
27. Share-based payments (continued)
Reconciliation of outstanding share awards
Outstanding at 1 August
Forfeited during the year
Exercised during the year
Expired during the year
Granted during the year
Outstanding at 31 July
Exercisable at 31 July
Nufarm LTI
number of
performance
rights
2013
465,677
–
–
–
555,451
1,021,128
–
Nufarm STI
number of
deferred
shares
2013
–
(4,452)
(217,472)
–
518,414
296,490
–
Nufarm LTI
number of
performance
rights
2012
–
–
–
–
465,677
465,677
–
Nufarm STI
number of
deferred
shares
2012
–
–
–
–
–
–
–
The performance rights outstanding at 31 July 2013 have a $nil exercise price and a weighted average contractual life of three
years (2012: three years). All performance rights granted to date have a $nil exercise price.
28. Provisions
Current
Restructuring
Other
Current provisions
Consolidated
Movement in provisions
Balance at 1 August 2012
Provisions made during the year
Provisions used during the year
Exchange adjustment
Balance at 31 July 2013
Consolidated
2013
$000
118
3,161
3,279
Restructuring
$000
Other
provisions
$000
3,747
–
(3,266)
(363)
118
2,995
–
–
166
3,161
2012
$000
3,747
2,995
6,742
Total
$000
6,742
–
(3,266)
(197)
3,279
The provision for restructuring is mainly relating to the restructuring of the European operations.
The restructuring provision primarily consists of unpaid redundancy costs.
The other provision consists of liabilities recognised with the Agripec acquisition.
Nufarm Limited Annual Report 2013 | 91
Notes to the financial statements continued
29. Capital and reserves
Share capital
Balance at 1 August
Issue of shares
Balance at 31 July
Parent company
Number
of ordinary
shares
2013
262,142,247
811,793
262,954,040
Number
of ordinary
shares
2012
261,833,005
309,242
262,142,247
The company does not have authorised capital or par value in respect of its issued shares.
On 12 October 2012, 274,443 shares at $5.86 were issued under the executive share plan.
On 15 October 2012, 245,936 shares at $5.86 were issued under the executive share plan.
On 16 November 2012, 58,796 shares at $5.76 were issued under the dividend reinvestment program.
On 8 January 2013, 75,469 shares at $5.87 were issued under the global share plan. 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.
On 10 May 2013, 157,149 shares at $4.06 were issued under the dividend reinvestment program.
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, were
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 curtailed 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
3.9 per cent (2012: 3.9 per cent ). On 23 September 2011, Nufarm announced that it would 'step-up' the NSS. This resulted in the
interest margin attached to the NSS being stepped up by 2.0 per cent, with the new interest margin being set at 3.9 per cent as at
24 November 2011. No other terms were adjusted and there are no further step-up dates. Nufarm retains the right to redeem or
exchange the NSS on future distribution dates.
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 from the presentation currency of the reporting entity.
Capital profit reserve
This reserve is used to accumulate realised capital profits.
92 | Nufarm Limited Annual Report 2013
Notes to the financial statements continued
29. Capital and reserves (continued)
Other reserve
This reserve represents the accrued employee entitlements to share awards that have been charged to the income statement and
have not yet been exercised. This reserve also holds the debit balance related to the written put option of the 49 per cent interest
held by the non-controlling shareholders of Altantica Sementes Ltda (Atlantica). As the non-controlling shareholders still have
present access to the economic benefits with their underlying ownership interest, their non-controlling interest continues to be
recognised. In the event the written put option is exercised, this debit reserve will be utilised to complete the transaction. This
reserve also holds the balances related to hedging.
Dividends
An interim dividend of 3 cents per share, totalling $7,883,907 was declared on 27 March 2013 and was paid (net of dividend
reinvestment program) on 10 May 2013 (2012: 3 cents per share, totalling $7,864,874).
A final dividend of 5 cents per share, totalling $13,147,702 was declared on 25 September 2013, and will be paid on 15 November
2013 (2012: 3 cents per share, totalling $7,817,469).
Distributions
Distributions recognised in the current year by Nufarm Finance (NZ) Ltd on the Nufarm step-up securities are:
2013
Distribution
Distribution
2012
Distribution
Distribution
Distribution rate
%
Total amount
$000
Payment
date
Consolidated
7.03
8.11
8,798
15 April 2013
10,146 15 October 2012
18,944
6.61 and 8.61*
6.94
10,253
16 April 2012
8,829 17 October 2011
19,082
* Refer to discussion titled ‘Nufarm step-up securities’ above.
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 $13.974 million (2012: $14.044 million).
Franking credit/(debit) 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% (2012: 30%)
Franking credits/(debits) that will arise from the payment of income tax payable/(refund)
as at the end of the year
Balance at 31 July
2013
$000
2012
$000
18,771
30,421
–
18,771
(4,923)
25,498
The ability to utilise the franking credits is dependent upon there being sufficient available profits to declare dividends. In accordance
with the tax consolidation legislation, the company as the head entity in the tax-consolidated group has also assumed the benefit
of $18,771,001 (2012: $25,498,018) franking credits.
Nufarm Limited Annual Report 2013 | 93
Notes to the financial statements continued
30. Earnings per share
Net profit for the year
Net profit attributable to non-controlling 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
Subtract items of material income/(expense) (refer note 6)
Earnings excluding items of material income/(expense) used in
the calculation of earnings per share excluding material items
Consolidated
2013
$000
81,750
(751)
80,999
(13,974)
67,025
2012
$000
72,822
(228)
72,594
(14,044)
58,550
67,025
67,025
58,550
58,550
(2,224)
(42,846)
69,249
101,396
For the purposes of determining basic and diluted earnings per share, the after-tax distributions on NSS are deducted from net profit.
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
2012
2013
262,675,412
261,983,233
263,587,730
262,203,348
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
Diluted earnings per share
From continuing operations
Earnings per share (excluding items of material income/expense – see note 6)
Basic earnings per share
Diluted earnings per share
31. Financial risk management and financial instruments
The group has exposure to the following financial risks:
• credit risk;
• liquidity risk; and
• market risk.
Cents per share
2012
2013
25.5
25.5
25.4
25.4
26.4
26.3
22.3
22.3
22.3
22.3
38.7
38.7
This note presents information about the group’s exposure to each of the above risks, the objectives, policies and processes for
measuring and managing risk, and the management of capital.
94 | Nufarm Limited Annual Report 2013
Notes to the financial statements continued
31. Financial risk management and financial instruments (continued)
The board of directors has responsibility to identify, assess, monitor and manage the material risks facing the group and to ensure
that adequate identification, reporting and risk minimisation mechanisms are established and working effectively. 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 system-based analyses of the internal controls in major business systems operating within
all significant company entities worldwide.
The general manager global risk management reports to the chairman of the audit committee and functionally to the chief
financial officer. He provides a written report of his activities at each meeting of the audit committee. In doing so he has direct
and ongoing access to the chairman and members of the audit committee.
Credit risk
Credit risk is the risk of financial loss to the group if a customer or counterparty to a financial instrument fails to meet
its contractual obligations, and arises principally from the group’s receivables from customers and other financial assets.
Exposure to credit risk
The group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics
of the group’s customer base, including the default risk of the industry and country in which the customers operate, has less
of an influence on credit risk.
The group has credit policies in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are
performed on all customers before the group’s standard payment and delivery terms and conditions are offered. Purchase limits
are established for each customer, which represents the maximum open amount without requiring further management approval.
The group’s maximum exposure to credit risk at the reporting date was:
Carrying amount
Trade and other receivables
Cash and cash equivalents
Forward exchange contracts:
Assets
The group’s maximum exposure to credit risk for trade and other receivables at the reporting
date by geographic region was:
Carrying amount
Australia/New Zealand
Asia
Europe
North America
South America
Trade and other receivables
Consolidated
2013
$000
2012
$000
792,564
264,972
764,395
191,317
2,161
1,059,697
7,196
962,908
166,006
31,022
223,360
103,750
268,426
792,564
199,740
22,476
192,943
122,663
226,573
764,395
The group’s top five customers account for $120.8 million of the trade receivables carrying amount at 31 July 2013 (2012: $150.6 million).
These top five customers represent 17 per cent (2012: 22 per cent) of the total receivables.
Nufarm Limited Annual Report 2013 | 95
Notes to the financial statements continued
31. Financial risk management and financial instruments (continued)
Credit risk (continued)
Exposure to credit risk (continued)
Impairment losses
The ageing of the group’s customer trade receivables at the reporting date was:
Receivables ageing
Current
Past due – 0 to 90 days
Past due – 90 to 180 days
Past due – 180 to 360 days
Past due – more than one year
Provision for impairment
Trade receivables
Consolidated
2013
$000
598,898
60,727
9,325
9,972
22,638
701,560
(24,172)
677,388
2012
$000
578,876
85,681
1,801
4,809
16,892
688,059
(22,278)
665,781
Some of the past due receivables are secured by collateral from customers such as directors guarantees, bank guarantees and
charges on fixed assets. The past due receivables not impaired relate to customers that have a good credit history with the group.
Historically, the bad debt write-off from trade receivables has been very low. Over the past nine years, the bad debt write-off
amount has averaged 0.03 per cent of sales, with no greater than 0.11 per cent of sales written off in any one year.
In the crop protection industry, it is normal practice to vary the terms of sales depending on the climatic conditions experienced
in each country.
The movement in the allowance for impairment in respect of trade receivables during the year was as follows:
Balance at 1 August
Provisions made during the year
Provisions used during the year
Provisions acquired through business combinations
Exchange adjustment
Balance at 31 July
Consolidated
2013
$000
22,278
294
(1,032)
39
2,593
24,172
2012
$000
26,587
410
(410)
–
(4,309)
22,278
The allowance account for trade receivables is used to record the impairment losses unless the group is satisfied that no
recovery of the amount owing is possible. At that point the amount is considered irrecoverable and is written off against the
receivable directly.
96 | Nufarm Limited Annual Report 2013
Notes to the financial statements continued
31. Financial risk management and financial instruments (continued)
Liquidity risk
Liquidity risk is the risk that the group will encounter difficulty in meeting the obligations associated with its financial liabilities
that are settled by delivering cash or another financial asset. The group’s approach to managing liquidity is to ensure, as far as
possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions,
without incurring unacceptable losses or risking damage to the group’s reputation.
On 23 August 2011, Nufarm executed a A$300 million trade receivables securitisation facility. Subsequent to execution, the
facility size was reduced to A$250 million to reflect the value of trade receivables being used to secure funding under the program
at the time. On 13 June 2013 the facility size was increased to A$300 million to reflect the increase in the current value of trade
receivables being used to secure funding under this program. The facility provides funding that aligns with the working capital
cycle of the company.
On 8 October 2012, the group completed a US$325 million senior unsecured notes offering due in October 2019 (the ‘notes’).
In November 2011, the group finalised a three year A$625 million syndicated bank facility. Concurrent with the issuance of the
notes, US$250 million of the commitments under the A$625 million senior secured bank facility was cancelled. Subsequently,
upon the admission of an additional financial institution to the syndicate on 25 January 2013, the syndicated bank facility was
increased by A$25 million. The amount drawn down under the facility at 31 July 2013 is $164 million (2012: $336 million).
At 31 July 2013, the group had access to debt of $1,322 million (2012: $1,029 million) under the notes, SFA, trade receivables
securitisation facility and with other lenders.
The majority of debt facilities that reside outside the notes, senior facility agreement (SFA) and the trade receivables securitisation facility
are regional working capital facilities, primarily located in Brazil and Europe, which at 31 July totalled $343 million (2012: $152 million).
The SFA is secured by assets in the primary geographies in which Nufarm operates including Australia, USA, Canada, UK and
France. A parent guarantee is provided to support working capital facilities in Brazil and the notes. Total net debt (net of cash)
at 31 July 2013 was $633.1 million (2012: $467.8 million). The SFA includes covenants of a type normally associated with facilities
of this kind, and the group was in compliance with these covenants throughout the financial year.
Nufarm Limited Annual Report 2013 | 97
Notes to the financial statements continued
31. Financial risk management and financial instruments (continued)
Liquidity risk (continued)
The following are the contractual maturities of the group’s financial liabilities:
Carrying
amount
$000
Contractual
cash flows
$000
Less than
1 year
$000
1–2
years
$000
More than
2 years
$000
–
556,893
456,676
98,627
350,146
1,490
12,256
–
556,893
470,867
101,256
502,868
1,490
98,184
–
530,335
241,563
94,863
23,471
386
1,732
–
4,876
197,102
363
23,471
1,104
1,657
–
21,682
32,202
6,030
455,926
–
94,795
22,313
–
279,592
(263,639)
19,321
(20,948)
19,751
(20,948)
240,520
(221,743)
19,984
–
222,794
(201,393)
222,794
(201,393)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(2,161)
1,516,224
105,905
(108,483)
1,766,334
105,905
(108,483)
909,546
–
–
227,376
–
–
629,412
Consolidated 2013
Non-derivative financial liabilities
Bank overdrafts
Trade and other payables
Bank loans – secured
Bank loans – unsecured
Senior unsecured notes
Other loans – unsecured
Finance lease liabilities – secured
Derivative financial liabilities
Derivatives used for hedging:
Outflow
Inflow
Other derivative contracts:
Outflow
Inflow
Derivative financial assets
Derivatives used for hedging:
Outflow
Inflow
Other derivative contracts:
Outflow
Inflow
98 | Nufarm Limited Annual Report 2013
Notes to the financial statements continued
31. Financial risk management and financial instruments (continued)
Liquidity risk (continued)
Consolidated 2012
Non-derivative financial liabilities
Bank overdrafts
Trade and other payables
Bank loans – secured
Bank loans – unsecured
Unsecured note issues
Other loans – unsecured
Finance lease liabilities – secured
Derivative financial liabilities
Derivatives used for hedging:
Outflow
Inflow
Other derivative contracts:
Outflow
Inflow
Derivative financial assets
Derivatives used for hedging:
Outflow
Inflow
Other derivative contracts:
Outflow
Inflow
Carrying
amount
$000
Contractual
cash flows
$000
Less than
1 year
$000
1–2
years
$000
More than
2 years
$000
–
483,108
574,762
86,402
–
1,373
10,572
–
483,108
604,435
86,402
–
1,373
87,158
–
472,862
228,038
82,268
–
557
1,382
–
1,903
12,717
–
–
816
1,493
–
8,343
363,680
4,134
–
–
84,283
–
–
–
–
–
–
2,129
–
179,158
(177,029)
179,158
(177,029)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(7,196)
1,151,150
183,880
(191,076)
1,257,409
183,880
(191,076)
780,040
–
–
16,929
–
–
460,440
Interest on borrowings is denominated in currencies that match the cash flows generated by the underlying operations of the
group. This provides an economic hedge and no derivatives are used to manage the exposure.
Nufarm Limited Annual Report 2013 | 99
Notes to the financial statements continued
31. Financial risk management and financial instruments (continued)
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect
the group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage
and control market risk exposures within acceptable parameters, while optimising the return.
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 the functional currency of the individual group entity. The currencies
giving rise to this risk include the US dollar (USD), the Euro, the British pound (GBP), the Australian dollar (AUD), the New Zealand
dollar and the Brazilian Real (BRL). The group uses foreign exchange contracts and options to manage currency risk.
The group uses foreign exchange contracts and options to manage 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. During the previous financial reporting period, the funding, which was previously advanced to these jurisdictions
in US dollars, the Euro and the British pound, was converted to Australian dollars. The foreign currency contracts therefore
primarily cover the exposure of the lenders to movements in the Australian dollar against their local currencies.
During the period the group completed a US$325 million senior unsecured notes offering due in October 2019 (the ‘notes’).
Currency risk related to the principal amount of the notes has been hedged using cross currency interest rate swap contracts
that mature on the same date as the notes are due for repayment. These contracts have been designated for hedge accounting.
For accounting purposes, other than the contracts referred to previously, the group has not designated any other derivatives in hedge
relationships and all movements in fair value are recognised in profit or loss during the period. The net fair value of forward exchange
contracts in the group, not designated as being in a hedge relationship, used as economic hedges of forecast transactions at 31 July
2013 was a $17.823 million liability (2012: $5.067 million asset) comprising assets of $2.161 million (2012: $7.196 million) and
liabilities of $19.984 million (2012: $2.129 million).
Exposure to currency risk
The group’s translation exposure to major foreign currency risks at balance date was as follows, based on notional amounts:
Consolidated
2013
Functional currency of group operation
Australian dollars
US dollars
Euro
UK pounds sterling
Consolidated
2012
Functional currency of group operation
Australian dollars
US dollars
Euro
UK pounds sterling
Net financial assets/(liabilities) – by currency of denomination
GBP
$000
AUD
$000
USD
$000
Euro
$000
–
2,345
6,820
(14,768)
(5,603)
AUD
$000
–
39,618
336
–
39,954
(15,380)
–
12,581
20,802
18,003
USD
$000
(24,448)
–
38,132
56,172
69,856
(14,715)
(2,515)
–
(8,771)
(26,001)
Euro
$000
(12,396)
(1,715)
–
(5,682)
(19,793)
(19,778)
–
(2,254)
–
(22,032)
GBP
$000
(24,665)
–
(9,498)
–
(34,163)
Sensitivity analysis
Based on the aforementioned group’s net financial assets/(liabilities) at 31 July, a one per cent strengthening or weakening of
the following currencies at 31 July would have increased/(decreased) profit or loss by the amounts shown below. This analysis
assumes all other variables, including interest rates, remain constant. The analysis is performed on the same basis for 2012.
100 | Nufarm Limited Annual Report 2013
Notes to the financial statements continued
31. Financial risk management and financial instruments (continued)
Market risk (continued)
Sensitivity analysis (continued)
Currency movement
1% change in the Australian dollar exchange rate
1% change in the US dollar exchange rate
1% change in the Euro exchange rate
1% change in the GBP exchange rate
Strengthening
Profit
or (loss)
after-tax
2013
$000
Weakening
Profit
or (loss)
after-tax
2013
$000
Strengthening
Profit
or (loss)
after-tax
2012
$000
Weakening
Profit
or (loss)
after-tax
2012
$000
306
127
(301)
(135)
(313)
(127)
303
135
705
226
(339)
(589)
(714)
(221)
343
593
The group’s financial asset and liability profile may not remain constant, and therefore these sensitivities should be used with care.
The following significant exchange rates applied during the year:
AUD
US dollar
Euro
GBP
BRL
Average rate
Reporting date
2013
1.009
0.774
0.645
2.086
2012
1.033
0.783
0.654
1.900
2013
0.895
0.673
0.589
2.037
2012
1.051
0.854
0.671
2.151
Interest rate risk
The group has the ability to use derivative financial instruments to manage specifically identified interest rate risks. Interest rate
swaps, denominated in AUD, are entered into to achieve an appropriate mix of fixed and floating rate exposures.
The majority of the group’s debt is raised under central borrowing programs. The A$406 million syndicated bank facility and the
A$300 million trade receivables securitisation facility are considered floating rate facilities. On 8 October 2012, the group completed
a US$325 million notes issue with a fixed coupon component. Concurrent with the completion of the US$325 million notes issue,
the group entered into interest rate swaps to manage specifically identified interest rate risks associated with the fixed coupon
component of the notes. These swaps effectively converted a majority of the fixed interest payable on the notes to floating interest,
and have been designated for hedge accounting. The group’s earnings are sensitive to changes in interest rates on the floating
interest rate component of the group’s net borrowings.
Interest rate risk on Nufarm step-up securities
The distribution rate is the average mid-rate for bank bills with a term of six months plus a margin of 3.90 per cent (2012: 3.90 per cent).
Profile
At the reporting date the interest rate profile of the group and company’s interest-bearing financial instruments was:
Variable rate instruments
Financial assets
Financial liabilities
Fixed rate instruments
Financial assets
Financial liabilities
Consolidated
Carrying amount
2012
$000
2013
$000
34,222
(807,416)
(773,194)
87,795
(673,109)
(585,314)
–
(111,779)
(111,779)
–
–
–
Nufarm Limited Annual Report 2013 | 101
Notes to the financial statements continued
31. Financial risk management and financial instruments (continued)
Market risk (continued)
Profile (continued)
A change of 100 basis points (bp) in interest rates at the reporting date would have increased/(decreased) profit or loss by the
amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant.
The sensitivity is calculated on the debt at 31 July. Due to the seasonality of the crop protection business, debt levels can vary
during the year. This analysis is performed on the same basis for 2012.
2013
Variable rate instruments
Total sensitivity
2012
Variable rate instruments
Total sensitivity
Profit or loss
100bp
increase
$000
100bp
decrease
$000
(7,732)
(7,732)
7,732
7,732
(5,853)
(5,853)
5,853
5,853
Fair values
All financial assets and financial liabilities, other than derivatives, are initially recognised at the fair value of consideration paid or
received, net of transaction costs as appropriate, and subsequently carried at fair value or amortised cost, as indicated in the tables
below. Derivatives are initially recognised at fair value on the date the contract is entered into and are subsequently remeasured at
their fair value.
The financial assets and liabilities are presented by class in the tables below at their carrying values, which generally approximate to
the fair values. In the case of the centrally managed fixed rate debt not swapped to floating rate totalling $111.8 million (2012: $nil),
the fair value at 31 July 2013 is $109.686 million (2012: $nil).
Consolidated 2013
Cash and cash equivalents
Trade and other receivables
Forward exchange contracts:
Assets
Liabilities
Interest rate swaps
Trade and other payables
Bank overdraft
Secured bank loans
Unsecured bank loans
Senior unsecured notes(a)
Other loans
Finance leases
Carried at
fair value
through
profit or loss
$000
–
–
Derivatives
used for
hedging
$000
–
–
Available
for sale
$000
–
–
Financial
assets/
liabilities at
amortised
cost
$000
264,972
792,564
–
–
–
–
–
–
–
–
–
–
–
2,161
(19,984)
–
–
–
–
–
–
–
–
(17,823)
–
–
(22,313)
–
–
–
–
–
–
–
(22,313)
–
–
–
(579,206)
–
(456,676)
(98,627)
(350,146)
(1,490)
(12,256)
(440,865)
Total
$000
264,972
792,564
–
2,161
(19,984)
(22,313)
(579,206)
–
(456,676)
(98,627)
(350,146)
(1,490)
(12,256)
(481,001)
Note
15
16
16
24
24
24
15
25
25
25
25
25
(a) Includes $238.3 million (2012: $nil) of centrally managed fixed rate debt swapped to floating rate under fair value hedges, and is consequently fair valued for interest rate risk.
102 | Nufarm Limited Annual Report 2013
Notes to the financial statements continued
31. Financial risk management and financial instruments (continued)
Fair values (continued)
Consolidated 2012
Cash and cash equivalents
Trade and other receivables
Forward exchange contracts:
Assets
Liabilities
Interest rate swaps
Trade and other payables
Bank overdraft
Secured bank loans
Unsecured bank loans
Senior unsecured notes(a)
Other loans
Finance leases
Carried at
fair value
through
profit or loss
$000
–
–
Derivatives
used for
hedging
$000
–
–
Available
for sale
$000
–
–
Financial
assets/
liabilities at
amortised
cost
$000
191,317
764,395
–
–
–
–
–
–
–
–
–
–
–
7,196
(2,129)
–
–
–
–
–
–
–
–
5,067
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(483,108)
–
(574,762)
(86,402)
–
(1,373)
(10,572)
(200,505)
Note
15
16
16
24
24
24
15
25
25
25
25
25
Total
$000
191,317
764,395
7,196
(2,129)
–
(483,108)
–
(574,762)
(86,402)
–
(1,373)
(10,572)
(195,438)
(a) Includes $238.3 million (2012: $nil) of centrally managed fixed rate debt swapped to floating rate under fair value hedges, and is consequently fair valued for interest rate risk.
Fair value hierarchy
The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined
as follows:
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
(i.e., as prices) or indirectly (i.e., derived from prices); and
• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
2013
Derivative financial assets
Derivative financial liabilities
2012
Derivative financial assets
Derivative financial liabilities
There have been no transfers between levels in either 2013 or 2012.
Level 1
$000
–
–
Consolidated
Level 2
$000
2,161
2,161
Level 3
$000
–
–
Total
$000
2,161
2,161
–
–
(42,297)
(42,297)
–
–
(42,297)
(42,297)
Consolidated
Level 1
$000
–
–
Level 2
$000
7,196
7,196
–
–
(2,129)
(2,129)
Level 3
$000
–
–
–
–
Total
$000
7,196
7,196
(2,129)
(2,129)
Nufarm Limited Annual Report 2013 | 103
Notes to the financial statements continued
31. Financial risk management and financial instruments (continued)
Capital management
The board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain
future development of the business. The board of directors monitors the group’s return on funds employed (ROFE). Return is
calculated on the group’s earnings before interest and tax and adjusted for any material items. Funds employed is defined as
shareholders’ funds plus total interest bearing debt. The board of directors determines the level of dividends to ordinary
shareholders and reviews the group’s total shareholder return with similar groups.
The board believes ROFE is an appropriate performance condition as it 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. ROFE
objectives are set by the board at the beginning of each year. There is a target and a stretch hurdle. These numbers will be based
on the budget and growth strategy. The ROFE return for the year ended 31 July 2013 was 8.8 per cent (2012: 10.4 per cent).
There were no changes in the group’s approach to capital management during the year.
32. 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
Consolidated
2013
$000
10,114
11,453
21,806
141,166
184,539
2012
$000
8,569
9,429
17,956
127,427
163,381
Operating leases are generally entered to access the use of shorter term assets such as motor vehicles, mobile plant and office
equipment. Rentals are fixed for the duration of these leases. There is a small number of leases for office properties. These rentals
have regular reviews based on market rentals at the time of review.
33. Capital commitments
The group had contractual obligations to purchase plant and equipment for $6.116 million at 31 July 2013 (2012: $8.253 million).
34. Contingencies
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.
Guarantee facility for Eastern European joint ventures with FMC Corporation.
Consolidated
2012
2013
$000
$000
6,225
6,983
Environmental guarantee given to the purchaser of land and buildings at Genneviliers for EUR 8.5 million.
12,630
9,953
Insurance bond for EUR 2.717 million established to make certain capital expenditures at Gaillon plant in France.
3,843
3,182
Brazilian taxation proceedings(a)
Contingent liabilities
74,624
86,163
97,322 106,281
(a) The group has a contingent liability for an amount of $74.624 million (July 2012: $86.163 million) in respect of potential pre-acquisition tax liabilities of its Brazilian business
acquired in 2007. In June 2010 the group commenced arbitration proceedings against the previous owners of the Brazilian business that sought to confirm that the tax
indemnification clauses contained in the initial Investment Agreement and the subsequent Share Purchase Agreement (‘the Agreements’) are effective in allowing Nufarm
to recover amounts from the previous owners.
In November 2012 Nufarm received the award from the Arbitral Tribunal. Whilst the award, and subsequent clarification ruling, confirmed the validity of the indemnities provided
by the previous owners of the Brazilian business, Nufarm continues to work through the application of the award to the many specific tax cases.
Nufarm will only be liable to the extent that the tax authorities are ultimately successful in pursuing the claims for primary tax, penalties and interest. In which case, Nufarm
will seek to enforce the tax indemnities provided by the former owners in order to recover, to the extent possible under the Agreements, the tax paid. It is acknowledged that the
cash outflow (if any) in the event the tax authorities are ultimately successful in pursuing their claims will pre-date cash inflows Nufarm will obtain by enforcing the indemnities.
Further to the above, the group has a contingent asset for an amount of $29.315 million (July 2012: $28.429 million) in respect of potential pre-acquisition tax credits of its
Brazilian business acquired in 2007. Currently, the validity of the credits is before the Brazilian courts and if found to be valid, can be used to offset federal tax obligations.
Nufarm’s share of the contingent liability after applying the former owner’s indemnities’ is estimated to be $31.147 million.
104 | Nufarm Limited Annual Report 2013
Notes to the financial statements continued
35. Group entities
Notes
Place of incorporation
Percentage of shares held
2012
2013
Parent entity
Nufarm Limited – ultimate controlling entity
Subsidiaries
Access Genetics Pty Ltd
Agcare Biotech Pty Ltd
Agchem Receivables Corporation
Agryl Holdings Limited
Ag-seed Research Pty Ltd
Agturf Inc
AH Marks (New Zealand) Limited
AH Marks Australia Pty Ltd
AH Marks Holdings Limited
Artfern Pty Ltd
Atlantica Sementes Ltda
Australis Services Pty Ltd
Bestbeech Pty Ltd
Chemicca Limited
CNG Holdings BV
Crop Care Australasia Pty Ltd
Crop Care Holdings Limited
Croplands Equipment Limited
Croplands Equipment Pty Ltd
Danestoke Pty Ltd
Edgehill Investments Pty Ltd
Fchem (Aust) Limited
Fernz Canada Limited
Fernz Singapore Pte Ltd
Fidene Limited
First Classic Pty Ltd
Framchem SA
Frost Technology Corporation
Greenfarm Hellas Chemicals SA
Growell Limited
Grupo Corporativo Nufarm SA
Laboratoire European de Biotechnologie s.a.s
Le Moulin des Ecluses s.a
Lefroy Seeds Pty Ltd
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
Masmart Pty Ltd
Mastra Corporation Pty Ltd
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)(b)
(a)
Australia
Australia
USA
Australia
Australia
USA
New Zealand
Australia
UK
Australia
Brazil
Australia
Australia
Australia
Netherlands
Australia
New Zealand
New Zealand
Australia
Australia
Australia
Australia
Canada
Singapore
New Zealand
Australia
Egypt
USA
Greece
UK
Guatemala
France
France
Australia
France
Malaysia
USA
Guatemala
Mexico
USA
Australia
Australia
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
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
100
100
100
100
100
100
70
Nufarm Limited Annual Report 2013 | 105
Notes to the financial statements continued
35. Group entities (continued)
Mastra Corporation Sdn Bhd
Mastra Corporation USA Pty Ltd
Mastra Holdings Sdn Bhd
Mastra Industries Sdn Bhd
Medisup International NV
Medisup Securities Limited
Midstates Agri Services de Mexico
Midstates Agri Services Inc
Nufarm (Asia) Pte Ltd
Nufarm Africa SARL AU
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 Canada Receivables Partnership
Nufarm Chemical (Shanghai) Co Ltd
Nufarm Chile Limitada
Nufarm Colombia S.A.
Nufarm Crop Products UK Limited
Nufarm de Costa Rica
Nufarm de Guatemala SA
Nufarm de Mexico Sa de CV
Nufarm de Panama SA
Nufarm de Venezuela SA
Nufarm del Ecuador SA
Nufarm Deutschland GmbH
Nufarm do Brazil LTDA
Nufarm Espana SA
Nufarm Europe GmbH
Nufarm Finance BV
Nufarm Finance (NZ) Limited
Nufarm GmbH
Nufarm GmbH & Co KG
Nufarm Grupo Mexico
Nufarm Holdings (NZ) Limited
Nufarm Holdings BV
Nufarm Holdings s.a.s
Nufarm Hong Kong Investments Ltd
Nufarm Hungaria Kft
Nufarm Inc.
106 | Nufarm Limited Annual Report 2013
Notes
Place of incorporation
Percentage of shares held
2012
2013
(a)
(a)
(a)
Malaysia
Australia
Malaysia
Malaysia
N. Antillies
Australia
Mexico
USA
Singapore
Morocco
South Africa
Canada
USA
Zimbabwe
USA
USA
Malaysia
Australia
Netherlands
Canada
China
Chile
Colombia
UK
Costa Rica
Guatemala
Mexico
Panama
Venezuela
Ecuador
Germany
Brazil
Spain
Germany
Netherlands
New Zealand
Austria
Austria
Mexico
New Zealand
Netherlands
France
Hong Kong
Hungary
USA
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
100
100
100
100
100
100
100
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
N/A
–
100
100
100
100
100
100
100
100
100
100
Notes to the financial statements continued
35. Group entities (continued)
Nufarm Industria Quimica e Farmaceutica SA
Nufarm Insurance Pte Ltd
Nufarm Investments Cooperatie WA
Nufarm Italia srl
Nufarm KK
Nufarm Korea Ltd
Nufarm Labuan Pte Ltd
Nufarm Limited
Nufarm Malaysia Sdn Bhd
Nufarm Materials Limited
Nufarm NZ Limited
Nufarm Peru SAC
Nufarm Platte Pty Ltd
Nufarm Portugal LDA
Nufarm Romania SRL
Nufarm s.a.s
Nufarm SA
Nufarm Suisse Sarl
Nufarm Technologies (M) Sdn Bhd
Nufarm Technologies USA
Nufarm Technologies USA Pty Ltd
Nufarm Treasury Pty Ltd
Nufarm UK Limited
Nufarm Ukraine LLC
Nufarm USA Inc
Nugrain Pty Ltd
Nuseed Americas Inc
Nuseed do Brazil S.A.
Nuseed Holding Company
Nuseed Pty Ltd
Nuseed SA
Nuseed Serbia d.o.o.
Nutrihealth Grains Pty Ltd
Nutrihealth Pty Ltd
Opti-Crop Systems Pty Ltd
Pharma Pacific Pty Ltd
PT Agrow
PT Crop Care
PT Nufarm Indonesia
Richardson Seeds Ltd
Seeds 2000 Inc
Seeds 2000 Argentina SRL
Selchem Pty Ltd
Notes
Place of incorporation
Percentage of shares held
2012
2013
Brazil
Singapore
Netherlands
Italy
Japan
Korea
Malaysia
UK
Malaysia
Australia
New Zealand
Peru
Australia
Portugal
Romania
France
Argentina
Switzerland
Malaysia
New Zealand
Australia
Australia
UK
Ukraine
USA
Australia
USA
Brazil
USA
Australia
Argentina
Serbia
Australia
Australia
Australia
Australia
Indonesia
Indonesia
Indonesia
USA
USA
Argentina
Australia
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
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
75
100
100
100
100
100
100
100
100
100
100
100
100
100
N/A
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
N/A
100
100
100
100
100
100
75
100
100
100
100
100
100
100
100
(a) These entities have entered into a deed of cross guarantee dated 21 June 2006 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, these companies are relieved from the requirement to prepare financial statements.
(b) Masmart Pty Ltd was previously named ‘ACN000425927 Pty Ltd’.
Nufarm Limited Annual Report 2013 | 107
Notes to the financial statements continued
36. Deed of cross guarantee
Under ASIC Class Order 98/1418, the Australian wholly-owned subsidiaries referred to in note 35 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 21 June 2006 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 2013 is set out as follows:
Summarised income statement and retained profits
Profit before income tax expense
Income tax expense
Net profit attributable to members of the closed group
Retained profits at the beginning of the period
Adjustments for entities entering the deed of cross guarantee
Dividends paid
Retained profits at the end of the period
Balance sheet
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Current tax assets
Total current assets
Non-current assets
Equity accounted investments
Other investments
Deferred tax assets
Property, plant and equipment
Intangible assets
Total non-current assets
TOTAL ASSETS
Current liabilities
Trade and other payables
Employee benefits
Current tax payable
Total current liabilities
Non-current liabilities
Payables
Interest bearing loans and borrowings
Deferred tax liabilities
Employee benefits
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
Equity
Share capital
Reserves
Retained earnings
TOTAL EQUITY
108 | Nufarm Limited Annual Report 2013
Consolidated
2013
$000
2012
$000
1,019
10,446
11,465
126,356
(1,459)
(15,703)
120,659
25,224
664,394
194,463
9,472
893,553
(32,368)
(3,039)
(35,407)
169,628
–
(7,865)
126,356
29,073
407,800
159,509
13,327
609,709
4,177
1,153,447
52,310
155,366
107,758
1,473,058
2,366,611
2,658
1,120,632
38,019
159,337
23,806
1,344,452
1,954,161
568,350
11,155
–
579,505
512,574
11,656
–
524,230
24,313
460,059
16,629
11,143
512,144
1,091,649
1,274,962
–
131,914
7,126
9,464
148,504
672,734
1,281,427
1,063,992
90,311
120,659
1,274,962
1,059,522
95,549
126,356
1,281,427
Notes to the financial statements continued
37. Parent entity disclosures
Result of the parent entity
Profit/(loss) for the period
Other comprehensive income
Total comprehensive profit/(loss) for the period
Financial position of the parent entity at year end
Current assets
Total assets
Current liabilities
Total liabilities
Total equity of the parent entity comprising of:
Share capital
Reserves
Accumulated losses
Retained earnings
Total equity
Company
2013
$000
2012
$000
8,833
2,385
11,218
(30,344)
(1,205)
(31,549)
1,106,952
1,447,739
1,096,826
1,432,484
188,746
189,073
173,448
173,714
1,063,992
38,651
(30,344)
186,367
1,258,666
1,059,522
36,355
(30,344)
193,237
1,258,770
Parent entity contingencies
The parent entity is one of the guarantors of the Senior Facility Agreement (SFA) and would be obliged, along with the other
guarantors, to make payment on the SFA in the unlikely event of a default by one of the borrowers. The parent entity also provides
guarantees to support several of the regional working capital facilities located in Brazil and Europe, and the senior unsecured notes.
Parent entity capital commitments for acquisition of property, plant and equipment
There are no capital commitments for the parent entity in 2013 or 2012.
38. Reconciliation of cash flows from operating activities
Cash flows from operating activities
Profit/(loss) for the period
Adjustments for:
Dividend from associated company
Amortisation and impairment of intangibles
Depreciation
Investment in associates write down
Gain on disposal of non-current assets and investments
Share of (profits)/losses of associates net of tax
Financial expense
Interest paid
Tax expense
Taxes paid
Movements in working capital items:
(Increase)/decrease in receivables
(Increase)/decrease in inventories
Increase/(decrease) in payables
Exchange rate change on foreign controlled entities working capital items
Net operating cash flows
Consolidated
2013
$000
2012
$000
81,750
72,822
73
33,612
41,564
–
(2,744)
60
65,460
(49,958)
31,173
(14,347)
186,643
(16,005)
(281,329)
65,917
107,561
(123,856)
62,787
151
27,455
38,034
1,993
(333)
(378)
61,796
(48,824)
37,501
(28,127)
162,090
(61,231)
39,607
84,830
(58,791)
4,415
166,505
Nufarm Limited Annual Report 2013 | 109
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 (except where denoted otherwise).
Executives
Non-executive directors
BF Benson
DG McGauchie AO (Chairman)
P Binfield(1)
AB Brennan
BJ Croft
GR Davis
R Heath
FA Ford (appointed 10 October 2012)
G Hunt(2)
Dr RJ Edgar (retired 27 March 2012)
DA Mellody(3)
Dr WB Goodfellow
RF Ooms(4)
GA Hounsell (retired 8 October 2012)
PM Margin (appointed 3 October 2011)
MJ Pointon
Dr JW Stocker AO (retired 1 December 2011) DA Pullan(5)
T Takasaki (appointed 6 December 2012)
RG Reis
E Prado(6)
Title
Group executive, agriculture
Chief financial officer (CFO)
Group executive, human resources and organisation development
Group executive, corporate services and company secretary
Group executive, global marketing and business development
Group executive, supply chain and strategic procurement
Group general manager chemicals
Group executive, innovation and development
Group executive, operations
Group executive, corporate strategy and external affairs
Group executive, manufacturing
Executive director
DJ Rathbone AM – Managing director and chief executive officer
1. Mr P Binfield was appointed as CFO with effect from 6 November 2011.
2. Mr G Hunt was appointed as group general manager of global marketing and business development with effect from 6 February 2012.
3. Mr DA Mellody, formerly the group general manager global marketing, moved into a new executive role of group general manager supply chain and strategic procurement
with effect from 1 February 2012.
4. Mr RF Ooms resigned as group general manager chemicals with effect from 29 February 2012.
5. Mr DA Pullan resigned as group general manager operations with effect from 31 July 2013.
6. Mr E Prado was appointed as group executive, manufacturing with effect from 1 July 2013.
Key management personnel compensation
The key management personnel compensation included in personnel expenses (see note 9) are as follows:
Consolidated
2013
$
9,182,961
358,079
1,811,459
799,000
200,271
2012
$
10,051,964
483,344
1,141,807
1,525,000
267,505
12,351,770
13,469,620
Short term employee benefits
Post-employment benefits
Equity compensation benefits
Termination benefits
Other long term benefits
110 | Nufarm Limited Annual Report 2013
Notes to the financial statements continued
39. Key management personnel disclosures (continued)
Individual director’s and executive’s compensation disclosures
Information regarding individual director’s and executive’s compensation is provided in the remuneration report section of the
directors’ report.
Apart from the details disclosed in this note, no director has entered into a material contract with the company or entities in the group
since the end of the previous financial year and there were no material contracts involving directors’ interest existing at year end.
Loans to key management personnel and their related parties
There were no loans to key management personnel at 31 July 2013 (2012: nil).
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 arm’s 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
The movement during the reporting period in the number of rights over ordinary shares in Nufarm Limited held directly, indirectly
or beneficially, by each key management person, including their related parties, is as follows:
Options/rights over
ordinary shares in
Nufarm Ltd
Scheme
Balance
at 1 August
2012
Granted as
remuneration
Exercised
Net
Balance
change at 31 July
2013
other
Vested
Vested
during at 31 July
2013
2013(a)
2013
Directors
DJ Rathbone(b)
Executives
BF Benson
P Binfield
BJ Croft
R Heath
G Hunt
DA Mellody
MJ Pointon
DA Pullan
RG Reis
Total
LTI performance
180,749
134,282
–
–
315,031
–
LTI performance
STI deferred
LTI performance
STI deferred
LTI performance
STI deferred
LTI performance
STI deferred
LTI performance
STI deferred
LTI performance
STI deferred
LTI performance
STI deferred
LTI performance
STI deferred
LTI performance
STI deferred
34,740
–
54,710
–
16,040
–
15,790
–
52,588
–
26,320
–
18,340
–
36,320
–
30,080
–
465,677
25,562
42,404
42,578
18,624
12,258
19,580
11,954
19,274
38,288
11,776
19,552
31,204
16,271
22,028
26,724
44,332
22,770
36,714
596,175
–
(21,202)
–
(9,312)
–
(9,790)
–
(9,637)
–
(5,888)
–
(15,602)
–
(11,014)
–
(22,166)
–
(18,357)
(122,968)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(63,044)
(22,166)
–
–
(85,210)
60,302
21,202
97,288
9,312
28,298
9,790
27,744
9,637
90,876
5,888
45,872
15,602
34,611
11,014
–
–
52,850
18,357
853,674
–
21,202
–
9,312
–
9,790
–
9,637
–
5,888
–
15,602
–
11,014
–
22,166
–
18,357
122,968
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(a) All options/rights that are vested are exerciseable.
(b) DJ Rathbone STI is deferred in cash.
Nufarm Limited Annual Report 2013 | 111
Notes to the financial statements continued
39. Key management personnel disclosures (continued)
Options and rights over equity instruments granted as compensation (continued)
Options/rights over
ordinary shares in
Nufarm Ltd
2012
Directors
DJ Rathbone
Executives
BF Benson
P Binfield
BJ Croft
R Heath
G Hunt
DA Mellody
MJ Pointon
DA Pullan
RG Reis
Total
Scheme
Balance
at 1 August
2011
Granted as
remuneration
Exercised
Net
Balance
change at 31 July
2012
other
Vested
Vested
during at 31 July
2012
2012(a)
LTI performance
LTI performance
LTI performance
LTI performance
LTI performance
LTI performance
LTI performance
LTI performance
LTI performance
LTI performance
–
–
–
–
–
–
–
–
–
–
–
180,749
34,740
54,710
16,040
15,790
52,588
26,320
18,340
36,320
30,080
465,677
–
–
–
–
–
–
–
–
–
–
–
–
180,749
–
–
–
–
–
–
–
–
–
–
34,740
54,710
16,040
15,790
52,588
26,320
18,340
36,320
30,080
465,677
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(a) All options/rights that are vested are exerciseable.
(b) DJ Rathbone STI is deferred in cash.
112 | Nufarm Limited Annual Report 2013
Notes to the financial statements continued
39. Key management personnel disclosures (continued)
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
2013
Directors
DG McGauchie1
DJ Rathbone4
AB Brennan
GR Davis
FA Ford (appointed 10 October 2012)
Dr WB Goodfellow 1,2
GA Hounsell (retired 8 October 2012)1, 3
PM Margin
T Takasaki (appointed 6 December 2012)
Executives
BF Benson
P Binfield
BJ Croft
R Heath
G Hunt
DA Mellody
MJ Pointon
E Prado (appointed 1 July 2013)
DA Pullan (retired 31 July 2013)3
RG Reis
Total
Balance at
1 August 2012
Granted as
remuneration
On exercise
of rights
Net change
other
Balance at
31 July 2013
31,239
11,676,031
10,000
40,000
–
1,141,491
43,723
2,458
–
70,783
30,000
36,040
218,300
10,000
34,848
37,292
–
187,242
131,811
13,701,258
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
21,202
9,312
9,790
9,637
5,888
15,602
11,014
–
22,166
18,357
122,968
15,000
50,000
–
–
–
1,925
(43,723)
–
–
–
–
52
–
10,000
(18,075)
–
–
(209,408)
–
(194,229)
46,239
11,726,031
10,000
40,000
–
1,143,416
–
2,458
–
91,985
39,312
45,882
227,937
25,888
32,375
48,306
–
–
150,168
13,629,997
Nufarm Limited Annual Report 2013 | 113
Notes to the financial statements continued
39. Key management personnel disclosures (continued)
Movements in shares (continued)
Shares held in Nufarm Ltd
2012
Directors
DG McGauchie1
DJ Rathbone4
AB Brennan
GR Davis
Dr RJ Edgar (resigned 27 March 2012)
Dr WB Goodfellow1,2
GA Hounsell1
PM Margin (appointed 3 October 2011)
Dr JW Stocker (retired 1 December 2011)1,3
Executives
BF Benson
P Binfield (appointed 7 November 2012)
BJ Croft
R Heath
G Hunt (appointed 6 February 2012)
DA Mellody
RF Ooms (retired 27 March 2012)
MJ Pointon
DA Pullan
RG Reis
Total
Balance at
1 August 2011
Granted as
remuneration
On exercise
of rights
Net change
other
Balance at
31 July 2012
31,239
11,676,031
10,000
20,000
13,000
1,120,551
43,723
–
41,521
33,068
–
19,990
206,250
–
16,773
333,409
19,217
159,527
104,096
13,848,395
–
–
–
–
–
–
–
–
–
27,715
–
12,050
12,050
–
18,075
18,075
18,075
27,715
27,715
161,470
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
20,000
(13,000)
20,940
–
2,458
(41,521)
10,000
30,000
4,000
–
10,000
–
(351,484)
–
–
–
(308,607)
31,239
11,676,031
10,000
40,000
–
1,141,491
43,723
2,458
–
70,783
30,000
36,040
218,300
10,000
34,848
–
37,292
187,242
131,811
13,701,258
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. The shareholdings of Dr WB Goodfellow, GA Hounsell, DG McGauchie and Dr JW Stocker include shares issued under the company’s non-executive director share plan and are
held by Pacific Custodians Pty Ltd as trustee of the plan.
2. The shareholding of Dr WB Goodfellow includes his relevant interest in:
(i)
St Kentigern Trust Board (430,434 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 (120,000 shares).
(iii) 531 Trust (400,861 shares). Dr Goodfellow and EW Preston are trustees of 531 Trust.
(iv) Auckland Medical Research Foundation (26,558 step-up securities). Dr Goodfellow does not have a beneficial interest in these step-up securities.
(v) Trustees of the Goodfellow Foundation (33,854 shares and 1,338 step-up securities). Dr Goodfellow is chairman of the foundation board and does not have a beneficial interest
in these shares or step-up securities.
(vi) Archem Trading (NZ) Ltd (700 step-up securities).
3. The shareholding of GA Hounsell, Dr JW Stocker, Dr RJ Edgar and GDW Curlewis has been removed under the ‘net change other’ column due to their retirement as directors.
The shareholding of DA Pullan has been removed under the ‘net change other’ column due to his resignation from the company on 31 July 2013.
4. DJ Rathbone holds 1,500 step-up securities at 31 July 2013 (2012: 1,500).
114 | Nufarm Limited Annual Report 2013
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
Excel Crop Care Ltd
F&N joint ventures
Sumitomo Chemical Company Ltd
Purchases from
Trade payable
Sales to
Trade payable
Trade receivable
Sales to
Purchases from
Trade receivable
Trade payable
These transactions were undertaken on commercial terms and conditions.
Consolidated
2013
$000
–
–
41,427
–
38,249
30,822
48,840
1,913
12,618
2012
$000
–
–
32,454
99
25,554
15,737
27,545
5,868
14,675
Nufarm Limited Annual Report 2013 | 115
Notes to the financial statements continued
41. Auditors’ remuneration
Audit services
KPMG Australia
Audit and review of group financial report
Overseas KPMG firms
Audit and review of group and local financial reports
Other auditors
Audit and review of financial reports
Audit services remuneration
Other services
KPMG Australia
Other assurance services
Other advisory services
Overseas KPMG firms
Other assurance services
Other services remuneration
Consolidated
2013
$000
2012
$000
546
615
1,149
1,695
79
1,774
55
–
79
134
1,022
1,637
259
1,896
356
41
2
399
42. Subsequent events
A final dividend of 5 cents per share, totalling $13,147,702 was declared on 25 September 2013 and will be paid on
15 November 2013 (2012: 3 cents per share, totalling $7,817,469).
116 | Nufarm Limited Annual Report 2013
Directors’ declaration
1.
In the opinion of the directors of Nufarm Limited (the company):
(a) the consolidated financial statements and notes, and 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 group's financial position as at 31 July 2013 and of its 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; and
(b) 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.
3.
4.
There are reasonable grounds to believe that the company and the group entities identified in note 36 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.
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 2013.
The directors draw attention to note 2 to the consolidated financial statements, which includes a statement of compliance
with International Financial Reporting Standards.
Signed in accordance with a resolution of the directors:
Dated at Melbourne this 25th day of September 2013.
DG McGauchie
Director
DJ Rathbone
Director
Nufarm Limited Annual Report 2013 | 117
Independent auditor’s report
to the members of Nufarm Limited
Report on the financial report
We have audited the accompanying financial report of Nufarm Limited (the company), which comprises the consolidated balance
sheet as at 31 July 2013, consolidated income statement and consolidated statement of comprehensive income, consolidated
statement of changes in equity and consolidated statement of cash flows for the year ended on that date, notes 1 to 42 comprising
a summary of significant accounting policies and other explanatory information 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.
Directors’ responsibility for the financial report
The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance
with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is
necessary to enable the preparation of the financial report that is free from material misstatement whether due to fraud or error.
In note 2(a), the directors also state, in accordance with Australian Accounting Standard AASB 101 Presentation of Financial Statements,
that the financial statements of the group comply with International Financial Reporting Standards.
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.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The
procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the
financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to
the entity’s preparation of the financial report that gives a true and fair view 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. 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.
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, a true and fair view which is consistent with our understanding of the
group’s financial position and of its performance.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
118 | Nufarm Limited Annual Report 2013
KPMG, an Australian partnership and a member
firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative
(KPMG International), a Swiss entity.
Liability limited by a scheme approved
under Professional Standards Legislation.
Independent auditor’s report continued
to the members of Nufarm Limited
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
Auditor’s opinion
In our opinion:
(a) the financial report of the group is in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the group’s financial position as at 31 July 2013 and of its performance for the year
ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.
(b) the financial report also complies with International Financial Reporting Standards as disclosed in note 2(a).
Report on the remuneration report
We have audited the remuneration report included under the heading ‘remuneration report’ of the directors’ report for the year
ended 31 July 2013. The directors of the company are responsible for the preparation and presentation of the remuneration report
in accordance with Section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration
report, based on our audit conducted in accordance with auditing standards.
Auditor’s opinion
In our opinion, the remuneration report of Nufarm Limited for the year ended 31 July 2013, complies with Section 300A of the
Corporations Act 2001.
KPMG
BW Szentirmay
Partner
Melbourne
25 September 2013
Nufarm Limited Annual Report 2013 | 119
Shareholder and statutory information
Details of shareholders, shareholdings and top 20 shareholders
Listed securities – 25 September 2013
Fully paid ordinary shares
Number of
holders
10,807
Number of
securities
262,954,040
Percentage held
by top 20
84.98
Twenty largest shareholders
Sumitomo Chemical Company Limited
HSBC Custody Nominees (Australia) Limited
National Nominees Limited
J P Morgan Nominees Australia Limited
Amalgamated Dairies Limited
Citicorp Nominees Pty Limited
Falls Creek No 2 Pty Ltd
JP Morgan Nominees Australia Limited
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