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American Vanguard CorpANNUAL
REPORT
2014
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103-105 Pipe Road
Laverton North Victoria 3026 Australia
Telephone + 61 3 9282 1000
Facsimile + 61 3 9282 1007
nufarm.com
At Nufarm we grow
a better tomorrow
by providing products
and services that
support the success of our
distributors and growers.
CONTENTS
1 About Nufarm
2 Key events
2 Facts in brief
4 Managing director’s review
11 Business review
14 Sustainability
16 Board of directors
18 Executive management
20 Information on the company
23 Corporate governance
32 Financial report
33 Directors’ report
49 Lead auditor’s independence declaration
50 Income statement
51 Statement of comprehensive income
52 Balance sheet
53 Statement of cash flows
54 Statement of changes in equity
56 Notes to the financial statements
116 Directors’ declaration
117 Independent auditor’s report
119 Shareholder and statutory information
124 Directory
NUFARM LIMITED ANNUAL REPORT 2014
Design: MDM Investor Connect
ABOUT NUFARM
Nufarm is an established global agricultural inputs company, competing
worldwide in crop protection and seed technologies. We are seen around
the world as a supplier of quality products, supported by high standards
of service and strong customer relationships.
Our mission is to grow a better tomorrow through the products and
services we provide that support the success of our distributors and
growers. This mission also reflects our commitment to the communities
in which we operate, the ambition we have for our people and our
collective approach to success.
Global headquarters
Regional headquarters
Crop protection production
Seeds production
Sales countries
NUFARM LIMITED ANNUAL REPORT 2014 | 01
KEY EVENTS
• Brazil posts another year of strong growth
• Australia and US impacted by tough market conditions
• Important progress on seeds development projects
• Reduction in year-end working capital and net debt
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 (cents)
Gearing ratio (%)
Net tangible assets per ordinary share ($)
Distribution to shareholders
Annual dividend per ordinary share (cents)
People
Staff employed
12 months ended
31 July 2014
$000
12 months ended
31 July 2013
$000
37,707
48,704
86,411
2,622,704
1,608,700
3,171,446
9.6
24.2
2.84
8.0
80,999
2,224
83,223
2,277,292
1,664,745
3,371,669
25.5
27.6
3.04
8.0
3,445
3,458
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 end 31 July 2013 unless otherwise stated. Non-IFRS measures have not
been subject to audit or review.
02 | NUFARM LIMITED ANNUAL REPORT 2014
SEED TECHNOLOGIES
THAT HAVE IMPACT
BEYOND YIELD
DELIVER SHARED
VALUE FOR A BETTER
TOMORROW.
NUFARM LIMITED ANNUAL REPORT 2014 | 03
MANAGING DIRECTOR’S REVIEW
The 2014 financial year delivered strong revenue growth and
an increase in underlying profit. While conditions in some
of our major markets were challenging, these results again
underline the importance of having a diversified business
across both geographic markets and product portfolio.
Doug Rathbone AM
Managing director and
chief executive
operations to support working capital
efficiency targets. Excluding the impact
of the lower volume through-put, the
underlying gross profit margin was
largely in line with the previous year.
Profit/loss attributable
to shareholders
0
.
1
8
6
.
2
7
Final dividend
Directors declared an unfranked
final dividend of five cents per share,
resulting in a full year dividend of
eight cents. A full year dividend of
eight cents per share (fully franked)
was paid in the previous year.
The final dividend will be paid on
14 November 2014 to the holders
of all fully paid shares in the company
as at the close of business on
17 October 2014. The final dividend
will be 100 per cent conduit foreign
income. Given the impact of carry
forward tax losses, it is unlikely the
company will be in a position to
frank dividend payments in the
foreseeable future.
The dividend reinvestment plan
(DRP) will be made available to
shareholders for the final dividend.
Directors have determined that
the issue price will be calculated
on the volume weighted average of
the company’s ordinary shares on the
ASX over a period of 10 consecutive
trading days commencing after the
record date and concluding before
the date of allotment of ordinary
shares under the plan. The last
election date for shareholders who
are not yet participants in the DRP
is 20 October 2014. The board has
determined that, for this dividend
payment, a one per cent discount will
apply to shares issued under the DRP.
7
.
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Material items
In March and April of this year, the
company announced a re-organisation
of its Australian business and the
rationalisation of the manufacturing
footprint in Australia and New Zealand.
These changes, which will be
implemented over the next two years,
resulted in a one-off after-tax cost of
$48.7 million. Upon full implementation
of the changes, total cost savings
are estimated to be approximately
$16 million.
The results also reflect a strong focus
on strengthening our balance sheet
and this will remain a key priority over
the coming 12 months.
The company announced a statutory
profit after tax of $37.7 million for
the 12 months to 31 July 2014. This
compares to a statutory profit after tax
of $81.0 million in the previous financial
year and included $48.7 million in
one-off costs associated with the
previously announced restructure and
asset rationalisation of the Australian
and New Zealand operations.
Group revenues increased by
15 per cent to $2.62 billion
(2013: $2.28 billion).
Underlying earnings before interest
and tax (EBIT)1 was $200.6 million,
up by just over seven per cent on
the $186.8 million generated
in the 2013 financial year.
Underlying net profit after tax3
was $86.4 million, up four per cent
on the previous year. This included
foreign exchange losses of
$12.6 million reported as part
of net financing expenses.
Earnings per share were 9.6 cents
(2013: 25.5 cents per share). Excluding
material items, earnings per share were
28.1 cents (2013: 26.4 cents).
The group generated an underlying
gross profit margin of 26.7 per cent,
which was down on the previous year
(27.4 per cent). Manufacturing volumes
were down on the prior period due
to both weather-related impacts
on demand and changes to plant
04 | NUFARM LIMITED ANNUAL REPORT 2014
AT NUFARM,
INNOVATIVE THINKING
IS ABOUT BEING
DIFFERENT, BETTER,
FASTER, RIGHT.
NUFARM LIMITED ANNUAL REPORT 2014 | 05
MANAGING DIRECTOR’S REVIEW CONTINUED
Important progress has been
achieved since the re-organisation
was announced, involving annualised
savings of $6 million and relating
to the rationalisation of back office
positions. The balance of total cost
savings will be achieved as several
manufacturing plants are closed over
the next two years. For financial year
2015, estimated annualised savings
will be $5 million, with further savings
of $5 million expected to be achieved
in financial year 2016.
Interest/tax/cash flow
Net external interest costs3 were
$64.3 million (2013: $50.5 million).
Higher levels of average net debt
and higher bank base rates in Brazil
were partially offset by reduced credit
margins negotiated as part of the
renewal of the syndicated bank facility.
Total net financing costs increased
from $70.7 million in the prior year to
$88.0 million. This included the impact
of foreign exchange losses that totalled
$12.6 million (prior year $10.7 million),
with almost half of those losses relating
to the devaluation of currencies in
Argentina and Ukraine.
The underlying effective tax rate was
23.2 per cent. The lower than normal
tax rate was driven by a number of
individually immaterial one-off credits,
mostly relating to tax credits in Brazil.
It is expected that the future underlying
effective tax rate will be approximately
30 per cent.
The business generated strong net
operating cash inflows of $268.1 million,
well up on the $62.8 million generated
in the prior period.
Balance sheet management
Net debt3 at year end was $513 million,
a material improvement on the
$633 million recorded at the end of the
previous financial year. The reduction
in net debt at balance date was driven
by a focus on working capital targets
delivering strong second half cash flow.
Average net debt3 was $913 million,
compared to $753 million in 2013.
Net working capital3 at 31 July was
down by $169 million to $842 million.
This was achieved via a more disciplined
approach to the management of
working capital, supported by a
range of initiatives implemented
across the business. The major driver
of the reduction in working capital was
more efficient inventory management,
with year-end inventories finishing
at $633 million, compared to
$803 million at 31 July 2013.
Average net working capital3 was
$1.25 billion, compared to $1.07 billion
in the prior period. As a proportion
of sales, average net working capital
was slightly up on the previous year
(47.7 per cent versus 46.8 per cent),
reflecting the high starting point and
large levels of working capital in the
first half. Management has targeted
an average net working capital to
sales ratio of 40 per cent within the
next two years.
Gearing (net debt to net debt
plus equity) was 24.2 per cent
(2013: 27.6 per cent).
People and organisation
Our talented and committed
employees around the world have
again contributed strongly to the
profitable growth of the company
during the 2014 financial year.
We operate in highly competitive
markets, where the strength of our
people and their relationships with
key stakeholders can provide an
important competitive advantage.
We continued to encourage innovative
thinking by providing training and
development programs, and fostering
the leadership qualities that will
support the growth of the business.
Our commitment to providing a safe
working environment is also supported
by appropriate training and awareness
programs and we expect to achieve
continuous improvement across a
range of safety and environmental
performance parameters.
Outlook
With a return to more normal seasonal
conditions in Australia and the US,
the company is strongly positioned
to generate growth at an underlying
EBIT level in 2015.
Spring and summer rains in northern
NSW and Queensland are needed to
generate demand for crop protection
products in Australia and to establish
an important first half platform for the
business. The restructuring program
will be further progressed in 2015,
with associated cost savings helping
to drive earnings recovery.
If the US experiences more normal
weather patterns – particularly in
the spring period from March to
May – Nufarm’s business will be
able to capitalise on a stronger
product portfolio and generate
a significant recovery in earnings.
06 | NUFARM LIMITED ANNUAL REPORT 2014
MANAGING DIRECTOR’S REVIEW CONTINUED
The branded business in Europe is
expected to generate further growth,
however, lower overhead recoveries
will result in a reduced contribution
from manufacturing operations and
an overall flat earnings outcome for
the European segment.
The South American business will
benefit from new product introductions
and – given normal seasonal conditions
and no significant further deterioration
in crop prices – should post high single
digit growth in 2015.
Earnings growth is also anticipated in
the seed technologies segment, with a
number of new varieties to be launched
across our core crops. Some $7 million
is forecast to be spent on progressing
the DHA omega-3 canola project and
this will be capitalised.
The balance sheet will remain a key
focus for management, with net
working capital to sales expected
to decline over the year.
Longer term growth will be driven
by a strong pipeline of new product
launches, a transition to higher margin
products and additional operational
efficiencies.
Doug Rathbone AM
Managing director and
chief executive
23 September 2014
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 $80.816 million for the year ended 31 July 2014
and $73.986 million for the year ended 31 July 2013. 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 impacting operating profit
Operating profit
3. Non-IFRS measures are defined as follows:
2014
$000
200,607
(50,761)
149,846
2013
$000
186,803
(3,177)
183,626
• underlying net profit after tax – comprises profit/(loss) for the period attributable to the equity
holders of Nufarm Limited less material items;
• 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 2014
Nufarm Limited financial report;
• net debt – total net debt less cash and cash equivalents;
• average net debt – net debt measured at each month end as an average;
• net working capital – current trade and other receivables and inventories less current trade
and other payables; and
• average net working capital – net working capital measured at each month end as an average.
NUFARM LIMITED ANNUAL REPORT 2014 | 07
MANAGING DIRECTOR’S REVIEW CONTINUED
Underlying net profit after tax
Group sales
4
.
5
1
1
3
.
8
9
2
.
3
8
4
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6
8
1
1
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2
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Underlying EBITDA
8
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Gearing ratio
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08 | NUFARM LIMITED ANNUAL REPORT 2014
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Return on funds employed
4
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Earnings per share
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C
NUFARM HAS MANUFACTURING
AND MARKETING OPERATIONS
THROUGHOUT AUSTRALIA,
NEW ZEALAND, ASIA, THE
AMERICAS AND EUROPE AND
SELLS PRODUCTS IN MORE
THAN 100 COUNTRIES AROUND
THE WORLD.
NUFARM LIMITED ANNUAL REPORT 2014 | 09
NUFARM IS COMMITTED TO
SUPPORTING THE COMMUNITIES
IN WHICH WE OPERATE,
FOSTERING THE AMBITION
WE HAVE FOR OUR PEOPLE
AND A COLLECTIVE APPROACH
TO SUCCESS.
10 | NUFARM LIMITED ANNUAL REPORT 2014
BUSINESS REVIEW
A continuation of dry conditions in Australia and an unusually
short spring season in the United States resulted in lower
demand and considerable margin pressure in both markets.
These negative impacts were more than offset, however, by
another strong performance from the South American business,
an increased profit contribution from the seeds business and
lower corporate costs.
The range of seasonal impacts
experienced in the 2014 financial
year again underlined the importance
of a geographically diverse business
and Nufarm’s expansion into the
seeds segment.
Nufarm’s crop protection business grew
sales by 16 per cent to $2.48 billion
and underlying EBIT by four per cent
to $202.1 million. Crop protection sales
accounted for just over 94 per cent of
group revenues and generated an
average gross margin of 26 per cent,
which was in line with the previous year.
The seed technologies segment
generated revenues of $144 million,
an increase of 10 per cent on the
previous year ($132 million) and grew
underlying EBIT by 15 per cent to
$37.2 million. The segment generated
an average gross margin of 51 per cent.
Corporate (head office) costs were
$38.6 million, down five per cent
on 2013. Total expenses were up
on the previous year, but represented
a slightly lower ratio to sales than in
the prior period.
A key focus during financial year 2014
was the implementation of a number
of programs to improve working capital
efficiencies. A significant reduction in
year-end working capital and net debt
reflected good progress on this front.
Operating segments summary
The table adjacent provides a summary
of the performance of the operating
segments for the 2014 financial year
and the prior period.
A re-organisation of the Australian
business was announced during the
year. Changes to the manufacturing
base – to be implemented over a
two-year period – will reduce fixed
costs and improve utilisation of
production facilities. A stronger focus
on product development and customer
service is also expected to contribute
to improved business performance
over the medium term.
Domestic sales in New Zealand
were in line with the previous year
but generated a slight improvement
in margin contribution. A record year
for the dairy industry, and strengthening
returns in the sheep and beef sectors,
as well as key horticultural crops,
underpinned local demand.
Asia
Asian crop protection sales were
$140.9 million, an increase of
approximately 13 per cent on
the previous year ($125.2 million).
Underlying EBIT was largely unchanged
at $19.5 million (2013: $19.6 million),
with additional investments being
made in new product development
and an expansion into new markets
segments, as well as regional markets
such as Vietnam and Korea.
The Indonesian business recorded
just over 25 per cent sales growth in
local currency, driven by new product
launches and increased sales in the
important rice and vegetable segments.
Australia/New Zealand
The Australian and New Zealand
business generated sales of
$605.8 million, which was in line
with the previous year ($604.4 million).
Underlying EBIT was $33.9 million,
slightly down on the $35.4 million
generated in the prior period.
Australian sales were down year on
year, reflecting lower demand due
to a continuation of dry conditions
throughout much of the country.
Summer cropping conditions featured
unusually low insect and weed pressure,
and fungal disease for a second
consecutive year, and fallow herbicide
applications were well below normal.
The challenging conditions led to
pressure on both pricing and margins.
With good rainfalls in many cropping
regions, market conditions improved
considerably in the final quarter of
the reporting period, providing an
opportunity for channel stocks to
normalise, lifting sentiment, and
giving the Australian business a
much more positive platform to
start the new financial year.
Year ended 31 July
Revenue
Underlying EBIT
2014
2013
($000s)
Crop protection
Australia and
New Zealand
604,432
125,201
Asia
468,253
Europe
516,278
North America
South America
431,440
Total crop protection 2,478,275 2,145,604
Seed technologies
– global
Corporate
Nufarm group
131,688
–
2,622,704 2,277,292
605,761
140,885
555,521
513,596
662,512
144,429
–
Change
(%)
2014
2013
Change
(%)
35,352
0.2 33,903
19,580
12.5 19,481
57,245
18.6 56,420
42,153
-0.5 20,638
53.6 71,622
40,595
15.5 202,064 194,925
9.7 37,160
n/a (38,617)
32,449
(40,571)
15.2 200,607 186,803
-4.1
-0.5
-1.4
-51.0
76.4
3.7
14.5
-4.8
7.4
NUFARM LIMITED ANNUAL REPORT 2014 | 11
BUSINESS REVIEW CONTINUED
North America
North American crop protection sales
were down on the previous year at
$513.6 million (2013: $516.3 million).
In local currency, Nufarm’s US sales
were down by 10 per cent. Segment
EBIT fell sharply to $20.6 million,
compared to $42.2 million in the
prior period.
An unusually cold and long winter
in the US negatively impacted both
the cropping and non-crop markets,
with fewer applications and higher
inventories generating strong price
competition. Sales into the burn-down
(pre-plant) segment were well below
average due to the shorter planting
window for growers.
Lower volume demand and more
efficient inventory management
resulted in reduced production
and lower overhead recoveries
at Nufarm’s major herbicide
manufacturing facility in Chicago.
Seasonal conditions prevented
Nufarm from capitalising on a stronger
and broader product position in the
turf and specialty segment, having
completed a distribution arrangement
for Valent’s portfolio of products in
January of this year.
Nufarm performed strongly in the US
industrial and vegetative management
segment, with both sales and EBIT
contribution ahead of the previous year.
Seasonal conditions in Canada were
generally average. Nufarm made
good progress in implementing its
differentiated strategy and launched
a number of new products that
received strong support from the
market. Both sales and margin
were up on the prior period.
South America
The South American business
performed strongly, with regional sales
up by 54 per cent to $662.5 million
(2013: $431.4 million) and underlying
EBIT up by 76 per cent to $71.6 million
(2013: $40.6 million).
12 | NUFARM LIMITED ANNUAL REPORT 2014
In general, weather and cropping
conditions in the region were average.
Some parts of central Brazil experienced
drier than normal weather which limited
fungicide applications, but favoured
the use of insecticides. Extremely cold
conditions in Chile negatively impacted
the important local fruit and vegetable
segments.
Nufarm’s sales in Brazil were up
on the previous year by more than
60 per cent in local currency and
helped the business gain market share.
Sales growth was driven by Nufarm’s
differentiated ‘Crucial’ glyphosate
formulation as well as the successful
introduction of a number of new
products. A different product mix,
that included significantly higher sales
of older insecticide products, resulted
in a slight fall in the average Brazilian
gross margin. However, good cost
control and the benefits of scale
resulted in EBITDA margin expansion.
In Argentina, the business performed
strongly with growth in the quickly
developing herbicide segment for
control of glyphosate resistant weeds.
Local currency sales grew by more
than 70 per cent.
Further investments were made
in strengthening the regional
organisation, with an additional
15 sales representatives added in Brazil
and a number of senior commercial
appointments in Argentina. A new
commercial manager was also
appointed to support Nufarm’s
expansion into Peru and a new
distribution arrangement was
finalised for the Uruguay market.
Europe
European sales were up by 19 per cent
to $555.5 million (2013: $468.3 million).
Underlying EBIT was in line with the
previous year ($56.4 million versus
$57.2 million). In local currency,
Nufarm’s branded sales were ahead
of the prior year, while revenues
generated from operations (third party
and industrial sales) were down. Total
gross margin was up on the previous
year when measured in euros, reflecting
a higher proportion of branded sales.
Most western European markets
experienced favourable weather
conditions which helped drive an
increase in cereal plantings and positive
demand for crop protection inputs.
Eastern Europe was affected by colder
weather patterns and dry conditions.
Nufarm experienced solid growth
in markets such as Spain, Germany
and Romania, with new product
introductions contributing to a
slight improvement in average
margins across the region.
A focus on working capital efficiencies
resulted in changes at the European
manufacturing units, with better
forecasting and supply chain
management allowing lower levels
of safety stock and a resulting
reduction in volume through-put.
Consequently, overhead recoveries
in these facilities were well down on
the previous year. The contribution
from the European manufacturing sites
was approximately €2 million lower
this year compared to the prior year.
Major product segments
Crop protection
Nufarm’s crop protection business
accounted for 94 per cent of group
revenues and grew sales by 16 per cent
to $2.48 billion. These sales generated
an average gross margin of 26 per cent.
Herbicide sales were $1.67 billion,
an increase of 13 per cent on the
previous year, and represented
67 per cent of total crop protection
revenues (2013: 69 per cent). Increased
sales in both South America and Europe
more than offset weather-related
demand weakness in Australia and
North America. Glyphosate margins
were slightly up compared to the
2013 year, mainly driven by a strong
performance from Nufarm’s ‘Crucial’
glyphosate formulation in Brazil.
BUSINESS REVIEW CONTINUED
Nufarm’s insecticide portfolio
generated strong sales growth
($290.5 million, up 37 per cent on FY13).
Strong pest infestations in Brazil’s major
crops generated very high demand
for insecticide applications. Nufarm’s
chlorpyrifos and imidacloprid-based
products were well positioned to
take advantage of these conditions.
Seed technologies
The company’s seed technologies
business grew revenues by 10 per cent
to $144.4 million and underlying EBIT
by 15 per cent to $37.2 million. This
was despite a relatively challenging
year in terms of seasonal conditions
for several core crops and the seed
treatment business.
While total fungicide sales were
up year on year ($247 million versus
$219 million), both Australia and
Brazil experienced low fungal disease
pressure and increased competition
for sales. The European business
had a strong year in the fungicides
segment, with increased sales
of azoxystrobin-based products.
Sales of plant growth regulators
(PGRs) were up by 11 per cent
on the prior period and generated
stronger margins. Record sales of
PGRs into both cereal crops and
the trees, nuts, vegetables and vines
segment in Europe drove the strong
performance in this product group.
The business also benefited
from a stronger portfolio of
biorational products.
The segment generated an average
gross margin of 51 per cent (2013:
55 per cent). A change in supply
and selling arrangements relating
to Nuseed’s servicing of the China
confectionery sunflower segment
resulted in a reduced percentage
margin as the company moved away
from a royalty-based model. The new
arrangements lower risk as Nuseed
consolidates its position as a leader
in this important segment.
Significant market share gains were
achieved in the Australian canola
segment, with Nuseed’s Roundup
Ready® hybrid varieties performing
very strongly. While the North
American sunflower business was also
positive, adverse weather and poor
market conditions negatively impacted
US seed treatment sales. Expansion
into Uruguay helped drive sales growth
in South America despite a poor
production environment in Argentina
and a reduction in local canola
plantings. European sales were lower
than expected, with instability in the
Ukraine region a contributing factor.
The seeds business made important
progress in advancing its pipeline
of new products including moving
DHA omega-3 canola into field trials,
the prelaunch of a new China sunflower
disease trait, prelaunch of a new
confection sunflower category
and a step change in molecular
research capability, with the
opening of two innovation
centres in Victoria and California.
Seed treatment sales increased
by four per cent but this was below
expectations, given weather-related
impacts and a delay in a key European
product registration. A large number of
development projects were progressed
and access to several new products was
negotiated with third parties, which will
lead to a broader portfolio offering in
this high-value segment.
Sales revenue by region 2014
Total business
Sales by product segment 2014
Crop protection
Sales by product segment 2014
Seed technologies
24%
22%
6%
22%
26%
Australia/New Zealand
North America
South America
Europe
Asia
$2,622.7 million
67%
11%
12%
10%
Herbicides
Fungicides
Insecticides
Other*
$2,478.3 million
* Other includes machinery, adjuvants,
PGRs and industrial.
70%
30%
Seed
Seed treatment
$144.4 million
NUFARM LIMITED ANNUAL REPORT 2014 | 13
SUSTAINABILITY
Agriculture relies on sustainable production systems and – as
a key supplier of necessary inputs into agricultural production
– Nufarm strives to ensure our operations and products
meet appropriate sustainability objectives and standards.
Nufarm’s growth strategy is built on the
two pillars of innovation and discipline.
Both of these principles have a strong
enabling role in helping us to meet our
sustainability objectives.
We are actively encouraging innovative
thinking across all areas of our business,
including the successful application
of innovative thinking to achieve safer
working environments; reductions
in emissions and waste; and more
sustainable operations generally.
Increased discipline is also vital to
ensure we have the right processes
and structures in place and that we
are measuring and managing our
business in a way that allows us to
be accountable for our performance.
Nufarm’s full sustainability report
for the 2013 calendar year can be
found on our corporate website.
Our health and safety data includes
permanent and casual employees as
well as contractors with data collected
from Nufarm manufacturing sites,
offices and regional service centres.
As yet, it does not include data from
eight offices in Asia and South America.
It is pleasing to report improved
outcomes in 2013 on important safety
and environmental measurements,
but we believe we can do better.
The company is making a significant
investment, both in terms of capital
and resources, to achieve further
improvements and we have restated
our commitment to work towards
a zero target for safety-related
incidents in our workplaces.
Total greenhouse emissions decreased
in 2013 compared with the previous
year, due to changes in production
volumes and product mix at various
sites. Emissions per tonne of
production remained consistent.
Air emissions result from the
production process and we work
to minimise emissions and their
impact. Emissions vary depending on
production volumes and the product
mix. While CO2 emissions for most
sites remained generally consistent,
there were some reductions at Laverton,
Wyke and Botlek sites following
concerted efforts by these teams.
Water is used in most of our production
processes with the amount used directly
impacted by production volumes and
the product mix. We aim to reduce
the amount of water we use and waste
water created with many of our sites
undergoing or investigating ways to
recycle, harvest and better utilise
water in our systems and processes.
Total waste decreased slightly in 2013
compared with 2012 and we continue
to work towards further reducing
waste generation from manufacturing
processes. A waste management system
at many of our sites captures the nature
and quantity of waste produced onsite
and tracks it through to recycling or
disposal. Waste generated per tonne
of production has remained consistent
due to efforts made in recent years to
improve practices.
Our 2013 health and safety
performance improved on our
2012 results, although we failed to
meet the board targets of LTIFR <1,
MTIFR <2 and Severity <0.012.
Early in the year we issued new
global corporate guiding principles
to promote alignment of best practice
and implement common operating
principles. The principles operate
within a continuous improvement
framework as part of a structured
and systematic approach to process
safety management across our
manufacturing base.
The health and safety results for
2013 were: LTIFR 1.16, MTIFR 2.18
and Severity 0.018.
The eight lost time injuries were
spread over eight separate sites.
Two of the injuries were extremely
severe; one resulting in the death
of an Indonesian colleague in a traffic
accident and another the lengthy
continuing recovery of a Linz team
member who accidentally opened
a valve containing corrosive material
which sprayed onto his face and into
his lungs.
There were 15 medical treatment
injuries, seven of which did not involve
loss of working days, and our global
severity performance improved in
comparison to the previous year.
LTIFR or lost time injury frequency rate
is the number of lost time injuries per
million hours worked that result in one
or more days 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.
14 | NUFARM LIMITED ANNUAL REPORT 2014
SUSTAINABILITY CONTINUED
LTIFR 2009–2013
Severity 2009–2013
6
5
4
3
2
1
0
6
5
4
3
2
1
0
/
r
e
t
a
w
s
e
n
n
o
T
n
o
i
t
c
u
d
o
r
p
s
e
n
n
o
t
3.0
2.5
2.0
1.5
1.0
0.5
0.0
s
e
n
n
o
t
0
0
0
’
s
n
o
i
s
s
i
m
e
2
O
C
130
115
100
0.06
0.05
0.04
0.03
0.02
0.01
2009
2010
2011
2012
2013
2009
2010
2011
2012
2013
Target
Actual
Target
Actual
MTIFR 2009–2013
Unusual incident report/injury report
versus LTIFR 2009–2013
16
14
12
10
8
6
4
2
0
2009
2010
2011
2012
2013
2009
2010
2011
2012
2013
Target
Actual
LTIFR
UIR/IR ratio
Water efficiency 2009–2013
Production volume 2009–2013
500
s
e
n
n
o
t
0
0
0
‘
400
2009
2010
2011
2012
2013
2009
2010
2011
2012
2013
CO2 released from energy use
and processes 2009–2013
2009
2010
2011
2012
2013
NUFARM LIMITED ANNUAL REPORT 2014 | 15
BOARD OF DIRECTORS
Donald McGauchie AO
Doug Rathbone AM
Anne Brennan
Gordon Davis
Chairman
Managing director
and chief executive
Doug Rathbone AM, 68,
joined the board in 1987.
His background is chemical
engineering and commerce
and he has worked for
Nufarm Australia Limited
for over 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,
64, 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.
16 | NUFARM LIMITED ANNUAL REPORT 2014
Anne Brennan, 54, joined the
board on 10 February 2011.
Gordon Davis, 58, 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
and risk 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 will be standing
down as a director and
deputy chairperson of Echo
Entertainment Group Limited
after that company’s 2014
annual general meeting.
Anne is a director of Myer
Holdings 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 and risk committee.
BOARD OF DIRECTORS CONTINUED
Frank Ford
Bruce Goodfellow
Peter Margin
Toshikazu Takasaki
Bruce Goodfellow, 62,
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.
Frank Ford, 68, joined the
board on 10 October 2012.
Mr 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 successful
career as a professional
advisor spanning some
35 years. During that period,
Mr Ford was also a member
of the Deloitte global
board, global governance
committee and national
management committee.
Mr Ford 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 and risk
committee and a member
of the nomination and
governance committee.
Peter Margin, 54, joined the
board on 3 October 2011.
Toshikazu Takasaki, 67,
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.
Toshikazu is a member
of the health, safety and
environment committee.
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 a
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, PACT Group
Holdings Limited and
Ricegrowers Limited.
Peter is chairman of the
human resources committee
and a member of the health,
safety and environment
committee.
NUFARM LIMITED ANNUAL REPORT 2014 | 17
EXECUTIVE MANAGEMENT
Doug Rathbone AM
Brian Benson
Paul Binfield
Managing director and chief executive
Doug Rathbone’s background is
chemical engineering and commerce
and he has worked for Nufarm Australia
Ltd for over 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).
Group executive marketing
and portfolio development
Brian Benson joined Nufarm in 2000
after a long career with Monsanto
where he held various senior positions
in both Australia and overseas. Brian
has extensive experience in the crop
protection industry in the areas of
international marketing and strategy.
He has degrees in agricultural science
and business administration.
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
Rodney Heath
Greg Hunt
Group executive people
and performance
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.
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
from New Zealand to Australia to
become company secretary of Nufarm
Australia Ltd. In 2000, Rod was appointed
company secretary of Nufarm Ltd.
Group executive commercial operations
Greg joined Nufarm in February 2012.
He has had considerable executive
and agribusiness experience with a
successful career at Elders Australia
Limited where he was chief executive
officer between 2001 and 2007.
After leaving Elders, Greg worked
with a number of organisations
in business development and
agribusiness related advisory roles.
He is a director of Costa Group.
18 | NUFARM LIMITED ANNUAL REPORT 2014
EXECUTIVE MANAGEMENT CONTINUED
Dale Mellody
Mike Pointon
Group executive procurement
and commercial services
Dale Mellody joined Nufarm in 1995,
having completed his bachelor of
agricultural science. Promoted to the
senior management group in 2005,
he has had various global roles
including group executive global
marketing and general manager of
Nufarm’s North American business.
Dale is now responsible for global
procurement and commercial services.
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. Mike
was appointed to the executive team
in 2008. He is responsible for the
group’s product development
and regulatory affairs activities.
Elbert Prado
Robert Reis
Group executive manufacturing
and supply chain
Elbert Prado, a chemical engineer,
joined Nufarm in July 2013 after
extensive international experience
in senior operations roles within
the chemical industry. He has a
strong focus on safety, supply chain
and manufacturing excellence. Elbert
was global manufacturing and supply
chain director for Rohm and Haas.
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.
NUFARM LIMITED ANNUAL REPORT 2014 | 19
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, and 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.
20 | NUFARM LIMITED ANNUAL REPORT 2014
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 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 a 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 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.
INFORMATION ON THE COMPANY CONTINUED
• 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.
• 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.
Principal risk area
Risk management approach
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.
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 market
place, 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 2014 | 21
OUR AIM IS TO GROW
A BETTER TOMORROW
THROUGH PRODUCTS
AND SERVICES THAT
SUPPORT THE SUCCESS
OF OUR DISTRIBUTORS
AND GROWERS.
22 | NUFARM LIMITED ANNUAL REPORT 2014
CORPORATE GOVERNANCE
Nufarm’s board processes have been reviewed to ensure they
represent and protect the interests of all stakeholders. This
includes detailed consideration of the second and third editions
of the Corporate Governance Principles and Recommendations,
(‘the ASX principles’) published by the Australian Securities
Exchange Limited’s (ASX) Corporate Governance Council.
There are six 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.
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
ASX principles. During this reporting
period, Nufarm complied with all of
the ASX principles contained in the
second edition of the ASX principles,
and Nufarm is currently transitioning
to compliance with the third edition
of the ASX principles.
Management and oversight
of Nufarm
The board
The governing body of the company
is the board of directors. The board’s
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 defines the board’s
individual and collective responsibilities
and describes those responsibilities
delegated to the managing director
and senior executives. A copy of
the board charter is available on
the corporate governance section
of the company’s website.
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;
At 31 July 2014, there are four board
committees: audit and risk; human
resources; nomination and governance;
health safety and environment. All
directors are entitled to attend any
committee meeting.
• 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. The company
secretary has a direct reporting
line to the chairman, and all directors
have direct access to the company
secretary, who is appointed by,
and accountable to, the board
on all governance matters; 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.
A copy of the board charter is available
on the corporate governance section
of the company’s website.
Details of the attendances at meetings
of board and committees during the
reporting period appear on page 34
of this report.
Nufarm undertakes appropriate checks
before appointing or putting forward
any director for election by shareholders
and provides shareholders with all
information relevant to their decision
whether or not to re-elect the director.
All directors and senior executives
have a written agreement with the
company setting out the terms of
their appointment.
Diversity and inclusion
Nufarm is committed to building
a diverse and inclusive workplace.
Diversity of gender, sexual orientation,
age, ethnicity, religion, skills and
experience increase our capability
to develop and maintain a high-
performing workforce and to take
advantage of the diverse challenges
and opportunities we face around
the globe.
To this end, we provide our people
with opportunities 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 a truly diverse team
across the business.
NUFARM LIMITED ANNUAL REPORT 2014 | 23
CORPORATE GOVERNANCE CONTINUED
In 2012 Nufarm identified cultural and
gender diversity as areas for specific
focus within the overall commitment
to inclusion of all employees, and this
focus remains key for the business.
Nufarm’s diversity policy is reviewed
annually and can be viewed at the
corporate governance section of our
website. Human resources policies and
practices and board selection processes
were reviewed to ensure they were
both free of bias and supportive of
diverse candidates and employees.
In 2014 our focus was in the three
key areas:
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.
Analysis of available data does not
highlight any gender or other diversity
bias in the involvement of our people in
training and development opportunities.
Reasons for leaving as identified
through exit interview data vary but do
not show any trends related to gender
or culture. Opportunities to participate
in management and leadership training
are open to all qualifying members of
staff. Following feedback received in
the 2012 employee opinion survey
(EOS) there have been a number of
programs put in place in our regions
for our people managers. Women
have been very well represented in
these programs.
As a global business Nufarm fosters
the use of cross-functional and
cross-regional project teams and
work groups. These groups provide
an excellent opportunity for our
people to collaborate. Women are
well represented within these groups.
24 | NUFARM LIMITED ANNUAL REPORT 2014
A comparison of salaries for men and
women was completed during the year
and the outcomes form a ‘base line’
for annual review. The indication from
initial analysis is that any difference in
salary for similar roles is based on the
nature of the role, length of service,
depth of experience and qualifications,
as well as varying regional market rates.
This analysis will be reviewed again
in light of relevant outcomes of the
2014 EOS. Nufarm is committed to
remuneration based only on
work-related factors.
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;
Nufarm employee representation
• 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 benefiting from the inclusion
of its diverse workforce.
Board and executive diversity
Every board, executive and senior
management position which becomes
available is an opportunity to bring
further diversity to the business. As
an example, in 2014 Pedro Tagliari,
previously head of operations for
Latin America, has moved to Australia
to lead the Australia/New Zealand
operations as part of the major
reorganisation of the Australia/New
Zealand business.
Women in Nufarm
Twenty-three per cent of Nufarm’s
permanent full-time or part-time
employees are women up from
22 per cent in 2013.
The table shows the percentages by
region with a breakdown of full-time
and part-time employment.
29%
20%
10%
9%
32%
Australia/New Zealand
Asia
North America
Europe
South America
Regions
All Nufarm
Australia/New Zealand
Asia
North America
Europe
South America
Percentage
of women
23
25
28
28
21
21
Percentage distribution
women in full and
part-time employment
Part-time
9
16
0
3
13
4
Full-time
91
84
100
97
87
96
CORPORATE GOVERNANCE CONTINUED
Role
Board
Executive/senior management
People manager/team leaders
Professionals
Manufacturing
Administrative
Notable shifts from 2013 include:
• an increase in the percentage of
women in Asia from 16 per cent in
2013 to 28 per cent in 2014. This is
mainly attributable to a change in
the mix of permanent and temporary
jobs which saw women who were
previously in temporary work moving
into the permanent workforce; and
• part-time positions have increased
in North America (two per cent),
which in turn provides greater
flexibility for our employees.
Women work in every area of our
business. The highest percentage is
in administrative roles. Women make
up 24 per cent of professional roles
including scientific, sales, engineering,
marketing, finance, human resources
and information technology. Ten per
cent of manufacturing roles are held
by women working in our plants and
mainly on day shift. Sixteen per cent
of management and executive roles
are held by women. One member of
the board is female.
The percentages for professional,
administrative and manufacturing
are in line with the 2013 statistics.
There has been a very pleasing shift
of four per cent of our women moving
into people management roles. A drop
of two per cent in executive and senior
management is due to restructuring
and turnover. For these purposes,
‘executive/senior management’ is
defined as key management personnel
and their direct reports and, regional
general managers and their direct
reports.
Percentage distribution
of employees by role
Male
86
84
80
76
90
66
Female
14
16
20
24
10
34
maternity leave. In the last year
81 per cent of maternity leavers
returned to work – 77 per cent full-time
and 23 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 opinion survey
feedback
Nufarm conducts the EOS 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.
This survey will run again in September
2014. The EOS provides valuable
feedback which allows us to track if
there are differences in the working
experience between men and women.
Diversity and inclusion 2015
In the 2015 year, Nufarm will ensure
that various policies, processes and
education seminars are in place to
actively encourage women into the
organisation and into management.
To this end, Nufarm has set the
following three key measurable
gender diversity objectives for
the upcoming reporting period:
1. Nufarm aims to make one of the
next two board appointments
a suitably qualified woman;
2. Nufarm will actively seek to have
at least two appropriately qualified
female candidates for all board,
executive, management and key
professional roles; and
One aspect of retaining women in
Nufarm is the ability to encourage
them back into the workforce after
3. Nufarm aims to annually improve the
percentage of female representation
in management roles.
These objectives are in addition
to the policies and practices which
ensure we encourage diversity and
inclusion across the business.
Evaluating board and board
committee performance
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 the board undertook
an annual internal survey of its
performance, the results of which
were used to monitor and improve
performance and identify ongoing
development opportunities to ensure
directors have a suitable knowledge
of the business.
In the current period, an independent
consultant completed a formal review
of the performance of the board and
board committees and a report outlining
the findings and recommendations of
the review, was presented to the board.
Evaluating the performance
of senior executives
As part of Nufarm’s annual remuneration
review, the performance of the senior
executive team is reviewed first by the
managing director, then the human
resources committee and then by the
board. 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 48 of this report.
NUFARM LIMITED ANNUAL REPORT 2014 | 25
CORPORATE GOVERNANCE CONTINUED
Board of directors
Tenure
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.
Profiles of each board member,
including terms in office, are on
pages 16 and 17 of this report.
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 has regard
to, and applies, the recommendations
and commentary in the ASX principles
concerning the independence of
directors.
At the date of this report, the majority
of 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).
Donald McGauchie has been a member
of the board for 10 years and chairman
of the board for four years. The board
unanimously continues to support
Donald as chairman, believing this to be
in the clear interest of all stakeholders.
Donald applies judgment independent
of management in all decision making.
He discharges his role with strong
commitment to considerations of
governance and disclosure.
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 nomination and governance
committee reviews the performance
of directors who seek to offer
themselves for re-election at the
company’s annual general meeting.
The company’s constitution requires
directors to submit themselves for
re-election at least every three years.
The nomination and governance
committee then recommends to
the board whether or not it should
continue to support the nomination
of the retiring directors.
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.
The Nufarm board has stipulated
that the role of the chairman and
chief executive officer may not be
filled by the same person.
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:
• 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 to ensure the board is
composed of directors who comprise
an appropriate mix of skills to provide
the necessary breadth and depth of
knowledge and experience to meet
the board’s responsibilities and
objectives as well as reviewing the
board to ensure it will be made up
of directors with a diversity of skills,
expertise, experience, backgrounds
and gender;
• 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;
• 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.
A copy of the nomination and
governance committee charter and a
summary of the policy and procedure
for director appointments are available
on the corporate governance section
of the company’s website.
In the current period, the nomination
and governance committee met on
three occasions.
26 | NUFARM LIMITED ANNUAL REPORT 2014
CORPORATE GOVERNANCE CONTINUED
Nufarm recognises the valuable
contribution made by each board
member to the effective running of
the company. When board positions
become available, the company takes
the opportunity to review the mix of
skills and experience on the board in
considering the skills and experience
that a new director should possess.
This analysis forms the basis of selection
criteria, which includes diversity, both
as to gender and experience.
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 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.
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.
To assist in providing appropriate
development opportunities for
continuing directors to develop and
maintain their skills and knowledge
of the company, each year, one of
the scheduled board meetings will
be held at one of the company’s
international locations allowing
directors to inspect the relevant
operation, meet local management,
customers and other stakeholders.
Furthermore, directors are also
provided with access to regional
general managers and key industry
speakers are scheduled to present
to the board.
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 to the chairman.
Acting ethically and responsibly
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 that it is necessary
to comment due to any perceived
major impact on the company, its
business or any of its stakeholders.
We require all directors, senior
executives and employees to adopt
standards of business conduct that
are ethical and which comply with the
law. Where there are no legislative
requirements, the company develops
policy statements to ensure appropriate
standards are maintained.
The company’s code of conduct is
available on the corporate governance
section of the company’s website.
Safeguard integrity in
corporate reporting
Financial reports
The company has put in place a
structure of review and authorisation
to independently verify and safeguard
the integrity of its financial reporting.
The audit and risk committee reviews the
company’s financial statements and the
independence of the external auditors.
Audit and risk committee
Frank Ford is chairman of the board
audit and risk committee and Anne
Brennan and Gordon Davis are
members of the committee. The
committee comprises independent
non-executive directors and is
chaired by an independent director.
Details of attendances at meetings
of the audit and risk committee are
set out on page 34 of this report.
Frank Ford has a master of taxation
from the University of Melbourne,
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 approximately
35 years. During that period, he was
also a member of the Deloitte global
board, global governance committee
and national management committee.
Frank is also a director of Toll Holdings
Limited, Citigroup Pty Limited and
Tarrawarra Museum of Art Limited.
Anne Brennan has a bachelor of
commerce (hons) from University College
Galway and she is a fellow of both the
Institute of Chartered Accountants in
Australia and the Australian Institute
of Company Directors.
NUFARM LIMITED ANNUAL REPORT 2014 | 27
CORPORATE GOVERNANCE CONTINUED
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.
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;
• 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 lead partner can again be
involved in the company’s audit.
In the current period the audit and risk
committee met on four occasions.
Prior to the approval of the financial
statements for any financial period,
the board receives a declaration from
the CEO and CFO that:
• the financial records of the company
have been properly maintained;
• the financial statements comply with
the appropriate accounting standards
and give a true and fair view of the
company’s financial position and
performance; and
• that opinion has been formed on
the basis of a sound system of risk
management and internal control
which operates effectively.
A summary of the disclosure policy is
available on the corporate governance
section of the company’s website.
Rights of shareholders
Information about Nufarm, including
copies of:
• relevant market announcements
and related information; and
• presentations made to analysts
and investor briefings,
are immediately made available on the
company’s website: www.nufarm.com.
The corporate governance section
of the website contains all relevant
governance information.
Communication
Nufarm is committed to timely,
open and effective communication
with its shareholders and the general
investment community.
Nufarm values a direct, two-way
dialogue with shareholders and the
company believes it is important not
only to provide relevant information
as quickly and efficiently as possible,
but also to listen and understand
shareholder’s perspectives and
respond to their feedback. Nufarm’s
communication policy aims to:
The company’s external auditor attends
the company’s AGM and is available
to answer questions for shareholders
relevant to the audit.
• ensure that shareholders and the
financial markets are provided with
full and timely information about
our activities;
Disclosure
The company has a detailed written
policy and procedure to ensure
compliance with both the ASX Listing
Rules and the Corporations Act. This
policy is reviewed regularly with the
company’s legal advisers and was most
recently amended in February 2014.
The company secretary prepares a
schedule of compliance and disclosure
matters for directors to consider at
each board meeting.
• comply with its continuous disclosure
obligations contained in applicable
listing rules and the Corporations
Act in Australia as well as industry
guidelines such as the Australasian
Investor Relations Association’s Best
Practice Guidelines for Communication
between Listed Entities and the
Investment Community;
• ensure equality of access to briefings,
presentations and meetings for
shareholders, analysts and media; and
• encourage attendance and voting
at shareholder meetings.
Anne will be standing down as a
director and deputy chairperson of
Echo Entertainment Group Limited
after that company’s 2014 annual
general meeting. Anne is a director
of Myer Limited, Charter Hall Group,
Argo Investments Ltd, Rabobank
Australia Limited and Rabobank
New Zealand Limited.
Gordon Davis has a bachelor of forest
science (hons), master of agricultural
science and he also 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. A copy of
the audit and risk committee charter
and the committee’s duties is available
on the corporate governance section
of the company’s website.
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 and risk
committee approval.
28 | NUFARM LIMITED ANNUAL REPORT 2014
CORPORATE GOVERNANCE CONTINUED
Information is communicated
to shareholders:
Information, including in relation to:
• the nature of the business of the
• through the distribution of half year
meeting;
Full details of the members of the
audit and risk committee are set
out on pages 27 and 28 of this report.
and annual reports;
• whenever there are other significant
developments to report, by electronic
means as well as by post; and
• when shareholders are provided with
notice of the company’s AGM and
other general meetings.
Nufarm has a dedicated investor
centre on the company’s website
which contains:
• all market announcements and
related information which is posted
immediately after release to the ASX;
• a calendar of events relating to
shareholders;
• archived presentations made at the
AGM and analyst and media briefings;
• notice of annual general meeting
and explanatory notes;
• archived half year and annual reports;
• ASX announcements and financial
results for at least the last three years;
and
• the company’s share price.
Management remains accessible to
shareholders, analysts, fund managers
and others with a potential interest
in the company. Communications
with external stakeholders are
coordinated via a central contact
point within the company.
Shareholders are encouraged to
attend and participate at general
meetings. To facilitate this, meetings
will be held during normal business
hours and at a place convenient for
the greatest possible number of
shareholders to attend.
The full text of notices and
accompanying materials will
appear on the company’s website.
• conflicts of interest;
• voting restrictions; and
• directors’ recommendations,
will be presented in a clear and
concise manner designed to provide
shareholders and the market with
full and accurate information. Proxy
forms will be provided in order to
enable shareholders unable to attend
the meeting to vote on the resolutions.
Nufarm encourages its shareholders
to receive communications from, and
to send communications to it and its
share registry, electronically.
Nufarm’s formal communications policy
is available on the corporate governance
section of the company’s website.
Identifying and managing risk
The board is committed to identifying,
assessing, monitoring and managing
its material business risks. To that end,
the board has implemented a sound
risk management framework which it
reviews at least annually to ensure its
effectiveness.
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
and primarily to its audit and risk
committee which is chaired by an
independent director. The audit
and risk committee’s responsibilities
include providing an oversight of the
effectiveness of Nufarm’s enterprise-
wide risk management and internal
control framework.
In the current period the audit and risk
committee met on four occasions.
A copy of the audit and risk committee
charter and its duties is available on
the corporate governance section of
the company’s website.
The company’s risk management
framework, policies and procedures
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 and are 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 expands.
Nufarm’s group risk management
department, led by the general
manager global risk and assurance,
manages the implementation of this
framework across the group. Detailed
risk profiles for key operational
business units have been developed.
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 LIMITED ANNUAL REPORT 2014 | 29
CORPORATE GOVERNANCE CONTINUED
The audit and risk committee charter
requires the committee and the general
manager global risk and assurance to
review, at least annually, the group’s
risk management framework. In the
current reporting period, the audit
and risk committee reviewed the
effectiveness of the company’s risk
management framework to ensure
that the framework remains sound.
Nufarm’s internal audit function is
headed by the general manager global
risk and assurance who reports at each
audit and risk committee meeting on the
implementation and management of
the enterprise risk management policy.
As explained in the audit and risk
committee charter, the internal audit
is designed to:
• 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 the 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.
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 and
Peter Margin and Toshikazu Takasaki
are members of the committee.
The committee has a majority of
independent directors.
All board committees report to the
board on risk management issues
within their area of responsibility.
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 publishes an annual
sustainability report which reviews
economic, environmental and
sustainability risks. A copy of the
2014 sustainability report is available
on the company’s website.
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 48 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, a copy
of which is available on the corporate
governance section of the company’s
website, includes a 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 practices.
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.
30 | NUFARM LIMITED ANNUAL REPORT 2014
CORPORATE GOVERNANCE CONTINUED
In the current period the human
resources committee met on five
occasions.
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 48 of this report.
The rules of the short term incentive
plan (‘STI plan’) provide that participants
are not permitted to hedge any shares
issued to them under the STI plan
whilst those shares are held in trust.
Clause 9 of the company’s security
trading policy sets out the process
by which key management personnel
may seek approval to enter into
a margin loan or other security
arrangement in respect of Nufarm’s
securities. A copy of the security
trading policy is available on the
corporate governance section of
the company’s website.
A copy of the human resources
committee charter is available on
the corporate governance section
of the company’s website.
NUFARM LIMITED ANNUAL REPORT 2014 | 31
FINANCIAL REPORT
32 | NUFARM LIMITED ANNUAL REPORT 2014
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 2014 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
Dr WB Goodfellow
PM Margin
T Takasaki
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 16 and 17.
Company secretary
The company secretary is R Heath.
Details of the qualifications and experience of the company secretary are set 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 Goodfellow1, 2
DG McGauchie1
PM Margin
DJ Rathbone
T Takasaki
Nufarm Ltd
ordinary shares
10,000
40,000
10,000
1,146,138
46,239
2,458
3,368,241
–
Nufarm Finance (NZ) Ltd
step-up securities
–
–
–
48,423
–
–
1,500
–
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 (123,171 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 2014 | 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
and risk
Committees
Human
resources
Nomination
and governance
AB Brennan
GR Davis
FA Ford
Dr WB Goodfellow
DG McGauchie
PM Margin
DJ Rathbone
T Takasaki
Meetings
held1
10
10
10
10
10
10
10
10
Meetings
attended
9
10
10
10
10
10
10
10
Meetings
held1
4
4
4
–
–
–
–
–
Meetings
attended
4
4
4
–
–
–
–
–
Meetings
held1
–
5
–
–
5
5
–
–
Meetings
attended
–
5
–
–
5
5
–
–
Meetings
held1
–
–
3
3
3
–
–
–
Meetings
attended
–
–
3
3
3
–
–
–
Health safety
and environment
Meetings
held1
2
3
–
–
–
3
–
1
Meetings
attended
2
3
–
–
–
3
–
1
1. 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 20 and 21
of the financial report
Nufarm employs approximately 3,445 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 2014 is $37.7 million. The comparable figure
for the 12 months to 31 July 2013 was $81.0 million.
Dividends
The following dividends have been paid declared or recommended since the end of the preceding financial year.
The final dividend for 2012–2013 of five cents paid 15 November 2013.
The interim dividend for 2013–2014 of three cents paid 9 May 2014.
The final dividend for 2013–2014 of five cents as declared and recommended by the directors is payable 14 November 2014.
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 2013 – 15 October 2013
at the rate of 6.9525% per annum paid 15 October 2013
Distribution for the period 15 October 2013 – 15 April 2014
at the rate of 6.5167% paid 15 April 2014
$000
13,166
7,912
$000
8,749
8,156
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 13.
34 | NUFARM LIMITED ANNUAL REPORT 2014
DIRECTORS’ REPORT continued
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 13.
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 20 and 21 of the financial report.
Events subsequent to reporting date
On 23 September 2014, the directors declared a final unfranked dividend of five cents per share payable 14 November 2014.
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 14 to 15. 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 40 of the financial report.
The board has considered the non-audit services provided during the year by the auditor and, in accordance with written
advice provided by resolution of the audit and risk 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 and risk 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 49 and forms part of the directors’ report for the financial
year ended 31 July 2014.
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 2014 | 35
DIRECTORS’ REPORT continued
Remuneration report (audited)
A message from the chairman of the human resources committee (unaudited)
Nufarm’s remuneration structure is designed to support our strategic objectives and help drive sustainable value creation.
The capabilities and commitment of our management and employees make a critical contribution to the success of the
company and our remuneration policies are based on principles that encourage and reward performance and outcomes.
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 2014. The report details remuneration information as it applies
to Nufarm non-executive directors (NED) and Nufarm’s executives (referred to as key management personnel (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
Key management personnel disclosed in this report
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).
Non-executive directors
DG McGauchie AO (Chairman)
DJ Rathbone AM (Managing director and chief executive officer)
GR Davis
Dr WB Goodfellow
PM Margin
AB Brennan
FA Ford (appointed 10 October 2012)
GA Hounsell (retired 8 October 2012)
T Takasaki (appointed 6 December 2012)
Other key management personnel
Executives
BF Benson
P Binfield
BJ Croft
R Heath
G Hunt
DA Mellody
MJ Pointon
E Prado2
DA Pullan1
RG Reis
Title
Group executive, marketing and portfolio development
Chief financial officer
Group executive, people and performance
Group executive, corporate services
Group executive, commercial operations
Group executive, procurement and commercial services
Group executive, innovation and development
Group executive, manufacturing and supply chain
Group executive, operations
Group executive, corporate strategy and external affairs
1. DA Pullan resigned as group executive, operations with effect from 31 July 2013.
2. E Prado was appointed as group executive, manufacturing with effect from 1 July 2013.
36 | NUFARM LIMITED ANNUAL REPORT 2014
DIRECTORS’ REPORT continued
Remuneration governance
The human resources 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 2014 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 did not seek external executive remuneration benchmarking data for the 2014 year but
relied on general information on executive salary movements to inform the committee’s recommendations to the board
in regard to KMP salaries.
The board considered this information in light of company performance, changes during the year to the scope and scale of
executive roles, individual performance and the motivation and retention of key individuals, in making its remuneration decisions.
Principles of remuneration for the period ended 31 July 2014
The company’s remuneration policy for the period ended 31 July 2014 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.
NUFARM LIMITED ANNUAL REPORT 2014 | 37
DIRECTORS’ REPORT continued
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 2014
year the financial measures remained unchanged with the board determining that underlying net profit after tax (NPAT) and
average net working capital (ANWC)/sales are aligned with shareholder interests and rewards and also reflect the focus within
the business on both profit and balance sheet performance.
In 2014 the STI, which rewards annual performance, was delivered through a combination of cash incentive and shares which
were retained and will vest in 2016 on the second anniversary.
Who participates in the STI?
When are awards made?
What measures are used
in the plan?
Plan participants include KMP and senior managers globally.
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 2014.
80% of the potential was based on
underlying net profit after tax (NPAT)
and average net working capital
(ANWC)/sales.
This structure reflects Nufarm’s strong focus on the use of capital and ensures alignment
of reward to business outcomes and shareholder returns.
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?
The board has resolved to change the percentage allocation for the managing director
in the 2015 year from 80/20 financial to strategic to 70/30 to highlight the importance
of effective competitive strategy to the sustainable performance of the business.
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
85
Percentage of STI target award
realised
Straight-line vesting between 85% and budget and between budget (target) and 120%
budget achievement (stretch).
25
nil
100 120 Underlying NPAT
110 ANWC/Sales
150
100
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.
38 | NUFARM LIMITED ANNUAL REPORT 2014
DIRECTORS’ REPORT continued
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 an 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).
The plan rules provide the flexibility to use a number of different instruments provided
they comply with local regulations and sound practice. Previous awards were 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.
The 2014 allocations will be in indeterminate rights. At the time of vesting the board will
determine if the rights convert to ordinary shares or cash or other instruments which may be
in use at the time. These rights will be valued using the same methodology as employed in
previous years. The change has no impact on the measurement or on the likelihood of vesting.
When are the awards made? Under the plan, Australian LTIP participants receive an annual award of rights as soon as
How are the number
of rights calculated?
practical after the announcement of results for the preceding year.
The number of rights for previous years of the plan were calculated at ‘face value’ using the
five-day volume weighted average price (VWAP) post the announcement of annual results;
When do the awards vest?
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?
• the board reviews efficacy of a fair value methodology annually and the board resolved
to retain ‘face value’ for the 2014 awards; and
• to be eligible the LTIP participant needs to be employed by Nufarm on the vesting date.
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.
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 & 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.
NUFARM LIMITED ANNUAL REPORT 2014 | 39
DIRECTORS’ REPORT continued
What is the relative TSR
performance required
for vesting?
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
Proportion of TSR grant vesting
0%
50%
Straight-line vesting between 50% and 100%
100% vesting
How is the ROFE target set? ROFE objectives are set by the board at the beginning of each year. There is both a ‘target’
How is ROFE measured?
What ROFE result is required
for vesting?
What was the result for the
2014 year?
What happens if the awards
do not vest?
Is there a clawback provision
in the plan?
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 was 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%
Target %
10.0
10.9
10.0
10.3
Outcome %
10.4
2012
8.8
2013
9.1
2014
Cumulative three-year average
9.4
This means that the first award which matures in 2014 has not vested on either the ROFE or
the relative TSR and the rights have been forfeited. At this time the 2013 award is tracking
below the ROFE hurdle rate necessary to trigger vesting on this metric.
To the extent that the TSR and ROFE performance hurdles are not met at the end of the
three year performance period and full vesting is not achieved, performance will not be
re-tested and the award will lapse. The awards tested on the 31 July 2014 did not vest
and therefore the rights have lapsed.
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.
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 6.5 per cent. Percentage increases reflected company performance, changes in the scope and
responsibility of the role and individual performance.
• STI: based on an underlying NPAT result of $86.4 million, an ANWC/Sales result at 47.7 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.
40 | NUFARM LIMITED ANNUAL REPORT 2014
DIRECTORS’ REPORT continued
• The managing director’s incentive outcome for 2014 was a calculated on part achievement of financial results and part
achievement of strategic objectives.
• LTIP: the LTIP vests on the third anniversary. Neither the average ROFE result over the three years nor the TSR result for
triggered vesting and the rights for this first award have been forfeited. Results for 2013 and 2014 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
148.4
171.8
206.0
186.8
200.6
ANWC/
Sales**
%
N/A
N/A
45.3
46.8
47.7
Underlying
NPAT*
$M
N/A
N/A
115.4
83.2
86.4
ROFE
achieved
%
6.0
7.6
10.4
8.8
9.1
Closing
share price
31 July
$
3.82
4.34
5.47
4.50
4.35
Total
shareholder
return***
%
(62.7)
13.6
26.8
(16.5)
(1.7)
2010
2011
2012
2013
2014
*
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.
2014 STI outcomes
2014 STI potential
KMP
Doug Rathbone*
Paul Binfield
Elbert Prado
Brian Benson
Robert Reis
Greg Hunt
Dale Mellody
Mike Pointon
Bonita Croft
Rodney Heath
At target
$
1,687,140
322,740
206,400
520,905
455,211
289,405
390,902
286,272
245,072
239,009
At maximum
$
2,530,710
484,110
309,600
781,358
682,817
434,107
586,353
429,408
367,068
358,513
Total award as
a % of target
potential
24.6
33.6
33.6
33.6
33.6
33.6
33.6
33.6
33.6
33.6
Total award
$
414,216
108,284
69,250
174,771
152,730
97,100
131,153
96,048
82,224
80,190
* Deferred STI is retained in cash.
To be paid
in cash in
October 2014
$
165,686
54,142
34,625
87,385
76,365
48,550
65,576
48,024
41,112
40,095
Retained in
shares vesting on
2nd anniversary
31 July 2016
$
248,530
54,142
34,625
87,385
76,365
48,550
65,576
48,024
41,112
40,095
NUFARM LIMITED ANNUAL REPORT 2014 | 41
DIRECTORS’ REPORT continued
2014 LTIP allocations
KMP
Doug Rathbone
Paul Binfield
Elbert Prado
Brian Benson
Robert Reis
Greg Hunt
Dale Mellody
Mike Pointon
Bonita Croft
Rodney Heath
Value of award
$
811,125
257,940
165,121
154,857
137,943
231,950
118,444
98,569
74,257
72,420
Number of
performance
rights*
170,881
54,341
34,786
32,624
29,061
48,865
24,953
20,766
15,644
15,257
Grant date
5.12.2013
9.10.2013
9.10.2013
9.10.2013
9.10.2013
9.10.2013
9.10.2013
9.10.2013
9.10.2013
9.10.2013
Vesting
date
31.7.2016
31.7.2016
31.7.2016
31.7.2016
31.7.2016
31.7.2016
31.7.2016
31.7.2016
31.7.2016
31.7.2016
Fair value at grant date
TSR tranche
(50% of award)
$2.40
$2.48
$2.48
$2.48
$2.48
$2.48
$2.48
$2.48
$2.48
$2.48
ROFE tranche
(50% of award)
$4.10
$4.21
$4.21
$4.21
$4.21
$4.21
$4.21
$4.21
$4.21
$4.21
* Rights were valued at $4.7467 being the five-day VWAP post the announcement of 2013 annual results.
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 most 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.
42 | NUFARM LIMITED ANNUAL REPORT 2014
DIRECTORS’ REPORT continued
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 (e.g. 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.
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 (including
superannuation costs).
Set out below are details of the annual fees payable for the year ended 31 July 2014 (including superannuation costs).
These fees were effective from 1 February 2012. There was no change to fees during the 2014 year.
The total fees for the 2014 year remained within the approved cap. However, the board has determined that five years after
the last revision of the board fee cap it is appropriate to seek a 10 per cent increase to accommodate the possible addition
of another board member and cover a review of fees in February 2015.
Chairman1
General board
Audit and risk committee chair
Audit and risk committee member
Health, safety and environment committee chair
Health, safety and environment committee member
Human resources committee chair
Human resources committee member
Nominations committee chair
Nominations committee member
1. The chairman receives no fees as a member of any committee.
Fees applicable from 1 August 2013 to 31 July 2014 $
346,500
141,750
28,875
11,550
17,325
5,775
23,100
8,663
11,550
1,444 per meeting
Board fees are reviewed every 18 months. These fees will be reviewed again in February 2015.
NUFARM LIMITED ANNUAL REPORT 2014 | 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 WB Goodfellow
GA Hounsell3
DG McGauchie
P Margin
F Ford2
T Takasaki4
Sub total non-executive directors’ remuneration
Executive director DJ Rathbone
Total directors’ remuneration
Group executives
PA Binfield
BF Benson7
GA Hunt
RG Reis
DA Mellody
MJ Pointon
BJ Croft
R Heath
E Prado6
DA Pullan5
Sub total – total executives’ remuneration
Total directors’ and executives’ remuneration
Short term
Salary and fees
$
Cash bonus
(vested)
$
Non-
monetary
benefits
$
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
143,301
137,728
162,988
155,228
132,801
126,478
–
27,841
315,000
300,000
155,114
147,728
159,051
122,387
130,718
80,717
1,198,973
1,098,107
1,581,554
1,522,303
2,780,527
2,620,410
677,492
639,588
753,818
682,937
606,730
587,303
657,587
610,707
561,743
498,339
410,026
346,351
333,042
324,974
290,654
281,498
443,055
55,078
–
778,558
4,734,147
4,805,333
7,514,674
7,425,743
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
440,339
840,247
440,339
840,247
54,141
51,709
87,385
83,458
48,550
46,372
76,365
72,940
65,576
62,629
48,024
45,866
41,112
39,265
40,095
38,293
34,625
–
–
87,252
495,873
527,784
936,212
1,368,031
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
55,027
47,172
55,027
47,172
–
–
16,557
37,638
8,636
14,160
22,199
43,511
16,479
35,219
18,381
35,416
43,207
33,519
34,097
32,746
57,378
–
–
–
216,934
232,209
271,961
279,381
Total
$
143,301
137,728
162,988
155,228
132,801
126,478
–
27,841
315,000
300,000
155,114
147,728
159,051
122,387
130,718
80,717
1,198,973
1,098,107
2,076,920
2,409,722
3,275,893
3,507,829
731,633
691,297
857,760
804,033
663,916
647,835
756,151
727,158
643,798
596,187
476,431
427,633
417,361
397,758
364,846
352,537
535,058
55,078
–
865,810
5,446,954
5,565,326
8,722,847
9,073,155
1. Represents total remuneration in the financial year.
2. F Ford appointed as a director 10 October 2012.
3. GA Hounsell retired as a director on 8 October 2012.
4. T Takasaki appointed as a director 6 December 2012.
5. 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.
6. E Prado was appointed to the role of group executive manufacturing and supply chain on 1 July 2013.
7. BF Benson – other long term includes partial payout of annual leave accrued.
Note: KMP were granted increases in fixed remuneration and short term incentive potential of between three per cent and 6.5 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 2014
Post-
employment
Share-based
payments
Other
long term
Superannuation
$
Termination
benefits
Equity
settled
Total1
Total
$
remuneration
Percentage of
Value of options
remuneration
performance-
based
%
as a proportion
of total
remuneration
%
14,330
13,772
16,299
15,522
13,280
12,647
–
2,784
31,500
30,000
15,511
14,772
15,905
12,238
13,071
8,071
119,896
109,806
33,416
22,341
153,312
132,147
24,650
23,606
24,850
23,725
25,832
22,917
24,850
24,000
24,175
24,150
24,850
24,000
35,000
25,833
34,017
24,833
23,180
2,040
–
30,828
241,404
225,932
394,716
358,079
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
192,602
439,683
192,602
439,683
126,562
175,934
141,108
201,346
112,038
162,636
124,230
175,405
106,058
150,335
82,320
109,715
66,792
93,820
65,223
92,085
43,441
–
–
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
799,000
799,000
799,000
210,500
867,772
1,371,776
1,060,374
1,811,459
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
75,383
94,909
75,383
94,909
229,130
25,364
23,266
29,644
5,588
17,265
10,992
15,080
17,101
18,009
286,077
105,362
361,460
200,271
157,631
151,500
179,287
170,750
146,081
139,125
–
30,625
346,500
330,000
170,625
162,500
174,956
134,625
143,789
88,788
1,318,869
1,207,913
2,378,321
2,966,655
3,697,190
4,174,568
882,845
890,837
1,252,848
1,054,468
801,786
833,388
928,497
956,207
779,619
787,937
594,593
576,428
519,153
517,411
481,187
487,464
601,679
57,118
–
1,906,138
6,842,207
8,067,396
10,539,397
12,241,964
27
43
20
26
18
27
20
25
22
26
22
27
22
27
21
26
22
27
13
0
0
16
8
15
8
13
13
3
7
8
4
6
4
7
5
7
4
6
4
7
8
0
0
4
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.
Post-
employment
Share-based
payments
Other
long term
Total1
DIRECTORS’ REPORT continued
Superannuation
$
Termination
benefits
$
14,330
13,772
16,299
15,522
13,280
12,647
–
2,784
31,500
30,000
15,511
14,772
15,905
12,238
13,071
8,071
119,896
109,806
33,416
22,341
153,312
132,147
24,650
23,606
24,850
23,725
25,832
22,917
24,850
24,000
24,175
24,150
24,850
24,000
35,000
25,833
34,017
24,833
23,180
2,040
–
30,828
241,404
225,932
394,716
358,079
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
799,000
–
799,000
–
799,000
Equity
settled
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
192,602
439,683
192,602
439,683
126,562
175,934
141,108
201,346
112,038
162,636
124,230
175,405
106,058
150,335
82,320
109,715
66,792
93,820
65,223
92,085
43,441
–
–
210,500
867,772
1,371,776
1,060,374
1,811,459
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
75,383
94,909
75,383
94,909
–
–
229,130
25,364
–
–
23,266
29,644
5,588
17,265
10,992
15,080
–
–
17,101
18,009
–
–
–
–
286,077
105,362
361,460
200,271
Total
remuneration
$
Percentage of
remuneration
performance-
based
%
Value of options
as a proportion
of total
remuneration
%
157,631
151,500
179,287
170,750
146,081
139,125
–
30,625
346,500
330,000
170,625
162,500
174,956
134,625
143,789
88,788
1,318,869
1,207,913
2,378,321
2,966,655
3,697,190
4,174,568
882,845
890,837
1,252,848
1,054,468
801,786
833,388
928,497
956,207
779,619
787,937
594,593
576,428
519,153
517,411
481,187
487,464
601,679
57,118
–
1,906,138
6,842,207
8,067,396
10,539,397
12,241,964
27
43
20
26
18
27
20
25
22
26
22
27
22
27
21
26
22
27
13
0
0
16
8
15
8
13
3
7
8
13
4
6
4
7
5
7
4
6
4
7
8
0
0
4
NUFARM LIMITED ANNUAL REPORT 2014 | 45
In AUD
Directors’ non-executive
AB Brennan
GR Davis
Dr WB Goodfellow
GA Hounsell3
DG McGauchie
P Margin
F Ford2
T Takasaki4
Sub total non-executive directors’ remuneration
Executive director DJ Rathbone
Total directors’ remuneration
Group executives
PA Binfield
BF Benson7
GA Hunt
RG Reis
DA Mellody
MJ Pointon
BJ Croft
R Heath
E Prado6
DA Pullan5
Short term
Cash bonus
(vested)
Non-
monetary
benefits
Salary and fees
$
143,301
137,728
162,988
155,228
132,801
126,478
–
27,841
315,000
300,000
155,114
147,728
159,051
122,387
130,718
80,717
1,198,973
1,098,107
1,581,554
1,522,303
2,780,527
2,620,410
677,492
639,588
753,818
682,937
606,730
587,303
657,587
610,707
561,743
498,339
410,026
346,351
333,042
324,974
290,654
281,498
443,055
55,078
–
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
440,339
840,247
440,339
840,247
54,141
51,709
87,385
83,458
48,550
46,372
76,365
72,940
65,576
62,629
48,024
45,866
41,112
39,265
40,095
38,293
34,625
–
–
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
55,027
47,172
55,027
47,172
–
–
16,557
37,638
8,636
14,160
22,199
43,511
16,479
35,219
18,381
35,416
43,207
33,519
34,097
32,746
57,378
–
–
–
216,934
232,209
271,961
279,381
Total
$
143,301
137,728
162,988
155,228
132,801
126,478
–
27,841
315,000
300,000
155,114
147,728
159,051
122,387
130,718
80,717
1,198,973
1,098,107
2,076,920
2,409,722
3,275,893
3,507,829
731,633
691,297
857,760
804,033
663,916
647,835
756,151
727,158
643,798
596,187
476,431
427,633
417,361
397,758
364,846
352,537
535,058
55,078
–
865,810
5,446,954
5,565,326
8,722,847
9,073,155
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. GA Hounsell retired as a director on 8 October 2012.
4. T Takasaki appointed as a director 6 December 2012.
778,558
4,734,147
4,805,333
7,514,674
7,425,743
87,252
495,873
527,784
936,212
1,368,031
5. 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.
6. E Prado was appointed to the role of group executive manufacturing and supply chain on 1 July 2013.
7. BF Benson – other long term includes partial payout of annual leave accrued.
Note: KMP were granted increases in fixed remuneration and short term incentive potential of between three per cent and 6.5 per cent. Percentage increases
reflected changes in the scope and responsibility of the role, individual performance and alignment to market comparators.
DIRECTORS’ REPORT continued
Equity instruments held by key management personnel
The following tables show the number of:
• options/performance rights over ordinary shares in the company;
• right to deferred shares granted under the STI scheme;
• shares in the company; and
that were held during the financial year by key management personnel of the group, including their close family members
and entities related to them.
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.
Options/rights over ordinary shares in Nufarm Ltd
Scheme
Balance
at 1 August
2013
Granted as
remuneration Exercised
Net
change
other(d)
Balance
at 31 July
2014(e)
Vested
during
2014
Vested
at 31 July
2014(a)
Value at
date of
forfeiture(d)
Executive director
DJ Rathbone(b)
LTI performance
315,031
170,881
–
(180,749)
305,163
–
670,579
Executives
BF Benson
P Binfield
BJ Croft
R Heath
G Hunt
DA Mellody
MJ Pointon
E Prado
RG Reis
Total
Total
LTI performance
STI deferred(c)
LTI performance
STI deferred(c)
LTI performance
STI deferred(c)
LTI performance
STI deferred(c)
LTI performance
STI deferred(c)
LTI performance
STI deferred(c)
LTI performance
STI deferred(c)
LTI performance
STI deferred(c)
LTI performance
STI deferred(c)
LTI performance
STI deferred(c)
60,302
21,202
97,288
9,312
28,298
9,790
27,744
19,274
90,876
11,776
45,872
15,602
34,611
11,014
–
–
52,850
18,357
752,872
116,327
869,199
(a) All options/rights that are vested are exercisable.
(b) DJ Rathbone’s deferred STI is deferred in cash.
–
(34,740)
58,186
(21,202)
–
17,582
21,202
–
(54,710)
(9,312)
–
–
(16,040)
96,919
10,894
27,902
–
9,312
–
(9,790)
–
8,272
9,790
–
–
–
–
–
(15,790)
–
(52,588)
–
(26,320)
27,211
27,341
87,153
21,545
44,505
–
–
–
34,786
–
(30,080)
51,831
–
–
–
(15,602)
–
13,194
15,602
–
(18,340)
37,037
–
9,663
(11,014)
9,663
11,014
32,624
17,582
54,341
10,894
15,644
8,272
15,257
8,067
48,865
9,769
24,953
13,194
20,766
34,786
–
29,061
15,366
447,178
–
–
–
–
–
–
–
9,637
19,274
–
–
195,101
5,888
11,776
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
128,885
–
202,974
–
59,508
–
58,581
–
–
97,647
–
68,041
–
–
–
111,597
1,592,914
(18,357)
–
15,366
18,357
–
(429,357)
770,693
–
92,807
(85,277)
–
123,857
100,802
31,050
–
539,985
(85,277)
(429,357)
894,550
100,802
31,050
1,592,914
(c) The grant date fair value of deferred shares granted as remuneration in 2014 was $4.75. One hundred per cent of STI deferred shares available to vest in 2014
vested as the necessary service condition was satisfied. One hundred per cent of non-vested STI deferred shares are due to vest in 2015.
(d) LTI performance rights forfeited during 2014 are disclosed in column ‘net change other’. One hundred per cent of rights due to vest in 2014 were forfeited.
The value of LTI performance rights forfeited is expressed in the table above using the grant date fair value of the rights determined in accordance with AASB
2 Share-based payments. The value of the rights forfeited calculated by applying the share price of the company upon forfeiture of $4.35 was $1,867,703.
(e) With the exception of E Prado, 44 per cent of total LTI performance rights held by KMPs are due to vest in 2015, with the balance due to vest in 2016.
One hundred per cent of LTI performance rights held by E Prado are due to vest in 2016.
46 | NUFARM LIMITED ANNUAL REPORT 2014
DIRECTORS’ REPORT continued
Shares held in Nufarm Ltd
Directors
DG McGauchie
DJ Rathbone
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)
Note
1
4
1, 2
1, 3
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)
RG Reis
3
Balance
at 1 August
2013
46,239
11,726,031
10,000
40,000
–
1,143,416
–
2,458
–
91,985
39,312
45,882
218,300
10,000
32,375
48,306
–
–
150,168
Total
13,604,472
Granted as
remuneration
On exercise
of rights
Net
change
other
Balance
at 31 July
2014
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(8,357,790)
–
–
10,000
2,722
–
–
–
46,239
3,368,241
10,000
40,000
10,000
1,146,138
–
2,458
–
21,202
9,312
9,790
–
–
15,602
11,014
–
–
18,357
–
26,000
(9,790)
–
–
(9,671)
–
–
–
–
113,187
74,624
45,882
218,300
10,000
38,306
59,320
–
–
168,525
85,277
(8,338,529)
5,351,220
1. The shareholdings of Dr WB Goodfellow and DG McGauchie 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 (123,171 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 has been removed under the ‘net change other’ column due to his retirement as a director. 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 2014 (2013: 1,500).
NUFARM LIMITED ANNUAL REPORT 2014 | 47
DIRECTORS’ REPORT continued
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.
Loans to key management personnel
There were no loans to key management personnel at 31 July 2014 (2013: nil).
Other key management personnel transactions with the company or its controlled entities
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 director’s interest
existing at year end.
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.
This report has been made in accordance with a resolution of directors.
DG McGauchie AO
Director
DJ Rathbone AM
Director
Melbourne
23 September 2014
48 | NUFARM LIMITED ANNUAL REPORT 2014
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 2014
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
23 September 2014
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 2014 | 49
INCOME STATEMENT
For the year ended 31 July 2014
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)
Net foreign exchange gains/(losses)
Net financing income
Financial expenses
Net financing costs
Profit/(loss) before income tax
Income tax benefit/(expense)
Consolidated
2014
$000
2013
$000
Note
2,622,704
(1,955,363)
667,341
2,277,292
(1,653,991)
623,301
7
19
10
10
10
10,882
(321,912)
(168,489)
(40,184)
2,208
149,846
5,050
(12,609)
(7,559)
(80,436)
(87,995)
20,677
(269,582)
(148,012)
(42,698)
(60)
183,626
5,491
(10,734)
(5,243)
(65,460)
(70,703)
61,851
112,923
11
(24,104)
(31,173)
Profit/(loss) for the period from continuing operations
37,747
81,750
Attributable to:
Equity holders of the company
Non-controlling interests
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.
37,707
40
80,999
751
37,747
81,750
30
30
9.6
9.6
25.5
25.4
50 | NUFARM LIMITED ANNUAL REPORT 2014
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 July 2014
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
2014
$000
37,747
2013
$000
81,750
(62,136)
(860)
10,314
166,767
(3,625)
(23,071)
(15,321)
(71)
(683)
252
Other comprehensive profit/(loss) for the period, net of income tax
(68,074)
139,640
Total comprehensive profit/(loss) for the period
(30,327)
221,390
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.
(30,367)
40
220,639
751
(30,327)
221,390
NUFARM LIMITED ANNUAL REPORT 2014 | 51
BALANCE SHEET
As at 31 July 2014
Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Current tax assets
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
Total non-current assets
TOTAL ASSETS
Current liabilities
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.
52 | NUFARM LIMITED ANNUAL REPORT 2014
Consolidated
2014
$000
2013
$000
Note
15
16
17
18
16
19
20
18
22
23
24
25
26
18
28
24
25
18
26
241,638
724,555
632,901
30,362
1,629,456
264,972
758,534
802,789
33,866
1,860,161
67,481
7,786
477
235,741
371,055
859,450
1,541,990
3,171,446
36,191
6,197
448
200,219
402,698
865,755
1,511,508
3,371,669
515,933
318,948
19,423
20,605
15,701
890,610
550,319
316,365
19,783
16,677
3,279
906,423
42,326
436,057
124,562
69,191
672,136
1,562,746
1,608,700
48,871
581,720
119,691
50,219
800,501
1,706,924
1,664,745
1,068,871
(248,573)
536,241
1,356,539
246,932
5,229
1,608,700
1,063,992
(198,670)
547,302
1,412,624
246,932
5,189
1,664,745
STATEMENT OF CASH FLOWS
For the year ended 31 July 2014
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
Material items
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
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
2014
$000
2013
$000
Note
2,698,423
(2,316,894)
381,529
5,050
254
(68,937)
(45,028)
(4,771)
268,097
2,464,521
(2,296,316)
168,205
5,491
73
(49,958)
(14,347)
(46,677)
62,787
6
38
689
2,088
(44,460)
–
(59,668)
(101,351)
1,036
12,630
(44,229)
(30,706)
(51,874)
(113,143)
(6,558)
910,991
(1,047,435)
(16,905)
(18,371)
(178,278)
(16,569)
1,244,168
(1,094,345)
(19,275)
(14,727)
99,252
(11,532)
264,972
(11,802)
241,638
48,896
191,317
24,759
264,972
15
NUFARM LIMITED ANNUAL REPORT 2014 | 53
STATEMENT OF CHANGES IN EQUITY
For the year ended 31 July 2014
Consolidated
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
1,059,522
Translation
reserve
$000
(363,410)
Capital profit
reserve
$000
33,627
Other
reserve
$000
2,868
Retained
earnings
$000
496,663
Nufarm step-up
Non-controlling
Total
$000
1,229,270
securities
$000
246,932
interest
$000
600
Total
equity
$000
1,476,802
–
–
–
–
–
–
–
–
3,494
–
976
–
–
–
–
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
Balance at 1 August 2013
1,063,992
(196,643)
33,627
(35,654)
547,302
1,412,624
246,932
5,189
1,664,745
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
Remeasurement of non-controlling interest option
–
–
–
–
–
–
–
–
2,172
–
2,707
–
–
–
–
(62,136)
–
–
–
(62,136)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Balance at 31 July 2014
1,068,871
(258,779)
33,627
(23,421)
536,241
1,356,539
246,932
5,229
1,608,700
The statement of changes in equity is to be read in conjunction with the attached notes.
54 | NUFARM LIMITED ANNUAL REPORT 2014
80,999
80,999
751
81,750
(3,625)
(23,071)
252
(26,444)
4,528
(3,494)
(13,112)
–
–
–
–
–
–
–
–
–
(860)
10,314
(71)
9,383
1,782
(2,172)
–
–
–
3,240
(683)
80,316
(15,703)
(13,974)
(15,321)
22,386
(21,078)
(12,369)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(683)
166,767
(3,625)
(23,071)
252
220,639
4,528
–
(15,703)
976
(13,974)
(13,112)
(15,321)
(62,136)
(860)
10,314
(71)
(30,367)
1,782
–
(21,078)
2,707
(12,369)
3,240
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
751
–
–
–
–
–
–
–
–
–
–
3,838
40
–
–
–
–
–
–
–
–
–
–
–
(683)
166,767
(3,625)
(23,071)
252
221,390
4,528
–
(15,703)
976
(13,974)
(9,274)
(15,321)
(62,136)
(860)
10,314
(71)
(30,327)
1,782
–
(21,078)
2,707
(12,369)
3,240
37,707
37,707
40
37,747
STATEMENT OF CHANGES IN EQUITY continued
For the year ended 31 July 2014
Share
capital
$000
1,059,522
Translation
Capital profit
reserve
$000
(363,410)
reserve
$000
33,627
Other
reserve
$000
2,868
Retained
earnings
$000
496,663
Total
$000
1,229,270
Nufarm step-up
securities
$000
246,932
Non-controlling
interest
$000
600
Total
equity
$000
1,476,802
–
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)
–
–
–
–
–
–
–
–
–
–
–
–
–
751
–
–
–
–
–
751
–
–
–
–
–
3,838
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
Balance at 1 August 2013
1,063,992
(196,643)
33,627
(35,654)
547,302
1,412,624
246,932
5,189
1,664,745
–
37,707
37,707
–
–
(860)
10,314
(71)
9,383
1,782
(2,172)
–
–
–
3,240
(15,321)
–
–
–
–
22,386
–
–
(21,078)
–
(12,369)
–
(15,321)
(62,136)
(860)
10,314
(71)
(30,367)
1,782
–
(21,078)
2,707
(12,369)
3,240
–
–
–
–
–
–
–
–
–
–
–
–
–
40
–
–
–
–
–
40
–
–
–
–
–
–
37,747
(15,321)
(62,136)
(860)
10,314
(71)
(30,327)
1,782
–
(21,078)
2,707
(12,369)
3,240
Consolidated
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
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
Remeasurement of non-controlling interest option
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,494
976
2,172
2,707
166,767
166,767
(62,136)
(62,136)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Balance at 31 July 2014
1,068,871
(258,779)
33,627
(23,421)
536,241
1,356,539
246,932
5,229
1,608,700
The statement of changes in equity is to be read in conjunction with the attached notes.
NUFARM LIMITED ANNUAL REPORT 2014 | 55
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 2014 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 23 September 2014.
(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 $530 million syndicated bank facility, entered into in December 2013,
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.
56 | NUFARM LIMITED ANNUAL REPORT 2014
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
Comparatives have been adjusted to present them on the same basis as current period figures.
3. Significant accounting policies
Except as described immediately below, the group’s accounting policies have been applied consistently to all periods
presented in these consolidated financial statements, and have been applied consistently by group entities.
The company has changed some of its accounting policies as the result of new or revised accounting standards that became
effective for the annual reporting period commencing on 1 July 2013. The affected policies and standards are:
• principles of consolidation: new standards AASB 10 Consolidated Financial Statements and AASB 11 Joint Arrangements; and
• accounting for employee benefits: revised AASB 119 Employee Benefits.
Other new standards that have been applied for the first time for the July 2014 annual report are AASB 12 Disclosure of
Interests in Other Entities, AASB 13 Fair Value Measurement, AASB 2012-2 Amendments to Australian Accounting Standards
– Disclosures – Offsetting Financial Assets and Financial Liabilities, AASB 2012-5 Amendments to Australian Accounting
Standards arising from Annual Improvements 2009-2011 Cycle and Recoverable Amount for Non-financial Assets –
Amendments to IAS 36(2013). These standards have introduced new disclosures for the annual report but did not
materially affect the entity’s accounting policies or any of the amounts recognised in the financial statements.
(i) Principles of consolidation – subsidiaries and joint arrangements
AASB 10 was issued in August 2011 and replaces the guidance on control and consolidation in AASB 127 Consolidated and
Separate Financial Statements and in Interpretation 112 Consolidation – Special Purpose Entities. Under the new principles,
the group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the
entity and has the ability to affect those returns through its power over the entity.
NUFARM LIMITED ANNUAL REPORT 2014 | 57
NOTES TO THE FINANCIAL STATEMENTS continued
3. Significant accounting policies (continued)
(i) Principles of consolidation – subsidiaries and joint arrangements (continued)
The group has reviewed its investments in other entities to assess whether the consolidation conclusion in relation to these
entities is different under AASB 10 than under AASB 127. No differences were found and therefore no adjustments to any
of the carrying amounts in the financial statements are required as a result of the adoption of AASB 10.
Under AASB 11 investments in joint arrangements are classified as either joint operations or joint ventures depending on the
contractual rights and obligations each investor has, rather than the legal structure of the joint arrangement. The group has
assessed the nature of its joint arrangements and determined to have joint ventures only.
The accounting for the group’s joint ventures has not changed as a result of the adoption of AASB 11. The group continues
to use the equity method to account for its interest in joint ventures. Under this method, the interests are initially recognised
in the consolidated balance sheet at cost and adjusted thereafter to recognise the group’s share of the post-acquisition profits
or losses and movements in other comprehensive income in profit or loss and other comprehensive income respectively.
(ii) Employee benefits
The adoption of the revised AASB 119 Employee Benefits resulted in two changes to the group’s accounting policy.
• All past service costs are now recognised immediately in profit or loss. Previously, past service costs were recognised on
a straight-line basis over the vesting period if the changes were conditional on the employees remaining in service for a
specified period of time (the vesting period). The impact of this change was immaterial.
• The group now determines the net interest expense (income) for the period on the net defined benefit liability (asset) by
applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the net
defined benefit liability (asset) at the beginning of the annual period, taking into account any changes in the net defined
benefit liability (asset) during the period as a result of contributions and benefit payments. Previously, the group determined
interest income on plan assets based on their long term rate of expected return. The impact on the income statement is
immaterial, the net impact on total comprehensive income is nil and there is also no adjustment to the amounts recognised
in the balance sheet from this change.
There are no other material impacts upon adoption of AASB 119.
(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.
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.
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.
58 | NUFARM LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS continued
3. Significant accounting policies (continued)
(a) Basis of consolidation (continued)
(ii) Non-controlling interests (NCI)
NCI are measured at their proportionate share of the acquiree’s identifiable net assets at the acquisition date.
When a written put option is established with non-controlling shareholders in an existing subsidiary, then the group will
recognise a liability for the present value of the exercise price of the option. When the NCI still has present access to the
returns associated with the underlying ownership interest, NCI continues to be recognised and accordingly the liability is
considered a transaction with owners and recognised via a reserve. Any changes in the carrying value of the put liability
over time is recognised directly in reserves.
(iii) Subsidiaries
Subsidiaries are entities controlled by the group. The group controls an entity when it is exposed to, or has rights to,
variable returns from its involvement with the entity and has the ability to affect those returns through its power over the
entity. 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.
(iv) Investments in equity accounted investees
The group’s interests in equity accounted investees comprise interests in associates and a joint venture. Associates are those
entities in which the group has significant influence, but not control or joint control, over the financial and operating policies.
A joint venture is an arrangement in which the group has joint control, whereby the group has rights to the net assets of the
arrangement, rather than rights to its assets and obligations for its liabilities.
Investments in associates and joint ventures 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 investees, after adjustments
to align the accounting policies with those of the group, from the date that significant influence of equity accounted 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.
(v) 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.
NUFARM LIMITED ANNUAL REPORT 2014 | 59
NOTES TO THE FINANCIAL STATEMENTS continued
3. Significant accounting policies (continued)
(b) Foreign currency (continued)
(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.
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.
60 | NUFARM LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS continued
3. Significant accounting policies (continued)
(c) Financial instruments (continued)
(i) Non-derivative financial assets (continued)
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 initially 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. This includes trade payables that represent liabilities for goods and services provided to the group prior to the
end of the year which are unpaid.
(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.
(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.
NUFARM LIMITED ANNUAL REPORT 2014 | 61
NOTES TO THE FINANCIAL STATEMENTS continued
3. Significant accounting policies (continued)
(c) Financial instruments (continued)
(iv) Derivative financial instruments, including hedge accounting (continued)
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.
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.
62 | NUFARM LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS continued
3. Significant accounting policies (continued)
(d) Property, plant and equipment (continued)
(i) Recognition and measurement (continued)
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
• computer equipment
5 years
3 years
Depreciation methods, useful lives and residual values are reassessed at each reporting date.
(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.
NUFARM LIMITED ANNUAL REPORT 2014 | 63
NOTES TO THE FINANCIAL STATEMENTS continued
3. Significant accounting policies (continued)
(e) Intangible assets (continued)
(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.
(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.
64 | NUFARM LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS continued
3. Significant accounting policies (continued)
(h) Impairment (continued)
(i) Non-derivative financial assets (continued)
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.
(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.
NUFARM LIMITED ANNUAL REPORT 2014 | 65
NOTES TO THE FINANCIAL STATEMENTS continued
3. Significant accounting policies (continued)
(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
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 the current and prior periods, discounting that amount and deducting the fair
value of any assets.
The calculation of defined benefit obligation is performed annually by a qualified actuary using the projected unit credit
method. When the calculation results in a potential asset for the group, the recognised asset is limited to the present value
of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan.
To calculate the present value economic benefits, consideration is given to any applicable minimum funding requirements.
Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan asset
(excluding interest) and the effect of the asset ceiling (if any, excluding interest) are recognised immediately in OCI. The
group determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the
discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then net-defined
benefit liability (asset), taking into account any changes in the net defined benefit liability (asset) during the period as a
result of contributions and benefit payments. Net interest expense and other expenses related to defined benefit plans
are recognised in profit and loss.
When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service
or the gain or loss on curtailment is recognised immediately in profit or loss. The group recognises gains and losses on the
settlement of a defined benefit plan when the settlement occurs.
(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.
(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.
66 | NUFARM LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS continued
3. Significant accounting policies (continued)
(j) Employee benefits
(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 that 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) that 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.
(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.
NUFARM LIMITED ANNUAL REPORT 2014 | 67
NOTES TO THE FINANCIAL STATEMENTS continued
3. Significant accounting policies (continued)
(m) Lease payments (continued)
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.
(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.
68 | NUFARM LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS continued
3. Significant accounting policies (continued)
(o) Income tax (continued)
(i) Tax consolidation (continued)
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 blow). 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
that 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 tax authority 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.
NUFARM LIMITED ANNUAL REPORT 2014 | 69
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 officer 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 officer 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 July 2013 and have not been applied in preparing these financial statements. None of these are expected to have a significant
effect on the consolidated financial statements of the group, except for AASB 9 Financial Instruments, which becomes
mandatory for the group’s 2016 consolidated financial statements and could change the classification and measurement
of financial assets. The group does not currently plan to adopt this standard early and the extent of the impact has not
been determined.
4. Determination of fair values
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.
70 | NUFARM LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS continued
4. Determination of fair values (continued)
(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.
(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 (VWAP) 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: 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 officer. 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 2014 | 71
NOTES TO THE FINANCIAL STATEMENTS continued
5. Operating segments (continued)
2014
Operating
segments
Revenue
Total segment revenue 605,761 140,885 555,521 513,596
Australia and
New Zealand
$000
Europe
$000
Asia
$000
Crop protection
North
America
$000
Seed
technologies Corporate
Group
South
America
$000
Total
$000
Global
$000
$000
Total
$000
662,512 2,478,275
144,429
– 2,622,704
Results
Underlying EBITDA(a)
Depreciation and
amortisation excluding
material items
Underlying EBIT(a)
53,869
22,418
89,629
35,879
75,286
277,081
41,963
(37,621)
281,423
(19,966)
33,903
(2,937) (33,209) (15,241)
20,638
56,420
19,481
(3,664)
71,622
(75,017)
202,064
(4,803)
37,160
(996)
(38,617)
(80,816)
200,607
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
(50,761)
–
(87,995)
61,851
Assets
Segment assets
Investment in associates
Total assets
Liabilities
Segment liabilities
Total liabilities
Other segment
information
Capital expenditure
417,599
–
417,599
85,878 753,554 442,360
–
1,993
91,287 755,547 442,360
5,409
645,914 2,345,305
7,402
645,914 2,352,707
–
316,316
384
316,700
502,039 3,163,660
7,786
502,039 3,171,446
–
134,764
134,764
98,342 186,768
98,342 186,768
56,022
56,022
133,211
133,211
609,107
609,107
31,307
31,307
922,332 1,562,746
922,332 1,562,746
12,834
5,102
37,675
13,979
7,175
76,765
16,900
–
93,665
(a) Underlying EBIT is earnings before net finance costs, taxation and material items. Underlying EBITDA is underlying EBIT, before depreciation, amortisation
and impairments.
72 | NUFARM LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS continued
5. Operating segments (continued)
2013
Operating
segments
Revenue
Total segment revenue
Australia and
New Zealand
$000
Crop protection
North
America
$000
Europe
$000
South
America
$000
Asia
$000
Seed
technologies Corporate
Group
Total
$000
Global
$000
$000
Total
$000
604,432 125,201 468,253
516,278
431,440 2,145,604
131,688
– 2,277,292
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
57,765
23,640
84,023
55,366
43,482
264,276
36,024
(39,511)
260,789
(22,413)
35,352
(4,060)
19,580
(26,778)
57,245
(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
Assets
Segment assets
Investment in associates
Total assets
Liabilities
Segment liabilities
Total liabilities
Other segment
information
Capital expenditure
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
(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 2014 | 73
NOTES TO THE FINANCIAL STATEMENTS continued
5. Operating segments (continued)
Geographical information
Australia
New Zealand
Asia
Europe
US
Rest of North America
Brazil
Rest of South America
Unallocated(b)
Total
Revenue by location
of customer
Non-current assets
by location
2014
$000
570,396
67,866
151,065
579,131
459,625
105,100
552,391
137,130
–
2,622,704
2013
$000
567,235
59,480
138,603
488,711
460,295
106,751
341,802
114,415
–
2,277,292
2014
$000
228,520
7,051
39,915
393,527
321,470
24,050
272,202
19,513
235,742
1,541,990
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
Australia/New Zealand asset rationalisation and restructure
Consolidated
Consolidated
2014
$000
Pre-tax
2014
$000
After-tax
2013
$000
Pre-tax
2013
$000
After-tax
–
(50,761)
(50,761)
–
(48,704)
(48,704)
(3,177)
–
(3,177)
(2,224)
–
(2,224)
Class action settlement
No class action settlement costs were incurred during the year ended 31 July 2014. During 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 were reported
as a material item.
Australia/New Zealand asset rationalisation and restructure
Asset rationalisation and restructure costs of $48.704 million (after tax) mainly relate to the rationalisation of Australian and
New Zealand manufacturing assets, whereby three manufacturing facilities will be closed and manufacturing consolidated.
The program has resulted in the rationalisation of under-utilised assets and an organisational restructure. Asset rationalisation
costs have only been tax benefited to the extent that it is foreseeable that the benefit will be utilised.
No material asset rationalisation and restructure costs were incurred during the year ended 31 July 2013.
74 | NUFARM LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS continued
6. Items of material income and expense (continued)
Material items are classified by function as follows:
Selling,
marketing and
distribution
expense
General and
administrative
expense
Research and
development
expense
Net
financing
costs
Cost of
sales
(33,612)
(33,612)
(7,322)
(7,322)
(8,674)
(8,674)
(1,153)
(1,153)
(33,612)
(7,322)
(8,674)
(1,153)
Total
Pre-tax
(50,761)
(50,761)
(50,761)
–
–
–
Selling,
marketing and
distribution
expense
–
–
Cost of
sales
–
–
General and
administrative
expense
(3,177)
(3,177)
Research and
development
expense
–
–
Net
financing
costs
–
–
Total
Pre-tax
(3,177)
(3,177)
–
–
(3,177)
–
–
(3,177)
Year ended 31 July 2014
$000
Australia/New Zealand asset
rationalisation and restructure
Total material items included
operating profit
Year ended 31 July 2013
$000
Class action settlement
Total material items included
operating profit
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
Consolidated
2014
$000
134
199
10,549
10,882
2013
$000
1
199
20,477
20,677
Consolidated
2014
$000
(80,816)
(5,693)
2013
$000
(73,986)
(5,773)
NUFARM LIMITED ANNUAL REPORT 2014 | 75
NOTES TO THE FINANCIAL STATEMENTS continued
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
Personnel expenses
Consolidated
2014
$000
(242,767)
(42,580)
(13,742)
(4,002)
(9,681)
(2,091)
(14,732)
(329,595)
2013
$000
(219,754)
(37,370)
(13,809)
(3,311)
(8,081)
(3,319)
–
(285,644)
The restructure expense relates to the rationalisation and restructure of the group’s Australian and New Zealand operations.
(No material restructure costs were incurred in the year ended 31 July 2013). These costs are included in material items
in note 6.
10. Finance income and expense
Financial income excluding foreign exchange gains/(losses)
Net foreign exchange gains/(losses)
Financial income
Interest expense – external
Interest expense – debt establishment transaction costs
Lease expense – finance charges
Financial expenses
Net financing costs
Consolidated
2014
$000
5,050
(12,609)
(7,559)
(67,527)
(11,129)
(1,780)
(80,436)
2013
$000
5,491
(10,734)
(5,243)
(54,537)
(9,447)
(1,476)
(65,460)
(87,995)
(70,703)
76 | NUFARM LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS continued
11. Income tax expense
Recognised in the income statement
Current tax expense
Current period
Expense upon derecognition of tax assets on material items
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
2014
$000
2013
$000
Note
24,275
12,961
(4,013)
33,223
(9,974)
(221)
1,076
(9,119)
29,383
–
(2,189)
27,194
3,446
(30)
563
3,979
Total income tax expense/(benefit) in income statement
24,104
31,173
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/(decrease) 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
Non-recognition of tax assets on material items
Settlement of Brazilian tax proceedings
Utilisation of tax losses on settlement of Brazilian tax proceedings
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
18
18
24,104
24,104
31,173
31,173
61,851
112,923
18,555
33,877
2,642
1,939
(221)
1,076
12,961
21,053
(21,053)
(4,349)
(1,747)
(2,739)
28,117
(4,013)
24,104
2,676
1,388
(30)
563
–
–
–
(2,838)
(382)
(1,892)
33,362
(2,189)
31,173
(4,536)
(4,536)
(4,970)
(4,970)
(4,052)
71
(3,981)
269
(252)
17
NUFARM LIMITED ANNUAL REPORT 2014 | 77
NOTES TO THE FINANCIAL STATEMENTS continued
12. Discontinued operations
There were no discontinued operations in 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
14. Acquisition of businesses and acquisition of non-controlling interests
Business acquisitions – 2014
There were no businesses acquired in the current period.
Business acquisitions – 2013
Consolidated
2014
$000
–
–
2013
$000
–
–
On 1 January 2013, the group purchased the turf and ornamental business of US-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 US. 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.
78 | NUFARM LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS continued
14. Acquisition of businesses and acquisition of non-controlling interests (continued)
Acquiree’s net assets at acquisition date
Cash and cash equivalents
Receivables
Inventory
Property, plant and equipment
Pre-acquistion intangibles assets
Other assets
Trade and other payables
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
Fair value on
acquisiton
2014
$000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Fair value on
acquisiton(a)
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
(a) There have been no adjustments to the provisional fair values reported at 31 July 2013.
Total goodwill of $nil (2013: $15,613,000) 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
There were no acquisition of non-controlling interest in the current or prior period.
15. Cash and cash equivalents
Bank balances
Call deposits
Cash and cash equivalents
Consolidated
2014
$000
194,121
47,517
241,638
2013
$000
230,750
34,222
264,972
NUFARM LIMITED ANNUAL REPORT 2014 | 79
NOTES TO THE FINANCIAL STATEMENTS continued
Consolidated
2014
$000
2013
$000
696,434
(26,591)
669,843
701,560
(24,172)
677,388
184
–
19,443
35,085
724,555
2,161
2,153
19,199
57,633
758,534
67,481
67,481
36,191
36,191
792,036
794,725
Consolidated
2014
$000
193,323
29,983
415,231
638,537
(5,636)
632,901
2013
$000
213,880
16,702
578,609
809,191
(6,402)
802,789
16. Trade and other receivables
Current
Trade receivables
Provision for impairment losses
Derivative financial instruments
Proceeds receivable from sale of businesses
Prepayments
Other receivables
Current receivables
Non-current
Other receivables
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
80 | NUFARM LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS continued
18. Tax assets and liabilities
Current tax assets and liabilities
The current tax asset for the group of $30,361,730 (2013: $33,865,619) 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 $20,604,868 (2013: $16,677,067) represents the amount of income taxes payable in
respect of current and prior financial periods.
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)
2014
$000
6,222
8,470
17,703
17,137
17,109
172,703
239,344
(3,603)
235,741
2013
$000
5,274
9,123
14,613
10,654
27,500
138,888
206,052
(5,833)
200,219
2014
$000
(10,516)
(102,089)
–
–
(15,560)
–
(128,165)
3,603
(124,562)
2013
$000
(11,808)
(98,113)
–
–
(15,603)
–
(125,524)
5,833
(119,691)
2014
$000
(4,294)
(93,619)
17,703
17,137
1,549
172,703
111,179
–
111,179
Movement in temporary differences during the year
Consolidated 2014
Property, plant and equipment
Intangibles assets
Employee benefits
Provisions
Other items
Tax value of losses carried forward
Consolidated 2013
Property, plant and equipment
Intangibles assets
Employee benefits
Provisions
Other items
Tax value of losses carried forward
Balance
31.07.13
$000
(6,534)
(88,990)
14,613
10,654
11,897
138,888
80,528
Recognised
in income
$000
2,201
(8,014)
(1,195)
6,903
(9,159)
18,383
9,119
Recognised
in equity
$000
–
–
4,052
–
(71)
–
3,981
Currency
adjustment
$000
39
3,385
233
(420)
(1,118)
(3,698)
(1,579)
Other
movement
$000
–
–
–
–
–
19,130
19,130
Balance
31.07.12
$000
(3,708)
(66,999)
14,265
25,951
12,955
103,346
85,810
Recognised
in income
$000
(571)
(10,671)
(668)
(15,852)
(3,946)
27,729
(3,979)
Recognised
in equity
$000
–
–
(269)
–
252
–
(17)
Currency
adjustment
$000
(2,255)
(10,836)
1,285
555
2,636
12,830
4,215
Other
movement
$000
–
(484)
–
–
–
(5,017)
(5,501)
2013
$000
(6,534)
(88,990)
14,613
10,654
11,897
138,888
80,528
–
80,528
Balance
31.07.14
$000
(4,294)
(93,619)
17,703
17,137
1,549
172,703
111,179
Balance
31.07.13
$000
(6,534)
(88,990)
14,613
10,654
11,897
138,888
80,528
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 $76.6 million (2013: $56.3 million).
The carrying value of this asset will continue to be assessed at each reporting date.
NUFARM LIMITED ANNUAL REPORT 2014 | 81
NOTES TO THE FINANCIAL STATEMENTS continued
18. Tax assets and liabilities (continued)
Deferred tax assets and liabilities (continued)
Unrecognised deferred tax liability
At 31 July 2014, a deferred tax liability of $25,743,684 (2013: $25,200,672) 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 2014, there are unrecognised tax losses and timing differences of $13,884,125 (2013: $29,590,667). These losses
do not have an expiry date.
During December 2013, the company elected to participate in a federal tax program instigated by the Brazilian government
that allows taxpayers to reduce their tax liabilities by offering discounts on claims (including penalties and interest). The company
elected to enter into the program and was able to offset the resulting tax liability by recognising previously unrecognised tax
assets. The amount of previously unrecognised deferred tax assets offset in this way was $21,053,467. Refer note 34.
19. Investments accounted for using the equity method
The group accounts for investments in associates and joint ventures using the equity method.
The group had the following individually immaterial associates and joint ventures during the year:
Nature of
relationship
Excel Crop Care Ltd Associate1
F&N joint ventures
Lotus Agrar GmbH
Others
Joint Ventures2
Joint Venture3
Associates4
Country
India
Europe
Germany
Balance date
of associate
31 March
31 December
31 December
Ownership and
voting interest
Carrying
amount
Share
of profit
2014
2014
$000
2013
14.69% 14.69% 5,409
50.00% 50.00% 1,142
851
50.00% 50.00%
384
7,786
2013
$000
3,882
506
1,486
323
6,197
2014
$000
2,081
651
(614)
90
2,208
2013
$000
796
(897)
–
41
(60)
1. Excel Crop Care Ltd is an agricultural chemicals manufacturer. Nufarm’s investment in Excel Crop Care Ltd is equity accounted due to Nufarm holding
14.69 per cent of voting rights in Excel Crop Care Ltd, the transactions undertaken between the parties and Nufarm’s ability to appoint two directors
to the board. The relationship extends to manufacturing and marketing collaborations and the sale/purchase of crop protection products.
2. F&N joint ventures are agricultural chemicals distributors. 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.
3. Lotus Agrar GmbH is a joint venture established in Germany to sell generic agrochemicals.
4. Aggregate of other individually immaterial associates.
The share of net profits has been derived from the latest management reports as at 31 July 2014 for the F&N joint ventures.
The Excel Crop Care share of net profits is from the 30 June 2014 management accounts.
82 | NUFARM LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS continued
20. Other investments
Investments – available-for-sale
Balance at the beginning of 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
Consolidated
2014
$000
–
–
–
–
477
477
2013
$000
5,568
(5,616)
48
–
448
448
Consolidated
2014
$000
–
–
2013
$000
–
–
NUFARM LIMITED ANNUAL REPORT 2014 | 83
NOTES TO THE FINANCIAL STATEMENTS continued
22. Property, plant and equipment
Consolidated 2014
Cost
Balance at 1 August 2013
Additions
Additions through business combinations
Disposals and write-offs
Other transfers
Exchange adjustment
Balance at 31 July 2014
Depreciation and impairment losses
Balance at 1 August 2013
Depreciation charge for the year
Additions through business combinations
Impairment loss
Disposals and write-offs
Other transfers
Exchange adjustment
Balance at 31 July 2014
Land
and
buildings
$000
Plant and
machinery
$000
Leased
plant and
machinery
$000
Capital
work in
progress
$000
214,121
1,220
–
(463)
2,690
(4,420)
213,148
647,143
17,895
–
(7,303)
14,608
(5,731)
666,612
(77,338)
(6,583)
–
(6,593)
391
188
2,076
(87,859)
(422,386)
(38,010)
–
(17,808)
6,720
2,204
5,462
(463,818)
18,637
723
–
–
–
385
19,745
(1,337)
(1,147)
–
–
–
–
(26)
(2,510)
Total
$000
903,759
44,460
–
(9,888)
(3,213)
(9,876)
925,242
23,858
24,622
–
(2,122)
(20,511)
(110)
25,737
–
–
–
–
–
–
–
–
(501,061)
(45,740)
–
(24,401)
7,111
2,392
7,512
(554,187)
Net property, plant and equipment at 31 July 2014
125,289
202,794
17,235
25,737
371,055
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
Depreciation and impairment losses
Balance at 1 August 2012
Depreciation charge for the year
Additions through business combinations
Disposals and write-offs
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)
19,424
24,217
11
(4)
(22,912)
3,122
23,858
–
–
–
–
–
–
–
Total
$000
792,176
44,232
3,702
(5,412)
(13,785)
82,846
903,759
(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
Assets pledged as security for finance leases amount to $10.714 million (2013: $10.063 million).
84 | NUFARM LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS continued
23. Intangible assets
Consolidated 2014
Cost
Balance at 1 August 2013
Additions
Additions through business combinations
Disposals and write-offs
Other transfers
Exchange adjustment
Balance at 31 July 2014
Amortisation and impairment losses
Balance at 1 August 2013
Amortisation charge for the year
Impairment loss
Disposals and write-offs
Other transfers
Exchange adjustment
Balance at 31 July 2014
Intellectual
property
Goodwill
$000
Indefinite
life
$000
Finite
life
$000
Capitalised
development
costs
$000
Computer
software
$000
Total
$000
357,906
–
–
–
(5,840)
(7,506)
344,560
419,751
2,842
–
(213)
(1,534)
(12,109)
408,737
146,741
4,612
–
–
1,534
(5,611)
147,276
195,342
42,264
–
(12,527)
1,285
3,758
230,122
36,778 1,156,518
51,317
1,599
–
–
(12,771)
(31)
(5,049)
(494)
(1,103)
(22,571)
36,749 1,167,444
(120,779)
–
(5,649)
–
5,840
2,839
(117,749)
(16,673)
(25)
(166)
166
1
493
(16,204)
(77,102)
(12,542)
(20)
(135)
–
2,385
(87,414)
(51,510)
(19,114)
(987)
12,381
28
122
(59,080)
(24,699)
(3,395)
–
24
1
522
(27,547)
(290,763)
(35,076)
(6,822)
12,436
5,870
6,361
(307,994)
Intangibles carrying amount at 31 July 2014
226,811
392,533
59,862
171,042
9,202
859,450
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
Intellectual
property
Goodwill
$000
Indefinite
life
$000
Finite
life
$000
Capitalised
development
costs
$000
Computer
software
$000
Total
$000
300,453
10,520
15,644
–
–
31,289
357,906
368,749
11,789
374
(489)
(9,919)
49,247
419,751
110,685
412
9,661
(1,872)
9,919
17,936
146,741
(110,590)
–
–
–
–
(10,189)
(120,779)
(14,894)
(560)
(1,191)
77
1,919
(2,024)
(16,673)
(53,348)
(14,450)
–
1,872
(1,919)
(9,257)
(77,102)
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
36,778
954,552
58,617
25,699
(5,705)
833
122,522
1,156,518
(18,930)
(3,778)
–
36
–
(2,027)
(24,699)
(231,862)
(32,421)
(1,191)
4,338
–
(29,627)
(290,763)
Intangibles carrying amount at 31 July 2013
237,127
403,078
69,639
143,832
12,079
865,755
NUFARM LIMITED ANNUAL REPORT 2014 | 85
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.
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 (CGU)).
The group has determined that operating unit by country or region (i.e. Europe) is the appropriate method for determining
the 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 or region specific in nature. There is no
allocation of goodwill between CGUs.
The major CGUs and their intangible value is as follows: US$191 million (2013: $188 million), Brazil $186 million (2013: $170 million),
Seeds business $211 million (2013: $200 million), Europe $188 million (2013: $181 million) and Australia/New Zealand $26 million
(2013: $29 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:
Terminal
growth rate
Discount
rate
Total goodwill
and indefinite
life assets
2014
%
2013
%
2014
%
2013
%
2014
$000
2013
$000
Material crop protection
CGUs (US, Brazil, Europe and
Australia/New Zealand)
Seeds CGU
1.6 to 3.5
2.0
2.0 to 3.5
2.0
7.3 to 13.3
8.8
9.2 to 11.4
8.9
423,240
162,796
436,621
168,200
86 | NUFARM LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS continued
24. Trade and other payables
Current payables – unsecured
Trade creditors and accruals – unsecured
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
2014
$000
2013
$000
510,961
2,628
2,344
515,933
525,846
19,984
4,489
550,319
10,537
21,092
10,697
42,326
9,633
22,313
16,925
48,871
Consolidated
2014
$000
2013
$000
294,898
29,136
(6,079)
489
504
318,948
78,524
14,739
339,271
(10,458)
1,589
12,392
436,057
231,002
93,793
(9,218)
386
402
316,365
225,674
4,834
350,146
(11,892)
1,104
11,854
581,720
(241,638)
(264,972)
513,367
633,113
NUFARM LIMITED ANNUAL REPORT 2014 | 87
NOTES TO THE FINANCIAL STATEMENTS continued
25. Interest-bearing loans and borrowings (continued)
Financing facilities
Key group facilities include a $300 million group trade receivables securitisation facility, a US$325 million senior unsecured
notes offering due in October 2019, and a senior secured syndicated bank facility of $530 million, of which $520 million is due
in December 2016 and $10 million is due in December 2014. On 19 December 2013, the refinancing of the syndicated bank
facility was completed with the facility increasing from $406 million to $530 million.
The majority of debt facilities that reside outside the senior unsecured notes, syndicated bank facility and the group trade
receivables securitisation facility are regional working capital facilities, primarily located in Brazil and Europe totalling
$572 million (2013: $343 million).
Refer to note 31 for further detail regarding the group’s financing facilities.
Accessible
$000
Utilised
$000
1,741,340
2,078
1,743,418
756,568
2,078
758,646
1,320,116
1,490
1,321,606
905,449
1,490
906,939
Consolidated
2014
$000
–
324,522
7,138
426,986
2013
$000
325,181
194,684
32,095
354,979
1,781
1,706
4,804
94,974
103,265
(90,369)
12,896
1,732
1,657
4,462
90,333
98,184
(85,928)
12,256
2014
Bank loan facilities and senior unsecured notes
Other facilities
Total financing facilities
2013
Bank loan facilities and senior unsecured notes
Other facilities
Total financing facilities
Financing arrangements
Repayment of borrowings (excluding finance leases)
Period ending 31 July 2014
Period ending 31 July 2015
Period ending 31 July 2016
Period ending 31 July 2017 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.
88 | NUFARM LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS continued
25. Interest-bearing loans and borrowings (continued)
Financing arrangements (continued)
Average interest rates
Nufarm step-up securities (refer note 29)
Syndicated bank facility
Group 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
2014
%
6.63
4.34
3.33
7.70
12.49
6.38
2013
%
6.95
5.06
3.32
5.66
12.48
6.38
Consolidated
2014
$000
2013
$000
16,051
3,372
19,423
16,400
3,383
19,783
5,866
170,495
(121,773)
54,588
6,079
140,505
(111,361)
35,223
14,603
69,191
88,614
14,996
50,219
70,002
The group makes contributions to defined benefit pension funds in the UK, the Netherlands, France and Indonesia that
provide defined benefit amounts for employees upon retirement.
NUFARM LIMITED ANNUAL REPORT 2014 | 89
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 losses/(gains)
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
Interest income
Actuarial gains/(losses) – return on plan assets excluding interest income
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
Interest income
Past service cost
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
2014
$000
2013
$000
146,584
3,326
7,730
18,096
(923)
–
54
(5,428)
6,922
176,361
111,361
6,131
(1,277)
–
5,147
(4,736)
5,147
121,773
3,326
7,730
(6,131)
(923)
4,002
2,315
763
618
306
4,002
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
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
(17,681)
(15,321)
(33,002)
(16,998)
(683)
(17,681)
90 | NUFARM LIMITED ANNUAL REPORT 2014
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
Future salary increases
Future pension increases
Consolidated
2014
%
62.4
35.4
1.4
0.8
4.2
3.1
2.5
2013
%
60.9
37.0
1.3
0.8
4.5
3.0
2.6
The group expects to pay $4,729,000 in contributions to defined benefit plans in 2015 (2014: $4,571,000).
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 2014 there
were 40 participants (2013: 48 participants) in the scheme and 387,076 shares (2013: 764,616) 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 on the following metrics, relevant to an individual:
• budget measures of EBIT or net profit after tax and net working capital; and
• 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
of Nufarm Limited shares in the five days subsequent to the results announcement. Vesting will occur after a two-year period.
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 performance
and vesting period for the awards will be three years. Awards vest in two equal tranches as follows:
• fifty 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.
NUFARM LIMITED ANNUAL REPORT 2014 | 91
NOTES TO THE FINANCIAL STATEMENTS continued
27. Share-based payments (continued)
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 2014 there were 872 participants (2013:
948 participants) in the scheme and 2,013,567 shares (2013: 1,925,656) 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
Consolidated
2014
$000
1,782
2013
$000
4,528
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:
Nufarm STI
2014
deferred
shares
$4.75
$4.54
9 Oct 2013
31 Jul 2015
–
1 year
n/a
n/a
n/a
Nufarm LTI
2014
performance
rights
Dec 2013
Nufarm LTI
2014
performance
rights
Oct 2013
$3.25
$4.40
5 Dec 2013
31 Jul 2016
–
2.7 years
35%
2.9%
2.7%
$3.35
$4.54
9 Oct 2013
31 Jul 2016
–
2.8 years
35%
3.0%
2.7%
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
Nufarm LTI
2013
performance
rights
Oct 2012
$4.40
$5.62
6 Dec 2012
31 Jul 2015
–
2.7 years
30%
2.6%
2.3%
$4.73
$5.96
9 Oct 2012
31 Jul 2015
–
2.8 years
30%
2.4%
2.3%
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
The fair values of awards granted were estimated using a Monte-Carlo simulation methodology and a Binomial Tree
methodology.
92 | NUFARM LIMITED ANNUAL REPORT 2014
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
2014
1,021,128
(26,724)
–
(566,463)
568,993
996,934
–
Nufarm STI
number of
deferred
shares
2014
296,490
–
(239,810)
–
381,237
437,917
79,047
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
39,509
The performance rights outstanding at 31 July 2014 have a $nil exercise price and a weighted average contractual life of three
years (2013: 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 2013
Provisions made during the year
Provisions used during the year
Exchange adjustment
Balance at 31 July 2014
Consolidated
2014
$000
12,642
3,059
15,701
Restructuring
$000
Other
provisions
$000
118
16,966
(4,926)
484
12,642
3,161
–
–
(102)
3,059
2013
$000
118
3,161
3,279
Total
$000
3,279
16,966
(4,926)
382
15,701
The provision for restructuring is mainly relating to the rationalisation of the Australian and New Zealand operations and
primarily consists of unpaid redundancy and associated transition costs. The other provision consists of liabilities recognised
with the Agripec acquisition.
NUFARM LIMITED ANNUAL REPORT 2014 | 93
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
2014
262,954,040
1,067,587
264,021,627
Number of
ordinary
shares
2013
262,142,247
811,793
262,954,040
The company does not have authorised capital or par value in respect of its issued shares.
On 15 October 2013, 381,237 shares at $4.75 were issued under the executive share plan.
On 15 November 2013, 308,171 shares at $4.83 were issued under the dividend reinvestment program.
On 6 January 2014, 82,447 shares at $4.39 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 9 May 2014, 295,732 shares at $4.12 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 (2013: 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.
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 Atlantica 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.
94 | NUFARM LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS continued
29. Capital and reserves (continued)
Dividends
An interim dividend of three cents per share, totalling $7,912,359 was declared on 26 March 2014, and was paid (net of
dividend re-investment program) on 9 May 2014 (2013: three cents per share, totalling $7,883,907).
A final dividend of five cents per share, totalling $13,201,081 was declared on 23 September 2014, and will be paid on
14 November 2014 (2013: five cents per share, totalling $13,166,764).
Distributions
Distributions recognised in the current year by Nufarm Finance (NZ) Ltd on the Nufarm step-up securities* are:
2014
Distribution
Distribution
2013
Distribution
Distribution
Distribution rate
%
Total amount
$000
Payment
date
Consolidated
6.52
6.95
7.03
8.11
8,156
8,749
16,905
8,798
10,146
18,944
15 April 2014
15 October 2013
15 April 2013
16 October 2012
* 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 $12.369 million (2013: $13.974 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% (2013: 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
2014
$000
2013
$000
4,973
18,771
(3,262)
1,711
–
18,771
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 $1,710,802 (2013: $18,771,001) franking credits.
NUFARM LIMITED ANNUAL REPORT 2014 | 95
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
2014
$000
37,747
(40)
37,707
(12,369)
25,338
2013
$000
81,750
(751)
80,999
(13,974)
67,025
25,338
25,338
67,025
67,025
(48,704)
(2,224)
74,042
69,249
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
2013
2014
263,587,507 262,675,412
265,033,403 263,587,730
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
2013
2014
9.6
9.6
9.6
9.6
28.1
27.9
25.5
25.5
25.4
25.4
26.4
26.3
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.
96 | NUFARM LIMITED ANNUAL REPORT 2014
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 and risk 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 and risk committee and functionally to the
chief financial officer. He provides a written report of his activities at each meeting of the audit and risk committee. In doing so
he has direct and ongoing access to the chairman and members of the audit and risk 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
Consolidated
2014
$000
2013
$000
791,852
241,638
792,564
264,972
184
1,033,674
2,161
1,059,697
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
2014
$000
2013
$000
106,699
32,223
251,058
95,781
306,091
791,852
166,006
31,022
223,360
103,750
268,426
792,564
The group’s top five customers account for $107.4 million of the trade receivables carrying amount at 31 July 2014
(2013: $120.8 million). These top five customers represent 15 per cent (2013: 17 per cent) of the total receivables.
NUFARM LIMITED ANNUAL REPORT 2014 | 97
NOTES TO THE FINANCIAL STATEMENTS continued
31. Financial risk management and financial instruments (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
2014
$000
572,214
71,151
18,482
9,225
25,362
696,434
(26,591)
669,843
2013
$000
598,898
60,727
9,325
9,972
22,638
701,560
(24,172)
677,388
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 0.04 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
2014
$000
24,172
5,437
(2,080)
–
(938)
26,591
2013
$000
22,278
294
(1,032)
39
2,593
24,172
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.
98 | NUFARM LIMITED ANNUAL REPORT 2014
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 group 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’).
The group holds a three-year A$530 million senior secured syndicated bank facility (SFA) (2013: A$406 million), of which
A$520 million is due in December 2016 and A$10 million is due in December 2014 (2013: A$406 million due in November
2014). The SFA is secured by assets in the primary geographies in which Nufarm operates including Australia, New Zealand
and the United States (2013: Australia, United States, Canada, United Kingdom, and France). 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 amount drawn down under the facility at 31 July 2014 is $51 million (2013: $164 million).
The majority of debt facilities that reside outside the notes, SFA and the group trade receivables securitisation facility are regional
working capital facilities, primarily located in Brazil and Europe, which at 31 July totalled $572 million (2013: $343 million).
At 31 July 2014, the group had access to debt of $1,743 million (2013: $1,322 million) under the notes, SFA, group trade
receivables securitisation facility and with other lenders.
A parent guarantee is provided to support working capital facilities in Europe, Brazil and the notes.
NUFARM LIMITED ANNUAL REPORT 2014 | 99
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
–
534,539
373,422
43,875
339,271
2,078
12,896
–
534,539
397,202
47,368
461,801
2,078
103,265
–
513,305
301,714
30,833
22,278
489
1,781
–
1,063
5,783
8,493
22,278
1,589
1,706
–
20,171
89,705
8,042
417,245
–
99,778
21,817
–
230,879
(232,876)
22,177
(22,815)
21,452
(22,815)
187,250
(187,246)
1,903
–
252,666
(250,933)
252,666
(250,933)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(184)
1,329,617
52,885
(53,064)
1,545,810
52,885
(53,064)
871,316
–
–
39,549
–
–
634,945
Consolidated 2014
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
100 | NUFARM LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS continued
31. Financial risk management and financial instruments (continued)
Liquidity risk (continued)
Consolidated 2013
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
–
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
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.
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.
NUFARM LIMITED ANNUAL REPORT 2014 | 101
NOTES TO THE FINANCIAL STATEMENTS continued
31. Financial risk management and financial instruments (continued)
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 2012, 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 borrowers to movements in the Australian dollar against their local currencies.
In October 2012, 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.
The group uses derivative financial instruments to manage foreign currency translation risk arising from the groups net
investments in foreign currency subsidiary entities. These contracts have been designated as net investment hedges for
hedge accounting purposes. No ineffectiveness was recognised from the net investment hedge.
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 2014 was a $1.719 million liability (2013: $17.823 million liability) comprising assets of $0.184 million
(2013: $2.161 million) and liabilities of $1.903 million (2013: $19.984 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
2014
Functional currency of group operation
Australian dollars
US dollars
Euro
UK pounds sterling
Consolidated
2013
Functional currency of group operation
Australian dollars
US dollars
Euro
UK pounds sterling
Net financial assets/(liabilities) – by currency
of denomination
AUD
$000
–
(83,268)
15,524
(14,768)
(82,512)
AUD
$000
–
2,345
6,820
(14,768)
(5,603)
USD
$000
(44,765)
–
11,489
9,351
(23,925)
USD
$000
(15,380)
–
12,581
20,802
18,003
Euro
$000
21,379
(730)
–
5,298
25,947
Euro
$000
(14,715)
(2,515)
–
(8,771)
(26,001)
GBP
$000
(17,464)
–
10,596
–
(6,868)
GBP
$000
(19,778)
–
(2,254)
–
(22,032)
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 2013.
102 | NUFARM LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS continued
31. Financial risk management and financial instruments (continued)
Currency 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/(loss)
after tax
2014
$000
Weakening
Profit/(loss)
after tax
2014
$000
Strengthening
Profit/(loss)
after tax
2013
$000
Weakening
Profit/(loss)
after tax
2013
$000
(289)
421
(82)
(47)
292
(416)
81
47
306
127
(301)
(135)
(313)
(127)
303
135
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
2014
0.917
0.673
0.556
2.092
2013
1.009
0.774
0.645
2.086
2014
0.930
0.694
0.551
2.105
2013
0.895
0.673
0.589
2.037
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$530 million syndicated bank facility and
the A$300 million group 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. During the period the group
entered into interest rate swaps to manage the level of floating rate debt held by the group. These swaps effectively
converted a portion of floating rate debt to fixed rate debt, 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
(2013: 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
2013
2014
$000
$000
47,517
(554,003)
(506,486)
34,222
(807,416)
(773,194)
–
(217,539)
(217,539)
–
(111,779)
(111,779)
NUFARM LIMITED ANNUAL REPORT 2014 | 103
NOTES TO THE FINANCIAL STATEMENTS continued
31. Financial risk management and financial instruments (continued)
Currency risk (continued)
Interest rate risk (continued)
Sensitivity analysis for variable rate instruments
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 2013.
2014
Variable rate instruments
Total sensitivity
2013
Variable rate instruments
Total sensitivity
Fair values
Profit/(loss)
100bp
increase
$000
100bp
decrease
$000
(5,065)
(5,065)
5,065
5,065
(7,732)
(7,732)
7,732
7,732
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
$107.6 million (2013: $111.8 million), the fair value at 31 July 2014 is $116.977 million (2013: $109.686 million).
Consolidated 2014
Cash and cash equivalents
Trade and other receivables
Forward exchange contracts:
Assets
Liabilities
Interest rate swaps
Trade and other payables excluding derivatives
Bank overdraft
Secured bank loans
Unsecured bank loans
Senior unsecured notes(a)
Other loans
Finance leases
Available
for sale
$000
–
–
Note
15
16
Carried at
fair value
through
profit or loss
$000
–
–
Derivatives
used for
hedging
$000
–
–
16
24
24
24
15
25
25
25
25
25
–
–
–
–
–
–
–
–
–
–
–
184
(1,903)
–
–
–
–
–
–
–
–
(1,719)
–
(725)
(21,092)
–
–
–
–
–
–
–
(21,817)
Financial
assets/
liabilities at
amortised
cost
$000
241,638
791,852
–
–
–
(534,539)
–
(373,422)
(43,875)
(339,271)
(2,078)
(12,896)
(272,591)
Total
$000
241,638
791,852
–
184
(2,628)
(21,092)
(534,539)
–
(373,422)
(43,875)
(339,271)
(2,078)
(12,896)
(296,127)
(a) Includes $231.7 million (2013: $238.3 million) of centrally managed fixed rate debt swapped to floating rate under fair value hedges, and is consequently
fair valued for interest rate risk.
104 | NUFARM LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS continued
31. Financial risk management and financial instruments (continued)
Fair values (continued)
Consolidated 2013
Cash and cash equivalents
Trade and other receivables
Forward exchange contracts:
Assets
Liabilities
Interest rate swaps
Trade and other payables excluding derivatives
Bank overdraft
Secured bank loans
Unsecured bank loans
Senior unsecured notes(a)
Other loans
Finance leases
Available
for sale
$000
–
–
Note
15
16
Carried at
fair value
through
profit or loss
$000
–
–
Derivatives
used for
hedging
$000
–
–
16
24
24
24
15
25
25
25
25
25
–
–
–
–
–
–
–
–
–
–
–
2,161
(19,984)
–
–
–
–
–
–
–
–
(17,823)
–
–
(22,313)
–
–
–
–
–
–
–
(22,313)
Financial
assets/
liabilities at
amortised
cost
$000
264,972
792,564
–
–
–
(556,893)
–
(456,676)
(98,627)
(350,146)
(1,490)
(12,256)
(418,552)
Total
$000
264,972
792,564
2,161
(19,984)
(22,313)
(556,893)
–
(456,676)
(98,627)
(350,146)
(1,490)
(12,256)
(458,688)
(a) Includes $231.7 million (2013: $238.3 million) 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).
2014
Derivative financial assets
Derivative financial liabilities
2013
Derivative financial assets
Derivative financial liabilities
There have been no transfers between levels in either 2014 or 2013.
Consolidated
Level 1
$000
–
–
–
–
–
–
–
–
Level 2
$000
184
184
(23,720)
(23,720)
2,161
2,161
(42,297)
(42,297)
Level 3
$000
–
–
–
–
–
–
–
–
Total
$000
184
184
(23,720)
(23,720)
2,161
2,161
(42,297)
(42,297)
NUFARM LIMITED ANNUAL REPORT 2014 | 105
NOTES TO THE FINANCIAL STATEMENTS continued
31. Financial risk management and financial instruments (continued)
Fair values (continued)
Fair value hierarchy (continued)
Valuation techniques used to derive fair values
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is
determined using valuation techniques. These valuation techniques maximise the use of observable market data where it is
available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument
are observable, the instrument is included in Level 2.
Specific valuation techniques used to value financial instruments include:
• the use of quoted market prices or dealer quotes for similar instruments;
• the fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based on observable
yield curves;
• the fair value of forward foreign exchange contracts is determined using forward exchange rates at the balance sheet date; and
• other techniques, such as discounted cash flow analysis, are used to determine fair value for the remaining financial
instruments.
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 shareholder’s 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 based on the budget and growth strategy. The ROFE return for the year ended 31 July 2014 was 9.1 per cent (2013:
8.8 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
2014
$000
11,807
10,286
22,725
144,995
189,813
2013
$000
10,114
11,453
21,806
141,166
184,539
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 $3.240 million at 31 July 2014 (2013: $6.116 million).
106 | NUFARM LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS continued
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
2014
$000
7,254
2013
$000
6,225
Environmental guarantee given to the purchaser of land and buildings at Genneviliers
for EUR 8.5 million.
12,248
12,630
Insurance bond for EUR 2.717 million established to make certain capital expenditures
at Gaillon plant in France.
Brazilian taxation proceedings.(a)
Contingent liabilities
4,019
3,843
12,157
74,624
35,678
97,322
(a) The company’s 2013 annual financial report previously disclosed a contingent liability of $74.6 million in respect of potential pre-acquisition tax liabilities
of its Brazilian business, which was acquired in 2007. The company continued to defend the related tax claims during the period. The agreements relating
to the purchase of the business included indemnities which allow Nufarm to recover the majority of any such tax liabilities from the previous owners.
These indemnities have previously been confirmed via an independent arbitration process.
During December 2013, the company elected to participate in a federal tax program instigated by the Brazilian Government that allows taxpayers to reduce
their tax liabilities by offering discounts on claims (including penalties and interest) applying to a period ending on 30 November 2008. The decision to
participate in the program reduced the company’s potential future liability and provided a final resolution of the claims to which the program applied.
Entering into the program has given rise to a tax liability, which will result in a cash outflow of approximately $300,000 per month for five years commencing
January 2014 and the utilisation of tax losses. As previously disclosed, cash inflows from the previous owner, via enforcement of the indemnities currently
under arbitration, will follow the settlement of the tax obligations.
The recognition of the liability has been offset by the benefit of previously unrecognised tax assets. The tax assets will be recovered via a combination
of recoupment in the normal course of business and enforcement of the indemnities provided by the previous owner.
As a consequence of entering the program, the total contingent liability relating to future potential tax liabilities has reduced to $12.157 million that
relate to claims not covered by the program, some of which may also be covered by the indemnities. These cases will continue to be defended.
Further to the above, the group has a contingent asset in respect of potential pre-acquisition tax credits of its Brazilian business acquired in 2007. Whilst the
credits are deemed to be valid, the Brazilian courts are currently deliberating the value of the credits and therefore the full amount of this contingent asset is
yet to be established. Such credits can be used to offset future federal tax payable.
NUFARM LIMITED ANNUAL REPORT 2014 | 107
NOTES TO THE FINANCIAL STATEMENTS continued
35. Group entities
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
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
Mastra Corporation Sdn Bhd
Mastra Corporation USA Pty Ltd
Mastra Holdings Sdn Bhd
Mastra Industries Sdn Bhd
108 | NUFARM LIMITED ANNUAL REPORT 2014
Note
Place of
incorporation
Percentage of shares held
2013
2014
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
Australia
Australia
USA
Australia
Australia
USA
New Zealand
Australia
United Kingdom
Australia
Brazil
Australia
Australia
Australia
Netherlands
Australia
New Zealand
New Zealand
Australia
Australia
Australia
Australia
Canada
Singapore
New Zealand
Australia
Egypt
USA
Greece
United Kingdom
Guatemala
France
France
Australia
Malaysia
USA
Guatemala
Mexico
USA
Australia
Australia
Malaysia
Australia
Malaysia
Malaysia
100
100
100
100
100
100
100
100
100
100
51
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
51
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
NOTES TO THE FINANCIAL STATEMENTS continued
35. Group entities (continued)
Medisup International NV
Medisup Securities Limited
Midstates Agri Services de Mexico
Midstates Agri Services Inc
Minteledan S.A.
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 Cropcare Private 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.
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
Note
(a)
(a)
Place of
incorporation
N. Antillies
Australia
Mexico
USA
Uruguay
Morocco
South Africa
Canada
USA
Zimbabwe
USA
USA
Malaysia
Australia
Netherlands
Canada
China
Chile
Colombia
United Kingdom
India
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
Brazil
Singapore
Netherlands
Italy
Japan
Korea
Malaysia
Percentage of shares held
2013
88
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
100
2014
88
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
100
100
100
NUFARM LIMITED ANNUAL REPORT 2014 | 109
NOTES TO THE FINANCIAL STATEMENTS continued
35. Group entities (continued)
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 Services (Singapore) Pte Ltd
Nufarm Services Sdn Bhd
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 Uruguay SA
Nufarm USA Inc
Nugrain Pty Ltd
Nuseed Americas Inc
Nuseed do Brazil S.A.
Nuseed Europe Ltd
Nuseed Europe Holding Company Ltd
Nuseed Global Innovation Ltd
Nuseed Holding Company
Nuseed Pty Ltd
Nuseed SA
Nuseed South America Sementes Ltda
Nuseed Serbia d.o.o.
Nuseed Ukraine LLC
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
Societe Des Ecluses la Garenne s.a.s
Note
(a)
(a)
(b)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(c)
(a)
Place of
incorporation
United Kingdom
Malaysia
Australia
New Zealand
Peru
Australia
Portugal
Romania
France
Argentina
Singapore
Malaysia
Switzerland
Malaysia
New Zealand
Australia
Australia
United Kingdom
Ukraine
Uruguay
USA
Australia
USA
Brazil
United Kingdom
United Kingdom
United Kingdom
USA
Australia
Argentina
Brazil
Serbia
Ukraine
Australia
Australia
Australia
Australia
Indonesia
Indonesia
Indonesia
USA
USA
Argentina
Australia
France
Percentage of shares held
2013
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
2014
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
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) Formerly known as Nufarm (Asia) Pte Ltd.
(c) Merged with Nuseed Americas Inc and deregistered.
110 | NUFARM LIMITED ANNUAL REPORT 2014
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 directors’ reports.
It is a condition of the class order that the company and each of the subsidiaries enter into a deed of cross guarantee.
The parent entity and all the Australian controlled entities have entered into a deed of cross guarantee dated 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 2014
is set out as follows:
Consolidated
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
2014
$000
2013
$000
(58,855)
4,305
(54,550)
120,659
–
(28,944)
37,165
1,019
10,446
11,465
126,356
(1,459)
(15,703)
120,659
42,724
472,637
169,736
9,766
694,863
25,224
664,394
194,463
9,472
893,553
5,793
1,171,314
65,178
122,170
102,288
1,466,743
2,161,606
4,177
1,153,447
52,310
155,366
107,758
1,473,058
2,366,611
548,689
23,095
1,053
572,837
568,350
11,155
–
579,505
22,092
337,506
18,014
10,661
388,273
961,110
1,200,496
24,313
460,059
16,629
11,143
512,144
1,091,649
1,274,962
1,068,871
94,460
37,165
1,200,496
1,063,992
90,311
120,659
1,274,962
NUFARM LIMITED ANNUAL REPORT 2014 | 111
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(a)
Total equity
Company
2014
$000
2013
$000
(1,192)
(403)
(1,595)
8,833
2,385
11,218
1,060,681
1,419,961
1,106,952
1,447,739
179,549
179,549
188,746
189,073
1,068,871
37,788
(31,536)
165,289
1,240,412
1,063,992
38,651
(30,344)
186,367
1,258,666
(a) Retained earnings comprises the transfer of net profit for the year and are characterised as profits available for distribution as dividends in future years.
Dividends amounting to $21.078 million (2013: $15.703 million) were distributed from the retained earnings during the year.
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 2014 or 2013.
112 | NUFARM LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS continued
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
Depreciation
Australia/New Zealand asset rationalisation and restructure
Inventory 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
2014
$000
2013
$000
37,747
81,750
120
35,076
45,740
33,355
5,693
(53)
(2,208)
80,436
(68,937)
24,104
(45,028)
146,045
(1,375)
169,886
5,727
(52,186)
122,052
268,097
73
33,612
41,564
–
5,773
(2,744)
60
65,460
(49,958)
31,173
(14,347)
192,416
(16,005)
(281,329)
60,144
107,561
(129,629)
62,787
NUFARM LIMITED ANNUAL REPORT 2014 | 113
NOTES TO THE FINANCIAL STATEMENTS continued
39. Related parties
(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
Lotus Agrar GmbH
Purchases from
Trade payable
Sales to
Trade payable
Trade receivable
Sales to
Purchases from
Trade receivable
Trade payable
Sales to
Trade receivable
Consolidated
2014
$000
13,837
7,152
48,729
338
36,385
41,665
53,877
17,525
22,507
29,098
6,840
2013
$000
–
–
41,427
–
38,249
30,822
48,840
1,913
12,618
–
–
These transactions were undertaken on commercial terms and conditions.
(c) Key management personnel compensation
The key management personnel compensation included in personnel expenses (see note 9) are as follows:
Short term employee benefits
Post-employment benefits
Equity compensation benefits
Termination benefits
Other long term benefits
Consolidated
2014
$
8,722,847
394,716
1,060,374
–
361,460
10,539,397
2013
$
9,073,155
358,079
1,811,459
799,000
200,271
12,241,964
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.
114 | NUFARM LIMITED ANNUAL REPORT 2014
NOTES TO THE FINANCIAL STATEMENTS continued
39. Related parties (continued)
(d) Other key management personnel transactions with the company or its controlled entities
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 director’s interest
existing at year end.
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.
(e) Loans to key management personnel and their related parties
There were no loans to key management personnel at 31 July 2014 (2013: nil).
40. 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 advisory services
Other services remuneration
41. Subsequent events
Consolidated
2014
2013
518,000
546,000
1,239,000
1,757,000
1,149,000
1,695,000
198,626
1,955,626
79,790
1,774,790
27,700
–
55,400
–
85,809
525,778
639,287
79,144
–
134,544
A final dividend of five cents per share, totalling $13,201,081 was declared on 23 September 2014, and will be paid on
14 November 2014 (2013: five cents per share, totalling $13,166,764).
NUFARM LIMITED ANNUAL REPORT 2014 | 115
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 2014 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. 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.
3. The directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the chief
executive officer and chief financial officer for the financial year ended 31 July 2014.
4. 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 23rd day of September 2014.
DG McGauchie AO
Director
DJ Rathbone AM
Director
116 | NUFARM LIMITED ANNUAL REPORT 2014
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 2014, 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 41 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.
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 2014 | 117
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 2014 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 2014. 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 2014, complies with Section 300A
of the Corporations Act 2001.
KPMG
BW Szentirmay
Partner
Melbourne
23 September 2014
118 | NUFARM LIMITED ANNUAL REPORT 2014
SHAREHOLDER AND STATUTORY INFORMATION
Details of shareholders, shareholdings and top 20 shareholders
Listed securities – 23 September 2014
Fully paid ordinary shares
Number
of holders
10,237
Number
of securities
264,021,627
Percentage held
by top 20
85.57
Twenty largest shareholders
Sumitomo Chemical Company Limited
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Limited
National Nominees Limited
Amalgamated Dairies Limited
Citicorp Nominees Pty Limited
NEFCO Nominees Pty Ltd
Challenge Investment Company Limited
BNP Paribas Noms Pty Ltd
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