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Annual Report 2019
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9
2019 Highlights
Sales
$3,758m
Net profit
after tax
$38m
reported
Net profit
after tax
$89m
underlying
Customers
100+
countries
Manufacturing
& distribution
30+
countries
Employees
3,000+
Contents
Chairman’s Message
Managing Director’s Message
Board of Directors
Key Management Personnel
Operating and Financial Review
Corporate Governance
Directors’ Report
Remuneration Report
Lead Auditor’s Independence Declaration
Consolidated Income Statement
2
3
4
6
7
24
25
29
53
54
Consolidated Statement of Comprehensive Income 55
Consolidated Balance Sheet
Consolidated Statement of Cash Flows
Consolidated Statement of Changes in Equity
Notes to the Consolidated Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Shareholder and Statutory Information
Corporate Directory
56
57
58
60
129
130
136
IBC
Helping farmers get
more from their land
For more than 100 years we’ve
been finding more effective
ways to fight disease, weeds and
pests to increase the yields of
growers’ crops.
Keeping customers at the heart of
our business has always been the
key to our success. As our customers
grow and the industry evolves,
we’re finding new ways to grow
with them to meet more of their
needs across the crop life-cycle.
We focus on what the farmers and
growers need and partner with
distributors so they get the right
product at the right time. That’s why
more and more people are
depending on us to help them grow.
Nufarm Limited Annual Report 2019
1
Chairman’s Message
Dear Shareholder,
In 2019 your company reported net profit after tax of
$38 million, including individually significant items of
$51 million. Underlying earnings before interest, tax,
depreciation and amortisation increased to $420 million
from $386 million in the prior year.
Earnings growth was achieved
this transaction will deliver compelling,
despite significant external
up-front value for shareholders and
headwinds, reflecting the benefit
refocus the company on regions
of recent investments and the quality
where we can generate higher
and resilience of the business.
margins and stronger cash flows.
A full year contribution from the
Shareholders will receive more
European portfolios acquired last
information and have an opportunity
year and strong performances in
to vote on the proposal later in the
North America, Seed Technologies
2019 calendar year.
and Asia combined to offset
weaker earnings in Australia
and flat earnings in Latin America.
The contribution from the European
portfolios was impacted by
supply issues and while this was
a disappointment, the acquisition
has transformed our presence
in this market and provides a strong
base to support improved earnings
in the short and medium term.
The Nufarm culture continues to
play an important role in delivering
the company’s strategy and
meeting community expectations.
Board members have observed
first-hand the commitment of
employees from around the world
to Nufarm’s values, stakeholders,
and to achieving Nufarm’s goals.
This extends from contributing to
communities, protecting the
The balance sheet was
environment, and developing new
strengthened with the support
products to help farmers increase
of shareholders for the equity
yield, adapt to changing growing
raising in the first half of the year.
conditions and address growing
This allowed us to reduce debt and
societal concerns about the
manage the impact of extreme
sustainability of modern agriculture.
weather conditions and supply
disruptions while meeting the
needs of our growing business.
On behalf of the Board of Directors,
I thank our management team
and employees for their dedication
Improving margins and generating
and commitment. We also thank
cash are key priorities for the
outgoing director, Bruce
coming year. The Board is confident
Goodfellow, for his guidance over
the management team has taken the
his many decades of involvement
necessary steps to ensure a timely
with the company.
recovery from the headwinds and
issues that impacted performance
in 2019 and 2020 will see improved
performance.
In closing, I also thank our
shareholders. With your support
we have built a valuable global
distribution network, quality product
On 30 September 2019 we
portfolio and promising pipeline
announced our intention to divest
of new product development.
the South American businesses to
Your Board is confident the
Sumitomo Chemical Company for
significant reinvestment we have
$1.188 billion and customary net
made over recent years will deliver
working capital adjustments on
value to shareholders in the coming
completion. The Board believes
year and for years to come.
Donald McGauchie AO
Chairman
2
Nufarm Limited Annual Report 2019
Managing Director’s Message
Greg Hunt
Managing Director and
Chief Executive Officer
Dear Shareholder,
2019 was a trying year for our industry but even in this
constrained environment we continued to see strong support
from our customers. Managing external headwinds and
strengthening our business to improve returns was a major
focus in every region.
In 2019 we faced continued drought
Latin America benefited from both
in large parts of Australia, flooding in
favourable weather and strong
major cropping regions in the United
commodity demand and we
States and supply conditions which
continued our focus on meeting
impacted product availability and
customer needs while maintaining
increased costs in Europe. Despite
discipline on margins in an
these difficult conditions, earnings
increasingly competitive market.
grew in all regions except Australia,
with earnings in Latin America
steady on the prior year.
The Seed Technologies business
achieved another year of earnings
growth with higher seed treatment,
In Europe we completed the
sunflower and sorghum seed sales.
integration of the portfolios acquired
The acquisition of the nematicide,
in 2018 and accelerated the transfer
Trunemco, is expected to support
of product registrations to improve
growth in coming years and first
product availability for the coming
sales of Nuseed’s proprietary
year. While tight supply conditions
for technical materials sourced from
China are expected to continue to
omega-3 canola product,
Aquaterra™, are on track for
2020, with a positive earnings
pressure costs in 2020, demand for
contribution expected from the
the acquired products is strong.
2021 financial year.
These portfolios are an important
extension to our business and are
expected to drive further earnings
growth in the coming years.
Improving working capital
efficiency to generate cash was a
focus in all regions and cash flow
generation improved significantly
In North America we maintained
on the prior year.
earnings momentum despite severe
flooding in the United States and dry
conditions in Canada which
reduced demand and increased
competition in an oversupplied
market. Our new formulation facility
in Greenville, Mississippi, is now
ready for commissioning and will
support growth into North America.
Keeping our people safe, improving
margins, and generating cash are
the key priorities for the 2020 year.
Over recent years we have invested
in the transformation of our cost base
and the growth of our business.
We have broadened our product
portfolio and strengthened our
pipeline of new products, including
In Australia we responded to a
the development of the commercially
second year of extreme drought
significant omega-3 canola.
with an unprecedented temporary
Our investment has created a strong
closure of manufacturing lines and
platform for future growth and we
by launching the next phase of our
are excited by the opportunities
transformation program to reduce
before us. In closing I thank our
costs. These actions set us up to
dedicated and talented people
improve margins and working
across the world and our shareholders
capital efficiency in 2020 while
for their continued support.
retaining upside exposure to a
recovery in weather conditions.
Nufarm Limited Annual Report 2019
3
Board of Directors
Donald McGauchie AO
Greg Hunt
AB Brennan
Gordon Davis
Chairman
Managing Director and
Anne Brennan joined the
Gordon Davis joined the
Donald McGauchie AO
Chief Executive Officer
board on 10 February 2011.
board on 31 May 2011.
joined the board in 2003
Greg Hunt joined the
She has a bachelor
He has a bachelor of
and was appointed
Board and was appointed
of commerce (hons)
forest science (Hons),
chairman on 13 July 2010.
chief executive officer
from University College
master of agricultural
in 2015.
Galway and is a
science and holds a
He has wide commercial
experience within the
He has extensive
Agricultural, food
executive and
processing, commodity
agribusiness experience
trading, finance and
having held senior
telecommunication
executive positions and
fellow of the Institute of
master of business
Chartered Accountants
administration.
in Australia and a fellow
of the Australian Institute
of Company Directors.
Gordon is a director
of Primary Health Care
Limited and Midway
sectors. He also has
advisory roles. Greg was
She was formerly the
Limited and was
extensive public policy
formerly the managing
executive finance director
managing director of
experience, having
director of Elders Australia
for the Coates Group
AWB Limited between
previously held several
Limited, a position he held
and chief financial officer
2006 and 2010.
high-level advisory
from 2001 to 2007, and
for CSR.
Prior to this, he held
Prior to this Anne was a
various senior executive
partner in professional
positions with Orica
services firms Ernst & Young,
Limited, including general
Andersen and KPMG.
manager of Orica Mining
Anne is a director of
Charter Hall Group and
Argo Investments Limited.
She is also a director
of Rabobank Australia
Limited and Rabobank
New Zealand Limited.
Anne is a former director
of Myer Holdings Limited
and Metcash Limited.
Anne is a member of the
audit and risk committee
and human resources
committee.
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.
positions to the
was also a director of
government including
Tandor Ltd and Costa
the Prime Minister’s
Group Holdings.
Supermarket to Asia
He has worked with
Council, the Foreign Affairs
various private equity
Council and the Trade
firms focused on the
Policy Advisory Council.
agriculture sector and
He is a former member of
acted as corporate
the board of the Reserve
advisor to Australian
and international
organisations in
agribusiness related
matters.
Bank of Australia.
Donald is chairman of
Australian Agricultural
Company Limited and a
director of Graincorp Ltd.
In the past three years,
Donald was a director of
James Hardie Industries plc.
Donald is chairman
of the nomination and
governance Committee
and a member of the
human resources
committee.
4
Nufarm Limited Annual Report 2019
Frank Ford
Peter Margin
Marie McDonald
Toshikazu Takasaki
Frank Ford joined the
Peter Margin joined the
Marie McDonald joined
Toshikazu Takasaki joined
board on 10 October 2012.
board on 3 October 2011.
the board in 2017.
the board in 2012.
Frank has a master
of taxation from the
Peter has a bachelor of
Marie has a bachelor
Mr Takasaki represents the
science (hons) from the
of laws (honours) and
interests of shareholder
University of Melbourne
University of NSW and
a bachelor of science
Sumitomo Chemical
and a bachelor of
holds a master of business
(honours) and was a
Company (SCC).
business, accounting
administration from
senior partner at Ashurst
from RMIT University
Monash University.
until 2014, specialising in
Peter has many years of
leadership experience
in major Australian
mergers and acquisitions,
corporate governance
and commercial law.
He has a bachelor of
business administration
from the University of
Tokyo and is a former
executive of SCC holding
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, Frank was
also a member of the
Deloitte global board,
global governance
committee and national
management committee.
Frank is a director of
Tarrawarra Museum of Art.
Frank is the chairman
of the audit and risk
committee and a member
of the nomination and
governance committee
and international food
She was widely
senior management
companies. His most
recognised as one
positions in businesses
recent role was a chief
of Australia’s leading
relating to crop
executive of Goodman
corporate and
protection, both within
Fielder Ltd and before
commercial lawyers.
Japan and in the US.
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,
HJ Heinz Company
Australia Limited and is
currently executive chair
of Asahi Beverages ANZ.
Peter is a director of
ASX Listed Companies
Bega Cheese Limited,
PACT Group Holdings
Limited and Costa
Group Holdings Limited.
In the past three years
Peter was a director of
PMP Limited and Huon
Aquaculture Group Limited.
Peter is chairman of the
human resources committee
and a member of the
audit and risk committee.
Marie is a director of
CSL Limited, Nanosonics
Limited and the Walter
and Eliza Hall Institute
of Medical Research.
She was chair of the
corporations committee
of the Business Law
Section of the Law Council
of Australia from 2012 to
2013, having previously
been the deputy chair,
He is now a business
consultant with a national
qualification registered
by the Japanese Ministry
of Economy, Trade and
Industry as a small and
medium sized enterprise
consultant.
He brings broad
industry and international
experience to the board.
Toshikazu is a member
and was a member of
of the health, safety and
the Australian Takeovers
environment committee.
Panel from 2001 to 2010.
Marie is a member of the
audit and risk committee
and the health, safety and
environment committee.
Nufarm Limited Annual Report 2019
5
Key Management Personnel
Greg Hunt
Paul Binfield
Niels Pörksen
Elbert Prado
Brent Zacharias
Managing Director
Chief Financial
Group Executive
Group Executive
Group Executive
and Chief Executive
Officer
Portfolio Solutions
Manufacturing and
Nuseed
Officer
Paul joined Nufarm
Niels joined
Supply Chain
Brent joined Nufarm
Greg Hunt joined
in November 2011.
Nufarm in 2014 as
Elbert, a chemical
in 2006 after a
the Board and was
He has held senior
director, business
engineer, joined
14-year career with
appointed chief
strategic financial
improvement in
Nufarm in July 2013
Dow AgroSciences.
executive officer
roles at Coles Liquor
Europe, and was
after extensive
in 2015.
and Hotels, a
appointed director,
international
He has extensive
executive and
agribusiness
experience
major division of
commercial
experience in
Wesfarmers Ltd, and
operations in 2015.
senior operations
at Mayne Group.
In October 2016,
Paul has extensive
Niels joined the
roles within the
chemical industry.
Brent has a degree
in agricultural
economics and
held senior roles in
Nufarm’s Canadian
business prior to
having held senior
experience in
global team in
He has a strong
transferring to
executive positions
publicly listed and
Australia to
focus on safety,
Australia as Nuseed
and advisory roles.
private company
represent the
supply chain and
general manager
Greg was formerly
finance functions,
portfolio function,
manufacturing
in 2008.
Now based in
Canada, Brent holds
global responsibility
for Nuseed –
Nufarm’s
agricultural seed
and traits division.
the managing
both in Australia and
as part of the
excellence.
director of Elders
the United Kingdom.
Nufarm executive
Elbert was global
manufacturing
and supply chain
director for Rohm
and Haas.
team.
Niels has significant
experience in the
crop protection
industry and was
an executive
board member at
Nordzucker and
worked at BASF
Chemicals in various
senior management
roles for over
17 years.
Australia Limited,
a position he held
from 2001 to 2007,
and was also a
director of Tandor
Ltd and Costa
Group Holdings.
He has worked
with various private
equity firms focused
on the agriculture
sector and acted as
corporate advisor
to Australian and
international
organisations
in agribusiness
related matters.
6
Nufarm Limited Annual Report 2019
Operating and Financial Review
Our strategy and operating model
Nufarm is a leading developer and manufacturer
of crop protection solutions and seed technologies
with more than 3,000 employees supporting
customers in over 100 countries. Our business has
two main reporting segments.
Seed
Technologies
Crop
Protection
Seed technologies combines
our seed treatment portfolio
and the Nuseed business.
Our seed treatment products
provide protection and
treatment for damage
caused by insects, fungus
and disease.
Nuseed is focused on
plant-based solutions that
deliver value BEYOND
YIELD™. Through Nuseed
we develop and distribute
high yielding sunflower,
sorghum and canola
seed to customers in
more than 30 countries.
We use our leading
molecular capabilities,
global genetics and
industry collaboration
to develop unique plant
output traits with specific
customer and consumer
benefits such as our
proprietary Omega-3
canola.
We develop, manufacture
and sell crop protection
solutions including
herbicides, insecticides
and fungicides that help
growers protect crops
against weeds, pests
and disease. We operate
primarily in the off-patent
market, providing
customers with long-
standing foundational
products and unique
formulations.
Our business is focused
on five core crops across
key geographies. Our key
crops are cereals; corn;
soybean; pasture, turf and
ornamentals; and trees,
nuts, vines and vegetables
(TNVV). Our core
geographies are Europe,
North America, Asia Pacific
and Latin America.
Our global footprint
means we manufacture,
source and deliver high
quality products at
competitive prices.
We partner with leading
industry and research
organisations around
the world to develop and
offer new solutions to meet
existing and emerging
farmer needs across
the life-cycle of our
chosen crops.
FY19 Gross
Profit
Asia 4%
Seed Technology 8%
ANZ 9%
Europe 32%
North America 22%
Latam 25%
FY19 Gross
Profit
Seed Technology 8%
Other 13%
Fungicide 10%
Insecticide 14%
Herbicide 55%
Nufarm Limited Annual Report 2019
7
Operating and Financial Review (continued)
Strategy
We aim to build a cost-competitive
business and improve the quality of
earnings to create a strong platform
to support continued, profitable
growth. We allocate capital to our
areas of existing strength and
potential growth opportunities
that will maximise returns.
Our scale and global distribution
footprint make us an attractive
partner for major manufacturers
and research organisations.
our customers high-quality
products at competitive prices
and a growing range of new,
differentiated products to meet
more of their needs across the
crop lifecycle.
We believe our product and
geographic diversity, along
with our long-term customer
relationships, help protect our
business from adverse seasonal
or commercial pressures in any
one market while also providing
Channel
partnerships
We have teams based in more
than 30 countries supporting
channel partners and growers
in over 100 countries around the
world. This platform also allows
us to establish close relationships
with our customer base, including
independent distributors and
dealers as well as end users of
our products – contributing to
a range of expansion opportunities
our understanding of the evolving
in major cropping markets around
needs of growers and thereby
helping us optimise our product
development activities.
By collaborating with these industry
the world.
participants, we are able to offer
Operating Model
Our business model puts the
customer at the centre of our
business and decision
making and provides a
foundation for future growth.
8
Nufarm Limited Annual Report 2019
Channel
partnerships
Customer
experience
Portfolio
solutions
Supply chain
excellence
People · Values · Culture · Process
Supply chain
excellence
Portfolio
solutions
We have crop protection
With strategically located
formulation and manufacturing
laboratories across the world,
facilities in nine countries, and
we have proven product
seed-related research,
development and registration
development and marketing
expertise in our key markets that
operations in Australia, North
enables us to develop innovative,
America, Latin America and Europe.
differentiated and value-added
Our global manufacturing and
distribution platform allows us to
deliver products to our customers
with short lead times, which is
critical given the weather dependent
nature of cropping and related crop
protection product demand patterns.
products and formulations
relevant to the region’s growers
and bring them to market quickly.
This provides us with a strong
pipeline of new product
opportunities and supports the
profitable growth of our business.
We have a strategic alliance with
our largest shareholder, Sumitomo
Chemical Company, with whom
we have a range of collaboration
agreements covering product
distribution, development and
manufacturing. We also have
commercial relationships with other
major crop protection companies
which we believe strengthen our
business in a variety of areas,
including research and development,
procurement, manufacturing,
distribution and sales.
Nufarm Limited Annual Report 2019
9
Operating and Financial Review (continued)
Sustainability
Our mission to “grow a better
over the four years reflects the
Improving environmental controls
tomorrow” reflects our ambition
positive impact of the strategy
and performance has been another
for our customers, our people,
with our safety metrics approaching
key area of progress during the period
communities and financial
industry best practice.
of strategy implementation. We have
stakeholders.
While some regions and operating
With the world’s population
sites achieved significant injury
increasing in size and prosperity,
prevention milestones in 2019,
Nufarm plays an important role
overall company performance
in helping farmers deliver food
against our principal safety
security and improved nutrition to a
metric, Serious Injury Frequency
growing population. We recognise
Rate, deteriorated in the first half
the challenges they face in using
of the year from our best ever
limited natural resources in a
performance recorded the
sustainable way while responding
prior year.
to climate volatility and growing
pressures on biodiversity.
We acted quickly to identify and
address the causes and satisfy
We are committed to understanding
ourselves there had not been a
these challenges and advancing
systemic weakening of controls.
change within our own organisation
Our efforts to refresh the focus on
and throughout the value chain.
safety across our global workforce
We work in partnership with our
through stop work initiatives
customers, colleagues, suppliers,
and safety leadership programs
regulators, industry groups, and
improved performance toward
investors to assess, prioritise and
the end of the year.
While we have expanded the
focus of our sustainability efforts
beyond safety and health over the
past years, making sure every one
of our colleagues gets home safely
every day will continue to be our
number one priority.
developed and implemented a
global environmental standard that
sets expectations around our key
environmental risk areas of waste
and emissions, soil and groundwater
protection, and resource use and
conservation. A gap analysis against
the standard has been completed
for all manufacturing operations and
we have improved the principal
elements of our environmental
management systems.
In 2019 we made good progress
closing gaps against our standards
and our environmental management
systems have been further
strengthened with an additional
two manufacturing sites completing
ISO14001 accreditation. This brings
the number of manufacturing sites
with ISO14001 accreditation to five
and this year we have committed
to achieving accreditation at all
manufacturing sites by 2024. We
further reduced our water use this
year and have set ourselves an
objective to improve waste water
treatment at our sites.
manage sustainability-related risks
and opportunities. Our approach
focuses on the following key areas:
• Safety
• Environment
• People
• Product stewardship and
ethical sourcing
• Governance
Financial year 2019 is the final
year of the sustainability strategy
launched in 2015. When we
launched the strategy our aspiration
was to achieve a step change in
sustainability maturity and impact,
with the health and safety of our
people being the priority of the
strategy for the first two years.
We have made significant progress
in safety risk management since
2015 through investment in safety
related plant improvements, safety
standards, systems and processes
and safety awareness programs.
The improvement in performance
10
Nufarm Limited Annual Report 2019
Global SIFR and LTIFR – rolling 12 month averages
4.50
4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0
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Nufarm Global SIFR
Nufarm Global LTIFR
Serious Injury Frequency Rate (SIFR) is an indicator that includes the two principal
serious injury metrics (Lost Time and Medical Treatment).
Nufarm Limited Annual Report 2019
11
Our people and the Nufarm culture play a critical role in both delivering on the company’s strategy and meeting community expectations. Over the past four years we have embedded common values and behavioural expectations that unite our global workforce and have helped us create “One Nufarm”. We have formalised our position on matters such as modern slavery, equal opportunity and collective bargaining in our human rights policy and committed to lifting inclusion and diversity across our workforce. In 2019 we established inclusion and diversity councils to support the achievement of our target of increasing female participation in our workforce. Our product stewardship standards and processes support our customers to meet the growing societal concerns around the sustainability of modern agriculture. This will be an increasing focus for our product development and portfolio teams and will influence how we allocate funding to construct our portfolio of future products. A significant milestone in advancing the maturity of our sustainability approach was the preliminary materiality assessment completed last year. This has helped confirm the issues relevant to Nufarm stakeholders and is an important step as we continue to broaden the focus of our sustainability efforts beyond our internal organisation and into the value chain. The increased discipline, processes and structures the organisation has put in place to ensure we are measuring and managing our business in a way that allows us to be accountable for our performance are testament to the achievement of the aspirations of the strategy we launched in 2015. There is more work to do and in 2020 we will re-engage with external stakeholders to expand our materiality assessment to inform the next phase of our sustainability strategy. The strategy will build on the work we have done to advance change within our organisation and seek to influence change beyond our business, particularly through how we support our customers in achieving their own sustainability goals. Operating and Financial Review (continued)
Group Results
A full year contribution from the
acquired European portfolios
and strong performances in North
America, Seed Technologies and
Asia were the key drivers of
earnings growth.
Year ended 31 July
Revenue
Underlying gross profit
Underlying EBITDA (1) (2)
Underlying EBIT (1)
Operating profit
External headwinds constrained
Underlying financing costs
performance with the continuation
Underlying net profit after tax (3)
of drought conditions in large parts
Net profit after tax
of eastern Australia, extreme
flooding in major cropping regions
in the United States and supply
Net operating cash flow
Underlying basic earnings per
share (cents)
disruptions in Europe.
Total dividend per share declared
in respect of period (cents)
2019
$000
2018
$000
Change
3,757,590
3,307,847
1,034,667
420,293
248,585
197,815
116, 866
89,080
38,310
98,131
21.2
–
963,434
385,653
265,103
175,499
118,334
98,396
(15,588)
(88,169)
13.6%
7.4%
9.0%
(6.2%)
12.7%
(1.2%)
(9.5%)
345.8%
211.3%
28.2
(25.0%)
11.0
(11.0)
Earnings
Statutory net profit after tax of
Underlying earnings before
Financing costs (comprising net
$38 million increased $54 million
interest, tax, depreciation and
interest and foreign exchange costs)
on the prior year loss of $16 million
amortisation (EBITDA) increased
were in line with the prior year, with
and included material items of
nine per cent to $420 million with
higher interest costs offset by lower
$51 million (2018: $114 million).
a full year contribution from the
foreign exchange costs. Underlying
Group revenues increased
14 per cent to $3.76 billion
(2018: $3.31 billion) with growth
in all regions except Australia/
New Zealand with large parts
of the Australian east coast
impacted by continued
drought conditions.
The increase in revenues was
partially offset by the impact of
increased competition in Latin
America, cost pressures in Europe
and pricing pressure in North
America resulting in a decline
in gross profit margins from
29.1 per cent in the prior year
to 27.5 per cent.
European portfolios acquired
interest costs increased by 17 per
in 2018 and strong earnings in
cent to $107 million (2018: $92 million)
North America, Seed Technologies
in line with higher average debt
and Asia offsetting a weaker
levels throughout the year. Foreign
performance in Australia/New
exchange losses declined 64 per
Zealand and flat earnings in
cent to $10 million (2018: $27 million)
Latin America.
Underlying earnings before
interest and tax (EBIT) declined
six per cent primarily due to
the inclusion of a full year of
as Latin American hedging costs of
approximately $15 million, which
were in line with the prior year,
were offset by gains from other
foreign exchange exposures.
depreciation and amortisation
Underlying basic earnings per
for the European portfolios
share declined to 21.2 cents with
acquired in 2018.
earnings growth less than the
increase in issued equity.
12
Nufarm Limited Annual Report 2019
Material items
Year ended 31 July 2019
Material items by category
Legal costs
Idle plant capacity
Asset rationalisation and restructuring
Pre-tax
$000
After-tax
$000
(10,517)
(21,386)
(18,867)
(10,517)
(21,386)
(18,867)
Total material items
(50,770)
(50,770)
Material items of $51 million were
of the performance improvement
comprised primarily of unrecovered
program in Australia, integration
overhead costs relating to the
costs for the acquired European
unprecedented temporary closure
portfolios and legal costs for the
of manufacturing lines in Australia
action brought in the United States
following continued drought
conditions, business restructuring
to enforce Nufarm’s rights in
relation to the omega-3 canola
costs relating to implementation
patent estate.
Dividend
Directors suspended dividends for the 2019 year. This decision reflects
the company’s immediate focus on reducing debt levels.
Cash flow
Year ended 31 July
Cash generated from operations
Net interest paid
Taxes paid
Dividends received
2019
$000
242,734
(102,608)
(42,060)
65
2018
$000
58,583
(98,652)
(48,112)
12
Change
184,151
(3,956)
6,052
53
Net operating cash flows
98, 131
(88,169)
186,300
Cash flows from investing activities
(173,980)
(965,574)
791,594
Cash flows from financing activities
269,994
1,112,430
(842,436)
Net increase in cash and cash
equivalents
194,145
58,687
135,458
Net operating cash flows
Net investing cash flows reduced, with
increased $186 million on the
the prior year including the acquisition
prior year primarily due to
of product portfolios in Europe.
higher earnings and a smaller
increase in net working capital
requirements compared to the
prior year.
The major financing activity during
the year was an equity raising that
raised net proceeds of $296 million.
Nufarm Limited Annual Report 2019
13
Operating and Financial Review (continued)
Balance Sheet Management
Year ended 31 July
Net debt
ANWC/sales (%)
Leverage (with pro forma adjustment in FY18)
Interest coverage ratio (with pro forma adjustment in FY18)
Gearing %
ROFE
2019
$000
2018
$000
Change
1,247,129
1,374,070
46.8%
2.97
3.92
34.1%
7.1%
40.3%
3.00
4.99
41.1%
9.4%
(9.2%)
6.5%
(0.03)
(1.07)
(7.0%)
(2.3%)
Net debt was reduced by nine
The leverage ratio of 2.97 times is
The performance improvement
per cent, with the equity raising in
a small improvement on the prior
program in Australia is forecast to
the first half of the financial year
year, reflecting lower net debt
deliver increased earnings before
reducing debt and strengthening
and higher earnings.
interest, tax, depreciation and
the company’s financial position.
Interest coverage reduced to
Average net working capital to
3.92 times reflecting the increase
sales increased to 46.8 per cent.
in interest costs on higher average
This was primarily due to higher
debt levels during 2019.
average inventories held in
Australia and North America due
to climatic factors impacting sales,
2020 outlook
amortisation of between $10 million
to $15 million in 2020. The business
is well positioned to benefit further
from improved weather conditions
if they occur.
Resolution of the supply issues
that impacted product availability
and higher average inventories
On 30 September 2019 the
in Europe in 2019 is expected to
and receivables in Europe.
company announced its intention
contribute positively to earnings for
Improving working capital
efficiency across all regions remains
a key focus for all levels of the
organisation with a medium-term
target to return to 2018 levels of
average net working capital to
sales, and in the longer term to
return this ratio to the range of
35 to 37 per cent.
Improving inventory levels in
Australia, North America and Europe
will be a key driver to meeting this
goal. Inventory levels in Australia
have been significantly reduced
during 2019 and this will benefit
2020. Inventory levels in North
America are expected to normalise
as the region recovers from flooding
that impacted industry sales in 2019.
In Europe, Nufarm will have full
control of the supply chain for the
majority of the acquired portfolio in
2020 and this will drive improved
inventory management.
to divest the crop protection and
2020. The tight supply conditions for
seed treatment assets in South
some technical ingredients sourced
America (including in Brazil,
from China experienced in 2019
Argentina, Chile and Colombia)
are expected to continue to impact
for cash proceeds of $1,188 million
negatively on the cost of goods
and customary net working capital
in this region during 2020. The net
adjustments on completion.
The proposal is subject to
impact of these factors is expected
to benefit earnings before interest
review by an independent expert,
and tax by approximately
shareholder and competition
approvals by relevant South
American regulatory bodies.
$15 million. There is no major
planned plant maintenance shut
down scheduled for the region
Completion of the transaction is
in the 2020 financial year.
targeted during the first half of
the 2020 calendar year. Nufarm
will continue to operate these
businesses until completion of
the transaction.
Nufarm expects continued
growth in sales, cost saving
Competitive market conditions are
expected in North America due to
the current high levels of inventory
in sales channels and lower farm
incomes. Continued support from
existing customers is forecast to
deliver sales growth and
benefits and improvements in
commissioning of the Greenville
supply chain efficiencies to drive
earnings growth in the remaining
businesses in 2020.
formulation facility in the first half
of 2020 will support future growth
into south-eastern states of the
United States.
14
Nufarm Limited Annual Report 2019
The full earnings benefit of the
Forecast net interest expense of
includes a full year forecast of
Greenville facility is expected to
$105 million to $110 million in 2020
$8 million relating to the South
be realised when manufacturing
includes an estimated $30 million
American businesses.
throughput reaches planned
of interest costs relating to the
capacity in 2021.
Earnings from Seed Technologies
South American businesses that
are proposed to be divested.
Earnings before interest, tax,
depreciation and amortisation for
the first half of the 2020 financial
will be reduced by the impact of the
Forecast hedging and net foreign
year are expected to be in line with
divestment of the South American
exchange costs of $20 million
the prior year. This assumes a full
seed treatment assets to Sumitomo
includes an estimated full year
half contribution from the South
if this transaction proceeds.
hedging cost of approximately
American businesses and average
Earnings from the remaining
$12 million relating to the South
seasonal conditions for the major
assets are expected to grow
American businesses that are
selling periods in our key markets,
with continued momentum from
proposed to be divested.
with the exception of Australia
product launches supplemented
by increased canola sales if
weather conditions in Australia
improve. First commercial sales of
omega-3 canola are expected
in 2020 with a positive earnings
contribution forecast for 2021.
The company’s effective tax rate
is expected to be approximately
33 per cent in 2020.
Capital expenditure is forecast
to be approximately $150 million.
Forecast depreciation and
amortisation of $190 million
where continued drought conditions
are expected to impact the east
coast for the summer cropping
season. No material impacts
from government policy changes
or additional third party supply
interruptions are assumed in
this forecast.
Operating segments results
Sales and earnings increased in both the crop protection and seed technologies segments.
Revenue
Underlying EBITDA
2019
2018
Change
2019
2018
Change
Year ended 31 July
($000s)
Crop protection
Australia and New Zealand
Asia
Europe
North America
Latin America
452,368
190,285
814,845
1,020,448
1,058,158
590,151
170,680
642,571
833,705
885,232
Total Crop Protection
3,536,104
3,122,339
Seed Technologies – global
221,486
185,508
–
–
Corporate
Nufarm Group
3,757,590
3,307,847
13.6%
420,293
385,653
(23.3%)
11.5%
26.8%
22.4%
19.5%
13.3%
19.4%
n/a
20,685
26,979
167,608
107,762
97,276
23,736
25,229
149,873
99,487
97,377
420,310
395,702
50,736
(50,753)
43,580
(53,629)
(12.9%)
6.9%
11.8%
8.3%
(0.1%)
6.2%
16.4%
(5.4%)
9.0%
Nufarm Limited Annual Report 2019
15
Operating and Financial Review (continued)
Crop Protection
Crop protection sales and earnings
Dry winter conditions in the central
company incurring overhead costs
increased in all regions except
and northern Europe impacted
of $21 million that could not be
Australia/New Zealand which was
earnings in the first half of the year,
allocated to manufacturing
impacted by continued drought
and biennual planned maintenance
production and these were
conditions in large parts of the east
shutdowns also impacted earnings
recorded as a material item in
coast of Australia, and earnings
by $5 million.
were flat in Latin America. Further
detail on the drivers of performance
North America
in each region is provided below.
Herbicide sales increased eight
per cent to $2.29 billion with growth
in phenoxy herbicides offsetting a
three per cent decline in glyphosate
sales due to unfavourable weather
conditions in Australia. Glyphosate
sales represented approximately
ten per cent of total company gross
margin in 2019. Other herbicide
revenues were up 21 per cent
on the prior year with Dicamba,
Extreme wet conditions in the US
south and midwest delayed the
season, reduced area planted and
impacted crop protection and turf
applications with dry conditions
in Canada also impacting sales.
High channel inventories in the
US and Canada from impending
tariffs and the reduction in seasonal
applications resulted in aggressive
industry pricing.
A strong contribution from the turf
the financial accounts. Inventory
levels have been reduced by
approximately $100 million and
manufacturing has recommenced
in the 2020 financial year.
The next phase of the performance
improvement program was
launched during the year to
deliver greater efficiencies, reduce
earnings volatility and improve the
company’s competitive position.
The program is expected to deliver
a sustained improvement in EBITDA
performance with an improvement
of $10 million to $15 million dollars
Flumioxazin, Bromoxynil and
and ornamental segment in the first
forecast in 2020. Costs of $10 million
Fluazifop the major contributors.
half and market share gains in crop
to implement the program have
Insecticide sales were up 21 per cent
to $462 million with growth driven
primarily by a full year contribution
protection products from existing
and new customers in the second
half offset the impact of external
from the acquired European portfolios
headwinds.
and continued growth in Brazil.
Fungicide sales grew by 30 per cent
to $410 million. Growth was driven
primarily by a full year contribution
from the acquired European
portfolios with tebuconazole and
Working capital levels were elevated
as a result of lower and later than
expected sales following the
extreme weather conditions.
Australia/New Zealand
prochloraz mixtures delivering
Continued dry conditions for large
strong growth despite constrained
parts of the east coast of Australia
supply limiting sales.
following extreme drought last year
been incurred to date and included
as a material item in the 2019 results.
Asia
Drought conditions, low pest
outbreaks and low commodity
prices led to a decline in the overall
market in Indonesia. Nufarm gained
market share with the support
of new product launches and
increased sales of differentiated
products to achieve a small
increase in sales and earnings.
Europe
Sales and earnings grew in flat
market conditions with a full year
contribution of $75 million from
the product portfolios acquired
in 2018 the main driver of growth.
This was below the forecast
contribution as a result of supply
issues increasing costs and
and a late season for the west coast
Sales and earnings momentum
impacted demand and sales of
continued in China with a full year
crop protection products. Elevated
contribution from the new joint
levels of inventories in Australian
sales channels due to a second
year of drought conditions resulted
in aggressive industry pricing that
venture. Sales and earnings also
increased with strong customer
support in Japan, Malaysia and
Sri Lanka and a new product
kept margins at reduced levels
launch in Vietnam.
for a second year.
In response to the low levels of
impacting ability to meet customer
demand and high inventory levels,
demand. The acceleration of
product registration transfers for
the acquired product portfolios
is expected to improve product
availability in 2020.
manufacturing lines in Australia
were temporarily closed to enable
an orderly reduction in excess
inventory. This action resulted in the
16
Nufarm Limited Annual Report 2019
Latin America
New varieties were successfully
period. Initial data confirms earlier
launched in all regions, helping to
independent findings by NOFIMA
drive both increased sales and
that production metrics such as
stronger margins. Europe was a
growth, feed conversion, and
stand-out performer, with new
mortality are competitive with
sunflower hybrids contributing
fish oil. The data also suggests
to a significant increase in sales
enhanced fillet colour for fish that
Increased soy plantings in
Brazil and a return to more normal
climatic conditions in Argentina
drove volume and revenue growth
across all key product groups.
Strong early demand for the
summer season drove sales late
into the second half of 2019,
which also resulted in an increase
in working capital balances.
Strong competition on foundational
products reduced margins, this was
offset by increased sales volumes
and an improved product mix to
deliver a steady EBITDA outcome
for the period.
Seed Technologies
over the prior year.
Substantial progress was achieved
in relation to Nuseed’s proprietary
omega-3 canola, which is being
commercialised initially as a feed
input for the aquaculture industry
branded under the name ‘Aquaterra™’.
During the period, a regulatory
approval for cultivation was
secured from the United States
Department of Agriculture and
regulatory filings were submitted
Seed Technologies combines the
in several other markets including
seed treatment portfolio and the
Europe. The regulatory submissions
Nuseed business.
Revenues increased 19 per cent to
$221 million, with seed treatment
relating to consumption (food and
feed) approval in both the USA and
in Canada are also progressing.
revenues increasing 17 per cent to
The first commercial crop of 35,000
$98 million and Nuseed revenues
acres was planted in Montana
increasing 20 per cent to
and North Dakota in the US and
$123 million.
Growth in seed treatment revenues
and earnings was driven by higher
sales of Sumitomo products into
Latin America and European sales
is currently being harvested.
This crop will be stored on-farm
prior to delivery to mill for crush
Proceedings were instigated
and oil production in the first
in the Eastern District of Virginia
quarter of next calendar year.
asserting infringement of valid
grew with a full year contribution of
Next generation varieties of
seed treatment products acquired in
omega-3 canola with improved
the prior year. This more than offset
agronomic performance, including
a decline in Australian sales and
higher yields, are currently in seed
sales into North America remained
production and will be available
stable on the prior year.
for commercial planting in the
Nuseed secured market share
gains across its three focus crops
of sunflower, sorghum and canola.
This was despite challenging
seasonal conditions in Australia
which negatively impacted canola
US next year. The introduction of
these new varieties will continue
to improve oil production per
planted acre, reduce grain
transport costs and progressively
lower the cost of goods.
plantings and in the United States,
Extensive fish feeding trials,
which resulted in lower plantings
involving more than one million
of sunflower and sorghum.
fish, were undertaken with several
aquaculture firms during the
were fed Aquaterra diets with
increasing inclusion rates, which
is an important feature for the
final market. The trial results
validate the performance and
fit of Aquaterra in potential
customers’ existing feed
manufacturing and fish farm
systems on a large scale.
Positive initial commercial
discussions have been undertaken
with the key aquafeed and farm
companies in Norway and Chile.
Nuseed is targeting to have first
commercial supply agreements
in place before the end of the
calendar year.
The intellectual property estate
which protects the proprietary
omega-3 technology platform
continued to strengthen, with new
patents secured during the period.
patents held by Nuseed and its
collaborative partners, CSIRO
and GRDC. The result of this court
action does not impact Nuseed’s
freedom to operate. The court
action is scheduled to be heard
in October 2019, with a decision
anticipated before the end of
the year.
Nufarm Limited Annual Report 2019
17
Operating and Financial Review (continued)
2019
$000
2018
$000
420,293
385,653
(171,708)
(120,550)
248,585
265,103
(50,770)
197,815
(89,604)
175,499
(2) Underlying EBITDA is used to reflect the underlying performance of
Nufarm’s operations. Underlying EBITDA is reconciled to Operating
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
Profit below.
Year ended 31 July
Underlying EBITDA
less depreciation and amortisation excluding
material items
Underlying EBIT
measures including Underlying
Material items impacting operating profit
net profit after tax and Gross profit
Operating profit
margin. These measures are used
internally by management to
(3) Non-IFRS measures are defined as follows:
assess the performance of our
business, make decisions on the
allocation of our resources and
assess operational management.
Non-IFRS measures have not been
• Underlying gross profit – comprises gross profit less material items.
• Underlying net profit after tax – comprises profit/(loss) for the
period attributable to the equity holders of Nufarm Limited less
material items.
subject to audit or review.
• Average gross margin – defined as average gross profit as a
The following notes explain
the terms used throughout this
profit release:
(1) Underlying EBIT is earnings
before net finance costs,
taxation and material items.
percentage of revenue.
• Average gross profit – defined as revenue less a standardized
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/debt establishment transaction
Underlying EBITDA is Underlying
costs and lease amortization – finance charges as described in
EBIT before depreciation and
note 10 to the 31 July 2019 Nufarm Limited financial report.
amortization of $420.293 million
for the year ended 31 July 2019
and $385.653 million for the
year ended 31 July 2018. We
believe 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.
• ROFE – defined as underlying EBIT divided by the average of
opening and closing funds employed(total equity plus net debt).
• Net debt – total 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,
non-current trade receivables/trade finance receivables,
and inventories less current trade and other payables.
• Average net working capital – net working capital measured
at each month end as an average.
• Constant currency – comparison removing the impact from the
fluctuation in exchange rates between all foreign denominated
amounts and the Australian dollar.
• Underlying free cash flow – net cash from operating activities
excluding material items less net cash from investing activities
excluding material items.
18
Nufarm Limited Annual Report 2019
Risk Management
A summary of the material risks that could impact the achievement
of Nufarm’s business objectives is included below. The Group’s
processes for managing risk are set out in the Group’s Corporate
Governance Statement which is available on our website:
www.nufarm.com/investor-centre/corporate-governance/
Economic and Business Risks
Climate and seasonality
Commodity prices
As an input supplier to global
International commodity prices
Further, a substantial portion of
Nufarm’s revenues, costs, assets
agriculture, demand for crop
can impact the profitability of crop
and liabilities are denominated in
protection products is influenced
protection companies. This relates
currencies other than Australian
by climatic conditions that help
to fluctuations in the prices of
determine the timing and extent
commodities that are associated
dollars. As a result, exchange
rate movements affecting these
of cropping activity as well as
with chemical intermediates used in
currencies may impact the financial
weed, pest and disease pressures.
the manufacture of crop protection
performance and future prospects
While certain conditions may
products, and to international prices
of the business of Nufarm.
increase demand for crop
for various crops (‘soft’ commodities)
protection products, extreme
that can affect demand for those
climatic conditions, such as
crops and growers’ decisions to
prolonged drought, may reduce
plant them. The crop protection
demand for those products.
products market can be volatile
In addition, the timing of weather
seasons in the geographies in
which Nufarm operates is uncertain
and varies from year to year.
Consequently, there is a risk that
unusually early or late seasons
may have a negative impact on
and pricing can change rapidly.
This volatility, in combination with
foreign exchange changes, could
have a material impact on Nufarm’s
ability to compete and may impact
the financial performance and
prospects of the business.
Nufarm has implemented a range
of financial risk management
policies and procedures to assist
with the management of foreign
exchange exposure. The group
treasury function manages financial
risks in accordance with these
policies. Where possible, currency
and interest rate risk is managed
through hedging strategies.
Industry consolidation
demand for Nufarm products in
Nufarm has entered into numerous
The industry in which Nufarm
a particular year and therefore
arrangements with suppliers
conducts business has undergone
its financial performance.
and customers to assist in the
a period of consolidation with
Nufarm’s operations are
global, providing geographic
diversification to climatic and
seasonality risks. Our product
portfolio is diverse, supporting
a wide range of agricultural
applications. At an operating
level, Nufarm’s business planning
processes incorporate forecasting
and supply planning based
on typical weather conditions.
These plans are reviewed on an
ongoing basis as the seasons
progress to align supply with
changing demand.
management of our supply chain
a number of large mergers and
costs to ensure we can compete
acquisitions (including, for example,
in changing and competitive
markets. Nufarm’s business
ChemChina’s acquisition of
Syngenta, Dow’s merger with
planning processes help inventory
DuPont, FMC’s acquisition of certain
management to reduce price risk
assets from DuPont’s crop protection
of stock on hand.
Foreign exchange
business, Bayer’s acquisition of
Monsanto, UPL’s acquisition of
Arysta and BASF’s acquisition of
Global crop protection companies
a portfolio of assets from Bayer).
such as Nufarm purchase inputs
Completion of these transactions
and determine selling prices in a
is expected to result in a change
range of international currencies
to the industry landscape and
and are therefore exposed to
fluctuations in exchange rates.
competitive environment, producing
larger market competitors with an
increased market presence.
Nufarm Limited Annual Report 2019
19
Operating and Financial Review (continued)
20
Nufarm Limited Annual Report 2019
Nufarm continues to actively monitor the market to identify specific risks and opportunities presented by industry consolidation. We have taken a disciplined approach to participation in opportunities presented, ensuring all decisions are strategically aligned and execution risks are understood and managed. Analysis of the industry post consolidation occurs on an ongoing basis as input to strategic marketing and operational decisions.Geopolitical risksNufarm is subject to a number of geopolitical risks in certain markets that Nufarm may or may not operate in, including political instability and policy changes. The introduction of Chinese and US tariffs have the potential to impact the price and volume of a number of agricultural products that are traded between the countries (for example, soybeans exported into China from the US) and also have the potential to impact the volume and price of certain chemical inputs imported by Nufarm.The UK’s exit from the European Union has the potential to impact the UK and Europe’s agricultural sector as new agricultural and crop chemical policies may be implemented. These changes, among others, could adversely affect Nufarm’s operations and earnings.Nufarm continues to monitor these developments closely and assess the potential impacts through our ongoing business planning processes for both demand and supply.Grower options and technologyGrowers evaluate a number of options when determining how best to address their crop protection needs. Products supplied by Nufarm might be assessed alongside products supplied by other crop protection companies and other forms of crop protection by alternative technologies such as biological controls and biotechnology. The introduction of genetically modified seeds has, in some instances, either reduced the need for crop protection products or resulted in a change in the crop protection products used.The Nufarm portfolio team conducts regular assessments of advancements in application technology and product development. This is a key input to the product development pipeline and participation in potential partnerships with third parties with access to alternative technologies. Debt financing risk
any issues are identified early
may have an adverse effect on the
Nufarm has significant short term
bilateral funding and supplier
financing facilities to fund its
working capital requirements.
Continued access to these facilities
is dependent upon compliance
with relevant banking covenants
and actively managed. A clearly
operating, marketing and financial
defined funding strategy is in
performance of Nufarm. Although
place which includes a diversified
most of Nufarm’s products are post
funding structure with a range
patent, there are certain products
of debt maturity profiles.
or developing technologies
IP rights and branded names
protection. There is a risk that
which may be entitled to patent
and the successful renewal of these
Nufarm regards its brand names,
facilities as and when they fall
trademarks, domain names, trade
due. Nufarm’s ability to refinance
secrets and similar intellectual
its debt obligations, and the terms
property as important to its success.
on which any such refinancing
Nufarm’s business has been
can be obtained, is uncertain.
developed with a strong emphasis
If Nufarm is unable to refinance its
on branding. Should any brand
debt obligations, or to do so on
names be damaged in any way
reasonable terms, it may have
or lose market appeal, Nufarm’s
an adverse effect on the financial
business could be adversely
position and performance of
Nufarm. Board and executive
oversight is in place to monitor
ongoing compliance with key
impacted. While Nufarm will use
all reasonable endeavours to
protect its intellectual property
rights, unauthorised use or
banking covenants and to ensure
disclosure of its intellectual property
Nufarm might not be able to obtain
or maintain such protection, or that
Nufarm’s activities may infringe the
patent or other rights of others.
Policies and procedures are in
place to assist with the identification
and protection of patents and
trademarks. The Nufarm product
development process includes
specific steps to identify potential
patent or trademark risks.
Where considered necessary,
external expert advice is obtained.
Nufarm Limited Annual Report 2019
21
Operating and Financial Review (continued)
Operational Risks
Third party supply
Nufarm relies on supply of various
active ingredients, intermediates
and other inputs from a number
of third party suppliers, including
suppliers based in China. The
reliability of supply and the cost of
these inputs can be impacted by a
range of factors including, but not
limited to, manufacturing closures or
temporary disruptions, compliance
Relationships with channel
partners and commercial
counterparties
Nufarm is exposed to competitor
pressures in retaining and attracting
customers. The loss of a key
customer, the inability to renew
contracts on similar terms or the
inability of Nufarm to attract new
customers may have a material
impact on future profitability.
Nufarm’s strategic alliances,
partnerships and distribution
agreements are reviewed on an
ongoing basis and aligned to
strategy. Customer marketing
plans are managed regionally
and aligned to specific customer
needs. Our customer base is
diversified to minimise the impact
of the loss of any single customer.
with more stringent environmental
Nufarm also uses third parties to
Quality controls
and/or safety standards, and other
sell and/or distribute its products.
Nufarm manufactures and supplies
changes in government policy or
These third parties may choose
a range of crop protection products
regulation. Any resulting disruption
to prioritise other products or may
which must be manufactured,
to supply or price impact may affect
elect not to renew distribution
formulated and packaged to
Nufarm’s ability to meet its sales
agreements when they expire.
exact standards, with strict quality
and/or margin forecasts.
Should this occur, Nufarm may
controls. The performance of those
Supply and demand factors play
a role in the profitability of crop
protection sales. The introduction of
new distributors.
not be able to sell its products or
products would be negatively
may suffer delays in appointing
impacted if those quality standards
are not met and this could, in turn,
have an adverse impact on the
reputation and success of Nufarm.
significant levels of new capacity
Nufarm has important strategic
relating to the supply of crop
alliances and a range of business
protection products can result in
relationships with other major
Quality guidelines and procedures are
volatility in pricing and margins in
companies in the sector, including
defined across the manufacturing
key products supplied by Nufarm.
licensing arrangements and
process, including external tolling
Nufarm’s procurement and
business planning processes
include the ongoing assessment
of supply availability as input to
manufacturing and safety stock
levels. Where possible, we have
entered into specific supply
arrangements to assist with
distribution arrangements.
activities. These processes are subject
These arrangements provide
to rigorous testing to ensure quality
opportunities to maximise the
standards are met. An ongoing
value of Nufarm’s distribution
review program is in place with
platforms as well as increasing
the aim of ensuring operations
Nufarm’s customer base by
adhere to the quality standards
providing access to additional
and identify continuous
products or new markets.
improvement opportunities.
availability and pricing of key
Nufarm’s collaborative
active ingredients.
Our manufacturing facilities are
geographically aligned with
distribution to minimise disruption
to supply.
relationships with other major
crop protection companies
may change or be terminated,
which could have a material
adverse impact on Nufarm’s
financial performance.
22
Nufarm Limited Annual Report 2019
Loss of key personnel
Nufarm and may impact
or natural disasters could have
There can be no assurance that
Nufarm will be able to retain key
Nufarm’s financial performance
a significant impact on Nufarm’s
and future prospects.
ability to maintain operations
personnel. The loss of key personnel
Critical roles across the
or the inability to recruit and retain
or motivate high calibre staff could
have a material adverse effect on
Nufarm. Nufarm operates globally
and has facilities in multiple
jurisdictions. Management of a
complex business that operates
globally has a higher employee
risk/complexity than a business
which operates in one jurisdiction.
The addition of new employees
and the departure of existing
employees, particularly in key
positions, can be disruptive and
could have an adverse effect on
organisation have been identified
and appropriate succession and
and service customers. This could
adversely impact Nufarm’s financial
position and/or reputation.
retention strategies developed.
Nufarm has implemented disaster
Guidelines for remuneration and
recovery strategies over its key IT
reward have been developed
systems, applications and data
to ensure Nufarm can attract
centres, which are reviewed and
and retain talent.
tested on a regular basis. Cyber
threats are assessed on an ongoing
Information and cyber security
basis to the best of our knowledge
Nufarm’s operations are supported
based on the continually evolving
by several key IT systems and
applications. Complete or partial
nature of these threats. Security
controls are updated to mitigate
failure of the IT systems, applications
these risks supported by a
or data centre infrastructure due to
unauthorised access, cyberattacks
combination of external and
internal vulnerability testing.
Compliance, Regulatory and Legal Risks
Regulatory and Legal
On 3 June 2019 Nufarm provided a
Nufarm monitors regulatory
The crop protection industry is
Glyphosate Update to the Australian
developments across its key
highly regulated with government
Securities Exchange concerning the
regions of operations closely and
controls and standards imposed
risk of glyphosate litigation relating
participates in several industry
on all aspects of the industry’s
operations. Crop protection
to Bayer (Monsanto) in the United
bodies and task forces which
States. Glyphosate continues to be
provide input and analysis to
products are subject to regulatory
subject to intense legal and
regulatory bodies on the use of our
review and approval in all
markets in which they are sold,
with the requirements of regulatory
community pressure globally and
key products. The Nufarm portfolio
sales around the world could be
adversely impacted. There is also
team considers the regulatory
environment in the maintenance
authorities varying from country
a risk of future litigation for suppliers
and ongoing development of
to country. Europe in particular,
of glyphosate-based products,
our portfolio.
is highly regulated and there is
including Nufarm. Introduction of
increasing political influence on the
new legislation or changes to
regulatory system. The influence of
legislation in any of the countries in
politics in the regulatory process
which Nufarm operates could have
also makes outcomes increasingly
an adverse impact on the financial
unpredictable. Regulatory policies
or operational position of Nufarm,
can have an impact on the
resulting in increased compliance
availability and usage of crop
costs and/or increased risk of
protection products and, in some
regulatory action.
Nufarm also maintains a dedicated
internal legal team across its key
regional operations which is
supported externally as required.
Specific reporting protocols and
guidelines are in place to manage
ongoing legal input and facilitate
escalation to executive management
when required.
cases, can result in the restriction
or removal of certain products
from the market, which can have
a material adverse effect on the
financial performance of Nufarm.
Nufarm Limited Annual Report 2019
23
Operating and Financial Review (continued)
Corporate Governance
24
Nufarm Limited Annual Report 2019
Environmental Nufarm operates in a regulatory environment that establishes high standards in terms of environmental compliance. Any material failure by Nufarm to adequately control hazardous substances and manufacturing operations, including the discharge of waste material, or to meet its various statutory and regulatory environmental responsibilities, could result in significant liabilities as well as ongoing costs relating to operational inefficiencies which may arise.Group HSE has provided clear guidelines on the management of environmental risks, which includes ongoing assessment and review of regulatory requirements. Local management engage with local environmental authorities on key risks and compliance.Workplace Safety Operation of Nufarm’s manufacturing sites across the globe require major hazard facility licences. Operating within these environments can lead to personal injury, loss of life or damage to property. Regulatory bodies undertake regular audits of Nufarm’s sites to ensure that it is appropriate to renew the licences. These audits can result in suspension of operations, fines or penalties or remediation expenses.A robust and comprehensive Health Safety and Environment (HSE) program is in place which provides clear guidance on culture, behaviours, process and reporting. This program includes the ongoing assessment of HSE risks and practices.Nufarm’s governance framework and board processes have been reviewed to ensure they represent and protect the interests of all stakeholders. This includes detailed consideration of the third edition of the Corporate Governance Principles and Recommendations, (‘the ASX principles’) published by the Australian Securities Exchange Limited’s (ASX) Corporate Governance Council.The ASX Listing Rules require Nufarm to disclose the extent to which we have adopted the ASX principles. During this reporting period, Nufarm complied with all of the ASX principles (third edition).Nufarm’s 2019 corporate governance statement can be viewed in the corporate governance section of our website: http://www.nufarm.com/investor-centre/corporate-governance 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 2019 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)
GA Hunt (Managing Director)
AB Brennan
GR Davis
FA Ford
Dr WB Goodfellow (retired on 6 December 2018)
ME McDonald
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 will be set out in the Company’s 2019 Annual Report.
Company secretary
Fiona Smith (BSc, LLB, GDipGov, FGIA) joined the company on 20 June 2019 and was appointed company
secretary on 27 June 2019. She has experience in company secretarial roles arising from her time spent in such
roles in listed companies.
Rodney Heath (LLB) joined the company in 1980 and was appointed company secretary in 1989 up until
27 June 2019 when he retired from the role.
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
GA Hunt
DG McGauchie
ME McDonald
PM Margin
T Takasaki
Nufarm Ltd
Ordinary shares
Nufarm Finance (NZ) Ltd
Step–up securities
14,156
71,609
51,400
494,663
76,761
22,327
3,480
–
–
–
–
–
–
–
–
–
Nufarm Limited Annual Report 2019 25
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:
Committees
Director
Board
Audit & Risk
Committee
Human
Resources
Nomination &
Governance
Health Safety
& Environment
Meetings
Held1
Meetings
Attended
Meetings
Held1
Meetings
Attended
Meetings
Held1
Meetings
Attended
Meetings
Held1
Meetings
Attended
Meetings
Held1
Meetings
Attended
AB Brennan
GR Davis
FA Ford
Dr WB Goodfellow2
GA Hunt
ME McDonald
DG McGauchie
PM Margin
T Takasaki
8
8
8
1
8
8
8
8
8
8
8
8
1
8
8
8
8
8
4
4
4
–
–
4
–
4
–
4
4
4
–
–
4
–
4
–
5
5
–
–
–
–
5
5
–
5
5
–
–
–
–
5
5
–
–
–
3
1
–
–
3
–
–
–
–
3
1
–
–
3
–
–
–
3
–
–
–
3
–
–
3
–
3
–
–
–
3
–
–
3
1 Number of meetings held during the period the director held office.
2 Dr WB Goodfellow retired on 6 December 2018.
Principal Activities and Changes
Nufarm’s principal activities during the financial year were the manufacture and sale of crop protection products
and its proprietary seed technologies business which are further described in the Information on the Company
section of the Operating and Financial Review accompanying this Directors’ Report.
Nufarm employs approximately 3,300 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/(loss) attributable to members of the Group for the 12 months to 31 July 2019 is $38.3 million.
The comparable figure for the 12 months to 31 July 2018 was $(15.6 million).
Operating and Financial Review and Future Prospects
The operating and financial review and future prospects are set out in the Operating and Financial Review
accompanying this Directors’ Report.
26
Nufarm Limited Annual Report 2019
Dividends
The following dividends have been paid, declared or recommended since the end of the preceding financial year.
The Final dividend for 2017‑2018 of 6 cents paid 2 November 2018
$’000
19,662
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 15 April 2018 – 14 October 2018 at the rate of 6.08 per cent
per annum paid 15 October 2018
Distribution for the period 15 October 2018 – 14 April 2019 at the rate of 6.00 per cent
paid 15 April 2019
$’000
7,651
7,511
State of Affairs
The state of the group’s affairs are set out in the Operating and Financial Review accompanying this Directors’ Report.
Events subsequent to reporting date
On 30 September 2019, the company has entered into a sale and purchase agreement (‘SPA’) with Sumitomo
Chemical Company and related group companies (‘Sumitomo’), to divest its shares in certain entities, that together,
comprise the majority of the Latin American crop protection business and the Latin American Seed treatment
business for consideration of $1,188 million.
The SPA remains subject to a number of conditions including regulatory and shareholder approval, and the review
of an independent expert.
There will be a contractual obligation to repay the redeemable preference securities of $97.5 million to Sumitomo
should the transaction complete.
Environmental performance
Details of Nufarm’s performance in relation to environmental regulations are set out in the Operating and Financial
Review accompanying this Directors’ Report. The group did not incur any prosecutions or fines in the financial
period relating to environmental performance. The group publishes annually a sustainability 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 39 to the financial report.
The board has considered the non‑audit services provided during the year by the auditor and, in accordance
with written advice provided by resolution of the audit committee, is satisfied that the provision of those non‑audit
services during the year by the auditor is compatible with, and did not compromise, the auditor independence
requirements of the Corporations Act 2001 for the reason that all non‑audit services were subject to the corporate
governance procedures adopted by the company and have been reviewed by the audit committee to ensure
they do not impact the integrity and objectivity of the auditor.
Nufarm Limited Annual Report 2019 27
Directors’ Report (continued)
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 to the extent allowed
by law. 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 in the Company’s 2019 Annual Report and forms part of the
directors’ report for the financial year ended 31 July 2019.
Rounding of amounts
The company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument
2016/191 and, in accordance with that Instrument, all financial information presented in Australian dollars has been
rounded to the nearest thousand unless otherwise stated.
This report has been made in accordance with a resolution of directors.
DG McGauchie AO
Director
GA Hunt
Director
Melbourne
30 September 2019
28
Nufarm Limited Annual Report 2019
2019 Remuneration Report
A letter from the chairman of the human resources committee (HRC) (unaudited)
Dear shareholder,
On behalf of the Board, I present our remuneration report for the year ended 31 July 2019. Our aim in preparing
this report is to enable you, our shareholders and interested stakeholders, to understand the links between
remuneration, company strategy and Nufarm’s performance, and the framework we have in place to provide
effective governance over remuneration at Nufarm.
The role of the Human Resources Committee has evolved over the past few years with a broader remit which better
reflects the breadth an effective HRC plays as we focus our efforts across the entire employee life cycle at Nufarm.
The Committee takes an active view of the following:
• Remuneration – Board and executive remuneration strategy and structure with a focus on strengthening the
link between Company and individual performance.
• Performance – establishing, monitoring and assessing executive KPIs that encourage strong and ethical
performance and drive business outcomes while adding shareholder value.
• Talent and Succession – ensure succession plans are in place for executives and a ready pool of talent is
considered internally and externally.
• Inclusion & Diversity – ensure all executive and board appointments are underpinned by our inclusion and
diversity framework. Ensure all employee processes such as recruitment, remuneration, retention, promotion,
recognition and termination are within the framework.
• Alignment with Strategy and Operating Model – ensure the people strategy supports our business objectives
and drives sustainable value creation.
Outcomes for FY19
Fiscal 2019 was a challenging year for our industry with the continuation of drought conditions in large parts
of eastern Australia and extreme flooding in major cropping regions in the United States. Our European business
also dealt with supply disruptions and cost pressures which resulted in lost sales and reduced margins.
Generating cash and reducing debt is an important focus for the coming year. The Board is confident the
management team has taken the necessary steps to ensure a timely recovery from the issues that impacted
performance in 2019 and our strategy of focussing on our chosen geographic markets and crops, rather than
spreading our efforts more broadly, is working.
The company’s performance has been reflected in the FY19 short term incentive outcomes which did not pay out for
the CEO and most of the executive KMPs. The short term incentive metrics are made up of 40% uNPAT, 40% ANWC and
20% non financial. The FY17 LTI plan was tested on 31 July 2019 with no equity vesting since neither the Relative Total
Shareholder Return (RTSR) nor the average ROFE targets were met. Our STI and LTI outcomes reflect that our senior
executives are only rewarded when they deliver sustainable returns over both the short and long term.
The FY19 Fixed remuneration increases (conducted in August 2018) for executives were determined according to the
nature and size of role and within Nufarm’s usual benchmarking approach. Any increases are reflective of market
pricing for roles that were undertaken.
Employee Engagement
We recognise the importance of employee engagement and its impact on customer satisfaction and business
results. Several initiatives have been conducted over the year to help strengthen this further:
• A high performance mindset culture is being embedded across the company, in all we do and how we work.
Systems and processes that touch the employee lifecycle have been modernised to improve the employee
experience, leadership and overall performance;
Nufarm Limited Annual Report 2019 29
Directors’ Report (continued)
• A focus on inclusion and diversity throughout FY19 was evident through a global pay parity review exercise
which confirmed our remuneration practices are equitable and consistent across genders. We conducted
a series of unconscious bias awareness training workshops for leaders and will conduct more in FY20;
• We implemented a contemporary talent and succession planning methodology that reduces manager bias
in the assessment and selection of new hires and succession planning;
• We adopted recruitment practices, metrics and objectives that aim to increase female representation at Nufarm;
• We conducted inclusive leadership training for all people managers as they are promoted or join Nufarm; and
• Board members visited several locations over the year in countries such as USA, France, UK and Brazil. They held
one on one and group meetings with staff to engage more actively and better understand the issues our people
face and how they are working to serve our customers with a specific focus on health, safety and environment.
Arrangements for FY20
Following a year of low growth and mixed financial results, the executive KMPs have elected to forfeit an increase
to their fixed annual remuneration for FY20 as a demonstration of their commitment to turning the company’s
financial health around.
The Human Resources Committee continues to have a strong focus on the relationship between business
performance and remuneration and in turn, 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
A marketplace review of the current STI plan involving market intelligence and external stakeholder consultation
was initiated in September 2018. This plan was last reviewed in 2016. The outcome was that from FY20 onwards:
• financial and non‑financial components of the plan will be delinked, with the non‑financial component shifting
to team (rather than individual) performance to reflect how the executive team actually function; and
• an increased focus on cash flow and overheads measures have been included to drive better balance sheet,
cash flow and expenses management.
After a review of all remuneration elements (base, STI and LTI) through external benchmarking, it’s evident that our
current arrangements are Australian centric whereas, most of our executives (and in fact our revenue) comes from
outside Australia. Over the next year, the HRC will continue to review this finding to better understand how we shape
our remuneration offering to attract and retain a global pool of executive talent.
In line with the executive KMP stance, non‑executive directors elected not to increase their fees or the pool for FY20.
Further detail is provided within the remuneration report.
Peter Margin
Chair – human resources committee
30
Nufarm Limited Annual Report 2019
The remuneration report is designed to provide shareholders with an understanding of Nufarm’s remuneration policies
and the link between our remuneration strategy and performance. This report details Nufarm’s remuneration
framework and outcomes for Key Management Personnel (KMP) for the year ended 31 July 2019 (FY19). The report
has been prepared in accordance with section 300A of the Corporations Act 2001 (Corporations Act).
Section
What it covers
1. Remuneration snapshot
1.1 Key Management Personnel
1.2 Executive KMP remuneration outcomes
1.3
1.4
Actual total remuneration earned by
executives in FY19
Summary of FY19 non executive director
(NED) fees
1.5 Changes for FY19
1.6 Outlook for FY20
2. Setting Senior Executive remuneration
2.1 Remuneration governance
2.2 Remuneration strategy
2.3 Remuneration components
• Lists the names and roles of the Executive KMP whose
remuneration details are disclosed in this report.
• Details the key remuneration outcomes in FY19.
• Additional voluntary disclosure of cash and benefits
actually earned by KMPs in FY19.
• Details the NED fees changes in FY19.
• Outlines the changes to remuneration arrangements
in FY19.
• Outlines the changes to remuneration in FY20.
• Explains Nufarm’s remuneration policy, and how the
board and Human Resources committee (HRC) make
decisions, including the use of external consultants.
• Explains Nufarm’s remuneration strategy for FY19
and how its evolving for FY20.
• Shows how executive remuneration is structured
to support business objectives and explains the
executive remuneration mix.
3. Executive remuneration outcomes
• Provides a breakdown of Nufarm’s performance
3.1 Financial performance
3.2 Short Term Incentive outcomes
3.3 Long Term Incentive outcomes
3.4 Senior executive contract details
over the past five years.
• Details the STI outcomes for FY19.
• Details the LTI outcomes for the plan with a performance
test at 31 July 2019.
• Lists the key contract terms governing the employment
of Executive KMP (including termination entitlements
where relevant).
4. Non‑Executive Director remuneration
• Provides details of the fee structure for board
5. Remuneration tables
5.1
Remuneration of directors and disclosed executives
5.2 Equity instruments held by disclosed executives
5.3 Shares held in Nufarm
and committee roles.
• Provides the remuneration disclosures required by
the Corporations Act and in accordance with relevant
Australian Accounting Standards.
Nufarm Limited Annual Report 2019 31
Directors’ Report (continued)
1. Remuneration snapshot
1.1 Key Management Personnel
This Remuneration Report is focused on the KMP of Nufarm, being those persons with authority and responsibility
for planning, directing and controlling the activities of Nufarm. KMP includes the non‑executive directors and senior
executives (referred to as executive KMPs throughout this report). Unless otherwise indicated, the KMP were
classified as KMP for the entire financial year.
Current non‑executive directors
Donald McGauchie
Chairman and independent, non‑executive director
Anne Brennan
Gordon Davis
Frank Ford
Independent, non‑executive director
Independent, non‑executive director
Independent, non‑executive director
Bruce Goodfellow
Independent, non‑executive director until 6 December 2018
Peter Margin
Independent, non‑executive director
Marie McDonald
Independent, non‑executive director
Toshikazu Takasaki
Non‑executive director
Current executive KMPs
Greg Hunt
Paul Binfield
Elbert Prado
Brent Zacharias
Niels Poerksen
Managing director and chief executive officer
Chief financial officer
Group executive supply chain operations
Group executive Nuseed
Group executive portfolio solutions
1.2 Executive KMP remuneration outcomes
The overall structure and philosophy of Nufarm’s approach to remuneration remained consistent throughout FY19.
The organisation’s remuneration philosophy is based on linking financial rewards directly to employee contributions
and company performance. As Nufarm continues its transformation journey to deliver growth and build a better
Nufarm, the remuneration framework and incentive plans continue to connect the evolving business strategy to
leadership behaviours.
Fixed annual remuneration (FAR)
All executive KMPs received an increase of 2.5% to their FAR in FY19. GE Nuseed received a 3% increase. Mr Prado
received a further 11.3% increase to his total package due to the benefits offered under US employment conditions
as part of his relocation to North America.
Short term incentive (STI)
The entry hurdle measures required for payment of STI for executive KMPs were not met. With the exception of
Brent Zacharias (Group Executive Nuseed) and Elbert Prado (Group Executive Supply Chain Operations) all KMPs
including the chief executive officer did not receive any payment related to the FY19 plan.
Consequently, the approval for grant of rights related to the FY19 STI payment will not apply for the CEO.
Long term incentive (LTI)
The FY17 LTI plan was tested on 31 July 2019. The average cumulative ROFE and the RTSR achievement were both
below threshold. The plan did not meet the entry hurdle associated with the measures. The outcome was that all
KMPs did not receive any equity related to the FY17 plan.
32
Nufarm Limited Annual Report 2019
1.3 Actual total remuneration earned by executives in FY19 (unaudited)
The table below details actual pay and benefits for Executive KMPs who were employed as at 31 July 2019.
This table aims to assist shareholders in understanding the cash and other benefits actually received by executive
KMPs from the various components of their remuneration during FY19.
As a general principle, Australian Accounting Standards require the value of share‑based payments to be
calculated at the time of grant and accrued over the performance period and restriction period. The Corporations
Act and Australian Accounting Standards also require that pay and benefits be disclosed for the period that a
person is an executive KMPs. This may not reflect what executive KMPs actually received or became entitled to
during FY19 (especially if they became KMP part way through the year). The figures in this table have not been
prepared in accordance with Australian Accounting Standards. They provide additional voluntary disclosures to
Table 5.1 (which provides a breakdown of executive KMPs remuneration in accordance with statutory requirements
and Australian Accounting Standards). The treatment of the remuneration elements in this disclosure are as follows:
• Fixed remuneration earned between 1 August 2018 and 31 July 2019. This includes superannuation.
• STI payable as cash under the FY18 STI plan (which is paid in FY19 after audited results), as well as any restricted
STI or LTI that has been earned as a result of performance in previous financial years but was subject to a
restriction period that ended between 1 August 2018 and 31 July 2019.
• Benefits received between 1 August 2018 and 31 July 2019.
Nufarm Limited Annual Report 2019 33
Directors’ Report (continued)
In AUD
Fixed remuneration
At risk remuneration (Realised)
Salary
and Fees
$
Non‑monetary
benefits
$
Superannuation
$
Total
$
STI cash
$
STI deferred
shares vested
LTI rights
vested
$
Other
long term
remuneration
Total
Total
$
Directors’ Non‑executive
Sub total non‑executive
directors remuneration
(realised)
Executive Director
GA Hunt
Total Directors’
remuneration (realised)
Group Executives
PA Binfield
E. Prado1
N Poerksen
B Zacharias
Sub total – total executive
remuneration (realised)
Total directors and executive
remuneration (realised)
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
1,479,952
1,526,277
1,294,688
1,265,479
2,774,640
2,791,756
822,223
804,635
889,938
735,420
703,684
713,209
495,003
461,044
2,910,848
2,714,308
–
–
295
2,944
295
2,944
295
295
88,266
23,504
33,735
27,661
53,417
46,261
175,713
97,721
127,619
137,985
25,000
25,000
152,619
162,985
25,000
25,000
14,829
–
25,522
25,449
92,729
50,601
158,080
101,050
1,607,571
1,664,262
1,319,983
1,293,423
2,927,554
2,957,685
847,518
829,930
993,033
758,924
762,941
766,319
641,149
557,906
3,244,641
2,913,079
5,685,488
5,506,064
176,008
100,665
310,699
264,035
6,172,195
5,870,764
111,509
–
7,337,566
6,400,743
$
–
–
340,112
171,078
340,112
171,078
187,153
111,619
138,763
99,793
145,429
66,695
99,562
44,230
570,907
322,337
911,019
493,415
–
–
–
–
–
–
–
–
–
–
–
77,321
65,522
36,564
142,843
36,564
142,843
36,564
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
111,509
111,509
1,607,571
1,664,262
1,660,095
1,464,501
3,267,666
3,128,763
1,034,671
941,549
1,320,626
858,717
908,370
833,014
806,233
638,700
4,069,900
3,271,980
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1 Mr E Prado fixed remuneration and other long term remuneration includes fees and long service leave amounts paid with
respect to the relocation of Mr Prado from Australia to the United States of America during 2019.
Note: Vested STI deferred shares and LTI rights are valued at the Nufarm share price prevailing upon the vesting or forfeiture
date ($4.88 at 31 July 2019 and $7.15 at 31 July 2018).
34
Nufarm Limited Annual Report 2019
$
–
–
295
2,944
295
2,944
295
295
88,266
23,504
33,735
27,661
53,417
46,261
175,713
97,721
1,479,952
1,526,277
1,294,688
1,265,479
2,774,640
2,791,756
822,223
804,635
889,938
735,420
703,684
713,209
495,003
461,044
2,910,848
2,714,308
127,619
137,985
25,000
25,000
152,619
162,985
25,000
25,000
14,829
–
25,522
25,449
92,729
50,601
158,080
101,050
1,607,571
1,664,262
1,319,983
1,293,423
2,927,554
2,957,685
847,518
829,930
993,033
758,924
762,941
766,319
641,149
557,906
3,244,641
2,913,079
Directors’ Non‑executive
Sub total non‑executive
directors remuneration
(realised)
Executive Director
GA Hunt
Total Directors’
remuneration (realised)
Group Executives
PA Binfield
E. Prado1
N Poerksen
B Zacharias
Sub total – total executive
remuneration (realised)
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
Total directors and executive
remuneration (realised)
5,685,488
5,506,064
176,008
100,665
310,699
264,035
6,172,195
5,870,764
1 Mr E Prado fixed remuneration and other long term remuneration includes fees and long service leave amounts paid with
respect to the relocation of Mr Prado from Australia to the United States of America during 2019.
Note: Vested STI deferred shares and LTI rights are valued at the Nufarm share price prevailing upon the vesting or forfeiture
date ($4.88 at 31 July 2019 and $7.15 at 31 July 2018).
In AUD
Fixed remuneration
At risk remuneration (Realised)
Total
Salary
Non‑monetary
and Fees
$
benefits
Superannuation
$
Total
$
STI cash
$
STI deferred
shares vested
$
LTI rights
vested
$
Other
long term
$
Total
remuneration
$
–
–
–
–
–
–
–
–
77,321
–
–
–
65,522
36,564
142,843
36,564
142,843
36,564
–
–
340,112
171,078
340,112
171,078
187,153
111,619
138,763
99,793
145,429
66,695
99,562
44,230
570,907
322,337
911,019
493,415
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
111,509
–
–
–
–
–
111,509
–
111,509
–
1,607,571
1,664,262
1,660,095
1,464,501
3,267,666
3,128,763
1,034,671
941,549
1,320,626
858,717
908,370
833,014
806,233
638,700
4,069,900
3,271,980
7,337,566
6,400,743
Nufarm Limited Annual Report 2019 35
Directors’ Report (continued)
1.4 Summary of FY19 NED fees
NED fees are fixed and do not have any variable components. The chairman receives a fee for chairing the
Nufarm board and is not paid any other fees. Other NEDs receive a base fee and additional fees for each
additional Committee chairmanship and membership. NED fees increased by 3.75% effective August 2018,
after no increases since August 2016. No additional retirement benefits were paid. Fees paid to NEDs are subject
to a maximum annual non‑executive director fee pool of $2 million approved by shareholders at the 2017 AGM
and this was not increased at the 2018 AGM.
1.5 Changes for FY19
Elbert Prado – Mr Prado relocated to USA effective 1 June 2019. In line with this move, his package was altered to
reflect the US employment conditions and market (with the inclusion of 401k, car allowance and health insurance).
Additionally, he held the dual role of Regional General Manager – Latin America for FY19 while the role has been
vacant. During FY19, he oversaw the Latin America regional strategy and execution of that strategy. His FY19 STI was
also prorated to reflect his dual role as detailed later in this report.
Brent Zacharias – It is evident that Nuseed’s growth agenda and strategy are substantially different from the crop
protection business. Therefore, to factor in the above and the start up like environment in which Nuseed operates, Mr
Zacharias’ package has been structured differently to other Group Executive roles. This difference will also be
acknowledged in the STI plan with Mr Zacharias being placed on an STI plan with Nuseed specific metrics only
from FY20 onwards.
Effective FY19, Nuseed Long Term Incentive Plan was offered to Mr Zacharias in lieu of the Nufarm LTIP in the form
of 9,500 phantom rights with a performance period of 3 years. The rights will only vest if certain performance
conditions are met. The Nuseed Phantom LTIP was created to foster stronger alignment between company strategy and
those selected roles which are considered pivotal to delivering Nuseed’s long term enterprise value.
The model is based on a proxy of economic value (EV) which generates a phantom share price. EV = (average
Nuseed EBITDA of FY19 and FY20) X 20x multiple – (change in net debt x 1.5x multiple). Change in net debt multiple
= (average 12 month net debt of 2020 – average 12 month net debt of 2017) X 1.5x multiple. The adjustment for
1.5 times any increase/decrease in cash/debt is designed to encourage the business to use funds wisely,
including net working capital (NWC) management in a growing business, capex and appropriate R&D investment.
It will also appropriately encourage a balance of monetising non‑core assets, and assessing EPS accretive
forward investments.
The plan is cash settled with the following pay out.
Performance level
Below threshold
Threshold
Target
Maximum
Growth in EV over the
Performance Period
Cash payment per
Vested Award (AU$)*
150%
150%
210%
350% (or above)
$0
1.5 x allocation
2 x allocation
3.5 x allocation
All other elements of the plan as it relates to items such as cessation of employment, divestment of business,
change of control and clawback, lapse and forfeiture events will continue to be underpinned by the Nufarm
LTIP terms and conditions as outlined in section 2.3c.
36
Nufarm Limited Annual Report 2019
1.6 Outlook for FY20
Fixed annual remuneration (FAR)
Following a year of disappointing financial results driven largely by factors outside the control of management,
the executive KMPs at Nufarm forfeited an increase to their FAR for FY20 as a demonstration of their commitment to
turning the company’s financial health around.
Short term incentive (STI)
A complete review of the current STI plan involving market intelligence and internal stakeholder consultation
was conducted in FY19. The outcome was that from FY20 onwards, financial and non‑financial components of
the plan were delinked, with the non‑financial component shifting to team (rather than individual) performance.
An increased focus on cash flow measures was also included.
Long term incentive (LTI)
A comprehensive review of the LTI plan was undertaken with no changes proposed for FY20.
Non‑executive director fees and pool
In line with the executive KMP stance, non‑executive directors elected not to increase their fees or the pool for FY20.
2. Setting senior executive remuneration
2.1 Remuneration governance
The HRC is responsible for reviewing and making recommendations to the Nufarm board on remuneration policies
and packages applicable to disclosed executives. The HRC is comprised of four 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 HRC
charter can be found at www.nufarm.com.
Over the past few years, the HRC has progressively increased their remit to include a wider talent and succession
agenda including a review of Nufarm’s diversity and inclusion practices.
The HRC reviews Executive KMPs’ remuneration annually to ensure there is a balance between fixed and at risk
pay, and it reflects both short and long term objectives aligned to Nufarm’s strategy. The board reviews the CEO’s
remuneration based on market practice, performance against agreed measures and other relevant factors,
while the CEO undertakes a similar exercise in relation to senior executives. The results of the CEO’s annual review
of senior executives’ performance and remuneration are subject to board review and approval.
The board measures financial performance under the STI and LTI plans using audited numbers. The relative total
shareholder return (RTSR) is measured by an independent external advisor.
Within the remuneration framework the board has discretion to ‘clawback’ LTI plan and STI (cash and equity):
• 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 mis‑stated; and/or
• for individual gross misconduct.
Executive KMPs are not permitted to hedge any shares issued to them under the STI while those shares remain held
in trust.
The board considered all 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.
Nufarm Limited Annual Report 2019 37
Directors’ Report (continued)
2.2 Remuneration Strategy
Up to FY19, Nufarm’s remuneration strategy and reward frameworks have reflected the importance of improving
the performance of the business and lifting returns on funds employed, as well as supporting a goal to attract,
motivate and retain a high performing workforce.
The core elements of Nufarm’s remuneration strategy and policy for the disclosed Executive KMPs up to FY19 have been:
• An overall framework that supports attraction, motivation and retention of talent, shareholder value creation
and reward differentiation.
• An STI program that is biased to growth in profitability and a strong focus on balance sheet management.
• An LTI plan that is based on the principle of aligning Executive KMPs’ interests and rewards with those of shareholders.
Throughout FY19, we reviewed the various elements of our reward offering. Consequently from FY20 onwards,
the remuneration strategy is further refined to incorporate the following:
• A renewed focus on managing working capital and improving returns on funds employed which is fundamental
to the way in which Nufarm operates and is therefore a key element of the way performance is measured and
assessed at a group level.
• An overall framework underpinned by the core principles of simplicity, flexibility, line of sight, retention, driving
business objectives and creation of value.
• An STI plan which rewards year on year growth, profitability, collaboration and stronger focus on balance
sheet management through additional measures of cashflow and stock cover.
• An LTI plan which creates long term value for the organisation and shareholders.
2.3 Remuneration components
The executive remuneration structure is based on Fixed Annual Remuneration (FAR) with additional short term
and long term incentives (described as a percentage of FAR) available to be earned subject to performance.
Australian based executive KMPs are employed on this basis. Those located overseas in Canada and US, also
receive benefits as per local employment conditions.
The graph below outlines the target remuneration mix for executive KMPs. The variable components of STI
(including potential restricted shares) and LTI are expressed at target.
Disclosed
Executives
CFO
CEO
49.4%
12.2%
12.2%
26.3%
38.5% Equity
45.5%
15.9%
15.9%
22.7%
38.6% Equity
40.0%
15.0%
15.0%
30.0%
45.0% Equity
FAR
Cash STI
Deferred STI
LTI
38
Nufarm Limited Annual Report 2019
a) Remuneration structure
Attract, motivate
and retain highly
skilled employees
FAR
Fixed annual
remuneration
Reward achievement
of financial and personal
strategic objectives
STI
Short term incentive
(at risk)
Align to long
term shareholder
value creation
LTI
Long term incentive
(at risk)
Cash
Equity
• Base Salary plus
superannuation.
• Set based on market
and internal relativities,
performance
and experience.
• 50% of STI outcome
paid in October after the
financial year end.
• STI outcome based on
financial and individual
performance.
• 50% of the STI outcome
is deferred as Restricted
Shares for a period of
2 years.
• Subject to clawback and
forfeiture in circumstances
outlined.
• Indeterminate Rights
subject to three year
performance period with
50% subject to RTSR and
50% subject to ROFE.
• Subject to clawback
and forfeiture in
circumstances outlined.
Note: From FY20 onwards, the personal component of STI will change to team based performance.
b) FY19 STI plan
For FY19, all Executive KMPs participated in the same STI plan with the exception of:
• Group executive Nuseed who participated in a separate plan tailored to ensure the role was measured against
and rewarded for Nuseed deliverables.
• Group executive supply chain operations who also participated in a plan aligned to his dual role of regional
general manager – Latin America.
All plan details are below, with the major differences between the plans outlined where applicable.
Who participates in the STI?
Plan participants include disclosed executives and senior managers globally.
What is the plan’s aim?
The Plan rewards a combination of financial and non‑financial performance measures
that are aligned to the creation of shareholder value. Primary emphasis is placed on
profitability and cash flow and the non‑financial measures focus our Executives and
employees on executing the most critical objectives aligned to the annual business
plan.
When are awards made?
Awards under the plan are made at the end of the financial year.
Nufarm Limited Annual Report 2019 39
Directors’ Report (continued)
What measures are
used in the plan?
The board sets measures at the start of each year focused on profitability and balance
sheet management. Noted below are the measures used in 2019.
All Executive KMP roles (except GE Nuseed and GE supply chain operations)
80% of the potential was based on Nufarm group underlying Net Profit after Tax
(uNPAT) and Average Net Working Capital (ANWC)/Sales.
Group executive Nuseed
20% of the potential was based on Nufarm group uNPAT and Nufarm group
ANWC/Sales.
60% of the potential was based on Nuseed uPBT and Nuseed ANWC/Sales.
Group executive supply chain operations (pro‑rata basis while acting as
regional general manager – Latin America)
45% of the potential was based on Nufarm group uNPAT and Nufarm group
ANWC/Sales.
35% of the potential was based on Latin America’s uPBT and Latin America NWC
as at 31 July 2019.
For all executives
20% of the potential was based on individual strategic and business improvement
objectives aligned to the role and contribution of the executive.
This structure reflects Nufarm’s strong focus on the use of capital and ensures alignment
of reward to business outcomes and shareholder returns.
When and how are the
STI payments determined?
Awards are assessed annually at the end of the financial year. Awards are based
on the percentage achievement against the budget and strategic measures.
Group uNPAT and Group ANWC/Sales – The threshold for these measures is the prior
year’s achievement or 85% of target, whichever is higher. At threshold achievement,
25% of the STI associated with the measure pays out. Target achievement results in
100% payment with stretch achievement (120% for uNPAT and 110% for ANWC/Sales)
paying out at 150%.
Nuseed uPBT and Nuseed ANWC/Sales – The threshold for these measures is the
achievement of 85% of target where 25% of the STI associated with the measure pays
out. Target achievement results in 100% payment with stretch achievement (120% for
uPBT and 110% for ANWC/Sales) paying out at 150%.
Regional NWC as at 31 July 2019 – This was a one off measure set for the region to
incentivise a focus on strong capital management and cash flow. The threshold of this
measure is the achievement of target where 100% of the STI associated with the
measure pays out. At stretch (125% of target), 150% of STI is paid.
Straight line vesting between threshold and budget and between budget (target)
and stretch.
Strategic and business improvement objectives are assessed on a merit basis against
stated objectives.
Are payments in cash
or shares?
50% of Executive KMPs’ STI is paid in cash at the time of performance testing and
50% deferred into indeterminate rights with a time based restriction.
When do the shares vest?
Is there a clawback
provision in the plan?
What happens if the
Executive KMP leaves Nufarm?
Vesting will occur on the second anniversary of the grant date of the deferred equity,
subject to continued employment or otherwise if the participant has left employment
for a qualifying reason.
The rules of the plan provide for clawback of the entire STI (cash and equity which
maybe vested or unvested) with board discretion 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.
If an Executive KMP leaves before the vesting anniversary under ‘qualifying leaver’
provisions the equity will remain in the plan until the vesting date. If the executive
leaves under other than ‘qualifying leaver’ circumstances the equity will be forfeited.
‘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 plan provides the flexibility, in special circumstances (e.g. health or
severe personal hardship), to accelerate the vesting. This would result in the shares
being released from the trust to the executive.
40
Nufarm Limited Annual Report 2019
FY20 STI plan
In 2019, Nufarm undertook a comprehensive review of the STI plans across the organisation. The proposed changes
reflect market data, feedback from the senior leaders and alignment to Nufarm’s financial objectives over the next
12 months. Key changes include:
• Delinking financial and non‑financial measures – The underlying principle to this approach is the ability to reward
both financial and non‑financial outcomes. In an industry heavily impacted by weather conditions, employees
have worked harder than ever to deliver on transformation projects which will yield long terms returns. Therefore,
the focus on transformation must continue to be rewarded. If one of the financial gates is missed then the
non‑financial component can still pay out. If all financial gates are missed, then, the non‑financial component is
reduced by half to remain fiscally sound and affordable.
• Changing non‑financial component from individual to team‑based performance – The STI plan aims to leverage
the One Nufarm model of collaboration by rewarding behaviour that ultimately leads to collective success.
The aim is to drive a growth mindset culture and a higher trust environment. For executive KMPs this means one
single assessment for what they deliver as a collective team, driving the success of the business and leading the
transformation of the organisation together. In line with this change, the non financial will also have a stretch to
150% in line with financial measures enabling the ability to reward exceptional performance.
• Financial measures – Nufarm’ s focus over the next 12 months is to improve margins and strengthen the balance
sheet with a focus on improving cash flow and working capital. Therefore, measures such as stock cover and
sales and general administration expenses/gross profit are being introduced to align better with the immediate
business imperatives.
• Brent Zacharias – Mr Zacharias will move from an STI plan (currently 20% group Nufarm financials, 60% group
Nuseed financials and 20% individual) to 80% group Nuseed financials and 20% team.
c) FY19 LTI plan
Why have an LTI plan?
This plan aims to align executive interests and earnings with the long term Nufarm
strategy and the interests of shareholders.
Who participates in the
LTI plan?
The current participants in the plan are disclosed executives and other selected senior
managers (together, the LTI plan participants).
Are the awards cash
or shares?
The plan rules provide the flexibility to use a number of different instruments provided
they comply with local regulations and sound practice. 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.
When are the awards made?
Under the plan, LTI plan participants receive an annual award of rights as soon as
practical after the announcement of results for the preceding year.
How are the number of
rights calculated?
The number of rights to be granted is calculated by dividing the individual’s LTI grant
opportunity for the performance year by the volume weighted average price of the
company’s shares over the five trading days immediately following the prior year’s
annual results announcement.
When do the awards vest?
The performance/vesting period for awards is 3 years. Awards will vest in two
equal tranches as follows:
• 50% of the LTI plan grant will vest subject to the achievement of RTSR
performance hurdle measured against a selected comparator group
of companies; and
• The remaining 50% of the LTI plan grant will vest subject to the 3 year
average of an absolute ROFE target.
Why have ROFE and RTSR
been chosen as the hurdles?
ROFE is used to track progress towards the goal to return long‑term results back to
acceptable levels for Nufarm. Strong RTSR performance ensures Nufarm is an attractive
investment for shareholders.
What is the comparator
group for the assessment
of relative TSR?
Based on the results of research and modelling carried out by Ernst and Young,
at the inception of the plan the board approved the adoption of the ‘S&P ASX 200
excluding those companies in the Financial, Materials and Energy groups’ as the
RTSR comparator group.
Nufarm Limited Annual Report 2019 41
Directors’ Report (continued)
How is RTSR measured?
What is the RTSR
performance required
for vesting?
How is the ROFE target set?
How is ROFE measured?
What ROFE result is
required for vesting?
What was the result
for the FY19 year?
What happens if the
awards do not vest?
Is there a clawback
provision in the plan?
What happens if an
Executive KMP leaves?
RTSR will be measured over the performance period. For the purposes of this
measurement, each company’s share price will be measured using the average 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.
RTSR of Nufarm relative to the RTSR of
comparator group companies
Proportion of RTSR
grant vesting
Less than 50th percentile
50th percentile
Between 51st percentile
and 75th percentile
0%
50%
Straight line vesting between
50% and 100%
75th percentile
100% vesting
ROFE objectives are set by the board at the beginning of each year. There is both a
‘target’ and a ‘stretch’ hurdle. These numbers are based on the budget and align with
the guidance given to the market. ‘Target’ represents a sustainable return to
acceptable ROFE levels. Stretch recognises achievement well above budget. This
ensures that full vesting of the LTI plan is truly reliant on outstanding performance.
Return is calculated on the group’s earnings before interest and taxation and adjusted
for any material items. Funds employed are represented by shareholder’s funds plus
total interest bearing debt. For the purposes of measuring ROFE performance in the LTI
plan, ROFE will be averaged over the life of the plan.
Percentage of ROFE
target achieved
Less than Target
Target
Proportion of ROFE
grant vesting
0%
50%
Between Target and Stretch
Straight line vesting between
50% and 100%
Stretch
100%
Nufarm’s RTSR was at the 13th percentile of the comparator group and average
cumulative ROFE was below threshold. Consequently, the FY17 award, which matured
in FY19 did not vest into shares as both performance hurdles were not met.
To the extent that the RTSR and ROFE performance hurdles are not met at the end of the
3‑year performance period and full vesting is not achieved, performance will not be
re‑tested and the award will lapse. There is no partial vesting of the LTI plan before the
3rd anniversary.
The rules of the plan provide for clawback of both vested and unvested LTI plan 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.
To be eligible under the LTI plan, the executive must be employed by Nufarm on the
1st anniversary of the allocation. If the executive leaves before this date, the allocation
is forfeited. If the executive leaves under ‘qualifying leaver’ provisions, (refer STI section
above for definition of ‘qualifying leaver’) after the 1st anniversary and before the 3rd
anniversary of the plan the allocation will be pro‑rated and the pro‑rated allocation
will remain ‘on foot’ in the plan subject to certain overriding discretions set out in
the plan.
FY20 LTI Plan
No changes are proposed for the FY20 LTI plan. Looking forward, we will continue to engage with the proxy advisors
and key investors to ensure we have the LTI plan that adequately reflects the long term aspirations of the company.
42
Nufarm Limited Annual Report 2019
3. Executive remuneration outcomes
3.1 Financial Performance
Details of Nufarm’s performance, share price and dividends over the past five years are summarised in the table below:
Performance measures
FY19
FY18
FY17
FY16
FY15
Earnings
Underlying EBIT*
Underlying EBITDA
ANWC/Sales***
Underlying NPAT**
ROFE achieved
Shareholder value
Closing share price 31 July
Enterprise value****
TSR
$m
$m
%
$m
%
$
$m
%
Dividends declared
Cents
248.6
420.3
46.8
89.1
7.1
4.88
3,443.7
(31.0)
0.0
265.1
385.7
40.3
98.4
9.4
7.15
3,964.1
(13.9)
11.0
302.3
390
36.8
135.8
13.6
8.46
3,185.4
3.5
13.0
286.7
372
39.9
108.9
13.2
8.28
3,074.0
8.7
11.0
236.9
317
41.9
117.1
11.0
7.72
2,840.0
80.2
10.0
* and **: Underlying EBIT is earnings before net finance costs, taxation and material items. Underlying NPAT is Net Profit after
Tax before material items. Underlying NPAT and Underlying EBIT are used internally by management to assess
performance of the 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 management of working capital
over the full year.
Enterprise value is Nufarm ordinary shares on issue, multiplied by Nufarm’s share price, plus net debt and Other securities
as at 31 July.
3.2 Short Term Incentive outcomes
Based on an underlying NPAT result of $89.08m, an ANWC/Sales result at 46.8% and performance against individual
strategic and business improvement objectives, disclosed executives (except GE Nuseed and GE supply chain
operations) employed for the performance period FY19 did not receive any payment under the 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 of risk, efficiency improvements, partnership development, portfolio
enhancement, business process and systems improvements and the implementation of initiatives to support growth
in higher value segments. There was no payment associated with the individual objectives since the entry hurdle
for the FY19 plan was not met for the CEO, CFO and GE portfolio solutions.
Nufarm Limited Annual Report 2019 43
Directors’ Report (continued)
a) FY19 STI plan payment results
Outcomes against targets for disclosed executives are shown below:
Financial: Weighting and outcome*
Group
uNPAT
Group
ANWC
Regional
NWC
31 Jul 2019
Business
Unit uPBT
Business
unit ANWC
Personal
Weighting &
outcome
40%
40%
25%
40%
10%
40%
40%
20%
40%
10%
20%
–
–
–
–
–
–
–
15%
30%
30%
–
–
–
–
20%
20%
20%
20%
20%
Disclosed executive
Greg Hunt
Paul Binfield
Elbert Prado
Niels Poerksen
Brent Zacharias
Key:
Below threshold
Between threshold and target
Above target
*: Nufarm’s objective is to be as transparent as possible, without disclosing commercially sensitive information. Consequently,
while STI measures, descriptions, weighting and performance in FY19 for executive KMPs have been provided above, the
specific targets for measures such as uNPAT have not.
The table below displays FY19 STI payments as a percentage of FAR and also as a percentage of target opportunity.
Disclosed executive
2019 STI Potential
At
target
$
At
maximum
$
989,766
1,484,649
593,056
889,584
–
–
Total
Award
$
FY19 STI
Award as a
% of target
potential
FY19 STI
as %
of FAR
Greg Hunt
Paul Binfield
Elbert Prado
384,800
577,199
154,642
Brent Zacharias
247,142
370,712
131,045
Niels Poerksen
376,903
565,355
–
Senior executive
average
518,333
777,500
57,137
0%
0%
40%
53%
0%
11%
0%
0%
21%
27%
0%
7%
To be
paid in
cash in
October
2019
$
Retained
in shares
vesting 2nd
anniversary
31.7.20*
$
–
–
77,321
65,522
–
–
–
77,321
65,523
–
28,569
28,569
* The portion of FY19 STI payment retained in shares will vest on 31 July 2020, on the second anniversary from effective allocation date.
** As the CEO will not receive an STI payment for FY19, there will be no deferred equity granted and therefore, no requirement to
raise a motion at the AGM for approval.
44
Nufarm Limited Annual Report 2019
b) Historical STI plan performance relative to Nufarm’s uNPAT results
The following chart compares Nufarm’s historical STI plan performance results against underlying NPAT for the
same period. Nufarm’s incentive plans measure performance against a range of financial and non‑financial
metrics with varied weightings. Accordingly, the pay for performance relationship is based on the performance
against these metrics as a whole and may not always align with underlying NPAT growth.
Underlying NPAT growth vs STI outcomes
40.0%
32.0%
24.0%
16.0%
8.0%
0.0%
-8.0%
FY15
FY16
FY17
FY18
FY19
h
t
w
o
r
G
T
A
P
N
g
n
i
y
l
r
e
d
n
U
-16.0%
-24.0%
-32.0%
-40.0%
Underlying NPAT % Growth
% STI max
140.0%
120.0%
100.0%
80.0%
60.0%
40.0%
20.0%
0.0%
e
m
o
c
t
u
O
n
a
l
P
I
T
S
3.3 Long Term Incentive outcomes
The performance period for the FY17 LTI plan concluded on 31 July 2019.
The results of Nufarm’s RTSR was calculated by an external provider. The board determined the ROFE outcome
to ensure no windfall gains or losses and accordingly adjusted for the net impact of material items. The board
approved the vesting outcomes in accordance with the LTI plan rules.
a) FY17 LTI plan testing as at 31 July 2019
The vesting table for the FY17 LTI plan is detailed below, reflecting performance up to 31 July 2019 against the
two performance measures of RTSR and ROFE.
Performance Measure
Target
Outcome
% of total plan vested
RTSR
ROFE
Total
75th percentile
11.8%
13th percentile
(below threshold)
84.7% of target
(below threshold)
0%
0%
Nil
Nufarm Limited Annual Report 2019 45
Directors’ Report (continued)
b) FY17 LTI award outcome
The table below details the individual outcome for the FY17 LTI plan.
Total
number of
rights
available
Total
number of
rights
awarded
Total Award
as a % of
potential
Average
grant date
fair value
of awarded
rights
Total grant
date fair
value of
award
$
95,670
35,096
31,226
19,276
26,008
–
–
–
–
–
0.0%
0.0%
0.0%
0.0%
0.0%
n/a
n/a
n/a
n/a
n/a
–
–
–
–
–
Total grant
date fair
value of
lapsed
awards
$
685,476
251,463
223,734
138,113
186,347
Disclosed executive
Greg Hunt
Paul Binfield
Elbert Prado
Brent Zacharias
Niels Poerksen
c) Historical LTI plan performance relative to Nufarm’s share price
The following chart compares Nufarm’s LTI plan vesting results for the past four LTI plans (as a percentage of plan
maximum) to the share price history during the same period. The FY16 and FY17 LTI plans did not meet hurdle and
therefore are not depicted.
Nufarm historical share price vs LTI outcome
$
e
c
i
r
P
e
r
a
h
S
12.00
10.00
8.00
6.00
4.00
2.00
0.00
100.0%
89.2%
31.3%
0.0%
0.0%
3
1
-
g
u
A
3
1
-
t
c
O
3
1
-
c
e
D
4
1
-
b
e
F
4
1
-
r
p
A
4
1
-
n
u
J
4
1
-
g
u
A
4
1
-
t
c
O
4
1
-
c
e
D
5
1
-
b
e
F
5
1
-
r
p
A
5
1
-
n
u
J
5
1
-
g
u
A
5
1
-
t
c
O
5
1
-
c
e
D
6
1
-
b
e
F
6
1
-
r
p
A
6
1
-
n
u
J
6
1
-
g
u
A
6
1
-
t
c
O
6
1
-
c
e
D
7
1
-
b
e
F
7
1
-
r
p
A
7
1
-
n
u
J
7
1
-
g
u
A
7
1
-
t
c
O
7
1
-
c
e
D
8
1
-
b
e
F
8
1
-
r
p
A
8
1
-
n
u
J
8
1
-
g
u
A
8
1
-
t
c
O
8
1
-
c
e
D
9
1
-
b
e
F
9
1
-
r
p
A
9
1
-
n
u
J
120%
100%
80%
60%
40%
20%
0%
e
m
o
c
t
u
O
n
a
l
P
I
T
L
LTI Plan
Share Price
3.4 Senior Executive contract details
The company has employment contracts with the disclosed executive KMPs. These contracts formalise the terms
and conditions of employment. The contracts are for an indefinite term. The contracts of the CEO and other disclosed
executives have been structured to be compliant with the termination benefits cap under the Corporations Act.
The company may terminate the contract of the CEO and managing director by giving 6 months’ notice, in
which case the CEO would be entitled to a termination payment of 12 months FAR inclusive of any notice paid
in lieu. The contract also provides for payment of applicable statutory entitlements.
The CEO may terminate the contract by giving the company 6 months’ notice.
The company may terminate the contract of other executives by 6 months’ notice in which case a termination
payment equivalent to 12 months FAR will be paid including notice period paid in lieu.
The company may terminate the employment contracts immediately for serious misconduct.
46
Nufarm Limited Annual Report 2019
4. Non‑Executive directors (NED) remuneration
Nufarm’s operations are managed under the direction of the board. The board oversees the performance
of Nufarm management in seeking to deliver superior business and operational performance and long‑term
growth in shareholder value. The board recognises that providing strong leadership and strategic guidance
to management is important to achieve our goals and objectives.
Fees for non‑executive directors are set at a level to attract and retain Directors with the necessary skills and
experience to allow the board to have a proper understanding of, and competence to deal with, current and
emerging issues for Nufarm’s business. The board seeks to attract directors with different skills, experience, expertise
and diversity. Additionally, when setting non‑executive director fees, the board takes into account factors such
as external market data on fees and the size and complexity of Nufarm’s operations. The non‑executive directors’
fees are fixed, and non‑executive directors do not participate in any Nufarm incentive plan.
The board’s policy with regard to NED remuneration is to position board remuneration at the market median
with comparably 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 2017 AGM, shareholders
approved an aggregate of $2,000,000 per year (including superannuation costs). The total fees for FY19
remained within the approved cap.
Board fees are generally reviewed every 18 months with the last increase of 3.75% effective August 2018. While the
next review will be held in February 2020, the board have mirrored management sentiment to forfeit any increase
for FY20.
Chairman*
General board
Audit committee Chair
Audit committee Member
HSE Risk committee Chair
HSE Risk committee Member
HR committee Chair
HR committee Member
Nominations committee Chair
Nominations committee Member
Fees applicable from 1 August 2018 to 31 July 2019 ($) per annum
392,567
160,597
32,370
16,185
18,883
9,441
26,975
13,488
12,462
1,618 per meeting
* The Chairman receives no fees as a member of any committee.
Nufarm Limited Annual Report 2019 47
Directors’ Report (continued)
5. Remuneration tables
5.1 Remuneration of directors and disclosed executives
Details follow of the nature and amount of each major element of remuneration in respect of the NED and
disclosed Executive KMPs.
Short Term
Post‑
employment
Share Based
Payments
Total1
In AUD
Directors’ Non‑executive
AB Brennan
GR Davis
Dr WB Goodfellow2
DG McGauchie
P. Margin
F. Ford
T. Takasaki
M. McDonald
Sub total non‑ executive
directors remuneration
Executive Director
GA Hunt
Total Directors’ remuneration
Group Executives
PA Binfield
E. Prado4
N Poerksen
B Zacharias3
Sub total – total
executive remuneration
Total directors and
executive remuneration
Salary
and Fees
$
Cash Bonus
(Vested)
$
Non‑monetary
Benefits
$
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
172,973
166,720
190,139
183,265
52,492
144,974
356,879
343,980
203,757
197,733
179,838
173,338
154,580
148,993
169,294
167,274
1,479,952
1,526,277
1,294,688
1,265,479
2,774,640
2,791,756
822,223
804,635
889,938
735,420
703,684
713,209
495,003
461,044
2,910,848
2,714,308
5,685,488
5,506,064
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
77,321
–
–
–
65,522
36,564
142,843
36,564
142,843
36,564
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
295
2,944
295
2,944
295
295
88,266
23,504
33,735
27,661
53,417
46,261
175,713
97,721
176,008
100,665
Total
$
172,973
166,720
190,139
183,265
52,492
144,974
356,879
343,980
203,757
197,733
179,838
173,338
154,580
148,993
169,294
167,274
1,479,952
1,526,277
1,294,983
1,268,423
2,774,935
2,794,700
822,518
804,930
1,055,525
758,924
737,419
740,870
613,942
543,869
3,229,404
2,848,593
6,004,339
5,643,293
1. Represents total remuneration paid in the financial year.
2. Dr WB Goodfellow ceased to be a Director on 6 December 2018.
3. Included in Other long term remuneration for B Zacharias is the fair value expense for the financial year relating to the Nuseed
LTI plan (refer section 1.5).
4. Mr E Prado fixed remuneration and other long term remuneration includes fees and long service leave amounts paid with
respect to the relocation of Mr Prado from Australia to the United States of America during 2019.
48
Nufarm Limited Annual Report 2019
Super‑
Termination
annuation
Benefits
Equity
Settled
Other
Total
performance
Long Term
Remuneration
based
Remuneration
Percentage of
Remuneration
Value of
Options as a
Proportion
of Total
$
$
$
$
17,297
16,672
19,014
18,326
5,249
19,630
35,688
34,398
–
–
17,984
17,333
15,458
14,899
16,929
16,727
127,619
137,985
25,000
25,000
152,619
162,985
25,000
25,000
14,829
–
25,522
25,449
92,729
50,601
158,080
101,050
310,699
264,035
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
443,069
557,691
443,069
557,691
219,410
263,659
178,702
205,715
162,098
215,533
94,641
130,170
654,851
815,077
1,097,920
1,372,768
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
111,509
108,504
220,013
220,013
190,270
183,392
209,153
201,591
57,741
164,604
392,567
378,378
203,757
197,733
197,822
190,671
170,038
163,892
186,223
184,001
1,607,571
1,664,262
1,763,052
1,851,114
3,370,623
3,515,376
1,066,928
1,093,589
1,360,565
964,639
925,039
981,852
909,816
724,640
4,262,348
3,764,720
7,632,971
7,280,096
25%
30%
21%
24%
19%
21%
18%
22%
30%
23%
14%
16%
11%
10%
5%
9%
9%
13%
1%
7%
5. Remuneration tables
5.1 Remuneration of directors and disclosed executives
Details follow of the nature and amount of each major element of remuneration in respect of the NED and
disclosed Executive KMPs.
Directors’ Non‑executive
In AUD
AB Brennan
GR Davis
Dr WB Goodfellow2
DG McGauchie
P. Margin
F. Ford
T. Takasaki
M. McDonald
Sub total non‑ executive
directors remuneration
Executive Director
GA Hunt
Total Directors’ remuneration
Group Executives
PA Binfield
E. Prado4
N Poerksen
B Zacharias3
Sub total – total
executive remuneration
Total directors and
executive remuneration
$
172,973
166,720
190,139
183,265
52,492
144,974
356,879
343,980
203,757
197,733
179,838
173,338
154,580
148,993
169,294
167,274
1,479,952
1,526,277
1,294,688
1,265,479
2,774,640
2,791,756
822,223
804,635
889,938
735,420
703,684
713,209
495,003
461,044
2,910,848
2,714,308
5,685,488
5,506,064
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
77,321
65,522
36,564
142,843
36,564
142,843
36,564
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
295
2,944
295
2,944
295
295
88,266
23,504
33,735
27,661
53,417
46,261
175,713
97,721
176,008
100,665
Total
$
172,973
166,720
190,139
183,265
52,492
144,974
356,879
343,980
203,757
197,733
179,838
173,338
154,580
148,993
169,294
167,274
1,479,952
1,526,277
1,294,983
1,268,423
2,774,935
2,794,700
822,518
804,930
1,055,525
758,924
737,419
740,870
613,942
543,869
3,229,404
2,848,593
6,004,339
5,643,293
1. Represents total remuneration paid in the financial year.
2. Dr WB Goodfellow ceased to be a Director on 6 December 2018.
3. Included in Other long term remuneration for B Zacharias is the fair value expense for the financial year relating to the Nuseed
LTI plan (refer section 1.5).
4. Mr E Prado fixed remuneration and other long term remuneration includes fees and long service leave amounts paid with
respect to the relocation of Mr Prado from Australia to the United States of America during 2019.
Short Term
Post‑
employment
Share Based
Payments
Total1
Salary
Cash Bonus
Non‑monetary
and Fees
(Vested)
Benefits
Super‑
annuation
$
Termination
Benefits
$
Equity
Settled
$
Other
Long Term
$
Total
Remuneration
$
Percentage of
Remuneration
performance
based
$
Value of
Options as a
Proportion
of Total
Remuneration
$
17,297
16,672
19,014
18,326
5,249
19,630
35,688
34,398
–
–
17,984
17,333
15,458
14,899
16,929
16,727
127,619
137,985
25,000
25,000
152,619
162,985
25,000
25,000
14,829
–
25,522
25,449
92,729
50,601
158,080
101,050
310,699
264,035
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
443,069
557,691
443,069
557,691
219,410
263,659
178,702
205,715
162,098
215,533
94,641
130,170
654,851
815,077
1,097,920
1,372,768
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
111,509
–
–
–
108,504
–
220,013
–
220,013
–
190,270
183,392
209,153
201,591
57,741
164,604
392,567
378,378
203,757
197,733
197,822
190,671
170,038
163,892
186,223
184,001
1,607,571
1,664,262
1,763,052
1,851,114
3,370,623
3,515,376
1,066,928
1,093,589
1,360,565
964,639
925,039
981,852
909,816
724,640
4,262,348
3,764,720
7,632,971
7,280,096
25%
30%
21%
24%
19%
21%
18%
22%
30%
23%
14%
16%
11%
10%
5%
9%
9%
13%
1%
7%
Nufarm Limited Annual Report 2019 49
Directors’ Report (continued)
5.2 Equity instruments held by disclosed executives
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; and
• shares in the company
that were held during the financial year by disclosed executives 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
Balance
at 1 August
2018
Granted
as
remun‑
eration(f)
Forfeited
or
Lapsed(c)
Net
Change
Other(e)
Balance
at 31 July
2019(d)
Vested
During
2019
Vested at
31 July
2019(a)
Exercised
Scheme
Directors
G Hunt
LTI performance
211,082
162,933
–
(95,670)
STI deferred(b)
69,695
–
(69,695)
–
Executives
Current KMP
P Binfield
LTI performance
84,494
69,734
–
(35,096)
STI deferred(b)
38,351
–
(38,351)
–
E Prado
LTI performance
66,384
49,636
–
(31,226)
STI deferred(b)
28,435
B Zacharias
LTI performance
41,400
–
–
(28,435)
–
–
(19,276)
STI deferred(b)
17,724
5,583
(20,402)
–
N Poerksen
LTI performance
61,166
49,636
–
(26,008)
STI deferred(b)
29,801
–
(29,801)
–
Total
LTI performance
464,526
331,939
–
(207,276)
STI deferred(b)
184,006
5,583
(186,684)
Non‑KMP Officers
F Smith
LTI performance
–
–
–
Former non‑KMP Officers
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
R Heath
LTI performance
20,408
14,599
–
(9,808)
(25,199)
278,345
–
–
69,695
119,132
–
–
38,351
84,794
–
–
28,435
22,124
–
2,905
20,402
84,794
–
–
29,801
589,189
–
2,905
186,684
–
–
–
–
Value at
Date of
for‑
feiture(c)
466,870
–
171,268
–
152,383
–
94,067
–
126,919
–
1,011,507
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
47,863
Total
668,940
352,121
(186,684)
(217,084)
(25,199)
592,094
186,684
– 1,059,370
(a) All options/rights that are vested are exercisable.
(b) The grant date fair value of deferred shares granted as remuneration during the year ended 31 July 2019 was $6.07. 100%
of STI deferred shares available to vest during the year ended 31 July 2019 vested as the necessary service condition was
satisfied. 100% of non‑vested STI deferred shares are due to vest during the year ended 31 July 2020. Note those deferred shares
granted as remuneration during the year ended 31 July 2019 relate to the year ended 31 July 2018 STI outcomes. Deferred shares
granted as remuneration on the back of the current year STI outcomes will be determined and allocated in October 2019.
(c) LTIP performance rights forfeited due to a failure to satisfy service or performance conditions during 2019 are disclosed in
column “Forfeited or lapsed”. 100% of rights due to vest in 2019 were forfeited. The value of LTIP performance rights forfeited
is expressed in the table above using the share price of the company at 31 July 2019 of $4.88.
(d) 267,850 of total LTIP performance rights held by KMPs or non‑KMP Officers are due to vest in the period ending 31 July 2020,
with the remaining unvested balance due to vest in the period ending 31 July 2021.
(e) “Net change other” reflects changes to KMPs and non‑KMP Officers during the period.
(f) The number of LTIP performance rights granted as remuneration during FY19 were determined by dividing the KMP’s total LTI
grant opportunity by $6.07, being the fix‑day VWAP commencing 1 October 2018.
50
Nufarm Limited Annual Report 2019
5.3 Shares held in Nufarm Ltd
Directors
DG McGauchie
G Hunt
AB Brennan
GR Davis
FA Ford
Dr WB Goodfellow1
PM Margin
ME McDonald
T Takasaki
Executives
Current KMP
P Binfield
E Prado
B Zacharias
N Poersken
Balance at
1 August 2018
Granted as
Remuneration
On Exercise of
Rights
Net Change
Other
Balance at
31 July 2019
66,293
319,727
12,224
48,889
24,445
1,339,887
3,005
8,584
–
266,501
71,471
32,649
18,024
–
–
–
–
–
–
–
–
–
–
–
–
–
–
69,695
–
–
–
–
–
–
–
10,468
105,241
1,932
22,720
26,955
(1,339,887)
475
13,743
38,351
28,435
23,307
29,801
27,323
(23,561)
5,965
35,996
76,761
494,663
14,156
71,609
51,400
–
3,480
22,327
–
332,175
76,345
61,921
83,821
Total
2,211,699
–
189,589
(1,112,630)
1,288,658
1. Dr WB Goodfellow ceased to be a Director on 6 December 2018.
Shares issued as a result of the exercise of options
There were nil (2018: 333,078) shares issued as a result of the exercise of options during the year.
Unissued shares under option
There are nil (2018: nil) unissued shares under option. The unissued shares under option have been provided
to Nufarm employees as performance rights and the exercise price of such options is nil.
Loans to key management personnel
There were no loans to key management personnel at 31 July 2019 (2018: Nil).
Nufarm Limited Annual Report 2019 51
Directors’ Report (continued)
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 arms‑length basis.
From time to time, key management personnel of the company or its controlled entities, or their related entities,
may purchase goods from the group. These purchases are on the same terms and conditions as those entered
into by other group employees or customers and are trivial or domestic in nature.
This report has been made in accordance with a resolution of directors.
DG McGauchie AO
Director
GA Hunt
Director
Melbourne
30 September 2019
52
Nufarm Limited Annual Report 2019
Lead Auditor’s Independence Declaration
Under section 307C of the Corporations Act 2001
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 of Nufarm Limited for
the financial year ended 31 July 2019 there have been:
i.
ii.
no contraventions of the auditor independence requirements as set out in the Corporations
Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
Gordon Sangster
Partner
Melbourne
30 September 2019
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 2019 53
Consolidated Income Statement
For the year ended 31 July 2019
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
Financial expenses excluding foreign exchange gains/(losses)
Net foreign exchange gains/(losses)
Net financial expenses
Net financing costs
Profit/(loss) before income tax
Consolidated
2019
$000
2018*
$000
Note
7
19
10
10
10
3,757,590
3,307,847
(2,744,309)
(2,344,413)
1,013,281
963,434
10,461
7,256
(561,151)
(480,650)
(223,768)
(275,573)
(41,132)
(39,046)
124
78
197,815
175,499
10,051
(117,293)
(9,624)
(126,917)
(116,866)
10,978
(118,638)
(27,946)
(146,584)
(135,606)
80,949
39,893
Income tax benefit/(expense)
11
(42,639)
(55,900)
Profit/(loss) for the period from continuing operations
38,310
(16,007)
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
38,310
(15,588)
–
(419)
38,310
(16,007)
30
30
7.4
7.4
(8.5)
(8.5)
* The group has initially applied AASB 15 and AASB 9 at 1 August 2018. Under the transition method chosen comparative information
is not restated.
The consolidated income statement is to be read in conjunction with the attached notes.
54
Nufarm Limited Annual Report 2019
Consolidated Statement of
Comprehensive Income
For the year ended 31 July 2019
Profit/(loss) for the period
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Note
Consolidated
2019
$000
2018*
$000
38,310
(16,007)
Foreign exchange translation differences for foreign operations
69,086
(24,231)
Foreign exchange translation differences for disposal groups
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
–
54
(10,735)
–
2,028
8,882
(7,356)
–
4,980
(587)
Other comprehensive profit/(loss) for the period, net of income tax
51,049
(8,928)
Total comprehensive profit/(loss) for the period
89,359
(24,935)
Attributable to:
Equity holders of the company
Non‑controlling interest
89,359
(24,516)
–
(419)
Total comprehensive profit/(loss) for the period
89,359
(24,935)
* The group has initially applied AASB 15 and AASB 9 at 1 August 2018. Under the transition method chosen comparative information
is not restated.
The amounts recognised directly in equity are disclosed net of tax.
The consolidated statement of comprehensive income is to be read in conjunction with the attached notes.
Nufarm Limited Annual Report 2019 55
Consolidated Balance Sheet
As at 31 July 2019
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Current tax assets
Other investments
Preference securities receivable
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
Bank overdraft
Trade and other payables
Loans and borrowings
Employee benefits
Current tax payable
Provisions
Total current liabilities
Non‑current liabilities
Payables
Loans and borrowings
Deferred tax liabilities
Employee benefits
Total non‑current liabilities
TOTAL LIABILITIES
NET ASSETS
Equity
Share capital
Reserves
Retained earnings
Equity attributable to equity holders of the Company
Other securities
Non‑controlling interest
TOTAL EQUITY
Consolidated
2019
$000
2018*
$000
Note
15
16
17
18
20
13
16
19
20
18
22
23
15
24
25
26
18
28
24
25
18
26
505,687
1,378,751
1,228,241
36,320
–
97,500
301,700
1,199,617
1,179,696
31,609
–
–
3,246,499
2,712,622
101,977
108,859
2,010
421
212,997
393,582
411
442
201,962
338,749
1,719,034
1,688,322
2,430,021
2,338,745
5,676,520
5,051,367
–
1,221,261
494,986
19,275
18,971
17,216
7,357
1,131,270
519,698
19,347
20,930
12,398
1,771,709
1,711,000
11,058
1,257,830
125,883
105,096
10,800
1,148,715
113,552
95,676
1,499,867
1,368,743
3,271,576
3,079,743
2,404,944
1,971,624
1,834,594
1,537,502
(249,508)
475,926
(309,126)
496,316
2,061,012
1,724,692
29
343,932
246,932
–
–
2,404,944
1,971,624
* The group has initially applied AASB 15 and AASB 9 at 1 August 2018. Under the transition method chosen comparative information
is not restated.
The consolidated balance sheet is to be read in conjunction with the attached notes.
56
Nufarm Limited Annual Report 2019
Consolidated Statement of Cash Flows
For the year ended 31 July 2019
Cash flows from operating activities
Profit/(loss) for the period – before tax
Adjustments for:
Depreciation & amortisation
Asset impairment
Inventory write down
Share of (profits)/losses of associates net of tax
Net finance expense
Other
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
Cash generated from operations
Interest received
Dividends received
Interest paid
Taxes paid
Net operating cash flows
Cash flows from investing activities
Proceeds from sale of property, plant and equipment
Payments for plant and equipment
Purchase of businesses, net of cash acquired
Purchase of equity investment
Proceeds from sale of business and investments
Payments for acquired intangibles and major product
development expenditure
Net investing cash flows
Cash flows from financing activities
Share issue proceeds (net of costs)
Debt establishment transaction costs
Proceeds from borrowings
Repayment of borrowings
Distribution to other securities 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 (a)
Note
8
8
8
19
6
14
19
Consolidated
2019
$000
2018*
$000
80,949
39,893
171,708
–
12,640
(124)
107,241
(648)
(194,552)
(61,184)
52,948
73,756
242,734
10,051
65
(112,659)
(42,060)
98,131
120,550
70,559
15,310
(78)
107,660
(102)
(183,045)
(407,253)
316,514
(21,425)
58,583
10,978
12
(109,630)
(48,112)
(88,169)
2,098
(66,966)
6,084
(69,539)
–
(778,859)
(1,440)
–
–
–
(107,672)
(123,260)
6
(173,980)
(965,574)
25
25
25
29
29
6
296,008
436,454
(2,288)
(16,911)
1,350,589
2,201,871
(1,340,229)
(1,458,764)
(15,162)
(18,924)
(14,640)
(35,580)
269,994
1,112,430
194,145
294,343
17,199
58,687
223,761
11,895
15
505,687
294,343
(a) Represented in 2019 by cash at bank of $505.687 million.
* The group has initially applied AASB 15 and AASB 9 at 1 August 2018. Under the transition method chosen comparative information
is not restated.
The consolidated statement of cash flows is to be read in conjunction with the attached notes.
Nufarm Limited Annual Report 2019 57
Consolidated Statement of Changes
in Equity
For the year ended 31 July 2019
Consolidated
Balance at 1 August 2017
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
Acquisition of remaining interest in non‑controlling interest
Contributions of equity net of transaction costs
Share
capital
$000
Translation
reserve
$000
1,090,197
(316,406)
Capital profit
reserve
$000
33,627
Other
reserve
$000
(18,962)
Retained
earnings
$000
563,140
Other
Non‑controlling
Total
$000
1,351,596
securities
$000
246,932
interest
$000
4,395
Total
equity
$000
1,602,923
–
–
–
–
–
–
–
–
7,473
–
2,962
–
–
–
436,870
–
–
(24,231)
–
–
–
(24,231)
–
–
–
–
–
–
1,249
–
Balance at 31 July 2018
1,537,502
(339,388)
33,627
(3,365)
496,316
1,724,692
246,932
Balance at 1 August 2018
Adjustment on initial application of AASB 15 (net of tax)
Adjustment on initial application of AASB 9 (net of tax)
1,537,502
(339,388)
33,627
(3,365)
1,724,692
246,932
–
–
–
–
*Adjusted balance at 1 August 2018
1,537,502
(339,388)
33,627
(3,365)
475,591
1,703,967
246,932
1,950,899
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
Acquisition of remaining interest in non‑controlling interest
Contributions of equity net of transaction costs
–
–
–
–
–
–
–
–
346
–
738
–
–
–
296,008
–
–
69,086
–
–
–
69,086
–
–
–
–
–
–
–
–
Balance at 31 July 2019
1,834,594
(270,302)
33,627
(12,833)
475,926
2,061,012
343,932
2,404,944
*The group has initially applied AASB 15 and AASB 9 at 1 August 2018. Under the transition method chosen comparative information is not restated.
The consolidated statement of changes in equity is to be read in conjunction with the attached notes.
58
Nufarm Limited Annual Report 2019
(15,588)
(15,588)
(419)
(16,007)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,028
8,882
(587)
10,323
3,904
(7,889)
–
–
–
(379)
9,638
–
–
–
–
–
–
–
–
–
–
–
–
–
54
(10,735)
1,559
(346)
4,980
(10,608)
(37,795)
(10,763)
(7,658)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(19,662)
(10,957)
4,980
(24,231)
2,028
8,882
(587)
(24,516)
3,904
(416)
(37,795)
2,962
(10,763)
(379)
3,229
436,870
(7,356)
69,086
54
(10,735)
–
89,359
1,559
–
(19,662)
738
(10,957)
–
–
496,316
(7,017)
(13,708)
(7,017)
(13,708)
38,310
38,310
(7,356)
(10,681)
30,954
296,008
97,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4,980
(24,231)
2,028
8,882
(587)
(24,935)
3,904
(416)
(38,542)
2,962
(10,763)
(379)
–
436,870
1,971,624
1,971,624
(7,017)
(13,708)
38,310
(7,356)
69,086
54
(10,735)
–
89,359
1,559
–
(19,662)
738
(10,957)
–
–
393,008
(419)
(747)
(3,229)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Share
capital
$000
1,090,197
Translation
reserve
$000
(316,406)
Capital profit
reserve
$000
33,627
Other
reserve
$000
(18,962)
Retained
earnings
$000
563,140
Total
$000
Other
securities
$000
Non‑controlling
interest
$000
Total
equity
$000
1,351,596
246,932
4,395
1,602,923
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,028
8,882
(587)
10,323
3,904
(7,889)
–
–
–
(379)
9,638
–
(15,588)
(15,588)
4,980
–
–
–
–
(10,608)
–
–
(37,795)
–
(10,763)
–
(7,658)
–
4,980
(24,231)
2,028
8,882
(587)
(24,516)
3,904
(416)
(37,795)
2,962
(10,763)
(379)
3,229
436,870
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Balance at 31 July 2018
1,537,502
(339,388)
33,627
(3,365)
496,316
1,724,692
246,932
Balance at 1 August 2018
Adjustment on initial application of AASB 15 (net of tax)
Adjustment on initial application of AASB 9 (net of tax)
1,537,502
(339,388)
33,627
(3,365)
–
–
–
–
496,316
(7,017)
(13,708)
1,724,692
246,932
(7,017)
(13,708)
–
–
*Adjusted balance at 1 August 2018
1,537,502
(339,388)
33,627
(3,365)
475,591
1,703,967
246,932
Consolidated
Balance at 1 August 2017
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
Acquisition of remaining interest in non‑controlling interest
Contributions of equity net of transaction costs
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
Acquisition of remaining interest in non‑controlling interest
Contributions of equity net of transaction costs
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
7,473
2,962
436,870
346
738
296,008
(24,231)
(24,231)
1,249
69,086
69,086
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
54
(10,735)
–
(10,681)
1,559
(346)
–
–
–
–
–
–
(7,356)
–
–
–
–
30,954
–
–
(19,662)
–
(10,957)
–
–
–
(7,356)
69,086
54
(10,735)
–
89,359
1,559
–
(19,662)
738
(10,957)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
296,008
97,000
38,310
38,310
Balance at 31 July 2019
1,834,594
(270,302)
33,627
(12,833)
475,926
2,061,012
343,932
*The group has initially applied AASB 15 and AASB 9 at 1 August 2018. Under the transition method chosen comparative information is not restated.
The consolidated statement of changes in equity is to be read in conjunction with the attached notes.
(419)
(16,007)
–
–
–
–
–
(419)
–
–
(747)
–
–
–
(3,229)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4,980
(24,231)
2,028
8,882
(587)
(24,935)
3,904
(416)
(38,542)
2,962
(10,763)
(379)
–
436,870
1,971,624
1,971,624
(7,017)
(13,708)
1,950,899
38,310
(7,356)
69,086
54
(10,735)
–
89,359
1,559
–
(19,662)
738
(10,957)
–
–
393,008
2,404,944
Nufarm Limited Annual Report 2019 59
Notes to the Consolidated
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 2019
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).
This is the first set of the group’s annual financial statements in which AASB 15 Revenue from Contracts with
Customers and AASB 9 Financial Instruments have been applied. Changes to significant accounting policies
are described in note 3.
The consolidated financial statements were authorised for issue by the Board of Directors on 30 September 2019.
(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, and defined benefit fund obligations that are 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 methods used to measure fair values are discussed further in note 4.
(c) Functional and presentation currency
These consolidated financial statements are presented in Australian dollars, which is the company’s functional
currency. The company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports)
Instrument 2016/191 and, in accordance with that Instrument, all financial information presented in Australian dollars
has been rounded to the nearest thousand unless otherwise stated.
(d) Use of estimates and judgements
The preparation of financial statements requires management to make judgements, estimates and assumptions that
affect the application of 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 the group making assumptions
about the timing of cash inflows and outflows, growth assumptions, discount rates and cost of debt.
(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, using a value in use (VIU) or a fair value less cost to dispose (FVLCD) methodology
to estimate the recoverable amount of cash generating units. VIU is determined as the present value of the estimated
future cash flows expected to arise from the continued use of the asset in its present form and its eventual disposal.
60
Nufarm Limited Annual Report 2019
2. Basis of preparation (continued)
(d) Use of estimates and judgements (continued)
(ii) Impairment testing (continued)
VIU is determined by applying assumptions specific to the group’s continued use and cannot consider future
development. The determination of recoverable value often requires the estimation and discounting of future
cash flows which is based on information available at balance date such as expected revenues from products,
the return on assets, future costs, growth rates, applicable discount rates and useful lives.
FVLCD is an estimate of the amount that a market participant would pay for an asset or Cash Generating Unit (CGU),
less the cost to dispose. Fair value is generally determined using independent market assumptions to calculate
the present value of the estimated future cash flows expected to arise from the continued use of the asset, and
its eventual sale where a market participant may take a consistent view. Cash flows are discounted using an
appropriate discount rate to arrive at a net present value of the asset which is compared against the asset’s
carrying value.
These estimates are subject to risk and uncertainty that may be beyond the control of the group; hence there is
a possibility that changes in circumstances will materially alter projections, which may impact the recoverable
amount of assets at each reporting date.
Other non‑current assets are also assessed for impairment indicators. Refer to note 23 for key assumptions
made in determining the recoverable amounts of the CGU’s.
(iii) Income taxes
Uncertain tax matters:
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. The group has exercised judgement in the application of tax legislation and its interaction with income
tax accounting principles. 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 recognised on the balance sheet
and the amount of other tax losses and temporary differences not yet recognised in the period in which the tax
determination is made.
Deferred tax:
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. Judgement is required by the group to determine the likely timing and the
level of future taxable income. The group assesses the recoverability of recognised and unrecognised deferred
taxes including losses in Australia and overseas using assumptions and projected cashflows.
Deferred tax liabilities arising from temporary differences in investments, caused principally by retained earnings
held in foreign tax jurisdictions, are recognised unless repatriation of retained earnings can be controlled and are
not expected to occur in the foreseeable future.
(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 and requires the
exercise of judgement in relation to assumptions for expected future salary levels, long term price inflation and
bond rates, experience of employee departures and periods of service.
Refer to note 26 for details of the key assumptions used in determining the accounting for these plans.
Nufarm Limited Annual Report 2019 61
Notes to the Consolidated Financial Statements (continued)
2. Basis of preparation (continued)
(d) Use of estimates and judgements (continued)
(v) Working capital
In the course of normal trading activities, the group uses judgement in establishing the carrying value of various
elements of working capital, which is principally inventories and trade receivables. Judgement is required to
estimate the provision for obsolete or slow moving inventories and bad and doubtful receivables. In estimating
the provision for obsolete or slow moving inventories the group considers the net realisable value of inventory
using estimated market price less cost to sell.
In estimating the provision for bad and doubtful receivables the group measures the expected credit losses (ECLs) using
key assumptions to determine a probability weighted basis including the geographical location’s specific circumstances.
Actual expenses in future periods may be different from the provisions established and any such differences would
impact future earnings of the group.
(vi) Capitalised development costs
Development expenditure is recognised as an intangible asset when the group judges and can 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.
The criteria above are derived from independent valuations and predicated on estimates and judgments including
future cash flows, revenue streams and value in use calculations. Estimates and assumptions may change as new
information becomes available. If, after having commenced the development activity, a judgement is made that
the intangible asset is impaired, the appropriate amount will be written off to the income statement.
(vii) 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. The group assesses intellectual property to have
a finite life or indefinite life. Changes to estimates related to the useful life of intellectual property are accounted for
prospectively and may affect amortisation rates and intangible asset carrying values.
(e) Reclassification
Where applicable comparatives are 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.
Changes in significant accounting policies
AASB 15 Revenue from Contracts with Customers
AASB 15 establishes a comprehensive framework for determining whether, how much and when revenue is
recognised. It replaced AASB 118 Revenue and related interpretations. AASB 15 was effective for the group beginning
on 1 August 2018.
Under AASB 15, revenue is recognised when a customer obtains control of the goods or services. Determining the
timing of the transfer of control requires judgement.
Revenue with customers is allocated between performance obligations and recognised as each performance
obligation is met. The group generates sales revenue primarily from the obligation to supply products to customers,
and in some cases there is a secondary obligation for delivery and tolling services.
62
Nufarm Limited Annual Report 2019
3. Significant accounting policies (continued)
Changes in significant accounting policies (continued)
AASB 15 Revenue from Contracts with Customers (continued)
Sales contracts include variable consideration such as rebates and sales incentives to customers. Variable
consideration is only included in the transaction price if, and to the extent that, it is highly probable that its inclusion
will not result in a significant revenue reversal in the future when the uncertainty has been resolved.
The seed technologies segment receives royalty revenue from growers for certain varieties of seed. Revenue is
recognised at the later of when the sales or usage occurs and the performance obligation is satisfied, which would
be when the harvest occurs and the royalty is paid. Under the previous accounting policy, royalty revenue was
estimated and accrued at the point the seed was sold.
The adjustment to derecognise accrued revenue related to the royalties has resulted in a reduction to accrued
receivables of $7.202 million (in trade and other receivables) and a corresponding entry to retained earnings
($7.017 million) and deferred tax asset ($0.185 million).
AASB 15 did not have a significant impact on the group’s accounting policies with respect to other revenue streams
(refer to note 3 (l)).
The group has adopted AASB 15 using the cumulative transition approach where transitional adjustments are
recognised in retained earnings at 1 August 2018, without adjustment of the 2018 comparatives. In addition, the
disclosure requirements in AASB 15 have not generally been applied to comparative information.
AASB 9 Financial Instruments
AASB 9 sets out requirements for recognising and measuring financial assets, financial liabilities and some
contracts to buy or sell non‑financial items. It replaced AASB 139 Financial Instruments: Recognition and
Measurement. AASB 9 was effective for the group beginning on 1 August 2018.
i) Impairment of financial assets
AASB 9 replaces the ‘incurred loss’ model in AASB 139 with a forward‑looking ‘expected credit loss’ (ECL) model.
The group measures loss allowances at an amount equal to lifetime ECLs.
The group applied judgement as to how changes in economic factors affect ECLs, and was determined on a
probability‑weighted basis. Reasonable and supportable information was considered, that was relevant and
available without undue cost or effort and included both qualitative and quantitative information based on
historical experiences, and also forward looking information.
The application of AASB 9’s impairment requirements is an additional loss allowance required of $17.401 million with
a corresponding entry to retained earnings ($13.708 million) and deferred tax assets ($3.693 million). Refer to note 31.
The group has used the exemption to not restate comparative information for prior periods with respect to
classification and measurement (including impairment) changes and accordingly there is no restatement
required for 2018.
ii) Classification and measurement of financial assets and liabilities
AASB 9 contains three principal classification categories for financial assets: measured at amortised cost, fair
value through other comprehensive income (FVOCI), and fair value through profit or loss (FVTPL). The classification
of financial assets under AASB 9 is generally based on the business model in which a financial asset is managed
and its contractual cash flow characteristics. AASB 9 eliminates the previous AASB 139 categories of held to maturity,
loans and receivables and available for sale.
AASB 9 largely retains the existing requirements in AASB 139 for the classification and measurement of financial liabilities.
Nufarm Limited Annual Report 2019 63
Notes to the Consolidated Financial Statements (continued)
3. Significant accounting policies (continued)
Changes in significant accounting policies (continued)
AASB 9 Financial Instruments (continued)
The adoption of AASB 9 has not had a significant effect on the group’s accounting policies related to financial
liabilities and derivative financial instruments (for derivatives that are used as hedging instruments).
For an explanation of how the group classifies and measures financial instruments and accounts for related gains
and losses under AASB 9 see note 3 (c).
New standards and interpretations not yet adopted
A number of new standards and amendments to standards are effective for annual periods beginning on or after
1 August 2019. The group has not early adopted any amendments, standards or interpretations that have been
issued but are not yet mandatory in preparing these consolidated financial statements. Of those standards that
are not yet effective, AASB 16 Leases is expected to have a material impact on the group’s consolidated financial
statements in the period of initial application.
AASB 16 Leases
The standard is effective for the group beginning on 1 August 2019. The group has assessed the estimated impact
that initial application of AASB 16 will have on its consolidated financial statements, as described below. The actual
impacts of adopting the standard on 1 August 2019 may change because – the new accounting policies are subject
to change until the group presents its first consolidated financial statements that include the date of initial application.
AASB 16 introduces a single, on‑balance lease sheet accounting model for lessees. As lessee, the group will
recognise a right‑of‑use asset representing its right to use the underlying asset and a lease liability representing its
obligation to make lease payments. There are optional exemptions for short‑term leases and leases of low value.
In addition, the nature of expenses related to those leases will change as AASB 16 replaces the straight‑line
operating lease expense with a depreciation charge for right‑of‑use assets and interest expense on lease liabilities.
EBITDA, as defined in note 5 operating segments, will increase as the operating lease cost is charged against EBITDA
under AASB 117 Leases while under the new standard will be included in depreciation and interest which are
excluded from EBITDA.
Based on information currently available, the group estimates that as at 1 August 2019 it will recognise:
• additional lease liabilities of between $140.0 million and $154.0 million
• right of use assets of between $113.0 million and $127.0 million
• deferred tax of approximately $5.0 million
No significant impact is expected for the group’s finance leases.
The group plans to apply AASB 16 initially on 1 August 2019 using the modified retrospective approach. Therefore the
cumulative effect of adopting AASB 16 will be recognised as an adjustment to the opening balance of retained earnings
at 1 August 2019, with no restatement of comparative information.
AASB Interpretation 23 Uncertainty over Income Tax Treatment
The Interpretation provides a framework to consider, recognise and measure the impact of tax uncertainties.
It specifically addresses how to determine the unit of account and provides recognition and measurement
guidance to be applied such as:
• how taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates are determined; and
• consideration of changes in facts and circumstances.
The Interpretation is effective for the group on 1 August 2019, with certain transition relief available. Since the group
operates in a complex multinational tax environment, applying the Interpretation may affect its consolidated
financial statements.
64
Nufarm Limited Annual Report 2019
3. Significant accounting policies (continued)
(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. 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. In assessing control, the group takes into consideration potential voting rights that currently
are exercisable.
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.
(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.
When the group loses control over a subsidiary it derecognises the assets and liabilities of the subsidiary and any
related NCI and other components of equity. Any resulting gain or loss is recognised in profit and loss. Any interest
retained is measured at fair value when control is lost.
Changes in the group’s interest in a subsidiary that do not result in a loss of control are accounted for as an
equity transaction.
The accounting policies of subsidiaries have been changed where necessary to align them with the policies
adopted by the group. Losses applicable to the NCI in a subsidiary are allocated to the NCI even if doing so
causes the NCI to have a deficit balance.
(iv) Investments in equity accounted investees
The group’s interests in equity‑accounted investees comprise interests in associates and joint ventures.
Nufarm Limited Annual Report 2019 65
Notes to the Consolidated Financial Statements (continued)
3. Significant accounting policies (continued)
(a) Basis of consolidation (continued)
(iv) Investments in equity accounted investees (continued)
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, which includes transaction costs. The group’s investment includes goodwill identified on acquisition, net of
any accumulated impairment losses. Subsequent to initial recognition, the consolidated financial statements include
the group’s share of the income and expenses and equity movements of the investees after adjustments to align the
accounting policies of the investees with those of the group, until the date on which significant influence or joint
control ceases. On loss of significant influence the investment is no longer equity accounted and is revalued to
fair value.
(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.
(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 and accumulated in translation
reserve except to the extent that the translation difference is allocated to NCI. When a foreign operation is disposed
of, in part or in full, the relevant amount in the translation reserve 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 translation reserve.
(c) Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity
instrument of another entity.
(i) Non‑derivative financial assets
Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through
other comprehensive income (FVOCI), and fair value through profit or loss (FVTPL).
66
Nufarm Limited Annual Report 2019
3. Significant accounting policies (continued)
(c) Financial instruments (continued)
(i) Non‑derivative financial assets (continued)
The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow
characteristics and the group’s business model for managing them. With the exception of trade receivables, the
group initially measures a financial asset at its fair value plus transaction costs on trade date at which the group
becomes a party to the contractual provisions of the instrument. Trade receivables that do not contain a significant
financing component are measured at the transaction price determined under AASB 15. Refer to note 3 (l).
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.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in four categories:
• Amortised cost
• Fair value through OCI with recycling of cumulative gains and losses (debt instruments)
• Fair value through OCI with no recycling of cumulative gains and losses upon derecognition (equity instruments)
• Fair value through profit or loss
Financial assets at amortised cost
This category is the most relevant to the group. Financial assets are measured at amortised cost if both of the
following conditions are met and is not designated as FVTPL:
• The financial asset is held within a business model with the objective to hold financial assets in order to collect
contractual cash flows; and
• The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments
of principal and interest on the principal amount outstanding.
Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method and are
subject to impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified
or impaired.
The group’s financial assets at amortised cost includes trade receivables.
Financial assets at fair value through OCI (FVOCI) – debt instruments
The Group measures debt instruments at fair value through OCI if both of the following conditions are met and is not
designated as FVTPL:
• The financial asset is held within a business model with the objective of both holding to collect contractual cash
flows and selling; and
• The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments
of principal and interest on the principal amount outstanding.
Interest income, foreign exchange revaluation and impairment losses or reversals are recognised in the statement
of profit or loss and computed in the same manner as for financial assets measured at amortised cost. The remaining
fair value changes are recognised in OCI. Upon derecognition, the cumulative fair value change recognised in OCI
is recycled to profit or loss.
The group does not currently have any financial assets classified as FVOCI.
Nufarm Limited Annual Report 2019 67
Notes to the Consolidated Financial Statements (continued)
3. Significant accounting policies (continued)
(c) Financial instruments (continued)
(i) Non‑derivative financial assets (continued)
Financial assets at fair value through OCI (FVOCI) – equity instruments
Upon initial recognition, the group can elect to classify irrevocably its equity investments as equity instruments
designated at fair value through OCI when they meet the definition of equity under AASB 132 Financial Instruments:
Presentation and are not held for trading. The classification is determined on an instrument‑by‑instrument basis.
Gains and losses on these financial assets are never recycled to profit or loss. Dividends are recognised as other
income in the statement of profit or loss when the right of payment has been established, except when the group
benefits from such proceeds as a recovery of part of the cost of the financial asset, in which case, gains are
recorded in OCI.
The Group has elected to classify irrevocably its non‑listed equity investments under this category.
Financial assets at fair value through profit or loss (FVTPL)
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. Financial assets with cash flows that are not
‘solely payments of principal and interest’ (SPPI) are classified and measured at fair value through profit or loss,
irrespective of the business model.
In assessing whether the contractual cash flows are SPPI, the group considers the contractual terms of the instrument
by considering events, terms and prepayment/extension features that could change the timing or amount of
contractual cash flows such that it would not meet this condition.
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.
(ii) Non‑derivative financial liabilities
At initial recognition, financial liabilities are classified at FVTPL, loans and borrowings, or payables, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables,
net of directly attributable transaction costs.
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.
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.
The group has the following non‑derivative financial liabilities: loans and borrowings, bank overdrafts and trade
and other payables.
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3. Significant accounting policies (continued)
(c) Financial instruments (continued)
(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.
(iv) Other securities
Sumitomo preference securities
The Sumitomo Preference Securities (SPS) are classified as non‑controlling equity instruments as no voting rights have
been attached to the SPS. After 24 months the SPS may be exchanged for Nufarm ordinary shares. After‑tax distributions
thereon are recognised as distributions within equity. Further details can be found in note 29.
Nufarm step‑up securities
The Nufarm Step‑up Securities (NSS) are classified as non‑controlling equity instruments 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.
(v) 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 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.
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.
Before 1 August 2018, the documentation includes identification of the hedging instrument, the hedged item or
transaction, the nature of the risk being hedged and how the Group will assess the effectiveness of changes in
the hedging instrument’s fair value in offsetting the exposure to changes in the hedged item’s fair value or cash
attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes
in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly
effective throughout the financial reporting periods for which they were designated.
Beginning 1 August 2018, the documentation includes identification of the hedging instrument, the hedged item,
the nature of the risk being hedged and how the Group will assess whether the hedging relationship meets the
hedge effectiveness requirements (including the analysis of sources of hedge ineffectiveness and how the hedge
ratio is determined). A hedging relationship qualifies for hedge accounting if it meets all of the following
effectiveness requirements:
• There is an economic relationship’ between the hedged item and the hedging instrument.
• The effect of credit risk does not ‘dominate the value changes’ that result from that economic relationship.
• The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that
the Group actually hedges and the quantity of the hedging instrument that the Group actually uses to hedge that
quantity of hedged item.
Nufarm Limited Annual Report 2019 69
Notes to the Consolidated Financial Statements (continued)
3. Significant accounting policies (continued)
(c) Financial instruments (continued)
(v) Derivative financial instruments, including hedge accounting (continued)
Hedges that meet all the qualifying criteria for hedge accounting are accounted for, as described below:
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 hedge
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.
(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.
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Nufarm Limited Annual Report 2019
3. Significant accounting policies (continued)
(d) Property, plant and equipment (continued)
(i) Recognition and measurement (continued)
Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self‑constructed
assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to
a working condition for its intended use, and the costs of dismantling and removing the items and restoring the site
on which they are located, and capitalised borrowing costs. Purchased software that is integral to the functionality
of the related equipment is capitalised as part of that equipment.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as
separate items (major components) of property, plant and equipment.
Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the
proceeds from disposal with the carrying amount of property, plant and equipment and are recognised net in
profit or loss.
(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.
Nufarm Limited Annual Report 2019 71
Notes to the Consolidated Financial Statements (continued)
3. Significant accounting policies (continued)
(e) Intangible assets (continued)
(ii) Research and development (continued)
Development activities involve a plan or design for the production of new or substantially improved products
and processes. Development expenditure is capitalised only if development costs can be measured reliably, the
product or process is technically and commercially feasible, future economic benefits are probable and the group
has sufficient resources to complete development and to use or sell the asset. The expenditure capitalised includes
the cost of materials, direct labour and overhead costs that are directly attributable to preparing the asset for its
intended use and capitalised borrowing costs. Development expenditure that does not meet the above criteria
is recognised in profit or loss as incurred.
Capitalised development expenditure is measured at cost less accumulated amortisation and accumulated
impairment losses.
(iii) Intellectual property
Intellectual property consists of product registrations, product access rights, trademarks, task force seats, product
distribution rights and product licences acquired from third parties. Intellectual property is assessed as to whether it
has a finite or indefinite life. Finite life intellectual property is amortised over its useful life but not longer than 30 years.
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, for the current and comparative periods, are as follows:
• capitalised development costs
5 to 30 years
• intellectual property – finite life
over the useful life and not more than 30 years
• computer software
3 to 7 years
Amortisation methods, useful lives and residual values are reassessed at each reporting date.
(f) Leases
Operating leases are not capitalised and payments made 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.
Assets held under lease, which result in the group receiving substantially all the risks and rewards of ownership
are capitalised as property, plant and equipment at the lower of the fair value of the asset or the estimated present
value of the minimum lease payments, with a corresponding lease liability included within loans and borrowings.
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.
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Nufarm Limited Annual Report 2019
3. Significant accounting policies (continued)
(g) Inventories
Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the first‑in
first‑out principle and includes expenditure incurred in acquiring the inventories, production or conversion costs and
other costs incurred in bringing them to their existing location and condition. In the case of manufactured inventories
and work in progress, cost includes an appropriate share of overheads based on normal operating capacity.
Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of
completion and selling expenses.
(h) Impairment
(i) Non‑derivative financial assets
The group recognises an allowance for expected credit losses (ECLs) for all financial assets at amortised cost
and debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the
contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to
receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include
cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.
For trade receivables, the group applies a simplified approach in calculating ECLs. Therefore, the group does not
track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date.
The group has established a provision matrix that is based on its historical credit loss experience, adjusted for
forward‑looking factors specific to the debtors and the economic environment.
The group considers a financial asset to be in default when contractual payments are 90 days past due. However,
in certain cases, the group may also consider a financial asset to be in default when internal or external information
indicates that the group is unlikely to receive the outstanding contractual amounts in full before taking into account
any credit enhancements held by the group. A financial asset is written off when there is no reasonable expectation
of recovering the contractual cash flows.
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.
Loss Allowances for financial assets measured at amortised cost are deducted from the gross carrying amount
of the assets. For debt securities at FVOCI, the loss allowance is charged to profit or loss and is recorded in OCI.
(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 of disposal. 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.
Nufarm Limited Annual Report 2019 73
Notes to the Consolidated Financial Statements (continued)
3. Significant accounting policies (continued)
(h) Impairment (continued)
(ii) Non‑financial assets (continued)
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 or joint venture is not recognised
separately, and therefore is not tested for impairment separately. Instead, the entire amount of the investment in
an associate or joint venture is tested for impairment as a single asset when there is objective evidence that the
investment in an associate or joint venture may be impaired.
Refer to use of estimates and judgements note 2 and intangibles note 23 for further information.
(i) Assets held for sale
Assets, or disposal groups comprising assets and liabilities, that are expected to be recovered primarily through
sale rather than continuing use are classified as held for sale. Immediately before classification as held for sale, the
assets, or components of a disposal group, are remeasured in accordance with the group’s accounting policies.
Thereafter generally the assets, or disposal group, are measured at the lower of their carrying amount and fair
value less costs to sell. Any impairment loss on a disposal group is allocated first to goodwill, and then to the
remaining assets and liabilities on a pro rata basis, except that no loss is allocated to inventories, financial assets,
deferred tax assets and employee benefit assets, which continue to be measured in accordance with the group’s
accounting policies.
Impairment losses on initial classification as held for sale and subsequent gains or losses on remeasurement
are recognised in profit or loss. Gains are not recognised in excess of any cumulative impairment loss.
Intangible assets and property, plant and equipment once classified as held for sale or distribution are not
amortised or depreciated. In addition, equity accounting of equity accounted investees ceases once classified
as held for sale or distribution.
(j) Employee benefits
(i) Defined contribution plans
A defined contribution plan is a post‑employment benefit plan under which an entity pays fixed contributions
into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for
contributions to defined contribution plans are recognised as an employee benefit expense in profit or loss in the
periods during which services are rendered by employees. Prepaid contributions are recognised as an asset to
the extent that a cash refund or a reduction in future payments is available.
(ii) Defined benefit plans
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.
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Nufarm Limited Annual Report 2019
3. Significant accounting policies (continued)
(j) Employee benefits (continued)
(ii) Defined benefit plans (continued)
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 other comprehensive income (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 corporate 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 twelve months after the reporting period, then they
are discounted to their present value.
(v) Short‑term benefits
Short‑term employee benefit obligations are measured on an undiscounted basis and are expensed as the related
service is provided.
A liability is recognised for the amount expected to be paid under short‑term cash bonus or profit‑sharing plans
if the group has a present legal or constructive obligation to pay this amount as a result of past service provided
by the employee and the obligation can be estimated reliably.
(vi) Share‑based payment transactions
The group has a global share plan for employees whereby matching and loyalty shares are granted to employees.
The fair value of matching and loyalty shares granted is recognised as an 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
to note 27 for details of the global share plan.
The group has a short term incentive plan (STI) available to key executives, senior managers and other managers
globally. A pre‑determined percentage of the STI is paid in cash with the remainder deferred into shares which have
either a one or two year vesting period. The cash portion is recognised immediately as an expense at the time of
performance testing. The expense relating to deferred shares is expensed over the vesting period. Refer to note 27
for further details on this plan.
The group has a long term incentive plan (LTIP) which is available to key executives and certain selected senior
managers. Performance 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 3 years. Refer to note 27 for further details on this plan.
Nufarm Limited Annual Report 2019 75
Notes to the Consolidated Financial Statements (continued)
3. Significant accounting policies (continued)
(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 from contracts with customers
The group has initially applied AASB 15 from 1 August 2018. The effect of initial application is described in Note 3.
Revenue from contracts with customers is recognised when control of the goods or services are transferred to the
customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for
those goods or services. The Group has generally concluded that it is the principal in its revenue arrangements,
because it typically controls the goods or services before transferring them to the customer.
The disclosures of significant accounting judgements, estimates and assumptions relating to revenue from contracts
with customers are provided in Note 3.
(i) Goods sold
Prior to 1 August 2018
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.
After 1 August 2018
Revenue from sale of goods is recognised at the point in time when control of the asset is transferred to the customer,
generally on delivery of the goods. The Group considers whether there are other promises in the contract that are
separate performance obligations to which a portion of the transaction price needs to be allocated. In determining
the transaction price for the sale of goods, the group considers the effects of variable consideration, the existence
of significant financing components, non‑cash consideration, and consideration payable to the customer (if any).
ii) Variable consideration
If the consideration in a contract includes a variable amount, the group estimates the amount of consideration
to which it will be entitled in exchange for transferring the goods to the customer. The variable consideration is
estimated at contract inception and constrained until it is highly probable that a significant revenue reversal in
the amount of cumulative revenue recognised will not occur when the associated uncertainty with the variable
consideration is subsequently resolved. Some contracts for the sale of certain products provide customers with
a right of return and volume rebates. The rights of return and volume rebates give rise to variable consideration.
Rights of return
Certain contracts provide a customer with a right to return the goods within a specified period. The group uses
the expected value method, including applying any constraints, to determine variable consideration to which
the group will be entitled. For goods that are expected to be returned, instead of revenue, the group recognises
a refund liability. A right of return asset (and corresponding adjustment to cost of sales) is also recognised for the
right to recover products from a customer.
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Nufarm Limited Annual Report 2019
3. Significant accounting policies (continued)
(l) Revenue from contracts with customers (continued)
ii) Variable consideration (continued)
Rebates and sales incentives
The group provides rebates and sales incentives to certain customers once thresholds specified in the contract
are met or exceeded. Rebates are offset against amounts payable by the customer. To estimate the variable
consideration for the expected future rebates, the group applies the requirements on constraining estimates
of variable consideration and recognises a refund liability for the expected future rebates.
iii) End point royalties
The group receives royalty revenue from growers for certain varieties of seed. Before 1 August 2018, royalty revenue
was estimated and accrued at the point the seed was sold. After 1 August 2018, sales or usage based royalties are
recognised as revenue at the later of when the sales or usage occurs and the performance obligation is satisfied,
which would be when the harvest occurs and the royalty is paid.
iv) Significant financing components
The group may receive short‑term advances from its customers. Using the practical expedient in AASB 15, the Group
does not adjust the promised amount of consideration for the effects of a significant financing component as it is
expected, at contract inception, that the period between the transfer of the good and when the customer pays for
that good will be one year or less.
(m) 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.
(n) Finance income and finance costs
The group’s finance income and finance costs include the following: interest income, interest expense, dividends on
preference shares issued classified as financial liabilities, financial assets, the net gain or loss on financial assets at
fair value through profit or loss, the foreign currency gain or loss on financial assets and financial liabilities, the gain
on the remeasurement to fair value of any pre‑existing interest in an acquiree in a business combination, the fair
value loss on contingent consideration classified as a financial liability, impairment losses recognised on financial
assets (other than trade receivables), the net gain or loss on hedging instruments that are recognised in profit or loss,
and the reclassification of net gains previously recognised in other comprehensive income.
Interest income or expense is recognised using the effective interest method.
Finance costs are expensed as incurred except where they relate to the financing of construction or development
of qualifying assets.
(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.
Nufarm Limited Annual Report 2019 77
Notes to the Consolidated Financial Statements (continued)
3. Significant accounting policies (continued)
(o) Income tax (continued)
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.
Current tax expense/benefit, deferred tax liabilities and deferred tax assets arising from temporary differences of
the members of the tax‑consolidated group are recognised in the separate financial statements of the members
of the tax‑consolidated group using the ‘separate taxpayer within group’ approach by reference to the carrying
amounts of assets and liabilities in the separate financial statements of each entity and the tax values applying
under tax consolidation.
Any current tax liabilities (or assets) and deferred tax assets arising from unused tax losses of the subsidiaries are
assumed by the head entity in the tax‑consolidated group and are recognised by the company as amounts
payable/(receivable) to/(from) other entities in the tax‑consolidated group in conjunction with any tax funding
arrangement (refer below). Any difference between these amounts is recognised by the company as an equity
contribution amounts or distribution.
The company recognises deferred tax assets arising from unused tax losses of the tax‑consolidated group to the
extent that it is probable that future taxable profits of the tax‑consolidated group will be available against which
the asset can be utilised.
Any subsequent period adjustments to deferred tax assets arising from unused tax losses as a result of revised
assessments of the probability of recoverability is recognised by the head entity only.
(ii) Nature of tax funding arrangements and tax sharing agreements
The head entity, in conjunction with other members of the tax‑consolidated group, has entered into a tax funding
arrangement which sets out the funding obligations of members of the tax‑consolidated group in respect of tax
amounts. The tax funding arrangements require payments to/from the head entity equal to the current tax liability/
(asset) assumed by the head entity and any tax‑loss deferred tax asset assumed by the head entity, resulting in the
head entity recognising an inter‑entity receivable/(payable) equal in amount to the tax liability/(asset) assumed.
The inter‑entity receivables/(payables) are at call.
78
Nufarm Limited Annual Report 2019
3. Significant accounting policies (continued)
(o) Income tax (continued)
(ii) Nature of tax funding arrangements and tax sharing agreements (continued)
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 consolidated 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.
(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
(CEO) to make decisions about resources to be allocated to the segment and to assess its performance.
Segment results that are reported to the CEO 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.
Nufarm Limited Annual Report 2019 79
Notes to the Consolidated Financial Statements (continued)
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.
(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 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).
80
Nufarm Limited Annual Report 2019
5. Operating segments
Segment information is presented in respect of the group’s key operating segments. The operating segments
are based on the group’s management and internal reporting structure.
Operating segments
The group operates predominantly along two business lines, being crop protection and seed technologies.
The crop protection business deals in the manufacture and sale of crop protection products used by farmers to
protect crops from damage caused by weeds, pests and disease. It is managed by major geographic segments,
being Australia and New Zealand, Asia, Europe, North America and South America. The North America region
includes Canada and USA. The Latin America region (previously known as South America) includes Brazil, Argentina,
Chile, Uruguay, Paraguay, Bolivia, Colombia, the Andean countries, Mexico and the Central American 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 defined on following page, as included in the internal management reports that are reviewed by
the group’s CEO. 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 non‑operating corporate segment comprises mainly corporate expenses,
interest‑bearing loans, borrowings and corporate assets.
Nufarm Limited Annual Report 2019 81
Notes to the Consolidated Financial Statements (continued)
5. Operating segments (continued)
Crop Protection
Seed
Technologies
Non‑
Operating
Corporate
Group
Australia
and New
Zealand
$000
Asia
$000
Europe
$000
North
America
$000
Latin
America
$000
Total
$000
Global
$000
$000
Total
$000
452,368
190,285
814,845 1,020,448
1,058,158 3,536,104
221,486
– 3,757,590
2019
Operating
Segments
Revenue
Total segment
revenue
Results
Underlying EBITDA(a)
20,685
26,979
167,608
107,762
97,276
420,310
50,736
(50,753)
420,293
Depreciation
& amortisation
excluding
material items
(12,537)
(3,251)
(107,720)
(25,004)
(6,897)
(155,409)
(14,153)
(2,146)
(171,708)
Underlying EBIT(a)
8,148
23,728
59,888
82,758
90,379
264,901
36,583
(52,899)
248,585
Material items included in operating profit (refer note 6)
Material items included in net financing costs (refer note 6)
Total material items (refer note 6)
Net financing costs (excluding material items)
Profit/(loss) before tax
Assets
(50,770)
–
(50,770)
(116,866)
80,949
Segment assets
455,942
105,280 1,873,952
912,105
997,737 4,345,016
488,719
840,775 5,674,510
Equity accounted
investments
–
1,559
–
–
–
1,559
451
–
2,010
Total assets
455,942
106,839 1,873,952
912,105
997,737 4,346,575
489,170
840,775 5,676,520
Liabilities
Segment liabilities
124,353
330,084
346,254
240,715
284,393 1,325,799
52,842 1,892,935 3,271,576
Total liabilities
124,353
330,084
346,254
240,715
284,393 1,325,799
52,842 1,892,935 3,271,576
Other segment information
Capital
expenditure
18,601
1,582
60,499
57,134
7,729
145,545
44,864
–
190,409
(a) Underlying EBIT is earnings before net finance costs, taxation and material items. Underlying EBITDA is Underlying EBIT,
before depreciation, amortisation and impairments.
82
Nufarm Limited Annual Report 2019
5. Operating segments (continued)
Crop Protection
Seed
Technologies
Non‑
Operating
Corporate
Group
Australia
and New
Zealand
$000
Asia
$000
Europe
$000
North
America
$000
Latin
America
$000
Total
$000
Global
$000
$000
Total
$000
590,151
170,680
642,571
833,705
885,232 3,122,339
185,508
– 3,307,847
2018
Operating
Segments
Revenue
Total segment
revenue
Results
Underlying EBITDA(a)
23,736
25,229
149,873
99,487
97,377
395,702
43,580
(53,629)
385,653
Depreciation &
amortisation
excluding material
items
Underlying EBIT(a)
(14,500)
(3,049)
(63,423)
(22,036)
(6,604)
(109,612)
(9,269)
(1,669)
(120,550)
9,236
22,180
86,450
77,451
90,773
286,090
34,311
(55,298)
265,103
Material items included in operating profit (refer note 6)
Material items included in net financing costs (refer note 6)
Total material items (refer note 6)
Net financing costs (excluding material items)
Profit/(loss) before tax
Assets
(89,604)
(17,272)
(106,876)
(118,334)
39,893
Segment assets
703,337
106,143 1,757,588
666,249
866,038 4,099,355
427,712
523,889 5,050,956
Equity accounted
investments
–
–
–
–
–
–
411
–
411
Total assets
703,337
106,143 1,757,588
666,249
866,038 4,099,355
428,123
523,889 5,051,367
Liabilities
Segment liabilities
239,835
281,043
304,458
203,173
209,598
1,238,107
34,745
1,806,891
3,079,743
Total liabilities
239,835
281,043
304,458
203,173
209,598
1,238,107
34,745
1,806,891
3,079,743
Other segment information
Capital
expenditure
55,906
1,296
814,587
12,574
13,128
897,491
43,662
–
941,153
(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 2019 83
Notes to the Consolidated Financial Statements (continued)
5. Operating segments (continued)
Geographical information – revenue by location of customer
Brazil
United States of America
Australia
Rest of world(b)
Total
2019
$000
960,923
903,387
407,103
Revenue
2018
$000
799,094
722,452
559,540
1,486,177
1,226,761
3,757,590
3,307,847
(b) Other than Australia, United States of America and Brazil, sales to other countries are individually less than 10% of the group’s
total revenues.
Geographical information – non‑current assets by location of asset
Germany
United States of America
United Kingdom
Brazil
Australia
Rest of world(c)
Unallocated(d)
Total
Non‑current assets
2019
$000
721,971
413,362
298,133
280,589
277,243
226,239
212,484
2018
$000
739,688
353,767
301,914
275,002
256,585
209,496
202,293
2,430,021
2,338,745
(c) Other than Germany, Australia, United States of America, Brazil and United Kingdom, non‑current assets held in other countries
are individually less than 10% of the group’s total non‑current assets.
(d) Unallocated non‑current assets predominately include deferred tax assets.
6. Individually material income and expense items
Individually material items are those items where their nature, including the expected frequency of the events giving
rise to them, and/or amount is considered material to the financial statements. Such items included within the group’s
profit for the year are detailed below.
Consolidated
Consolidated
2019
$000
2019
$000
2018
$000
2018
$000
Pre‑tax
After‑tax
Pre‑tax
After‑tax
(10,517)
(21,386)
(18,867)
–
–
–
–
(10,517)
(21,386)
(18,867)
–
–
–
–
–
–
1,491
(70,559)
(24,124)
(13,684)
–
(50,770)
(50,770)
(106,876)
–
–
1,201
(91,504)
(22,228)
(13,684)
12,231
(113,984)
Material items by category:
Legal costs
Idle plant capacity
Asset rationalisation and restructuring
ANZ impairment and tax asset write‑down
Business acquisition costs – other
Business acquisition costs – refinance 2019 notes
Change in corporate tax rates
Total
84
Nufarm Limited Annual Report 2019
6. Individually material income and expense items (continued)
2019 Material Items
Legal costs
During the year ended 31 July 2019, the group has incurred legal costs associated with the enforcement of Omega‑3
canola trademark and patent matters.
Idle plant capacity
Drought conditions in Australia have continued through 2019 impacting the ANZ business and has resulted in a
reduction to production activity and temporary closure of all formulation lines at the Laverton manufacturing plant
giving rise to idle capacity charges.
Asset rationalisation and restructuring
A performance and improvement program has commenced in the ANZ and European businesses across all
functions. This includes organisational restructuring and the assessment and closure of certain under‑utilised facilities.
2018 Material Items
Asset rationalisation and restructuring
During the year ended 31 July 2018, the group undertook rationalisation and restructuring activities including the
sale of a former manufacturing site located in NZ and the reorganisation of certain back office activities.
ANZ Impairment and tax asset write‑down
Prolonged and severe drought conditions across Australia reduced current expectations of future earnings whereby
a non‑cash impairment of intangibles (refer note 22), property, plant and equipment (refer note 21), and tax assets
amounting to $91.504 million was incurred in the year ended 31 July 2018.
Business acquisition costs
During the year the group acquired two separate European businesses consisting of product portfolios based in
Europe (refer to note 14 for further details). One‑off transaction costs incurred to effect the acquisitions include, but
are not limited to, advisor fees, integration costs, hedging costs, and other financing expenses.
Business acquisition costs – refinance of 2019 notes
In response to the 2018 business acquisitions, the group undertook an early refinance of the 2019 senior secured
notes to strengthen its capital structure. As a result, break fees and the early recognition of interest costs in relation
to interest rate swaps were incurred. The cash impact of the refinance of the 2019 Notes was a cash outflow of
$0.300 million due to favourable cashflow outcomes on cash flow hedges offsetting break fees and interest costs
on interest rate swaps.
Change in corporate tax rates
Changes in corporate tax rates across the USA, France and Argentina led to the re‑measurement of the group’s
deferred tax position resulting in net income tax credits of $12.231 million.
Nufarm Limited Annual Report 2019 85
Notes to the Consolidated Financial Statements (continued)
6. Individually material income and expense items (continued)
Material items are classified by function as follows:
Selling,
marketing
and
distribution
expense
General &
admin‑
istrative
expense
Net
financing
costs
Year ended 31 July 2019 ($’000s)
Cost of sales
Legal costs
Idle plant capacity
Asset rationalisation and restructuring
Total material items
Total material items included in
operating profit
–
(21,386)
–
(21,386)
(21,386)
Year ended 31 July 2018 ($’000s)
Cost of sales
Asset rationalisation and restructuring
ANZ impairment and tax asset write‑down
Business acquisition costs
Business acquisition costs – refinance
2019 notes
Total material items
Total material items included in
operating profit
–
–
–
–
–
–
Material items impacting cash flows is as follows:
–
–
(2,517)
(2,517)
(2,517)
Selling,
marketing
and
distribution
expense
(509)
–
–
–
(509)
(509)
Net operating cash flows
Net operating cash (inflows)/outflows arising on material items
Net cash from operating activities excluding material items
Net investing cash flows
Individually material (inflows)/outflows from sale of property, plant and equipment
Individually material (inflows)/outflows form the sale/purchase of businesses
and investments
Net cash from investing activities excluding material items
7. Other income
Dividend income
Rental income
Sundry income
Total other income
86
Nufarm Limited Annual Report 2019
(10,517)
–
(16,350)
(26,867)
(26,867)
General &
admin‑
istrative
expense
2,000
(70,559)
(20,536)
–
–
–
–
–
Net
financing
costs
–
–
(3,588)
Total
pre‑tax
(10,517)
(21,386)
(18,867)
(50,770)
(50,770)
Total
pre‑tax
1,491
(70,559)
(24,124)
–
(13,684)
(13,684)
(89,095)
(17,272)
(106,876)
(89,095)
–
(89,604)
Consolidated
2019
$000
98,131
40,318
138,449
2018
$000
(88,169)
31,462
(56,707)
(173,980)
(965,574)
–
–
(5,351)
778,859
(173,980)
(192,066)
Consolidated
2019
$000
47
287
10,127
10,461
2018
$000
–
271
6,985
7,256
8. Other expenses
The following expenses were included in the period result:
Depreciation and amortisation
Impairment loss
Inventory write down
Minimum lease payments recognised as an operating lease expense
9. Personnel expenses
Wages and salaries
Other associated personnel expenses
Contributions to defined contribution superannuation funds
(Expense)/gain related to defined benefit superannuation funds
Short‑term employee benefits
Other long‑term employee benefits
Restructuring
Personnel expenses
Consolidated
2019
$000
(171,708)
–
(12,640)
(6,987)
2018
$000
(120,550)
(70,559)
(15,310)
(4,671)
Consolidated
2019
$000
2018
$000
(301,848)
(303,004)
(52,131)
(22,689)
(4,505)
(9,616)
(3,368)
(8,234)
(50,057)
(24,045)
(2,113)
(10,582)
(3,004)
(2,681)
(402,391)
(395,486)
The Restructuring expense relates to the group’s asset rationalisation and organisational restructure program.
These costs are included in material items in note 6.
10. Finance income and expense
Other financial income
Financial income
Interest expense – external
Interest expense – debt establishment transaction costs
Lease amortisation – finance charges
Net foreign exchange gains/(losses)
Financial expenses
Net financing costs
Consolidated
2019
$000
10,051
10,051
2018
$000
10,978
10,978
(110,608)
(109,933)
(4,634)
(2,051)
(9,624)
(126,917)
(116,866)
(6,719)
(1,986)
(27,946)
(146,584)
(135,606)
Nufarm Limited Annual Report 2019 87
Notes to the Consolidated Financial Statements (continued)
11. Income tax expense
Recognised in the income statement
Current tax expense
Current period
Tax free income and non‑recognition 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
Effect of changes in tax rates – material items
Effect of changes in tax rates
(Recognition)/derecognition of tax assets
ANZ tax asset write‑down – material items
Deferred tax expense/(benefit)
Total income tax expense/(benefit) in income statement
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 Australian corporate tax rate of 30%
Increase/(decrease) in income tax expense due to:
Non‑deductible expenses
Other taxable income
Effect of changes in tax rates‑material items
Effect of changes in tax rates
Initial (recognition)/derecognition of tax assets
ANZ tax asset write‑down‑material items
Tax free income and non‑recognition of tax assets on material items
Effect of 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
88
Nufarm Limited Annual Report 2019
Consolidated
2019
$000
2018
$000
32,528
15,262
(3,399)
44,391
(11,905)
–
83
10,070
–
(1,752)
42,639
15,191
30,583
(538)
45,236
(3,326)
(12,231)
–
5,276
20,945
10,664
55,900
42,639
42,639
55,900
55,900
80,949
24,285
9,096
3,497
–
83
10,070
–
15,262
(6,167)
(3,441)
(6,647)
46,038
(3,399)
42,639
39,893
11,968
7,085
2,428
(12,231)
–
5,276
20,945
30,583
(4,109)
(242)
(5,265)
56,438
(538)
55,900
(4,205)
(4,205)
(3,877)
(3,877)
(1,615)
–
(1,615)
917
587
1,504
12. Discontinued operations
There were no discontinued operations in the current or prior period.
13. Preference securities receivable
Preference securities receivable
Total preference securities receivable
Consolidated
2019
$000
97,500
97,500
2018
$000
–
–
On 31 July 2019, the group undertook the placement of $97.5 million of preference securities to existing shareholder
and strategic business partner, Sumitomo Chemical Company Limited (Sumitomo), through a wholly owned
subsidiary (Nufarm Investment Pty Ltd). The settlement of the cashflow in relation to the placement of the preference
securities occurred on 2 August 2019.
14. Acquisition of businesses and acquisition of non‑controlling interests
Business acquisitions – 2019
There were no acquisitions in the current period.
Business acquisitions – 2018
Century and FMC acquisition
On 24 October 2017, the group announced that it had entered into an agreement with Adama Agricultural Solutions
Ltd (“Adama”) and Syngenta Crop Protection AG and related group companies (“Syngenta”) to purchase a European
business comprising of a portfolio of crop protection products registered in European markets (“Century Acquisition”).
Subsequently, the group announced an issuance of 59,551,672 ordinary shares which generated $436.870 million
of additional share capital (net of costs). The cash consideration paid was US$490 million, plus inventory of
$21.843 million.
On 8 November 2017, the group announced that it had entered into an agreement with FMC Corporation (“FMC”)
to purchase a European business comprising of a portfolio of herbicide products registered in European markets
(“FMC Acquisition”). The cash consideration paid was US$85 million, plus inventory of $2.871 million.
On 1 February 2018 the FMC Acquisition was closed with the successful transfer of registration data and cash
consideration in accordance with the transaction agreements. Related derivative contracts were utilised or closed
as part of the acquisition completion.
On 16 March 2018, European regulatory approval was obtained in relation to the Century Acquisition. On 16 March 2018
the Century Acquisition was effectively closed with the successful transfer of registration data and cash consideration
in accordance with the transaction agreements. Derivative contracts related to the Century Acquisition were utilised
or closed as part of the acquisition completion, this included the derivative not designated for hedge accounting,
which resulted in a realised loss for the group of $1.807 million in net financing costs.
One‑off transaction costs incurred to effect the acquisitions include, but are not limited to, advisor fees, integration
costs, hedging costs, and other financing expenses. These one‑off costs totalled $22.228 million net of tax (refer to
note 6) for the year ended 31 July 2018.
The acquisition of the these businesses increases the group’s product portfolio offering within the European region.
The business expects to extract revenue synergies from the acquisitions via opening up the existing business to new
customers and cross selling opportunities.
Nufarm Limited Annual Report 2019 89
Notes to the Consolidated Financial Statements (continued)
14. Acquisition of businesses and acquisition of non‑controlling interests
(continued)
Business acquisitions – 2018 (continued)
Identifiable assets acquired and liabilities assumed
The following table summarises the assets acquired and liabilities assumed at the date of acquisition.
Acquiree’s net assets at acquisition date
Inventory
Intangible assets
Net identifiable assets and liabilities
Goodwill on acquisition
Consideration to be transferred
FMC
Acquisition
fair value on
acquisition
$000
Century
Acquisition
fair value on
acquisition
$000
Total fair
value on
acquisitions
$000
2,871
84,763
87,634
26,308
113,942
21,843
530,487
552,330
105,283
657,613
24,714
615,250
639,964
131,591
771,555
Total goodwill of $131.591 million from business acquisitions is attributable mainly to the synergies expected to
be achieved from integrating the respective businesses into the group’s existing business.
During the year ended 31 July 2018, the acquired businesses above generated additional revenues of
$68.943 million and operating profits of approximately $10.969 million. Revenue and profit from the acquired
businesses that would have been earned if the acquisitions had occurred at the commencement of the financial
year has not been provided on the basis that the calculation of that information is impracticable. This is because
the businesses were fully integrated into the vendor’s operations and separate comparable financial information
relating to the acquired businesses as stand‑alone operations is not available.
Acquisition of non‑controlling interest 2019
There was no acquisition of non‑controlling interest in current period.
Acquisition of non‑controlling interest 2018
On 29 December 2017 the group acquired an additional 49% of the equity interest in Atlantica Sementes SA
(“Atlantica”), a business based in Brazil specialising in the sale and distribution of seed related products, via the
exercising of a written put option. As a result, the group’s equity interest in Atlantica increased from 51% to 100%.
The group recognised a liability for the present value of the exercise price of the put option up to the date of
acquisition and exercise of the put option. The carrying amount of Atlantica’s net assets in the group’s consolidated
financial statements on the date of acquisition was $6.590 million. Given the transaction is deemed as a common
control transaction the impact has been recognised in equity resulting in a transfer of non‑controlling interests to
retained earnings.
90
Nufarm Limited Annual Report 2019
15. Cash and cash equivalents
Bank balances
Call deposits
Bank overdraft
Total cash and cash equivalents
16. Trade and other receivables
Current
Trade receivables
Provision for impairment losses
Derivative financial instruments
Prepayments
Other receivables
Current receivables
Non‑current
Derivative financial instruments
Trade receivables
Trade finance receivables
Other receivables
Non‑current receivables
Consolidated
2019
$000
2018
$000
424,274
255,535
81,413
505,687
–
46,165
301,700
(7,357)
505,687
294,343
Consolidated
2019
$000
2018
$000
1,297,372
1,130,846
(49,531)
(36,546)
1,247,841
1,094,300
3,829
42,163
84,918
5,339
23,882
76,096
1,378,751
1,199,617
–
73,024
22,583
6,370
101,977
–
76,452
26,824
5,583
108,859
Total trade and other receivables
1,480,728
1,308,476
17. Inventories
Raw materials
Work in progress
Finished goods
Provision for obsolescence of finished goods
Total inventories
Consolidated
2019
$000
414,005
10,442
816,105
1,240,552
(12,311)
2018
$000
313,103
18,438
862,360
1,193,901
(14,205)
1,228,241
1,179,696
Nufarm Limited Annual Report 2019 91
Notes to the Consolidated Financial Statements (continued)
18. Tax assets and liabilities
Current tax assets and liabilities
The current tax asset for the group of $36.320 million (2018: $31.609 million) represents the amount of income taxes
recoverable in respect of prior periods and that which 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 $18.971 million (2018: $20.930 million) 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:
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
Assets
Liabilities
Net
2019
$000
13,648
9,158
21,099
24,770
12,450
2018
$000
16,945
8,928
19,556
20,993
16,231
2019
$000
(8,295)
2018
$000
(8,311)
2019
$000
5,353
2018
$000
8,634
(101,267)
(86,770)
(92,108)
(77,842)
–
(1,059)
(15,262)
–
(1,024)
(17,447)
21,099
23,710
(2,812)
19,556
19,969
(1,216)
131,872
119,309
–
–
131,872
119,309
212,997
201,962
(125,883)
(113,552)
87,114
88,410
–
–
–
–
–
–
Net tax assets/(liabilities)
212,997
201,962
(125,883)
(113,552)
87,114
88,410
Movement in temporary differences during the year
Balance
2018
$000
Recognised
in income
$000
Recognised
in equity
$000
Currency
adjustment
$000
Other
movement
$000
Balance
2019
$000
8,634
(77,842)
19,556
19,969
(1,216)
119,309
88,410
(2,883)
(9,208)
2,998
2,798
(58)
8,105
1,752
–
–
(1,615)
–
–
–
(397)
(5,057)
160
942
(1,537)
4,457
(1,615)
(1,432)
–
–
–
–
–
–
–
5,353
(92,108)
21,099
23,710
(2,812)
131,872
87,114
Balance
2017
$000
Recognised
in income
$000
Recognised
in equity
$000
Currency
adjustment
$000
Other
movement
$000
Balance
2018
$000
(9,132)
(92,613)
20,125
19,540
8,540
18,262
18,573
(657)
1,032
(10,379)
156,144
(37,495)
–
–
(917)
–
(587)
–
(496)
(3,802)
1,005
(603)
1,210
660
102,604
(10,664)
(1,504)
(2,026)
–
–
–
–
–
–
–
8,634
(77,842)
19,556
19,969
(1,216)
119,309
88,410
Consolidated 2019
Property, plant and equipment
Intangibles assets
Employee benefits
Provisions
Other items
Tax value of losses
carried forward
Consolidated 2018
Property, plant and equipment
Intangibles assets
Employee benefits
Provisions
Other items
Tax value of losses
carried forward
92
Nufarm Limited Annual Report 2019
18. Tax assets and liabilities (continued)
Deferred tax assets and liabilities (continued)
The carrying value of deferred tax assets relating to tax losses and tax credits is largely dependent on the
generation of sufficient future taxable income. The carrying value of this asset will continue to be assessed
at each reporting date.
Unrecognised deferred tax liability
At 31 July 2019, a deferred tax liability of $32.762 million (2018: $26.368 million) 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 2019, there are unrecognised deferred tax assets in respect of tax losses and timing differences of
$113.864 million (2018: $90.197 million).
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:
Ownership and
voting interest Carrying amount
Share of
profit/(loss)
Nature of
relationship Country
Balance date
of associate
2019
2018
Seedtech Pty Ltd Associate(1)
Australia 31 December
25.00%
25.00%
2019
$000
451
Leshan Nong Fu
Trading Co., Ltd
Joint
Venture(2)
China
31 December
35.00%
–
1,559
2,010
2018
$000
2019
$000
2018
$000
411
–
411
40
84
124
78
–
78
(1) Seedtech is a company that offers services to the seed industry such as cleaning, packaging, distribution and storage of seeds.
(2) Leshan Nong Fu Trading is a joint venture in which the group has joint control and a 35 percent ownership interest. The joint
venture is focused on sales and marketing of formulation crop protection products in the Chinese domestic market. It is structured
as a separate vehicle. In accordance with the agreement under which Leshan Nong Fu Trading was established, the investors
in the joint venture have agreed to make capital contributions in proportion to their ownership interests to make up any losses,
if required, or at the latest within 5 years after incorporation, up to a maximum amount of RMB 100 million. This commitment has
not been recognised in this consolidated financial report.
20. Other investments
Current investments
Balance at the beginning of the year
Additions
Net change in fair value gains/(losses) transferred to equity
Disposal
Balance at the end of the year
Non‑current investments
Other investments
Total non‑current investments
Consolidated
2019
$000
2018
$000
–
–
–
–
–
421
421
–
–
–
–
–
442
442
Nufarm Limited Annual Report 2019 93
Notes to the Consolidated Financial Statements (continued)
21. Other non‑current assets
There were no other non‑current assets in the current or prior period.
22. Property, plant and equipment
Consolidated 2019
Cost
Land and
buildings
$000
Plant and
machinery
$000
Leased plant
and
machinery
$000
Capital work
in progress
$000
Balance at 1 August 2018
206,234
Additions
Additions through business combinations
Disposals and write‑offs
Other transfers
Foreign exchange adjustment
1,740
–
(1,668)
2,794
7,152
581,790
45,458
–
(11,116)
12,399
14,700
12,684
461
–
(132)
288
148
Balance at 31 July 2019
216,252
643,231
13,449
Accumulated depreciation
and impairment losses
Balance at 1 August 2018
(114,067)
(402,077)
Depreciation charge for the year
(5,673)
(31,863)
Additions through business combinations
Disposals and write‑offs
Other transfers
Foreign exchange adjustment
–
573
(14)
(3,848)
–
10,748
471
(9,486)
(2,757)
(442)
–
101
(45)
(46)
Balance at 31 July 2019
(123,029)
(432,207)
(3,189)
56,942
36,624
–
(170)
(15,893)
1,572
79,075
–
–
–
–
–
–
–
Total
$000
857,650
84,283
–
(13,086)
(412)
23,572
952,007
(518,901)
(37,978)
–
11,422
412
(13,380)
(558,425)
Net property, plant and equipment
at 31 July 2019
93,223
211,024
10,260
79,075
393,582
94
Nufarm Limited Annual Report 2019
Land and
buildings
$000
Plant and
machinery
$000
Leased plant
and
machinery
$000
Capital work
in progress
$000
Total
$000
22. Property, plant and equipment (continued)
Consolidated 2018
Cost
Balance at 1 August 2017
Additions
Additions through business combinations
Impairment loss
Disposals and write‑offs
Other transfers
Foreign exchange adjustment
200,126
872
–
–
(2,265)
3,008
4,493
518,170
31,659
–
–
(7,340)
19,462
19,839
Balance at 31 July 2018
206,234
581,790
Accumulated depreciation
and impairment losses
Balance at 1 August 2017
Depreciation charge for the year
Additions through business combinations
Impairment loss
Disposals and write‑offs
Other transfers
(89,539)
(6,690)
–
(15,513)
1,014
(1)
(331,158)
(31,049)
–
(33,729)
7,180
149
Foreign exchange adjustment
(3,338)
(13,470)
11,746
512
–
–
(81)
–
507
12,684
(2,306)
(453)
–
–
59
–
(57)
43,481
36,496
773,523
69,539
–
–
(3)
(23,985)
953
56,942
–
–
–
–
–
–
–
–
–
–
(9,689)
(1,515)
25,792
857,650
(423,003)
(38,192)
–
(49,242)
8,253
148
(16,865)
(518,901)
Balance at 31 July 2018
(114,067)
(402,077)
(2,757)
Net property, plant and equipment
at 31 July 2018
92,167
179,713
9,927
56,942
338,749
Assets pledged as security for finance leases amount to $10.260 million (2018: $9.927 million).
Nufarm Limited Annual Report 2019 95
Notes to the Consolidated Financial Statements (continued)
23. Intangible assets
Consolidated 2019
Cost
Intellectual Property
Goodwill
$000
indefinite life
$000
finite life
$000
Capitalised
development
costs
$000
Computer
software
$000
Total
$000
Balance at 1 August 2018
456,322
1,680
1,162,306
Additions
Additions through business
combinations
Disposals and write‑offs
Other transfers
Foreign exchange
adjustment
–
–
–
(1,756)
21,223
–
–
–
–
38
701
–
–
(1,558)
47,128
388,744
86,075
153,537
2,162,589
19,350
106,126
–
(214)
1,559
5,935
–
(1,987)
(3)
–
(2,201)
(1,758)
4,636
78,960
Balance at 31 July 2019
475,789
1,718
1,208,577
482,099
175,533
2,343,716
Accumulated
amortisation and
impairment losses
Balance at 1 August 2018
(104,940)
(1,680)
(189,126)
(121,859)
(56,662)
(474,267)
Amortisation charge for the
year
Additions through business
combinations
Impairment loss
Disposals and write‑offs
Other transfers
Foreign exchange
adjustment
–
–
–
–
1,757
(6,092)
–
–
–
–
–
(85,065)
(30,759)
(17,906)
(133,730)
–
–
17
546
–
–
41
(499)
(1,928)
–
–
1,926
(46)
–
–
1,984
1,758
(1,943)
(20,427)
(38)
(10,426)
Balance at 31 July 2019
(109,275)
(1,718)
(284,054)
(155,004)
(74,631)
(624,682)
Intangibles carrying
amount at 31 July 2019
366,514
–
924,523
327,095
100,902
1,719,034
96
Nufarm Limited Annual Report 2019
23. Intangible assets (continued)
Consolidated 2018
Cost
Intellectual Property
Goodwill
$000
indefinite life
$000
finite life
$000
Capitalised
development
costs
$000
Computer
software
$000
Total
$000
Balance at 1 August 2017
322,497
1,576
526,026
Additions
Additions through business
combinations
Disposals and write‑offs
Other transfers
Foreign exchange
adjustment
–
131,591
(237)
–
2,471
–
–
–
–
4,136
308,619
69,394
102,655
1,261,373
51,243
124,773
615,250
–
–
746,841
(91)
(2,518)
(6,886)
3,179
104
19,503
14,438
(5,197)
2,132
2,704
(12,411)
2,793
39,220
Balance at 31 July 2018
456,322
1,680
1,162,306
388,744
153,537
2,162,589
Accumulated
amortisation and
impairment losses
Balance at 1 August 2017
(105,477)
(1,576)
(134,326)
(89,822)
(38,786)
(369,987)
Amortisation charge
for the year
Additions through business
combinations
Impairment loss
Disposals and write‑offs
Other transfers
Foreign exchange
adjustment
–
–
(3,109)
–
–
–
–
–
–
–
(44,371)
(27,058)
(10,928)
(82,357)
–
(5,612)
76
644
–
(5,500)
6,541
(644)
(5,376)
–
(7,096)
1,244
–
(1,096)
–
(21,317)
7,861
–
(8,467)
3,646
(104)
(5,537)
Balance at 31 July 2018
(104,940)
(1,680)
(189,126)
(121,859)
(56,662)
(474,267)
Intangibles carrying
amount at 31 July 2018
351,382
–
973,180
266,885
96,875
1,688,322
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 cash‑generating units (CGU) of the business. This level of CGU aligns with the cash flows of the
business and the management structure of the group. The goodwill and intellectual property with an indefinite life
are CGU specific, as the acquisitions generating goodwill and the product registrations that are the major indefinite
life intangibles are country or region specific in nature. There is no allocation of goodwill between CGUs.
The major CGUs and their intangible assets are as follows: North America $220 million (2018: $208 million),
Brazil $157 million (2018: $150 million), Seed Technologies $343 million (2018: $305 million), Europe $953 million
(2018: $979 million) and Australia and New Zealand (ANZ) $22 million (2018: $25 million). The balance of intangibles
is spread across multiple CGUs, with no individual CGU intangible balance 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. Two valuation methods are used by the group.
Nufarm Limited Annual Report 2019 97
Notes to the Consolidated Financial Statements (continued)
23. Intangible assets (continued)
Valuation method – Value in use
The group uses the value‑in‑use (VIU) method to estimate the recoverable amount. In assessing VIU, the estimated
future cash flows are derived from the three year plan for each cash‑generating unit with a growth factor applied
to extrapolate a cash flow beyond year three. A perpetuity factor is then applied to the normalised cash flow
beyond year five in order to include a terminal value in the VIU 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, adjusted for country risk and asset‑specific
risk associated with each CGU.
Valuation method – Fair value less cost of disposal
Fair value less cost of disposal (FVLCD) is an estimate of the amount that a market participant would pay for an
asset or a CGU, less the cost of disposal. The fair value is determined using discounted cash flows. This fair value
is benchmarked against the sum of the parts method, comparable market transactions, and company trading
multiples. The cash flows are derived from Board approved management expectations of future outcomes taking
into account past experience, adjusted for anticipated revenue growth. Cash flows are discounted using an
appropriate post‑tax market discount rate to arrive at a net present value of the asset which is compared against
the asset’s carrying value. The fair value measurement was categorised as a Level 3 fair value based on inputs
in the valuation technique used (see note 31).
Valuation assumptions
The valuation method, range of terminal growth rates and nominal post‑tax discount rates applied for impairment
testing purposes is as follows:
2019
Material crop protection CGU’s (North America,
Brazil and Europe)
ANZ CGU
Seed Technology CGU
2018
Material crop protection CGU’s (North America,
Brazil and Europe)
ANZ CGU(1)
Seed Technology CGU
Valuation
method
Terminal
growth rate
Discount
rate
Total
goodwill
$000
VIU
2.0% to 4.0%
7.8% to 11.6%
278,897
FVLCD
VIU
2.0%
3.0%
11.0% to 12.5%
–
11.4%
71,563
Valuation
method
Terminal
growth rate
Discount
rate
Total
goodwill
$000
VIU
1.9% to 4.1%
8.0% to 13.1%
268,051
FVLCD
VIU
2.5%
3.1%
9.9%
12.4%
–
68,431
(1) As at 31 July 2017, the total goodwill and indefinite life assets for the ANZ CGU was equal to $3.109 million. The carrying amount
of goodwill and indefinite life assets for the ANZ CGU was reduced to nil at 31 July 2018 as a result of impairment.
The terminal growth rate assumed is generally a long term inflation estimate. The discount rate assumed is the
company’s weighted average cost of capital, adjusted for country risk and asset‑specific risk. The margin and
volume assumptions generally reflect past experience for existing and enhanced portfolio products, while new
products utilise external sources of information reflecting current market pricing in expected end use markets.
With the exception of the ANZ CGU (see below), management has determined that, given the excess of recoverable
value over asset carrying value (headroom), there are no reasonably possible changes in assumptions which
could occur to cause the carrying amount of the CGU’s to exceed their recoverable amount.
98
Nufarm Limited Annual Report 2019
23. Intangible assets (continued)
ANZ cash generating unit
Following the impairment loss recognised in the ANZ CGU during the year ended 31 July 2018, the recoverable
amount was equal to the carrying amount. At 31 July 2019, management has determined that the recoverable
amount remains equal to the carrying amount. If there was an adverse movement in a key assumption (noted
above) or ANZ cash flows, in the absence of other factors, this may lead to further impairment.
At 31 July 2018 the group became aware of impairment indicators for the ANZ CGU and commenced using the
FVLCD methodology for the CGU. The carrying amount of the ANZ CGU was determined to be higher than its
recoverable amount and an impairment loss of $70.559 million was recognised during the year ended 31 July 2018.
The impairment loss was allocated against goodwill, intangibles assets, and property, plant and equipment, and is
included in ‘general and administrative expenses’ (refer note 6).
24. Trade and other payables
Current payables – unsecured
Trade creditors and accruals – unsecured
Deferred revenue
Derivative financial instruments
Payables – acquisitions
Current payables
Non‑current payables – unsecured
Creditors and accruals
Derivative financial instruments
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
Brazil unsecured notes
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
2019
$000
2018
$000
1,108,267
1,087,802
111,812
1,182
–
40,280
3,024
164
1,221,261
1,131,270
11,058
–
11,058
10,800
–
10,800
Consolidated
2019
$000
2018
$000
385,948
110,868
(3,683)
1,342
511
390,905
130,817
(3,683)
1,303
356
494,986
519,698
420,969
404,842
63,786
77,122
689,605
(9,374)
3,381
12,341
30,878
71,610
638,613
(11,721)
2,256
12,237
1,257,830
1,148,715
(505,687)
(294,343)
1,247,129
1,374,070
Nufarm Limited Annual Report 2019 99
Notes to the Consolidated Financial Statements (continued)
25. Interest‑bearing loans and borrowings (continued)
Financing facilities
Refer to the section entitled “Liquidity Risk” in note 31 for detail regarding the group’s financing facilities.
2019
Bank loan facilities and senior unsecured notes
Other facilities
Total financing facilities
2018
Bank loan facilities and senior unsecured notes
Other facilities
Total financing facilities
Reconciliation of liabilities arising from financing activities
Accessible
$000
Utilised
$000
2,519,407
1,748,298
4,723
4,723
2,524,130
1,753,021
2,185,377
1,667,665
3,559
3,559
2,188,936
1,671,224
Balance at 31 July 2018
Cash changes
Proceeds from borrowings (net of costs)
Repayment of borrowings
Debt establishment transaction costs
Total cash flows
Non‑cash changes
Foreign exchange movements
Transfer
Amortisation of debt establishment transaction costs
Total non‑cash changes
Balance at 31 July 2019
Loans and
borrowings
– current
$000
Loans and
borrowings
– non‑current
$000
Debt related
derivatives
(included in
assets/
liabilities)(1)
$000
Total debt
related
financial
instruments
$000
519,698
1,148,715
(3,553)
1,664,860
578,098
(529,736)
(2,288)
46,074
76,280
(13,239)
750,693
(810,493)
(59,800)
17,215
13,239
4,634
35,088
21,798
1,350,589
(1,340,229)
(2,288)
8,072
21,798
(22,703)
70,792
–
4,634
75,426
63,041
(22,703)
494,986
1,257,830
(4,458)
1,748,358
(1) Total derivatives balance at 31 July 2019 is a net asset of $2.647 million (31 July 2018: $2.315 million net asset). The difference
in carrying value to the table above relates to interest rate swap contracts, cross‑currency interest rate swap contracts,
and forward exchange contracts which are excluded from the balances above.
Financing arrangements
Repayment of borrowings (excluding finance leases)
Period ending 31 July, 2019
Period ending 31 July, 2020
Period ending 31 July, 2021
Period ending 31 July, 2022 or later
Consolidated
2019
$000
2018
$000
–
523,025
498,158
185,847
1,069,016
30,648
1,117,551
–
100
Nufarm Limited Annual Report 2019
25. Interest‑bearing loans and borrowings (continued)
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.
Average interest rates
Nufarm step‑up securities
Syndicated bank facility
Group securitisation program facility
Other bank loans
Finance lease liabilities – secured
Brazil unsecured notes
Senior unsecured notes
Consolidated
2018
$000
1,640
1,664
5,551
85,629
94,484
(81,890)
12,594
Consolidated
2018
%
6.08
1.84
2.89
5.70
13.33
9.69
5.75
2019
$000
1,628
1,906
5,756
84,348
93,638
(80,786)
12,852
2019
%
5.67
2.03
2.94
4.43
13.73
9.20
5.75
Average interest rates are calculated using the weighted average of the interest rates for the drawn balances under
each facility as at 31 July 2019.
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 non‑current portion of other long‑term employee benefits
Non‑current employee benefits
Total employee benefits
Consolidated
2018
$000
17,377
1,970
19,347
7,505
173,171
(100,115)
80,561
15,115
95,676
115,023
2019
$000
16,684
2,591
19,275
9,337
188,948
(109,567)
88,718
16,378
105,096
124,371
During the year ended 31 July 2019 the group made contributions to defined benefit pension funds in the United
Kingdom, France and Indonesia that provide defined benefit amounts for employees upon retirement.
Nufarm Limited Annual Report 2019 101
Notes to the Consolidated Financial Statements (continued)
26. Employee benefits (continued)
Changes in the present value of the defined benefit obligation are as follows:
Opening defined benefit obligation
180,676
174,583
Consolidated
2019
$000
2018
$000
Service cost
Interest cost
Actuarial losses/(gains)
Past service cost
Losses/(gains) on curtailment
Plan amendments
Contributions
Benefits paid
Exchange adjustment
695
5,100
15,191
–
–
1,523
–
(6,287)
1,387
607
4,908
(3,604)
(908)
59
–
–
(6,579)
11,610
Closing defined benefit obligation
198,285
180,676
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
Assets distributed on settlement
Contributions by employer
Distributions
Exchange adjustment
Closing fair value of fund assets
100,115
2,813
6,346
–
–
5,286
(5,730)
737
109,567
90,485
2,553
2,293
–
–
4,933
(6,376)
6,227
100,115
The actual return on plan assets is the sum of the expected return and the actuarial gain/(loss).
Expense/(gain) recognised in profit or loss
Current service costs
Interest on obligation
Interest income
Losses/(gains) on curtailment
Plan amendments
Past service cost/(gain)
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
102
Nufarm Limited Annual Report 2019
Consolidated
2018
$000
607
4,908
(2,553)
59
–
(908)
2,113
1,287
546
231
49
2,113
2019
$000
695
5,100
(2,813)
–
1,523
–
4,505
1,769
1,972
180
584
4,505
26. Employee benefits (continued)
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
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
2019
$000
2018
$000
(69,067)
(7,356)
(76,423)
(74,047)
4,980
(69,067)
Consolidated
2019
%
71.8
25.2
1.6
1.4
2.2
0.2
2.6
2018
%
%
62.2
31.7
1.3
4.8
2.8
0.3
2.8
The group expects to pay $5.177 million in contributions to defined benefit plans in 2020. (2018: $5.116 million).
27. Share‑based payments
Nufarm Executive Share Plan (2000)
The Nufarm Executive Share Plan (2000) offered shares to executives. 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. 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 ten
years without board approval. An independent trustee holds the shares and options on behalf of the executives.
At 31 July 2019 there were 13 participants (2018: 14 participants) in the scheme and 72,181 shares (2018: 77,916) were
allocated and held by the trustee on behalf of the participants. The cost of issuing shares is expensed in the year
of issue.
Nufarm 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 profit before tax or net profit after tax and net working capital; and
• strategic and business improvement objectives
A pre‑determined percentage of the STI is paid in cash at the time of performance testing and the balance is
deferred into shares in the company for nil consideration. The number of shares granted is based on the volume
weighted average price (VWAP) of Nufarm Limited shares in the 5 days subsequent to the results announcement.
Vesting will occur after a two year period.
Nufarm Limited Annual Report 2019 103
Notes to the Consolidated Financial Statements (continued)
27. Share‑based payments (continued)
Nufarm Executive Long Term Incentive Plan (LTIP)
On 1 August 2011, the LTIP commenced and is available to key executives and certain selected senior managers.
Awards are granted to individuals in the form of performance rights, which comprise rights to acquire ordinary
shares in the company for nil consideration, subject to the achievement of global performance hurdles. Under the
plan, individuals will receive an annual award of performance rights as soon as practical after the announcement
of results in the preceding year. The performance and vesting period for the awards will be three years. Awards
vest in two equal tranches as follows:
• 50 per cent of the LTIP grant will vest subject to the achievement of a relative total shareholder return (TSR)
performance hurdle measured against a selected comparator group of companies; and
• the remaining 50 per cent will vest subject to meeting an absolute return on funds employed (ROFE) target.
Global Share Plan (2001)
The Global Share Plan commenced in 2001, and is available to all permanent employees. Participants contribute
a proportion of their salary to purchase shares. The company will contribute an amount equal to 10% of the number
of ordinary shares acquired with a participant’s contribution in the form of additional ordinary shares. Amounts
over 10% of the participant’s salary can be contributed but will not be matched. For each year the shares are held,
up to a maximum of five years, the company contributes a further 10% of the value of the shares acquired with the
participant’s contribution. An independent trustee holds the shares on behalf of the participants. At 31 July 2019 there
were 519 participants (2018: 512 participants) in the scheme and 1,833,858 shares (2018: 1,624,341) 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
Measurement of fair values
2019
$000
1,559
2018
$000
3,904
The fair value of performance rights granted through the LTIP and deferred shares granted through the STIP were
measured as follows:
Plan
Weighted average fair value at grant date
Share price at grant date
Grant date
Earliest vesting date
Exercise price
Expected life
Volatility
Risk free interest rate
Dividend yield
Nufarm STI
2019
Deferred
shares
Nufarm LTI
2019
Performance
rights
Nufarm STI
2018
Deferred
shares
Nufarm LTI
2018
Performance
rights Nov
2017
$6.07
$6.07
$4.94
$7.25
$8.37
$8.37
$6.60
$8.99
1 Oct 2018
1 Aug 2018
28 Sep 2017
1 Nov 2017
31 Jul 2020
31 Jul 2021
31 Jul 2019
31 Jul 2020
–
–
–
–
1 year
3.0 years
1 year
2.8 years
n/a
n/a
n/a
28%
2.1%
2.0%
n/a
n/a
n/a
28%
2.0%
1.7%
The fair values of awards granted were estimated using a Monte‑Carlo simulation methodology and a Binomial
Tree methodology.
104
Nufarm Limited Annual Report 2019
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
2019
Nufarm STI
number of
deferred
shares
2019
Nufarm LTI
number of
performance
rights
2018
Nufarm STI
number of
deferred
shares
2018
672,683
(302,091)
–
–
600,048
970,640
–
529,572
(11,751)
(517,821)
–
19,294
19,294
–
887,364
(276,863)
(333,078)
–
395,260
672,683
–
269,506
(14,272)
(268,840)
–
543,178
529,572
–
The performance rights outstanding at 31 July 2019 have a $nil exercise price (2018: $nil) and a weighted average
contractual life of 3 years (2018: 3 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 2018
Provisions made during the year
Provisions reversed during the year
Provisions used during the year
Exchange adjustment
Balance at 31 July 2019
2019
$000
15,857
1,359
17,216
Restructuring
$000
Other
provisions
$000
11,161
14,690
(1,256)
(8,814)
76
15,857
1,237
125
–
–
(3)
1,359
Consolidated
2018
$000
11,161
1,237
12,398
Total
$000
12,398
14,815
(1,256)
(8,814)
73
17,216
The provision for restructuring is mainly relating to the asset rationalisation and restructuring being undertaken by
the group.
29. Capital and reserves
Share capital
Balance at 1 August
Issue of shares
Balance at 31 July
Parent Company
Number of
ordinary
shares
2019
Number of
ordinary
shares
2018
327,704,975
266,928,840
51,934,359
60,776,135
379,639,334
327,704,975
The company does not have authorised capital or par value in respect of its issued shares. The holders of ordinary
shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at
meetings of the company.
Nufarm Limited Annual Report 2019 105
Notes to the Consolidated Financial Statements (continued)
29. Capital and reserves (continued)
Share capital (continued)
On 26 September 2018, the company announced it was undertaking a pro‑rata entitlement offer to raise
$303.000 million of share capital to repay existing debt facilities. On 8 October 2018, 40,272,313 shares at
$5.8500 were issued under the institutional offer and on 25 October 2018, 11,475,463 shares at $5.8500 were
issued under the retail offer.
On 2 November 2018, 126,056 shares at $5.8565 were issued under the dividend reinvestment program.
On 8 January 2019, 60,527 shares at $5.7269 were issued under the global share plan.
In October 2017, the directors of the group agreed to issue 59,551,672 new shares to fund the acquisition of two
European businesses (note 14) pursuant to the terms of an underwritten accelerated renounceable entitlement offer.
Following the announcement in October 2017, on 6 November 2017, 44,777,979 shares at $7.5000 were issued
under the institutional entitlement offer and on 24 November 2017, 14,773,693 shares at $7.5000 were issued under
the retail entitlement offer.
On 6 October 2017, 756,172 shares at $8.3667 were issued under the Nufarm short term incentive plan and Nufarm
executive long term incentive plan. On 10 November 2017, 228,101 shares at $8.9479 were issued under the dividend
reinvestment program. On 11 December 2017, 69,695 shares at $8.3667 were issued under the Nufarm short term
incentive plan. On 5 January 2018, 64,104 shares at $8.7800 were issued under the global share plan. On 4 May 2018,
106,391 shares at $8.6513 were issued under the dividend reinvestment program.
Other securities
Sumitomo preference securities
On 31 July 2019, the group undertook the placement of $97.5 million of preference securities to existing shareholder
and strategic business partner, Sumitomo Chemical Company Limited (Sumitomo), through a wholly owned subsidiary
(Nufarm Investment Pty Ltd), known as the Sumitomo Preference Securities (SPS). The SPS may be exchanged for
Nufarm ordinary shares at Sumitomo’s election any time after 24 months, from the date of issue of the SPS, at an
exchange price of $5.8500 per Nufarm ordinary share. As at 31 July 2019 $0.5 million of costs were incurred in
relation to the placement.
Nufarm Investments Pty Ltd maintains the ability to purchase the SPS from Sumitomo at any quarter following the issue
of the SPS for the full principal amount outstanding at that time plus the amount of any unpaid distributions.
Distributions on the SPS are at the discretion of the directors and are fixed rate, unfranked, cumulative and
subordinated. In the event that Nufarm Investment Pty Ltd does not pay the distribution on the SPS, Nufarm may
not declare a dividend payment in respect of its ordinary shares or declare a distribution on the Nufarm step‑up
securities until all undeclared SPS distributions are declared and paid. The SPS distributions are declared and paid
to Sumitomo quarterly at a fixed rate of 6% per annum for the first 12 months and at a fixed rate of 10% per annum
thereafter. The first distribution is expected to be declared and paid on 31 October 2019.
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% (2018: 3.9%). 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.
106
Nufarm Limited Annual Report 2019
29. Capital and reserves (continued)
Translation reserve
The translation reserve comprises all foreign exchange differences arising from the translation of the financial
statements of foreign operations where their functional currency is different 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. Until December 2017, this reserve held the debit balance related to a
written put option of a 49% interest held by the non‑controlling shareholders of Altantica Sementes Ltda (Atlantica).
As the non‑controlling shareholders had the present access to the economic benefits with their underlying ownership
interest, their non controlling interest was recognised. In December 2017, the written put option was exercised, and
the debit reserve was utilised to complete the transaction. This reserve also holds the balances related to hedging.
Dividends
No interim dividend was declared for Jan 2019 (2018: 5 cents per share, totalling $16,379,929).
No final dividend was declared for Jul 2019 (2018: six cents per share, totalling $19,662,299).
Distributions
Distributions recognised in the current year by Nufarm Finance (NZ) Ltd on the Nufarm Step‑up Securities* are:
2019
Distribution
Distribution
2018
Distribution
Distribution
Distribution
rate
Total amount
$000
Payment
date
Consolidated
6.00%
6.08%
5.80%
5.87%
7,511
7,651
15,162
15 Apr 2019
15 Oct 2018
7,259
16 Apr 2018
7,381
16 Oct 2017
14,640
* 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 $10.957 million (2018:$10.763 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% (2018: 30%)
Franking credits/(debits) that will arise from the payment of income tax payable/(refund)
as at the end of the year
Credit/(debit) balance at 31 July
2019
$000
2018
$000
–
–
–
–
–
–
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/(obligation of $nil (2018: $nil)) franking credits/(debits).
Nufarm Limited Annual Report 2019 107
Notes to the Consolidated Financial Statements (continued)
30. Earnings per share
Net profit/(loss) for the year
Net profit/(loss) attributable to non‑controlling interest
Net profit/(loss) attributable to equity holders of the parent
Nufarm Step‑up Securities distribution
Earnings/(loss) used in the calculations of basic and diluted earnings per share
Consolidated
2019
$000
38,310
–
38,310
(10,957)
27,353
2018
$000
(16,007)
419
(15,588)
(10,763)
(26,351)
Earnings/(loss) from continuing operations
27,353
(26,351)
Subtract/(add back) items of material income/(expense) (refer note 6)
(50,770)
(113,984)
Earnings/(loss) excluding items of material income/(expense) used in the
calculation of earnings per share excluding material items
78,123
87,633
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
2019
2018
369,231,803
310,650,760
370,502,520
311,631,734
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
Cents per share
2019
2018
7.4
7.4
21.2
21.1
(8.5)
(8.5)
28.2
28.1
108
Nufarm Limited Annual Report 2019
31. Financial risk management and financial instruments
The group has exposure to the following financial risks:
• credit risk;
• liquidity risk; and
• market risk.
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.
The Board of Directors has responsibility to identify, assess, monitor and manage the material risks facing the group
and to ensure that adequate identification, reporting and risk minimisation mechanisms are established and
working effectively. To support and maintain this objective, the audit committee has established detailed policies on
risk oversight and management by approving a global risk management charter that specifies the responsibilities
of the general manager global risk management (which includes responsibility for the internal audit function). This
charter also provides comprehensive global authority to conduct internal audits, risk reviews and system‑based
analyses of the internal controls in major business systems operating within all significant company entities
worldwide.
The general manager global risk management reports to the chairman of the audit 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
Preference securities receivable
Cash and cash equivalent assets
Derivative contracts:
Assets
Consolidated
2019
$000
2018
$000
1,476,899
1,303,137
97,500
505,687
–
301,700
3,829
5,339
2,083,915
1,610,176
Nufarm Limited Annual Report 2019 109
Notes to the Consolidated Financial Statements (continued)
31. Financial risk management and financial instruments (continued)
Credit risk (continued)
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
Consolidated
2019
$000
83,261
57,121
497,484
246,476
592,557
2018
$000
210,914
30,557
430,792
125,685
505,189
Trade and other receivables
1,476,899
1,303,137
The group’s top five customers account for $152.812 million of the trade receivables carrying amount at 31 July 2019
(2018: $186.729 million). These top five customers represent 11 per cent (2018: 15 per cent) of the total receivables.
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
2019
$000
1,146,435
119,606
31,846
15,610
56,899
2018
$000
1,017,819
109,279
10,987
9,884
59,329
1,370,396
1,207,298
(49,531)
(36,546)
1,320,865
1,170,752
Some receivables are secured by collateral from customers such as guarantees and charges on assets. In some
countries credit insurance is undertaken to reduce credit risk. The past due receivables not impaired are
considered recoverable.
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.
Comparative amounts for 2018 represent the allowance account for impairment losses under AASB 139.
110
Nufarm Limited Annual Report 2019
31. Financial risk management and financial instruments (continued)
Credit risk (continued)
Balance at 1 August under AASB 139
Adjustment on initial application of AASB 9
Balance at 1 August under AASB 9
Provisions made during the year
Provisions used during the year
Provisions acquired through business combinations
Exchange adjustment
Balance at 31 July
Consolidated
2018
$000
26,439
–
13,915
(1,772)
–
(2,036)
36,546
2019
$000
36,546
16,414
52,960
6,830
(13,044)
–
2,785
49,531
Expected credit loss assessment for individual customers
The group uses an allowance matrix to measure the ECLs of trade receivables from individual customers, which
comprise of a large number of customers with small balances.
Loss rates are calculated using a ‘roll rate’ method based on the probability of a receivable progressing through
successive stages of delinquency to write off. Roll rates are calculated separately for exposures in different
segments and countries.
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.
Sales and operating profit are seasonal and are weighted towards the first half of the calendar year in Australia/
New Zealand, North America and Europe, reflecting the planting and growing cycle in these regions while in Latin
America the sales and operating profit is weighted towards the second half of the calendar year. This seasonal
operating activity results in seasonal working capital requirements.
Principally, the group sources liquidity from cash generated from operations, and where required, external bank
facilities. Working capital fluctuations due to seasonality of the business are supported by the short‑term funding
available from the group’s trade receivable securitisation facility.
Debt facilities
As at 31 July 2019, the key group facilities include a group trade receivables securitisation facility, a US$475 million
senior unsecured notes offering due in April 2026 (31 July 2018: US$475 million), and a senior secured bank facility
of $665 million (31 July 2018: $645 million).
On 26 April 2018 the group completed the refinancing of the US$325m senior unsecured notes due in October 2019.
The 2019 notes were redeemed from investors in May 2018 through the issuance of US$475m senior unsecured notes
due in April 2026 with a fixed coupon component of 5.75% (“2026 notes”). The 2026 notes were issued under a dual
tranche structure by Nufarm Australia Ltd (US$266 million) and Nufarm Americas Inc (US$209 million).
On 27 July 2018 the group closed an unsecured and non‑convertible BRL 200 million debenture. Issued by Nufarm
Industria Quimica e Farma (Nufarm Brazil), the floating rate debenture matures in July 2021 and is governed by two
group covenants that are measured and reported at 31 July each year. The proceeds have been used to repay
existing bank debt and extend Brazil’s weighted average debt maturity profile.
On 8 February 2019 the group upsized its senior secured bank facility (SFA) to $665 million (31 July 2018: $645 million)
and renegotiated the tenor with lenders. As a result of these negotiations, $50 million is due in August 2019, $125 million
is due in January 2021 and $490 million is due in January 2022 (31 July 2018: $645 million is due in January 2021).
The SFA includes covenants of a type normally associated with facilities of this kind, and the group was in compliance
with these covenants. The facility is drawn to $459.904 million at 31 July 2019 (31 July 2018: $404.843 million).
Nufarm Limited Annual Report 2019 111
Notes to the Consolidated Financial Statements (continued)
31. Financial risk management and financial instruments (continued)
Liquidity risk (continued)
Debt facilities (continued)
On 23 August 2011, Nufarm executed a group trade receivables securitisation facility. The facility provides funding
that aligns with the working capital cycle of the company. The facility limit varies on a monthly basis to reflect the
cyclical nature of the trade receivables being used to secure funding under the program. The monthly facility limit is
set at $500 million for three months of the financial year, $400 million for one month of the financial year, $350 million
for four months of the financial year, $300 million for two months of the financial year and $250 million for two
months of the financial year (31 July 2018: facility limit is set to $375 million for five months of the financial year,
$300 million for three months of the financial year, $275 million for one month of the financial year and $175 million
for three months of the financial year).
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 Latin America and Europe, which at 31 July 2019 totalled
$814.802 million (2018: $601.765 million).
At 31 July 2019, the group had access to debt of $2,519 million (2018: $2,185 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, South America and the notes.
Trade finance
The liquidity of the group is influenced by the terms suppliers extend in respect of purchases of goods and services.
The determination of terms provided by suppliers is influenced by a variety of factors including supplier’s liquidity.
Suppliers may engage financial institutions to facilitate the receipt of payments for goods and services from the
group, which are often referred to as supplier financing arrangements. The group is aware that trade payables
of $293.810 million at 31 July 2019 (2018: $327.123 million) are to be settled via such arrangements in future periods.
In the event suppliers or financial institutions cease such arrangements the liquidity of the group’s suppliers may be
affected. If suppliers subsequently seek to reduce terms on group’s purchases of goods and services in the future,
the group’s liquidity will be affected. Details of the group’s trade and other payables are disclosed in note 24.
To support the liquidity of the group and reduce the credit risk relating to specific customers, trade receivables held
by the group are sold to third parties. The sales (or factoring) of receivables to third parties is primarily done on a
non‑recourse basis, and the group incurs a financing expense at the time of the sale. The group derecognises trade
receivables where the terms of the sale allows for derecognition. At 31 July 2019 the group estimates $91.387 million
(2018: $74.644 million) of derecognised trade receivables were being held by third parties. For clarity, the group
trade receivables securitisation facility, noted above, has terms which does not allow the group to derecognise
these trade receivables.
112
Nufarm Limited Annual Report 2019
31. Financial risk management and financial instruments (continued)
The following are the contractual maturities of the group’s financial liabilities:
Consolidated 2019
Non‑derivative financial liabilities
Bank overdrafts
Trade and other payables
Bank loans – secured
Bank loans – unsecured
Brazil unsecured notes
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
Consolidated 2018
Non‑derivative financial liabilities
Bank overdrafts
Trade and other payables
Bank loans – secured
Bank loans – unsecured
Brazil unsecured notes
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
Carrying
amount
$000
Contractual
cash flows
$000
Less than
1 year
$000
1‑2 years
$000
More than
2 years
$000
–
1,231,137
806,917
174,654
77,122
689,605
4,723
12,852
–
1,231,137
836,090
189,310
91,234
967,170
4,723
93,638
–
1,220,079
405,081
120,397
7,095
39,652
1,342
1,628
–
19
7,185
10,094
84,139
39,652
3,381
1,906
–
11,039
423,824
58,819
–
887,866
–
90,104
–
–
1,182
–
–
–
–
–
–
–
460,120
(456,546)
460,120
(456,546)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(3,829)
2,994,363
649,811
(657,546)
3,409,141
649,811
(657,546)
1,791,113
Carrying
amount
$000
Contractual
cash flows
$000
Less than
1 year
$000
–
–
146,376
1‑2 years
$000
–
–
1,471,652
More than
2 years
$000
7,357
1,139,046
795,747
161,695
71,610
638,613
3,559
12,593
7,357
1,139,046
825,915
174,911
92,351
933,088
3,559
94,484
7,357
1,128,246
410,035
142,212
6,939
37,434
1,303
1,640
–
14
7,433
29,933
6,939
36,720
2,256
1,664
–
10,786
408,447
2,766
78,473
858,934
–
91,180
–
–
–
–
–
–
3,024
–
523,446
(517,878)
523,446
(517,878)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(5,339)
2,827,905
843,835
(852,737)
3,267,377
843,835
(852,737)
1,731,832
–
–
84,959
–
–
1,450,586
Nufarm Limited Annual Report 2019 113
Notes to the Consolidated Financial Statements (continued)
31. Financial risk management and financial instruments (continued)
Liquidity risk (continued)
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.
Currency risk
The group uses 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, the Euro, the British Pound, the Australian Dollar,
the New Zealand Dollar and the Brazilian Real. Financial instruments used by the group to manage currency risks
include derivative instruments such as foreign exchange contracts, cross currency interest rate swaps and options,
and non‑derivative instruments such as foreign currency debt instruments. The group designates select financial
instruments for hedge accounting where it is deemed appropriate to do so.
On 26 April 2018 the group completed the refinancing of the US$325m senior unsecured notes due in October 2019.
The 2019 notes were redeemed through the issuance of US$475m senior unsecured notes due in April 2026 as
a dual tranche issuance by Nufarm Australia Ltd and Nufarm Americas Inc. Currency risk related to the notes is
managed using foreign exchange contracts.
The group uses financial instruments to manage foreign currency translation risk arising from the group’s net
investments in foreign currency subsidiary entities. These financial instruments are designated as net investment
hedges for hedge accounting purposes. No ineffectiveness was recognised from net investment hedges during
the reporting periods.
For accounting purposes, the group has not designated any other derivative financial instruments in hedge
relationships and all movements in fair value are recognised in profit or loss during the period. The net fair value
of derivative financial instruments in the group, not designated as being in a hedge relationship, used as economic
hedges of forecast transactions at 31 July 2019 was a $2.647 million asset (2018: $2.315 million liability) comprising
assets of $3.829 million (2018: $5.339 million) and liabilities of $1.182 million (2018: $3.024 million).
Exposure to currency risk
The group’s exposure to major foreign currency risks at balance date are as follows. The exposures are calculated
based on locally reported net foreign currency exposures, and are presented net of open derivative financial
instruments. The analysis is performed on the same basis as the previous financial year.
Net financial assets/(liabilities) –
by currency of denomination
AUD
$000
–
2,467
(1,358)
(268)
–
841
USD
$000
12,235
–
6,658
7,905
(22,964)
3,834
Euro
$000
9,006
(187)
–
7,754
–
16,573
GBP
$000
(419)
(23)
4,727
–
–
4,285
Consolidated 2019
Functional currency of group operation
Australian dollars
US dollars
Euro
British pound
Brazilian real
114
Nufarm Limited Annual Report 2019
31. Financial risk management and financial instruments (continued)
Market risk (continued)
Consolidated 2018
Functional currency of group operation
Australian dollars
US dollars
Euro
British pound
Brazilian real
Sensitivity analysis
Net financial assets/(liabilities) –
by currency of denomination
AUD
$000
–
2,447
97
(268)
–
2,276
USD
$000
Euro
$000
37,906
21,682
–
25,836
10,533
(7,056)
67,219
(3)
–
(6,569)
–
15,110
GBP
$000
(1,392)
–
4,625
–
–
3,233
Based on the aforementioned group’s net financial assets/(liabilities) at 31 July 2019, a 1 percent strengthening
or weakening of the following currencies at 31 July 2019 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 31 July 2018.
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
1% change in the BRL exchange rate
Strengthening Weakening Strengthening Weakening
Profit or (loss)
after tax
2019
$000
Profit or (loss)
after tax
2019
$000
Profit or (loss)
after tax
2018
$000
Profit or (loss)
after tax
2018
$000
(138)
172
46
(78)
161
140
(170)
(45)
77
(159)
(388)
503
(108)
(3)
49
391
(498)
107
3
(49)
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
Interest rate risk
Average rate
Reporting date
2019
0.715
0.627
0.553
2.761
2018
0.774
0.648
0.574
2.583
2019
0.689
0.619
0.564
2.593
2018
0.744
0.635
0.567
2.793
The group’s exposure to the risk of changes in market interest rates primarily relates to the group’s debt obligations
that have floating interest rates. This risk is mitigated by maintaining a level of fixed and floating rate borrowings,
as well as the the ability to use derivative financial instruments when deemed appropriate to do so.
The majority of the group’s debt is raised under central borrowing programs. The A$665 million syndicated bank
facility and the group trade receivables securitisation facility are considered floating rate facilities. The group
completed the refinancing of the existing US$325m senior unsecured notes due in October 2019 during April 2018.
The former notes were refinanced through the issuance of US$475m senior unsecured notes due in April 2026 with
a fixed coupon component.
Nufarm Limited Annual Report 2019 115
Notes to the Consolidated Financial Statements (continued)
31. Financial risk management and financial instruments (continued)
Market risk (continued)
Interest rate risk (continued)
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% (2018: 3.90%).
Profile
At the reporting date the interest rate profile of the group’s interest‑bearing financial instruments were:
Carrying amount
Variable rate instruments
Financial assets
Financial liabilities
Fixed rate instruments
Financial assets
Financial liabilities
Consolidated
2019
$000
2018
$000
81,413
(1,065,803)
(984,390)
46,165
(969,870)
(923,705)
–
(700,070)
(700,070)
–
(642,337)
(642,337)
Sensitivity analysis for variable rate instruments
A change of 100 basis points 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 2019. Due to the seasonality of the crop protection
business, debt levels can vary during the year. The analysis is performed on the same basis for 31 July 2018.
2019
Variable rate instruments
Total sensitivity
2018
Variable rate instruments
Total sensitivity
Fair values
Profit or loss
100bp
increase
$000
100bp
decrease
$000
(9,844)
(9,844)
(9,237)
(9,237)
9,844
9,844
9,237
9,237
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 $700.070 million (2018: $642.337 million), the fair value at 31 July 2019 is $663.238 million
(2018: $618.389 million).
116
Nufarm Limited Annual Report 2019
31. Financial risk management and financial instruments (continued)
Consolidated 2019
Note
Carried at
fair value
through
profit or loss
$000
Derivatives
used for
hedging
$000
Financial
assets/
liabilities at
amortised
cost
$000
Total
$000
Cash and cash equivalents
Trade and other receivables
excluding derivatives
Forward exchange contracts:
Assets
Liabilities
Interest Rate Swaps:
Assets
Liabilities
Trade and other payables
excluding derivatives
Bank overdraft
Secured bank loans
Unsecured bank loans
Brazil unsecured notes
Senior unsecured notes
Other loans
Finance leases
15
16
16
24
16
24
24
15
25
25
25
25
25
25
–
–
3,493
(1,182)
336
–
–
–
–
–
–
–
–
–
2,647
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
505,687
505,687
1,476,899
1,476,899
–
–
–
–
3,493
(1,182)
336
–
(1,231,137)
(1,231,137)
–
(806,917)
(174,654)
(77,122)
–
(806,917)
(174,654)
(77,122)
(689,605)
(689,605)
(4,723)
(12,852)
(4,723)
(12,852)
(1,014,424)
(1,011,777)
Consolidated 2018
Note
Carried at
fair value
through
profit or loss
$000
Derivatives
used for
hedging
$000
Financial
assets/
liabilities at
amortised
cost
$000
Total
$000
Cash and cash equivalents
Trade and other receivables
excluding derivatives
Forward exchange contracts:
Assets
Liabilities
Interest Rate Swaps:
Assets
Liabilities
Trade and other payables
excluding derivatives
Bank overdraft
Secured bank loans
Unsecured bank loans
Brazil unsecured notes
Senior unsecured notes
Other loans
Finance leases
15
16
16
24
16
24
24
15
25
25
25
25
25
25
–
–
2,500
(3,024)
2,839
–
–
–
–
–
–
–
–
–
2,315
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
301,700
301,700
1,303,137
1,303,137
–
–
–
–
2,500
(3,024)
2,839
–
(1,139,046)
(1,139,046)
(7,357)
(7,357)
(795,747)
(795,747)
(161,695)
(71,610)
(161,695)
(71,610)
(638,613)
(638,613)
(3,559)
(12,593)
(3,559)
(12,593)
(1,225,383)
(1,223,068)
Nufarm Limited Annual Report 2019 117
Notes to the Consolidated Financial Statements (continued)
31. Financial risk management and financial instruments (continued)
Fair values (continued)
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).
Consolidated 2019
Derivative financial assets
Derivative financial liabilities
Consolidated 2018
Derivative financial assets
Derivative financial liabilities
Level 1
$000
–
–
–
–
Level 1
$000
–
–
–
–
Level 2
$000
3,829
3,829
(1,182)
(1,182)
Level 2
$000
5,339
5,339
(3,024)
(3,024)
Level 3
$000
–
–
–
–
Level 3
$000
–
–
–
–
Total
$000
3,829
3,829
(1,182)
(1,182)
Total
$000
5,339
5,339
(3,024)
(3,024)
There have been no transfers between levels in either 2019 or 2018.
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.
• Other techniques, such as discounted cash flow analysis, are used to determine fair value for the remaining
financial instruments.
118
Nufarm Limited Annual Report 2019
31. Financial risk management and financial instruments (continued)
Capital management
The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence
and to sustain future development of the business. The Board of Directors monitors the group’s return on funds
employed (ROFE). Return is calculated on the group’s earnings before interest and tax and adjusted for any material
items. Funds employed is defined as 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 2019 was 7.1 per cent (2018: 9.4 per cent).
There were no changes in the group’s approach to capital management during the year.
32. Operating leases
Non‑cancellable operating lease rentals are payable as follows:
Not later than one year
Later than one year but not later than two years
Later than two years but not later than five years
Later than five years
Consolidated
2019
$000
27,218
22,269
33,875
158,129
241,491
2018
$000
13,036
10,583
19,000
139,440
182,059
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 $22.064 million at 31 July 2019
(2018: $5.394 million).
The group has agreed to make capital contributions in proportion to its interest in the Leshan Nong Fu Trading Co.,
Ltd joint venture to make up any losses if required or at the latest within five years after incorporation, up to a maximum
of RMB 100 million. Also refer to note 19.
Nufarm Limited Annual Report 2019 119
Notes to the Consolidated 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.
Environmental guarantee given to the purchaser of land and buildings
at Genneviliers for EUR 8.5 million.
Insurance bond for EUR 2.789 million established to make certain capital
expenditures at Gaillon plant in France.
Consolidated
2019
$000
2018
$000
13,732
13,386
4,506
4,393
Brazilian taxation proceedings
20,546
31,554
Brazilian taxation proceedings – hedge costs deductibility
8,537
8,874
Brazilian taxation proceedings – goodwill deductibility
29,615
29,739
Other bank guarantees
Contingent liabilities
221
219
77,157
88,165
Obligations may arise in the future due to currently unknown lawsuits and claims including those pertaining to
product liability, safety and health, environmental and tax matters which may be instituted or asserted against the
group. While the amounts claimed may be substantial, the ultimate liability cannot now be determined because
of the considerable uncertainties that existed at balance date. Nonetheless, it is possible that results of Nufarm’s
operations or liquidity in a particular period could be materially affected by such claims.
Brazilian taxation proceedings
As at 31 July 2019, the total contingent liability relating to future potential tax liabilities (excluding the goodwill
and hedge cases) in Brazil is $20.546 million (2018: $31.554 million). The group considers that it is not probable
that a liability will arise in respect of these cases and it continues to defend the cases.
Brazilian taxation proceedings – goodwill deductibility
The Brazilian tax authorities are challenging the validity of goodwill deductions, in respect of certain years,
arising from Nufarm’s acquisition of Agripec (now known as Nufarm Brazil).
There are six levels of Brazilian courts (3 levels of administrative court and 3 levels of judicial court), and Brazilian
tax disputes can take 10‑15 years to be settled. This dispute has been ongoing since 2013, during which period
the following events have occurred:
• 2014 unfavourable decision at first level of administrative court
• 2017 favourable decision at second level of administrative court
• 2018 unfavourable decision at third level of administrative court
The contingent liability has been estimated based on assessments received. Nufarm considers that it is not probable
that a liability will arise in respect of these assessments. It is possible that further assessments could be received in
future periods.
120
Nufarm Limited Annual Report 2019
34. Contingencies (continued)
Brazilian taxation proceedings – hedge costs deductibility
The Brazilian tax authorities are challenging the deductibility of hedge costs incurred in 2008. Nufarm received
unfavourable decisions at the first and second levels of administrative court, but considers that it is not probable
that a liability will arise in respect of this matter. The contingent liability has been estimated based on an
assessment received.
In the event any of the contingent Brazilian tax obligations crystallise, it will result in a tax asset write‑off and the tax
liability will be settled using a combination of remaining recognised and unrecognised tax assets (refer note 18)
and/or cash.
Contingent asset
The group holds 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.
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
Agtrol International SE DE CV
Ag‑seed Research Pty Ltd
Ag‑turf SA DE CV
AH Marks (New Zealand) Limited
AH Marks Australia Pty Ltd
AH Marks Holdings Limited
AH Marks Pensions Scottish Limited Partnership
Artfern Pty Ltd
Atlantica Sementes SA
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
Fidene Limited
Notes
Place of
incorporation
Percentage of shares held
2019
2018
(a)
(a)
(a)
(a)
Australia
Australia
USA
Australia
Mexico
Australia
Mexico
New Zealand
(a)
Australia
United Kingdom
United Kingdom
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
Australia
Brazil
Australia
Australia
Australia
Netherlands
Australia
New Zealand
New Zealand
Australia
Australia
Australia
Australia
Canada
New Zealand
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
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 2019 121
Notes to the Consolidated Financial Statements (continued)
35. Group entities (continued)
First Classic Pty Ltd
Frost Technology Corporation
Greenfarm Hellas Trade of Chemical Products 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
Medisup Securities Limited
NF Agriculture Inc
Nufarm Africa SARL AU
Nufarm Agriculture (Pty) Ltd
Nufarm Agriculture Inc
Nufarm Agriculture Zimbabwe (Pvt) Ltd
Nufarm Americas Holding Company
Nufarm Americas Inc
Nufarm Asia Sdn Bhd
Nufarm Australia Limited
Nufarm Bulgaria
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 Costa Rica Inc. SA
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
122
Nufarm Limited Annual Report 2019
Notes
Place of
incorporation
(a)
Australia
USA
Greece
United Kingdom
Guatemala
France
France
(a)
Australia
Malaysia
USA
Guatemala
Mexico
USA
Australia
Australia
Malaysia
Australia
Malaysia
Malaysia
(a)
(a)
(a)
(a)
Australia
(a)
USA
Morocco
South Africa
Canada
Zimbabwe
USA
USA
Malaysia
Australia
Bulgaria
Netherlands
Canada
China
Chile
Colombia
United Kingdom
India
Costa Rica
Guatemala
Mexico
Panama
Venezuela
Ecuador
Germany
Brazil
Percentage of shares held
2019
2018
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
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 Espana SA
Nufarm Europe GmbH
Nufarm Finance BV
Nufarm Finance Inc
Nufarm Finance Pty Ltd
Nufarm Finance (NZ) Limited
Nufarm GmbH
Nufarm GmbH & Co KG
Nufarm Grupo Mexico S DE RL DE CV
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 Investments Pty Ltd
Nufarm Italia srl
Nufarm KK
Nufarm Korea Ltd
Nufarm Labuan Pte Ltd
Nufarm Limited
Nufarm Malaysia Sdn Bhd
Nufarm Materials Limited
Nufarm Middle East Operations
Nufarm NZ Limited
Nufarm Paraguay SA
Nufarm Pensions General Partner Ltd
Nufarm Pensions Scottish Limited Partnership
Nufarm Peru SAC
Nufarm Platte Pty Ltd
Nufarm Polska SP.Z O.O
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 Turkey Import & Trade of Chemical Products LLP
Notes
Place of
incorporation
Spain
Germany
Netherlands
USA
Australia
New Zealand
Austria
Austria
Mexico
New Zealand
Netherlands
France
Hong Kong
Hungary
USA
Brazil
Singapore
Netherlands
Australia
Italy
Japan
Korea
Malaysia
United Kingdom
Malaysia
(a)
Australia
Egypt
New Zealand
Paraguay
United Kingdom
United Kingdom
Peru
(a)
Australia
Poland
Portugal
Romania
France
Argentina
Singapore
Malaysia
Switzerland
Malaysia
New Zealand
(a)
(a)
Australia
Australia
Turkey
Nufarm UK Limited
United Kingdom
Percentage of shares held
2019
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
2018
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 2019 123
Notes to the Consolidated Financial Statements (continued)
35. Group entities (continued)
Notes
Place of
incorporation
Percentage of shares held
2019
2018
Nufarm Ukraine LLC
Nufarm Uruguay SA
Nufarm USA Inc
Nugrain Pty Ltd
Nuseed Americas Inc
Nuseed Canada Inc
Nuseed Europe Holding Company Ltd
Nuseed Europe Ltd
Ukraine
Uruguay
USA
(a)
Australia
USA
Canada
United Kingdom
United Kingdom
Nuseed Global Holdings Pty Ltd
(a)
Australia
Nuseed Global Innovation
Nuseed Holding Company
Nuseed International Holdings Pty Ltd
Nuseed Mexico SA De CV
Nuseed Omega Holdings Pty Ltd
Nuseed Pty Ltd
Nuseed Russia LLC
Nuseed SA
Nuseed Serbia d.o.o.
Nuseed South America Sementes Ltda
Nuseed Ukraine LLC
Nuseed Uruguay
Nutrihealth Grains Pty Ltd
Nutrihealth Pty Ltd
Opti‑Crop Systems Pty Ltd
Pharma Pacific Pty Ltd
PT Agrow
PT Crop Care
PT Nufamindo Agro Mukmur
PT Nufarm Indonesia
Richardson Seeds Ltd
Seeds 2000 Argentina SRL
Selchem Pty Ltd
Societe Des Ecluses la Garenne s.a.s
(a)
(a)
(a)
(a)
(a)
(a)
United Kingdom
USA
Australia
Mexico
Australia
Australia
Russia
Argentina
Serbia
Brazil
Ukraine
Uruguay
Australia
Australia
Australia
Australia
Indonesia
Indonesia
Indonesia
Indonesia
USA
Argentina
(a)
Australia
France
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
75
100
100
100
100
100
100
100
100
100
100
100
100
100
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
(a) These entities have entered into a deed of cross guarantee dated 21 June 2006, varied by an Assumption Deed dated
13 February 2013, 29 May 2013 and 26 July 2019 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.
124
Nufarm Limited Annual Report 2019
36. 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
2019
$000
(20,135)
518
(19,617)
Company
2018
$000
84,758
468
85,226
1,799,327
1,529,926
2,135,552
1,880,129
168,384
167,701
171,985
171,301
1,834,594
1,537,502
38,342
(51,671)
146,586
1,967,851
36,611
(31,536)
166,251
1,219,014
(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 $19.662 million (2018: $37.795 million) were distributed from the retained
earnings during the year.
Parent entity contingencies
The parent entity is one of the guarantors of the senior secured bank facility (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 Latin America 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 2019 or 2018.
37. Deed of cross guarantee
Under ASIC Corporations (Wholly owned Companies) Instrument 2016/785, the Australian wholly‑owned
subsidiaries referred to in note 35 are relieved from the Corporations Act 2001 requirements for preparation,
audit and lodgement of financial reports and director’s reports.
It is a condition of the class order that the company and each of the subsidiaries enter into a deed of cross
guarantee. The parent entity and all the Australian controlled entities have entered into a deed of cross guarantee
dated 21 June 2006 which provides that all parties to the deed will guarantee to each creditor payment in full of
any debt of each company participating in the deed on winding‑up of that company.
A consolidated income statement and consolidated balance sheet, comprising the company and controlled entities
which are a party to the deed, after eliminating all transactions between parties to the deed of cross guarantee,
at 31 July 2019 is set out on the following page.
Nufarm Limited Annual Report 2019 125
Notes to the Consolidated Financial Statements (continued)
37. Deed of cross guarantee (continued)
Summarised income statement and retained profits
Profit/(loss) before income tax expense
Income tax expense
Consolidated
2019
$000
(64,623)
831
2018
$000
(111,228)
(15,580)
Net profit attributable to members of the closed group
(63,792)
(126,808)
Retained profits at the beginning of the period
Adjustment on initial application of AASB 15 (net of tax)
Adjustment on initial application of AASB 9 (net of tax)
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
Other Investments
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
Provision
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
TOTAL EQUITY
126
Nufarm Limited Annual Report 2019
(60,076)
(6,379)
(2,402)
(19,662)
(152,311)
104,527
–
–
(37,795)
(60,076)
47,387
1,083,750
244,299
8,242
–
58,242
1,054,010
362,117
5,272
–
1,383,678
1,479,641
–
451
–
411
1,548,458
1,520,249
44,454
114,441
163,919
1,871,723
43,359
108,367
149,575
1,821,961
3,255,401
3,301,602
658,832
36,065
7,505
1,172
9,360
982,143
(3,182)
7,689
1,861
6,542
712,934
995,053
–
–
674,372
662,266
13,173
10,212
697,757
1,410,691
1,844,710
12,066
9,489
683,821
1,678,874
1,622,728
1,901,084
1,603,992
95,937
(152,311)
78,812
(60,076)
1,844,710
1,622,728
38. 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
Sumitomo Chemical Company Ltd
sales to
purchases from
trade receivable
trade payable
preference securities receivable
Consolidated
2019
$000
57,262
175,605
34,319
62,382
97,500
2018
$000
44,176
177,841
27,574
68,926
–
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
2019
$
2018
$
6,004,339
5,643,293
310,699
264,035
1,097,920
1,372,768
–
220,013
–
–
7,632,971
7,280,096
Individual directors and executives compensation disclosures
Information regarding individual directors and executives compensation is provided in the remuneration report
section of the director’s report.
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 arms‑length basis.
From time to time, key management personnel of the company or its controlled entities, or their related entities,
may purchase goods from the group. These purchases are on the same terms and conditions as those entered
into by other group employees or customers and are trivial or domestic in nature.
e) Loans to key management personnel and their related parties
There were no loans to key management personnel at 31 July 2019 (2018: nil).
Nufarm Limited Annual Report 2019 127
Notes to the Consolidated Financial Statements (continued)
39. Auditors’ remuneration
Audit services
KPMG Australia
Consolidated
2019
$
2018
$
Audit and review of group financial report
571,000
564,000
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 firms
Other assurance services
Other advisory services
Other services remuneration
2,045,211
1,608,548
2,616,211
2,172,548
379,586
177,834
2,995,797
2,350,382
105,709
75,656
591,650
834,477
1,221
98,866
278,533
180,869
–
389,981
671,433
–
99,030
1,984,559
40. Subsequent events
On 30 September 2019, the company has entered into a sale and purchase agreement (‘SPA’) with Sumitomo
Chemical Company and related group companies (‘Sumitomo’), to divest its shares in certain entities, that together,
comprise the majority of the Latin American crop protection business and the Latin American seed treatment
business for consideration of $1,188 million.
The SPA remains subject to a number of conditions including regulatory and shareholder approval, and the review
of an independent expert.
There will be a contractual obligation to repay the redeemable preference securities of $97.5 million to Sumitomo
should the transaction complete.
Other
Other than the matters outlined above, or elsewhere in the financial information, no matters or circumstances
have arisen since the end of the financial year, that have or may significantly affect the operations, results or
state of affairs of the group in subsequent accounting periods.
128
Nufarm Limited Annual Report 2019
Directors’ Declaration
1.
In the opinion of the directors of Nufarm Limited (the company):
(a)
the consolidated financial statements and notes 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 2019 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 35 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 Corporations (Wholly owned
Companies) Instrument 2016/785.
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 2019.
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 30th day of September 2019
DG McGauchie AO
Director
GA Hunt
Director
Nufarm Limited Annual Report 2019 129
Independent Auditor’s Report
Independent Auditor’s Report
To the shareholders of Nufarm Limited
Report on the audit of the Financial Report
Opinion
We have audited the Financial Report of
The Financial Report comprises the:
Nufarm Limited (the Company).
In our opinion, the accompanying Financial
Report of the Company is in accordance with the
Corporations Act 2001, including:
giving a true and fair view of the Group’s
financial position as at 31 July 2019 and of its
financial performance for the year ended on
that date; and
complying with Australian Accounting
Standards and the Corporations Regulations
2001.
Consolidated balance sheet as at 31 July 2019
Consolidated income statement, consolidated
statement
income,
consolidated statement of changes in equity,
and consolidated statement of cash flows for
the year then ended
comprehensive
of
Notes
including a summary of significant
accounting policies
Directors’ Declaration.
The Group consists of the Company and the
entities it controlled at the year end and from time
to time during the financial year.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the
audit of the Financial Report section of our report.
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics
for Professional Accountants (the Code) that are relevant to our audit of the Financial Report in Australia.
We have fulfilled our other ethical responsibilities in accordance with the Code.
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
Profession Standards Legislation.
130
Nufarm Limited Annual Report 2019
Key Audit Matters
The Key Audit Matters we identified are:
Recoverability
assets,
including property, plant and equipment and
intangible assets
non-current
of
Recoverability of deferred
tax assets
recognised in relation to prior period losses
Key Audit Matters are those matters that, in our
professional judgement, were of most significance
in our audit of the Financial Report of the current
period.
These matters were addressed in the context of our
audit of the Financial Report as a whole, and in
forming our opinion thereon, and we do not provide
a separate opinion on these matters.
Recoverability of non-current assets, including property, plant and equipment ($393.6m) and
intangible assets ($1,719.0m)
Refer to the following notes to the financial report: Note 2 (d) (ii) Basis of preparation – Use of estimates
and judgements – impairment testing, Note 3 (h) Significant accounting policies – Impairment, and Note
23 Intangible assets.
The key audit matter
How the matter was addressed in our audit
Recoverability of non-current assets including
property, plant and equipment, and intangible
assets is a key audit matter due to the following:
inherent complexity in determination of the
Group’s cash generating units (‘CGU’s);
the diverse nature of regional agricultural
markets in which the Group operates. This
includes different economic, regulatory and
climatic conditions of a large number of
geographies. The Group prepares individual
discounted cash flow models incorporating
these variations for each CGU. This volume
and variety of data necessitates additional
audit effort, and we involve KPMG audit
teams located in significant jurisdictions who
have knowledge of the local conditions.
each geographic and product market
segment experiences the following, which
are subject to inherent uncertainty leading to
a range of possible forecast outcomes:
-
-
-
fluctuating demand depending on
economic and climatic conditions;
regulatory
and
significant
oversight, which can lead to approval
and cessation of new and existing
products; and
activity
technology advancements by the Group
and competitors, which can lead to
Our procedures included:
testing the key controls over the cash flow
models, including Board review and approval of
key assumptions and business unit budgets
which form the basis of the cash flow forecasts
using our understanding of the nature of the
Group’s business, we analysed:
-
-
the internal reporting of the Group to
assess how results are monitored and
reported; and
the implications to CGU identification in
accordance with accounting standards.
assessing the Group’s discounted cash flow
models and key assumptions by:
-
-
-
comparing cash flows to historical trends
and performance, by CGU, to inform our
forecasts
current
evaluation
incorporated into the models;
of
comparing the relevant cash flow forecasts
to the Board approved budgets and FY20-
FY21 business plans;
involving our valuation specialists to assess
the discount rates against comparable
market
information and the economic
assumptions relating to cost of debt and
cost of equity; and
-
using our industry knowledge, information
Nufarm Limited Annual Report 2019 131
Independent Auditor’s Report (continued)
shifts in market demand for products.
Given the unique, non-homogenous, nature of
these factors, specific auditor attention is applied
to each element, increasing the audit effort. We
focus on the authority and knowledge of the
sources of judgements to the models, evidence
of bias, and consistency of application of
judgements.
The above factors increase the complexity in
auditing the intangible asset useful lives and the
forward-looking assumptions contained in the
Group’s discounted cash flow models for each
CGU. Additional key assumptions we focused on
included short term and terminal value growth
rates and discount rates.
These same conditions impact our audit effort
applied for the value associated with new
products in development phases.
Products
in early stages of development,
compared to those closer to product launch, are
prone to wider ranging forecasting outcomes and
highly judgemental assumptions. The Group
engaged an external valuation expert to assist
them. We focused on the authority and
knowledge of the sources of judgements to the
valuation, common market practices, and
consistency of judgements.
published by regulatory and other bodies,
and through inquiries with the Group, to
assess the assumptions. These included
intangible asset useful lives and the impact
of technology, market and regulatory
changes on those assumptions. We
looked for evidence of sensitivity and bias
within and across models, and consistency
of application,
investigating significant
differences.
the
evaluating the Group’s sensitivity analysis in
respect of the key assumptions in the models,
including
identification of areas of
estimation uncertainty and reasonably possible
changes in key assumptions. We assessed the
related disclosures against accounting standard
requirements;
comparing carrying values of CGUs to available
market data, such as implied earnings multiples
of comparable entities;
assessing the Group’s valuation of the ANZ
Crop Protection CGU and products
in
development phase by additionally:
-
-
assessing the competency, scope of work
and objectivity of experts engaged by the
Group; and
involving our valuation specialists to assess
the valuation methodology against industry
practice and the requirements of the
accounting standards.
Recoverability of deferred tax assets recognised in relation to prior period tax losses ($131.9m)
Refer to the following notes to the financial report: Note 2 (d) (iii) Basis of preparation - Use of estimates
and judgements - income tax, Note 3(o) Significant accounting policies – Income tax, Note 11 Income
tax expense and Note 18 Tax assets and liabilities.
The key audit matter
How the matter was addressed in our audit
Recoverability of deferred tax assets in relation
to prior period tax losses is a key audit matter due
to the:
complexity in auditing the forward-looking
assumptions applied to the Group’s tax loss
utilisation models for each tax jurisdiction
given
forward-looking
assumptions involved. Further details on the
significant
the
Our procedures included:
testing key controls over the taxable profit
forecasts underpinning the tax loss utilisation
models, including Board review and approval of
key assumptions and business unit budgets
which form the basis of these forecasts.
132
Nufarm Limited Annual Report 2019
of
non-current
significant forward-looking assumptions and
implications for the audit are contained in the
recoverability
assets,
including property, plant and equipment and
intangible assets key audit matter. Additional
the
is
auditor attention
reconciliation of forecast cash flows to
taxable profits.
focused on
age of the tax losses, and the relevance of
recent taxable profits to forecasts.
large number of jurisdictions and our need to
consider their varying and complex rules on
tax loss utilisation.
comparing the key assumptions and business
unit budgets for consistency with those tested
by us, as set out in the recoverability of non-
current assets, including property plant and
equipment and intangible assets key audit
matter, and taxable profit concepts.
assessing the Group’s tax
loss utilisation
models and key assumptions, by significant
jurisdiction, by:
-
-
-
-
-
comparing taxable profit to historical trends
and performance to inform our evaluation
of the current taxable profit forecasts;
comparing the taxable profit forecasts to
the Board approved budgets;
evaluating the Group’s aged utilisation
sensitivity analysis in respect of the key
assumptions, including the identification of
areas of estimation uncertainty to focus
our further procedures;
understanding the timing of future taxable
profits and considering the consistency of
the timeframes of expected recovery to
our knowledge of the business and its
plans; and
involving our tax specialists and teams
from the relevant jurisdictions to assess
the tax loss utilisation expiry dates and
annual
for
consistency with local practice, regulatory
parameters and legislation.
allowances
utilisation
Nufarm Limited Annual Report 2019 133
Independent Auditor’s Report (continued)
Other Information
Other Information is financial and non-financial information in Nufarm Limited’s annual reporting which
is provided in addition to the Financial Report and the Auditor's Report. The Directors are responsible
for the Other Information.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not
express an audit opinion or any form of assurance conclusion thereon, with the exception of the
Remuneration Report and our related assurance opinion.
In connection with our audit of the Financial Report, our responsibility is to read the Other Information.
In doing so, we consider whether the Other Information is materially inconsistent with the Financial
Report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
We are required to report if we conclude that there is a material misstatement of this Other Information,
and based on the work we have performed on the Other Information that we obtained prior to the date
of this Auditor’s Report we have nothing to report.
Responsibilities of Directors for the Financial Report
The Directors are responsible for:
preparing the Financial Report that gives a true and fair view in accordance with Australian
Accounting Standards and the Corporations Act 2001;
implementing necessary internal control to enable the preparation of a Financial Report that gives a
true and fair view and is free from material misstatement, whether due to fraud or error; and
assessing the Group’s ability to continue as a going concern. This includes disclosing, as applicable,
matters related to going concern and using the going concern basis of accounting unless they either
intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objective is:
to obtain reasonable assurance about whether the Financial Report as a whole is free from material
misstatement, whether due to fraud or error; and
to issue an Auditor’s Report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Australian Auditing Standards will always detect a material misstatement when it
exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of the Financial Report.
A further description of our responsibilities for the audit of the Financial Report is located at the Auditing
and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_files/ar1.pdf. This
description forms part of our Auditor’s Report.
134
Nufarm Limited Annual Report 2019
Report on the Remuneration Report
Opinion
Directors’ responsibilities
In our opinion, the Remuneration Report of
Nufarm Limited for the year ended 31 July
2019, complies with Section 300A of the
Corporations Act 2001.
KPMG
Gordon Sangster
Partner
Melbourne
30 September 2019
preparation
The Directors of the Company are responsible for
the
the
Remuneration Report in accordance with Section
300A of the Corporations Act 2001.
presentation
and
of
Our responsibilities
We have audited the Remuneration Report included
in the Directors’ report for the year ended 31 July
2019.
Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted
in accordance with Australian Auditing Standards.
Nufarm Limited Annual Report 2019 135
Shareholder and Statutory Information
Details of shareholders, shareholdings and top 20 shareholders
Listed securities
Fully paid ordinary shares
Twenty largest shareholders
Number of
holders
Number of
securities
Percentage
held by top 20
16,948
379,639,334
82.12
HSBC Custody Nominees (Australia) Limited
Sumitomo Chemical Company Limited
J P Morgan Nominees Australia Pty Limited
Citicorp Nominees Pty Limited
National Nominees Limited
BNP Paribas Noms Pty Ltd
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