More annual reports from Nufarm Limited:
2023 ReportPeers and competitors of Nufarm Limited:
Nufarm LimitedAnnual Report 2020
and Annual Report for 2 months
ended 30 September 2020
N
u
f
a
r
m
L
i
m
i
t
e
d
A
n
n
u
a
l
R
e
p
o
r
t
2
0
2
0
a
n
d
A
n
n
u
a
l
R
e
p
o
r
t
f
o
r
2
m
o
n
t
h
s
e
n
d
e
d
3
0
S
e
p
t
e
m
b
e
r
2
0
2
0
Contents
Financial Year 2020 Overview
Chairman’s message
Managing Director’s message
About us
Annual Report for year ended 31 July 2020
Operating and Financial Review
Board of Directors
Key Management Personnel
Corporate Governance Statement
Directors’ report
2020 Remuneration Report
Auditors’ Independence Declaration
Financial statements for the year ended 31 July 2020
Consolidated statement of profi t or loss and
other comprehensive income
Consolidated balance sheet
Consolidated statement of cash fl ows
Consolidated statement of changes in equity
Notes to the consolidated fi nancial statements
Directors’ declaration
Independent Audit Report
Annual Report for 2 months ended
30 September 2020
Operating and Financial Review
Corporate Governance Statement
Directors’ report
Remuneration Report for the 2 months ended
30 September 2020
Auditors’ Independence Declaration
Financial statements for the 2 months ended
30 September 2020
Consolidated statement of profi t or loss and
other comprehensive income
Consolidated balance sheet
Consolidated statement of cash fl ows
Consolidated statement of changes in equity
Notes to the consolidated fi nancial statements
Directors’ declaration
Independent Audit Report
Shareholder and Statutory Information
Corporate Information
1
2
3
4
8
18
20
21
37
39
54
55
56
58
59
60
62
118
119
126
128
132
145
149
162
163
164
166
167
168
170
224
225
231
ibc
Nufarm Limited ABN 37 091 323 312
Financial Year 2020 Overview
The statutory net loss of $456 million included the impact of discontinued operations and material items
Our teams adapted quickly
to the global COVID-19
pandemic and achieved
Nufarm’s best ever safety
performance
Good sales momentum
was generated in most
regions in the second
half as external
headwinds eased
Safety
(Lost time injury
frequency rate per
1,000,000 hours worked)
3
5
.
1
9
2
0
.
2019
2020
Revenue
from continuing
operations
(A$m)
4
7
6
2
,
7
4
8
2
,
2019 2020
Earnings growth
in Asia Pacific
was offset by
lower earnings in
other regions
Underlying
EBITDA from
continuing operations
(A$m)
0
0
3
6
3
2
2019 2020
Underlying cash generation
was improved through
disciplined working
capital management
Our financial position
was strengthened with
proceeds from the sale of the
South American businesses
Underlying
cash from
continuing operations
(A$m)
7
2
1
0
8
2019 2020
Net Debt
(A$m)
7
4
2
,
1
1
4
4
2019 2020
1
Nufarm Limited | Annual Report 2020
Chairman’s message
While 2020 will be remembered globally for an extraordinary
succession of events, the external headwinds that have impacted
Nufarm’s performance over the past two years showed signs of
easing toward the end of the year. Drought breaking rain on the
east coast of Australia and improved conditions in Asia and North
America generated good earnings momentum in the second half
of the year. This partially offset the impact of a weaker first half in
North America and lower earnings from the European and Seed
Technologies businesses, however earnings for the full year
declined on the prior year.
Nufarm’s operations have shown good resilience to the impact
and disruption of COVID-19. While there has been some demand
reduction in smaller niche markets to which the company is
exposed, demand for crop protection products has largely
continued to be driven by seasonal conditions and fundamental
drivers such as food commodity prices and farm incomes. With
governments around the world recognising that the supply of
farm inputs such as crop protection is an essential service, our
manufacturing and logistics supply chains have continued to
operate and supply to customers has been maintained with
minimal disruption.
Our strategy of focusing on core crops in key agricultural regions
has provided diversification to mitigate the impact of seasonal
volatility. In April 2020 we completed the sale of our South
American businesses to Sumitomo Chemical Company. This
delivered up-front value for shareholders and we have retained
a strong, geographically diverse portfolio focused on businesses
and agricultural regions with higher margins and stronger cash flow.
The sale proceeds also strengthened the company’s balance
sheet, allowing us to better manage inherent industry volatility
and continue to make prudent reinvestment into the business. Cash
generation from the underlying performance of the continuing
businesses also improved despite the decline in earnings. While
this reinforces the Board’s confidence in the continued strength
of the balance sheet, we have considered it prudent to continue
the suspension of dividends for the current year.
Improving margins and cash generation remain key priorities
for the management team. By focusing on building strong
relationships with channel partners and investing in our product
portfolio we are continuing to build scale in our chosen markets.
During the year a review of our manufacturing footprint and cost
structures identified opportunities to improve the competitiveness
of our supply chain and cost base. When combined with a
refocused portfolio and the continued support of our channel
partners, these measures are expected to contribute to improved
returns in the coming year and years.
2
Most importantly, ongoing work to strengthen the company’s
safety culture is generating good results. In 2020 we achieved
our best ever safety performance. Ensuring that our colleagues
return home safely every day remains the most important priority
of the Board, the Executive Team, and every Nufarm employee.
In financial year 2021, Nufarm will change its financial year end
from 31 July to 30 September. The company’s earnings are
currently weighted toward the second half of the financial year
and this is expected to become more pronounced following the
divestment of the South American businesses. The change will
better align the reporting periods with Nufarm’s key sales periods
and enable improved comparison with industry peers.
A program of Board renewal was also commenced this year.
After nine years on the Board, Anne Brennan will retire after this
year’s Annual General Meeting of shareholders. Anne has made
an outstanding contribution to the Board and on your behalf,
I thank Anne and wish her well for the future.
John Gillam was appointed as a non-executive Director and will
succeed me as Chairman. John’s background and experience
will be invaluable to the Board and I believe he will be an
excellent Chairman. It has been a privilege to serve as your
Chairman and I thank you for your support over the 17 years
I have been on the Board and during my 10 years as Chairman.
Donald McGauchie
Chairman
Nufarm Limited | Annual Report 2020 Managing Director’s message
The 2020 financial year saw a continuation of external
headwinds for Nufarm as the agricultural markets in which we
operate endured mixed seasonal conditions, industry-related
supply issues and the tragedy and disruption of COVID-19.
Against this backdrop, we maintained our commitment to
the safety of our people, recording our best ever safety
performance, and continued to meet the needs of our
customers with minimal disruption.
We have taken decisive steps to strengthen our business to deliver
improved returns. We have refocused our portfolio, strengthened
our balance sheet and progressed key priorities to drive better
performance from our continuing businesses.
Our earnings performance in 2020 was disappointing. While
constant currency revenues were in line with the prior year and
good earnings momentum was generated in most regions in the
second half of the year, underlying EBITDA from continuing
operations declined by 21%.
I was pleased with the rebound in earnings in ANZ, North
America and Asia in the second half of the year and our primary
focus is on driving improved performance from of our European
business. Over the past few years, higher raw material and
manufacturing costs and increased competition have eroded
earnings in the base product portfolio in this region. While our
recent investment in new product portfolios has helped offset this
trend, we recognised a pre-tax impairment to the carrying value
of the European assets of $188m in the reporting period.
We have a comprehensive program underway in Europe to
grow revenues, reduce costs and lift margins. We expect this
program, combined with an anticipated easing in raw material
costs and improved weather conditions would be the major
drivers of improved profitability in the European business in
financial year 2021 and beyond.
Our Nuseed business achieved a number of important commercial
milestones during the year. A new Value Beyond Yield® technology
platform was added to our portfolio with the acquisition of key
assets relating to the oilseed crop, carinata. This crop has been
developed as a feedstock for renewable fuels and high protein
meal for livestock feed. We generated our first commercial sales
during the year and a multi-year offtake agreement has been
secured to underpin future growth.
In September 2020 we also secured the first commercial orders
of our proprietary omega-3 canola oil to a major global salmon
producer. This follows more than a decade of development and
significant investment and marks the beginning of a new phase
in the delivery of shareholder value from this technology growth
platform. Plans to scale and expand production and sales of
omega-3 canola are now advancing and we believe this
product is set to deliver significant value for shareholders in the
coming years.
In closing I thank our dedicated and talented people. The
backdrop of COVID-19 has made 2020 a particularly challenging
year. The speed with which our teams adapted to new ways
of working and the discretionary efforts made to ensure we
maintained supply to our customers has contributed not only to
the continued resilience of our business, but also to the continuity
of global food supply chains. I also thank our shareholders for
their continued support.
Greg Hunt
Managing Director and Chief Executive Officer
3
Nufarm Limited | Annual Report 2020 About us
Nufarm is a leading developer and manufacturer of crop protection solutions and
seed technologies. Our business is comprised of two reporting segments.
Crop protection
Seed Technologies
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). In 2020 we divested
our businesses in South America and our
continuing businesses are focused in
Europe, North America, and Asia Pacific.
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 develops unique plant output traits
with specific customer and consumer benefits.
We call this our BEYOND YIELD™ strategy.
Nuseed distributes high yielding sunflower,
sorghum and canola seed to customers in
more than 30 countries. In financial year 2020,
Nuseed added a new oilseed crop, carinata,
to the portfolio.
FY20 Underlying EBITDA from continuing businesses
FY20 Gross margin by product type
Europe
North America
ANZ
34%
32%
13%
Seed Technologies
11%
Asia
10%
Other herbicide
Phenoxy
Fungicide
Glyphosate
Seed Technologies
Other
Insecticide
24%
23%
11%
11%
11%
10%
10%
Other includes Croplands equipment, adjuvants, plant
growth regulators and industrial products
4
Nufarm Limited | Annual Report 2020 Purpose and strategy
We aim to create long term shareholder value by helping farmers get more from their land through
the provision of crop protection and seed technologies. We focus on five core crops in key regions;
Asia Pacific, Europe and North America.
Alsip and
Chicago Heights
USA
Sacramento
California
USA
Asia
ANZ
Europe
Greenville
Mississippi
USA
LATAM
North America
Gaillon
France
Dusseldorf
Germany
Wyke
UK
Linz
Austria
Shanghai
China
Kuala Lumpur
Malaysia
Merak
Indonesia
Manufacturing facilities
Regional HQ
Seed R&D
Procurement Hub
Kwinana
Australia
Laverton
(2 sites)
Australia
Melbourne
Australia
Cereals
Corn
Pasture, turf
and ornamentals
Soybean
Trees, nuts, vines
and vegetables
Our scale and global distribution footprint make us an attractive
partner for major manufacturers and research organisations. By
collaborating with these industry participants, we are able to
offer 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 a range of expansion opportunities in major
cropping markets around the world.
5
Nufarm Limited | Annual Report 2020 About us continued
Business Model
Our business model puts the customer at the centre of our business
and decision making and provides a foundation for future growth.
Channel Partnerships
Portfolio solutions
We have teams based in more than 30 countries supporting
channel partners and growers in major agricultural regions
around the world. This platform allows us to establish close
relationships with our customer base as well as end users
of our products, contributing to our understanding of the
evolving needs of growers and helping us optimise our
product development activities.
Supply chain excellence
We have crop protection formulation and manufacturing facilities
in seven countries, and seed related research, development and
marketing operations in Australia, the Americas and Europe.
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.
We have proven product development and registration expertise
in our key markets to enable us to develop innovative, differentiated
and value-added products and formulations and bring them to
market quickly. This provides us with a pipeline of new product
opportunities and supports the profi table growth of our business.
Our strategic alliance with our largest shareholder, Sumitomo
Chemical Company, encompasses 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.
Our Operating Model
Customer at the Centre
Channel
Channel
Channel
partnerships
partnerships
Partnerships
Customer
Customer
Customer
Customer
Customer
Experience
Experience
Experience
Experience
Experience
Experience
Experience
Experience
Experience
Portfolio
Portfolio
Portfolio
Solutions
Solutions
Solutions
Supply chain
Supply chain
Supply Chain
excellence
excellence
Excellence
People l Values l Culture l Process
6
Nufarm Limited | Annual Report 2020
Sustainability
Our mission to ’grow a better tomorrow’ reflects our ambition for our customers, our people,
communities and shareholders. We work with these stakeholders to assess, prioritise and manage
sustainability related risks and opportunities and publish our progress in our annual sustainability report.
Our approach focuses on the following areas:
Our values
Protecting the safety, health and wellbeing of our
people and communities
Our most important priority is to ensure that every colleague
goes home safely every day. We work toward achieving this by
embedding processes that identify risks, implementing risk
reduction measures and fostering a culture where people’s
health and safety is front of mind in all we do.
Supporting sustainable agriculture
We recognise the challenges farmers face in using limited natural
resources in a sustainable way while responding to climate
volatility and growing pressures on biodiversity. We are committed
to understanding these challenges and developing solutions
that will advance change within our organisation and throughout
the value chain.
Reducing our environmental footprint
We work to reduce our resource consumption and minimise
adverse environmental impacts from our operational activities
through robust environmental management systems and
a risk-based approach.
Empowering our people
Our people and culture play an important role in delivering
on our strategy and meeting community expectations. We aim
to provide an inclusive and diverse work environment where
individuals are valued for their diversity and empowered
to reach their full potential.
Conducting our business with integrity
We recognise that trust is at the foundation of relationships.
We strive to work with integrity and do what is right. We take
accountability for our decisions and our actions.
R
Responsibility
We are accountable for our decisions
and our actions. We recognise that
trust is at the foundation of relationships
and that acting ethically, safely and
responsibly creates that trust.
A
Agility
R
Respect
We are resourceful and adaptable
in meeting the needs of our customers
and our organisation.
We respect others – colleagues,
customers and stakeholders – and
our environment. We care for all
of our resources.
E
Empowerment
We are an innovative, entrepreneurial
organisation where individuals and
teams can do what is best for the
customer, the organisation and
our stakeholders.
7
Nufarm Limited | Annual Report 2020 Operating and Financial Review
Group Results
On 1 April 2020 Nufarm completed the sale of its crop protection and seed treatment operations in Brazil, Argentina, Colombia and Chile
to Sumitomo Chemical Company Limited for AUD$1.188 billion. Trading results and the after-tax loss on sale of these operations is disclosed
throughout this Review as discontinued operations.
Summary financial results
(continuing operations unless specified)
FY20
$000
FY19
$000
Change
%
Revenue
Underlying gross profit
Underlying EBITDA
Underlying EBIT
Operating profit/(loss)
Net financing costs
Underlying net profit/(loss) after tax
Net profit/(loss) after tax
Net profit/(loss) after tax – discontinued operations
Net profit/(loss) after tax – total group
Statutory effective tax rate
Underlying net operating cash flow
Basic earnings per share – excluding material items (cents)
Total dividend per share declared in respect of period (cents)
2,847,375
2,673,572
734,729
767,404
235,767
34,355
(214,315)
(96,191)
(80,605)
(362,412)
(93,667)
(456,079)
(16.7)%
300,142
135,293
84,523
(63,730)
39,632
(11,138)
49,448
38,310
153.6%
216,553
79,567
(24.8)
–
7.8
–
6.5%
(4.3)%
(21.4)%
(74.6)%
large
50.9%
large
large
large
large
large
large
large
n/a
The financial information contained within the group’s statutory financial statements has been prepared in accordance with International
Financial Reporting Standards (IFRS). Refer to endnotes, including explanations of the non-IFRS measures used in this announcement. This
report is based on financial statements which have been audited by KPMG. Non-IFRS measures have not been subject to audit or review.
Earnings from continuing businesses
Revenues increased 7% to $2.85 billion, however the increase
is 3% when zero margin sales made to Sumitomo under the
transitional services agreement for procurement services to the South
American businesses are excluded. Strong second half momentum in
all regions and businesses except Europe offset the impact of poor
seasonal conditions in the first half. Drought breaking rains on the
east coast of Australia generated strong demand for herbicides
and were the primary driver of revenue growth for the year.
Underlying gross profit declined 4% to $735 million with a decline
in Europe and North America more than offsetting improvements
in ANZ, Asia and Seed Technologies.
Underlying operating costs increased on the prior year due to
the currency impact of a weaker Australian dollar and additional
investment in the Seed Technologies segment as it ramped up
activity for the commercialisation of omega-3 canola oil and
carinata. European cost increases included a full year of supply
chain costs to transition the acquired portfolios.
Underlying earnings before interest, tax, depreciation and
amortisation (underlying EBITDA) declined 21% to $236 million
with reduced earnings in Europe and Seed Technologies and
a weaker first half in North America offsetting earnings growth
in ANZ and Asia.
Depreciation and amortisation expenses increased from
$165 million to $201 million due to the impact of increased
amortisation for new products and an additional $22 million
of amortisation related to the adoption of AASB16 Leases in FY20.
Net financing costs (comprising net external financing costs, foreign
exchange costs and lease amortisation) increased $32 million.
Net external financing costs reduced by $2 million to $65 million.
Foreign exchange losses increased $28 million to a loss of $24
million for the year due primarily to pandemic related exchange
rate volatility. Finance charges on leases increased $6 million due
to adoption of AASB16 Leases. Underlying basic earnings per share
declined to a loss of 24.8 cents per share.
The statutory effective tax rate includes the impact of derecognition
of taxation assets and losses, and non-recognition of the tax
benefit for the costs for planned manufacturing plant closures
and the impairment of intangible assets in Europe.
8
Nufarm Limited | Annual Report 2020 Material items
Summary financial results
Material items by category
Legal costs
Asset rationalisation and restructuring
Europe impairment loss
South American business disposal
– gain/(loss) on disposal
– other associated net expenses
Net tax loss write-off
Total material items
Continuing Operations
Discontinued Operations
FY20
Pre-tax
$000
Post-tax
$000
(9,934)
(50,461)
(9,934)
(50,461)
(188,275)
(179,941)
52,324
(38,464)
–
(77,383)
(38,464)
(32,941)
(234,810)
(389,124)
(248,670)
(281,807)
13,860
(107,317)
Material items of $389 million post tax included:
• Costs relating to the successful legal action brought in the USA
to enforce Nufarm’s rights in relation to the omega-3 canola
patent estate
• Asset rationalisation costs relating to the planned closure of
manufacturing facilities in Australia and Austria, and
restructuring costs relating to implementation of the expanded
performance improvement program
• Profit on sale of the South American operations (pre-tax) and tax
expenses recognised in relation to the sale
• Other associated net expenses relating to the sale of the South
American businesses, an onerous contract, costs related to a
debt restructuring initiative that ceased post the announcement
of the divestment, and other costs including, but not limited to,
adviser fees and other separation costs
• Non-cash impairment of intangible assets in the European
• De-recognition of deferred tax assets
business to recognise a moderated outlook of future earnings
based on an expectation of continuing margin pressure
Cash flow
Cash flow results
Underlying net operating cash flow – continuing operations
Net operating cash flow from material items – continuing operations
Net operating cash flow – discontinued operations
Net operating cash flow – total group
Underlying net investing cash flow – continuing operations
Net investing cash flow – discontinued operations
Net investing cash flow – total group
Underlying net operating and investing cash flows – continuing operations
Net operating and investing cash flows – total group
FY20
$000
216,553
(30,510)
(417,557)
(231,514)
FY19
$000
79,567
(40,318)
58,882
98,131
(161,514)
(166,895)
1,277,106
(7,085)
1,115,592
(173,980)
55,039
884,078
(87,328)
(75,849)
Change
%
large
(24.3)%
large
large
(3.2)%
large
large
large
large
Underlying net operating cash flow from continuing operations increased by $137 million primarily due to improved working capital
management which more than offset the impact of reduced earnings.
Underlying net investing cash outflows from continuing operations reduced slightly on the prior year. Major investments in the current year
included capital expenditure at manufacturing plants of $65 million (this incorporated final payments for the new formulation facility in the
United States), development expenditure of $47 million for the crop protection portfolio, $36 million for seed technologies (including
omega-3 canola development and acquisition of the carinata asset portfolio) and $14 million for information technology.
Cash flows from discontinued operations relate to trading operations for the South American businesses for the eight months to 31 March
2020 and the impact of the sale proceeds from the divestment of the assets.
9
Nufarm Limited | Annual Report 2020 Operating and Financial Review continued
Balance Sheet Management
Financial position
Net debt
ANWC/sales (%)
Leverage – total group (includes lease liabilities)
Leverage – continuing operations (includes lease liabilities)
Gearing %
FY20
$000
FY19
$000
441,264
1,247,129
47.7%
2.97
46.4%
1.50
1.87
17.1%
Change
%
(64.6)%
(131)bps
(49.5)%
n/a
34.1%
(1,708)bps
The group’s financial position has been significantly strengthened following the divestment of the South American businesses. Net
proceeds from the sale were applied to reduce group debt. Group leverage reduced from 3.0x to 1.5x excluding lease liabilities and
1.9x including lease liabilities. The reduced leverage enables the group to better manage inherent industry volatility and withstand a
range of scenarios.
Average net working capital to sales reduced to 46.4% driven primarily by a reduction in average inventory levels held in Australia.
Improving working capital efficiency across all regions remains a key focus with a target to return average net working capital to sales
to 35% to 40%.
Operating segments results
Revenue
Underlying EBITDA
FY20
($000s)
FY19
($000s)
Change
%
FY20
($000s)
FY19
($000s)
Change
%
Crop protection
Australia and New Zealand
Asia
North America
Europe
Total Crop protection
Seed Technologies – global
Corporate
Nufarm Group
562,897
452,368
165,947
190,285
1,051,285
1,031,935
783,028
814,845
2,563,157
2,489,433
198,831
85,387
184,139
–
2,847,375
2,673,572
24.4%
(12.8)%
1.9%
(3.9)%
3.0%
8.0%
n/a
6.5%
38,800
30,481
92,333
99,255
260,869
31,471
20,685
26,979
107,602
163,849
319,115
38,475
(56,573)
(57,448)
235,767
300,142
Discontinued operations
643,630
1,084,018
(40.6)%
58,918
120,151
87.6%
13.0%
(14.2)%
(39.4)%
(18.3)%
(18.2)%
(1.5)%
(21.4)%
(51.0)%
Nufarm Group
3,491,005
3,757,590
(7.1)%
294,685
420,293
(29.9)%
Revenue
Underlying EBITDA
2H20
($000s)
2H19
($000s)
Change
%
2H20
($000s)
2H19
($000s)
Change
%
Crop protection
Australia and New Zealand
Asia
North America
Europe
392,723
230,158
93,226
89,537
666,796
586,008
556,007
615,204
Total Crop protection
1,708,752
1,520,907
Seed Technologies – global
Corporate
Nufarm Group
Discontinued operations
Nufarm Group
152,081
85,387
129,062
–
1,946,220
1,649,969
67,840
531,513
2,014,060
2,181,482
70.6%
4.1%
13.8%
(9.6)%
12.4%
17.8%
n/a
18.0%
(87.2)%
(7.7)%
37,598
18,957
76,198
109,371
16,689
12,517
67,342
151,023
242,124
247,571
29,099
(29,817)
241,406
(12,303)
31,839
(27,859)
251,551
47,796
large
51.5%
13.2%
(27.6)%
(2.2)%
(8.6)%
7.0%
(4.0)%
large
229,103
299,347
(23.5)%
10
Nufarm Limited | Annual Report 2020 Crop Protection
Europe
Reported results benefited from a depreciation in the Australian
dollar relative to the Euro. Constant currency revenue declined
8% on the prior year.
Revenues were impacted by poor seasonal conditions in
northern and eastern Europe and high levels of inventory in
distribution channels in some regions. COVID-19 tempered
demand in some niche market segments such as horticulture
and ornamental markets.
Earnings include the adverse impact of AUD$9 million of customer
rebates relating to the prior year that were included in the FY20
results (as previously advised in November 2019).
The continuation of elevated raw material costs and increased
conversion costs impacted margins with the competitive pricing
environment limiting the extent to which cost increases could be
passed through to customers. Increased logistics and general
administration costs also impacted earnings.
A comprehensive program to grow revenues, reduce costs and
lift margins commenced in the second half of the financial year.
The program is targeting a sustained improvement in earnings run
rate of AUD$25 million to AUD$30 million by the end of FY22.
Estimated additional benefits of up to AUD$10 million per annum
are expected to be derived from cessation of 2,4-D synthesis at
the Linz manufacturing site in Austria. 2,4-D synthesis will cease in
the first half of calendar year 2021 and estimated closure costs
of $21 million were included as a material item in the current year.
Benefits from the program will be realised once inventories begin
to be sourced from lower cost sources of supply.
It is expected that the improvement program, combined with an
anticipated easing in raw material costs and improved weather
conditions would be the major drivers of improved profitability
for the European business in the coming financial year.
North America
Reported results benefited from a depreciation in the Australian
dollar relative to the US dollar. Constant currency revenue
declined 5% with good momentum in the second half of the year
partially offsetting a weaker first half.
Demand for crop protection in the first half was impacted by high
inventory levels in distribution channels and strong competition
following extreme weather toward the end of the prior financial
year. Second half revenue and earnings improved on the prior
year with seasonal conditions lifting demand for crop protection
products, particularly in Canada.
Demand in the higher margin turf and ornamental segment was
impacted by COVID-19 restrictions with closures of golf courses in
numerous States and reduced end user demand for cut flowers,
ornamentals and nursery plants. Reduced sales into this higher
margin segment and strong pricing pressure on the overall
portfolio impacted margins and earnings for the year. Increased
manufacturing and logistics costs relating to COVID-19 were
largely offset by reduced discretionary expenditure.
Nufarm’s Mexico business was incorporated into the North
American business following the divestment of Nufarm’s South
American businesses in April 2020. This is a relatively small
business however it is showing good potential to generate
growth from a low base in the new organisational structure.
The North American manufacturing footprint was expanded
in 2020 with the successful commissioning of a new herbicide
formulation facility in Greenville, Mississippi. The facility provides
logistics synergies and incorporates in-line formulation
technology to respond quickly to meet surge demand in this
major cropping region. The product portfolio was also
expanded through a new distribution agreement and planned
product launches for 2021.
Australia and New Zealand
Increased sales volumes in the second half of the year and
benefits from the performance improvement program lifted
revenue and earnings significantly. Gross profit margin reduced
as the product mix returned to a more typical composition with
a greater proportion of high volume, low margin herbicide sales.
Demand in the first half of the financial year was impacted by
drought conditions reducing summer crop planting (sorghum
and cotton) and elevated inventory levels in distribution channels.
Drought breaking rain on the east coast of Australia in the second
half of the year stimulated demand and generated strong
revenue growth.
The performance improvement program launched in 2019
delivered an estimated $10 million benefit from a broad range of
projects to reduce manufacturing, selling and administrative costs.
Working capital management remained a priority with increased
product demand and disciplined planning resulting in
normalisation of inventory levels and improved cash generation.
Insecticide and fungicide manufacturing currently undertaken in
Laverton, Victoria will be progressively phased out with the site
prepared for closure and sale toward the end of calendar year
2021. This is expected to deliver a further annualised improvement
in earnings of approximately $5 million. Estimated closure costs of
approximately $20 million were included as a material item in the
current year. Proceeds from the future sale of the site and any gain
or loss on the sale will be recorded when a sale is completed.
Asia
Revenues in Asia were impacted by poor seasonal conditions
in Indonesia in the first half of the year. Earnings improved on the
prior year with the benefit of new product launches increasing
sales of higher margin, differentiated products and continued
disciplined cost control.
From October 2020 the Australian and New Zealand business will
be combined with the Asia businesses to create an Asia Pacific
(APAC) business.
The combination is expected to deliver further efficiencies in
supply chain and manufacturing capabilities and create portfolio
marketing and development opportunities across the region.
The APAC business will incorporate Nufarm’s crop protection
operations in Australia, New Zealand, South East Asia as well
as the Croplands equipment business and Nufarm’s joint venture
with Fuhua in China.
11
Nufarm Limited | Annual Report 2020 Operating and Financial Review continued
Seed Technologies
Seed Technologies combines the seed treatment portfolio and
the Nuseed business.
Revenue growth continued in 2020 despite difficult seasonal
conditions reducing seed treatment revenues, with Nuseed
achieving sales growth in all regions and crops.
Canola seed sales were boosted by growth in Latin America and
the launch of hybrid canola varieties into the large Canadian
market and the USA.
Sorghum seed sales expanded in North America and Latin
America with Nuseed now the leading sorghum supplier in Brazil.
Sunflower volumes grew in North America and new product
launches supported further growth in Europe.
Nuseed’s gross margin improved however EBITDA declined due to
a combination of lower gross profit from seed treatment products,
reduced end-point royalties from 2019 canola crops in Australia, a
bad debt expense and increased investment in costs associated
with the commercialisation of omega-3 canola oil and carinata.
Subsequent to the end of the financial year, Nuseed secured the
first commercial sales and forward orders of AquaterraTM, our
proprietary oil produced from omega-3 canola. The sale follows
more than a decade of development and significant investment. It
marks the beginning of a new phase in the delivery of shareholder
value from Nuseed’s Beyond YieldTM growth platform. The
program to scale production and sales of omega-3 canola oil is
now advancing with a large portion of the 2020 crop harvested
and plans to double oil production for sales in 2021 on track.
Canadian regulatory approvals for cultivation and use in
aquafeed and livestock feed and for human consumption were
received in July 2020. This is an important element supporting
our future expansion as Canada is the world’s largest producer
of canola and a major producer of salmon. Negotiations with
additional customers for AquaterraTM are progressing. The patient
phase of human clinical trials of omega-3 canola oil to support
Nuseed’s NutriterraTM product development and commercialisation
also concluded in 2020.
A new technology platform, carinata, was acquired in
November 2019. Carinata is an oil-seed cover crop that has been
developed as a feedstock for renewable fuels and high protein,
non-GMO meal for livestock feed. First commercial sales and
a multi-year offtake agreement were secured during the year.
Grower contracts for the FY21 crop have been substantially
expanded. A positive EBITDA contribution is expected from
both omega-3 canola and carinata in FY21.
A new innovation centre to support Nuseed’s capabilities in
molecular science, trait development, gene discovery and quality
assurance was commissioned in Sacramento during the year.
12
Nufarm Limited | Annual Report 2020 Assumptions for financial year ending 30 September 2021
In spite of the disposal of the South American businesses, Nufarm
continues to operate in a number of markets with volatile
currencies. In a number of these markets it is neither practical or
economic to hedge currency exposures. Hedging costs and
foreign exchange gains and losses will continue to be incurred in
relation to management of currency exposures in crop protection
and seed technologies businesses.
Net external interest costs (excluding foreign exchange gains and
losses) are expected to be in the range of $75 million to $80 million.
Depreciation and amortisation is forecast to be approximately
$220 million.
Capital expenditure is forecast to be approximately $180 million.
A number of individual countries have significant deferred tax
assets available to reduce future taxation liabilities. It is expected
that any tax losses incurred in these countries will not contribute
to taxation credits in FY21. This is expected to result in the Group’s
effective tax rate being significantly above 30% in FY21 with the
rate trending back toward 30% in subsequent years.
IFRS and Non-IFRS financial information
Nufarm results are reported under International Financial Reporting Standards (IFRS) including Underlying EBIT and Underlying EBITDA
which are used to measure segment performance. This release also includes certain non-IFRS measures including Underlying net profit
after tax and Gross profit margin. These measures are used internally by management to assess the performance of our business, make
decisions on the allocation of our resources and assess operational management. Non-IFRS measures have not been subject to audit
or review.
The following notes explain the terms used throughout this profit release:
(1) Underlying EBIT is earnings before net finance costs, taxation and material items. Underlying EBITDA is Underlying EBIT before
depreciation and amortisation of $235.767 million for the year ended 31 July 2020 and $300.142 million for the year ended
31 July 2019. 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.
(2) Underlying EBITDA is used to reflect the underlying performance of Nufarm’s operations. Underlying EBITDA is reconciled to Operating
Profit below.
Summary financial results
Underlying EBITDA
add Depreciation and amortisation excluding material items
Underlying EBIT
Material items impacting operating profit
Operating profit
FY20
$000
FY19
$000
235,767
300,142
(201,412)
(164,849)
34,355
(248,670)
(214,315)
135,293
(50,770)
84,523
(3) Non-IFRS measures are defined as follows:
• 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.
• Average gross margin – defined as average gross profit
as a percentage of revenue.
• Average gross profit – defined as revenue less a standardised
estimate of production costs excluding material items and
non-product specific rebates and other pricing adjustments.
• Net external interest expense – comprises interest income –
external, interest expense – external/debt establishment
transaction costs and lease amortisation – finance charges
as described in note 10 to the 31 July 2020 Nufarm Limited
financial report.
• 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.
13
Nufarm Limited | Annual Report 2020
Operating and Financial Review continued
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 in the corporate governance section of our website:
www.nufarm.com/CorporateGovernance.
Description
Mitigation strategies adopted by Nufarm
• 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.
• Customer marketing plans are managed regionally and
aligned to specific customer needs and we continue to invest
in our commercial capability and supporting systems.
• Our customer base is diversified to minimise the impact of the
loss of any single customer.
• Nufarm reviews its operations and cost base on an ongoing
basis, ensuring that investment and divestment decisions
continue to support our competitive position.
• Nufarm’s strategic alliances, partnerships and distribution
agreements are reviewed on an ongoing basis and aligned
to our strategy.
• 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.
• All product development is aligned to Nufarm’s strategic focus
on key geographies and crops. This is supported by centralised
systems and processes to approve and monitor development
activities and provide ongoing support and technical advice to
the marketing and commercial functions.
• Nufarm monitors regulatory developments across its key
regions of operations closely and completes detailed
regulatory risk scenario analysis biannually. The Nufarm
portfolio team considers this analysis in the maintenance and
ongoing development of our portfolio.
• Nufarm participates in several industry bodies and task forces
which provide input and analysis to regulatory bodies on the
use of our key products.
• 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.
Risk Category – Competitive Market & Customer
Industry Consolidation
The industry has undergone a period of consolidation with
a number of large mergers and acquisitions. The industry
landscape and competitive environment has changed as a result
of these transactions, producing larger market competitors with
an increased market presence.
Customer Choice
Nufarm uses third parties to sell and/or distribute its products.
These third parties may choose to prioritise other products or
may elect not to renew distribution agreements when they
expire. Should this occur, Nufarm may not be able to sell its
products or may suffer delays in appointing new distributors.
Strategic Alliances
Nufarm has important strategic alliances and a range of business
relationships with other major companies in the sector, including
licensing arrangements and distribution arrangements. These
arrangements provide opportunities to maximise the value of
Nufarm’s distribution platforms as well as increasing Nufarm’s
customer base by providing access to additional products or
new markets.
Nufarm’s collaborative relationships with other major crop
protection companies may change or be terminated,
which could have a material adverse impact on Nufarm’s
financial performance.
Risk Category – Product Development & Regulatory
Product Development
Products supplied by Nufarm compete 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.
Regulatory Environment
The crop protection industry is highly regulated with government
controls and standards imposed on all aspects of the industry’s
operations. Crop protection products are subject to regulatory
review and approval in all markets in which they are sold, with
the requirements of regulatory authorities varying from country
to country. Europe in particular, is highly regulated and there
is increasing political influence on the regulatory system.
The influence of politics in the regulatory process also makes
outcomes increasingly unpredictable. Regulatory policies can
have an impact on the availability and usage of crop protection
products and, in some 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.
Glyphosate continues to be subject to intense legal and community
pressure globally and sales around the world could be adversely
impacted. There is also a risk of future litigation for suppliers of
glyphosate-based products, including Nufarm. Introduction of new
legislation or changes to legislation in any of the countries in which
Nufarm operates could have an adverse impact on the financial or
operational position of Nufarm, resulting in increased compliance
costs and/or increased risk of regulatory action.
14
Nufarm Limited | Annual Report 2020 Description
Mitigation strategies adopted by Nufarm
Risk Category – Climate & Seasonality
Climatic Conditions
As an input supplier to global agriculture, demand for crop
protection products is influenced by climatic conditions that help
determine the timing and extent of cropping activity as well as
weed, pest and disease pressures. While certain conditions may
increase demand for crop protection products, extreme climatic
conditions, such as prolonged drought or excessive flooding,
may reduce demand for those products.
An increase in extreme weather events as a result of changing
climatic conditions could also result in operational disruptions
such as physical damage to our manufacturing facilities
or disruption to our supply chain for key raw material inputs
or delivery of finished goods to our customers.
Seasonality
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 demand for Nufarm products
in a particular year and therefore its financial performance.
Risk Category – Manufacturing & Operations
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 with more stringent
environmental and/or safety standards, and other changes
in government policy or regulation.
Supply and demand factors play a role in the profitability of crop
protection sales. The introduction of significant levels of new
capacity relating to the supply of crop protection products can
result in volatility in pricing and margins in key products supplied
by Nufarm.
• Nufarm’s operations are global, providing geographic
diversification to climatic and seasonality risks and our
product portfolio is diverse, supporting a wide range
of agricultural applications.
• Nufarm maintains a comprehensive insurance program which
is supported by continuity strategies across our global
manufacturing footprint and key suppliers.
• 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.
• Nufarm’s procurement and integrated 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 availability and pricing of key
active ingredients.
• Alternate supply arrangements have been established,
where permitted under regulatory requirements.
• Our manufacturing facilities are geographically aligned with
distribution to minimise disruption to supply.
Continuity of Manufacturing Operations
• Assessment of the viability of our manufacturing footprint is
Nufarm operates twelve manufacturing facilities globally which
are exposed to operational risks impacting manufacturing and
storage of raw materials and finished goods. Manufacturing
plants, equipment and systems are vulnerable to mechanical
breakdown, natural disasters or other unforeseen events.
Significant disruption to our manufacturing facilities could
materially impact production and our financial performance.
Quality controls
Nufarm manufactures and supplies a range of crop protection
products which must be manufactured, formulated and
packaged to exact standards, with strict quality controls. The
performance of those products would be negatively impacted
if those quality standards are not met and this could, in turn, have
an adverse impact on the reputation and success of Nufarm.
completed on an ongoing basis. This has resulted in investment,
such as the newly commissioned formulation facility in
Greenville, USA and divestment in manufacturing capability
in Australia and Austria.
• Capital plans developed to support replacement of ageing
plant and preventative maintenance programs have been
established to minimise production downtime.
• Arrangements have been established with key toll
manufacturers to support our internal manufacturing capability.
• Quality guidelines and procedures are defined across the
manufacturing process, including external tolling activities.
This includes a detailed contamination prevention program
with associated procedures.
• Manufacturing processes are subject to rigorous testing to
ensure quality standards are met and an ongoing review
program is in place with the aim of ensuring operations adhere
to the quality standards.
15
Nufarm Limited | Annual Report 2020 Operating and Financial Review continued
Description
Mitigation strategies adopted by Nufarm
Risk Category – Manufacturing & Operations continued
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.
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.
COVID-19
The COVID-19 pandemic has developed rapidly in 2020, with a
significant number of cases globally. Measures taken by various
governments to contain the virus have affected economic activity.
At this stage, the impact on our business and results has not been
significant and we will continue to follow the various government
policies and advice.
In addition, we will continue our operations and supply our
customers in the best and safest way possible without
jeopardising the health and wellbeing of our people.
Risk Category – Financial Exposures
Debt financing
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 the successful renewal
of these facilities as and when they fall due. Nufarm’s ability to
refinance its debt obligations, and the terms on which any such
refinancing can be obtained, is uncertain. If Nufarm is unable
to refinance its debt obligations, or to do so on reasonable terms,
it may have an adverse effect on the financial position and
performance of Nufarm.
Foreign exchange exposure
Global crop protection companies such as Nufarm purchase
inputs and determine selling prices in a range of international
currencies and are therefore exposed to fluctuations in exchange
rates. Further, a substantial portion of Nufarm’s revenues, costs,
assets and liabilities are denominated in currencies other than
Australian dollars. As a result, exchange rate movements affecting
these currencies may impact the financial performance and
future prospects of the business of Nufarm.
Working Capital Management
Effective management of working capital is a key operational
priority across the group and is impacted by factors such as
changing customer demand as a result of seasonality and
climatic conditions, changes in customer credit profiles and
supply constraints.
16
• Environmental risk assessments have been completed across
all our key operational sites and guidelines on the
management of environmental risks aligned to ISO 14001 on
environmental management systems have been implemented.
• Local management engage with local environmental
authorities on key risks and compliance.
• A robust and comprehensive Health, Safety and Environment
(HSE) program is in place which provides clear guidance on
culture, behaviours, process, metrics and reporting.
• This program includes the ongoing audit and assessment of HSE
risks and practices.
• A program of regular reporting at a local, regional and global
level is in place, including quarterly reporting to the Executive
Management and Board.
We have taken a number of measures to monitor and mitigate
the effects of COVID-19:
• Crisis management and business continuity plans were
activated in the early stages of the pandemic across our
operations. This was supported by a global response team
to support coordination across regions.
• Actions have been implemented to ensure the safety and
wellbeing of our people, such as social distancing, enhanced
hygiene measures across our operational sites and offices and
implementation of working from home strategies.
• Detailed review and ongoing monitoring of our global supply
chain to assess potential risks and secure the supply of key
materials that are essential to our manufacturing process.
• Reviewed and where considered necessary strengthened our
cyber security processes to support work from home arrangements.
• Completed scenario analysis to assess the impact on cashflow
of potential wave 2 or 3 infections across our global operations.
• A clearly defined funding strategy is in place which includes a
diversified funding structure with a range of debt maturity profiles.
• Board and executive oversight is in place to monitor ongoing
compliance with key banking covenants and facilitate the early
identification of any covenants under stress.
• Further details on strategies to manage liquidity, credit
and market risk is included in note 31 of the Consolidated
Financial Statements.
• 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 (refer note 31 of the Consolidated
Financial Statements).
• Policies and procedures have been developed to support the
management of customer credit, inventory and procurement.
• Nufarm’s procurement and integrated business planning
processes provide a focus on working capital management
regionally and globally. This is supported by an investment
in systems and data analytics to provide timely data on key
working capital drivers.
• Performance metrics supporting working capital management
have been defined at a global and regional level and included
in individual objectives and performance related remuneration
for senior management.
Nufarm Limited | Annual Report 2020 Description
Mitigation strategies adopted by Nufarm
Risk Category – Key Personnel
There can be no assurance that Nufarm will be able to retain
key personnel. The loss of key personnel 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 Nufarm and may impact
Nufarm’s financial performance and future prospects.
Risk Category – IT Operations & Security
• Critical roles across the organisation have been identified and
appropriate succession and retention strategies developed.
• Guidelines for remuneration and reward have been developed
to ensure Nufarm can attract and retain talent.
Nufarm’s operations are supported by several key IT systems
and applications. Complete or partial failure of the IT systems,
applications or data centre infrastructure due to unauthorised
access, cyberattacks or natural disasters could have a significant
impact on Nufarm’s ability to maintain operations and service
customers. This could adversely impact Nufarm’s financial
position and/or reputation.
• Nufarm has made significant investment in IT systems,
infrastructure and capability to support the efficient operation
of the business. This investment has included a global integrated
business planning system, new financial system across Europe,
significant uplift in our customer platforms and realignment
to the Cloud for certain services to gain access to improved
technology and capability.
Risk Category – Compliance & Legal risks
Nufarm’s global footprint requires compliance with government
legislation and regulations across all the countries within which
we are established to maintain our licenses to operate. New
legislation or changes to requirements could have an adverse
impact on our operations, financial position or relationship with
key customers and suppliers. This includes requirements relating
to occupational health and safety, environment, product
registration, sanctions and anti-bribery, data privacy, taxation
and review of contractual obligations with key suppliers and
customers. Geopolitical risks such as changes to tariffs and
sovereign risk impacting the political stability of certain countries
we operate in could impact the price and volume of agricultural
products traded in these regions.
• Nufarm has implemented disaster recovery strategies over
its key IT systems, applications and data centres, which are
reviewed and tested on a regular basis.
• Cyber threats are assessed on an ongoing basis to the best of
our knowledge based on the continually evolving nature of
these threats. Security controls are updated to mitigate these
risks supported by a combination of external and internal
vulnerability testing.
• Policies and procedures have been developed supporting
legislative and regulatory compliance. Nufarm’s Code of
Conduct provides overarching guidance on behaviours and
is supported by procedures for sanction implications, ethical
sourcing and management of sensitive personal data.
• Nufarm also maintains a dedicated internal legal team
across its key regional operations, which is supported
externally as required, to provide input on key legislative
and regulatory compliance.
• Nufarm’s internal tax department has developed specific
guidance on the group’s tax strategy and policies to ensure
compliance and alignment with tax authorities on the treatment
of transactions.
• Nufarm has introduced an online global whistleblower
program to allow employees to report any unethical, illegal
or fraudulent behaviour.
17
Nufarm Limited | Annual Report 2020 Board of Directors
DG McGauchie AO (Chairman until 24 September 2020)
Independent Non-executive Director
Other directorships and offices (current and recent):
Donald McGauchie AO joined the Board in 2003 and
was appointed Chairman on 13 July 2010. Donald retired
from the Board with effect from 24 September 2020.
• Chairman of Australian Agricultural Company
Limited (since 2010)
• Director of Graincorp Ltd. (since December 2009)
Donald has wide commercial experience within the
agricultural, food processing, commodity trading,
finance and telecommunication sectors. He also has
extensive public policy experience, having previously
held several high level advisory positions to the
government including the Prime Minister’s Supermarket
to Asia Council, the Foreign Affairs Council and the
Trade Policy Advisory Council. He is a former member
of the board of the Reserve Bank of Australia.
Board Committee memberships:
• Chairman of Nomination and Governance
Committee (to March 2020) and member
(until 24 September 2020)
• Member of the Human Resources Committee
(to 24 September 2020)
John Gillam BCom, MAICD, FAIM (Chairman from 24 September 2020)
Independent Non-executive Director
Other directorships and offices (current and recent):
John Gillam joined the Board on 31 July 2020 and
was appointed Chairman on 24 September 2020.
• Chairman of CSR Limited (Director since December
2017 and Chairman since 1 June 2018)
John has extensive commercial and leadership
experience from a 20 year career with Wesfarmers
where he held various senior leadership roles
including CEO of the Bunnings Group, Managing
Director of CSBP and Chairman of Officeworks.
• Chairman of BlueFit Pty Limited (since February 2018)
• Director of Trinity Grammar School (since June 2018)
• Director of the Heartwell Foundation (since 2009)
• Director of Clontarf Foundation (since 2017)
Board Committee memberships:
• Member of Nomination and Governance Committee
GA Hunt Managing Director and Chief Executive Officer
Non-Independent Executive Director
Greg Hunt joined the Board on 5 May 2015.
Greg joined Nufarm in 2012 and was Group Executive
Commercial Operations prior to being appointed
Acting Chief Executive Officer in February 2015 and
Managing Director and Chief Executive Officer
in May 2015.
Greg has considerable executive and agribusiness
experience. Greg had a successful career at Elders
before being appointed managing director of
Elders Australia Limited, a position he held between
2001-2007. After leaving Elders, Greg worked
with various private equity firms focused on the
agriculture sector and has acted as a corporate
advisor to Australian and international organisations
in agribusiness related matters.
AB Brennan BCom(Hons), FCA, FAICD
Independent Non-executive Director
Other directorships (current and recent):
Anne Brennan joined the Board on 10 February 2011.
• Director of Charter Hall Group (since October 2010)
Anne was formerly the Executive Finance Director
for the Coates Group and Chief Financial Officer for
CSR. Prior to this Anne was a partner in professional
services firms Ernst & Young, Andersen and KPMG.
• Director of Argo Investments Limited (since
September 2011)
• Director of Rabobank New Zealand Limited
(since November 2011)
• Director of NSW Treasury Corporation (since October 2018)
• Director of Spark Infrastructure Trust (since June 2020)
• Director of Tabcorp Holdings (since July 2020)
• Former Director of Rabobank Australia Limited
(from November 2011 to September 2020)
• Former Director of Myer Holdings Limited
(from September 2009 to November 2017)
Board Committee memberships:
• Member of the Audit Committee
• Member of the Human Resources Committee
GR Davis BForSc, MAgSc, MBA
Independent Non-executive Director
Other directorships (current and recent):
Gordon Davis joined the Board on 31 May 2011.
• Director of Healius Limited (formerly Primary
Gordon was Managing Director of AWB Limited
(from 2006 to 2010) and has held various senior
executive positions with Orica Limited, including
General Manager of Orica Mining Services (Australia,
Asia) and General Manager of Incitec Fertilisers.
He has also served in a senior capacity on various
industry associations.
Health Care Limited) (since August 2015)
• Director of Midway Limited (since April 2016)
Board Committee memberships:
• Chairman of the Risk and Compliance Committee
• Member of the Audit Committee
• Member of the Human Resources Committee
18
Nufarm Limited | Annual Report 2020 FA Ford MTax, BBus, FCA
Independent Non-executive Director
Board Committee memberships:
Frank Ford joined the Board on 10 October 2012.
• Chairman of the Audit Committee
Frank is a former Managing Partner of Deloitte Victoria
after a long and successful career as a professional
advisor spanning some 35 years. During that period,
Mr Ford was also a member of the Deloitte Global
Board, Global Governance Committee and National
Management Committee.
PM Margin BSc(Hons), MBA
• Member of the Nomination and
Governance Committee
Independent Non-executive Director
Other directorships (current and recent):
Peter Margin joined the Board on 3 October 2011.
• Non-executive Chairman of Asahi Holdings
Peter has many years of leadership experience in
major Australian and international food companies
including Executive Chairman of Asahi Holdings
(Australia) Pty Ltd, Chief Executive of Goodman Fielder
Ltd and before that Chief Executive and Chief
Operating Officer of National Foods Ltd.
(Australia) Pty Ltd
• Deputy Chairman of Bega Cheese Limited
(since September 2020)
• Former Director of PACT Group Holdings Limited
(from November 2013 to August 2019)
• Director of Costa Group Holdings Limited
(since June 2015)
• Director of Bega Cheese Limited (from June 2011
to January 2019)
Board Committee memberships:
• Chairman of the Human Resources Committee
• Member of the Risk and Compliance Committee
ME McDonald LLB(Hons), BSc(Hons)
Independent Non-executive Director
Other directorships (current and recent):
Marie McDonald joined the Board on 22 March 2017.
• Director of CSL Limited (since 14 August 2013)
Marie is widely recognised as one of Australia’s
leading corporate and commercial lawyers having
been a Senior Partner at Ashurst until 2014 where she
specialised in mergers and acquisitions, corporate
governance and commercial law.
Marie 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, and was a member of the Australian Takeovers
Panel from 2001 to 2010.
• Director of Nanosonics Limited (since
24 October 2016)
• Director of Walter and Eliza Hall Institute
of Medical Research (since October 2016)
Board Committee memberships:
• Chair of the Nomination and Governance
Committee (since March 2020)
• Member of the Audit Committee
• Member of the Risk and Compliance Committee
T Takasaki BBA
Non-Independent Non-executive Director
Board Committee memberships:
• Member of the Risk and Compliance Committee
Toshikazu Takasaki joined the Board on
6 December 2012.
Mr Takasaki represents the interests of shareholder
Sumitomo Chemical Company (SCC).
He is a former executive of SCC holding senior
management positions in businesses relating to crop
protection, both within Japan and in the US. 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.
Fiona Smith Group General Counsel and Company Secretary BSc, LLB, GDipGov, FGIA
Fiona joined Nufarm on 20 June 2019 and was
appointed company secretary on 27 June 2019.
Fiona is a senior legal and governance professional
with 20 years experience in company secretarial
roles arising from her time spent in such roles
in listed companies.
Fiona reports directly to the Board. She holds
a Bachelor of Science and Bachelor of Law from
the Australian National University and a Graduate
Diploma in Applied Governance.
19
Nufarm Limited | Annual Report 2020 Key Management Personnel
Greg Hunt Managing Director and Chief Executive Officer
Greg joined Nufarm in 2012 as Group Executive Commercial Operations prior to being appointed to the role
of Managing Director and Chief Executive Officer in 2015. He has extensive executive and agribusiness
experience having held senior executive positions within the industry, including as Managing Director of
Elders Australia Limited from 2001 to 2007. Greg has also 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.
Paul Binfield Chief Financial Officer
Paul joined Nufarm as Chief Financial Officer in 2011. He has held senior strategic financial roles at Coles
Liquor and Hotels, a major division of Wesfarmers Ltd, and at Mayne Group. Paul has extensive experience
in publicly listed and private company finance functions, both in Australia and the United Kingdom.
Elbert Prado Group Executive Manufacturing and Supply Chain
Elbert joined Nufarm in July 2013. He has extensive international experience in senior operations roles within
the chemical industry, including as Global Manufacturing and Supply Chain director for Rohm and Haas.
Elbert has a strong focus on safety, supply chain and manufacturing excellence.
Brent Zacharias Group Executive Nuseed
Brent joined Nufarm in 2006 after a long career with Dow AgroSciences. Brent has a degree in agricultural
economics and held senior roles in Nufarm’s Canadian business prior to transferring to Australia as Nuseed
General Manager in 2008. Now based in Canada, Brent holds global responsibility for Nuseed – Nufarm’s
agricultural seed and traits division.
20
Nufarm Limited | Annual Report 2020 Corporate Governance Statement
1 Introduction
Nufarm is committed to ensuring that its policies
and practices reflect a high standard of corporate
governance. The Board considers that Nufarm’s
governance framework and adherence to that
framework are fundamental in demonstrating that
the Directors are accountable to shareholders,
are appropriately overseeing the management
of risk and promoting a culture of ethical, lawful
and responsible behaviour within Nufarm.
This section of the Annual Report outlines the governance
framework of Nufarm Limited and its controlled entities
(Nufarm or Company) for the year ended 31 July 2020.
In 2020, the Board undertook an externally facilitated Board
review. One of the outcomes from this review was a restructuring
of the Board Committees. The responsibilities of the Audit and
Risk Committee were separated into a separate Audit Committee
and a newly created Risk and Compliance Committee
incorporating an expanded scope of assisting the Board in
overseeing all aspects of risk, both financial and non-financial
(including health, safety and environment risks previously within
the scope of the Health, Safety and Environment Committee) as
well as overseeing compliance management within Nufarm. The
Audit Committee retained responsibility, however, for oversight of
financial controls associated with financial risk. The scope of the
Human Resources Committee and Nomination and Governance
Committee responsibilities have been expanded which is
discussed further in sections 3.2 and 3.3.
In addition, all governance policies were reviewed to ensure that
they reflect a high standard of corporate governance and
comply with the ASX Corporate Governance Principles and
Recommendations (ASX Principles). Nufarm, as a listed entity
is required to comply with the Corporations Act (Cth), the ASX
Listing Rules and other Australian and international laws and
is required to report on the extent to which it has complied with
the ASX Principles. During financial year 2020 Nufarm complied
with all current ASX Principles and, where appropriate, early
adopted the fourth edition of the ASX Principles released
in February 2019.
Nufarm’s key governance documents, including the Constitution,
Board and Board Committee Charters and key policies are
available on the Company’s website at https://nufarm.com/
investor-centre/corporate-governance/.
The Corporate Governance Statement has been approved
by the Board.
2 Board of directors
2.1 Board role and responsibilities
The Constitution provides that the business and affairs of Nufarm
are to be managed by or under the direction of the Board.
Ultimate responsibility for governance and strategy rests with
the Board. The role of the Board is to represent shareholders
and to demonstrate leadership and approve the strategic
direction of Nufarm. The Board is accountable to the shareholders
for the Company’s performance and governance.
The Board has adopted a formal Board Charter which sets
out the Board’s key responsibilities, the matters the Board has
reserved for its own consideration and decision-making and the
authority it has delegated to the Managing Director and Chief
Executive Officer (CEO). The Board’s responsibilities,
as set out in the Board Charter, include:
• Appointment and termination of the CEO and the Company
Secretary and ratification of the appointment of the Chief
Financial Officer (CFO) and Key Management Personnel (KMP)
and the terms of their employment contracts including
termination payments;
• Approving the remuneration policies and practices of the
Board, the CEO and the CEO’s direct reports;
• Approving commitments, capital and non-capital items,
acquisitions and divestments above authority levels delegated
to the CEO;
• Approving the overall capital structure of Nufarm including any
equity related transactions and major financing arrangements;
• Approving the annual and half year financial and director
reports including the full year operating and financial review,
remuneration report and corporate governance statement;
• Approving the dividend policy and determining the dividends
to be paid;
• Approving management’s development of corporate strategy;
• Reviewing and approving the annual budget, strategic
business plans, balance sheet and funding strategy;
• Approving the succession plans and processes for the
Chairman, Directors, CEO and the CEO’s direct reports;
• Approving the Diversity and Inclusion Policy and measurable
objectives for achieving diversity across Nufarm and
monitoring progress in achieving those objectives;
• Approving Board governance policies including Continuous
Disclosure Policy, Code of Conduct, Anti-Bribery Policy and
Whistleblower Policy;
• Approving ASX releases as set out in the Continuous
Disclosure Policy;
• Appointing the Chairman of the Board; and
• Appointing Directors to casual vacancies and recommending
their election to shareholders at the next Annual General Meeting.
A copy of the Board Charter which sets out the role and
responsibilities of the Board in more detail can be found
in the Corporate Governance section of Nufarm’s website.
Delegation to management
The Board has delegated to the CEO responsibility for the
day-to-day management of the Company’s affairs and
implementation of the strategic objectives, the annual budgets
and policy initiatives. The CEO is accountable to the Board for
all authority delegated to management and for the Company’s
performance. The CEO is required to operate in accordance
with Board approved policies and delegations of authority
and management must supply the Board with information
in a form, timeframe and quality that will enable the Board
to discharge its duties effectively. The CEO is required to report
to the Board in a spirit of openness and trust and is required
to ensure that all decisions are made lawfully, ethically
and responsibly.
21
Nufarm Limited | Annual Report 2020 Corporate Governance Statement continued
2.2 Board meetings and attendance
The Board meets as often as required. During the reporting period, the Board met 11 times. Regularly scheduled meetings are generally
held face to face on one day. The impact of COVID-19 resulted in more frequent meetings being held via electronic means and for
shorter periods.
In addition to the Company Secretary, the CFO regularly attends all Board meetings by invitation. Other members of management
attend meetings by invitation. During regularly scheduled meetings, the Board holds a closed session (attended by Non-executive
Directors only), which provides Non-executive Directors with an opportunity to raise issues in the absence of management.
Details of attendance at Board and standing Board committee meetings during FY2020 are set out in the following table:
Board and Board Committee attendance in FY20
Board
Audit
and Risk 1
A
10
11
11
0
11
11
11
11
11
B
11
11
11
0
11
11
11
11
11
A
5
5
5
5
5
B
5
5
5
5
5
5
4
Audit 2
A
B
1
1
1
1
1
1
1
1
1
1
1
Health,
Safety and
Environment
Committee 3
Risk and
Compliance 4
Nomination and
Governance
Human
Resources
Committee
A
2
2
2
B
2
2
2
2
2
A
B
A
1
1
1
1
1
1
1
1
1
1
6
4
6
6
B
1
2
6
5
6
5
A
5
5
5
5
B
5
5
4
5
3
5
Anne Brennan
Gordon Davis
Frank Ford
John Gillam 5
Greg Hunt
Peter Margin
Marie McDonald
Donald McGauchie
Toshikazu Takasaki
Column A: indicates the number of scheduled or ad-hoc meetings held during the period the Director was a member of the Board and/or
Committee. Where a Director is not a member but attended meetings during the period, then only the number of meetings attended rather
than held is shown.
Column B: indicates the number of scheduled or ad-hoc meetings attended by Director.
1. Audit and Risk Committee in place up to 24 March 2020.
2. Audit Committee established 25 March 2020.
3. Health and Safety Committee responsibilities incorporated into Risk and Compliance Committee from 25 March 2020.
4. Risk and Compliance Committee replaced risk responsibilities of Audit and Risk Committee and incorporated Health, Safety and
Environment Committee from 25 March 2020.
5. John Gillam joined the Board on 31 July 2020.
Key Activities undertaken by the Board during the year
• agreeing to adopt a new Continuous Disclosure Policy;
The Board considered a range of matters during FY20, including:
• placement of $97.5 million preference securities to existing
shareholder, Sumitomo Chemical Company (Sumitomo),
through a wholly owned subsidiary Nufarm Investment Limited;
• the divestment of the Company’s South American crop
protection and seed treatment operations in Brazil, Argentina,
Colombia and Chile to Sumitomo for $1,188 million;
• appointment of the Independent Expert, and recommending
shareholders vote in favour of the divestment of the Company’s
South American crop protection and seed treatment operations
to Sumitomo and the acquisition of the $97.5 million preference
securities from Sumitomo;
• participating in the external Board evaluation process and
agreeing to several improvements including changes to the
Board Committee structure;
• participating in the Chairman succession process concluding
with the appointment of John Gillam as a Non-executive Director
from 31 July 2020 and as Chairman from 24 September 2020;
• adopting a new Board skill matrix;
• participating with management in the annual review of
strategy and monitoring management’s execution of strategy;
• overseeing the financial performance and key metrics of the
Company including receiving regular updates of the impact
of COVID-19 on the Company;
• overseeing the changes to the risk management system
including approving an updated risk appetite statement
for management to operate within;
• approving the ceasing of manufacture of insecticides and
fungicides at the Raymond Road site in Laverton, Australia
and 2,4-D synthesis at Linz in Austria; and
• agreeing to adopt an updated Board Charter, a new Audit
• agreeing to amend the Company’s financial year end from
Committee Charter, a new Risk and Compliance Committee, an
updated Nomination and Governance Committee Charter and
an updated Human Resources Committee Charter and
approving changes to the Committee membership;
31 July to 30 September.
22
Nufarm Limited | Annual Report 2020 2.3 Board composition
The Board currently has eight Non-executive Directors and
the CEO. Details of the Directors, including their qualifications,
experience, date of appointment and independent status are
set out below. The Constitution provides that the Company
is not to have more than 11 or less than three directors. Detailed
biographies of each Director can be found in the Annual Report
at pages 18-19.
Sumitomo Chemical Company, as a major shareholder in the
Company, is entitled to have one nominee Director on the Board.
Toshikazu Takasaki is Sumitomo’s current nominee and is therefore
not considered independent.
In assessing the composition of the Board regard is given to the
following principles:
• the role of the Chairman and the CEO should not be filled
by the same person;
• the Chairman must be an independent Non-executive Director;
• the CEO must be a full-time employee of the Company;
• the majority of the Board must be independent Non-executive
Directors; and
• the Board should represent a broad range of qualifications,
experience, expertise and diversity.
Changes during the year
During the year, Donald McGauchie announced his intention
to retire as a Non-executive Director and Chairman of the Board
at an appropriate time that allows for an orderly transition to a
new Chairman. In addition, Anne Brennan has advised that she
will retire at the 2020 Annual General meeting. The Board, with
the assistance of the Nomination and Governance Committee
actively progressed Board succession planning this year,
including Chairman succession. John Gillam was appointed
as a Non-executive Director from 31 July 2020 and will succeed
Donald McGauchie as Chairman on 24 September 2020.
2.4 Director skills, experience and attributes
The key attributes that Directors must possess are set out in the Board Charter and include:
• honesty, integrity and a proven track record of creating value for shareholders;
• an ability to apply strategic thought;
• a preparedness to debate issues openly and constructively and to question, challenge and critique;
• a willingness to understand and commit to the governance framework of the Company; and
• an ability to devote sufficient time to properly carry out the role and responsibilities of the Board.
Name of Director
Tenure as at 31 July 2020
Qualifications
Independent Status
Donald McGauchie (Chairman)
Anne Brennan
Gordon Davis
Frank Ford
John Gillam
16 years 7 months
9 years 5 months
9 years 2 months
7 years 9 months
1 day
Greg Hunt (Managing Director and CEO)
5 years 2 months
Peter Margin
Marie McDonald
Toshikazu Takasaki
8 years 10 months
3 years 4 months
7 years 7 months
AO
BCom (Hons), FCS, FAICD
BForSc, MAgSc, MBA
MTax, BBus, FCA
BCom, MAICD, FAIM
BSc (Hons), MBA
BSc (Hons), LLB (Hons)
Independent
Independent
Independent
Independent
Independent
Executive
Independent
Independent
BBA
Non-Independent
23
Nufarm Limited | Annual Report 2020 Corporate Governance Statement continued
Skills matrix
During FY2020, as part of the ongoing succession planning for the Board, the Nomination and Governance Committee undertook a
review of the Board skills matrix which took into consideration the skills and experience the Board currently requires but also the skills
and experience that will be required for the Company during its next phase of development. The new Board skills matrix and the
assessment of the current Directors is included below.
Skills/Experience
No of Directors
with skill
Manufacturing & Integrated Supply Chain Management in High Risk Environment
Relevant experience in international manufacturing and/or integrated supply chain management including demonstrated
ability to improve production systems.
Customer Relations
Relevant international experience in customer service delivery and/or marketing of products, including brand marketing,
e-commerce and use of digital technology.
R&D, Innovation, Seed Technologies and Commercialisation
Experience in R&D, seed technologies or emerging technologies including commercialisation.
Agricultural experience
Experience in crop protection or agricultural industry obtained through a large international company.
Finance
Board audit experience or a senior executive or equivalent experience in financial accounting and reporting, corporate
finance and internal financial controls/audit.
Risk
Relevant experience and understanding of risk management frameworks and controls, including HSEC and sustainability, and
the ability to oversee mitigation strategies and identify emerging risks.
Mergers, Acquisitions, JVs, Partnerships, Alliances, Divestments & Integrations
Relevant experience in merger and acquisition transactions (including JV’s etc) raising complex financial, regulatory and
operational issues.
Strategy and Transformation
Experience in developing and implementing successful strategies and/or transformation in a complex environment to deliver
a sustained and resilient business.
Corporate Governance and Compliance
Experience serving on boards in different industries, including publicly listed. Awareness of leading practice
in corporate governance and compliance with a demonstrated commitment to achieving those standards.
Regulatory, Government, Public Policy
Relevant experience identifying and managing legal, regulatory, public policy and corporate affairs issues.
People, culture and remuneration
Relevant experience overseeing or implementing a company’s culture and people management framework, including
succession planning and setting and applying remuneration policy and frameworks linked to strategy.
7
6
5
6
9
9
8
8
8
7
8
Diversity
(as at 31 July 2020)
Tenure of non-executive directors
(as at 31 July 2020)
Female
Male
2
7
0–3 years
3–6 years
6–9 years
9+ years
1
1
3
3
24
Nufarm Limited | Annual Report 2020 2.5 Chairman
2.7 Director independence
The Chairman of the Board is Donald McGauchie, an independent
Non-executive Director.
The Chairman is responsible for the leadership of the Board and
for encouraging a culture of openness and debate amongst the
Directors to foster a high performing and collegiate Board. The
Chairman also serves as the primary link between the Board
and management.
The Board has been actively engaged in Chairman succession
planning as Mr McGauchie advised his intention to retire as a
Director and Chair in a time period that allowed for an orderly
transition. John Gillam was appointed as a Non-executive
Director effective from 31 July 2020 and will succeed Donald
McGauchie as Chairman on 24 September 2020 when Donald
McGauchie retires from the Board.
2.6 Board succession planning
The Board manages succession planning for Non-executive
Directors with the assistance of the Nomination and Governance
Committee and for the CEO with the assistance of the Human
Resources Committee.
During FY2020 the Board introduced a non-executive tenure
policy that provides for non-executive directors to retire after
nine years (or twelve years in the case of a Chairman who has
served in the role of Chair for less than six years) from the first
date of election of shareholders. The Board may in exceptional
circumstances, exercise discretion to extend the maximum
term where it considers such an extension is in the best interests
of the Company.
All Non-executive Directors are required to stand for re-election
every three years. The Nomination and Governance Committee
will undertake a review of the Directors retiring by rotation
and make a recommendation to the Board on whether their
re-election is to be supported. The Company provides all material
information in its possession concerning the Director standing
for re-election in the notice of meeting and accompanying
explanatory notes.
During FY2020, in addition to Donald McGauchie’s advice that
he will be retiring from the Board, Anne Brennan advised her
intention to retire as a Director at the 2020 Annual General
Meeting. Both Gordon Davis and Peter Margin have been on
the Board for a period of nine years and have advised that they
will stand for re-election at the 2020 Annual General Meeting
but do not intend to serve the full term to allow for a period of
Board renewal. John Gillam was appointed as a Non-executive
Director on 31 July 2020 and will succeed Donald McGauchie
as Chairman on 24 September 2020 when Donald McGauchie
retires from the Board.
In undertaking the Board renewal and identifying suitable
candidates for appointment to the Board, the Nomination and
Governance Committee will take into account the gaps identified
in the Board skills matrix.
The Board is committed to ensuring the majority of Non-executive
Directors are independent. The Board considers Directors to be
independent where they are independent of management and
free from any interest, position, association or relationship that
might influence or might reasonably be perceived to interfere
with the exercise of their unfettered and independent judgement.
During FY2020 all Non-executive Directors, except for Toshikazu
Takasaki, who is a nominee of Sumitomo, a substantial shareholder
in the Company, were considered to be independent.
2.8 Conflict of interest
The Board has in place a procedure to ensure Directors disclose
any conflicts of interest and if appropriate, the conflict can be
authorised. In the event a Director does have an actual or
potential conflict, the Director does not receive the relevant Board
or Committee papers and must absent themselves from the room
when the Board or Committee discusses and votes on matters
subject to the conflict. This protocol continues unless the other
Directors resolve otherwise. The director cannot access the
minutes of the Board or Committee meeting in relation to the conflict.
The Board has in place an information exchange protocol
with Sumitomo Chemical Company to ensure that the Sumitomo
nominee Director can discharge their duties as a Director while
also ensuring that they do not receive any competitive information
or participate in discussions regarding competitive information.
2.9 Director appointment, induction training
and continuing education
When considering new appointments to the Board, the Nomination
and Governance Committee oversees the preparation of a role
description which includes the key attributes identified in the
Board Charter and the relevant skills taking into account the
principles set out in section 2.3 and any gaps identified in the
Board skills matrix. This role description is provided to an external
search firm who assists in undertaking the search.
When suitable candidates are identified, the Nomination and
Governance Committee will interview a short list of candidates
before making a recommendation to the Board. All Directors
will interview the candidate prior to the Board considering the
formal appointment.
All Non-executive Directors on appointment are required to sign
a letter of appointment which sets out the terms and conditions
of their appointment including;
• duties and responsibilities of a Director;
• participation in induction training and continuing education;
• remuneration;
• expectation around time commitments for the Board
and relevant Committee meetings;
• the requirement to disclose Directors’ interests on an ongoing basis;
• access to professional advice; and
• indemnity, access and insurance arrangements.
25
Nufarm Limited | Annual Report 2020 Corporate Governance Statement continued
Prior to appointment all Directors, including any new executive
Directors, are subject to extensive background and screening
checks. All new senior executive appointments are also subject
to extensive background and screening checks.
With the exception of the CEO, all Directors appointed by the
Board to a casual vacancy are required to stand for shareholder
election at the next AGM. The Company provides all material
information in its possession concerning the Director standing
for re-election in the notice of meeting and accompanying
explanatory notes.
Induction training is provided to all new Directors. This includes
discussions with the CEO, CFO, Company Secretary and other
senior executives and the option to visit the Company’s sites in
Australia on appointment or with the Board during an overseas
Board meeting. Induction materials include information on the
Company’s strategy and financial performance, full information
on the Board including all Board and Committee Charters, recent
Board and Committee minutes, information on the risk management
framework and the risk appetite statement approved by the
Board, all Board policies including the Code of Conduct and the
obligations of Directors.
All Directors are expected to undertake ongoing professional
development to develop and maintain the skills and knowledge
required to discharge their responsibilities. Directors are provided
with information papers and presentations on developments in
the law including continuous disclosure, industry related matters
and any new emerging developments that may affect the Company.
2.10 Remuneration
Details of the Company’s remuneration policy and practices
and the remuneration paid to Directors and key management
personnel are set out in the Remuneration Report on pages 39
to 53 of this Annual Report.
2.11 Board performance evaluation
The Board conducted a review using an external provider during
FY2020. This review focused on Chairman succession, Board
succession planning and board capabilities, board calendar
and papers, executive succession planning and the structure
of the Board Committees. The review included interviews and
feedback with all directors including the CEO, CFO and the
Company Secretary.
The Board agreed to a number of improvement measures which
resulted in amendments to the Board Charter, the Nomination and
Governance Committee Charter, the Human Resources Committee
Charter and the establishment of a separate Audit Committee and
a new Risk and Compliance Committee incorporating the Health,
Safety and Environment Committee’s responsibilities.
The Board review also resulted in a change in structure for Board
meetings which has been implemented in the Board calendar
of meetings for FY2021.
An assessment of Director performance is undertaken by the
Nomination and Governance Committee with feedback sought
from all Directors prior to the Board considering recommending
a Director for re-election to shareholders at an Annual
General Meeting.
2.12 Independent professional advice
The Board and its Committees may access independent experts
and professional counsel for advice where appropriate and
may invite any person from time to time to attend meetings.
2.13 Company Secretary
The details of the Company Secretary, including their
qualifications, are set out in the Annual Report 2020 on page 19.
The appointment and removal of the Company Secretary is
a matter for the Board. The Company Secretary is accountable
to the Board for the effectiveness of the implementation of the
corporate governance processes, adherence to the Board’s
principles and procedures and co ordinates all Board and
Board Committee business, including agendas, papers, minutes,
communication and filings. All Directors have direct access to the
Company Secretary.
3 Committees
To assist the Board to carry out its responsibilities, the Board
established an Audit and Risk Committee, a Nomination and
Governance Committee, a Human Resources Committee and
a Health, Safety and Environment Committee. During FY2020,
the Board reconfigured the Committee structure and going
forward the permanent Committees are:
• Audit Committee;
• Risk and Compliance Committee;
• Nomination and Governance Committee; and
• Human Resources Committee.
Each of the permanent Committees has a Charter which sets
out the membership structure, roles and responsibilities and
meeting procedures.
Generally, these Committees review matters on behalf of the
Board and, as determined by the relevant Charter:
• refer matters to the Board for decision, with a recommendation
from the Committee; or
• determine matters (where the Committee acts with delegated
authority), which the Committee then reports to the Board.
The Company Secretary provides secretarial support
for each Committee.
In addition to the changes to the standing Committee structure,
changes were made to the membership of each Committee
highlighted in the relevant section below.
26
Nufarm Limited | Annual Report 2020 3.1 Audit and Risk Committee
The role of the Audit and Risk Committee is to assist the Board in
fulfilling its responsibilities in respect of the Company’s financial
reporting, compliance with legal and regulatory requirements,
internal accounting and control systems, oversight of the
effectiveness of the risk management framework and oversight
of the external auditors and internal audit function.
In March 2020, the responsibilities of the Audit and Risk Committee
were separated into an Audit Committee and a Risk and
Compliance Committee. The key responsibilities and functions
of the Audit Committee are:
• the integrity of the financial statements and financial reporting
systems and processes of the Company and its related
bodies corporate;
• the effectiveness of external audit including the external
auditor’s qualifications, performance, independence and fees;
• the effectiveness of the internal audit function and systems
of internal control;
• compliance with tax obligations;
• the Company’s systems for compliance with applicable legal
and regulatory requirements within the Committee’s area
of responsibility; and
• other matters referred by the Board from time to time.
The key responsibilities and functions of the Risk and Compliance
Committee are:
The members of the Audit Committee from April 2020 for the
remainder of the period were:
Name
Membership status
from April 2020
Frank Ford (Chairman)
Member for the relevant period
Anne Brennan
Gordon Davis
Member for the relevant period
Member for the relevant period
Marie McDonald
Member for the relevant period
At least one member of the Committee must have formal
accounting qualifications with recent and relevant experience.
The Committee as a whole is to have sufficient understanding of
the industry in which Nufarm operates. The Board is satisfied that
the current composition of the Committee satisfies this requirement.
The external auditors, the Chairman, the CEO, the CFO, the Group
Financial Controller, the General Manager Group Risk and
Assurance, the external internal audit partner and the head
of Taxation attend meetings of the Committee at the invitation
of the Committee Chair. All Board members are invited to attend
the Audit Committee meetings at which the half year and annual
financial statements and reports are considered.
The Risk and Compliance Committee consists of:
• a minimum of 3 members of the Board, all of whom are
Non executive Directors; and
• the risk profile and risk appetite for the Company;
• a majority of independent Directors (as defined in the
• in respect of both financial and non-financial risk, considering and
recommending to the Board the Risk Management Framework
(including the Health, Safety and Environment Framework);
• recommending for approval by the Board the Company’s Risk
Management Policy and Health, Safety and Environment Policy;
• overseeing compliance management; and
• receiving reports of any material breaches of the Anti-Bribery
Board Charter).
The members of the Risk and Compliance Committee from
April 2020 were:
Name
Membership status
from April 2020
Gordon Davis (Chairman)
Member for the relevant period
and Whistleblower Policies.
Peter Margin
Member for the relevant period
A copy of the Audit Committee Charter and Risk and Compliance
Committee Charter which sets out role and responsibilities
of the Committees in more detail can be found in the Corporate
Governance section of Nufarm’s website.
Membership and meetings
The Audit Committee consists of:
• a minimum of 3 members of the Board, all of whom are
Non executive Directors;
• a majority of independent Directors (as defined in the Board
Charter); and
• an independent chair, who is not Chair of the Board.
The members of the Audit and Risk Committee until March 2020 were:
Name
Membership status
to March FY2020
Frank Ford (Chairman)
Member for the relevant period
Anne Brennan
Gordon Davis
Member for the relevant period
Member for the relevant period
Marie McDonald
Member for the relevant period
Peter Margin
Member for the relevant period
Marie McDonald
Member for the relevant period
Toshikazu Takasaki
Member for the relevant period
The details of the relevant Committee meetings are included
on page 22.
Activities during the year
The key activities undertaken by the relevant Committees during
the year include:
• reviewing the scope, plan and fees for the external audit
for the period and overseeing the work performed by the
External Auditor;
• reviewing the independence and performance of the
External Auditor;
• reviewing significant accounting, financial reporting and
related issues raised by management, the head of the internal
audit function and the External Auditor;
• reviewing the Company’s key risks and risk management
framework including adopting a revised risk appetite statement
and confirming that the framework was sound and that the
Company is operating with due regard to the risk appetite
set by the Board;
• reviewing management reports on the Company’s key financial
and non-financial risks and risk management program including
contemporary and emerging risks such as cyber-security,
privacy and data breaches and climate change;
27
Nufarm Limited | Annual Report 2020 Corporate Governance Statement continued
• monitoring developments in significant accounting, financial
reporting and taxation matters and considering the implications
for the Company;
• approving the internal audit plan for FY20 including
amendments required in response to COVID-19 and reviewing
the outcome of internal audit reviews and the plans to implement
any remedial action;
• reviewing and monitoring improvements to the Company’s
internal control and accounting practices;
• reviewing and recommending to the Board the approval
of the Company’s annual and half year financial statements;
• endorsing to the Board the adoption of a new Audit Committee
Charter and a Risk and Compliance Committee Charter; and
• approving the Whistleblower Policy.
External Audit
The Audit and Risk Committee reviewed the External Auditor’s
scope of work, including the external audit plan, to ensure it is
appropriate, having regard to the Company’s key risks. The
External Auditor reports to the Committee at each meeting and is
given an opportunity to raise issues with the Committee in the
absence
of management. The Committee also reviews the performance
and independence of the External Auditor on an annual basis.
KPMG is the External Auditor.
The Committee has also adopted a policy on the provision
of non-audit related services by the External Auditor which sets
out the Company’s approach to engaging the External Auditor
for the performance of non-audit related services with a view
to ensuring their independence is maintained.
A copy of the policy on the provision of non-audit related services
by the External Auditor can be found in the Corporate Governance
Section of Nufarm’s website.
The External Auditor attends the Company’s Annual General
Meeting and is available to answer questions from investors
relevant to the audit.
3.2 Nomination and Governance Committee
The members of the Nomination and Governance Committee are:
The role of the Nominations and Governance Committee is
to assist the Board to oversee the composition, performance,
succession planning of the Board as well as the induction
and ongoing training for directors. The Committee also advises
and makes recommendation to the Board in relation to the
Company’s corporate governance practices.
The Nominations and Governance Committee Charter was
amended in March 2020 to expand the role of the Committee
to include induction of new Directors and to include a separate
Chair be appointed when the Committee is dealing with
Chairman succession.
A copy of the Nomination and Governance Committee
Charter can be found in the Corporate Governance section
of Nufarm’s website.
Name
Membership status
Marie McDonald (Chairman)
Donald McGauchie
Frank Ford
Peter Margin
Member for the entire period
and Chair from 24 March 2020
Member for the entire period
and Chair from 1 August 2019
until 24 March 2020
Member for the entire period
Member from 18 February 2020
Activities during the year
The key activities undertaken by the Nomination and Governance
Committee during the year include:
Membership and meetings
• overseeing the process of the external Board review;
The Nomination and Governance Committee consists of:
• overseeing the process of succession planning for the Chairman
• at least three independent Non-executive Directors;
• where the Board Chairman is the Committee Chair, he or she
will not chair the Committee when it is dealing with the
appointment of a successor to the Chair.
Donald McGauchie was the Chair of the Committee until March 2020
but as a major activity was Chairman succession, he was
replaced by Marie McDonald from 24 March 2020.
including recommending the external recruitment firm;
• making recommendations to the Board regarding the directors
seeking re-election at the 2020 Annual General Meetings;
• making a recommendation to the Board on adopting a new
Continuous Disclosure Policy;
• making recommendations to the Board on changes to
Committee membership;
• making a recommendation to the Board to adopt a new
Committee Charter; and
• making a recommendation to the Board to appoint John Gillam
as a Non-executive Director.
28
Nufarm Limited | Annual Report 2020 3.3 Human Resources Committee
The role of the Human Resources Committee is to assist the Board
to perform its functions in relation to remuneration policies and
practices, development, retention and termination arrangements
for the CEO and KMP.
The Committee’s key responsibilities and functions are to:
• oversee the Company’s remuneration, recruitment, retention
and termination policy and procedures and its application
to the CEO and the KMPs;
• assess the performance of the CEO and assist the Chair with
reviews of the CEO’s performance;
A copy of the Human Resources Committee Charter which
sets out further details on the roles and responsibilities of the
committee, is available in the Corporate Governance Section
of Nufarm’s website.
Membership and meetings
The Committee must consist of:
• a minimum of 3 members of the Board, all of whom are
Non-executive Directors;
• a majority of independent Directors; and
• an independent Director as Chair.
• review and make recommendations to the Board on the CEO
The members of the Committee during this period were:
succession plans;
• review and make recommendations to the Board regarding
the remuneration and benefits of Non-executive Directors;
• review the annual remuneration report;
• review and make recommendations to the Board on the
Inclusion and Diversity Policy and the measurable objectives
for achieving the inclusion and diversity outcomes; and
• make recommendations to the Board on the adoption of the
Company’s Code of Conduct.
During the period the Human Resources Committee Charter was
updated to expand the role of the Committee to include the
succession plans for the CEO’s direct reports as well as receiving
reports on any material breaches of the Code of Conduct.
The process to engage remuneration consultants is included
in the Human Resources Charter who will provide independent
remuneration advice, as appropriate, on Director fees and KMP
remuneration, structure, practice and disclosure. Remuneration
consultants are engaged directly by the Chair of the Human
Resources Committee and report directly to the Committee.
Name
Membership status for FY2020
Peter Margin (Chairman)
Member for the entire period
Donald McGauchie
Member for the entire period
Anne Brennan
Gordon Davis
Member for the entire period
Member for the entire period
Non committee members, including members of management
may attend meetings of the Committee at the invitation of the
Committee Chair.
Activities during the year
The key activities undertaken by the Committee during the period
in relation to the Company’s remuneration framework, the
policies and practices regarding the remuneration of Directors,
as well as the contractual arrangements, remuneration and
performance evaluation of other members of Key Management
Personnel, are reflected in the Remuneration Report on pages 39
to 53. The progress against the Company’s Inclusion and Diversity
objectives are detailed in the Inclusion and Diversity section of this
statement on pages 33 to 36.
3.4 Health, Safety and Environment Committee
(up to March 2020)
Membership and meetings
The Committee consisted of:
The role of the Health, Safety and Environment Committee was
to assist the Board in the effective discharge of its responsibilities
in relation to health, safety and environment matters.
The Committee’s key responsibilities and functions were:
• consideration of health, safety and environmental issues that
may have a strategic business and reputational implication
on the Company;
• reviewing the setting of appropriate health, safety and
environment strategies and policies;
• monitoring compliance with the Company’s Health and
Safety Policy;
• reviewing significant health, safety and environment
incident reports;
• monitoring the environmental performance of the Company’s
activities; and
• reviewing sustainability practice and performance.
The responsibilities of the Committee were combined into the Risk
and Compliance Committee from April 2020 which are detailed
in 3.1 above.
• a minimum of 3 members of the Board, all of whom are
Non-executive directors;
• a majority of independent Directors and
• an independent Director as chair.
The members of the Committee during the relevant period were:
Name
Membership status
to March FY2020
Gordon Davis (Chairman)
Member for the entire period
Marie McDonald
Member for the entire period
Toshikazu Takasaki
Member for the entire period
Non-committee members, including members of management
attended meetings of the Committee at the invitation of the
Committee Chair.
Membership of the Risk and Compliance Committee from
April 2020 is detailed in 3.1 above.
29
Nufarm Limited | Annual Report 2020 Corporate Governance Statement continued
4 Risk management and internal control
4.1 Approach to risk management and internal control
The Board recognises that the effective identification and
management of risk reduces the uncertainty associated
in executing the Company’s business strategies.
The Company has introduced a risk management framework
and policies and procedures which are based on concepts
and principles identified in the Australia/New Zealand standard
on Risk Management (AS/NZ ISO 31000:2009). The risk framework,
policies and procedures set out the roles, responsibilities and
guidelines for managing financial and non-financial risks
associated with the Company’s business and have been
designed to provide effective management of material risks
at a level appropriate to the Company’s global business and
have continued to be enhanced as the Group’s operations
develop and its range of activities expand. These risks include
contemporary and emerging risks such as COVID-19, cyber-
security, privacy and data breaches, increased geo-political
risk and climate change.
The Risk Management Policy is available in the Corporate
Governance Section of Nufarm’s website.
Nufarm is committed to continuing to improve its enterprise
risk management practices to protect and enhance shareholder
value. During FY2020 an Executive Risk, Health, Safety and
Environment Committee was established to assist with overseeing,
directing and supporting the implementation and operation
of the risk management framework and internal compliance
and control system across the Company. The members of the
Committee are the CEO (Chair), Chief Financial Officer, Group
Executive Supply Chain Operations, Group Executive People
and Performance, the Group Company Secretary and General
Counsel, General Manager Global Risk Management and
Assurance, General Manager, Global Sustainability and Quality
and a Regional General Manager (on a rotational basis).
More information on Nufarm’s financial and non-financial risks,
including environmental, the approach to climate change and
social related risks, is set out in the Annual Report 2020 on pages
14 to 17 and the Sustainability Report.
4.2 Risk management responsibilities
The Board is responsible for overseeing Nufarm’s risk management
framework, including both financial and non-financial risks
and setting the risk appetite within which the Board expects
management to operate. The Board is also responsible to satisfy
itself that management has developed and implemented
a sound system of internal controls.
The Board has delegated oversight of risk, including review of the
effectiveness of internal control systems and risk systems to the
Audit and Risk Committee up until March 2020. From March 2020
the Board has delegated oversight of the ongoing risk
management program, procedures, auditing and adequacy
and effectiveness of the enterprise risk management to the Risk
and Compliance Committee and oversight of evaluating the
adequacy and effectiveness of the internal control systems
associated with financial risk to the Audit Committee.
30
The company’s risk management framework, policies and
procedures set out the roles, responsibilities and guidelines for
managing financial and non-financial risks associated with the
business. The framework, policies and procedures have been
designed to provide effective management of material risks
at a level appropriate to Nufarm’s global business. The risk
framework, policies and procedures will continue to be
enhanced as the group’s operations develop and its range
of activities expands.
Nufarm’s group risk management department, led by the
General Manager Global Risk and Assurance, manages
the implementation of this framework across the Company.
The framework aims to deal adequately with contemporary
and emerging risks, such as conduct risk, digital disruption,
cyber-security, privacy and data breaches, sustainability
and climate change.
Detailed risk profiles for key operational business units have
been developed. These risk profiles identify the:
• nature and likelihood of specific material risks;
• key controls in place to mitigate and manage the risk;
• sources and level of assurance provided on the effective
operation of key controls; and
• responsibilities for managing these risks.
The Audit and Risk Committee Charter (and from March 2020, the
Risk and Compliance Committee Charter) requires the Committee
and the General Manager Global Risk and Assurance to review,
at least annually, the Risk Management Framework.
During FY2020, the Audit and Risk Committee oversaw a review
of the Risk Management Framework that resulted in an updated
risk appetite statement including tolerance metrics within in
which management is expected to operate being approved.
In undertaking this review, the Audit and Risk Committee was
satisfied that the Risk Management Framework continues to
be sound and that the Company is operating with due regard
for the risk appetite set by the Board.
4.3 Internal audit
Nufarm has an internal audit function which is part of the global
risk and assurance function that reports to the Group General
Counsel and Company Secretary.
Nufarm’s internal audit model is a co-sourced model, with PWC
engaged to provide internal audit services under this model.
Nufarm’s General Manager Risk and Assurance is accountable
to both the Committee and the CEO for the performance of the
internal audit function and manages the relationship with PWC.
The internal audit function supports management efforts to:
• manage and control risks;
• improve the efficiency and effectiveness of key business
processes and internal control systems;
• monitor compliance with Company wide requirements,
policies and procedures; and
• provide the Committee with assurance on the operating
effectiveness of controls.
The scope of internal audit work (including the annual internal
audit plan) is prepared with a view to providing coverage of all
major functional units and identified key risks and the Audit and
Risk Committee reviewed the internal audit plan to ensure it was
appropriate. During FY2020 this plan was modified to reflect the
impact of COVID-19 and the requirement to undertake internal
audits remotely. The internal audit program continued during
this period with the use of data analytics.
Nufarm Limited | Annual Report 2020 The General Manager Risk and Assurance, together with PWC
representatives, reported directly to the Committee at each
meeting on the progress against the internal audit plan, as well
as detailed findings and corresponding management actions
in relation to reviews undertaken in accordance with the internal
audit plan. They also were given an opportunity to raise issues
with the Committee in the absence of management, in a closed
session held during each Committee meeting. The internal audit
function had unfettered access to the Chair of the Audit and Risk
Committee and now has unfettered access to the Chair of the
Audit Committee.
4.4 CEO and CFO assurance
Before adoption by the Board of the 2020 half year and annual
financial statements, the CEO and the CFO provided written
declarations to the Board in respect of the Company’s half year
and annual financial statements that, in their opinion, the financial
records of the Company have been properly maintained, the
financial statements comply with the appropriate accounting
standards and give a true and fair view of the financial position
and performance of the Company, and that the opinion has been
formed on the basis of an adequate system of risk management
and internal control which is operating effectively.
The declaration of the CEO and CFO is supported by written
statements by all executives and key finance personnel relating
to the financial position of the Company, market disclosure, the
application of Company policies and compliance with internal
controls and external obligations.
5 Promoting responsible and ethical behaviour
Code of Conduct
Nufarm has in place a Code of Conduct, which applies to all
Directors, employees, contractors, agents and representatives
of the Company.
The key values underpinning the Code of Conduct are:
• actions must be governed by the highest standards of integrity
and fairness;
• all decisions must be made in accordance with the spirit and
letter of applicable law; and
• business must be conducted honestly and ethically, with skill
and the best judgement, and for the benefit of customers,
employees, investors and the Company alike.
The Code of Conduct provides clear direction and advice on
general workplace behaviour and how to conduct business both
domestically and internationally, interacting with investors, business
partners and the communities in which the Company operates.
Material breaches of the Code of Conduct are reported to the
Human Resources Committee.
Anti-bribery Policy
Nufarm has in place an Anti-bribery Policy that applies to all
Directors, officers and employees of Nufarm. The Policy strictly
prohibits the making or receiving of unlawful improper payments,
or the giving or receiving of anything of value or improper
advantage, to or by any individual or entity with the intent
of securing a business advantage for Nufarm to which it is not
legally entitled.
The policy prohibits improper payments to persons or entities
including public officials, any Nufarm customer or any other
individual or entity with whom Nufarm does business.
Breaches of the Anti-bribery Policy are reported to the Risk
and Compliance Committee.
Whistleblower Policy
During FY2020 Nufarm adopted a Whistleblower Policy to
provide a clear and transparent way for employees and
contractors to report unethical, unlawful or irresponsible
behaviour without fear of intimidation or recrimination.
The purpose of the Whistleblower Policy is to help detect
and address any conduct that is:
• corrupt, illegal, unlawful or fraudulent including bribery or any
other act in breach of the Company’s Antibribery Policy;
• contrary to or in breach of any Company’s Policy or the
Company’s Code of Conduct, including harassment,
bullying, discrimination victimisation;
• seriously harmful or potentially seriously harmful activity that
pose a threat to the Company’s employees, shareholders,
clients or third parties such as deliberate unsafe work practices,
with wilful disregard for the safety of others;
• activity that could cause significant financial loss to the
Company or damage its reputation or be otherwise
detrimental to the Company’s interests;
• a substantial mismanagement of Company resources; and
• any act which endangers the public or the financial system.
The Whistleblower Policy sets out protection that will be
afforded to whistleblowers as well as the option to make
an anonymous report.
Material breaches of the Whistleblower Policy are reported
to the Risk and Compliance Committee.
Securities Trading Policy and insider trading
The Board has adopted a Securities Trading Policy that covers
dealings by Directors, KMP and relevant employees and
complies with the ASX Listing Rule requirements for a trading
policy. The Securities Trading Policy aims to ensure that public
confidence is maintained in the reputation of Nufarm, the
reputation of its directors and employees and in the trading
of Nufarm securities.
The Securities Trading Policy restricts dealings by Directors,
KMPs and relevant employees in Nufarm securities except for a
period of four weeks from the first trading day after half and full
year results are announced and following the AGM. No dealing
is allowed at any time that they are in possession of unpublished
price sensitive information. Directors, KMP and relevant employees
are required to get pre-approval to trade during these
applicable windows.
The Nufarm Code of Conduct, Anti-Bribery Policy, Whistleblower
Policy and the Securities Trading Policy are available in the
Corporate Governance Section of Nufarm’s website.
31
Nufarm Limited | Annual Report 2020 Corporate Governance Statement continued
6 Continuous disclosure and communications with shareholders
6.1 Continuous disclosure and market communications
Nufarm is committed to timely, open and effective communication
with its shareholders and the general investment community.
The Board has adopted a Continuous Disclosure Policy,
which establishes procedures aimed at ensuring that Nufarm
complies with the legal and regulatory requirements under the
Corporations Act and the ASX Listing Rules. These procedures
include the establishment of a Market Disclosure Committee,
which monitors the continuous disclosure framework and is
responsible for ensuring that Nufarm complies with its obligations.
The Market Disclosure Committee is constituted by the CEO,
CFO, Group General Counsel and Company Secretary and the
General Manager, Investor Relations and External Communications
and is responsible for implementing and monitoring reporting
processes and controls to ensure there is an adequate system
in place for the disclosure of all material information to the ASX.
The Group General Counsel and Company Secretary reports
to the Board on the matters considered by the Market Disclosure
Committee at each meeting. The Board approves any
announcement which are within the matters reserved for
decision by the Board including annual and half year financial
reports, any profit update or earnings guidance, matters which
could have significant financial or reputational risks, company
transforming transactions or events, significant corporate
transactions including any equity related transactions and
any other matters that the Market Disclosure Committee
considers is of fundamental significance to the Company.
In addition to approving the announcements reserved for
decision by the Board, Directors are provided with copies of all
announcements that are made to the ASX immediately after they
have been released on the Market Announcements Platform.
The Continuous Disclosure Policy is available in the Corporate
Governance Section of Nufarm’s website.
6.2 Shareholder communication
The Company places a high priority on communication with
shareholders and other stakeholders and aims to ensure they are
kept informed of all major developments affecting Nufarm. The
Company has an investor relations program to facilitate a direct,
two-way dialogue with shareholders and the Company believes
it is important not only to provide relevant information as quickly
and efficiently as possible, but also to listen and understand
shareholders’ perspectives and respond to their feedback.
Nufarm holds briefings on the annual and half year financial
results and on other new and significant information. Presentation
material or speeches that provides any new and substantive
information are first disclosed to the ASX through the Market
Announcements Platform and then posted to the Nufarm website
prior to any discussion.
One of the key communication tools is the Company’s website.
The website contains the key governance documents, market
announcements, the Annual Report and half-yearly financial
statements, a calendar of events relating to shareholders and
other communications to key stakeholders. The website also
contains a facility for shareholders to direct inquiries to the Company.
Shareholders are provided with an update on the Company’s
performance at the Annual General Meeting, as well as an
opportunity to vote on important matters affecting Nufarm and
ask questions of the Board and key members of management.
All substantiative resolutions at the AGM are decided by a poll
rather than a show of hands. Copies of the Chairman’s speech
and the meeting presentation are released to the ASX and posted
the Company’s website as the meeting commences. A summary
of proceedings and outcome of voting on the items of business
are also released to the ASX and posted to the website as soon
as they are available after the meeting. All directors are expected
to attend the AGM.
Nufarm’s external auditor attends the AGM to answer any
shareholder questions concerning the conduct of the audit,
the preparation and content of the audit report, the accounting
policies adopted by Nufarm and the independence of the
external auditor in relation to the audit.
The Company encourages shareholders to receive
communications electronically. Shareholders may elect to
receive all or some of their communications electronically.
This election can be made directly with the Share Registry,
Computershare Investor Services Pty Limited.
The Board obtains the views of shareholders by either formal
or informal means. The Board receives a regular report
from the General Manager Investor Relations and External
Communications which contains feedback from investors.
The CEO and CFO are accessible to shareholders, analysts,
fund managers and others with a potential interest in the
company. The Chairman and the Chairman of the Human
Resources Committee are also accessible to shareholders
and institutional investors.
6.3 Verification of periodic reports
Nufarm is committed to ensuring that all the information contained
in its corporate reports are accurate, effective and clear. Nufarm
has put in place a process to verify the integrity of its periodic
reports that are not subject to audit or reviewed by the external
auditor. This includes the annual Directors reports, the Annual
Report and the Sustainability Report.
A statement on the processes undertaken to verify the information
not audited or verified by the external auditor is available in the
Corporate Governance Section of Nufarm’s website.
32
Nufarm Limited | Annual Report 2020 7 Inclusion and diversity
Nufarm is a global organisation that aims to provide an inclusive
work environment where individuals are valued for their diversity
and empowered to reach their full potential. We believe we are
stronger when our plans and operations reflect the thinking of all
our people, representing a broad range of backgrounds,
cultures and experience.
Highlights in the 2020 financial year
This year we continued the delivery of our Inclusion and Diversity
strategy. Our goal is to embed inclusion and diversity in the way
we conduct our business, wherever we operate around the
world. Activities included:
• established gender pay analysis process as part of our annual
salary and short-term incentive cycle;
• introduced our NuLead Principles that underpin our talent and
leadership programs and drive inclusive leadership;
• responded to Covid-19 with flexibility and inclusion. Our IT
digital enablement strategy along with leadership training to
support managers in managing through a crisis and regular
engagement with our Employee Assistant Programs are some
of the initiatives that have enabled us to manage through these
unprecedented times. As an essential service we were able
to maintain and for some functions and regions improve
productivity as an outcome of our response to Covid-19, this
was quantified through a recent survey;
• launched a new employee value proposition (EVP). The EVP
has three foundational pillars, one of which focuses entirely on
inviting people to ‘Come as you are’, to represent and continue
to build our inclusive and diverse workplace. Creating an
awareness of unconscious bias, reducing bias from our internal
process and celebrating the differences between us are some
of the ways Nufarm ensures we are creating a place where
everyone feels they can belong.
• our One Nufarm Behaviours recognition program has continued
to excel with 702 (2019:565) people recognised with 1,107 new
badges (2019:518 badges) of appreciation during FY2020.
The Australian Workplace Gender Equality Act (WGEA) deems
Nufarm as a designated relevant employer.
We comply with the WGEA requirements and saw improvements in
three (GE11, GE14 and GE15) of the six key Gender Equality Indicators.
Nufarm’s workforce
At the end of this financial year we employed 2,702 people (2019
3,315 people) across five regions, a decrease of 18 per cent
predominantly due to the LATAM sale (580 people), on 1 April 2020.
All data provided for 2020 included in this annual report excludes
headcount activity from the LATAM sale.
Most of our workforce remain full time with 88 per cent permanent
employees (2019: 91 per cent) and 12 per cent contract or
non-permanent employees up from 9 per cent in 2019. This is due
to resource management and targeted expertise brought into the
business to support short-term deliverables, mostly attributed to
our technology infrastructure investments. Where the nature of the
role allows it, we support flexible work arrangements with 3 per
cent of our workforce operating with part-time arrangements
down from 5 per cent in 2019, although a significant increase in
flexible working arrangements have been initiated due to
Covid-19 and continue due to our remote working capability.
We continue to recruit across the career lifespan with 26 per cent
(2019: 33 per cent) of new hires aged less than 30 years of age,
57 per cent between 30-50 years and 17 per cent over the age
of 50 (2019:13 per cent). This shift away for early in career to later
in career has occurred mostly in the Sales and IT functions where
we have sourced talent with greater experience and/or with
required specialised skills.
2020 FTE by region
2020 FTE by function
Asia
ANZ
Europe
LATAM
NA
22%
23%
37%
3%
15%
2020 FTE v 2019 FTE by function
Supply Chain
Sales
Portfolio Solutions
Finance
Corporate
Information Technology
Human Resources
*Includes LATAM in 2019
Supply Chain
Sales
Portfolio Solutions
Finance
Corporate
47%
31%
9%
6%
3%
Information Technology 2%
Human Resources
2%
2020
1,272
847
241
160
77
64
41
2019
1,463
1,112
279
240
95
72
54
33
Nufarm Limited | Annual Report 2020 Corporate Governance Statement continued
Women at Nufarm
Nufarm’s focus on gender diversity is designed to empower all employees by actively addressing the barriers to equality and creating
a level playing field and inclusive culture for both men and women. To this end we are committed to working towards a target of not less
than 30 per cent of either gender making up our workforce.
We are focused on improving female representation across all areas of the business and maintained 31 per cent of all new hires being
female in 2020 (2019:31 per cent). Females represented 24 per cent of people leaving the business compared to last year’s 28 per cent.
Overall, we have increased female representation to 25 per cent across the organisation (2019:24 per cent).
Female representation increased in Portfolio Solutions (2019:39 per cent), Supply Chain (2019: 19 per cent) and Sales (2019:17 per cent).
Portfolio, Finance and Corporate are functions that already meet our target of no less than 30 per cent of either gender. Geographically
North America achieves our goal with Europe and ANZ making gradual progress closer to our no less than 30 per cent of either gender
goal. All employee categories increased female representation in 2020 apart from the Executive and senior management category
at 21 per cent (2019: 23 per cent).
Females appointed at the executive and senior management category represented 33 per cent and came from within our internal
talent pool. Across the organisation promotions showed a higher female representation of 25 per cent (2019:23 per cent). Twenty-two
per cent of all internal lateral moves across the organisation were filled by females compared to 34 per cent last year. Females
represent 20 per cent of all people leadership positions across Nufarm (2019:19 per cent).
The Board considers gender diversity an important factor in its succession planning. The percentage of female Non-executive Directors
reduced slightly to 25 per cent due to the appointment of a new Director and the transition of the Chairman to retirement (2019: 29 per cent).
Our Board gender diversity continues to be better than most of our global industry peers.
Gender by region FY2020
Female
Male
Gender by function FY2020
Female
ANZ
ASIA
Europe
LATAM
NA
26%
20%
26%
17%
31%
74%
80%
74%
83%
69%
Supply Chain
Sales
Portfolio Solutions
Finance
Corporate
Information Technology
Human Resources
20%
19%
42%
51%
53%
13%
78%
Male
80%
81%
58%
49%
47%
87%
22%
Gender Pay Parity Review
This year we included a gender salary and incentive review as
part of our annual remuneration cycle. Globally, the findings show
that on average female salary increase/ex-gratia awarded
was 102.6 per cent of budget compared with males who were
awarded on average 93.6 per cent of budget. Seventy-seven
per cent of females in the global analysis received a salary
increase compared with 72.2 per cent of males. Similar rates of
ex-gratia payments were awarded between males (4.7 per cent)
and females (5 per cent).
Gender pay parity slightly favoured female remuneration
outcomes for both salary and bonus in most regions with Asia and
Nuseed being the exception. The Asia and Nuseed average merit
increase awarded was favourable to males. Both Nuseed and
Asia had outcomes favourable to females in their bonus pay out.
Cultural diversity
Our global footprint enables a culturally diverse workforce of
leaders and teams, representing local cultures and customers in
over 100 countries. Eleven percent of Board members reside
outside Australia (2019: 15 per cent). Our executive and senior
management team remains culturally diverse with at least 15
different cultural backgrounds represented. Nufarm’s employee
self-disclosed data indicates that our workforce originates from
no less than 63 different countries and speaks at least 37 different
languages. Nufarm also has at least 5 per cent of employees
working in a different country to their birth country.
34
Nufarm Limited | Annual Report 2020 Progress against 2020 objectives
In 2019 we deployed a global Inclusion & Diversity diagnostic across all regions to better understand the challenges and opportunities
associated with inclusion and diversity. This enabled us to develop a meaningful and appropriate global inclusion and diversity strategy
that can be measured and monitored over a three-year period. The table below demonstrates progress made against our objectives in
the first year of the strategy.
Objective
1 Vision and Purpose
Progress
Continue with the communications plan and regular inclusion
and diversity articles, with a targeted campaign specifically
designed for our senior management level.
2 Policy
Review all key people related policies to eliminate potential bias
and encourage inclusion and diversity.
3 Knowledge and Capability
Extend knowledge and capability training to a wider audience
beyond people managers. Provide education to increase
awareness of unconscious bias and reinforce an inclusive culture.
• Deploy the unconscious bias training to 100% of our
senior leaders.
• Launch NuLead Principles as part of our continuous effort
to develop inclusive leadership.
4 Remuneration
Address the identified anomalies from the pay parity review.
Conduct an annual gender pay analysis to identify any gender
bias during the salary and short-term incentive review
5 Talent Goal
Take the new talent and succession cycle deeper into the
organisation to provide greater talent visibility to the Board
and senior management.
Have one female on the panel for all senior leadership level
appointments and the commitment of having one female
on the short list for all senior leadership roles.
Launch a new employee value proposition externally that has
three foundational pillars, one of which focusses entirely on
inviting people to ‘Come as you are’, to represent and continue
to build our inclusive and diverse workplace. These pillars will
form part a new recruitment marketing campaign in 2020.
Communications plan is ongoing, including regular articles and
showcasing events across the organisation through our intranet
platform, including Cultural Diversity Day events to raise
awareness. Regions also include the inclusion and diversity
benefits during Town Hall, Diversity Days, video blogs as part
of their broader communications cycle.
Steering committees continue to actively and regularly
discuss diversity part of our regular meetings and the regional
MBR discussions.
Delivered a targeted program for Senior Management on
Leading through a Crisis: a strong focus on improving how we
lead, engage and provide a psychologically safe and inclusive
environment while experiencing a pandemic and adapting to
remote working (86% participation)
All key people policies were reviewed and updated to include
the inclusion and diversity checklist. These policies will continue
to be reviewed regularly and new policies will be developed
in alignment with the checklist. Employee Handbooks have
commenced being updated to include the reviewed policies.
NuLead Principles have been recently launched and deployed
in English to 956 employees with current active participation of
48%, including online and workshops (face to face prior Covid-19
and adapted to virtual during Covid-19). This includes 100% of the
Senior Leadership Team from Nufarm excluding Nuseed. There
is a plan to continue deployment through online training to the
remaining staff in their national language for 2021.
The extensive training with Managers/Supervisors on
‘Compensation with a Growth Mindset’ continues the opportunity
to have in depth discussion on unconscious bias.
A gender pay analysis was conducted as part of our annual
salary and short-term incentive review. The findings showed
that most regions gender pay parity slightly favoured female
remuneration outcomes for both salary and incentive.
The talent cycle extended one level deeper in each region
providing full visibility of talent at the CEO-2 and CEO-3. Some
functions and countries went deeper to CEO-4 and CEO-5.
The talent cycle will continue to be deployed deeper in the
organisation as we mature our talent agenda in 2021.
100% of senior leadership level appointments had one female
on the shortlist and a female represented on recruitment panel.
The EVP has been launched globally and part of all external
websites. The EVP aligned to reflect new inclusive messaging
and branding. Nufarm’s LinkedIn has also been revised.
35
Nufarm Limited | Annual Report 2020 Corporate Governance Statement continued
Focus for FY2021
Nufarm believes that inclusion and diversity are both critical to our sustainable growth. A key enabler to achieving growth is to develop
our talent and continue to build an inclusive culture.
As a continuation of our efforts we now continue into year three of our inclusion and diversity strategy through extending our themes
and objectives from last year deeper into the organisation, focusing additional efforts towards developing greater gender equality
with our internal talent pipeline, and conducting our interim regional inclusion and diversity audit.
FY2021 objectives
Inclusion and diversity strategy goals
2021 inclusion and diversity objectives
1 Vision and Purpose Goal
Diversity is actively understood and represented by all
employees who promote an inclusive culture. Difference
is celebrated across the Company and there is a solid
understanding of how inclusion and diversity can contribute
to achieving business objectives.
By 2022
2 Policy Goal
Continue with the communications plan and regular inclusion
and diversity articles.
Refresh the NLT Inclusion and Diversity Steering Committee,
minimum 2 year term and maximum 3 year term to ensure
diversity of the group.
Inclusion and Diversity Policy underpins other HR strategies.
Policies and procedures are regularly reviewed, and where
special circumstances allow, alternative solutions are put in
place to ensure attraction and retention of a diverse workforce.
Conduct a progress Global (regional) Inclusion and Diversity
diagnostic by March 2021 to demonstrate progress and review
Inclusion and Diversity Strategy.
By 2020
3 Knowledge and Capability Goal
All employees understand what diversity and inclusion is
and the competitive advantages it brings, are aware of their
responsibilities in contributing to a diverse and inclusive
environment, and how to do so effectively.
By 2022
4 Remuneration Goal
Remuneration practices ensure there is no bias based
on difference.
By 2022
5 Talent Goal
Deliver unconscious bias trainings to the European Senior
Leadership team and the next level.
100% of employees have access to Inclusive Leadership
Framework. The remaining employees will be provided the
NuLead Principles – inclusive leadership training online in their
national language (where possible).
Deploy a Voice of the Business program to improve engagement
through continuous listening and data driven actions.
Incorporate business as usual gender analysis by region into
the remuneration review signoff process, to be led by regional
leads and signed off by RGM. Global to support development
of analysis.
The Board and senior leadership to have not less than 30 per
cent of people of each gender. Succession plan coverage
reflects the diversity of the organisation.
Continue to have one female on the panel for all senior
leadership level appointments and the commitment of having
one female on the shortlist for all senior Leadership roles.
By 2022
Succession plan coverage reflects the diversity of the
SLT population
These objectives are in addition to the ongoing activities under Nufarm’s inclusion and diversity policy and current practices that are
already yielding meaningful results.
36
Nufarm Limited | Annual Report 2020 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 2020 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
JC Gillam (appointed 31 July 2020)
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 2020 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. Fiona is a senior legal and governance
professional with 20 years experience in company secretarial
roles arising from her time spent in such roles in listed companies.
Fiona reports directly to the Board. She holds a Bachelor of
Science and Bachelor of Law from the Australian National
University and a Graduate Diploma in Applied Governance.
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
JC Gillam
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
494,812
–
76,761
22,327
3,480
–
–
–
–
–
–
–
–
–
Directors’ meetings
Board
Audit and Risk1
Audit2
Health,
Safety and
Environment
Committee3
Risk and
Compliance4
Nomination
and
Governance
Human
Resources
Committee
Anne Brennan
Gordon Davis
Frank Ford
John Gillam5
Greg Hunt
Peter Margin
Marie McDonald
Donald McGauchie
Toshikazu Takasaki
A
10
11
11
0
11
11
11
11
11
B
11
11
11
0
11
11
11
11
11
A
5
5
5
5
5
B
5
5
5
5
5
A
1
1
1
1
B
1
1
1
1
A
2
2
2
B
2
2
2
A
1
1
1
1
B
1
1
1
1
A
B
6
6
4
6
6
4
6
5
A
5
5
5
5
B
5
5
5
5
Column A: indicates the number of scheduled or ad-hoc meetings held during the period the Director was a member of the board
and/or committee
Column B: indicates the number of scheduled or ad-hoc meetings attended by the Director during the period the Director was a
member of the board and/or committee
1. Audit and Risk Committee in place up to 24 March 2020.
2. Audit Committee established 25 March 2020.
3. Health and Safety Committee responsibilities incorporated into Risk and Compliance Committee from 25 March 2020.
4. Risk and Compliance Committee replaced risk responsibilities of Audit and Risk Committee and incorporated Health, Safety and Environment
Committee from 25 March 2020.
5. John Gillam joined the Board on 31 July 2020.
37
Nufarm Limited | Annual Report 2020 Directors’ report continued
Principal Activities and changes
Non-audit services
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 2,700 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 2020 is ($456.1 million). The comparable figure
for the 12 months to 31 July 2019 was $38.3 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.
Dividends
The following dividends have been paid, declared or
recommended since the end of the preceding financial year.
No dividend paid for the year ended 31 July 2020
No final dividend for 2018-2019 was paid
$000
$000
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.
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.
Nufarm Step-up Securities distributions
The following Nufarm Step-up Securities distributions have been
paid since the end of the preceding financial year:
Lead auditor’s independence declaration
The lead auditor’s independence declaration is set out in the
Company’s 2020 Annual Report and forms part of the directors’
report for the financial year ended 31 July 2020.
$000
7,138
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 is made in accordance with a resolution of the Directors.
Donald G McGauchie
Chairman
Greg A Hunt
Managing Director
23 September 2020
23 September 2020
Distribution for the period 15 April 2019 – 14 October 2019
at the rate of 5.67 per cent per annum paid 15 October 2019
Distribution for the period 15 October 2019 – 14 April 2020
at the rate of 4.85 per cent paid 15 April 2020
6,102
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
The Directors are not aware of any matter or circumstance that
has arisen since the end of the financial year that, in their opinion,
has significantly affected, or may significantly affect in future
years, Nufarm’s operations or the state of Nufarm’s operations.
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.
38
Nufarm Limited | Annual Report 2020
2020 Remuneration Report
A letter from the Chairman of the Human Resources Committee (HRC)
Looking ahead
As announced, the company’s financial year end will change
to 30 September. Key Management Personnel have elected to
forfeit entitlement to any STI during the transitional period from
1 August 2020 to 30 September 2020. The testing period for the
2019 and 2020 LTI threshold targets will be extended to include
an additional two months in the final performance calculations.
Key Management Personnel have also elected to continue the fixed
annual remuneration freeze for a second year to demonstrate
commitment to improving performance for shareholders.
The Chairman’s fee and Non-executive Director fees will also
remain frozen for a second year. Directors’ Committee fees will
be adjusted from 1 August 2020 to reflect changes to the structure
of the Board Committees.
While the Board is confident that remuneration outcomes for
2020 are sound, we will continue to respond to feedback on
the effectiveness of the remuneration policy, framework, and
governance to ensure it continues to meet the needs of the
business and its stakeholders.
Peter Margin
Chair – Human Resources Committee
Dear fellow shareholder,
On behalf of the Board, I am pleased to present the 2020
Remuneration Report.
Driving improved performance
Nufarm’s remuneration framework seeks to motivate executives
and employees to create value for shareholders in a manner
consistent with the company’s values.
The framework is based on the principle of rewarding
performance that manages inherent industry volatility, improves
shareholder outcomes, and strengthens the business to deliver
long term value. The Board adapts the framework to respond to
stakeholder feedback and the needs of the business.
Last year the short-term incentive (STI) plan was updated to
increase the focus on improving cost efficiencies and generating
cash flow to strengthen the balance sheet. The long-term incentive
(LTI) plan remains in place to ensure a good balance between
short-term performance and long-term decision making.
Executive remuneration outcomes for the 2020 year
The 2020 financial year has been challenging for Nufarm. Difficult
seasonal conditions and industry-related supply issues impacted
demand and margins throughout much of the year and the onset
of COVID-19 introduced additional complexities. While good
momentum was generated in most regions in the second half
of the financial year, earnings declined on the prior year.
Importantly, year-end leverage reduced from 3 times in 2019
to 1.9 times in 2020 with the sale of the South American businesses
and improved cash generation significantly reducing debt.
Although senior management worked exceptionally hard this
year, in some testing circumstances, and a number of their target
metrics achieved threshold, they decided to forfeit their STI
payment. The Board did apply their discretion and awarded a
special cash payment for the sale execution of the Latin American
business to select KMP in recognition of this transformational piece
of work.
The 2018 LTI threshold targets were not achieved and consequently
no incentive was paid.
39
Nufarm Limited | Annual Report 2020 2020 Remuneration Report continued
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 2020 (FY20). 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
• Lists the names and roles of the Executive KMP whose remuneration
details are disclosed in this report.
1.2 Executive KMP remuneration outcomes
• Details the key remuneration outcomes in FY20.
1.3
Actual total remuneration earned by executives
in FY20 (unaudited)
• Additional voluntary disclosure of cash and benefits actually earned
by KMPs in FY20.
1.4 Summary of FY20 non executive director (NED) fees
• Details the NED fees changes in FY20.
1.5 Changes for FY20
1.6 Outlook for FY21
2. Setting Senior Executive remuneration
2.1 Remuneration governance
• Outlines the changes to remuneration arrangements in FY20.
• Outlines the changes to remuneration in FY21.
• Explains Nufarm’s remuneration policy, and how the board and
Human Resources committee (HRC) make decisions, including the use
of external consultants.
2.2 Remuneration strategy
• Explains Nufarm’s remuneration strategy for FY20 and how it’s
evolving for FY21.
2.3 Remuneration components
• Shows how executive remuneration is structured to support business
objectives and explains the executive remuneration mix.
3. Executive remuneration outcomes
3.1 Financial Performance
• Provides a breakdown of Nufarm’s performance over the past
3.2 Short Term Incentive outcomes
3.3 Long Term Incentive outcomes
five years.
• Details the STI outcomes for FY20.
• Details the LTI outcomes for the plan with a performance test
at 31 July 2020.
3.4 Senior Executive contract details
• Lists the key contract terms governing the employment of Executive
KMP (including termination entitlements where relevant).
4. Non-Executive directors (NED) remuneration
• Provides details of the fee structure for board and committee roles.
5. Remuneration tables
5.1 Remuneration of directors and disclosed executives
• Provides the remuneration disclosures required by the Corporations
5.2 Equity instruments held by disclosed executives
5.3 Shares held in Nufarm Ltd
Act and in accordance with relevant Australian Accounting Standards.
40
Nufarm Limited | Annual Report 2020
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
John Gillam
Anne Brennan
Gordon Davis
Frank Ford
Peter Margin
Marie McDonald
Toshikazu Takasaki
Current executive KMPs
Greg Hunt
Paul Binfield
Elbert Prado
Brent Zacharias
Niels Poerksen
Independent, non-executive director (effective 31 July 2020)
Independent, non-executive director
Independent, non-executive director
Independent, non-executive director
Independent, non-executive director
Independent, non-executive director
Non-executive director
Managing director and chief executive officer
Chief financial officer
Group executive supply chain operations
Group executive Nuseed
Group executive portfolio solutions until 28 February 2020
1.2 Executive KMP remuneration outcomes
The overall structure and philosophy of Nufarm’s approach to remuneration remained consistent throughout FY20. The organisation’s
remuneration philosophy continues to be based on linking financial rewards directly to employee contributions and company performance.
Fixed annual remuneration (FAR)
All executive KMPs received an increase of 0% to their FAR in FY20.
Short term incentive (STI)
Long term incentive (LTI)
Executive KMPs with the exception of Brent Zacharias, would have received an average of
34.5 per cent of the target opportunity available based on the assessment of financial and
team performance. Brent Zacharias (Group Executive Nuseed), would have received an
average of 53.6 per cent of the target opportunity available based on the assessment of
Nuseed financial and team performance. Management elected to forfeit any payment for
both the financial and team performance metrics for FY20.
The Board approved a cash payment to Greg Hunt, Paul Binfield and Elbert Prado for the
successful completion of the sale of the South American businesses to Sumitomo Chemical
Company for $1,188 million. This sale delivered significant up-front value for shareholders,
strengthened the balance sheet, and will also allow the company to focus on higher margin
businesses that generate stronger cash flows.
The FY18 LTI plan was tested on 31 July 2020. 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
FY18 plan.
41
Nufarm Limited | Annual Report 2020 2020 Remuneration Report continued
1.3 Actual total remuneration earned by executives
in FY20 (unaudited)
The table below details actual pay and benefits for Executive
KMPs who were employed as at 31 July 2020 and Niels Poerksen
until his termination date as at 28 February 2020. This table aims
to assist shareholders in understanding the cash and other
benefits received by executive KMPs from the various components
of their remuneration during FY20.
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 KMP. This may not reflect
what executive KMPs received or became entitled to during FY20
(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 2019 and
31 July 2020. This includes superannuation.
• STI payable as cash under the FY19 STI plan (which is paid in
FY20 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 2019 and 31 July 2020.
• Benefits received between 1 August 2019 and 31 July 2020.
Fixed remuneration
At risk remuneration (Realised)
Total
Salary
and Fees
$
Non-
monetary
benefits
$
Super-
annuation
$
STI
deferred
shares
vested
$
Total
$
STI cash1
LTI rights
vested
$
Other
long
term $
Total
Re-
muneration
$
LTI rights
forfeited
$
In AUD
Directors’ Non-executive
Sub total non-executive
directors remuneration
(realised)
2020 1,467,005
2019 1,479,952
Executive Director
–
–
120,051
1,587,056
127,619
1,607,571
–
–
GA Hunt
2020 1,294,688
100
25,000
1,319,788 330,000
–
–
–
Total Directors’
remuneration (realised)
Group Executives
2019 1,294,688
295
25,000
1,319,983
–
340,112
2020 2,761,693
100
145,051 2,906,844 330,000
–
2019 2,774,640
295
152,619 2,927,554
–
340,112
PA Binfield
2020
822,223
100
25,000
847,323
212,000
–
2019
822,223
295
25,000
847,518
–
187,153
E Prado2
2020
791,548
67,351
99,292
958,191
38,823
–
N Poerksen3
2020
444,606
21,990
15,426
482,022
–
–
2019
889,938
88,266
14,829
993,033
77,321
138,763
B Zacharias
2020
538,741
55,290
59,394
653,425
–
11,678
2019
703,684
33,735
25,522
762,941
– 145,429
Sub total – total
executive remuneration
(realised)
Total directors
and executive
remuneration
(realised)
2019
495,003
53,417
92,729
641,149
65,522
99,562
2020 2,597,118
144,731
199,112
2,940,961 250,823
11,678
2019 2,910,848
175,713
158,080
3,244,641
142,843 570,907
2020 5,358,811
144,831
344,163 5,847,805 580,823
11,678
2019 5,685,488
176,008
310,699
6,172,195
142,843
911,019
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,587,056
1,607,571
–
–
1,649,788 (463,956)
1,660,095 (466,870)
3,236,844 (463,956)
3,267,666 (466,870)
1,059,323 (198,580)
1,034,671
(171,268)
997,014
(141,335)
111,509
1,320,626 (152,383)
–
–
–
–
–
482,022
(121,601)
908,370
(126,919)
665,103
(88,938)
806,233
(94,067)
3,203,462 (550,455)
111,509
4,069,900 (544,637)
–
6,440,306
(1,014,411)
111,509
7,337,566 (1,011,507)
1. STI cash for 2020 includes a cash payment paid for the successful completion of the sale of the South American business.
2. Mr E Prado’s fixed remuneration and other long-term remuneration for 2019 includes fees and long service amounts paid with respect to the relocation
of Mr Prado during 2019.
3. Mr N Poerksen ceased to be a KMP on 28 February 2020.
42
Nufarm Limited | Annual Report 2020
1.4 Summary of FY20 non executive director (NED) fees
1.5 Changes for FY20
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 did not change in FY20. 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.
• Niels Poerksen – Left the business 28 February 2020, after
conducting a global search an appointment is imminent.
• John Gillam – Joined the Board on 31 July 2020 and will
assume the role of Chairman on the 24 September 2020
following Mr McGauchie’s retirement as Chairman and
Non-executive Director.
1.6 Outlook for FY21
Fixed annual remuneration (FAR)
Short term incentive (STI)
Following a year of disappointing profit results, the executive KMPs at Nufarm forfeited an
increase to their FAR (for the second year in a row) for FY21 as a demonstration of their
continued commitment to turning the company’s financial health around.
The FY21 STI plan will be simplified with a targeted focus on a single profit measure and a
single cash flow measure, with the continuation of a non-financial component based on
team performance.
Long term incentive (LTI)
A review of the LTI plan was undertaken and whilst no changes are currently proposed for
FY21 the plan will be reviewed again during FY21.
Non-executive director fees and pool
In line with the executive KMP stance, non-Executive directors elected not to increase board
fees for FY21 and decided that it was not necessary to seek any increase to the fee pool
previously approved by shareholders. Effective 1 August 2020 committee fees will change
to align with the revised board committee structure.
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
benchmarks, 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 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.
2.2 Remuneration strategy
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 FY20 have been:
• A renewed focus on managing working capital, profitability,
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 driving business objectives, creation of value, simplicity,
flexibility, line of sight and retention.
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.
• An STI plan which rewards year on year growth, profitability
and cash flow management through the addition of SG&A
and Stock Cover measures.
Within the remuneration framework the board has discretion
to ‘clawback’ LTI plan and STI accruals (cash and equity):
• An LTI plan which creates long term value for the organisation
and shareholders.
• 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.
Throughout FY20, we reviewed the various elements of our reward
offering. Consequently, from FY21 onwards, the remuneration
strategy is further refined to incorporate the following:
• An STI plan which rewards year on year growth, with an equal
focus on profitability and cashflow, as well as a non-financial
team based component.
• An LTI plan which rewards plan participants for creating long
term value for the organisation and shareholders.
43
Nufarm Limited | Annual Report 2020 2020 Remuneration Report continued
FAR
STI
LTI
Attract, motivate, and retain highly
skilled employees
Reward achievement if financial and personal/team strategic
objectives are met
Align to long term shareholder
value creation
Cash
Equity
Base salary plus superannuation
50% of STI paid annually after
financial year end
Set based on market and internal
relativity, performance, and
experience
STI outcome based on financial
and team performance
50% of the STI outcome is deferred
as Indeterminate Rights for a
period of 2 years
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
2.3 Remuneration components
a) Remuneration structure
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
52.8%
13.2%
13.2%
20.8%
43.8% Equity
34% Equity
41.7%
14.6%
14.6%
29.2%
45% Equity
40.0%
15.0%
15.0%
30.0%
● FAR ● Cash STI ● Deferred STI ● LTI
b) FY20 STI plan
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
All plan details are below, with the major differences between the plans outlined where applicable.
Who participates
in the STI?
What is the
plan’s aim?
When are
awards made?
Plan participants include disclosed executives and senior managers globally.
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. The
non-financial team measures focus our Executives and employees on executing the most critical objectives
aligned to the annual business plan as a collaborative member of a team.
Awards are made at the end of the financial year.
44
Nufarm Limited | Annual Report 2020 What measures are
used in the plan?
The board sets measures at the start of each year focused on profitability and cash flow management.
Noted below are the measures used in 2020.
All Executive KMP roles (except GE Nuseed)
20% of potential was based on Group Underlying Net Profit After Tax (uNPAT)
15% of potential was based on Group Selling General Admin expenses/Gross Profit (SGA/GP)
20% of potential was based on Group Average Stock Cover (STC)
25% of potential was based on Group Average Net Working Capital (ANWC)/Sales. This measure presents
the Groups ANWC as a percentage of the Groups total sales.
Group executive Nuseed
15% of potential was based on Group Nuseed Underlying Earnings before Interest Tax Depreciation
& Amortisation (uEBITDA)
25% of potential was based on Group Nuseed Underlying Profit Before Tax (uPBT)
40% of potential was based on Group Nuseed Average Net Working Capital (ANWC)/Sales
For all executives
20% of the potential was based on team objectives.
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) of up to 150%. SGA/GP and STC both have a threshold of 85% of current year’s target. Target
achievement results in 100% payment with stretch achievement (110% for SGA/GP and 120% for STC) of up to 150%.
Nuseed uEBITDA, 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% of target for Nuseed uEBITDA and
Nuseed uPBT; and 110% of target for Nuseed ANWC/Sales) paying out at 150%.
Straight line vesting between threshold and target and between target and stretch.
Strategic and business improvement objectives are assessed on a merit basis against stated objectives.
Are payments
in cash or equity?
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?
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.
Is there a clawback
provision in the plan?
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.
What happens
if the Executive KMP
leaves Nufarm?
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,
or such other reason as determined by the board at its absolute discretion.
The rules of the plan provide 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.
45
Nufarm Limited | Annual Report 2020 2020 Remuneration Report continued
c) FY20 LTI plan
All Executive KMPs participated in the same LTI plan with the exception of:
• Group executive Nuseed who participated in a separate ‘phantom share’ plan tailored to ensure the role is measured against
and rewarded for Nuseed’s long term deliverables.
Why have an LTI plan? This plan aims to focus and reward plan participants for delivering sustainable financial returns over
a longer period in line with Nufarm’s 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 equity?
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?
What is the
comparator group
for the assessment
of relative TSR?
How is RTSR
measured?
What is the RTSR
performance
required for vesting?
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.
Based on the results of research and modelling carried out by EY, 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.
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
0%
50%
Between 51st percentile and 75th percentile
Straight line vesting between 50% and 100%
75th percentile
100% vesting
How is the ROFE
target set?
ROFE objectives are set by the board at the beginning of each year. There is both a ‘target’ 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.
How is ROFE
measured?
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.
What ROFE result is
required for vesting?
Percentage of ROFE target achieved
Proportion of ROFE grant vesting
Less than Target
Target
0%
50%
Between Target and Stretch
Straight line vesting between 50% and 100%
Stretch
100%
What was the result
for the FY20 year?
Nufarm’s RTSR was less than 50th percentile of the comparator group and average cumulative ROFE was
below threshold. Consequently, the FY18 award, which matured in FY20 did not vest into shares as both
performance hurdles were not met.
46
Nufarm Limited | Annual Report 2020 What happens if the
awards do not vest?
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.
Is there a clawback
provision in the plan?
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.
What happens if an
Executive KMP leaves?
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.
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
Earnings
Underlying EBITDA*
ANWC/Sales***
Underlying NPAT**
ROFE
Shareholder value
TSR
Dividends declared
Closing share price 31 July
$m
%
$m
%
%
Cents
$
Continuing Group
Total group (Continuing and discontinued group)
FY201
FY191
FY18
FY17
FY16
235.8
46.4
(80.6)
1.2
(49.2)
0.0
4.02
300.1
47.7
39.6
4.6
(31.0)
0.0
4.88
385.7
40.3
98.4
9.4
(13.9)
11.0
7.03
390.0
36.8
135.8
13.6
3.5
13.0
8.10
371.7
39.9
108.9
13.2
8.7
11.0
7.93
1. FY19 data has been restated following the sale of the South American businesses. FY20 data is presented on a continuing operations basis.
* and ** Underlying EBITDA is earnings before net finance costs, taxation, depreciation, amortisation and material items. Underlying NPAT is Net Profit/(Loss)
after Tax before material items. Underlying NPAT and Underlying EBITDA are used internally by management to assess performance of the business and make
decisions on the allocation of our resources. NPAT, rather than EBITDA, 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.
3.2 Short Term Incentive outcomes
The STI measures of ASTC and ANWC/Sales met threshold for a payment however, management have elected to forfeit their payment for
both the financial and team performance metrics. Therefore, disclosed executives employed for the performance period FY20 did not
receive a payment under the FY20 incentive plan.
a) FY20 STI plan payment results
Outcomes against targets for disclosed executives are shown below:
Disclosed executive
Greg Hunt
Paul Binfield
Elbert Prado
Brent Zacharias
Group
uNPAT and
SG&A
35% ●
35% ●
35% ●
Group
ANWC
25% ●
25% ●
25% ●
Weighting and outcome*
Group
ASTC
Nuseed income
statement
measures
Nuseed
ANWC%
Team metrics
20% ●
20% ●
20% ●
–
–
–
–
–
–
40% ●
40% ●
20% ●
20% ●
20% ●
20% ●
● Below threshold ● Between threshold and target ● Above target
*
Whilst the outcome for certain targets were above threshold, management have elected to forfeit their payment for both the financial and team
performance metrics.
47
Nufarm Limited | Annual Report 2020 2020 Remuneration Report continued
The table below displays FY20 STI payments as a percentage of FAR and also as a percentage of target opportunity.
2020 STI Potential
Disclosed executive
Greg Hunt
Paul Binfield
Elbert Prado
Brent Zacharias
Senior Executive average
At target
$
At maximum
$
Total Award
$
FY20 STI Award
as a %
of target
potential
FY20 STI as
% of FAR
To be paid
in cash in
October 2020
$
989,751
1,484,627
593,056
368,586
242,276
548,417
889,584
552,879
363,413
822,626
–
–
–
–
–
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
–
–
–
–
–
Retained
in shares
vesting 2nd
anniversary
31.7.22
$
–
–
–
–
–
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
t
r
h
w
o
g
T
A
P
N
g
n
y
l
r
e
d
n
U
i
FY16
FY17
FY18
FY19
50.0%
0.0%
-50.0%
-100.0%
-150.0%
-200.0%
-250.0%
-300.0%
-350.0%
140.0%
122.5%
105.0%
87.5%
70.0%
52.5%
35.0%
17.5%
0.0%
FY20
t
e
m
o
c
u
o
n
a
p
l
I
T
S
● Underlying NPAT % Growth
% STI outcome
3.3 Long Term Incentive outcomes
The performance period for the FY18 LTI plan concluded on 31 July 2020.
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) FY18 LTI plan testing as at 31 July 2020
The vesting table for the FY18 LTI plan is detailed below, reflecting performance up to 31 July 2020 against the two performance
measures of RTSR and ROFE.
Performance Measure
Target
Outcome
% of total plan vested
75th percentile
9.9%
Below threshold
Below threshold
0%
0%
Nil
RTSR
ROFE
Total
48
Nufarm Limited | Annual Report 2020
b) FY18 LTI award outcome
The table below details the individual outcome for the FY18 LTI plan award granted 1 August 2017.
Disclosed executive
Greg Hunt
Paul Binfield
Elbert Prado
Brent Zacharias
FY18 LTI award due to vest 31.7.20
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
$
115,412
49,398
35,158
22,124
–
–
–
–
0.0%
0.0%
0.0%
0.0%
n/a
n/a
n/a
n/a
–
–
–
–
Total grant
date fair
value of
lapsed
awards
$
761,719
326,027
232,043
146,018
c) Historical LTI plan performance relative to Nufarm’s share price
The following chart compares Nufarm’s LTI plan vesting results for the past six LTI plans (as a percentage of plan maximum) to the share
price history during the same period. The FY16, FY17 and FY18 LTI plans did not meet hurdle and therefore are not depicted.
Nufarm historical share price vs LTI outcome
t
e
m
o
c
u
o
n
a
p
l
I
T
L
$
e
c
i
r
p
e
r
a
h
S
12.00
10.50
9.00
7.50
6.00
4.50
3.00
1.50
0.00
100%
89.2%
31.3%
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
9
1
-
g
u
A
9
1
-
t
c
O
9
1
-
c
e
D
0.0%
0.0%
0.0%
0
2
-
r
p
A
-
0
2
n
u
J
-
0
2
b
e
F
120%
105%
90%
75%
60%
45%
30%
15%
0%
● 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.
49
Nufarm Limited | Annual Report 2020
2020 Remuneration Report continued
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 $2,000,000 per year
(including superannuation costs). The total fees for FY20 remained
within the approved cap.
The board fees are reviewed every 12 months with the last
increase of 3.75% effective August 2018. While the next review
is due in February 2021, the board have mirrored management
sentiment to forfeit any increase in the general board fee for FY21
(for a second year).
Fees applicable from 1 August 2018 to 31 July 2020
($) per annum
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
* The Chairman receives no fees as a member of any committee
5 Remuneration tables
5.1 Remuneration of directors and disclosed executives
392,567
160,597
32,370
16,185
18,883
9,441
26,975
13,488
12,462
1,618 per meeting
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
Total2
In AUD
Salary
and Fees
$
Cash
Bonus
(Vested)1
$
Non-
monetary
benefits
$
Total
$
Super-
annuation
$
Termination
benefits
$
Equity
settled
$
Other
long
term
$
Total
Remun-
eration
$
Percen-
tage of
remun-
eration
perfor-
mance
based
$
Value of
options
as a
proportion
of total
remun-
eration
$
Directors’ Non-executive
AB Brennan
2020
172,973
2019
172,973
GR Davis
2020
190,139
Dr WB
Goodfellow3
2019
190,139
2020
–
2019
52,492
DG McGauchie 2020
356,879
2019
356,879
P Margin
2020
215,086
2019
203,757
–
–
–
–
–
–
–
–
–
–
50
–
–
–
–
–
–
–
–
–
–
172,973
172,973
190,139
190,139
–
17,297
17,297
19,014
19,014
–
52,492
5,249
356,879
35,688
356,879
35,688
215,086
203,757
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
190,270
190,270
209,153
209,153
–
57,741
392,567
392,567
215,086
203,757
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Nufarm Limited | Annual Report 2020
–
–
–
–
–
–
–
–
13%
14%
–
–
11%
11%
7%
5%
9%
-2%
1%
–
–
–
–
In AUD
F Ford
2020
190,138
2019
179,838
T Takasaki
2020
154,580
2019
154,580
M McDonald
2020
187,210
2019
169,294
2020 1,467,005
2019 1,479,952
Sub total
non–
executive
directors
remuneration
Executive
Director
GA Hunt
Total
Directors’
remuneration
Short Term
Post-
employment
Share
based
payments
Total2
Salary
and Fees
$
Cash
Bonus
(Vested)1
$
Non-
monetary
benefits
$
Total
$
Super-
annuation
$
Termination
benefits
$
Equity
settled
$
Other
long
term
$
Total
Remun-
eration
$
Percen-
tage of
remun-
eration
perfor-
mance
based
$
Value of
options
as a
proportion
of total
remun-
eration
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
190,138
179,838
154,580
154,580
187,210
169,294
– 1,467,005
– 1,479,952
19,014
17,984
15,458
15,458
13,580
16,929
120,051
127,619
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
209,152
197,822
170,038
170,038
200,790
186,223
– 1,587,056
–
1,607,571
–
–
–
–
–
–
–
–
2020 1,294,688 330,000
100 1,624,788
25,000
– 256,718
– 1,906,506
31%
2019 1,294,688
–
295 1,294,983
25,000
– 443,069
– 1,763,052
25%
2020 2,761,693 330,000
100 3,091,793
145,051
– 256,718
– 3,493,562
2019 2,774,640
–
295 2,774,935
152,619
– 443,069
– 3,370,623
–
–
Group Executives
PA Binfield
2020
822,223 212,000
100 1,034,323
25,000
– 136,806
–
1,196,129
29%
2019
822,223
–
295
822,518
25,000
–
219,410
– 1,066,928
E Prado4
2020
791,548
38,823
67,351
897,772
99,292
– 106,007
–
1,103,021
2019
889,938
77,321
88,266 1,055,525
– 178,702
111,509 1,360,565
N Poerksen5
2020
444,606
2019
703,684
B Zacharias6
2020
538,741
–
–
–
21,990
466,596
33,735
737,419
25,522
55,290
594,031
59,394
14,829
15,426
2019
495,003
65,522
53,417
613,942
92,729
2020 2,597,118 250,823
144,731 2,992,672
199,112
– (157,902)
– 162,098
–
–
925,039
324,120
-49%
-49%
–
–
–
19,340 (74,950)
597,815
94,641
108,504
909,816
30%
104,251
(74,950) 3,221,085
2019 2,910,848 142,843
175,713 3,229,404
158,080
– 654,851 220,013 4,262,348
2020 5,358,811 580,823
144,831 6,084,465
344,163
– 360,969 (74,950) 6,714,647
2019 5,685,488 142,843
176,008 6,004,339
310,699
– 1,097,920 220,013 7,632,971
21%
13%
19%
18%
-9%
–
–
–
–
Sub total–
total
executive
remuneration
Total
directors and
executive
remuneration
1. Cash Bonus (Vested) for 2020 includes a discretionary bonus paid for the successful completion of the sale of the South American businesses.
2. Represents total remuneration paid in the financial year.
3. Dr WB Goodfellow ceased to be a Director on 6 December 2018.
4. Mr E Prado’s 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.
5. Mr N Poerksen ceased to be a KMP on 28 February 2020. Upon departure, Mr Poerksen forfeited his equity based compensation, resulting in negative
remuneration from the reversal of prior awards.
6. 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 2.3c).
In FY20, negative income arises as the rights associated with the 2019 grant are no longer expected to vest.
51
Nufarm Limited | Annual Report 2020 2020 Remuneration 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 Ltd
Balance at
1 August
2019
Scheme
Granted as
remune-
ration(e)
Exercised
Forfeited
or lapsed(b)
Net
change
Balance at
31 July
other(d)
2020(c)
Vested
during
2020
Vested at
31 July
2020(a)
Value at
date of
forfeiture(b)
Directors
GA Hunt
LTI performance
278,345
159,456
STI deferred
–
–
Executives
Current KMP
P Binfield(f)
LTI performance
119,132
95,544
STI deferred
–
–
E Prado
LTI performance
84,794
50,630
STI deferred
–
B Zacharias
LTI performance
22,124
STI deferred
2,905
–
–
–
N Poerksen
LTI performance
84,794
48,576
STI deferred
–
–
Total
LTI performance
589,189
354,206
–
–
–
–
–
–
–
(115,412)
–
(49,398)
–
(35,158)
–
(22,124)
(2,905)
–
–
–
–
(133,370)
–
(355,462)
STI deferred
2,905
–
(2,905)
Non-KMP Officers
F Smith
LTI performance
STI deferred
–
–
36,248
–
–
–
–
–
–
Total
592,094
390,454
(2,905)
(355,462)
(a) All options/rights that are vested are exercisable.
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
322,389
–
165,278
–
100,266
–
–
–
–
–
587,933
–
–
–
–
–
–
2,905
–
–
–
–
2,905
36,248
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
463,956
–
198,580
–
141,335
–
88,938
–
536,147
–
1,428,957
–
–
–
624,181
2,905
– 1,428,957
(b) LTIP performance rights forfeited due to a failure to satisfy service or performance conditions during 2020 are disclosed in the column ‘Forfeited or lapsed’.
100% of rights due to vest in 2020 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 2020 of $4.02.
(c) 308,479 of total LTIP performance rights held by KMPs are due to vest in the period ending 31 July 2021, with the remaining unvested balance due to vest
in the period ending 31 July 2022.
(d) ‘Net change other’ reflects changes to KMPs during the period.
(e) The number of LTIP performance rights granted as remuneration during FY20 were determined by dividing the KMP’s total LTI grant opportunity by $6.21,
being the five-day VWAP post the announcement of the group’s 2019 annual results.
(f) On 14 September 2020, Mr Binfield announced his resignation from Nufarm. Upon leaving Nufarm, in accordance with the long-term incentive plan rules,
Mr Binfield will forfeit all of his LTI rights.
52
Nufarm Limited | Annual Report 2020 5.3 Shares held in Nufarm Ltd
Directors
DG McGauchie
GA Hunt
AB Brennan
GR Davis
FA Ford
PM Margin
ME McDonald
T Takasaki
Executives
Current KMP
P Binfield
E Prado
B Zacharias
N Poerksen(a)
Total
Balance at
1 August 2019
Granted as
remuneration
On exercise
of rights
Net change
other
Balance at
31 July 2020
76,761
494,663
14,156
71,609
51,400
3,480
22,327
–
332,175
76,345
61,921
83,821
1,288,658
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
149
–
–
–
–
–
–
76,761
494,812
14,156
71,609
51,400
3,480
22,327
–
(133,827)
198,348
(35,874)
(20,014)
(83,821)
40,471
41,907
–
(273,387)
1,015,271
(a) ‘Net change other’ for Mr N Poerksen reflects that he has ceased to be a KMP from 28 February 2020.
Shares issued as a result of the exercise of options
There were nil (2019: nil) shares issued as a result of the exercise of options during the year.
Unissued shares under option
There are nil (2019: 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 2020 (2019: Nil).
Other key management personnel transactions with the company or its controlled entities
Apart from the details disclosed in this note, no director has entered into a material contract with the company or entities in the group
since the end of the previous financial year and there were no material contracts involving director’s interest existing at year-end.
A number of key management persons, or their related parties, hold positions in other entities that result in them having control or
significant influence over the financial or operating policies of those entities. A number of these entities transacted with the company or its
subsidiaries in the reporting period. The terms and conditions of the transactions with management persons and their related parties
were no more favourable than those available, or which might reasonably be expected to be available, on similar transactions to
non-director related entities on an 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
Director
Melbourne
23 September 2020
GA Hunt
Director
53
Nufarm Limited | Annual Report 2020 Auditors’ Independence Declaration
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 2020 there have been:
i.
ii.
KPM_INI_01
PAR_SIG_01
KPMG
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.
PAR_NAM_01
PAR_POS_01
PAR_DAT_01
PAR_CIT_01
Chris Sargent
Partner
Melbourne
23 September 2020
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.
54
Nufarm Limited | Annual Report 2020
Financial statements
for the year ended 31 July 2020
Contents
Consolidated statement of profit or loss and other
comprehensive income
Consolidated balance sheet
Consolidated statement of cash flows
Consolidated statement of changes in equity
Notes to the consolidated financial statements
1 Reporting entity
2 Basis of preparation
3 Significant accounting policies
4 Determination of fair values
5 Operating segments
6
Individually material income and expense items
7 Other income
8 Other expenses
9 Personnel expenses
10 Finance income and expense
11
Income tax expense
12 Discontinued operation
13 Preference securities receivable
14 Acquisition of businesses and acquisition
of non-controlling interests
15 Cash and cash equivalents
16 Trade and other receivables
17
Inventories
18 Tax assets and liabilities
56
58
59
60
62
62
62
63
73
74
78
80
80
81
81
82
83
84
84
84
85
85
86
19
Investments accounted for using the equity method
20 Other investments
21 Other non-current assets
22 Property, plant and equipment
23 Intangible assets
24 Trade and other payables
25 Interest-bearing loans and borrowings
26 Employee benefits
27 Share-based payments
28 Provisions
29 Capital and reserves
30 Earnings per share
31 Financial risk management and financial instruments
32 Leases
33 Capital commitments
34 Contingencies
35 Group entities
36 Company disclosures
37 Deed of cross guarantee
38 Related parties
39 Auditors’ remuneration
40 Subsequent events
Directors’ declaration
Independent Audit Report
87
87
87
87
88
91
91
93
95
97
97
99
100
109
110
110
110
114
115
116
117
117
118
119
55
Nufarm Limited | Annual Report 2020 Consolidated statement of profit or loss and
other comprehensive income
For the year ended 31 July 2020
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 profits/(losses)
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
Note
2020
$000
2019*
$000
restated
2,847,375
2,673,572
(2,112,646)
(1,927,554)
734,729
746,018
7
5,833
10,443
19
10
10
10
(486,357)
(441,926)
(446,231)
(22,652)
363
(195,184)
(34,952)
124
(214,315)
84,523
3,405
(76,031)
(23,565)
(99,596)
(96,191)
2,512
(71,196)
4,954
(66,242)
(63,730)
(310,506)
20,793
Income tax benefit/(expense)
11
(51,906)
(31,931)
Profit/(loss) for the period from continuing operations
(362,412)
(11,138)
Discontinued operation
Profit/(loss) from discontinued operation, net of tax
12
(93,667)
49,448
Profit/(loss) for the period
Attributable to:
Equity holders of the group
(456,079)
38,310
(456,079)
38,310
*
Comparative information has been restated due to a discontinued operation (note 12). The group has initially applied AASB 16 at 1 August 2019 using the
modified retrospective approach. Under this approach, comparative information is not restated and the cumulative effect of initially applying AASB 16
is recognised in retained earnings at the date of initial application. Refer to note 3(a)(i).
The consolidated income statement is to be read in conjunction with the attached notes.
56
Nufarm Limited | Annual Report 2020 Profit/(loss) for the year from continuing operations
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Foreign exchange translation differences for foreign operations
Effective portion of changes in fair value of cash flow hedges
Effective portion of changes in fair value of net investment hedges
Items that will not be reclassified to profit or loss:
Actuarial gains/(losses) on defined benefit plans
Income tax on share based payment transactions
Other comprehensive profit/(loss) for the period, net of income tax from
continuing operations
Total comprehensive profit/(loss) for the year from continuing operations
Profit/(loss) from discontinued operation, net of tax
Foreign exchange translation differences for disposal group reclassified to profit/(loss)
Consolidated
Note
2020
$000
2019*
$000
restated
(362,412)
(11,138)
(96,656)
69,086
(86)
6,117
54
(10,735)
(8,349)
167
(7,356)
–
(98,807)
(461,219)
(93,667)
417,842
51,049
39,911
49,448
–
Total comprehensive profit/(loss) for the period
(137,044)
89,359
Attributable to:
Equity holders of the group
Earnings per share
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
Earnings per share – Continuing
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
(137,044)
89,359
30
30
30
30
(123.7)
(123.3)
(99.0)
(98.7)
7.4
7.3
(6.0)
(6.0)
*
Comparative information has been restated due to a discontinued operation (note 12). The group has initially applied AASB 16 at 1 August 2019 using the
modified retrospective approach. Under this approach, comparative information is not restated and the cumulative effect of initially applying AASB 16
is recognised in retained earnings at the date of initial application. Refer to note 3(a)(i).
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.
57
Nufarm Limited | Annual Report 2020 Consolidated balance sheet
As at 31 July 2020
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Current tax assets
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
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 group
Other securities
TOTAL EQUITY
Consolidated
Note
2020
$000
2019*
$000
restated
15
16
17
18
13
16
19
20
18
22
23
24
25
26
18
28
24
25
18
26
686,552
505,687
982,169
1,378,751
932,806
1,228,241
15,950
–
36,320
97,500
2,617,477
3,246,499
3,091
2,250
389
101,977
2,010
421
133,302
212,997
439,644
393,582
1,339,016
1,726,289
1,917,692
2,437,276
4,535,169
5,683,775
932,996
1,221,261
338,861
494,986
16,038
12,354
37,389
19,275
18,971
17,216
1,337,638
1,771,709
5,244
11,058
788,955
1,257,830
145,886
133,138
113,823
105,096
1,053,908
1,507,122
2,391,546
3,278,831
2,143,623
2,404,944
1,834,934
1,834,594
79,805
(249,508)
(18,048)
475,926
1,896,691
2,061,012
29
246,932
343,932
2,143,623
2,404,944
* The group has initially applied AASB 16 at 1 August 2019 using the modified retrospective approach. Under this approach, comparative information
is not restated and the cumulative effect of initially applying AASB 16 is recognised in retained earnings at the date of initial application. Refer to note 3(a)(i).
Additionally comparative information has been restated due to a change in accounting policy described in note 3(a)(ii).
The consolidated balance sheet is to be read in conjunction with the attached notes.
58
Nufarm Limited | Annual Report 2020 Consolidated statement of cash flows
For the year ended 31 July 2020
Cash flows from operating activities
Profit/(loss) for the period – after tax
Adjustments for:
Tax expense
Net finance expense
Depreciation & amortisation
Asset rationalisation and restructuring
Europe Impairment loss
Pre tax (profit)/loss on sale of discontinued operations
Pre tax (profit)/loss on sale of fixed assets
Inventory write down
Share of (profits)/losses of associates net of tax
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)
Preference securities proceeds received net of costs
Preference securities proceeds redeemed
Debt establishment transaction costs
Proceeds from borrowings
Repayment of borrowings
Lease liability payments
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
Consolidated
Note
2020
$000
2019*
$000
(456,079)
38,310
6
6
6
8
19
6
14
19
12
6
25
25
25
25
29
29
6
186,102
88,470
208,031
50,461
188,275
(13,860)
(77)
19,051
(363)
8
42,639
107,241
171,708
–
–
–
–
12,640
(124)
(648)
(93,702)
(194,552)
(3,026)
(61,896)
(142,086)
(61,184)
52,948
73,756
(30,691)
242,734
7,721
–
(90,296)
(118,248)
(231,514)
10,051
65
(112,659)
(42,060)
98,131
854
2,098
(69,811)
(66,966)
–
–
1,283,641
–
(1,440)
–
(99,092)
(107,672)
1,115,592
(173,980)
–
296,008
97,000
(97,500)
–
–
(1,471)
(2,288)
1,721,216
1,350,589
(2,351,291)
(1,340,229)
(21,502)
(17,135)
–
–
(15,162)
(18,924)
(670,683)
269,994
213,395
194,145
505,687
294,343
(32,530)
17,199
15
686,552
505,687
* The group has initially applied AASB 16 at 1 August 2019 using the modified retrospective approach. Under this approach, comparative information is not restated.
The consolidated statement of cash flows is to be read in conjunction with the attached notes.
59
Nufarm Limited | Annual Report 2020
Consolidated statement of changes in equity
For the year ended 31 July 2020
Attributable to equity holders of the group
Consolidated
Share
capital
$000
Translation
reserve
$000
Capital
profit
reserve
$000
Other
reserve
$000
Retained
earnings
$000
Total
$000
Other
securities
$000
Non-
controlling
interest
$000
Total
equity
$000
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 year from continuing
operations
Profit/(loss) for the year from
discontinued operations
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
–
–
–
–
–
–
–
–
–
–
–
69,086
–
–
–
69,086
Transactions with owners,
recorded directly in equity
Employee share award entitlements
and share issuances
Dividends paid to shareholders
Dividend Reinvestment Plan
Distributions to Other Security holders
346
–
738
–
Contributions of equity net of
transaction costs
296,008
–
–
–
–
–
–
–
–
–
–
–
(11,138)
(11,138)
–
49,448
49,448
–
–
(7,356)
(7,356)
–
69,086
54
–
54
–
(10,735)
–
(10,735)
–
–
–
–
–
–
–
–
–
–
(10,681)
30,954
89,359
1,213
–
1,559
(19,662)
(19,662)
–
738
(10,957)
(10,957)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(11,138)
–
49,448
–
(7,356)
–
69,086
–
54
–
(10,735)
–
–
–
89,359
–
–
–
–
1,559
(19,662)
738
(10,957)
–
296,008
97,000
–
393,008
Balance at 31 July 2019
1,834,594
(270,302)
33,627
(12,833)
475,926
2,061,012
343,932
– 2,404,944
60
Nufarm Limited | Annual Report 2020 Attributable to equity holders of the group
Consolidated
Share
capital
$000
Translation
reserve
$000
Capital
profit
reserve
$000
Other
reserve
$000
Retained
earnings
$000
Total
$000
Other
securities
$000
Non-
controlling
interest
$000
Total
equity
$000
Balance at 1 August 2019
1,834,594
(270,302)
33,627
(12,833)
475,926
2,061,012
343,932
–
2,404,944
Adjustment on initial application
of AASB 16 (net of tax)
–
–
–
–
(15,910)
(15,910)
–
–
(15,910)
* Adjusted balance at 1 August 2019 1,834,594
(270,302)
33,627
(12,833)
460,016
2,045,102
343,932
– 2,389,034
Profit/(loss) for the year from
continuing operations
Profit/(loss) for the year from
discontinued operations
Other comprehensive income
Actuarial gains/(losses) on defined
benefit plans
Foreign exchange translation
differences for disposal groups
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
–
–
–
–
–
–
–
–
–
–
–
–
417,842
(96,656)
–
–
–
321,186
Transactions with owners,
recorded directly in equity
Employee share award entitlements
and share issuances
340
Dividends paid to shareholders
Dividend Reinvestment Plan
Distributions to Other Security holders
Preference securities redeemed
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(362,412)
(362,412)
–
(93,667)
(93,667)
–
–
–
(86)
6,117
167
(8,349)
(8,349)
–
–
–
–
–
417,842
(96,656)
(86)
6,117
167
6,198
(464,428)
(137,044)
–
–
–
2,269
–
–
(13,636)
(13,636)
1,929
–
–
–
–
–
–
(97,000)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(362,412)
–
(93,667)
–
(8,349)
–
417,842
–
(96,656)
–
–
–
(86)
6,117
167
–
(137,044)
–
–
–
–
–
2,269
–
–
(13,636)
(97,000)
Balance at 31 July 2020
1,834,934
50,884
33,627
(4,706)
(18,048)
1,896,691
246,932
–
2,143,623
* The group has initially applied AASB 16 at 1 August 2019 using the modified retrospective approach. Under this approach, comparative information
is not restated.
The amounts recognised directly in equity are disclosed net of tax.
The consolidated statement of changes in equity is to be read in conjunction with the attached notes.
61
Nufarm Limited | Annual Report 2020 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 2020 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).
Changes to significant accounting policies are described in note 3.
The consolidated financial statements were authorised for issue
by the Board of Directors on 23 September 2020.
(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 and
presentation currency. The company is of a kind referred to
in ASIC Corporations (Rounding in Financial/Director’s Reports)
Instrument 2016/191 and, in accordance with that Instrument, all
financial information presented in Australian dollars has been
rounded to the nearest thousand dollars 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.
62
(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 the higher of 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.
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 incorporating assumptions including expected
revenues from products, the return on assets, future costs,
growth rates and useful lives.
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.
Nufarm Limited | Annual Report 2020 (iv) Defined benefit plans
3 Significant accounting policies
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.
(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.
(viii) Coronavirus (COVID-19)
The group has carefully considered the effect of the Coronavirus in
preparing its financial statements for the year ended 31 July 2020.
The group did not identify any material financial effects, including
on the application of critical estimates and judgements.
(e) Reclassification
Where applicable comparatives are adjusted to present them
on the same basis as current period figures.
Except as described 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.
(a) Changes in significant accounting policies
(i) AASB 16 Leases
AASB 16 introduces a single, on-balance sheet lease 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.
The group has applied AASB 16 using the modified retrospective
approach, under which the cumulative effect of initial application
is recognised in retained earnings at 1 August 2019. Accordingly,
the comparative information presented has not been restated –
i.e. it is presented, as previously reported, under AASB 117 Leases
and related interpretations. The following details the change in
accounting policy and its impacts.
Definition of a lease
Previously, the group determined at the contract inception whether
an arrangement was or contained a lease under Interpretation
4 Determining Whether an Arrangement Contains a Lease. The
group now assesses whether a contract is or contains a lease
based on the new definition of a lease. Under AASB 16, a contract
is, or contains, a lease if the contract conveys a right to control
the use of an identified asset for a period of time in exchange
for consideration.
On transition to AASB 16, the group elected to apply the practical
expedient to grandfather the assessment of which transactions
are leases. It applied AASB 16 only to contracts that were
previously identified as leases. Contracts that were not identified
as leases under AASB 117 and Interpretation 4 were not reassessed.
Therefore, the definition of a lease under AASB 16 has been applied
only to contracts entered into or changed on or after 1 August 2019.
At inception or on reassessment of a contract that contains a
lease component, the group allocates the consideration in the
contract to each lease and non-lease component on the basis
of their relative stand-alone prices. However, for leases of
properties, the group has elected not to separate non-lease
components and will instead account for the lease and non-
lease components as a single lease component.
As a lessee
The group leases many assets including, but not limited to, motor
vehicles, plant and equipment, office buildings and land.
As a lessee, the group previously classified leases as operating
or finance leases based on its assessment of whether the lease
transferred substantially all of the risks and rewards of ownership.
Under AASB 16, the group recognises right-of-use assets and
lease liabilities.
However, the group has elected not to recognise right-of-use
assets and lease liabilities for some leases of low-value assets
(e.g. IT equipment). The group recognises the lease payments
associated with these leases as an expense on a straight-line
basis over the lease term.
63
Nufarm Limited | Annual Report 2020 3 Significant accounting policies continued
The carrying amounts of right-of-use assets, including those previously recognised as finance leases, are as below:
Balance at 1 August 2019
Balance at 31 July 2020
Land and
buildings
$000
Plant and
machinery
$000
106,723
91,157
26,637
19,580
Total
$000
133,360
110,737
The group presents lease liabilities in Loans and borrowings in the balance sheet (refer note 25).
Significant accounting policies
The group recognises a right-of-use asset and a lease liability at the
lease commencement date. The right-of-use asset is initially measured
at cost, and subsequently at cost less any accumulated depreciation
and impairment losses, and adjusted for certain remeasurements of the
lease liability.
The lease liability is initially measured at the present value of the
lease payments that are not paid at the commencement date,
discounted using the interest rate implicit in the lease or, if that
rate cannot be readily determined, the group’s incremental
borrowing rate relevant to the location of the lease. Generally,
the group uses incremental borrowing rates as the discount rate.
The lease liability is subsequently increased by the interest cost
on the lease liability and decreased by lease payments made.
It is remeasured when there is a change in future lease payments
arising from a change in an index or rate, a change in the
estimate of the amount expected to be payable under a residual
value guarantee, or as appropriate, changes in the assessment
of whether a purchase or extension option is reasonably certain
to be exercised or a termination option is reasonably certain not
to be exercised.
The group has applied judgement to determine the lease term for
some lease contracts in which the group has renewal options. The
assessment of whether the group is reasonably certain to exercise
such options impacts the lease term, which significantly affects the
amount of lease liabilities and right-of-use assets recognised.
Transition
Prior to the adoption of AASB 16, leases classified as operating
leases under AASB 117 were not capitalised and payments
made were recognised in profit or loss on a straight line basis
over the term of the lease. Lease incentives received were
recognised as an integral part of the total lease expense,
over the term of the lease.
At transition, for leases classified as operating leases under AASB 117,
lease liabilities were measured at the present value of the remaining
lease payments, discounted at the group’s incremental borrowing
rates as at 1 August 2019. Right-of-use assets are measured at either:
• their carrying amount as if AASB 16 had applied since the
commencement date, discounted using the lessee’s incremental
borrowing rate at the date of initial application (the group
applied this approach to its largest land lease); or
• an amount equal to the lease liability, adjusted by the amount
of any prepaid or accrued lease payments (the group applied
this approach to all other leases).
The group used the following practical expedients when
applying AASB 16 to leases previously classified as operating
leases under AASB 117:
• Applied the exemption not to recognise right-of-use assets and
liabilities for leases with less than 12 months of lease term,
except where there is an option and intent to renew or extend.
• excluded initial direct costs from measuring the right-of-use
asset at the date of initial application.
• used hindsight when determining the lease term if the contract
contains options to extend or terminate the lease.
The group classified certain leases as finance leases under AASB
117. For these finance leases, the carrying amount of the right-of-
use asset and the lease liability at 1 August 2019 were determined
at the carrying amount of the lease asset and lease liability under
AASB 117 immediately before that date (i.e. 31 July 2019).
Impacts on financial statements
Impacts on transition
On transition to AASB 16, the group recognised additional
right-of-use assets and additional lease liabilities, recognising
the difference in retained earnings.
The impact on the consolidated net assets as at 1 August 2019, is summarised below (increase/(decrease)):
Property, plant and equipment
Trade and other payables
Deferred tax assets
Payables
Deferred tax liabilities
Interest bearing loans and borrowings
Retained earnings
$000
123,099
185
37,856
6,531
(32,549)
(151,032)
15,910
When measuring lease liabilities for leases that were classified as operating leases, the group discounted lease payments using
relevant incremental borrowing rates at 1 August 2019. The weighted average rate applied is 4.03%.
Operating lease commitment at 31 July 2019 as disclosed in the group’s consolidated financial statements
Discounted using the relevant incremental borrowing rate
Finance lease liabilities recognised as at 31 July 2019
Recognition exemptions and extension options reasonably certain to be exercised
Lease liabilities recognised at 1 August 2019
64
$000
241,491
142,004
12,852
9,028
163,884
Nufarm Limited | Annual Report 2020Notes to the consolidated financial statements continued Impacts for the year
As a result of initially applying AASB 16, in relation to the leases that
were previously classified as operating leases, the group has
recognised $100.977 million of right-of-use assets and $131.976 million
of lease liabilities as at 31 July 2020. At 31 July 2020, the group
recognised right-of-use assets of $110.373 million and lease
liabilities of $144.996 million.
Also in relation to those leases under AASB 16, the group has
recognised depreciation and interest costs, instead of operating
lease expenses. During the year ended 31 July 2020, the group
recognised $24.054 million of depreciation charges and
$5.886 million of interest costs from these leases. Of the amounts
recognised, $22.202 million of depreciation charges, and
$5.605 million of interest costs were recognised as part of
continuing operations.
(ii) Other
AASB Interpretation 23 Uncertainty over Income Tax Treatment
This interpretation addresses the accounting for income taxes
when tax treatments involve uncertainty that affects the application
of AASB 112 Income Taxes. The interpretation does not apply
to taxes or levies outside the scope of AASB 112, nor does it
specifically include requirements relating to interest and penalties
associated with uncertain tax treatments. The group has reviewed
its internal policies and tax risk frameworks and has determined
that adoption of the Interpretation does not have a material
impact. The Interpretation had an effective date for the group
of 1 August 2019.
IFRIC agenda decision – Lease Term and Useful Life of
Leasehold Improvements
In November 2019, the International Financial Reporting
Interpretations Committee (IFRIC) issued a final agenda decision,
Lease Term and Useful Life of Leasehold Improvements, on how
the lease term of a cancellable or renewable lease should be
determined for both the lessor and lessee when applying AASB 16
Leases. The decision clarifies that the broader economics and not
only the contractual termination payments should be considered
in determining lease terms. The group has considered and
retrospectively adopted this IFRIC Agenda Decision as at 31 July
2020, which had had an immaterial effect on the group’s results.
IFRIC draft agenda decision – Multiple Tax Consequences
of Recovering an Asset
In May 2020, the IFRS Interpretations Committee (IFRS IC) published
its final agenda decision ‘Multiple Tax Consequences of Recovering
an Asset (IAS 12 Income taxes)’ which considers how an entity
accounts for deferred taxes on an asset that has two distinct
tax consequences over its life that cannot be offset (taxable
economic benefits from use and capital gains on disposal or
expiry). The IFRS IC concluded that in these circumstances an entity
identifies separate temporary differences (and deferred taxes)
that reflect these distinct and separate tax consequences of
recovering the asset’s carrying amount.
The group’s accounting policy had been to consider these two
tax consequences of recovering the asset’s carrying amount
together as they crystallised over the asset’s life, irrespective
of how the asset was recovered.
As a result of the IFRS IC agenda decision, Nufarm Limited has
changed its accounting policy retrospectively, adjusting the
deferred tax accounting for affected intangible assets. The effect
of the change in accounting policy for the comparative reporting
period is an increase in both goodwill and deferred tax liabilities
of $7.255 million (refer notes 18 and 23).
Other amendments made to existing standards that are not yet
effective are not expected to result in a material effect on the
group’s financial position or its performance.
(b) 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.
65
Nufarm Limited | Annual Report 2020 3 Significant accounting policies continued
(iv) Investments in equity accounted investees
(d) 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).
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.
The group’s interests in equity-accounted investees comprise
interests in associates and joint ventures.
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.
(c) 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.
66
Nufarm Limited | Annual Report 2020Notes to the consolidated financial statements continued 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.
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.
(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-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.
67
Nufarm Limited | Annual Report 2020 3 Significant accounting policies continued
The group designates certain derivatives as either:
• hedges of the fair value of recognised assets or liabilities
or a firm commitment (fair value hedges);
• hedges of a particular risk associated with the cash flows
of recognised assets and liabilities and highly probable
forecast transactions (cash flow hedges); or
• hedges of a net investment in a foreign operation (net
investment hedges).
The group documents at the inception of the hedging transaction
the relationship between hedging instruments and hedged items,
as well as its risk management objective and strategy for
undertaking various hedge transactions.
The 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.
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)
68
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 or are not designated
for hedge accounting
Certain derivative instruments do not qualify, or are not designated
for hedge accounting. Changes in the fair value of any derivative
instrument that does not qualify, or is not designated for hedge
accounting are recognised immediately in profit or loss.
(e) Property, plant and equipment
(i) Recognition and measurement
Items of property, plant and equipment are measured at cost
less accumulated depreciation and impairment losses.
Cost includes expenditure that is directly attributable to the
acquisition of the asset. The cost of self-constructed assets
includes the cost of materials and direct labour, any other costs
directly attributable to bringing the asset to a working condition
for its intended use, and the costs of dismantling and removing
the items and restoring the site on which they are located, and
capitalised borrowing costs. Purchased software that is integral
to the functionality of the related equipment is capitalised as part
of that equipment.
When parts of an item of property, plant and equipment have
different useful lives, they are accounted for as separate items
(major components) of property, plant and equipment.
Gains and losses on disposal of an item of property, plant and
equipment are determined by comparing the proceeds from
disposal with the carrying amount of property, plant and
equipment and are recognised net in 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.
Nufarm Limited | Annual Report 2020Notes to the consolidated financial statements continued (iii) Depreciation
(iv) Other intangible assets
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.
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.
The estimated useful lives for the current and comparative periods
are as follows:
• buildings
• leasehold improvements
• plant and equipment
• motor vehicles
• computer equipment
15-50 years
5 years
10-15 years
5 years
3 years
(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:
Depreciation methods, useful lives and residual values are
reassessed at each reporting date.
(f) Intangible assets
(i) Goodwill
Goodwill that arises upon the acquisition of business combinations
is included in intangible assets. Subsequent to initial recognition,
goodwill is measured at cost less accumulated impairment
losses. In respect of equity accounted investees, the carrying
amount of goodwill is included in the carrying amount of the
investment, and an impairment loss on such an investment is
not allocated to any asset, including goodwill, that forms part
of the carrying amount of the equity accounted investee.
(ii) Research and development
Expenditure on research activities, undertaken with the prospect
of gaining new scientific or technical knowledge and
understanding, is recognised in profit or loss when incurred.
Development activities involve a plan or design for the production
of new or substantially improved products and processes.
Development expenditure is capitalised only if development
costs can be measured reliably, the product or process is
technically and commercially feasible, future economic benefits
are probable and the group has sufficient resources to complete
development and to use or sell the asset. The expenditure
capitalised includes the cost of materials, direct labour and
overhead costs that are directly attributable to preparing the
asset for its intended use and capitalised borrowing costs.
Development expenditure that does not meet the above
criteria is recognised in profit or loss as incurred.
Capitalised development expenditure is measured at cost less
accumulated amortisation and accumulated impairment losses.
(iii) Intellectual property
Intellectual property consists of product registrations, product
access rights, trademarks, task force seats, product distribution
rights and product licences acquired from third parties. 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.
• 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.
(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.
69
Nufarm Limited | Annual Report 2020 3 Significant accounting policies continued
Objective evidence of impairment includes default or delinquency
by a debtor, indications that a debtor will enter bankruptcy, and,
in the case of an investment in an equity security, a significant
or prolonged decline in its fair value.
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.
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.
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.
(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.
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.
(j) Employee benefits
(i) Defined contribution plans
A defined contribution plan is a post-employment benefit plan
under which an entity pays fixed contributions into a separate
entity and will have no legal or constructive obligation to pay
further amounts. Obligations for contributions to defined
contribution plans are recognised as an employee benefit
expense in profit or loss in the periods during which services are
rendered by employees. Prepaid contributions are recognised
as an asset to the extent that a cash refund or a reduction in future
payments is available.
(ii) Defined benefit plans
The group’s net obligation in respect of defined benefit plans is
calculated separately for each plan by estimating the amount
of future benefit that employees have earned in the current and
prior periods, discounting that amount and deducting the fair
value of any assets.
The calculation of defined benefit obligation is performed
annually by a qualified actuary using the projected unit credit
method. When the calculation results in a potential asset for the
group, the recognised asset is limited to the present value of
economic benefits available in the form of any future refunds
from the plan or reductions in future contributions to the plan.
To calculate the present value economic benefits, consideration
is given to any applicable minimum funding requirements.
Remeasurements of the net defined benefit liability, which
comprises 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.
(i) Assets held for sale
(iii) Other long-term employee benefits
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.
70
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.
Nufarm Limited | Annual Report 2020Notes to the consolidated financial statements continued (iv) Termination benefits
(i) Goods sold
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. Refer 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 group 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.
(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
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.
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.
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. 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.
71
Nufarm Limited | Annual Report 2020 3 Significant accounting policies continued
(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 or losses 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.
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.
72
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.
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.
Nufarm Limited | Annual Report 2020Notes to the consolidated financial statements continued (q) Earnings per share
(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).
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 group
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.
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) Intangible 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.
73
Nufarm Limited | Annual Report 2020 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.
The seed technologies business deals in the sale of seeds
and seed treatment products. The seed technologies business
is managed on a worldwide basis.
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 and North America. During the year ended 31 July 2020
the majority of the former geographic segment of Latin America
was divested, and this segment is classified as a discontinued
operation. The remaining Latin American operations (Mexico)
are now managed via the North America segment along with
the USA and Canada.
Information regarding the results of each operating segment is
included below. Performance is measured based on underlying
EBITDA, as defined on following page, as included in the internal
management reports that are reviewed by the group’s CEO.
Underlying EBITDA 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.
Crop Protection
Australia
and New
Zealand
$000
Asia
$000
Europe
$000
North
America
$000
Seed
Technologies
Global
$000
Non-
Operating
Corporate
$000
Continuing
Total
$000
Discontinued
operation
Total
$000
Total
$000
Group
Total
$000
2020
Operating
Segments
Revenue
Total segment revenue
562,897
165,947
783,028
1,051,285 2,563,157
198,831
85,387
2,847,375
643,630
3,491,005
Results
Underlying EBITDA (a)
38,800
30,481
99,255
92,333
260,869
31,471
(56,573)
235,767
58,918
294,685
Depreciation &
amortisation excluding
material items
(16,281)
(4,563)
(124,169)
(32,608)
(177,621)
(22,203)
(1,588)
(201,412)
(6,619)
(208,031)
Underlying EBIT (a)
22,519
25,918
(24,914)
59,725
83,248
9,268
(58,161)
34,355
52,299
86,654
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
(248,670)
–
(248,670)
(96,191)
(310,506)
74
Nufarm Limited | Annual Report 2020Notes to the consolidated financial statements continued Crop Protection
Australia
and New
Zealand
$000
Asia
$000
Europe
$000
North
America
$000
Seed
Technologies
Global
$000
Non-
Operating
Corporate
$000
Total
$000
Continuing
Total
$000
Discontinued
operation
Total
$000
Group
Total
$000
2019*
Operating
Segments
Revenue
Total segment revenue
452,368
190,285
814,845
1,031,935 2,489,433
184,139
– 2,673,572
1,084,018
3,757,590
Results
Underlying EBITDA (a)
20,685
26,979
163,849
107,602
319,115
38,475
(57,448)
300,142
120,151
420,293
Depreciation &
amortisation excluding
material items
(12,537)
(3,251)
(107,720)
(25,042)
(148,550)
(14,153)
(2,146)
(164,849)
(6,859)
(171,708)
Underlying EBIT (a)
8,148 23,728
56,129
82,560
170,565
24,322
(59,594)
135,293
113,292
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
(50,770)
–
(50,770)
(63,730)
20,793
(a) Underlying EBIT is earnings before net finance costs, taxation and material items. Underlying EBITDA is Underlying EBIT, before depreciation, amortisation
and impairments.
*
Comparative information has been re-presented due to a discontinued operation (see Note 12). The group has initially applied AASB 16 at 1 August 2019
using the modified retrospective approach. Under this approach, comparative information is not restated and the cumulative effect of initially applying
AASB 16 is recognised in retained earnings at the date of initial application.
75
Nufarm Limited | Annual Report 2020 5 Operating segments continued
Crop protection
2020
Operating
Segments
Assets
Australia
and New
Zealand
$000
Asia
$000
Europe
$000
Latin
America
$000
North
America
$000
Seed
Technologies
Global
$000
Non-
Operating
Corporate
$000
Total
$000
Group
Total
$000
Segment assets
453,977
194,299
1,655,277
Equity accounted investments
–
1,701
–
Total assets
453,977
196,000
1,655,277
Liabilities
Segment liabilities
204,700
234,856
334,628
Total liabilities
204,700
234,856
334,628
–
–
–
–
–
871,939
3,175,492
532,109
825,318
4,532,919
–
1,701
549
–
2,250
871,939
3,177,193
532,658
825,318
4,535,169
269,610
1,043,794
53,134
1,294,618
2,391,546
269,610
1,043,794
53,134
1,294,618
2,391,546
Other segment information
Capital expenditure
18,266
1,170
65,802
6,913
29,284
121,435
42,519
–
163,954
2019**
Operating
Segments (restated)
Assets
Crop protection
Australia
and New
Zealand
$000
Asia
$000
Europe
$000
Latin
America
$000
North
America
$000
Seed
Technologies
Global
$000
Non-
Operating
Corporate
$000
Total
$000
Group
Total
$000
Segment assets
455,942
105,280
1,876,775
997,737
912,105
4,347,839
493,151
840,775
5,681,765
Equity accounted investments
–
1,559
–
–
–
1,559
451
–
2,010
Total assets
455,942
106,839
1,876,775
997,737
912,105
4,346,575
493,602
840,775
5,683,775
Liabilities
Segment liabilities
124,353
330,084
346,254
284,393
240,715
1,325,799
52,842
1,900,190
3,278,831
Total liabilities
124,353
330,084
346,254
284,393
240,715
1,325,799
52,842
1,900,190
3,278,831
Other segment information
Capital expenditure
18,601
1,582
60,499
7,729
57,134
145,545
44,864
–
190,409
** The group has initially applied AASB 16 at 1 August 2019 using the modified retrospective approach. Under this approach, comparative information
is not restated and the cumulative effect of initially applying AASB 16 is recognised in retained earnings at the date of initial application. Refer to note 3(a)(i).
Additionally comparative information has been restated due to a change in accounting policy described in note 3(a)(ii).
76
Nufarm Limited | Annual Report 2020Notes to the consolidated financial statements continued Geographical information – revenue by location of customer
United States of America
Australia
Rest of world (b)
Total continuing operations
Brazil – discontinuing
Rest of world – discontinuing
Total
Revenue
2020
$000
2019*
$000
898,486
903,387
517,681
407,103
1,431,208
1,363,082
2,847,375
2,673,572
553,332
940,426
90,298
143,592
3,491,005
3,757,590
(b) Other than Australia and the United States of America sales to other countries are individually less than 10% of the group’s total continuing revenues.
* Comparative information has been re-presented due to a discontinued operation (note 12).
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
2020
$000
539,985
426,203
320,848
6,337
2019*
$000
restated
721,971
413,362
298,133
281,099
292,043
280,797
205,311
229,430
126,965
212,484
1,917,692
2,437,276
(c) Other than Germany, Australia, United States of America, Brazil (for year ended 31 July 2019) and the 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.
* Comparative information has been restated due to a change in accounting policy described in note 3(a)(ii).
77
Nufarm Limited | Annual Report 2020 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.
Material items by category:
Legal costs
Idle plant capacity
Asset rationalisation and restructuring
Europe impairment loss
South American business disposal
– gain/(loss) on disposal
– other associated net expenses
Net tax assets write-off
Total
Consolidated
Consolidated
2020
$000
pre-tax
2020
$000
after-tax
2019
$000
pre-tax
2019
$000
after-tax
(9,934)
(9,934)
–
(50,461)
(188,275)
52,324
(38,464)
–
–
(50,461)
(179,941)
(77,383)
(38,464)
(32,941)
(10,517)
(21,386)
(18,867)
(10,517)
(21,386)
(18,867)
–
–
–
–
–
–
–
–
(234,810)
(389,124)
(50,770)
(50,770)
Material items from continuing operations
Material items from discontinuing operations
(248,670)
(281,807)
13,860
(107,317)
2020 Material items
Legal costs
During the year the group has incurred additional legal costs
associated with the enforcement of Omega-3 canola trademark
and patent matters.
Asset rationalisation and restructuring
A performance improvement program commenced in the ANZ
business during the year ended 31 July 2019, and has been
extended during 31 July 2020 across the group. This program
includes assessing the group’s organisational structure and its
assets. Asset rationalisation and organisational restructuring costs
amounting to $50.461 million mainly relate to the rationalisation
of Australian and European manufacturing assets, including the
decision to close 2,4-D synthesis in Linz, Austria and Nufarm’s
insecticide and fungicide facility in Laverton, Australia.
Europe impairment loss
The group completed an assessment of the carrying value
of its European assets, following recent operating performance
and a moderated outlook of future earnings. The expectation
of continuing margin pressure in the European base product
portfolio due to higher manufacturing costs and increased
competition has been reflected in the carrying value assessment,
resulting in the recognition of an impairment charge.
Net tax asset write-off
The group assessed recognised and unrecognised deferred
tax assets and determined that specific deferred tax assets
recognised in the balance sheet should be derecognised,
and that specific unrecognised deferred tax assets should be
recognised in the balance sheet, reflecting changing expectations
of the geographic distribution of assessable income. The net
impact of the assessment is a reduction in the carrying value of
the group’s deferred tax assets of $32.941 million for continuing
and discontinuing operations. This includes a write down in
European tax assets of $41.471 million ($24.592 million in July 2020
and $16.879 million in January 2020) impacting continuing
operations. Additionally Brazilian tax assets of $8.529 million were
recognised in January 2020 impacting discontinued operations.
South American business disposal
On 30 September 2019, the group publicly announced the
decision of its Board of Directors to divest its shares in certain
entities, that together, comprise the majority of the Latin American
crop protection segment and the South American seed treatment
business (together known as the South American business).
The sale was successfully completed on 1 April 2020, resulting
in a loss on disposal after tax (see note 12).
As at 31 July 2020, other associated net expenses of $38.464 million
to effect the disposal have been incurred. Included in this balance
are costs of $11.554 million relating to a contract signed as part
of the disposal that subsequently became onerous. Additionally
there are costs amounting to $8.514 million which were incurred
during the period as the group advanced a debt restructuring
alongside the sale of the South American business. This initiative
was focused on strengthening Nufarm’s balance sheet, but was
ceased post the announcement of the divestment. The remaining
costs include, but are not limited to, advisor fees and other
separation costs.
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.
78
Nufarm Limited | Annual Report 2020Notes to the consolidated financial statements continued Material items are classified by function as follows:
Year ended 31 July 2020
$’000s
Continuing Operations
Legal costs
Asset rationalisation and restructuring
Europe impairment loss
Total material items
Total material items included in operating profit
Discontinued Operations
South American business disposal
– gain/(loss) on disposal
– other associated net expenses
Total material items – discontinued operations
Year ended 31 July 2019
$’000s
Legal costs
Idle plant capacity
Asset rationalisation and restructuring
Total material items
Total material items included in operating profit
Material items impacting cash flows are as follows:
Year ended 31 July 2020
Cash flows from operating activities
Net operating cash flows
Cash flows from investing activities
Proceeds from sale of business and investments
Other investing activities
Net investing cash flows
Selling,
marketing and
distribution
expense
Cost of sales
General &
administrative
expense
Net
financing
costs
Total
Pre-tax
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(9,934)
(50,461)
(188,275)
(248,670)
(248,670)
52,324
(38,464)
13,860
–
–
–
–
–
–
–
–
Selling,
marketing and
distribution
expense
General &
administrative
expense
Net financing
costs
Cost of sales
–
(21,386)
–
(21,386)
(21,386)
–
–
(2,517)
(2,517)
(2,517)
(10,517)
–
(16,350)
(26,867)
(26,867)
–
–
–
–
–
(9,934)
(50,461)
(188,275)
(248,670)
(248,670)
52,324
(38,464)
13,860
Total
Pre-tax
(10,517)
(21,386)
(18,867)
(50,770)
(50,770)
Underlying
continuing
$000
Material
items
continuing
$000
Discontinued
operations
$000
Total
group
$000
216,553
(30,510)
(417,557)
(231,514)
–
(161,514)
(161,514)
–
–
–
1,283,641
1,283,641
(6,535)
(168,049)
1,277,106
1,115,592
Net operating and investing cash flows
55,039
(30,510)
859,549
884,078
Year ended 31 July 2019
Cash flows from operating activities
Net operating cash flows
Cash flows from investing activities
Proceeds from sale of business and investments
Other investing activities
Net investing cash flows
Underlying
continuing
$000
Material
items
continuing
$000
Discontinued
operations
$000
Total
group
$000
79,567
(40,318)
58,882
98,131
–
(166,895)
(166,895)
–
–
–
–
(7,085)
(7,085)
–
(173,980)
(173,980)
Net operating and investing cash flows
(87,328)
(40,318)
51,797
(75,849)
79
Nufarm Limited | Annual Report 2020
7 Other income
Dividend income
Rental income
Sundry income
Total other income
* Comparative information has been re-presented due to a discontinued operation (note 12).
8 Other expenses
The following expenses were included in the period result:
Depreciation and amortisation
Impairment loss (1)
Inventory write down
Consolidated
2020
$000
–
48
5,785
5,833
2019*
$000
–
287
10,156
10,443
Consolidated
2020
$000
2019*
$000
(201,412)
(164,849)
(210,996)
(19,051)
–
(11,614)
*
Comparative information has been re-presented due to a discontinued operation (see Note 12). The group has initially applied AASB 16 at 1 August 2019
using the modified retrospective approach. Under this approach, comparative information is not restated and the cumulative effect of initially applying
AASB 16 is recognised in retained earnings at the date of initial application.
(1) Impairment losses incurred during the year ended 31 July 2020 relate to Europe impairment loss of $188.275 million, and asset rationalisation activities.
These expenses are included in material items in note 6.
80
Nufarm Limited | Annual Report 2020Notes to the consolidated financial statements continued 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
* Comparative information has been re-presented due to a discontinued operation (note 12).
The Restructuring expense relates to the group’s asset rationalisation and organisational restructure program.
These expenses 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
2020
$000
2019*
$000
restated
(296,824)
(263,901)
(50,277)
(12,605)
(3,637)
(6,399)
(1,302)
(12,623)
(48,558)
(12,837)
(4,505)
(6,297)
(3,368)
(8,130)
(383,667)
(347,596)
Consolidated
2020
$000
3,405
3,405
2019*
$000
restated
2,512
2,512
(64,190)
(64,928)
(4,020)
(7,821)
(23,565)
(99,596)
(4,239)
(2,029)
4,954
(66,242)
(96,191)
(63,730)
*
Comparative information has been re-presented due to a discontinued operation (see Note 12). The group has initially applied AASB 16 at 1 August 2019
using the modified retrospective approach. Under this approach, comparative information is not restated and the cumulative effect of initially applying
AASB 16 is recognised in retained earnings at the date of initial application.
81
Nufarm Limited | Annual Report 2020 11 Income tax expense
Recognised in the income statement
Current tax expense/(benefit)
Current period
Tax free income and non-recognition of tax assets on material items
Adjustments for prior periods
Current tax expense/(benefit)
Deferred tax expense/(benefit)
Consolidated
2020
$000
2019*
$000
restated
(63,338)
64,758
(3,814)
(2,394)
23,314
15,262
(4,894)
33,682
Origination and reversal of temporary differences and tax losses
(22,354)
(14,834)
Effect of changes in tax rates
(Recognition)/derecognition of tax assets
European tax assets write-down – material items
Deferred tax expense/(benefit)
236
34,947
41,471
54,300
71
13,012
–
(1,751)
Total income tax expense/(benefit) in income statement
51,906
31,931
* Comparative information has been re-presented due to a discontinued operation (note 12).
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
Initial (recognition)/derecognition of tax assets
European 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)
* Comparative information has been re-presented due to a discontinued operation (note 12).
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
82
Consolidated
2020
$000
(310,506)
(93,152)
6,864
1,056
236
34,947
41,471
64,758
763
32
(1,255)
55,720
(3,814)
51,906
2020
$000
(3,499)
(3,499)
(3,776)
(167)
(3,943)
2019*
$000
restated
20,793
6,238
6,264
3,360
71
13,012
–
15,262
(5,021)
(3)
(2,358)
36,825
(4,894)
31,931
2019
$000
(4,205)
(4,205)
(1,615)
–
(1,615)
Nufarm Limited | Annual Report 2020Notes to the consolidated financial statements continued 12 Discontinued operation
On 1 April 2020, the group completed the divestment of certain entities that, together, comprise the majority of the Latin American crop
protection segment and the South American seed treatment business (together known as the South American business).
Results of discontinued operation – for the year ended 31 July
Revenue
Cost of sales
Gross profit
Net operating expenses
Operating profit/(loss)
Net financing costs
Profit/(loss) before tax
Income tax benefit/(expense)
Profit/(loss) from operating activities after tax
Loss on sale of discontinued operation, net of tax
Profit/(loss) from discontinued operation after tax
2020
$000
2019
$000
643,630
1,084,018
(487,538)
(816,755)
156,092
267,263
(103,793)
52,299
(153,971)
113,292
(25,631)
(53,136)
26,668
60,156
(4,488)
(10,708)
22,180
49,448
(115,847)
–
(93,667)
49,448
Foreign exchange translation differences for disposal group reclassified to profit or loss
417,842
–
Other comprehensive income from discontinued operations
324,175
49,448
Basic earnings per share (cents)
Diluted earnings per share (cents)
2020
(24.7)
(24.6)
2019
13.4
13.3
The loss for the period from the discontinued operation of $93.667 million was attributable entirely to the equity holders of the group.
Cash flows from (used in) in discontinued operation
Net proceeds used in operating activities
Net proceeds from investing activities
Net proceeds from sale of business
Net cash flow for the period
Details of the sale of the discontinued operation
Total consideration received
Carrying amount of net assets sold
Other associated net expenses
Gain on sale before income tax and reclassification of foreign currency translation reserve
Reclassification of foreign currency reserve
Income tax benefit/(expense)
Loss on sale of discontinued operation after tax
2020
$000
(417,557)
(6,535)
1,283,641
859,549
2020
$000
1,283,641
(813,475)
(38,464)
431,702
(417,842)
(129,707)
(115,847)
2019
$000
58,882
(7,085)
–
51,797
83
Nufarm Limited | Annual Report 2020 2020
$000
763,135
279,410
13,503
31,769
57,193
131,986
16
1,277,012
(443,797)
(1,991)
(3,269)
(14,480)
(463,537)
813,475
Consolidated
2020
$000
–
–
2019
$000
97,500
97,500
Consolidated
2020
$000
2019
$000
675,664
424,274
10,888
81,413
686,552
505,687
–
–
686,552
505,687
12 Discontinued operation continued
Carrying amount of net assets sold as at the date of sale (1 April 2020)
Trade and other receivables
Inventories
Current tax assets
Property plant and equipment
Deferred tax assets
Intangibles
Other
Total assets
Trade and other payables
Current tax liabilities
Provisions
Deferred tax liabilities
Total liabilities
Net assets
Refer to note 34 for discussion on treatment of Brazilian contingent tax liabilities.
13 Preference securities receivable
Preference securities receivable
Total preference securities receivable
Refer to note 29 for further information on preference securities.
14 Acquisition of businesses and acquisition of non-controlling interests
There were no acquisitions in either the current or prior year.
15 Cash and cash equivalents
Bank balances
Call deposits
Bank overdraft
Total cash and cash equivalents
84
Nufarm Limited | Annual Report 2020Notes to the consolidated financial statements continued 16 Trade and other receivables
Current
Trade receivables
Provision for impairment losses
Prepayments
Derivative financial instruments
Other receivables
Current receivables
Non-current
Trade receivables
Trade finance receivables
Other receivables
Non-current receivables
Consolidated
2020
$000
2019
$000
880,120
1,297,372
(28,689)
(49,531)
851,431
1,247,841
36,152
3,373
91,213
42,163
3,829
84,918
982,169
1,378,751
–
–
3,091
3,091
73,024
22,583
6,370
101,977
Total trade and other receivables
985,260
1,480,728
17 Inventories
Raw materials
Work in progress
Finished goods
Provision for obsolescence of finished goods
Total inventories
Consolidated
2020
$000
2019
$000
256,646
414,005
16,243
674,879
10,442
816,105
947,768
1,240,552
(14,962)
(12,311)
932,806
1,228,241
85
Nufarm Limited | Annual Report 2020 18 Tax assets and liabilities
Current tax assets and liabilities
The current tax asset for the group of $15.950 million (2019: $36.320 million) represents the amount of income taxes recoverable in respect
of prior periods and that arose from the payment of tax in excess of the amounts due to the relevant tax authority. The current tax liability
for the group of $12.354 million (2019: $18.971 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:
Assets
Liabilities
Net
Consolidated
Property, plant and equipment
Intangible assets
Employee benefits
Provisions
Other items
Tax value of losses carried forward
2020
$000
14,271
6,540
25,056
19,059
28,253
40,123
2019
$000
13,648
9,158
21,099
24,770
12,450
131,872
2020
$000
(7,690)
(93,528)
–
(21,421)
(23,247)
–
2019*
$000
Restated
(8,295)
(108,521)
–
(1,060)
(15,262)
–
Net tax assets/(liabilities)
133,302
212,997
(145,886)
(133,138)
Movement in temporary differences during the year
Adjustments
on initial
application
of AASB 16
$000
Recognised
in income
$000
Recognised
in equity
$000
Currency
adjustment
$000
Consolidated 2020
Property, plant and
equipment
Intangibles assets
Employee benefits
Provisions
Other items
Tax value of losses
carried forward
Balance
2019
$000
5,353
(99,363)
21,099
23,710
(2,812)
131,872
79,859
Consolidated 2019
Property, plant and equipment
Intangibles assets
Employee benefits
Provisions
Other items
Tax value of losses carried forward
–
–
–
–
5,307
–
5,307
Balance
2018*
$000
restated
8,634
(85,098)
19,556
19,969
(1,216)
119,309
81,154
(1,990)
647
(740)
(13,299)
(7,585)
(31,333)
(54,300)
–
–
3,776
–
(5,307)
–
(1,531)
390
3,915
434
(1,580)
1,475
(3,840)
794
Recognised
in income
$000
Recognised
in equity
$000
Currency
adjustment
$000
Other
movement
$000
(2,883)
(9,208)
2,998
2,798
(58)
8,105
1,752
–
–
(1,615)
–
–
–
(1,615)
(398)
(5,057)
160
943
(1,538)
4,458
(1,432)
–
–
–
–
–
–
–
2020
$000
6,581
(86,988)
25,056
(2,362)
5,006
40,123
(12,584)
Disposal of
South
America
business
$000
2,828
7,813
487
(11,193)
13,928
(56,576)
(42,713)
2019*
$000
Restated
5,353
(99,363)
21,099
23,710
(2,812)
131,872
79,859
Balance
2020
$000
6,581
(86,988)
25,056
(2,362)
5,006
40,123
(12,584)
Balance
2019
$000
5,353
(99,363)
21,099
23,710
(2,812)
131,872
79,859
* Comparative information has been restated due to a change in accounting policy described in note 3(a)(ii).
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.
Deferred tax assets and liabilities
Unrecognised deferred tax liability
At 31 July 2020, a deferred tax liability of $34.534 million (2019: $32.762 million) relating to investments in subsidiaries has not been
recognised because the group 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 2020, there are unrecognised deferred tax assets in respect of tax losses and timing differences of $244.786 million
(2019: $113.864 million).
86
Nufarm Limited | Annual Report 2020Notes to the consolidated financial statements continued 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
2020
2019
2020
$000
2019
$000
Seedtech Pty Ltd (1)
Associate
Australia 31 December
25.00%
25.00%
549
451
Leshan Nong Fu Trading Co., Ltd (2) Joint Venture
China
31 December
35.00%
35.00%
1,701
1,559
2,250
2,010
2020
$000
98
265
363
2019
$000
40
84
124
(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 formulated 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
Non-current investments
Other investments
Total non-current investments
21 Other non-current assets
There were no other non-current assets in the current or prior period.
22 Property, plant and equipment
2020
Cost
Consolidated
2020
$000
389
389
2019
$000
421
421
Consolidated
Land
and
buildings
$000
Plant and
machinery
$000
Capital
work in
progress
$000
Total
$000
Balance at 1 August 2019
216,252
656,680
79,075
952,007
Recognition of right-of-use asset on initial application of AASB 16
Additions
Disposals and write-offs
Other transfers
Foreign exchange adjustment
Balance at 31 July 2020
Accumulated depreciation and impairment losses
Balance at 1 August 2019
Depreciation charge for the year
Impairment charge for the year (1)
Disposals and write-offs
Other transfers
Foreign exchange adjustment
Balance at 31 July 2020
106,722
12,121
(37,447)
35,815
(8,745)
16,377
12,748
(32,277)
37,238
(4,712)
–
39,996
(3,969)
(73,053)
123,099
64,865
(73,693)
–
(829)
(14,286)
324,718
686,054
41,220
1,051,992
(123,029)
(435,396)
(23,269)
(2,529)
11,180
–
2,701
(41,138)
(20,192)
18,331
–
993
(134,946)
(477,402)
–
–
–
–
–
–
–
(558,425)
(64,407)
(22,721)
29,511
–
3,694
(612,348)
Net property, plant and equipment at 31 July 2020
189,772
208,652
41,220
439,644
(1) Impairment losses incurred during the year ended 31 July 2020 relate to asset rationalisation activities. These expenses are included in material items in note 6.
87
Nufarm Limited | Annual Report 2020 22 Property, plant and equipment continued
2019
Cost
Balance at 1 August 2018
Additions
Disposals and write-offs
Other transfers
Foreign exchange adjustment
Balance at 31 July 2019
Land
and
buildings
$000
Plant and
machinery
$000
Consolidated
Leased
plant and
machinery
$000
206,234
581,790
12,684
1,740
(1,668)
2,794
7,152
45,458
(11,116)
12,399
14,700
461
(132)
288
148
Capital
work in
progress
$000
56,942
36,624
(170)
(15,893)
1,572
Total
$000
857,650
84,283
(13,086)
(412)
23,572
216,252
643,231
13,449
79,075
952,007
Accumulated depreciation and impairment losses
Balance at 1 August 2018
Depreciation charge for the year
Disposals and write-offs
Other transfers
Foreign exchange adjustment
Balance at 31 July 2019
(114,067)
(402,077)
(5,673)
573
(14)
(3,848)
(31,863)
10,748
471
(9,486)
(2,757)
(442)
101
(45)
(46)
(123,029)
(432,207)
(3,189)
–
–
–
–
–
–
(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
23 Intangible assets
2020
Cost
Consolidated
Intellectual Property
Goodwill
$000
indefinite
life
$000
finite
life
$000
Capitalised
development
costs
$000
Computer
software
$000
Total
$000
Balance at 1 August 2019
483,044
1,718
1,208,577
482,099
175,533
2,350,971
Additions
Disposals and write-offs
Other transfers
Foreign exchange adjustment
Balance at 31 July 2020
–
(78,866)
–
(21,619)
382,559
43
–
–
6
10,828
(83,621)
2,619
(15,242)
73,846
(21,110)
97
(873)
14,375
99,092
(25,905)
(209,502)
(2,716)
(2,303)
–
(40,031)
1,767
1,123,161
534,059
158,984
2,200,530
Accumulated amortisation and impairment losses
Balance at 1 August 2019
(109,275)
(1,718)
(284,054)
(155,004)
(74,631)
(624,682)
Amortisation charge for the year
Impairment loss
Disposals and write-offs
Other transfers
Foreign exchange adjustment
Balance at 31 July 2020
–
(121,946)
46,871
–
10,257
(174,093)
–
–
–
–
(49)
(83,583)
(39,308)
(20,733)
(61,983)
14,530
4,062
7,146
(4,346)
4,353
(2,266)
(162)
–
10,293
(1,796)
1,828
(1,767)
(403,882)
(196,733)
(85,039)
(143,624)
(188,275)
76,047
–
19,020
(861,514)
Intangibles carrying amount at 31 July 2020
208,466
–
719,279
337,326
73,945
1,339,016
(1) Impairment losses incurred during the year ended 31 July 2020 relate to asset rationalisation activities. These expenses are included in material items in note 6.
88
Nufarm Limited | Annual Report 2020Notes to the consolidated financial statements continued 2019
Cost
Consolidated
Intellectual Property
Goodwill*
$000
Restated
indefinite
life
$000
finite
life
$000
Capitalised
development
costs
$000
Computer
software
$000
Total
$000
Balance at 1 August 2018 (restated)
463,577
1,680
1,162,306
388,744
153,537
2,169,844
Additions
Disposals and write-offs
Other transfers
Foreign exchange adjustment
Balance at 31 July 2019
–
–
(1,756)
21,223
–
–
–
38
701
–
(1,558)
47,128
86,075
(214)
1,559
5,935
19,350
(1,987)
(3)
106,126
(2,201)
(1,758)
4,636
78,960
483,044
1,718
1,208,577
482,099
175,533
2,350,971
Accumulated amortisation and impairment losses
Balance at 1 August 2018
(104,940)
(1,680)
Amortisation charge for the year
Disposals and write-offs
Other transfers
Foreign exchange adjustment
Balance at 31 July 2019
–
–
1,757
(6,092)
(189,126)
(85,065)
17
546
–
–
–
(38)
(10,426)
(121,859)
(30,759)
41
(499)
(1,928)
(56,662)
(474,267)
(17,906)
(133,730)
1,926
(46)
(1,943)
1,984
1,758
(20,427)
(109,275)
(1,718)
(284,054)
(155,004)
(74,631)
(624,682)
Intangibles carrying amount at 31 July 2019
373,769
–
924,523
327,095
100,902
1,726,289
* Comparative information has been restated due to a change in accounting policy described in note 3(a)(ii).
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 $186 million (2019: $220 million), Seed Technologies
$376 million (2019: $343 million), Europe $732 million (2019:
$953 million) and Australia and New Zealand (ANZ) $28 million
(2019: $22 million). The remaining balance of intangibles is
spread across multiple CGUs, with no remaining individual CGU
intangible balance being more than 5 percent of the total
intangibles balance at balance date.
Impairment testing for cash-generating units
containing goodwill
For the impairment testing of these assets, the carrying amount
of the asset is compared to its recoverable amount at a CGU
level. The higher of the following two valuation methods are
used by the group when assessing recoverable value.
Valuation method – Value in use
Value in use (VIU) is an estimate of the recoverable amount based
on the present value of the future cash flows expected to be
derived from a CGU. 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 using
relevant methodologies including 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).
89
Nufarm Limited | Annual Report 2020 23 Intangible assets continued
Valuation assumptions
The valuation method, range of terminal growth rates and nominal post-tax discount rates applied for impairment testing purposes
is as follows:
2020
North America CGU
Europe CGU (1)
ANZ CGU
Seed Technology CGU
2019
Valuation
method
Terminal
growth rate
Discount rate
Total goodwill
$000
VIU
FVLCD
FVLCD
VIU
1.9%
1.7%
2.0%
2.6%
8.5%
9.5% to 11.3%
9.8% to 11.3%
53,114
68,132
–
13.4%
72,311
Valuation
method
Terminal
growth rate
Discount rate
Total goodwill
restated
$000
Material crop protection CGU’s (North America, Brazil and Europe)
VIU
2.0% to 4.0%
7.8% to 11.6%
281,720
ANZ CGU
Seed Technology CGU
FVLCD
VIU
2.0%
11.0% to 12.5%
–
3.0%
11.4%
75,995
(1) As at 31 July 2019, the total goodwill assets for the Europe CGU was equal to $186.882 million. The carrying amount of goodwill assets for the Europe CGU
was reduced to $68.132 million at 31 July 2020 as a result of impairment.
The terminal growth rate assumed is generally a long term
inflation estimate. The discount rate assumed is the group’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 Europe and ANZ CGU (see below), the
directors have 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.
Europe CGU
At 31 July 2020 the group used a FVLCD methodology to estimate
the recoverable amount of the Europe CGU. The carrying amount of
the Europe CGU was determined to be higher than its recoverable
amount. An impairment loss of $66.329 million was recognised
against the carrying amount of the specific intangible assets and
an impairment loss of $121.946 million was recognised against
the carrying amount of goodwill included in the Europe CGU.
The impairment losses are included in ‘general and administrative
expenses’ (refer note 6).
Following the impairment loss recognised in the Europe CGU,
the recoverable amount was equal to the carrying amount.
Any adverse movement in a key assumption (noted above)
or projected Europe cash flows, in the absence of other factors,
may lead to further impairment.
ANZ CGU
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 2020, management has
determined that the recoverable amount remains equal to the
carrying amount. Any adverse movement in a key assumption
(noted above) or projected ANZ cash flows, in the absence of
other factors, may lead to further impairment.
90
Nufarm Limited | Annual Report 2020Notes to the consolidated financial statements continued 24 Trade and other payables
Current payables – unsecured
Trade creditors and accruals – unsecured
Derivative financial instruments
Cash advances from customers (contract liabilities)
Current payables
Non-current payables – unsecured
Creditors and accruals
Non-current payables
25 Interest-bearing loans and borrowings
Current liabilities
Bank loans – secured
Bank loans – unsecured
Deferred debt establishment costs
Lease liabilities*
Other loans – unsecured
Loans and borrowings – current
Non-current liabilities
Bank loans – secured
Bank loans – unsecured
Brazil unsecured notes
Senior unsecured notes
Deferred debt establishment costs
Lease liabilities*
Other loans – unsecured
Loans and borrowings – non-current
Net cash and cash equivalents
Net debt
Consolidated
2020
$000
2019
$000
819,742
1,108,267
17,747
95,507
1,182
111,812
932,996
1,221,261
5,244
5,244
11,058
11,058
Consolidated
2020
$000
2019
$000
314,127
385,948
8,869
(2,552)
18,417
–
110,868
(3,683)
511
1,342
338,861
494,986
–
420,969
696
–
63,786
77,122
660,548
689,605
(7,697)
126,579
8,829
(9,374)
12,341
3,381
788,955
1,257,830
(686,552)
(505,687)
441,264
1,247,129
* The group has initially applied AASB 16 at 1 August 2019 using the modified retrospective approach. Under this approach, comparative information is not
restated and the cumulative effect of initially applying AASB 16 is recognised in retained earnings at the date of initial application. Refer to note 3(a)(i).
Comparative balances represent finance lease liabilities.
91
Nufarm Limited | Annual Report 2020 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.
2020
Bank loan facilities and senior unsecured notes
Other facilities
Total financing facilities
2019
Bank loan facilities and senior unsecured notes
Other facilities
Total financing facilities
* Accessible group financing facilities is inclusive of amounts already utilised.
Reconciliation of liabilities arising from financing activities
Balance at 31 July 2019
Cash changes
Proceeds from borrowings (net of costs)
Repayment of borrowings
Debt establishment transaction costs
Lease liability payments
Total cash flows
Non-cash changes
Recognition of lease liabilities upon initial application of AASB 16
Leases entered into during the year net of leases ceased
Foreign exchange movements
Transfer
Amortisation of debt establishment transaction costs
Total non-cash changes
Balance at 31 July 2020
Accessible*
$000
Utilised
$000
1,632,422
984,240
8,829
8,829
1,641,251
993,069
2,519,407
1,748,298
4,723
4,723
2,524,130
1,753,021
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
494,986
1,257,830
(4,458)
1,748,358
1,295,977
419,598
5,641
1,721,216
(1,451,632)
(899,659)
(480,518)
5,641
(653,048)
(1,014)
(21,502)
(178,171)
26,170
2,923
(77,391)
66,065
4,279
22,046
(457)
–
124,862
–
(47,154)
(66,065)
–
11,643
338,861
788,955
–
–
–
(2,351,291)
(1,471)
(21,502)
–
–
10,713
–
–
10,713
11,896
151,032
2,923
(113,832)
–
4,279
44,402
1,139,712
(1) Total derivatives balance at 31 July 2020 is a net liability of $14.374 million (31 July 2019: $2.647 million net asset). The difference in carrying value to the table
above relates to forward exchange contracts which are excluded from the balances above.
92
Nufarm Limited | Annual Report 2020Notes to the consolidated financial statements continued Financing arrangements
Without refinancing, expiry of available debt facilities (excluding finance leases)
Period ending 31 July, 2020
Period ending 31 July, 2021
Period ending 31 July, 2022
Period ending 31 July, 2023 or later
Average interest rates
Nufarm step-up securities
Syndicated bank facility
Group securitisation program facility
Other bank loans
Lease liabilities
Brazil unsecured notes
Senior unsecured notes
Consolidated
2020
$000
–
418,670
553,204
669,377
2019
$000
498,158
185,847
1,069,016
–
Consolidated
2020
%
4.15
n/a
1.31
3.42
5.14
n/a
5.75
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 2020.
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
2020
$000
2019
$000
13,419
2,619
16,038
16,684
2,591
19,275
10,297
9,337
206,406
188,948
(117,823)
(109,567)
98,880
88,718
14,943
113,823
129,861
16,378
105,096
124,371
During the year ended 31 July 2020 the group made contributions to defined benefit pension funds in the United Kingdom, France,
Indonesia and Germany that provide defined benefit amounts for employees upon retirement.
93
Nufarm Limited | Annual Report 2020 26 Employee benefits continued
Changes in the present value of the defined benefit obligation are as follows:
Opening defined benefit obligation
Service cost
Interest cost
Actuarial losses/(gains)
Past service cost
Losses/(gains) on curtailment
Plan amendments
Contributions
Benefits paid
Exchange adjustment
Consolidated
2020
$000
2019
$000
198,285
180,676
1,639
4,478
14,191
–
–
(30)
–
(6,913)
5,053
695
5,100
15,191
–
–
1,523
–
(6,287)
1,387
Closing defined benefit obligation
216,703
198,285
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
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)
109,567
2,450
2,469
–
–
7,002
(6,713)
3,048
100,115
2,813
6,346
–
–
5,286
(5,730)
737
117,823
109,567
Consolidated
2020
$000
1,639
4,478
(2,450)
–
(30)
–
2019
$000
695
5,100
(2,813)
–
1,523
–
Expense recognised in profit or loss
3,637
4,505
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
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
1,554
1,403
530
150
1,769
1,972
180
584
3,637
4,505
2020
$000
2019
$000
(76,423)
(69,067)
(8,349)
(7,356)
(84,772)
(76,423)
94
Nufarm Limited | Annual Report 2020Notes to the consolidated financial statements continued The major categories of fund assets as a percentage of total fund assets are as follows:
Equities
Bonds
Property
Cash
Other
Principal actuarial assumptions at the reporting date (expressed as weighted averages):
Discount rate at 31 July
Future salary increases
Future pension increases
Consolidated
2020
%
64.8%
26.7%
1.2%
1.6%
5.7%
1.6%
2.5%
2.1%
2019
%
71.8%
25.2%
1.6%
1.4%
0.0%
2.2%
2.2%
2.6%
The group expects to pay $8.318 million in contributions to defined benefit plans during the 12 months ending 31 July 2021
(12 months ending 31 July 2020: $5.177 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 2020 there
were 7 participants (2019: 13 participants) in the scheme and
48,137 shares (2019: 72,181) 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 group 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 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 group 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 group 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 group 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 2020 there were 471 participants
(2019: 519 participants) in the scheme and 1,702,886 shares
(2019: 1,833,858) 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 group.
95
Nufarm Limited | Annual Report 2020 27 Share-based payments continued
Employee expenses
Total expense arising from share-based payment transactions
Measurement of fair values
2020
$000
2,269
2019
$000
1,559
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 LTI
2020
Performance
rights
Nufarm STI
2019
Deferred
shares
Nufarm LTI
2019
Performance
rights
Nov 2017
$4.48
$5.03
$6.07
$6.07
$4.94
$7.25
1 Aug 2019
1 Oct 2018
1 Aug 2018
31 Jul 2021
31 Jul 2020
31 Jul 2021
–
–
–
3.0 years
1 year
3.0 years
30%
0.85%
1.0%
n/a
n/a
n/a
28%
2.1%
2.0%
The fair values of awards granted were estimated using a Monte-Carlo simulation methodology and a Binomial Tree methodology.
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
2020
Nufarm STI
number of
deferred
shares
2020
Nufarm LTI
number of
performance
rights
2019
Nufarm STI
number of
deferred
shares
2019
970,640
(465,118)
–
–
637,650
1,143,172
–
19,294
672,683
529,572
–
(302,091)
(19,294)
–
–
–
–
–
–
600,048
970,640
–
(11,751)
(517,821)
–
19,294
19,294
–
The performance rights outstanding at 31 July 2020 have a $nil exercise price (2019: $nil) and a weighted average contractual life of 3 years
(2019: 3 years). All performance rights granted to date have a $nil exercise price.
96
Nufarm Limited | Annual Report 2020Notes to the consolidated financial statements continued 28 Provisions
Current
Restructuring
Other
Current provisions
Movement in provisions
Balance at 1 August 2019
Provisions made during the year
Provisions reversed during the year
Provisions used during the year
Exchange adjustment
Balance at 31 July 2020
Consolidated
2020
$000
28,278
9,111
37,389
Consolidated
Other
provisions
$000
Restructuring
$000
15,857
25,678
(445)
(13,058)
246
28,278
1,359
11,544
(1,397)
(2,459)
64
9,111
2019
$000
15,857
1,359
17,216
Total
$000
17,216
37,222
(1,842)
(15,517)
310
37,389
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
Group
Number
of ordinary
shares
2020
Number
of ordinary
shares
2019
379,639,334
327,704,975
55,372
51,934,359
379,694,706
379,639,334
The group 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.
On 26 September 2018, the group 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.
On 16 January 2020, 55,372 shares at $6.1459 were issued under the Global Share Plan.
97
Nufarm Limited | Annual Report 2020 29 Capital and reserves continued
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). As at 31 July 2019 $0.5 million of costs were incurred in
relation to the placement.
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%
(2019: 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.
On 1 April 2020 the group re-purchased the SPS.
Translation reserve
Distributions on the SPS were at the discretion of the directors and
were fixed rate, unfranked, cumulative and subordinated. In the
event that Nufarm Investment Pty Ltd did not pay the distribution
on the SPS, Nufarm could 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
were declared and paid. The SPS distributions were declared
and paid to Sumitomo quarterly and pro-rata per the re-purchase
date, at a fixed rate of 6%.
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.
Distributions
Nufarm Step-up Securities
The following distributions were paid by Nufarm Finance (NZ) Ltd:
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 includes the accrued employee entitlements to share
awards that have been charged to the income statement and
have not yet been exercised.
Also included in this reserve are the accumulative effective
portion of changes in the fair value of financial instruments that
have been designated as either cash flow hedges or net
investment hedges.
Dividends
No interim dividend was declared for Jan 2020 (2019: nil).
No final dividend was declared for Jul 2020 (2019: nil).
2020
Distribution
Distribution
2019
Distribution
Distribution
Consolidated
Distribution
rate
Total amount
$000
Payment
date
4.85%
5.67%
6,102
15 Apr 2020
7,138
15 Oct 2019
13,240
Consolidated
Distribution
rate
Total amount
$000
Payment
date
6.00%
6.08%
7,511
15 Apr 2019
7,651
15 Oct 2018
15,162
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 $9.741 million (2019: $10.957 million).
98
Nufarm Limited | Annual Report 2020Notes to the consolidated financial statements continued
Sumitomo preference securities
The following distributions were paid by Nufarm Investment Pty Ltd:
2020
Distribution
Distribution
Distribution
Franking credit balance
The amount of franking credits available for the subsequent financial year are:
Franking account balance as at the end of the year at 30% (2019: 30%)
Franking credits that will arise from the payment of income tax payable as at the end of the year
Credit balance at 31 July
Consolidated
Distribution
rate
Total amount
$000
Payment
date
6.00%
6.00%
6.00%
1,458
31 Oct 2019
1,475
31 Jan 2020
962
1 Apr 2020
3,895
2020
$000
–
–
–
2019
$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
of $nil (2019: $nil) franking credits.
30 Earnings per share
Net profit/(loss) for the year from continuing operations
Net profit/(loss) attributable to non-controlling interest
Net profit/(loss) attributable to equity holders of the group
Other securities distributions (net of tax)
Earnings/(loss) used in the calculations of basic and diluted earnings per share
Net profit/(loss) for the year from discontinued operations, net of tax
Earnings/(loss) used in the calculations of basic and diluted earnings per share from continuing operations
Consolidated
2020
$000
2019*
$000
restated
(456,079)
38,310
–
(456,079)
(13,636)
(469,715)
–
38,310
(10,957)
27,353
(93,667)
(376,048)
49,448
(22,095)
Subtract/(add back) items of material income/(expense) from continuing operations (refer note 6)
(281,807)
(50,770)
Earnings/(loss) excluding items of material income/(expense) used in the calculation of underlying
earnings per share from continuing operations
(94,241)
28,675
* Comparative information has been re-presented due to a discontinued operation (note 12).
For the purposes of determining basic and diluted earnings per share, the after-tax distributions on Other Securities are deducted
from net profit.
Number of shares
2020
2019
Weighted average number of ordinary shares used in calculation of basic earnings per share
379,669,138
369,231,803
Weighted average number of ordinary shares used in calculation of diluted earnings per share
381,066,560
370,502,520
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.
99
Nufarm Limited | Annual Report 2020 30 Earnings per share continued
Earnings per share for continuing and discontinued operations
Basic earnings per share
From continuing operations
From discontinuing operations
Diluted earnings per share
From continuing operations
From discontinuing operations
Underlying earnings per share (excluding items of material income/expense
– see note 6) from continuing operations
Basic earnings per share
Diluted earnings per share
* Comparative information has been re-presented due to a discontinued operation (note 12).
31 Financial risk management and financial instruments
The group has exposure to the following financial risks:
Credit risk
Cents per share
2020
2019*
restated
(99.0)
(24.7)
(123.7)
(98.7)
(24.6)
(123.3)
(24.8)
(24.7)
(6.0)
13.4
7.4
(6.0)
13.3
7.3
7.8
7.7
• 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
group 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 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.
100
Nufarm Limited | Annual Report 2020Notes to the consolidated financial statements continued 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
2020
$000
2019
$000
981,887
1,476,899
–
97,500
686,552
505,687
3,373
3,829
1,671,812
2,083,915
The group’s maximum exposure to credit risk for trade and other receivables at the reporting date by geographic region was:
Carrying amount
Australia/New Zealand
Asia
Europe
North America
South America
Trade and other receivables
Consolidated
2020
$000
128,510
140,747
2019
$000
83,261
57,121
444,972
497,484
247,316
246,476
20,342
592,557
981,887
1,476,899
The group’s top five customers account for $275.287 million of the trade receivables carrying amount at 31 July 2020 (2019: $152.812
million). These top five customers represent 31 per cent (2019: 11 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
2020
$000
2019
$000
759,411
1,146,435
72,909
119,606
11,332
12,119
31,846
15,610
24,349
56,899
880,120
1,370,396
(28,689)
(49,531)
851,431
1,320,865
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.
101
Nufarm Limited | Annual Report 2020 31 Financial risk management and financial instruments continued
The movement in the allowance for impairment in respect of trade receivables during the year was as follows.
Balance at 1 August
Sale of South American business
Provisions made during the year
Provisions used during the year
Exchange adjustment
Balance at 31 July
Expected credit loss assessment for individual customers
The group uses an allowance matrix to measure the expected credit
lose (ECL) 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 2020, 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 2019: US$475 million),
and a senior secured bank facility of $555 million (31 July 2019:
$665 million).
On 26 April 2018 the group completed the refinancing of the
US$325 million senior unsecured notes due in October 2019.
The 2019 notes were redeemed from investors in May 2018
through the issuance of US$475 million 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).
Upon completion of the sale of the South American business, the
group’s senior secured bank facility (SFA) reduced to $555 million
(31 July 2019: $665 million). $85 million and $470 million expires in
January 2021 and January 2022 respectively (31 July 2019: $50
million expires in August 2019, $125 million expires in January 2021
and $490 million expires in January 2022). 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
was undrawn at 31 July 2020 (31 July 2019: $459.904 million).
102
Consolidated
2020
$000
49,531
(23,380)
10,568
(4,627)
(3,403)
28,689
2019
$000
52,960
–
6,830
(13,044)
2,785
49,531
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 group. 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 2019: facility limit is set to $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).
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 Europe, which
at 31 July 2020 totalled $128.512 million (2019: $814.802 million).
The year on year reduction in regional working capital facilities
was attributable to the sale of the South American crop
protection business.
At 31 July 2020, the group had access to debt of $1,632 million
(2019: $2,519 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 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 $143.128 million at 31 July 2020 (2019:
$293.810 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 2020 the group
estimates $8.286 million (2019: $91.387 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.
Nufarm Limited | Annual Report 2020Notes to the consolidated financial statements continued The following are the contractual maturities of the group’s financial liabilities:
Consolidated
2020
Non-derivative financial liabilities
Trade and other payables
Bank loans – secured
Bank loans – unsecured
Senior unsecured notes
Other loans – unsecured
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
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
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
920,493
920,493
314,127
318,254
9,565
10,471
915,249
318,254
9,731
161
–
740
5,083
–
–
660,548
878,968
37,982
37,982
803,004
8,829
8,829
–
–
8,829
144,996
303,925
22,297
16,615
265,013
–
–
–
–
–
–
17,747
1,484,685
1,484,685
–
(1,465,158)
(1,465,158)
–
–
–
–
–
–
–
329,347
329,347
(3,373)
(334,471)
(334,471)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,072,932
2,455,343
1,317,916
55,498
1,081,929
Carrying
amount
$000
Contractual
cash flows
$000
Less than
1 year
$000
1-2
years
$000
More than
2 years
$000
–
–
–
1,231,137
1,231,137
1,220,079
806,917
836,090
174,654
77,122
189,310
91,234
689,605
967,170
4,723
12,852
4,723
93,638
405,081
120,397
7,095
39,652
1,342
1,628
–
19
–
11,039
7,185
423,824
10,094
84,139
58,819
–
39,652
887,866
3,381
1,906
–
90,104
–
–
–
–
–
–
1,182
460,120
460,120
–
(456,546)
(456,546)
–
–
–
–
–
–
–
649,811
649,811
(3,829)
(657,546)
(657,546)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,994,363
3,409,141
1,791,113
146,376
1,471,652
103
Nufarm Limited | Annual Report 2020 31 Financial risk management and financial instruments 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
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.
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.
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.
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, and the New Zealand Dollar.
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.
Exposure to currency risk
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 2020 was
a $14.374 million liability (2019: $2.647 million liability) comprising
assets of $3.373 million (2019: $3.829 million) and liabilities of
$17.747 million (2019: $1.182 million).
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
USD
$000
Euro
$000
GBP
$000*
–
(2,622)
(6,439)
2,463
(494)
(268)
1,701
–
23,822
23,937
45,137
(110)
–
24,132
17,583
(5,060)
(21)
6,255
–
1,174
Net financial assets/(liabilities) – by currency of denomination
AUD
$000
USD
$000
Euro
$000
GBP
$000*
–
12,235
9,006
2,467
(1,358)
(268)
–
841
–
6,658
7,905
(22,964)
3,834
(187)
–
7,754
–
(419)
(23)
4,727
–
–
16,573
4,285
Consolidated
2020
Functional currency of group operation
Australian dollars
US dollars
Euro
British pound
Consolidated
2019
Functional currency of group operation
Australian dollars
US dollars
Euro
British pound
Brazilian real
104
Nufarm Limited | Annual Report 2020Notes to the consolidated financial statements continued Sensitivity analysis
Based on the aforementioned group’s net financial assets/(liabilities) at 31 July 2020, a 1 percent strengthening or weakening of the
following currencies at 31 July 2020 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 2019.
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
2020
$000
Profit or (loss)
after tax
2020
$000
Profit or (loss)
after tax
2019
$000
Profit or (loss)
after tax
2019
$000
110
300
(84)
(326)
–
(111)
(297)
83
323
–
(138)
172
46
(78)
161
140
(170)
(45)
77
(159)
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
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 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$555 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.
Average rate
Reporting date
2020
0.670
0.605
0.531
3.036
2019
0.715
0.627
0.553
2.761
2020
0.719
0.606
0.548
3.707
2019
0.689
0.619
0.564
2.593
The former notes were refinanced through the issuance of
US$475m senior unsecured notes due in April 2026 with a fixed
coupon component.
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% (2019: 3.90%).
105
Nufarm Limited | Annual Report 2020 31 Financial risk management and financial instruments continued
Profile
At the reporting date the interest rate profile of the group’s interest-bearing financial instruments were:
Variable rate instruments
Financial assets
Financial liabilities
Fixed rate instruments
Financial assets
Financial liabilities
Consolidated Carrying amount
2020
$000
2019
$000
10,888
81,413
(477,517)
(1,065,803)
(466,629)
(1,065,556)
–
–
(660,548)
(700,070)
(660,548)
(700,070)
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 2020. 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 2019.
2020
Variable rate instruments
Total sensitivity
2019
Variable rate instruments
Total sensitivity
Fair values
Profit or loss
100bp
increase
$000
(4,666)
(4,666)
100bp
decrease
$000
4,666
4,666
Profit or loss
100bp
increase
$000
(10,656)
(10,656)
100bp
decrease
$000
10,656
10,656
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 $660.548 million
(2019: $700.070 million), the fair value at 31 July 2020 is $662.199 million (2019: $663.238 million).
106
Nufarm Limited | Annual Report 2020Notes to the consolidated financial statements continued Consolidated
2020
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
Lease liabilities
Consolidated
2019
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
Lease liabilities
Carried at
fair value
through
profit or loss
$000
Derivatives
used for
hedging
$000
Note
Financial
assets/
liabilities at
amortised
cost
$000
Total
$000
15
16
16
24
16
24
24
15
25
25
25
25
25
25
–
–
3,373
(17,747)
–
–
–
–
–
–
–
–
–
–
(14,374)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
686,552
686,552
985,260
985,260
–
–
–
–
3,373
(17,747)
–
–
(920,493)
(920,493)
–
–
(314,127)
(314,127)
(9,565)
(9,565)
–
–
(660,548)
(660,548)
(8,829)
(8,829)
(144,996)
(144,996)
(386,746)
(401,120)
Carried at
fair value
through
profit or loss
$000
Derivatives
used for
hedging
$000
Note
Financial
assets/
liabilities at
amortised
cost
$000
Total
$000
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)
247
247
(806,917)
(806,917)
(174,654)
(174,654)
(77,122)
(77,122)
(689,605)
(689,605)
(4,723)
(12,852)
(4,723)
(12,852)
(1,014,177)
(1,011,530)
107
Nufarm Limited | Annual Report 2020 31 Financial risk management and financial instruments 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).
2020
Derivative financial assets
Derivative financial liabilities
2019
Derivative financial assets
Derivative financial liabilities
Level 1
$000
–
–
–
–
Level 1
$000
–
–
–
–
Consolidated
Level 2
$000
3,373
3,373
(17,747)
(17,747)
Consolidated
Level 2
$000
3,829
3,829
(1,182)
(1,182)
Level 3
$000
–
–
–
–
Level 3
$000
–
–
–
–
Total
$000
3,373
3,373
(17,747)
(17,747)
Total
$000
3,829
3,829
(1,182)
(1,182)
There have been no transfers between levels in either 2020 or 2019.
Valuation techniques used to derive fair values
Capital management
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.
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 for the year ended
31 July 2020 was 1.2 per cent (2019: 4.6 per cent).
• Other techniques, such as discounted cash flow analysis, are
used to determine fair value for the remaining financial instruments.
There were no changes in the group’s approach to capital
management during the year.
108
Nufarm Limited | Annual Report 2020Notes to the consolidated financial statements continued 32 Leases
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.
The group also leases IT equipment which have short term contracts and/or are low value items. The group has elected not to recognise
right-of-use assets and lease liabilities for these leases.
Right-of-use assets
Right-of-use assets included in property, plant and equipment (see Note 22) are as follows:
Balance at 1 August 2019
Recognition on initial application of AASB 16
Additions to right-of-use assets
Depreciation charge for the year
Disposals and write-offs
Foreign exchange adjustment
Balance at 31 July 2020
Amounts recognised in profit or loss
Depreciation on right of use assets
Interest on lease liabilities
Expenses relating to short-term leases
Expenses relating to leases of low-value assets, excluding short-term leases of low-value assets
Amounts recognised in statement of cash flows
Operating cashflows
Lease liability interest payments
Short-term and low-value lease payments
Financing cashflows
Lease liability principal payments
Non-cancellable 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
Land and
buildings
$000
–
106,722
11,456
(17,216)
(9,175)
(630)
91,157
Plant and
machinery
$000
10,260
16,377
2,225
(7,307)
(1,725)
(250)
Total
$000
10,260
123,099
13,681
(24,523)
(10,900)
(880)
19,580
110,737
2020
$000
24,523
7,821
1,227
48
7,821
1,275
21,502
Consolidated
2019
$000
27,218
22,269
33,875
158,129
241,491
109
Nufarm Limited | Annual Report 2020 33 Capital commitments
The group had contractual obligations to purchase plant and equipment for $6.413 million at 31 July 2020 (2019: $22.064 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.
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
2020
$000
14,050
–
2019
$000
13,732
4,506
11,041
20,546
–
–
182
25,273
8,537
29,615
221
77,157
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).
Under the terms of the sale of the Brazilian business to Sumitomo,
Nufarm has been released from any further rights or obligations
in respect of this matter (2019: $29.615million).
Brazilian taxation proceedings – hedge costs
deductibility
The Brazilian tax authorities challenged the deductibility of
hedge costs incurred in 2008. Under the terms of the sale of the
Brazilian business to Sumitomo, this case has ultimately been
settled. Nufarm’s contribution to the settlement is $0.947m and
the group has no further obligations in respect of this matter
(2019: $8.537 million).
Notes
Place of
incorporation
Percentage of
shares held
2020
(a)
(a)
Australia
Australia
USA
(a)
Australia
Mexico
(a)
Australia
100
100
100
100
100
100
2019
100
100
100
100
100
100
Brazilian taxation proceedings
Brazilian taxation proceedings – hedge costs deductibility
Brazilian taxation proceedings – goodwill deductibility
Other bank guarantees
Contingent liabilities
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
Following the sale of the Brazilian business to Sumitomo, Nufarm
retains a contingent liability in respect of certain pre-sale tax
assessments that are being challenged and other potential
tax liabilities.
As at 31 July 2020, the total contingent liability relating to future
potential tax liabilities in Brazil is $11.041 million (2019: $20.546 million).
The group considers that it is not probable that a liability will arise
in respect of these cases.
35 Group entities
Company
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
110
Nufarm Limited | Annual Report 2020Notes to the consolidated financial statements continued Subsidiaries (continued)
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
COCRF Investor 177, LLC
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
First Classic Pty Ltd
Frost Technology Corporation
Greenfarm Hellas Trade of Chemical Products SA
Growell Limited
Grupo Corporativo Nufarm SA
Le Moulin des Ecluses s.a
Lefroy Seeds Pty Ltd
Manaus Holdings Sdn Bhd
Marman (Nufarm) Inc
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
Muni Strategies Sub-CDE 29, LLC
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
Notes
Place of
incorporation
2020
2019
Percentage of shares held
Mexico
New Zealand
(a)
Australia
United Kingdom
United Kingdom
(a)
(a)
(a)
(a)
Australia
Brazil
Australia
Australia
Australia
Netherlands
USA
(a)
Australia
New Zealand
New Zealand
(a)
(a)
(a)
(a)
Australia
Australia
Australia
Australia
Canada
New Zealand
(a)
Australia
USA
Greece
United Kingdom
Guatemala
(a)
(a)
(a)
(a)
(a)
(a)
France
Australia
Malaysia
USA
Mexico
USA
Australia
Australia
Malaysia
Australia
Malaysia
Malaysia
Australia
USA
USA
Morocco
South Africa
Canada
Zimbabwe
USA
USA
Malaysia
Australia
Bulgaria
Netherlands
100
100
100
100
100
100
100
100
100
100
100
–
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
–
100
100
100
100
100
100
100
100
100
–
100
100
100
100
100
100
100
100
100
100
100
100
–
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
–
100
100
100
100
100
100
100
100
100
100
100
111
Nufarm Limited | Annual Report 2020 35 Group entities continued
Subsidiaries (continued)
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
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 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
112
Nufarm Industria Quimica e Farmaceutica SA
(b)
Notes
Place of
incorporation
Canada
China
Chile
Colombia
United Kingdom
(b)
(b)
India
Costa Rica
Guatemala
Mexico
Panama
Venezuela
Ecuador
Germany
Brazil
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
(a)
(a)
Malaysia
United Kingdom
Malaysia
Australia
Egypt
New Zealand
Paraguay
United Kingdom
United Kingdom
Peru
Australia
Poland
Portugal
Romania
Percentage of shares held
2020
100
100
–
–
100
100
100
100
100
100
100
100
100
100
100
100
–
100
100
100
100
100
100
100
100
100
100
100
100
–
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
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
100
100
100
Nufarm Limited | Annual Report 2020Notes to the consolidated financial statements continued Subsidiaries (continued)
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
Nufarm UK Limited
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
Nuseed Global Holdings Pty Ltd
Nuseed Global Innovation
Nuseed Global Management USA Inc
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
Selchem Pty Ltd
Societe Des Ecluses la Garenne s.a.s
3 Rivers Sub-CDE 5, LLC
Notes
Place of
incorporation
France
(b)
Argentina
(a)
(a)
Singapore
Malaysia
Switzerland
Malaysia
New Zealand
Australia
Australia
Turkey
United Kingdom
Ukraine
Uruguay
USA
(a)
Australia
USA
Canada
United Kingdom
United Kingdom
(a)
Australia
United Kingdom
(a)
(a)
(a)
(a)
(a)
(a)
(a)
USA
USA
Australia
Mexico
Australia
Australia
Russia
Argentina
Serbia
Brazil
Ukraine
Uruguay
Australia
Australia
Australia
Australia
Indonesia
Indonesia
Indonesia
Indonesia
USA
Australia
France
USA
Percentage of shares held
2020
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
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
100
100
100
100
100
100
100
100
100
100
75
100
100
100
100
100
100
100
100
–
(a): These entities have entered into a deed of cross guarantee dated 21 June 2006, 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.
(b): These entities were disposed on 1 April 2020 as part of the sale of the South American business. They ceased being subsidiaries of the group from this date
and were not consolidated into the group after this date.
113
Nufarm Limited | Annual Report 2020 36 Company disclosures
Result of the company
Profit/(loss) for the period
Other comprehensive income
Total comprehensive profit/(loss) for the period
Financial position of the company at year end
Current assets
Total assets
Current liabilities
Total liabilities
Total equity of the company comprising of:
Share capital
Reserves
Accumulated losses
Retained Earnings (a)
Total equity
Consolidated
2020
$000
2019
$000
(5,841)
267
(5,574)
(20,135)
518
(19,617)
1,462,458
1,799,327
2,360,633
2,135,552
393,498
168,384
396,087
167,701
1,834,934
1,834,594
40,538
(57,512)
38,342
(51,671)
146,586
146,586
1,964,546
1,967,851
(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.
No dividends (2019: $19.662 million) were distributed from the retained earnings during the year.
Company contingencies
The company 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 company also provides guarantees to
support several of the regional working capital facilities located
in Europe, and the senior unsecured notes.
Company capital commitments for acquisition
of property, plant and equipment
There are no capital commitments for the company in 2020 or 2019.
114
Nufarm Limited | Annual Report 2020Notes to the consolidated financial statements continued 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 company 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 2020 is set out below.
Summarised income statement and retained profits
Profit/(loss) before income tax expense
Income tax expense
Net profit attributable to members of the closed group
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
Total current assets
Non-current assets
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
Loans and borrowings
Deferred tax liabilities
Employee benefits
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
Equity
Share capital
Reserves
Retained earnings
TOTAL EQUITY
Consolidated
2020
$000
2019
$000
121,420
(64,623)
(130,758)
831
(9,338)
(63,792)
(152,311)
(60,076)
–
–
–
(161,649)
(6,379)
(2,402)
(19,662)
(152,311)
293,031
47,387
1,264,583
1,083,750
199,875
244,299
7,501
8,242
1,764,990
1,383,678
549
451
914,209
1,548,458
52,926
117,574
176,315
44,454
114,441
163,919
1,261,573
1,871,723
3,026,563
3,255,401
741,005
658,832
2,110
8,022
7,728
26,900
36,065
7,505
1,172
9,360
785,765
712,934
374,017
674,372
42,583
10,098
13,173
10,212
426,698
697,757
1,212,463
1,410,691
1,814,100
1,844,710
1,901,425
1,901,084
74,324
(161,649)
95,937
(152,311)
1,814,100
1,844,710
115
Nufarm Limited | Annual Report 2020 38 Related parties
a) Transactions with related parties in the wholly-owned group
The group 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
2020
$000
2019
$000
156,445
145,382
144,125
13,630
–
57,262
175,605
34,319
62,382
97,500
These transactions were undertaken on commercial terms and conditions.
On 1 April 2020 the group completed the sale of the South American business to Sumitomo Chemical Company Ltd – see note 12.
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
2020
$
2019
$
6,084,465
6,004,339
344,163
310,699
360,969
1,097,920
–
–
(74,950)
220,013
6,714,647
7,632,971
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.
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 2020 (2019: nil).
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.
116
Nufarm Limited | Annual Report 2020Notes to the consolidated financial statements continued 39 Auditors’ remuneration
Audit services
KPMG Australia
Consolidated
2020
$
2019
$
Audit and review of group financial report
677,000
571,000
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
40 Subsequent events
2,343,870
2,045,211
3,020,870
2,616,211
179,266
379,586
3,200,136
2,995,797
35,000
105,709
221,905
75,656
8,768
70,336
1,221
98,866
–
420,837
756,846
–
389,981
671,433
No matters or circumstances have arisen in the interval between 31 July 2020 and the date of this report that, in the opinion of the
directors, have or may significantly affect the operations, results or state of affairs of the group in subsequent accounting periods.
117
Nufarm Limited | Annual Report 2020 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 2020 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 2020.
4 The directors draw attention to note 2 to the consolidated financial statements, which includes a statement of compliance with
International Financial Reporting Standards.
Signed in accordance with a resolution of the directors:
Dated at Melbourne this 23rd day of September 2020
DG McGauchie AO
Director
GA Hunt
Director
118
Nufarm Limited | Annual Report 2020 Independent Audit 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 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 2020 and of its
financial performance for the year ended on
that date; and
complying with Australian Accounting
Standards and the Corporations Regulations
2001.
The Financial Report comprises:
• Consolidated balance sheet as at 31 July 2020
• Consolidated statement of profit or loss and
income, consolidated
other comprehensive
and
in equity,
statement
consolidated statement of cash flows for the
year then ended
changes
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 (including Independence Standards) (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.
Nufarm Limited | Annual Report 2020
119
Independent Audit Report continued
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 in
relation to tax losses
• Accounting for the South American business
disposal
Key Audit Matters are those matters that, in our
professional judgment, 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 ($439.6m) and
intangible assets ($1,339.0m)
Refer to the following notes to the financial report: Note 2(d)(ii) Basis of preparation – Use of estimates
and judgments – impairment testing, Note 3(h)(ii) Significant accounting policies – Impairment – Non-
financial assets, Note 22 Property, plant and equipment, and Note 23 Intangible assets.
The key audit matter
How the matter was addressed in our audit
including
Recoverability of non-current assets,
property, plant and equipment and intangible
assets, is a key audit matter due to the following:
Our procedures included:
• Using our understanding of the nature of the
Group’s business, we analysed:
• Inherent complexity in determination of the
Group’s cash generating units (“CGU’s”),
noting that the Group prepares a separate
discounted cash flow model for each CGU.
-
-
• The diverse nature of regional agricultural
markets in which the Group operates, noting
that each geographic and product market
segment experiences the following factors
which are subject to inherent uncertainty
leading to a range of possible forecast
outcomes:
-
-
-
fluctuating
economic and climatic conditions;
demand
depending
regulatory
significant
and
oversight, which can lead to approval and
cessation of new and existing products;
and
activity
technological advancements by the Group
and competitors, which can lead to shifts
in market demand for products.
the internal reporting of the Group to assess
how results are monitored and reported; and
the implications for CGU identification in
accordance with accounting standards.
•
Testing the design and implementation of key
controls over the cash flow models, including
Board consideration and approval of key
assumptions and business unit budgets which
form the basis of the cash flow forecasts.
• Assessing the Group’s discounted cash flow
on
models and key assumptions by:
-
-
-
comparing forecast cash flows to historical
trends and performance, by CGU, to inform
our evaluation of the forecasts incorporated
into the models;
comparing the relevant cash flow forecasts
to the Board approved budgets and FY21-
FY23 business plans;
involving our valuation specialists to assess
the discount rates and terminal growth rates
against comparable market information and
the economic assumptions relating to cost
of debt and cost of equity; and
-
using our industry knowledge, information
Given the unique, non-homogenous, nature of
these factors, specific auditor attention is
applied to each element, increasing the overall
audit effort in this area. We focus on the
authority and knowledge of the sources of
120
Nufarm Limited | Annual Report 2020
judgements incorporated into the cash flow
models, evidence of bias and consistency of
application of judgements.
• The above factors increase the complexity in
auditing both the assessed useful lives for
individual intangible assets, and also the
forward-looking assumptions contained in the
Group’s discounted cash flow models for each
CGU. Additional key assumptions we focused
on included growth rates during the forecast
period, terminal value growth rates and
discount rates.
• These same conditions impact our audit effort
associated with assessing the capitalised
in
development costs
particular the recoverable amount of new
products in development phases.
intangible asset,
Products in early stages of development,
compared to those closer to product launch,
are prone to a wider range of forecast
outcomes and projections can contain highly
judgemental assumptions. We focused on
the authority and knowledge of the sources of
judgements incorporated into the valuation,
common market practices and consistency of
judgements.
We involved valuation specialists to supplement
our senior audit team members in assessing this
key audit matter.
In addition to the above, the Group recorded an
impairment charge of $188.3m (before tax)
against goodwill and intangible assets in the
Europe CGU. The results of this CGU were below
expectations, increasing the sensitivity of the
model to small changes in forecast cash flows.
This further increased our audit effort in this area.
loss of $22.7m was also
An
recognised in relation to property, plant and
equipment as a result of asset rationalisation
decisions in Europe and Australia.
impairment
in
published by regulatory and other bodies and
information obtained through inquiries with
the Group to challenge key assumptions.
This included the forecast cash flows and
light of recent
growth assumptions
operating performance, the useful lives
associated with specific intangible assets
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.
• Evaluating the Group’s sensitivity analysis in
respect of the key assumptions in the models,
including the identification of areas of estimation
uncertainty and reasonably possible changes in
key assumptions. We assessed the related
disclosures included in the financial report 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 assessment of the
recoverable amount of the ANZ Crop Protection
CGU and the Europe CGU 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
the
practice and
accounting standards.
requirements of
the
• Recalculating the impairment charge, assessing
the allocation of the impairment charge against
specific intangible assets and goodwill, and
the Group’s
assessing
disclosures in respect of the impairment in
accordance with accounting standards.
the adequacy of
Nufarm Limited | Annual Report 2020
121
Independent Audit Report continued
Recoverability of deferred tax assets in relation to tax losses ($40.1m)
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 tax losses is a key audit matter due to the:
Our procedures included:
• Testing design and
implementation of key
controls over the taxable
income forecasts
underpinning the tax loss utilisation models,
including Board consideration and approval of key
assumptions and business unit budgets which
form the basis of these forecasts.
• Comparing the key assumptions and business
unit budgets for consistency with those tested by
us, as set out in the Key Audit Matter relating to
the recoverability of non-current assets, including
property plant and equipment and intangible
assets, and also comparing the reconciliation of
these budgets to taxable income concepts.
• Assessing the Group’s tax loss utilisation models
and key assumptions, by significant jurisdiction,
by:
-
-
-
-
comparing taxable income to historical trends
and performance to inform our evaluation of
the current taxable profit forecasts;
evaluating the key assumptions in the Group’s
forecast tax loss utilisation models, including
identification of areas of estimation
the
uncertainty to focus further procedures;
understanding the timing of future taxable
income 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
relevant jurisdictions to assess the tax loss
utilisation expiry dates and annual utilisation
allowances for consistency with local practice,
regulatory parameters and legislation.
• Recalculating
of
the
amount
previously
recognised tax losses written off against the
recorded amount disclosed and assessing the
adequacy of the Group’s disclosures in respect of
the tax assets de-recognised, in accordance with
accounting standards.
• Complexity in auditing the forward-looking
assumptions applied to the Group’s tax loss
utilisation models, especially given
the
multiple tax jurisdictions and their bespoke tax
regimes. Further details on the significant
forward-looking assumptions and implications
for the audit are contained in the Key Audit
Matter relating to the recoverability of non-
current assets, including property, plant and
equipment and intangible assets. Additional
auditor
the
is
reconciliation of forecast cash flows to
forecasts of taxable income for each tax
jurisdiction.
focused on
attention
• Age of the tax losses, and the relevance of
recent taxable profits to forecasts.
• The large number of jurisdictions and our need
to consider their varying and complex rules on
This necessitated
tax
loss utilisation.
involvement of our
to
tax specialists
supplement our senior audit team members in
relevant jurisdictions.
The Group recorded a write-off of carry-forward
tax losses in Europe of $41.5 million. As noted
above, the results of the European region were
below expectations, which impacted forward-
looking earnings assumptions. This
further
increased our audit effort in this key audit area.
122
Nufarm Limited | Annual Report 2020
Accounting for the South American business disposal
Refer to the following notes to the financial report: Note 12 Discontinued operation
The key audit matter
How the matter was addressed in our audit
During the year the Group completed the
disposal of certain entities comprising the
majority of the Latin American crop protection
the South American seed
segment and
treatment business (together referred to the
South American business).
The Group’s accounting for these disposals, in
particular the calculation of the post-tax loss on
sale and presentation of discontinued versus
continuing operations in the statement of profit
or loss, is a key audit matter due to:
• The size and significance of the disposal to the
Group’s financial statements.
the Sale Agreement,
• The audit effort applied responding to the
complexity of
in
particular with respect to interpreting clauses
relating to the accounting for transferred or
retained obligations for on-going taxation
litigation matters in Brazil.
• The pervasive impact on the presentation of
the financial statements due to the accounting
standard requirement to restate financial
information relating to previous periods into
continuing and discontinuing operations. We
focused on the attribution to continuing or
discontinuing, and
the consistency of
application of management judgements.
We involved tax specialists in Australia and Brazil
to supplement our senior audit team members in
assessing this key audit matter.
Our procedures included:
• Reading the transaction documents, including the
Sale Agreement, to understand the structure and
key terms and conditions of the disposal.
• Comparing the Group’s identification of assets
and liabilities disposed of to the relevant clauses
of the Sale Agreement and underlying financial
records.
• Checking the consideration received in the
Group’s bank records to the Sale Agreement.
• Checking the calculation of the post tax loss on
disposal, including the treatment of foreign
currency gains and losses previously deferred in
the foreign currency translation reserve.
• Using our tax specialists, evaluating the tax
implications of the disposal for the Group against
the requirements of the tax legislation in the
various jurisdictions.
• Assessing the accounting treatment for retained
obligations,
to
including obligations
ongoing tax litigation, with reference to the Sale
Agreement and the requirements of accounting
standards.
relating
• Assessing
the adequacy of
respect of
the Group’s
disclosures in
in
accordance with accounting standards, including
the restatement of prior period information as
relating to either continuing or discontinuing
operations.
the disposal
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.
The Other Information we obtained prior to the date of this Auditor’s Report was the Operating and
Financial Review, the Corporate Governance Statement and the Directors’ Report. The Chairman’s
Message, Managing Director’s Message, information on the Board of Directors and Key Management
Personnel, and the Shareholder and Statutory Information are expected to be made available to us after
the date of the Auditor’s Report.
Nufarm Limited | Annual Report 2020
123
Independent Audit Report continued
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not
and will 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
assessing the Group and Company’s ability to continue as a going concern and whether the use of
the going concern basis of accounting is appropriate. 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 and Company 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: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of
our Auditor’s Report.
124
Nufarm Limited | Annual Report 2020
Report on the Remuneration Report
Opinion
Directors’ responsibilities
In our opinion, the Remuneration Report of
Nufarm Limited for the year ended 31 July
2020 complies with Section 300A of the
Corporations Act 2001.
KPMG
Chris Sargent
Partner
Melbourne
23 September 2020
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
2020.
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 2020
125
Annual Report
for 2 months ended 30 September 2020
126
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 Contents
Operating and Financial Review
Corporate Governance Statement
Directors’ report
Remuneration Report for the 2 months ended
30 September 2020
Auditors’ Independence Declaration
Financial statements for the 2 months ended
30 September 2020
Consolidated statement of profit or loss and
other comprehensive income
Consolidated balance sheet
Consolidated statement of cash flows
Consolidated statement of changes in equity
Notes to the consolidated financial statements
Directors’ declaration
Independent Audit Report
128
132
145
149
162
163
164
166
167
168
170
224
225
127
Nufarm Limited | Annual Report for 2 months ended 30 September 2020
Operating and Financial Review
Following the divestment of the South American crop protection businesses on 1 April 2020 Nufarm changed financial
year end to better align reporting periods with key sales periods and enable improved comparison with industry
peers. This Operating and Financial Review includes financial information for the two months ended 30 September
2020 to complete the transition to the new reporting period. The information is based on financial statements prepared
in accordance with International Financial Reporting Standards (IFRS) and audited by KPMG. The information is
presented on a continuing operations basis unless otherwise specified. The Review also includes non-IFRS measures
and pro-forma comparatives for the two months ended 30 September 2019 which have been provided for additional
insight to performance. Non-IFRS measures and pro-forma figures have not been subject to audit or review.
Earnings summary
Group earnings
Summary financial results
(continuing operations unless specified)
Revenue
Revenue excluding corporate revenue
Gross profit
Underlying SG&A
Underlying EBITDA
Underlying EBIT
Operating profit/(loss)
Net external interest
Foreign exchange (gains)/losses
Underlying net profit/(loss) after tax
Net profit/(loss) after tax
Net profit/(loss) after tax – discontinued operations
Net profit/(loss) after tax – total group
Statutory effective tax rate
Basic earnings per share – excluding material items (cents)
Basic earnings per share (cents)
Total dividend per share declared in respect of period (cents)
2 months
ended
30 Sep 2020
$000
Proforma
2 months ended
30 Sep 2019
$000
12 months
ended
31 Jul 2020
$000
Change
30 Sep 2020 vs
30 Sep 2019
%
267,320
222,136
39,920
(119,801)
(43,379)
(78,815)
(85,677)
(9,348)
(4,659)
(85,934)
(91,345)
–
(91,345)
8.4%
(22.6)
(24.1)
–
181,195
2,847,375
181,195
2,761,988
36,778
734,729
(122,921)
(706,570)
(52,816)
235,767
(86,373)
n/a
(12,161)
(1,979)
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
34,355
(214,315)
(72,626)
(23,565)
(80,605)
(362,412)
(93,667)
(456,079)
(16.7)%
(24.8)
(99)
–
47.5%
22.6%
8.5%
2.5%
17.9%
8.8%
n/a
23.1%
large
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
The two months to 30 September are a period of lower demand
for crop protection and seed technologies, consistent with
seasonal agricultural cycles. Nufarm revenues (excluding the
divested South American crop protection businesses) for this
period typically reflect around 10% of annual sales.
Gross profit increased 9% on the proforma comparative period
and underlying selling, general and administrative costs (SG&A)
reduced $3 million reflecting initial benefits of the performance
improvement program commenced in the prior financial year
and some shift in timing of discretionary expenditure.
Within this context, improved demand relative to the proforma
comparative period and cost savings from the performance
improvement program delivered increased revenue and
earnings for the two month period with the business showing
continued resilience to the impact of COVID-19.
Revenue (excluding corporate sales) increased 23% relative
to the proforma comparative period with improved demand
in all crop protection regions. Revenue in the seed technologies
segment declined slightly on the proforma comparative period
due primarily to a change in timing of revenue recognition
relating to a new licensing agreement for sorghum and
sunflower sales in Australia.
Underlying EBITDA increased 18% reflecting both increased sales
and reduced SG&A costs.
Net interest expense reduced $3 million on the proforma
comparative period reflecting lower net debt while foreign
exchange losses increased $3 million due to increased currency
volatility in Eastern European countries.
The statutory effective tax rate of 8.4% includes the impact of
non-recognition of the tax benefit for losses in certain countries
and a provision of $3 million for withholding tax to be paid
in relation to the repatriation of offshore earnings.
128
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 Segment earnings
Revenue
($000s)
Crop protection
Australia and New Zealand
Asia
North America
Europe
Total Crop protection
Seed Technologies – global
Non-operating corporate
2 months
ending
Sep-20
Proforma
2 months
ending
Sep-19
71,179
21,284
74,323
48,293
51,963
15,046
71,322
35,117
Change
19,216
6,238
3,001
13,176
12 months
ending
Jul-20
Change
562,897
(491,718)
165,947
(144,663)
1,051,285
(976,962)
783,028
(734,735)
215,079
173,448
41,631
2,563,157
(2,348,078)
7,057
45,184
7,747
–
(690)
45,184
198,831
85,387
(191,774)
(40,203)
Nufarm Group – continuing operations
267,320
181,195
86,125
2,847,375
(2,580,055)
Discontinued operations
Nufarm Group
Underlying EBITDA
($000s)
Crop protection
Australia and New Zealand
Asia
North America
Europe
Total Crop protection
Seed Technologies – global
Non-operating corporate (costs)
Nufarm Group – continuing operations
Discontinued operations
Nufarm Group
–
201,208
(201,208)
643,630
(643,630)
267,320
382,403
(115,083)
3,491,005
(3,223,685)
2 months
ending
Sep-20
(2,143)
2,834
(6,224)
(19,119)
(24,652)
(4,515)
(14,212)
(43,379)
–
(43,379)
Proforma
2 months
ending
Sep-19
(7,789)
1,778
(10,745)
(22,047)
(38,803)
(2,536)
(11,477)
(52,816)
30,833
(21,983)
Change
5,646
1,056
4,521
2,928
14,151
(1,979)
12 months
ending
Jul-20
38,800
30,481
92,333
99,255
Change
(40,943)
(27,647)
(98,557)
(118,374)
260,869
(285,521)
31,471
(35,986)
(2,735)
(56,573)
42,361
9,437
235,767
(279,146)
(30,833)
58,918
(58,918)
(21,396)
294,685
(338,064)
Revenues in Australia and New Zealand increased 37% relative
to the proforma comparative period with improved seasonal
conditions in Australia driving good demand for herbicides.
Stronger revenues and improved recoveries of manufacturing
overhead costs contributed to the increase of $6 million (72%)
in underlying EBITDA.
Revenues in Europe increased 38% on the proforma comparative
period with strong growth in herbicide sales. Revenues in Europe
during this two month period typically represent approximately
5% of annual revenue and the product mix is not considered
indicative of the full year outlook. EBITDA improved $3 million (13%)
on the pro-forma comparative period due to both increased
sales and a reduction in SG&A costs of $2 million which partially
offset an increase in stock obsolescence costs.
Revenues in North America increased 4% relative to the proforma
comparative period with demand building in September after
a slow August in which demand was impacted by storms and
bushfires. Reduced SG&A costs also contributed to the underlying
EBITDA improvement of $5 million (42%), including a shift in timing
of some discretionary expenditure.
Improved seasonal conditions in Indonesia drove increased
herbicide sales and earnings for the Asia business with revenues
up 41% and underlying EBITDA up $1 million (59%) relative to the
proforma comparative period.
Revenues in the Seed Technologies segment for the months of
August and September typically represent around 5% of annual
revenue. Revenues for the two months to 30 September 2020
declined slightly on the proforma comparative period with a
shift from direct sales of sorghum and sunflower in Australia to a
licencing agreement under which the first royalty income will be
recognised in the new financial year. Revenue from the first sale
of omega-3 canola oil was recognised in October 2020 in line
with the timing of the initial shipment. Increased costs associated
with the commercialisation of omega-3 canola and carinata
contributed to the decline in underlying EBITDA of $2 million (78%).
Corporate revenues represent zero margin sales made
to Sumitomo under the transitional services agreement for
procurement services to the South American businesses.
Corporate costs increased $3 million primarily due to one-off
costs associated with the change in financial year end.
129
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 Operating and Financial Review continued
Material items
Material items by category
Asset rationalisation and restructuring
South American business disposal
– high yield bond
Total material items
2 months ended
30 September 2020
Pre-tax
$000
Post-tax
$000
(1,926)
(961)
(4,936)
(6,862)
(4,450)
(5,411)
Material items excluded from the underlying result related to restructuring costs for the implementation of the performance improvement
program and the cost of obtaining the exemption associated with the sale of the South American crop protection businesses in April 2020
described in more detail below.
Balance sheet and financial position
Net debt
Net working capital
ANWC/sales excluding external corporate (%)
Leverage – continuing operations (includes lease liabilities)
Gearing %
As at
30 Sep 2020
$000
606,207
1,044,934
44.7%
2.47
22.9%
As at
31 Jul 2020
$000
441,264
981,979
Change
%
37.4%
6.4%
46.4%
(165) bps
1.87
17.1%
32.2%
578 bps
The increase in net working capital and net debt from July to September is typical of the annual trading pattern. Relative to
30 September 2019, net working capital improved by $134 million (11%). Average net working capital as a percentage of sales
continues to track toward the target of 35% to 40%, with the improvement in the two month period reflecting both increased sales
and reduced average net working capital balances.
The sale of the group's South American crop protection businesses in April 2020 would have triggered a requirement for unutilised sale
proceeds remaining at 31 March 2021 to be used to either make a tender offer to noteholders at par for the group's senior unsecured
notes (due in April 2026) or cancel other debt facilities. The group chose to approach current noteholders in September 2020 to seek
exemption from this requirement in order to maintain the group’s liquidity. Majority consent was provided by the noteholders on
14 September 2020. The terms and conditions of the 2026 notes remain unchanged and the exemption has provided greater flexibility
regarding future options for further capital management.
The Company’s reduced leverage following the sale of the South American businesses, along with substantial undrawn facilities, cash
on the balance sheet and capacity in the debtor securitisation facility also provides excellent liquidity to manage inherent industry
volatility and withstand a range of scenarios.
130
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 Basis of preparation of selected Proforma financial information for 2 months ended
30 September 2019 (‘Proforma’)
The Proforma financial information presented in this report has
been measured using the accounting policies of the group in
place at 1 August 2019. In this respect, the adoption of the revision
to lease accounting as described in the 31 July 2020 annual
report has been adopted. The information is presented on a
continuing basis and adopts certain non-IFRS measures of the
group, defined herein. The Proforma information does not provide
information regarding material items or tax due to the inherent
complications arising to reliably measure statutory measures on
a continuing basis, at a point in time in a financial year that had
not been subject to review or audit.
Reconciliation and definition of non-IFRS measures
The non-IFRS measures Underlying EBIT and Underlying EBITDA
are used internally by management to assess business
performance, make decisions on the allocation of resources
and assess operational management. 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, or as an alternative to cash flow
as a measure of liquidity.
Underlying EBIT: earnings before net finance costs, taxation
and material items.
Underlying net profit after tax: profit/(loss) attributable
to Nufarm Limited equity holders less material items.
Net external interest expense: interest income less interest
expense, debt establishment transaction costs, lease
amortisation and finance charges as described in Note 10.
Net debt: total debt less cash and cash equivalents.
Net working capital: current trade and other receivables,
non-current trade receivables/trade finance receivables,
and inventories less current trade and other payables.
Underlying EBITDA: Underlying EBIT before depreciation
and amortisation.
Average net working capital: net working capital measured
at each month end as an average.
Underlying SG&A: sales, marketing and distribution expenses
plus general and administrative expenses and research and
development expenses less material items.
Underlying free cash flow: net cash from operating activities
excluding material items less net cash from investing activities
excluding material items.
Summary financial results (continuing operations)
Underlying EBITDA
add Depreciation and amortisation excluding material items
Underlying EBIT
Material items impacting operating profit
Operating profit
2 months
ended
30 Sep 2020
$000
12 months
ended
31 Jul 2020
$000
(43,379)
235,767
(35,436)
(78,815)
(201,412)
34,355
(6,862)
(248,670)
(85,677)
(214,315)
Our strategy, business model and risk management
Information relating to our business, strategy, business model and risk management is provided on pages 4-7 and 14-17 of the 2020
Annual Report and page 139 of this Annual Report.
131
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 Corporate Governance Statement
1 Introduction
Nufarm is committed to ensuring that its policies and
practices reflect a high standard of corporate
governance. The Board considers that Nufarm’s
governance framework and adherence to that
framework are fundamental in demonstrating that the
Directors are accountable to shareholders, are
appropriately overseeing the management of risk and
promoting a culture of ethical, lawful and responsible
behaviour within Nufarm.
This section of the Annual Report outlines the governance
framework of Nufarm Limited and its controlled entities (Nufarm
or Company) for the two months ended 30 September 2020
(reporting period). This reporting period is a result of Nufarm
changing its financial year end from 31 July to 30 September.
During the reporting period, there were no major changes to any
of the Board governance practices or policies as this had been
undertaken during FY20. Nufarm, as a listed entity, is required to
comply with the Corporations Act (Cth), the ASX Listing Rules and
other Australian and international laws and is required to report
on the extent to which it has complied with the ASX Principles.
During the reporting period, Nufarm complied with the fourth
edition of the ASX Corporate Governance Principles and
Recommendations (ASX Principles) released in February 2019.
Nufarm’s key governance documents, including the Constitution,
Board and Board Committee Charters and key policies are
available on the Company’s website at nufarm.com/investor-
centre/corporate-governance/.
This Corporate Governance Statement has been approved
by the Board.
132
2 Board of directors
2.1 Board role and responsibilities
The Constitution provides that the business and affairs of Nufarm
are to be managed by or under the direction of the Board.
Ultimate responsibility for governance and strategy rests with the
Board. The role of the Board is to represent shareholders and to
demonstrate leadership and approve the strategic direction of
Nufarm. The Board is accountable to the shareholders for the
Company’s performance and governance.
The Board has adopted a formal Board Charter which sets out
the Board’s role, key responsibilities, matters the Board has
reserved for its own consideration and decision making and the
authority it has delegated to the Managing Director and Chief
Executive Officer (CEO). The Board’s responsibilities, as set out in
the Board Charter, include:
• Appointment and termination of the CEO and the Company
Secretary and ratification of the appointment of the Chief
Financial Officer (CFO) and Key Management Personnel (KMP)
and the terms of their employment contracts including
termination payments;
• Approving the remuneration policies and practices of the
Board, the CEO and the CEO’s direct reports;
• Approving commitments, capital and non-capital items,
acquisitions and divestments above authority levels delegated
to the CEO;
• Approving the overall capital structure of Nufarm including any
equity related transactions and major financing arrangements;
• Approving the annual and half year financial and director
reports including the full year operating and financial review,
remuneration report and corporate governance statement;
• Approving the dividend policy and determining the dividends
to be paid;
• Approving management’s development of corporate strategy;
• Reviewing and approving the annual budget, strategic
business plans, balance sheet and funding strategy;
• Approving the succession plans and processes for the
Chairman, Directors, CEO and the CEO’s direct reports;
• Approving the Diversity and Inclusion Policy and measurable
objectives for achieving diversity across Nufarm and
monitoring progress in achieving those objectives;
• Approving Board governance policies including the Continuous
Disclosure Policy, Code of Conduct, Anti-Bribery Policy and
Whistleblower Policy;
• Approving ASX releases as set out in the Continuous
Disclosure Policy;
• Appointing the Chairman of the Board; and
• Appointing Directors to casual vacancies and recommending
their election to shareholders at the next Annual General Meeting.
A copy of the Board Charter which sets out the role and
responsibilities of the Board in more detail can be found in the
Corporate Governance section of Nufarm’s website.
Delegation to management
The Board has delegated to the CEO responsibility for the
day-to-day management of the Company’s affairs and
implementation of the strategic objectives, the annual budgets
and policy initiatives. The CEO is accountable to the Board for
all authority delegated to management and for the Company’s
performance. The CEO is required to operate in accordance
with Board approved policies and delegations of authority and
management must supply the Board with information in a form,
timeframe and quality that will enable the Board to discharge
its duties effectively. The CEO is required to report to the Board
in a spirit of openness and trust and is required to ensure that
all decisions are made lawfully, ethically and responsibly.
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 2.2 Board meetings and attendance
The Board meets as often as required. During the reporting period, the Board met 3 times. Regularly scheduled meetings are generally
held face to face on one day. Due to COVID-19 related restrictions, these meetings were held electronically.
In addition to the Company Secretary, the CFO regularly attends all Board meetings by invitation. Other members of management attend
meetings by invitation. During regularly scheduled meetings, the Board holds a closed session (attended by Non-executive Directors
only), which provides Non-Executive Directors with an opportunity to raise issues in the absence of management.
Details of attendance at Board and standing Board committee meetings during the reporting period are set out in the following table:
Board and Board Committee attendance in the reporting period
Board
Audit
Risk and
Compliance
Nomination and
Governance
Human Resources
Committee
Anne Brennan
Gordon Davis
Frank Ford
John Gillam
Greg Hunt
Peter Margin
Marie McDonald
Donald McGauchie 1
Toshikazu Takasaki
A
3
3
3
3
3
3
3
3
3
B
3
3
3
3
3
3
3
3
3
A
2
2
2
2
B
2
2
2
2
2
2
2
2
1
A
B
A
1
1
1
1
1
1
1
1
1
1
1
2
2
2
2
2
B
2
2
2
2
1
A
1
1
1
1
B
1
1
1
1
1
1
1
Column A: indicates the number of meetings held during the period of each Director’s tenure. Where a Director is not a member but attending
meetings during the period, then only the number of meetings attended rather than held is shown.
Column B: indicates the number of meetings attended by each Director.
1. Donald McGauchie retired as a Non-executive Director and Chairman on 24 September 2020.
Key activities undertaken by the Board during the
reporting period
• the majority of the Board must be independent Non-executive
Directors; and
The Board considered a range of matters during the reporting
period, including overseeing the financial performance and key
metrics of the Company; agreeing to an impairment charge of
$215 million to be recorded for the European Cash Generating
Unit, approving the FY20 financial results for release to the ASX;
undertaking a review of the CEO performance for FY20 and
considering the outcome of the FY20 Short Term Incentive Plan.
2.3 Board composition
As at 30 September 2020, the Board had seven Non-executive
Directors and the CEO. Donald McGauchie retired from the Board
on 24 September 2020. The Constitution provides that the
Company is not to have more than 11 or less than three directors.
Details of the Directors, including their qualifications, experience,
date of appointment and independent status can be found in the
Director’s Report at pages 145 to 146.
Sumitomo Chemical Company, as a major shareholder in the
Company, is entitled to have one nominee Director on the Board.
Toshikazu Takasaki is Sumitomo’s current nominee and is therefore
not considered independent.
In assessing the composition of the Board, regard is given to the
following principles:
• the roles of the Chairman and the CEO should not be filled by
the same person;
• the Chairman must be an independent Non-executive Director;
• the CEO must be a full-time employee of the Company;
• the Board should represent a broad range of qualifications,
experience, expertise and diversity.
Changes during the reporting period
During the reporting period, Donald McGauchie retired
as a Non-executive Director and Chairman of the Board
on 24 September 2020. John Gillam was appointed
Chairman on 24 September 2020.
2.4 Director skills, experience and attributes
The key attributes that Directors must possess are set out in the
Board Charter and include:
• honesty, integrity and a proven track record of creating value
for shareholders;
• an ability to apply strategic thought;
• a preparedness to debate issues openly and constructively
and to question, challenge and critique;
• a willingness to understand and commit to the governance
framework of the Company; and
• an ability to devote sufficient time to properly carry out the role
and responsibilities of the Board.
133
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 Corporate Governance Statement continued
Skills matrix
The Board has a skills matrix which takes into consideration the skills and experience the Board currently requires but also the skills
and experience that will be required for the Company during its next phase of development. The Board skills matrix and the assessment
of the current Directors is included below.
Skills/Experience
No of Directors
with skill
Manufacturing & Integrated Supply Chain Management in High Risk Environment
Relevant experience in international manufacturing and/or integrated supply chain management including demonstrated
ability to improve production systems.
Customer Relations
Relevant international experience in customer service delivery and/or marketing of products, including brand marketing,
e-commerce and use of digital technology.
R&D, Innovation, Seed Technologies and Commercialisation
Experience in R&D, seed technologies or emerging technologies including commercialisation.
Agricultural experience
Experience in crop protection or the agricultural industry obtained through a large international company.
Finance
Board audit experience or senior executive or equivalent experience in financial accounting and reporting, corporate
finance and internal financial controls/audit.
Risk
Relevant experience and understanding of risk management frameworks and controls, including HSEC and sustainability,
and the ability to oversee mitigation strategies and identify emerging risks.
Mergers, Acquisitions, JVs, Partnerships, Alliances, Divestments & Integrations
Relevant experience in merger and acquisition transactions (including JVs etc) raising complex financial, regulatory and
operational issues.
Strategy and Transformation
Experience in developing and implementing successful strategies and/or transformation in a complex environment to deliver
a sustained and resilient business.
Corporate Governance and Compliance
Experience serving on boards in different industries, including publicly listed companies. Awareness of leading practice
in corporate governance and compliance, with a demonstrated commitment to achieving those standards.
Regulatory, Government & Public Policy
Relevant experience identifying and managing legal, regulatory, public policy and corporate affairs issues.
People, culture and remuneration
Relevant experience overseeing or implementing a company’s culture and people management framework, including
succession planning and setting and applying remuneration policy and frameworks linked to strategy.
6
5
4
5
8
8
7
6
7
6
7
Diversity
(as at 30 September 2020)
Tenure of non-executive directors
(as at 30 September 2020)
Female
Male
2
6
0-3 years
3–6 years
6–9 years
9+ years
1
1
3
2
134
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 2.5 Chairman
2.7 Director independence
The Chairman of the Board is John Gillam, an independent
Non-executive director who succeeded Donald McGauchie
on his retirement on 24 September 2020.
The Chairman is responsible for the leadership of the Board and
for encouraging a culture of openness and debate amongst the
directors to foster a high performing and collegiate Board. The
Chairman also serves as the primary link between the Board
and management.
2.6 Board succession planning
The Board manages succession planning for non-executive
directors with the assistance of the Nomination and Governance
Committee and for the CEO with the assistance of the Human
Resources Committee.
The Board has a non-executive tenure policy that provides for
non-executive directors to retire after nine years (or twelve years
in the case of a Chairman who has served in the role of Chair for
less than six years) from the first date of election by shareholders.
The Board, may in exceptional circumstances, exercise discretion
to extend the maximum term where it considers such an extension
is in the best interests of the Company. When introducing the
tenure policy in FY2020, the Board determined the tenure policy
should not apply to restrict a director who will have served for
nine years from seeking election for one additional term.
All non-executive directors are required to stand for re-election
every three years. The Nomination and Governance Committee
will undertake a review of the directors retiring by rotation and
make a recommendation to the Board on whether their re-
election is to be supported. The Company provides all material
information in its possession concerning the director standing
for re-election in the notice of meeting and accompanying
explanatory notes.
Anne Brennan has advised her intention to retire as a director
at the 2020 Annual General Meeting. Both Gordon Davis and
Peter Margin have been on the Board for a period of nine years
and have advised that they will stand for re-election at the 2020
Annual General Meeting but do not intend to serve the full term to
allow for a period of Board renewal.
In undertaking the Board renewal and identifying suitable
candidates for appointment to the Board, the Nomination and
Governance Committee considers the gaps identified in the
Board skills matrix as well as the requirement to replace
appropriate skills of directors who are retiring from the Board.
The Board is committed to ensuring the majority of non-executive
directors are independent. The Board considers Directors to be
independent where they are independent of management and
free from any interest, position, association or relationship that
might influence or might reasonably be perceived to interfere
with the exercise of their unfettered and independent judgement.
During the reporting period, all non-executive directors except
Toshikazu Takasaki, who is a nominee of Sumitomo, a substantial
shareholder in the Company, were considered to be independent.
2.8 Conflict of interest
The Board has in place a procedure to ensure Directors disclose
any conflicts of interest and if appropriate, the conflict can be
authorised. In the event a Director does have an actual or
potential conflict, the Director does not receive the relevant Board
or Committee papers and must absent themselves from the room
when the Board or Committee discusses and votes on matters
subject to the conflict. This protocol continues unless the other
directors resolve otherwise. The Director cannot access the minutes
of the Board or Committee meeting in relation to the conflict.
The Board has in place an information exchange protocol with
Sumitomo Chemical Company to ensure that the Sumitomo
nominee Director can discharge their duties as a Director while
also ensuring that they do not receive any competitive information
or participate in discussions regarding competitive information.
2.9 Director appointment, induction training
and continuing education
When considering new appointments to the Board, the Nomination
and Governance Committee oversees the preparation of a role
description which includes the key attributes identified in the Board
Charter and the relevant skills considering the principles set out in
section 2.3 and any gaps identified in the Board skills matrix. This
role description is provided to an external search firm that assists
in undertaking the search.
When suitable candidates are identified, the Nomination and
Governance Committee will interview a short list of candidates
before making a recommendation to the Board. All directors
will interview the candidate prior to the Board considering the
formal appointment.
All non-executive directors on appointment are required to sign
a letter of appointment which sets out the terms and conditions
of their appointment including;
• duties and responsibilities of a director;
• participation in induction training and continuing education;
• remuneration;
• expectation around time commitments for the Board and
relevant Committee meetings;
• the requirement to disclose directors’ interests on an ongoing basis;
• access to professional advice; and
• indemnity, access and insurance arrangements.
135
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 Corporate Governance Statement continued
Prior to appointment all Directors, including any new executive
Directors, are subject to extensive background and screening
checks. All new senior executive appointments are also subject
to extensive background and screening checks.
With the exception of the CEO, all directors appointed by the
Board to a casual vacancy are required to stand for shareholder
election at the next AGM. The Company provides all material
information in its possession concerning the director standing
for re-election in the notice of meeting and accompanying
explanatory notes.
Induction training is provided to all new directors. This includes
discussions with the CEO, CFO, Company Secretary and other
senior executives and the option to visit the Company’s sites in
Australia on appointment or with the Board during an overseas
Board meeting. Induction materials include information on the
Company’s strategy and financial performance, full information
on the Board including all Board and Committee Charters, recent
Board and Committee minutes, information on the risk management
framework and the risk appetite statement approved by the
Board and, all Board policies including the Code of Conduct
and the obligations of directors.
All Directors are expected to undertake ongoing professional
development to develop and maintain the skills and knowledge
required to discharge their responsibilities. Directors are provided
with information papers and presentations on developments in
the law including continuous disclosure, industry related matters
and any new emerging developments that may affect the Company.
2.10 Remuneration
Details of the Company’s remuneration policy and practices
and the remuneration paid to directors and key management
personnel are set out in the Remuneration Report on pages
149 to 161 of this Annual Report.
2.11 Board performance evaluation
The Board undertook a review conducted by an external provider
during FY2020. This review focused on Chairman succession,
Board succession planning and Board capabilities, Board
calendar and papers, executive succession planning and the
structure of the Board Committees. The review included interviews
and feedback with all directors including the CEO, CFO and the
Company Secretary. All actions from this review have been
implemented. Due to the short two month period, a Board
performance evaluation did not occur during the reporting period.
An assessment of director performance was undertaken by
the Nomination and Governance Committee with feedback
sought from all Directors prior to the Board considering
recommending a director for re-election to shareholders at the
Annual General Meeting.
2.12 Independent professional advice
The Board and its Committees may access independent experts
and professional counsel for advice where appropriate and
may invite any person from time to time to attend meetings.
2.13 Company Secretary
The details of the Company Secretary, including their qualifications,
are set out in the Annual Report on page 19. The appointment
and removal of the Company Secretary is a matter for the Board.
The Company Secretary is accountable to the Board for the
effectiveness of the implementation of the corporate governance
processes, adherence to the Board’s principles and procedures
and co-ordinates all Board and Board Committee business,
including agendas, papers, minutes, communications and filings.
All Directors have direct access to the Company Secretary.
3 Committees
To assist the Board to carry out its responsibilities, the Board has
established an Audit Committee, a Nomination and Governance
Committee, a Human Resources Committee and a Risk and
Compliance Committee.
Each of the permanent Committees has a Charter which sets
out the membership structure, roles and responsibilities and
meeting procedures.
Generally, these Committees review matters on behalf of the
Board and, as determined by the relevant Charter:
• refer matters to the Board for decision, with a recommendation
from the Committee; or
• determine matters (where the Committee acts with delegated
authority), which the Committee then reports to the Board.
The Company Secretary provides secretarial support for
each Committee.
136
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 3.1 Audit Committee
The key responsibilities and functions of the Audit Committee are:
• the integrity of the financial statements and financial reporting
systems and processes of the Company and its related
bodies corporate;
• the effectiveness of external audit including the external
auditor’s qualifications, performance, independence and fees;
• the effectiveness of the internal audit function and systems
of internal control;
• compliance with tax obligations;
• the Company’s systems for compliance with applicable legal
and regulatory requirements within the Committee’s area of
responsibility; and
• other matters referred by the Board from time to time.
A copy of the Audit Committee Charter which sets out role and
responsibility of the Committee in more detail can be found
in the Corporate Governance section of Nufarm’s website.
Membership and meetings
The Audit Committee consists of:
• a minimum of 3 members of the Board, all of whom are
non executive directors;
• a majority of independent directors (as defined in the Board
Charter); and
• an independent chair, who is not Chair of the Board.
The members of the Audit Committee during the reporting
period are:
Name
Membership status
Frank Ford (Chair)
Member for the entire period
Anne Brennan
Gordon Davis
Member for the entire period
Member for the entire period
Marie McDonald
Member for the entire period
At least one member of the Committee must have formal
accounting qualifications with recent and relevant experience.
The Committee as a whole is to have sufficient understanding of
the industry in which Nufarm operates. The Board is satisfied that
the current composition of the Committee satisfies this requirement.
The external auditors, the Chairman, the CEO, the CFO, the Group
Financial Controller, the General Manager, Group Risk and
Assurance, the external internal audit partner and the Global
Head of Taxation attend meetings of the Committee at the
invitation of the Committee Chair. All Board members are invited
to attend the Audit Committee meetings at which the half year
and annual financial statements and reports are considered.
The details of the relevant Committee meetings are included
on page 133.
Activities during the reporting period
The key activities undertaken by the Audit Committee during the
reporting period were reviewing and recommending to the
Board the approval of the FY2020 financial statements, including
recommending to the Board an impairment charge of $215 million
be recorded for the Europe Cash Generating Unit and approving
the internal audit plan for FY2021.
External Audit
The Audit Committee reviews the External Auditor’s scope of work,
including the external audit plan, to ensure it is appropriate
having regard to the Company’s key risks. The External Auditor
reports to the Committee at each meeting and is given an
opportunity to raise issues with the Committee in the absence of
management. The Committee also reviews the performance and
independence of the External Auditor on an annual basis. KPMG
is the External Auditor.
The Committee has also adopted a policy on the provision of
non-audit related services by the External Auditor which sets out
the Company’s approach to engaging the External Auditor for
the performance of non-audit related services with a view to
ensuring their independence is maintained.
A copy of the policy on the provision of non-audit related services
by the External Auditor can be found in the Corporate
Governance Section of Nufarm’s website.
The External Auditor attends the Company’s Annual General
Meeting and is available to answer questions from shareholders
relevant to the audit.
3.2 Nomination and Governance Committee
The role of the Nomination and Governance Committee is to
assist the Board to oversee the composition, performance and
succession planning of the Board as well as the induction and
ongoing training for directors. The Committee also advises and
makes recommendation to the Board in relation to the Company’s
corporate governance practices.
A copy of the Nomination and Governance Committee
Charter can be found in the Corporate Governance section
of Nufarm’s website.
Membership and meetings
The Nomination and Governance Committee consists of:
The members of the Nomination and Governance Committee
during the reporting period are:
Name
Membership status
Marie McDonald (Chair)
Member for the entire period
Donald McGauchie
Member up to 24 September 2020
Frank Ford
John Gillam
Member for the entire period
Member from 24 September 2020
Peter Margin
Member for the entire period
• at least three independent non-executive directors; and
Activities during the reporting period
• where the Board Chairman is the Committee Chair, he or she
will not chair the Committee when it is dealing with the
appointment of a successor to the Chair.
Marie McDonald is the Chair of the Committee.
The key activities undertaken by the Nomination and
Governance Committee during the reporting period included:
• overseeing the process of succession planning for the
Board including the identification of suitable non-executive
director candidates;
137
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 Corporate Governance Statement continued
• undertaking a performance review of directors seeking
re-election at the 2020 Annual General Meeting and making
recommendations to the Board regarding their endorsement
to shareholders; and
A copy of the Human Resources Committee Charter which
sets out further details on the roles and responsibilities of the
Committee is available in the Corporate Governance Section
of Nufarm’s website.
• making a recommendation to the Board to adopt a new
Constitution to be considered by shareholders at the 2020
Annual General Meeting.
Membership and meetings
The Committee must consist of:
3.3 Human Resources Committee
The role of the Human Resources Committee is to assist the Board
to perform its functions in relation to remuneration policies and
practices, development, retention and termination arrangements
for the CEO and KMP.
The Committee’s key responsibilities and functions are to:
• oversee the Company’s remuneration, recruitment, retention
and termination policy and procedures and its application
to the CEO and the KMPs;
• assess the performance of the CEO and assist the Chair with
reviews of the CEO’s performance;
• review and make recommendations to the Board on the CEO
succession plans;
• review and make recommendations to the Board regarding
the remuneration and benefits of non-executive directors;
• review the annual remuneration report;
• review and make recommendations to the Board on the
Inclusion and Diversity Policy and the measurable objectives
for achieving the inclusion and diversity outcomes; and
• make recommendations to the Board on the adoption of the
Company’s Code of Conduct including receiving reports on
any material breaches of the Code of Conduct.
The process to engage remuneration consultants is included in
the Human Resources Charter. Consultants provide independent
remuneration advice, as appropriate, on director fees and KMP
remuneration, structure, practice and disclosure. Remuneration
consultants are engaged directly by the Chair of the Human
Resources Committee and report directly to the Committee.
• a minimum of 3 members of the Board, all of whom are
Non-executive Directors;
• a majority of independent Directors; and
• an independent Director as Chair.
The members of the Human Resources Committee during the
reporting period are:
Name
Membership status
Peter Margin (Chair)
Member for the entire period
Donald McGauchie
Member until 24 September 2020
Anne Brennan
Gordon Davis
Member for the entire period
Member for the entire period
Non-Committee members, including members of management,
may attend meetings of the Committee at the invitation of the
Committee Chair.
Activities during the reporting period
The key activities undertaken by the Committee during the
reporting period in relation to the Company’s remuneration
framework, the policies and practices regarding the remuneration
of directors, as well as the contractual arrangements, remuneration
and performance evaluation of other members of Key
Management Personnel, are reflected in the Remuneration
Report on pages 149 to 161.
The progress against the Company’s Inclusion and Diversity
objectives are detailed in the Inclusion and Diversity section
of this statement on pages 142 to 144.
3.4 Risk and Compliance Committee
The key responsibilities and functions of the Risk and Compliance
Committee are:
The members of the Risk and Compliance Committee during the
reporting period were:
• overseeing the risk profile and approving the risk appetite
Name
Membership status
for the Company;
• considering and recommending to the Board the Risk
Management Framework in respect of both financial
and non-financial risk, (including the Health, Safety and
Environment Framework);
• recommending for approval by the Board the Company’s Risk
Management Policy and Health, Safety and Environment Policy;
• overseeing the Company’s insurance program;
• overseeing compliance management; and
• receiving reports of any material breaches of the Anti-Bribery
and Whistleblower Policies.
Membership and meetings
The Committee consists of:
• a minimum of 3 members of the Board, all of whom are
non-executive directors;
• a majority of independent directors; and
• an independent director as Chair.
138
Gordon Davis (Chair)
Member for the entire period
Peter Margin
Member for the entire period
Marie McDonald
Member for the entire period
Toshikazu Takasaki
Member for the entire period
Non-Committee members, including members of management,
attended meetings of the Committee at the invitation of the
Committee Chair.
Activities during the reporting period
The key activities undertaken by the Committee during the
reporting period included receiving a report on compliance with
health, safety and environment policies and procedures, a status
risk report confirming that management was operating within
the risk appetite statement set by the Board and a report on the
FY2021 insurance renewal.
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 4 Risk management and internal control
4.1 Approach to risk management and internal control
The Board recognises that the effective identification and
management of risk reduces the uncertainty associated in
executing the Company’s business strategies.
The Company has introduced a risk management framework
and policies and procedures which are based on concepts and
principles identified in the Australia/New Zealand standard on
Risk Management (AS/NZ ISO 31000:2009). The risk framework,
policies and procedures set out the roles, responsibilities and
guidelines for managing financial and non-financial risks
associated with the Company’s business and have been
designed to provide effective management of material risks
at a level appropriate to the Company’s global business and
have continued to be enhanced as the Group’s operations
develop and its range of activities expand. These risks include
contemporary and emerging risks such as COVID-19, cyber-
security, privacy and data breaches, increased geo-political
risk and climate change.
The Risk Management Policy is available in the Corporate
Governance Section of Nufarm’s website.
Nufarm is committed to continuing to improve its enterprise risk
management practices to protect and enhance shareholder
value. During FY2020 an Executive Risk, Health, Safety and
Environment Committee was established to assist with overseeing,
directing and supporting the implementation and operation
of the risk management framework and internal compliance
and control system across the Company. The members of the
Committee are the CEO (Chair), Chief Financial Officer, Group
Executive Supply Chain Operations, Group Executive People
and Performance, Group Company Secretary and General
Counsel, General Manger Global Risk Management and
Assurance, General Manager, Global Sustainability and Quality
and a Regional General Manager (on a rotational basis).
More information on Nufarm’s financial and non-financial risks,
including environmental, the approach to climate change
and social related risks, is set out in the Annual Report 2020
on pages 14 to 17 and the Sustainability Report on page 7.
4.2 Risk management responsibilities
The Board is responsible for overseeing Nufarm’s risk management
framework, including both financial and non-financial risks,
and setting the risk appetite within which the Board expects
management to operate. The Board is also responsible
for satisfying itself that management has developed
and implemented a sound system of internal controls.
The Board has delegated oversight of the ongoing risk
management program, procedures, auditing and adequacy
and effectiveness of the enterprise risk management to the Risk
and Compliance Committee, and oversight of evaluating the
adequacy and effectiveness of the internal control systems
associated with financial risk to the Audit Committee.
The Company’s risk management framework, policies and
procedures set out the roles, responsibilities and guidelines for
managing financial and non-financial risks associated with the
business. The framework, policies and procedures have been
designed to provide effective management of material risks
at a level appropriate to Nufarm’s global business. The risk
framework, policies and procedures will continue to be
enhanced as the Group’s operations develop and its range
of activities expand.
Nufarm’s Group risk management department, led by the General
Manager Global Risk and Assurance, manages the implementation
of this framework across the Company. The framework aims to
deal adequately with contemporary and emerging risks, such
as conduct risk, digital disruption, cyber-security, privacy and
data breaches, sustainability and climate change.
Detailed risk profiles for key operational business units have been
developed. These risk profiles identify the:
• nature and likelihood of specific material risks;
• key controls in place to mitigate and manage the risk;
• sources and level of assurance provided on the effective
operation of key controls; and
• responsibilities for managing these risks.
The Risk and Compliance Committee Charter requires the
Committee and the General Manager Global Risk and Assurance
to review, at least annually, the Risk Management Framework.
This was last undertaken during FY2020 and will be undertaken
during FY2021.
4.3 Internal audit
Nufarm has an internal audit function which is part of the global
risk and assurance function that reports to the Group General
Counsel and Company Secretary.
Nufarm’s internal audit model is a co-sourced model, with PWC
engaged to provide internal audit services under this model.
Nufarm’s General Manager Risk and Assurance is accountable
to both the Committee and the CEO for the performance of the
internal audit function and manages the relationship with PWC.
The internal audit function supports management efforts to:
• manage and control risks;
• improve the efficiency and effectiveness of key business
processes and internal control systems;
• monitor compliance with Company-wide requirements, policies
and procedures; and
• provide the Committee with assurance on the operating
effectiveness of controls.
The scope of internal audit work (including the annual internal
audit plan) is prepared with a view to providing coverage
of all major functional units and identified key risks. The Audit
Committee reviewed the internal audit plan to ensure it was
appropriate. During the reporting period the Audit Committee
approved the FY2021 internal audit plan, which reflects the
ongoing impact of COVID-19 restrictions with a focus on the
use of data analytics.
The General Manager Risk and Assurance, together with PWC
representatives, reported directly to the Committee on the
progress against the internal audit plan, as well as detailed
findings and corresponding management actions in relation to
reviews undertaken in accordance with the internal audit plan.
They also were given an opportunity to raise issues with the
Committee in the absence of management, in a closed session
held during each Committee meeting. The internal audit function
had unfettered access to the Chair of the Audit Committee.
4.4 CEO and CFO assurance
Before adoption by the Board of the reporting period financial
statements, the CEO and the CFO provided written declarations to
the Board in respect of the Company’s transition period financial
statements that, in their opinion, the financial records of the
Company have been properly maintained, the financial
statements comply with the appropriate accounting standards
and give a true and fair view of the financial position and
performance of the Company, and that the opinion has been
formed on the basis of an adequate system of risk management
and internal control which is operating effectively.
The declaration of the CEO and CFO is supported by written
statements by all executives and key finance personnel relating
to the financial position of the Company, market disclosure, the
application of Company policies and compliance with internal
controls and external obligations.
139
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 Corporate Governance Statement continued
5 Promoting responsible and ethical behaviour
Code of Conduct
Securities Trading Policy and Insider Trading
The Board has adopted a Securities Trading Policy that covers
dealings by directors, KMP and relevant employees and
complies with the ASX Listing Rules requirements for a trading
policy. The Securities Trading Policy aims to ensure that public
confidence is maintained in the reputation of Nufarm, the
reputation of its Directors and employees and in the trading
of Nufarm securities.
The Securities Trading Policy restricts dealings by directors, KMPs
and relevant employees in Nufarm securities except for a period
of four weeks from the first trading day after half and full year
results are announced and following the AGM. No dealing is
allowed at any time that they are in possession of unpublished
price sensitive information. Directors, KMP and relevant
employees are required to get pre-approval to trade during
these applicable windows.
The Nufarm Code of Conduct, Anti-Bribery Policy, Whistleblower
Policy and the Securities Trading Policy are available in the
Corporate Governance Section of Nufarm’s website.
Nufarm has in place a Code of Conduct which applies to all
Directors, employees, contractors, agents and representatives
of the Company.
The key values underpinning the Code of Conduct are:
• actions must be governed by the highest standards of integrity
and fairness;
• all decisions must be made in accordance with the spirit and
letter of applicable law; and
• business must be conducted honestly and ethically, with
skill and best judgement, and for the benefit of customers,
employees, investors and the Company alike.
The Code of Conduct provides clear direction and advice
on general workplace behaviour and how to conduct
business both domestically and internationally, interacting
with investors, business partners and the communities in which
the Company operates.
Material breaches of the Code of Conduct are reported to the
Human Resources Committee.
Anti-bribery Policy
Nufarm has in place an Anti-bribery policy that applies to all
Directors, officers and employees of Nufarm. The policy strictly
prohibits the making of unlawful or improper payments to any
individual or entity. The Policy also outlines the process for
ensuring that appropriate controls are implemented in relation
to third parties who are engaged to act on behalf of Nufarm.
Nufarm provides targeted training to managers and employees
that are likely to be exposed to bribery and corruption regarding
the policy and its application.
Breaches of the Anti-bribery Policy are reported to the Risk and
Compliance Committee.
Whistleblower Policy
Nufarm has a Whistleblower Policy that provides a clear and
transparent way for employees and contractors to report
unethical, unlawful or irresponsible behaviour without fear
of intimidation or recrimination.
The purpose of the Whistleblower Policy is to help detect and
address any conduct that is:
• corrupt, illegal, unlawful or fraudulent including bribery or
any other act in breach of the Company’s Antibribery Policy;
• contrary to or in breach of any Company policy or the
Company’s Code of Conduct, including harassment, bullying,
discrimination or victimisation;
• seriously harmful or potentially seriously harmful activity that
poses a threat to the Company’s employees, shareholders,
clients or third parties, such as deliberate unsafe work practices
with wilful disregard for the safety of others;
• activity that could cause significant financial loss to the
Company or damage its reputation or be otherwise
detrimental to the Company’s interests;
• a substantial mismanagement of Company resources; and
• any act which endangers the public or the financial system.
The Whistleblower Policy sets out protections that will be
afforded to whistleblowers as well as the option to make
an anonymous report.
Material incidents of the Whistleblower Policy are reported
to the Risk and Compliance Committee.
140
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 6 Continuous disclosure and communications with shareholders
6.1 Continuous disclosure and market communications
Nufarm is committed to timely, open and effective communication
with its shareholders and the general investment community.
The Board has adopted a Continuous Disclosure Policy which
establishes procedures aimed at ensuring that Nufarm complies
with the legal and regulatory requirements under the
Corporations Act and the ASX Listing Rules. These procedures
include the establishment of a Market Disclosure Committee,
which monitors the continuous disclosure framework and is
responsible for ensuring that Nufarm complies with its obligations.
The Market Disclosure Committee is constituted by the CEO, CFO,
Group General Counsel and Company Secretary and the
General Manger, Investor Relations and External Communications
and is responsible for implementing and monitoring reporting
processes and controls to ensure there is an adequate system
in place for the disclosure of all material information to the ASX.
The Group General Counsel and Company Secretary reports
to the Board on the matters considered by the Market Disclosure
Committee at each meeting. The Board approves any
announcement which is within the matters reserved for decision
by the Board including annual and half year financial reports, any
profit update or earnings guidance, matters which could have
significant financial or reputational risks, Company transforming
transactions or events, significant corporate transactions
including any equity related transactions and any other matters
that the Market Disclosure Committee considers is of fundamental
significance to the Company.
In addition to approving any announcements reserved for
decision by the Board, Directors are provided with copies of all
announcements that are made to the ASX immediately after they
have been released on the Market Announcements Platform.
The Continuous Disclosure Policy is available in the Corporate
Governance Section of Nufarm’s website.
6.2 Shareholder communication
The Company places a high priority on communication with
shareholders and other stakeholders and aims to ensure they are
kept informed of all major developments affecting Nufarm. The
Company has an investor relations program to facilitate a direct
two way dialogue with shareholders and the Company believes
it is important not only to provide relevant information as quickly
and efficiently as possible, but also to listen and understand
shareholders’ perspectives and respond to their feedback.
Nufarm holds briefings on the annual and half year financial
results and on other new and significant information. Presentation
material or speeches that provide any new and substantive
information are first disclosed to the ASX through the Market
Announcements Platform and then posted to the Nufarm website
prior to any discussion.
One of the key communication tools is the Company’s website.
The website contains the key governance documents, market
announcements, the Annual Report and half-yearly and full
year financial statements and a calendar of events relating to
shareholders and other communications to key stakeholders.
The website also contains a facility for shareholders to direct
inquiries to the Company.
Shareholders are provided with an update on the Company’s
performance at the Annual General Meeting, as well as an
opportunity to vote on important matters affecting Nufarm and
ask questions of the Board and key members of management. All
substantiative resolutions at the AGM are decided by a poll rather
than a show of hands. Copies of the Chairman’s speech and the
meeting presentation are released to the ASX and posted on the
Company’s website as the meeting commences. A summary of
proceedings and outcome of voting on the items of business are
also released to the ASX and posted to the website as soon as
they are available after the meeting. All Directors are expected
to attend the AGM.
Nufarm’s external auditor attends the AGM to answer any
shareholder questions concerning the conduct of the audit,
the preparation and content of the audit report, the accounting
policies adopted by Nufarm and the independence of the
external auditor in relation to the audit.
The Company encourages shareholders to receive communications
electronically. Shareholders may elect to receive all or some of
their communications electronically. This election can be made
directly with the Share Registry, Computershare Investor Services
Pty Limited.
The Board obtains the views of shareholders by either formal
or informal means. The Board receives a regular report from the
General Manager Investor Relations and External Communications
which contains feedback from investors. The CEO and CFO are
accessible to shareholders, analysts, fund managers and others
with a potential interest in the Company. The Chairman and the
Chair of the Human Resources Committee are also accessible
to shareholders and institutional investors.
6.3 Verification of periodic reports
Nufarm is committed to ensuring that all the information contained
in its corporate reports is accurate, effective and clear. Nufarm
has put in place a process to verify the integrity of its periodic
reports that are not subject to audit or reviewed by the external
auditor. This includes the annual Directors’ Report, the Annual
Report and the Sustainability Report.
A statement on the processes undertaken to verify the information
not audited or verified by the external auditor is available in the
Corporate Governance Section of Nufarm’s website.
141
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 Corporate Governance Statement continued
Nufarm’s workforce
At the end of this reporting period we employed 2,668 people
(2020 2,702) across five regions, a decrease of 34 full time equivalents.
Most of our workforce remain full time with 88 per cent permanent
employees (2020: 88 per cent) and 12 per cent contract or
non-permanent employees (2020, 12 per cent). Where the nature
of the role allows it, we support flexible work arrangements with
3 per cent of our workforce operating with part-time arrangements,
we continue to operate with significant flexible working
arrangement to support our workforce capability during Covid-19.
7 Inclusion and diversity
Nufarm is a global organisation that aims to provide an inclusive
work environment where individuals are valued for their diversity
and empowered to reach their full potential. We believe we are
stronger when our plans and operations reflect the thinking
of all our people, representing a broad range of backgrounds,
cultures and experience.
During the two month period ended 30 September 2020
(reporting period) we continued to keep inclusion and diversity
a priority. Our goal is to embed inclusion and diversity in the way
we conduct our business, wherever we operate around the
world. Activities included:
• Nufarm’s continued effort to respond to Covid-19 with flexibility
and inclusion. While we are privileged to be working in an
essential industry we also recognise that this is a very trying
time for all our employees. During this reporting period we
introduced a Health and Wellbeing intranet site for all
employees focusing on staying connected, work life balance,
flexible working and building resilience to name a few.
• The NLT Inclusion and Diversity Steering Committee appointed
two new Committee members as part of the steering committee
rules to ensure continued diversity of this Committee.
Two-month period ended 30 September 2020
Two-month period ended 30 September 2020
Asia
ANZ
Europe
LATAM
NA
22%
23%
37%
4%
14%
Supply Chain
Sales
Portfolio Solutions
Finance
Corporate
47%
31%
9%
6%
3%
Information Technology 2%
Human Resources
2%
Organisation Functions
Two-month period ended 30 September 2020 v 2020FY FTE by function
30 September
2020
Supply Chain
Sales
Portfolio Solutions
Finance
Corporate
Information Technology
Human Resources
Organisation Levels
Two-month period ended 30 September 2020
Key management personnel (CEO and CEO-1)
Exec and senior management (CEO-1 and CEO-2)
People manager
Professionals
Manufacturing shop floor
Administration
Other
1,265
827
238
168
73
56
41
Female
0%
21%
21%
29%
10%
70%
22%
FTE
4
92
472
1,212
654
202
32
2020 FY
1,272
847
241
160
77
64
41
Male
100%
79%
79%
71%
90%
30%
78%
*Key Management Personnel as listed in the annual report and include CEO and some direct reports.
**CEO-1 refers to the layer of senior executives reporting directly to the CEO, CEO-2 the next layer of management reporting to those senior executives.
142
Nufarm Limited | Annual Report for 2 months ended 30 September 2020
Women at Nufarm
Nufarm’s focus on gender diversity is designed to empower all employees by actively addressing the barriers to equality and creating
a level playing field and inclusive culture for both men and women. To this end we are committed to working towards a target of not less
than 30 per cent of either gender making up our workforce.
We are focused on improving female representation across all areas of the business and continue to recruit above our female representation
of 25 percent (2020). During this reporting period, 29 percent (2020, 32 per cent) of new hires were female and 18 percent of people
leaving the business were female (2020: 24 per cent).
Female representation increased in Finance by 2 percent (2020: 51 per cent) and decreased in Corporate (by 4 percent) and Human
Resources (by 3 percent). Portfolio, Finance and Corporate are functions that already meet our target of no less than 30 per cent of either
gender. Geographically North America achieves our goal with ANZ and LATAM making gradual progress closer to our no less than
30 per cent of either gender goal. People Manager and Professionals went up in female representation by 1 per cent while Administration
went down by 1 per cent.
The Board considers gender diversity an important factor in its succession planning. The percentage of female Non-executive Directors
is back to 29 percent following Donald McGauchie’s resignation (2020: 25 per cent).
Gender by region
Two-month period ended
30 September 2020
Female
Male
Gender by function
Two-month period ended
30 September 2020
Female
Male
ANZ
ASIA
Europe
LATAM
NA
27%
19%
26%
19%
31%
73%
81%
74%
81%
69%
Supply Chain
Sales
Portfolio Solutions
Finance
Corporate
Information Technology
Human Resources
20%
19%
42%
53%
49%
13%
75%
80%
81%
58%
47%
51%
87%
25%
Cultural diversity
Our global footprint enables a culturally diverse workforce of
leaders and teams, representing local cultures and customers in
over 100 countries. 12.5 percent of board members reside outside
Australia (2020: 11 per cent). Our executive and senior management
team remains culturally diverse with at least 15 different cultural
backgrounds represented. Nufarm’s employee self-disclosed
data indicates that our workforce originates from no less than
63 different countries and speaks at least 37 different languages.
Nufarm also has at least 5 per cent of employees working
in a different country to their birth country.
143
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 Corporate Governance Statement continued
Progress against 2021 objectives
Nufarm believes that inclusion and diversity are both critical to our sustainable growth. A key enabler to achieving growth is to develop
our talent and continue to build an inclusive culture.
As a continuation of our efforts we now continue into year three of our inclusion and diversity strategy through extending our themes
and objectives from last year deeper into the organisation; focusing additional efforts towards developing greater gender equality
with our internal talent pipeline; and conducting our interim regional inclusion and diversity audit.
FY2021 objectives
Inclusion and diversity strategy goals
2021 inclusion and diversity objectives and progress
1 Vision and Purpose Goal
Diversity is actively understood and represented by all
employees who promote an inclusive culture. Difference
is celebrated across the company and there is a solid
understanding of how inclusion and diversity can contribute
to achieving business objectives.
By 2022
2 Policy Goal
Continue with the communications plan and regular inclusion
and diversity articles.
Refresh the NLT Inclusion and Diversity Steering Committee,
minimum 2 year term and maximum 3-year term to ensure
diversity of the group.
Progress: Rotation of 2 new executives to the NLT steering
committee have been appointed.
Inclusion and diversity policy underpins other HR strategies.
Policies and procedures are regularly reviewed, and where
special circumstances allow, alternative solutions are put in
place to ensure attraction and retention of a diverse workforce.
Conduct a progress Global (regional) Inclusion and Diversity
diagnostic by March 2021 to demonstrate progress and review
Inclusion and Diversity Strategy.
By 2020
3 Knowledge and Capability Goal
All employees understand what diversity and inclusion is
and the competitive advantages it brings, are aware of their
responsibilities in contributing to a diverse and inclusive
environment, and how to do so effectively.
By 2022
4 Remuneration Goal
Remuneration practices ensure there is no bias based
on difference.
By 2022
5 Talent Goal
The Board to have not less than 30 per cent of directors
of each gender by 2022.
The senior leadership team and workforce generally to have
not less than 30 percent of people of each gender by 2025.
Succession plan coverage reflects the diversity
of the organisation.
By 2025
Deliver unconscious bias trainings to the European Senior
Leadership team and the next level.
100% employees have access to Inclusive Leadership Framework.
Deploy a Voice of the Business program ‘Nufarm Voice’ to
improve engagement through continuous listening and data
driven actions.
Progress: Nufarm Voice and platform has now been designed
and will be launched November 2020. The inclusive Leadership
Framework continues to be deployed through online training to
staff in their national language.
Incorporate business as usual, gender analysis by region into
the remuneration review signoff process, to be led by regional
leads and signed off by RGM. Global to support development
of analysis.
Progress: Our planned annual gender pay analysis for FY20
did not occur due to a salary freeze.
Nufarm’s short term incentive 2020 plan included a non-financial
team component that aims to drive a collaborative growth
mindset culture. This component is measured based on team
performance, contribution and behaviour and minimises
manager bias associated to individual performance decisions.
Continue to have one female on the panel for all senior
leadership level appointments and the commitment of having
one female on the shortlist for all senior Leadership roles.
Succession plan coverage reflects the diversity of the
SLT population.
Progress: NEW gender diversity KPI has been introduced to
the CEO and executive team for the 2021 FY and will be included
in their team performance scorecard.
These objectives are in addition to the ongoing activities under Nufarm’s inclusion and diversity policy and current practices that are
already yielding meaningful results.
144
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 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 two month financial year ended 30 September 2020 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:
JC Gillam (appointed Chairman from 24 September 2020)
ME McDonald
DG McGauchie AO (Chairman and Director until 24 September 2020)
PM Margin
GA Hunt (Managing Director)
T Takasaki
AB Brennan
GR Davis
FA Ford
Name, qualifications
and responsibilities
Donald McGauchie AO
Independent Non-executive
Chairman (until 24 September 2020)
Member of the Nomination and
Governance Committee
Member of the Human
Resources Committee
Unless otherwise indicated, all Directors held their position as
a director throughout the entire period and up to the date of this
report. Details of the qualifications, experience and responsibilities
and other directorships of the Directors are set out below.
Tenure and Experience
Donald McGauchie AO joined the board in 2003 and was appointed chairman on 13 July 2010.
Donald retired from the Board with effect from 24 September 2020.
Donald has wide commercial experience within the agricultural, food processing, commodity
trading, finance and telecommunication sectors. He also has extensive public policy experience,
having previously held several high-level advisory positions to the government including the
Prime Minister’s Supermarket to Asia Council, the Foreign Affairs Council and the Trade Policy
Advisory Council. He is a former member of the board of the Reserve Bank of Australia.
Other directorships and offices (current and recent):
• Chairman of Australian Agricultural Company Limited (since 2010)
• Director of Graincorp Ltd. (since December 2009)
John Gillam
BCom, MAICD, FAIM
John Gillam joined the Board on 31 July 2020 and was appointed Chairman on
24 September 2020.
Non-executive Chairman (from
24 September 2020)
Member of the Nomination and
Governance Committee
John has extensive commercial and leadership experience from a 20-year career with
Wesfarmers where he held various senior leadership roles including CEO of the Bunnings
Group, Managing Director of CSBP and Chairman of Officeworks.
Other directorships and offices (current and recent):
• Chairman of CSR Limited (Director since December 2017 and Chairman since 1 June 2018)
• Chairman of BlueFit Pty Limited (since February 2018)
• Director of Trinity Grammar School (since June 2018)
• Director of the Heartwell Foundation (since 2009)
• Director of Clontarf Foundation (since 2017)
Greg Hunt
Greg Hunt joined the Board on 5 May 2015.
Managing Director and CEO
Anne Brennan
BCom(Hons), FCA, FAICD
Independent Non-executive Director
Member of the Audit Committee
Member of the Human
Resources Committee
Greg joined Nufarm in 2012 and was Group Executive Commercial Operations prior to being
appointed acting chief executive officer in February 2015 and Managing Director and Chief
Executive Officer in May 2015.
Greg has considerable executive and agribusiness experience. Greg had a successful
career at Elders before being appointed managing director of Elders Australia Limited, a
position he held between 2001-2007. After leaving Elders, Greg worked with various private
equity firms focussed on the agriculture sector and has acted as a corporate advisor to
Australian and international organisations in agribusiness related matters.
Anne Brennan joined the Board on 10 February 2011.
Anne was formerly the Executive Finance Director for the Coates Group and Chief Financial
Officer for CSR. Prior to this Anne was a partner in professional services firms Ernst & Young,
Andersen and KPMG.
Other directorships (current and recent):
• Director of Charter Hall Group (since October 2010)
• Director Argo Investments Limited (since September 2011)
• Director of Rabobank New Zealand Limited (since November 2011)
• Director of NSW Treasury Corporation (since October 2018)
• Director of Spark Infrastructure Trust (since June 2020)
• Director of Tabcorp Holdings Limited (since July 2020)
• Former Director of Rabobank Australia Limited (from November 2011 to September 2020)
• Former Director of Myer Holdings Limited (from September 2009 to November 2017)
145
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 Directors’ report continued
Name, qualifications
and responsibilities
Gordon Davis
BForSc, MAgSc, MBA
Independent Non-executive Director
Chairman of the Risk and
Compliance Committee
Member of the Audit Committee
Member of the Human
Resources Committee
Frank Ford
MTax, BBus, FCA
Independent Non-executive Director
Chairman of the Audit Committee
Member of the Nomination and
Governance Committee
Peter Margin
BSc(Hons), MBA
Independent Non-executive Director
Chairman of the Human
Resources Committee
Member of the Risk and
Compliance Committee
Member of the Nomination and
Governance Committee
Marie McDonald
LLB(Hons), BSc(Hons)
Independent Non-executive Director
Chairman of the Nomination and
Governance Committee
Member of the Audit Committee
Member of the Risk and
Compliance Committee
Toshikazu Takasaki
BBA
Non-Independent
Non-executive Director
Member of the Risk and
Compliance Committee
Tenure and Experience
Gordon Davis joined the Board on 31 May 2011.
Gordon was Managing Director of AWB Limited (from 2006 to 2010) and has held various
senior executive positions with Orica Limited, including General Manager of Orica Mining
Services (Australia, Asia) and General Manager of Incitec Fertilisers. He has also served
in a senior capacity on various industry associations.
Other directorships (current and recent):
Director of Healius Limited (formerly Primary Health Care Limited) (since August 2015)
Director of Midway Limited (since April 2016)
Frank Ford joined the Board on 10 October 2012.
Frank is a former Managing Partner of Deloitte Victoria after a long and successful career
as a professional advisor spanning some 35 years. During that period, Mr Ford was also
a member of the Deloitte Global Board, Global Governance Committee and National
Management Committee
Peter Margin joined the Board on 3 October 2011.
Peter has many years of leadership experience in major Australian and international food
companies including Executive Chairman of Asahi Holdings (Australia) Pty Ltd, Chief Executive
of Goodman Fielder Ltd and before that Chief Executive and Chief Operating Officer of
National Foods Ltd.
Other directorships (current and recent):
• Non-Executive Chairman of Asahi Holdings (Australia) Pty Ltd
• Deputy Chairman of Bega Cheese Limited (since September 2020)
• Former Director of PACT Group Holdings Limited (from November 2013 to August 2019)
• Director of Costa Group Holdings Limited (since June 2015)
• Director of Bega Cheese Limited (from June 2011 to January 2019)
Marie McDonald joined the Board on 22 March 2017.
Marie is widely recognised as one of Australia’s leading corporate and commercial lawyers
having been a Senior Partner at Ashurst until 2014 where she specialised in mergers and
acquisitions, corporate governance and commercial law.
Marie 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, and was a member
of the Australian Takeovers Panel from 2001 to 2010.
Other directorships (current and recent):
• Director of CSL Limited (since 14 August 2013)
• Director of Nanosonics Limited (since 24 October 2016)
• Director of Walter and Eliza Hall Institute of Medical Research (since October 2016)
Toshikazu Takasaki joined the Board on 6 December 2012.
Mr Takasaki represents the interests of shareholder Sumitomo Chemical Company (SCC).
He is a former executive of SCC holding senior management positions in businesses relating
to crop protection, both within Japan and in the US. 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.
146
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 Company secretary
Fiona Smith (BSc, LLB, GDipGov, FGIA) joined the company
on 20 June 2019 and was appointed company secretary
on 27 June 2019. Fiona is a senior legal and governance
professional with 20 years’ experience in company secretarial
roles arising from her time spent in such roles in listed companies.
Fiona reports directly to the Board. She holds a Bachelor of
Science and Bachelor of Law from the Australian National
University and a Graduate Diploma in Applied Governance.
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:
Directors’ meetings
AB Brennan
GR Davis
FA Ford
GA Hunt
JC Gillam
DG McGauchie1
ME McDonald
PM Margin
T Takasaki
Nufarm Ltd
Ordinary
shares
Nufarm Finance
(NZ) Ltd
Step-up
securities
14,156
71,609
51,400
544,812
185,000
76,761
34,827
3,480
–
–
–
–
–
–
–
–
–
1.
Donald McGauchie ceased to be a Director of the Company
on 24 September 2020.
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:
Board and Board Committee attendance in the reporting period
Board
Audit
Risk and
Compliance
Nomination and
Governance
Human Resources
Committee
Anne Brennan
Gordon Davis
Frank Ford
John Gillam
Greg Hunt
Peter Margin
Marie McDonald
Donald McGauchie 1
Toshikazu Takasaki
A
3
3
3
3
3
3
3
3
3
B
3
3
3
3
3
3
3
3
3
A
2
2
2
2
B
2
2
2
2
2
2
2
2
1
A
B
A
1
1
1
1
1
1
1
1
1
1
1
2
2
2
2
2
B
2
2
2
2
1
A
1
1
1
1
B
1
1
1
1
1
1
1
Column A: indicates the number of meetings held during the period of each Director’s tenure. Where a Director is not a member but
attending meetings during the period then only the number of meetings attended rather than held is shown.
Column B: indicates the number of meetings attended by each Director.
1. Donald McGauchie retired as a non-executive Director and Chairman on 24 September 2020
147
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 Directors’ report continued
Principal Activities and changes
Environmental performance
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 2,700 people at its various
locations in Australasia, Africa, the Americas and Europe.
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 two month 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.
The company is listed on the Australian Securities Exchange
(symbol NUF). Its head office is located at Laverton in Melbourne.
Non-audit services
Results
The net profit / (loss) attributable to members of the Group for the
2 months to 30 September 2020 is $(91.3) million. The comparable
figure for the 12 months to 31 July 2020 was $(456.1) 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 on pages 128 to 131
and forms part of this Directors’ Report.
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 35
on page 233 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.
Dividends
The following dividends have been paid, declared or
recommended since the end of the preceding financial year.
Indemnities and insurance for directors
and officers
No dividend paid for the 2 months ended
30 September 2020
No final dividend for 2019-2020 was paid
$000
$000
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.
Nufarm Step-up Securities distributions
No Nufarm Step-up Securities distributions have been paid since
the end of the preceding financial year:
Distribution for the period 15 October 2019 – 14 April 2020
at the rate of 4.85 per cent paid 15 April 2020
$000
6,102
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.
State of Affairs
The state of the Group’s affairs is set out in the Operating and
Financial Review accompanying this Directors’ Report.
Lead auditor’s independence declaration
The lead auditor’s independence declaration is set out on
page 162 and forms part of the Directors’ Report for the two
month financial year ended 30 September 2020.
Events subsequent to reporting date
On 15 October 2020 a distribution was paid by Nufarm Finance
(NZ) Ltd on the Nufarm Step-up Securities. The distribution rate was
4.14% resulting in a gross distribution of $5.216 million.
Other than noted above, the Directors are not aware of any matter
or circumstance that has arisen since the end of the two month
financial year that, in their opinion, has significantly affected, or
may significantly affect in future years, Nufarm’s operations or the
state of Nufarm’s operations.
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.
Remuneration Report
The Remuneration Report set out on pages 149 to 161 forms part
of this Directors’ Report
John Gillam
Director
Melbourne
19 November 2020
Greg Hunt
Director
148
Nufarm Limited | Annual Report for 2 months ended 30 September 2020
Remuneration Report
for the 2 months ended 30 September 2020
A letter from the Chairman of the Human Resources Committee (HRC)
Dear fellow shareholder,
On behalf of the Board I am pleased to present the Remuneration
Report for the two months ended 30 September 2020.
This reporting period has arisen as a result of the change of the
Company’s financial year end from 31 July to 30 September.
Due to the brevity of the reporting period, Key Management
Personnel agreed to forfeit entitlement to any short-term incentive
during the reporting period and fixed annual remuneration has
remained frozen at 2019 levels.
The testing period for the financial year 2019 and 2020 long term
incentive (LTI) plan threshold targets has been extended to include
an additional two months in the final performance calculations to
align the testing with the new financial year end. As a result, the
next testing period will be 30 September 2021.
The Chairman’s fee and non-executive director fees also
remained frozen at 2019 levels, however Directors’ Committee
fees were adjusted on 1 August 2020 to reflect changes to the
structure of the Board Committees.
Peter Margin
Chair – Human Resources Committee
149
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 Remuneration Report
for the 2 months ended 30 September 2020 continued
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 reporting period (1 August 2020 – 30 September 2020). 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
• Lists the names and roles of the Executive KMP whose remuneration
details are disclosed in this report.
1.2 Executive KMP remuneration outcomes
• Details the key remuneration outcomes between 1 August 2020 –
30 September 2020.
1.3
1.4
Actual total remuneration earned by executives in the
reporting period (unaudited)
• Additional voluntary disclosure of cash and benefits actually earned
by KMPs between 1 August 2020 – 30 September 2020.
Summary of the reporting period non executive
director (NED) fees
• Details the NED fee changes between 1 August 2020 –
30 September 2020.
1.5 Changes for the reporting period
• Outlines the changes to remuneration arrangements between
1 August 2020 – 30 September 2020.
1.6 Outlook for FY21
• Outlines the changes to remuneration in FY21.
2. Setting Senior Executive remuneration
2.1 Remuneration governance
2.2 Remuneration strategy
2.3 Remuneration components
3. Executive remuneration outcomes
• 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 FY21.
• Shows how executive remuneration is structured to support business
objectives and explains the executive remuneration mix.
3.1 Financial performance
• Provides a breakdown of Nufarm’s performance over the past
five years.
3.2 Short Term Incentive performance
• Details the historical STI plan performance relative to Nufarm’s
uNPAT results.
3.3 Long Term Incentive performance
• Historical LTI plan performance relative to Nufarm’s share price.
3.4 Senior executive contract details
• 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 and Committee roles.
5. Remuneration tables
5.1 Remuneration of Directors and disclosed executives
• Provides the remuneration disclosures required by the Corporations
Act and in accordance with relevant Australian Accounting Standards.
5.2 Equity instruments held by disclosed executives
5.3 Shares held in Nufarm
150
Nufarm Limited | Annual Report for 2 months ended 30 September 2020
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 reporting period.
Current non-executive directors
Donald McGauchie
John Gillam
Anne Brennan
Frank Ford
Gordon Davis
Marie McDonald
Peter Margin
Toshikazu Takasaki
Current executive KMPs
Greg Hunt
Paul Binfield
Elbert Prado
Brent Zacharias
Chairman and independent, non-executive director (until 24 September 2020)
Chairman (effective 24 September 2020) and independent, non-executive director
(effective 31 July 2020)
Independent, non-executive director
Independent, non-executive director
Independent, non-executive director
Independent, non-executive director
Independent, non-executive director
Non-executive director
Managing director and chief executive officer
Chief financial officer
Group executive supply chain operations
Group executive Nuseed
1.2 Executive KMP remuneration outcomes
The overall structure and philosophy of Nufarm’s approach to remuneration remained consistent between 1 August 2020 – 30 September
2020. The organisation’s remuneration philosophy continues to be based on linking financial rewards directly to employee contributions
and Company performance.
Fixed annual remuneration (FAR)
All executive KMPs did not receive an increase to their FAR between 1 August 2020 –
30 September 2020.
Short term incentive (STI)
Long term incentive (LTI)
All executive KMPs have forfeited an STI between 1 August 2020 – 30 September 2020.
All executive KMPs have forfeited an LTI between 1 August 2020 – 30 September 2020.
151
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 Remuneration Report
for the 2 months ended 30 September 2020 continued
1.3 Actual total remuneration earned by executives
in the reporting period (unaudited)
The table below details actual pay and benefits for Executive
KMPs who were employed between 1 August 2020 to
30 September 2020. This table aims to assist shareholders in
understanding the cash and other benefits received by executive
KMPs from the various components of their remuneration between
1 August 2020 to 30 September 2020.
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 KMP. This may not reflect
what executive KMPs received or became entitled to during the
reporting period (especially if they became KMP part way
through the reporting period). 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 2020 and
30 September 2020. This includes superannuation.
• 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 2020
and 30 September 2020.
• Benefits received between 1 August 2020 and 30 September 2020.
Fixed remuneration
At risk remuneration (Realised)
Total
Salary
and Fees
$
Non-
monetary
benefits
$
Super-
annuation
$
Total
$
STI cash2
$
STI
deferred
shares
vested
$
In AUD
Period 1
Directors’ Non-executive
Sub total non-executive
directors remuneration
(realised)
Sept
272,873
July 1,467,005
Executive Director
GA Hunt
Sept
215,781
–
–
–
23,604
296,477
120,051
1,587,056
4,167
219,948
–
–
–
Total Directors’
remuneration
(realised)
Group Executives
July 1,294,688
100
25,000
1,319,788
330,000
Sept 488,654
–
27,771
516,425
–
July 2,761,693
100
145,051 2,906,844 330,000
PA Binfield3
Sept
137,037
–
4,167
141,204
–
July
822,223
100
25,000
847,323
212,000
N Poerksen4
Sept
–
–
–
–
E Prado
Sept
122,329
10,326
–
132,655
July
444,606
21,990
15,426
482,022
–
–
–
July
791,548
67,351
99,292
958,191
38,823
B Zacharias
Sept
74,909
7,608
8,240
90,757
Sub total – total
executive
remuneration (realised)
Total directors
and executive
remuneration (realised)
July
538,741
55,290
59,394
653,425
Sept 334,275
17,934
12,407
364,616
July 2,597,118
144,731
199,112 2,940,961 250,823
11,678
Sept 822,929
17,934
40,178
881,041
–
–
July 5,358,811
144,831
344,163 5,847,805 580,823
11,678
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
11,678
–
LTI
rights
vested
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Other
long
term
$
Total
Re-
muneration
$
LTI rights
forfeited
$
–
–
–
–
–
296,477
1,587,056
219,948
–
–
–
1,649,788 (463,956)
516,425
–
– 3,236,844 (463,956)
–
–
–
–
–
–
–
–
–
141,204 (636,320)
1,059,323 (198,580)
–
–
482,022
(121,601)
132,655
–
997,014
(141,335)
90,757
–
665,103
(88,938)
364,616 (636,320)
– 3,203,462 (550,454)
–
881,041 (636,320)
– 6,440,306 (1,014,410)
1.
‘Sept’ in this table represents the 2 months ended 30 September 2020; ‘July’ in this table represents the 12 months ended 31 July 2020.
2. STI Cash for the 12 months ended 31 July 2020 includes a cash payment paid for the successful completion of the sale of the South American business.
3. Mr PA Binfield resigned on 14 September 2020 and therefore forfeited his rights under the Long-term incentive program.
4. Mr N Poerksen ceased to be a KMP on 28 February 2020.
Note: Vested STI deferred shares and LTI rights are valued at the Nufarm share price prevailing upon the vesting or forfeiture date ($3.85 at 30 September 2020
and $4.02 at 31 July 2020).
152
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 1.4 Summary of the reporting period Non-Executive
Director (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 did not change between 1 August 2020
and 30 September 2020. 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.
1.5 Changes for the reporting period
• John Gillam – Joined the Board on 31 July 2020 and
assumed the role of Chairman effective 24 September 2020
following Mr McGauchie’s retirement as Chairman and
Non-executive Director.
• Effective 1 August 2020 Committee fees changed to align
with the revised Board Committee structure.
1.6 Outlook for FY21
Fixed annual remuneration (FAR)
Following a year of disappointing profit results, the executive KMPs forfeited an increase
to their FAR (for the second year in a row) for the reporting period to 30 September and
FY21 as a demonstration of their continued commitment to turning the Company’s financial
health around.
Short term incentive (STI)
The FY21 STI plan will be simplified with a targeted focus on a single profit measure, aligned
with cash flow and cost measures, with the continuation of a non-financial component
based on team/individual performance.
Long term incentive (LTI)
A review of the LTI plan will be undertaken during FY21.
Non-executive director fees and pool
In line with the executive KMP stance, non-executive directors elected not to increase board
fees for FY21 and decided that it was not necessary to seek any increase to the fee pool
previously approved by shareholders.
2 Setting senior executive remuneration
2.1 Remuneration governance
The HRC is responsible for reviewing and making recommendations
to the Board on remuneration policies and practices applicable
to disclosed executives. The HRC is comprised of a minimum of
three independent non-executive directors and has responsibility
for ensuring that remuneration policies and practices are aligned
to the overall strategy, values and risk appetite of Nufarm while
also providing competitive rewards to attract, retain and motivate
highly skilled executives and has a clear relationship between
executive remuneration and value creation for shareholders.
The HRC charter can be found at www.nufarm.com.
In addition to reviewing and recommending the remuneration
policies and practices to the Board, the HRC has responsibility for
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 Nufarm Board have
absolute discretion regarding the amount and timing of any
incentive payment made or not made to any eligible employee.
In addition, a ‘clawback’ provision applies to both LTI and STI
plans (cash and equity) as follows:
• where payment is contrary to the financial soundness
of the Company;
• in circumstances where the financial performance of Nufarm
over the relevant reporting period (including the initial STI
performance period) has been mis-stated; and/or
• overseeing the succession plans and process for the CEO
• for individual gross misconduct.
and direct reports to the CEO;
• assisting the Board in the annual performance review of the
CEO and overseeing the annual performance review of the
Executive KMPs;
• approving the appointment of Executive KMPs and the
general terms of their employment contracts including
termination payments;
• overseeing the implementation of the Inclusion and Diversity
Policy and assessing progress in achieving measurable
objectives; and
• overseeing Nufarm’s key people and performance strategies,
policies and programs to ensure there is alignment with
Nufarm’s overall strategy and values.
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
benchmarks, 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.
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.
2.2 Remuneration strategy
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.
From FY21 onwards, the remuneration strategy is further refined
to incorporate the following:
• An STI plan which rewards year on year growth, with
an equal focus on profitability and cashflow, as well
as a non-financial component.
• An LTI plan which rewards plan participants for creating long
term value for the organisation and shareholders.
153
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 Remuneration Report
for the 2 months ended 30 September 2020 continued
FAR
STI
LTI
Attract, motivate, and retain highly
skilled employees
Reward achievement if financial and personal/team strategic
objectives are met
Align to long term shareholder
value creation
Cash
Equity
Base salary plus superannuation
50% of STI paid annually after
financial year end
Set based on market and internal
relativity, performance and
experience
STI outcome based on financial
and personal/team performance
50% of the STI outcome is deferred
as Indeterminate Rights for a
period of 2 years.
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
2.3 Remuneration components
a) Remuneration structure
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 between 1 August 2020 – 30 September 2020. There are
no applicable performance conditions relating to STI and LTI in the relevant reporting period.
Disclosed
Executives
CFO
CEO
● FAR ● Cash STI ● Deferred STI ● LTI
100.0%
100.0%
100.0%
The graph below outlines the target remuneration mix for executive KMPs for FY21. The variable components of STI (including potential
restricted shares) and LTI are expressed at target.
52.8%
13.2%
13.2%
20.8%
43.8% Equity
34% Equity
41.7%
14.6%
14.6%
29.2%
45% Equity
40.0%
15.0%
15.0%
30.0%
● FAR ● Cash STI ● Deferred STI ● LTI
Disclosed
Executives
CFO
CEO
154
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 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
Sept 202
FY20
FY19
FY18
FY17
Continuing group 1
Total Group (continuing and discontinued operations)
Earnings
Underlying EBITDA *
ANWC/Sales***
Underlying NPAT**
Shareholder value
TSR
Dividends declared
Closing share price
$m
%
$m
%
Cents
$m
(43.4)
44.7
(85.9)
(4.2)
–
3.85
235.8
46.4
(80.6)
(49.2)
–
4.02
300.1
47.7
39.6
(31.0)
–
4.88
385.7
40.3
98.4
(13.9)
11.0
7.03
390.0
36.8
135.8
3.5
13.0
8.10
1. Performance measures for FY19, FY20 and the 2 months ended 30 September 2020 are presented on a continuing operations basis.
2. ‘Sept 20’ in this table represents the 2 months ended 30 September 2020.
* and ** Underlying EBITDA is earnings before net finance costs, taxation, depreciation, amortisation and material items. Underlying NPAT is Net Profit/(Loss)
after Tax before material items. Underlying NPAT and Underlying EBITDA are used internally by management to assess performance of the business and make
decisions on the allocation of our resources. NPAT, rather than EBITDA, 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.
3.2 Short Term Incentive outcomes
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. There are no applicable performance conditions relating to STI in the relevant reporting period.
Underlying NPAT growth vs STI outcomes
t
r
h
w
o
g
T
A
P
N
g
n
y
l
r
e
d
n
U
i
50.0%
0.0%
-50.0%
-100.0%
-150.0%
-200.0%
-250.0%
-300.0%
-350.0%
FY17
FY18
FY19
FY20
30 September 2020
140.0%
122.5%
105.0%
87.5%
70.0%
52.5%
35.0%
17.5%
0.0%
● Underlying NPAT % Growth
% STI outcome
t
e
m
o
c
u
o
n
a
p
l
I
T
S
155
Nufarm Limited | Annual Report for 2 months ended 30 September 2020
Remuneration Report
for the 2 months ended 30 September 2020 continued
3.3 Long Term Incentive outcomes
The results of Nufarm’s RTSR are 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 approves the vesting
outcomes in accordance with the LTI plan rules.
Historical LTI plan performance relative to Nufarm’s
share price
The following chart compares Nufarm’s LTI plan vesting results for
the past six LTI plans (as a percentage of plan maximum) to the
share price history during the same period. The FY16, FY17 and
FY18 LTI plans did not meet hurdle and therefore are not depicted.
There are no applicable performance conditions relating to LTI
in the relevant reporting period.
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
89.2%
100%
120%
100%
80%
60%
t
e
m
o
c
u
o
n
a
p
l
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
9
1
-
g
u
A
9
1
-
t
c
O
9
1
-
c
e
D
-
0
2
b
e
F
0
2
-
r
p
A
-
0
2
n
u
J
-
0
2
g
u
A
0.0%
0.0%
0.0%
40%
I
T
L
20%
0%
● 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 other disclosed executives by giving 6 months notice, in which case the CEO
and other disclosed executives 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 and other disclosed executives may terminate the contract by giving the Company 6 months notice.
The Company may terminate the employment contracts immediately for serious misconduct.
156
Nufarm Limited | Annual Report for 2 months ended 30 September 2020
4 Non-Executive Directors (NED) remuneration
Nufarm’s business and affairs are managed by or 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 $2,000,000 per year
(including superannuation costs). The total fees for FY20 remained
within the approved cap.
The Board fees are reviewed every 12 months with the last
increase of 3.75% effective August 2018.The next review is due
in September 2021. Effective 1 August 2020 Board fees changed
to align with the revised sub-committee structure.
Fees applicable from 1 August 2020
($) per annum
Chairman
Director
Audit committee Chair
Audit committee Member
Risk and Compliance committee Chair
Risk and Compliance committee Member
HR committee Chair
HR committee Member
Nominations and Governance committee Chair
Nominations and Governance committee Member
* The Chairman receives no fees as a member of any committee
392,567
160,597
27,000
13,500
27,000
13,500
27,000
13,500
20,250
10,125
157
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 Remuneration Report
for the 2 months ended 30 September 2020 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
Total3
Percen-
tage of
remun-
eration
perfor-
mance
based
$
Value of
options as a
proportion
of total
remun-
eration
$
In AUD
Period1
Salary
and Fees
$
Cash
Bonus
(Vested)2
$
Non-
monetary
benefits
$
Total
$
Super-
annuation
$
Termin-
ation
benefits
$
Equity
settled
$
Other
long
term
$
Total
Re-
muneration
$
Directors’ Non-executive
DG McGauchie
Sept
59,480
July 356,879
J Gillam4
Sept
24,862
July
–
AB Brennan
Sept
28,424
July
172,973
GR Davis
Sept
32,515
July
190,139
F Ford
Sept
31,429
July
190,138
P Margin
Sept
36,822
July
215,086
M McDonald
Sept
32,963
July
187,210
T Takasaki
Sept
26,378
July
154,580
Sub total
non-
executive
directors
remuneration
Sept 272,873
July 1,467,005
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
59,480
5,948
– 356,879
35,688
–
–
–
–
–
–
–
–
–
–
–
–
–
–
24,862
2,486
–
–
28,424
2,842
172,973
17,297
32,515
190,139
31,429
190,138
36,822
215,086
3,251
19,014
3,143
19,014
–
–
32,963
3,296
187,210
13,580
26,378
2,638
154,580
15,458
– 272,873
23,604
– 1,467,005
120,051
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
65,428
392,567
27,348
–
31,266
190,270
35,766
209,153
34,572
209,152
36,822
215,086
36,259
200,790
29,016
170,038
296,477
1,587,056
158
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 Short Term
Post-
employment
Share
based
payments
Total3
Salary
and Fees
$
Cash
Bonus
(Vested)2
$
Non-
monetary
benefits
$
Total
$
Super-
annuation
$
Termin-
ation
benefits
$
Equity
settled
$
Other
long
term
$
Total
Re-
muneration
$
In AUD
Period1
Executive Director
GA Hunt
Sept
215,781
–
–
215,781
4,167
–
47,556
July 1,294,688 330,000
100
1,624,788
25,000
– 256,718
Total Directors’
remuneration
Sept 488,654
–
– 488,654
27,771
–
47,556
July 2,761,693 330,000
100 3,091,793
145,051
– 256,718
Group Executives
PA Binfield5
Sept
137,037
–
–
137,037
4,167
– (244,547)
July 822,223 212,000
100
1,034,323
25,000
– 136,806
N Poerksen6
Sept
–
July 444,606
E Prado7
Sept
122,329
–
–
–
–
–
–
–
–
21,990 466,596
15,426
– (157,902)
10,326
132,655
–
–
19,072
July
791,548 38,823
67,351 897,722
99,292
– 106,007
–
–
–
–
–
–
–
–
–
–
267,504
1,906,506
563,981
3,493,562
–
324,120
151,727
1,103,021
Percen-
tage of
remun-
eration
perfor-
mance
based
$
Value of
options as a
proportion
of total
remun-
eration
$
18%
31%
124%
14%
(103,343)
237%
1,196,129
21%
237%
11%
18%
13%
19%
8%
9%
68%
5%
0%
1%
B Zacharias8
Sept
74,909
July
538,741
Sept 334,275
–
–
–
7,608
82,517
8,240
55,290 594,031
59,394
–
–
3,647
4,146
98,550
19,340
(74,950)
597,815
30%
17,934 352,209
12,407
– (221,828)
4,146
146,934
July 2,597,118 250,823
144,731 2,992,672
199,112
–
104,251
(74,950)
3,221,085
Sept 822,929
–
17,934 840,863
40,178
– (174,272)
4,146
710,915
July 5,358,811 580,823
144,831 6,084,465
344,163
– 360,969
(74,950)
6,714,647
Sub total –
total executive
remuneration
Total directors
and executive
remuneration
1.
‘Sept’ in this table represents the 2 months ended 30 September 2020; ‘July’ in this table represents the 12 months ended 31 July 2020.
2. Cash Bonus (Vested) for the 12 months ended 31 July 2020 includes a cash payment paid for the successful completion of the sale of the South American business.
3. Represents total remuneration paid in the financial period.
4. Mr J Gillam joined the Board on 31 July 2020.
5. Mr PA Binfield resigned on 14 September 2020 and therefore forfeited his equity based compensation, resulting in negative remuneration from the reversal
of prior awards.
6. Mr N Poerksen ceased to be a KMP on 28 February 2020. Upon departure, Mr Poerksen forfeited his equity based compensation, resulting in negative
remuneration from the reversal of prior awards for the 12 months ended 31 July 2020.
7. Mr E Prado’s fixed remuneration and other long-term remuneration for the 12 months ended 31 July 2020 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.
8. Included in Other long-term remuneration for B Zacharias for the 12 months ended 31 July 2020 is the fair value expense for the financial year relating to the
Nuseed LTI plan (refer section 2.3c). In FY20, negative income arises as the rights associated with the 2019 grant are no longer expected to vest.
159
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 Remuneration Report
for the 2 months ended 30 September 2020 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 Ltd
Balance
at 1 August
2020
Granted as
remun-
eration
Scheme
Exercised
Forfeited
or lapsed
Net
change
other
Balance
at 30 Sept
2020(b)
Vested
during
2020
Vested
at 30 Sept
2020(a)
Value at
date of
forfeiture
Directors
G Hunt
LTI performance 322,389
STI deferred
–
Executives
Current KMP
P Binfield(c)
LTI performance
165,278
STI deferred
–
E Prado
LTI performance
100,266
STI deferred
12,456
B Zacharias
LTI performance
–
STI deferred
10,575
Total
LTI performance 587,933
STI deferred
23,031
Non-KMP Officers
F Smith
LTI performance
36,248
STI deferred
–
Total
647,212
(a) All options/rights that are vested are exercisable.
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
322,389
–
165,278
–
100,266
12,456
–
10,575
587,933
23,031
36,248
–
647,212
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(b) 308,479 of total LTIP performance rights held by KMPs are due to vest in the period ending 30 September 2021, with the remaining unvested balance due
to vest in the period ending 30 September 2022.
(c) On 14 September 2020, Mr Binfield announced his resignation from Nufarm. Upon leaving Nufarm, in accordance with the long-term incentive plan rules,
Mr Binfield will forfeit all of his LTI rights.
160
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 5.3 Shares held in Nufarm Ltd
Directors
DG McGauchie1
J Gillam
AB Brennan
GR Davis
FA Ford
G Hunt
PM Margin
ME McDonald
T Takasaki
Executives
Current KMP
P Binfield
E Prado
B Zacharias
Total
Balance at
1 August 2020
Granted as
remuneration
On exercise of
of rights
Net change
other
Balance at
30 September
2020
76,761
–
14,156
71,609
51,400
494,812
3,480
22,327
–
198,348
40,471
41,907
1,015,271
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
76,761
185,000
185,000
–
–
–
14,156
71,609
51,400
50,000
544,812
–
–
–
–
353
536
3,480
22,327
–
198,348
40,824
42,443
159,128
1,174,399
1. Mr DG McGauchie retired from the board 24 September 2020
Shares issued as a result of the exercise of options
There were nil (2020: nil) shares issued as a result of the exercise of options during the year.
Unissued shares under option
There are nil (2020: 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 30 September 2020 (2019: Nil).
Other key management personnel transactions with the company or its controlled entities
Apart from the details disclosed in this note, no director has entered into a material contract with the Company or entities in the Group
since the end of the previous financial year and there were no material contracts involving director’s interest existing at year end.
A number of key management persons, or their related parties, hold positions in other entities that result in them having control or
significant influence over the financial or operating policies of those entities. A number of these entities transacted with the Company
or its subsidiaries in the reporting period. The terms and conditions of the transactions with management persons and their related
parties were no more favourable than those available, or which might reasonably be expected to be available, on similar transactions
to non-director related entities on an 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.
John Gillam
Director
Melbourne
19 November 2020
Greg Hunt
Director
161
Nufarm Limited | Annual Report for 2 months ended 30 September 2020
Auditors’ Independence Declaration
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 period ended 30 September 2020 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.
KPM_INI_01
KPMG
Chris Sargent
Partner
Melbourne
19 November 2020
PAR_SIG_01
PAR_NAM_01
PAR_POS_01
PAR_DAT_01
PAR_CIT_01
© 2020 KPMG, an Australian partnership and a member firm of the KPMG global organization of independent member firms
affiliated with KPMG International Limited, a private English company limited by guarantee. All right reserved. The KPMG name
and logo are trademarks used under license by the independent member firms of the KPMG global organization. Liability limited
by a scheme approved under Professional Standards Legislation.
162
Nufarm Limited | Annual Report for 2 months ended 30 September 2020
Financial statements
for the 2 months ended 30 September 2020
Contents
Consolidated statement of profit or loss and
other comprehensive income
Consolidated balance sheet
Consolidated statement of cash flows
Consolidated statement of changes in equity
Notes to the consolidated financial statements
1 Reporting entity
2 Basis of preparation
3 Significant accounting policies
4 Determination of fair values
5 Operating segments
6
Individually material income and expense items
7 Other income
8 Other expenses
9 Personnel expenses
10 Finance income and expense
11
Income tax expense
12 Discontinued operation
13 Cash and cash equivalents
14 Trade and other receivables
15 Inventories
16 Tax assets and liabilities
164
166
167
168
170
170
170
171
180
181
185
187
187
187
187
188
189
190
191
191
192
17 Investments accounted for using the equity method
18 Property, plant and equipment
19 Intangible assets
20 Trade and other payables
21 Interest-bearing loans and borrowings
22 Employee benefits
23 Share-based payments
24 Provisions
25 Capital and reserves
26 Earnings per share
193
193
194
197
197
199
201
203
203
205
27 Financial risk management and financial instruments 206
28 Leases
29 Capital commitments
30 Contingencies
31 Group entities
32 Company disclosures
33 Deed of cross guarantee
34 Related parties
35 Auditors’ remuneration
36 Subsequent events
Directors’ declaration
Independent Audit Report
215
216
216
216
220
221
222
223
223
224
225
163
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 Consolidated statement of profit or loss and
other comprehensive income
For the 2 months ended 30 September 2020
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 profits/(losses)
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
2 months to
30 Sep 2020
$000
12 months to
31 Jul 2020
$000
Note
267,320
2,847,375
(227,400)
(2,112,646)
39,920
734,729
7
1,114
5,833
17
10
10
10
(78,337)
(486,357)
(42,194)
(446,231)
(6,132)
(48)
(22,652)
363
(85,677)
(214,315)
467
(9,815)
(4,659)
(14,474)
(14,007)
3,405
(76,031)
(23,565)
(99,596)
(96,191)
(99,684)
(310,506)
Income tax benefit/(expense)
11
8,339
(51,906)
Profit/(loss) for the period from continuing operations
(91,345)
(362,412)
Discontinued operation
Loss from discontinued operation, net of tax
Profit/(loss) for the period
Attributable to:
Equity holders of the group
12
–
(93,667)
(91,345)
(456,079)
(91,345)
(456,079)
The consolidated statement of profit or loss and other comprehensive income is to be read in conjunction with the attached notes.
164
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 Profit/(loss) for the period from continuing operations
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Foreign exchange translation differences for foreign operations
Effective portion of changes in fair value of cash flow hedges
Effective portion of changes in fair value of net investment hedges
Items that will not be reclassified to profit or loss:
Actuarial gains/(losses) on defined benefit plans
Income tax on share based payment transactions
Other comprehensive profit/(loss) for the period, net of income tax from
continuing operations
Total comprehensive profit/(loss) for the period from continuing operations
Loss from discontinued operation, net of tax
Foreign exchange translation differences for disposal group reclassified to profit/(loss)
Consolidated
2 months to
30 Sep 2020
$000
12 months to
31 Jul 2020
$000
Note
(91,345)
(362,412)
(4,088)
(78)
(1,426)
(96,656)
(86)
6,117
(417)
–
(8,349)
167
(6,009)
(97,354)
(98,807)
(461,219)
–
–
(93,667)
417,842
Total comprehensive profit/(loss) for the period
(97,354)
(137,044)
Attributable to:
Equity holders of the group
Earnings per share
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
Earnings per share – Continuing
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
(97,354)
(137,044)
26
26
26
26
(24.1)
(24.1)
(24.1)
(24.1)
(123.7)
(123.3)
(99.0)
(98.7)
The amounts recognised directly in equity are disclosed net of tax.
The consolidated statement of profit or loss and other comprehensive income is to be read in conjunction with the attached notes.
165
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 Consolidated
Note
30 Sep 2020
$000
31 Jul 2020
$000
13
14
15
16
14
17
16
18
19
20
21
22
16
24
20
21
16
22
423,914
686,552
859,035
982,169
1,046,929
932,806
22,593
15,950
2,352,471
2,617,477
3,119
2,259
394
3,091
2,250
389
141,731
133,302
436,685
439,644
1,328,906
1,339,016
1,913,094
1,917,692
4,265,565
4,535,169
861,030
932,996
234,313
338,861
16,703
11,113
16,038
12,354
33,557
37,389
1,156,716
1,337,638
5,995
5,244
795,808
788,955
148,146
112,165
145,886
113,823
1,062,114
1,053,908
2,218,830
2,391,546
2,046,735
2,143,623
1,834,934
1,834,934
74,679
(109,810)
79,805
(18,048)
1,799,803
1,896,691
25
246,932
246,932
2,046,735
2,143,623
Consolidated balance sheet
As at 30 September 2020
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Current tax assets
Total current assets
Non-current assets
Trade and other receivables
Investments in equity accounted investees
Other investments
Deferred tax assets
Property, plant and equipment
Intangible assets
Total non-current assets
TOTAL ASSETS
Current liabilities
Trade and other payables
Loans and borrowings
Employee benefits
Current tax payable
Provisions
Total current liabilities
Non-current liabilities
Payables
Loans and borrowings
Deferred tax liabilities
Employee benefits
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
Equity
Share capital
Reserves
Retained earnings
Equity attributable to equity holders of the group
Other securities
TOTAL EQUITY
The consolidated balance sheet is to be read in conjunction with the attached notes.
166
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 Consolidated statement of cash flows
For the 2 months ended 30 September 2020
Cash flows from operating activities
Profit/(loss) for the period – after tax
Adjustments for:
Tax expense/(benefit)
Net finance expense
Depreciation & amortisation
Asset rationalisation and restructuring
Europe impairment loss
South American business disposal – high yield bond
Pre tax (profit)/loss on sale of discontinued operations
Pre tax (profit)/loss on sale of fixed assets
Inventory write down
Share of (profits)/losses of associates net of tax
Other
Movements in working capital items:
(Increase)/decrease in receivables
(Increase)/decrease in inventories
Increase/(decrease) in payables
Consolidated
2 months to
30 Sep 2020
$000
12 months to
31 Jul 2020
$000
Note
6
6
6
6
8
17
(91,345)
(456,079)
(8,339)
9,348
186,102
88,470
35,436
208,031
1,926
50,461
–
188,275
4,936
–
(69)
6,628
48
–
123,105
(120,751)
(82,986)
–
(13,860)
(77)
19,051
(363)
8
(93,702)
(3,026)
(61,896)
Exchange rate change on foreign controlled entities working capital items
6,215
(142,086)
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
Proceeds from sale of business and investments
Payments for acquired intangibles and major product development expenditure
(115,848)
467
–
(2,132)
(8,664)
6
(126,177)
(30,691)
7,721
–
(90,296)
(118,248)
(231,514)
90
(2,895)
854
(69,811)
–
1,283,641
(18,112)
(99,092)
Net investing cash flows
6
(20,917)
1,115,592
Cash flows from financing activities
Share issue proceeds (net of costs)
Preference securities proceeds received net of costs
Preference securities redeemed
Debt establishment transaction costs
Proceeds from borrowings
Repayment of borrowings
Lease liability payments
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 period
Exchange rate fluctuations on foreign cash balances
Cash and cash equivalents at period end date
The consolidated statement of cash flows is to be read in conjunction with the attached notes.
21
21
21
21
25
25
6
–
–
–
(131)
–
97,000
(97,500)
(1,471)
13,629
1,721,216
(124,326)
(2,351,291)
(3,996)
–
–
(21,502)
(17,135)
–
(114,824)
(670,683)
(261,918)
213,395
686,552
505,687
(720)
(32,530)
13
423,914
686,552
167
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 Consolidated statement of changes in equity
For the 2 months ended 30 September 2020
Attributable to equity holders of the group
Consolidated
Share
capital
$000
Translation
reserve
$000
Capital
profit
reserve
$000
Other
reserve
$000
Retained
earnings
$000
Total
$000
Other
securities
$000
Non-
controlling
interest
$000
Total
equity
$000
Balance at 1 August 2019
1,834,594
(270,302)
33,627
(12,833)
460,016
2,045,102
343,932
– 2,389,034
Profit/(loss) for the period from
continuing operations
Profit/(loss) for the period from
discontinued operations
Other comprehensive income
Actuarial gains/(losses) on defined
benefit plans
Foreign exchange translation
differences for disposal groups
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
–
–
–
–
–
–
–
–
–
–
–
–
417,842
(96,656)
–
–
–
321,186
Transactions with owners,
recorded directly in equity
Employee share award entitlements
and share issuances
340
Dividends paid to shareholders
Dividend reinvestment plan
Distributions to other security holders
Preference securities redeemed
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(362,412)
(362,412)
–
(93,667)
(93,667)
–
–
–
(86)
6,117
167
(8,349)
(8,349)
–
–
–
–
–
417,842
(96,656)
(86)
6,117
167
6,198
(464,428)
(137,044)
–
–
–
2,269
–
–
(13,636)
(13,636)
1,929
–
–
–
–
–
–
(97,000)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(362,412)
–
(93,667)
–
–
–
–
–
–
(8,349)
417,842
(96,656)
(86)
6,117
167
–
(137,044)
–
–
–
–
–
2,269
–
–
(13,636)
(97,000)
Balance at 31 July 2020
1,834,934
50,884
33,627
(4,706)
(18,048)
1,896,691
246,932
– 2,143,623
168
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 Attributable to equity holders of the group
Consolidated
Share
capital
$000
Translation
reserve
$000
Capital
profit
reserve
$000
Other
reserve
$000
Retained
earnings
$000
Total
$000
Other
securities
$000
Non-
controlling
interest
$000
Total
equity
$000
Balance at 1 August 2020
1,834,934
50,884
33,627
(4,706)
(18,048)
1,896,691
246,932
– 2,143,623
Profit/(loss) for the period from
continuing operations
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
Employee share award entitlements
and share issuances
Dividends paid to shareholders
Dividend reinvestment plan
Distributions to other security holders
–
–
–
–
–
–
–
–
–
–
–
–
–
(4,088)
–
–
–
(4,088)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(91,345)
(91,345)
–
–
(78)
(1,426)
–
(417)
(417)
–
–
–
–
(4,088)
(78)
(1,426)
–
(1,504)
(91,762)
(97,354)
466
–
–
–
–
–
–
–
466
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(91,345)
–
–
–
–
–
–
–
–
–
–
(417)
(4,088)
(78)
(1,426)
–
(97,354)
466
–
–
–
Balance at 30 September 2020
1,834,934
46,796
33,627
(5,744)
(109,810)
1,799,803
246,932
– 2,046,735
The amounts recognised directly in equity are disclosed net of tax.
The consolidated statement of changes in equity is to be read in conjunction with the attached notes.
169
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 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 2 months
ended 30 September 2020 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 comparative period is presented
as at and for the 12 months ended 31 July 2020 due to a change
in financial year for the group. 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).
Changes to significant accounting policies are described in note 3.
The consolidated financial statements were authorised for issue
by the Board of Directors on 19 November 2020.
(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 and
presentation currency. The company is of a kind referred to
in ASIC Corporations (Rounding in Financial/ Director’s Reports)
Instrument 2016/191 and, in accordance with that Instrument, all
financial information presented in Australian dollars has been
rounded to the nearest thousand dollars 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.
170
(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 the higher of 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.
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 19 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 incorporating assumptions including expected
revenues from products, the return on assets, future costs, growth
rates and useful lives.
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.
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 (iv) Defined benefit plans
3 Significant accounting policies
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 22 for details of the key assumptions used in
determining the accounting for these plans.
(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.
(viii) Coronavirus (COVID-19)
The group has carefully considered the effect of the Coronavirus
in preparing its financial statements for the 2 months ended
30 September 2020. The group did not identify any material
financial effects, including on the application of critical estimates
and judgements.
(e) Reclassification
Where applicable comparatives are adjusted to present them
on the same basis as current period figures.
Except as described 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.
(a) Changes in significant accounting policies
Amendments made to existing standards that are not yet effective
are not expected to result in a material effect on the group’s
financial position or its performance.
(b) 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.
171
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 3 Significant accounting policies continued
(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. 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.
(c) 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.
(d) 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 either measured
at amortised cost, fair value through other comprehensive income
(FVOCI), or fair value through profit or loss (FVTPL).
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 Revenue from
Contracts with Customers. Refer to note 3 (m).
172
Nufarm Limited | Annual Report for 2 months ended 30 September 2020Notes to the consolidated financial statements continued 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 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.
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.
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
period which are unpaid.
The group has the following non-derivative financial liabilities:
loans and borrowings, bank overdrafts and trade and
other payables.
173
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 3 Significant accounting policies 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-tax distributions thereon are recognised as distributions
within equity. Further details can be found in note 25.
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 25.
(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.
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.
Hedges that meet all the qualifying criteria for hedge accounting
are accounted for, as described below:
174
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 or are not designated
for hedge accounting
Certain derivative instruments do not qualify, or are not designated
for hedge accounting. Changes in the fair value of any derivative
instrument that does not qualify, or is not designated for hedge
accounting are recognised immediately in profit or loss.
Nufarm Limited | Annual Report for 2 months ended 30 September 2020Notes to the consolidated financial statements continued (e) Property, plant and equipment
(ii) Research and development
(i) Recognition and measurement
Items of property, plant and equipment are measured at cost less
accumulated depreciation and impairment losses.
Cost includes expenditure that is directly attributable to the acquisition
of the asset. The cost of self-constructed assets includes the cost of
materials and direct labour, any other costs directly attributable
to bringing the asset to a working condition for its intended use,
and the costs of dismantling and removing the items and restoring
the site on which they are located, and capitalised borrowing
costs. Purchased software that is integral to the functionality of
the related equipment is capitalised as part of that equipment.
When parts of an item of property, plant and equipment have
different useful lives, they are accounted for as separate items
(major components) of property, plant and equipment.
Gains and losses on disposal of an item of property, plant and
equipment are determined by comparing the proceeds from
disposal with the carrying amount of property, plant and
equipment and are recognised net in 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.
Expenditure on research activities, undertaken with the prospect
of gaining new scientific or technical knowledge and
understanding, is recognised in profit or loss when incurred.
Development activities involve a plan or design for the
production of new or substantially improved products and
processes. Development expenditure is capitalised only if
development costs can be measured reliably, the product
or process is technically and commercially feasible, future
economic benefits are probable and the group has sufficient
resources to complete development and to use or sell the
asset. The expenditure capitalised includes the cost of materials,
direct labour and overhead costs that are directly attributable
to preparing the asset for its intended use and capitalised
borrowing costs. Development expenditure that does not meet
the above criteria is recognised in profit or loss as incurred.
Capitalised development expenditure is measured at cost less
accumulated amortisation and accumulated impairment losses.
(iii) Intellectual property
Intellectual property consists of product registrations, product
access rights, trademarks, task force seats, product distribution
rights and product licences acquired from third parties. 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.
(iii) Depreciation
(iv) Other intangible assets
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. Land is not depreciated.
The estimated useful lives for the current and comparative
periods are as follows:
• buildings
• leasehold improvements
• plant and equipment
• motor vehicles
• computer equipment
15-50 years
5 years
10-15 years
5 years
3 years
Depreciation methods, useful lives and residual values are
reassessed at each reporting date.
(f) 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.
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.
175
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 3 Significant accounting policies continued
(g) Leases
Lease liability
Lease liabilities are initially measured at the present value of lease
payments that are not paid at that date. The lease payments are
discounted using either the interest rate implicit in the lease, where
that rate can be readily determined, or the incremental
borrowing rate.
The lease payments included in the measurement of the lease
liability comprise the following (where applicable):
(a) fixed payments, less any lease incentives receivable;
(b) variable lease payments, measured using the index or rate
as at the commencement;
(c) amounts expected to be paid by the lessee under residual
(h) 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.
(i) Impairment
value guarantees;
(i) Non-derivative financial assets
(d) the exercise price of a purchase option if the lessee is
reasonably certain to exercise that option; and
(e) payments of penalties for terminating the lease, if the lease term
reflects the lessee exercising an option to terminate the lease.
Lease liabilities are remeasured when there is a change in future
lease payments arising from a change in the above.
Lease liabilities are measured at amortised cost using the
effective interest method.
Interest is recognised as part of the financial expenses in the
Income Statement.
Right of use asset
The right-of-use asset is initially measured at cost, and comprises
the following (where applicable):
(a) the amount of the initial measure of the lease liability, as
described above;
(b) any lease payments made at or before the commencement
date, less any lease incentives received;
(c) any initial direct costs incurred by the lessee; and
(d) an estimate of the costs to be incurred by the lessee in
dismantling and removing the underlying asset, restoring the
site on which it is located or restoring the underlying asset to
the condition required by the lease terms and conditions of the
lease, unless those costs are incurred to produce inventories.
The right-of-use asset is depreciated on a straight-line basis over
the shorter of the lease term and the useful life.
Determining the lease term
The lease term is the non-cancellable period of a lease, together
with both:
(a) periods covered by an option to extend the lease, if the lessee
is reasonably certain to exercise that option; and
(b) periods covered by an option to terminate the lease, if the
lessee is reasonably certain not to exercise that option.
The lease term is revised if there is a change in the non-cancellable
period of a lease.
Short term/low value leases
Leases with a short term (duration of a year or less at the time of
commencement) and leases which are low value are expensed
on a straight line basis over the lease term.
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
176
Nufarm Limited | Annual Report for 2 months ended 30 September 2020Notes to the consolidated financial statements continued largely independent of the cash inflows of other assets or groups
of assets (the ‘cash-generating unit’). The goodwill acquired in a
business combination, for the purpose of impairment testing, is
allocated to cash-generating units that are expected to benefit
from the synergies of the combination.
An impairment loss is recognised if the carrying amount of an
asset or its cash-generating unit exceeds its estimated
recoverable amount. Impairment losses are recognised in profit
or loss. Impairment losses recognised in respect of cash-
generating units are allocated first to reduce the carrying amount
of any goodwill allocated to the units and then to reduce the
carrying amount of other assets in the unit on a pro-rata basis.
An impairment loss in respect of goodwill is not reversed. In
respect of other assets, impairment losses recognised in prior
periods are assessed at each reporting date for any indications
that the loss has decreased or no longer exists. An impairment
loss is reversed if there has been a change in the estimates used
to determine the recoverable amount. An impairment loss is
reversed only to the extent that the asset’s carrying amount does
not exceed the carrying amount that would have been determined,
net of depreciation or amortisation, if no impairment loss had
been recognised.
Goodwill that forms part of the carrying amount of an investment
in an associate 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 19 for further information.
(j) 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.
(k) Employee benefits
(i) Defined contribution plans
A defined contribution plan is a post-employment benefit plan
under which an entity pays fixed contributions into a separate
entity and will have no legal or constructive obligation to pay
further amounts. Obligations for contributions to defined
contribution plans are recognised as an employee benefit
expense in profit or loss in the periods during which services are
rendered by employees. Prepaid contributions are recognised
as an asset to the extent that a cash refund or a reduction in future
payments is available.
(ii) Defined benefit plans
The group’s net obligation in respect of defined benefit plans is
calculated separately for each plan by estimating the amount
of future benefit that employees have earned in the current and
prior periods, discounting that amount and deducting the fair
value of any assets.
The calculation of defined benefit obligation is performed
annually by a qualified actuary using the projected unit credit
method. When the calculation results in a potential asset for the
group, the recognised asset is limited to the present value of
economic benefits available in the form of any future refunds
from the plan or reductions in future contributions to the plan.
To calculate the present value economic benefits, consideration
is given to any applicable minimum funding requirements.
Remeasurements of the net defined benefit liability, which
comprises 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.
177
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 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.
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. 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.
(n) 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.
(o) 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 or losses 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.
3 Significant accounting policies continued
(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. Refer to note 23 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 23 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 group
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 23 for further details on this plan.
(l) 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.
(m) Revenue from contracts with customers
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.
(i) Goods sold
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.
178
Nufarm Limited | Annual Report for 2 months ended 30 September 2020Notes to the consolidated financial statements continued (p) 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 period, using tax rates enacted or
substantively enacted at the reporting date, and any adjustment
to tax payable in respect of previous periods. 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.
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.
(q) 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.
(r) Earnings per share
The group presents basic and diluted earnings per share (EPS)
data for its ordinary shares. Basic EPS is calculated by dividing the
profit or loss attributable to ordinary shareholders of the group
by the weighted average number of ordinary shares outstanding
during the period. Diluted EPS is determined by adjusting the profit
or loss attributable to ordinary shareholders and the weighted
average number of ordinary shares outstanding for the effects of
all potential dilutive ordinary shares, which comprise convertible
notes and share options granted to employees.
(s) Segment reporting
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.
179
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 (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 period 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).
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) Intangible 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.
180
Nufarm Limited | Annual Report for 2 months ended 30 September 2020Notes to the consolidated financial statements continued 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.
The seed technologies business deals in the sale of seeds
and seed treatment products. The seed technologies business
is managed on a worldwide basis.
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 and North America. During the 12 months ended
31 July 2020 the majority of the former geographic segment of
Latin America was divested, and this segment is classified as a
discontinued operation. The remaining Latin American operations
(Mexico) are now managed via the North America segment
along with the USA and Canada.
Information regarding the results of each operating segment is
included below. Performance is measured based on underlying
EBITDA, as defined on following page, as included in the internal
management reports that are reviewed by the group’s CEO.
Underlying EBITDA 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. From April 2020, the non-operating corporate segment
revenue represents revenue earned on delivering products under
a two year supply agreement with Sumitomo Chemical Company
Ltd as the purchaser of the group’s South American business, that
was divested in April 2020.
2 months ended
30 Sep 2020
Operating
Segments
Revenue
Crop Protection
Australia
and New
Zealand
$000
Asia
$000
Europe
$000
North
America
$000
Seed
Technologies
Global
$000
Non-
Operating
Corporate
$000
Total
$000
Continuing
Total
$000
Group
Total
$000
Total segment revenue
71,179
21,284
48,293
74,323
215,079
7,057
45,184
267,320
267,320
Results
Underlying EBITDA (a)
(2,143)
2,834
(19,119)
(6,224)
(24,652)
(4,515)
(14,212)
(43,379)
(43,379)
Depreciation &
amortisation excluding
material items
(2,469)
(698)
(21,675)
(5,359)
(30,201)
(5,053)
(182)
(35,436)
(35,436)
Underlying EBIT (a)
(4,612)
2,136
(40,794)
(11,583)
(54,853)
(9,568)
(14,394)
(78,815)
(78,815)
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
(6,862)
–
(6,862)
(14,007)
(99,684)
181
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 5 Operating segments continued
Crop Protection
12 months ended
31 July 2020
Operating
Segments
Revenue
Australia
and New
Zealand
$000
Asia
$000
Europe
$000
North
America
$000
Seed
Technologies
Global
$000
Non-
Operating
Corporate
$000
Total
$000
Continuing
Total
$000
Discontinued
operation
Total
$000
Group
Total
$000
Total segment revenue
562,897
165,947
783,028
1,051,285 2,563,157
198,831
85,387
2,847,375
643,630
3,491,005
Results
Underlying EBITDA (a)
38,800
30,481
99,255
92,333
260,869
31,471
(56,573)
235,767
58,918
294,685
Depreciation &
amortisation excluding
material items
(16,281)
(4,563)
(124,169)
(32,608)
(177,621)
(22,203)
(1,588)
(201,412)
(6,619)
(208,031)
Underlying EBIT (a)
22,519
25,918
(24,914)
59,725
83,248
9,268
(58,161)
34,355
52,299
86,654
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
(248,670)
–
(248,670)
(96,191)
(310,506)
(a) Underlying EBIT is earnings before net finance costs, taxation and material items. Underlying EBITDA is Underlying EBIT, before depreciation, amortisation
and impairments.
182
Nufarm Limited | Annual Report for 2 months ended 30 September 2020Notes to the consolidated financial statements continued As at 30 September 2020
Operating
Segments
Assets
Crop protection
Australia
and New
Zealand
$000
Asia
$000
Europe
$000
North
America
$000
Seed
Technologies
Global
$000
Non-
Operating
Corporate
$000
Total
$000
Group
Total
$000
Segment assets
451,428
229,645
1,565,962
906,288
3,153,323
532,666
577,317
4,263,306
Equity accounted investments
–
1,710
–
–
1,710
549
–
2,259
Total assets
451,428
231,355
1,565,962
906,288
3,155,033
533,215
577,317
4,265,565
Liabilities
Segment liabilities
184,415
299,782
288,218
222,089
994,504
30,572
1,193,754
2,218,830
Total liabilities
184,415
299,782
288,218
222,089
994,504
30,572
1,193,754
2,218,830
Other segment information
Capital expenditure
2,140
258
9,453
4,123
15,974
8,983
–
24,957
As at 31 July 2020
Operating
Segments (restated)
Assets
Crop protection
Australia and
New
Zealand
$000
Asia
$000
Europe
$000
North
America
$000
Seed
Technologies
Global
$000
Non-
Operating
Corporate
$000
Total
$000
Group
Total
$000
Segment assets
453,977
194,299
1,655,277
871,939
3,175,492
532,109
825,318
4,532,919
Equity accounted investments
–
1,701
–
–
1,701
549
–
2,250
Total assets
453,977
196,000
1,655,277
871,939
3,177,193
532,658
825,318
4,535,169
Liabilities
Segment liabilities
204,700
234,856
334,628
269,610
1,043,794
53,134
1,294,618
2,391,546
Total liabilities
204,700
234,856
334,628
269,610
1,043,794
53,134
1,294,618
2,391,546
Other segment information
Capital expenditure
18,266
1,170
65,802
29,284
114,522
42,519
–
157,041
183
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 5 Operating segments continued
Geographical information – revenue by location of customer
United States of America
Australia
Brazil
Rest of world (b)
Total continuing operations
Brazil – discontinuing
Rest of world – discontinuing
Total
Revenue
2 months to
30 Sep 2020
$000
12 months to
31 Jul 2020
$000
69,721
898,486
57,508
40,882
517,681
92,769
99,209
1,338,439
267,320
2,847,375
–
–
553,332
90,298
267,320
3,491,005
(b) Other than Australia, Brazil and the United States of America sales to other countries are individually less than 10% of the group’s total continuing revenues.
Geographical information – non-current assets by location of asset
Germany
United States of America
United Kingdom
Australia
Rest of world (c)
Unallocated (d)
Total
Non-current assets
30 Sep 2020
$000
31 Jul 2020
$000
restated
528,822
539,985
429,716
426,203
318,791
320,848
292,017
292,043
207,996
211,648
135,752
126,965
1,913,094
1,917,692
(c) Other than Germany, Australia, United States of America, and the 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.
184
Nufarm Limited | Annual Report for 2 months ended 30 September 2020Notes to the consolidated financial statements continued 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 period are detailed below.
Material items by category:
Asset rationalisation and restructuring
Legal costs
Europe impairment loss
South American business disposal
– high yield bond
– gain/(loss) on disposal
– other associated net expenses
Net tax assets write-off
Total
Material items from continuing operations
Material items from discontinuing operations
30 September 2020 Material items
South American business disposal – high yield bond
The sale of the group’s South American crop protection
businesses would have triggered a requirement for unutilised
sale proceeds remaining at 31 March 2021 to be used to either
make a tender offer to noteholders at par for the group’s senior
unsecured notes due in April 2026 (2026 notes) ( refer note 27)
or cancel other debt facilities.
The group chose to approach current noteholders in September
2020 to seek exemption from this requirement in order to maintain
the group’s liquidity. Majority consent was provided by the
noteholders on 14 September 2020. The terms and conditions
of the 2026 notes remain unchanged. The cost of obtaining the
exemption was $4.936 million including consent fees, advisor
and legal fees.
Asset rationalisation and restructuring
Expenses continue to be incurred on the group wide performance
improvement program, relating to asset rationalisation and
organisational restructuring.
31 July 2020 Material items
Legal costs
During the prior period the group incurred additional legal costs
associated with the enforcement of Omega-3 canola trademark
and patent matters.
Asset rationalisation and restructuring
A performance improvement program commenced in the ANZ
business and has been extended across the group. This program
includes assessing the group’s organisational structure and its
assets. Asset rationalisation and organisational restructuring costs
amounting to $50.461 million mainly relate to the rationalisation
of Australian and European manufacturing assets, including the
decision to close 2,4-D synthesis in Linz, Austria and Nufarm’s
insecticide and fungicide facility in Laverton, Australia.
Europe impairment loss
The group completed an assessment of the carrying value
of its European assets, following recent operating performance
and a moderated outlook of future earnings. The expectation
Consolidated
Consolidated
2 months to
30 Sep 2020
$000
pre-tax
2 months to
30 Sep 2020
$000
after-tax
12 months to
31 Jul 2020
$000
pre-tax
12 months to
31 Jul 2020
$000
after-tax
(1,926)
(961)
–
–
–
–
(50,461)
(9,934)
(50,461)
(9,934)
(188,275)
(179,941)
(4,936)
(4,450)
–
–
–
(6,862)
(6,862)
–
–
–
–
(5,411)
(5,411)
–
–
52,324
(38,464)
–
–
(77,383)
(38,464)
(32,941)
(234,810)
(389,124)
(248,670)
(281,807)
13,860
(107,317)
of continuing margin pressure in the European base product
portfolio due to higher manufacturing costs and increased
competition has been reflected in the carrying value assessment,
resulting in the recognition of an impairment charge.
Net tax asset write-off
The group assessed recognised and unrecognised deferred
tax assets and determined that specific deferred tax assets
recognised in the balance sheet should be derecognised,
and that specific unrecognised deferred tax assets should be
recognised in the balance sheet, reflecting changing expectations
of the geographic distribution of assessable income. The net
impact of the assessment is a reduction in the carrying value of
the group’s deferred tax assets of $32.941 million for continuing
and discontinued operations. This includes a write down in
European tax assets of $41.471 million ($24.592 million in July and
$16.879 million in January 2020) impacting continuing operations.
Additionally Brazilian tax assets of $8.529 million were
recognised in January 2020 impacting discontinued operations.
South American business disposal
On 30 September 2019, the group publicly announced the
decision of its Board of Directors to divest its shares in certain
entities, that together, comprise the majority of the Latin American
crop protection segment and the South American seed treatment
business (together known as the South American business).
The sale was successfully completed on 1 April 2020, resulting
in a loss on disposal after tax (see note 12).
As at 31 July 2020, other associated net expenses of $38.464 million
to effect the disposal have been incurred. Included in this
balance are costs of $11.554 million relating to a contract signed
as part of the disposal that subsequently became onerous.
Additionally there are costs amounting to $8.514 million which
were incurred during the period as the group advanced a debt
restructuring alongside the sale of the South American business.
This initiative was focused on strengthening Nufarm’s balance
sheet, but was ceased post the announcement of the divestment.
The remaining costs include, but are not limited to, advisor fees
and other separation costs.
185
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 6 Individually material income and expense items continued
Material items are classified by function as follows:
2 months ended 30 September 2020
$000
Continuing Operations
South American business disposal – high yield bond
Asset rationalisation and restructuring
Total material items
Total material items included in operating profit
Selling,
marketing and
distribution
expense
General &
administrative
expense
Net
financing
costs
Cost of sales
–
–
–
–
–
–
–
–
(4,936)
(1,926)
(6,862)
(6,862)
–
–
–
–
Total
Pre-tax
(4,936)
(1,926)
(6,862)
(6,862)
12 months ended 31 July 2020
$000
Continuing Operations
Legal costs
Asset rationalisation and restructuring
Europe impairment loss
Total material items
Total material items included in operating profit
Discontinued Operations
South American business disposal
– gain/(loss) on disposal
– other associated net expenses
Total material items – discontinued operations
Material items impacting cash flows are as follows:
2 months ended 30 September 2020
Cash flows from operating activities
Net operating cash flows
Cash flows from investing activities
Net investing cash flows
Selling,
marketing and
distribution
expense
Cost of sales
General &
administrative
expense
Net
financing
costs
Total
Pre-tax
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(9,934)
(50,461)
(188,275)
(248,670)
(248,670)
52,324
(38,464)
13,860
–
–
–
–
–
–
–
–
(9,934)
(50,461)
(188,275)
(248,670)
(248,670)
52,324
(38,464)
13,860
Underlying
$000
Material
items
$000
Total
group
$000
(115,871)
(10,306)
(126,177)
(20,917)
–
(20,917)
Net operating and investing cash flows
(136,788)
(10,306)
(147,094)
12 months ended 31 July 2020
Cash flows from operating activities
Net operating cash flows
Cash flows from investing activities
Proceeds from sale of business and investments
Other investing activities
Net investing cash flows
Underlying
continuing
$000
Material
items
continuing
$000
Discontinued
operations
$000
Total
group
$000
216,553
(30,510)
(417,557)
(231,514)
–
(161,514)
(161,514)
–
–
–
1,283,641
1,283,641
(6,535)
(168,049)
1,277,106
1,115,592
Net operating and investing cash flows
55,039
(30,510)
859,549
884,078
186
Nufarm Limited | Annual Report for 2 months ended 30 September 2020Notes to the consolidated financial statements continued 7 Other income
Rental income
Sundry income
Total other income
8 Other expenses
The following expenses were included in the period result:
Depreciation and amortisation
Impairment loss (1)
Inventory write down
Consolidated
2 months to
30 Sep 2020
$000
12 months to
31 Jul 2020
$000
6
1,108
1,114
48
5,785
5,833
Consolidated
2 months to
30 Sep 2020
$000
12 months to
31 Jul 2020
$000
35,436
–
6,628
201,412
210,996
19,051
(1) Impairment losses incurred during the 12 months ended 31 July 2020 relate to Europe impairment loss of $188.275 million, and asset rationalisation activities.
These expenses are included in material items in note 6
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
2 months to
30 Sep 2020
$000
12 months to
31 Jul 2020
$000
50,529
296,824
7,713
2,204
417
1,555
140
1,091
50,277
12,605
3,637
6,399
1,302
12,623
63,649
383,667
The restructuring expense relates to the group’s asset rationalisation and organisational restructure program. These expenses 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
2 months to
30 Sep 2020
$000
12 months to
31 Jul 2020
$000
467
467
3,405
3,405
(8,075)
(64,190)
(569)
(1,171)
(4,659)
(14,474)
(4,020)
(7,821)
(23,565)
(99,596)
(14,007)
(96,191)
187
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 11 Income tax expense
Recognised in the income statement
Current tax expense/(benefit)
Current period
Tax free income and non-recognition of tax assets on material items
Adjustments for prior periods
Current tax expense/(benefit)
Deferred tax expense/(benefit)
Origination and reversal of temporary differences and tax losses
Effect of changes in tax rates
(Recognition)/non-recognition of tax assets
European tax assets write-down – material items
Deferred tax expense/(benefit)
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
(Recognition)/non-recognition of tax assets
European 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 periods
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
188
Consolidated
2 months to
30 Sep 2020
$000
12 months to
31 Jul 2020
$000
(2,981)
310
635
(2,036)
(63,338)
64,758
(3,814)
(2,394)
(21,612)
(22,354)
–
15,309
–
(6,303)
236
34,947
41,471
54,300
(8,339)
51,906
Consolidated
2 months to
30 Sep 2020
$000
12 months to
31 Jul 2020
$000
(99,684)
(29,905)
(310,506)
(93,152)
1,131
496
–
15,309
–
310
3,997
(61)
(251)
(8,974)
635
(8,339)
6,864
1,056
236
34,947
41,471
64,758
763
32
(1,255)
55,720
(3,814)
51,906
Consolidated
2 months to
30 Sep 2020
$000
12 months to
31 Jul 2020
$000
–
–
(3,499)
(3,499)
(105)
–
(105)
(3,776)
(167)
(3,943)
Nufarm Limited | Annual Report for 2 months ended 30 September 2020Notes to the consolidated financial statements continued 12 Discontinued operation
On 1 April 2020, the group completed the divestment of certain entities that, together, comprise the majority of the Latin American crop
protection segment and the South American seed treatment business (together known as the South American business).
Results of discontinued operation
Revenue
Cost of sales
Gross profit
Net operating expenses
Operating profit/(loss)
Net financing costs
Profit/(loss) before tax
Income tax benefit/(expense)
Profit/(loss) from operating activities after tax
Loss on sale of discontinued operation, net of tax
Profit/(loss) from discontinued operation after tax
Foreign exchange translation differences for disposal group reclassified to profit or loss
Other comprehensive income from discontinued operations
Basic earnings per share (cents)
Diluted earnings per share (cents)
Cash flows from discontinued operation
Net proceeds used in operating activities
Net proceeds from investing activities
Net proceeds from sale of business
Net cash flow for the period
12 months to
31 Jul 2020
$000
643,630
(487,538)
156,092
(103,793)
52,299
(25,631)
26,668
(4,488)
22,180
(115,847)
(93,667)
417,842
324,175
31 Jul 2020
(24.7)
(24.6)
31 Jul 2020
$000
(417,557)
(6,535)
1,283,641
859,549
189
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 12 months to
31 Jul 2020
$000
1,283,641
(813,475)
(38,464)
431,702
(417,842)
(129,707)
(115,847)
As at
1 April 2020
$000
763,135
279,410
13,503
31,769
57,193
131,986
16
1,277,012
(443,797)
(1,991)
(3,269)
(14,480)
(463,537)
813,475
Consolidated
30 Sep 2020
$000
31 Jul 2020
$000
415,890
675,664
8,024
10,888
423,914
686,552
–
–
423,914
686,552
12 Discontinued operation continued
Details of the sale of the discontinued operation
Total consideration received
Carrying amount of net assets sold
Other associated net expenses
Gain on sale before income tax and reclassification of foreign currency translation reserve
Reclassification of foreign currency reserve
Income tax benefit/(expense)
Loss on sale of discontinued operation after tax
Carrying amount of net assets sold as at the date of sale
Trade and other receivables
Inventories
Current tax assets
Property plant and equipment
Deferred tax assets
Intangibles
Other
Total assets
Trade and other payables
Current tax liabilities
Provisions
Deferred tax liabilities
Total liabilities
Net assets
13 Cash and cash equivalents
Bank balances
Call deposits
Bank overdraft
Total cash and cash equivalents
190
Nufarm Limited | Annual Report for 2 months ended 30 September 2020Notes to the consolidated financial statements continued 14 Trade and other receivables
Current
Trade receivables
Provision for impairment losses
Prepayments
Derivative financial instruments
Other receivables
Current receivables
Non-current
Other receivables
Non-current receivables
Total trade and other receivables
15 Inventories
Raw materials
Work in progress
Finished goods
Provision for obsolescence of finished goods
Total inventories
Consolidated
30 Sep 2020
$000
31 Jul 2020
$000
772,125
(28,423)
743,702
27,880
5,980
81,473
880,120
(28,689)
851,431
36,152
3,373
91,213
859,035
982,169
3,119
3,119
3,091
3,091
862,154
985,260
Consolidated
30 Sep 2020
$000
31 Jul 2020
$000
233,320
256,646
25,968
16,243
804,456
674,879
1,063,744
947,768
(16,815)
(14,962)
1,046,929
932,806
191
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 16 Tax assets and liabilities
Current tax assets and liabilities
The current tax asset for the group of $22.593 million (31 July 2020: $15.950 million) represents the amount of income taxes recoverable in
respect of prior periods and that arose from the payment of tax in excess of the amounts due to the relevant tax authority. The current tax
liability for the group of $11.113 million (31 July 2020: $12.354 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
Net tax assets/(liabilities)
Assets
Liabilities
Net
30 Sep 2020
$000
31 Jul 2020
$000
30 Sep 2020
$000
31 Jul 2020
$000
30 Sep 2020
$000
31 Jul 2020
$000
14,205
6,637
25,087
21,257
29,818
44,727
141,731
14,271
6,540
25,056
19,059
28,253
40,123
(7,971)
(95,445)
–
(21,273)
(23,457)
–
(7,690)
(93,528)
–
(21,421)
(23,247)
–
133,302
(148,146)
(145,886)
6,234
(88,808)
25,087
(16)
6,361
44,727
(6,415)
6,581
(86,988)
25,056
(2,362)
5,006
40,123
(12,584)
Movement in temporary differences during the period
Consolidated
Property, plant and equipment
Intangibles assets
Employee benefits
Provisions
Other items
Tax value of losses carried forward
Consolidated
Property, plant and equipment
Intangibles assets
Employee benefits
Provisions
Other items
Tax value of losses carried forward
Balance
31 Jul 2020
$000
Recognised
in income
$000
Recognised
in equity
$000
Currency
adjustment
$000
Other
movement
$000
Balance
30 Sep 2020
$000
6,581
(86,988)
25,056
(2,362)
5,006
40,123
(12,584)
(354)
(1,412)
147
2,351
1,310
4,261
6,303
–
–
105
–
–
–
105
7
(408)
(221)
(5)
45
343
(239)
Balance
1 Aug 2019
$000
Recognised
in income
$000
Recognised
in equity
$000
Currency
adjustment
$000
5,353
(99,363)
21,099
23,710
2,495
131,872
85,166
(1,990)
647
(740)
(13,299)
(7,585)
(31,333)
(54,300)
–
–
3,776
–
(5,307)
–
(1,531)
390
3,915
434
(1,580)
1,475
(3,840)
794
–
–
–
–
–
–
–
Disposal of
South
America
business
$000
2,828
7,813
487
(11,193)
13,928
(56,576)
(42,713)
6,234
(88,808)
25,087
(16)
6,361
44,727
(6,415)
Balance
31 Jul 2020
$000
6,581
(86,988)
25,056
(2,362)
5,006
40,123
(12,584)
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.
Deferred tax assets and liabilities
Unrecognised deferred tax liability
At 30 September 2020, a deferred tax liability of $28.463 million (31 July 2020: $34.534 million) relating to investments in subsidiaries
has not been recognised because the group controls the repatriation of retained earnings and it is satisfied that it will not be incurred
in the forseeable future. This amount represents the theoretical withholding tax payable if all overseas retained earnings were paid
as dividends.
Unrecognised deferred tax assets
At 30 September 2020, there are unrecognised deferred tax assets in respect of tax losses and timing differences of $257.558 million
(31 July 2020: $244.786 million).
192
Nufarm Limited | Annual Report for 2 months ended 30 September 2020Notes to the consolidated financial statements continued 17 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 period:
Nature of
relationship
Country
Balance date
date of
associate
As at
30 Sep 2020
As at
31 Jul 2020
Ownership and
voting interest
Seedtech Pty Ltd
Associate (1)
Australia
31 December
Leshan Nong Fu Trading Co., Ltd
Joint Venture (2) China
31 December
25.00%
35.00%
25.00%
35.00%
Seedtech Pty Ltd
Leshan Nong Fu Trading Co., Ltd
Carrying amount
Share of profit/(loss)
As at
30 Sep 2020
$000
As at
31 Jul 2020
$000
2 months
ended
30 Sep 2020
$000
12 months
ended
31 Jul 2020
$000
549
1,710
2,259
549
1,701
2,250
–
(48)
(48)
98
265
363
(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 formulated 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.
18 Property, plant and equipment
30 September 2020
Cost
Balance at 1 August 2020
Additions
Disposals and write-offs
Other transfers
Foreign exchange adjustment
Balance at 30 September 2020
Accumulated depreciation and impairment losses
Balance at 1 August 2020
Depreciation charge for the period
Impairment charge for the period
Disposals and write-offs
Other transfers
Foreign exchange adjustment
Balance at 30 September 2020
Consolidated
Land
and
buildings
$000
Plant and
machinery
$000
Capital
work in
progress
$000
Total
$000
324,718
686,054
41,220
1,051,992
2,458
(481)
–
497
1,950
(1,656)
491
(1,092)
2,435
(59)
(491)
(116)
6,843
(2,196)
–
(711)
327,192
685,747
42,989
1,055,928
(134,946)
(477,402)
(3,469)
(5,996)
266
–
(222)
1,758
–
768
(138,371)
(480,872)
–
–
–
–
–
–
–
(612,348)
(9,465)
–
2,024
–
546
(619,243)
Net property, plant and equipment at 30 September 2020
188,821
204,875
42,989
436,685
193
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 18 Property, plant and equipment continued
31 July 2020
Cost
Balance at 1 August 2019
Additions
Disposals and write-offs
Other transfers
Foreign exchange adjustment
Balance at 31 July 2020
Accumulated depreciation and impairment losses
Balance at 1 August 2019
Depreciation charge for the period
Impairment charge for the period (1)
Disposals and write-offs
Other transfers
Foreign exchange adjustment
Balance at 31 July 2020
Consolidated
Land
and
buildings
$000
Plant and
machinery
$000
Capital
work in
progress
$000
Total
$000
322,974
673,057
79,075
1,075,106
12,121
(37,447)
35,815
(8,745)
12,748
(32,277)
37,238
(4,712)
39,996
(3,969)
(73,053)
64,865
(73,693)
–
(829)
(14,286)
324,718
686,054
41,220
1,051,992
(123,029)
(435,396)
(23,269)
(2,529)
11,180
–
2,701
(41,138)
(20,192)
18,331
–
993
(134,946)
(477,402)
–
–
–
–
–
–
–
(558,425)
(64,407)
(22,721)
29,511
–
3,694
(612,348)
Net property, plant and equipment at 31 July 2020
189,772
208,652
41,220
439,644
(1) Impairment losses incurred during the 12 months ended 31 July 2020 relate to asset rationalisation activities. These expenses are included in material
items in note 6.
19 Intangible assets
30 September 2020
Cost
Consolidated
Intellectual Property
Goodwill
$000
indefinite
life
$000
finite
life
$000
Capitalised
development
costs
$000
Computer
software
$000
Total
$000
Balance at 1 August 2020
382,559
1,767
1,123,161
534,059
158,984
2,200,530
Additions
Disposals and write-offs
Other transfers
–
–
–
–
–
–
237
14,106
3,771
–
–
(38)
–
–
–
18,114
(38)
–
Foreign exchange adjustment
(78)
(10)
(201)
(3,564)
(204)
(4,057)
Balance at 30 September 2020
382,481
1,757
1,123,197
544,563
162,551
2,214,549
Accumulated amortisation and impairment losses
Balance at 1 August 2020
(174,093)
(1,767)
(403,882)
(196,733)
(85,039)
Amortisation charge for the period
Impairment loss
Disposals and write-offs
Other transfers
–
–
–
–
–
–
–
–
(14,418)
(7,821)
(3,732)
–
–
–
–
–
–
–
–
–
(861,514)
(25,971)
–
–
–
Foreign exchange adjustment
557
10
(187)
1,522
(60)
1,842
Balance at 30 September 2020
(173,536)
(1,757)
(418,487)
(203,032)
(88,831)
(885,643)
Intangibles carrying amount
at 30 September 2020
208,945
–
704,710
341,531
73,720
1,328,906
194
Nufarm Limited | Annual Report for 2 months ended 30 September 2020Notes to the consolidated financial statements continued 31 July 2020
Cost
Consolidated
Intellectual Property
Goodwill
$000
indefinite
life
$000
finite
life
$000
Capitalised
development
costs
$000
Computer
software
$000
Total
$000
Balance at 1 August 2019
483,044
1,718
1,208,577
482,099
175,533
2,350,971
Additions
Disposals and write-offs
Other transfers
Foreign exchange adjustment
Balance at 31 July 2020
–
(78,866)
–
(21,619)
382,559
43
–
–
6
10,828
(83,621)
2,619
(15,242)
73,846
14,375
99,092
(21,110)
(25,905)
(209,502)
97
(873)
(2,716)
(2,303)
–
(40,031)
1,767
1,123,161
534,059
158,984
2,200,530
Accumulated amortisation and impairment losses
Balance at 1 August 2019
(109,275)
(1,718)
(284,054)
(155,004)
(74,631)
(624,682)
Amortisation charge for the period
Impairment loss (1)
Disposals and write-offs
Other transfers
Foreign exchange adjustment
Balance at 31 July 2020
–
(121,946)
46,871
–
10,257
(174,093)
–
–
–
–
(49)
(83,583)
(39,308)
(20,733)
(143,624)
(61,983)
14,530
4,062
7,146
(4,346)
4,353
(2,266)
(162)
–
(188,275)
10,293
76,047
(1,796)
1,828
–
19,020
(1,767)
(403,882)
(196,733)
(85,039)
(861,514)
Intangibles carrying amount at 31 July 2020
208,466
–
719,279
337,326
73,945
1,339,016
(1) Impairment losses incurred during the 12 months ended 31 July 2020 relate to asset rationalisation activities. These expenses are included in material items
in note 6.
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 $187 million (31 July 2020: $186 million), Seed
Technologies $378 million (31 July 2020: $376 million), Europe
$716 million (31 July 2020: $732 million) and Australia and
New Zealand (ANZ) $31 million (31 July 2020: $28 million). The
remaining balance of intangibles is spread across multiple CGUs,
with no remaining individual CGU intangible balance being more
than 5 percent of the total intangibles balance at balance date.
Impairment testing for cash-generating units
containing goodwill
For the impairment testing of these assets, the carrying amount
of the asset is compared to its recoverable amount at a CGU level.
The higher of the following two valuation methods are used by
the group when assessing recoverable value.
Valuation method – Value in use
Value in use (VIU) is an estimate of the recoverable amount based
on the present value of the future cash flows expected to be derived
from a CGU. 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 using
relevant methodologies including 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 27).
195
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 19 Intangible assets continued
Valuation assumptions
The valuation method, range of terminal growth rates and nominal post-tax discount rates applied for impairment testing purposes
is as follows:
30 Sep 2020
North America CGU
Europe CGU
ANZ CGU
Seed Technology CGU
31 July 2020
North America CGU
Europe CGU (1)
ANZ CGU
Seed Technology CGU
Valuation
method
Terminal
growth rate
Discount rate
Total goodwill
$000
VIU
FVLCD
FVLCD
VIU
1.9%
1.7%
2.0%
2.6%
8.5%
9.5% to 11.3%
9.8% to 11.3%
53,664
67,781
–
13.4%
72,302
Valuation
method
Terminal
growth rate
VIU
FVLCD
FVLCD
VIU
1.9%
1.7%
2.0%
2.6%
Discount rate
8.5%
9.5% to 11.3%
9.8% to 11.3%
Total goodwill
$000
53,114
68,132
–
13.4%
72,311
(1) As at 31 July 2019, the total goodwill assets for the Europe CGU was equal to $186.882 million. The carrying amount of goodwill assets for the Europe CGU
was reduced to $68.132 million at 31 July 2020 as a result of impairment.
At 30 September 2020, management has determined that the
recoverable amount remains equal to the carrying amount.
Any adverse movement in a key assumption (noted above)
or projected Europe cash flows, in the absence of other factors,
may lead to further impairment.
ANZ CGU
At 30 September 2020, management has determined that the
recoverable amount remains equal to the carrying amount.
Any adverse movement in a key assumption (noted above)
or projected ANZ cash flows, in the absence of other factors,
may lead to further impairment.
The terminal growth rate assumed is generally a long term inflation
estimate. The discount rate assumed is the group’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 Europe and ANZ CGU (see below), the
directors have 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.
Europe CGU
At 31 July 2020 the group used a FVLCD methodology to estimate
the recoverable amount of the Europe CGU. The carrying amount
of the Europe CGU was determined to be higher than its recoverable
amount. An impairment loss of $66.329 million was recognised
against the carrying amount of the specific intangible assets and
an impairment loss of $121.946 million was recognised against the
carrying amount of goodwill included in the Europe CGU. The
impairment losses are included in ‘general and administrative
expenses’ (refer note 6).
196
Nufarm Limited | Annual Report for 2 months ended 30 September 2020Notes to the consolidated financial statements continued 20 Trade and other payables
Current payables – unsecured
Trade creditors and accruals – unsecured
Derivative financial instruments
Cash advances from customers (contract liabilities)
Current payables
Non-current payables – unsecured
Creditors and accruals
Non-current payables
21 Interest-bearing loans and borrowings
Current liabilities
Bank loans – secured
Bank loans – unsecured
Deferred debt establishment costs
Lease liabilities
Other loans – unsecured
Loans and borrowings – current
Non-current liabilities
Bank loans – secured
Bank loans – unsecured
Senior unsecured notes
Deferred debt establishment costs
Lease liabilities
Other loans – unsecured
Loans and borrowings – non-current
Net cash and cash equivalents
Net debt
30 Sep 2020
$000
31 Jul 2020
$000
788,215
819,742
6,098
66,717
17,747
95,507
861,030
932,996
5,995
5,995
5,244
5,244
Consolidated
30 Sep 2020
$000
31 Jul 2020
$000
208,156
314,127
10,161
(2,229)
18,225
–
8,869
(2,552)
18,417
–
234,313
338,861
–
388
–
696
667,322
660,548
(7,216)
(7,697)
126,395
126,579
8,919
8,829
795,808
788,955
(423,914)
(686,552)
606,207
441,264
197
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 21 Interest-bearing loans and borrowings continued
Financing facilities
Refer to the section entitled ‘Liquidity Risk’ in note 27 for detail regarding the group’s financing facilities.
30 Sep 2020
Bank loan facilities and senior unsecured notes
Other facilities
Total financing facilities
31 Jul 2020
Bank loan facilities and senior unsecured notes
Other facilities
Total financing facilities
Reconciliation of liabilities arising from financing activities
Balance at 31 July 2020
Cash changes
Proceeds from borrowings (net of costs)
Repayment of borrowings
Debt establishment transaction costs
Lease liability payments
Total cash flows
Non-cash changes
Leases entered into during the period net of leases ceased
Foreign exchange movements
Transfer
Amortisation of debt establishment transaction costs
Total non-cash changes
Balance at 30 September 2020
Accessible
$000
Utilised
$000
1,541,028
886,027
8,919
8,919
1,549,947
894,946
1,632,422
984,240
8,829
8,829
1,641,251
993,069
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
338,861
788,955
11,896
1,139,712
9,817
(114,573)
(44)
(3,996)
(108,796)
–
78
3,601
569
4,248
9,566
(9,753)
(87)
–
(274)
3,748
6,615
(3,236)
–
(5,754)
–
–
–
(5,754)
13,629
(124,326)
(131)
(3,996)
(114,824)
–
3,748
(5,806)
–
–
887
365
569
7,127
(5,806)
5,569
234,313
795,808
336
1,030,457
(1) Total derivatives balance at 30 September 2020 is a net liability of $0.118 million (31 July 2020: $14.374 million net liability). The difference in carrying value
to the table above relates to forward exchange contracts which are excluded from the balances above.
198
Nufarm Limited | Annual Report for 2 months ended 30 September 2020Notes to the consolidated financial statements continued Financing arrangements
Without refinancing, expiry of available debt facilities (excluding lease liabilities)
Period ending 30 September 2021/31 July 2021
Period ending 30 September 2022/31 July 2022
Period ending 30 September 2023 or later/31 July 2023 or later
Average interest rates
Nufarm step-up securities
Syndicated bank facility
Group securitisation program facility
Other bank loans
Lease liabilities
Senior unsecured notes
Consolidated
30 Sep 2020
$000
31 Jul 2020
$000
321,081
418,670
552,625
553,204
676,241
669,377
Consolidated
30 Sep 2020
%
31 Jul 2020
%
4.15
n/a
1.22
4.77
4.91
5.75
4.15
n/a
1.31
3.42
5.14
5.75
Average interest rates are calculated using the weighted average of the interest rates for the drawn balances under each facility
as at 30 September 2020.
22 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
30 Sep 2020
$000
31 Jul 2020
$000
14,176
2,527
16,703
13,419
2,619
16,038
10,377
10,297
202,444
206,406
(115,517)
97,304
(117,823)
98,880
14,861
112,165
128,868
14,943
113,823
129,861
During the 2 months ended 30 September 2020 the group made contributions to defined benefit pension funds in the United Kingdom,
France, Indonesia and Germany that provide defined benefit amounts for employees upon retirement.
199
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 22 Employee benefits continued
Changes in the present value of the defined benefit obligation are as follows:
Opening defined benefit obligation
Service cost
Interest cost
Actuarial losses/(gains)
Past service cost
Losses/(gains) on curtailment
Plan amendments
Contributions
Benefits paid
Exchange adjustment
Consolidated
2 months to
30 Sep 2020
$000
12 months to
31 Jul 2020
$000
216,703
198,285
148
562
(1,254)
–
–
–
–
(1,186)
(2,152)
1,639
4,478
14,191
–
–
(30)
–
(6,913)
5,053
Closing defined benefit obligation
212,821
216,703
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
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)
117,823
109,567
293
(1,788)
–
–
1,335
(1,163)
(983)
2,450
2,469
–
–
7,002
(6,713)
3,048
115,517
117,823
Consolidated
2 months to
30 Sep 2020
$000
12 months to
31 Jul 2020
$000
148
562
(293)
–
–
–
1,639
4,478
(2,450)
–
(30)
–
Expense recognised in profit or loss
417
3,637
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
Actuarial gains/(losses) recognised in other comprehensive income (net of tax)
Cumulative amount at 1 August
Recognised during the period
Cumulative amount at 30 September/31 July
186
169
47
15
417
1,554
1,403
530
150
3,637
30 Sep 2020
$000
31 Jul 2020
$000
(84,772)
(76,423)
(417)
(8,349)
(85,189)
(84,772)
200
Nufarm Limited | Annual Report for 2 months ended 30 September 2020Notes to the consolidated financial statements continued The major categories of fund assets as a percentage of total fund assets are as follows:
Equities
Bonds
Property
Cash
Other
Principal actuarial assumptions at the reporting date (expressed as weighted averages):
Discount rate at period end
Future salary increases
Future pension increases
Consolidated
30 Sep 2020
%
31 Jul 2020
%
70.0%
10.1%
1.2%
1.9%
16.8%
1.7%
2.6%
2.1%
64.8%
26.7%
1.2%
1.6%
5.7%
1.6%
2.5%
2.1%
The group expects to pay $8.007 million in contributions to defined benefit plans during the 12 months ending 30 September 2021
(12 months ending 31 July 2021: $8.318 million).
23 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 30 September 2020 there
were 7 participants (31 July 2020: 7 participants) in the scheme
and 24,640 shares (31 July 2020: 48,137) were allocated and held
by the trustee on behalf of the participants. The cost of issuing
shares is expensed in the period 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 group 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 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 group 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 period. 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 group 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 group 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 30 September 2020 there were 466
participants (31 July 2020: 471 participants) in the scheme and
1,685,312 shares (31 July 2020: 1,702,886) 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 group.
201
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 23 Share-based payments continued
Employee expenses
Total expense arising from share-based payment transactions
Measurement of fair values
2 months to
30 Sep 2020
$000
12 months to
31 Jul 2020
$000
466
2,269
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
31 July 2020
Deferred
shares
Nufarm LTI
31 July 2020
Performance
rights
$6.21
$6.46
$4.48
$5.03
3 Oct 2019
1 Aug 2019
31 Jul 2021
31 Jul 2021
–
–
2 years
3 years
n/a
n/a
n/a
30%
0.8%
1.0%
The fair values of awards granted were estimated using a Monte-Carlo simulation methodology and a Binomial Tree methodology.
Reconciliation of outstanding share awards
Outstanding at 1 August
Forfeited during the period
Exercised during the period
Expired during the period
Granted during the period
Outstanding at 30 September/31 July
Exercisable at 30 September/31 July
Nufarm LTI
number of
performance
rights
30 Sep 2020
Nufarm STI
number of
deferred
shares
30 Sep 2020
Nufarm LTI
number of
performance
rights
31 Jul 2020
Nufarm STI
number of
deferred
shares
31 Jul 2020
35,545
970,640
19,294
1,143,172
(119,384)
–
–
–
–
–
–
–
(465,118)
–
–
637,650
1,023,788
35,545
1,143,172
–
–
–
–
(19,294)
–
35,545
35,545
–
The performance rights outstanding at 30 September 2020 have a $nil exercise price (31 July 2020: $nil) and a weighted average
contractual life of 3 years (31 July 2020: 3 years). All performance rights granted to date have a $nil exercise price.
202
Nufarm Limited | Annual Report for 2 months ended 30 September 2020Notes to the consolidated financial statements continued 24 Provisions
Current
Restructuring
Other
Current provisions
Movement in provisions
Balance at 1 August 2020
Provisions made during the period
Provisions reversed during the period
Provisions used during the period
Exchange adjustment
Balance at 30 September 2020
Consolidated
30 Sep 2020
$000
31 Jul 2020
$000
25,407
28,278
8,150
9,111
33,557
37,389
Consolidated
Other
provisions
$000
Restructuring
$000
Total
$000
28,278
9,111
37,389
–
–
(2,833)
(38)
25,407
–
–
(960)
(1)
8,150
–
–
(3,793)
(39)
33,557
The provision for restructuring is mainly relating to the asset rationalisation and restructuring being undertaken by the group.
25 Capital and reserves
Share capital
Balance at 1 August
Issue of shares
Balance at 30 September 2020/31 July 2020
Group
Number
of ordinary
shares
30 Sep 2020
Number
of ordinary
shares
31 Jul 2020
379,694,706
379,639,334
–
55,372
379,694,706
379,694,706
The group 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.
On 16 January 2020, 55,372 shares at $6.1459 were issued under the Global Share Plan.
203
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 25 Capital and reserves continued
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).
On 1 April 2020 the group re-purchased the SPS.
Distributions on the SPS were at the discretion of the directors and
were fixed rate, unfranked, cumulative and subordinated. The
SPS distributions were declared and paid to Sumitomo quarterly,
and pro-rata per the re-purchase date, at a fixed rate of 6%.
Nufarm step-up securities
On 24 November 2006 Nufarm Finance (NZ) Limited, a wholly
owned subsidiary of Nufarm Limited, issued 2,510,000 hybrid
securities at $100 each called Nufarm Step-up Securities (NSS),
which are perpetual step up securities. The NSS are listed
on the ASX under the code ‘NFNG’ and on the NZDX under the
code ‘NFFHA’.
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.
Distributions
Nufarm Step-up Securities
The following distributions were paid by Nufarm Finance (NZ) Ltd:
12 months ended 31 Jul 2020
Distribution
Distribution
The floating rate is the average mid-rate for bills with a term
of six months plus a margin of 3.9% (31 July 2020: 3.9%).
Nufarm retains the right to redeem or exchange the NSS on future
distribution dates.
Translation reserve
The translation reserve comprises all foreign exchange
differences arising from the translation of the financial statements
of foreign operations where their functional currency is different
from the presentation currency of the reporting entity.
Capital profit reserve
This reserve is used to accumulate realised capital profits.
Other reserve
This reserve includes the accrued employee entitlements to share
awards that have been charged to the income statement and
have not yet been exercised.
Also included in this reserve are the accumulative effective
portion of changes in the fair value of financial instruments that
have been designated as either cash flow hedges or net
investment hedges.
Dividends
No dividends have been declared (final dividend July 2020: nil;
interim dividend January 2020: $nil).
Consolidated
Distribution
rate
Total amount
$000
Payment
date
4.85%
5.67%
6,102
15 Apr 2020
7,138
15 Oct 2019
13,240
There were no distributions in the 2 months ended 30 September 2020 for the Nufarm Step-up Securities.
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 $9.741 million for the 12 months ended 31 July 2020.
204
Nufarm Limited | Annual Report for 2 months ended 30 September 2020Notes to the consolidated financial statements continued Sumitomo preference securities
The following distributions were paid by Nufarm Investment Pty Ltd:
12 months ended 31 Jul 2020
Distribution
Distribution
Distribution
Franking credit balance
The amount of franking credits available for the subsequent financial period are:
Franking account balance as at the end of the period at 30% (31 July 2020: 30%)
Franking credits that will arise from the payment of income tax payable as at the end of the period
Credit balance at 30 September 2020/31 July 2020
Consolidated
Distribution
rate
Total amount
$000
Payment
date
6.00%
6.00%
6.00%
962
1 Apr 2020
1,475
31 Jan 2020
1,458
31 Oct 2019
3,895
2 months to
30 Sep 2020
$000
12 months to
31 Jul 2020
$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
of $nil (31 July 2020: $nil) franking credits.
26 Earnings per share
Net profit/(loss) for the period from continuing operations
Net profit/(loss) attributable to non-controlling interest
Net profit/(loss) attributable to equity holders of the group
Other securities distributions (net of tax)
Earnings/(loss) used in the calculations of basic and diluted earnings per share
Consolidated
2 months to
30 Sep 2020
$000
12 months to
31 Jul 2020
$000
(91,345)
(456,079)
–
–
(91,345)
(456,079)
–
(13,636)
(91,345)
(469,715)
Net profit/(loss) for the period from discontinued operations, net of tax
–
(93,667)
Earnings/(loss) used in the calculations of basic and diluted earnings per share from continuing operations
(91,345)
(376,048)
Subtract/(add back) items of material income/(expense) from continuing operations (refer note 6)
(5,411)
(281,807)
Earnings/(loss) excluding items of material income/(expense) used in the calculation of underlying
earnings per share from continuing operations
(85,934)
(94,241)
For the purposes of determining basic and diluted earnings per share, the after-tax distributions on Other Securities are deducted
from net profit.
Number of shares
30 Sep 2020
31 Jul 2020
Weighted average number of ordinary shares used in calculation of basic earnings per share
379,694,706
379,669,138
Weighted average number of ordinary shares used in calculation of diluted earnings per share
380,718,494
381,066,560
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.
205
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 26 Earnings per share continued
Earnings per share for continuing and discontinued operations
Basic earnings per share
From continuing operations
From discontinuing operations
Diluted earnings per share
From continuing operations
From discontinuing operations
Underlying earnings per share (excluding items of material
income/expense – see note 6) from continuing operations
Basic earnings per share
Diluted earnings per share
27 Financial risk management and financial instruments
The group has exposure to the following financial risks:
Credit risk
Cents per share
2 months to
30 Sep 2020
12 months to
31 Jul 2020
(24.1)
–
(24.1)
(24.1)
–
(24.1)
(99.0)
(24.7)
(123.7)
(98.7)
(24.6)
(123.3)
(22.6)
(22.6)
(24.8)
(24.7)
• 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
group 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 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.
206
Nufarm Limited | Annual Report for 2 months ended 30 September 2020Notes to the consolidated financial statements continued The group’s maximum exposure to credit risk at the reporting date was:
Carrying amount
Trade and other receivables
Cash and cash equivalent assets
Derivative contracts:
Assets
Consolidated
30 Sep 2020
$000
31 Jul 2020
$000
856,174
981,887
423,914
686,552
5,980
3,373
1,286,068
1,671,812
The group’s maximum exposure to credit risk for trade and other receivables at the reporting date by geographic region was:
Carrying amount
Australia/New Zealand
Asia
Europe
North America
South America
Trade and other receivables
Consolidated
30 Sep 2020
$000
31 Jul 2020
$000
121,315
167,010
128,510
140,747
347,129
444,972
203,271
17,449
856,174
247,316
20,342
981,887
The group’s top five customers account for $274.052 million of the trade receivables carrying amount at 30 September 2020
(31 July 2020: $275.287 million). These top five customers represent 35 per cent (31 July 2020: 31 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
30 Sep 2020
$000
31 Jul 2020
$000
607,529
98,016
32,437
10,492
23,651
772,125
(28,423)
743,702
759,411
72,909
11,332
12,119
24,349
880,120
(28,689)
851,431
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.
207
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 27 Financial risk management and financial instruments continued
The movement in the allowance for impairment in respect of trade receivables during the period was as follows.
Consolidated
30 Sep 2020
$000
31 Jul 2020
$000
28,689
–
(30)
(46)
(190)
49,531
(23,380)
10,568
(4,627)
(3,403)
28,423
28,689
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 group. 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 2020: facility limit is set to $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).
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 Europe, which
at 30 September 2020 totalled $129.299 million (31 July 2020:
$128.512 million).
At 30 September 2020, the group had access to debt of $1,541 million
(31 July 2020: $1,632 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 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 $198.139 million at 30 September 2020 (31 July 2020:
$143.128 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 20.
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 30 September 2020 the group estimates
$10.639 million (31 July 2020: $8.286 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.
Balance at 1 August
Sale of South American business
Provisions made/(reversed) during the period
Provisions used during the period
Exchange adjustment
Balance at 30 September 2020/31 July 2020
Expected credit loss assessment for individual customers
The group uses an allowance matrix to measure the expected credit
loss (ECL) 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 30 September 2020, 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 2020: US$475
million), and a senior secured bank facility of $555 million million
(31 July 2020: $555 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$475 million 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).
Upon completion of the sale of the South American business, the
group’s senior secured bank facility (SFA) reduced to $555 million
(31 July 2020: $555 million). $85 million and $470 million expires
in January 2021 and January 2022 respectively (31 July 2020:
$85 million expires in January 2021, $470 million expires in
January 2022). 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 was undrawn
at 30 September 2020 (31 July 2020: undrawn).
208
Nufarm Limited | Annual Report for 2 months ended 30 September 2020Notes to the consolidated financial statements continued The following are the contractual maturities of the group’s financial liabilities:
Consolidated
30 Sep 2020
Non-derivative financial liabilities
Trade and other payables
Bank loans – secured
Bank loans – unsecured
Senior unsecured notes
Other loans – unsecured
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
31 Jul 2020
Non-derivative financial liabilities
Trade and other payables
Bank loans – secured
Bank loans – unsecured
Senior unsecured notes
Other loans – unsecured
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
860,927
860,927
854,932
208,156
210,690
210,690
10,549
11,734
667,322
881,569
8,919
8,919
11,341
38,371
–
904
–
393
5,091
–
–
38,371
804,827
–
8,919
144,620
307,314
20,448
20,124
266,742
–
–
–
–
–
–
6,098
925,927
925,927
–
–
–
–
(916,152)
(916,152)
–
–
–
–
1,027,346
1,027,346
(5,980)
(1,036,319)
(1,036,319)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,900,611
2,281,955
1,136,584
59,792
1,085,579
Carrying
amount
$000
Contractual
cash flows
$000
Less than
1 year
$000
1-2
years
$000
More than
2 years
$000
920,493
920,493
314,127
318,254
9,565
10,471
915,249
318,254
9,731
161
–
740
5,083
–
–
660,548
878,968
37,982
37,982
803,004
8,829
8,829
–
–
8,829
144,996
303,925
22,297
16,615
265,013
–
–
–
–
–
–
17,747
1,484,685
1,484,685
–
(1,465,158)
(1,465,158)
–
–
–
–
–
–
–
329,347
329,347
(3,373)
(334,471)
(334,471)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,072,932
2,455,343
1,317,916
55,498
1,081,929
209
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 27 Financial risk management and financial instruments continued
On 26 April 2018 the group completed the refinancing of the
US$325 million senior unsecured notes due in October 2019 (‘2019
notes’). The 2019 notes were redeemed through the issuance of
US$475 million 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 principal of the notes is managed
using a combination of foreign exchange contracts, other financial
instruments (natural hedges), and net investment hedges. Currency
risk related to the interest incurred on the notes is managed using
a combination of foreign exchange contracts, and earnings
derived in US Dollars (natural hedges).
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 30 September
2020 was a $0.118 million liability (31 July 2020: $14.374 million
liability) comprising assets of $5.980 million (31 July 2020: $3.373
million) and liabilities of $6.098 million (31 July 2020: $17.747 million).
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 risks. This includes risks relating to the
translation of earnings that are denominated in a currency other
than the group reporting currency (Australian Dollars), and
transactional foreign currency risks where receivables, payables
and borrowings are denominated in a currency other than the
functional currency of the individual group entity. The functional
currency is determined via reference to the currency of the
operating, investing and financing cashflows for each individual
group entity. The currencies giving rise to the identified risks
include the US Dollar, the Euro, the British Pound, the Australian
Dollar, New Zealand Dollar, Polish Zloty, Ukrainian Hryvnia,
Romanian Leu, Hungarian Forint, Mexican Peso, Turkish Lira and
the Russian Ruble.
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.
Exposure to transactional currency risk
The group’s exposure to major transactional 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 period.
Net financial assets/(liabilities) – by currency of denomination
AUD
$000
USD
$000
Euro
$000
GBP
$000
–
2,463
(2,036)
(268)
159
(1,233)
–
21,494
36,314
56,575
6,707
(3,452)
–
(15,139)
(11,884)
4,435
(10)
6,544
–
10,969
Net financial assets/(liabilities) – by currency of denomination
AUD
$000
USD
$000
Euro
$000
GBP
$000
–
(2,622)
(6,439)
2,463
(494)
(268)
1,701
–
23,822
23,937
45,137
(110)
–
24,132
17,583
(5,060)
(21)
6,255
–
1,174
Consolidated
30 Sep 2020
Functional currency of group operation
Australian dollars
US dollars
Euro
British pound
Consolidated
31 Jul 2020
Functional currency of group operation
Australian dollars
US dollars
Euro
British pound
210
Nufarm Limited | Annual Report for 2 months ended 30 September 2020Notes to the consolidated financial statements continued
Sensitivity analysis
Based on the aforementioned group’s net financial assets/(liabilities) at 30 September 2020, a 1 percent strengthening or weakening
of the following currencies at 30 September 2020 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 2020.
Currency movement
1% change in the Australian dollar exchange rate
1% change in the US dollar exchange rate
1% change in the Euro exchange rate
1% change in the GBP exchange rate
Strengthening
Weakening
Strengthening
Weakening
Profit or (loss)
after tax
30 Sep 2020
$000
Profit or (loss)
after tax
30 Sep 2020
$000
Profit or (loss)
after tax
31 Jul 2020
$000
Profit or (loss)
after tax
31 Jul 2020
$000
(68)
403
(265)
(70)
68
(399)
263
69
110
300
(84)
(326)
(111)
(297)
83
323
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 period:
AUD
US Dollar
Euro
GBP
BRL
Interest rate risk
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 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$555 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$325 million senior unsecured notes due in October 2019
during April 2018.
Average rate
Reporting date
2 months to
30 Sep 2020
12 months to
31 Jul 2020
As at
30 Sep 2020
As at
31 Jul 2020
0.722
0.611
0.552
3.894
0.670
0.605
0.531
3.036
0.712
0.608
0.555
4.009
0.719
0.606
0.548
3.707
The former notes were refinanced through the issuance of
US$475 million senior unsecured notes due in April 2026 with
a fixed coupon component.
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% (31 July 2020: 3.90%).
211
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 27 Financial risk management and financial instruments continued
Profile
At the reporting date the interest rate profile of the group’s interest-bearing financial instruments were:
Variable rate instruments
Financial assets
Financial liabilities
Fixed rate instruments
Financial assets
Financial liabilities
Consolidated Carrying amount
30 Sep 2020
$000
31 Jul 2020
$000
8,024
10,888
(372,244)
(477,517)
(364,220)
(466,629)
–
–
(667,322)
(660,548)
(667,322)
(660,548)
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 30 September 2020. Due to the seasonality of the crop protection business, debt levels can vary during
the period. The analysis is performed on the same basis for 31 July 2020.
30 Sep 2020
Variable rate instruments
Total sensitivity
31 Jul 2020
Variable rate instruments
Total sensitivity
Fair values
Profit or loss
100bp
increase
$000
(3,642)
(3,642)
100bp
decrease
$000
3,642
3,642
(4,666)
(4,666)
4,666
4,666
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 $667.322 million (31 July 2020:
$660.548 million), the fair value at 30 September 2020 is $678.166 million (31 July 2020: $662.199 million).
212
Nufarm Limited | Annual Report for 2 months ended 30 September 2020Notes to the consolidated financial statements continued Consolidated
30 Sep 2020
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
Secured bank loans
Unsecured bank loans
Senior unsecured notes
Other loans
Lease liabilities
Consolidated
31 Jul 2020
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
Secured bank loans
Unsecured bank loans
Senior unsecured notes
Other loans
Lease liabilities
Carried at
fair value
through
profit or loss
$000
Derivatives
used for
hedging
$000
Note
Financial
assets/
liabilities at
amortised
cost
$000
Total
$000
13
14
14
20
14
20
20
21
21
21
21
21
–
–
5,980
(6,098)
–
–
–
–
–
–
–
–
(118)
–
–
–
–
–
–
–
–
–
–
–
–
–
423,914
423,914
856,174
856,174
–
–
–
–
5,980
(6,098)
–
–
(860,927)
(860,927)
(208,156)
(208,156)
(10,549)
(10,549)
(667,322)
(667,322)
(8,919)
(8,919)
(144,620)
(144,620)
(620,405)
(620,523)
Carried at
fair value
through
profit or loss
$000
Derivatives
used for
hedging
$000
Note
Financial
assets/
liabilities at
amortised
cost
$000
Total
$000
13
14
14
20
14
20
20
21
21
21
21
21
–
–
3,373
(17,747)
–
–
–
–
–
–
–
–
(14,374)
–
–
–
–
–
–
–
–
–
–
–
–
–
686,552
686,552
985,260
985,260
–
–
–
–
3,373
(17,747)
–
–
(920,493)
(920,493)
(314,127)
(314,127)
(9,565)
(9,565)
(660,548)
(660,548)
(8,829)
(8,829)
(144,996)
(144,996)
(386,746)
(401,120)
213
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 27 Financial risk management and financial instruments 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).
30 Sep 2020
Derivative financial assets
Derivative financial liabilities
31 Jul 2020
Derivative financial assets
Derivative financial liabilities
Level 1
$000
–
–
–
–
Level 1
$000
–
–
–
–
Consolidated
Level 2
$000
5,980
5,980
(6,098)
(6,098)
Consolidated
Level 2
$000
3,373
3,373
(17,747)
(17,747)
Level 3
$000
–
–
–
–
Level 3
$000
–
–
–
–
Total
$000
5,980
5,980
(6,098)
(6,098)
Total
$000
3,373
3,373
(17,747)
(17,747)
There have been no transfers between levels in either the 2 months ended 30 September 2020 or the 12 months ended 31 July 2020.
Valuation techniques used to derive fair values
Capital management
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.
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 period. There is
a target and a stretch hurdle. These numbers will be based on the
budget and growth strategy.
There were no changes in the group’s approach to capital
management during the period.
214
Nufarm Limited | Annual Report for 2 months ended 30 September 2020Notes to the consolidated financial statements continued 28 Leases
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.
The group also leases IT equipment which have short term contracts and/or are low value items. The group has elected not to recognise
right-of-use assets and lease liabilities for these leases.
Right-of-use assets
Right-of-use assets included in property, plant and equipment (see Note 18) are as follows:
Balance at 1 August 2020
Additions to right-of-use assets
Depreciation charge for the period
Disposals and write-offs
Foreign exchange adjustment
Balance at 30 September 2020
Balance at 1 August 2019
Additions to right-of-use assets
Depreciation charge for the period
Disposals and write-offs
Foreign exchange adjustment
Balance at 31 July 2020
Amounts recognised in profit or loss
Depreciation on right of use assets
Interest on lease liabilities
Expenses relating to short-term leases
Expenses relating to leases of low-value assets, excluding short-term leases of low-value assets
Amounts recognised in statement of cash flows
Operating cashflows
Lease liability interest payments
Short-term and low-value lease payments
Financing cashflows
Lease liability principal payments
Land and
buildings
$000
Plant and
machinery
$000
Total
$000
91,157
2,600
(2,382)
(417)
(65)
19,580
110,737
1,825
(1,156)
(189)
(276)
4,425
(3,538)
(606)
(341)
90,893
19,784
110,677
Land and
buildings
$000
Plant and
machinery
$000
Total
$000
106,722
26,637
133,359
11,456
(17,216)
(9,175)
(630)
91,157
2,225
(7,307)
(1,725)
(250)
19,580
13,681
(24,523)
(10,900)
(880)
110,737
2 months to
30 Sep 2020
$000
12 months to
31 Jul 2020
$000
3,538
1,170
113
1
24,523
7,821
1,227
48
1,170
114
7,821
1,275
3,996
21,502
215
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 29 Capital commitments
The group had contractual obligations to purchase plant and equipment for $4.943 million at 30 September 2020 (31 July 2020: $6.413 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 17.
30 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.
Brazilian taxation proceedings
Other bank guarantees
Contingent liabilities
Consolidated
30 Sep 2020
$000
31 Jul 2020
$000
13,980
10,227
923
25,130
14,050
11,041
182
25,273
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
Following the sale of the Brazilian business to Sumitomo, Nufarm
retains a contingent liability in respect of certain pre-sale tax
assessments that are being challenged and other potential
tax liabilities.
As at 30 September 2020, the total contingent liability relating to
future potential tax liabilities in Brazil is $10.227 million (31 July 2020:
$11.041 million). The group considers that it is not probable that
a liability will arise in respect of these cases.
31 Group entities
Company
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
COCRF Investor 177, LLC
Crop Care Australasia Pty Ltd
Crop Care Holdings Limited
Croplands Equipment Limited
216
Notes
Place of
incorporation
30 Sep 2020
31 Jul 2020
Percentage of shares held
(a)
(a)
(a)
(a)
Australia
Australia
USA
Australia
Mexico
Australia
Mexico
New Zealand
(a)
Australia
United Kingdom
United Kingdom
(a)
(a)
(a)
(a)
Australia
Brazil
Australia
Australia
Australia
Netherlands
USA
(a)
Australia
New Zealand
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
Nufarm Limited | Annual Report for 2 months ended 30 September 2020Notes to the consolidated financial statements continued Croplands Equipment Pty Ltd
Danestoke Pty Ltd
Edgehill Investments Pty Ltd
Fchem (Aust) Limited
Fernz Canada Limited
Fidene Limited
First Classic Pty Ltd
Frost Technology Corporation
Greenfarm Hellas Trade of Chemical Products SA
Growell Limited
Grupo Corporativo Nufarm SA
Le Moulin des Ecluses s.a
Lefroy Seeds Pty Ltd
Manaus Holdings Sdn Bhd
Marman (Nufarm) Inc
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
Muni Strategies Sub-CDE 29, LLC
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 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
Nufarm Espana SA
Nufarm Europe GmbH
Nufarm Finance BV
Notes
Place of
incorporation
30 Sep 2020
31 Jul 2020
Percentage of shares held
(a)
(a)
(a)
(a)
Australia
Australia
Australia
Australia
Canada
New Zealand
(a)
Australia
USA
Greece
United Kingdom
Guatemala
(a)
(a)
(a)
(a)
(a)
(a)
France
Australia
Malaysia
USA
Mexico
USA
Australia
Australia
Malaysia
Australia
Malaysia
Malaysia
Australia
USA
USA
Morocco
South Africa
Canada
Zimbabwe
USA
USA
Malaysia
Australia
Bulgaria
Netherlands
Canada
China
United Kingdom
India
Costa Rica
Guatemala
Mexico
Panama
Venezuela
Ecuador
Germany
Brazil
Spain
Germany
Netherlands
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
–
100
100
100
100
100
100
100
100
100
–
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
–
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
–
100
100
100
100
100
100
100
100
100
–
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
–
217
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 31 Group entities continued
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 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 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
Nufarm UK Limited
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
Nuseed Global Holdings Pty Ltd
218
Notes
Place of
incorporation
30 Sep 2020
31 Jul 2020
Percentage of shares held
USA
Australia
New Zealand
Austria
Austria
Mexico
New Zealand
Netherlands
France
Hong Kong
Hungary
USA
Singapore
Netherlands
Australia
Italy
Japan
Korea
Malaysia
United Kingdom
Malaysia
Australia
Egypt
New Zealand
Paraguay
United Kingdom
United Kingdom
Peru
Australia
Poland
Portugal
Romania
France
Singapore
Malaysia
Switzerland
Malaysia
New Zealand
Australia
Australia
Turkey
United Kingdom
Ukraine
Uruguay
USA
(a)
(a)
(a)
(a)
(a)
Australia
USA
Canada
United Kingdom
United Kingdom
(a)
Australia
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
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 for 2 months ended 30 September 2020Notes to the consolidated financial statements continued Nuseed Global Innovation
Nuseed Global Management USA Inc
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
Selchem Pty Ltd
Societe Des Ecluses la Garenne s.a.s
3 Rivers Sub-CDE 5, LLC
Notes
Place of
incorporation
30 Sep 2020
31 Jul 2020
Percentage of shares held
United Kingdom
USA
USA
Australia
Mexico
Australia
Australia
Russia
Argentina
Serbia
Brazil
Ukraine
Uruguay
Australia
Australia
Australia
Australia
Indonesia
Indonesia
Indonesia
Indonesia
USA
Australia
France
USA
(a)
(a)
(a)
(a)
(a)
(a)
(a)
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
75
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.
219
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 32 Company disclosures
Result of the company
Profit/(loss) for the period
Other comprehensive income
Total comprehensive profit/(loss) for the period
Financial position of the company at the period end
Current assets
Total assets
Current liabilities
Total liabilities
Total equity of the company comprising of:
Share capital
Reserves
Accumulated losses
Retained Earnings (a)
Total equity
Company
2 months to
30 Sep 2020
$000
12 months to
31 Jul 2020
$000
697
(76)
621
(5,841)
267
(5,574)
As at
30 Sep 2020
$000
As at
31 Jul 2020
$000
1,462,687
1,462,458
2,360,879
2,360,633
392,703
393,498
395,247
396,087
1,834,934
1,834,934
40,927
(57,512)
40,538
(57,512)
147,283
146,586
1,965,632
1,964,546
(a) Retained earnings comprises the transfer of net profit for the period and are characterised as profits available for distribution as dividends in future
periods. No dividends (31 July 2020: $nil) were distributed from the retained earnings during the period.
Company contingencies
The company 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 company also provides
guarantees to support several of the regional working capital
facilities located in Europe, and the senior unsecured notes.
Company capital commitments for acquisition
of property, plant and equipment
There are no capital commitments for the company
at 30 September 2020 or 31 July 2020.
220
Nufarm Limited | Annual Report for 2 months ended 30 September 2020Notes to the consolidated financial statements continued 33 Deed of cross guarantee
Under ASIC Corporations (Wholly owned Companies) Instrument 2016/785, the Australian wholly-owned subsidiaries referred to in note 31
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 company 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 30 September 2020 follows.
Summarised income statement and retained profits
Profit/(loss) before income tax expense
Income tax (expense)/benefit
Net profit/(loss) attributable to members of the closed group
Retained profits at the beginning of the period
Dividends paid
Retained profits at the end of the period
Balance sheet
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Current tax assets
Total current assets
Non-current assets
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
Loans and borrowings
Deferred tax liabilities
Employee benefits
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
Equity
Share capital
Reserves
Retained earnings
TOTAL EQUITY
Consolidated
2 months to
30 Sep 2020
$000
12 months to
31 Jul 2020
$000
(13,512)
121,420
314
(130,758)
(13,198)
(9,338)
(161,649)
(152,311)
–
–
(174,847)
(161,649)
As at
30 Sep 2020
$000
As at
31 Jul 2020
$000
44,840
293,031
1,367,640
1,264,583
211,700
6,802
199,875
7,501
1,630,982
1,764,990
549
918,713
50,929
113,638
180,164
549
914,209
52,926
117,574
176,315
1,263,993
1,261,573
2,894,975
3,026,563
619,439
741,005
2,265
8,580
3,639
23,294
657,217
2,110
8,022
7,728
26,900
785,765
377,648
43,616
10,184
374,017
42,583
10,098
431,448
426,698
1,088,665
1,212,463
1,806,310
1,814,100
1,908,625
1,901,425
72,532
(174,847)
74,324
(161,649)
1,806,310
1,814,100
221
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 34 Related parties
a) Transactions with related parties in the wholly-owned group
The group entered into the following transactions during the period 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
Consolidated
2 months to
30 Sep 2020
$000
12 months to
31 Jul 2020
$000
49,140
14,261
156,445
145,382
As at
30 Sep 2020
$000
166,253
11,730
As at
31 Jul 2020
$000
144,125
13,630
On 1 April 2020 the group completed the sale of the South American business to Sumitomo Chemical Company Ltd (refer note 12).
These transactions were undertaken on commercial terms and conditions, and include certain transactions disclosed within the non
operating corporate segment (note 5) in accordance with a two year supply agreement that the group and Sumitomo Chemical
Company Ltd agreed upon the sale of the group’s South American business (‘Supply Agreement’). Under the Supply Agreement, active
ingredient manufactured by the group is transacted at an agreed market price. This resulted in the recognition of an onerous contract
in April 2020 (note 6). The balance of the product supplied under the Supply Agreement is transacted at the cost incurred by the group.
c) Key management personnel compensation
The key management personnel compensation included in personnel expenses (see note 9) are as follows:
Consolidated
2 months to
30 Sep 2020
$
12 months to
31 Jul 2020
$
840,863
6,084,465
40,178
344,163
(174,272)
360,969
–
–
4,146
(74,950)
710,915
6,714,647
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 30 September 2020 (31 July 2020: nil).
Short term employee benefits
Post employment benefits
Equity compensation benefits
Termination benefits
Other long term benefits
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 reporting period
and there were no material contracts involving director’s
interest existing at the end of this period.
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
222
Nufarm Limited | Annual Report for 2 months ended 30 September 2020Notes to the consolidated financial statements continued 35 Auditors’ remuneration
Audit services
KPMG Australia
Consolidated
2 months to
30 Sep 2020
$
12 months to
31 Jul 2020
$
Audit and review of group financial report
455,000
677,000
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
36 Subsequent events
906,813
2,343,870
1,361,813
3,020,870
52,265
179,266
1,414,078
3,200,136
–
–
–
–
–
64,115
64,115
35,000
221,905
8,768
70,336
–
420,837
756,846
On 15 October 2020 a distribution was paid by Nufarm Finance (NZ) on the Nufarm Step-up Securities. The distribution rate was 4.15%
resulting in a gross distribution of $5.216 million.
Other than noted above, no matters or circumstances have arisen in the interval between 30 September 2020 and the date of this report
that, in the opinion of the directors, have or may significantly affect the operations, results or state of affairs of the group in subsequent
accounting periods.
223
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 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 30 September 2020 and of its performance for the two months
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 31 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 two months ended 30 September 2020.
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 19th day of November 2020
JC Gillam
Director
GA Hunt
Director
224
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 Independent Audit 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 Nufarm
Limited (the Company).
The Financial Report comprises:
• Consolidated balance sheet as at 30 September
•
•
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 30 September 2020
and of its financial performance for the
Period ended on that date; and
2020
Consolidated statement of profit or loss and
other comprehensive income, consolidated
in equity, and
statement
consolidated statement of cash flows for the
Period then ended
of changes
• Notes
including a summary of significant
complying with Australian Accounting
Standards and the Corporations Regulations
2001.
accounting policies
• Directors’ Declaration.
The Group consists of the Company and the
entities it controlled at the period end and from time
to time during the financial year.
The Period is the 2 month period ended 30
September 2020.
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 (including Independence Standards) (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.
© 2020 KPMG, an Australian partnership and a member firm of the KPMG global organization of independent member
firms affiliated with KPMG International Limited, a private English company limited by guarantee. All right reserved. The
KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global
organization. Liability limited by a scheme approved under Professional Standards Legislation.
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 225
Independent Audit Report continued
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 in
relation to tax losses
Key Audit Matters are those matters that, in our
professional judgment, 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 ($436.7m) and
intangible assets ($1,328.9m)
Refer to the following notes to the financial report: Note 2(d)(ii) Basis of preparation – Use of estimates
and judgments – impairment testing, Note 3(i)(ii) Significant accounting policies – Impairment – Non-
financial assets, Note 18 Property, plant and equipment, and Note 19 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:
Our procedures included:
• Using our understanding of the nature of the
Group’s business, we analysed:
• Inherent complexity in determination of the
Group’s cash generating units (“CGU’s”),
noting that the Group prepares a separate
discounted cash flow model for each CGU.
-
-
• The diverse nature of regional agricultural
markets in which the Group operates, noting
that each geographic and product market
segment experiences the following factors
which are subject to inherent uncertainty
leading to a range of possible forecast
outcomes:
-
-
-
fluctuating
economic and climatic conditions;
demand
depending
regulatory
significant
and
oversight, which can lead to approval and
cessation of new and existing products;
and
activity
technological advancements by the Group
and competitors, which can lead to shifts
in market demand for products.
the internal reporting of the Group to assess
how results are monitored and reported; and
the implications for CGU identification in
accordance with accounting standards.
•
Testing the design and implementation of key
controls over the cash flow models, including
Board consideration and approval of key
assumptions and business unit budgets which
form the basis of the cash flow forecasts.
• Assessing the Group’s discounted cash flow
on
models and key assumptions by:
-
-
-
-
comparing forecast cash flows to historical
trends and performance, by CGU, to inform
our evaluation of the forecasts incorporated
into the models;
comparing the relevant cash flow forecasts
to the Board approved budgets and FY21-
FY23 business plans;
involving our valuation specialists to assess
the economic assumptions relating to cost
of debt and cost of equity, and to assess
discount rates and terminal growth rates
against comparable market information; and
using our industry knowledge, information
published by regulatory and other bodies and
Given the unique, non-homogenous, nature of
these factors, specific auditor attention is
applied to each element, increasing the overall
audit effort in this area. We focus on the
authority and knowledge of the sources of
judgements incorporated into the cash flow
models, evidence of bias and consistency of
226
Nufarm Limited | Annual Report for 2 months ended 30 September 2020
application of judgements.
• The above factors increase the complexity in
auditing both the assessed useful lives for
individual intangible assets, and also the
forward-looking assumptions contained in the
Group’s discounted cash flow models for each
CGU. Additional key assumptions we focused
on included growth rates during the forecast
period, terminal value growth rates and
discount rates.
• These same conditions impact our audit effort
associated with assessing the capitalised
in
development costs
particular the recoverable amount of new
products in development phases.
intangible asset,
Products in early stages of development,
compared to those closer to product launch,
are prone to a wider range of forecast
outcomes and projections can contain highly
judgemental assumptions. We focused on
the authority and knowledge of the sources of
judgements incorporated into the valuation,
common market practices and consistency of
judgements.
We involved valuation specialists to supplement
our senior audit team members in assessing this
key audit matter.
information obtained through inquiries with
the Group to challenge key assumptions.
This included the forecast cash flows and
growth assumptions considering recent
operating performance, the useful lives
associated with specific intangible assets
and the impact of technology, market and
regulatory changes on those assumptions.
We looked for evidence of sensitivity and
bias within and across models at the time of
the assessment and at period end, and
consistency of application,
investigating
significant differences.
• Evaluating the Group’s sensitivity analysis in
respect of the key assumptions in the models,
including the identification of areas of estimation
uncertainty and reasonably possible changes in
key assumptions at the point
in time the
assessment was performed and at period end.
• Comparing carrying values of CGUs to available
market data, such as implied earnings multiples
of comparable entities.
• Assessing the Group’s assessment of the
recoverable amount of the ANZ Crop Protection
CGU and the Europe CGU 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
accounting standards.
requirements of
the
• We assessed the related disclosures included in
the financial report against the accounting
standard requirements.
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 227
Independent Audit Report continued
Recoverability of deferred tax assets in relation to tax losses ($44.7m)
Refer to the following notes to the financial report: Note 2(d)(iii) Basis of preparation – Use of estimates
and judgements – income taxes, Note 3(p) Significant accounting policies – Income tax, Note 11 Income
tax expense and Note 16 Tax assets and liabilities.
The key audit matter
How the matter was addressed in our audit
Recoverability of deferred tax assets in relation
to tax losses is a key audit matter due to the:
Our procedures included:
• Testing design and
implementation of key
controls over the taxable
income forecasts
underpinning the tax loss utilisation models,
including Board consideration and approval of key
assumptions and business unit budgets which
form the basis of these forecasts.
• Comparing the key assumptions and business
unit budgets for consistency with those tested by
us, as set out in the Key Audit Matter relating to
the recoverability of non-current assets, including
property plant and equipment and intangible
assets, and also comparing the reconciliation of
these budgets to taxable income concepts.
• Assessing the Group’s tax loss utilisation models
and key assumptions, by significant jurisdiction,
by:
-
-
-
-
recent performance to
comparing taxable income to historical trends
inform our
and
evaluation of
taxable profit
forecasts;
the current
evaluating the key assumptions in the Group’s
forecast tax loss utilisation models, including
identification of areas of estimation
the
uncertainty to focus further procedures;
understanding the timing of future taxable
income 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
relevant jurisdictions to assess the tax loss
utilisation expiry dates and annual utilisation
allowances for consistency with local practice,
regulatory parameters and legislation.
• Complexity in auditing the forward-looking
assumptions applied to the Group’s tax loss
utilisation models, especially given
the
multiple tax jurisdictions and their bespoke tax
regimes. Further details on the significant
forward-looking assumptions and implications
for the audit are contained in the Key Audit
Matter relating to the recoverability of non-
current assets, including property, plant and
equipment and intangible assets. Additional
auditor
the
is
reconciliation of forecast cash flows to
forecasts of taxable income for each tax
jurisdiction.
focused on
attention
• Age of the tax losses, and the relevance of
recent taxable profits to forecasts.
• The large number of jurisdictions and our need
to consider their varying and complex rules on
tax loss utilisation.
. This necessitated involvement of our tax
specialists to supplement our senior audit
team members in relevant jurisdictions.
228
Nufarm Limited | Annual Report for 2 months ended 30 September 2020
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
and will 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
assessing the Group and Company’s ability to continue as a going concern and whether the use of
the going concern basis of accounting is appropriate. 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 and Company 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:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our
Auditor’s Report.
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 229
Independent Audit Report continued
Report on the Remuneration Report
Opinion
Directors’ responsibilities
In our opinion, the Remuneration Report of
Nufarm Limited for the Period ended 30
September 2020 complies with Section 300A
of the Corporations Act 2001.
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 Period ended 30
September 2020.
Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted
in accordance with Australian Auditing Standards.
KPMG
Chris Sargent
Partner
Melbourne
19 November 2020
230
Nufarm Limited | Annual Report for 2 months ended 30 September 2020
Shareholder and Statutory Information
Substantial shareholders
In accordance with section 671B of The Corporations Act, as at 30 September 2020, the names of the substantial holders of the Company and
the number of equity securities in which those substantial holders and their associates have a relevant interest, as disclosed in substantial
holding notices given to the Company, are as follows:
Holder of Equity Securities
Ellerston Capital Limited
Allan Gray Australia Pty Ltd
Sumitomo Mitsui Trust Holdings Inc
Schroder Investment Management Australia Limited
Firetrail Investments Pty Ltd
Zhang Hua on behalf of himself and his controlled entities
Sumitomo Chemical Company Limited
Nufarm Limited1
Number
of Equity
Securities held
% of total issued
securities
capital in
relevant class
24,429,246
32,827,083
30,577,548
19,913,404
25,400,315
21,822,196
60,271,136
60,271,136
6.43%
8.65%
8.05%
5.25%
6.69%
5.93%
15.9%
15.9%
1
Nufarm Limited has a relevant interest in the shares held by Sumitomo Chemical Company Limited. The relevant interest arises under a Shareholder Deed
dated 22 January 2010 between Nufarm and Sumitomo which contains certain obligations to the voting and disposal of shares in Nufarm by Sumitomo.
Number of holders
As at 30 September 2020, the number of holders is as follows:
Class of Equity Securities
Fully paid ordinary shares
Number of
holders
15,456
Less than marketable parcels of ordinary shares (UMP Shares)
The number of holders of less than a marketable parcel of ordinary shares based on the closing market price at 30 September 2020
is as follows:
Total Shares
66,382
UMP Shares
130
UMP Holders
1,371
% of issued shares held
by UMP holders
Voting rights of equity securities
As at 30 September 2020, there were 15,456 holders of a total of 379,694,706 ordinary shares of the Company. At a general meeting
of the Company, every holder of ordinary shares present in person or by proxy, attorney or representative has one vote on a show of
hands and, on a poll, one vote for each ordinary share held. On a poll, every member (or his or her proxy, attorney or representative) is
entitled to vote for each fully paid share held and, in respect of each partly paid share, is entitled to a fraction of a vote equivalent to the
proportion which the amount paid up (not credited) on that partly paid share bears to the total amounts paid and payable (excluding
amounts credited) on that share. Amounts paid in advance of a call are ignored when calculating the proportion.
Distribution of holders of equity securities
The distribution of holders of equity securities on issue in the Company as at 30 September 2020 is as follows:
Distribution of Ordinary Shareholders
Holdings Ranges
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 Over
Holders
Total Units
6,531
6,516
1,456
900
2,929,637
16,038,710
10,738,097
20,111,801
%
0.77
4.22
2.83
5.30
53
329,876,461
86.88
231
Nufarm Limited | Annual Report for 2 months ended 30 September 2020 Shareholder and Statutory Information continued
Corporate Information
Twenty largest shareholders
Rank Holder Name
Units
% Units
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
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
Continue reading text version or see original annual report in PDF format above