2015 ANNUAL REPORT

Transcription

2015 ANNUAL REPORT

2015 Annual Report
An Australian, farmer owned dairy co-operative since 1895
corporate directory
Registered Office
Norco Co-operative Limited
ARBN 009 717 417 / ABN 17 009 717 417
‘Windmill Grove’, 107 Wilson Street
SOUTH LISMORE NSW 2480
T: 02 6627 8000 F: 02 6621 9673
W: www.norco.com.au
Financiers/Bankers
St George Bank
Level 13, 182 George Street
SYDNEY NSW 2000
Auditors
Ernst & Young Chartered Accountants
Level 5 Waterfront Place, 1 Eagle Street
BRISBANE QLD 4000
Solicitors
Thomsons Geer Lawyers
BRISBANE QLD 4000
S+P Lawyers
LISMORE NSW 2480
Piper Alderman Lawyers
SYDNEY NSW 2000
BRANCH directory
head offices
NORCO CORPORATE
(PO Box 486 LISMORE NSW 2480)
Ph: 02 6627 8000 Fax: 02 6621 9673
NORCO RURAL
‘Windmill Grove’, 107 Wilson Street,
(PO Box 3107 LISMORE DC NSW 2480)
Ph: 02 6627 8000 Fax: 02 6622 1730
NORCO AGRIBUSINESS
Ph: 02 6627 8000 Fax: 02 6622 1730
MILK SUPPLY
(PO Box 486, LISMORE NSW 2480)
Ph: 02 6627 8029 Fax: 02 6622 7410
NORCO FOODS
NORCO MILK – LABRADOR
Cnr Pine Ridge Road & Gold Coast Hwy
LABRADOR QLD 4215
(PO Box 530, SOUTHPORT QLD 4215)
Ph: 07 5511 7200 Fax: 07 5594 0101
NORCO MILK – RALEIGH
North Street RALEIGH NSW 2454
Ph: 02 6692 0000 Fax: 02 6655 4447
contents
Corporate Profile
2
Norco Rural / Agribusiness
16
Facts at a Glance
4
Financial Management
18
Chairman’s Report
5
Norco People
19
Chief Executive Officer’s Report
8
Directors’ Report
20
Business Unit Reports:
Auditor’s Independence Declaration 27
Norco Foods
Corporate Governance Statement
29
- Sales and Marketing
13
Financial Statements
36
- Operations
14
Independent Auditor’s Report
62
15
Corporate and Branch Directories
65
Milk Supply
ICE CREAM BUSINESS UNIT
Union St SOUTH LISMORE NSW 2480
Ph: 02 6627 8000 Fax: 02 6621 6120
NORCO AGRIBUSINESS
– GOLDMIX AND GRAIN TRADING
HEATHERBRAE
9 Hank St HEATHERBRAE NSW 2324
Ph: 02 4987 6500 Fax: 02 4987 6099
GOLDMIX STOCKFEEDS
Krauss Ave SOUTH LISMORE NSW 2480
Ph: 02 6621 3042 Fax: 02 6621 9170
KEMPSEY
3 Kemp St WEST KEMPSEY NSW 2440
Ph: 02 6562 6393 Fax: 02 6563 1020
GOLDMIX STOCKFEEDS
2814 Murgon – Gayndah Road
WINDERA QLD 4605
Ph: 07 4168 6186 Fax: 07 4168 6214
KINGAROY
97 River Road KINGAROY QLD 4610
Ph: 07 4163 6310 Fax: 07 4162 4992
GOLDMIX CREST SEEDS
316 Anzac Ave TOOWOOMBA QLD 4350
Ph: 07 4630 2318 Fax: 07 4630 2348
GRAIN TRADING – TOOWOOMBA
Ph: 07 4637 3315 Fax: 07 4637 3399
NORCO RURAL BRANCHES
ALSTONVILLE
17 Kays Lane Russelton Estate
ALSTONVILLE NSW 2477
Ph: 02 6628 8315 Fax: 02 6628 5765
ARMIDALE
252 Mann Street ARMIDALE NSW 2350
Ph: 02 6771 4669 Fax: 02 6771 1187
BEAUDESERT
9A Thiedeke Rd BEAUDESERT QLD 4285
Ph: 07 5541 4882 Fax: 07 5541 1025
BELLINGEN
1076 Waterfall Way
BELLINGEN NSW 2454
Ph: 02 6655 9792 Fax: 02 6655 2266
BOWRAVILLE
51 Carbin St BOWRAVILLE NSW 2449
Ph: 02 6564 8648 Fax: 02 6564 7425
BUNDABERG
71 Gavin St BUNDABERG QLD 4670
Ph: 07 4151 7883 Fax: 07 4154 4341
CASINO
136 Dyraaba Street CASINO NSW 2470
Ph: 02 6661 2100 Fax: 02 6662 6007
COFFS HARBOUR
5/24 Isles Drive
SOUTH COFFS HARBOUR NSW 2450
Ph: 02 6658 0393 Fax: 02 6658 0374
DUNGOG
Stroud Road DUNGOG NSW 2420
Ph: 02 4992 1087 Fax: 02 4992 3000
GAYNDAH
59 Dalgangal Rd GAYNDAH QLD 4625
Ph: 07 4140 8542
GLEN INNES
165 Lang St GLEN INNES NSW 2370
Ph: 02 6732 2162 Fax: 02 6732 5642
GLOUCESTER
Cnr Church & Phillip Streets
GLOUCESTER NSW 2422
Ph: 02 6558 9600 Fax: 02 6558 9666
GRAFTON
19 Queen Street GRAFTON NSW 2460
Ph: 02 6643 5630 Fax: 02 6642 7245
www.norco.com.au
KYOGLE
Willis Street KYOGLE NSW 2474
Ph: 02 6632 2920 Fax: 02 6632 1221
LISMORE
105 Wilson Street
Ph: 02 6627 8266 Fax: 02 6621 2286
MACKSVILLE
Tilly Willy St MACKSVILLE NSW 2447
Ph: 02 6568 4057 Fax: 02 6568 2308
MURGON
21 Lamb Street MURGON QLD 4605
Ph: 07 4168 3060 Fax: 07 4168 2996
MURWILLUMBAH
17 Buchanan Street
MURWILLUMBAH NSW 2484
Ph: 02 6672 2311 Fax: 02 6672 5120
STUARTS POINT
906 Stuarts Point Road
STUARTS POINT NSW 2441
Ph: 02 6569 0955 Fax: 02 6569 0983
TAREE
5 Grey Gum Road TAREE NSW 2430
Ph: 02 6551 2999 Fax: 02 6551 2522
TENTERFIELD
445 Rouse St TENTERFIELD NSW 2372
Ph: 02 6736 5902 Fax: 02 6736 2270
WAMURAN
1055 D’Aguilar Highway
WAMURAN QLD 4512
Ph: 07 5496 6500 Fax: 07 5496 6406
WINDERA DEPOT
WINDERA QLD 4605
Ph: 07 4168 6186 Fax: 07 4168 6214
WOOLGOOLGA
16 Featherstone Drive
WOOLGOOLGA NSW 2456
Ph: 02 6654 2905 Fax: 02 6654 1031
WOOLGOOLGA CARTON SERVICES
8 Bosworth Road
WOOLGOOLGA NSW 2456
Ph: 02 6654 8078 Fax: 02 6654 0103
– NORCO BOWDLERS
NORCO BOWDLERS – TOOWOOMBA
Ph: 07 4637 3300 Fax: 07 4637 3399
NORCO BOWDLERS – ALLORA
120 Allora – Clifton Rd ALLORA QLD 4362
Ph: 07 4666 2210 Fax: 07 4666 3520
NORCO BOWDLERS – QUINALOW
3 Myall Street QUINALOW QLD 4403
Phone: 07 4692 1333
65
Norco’s Purpose
Norco’s purpose is to build wealth, security and sustainability
for our shareholders, business partners and employees.
We achieve this by:
• maintaining a diverse and strong range of businesses;
• being a competitive regional purchaser and supplier of milk;
and
• creating integrated solutions for our partners.
• We encourage and support people to grow as individuals and
contributors to our organisation.
• We respect our heritage and legacy.
• We respect our natural environment.
Responsible
• We are responsible for preserving the co-operative principles.
• We are responsible for our actions and our performance.
• We are responsible for providing a safe work environment.
Norco’s Values
Efficient
Norco applies a common set of values to everything it does.
These values include:
• We seek to add value in everything we do.
Respect
• We seek to consistently improve through innovation.
• We respect our shareholders, employees, business partners
and customers.
Community
• We respect a diversity of views and opinions.
Innovation
• We seek active involvement in our communities.
1
corporate profile
How does one adequately describe a co-operative
the speed of technological advancements as the Co-
business that has been a part of the fabric of the North
operative moved from the nineteenth to twentieth
Coast of New South Wales since 1895? The words
century. The Co-operative then had to find a market for
resilient, sustainable, adaptable and iconic come to
the butter and ensure that the farmers received a fair
mind, or perhaps just one word resonates above all
return for their produce.
others as the most appropriate description – NORCO.
2
Even though 120 years have passed and in that time
It was 120 years ago on 5 June 1895 when the Byron
the business has grown and reinvented itself over and
Bay Creamery first made butter from locally supplied
over to keep pace with consumer trends, some things
cream. The history of Norco is quite complicated and in
don’t change. The very reasons the Co-operative
fact there was a great deal of uncertainty in those early
started all those years ago still ring true today. Just like
times. Just imagine the public meetings that needed to
in 1895, Norco’s Members collectively come together
be held and the distances travelled by the Co-operative
with a common purpose to have their milk produce
leaders in trying to garner the support of both individual
marketed. Members democratically participate in the
cream suppliers and fragmented factories that quite
Co-operative, are all treated equally and ultimately
possibly could not envisage a cohesive and organised
determine the future of the Co-operative as the owners
future for the fledgling dairy industry in the region.
of the business. The leaders of today’s Norco consult
We then need to consider the capital that had to be
and communicate with the Members to ensure that
raised and the risks taken to underwrite the purchase
there is a willingness to travel on the strategic path as
of property, plant and equipment and how quickly
set by the Board. As was the case at the turn of the
that infrastructure would need to be replaced due to
twentieth century, the world today is also moving at a
fast pace, with infrastructure needing to be upgraded
on a continual basis to meet the growing needs of
consumers in relation to higher quality and more
efficiently produced foods.
However, on reflection, there seems to be one
overwhelming point of difference about the Cooperative that has transcended through time and the
generations of people involved in the business and
which almost gives Norco a heartbeat. There is an
acknowledgement that each generation is simply the
custodian of the Co-operative’s substantial assets that
have been built up over time and there is a communal
sense of responsibility that these assets need to be
passed on to the next generation in an even better
condition than that in which they were received – to
ensure the continued future of NORCO.
It is safe to say that Norco’s 326 Active Members on
My memories of Norco
A review of 120 years of Norco operations has
unearthed some close links between the cooperative and the Reading family.
220 farms, 750 employees, the growing customer
Retired engineer, Frank Reading, has been delving into
base, business partners and the communities that the
family records that reveal the association goes back
business operates in, are all grateful that Norco exists
to Norco’s very roots when his great-uncle, George
today as a strong, vibrant and successful Co-operative.
Reading, was chairman from 1896 to 1903, and his
The 2015 Annual Report is full of facts and figures
relating to the current performance of Norco in the
2014/15 financial year, including:
• Net Profit $3.105 million versus last year’s $500,000.
• EBITDA of $10.643 million (up 38.4 percent on last
year).
• All business unit results are favourable to the 2013/14
financial year.
• Total debt $33.8 million which is $0.5 million less than
2013/14 despite a 20 percent growth in sales.
• Members’ total milk supply 211 million litres (which is
a record) – up 29 percent on 2013/14.
• Average milk price before patronage and dividend of
56.48 cents per litre versus 53.25 cents per litre for
2013/14.
• Record Suppliers’ Patronage reward payment of $1.1
million.
grandfather Fred (George’s brother) was chairman in
1909 and 1913 and a director for 32 years.
Frank’s father, Hugh, was an engineer of note who
undertook many engineering assignments for
Norco, installing key equipment in the factories.
In fact Hugh supervised the installation of plant
and equipment at the Lismore and Murwillumbah
factories before being appointed as Norco’s
assistant chief engineer and workshop manager.
Hugh retired from Norco in 1946 to establish his
own business, Readings Engineering Works.
Frank joined his father and worked for Readings for
52 years, including some 30 years as manager. He
acknowledges having Norco to thank for his career
in engineering, explaining that:
“At the age of eight I would visit the Norco workshop
after school to watch and talk with the tradesmen
as they went about their work, and being intrigued
with the machinery and the smells of oils.”
And by the way, from those humble beginnings in 1895
when the turnover for the first full year was in the region
Photo of Frank Reading holding a picture
of 30,000 pounds, now in our 120th year we are proud
of his father Hugh Reading made in India
to be able to say that our Co-operative is now a half
entirely out of mineral sands
billion dollar business, with a record turnover of $510
million achieved in 2014/15.
3
facts at a glance
total net profit
2014/15
3.1
2013/14
0.5
2012/13
0.4
staff employed
2011/12
5.7
2010/11
4.2
AVERAGE MILK PRODUCTION
PER MEMBER FARM
as at 30 june 2015
Business Unit
No.
Financial Year Norco Foods
509
2014/15968
Norco Rural
177
2013/14933
Norco Agribusiness
48
2012/13947
Corporate18
2011/12923
(includes permanent, part-time and casual staff)
2010/11851
NUMBER OF MEMBER FARMS
Financial Year 000’s Litres
TOTAL MEMBERS’ MILK INTAKE
No.
Financial Year Millions Litres
2014/15218
2014/15211
2013/14181
2013/14163
2012/13159
2012/13151
2011/12160
2011/12149
2010/11161
2010/11137
TOTAL MEMBER RETURNS
FINANCIAL
YEAR AVE BASE
STEP UPS
MILK PRICE cents per litre
AVE TOTAL
DIVIDEND
MILK PAY
SUPPLIERS’
PATRONAGE
TOTAL AVE
MEMBER RETURNS
2014/1556.48
- 56.48 0.22*0.52
57.22
2013/14
53.25
-
53.25
0.14
0.51
53.90
2012/13
51.50
0.24
51.74
-
0.45
52.19
2011/1251.28
1.43 52.71 0.30 0.42
53.43
2010/1150.54
1.50 52.04 0.23 0.41
52.68
*Dividend proposed for consideration at 2015 Annual General Meeting
4
millions $
chairman’s report
It is with immense pleasure that on behalf of the Board
of Directors I am able to provide some commentary
on what has been an extremely busy and rewarding
financial year for our members and Norco.
Norco has continued its expansion in the Route trade
to ensure that we have a mix of customers to meet a
strategy goal set by the Board. Not only is the Norco
The summary highlights for the 2014/15 financial
Route business growing on a geographical basis both
year are as follows:
north and south of the traditional Norco territory,
• Net Profit $3.105 million versus last year’s $500,000.
• Sales $510 million.
• All business unit results are favourable to the
2013/14 financial year.
• Record Suppliers’ Patronage reward payment of $1.1
million.
• 6% dividend allowed for in the upcoming year on the
back of the profit result.
• Both debtors’ days and creditors’ days are lower than
last year.
• Working capital is lower than last year despite a 20
percent growth at the sales line.
but the product offering has also been improved and
diversified to cater for the desire of consumers to
have a wide range of milk products to choose from.
As reported last year, in June 2014 Norco commenced
a program to export fresh milk to China in commercial
volumes. While progress has been steady resulting in
Norco achieving reasonable success, an unexpected
benefit of this program has been the wide exposure
Norco has received to date. The significant awareness
that has been generated both within Australia and
internationally as a result of embarking on this
program adds weight to the Norco story and our point
of difference. The Board of Directors is treating export
as a longer term project which we believe will not only
provide an alternative value stream for our members’
The value of strong relationships
fresh milk but we are also excited by the prospects that
Our commitment to develop long standing relationships
are unfolding in relation to the export opportunities for
that add value to Norco and our members has, and
our ice cream business.
will continue to provide significant benefits for some
Members / Milk Suppliers
time, in particular in relation to milk price and reduced
exposure to international dairy commodity volatility.
To service the growth in the Norco business, new
member farms have been acquired to meet the need
A good example is the success Norco has enjoyed
for additional milk supply to satisfy the ever growing
with the Coles contract, firstly in ice cream and now
customer base. The decision by the Board to introduce
in fresh milk. Our ability to provide service and product
a regional milk price, which is effective from 1 January
quality equal to our competitors whilst remaining a
2016, was driven by the need to create a sustainable
100% Australian Farmer Owned Co-operative, is a
milk supply in the Queensland and northern New
substantially unique proposition in the market place
South Wales regions and also recognising that as
and in the dairy industry.
Norco expands beyond its traditional areas in the
The commencement of the Coles contract to supply
south, there are different pricing structures offered by
fresh milk in south east Queensland and northern New
South Wales from 1 July 2014 has been managed
extremely well. The capital expenditure program
required to service the volume was completed well
in advance of the start of the contract to ensure a
smooth transition for both Coles and Norco.
More recently we have been able to negotiate a longer
term contractual arrangement with Aldi to supply
the Sydney market. Norco has maintained a long
standing relationship with Aldi since its entry into the
Australian retail market and moving to a long term
contract provides for greater security for our Raleigh
manufacturing facility.
5
Route trade and export opportunities
our competitors. Even though we proudly operate as a
Co-operative, it is not in our members’ best interests
as a whole to allow the Co-operative to become
uncompetitive in the market place when sourcing milk
or engaging with new customers. The overall benefit to
all members will be greater and will be shared amongst
all through profit distributions and retained earnings
for future capital projects.
The overall diversity of Norco’s business continues to
provide benefits to our members. The transformation
of the Rural Retail / Agribusiness division over the
last several years supports our strategy of increasing
member returns through avenues other than milk
5
price. It is pleasing to see the Suppliers’ Patronage
Scheme at its highest reward level since the inception
of the scheme and the usage of the interest free
accounts within the Rural / Agribusiness division is
also supporting members / milk suppliers with cash
flow to grow their dairy businesses without having
Denzil Thomas
to pay a bank for the use of funds. With significant
What Norco means to us
Denzil and Audrey Thomas of Possum Creek have
been Norco milk suppliers for 50 years, however the
association between the Thomas family and Norco goes
back even further.
improvement in the beef and horticultural sectors
in the last quarter of 2014/15, our expectation is
for a sustained overall improvement in the 2015/16
financial year for Rural Retail / Agribusiness.
Board of Directors
Denzil’s father Harry purchased the Possum Creek
The Board continues to remain committed to
property in 1918 and started supplying 10 gallon cans
extending our knowledge base. The introduction of
of cream to the Byron Bay factory. He married Mary in
master classes within the Board room to enhance our
1919 and they had six children, with Denzil being the
strategy development has been beneficial over the
youngest. Denzil has fond memories helping his father
last twelve months. Additionally, in the coming months,
in the dairy and piggery and riding his favourite horse
the Board will also consider filling the Independent
“Titch”. After leaving school at 16, Denzil remained on
Director position formally held by Mr David Hodges.
the farm to help his father work the dairy and piggery.
The Directors will consider and assess the skill set
In 1954 Denzil and Audrey married and then later built
their home on the family property while working the farm
with Denzil’s parents. Some years after the death of his
that they believe will add the maximum value to the
Board and if a suitable candidate is found they will be
recommended to our members.
father in 1959, Denzil and Audrey were able to secure
At the 2014 Annual General Meeting we farewelled
the farm with the support of Denzil’s siblings. Denzil
two long standing and well respected Directors. Mr
and Audrey have also welcomed four children into their
David Hodges finished his Independent Director role
family; twins Margaret and Susan, followed by David and
after completing two, three year terms. Over this
then Geoffrey.
period of time, David contributed greatly to the Board
Norco records indicate that Denzil and Audrey
became the milk suppliers on 1 July 1965 and Denzil
has confirmed this, meaning that not only is Norco
celebrating its milestone of 120 years, but Denzil and
Audrey are also celebrating 50 years as Norco milk
suppliers in their own right.
In explaining why he and Audrey value their long term
association with Norco, Denzil advised: “Norco provides
us with a sense of stability. We can depend on Norco to
take all our milk and we in turn make full use of Norco
for our supplies of grain, fodder, seed and fertiliser etc.
We are happy with the service and the staff are always
pleasant and obliging, in fact most of our farm inputs
come from Norco and Goldmix Stockfeeds.”
process in areas such as strategy, policy development
and member related issues. As a result of David’s input
and guidance, there have been major improvements
made to the rigour relating to strategy development
over this time and we would like to thank David for
his commitment and dedication to Norco and to our
members.
Mr Tom Cooper retired from the Board after serving
as a Director for 12 years, having been first elected
on 13 November 2002. By way of background, on 25
June 2014 members approved changes to Norco’s
Rules relating to the geographical boundaries of the
Northern and Central Regions. As a result of these
changes, Tom was no longer eligible to serve as a
Supplier Director for the Northern Region at the
Norco has a rich history of “family farms” that have
end of his then current term. Regardless of the Rule
loyally supplied Norco with quality milk over many years,
changes, after 12 years’ service Tom decided not to
and in some cases, over several generations dating back
offer himself for re-election. During his 12 years of
to 1895.
service, Tom always demonstrated a great amount of
compassion and care for all the members and was very
6
much a supporter of the co-operative structure. This
after the date of cancellation in accordance with
was most evident when the Co-operative acquired
Section 163 of the Co-operatives National Law (CNL).
many new members in south east Queensland in
recent times. Tom would ensure that each and every
new member was welcomed into the Co-operative
and that they were given a comprehensive overview of
the business. Tom was also a strong supporter of the
Rural Retail / Agribusiness division and took an active
interest in helping to return that business unit to the
profitability it enjoys today. Being a team player, Tom
always actively participated in Board meetings and
strategy sessions and in addition to providing his own
views, he was always willing to consider the views of
all Directors around the Board table to assist in good
decision making processes.
With the changes to the regional boundaries approved
and in place for the 2014 Election of Directors
program as described above, Mr Heath Hoffman was
As a result, the Board will be recommending to
members via a Special Postal Ballot in November
2015 that the current scheme be amended so that it
has a secondary purpose, being to use funds collected
(that exceed the amount required for the purpose
of repayment of former members’ capital) to assist
in funding existing and future capital projects as
approved by the Board of Directors.
Finally I would like to thank our members for their
continuing support and our staff for their incredible
dedication
and
commitment
to
meeting
the
requirements of our loyal customers. Without the
continuing support of everyone involved in the Cooperative we could not have achieved what has truly
been a successful year.
successful in being elected to the Board to fill the
vacancy created in the Northern Region.
In my 2014 Chairman’s Report, I discussed the
circumstances relating to Mr Peter Neal vacating his
office as a Supplier Director on 30 June 2014. In a
GREG McNAMARA
letter dated 13 February 2015, I retracted comments
Chairman
made in the 2014 Annual Report and apologised to
Board of Directors
Peter and his family for publishing information that was
not factually correct. The letter acknowledged that
there had been no changes to the farm ownership and
operation of the Neal family farm and that in fact the
reason Peter was no longer an active member was due
to Norco’s interpretation of the active member Rules.
Peter subsequently took the steps necessary to comply
with Norco’s interpretation of the active member Rules
and the Board approved his reinstatement as an active
member. As a result, Peter was then able to nominate
for the casual vacancy in the Southern Region which
had been created as a result of his vacation of office
on 30 June 2014. Peter was re-elected unopposed to
the Norco Board on 24 September 2014.
Compulsory Share Acquisition Scheme
Norco has made significant progress in the repayment
of former members’ capital as a result of the continued
operation of the Compulsory Share Acquisition
Scheme over recent years. In the last financial year
$570,704 has been repaid to former members and
we are now in a maintenance phase in relation to the
repayment of cancelled and forfeited shares, whereby
the shares of former members are repaid one year
7
CHIEF EXECUTIVE OFFICER’S report
Business overview 2014/15
The 2014/15 financial year has been another
successful one for our Co-operative in terms of
the magnitude of the growth, our sales have grown over
45 percent in the last three years.
achieving and exceeding all financial Key Performance
Our Norco Foods business division, consisting of the
Indicators (KPI’s) as set by the Norco Board. Our Co-
Ice Cream Business Unit (ICBU), Norco Milk and Milk
operative has exceeded our financial budget once
Supply, achieved a 51 percent increase in EBITDA over
again. The collective final results for the Co-operative
the 2013/14 year. This was an excellent outcome and
for the financial year ending 30 June 2015 have again
the demand was managed exceptionally well by our
improved, taking into account the difficult trading
Foods’ teams throughout the year. Milk Supply was
conditions in the market place as well as the ongoing
down on last year due to the average milk pay increase
turnaround of the Front End business re-acquired on 9
of 3.23 cents per litre. A further 0.5 cents per litre
November 2012. This continues to show the strength
increase for the base has been successfully achieved
of our brand and members / milk suppliers, as well as
for the commencement of the 2015/16 financial year
the commitment, calibre and talent of all our people in
for members / milk suppliers who have entered into a
the Co-operative.
five year contract. Norco Milk’s EBITDA was up 65.7
The final result for 2014/15 has enabled us to not only
take a longer term strategic position to further improve
the farm gate returns for our members / milk suppliers but
to also plan well ahead for required capital reinvestment.
Our heritage as a 120 year old Australian Farmer Owned
percent on last year predominantly due to the Coles’
contract volume and Route business improvement.
ICBU was up by 12.4 percent on last year’s EBITDA
which was driven by higher volume, better margins and
also the returns from the plastics division.
Co-operative has allowed us to strategically position our
Our Rural / Agribusiness division again had a strong
brand and further enhance the point of difference and
result in 2014/15 with a collective result that was
competitive edge that we have in the market place. Our
up on last year’s EBITDA by 3.6 percent, before
diversified business model, geographical positioning,
patronage (Rural up 1.5 percent / Agribusiness up
quality of product and strong long term relationships
by 6.4 percent). This was driven by better trading
have again been significant drivers in achieving these
results achieved from our Rural Stores, Goldmix
financial results. The co-operative structure and values
Lismore Stockfeed Mill and also by the Grain Trading
that we collectively uphold are, without a doubt, proving
business. The Rural Stores team continue to focus on
that our members / milk suppliers can rely on the co-
operational efficiencies, improved buying, customer
operative to manage their supply in the market place
service and gross margins as well as now planning
and this is reflected in our continuous solid growth as
the expansion of the Rural network over the next few
well as the returns being achieved for our members / milk
years. The Suppliers’ Patronage Scheme was up 37.6
suppliers at the farm gate.
percent on last year with $1.1 million of patronage
We have collectively finished the 2014/15 financial
year at an EBITDA (Earnings before Interest, Tax,
Depreciation and Amortisation) level of $10.643
8
equipment as well as our people. To give you a sense of
rewards paid out to our members / milk suppliers for
shopping with Norco. This is a record for the business
compared to last year’s $766,000.
million which is 38.4 percent up on last year. This is
Corporate costs increased on last year by 8.3 percent.
an excellent result taking into account that we have
This was due to the increased size of our overall business,
been able to put an average 3.23 cents per litre
now with a collective turnover of over $500 million. The
increase into our base farm gate milk price. This is also
increase was due to higher IT and corporate costs, such
a material improvement on the prior year especially
as travel for export and managing a larger business.
when you consider all the capital projects that have
Corporate continues to manage and implement tight
been successfully implemented during the year. Our
cost and overheads control. This is reflected in Norco’s
total debt at the end of the 2014/15 year was $33.8
Corporate costs as a percentage of sales consistently
million; this is $.5 million down on the previous year
being better than the industry standard for a company
due to finance lease payments made on the moulding
of our size. As we strengthen our financial position and
equipment at Labrador. With the explosive growth and
implement long term opportunities we will continue to
financial achievement we have experienced in the past
put further focus on the development of our people and
few years, we will need to further invest in our plant and
succession planning.
Human Resources (HR) have continued to adapt and
resource as necessary to meet the growing needs
of our business units. With our clear focus being on
business growth, at the same time we need to keep our
people safe in all aspects of Work Health and Safety
- IT and systems development to meet business growth
requirements.
- People - professional development and succession
planning.
(WHS). Our HR team is building further training and
- Manage and meet all banking covenants.
development platforms for all our teams in respect of
• Rural / Agribusiness Division:
best practices in WHS as well as individual professional
development programs.
Again this year there are a number of accomplishments
from all the teams at Norco. I have listed below some of
the key achievements from the 2014/15 financial year,
including.
• Continued development of our export opportunities in
fresh milk and ice cream.
• Route business sales were up by 16.5 percent on
previous year.
• EBITDA of $10.643 million (up 38.4 percent on last
year).
• Net profit up on last year by 520.8 percent.
• Collective Co-operative sales increased 20 percent.
• Average milk price increase to our members of 3.23
cents per litre achieved for 2014/15 and another 0.5
cents per litre budgeted from 1 July 2015.
• Members’ volume was up 29.3 percent on last year.
• The Rural / Agribusiness division net profit result was
6.5 percent up on last year.
• The net profit achieved in ICBU was up 21.1 percent
on last year.
• Met and exceeded all banking covenants.
• Suppliers’ Patronage Scheme rewards up 37.6 percent
on last year (record amount of $1.1 million paid out).
• Norco Milk sales up 53.4 percent on last year.
• Debtors’ days improved by 4.9 days. This has enabled
the Co-operative to in turn pay creditors earlier, on
average by 4.4 days.
• New high speed filler project for Raleigh ($2.4 million)
approved in 2014/15 is ahead of schedule and due
for commissioning in August 2015.
- Continue
to
focus
on
the
ongoing
financial
improvement and market share growth of the Rural /
Agribusiness division.
- Explore further opportunities for expansion of the
Rural Stores network.
- Ongoing strategies to address profitability of our
Toowoomba site.
- Improve Rural Stores buying power, network sales,
service and market share.
- Increase volumes through the Lismore and Windera
Goldmix
Stockfeed
Mills
and
further
capital
reinvestment as required.
- Training and development of our sales people.
- Focus on training, reinvestment and upgrades in all
aspects of WHS best practice at our sites.
• Foods Division:
- Focus on Norco branded product market share and
point of difference.
- Ongoing development of strategic alliances with key
business partners.
- Consistent milk volume pre selling.
- Continued growth and development of our ice cream
business.
- Improvement of milk price at farm gate.
- Ongoing research and development of future export
opportunities.
- Continued focus on the turnaround and profitability in
the Route trade.
- Capital upgrades at all Norco owned sites to enhance
business development.
- Training and development of our teams.
Our 2015/16 key points of focus are:
• Human Resources:
• Corporate:
- Focus on WHS best practice across all business units.
- Continue to focus on cost controls and efficiencies in
- Training and professional development requirements
all overheads.
for our teams.
9
-B
etter communication processes and clear strategic
directional focus for all our business units.
• Focus of Senior Management Team:
- Improve core businesses profitability.
- Ongoing development of core strategic partnerships
across all business units.
- Continued improvement of asset values and goodwill
appreciation of the Co-operative.
- Competitive farm gate milk price and increased
shareholder returns through ongoing profit growth
across all divisions.
- Enhance
the
levels
of
service,
support
and
communication to members / milk suppliers and
customers.
- Achieve / exceed KPI’s and budget.
- Strengthening, positioning and ongoing sustainability
of the Co-operative.
- Ongoing focus on employee training, development,
mentoring and career/succession planning across
business units.
- Continued investment and strive towards best
practice in all aspects of WHS.
- Focus on long term strategic plans.
In conclusion, I would like to thank all Norco employees,
members, milk suppliers, stakeholders and customers
for your support, input and loyalty to the Co-operative
throughout the 2014/15 financial year. I look forward
to working with you all as we continue to strive to
strengthen the business in the 2015/16 financial year.
We are unique as a truly 120 year old Australian Farmer
Owned Co-operative. We have positioned ourselves
to take advantage of future opportunities to improve
and grow our Co-operative to ensure our long term
sustainability.
(signature)
BRETT KELLY
Chief Executive Officer
10
Board of Directors and Management 1991
Front row: DC Macrae, AW Hoskins (Gen. Manager), WR Noble (Chairman), RG Everingham (Deputy Chairman), AG Binney (dec’d)
Back row: GE McDonald (dec’d), RA Armstrong, KB Weatherstone, LC Cork (ded’d), WJ Jarrett, BWC Patch, RG Hancock (Secretary)
Norco’s more recent history remembered
With a backdrop of past newspaper cuttings on the table and around the walls of the Norco board room, four men
who played key roles in shaping what the co-operative is today came together to re-live the highs and lows of
challenges during the 1970’s, 80’s and 90’s when the very future of the north coast dairy industry was on the line.
Warren Noble (a director for 24 years and chairman for 10 years), Ray Everingham (a director for 16 years
and deputy chairman for some 13 years), Alan Hoskins (general manager for 10 years) and Graeme Hancock
(commercial manager / secretary for 13 years) all shared a few instances of key issues during their respective
terms with the co-operative.
Interestingly, there was something common to all as they looked back during their terms of office – the pursuit of
opportunities that had the potential to improve the co-operative, including joint ventures with other dairy companies.
Warren Noble, referring to the Sydney milk ‘war’, paid tribute to former Norco chairmen, Roley Johnston and
Alex Armstrong, whose efforts, he said, saved the north coast dairy industry. In his time on the board it pleased
him to see the introduction of meetings between directors and suppliers on their own turf. The amalgamation
of other dairy companies with Norco was another key development, and notably allowing Norco to enter the
Queensland milk market.
Ray Everingham said that the Norco Pauls Milk joint venture agreement back in the mid 1990’s heralded a
change of direction for Norco from its traditional butter, cheese and milk powder businesses, enabling Norco
to modernise its milk plants and laying the platform for what the co-operative is today.
Alan Hoskins recalled three highlights during his term as general manager - the fight for the north coast to
access the Sydney milk market; a partnership with Baskin Robbins and Sara Lee in ice cream manufacture; and
the Norco Pauls Milk joint venture agreement. The ice cream venture, he said, enabled Norco staff to visit the
USA for training in the manufacture of premium ice cream.
Graham Hancock also mentioned mergers as one of the highlights during his term of office, in particular the
purchase of the PDS rural stores business and the effect this had on Norco’s expansion program in rural stores.
He too mentioned the impact that the Norco Pauls Milk joint venture agreement has had on Norco.
11
Locals supporting their local Norco milk
The Norco link with Murwillumbah has turned full circle
with the opening of an IGA supermarket store on the
site of what used to be the Norco butter and milk
factory. Norco operated the factory until 1996 on the
banks of the Tweed River and later sold the property.
The site was more recently purchased by Mr Brett
and Mrs Leanne Bugg and it now houses their second
Murwillumbah IGA store in which the Norco heritage
lives on, being an exclusive Norco milk provider.
It’s a unique business venture that re-introduces
locally produced milk to a site that once boasted the
production of 1420 tons of butter in one year, and
reflects the owners’ desire to promote local produce in
their store.
It made sense to incorporate the flavour of Norco into
the new business, according to the Buggs. “We wanted
to build this store around local products and the local
community, so it’s important to stock product that the
locals want from their local suppliers, and that means
local Norco milk,” owner Brett Bugg said at the store’s
official opening on 30 April 2015.
“Norco is local and residents are loyal towards their
locally produced milk,” he said.
David Blunden, Norco Milk franchisee
Brett & Leanne Bugg
12
NORCO FOODS
Sales and Marketing
Andrew Burns
General Manager Sales & Marketing Norco Foods
Norco Milk
The geographic reach of the Norco brand is growing
beyond our traditional boundaries and we continue
to increase our number of products with new and
exciting offers that attract a premium.
The 2014/15 year has proven to be a challenging
yet rewarding one for the milk sales team at Norco
Foods. We should never underestimate the strength
of the Norco name in our heartland; however we
must remind ourselves that outside our home base,
there still remain significant opportunities to grow
brand recognition.
So how do we win in the market place and grow
our distribution base? Unlike others in the market
place, price isn’t our primary focus; it’s our quality,
our heritage, our service and our point of difference.
Every day our sales representatives, account
managers and distributors service our loyal
customers and consumers, restocking shelves
with fresh deliveries of our award winning products.
However, we not only replenish the traditional
range of Norco products stocked. In addition, the
team has a firm focus on providing customers, both
existing and new, with an extended and innovative
product portfolio.
During the 2014/15 year we launched a number
of new product initiatives that provided Norco
milk with a growing range of premium offers that
support our stability and diversity in the market
place. We are proud to have launched a range of new
Norco branded products including 100% Jersey
milk, Lactose Free milk and a revamped range of
custard that will all aid in supporting the desire of
the market for innovative products and offers that
provide a point of difference. Add to these products
our Norco Non-Homogenised milk which continues
to grow every day and we really have a growing
range of alternatives that give our loyal consumers
products that meet their expectations.
Our relationship with the major retailers is also
strong, allowing us to incrementally grow the Norco
brand on the back of major supply contracts. These
supply contracts allow us to invest capital into our
plants whilst providing a secure, long term home for
our Members’ milk.
Our market place is growing and we continue to reach
new locations. Just a few short years ago we sold
very little milk in the Toowoomba market. Today we
send more than two semi trailer loads of milk a week
into this growing Norco market. It’s the same story for
the Sunshine Coast, where we are growing out of our
current distribution location. Brisbane, our closest
capital city, has seen outstanding growth for Norco
over the last few months and that trend will continue
as we invest our time and marketing resources into
our closest major population base. The 2015/16 year
will be another challenging yet rewarding one as we
continue to stretch our supply base and enter new
markets primarily north and south.
Ice Cream
2014/15 has been another record year on the back
of increasing production underpinned by the desire of
the major retailers to grow their own brand presence.
We have been, and continue to be, the largest supplier
of house brand products to Coles, Woolworths and
Aldi while continuing to drive innovations with national
and international brand owners.
With a warm summer and a growing number of
product lines we now produce, our teams did well
to manage the complexities of sales, production
and logistics during 2014/15. It’s through the
professionalism of our teams and the quality of the
products we produce, starting with the quality of
raw materials (milk and cream), that Norco is held
in high regard and as a result, our relationships with
our clients are strong. It’s important for us not to
rest however and to continually challenge ourselves
and our business to continually improve and to be
seen as a supplier of choice.
Export
With cautious steps our exports of fresh milk into
China continue to grow. It’s a very difficult market
to win in and our experiences to date support such
a claim. Fresh milk deliveries continue to be flown
into China weekly and it is pleasing to see our
product on the retail shelves within the major cities
of Shanghai and Guangzhou. However, it will take us
more time and resources to succeed in this market,
as we continue to seek out reliable partners to work
with. The year ahead will prove to be an important
one in this regard.
On the ice cream side, we are increasing our
footprint, with product produced in Lismore now
available in Japan, China, Philippines, USA, and
shortly Taiwan. These are indeed exciting times for
our export business, as we take Norco from the
domestic markets to the world.
13
Operations
Robert Vandermaat
General Manager Operations Norco Foods
With record sales achieved by the Norco Foods’
Sales and Marketing team, the performance of our
factory operations and New Product Development
teams has been impressive throughout the
year in servicing those record sales. The volume
through our plants has continued to grow with a
three percent increase in the Ice Cream Business
Unit (ICBU) volume and a 58 percent increase in
Norco Milk production primarily due to the Coles’
contract that commenced 1 July 2014. We have
accomplished this growth while also reducing
storage costs and improving transport efficiencies.
Focus on continuous improvement and quality
Working in an environment where customers are
seeking lower cost solutions and demand a quality
product, continuous improvement has been, and
will remain, the centre of attention for our three
processing facilities at Labrador, Raleigh and Lismore.
Of the 45 million litres of ice cream processed at
our ICBU site, 41 percent was manufactured using
Norco packaging and at our two Norco Milk factories
at Labrador and Raleigh, all our requirements for 2
and 3 litre milk bottles were manufactured on site.
New cooling systems for our injection moulders
at Lismore has given us the ability to refine the
quality of our tubs and lids, in turn improving the
quality of finished product and creating efficiencies
in the ICBU. Working closely with our suppliers
was of high importance during this growth year as
without the raw materials being available we could
not achieve our production targets to support the
record sales. All these factors combined to ensure
a strong finish to 2014/15 and a good start to the
2015/16 year ahead.
14
Our team focus on continuous improvement of
quality, manufacture and distribution, together with
the development of our staff was exceptional. This
will continue to be a focus to ensure we supply the
best quality products and service to our customers.
With increased throughput at all sites our production,
milk intake and distribution areas have achieved their
targets for quality and efficiency. A large amount of
this achievement can be credited to the standardising
of systems across all three Foods’ sites.
First time quality results for the year are the highest
achieved to date which is a credit to all staff given the
record production levels. Our ability to develop and
trial new products for the market must be recognised
and commended because in 2014/15 our teams
released 27 new ice cream lines, three specialty milk
products and a cold fill custard range of products.
Highlights for the 2014/15 year include:
• The first full year of Coles’ production at Labrador
along with the export of fresh milk for the China
market.
• Substantially completed the new export filler
project at Raleigh expanding our capability to
pack for both the export and domestic markets
(being commissioned during August 2015).
• The introduction of a new Norco fleet to service
our milk depots.
• Three new milk depots to accommodate our
growing Route volume and distribution reach.
Work Health and Safety
The health, safety and wellbeing of our people is
critical to the success of our business. Regardless
of where our people are located or the type of
work they perform, we strive to create a working
environment that is free from occupational
injury. Identifying and managing risk is a critical
component of our management approach.
Milk Supply
Rob Randall
General Manager Norco Milk Supply
In the 2014/15 financial year, Norco Milk Supply
experienced a significant step-change in managing
the milk volumes received from our members / milk
suppliers. The total members’ milk received was
211 million litres, up 48 million litres or 29 percent
from 2013/14. The driver of this growth in milk
supply has been the increased demand for Norco
milk products through the retail and route sales
channels. This significant growth in milk supply
has been achieved through the acquisition of new
members / milk suppliers and from growth within
our existing farmer base.
While it is important to note the continuing negative
impacts of the shortfall of milk in the Queensland
market, in an environment of variable seasonal
conditions during 2014/15 (both difficult and
reasonable) and the continued high input costs
experienced by dairy farmers, in overall terms Norco’s
milk suppliers have increased milk intake volumes on
a year-on-year comparative basis in all regions.
Another major positive development for Norco and
the dairy industry as a whole, has been the number
of new start-up farms approved by the Board to
supply Norco. In 2014/15, a total of seven new
start-up farms have been accepted, mainly in
Queensland and northern New South Wales. While
these farms are generally small in volume at the
commencement of supply, this development could
be said to represent a significant positive change in
confidence for the northern dairy industry.
In summary for 2014/15:
• Norco members’ total milk supply for the year was
211 million litres – up 29 percent from the prior year.
• The average milk pay increase was 3.23 cents per
litre translating to an overall average milk price
before patronage and dividend of 56.48 cents per
litre.
• Average BMCC results for the year reduced to
196. This represents the fifth year in a row that
average cell counts have decreased, providing real
benefits to our supply chain and confirming our
reputation to strive for quality.
Farm Services
Our Norco Farm Services team welcomed Dr Mark
Callow to the team during September 2014. Mark
brings a wealth of knowledge from his previous role
at the University of Queensland and builds on the
strength of our team.
Through both co-operation with industry
organisations and internally driven activity,
there has been a marked increase in research,
development, education and extension involvement
with our members / milk suppliers during the year.
This significant drive will continue in 2015/16.
Commodities report
The milk commodity market had a significant
decline in value in the 2014/15 financial year.
The combination of world milk supply growth, the
decline of China’s milk powder purchases and the
Russian trade embargo, have contributed to prices
declining from record highs in early 2014 to record
lows by mid 2015.
For Norco, the impact has been managed through
the overall supply volume strategy with a lower
proportion of milk being exposed to the commodity
market. However, the decline in pricing remains a
concern for the local and world dairy market where
we have seen record low farm gate pricing in New
Zealand and declining prices elsewhere, including
in southern Australia.
15
norco rural / Agribusiness
Damon Bailey
General Manager Norco Rural / Agribusiness
The Norco Rural / Agribusiness division continued
to deliver on its strategic plan of sales growth, profit
improvement and regional expansion in 2014/15.
Both Norco Rural and Agribusiness delivered year
on year trading improvements combined with a
significant increase in patronage reward payments
to members.
The regions within which Norco Rural operates
predominantly enjoyed reasonable to good
seasonal conditions during 2014/15, the
exception being the New South Wales Northern
Tablelands. Unfortunately this area encountered
its second year of below average rainfall and was
subjected to extremely difficult and challenging
seasonal conditions. This has resulted in significant
reductions in livestock numbers throughout the
New England. The Darling Downs and South
Burnett regions also experienced extended periods
of dry weather, particularly during the first half of
the financial year, but conditions were generally
manageable.
On the coastal areas we enjoyed fair to reasonably
favourable conditions throughout 2014/15 with
timely rainfall events ensuring our pasture, cropping
and horticultural clientele were able to implement
management and farming programs as planned and
on time.
Norco Rural continued to deliver on its growth
strategy with the addition of two new branches.
In November 2014 Norco and Wamuran Cooperative announced the conversion of Wamuran
Co-operative’s ‘Suncoast Rural’ into a Norco Rural
Agency. Wamuran is located on Queensland’s
Sunshine Coast approximately 15 minutes west
of Caboolture. The Wamuran region is an intense
horticultural area being a significant producer of
strawberries and pineapples. The area also contains
beef, dairy and equine markets and additionally
captures a large number of smaller lifestyle or
hobby farm clients.
In June 2015, Norco and Jordan Rural Supplies
announced the opening of a Norco Rural agency at
Gayndah. Gayndah is located in the South Burnett
region of Queensland and is approximately 70
kilometres north of our Goldmix Stockfeed Mill
located at Windera, and 100 kilometres northwest
of Norco Rural Murgon. The addition of Wamuran
and Gayndah strengthens Norco Rural’s presence
in south east Queensland, and fills gaps within
our regional footprints within the South Burnett
and Sunshine Coast. In total, seven Norco Rural
locations have been added to our business since
January 2013, three of these being located in our
southern territory and four in our northern territory.
Major projects undertaken during 2014/15
included the incorporation of Hunter Rural and the
Murgon ‘greenfield’ operation into Norco Rural. Both
sites commenced as business units within Norco
Rural during June 2014. The Wamuran business
unit came on line in November 2014, followed
by Gayndah in June 2015.
The past year has seen a significant
change in the way the business
focuses
on
Workplace
Health and Safety (WHS).
16
Lismore Rural Store staff members
2014/15 saw the revamp of the group’s safety
committees and the way these committee
meetings are conducted. In addition, a renewed
emphasis was placed on the training needs and
requirements of our employees, with a focus on
both practical and theoretical training. A significant
amount of work has gone into this area which has
delivered positive outcomes including a 33 percent
year on year reduction in the number of workers’
compensation claims. More work is required and
will remain a major focus point for management
and staff.
In terms of capital programs, several major
projects were undertaken during 2014/15. In the
Agribusiness division, our Goldmix Stockfeed Mill
at Windera took delivery of a new Kenworth T359
8 x 4 bulk delivery vehicle with a custom imported
Walinga aluminium tanker. The unit provides weight
savings and increased carrying capacity above our
older units. At our Goldmix Stockfeed Mill at Lismore,
the pellet production line underwent a complete
reconfiguration which included the installation of a
new pellet cooling, sieving, crumbling and transfer
system. This has improved efficiency and capacity
of our pellet production system. For the coming
year capital projects already underway include
improvements at our Bellingen Rural Store site,
the continued rollout of pallet racking upgrades
throughout the business and replacement of the
Lismore Mill bulk grain storage and reclaim system.
Financial Performance
The combined business units of Norco Rural
and Agribusiness delivered an EBITDA result
of $3.977 million. This result is adverse to the
previous year by $0.197 million or 4.7 percent.
Norco Rural produced a 1.5 percent improvement
in EBITDA year on year and Agribusiness produced
an increase in EBITDA of 6.4 percent. The driver of
the adverse result to last year is the significant year
on year increase in patronage payments. Patronage
payments to members were up $0.3 million and this
produced the adverse EBITDA result.
The Norco Rural division delivered a strong sales
performance with sales up 9.11 percent year
on year and a solid increase in gross profit of 8.5
percent which was primarily driven by sales growth.
Margin was slightly adverse by 0.08 percent
and is a reflection of the product mix and follows
three years of margin improvement. A significant
increase of 15.4 percent in sundry income was
delivered and follows last year’s improvement of 6
percent. The positive increase in sundry income is a
reflection of Norco Rural’s commitment to industry
leading suppliers and brands, and supporters of
R & D products.
The Agribusiness Mills based in Windera and
Lismore entered 2014/15 off the back of strong
demand and record volumes in 2013/14. Strong
demand continued into the first half of 2014/15,
but a significant seasonal break in December
2014 – January 2015 resulted in an abundance
of paddock feed and a reduction in demand for
manufactured feed products. Despite the drop in
demand, combined volumes across our two mills
were slightly favourable to the previous year.
The Norco Grain division that sits within
Agribusiness continued its strong performance in
2014/15 with a 37 percent increase in gross sales
and a 41 percent increase in volume traded. As a
total business unit Agribusiness produced a 16
percent increase in sales.
Patronage
Patronage payments to members during 2014/15
increased to a level never before seen. Total
patronage payments to Norco members for the
year totalled $1.054m. This represents a 37.6
percent year on year increase and follows on from
the previous increase of 22.2 percent. Sales to
members by the Norco Rural and Agribusiness
divisions increased by 40 percent and 93 percent
of members transacted with the Co-operative
during the year.
17
FINANCIAL MANAGEMENT
Camille Hogan
Chief Financial Officer
In the 2014/15 year Norco achieved a net profit
of $3,105,000 versus the prior year’s $500,000
and an EBITDA of $10.6 million versus the prior
year’s $7.7 million. Both these financial results
were significantly favourable to 2013/14 and were
driven by a higher sales volume in the Ice Cream
Business Unit (ICBU), the volume upside from
the Coles contract in Norco Milk and improved
trading in Rural Retail / Agribusiness. Norco’s
total debt, which includes finance leases, reduced
by $0.5 million during the year from $34.3 million
to $33.8 million as a result of scheduled finance
lease payments made on the Labrador moulding
equipment. In accordance with the facility, there
was no requirement to repay any debt to St George
Bank during the 2014/15 financial year, with the
next repayment due on 1 October 2015.
Higher EBITDA in 2014/15
The $2.9 million EBITDA improvement over the
2013/14 result was driven by strong performance
across the business units. The EBITDA for the
ICBU was up 12.4 percent due to volume growth.
Norco Milk’s EBITDA was favourable by 65.7
percent, driven by the volume lift resulting from
the commencement of the Coles contract on 1
July 2014 and the improvement in Route Trade
volume. The EBITDA for the Milk Supply business
was adverse 17.8 percent due to paying a higher
milk price which benefits our members. The Rural
Retail business unit EBITDA improved by 1.5
percent due to higher volume and rebates, while the
Agribusiness EBITDA was up 6.4 percent, driven
by higher volume at the Lismore Mill and higher
sales from the Norco Grain division. Return on
Capital Employed (ROCE) doubled to 5.0 percent
in 2014/15 driven by the improved profit position.
Debtor and creditor days
Debtor days were materially lower at 31.0
compared to 35.9 days in 2013/14 which is a
significant improvement and a record for the
business. Creditor days were 32.2 versus 36.6
days for the previous year which was able to be
achieved as a result of the record debtor days.
Debt stable
Norco’s core debt with St George remained at
$31.9 million in 2014/15 which is a pleasing result
given the growth of the business and the $2.4
18
million of capital expenditure which has been spent
at Raleigh on the new high speed filler. This was
able to be achieved as a result of the significant
reduction in debtor days. Total debt at year end,
including the Labrador moulding equipment finance
lease, is $33.8 million versus the prior year’s $34.3
million. The total debt of $33.8 million includes
$31.9 million of core debt with St George, $1.8
million of finance leases and $0.1 million of Norco
Capital Units. During the year, Norco worked with
St George to replace the working capital overdraft
facility with an invoice discounting facility. This
allows Norco to borrow against the Norco Foods’
debtor book during the month to best manage its
cash flow. This is not a factoring facility where the
debt is sold to St George, rather it is a short term
loan facility secured against the debtor book to
manage Norco’s monthly cash flow. The new facility
gives the business a lot more flexibility than the
overdraft system.
Bank covenants
Norco again met all bank covenants set by St
George. Norco’s EBITDA Leverage, which is total
debt divided by EBITDA for the full year, was
3.05 versus the result of 3.98 in 2013/14. This
improvement is a function of increasing profit and
reducing total debt. The Interest Cover Ratio, which
is the number of times EBITDA covers financial
commitments, achieved a result of 3.59 versus the
prior year’s 2.86.
Working capital
Working capital (made up of debtors, creditors
and inventory) as at 30 June 2015 was $11.7
million versus the prior year’s $12.6 million, with
the decrease due to the reduction in debtor days
despite a 20 percent increase in sales.
Dry former member repayments
Using the funds derived from the Compulsory Share
Acquisition Scheme, Norco repaid $570,704 to
“dry” former members this financial year. This takes
active member capital to 89 percent of issued
capital compared to 88 percent in 2013/14.
NORCO PEOPLE
Yasmin Lawrence
Human Resources Manager
the entire business in relation to health and safety. By
increasing the competencies of all workers in relation
to WHS we aim to see a reduction in incidents and
With Norco celebrating its 120th Birthday in 2015 it
injuries related to unsafe behaviours and attitude.
gave us a chance to reflect on the reasons why what
started as a small farmer co-operative has continued to
grow and thrive in difficult circumstances and against
the odds while so many other businesses have failed. As
Notice of Acceptance of an Enforceable
in any similar scenario, there is a range of contributing
Undertaking under Part 11 of the Work Health
factors, but certainly one of the big ones is people.
and Safety Act 2011.
Norco is lucky to have a talented and dedicated
On 25 July 2013, a Worker of Norco Co-
workforce who truly believe in the past, present and
future success of the business. Out of the 750 people
that work at Norco, 116 of them have been at Norco
operative Limited sustained a serious injury
whilst operating a Compactor at Goldmix
Stockfeed, 14-17 Krauss Avenue, South
for over 20 years. The collective knowledge and
Lismore.
experience of these people, combined with the fresh
The WorkCover Authority of NSW investigated
ideas of our newer employees is one of the factors
the incident and subsequently alleged that
that gives us an edge over our competitors – we know
Norco Co-operative Limited contravened
what to do and how to do it well.
section 19(1) of the Work Health and Safety
The Human Resources team have had a busy year:
Act 2011.
filling vacancies to increase our team due to business
This notice has been placed under the
growth; providing training and development across
terms of an enforceable undertaking and
the business; working with managers on performance
acknowledges acceptance of an undertaking,
improvement
business
that is enforceable under the Act, from Norco
improvement; and ensuring our teams were working
Co-operative Limited, ABN 17 009 717 417
together in a harmonious way.
as settlement of the abovementioned alleged
which
then
links
to
Work Health and Safety
Without doubt throughout Norco’s 120 year history
the business has seen ten-fold change in relation to
Work Health and Safety (WHS).
Twentieth century industrial machines were seriously
dangerous. Workers had genuine reason to fear the
machines they used every day. Occupational injury
and death were a serious threat to worker’s lives and
livelihoods. Workers didn’t have the kinds of basic
safety practices and compensation schemes that we
take for granted these days.
Today Norco’s top priority is the safety of all workers.
During the past 12 months the WHS team and
business unit have made significant improvements to
providing a safe workplace especially related to plant
and equipment, and other high risk activities such as
electrical safety.
contravention.
The undertaking requires the following actions:
• Conduct Executive Work Health and Safety
Workshops;
• Develop online Work Health and Safety and
Human Resources induction modules for
staff;
• Implement a Human Resources Information
System with Work Health and Safety and
Training modules;
• Implement and maintain an accredited
Occupational Health and Safety Management
System;
• Update and publish “Managing Dairy Farm
Safety” Farmer Resources; and
• Develop a two part Farm Safety for Children
video.
The full enforceable undertaking and general
Most recently the WHS team has expanded to
information about enforceable undertakings is
include a WHS Training Officer who is responsible for
available at www.workcover.nsw.gov.au.
developing skills, knowledge and competencies across
19
directors’ report
The Directors present their report together with the
To supplement the existing skill base of the Board
financial reports for Norco Co-operative Limited (‘the
and to ensure all Directors are able to gain an equal
Co-operative’) for the year ended 30 June 2015 and
knowledge of various aspects of Norco’s business,
the Auditors’ report thereon.
the program of master classes continued during
The Board of Directors currently comprises six
supplier Directors (non executive) and no Independent
Directors.
Norco’s Directors bring a range of skills and experience
to the Board, including detailed knowledge of the
dairy and agricultural sectors, extensive experience in
business planning and strategy, strong leadership and
interpersonal skills. In addition, there is a commitment
to achieving a harmonious balance between Norco’s
strategic business objectives and the needs of
shareholders.
During October 2014, one and one-half days were
dedicated to holding a strategic workshop involving
Directors and the Senior Management Team. In
addition, each monthly Board meeting has time
allocated for Directors and management to discuss
strategic issues.
the 2014/15 financial year. Master class topics
are predetermined by the Board in consultation with
the Chief Executive Officer and presented by senior
managers of the business on a regular basis. During
2014/15, Directors received presentations relating
to export credit terms and Customer Relationship
Management (CRM) software which has been recently
introduced into the Norco Milk business.
The Board of Directors continue to be committed
to ongoing training and professional development.
During the year, Directors have had the opportunity to
attend a range of industry conferences and to use their
memberships in the Australian Institute of Company
Directors (AICD) to attend various AICD educational
courses and functions (some of which are listed below
in the individual Director profiles). Collectively, the
Board also undertook in-house training sessions in
relation to Work Health and Safety and also Prevention
of Discrimination, Harassment and Bullying.
Board Meeting 1902
20
DIRECTORS
Gregory J McNamara – Chairman
Greg McNamara has been a director of Norco Co-operative Limited for 19 years and is from the Central
Region. In addition to his role as Chairman of the Board of Directors, he is Chairman of the Remuneration
Advisory Committee and a member of the Milk Supply Advisory Committee, Brand Management Advisory
Committee and Communication Committee.
Greg runs a 300 head dairy herd in partnership with his wife Sue and son Todd at Goolmangar. He has
extensive experience across the agricultural sector, including dairy, beef, pigs, horticulture and animal
genetics.
In his role as Chairman, during 2014/15 Greg has led the Board through some challenging discussions and
decisions relating to issues such as developing Norco’s future growth strategy, the introduction of regional
milk pricing from 1 January 2016 and positioning Norco to be a competitive force in both the domestic
and international market places to ensure Members receive appropriate rewards for their support. Greg’s
approach, whether communicating with Members, major stakeholders or with fellow Board members, is to
be consultative and communicate effectively to ensure that the best outcome possible is achieved for the
Co-operative as a whole.
Greg is a member of the Australian Institute of Company Directors and is a keenly sought after speaker for
industry events and forums. During August 2014, Greg was a speaker at the DIAA Queensland Conference
and later in the year he was involved in a PPB Advisory panel discussion and was a speaker at the Maximising
Agribusiness Competitiveness Forum. He attended the Dairy Futures Co-operative Research Centre and
met with Dairy Australia executives as part of a Norco Board and management delegation. Greg has also
attended many industry events such as the Australian Dairy Farm Investment Forum, the Ag in the Asian
Century Conference, the QDO Conference, the Agricultural Competitiveness Green Paper Roundtable and
the Australia and New Zealand Co-operative Leaders’ Forum. Greg is also a Board member of the NSW
Business Chamber.
Anthony (Tony) W Wilson – Deputy Chairman
Tony Wilson was elected as a director on 4 March 2009 and is from the Northern Region. He is Chairman of
the Milk Supply Advisory Committee and is also a member of the Audit and Risk Management Committee,
Member Services Committee and Communication Committee.
Together with his wife Jillian and sons Nicholas and James, Tony lives and farms at The Risk, 20 kms NW
of Kyogle milking a herd of 260 cows that are Holstein based, with a crossbreeding program in place. Tony
has studied and gained a BA, Dip Ed at UNE, Armidale. Tony also has an interest in agri-politics which has
developed over many years and has been focussed on the welfare of the dairy farming community.
Tony and his family operate a robotic dairy which has created considerable interest within the regional dairy
industry and with the general public.
Tony is a member of the Australian Institute of Company Directors. He was invited to join the Norco Rural
Stores Managers’ Conference which was held in New Zealand in July 2014. During August 2014, Tony
attended the Dairy Futures Co-operative Research Centre and met with Dairy Australia executives as part of
a Norco Board and management delegation. In addition, Tony has been a presenter at the QDO Conference
and the New Generation Dairy Farmers Forum. He has also attended the Queensland Government Dairy
Industry Roundtable with the Agriculture Minister and the Australian Dairy Conference in Devonport.
21
Heath B J Hoffman - Director
Heath was elected to the Board of Directors on 12 November 2014 and is a supplier Director from the
Northern Region. He is a member of the Milk Supply Advisory Committee, Brand Management Advisory
Committee and Member Services Committee.
Heath is a member of a family partnership that owns and operates a dairy farm near Warwick milking 250
Holstein cows on a full TMR (total mixed ration) system. As a fifth generation farmer, Heath has a strong
passion for the dairy industry and wants Norco and its farmers to succeed and prosper. Heath and his family
have been supplying milk to Norco for eight years and views this time with Norco as being his most positive
in the industry which Heath puts down to being part of a Co-operative model.
Heath brings to the Norco Board a loyal, open minded and common sense approach with considerable
business skills and industry knowledge and a desire to provide fair representation for all Norco Members.
Heath is an affiliate member of the Australian Institute of Company Directors and recently completed the
AICD Company Directors’ Course during August 2015.
Michael C Jeffery - Director
Michael Jeffery was elected as a director on 14 November 2012 and is from the Southern Region. Michael
is the Chairman of the Brand Management Advisory Committee and a member of both the Milk Supply
Advisory Committee and the Member Services Committee.
Michael has been farming at Austral Eden near Kempsey in a family partnership for 26 years and milks a
herd of 300 cows. He has extensive business, marketing and dairy industry experience, including in overseas
countries and has held a number of positions including directorships in dairy related export, consulting
and genetics businesses. In addition, Michael has been a state delegate of both the NSW Dairy Farmers’
Association and Holstein Australia for five years. He had been on LiveCorp’s China Live Export Industry
Working Group Committee for two years and as part of the NorcoNet communication network, has been
Chairman of the Nambucca / Kempsey group for three years. Michael also holds an Advanced Diploma in
Agriculture. More recently, Michael has been appointed as an Alternate Delegate to the Dairy Connect Farm
Group Board and is the current Chairman of the Kempsey Dairy Industry Group, a position he has held for
four years.
Michael is a member of the Australian Institute of Company Directors. During August 2014, Michael
attended the Dairy Futures Co-operative Research Centre and met with Dairy Australia executives as part
of a Norco Board and management delegation. In addition, Michael has attended several industry events
such as the NSW Dairy Forum, the New Generation Dairy Farmers Forum and the Mid North Coast Food
Forum where he was a member of the Forum Panel. Michael represented Norco at the NSW Dairy Industry
Strategy meeting at Camden, attended the Maximising Agribusiness Competitiveness Forum and during
January 2015 travelled to China with members of Norco’s management team.
22
Peter W Neal - Director
Peter’s first term as a director was from 11 November 2009 to 30 June 2014. He was re-elected to the
Board on 24 September 2014 and is from the Southern Region. Following his re-election to the Board,
Peter serves as Chairman of the Audit and Risk Management Committee and is a member of the Milk
Supply Advisory Committee and Remuneration Advisory Committee.
Peter and his family own and operate a 600 cow dairy near Taree, and has been dairying for 47 years first
with his parents and now with his sons, who represent the fifth generation on this farm and wish to continue
dairying in the future for their children.
Peter has experience on boards with 14 years on NSW Dairyfarmers’ Association and 10 years on the NSW
Dairy Industry Development Company (DIDCO – now Dairy NSW), with four years as chairman. Currently
Peter chairs his local North Oxley Island drainage union and the Manning Delta Landholders Protection
Committee. In addition, Peter has a Diploma of Agriculture from Hawksbury Agricultural College.
Peter is a graduate and member of the AICD and during 2014/15 has attended the AICD Company
Directors’ Course Update, the Australia and New Zealand Co-operative Leaders’ Forum and the Maximising
Agribusiness Competitiveness Forum.
Leigh Shearman - Director
Leigh was elected as a director on 14 November 2012 and is from the Central Region. Leigh is Chairperson
of the Member Services Committee and a member of both the Audit and Risk Management Committee and
Milk Supply Advisory Committee.
With her partner Donald Shedden, Leigh owns and operates a dairy farm at Goolmangar just outside Lismore
in Northern New South Wales milking 180 cows. Leigh also has experience across a broad agricultural base
gained over many years, including beef, horticulture and intensive piggery farming. She has also owned
and operated a retail franchise and has worked in the banking industry for 10 years. Leigh has a Diploma
in Rural Business Management, Diploma of Agriculture and Certificate III Financial Services. Leigh is the
vice chairperson of the Far North Coast Dairy Industry Group Inc (DIG), secretary of Subtropical FNC,
chairperson of the Goolmangar Water Users Association and a member of the Steering Committee for the
Northern Rivers Resource Efficiency Focus Farm.
Leigh is a strong believer in the benefits of being part of a co-operative and is confident that this model will
ensure the long term sustainability of Norco’s members and other stakeholders associated with, and reliant
on, a strong and progressive Norco business.
Leigh is a member of the Australian Institute of Company Directors. During the year Leigh attended the
QDO Conference, was a speaker at the PEI Agri Investor Australia Forum 2015 and also presented to a
local Probus group.
Note: In accordance with a Board resolution which is presently effective until December 2015, the full
Board currently constitutes the Milk Supply Advisory Committee.
23
DIRECTOR ELECTIONS – 2014/15
As a result of Rule changes approved by Members
Mr David Hodges finished his Independent Director role
at a Special General Meeting held on 25 June 2014
at the 2014 Annual General Meeting after completing
relating to the definition of the regional boundaries, the
two, three year terms. Mr Hodges was not nominated
retiring Director for the Northern Region, Mr TJ Cooper,
by the Board as a candidate for a further term as
was no longer eligible to serve as a Supplier Director
Independent Director.
for the Northern Region. Regardless of the Rule
The positions of Chairman and Deputy Chairman are
changes, however, after 12 years’ service as a Supplier
voted on annually by the directors following the Annual
Director Mr Cooper decided not to offer himself for re-
General Meeting.
election. The retiring Director for the Central Region,
Mr GJ McNamara, being eligible, offered himself for re-
Directors’ Meetings
election.
The number of Board meetings (including meetings of
Member nominations for the Northern Region vacancy
the Audit and Risk Management Committee and Milk
Supply Advisory Committee) and number of meetings
were received from Mr PJ Rough and Mr HBJ Hoffman
attended by each of the directors of the Co-operative
and accordingly a postal ballot was held for the
Northern Region resulting in Mr Hoffman being elected
during the financial year are listed in the table below.
for a three year term effective from the 2014 Annual
During the course of the 2014/15 financial year
General Meeting on 12 November 2014. As there were
there were also seven directors’ meetings held by
no Member nominations received from the Central
teleconference and two Milk Supply Advisory Committee
Region, Mr McNamara was re-elected unopposed
meetings held by teleconference. Teleconferences
for a three year term effective from the 2014 Annual
are organised to discuss and resolve specific issues
General Meeting on 12 November 2014.
that cannot be held over until the next scheduled
monthly meeting and generally the duration of such
A casual vacancy was created in the Southern Region
teleconferences is one hour or less. Teleconferences
as a result of Mr PW Neal’s vacation of office on 30
are a cost effective and practical way for directors to
June 2014. The circumstances regarding Mr Neal’s
discuss specific issues in a timely manner given that
vacation of office and subsequent reinstatement as
an active member are discussed in the Chairman’s
their residences are spread over a large geographic area.
Report commencing on page 5. With Mr Neal’s active
At the Board meeting held on 17 and 18 December
membership resolved, he was able to nominate for the
2014 it was resolved that the full Board will continue
casual vacancy. Mr Neal was re-elected unopposed to
to sit on the Milk Supply Advisory Committee until at
the Norco Board on 24 September 2014 and as Mr
least the December 2015 Board meeting, at which
Neal is filling a casual vacancy, he is due to retire at the
time the annual review of Committee memberships will
2016 Annual General Meeting.
take place.
Audit and Risk Management
Committee Meetings
Directors’ Meetings
A
B
A
B
A
B
GJ McNamara
12
12
-
-
11
11
AW Wilson
12
12
6
6
11
11
TJ Cooper
4
4
-
-
4
4
DR Hodges
4
4
3
3
4
4
HBJ Hoffman
8
8
-
-
7
7
MC Jeffery
12
12
-
-
11
11
PW Neal
10
10
8
8
9
9
L Shearman
12
12
9
9
11
11
A Reflects the number of meetings held during the time the director held office during the year
24
Milk Supply Advisory
Committee Meetings
B Number of meetings attended
CORPORATE INFORMATION
Corporate structure
Norco Co-operative Limited is a co-operative limited by
shares which is incorporated and domiciled in Australia.
any item, transaction or event of a material and unusual
nature which, in the opinion of the directors, is likely to
significantly affect the operations of the Co-operative,
the results of those operations or the state of affairs of
the Co-operative in subsequent financial years.
Nature of operations and principal activities
Future developments
The principal activities of the Co-operative during the
In the opinion of the directors, disclosure of information
financial year were the processing, manufacture and
sale of dairy products, the manufacture and sale of
stockfeeds and rural retailing.
Employees
The Co-operative employed 494 full-time, 70 parttime permanent and 188 casual employees at 30 June
regarding the likely developments in the operations of
Norco in future financial years and the expected results
of those operations is likely to result in unreasonable
prejudice to the Co-operative. Accordingly, this
information has not been disclosed in this report.
Indemnification and insurance of Directors and
2015 (2014: 465 full-time, 66 part-time permanent
Officers
and 174 casual employees).
The Co-operative has entered into agreements to
Results of operations
indemnify all directors named at the beginning of this
The net amount of the operating profit for the financial
year of the Co-operative after providing for income tax
was $2.3 million (2014: $0.3 million profit).
Derivatives and other financial instruments
The Co-operative’s activities expose it to changes in
report, former directors and current and former officers
of the Co-operative against all liabilities to persons
(other than to the Co-operative or to a related body
corporate) which arise out of the performance of their
normal duties as a director or officer, unless the liability
relates to conduct involving a lack of good faith.
interest rates, foreign exchange rates and commodity
The Co-operative has agreed to indemnify the directors
prices. It is also exposed to credit, liquidity and cash
and officers against all costs and expenses incurred in
flow risks from its operations. During the year, the
defending an action that falls within the scope of the
Board has maintained policies and procedures in
indemnity and any resulting payments. The relevant
each of these areas to manage these exposures.
insurances cover legal liabilities and associated
Management reports to the Board on a monthly basis
costs arising from the performance of their duties as
on the monitoring of and compliance with the policies
directors and officers and compensation for loss or
in place.
injury sustained in the course of such duties.
Dividends
Options over unissued shares
Dividends paid during the 2014/15 financial year
Options over unissued shares have not been granted
totalled $255,000 (being a dividend rate of 3.0% [three
to any person or director since the end of the previous
percent] on issued capital), declared and approved by
financial year to date of this report.
Members at the 2014 Annual General Meeting, which
was held on 12 November 2014.
Operations review
Directors’ benefits
Since the end of the previous financial year, except as
declared below, no director of the Co-operative has
The directors’ have reviewed the Co-operative’s
received or become entitled to receive any benefit
operations during the financial year and the results of
(other than a benefit included in the aggregate amount
those operations, which are discussed in the Chairman’s
of emoluments received or due and receivable by
Report and Chief Executive Officer’s Report for the
directors shown in the financial statements or the
financial year ended 30 June 2015 (see pages 5 and 8).
fixed salary of a full time employee of the Co-operative
Events subsequent to balance date
or of a related corporation) by reason of a contract
made by the Co-operative or a related corporation
During the interval between the end of the financial
with the director or with a firm of which the director is
year and the date of this report, there has not arisen
a member, or with a company in which the director has
25
a substantial financial interest, except for that benefit
National Law (NSW) and, in addition, excludes himself
which may be deemed to accrue to those directors in
from any discussions or decisions relating to these
their capacity as dairy farmers in the supply of milk to
entities.
the Co-operative in the ordinary course of business.
Directors’ declarations of interest
Rounding off of amounts
The amounts in this report and the accompanying
On 28 May 2015, Mr GJ McNamara advised that
financial statements have been rounded to the nearest
as a Director of the NSW Business Chamber, the
one thousand dollars in accordance with the Co-
organisation Kaytone has been asked to submit a
operatives National Law (NSW).
proposal to be the sole supplier of casual workers for
Norco’s Labrador milk factory. Kaytone is a part of the
NSW Business Chamber and so Mr McNamara has
declared his interest in accordance with Section 208 of
the Co-operatives National Law (NSW) and, in addition,
Auditor’s independence declaration to the directors
The directors received a declaration of independence
from the Co-operative’s auditor, Ernst & Young. A copy
of that declaration is included after this Directors’
excludes himself from any discussions or decisions
Report.
relating to this entity.
Appreciation
On 31 July 2014 Mr AW Wilson advised that he has
The efforts and contribution of our management
been appointed to the Community Advisory Group of
the North Coast Local Land Services organisations.
Mr Wilson has declared his interest in accordance with
Section 208 of the Co-operatives National Law (NSW)
and staff during the year were greatly appreciated by
directors.
Signed in accordance with a resolution of the directors.
and, in addition, excludes himself from any discussions
or decisions relating to this entity.
On 24 June 2015 Mr MC Jeffery advised that he has
been appointed as an Alternate Delegate to the Dairy
Connect Farm Group Board. Mr Jeffery has declared
GJ McNamara AW Wilson
his interest in accordance with Section 208 of the
Chairman Deputy Chairman
Co-operatives National Law (NSW) and, in addition,
Lismore, 30 September 2015
excludes himself from any discussions or decisions
relating to this entity.
On 4 August 2015 Ms L Shearman advised that she
is no longer the Chairperson of the Far North Coast
Dairy Industry Group (DIG) but still holds the executive
position of Vice Chairperson. Ms Shearman is also the
Secretary of the Far North Coast Subtropical Regional
Group and has declared her interest in accordance with
Section 208 of the Co-operatives National Law (NSW)
and, in addition, excludes herself from any discussions
or decisions relating to these entities.
On his re-election to the Board on 24 September 2014,
Mr PW Neal declared that he is Chairman and Director of
the North Oxley Island Drainage Union, Chairman of the
Mid Coast Dairy Advancement Group and Chairman of
the Manning Delta landholders Protection Committee.
On 4 August 2015 Mr Neal advised that he is no
longer Chairman or a member of the Mid Coast Dairy
Advancement Group. Mr Neal has declared his interest
in accordance with Section 208 of the Co-operatives
26
Ernst & Young and Norco
– a valued business partnership
“EY is proud to have been associated with Norco as
its auditor for over 15 years. In this time we have
seen Norco move from a business with significant
uncertainty as to whether it would continue as a
going concern, to today being one of the largest cooperatives in Australia,” said EY Partner Brad Tozer.
“Records confirm that during the period since
2001, Norco has returned over $920 million in
milk payments and dividends to members through
purchasing nearly 2 billion litres of milk, just to name
a few of the benefits the co-operative has provided
to members. Through the collective strength of the
members, management, board and the co-operative
working model, these results and other tangible and
intangible benefits have been achieved for members
and the community at large.
As we continue to work with Norco, we see
significant potential for growth. Unique to cooperatives (as opposed to other corporate
structures) are propositions such as member control
and goal alignment, democratic governance by
members, re-investment of profits, creation of social
value and member education, just to name a few. All
these principles that underpin the structure of a cooperative deliver value now and into the future for
members and the community.”
27
Ken Wadsworth, Norco member and milk supplier
28
CORPORATE GOVERNANCE STATEMENT
corporate
election as a supplier Director in accordance with
governance practices that were in place throughout
the Rules and, if elected, serve a term of three years
the 2014/15 financial year, unless otherwise stated.
after which time they retire. Independent Directors,
These practices are dealt with under the headings:
when nominated and elected, are elected for a
Board of Directors and its Committees; Internal
term of three years after which time they retire. The
Control Framework; Ethical Standards; Business Risks
Directors regularly consider whether or not the skills
and Emergency Planning; and The Role of Members.
and characteristics which might be contributed by
This
statement
outlines
the
main
Independent Directors should be added to the Board
Board of Directors and its Committees
The Board of Directors is responsible for the overall
corporate governance of the Co-operative including
strategic direction and enhancing organisational
performance,
the
sound
management
of
its
business and assets, confirming financial objectives,
understanding and managing risks to maximise
opportunities, establishing goals for management
and monitoring performance against those goals. The
Board of Directors is also responsible for reporting
to members and being accountable to, and focussed
on the needs of members and meeting statutory
and regulatory requirements. To give further effect,
the Audit and Risk Management Committee assists
in the execution of the Board’s responsibilities. The
to maximise its effectiveness. Independent Directors
are to be nominated by the Board and elected by
members. Mr David Hodges’ term as an Independent
Director concluded at the 2014 Annual General
Meeting after having completed two, three year terms.
Mr Hodges was not nominated by the Board for a
further term.
Regarding potential conflicts of interest, it is the
practice of the Norco Board to open every meeting
by giving Directors the opportunity to declare any
actual or potential conflicts. If a conflict of interest
should arise, the Director concerned takes no part in
discussions at the Board meeting on the issue, nor
exercises any influence over other Board members.
Milk Supply Advisory Committee, Member Services
The total remuneration package for Directors is voted
Committee
Advisory
on at each Annual General Meeting. The amount paid
Committee also meet regularly and play an important
may vary between Directors depending on their level
role in assisting the Board of Directors in managing the
of responsibilities. Remuneration of Directors is set
important relationship between the Co-operative and
out in the notes to the financial statements.
and
Brand
Management
the members. The Board Committees are discussed
further below.
To better understand the operations of the Cooperative’s businesses the Board receives regular
management reports, presentations and briefing
papers on key aspects and makes site visits to the Cooperative’s operations.
Composition of the Board
Under the Rules of the Co-operative the Board of
Directors is comprised of a minimum of six nonexecutive (supplier) Directors who represent the
members from the Northern, Central and Southern
Board Corporate Governance Policy and Emerging
Corporate Governance Issues
The purpose of the Corporate Governance Policy
Statement is to provide guidance to Directors and
management on how the Co-operative is to be
governed in practice. The document was developed
having regard to the Co-operatives National Law (NSW)
and Norco’s Rules. All current Directors have signed
Deed Polls and Statutory Declarations to ensure
their commitment to the Corporate Governance
Policy Statement and the duties and responsibilities
specifically addressed in the Deed Polls.
regions. Each region is represented by two supplier
A review of the Corporate Governance Policy Statement
Directors, with Directors serving a three year term. At
is undertaken annually by the Directors to ensure that
each Annual General Meeting two Directors retire in
issues of governance are dealt with in accordance with
accordance with the Rules of the Co-operative. The
the policy. At the same time, the policy is reviewed to
Rules also allow for two Independent Directors to be
ensure it is still relevant and up to date.
elected to the Board. Currently the positions for both
Independent Directors remain vacant.
An active member of the Co-operative may seek
It is also pleasing to report that all current Directors
have attended and completed the AICD Company
Directors’ Course.
29
• review of the audit and annual financial statements
Co-operatives National Law in NSW
and interim financial information and the adequacy of
As reported last year, on 3 March 2014 the Co-
existing external audit arrangements with particular
operatives National Law (CNL) came into operation,
emphasis on the scope and quality of the audit; and
repealing and replacing the Co-operatives Act 1992.
Leading up to the 2014 Annual General Meeting,
• risk management reporting systems are in place to
the Board undertook a review of Norco’s Rules with
effectively identify and manage strategic, operational
the assistance of Norco’s lawyer to ensure that, as
and financial risks. To give further effect to identifying
a consequence of the introduction of the CNL, the
and quantifying risks faced by the Co-operative, a
Rules correctly reflected the terminology and law as
risk register has been developed which is managed
specified in the CNL. The members considered and
under the scope of the Audit and Risk Management
voted unanimously in favour of the proposed Rule
Committee. The risk register details the probability
changes at the 2014 Annual General Meeting held on
and impact of various business risks and creates a
12 November 2014.
risk score together with a mitigation plan.
The Audit and Risk Management Committee reviews
Board Committees
The Directors seek to achieve best practice in
corporate governance and accountability through the
the performance of the external auditors on an annual
basis and meets them during the year as follows:
following Board Committees which assist the Board in
• to review the results and findings of the audit, the
the execution of its responsibilities. These committees
adequacy of financial and operating controls, and to
are subject to Charters which have been approved by
monitor the implementation of any recommendations
the Board and which define their respective roles and
made; and
responsibilities.
• to review the draft financial statements and the audit
report and to make the necessary recommendation
Audit and Risk Management Committee
to the Board for the approval of the financial
The objective of the Audit and Risk Management
statements.
Committee is to assist the Board of Directors in
fulfilling its statutory and fiduciary responsibilities
The Committee is comprised of three Directors and
relating to accounting and reporting practices of
meets at least six times per year. The Chairperson
the Co-operative and subsidiaries. The Committee
of the Co-operative shall not be a member of the
advises on the establishment and maintenance of an
Committee.
overall framework of internal control and appropriate
ethical standards for the management of the Cooperative. The Committee gives the Board additional
assurance regarding the quality and reliability of
financial information prepared for use by the Board
in determining policies for inclusion in financial
statements. The
Audit
and
Risk
Management
Committee also embraces, as part of its Charter, the
Milk Supply Advisory Committee
The objective of the Milk Supply Advisory Committee
is to provide properly considered recommendations
to the Board of Directors in relation to the adoption
of policies pertaining to certain matters regarding the
acquisition of milk by the Milk Supply business unit
and the sale of that milk to its external and internal
Co-operative’s Risk Management Program.
customers.
The Audit and Risk Management Committee ensures:
In giving effect to this objective, the Committee will
• compliance with statutory responsibilities relating to
financial disclosure;
• focus
on
significant
changes
in
accounting
policies, standards and practices or other reporting
requirements likely to affect developments in
make recommendations to the Board of Directors in
relation to policies regarding:
• the sourcing of milk by the Milk Supply business unit,
with specific reference to (including but not limited to price): and
financial reporting;
• regular reviews of operations and policies are
conducted;
30
- the terms under which such milk is to be acquired
- the location(s) from which such milk is to be
acquired; and
• the sale of milk by the Milk Supply business unit, with
farm base by assisting with succession planning,
specific reference to the terms under which that milk
mental health issues and social networking / support;
is sold (including but not limited to price).
• providing and disseminating information from external
The composition of the Milk Supply Advisory
sources relating to issues such as the education
Committee consists of the full Board, Chief Executive
and training of potential Directors, government
Officer and General Manager Milk Supply. The
assistance and climate variability; and
Committee meets at least every quarter.
• providing support to the Norco farm base through
the management of issues such as exceptional
Brand Management Advisory Committee
The objective of the Brand Management Advisory
Committee
is
to
provide
properly
considered
circumstances, disaster recovery planning and other
critical farm issues (such as tick infestations).
recommendations to the Board of Directors in relation
The Committee is comprised of four Directors and
to matters that affect Norco’s brands and to the
meets at least every quarter.
adoption of policies pertaining to specific issues such
as animal welfare issues for both Norco and Norco’s
milk suppliers / members.
• Animal welfare – including all aspects of animal
welfare
pertaining
to
the
Norco
farm
base,
understanding the requirements of retail customers,
ensuring Norco has robust policies and procedures
and working with, and making representations to, a
range of stakeholders that have an interest in animal
welfare; and
• Norco brands – including protecting and adding value
and ensuring that the reputation of the Norco brands
are maintained and improved upon as well as the
promotion of the Norco Brands.
The Committee is comprised of three Directors and
Communication Committee
The objective of the Communication Committee is
to make properly considered recommendations to
the Board of Directors in relation to the adoption of
policies pertaining to corporate communication.
The
Committee
recognises
that
effective
communication relies on “listening as well as speaking”.
Consequently, in seeking to achieve its objective the
Committee will make recommendations to the Board
of Directors in relation to policies regarding:
• the Co-operative’s overall strategy in relation to
corporate communications;
• the Co-operative’s major corporate communications
and announcements, ensuring all stakeholders
are considered and that such communications
and announcements are through the appropriate
nominated spokesperson;
the General Manager Milk Supply and meets at least
• communication plans for crisis / disaster situations;
every quarter.
• joint communications which may affect another
Member Services Committee
The objective of the Member Services Committee
is to make properly considered recommendations to
the Board of Directors in relation to the adoption of
policies pertaining to non milk supply, member issues.
organisations or individuals, or by which Norco may
be affected; and
• the
terms
under
which
an
The Committee is comprised of two Directors and
meets on an as needs basis.
Remuneration Advisory Committee
• developing and encouraging the sustainability of
The
improving farming techniques, study tours and
improving business skills;
• assisting with the ongoing wellbeing of the Norco
or
to assist Norco with corporate communications.
the Norco farm base through initiatives such as
appointment
engagement (if any) of a public relations firm is made
objective
Committee
is
of
to
the
Remuneration
make
properly
Advisory
considered
recommendations to the Board of Directors in relation
to the remuneration of the Senior Management Team,
Chief Executive Officer and Board of Directors and
31
in relation to incentive programs within the Norco
business.
In giving effect to this objective, the Committee will:
• monitor and review all Senior Management Team
remuneration;
• evaluate, monitor and review any Short Term Incentive
(STI) and Long Term Incentive (LTI) programs that
may be in operation in the Norco business;
• evaluate the performance of the Chief Executive
Officer and make recommendations in relation to the
remuneration of the Chief Executive Officer; and
• make recommendations to the Board in relation to
Director remuneration.
The Committee is comprised of two Directors and
the Chief Executive Officer and meets on an as needs
basis.
INTERNAL CONTROL FRAMEWORK
• Executive authority limits – the Co-operative
has clearly defined financial authority limits for
management
positions
in
relation
to
capital
expenditure, foreign exchange, forward purchase
agreements, forward grain sale agreements and
general expenses.
Quality Accreditation
The Norco Foods division strives to ensure that its
products are of the highest standard. The Lismore Ice
Cream Business Unit has accreditation in HACCP with
the NSW Food Authority, SQF 2014 Level 3, Coles
Quality Assurance, Woolworths Quality Assurance
Standard,
U.S.
Food
and
Drug
Administration
registered and has an Approved Arrangement with
AQIS for export. The Labrador milk factory has HACCP
accreditation with Safe Foods QLD, SQF 2014 Level
3, Coles Quality Assurance, Woolworths Quality
Assurance Standard, NCS HACCP accreditation and
The Board acknowledges that it is responsible for the
has an Approved Arrangement with AQIS for export.
overall internal control framework, but recognises that
The Raleigh milk factory has NSW Food Authority
no cost-effective internal control system will preclude
HACCP accreditation, SQF 2014 Level 3, NASAA
all errors and irregularities. To assist in discharging
and ACO accreditation (both for organic milk) and
this responsibility, the Board has instigated an internal
has an Approved Arrangement with AQIS for export.
control framework which can be categorised under the
Raleigh is also Kosher certified for the production of
following headings:
al A2 products.
• Corporate Strategy – there are clearly defined short,
In the Norco Agribusiness unit both the Goldmix
medium and long term strategic objectives set
Stockfeeds manufacturing mills at Lismore New
and reviewed by the Board of Directors on at least
South Wales and Windera Queensland have FeedSafe
an annual basis and an operational strategic plan
accreditation under the Stockfeed Manufacturers’
developed by management to meet these objectives.
Association of Australia and HACCP accreditation.
Strategic issues are considered at each meeting of
Norco is a member of the Stockfeed Manufacturers’
the Board of Directors.
Association of Australia.
• Financial reporting - there is a comprehensive
Norco Rural Retail staff are AgSafe accredited
budgeting system with an annual budget approved
for the handling, transport and recommendation
by the Board. Monthly actual results are reported
of agricultural chemical products. The Rural Retail
against budget and revised rolling year end forecasts
premises are AgSafe accredited for the storage and
are prepared monthly.
handling of agricultural chemical products.
• Quality and integrity of personnel - the Co-operative’s
policies are detailed in a policy and procedures
manual. New policies and procedures are developed,
or amendments made to existing policies and
procedures, as the need arises.
32
businesses are being acquired and divested.
Safety
Norco is committed to the safety and wellbeing of staff
across its entire operations. Norco strives to comply
with the provisions of a safe working environment
and continues to make safety an integral part of our
• Investment appraisal - the Co-operative has clearly
organisation, which is essential if we are to continue
defined guidelines for capital expenditure. These
building a successful business into the future. On page
include annual budgets, detailed appraisal and review
19 of this report are details regarding an Enforceable
procedures and due diligence requirements where
Undertaking that Norco has entered into with the
WorkCover Authority of NSW relating to a serious
injury sustained by a Norco employee at the Goldmix
Stockfeed mill on 25 July 2013. On a monthly basis,
the Board of Directors receives management reports
detailing the safety performance for the business and
monitors this performance closely. The Board also
receives a copy of all minutes of the various site WHS
committee meetings that are held.
Environment
is communicated to members as follows:
• The Annual Report is distributed to all members. The
Annual Report includes relevant information about
the operations of the Co-operative for the financial
year just ended, changes in the state of affairs of the
Co-operative and details of future developments,
in addition to the other disclosures required by the
Cooperatives Legislation;
• Meetings are held at least twice yearly with supplier
Norco aims to ensure that the highest standard of
members at various locations to personally inform
environmental care is achieved. The Co-operative
them about the affairs of the Co-operative;
recognises that it has a responsibility to ensure that
its operations are sensitive to the environment and
comply with the letter and spirit of all applicable
environmental legislation.
ETHICAL STANDARDS
All Directors, managers and employees are expected
to act with the utmost integrity and objectivity, striving
at all times to enhance the reputation and performance
of Norco. Every employee has a nominated manager or
supervisor to whom they may refer any issue arising
from their employment.
BUSINESS RISKS AND EMERGENCY PLANNING
Management has identified, and continues to identify,
business risks and potential emergencies with the aim
of minimising any consequential adverse effects on
the Co-operative.
Business risks arise from such matters as:
• action by competitors and industry rationalisation;
• government policy changes;
• physical loss of assets through fire or another natural
disaster and the resultant business interruption that
may occur;
• the impact of exchange rate movements on the price
of raw materials and on sales
• variations in interest rates;
• difficulties in sourcing raw materials; and
•In addition to the meetings with supplier members,
a more informal communication network called
‘NorcoNet’ is active in some localities within the
Norco supply area. The purpose of ‘NorcoNet’ is to
bring small groups of members together on a regular
basis to form a local network to discuss general dairy
industry issues and issues that relate to the Cooperative;
• The preparation and distribution of a monthly Norco
Bulletin and ad hoc newsletters;
•Some proposed major changes in the Co-operative
which relate to the core businesses are required by
the Cooperatives National Law (NSW) to be submitted
to a vote of members; and
• Communication is a two-way process, and the
Board encourages individual members or groups of
members to apply to attend Board Committee and /
or meetings by appointment.
The Board encourages full participation of members
at the Annual General Meeting to ensure a high
level of accountability and identification with the
Co-operative’s strategies and goals. Due to the
geographical spread of members, the holding of the
Annual General Meeting is rotated between the three
member regions. Important issues are presented to the
members as single resolutions for their consideration.
The members are responsible for the election of
Directors.
• the purchase, development and use of information
systems, and other emergencies that may occur.
THE ROLE OF MEMBERS
The Board of Directors aims to ensure that the
members are informed of all major developments
affecting the Cooperative’s state of affairs. Information
33
Photo credits and contributions – thank you
In addition to thanking our Norco employees,
Co-operative members and customers for your
time and participation in the 2015 Annual Report
photography which is greatly appreciated, the
Co-operative would like to acknowledge and provide
sincere thanks to the following for contributing to,
and participating in, the historical content contained
in the 2015 Annual Report:
Mr Donald Maughan and the Richmond – Tweed
Regional Library (Eric Wright Collection)
Mr Frank Reading
Mr Denzil and Mrs Audrey
Thomas
Messrs Warren Noble, Ray
Everingham, Alan Hoskins
and Graeme Hancock
Mr Brett and Mrs Leanne
Bugg
Mr Kevin Elsley
34
35
FINANCIAL STATEMENTS
Janelle Foster, Ice Cream Business Unit employee
36
Statement of profit or loss
and other comprehensive income
for the year ended 30 June 2015
2015
2014
Before
Notes
Revenue
4.1
Before
Significant
Significant
Items
Items (1)
Significant Significant
Total
Items
Items (1)
Total
$000
$000
$000
$000
$000
$000
510,909
-
510,909
430,729
-
430,729
-
(87,962)
Milk payments to suppliers
(123,529)
- (123,529)
(87,962)
Cost of sales
(264,705)
- (264,705)
(242,231)
- (242,231)
Employee expenses
4.2
(60,347)
-
(60,347)
(49,906)
-
(49,906)
Depreciation expense
4.3
(5,681)
-
(5,681)
(5,385)
-
(5,385)
(2,552)
-
(2,552)
(2,448)
-
(2,448)
(4,800)
-
(4,800)
(4,442)
-
(4,442)
(46,162)
-
(46,162)
(37,940)
-
(37,940)
Borrowing costs expense
Occupancy expenses
Administration and other costs
4.4
(Loss)/profit on disposal of non-current
assets
(28)
-
(28)
85
-
85
-
(153)
(153)
-
(138)
(138)
3,105
(153)
2,952
500
(138)
362
-
(298)
(298)
-
(46)
(46)
3,105
(451)
2,654
500
(184)
316
-
-
-
-
-
-
3,105
(451)
2,654
500
(184)
316
Restructure costs
Profit/(loss) before tax from ordinary
activities before income tax expense
and member distributions
Member distributions
6
Profit/(loss) before income tax
Income tax expense
Net profit/(loss) attributable to members
5
Other comprehensive income
Other comprehensive income to
be reclassified to profit or loss in
subsequent periods:
Net gain/(loss) on cash flow hedges
(391)
-
(391)
-
-
-
(391)
-
(391)
-
-
-
2,714
(451)
2,263
500
(184)
316
Other comprehensive loss for the year,
net of tax
Total comprehensive income/(loss) for
the year, net of tax
(1) Significant items are items of income and expense, presented separately due to their nature and size.
The above Statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.
37
Statement of financial position
As at 30 June 2015
2015
2014
Notes
$000
$000
18.2
4,226
1,802
Assets
Current assets
Cash assets and cash equivalents
Trade and other receivables
7
47,437
47,489
Inventories
8
32,020
29,647
Other assets
Total current assets
527
488
84,210
79,426
3
3
Non-current assets
Investments
9
Property, plant and equipment
10
55,177
53,735
Intangible assets and goodwill
11
37,038
37,101
92,218
90,839
176,428
170,265
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
12
59,146
56,665
Interest-bearing loans and borrowings
14
2,160
589
Derivative financial instruments
15
78
-
Employee benefit liabilities
13
9,085
8,235
70,469
65,489
Total current liabilities
Non-current liabilities
12
398
398
14
31,632
33,669
15
313
-
Employee benefit liabilities
13
1,340
1,309
33,683
35,376
104,152
100,865
72,276
69,400
8,783
8,170
63,493
61,230
24,797
22,143
38,696
39,087
63,493
61,230
Total non-current liabilities
Total liabilities
Net assets attributable to members
Members’ interest
16.1
Net assets
Equity
Retained earnings
Reserves
Total equity
17
The above Statement of financial position should be read in conjunction with the accompanying notes.
38
Statement of changes in equity
At 1 July 2014
Profit for the year
Total comprehensive income
At 30 June 2015
At 1 July 2013
Profit for the year
Total comprehensive income
At 30 June 2014
Cash flow
Asset
Retained
hedge
revaluation
earnings
reserve
reserve
Total equity
$000
$000
$000
$000
22,143
-
39,087
61,230
2,654
-
-
2,654
-
(391)
-
(391)
2,654
(391)
-
2,263
24,797
(391)
39,087
63,493
Cash flow
Asset
Retained
hedge
revaluation
earnings
reserve
reserve
Total equity
$000
$000
$000
$000
21,827
-
39,087
60,914
316
-
-
316
-
-
-
-
316
-
-
316
22,143
-
39,087
61,230
The above Statement of changes in equity should be read in conjunction with the accompanying notes.
39
Statement of cash flows
2015
2014
$000
$000
510,655
424,381
(374,819)
(333,859)
306
330
Notes
Operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Interest paid
Milk supplier payments
Net cash flows from operating activities
(2,552)
(2,448)
(123,529)
(87,962)
10,061
442
18.1
Investing activities
Proceeds from sale of property, plant and equipment
170
101
Purchase of property, plant and equipment
(7,321)
(8,196)
Net cash flows used in investing activities
(7,151)
(8,095)
Financing activities
Suppliers’ share contribution
613
659
Repayment of member deposits
(335)
(598)
Distributions paid to members
(298)
(46)
Payment of finance lease liabilities
(466)
(190)
-
5,142
(486)
4,967
Net increase/(decrease) in cash and cash equivalents
2,424
(2,686)
Cash and cash equivalents at opening balance date
1,802
4,488
4,226
1,802
Proceeds from borrowings
Net cash flows (used in)/from financing activities
Cash and cash equivalents at 30 June
18.2
The above Statement of cash flows should be read in conjunction with the accompanying notes.
40
Notes to the financial statements
1. Corporate information
The financial statements of Norco Co-operative Limited and its
controlled entities (the Co-operative) for the year ended 30 June
2015 were authorised for issue in accordance with a resolution of
the directors on 30 September 2015.
Norco Co-operative Limited is a Co-operative under the Cooperatives National Law (NSW), incorporated and domiciled in
Lismore, Australia. The Co-operative operates out of its registered
place of business at “Windmill Grove” 107 Wilson Street, South
Lismore, New South Wales. The principal operations of the Cooperative are the processing, manufacture and sale of dairy
products, the manufacture of stockfeed and rural retailing.
2. Summary of significant accounting policies
(a) Basis of preparation
The general purpose financial report has been prepared on the
basis of historical cost (except for certain land and building
assets where in 2004 fair value was deemed to be cost) and in
accordance with the requirements of the Corporations Act 2001.
Cost is based on the fair values of the consideration given in
exchange for assets.
In the application of Australian equivalents to International
Financial Reporting Standards (‘AIFRS’) management is required
to make judgements, estimates and assumptions about carrying
values of assets and liabilities that are not readily apparent from
other sources. The estimates and associated assumptions are
based on historical experience and various other factors that are
believed to be reasonable under the circumstance, the results of
which form the basis of making the judgements. Actual results
may differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised
in the period in which the estimate is revised if the revision affects
only that period, or in the period of the revision and future periods
if the revision affects both current and future periods.
Judgements made by management in the application of AIFRS
that have significant effects on the financial statements and
estimates with a significant risk of material adjustments in the next
year are disclosed, where applicable, in the relevant notes to the
financial statements. Accounting policies are selected and applied
in a manner which ensures that the resulting financial information
satisfies the concepts of relevance and reliability, thereby ensuring
that the substance of the underlying transactions or other events
is reported.
The accounting policies set out below have been applied in
preparing the financial statements for the year ended 30 June
2015 and the comparative information presented in these
financial statements for the year ended 30 June 2014.
The financial report is presented in Australian dollars and all
values are rounded to the nearest thousand dollars ($’000) unless
otherwise stated under the option available to the Co-operative
under class order 98/100. The Co-operative is an entity to which
the class order applies.
(b) Changes in accounting policy, disclosures, standards and
interpretations
(i) Changes in accounting policies, new and amended standards
and interpretations
The accounting policies adopted are consistent with those of the
previous financial year, with the exception of Derivative Financial
Instruments and hedge accounting. Refer Note 2(x).
(ii) Accounting Standards and Interpretations issued but not
yet effective
Certain Australian Accounting Standards and Interpretations have
recently been issued or amended but are not yet effective and have
not been adopted by the Co-operative for the annual reporting
period ended 30 June 2015. The directors have not early adopted
any of these new or amended standards or interpretations. The
directors have not yet fully assessed the impact of these new or
amended standards (to the extent relevant to the Co-operative)
and interpretations.
(c) Statement of compliance
The financial report complies with Australian Accounting
Standards, which include International Financial Reporting
Standards (IFRS) as issued by the International Accounting
Standards Board.
The accounting policies are consistent with those of the previous
financial year. Norco Co-operative Limited has not made a formal
written election to early adopt any new and amended Australian
Accounting Standards as of 30 June 2015. For Australian
Accounting Standards and Interpretations that have recently
been issued or amended but are not yet effective and have not
been adopted by the Group for the annual reporting period ended,
the Group has assessed there will be no material impact on the
presentation of the financial statements.
(d) Basis of consolidation
The financial statements comprise the financial statements of
the Co-operative and its subsidiaries as at 30 June 2015. Control
is achieved when the Co-operative is exposed, or has rights, to
variable returns from its involvement with the investee and has the
ability to affect those returns through its power over the investee.
Specifically, the Co-operative controls an investee if and only if the
Co-operative has:
• Power over the investee (i.e. existing rights that give it the current
ability to direct the relevant activities of the investee);
•
Exposure, or rights, to variable returns from its involvement with
the investee; and
The ability to use its power over the investee to affect its
•
returns.
Generally, there is a presumption that a majority of voting rights
results in control. To support this presumption, and when the
Co-operative has less than a majority of the voting or similar
rights of an investee, the Co-operative considers all relevant facts
and circumstances in assessing whether it has power over an
investee, including:
41
•
The contractual arrangement with the other vote holders of the
investee;
•
Rights arising from other contractual arrangements; and
•
There is no unconditional right to defer the settlement of the
liability for at least twelve months after the reporting period.
•
The Co-operative’s voting rights and potential voting rights.
The Co-operative classifies all other liabilities as non-current.
The Co-operative re-assesses whether or not it controls an
investee if facts and circumstances indicate that there are changes
to one or more of the three elements of control. Consolidation of
a subsidiary begins when the Co-operative obtains control over
the subsidiary and ceases when the Co-operative loses control
of the subsidiary. Assets, liabilities, income and expenses of a
subsidiary acquired or disposed of during the year are included in
the Statement of profit or loss and other comprehensive income
from the date the Co-operative gains control until the date the Cooperative ceases to control the subsidiary.
Deferred tax assets and liabilities are classified as non-current
assets and liabilities.
Profit or loss and each component of other comprehensive
income (OCI) are attributed to the equity holders of the parent
of the Co-operative and to the non-controlling interests, even
if this results in the non-controlling interests having a deficit
balance. When necessary, adjustments are made to the financial
statements of subsidiaries to bring their accounting policies into
line with the Co-operative’s accounting policies. All intra-group
assets and liabilities, equity, income, expenses and cash flows
relating to transactions between members of the Co-operative
are eliminated in full on consolidation.
A change in the ownership interest of a subsidiary, without a
loss of control, is accounted for as an equity transaction. If the
Co-operative loses control over a subsidiary, it derecognises
the related assets (including goodwill), liabilities, non-controlling
interest and other components of equity while any resultant gain
or loss is recognised in profit or loss. Any investment retained is
recognised at fair value.
(e) Current versus non-current classification The Co-operative presents assets and liabilities in the Statement
of financial position based on current/non-current classification.
An asset is current when it is:
•
Expected to be realised or intended to be sold or consumed in
the Co-operative’s normal operating cycle;
Held primarily for the purpose of trading;
•
•
Expected to be realised within twelve months after the reporting
period; or
•
Cash or a cash equivalent unless restricted from being
exchanged or used to settle a liability for at least twelve months
after the reporting period.
The Co-operative classifies all other assets as non-current.
A liability is current when:
It is expected to be settled in the Co-operative’s normal
•
operating cycle;
• It is held primarily for the purpose of trading;
•
It is due to be settled within twelve months after the reporting
42
period; or
(f) Revenue recognition
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Co-operative and the revenue
can be reliably measured. The following specific recognition
criteria must also be met before revenue is recognised:
Sale of goods
Revenue is recognised when the significant risks and rewards of
ownership of the goods have passed to the buyer and the costs
incurred or to be incurred in respect of the transaction can be
measured reliably. Risk and rewards of ownership are considered
passed to the buyer at the time of delivery of the goods to the
customer.
Rendering of services
Revenue is recognised on the basis of services provided, measured
in accordance with agreed parameters between the customer and
the Co-operative.
Interest income
Revenue is recognised as interest accrues using the effective
interest method. This is a method of calculating the amortised
cost of a financial asset and allocating the interest income over
the relevant period using the effective interest rate, which is
the rate that exactly discounts estimated future cash receipts
through the expected life of the financial asset to the net carrying
amount of the financial asset.
Dividends
Dividend revenues are recognised when control of a right to
receive consideration for the investment in assets is attained,
usually evidenced by approval of the dividend at a meeting of
shareholders.
Government grants
Grants received for the construction of non-current assets are
deferred and recorded as revenue over the life of the funded asset.
(g) Borrowing costs
Borrowing costs consist of interest and other costs that an
entity incurs in connection with the borrowing of funds. All loans
and borrowings are initially recognised at the fair value of the
consideration received less directly attributable transaction costs.
(h) Leases
The determination of whether an arrangement is, or contains a
lease is based on the substance of the arrangement. It requires
an assessment of whether the fulfilment of the arrangement
is dependent on the use of a specific asset or assets and the
arrangement conveys a right to use the asset.
Co-operative as a lessee
Finance leases are capitalised at the commencement of the
lease at the inception date fair value of the leased property or,
if lower, at the present value of the minimum lease payments.
Lease payments are apportioned between finance charges and
reduction of the lease liability so as to achieve a constant rate of
interest on the remaining balance of the liability. Finance charges
are recognised in finance costs in the Statement of profit or loss
and other comprehensive income.
Capitalised leased assets are depreciated over the shorter of the
estimated useful life of the asset and the lease term if there is no
reasonable certainty that the Co-operative will obtain ownership
by the end of the lease term.
Operating lease payments are recognised as an expense in the
Statement of profit or loss and other comprehensive income
on a straight-line basis over the lease term. Lease incentives
are recognised in the Statement of profit or loss and other
comprehensive income as an integral part of the total lease
expense.
Co-operative as a lessor
Leases in which the Co-operative retains substantially all the
risks and benefits of ownership of the leased asset are classified
as operating leases. Initial direct costs incurred in negotiating an
operating lease are added to the carrying amount of the leased
asset and recognised as an expense over the lease term on the
same basis as rental income.
(i) Cash and cash equivalents
Cash and short-term deposits in the Statement of financial position
comprise cash at bank and in hand and short-term deposits with
an original maturity of three months or less. For the purposes of
the Statement of cash flows, cash and cash equivalents consist
of cash and cash equivalents as defined above, net of outstanding
bank overdrafts.
(j) Trade and other receivables
Trade receivables, which generally have 30-90 day terms, are
recognised and carried at original invoice amount less an allowance
for any uncollectable amounts.
An allowance for doubtful debts is made when there is objective
evidence that the Co-operative will not be able to collect the
debts. Bad debts are written off when identified.
(k) Inventories
Inventories are valued at the lower of cost and net realisable
value.
Costs incurred in bringing each product to its present location and
condition are accounted for as follows:
Raw materials: purchase cost on a first in, first out basis.
•
Finished goods and work in progress: cost of direct materials
•
and labour and a proportion of manufacturing overheads based
on normal operating capacity but excluding borrowing costs.
Net realisable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and the
estimated costs necessary to make the sale.
Maintenance spares are recognised as inventories and expensed
when utilised.
(l) Foreign currency translation
Both the functional and presentation currency of Norco Cooperative Limited and its controlled entities is Australian dollars.
Transactions in foreign currencies are initially recorded in the
functional currency by applying the exchange rates ruling at
the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are retranslated at the rate of
exchange ruling at the balance sheet date.
(m) Taxes
Current income tax
Current income tax assets and liabilities for the current year are
measured at the amount expected to be recovered from or paid
to the taxation authorities. The tax rates and tax laws used to
compute the amount are those that are enacted or substantively
enacted, at the reporting date in the countries where the Cooperative operates and generates taxable income.
Deferred tax
Deferred tax is provided using the liability method on temporary
differences between the tax bases of assets and liabilities and
their carrying amounts for financial reporting purposes at the
reporting date.
Deferred tax liabilities are recognised for all taxable temporary
differences except:
When the deferred income tax liability arises from the initial
•
recognition of goodwill or of an asset or liability in a transaction
that is not a business combination and that, at the time of the
transaction, affects neither the accounting profit nor taxable
profit or loss.
•
In respect of taxable temporary differences associated with
investments in subsidiaries, associates and interests in joint
arrangements, when the timing of the reversal of the temporary
differences can be controlled and it is probable that the
temporary differences will not reverse in the foreseeable future.
Deferred tax assets are recognised for all deductible temporary
differences, the carry forward of unused tax credits and any unused
tax losses. Deferred tax assets are recognised to the extent that
it is probable that taxable profit will be available against which the
deductible temporary differences, and the carry forward of unused
tax credits and unused tax losses can be utilised, except:
•
When the deferred tax asset relating to the deductible temporary
difference arises from the initial recognition of an asset or
liability in a transaction that is not a business combination and,
at the time of the transaction, affects neither the accounting
profit nor taxable profit or loss.
•
In respect of deductible temporary differences associated
with investments in subsidiaries, associates and interests in
joint arrangements, deferred tax assets are recognised only
to the extent that it is probable that the temporary differences
will reverse in the foreseeable future and taxable profit will
43
be available against which the temporary differences can be
utilised.
The carrying amount of deferred tax assets is reviewed at each
reporting date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow
all or part of the deferred tax asset to be utilised. Unrecognised
deferred tax assets are reassessed at each reporting date and
are recognised to the extent that it has become probable that
future taxable profits will allow the deferred tax asset to be
recovered.
Unrecognised deferred income tax assets are reassessed at each
balance sheet date and are recognised to the extent that it is no
longer probable that sufficient taxable profit will be available to
allow all or part of the deferred income tax asset to be utilised.
Goods and services tax (GST)
Revenues, expenses and assets are recognised net of the amount
of GST, except:
•
When the GST incurred on a purchase of assets or services is
not recoverable from the taxation authority, in which case the
GST is recognised as part of the cost of acquisition of the asset
or as part of the expense item, as applicable.
•
When receivables and payables are stated with the amount of
GST included.
The net amount of GST recoverable from, or payable to, the
taxation authority is included as part of receivables or payables in
the Statement of financial position.
Cash flows are included in the Statement of cash flows on a gross
basis and the GST component of cash flows arising from investing
and financing activities, which is recoverable from, or payable to,
the taxation authority is classified as part of operating cash flows.
Commitments and contingencies are disclosed net of the amount
of GST recoverable from, or payable to, the taxation authority.
(n) Property, plant and equipment
Items of property, plant and equipment including buildings and
leasehold property, but excluding freehold land, are measured
at cost less accumulated depreciation and less any impairment
losses recognised. Freehold land is held at cost and is not
depreciated.
Plant and equipment is depreciated on a straight-line basis over
the estimated useful life of the assets, units of output, life of
project or other appropriate basis.
Leasehold improvements are depreciated over the period of the
lease or estimated useful life, whichever is shorter, using the
straight-line method.
The following estimated useful lives are used in the calculation of
depreciation:
-
-
-
Buildings2 - 5%
Plant and vehicles
10 - 33%
Leasehold plant and equipment
10 - 20%
The assets’ residual values, useful lives and amortisation methods
44
are reviewed, and adjusted if appropriate, at each financial year end.
Impairment
The carrying values of items of property, plant and equipment
are reviewed for impairment at each reporting date, with
recoverable amounts being estimated when events or changes in
circumstances indicate that the carrying value may be impaired.
The recoverable amount of property, plant and equipment is the
higher of fair value less costs to sell and value in use. 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 an asset that does not generate largely independent cash
inflows, the recoverable amount is determined for the cashgenerating unit to which the asset belongs, unless the asset’s
value in use can be estimated to be close to its fair value.
An impairment exists when the carrying value of an asset or
cash-generating unit exceeds its estimated recoverable amount.
The asset or cash-generating unit is then written down to its
recoverable amount.
Derecognition and disposal
An item of property, plant and equipment is derecognised upon
disposal or when no further future economic benefits are expected
from its use or disposal.
Any gain or loss arising on derecognition of the asset (calculated
as the difference between the net disposal proceeds and the
carrying amount of the asset) is included in profit or loss in the year
the asset is derecognised.
(o) Intangible assets
Intangible assets acquired separately are measured on initial
recognition at cost. The cost of intangible assets acquired
in a business combination are their fair value as at the date
of acquisition. Following initial recognition, intangible assets
are carried at cost less any accumulated amortisation and
accumulated impairment losses. Internally generated intangibles,
excluding capitalised development costs, are not capitalised and
the related expenditure is reflected in the Statement of profit
or loss and other comprehensive income in the year in which the
expenditure is incurred.
The useful lives of intangible assets are assessed as either finite
or indefinite.
Intangible assets with finite lives are amortised over the useful
economic life and assessed for impairment whenever there is
an indication that the intangible asset may be impaired. The
amortisation period and the amortisation method for an intangible
asset with a finite useful life are reviewed at least at the end of
each reporting period. Changes in the expected useful life or the
expected pattern of consumption of future economic benefits
embodied in the asset are considered to modify the amortisation
period or method, as appropriate, and are treated as changes in
accounting estimates. The amortisation expense on intangible
assets with finite lives is recognised in the Statement of profit or
loss and other comprehensive income as the expense category
that is consistent with the function of the intangible assets.
Intangible assets with indefinite useful lives are not amortised,
but are tested for impairment annually, either individually or at
the cash-generating unit level. The assessment of indefinite
life is reviewed annually to determine whether the indefinite life
continues to be supportable. If not, the change in useful life from
indefinite to finite is made on a prospective basis.
Gains or losses arising from derecognition of an intangible asset
are measured as the difference between the net disposal proceeds
and the carrying amount of the asset and are recognised in the
when the asset is derecognised.
(p) Goodwill
Goodwill acquired in a business combination is initially measured
at cost being the excess of the cost of the business combination
over the Co-operative’s interest in the net fair value of the
acquiree’s identifiable assets, liabilities and contingent liabilities.
Following initial recognition, goodwill is measured at cost less any
accumulated impairment losses.
Goodwill is reviewed for impairment annually or more frequently
if events or changes in circumstances indicate that the carrying
value may be impaired.
For the purpose of impairment testing, goodwill acquired in a
business combination is, from the acquisition date, allocated
to each of the Co-operatives cash-generating units, or groups
of cash-generating units, that are expected to benefit from the
synergies of the combination, irrespective of whether other assets
or liabilities of the Co-operative are assigned to those units or
groups of units. Each unit or group of units to which the goodwill
is so allocated:
•
Represents the lowest level within the Co-operative at which
the goodwill is monitored for internal management purposes;
and
•
Is not larger than a segment based on the Co-operative’s primary
reporting format determined as if applying AASB 8 Operating
Segments.
Impairment is determined by assessing the recoverable amount
of the cash-generating unit (group of cash-generating units), to
which the goodwill relates. When the recoverable amount of the
cash-generating unit (group of cash-generating units) is less then
the carrying amount, an impairment loss is recognised. When
goodwill forms part of a cash-generating unit (group of cashgenerating units) and an operation within that unit is disposed of,
the goodwill associated with the operation disposed of is included
in the carrying amount of the operation when determining the
gain or loss on disposal of the operation. Goodwill disposed of
in this manner is measured based on the relative values of the
operation disposed of and the portion of the cash-generating
unit retained. Impairment losses recognised for goodwill are not
subsequently reversed.
(q) Impairment of non-financial assets
The Co-operative assesses, at each reporting date, whether there
is an indication that an asset may be impaired. If any indication
exists, or when annual impairment testing for an asset is required,
the Co-operative estimates the asset’s recoverable amount. An
asset’s recoverable amount is the higher of an asset’s or cashgenerating unit’s (CGU) fair value less costs of disposal and its
value in use. Recoverable amount is determined for an individual
asset, unless the asset does not generate cash inflows that are
largely independent of those from other assets or groups of
assets. When the carrying amount of an asset or CGU exceeds
its recoverable amount, the asset is considered impaired and is
written down to its recoverable amount.
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. In determining fair value less
costs to sell, recent market transactions are taken into account.
If no such transactions can be identified, an appropriate valuation
model is used. These calculations are corroborated by valuation
multiples, quoted share prices for publicly traded companies or
other available fair value indicators.
An assessment is also made at each reporting date as to whether
there is any indication that previously recognised impairment
losses may no longer exist or may have decreased. If such
an indication exists, the recoverable amount is estimated. A
previously recognised impairment loss is reversed only if there
has been a change in the estimates used to determine the asset’s
recoverable amount since the last impairment loss was recognised.
If that is the case the carrying amount of the asset is increased
to its recoverable amount. That increased amount cannot exceed
the carrying amount that would have been determined, net of
depreciation, had no impairment loss been recognised for the
asset in prior years. Such reversal is recognised in profit or loss
unless the asset is carried at revalued amount, in which case the
reversal is treated as a revaluation increase. After such a reversal
the depreciation charge is adjusted in future periods to allocate
the asset’s revised carrying amount, less any residual value, on a
systematic basis over its remaining useful life.
(r) Trade and other payables
Trade payables and other payables are carried at amortised cost
and represent liabilities for goods and services provided to the
Co-operative prior to the end of the financial year that are unpaid
and arise when the Co-operative becomes obliged to make
future payments in respect of the purchase of these goods and
services.
(s) Interest bearing loans and borrowings
All loans and borrowings are initially recognised at the fair value
of the consideration received less directly attributable transaction
costs.
After initial recognition, interest-bearing loans and borrowings
are subsequently measured at amortised cost using the effective
interest method.
45
Gains or losses are recognised in profit or loss when the
liabilities are derecognised.
(t) Provisions
General
Provisions are recognised when the Co-operative has a present
obligation (legal or constructive) as a result of a past event, it is
probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation. When
the Co-operative expects some or all of a provision to be
reimbursed, for example, under an insurance contract, the
reimbursement is recognised as a separate asset, but only when
the reimbursement is virtually certain. The expense relating to any
provision is presented in the Statement of profit or loss and other
comprehensive income net of any reimbursement.
Wages, salaries and sick leave
Liabilities for wages and salaries, including non-monetary benefits
and accumulating sick leave which are expected to be settled
within 12 months of the reporting date are recognised in respect
of employees’ services up to the reporting date. They are measured
at the amounts expected to be paid when the liabilities are settled.
Expenses for non-accumulating sick leave are recognised when
the leave is taken and are measured at the rates paid or payable.
Long service leave and annual leave
The Co-operative does not expect its long service leave or
annual leave benefits to be settled wholly within 12 months of
each reporting date. The Co-operative recognises a liability for
long service leave and annual leave measured as the present
value of expected future payments to be made in respect of
services provided by employees up to the reporting date using the
projected unit credit method. Consideration is given to expected
future wage and salary levels, experience of employee departures,
and periods of service. Expected future payments are discounted
using market yields at the reporting date on national government
bonds with terms to maturity and currencies that match, as closely
as possible, the estimated future cash outflows.
(u) Member’s interest
In periods before 1 July 2004, members units in the Co-operative
were recorded in equity as contributed equity. On 1 July 2004,
the Co-operative re-classified these instruments to non-current
interest bearing liabilities in accordance with generally accepted
International Accounting Practice. Any distributions paid on these
instruments are treated as a borrowing cost.
This position which was clarified by UIG 2 Members’ Shares in
Co-operative Entities and Similar Instruments, which the Cooperative adopted effective 1 July 2004.
(v) Norco capital units
Norco Capital Units are carried at the principal amount. Interest is
accrued at the entitlement rate and is included in “Interest Bearing
Liabilities.”
(w) Investments in joint venture
A joint venture is a type of joint arrangement whereby the parties
that have joint control of the arrangement have rights to the
46
net assets of the joint venture. Joint control is the contractually
agreed sharing of control of an arrangement, which exists only
when decisions about the relevant activities require unanimous
consent of the parties sharing control.
The considerations made in determining significant influence or
joint control are similar to those necessary to determine control
over subsidiaries.
The Co-operative’s investments in its associate and joint venture
are accounted for using the equity method.
Under the equity method, the investment in an associate or a joint
venture is initially recognised at cost. The carrying amount of the
investment is adjusted to recognise changes in the Co-operative’s
share of net assets of the associate or joint venture since the
acquisition date. Goodwill relating to the associate or joint venture
is included in the carrying amount of the investment and is neither
amortised nor individually tested for impairment.
The Statement of profit or loss and other comprehensive income
reflects the Co-operative’s share of the results of operations of
the associate or joint venture. Any change in other comprehensive
income of those investees is presented as part of the Co-operative’s
other comprehensive income. In addition, when there has been a
change recognised directly in the equity of the associate or joint
venture, the Co-operative recognises its share of any changes,
when applicable, in the Statement of changes in equity. Unrealised
gains and losses resulting from transactions between the Cooperative and the associate or joint venture are eliminated to the
extent of the interest in the associate or joint venture.
The aggregate of the Co-operative’s share of profit or loss of
an associate and a joint venture is shown on the face of the
outside operating profit and represents profit or loss after tax and
non-controlling interests in the subsidiaries of the associate or
joint venture.
The financial statement of the associate or joint venture is
prepared for the same reporting period as the Co-operative. When
necessary, adjustments are made to bring the accounting policies
in line with those of the Co-operative.
After application of the equity method, the Co-operative
determines whether it is necessary to recognise an impairment
loss on its investment in its associate or joint venture. At each
reporting date, the Co-operative determines whether there is
objective evidence that the investment in the associate or joint
venture is impaired. If there is such evidence, the Co-operative
calculates the amount of impairment as the difference between
the recoverable amount of the associate or joint venture and its
carrying value, then recognises the loss as ‘Share of profit of an
associate and a joint venture’ in the Statement of profit or loss and
other comprehensive income.
Upon loss of significant influence over the associate or joint control
over the joint venture, the Co-operative measures and recognises
any retaining investment at its fair value. Any difference between
the carrying amount of the associate or joint venture upon loss
of significant influence or joint control and the fair value of the
retained investment and proceeds from disposal is recognised in
the Statement of profit or loss and other comprehensive income.
(x) Derivative financial instruments and hedge accounting
Initial recognition and subsequent measurement
The Co-operative uses derivative financial instruments, such as
interest rate swaps, to hedge interest rate risk. Such derivative
financial instruments are initially recognised at fair value on
the date on which a derivative contract is entered into and are
subsequently remeasured at fair value. Derivatives are carried
as financial assets when the fair value is positive and as financial
liabilities when the fair value is negative.
Any gains or losses arising from changes in the fair value of
derivatives are taken directly to profit or loss, except for the
effective portion of cash flow hedges, which is recognised in OCI
and later reclassified to profit or loss when the hedge item affects
profit or loss.
For the purpose of hedge accounting, a hedge is classified as:
•
Cash flow hedges: when hedging the exposure to variability
in cash flows that is either attributable to a particular risk
associated with a recognised asset or liability or a highly
probable forecast transaction or the foreign currency risk in an
unrecognised firm commitment.
At the inception of a hedge relationship, the Co-operative formally
designates and documents the hedge relationship to which it
wishes to apply hedge accounting and the risk management
objective and strategy for undertaking the hedge. The
documentation includes identification of the hedging instrument,
the hedged item or transaction, the nature of the risk being hedged
and how the entity will assess the effectiveness of changes in
the hedging instrument’s fair value in offsetting the exposure to
changes in the hedged item’s fair value or cash flows attributable
to the hedged risk. Such hedges are expected to be highly effective
in achieving offsetting changes in fair value or cash flows and are
assessed on an ongoing basis to determine that they actually have
been highly effective throughout the financial reporting periods for
which they were designated.
Hedges that meet the strict criteria for hedge accounting are
accounted for as described below:
Cash flow hedges
The effective portion of the gain or loss on the hedging instrument
is recognised in OCI in the cash flow hedge reserve, while any
ineffective portion is recognised immediately in the statement of
profit or loss as other operating expenses.
The Co-operative uses interest rate swaps to hedge the exposure
to cash flow movements in loan movements. The Co-operative
has entered into interest rate swaps which are economic hedges,
which are fair valued by comparing the contracted rate to the
future market rates for contracts with the same length of maturity.
The $0.4 million of swaps have been designated as effective
interest rate swaps and therefore satisfy the accounting standard
requirements for hedge accounting.
If the forecast transaction or firm commitment is no longer
expected to occur, the cumulative gain or loss previously
recognised in equity is transferred to the income statement. If
the hedging instrument expires or is sold, terminated or exercised
without replacement or rollover, or if its designation as a hedge is
revoked, any cumulative gain or loss previously recognised in other
comprehensive income remains in other comprehensive income
until the forecast transaction or firm commitment affects profit
or loss.
3. Significant accounting judgements, estimates and
assumptions
Significant judgements
The preparation of the financial statements requires management
to make judgments, estimates and assumptions that affect the
reported amounts in the financial statements. Management
continually evaluates its judgments and estimates in relation to
assets, liabilities, contingent liabilities, revenue and expenses.
Management bases its judgments and estimates on historical
experience and on other various factors it believes to be
reasonable under the circumstances, the result of which form
the basis of the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ
from these estimates under different assumptions and conditions.
Management has identified the following critical accounting
policies for which significant judgments, estimates and
assumptions are made. Actual results may differ from these
estimates under different assumptions and conditions and may
materially affect financial results or the financial position reported
in future periods.
Further details of the nature of these assumptions and conditions
may be found in the relevant notes to the financial statements.
Impairment of non-financial assets other than goodwill
The Co-operative assesses impairment of all assets at each
reporting date by evaluating conditions specific to the Cooperative and to the particular asset that may lead to impairment.
These include product and manufacturing performance,
technology, economic and political environments and future
product expectations. If an impairment trigger exists the
recoverable amount of the asset is determined.
Provision for doubtful debts
The Co-operative assesses the ability to recover debtors through
a periodic review of overdue debtors. An allowance for doubtful
debts is made when there is objective evidence that the Cooperative will not be able to collect the debts. Bad debts are
written off when identified.
Provision for inventory obsolescence
The Co-operative periodically reviews the inventory ledger to
identify inventory items that may be held in excess of their net
realisable value. For such items that are identified, a provision for
inventory obsolescence amount is raised which represents the
amount for which the Co-operative may not recover through use
of sale of the goods. Obsolete stock is written off when identified.
47
4. Revenue and expenses
4.1 Revenue
Sale of goods
2015
2014
$000
$000
510,440
428,662
Interest received
306
330
Other
163
1,737
510,909
430,729
2015
2014
4.2 Employee expenses
$000
$000
51,194
41,213
Workers compensation
3,258
3,824
Superannuation costs
3,631
3,003
Salaries and wages (including contractors)
Payroll tax
2,264
1,866
60,347
49,906
2015
2014
$000
$000
4.3 Depreciation expense
5,029
4,773
Buildings
Plant and equipment
465
453
Leased assets
187
159
5,681
5,385
2015
2014
$000
$000
863
783
4.4 Administration and other costs
Administration and other costs include the following:
Provision for employee benefits
Inventory obsolescence
78
90
Doubtful/bad debts
68
56
Minimum lease payments recognised as an operating lease expense
43
37
5. Income tax expense
The major components of income tax expense for the years ended 30 June 2015 and 2014 are:
2015
2014
$000
$000
Current income tax charge
-
-
Adjustments for current tax of prior periods
-
-
-
-
-
-
Current income tax:
Deferred tax:
Relating to origination and reversal of temporary differences
Income tax benefit/(expense) reported in the Statement of profit or loss and other
comprehensive income
A reconciliation between tax expense and the product of accounting profit before income tax multiplied by Co-operative applicable
income tax rate is as follows:
48
Accounting profit before income tax
At Australia’s statutory income tax rate of 30% (2014: 30%)
Non deductible amounts
2015
2014
$000
$000
2,654
316
796
95
347
108
Movement in temporary differences
(334)
92
Income tax loss movement
(624)
(3,350)
Adjustment in respect of current income tax of previous years
(185)
3,055
-
-
Tax losses
At 30 June 2015, the Co-operative had an estimated gross $9.6m in carry forward losses (2014: $13.0m). These tax losses have
not been brought to account in the Statement of financial position. There are no available franking credits.
Temporary differences - not recorded
The Co-operative has a surplus of deductible temporary differences. The deferred tax asset associated with these differences has
not been recognised at 30 June 2015.
2015
2014
$000
$000
Unrecognised deferred tax assets and liabilities
Provision for bad debts
Provision for employee benefits
Provision for obsolescence
275
272
3,128
2,856
340
281
3,743
3,409
2015
2014
$000
$000
298
46
2015
2014
6. Member distributions
Expensed in the period
7. Trade and other receivables
$000
$000
Trade receivables
47,018
47,423
Provision for doubtful debts
(1,034)
(906)
45,984
46,517
1,453
972
47,437
47,489
Other receivables
Doubtful debts
Carrying amount of doubtful debts
Opening balance year 2013
(Reduction)/addition in provision
Amount provided for during the year
$000
1,346
(496)
56
Ending balance year 2014
906
Opening balance year 2014
906
(Reduction)/addition in provision
60
Amount provided for during the year
68
Ending balance year 2015
1,034
49
Trade receivables are generally on 30 day terms. An allowance for doubtful debts is made where there is objective evidence that a
trade receivable is impaired. The carrying value of trade and other receivables approximates fair value.
At 30 June, the ageing analysis of trade receivables is as follows (in $000’s):
< 30
30-60
61-90
91+
Total
days
days
days
days
$000
$000
$000
$000
$000
2015
47,018
32,207
10,099
3,158
1,554
2014
47,423
28,907
13,091
2,904
2,521
Receivables past due but not considered impaired are: $5,293,000 (2014: $6,661,999). Payment terms have not been renegotiated,
however communications with counterparties have satisfied management that payment will be received in full.
8. Inventories
Raw materials
Finished goods
Work in progress
2015
2014
$000
$000
7,403
6,689
25,651
22,896
381
1,000
Provision to net realisable value
(1,415)
(938)
Total inventories at the lower of cost and net realisable value
32,020
29,647
An allowance for inventory obsolescence is made where there is objective evidence that inventories are carried in excess of their
net realisable value.
9. Investments
2015
2014
$000
$000
3
3
2015
2014
$000
$000
At cost
28,814
28,427
Accumulated depreciation
(4,794)
(4,390)
Net carrying amount
24,020
24,037
Shares
Unlisted corporations, at cost
10. Property, plant and equipment
Land and buildings
Plant and vehicles
At cost
Net carrying amount
66,878
91,780
(39,625)
(68,562)
27,253
23,218
1,860
2,972
Assets under lease
At cost
(217)
(788)
1,643
2,184
At cost
2,261
4,296
Net carrying amount
2,261
4,296
Net carrying amount
Capital expenditure work in progress
50
2015
2014
$000
$000
Total property, plant and equipment
At cost
Net carrying amount
99,813
127,475
(44,636)
(73,740)
55,177
53,735
2015
2014
$000
$000
24,037
24,226
Reconciliation of carrying amounts at the beginning and the end of the year
Reconciliation
Reconciliations of the carrying amounts of each class of property, plant and equipment
Land and buildings
At 1 July
Reclassification
306
44
Transfers
142
220
(465)
(453)
24,020
24,037
At 30 June
Plant and vehicles
23,218
23,636
Disposals
At 1 July
(198)
-
Reclassification
(306)
(44)
9,568
4,399
Transfers
(5,029)
(4,773)
At 30 June
27,253
23,218
2,184
523
-
1,860
Disposals
-
(40)
Transfers
(354)
-
(187)
(159)
1,643
2,184
Assets under lease
At 1 July
Additions
At 30 June
Capital expenditure work in progress
At 1 July
4,296
695
Additions
7,321
8,220
Transfers
(9,356)
(4,619)
2,261
4,296
53,735
49,080
Additions
7,321
10,080
Disposals
(198)
(40)
(5,681)
(5,385)
At 30 June
55,177
53,735
At 30 June
Total property, plant and equipment
At 1 July
There were no impairment losses recognised in the 2015 or 2014 financial years.
Leased manufacturing plant is pledged as security for the related finance lease liabilities.
Freehold land, buildings and plant and equipment are subject to a fixed and floating first charge of the Co-operative’s assets as disclosed in
note 14(c). All assets and undertakings are pledged as security on the interest bearing liabilities of the Co-operative and controlled entities.
All assets acquired under finance lease were acquired for nil cash flow and are considered to be a non-cash financing and investing activity.
51
11. Intangible assets and goodwill
Acquired goodwill
Trademark
Net carrying amount
2015
2014
$000
$000
34,309
34,372
2,729
2,729
37,038
37,101
(a) Impairment testing of goodwill
Goodwill acquired through business combinations has been allocated at an entity level to the relevant cash generating units
(CGU’s). The CGU’s for the Co-operative are Norco Foods, Norco Rural Retail and Norco Agribusiness. The goodwill acquired and
trademark are allocated to the Norco Foods CGU.
The discount rate applied to cash flow projections is 12% pre-tax (2014: 14%).
Key assumptions used in the value in use calculation are:
•
Revenue: based on projected growth predictions;
•
Cost of sales: based on revenue growth; and
•
Other costs: based on rural store growth and expected wage increases.
No reasonably possible change in the key assumptions noted would result in an impairment.
12. Trade and other payables
Current
Trade payables and accrued expenses
Member deposits
2015
2014
$000
$000
59,146
56,330
-
335
59,146
56,665
398
398
Non-current
Other payables
Trade payables are generally on 30 day terms. The fair value of trade and other payables approximates their carrying value.
13. Employee benefit liabilities
2015
2014
$000
$000
9,085
8,235
1,340
1,309
2015
2014
$000
$000
Lease liability
374
467
Norco Capital Units
111
122
1,675
-
2,160
589
1,397
1,759
Current
Employee entitlements
Non-current
Employee entitlements
14. Interest-bearing loans and borrowings
Current
Term loans - secured
Non-current
Lease liability
Term loans - secured
52
30,235
31,910
31,632
33,669
Term loans are secured by a fixed and floating charge over the assets of Norco Co-operative Limited.
During the period, the Group’s St George finance facility of $31.985 million was amended and is scheduled to expire on 31 October 2016.
Under the finance facility, the facility limit will reduce by a fixed amount immediately after each quarter end date. As at 30 June 2015,
the fixed amounts payable over the next twelve months have been classified as a current liability. The remainder of the liability has been
classified as non-current at 30 June 2015.
Refer to Note 14(d) for financing facilities available to the Co-operative.
(a) Fair values
The carrying amount of the Co-operative’s current and non-current borrowings approximates their fair value. The fair values have
been calculated by discounting the expected future cash flows at prevailing market interest rates.
(b) Interest rate, foreign exchange and liquidity risk
Details regarding interest rate, foreign exchange and liquidity risk is disclosed in Note 29.
(c) Assets pledged as security
The carrying amounts of assets pledged as security for current and non-current interest bearing liabilities are:
Property asset charges
2015
2014
$000
$000
53,534
51,551
Leased asset charges
1,643
2,184
Trademark
2,729
2,729
57,906
56,464
2015
2014
$000
$000
31,910
31,910
Total assets pledged as security
There are no specific terms and conditions related to the above pledges.
(d) Interest rate, foreign exchange and liquidity risk
The following financing facilities are available for the Co-operative at 30 June:
Term loan facilities
Used facilities
Unused facilities
75
1,075
31,985
32,985
Used facilities
-
-
Unused facilities
-
9,000
-
9,000
Bank overdrafts
Invoice discounting facilities
Used facilities
Unused facilities
-
-
17,000
-
17,000
-
Bank guarantees and finance leases
Used facilities
25
25
575
78
600
103
Used facilities
43
40
Unused facilities
97
100
140
140
Used facilities
-
100
Unused facilities
-
1,117
-
1,217
Used facilities
31,978
32,075
Unused facilities
17,747
11,370
49,725
43,445
Unused facilities
Business credit card facility
Other
Total finance facilities
53
15. Derivative financial instruments
2015
2014
$000
$000
78
-
313
-
Financial liabilities at fair value through OCI
Current
Interest rate swap contracts - cash flow hedges
Non-current
Interest rate swap contracts - cash flow hedges
The Co-operative has entered into interest rate swaps which are economic hedges, which are fair valued by comparing the contracted
rate to the future market rates for contracts with the same length of maturity. The $30 million of swaps have been designated as effective
interest rate swaps and therefore satisfy the accounting standard requirements for hedge accounting. The timing of the interest rate
payments for the swaps are in line with the interest rate payments of the bank facility.
16. Members’ interest
16.1 Movements in shares on issue
$000
Opening balance - 7,511,000 fully paid shares
7,511
Transferred to deposits ex-shareholders
(201)
Subscriptions
860
At 1 July 2014
8,170
Opening balance - 8,170,000 fully paid shares
8,170
Transferred to deposits ex-shareholders
(241)
Subscriptions
854
At 30 June 2015
8,783
16.2 Terms and conditions of contributed equity
Contributed equity has rights in accordance with the Co-operatives National Law (NSW).
17. Reserves
Asset revaluation reserve
Effective 1 July 2004, the Co-operative changed the valuation basis applied to non-current land and buildings. Under historical AGAAP, the
Co-operative carried land and buildings at fair value. From 1 July 2004, the Co-operative deemed the fair value to be cost. The asset revaluation
reserve represents the historical accumulation of revaluation adjustments. The reserve will no longer be available to offset decrements in the
value of land and buildings and will be transferred to retained earnings on depreciation and/or disposal of land and buildings.
Cash flow hedge reserve
This reserve records the portion of the gain or loss on a hedging instrument in a cash flow hedge that is determined to be an effective hedge.
18. Statement of cash flows reconciliation
18.1 Cash flow reconciliation
2015
2014
$000
$000
2,654
316
5,681
5,385
298
46
28
(84)
52
(6,612)
(2,311)
(4,232)
(39)
(74)
2,817
4,946
881
751
10,061
442
Reconciliation of net profit after tax to net cash flows from operations:
Profit before tax from continuing operations
Adjustments for:
Depreciation of property, plant and equipment
Member distribution expense
Net profit/(loss) on disposal of property, plant and equipment
Changes in assets and liabilities:
(Increase)/decrease in trade and other receivables
(Increase)/decrease in inventories
(Increase)/decrease in other assets
Increase/(decrease) in trade and other payables
Increase/(decrease) in provisions
Net cash flows from operating activities
54
18.2 Reconciliation of cash
Cash on hand and with financial institutions
2015
2014
$000
$000
4,226
1,802
19. Controlled entities
% equity interest
Investment $000
Principal
Name
activities
2015
2014
2015
2014
Logan Valley Dairies Pty Ltd
Dormant
100%
100%
165
165
Norco Wholesalers Pty Ltd*
Wholesaler
100%
100%
-
-
Fieldco Pty Ltd*
Dormant
100%
100%
-
-
Norcofields Pty Ltd*
Dormant
100%
100%
-
-
Beaudesert Milk Pty Ltd*
Dormant
100%
100%
-
-
Norco Milk Pty Ltd**
Dormant
100%
100%
-
-
Gold Coast Pty Ltd
Property Holder
100%
100%
15,783
15,783
ACN 146 859 074 Pty Ltd*
Dormant
100%
100%
-
-
800%
15,948
15,948
2015
2014
$000
$000
800%
* Investment <$101
** 100 shares at $1 each
20. Commitments
Capitalised finance lease commitments for plant and vehicles:
Within one year
416
516
1,465
1,781
-
119
Total minimum lease payments
1,881
2,416
Deduct future finance charges
(114)
(190)
1,767
2,226
2015
2014
$000
$000
After one year but not more than five years
More than five years
Non-cancellable operating lease commitments for equipment, land and buildings:
Within one year
2,512
2,514
3,766
4,509
-
36
6,278
7,059
2015
2014
$000
$000
Within one year
1,053
761
1,921
809
2,974
1,570
More than five years
Cancellable operating lease commitments for vehicles and plant:
21. Contingent liabilities
Legal Actions
The directors are not aware of any material legal actions being brought against the Co-operative, its controlled entities or any joint venture
to which the Co-operative holds an interest which has not been provided for.
Bank Guarantees
Contingent liabilities exist in respect of bank guarantees given to various parties that amount to $25,000 (2014: $25,000) and are not
included as creditors.
55
22. Financial guarantee contracts
The Co-operative has no outstanding financial guarantee contracts at 30 June 2015 (2014: Nil).
23. Capital management
The Co-operative manages its capital structure through regular reviews of its exposure to debt and members as shareholders.
The Co-operative has no set levels for equity and debt. The management of the Co-operative views members shares as equity.
Member’s interests are managed in line with the requirements of the Co-operatives National Law (NSW). The Co-operative has
complied with all requirements of the Co-operatives National Law (NSW) during the year.
24. Related party disclosures
Material transactions and balances with related parties are as follows:
Net trading
debt payable
(current)
Net trading
debt payable
(non-current)
Goods and
services
purchased
$000
$000
$000
2015
36,233
-
434,805
2014
28,356
-
340,278
2015
-
397
-
2014
-
397
-
Wholly owned group
Norco Wholesalers Pty Limited
Logan Valley Dairies Pty Limited
Shareholdings in controlled entities are outlined in Note 19.
Sales to and purchases from related parties are made in arm’s length transactions both at normal market prices and on normal
commercial terms.
25. Directors and executive disclosures
25.1 Key management personnel
(i)
The directors of Norco Co-operative Limited during the financial year were:
Greg McNamara (Non-Executive Chairman)
Peter Neal (Non-Executive) (Appointed 24/09/2014)
Anthony Wilson (Non-Executive Deputy Chairman)
Michael Jeffery (Non-Executive)
Leigh Shearman (Non-Executive)
Heath Hoffman (Non-Executive) (Appointed 12/11/2014)
Thomas Cooper (Non-Executive) (Ceased 12/11/2014)
David Hodges (Independent Director) (Ceased 12/11/2014)
(ii)
The executives of Norco Co-operative Limited during the financial year were:
Brett Kelly (Chief Executive Officer)
Camille Hogan (Chief Financial Officer)
Mark Myers (Co-operative Secretary)
Yasmin Lawrence (Human Resource Manager)
Andrew Burns (GM Sales and Marketing Norco Foods)
Ian Foote (GM Operations Norco Foods) (a)
Damon Bailey (GM Norco Rural/Agri)
Rob Randall (GM Milk Supply)
Robert Vandermaat (GM Operations Norco Foods) (b)
(a) Resigned as GM Operations Norco Foods effective 22 December 2014.
(b) Acting GM Operations Norco Foods from 1 December 2014. Appointed in the position as at 28 May 2015.
56
25.2 Compensation of key management personnel and Directors
Short term - wages and salaries
2015
2014
$
$
1,934,035
1,868,626
-
57,900
159,109
135,026
Incentive
Superannuation
Non-cash
Total compensation
26,167
15,000
2,119,311
2,076,552
9
8
Total KMP excluding Directors
The above amounts only relate to the cash and other benefits paid to key management personnel for the period of their employment
with the Co-operative or for the period they held a position as a key management person.
25.3 Transactions with and balances with key management personnel
Purchases
Purchases of milk from key management personnel and related entities are on the same commercial terms and conditions as
enjoyed by other non key management personnel members.
Sales
Sale of farm supplies and stores to key management personnel and related entities are on the same commercial terms and
conditions as enjoyed by other non key management personnel members.
25.4 Share transactions
2015
2014
540,866
501,622
66,288
48,162
Aggregate number of shares held by Co-operative key management personnel
and their related entities at 30 June
Aggregate number of shares acquired by key management personnel and their
related entities during the year
26. Superannuation commitments
All employees participate in an employer sponsored defined contribution/accumulation style superannuation plan. Contributions
by the Co-operative of 9.5% of employees’ wages and salaries are legally enforceable except employees of the Ice Cream division
who are paid 11% superannuation commitments in line with their Enterprise Bargaining Agreement.
27. Auditors’ remuneration
The auditor of Norco Co-operative Limited is Ernst & Young.
2015
2014
$
$
135,200
131,400
10,800
10,800
146,000
142,200
Amounts received or due and receivable by Ernst & Young for:
An audit or review of the financial report
Other services
Financial statement compilation
57
28. Information relating to Norco Co-operative Limited (the Parent)
2015
2014
$000
$000
84,210
78,402
Information relating to Norco Co-operative Limited:
Current assets
Total assets
160,646
153,467
(103,163)
(98,860)
Net assets attributable to members
57,483
54,607
Members interest
12,008
11,395
Net assets
45,475
43,212
Asset revaluation reserve
31,214
31,214
(391)
-
Retained profits
14,652
11,998
Total equity
45,475
43,212
Profit of the Parent entity
2,654
316
Total comprehensive income of the Parent
2,263
316
Total liabilities
Cash flow hedge reserve
Details of any guarantees entered into by the Parent entity in relation to the debts of its subsidiaries
The Parent’s share of the jointly controlled entities financial guarantees is included in disclosures in Note 22.
Details of any contingent liabilities of the Parent entity
The Parent’s share of the jointly controlled entities contingent liabilities is included in disclosures in Note 21.
Details of any contractual commitments by the Parent entity for the acquisition of property, plant or equipment
The Parent’s share of the jointly controlled entities commitments is included in disclosures in Note 20.
29. Financial risk management objectives and policies
The Co-operative’s principal financial liabilities, other than derivatives, comprise of loans and borrowings, trade and other payables,
and financial guarantee contracts. The main purpose of these financial liabilities is to finance the Co-operative’s operations and
to provide guarantees to support its operations. The Co-operative’s principal financial assets include loans, trade and other
receivables, and cash and short-term deposits that derive directly from its operations.
The Co-operative is exposed to market risk, credit risk and liquidity risk. The Co-operative’s senior management oversees the
management of these risks. The Co-operative’s senior management is supported by the Audit and Risk Management Committee
that advises on financial risks and the appropriate financial risk governance framework for the Co-operative. The Audit and Risk
Management Committee provides assurance to the Co-operative’s senior management that the Co-operative’s financial risk-taking
activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in
accordance with the Co-operative’s policies and risk objectives. All derivative activities for risk management purposes are carried
out by specialist teams that have the appropriate skills, experience and supervision. It is the Co-operative’s policy that no trading in
derivatives for speculative purposes shall be undertaken. The board of directors reviews and agrees policies for managing each of
these risks which are summarised below.
Risk exposures and responses
Interest rate risk
The Co-operative’s exposure to interest rates relates primarily to the Co-operative’s long term debt and associated obligations. The level
of debt is disclosed in Note 14.
At balance date, the Co-operative had the following mix of financial assets and liabilities exposed to Australian variable interest rate risk:
58
2015
2014
$000
$000
Financial assets and liabilities
Cash and cash equivalents
4,226
1,802
-
(31,910)
(391)
-
3,835
(30,108)
Interest-bearing loan
Net exposure
Interest rate swap contracts outlined in Note 15, with a fair value of $391,000 (loss) are exposed to fair value movements if interest
rates change. The Co-operative’s policy is to manage its finance costs using variable rate debt with an appropriate level of instruments
to fix interest exposure. The Co-operative constantly analyses its interest rate exposure. To manage this mix in a cost-efficient manner,
the Co-operative has entered into interest rate swaps, in which they agree to exchange, at specified intervals, the difference between
fixed and variable rate interest amounts calculated by reference to an agreed-upon notional principal amount. Consideration is given
to potential renewals of existing positions, alternative financing and the mix of fixed and variable interest rates.
The following sensitivity analysis is based on the interest rate risk exposures in existence at the reporting date:
Judgements of reasonably possible movements:
Post tax profit
Equity
Higher/(Lower)
Higher/(Lower)
2015
2014
2015
2014
$’000
$’000
$’000
$’000
+1.0% (100 basis points)
(42)
(319)
(834)
(319)
-1.0% (100 basis points)
42
319
834
319
The movements in post-tax profit are due to the movement in fair value of cash, based on movements in interest rates only.
Significant assumptions used in the interest rate sensitivity analysis include:
•
A price sensitivity of derivatives based on a reasonably possible movement of interest rates at balance
dates by applying the change as a parallel shift in the forward curve.
•
The net exposure at balance date is representative of what the Co-operative was and is expecting to be
exposed to in the next twelve months from balance date.
Foreign currency risk
The Co-operative has no material exposure to foreign currency therefore this is not an applicable risk.
Commodity price risk
The Co-operative’s exposure to commodity price risk is present through the grain purchasing requirements for the Agribusiness
business. It is the Co-operatives policy to secure grain quantities and prices through forward grain contracts. As these contracts
are regular advance purchase contracts for process inputs, derivative accounting is not applied and contract fair value movements
are not recorded.
Credit risk
Credit risk arises from the financial assets of the Co-operative, which comprise cash and cash equivalents and trade and other
receivables. The Co-operative’s exposure to credit risk arises from potential default of the counter party, with a maximum exposure
equal to the carrying amount of these instruments. Exposure at balance date is addressed in each applicable note.
The Co-operative does not hold any credit derivatives to offset its credit exposure.
The Co-operative trades only with recognised, creditworthy third parties, and as such collateral is not requested nor is it the Cooperative’s policy to securitise its trade and other receivables.
It is the Co-operative’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures
including an assessment of their independent credit rating, financial position, past experience and industry reputation. Risk limits
are set for each individual customer in accordance with parameters set by the board. These risk limits are regularly monitored.
In addition, receivable balances are monitored on an ongoing basis with the result that the Co-operative’s exposure to bad debts
is not significant.
There are no significant concentrations of credit risk within the consolidated entity.
59
Liquidity risk
The Co-operative’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts,
bank loans, finance leases and committed available credit lines.
The table below reflects contractual finance principal repayments and interest resulting from recognised financial liabilities as of 30
June 2015. Cash flows for financial liabilities without fixed amount or timing are based on the conditions existing at 30 June 2015.
The remaining contractual maturities of the consolidated entity’s and parent entity’s financial liabilities are presented with an
analysis of the financial assets.
2015
2014
$000
$000
0-1 year
61,125
56,116
1-5 years
32,098
33,948
-
119
93,223
90,183
Over 5 years
Maturity analysis of financial assets and liability based on management’s expectation.
The risk implied from the values shown in the table below reflects a balanced view of cash inflows and outflows. Leasing obligations,
trade payables and other financial liabilities mainly originate from the financing of assets used in our ongoing operations such as
property, plant, equipment and investments in working capital e.g. inventories and trade receivables. These assets are considered
in the consolidated entity’s overall liquidity risk.
1 to 5
Over
<12 months
years
5 years
Total
$000
$000
$000
$000
4,226
-
-
4,226
47,437
-
-
47,437
(1,675)
(30,235)
-
(31,910)
(416)
(1,465)
-
(1,881)
(59,146)
(398)
-
(59,544)
(9,574)
(32,098)
-
(41,672)
1 to 5
Over
<12 months
years
5 years
Total
$000
$000
$000
$000
1,802
-
-
1,802
Year ended 30 June 2015
Finance leases
Net maturity
Year ended 30 June 2014
47,489
-
-
47,489
-
(31,910)
-
(31,910)
(516)
(1,781)
(119)
(2,416)
Finance leases
Net maturity
(56,665)
(398)
-
(57,063)
(7,890)
(34,089)
(119)
(42,098)
Fair value
The methods for estimating fair value are outlined in the relevant notes to the financial statements.
30. Events after the reporting period
There have been no significant events occurring after the reporting period which may affect either the Co-operative’s operations
or results of those operations or the Co-operative’s state of affairs.
60
DIRECTORS’ DECLARATION
In accordance with a resolution of the directors of Norco Co-operative Limited, I state that:
In the opinion of the directors:
(a)the financial statements and notes of the Co-operative are in accordance with the Corporations Act 2001
and Co-operatives National Law (NSW), including:
(i)giving a true and fair view of the Co-operative’s financial position as at 30 June 2015 and of its
performance for the year ended on that date; and
(ii)complying with Accounting Standards, as required by the Co-operatives National Law (NSW); and
(b)there are reasonable grounds to believe that the Co-operative will be able to pay its debts as and when they
become due and payable.
On behalf of the Board
G.J. McNamara
Chairman
Lismore
30 September 2015
61
62
63
Looking back... to 30 June 1965
On 30 June 1965 the number one song on the Australian music chart was “Crying in the Chapel” by Elvis Presley
and the Wheels “Car of the Year” was the XP Falcon.
In relation to Norco, the board of directors consisted of 12, with Mr JA Stockdale the chairman and Mr AJ Barlow
the deputy chairman. Directors were Messrs TB Armstrong, HE Gibson, CH Hall, JA Johnston, RL Johnston, JS
McKeand, CT Mustard, RA Robson, WA Slater and GA Steel. The general manager was Mr JK Donaldson and the
secretary Mr John T Swain.
One of the two special resolutions proposed by the Board to members at the 1965 Annual General Meeting
related to the introduction of decimal currency on 14 February 1966 and included as part of the resolution “.....each
of the issued shares of stock units of £1 each in the capital of the society be subdivided into two shares or stock
units of $1 each so that existing members at the time of conversion to decimal currency shall thereafter hold two
$1 shares or stock units for every £1 share or stock unit previously held.”
This must have been a great change for the co-operative and the report even contained a comparative balance
sheet for 30 June 1965 expressed in both pounds and dollars as an example.
Butter production for the year was 23,276,147 lbs (10,391 tons) with a final pay rate of 4/1 lb butterfat. The total
milk handled for the year was 4,670,386 gallons, cheese production was 713 tons and the number of pigs killed
was 22,502. Turnover in the stores department was a record according to the report, with a rebate of ninepence in
the pound paid on rebatable purchases.
64
corporate directory
Registered Office
Norco Co-operative Limited
ARBN 009 717 417 / ABN 17 009 717 417
T: 02 6627 8000 F: 02 6621 9673
W: www.norco.com.au
Financiers/Bankers
St George Bank
Level 13, 182 George Street
SYDNEY NSW 2000
Auditors
Ernst & Young Chartered Accountants
Level 5 Waterfront Place, 1 Eagle Street
BRISBANE QLD 4000
Solicitors
Thomsons Geer Lawyers
BRISBANE QLD 4000
S+P Lawyers
LISMORE NSW 2480
Piper Alderman Lawyers
SYDNEY NSW 2000
BRANCH directory
head offices
NORCO CORPORATE
(PO Box 486 LISMORE NSW 2480)
Ph: 02 6627 8000 Fax: 02 6621 9673
NORCO RURAL
‘Windmill Grove’, 107 Wilson Street,
Ph: 02 6627 8000 Fax: 02 6622 1730
NORCO AGRIBUSINESS
Ph: 02 6627 8000 Fax: 02 6622 1730
MILK SUPPLY
Ph: 02 6627 8029 Fax: 02 6622 7410
NORCO FOODS
NORCO MILK – LABRADOR
Cnr Pine Ridge Road & Gold Coast Hwy
LABRADOR QLD 4215
(PO Box 530, SOUTHPORT QLD 4215)
Ph: 07 5511 7200 Fax: 07 5594 0101
NORCO MILK – RALEIGH
North Street RALEIGH NSW 2454
Ph: 02 6692 0000 Fax: 02 6655 4447
contents
Corporate Profile
2
Norco Rural / Agribusiness
16
Facts at a Glance
4
Financial Management
18
Chairman’s Report
5
Norco People
19
Chief Executive Officer’s Report
8
Directors’ Report
20
Business Unit Reports:
Auditor’s Independence Declaration 27
Norco Foods
Corporate Governance Statement
29
- Sales and Marketing
13
Financial Statements
36
- Operations
14
Independent Auditor’s Report
62
15
Corporate and Branch Directories
65
Milk Supply
ICE CREAM BUSINESS UNIT
Union St SOUTH LISMORE NSW 2480
Ph: 02 6627 8000 Fax: 02 6621 6120
NORCO AGRIBUSINESS
– GOLDMIX AND GRAIN TRADING
HEATHERBRAE
9 Hank St HEATHERBRAE NSW 2324
Ph: 02 4987 6500 Fax: 02 4987 6099
GOLDMIX STOCKFEEDS
Krauss Ave SOUTH LISMORE NSW 2480
Ph: 02 6621 3042 Fax: 02 6621 9170
KEMPSEY
3 Kemp St WEST KEMPSEY NSW 2440
Ph: 02 6562 6393 Fax: 02 6563 1020
GOLDMIX STOCKFEEDS
WINDERA QLD 4605
Ph: 07 4168 6186 Fax: 07 4168 6214
KINGAROY
97 River Road KINGAROY QLD 4610
Ph: 07 4163 6310 Fax: 07 4162 4992
GOLDMIX CREST SEEDS
Ph: 07 4630 2318 Fax: 07 4630 2348
GRAIN TRADING – TOOWOOMBA
Ph: 07 4637 3315 Fax: 07 4637 3399
ALSTONVILLE
17 Kays Lane Russelton Estate
ALSTONVILLE NSW 2477
Ph: 02 6628 8315 Fax: 02 6628 5765
ARMIDALE
252 Mann Street ARMIDALE NSW 2350
Ph: 02 6771 4669 Fax: 02 6771 1187
BEAUDESERT
9A Thiedeke Rd BEAUDESERT QLD 4285
Ph: 07 5541 4882 Fax: 07 5541 1025
BELLINGEN
1076 Waterfall Way
BELLINGEN NSW 2454
Ph: 02 6655 9792 Fax: 02 6655 2266
BOWRAVILLE
51 Carbin St BOWRAVILLE NSW 2449
Ph: 02 6564 8648 Fax: 02 6564 7425
BUNDABERG
71 Gavin St BUNDABERG QLD 4670
Ph: 07 4151 7883 Fax: 07 4154 4341
CASINO
136 Dyraaba Street CASINO NSW 2470
Ph: 02 6661 2100 Fax: 02 6662 6007
COFFS HARBOUR
5/24 Isles Drive
SOUTH COFFS HARBOUR NSW 2450
Ph: 02 6658 0393 Fax: 02 6658 0374
DUNGOG
Stroud Road DUNGOG NSW 2420
Ph: 02 4992 1087 Fax: 02 4992 3000
GAYNDAH
59 Dalgangal Rd GAYNDAH QLD 4625
Ph: 07 4140 8542
GLEN INNES
165 Lang St GLEN INNES NSW 2370
Ph: 02 6732 2162 Fax: 02 6732 5642
GLOUCESTER
Cnr Church & Phillip Streets
GLOUCESTER NSW 2422
Ph: 02 6558 9600 Fax: 02 6558 9666
GRAFTON
19 Queen Street GRAFTON NSW 2460
Ph: 02 6643 5630 Fax: 02 6642 7245
www.norco.com.au
KYOGLE
Willis Street KYOGLE NSW 2474
Ph: 02 6632 2920 Fax: 02 6632 1221
LISMORE
105 Wilson Street
Ph: 02 6627 8266 Fax: 02 6621 2286
MACKSVILLE
Tilly Willy St MACKSVILLE NSW 2447
Ph: 02 6568 4057 Fax: 02 6568 2308
MURGON
21 Lamb Street MURGON QLD 4605
Ph: 07 4168 3060 Fax: 07 4168 2996
MURWILLUMBAH
17 Buchanan Street
MURWILLUMBAH NSW 2484
Ph: 02 6672 2311 Fax: 02 6672 5120
STUARTS POINT
906 Stuarts Point Road
STUARTS POINT NSW 2441
Ph: 02 6569 0955 Fax: 02 6569 0983
TAREE
5 Grey Gum Road TAREE NSW 2430
Ph: 02 6551 2999 Fax: 02 6551 2522
TENTERFIELD
445 Rouse St TENTERFIELD NSW 2372
Ph: 02 6736 5902 Fax: 02 6736 2270
WAMURAN
1055 D’Aguilar Highway
WAMURAN QLD 4512
Ph: 07 5496 6500 Fax: 07 5496 6406
WINDERA DEPOT
WINDERA QLD 4605
Ph: 07 4168 6186 Fax: 07 4168 6214
WOOLGOOLGA
16 Featherstone Drive
WOOLGOOLGA NSW 2456
Ph: 02 6654 2905 Fax: 02 6654 1031
WOOLGOOLGA CARTON SERVICES
8 Bosworth Road
WOOLGOOLGA NSW 2456
Ph: 02 6654 8078 Fax: 02 6654 0103
– NORCO BOWDLERS
NORCO BOWDLERS – TOOWOOMBA
Ph: 07 4637 3300 Fax: 07 4637 3399
NORCO BOWDLERS – ALLORA
120 Allora – Clifton Rd ALLORA QLD 4362
Ph: 07 4666 2210 Fax: 07 4666 3520
NORCO BOWDLERS – QUINALOW
3 Myall Street QUINALOW QLD 4403
Phone: 07 4692 1333
65
2015 Annual Report
An Australian, farmer owned dairy co-operative since 1895

2015 ANNUAL REPORT

Transcription

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