2009 Annual Report

GrainCorp Limited
annual report 2009
Transforming our business
GrainCorp has
been
transformed
into an international agribusiness
with operations in Australia,
Canada, the United States and
the United Kingdom
With the acquisition in November 2009 of Canada Malting
Company (Canada), Great Western Malting (USA), Bairds Malt
(UK) and Barrett Burston Malting (Australia) – making it the
world’s fourth largest commercial malt producer – GrainCorp
took one of the most significant steps forward in its
93 year history.
Contents
About GrainCorp
Results summary and highlights
Chairman’s review
Managing Director’s review
Review of operations
Storage and logistics
Port elevators
Trading
2
4
6
7
10
10
12
14
Merchandise and Allied Mills
People, community and environment
Board of directors
Executive management
Corporate governance statement
Financial report
Shareholder information
Corporate directory
16
18
22
23
24
29
107
108
1
About GrainCorp
From what was essentially an Australian grain industry supply chain and grain trading
company, GrainCorp has, following the acquisition of Canada Malting Company,
Great Western Malting, Bairds Malt and Barrett Burston Malting, been transformed
into an international agribusiness. GrainCorp maintains a strong supply chain focus,
but with the potential for half of our earnings being derived from barley (malt)
and wheat (flour) processing.
Transformation timeline 2005-2009
Implementation of
strategic plan led to
annual cost savings of
more than $20 million
Increased NPAT/Tonnes
received, stored and
handled
Profitable entry into
the bulk wheat export
market
Graincorp’s existing business in Australia
Country and ports storage and handling
• Valuable portfolio of infrastructure assets
• Up to 20 million tonnes of storage capacity
• Up to 13 million tonnes of annual grain
shipping capacity through seven bulk
grain port elevators
Trading
•M
ajor Australian grain trader, exporting
bulk wheat, barley and other grains
• Trades more than three million tonnes
of grain a year
Downstream processing
•P
rocesses wheat for flour via 60%
ownership of Allied Mills, Australia’s
largest producer of bakery premixes
and flour for the bread and food sector
2
Acquisition of United
Malt Holdings
in November 2009
GrainCorp Malt’s strategic fit
• A portion of Barrett Burston’s barley can
be sourced from GrainCorp’s network
in Australia
• Expanded business will create demand for
our storage and handling network in Australia
• GrainCorp Malt owns storage assets in
Canada and the UK
•G
rainCorp’s grain sourcing, market
intelligence and trading experience will
complement GrainCorp Malt’s international
barley procurement
•G
rainCorp’s existing ability to create
and maintain grower relationships
•P
rocesses barley to create malt for supply
to brewers and distillers
•W
ell positioned for further international
growth opportunities
NORTH
AMERICA
EUROPE
AFRICA
SOUTH
AMERICA
AUSTRALIA
Locations
North
America
United
Kingdom
•C
anada Malting
Company – the largest
malt producer in Canada
•B
airds Malt Limited –
major malt producer
•G
reat Western Malting –
one of the largest
malt producers in the
United States
•S
ervicing domestic
brewers, the growing
North American
micro-brew market and
export markets
Australia
• L argest grain storage
network on the east
coast – operating
seven bulk grain export
elevators
•S
upplying domestic
brewers and Scottish
distilling industry
•G
rain value adding
– Allied Mills largest
supplier of bakery
premixes and flour
to bakeries and
food sector
•S
cotgrain and Saxon
Agriculture – leading
suppliers of seed and
other farm inputs
•B
arrett Burston Malting
– supplying malt to
major Australian and
Asian brewers
Grain
growers
EBITDA by segment
‘Take-or-pay’ trains
Contracted road
transport
Road
Port
elevators
Rail
other bulk
handlers
Domestic
customers
Australia 66%
UK 12%
US 8%
Canada 14%
•G
rainCorp Malt provides
vertical and geographic
diversification
•M
ajority of revenue will
continue to be generated
in Australia
•P
latform for further
international growth
Graincorp SUPPLY CHAIN BUSINESS MODEL
Country storage
network
Revenue by geographic
Segment
other bulk
handlers
Export
markets
Storage and
Logistics 23%
Port Elevators
17%
Trading 15%
Allied Mills 2%
Malt 43%
•E
arnings from malt
production are not
significantly dependent
on Australian weather
conditions
• Increased exposure to
downstream processing
revenue provides
increased earnings
stability
3
Results summary and highlights
Key financial results show that GrainCorp’s transformation has led to a significant
improvement in financial performance
180
150
120
EBITDA up by
1
EBITDA – $M
$114 million
90
60
30
0
1 EBITDA is earnings before interest, tax, depreciation
and amortisation.
05
06
05
06
05
06
07
08
07
08
09
Cash flow up by
$229 million
OPERATING CASH FLOW – $M
250
200
150
100
50
0
09
-50
80
Net Profit After Tax
40
NPAT – $M
$63.2 million
60
20
0
-20
-40
4
07
08
09
FY09 Results Summary
FY09
FY08
Business Drivers (million tonnes)
Grain carryin
Country network grain receivals
Grain received at port ex-farm and from other Bulk Handling Companys
Grain exports handled
GrainCorp bulk wheat exports
Domestic outload
Grain carryout
Non-grain exports 2.2
9.6
1.1
5.2
1.3
4.9
2.9
1.3
1.2
5.8
0.7
0.8
–
4.7
2.2
2.1
1,729.8
165.2
122.1
63.2
Nil
1,534.2
51.3
11.1
(19.9)
Nil
Key Results ($ million)
Revenue
EBITDA
EBIT
Net profit / (loss) after tax
Dividend per share
FY09 Business Units Results Summary
BUSINESS UNIT
$ MILLION
FY09
REVENUE
FY09
EBITDA
FY08
REVENUE
FY08
EBITDA
MOVEMENT
EBITDA %
401.6
130.5
1,346.9
73.1
–
-225.5
1,729.8
65.7
78.5
39.5
-22.8
9.8
-5.4
165.2
186.5
51.8
1,291.2
90.4
–
-85.7
1,534.2
21.6
10.5
28.4
4.2
10.6
-24.0
51.3
204.2
647.6
39.1
–
-7.5
77.3
222.1
2009
2008
2007
2006
2005
Drivers
Total receivals
Outloadings – Domestic
Outloadings – International
Carryover
MMT
MMT
MMT
MMT
10.7 4.9 5.2 2.9 6.5 4.7 0.8 2.2 3.0 5.7 1.0 1.2 12.1 5.1 5.3 4.9 10.2
5.3
4.7
3.2
$M
$M
1,729.8 165.2
1,534.2 51.3 832.1 31.9 832.9 120.9 702.9
92.2
$M
63.2 (19.8) 31.7 13.5
Assets and Equity
Total assets
Net tangible assets per ordinary share2
Total equity
Long-term debt to equity Net debt to net debt and equity3
$M
$
$M
%
%
1,083.8 6.8 693.8 15.1
4.4
970.2 6.4 399.0 57.2
45.8
975.6 7.0 412.4 45.8
42.5
830.2
6.3
396.7
60.8
42.6
Shareholder Returns
Basic earnings / (loss) per ordinary share
Return on equity
Dividend per ordinary share4
Dividend yield per ordinary share4, 5
cents
%
cents
%
33.8 9.1 –
–
(34.5) (5.0) 10.0 1.5 77.6
7.7 50.0
8.9
13.9
3.4
5.0
0.9
Storage and Logistics
Port Elevators
Trading
Merchandise and other
Allied Mills
Corporate, head office and eliminations
Total
Five Year Financial Highlights
Earnings
Total revenue
EBITDA1
Net profit / (loss) after tax attributable
to members
1
2
3
4
5
(19.9) 1,098.3 5.9 436.1 51.5
50.5
(11.4)
(4.6) –
–
EBITDA is earnings before interest, tax, depreciation and amortisation.
Excludes reset preference shares at nominal value.
Debt includes an amount for commodities inventory which is offset by an inventory balance.
All dividends were fully franked and yields include franking credit.
Using closing price immediately prior to or on 30 September divided by dividends for year.
5
“The acquisition of the former United Malt Holdings... strengthens
our core business, reduces the seasonal volatility of our
earnings, substantially increases the contribution to earnings
from the downstream processing of grain and positions
us well for future growth.”
Chairman’s review
criticism of our gearing levels, meant the
board had two choices. Either hope for a
good 2009/10 harvest to maintain cash
flows that would allow us to continue
to meet our banking covenants, or take
a more conservative approach and go
to the marketplace to strengthen our
balance sheet and reduce debt.
This financial year has been one of
the most challenging and rewarding
GrainCorp has ever experienced.
The new marketing opportunities for
the wheat industry with the removal
of the bulk wheat export monopoly,
that came into effect in July 2008,
was something that GrainCorp – and
I as Chairman – had been advocating
for some years.
We were nevertheless uncertain about
how growers would adapt to the new
circumstances. Multiple exporters
and significantly reduced rail capacity
presented new challenges, and as a
consequence we began the year in
uncharted territory.
It quickly became apparent that growers
were comfortable marketing their wheat to
a range of export buyers, as they have been
doing domestically over the past 20 years.
The new export wheat market, combined
with better-than-expected seasonal
conditions in our northern region and
higher infrastructure revenues, contributed
to the significant improvement in the
company’s performance.
Another uncertainty for us at the
start of the year was how the global
financial crisis would play out. While we
had received strong support from our
bankers, the uncertainty about the future
availability of credit, and the market’s
6
We chose to go to the market and we were
very well supported by the investment
community. Going to the market when we
did was not risk free. We raised funding
at a time when we did not know just
how strongly our results this year would
be. Factors unknown to us at the time –
including one million tonnes of additional
winter crop receivals post harvest,
something that had never occurred
previously – resulted in the company
upgrading its results on two occasions.
Being involved in agriculture means
our profit performance will always be
dependent on rainfall and the capacity
of farmers to produce grain. The cyclical
nature of our earnings is something we
accept. That said, for some time we have
been looking to expand and diversify our
business, to allow the company to return
a profit, no matter the size of the crop.
We believe the acquisition of United
Malt Holdings meets this objective. It
strengthens our core business, reduces
the seasonal volatility of our earnings,
substantially increases the contribution
to earnings from the downstream
processing of grain and positions us
well for future growth. Significantly, the
acquisition transforms GrainCorp into
an international business.
Finally, I would like to take this
opportunity to thank all of the company’s
employees and the management team,
led by Mark Irwin, for their outstanding
contribution and dedication over the
past year. This has been a busy year
for GrainCorp but one which has laid the
foundations for robust future growth.
Don Taylor
Chairman
“There is no doubt that had we not transformed the business
internally and recapitalised the balance sheet, we would not have
been in the position to execute this international transaction.”
Managing Director’s review
led to a significant increase in efficiency
of the eight trains contracted in NSW and
Victoria, and the four branch line trains
in NSW, and allowed us to supply rail
transport not only for our own grain, but
also for other exporters.
By any measure, 2009 was a seminal
year for GrainCorp. The transformation
of the company which commenced in
2006, and was particularly evident in
the past 18 months, finally bore fruit.
In that time we revised and revitalised
our management team. We restructured
a number of key functions, created
an in-house grain accumulation team,
and improved our focus on customer
service and commercial returns. We also
expanded the quality and reach of our
grain trading operations.
As a new bulk wheat exporter, we had
to develop systems and processes
that focused on delivering high quality
products to international customers. This
focus has allowed us to add value at
each step of the supply chain: the way we
trade, store, transport and export grain.
Fiscal 09 was the first year GrainCorp
had the ability to manage the full logistics
chain from country storage to port. The
withdrawal of Pacific National from hauling
grain on rail in late 2007 left GrainCorp
with no choice other than to begin playing
a meaningful role in rail logistics.
To ensure there was a rail provider in
NSW and Victoria, GrainCorp entered into
a five year ‘take-or-pay’ contract for rail
haulage with Pacific National. Rail is the
most efficient means of moving export
grain long distances from receival sites
to ports. Our management of rail freight
Our capital restructure, achieved through
a $198 million equity raising in mid
2009, was a significant factor in the
transformation of GrainCorp. It meant we
had the confidence, and the confidence of
the market, to negotiate the successful
acquisition of United Malt Holdings
(UMH). There is no doubt that had we not
transformed the business internally and
recapitalised the balance sheet, we would
not have been in the position to execute
this international transaction.
An international
agribusiness
With the acquisition in November
2009 of Canada Malting Company, Great
Western Malting, Bairds Malt and Barrett
Burston Malting, GrainCorp has taken
one of the most significant steps in its
93 year history.
The new GrainCorp is approximately double
the size, with more than 1,400 staff in
five countries and a market value on the
Australian Securities Exchange of over
$1 billion.
The four well-known and respected
maltsters we acquired are a logical and
strategic fit for GrainCorp’s existing
business, as we already have downstream
processing experience from our
60% interest in Allied Mills.
The new earnings base is geographically
diverse, reducing our reliance on eastern
Australian weather conditions and giving
us more earnings stability.
The acquisition provides a larger
infrastructure footprint, improved trading
knowledge, active conditions for growth,
particularly internationally, and gives us
choices which would otherwise not have
been available. For example, we now have
the ability to procure grain in Australia,
7
Managing Director’s review
Canada, the US and the UK and sell it
into markets such as the United Kingdom,
Canada, the United States, the Middle
East and Australia.
GrainCorp to develop grain supply chains
in these significant markets, should we
choose to do so.
Canada Malting Company, Great Western
Malting, Bairds Malt and Barrett Burston
Malting all supply malt to some of the
world’s largest brewers and distillers.
Their production volumes are underpinned
by long-standing customer relationships,
by a capacity to expand and by strong
underlying industry fundamentals.
Looking ahead
Growth prospects
A new business unit, ‘GrainCorp Malt’,
has been formed, replacing the United
Malt Holdings name. Canada Malting
Company, Great Western Malting, Barrett
Burston Malting and Bairds Malt are
well known and respected brands.
To ensure we protect their inherent
value, each organisation will retain its
name and will operate as a separate
GrainCorp business. Also unchanged will
be their focus on procuring high-quality
malting barley, controlling process costs,
producing superior quality malt and
providing outstanding customer service.
The malt businesses have demonstrated
strong Australian and international growth.
They currently produce approximately
1.05 million metric tonnes (MT) of malt
per year. There are expansion projects
underway to increase production capacity
to up to 1.2 MT a year by early 2011.
Between them, Canada Malting Company,
Great Western Malting, Bairds Malt
and Barrett Burston Malting operate
14 facilities which are located near, or
with convenient access to, the world’s
main barley growing and trading regions.
Malt barley is grown in a limited number
of countries, meaning there is an inherent
barrier to entry to this market. Most malt
produced, around 95%, goes into beer
production, 4% is used in whisky and the
rest is used in various food products.
Global beer consumption has grown
steadily over the past seven years,
with an average annual growth of
approximately 4% between 2001 and
2008. Much of that growth has come
from increased consumption in emerging
markets. At present, beer consumption
is relatively low in Asia, Latin America
and Africa, providing potential for further
growth. As a result, we believe the
industry fundamentals are attractive.
Canada Malting Company and Great
Western Malting also provide a direct
presence in the export-focused Canadian
and United States grain markets, enabling
8
In many ways the UMH transaction was
more a merger than an acquisition, and
is complementary, rather than a cost
synergy-based transaction. We are putting
together two high quality management
teams and aligning the interests of
both businesses.
The new enlarged GrainCorp will be led
by a team made up of members from
the existing GrainCorp and Canada
Malting Company, Great Western Malting,
Bairds Malt and Barrett Burston Malting
senior management teams. The key malt
businesses managers, including Chief
Executive Officer Jim Anderson, and the
four operating company presidents, have
executed new terms of employment.
I would like to take this opportunity to
thank every one of the people in our
respective businesses who have laboured
so long and with such determination to
make the transformation of GrainCorp a
reality. Thanks to your efforts, the future
looks truly bright.
mark irwin
Managing Director
Our management of rail freight led to a significant increase
in efficiency of the eight trains contracted in NSW and Victoria,
and the four branch line trains in NSW, and allowed us
to supply rail transport not only for our own grain, but also
for other exporters.
9
Storage and
Logistics
Review of operations
10
Key features
• A 66% increase in up-country grain receivals to 9.6 MT
• Increased profit per tonne
• Restructured the business in March 2009 to improve
decision making and strengthen grower relationships
• Secured an additional nine grains trains, three
in Queensland, two in Victoria and four branch line
trains in NSW
National for eight mainline export grain
trains in NSW and Victoria. It is pleasing
to report that we were able to increase
the annual volumes moved per train
by approximately 100,000 tonnes,
ensuring a sustainable grain rail service
for our system and the industry as
a whole.
In July, we took ownership of four
branch line trains. These trains provide
grain haulage on the NSW branch line
network and support our high capacity
grain sub-terminals. In October 2009,
we entered a three year arrangement
for three trains in Queensland.
The earnings contribution from our
Storage and Logistics business
increased to $44 million EBIT compared
with last year’s $1 million loss. The
result was primarily driven by increased
grain receival volumes (9.6 million
tonnes (MT) compared with 5.8 MT in
the prior reporting period (PRP)) and
higher grain carry-in (2.2 MT compared
with 1.2MT PRP), as well as increased
revenues from the greater use of our
rail assets.
In March 2009, we restructured
our country grain receival and storage
network management to promote
closer grower and buyer customer
relationships.
During the year, six new regions:
Queensland, Northern NSW, Central
NSW, Southern NSW, South Eastern
Victoria and North Western Victoria
were formed as a way of better
managing our country operations.
Each regional manager has a smaller
area to cover than the former divisional
managers. This not only allows them
to engage more effectively with growers,
it empowers them to make decisions
and be more responsive to grower
problems. They are also better placed
to capture new business opportunities
as we expand our range of supply
chain services.
EASTERN AUSTRALIAN GRAIN PRODUCTION
VS GRAINCORP RECEIVALS
East coast grain production
GrainCorp grower receivals
GrainCorp stores and
handles around 60% of
the grain grown in eastern
Australia. As our network is
open access, up to 80% of
the grain passing through
it is owned or traded by
third parties.
More than $15 million in fixed costs
have been removed from the Storage
and Logistics business over the past
four years. The current flexible cost
structure better matches the variability
of grain production and receivals. This,
together with rail freight management,
should allow us to maximise returns
from the business in the year ahead.
20
18
16
14
12
10
8
6
4
2
0
99
00
01
02
03
04
05
06
07
08
09
As the Managing Director mentioned,
2009 was the first year of our five year
take-or-pay arrangement with Pacific
11
Port Elevators
Review of operations
12
Key features
• Elevated over five million tonnes compared with less
than one million tonnes in the previous year
• A 40-50% decrease in non-grain volumes, largely
as a result of the global financial crisis’ impact on
demand for paper in Japan
Our terminals – at Mackay, Gladstone,
Fisherman Islands (Brisbane), Carrington
(Newcastle), Port Kembla, Geelong and
Portland – have the capacity to elevate
up to 13 million tonnes of grain a year.
We also operate two grain container
packing facilities, at Fisherman Islands in
Brisbane and at Sunshine in Melbourne.
Our Portland, Geelong and Fisherman
Islands terminals also elevate up to
1.2 million tonnes of woodchip a year,
while our bulk commodity terminals at
Pinkenba (Brisbane) and Kooragang Island
(Newcastle) handle and store mineral
sands, fertiliser and protein meals.
The five million tonnes exported
compared with less than one million
tonnes the prior year was undoubtedly
a key highlight for the year.
The shortage of rail capacity in
Queensland had a significant impact
on the operation of Fisherman Islands.
Around 70% of the total tonnage elevated
was received by road. Historically the mix
has been 70% rail and 30% road.
The new Barrett Burston malt house at
Pinkenba, part of an $80 million plus
redevelopment of the site, commenced
construction mid year. The new malt
facility and the upgraded storage facilities
should be operating by early 2011.
The contribution by the Ports business
unit to EBIT was $66 million, compared
with $5 million the previous financial
year. The FY08/09 result was enhanced
by continuation of the cost reduction
program that commenced in 2005.
During 2009, as a requirement of the
Wheat Export Marketing Act 2008,
GrainCorp had to develop, in consultation
with the Australian Competition and
Consumer Commission, a port access
undertaking. This undertaking was
approved at the end of September 2009
and regulates the provision of wheat
elevation services at GrainCorp’s seven
bulk grain terminals.
The global financial crisis contributed to
a decline in woodchip exports to Japan of
around 40%-50%. Before the crisis, Japan
was producing about 30 million tonnes
of paper a year. The drop to around
27 million tonnes of paper had a
significant effect on the volume of
woodchips handled through Portland,
Geelong and Fisherman Islands.
Significant declines in other non-grain
GRAINCORP’S EASTERN AUSTRALIA PORT NETWORK
AND COUNTRY REGIONS
2.5
NON-GRAIN EXPORTS HANDLED – MMT
GrainCorp operates seven of the eight
bulk grain ports in eastern Australia
and handles over 80% of all bulk
grain exports.
products, such as sand, dropped
overall non-grain volumes by 40%, to
1.3 million tonnes.
GRAIN BULK PORTS
OTHER
2.0
1.5
1.0
0.5
MACKAY
0
05
06
07
08
Queensland
09
6
GRAIN EXPORTS HANDLED – MMT
The removal of the bulk
wheat export monopoly in
July 2008, and the entry into
the bulk wheat export market
of 22 accredited exporters,
injected new competition
into the wheat export sector.
approximately 700,000 tonnes was
sorghum, compared with an average
quantity of 200,000 tonnes.
Northern NSW
5
4
Central NSW
3
Southern NSW
North
Western
Victoria
2
PORTLAND
1
GLADSTONE
PINKENBA
FISHERMAN
ISLANDS
KOORAGANG
NEWCASTLE
PORT KEMBLA
South
Eastern
Victoria
GEELONG SUNSHINE
0
05
06
07
08
09
Removal of the bulk wheat export
monopoly introduced more competition
into the wheat export market and
changed the way customers accumulate
cargoes. In 2009, significant quantities
of high protein wheat were delivered to
European markets, achieving good returns
for exporters.
Most activity in 2009 was focused on
Queensland and New South Wales.
Our Fisherman Islands port elevated
1.5 million tonnes of grain, compared
with 420,000 tonnes in 2008. Of the
1.5 million tonnes elevated in 2009,
13
Trading
Review of operations
Key features
• Sold more than 1.3 million tonnes of bulk wheat to
exporters and customers in the South Pacific, South East
Asia, Europe and the Middle East
• Contributed $25 million to earnings, demonstrating positive
impact of entry this year into the bulk wheat export market
• Opened a representative office in Singapore
• Entered the durum export market
• Integrated Hunter Grain’s soymeal trading
14
To enhance GrainCorp’s ability to
service South East Asian customers,
a representative office was opened
in Singapore in August 2009. The
Singapore office will allow us to
offer technical, quality and logistical
support and advice to customers in the
competitive Asian markets. Opening
the representative office sends a
clear signal to customers in Asia that
GrainCorp is serious about building
direct relationships and providing
support in their region.
GrainCorp Trading currently
buys and sells more than
three million tonnes of grain
and protein meals a year,
and services both domestic
and overseas customers.
Over the past 13 years GrainCorp has
established itself as one of the major
traders of wheat, barley, sorghum and
oilseeds on the east coast of Australia.
Following our acquisition of Hunter
Grain in 2007, we became the country’s
largest importer and distributor of
soybean meal servicing the Australian
stockfeed sector.
Managing the complexities of the
supply chain, meeting customers
and promoting our services to them,
increasing the level of knowledge of
the international wheat market, and
recruiting people with the expertise,
were all part of the activities of
GrainCorp Trading during the year.
During 2009, the Hunter Grain soymeal
importation business was fully integrated
with GrainCorp Trading. This involved
putting in place a new management
team, systems and processes that
allowed the business to focus on core
soybean trading activities. Hunter Grain
imports soymeal from Brazil, Argentina
and the United States. Soybean meal is
principally used in the poultry sector.
Another highlight of the year was
our entrance into the durum market.
In 2009, GrainCorp, in alliance with
CHS Inc., one of the world’s largest
durum traders, became Australia’s
largest durum exporter. The main
market for these durum exports was
Europe. Durum is used to manufacture
pasta and couscous.
During 2009, GrainCorp sold its
50% share of Australian Grain
Accumulation Services (AGA) to Cargill
Australia. The company then formed the
GrainCorp Marketing Services (GMS)
team to take greater control of our
relationships with growers.
The highlight of the year for our Trading
business was the opportunity to
participate in the bulk wheat export
market, following the removal of the
wheat export monopoly in July 2008.
TRADING RESULTS FY09 $M
25
20
PROFIT BEFORE TAX – $M
During 2008/09, GrainCorp Trading
sold over 1.3 million tonnes of wheat
to exporters and direct to international
customers. Wheat sold by GrainCorp
was exported to flour millers in the
South Pacific, South East Asia, Europe
and the Middle East. As a new bulk
wheat exporter, GrainCorp had to build
a customer base from zero and adapt
to a new marketing environment.
Hunter Grain
REVENUE
15
10
FY09
FY08
1,243
1,270
EBITDA
39
28
PROFIT BEFORE TAX
25
4
5
0
05
06
07
08
09
GrainCorp Trading’s contribution to after
tax earnings was $25 million, reflecting
good trading results from both the
wheat and sorghum desks.
15
Merchandise
and Allied Mills
Review of operations
16
Key features
Merchandise
• Record decline in price and demand for fertiliser
and chemicals in late 2008
• Inventory write-downs to market value:
total of $11 million for fertiliser and chemicals
• Total operating costs reduction in excess
of 30% vs. budget
Allied Mills
• Margins reduced due to mill commissioning and Albury
and Summer Hill shutdown
• Frozen dough manufacturing acquisition
• Picton commissioning
known household brands manufactured
by Goodman Fielder and Arnotts. Allied
also supplies the Woolworths and Coles
in-store bakery businesses.
Allied Mills buys over 800,000 tonnes
of wheat each year. GrainCorp and its
joint venture partner, Cargill, buy wheat
from growers and traders for Allied,
and supply this wheat at the prevailing
market price. GrainCorp provides Allied
with rail and road transport services.
Merchandise
The year was a challenging
one for GrainCorp
Merchandise.
The prices of fertiliser and glyphosate,
two products that constitute a
significant portion of the whole
merchandise sector, dropped by almost
78% during the year. This required our
inventory to be written down to market
replacement value. The fertiliser and
chemical write-down of $11 million
contributed to an end-of-year loss of
$23 million EBIT.
Allied Mills will continue to innovate
and introduce new flour mix products to
complement its current product range.
The company will also continue to pursue
growth in complementary business areas,
to add value to the current flour milling
and distribution network.
Allied Mills commenced milling
operations at its new $97 million flour
and maize mill at Picton, in Sydney’s
southwest, in January 2009. This
location, on the major north-south rail
line, and near major flour customers
on Sydney’s western expressway
network, has increased supply and
distribution efficiencies.
In December 2008, Allied Mills
purchased a frozen doughnut factory
in Yatala, Queensland. This factory
produces doughnuts, and other frozen
dough products, under a long-term
supply agreement for a major Australian
retail franchise chain.
During the 2008/09 financial year,
Allied Mills’ margins were reduced
by costs associated with the
commissioning of the Picton mill,
ALLIED MILLS MILLING NETWORK
Allied Mills
GrainCorp, by way of a
joint venture with Cargill
Australia, owns 60% of
Allied Mills, Australia’s
largest producer of bakery
premixes and flour for the
bread and food sector.
60
TOOWOOMBA
AND DALBY
50
40
NORTH
FREMANTLE
30
EBITDA – $M
Allied Mills operates a bakery premix
plant in Kingsgrove, New South Wales;
eight flour mills located in Queensland,
New South Wales, Victoria, South
Australia and Western Australia; and
a soy flour mill in Dalby, Queensland.
and the shutdown of Allied Mills’ Albury
and Summer Hill flour and maize mills.
20
TENNYSON
MILE END
BALLARAT
KENSINGTON
10
TAMWORTH
PICTON &
KINGSGROVE
(PREMIX)
0
05
06
07
08
09
Allied Mills supplies biscuit and bakers’
flour, specialty grains and premixes
to industrial bakeries, supermarket
bakeries, hot bread shops, food service
and catering companies. More than
100,000 tonnes of the flour milling
by-product ‘millrun’ (bran and pollard),
is sold by Allied to the stockfeed sector
each year. Allied’s flour and premix
products are distributed in bulk and
bagged form to customers from a
national warehouse network. Allied
products are included in a range of well
17
People
community and
environment
Review of operations
Key features
• Defined GrainCorp’s values
• Embarked on a three year Occupational Health
and Safety Plan
• Introduced new recruitment strategy
• Implemented comprehensive leadership development
strategy for all executives and managers
• Together with our staff, donated approximately
$50,000 to help victims of the Victorian bushfires
18
relevant information that will enable
better management of safety. Our aim is
to reduce the rate of injuries across the
business by 10% in FY10.
The plan is designed to strengthen our
focus on OH&S, by improving systems,
processes and behaviour. Led by a
newly appointed General Manager –
OH&S, and with the full commitment of
the board and executive team, the plan
is being implemented by line managers
throughout the organisation.
Following a comprehensive
consultative process,
which included workshops
with employees and the
executive team, this year we
reaffirmed what we value:
Safety, Excellence, Integrity,
Our People, Community
and the Environment.
These values define how
GrainCorp employees should
interact with each other,
our customers and our
stakeholders.
The GrainCorp values have been
communicated throughout the business
and will continue to govern the way in
which we operate. They are linked to all
our leadership development initiatives
and employee performance will be
measured against them.
Safety
We hold safety as one of our highest
values. We are committed to achieving
best-practice safety performance and
work hard to create high levels of
safety awareness for all employees,
visitors to our sites and members of the
community. Our aim is to build a culture
of zero harm and to ensure safety at
work is never compromised.
An occupational, health and safety
steering committee, chaired by the
Group General Manager of Storage
and Logistics, meets quarterly. The
committee’s charter is to review our
safety performance, develop strategies
to achieve safety goals, review the
effectiveness of these strategies
and resolve safety issues presenting
specific challenges to individual
businesses.
Excellence
GrainCorp has a proud history of being
at the forefront of industry change.
We recognise that our reputation
depends on our ability to achieve
excellence, provide superior customer
service, adapt to change and solve
problems. We acknowledge, too,
that demonstrating accountability,
consistency and professionalism
is essential if we are to maintain
successful relationships with
all stakeholders.
Integrity
Embracing and upholding the highest
standards of personal and professional
integrity and being honest and
trustworthy are all at the core of our
beliefs. We believe integrity to be a
prerequisite for future success.
We encourage all employees to be
responsible and accountable for their
decisions, and promote and practise
open and honest internal and external
communication.
Our people
During the year we put significant effort
into strategies for recruiting talented,
skilled and motivated people, developing
our leaders, managing performance and
retaining talent.
Recruiting the right people
The breadth, scope and scale of our
operations present career opportunities
across the entire grain supply chain,
while also creating considerable
employee challenges.
As one of the country’s largest supply
chain and logistics companies, we are
an integral part of rural Australia, and
many of our people provide an essential
link between growers and customers.
Hiring the right expertise is essential.
To this end, this year as part of a new
recruitment strategy, we established
a formal partnership with the leading
recruitment outsourcing provider in
GrainCorp has a proud history of being at the
forefront of industry change. We recognise
that our reputation depends on our ability to
achieve excellence, provide superior customer
service, adapt to change and solve problems.
We are disappointed to report that
this year’s Lost Time Injury Frequency
Rate increased from 7.3 to 10.6. This
deterioration in performance was a
driving factor in deciding to embark on
a new three year plan to reinvigorate
safety management at GrainCorp. As
part of this plan, we have moved to
an All Injury Frequency Rate target for
the coming year. This will provide more
19
People, community and environment
the Asia-Pacific, created an internal
recruitment team and developed a
careers website.
The new strategy will reduce time
and cost spent on recruiting, improve
screening to ensure the quality of our
hires, mitigate risks associated with
labour shortages and help us to create
and build a first-class talent pool. It will
also facilitate a cultural understanding
of GrainCorp and allow us to promote
and manage internal mobility, which in
turn means we will retain talent.
Developing our leaders
During the year we implemented a
comprehensive leadership development
strategy for all managers. The strategy,
endorsed by the board and executive
team, sets out the vision, objectives
and implementation plans to develop
a sustainable approach to leadership
and management development within
GrainCorp. Its purpose is threefold:
• T o develop the capacity and capability
of leaders and managers at all levels
to improve performance and achieve
business goals and growth.
• T o develop a cohesive framework
that brings together the principles of
leadership and management.
• T o develop a culture that supports
people in achieving business goals
and maintaining high levels of skill
and professionalism.
Initiatives include a leadership
competency framework and curriculum;
and a talent and succession
management plan. These initiatives
incorporate all levels of leadership:
executives, line and functional
managers, emerging leaders and teams.
These programs will be implemented
over the coming year and will be
evaluated to measure business impact.
Leadership competency framework:
This translates our values into the
behaviours we expect from our leaders.
We expect them to be committed to
safety and the environment, think
strategically, bring out the best in
others, deliver results and achieve
business excellence. The framework
enables us to recruit, develop and
evaluate performance more effectively.
It also allows us to identify gaps
between present skill sets and future
requirements, and empowers employees
to take charge of their own careers and
personal development.
Leadership curriculum: The curriculum
currently comprises a 360-degree
feedback program that is facilitated
by an external provider and includes
one-on-one coaching for leaders.
It also includes a safety leadership
development program for all line
managers, and a program that focuses
leaders’ attention on three areas in
phase one: effective conversations,
constructive problem-solving and
decision making, and coaching
skills and tools and techniques
for empowerment.
Talent and succession management
plan: This determines how we recruit,
develop, promote and retain our people.
It protects the company against the risk
of critical positions remaining unfilled,
lack of readiness for more senior roles
and assimilation problems when we
recruit external talent.
Retaining employees
In addition to the new recruitment
strategy and the talent and succession
management plan, both of which
will support retention across the
organisation, we introduced a retention
share plan for key staff. Its main aim is
to ensure GrainCorp retains people over
the medium to longer term.
The plan aligns individual performance
with that of the company in each
business year, and over a three year
period. Shares are allocated to reward
individual performance to the employee
after three years. This serves to keep
employees focused on shareholder
value over the longer term.
Leadership development strategy
Initiatives
Integrated approach and consistent messages
Evaluation and Assessment of
Leadership Framework
Talent and Succession Management, Personal
Development Plans
Leadership Curriculum and Development Options
GrainCorp Leadership Competency Framework
GrainCorp Values and Strategic Plan
20
Community
GrainCorp is an important part of the
community, wherever we operate. That
is why we actively support and invest in
local communities. In February 2009,
fires ravaged large sections of Victoria.
In response to appeals, GrainCorp’s
employees donated approximately
$24,000 to the Australian Red Cross,
and GrainCorp donated $25,000 to
the Horsham Rotary Club in Victoria
and $25,000 to the Victorian
Farmers Federation bushfire appeal.
Leadership development strategy
Objectives and outcomes
Fostering open relationships with local
communities is essential for the longterm sustainability of our business.
We work hard at facilitating the flow of
information and knowledge between
GrainCorp and the places in which we
do business.
Environment
As a significant contributor to the
agricultural sector, we recognise that
the adoption of sound environmental
management practices and sustainable
business operations is important.
To that end we are a registered
participant in the Energy Efficiency
Opportunities (EEO) program
administered by the Federal Department
of Resources, Energy and Tourism.
Companies participating in this program
undertake energy use assessments and
identify energy efficiency opportunities.
As the majority owner of Allied Mills,
GrainCorp has elected to act as that
organisation’s ‘controlling corporation’
for the purposes of the Energy Efficiency
Opportunities Act 2006. This means
that GrainCorp and Allied Mills are joint
participants in the EEO program. By
31 December 2009, GrainCorp will
release its first Energy Efficiency
Opportunities Public Report, which will
be available on our website.
In 2009, almost 1,000 of Australia’s
largest corporations were required to
report their greenhouse gas emissions
under the National Greenhouse and
Energy Reporting Act 2007. As a
participant in the scheme, GrainCorp
is obliged to disclose its Scope 1 and
Scope 2 greenhouse gas emissions
on an annual basis. GrainCorp
submitted its National Greenhouse and
Energy Report on 30 October 2009 in
compliance with the Act.
As one of the country’s largest supply chain and
logistics companies, we are an integral part of
rural Australia, and many of our people provide
an essential link between growers and customers.
Hiring the right expertise is essential.
21
Board of directors
Don Taylor
B.Com, CA, Graduate Certificate
in Rural Science
Fellow of the Australian Institute
of Company Directors
Chairman
Don Taylor joined the
board as a non-executive
director in October 2003
and was appointed
Chairman in December
2005. He also chairs
the Remuneration and
Nominations Committee
and is a member of the
Trading Risk Management
Committee.
A chartered accountant
with audit and taxation
experience in the
manufacturing and heavy
industry sectors, Mr Taylor
runs a mixed farming
and grazing enterprise at
Moonie in Queensland.
He was formerly Executive
Chairman of Grainco
Australia, a director
of Forest Enterprises
Australia and Chairman
of Carrington Cotton
(formerly listed on the
Australian Securities
Exchange).
22
Mark Irwin
LLB MBA
Managing Director and
Chief Executive Officer
Mark Irwin was appointed
Managing Director and
Chief Executive Officer of
GrainCorp in March 2008.
He is a member of the
Trading Risk Management
Committee and is a
director of Allied Mills
Australasia.
Before joining GrainCorp,
Mr Irwin led a team of
finance professionals,
based in London,
specialising in global
mining and metals
corporate transactions.
Prior to this, he spent
11 years with BHP Billiton
working across a variety of
international operational,
change management and
strategic leadership roles.
Dan Mangelsdorf
David Trebeck
Non-Executive Director
Non-Executive Director
Daniel Mangelsdorf has
been a non-executive
director of GrainCorp
since February 2005.
He chairs the Trading Risk
Management Committee
and is a member of
the Remuneration and
Nominations Committee.
A non-executive director
since he joined the
GrainCorp board in
February 2002, David
Trebeck also chairs
the Audit Committee
and is a member of
the Remuneration and
Nominations Committee.
Mr Mangelsdorf is a
grain grower from West
Wyalong in New South
Wales. He was formerly
Chairman of the Grain
Growers Association and
a member of the Federal
Government’s industry
expert group.
Mr Trebeck is a grain
grower from Barmedman
in New South Wales and
resides in Canberra. He
is a director of Maersk
Australia and PrimeAg
Australia and Chairman
of Penrice Soda Holdings
Ltd. He was formerly
a commissioner of
the National Water
Commission.
B.Ag.Ec (Hons)
Graduate of the Australian
Institute of Company Directors
B.Sc.Ag (Hons), M.Ec
Fellow of the Australian Institute
of Company Directors
For over 35 years
Mr Trebeck provided
high level economic
advice to companies and
governments in Australia
and abroad, having
been principal Managing
Director and co-founder
of economic consultancy
ACIL Consulting (now
ACIL Tasman).
Executive management
Bruce Griffin
Group General Manager Storage and Logistics
Bruce Griffin joined GrainCorp in March 2009 as General
Manager Storage and Logistics. He is responsible for GrainCorp’s
grain receival, storage, handling, road and rail logistics, quality
assurance and technical services. Before joining GrainCorp,
Mr Griffin spent seven years at BHP Billiton and nine years
in a variety of operational and commercial positions with Shell.
He also has experience as a management consultant with
Bain & Company.
Jim Anderson
Chief Executive Officer GrainCorp Malt
Jim joined GrainCorp following the UMH acquisition, having
joined UMH as CEO in September 2006. Before taking up this
position, he was Chief Operating Officer/Executive Vice President
of CT Malt, a joint venture between ConAgra Foods and Tiger
Brands of South Africa. He had been recruited by ConAgra
Foods in 1995 and took up the COO/EVP position in April 2003.
Mr Anderson has over 26 years experience in the agricultural
processing and trading business and has held board positions
with North American Export Grain Association and National Grain
and Feed Association.
Peter Housden
B.Com
Fellow of CPA Australia and of
the Australia Institute of Company
Directors
Non-Executive Director
Peter Housden joined
the GrainCorp board as
a non-executive director
in October 2008. He
is also a member of
the Remuneration and
Nominations Committee
and the Audit Committee.
Mr Housden is a director
of China Holdings Travel
Group, Magenta Shores
Golf & Country Club,
a board member of law
firm Sparke Helmore and
a member of the audit
committee for the New
South Wales Department
of Housing. He has
40 years experience
in accounting, finance,
management, treasury
and commercial fields
across a number
of industries.
Simon Tregoning
B.Com
Non-Executive Director
Appointed as a nonexecutive director
in November 2008,
Simon Tregoning is
also a member of the
Remuneration and
Nominations Committee
and the Audit Committee.
He is a director of St
Luke’s Care and Capilano
Honey and a former
director of Australian
Cooperative Foods (Dairy
Farmers) and Capitol
Chilled Foods (Australia).
Mr Tregoning has 23 years
of senior management
experience spanning
15 countries in the fast
moving consumer goods
and energy sectors.
Sam Tainsh
General Manager Trading
Sam Tainsh has been with GrainCorp for eight years and was
appointed General Manager Trading in February 2002. He is
responsible for all domestic and international grain, oilseed and
meal marketing and trading activities. Before joining GrainCorp,
Mr Tainsh spent seven years as a commodity trader at Louis
Dreyfus Corporation.
Ian Wilton
Chief Financial Officer
Appointed in June 2009, Ian Wilton is responsible for capital
management, risk, taxation, financial reporting and compliance
functions across the GrainCorp Group. He has an extensive
range of international and Australian agribusiness experience,
having worked in senior positions for a number of companies
both here and in the United States and Europe. Before joining
GrainCorp, Mr Wilton was CFO of Ridley Corporation for
eight years and spent three years as CFO of ConAgra Malt,
a forerunner of the UMH business.
Betty Ivanoff
General Counsel and Company Secretary
Betty Ivanoff was appointed General Counsel and Company
Secretary for all GrainCorp entities in October 2008. She is
responsible for the company’s compliance and legal affairs and
oversees the company’s insurance, risk and energy efficiency
programs. Ms Ivanoff has held corporate counsel positions with
a number of companies, including CSR and Walter Constructions.
Neil Johns
Chief Development Officer
Neil Johns has been with GrainCorp for 20 years and was
appointed to his current position in 1997. He is responsible for
corporate strategy, mergers and acquisitions, major projects and
investor relations. Mr Johns is a director of Allied Mills, Grain
Trade Australia and Queensland Commodity Exports.
Robyn Porcheron
General Manager Human Resources
Robyn Porcheron has been GrainCorp’s General Manager
Human Resources for the past five years. She is responsible for
developing and deploying the company’s employment strategies,
policies and programs. Ms Porcheron has extensive experience
in senior human resources roles across a variety of industries
in Australia, the UK, Europe and the US.
23
Corporate governance statement
1. GrainCorp’s approach
3. The role of the board
GrainCorp considers the management
and promotion of an effective corporate
governance system to be fundamental to
the success and effective management
of the company. Sound ethical conduct
is an attribute we expect of our directors
and employees. It is through such
an approach that GrainCorp and its
controlled entities (‘Group’) may be
viewed as good corporate citizens.
The role of the board is to provide an
effective corporate governance framework
and strategic guidance for the Group,
whilst ensuring effective oversight
of management with the objective of
protecting and enhancing the interests
and investments of our shareholders. The
board has recently revised and adopted a
board Charter which describes, amongst
other things, the structure of the board,
and the board’s responsibilities which
include (but are not limited to):
•Providing the overall strategic
direction of the Group and monitoring
performance against the strategic plan;
•Approving annual and long-term
budgets, and monitoring performance
against those plans;
•Endorsing appropriate culture and
values of the Group and monitoring
compliance with these to ensure
appropriate social, ethical and
environmental standards;
•Selecting and appointing the Managing
Director, evaluating performance and
developing a succession plan for the
Managing Director;
•Developing and reviewing the
effectiveness of Occupational Health
and Safety systems; and
•Determining the risk profile of
GrainCorp, including credit, market,
liquidity, equity and operational risks
and developing and monitoring the
integrity of internal controls and
systems in order to identify and mitigate
these risks.
GrainCorp’s corporate governance
framework aims to enhance and protect
our business, and the interests of our
shareholders and our stakeholders. This
statement outlines GrainCorp’s support,
compliance with, and achievements
against the ASX Corporate Governance
Council’s ‘Corporate Governance
Principles and Recommendations’.
GrainCorp reviews local and international
developments in governance standards,
and relevant laws and regulations
and incorporates these into its
governance framework.
2. ASX Corporate
Governance Council
guidelines
As an entity listed on the Australian
Securities Exchange (ASX),
GrainCorp complies with the ASX
Corporate Governance Principles and
Recommendations. The second edition of
these Principles and Recommendations
was released in August 2007, including
revisions which aim to improve and
simplify corporate governance disclosures.
Listed entities are required to report
against the changes to the Principles and
Recommendations. GrainCorp’s obligation
to report commenced on 1 October
2008, and this statement incorporates
the revisions to the Principles and
Recommendations. For further
information on these revisions, please
refer to http://www.asx.com.au/about/
corporate_governance/index.htm
24
The Managing Director is responsible to
the board for the ongoing management of
GrainCorp in accordance with the strategy,
policies and programs approved by
the board.
4. The role of management
The management of GrainCorp is
the responsibility of the board. Daily
management of the company has been
delegated to the Managing Director.
The Managing Director has been vested
with certain authorities that allow for
the efficient operation and conduct of
the business. These authorities are
sufficiently restricted and monitored to
ensure ethical standards and adequate
segregations are upheld. The Managing
Director has appointed an Executive
Leadership Team, which is empowered to
implement the Group’s strategic plan at
an operational and functional level.
The Executive Leadership Team is guided
by an adopted Charter, and in accordance
with this Charter seeks to (amongst
other things):
•Promote greater integration and
collaboration between business units
and support services to facilitate
consistency and improve performance
in profitability and service delivery;
•Advise on the implications of policies,
strategies, industry standards, changes
to statutory requirements and markets,
and to develop appropriate plans;
•Openly discuss all matters that may
affect the operations of the Group, its
people and the Group’s reputation and
make decisions in the best interest of
the Group and its people;
•Promote and endorse the Group’s
values in all aspects that affect the
operations of the Group; and
•Provide a forum for the communication
of directions and queries from the board
of directors or any committee of
the board.
The Executive Leadership Team provides
financial and operational reports to the
board, ensuring that the business is
transparent and the directors are fully
informed of the Group’s affairs.
5. Structure of the board
(a)Board Charter
The board is governed by GrainCorp’s
Constitution and is bound by the
board Charter, which sets out the
roles, responsibilities, authorities, and
processes of the board. GrainCorp
recently revised its board Charter, which
was approved by the board in November
2009 and is available on our website.
(b)Appointment of Chairperson
The board of directors elects one of
their members as the Chairperson of the
board. The Chairperson must be a NonExecutive Director, and his/her term of
office may be determined by the directors.
The Chairpersons of board committees
are appointed on an annual basis by
the directors.
(c)Composition and size of the board
GrainCorp’s board presently consists
of six directors, represented by five
independent Non-Executive Directors
(including the Chairman) and an Executive
Director (the Managing Director).
GrainCorp’s Constitution requires a
minimum of four directors to hold office;
however, does not impose a maximum
limit on the number of directors who
may hold office. The names of directors
who currently hold office are noted in the
directors’ report.
(d)Tenure of directors
A director holds office for a period of three
years, after which the director must retire
at their third Annual General Meeting.
Retiring directors may seek re-election to
the board. If no directors are required to
retire from office in accordance with their
tenure, the director who retires will be
chosen from those who have held office
for the longest time since he/she was
last elected.
6. Selection, skills and
experience of directors
Directors are appointed by the
shareholders at each Annual General
Meeting. The company or its directors
may fill a newly created position or the
office of a vacated or retired director by
electing an eligible person, in accordance
with the Constitution.
At the Annual General Meeting of the
company in February 2010, Mr D Taylor
and Mr D Trebeck will offer themselves for
re-election by the shareholders, with the
recommendation of the board.
The Remuneration and Nominations
Committee nominates persons it believes
are sufficiently skilled and experienced
to act as directors on the board. As a
diverse agricultural company, our board
requires its directors to have a variety
of skills and expertise that complement
and enhance the strategic direction of
the Group. From time to time GrainCorp
may employ the services of external
consultants to assist in identifying
suitable director nominations. Further
detail about the skills and experience
of our directors is available in the
directors’ report.
7. Access to independent
advice
GrainCorp’s directors may access
independent professional advice, at the
company’s expense, having consulted the
Chairman prior to seeking the advice. This
advice may be obtained by the directors
to assist them in performing their duties.
8. Performance of
the board
GrainCorp’s board has adopted a process
of self evaluation. The board measures
its own performance and the performance
of all board committees. This process did
not take place during the reporting period
due to the new composition of the board.
It was deemed prudent to allow some
time for the board to function within the
period. An independent board evaluation
is now underway and is expected to be
completed during the first half of 2010.
The performance of each Non-Executive
Director is formally reviewed on an annual
basis by the Chairman. Similarly, the
Chairman’s performance is reviewed
annually by the board as a whole.
25
Corporate governance statement
Directors are encouraged to undertake
continuing education, for which the
company provides resources as and
when required.
The performance of the Managing
Director is reviewed by the board at
the conclusion of each financial year,
through an evaluation process conducted
by the Remuneration and Nominations
Committee.
9. Performance
of management
All members of the Executive Leadership
Team are set key performance
indicators which are used to assess
their performance against business
objectives. The board and Remuneration
and Nominations Committee monitor
the performance of the Executive
Leadership Team on a monthly basis,
through functional area and business unit
reporting. Specific information relating to
performance of the Executive Leadership
Team is located in the directors’ report.
10. Committees of
the board
GrainCorp has three board subcommittees that assist the board in its
oversight and governance functions.
These are detailed below:
(a)Board Audit Committee (BAC)
overview
The BAC is responsible for evaluating
the overall effectiveness of the internal
control and risk management systems
implemented by the Group, and making
recommendations to the board. This
includes oversight of the financial
reporting function, accounting policy
changes, the appointment of external
and internal auditors, assessing the
effectiveness of compliance systems,
reviewing and managing business risk and
reviewing the Group’s insurance program.
The BAC consists of three independent
Non-Executive Directors, and is chaired by
26
a director who is not the Chairman of the
GrainCorp board. The names of directors
who serve on this committee, and their
attendance history, are located in the
directors’ report. The BAC operates under
a Charter which is regularly reviewed and
updated. The Charter is available on our
website.
(b)Trading Risk Management
Committee (TRMC) overview
The TRMC is primarily responsible for
overseeing the operations of the Trading
business unit. The TRMC’s role extends
to ensuring that adequate operational
procedures and risk control systems
are established; that lines of authority
and responsibility are clearly delineated;
and that the Trading business unit at
all times complies with the Trading Risk
Management Policy. The TRMC consists of
two independent Non-Executive Directors,
an independent external Committee
Member and the Managing Director. The
names of directors who serve on this
committee, and their attendance history,
are located in the directors’ report. The
TRMC operates under a Charter which is
updated regularly. The Charter is available
on our website.
(c)Remuneration and Nominations
Committee (RNC) overview
The RNC is responsible for reviewing the
composition, performance, succession
planning and membership of the
board, including the appointment of
new directors. The RNC also provides
recommendations to the board on
the direction and strategies regarding
remuneration and benefits, reward and
recognition, succession planning and
professional development. The RNC
consists of five independent NonExecutive Directors, as the Managing
Director is not a member of the RNC. The
names of directors that serve on this
committee, and their attendance history,
are located in the directors’ report. The
RNC operates under a Charter which
is regularly reviewed. The Charter is
available on our website.
11. Remuneration
of directors
GrainCorp’s Non-Executive Director
remuneration is not tied to the
overall performance of the Group.
The Remuneration and Nominations
Committee is responsible for reviewing
and making recommendations in
connection with Non- Executive Director
remuneration, taking into account current
market conditions. Further information
regarding directors’ remuneration is
located in the directors’ report.
12. Our people
(a)Values Statement
In 2009, GrainCorp developed a
statement of values that helps define
how our employees should behave
towards each other, our customers and
our stakeholders. Through a process of
employee consultation, a series of values
were identified that reflect the culture of
our business, and how we would like to be
seen in the wider community.
At GrainCorp, we value:
•Safety
•Our People
•Excellence
•Integrity
•Our Community and Environment
All of GrainCorp’s directors and
employees are expected to adhere
to and promote our values. Senior
management and employee performance
against GrainCorp’s values is measured
as a component of our performance
management system.
13. Our ethical standards
(a)Business ethics
GrainCorp expects directors and all
employees to meet the highest ethical
standards in all facets of their conduct.
GrainCorp’s Business Ethics Procedure
is designed to assist our employees in
obtaining a general understanding of the
legal issues surrounding bribery.
The procedure also clearly documents
what obligations an employee has
to report known contraventions or
suspicious activities. The procedure
is regularly updated.
(b)Share trading
All designated officers and their
associates are prohibited from trading
in GrainCorp’s securities while in
possession of unpublished price sensitive
information concerning the Group.
Directors and designated officers may
only trade in GrainCorp’s securities
during the designated ‘trading windows’,
which are open for a period of six weeks
commencing 48 hours after certain
events, or as otherwise documented in
our Share Trading Policy, or as determined
by the board.
The board may impose an embargo, at
any time, upon trading in GrainCorp’s
securities if it believes that a market
sensitive event has occurred or is likely
to occur.
Directors and designated officers are
prohibited from entering into financing
arrangements (specifically margin
loans) over GrainCorp securities, unless
appropriate notification and approval
is sought in accordance with the Share
Trading Policy, and reported on thereafter.
The procedure is regularly updated and
available on our website.
(c)Conflicts of interest
GrainCorp’s directors and employees
are required to comply with our Conflicts
of Interest Policy, and are required to
disclose any material personal interest
that they may have that relates to the
affairs of the Group. Directors declare
any conflicts to the General Counsel and
Company Secretary, which are maintained
in a Conflicts of Interest register. Similarly
management and staff are required to
report all actual or potential conflicts,
which are also reviewed, actioned and
reported on in the same manner. The
policy is available on our website.
(d)Fraud and corruption control
GrainCorp strictly prohibits acts of
fraud or corruption against or otherwise
involving the Group, our customers,
suppliers and employees. GrainCorp
has a documented Fraud and Corruption
Control Procedure that has been prepared
in consideration of AS/NZS 8001:2008.
The purpose of the procedure is to put
controls in place to prevent, identify,
report and investigate fraud and
corruption events that may occur in our
business. The Fraud Control Officer is
responsible for investigating suspected
or known incidents of fraud, and all
fraud events are reported to the Board
Audit Committee. The procedure is
regularly updated.
14. Our Code of Conduct
GrainCorp’s Code of Conduct serves
to complement our Values Statement
by establishing a framework of ethical
standards, accepted behaviours and
aspirational goals that employees are
expected to uphold and promote. Our
Code of Conduct is both aspirational and
prescriptive in nature.
The aspirational aspects of our Code
set the high level ideals to which our
employees should aspire. Examples of
aspirations in our Code include:
•Valuing all people;
•Treating others with dignity;
•Acting in a manner that merits public
trust and confidence; and
•Conducting business in an ethical, law
abiding and responsible manner.
Our Code of Conduct is also prescriptive
as it clearly sets out our employees’
obligations which we consider ‘nonnegotiable’. Examples of prescriptions
in our Code include:
•Not engaging in offensive behaviour;
•Not contravening any laws or
regulations;
•Not participating in or conducting or
encouraging acts of fraud, theft
or corruption;
•The non-disclosure of confidential or
company sensitive information; and
•Not engaging in situations that could be
a ‘conflict of interest’.
Our Code of Conduct is designed to be a
dynamic tool on which we can all leverage
to create a more ethical, robust and
socially acceptable working environment.
The Code of Conduct is updated regularly
available on our website.
15. How we manage risk
(a)GrainCorp’s approach to risk
management
GrainCorp recognises risk to be both
a challenge and an opportunity in our
business. Sound risk management
practices are essential for the
achievement of our corporate strategy
and objectives.
GrainCorp’s risk management framework
has been established in consideration
of AS/NZS 4360:2004. Our systems
of risk management are documented
in the Group’s Risk Management Policy
Framework and Guidelines, which are
updated from time to time. As risk
management is not a static discipline,
GrainCorp’s risk approach continues to
evolve and improve over time, as does
our culture which promotes the proper
identification and mitigation of risks.
The board has ultimate responsibility
for ensuring the business adequately
manages and monitors risk. However,
the Board Audit Committee oversees
risk management systems on behalf
of the board, and the Trading Risk
Management Committee focuses on
trading related risks. The Board Audit
Committee receives regular reports from
management on the risk environment
and systems of control, as does all the
board in the Group’s monthly reporting
systems. This includes a report on the
implementation of the Group’s insurance
program. The Executive Leadership Team
is responsible for the ongoing, day-to-day
management of risk at an operational and
strategic level.
27
Corporate governance statement
(b)Risk identification and risk
management
GrainCorp identifies risk through a
‘bottom-up’ risk-based approach. Each
member of the Executive Leadership
Team is responsible for identifying risks
that impact on their functional area
or business unit. The resultant risk
management actions then cascade
through to the operational level of
each business unit or functional area.
Risk registers and risk action plans
are established to ensure those risks
are being adequately managed and/or
mitigated at an operational level.
Where appropriate and required, certain
risks are escalated to the corporate
risk register where they receive a
high degree of oversight from the
Executive Leadership Team and the
board. Generally, risks that appear on
the corporate risk register are highly
significant to the success of our business
and the safety of our people.
GrainCorp’s Managing Director and the
CFO report in writing to the board that, to
the best of their knowledge, the financial
records of the company are properly
maintained in accordance with s286 of
the Corporations Act, that statements
made regarding the integrity of the
financial statements are founded on a
system of risk management and internal
control, and that the risk management
and internal control systems are in all
material respects operating effectively.
16. The role of audit
and assurance
(a)Independence of audit
GrainCorp’s internal audit function is
independent of external audit. KPMG
is appointed to report on and manage
GrainCorp’s internal audit function, and
is responsible for monitoring the internal
control framework of the Group.
28
KPMG operates under an internal audit
plan which is approved by the Board Audit
Committee. KPMG regularly reports to
the Board Audit Committee on its
progress against the plan and any
deviations from it.
PricewaterhouseCoopers (PwC) is
GrainCorp’s external auditor and is
responsible for reviewing and auditing
the financial accounts for both the halfyear and full-year respectively. PwC has
been GrainCorp’s external auditor since
1998. PwC regularly attends Board Audit
Committee meetings, meets with the
Board Audit Committee independently
of management and also attends
GrainCorp’s Annual General Meeting to
answer shareholder questions about the
conduct of the audit, and the preparation
of the auditor’s report.
GrainCorp has an Auditor Independence
Policy. The Board Audit Committee
requires that the external audit
engagement partner be rotated every five
years, unless otherwise extended under
transition provisions. Further information
on the policy can be obtained from
our website.
17. Environment
The board recognises that the adoption
of sound environmental management
practices, and sustainable business
operations are important to the long-term
stability and growth of our business.
Climate change is a key challenge for
GrainCorp as well as other businesses
in primary industry. GrainCorp identifies
drought as a significant corporate risk,
and our response to this challenge will
be important for the long-term success
of our business.
GrainCorp is a registered participant
of the Energy Efficiency Opportunities
(EEO) program, and is registered to
report energy use and greenhouse gas
emissions under the National Greenhouse
and Energy Reporting Act 2007.
18. Communication with
our stakeholders
GrainCorp’s shareholders play an
important role in the governance of the
Group, through exercising their right to
vote for the election of Non-Executive
Directors to the board, and responding
to motions for adoption on requisite
matters of importance. Similarly, our
communication with other stakeholders
such as our customers, suppliers,
government and regulators, and the
community is crucial to the stability and
profitability of the business. GrainCorp
aims to keep shareholders informed
of company developments in a timely
manner through various communications
mediums, such as:
•The annual and interim financial results;
•Newsletters, presentations and reports;
•Company announcements;
•The Annual General Meeting;
•Pre-harvest meetings;
•Analyst briefings; and
•The company website.
19. Continuous disclosure
to the market
GrainCorp’s General Counsel and
Company Secretary is responsible for
communicating with the ASX. Where
appropriate, the Corporate Affairs and
Investor Relations Manager is responsible
for communications with our shareholders
and stakeholders.
The General Counsel and Company
Secretary is responsible for the Group’s
compliance with the ASX Listing Rules
and our continuous disclosure obligations.
GrainCorp has a Continuous Disclosure
Policy, which documents how we will meet
our disclosure obligations to the market.
The policy is available on our website.
Financial report
2009
Directors’ report
Auditor’s independence declaration
Income statements
Balance sheets
Statements of changes in equity
Cash flow statements
Notes to the financial statements
1. Summary of significant
accounting policies
2. Financial risk management 3. C
ritical accounting estimates
and judgements
4. Segment information
5. Revenue
6. Other income
7. Expenses
8. Income tax expense
9. C
ash and cash equivalents
(current)
10. Trade and other receivables
(current)
11. Inventories (current)
12. Derivative financial instruments
(current)
13. Non-current assets classified
as held for sale (current)
14. Receivables (non-current)
15. Investments accounted for using
the equity method (non-current)
16. Other financial assets
(non-current)
17. Property, plant and equipment
(non-current)
18. Deferred tax assets (non-current)
19. Intangible assets (non-current)
20. Trade and other payables (current)
21. Borrowings (current)
22. Other financial liabilities
23. Provisions (current)
24. Borrowings (non-current)
25. Derivative financial instruments
(non-current)
30
45
46
47
48
49
50
59
66
68
70
70
71
72
73
73
74
74
75
75
76
76
76
77
78
79
79
80
80
81
26. Deferred tax liabilities
(non-current)
27. Provisions (non-current)
28. Contributed equity
29. Reserves and retained profits
30. Dividends
31. Remuneration of auditor
32. Contingencies
33. Commitments
34. Key Management Personnel
disclosures and related party
transactions
35. Subsidiaries
36. Acquisition of businesses
37. Deed of cross guarantee
38. Investments in associates
39. Reconciliation of profit after
income tax to net cash flow from
operating activities
40. Earnings per share
41. Share-based payments
42. Events occurring after the
balance sheet date
Directors’ declaration
Independent auditor’s report
83
83
84
85
86
87
87
88
89
95
96
97
99
100
100
101
103
104
105
This financial report covers both GrainCorp Limited
as an individual entity and the consolidated entity
consisting of GrainCorp Limited and its controlled
entities. The financial report is presented in
Australian dollars. GrainCorp Limited is a company
limited by shares, incorporated and domiciled in
Australia. Its registered office and principal place
of business is:
Level 26
175 Liverpool Street
SYDNEY NSW 2000
A description of the nature of the consolidated
entity’s principal activities and its operations is
included in the directors’ report on page 30.
This financial report was authorised for issue by the
directors on 25 November 2009. The Company has
the power to amend and reissue it.
82
29
Directors’ report
The directors present their report on the consolidated entity (referred to hereafter as the Group) consisting of GrainCorp Limited (GrainCorp
or the Company) and the entities it controlled at the end of, or during, the year ended 30 September 2009.
Directors
The following persons were directors of GrainCorp during the financial year and/or up to the date of this report:
D C Taylor (Chairman)
M D Irwin (Managing Director)
P J Housden (appointed 17 October 2008)
D J Mangelsdorf
D B Trebeck
S L Tregoning (appointed 2 December 2008)
G D W Curlewis (resigned 17 October 2008)
D F Groves (resigned 18 May 2009)
Directors have been in office since the start of the financial year to the date of this report unless otherwise stated.
Principal activities
The nature and scope of the main activities undertaken by the Group during the year were the provision of services primarily to the grain
industry including:
• Receival, handling and storage of grain and other bulk commodities for end users and growers; and as an agent for
marketing organisations;
• Handling of export grains and other bulk commodities through GrainCorp ports;
• Marketing of grain, meals and other bulk commodities and the operation of grain pools;
• Road and rail transport services for bulk commodities;
• Provision of farm input products; and
• Flour milling and mixing services (through investment in Allied Mills).
Dividends
No dividends have been provided, or paid, to shareholders during the financial year.
Review of operations
Total up-country grain receivals during the year were 9.6 million tonnes with 1.1 million tonnes received at our ports from non-GrainCorp
sites. This compared to 5.8 million tonnes up-country and 0.7 million tonnes at our ports in the previous financial year. Grain in storage at
the beginning of the year was 2.2 million tonnes, up on the previous year of 1.2 million tonnes. Grain exports by all grain exporters through
GrainCorp ports exceeded 5.2 million tonnes during the year, which increased from 1.0 million tonnes in the prior year. This was due to
increased grain production resulting in a greater exportable surplus as well as aggressive export programs by multiple exporters following
the first year of bulk wheat export deregulation.
The Group recorded a profit after tax of $63.2 million for the financial year compared to a loss after tax of $19.9 million for the previous
year. EBITDA increased from $51.3 million to $165.2 million, reflecting the higher grain receivals and exports. A more detailed review of the
operations during the financial year and the results of those operations appear elsewhere in the Annual Report.
Significant changes in state of affairs during the financial year
Ordinary share placement
On 26 May 2009, 9.7 million shares were issued by way of an institutional placement at $6.25 per share. This raised net proceeds of
$57.8 million.
State Government broad acre train decision
On 29 May 2009, the NSW State Government transferred 18 ‘48 Class’ locomotives and 180 wagons to GrainCorp at no cost. These trains
are being used to transport grain from silos on the branch lines into various sub terminals in NSW. Day-to-day operation of the trains has
been contracted to Pacific National.
Share purchase plan
On 8 July 2009, 22.1 million shares were issued at $6.25 per share under a share purchase plan. Net proceeds raised were
$134.9 million.
Matters subsequent to the end of the financial year
Dividend declared
Since year end the directors have approved the payment of a fully franked final dividend totalling $14.4 million. This represents the
equivalent of 7.27 cents per share on issue at the record date of 4 December 2009. The dividend will be paid on 16 December 2009.
30
Acquisition of United Malt Holdings Group
With the acquisition in November 2009 of United Malt Holdings Group, GrainCorp became the world’s fourth largest commercial malt
producer. The acquisition provides a larger infrastructure footprint, improved trading knowledge, and growth opportunities. The malt
businesses can produce up to 1.05 million metric tonnes of malt per year. There are expansion projects underway (due to complete
December 2009 in Scotland and January 2011 in Australia) to increase capacity by approximately 14% to 1.2 million metric tonnes per
annum. Further detailed information on the acquisition can be found elsewhere in the Annual Report.
Share capital issued
Since the year end the Company has raised $600 million through the issue of 102,228,905 ordinary shares for the purpose of partially
funding the acquisition of United Malt Holdings Group.
Borrowings
The Company has drawn additional debt of US$200 million ($215 million) under a new revolving acquisition debt facility to partially fund
the acquisition.
Other than reported above, no other matter or circumstance has arisen since 30 September 2009 which has significantly affected or may
significantly affect:
(a) the Group’s operations in future financial years; or
(b) the results of those operations in future financial years; or
(c) the Group’s state of affairs in future financial years.
Likely developments and expected results of operations
The directors believe that additional information as to likely developments in operations of the Group in future financial years, including the
expected results of those operations, would likely result in unreasonable prejudice to the Group.
Environment
The Group’s operations are subject to various Australian federal and state environmental legislation and regulation. There is no
environmental regulation specific to the Group. The directors are not aware of any significant environmental breaches during the year.
Energy efficiency and greenhouse reporting
The Group is subject to the greenhouse gas and energy data reporting requirements of both the Energy Efficiency Opportunities Act 2006
and the National Greenhouse and Energy Reporting Act 2007.
The Energy Efficiency Opportunities Act 2006 requires the Group to assess its energy usage, including the identification, investigation and
evaluation of energy saving opportunities, and to report publicly on the assessments undertaken, including what action the Group intends
to take as a result. As required under this Act, the Group registered with the Department of Resources, Energy and Tourism as a participant
entity and submitted its first assessment plan and reporting schedule before 31 December 2008. The Group is currently conducting its initial
assessments and will report publicly and to the Government on these assessments before 31 December 2009.
The National Greenhouse and Energy Reporting Act 2007 requires the Group to report its annual greenhouse gas emissions and energy use.
The first measurement period for this Act runs from 1 July 2008 until 30 June 2009. The Group has registered with the Greenhouse and
Energy Data Officer (GEDO) and implemented systems and processes for the collection and calculation of the data required to enable it to
prepare and submit reporting to the GEDO. The initial report was submitted before the deadline of 31 October 2009.
Information on directors
D C (Don) Taylor B.Com., CA, Grad.Cert.Rur.Sc., FAICD (Chairman and Non-Executive Director)
Don Taylor has been Chairman of the Board of Directors since December 2005. Mr Taylor is also Chairman of the Remuneration and
Nominations Committee and a member of the Trading Risk Management Committee. Mr Taylor joined the Board in October 2003.
Mr Taylor was formerly Executive Chairman of Grainco Australia Limited, a Director of Forest Enterprises Australia Limited and Chairman of
Carrington Cotton Limited (formerly listed on ASX).
M D (Mark) Irwin LLB, MBA (Managing Director and Chief Executive Officer)
Mark Irwin is a Director of Allied Mills Australia Pty Limited and a member of the Trading Risk Management Committee. Mr Irwin was
appointed in March 2008.
Prior to joining GrainCorp, Mr Irwin led a team of finance professionals, based in London, specialising in global mining and metals corporate
transactions. Prior to this, Mr Irwin worked for BHP Billiton Limited for a period of 11 years across a variety of international operational,
change management and strategic leadership roles.
P J (Peter) Housden B.Com., FCPA, FAICD (Non-Executive Director)
Peter Housden is a member of the Remuneration and Nominations Committee and a member of the Board Audit Committee. Mr Housden
joined the Board in October 2008.
Mr Housden is a Board Member of Sparke Helmore Lawyers, a Director of China Holidays Travel Group (Holdings) Pty Ltd and a Director
of Magenta Shores Golf and Country Club. Mr Housden is also a member of the Audit Committee for NSW Department of Housing.
31
Directors’ report
D J (Dan) Mangelsdorf B.Agr.Ec.(Hons), GAICD (Non-Executive Director)
Dan Mangelsdorf is a member of the Remuneration and Nominations Committee, and Chairman of the Trading Risk Management
Committee. Mr Mangelsdorf joined the Board in February 2005.
Mr Mangelsdorf was formerly Chairman of Grain Growers Association Limited and a member of the Federal Government Industry
Expert Group.
D B (David) Trebeck B.Sc.Agr.(Hons), M.Ec., FAICD (Non-Executive Director)
David Trebeck is Chairman of the Board Audit Committee, and is also a member of the Remuneration and Nominations Committee.
Mr Trebeck joined the Board in February 2002.
Mr Trebeck is currently Chairman of ASX listed company Penrice Soda Holdings Limited and a Director of Maersk Australia Pty Limited and
PrimeAg Australia Ltd. Mr Trebeck was formerly a Commissioner of the National Water Commission, and formerly Principal, Managing Director
and co-founder of economic consultancy ACIL Consulting Pty Ltd (now ACIL Tasman Pty Ltd).
S L (Simon) Tregoning B.Com. (Non-Executive Director)
Simon Tregoning is a member of the Remuneration and Nominations Committee and a member of the Board Audit Committee. Mr Tregoning
joined the Board in November 2008.
Mr Tregoning is currently a Director of St Luke’s Care and a Director of Capilano Honey Limited. Mr Tregoning was formerly a Director of
Australian Co-operative Foods Limited (Dairy Farmers) and Capitol Chilled Foods (Australia) Pty Ltd, and was formerly Vice-President of
Kimberley-Clark Corporation.
Details of directors’ interests in shares and options of GrainCorp are set out in note 34 of the financial statements.
Company Secretary
B (Betty) Ivanoff, LLB, Grad.Dip. Legal Practice
Appointed General Counsel and Company Secretary on 1 October 2008 for all Group entities.
Meetings of directors
The following table sets out the number of meetings of GrainCorp’s directors (including meetings of committees of directors) held during the
12 months to 30 September 2009, and the number of meetings attended by each director.
Director
Board committee meetings
Remuneration and Trading risk
Full Board meetings
Auditnominationsmanagement
A
B
A
B
A
B
A
B
D C Taylor
M D Irwin
P J Housden
D J Mangelsdorf
D B Trebeck
S L Tregoning
11
11
11
11
11
10
11
11
11
10
11
10
–
5
5
–
5
5
–
4
4
–
5
4
4
4
–
4
4
4
4
4
–
4
4
4
4
4
–
4
–
–
4
4
–
4
–
–
G D W Curlewis
D F Groves
1
7
1
7
–
1
–
1
–
3
–
3
–
2
–
2
A Number held during period in office.
B Number attended.
– Not a member of the relevant committee.
Remuneration report
The remuneration report is set out under the following main headings:
A Remuneration at a glance;
B Executive remuneration principles and executive reward framework overview;
C Executive reward framework details;
D Executive service agreements;
E Non-Executive Director remuneration;
F Remuneration details;
G Relationship between reward and performance; and
H Additional information.
32
Remuneration report (continued)
This report details the Group’s Remuneration Policy and actual remuneration for Key Management Personnel (including Directors and the
five highest paid Executives) for the year ended 30 September 2009. For the purposes of this report a distinction is made between NonExecutive Directors and Executives including the Managing Director. The report incorporates the disclosure requirements of accounting
standard AASB 124 Related Party Disclosures, as well as those prescribed by the Corporations Act 2001. The information provided in this
remuneration report has been audited as required by section 308(3C) of the Corporations Act 2001. Details of equity holdings, loans and
other transactions with respect to Key Management Personnel are disclosed in note 34 to the financial statements.
A. Remuneration at a glance
The following section sets out the principal elements of the Group’s remuneration strategy and framework for Non-Executive Directors and
Executives, and the impact of recent regulatory developments. Further details are set out in the remainder of this remuneration report.
Executive remuneration
Executive remuneration comprises the following elements:
1. Base package
The base package is the fixed component of remuneration. Job level, graded by independent market surveys, and individual performance
are taken into account when reviewing the quantum of base packages and determining the amount of increase, if any, to be provided.
2. Short-term incentive (STI) cash bonus
Short-term incentives are performance-related components of remuneration, for which performance is measured on an annual basis. The
performance measures, standards of performance and weightings are determined each year for each Executive having regard to the nature
of the role and the Group’s business plans.
3. Equity incentive Retention Share Plan (new equity plan)
In the 2009 financial year, the Group introduced a new equity plan to improve alignment with business strategies. Equity awards are
retention-related components of remuneration. The level of benefit derived by participants relates to the prior year STI performance and the
Company’s share price performance over a three year vesting period.
The Group has introduced the Retention Share Plan as the mechanism to align management performance with the Company’s equity
performance. Eastern Australian weather conditions have a dominating effect on east coast grain production, which in turn has the biggest
single impact on the Group’s harvest receivals, earnings and earnings per share. This impact and consequential earnings volatility meant the
EPS component in the legacy Performance Share Rights Plan, which has an annual reset, is not a true reflection of the Group’s management
performance. Hence the decision to introduce the Retention Share Plan and make no further grants under the legacy Performance Share
Rights Plan.
4. Performance Share Rights Plan (legacy long-term incentive plan)
The last grant of rights under the long-term incentive Performance Share Rights Plan was made on 1 October 2007 and it is not intended
that any future grants will be made.
Non-Executive Director remuneration
Non-Executive Directors are paid fees from a maximum aggregate fee pool of $1,000,000 approved by shareholders in 2001 for the
remuneration of Non-Executive Directors. Non-Executive Directors do not receive performance-based bonuses and do not participate in
equity schemes of the Group, other than the Non-Executive Director Deferred Share Plan which is a salary sacrifice plan.
Impact of regulatory developments
Over the past year, there have been many regulatory developments in the area of remuneration. The Group anticipates that further
developments, including legislative changes arising from the Government’s consideration of the final report of the Productivity Commission’s
review of executive remuneration, may result in the need to review the Group’s remuneration arrangements. The following specific measures
will be addressed by the Group over the course of the financial year:
• Termination cap legislation: When legislation is passed, the Group will review its approach to executive contracts.
• Taxation of employee share plans: Once legislation is passed, the Group will review its equity plans. The discussion of the Group’s equity
plans in this remuneration report is based on the current plan designs. However, the design of the plans may need to change subject to
any new legislation.
B. Executive remuneration principles and executive reward framework overview
Executive remuneration principles
The objective of the Group’s executive reward framework is to ensure reward for performance is competitive and appropriate for the results
delivered. The framework aligns executive reward with achievement of strategic objectives and the creation of value for shareholders.
In consultation with external remuneration consultants, the Group has structured an executive remuneration framework that is market
competitive and complementary to the organisation’s reward strategy, as defined by the following policy position:
Policy Position
1. Fixed Remuneration
Fixed remuneration will be positioned at the market median.
2. Total Remuneration
Total remuneration (through appropriately challenging variable incentives) provides the opportunity for
individuals to earn up to the market 75th percentile.
3. Application of Policy
Each executive is considered on a case-by-case basis with actual positioning varying by individual based
on tenure, competence, performance, and value to GrainCorp, as well as internal relativities.
33
Directors’ report
Remuneration report (continued)
Executive remuneration principles (continued)
Remuneration is benchmarked against other ASX companies taking into consideration factors including market capitalisation, assets,
appropriateness of role match, tenure and performance.
The framework provides a mix of fixed and variable ‘at risk’ pay, and a blend of short-term (cash) and longer-term incentives (equity). As
executive responsibility increases, the balance of this mix shifts to a higher proportion of ‘at risk’ rewards. The target remuneration mix for
the Managing Director and other Executives is as follows:
Total target
Base Package
STI
Equityremuneration
Managing Director
Executives
100%
100%
35%
20-37.5%
35%
20-25%
170%
140-162.5%
Overview of executive remuneration components
The following table summarises the purpose of each remuneration element:
REMUNERATION ELEMENT
PURPOSE
Base package
Base package rewards the competent completion of day-to-day accountabilities.
Short-term incentive (STI)
(cash bonus)
The short-term incentive is performance-related, rewarding relative performance related to the
achievement of Board approved annual business plans.
Retention Share Plan
(new equity plan)
The Retention Share Plan provides grants in the form of GrainCorp equity to participants based on prior
year STI performance, i.e. STI awards are matched 100%. Vesting of the equity grants is deferred for
three years so that the benefit to participants also depends on the Company’s share price performance
over the three year vesting period.
Performance Share Rights Plan
(legacy plan)
The Group does not intend to make any future grants under this Plan.
C. Executive reward framework details
Base package
The base package is a fixed component of remuneration. Individual performance is taken into account when reviewing the quantum of base
packages and determining the amount of increase, if any, to be provided. There are no guaranteed base pay increases in any executive
contracts. Base packages comprise the cost to the Group of salary, benefits, and fringe benefits tax.
Flexibility is allowed as to the mix of base packages between salary and benefits within the total cost to the Group to better meet the needs
of the Executives. Non-monetary benefits are shown separately in the remuneration tables. The total cost to the Group is not changed by the
benefit selections.
Short-term incentive
The STI plan is a cash-based award reflecting a number of key performance indicators (KPIs). KPIs are monitored in the following three
areas:
• Group performance;
• Business Unit performance; and
• Individual performance.
KPIs, standards of performance and weightings are determined each year for each Executive, having regard to the nature of the role and the
Group’s business plans. Measures focus on the achievement of the annual business plan. The STI quantum is typically weighted towards
financial measures, increasing as executive responsibility increases.
The table below outlines the KPIs:
34
Area of Focus
Measures
Financial measures
•
•
•
•
Non-financial measures
• Occupational health & safety;
• Business Unit initiatives; and
• Personal development.
Profit;
Capital expenditure;
Cost management; and
Return on capital.
Remuneration report (continued)
Short-term incentive (continued)
Each measure has a threshold, target and maximum level of performance. Where possible, quantitative measures are used.
The performance-related components are set so that the incentive opportunity as a percentage of total base package is as follows:
Position
Managing Director
Other Executives
Threshold Incentive
Target Incentive
Maximum Incentive
17.5%
10%-18.75%
35%
20%-37.5%
70%
40%-75%
Retention Share Plan
In the 2009 financial year, the Group introduced a Retention Share Plan and determined that there will be no further grant of rights under
the Performance Share Rights Plan.
Given GrainCorp’s volatility of earnings caused by the cyclical nature of its business, largely due to weather and seasonal conditions beyond
the Group’s control, the Group believes that the structure of the Performance Share Rights Plan did not reflect the best way to remunerate
Executives whilst creating shareholder value.
The Group is confident that the Retention Share Plan better meets the needs of the Group by initially focusing participants on performance
over the forthcoming 12 month period, through the STI KPIs. The plan then provides a strong retention element over the medium to longer
term, whilst directly aligning with shareholder value creation due to the deferral into shares.
The following table summarises the Retention Share Plan:
Element
Description
Award
• Grant of restricted shares.
Quantum
• Grant quantum is derived by matching 100% of the prior financial year STI award into shares.
Vesting period
• Three year sales restriction period post grant; except that in respect of awards to Executives who
participated in the Performance Share Rights Plan and were granted rights on 1 October 2007, the
restriction period for the award related to financial year end 30 September 2009 will be two years.
• Restricted shares are subject to forfeiture in the event a participant ceases employment with the Group
before the end of the restriction period.
• Disposal restrictions apply to shares post-vesting.
Performance measures
• Grant is determined by performance against STI KPIs (set annually).
• If, in any financial year, the Group does not make a net profit after tax, the opportunity under the Plan is
capped at target STI.
• Once restricted shares have been granted, the vesting period must be served before the shares vest.
• The Group does not believe multi-year performance measures are appropriate due to cyclicality of
earnings, and the inherent difficulty of setting multi-year targets.
Treatment of dividends
• Dividends are not paid on shares held by the Trustee on behalf of participants in the Plan during the
restriction period.
Termination provisions
On leaving the Group, restricted shares under the Plan vest as follows:
• Retirement: Awards vest pro-rata for time served.
• Redundancy, disability or death: Awards vest in full, subject to Board discretion.
•R
esignation/termination with cause: The individual forfeits all shares.
35
Directors’ report
Remuneration report (continued)
Performance Share Rights Plan (legacy plan)
No grants were made under the Performance Share Rights Plan in this financial year. The Group does not intend to make any future grants
under this Plan. The Plan provided selected eligible employees (including the Managing Director) a grant of rights. Each right is converted
into one share on the satisfaction of certain performance conditions.
No amount is payable for the grant of a right and no exercise price is payable on the exercise of a right.
The following table outlines the features of the Performance Share Rights Plan:
Awards pre 1 October 2007
Performance conditions
Award on 1 October 2007
• Earnings Per Share (EPS) growth of at least • Earnings Per Share (EPS) growth of at least
4% average per annum compound; and
4% average per annum compound.
• Total Shareholder Return (TSR) ranking
for the Company of at least equal to the
50th percentile of the S&P/ASX 200 Index
(excluding companies in the resources,
biotechnology and property trust sectors)
defined at the date of grant.
TSR hurdle
(relates to 50% of awards made pre 1 October 2007)
EPS hurdle
(relates to 50% of awards made pre 1 October 2007 and
100% of awards made on 1 October 2007)
•T
hreshold: At the 50th percentile, 25%
of awards vest. No awards vest for below
threshold performance.
• Target: At the 60th percentile, 50% of
awards vest.
• Stretch: At the 75th percentile, 100% of
awards vest.
• Pro-rata vesting occurs between threshold
and target, and target and maximum levels
of performance.
• Not applicable
•T
hreshold: EPS that is equivalent to being at or above 4% per annum compound
EPS growth over the three year period. At threshold 25% of the award vests.
• Target: EPS that is equivalent to being at or above 7.5% per annum compound
EPS growth over the three year period. At target, 50% of the award vests.
•S
tretch: EPS that is equivalent to being at or above 12% per annum compound
EPS growth over the three year period. At stretch, 100% of the award vests.
Grant date and performance period
The measurement period for the purposes of the performance conditions is three financial
years, commencing on the grant date. The first grant date was 1 October 2004. Subsequent
annual grants were made at the commencement of each financial year on 1 October with
the last grant made on 1 October 2007. The Company does not intend to make any future
grants under this Plan.
Performance re-testing
If vesting of the grant of rights is not achieved at the end of the measurement period,
re-testing will occur at the end of the 4th and 5th years. Improved performance over the four
or five year measurement periods will produce additional vesting.
Group performance
Remuneration policy links remuneration with Group performance. The at risk portion of remuneration is linked to the Group’s earnings and
the Company’s share price performance.
The total return to an investor over a given period consists of the combination of dividends paid by the Company and the movement in the
market value of their shares in the Company.
Group performance over the last five years:
Share price at 30 September ($)
Total dividends paid per share (cents)
Basic earnings per share (cents)
Profit attributable to equity holders
of GrainCorp Limited ($’000)
36
2009
2008
2007
2006
2005
9.04
–
33.8
8.00
–
(11.4)
9.80
10.0
(34.5)
7.85
50.0
77.6
11.15
5.0
13.9
63,161
(19,943)
(19,786)
31,734
13,447
Remuneration report (continued)
Hedging policy
Executives are prohibited from hedging or otherwise reducing or eliminating the risk associated with equity incentives such as unvested
shares, rights and options offered by the Company to the Executive. Where an Executive is in breach of this policy, the unvested shares,
rights or options shall be forfeited or lapse.
D. Executive service agreements
This section outlines the current service agreements for the Managing Director and other Executives.
Managing Director
The following terms set out the service agreement of the Managing Director, GrainCorp Limited, M D Irwin.
Agreement with Managing Director
(i) Term of Contract
Contract commenced on 31 March 2008 and will continue until terminated by either party.
(ii) Remuneration
The remuneration package is made up as follows:
• Base package of $795,600 reviewed annually and benchmarked against an agreed relevant
peer group.
• Short-term incentive (STI).The maximum available quantum is 70% of base package, with a target
of 35%.
• A one-time pro-rata grant of share rights in 2008 under the now legacy Performance Share Rights Plan.
• Retention Share Plan awards are matched at 100% of the STI award.
(iii) Termination
• Six months notice required. The Company may pay pro-rata base package in lieu of notice.
• Pro-rata STI for the year in which the termination occurs, having regard to the Board’s assessment
of performance to the date of termination.
Company initiated termination
without cause
• Six months notice required. The Company may pay pro-rata base package in lieu of notice.
• Pro-rata STI for the year in which the termination occurs, having regard to the Board’s assessment
of performance to the date of termination.
Company initiated termination
with cause
• Receive statutory entitlements up to date of termination. Not entitled to STI payment for year in which
termination occurs.
Equity
Retention Share Plan
• Retirement: Awards vest pro-rata for time served during the vesting period.
• Redundancy, disability and death: Awards vest in full, subject to Board discretion.
• Resignation/termination with cause: All shares are forfeited.
Managing Director initiated
termination without cause
Performance Share Rights Plan
• Death, disability, retirement, retrenchment, company initiated terminations for other than cause and
change-in-control: Pro-rata for time and performance over the performance period, subject to
Board discretion.
• Takeover: 50% of awards vest, 50% of awards subject to Board discretion.
• Other circumstances: Awards forfeited.
Other Executives
All other Executives are employed under common law employment contracts.
The Group may terminate an employment contract in the event of redundancy by providing four or five weeks notice depending on the age
of the Executive, with a redundancy benefit of three weeks base package for each completed year of service up to a maximum of 52 weeks
base package.
The Group may terminate an employment contract at any time without being required to have any reason or cause by providing four or five
weeks notice depending on the age of the Executive, with a severance payment of three weeks base package for each completed year of
service with a minimum of 16 weeks base package and a maximum of 52 weeks base package. In addition, the Executive may be eligible for
a pro-rata short-term incentive cash bonus subject to the Managing Director’s discretion.
The Group may terminate an employment contract if it reasonably determines that the performance of the Executive has fallen below the
standard required for the position by providing eight weeks notice.
In the instance of serious misconduct the Group can terminate employment at any time. Termination payments are generally not payable on
resignation or dismissal for serious misconduct.
37
Directors’ report
Remuneration report (continued)
Other Executives (continued)
The following table shows how the other Executives’ equity is treated on termination.
Retention Share Plan
• Retirement: Awards vest pro-rata for time served during the vesting period.
• Redundancy, disability and death: Awards vest in full, subject to Board discretion.
• Resignation/termination with cause: All shares are forfeited.
Performance Share Rights Plan
(legacy plan)
•D
eath, disability, retirement, retrenchment, company initiated terminations for other than cause
and change-in-control: Pro-rata for time and performance over the performance period, subject to
Board discretion.
• Takeover: 50% of awards vest, 50% of awards subject to Board discretion.
• Other circumstances: Awards forfeited.
E. Non-Executive Director remuneration
The Remuneration and Nominations Committee periodically reviews the Non-Executive Directors’ remuneration arrangements.
Recommendations are then submitted to the Board for its review and approval. Non-Executive Directors’ annual fees are established based
on independent advice.
The Annual General Meeting of shareholders in 2001 approved a total Non-Executive Director remuneration pool of up to $1,000,000
annually. The table below outlines the base and committee fees payable to Non-Executive Directors. The Chairman and Deputy Chairman do
not receive additional committee fees. The position of Deputy Chairman was removed in March 2009.
Position
Non-Executive Chairman
Non-Executive Deputy Chairman
(to March 2009)
Non-Executive Directors
Base Fees $
Audit Committee Chair
Committee Fees $
Trading Risk Management
Committee Chair
Committee Member
200,000
None paid
103,000
62,000
25,000
15,000
10,000
The compulsory 9% Superannuation Guarantee Contribution is paid in addition to all fees except that it is included in the fees shown above
for the Chairman and Deputy Chairman.
Retirement benefits
In December 2003, the Board resolved to cease any further contributions to Non-Executive Director retirement benefits other than statutory
entitlements. The benefit accrued by each Non-Executive Director prior to 16 December 2003 has been preserved at the accrued level and
will be paid on retirement in cash and not indexed from the cessation date. Non-Executive Directors appointed subsequent to December
2003 are not eligible for a retirement benefit.
Share-based compensation
In line with ASX Corporate Governance Council guidelines on Non-Executive Director remuneration, Non-Executive Directors are entitled to
participate in the Company Non-Executive Director Deferred Share Plan which is a salary sacrifice plan. Under the plan, they may acquire
ordinary shares through on market purchases in lieu of fees.
F. Remuneration details
Details of the remuneration of the Directors and the other Key Management Personnel of GrainCorp Limited and the Group are set out in
the following tables.
38
Remuneration report (continued)
Directors of GrainCorp Limited
2009
Name
Short-term benefits
Cash salary
Non-monetary
and fees
Cash bonus
benefits
$
$
$
D C Taylor
146,045
M D Irwin
702,699
72,085
P J Housden3
D J Mangelsdorf
68,513
D B Trebeck
61,799
64,454
S L Tregoning4
G D W Curlewis5
5,353
10,561
D F Groves2
Total
1,131,509
–
422,786
–
–
–
–
–
–
422,786
–
53,629
–
–
–
–
–
–
53,629
Post
employment
benefits
Superannuation
$
Long-term
benefits
Long service
leave
$
Termination
benefits
Retirement/
redundancy
$
50,599
37,881
6,491
7,976
21,706
5,822
482
5,029
135,986
–
13,424
–
–
–
–
–
–
13,424
–
–
–
–
–
–
–
–
Share-based payments
Share
Share
sacrifice
rights1
$
$
2,885
–
–
20,000
14,423
–
–
44,997
82,305
–
–
–
–
–
–
–
–
–
Total
$
199,529
1,230,419
78,576
96,489
97,928
70,276
5,835
60,587
1,839,639
1The value of awards listed under share rights above represents the accounting value, rather than the cash value to participants. The total cash value of awards vested to participants in
the financial year was $nil.
2 D F Groves resigned 18 May 2009 and received $171,079 as retirement benefit (accrued in a previous period).
3 P J Housden appointed 17 October 2008.
4 S L Tregoning appointed 2 December 2008.
5 G D W Curlewis resigned 17 October 2008.
2008
Name
Short-term benefits
Cash salary
Non-monetary
and fees
Cash bonus
benefits
$
$
$
D C Taylor
97,535
D J Mangelsdorf
65,154
308,294
M D Irwin2
G D W Curlewis
67,304
D F Groves
320
D B Trebeck
49,584
302,056
T B Keene3
39,785
J W Eastburn4
–
R R Flanery5
39,759
R G Freeman6
38,220
G T Lane7
36,254
S J Millear8
12,012
B Smith9
Total
1,056,277
–
–
172,125
–
–
–
–
–
–
–
–
–
–
172,125
–
–
30,376
–
–
–
51,180
–
–
–
–
–
–
81,556
Post
employment
benefits
Superannuation
$
Long-term
benefits
Long service
leave
$
Termination
benefits
Retirement/
redundancy
$
79,956
7,687
49,672
6,057
5,805
7,142
26,397
4,282
26,186
3,735
3,440
3,342
1,179
224,880
–
–
6,452
–
–
–
15,254
–
–
–
–
–
–
21,706
–
–
–
–
–
–
528,424
–
–
–
–
–
–
528,424
Share-based payments
Share
Share
sacrifice
rights1
$
$
5,000
20,000
–
–
64,184
25,000
8,154
6,539
–
–
–
–
–
128,877
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
$
182,491
92,841
566,919
73,361
70,309
81,726
931,465
50,606
26,186
43,494
41,660
39,596
13,191
2,213,845
1The value of awards listed under share rights above represents the accounting value, rather than the cash value to participants. The total cash value of awards vested to participants in
the financial year was $nil.
2 M D Irwin is the Managing Director of the GrainCorp Group and the only Executive Director on the Board. He was appointed 31 March 2008.
3 T B Keene retired 28 March 2008 and received $2,675,891 as final payment ($2,147,467 accrued in a previous period).
4 J W Eastburn resigned 6 June 2008.
5 R R Flanery resigned 22 February 2008 and received $173,849 as retirement benefit (accrued in a previous period).
6 R G Freeman resigned 3 June 2008 and received $166,055 as retirement benefit (accrued in a previous period).
7 G T Lane resigned 23 May 2008.
8 S J Millear resigned 12 May 2008.
9 B Smith appointed 25 February 2008, resigned 9 May 2008.
39
Directors’ report
Remuneration report (continued)
Other Key Management Personnel
The other Key Management Personnel are the following Executives with authority and responsibility for planning, directing and controlling the
activities of the Group and the Company in the financial year. They include the five Executives who received the highest emoluments in the
Company and the Group during the year ended 30 September 2009.
Name
Position
B J Griffin
N P Hart
M P Henry
A N Johns
K J Lloyd
G R Mathason
R Porcheron
S J Tainsh
I Wilton
J de Salis
A K Scott
General Manager, Storage & Logistics (appointed 17 March 2009)
General Manager, Ports & New Business
General Manager, Merchandise
Chief Development Officer
General Manager, Country Operations
General Manager, Account Management
General Manager, Human Resources
General Manager, Trading
Chief Financial Officer (appointed 22 June 2009)
General Manager, AG Finance (position redundant 30 January 2009)
Chief Financial Officer (resigned 6 April 2009)
Details of the remuneration of the other Key Management Personnel are set out in the table below.
2009
Name
B J Griffin2
N P Hart
M P Henry
A N Johns
K J Lloyd
G R Mathason
R S Porcheron
S J Tainsh
I Wilton3
J de Salis4
A K Scott5
Total
Short-term benefits
Cash salary
Non-monetary
and fees
Cash bonus
benefits
$
$
$
162,942
295,984
229,956
314,628
350,099
161,943
136,114
291,834
86,905
110,989
341,656
2,483,050
58,140
98,640
41,596
99,040
122,833
47,737
44,358
203,700
–
–
–
716,044
6,295
31,977
21,579
23,032
23,350
25,348
16,735
–
1,293
3,311
–
152,920
Post
employment
benefits
Superannuation
$
Long-term
benefits
Long service
leave
$
Termination
benefits
Retirement/
redundancy
$
7,302
13,984
13,910
13,984
90,562
17,534
44,231
23,458
11,803
5,022
7,930
249,720
3,137
8,791
4,513
13,228
14,827
7,285
3,371
5,399
1,872
–
–
62,423
–
–
–
–
–
–
–
–
–
118,000
–
118,000
1The value of awards listed under share rights above represents the accounting value, rather than the cash value to participants.
The total cash value of awards vested to participants in the financial year was $338,192.
2 B J Griffin appointed 17 March 2009.
3 I Wilton appointed 22 June 2009.
4 J de Salis’ position redundant 30 January 2009.
5 A K Scott resigned 6 April 2009.
40
Share-based payments
Share
Share
sacrifice
rights1
$
$
–
577
–
577
–
–
577
–
–
808
–
2,539
–
191,301
–
195,204
191,653
74,542
50,487
195,204
–
–
–
898,391
Total
$
237,816
641,254
311,554
659,693
793,324
334,389
295,873
719,595
101,873
238,130
349,586
4,683,087
Remuneration report (continued)
Other Key Management Personnel (continued)
2008
Name
J P Breeze2
N P Hart
M P Henry
A N Johns
K J Lloyd
G R Mathason3
R Porcheron3
J de Salis
A K Scott
S J Tainsh
Total
Short-term benefits
Cash salary
Non-monetary
and fees
Cash bonus
benefits
$
$
$
98,137
256,501
214,384
256,644
257,252
150,568
114,343
217,809
284,267
275,098
2,125,003
–
96,362
85,511
85,423
98,930
33,010
35,495
68,988
84,540
34,506
622,765
4,804
37,481
30,212
17,932
31,285
24,101
11,589
7,730
2,423
11,739
179,296
Post
employment
benefits
Superannuation
$
Long-term
benefits
Long service
leave
$
20,874
13,345
13,271
13,380
75,327
16,895
49,999
13,271
13,271
13,271
242,904
–
8,354
4,217
12,320
14,345
6,649
3,070
3,981
5,313
4,925
63,174
Share-based payments
Share
Share
sacrifice
rights1
$
$
1,154
1,000
–
1,000
–
–
1,000
1,000
–
3,847
9,001
–
59,414
–
60,627
64,264
22,944
15,821
49,943
–
60,627
333,640
Total
$
124,969
472,457
347,595
447,326
541,403
254,167
231,317
362,722
389,814
404,013
3,575,783
1The value of awards listed under share rights above represents the accounting value, rather than the cash value to participants.
The total cash value of awards vested to participants in the financial year was $nil.
2 J P Breeze retired 2 April 2008. Performance share rights were forfeited.
3 Promoted to Executive on 11 April 2008.
The relative proportions of remuneration that are linked to performance and those that are fixed are as follows:
Name
Fixed remuneration
At risk
– target STI
At risk
– target Equity1
58.8%
20.6%
20.6%
66.6%
66.6%
66.6%
71.4%
66.6%
71.4%
71.4%
61.5%
71.4%
16.7%
16.7%
16.7%
14.3%
16.7%
14.3%
14.3%
23.1%
14.3%
16.7%
16.7%
16.7%
14.3%
16.7%
14.3%
14.3%
15.4%
14.3%
Executive Director of GrainCorp Limited
M D Irwin
Other Key Management Personnel of the Group
B J Griffin
N P Hart
M P Henry
A N Johns
K J Lloyd
G R Mathason
R S Porcheron
S J Tainsh
I Wilton
1 Refers to the Retention Share Plan.
Shares under option and rights
During the financial year, no share rights were granted under the Performance Share Rights Plan (legacy plan). Shares will be awarded with
an acquisition date of 1 October 2009 under the Retention Share Plan for FY09 performance and will be held on behalf of each Executive
by the Plan Trustee until the expiration of the three year restriction period. No options have been granted during or since the end of the
financial year to any Directors or other Key Management Personnel of the Company and Group.
41
Directors’ report
Remuneration report (continued)
G. Relationship between reward and performance
The executive remuneration framework includes performance measures linked to business strategy objectives. Part of remuneration is
provided in the form of equity, linked to share price performance.
Performance Share Rights Plan (legacy plan)
The table below summarises the performance and vesting implications for grants under the legacy Performance Share Rights Plan.
Grant
Grant Date
Performance Hurdle
Summary of Performance
Implications for Vesting
2004
1 October 2004
TSR and EPS as
per section C of
the remuneration
report.
• Performance conditions were not
• No awards vested and this grant is
achieved at the end of the performance
now closed.
period to 30 September 2007.
• Re-testing occurred at 30 September
2008 and 30 September 2009 but
the performance conditions were
not achieved.
2005
1 October 2005
TSR and EPS as
per section C of
the remuneration
report.
• Performance conditions were not
• This grant vested at 100% on EPS
achieved at the end of the performance
which is 50% of the performance
period to 30 September 2008.
measures.
• Re-testing occurred at 30 September
2009 and the performance conditions
on EPS (50% of the performance
measures) were achieved at stretch
level (i.e. 100%).
• Performance will be measured again at
30 September 2010.
2006
1 October 2006
TSR and EPS as
per section C of
the remuneration
report.
2007
1 October 2007
EPS as per
section C of the
remuneration
report.
• Performance conditions were not
• No awards vested on first testing on
achieved at the end of the performance
30 September 2009.
period to 30 September 2009.
• Performance will be measured again
at 30 September 2010, and
30 September 2011.
• Performance will be measured on
• Not applicable.
30 September 2010, 30 September
2011 and 30 September 2012.
Retention Share Plan
The table below summarises the performance and vesting implications for grants under the Retention Share Plan.
Grant
Grant Date
Performance Criteria Summary of Performance
Implications for Vesting
2009
1 October 2009
100% matching of • Performance is calculated on
STI cash bonus
STI results:
1. Company performance;
2. Business Unit performance; and
3. Individual performance.
• Shares will be fully vested on
30 September 2012, except that in
respect of awards to Executives who
participated in the Performance Share
Rights Plan and were granted rights on
1 October 2007, the shares will vest
on 30 September 2011.
H. Additional information for remuneration report
STI cash bonus
For each STI cash bonus included in the tables on pages 39 to 41, the percentage of the available incentive that was paid in the financial
year, and the percentage that was forfeited because the person did not meet the performance criteria are set out below. No part of the cash
bonus is payable in future years.
42
Remuneration report (continued)
STI cash bonus (continued)
Name
STI Cash Bonus
Paid %
Forfeited %
53%
47%
34%
29%
16%
32%
35%
23%
22%
64%
–
–
–
66%
71%
84%
68%
65%
77%
78%
36%
–
–
–
Executive Director of GrainCorp Limited
M D Irwin
Other Key Management Personnel of the Group
B J Griffin
N P Hart
M P Henry
A N Johns
K J Lloyd
G R Mathason
R S Porcheron
S J Tainsh
I Wilton
J de Salis
A K Scott
Performance rights (under legacy plan)
For prior year unvested grants of performance rights, the percentage of the available grant that vested in the financial year, and the
percentage that was forfeited because the person did not meet the service and performance criteria, are set out below.
The performance rights first vest after three years, providing the vesting conditions are met. No performance rights vest if the conditions are
not satisfied, hence the minimum value of the performance rights yet to vest is nil. The maximum value of the performance rights yet to vest
has been determined as the amount of the grant date fair value that is yet to be expensed.
Name
Earliest financial
year in which
Forfeited %
rights may vest
Minimum total
value of grant
yet to vesT
$
Maximum total
value of grant
yet to vesT
$
Year granted
Vested %
2008
–
–
30/9/2010
–
400,804
–
2008
2007
2006
2008
2007
2008
2007
2006
2008
2007
2006
2008
2007
2006
2008
2007
2006
2008
2007
2006
–
2008
2007
2006
2008
2007
–
–
50%
–
–
–
–
50%
–
–
50%
–
–
50%
–
–
50%
–
–
50%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
100%
100%
100%
100%
100%
–
30/9/2010
30/9/2009
30/9/2008
30/9/2010
30/9/2009
30/9/2010
30/9/2009
30/9/2008
30/9/2010
30/9/2009
30/9/2008
30/9/2010
30/9/2009
30/9/2008
30/9/2010
30/9/2009
30/9/2008
30/9/2010
30/9/2009
30/9/2008
–
30/9/2010
30/9/2009
30/9/2008
30/9/2010
30/9/2009
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
178,489
169,584
–
152,814
–
178,489
173,042
–
188,267
183,426
–
66,540
64,601
–
63,570
45,756
–
178,489
173,042
–
–
–
–
–
–
–
Executive Director of GrainCorp Limited
M D Irwin
Other Key Management Personnel of the Group
B J Griffin
N P Hart
M P Henry
A N Johns
K J Lloyd
G R Mathason
R S Porcheron
S J Tainsh
I Wilton
J de Salis
A K Scott
43
Directors’ report
Remuneration report (continued)
Options and performance rights holdings
The number of rights over ordinary shares in the Company held by the Managing Director and each of the other Key Management Personnel
of the Group, including their personally-related entities, are set out below.
Name
Balance
at the start
of the year
Number
granted during
the year as
remuneration
% of total
remuneration
during the year
Exercised
during the
year
Other
changes
during the
year
Accrued
balance at
the end
of the year
Vested and
exercisable
at the end
of the year
–
–
–
–
47,098
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(40,274)
–
(41,096)
(43,561)
(15,781)
(10,567)
(41,096)
–
(85,227)
(20,974)
–
61,268
17,957
62,090
65,706
23,340
18,226
62,090
–
–
–
–
7,840
–
8,000
8,480
3,072
2,057
8,000
–
–
–
Executive Directors of GrainCorp Limited
M D Irwin
47,098
Other Key Management Personnel of the Group
B J Griffin1
N P Hart
M P Henry
A N Johns
K J Lloyd
G R Mathason
R S Porcheron
S J Tainsh
I Wilton2
J de Salis3
A K Scott4
1
2
3
4
–
101,542
17,957
103,186
109,267
39,121
28,793
103,186
–
85,227
20,974
B J Griffin appointed 17 March 2009.
I Wilton appointed 22 June 2009.
J de Salis’ position redundant 30 January 2009.
A K Scott resigned 6 April 2009.
Insurance of officers
During the financial year, the Group has paid, or agreed to pay, premiums to insure persons who are, or have been, an officer of the Company
or a related entity, or any past, present or future director or officer of the Company, or any of its subsidiaries or related entities. The contracts
prohibit disclosure of the amount of the premium paid. The liabilities insured include costs and expenses that may be incurred in defending
civil or criminal proceedings that may be brought against the officers in their capacity as officers of entities in the Group.
Proceedings on behalf of the Company
No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section 237 of the Corporations
Act 2001.
Non-audit services
The Company may decide to employ the external auditor on assignments additional to its statutory audit duties where the
auditor’s expertise and experience with the Company and/or the Group are important. Details of the amounts paid to the auditor
(PricewaterhouseCoopers) for audit and non-audit services provided during the year are set out in note 31.
In accordance with the advice received from the Board Audit Committee, the Board is satisfied that the provision of non-audit services is
compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the
provision of non-audit services by the auditor did not compromise the auditor independence requirements of the Corporations Act 2001 for
the following reasons:
• All non-audit services have been reviewed by the Board Audit Committee to ensure they do not impact the integrity and objectivity of the
auditor; and
• None of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics of
Professional Accountants.
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 45 and
forms part of this report.
Rounding of amounts to nearest thousand dollars
The Company is of a kind referred to in Class Order 98/100 issued by the Australian Securities and Investments Commission (ASIC),
relating to the ‘rounding off’ of amounts in the directors’ report and financial report. Amounts in the directors’ report and financial report
have been rounded off to the nearest thousand dollars in accordance with that Class Order, or in certain cases, to the nearest dollar.
This report is made in accordance with a resolution of the directors.
D C Taylor
Chairman
Sydney,
25 November 2009
44
Auditor’s independence declaration
Auditor’s independence declaration
As lead auditor for the audit of GrainCorp Limited for the year ended 30 September 2009, I declare that, to the best of my knowledge and
belief, there have been:
(a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of GrainCorp Limited and the entities it controlled during the period.
M K Graham
Partner PricewaterhouseCoopers
Sydney,
25 November 2009
45
Income statements
For the year ended 30 September 2009
Note
Consolidated
2009
2008
$’000
$’000
Revenue from continuing operations
5
1,729,787
1,534,170
12,515
8,286
Other income
Goods purchased for resale
Raw materials and consumables used
Employee benefits expense
Depreciation and amortisation expense
Impairment expense
Finance costs
Repairs and maintenance
Other expenses
Share of net profits of associates accounted for using
the equity method
6
51,862
(1,339,083)
(29,680)
(142,645)
(43,094)
(3,318)
(36,295)
(24,228)
(87,251)
2,426
(1,304,205)
(18,849)
(104,948)
(40,109)
–
(46,961)
(10,415)
(57,503)
–
–
–
–
–
–
(2,457)
–
(291)
–
–
–
–
–
–
(5,144)
–
(468)
Profit / (loss) before income tax
Income tax benefit / (expense)
7
7
38
8
Profit / (loss) from continuing operations
Profit attributable to minority interest
Profit / (loss) attributable to equity holders of GrainCorp Limited
Earnings per share for profit from continuing operations
attributable to ordinary equity holders of the Company
Basic earnings per share
Diluted earnings per share
40
40
9,787
10,576
–
–
85,842
(22,681)
(35,818)
15,880
9,767
(3,204)
2,674
(173)
63,161
–
63,161
(19,938)
(5)
(19,943)
6,563
–
6,563
2,501
–
2,501
Cents
Cents
33.8
33.7
(11.4)
n/a
The above income statements should be read in conjunction with the accompanying notes.
46
Parent entity
2009
2008
$’000
$’000
Balance sheets
AS AT 30 September 2009
Consolidated
2009
2008
$’000
$’000
Note
Parent entity
2009
2008
$’000
$’000
Current assets
161,423
158,533
96,808
51,935
468,699
880
469,579
8,935
183,013
198,031
68,990
458,969
882
459,851
2,726
3,695
–
–
6,421
–
6,421
482
487
–
–
969
–
969
14
15
16
17
18
19
19,109
106,653
3,030
414,485
37,080
33,834
614,191
1,083,770
19,109
96,866
4,538
433,062
52,982
31,879
638,436
1,098,287
161,385
–
348,773
–
17,508
–
527,666
534,087
44,838
–
348,421
–
33,676
–
426,935
427,904
20
21
12
22
110,458
88,719
24,867
203
–
26,438
250,685
78,077
228,982
68,681
409
2,492
27,590
406,231
74
–
–
–
–
–
74
720
899
–
–
–
–
1,619
24
25
22
26
27
104,644
1,276
1,166
29,696
2,548
139,330
390,015
693,755
224,432
2,669
1,158
25,151
2,501
255,911
662,142
436,145
–
–
–
72
154
226
300
533,787
94,647
–
–
140
324
95,111
96,730
331,174
28
29
29
487,962
12,545
193,248
693,755
–
693,755
296,581
9,377
130,087
436,045
100
436,145
491,030
13,647
29,110
533,787
–
533,787
296,581
12,046
22,547
331,174
–
331,174
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative financial instruments
9
10
11
12
Non-current assets classified as held for sale
Total current assets
13
Non-current assets
Receivables
Investments accounted for using the equity method
Other financial assets
Property, plant and equipment
Deferred tax assets
Intangible assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Borrowings
Derivative financial instruments
Other financial liabilities
Current tax liabilities
Provisions
Total current liabilities
23
Non-current liabilities
Borrowings
Derivative financial instruments
Other financial liabilities
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained profits
Parent entity interest
Minority interest
Total equity
The above balance sheets should be read in conjunction with the accompanying notes.
47
Statement of changes in equity
For the year ended 30 September 2009
Consolidated
Contributed
equity
$’000
At 1 October 2007
Gain / (loss) on cash
flow hedges
Net income recognised directly in equity
Loss for the year
Total income / expense for the year
Share issue (net of transaction costs)
Share-based payments
Deferred tax credit
At 30 September 2008
Gain / (loss) on cash
flow hedges
Net income recognised directly in equity
Transfer to net profit – gross
Deferred tax credit
Profit for the year
Total income / expense for the year
Disposal of Group entity that had
minority interest
Share issues (net of transaction costs)
Share-based payments
Deferred tax credit
Less: Treasury shares
At 30 September 2009
237,339
Attributable to equity holders of the parent
Hedging
Capital Share option
Retained
reserve
reserve
reserve
profits
$’000
$’000
$’000
$’000
–
Minority
interest
Total
equity
Total
$’000
$’000
$’000
8,328
3,229
150,030
398,926
95
399,021
–
–
–
–
58,771
54
417
296,581
(2,669)
(2,669)
–
(2,669)
–
–
–
(2,669)
–
–
–
–
–
–
–
8,328
–
–
–
–
–
489
–
3,718
–
–
(19,943)
(19,943)
–
–
–
130,087
(2,669)
(2,669)
(19,943)
(22,612)
58,771
543
417
436,045
–
–
5
5
–
–
–
100
(2,669)
(2,669)
(19,938)
(22,607)
58,771
543
417
436,145
–
–
–
–
–
–
(2,617)
(2,617)
3,711
473
–
1,567
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
63,161
63,161
(2,617)
(2,617)
3,711
473
63,161
64,728
–
–
–
–
–
–
(2,617)
(2,617)
3,711
473
63,161
64,728
–
192,692
35
1,722
(3,068)
487,962
–
–
–
–
–
(1,102)
–
–
–
–
–
8,328
–
–
1,601
–
–
5,319
–
–
–
–
–
193,248
–
192,692
1,636
1,722
(3,068)
693,755
(100)
–
–
–
–
–
(100)
192,692
1,636
1,722
(3,068)
693,755
The above statement of changes in equity should be read in conjunction with the accompanying notes.
PARENT Entity
Contributed
equity
$’000
At 1 October 2007
Profit for the year
Total income / expense for the year
Share issue (net of transaction costs)
Share-based payments
Deferred tax credit
At 30 September 2008
Profit for the year
Total income / expense for the year
Share issues (net of transaction costs)
Share-based payments
Deferred tax credit
At 30 September 2009
237,339
–
–
58,771
54
417
296,581
–
–
192,692
35
1,722
491,030
Attributable to equity holders of the parent
Hedging
Capital Share option
Retained
reserve
reserve
reserve
profits
$’000
$’000
$’000
$’000
–
–
–
–
–
–
–
–
–
–
–
–
–
8,328
–
–
–
–
–
8,328
–
–
–
–
–
8,328
3,229
–
–
–
489
–
3,718
–
–
–
1,601
–
5,319
20,046
2,501
2,501
–
–
–
22,547
6,563
6,563
–
–
–
29,110
The above statement of changes in equity should be read in conjunction with the accompanying notes.
48
Minority
interest
Total
equity
Total
$’000
$’000
$’000
268,942
2,501
2,501
58,771
543
417
331,174
6,563
6,563
192,692
1,636
1,722
533,787
–
–
–
–
–
–
–
–
–
–
–
–
–
268,942
2,501
2,501
58,771
543
417
331,174
6,563
6,563
192,692
1,636
1,722
533,787
Cash flow statements
For the year ended 30 September 2009
Note
Consolidated
2009
2008
$’000
$’000
Parent entity
2009
2008
$’000
$’000
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Interest paid
Income taxes refunded / (paid)
Net inflow (outflow) from operating activities
39
1,974,221
(1,725,992)
248,229
4,478
(37,488)
(2,491)
212,728
1,489,360
(1,465,324)
24,036
4,324
(46,056)
1,764
(15,932)
5,749
(1,107)
4,642
6,426
(2,457)
(334)
8,277
3,588
(1,258)
2,330
7,392
(6,252)
525
3,995
(27,841)
(3,534)
800
4,338
–
200
2,133
–
358
(23,546)
(22,340)
(8,208)
2,114
–
(21,293)
345
2,097
–
9,000
(38,285)
–
–
–
1,249
–
200
–
(101,595)
–
(100,146)
–
–
–
–
–
345
–
–
9,000
9,345
399,182
(625,500)
–
198,384
(5,692)
(3,068)
(36,694)
409,287
(387,200)
(19,900)
60,160
(1,389)
–
60,958
–
(95,546)
–
198,419
(5,692)
(3,068)
94,113
–
(72,889)
–
60,160
(1,389)
–
(14,118)
Cash flows from investing activities
Payments for property, plant and equipment
Payments for computer software
Proceeds from sale of property, plant and equipment
Proceeds from sale of investments
Payments for investment/business (net of cash)
Dividends received
Deposit bond for pools funding (net)
Loans to related parties
Loans repaid by related parties
Net inflow (outflow) from investing activities
17
19
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Repayment of deposit notes (net)
Proceeds from share issue
Share issue transaction costs
Treasury shares purchased
Net inflow (outflow) from financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
28
9
152,488
8,935
161,423
6,741
2,194
8,935
2,244
482
2,726
(778)
1,260
482
The above cash flow statements should be read in conjunction with the accompanying notes.
49
Notes to the financial statements
30 September 2009
1. Summary of significant accounting policies
The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been consistently
applied to all years presented, unless otherwise stated. The financial report includes separate financial statements for GrainCorp Limited
as an individual entity and the consolidated entity consisting of GrainCorp Limited and its subsidiaries, referred to hereafter as the Group.
(a) Basis of preparation
This general purpose financial report has been prepared in accordance with Australian Accounting Standards, other authoritative
pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the Corporations Act 2001.
Compliance with International Financial Reporting Standards (IFRS)
Australian Accounting Standards include Australian equivalents to International Financial Reporting Standards (AIFRS). Compliance with
AIFRS ensures that the consolidated financial statements and notes of GrainCorp Limited comply with IFRS as issued by the International
Accounting Standards Board (IASB).
Historical cost convention
These financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets and
liabilities (including derivative instruments), and commodity inventories, at fair value through profit or loss.
Critical accounting estimates
The preparation of financial statements in conformity with AIFRS requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of
judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 3.
(b) Principles of consolidation
(i) Subsidiaries
The consolidated financial statements incorporate the assets and liabilities of GrainCorp Limited (referred to as the Company or parent
entity) and all subsidiaries of the Company as at 30 September 2009 and the results of the Company and all subsidiaries for the year then
ended. GrainCorp Limited and its subsidiaries together are referred to in this financial report as the Group.
Subsidiaries are all those entities over which the parent entity has the power to govern the financial and operating policies, generally
accompanying a shareholding of more than one-half of the voting rights. The existence and effect of potential voting rights that are currently
exercisable or convertible are considered when assessing whether the parent entity controls another entity.
Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are
also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have
been changed where necessary to ensure consistency with the policies adopted by the Group.
Minority interests in the results and equity of subsidiaries are shown separately in the consolidated income statement and balance
sheet respectively.
Investments in subsidiaries are accounted for at cost in the individual financial statements of the Company.
(ii) Associates
Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of
between 20% and 50% of the voting rights. Investments in associates are stated in the parent entity financial statements at cost. They are
accounted for in the consolidated financial statements using the equity method, after initially being recognised at cost.
When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables,
the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates.
Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group.
(iii) Joint ventures
The proportionate interests in the assets, liabilities and expenses of joint venture operations have been incorporated in the consolidated
financial statements under the appropriate headings.
(c) Segment reporting
A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns
that are different to those of other business segments. A geographical segment is engaged in providing products and services within a
particular economic environment and is subject to risks and returns that are different from those of segments operating in other
economic environments.
50
1. Summary of significant accounting policies (continued)
(d) Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade
allowances and duties and taxes paid. Revenue from major business activities include: revenue earned from the provision of services,
including the handling, classification and storage of grains and other bulk commodities; management of grain pools; and the marketing and
sale of grain, seed, fertiliser and other products.
(i) Sale of goods
Revenue from sale of goods is recognised when the risks and rewards of the ownership of goods are transferred to the customer. This
occurs upon delivery of the goods. In the case of export sales, the bill of lading (shipment) date is taken as the transaction date unless title
is to pass at a materially different time.
(ii) Services
Revenue from a contract to provide services is recognised by reference to the stage of completion of the contract. Amounts billed in
advance are recorded as a current liability until such time as the service is performed.
(iii) Other revenue
Other revenue includes rental income which is recognised on a straight-line basis over the lease term, interest income which is recognised
on a time proportion basis using the effective interest rate method, and dividends which are recognised when the right to receive payment
is established.
(e) Government grants
Government grants relating to costs are deferred and recognised in the income statement over the period necessary to match them with
the costs they are intended to compensate.
Government grants relating to the purchase of property, plant and equipment are included in non-current liabilities as deferred income and
are credited to the income statement on a straight-line basis over the expected lives of the related assets.
Where Government grants take the form of a transfer of non-monetary assets for the use of the entity, both the asset and grant are recorded
at a nominal amount.
(f) Income tax
The income tax expense or revenue for the period is the tax payable on the current period’s taxable income adjusted by changes in deferred
tax assets and liabilities attributed to temporary differences between the tax bases of assets and liabilities and their carrying amount in the
financial statements, and to unused tax losses.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it
arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction
affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted
or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the
deferred income tax liability is settled.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable
amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in
controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the
differences will not reverse in the foreseeable future.
Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.
Tax consolidation legislation
GrainCorp Limited is the head entity in a tax-consolidated group comprising the head entity and all of its wholly-owned Australian
subsidiaries.
The head entity, GrainCorp Limited, and the controlled entities in the tax-consolidated group account for their own current and deferred tax
amounts. These tax amounts are measured as if each entity in the tax-consolidated group continues to be a stand alone taxpayer in its
own right.
In addition to its own current and deferred tax amounts, GrainCorp Limited also recognises the current tax liabilities (or assets) and the
deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax-consolidated group.
Assets or liabilities arising under the tax funding agreement between GrainCorp Limited and tax-consolidated entities are recognised as
amounts receivable from or payable to other entities in the Group. Details of the tax funding agreement are disclosed in note 8.
Any difference between the amounts assumed and the amounts receivable or payable under the tax funding agreement are recognised as a
contribution to (or distribution from) wholly-owned tax-consolidated entities.
51
Notes to the financial statements
30 September 2009
1. Summary of significant accounting policies (continued)
(g) Goods and services tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, except where the amount of GST incurred is not
recoverable from the taxation authority, in which case it is recognised as part of the cost of acquisition of an asset or as part of
the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or
payable to, the taxation authority is included as part of other receivables or payables in the balance sheet.
Cash flows are included in the cash flow statement on a gross basis. 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 operating cash flows.
(h) Business combinations
The acquisition method of accounting is used to account for all business combinations regardless of whether equity instruments or other
assets are acquired. Cost is measured as the fair value of the assets given, shares issued or liabilities incurred or assumed at the date
of exchange plus costs directly attributable to the acquisition. Where equity instruments are issued in an acquisition, the fair value of the
instruments is their published market price at the date of exchange unless other evidence and valuation methods provide a more reliable
measure of fair value. Transaction costs arising on the issue of equity instruments are recognised directly in equity.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair
values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of
the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the
net assets of the subsidiary acquired, the difference is recognised directly in the income statement, but only after a reassessment of the
identification and measurement of the net assets acquired.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at
the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be
obtained from an independent financier under comparable terms and conditions.
(i) Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method,
less provision for impairment. Trade receivables are generally due for settlement no more than 30 days from the date of recognition.
Collectibility of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A provision for
impairment of trade receivables is established when there is objective evidence that the Group will be unable to collect all amounts due
according to the original terms of receivables.
The amount of the provision is recognised in the income statement in other expenses.
(j) Inventories
(i) Consumable stores
Consumable stores held for own consumption are valued at the lower of cost and net realisable value.
(ii)Trading inventory
Trading inventory is stated at the lower of cost and net realisable value. Cost comprises direct materials and an appropriate portion of
variable overhead. Costs are assigned to individual items of inventory on the basis of weighted average costs.
(iii) Commodities inventory
Commodities inventory, principally grain inventories acquired with the purpose of selling in the near future and generating a profit from
fluctuation in price or broker-traders’ margin, is measured at fair value less costs to sell, with changes in fair value recognised in the
income statement.
(k) Grain pools
The Group manages grain pools on behalf of growers, and receives a management fee for its services based on a percentage of the pools’
final return to pool participants. The expected management fee is recognised on a straight-line basis over the estimated life of the pool.
As part of the Group’s management of the most significant pools of wheat and barley, it is responsible for arranging funding to facilitate
advance payments to growers over the life of the pool. The Group has entered into an arrangement with GrainCorp Pools Pty Limited (GCPL),
a company 100% owned by Rabo Australia Limited, to provide this financing.
Although this funding is non-recourse to the Group it has resulted, consistent with prior years, in the recognition on the balance sheet
of the pool advance facility balance of $28.6 million from Rabobank and net pool assets of $28.6 million at 30 September 2009
(2008: $1.8 million; $1.8 million). Any interest on this facility is borne by the pools and not by the Group.
GCPL also requires the Group to provide a deposit bond of up to 5% of the final value of the estimated pool which is shown as a receivable
in the balance sheet. In the event of a significant shortfall in pool funds, the Group’s exposure is limited to the forfeiture of this bond (until
reimbursed by pool participants), together with its management fee income.
52
1. Summary of significant accounting policies (continued)
(l) Non-current assets (or disposal groups) held for sale
Non-current assets (or disposal groups) that are classified as held for sale are shown as current assets in the balance sheet. They are
stated at the lower of their carrying amount and fair value less costs to sell if their carrying amount will be recovered principally through a
sale transaction rather than through continuing use.
An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell.
A gain is recognised for any subsequent increase in fair value less costs to sell of an asset (or disposal group), but not in excess of any
cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset
(or disposal group) is recognised at the date of derecognition.
Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they are classified as held for
sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognised.
Non-current assets classified as held for sale and the assets of a disposal group classified as held for sale are presented separately from
the other assets in the balance sheet. The liabilities of a disposal group classified as held for sale are presented separately from other
liabilities in the balance sheet.
(m) Investments and other financial assets
Classification
The Group classifies its investments in the following categories: financial assets at fair value through profit or loss, loans and receivables,
held-to-maturity investments, and available-for-sale financial assets. The classification depends on the purpose for which the investments
were acquired. Management determines the classification of its investments at initial recognition and re-evaluates this designation at each
reporting date.
(i) Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if
acquired principally for the purpose of selling in the short term. Derivatives are categorised as held for trading unless they are designated
as hedges. Assets in this category are classified as current assets.
(ii) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They
are included in current assets, except for those with maturities greater than 12 months after the balance sheet date which are classified as
non-current assets. Loans and receivables are included in trade and other receivables in the balance sheet.
(iii)Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Group’s
management has the positive intention and ability to hold to maturity.
(iv)Available-for-sale financial assets
Available-for-sale financial assets, comprising principally marketable equity securities, are non-derivatives that are either designated in this
category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of
the investment within 12 months of the balance sheet date.
Recognition and derecognition
Regular purchases and sales of investments are recognised on trade-date, the date on which the Group commits to purchase or sell the
asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through
profit or loss. Financial assets are derecognised when all rights to receive cash flows from the financial assets have expired or have been
transferred and the Group has transferred substantially all the risks and rewards of ownership.
Subsequent measurement
Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and
receivables and held-to-maturity investments are carried at amortised cost using the effective interest method. Realised and unrealised
gains and losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are included in
the income statement in the period in which they arise. Unrealised gains and losses arising from changes in the fair value of non-monetary
securities classified as available-for-sale are recognised in equity in the available-for-sale investments revaluation reserve. When securities
classified as available-for-sale are sold or impaired, the accumulated fair value adjustments are included in the income statement as gains
and losses from investment securities.
Details on how the fair value of financial instruments is determined are disclosed in note 2.
Impairment
The Group assesses at each balance date whether there is objective evidence that a financial asset or group of financial assets is
impaired. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of a security
below its cost is considered in determining whether the security is impaired. If any such evidence exists for available-for-sale financial
assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss
on that financial asset previously recognised in profit or loss – is removed from equity and recognised in the income statement. Impairment
losses recognised in the income statement on equity instruments are not reversed through the income statement.
53
Notes to the financial statements
30 September 2009
1. Summary of significant accounting policies (continued)
(n) Property, plant and equipment
(i) Cost of asset
Property, plant and equipment is carried at cost less accumulated depreciation and accumulated impairment losses. For acquired assets,
cost includes the purchase price, costs that are directly attributable to bringing the asset to the necessary location and condition and an
initial estimate of any dismantling, removal and restoration costs that have been recognised as provisions. For self constructed assets, cost
includes the cost of all materials used in construction, direct labour, borrowing costs incurred during the construction and an appropriate
proportion of fixed and variable overheads.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable
that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other
repairs and maintenance costs are charged to the income statement during the financial period in which they are incurred.
(ii) Depreciation
Freehold land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost over their
estimated useful lives as follows:
• Freehold buildings – 20 to 50 years;
• Leasehold improvements – 1 to 50 years; and
• Plant and equipment – 3 to 25 years.
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date.
Assets located at port sites are depreciated over useful lives based on management’s judgement of the likelihood of continuing renewal of
the underlying operating leases.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated
recoverable amount.
Gains and losses on disposal are determined by comparing proceeds with the carrying amount, and are included in the income statement.
(iii) Leased assets
A distinction is made between finance leases and operating leases:
A finance lease effectively transfers from the lessor to the lessee substantially all the risks and benefits incidental to ownership of leased
non-current assets. Finance leases are capitalised at the lease’s inception at the lower of the fair value of the leased property and the
present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in current and noncurrent borrowings. Each lease payment is allocated between the liability and finance charges and the interest element of the finance cost is
charged to the income statement. The leased asset is depreciated on a straight-line basis over the shorter of the asset’s useful life and the
expected total lease term.
An operating lease allows the lessor to retain substantially all the risks and benefits incidental to ownership. Lease payments are charged to
the income statement on a straight-line basis over the lease term.
(o) Intangible assets
(i) Computer software
Costs incurred in developing products or systems and costs incurred in acquiring software and licences that will contribute to future period
financial benefits through revenue generation and/or cost reduction are capitalised to computer software. Costs capitalised include external
direct costs of materials and service, direct payroll and payroll related costs of employees’ time spent on the project. Amortisation is
calculated on a straight-line basis over an estimated useful life of three years.
Computer software development costs include only those costs directly attributable to the development phase and are only recognised
following completion of technical feasibility and where the Group has an intention and ability to use the asset.
(ii) Goodwill
Where an entity or operation is acquired, the identifiable net assets acquired are initially measured at fair value. Contingent liabilities
assumed and intangible assets acquired are separately identified on acquisition where their fair values can be reliably determined. The
excess of the fair value of the cost of acquisition over the fair value of the identifiable net assets acquired, including contingent liabilities
assumed and intangibles acquired, is brought to account as goodwill.
Goodwill is not amortised. Instead, goodwill is tested for impairment at least annually and whenever there is indication that the goodwill may
be impaired, and carried at cost less accumulated impairment losses. Refer note 1(p) for accounting policy on impairment. Gains and losses
on the disposal of an entity or operation include the carrying amount of goodwill relating to the entity or operation sold.
Where the fair value of the identifiable net assets acquired exceeds the cost of acquisition, the excess is recognised immediately as a gain in
the income statement, but only after a reassessment of the identification and measurement of the net assets acquired.
(iii) Trade names
Trade names acquired as part of a business combination are recognised separately from goodwill. The trade name is carried at fair value at
the date of acquisition less accumulated amortisation and impairment losses. Amortisation is calculated on a straight-line basis over the
estimated useful life of three years.
54
1. Summary of significant accounting policies (continued)
(o) Intangible assets (continued)
(iv) Customer relationships
Customer relationships acquired as part of a business combination are recognised separately from goodwill. The customer relationships
are carried at their fair value at the date of acquisition less accumulated amortisation and impairment losses. Amortisation is calculated on
a straight-line basis over the useful life of seven years.
(p) Impairment of assets
Assets that have an indefinite useful life, including goodwill, are not subject to amortisation and are tested at least annually for impairment.
Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds
its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes
of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows (cash
generating units).
(q) Repairs and maintenance
Property, plant and equipment is required to be overhauled on a regular basis. This is managed as part of an ongoing major cyclical
maintenance program. The costs of this maintenance are charged as expenses as incurred, except where they relate to the replacement of
a component of an asset, in which case the costs are capitalised and depreciated. Other routine operating maintenance, repair and minor
renewal costs are also charged as expenses as incurred.
(r) Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the year end which are unpaid. The amounts are
unsecured and are usually paid within 30 days of recognition.
(s) Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised
cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the income statement
over the period of the borrowings using the effective interest method.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least
12 months after the balance sheet date.
(t) Employee benefits
(i) Wages, salaries, annual leave and sick leave
Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled within
12 months of the reporting date are recognised in other payables in respect of employees’ services up to the reporting date and are
measured at the amounts expected to be paid when the liabilities are settled. Non-accumulating sick leave is charged to expense as the
leave is taken and measured at the rates paid or payable.
(ii) Long service leave
The liability for long service leave is measured as the present value of expected future payments to be made in respect of services provided
by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures
and periods of service. Expected future payments are discounted using interest rates on national government guaranteed securities with
terms to maturity that match, as closely as possible, the estimated future cash outflows.
(iii) Superannuation
All employees of the Group are entitled to benefits on retirement, disability or death from the Group’s defined contribution superannuation
plans. Contributions to employee superannuation funds are charged as an expense as the contributions are paid or become payable. The
Group’s legal or constructive obligation is limited to these contributions.
(iv) Termination benefits
Liabilities for termination benefits, not in connection with the acquisition of an entity or operation, are recognised when a detailed plan
for the terminations has been developed and a valid expectation has been raised in those employees affected that the terminations will
be carried out. The liabilities for termination benefits are recognised in other payables unless the amount or timing of the payments is
uncertain, in which case they are recognised as provisions.
Liabilities for termination benefits expected to be settled within 12 months are measured at the amounts expected to be paid when they
are settled. Amounts expected to be settled more than 12 months from the reporting date are measured as the estimated cash outflows,
discounted using market yields at the reporting date on national government bonds with terms to maturity and currency that match, as
closely as possible, the estimated future payments, where the effect of discounting is material.
(v) Share-based payments
Share-based compensation benefits are provided to employees via GrainCorp’s employee share plans. (Refer note 1(u).)
(vi) Bonus plans
The Group recognises a liability and an expense for bonuses. The liability is recognised where the Group has a contractual obligation or
where there is a past practice that has created a constructive obligation.
55
Notes to the financial statements
30 September 2009
1. Summary of significant accounting policies (continued)
(u) Share-based payments
Share-based compensation benefits are provided to employees via the Employee Acquisition Share Plan, the Performance Share Rights
Plan, and the Retention Share Plan.
(i) Employee Acquisition Share Plan
The fair value of shares issued under the Employee Acquisition Share Plan is recognised as an employee benefit expense with a
corresponding increase in equity. The fair value is measured and expensed at grant date.
(ii) Performance Share Rights Plan
The fair value of rights issued under the Performance Share Rights Plan is recognised as an employee benefit expense with a corresponding
increase in the share option reserve included in equity. The fair value is measured at grant date and recognised over the period during
which the employees become unconditionally entitled to the options/rights.
The fair value at grant date of the Performance Share Rights Plan is independently determined using either a valuation method based on
share price, less three years of expected dividends, and adjusted for imputation credits, or Monte Carlo simulation stock pricing techniques
that take into account the exercise price, the term of the option or right, the vesting and performance criteria, the impact of dilution, the
non-tradeable nature of the option or right, the share price at grant date and expected price volatility of the underlying share, the expected
dividend yield and the risk-free interest rate for the term of the option or right. The terms of the rights plan determine which method is used
for the valuation.
The fair value of the options and rights granted excludes the impact of any non-market vesting conditions (for example, profitability and
share price targets). Non-market vesting conditions are included in assumptions about the number of options that are expected to become
exercisable. At each balance sheet date, the entity revises its estimate of the number of options and rights that are expected to become
exercisable. The employee benefit expense recognised each period takes into account the most recent estimate.
(iii) Retention Share Plan
The fair value of restricted shares granted under the Retention Share Plan is measured at grant date and recognised as an employee
benefit expense over the period during which the employees become unconditionally entitled to the restricted shares.
Non-market vesting conditions are included in assumptions about the number of shares that are expected to ultimately vest. At each balance
sheet date, the entity revises its estimate of the number of shares that are expected to vest. The employee benefit expense recognised each
period takes into account the most recent estimate.
(v) Borrowing costs
Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time that it is required to complete
and prepare the asset for its intended use or sale. Other borrowing costs are expensed.
(w) Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is more likely than not
that an outflow of resources will be required to settle the obligation, and the amount can be reliably estimated.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering
the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the
same class of obligations may be small.
If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax
rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. When
discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
(x) Workers’ compensation
The Group insures for workers’ compensation through the relevant statutory funds in all States and Territories. Premiums are recognised as
an expense in the income statement as incurred.
Prior to 29 June 2006, the controlled entity GrainCorp Operations Limited was a self-insurer in New South Wales for workers’ compensation
liabilities. Provision is made for potential liability in respect of claims incurred prior to 29 June 2006 on the basis of an independent
actuarial assessment.
56
1. Summary of significant accounting policies (continued)
(y) Derivatives
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their
fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument.
The Group’s commodity futures and options contracts, interest rate swap agreements and foreign exchange contracts are used to manage
financial risk and exposure of commodity inventories but only interest rate swap agreements currently qualify for hedge accounting.
The Group documents at the inception of the hedging transaction the relationship between hedging instruments and hedged items, as well as
its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at
hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been and will continue to be
highly effective in offsetting changes in fair values or cash flows of hedged items.
(i) Interest rate swap – cash flow hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in equity
in the hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in the income statement within other
income or other expense.
Amounts accumulated in equity are recycled in the income statement in the periods when the hedged item affects the profit or loss. The gain
or loss relating to the effective portion of interest rate swaps hedging variable rate borrowings is recognised in the income statement within
finance costs.
When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any
cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately
recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was
reported in equity is immediately transferred to the income statement.
(ii) Derivatives that do not qualify for hedge accounting
Where derivative instruments do not qualify for hedge accounting, changes in fair value are recognised immediately in the income statement
and are included in other income or other expenses.
(z) Foreign currency translation
The consolidated financial statements are presented in Australian dollars, which is the Company’s functional and presentation currency.
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date of transactions.
Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of
monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.
Translation differences on non-monetary financial assets and liabilities are reported as part of the fair value gain or loss.
(aa) Cash and cash equivalents
For cash flow statement presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call with financial
institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known
amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within
borrowings in current liabilities on the balance sheet.
(ab) Contributed equity
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the
proceeds. Incremental costs directly attributable to the issue of new shares or options, for the acquisition of a business, are not included in
the cost of the acquisition as part of the purchase consideration.
Shares acquired by an employee share trust that is consolidated are not cancelled, but are presented as a deduction from equity.
(ac) Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company, excluding any costs of servicing
equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the year, adjusted for bonus
elements in ordinary shares issued during the year.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income
tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of
shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.
(ad) Dividends
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or
before the end of the year but not distributed at balance date.
57
Notes to the financial statements
30 September 2009
1. Summary of significant accounting policies (continued)
(ae) Financial guarantee contracts
Financial guarantee contracts are recognised as a financial liability at the time the guarantee is issued. The liability is measured at
fair value and subsequently at the higher of the amount determined in accordance with AASB 137 Provisions, Contingent Liabilities and
Contingent Assets and the amount initially recognised less cumulative amortisation, where appropriate.
The fair value of financial guarantees is determined as the present value of the difference in cash flows between the contractual payments
under the debt instrument and the payments that would be required without the guarantee, or the estimated amount that would be payable to
a third party for assuming the obligations.
Where guarantees in relation to loans or other payables of subsidiaries or associates are provided for no compensation, the fair values are
accounted for as contributions and recognised as part of the cost of the investment.
(af) Rounding of amounts
The Company is of a kind referred to in Class Order 98/0100, issued by the Australian Securities and Investments Commission, relating to
the ‘rounding off’ of amounts in the financial report. Amounts in the financial report have been rounded off in accordance with that Class
Order to the nearest thousand dollars, or in certain cases, the nearest dollar.
(ag) New accounting standards and interpretations not yet adopted
The following new standards, amendments to standards and interpretations have been identified as those that may impact the Group in
the period of initial application. They are available for early adoption at 30 September 2009, but have not been applied in preparing this
financial report:
(i) AASB 8 Operating Segments and AASB 2007-3 Amendments to Australian Accounting Standards [AASB 5, AASB 6, AASB 102, AASB 107,
AASB 119, AASB 127, AASB 134, AASB 136, AASB 1023 and AASB 1038]
AASB 8 introduces the ‘management approach’ to segment reporting and becomes mandatory for the Group’s 30 September 2010
financial statements. The standard will require the disclosure of segment information based on internal reports regularly reviewed by the
Group’s chief operating decision maker in order to assess each segment’s performance and to allocate resources to them. The Group does
not anticipate any significant change to the disclosure of segment information under the management approach. As goodwill is allocated
by management on a segment level, the change in reportable segment may also require a reallocation of goodwill. However, this is not
expected to result in any additional impairment of goodwill.
(ii) Revised AASB 101 Presentation of Financial Statements and AASB 2007-8 Amendments to Australian Accounting Standards
arising from AASB 101
Revised AASB 101 and AASB 2007-8 will be mandatory for the Group’s 30 September 2010 financial statements. These standards require
the presentation of a statement of comprehensive income, changes to the statement of changes in equity and disclosure of a third balance
sheet (statement of financial position) if an entity makes a prior period adjustment or has reclassified items in the financial statements.
The standards apply specifically to disclosure and presentation in financial statements so that application of the standards will not affect
the amounts recognised in the Group’s financial statements.
(iii) Revised AASB 123 Borrowing Costs and AASB 2007-6 Amendments to Australian Accounting Standards arising from AASB 123 [AASB 1,
AASB 107, AASB 111, AASB 116 and AASB 138 and Interpretations 1 and 12]
The revised AASB 123 is applicable to the Group’s 30 September 2010 financial statements. It has removed the option to expense all
borrowing costs and will require the capitalisation of all borrowing costs directly attributable to the acquisition, construction or production of
a qualifying asset. There will be no impact on the financial report of the Group, as the Group already capitalises borrowing costs relating to
qualifying assets.
(iv) AASB 2008-1 Amendments to Australian Accounting Standard – Share-based Payments: Vesting Conditions and Cancellations
AASB 2008-1 clarifies that vesting conditions are service conditions and performance conditions only and that other features of a sharebased payment are not vesting conditions. It also specifies that all cancellations, whether by the entity or by other parties, should receive
the same accounting treatment. The Group will apply the revised standard from 1 October 2009, but it is not expected to affect the
accounting for the Group’s share-based payments.
(v) Revised AASB 3 Business Combinations, AASB 127 Consolidated and Separate Financial Statements and AASB 2008-3 Amendments to
Australian Accounting Standards arising from AASB 3 and AASB 127
The revised AASB 3 continues to apply the acquisition method to business combinations, but with some significant changes, including:
providing a choice to measure a non-controlling interest acquired in a business acquisition at fair value or as a proportionate share of the
acquired entity’s net assets; all payments to purchase a business are to be recorded at fair value at the acquisition date, with contingent
payments classified as debt subsequently remeasured through the income statement; and incidental costs, related to the acquisition of a
business, will now be required to be expensed. The revised AASB 127 requires the effects of all transactions with non-controlling interests
to be recorded in equity if there is no change in control. When control is lost, any remaining interest is remeasured to fair value, and a
gain or loss is recognised in profit or loss. The Group will apply the revised standards prospectively to all business combinations and
transactions with non-controlling interests from 1 October 2009.
(vi) AASB 2008-6 Further Amendments to Australian Accounting Standards arising from the Annual Improvement Project. Amendments to
AASB 5 Discontinued Operations and AASB 1 First-Time Adoption of Australian-Equivalents to International Financial Reporting Standards
The amendments clarify that all of a subsidiary’s assets and liabilities are classified as held for sale if a partial disposal sale plan results in
a loss of control. Relevant disclosures should be made for this subsidiary if the definition of discontinued operation is met. The Group will
apply the amendments prospectively to all partial disposals of subsidiaries from 1 October 2009.
58
1. Summary of significant accounting policies (continued)
(ag) New accounting standards and interpretations (continued)
(vii) AASB 2008-7 Amendments to Australian Accounting Standards – Cost of an Investment in a Subsidiary, Jointly Controlled Entity
or Associate
AASB 2008-7 requires all dividends received from investments in subsidiaries, jointly controlled entities or associates to be recognised as
revenue, even if they are paid out of pre-acquisition profits, and these investments may need to be tested for impairment as a result of the
dividend payment. Under the Group’s current policy, these dividends are deducted from the cost of the investment. Furthermore, when a
new intermediate parent entity is created in internal reorganisations it will measure its investment in subsidiaries at the carrying amounts
of the net assets of the subsidiary rather than the subsidiary’s fair value. The Group will apply the revised rules prospectively from
1 October 2009.
(viii) AASB Interpretation 16 Hedges of a Net Investment in a Foreign Operation
AASB-I 16 clarifies which foreign currency risks qualify as a hedged risk of a net investment in a foreign operation and that hedging
instruments may be held by an entity or entities within the Group. The interpretation has no current application to the Group, and will be
applied prospectively from 1 October 2009.
(ix) AASB 2008-8 Amendments to Australian Accounting Standards – Eligible Hedged Items
AASB 2008-8 amends AASB 139 Financial Instruments: Recognition and Measurement and must be applied retrospectively in accordance
with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors. The amendment makes two significant changes. It prohibits
designating inflation as a hedgeable component of a fixed rate debt, and it prohibits including time value in the one-sided hedged risk when
designating options as hedges. The Group will apply the amended standards from 1 October 2009. It is not expected to have a material
impact on the Group’s financial statements.
(x) AASB Interpretation 17 Distribution of Non-cash Assets to Owners and AASB 2008-13 Amendments to Australian Accounting Standards
arising from AASB Interpretation 17
AASB–I 17 applies to situations where an entity pays dividends by distributing non-cash assets to its shareholders. Such distributions are
measured at fair value and the entity recognises the difference between the fair value and the carrying amount of the distributed assets in
the income statement on distribution. The Group will apply the interpretation prospectively from 1 October 2009. It is not expected to have
any impact on the Group’s financial statements.
2. Financial risk management
Overview
The Group’s activities expose it to a variety of financial risks including commodity price risk, foreign currency risk, interest rate risk,
credit risk and liquidity risk. The overall management of these financial risks seeks to minimise any potential adverse effects on the
Group’s financial performance that may arise from the unpredictability of financial markets. All areas of risk management are subject to
comprehensive policies, procedures and limits which are monitored by management and approved by the Board, the Board Audit Committee
or the Trading Risk Management Committee under authority from the Board.
Group Treasury manages interest rate risk, liquidity risk, counterparty credit risk and foreign currency risk in accordance with policies
approved by the Board.
The Trading Risk Management Committee reviews and agrees policies for managing risks arising from commodity trading including the setting
of limits for trading in derivatives to manage commodity price risk and related foreign currency risk in accordance with the Group’s Trading
Risk Management policy.
The Group’s principal financial instruments comprise receivables, cash and short-term deposits, payables, bank loans and overdrafts, finance
leases and derivative financial instruments.
Trading in derivative financial instruments is undertaken to manage the commodity price risk and foreign currency risk arising from trading in
commodities in the ordinary course of business, and to manage the inherent interest rate risk of Group borrowings. Only interest rate swaps
currently qualify for hedge accounting.
The Group uses different methods to measure and manage the different types of risks to which it is exposed. These include monitoring
levels of exposure to interest rate and foreign exchange risk; and assessments of market forecasts for interest rate, foreign exchange and
commodity prices. Ageing analyses and monitoring of specific credit limits are undertaken to manage credit risk. Liquidity risk is monitored
through the use of rolling cash flow forecasts, and by comparing projected net debt levels against total committed facilities.
Price risk
Commodity price risk
Commodity price risk arises due to grain price fluctuations impacting on the value of commodity forward purchase and forward sales
contracts written by the Group as part of its grain and meal marketing activities. The Group’s policy is generally to lock in favourable
margins between the purchase and sale price of commodities but differences in the timing of entering into these contracts create an
exposure to commodity price risk.
To manage exposure to this commodity price risk, the Group enters into grain futures contracts, options contracts and over-the-counter
contracts with terms between 2 and 24 months depending on the underlying transactions. These contracts are predominantly on US,
Canadian and European financial markets and denominated in those currencies. Changes in fair value are recognised immediately in the
income statement.
59
Notes to the financial statements
30 September 2009
2. Financial risk management (continued)
Price risk (continued)
Commodity price risk (continued)
Assets and liabilities subject to commodity price risk as at 30 September 2009:
Consolidated
2009
2008
$’000
$’000
Commodity contracts (forward purchase and sales) at fair value:
Assets
Liabilities
Commodity futures and options at fair value:
Assets
Liabilities
Commodities inventory at fair value less costs to sell
43,549
(22,764)
56,308
(43,699)
6,522
(1,429)
85,132
111,010
9,800
(6,386)
155,947
171,970
At 30 September 2009, had the price of traded commodities moved, as illustrated in the table below, with all other variables held constant,
profit after tax would have been affected as follows:
Consolidated
2009
2008
Impact on profit Impact on profit
(loss) after tax
(loss) after tax
$’000
$’000
20% increase
Wheat
Coarse grains
Canola
Soybean meal
Other
Commodity inventory
Net effect of 20% increase
(4,218)
(4,597)
(187)
(5,143)
(508)
(14,653)
13,191
(1,462)
(3,010)
(8,083)
174
(6,283)
(1,640)
(18,842)
17,882
(960)
4,218
4,597
187
5,143
508
14,653
(13,191)
1,462
2,041
8,122
(65)
6,283
1,640
18,021
(17,882)
139
20% decrease
Wheat
Coarse grains
Canola
Soybean meal
Other
Commodity inventory
Net effect of 20% decrease
Movements in commodity prices expose the Group to risks associated with changes in the value of financial instruments (e.g. forward
contracts, derivatives etc) and in the value of its commodities inventory. As a result, the Group takes into account a ‘full portfolio view’,
including financial instruments and commodities inventory, when managing price risk. On this basis the total price risk associated with
commodities inventory has also been included in the table above to provide a holistic view of the impact of price risk on the Group.
The parent entity had no exposure to commodity price risk (2008: $nil).
Equity securities price risk
The Group and parent entity have no exposure to equity securities price risk (2008: $nil).
Foreign currency risk
The Group is exposed to foreign currency risk on foreign currency denominated commodity contracts taken out on the US, Canadian and
European markets to manage commodity price risk. Forward exchange contracts are taken out to manage this risk, with these contracts
timed to mature when the relevant underlying commodity contracts expire. Changes in fair value are recognised immediately in the
income statement.
The Group also has transactional currency exposures arising from sales or purchases in currencies other than the Group’s
functional currency.
60
2. Financial risk management (continued)
Foreign currency risk (continued)
At 30 September 2009, the Group had the following exposure to foreign currencies:
2009
USD
$’000
Cash
Trade receivables
Borrowings
Trade payables
Notional values of derivatives:
Forward exchange contracts – buy
Forward exchange contracts – sell
Commodity futures and options
Commodity contracts – forward purchases
Commodity contracts – forward sales
NZD
$’000
EUR
$’000
CAD
$’000
Other1
$’000
Total
$’000
10,768
6,214
(13,279)
(3,132)
775
1,038
–
(2)
10
–
–
–
11
–
–
–
–
–
–
–
11,564
7,252
(13,279)
(3,134)
2,222
(843)
676
4,813
(3,389)
(29)
–
–
494
–
172
(40)
(29)
–
–
–
(14)
271
–
–
5,872
(5,717)
–
–
–
8,237
(6,614)
918
5,307
(3,389)
NZD
$’000
EUR
$’000
CAD
$’000
Other1
$’000
2008
USD
$’000
Cash
Trade receivables
Borrowings
Trade payables
Notional values of derivatives:
Forward exchange contracts – buy
Forward exchange contracts – sell
Commodity futures and options
Commodity contracts – forward purchases
Commodity contracts – forward sales
Total
$’000
19,645
1,456
(2,054)
(10,009)
71
2,910
–
(113)
1,911
1,449
–
–
3,093
–
–
–
–
–
–
–
24,720
5,815
(2,054)
(10,122)
6,380
(20,761)
5,754
10,322
(2,015)
236
–
–
–
(603)
246
(1,958)
2,107
–
–
3,030
(5,695)
(208)
–
(78)
9,761
(3,608)
–
–
–
19,653
(32,022)
7,653
10,322
(2,696)
1 Relates to forward exchange contracts where both the buy and sell contracts are in currencies other than the Australian dollar.
The sensitivity analysis below is based on the foreign currency risk exposures at the balance sheet date.
Had the Australian dollar strengthened or weakened against the nominated foreign currency as illustrated in the table below, with all other
variables held constant, profit after tax would have been affected as follows:
Consolidated
2009
2008
Impact on profit Impact on profit
after tax
after tax
$’000
$’000
10% increase
AUD/USD
AUD/NZD
AUD/EUR
AUD/CAD
49
(2)
2
(40)
112
(280)
3
15
(60)
3
(3)
49
(137)
343
(3)
(18)
10% decrease
AUD/USD
AUD/NZD
AUD/EUR
AUD/CAD
The parent entity had no exposure to foreign currency risk (2008: $nil).
61
Notes to the financial statements
30 September 2009
2. Financial risk management (continued)
Credit risk
Credit risk arises from the financial assets of the Group.
The Group’s exposure to credit risk arises from potential default of the customer or counterparty.
The carrying amount of financial assets represents the maximum exposure at the reporting date:
Consolidated
2009
2008
$’000
$’000
Trade receivables
Other receivables
Derivative contracts at fair value
Amounts receivable from associates
Amounts receivable from subsidiaries
Derivative contracts margin deposits
Bank balances and call deposits
Pool advance
Deposit bond for Pools facility
108,982
13,358
122,340
51,935
20,349
–
1,588
161,423
28,641
–
386,276
152,428
15,085
167,513
68,990
20,933
–
9,683
8,935
1,816
2,133
280,003
Parent entity
2009
2008
$’000
$’000
–
387
387
–
19,332
145,361
–
2,726
–
–
167,806
–
21
21
–
19,558
25,746
–
482
–
–
45,807
It is the Group’s policy that customers who wish to trade on credit terms are subject to credit verification which may include an assessment
of their independent credit rating (provided by credit bureau), supplier references, financial position, past trading experience and industry
reputation. Credit limits are determined for each individual customer based on the credit assessment. These limits are approved under the
financial delegation policy which is approved by the Board.
The Group does not have any significant credit risk exposure to a single customer or group of customers. Receivable balances are monitored
on an ongoing basis with the result that the Group’s exposure to bad debts is usually not significant but where appropriate, an allowance
for doubtful debtors may be raised. On occasion, the Group may also hold collateral which may take the form of physical commodities, bank
guarantees, personal guarantee or mortgage over property until the debt is recovered. There was no significant concentration of credit risk
within the Group as it deals with a large number of customers, geographically dispersed.
The Group may not provide for balances past due where it has been determined that there was no significant change in credit quality at
reporting date based upon the customer’s payment history and analysis of the customer’s current financial position.
The credit risk arising from favourable derivatives transactions and deposits with financial institutions exposes the Group if the contracting
entity is unable to complete its obligations under the contracts. The Group has a panel of authorised counterparties. Authorised
counterparties are principally large banks and recognised financial intermediaries with acceptable credit ratings determined by a rating
agency. The Group’s net exposure and credit assessment of its counterparties are continuously monitored to ensure any risk is minimised.
The Group may also be subject to credit risk for transactions which are not included in the balance sheet, such as when a guarantee is
provided for another party. Details of contingent liabilities are disclosed in note 32.
The ageing of trade receivables at the reporting date was:
Group
Gross
$’000
Not past due
Past due up to 30 days
Past due 31 to 60 days
Past due 61 to 90 days
Past due over 90 days
80,307
16,548
1,340
2,102
8,685
108,982
2009
Impairment
$’000
(35)
(21)
–
(38)
(2,099)
(2,193)
Gross
$’000
2008
Impairment
$’000
114,791
19,901
2,467
2,653
12,616
152,428
Included within the over 90 day category is $nil (2008: $3,623,000) of receivables that were past due but have been renegotiated.
62
(126)
(29)
(20)
(316)
(3,942)
(4,433)
2. Financial risk management (continued)
Credit risk (continued)
The movement in the provision for impairment in respect of trade receivables during the year was as follows:
2009
$’000
(4,433)
(493)
1,928
805
(2,193)
Balance at 1 October
Provisions made during the year
Impairment loss recognised
Provisions reversed during the year
Balance at 30 September
2008
$’000
(1,321)
(3,838)
707
19
(4,433)
None of the Group’s other receivables and other financial assets are past due (2008: $nil).
Amounts receivable from associates – Group
Of the total amount receivable from associates $1,000,000 (2008: $1,358,000) was impaired. The allowance for impairment was
decreased by $358,000, from $1,358,000 to $1,000,000 (2008: Increase in allowance by $171,000, from $1,187,000 to $1,358,000).
Company
None of the parent entity’s financial assets are past due (2008: $nil).
Interest rate risk
The Group’s interest rate risk arises from interest obligations on all borrowings. Borrowings issued at variable rates expose the Group to
cash flow interest rate risk.
The Group’s policy is to manage its finance costs using a mix of fixed and variable rate debt. Current policy is to maintain between 40%
and 75% of long-term borrowings at fixed rates inclusive of a natural hedge from a subordinated loan. To manage this mix, the Group
predominantly uses interest rate swaps. Under interest rate swap contracts, the Group is entitled to receive interest at variable rates and is
obliged to pay interest at fixed rates, calculated by reference to an agreed-upon notional principal amount. The contracts require settlement
of net interest receivable or payable at each reset period. The settlement dates coincide with the dates on which interest is payable on the
underlying debt.
At 30 September 2009, after taking into account the effect of interest rate swaps and a natural hedge from a subordinated loan,
approximately 64% of the Group’s long-term borrowings are at a fixed rate of interest (2008: 51%).
The Group constantly analyses its interest rate exposure with consideration given to cash flows impacting on rollovers/repayments of debt,
alternative hedging instruments and the mix of fixed and variable interest rates.
At balance date, having adjusted for the effect of interest rate swaps and a natural hedge from a subordinated loan, the Group and the parent
entity had the following mix of financial assets and liabilities with interest at fixed and variable rates:
Consolidated
2009
2008
$’000
$’000
Parent entity
2009
$’000
2008
$’000
Fixed rate instruments
Financial assets
Financial liabilities1
19,109
(74,704)
(55,595)
19,109
(122,572)
(103,463)
3,068
–
3,068
–
–
–
161,423
(118,658)
42,765
11,068
(330,841)
(319,773)
164,111
–
164,111
25,746
(76,454)
(50,708)
Variable rate instruments
Financial assets
Financial liabilities
1 Fixed rate non-current financial liabilities: $54,691,000 (2008: $102,568,000).
63
Notes to the financial statements
30 September 2009
2. Financial risk management (continued)
Interest rate risk (continued)
At balance date the Group and the parent entity had the following variable rate borrowings outstanding, exposed to variable interest
rate risk:
30 September 2009
Weighted
average
interest rate
Balance
%
$’000
30 September 2008
Weighted
average
interest rate
Balance
%
$’000
Group
Current:
Term facilities
Short-term facilities
Commodity inventory funding facility
Deposit notes
–
2.7%
4.3%
–
–
(34,493)
(53,322)
–
(87,815)
8.0%
8.2%
7.8%
–
(5,000)
(136,026)
(87,055)
(6)
(228,087)
Non-current:
Term facilities
Subordinated loan
Interest rate swaps (notional principal amount)
4.2%
4.4%
7.6%
(99,936)
19,092
50,000
(30,844)
(118,659)
7.8%
9.1%
8.7%
(216,846)
19,092
95,000
(102,754)
(330,841)
–
–
7.4%
(899)
–
–
–
–
–
–
–
–
7.1%
9.1%
(94,647)
19,092
(75,555)
(76,454)
Net exposure to cash flow interest rate risk
Parent entity
Current:
Amounts payable to subsidiaries
Non-current:
Term facilities
Subordinated loan
Net exposure to cash flow interest rate risk
Sensitivity analysis
At 30 September 2009, if interest rates had moved as illustrated in the table below, with all other variables held constant, profit and equity
would have been affected as follows:
Consolidated
2009
2008
$’000
$’000
Parent entity
2009
2008
$’000
$’000
Profit / (loss)
+ 100 basis points
- 100 basis points
(128)
128
(4,148)
4,148
1,641
(1,641)
(951)
951
Increase / (decrease) in equity
+ 100 basis points
- 100 basis points
372
(372)
(3,198)
3,198
1,641
(1,641)
(951)
951
Liquidity risk
The Group’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 facilities. The Group manages liquidity risk by regularly monitoring actual and forecast cash
flows and matching the maturity profiles of financial assets and liabilities. Group Treasury aims at maintaining flexibility in funding by
keeping committed credit lines available with a variety of counterparties.
At balance date, the Group had approximately $435.7 million of unused credit facilities available for its immediate use. The parent entity had
no unused credit facilities. For further details refer note 24.
64
2. Financial risk management (continued)
Liquidity risk (continued)
Maturity analysis of financial liabilities
The tables below show the contractual maturities of financial liabilities, including estimated interest payments. The amounts disclosed in
the table are the contractual undiscounted cash flows:
At 30 September 2009
Non-derivatives:
Bank borrowings
Trade payables
Pool advance facility
Other payables
Finance leases
Derivatives:
Interest rate swap contracts
Forward foreign exchange contracts – held for trading:
– outflow
– inflow
Commodity futures and options:
– outflow
– inflow
Commodity contracts (forward purchases and sales):
– outflow
– inflow
At 30 September 2008
Non-derivatives:
Bank borrowings
Deposit notes
Trade payables
Pool advance facility
Other payables
Finance leases
Derivatives:
Interest rate swap contracts
Forward foreign exchange contracts – held for trading:
– outflow
– inflow
Commodity futures and options:
– outflow
– inflow
Commodity contracts (forward purchases and sales):
– outflow
– inflow
Less than 1 year
$’000
Between 1 and
2 years
$’000
Consolidated
Between 2 and
5 years
$’000
Over 5 years
$’000
Total
$’000
(92,823)
(58,820)
(28,641)
(21,793)
(904)
(100,286)
–
–
–
(918)
–
–
–
–
(2,262)
–
–
–
–
(1,528)
(193,109)
(58,820)
(28,641)
(21,793)
(5,612)
(299)
(1,276)
–
–
(1,575)
(74,510)
76,488
–
–
–
–
–
–
(74,510)
76,488
(2,187)
4,540
–
2,806
–
–
–
–
(2,187)
7,346
(98,323)
222,829
–
5,028
–
–
–
–
(98,323)
227,857
Between 1 and
2 years
$’000
Consolidated
Between 2 and
5 years
$’000
Over 5 years
$’000
Less than 1 year
$’000
Total
$’000
(228,110)
(6)
(61,961)
(1,816)
(14,300)
(895)
(5,411)
–
–
–
–
(871)
(268,500)
–
–
–
–
(829)
–
–
–
–
–
(5,885)
(502,021)
(6)
(61,961)
(1,816)
(14,300)
(8,480)
–
(834)
(1,835)
–
(2,669)
(450,556)
411,116
42
(141)
–
–
–
–
(450,514)
410,975
(6,159)
8,033
(481)
3,446
–
–
–
–
(6,640)
11,479
(198,882)
376,511
(1,059)
3,060
–
–
–
–
(199,941)
379,571
65
Notes to the financial statements
30 September 2009
2. Financial risk management (continued)
Liquidity risk (continued)
Maturity analysis of financial liabilities (continued)
At 30 September 2009
Non-derivatives:
Trade payables
Other payables
At 30 September 2008
Non-derivatives:
Bank borrowings
Trade payables
Other payables
Amounts payable to subsidiaries
Less than 1 year
$’000
Between 1 and
2 years
$’000
Parent entity
Between 2 and
5 years
$’000
Over 5 years
$’000
–
–
–
–
–
–
Between 1 and
2 years
$’000
parent entity
Between 2 and
5 years
$’000
Over 5 years
$’000
(61)
(13)
Less than 1 year
$’000
–
(398)
(322)
(899)
–
–
–
–
(119,958)
–
–
–
–
–
–
–
Total
$’000
(61)
(13)
Total
$’000
(119,958)
(398)
(322)
(899)
Fair value estimation
The fair value of financial assets and liabilities must be estimated for recognition and measurement or for disclosure purposes.
The fair value of financial instruments traded on active markets (such as publicly traded derivatives) is based on quoted market prices at the
reporting date. The quoted market price used for financial assets held by the Group is the current bid price; the appropriate quoted market
price for financial liabilities is the current ask price.
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined using
valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each
balance date. Quoted market prices or dealer quotes for similar instruments are used for long-term debt instruments held. Physical positions
comprising stocks, forward sales and forward purchases do not have quoted market prices available. Other techniques, such as obtaining bid
values from a variety of commodity brokers and trade marketers, are used to determine fair value for these financial instruments.
The fair value of interest rate swap contracts is determined by reference to market values for similar instruments.
The fair value of forward exchange contracts is determined using forward exchange market rates at the balance sheet date.
The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair values. The
fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market
interest rate that is available to the Group for similar financial instruments.
The fair values of financial assets and liabilities are shown in each applicable note.
3. Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectation of
future events that are believed to be reasonable under the circumstances.
(a) Critical accounting estimates and assumptions
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal
the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying
amount of assets and liabilities within the next financial year are discussed below.
(i) Estimated impairment of goodwill and other assets
The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note 1(p). The
recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use
of assumptions. Refer note 19 for details of these assumptions.
(ii) Treatment of inactive sites
From time to time, the Group decides to close and/or suspend operations at certain sites based on expected receivals in the coming
year, or other relevant factors. These sites can become operational in future periods. The carrying value of such sites is considered for
impairment annually. The total value of such sites as at 30 September 2009 amounts to $19,163,000 (2008: $20,085,000).
Based on historical experience, such sites have consistently achieved sales proceeds in excess of their carrying value. Based on this and
other relevant factors, no impairment has been recorded in the current year (2008: $nil).
66
3. Critical accounting estimates and judgements (continued)
(b) Critical judgements in applying the entity’s accounting policies
(i) Fair value where there is no organised market
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined
using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions existing at
each balance date. Quoted market prices or dealer quotes for similar instruments are used for long-term debt instruments held. Physical
positions comprising stocks, forward sales and forward purchases do not have quoted market prices available. Other techniques, such
as obtaining bid values from a variety of commodity brokers and trade marketers, are used to determine fair value for these financial
instruments. The fair value of interest rate swap contracts is determined by reference to market values for similar instruments. The fair
value of forward exchange contracts is determined using forward exchange market rates at the balance sheet date.
(ii) Port leases and the useful lives of port assets
Operating leases over port facilities are on terms ranging from 3 to 99 years. The majority of these leases include options to extend terms.
Given the nature of the Group’s relationship with port operators it is anticipated that most leases will be continually renewed. As a result,
the useful lives of certain port assets may be assessed by management to be in excess of the lease term of the underlying port lease.
(iii) Ownership interest in Allied Mills
GrainCorp Limited (GrainCorp) has a 60% equity interest in Allied Mills Australia Pty Limited (Allied), with the other 40% held by Cargill
Australia Limited (Cargill). However, GrainCorp’s voting rights in Allied are 50%, equal with Cargill.
GrainCorp entered into an agreement with Cargill on 2 October 2002 to establish Allied as a jointly operated company. The agreement
establishes that neither party has control of Allied, due to the existence of 50% voting rights and equal Board representation between the
two parties.
Therefore, although GrainCorp owns more than half of the equity interest in Allied, this ownership is not judged to constitute control. Hence
the Group applies the concept of equity accounting and does not consolidate this entity.
(iv) Judgements in providing for claims and disputes
Provision is made for various claims for losses or damages received from time-to-time in the ordinary course of business. Management
estimates the provision based on historical information and its experience in resolving claims and disputes.
67
Notes to the financial statements
30 September 2009
4. Segment information
Primary reporting format – business segments
2009
Sales to external customers
Inter-segment sales
Total sales revenue
Interest revenue
Other revenue
Total segment revenue
Segment result before
interest, depreciation,
amortisation and income tax
Corporate overheads
Share of profits of associates
accounted for using the
equity method
Profit before interest,
depreciation, amortisation
and income tax
Depreciation and
amortisation
Segment result
Interest expense
Profit / (loss) from continuing
operations before income tax
Income tax (expense) /
benefit
Profit / (loss) from continuing
operations after income tax
Segment assets
Segment liabilities
Investments in associates
Acquisitions of property, plant
and equipment and other
non-current segment assets
Other significant non-cash
expenses
68
Storage &
logistics
$’000
Trading
$’000
Ports
$’000
Other
$’000
275,679
120,638
396,317
–
5,280
401,597
1,241,584
104,401
1,345,985
951
–
1,346,936
129,004
–
129,004
–
1,499
130,503
72,208
500
72,708
158
200
73,066
65,723
–
39,499
–
78,497
–
–
–
65,723
(22,079)
43,644
Inter-segment
eliminations
$’000
Unallocated
$’000
Consolidated
$’000
–
(225,539)
(225,539)
–
–
(225,539)
–
–
–
3,218
6
3,224
1,718,475
–
1,718,475
4,327
6,985
1,729,787
(22,835)
–
–
–
3,444
(8,884)
164,328
(8,884)
–
–
–
9,787
9,787
39,499
78,497
(22,835)
–
4,347
165,231
(414)
39,085
(13,264)
65,233
(1,160)
(23,995)
–
–
(6,177)
(1,830)
(43,094)
122,137
(36,295)
85,842
(22,681)
63,161
266,360
189,652
207,720
34,825
–
385,213
1,083,770
66,116
193,788
13,032
23,777
–
93,302
390,015
–
–
–
–
–
106,653
106,653
19,946
–
4,316
–
–
7,668
31,931
–
–
–
–
–
–
–
4. Segment information (continued)
Primary reporting format – business segments (continued)
2008
Sales to external customers
Inter-segment sales
Total sales revenue
Interest revenue
Other revenue
Total segment revenue
Segment result before
interest, depreciation,
amortisation and income tax
Corporate overheads
Share of profits of
associates accounted for
using the equity method
Profit before interest,
depreciation, amortisation
and income tax
Depreciation and
amortisation
Segment result
Interest expense
Profit / (loss) from
continuing operations
before income tax
Income tax benefit /
(expense)
Profit / (loss) from
continuing operations after
income tax
Segment assets
Segment liabilities
Investments in associates
Acquisitions of property,
plant and equipment
and other non-current
segment assets
Other significant non-cash
expenses
Storage &
logistics
$’000
Trading
$’000
Ports
$’000
Other
$’000
118,548
67,043
185,591
–
883
186,474
1,268,754
20,954
1,289,708
1,462
–
1,291,170
51,195
–
51,195
–
608
51,803
88,810
1,503
90,313
–
84
90,397
21,577
–
28,439
–
10,484
–
4,191
–
–
–
–
21,577
28,439
10,484
(22,285)
(708)
(578)
27,861
(12,073)
(1,589)
Inter-segment
eliminations
$’000
Unallocated
$’000
Consolidated
$’000
–
(91,118)
(91,118)
–
–
(91,118)
588
1,618
2,206
2,967
271
5,444
1,527,895
–
1,527,895
4,429
1,846
1,534,170
–
–
2,827
(26,842)
67,518
(26,842)
–
10,576
10,576
4,191
–
(13,439)
51,252
(1,332)
2,859
–
–
(3,841)
(17,280)
(40,109)
11,143
(46,961)
(35,818)
15,880
(19,938)
222,626
387,870
173,652
61,352
–
252,787
1,098,287
14,229
259,400
8,582
47,923
–
332,008
662,142
–
–
–
–
–
–
96,866
13,675
4,216
5,043
911
–
8,658
32,503
564
39,543
–
–
–
–
40,107
(a) T he above business segments derive revenue from the following operations and activities:
Storage and Logistics – includes fees for receival, transport, storage and testing of wheat, other grains and bulk commodities.
Trading – marketing of grain, meal and agricultural products, and the operation of grain pools.
Ports – includes fees for export and import of grain and bulk commodities.
Other – sale of farm inputs (Merchandise) and the provision of financial services to customers of the Group.
(b) Inter-segment pricing is on an ‘arm’s length’ basis and is eliminated on consolidation.
(c) The Group operates in predominantly one geographical segment – Australia.
69
Notes to the financial statements
30 September 2009
5. Revenue
From continuing operations
Consolidated
2009
2008
$’000
$’000
Parent entity
2009
2008
$’000
$’000
Sales revenue
Sale of goods
Services
1,397,580
320,895
1,718,475
1,397,172
130,723
1,527,895
–
6,341
6,341
–
444
444
200
4,327
6,785
11,312
1,729,787
345
4,429
1,501
6,275
1,534,170
200
5,974
–
6,174
12,515
345
7,497
–
7,842
8,286
Other revenue
Dividends
Interest
Rental income
Total revenue
6. Other income
Consolidated
2009
2008
$’000
$’000
Net gain on disposal of property, plant and equipment
Net gain on sale of investments
Net gain / (loss) on derivative/commodity trading:
Net realised gain on foreign currency derivatives
Net realised gain / (loss) on financial derivatives
Net unrealised gain / (loss) on foreign currency derivatives
Net unrealised gain on financial derivatives
Net unrealised gain on commodity contracts
Net unrealised (loss) on commodity inventories
at fair value less costs to sell
Net gain / (loss) on derivative/commodity trading
Sundry income
70
Parent entity
2009
2008
$’000
$’000
–
3,303
2,621
–
–
–
–
–
8,464
20,197
20,033
266
6,759
39,460
(9,283)
(26,635)
29,289
15,837
–
–
–
–
–
–
–
–
–
–
(14,685)
41,034
(58,033)
(9,365)
–
–
–
–
9,170
2,426
–
–
–
–
7,525
51,862
7. Expenses
Consolidated
2009
2008
$’000
$’000
Parent entity
2009
2008
$’000
$’000
Finance costs
– interest charges
– loss on interest swaps cash flow hedges – transfer from equity
Total finance costs
32,584
3,711
36,295
46,961
–
46,961
2,457
–
2,457
5,144
–
5,144
Depreciation
– plant and equipment
– buildings and improvements
Total depreciation
29,466
10,960
40,426
27,108
9,965
37,073
–
–
–
–
–
–
252
2,416
2,668
531
2,505
3,036
–
–
–
–
–
–
Rental expenses relating to operating leases
– minimum lease payments
Total rental expenses relating to operating leases
21,439
21,439
9,992
9,992
–
–
–
–
Defined contribution superannuation expense
Research and development costs
Provision for claims and disputes
10,768
164
3,225
7,517
327
2,072
–
–
–
–
–
–
Amortisation
– leased assets
– intangible assets
Total amortisation
71
Notes to the financial statements
30 September 2009
8. Income tax expense
Consolidated
2009
2008
$’000
$’000
Parent entity
2009
2008
$’000
$’000
(a) Income tax expense / (benefit)
Current tax
Deferred tax
Under / (over) provision in prior years
Deferred income tax (revenue) / expense included in income tax
expense comprises:
Decrease / (increase) in deferred tax assets (note 18)
(Decrease) / increase in deferred tax liabilities (note 26)
414
22,642
(375)
22,681
626
(15,806)
(700)
(15,880)
–
2,870
334
3,204
977
(629)
(175)
173
18,097
4,545
22,642
(5,904)
(9,902)
(15,806)
2,938
(68)
2,870
(565)
(64)
(629)
85,842
25,753
(35,818)
(10,745)
9,767
2,930
2,674
802
13
311
300
135
245
–
–
–
–
–
–
–
(b) Numerical reconciliation of income tax expense to prima facie tax payable
Operating profit / (loss) before income tax expense
Income tax calculated at 30% (2008: 30%)
Tax effect of amounts which are not deductible (taxable) in calculating
taxable income:
Increase in tax expense due to:
– Performance rights/Share-based payments
– Other non-deductible items
– Impairment expense
Decrease in tax expense due to:
– R&D Credit
– Share of net (profit) / loss of associate
– Dividends received/receivable
– Investment allowances
– Other non-assessable items
(Over) / under provision in prior years
Income tax expense / (benefit)
–
(2,937)
(60)
(324)
–
23,056
(375)
22,681
(1,283)
(3,157)
(103)
–
(272)
(15,180)
(700)
(15,880)
–
–
(60)
–
–
2,870
334
3,204
–
–
(103)
–
(351)
348
(175)
173
(c) Tax losses
Unused tax losses for which no deferred tax asset has been recognised
3,824
3,824
3,824
3,824
10,677
7,767
–
–
(d) Unrecognised temporary differences
Temporary differences relating to investments in subsidiaries for which
deferred tax liabilities / (assets) have not been recognised
72
8. Income tax expense (continued)
(e) Tax consolidation legislation
GrainCorp Limited is the head entity in a tax-consolidated group comprising the head entity and all of its wholly-owned Australian
subsidiaries. The accounting policy in relation to this legislation is set out in note 1(f).
On adoption of the tax consolidation legislation, the entities in the tax-consolidated group entered into a tax sharing agreement which, in
the opinion of the directors, limits the joint and several liability of the wholly-owned entities in the case of a default of the head entity,
GrainCorp Limited.
The members of the tax-consolidated group have entered into a tax funding agreement which sets out the funding obligations of members
of the tax-consolidated group in respect of tax amounts. Under the terms of the agreement the wholly-owned entities fully compensate
GrainCorp Limited for any current tax payable assumed and are compensated by GrainCorp Limited for any current tax receivable and
deferred tax assets relating to unused tax losses or unused tax credits that are transferred to GrainCorp Limited under the tax consolidation
legislation. The funding amounts are determined by reference to the amounts recognised in the wholly-owned entities’ accounts.
The amounts receivable/payable under the tax funding agreement are due on demand, subject to set-off or agreement to the contrary, and
regardless of whether any consolidated group liability is actually payable by the head entity. These amounts are recognised as current intercompany receivables or payables.
9. Cash and cash equivalents (current)
Consolidated
2009
2008
$’000
$’000
Cash at bank and on hand
Deposits at call
3,484
157,939
161,423
8,935
–
8,935
Parent entity
2009
2008
$’000
$’000
2,726
–
2,726
482
–
482
10. Trade and other receivables (current)
Consolidated
2009
2008
$’000
$’000
Trade receivables
Provision for impairment of trade receivables
Other receivables
Prepayments
Margin deposits on commodity futures contracts
Pool advance (note 1(k) and note 20)
Deposit bond for Pools facility
Amounts receivable from related entities
Amounts receivable from associates (note 34)
108,982
(2,193)
106,789
13,358
7,917
1,588
28,641
–
–
240
158,533
152,428
(4,433)
147,995
15,085
5,835
9,683
1,816
2,133
–
466
183,013
Parent entity
2009
2008
$’000
$’000
–
–
–
387
–
–
–
–
3,068
240
3,695
–
–
–
21
–
–
–
–
–
466
487
(a) Risk exposures
Information about the Group’s and the parent entity’s exposure to credit risk, foreign exchange and interest rate risk is provided in note 2.
(b) Fair values
Due to the short-term nature of these receivables, their carrying amount is assumed to approximate their fair value.
73
Notes to the financial statements
30 September 2009
11. Inventories (current)
Consolidated
2009
2008
$’000
$’000
Consumable stores at cost
Trading stock at net realisable value
Commodities inventory at fair value less costs to sell
2,292
9,384
85,132
96,808
2,187
39,897
155,947
198,031
Parent entity
2009
2008
$’000
$’000
–
–
–
–
–
–
–
–
(a) Inventory expense
Inventories recognised as an expense during the year ended 30 September 2009 amounted to $1,183,726,000 (2008: $1,323,054,000).
Write-downs of inventories to net realisable value recognised as an expense during the year ended 30 September 2009 amounted to
$11,267,000 (2008: $82,000). The expense is included in other expenses in the income statement.
(b) Secured inventory
The value of inventory secured against bank loans is $53,320,000 (2008: $84,100,000). Refer to note 21.
12. Derivative financial instruments (current)
Consolidated
2009
2008
$’000
$’000
Parent entity
2009
$’000
2008
$’000
Current assets
Commodity futures and options
Commodity contracts (forward purchases and sales)
Foreign exchange contracts
Total current derivative financial instrument assets
6,522
43,549
1,864
51,935
9,800
56,308
2,882
68,990
–
–
–
–
–
–
–
–
1,429
22,764
375
299
24,867
6,386
43,699
18,596
–
68,681
–
–
–
–
–
–
–
–
–
–
Current liabilities
Commodity futures and options
Commodity contracts (forward purchases and sales)
Foreign exchange contracts
Interest rate swaps contracts – cash flow hedges
Total current derivative financial instrument liabilities
(a) Instruments used by the Group
The Group is party to derivative financial instruments in the normal course of business in order to manage financial risk and the financial
exposure of commodity inventories in accordance with the Group’s financial risk management policies (see note 2). Of the Group’s derivative
transactions only the interest rate swap contracts currently qualify for hedge accounting as defined under AASB 139 Financial Instruments:
Recognition and Measurement.
(i) Interest rate swap contracts
It is the Group’s policy to protect part of the loans from exposure to increasing interest rates. Accordingly, it entered into interest rate swap
contracts under which the Group was entitled to receive interest at variable rates and obliged to pay interest at fixed rates. The contracts
required settlement of net interest receivable or payable at each reset period. The settlement dates coincided with the dates on which
interest became payable on the underlying debt.
The gain or loss from remeasuring the interest rate swap contracts at fair value is deferred in equity in the hedging reserve, to the extent that
the hedge is effective, and reclassified into profit and loss when the hedged interest expense is recognised. In the year ended 30 September
2009, $3,711,000 was reclassified into profit and loss and included in finance costs (2008: $nil). There was no hedge ineffectiveness in the
current or prior year.
(ii) Forward purchase and forward sale contracts
As part of its grain marketing activities as a commodity trader the Group writes forward purchase and forward sales contracts. All open
contracts are fair valued at balance date with any gains and losses on these contracts, together with the costs of the contracts, being
recognised immediately through the income statement.
At balance date, outstanding purchase contracts had a fair value of $19,107,000 loss (2008: $24,300,000 loss), and outstanding sales
contracts had a fair value of $39,892,000 gain (2008: $38,325,000 gain).
74
12. Derivative financial instruments (current) (continued)
(a) Instruments used by the Group (continued)
(iii) Commodity futures and option contracts
To manage exposure to commodity price risk, the Group has entered into grain commodity futures contracts and grain commodity
options contracts.
At balance date, net outstanding commodity futures contracts had a fair value of $5,159,000 gain (2008: $4,808,000 gain) with various
maturities up to January 2011 (2008: January 2010).
Commodity sold and bought options are marked to market at each balance date. These options have maturities up to March 2010 (2008:
January 2009). At balance date, net outstanding commodity bought and sold options had a fair value of $65,000 loss (2008: $19,000 gain).
At balance date, the Group has entered into commitments to futures contracts for $30,878,000 (2008: $69,321,000) relating to purchase
contracts and for $43,077,000 (2008: $90,864,000) relating to sales contracts.
(iv) Foreign exchange contracts
The Group manages currency exposures arising from grain futures taken out in the US, Canada and Europe and from export contracts for
sales of grain and meal. In accordance with the Group’s risk management policy, this exposure is managed through transactions entered
into in foreign exchange markets. Forward exchange contracts and currency option contracts have been used for this purpose. The foreign
exchange contracts are timed to mature when the grain futures contracts expire.
(b) Risk exposures
Information about the Group’s and the parent entity’s exposure to credit risk, foreign exchange and interest rate risk is provided in note 2.
13. Non-current assets classified as held for sale (current)
Consolidated
2009
2008
$’000
$’000
Land
Buildings and structures
Plant and equipment
108
31
741
880
108
33
741
882
Parent entity
2009
2008
$’000
$’000
–
–
–
–
–
–
–
–
From time to time, the directors of GrainCorp Limited determine to sell certain sites which have been closed to operations based on their
historic and expected receivals. As at 30 September 2009, seven sites were being actively marketed for sale (2008: seven sites). There
are several interested parties and the sales are expected to be completed within the next 12 months. The assets are presented within total
assets of the storage and logistics segment in note 4.
14. Receivables (non-current)
Consolidated
2009
2008
$’000
$’000
Amounts receivable from subsidiaries (note 34)
Loans to associate entities (note 34)
Less: Provision for impairment of loans to associated entities
–
20,109
(1,000)
19,109
–
20,467
(1,358)
19,109
Parent entity
2009
2008
$’000
$’000
142,293
19,092
–
161,385
25,746
19,092
–
44,838
(a) Fair values
All amounts in respect of non-current receivables approximate fair value.
(b) Risk exposure
Information about the Group’s and the parent entity’s exposure to credit risk, foreign exchange and interest rate risk is provided in note 2.
75
Notes to the financial statements
30 September 2009
15. Investments accounted for using the equity method (non-current)
Consolidated
2009
2008
$’000
$’000
106,653
Shares in associates
96,866
Parent entity
2009
$’000
2008
$’000
–
–
Investments in associates are accounted for using the equity method in the consolidated financial statements and are carried at cost by the
parent entity (see note 16).
16. Other financial assets (non-current)
Consolidated
2009
2008
$’000
$’000
Shares in subsidiaries – at cost (note 35)
Shares in associates – at cost (note 38)
Investments in other entities – at cost
Parent entity
2009
2008
$’000
$’000
–
–
3,030
3,030
–
–
4,538
4,538
276,823
70,920
1,030
348,773
275,223
70,920
2,278
348,421
2009
Leased plant &
equipment
$’000
Plant &
equipment
$’000
Capital works
in progress
$’000
Total
$’000
17. Property, plant and equipment (non-current)
Consolidated
Land
$’000
Buildings &
structures
$’000
Leasehold
improvements
$’000
At 1 October 2008
Cost
Accumulated depreciation
Net book value
18,743
–
18,743
142,281
(74,335)
67,946
14,547
(3,327)
11,220
4,348
(4,110)
238
634,058
(310,586)
323,472
11,443
–
11,443
825,420
(392,358)
433,062
18,743
67,946
11,220
238
323,472
11,443
433,062
–
55
(58)
–
–
18,740
–
9,571
(207)
(10,307)
(313)
66,690
–
400
(82)
(653)
–
10,885
–
865
–
(252)
–
851
–
17,313
(1,584)
(29,466)
(2,005)
307,730
(1,837)
194
(211)
–
–
9,589
(1,837)
28,398
(2,142)
(40,678)
(2,318)
414,485
18,740
–
18,740
149,368
(82,678)
66,690
14,843
(3,958)
10,885
5,213
(4,362)
851
635,676
(327,946)
307,730
9,589
–
9,589
833,429
(418,944)
414,485
Year ended 30 September 2009
Opening net book value
Transfer between asset
categories (note 19)
Additions
Disposals
Depreciation
Impairment charge1
Closing net book value
At 30 September 2009
Cost or fair value
Accumulated depreciation
Net book value
1 T he carrying amount of assets totalling $2.25 million allocated to the Merchandise CGU has been written off as impaired. This loss is included in impairment expenses disclosed as a
separate line item in the income statement.
On 29 May 2009, the NSW State Government transferred to the Group, at no cost, 18 ‘48 Class’ locomotives and 180 wagons to enable the
Group to provide branch line grain services. Both the assets and the grant were recognised at nominal value.
76
17. Property, plant and equipment (non-current) (continued)
Consolidated
Land
$’000
Buildings &
structures
$’000
Leasehold
improvements
$’000
2008
Leased plant &
equipment
$’000
Plant &
equipment
$’000
Capital works
in progress
$’000
Total
$’000
At 1 October 2007
Cost
Accumulated depreciation
Net book value
19,253
–
19,253
138,498
(64,874)
73,624
14,056
(2,823)
11,233
4,348
(3,579)
769
617,350
(285,886)
331,464
5,352
–
5,352
798,857
(357,162)
441,695
19,253
73,624
11,233
769
331,464
5,352
441,695
(640)
55
81
(6)
–
18,743
(795)
49
4,646
(167)
(9,411)
67,946
(264)
–
805
–
(554)
11,220
–
–
–
–
(531)
238
763
6,318
12,807
(772)
(27,108)
323,472
936
–
5,155
–
–
11,443
–
6,422
23,494
(945)
(37,604)
433,062
18,743
–
18,743
142,281
(74,335)
67,946
14,547
(3,327)
11,220
4,348
(4,110)
238
634,058
(310,586)
323,472
11,443
–
11,443
825,420
(392,358)
433,062
Year ended 30 September 2008
Opening net book value
Transfers to non-current
assets held for sale
Acquisition of subsidiary
Additions
Disposals
Depreciation
Closing net book value
At 30 September 2008
Cost
Accumulated depreciation
Net book value
No property, plant and equipment is held by the parent entity.
18. Deferred tax assets (non-current)
Consolidated
2009
2008
$’000
$’000
Parent entity
2009
2008
$’000
$’000
The balance comprises temporary differences attributable to:
Unrealised losses on derivative contracts
Inventories
Share capital costs
Cash flow hedges
Creditors and other payables
Asset impairment
Provisions and accruals
Tax losses recognised
Net deferred tax assets
–
596
2,208
473
3,386
641
14,350
15,426
37,080
298
3,064
739
–
2,614
–
13,494
32,773
52,982
–
–
1,647
–
–
–
435
15,426
17,508
–
–
358
–
–
–
605
32,713
33,676
52,982
–
(18,097)
2,195
–
–
37,080
44,458
3,037
5,904
(417)
–
–
52,982
33,676
–
(2,938)
1,722
–
(14,952)
17,508
22,764
–
565
(417)
10,764
–
33,676
Movements:
Opening balance at 1 October
Take on balance through acquisition (note 36)
Credited / (charged) to the income statement (note 8)
Credited / (charged) to equity (notes 28 and 29)
Assumption of tax losses from consolidated entities
Utilisation of transferred tax losses
Closing balance at 30 September
Deferred tax assets recoverable within 12 months: Group: $31,661,000 (2008: $38,098,000); parent entity: $13,233,000
(2008: $19,157,000).
77
Notes to the financial statements
30 September 2009
19. Intangible assets (non-current)
Consolidated
Computer
software
$’000
Trade name
$’000
2009
Customer
relationship
$’000
Goodwill
$’000
Total
$’000
At 1 October 2008
Cost
Accumulated amortisation
Net book amount
26,268
(12,685)
13,583
458
(127)
331
346
(41)
305
17,660
–
17,660
44,732
(12,853)
31,879
13,583
3,534
1,837
(2,213)
–
16,741
331
–
–
(153)
–
178
305
–
–
(50)
–
255
17,660
–
–
–
(1,000)
16,660
31,879
3,534
1,837
(2,416)
(1,000)
33,834
30,843
(14,102)
16,741
458
(280)
178
346
(91)
255
17,660
(1,000)
16,660
49,307
(15,473)
33,834
Year ended 30 September 2009
Opening net book amount
Additions
Transfer between asset categories
Amortisation charge1
Impairment charge2
Closing net book amount
At 30 September 2009
Cost or fair value
Accumulated amortisation and impairment
Net book amount
1 Amortisation is included in depreciation and amortisation expense in the income statement.
2 The carrying amount of goodwill of $1.0 million allocated to the Merchandise CGU has been written off as impaired. This loss is included in impairment expenses disclosed
as a separate line item in the income statement.
Trade name
$’000
2008
Customer
relationship
$’000
Goodwill
$’000
Consolidated
Computer
software
$’000
At 1 October 2007
Cost
Accumulated amortisation
Net book amount
18,085
(10,348)
7,737
–
–
–
–
–
–
11,693
–
11,693
29,778
(10,348)
19,430
7,737
8,208
(25)
(2,337)
13,583
–
458
–
(127)
331
–
346
–
(41)
305
11,693
5,967
–
–
17,660
19,430
14,979
(25)
(2,505)
31,879
26,268
(12,685)
13,583
458
(127)
331
346
(41)
305
17,660
–
17,660
44,732
(12,853)
31,879
Total
$’000
Year ended 30 September 2008
Opening net book amount
Additions
Disposals
Amortisation charge3
Closing net book amount
At 30 September 2008
Cost
Accumulated amortisation
Net book amount
3 Amortisation is included in depreciation and amortisation expense in the income statement.
(a) Impairment tests for goodwill
As at 30 September 2008, goodwill was allocated to the Group’s cash-generating units (CGUs) as follows: Storage and Logistics:
$10,600,000; Hunter Grain: $6,100,000 (acquired 2008) and Merchandise: $1,000,000.
The recoverable amount of the CGUs is determined based on value-in-use calculations. These calculations use projected cash flow from a
growth model that is based on an initial five year forecast. Inputs into these forecasts include expected receivals and outloads for Storage
and Logistics, sales of soybean meal for Hunter Grain, and expected sales of farm inputs for Merchandise.
78
19. Intangible assets (non-current) (continued)
(b) Key assumptions used for value-in-use calculations
A growth rate of 1.5% has been applied to extrapolate cash flows for a five year period. This growth rate does not exceed the long-term
average growth rate for the businesses in which the CGUs operate.
A post-tax discount rate of 8.9% (pre-tax discount rate 9.6%) has been applied to discount the forecast future attributable post tax cash
flows. The post-tax discount rate reflects specific risks relating to the relevant segment and its country of operation.
Other than for the Merchandise CGU, noted below, if the post-tax discount rate applied to the cash flow projections was 12.0% instead
of 8.9% (pre-tax discount rate 14.0% instead of 9.6%) (2008 – post-tax: 13.9% instead of 8.3%; pre-tax: 16.4% instead of 9.8%), the
recoverable amount of the goodwill would equal its carrying amount. Management does not consider a change in any of the other key
assumptions would cause the carrying value of the CGUs to exceed their recoverable amount.
(c) Impairment charge
A total impairment charge of $3.25 million (allocated to: goodwill $1.0 million; and property, plant and equipment $2.25 million), arose
in the Merchandise CGU as a result of continuing lower than expected margins on sales of farm inputs. The Group reassessed the
depreciation policies of its property, plant and equipment allocated to this CGU and estimated that their useful lives will not be affected
following this decision.
No intangible assets are held by the parent entity (2008: $nil).
20. Trade and other payables (current)
Consolidated
2009
2008
$’000
$’000
Trade payables
Other payables
Income received in advance
Pool advance facility (notes 1(k) and 10)
58,820
21,793
1,204
28,641
110,458
61,961
13,180
1,120
1,816
78,077
Parent entity
2009
2008
$’000
$’000
61
13
–
–
74
398
322
–
–
720
21. Borrowings (current)
Consolidated
2009
2008
$’000
$’000
Parent entity
2009
2008
$’000
$’000
Unsecured
Short-term facilities
Term funding facilities
Amounts payable to subsidiaries (note 34)
Deposit notes
Total unsecured current borrowings
34,493
–
–
–
34,493
136,026
5,000
–
6
141,032
–
–
–
–
–
–
–
899
–
899
53,322
904
54,226
88,719
87,055
895
87,950
228,982
–
–
–
–
–
–
–
899
Secured
Commodity inventory funding facility (note 11)
Leases
Total secured current borrowings
Total current borrowings
(a) Bank overdraft
No interest is payable on overdrawn amounts, providing the Group’s cash position is positive.
(b) Short-term and commodity inventory funding facilities
These facilities are available to be drawn down on demand. The facilities are renewable at the option of the financier each 12 months.
Interest was payable for the term drawn in the range 3.6%-8.3% (2008: 6.7%-8.3%).
(c) Secured borrowings
Leases are secured by the underlying assets. The commodity inventory funding facility is secured against the related inventory. Details of
assets pledged as security are set out in note 24.
(d) Risk exposures
Details of the Group’s exposure to risks arising from current and non-current borrowings are set out in note 2.
79
Notes to the financial statements
30 September 2009
22. Other financial liabilities
Consolidated
2009
2008
$’000
$’000
Parent entity
2009
2008
$’000
$’000
Current
Lease incentives
203
409
–
–
1,166
1,369
1,158
1,567
–
–
–
–
Non-current
Lease incentives
Total
(a) Financial guarantees
Financial guarantees are provided by the parent entity and Group entities as follows:
(i) GrainCorp Operations Limited was a self-insurer for workers’ compensation in NSW up to 29 June 2006. As required by the NSW workers’
compensation self-insurance licensing requirements a Bank Guarantee in favour of the WorkCover Authority NSW for $2,550,000 is in
place, representing an actuarial assessment of the contingent liability arising from past self-insurance for periods prior to 29 June 2006.
(ii) In the normal course of business the Group enters into guarantees. At 30 September 2009 they amounted to $4,056,000 (2008:
$2,606,000). The directors do not believe any claims will arise in respect of these guarantees.
(iii) GrainCorp Limited provides an eligible undertaking to act as guarantor for a subsidiary operating with an Australian Financial Services
Licence. The guarantee is $10,000,000 for Agricultural Risk Management Services Pty Limited (2008: $10,000,000).
(iv)GrainCorp Limited and the wholly-owned entities listed in note 35 are parties to a deed of cross guarantee as described in note 37. The
nature of the deed of cross guarantee is such that each company which is party to the deed guarantees, to each creditor, payment in full
of any debt in accordance with the deed of cross guarantee. No deficiency of net assets existed for the Group as at 30 September 2009.
No liability was recognised by the parent entity or the Group in relation to these guarantees, as the fair value of the guarantees is immaterial.
23. Provisions (current)
Consolidated
2009
2008
$’000
$’000
Claims and disputes
Workers’ compensation
Restoration
Onerous contracts
Employee benefits
8,905
228
217
640
16,448
26,438
10,751
569
76
–
16,194
27,590
Parent entity
2009
2008
$’000
$’000
–
–
–
–
–
–
(a) Claims and disputes
Provision is made for various claims for losses or damages received from time-to-time in the ordinary course of business. Management
estimates the provision based on historical information and its experience in resolving claims.
(b) Workers’ compensation
GrainCorp Operations Limited (GCOP) was a self-insurer for workers’ compensation in NSW up to 29 June 2006. As required by the NSW
workers’ compensation self-insurance licensing requirements, provision is made based on an annual actuarial assessment for GCOP’s
potential liability arising from past self-insurance.
(c) Restoration
Provision is made to satisfy obligations to remove redundant plant and equipment.
(d) Onerous contracts
Provision is made for the unavoidable costs of meeting contractual obligations where the costs of meeting those obligations exceed the
economic benefits expected to be received from the contract.
80
–
–
–
–
–
–
23. Provisions (current) (continued)
(e) Movements in provisions
Consolidated – 2009
Claims & disputes
$’000
Carrying amount at beginning of year
Additional provisions recognised
Amounts used
Unused amounts reversed
Carrying amount at end of year
10,751
3,225
(4,949)
(122)
8,905
Workers’
compensation
$’000
569
37
(378)
–
228
Restoration
$’000
76
189
(27)
(21)
217
Onerous
contracts
$’000
–
640
–
–
640
(f) Amounts not expected to be settled within the next 12 months
The Group’s current provision for employee benefits includes $16,448,000 (2008: $16,194,000) in respect of long service leave, where
employees have completed the required period of service and, as the Group does not have an unconditional right to defer settlement, the
entire obligation is categorised as a current liability. Based on past experience, the Group does not expect all employees to take the full
amount of accrued long service leave or require payment within the next 12 months.
Group long service leave obligations expected to be settled within the next 12 months amount to $350,000 (2008: $253,000).
24. Borrowings (non-current)
Consolidated
2009
2008
$’000
$’000
Parent entity
2009
2008
$’000
$’000
Unsecured
99,936
99,936
216,847
216,847
–
–
94,647
94,647
4,708
4,708
104,644
7,585
7,585
224,432
–
–
–
–
–
94,647
Term funding facilities
Total unsecured non-current borrowings
Secured
Leases
Total secured non-current borrowings
Total non-current borrowings
(a) Term funding facilities
Interest was payable for the term drawn in the range 3.9%-8.9% (2008: 6.5%-8.8%).
(b) Assets pledged as security
The total secured liabilities (current and non-current) are as follows:
Consolidated
2009
2008
$’000
$’000
Lease liabilities (notes 21 and 24)
Commodity inventory funding facility (note 21)
5,612
53,322
58,934
8,480
87,055
95,535
Parent entity
2009
2008
$’000
$’000
–
–
–
–
–
–
The carrying amounts of assets pledged as security for current and non-current borrowings are:
Consolidated
2009
2008
$’000
$’000
Leased assets (note 17)
Commodity inventory (note 11)
851
53,320
54,171
238
84,100
84,338
Parent entity
2009
2008
$’000
$’000
–
–
–
–
–
–
81
Notes to the financial statements
30 September 2009
24. Borrowings (non-current) (continued)
(b) Assets pledged as security (continued)
Lease liabilities (other than liabilities recognised in relation to surplus space under non-cancellable operating leases) are effectively
secured, as rights to the leased assets recognised in the financial statements revert to the lessor in the event of default.
The commodity inventory funding facility is secured against the related inventory.
Loans under term funding facilities are secured by a negative pledge that imposes certain covenants on the Group. The negative pledge
states that (subject to certain exceptions) the subject entity will not provide any other security over its assets, and will ensure that certain
financial ratios and limits are maintained at all times, including: debt service, working capital and gearing ratios; and net tangible assets to
exceed $320,000,000. All such borrowing covenant ratios and limits have been complied with during the financial year.
(c) Financing arrangements
Borrowings are drawn under the following Group debt facilities:
2009
Group
Term debt
Commodity inventory funding
Working capital
Working capital
Maturity date
November 2011
December 2009
November 2009
December 2009
2008
Group
Term debt
Commodity inventory funding
Working capital
Maturity date
November 2011
December 2008
December 2008
Principal
facility amounT
$’000
Amount
utilised
$’000
100,000
82,500
126,000
315,000
623,500
99,936
53,322
34,493
–
187,751
Principal
facility amounT
$’000
Amount
utilised
$’000
222,700
180,000
218,000
620,700
221,846
87,055
136,026
444,927
In conjunction with the acquisition of United Malt Holdings Group and the related capital raising referred to in note 42, the Group has revised
the terms for its debt facilities.
Company borrowings are drawn under the Group debt facilities noted above. 2009: $nil (2008: $94,647,000).
(d) Risk exposures
Information about the Group’s and parent entity’s exposure to interest rate and foreign currency movements is provided in note 2.
(e) Fair value
Current and non-current liabilities are stated at fair value.
25. Derivative financial instruments (non-current)
Consolidated
2009
2008
$’000
$’000
Interest rate swaps contracts – cash flow hedges (note 2)
82
1,276
2,669
Parent entity
2009
2008
$’000
$’000
–
–
26. Deferred tax liabilities (non-current)
Consolidated
2009
2008
$’000
$’000
Parent entity
2009
2008
$’000
$’000
The balance comprises temporary differences attributable to:
Prepayments
Consumables
Creditors and other payables
Property, plant and equipment
Unrealised gains on derivative contracts
Net deferred tax liabilities
340
1,064
369
25,948
1,975
29,696
523
980
526
23,122
–
25,151
–
–
72
–
–
72
–
–
140
–
–
140
25,151
–
4,545
29,696
34,733
320
(9,902)
25,151
140
–
(68)
72
204
–
(64)
140
Movements:
Opening balance 1 October
Take on balance through acquisition (note 36)
Charged / (credited) to the income statement (note 8)
Closing balance 30 September
Deferred tax liabilities recoverable within 12 months: Group: $3,747,000 (2008: $2,029,000); parent entity: $72,000 (2008: $140,000).
27. Provisions (non-current)
Consolidated
2009
2008
$’000
$’000
Restoration
Workers’ compensation
Employee benefits
368
1,290
890
2,548
284
1,156
1,061
2,501
Parent entity
2009
2008
$’000
$’000
–
–
154
154
–
–
324
324
(a) Restoration
Provision is made for head office leased premises make-good obligations.
(b) Workers’ compensation
GrainCorp Operations Limited (GCOP) was a self-insurer for workers’ compensation in NSW up to 29 June 2006. As required by the NSW
workers’ compensation self-insurance licensing requirements, provision is made based on an annual actuarial assessment for GCOP’s
potential liability arising from past self-insurance.
Movements in provisions
Consolidated – 2009
Carrying amount at beginning of year
Additional provisions recognised
Amounts used
Carrying amount at end of year
Restoration
$’000
284
368
(284)
368
Workers’
compensation
$’000
1,156
170
(36)
1,290
83
Notes to the financial statements
30 September 2009
28. Contributed equity
Consolidated and parent entity
Number
Fully paid ordinary shares
Total contributed equity – parent entity
Treasury shares
Total consolidated contributed equity
96,089,995
(417,884)
2009
$’000
491,030
(3,068)
487,962
Number
64,343,846
–
2008
$’000
296,581
–
296,581
Movements in ordinary share capital of the Company during the past two years were as follows:
Date
Details
30 September 2007
21 December 2007
27 February 2008
2 June 2008
Balance brought forward
Share placement issues
Conversion of foundation share
Employee share acquisition plan issues1
Less: Transaction costs arising on share issues
Deferred tax credit recognised directly in equity
Sub-total
Share placement issues
Employee share acquisition plan issues1
Share purchase plan issues
Less: Transaction costs arising on share issues
Deferred tax credit recognised directly in equity
Total contributed equity – parent entity
Less: Treasury shares
Total consolidated contributed equity
30 September 2008
26 May 2009
22 June 2009
8 July 2009
30 September 2009
30 September 2009
Total number
of shares
57,939,201
6,400,000
1
4,644
64,343,846
9,651,577
4,725
22,089,847
96,089,995
Ordinary share
capital
$’000
237,339
60,160
–
54
(1,389)
417
296,581
60,322
35
138,062
(5,692)
1,722
491,030
(3,068)
487,962
1 Refer to note 41 for details of employee share acquisition plan.
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of
and amounts paid on the shares held. On a show of hands every member present in person or by proxy is entitled to one vote, and upon a
poll each share shall have one vote.
Ordinary shares have no par value and the Company does not have a limited amount of authorised capital.
Employee equity schemes
Details of employee share and rights schemes are set out in note 41.
Foundation share
Until 27 February 2008, Grain Growers Association Limited owned a foundation share which gave it the right to appoint a majority of the
directors to the GrainCorp Board. However, the foundation share carried no entitlement to dividends or to the proceeds on winding up.
At the AGM on 27 February 2008, shareholders voted by way of a special resolution to remove the foundation share. It was converted to one
fully paid ordinary share.
Treasury shares
Treasury shares are shares in GrainCorp Limited that are held by the GrainCorp Employee Share Ownership Plan Trust for purposes of
issuing shares under employee share plans including: GrainCorp Exempt Share Plan, GrainCorp Deferred Share Plan, and GrainCorp
Retention Share Plan (see note 41 for further information). During the year, 417,884 shares were acquired on market at a cost of
$3,068,000 (2008: nil shares). No shares were granted or issued under the employee share plans during the year (2008: nil).
84
28. Contributed equity (continued)
Capital risk management
The Group’s objective when managing capital is to safeguard the Group’s ability to maintain an optimal capital structure so that it can
continue to provide returns for shareholders and benefits for other stakeholders.
The capital structure of the Group consists of debt and equity and the mix of debt and equity is measured by reference to the Group’s gearing
ratio (long-term debt net of cash and cash equivalents to total equity). The Group’s objective is to maintain this gearing ratio at 50% or
less. At 30 September 2009, the long-term gearing ratio was not applicable as cash and cash equivalents were in excess of total long-term
borrowings (2008: 49%).
The long-term gearing ratios were as follows:
Consolidated
2009
2008
$’000
$’000
104,644
(161,423)
(56,779)
693,755
N/A
Long-term borrowings
Cash and cash equivalents
Net debt
Total equity
Gearing ratio
224,432
(8,935)
215,497
436,145
49%
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to
shareholders or issue new shares.
The Group complied with all borrowing covenant ratios and other capital requirements during the year.
29. Reserves and retained profits
Consolidated
2009
2008
$’000
$’000
Parent entity
2009
2008
$’000
$’000
Reserves
Share option reserve
Balance 1 October
Performance rights expense
Capital reserve
Balance 30 September
Hedging reserve
Balance 1 October
Gain / (loss) on cash flow hedges
Transfer to income statement – gross
Deferred tax
Balance of reserves 30 September
3,718
1,601
5,319
3,229
489
3,718
3,718
1,601
5,319
3,229
489
3,718
8,328
8,328
8,328
8,328
8,328
8,328
8,328
8,328
(2,669)
(2,617)
3,711
473
(1,102)
12,545
–
(2,669)
–
–
(2,669)
9,377
–
–
–
–
–
13,647
–
–
–
–
–
12,046
The share option reserve is used to recognise the fair value of share rights issued as share-based payments issued but not exercised.
85
Notes to the financial statements
30 September 2009
29. Reserves and retained profits (continued)
The capital reserve represents the residual equity component of reset preference shares of the Company, on their reclassification to an
interest-bearing liability as at 1 October 2005. The reset preference shares were converted to ordinary shares on 30 September 2006.
The hedging reserve is used to record gains and losses on a hedging instrument in a cash flow hedge that are recognised directly in equity,
as described in note 1(y) and note 2. Amounts are recognised in profit and loss when the associated hedged transaction affects profit
and loss.
Consolidated
2009
2008
$’000
$’000
Parent entity
2009
2008
$’000
$’000
Retained profits
Retained profits at the beginning of the financial year
Net profit / (loss) attributable to members of GrainCorp Limited
Dividends provided for or paid (note 30)
Closing balance
130,087
63,161
–
193,248
150,030
(19,943)
–
130,087
22,547
6,563
–
29,110
20,046
2,501
–
22,547
30. Dividends
No dividends have been provided for or paid to shareholders during the year (2008: $nil).
Dividends not recognised at year end
Since year end the directors have approved the payment of a fully franked final dividend in aggregate of $14,418,000 (2008: $nil) expected
to be paid on 16 December 2009, out of retained profits at 30 September 2009, but not recognised as a liability at year end.
New shares issued prior to the record date will also qualify to receive this final dividend.
The related amount per ordinary share is 7.27 cents (2008: $nil), based on shares on issue at the record date of 4 December 2009.
Franking credits available
Consolidated
2009
2008
$’000
$’000
Franking credits available for the subsequent financial year
The
(a)
(b)
(c)
(d)
27,740
25,575
Parent entity
2009
2008
$’000
$’000
27,740
25,575
above amounts represent the balance of the franking account as at the end of the financial year, adjusted for:
franking credits that will arise from the payment of the current tax liability;
franking debits that will arise from the payment of dividends recognised as a liability at the reporting date;
franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date; and
franking credits that may be prevented from being distributed in subsequent financial years.
The impact on the franking account of the dividend approved by the directors since year end, but not recognised as a liability at year end, will
be a reduction in the franking account of $6,177,000 (2008: $nil).
86
31. Remuneration of auditor
During the year, the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and
non-related audit firms:
Consolidated
2009
2008
$
$
Parent entity
2009
$
2008
$
Assurance services
(i) Audit services
Fees paid to PricewaterhouseCoopers Australian firm
Audit and review of financial reports and other work under
the Corporations Act 2001
(ii) Other assurance services
Fees paid to PricewaterhouseCoopers Australian firm
Other audit services
Review of other financial information
(iii) Taxation services
Fees paid to PricewaterhouseCoopers Australian firm
Tax due diligence fees
Tax compliance and advice
Total
546,000
546,000
451,000
451,000
84,823
84,823
80,200
80,200
55,000
160,000
215,000
67,500
85,401
152,901
–
–
–
–
–
–
–
6,358
6,358
767,358
13,752
5,000
18,752
622,653
–
–
–
84,823
–
–
–
80,200
Any PricewaterhouseCoopers non-audit engagements are subject to the Group’s corporate governance procedures, auditor independence
policies and Board Audit Committee approval.
32. Contingencies
(i) The Group may from time to time receive notices of possible claims for losses or damages. A provision of $8,905,000 (2008:
$10,751,000) has been recognised to cover any liabilities which may arise out of such claims.
Based on information currently available, the directors believe that no further provision is required at this time. A contingent liability exists for
any amounts that ultimately become payable over and above current provisioning levels.
(ii) On 4 May 2009, a charge and summons was served on GrainCorp Operations Limited (GCOP) by the WorkCover Authority of Victoria
documenting five indictable offences with respect to the death of an employee in December 2007. The charges allege that GCOP breached
the Victorian Occupational Health and Safety Act. Each charge carries a maximum penalty of approximately $1.0 million. GCOP has engaged
legal representation and the committal hearing has been set for 12 April 2010. A contingent liability exists for any amounts that ultimately
become payable over and above management’s current provisioning levels.
87
Notes to the financial statements
30 September 2009
33. Commitments
Consolidated
2009
2008
$’000
$’000
Parent entity
2009
2008
$’000
$’000
Capital expenditure commitments
Total capital expenditure contracted for at the reporting date but not
provided for in payables:
– Not later than one year
– Later than one year but not later than five years
18,683
–
18,683
8,169
–
8,169
–
–
–
–
–
–
25,435
71,236
59,871
156,542
25,925
86,266
57,537
169,728
–
–
–
–
–
–
–
–
179
156,363
156,542
231
169,497
169,728
–
–
–
–
–
–
25,425
71,067
59,871
156,363
25,868
86,092
57,537
169,497
–
–
–
–
–
–
–
–
Lease commitments
Commitments in relation to leases contracted for at the reporting date but
not recognised as liabilities, payable:
– Not later than one year
– Later than one year and not later than five years
– Later than five years
Representing:
Cancellable operating leases
Non-cancellable operating leases
Operating leases
Commitments for minimum lease payments in relation to non-cancellable
operating leases are payable as follows:
– Not later than one year
– Later than one year but not later than five years
– Later than five years
Operating leases are principally over port facilities, on terms up to 99 years. Contingent rentals are based on CPI and/or periodic valuation
to market value. The majority of leases include options to extend terms. Given the nature of the Group’s relationship with port operators it is
anticipated that most leases will be continually renewed. Operating leases also apply to offices, storage sites, computer equipment, trucks,
and railway locomotives and wagons.
Finance leases
Commitments in relation to finance leases are payable as follows:
– Not later than one year
– Later than one year but not later than five years
– Later than five years
Minimum lease payments
Future finance charges
Total lease liabilities
Representing lease liabilities:
Current (note 21)
Non-current (note 24)
904
3,180
1,528
5,612
–
5,612
895
3,900
3,685
8,480
–
8,480
–
–
–
–
–
–
–
–
–
–
–
–
904
4,708
5,612
895
7,585
8,480
–
–
–
–
–
–
The weighted average interest rate implicit in the leases is 5.9% (2008: 7.6%).
Finance leases are principally over port facilities, commencing between 1977 and 2005, and terminating between 2010 and 2077.
Contingent rental payments are based on the volume of through puts generated by the Group. Options exist to renew the leases.
88
34. Key Management Personnel disclosures and related party transactions
(1) Key Management Personnel disclosures
(a) Directors
The following persons were directors of GrainCorp Limited during the financial year:
(i) Chairman – non-executive
D C Taylor
(ii) Executive director
M D Irwin (Managing Director)
(iii) Non-executive directors
P J Housden (appointed 17 October 2008)
D J Mangelsdorf
D B Trebeck
S L Tregoning (appointed 2 December 2008)
G D W Curlewis (resigned 17 October 2008)
D F Groves (resigned 18 May 2009)
(b) Other Key Management Personnel
The following persons also had authority and responsibility for planning, directing and controlling the activities of the Group, directly or
indirectly, during the financial year and also for the year ended 30 September 2009, except where indicated:
Name
Position
B J Griffin
N P Hart
M P Henry
A N Johns
K J Lloyd
G R Mathason
R S Porcheron
S J Tainsh
I Wilton
J de Salis
A K Scott
General Manager, Storage & Logistics (appointed 17 March 2009)
General Manager, Ports & New Business
General Manager, Merchandise
Chief Development Officer
General Manager, Country Operations
General Manager, Account Management
General Manager, Human Resources
General Manager, Trading
Chief Financial Officer (appointed 22 June 2009)
General Manager, AG Finance (position redundant 30 January 2009)
Chief Financial Officer (resigned 6 April 2009)
(c) Key Management Personnel compensation
Consolidated
2009
2008
$
$
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments
Termination payments
4,959,938
385,706
75,847
983,235
118,000
6,522,726
4,237,022
467,784
84,880
471,518
528,424
5,789,628
Parent entity
2009
$
2008
$
–
–
–
–
–
–
–
–
–
–
–
–
Detailed remuneration disclosures are provided in sections A-F of the remuneration report on pages 33 to 41.
89
Notes to the financial statements
30 September 2009
34. Key Management Personnel disclosures and related party transactions (continued)
(1) Key Management Personnel disclosures (continued)
(d) Equity instrument disclosures relating to Key Management Personnel
(i) Performance share rights provided as remuneration and shares issued on exercise of such rights
Details of rights provided as remuneration and shares issued on the exercise of such rights, together with terms and conditions of the
rights, can be found in section H of the remuneration report on pages 42 to 44.
(ii) Performance share rights holdings
The numbers of performance rights in the Company held during the financial year by each director of GrainCorp Limited and other
Key Management Personnel of the Group, including their personally related entities, are set out below.
2009
Name
Balance at the
start of the year
Granted during
the year as
compensation
Other changes
during the year
Vested and
Balance at the exercisable at the
end of the year
end of the year
47,098
–
–
47,098
–
–
101,542
17,957
103,186
109,267
39,121
28,793
103,186
–
85,227
20,974
–
–
–
–
–
–
–
–
–
–
–
–
(40,274)
–
(41,096)
(43,561)
(15,781)
(10,567)
(41,096)
–
(85,227)
(20,974)
–
61,268
17,957
62,090
65,706
23,340
18,226
62,090
–
–
–
–
7,840
–
8,000
8,480
3,072
2,057
8,000
–
–
–
Directors of GrainCorp Limited
M D Irwin
Other Key Management Personnel of the Group
B J Griffin1
N P Hart
M P Henry
A N Johns
K J Lloyd
G R Mathason
R S Porcheron
S J Tainsh
I Wilton2
J de Salis3
A K Scott4
1
2
3
4
B J Griffin appointed 17 March 2009.
I Wilton appointed 22 June 2009.
J de Salis’ position redundant 30 January 2009.
A K Scott resigned 6 April 2009.
The numbers of options and performance share rights in the Company held during the 2008 financial year by each director of GrainCorp
Limited and other Key Management Personnel of the Group, including their personally related entities, are set out below.
2008
Name
Balance at the
start of the year
Granted during
the year as
compensation
326,312
–
–
47,098
(326,312)
–
–
47,098
–
–
80,568
–
82,212
87,144
31,302
21,323
68,276
–
82,212
60,149
20,974
17,957
20,974
22,123
7,819
7,470
16,951
20,974
20,974
14,940
–
–
–
–
–
–
–
–
–
(75,089)
101,542
17,957
103,186
109,267
39,121
28,793
85,227
20,974
103,186
–
–
–
–
–
–
–
–
–
–
–
Other changes
during the year
Vested and
Balance at the exercisable at the
end of the year
end of the year
Directors of GrainCorp Limited
T B Keene1
M D Irwin2
Other Key Management Personnel of the Group
N P Hart
M P Henry
A N Johns
K J Lloyd
G R Mathason4
R S Porcheron4
J de Salis
A K Scott
S J Tainsh
J P Breeze3
1
2
3
4
90
T B Keene retired 28 March 2008.
M D Irwin appointed 31 March 2008.
J P Breeze retired 2 April 2008. Performance share rights were forfeited.
Promoted to Executive on 11 April 2008.
34. Key Management Personnel disclosures and related party transactions (continued)
(1) Key Management Personnel disclosures (continued)
(d) Equity instrument disclosures relating to Key Management Personnel (continued)
(iii) Share holdings
The numbers of shares in the Company and subsidiaries held during the financial year by each director of GrainCorp Limited and other Key
Management Personnel of the Group, including their personally related entities, are set out in the following table:
2009
Name
Balance at the
start of the year
Movements
arising from
changes in
Board/
KMP status
Granted during
the year as
compensation
Other changes
during the year
Balance at the
end of the year
–
–
–
–
–
–
–
(1,595,801)
–
–
–
–
–
–
–
–
2,895
8,730
3,900
4,382
4,877
5,400
–
4,746
10,348
8,730
3,900
11,388
34,080
5,400
–
–
–
–
–
–
–
–
–
–
–
(521)
–
–
–
–
–
–
–
–
–
–
–
–
3,050
2,499
480
99
12,400
390
99
–
6,900
–
–
3,050
3,820
566
1,307
14,597
2,513
621
2,633
6,900
–
–
Directors of GrainCorp Limited
Ordinary shares – held in the parent company, GrainCorp Limited
D C Taylor
7,453
M D Irwin
–
–
P J Housden3
D J Mangelsdorf
7,006
D B Trebeck
29,203
–
S L Tregoning4
–
G D W Curlewis1
1,591,055
D F Groves2
Other Key Management Personnel of the Group
Ordinary shares – held in the parent company, GrainCorp Limited
B J Griffin5
N P Hart
M P Henry
A N Johns
K J Lloyd
G R Mathason
R S Porcheron
S J Tainsh
I Wilton6
J de Salis7
A K Scott8
1
2
3
4
5
6
7
8
–
1,321
86
1,208
2,197
2,123
522
2,633
–
521
–
G D W Curlewis resigned 17 October 2008.
D F Groves resigned 18 May 2009.
P J Housden appointed 17 October 2008.
S L Tregoning appointed 2 December 2008.
B J Griffin appointed 17 March 2009.
I Wilton appointed 22 June 2009.
J de Salis’ position redundant 30 January 2009.
A K Scott resigned 6 April 2009.
91
Notes to the financial statements
30 September 2009
34. Key Management Personnel disclosures and related party transactions (continued)
(1) Key Management Personnel disclosures (continued)
(d) Equity instrument disclosures relating to Key Management Personnel (continued)
(iii) Share holdings (continued)
2008
Name
Balance at the
start of the year
Movements
arising from
changes in
Board/
KMP status
Granted during
the year as
compensation
Other changes
during the year
Balance at the
end of the year
Directors of GrainCorp Limited
Ordinary shares – held in the parent company, GrainCorp Limited
D C Taylor
6,934
D J Mangelsdorf
5,157
–
M D Irwin1
G D W Curlewis
1,000
D F Groves
1,784,397
D B Trebeck
26,607
7,744
G T Lane8
51
S J Millear9
249,420
T B Keene2
1,001
J W Eastburn3
82,897
R R Flanery4
136,199
R G Freeman5
–
–
–
(1,000)
–
–
(7,744)
(51)
(250,368)
(1,001)
(82,897)
(136,199)
–
–
–
–
–
–
–
–
948
–
–
–
519
1,849
–
–
(193,342)
2,596
–
–
–
–
–
–
7,453
7,006
–
–
1,591,055
29,203
–
–
–
–
–
–
(833)
–
–
–
–
2,123
379
–
–
–
138
–
–
–
–
–
–
–
–
–
–
112
86
112
–
–
143
111
–
422
–
1,321
86
1,208
2,197
2,123
522
521
–
2,633
Other Key Management Personnel of the Group
Ordinary shares – held in the parent company, GrainCorp Limited
J P Breeze6
N P Hart
M P Henry
A N Johns
K J Lloyd
G R Mathason7
R S Porcheron7
J de Salis
A K Scott
S J Tainsh
1
2
3
4
5
6
7
8
9
92
M D Irwin appointed 31 March 2008.
T B Keene retired 28 March 2008.
J W Eastburn resigned 6 June 2008.
R R Flanery resigned 22 February 2008.
R G Freeman resigned 3 June 2008.
J P Breeze retired 2 April 2008.
Promoted to Executive on 11 April 2008.
G T Lane resigned 23 May 2008.
S J Millear resigned 12 May 2008.
695
1,209
–
1,096
2,197
–
–
410
–
2,211
34. Key Management Personnel disclosures and related party transactions (continued)
(1) Key Management Personnel disclosures (continued)
(e) Other transactions with Key Management Personnel
Transactions for storage, handling, transport, testing, seed sales and purchase of grain, fertiliser and other agricultural products from
directors or director-related entities took place during both financial years covered by this report and occurred within a normal customer
relationship on terms no more favourable than those available on similar transactions to other customers. Below are aggregate amounts
due, from and to directors, any other Key Management Personnel and their director-related and KMP-related entities at balance date. These
balances are the result of transactions conducted under normal trading terms and conditions.
Directors and other Key Management Personnel who transacted business with the Group were M D Irwin, D J Mangelsdorf, D B Trebeck and
A N Johns (2008: M D Irwin, T B Keene, G D W Curlewis, D B Trebeck, M P Henry, A N Johns and S J Tainsh).
Consolidated
2009
2008
$
$
Current receivables
– Director-related and KMP-related entities1
Current payables
– Directors and other Key Management Personnel
– Director-related and KMP-related entities2
Parent entity
2009
$
2008
$
3,718,064
4,105,849
–
–
–
–
–
220,779
–
–
–
–
2009:
1 Includes $3,298,719 receivable relating to Allied Mills Pty Ltd of which M D Irwin and A N Johns are directors, $140,174 receivable from D J Manglesdorf, and $279,171 receivable from
entities related to D B Trebeck.
2008:
1 Includes $4,075,453 receivable relating to Allied Mills Pty Ltd of which M D Irwin and A N Johns are directors, and $29,225 receivable relating to Delta Agribusiness Pty Ltd of which
A N Johns is a director.
2 Includes $165,010 payable relating to Austasia Grains Pty Ltd of which S J Tainsh is a director.
(2) Related party transactions
(a) Transactions with related parties – wholly-owned members of the Group
Details of wholly-owned members of the Group and ownership interests in controlled entities are set out in note 35. Aggregate amounts
included in the determination of profit from ordinary activities before income tax that resulted from transactions with wholly-owned entities
within the Group were as follows:
Parent entity
2009
2008
$
$
3,603,996
–
13,324
4,794,363
Fee for liabilities guarantee
Tax losses assumed from wholly-owned tax-consolidated entities
Interest expense payable to subsidiaries
Interest revenue from subsidiaries
6,203,133
19,645
4,020,092
5,684,974
(b) Transactions with related parties – associates
Details of associated companies are shown in note 38. Aggregate amounts included in the determination of profit from ordinary activities
before income tax that resulted from transactions with associates were as follows:
Consolidated
2009
2008
$
$
Freight income from Allied Mills
Rental charge from Allied Mills
Sales income from Allied Mills
Purchases from Allied Mills
Interest received from Allied Mills
Storage income from Allied Mills
Agency service fees to Australian Grain Accumulation Services
Membership fees to National Grower Register Pty Limited (NGR)
Rental income from NGR
Interest income from NGR
31,274,512
44,174
119,396,985
9,554,642
1,179,282
13,165,396
939,666
260,422
5,080
108,966
14,365,260
16,441
176,855,862
348,024
1,811,751
7,785,433
2,046,219
247,721
13,000
123,107
Parent entity
2009
$
2008
$
–
–
–
–
1,179,282
–
–
–
–
–
–
–
–
–
1,811,751
–
–
–
–
–
93
Notes to the financial statements
30 September 2009
34. Key Management Personnel disclosures and related party transactions (continued)
(2) Related party transactions (continued)
(c) Outstanding balances in relation to transactions with related parties
Aggregate amounts receivable from and payable to other related parties at balance sheet date were as follows:
Consolidated
2009
2008
$
$
Parent entity
2009
$
2008
$
Subsidiaries
Current borrowings (note 21)
Non-current receivables (note 14)
–
–
–
–
–
142,292,501
899,000
25,746,000
1,000,000
17,000
19,092,000
239,879
1,358,000
17,000
19,092,000
465,573
–
–
19,092,000
239,879
–
–
19,092,000
465,573
Associates
Loan to NGR (note 14)
Loan to Wheat Australia (note 14)
Loan to Allied Mills (note 14)
Current receivable (note 10) loan interest Allied Mills
A provision for impairment of advances to associated entities of $1,000,000 has been raised in relation to the amount owing by NGR (2008:
$1,358,000). The Group received $358,000 in respect of this impaired advance during the year ended 30 September 2009 (2008: revenue
$25,011). The impairment reversal is included in other expenses in the income statement.
(d) Terms and conditions
Transactions between GrainCorp and related parties in the Group during the years ended 30 September 2009 and 2008 consisted of:
(i) loans advanced and repaid within the Group;
(ii) payment of dividends to GrainCorp;
(iii) management fees for administrative services paid to GrainCorp;
(iv) liability guarantee fees paid to GrainCorp;
(v) sale of goods; and
(vi) reimbursement of expenses.
These transactions occurred within a normal customer relationship on terms no more favourable than those available on similar transactions
to other customers, except when there is no interest or fixed terms for repayment on intercompany loans within the Group.
Outstanding balances are unsecured and repayable in cash.
94
35. Subsidiaries
Name of entity
Class of
shares
Equity holdings
2009
2008
Entities controlled by GrainCorp Limited:
GrainCorp Services Limited
ABN 99 059 347 349 Pty Ltd (formerly: Victorian Grain Services Limited)
Grainco Australia Pty Limited
GrainCorp Warehouse Cashflow Pty Ltd
GrainCorp AG Finance Limited
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Entities controlled by GrainCorp Services Limited:
GrainCorp Operations Limited
Ordinary
100%
100%
Entities controlled by ABN 99 059 347 349 Pty Ltd:
Vicgrain Limited1
Ordinary
75%
75%
Entities controlled by Grainco Australia Pty Limited:
Agricultural Risk Management Services Pty Ltd
ABN 36 073 105 656 Pty Ltd (formerly: Globex International Pty Ltd)
ABN 18 052 348 973 Pty Ltd (formerly: Ausfarmers Pty Limited)
ABN 90 100 751 102 Pty Ltd (formerly: Bulk Terminals Australia Pty Ltd)2
Austasia Grains Pty Ltd
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100%
100%
100%
50%
–
100%
100%
100%
50%
51%
Entities controlled by GrainCorp Operations Limited:
ABN 25 069 096 582 Pty Ltd (formerly: GrainCorp Victoria Pty Limited)
ABN 92 096 359 474 Pty Ltd (formerly: GrainCorp National Pty Limited)2
ABN 90 100 751 102 Pty Ltd (formerly: Bulk Terminals Australia Pty Ltd)2
ACN 127 251 147 Pty Ltd (formerly: Grain Policy Institute Pty Limited)2
ABN 46 089 443 498 Pty Ltd (formerly: GrainCorp Ports Pty Ltd)2
Hunter Grain Pty Ltd
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100%
100%
50%
100%
100%
100%
100%
100%
50%
100%
100%
100%
Entities controlled by Hunter Grain Pty Ltd:
Hunter Grain Transport Pty Limited
GrainCorp NZ Pty Ltd
Ordinary
Ordinary
100%
100%
100%
–
Entities controlled by Vicgrain Limited:
Vicgrain (Assets) Pty Ltd
ACN 069 750 447 Pty Ltd (formerly: Vicgrain (Finance) Pty Ltd)2
Ordinary
Ordinary
100%
100%
100%
100%
Entities controlled by ABN 18 052 348 973 Pty Ltd:
ABN 85 065 134 661 Pty Ltd (formerly: Maceast Pty Ltd)2
ABN 50 009 926 103 Pty Ltd (formerly: Wilsonton Facilities Pty Limited)2
ABN 50 092 220 909 Pty Ltd (formerly: MarketLink (Aust) Pty Ltd)2
Ordinary
Ordinary
Ordinary
100%
100%
100%
100%
100%
100%
Entities controlled by ABN 36 073 105 656 Pty Ltd:
ContainerLink Pty Ltd
Ordinary
100%
100%
1 Remaining 25% equity interest is held by ABN 25 069 096 582 Pty Ltd.
2 Subject to members’ voluntary liquidation or deregistration.
All of the above subsidiaries are incorporated in Australia.
95
Notes to the financial statements
30 September 2009
36. Acquisition of businesses
(a) There were no acquisitions in the year ended 30 September 2009
(b) Acquisition in the year ended 30 September 2008
On 30 November 2007, GrainCorp Operations Limited (a wholly-owned subsidiary of GrainCorp Limited) acquired all of the issued capital of
Hunter Grain Pty Limited, Australia’s largest distributor of imported protein meals, and its wholly-owned subsidiary for a cash consideration
of $28,163,000.
The acquired business contributed revenues of $262.8 million and net profit before tax of $6.9 million to the Group for the period from
30 November 2007 to 30 September 2008. If the acquisition had occurred on 1 October 2007, and results had been consolidated from
that date, consolidated revenue and consolidated profit before tax for the year ended 30 September 2008 would have been $315.3 million
and $8.2 million respectively. Details of net assets acquired and goodwill are as follows:
Purchase consideration:
Cash paid
Direct costs relating to the acquisition
Total purchase consideration
Fair value of net identifiable assets acquired (refer below)
Goodwill
Provisional
$’000
Final
$’000
28,163
641
28,804
22,837
5,967
28,163
641
28,804
22,614
6,190
The goodwill is attributable to Hunter Grain Pty Limited’s strong position in the import of soybean and other meals into the Australian Market,
and the revenue synergies expected to be generated from the acquisition.
The amounts set out in the table below reflect provisional fair values of assets and liabilities acquired and goodwill at the acquisition date as
the necessary valuations of certain assets and liabilities were not completed as at 30 September 2008, and subsequent adjustment to fair
values on completion of the valuations in the financial year ended 30 September 2009.
The assets and liabilities arising from the acquisition are as follows:
Acquiree’s
carrying amount
$’000
Cash and cash equivalents
Property, plant and equipment
Intangible assets
Inventories
Receivables
Net deferred tax assets
Net derivative financial instruments
Payables
Provisions
Borrowings
Tax liabilities
Net identifiable assets acquired
7,512
6,437
–
68,269
56,330
156
–
(19,108)
(250)
(90,080)
(722)
28,544
Provisional
fair value
$’000
7,512
6,422
804
82,896
56,331
2,717
(23,685)
(19,108)
(250)
(90,080)
(722)
22,837
Final adjusted
fair value
$’000
7,512
6,422
804
82,891
56,179
2,717
(23,685)
(19,139)
(285)
(90,080)
(722)
22,614
Cash consideration, net of cash acquired, resulted in an outflow of cash of $21,292,000.
Adjustment to provisional values recognised during the current period
Finalisation of the acquisition accounting establishing the fair value of the assets and liabilities acquired resulted in a reduction in the
provisional fair value of $223,000, adjusting the value of goodwill acquired. The adjusted value of goodwill acquired is $6,190,000.
96
37. Deed of cross guarantee
GrainCorp and its wholly-owned entities listed in note 35, with the exception of Agricultural Risk Management Services Pty Ltd, ACN 127
251 147 Pty Ltd, and GrainCorp NZ Pty Ltd, are parties to a deed of cross guarantee under which each of the companies guarantees the
debts of the other and are thus relieved from the requirement to prepare a financial report and directors’ report under Class Order 98/1418
(as amended) issued by the Australian Securities and Investments Commission.
During the financial year, GrainCorp AG Finance Limited was added to the deed of cross guarantee by an assumption deed dated
1 December 2008.
The above mentioned parties to the deed of cross guarantee represent a ‘Closed Group’ for the purposes of the Class Order, and as there
are no other parties in the deed of cross guarantee that are controlled by GrainCorp Limited, they also represent the ‘Extended
Closed Group’.
Set out below is the consolidated income statement and a summary of movements in consolidated retained profits for the Closed Group for
the year ended 30 September 2009.
Income statement
Revenue from continuing operations
Other income
Goods purchased for resale
Raw materials and consumables used
Employee benefits expense
Depreciation and amortisation expense
Impairment expense
Finance costs
Repairs and maintenance
Other expenses
Share of net profits of associates accounted for using the equity method
Profit / (loss) before income tax
Income tax (expense) / benefit
Profit / (loss) for the year
2009
$’000
2008
$’000
1,728,980
51,862
(1,339,083)
(29,680)
(142,645)
(43,094)
(3,318)
(36,295)
(24,228)
(87,121)
9,787
85,166
(22,478)
62,688
1,532,627
2,395
(1,304,156)
(18,849)
(104,899)
(40,022)
–
(47,173)
(10,415)
(58,909)
10,576
(38,825)
16,167
(22,658)
129,978
(921)
62,688
–
191,745
152,636
–
(22,658)
–
129,978
Summary of movements in consolidated retained profits
Retained profits at the beginning of the financial year
Entity disposals and inclusion in Closed Group
Profit / (loss) after related income tax expense
Dividends provided for or paid
Retained profits at the end of the financial year
97
Notes to the financial statements
30 September 2009
37. Deed of cross guarantee (continued)
Set out below is the consolidated balance sheet as at 30 September 2009 of the Closed Group.
2009
$’000
2008
$’000
160,273
161,601
96,808
51,935
880
471,497
3,752
479,951
198,031
68,990
882
751,606
19,109
106,653
3,580
414,485
37,080
33,834
614,741
1,086,238
19,109
96,865
7,189
432,841
52,875
32,100
640,979
1,392,585
111,564
88,719
24,867
203
–
26,438
251,791
372,945
228,573
68,681
409
2,228
27,590
700,426
104,644
1,276
1,166
29,493
2,548
139,127
390,918
695,320
224,431
2,669
1,567
25,055
2,501
256,223
956,649
435,936
Contributed equity
Reserves
Retained profits
491,030
12,545
191,745
296,581
9,377
129,978
Total equity
695,320
435,936
Balance sheet
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative financial instruments
Non-current assets classified as held for sale
Total current assets
Non-current assets
Receivables
Investments accounted for using the equity method
Other financial assets
Property, plant and equipment
Deferred tax assets
Intangible assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Borrowings
Derivative financial instruments
Other financial liabilities
Current tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Borrowings
Derivative financial instruments
Other financial liabilities
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
98
38. Investments in associates
(a) Carrying amounts
Company
Allied Mills Australia
Pty Ltd1
Australian Grain
Accumulation Services
Pty Limited
National Grower Register
Pty Limited
Wheat Australia Pty Ltd
Principal
activity
Ownership interest
Parent entity
carrying amount
2009
2008
$’000
$’000
2009
2008
60%
60%
106,509
96,809
70,920
70,920
–
50%
–
39
–
–
50%
50%
129
–
–
–
33.3%
33.3%
15
106,653
18
96,866
–
70,920
–
70,920
Mixing and
milling
Grain
accumulators
Register
management
Wheat
exportation
Consolidated
carrying amount
2009
2008
$’000
$’000
1 Equity interest in Allied Mills is 60%, however, voting rights are 50%.
Each of the above associates is incorporated in Australia.
(b) Movements in carrying amounts
Consolidated
2009
2008
$’000
$’000
96,866
9,787
106,653
Carrying amount at the beginning of the financial year
Share of operating profits after income tax
Carrying amount at the end of the financial year
86,290
10,576
96,866
Group’s share of results attributable to associated companies:
13,938
(4,151)
9,787
25,331
35,118
14,174
(3,598)
10,576
14,755
25,331
1,084
1,485
–
5,175
1,856
–
Group’s share of:
Liabilities
Revenues
$’000
$’000
Profit
$’000
Operating profits before income tax
Income tax expense
Share of associates’ operating profits after income tax
Retained profits attributable to associates at the beginning of the financial year
Retained profits attributable to associates at the end of the financial year
Group’s share of associate’s expenditure commitments, other than for supply of inventories:
Capital commitments
Lease commitments
Contingent liabilities
Summarised financial information of associates:
Assets
$’000
2009
250,987
Assets
$’000
2008
257,160
124,872
321,155
9,787
Group’s share of:
Liabilities
Revenues
$’000
$’000
Profit
$’000
141,142
302,975
10,576
99
Notes to the financial statements
30 September 2009
39. Reconciliation of profit after income tax to net cash flow from operating activities
Consolidated
2009
2008
$’000
$’000
Profit / (loss) for the year
Net (profit) / loss on sale of non-current assets
Dividends received
Non-cash employee benefits expense – share-based payments
Share of (profit) / loss of associate not received as dividends
Depreciation/amortisation
Impairment expense
Assets written off
Changes in operating assets and liabilities (net of acquired entity):
(Increase) / decrease in inventories
(Increase) / decrease in deferred tax asset
(Increase) / decrease in derivatives
(Increase) / decrease in receivables
Increase / (decrease) in trade payables
Increase / (decrease) in other liabilities
Increase / (decrease) in provision for income tax
Increase / (decrease) in provision for deferred tax liability
Increase / (decrease) in provisions
Net cash provided by operating activities
Parent entity
2009
2008
$’000
$’000
63,161
(2,172)
(200)
1,636
(9,788)
43,094
3,318
211
(19,943)
(2,621)
(345)
543
(10,576)
40,109
–
–
6,563
–
(200)
–
–
–
–
–
2,501
–
(345)
–
–
–
–
–
101,223
18,097
(18,963)
41,079
5,733
(33,733)
(2,492)
4,545
(2,021)
212,728
9,499
(5,337)
(19,885)
114,097
(83,974)
(13,703)
1,086
(9,902)
(14,980)
(15,932)
–
17,890
–
(15,318)
(420)
–
–
(68)
(170)
8,277
–
(10,912)
–
15,358
(2,213)
–
–
(64)
(330)
3,995
40. Earnings per share
Consolidated
2009
2008
Cents
Cents
Basic earnings per share
Diluted earnings per share
33.8
33.7
(11.4)
n/a
Number of
ordinary shares
2009
2008
Weighted average number of ordinary shares used as the denominator in the calculation
of basic earnings per share
Adjustment for calculation of diluted earnings per share:
Performance rights
Weighted average number of ordinary shares and potential ordinary shares used as the denominator in the
calculation of diluted earnings per share
186,963,687
175,338,844
466,709
975,601
187,430,396
176,314,445
The weighted average number of ordinary shares used as the denominator in the calculation for the current and prior year has been adjusted
for the proportionate change in the number of ordinary shares resulting from the issue of shares at a discount during the year; and for the
discounted shares issued in October and November 2009. The weighted average number of ordinary shares used as the denominator in the
calculation assumes that shares issued in October and November 2009 were on issue from the beginning of the earliest period presented,
being 1 October 2007 (as required by AASB 133 Earnings per Share).
Diluted earnings per share are not presented for the comparative period because the reported loss results in them being anti-dilutive.
Consolidated
2009
2008
$’000
$’000
Reconciliation of earnings used in calculating earnings per share
Basic and diluted earnings per ordinary share:
Net profit / (loss)
Net profit attributable to outside equity interest
Earnings used in calculating basic and diluted earnings per ordinary share
100
63,161
–
63,161
(19,938)
(5)
(19,943)
40. Earnings per share (continued)
Information concerning the classification of securities
Performance rights
Performance rights first granted in 2005 under the GrainCorp Performance Share Rights Plan are considered to be potential ordinary shares
and have been included in the determination of diluted earnings per share. The rights have not been included in the determination of basic
earnings per share. Details relating to the rights are set out in the remuneration report and note 41.
41. Share-based payments
(a) Performance share rights plan (legacy plan)
The performance share rights plan became operative on 1 October 2004, to provide permanent full time employees of the Group (including
executive directors) the opportunity to participate in competitive performance-based remuneration incentives. No grants were made under
the plan in the financial year, and the Company does not intend to make any future grants under this plan.
Under the plan, employees may be granted a number of rights, each right may be converted into one share on the satisfaction of certain
performance conditions. The number of rights available to be granted, other than the initial grant, is determined by the following process:
(a) Base salary multiplied by standard grant LTI value %;
(b) Divided by the Volume Weighted Average Share Price for the period 1 September – 30 September.
The initial grant of rights was made on 1 October 2004 and further grants have been made on 1 October 2005, 1 October 2006 and
1 October 2007. The Company does not intend to make future grants under this plan.
There is no amount payable for the grant of a right and there is no exercise price payable on the exercise of a right. Rights may be exercised
on the exercise date (being the date on which performance conditions are satisfied). Rights expire (lapse) on the fifth anniversary of the date
they are granted. Rights are forfeited if the employee ceases to be employed in the Group.
Rights vest only if certain performance conditions based on growth in the Group’s earnings per share and total shareholder return are fulfilled,
and the employee continues to be employed in the Group.
The measurement period for the purposes of the performance conditions is in blocks of three financial years, commencing on each grant
date. If vesting of the grant of rights is not achieved at the end of the measurement period, re-testing takes place at the end of the 4th and
5th years, and improved performance over the four or five year measurement periods will produce additional vesting.
Set out below are summaries of the number of rights granted under the plan.
Grant date
Expiry date
Balance at
start of year
Granted
during year
353,239
137,541
224,126
260,695
975,601
–
–
–
–
–
Forfeited
during year
Expired
during year
Balance at
end of year
Exercisable at
end of year
(73,836)
(28,750)
(49,319)
(77,584)
(229,489)
(279,403)
–
–
–
(279,403)
–
108,791
174,807
183,111
466,709
–
54,395
–
–
54,395
Consolidated and parent entity 2009
1 Oct 2004
1 Oct 2005
1 Oct 2006
1 Oct 2007
30 Sept 2009
30 Sept 2010
30 Sept 2011
30 Sept 2012
The first measurement period for the performance rights issued on 1 October 2004 was the three year period to 30 September 2007.
No rights vested as at 30 September 2007 as the performance conditions were not fulfilled for this three year period. Re-testing occurred
at 30 September 2008 and 2009 but no rights vested as the performance conditions remained unfulfilled. The rights expired on
30 September 2009.
The first measurement period for the performance rights issued on 1 October 2005 was the three year period to 30 September 2008. No
rights vested as at 30 September 2008 as the performance conditions were not fulfilled for this three year period. Re-testing occurred as at
30 September 2009, at which time 50% of the rights vested as performance conditions were fulfilled. Re-testing of the remaining 50% will
occur at the end of the 5th year.
The first measurement period for the performance rights issued on 1 October 2006 was the three year period to 30 September 2009. No
rights vested as at 30 September 2009 as the performance conditions were not fulfilled for this three year period. Re-testing will occur at the
end of the 4th and 5th years.
The first measurement period for the performance rights issued on 1 October 2007 is the three year period to 30 September 2010.
101
Notes to the financial statements
30 September 2009
41. Share-based payments (continued)
(b) Employee share acquisition plan
Under the plan, eligible employees (permanent employees with at least 12 months’ service and satisfactory performance), may be offered
fully-paid ordinary shares in GrainCorp Limited annually for no cash consideration. The market value of shares issued under the scheme,
measured at the weighted average market price on the day of issue of the shares, is recognised in the balance sheet as contributed equity
and as part of employee benefit costs in the period the shares are granted.
Shares vest once granted but employees cannot dispose of the shares until their employment ceases or three years after the grant whichever
is earlier. In all other respects the shares rank equally with other fully-paid ordinary shares on issue.
Number of shares
Shares issued under the plan to participating employees on 22 June 2009
(2008: 21 May 2008)
Consolidated
2009
2008
4,725
4,644
Parent entity
2009
2008
4,725
4,644
Each participant was issued with shares based on the market price of $7.40 (2008: $11.61).
(c) Employee exempt share plan, deferred employee share plan and non-executive directors’ deferred share plan
These salary sacrifice plans enable eligible employees and directors of the Company to acquire shares in the Company as part of their
remuneration. Shares are purchased on market and held in the plans by the plan trustee for the benefit of participating employees subject
to holding locks under the plan rules.
Under the employee exempt share plan, the plan trustee purchases as close as possible to (but no more than) $1,000 worth of shares
(as calculated under the tax rules) in December each year. The employee’s future cash salary or wages are reduced by $1,000 spread evenly
over a one year period.
Under the employee and non-executive directors deferred share plans, employees and non-executive directors may elect to salary sacrifice a
minimum of $1,000 and up to a maximum of 50% of their pre-tax base wage or salary to acquire shares in the Company in the course of a
year. The plan trustee purchases shares each month, at the prevailing market price over a period of up to five days, commencing on the 23rd
day of each month (or on the next business day).
(d) Retention share plan
The retention share plan was introduced in the financial year for eligible employees (including executive directors).
Under the plan, eligible employees invited to participate will be awarded restricted shares to the value of their prior year’s STI amount
received. The shares are purchased on market and held by the plan trustee subject to a three year sale restriction; vesting to the employee
on the conclusion of three years service.
The restricted shares are subject to forfeiture in the event that a participant ceases employment within the Group before the end of the
restriction period as a result of resignation or termination with cause.
The first grant of restricted shares under the retention share plan will occur on 19 December 2009.
(e) Expenses arising from share-based payment transactions
Total expenses arising from share-based payment transactions recognised during the period as part of employee benefit expenses in the
income statement were as follows:
Consolidated
2009
2008
$’000
$’000
Rights issued under performance share rights plan
Shares issued under employee share acquisition plan
102
1,601
35
1,636
489
54
543
Parent entity
2009
2008
$’000
$’000
–
–
–
–
–
–
42. Events occurring after the balance sheet date
Acquisition of United Malt Holdings Group
On 13 November 2009, the Group acquired 100% of United Malt Holdings Group [Canada Malting Company (Canada), Great Western
Malting (USA), Bairds Malt (UK), and Barrett Burston Malting (Australia)] for the purchase price of $757 million.
Net assets acquired and resulting goodwill are subject to finalisation of completion accounts and acquisition accounting. This acquisition
increases and diversifies the future earnings of the Group and transforms GrainCorp into an international agribusiness.
Share capital
For the purposes of partially funding the acquisition of United Malt Holdings Group the Company has issued the following shares:
• 6 October 2009 – institutional entitlement issue of 38,662,315 ordinary shares at $5.65 per share;
• 7 October 2009 – institutional placement of 16,019,095 ordinary shares at $7.05 per share;
• 30 October 2009 – retail entitlement issue of 27,173,443 ordinary shares at $5.65 per share;
• 5 November 2009 – retail book build of 20,374,052 ordinary shares at $6.50 per share. Of this the premium of $0.85 per share will be
paid to retail shareholders who did not take up their entitlement or who were ineligible, for each ordinary share not taken up.
Total funds raised before expenses are $600,020,046.
Borrowings
On 13 November 2009, the Company has drawn US$200 million ($215 million) under a revolving acquisition debt facility. The purpose of
this is to partially fund the acquisition of United Malt Holdings Group and to fund working capital requirements of the acquired group. The
facility has a maturity date of November 2010.
Other than reported above, no other matter or circumstance has arisen since 30 September 2009 which has significantly affected or may
significantly affect:
(a) the Group’s operations in future financial years; or
(b) the results of those operations in future financial years; or
(c) the Group’s state of affairs in future financial years.
103
Directors’ declaration
30 September 2009
In the directors’ opinion:
(a)the financial statements and notes set out on pages 46 to 103 are in accordance with the Corporations Act 2001, including:
i. complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and
ii.giving a true and fair view of the Company’s and consolidated entity’s financial position as at 30 September 2009 and of their
performance for the financial year ended on that date; and
(b)there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and
(c)at the date of this declaration, there are reasonable grounds to believe that the members of the Extended Closed Group identified in note
37 will be able to meet any obligation or liabilities to which they are, or may become, subject to by virtue of a deed of cross guarantee
described in note 37.
The directors have been given the declarations by the chief executive officer and chief financial officer required by section 295A of the
Corporations Act 2001.
This declaration is made in accordance with a resolution of the directors.
D C Taylor
Chairman
Sydney
25 November 2009
104
Independent auditor’s report
30 September 2009
PWC Letterhead to go here
Independent auditor’s report to the members of GrainCorp Limited
Report on the financial report
We have audited the accompanying financial report of GrainCorp Limited (the company), which comprises the balance sheet as at
30 September 2009, and the income statement, statement of changes in equity and cash flow statement for the year ended on that date,
a summary of significant accounting policies, other explanatory notes and the directors’ declaration for both GrainCorp Limited and the
GrainCorp Group (the consolidated entity). The consolidated entity comprises the company and the entities it controlled at the year’s end or
from time to time during the financial year.
Directors’ responsibility for the financial report
The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with Australian
Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes
establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free from
material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting
estimates that are reasonable in the circumstances. In note 1(a), the directors also state, in accordance with Accounting Standard AASB
101 Presentation of Financial Statements, that compliance with the Australian equivalents to International Financial Reporting Standards
ensures that the financial report, comprising the financial statements and notes, complies with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian
Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and
plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures
selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report,
whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation
and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall
presentation of the financial report.
Our procedures include reading the other information in the Annual Report to determine whether it contains any material inconsistencies with
the financial report.
Our audit did not involve an analysis of the prudence of business decisions made by directors or management.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
105
Independent auditor’s report
30 September 2009
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
Auditor’s opinion
In our opinion:
(a)the financial report of GrainCorp Limited is in accordance with the Corporations Act 2001, including:
(i)giving a true and fair view of the company’s and consolidated entity’s financial position as at 30 September 2009 and of their
performance for the year ended on that date; and
(ii)complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations
2001; and
(b)the consolidated financial statements and notes also comply with International Financial Reporting Standards as disclosed in Note 1(a).
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 32 to 44 of the directors’ report for the year ended 30 September 2009. The
directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A
of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
Auditor’s opinion
In our opinion, the Remuneration Report of GrainCorp Limited for the year ended 30 September 2009, complies with section 300A of the
Corporations Act 2001.
PricewaterhouseCoopers
M K Graham
Partner Sydney
25 November 2009
106
Shareholder information
Holdings distribution
07 December 2009
Range
100,001 and Over
50,001 to 100,000
10,001 to 50,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
Unmarketable Parcels
Securities
%
No of Holders
%
146,337,304
4,196,421
15,559,488
11,733,326
17,327,776
3,164,585
198,318,900
35,290
73.79
2.12
7.85
5.92
8.74
1.60
100.00
0.02
76
59
857
1,648
7,128
7,736
17,504
937
0.43
0.34
4.90
9.41
40.72
44.20
100.00
5.35
shares held
Issued Capital
19,507,801
18,344,072
16,765,667
15,198,668
10,775,651
9,265,519
8,389,251
7,916,327
4,154,472
4,039,022
4,000,000
2,537,586
2,295,210
2,270,847
1,957,199
1,235,437
1,185,311
1,021,885
905,672
819,400
132,584,997
65,733,903
198,318,900
9.84%
9.25%
8.45%
7.66%
5.43%
4.67%
4.23%
3.99%
2.09%
2.04%
2.02%
1.28%
1.16%
1.15%
0.99%
0.62%
0.60%
0.52%
0.46%
0.41%
66.85%
33.15%
100.00%
Twenty largest shareholders – fully paid employee shares
07 December 2009
Rank
Name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
J P Morgan Nominees Australia Limited
National Nominees Limited
Grain Growers Association Limited
HSBC Custody Nominees (Australia) Limited
ANZ Nominees Limited
RBC Dexia Investor Services Australia Nominees Pty Limited
Citicorp Nominees Pty Limited
Cogent Nominees Pty Limited
AMP Life Limited
UBS Nominees Pty Ltd
Credit Suisse Securities (Europe) Ltd
Pan Australian Nominees Pty Limited
Queensland Investment Corporation
Australian Reward Investment Alliance
Citicorp Nominees Pty Limited
Bainpro Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited – A/C 2
UBS Wealth Management Australia Nominees Pty Ltd
Citicorp Nominees Pty Limited
Sandhurst Trustees Ltd
Total
Balance of Register
Grand Total
107
Shareholder information
Substantial shareholders
The following shareholders and their related parties had substantial shareholdings in GrainCorp Limited as at 07 December 2009.
Rank
Name
1
2
3
4
5
J P Morgan Nominees Australia Limited
National Nominees Limited
Grain Growers Association Limited
HSBC Custody Nominees (Australia) Limited
ANZ Nominees Limited
shares held
Issued capital
19,507,801
18,344,072
16,765,667
15,198,668
10,775,651
9.84%
9.25%
8.45%
7.66%
5.43%
Voting rights
On a show of hands, every member present in person or by proxy shall have one vote, and upon each poll, each share shall have one vote.
108
Corporate directory
Board of Directors
Don Taylor
(Chairman)
Mark Irwin
(Managing Director)
Dan Mangelsdorf
(Non-Executive Director)
David Trebeck
(Non-Executive Director)
Peter Housden
(Non-Executive Director)
Simon Tregoning
(Non-Executive Director)
General Counsel and Company Secretary
Betty Ivanoff
Registered Office
Level 26
175 Liverpool Street
Sydney NSW 2000
Tel: + 612 9325 9100
Fax: + 612 9325 9180
Company website
www.graincorp.com.au
Share Registry
Link Market Services Limited
Locked Bag A14
Sydney South NSW 1235
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Tel: +61 2 8280 7111