STRENGTHENING OUR PRESENCE GrainCorp Limited 2004 Annual Report GrainCorp is focused on strengthening our presence – along every part of the supply chain and to every corner of Australia and beyond. Front Cover: Ship anchored offshore near Newcastle Port Terminal. This page: Moree receival site 6am. GrainCorp Limited 2004 Annual Report 01 Contents Report to shareholders 2004 Concise Report 02 Chairman’s Report 43 Directors’ Report 04 Managing Director’s Report Consolidated Statement of 49 Financial Performance Business Units 06 GrainCorp Supply Chain Discussion and Analysis of Consolidated Statement of 50 Financial Performance 08 AG Plus 10 Marketing Consolidated Statement of 12 Storage & Handling 51 Financial Position 14 Transport Discussion and Analysis of Consolidated Statement of 16 Allied Mills 52 Financial Position Consolidated Statement of Corporate Review 53 Cash Flows 18 Community Discussion and Analysis of Consolidated Statement of 19 OH&S and Environment 54 Cash Flows 20 Corporate Services Notes to the Consolidated 21 GrainCorp Network 55 Financial Statements 24 Executive 26 Board of Directors 77 Directors’ Declaration 28 Review of Operations 78 Independent Audit Report 32 Corporate Governance 79 Shareholder Information 42 5 Year Financial History 81 Corporate Directory Report to shareholders CHAIRMAN’S REPORT 02 I am pleased to report that GrainCorp has returned to profitability with a full year profit result of $25.7 million for the year ended 30 September 2004. Our ordinary dividend payment for the year was 41 cents per share which represents a gross dividend yield of 4.7 percent. Revenue for the year was $964.1 million which also compares favourably with the figure of $512.9 million for the previous year. Whilst the recovery from the drought has been subdued, we 2002; and then Grainco Australia in 2003; and the growth of are confident that our business has emerged stronger for the our business units are examples of this. experience. The recovery has also been evident in our share We have indeed been strengthening our presence along the price which at the time of writing is trading around $13.20. supply chain – however, the task is not yet complete. Our Reset Preference Shares (RPS) have also performed solidly and we have enjoyed increasing interest from investors At the beginning of the reporting year, GrainCorp adopted a as the benefits of our strategy begin to bear fruit. business plan endorsed by the Board which provides the company’s business units with greater autonomy; clearer To reward shareholders for their continuing commitment we measurement and reporting structures; and, in some cases paid a special dividend of 10 cents per share and also revised significantly increased growth targets. our dividend policy from 65 percent of profit after tax to a minimum of 70 percent. The plan is both a product and a driver of the company’s ongoing diversification. On the one hand it provides evidence The Industry of the Board’s determination to invest and grow each of these business units, and on the other, a means whereby that growth The pace of change in the grains industry has not abated may be achieved. It allows for distinct approaches for each over the past 12 months with continuing expansion by all the business unit – from the dynamic and strategically important major participants. Along with ongoing diversification and grain marketing, farm inputs and transport businesses, where consolidation, we are also witnessing an increasing level of GrainCorp is seeking accelerated growth; to the mature areas maturity within the industry. of storage and handling and primary processing, where An excellent example of this is the recent creation of the joint GrainCorp is active in maintaining its leading position. venture company Export Grain Logistics as a partnership between GrainCorp and AWB Limited. It shows that two Corporate governance companies with a track record of robust competition can work Shareholders are increasingly aware of their rights and are together to achieve common goals for the industry. It also driving reform in the field of corporate governance. The demonstrates that collaboration is able to coexist with standard has never been higher in relation to increased vigorous competition. transparency and disclosure – and rightly so. GrainCorp More generally, it is pleasing that the agri-food sector as a recognises and embraces its obligations in this area. whole has become the subject of renewed interest from the Over the past 12 months the Board and management of the investment community, with recent events combining to create company have sought to develop and implement policies a group of strong listed companies for investors to add to their which are consistent with current standards of disclosure. portfolio. These policies are now available on the company website and the relevant policies have been clearly communicated to the Strategic direction company’s employees. During the year a management Since our listing in 1998, our strategy has focused firmly committee was established to oversee disclosure issues. on business growth, both geographically and along the supply We have also endeavoured to provide more information in chain. We believe our efforts have been successful – the our annual report as a reflection of our commitment to an merger with Vicgrain in 2000; the acquisition of Allied Mills in informed market. GrainCorp Limited 2004 Annual Report 03 The Board places great importance on ensuring that GrainCorp acts in a manner which is consistent with both the spirit and the letter of disclosure guidelines. We also recognise that we can always do better, and for this reason, we intend to continue improving our governance procedures. The past year has brought with it some changes to the membership of our Board. At our AGM in February 2004, our ordinary shareholders elected Don Taylor to the one available vacancy resulting in the departure of Julian Menegazzo. That same month we were joined by Ron Hards who replaced Donald McGauchie as a Director of Grain Growers Association Limited (“GGA”). I would like to once again thank Julian and Donald for their valuable contribution to the company. Community This year GrainCorp was able to once again allocate one percent of the company’s after-tax profits to the GrainCorp Foundation. The total amount awarded to community projects since its creation is around $1.5 million. The work of the Foundation is valuable to us for a number of reasons. Importantly, our employees live in the communities where they work. This means that they serve as ambassadors for the company in a way which is not as common in urban environments. The GrainCorp Foundation provides them with an important link to their communities, and we believe this also provides them with a significant advantage in doing business with them. As Chairman of GrainCorp it has been a pleasure to be able to work with such a group of talented people who share my passion for agri-business. I would like to thank the Managing Director, his team of senior managers and their staff, and my fellow Directors for contributing their skills and energy over the past year. Their dedication, competence and wisdom during a time of enormous organisational change have been impressive. I am now looking forward to 2005, undoubtedly it will be another exciting year. Ron Greentree Chairman Report to shareholders MANAGING DIRECTOR’S REPORT 04 An unrivalled network of physical assets; a presence in every part of the grain supply chain; an understanding of grain growers and the industry; strong relationships with export customers; and a skilled and committed workforce have all contributed to our strong recovery from the drought in 2003/04. This year we have returned to profitability, and the foundation has been laid for improving returns over time. The operating environment within the agri-food sector Company growth continues to evolve at a rapid pace. Like ourselves, our In October 2003 we completed the acquisition of the former competitors have been busy, with ongoing change apparently Grainco group of companies; following resounding approval the only constant in the industry. GrainCorp has historically from both their shareholders and ours. We proceeded to been at the forefront of this change, and the past year has successfully integrate the Queensland operations into what is been host to a number of exciting developments for the now the Northern Division of our Storage & Handling business company, as well as a range of new challenges. unit. The ensuing harvest which unfolded seamlessly is testament to this and targeted synergies of $12 million were Safety achieved in the first year. One development of which we are extremely proud is the Importantly, the acquisition enabled us to significantly improvement in our safety performance over the past 12 augment our Marketing business unit. We have gained some months. The grains industry can provide a hazardous work valuable new commercial relationships with a range of export environment, particularly during harvest – and we recognise customers. This is an opportunity which we have embraced that ensuring the safety of our employees has presented us and developed over the past year. with many challenges. The reality is that in the past our safety performance has not been acceptable. In November Allied Mills announced the signing of a long-term National Supply Agreement with Goodman Fielder Baking to However, there is nothing more important to GrainCorp 2012. The agreement secures a major customer for its mills than safety, and we have dedicated significant resources and cements the already strong relationship between Allied to improving our performance in this area. Safety is now a Mills and Burns Philp. central component of the company’s incentive scheme and features in every corporate communication with our We have also continued our three year restructuring program employees. We have made it our number one priority.