nnual 2013 NUPLE X
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R EPORT
C Reating TRHE CHEMIST Y behind ERAVE YD Y PRODUCTS ER VE YWHEre
2013 annual report c ontents
oreve vi w operating & financial review s afety, health & environment
chairman’s report
operating & financial review ri sk report
chief executive officer’s report board of directors
operating & financial review finan cial review executive team
operating & financial review bu sg sines se ment corporate governance performance report
operating & financial review financial report s trategies at work corporate directory ibc
operating & financial review ree vi w of strategy Three years ago we drew up a strategic roadmap to achieve our ambition: to be a leading independent and trusted resin manufacturer globally. s trategies We are focused on strengthening and growing Nuplex every single day, in every area of our business. at work Our people are continuously searching for innovative ways of improving operational excellence and building leading positions in selected markets and product lines.
Nuplex is a leading global manufacturer of resins used in paints, coatings and structural materials. The Company has an integrated sales, manufacturing and R&D network located across Australia, New Zealand, Asia, Europe and North America. Our operations supply resins used in a wide variety of paint and coating applications, including decorative and trim paint, automotive coatings, vehicle refinish, wood flooring and furniture coatings, metal furniture coatings, consumer electronics and whitegoods coatings, marine and protective coatings, and coatings for infrastructure and transport. Our products are sold in 80 countries around the world. Nuplex has approximately 1,900 employees in 11 countries spread over four continents.
2013 annual report 1 Ovre e vi w
• Full year revenue up 3.0% to $1,664.9 million, • NuLEAP I delivered net benefits of $33 million reflecting Nuplex’s acquisition of Viverso exceeding its three year program target of $30 million • Reported EBITDA1 down 3.5% to $126.4 million • NuLEAP II delivered net benefits of $2.3 million, • Underlying EBITDA (before restructure costs) and is on track to deliver $12 million in the 2014 $132.7 million, in line with the prior year Financial Year • Reported net profit attributable to shareholders, • Nuplex is responding to the changed environment after significant items $42.9 million, down 31.4% in Australia and New Zealand: • Underlying net profit attributable to shareholders, - c losing four inefficient operations and increasing before significant items $56.8 million, down 14.2% the efficiency of the remaining four sites • Gearing was 26.0%, down from 28.1% as at - restructure will deliver $6.5 million of annualised 30 June, 2012 cost savings in the 2016 Financial Year • Working capital to sales was 14.7% • N uplex is well placed to capture the benefit of • Full year dividend 21 cents per share, in line increased earnings and higher margins as market with the prior year dividend conditions improve, following the successful • External market factors in Australia and Europe implementation of NuLEAP’s continuous impacted earnings improvement disciplines • Safety performance metrics at record low levels • Nuplex’s capacity expansion projects in Asia are on track to increase regional capacity by 75% by the • Viverso acquisition delivered EBITDA of end of 2014, providing an exciting growth platform €12.5 million, ahead of forecast 1Earnings before interest, tax, depreciation and amortisation.
R evenue (n i $m) EBITDA (n i $m) 13 1,665 13 126 12 1,616 12 131 11 1,575 11 131 10 1,460 10 139 09 1,494 09 92
operating profit (n i $m) npat (n i $m) 13 57 13 43 12 66 12 63 11 68 11 67 10 71 10 64 09 24 09 17
regional sales (%) regional ebitda (%)
AUSTRALIA AUSTRALIA 31% 24% ASIA ASIA 24% 17% NZ 2%
NZ 9% a meRICAS 15%
a meRICAS 9% E MEA* E MEA* 34% 35%
*Europe, Middle East & Africa
2 NUPLE X InduSTRIES LIMITED C hairman’s report
i am confident that “the actions taken in recent years are gaining momentum and positioning nuplex to deliver growing returns in the years ahead. rob aitken Ch n aIRma ”
Three years ago, Nuplex embarked on a new Despite our significant progress over the last strategy to create value for shareholders by four years, our earnings have remained relatively improving and growing returns through flat. This has been largely the result of tough implementing initiatives that would strengthen trading conditions around the globe that has the business and build market-leading positions. reduced volumes, and the strengthening of Three years on and I am pleased to report the New Zealand dollar against most currencies that the initiatives implemented are working. that has impacted earnings by approximately This was evident in the 2013 Financial Year, $35 million. In addition, we have also faced as a number of the actions taken to strengthen significant upfront investment in several of our and grow Nuplex contributed to earnings. growth projects, such as the capacity expansion projects in Asia and the restructure in ANZ.
2013 annual report 3 CHair man’S Report
FINAN E CIal R SULTS T HE Board Reported earnings before interest, tax, depreciation Over the past three years, in addition to strengthening and amortisation (EBITDA) were $126.4 million, down and growing Nuplex’s operations and financial position, from $131.0 million in the prior year. Had exchange the Board has focused on implementing best practice rates remained unchanged over the 12 months, governance structures and reducing risk within EBITDA would have been $130.7 million and largely the Company. This has been achieved through the in line with the prior year result of $131.0 million. establishment of a Safety Health & Environment Our financial performance was impacted by the weaker Committee, an expanded mandate for the Human market conditions in Australia and Europe, which Resources Committee and the implementation of resulted in lower volumes. Also, whilst the restructure a Risk Management Program throughout Nuplex. of the ANZ operations will improve the profitability of At the beginning of 2013, the Board undertook its this region in future years, this year it incurred costs and regular review to ensure that as your representatives asset write-downs which impacted earnings. Positively, it has the right mix of skills and capabilities to steer the impact of lower volumes was largely mitigated by the business and oversee the implementation of the the contribution from recent acquisitions and operational Company’s strategy. The review, conducted by an improvement programs. external Board governance specialist concluded that Statutory net profit after tax (NPAT) and significant the Board has the right mix of industry, governance, items attributable to shareholders was $42.9 million, finance and accounting, leadership and international down 31.4% on the prior year. This result included business expertise and experience. I encourage you $13.8 million of significant items including the to review the skillset and experience of your Directors $5.6 million write-down associated with the restructure set out on pages 28 and 29 of this report or on of the ANZ operations and a $5.5 million write-down of www.nuplex.com. Nuplex’s equity investment in Fibrelogic, the Australian The composition of the Board remained unchanged based wide diameter pipe manufacturer. in 2012/2013. Before significant items, net profit after tax of After five years as Chairman of your Company, I have $56.8 million was 14.2% lower than in the prior year. advised my fellow Directors of my intention to retire as Chairman at the conclusion of the Annual Meeting DI VIdend on 6 November 2013. The Directors propose to elect Mr Peter Springford as the new Chairman. In accordance The Board has declared a final dividend of 11 cents per with Regulation 10.6 of the Company’s Constitution, share, taking the total dividend for the 2013 Financial I will also retire from the Board by rotation at the Annual Year to 21 cents per share. Being able to maintain the Meeting but, at the request of the other Directors, to dividend at 21 cents per share for the third year in a row assist with management of succession, I will offer myself is a pleasing result given the volatile and challenging for re-election. Jerry Maycock will also retire from the market conditions experienced over the past three Board by rotation and will offer himself for re-election. years and the significant investment program that is underway. Nuplex’s Dividend Policy is to pay out between 55 AS Tronger NupleX and 65% of net profits attributable to shareholders. The strategic initiatives undertaken in the past three Directors determine the amount paid out each year years are working and have strengthened your Company. within the context of assessing the Company’s current We have sharpened our focus on safety, improved and expected performance and cash flow, as well as the effectiveness of the existing operations, focused the Company’s ability to reinvest profits to generate on growth projects in emerging markets and developed future value for shareholders. In the 2013 Financial new products through a targeted R&D program. Year, the payout ratio was 97% and reflected Nuplex’s Nuplex has been strengthened by the value creating particularly strong cash flow over the period. acquisition of Viverso, a German based resins and putties manufacturer. In its first 18 months of Nuplex S AfetY ownership, the business has exceeded its EBITDA Our actions to improve our safety performance are target for the 2013 Financial Year of €12 million and delivering improved results, and it was particularly was earnings per share accretive. pleasing to see our safety measures at record low This acquisition cemented Nuplex as a leading resins levels. With our focus firmly set on achieving ‘Zero producer in Europe and provides direct access to the Harm’ we will continue to further embed best practice German markets as well as the emerging markets of safety management systems and programs across Central & Eastern Europe. The site in Bitterfeld, Germany our global operations. For more detail, please see the has been integrated into our European operations and Safety Health & Environment section of this report. its products have been introduced to our global portfolio – where they have been well received by our customers in Asia and the Americas.
4 NUPLE X InduSTRIES LIMITED Nuplex’s Balance Sheet has been strengthened over The combination of our global operations and our the past three years. The Board has a discipline of a growing presence in these emerging markets target gearing range of between 20 to 35%. Currently represents a unique opportunity for the Company, gearing sits at 26%. Through reducing the cost of debt one not shared by many other companies listed on and diversifying funding sources, interest rates have the New Zealand and Australian stock exchanges. been reduced since 2010 and the average tenor of Nuplex has the benefit of a diverse international team Nuplex’s debt has been extended from three to that is the foundation of our competitive advantage. five years. On behalf of my fellow Board members I would like to thank all our employees for their significant efforts PO O SItioned T DELIVER IMPROVED over the past 12 months. Against challenging market AND GROWING RETURNS conditions, their ongoing focus and discipline underpinned the Company’s ability to control the controllable and The initiatives to grow Nuplex through building market- take action where needed. It is their commitment and leading positions are well advanced. We are undertaking expertise that is at the centre of our ability to strengthen a record level of investment that over the next 12 to 18 Nuplex’s operations and implement growth initiatives months will deliver improved and growing returns to that will deliver value to shareholders. shareholders through: The Board and I are confident that the actions taken in • the completion of the ANZ restructure; recent years are gaining momentum and positioning • new product launches; Nuplex to deliver improving and growing returns in • the commissioning of the capacity expansion the years ahead. Thank you for your ongoing support. projects in China, Indonesia and Thailand; • entering the Russian coating resins market; and • a new global ERP system. Future growth in earnings of the Company (and consequent value uplift and returns to shareholders) is very dependent on delivering the benefits from these investments. The Board considers it is appropriate to rob aitken directly link incentives for senior executives to achieving Ch n aIRma the benefits targeted by our investment program as well as generating returns that exceed the cost of capital available to the Company. It has therefore determined that a performance hurdle for the Long Term Incentive Plan will be based on Return on Funds Employed (ROFE) in place of the former EPS Growth performance hurdle. The relative Total Shareholder Return (TSR) hurdle measure will remain.
A E UniQU OpportunitY Nuplex is a global company. From our 21 manufacturing operations located throughout Australia and New Zealand, Asia, Europe and North America and we supply customers in over 80 countries across the world. Whilst Australia and New Zealand remain important markets, the opportunities for growth continue to be in the emerging markets within Asia and Central & Eastern Europe – hence we continue to focus our activities in these regions.
2013 annual report 5 CHief executive officer’S REPORT
dic s iplined execution “of our strategies has resulted in a leaner cost base, broader product portfolio and a more diverse geographic footprint. ER ME Y SEVErin CEO ”
Over the past three years we have made significant progress towards the successful execution of our strategy to grow and improve returns to shareholders as we pursue our ambition to be a leading, trusted independent resins producer globally and a leading agency and distribution business in ANZ. Finding ways to deliver and create value to all our stakeholders is fundamental to how we are delivering on our strategy and moving towards achieving our ambition. Throughout the 2013 Financial Year, despite the challenging market conditions, we stayed on course and took actions that delivered value in the current year and will create value in the future.
6 NupleX InduSTRIES LIMITED In the 2013 Financial Year, our earnings and profits were our strategies are working lower than in the prior year and clearly not where we In the 2013 Financial Year, we undertook a strategy to wanted them to be. This was a result of the deteriorating improve and grow returns to shareholders by unlocking market conditions in our largest markets, Australia & the value in the existing business while at the same New Zealand (ANZ) and Europe, Middle East & Africa time growing the Company. Our strategy is centred on: (EMEA). However, I can definitely say that we performed well in relation to things we were able to control. 1. Strengthening Nuplex by pursuing operational excellence and in doing so unlock the inherent By taking action to progress our strategic initiatives we potential throughout the Company’s operations. were able to deliver constant currency EBITDA in line with the prior year despite the challenging conditions. 2. Building market-leading positions through innovating This demonstrated that our strategies, focused on and investing so that we grow our returns through improving our operational efficiency and building leading launching new products, consolidating our leading market positions across the globe, are robust even in market positions in established markets and entering difficult market conditions. new emerging markets. In reviewing the performance of our strategy, I am OREVE VI W confident that our initiatives are working – some are already delivering benefits whilst others are positioning Resins Nuplex to deliver improved and growing returns in The global Resins segment delivered EBITDA of the near to mid-term future. Here is why. $100.9 million, down 8.5% on the prior year. About half of this decline was due to the stronger New Zealand Our initiatives have delivered benefits to dollar. This year’s result included the extra six-month shareholders contribution from the acquired Viverso business, which • More employees are working more safely as our was offset by weaker markets and the costs associated safety performance has continued to improve. with implementing the ANZ restructure. - Our Lost Time Injury Rate and Total Reportable Overall volumes in the Resins segment were flat Injury Rate have both fallen. year on year. Looking across our four regions: • We are working more effectively and efficiently, • ANZ volumes were down 8.6%, due to the impact which is delivering benefits to shareholders. of the continued weakness in construction and - Our step change program, NuLEAP I, delivered manufacturing markets in Australia offsetting $33 million in net benefits over its three-year life, steady volumes in New Zealand. exceeding the program target of $30 million. • Asia volumes were up 12.9%, reflecting continued These benefits were delivered via a range of sales, economic growth across the region and were also margin, procurement and cost reduction initiatives. boosted by sales of Viverso products. - NuLEAP II, our global procurement initiative, delivered • EMEA volumes were up 17.6%, due to the $2.3 million in net benefits in the 2013 Financial Year contribution of Viverso. Removing the Viverso and is on track to deliver $12 million next year. contribution, volumes were down 1.8% as a • The acquired Viverso business delivered €12.5 million result of the long European winter and softer of EBITDA in the 2013 Financial Year, ahead of economic conditions. management’s forecast of €12 million. • Americas volumes were up 7.2%, driven by sales Our initiatives will deliver more benefits and are of the Viverso products and the ongoing recovery positioning Nuplex for near to mid-term growth in the US. • The ANZ restructure, once complete, will enable Specialties the region to deliver cost of capital returns in the EBITDA in the Specialties segment was up 23.2%. 2016 Financial Year. As the restructure is completed This year’s result included the additional three months in the coming two years, it will realise cost savings of earnings from the acquired Acquos masterbatch and improve customer service. operations which were transitioned to a lower cost • NuLEAP I and II will continue to deliver future base. Pleasingly, additional earnings growth came benefits in coming years. from tight margin management and cost control • Through our ‘One Global Team’ approach initiatives in the Agency & Distribution business. to leverage existing technologies and products will be deployed more globally.
2013 annual report 7 CHief executive officer’S REPORT
• Our targeted R&D approach is delivering a pipeline of innovative products that will also drive sales growth. • In Asia, we are expanding our capacity by 75%. Initially we planned to increase capacity in Vietnam and China. However, following the strong performance of the businesses in Indonesia and Thailand, additional growth projects have been undertaken in these countries. These projects will increase our production capacity to meet growing demand for our existing products and, importantly, introduce new technology capabilities enabling Nuplex to access new product segments and markets.
OUTLOOK We have entered the 2014 Financial Year in robust shape. It will be a busy and exciting 12 months as we embark on completing the final stages of our capacity expansion projects that will deliver returns to shareholders in the coming years. The tougher trading conditions of the past few years have become the new ‘normal’. However, encouragingly in both Australia and Europe over the past few months there have been some positive indications that conditions are more stable. Therefore we expect flat trading conditions for both regions in the year ahead. Elsewhere, we are expecting modest growth in New Zealand and the Americas and steady growth in Asia. Whilst every year is important, it is often worthwhile to assess the year in the context of a longer term time frame to put the progress and direction of the Company into context. Over the past three years, disciplined execution of our strategies to strengthen Nuplex has resulted in a leaner cost base, broader product portfolio and a more diverse geographic footprint. With the strategies to strengthen Nuplex now well embedded, over the next two years we will focus even more on those initiatives to grow returns. In this regard I am confident that the energy and focus being directed into commissioning our expanded capacity in Asia, restructuring ANZ, entering Russia and pursuing innovative R&D will position Nuplex for further success into the future.
ER ME Y SEVErin ChIEF EXECUTIVE OFFICER
8 NUPLE X InduSTRIES LIMITED operating & financial review finan cial review
N Z$ millions FY2013 FY2012 Change change actual fx constant fx 7 Sales Revenue 1,664.9 1,615.9 3.0% 6.4% EBITDA – Reported 126.4 131.0 (3.5)% (0.3)% – Underlying1,4,5 132.7 133.0 (0.2)% 3.1% NPAT attributable to shareholders – reported 42.9 62.5 (31.4)% (29.1)% – underlying2,4,5 56.8 66.2 (14.2)% (11.8)% Earnings per share (cents) – reported 21.7 31.8 (31.8)% (29.9)% – underlying4,5 28.7 33.7 (14.8)% (12.8)% Dividend per share (cents) 21.0 21.0 Operating cash flow 111.8 48.4 Working capital to sales ratio 14.7% 16.5% Return on funds employed (ROFE)3 11.1% 13.0%
finan cial overview Group sales revenue was up 3.0% to $1,664.9 million • Resins segment volumes (excluding Viverso) were flat (up 6.4% in constant currency), reflecting a full year of (down 0.4%) as growth in Asia offset lower volumes contribution from the Viverso acquisition. Sales revenue throughout the year in Australia and from Europe in excluding the contribution from the Viverso acquisition the second half, flat volumes in New Zealand and and the impact of foreign exchange was down 1.9% to the Americas. $1,469 million when compared with the prior financial • $17.5 million in net benefits as NuLEAP I realised period. This was mainly due to the weakness in Australian $15.2 million and NuLEAP II realised $2.3 million. markets throughout the year and softer conditions in The effective income tax rate applicable to operating Europe in the second half. profit for the period was 25.4%, up from 22.6% in Nuplex’s earnings before interest, tax, depreciation and the prior year as earnings increased in the higher tax amortisation (EBITDA4,5) of $126.4 million was down jurisdictions in Germany and the US and Asian tax 3.5% when compared with the prior full year EBITDA incentives tailed off. The prior year tax rate was lowered result of $131.0 million. Had the New Zealand dollar by the recognition of tax losses in the UK. In future remained unchanged over the period, EBITDA would years, the tax rate on operating profits is expected have been $130.7 million, down 0.3%. to be around 29%. Nuplex reported net profit after tax attributable to ke y elements of EBITDA shareholders (NPAT) after significant items for the • A 12 month EBITDA contribution from Viverso of 12 months ended 30 June 2013 of $42.9 million, down $19.7 million (€12.5 million), compared with a six 31.4% from $62.5 million in the prior financial year. month contribution in the prior financial year of Significant items6 after tax were $13.8 million, up from $10.4 million (€6.9 million). $3.6 million in the prior financial year. $11.1 million of • A 12 month EBITDA contribution from Nuplex the significant items related to: Masterbatch of $5.2 million (A$4.1 million), • $5.6 million after tax ($8.1 million pre-tax) write-down compared with nine months in the prior financial year. of obsolete equipment as a result of the restructure • Restructuring costs of $6.3 million associated with of the Australian and New Zealand operations. reshaping the Australian and New Zealand operations. • $5.5 million write-down of Nuplex’s investment This compared with $2.0 million of restructuring costs in Fibrelogic. in the prior financial year.
1Before ANZ Restructure costs of $6.3 million (2012: $2 million). 5EBITDA and underlying NPAT and EPS exclude the effects of significant income 2Before significant items of $13.8 million (2012: $3.6 million). and expenses associated with asset impairments, acquisitions, divestments 3Return on Funds employed (earnings before interest, tax and unusual items) and legal cases where the income or expense is the result of an isolated divided by average funds employed. non-recurring event. 6 4 Nuplex Industries Limited’s statutory results are reported under International The complete list of significant items is included in Note 2 to the Financial Reporting Standards (IFRS). Throughout this document, non-IFRS Financial Statements. profit measures, including EBITDA and Underlying NPAT have been included 7Constant currency comparisons are presented on the basis of translating as they are measures used by the Board and management in assessing FY2013 results at the exchange rates in force for the FY2012 financial year. the performance of the business and are presented to provide a greater understanding of underlying performance.
2013 annual report 9 operating & financial review finan cial review
NPAT before significant items of $56.8 million was As at 30 June 2013, due to increased cash, net debt 14.2% lower than the $66.2 million in the prior financial was $198 million, down from $220 million as at the year. Excluding the impact of significant items and the end of the prior financial year. Gearing9 was 26.0%, above mentioned costs relating to the restructure of the down from 28.1% as at 30 June 2012, and remains Australian and New Zealand operations, NPAT would within the Board’s target gearing range of between have been $61.3 million, 9.3% lower than in the prior 20 to 35%. financial year. As a result of reduced NPAT, earnings per share (EPS) Working capital as a percentage was 21.7 cents, down 31.8% from 31.8 cents in the of 12 month rolling sales prior financial year. 20% In line with the decline in profits, Nuplex’s return on funds employed (earnings before interest, tax and 18% TARGET RANGE 15–17% significant items divided by average funds employed) as at 30 June 2013 was 11.1%, down from 13.0% at 16% the end of the prior financial year. During the 2013 Financial Year, over $25 million was 14% spent to increase the efficiency of existing operations 14.7% and progress growth projects in emerging markets. 12% The benefits of these actions are expected to flow from the 2014 Financial Year. 10% Operating costs were tightly controlled. The year on year increase largely reflects a full 12 months of 8% Viverso and Acquos’s masterbatch operations as well as $1 million in expenses incurred in preparation 6% for the construction of the third site in Changshu, China. Above inflation increases infixed costs in the 4% existing business were due to increased wages and JUNE 08 JUNE 09 JUNE 10 JUNE 11 JUNE 12 JUNE 13 entitlements in Europe, and increased R&D wage costs relating to an initiative to support succession planning, Net debt to net debt plus equity ratio particularly at the R&D Centre in The Netherlands. The average funding cost for the year was 6%, 60% down from 7% in the 2012 Financial Year. The average drawn debt over the 2013 Financial Year increased 50% to $289 million from $215 million. Average debt was higher due to the funding of Viverso and Masterbatch 40% acquisitions in December and September during the TARGET RANGE 20–35% 2012 Financial Year. Funding costs benefited from the previously announced redemption of the NZ$52.6 million 30% of Capital Notes on 15 September 2012 using funds from 26.0% existing bank facilities and the US$105 million of debt 20% raised in the US Private Placement market that settled in July 2012. 10% ke y balance sheet movements 0% The working capital to sales ratio8 was 14.7% JUNE 08 JUNE 09 JUNE 10 JUNE 11 JUNE 12 JUNE 13 as at 30 June 2013 and slightly better than the target working capital to sales ratio range of between 15 and 17%. It was down from 16.5% as at 30 June 8 Inventories plus trade and other receivables less trade and other payables 2012 and steady when compared to the 14.8% as divided by sales for the 12 months to balance date. at 31 December 2012. 9 As measured by net debt to net debt plus equity.
10 NUPLE X InduSTRIES LIMITED ch as flow performance the context of the Company’s current and expected performance and cash flow. Operating cash flow was up 131% to $111.8 million from $48.4 million in the prior financial year, reflecting The Dividend Reinvestment Plan will not be active. tightly controlled cash and working capital. Cash used in investing activities of $53 million sg e ment results included net acquisition cash outflows of $5 million Volumes in the global Resins segment were up 8.1% and capital expenditure of $48 million. Acquisition year on year, reflecting a full year contribution from cash flows included the final payment for the Viverso Viverso. Excluding Viverso, volumes from existing acquisition, net of proceeds from sale of the Plaster operations were flat (down 0.4%). This was as a result Systems NZ business. of volume growth in Asia (up 10%), flat volumes in Stay-in-business capital expenditure (SIB) for the year the Americas, lower volumes in EMEA (down 1.8%) was $32 million, equivalent to 125% of depreciation and and lower volumes in ANZ (down 8.8%). consistent with management’s guidance for the 2013 On a constant currency basis, unit margins in the Financial Year. The increase in stay-in-business capital existing operations (excluding Viverso) were up 1.4% expenditure included costs associated with the rollout as NuLEAP sales and procurement initiatives drove of the global ERP system (approximately $8.4 million) improved unit margins in all four of Nuplex’s regions. and the replacement of reactors at Wacol and Botany Resins segment EBITDA was $100.9 million, down in Australia and East St.Louis in the US (approximately 8.5% (down 4.8% in constant currency). This was $5 million). Post the investment in the ANZ restructure, due to the additional six month contribution from management expects average yearly SIB to return to Viverso and improved unit margins in the existing between 70 to 80% of depreciation. operations being offset by the impact of the costs Capital expenditure for growth was $16 million associated with the restructure of Australia and during the 2013 Financial Year and below the previously New Zealand, lower volumes in Australia throughout forecast spend of $20 million. This mainly related to the year and in EMEA in the second half. costs associated with the new site at Changshu in Resins EBITDA from existing operations (excluding China ($8 million). Viverso) and before ANZ restructure costs was Cash used in financing activities of $35 million $86.7 million, down 14% (down 11% in constant included dividend payments of $40 million, net of currency) as a result of the lower volumes in net proceeds from borrowings of $4 million. Dividend Australia and Europe. The second half Resins payments reduced from the prior year $43 million due segment EBITDA benefited from $5.7 million to the operation of the dividend reinvestment plan for of NuLEAP II procurement benefits. the FY2012 final dividend. Specialties segment sales were up 2.2% to $311.8 million (up 4.4% in constant currency) and EBITDA was up di vidend 23.2% (up 25.7% in constant currency). These results The Board has resolved to pay a finaldividend of included a full year contribution from Acquos’s masterbatch 11 cents per share, bringing the full year dividend operations compared with a nine month contribution in to 21 cents per share and maintaining it in line with the prior financial year. the full year dividend paid in the prior financial year. The final dividend will not carry any New Zealand F Y2014 outlook imputation credits and will not be franked for Australian In the 2014 Financial Year, notwithstanding unforeseen shareholders. It will be paid on 11 October 2013 to all events, Nuplex expects EBITDA to be higher than in shareholders on the register as at 27 September 2013. the 2013 Financial Year. The full year dividend of 21 cents per share represents a 97% payout ratio of net profit after significant items attributable to shareholders. Whilst exceeding Nuplex’s target dividend payout ratio range of between 55 and 65% of earnings for the period, the dividend policy allows the Board to determine the dividend in
2013 annual report 11 operating & financial review bu sg sines se ment performance
REN SI S Our largest business segment, Resins consists of our global ‘Coating Resins’ operations (approximately 85% of the segment’s sales) which produce resins and additives used in the formulation of surface coatings such as house paint, car paint and coatings used on white goods and wooden furniture as well as in flooring, textiles, inks and adhesives. It also includes Nuplex’s composites, pulp & paper and construction products businesses which primarily serve the Australian and New Zealand markets.
EUROPE, 2013 AU STralia & MIDDLE EAST results NEW ZEALAND asia & AFRICA (AEME ) A MEriCAS total resins
Sales Down UP up up up 13.2% 9.2% 12.5% 6.1% 3.2% $349.4M $279.3M $567.6M $156.8M $1,353.1M
EBITDA Down UP d own up d own ( Earnings before % % % % % interest, tax, Depreciation and 70 10.7 6.2 28.8 8.5 amortisation) $5.9M $29.4M $45.0M $20.6M $100.9M
O perational Volumes down 8.6%; Volumes up 12.9%, Volumes up 17.6% Volumes up 7.2% due Volumes up 8.1% flat in New Zealand, driven by sales of including Viverso. to ongoing sales growth due to a full year insights down in Australia. Viverso products. of Viverso products. contribution from - Excluding Viverso, Viverso. Australian trading EBITDA margin was volumes down 1.8% EBITDA margin up to conditions impacted steady at 10.5%. due to weak markets 13.1% from 10.9%. - Excluding Viverso, by low levels of China – growth in high and a long winter. volumes were flat construction activity Positive product mix year on year. performance metal EBITDA margin was shift towards higher and weakness in products such as manufacturing. down to 8.4% from 9.5%. margin performance EBITDA was impacted Automotive OEM metal coating products, by ANZ restructure EBITDA included $6.3m & Vehicle Refinish. EBITDA impacted by for example those costs and weakness of restructure costs. lower volumes, product used on earthmoving, in Australia and Europe. Indonesia – benefit mix shift towards powder of economic growth agricultural and EBITDA margin was and $3m in additional construction equipment. On a constant currency down to 1.7% from 4.9%. tempered by capacity costs associated with basis, unit margins constraints. staff entitlement fund, pre in Nuplex’s existing - Excluding restructure Malaysia – regional exports agreed wage adjustment operations were up costs was 3.3%. supported volume growth. given in exchange for 1.4% as NuLEAP Vietnam – construction wage restraint during sales and procurement market stabilised in 2H. GFC and R&D succession initiatives drove planning costs. improved margins Thailand – sales growth in all four regions. tempered by capacity constraints. Second half EBITDA benefited from $5.7m in NULEAP II P roducts’ c oating & other resins coating resins coating resins coating resins procurement benefits. Main markets Global Viverso Business Viverso, smoothly integrated and renamed Decorative Metal Wood Automotive Vehicle Metal Automotive Vehicle Marine & Vehicle Metal Wood OEM Refinish OEM Refinish Protective Refinish Nuplex Germany. - Globally delivered €12.5m EBITDA. - S ales in Asia and Americas offset Adhesives Ink Textiles Decorative Powder Wood Powder Wood Metal Marine & Decorative Protective weakness in EMEA. composites
Marine & Decorative Protective Swimming Marine Infrastructure Pools & Leisure composites paper
Infrastructure Swimming Tissue Packaging Pools construction products
Marine Sheeting & Leisure Flooring
12 NUPLE X InduSTRIES LIMITED SE P CIaltieS The Specialties segment consists of two businesses based in Australia and New Zealand – Nuplex Specialties and Nuplex Masterbatch. Nuplex Specialties’ agency and distribution activities are complementary to the business units within Nuplex’s Resins segment as they leverage a similar customer base and the same high-compliance transport and storage requirements. Nuplex Masterbatch is Australia and New Zealand’s leading manufacturer of colour and performance additives for plastics, known as masterbatch.
2013 results totale sp cialties total GROUP
Sales up up 2.2% 3.0% $311.8M $1,664.9M
EBITDA up d own ( Earnings before % % interest, tax, Depreciation and 23.2 3.5 amortisation) $25.5M $126.4M
Operational Agency and Distribution insights - Sales were flat as growth in Australia was offset by a decline in New Zealand. - Continued sales growth in core segments of Food & Nutrition, Pharmaceutical & Healthcare. - EBITDA driven by tight cost control and margin management. - Consolidation of multiple brands into Nuplex Specialties delivering benefits of improved customer service and identification of cross segment sales opportunities. Masterbatch - Delivered A$4.1m EBITDA; below $5m target due to difficult trading conditions. - Integration complete. - Operating sites reduced from six to four. - Expanded product portfolio. - Transitioned onto lower cost base.
P roducts’ trading & agency Main markets
Food & Surface Plastics, Healthcare & Nutrition Coatings Rubber & Pharmaceuticals Foam masterbatch
Colour Additives
2013 annual report 13 operating & financial review s trategies at work
ourg si hts are firmly set on our ambition to be A w orld leading, tru sted independent ren si s manufacturer AND leading specialty chemicals DISTRIBUTOR IN AUSTralia & new zealand. our strategy: tohe ac i ve superior shareholder returns by delivering high quality products to our customers through pursuing operational excellence, innovation and building market-leading positions.
14 NUPLE X InduSTRIES LIMITED s trengthening growing t hrough operational through building market- excellence leading positions
safety people nuleap emerging r&d strategic markets acquisitions
• Developed global NuLEAP | Progressed Asian Viverso common standards completed growth projects • Delivered €12.5m relating to processes • Delivered $33m • C hina: New site at EBITDA, ahead of and policies in net benefits Changshu (US$35m) €12m forecast • Introduced Health & over three years, has received permits • Integrated operations Wellbeing program exceeding target and ground has been into Nuplex EMEA in ANZ NuLEAP II broken and renamed delivered • C ommitted and Nuplex Germany • On track to began capacity • Leveraged products deliver $12m expansion projects in into Asia and Americas Indonesia (US$5.1m) in FY2014 of Masterbatch annualised and at Nuplex’s JV in • Delivered A$4.1m procurement Thailand (US$1.5m) EBITDA, below A$5m • Held global Senior benefits Management Conference target • Commenced in September 2012 • Transitioned onto restructure of lower cost base • Completed Global Employee Australia and Survey New Zealand • Integrated product portfolio • Rolled out global performance • Focused on management system increasing productivity and reducing costs • Launched new products at European Coatings Show • Succession planning for R&D personnel underway • Commenced construction of on-site Application Lab at Suzhou, China
2013 annual report 15 operating & financial review ree vi w of strategy
t hree years on...
organi sation strategic acquisitions nuleap R&D Emerging Market ANZ Restructure
February 2012 December 2010 January 2011 Refreshed strategic plans, Strategic review completed New strategy implemented focus on execution
ch h ina, c angshu: secured ch h ina, c angshu: land for new 3rd site ground breaking
ree vi w of anz an z restructure operations undertaken commenced
june january june january june january june 2010 2011 2011 2012 2012 2013 2013
nuleap delivered $3m nuleap delivered $14m nuleap delivered net benefits net benefits $16m net benefits total program benefits $33m, v mietnam: com enced v mietnam: com issioned new exceeding $30m capacity expansion project plant on time and on budget target
de cision to invest european 1 st employee ne w one team and in china application coatings show – survey overlay structure laboratory launched new products
aq c uired ac uos masterbatch operations, started integration 2nd employee into nuplex masterbatch survey
aq rc uired vive so and vr ive so integrated started integration into nuplex emea
indone sia: capacity expansion t hailand: capacity expansion project undertaken project undertaken
1616 NUPLE NUPLE XXIIndunduSSTTRIERIESS LLIIMMIITEDTED REE FS VI W O TrategieS STRENGTHENING NUPLEX During the year we continued to implement ways to help facilitate collaboration and teamwork across the Our strategy to strengthen Nuplex involves the pursuit organisation. The rollout of Microsoft’s Lync application of operational excellence in three key areas: our safety is helping employees, global teams and mobile users performance, operational efficiency and effectiveness, to interact and share knowledge and information in and the engagement of our most critical asset, our an efficient and cost effective way, regardless of people. Throughout the year, the continued execution their location. The second global Senior Management of initiatives focused on improving the ‘way we work’ Conference was held in Sydney in September 2012 in these areas delivered results. and a mentoring program with an emphasis of pairing Safety – ‘Zero Harm’ individuals from different regions with experienced Safety is a core value at Nuplex and our commitment to leaders was put in place. achieving our safety goal of ‘Zero Harm’ to all employees, To deliver results requires the input of a successful contractors, communities and environments is central team and to build a successful team requires each to the way we operate. Full details of our progress during team member to be engaged with their organisation. the year are set out in the Safety Health & Environment At Nuplex, we see the provision of development section on page 22 of this report. opportunities as a key component of building an engaged workforce. During the year a common People – ‘One Global Team’ performance management platform called ReNu As our most valuable asset, engaging and developing our was introduced to facilitate regular and valuable people is crucial to our success. With the Nuplex team development discussions between managers working across many geographies and encompassing and employees. a wide range of expertise, enabling their ability to work together as ‘One Global Team’ is an important part of strengthening Nuplex’s operations.
V AlueS that drive OUR SUCCESS AS ONE GLOBAL TEAM In building the foundations of our One Global Team, in 2010 we began a collaborative journey to identify those values that unify us as a team and define who we are as an organisation. Through drawing on those strengths that have underpinned Nuplex’s success over the past 60 years as well as those brought to the business through acquisitions, six values have been embraced. These values guide the behaviour, actions and decisions of everyone at Nuplex and are integral to creating the chemistry behind everyday products everywhere.
• SAFETY – in every action, every day • INNOVATION – to solve our customers’ challenges • T EAMWORK and PERFORMANCE – • INTEGRITY – that underpins how we conduct ourselves to deliver results and excellence • DIVERSITY – of products, people and possibilities • CUSTOMERS – we’re exceeding their expectations
Every day we use chemistry to create innovative products that enhance, strengthen and protect a wide variety of consumer and capital goods found in all aspects of modern life. We also draw on another kind of chemistry – the synergy created when people collaborate as a team with shared values and purpose and deliver more than they thought was possible. This is the chemistry that makes us stand out, and makes us proud of our achievements.
corust me s diversity entrepreneurial integrity safety teamwork & spirit performance
2013 annual report 17 operating & financial review ree vi w of strategy
NuLEAP Nuplex has adopted a centre-led procurement Over the past three years, NuLEAP, our rigorous, approach, with the central operations supported by disciplined and measurable framework for business regional hubs. Through maximising its buying power, improvement has been embedded throughout utilising strategic sourcing processes and category the organisation. management disciplines, $3.2 million in net benefits were delivered in the 2013 Financial Year. $12 million Wit h its focus on improving the effectiveness in benefits are expected in the 2014 Financial Year. and efficiency of Nuplex’s operations, In the coming year, as part of our NuLEAP II program, three years on the company’s operations we will be completing the global procurement initiative, assessing the opportunity to improve the way we have been strengthened. work at our site in Bitterfeld in Germany and looking at ways to optimise how we most effectively The first phase of NuLEAP targeted the delivery of service customers. $30 million in net benefits by the end of the 2013 Financial Year. Pleasingly, phase one delivered ANZ restructure $33 million in net benefits through the implementation Utilising the NuLEAP framework, the review of of more than 200 ideas in each of our four regions. the ANZ operations concluded in September 2012. Benefits such as cost savings, increased efficiency The express intent of the review was to identify and margin improvements were realised through how we could return the region to achieving cost a range of executed ideas such as: of capital returns given the structural shifts in the • the introduction of a procurement desk in China Australian manufacturing industry and forecast which aggregates regional purchases of small lower levels of building and construction activity product lots; in both Australia and New Zealand. • at all sites, production processes were assessed for All options were considered, including moving to a opportunities to optimise efficiency and reduce waste business model where we imported all products to the through engineered solutions and improved practices; region from Asia. We determined that the best course • in ANZ, onsite warehousing facilities have been of action to remain competitive and deliver acceptable optimised and removed the need for rented premises; returns to shareholders was to increase the productivity of the manufacturing network. This will be done through • at Bergen op Zoom in The Netherlands, the closing the inefficient operations at Wangaratta and engineering team identified the ability to use Canning Vale in Australia, and at Onehunga and the less cleaning solvent yet remain as effective high temperature plant at Penrose in New Zealand. and thereby reduce costs and waste; We will invest in our remaining resins operations of the • at Foshan in China, operating costs and emissions waterborne operations at Penrose in New Zealand as were reduced through converting the hot oil heater well as Botany and Wacol in Australia. from diesel to natural gas; and The restructure process commenced in September • in the US, production efficiency was increased 2012 and is on track with management expectations. through developing production schedules that Forecast to cost $9.6 million, $6.3 million of these combined the Louisville and East St. Louis sites. costs were incurred in the 2013 Financial Year. The The pursuit of operational excellence is an ongoing full benefits of the restructure are expected to be journey, and towards the end of 2012, NuLEAP II $6.5 million in annualised savings, realised in the 2016 commenced with the undertaking of a global Financial Year, with over 60% of these savings to be procurement initiative. Under this initiative, delivered in the 2014 Financial Year.
18 NUPLE X InduSTRIES LIMITED GRO WIng NupleX We are well advanced with our initiatives to grow Nuplex through building market-leading positions. We are well positioned to deliver improved and growing returns in future periods through expanding our presence in emerging markets, utilising innovative R&D to develop new products and pursuing strategic acquisitions. N uplex continues to increase its presence in those geographies where the markets for our products are growing, with a particular focus on emerging economies located throughout Asia and Central & Eastern Europe.
Asia In China, construction of the new site in Changshu continued. Commissioning is now expected in September 2014, six months later than previously estimated as obtaining permits and approvals took longer than expected. Importantly, it remains on track to cost US$35 million and will double Nuplex’s capacity in China. This investment will relieve the capacity constrained site at Suzhou and enable the introduction Central & Eastern Europe of new products used in coatings, textiles, inks and Over the past three years Nuplex has been assessing its construction materials. strategy for entering Russia. Having considered a joint Also in Asia, two additional capacity expansion projects venture with Kvil Group, a local paint producer, Nuplex were commenced. In Indonesia, given the outlook has identified an alternative and preferred approach for strong economic growth, Nuplex is undertaking and will now enter the Russian market through the a US$5.1 million capacity expansion project which is acquisition of Kvil’s resins factory located in Shebekino, expected to be completed towards the end of the 2014 near Belgorod. These are the same assets that were Financial Year. In Thailand, where Nuplex produces intended for the joint venture. powder resins via a joint venture, a US$1.5 million In order to meet the demand for domestically produced capacity expansion project will increase the site’s high quality resins from multinational and regional capacity by 40%. The new capacity is expected to customers, Nuplex will upgrade the site to enable be commissioned in November 2013. production of its more technically advanced products Once all the growth projects undertaken over the as well as to improve safety. The establishment of a past three years are completed, regional capacity will wholly owned subsidiary, the acquisition of the factory be increased by 75% by the end of 2014 and cement in Belgorod, its subsequent upgrade and an investment Nuplex’s position as a leading independent resins in working capital is expected to cost €7 million. supplier in the region. Once commissioned, the new Once a presence has been established, as previously capacity is expected to be filled within three to five announced, a new site will be built in the Belgorod years and deliver above cost of capital returns. area, with construction likely to start in the 2016 Financial Year.
in asia, Once all the growth projects undertaken over the past three years are completed, this will increase Nuplex’s regional capacity by 75% by the end of 2014 and cement Nuplex’s position as a leading independent resins supplier in the region. 2013 annual report 19 operating & financial review ree vi w of strategy
Innovative R&D Investing in capabilities not only supports the development Developing new innovative products that improve of new products but also their commercialisation. and enhance the performance of customer’s products For example, recently acquired equipment at Bergen and their customers’ applications is fundamental op Zoom was able to help fast track the scale up to our ongoing success. Our ongoing investment in process of the recently launched new high-flow R&D activities is key to our ability to deliver innovative Setapoll powder coatings resins range, and in doing solutions and build market-leading positions. Over the so have the products ready for commercialisation past three years, we have focused our R&D activities significantly faster than using the previous scale on those areas where we have leading technologies up process. and products and the opportunity to build on these. Through ongoing collaboration with customers and our These are: solution focused approach, Nuplex continues to develop • P erformance coatings innovative products with commercial value. We are Examples of end product uses include agricultural constantly offering customers new products and in and construction equipment. the past year these have included: • W aterborne coatings • O ur high-flow Setapoll powder coating resins range Examples of end product uses include architectural Over the past five years, the R&D team at Silvertown coatings such as trim paint for windows, doors, in the UK have developed the technology to improve furniture and cabinetry. the flow of our powder resins during the application • P owder coatings process which improves the appearance once Examples of end product uses include coatings dry, whilst maintaining essential performance for buildings and street furniture. characteristics. • C omposite resins • S etaqua 6301 Examples of end product uses include boats Used in waterborne resins for wood coatings applied to and swimming pools. furniture, this new resin has improved drying speed and hardness. Setaqua 6301 allows the coating to N imuplex s com itted to investing in both people require less drying time between application and storage or movement of the final product, it improves and capabilities and on average spends 3% of its the productivity of furniture makers whilst preserving Resins segment sales revenue each year on R&D. the quality of their product. • S etaqua 6376 This year, at our largest R&D Centre in The Netherlands, Used in waterborne resins for wood coatings, this we invested in additional people and put a succession resin is free of volatile organic compounds. It improves planning strategy in place to preserve and grow our the speed with which the coating adheres to the knowledge and skill base. surface to which it is applied. As well as improved water resistance, it has increased chemical resistance, particularly in regards to coffee stains. In addition, 5 to 10% less titanium dioxide can be used without reducing the hiding properties of the paint, which given the significant cost increases in titanium dioxide over the past years provides an opportunity for Nuplex’s customers to reduce their costs.
20 NUPLE X InduSTRIES LIMITED Strategic Acquisitions Acquisition Criteria When considering an investment of shareholders’ funds, the opportunity under assessment must meet Nuplex’s strict acquisition framework which encompasses both financial and non-financial criteria. Our disciplined approach ensures that the opportunity is reviewed in terms of how it fits with Nuplex’s strategy of building market-leading positions, as well as determining the price we are prepared to pay and the value it will deliver shareholders. From a financial perspective, all acquisitions must be forecast to earn a return above Nuplex’s cost of capital. For acquisitions in mature markets this return must be above the cost of capital, and for acquisitions in emerging markets, a country risk premium must also be earned. Additionally, they must be forecast to be earnings per share accretive within two years. In terms of the non-financial criteria, acquisitions must also create market-leading positions in product segments or technologies, and/or provide access to growing emerging markets. Nuplex Germany Over the year, Viverso, the German based resins and putties manufacturer acquired from Bayer MaterialScience in the 2012 Financial Year for €75 million, was integrated and renamed Nuplex Germany. Pleasingly, the acquired global business delivered EBITDA of €12.5 million, ahead of management’s forecast of €12 million. The acquired technologies and products are progressively being integrated into the global portfolio and have been well received by customers particularly in Asia and the Americas. Nuplex Masterbatch The ANZ focused masterbatch business delivered EBITDA of $4.1 million, slightly below management’s $5 million forecast as a result of the difficult trading conditions. This business was formed through the integration of Nuplex’s heritage masterbatch business Culamix with the acquired Acquos masterbatch operations in the prior financial year. The restructure of the business was completed during the 2013 Financial Year with the closure of two of the six operational sites. The expanded product portfolio now offers the most extensive colour range in the Australian market.
Th rough ongoing collaboration with customers and our solution focused approach, Nuplex continues to develop innovative products with commercial value.
2013 annual report 21 operating & financial review s afety, health & environment
This year we continued to progress towards our safety vision of ‘Zero Harm’ to our employees, communities and the environment in which we operate.
L ost Time Injuries (LTI) L ost Time InjurY FREQUENCY RATE (LTIFR) A lost time injury is a work-related injury that results in This is the number of lost time injuries per million hours worked. an employee being unable to work for at least one shift.
13 1 13 0.2 12 11 12 3.1 11 4 11 1.25 10 6 10 2 09 12 09 4
T otal Reportable injury Rate (TRIR) I njury Severity Rate (ISR) This is the sum of LTIs, medical treatment injuries and This is the number of days lost due to LTIs per million hours worked restricted work cases per million man hours worked. and gives the measure of the seriousness of work injuries and the impact of the ‘return-to-work’ program.
13 7.3 13 23.2 12 9.3 12 135.2 11 12.8 11 37.14 10 17.6 10 50.23 09 14 09 27
E nergy Consumption Rate (GJ/t) Water Consumption Rate (M3/T) This is the total consumption of energy from natural gas, petroleum This is the total water used in the process which is not fuel oils and electrical power supply per tonne of product produced. harvested and/or recycled per tonne of product produced.
13 2.21 13 1.01 12 2.33 12 1.30 11 2.44 11 1.23 10 2.50 10 1.28 09 2.62 09 1.44
Wa ste Generation Rate (KG/T) G ureenho se Gas Emission RateS This is the total waste arising from the operations and which (onnest of CO e/roductionp tonne) leaves the sites for further treatment and disposal, per tonne 2 This is the total emissions mass produced by the operations, of product produced. expressed in CO2 equivalents, per tonne of product produced. 13 9.87 13 0.266 12 8.40 12 0.273 11 8.65 11 0.277 10 9.04 10 0.286 09 8.25 09 0.307
22 NUPLE X InduSTRIES LIMITED At Nuplex we believe that: S AfetY PerforMANCE • All employees, contractors and visitors have the We are pleased to have made further progress in right to be safe in our workplaces. reducing injury rates in FY2013. The improvement • Neither the environment nor communities should be in Nuplex’s safety performance is the result of the adversely affected by our operations and products. continued investment in training and resources Based on our belief and guided by the principle that as well as the application of industry best practices all accidents, injuries and harm can and should be in Nuplex’s policies and processes over the past prevented, Nuplex is committed to the pursuit of our three years. safety, health and environment vision of ‘Zero Harm’. During the year, only one employee experienced a Lost Time Injury. For the 12 months ended 30 June We are pursuing the achievement of ‘Zero Harm’ 2013, the Lost Time Injury Frequency Rate was 0.2 through initiatives that focus on three key areas: per million hours worked, compared to 3.1 in the prior • Procedures – Nuplex is implementing consistent financial year. standards and procedures via a global SHE There were 31 reportable injuries resulting in the management system which encompasses the Total Reportable Injury Frequency Rate for employees areas of occupational health & safety management, per million hours worked declining to 7.3 from 9.3 in process safety management, legal compliance the prior financial year. and auditing. These safety measures are at record low levels for Nuplex. • P eople – Nuplex is building a culture of ‘Zero Harm’ A major factor in achieving these reduced injury rates through investing in training and processes that was the turnaround in the safety performance in ANZ. engage employees to embed safe behaviour into Key contributors to the improved safety performance in every action, every day. ANZ has been the increased use of engineered solutions • Plants and Products – Nuplex is implementing best to reduce manual handling, training in manual handling practice engineering and product standards at its techniques and the continuation of the behavioural 23 sites. Across Nuplex, this is occurring through based safety program initiated last year. asset upgrades, setting plant design standards, At the 2013 Financial Year interim results, Nuplex began and maintaining a focus on maintenance and publicly reporting safety statistics for contractors. product safety. During the full year there were five contractor injuries, three of which resulted in lost time. The Lost Time Injury Frequency Rate for contractors was 6.5 per million hours worked and the Total Reportable Injury Frequency Rate for contractors was 10.8 per million hours worked.
2012 Award for Excellence in Safety I n 2012, the Nuplex Excellence Awards were introduced. These Awards provide the opportunity to acknowledge stand-out accomplishments in the areas of Safety, One Global Team, Business Improvement, Customer Engagement, Growth and Innovation. The Award for Excellence in Safety is awarded for an outstanding safety performance or significant safety turnaround. In 2012, the strength of the nominees for the inaugural Award for Excellence in Safety reflect the commitment across the organisation to improve our safety performance. The nominees were: • Nuplex’s global SHE team for their focus on developing and implementing our SHE policies and initiatives. • Nuplex Indonesia for more than 13 years without a Lost Time Injury. • Nuplex Americas for turning around safety performance and reducing their reportable injury rate from 31.7 in 2011 to 0 in 2012. • Nuplex China for their safety performance. By the end of June 2012, Suzhou had operated for 1,492 days without a lost time injury and 767 days without a reportable injury. The winner was Nuplex Indonesia. Central to the Surabaya team’s approach to safety is an understanding by each and every employee that it is their personal responsibility to comply with safety procedures, look out for each other’s safety and be involved in safety improvement activities every day.
2013 annual report 23 operating & financial review s afety, health & environment
EN VIronMEnt Investigation activities continued on the Cheltenham, Victoria site. Ongoing discussions with the Environmental Nuplex operates in an environmentally sensitive Protection Authority, consultants and interested potential purchasers have enabled Nuplex to work industry and is committed to reducing its toward formulating a sale strategy for the site. environmental impact. New Zealand During the year, actions taken to reduce Nuplex’s The Avondale site is currently dormant with plans impact on the environment included: being developed to complete demolition on the site, • At Bergen op Zoom, in The Netherlands, enhanced and ultimately complete remediation works which bulk transport facilities with new impervious flooring will enable the property to be sold. to protect the ground from potential spillages during loading and unloading of materials were constructed. C OMPlianCE • At Bitterfeld, in Nuplex’s new site in Germany, the Nuplex co-operates with regulatory authorities to ensure site continued to successfully operate their energy we can remain in full compliance with local regulatory recovery system using heat from the destruction requirements and licencing conditions. All sites of waste gases to significantly reduce the amount maintained their operational certificates in 2012/2013. of energy required to heat the production reactors. Australia & New Zealand • At Surabaya in Indonesia, work is underway to significantly upgrade the on-site waste water In January 2013, a fire broke out onsite at Nuplex’s treatment plant to achieve improved discharge operations at Canning Vale in Western Australia quality standards. following an unexpected build-up of pressure in a production vessel. There were no injuries to staff or • At Silvertown, in the United Kingdom, the cooling neighbouring community. The local community was systems were redesigned and rebalanced leading disrupted for approximately one hour due to smoke to reduced water usage. from the fire. A full investigation was undertaken by • At Louisville, in the United States, work is underway the Company and a number of corrective actions were to install an odour control system. identified and implemented. Regulators have since visited the site to confirm the implementation of the corrective actions and are satisfied with the C OntaMInation steps taken. Nuplex met its environmental obligations during the As a result of the loss of containment at Nuplex’s 2013 Financial Year in relation to site remediation as Wangaratta, site located in regional Victoria, in work continued in remediating three Australian and December 2011, proceedings were brought against one New Zealand legacy contaminated sites. the Company under the Environmental Protection Australia Act 1970 in April 2013. No conviction was recorded, The Botany site in New South Wales continues reflecting Nuplex’s previously good record. A financial to operate the equipment installed to prevent the penalty of $160,000 was imposed on the basis that migration of contaminated ground water beyond the this would be applied to local community projects. site’s boundary. This operation is monitored by the Details of the proceedings, including the community Environmental Protection Agency. projects to which the penalty was applied, is set out in the Notice of Proceedings on page 44. Seven Hills is a dormant site in Western Sydney that was previously home to the APS manufacturing and distribution facility acquired by Nuplex in 2002. The site Th roughout the year, the Environmental Protection was subsequently decommissioned and demolished. Authority undertook audits at Nuplex’s major sites Remediation works on the site continued during the 2013 year and is currently nearing completion. in Australia and no major issues were identified. Once certification by the enviornmental authorities is received, management’s expectation is that the property will be divested during 2014.
24 NUPLE X InduSTRIES LIMITED Asia In connection with the incident at Nuplex’s Silvertown In China, Nuplex’s Foshan site successfully renewed plant in August 2011, in which an employee was seriously its Safe Production Licence for a further three years injured after being hit by a forklift truck, Nuplex was and obtained the required Waste Discharge Licence. prosecuted by the UK Regulator, the Health and Safety Under the national safety management standardisation Executive, in the Westminster Magistrates Court in system, Foshan secured its ‘Grade 3’ rating. March 2013. At these proceedings, Nuplex was fined a total of £20,000 and ordered to pay £3,139 in costs EMEA after pleading guilty to single breaches of the Health Following The Netherlands Government’s increased and Safety at Work etc Act 1974 and the Management focus on fire regulation, at Nuplex’s site in Bergen op of Health and Safety at Work Regulations 1999. Zoom, the fire extinguishing system was expanded in the packed product storage facility. Also at Bergen Americas op Zoom, Nuplex has begun a multi-year program to During the year, Nuplex began the process to enable it to meet the recently introduced nation-wide obtain certification to the OHSAS 18001 Occupational tank storage standards. Health and Safety standard. Third party registrar audits we conducted in February 2013 and July 2013 and certification was received in August 2013. This certification was the final component of a fully integrated QSHE Management System in the US which includes current certifications to the ISO 9001 Quality Standard, the ISO 14001 Environmental Standard and the OHSAS 18001 Safety and Health Standard.
2013 annual report 25 operating & financial review ri sk report
s ignificant risks • S trategy and execution – the risk of not having effective strategies in place to drive and guide Nuplex has adopted a risk management framework the Group’s growth and development as well as which sets out the processes for the identification, the Group’s performance across a range of areas management and reporting of risks throughout the including sales and profit growth, innovation and Nuplex Group. Further details of the framework are safety improvement. This is an ongoing risk which set out in section 10 of the Corporate Governance has the ability to impact the achievement of business Report on page 37. planning, financial and growth objectives. As a result of the implementation of the risk The Group has addressed this risk in a number management framework, risks affecting the of ways including: - the development and implementation of overlay business and operations of the Group have structures in key areas spanning the Group’s been identified and recorded. risks are operations including procurement, global accounts, monitored on a continuous basis and formal technology and across product groupings; reporting is undertaken on a quarterly - the ongoing review of the Group’s growth strategy including by way of organic growth, market acquisition basis at site, management and executive and divestiture as well as a focus on portfolio level, and to the Board. performance and development; and - the development of a structured and rigorous Risks are categorised as operational, strategic, financial M&A process – including M&A strategy, target or compliance. Taking into account existing controls and monitoring, pre-merger integration planning and risk treatment plans, each risk has been assessed in post-acquisition integration. terms of its likelihood and impact/consequence on the Group and a risk profile matrix has been produced which • Treasury risk – this refers to certain ongoing financial assists in the prioritising, management and monitoring risks associated with liquidity management; foreign of risks. The risk profile is reviewed on a quarterly basis. exchange and interest rate fluctuation; the effective Material risks faced by the Group which are likely to management of capital; and securing access to have an impact on the financial prospects of the Group, debt finance at competitive rates. Nuplex has in and how the Group manages these risks, include: place a Treasury Management Policy which details the objectives and approach that the Nuplex Group • the risk arising from adverse economic Market risk – adopts in the treasury management process. The role conditions and cycles in the geographical markets of the Treasury function within Nuplex is to reduce in which the Group operates which may have exposure to financial and pricing risks; to ensure that the ability to impact the achievement of financial the Group has sufficient financial resources to meet and budgetary objectives and targets. The Group its commitments; and that the capital structure is manages this risk through controls on operational appropriate for the Group. Key areas of focus in the and capital expenditure and by controlling working management of treasury risk are: capital levels. In addition, as part of the Group’s strategy development process, key economic and - Funding risk management which aims at ensuring environmental drivers that impact, or are likely to that Nuplex has available the appropriate level of impact, the Group’s business are identified so as funding to meet overall business objectives; to enable the formulation of appropriate response - Liquidity risk management to ensure that Nuplex strategies. Other risk management controls include has sufficient funds available to meet its financial the implementation of global procurement reporting obligations in a timely manner; processes and treasury policies for the hedging of - Foreign exchange risk management which is raw material purchases and sales contracts. conducted with the aim of protecting Nuplex’s financial performance from adverse currency movements relating to the day-to-day operations of the business. Nuplex does not actively pursue a hedging policy in relation to the translation into New Zealand dollars of earnings generated outside New Zealand; and
26 NUPLE X InduSTRIES LIMITED - C ounterparty risk management which requires - the development of asset integrity testing programs that all treasury transactions are undertaken with to identify assets at risk of potential failure and plans an approved counterparty of appropriate credit for timely replacement. rating and quality. This risk may decline to a gradual degree as Nuplex’s • Safety – the risk of life threatening or serious injury controls and initiatives continue to be implemented at a Nuplex site. Initiatives aimed at controlling this and embedded across the Group. risk include such things as: • People capability – Nuplex is subject to the risk of not - the implementation of a Group SHE Management attracting, developing and retaining high-performance System; individuals and of ensuring that succession planning - the development and implementation of safety is managed effectively so that talented and promising related performance indicators and evaluation tools; individuals are able to be developed and promoted within the Group. This could result in Nuplex not having - the introduction of enhanced policies relating to the highest calibre of people to meet its business the use of Personal Protective Equipment; and and growth objectives. To manage this risk, actions - the development and implementation of new site have been taken which include the formulation and traffic safety rules. implementation of a Group HR strategy incorporating This risk is expected to decline gradually as Nuplex policies and procedures covering talent management, continues its focus on achieving and maintaining its succession planning, diversity, remuneration and goal of ‘Zero Harm’. performance management. This risk is ongoing and is not expected to decline to any significant degree. • Environmental – the risk arising from significant loss of containment, emissions and waste management which may impact Nuplex’s ability to continue operating at a particular site and therefore affect operating results. The Group has in place a number of controls and risk treatment plans which operate across the Group and at individual site level. These include such controls and initiatives as: - the development and continuous review of SHE policies and procedures incorporating SHE risk assessment and reviews and the design and implementation of a Group SHE Management System; - process safety management including HAZOP and Change Management processes; - the development of process control standards and Safety Observation Programs; - the use of licensed waste treatment facilities and contractors; and
2013 annual report 27 board of directors
ROB Aitken Emr e y Severin DADAN VI J CKSO C hairman and Independent Director, CO xE and E ecutive Director, I ndependent Director, based in Sydney, Australia. based in Sydney, Australia. based in Auckland, New Zealand. An experienced non-executive director Emery joined the Board following his David is a former New Zealand of ASX and NZX listed and private appointment as Managing Director Chairman and Audit Partner of equity funded Companies, Rob joined and Chief Executive Officer in international accounting firm, the Nuplex board in July 2006, and April 2010. He is a member of Ernst & Young. Having joined Nuplex became Chairman in November the Nominations Committee. in November 2006, he brings his strong 2008. Rob is an ex officio member With over 25 years in senior financial and corporate governance of the Audit, Human Resources, management roles in the steel, and skills to the Board. David is the Safety, Health & Environment and building and construction industries, Chairman of the Audit Committee Nominations Committees. Emery brings his strong leadership and a member of the Nominations An analytical chemist and chemical experience to Nuplex. During Committee. process engineer, Rob has over his career, Emery has managed During his professional career 25 years’ experience in senior businesses located in Australia, SE with Ernst & Young, David gained management roles with international Asia and America and has developed experience in Asia, the UK, U.S.A firms in the manufacturing and expertise in a broad range of and South America. Working with industrial marketing sectors. areas including, sales, operations, major national and international Having managed businesses strategic planning, safety and general clients for over 30 years, David has located throughout Australia and management. Emery has extensive developed his extensive experience New Zealand, America, Europe and experience in executing business in corporate governance, capital Asia, Rob brings to the Nuplex Board improvement programs, developing structures, reporting requirements, his extensive experience in managing new geographic and product markets, audit and risk management. technology-based businesses, as well as managing significant David is Chairman of The New overseeing business improvement capital expansion projects and Zealand Refining Company Limited, programs and managing significant acquisitions. and an Independent Director of the capital projects and capital raisings. Prior to joining Nuplex, Emery spent Fonterra Cooperative Group Limited. With a strong background in developing 14 years with Australia’s leading He has been a member of the market-driven strategies for growth international building materials New Zealand Institute of Chartered and business management, Rob is company, Boral Limited, during Accountants since 1975 and was also experienced in divestments which time he ran the Australian awarded an Institute Fellowship in and acquisitions. construction materials and American 1994. He is also Chairman of The Most recently, he was an Executive building materials operations. Before Dame Malvina Major Foundation. General Manager at Southcorp Water joining Boral, Emery spent 10 years Heaters and Southcorp Appliances, working for BHP Steel in a range accountable for manufacturing based of line management roles including businesses in the USA, Australia, the management of their SE Asian New Zealand, Italy and China. Prior operations and their Steel Making to that, Rob was President Formica & Casting operations in Newcastle, Corporation in North America Australia. Between 1977 and 1986 and Europe with responsibility for Emery was an Australian Army businesses in the U.S.A, Canada, officer, and pursued his studies France, Spain and the UK. In these in chemistry, winning a Rhodes roles, he also chaired joint ventures in Scholarship to obtain his D. Phil China, Germany and the Philippines. in physical chemistry at Oxford Rob is also a non-executive Director University. In 2007 Emery completed of SAI Global Limited, an international Harvard Business School’s Advanced information services and solutions Management Program and is a business also listed on the ASX. member of the Australian Institute of Company Directors.
28 NUPLE X InduSTRIES LIMITED BARBARA GibSON P eter Springford J y( erem Jerry) Maycock I ndependent Director, I ndependent Director, I ndependent Director, based in Melbourne, Australia. based in Auckland, New Zealand. based in Brisbane, Australia. Barbara joined the Nuplex Board in Peter joined the Nuplex Board in With over 35 years’ management September 2008 and is Chairman 2009 and is Chairman of Nuplex’s experience in the building and of Nuplex’s Human Resources Safety, Health and Environment construction industries in Australia Committee and a member of the Committee and a member of the and New Zealand as well as throughout Safety, Health & Environment Audit and Nominations Committees. Asia, Jerry joined the Nuplex Board and Nominations Committees. Peter has extensive experience in in September 2011. He is a member A former senior executive with Orica managing companies in Australia, of the Human Resources and Limited (previously ICI Australia), New Zealand and Asia. For five years, Nominations Committees. she was previously Group General Peter was the Hong Kong based Having begun his career with Shell Manager, Chemicals Group. She has President of IP Asia, a subsidiary of Oil in the UK and New Zealand, Jerry extensive experience in the chemicals major US listed forestry company, held a number of senior management sector and the development of International Paper. During this time, positions, principally with Swiss based technology-based businesses in Peter built a US$500 million business multinational, Holcim Ltd, one of Australia and overseas, including for IP through the development of the world’s largest construction and substantial experience in mergers three greenfield plants in China, building materials companies. Over and acquisitions. Barbara has joint ventures in Japan, Korea, India, his 20-year career with Holcim, Jerry managed large operational business Taiwan and the Philippines and has held country CEO roles in New units in diverse geographies including acquisitions within the region. Zealand and Australia before becoming Australia and New Zealand, Asia, On returning to New Zealand in Senior Vice President for the southern Europe, Americas and Latin America. 2002, Peter was Chief Executive ASEAN countries and Australasia. She has strong experience in leading Officer of listed forest products During this time, he developed his and managing organisational change, company, Carter Holt Harvey (CHH). extensive experience in business asset optimisation programs and Following the acquisition of CHH leadership, strategy development, developing global technology by Rank Group in 2006, Peter project management, B2B marketing, businesses from patented technology. co-invested with CVC Capital greenfield site development, mergers Barbara is a non-executive director Partners, an international private and acquisitions and capital markets. of GrainCorp Limited, and Chairman equity firm, in the purchase of Before becoming a professional of Warakirri Asset Management Pty Carter Holt Harvey’s Chinese panels director, Jerry was most recently Ltd. She is a previous Director of business. He has also chaired, CEO and Managing Director at CSR the Plastics and Chemicals Industry co-invested and successfully sold Limited. Here, Jerry oversaw the Association of Australia, the national for CVC two other Asia based reshaping of CSR into a focused body representing the industries. businesses, one of which was listed building materials company through A clinical biochemist, in 2003 on the HK Stock Exchange. He is the demerger and subsequent trade Barbara received the Centenary involved in the running of and/or has sale of CSR’s sugar business. Medal for services to Australian invested in three entrepreneurial Jerry is also Chairman of AGL Energy Society in Medical Technology. New Zealand based companies - Limited, an ASX listed integrated She is a member of the Australian New Zealand Frost Fans, New Zealand energy company, and Chairman of Academy of Technological Sciences Wood Products and Creating Tracks the Port of Brisbane Pty Limited. and Engineering. New Zealand. He is also a director of Australian Peter is a non-executive director of educational charity The Smith Family. The New Zealand Refining Company He holds a Bachelor of Engineering Ltd and Rakon Ltd, Chairman of the (1st Class Hons) in Mechanical board of private industrial company, Engineering, and has completed McKechnie Aluminium Solutions Stanford University’s senior executive Ltd and is a trustee of The Graeme and finance management programs. Dingle Foundation. Jerry is a Fellow of the Institute of Professional Engineers New Zealand, and a Fellow of the Australian Institute of Company Directors.
2013 annual report 29 e xecutive team
Emr e y severin I an Davis J ames Williams Sa m Bastounas Cli ve Deetlefs PAULA D VEY CO xE and E ecutive C hief Financial Vi e ce Pr sident, R eegional Pr sident v ice president Vi e ce Pr sident, director, based in Officer, based in General Counsel – Australia & Operations, based Human Resources, Sydney, Australia. Sydney, Australia. and Company new zealand, based in melbourne, based in Sydney, See previous page Ian joined Nuplex Secretary, based in in Melbourne, Australia. Australia. for details. in 2009 as Chief Sydney, Australia. Australia. Clive joined Nuplex Paul joined Nuplex Financial Officer. James joined Prior to being in 2010. in 2010. A Chartered Nuplex in 2009 appointed Regional He is a Chartered Previously Paul has Accountant, Ian in the role of President, Australia Professional held HR leadership has over 30 years’ General Counsel & New Zealand Chemical Engineer positions in experience in public and Company in 2011, Sam and also has a multinationals such accounting and Secretary. He has had been Chief Bachelor’s Degree as Nestlé, Glaxo senior financial over 25 years’ Operating Officer in Business/ Wellcome, and roles in commerce. experience in for the Australasian Accounting senior consulting The commercial commercial law based Functional Economics. roles within Ernst & roles have and corporate Materials and In addition he is a Young and Mercer. predominantly been administration, Specialties Certified Six Sigma These roles have in manufacturing and has worked as operations. Master Black Belt. all had regional and include legal counsel and He has held a Clive has 23 years’ accountability – experience in company secretary number of roles experience in senior based in Australia, Australia, New in a number of with Orica and ICI manufacturing Switzerland, the UK Zealand, China and large publicly listed in the past and roles including and South Africa. the United States. companies and spent two years in major corporates. process and project Paul has a BA Prior to joining Asia as CFO of a engineering, multi- and Post Graduate Nuplex, Ian was James was joint venture in the plant operational honours degree CFO of Tenix Pty previously a partner late 1990s. management, and in Business Ltd and before that in a medium-sized Sam holds a BSc regional supply Administration. General Manager law firm in Sydney (Hons) in Chemistry chain operations. Finance of Rheem before leaving and an MBA, both He has global Australia Pty Ltd. private practice from Monash to work in-house. experience, having University in worked in South James holds Melbourne. Africa, the UK, The degrees in In 2007 he Netherlands, the Commerce and completed the United States, Asia, Law and is a Fellow AMP at the as well as Australia. of the Institute Wharton School of Chartered Prior to joining in the United Nuplex, Clive was Secretaries in States and in 2009 Australia. the Global Six completed his Sigma and Lean graduate diploma Manufacturing at The Australian Lead for Monsanto, Institute of based in the United Company Directors. States.
30 NUPLE X InduSTRIES LIMITED P aul Kieffer HNSH ASA Afi R uben Mannien Mike Kelly William Weaver jo h sie as ton R eegional Pr sident Vi e ce Pr sident, R eegional Pr sident R eegional Pr sident Vi e ce Pr sident, dire ctor, corporate – Europe, Middle Corporate – Asia, based in – Americas, based in Technology, based communications. East & Africa, based Development and Singapore. Louisville, U.S.A. in Bergen op Zoom, Based in Sydney, in Bergen op Zoom, Planning, based in H aving joined Akzo M ike joined the Netherlands. australia. the Netherlands. Sydney, Australia. Nobel as a member Nuplex through William has Josie was appointed Paul joined Nuplex H asan joined of their graduate the acquisition been overseeing Director, Corporate through the Nuplex in 2010, recruitment of Akzo Nobel’s Nuplex’s global Communications acquisition of Akzo in the role of Vice program in 1997, Coating Resins R&D activities in 2012, having Nobel Coating President Corporate Ruben joined operation in 2005 since 2008, having joined Nuplex in Resins in 2005. Development and Nuplex following and has over 30 previously been 2010 as Investor the acquisition of years’ experience Nuplex Resins’ Relations and Paul joined Akzo Planning. their coating resins in the coatings European R&D Communications Nobel in 1987 and Prior to joining operations in 2005. industry. manager. He Manager. was appointed Nuplex, Hasan was Prior to being Before being holds a BSc (Hons) General Manager a Principal with Josie has appointed Regional appointed to Chemistry from of the European A.T. Kearney, a experience in President for Asia Regional President, the University Resins operations global management investor and media in 2011, Ruben was Americas in 2011, of Lancaster in 2002, and held consulting firm, in relations, employee General and a MSc in this role until his its Sydney office. Manager Mike had been communication for China for three running Nuplex’s Polymer Science and engagement, appointment to For over 10 years, years, and before North and South and Technology public affairs Regional President Hasan consulted that, Director American resins from the London and reputation in 2011. to clients in General in Vietnam operations since School of Polymer management, Throughout his Australia, New for three years. 2002. Technology. having held a range career he has held Zealand, South Before moving into During his career, of communication a number of roles East Asia, China Mike holds senior management William’s areas of roles with Challenger in production, sales and the United a Bachelor roles in Asia, Ruben in Business focus have spanned Financial Services, and marketing States. Hasan also held a number of several of Nuplex’s Macquarie Bank as well as senior held operational Administration global raw material key product and the Westpac management. management from the University procurement roles. of Illinois, and areas including Group. Paul completed responsibilities with graduate MBA powder coatings, She began her his degree in Schlumberger in Ruben has a ster of Science studies from automotive in- career with Mineral Processing the upstream oil Ma in Industrial Northwestern mould and industrial JPMorgan in & Metallurgy and gas industry. Engineering and University. coatings, as well as institutional sales of at Technical Hasan has a PhD nagement composite resins. Australian equities. University, Delft in in Mechanical Ma William joined The Netherlands. Engineering and a Science from Josie has a Nuplex following its BSc in Aeronautical Eindhoven Bachelor of University of acquisition of Akzo Engineering. He Commerce from Technology, in Nobel’s Coating has an MBAE from Sydney University, Resins operations the Ross School The Netherlands. a Graduate Diploma in 2005, having of Business, in Applied Finance joined Akzo Nobel University of and has completed in 1994. Michigan and is a FINSIA’s Graduate Graduate member Diploma in Applied of The Australian Finance and Institute of Investment. Company Directors.
2012 annual report 31 c ontents
33 Corporate Governance report 44 Financial Report 45 Auditors’ Report 46 Statements of Comprehensive Income 47 Statements of Changes in Equity 48 Statements of Financial Position 49 Cash Flow Statements 50 Notes to the Financial Statements 91 Five-Year Statistical Summary 92 Shareholder Information 94 Statutory Information IBC Corporate Directory
32 NUPLE X InduSTRIES LIMITED Corporate Governance Report
1. Introduction 3. Role and Function of Senior Management Nuplex Industries Limited (Nuplex) is listed on the New The Board has delegated to the Chief Executive Officer, Zealand Stock Exchange (NZX) and the Australian Securities responsibility for the conduct of the affairs and day‑to‑day Exchange (ASX). management of the Company. Delegation is subject to Nuplex has adopted the following governance principles as matters reserved for Board approval as detailed in the the benchmark against which it will implement its governance Board of Directors Charter. principles and practices: In addition, there are 11 senior executives reporting to • T he NZX Corporate Governance Best Practice Code; the Chief Executive Officer who have been delegated the responsibility for managing key areas of the business • T he New Zealand Financial Markets Authority’s Governance including: operations and production facilities, raw material Principles and Guidelines; and purchasing, sales, marketing, distribution, technology, • T he ASX Corporate Governance Principles and research & development, financial and treasury management, Recommendations (2nd Edition). strategic planning, human resources, SHE, legal and This report contains details of Nuplex’s corporate governance compliance, risk management, investor relations, regulatory practices. affairs and corporate governance. The performance of the Chief Executive Officer and senior 2. Role and Function of Board of Directors executives is reviewed periodically by the Board, and by the Chief Executive Officer in respect of executives against The Board of Directors (the Board) of Nuplex is elected by appropriate measures set by the Board, the Chief Executive shareholders to direct and supervise the management of the Officer and the Human Resources Committee relative to Company. the executive’s role. The Human Resources Committee has The Board establishes the strategic direction and objectives of oversight in relation to the setting of goals to be achieved the Company and sets the policy framework within which the by senior executives in connection with both short‑term and Company will operate. The Board appoints the Chief Executive long‑term incentive schemes and monitors the performance Officer, delegates appropriate authority for the management of senior executives in relation to the achievement of those of the Company, and monitors management’s performance goals. In accordance with this process, a performance on a regular basis. evaluation for senior executives has taken place during the Nuplex has formally established the functions reserved to the reporting period. Board. These are contained in the Board of Directors Charter During the year under review, the executive management which is available in the Investor Relations section of the structure of the Group was as follows: Company’s website (www.nuplex.com).
Executive management structure of the Group Emery Severin Managing Director & Chief Executive Officer
Regional Presidents Group Heads Sam Bastounas – Australia & New Zealand Josie Ashton – Also responsible for Director, Corporate Communications • Global composites development Ian Davis – Mike Kelly – Americas Chief Financial Officer Also responsible for Paul Davey – • Global performance coatings development Vice President, Human Resources • Global Key Accounts Clive Deetlefs – Paul Kieffer – Europe, the Middle East & Africa Vice President, Operations Also responsible for Hasan Shafi – • Global powder coatings development Vice President, Corporate Development & Planning • Global Procurement Council Chairman William Weaver – Ruben Mannien – Asia Vice President, Technology Also responsible for • Global waterborne products development James Williams – Vice President, General Counsel & Company Secretary
2013 annual report 33 Corporate Governance Report continued
4. Board Structure 5.mi Board Com ttees The Board is comprised of a majority of five non‑executive The Board has the following standing committees. The Directors, all of whom are independent Directors. The Chief Chairman, Mr Rob Aitken, is an ex‑officio member of all Board Executive Officer, Emery Severin, is the only executive committees. Non‑members of Board committees have a Director. Non‑executive Directors are selected to ensure standing invitation to attend meetings of all Board committees. that a broad range of skills and experience is available. Mr Rob Aitken is the current Chairman. There was no change Nomination Committee in Directors during the period under review. The Board’s practice has been that the full Board constitutes Mr Aitken has indicated his intention to retire as Chairman at the Nomination Committee. From time to time the Board the conclusion of the Annual Meeting on November 6, 2013. establishes a sub‑committee to carry out the responsibilities The Directors propose to elect Mr Peter Springford as the of the Nomination Committee. on-going Chairman. Mr Aitken, in accordance with Regulation The responsibilities of the Nomination Committee include 10.6 of the Company’s Constitution, will also retire from the the identification and nomination of suitable candidates to Board by rotation at the Annual Meeting but, at the request of fill board vacancies as they arise. The policy and selection each of the other Directors, will offer himself for re-election. process for the appointment of Directors includes an The Board meets in accordance with a schedule prepared evaluation of the skills, knowledge and experience of current well in advance of the start of each calendar year, rotating Directors, an evaluation of the competencies required of between the Auckland Office and other overseas facilities. prospective Directors and the evaluation of prospective This enables Directors to become familiar with the Group’s candidates against these requirements. A similar evaluation market environment and manufacturing operations and to occurs in connection with the re‑election of directors to meet employees. Board meetings follow procedures that ensure that the Board has the requisite range of skills and ensure that all Directors have the necessary information to experience. In determining the mix of skills, the Nomination participate in an informed discussion on all agenda items. Committee and the Board will have regard to the objectives Senior managers make direct presentations to the Board sought to be achieved in accordance with the Company’s on a regular basis to give the Directors a broad exposure to Diversity Policy. management philosophies, capabilities and the key issues A description of the procedure for the selection and facing the business and actions taken to address them. appointment of new Directors, including the policy for the Any Director is entitled to obtain professional advice relating to nomination and appointment of Directors is set out in the the affairs of the Company or to his or her other responsibilities Nomination Committee Charter which is available in the as a Director. The full provisions in this regard are set out in Investor Relations section of the Company’s website the Board of Directors Charter and other Board Committee (www.nuplex.com). Charters. The Nomination Committee met on two occasions to conduct The Board has established that all non‑executive Directors are an externally facilitated review of the desired skills matrix of the independent after taking into consideration their associations Board and the skills and experience of each of the Directors, as Directors and shareholders of the Company and as mapping each Director’s skills against the desired skill set for Directors, officers or shareholders of other organisations. the Board. All directors were in attendance at both meetings. Details of the Directors’ skills and experience, period of Audit Committee appointment and their interests are disclosed on pages 28 and 29 of this report. The Audit Committee is comprised of three independent, non‑executive Directors, of whom one is the Company The Board has instituted a system to review annually the Chairman, ex officio. The Chief Executive Officer, the Chief performance of the Board, its Committees and individual Financial Officer, the internal auditor and the external auditors Directors. This process involves peer review and one‑on‑one attend meetings by invitation. consultation between the Chairman and individual directors. In accordance with this process, an evaluation of the Board, The composition of the Audit Committee during the last its Committees and the performance of directors took place financial year was David Jackson (Committee Chair), within the reporting period. Rob Aitken and Peter Springford. The qualifications of the members of the Audit Committee are disclosed on pages The Board has held 11 meetings during the year ended 28 and 29 of this report. 30 June 2013 with attendances recorded as follows: The Audit Committee met on four occasions during the year Name of Director No. of Meetings attended ended 30 June 2013 with attendances recorded as follows: R M Aitken 11/11 Name of Director No. of Meetings Attended
B J Gibson 11/11 R M Aitken 4/4 D A Jackson 11/11 D A Jackson 4/4 J C R Maycock 11/11 P M Springford 4/4 E S Severin 11/11 The Committee has direct communication with and P M Springford 11/11 unrestricted access to the Group’s external auditors, (Denominator indicates the number of meetings which took place in the internal auditor and internal accounting staff. the period during which the director held office.)
34 NUPLE X INdustrIES LIMITED The Committee’s responsibilities include: Remuneration packages are reviewed annually with the • R eviewing the half yearly and annual financial statements benefit of independent external advice to ensure that and reports and advising all Directors whether they comply remuneration is competitive with like organisations within with the relevant and appropriate laws, regulations and the jurisdiction in which an employee resides. The Human recognised accounting policies; Resources Committee has taken steps to ensure that its approach to the appointment and use of remuneration • O btaining formal sign‑off from the Chief Executive Officer advisers accords with legislative requirements in Australia. and the Chief Financial Officer that the Company’s financial reports present a true and fair view in all material respects During the last financial year, the Human Resources and are in accordance with applicable accounting standards; Committee was comprised of Barbara Gibson (Committee Chair), Rob Aitken and Jeremy Maycock. • O versight of compliance with statutory responsibilities relating to financial and stock exchange regulations and The Committee has met on six occasions during the year guidelines; ended 30 June 2013 with attendances recorded as follows: • A pproval of other advisory services from the external auditor; Name of Director No. of Meetings Attended • M onitoring of corporate financial risk; R M Aitken 6/6 • R eviewing the Company’s accounting policies and reporting B J Gibson 6/6 requirements to ensure accuracy and timeliness and the inclusion of appropriate disclosures; J C R Maycock 6/6
• t o review the scope and outcome of the external audit; and The Charter of the HR Committee is available in the • t o review the scope and outcome of internal audit activities. Investor Relations section of the Company’s website The Committee reports the proceedings of each meeting (www.nuplex.com). to the Board. Safety, Health and Environment Committee The Audit Committee has the responsibility for making The Safety Health and Environment (SHE) Board recommendations to the Board in connection with the sub‑committee is comprised of three independent, appointment of the external auditor. The Audit Committee non‑executive Directors of whom one is the Company Charter requires the Audit Committee to ensure that the Chairman, ex‑officio. external audit lead partner’s term is limited to five years. The purpose of the Committee is to assist the Board in The Audit Committee has a formal charter which is available discharging its responsibilities by assessing and monitoring the in the Investor Relations section of the Company’s website effectiveness of the Company’s safety, health and environment (www.nuplex.com). programmes, initiatives and policies with a view to ensuring Human Resources Committee compliance with all legislative and regulatory requirements. In March 2012, the Committee’s name was changed from The composition of the SHE Committee during the last Remuneration Committee to Human Resources Committee financial year was Peter Springford (Committee Chair), and its responsibilities were expanded to encompass Rob Aitken and Barbara Gibson. the following: The Committee has met on three occasions during the year • A ssisting the Board in the establishment of effective ended 30 June 2013 with attendances recorded as follows: remuneration policies and practices including the setting Name of Director No. of Meetings Attended and reviewing the effectiveness of, the remuneration, recruitment, retention and termination policies and R M Aitken 3/3 procedures for senior executives; B J Gibson 3/3 • M aking recommendations to the Board on all components P M Springford 3/3 of the remuneration of the non‑executive directors; • R eviewing and making recommendations to the Board in The Charter of the SHE Committee is available in the connection with the human resources policies and practices Investor Relations section of the Company’s website in the following areas: (www.nuplex.com).
– S uccession planning for executive and senior Special Board Sub‑Committee management roles; A Special Board Sub‑Committee comprised of the Chairman, – T alent management including plans for appropriate the Chairman of the Audit Committee and the Chief Executive development opportunities and training; Officer was formed on two occasions, coinciding with the – D iversity. finalisation of the half‑year and full‑year accounts, respectively. The Human Resources Committee is comprised of three The purpose of the Special Board Sub‑Committee on each independent, non‑executive Directors, of whom one is the occasion was to approve adjustments made to the accounts Company Chairman, ex‑officio. The Chief Executive Officer and results release documentation, following meetings of the is not a member of the Committee. Audit Committee and Board, and to approve the release of the final accounts and related documentation at the half‑year and With regard to the setting of remuneration, the Human full‑year, respectively. Resources Committee meets as required to review the remuneration of the Directors, the Chief Executive Officer and the senior executives reporting directly to the Chief Executive Officer, before making recommendations to the Board.
2013 annual report 35 Corporate Governance Report continued
6. Code of Conduct of FY2012, the overall percentage of females in the company remained constant at 20%, whereas the percentage in The Board has established a policy (Code of Conduct and management increased to 17.4%. Ethics Policy) to give guidance to its employees and Directors on how it expects them to conduct themselves when At the end of FY2013, the overall percentage of females in undertaking business on behalf of the Company. the company was 21.8% and the percentage in management The Board has also established a Whistleblower Policy to was 18.8%. provide guidance and assistance to employees who may FY11 FY12 FY13 wish to disclose information that relates to wrongdoing in % % % % % % the workplace and related work environment. Females Females Females Females Females Females The Code of Conduct and Ethics Policy is available in the in in in in in in Investor Relations section of the Company’s website Company Mgt Company Mgt Company Mgt (www.nuplex.com). 20.0% 16.5% 20.0% 17.4% 21.8% 18.8% 7.i D versity Policy The following table shows for the purposes of compliance with NZSX Listing Rule 10.5.5(j) a quantitative breakdown of gender Nuplex employs over 1900 employees across four regions composition of Directors and Officers at 30 June 2013. spanning 13 countries around the world. The geographic diversity of our people is indicated below. % female % male 2013 2012 2013 2012 Region % of Employees Directors 16.6% 16.6% 83.4% 83.4% ANZ 40% Management (Officers) 18.8% 17.4% 81.2% 82.6% Asia 28% Total workforce 21.8% 20.0% 78.2% 80.0% EMEA 26% Americas 6% 2. Diversity Promotion To promote diversity globally across all our sites, a number Nuplex appreciates the value inherent in a diverse workforce. of activities have been undertaken: Our diversity is represented in various ways including gender, • Nuplex Australia maintains its compliance with the age, origin, race, cultural heritage, language and physical Workplace Gender Equality Agency (WGEA). Compliance ability. Based upon the Nuplex 2012 Employee survey, 52.8% requires an active workplace program designed to eliminate of employees speak a home language other than English. barriers for women in Australian workplaces. All our other The range of languages spoken is as follows: country sites are compliant with local gender-specific Language % of Employees legislation where this exists. • A Program has been initiated to bring the value of diversity English 47.2% (and the other five Core Values) to life through behavioural Dutch 16.4% and awareness programs on site. Mandarin 12.4% • A Nuplex Leadership Academy was launched in the FY2012 aimed at our future leaders. This is an individually tailored German 7.0% program supporting our future leaders through a series of Vietnamese 7.1% online learning opportunities, 360 degree assessments and mentoring. There is an equal representation of males and Bahasa Indonesia 6.3% females in this program. Bahasa Malaysia 3.6% • Talent Management: A number of psychometric tools including Herrmann Brain Dominance Instrument, Myers Nuplex acknowledges that promoting diversity across the Briggs Type Indicator, 360 degree feedback as well as Nuplex Group ensures that the talents of all our people are individual mentoring have been initiated across Nuplex. maximised to the fullest to ensure that we realise our This has been aimed at our leadership group including our Corporate goals. emerging female leadership irrespective of their seniority. To this end, Diversity has also been established as one of • Development Plans: The Development Plans of all females Nuplex’s Core Values; who are identified as high potential at the annual executive ‘We value diversity in culture, age, gender, thinking styles talent review discussions are to be reviewed by the CEO and preferences.‘ and VP, HR. In 2011, a Diversity Policy was adopted by the Board and • Global and local policies have been reviewed to ensure specific goals were identified for the company. The goals that they are: are in two areas: a) discrimination-free and that; 1. targets aimed at increasing the percentage of women in b) flexible employment practices specifically sympathetic management roles across Nuplex, and, to working women are in place. 2. undertaking specific actions to promote and nurture all • Nuplex Global Employee Survey: The 2012 Nuplex Employee forms of diversity across Nuplex. Survey completed by 65% of employees indicated that 95% of respondents agreed that Nuplex respected ‘employee 1. Gender Diversity Targets diversity in culture, religion, language and gender’. This was In FY2011, the percentage of females in the company was the highest scoring answer of all the survey questions posed. 20% globally and the percentage of females in management roles was 16.5%. For FY2012, an aspirational target of 20% females in management roles was set, towards which the 8. Trading in the Company’s Shares Company would work over the next 12 months. At the end The Board has established a policy and procedure for the guidance and direction of Directors, senior managers and 36 NUPLE X INdustrIES LIMITED employees on the laws governing share trading (Securities Accordingly, the Company’s policies are aimed at managing Trading Policy and Guidelines). risk in the following ways: Under the policy Directors, senior managers and employees • T he Board of Directors has oversight of risk management are advised that it is illegal to buy or sell ordinary shares or initiatives aimed at identifying risks that may have a material other listed securities if they have material information that is impact on the Company’s business. not generally available to the market and, if it were generally • T he Chief Executive Officer and Senior Executives of the available to the market, a reasonable person would expect it to have a material effect on the price of the Company’s listed Company are responsible for designing and implementing securities. The policy contains provisions prohibiting entry into risk management and internal control systems to identify transactions in relation to products which operate to limit the material risks that the Company faces as well as managing economic risk of security holdings in Nuplex. risk across the Group, and are required to report to the Board through the Chief Executive Officer. This includes The policy also covers the notification procedures that must formulation of policies and procedures that cover the be adopted by Directors and senior managers before they buy identification, assessment, reduction, management and or sell the Company’s listed securities. monitoring of risk, as well as identifying any material The Securities Trading Policy and Guidelines has been lodged changes to the Group’s risk profile. These are required with the ASX in accordance with ASX listing rule requirements, to be reported to the Board at regular intervals. and a copy is available in the Investor Relations section of the Company’s website (www.nuplex.com). • T here is regular assessment by the Board and Senior Executives of strategic risks affecting the Company’s During FY2011, the Company amended the Share Trading operations and the establishment of controls to reduce Policy and Guidelines to comply with changes to the ASX their impact. This includes policies and procedures directed Listing Rules, in particular, to provide for the “closed periods” at maintaining all relevant registrations and approvals in during which trading in securities may not take place. relation to operating plant, processes and the handling of materials that are hazardous or require traceability. On a 9.mnct Com u i a ions and Disclosure regular basis the Board also reviews the Company’s internal controls and risk management practices to ensure that they Nuplex has established a Communications and Disclosure are adequate and reflect the Company’s risk profile. Policy to ensure compliance with NZX and ASX disclosure requirements and to ensure accountability for compliance • N uplex’s risk management policies require that risk at a senior executive level. assessments are conducted for all major work initiatives, where new projects are undertaken and for new product The Communications and Disclosure Policy is available in introductions. the Investor Relations section of the Company’s website (www.nuplex.com). • N uplex’s risk management policies require that there is periodic verification of risk controls at various levels across Nuplex has established a separate Shareholder the Company’s operations. Communications Policy designed to promote effective communication with shareholders, and to encourage • T he Company has established a range of policies and shareholder participation at the annual general meeting. procedures aimed at assisting in the management of risk Nuplex ensures that its Auditor attends the annual general across the Company’s operations. meeting and is in a position to answer questions about the • T he Board satisfies itself that adequate external insurance audit of Nuplex’s financial information. cover is in place appropriate for the Company’s size and risk profile. The Shareholder Communications Policy is available in the Investor Relations section of the Company’s website • T he Board satisfies itself that adequate Safety, Health and (www.nuplex.com). Environmental Protection Policies and hazard assessments are in place and monitors performance. The SHE Board 10.i R sk Management Sub‑Committee assists the Board in this process. • T he Chief Executive Officer and Chief Financial Officer also Nuplex recognises that in order to achieve its business plans provide a declaration that the financial statements of the and strategic goals, there must be a thorough understanding Group present a true and fair view, in all material respects across the Group of the risks that may affect the ability of the of the Group’s financial position and operating results. The Group to achieve those plans and goals. Chief Executive Officer and Chief Financial Officer are able At the direction of the Board, Nuplex’s management has to make this declaration having regard to the Company’s developed an enterprise risk management framework for the sound system of risk management and control. oversight and management of material business risks which • T he Company has established an internal audit function has been implemented and is being continually embedded within the Group to assist the Company in carrying out the across the Group. analysis and independent appraisal of the adequacy and Nuplex’s Risk Management Framework incorporates key effectiveness of the Group’s financial risk management principles covering Risk Governance, Risk Infrastructure and and internal control systems. The internal audit function Oversight, and Risk Ownership to provide a structured and is independent of the external auditor. transparent approach to managing risk across the Group. The Board requires management to report to it on whether Through the development and implementation of this risks are being managed effectively, and management has framework, the Board ensures that there are appropriate risk reported to the Board periodically during the financial year management and internal control systems to manage Nuplex’s under review as to the effectiveness of the management material business risks. of material business risks in accordance with the risk management framework. Throughout all of its business operations the Company has in place policies, processes and systems designed to identify, assess, monitor and manage material business risk.
2013 annual report 37 Corporate Governance Report continued
11. Internal Financial Control and Risk Management remuneration packages that are aligned with the objectives of the Company and its shareholders and comprise: The Board, assisted and advised by the Audit Committee, monitors and approves the Company’s system of internal • A Total Employment Cost (TEC) element as defined below; financial control which includes clearly defined policies • For all executives and managers, a Short Term Incentive (STI) controlling treasury operations, capital expenditure payment dependent on the achievement of annual financial authorisation and risk management. The Board participates performance hurdles and specific operational objectives; in the development of strategic plans, approves budgets and • For the Chief Executive Officer and senior executives monitors performance monthly. reporting to the Chief Executive Officer, a Long Term The Chief Financial Officer is responsible to the Chief Executive Incentive (LTI) payment in the form of cash or ordinary shares Officer for ensuring that all operations within the Company in the Company subject to achievement of performance adhere to the board‑approved financial control policies. criteria aligned to the objectives of shareholders. The The Chief Executive Officer and Chief Financial Officer have performance criteria for the issue of Rights made in FY2011, signed a declaration stating: FY2012 and FY2013 were based on relative Total Shareholder Return and growth in Earnings Per Share (EPS). For FY2014, 1. That Financial Statements for year ended 30 June 2013 the EPS hurdle will be replaced by a Return on Funds present a true and fair view, in all material respects, of the Employed (ROFE) hurdle as the Board has determined that Group’s financial condition and operational results and are such a hurdle provides better alignment to the objectives of in accordance with NZIFRS; shareholders. At the 2010 annual meeting shareholders 2. That the statement referred to in the preceding paragraph 1 approved the Company’s Performance Rights plan and the is founded on a sound system of risk management and grant of up 1,800,000 Performance Rights to the Chief internal control which implements policies adopted by the Executive Officer under the terms of that plan, such grant to Board of Directors; and be made over a three year period. At the annual meeting of 3. That the Group’s risk management and internal compliance shareholders to be held in November 2013, a refresher of the and control system is operating efficiently and effectively in approval for the LTI Plan will be sought from shareholders to all material respects. cover the period from July 2013 through to June 2016. • For other senior managers, a Medium Term Incentive 12. Remuneration (MTI) payment dependent on achievement of financial performance hurdles and specific operational objectives 12.1 Senior Executive Remuneration which may be required to be achieved over a period in excess of twelve months. The policy of the Company is to reward the Chief Executive Officer and senior executives and managers with competitive
Executive TEC and Short and Long Term Incentives The remuneration of the Senior Executives of the Company for year ended 30 June 2013 was as follows: Total TEC Short Share LTI Cash (incl (Less Term STI Cash Based Total Rem STI & MTI Super) Super) Super Incentives1 Achievement2 LTI1 Other3 LTI1 (G=A+B+C Rec’d4 Rec’d5 (J=A+B Name Title (A) (B) (C) (D) (E) (F) +D+E+F) (H) (I) +E+H+I) Currency AUD E Severin Chief Executive Officer 1,093,250 25,000 514,778 45.6% – – 333,933 1,966,961 441,975 197,260 1,757,485 J Ashton Director Corporate Comms 186,432 20,235 53,290 42.7% – – 20,814 280,771 38,400 – 245,067 S Bastounas Regional President Aust & NZ 459,633 25,000 70,369 24.2% – – 90,758 645,760 83,541 127,422 695,596 I Davis Chief Financial Officer 438,130 25,000 111,309 39.8% – – 83,933 658,372 98,154 231,750 793,034 J Williams VP General Counsel & Co Sec 327,067 25,000 89,856 42.4% – – 63,759 505,682 75,032 54,094 481,193 C Deetlefs VP Operations 349,844 25,000 99,597 44.2% – – 67,933 542,374 80,531 – 455,375 P Davey VP Human Resources 329,115 25,000 89,951 41.9% – – 64,003 508,069 74,449 – 428,564 H Shafi VP Planning & Strategy 329,115 25,000 87,809 41.2% – – 64,003 505,927 75,469 – 429,583 Currency EUR P Kieffer Regional President EMEA 235,613 38,764 37,718 22.8% (9,235) – 302,860 101,462 59,673 435,512 R Mannien Regional President Asia 201,365 17,323 66,396 50.2% (4,884) 180,817 461,017 47,439 9,720 456,664 Currency USD M Kelly Regional President Americas 303,221 32,802 110,010 54.3% (4,393) 17,000 458,640 117,092 54,377 524,492 Currency GBP W Weaver VP Technology 134,179 11,720 34,625 39.3% (2,278) – 178,246 30,925 27,859 204,683 1. Amounts provisioned in FY2013 based on projected performance and, for the Share Based LTI, actuarial valuation of share based payments at grant date. Bracketed amounts represent a net reduction in provision. 2. Percentage of total possible short term incentive earnings achieved. 3. Expatriate and Other employee costs. 4. Cash payments received in FY2013 based on actual performance for the FY2012 incentives scheme. 5. Cash payments received in FY2013 based on actual performance for the FY2010 LTI scheme and FY2011 MTI scheme. 38 NUPLE X INdustrIES LIMITED Interest in Performance Share Rights The table below shows details of Performance Share Rights over Nuplex Industries Limited ordinary shares in which Senior Executives of the Company hold relevant interests being Performance Share Rights issued in accordance with the rules of the Performance Rights Plan approved by shareholders at the 2010 Annual Meeting. Vested and Balance at Granted Exercised Lapsed Balance exercisable the start during during during at the end at the end Name of the year the year the year the year of the year of the year
E Severin 1,101,992 698,008 – – 1,800,000 – J Ashton – 82,105 – – 82,105 – S Bastounas 303,490 198,955 – – 502,445 – I Davis 280,669 183,994 – – 464,664 – C Deetlefs 227,166 148,920 – – 376,086 – H Shafi 212,886 140,900 – – 353,786 – P Davey 212,886 140,900 – – 353,786 – J Williams 211,654 140,085 – – 351,739 –
Total Employment Cost (TEC) may include the following 2. Long Term Incentive (LTI) components: The LTI plan is designed to drive behaviour that grows (i) Cash salary; business value over the longer term and to complement the (ii) The cost of the provision of a motor vehicle to a standard shorter term focus of the STI Plan. nominated by the executive and approved by the Board; The Chief Executive Officer is entitled to an annual LTI grant (iii) Superannuation including compulsory and voluntary up to an amount of 100% of TEC subject to achievement of contributions; performance hurdles. (iv) Other non‑cash benefits nominated by the executive and At the 2010 annual meeting shareholders approved the approved by the Board; Company’s Performance Rights Plan and the grant of up 1,800,000 Performance Rights to the Chief Executive Officer (v) Fringe benefits tax payable in respect to any component under the terms of that plan, such grant to be made over a of TEC. three year period. The following table sets out the number Executive and management salaries were reviewed with of Performance Rights which have been granted to the effect from 1 September 2012. In most cases, increases Chief Executive Officer: were in line with cost of living increases, except in cases of promotion or similar special circumstances. Financial Year No. of PSRs
Chief Executive Officer’s Remuneration FY11 526,316 The Chief Executive Officer’s remuneration consists of “Total FY12 575,676 Employment Cost” (TEC) as defined above, plus the short FY13 698,008 term and long term incentives referred to in the above tables. Total 1,800,000 Total Employment Cost (TEC) For the year under review, the Chief Executive Officer’s TEC In FY13 the Chief Executive Officer was issued 44,689 Cash was AUD1,118,250 per annum. Rights under the Cash Rights Plan. Incentives Vesting of performance rights under the Performance Rights Plan issued in 2010, 2011 and 2012 is subject to performance Under the terms of the employment agreement with the Chief hurdles based on Earnings per Share (EPS) growth and Executive Officer, he is entitled to receive incentive awards as Nuplex’s Total Shareholder Return (TSR) performance relative set out below calculated by reference to his TEC. to companies within the NZX50 Index over a measurement 1. Short Term Incentive (STI) period of three to four years. The amount of the STI payment in any year will be determined by the Board by assessment of the Chief Executive Officer’s performance against financial and non‑financial targets set by the Board at the start of each financial year. For performance outcomes at target level, the Chief Executive Officer would receive 50% of his TEC and for performance outcomes at stretch level, he would receive a maximum of 100% of his TEC.
2013 annual report 39 Corporate Governance Report continued
Performance Rights Plan (2010 issue) Relative TSR In 2010, Performance Rights were issued to senior executives Percentile (P) Performance Level Ranking Vesting % in accordance with the terms of the plan as follows: Participant PR Issue Threshold <= P40 0% > Threshold & < Target > P40 & < P50 Pro rata Emery Severin 526,316 Target P50 50% Ian Davis 135,310 > Target & < Stretch > P50 & < P75 Pro rata Rob Harmsen* 146,312 Stretch ≥ P75 100% Sam Bastounas 146,312 Clive Deetlefs 109,516 Performance Hurdle: EPS Growth Hasan Shafi** 102,632 The vesting scale for the EPS Tranche (50%) is as follows: Paul Davey** 102,632 Compound Annual Growth Rate James Williams 102,038 Performance Level (CAGR) in EPS Vesting % Total 1,371,065 Threshold <= 6% 0% (* No longer a senior executive with Nuplex; ** Issue to be pro‑rated to 11/12ths for one month delayed entry > Threshold & < Target > 6% & < 10% Pro rata to plan.) Target 10% 50% Vesting of performance rights issued under the Performance > Target & < Stretch > 10% & < 16% Pro rata Rights Plan in 2010 is subject to the following performance hurdles: Stretch ≥ 16% 100% Performance Hurdle: Total Shareholder Return (TSR) Measurement to determine the extent of vesting of The vesting scale for the TSR Tranche (50%) is as follows and performance rights issued under the Performance Rights Plan is measured against the performance of companies in the in 2010 occurred at the conclusion of the 2013 financial year. NZX50 Index.
The following tables set out the measurement of performance under the Performance Rights Plan (2010 issue). As at 30 June 2013, the performance scorecards below show that the LTI Performance Rights Plan (2010 issue) is below Threshold for both TSR and EPS targets and hence no Performance Rights have vested.
TABLE: PR PLAN (2010 ISSUE) – PERFORMANCE SCORECARD (Relative TSR Percentile) 2010‑11 LTI Performance FY10 Performance Payment Year 1 Year 2 Year 3 Year 4 Rights Plan Actual Base Level Potential FY11 FY11‑FY12 FY11‑FY13 FY11‑FY14
TSR vs NZX50 Index Actual TSR n/a n/a P39 P37 P22 (tbd) Performance Threshold = P40 0% > P40 > P40 Required for Payment Target = P50 50% P50 P50 Stretch => P75 100% P75 P75
TABLE: PR PLAN (2010 ISSUE) – PERFORMANCE SCORECARD (EPS CAGR*) (*Compound Annual Growth Rate) 2010‑11 LTI Performance FY10 Performance Payment Year 1 Year 2 Year 3 Year 4 Rights Plan Actual Base Level Potential FY11 FY12 FY13 FY14
EPS Actual EPS (cents) 33.7 33.7 34.2 31.8 22.1 (tbd) Performance Threshold = 6% 0% 40.2 42.5 Required for Payment Target = 10% 50% 44.9 49.3 Stretch >= 16% 100% 52.6 61.0
40 NUPLE X INdustrIES LIMITED Performance Rights Plan (2011 issue) Relative TSR In 2011, Performance Rights were issued to senior executives Percentile (P) Performance Level Ranking Vesting % in accordance with the terms of the plan as follows: Participant PR Issue < Threshold < P50 0% Threshold P50 50% Emery Severin 575,676 > Threshold & < Stretch > P50 & < P75 Pro rata Ian Davis 145,359 Stretch ≥ P75 100% Sam Bastounas 157,178 Performance Hurdle: EPS Growth Clive Deetlefs 117,650 The vesting scale for the EPS Tranche (50%) is as follows: Hasan Shafi 110,254 Compound Annual Paul Davey 110,254 Growth Rate Performance Level (CAGR) in EPS Vesting % James Williams 109,616 Total 1,325,987 Threshold <= 6% 0% > Threshold & < Target > 6% & < 10% Pro rata For the Performance Rights issued during the 2011‑12 financial year (2011 Performance Rights) the TSR and EPS Target 10% 50% Growth hurdles were set as follows: > Target & < Stretch > 10% & < 14% Pro rata Performance Hurdle: Total Shareholder Return (TSR) Stretch ≥ 14% 100% The vesting scale for the TSR Tranche (50%) is as follows and is measured against the performance of companies in the NZX50 Index.
The following tables set out the current measurement of performance under the Performance Rights Plan (2011 issue).
TABLE: PR PLAN (2011 ISSUE) – PERFORMANCE SCORECARD (Relative TSR Percentile) 2011‑12 LTI Performance FY11 Performance Payment Year 1 Year 2 Year 3 Year 4 Rights Plan Actual Base Level Potential FY12 FY12‑FY13 FY12‑FY14 FY12‑FY15
TSR vs NZX50 Index Actual TSR n/a n/a P35 P20 (tbd) (tbd) Performance Threshold <= P50 0% Required for Payment Target = P50 50% P50 P50 Stretch => P75 100% P75 P75
TABLE: PR PLAN (2011 ISSUE) – PERFORMANCE SCORECARD (EPS CAGR*) (*Compound Annual Growth Rate) 2011‑12 LTI Performance FY11 Performance Payment Year 1 Year 2 Year 3 Year 4 Rights Plan Actual Base Level Potential FY12 FY13 FY14 FY15
EPS Actual EPS (cents) 34.2 34.2 31.8 22.1 (tbd) (tbd) Performance Threshold = 6% 0% 40.7 43.2 Required for Payment Target = 10% 50% 45.5 50.1 Stretch = 14% 100% 50.7 57.8
As at 30 June 2013, the performance scorecards above show that the LTI Performance Rights Plan (2011 issue) is tracking below Threshold for both TSR and EPS targets.
2013 annual report 41 Corporate Governance Report continued
Performance Rights Plan (2012 issue) Performance Hurdle: Total Shareholder Return (TSR) In 2012, Performance Rights were issued to senior executives The vesting scale for the TSR Tranche (50%) is as follows in accordance with the terms of the plan as follows: and is measured against the performance of companies in the NZX50 Index. Participant PR Issue Relative TSR Emery Severin* 698,008 Percentile (P) Performance Level Ranking Vesting % Ian Davis 183,994 Sam Bastounas 198,955 < Threshold < P50 0% Clive Deetlefs 148,920 Threshold P50 50% Hasan Shafi 140,900 > Threshold & < Stretch > P50 & < P75 Pro rata Paul Davey 140,900 Stretch ≥ P75 100%
James Williams 140,085 Performance Hurdle: EPS Growth Josie Ashton 82,105 The vesting scale for the EPS Tranche (50%) is as follows: Total 1,733,867 Compound Annual (* 742,697 Performance Rights were issued to Emery Severin of Growth Rate which 44,689 Performance Rights were cancelled to bring the total Performance Level (CAGR) in EPS Vesting % Performance Rights issued to Emery Severin to 1,800,000 being the amount approved by shareholders in 2010.) Threshold <= 5% 0% For the Performance Rights issued during the 2012‑13 > Threshold & < Target > 5% & < 9% Pro rata financial year (2012 Performance Rights) the TSR and EPS Target 9% 50% Growth hurdles were set as follows: > Target & < Stretch > 9% & < 13% Pro rata Stretch ≥ 13% 100%
The following tables set out the current measurement of performance under the Performance Rights Plan (2012 issue).
TABLE: PR PLAN (2012 ISSUE) – PERFORMANCE SCORECARD (Relative TSR Percentile) 2012‑13 LTI Performance FY12 Performance Payment Year 1 Year 2 Year 3 Year 4 Rights Plan Actual Base Level Potential FY13 FY13‑FY14 FY13‑FY15 FY13‑FY16
TSR vs NZX50 Index Actual TSR n/a n/a P41 (tbd) (tbd) (tbd) Performance Threshold <= P50 0% Required for Payment Target = P50 50% P50 P50 Stretch => P75 100% P75 P75
TABLE: PR PLAN (2012 ISSUE) – PERFORMANCE SCORECARD (EPS CAGR*) (*Compound Annual Growth Rate) 2012‑13 LTI Performance FY12 Performance Payment Year 1 Year 2 Year 3 Year 4 Rights Plan Actual Base Level Potential FY13 FY14 FY15 FY16
EPS Actual EPS (cents) 31.8 31.8 22.1 (tbd) (tbd) (tbd) Performance Threshold = 5% 0% 36.8 38.7 Required for Payment Target = 9% 50% 41.2 44.9 Stretch = 13% 100% 45.9 51.8
As at 30 June 2013, the performance scorecards above show that the LTI Performance Rights Plan (2012 issue) is tracking below Threshold for both TSR and EPS targets.
42 NUPLE X INdustrIES LIMITED Cash Rights Plan The Company has embarked on a period of record capital Having regard to the complexities of the laws associated with investment with the acquisition of Viverso and Acquos and the issue of securities, including Performance Rights, in a number of organic growth projects including: a global ERP countries other than New Zealand and Australia, in 2011 the system, a new third manufacturing plant, at Changshu, in China, Board adopted a Cash Rights Plan to provide for the issue of expanded capacity in Vietnam, Indonesia and Thailand and a long term incentive to the four senior Executives of Nuplex restructure of the operations in NZ and Australia. Future growth who reside outside Australia and New Zealand. in earnings of the Company (and consequent value uplift and returns to shareholders) are very dependent on delivering the Under the terms of the Cash Rights Plan, participants are benefits from these investments. The Board has decided that it issued rights (Cash Rights), similar to rights issued under the is therefore appropriate to directly link long term incentives for Performance Rights Plan, except that on vesting, the rights senior executives to achieving the benefits targeted by our issued under the Cash Rights Plan convert into cash, rather investment program as well as generating returns that exceed than an issue of shares. the cost of capital available to the Company. For the Cash Rights issued during the 2011‑12 financial year For the purposes of the LTI Performance Rights Plan ROFE is (2011 Cash Rights) the TSR and EPS Growth hurdles were the defined as Earnings Before Interest and Tax (EBIT), adjusted same as for the 2011 Performance Rights, details of which are for abnormal items, divided by the Company’s Average Funds set out in the preceding section of this report. Employed over the measurement period, being the sum For the Cash Rights issued during the 2012‑13 financial year of Equity plus Interest‑Bearing Debt. The adjustments for (2012 Cash Rights) the TSR and EPS Growth hurdles were the abnormal items will be made at the discretion of the Board same as for the 2012 Performance Rights, details of which are having regard to any material changes in business structure. set out in the preceding section of this report. It is proposed that the vesting scale for the ROFE Tranche The following table sets out the details of the Cash Rights that (50%) be as follows: have been issued under the Cash Rights Plan: Performance Level ROFE Vesting % Cash Rights Issue Participant 2011 2012 Threshold ≤ 13.0% 0% > Threshold & < Target > 13% & < 14.5% Pro rata Paul Kieffer 101,988 128,877 Target 14.5% 50% Mike Kelly 98,869 130,637 > Target & < Stretch > 14.5% & Ruben Mannien 81,254 112,799 < 16.0% Pro rata William Weaver 73,671 88,515 Stretch ≥ 16.0% 100% TOTAL 355,782 460,828
The current measurement of performance for issues made 12.2ie D r ctors’ Remuneration under the Cash Rights Plan is the same as for the Performance Annual Fees Rights Plan as shown in the above tables. Fees paid to non‑executive Directors are fixed based on 2013 Performance Rights Plan and Cash Rights Plan – service during the year and do not include any Short Term or Performance Hurdles Long Term Incentives. As indicated above, the Performance Rights Plan will be The maximum aggregate fees payable to non‑executive re‑submitted for approval by shareholders at the annual Directors was set at AUD1,000,000 by Ordinary Resolution of meeting to be held in November 2013. Shareholders at the Annual Meeting held on 1 November 2012. Subject to obtaining approval from shareholders, it is proposed During the year ended 30 June 2013, there was an increase in that for the Performance Rights and Cash Rights to be issued Directors fees effective 1 July 2012. during the 2013‑14 financial year (2013 Performance Rights), Remuneration paid to Directors during the year ended 30 June the following performance hurdles will apply: 2013 is disclosed in the Statutory Information section of this Performance Hurdle: Total Shareholder Return (TSR) report on page 94 of this report. The vesting scale for the TSR Tranche (50%) is as follows and is measured against the performance of companies in the 13.m Sum ary of Waivers granted by NZX NZX50 Index. There were no waivers granted under the listing rules of the Relative TSR NZX in the 12 month period preceding the date two months Percentile (P) before the date of publication of this annual report. Performance Level Ranking Vesting %
< Threshold < P50 0% 14. Statement on Governance Practices Threshold P50 50% The Board has reviewed its governance practices against: > Threshold & < Stretch > P50 & < P75 Pro rata • The best practice recommendations set by the ASX Corporate Governance Council; Stretch ≥ P75 100% • The NZX Corporate Governance Best Practice Code; and Performance Hurdle: Return on Funds Employed (ROFE) • The NZ Financial Markets Authority’s Principles and The Board has determined that a performance hurdle based Guidelines of Corporate Governance; on Return on Funds Employed (ROFE) will be used in place of and is of the view that Nuplex is compliant with these codes. the former EPS Growth performance hurdle.
2013 annual report 43 The following notice is published pursuant to Orders made in the Magistrates Court of Victoria, at Wangaratta, Australia on 22nd April 2013 under Section 67AC(2)(b) of the Victorian Environmental Protection Act, 1970.
Nuplex Industries (Aust) Pty Ltd charged after causing air pollution On 22 April 2013 at Wangaratta Magistrates’ Court, Nuplex Industries (Aust) Pty Ltd (“the Accused”) pleaded guilty to an air pollution charge brought by the Environment Protection Authority (“EPA”) in relation to the release of chemical vapours, namely ethyl acrylate, butyl acrylate and acrylonitrile on 19 December 2011 into the atmosphere at Wangaratta. The Accused holds an EPA licence at 1-5 Gibson Street, Wangaratta (“the Premises”) to manufacture water based acrylic products for the textile, adhesive and paint industries. The release of chemical vapours was caused when, as a result of operator error, materials used in the creation of a textile coating material were manually added to the incorrect tank at the Premises. The reaction of the added materials with the product already in the tank caused an increase of pressure and temperature in the tank, resulting with the subsequent release of some of the tank contents and the discharge of chemical vapours. The odours impacted the residential area to the north west of the Accused’s premises, and resulted in the evacuation of a number of residents as a precaution. Some of these residents reported symptoms of irritation of the eyes, sore throats, coughs, nausea, headaches and anxiety. Those who sought medical advice were discharged with no lasting injuries. The Court without conviction ordered the Accused to pay $160,000.00 in total to the Rural City of Wangaratta as lead organisation and on behalf of North East Catchment Management Authority, Wangaratta Urban Landcare Group, Wangaratta Sustainability Network, Restore Our Waterways, Ovens Landcare Network and Park Lane Nursery. The funds will be used for the following project/s. The Sisely Avenue Tree Planting Project which will provide a visual buffer between residential and industrial zones in Wangaratta, provide habitat for birdlife and increase shading which will help counteract urban heat island effect ($54,450.00). The Wareena Park and Wetland and One Mile Creek Project which will allow for environmental activities which provide for community participation and education ($68,450.00). The Significant Local Trees Project which will provide for the identification, photographing, mapping and registering of significant trees in urban Wangaratta. Exhibitions will be held to showcase the photographs ($21,100.00). The One Mile Creek Survey Project which will involve creek health assessments and fauna surveys along One Mile Creek, north of Tone Road in urban Wangaratta. Information will be utilised for community education ($16,000.00). The Accused was also ordered to pay the EPA’s costs of $13,464.00. The Accused has since changed its procedures and is improving its systems to prevent a recurrence of this incident. The Court also ordered publication of this notice.
FI IL NanC A Report
The Directors are pleased to present the Financial Statements of the Nuplex Group for the year ended 30 June 2013.
roa b itken dav id jackson C hAIRMAN director
15 August 2013 15 August 2013
44 NUPLE X INdustrIES LIMITED Independent Auditors’ Report to the shareholders of Nuplex Industries Limited
R eport on the Financial Statements We have audited the financial statements of Nuplex Industries Limited (“the Company”) on pages 46 to 90, which comprise the statement of financial position as at 30 June 2013, the statements of comprehensive income, statements of changes in equity and statements of cash flows for the year then ended, and the notes to the financial statements that include a summary of significant accounting policies and other explanatory information for both the Company and the Group. The Group comprises the Company and the entities it controlled at 30 June 2013 or from time to time during the financial year.
Directors’ Responsibility for the Financial Statements The Directors are responsible for the preparation of these financial statements in accordance with generally accepted accounting practice in New Zealand and that give a true and fair view of the matters to which they relate and for such internal controls as the Directors determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing (New Zealand) and International Standards on Auditing. These standards require that we comply with relevant ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider the internal controls relevant to the Company and the Group’s preparation of financial statements that give a true and fair view of the matters to which they relate, 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 Company and the Group’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Other than in our capacity as auditors we have no relationship with, or interests in, Nuplex Industries Limited or any of its subsidiaries.
Opinion In our opinion, the financial statements on pages 46 to 90: (i) comply with generally accepted accounting practice in New Zealand; and (ii) comply with International Financial Reporting Standards; and (iii) give a true and fair view of the financial position of the Company and the Group as at 30 June 2013, and their financial performance and cash flows for the year then ended.
Report on Other Legal and Regulatory Requirements We also report in accordance with Sections 16(1)(d) and 16(1)(e) of the Financial Reporting Act 1993. In relation to our audit of the financial statements for the year ended 30 June 2013: (i) we have obtained all the information and explanations that we have required; and (ii) in our opinion, proper accounting records have been kept by the Company as far as appears from an examination of those records.
Restriction on Distribution or Use This report is made solely to the Company’s shareholders, as a body, in accordance with Section 205(1) of the Companies Act 1993. Our audit work has been undertaken so that we might state to the Company’s shareholders those matters which we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s shareholders, as a body, for our audit work, for this report or for the opinions we have formed.
Chartered Accountants Sydney, 15 August 2013
PricewaterhouseCoopers, ABN 52 780 433 757 Darling Park Tower 2, 201 Sussex Street, GPO BOX 2650, SYDNEY NSW 1171 DX 77 Sydney, Australia T +61 2 8266 0000, F +61 2 8266 9999, www.pwc.com.au Liability limited by a scheme approved under Professional Standards Legislation. 2013 annual report 45 S otatementS f COMPREHENSIVE income For the year ended 30 June 2013
Group Company (NZD in thousands) Note 2013 2012 2013 2012
Sales revenue 1,664,911 1,615,897 81,449 83,746 Cost of sales (1,313,975) (1,278,835) (61,941) (62,723) Gross profit 350,936 337,062 19,508 21,023 Other operating income 3 5,146 5,025 850 26,448 Distribution expenses (89,249) (78,512) (4,342) (4,495) Marketing expenses (86,079) (85,657) (7,928) (8,299) Administration expenses (74,702) (68,705) (10,788) (8,849) Other operating expenses 4 (29,188) (9,605) (3,978) (2,342) Operating profit before financing costs and share of profits/(losses) of associates 76,864 99,608 (6,678) 23,486 Financial income 1,842 2,440 15,346 19,212 Financial expenses (18,451) (16,423) (3,684) (7,786) Net financing (costs)/income 7 (16,609) (13,983) 11,662 11,426 Share of profits/(losses) of associates 12 1,843 (1,829) – – Profit before income tax 62,098 83,796 4,984 34,912 Income tax expense 8 (16,803) (19,289) (1,396) (2,899) Profit for the year 45,295 64,507 3,588 32,013 Other comprehensive income Foreign currency translation differences for foreign operations (2,765) (16,978) – – Effective portion of changes in fair value of cash‑flow hedges (6,457) 1,212 (339) 296 Income tax on other comprehensive income 1,769 (335) 95 (83) Other comprehensive income for the period, net of income tax (7,453) (16,101) (244) 213 Total comprehensive income for the year 37,842 48,406 3,344 32,226 Profit attributable to: Equity holders of the parent 42,928 62,533 3,588 32,013 Non‑controlling interests 2,367 1,974 – – 45,295 64,507 3,588 32,013 Total comprehensive income attributable to: Equity holders of the parent 35,216 46,480 3,344 32,226 Non‑controlling interests 2,626 1,926 – – 37,842 48,406 3,344 32,226 Earnings per share for profit attributable to the ordinary equity holders of the company: Basic earnings per share 9 0.22 0.32 Diluted earnings per share 9 0.21 0.30
To be read in conjunction with the notes to the financial statements on pages 50 to 90.
46 NUPLE X INdustrIES LIMITED S tatements of CHANGES IN Equity For the year ended 30 June 2013
Statements of Changes in Equity for the year ended 30 June 2013 Group Company Attributable to equity holders of the parent Share- Share- based Trans- Non‑ based Share payments lation Retained Hedging controlling Total Share payments Retained Hedging (NZD in thousands) Note capital reserve reserve earnings reserve Total interest equity capital reserve earnings reserve Total
Balance at 1 July 2012 364,244 1,751 (32,155) 222,452 160 556,452 7,108 563,560 364,244 1,751 73,239 (217) 439,017 Other comprehensive income Foreign currency translation differences – – (3,024) – – (3,024) 259 (2,765) – – – – – Effective portion of changes in fair value of cash‑flow hedges, net of tax – – – – (4,688) (4,688) – (4,688) – – – (244) (244) Total other comprehensive income – – (3,024) – (4,688) (7,712) 259 (7,453) – – – (244) (244) Profit for the year – – – 42,928 – 42,928 2,367 45,295 – – 3,588 – 3,588 Total comprehensive income for the year – – (3,024) 42,928 (4,688) 35,216 2,626 37,842 – – 3,588 (244) 3,344 Contributions by and distributions to owners Dividend reinvestment plan 20 4,209 – – – – 4,209 – 4,209 4,209 – – – 4,209 Performance rights plan 18 – 996 – – – 996 – 996 – 996 – – 996 Dividends paid 20 – – – (41,455) – (41,455) (2,377) (43,832) – – (41,455) – (41,455) Balance as at 30 June 2013 368,453 2,747 (35,179) 223,925 (4,528) 555,418 7,357 562,775 368,453 2,747 35,372 (461) 406,111
Statements of Changes in Equity for the year ended 30 June 2012 Group Company Attributable to equity holders of the parent Share- Share- based Trans- Non‑ based Share payments lation Retained Hedging controlling Total Share payments Retained Hedging (NZD in thousands) Note capital reserve reserve earnings reserve Total interest equity capital reserve earnings reserve Total
Balance at 1 July 2011 364,244 1,200 (15,225) 201,236 (717) 550,738 9,994 560,732 364,244 1,200 82,543 (430) 447,557 Other comprehensive income Foreign currency translation differences – – (16,930) – – (16,930) (48) (16,978) – – – – – Effective portion of changes in fair value of cash‑flow hedges, net of tax – – – – 877 877 – 877 – – – 213 213 Total other comprehensive income – – (16,930) – 877 (16,053) (48) (16,101) – – – 213 213 Profit for the year – – – 62,533 – 62,533 1,974 64,507 – – 32,013 – 32,013 Total comprehensive income for the year – – (16,930) 62,533 877 46,480 1,926 48,406 – – 32,013 213 32,226 Contributions by and distributions to owners Performance rights plan 18 – 551 – – – 551 – 551 – 551 – – 551 Dividends paid 20 – – – (41,317) – (41,317) (1,700) (43,017) – – (41,317) – (41,317) Transactions with non‑controlling interests – – – – – – (3,112) (3,112) – – – – – Balance as at 30 June 2012 364,244 1,751 (32,155) 222,452 160 556,452 7,108 563,560 364,244 1,751 73,239 (217) 439,017
To be read in conjunction with the notes to the financial statements on pages 50 to 90.
2013 annual report 47 S otatementS f Financial Position as at 30 June 2013
Group Company (NZD in thousands) Note 2013 2012 2013 2012
Equity attributable to members of the parent company 20 Share capital 368,453 364,244 368,453 364,244 Share‑based payments reserve 2,747 1,751 2,747 1,751 Translation reserve (35,179) (32,155) – – Retained earnings 223,925 222,452 35,372 73,239 Hedging reserve (4,528) 160 (461) (217) Non‑controlling interests 20 7,357 7,108 – – Total Equity 562,775 563,560 406,111 439,017 Property, plant and equipment 14 313,173 311,008 18,270 18,574 Intangible assets 15 219,278 215,786 2,150 2,151 Investments in associates 12 6,581 11,716 – – Investments in subsidiaries – – 228,771 228,771 Trade and other receivables 11 – – 233,467 237,760 Deferred tax asset 13 10,205 8,075 401 – Non‑current Assets 549,237 546,585 483,059 487,256 Inventories 10 238,312 234,354 16,301 15,342 Trade and other receivables 11 369,460 361,835 15,766 18,613 Income tax receivable 9,498 11,963 – 591 Cash and cash equivalents 91,790 68,325 3,630 1,595 Current Assets 709,060 676,477 35,697 36,141 Total Assets 1,258,297 1,223,062 518,756 523,397 Borrowings 17 289,108 130,815 52,707 215 Trade and other payables 16 – – 30,480 – Employee provisions 18 22,616 22,947 139 204 Deferred tax liability 13 17,527 17,414 – 53 Non‑current Liabilities 329,251 171,176 83,326 472 Borrowings 17 490 157,594 98 52,685 Trade and other payables 16 323,478 287,086 21,085 28,054 Employee provisions 18 22,188 21,306 2,608 1,453 Provisions 19 5,728 8,288 2,216 1,716 Income tax payable 14,387 14,052 3,312 – Current Liabilities 366,271 488,326 29,319 83,908 Total Liabilities 695,522 659,502 112,645 84,380 Total Net Assets 562,775 563,560 406,111 439,017
To be read in conjunction with the notes to the financial statements on pages 50 to 90.
48 NUPLE X INdustrIES LIMITED Cash Flow StatementS For the year ended 30 June 2013
Group Company (NZD in thousands) Note 2013 2012 2013 2012
Receipts from customers (inclusive of goods and services tax) 1,797,934 1,692,633 95,322 94,029 Interest received 975 1,026 14,829 19,212 Payments to suppliers and employees (inclusive of goods and services tax) (1,656,457) (1,606,946) (88,334) (88,444) Interest paid (14,938) (15,306) (3,559) (5,312) Dividends received 1,215 1,251 – – Income taxes (paid)/received (16,941) (24,236) 2,044 (1,280) Net cash from/(used in) operating activities 28 111,788 48,422 20,302 18,205 Disposal of property, plant and equipment 188 481 – – Payments for property, plant, equipment and intangibles (48,272) (31,546) (1,218) (602) Receipts from loans to subsidiaries – – 20,877 21,034 Increase in investment in subsidiaries less cash acquired – (104,035) – – Payments for purchases of businesses, net of cash acquired (7,002) (26,453) – – Disposal of businesses, net of cash disposed of 2,005 3,954 – – Net cash from/(used in) investing activities (53,081) (157,599) 19,659 20,432 Proceeds from borrowings 155,718 191,508 232 – Repayment of borrowings (151,903) (36,455) (328) – Dividends paid to shareholders (39,623) (43,017) (37,246) (41,317) Net cash from/(used in) financing activities (35,808) 112,036 (37,342) (41,317) Increase/(decrease) in cash and cash equivalents 22,899 2,859 2,619 (2,680) Cash and cash equivalents at 1 July 68,325 66,850 1,595 4,275 Effect of exchange rate fluctuation 566 (1,384) – – Cash and cash equivalents at 30 June 91,790 68,325 4,214 1,595 Comprising: Cash balances 66,288 57,338 3,630 1,595 Cash on call deposit 25,502 10,987 584 – 91,790 68,325 4,214 1,595
To be read in conjunction with the notes to the financial statements on pages 50 to 90.
2013 annual report 49 N otes to the Financial Statements For the year ended 30 June 2013
1.igfic S ni ant accounting policies Nuplex Industries Limited (the “Company”) is a Company registered and domiciled in New Zealand. The consolidated financial statements of the Company comprise the Company and its subsidiaries (the “Group”) and the Group’s interest in associated entities.
(a) Statement of compliance The financial statements have been prepared in accordance with New Zealand Generally Accepted Accounting Practice (NZ GAAP). They comply with New Zealand equivalents to International Financial Reporting Standards (NZIFRS), and other applicable Financial Reporting Standards, as appropriate for profit‑orientated entities. The financial statements also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). The accounting policies set out below have been applied consistently to all periods in these financial statements, there have been no changes in the accounting policies during the year. The International Accounting Standards Board has issued a number of other standards, amendments and interpretations which are not yet effective, detailed below. The Group has not yet applied these in preparing these financial statements and will apply each in the period in which it becomes mandatory. Standard Description Mandatory for the year‑ending
NZ IFRS 10 Consolidated Financial Statements 30 June 2014 NZ IFRS 11 Joint Arrangements 30 June 2014 NZ IFRS 12 Disclosure of interests in other entities 30 June 2014 NZ IFRS 13 Fair Value Measurement 30 June 2014 NZ IAS 19 Employee Benefits (amended 2011) 30 June 2014 NZ IAS 27 Separate Financial Statements (2011) 30 June 2014 NZ IAS 28 Investments in Associates and Joint Ventures (2011) 30 June 2014 NZ IFRS 7 Disclosures – Offsetting Financial Assets and Financial Liabilities 30 June 2014 NZ IAS 32 Amendments – Offsetting Financial Assets and Financial Liabilities 30 June 2015 NZ IFRS 9 Financial Instruments 30 June 2016
The above standards and interpretations are not considered likely to have a material impact for the Group.
(b) Basis of preparation The financial statements of the Group and Company comply with the Financial Reporting Act 1993 and the Companies Act 1993. These financial statements are presented in New Zealand dollars, which is the Company’s functional currency, except where stated otherwise, rounded to the nearest thousands. They are prepared on the historical cost basis except that previously revalued property, plant and equipment carrying values which on transition to NZIFRS have been deemed as cost, and the following assets and liabilities are stated at their fair values: derivative financial instruments. The consolidated financial statements have been approved by the Board of Directors on 15 August 2013. The preparation of financial statements in conformity with NZIFRS’s requires management to make judgements, estimates and assumptions that effect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgements about carrying values of some assets and liabilities. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of revision and future periods if the revision affects both current and future periods. Information about the significant areas of judgement exercised or estimation in applying accounting policies that have had a significant impact on the amounts recognised in the financial statements are described below. (i) Valuation of goodwill and other intangibles The carrying value of goodwill is assessed at least annually to ensure that it is not impaired. This assessment requires management to estimate future cash flows to be generated by cash-generating units to which goodwill has been allocated. Estimating future cash-flows entails making judgements including the expected rate of growth of revenues and expenses, margins and market shares to be achieved, and the appropriate discount rate to apply when discounting future cash flows. Note 15 of these financial statements provides more information on the assumptions management have made in this area and the carrying values of goodwill. As the outcomes in the next financial period may be different to the assumptions made, it is impracticable to predict the impact that could result in a material adjustment to the carrying amount. (ii) Recognition of deferred tax assets The value of deferred tax assets recognised in the financial statements involve a significant degree of judgement around the future profitability, ownership and legislative outcomes impacting on the Group entity to which the assets or potential assets relate. In making the required judgements management take account of all circumstances of which they are aware and current
50 NUPLE X INdustrIES LIMITED economic forecasts which might have bearing on the tax In assessing control the Group takes into consideration situation of the entity concerned. Note 13 to these financial potential voting rights that are currently exercisable. statements contains further information on tax losses the Acquisition date is the date on which control is transferred Group has incurred but not recognised as a deferred tax asset. to the acquirer. Judgement is applied in determining the (iii) Doubtful debt provisions acquisition date and determining whether control is transferred from one party to another. Provisioning for doubtful debts takes into account known factors impacting specific debtors, as well as the overall The Group measures goodwill as the fair value of the profile of each Group company’s debtors portfolio. Factors consideration transferred including the recognised amount such as the age of receivable balances, past collection history, of any non‑controlling interest in the acquiree, less the net the level of activity in customer accounts are taken into recognised amount (generally fair value) of the identifiable account. Further information on the doubtful debt provision assets acquired and liabilities assumed, all measured as at is contained in note 21 to these financial statements. the acquisition date. (iv) Provisions and contingencies Consideration transferred includes the fair value of the assets transferred, liabilities incurred by the Group to the previous Identification, recognition and valuation of provisions requires owners of the acquiree, and equity interests issues by the management to make judgements about the likelihood of an Group. Consideration transferred also includes the fair value amount becoming payable or an economic benefit being of any contingent consideration and share‑based payment foregone, estimation of the value of the potential obligations awards of the acquiree that are replaced mandatorily in the based on available information and estimating when such business combination. If a business combination results in the obligations are likely to be settled. Where a range of possible termination of pre‑existing relationships between the Group outcomes exist, management must apply judgement in and the acquiree, then the lower of the termination amount, assessing the probability that any given outcome may occur. as contained in the agreement, and the value of the off‑market Note 19 to these financial statements gives further information element is deducted from the consideration transferred and on the value of provisions recognised. As new contingencies recognised in other expenses. can arise unexpectedly or existing items be resolved at short notice, it is impracticable to predict how the carrying value may Transaction costs that the Group incurs in connection with be impacted over the next financial period but changes could a business combination, such as finders fees, legal fees, result in a material adjustment to the carrying amount. due diligence fees, and other professional and consulting fees are expensed as incurred in the Group financial statements. (v) Employee provisions A contingent liability of the acquiree is assumed in a business The Group is exposed to defined benefit obligations and long combination only if such a liability represents a present service leave obligations that require significant judgements obligation and arises from a past event, and its fair value can to be made in the calculation of the Group’s expected future be measured reliably. liability and its present value. Significant assumptions made include the expected asset growth rates, social security rates, When share‑based payment awards (replacement awards) pension and salary growth rates and the discount rates to be are exchanged for awards held by the acquiree’s employees applied in calculating present values. For each significant (acquiree’s awards) and relate to past services, then a part defined benefit scheme a qualified external actuary is of the market‑based measure of the replacement awards is engaged to provide a valuation based, where possible, on included in the consideration transferred. If future services are externally verifiable assumptions. As the outcomes in the required, then the difference between the amount included in next financial period may be different to the assumptions consideration transferred and the market‑based measure of made, it is impracticable to predict the impact that could the replacement awards is treated as post combination result in a material adjustment to the carrying amount. compensation cost. (vi) Property plant and equipment and finite‑life Accounting for acquisitions of non‑controlling interests intangible assets Acquisitions of non‑controlling interests are accounted for In accounting for Property plant and equipment and finite‑life as transactions with equity holders in their capacity as equity intangible assets management is required to make judgements holders and therefore no goodwill is recognised as a result of on the expected life of the asset, the likelihood of the assets such transactions. obsolescence and the likelihood that the asset will continue Subsidiaries to be utilised. Management reassesses useful lives at least Subsidiaries are entities controlled by the Group. Control annually and considers whether indicators of impairment have exists when the Group has the power, directly or indirectly, occurred that might necessitate impairment testing. Assessing to govern the financial and operating policies of an entity impairment where required may involve estimation and so as to obtain benefits from its activities. The financial valuation of future cash‑flows that an asset is expected to statements of subsidiaries are included in the consolidated generate and making assumptions thereon. As the outcomes financial statements from the date that control commences of the next financial period may differ from the assumptions until the date that control ceases. made, it is impractical to predict the impact that could result In the Company’s financial statements, investments in in a material adjustment to the carrying amount. subsidiaries are carried at the lower of cost or recoverable (c) Basis of consolidation amount. Accounting for business combinations The acquisition method of accounting is used to account for all business combinations. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.
2013 annual report 51 N otes to the Financial Statements continued For the year ended 30 June 2013
1.igfic S ni ant accounting policies – continued presented within equity in the translation reserve. If ineffective, it is recognised in profit or loss. Amounts recognised in equity Associates are released to profit or loss upon disposal. Associates are those entities in which the Group has significant influence, but not control, over the financial and (e) Revenue and other operating income operating policies. Investments in associates are accounted Sale of goods for using the equity method and are initially measured at cost. Revenue from the sale of goods is measured at the fair value The consolidated financial statements include the Group’s of the consideration received or receivable, net of returns and share of the total recognised income, expense and equity allowances, trade discounts and volume rebates. Revenue is movements of associates on an equity accounted basis, net of recognised when the significant risks and rewards of any impairment losses, from the date that significant influence ownership have been transferred to the buyer, recovery of the commences until the date that significant influence ceases. consideration is probable, the associated costs and possible When the Group’s share of losses exceeds its interest in the return of goods can be estimated reliably, and there is no associate, the Group’s carrying amount is reduced to nil and continuing management involvement with the goods. If it is recognition of further losses is discontinued except to the probable that discounts will be granted and the amount can extent that the Group has incurred legal or constructive be measured reliably, then the discount is recognised as a obligations or made payments on behalf of the associate. reduction in revenue as the sales are recognised. Transfer of entities or assets under Group control Dividend income Business combinations arising from the transfer of assets or Dividend income is recognised in profit and loss on the date interests from one Group entity to another Group entity are the entity’s right to receive payment is established, which accounted for at the carrying amounts recognised previously is when the dividend is declared. Dividend income from in the Group’s controlling shareholders consolidated financial associates reduces the investment balance shown in the statements. consolidated statement of financial position. Transactions eliminated on consolidation (f) Expenses Intragroup balances and any unrealised gains or losses or income and expenses arising from intragroup transactions are Operating lease payments eliminated in preparing the consolidated financial statements. Payments made under operating leases are recognised Unrealised gains arising from transactions with associates are in profit and loss on a straight‑line basis over the term of eliminated to the extent of the Group’s interest in the entity. the lease. Unrealised losses are eliminated in the same way as unrealised Net financing costs gains, but only to the extent that there is no evidence of impairment. Net financing costs comprise interest payable on borrowings calculated using the effective interest rate method, foreign (d) Foreign currency exchange gains and losses, and gains and losses on hedging Foreign currency transactions instruments that are recognised in profit and loss. The interest expense component of finance lease payments is recognised Transactions in foreign currencies are translated at the foreign in profit and loss using the effective interest rate method. exchange rate ruling at the date of the transaction. Monetary Interest income is recognised in profit and loss as it accrues, assets and liabilities denominated in foreign currencies at the using the effective interest rate method. balance sheet date are translated to the functional currency at the foreign exchange rate ruling at that date. Foreign exchange (g) Income tax differences arising on translation are recognised in the income Income tax on the profit or loss for the year comprises current statement. Non‑monetary assets and liabilities denominated and deferred tax. Income tax is recognised in profit and loss in foreign currencies that are stated at fair value are translated except if it relates to items recognised directly in equity or to the functional currency at foreign exchange rates ruling at other comprehensive income, in which case the income tax the dates the fair values were determined. is recognised therein. Current tax is the expected tax payable Financial statements of foreign operations on the taxable income for the period, using tax rates enacted The assets and liabilities of foreign operations, including or substantially enacted at the balance sheet date, and any goodwill and fair value adjustments arising on consolidation, adjustments to tax payable in prior years. are translated to New Zealand dollars at foreign exchange Deferred tax is recognised in respect of temporary differences rates ruling at the balance sheet date. The revenues and between the carrying amounts of assets and liabilities for expenses of foreign operations are translated to New Zealand accounting purposes and the amounts used for taxation dollars at rates approximating to the foreign exchange rates purposes. The following temporary differences are not ruling at the dates of the transactions. This would normally provided for: goodwill not deductible for taxation purposes, be the average foreign exchange rate for the reporting period, the initial recognition of assets and liabilities that affect neither or such shorter period for an entity or business acquired or accounting, nor taxable profit, and differences relating to disposed of during the period. Exchange differences arising investments in subsidiaries to the extent that they will on these retranslations are recognised in other comprehensive probably not reverse in the foreseeable future. The amount income and presented in the translation reserve. of deferred tax provided is based on the expected realisation Net investment in foreign operations or settlement of the carrying amount of assets and liabilities, using tax rates at balance date, or if known, tax rates at the Exchange differences arising from the translation of the net expected time of realisation or settlement. investment in foreign operations, and the related hedges and deferred tax impact are recognised in other comprehensive income to the extent that the hedge is effective and are
52 NUPLE X INdustrIES LIMITED Tax losses and other deferred tax assets are recognised only (j) Intangible assets to the extent that it is probable that future tax profits will be Goodwill available against which the asset can be utilised. Deferred tax All business combinations are accounted for by applying the assets are reduced to the extent that it is no longer probable acquisition method. Goodwill represents amounts arising on that the related tax benefit will be realised. Additional income acquisition of subsidiaries and associates, and represents the taxes that arise from the distribution of dividends are difference between the cost of the acquisition and the fair recognised at the same time as the liability to pay the value of the net identifiable assets acquired. Goodwill is stated related dividend. at cost less any accumulated impairment losses. Goodwill is (h) Earnings per share allocated to cash‑generating units and is tested annually for impairment. In respect of associates, the carrying amount of The Group presents basic and diluted earnings per share (EPS) goodwill is included in the carrying amount of the investment data for its ordinary shares. Basic EPS is calculated by dividing in the associate. Negative goodwill arising on an acquisition is the profit or loss attributable to ordinary shareholders of the recognised directly in profit and loss. Company by weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by Intellectual property adjusting the profit or loss attributable to ordinary shareholders Expenditure on research activities, undertaken with the and the weighted average number of ordinary shares prospect of gaining new scientific or technical knowledge, outstanding for the effects of all dilutive potential ordinary is recognised in profit and loss as an expense as incurred. shares, which comprise convertible capital notes and Expenditure on product or process development activities, performance rights granted to employees. whereby research findings are applied to the development of new or substantially improved products and processes, (i) Property, plant and equipment is capitalised if the product or process is technically and Owned assets commercially feasible with the probability of future economic Items of property, plant and equipment are stated at cost or benefits, the Group has sufficient resources to complete deemed cost less accumulated depreciation and impairment development and costs can be measured reliably. The losses. expenditure capitalised includes the cost of materials, direct Cost includes expenditure that is directly attributable to the labour and an appropriate proportion of overheads. Capitalised acquisition of the asset. The cost of self‑constructed assets development expenditure is stated at cost less accumulated includes the cost of materials and direct labour, any other amortisation and impairment losses. Other development costs directly attributable to bringing the asset to a working expenditure is recognised in profit and loss as an expense condition for its intended use, the costs of dismantling and as incurred. removing the items and restoring the site on which they are Purchased agency portfolio located and capitalised borrowing costs. Agency agreements acquired are capitalised as intangible The cost of replacing part of an item of property, plant and assets at a value based on a discounted cash flow analysis equipment is recognised in the carrying amount of the item of their expected net worth at acquisition. The portfolio if it is probable that the future economic benefits embodied of agreements is not considered to have a finite life, as within the part will flow to the Group and its cost can be agreements can be rolled over at the option of the Group, measured reliably. The carrying value of the replaced part and it is reasonably expected that this will occur, and as such is derecognised. The cost of the day‑to‑day servicing of the portfolio is not amortised. The portfolio is tested for property, plant and equipment are recognised in profit or impairment each reporting period and any impairment is loss as incurred. recognised in profit and loss. Gains and losses on disposal of an item of property, plant and Other intangible assets equipment are determined by comparing the proceeds from Other intangible assets that are acquired by the Group are disposal with the carrying amount of property, plant and stated at cost less accumulated amortisation and impairment equipment and are recognised within “other income” in losses. profit or loss. Amortisation Leased assets Amortisation is charged to profit and loss on a straight‑line Lease agreements where the Group assumes substantially basis over the estimated useful lives of the finite life intangible all the risks and rewards of ownership of the leased asset are assets. Goodwill and intangible assets with an indefinite classified as finance leases. useful life are not amortised but tested for impairment at Depreciation each annual balance sheet date. Other intangible assets Depreciation is charged to profit and loss on a straight‑line are amortised from the date they are available for use. basis over the estimated useful lives of each part of an item The estimated useful lives for the current and comparative of property, plant and equipment. Depreciation is classified as years are as follows: Distribution, Marketing, Administration or other based on the Intellectual property up to 15 years function of the underlying asset to which the charge relates. Other up to 10 years The land component of land and buildings is not depreciated. The estimated useful lives for the current and comparative (k) Trade and other receivables year are as follows: Trade and other receivables are initially stated at fair value Land and buildings 20 – 50 years and are categorised as loans and receivables which are Plant and equipment 3 – 20 years subsequently measured at amortised cost less impairment. Motor vehicles 5 years
2013 annual report 53 N otes to the Financial Statements continued For the year ended 30 June 2013
1.igfic S ni ant accounting policies – continued expense is adjusted to reflect the number of rights for which the service and non‑market vesting conditions are expected (l) Inventories to be met at the vesting date. The rights are both equity and Inventories are stated at lower of cost and net realisable value cash settled. with due allowance for rework and/or obsolescence. Raw Defined contribution plans materials, packaging and inventories purchased for resale Obligations for contributions to defined contribution pension are valued on a weighted average cost basis. Manufactured plans are recognised as an expense in profit or loss in the inventories and work in progress are valued at the cost of periods during which services are rendered by employees. materials plus direct labour and factory overheads based on normal operating capacity, including all costs of bringing Defined benefit plans items to their present location and condition. The Group’s net obligation in respect of defined benefit pension and medical plans is calculated separately for each (m) Cash and cash equivalents plan by estimating the amount of future benefit that employees Cash and cash equivalents comprise cash balances and call have earned or might receive in return for their service in the deposits with original maturities of less than three months and current and prior periods. That benefit is discounted to readily convertible to cash. Bank overdrafts that are repayable determine its present value and the fair value of any plan on demand and form part of the Group’s cash management assets is deducted. The discount rate is the yield at the are included for the purposes of the cash flow statements. balance sheet date on government bonds that have maturity dates approximating to the terms of the Group’s obligations. (n) Impairment The calculation is performed by a qualified actuary using the The carrying amounts of the Group’s assets, other than projected unit credit method. When the benefits of a plan are inventories and deferred tax assets, are reviewed at each improved, the portion of the increased benefit relating to past balance sheet date to determine whether there is any service by employees is recognised immediately as an indication of impairment. If any such indication exists, the expense in the income statement. In respect of actuarial assets recoverable amount is estimated. For intangible gains and losses that arise in calculating the Group’s obligation assets that have an indefinite useful life and intangible assets in respect of a plan, to the extent that any cumulative that are not yet available for use, the recoverable amount is unrecognised actuarial gain or loss exceeds 10% of the greater estimated at each balance sheet date. An impairment loss of the present value of the defined benefit obligation and the is recognised whenever the carrying amount of an asset or fair value of plan assets, that portion is recognised in profit and its cash‑generating unit exceeds its recoverable amount. loss over the expected average remaining working lives of the Impairment losses are recognised in the income statement. employees participating in the plan. Otherwise, the actuarial Impairment losses recognised in respect of cash‑generating gain or loss is not recognised. units are allocated first to reduce the carrying amount of any Long‑term service benefits goodwill allocated to cash‑generating units and then to reduce The Group’s obligation in respect of long‑term service the carrying amount of other assets in the unit on a pro‑rata benefits, other than pension plans, is the amount of the future basis. The recoverable amount of other assets is the greater benefit, including on‑costs, and discounted to present value at of their net selling price and value in use. discount rates appropriate to the local jurisdiction in which the (o) Equity liability arises, that employees have earned in return for their Share capital is recognised at the fair value of the service in the current and prior periods. consideration received by the Company. Transaction costs Termination benefits attributable to the issue of ordinary shares are recognised Termination benefits are recognised as an expense when the directly in equity as a reduction of the share proceeds Group is demonstrably committed, without realistic possibility received. Dividends are recognised as a liability in the of withdrawal, to a formal detailed plan to terminate period in which they are declared. employment before the normal retirement date. If benefits are payable more than 12 months after the end of the reporting (p) Interest‑bearing borrowings period then they are discounted to their present value. Interest‑bearing borrowings are recognised initially at fair Other value less attributed transaction costs. The attributed transaction costs are amortised over the period of the Vested sick leave, annual leave and bonuses are measured borrowings on an effective interest basis. at their nominal amounts, based on remuneration rates which are expected to be paid when the liability is settled. Subsequent to initial recognition, borrowings are measured These amounts are disclosed in current employee benefits. at amortised cost using the effective interest rate method, less any impairment losses. (r) Provisions (q) Employee benefits A provision is recognised in the statement of financial position when the Group has a present legal or constructive obligation Share‑based transactions as a result of a past event, and it is probable that an outflow of Performance share rights are granted to senior management economic benefits will be required to settle the obligation. under the Nuplex Performance Rights Plan. The fair value of the rights is recognised as an employee expense with a (s) Payables corresponding increase in equity. The fair value of rights Liabilities for trade payables and other amounts are carried at are measured at the grant date and spread over the vesting cost which is the fair value of the consideration to be paid in period, taking into account the terms and conditions upon the future for goods or services received, whether or not billed. which the rights were granted. The amount recognised as an
54 NUPLE X INdustrIES LIMITED (t) Segment reporting period or periods during which the underlying exposure The Group determines and presents operating segments impacts profit and loss. When the hedged item is a based on the information that is internally provided to the non‑financial asset, the amount recognised in other CEO, who is the Group’s chief operating decision maker. comprehensive income is transferred to the carrying amount of the asset when the asset is recognised. The ineffective part An operating segment is a component of the Group that of any gain or loss is recognised immediately in profit and loss. engages in business activities from which it may earn revenues and incur expenses, including revenues and Hedges of net investments in foreign operations expenses that relate to transactions with any of the Group’s The portion of the gain or loss on an instrument used to hedge other components. An operating segment’s operating results a net investment in a foreign operation that is determined to are reviewed regularly by the CEO to make decisions about be an effective hedge is recognised in other comprehensive resources to be allocated to the segment and to assess its income and presented in the hedging reserve in equity. performance, and for which discrete financial information Any ineffective portion is recognised immediately in profit is available. and loss. Segment capital expenditure is the total cost incurred during (w) Assets held for sale and discontinued operations the period to acquire property, plant and equipment, subsidiaries and businesses. Immediately before classification as held for sale, the measurement of the assets (and all assets and liabilities in (u) Financial instruments a disposal Group) is brought up‑to‑date in accordance with Non‑derivative financial instruments applicable accounting standards. Then, on initial classification as held for sale, non‑current assets and disposal Groups are Non‑derivative financial instruments comprise trade and other recognised at the lower of carrying amount and fair value less receivables, cash and cash equivalents, loans and borrowings costs to sell. Impairment losses on initial classification as held and trade and other payables. for sale are included in profit or loss, even when there is a Non‑derivative financial instruments are recognised initially at revaluation. The same applies to gains and losses on fair value plus, for instruments not at fair value through profit subsequent remeasurement. or loss, any directly attributable transaction costs. Subsequent A discontinued operation is a component of the consolidated to initial recognition non-derivative financial instruments are entity’s business that represents a separate major line of measured at amortised cost using the effective interest rate business or geographical area of operations that has been method. disposed of or is held for sale, or is a subsidiary acquired A financial instrument is recognised if the Group becomes a exclusively with a view to resale. Classification as a party to the contractual provisions of the instrument. Financial discontinued operation occurs upon disposal or when the instruments are derecognised if the Group’s obligations operation meets the criteria to be classified as held for sale, specified in the contract expire or are discharged or cancelled. if earlier. Derivative financial instruments (x) Determination of fair values The Group uses derivative financial instruments to hedge its A number of the Group’s accounting policies and disclosures exposure to foreign exchange and interest rate risks arising require the determination of fair value, for both financial and from operational, financing and investment activities. In non‑financial assets and liabilities. The following summarises accordance with its treasury policy, the Group does not hold the major methods and assumptions used in estimating those or issue derivative financial instruments for trading purposes. fair values. Where applicable, further information about the However, derivatives that do not qualify for hedge accounting assumptions made in determining fair values is disclosed in are accounted for as trading instruments. Derivative financial the notes specific to that asset or liability. instruments are recognised initially at fair value (transaction price). Subsequent to initial recognition, derivative financial Trade receivables and payables instruments are stated at fair value. The gain or loss on Fair value is estimated as the present value of future remeasurement to fair value is recognised immediately in cash‑flows discounted at market rates of interest where profit and loss except where the derivatives qualify for settlement is not expected within 12 months. hedge accounting, as described in policy (v). Secured bank loans The fair value of interest rate swaps is the estimated amount Fair value is taken to be the carrying value of these assets that the Group would receive or pay to terminate the swap at and liabilities due to their short-term repricing. the balance sheet date, taking into account current interest rates and the current creditworthiness of the swap Derivatives counterparties. The fair value of forward exchange contracts For forward exchange contracts and interest rate swaps, is their quoted market price at the balance sheet date. independent third party valuations are used. Capital notes (v) Hedging Fair value is calculated based on discounted expected future Cash flow hedges principal and interest cash-flows. Where a derivative financial instrument is designated as a Finance lease liabilities hedge of the variability in cash flows of a recognised asset or liability, or a highly probable forecasted transaction, the The fair value is estimated as the present value of future effective part of any gain or loss on the derivative financial cash-flows, discounted at current market interest rates for instrument is recognised directly in equity. For cash flow homogeneous lease agreements. The estimated fair values hedges, the associated cumulative gain or loss is removed reflect changes in interest rates. from equity and recognised in profit and loss in the same
2013 annual report 55 N otes to the Financial Statements continued For the year ended 30 June 2013
2.m Seg ent analysis The Group has two reportable segments, as described below. The reportable segments offer products and services with markedly different production processes and are managed separately. For each of the reporting segments the CEO reviews internal management reports monthly. The following summary describes the operations in each of the Group’s reportable segments: Resins Global manufacture of synthetic resins for regional markets. Distribution of complementary functional materials. Specialties Manufacture and distribution of a range of functional materials for regional markets.
Inter‑segment pricing is determined on an arm’s length basis and eliminated on consolidation.
Geographical segments In presenting information on the basis of geographical segments, segment sales are based on the ultimate country of destination of the product if known. Segment assets are based on the geographical location of the assets. Information about reportable segments 2013 2012 (NZD in thousands) Resins Specialties Total Group Resins Specialties Total Group
Sales to outside customers 1,353,081 311,830 1,664,911 1,310,788 305,109 1,615,897 Inter‑segment sales 23 1,554 263 8,215 Segment sales 1,353,104 313,384 1,311,051 313,324 EBITDA 100,941 25,477 126,418 110,362 20,676 131,038 Depreciation and amortisation (30,308) (2,821) (33,129) (25,404) (2,392) (27,796) Segment result 70,633 22,656 93,289 84,958 18,284 103,242 Net financing costs (16,609) (13,983) Share of profits of associates 1,843 (1,829) Non‑controlling interest (2,367) (1,974) Tax on operating profits (19,377) (19,289) Operating profit after tax 56,779 66,167 Impairment of property, plant and equipment on Australian restructuring (8,068) – Seven Hills remediation provision (415) – Impairment of investment in RPC Pipe Systems Proprietary Limited (5,516) – Loss on sale of Plaster Systems NZ business (797) – US waste water discharge costs and legal costs provision – (142) Acquisition related legal and consulting costs (1,180) (3,033) US tax audit legal costs (449) (459) Income tax credit on non‑operating items 2,574 – Net profit attributable to equity holders of the parent 42,928 62,533 Net profit attributable to non‑controlling interests 2,367 1,974 Profit for the period 45,295 64,507 Assets 891,950 254,854 1,146,804 926,075 208,624 1,134,699 Unallocated assets 111,493 88,363 1,258,297 1,223,062 Liabilities 293,645 80,365 374,010 292,002 47,625 339,627 Unallocated liabilities 321,512 319,875 695,522 659,502
56 NUPLE X INdustrIES LIMITED Information about reportable segments – continued 2013 2012 (NZD in thousands) Resins Specialties Total Group Resins Specialties Total Group
Other segment information Equity accounted investments included in segment assets 4,422 2,159 6,581 9,374 2,342 11,716 Capital and acquisition expenditure 47,515 759 48,274 142,320 26,581 168,901
Sales by destination Non‑current assets Geographic segments 2013 2012 2013 2012
New Zealand 142,401 141,483 42,733 44,389 Australia 500,371 536,011 199,153 216,788 Asia 315,331 289,976 70,502 57,197 Europe 529,295 482,131 216,527 207,834 Americas 177,513 166,296 20,322 20,377 Total Group 1,664,911 1,615,897 549,237 546,585
Revenues in the resins segment from one group of customers under common control amount to 11% of the Group’s total revenues.
3. Other income Group Company (NZD in thousands) 2013 2012 2013 2012
Gain on disposal of property, plant and equipment 27 133 – – Dividends received from subsidiaries – – – 25,523 Commissions, royalties and fees received 4,445 3,472 – – Rental income received 546 690 – – Other 128 730 850 925 5,146 5,025 850 26,448
Dividends received from subsidiaries Dividends recognised in Company other income represent the value of dividends declared by Nuplex Operations (Aust) Pty Limited and applied to intercompany loan accounts during the year.
4. Other operating expenses Group Company (NZD in thousands) 2013 2012 2013 2012
Loss on sale of property, plant and equipment 10 20 – – Non‑recurring legal costs and settlements 556 674 – 83 Site remediation costs provided 1,040 86 500 – Fees associated with acquisitions and integrations 1,603 4,041 275 2,259 Impairment of investment in RPC Pipe Systems Proprietary Limited 5,516 – – – Amortisation of intangibles 5,270 3,938 – – Restructuring and retirement 5,805 604 3,175 – Impairment of property, plant and equipment 8,068 – – – Loss on sale of Plaster Systems NZ Business* 797 – – – Other 523 242 28 – 29,188 9,605 3,978 2,342
* Land and buildings held by the Group at 30 June 2013 associated with the Plaster Systems NZ Business was sold in July 2013, realising a profit of NZD718,000.
2013 annual report 57 N otes to the Financial Statements continued For the year ended 30 June 2013
5. Personnel expenses Included in cost of sales, distribution, marketing, administration and other expenses are the following personnel expenses: Group Company (NZD in thousands) Note 2013 2012 2013 2012
Wages and salaries 155,930 142,952 12,712 12,879 Social security contributions 10,467 9,281 589 500 Contributions to defined contribution plans 12,257 12,607 – – Expenses related to defined benefit plans 18 1,088 1,487 – – Increase/(decrease) in liability for leave 1,499 2,337 (37) (47) Share‑based incentive scheme 996 551 – 210 Restructuring and retirement 5,432 604 – – Other benefits 3,232 2,123 – – 190,901 171,942 13,264 13,542
6.d Au itors’ remuneration Group Company (NZD) 2013 2012 2013 2012
Audit services Auditors of the Company PricewaterhouseCoopers Australia: Audit and review of financial reports 846,305 854,950 253,892 256,485 Overseas PricewaterhouseCoopers Firms: Audit and review of financial reports 689,300 638,340 71,400 70,000 1,535,605 1,493,290 325,292 326,485 Other auditors: Audit and review of financial reports 16,669 63,390 – – 1,552,274 1,556,680 325,292 326,485 Other services Auditors of the Company PricewaterhouseCoopers Australia: Taxation services – 5,000 – – Other services – 23,000 – – Overseas PricewaterhouseCoopers Firms: Taxation Services – – – – Other services – 22,689 – – – 50,689 – –
The lead auditors of the Group are PricewaterhouseCoopers Australia.
58 NUPLE X INdustrIES LIMITED 7. i Financ al Income and Expense Recognised in profit and loss Group Company (NZD in thousands) 2013 2012 2013 2012
Interest income from outside the Group 975 1,026 53 42 Interest income from subsidiaries – – 14,723 19,170 Foreign exchange gain 867 1,414 570 – Financial income 1,842 2,440 15,346 19,212 Interest expense 17,739 15,205 3,208 5,092 Interest paid to subsidiaries – – 351 220 Foreign exchange loss 712 1,218 125 2,474 Financial expenses 18,451 16,423 3,684 7,786 Net financing costs/(income) 16,609 13,983 (11,662) (11,426)
8. Income tax expense Recognised in profit and loss Group Company (NZD in thousands) 2013 2012 2013 2012
Current tax expense Current year 17,929 19,575 1,755 2,730 Adjustments for prior years (811) 250 – – 17,118 19,825 1,755 2,730 Deferred tax expense Temporary differences (315) (536) (359) 169 (315) (536) (359) 169 Total income tax expense in profit and loss 16,803 19,289 1,396 2,899
Reconciliation between tax expense and pre‑tax net profit Group Company (NZD in thousands) 2013 2012 2013 2012
Profit before tax 62,098 83,796 4,984 34,912 Income tax using the New Zealand corporate tax rate of 28% (2012: 28%) 17,387 23,463 1,396 9,775 Increase in income tax expense due to: Non‑deductible expenses 1,613 825 – 270 Share of losses of associates 1,406 805 – – Tax losses not recognised 258 – – – Decrease in income tax expense due to: Dividends from subsidiaries – – – (7,146) Utilisation of previously unrecognised tax losses (134) (1,053) – – Effect of tax rate in foreign jurisdictions (1,511) (2,085) – – Tax losses recognised – (2,677) – – Share of profits of associates (284) (239) – – Tax incentives (1,121) – – – Under/(over) provided in prior years (811) 250 – – Income tax expense/(benefit) on pre‑tax net profit 16,803 19,289 1,396 2,899
2013 annual report 59 N otes to the Financial Statements continued For the year ended 30 June 2013
8. Income tax expense – continued Deferred tax recognised directly in equity Group Company (NZD in thousands) 2013 2012 2013 2012
Fair valuation of hedge accounted derivatives 1,769 (335) 95 (83) 1,769 (335) 95 (83)
9. Earnings per share Group The calculation of basic earnings per share is based on: 2013 2012
Net surplus attributable to ordinary shareholders 42,928 62,533 Weighted average number of ordinary shares (in thousands of shares): Ordinary shares on issue at 1 July 196,748 196,748 Dividend reinvestment plan shares issued 12 October 2012 988 – 197,736 196,748 Basic earnings per share 0.22 0.32 The calculation of diluted earnings per share is based on: Net surplus attributable to ordinary shareholders 42,928 62,533 Interest expense on convertible notes, net of tax – 3,422 Net surplus attributable to ordinary shareholders (diluted) 42,928 65,955 Basic weighted average number of ordinary shares (in thousands of shares) 197,736 196,748 Effect of Performance Rights Plan 2,403 1,714 Effect of conversion of convertible notes – 19,976 Diluted weighted average number of ordinary shares 200,139 218,438 Diluted earnings per share 0.21 0.30
10. Inventories Group Company (NZD in thousands) 2013 2012 2013 2012
Raw materials and consumables 62,850 58,246 5,141 4,090 Finished goods 180,933 180,749 11,514 11,615 Provision for stock obsolescence (5,471) (4,641) (354) (363) 238,312 234,354 16,301 15,342
Separately identifiable unmodified purchased inventory included in the above note may be subject to a retention of title clause in the normal course of business.
60 NUPLE X INdustrIES LIMITED 11. Trade and other receivables Group Company (NZD in thousands) 2013 2012 2013 2012
Current Trade receivables 326,384 318,725 12,342 13,780 Other receivables and prepayments 39,741 42,435 1,529 2,788 Receivables due from controlled entities – – 1,895 2,045 Fair value derivatives – Foreign currency swaps – 675 – – Fair value derivatives – Forward foreign exchange contracts 3,335 – 369,460 361,835 15,766 18,613 Non‑current Loans to controlled entities – – 233,467 237,760 – – 233,467 237,760
The Company’s loans to controlled entities bear market interest rates.
12. Investments accounted for using the equity method Investments in associates The Group has the following investments in associates: Reporting Ownership 30 June Principal activities Country Date 2013 2012
Quaker Chemical (Australasia) Pty Limited Distributor of specialty products Australia 31‑Dec 49% 49% Innospec Valvemaster Limited Distributor of specialty products UK 31‑Dec 50% 50% Synthese (Thailand) Co Limited Manufacture and distribution of synthetic resins Thailand 31‑Dec 47.5% 47.5% RPC Pipe Systems Pty Limited Manufacture and distribution of GRP Piping Australia 30‑Jun 50% 50%
Share of Net associates’ assets as net profit/ Total Total reported by Share of Revenues Profit/(loss) (loss) Assets Liabilities associates associates’ (NZD in thousands) (100%) (100%) recognised (100%) (100%) (100%) net assets
2013 Quaker Chemical (Australasia) Pty Limited 16,173 2,605 1,277 7,315 2,992 4,323 2,118 Innospec Valvemaster Limited – – – 596 512 84 42 Synthese (Thailand) Co Limited 34,242 2,137 1,015 21,155 11,523 9,632 4,421 RPC Pipe Systems Pty Limited 1,000 (897) (449) 17,579 15,916 1,663 – 51,415 3,845 1,843 46,645 30,943 15,702 6,581 2012 Quaker Chemical (Australasia) Pty Limited 17,652 2,043 1,001 7,027 2,335 4,691 2,300 Innospec Valvemaster Limited – – – 596 512 84 42 Synthese (Thailand) Co Limited 33,460 1,799 855 19,856 12,864 6,992 3,284 RPC Pipe Systems Pty Limited 11,808 (7,370) (3,685) 25,057 12,882 12,176 6,090 62,920 (3,528) (1,829) 52,536 28,593 23,943 11,716
RPC Pipe Systems Pty Ltd results shown above for the current year represent the two months to August 2012, the date at which the Group’s investment was written down to Nil.
2013 annual report 61 N otes to the Financial Statements continued For the year ended 30 June 2013
12. Investments accounted for using the equity method – continued Results of associates Group (NZD in thousands) 2013 2012
Share of associate profit/(loss) before income tax 2,633 (2,613) Share of income tax benefit/(expense) (790) 784 Share of associates’ net profit/(loss) as disclosed by associates 1,843 (1,829) Share of associates’ net profit accounted for using the equity method 1,843 (1,829)
Reconciliation of investment balance Group (NZD in thousands) 2013 2012
Balance at 1 July 11,716 4,946 Share of associates net profit/(loss) 1,843 (1,829) Dividends received (1,215) (1,251) Exchange translation difference (247) (98) Impairment of investment in RPC Pipe Systems Pty Ltd (5,516) – Additional investment – 9,948 Balance at 30 June 6,581 11,716
13. Deferred tax assets and liabilities Recognised deferred tax assets and liabilities Deferred tax assets and liabilities are attributable to the following: Group Assets Liabilities (NZD in thousands) 2013 2012 2013 2012
Property, plant and equipment 600 440 19,612 20,174 Intangible assets – – 5,419 6,025 Receivables 260 270 1,283 591 Inventories 1,329 953 864 823 Employee benefits 9,403 9,998 242 – Payables 1,953 1,820 – – Provisions 1,572 1,190 – 381 Fair value derivatives 2,533 629 884 36 Other items 3,534 3,410 202 19 Deferred tax assets/liabilities 21,184 18,710 28,506 28,049 Set off of deferred tax (10,979) (10,635) (10,979) (10,635) Net deferred tax assets/liabilities 10,205 8,075 17,527 17,414
62 NUPLE X INdustrIES LIMITED Company Assets Liabilities (NZD in thousands) 2013 2012 2013 2012
Property, plant and equipment – – 1,287 1,357 Receivables 119 90 – – Inventories 99 102 – – Employee benefits 770 465 – – Payables 54 156 – – Provisions 620 479 – – Fair value derivatives 83 12 – – Other items – – 57 – Deferred tax assets/liabilities 1,745 1,304 1,344 1,357 Set off of deferred tax (1,344) (1,357) (1,344) (1,357) Net deferred tax assets/liabilities 401 (53) – –
Movement in temporary differences during the year Group Company (NZD in thousands) 2013 2012 2013 2012
Balance at 1 July (9,339) (5,725) (53) 199 Acquired in the year – (5,286) – – Recognised in profit or loss 315 536 359 (169) Recognised in equity 1,769 (335) 95 (83) Exchange adjustment (67) 1,471 – – Balance at 30 June (7,322) (9,339) 401 (53)
Unrecognised deferred tax assets Group Company (NZD in thousands) 2013 2012 2013 2012
Gross value of tax losses 6,160 8,516 – –
The tax losses will not expire under local legislation, subject to the local taxpaying entities meeting any conditions relating to continuity of business and ownership. Deferred tax assets have not been recognised in respect of these losses because it is not probable that taxable profit will be available in the immediate future against which the losses can be applied. The losses originate in Brazil (2013: NZD6,159,000 (2012: NZD8,516,000)).
2013 annual report 63 N otes to the Financial Statements continued For the year ended 30 June 2013
14. Property, plant and equipment Group Company Land and Plant and Motor Under Land and Plant and Motor (NZD in thousands) buildings equipment vehicles construction Total buildings equipment vehicles Total
Cost Balance at 1 July 2011 184,665 277,378 6,150 2,779 470,972 17,078 29,467 35 46,580 Acquisitions through business combinations 17,265 34,081 1,300 2,360 55,006 – – – – Additions/transfers 5,718 18,945 1,219 333 26,215 – 797 – 797 Disposals (424) (21,763) (643) – (22,830) – (420) – (420) Effect of movements in foreign exchange (4,614) (5,845) (288) 277 (10,470) – – – – Balance at 30 June 2012 202,610 302,796 7,738 5,749 518,893 17,078 29,844 35 46,957 Balance at 1 July 2012 202,610 302,796 7,738 5,749 518,893 17,078 29,844 35 46,957 Additions/transfers 8,015 16,970 135 14,322 39,442 – 1,218 – 1,218 Disposals (14) (587) (11) – (612) (14) (397) – (411) Effect of movements in foreign exchange (2,570) (4,296) 157 305 (6,404) – – – – Balance at 30 June 2013 208,041 314,883 8,019 20,376 551,319 17,064 30,665 35 47,764 Depreciation and impairment losses Balance at 1 July 2011 38,715 145,377 3,961 – 188,053 2,364 25,226 30 27,620 Depreciation charge for the year 3,757 18,568 458 – 22,783 316 844 2 1,162 Disposals/transfers (85) (1,009) (620) – (1,714) – (399) – (399) Effect of movements in foreign exchange (29) (1,079) (66) – (1,237) – – – – Balance at 30 June 2012 42,295 161,857 3,733 – 207,885 2,680 25,671 32 28,383 Balance at 1 July 2012 42,295 161,857 3,733 – 207,885 2,680 25,671 32 28,383 Depreciation charge for the year 5,624 19,732 758 – 26,114 316 793 2 1,111 Depreciation write back (14) (397) – – (411) – – – – Impairments 345 7,723 – – 8,068 – – – – Effect of movements in foreign exchange 753 (4,289) 26 – (3,510) – – – – Balance at 30 June 2013 49,003 184,626 4,517 – 238,146 2,996 26,464 34 29,494 Carrying amounts At 1 July 2011 145,950 132,001 2,189 2,779 282,919 14,714 4,241 5 18,960 At 30 June 2012 160,315 140,939 4,005 5,749 311,008 14,398 4,173 3 18,574 At 1 July 2012 160,315 140,939 4,005 5,749 311,008 14,398 4,173 3 18,574 At 30 June 2013 159,038 130,257 3,502 20,376 313,173 14,068 4,201 1 18,270
Impairment The impairment charge recognised in 2013 represents the reduction in useful economic lives of buildings and plant and equipment at manufacturing sites in Australia and New Zealand as part of a restructure of manufacturing capacity that will see plant closures before the end of their previously assessed useful lives.
Leased plant and machinery The Group leases plant and equipment under a number of finance lease agreements. At 30 June 2013, the net carrying amount of leased plant and machinery was NZD771,000 (2012: NZD926,000) for the Group and NZD187,000 (2012: NZD282,000) for the Company. The leased equipment secures the underlying lease obligations (note 17).
64 NUPLE X INdustrIES LIMITED 15.ib Intang le assets Group Company Intellectual (NZD in thousands) Goodwill Agencies property Other Total Goodwill Other Total
Cost Balance at 1 July 2011 119,023 31,837 24,811 11,802 187,473 2,650 208 2,858 Acquisitions through business combinations 56,611 – 16,113 724 73,448 – – – Other acquisitions – – – 4,962 4,962 – – – Effect of movements in foreign exchange (8,431) – (3,039) (236) (11,706) – – – Balance at 30 June 2012 167,203 31,837 37,885 17,252 254,177 2,650 208 2,858 Balance at 1 July 2012 167,203 31,837 37,885 17,252 254,177 2,650 208 2,858 Disposals (1,807) – – – (1,807) – – – Other acquisitions – – – 8,832 8,832 – – – Effect of movements in foreign exchange 2,689 – 2,173 (1,597) 3,265 – – – Balance at 30 June 2013 168,085 31,837 40,058 24,487 264,467 2,650 208 2,858 Amortisation and impairment losses Balance at 1 July 2011 18,815 – 14,336 1,931 35,082 500 204 704 Amortisation for the year – – 3,938 1,075 5,013 – 3 3 Effect of movements in foreign exchange (221) – (1,458) (25) (1,704) – – – Balance at 30 June 2012 18,594 – 16,816 2,981 38,391 500 207 707 Balance at 1 July 2012 18,594 – 16,816 2,981 38,391 500 207 707 Amortisation for the year – – 5,270 1,745 7,015 – 1 1 Disposals (36) – – – (36) – – – Effect of movements in foreign exchange (1,043) – 1,076 (214) (181) – – – Balance at 30 June 2013 17,515 – 23,162 4,512 45,189 500 208 708 Carrying amounts At 1 July 2011 100,208 31,837 10,475 9,871 152,391 2,150 4 2,154 At 30 June 2012 148,609 31,837 21,069 14,271 215,786 2,150 1 2,151 At 1 July 2012 148,609 31,837 21,069 14,271 215,786 2,150 1 2,151 At 30 June 2013 150,570 31,837 16,896 19,975 219,278 2,150 – 2,150
Agencies Agencies disclosed above represent the fair value assessed at the time of acquisition of certain agency agreements acquired as part of the PML Holdings Limited group of companies and Med‑Chem business.
Amortisation charge The amortisation charge is recognised in the following line items in profit and loss: Group Company (NZD in thousands) 2013 2012 2013 2012
Administration expenses 1,745 1,075 1 3 Other operating expenses 5,270 3,938 – – 7,015 5,013 1 3
2013 annual report 65 N otes to the Financial Statements continued For the year ended 30 June 2013
15.ib Intang le assets – continued Impairment tests for cash generating units containing goodwill and capitalised agencies The following segments have significant carrying amounts of goodwill and capitalised agencies: Group Company (NZD in thousands) 2013 2012 2013 2012
Resins goodwill 133,840 131,190 2,150 2,150 Specialties goodwill 16,729 17,419 – – Specialties agencies 31,837 31,837 – – 182,406 180,446 2,150 2,150
For the purposes of impairment testing, goodwill and agencies are allocated to the Group’s operating divisions which represent the lowest level within the Group at which goodwill is monitored for internal management purposes. The recoverable amount of each cash‑generating unit (“CGU”) is based on value in use calculations. Those calculations use cash flow projections based on actual operating results, budgets and forecasts. Key budget and forecast assumptions, including market growth rates, wages growth rates and inflation are set based on independent economic forecasts for each relevant jurisdiction and approved at Board level. Detailed budgets and forecast cash flows are prepared for a two year period and are extrapolated using the following growth rates, in accordance with current business plans and forecasts and with reference to long-term independent economic forecasts. Growth rate assumptions: Australian Resins 3% New Zealand Resins 2% Australia and New Zealand Specialties 2 – 3% Europe Resins 2% Americas Resins 2% China Resins 5%
The period over which cash‑flows are considered for each region is consistent with the Group’s long-term commitment and certainty of cash‑flows in each region. The following pre‑tax discount rates have been used in discounting the projected cash flows: Discount rates used: 2013 2012
New Zealand 14.2% 16.2% Australia 13.7% 13.9% Europe 10.6 – 10.9% 11.3 – 11.8% Americas 14.0% 13.5% China 12.7% 13.4%
There was a significant amount of headroom between the recoverable amount and the carrying value of goodwill by CGU and no impairment was recognised. Management do acknowledge that the value in use calculations are sensitive to changes in interest rates, earnings and foreign exchange rates varying from the assumptions and forecast data used in the impairment testing. As such, sensitivity analysis was undertaken to examine the effect of a change in a variable on each CGU. Management believes that any reasonably possible change in the key assumptions on which recoverable amount is based would not create a situation where the carrying value of goodwill allocated to a particular CGU would exceed its recoverable amount.
66 NUPLE X INdustrIES LIMITED 16. Trade and other payables Group Company (NZD in thousands) 2013 2012 2013 2012
Current Trade payables and accrued expenses 314,061 286,856 10,868 11,559 Trade payables and accruals owed to subsidiaries – – 9,919 16,454 Fair value derivatives – Forward foreign exchange contracts 298 230 298 41 Fair value derivatives – Foreign currency swaps 9,119 – – – 323,478 287,086 21,085 28,054 Non‑current Payables to controlled entities – – 30,480 – – – 30,480 –
17. Interest‑bearing loans and borrowings This note provides information about the contractual terms of the Group’s interest‑bearing loans and borrowings. For more information about the Group’s exposure to interest rate and foreign currency risk, see note 21. Group Company (NZD in thousands) 2013 2012 2013 2012
Current liabilities Bank loans – 104,652 – – Capital notes – 52,568 – 52,568 Finance lease liabilities 490 374 98 117 490 157,594 98 52,685 Non‑current liabilities Bank loans 152,987 130,285 52,600 – USPP debt 135,764 – – – Finance lease liabilities 357 530 107 215 289,108 130,815 52,707 215 Financing facilities Bank loans 236,160 373,716 – – Facilities utilised at reporting date Bank loans 152,987 234,937 – – Facilities not utilised at reporting date Bank loans 83,173 138,779 – –
2013 annual report 67 N otes to the Financial Statements continued For the year ended 30 June 2013
17. Interest‑bearing loans and borrowings – continued Terms and debt repayment schedule The terms and conditions of outstanding loans were as follows: Nominal interest rate (excluding fees) 2013 2012 Face Carrying Face Carrying (NZD in thousands) Currency 2013 2012 Maturity value amount value amount
Capital Notes NZD – 9.30% Sep‑12 – – 52,568 52,568 USPP debt USD 6.13% – Jul‑19 135,764 135,764 – – Bank loan NZD 4.62% 3.08% Aug‑14 78,263 78,263 25,663 25,663 Bank loan AUD 5.14% 6.00% Aug‑14 57,269 57,269 93,160 93,160 Bank loan USD 2.49% – Aug‑14 17,455 17,455 – – Bank loan EUR – 0.80% Dec‑12 – – 78,989 78,989 Bank loan EUR – 2.35% Aug‑14 – – 37,125 37,125 Total interest‑bearing liabilities 288,751 288,751 287,505 287,505
Financing arrangements Capital notes On 15 September 2012, the election date, the Company fully redeemed the notes for cash. The capital notes previously had an interest rate of 9.3% per annum. Revolving multi‑currency cash advance facilities Bank loans are denominated in New Zealand Dollars, Australian Dollars, US Dollars and Euro. The Group’s cash advance facility expires in August 2014 with an overall facility limit denominated in AUD of AUD200,000,000 (2012: AUD200,000,000). The bank loans are subject to a negative pledge whereby Nuplex Industries Limited and a guaranteeing group of its subsidiary companies undertake to the lenders that they will not create or allow to continue any security interest over any part of its property other than in limited circumstances. The guaranteeing group comprises all wholly-owned subsidiary companies except Cong Ty Nuplex Resins (Vietnam), Nuplex Resins (Foshan) Co Limited, Nuplex Resins (Suzhou) Co Limited, Nuplex Resins (Thailand) Limited, Nuplex Industries (Hong Kong) Limited, Nuplex Producao de Resinas Ltda, and Nuplex Singapore Pte Ltd. Loans are drawn on a revolving facility and are drawn for periods of up to six months under the facilities and interest accrues at a rate fixed on the date of drawdown for that period. The Group’s borrowings are subject to various covenants pursuant to the financing arrangements with the Group’s bank lenders. USPP debt On 31 July 2012, the Group raised USD105 million of debt from the US Private Placement market (“USPP”) with a maturity of 31 July 2019 and an interest rate of 6.125%. The proceeds and ongoing obligations were converted into EUR via cross-currency swap.
Finance lease liabilities The Group leases equipment under finance leases expiring from one to five years. Finance lease liabilities of the Group and Company are payable as follows: Group Company Minimum Minimum lease lease (NZD in thousands) payments Principal Interest payments Principal Interest
2013 Less than one year 490 456 34 98 91 7 Between one and five years 357 337 20 107 98 9 847 793 54 205 189 16 2012 Less than one year 374 346 28 118 111 7 Between one and five years 530 499 31 215 199 16 904 845 59 333 310 23
68 NUPLE X INdustrIES LIMITED 18.m E ployee provisions Group Company (NZD in thousands) 2013 2012 2013 2012
Current Bonus provisions 5,789 6,882 140 338 Liability for annual leave 11,126 12,517 1,078 1,115 Redundancy 2,331 71 1,390 – Other 2,942 1,836 – – 22,188 21,306 2,608 1,453 Non‑current Present value of unfunded obligations 5,792 8,513 – – Present value of funded obligations 24,164 21,697 – – Fair value of plan assets (17,923) (14,850) – – Present value of net obligations 12,033 15,360 – – Unrecognised actuarial amounts 560 (2,508) – – Recognised liability for defined benefit obligations (see below) 12,593 12,852 – – Liability for long‑service leave 9,158 9,476 139 204 Other 865 619 – – Total non‑current employee benefits 22,616 22,947 139 204
(a) Liability for defined benefit obligation The Group makes contributions to three defined benefit plans that provide benefits for employees upon retirement. The plans include retirement schemes in Germany and the Netherlands and a United States medical scheme. Categories of plan assets Group Company (NZD in thousands) 2013 2012 2013 2012
Equity instruments 2,627 2,172 – – Debt instruments 12,085 9,555 – – Property 1,751 1,447 – – Other assets 1,460 1,676 – – 17,923 14,850 – –
Movements in the net liability for defined benefit obligations: Group Company (NZD in thousands) 2013 2012 2013 2012
Net liability for defined benefit obligations at 1 July 30,210 10,630 – – Acquisitions/transfers (1,302) 19,913 – – Benefits and settlements paid (821) (2,383) – – Current service costs and interest 1,873 1,318 – – Employee contributions – 87 – – Actuarial (gain)/loss (1,709) 2,328 – – Exchange adjustment 1,705 (1,683) – – Net liability for defined benefit obligations at 30 June 29,956 30,210 – –
2013 annual report 69 N otes to the Financial Statements continued For the year ended 30 June 2013
18.m E ployee provisions – continued
Movements in plan assets: Group Company 2013 2012 2013 2012
Fair value of plan assets at 1 July 14,850 – – – Acquisitions/transfers (335) 15,092 – – Employer contributions paid into the plan 700 313 – – Participant contributions paid into the plan 79 87 – – Benefits and settlements paid by the plan (110) (93) – – Expected return on plan assets 625 323 – – Actuarial gain/(loss) 1,020 – – – Exchange adjustment 1,094 (872) – – 17,923 14,850 – –
Expense recognised in profit and loss: Group Company 2013 2012 2013 2012
Current service costs (933) (409) – – Interest on obligation (939) (909) – – Expected return on plan assets 625 323 – – Actuarial gains/(losses) 159 (492) – – (1,088) (1,487) – –
The expense is recognised in the following lines in profit and loss: Group Company 2013 2012 2013 2012
Cost of sales (918) (1,157) – – Administration expenses (170) (330) – – (1,088) (1,487) – –
It is expected that the Group will make contributions to plans of NZD0.7 million and pay benefits from the plans of NZD0.6 million in the year ended 30 June 2014. Actuarial assumptions: Group Company 2013 2012 2013 2012
Discount rate 3.5 to 4.00% 3.25 to 4.00% – – Return on plan assets 4.20% 4.20 to 4.30% – – Pension increases 2.00 to 8.50% 1.75 to 7.60% – – Salary increases 2.50% 2.50 to 3.00% – –
Trend data 2013 2012 2011 2010 2009
Defined benefit obligation (29,956) (30,210) (10,630) (16,064) (17,223) Assets of the plans 17,923 14,850 – 1,796 1,626 Net obligation (12,033) (15,360) (10,630) (14,268) (15,597) Experience adjustments arising on plan assets 1,090 – (23) 44 292 Experience adjustments arising on plan liabilities 1,099 (58) (446) (184) (184)
70 NUPLE X INdustrIES LIMITED Share‑based incentive schemes The Company has a Performance Rights Plan that entitles key management personnel to receive shares in the Company after a three or four year vesting period subject to TSR and EPS performance hurdles. The first tranche of the scheme was approved by shareholders in November 2010 and involved the issue of 1,371,668 rights with a vesting period commencing 1 July 2010 and tested for vesting at 30 June 2013 and 30 June 2014 if not fully vested at the earlier date, rights lapse at 30 June 2014 if unvested. The second tranche of the scheme was issued in September 2011 and involved the issue of 1,702,274 rights with a vesting period commencing 1 July 2011 and tested for vesting at 30 June 2014 and 30 June 2015 if not fully vested at the earlier date, rights lapse at 30 June 2015 if unvested. The third tranche of the scheme was issued in September 2012 and involved the issue of 2,239,384 rights with a vesting period commencing 1 July 2012 and tested for vesting at 30 June 2015 and 30 June 2016 if not fully vested at the earlier date, rights lapse at 30 June 2016 if unvested. The rights are equally split into those tested against a TSR performance hurdle and those tested against an EPS performance hurdle and rights vest on a sliding scale depending on performance against targets set at grant date in each case, subject also to continuing service with the Company. The grant date fair value of the rights was measured based on Monte Carlo sampling for those subject to a TSR hurdle. Expected volatility is estimated by considering historic average share price volatility. The inputs used in the measurement of those fair values were: 2013 2012
Share price at grant date: NZD3.09 NZD2.84 Risk-free rate (based on Govt bonds) 2.56% 2.99% Dividend yield 8.1% 6.6% Volatility 25.5% 25%
(Income)/Expense recognised in the income statement Group Company (NZD in thousands) 2013 2012 2013 2012
Performance Rights granted in 2011 financial year – equity settled 324 (103) 108 8 Performance Rights granted in 2012 financial year – equity settled 100 654 32 202 Performance Rights granted in 2012 financial year – cash settled (180) 188 – – Performance Rights granted in 2013 financial year – equity settled 572 – 181 – Performance Rights granted in 2013 financial year – cash settled 180 – – – 996 739 321 210
2013 annual report 71 N otes to the Financial Statements continued For the year ended 30 June 2013
19. Provisions Group Company Site Site (NZD in thousands) restoration Other Total restoration Total
Balance at 1 July 2012 6,292 1,996 8,288 1,716 1,716 Provisions made during the year 1,040 388 1,428 500 500 Provisions used or reversed during the year (2,797) (1,049) (3,846) – – Exchange rate adjustment (142) – (142) – – Balance at 30 June 2013 4,393 1,335 5,728 2,216 2,216 2013 Current 4,393 1,335 5,728 2,216 2,216 Non‑current – – – – – Total 4,393 1,335 5,728 2,216 2,216 2012 Current 6,292 1,996 8,288 1,716 1,716 Non‑current – – – – – Total 6,292 1,996 8,288 1,716 1,716
Site restoration Provisions for site restoration are made where the Group has an obligation to remediate a site on which contamination has occurred. Provisions are based upon prior experience and surveyors reports. The amounts are expected to be utilised within the year.
Other Other provisions include provisions for costs to defend legal claims.
72 NUPLE X INdustrIES LIMITED 20. Capital and reserves Reconciliation of movement in capital and reserves Group Attributable to equity holders of the parent
Share- based Non‑ Share payments Translation Retained Hedging controlling Total (NZD in thousands) capital reserve reserve earnings reserve Total interest equity
Balance at 1 July 2011 364,244 1,200 (15,225) 201,236 (717) 550,738 9,994 560,732 Total comprehensive income for the year – – (16,930) 62,533 877 46,480 1,926 48,406 Shares issued – – – – – – – – Performance rights plan – 551 – – – 551 – 551 Dividends paid – – – (41,317) – (41,317) (1,700) (43,017) Non‑controlling interest in acquisition – – – – – – (3,112) (3,112) Balance as at 30 June 2012 364,244 1,751 (32,155) 222,452 160 556,452 7,108 563,560 Balance at 1 July 2012 364,244 1,751 (32,155) 222,452 160 556,452 7,108 563,560 Total comprehensive income for the year – – (3,024) 42,928 (4,688) 35,216 2,626 37,842 Shares issued 4,209 – – – – 4,209 – 4,209 Performance rights plan – 996 – – – 996 – 996 Dividends paid – – – (41,455) – (41,455) (2,377) (43,832) Balance as at 30 June 2013 368,453 2,747 (35,179) 223,925 (4,528) 555,418 7,357 562,775
Company Share‑based payments Retained Hedging (NZD in thousands) Share capital reserve earnings reserve Total
Balance at 1 July 2011 364,244 1,200 82,543 (430) 447,557 Total comprehensive income for the year – – 32,013 213 32,226 Performance rights plan – 551 – – 551 Dividends paid – – (41,317) – (41,317) Balance as at 30 June 2012 364,244 1,751 73,239 (217) 439,017 Balance at 1 July 2012 364,244 1,751 73,239 (217) 439,017 Total comprehensive income for the year – – 3,588 (244) 3,344 Shares issued 4,209 – – – 4,209 Performance rights plan – 996 – – 996 Dividends paid – – (41,455) – (41,455) Balance as at 30 June 2013 368,453 2,747 35,372 (461) 406,111
2013 annual report 73 N otes to the Financial Statements continued For the year ended 30 June 2013
20. Capital and reserves – continued Share capital Company and Group (In thousands of shares) (NZD in thousands) 2013 2012 2013 2012
Fully paid ordinary shares On issue at 1 July 196,748 196,748 364,244 364,244 Dividend reinvestment plan 1,378 – 4,209 – On issue at 30 June 198,126 196,748 368,453 364,244
The holders of ordinary shares are entitled to receive dividends as declared from time to time, are entitled to one vote per share at meetings of the Company and participate equally on winding up of the Company.
Share‑based payments reserve The share‑based payments reserve comprises the equity impact of the Group’s performance rights plan as disclosed in note 18.
Translation reserve The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations where their functional currency is different to the functional currency of the reporting entity, as well as from the translation of liabilities designated as hedges of the Company’s net investment in a foreign subsidiary.
Hedging reserve The hedging reserve comprises the effective portion of the cumulative net change in the fair value of effective cash-flow hedging instruments related to hedged transactions that have not yet occurred.
Dividends Dividends recognised in the current and previous years by the Company are as follows: 2013 2012 Imputation Imputation Cents per Total cents per Date of Cents per Total cents per Date of (NZD in thousands) share amount share payment share amount share payment
Interim current year ordinary 10.0 19,813 1.4 Apr‑13 10.0 19,675 Nil Apr‑12 Final prior year ordinary 11.0 21,642 Nil Oct‑12 11.0 21,642 Nil Oct‑11 Total amount 21.0 41,455 21.0 41,317
Dividends include tax credits from the Company’s Imputation Credit Account as noted above. Dividends also included Australian franking credits at 50% of the maximum rate for the interim dividend paid 2 April 2012, 60% for the prior year final dividend paid 7 October 2011 and no franking credits on the dividends paid in the current year. After the balance sheet date the following dividends were proposed by the directors. The dividends have not been provided. Imputation Cents per Total cents per Date of (NZD in thousands) share amount share payment
Final dividend 11.0 21,794 Nil 11 October 2013
Imputation credits Group (NZD in thousands) 2013 2012
Balance at 1 July 2,240 1,095 Prior year adjustment (11) (1) Tax paid/(refunded) and interest applied 1,073 1,146 Imputation credits attached to dividends paid (2,774) – Balance at 30 June 528 2,240
The Company is part of a New Zealand tax group with the Group’s other New Zealand domiciled entities. The imputation credit balance presented above represents that of the Group.
74 NUPLE X INdustrIES LIMITED Australian franking credits Group (AUD in thousands) 2013 2012
Balance at 1 July 679 3,351 Franking credits attached to dividends received 441 381 Prior year adjustment (438) – Tax paid 352 5,518 Franking credits attached to dividends paid – (8,571) Balance at 30 June 1,034 679
21. i Financ al risk management Exposure to credit, liquidity, interest rate and currency risks arises in the normal course of the Group’s business. This note presents information about the Group’s exposure to those risks, the objectives, policies and processes for measuring and managing financial risks, and the Group’s management of capital. Further quantitative disclosures are included throughout these financial statements. The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Group’s risk management policies are set to identify and analyse the risks faced by the Group, to set appropriate limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Board oversees how management monitors compliance with the Group’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to risks faced by the Group.
Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers. Trade and other receivables The Group has a credit policy which restricts the exposure to individual trade debtors. Each new customer is analysed for creditworthiness before the Group offers payment and delivery terms. The review includes external ratings where available. Credit limits are established for each customer, representing the maximum open amount without requiring approval from senior management or the board. The Board of Directors reviews the exposure to trade debtors on a regular basis. 11% of the Group’s revenue is attributable to one global group of customers under common control. Separately identifiable unmodified inventory sold to customers is subject to a retention of title clause in the normal course of business, so that in the event of non‑payment the Group may have a secured claim. The Group does not require collateral in respect of trade receivables. Guarantees The Company has issued a guarantee to HSBC to enable associate company Synthese Thailand Co Limited to borrow up to THB205 million, and to RPC Pipe Systems Pty Limited securing an AUD14.3 million banking facility, as detailed in note 24. The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was: Group Company (NZD in thousands) 2013 2012 2013 2012
Trade and other receivables 366,125 361,160 13,871 16,568 Cash and cash‑equivalents 91,790 68,325 3,630 1,595 Interest rate swaps used for hedging: Assets – 675 – – Forward exchange contracts used for hedging: Assets 3,335 – – – 461,250 430,160 17,501 18,163
2013 annual report 75 N otes to the Financial Statements continued For the year ended 30 June 2013
21. i Financ al risk management – continued
The maximum exposure to credit risk for financial assets at the reporting date by geographic region was: Group Company (NZD in thousands) 2013 2012 2013 2012
New Zealand 29,664 29,670 17,283 16,807 Australia 111,371 109,199 3 3 Americas 34,487 33,611 – – Europe 165,815 158,204 – – Asia 119,913 99,476 215 1,353 461,250 430,160 17,501 18,163
The aging of trade receivables at the reporting date was: Group Company Gross Impairment Gross Impairment Gross Impairment Gross Impairment (NZD in thousands) 2013 2013 2012 2012 2013 2013 2012 2012
Not past due 249,450 (417) 267,100 (340) 6,726 – 9,507 – Past due 0 – 30 days 57,959 (4) 38,549 (9) 4,778 – 3,204 – Past due 31 – 90 days 14,618 (78) 10,355 – 1,112 – 913 – Past due 91 days or more 6,985 (2,129) 5,005 (1,935) 151 (424) 477 (321) Total 329,012 (2,628) 321,009 (2,284) 12,767 (424) 14,101 (321)
The movement in the allowance for impairment in respect of trade receivables during the year was: Group Company (NZD in thousands) 2013 2012 2013 2012
Balance at 1 July 2,284 3,678 321 424 Impairment loss recognised/(reversed) 569 651 133 84 Utilisation of existing provisions (279) (2,003) (30) (187) Exchange adjustment 54 (42) – – Balance at 30 June 2,628 2,284 424 321
76 NUPLE X INdustrIES LIMITED Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group ensures as far as possible that it maintains sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. In addition to the group debt facility, companies in the Group maintain operating credit facilities for day‑to‑day operational purposes. The following are the contractual maturities of financial liabilities, including interest payments and excluding the impact of netting arrangements: Group Carrying Contractual 6 months 6‑12 1‑2 2‑5 5 years (NZD in thousands) amount cash flows or less months years years or more
2013 Non‑derivative financial liabilities Bank loans 152,987 162,628 4,260 4,260 154,108 – – USPP debt 135,764 169,374 4,158 4,158 8,316 12,473 140,269 Finance lease liabilities 793 847 245 245 308 49 – Trade and other payables 314,061 314,061 314,061 – – – – Derivative financial liabilities Foreign currency swaps Outflow 9,119 195,322 4,248 4,248 8,497 25,490 152,839 Inflow – (189,816) (4,158) (4,158) (8,316) (24,947) (148,237) Forward exchange contracts Outflow 298 46,682 46,069 613 – – – Inflow (3,335) (50,329) (49,696) (633) – – – 609,687 648,769 319,187 8,733 162,913 13,065 144,871
Carrying Contractual 6 months 6‑12 1‑2 2‑5 5 years (NZD in thousands) amount cash flows or less months years years or more
2012 Non‑derivative financial liabilities Bank loans 234,937 256,521 6,289 110,941 8,006 131,285 – Capital notes 52,568 53,790 53,790 – – – – Finance lease liabilities 845 904 187 187 340 190 – Trade and other payables 286,856 286,856 286,856 – – – – Derivative financial liabilities Forward exchange contracts Outflow 230 36,003 35,908 95 – – – Inflow – (35,769) (35,675) (94) – – – 575,436 598,305 347,355 111,129 8,346 131,475 –
2013 annual report 77 N otes to the Financial Statements continued For the year ended 30 June 2013
21. i Financ al risk management – continued Company Carrying Contractual 6 months 6‑12 1‑2 2‑5 5 years (NZD in thousands) amount cash flows or less months years years or more
2013 Non‑derivative financial liabilities Bank loans 52,600 55,461 1,259 1,259 52,943 – – Finance lease liabilities 189 206 49 49 107 1 – Trade and other payables 20,787 20,787 20,787 – – – – Derivative financial liabilities Forward exchange contracts Outflow 298 3,654 3,654 – – – – Inflow – (3,952) (3,952) – – – – 73,874 76,156 21,797 1,308 53,050 1 –
Carrying Contractual 6 months 6‑12 1‑2 2‑5 5 years (NZD in thousands) amount cash flows or less months years years or more
2012 Non‑derivative financial liabilities Capital notes 52,568 53,790 53,790 – – – – Finance lease liabilities 310 334 59 59 124 92 – Trade and other payables 28,013 28,013 28,013 – – – – Derivative financial liabilities Forward exchange contracts Outflow 41 4,526 4,526 – – – – Inflow – (4,484) (4,484) – – – – 80,932 82,179 81,904 59 124 92 –
The following table indicates the periods in which the cash‑flows associated with derivatives that are cash‑flow hedges are expected to occur: Group Carrying Contractual 6 months 6‑12 1‑2 2‑5 5 years (NZD in thousands) amount cash flows or less months years years or more
2013 Currency swaps Liabilities (9,119) (5,508) (91) (91) (181) (543) (4,602) Forward exchange contracts Assets 3,335 50,329 49,696 633 – – – Liabilities (298) (46,682) (46,069) (613) – – – (6,082) (1,861) 3,536 (71) (181) (543) (4,602)
Carrying Contractual 6 months 6‑12 1‑2 2‑5 5 years (NZD in thousands) amount cash flows or less months years years or more
2012 Currency swaps Assets 675 678 (293) 48 97 291 535 Forward exchange contracts Assets – 35,769 35,675 94 – – – Liabilities (230) (36,003) (35,908) (95) – – – 445 444 (526) 47 97 291 535
78 NUPLE X INdustrIES LIMITED Company Carrying Contractual 6 months 6‑12 1‑2 2‑5 5 years (NZD in thousands) amount cash flows or less months years years or more
2013 Forward exchange contracts Assets – 3,952 3,952 – – – – Liabilities (298) (3,654) (3,654) – – – – (298) 298 298 – – – –
Carrying Contractual 6 months 6‑12 1‑2 2‑5 5 years (NZD in thousands) amount cash flows or less months years years or more
2012 Forward exchange contracts Assets – 4,484 4,484 – – – – Liabilities (41) (4,526) (4,526) – – – – (41) (42) (42) – – – –
The following table indicates the periods in which the cash‑flows associated with derivatives that are cash‑flow hedges are expected to impact profit and loss: Group Carrying Contractual 6 months 6‑12 1‑2 2‑5 5 years (NZD in thousands) amount cash flows or less months years years or more
2013 Currency swaps Liabilities (9,119) (1,283) (91) (91) (181) (543) (377) Forward exchange contracts Assets 3,335 50,329 49,696 633 – – – Liabilities (298) (46,682) (46,069) (613) – – – (6,082) 2,364 3,536 (71) (181) (543) (377)
Carrying Contractual 6 months 6‑12 1‑2 2‑5 5 years (NZD in thousands) amount cash flows or less months years years or more
2012 Currency swaps Assets 675 678 40 48 97 291 202 Forward exchange contracts Assets – 35,769 35,675 94 – – – Liabilities (230) (36,003) (35,908) (95) – – – 445 444 (193) 47 97 291 202
2013 annual report 79 N otes to the Financial Statements continued For the year ended 30 June 2013
21. i Financ al risk management – continued Company Carrying Contractual 6 months 6‑12 1‑2 2‑5 (NZD in thousands) amount cash flows or less months years years
2013 Forward exchange contracts Assets – 3,952 3,952 – – – Liabilities (298) (3,654) (3,654) – – – (298) 298 298 – – –
Carrying Contractual 6 months 6‑12 1‑2 2‑5 (NZD in thousands) amount cash flows or less months years years
2012 Forward exchange contracts Assets – 4,484 4,484 – – – Liabilities (41) (4,526) (4,526) – – – (41) (42) (42) – – –
Market risk The Group is exposed to the risk that changes in foreign exchange rates and interest rates will affect the Group’s income or value of financial instruments. The objective of managing these risks is to control exposures within acceptable parameters while optimising the impact on return. The Group utilises forward currency contracts and interest rate swaps in the ordinary course of business in order to manage these risks. All such transactions are carried out within the guidelines of the Group’s Treasury policy as set by the Board. The Group applies hedge accounting where permitted in order to limit volatility in profit and loss.
Capital management The Group’s capital structure comprises a mixture of equity, USPP debt, bank debt of varying tenure and cash. The structure gives a balance between costs of each component, the liquidity risk, the quantum of unused facilities and tenure such that the Group has adequate facilities available at all times to meet its short and medium-term cash needs for operations, capital expenditure, financing and pursuit of growth opportunities.
Interest rate risk The Group has adopted a policy of ensuring that 40 – 100% of its exposure to interest rates to reset within a year is fixed, that 30 – 80% of its exposure to rates to reset from one to three years time is fixed and that 0 – 60% of exposure to rates to reset from three to five years time is fixed. The Board regularly monitors compliance with this policy.
Interest rate risk profile At the reporting date the interest rate profile of the Group’s interest‑bearing financial instruments was: Group Company (NZD in thousands) 2013 2012 2013 2012
Fixed rate instruments Financial assets – – – – Financial liabilities (136,611) (53,413) (205) (52,900) (136,611) (53,413) (205) (52,900) Variable rate instruments Financial assets 91,790 68,325 3,630 1,595 Financial liabilities (426,209) (234,996) (52,600) – (334,419) (166,671) (48,970) 1,595
80 NUPLE X INdustrIES LIMITED Sensitivity analysis A change of 100 basis points in interest rates at the reporting date would have impacted equity and profit by the amounts shown below. The analysis assumes all other variables remain constant. The analysis is performed on the same basis for 2012. Group Company Equity Profit Equity Profit Equity Profit Equity Profit (Impact NZD in thousands) 2013 2013 2012 2012 2013 2013 2012 2012
100bp increase Variable rate instruments – (371) – (1,220) – 405 – 11 Interest rate swaps – – – – – – – – Cash‑flow sensitivity (net) – (371) – (1,220) – 405 – 11 100bp decrease Variable rate instruments – 371 – 1,220 – (405) – (11) Interest rate swaps – – – – – – – – Cash‑flow sensitivity (net) – 371 – 1,220 – (405) – (11)
Effective interest rates and repricing analysis In respect of income‑earning financial assets and interest‑bearing financial liabilities, the following table indicates their effective interest rates at the balance sheet date and the periods in which they reprice. Group Amount of Effective interest interest rate 6 months 6‑12 1‑2 2‑5 5 years (NZD in thousands) rate hedged Total or less months years years or more
2013 Cash and cash equivalents 1.42 – 91,790 91,790 – – – – Bank loans: AUD loan 5.14 – (57,269) (57,269) – – – – USD loan 2.49 – (17,455) (17,455) – – – – NZD loan 4.62 – (78,263) (78,263) – – – – USPP debt 6.13 – (135,764) – – – – (135,764) Finance lease liabilities (793) (228) (228) (289) (48) – (197,754) (61,425) (228) (289) (48) (135,764)
Amount of Effective interest interest rate 6 months 6‑12 1‑2 2‑5 (NZD in thousands) rate hedged Total or less months years years
2012 Cash and cash equivalents 0.94 – 68,325 68,325 – – – Bank loans: AUD loan 6.00 – (93,160) (93,160) – – – EUR loan 0.80 – (78,989) (78,989) – – – EUR loan 2.35 – (37,125) (37,125) – – – NZD loan 3.08 – (25,663) (25,663) – – – Capital notes 9.30 – (52,568) (52,568) – – – Finance lease liabilities (845) (173) (173) (499) – (220,025) (219,353) (173) (499) –
2013 annual report 81 N otes to the Financial Statements continued For the year ended 30 June 2013
21. i Financ al risk management – continued Company Effective Amount 6 months 6‑12 1‑2 (NZD in thousands) interest rate hedged Total or less months years
2013 Cash and cash equivalents 2.00 – 3,630 3,630 – – Bank loan 4.68 – (52,600) (52,600) – – Finance lease liabilities (189) (46) (46) (97) (49,159) (49,016) (46) (97)
Effective Amount 6 months 6‑12 1‑2 (NZD in thousands) interest rate hedged Total or less months years
2012 Cash and cash equivalents 2.00 – 1,595 1,595 – – Capital notes 9.30 – (52,568) (52,568) – – Finance lease liabilities (310) (56) (56) (198) (51,283) (51,029) (56) (198)
Currency risk The Group has exposure to foreign exchange risk as a result of transactions in currencies other than the functional currency of the transacting Group entity. The Group uses forward exchange instruments to manage elements of these exposures. Significant exposures occur primarily in USD, EUR and AUD. The Group aims to cover 80 – 100% of its three-month forecast net currency exposure, up to 50% of its four to six-month net exposure and up to 25% of its seven to 12-month net exposure. With the exception of the USPP debt, interest on borrowings is denominated in currencies that match the cash‑flows generated by the underlying operations of the Group. This provides an economic hedge and no derivatives are entered into in this respect. The principal and interest payments on the USPP debt have been translated from USD to EUR using fixed to fixed currency swaps, with the objective of matching the currency of the assets of the entities in which the debts reside.
Forecast transactions The Group hedge accounts its forward exchange contracts. These contracts are fair valued and any effective portion of hedge valuation movement is shown in the statement of changes in equity. The net fair value of these forward exchange contracts at 30 June was NZD3,037,000 (2012: liabilities of NZD230,000), comprising assets of NZD3,335,000 and liabilities of NZD298,000 (2012: liabilities of NZD230,000) that were recognised in fair value derivatives. Contracts are taken out for periods of one to 12-months depending upon the timing of the anticipated foreign currency cash‑flows that the contracts hedge.
82 NUPLE X INdustrIES LIMITED Exposure to currency risk The Group’s exposure to foreign currency risk was as follows based on notional amounts: Group AUD USD EUR AUD USD EUR (NZD in thousands) 2013 2013 2013 2012 2012 2012
Non‑functional currency amounts Trade receivables and cash balances 1,933 21,089 24,026 298 23,594 23,243 Trade payables (6,053) (22,557) (24,195) (2,099) (18,392) (21,509) Gross statement of financial position exposure (4,120) (1,468) (169) (1,801) 5,202 1,734 Subsidiary net assets 303,698 73,717 105,665 288,571 83,213 128,040 Forward exchange contracts 768 35,566 4,776 1,305 24,636 4,814 Statement of financial position exposure 300,346 107,815 110,272 288,075 113,051 134,588 Profit in functional currency (5,195) 16,197 16,386 (1,571) 13,745 19,886
Company AUD USD EUR AUD USD EUR (NZD in thousands) 2013 2013 2013 2012 2012 2012
Trade receivables and cash balances 1,460 773 11 185 1,521 35 Trade payables (1,181) (2,286) (57) (407) (1,529) (73) Gross statement of financial position exposure 279 (1,513) (46) (222) (8) (38) Forward exchange contracts 142 3,402 99 549 3,351 513 Statement of financial position exposure 421 1,889 53 327 3,343 475
The following significant exchange rates applied during the year: Reporting date Average rate mid‑spot rate 2013 2012 2013 2012
USD 0.82 0.80 0.77 0.80 AUD 0.80 0.78 0.85 0.78 EUR 0.64 0.60 0.60 0.63
Sensitivity analysis A 10% strengthening of the NZD against the following currencies at 30 June would have impacted equity and profit by the amounts shown below. The analysis assumes all other variables remain constant. The analysis is performed on the same basis for 2012. Group Company Increase/(Decrease) Equity Profit Equity Profit Equity Profit Equity Profit (NZD in thousands) 2013 2013 2012 2012 2013 2013 2012 2012
AUD (30,437) 932 (28,974) 337 (13) (28) (49) 22 EUR (10,685) (1,622) (12,988) (2,162) (9) 5 (45) 4 USD (8,358) (1,473) (9,095) (1,895) (336) 151 (303) 1
2013 annual report 83 N otes to the Financial Statements continued For the year ended 30 June 2013
21. i Financ al risk management – continued Fair values The fair values together with the carrying amounts shown in the statement of financial position are as follows: Group Loans Other At fair and amortised Carrying (NZD in thousands) Note value receivables cost amount Fair value
2013 Trade and other receivables 11 – 366,125 – 366,125 366,125 Cash and cash equivalents – 91,790 – 91,790 91,790 Interest rate and currency swaps: Liabilities (9,119) – – (9,119) (9,119) Forward exchange contracts: Assets 3,335 – – 3,335 3,335 Liabilities (298) – – (298) (298) Bank loans 17 – – (152,987) (152,987) (152,987) USPP debt 17 – – (135,764) (135,764) (135,764) Finance lease liabilities 17 – – (847) (847) (829) Trade and other payables 16 – – (314,061) (314,061) (314,061) (6,082) 457,915 (603,659) (151,826) (151,808) Unrecognised (losses)/gains 18
2012 Trade and other receivables 11 – 361,160 – 361,160 361,160 Cash and cash equivalents – 68,325 – 68,325 68,325 Interest rate and currency swaps: Assets 675 – – 675 675 Forward exchange contracts: Assets – – – – – Liabilities (230) – – (230) (230) Bank loans 17 – – (234,937) (234,937) (234,937) Capital notes 17 – – (52,568) (52,568) (53,377) Finance lease liabilities 17 – – (845) (845) (1,002) Trade and other payables 16 – – (286,856) (286,856) (286,856) 445 429,485 (575,206) (145,276) (146,242) Unrecognised (losses)/gains (966)
84 NUPLE X INdustrIES LIMITED Company Loans Other At fair and amortised Carrying (NZD in thousands) Note value receivables cost amount Fair value
2013 Trade and other receivables 11 – 15,766 – 15,766 15,766 Cash and cash equivalents – 3,630 – 3,630 3,630 Forward exchange contracts: Liabilities (298) – – (298) (298) Bank loan 17 – – (52,600) (52,600) (52,600) Finance lease liabilities 17 – – (205) (205) (209) Trade and other payables 16 – – (20,787) (20,787) (20,787) (298) 19,396 (73,592) (54,494) (54,498) Unrecognised (losses)/gains (4)
2012 Trade and other receivables 11 – 18,613 – 18,613 18,613 Cash and cash equivalents – 1,595 – 1,595 1,595 Forward exchange contracts: Liabilities (41) – – (41) (41) Capital notes 17 – – (52,568) (52,568) (53,377) Finance lease liabilities 17 – – (310) (310) (312) Trade and other payables 16 – – (28,013) (28,013) (28,013) (41) 20,208 (80,891) (60,724) (61,535) Unrecognised (losses)/gains (811)
Estimation of fair values The methods used in determining fair values of financial instruments are discussed in note 1(x). NZIFRS 7 dictates a hierarchy of valuation methods for determining the fair value of financial instruments, as follows: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: Inputs other than level 1 quoted prices that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Level 3: Inputs for the asset or liability that are not based on observable market data. All of the Group and Company assets and liabilities valued at fair value are valued using level 2 methods. Interest rates used for determining fair value The entity uses the government yield curve as of 30 June 2013 plus an adequate constant credit spread to discount financial instruments. The interest rates used are as follows: 2013 2012
Capital notes N/A 2.6% Leases 7% – 8% 7% – 8%
All assets and liabilities measured at fair value are valued using inputs other than quoted prices that are observable for the asset or liability either directly (i.e. as prices) or indirectly (i.e. derived from prices).
2013 annual report 85 N otes to the Financial Statements continued For the year ended 30 June 2013
22. Operating leases Non‑cancellable operating lease rentals are payable as follows: Group Company (NZD in thousands) 2013 2012 2013 2012
Less than one year 7,254 10,505 2,273 2,061 Between one and five years 16,265 14,664 5,809 4,800 More than five years 14,017 16,825 14,017 14,273 37,536 41,994 22,099 21,134
The Group leases a number of warehouse, factory facilities and other operating equipment under operating leases. With the exception of New Zealand property leases, the leases typically run for a period of three to five years, with an option to renew the lease after that date. None of the leases include contingent rentals. During the year ended 30 June 2013, NZD12,117,000 was recognised as an expense in profit and loss in respect of operating leases (2012: NZD11,256,000).
23. Capital and other commitments Group Company (NZD in thousands) 2013 2012 2013 2012
Plant and equipment contracted but not provided for and payable: Within one year 19,420 10,703 – – 19,420 10,703 – –
86 NUPLE X INdustrIES LIMITED 24. Contingent liabilities US Class Action Proceedings purporting to be a class action were commenced in Kentucky in March 2010 in connection with alleged contamination of the area surrounding the plant of a wholly owned subsidiary in Louisville, Kentucky. The plaintiffs claim to represent a group of local residents. The claim is yet to be certified as a class action by the Kentucky court and does not specify an amount of damages.
Negative pledge deed The Company and all the material wholly owned subsidiaries have entered into a negative pledge deed with the Group’s lenders whereby all Group companies that are party to the deed have guaranteed the repayment of all liabilities in the event that any of these companies are wound up.
HSBC Guarantee The Company has issued a guarantee to HSBC to enable associate company Synthese Thailand Co Limited to borrow up to THB205 million (2012: THB205 million). Nuplex has discharged the JV partner Thai Urethane Plastic Co Limited from its indemnity against 48% of all losses, costs, damages, expenses, claims and demands which may be incurred or sustained by reason or on account of having given the guarantee. Nuplex granted this discharge as part of its commitment to increase the funds available to Synthese Thailand Co Limited to meet an obligation to purchase plant and equipment from Thai Urethane Plastic Co Limited. This transaction was executed in January 2008.
Weathertight Homes Resolution Plaster Systems Limited (PSL) has been named as a respondent in various claims in the Weathertight Homes Tribunal and New Zealand High Court. PSL has provided for the costs of settlement of these claims as a current provision. PSL has denied liability for damages under these claims but has participated in the settlement process and contributed towards remediation costs without reverting to its full legal remedies as a gesture of good faith and to protect the reputation of its products’ suitability for purpose.
RPC Pipe Systems Pty Limited Guarantee In connection with the Group’s joint venture interest in RPC Pipe Systems Pty Limited, Nuplex Industries (Aust) Pty Limited has provided a guarantee to Westpac Banking Corporation for up to AUD14.3 million to secure Westpac’s facilities to the joint venture. Nuplex Industries (Aust) Pty Limited’s position is secured by a registered charge over the assets of RPC Pipe Systems Pty Limited, which ranks behind a charge in favour of the bank.
Botany Town Centre The Company has been named as one of seventeen defendants in proceedings relating to the supply and installation of materials at the Botany Town Centre in Manukau, New Zealand between 2000 and 2001. When the initial proceedings were served against the Company in 2011, the quantum of the alleged damages claim against the Company was not specified, but it was subsequently quantified at NZD23 million. Four of the defendants have issued cross-claims against the Company claiming an entitlement to a contribution from the Company in respect of any liability they may have to the plaintiffs. The plaintiffs have recently taken action to discontinue the proceedings against the Company. When this is approved by the Court, only the cross-claims will remain to be defended. The Company does not admit any liability in respect of the claim or the cross‑claims. The Company has a strong defence and will vigorously defend these matters. The Company has made provision for legal fees associated with the defence of these matters. The directors consider that no further provisions are required in respect of these matters as they are considered unlikely to result in future liability and/or the quantum of any future liability is not capable of reliable measurement.
2013 annual report 87 N otes to the Financial Statements continued For the year ended 30 June 2013
25. Investments The subsidiary and associate companies comprise: Country of incorporation other % Held Principal activity Directors** than NZ 2013 2012
Nuplex Finance Holdings Limited Investment and group finance company 2, 7 100% 100% Nuplex Operations (New Zealand) Limited (formerly PML Holdings Limited) Non‑operating holding company 2, 7 100% 100% Nuplex Specialties NZ Limited (formerly Polychem Marketing Limited) Import and distribution of specialty chemicals 2, 10 100% 100% Nuplex US Holdings Limited Investment and group finance company 2, 7 100% 100% Plaster Systems Limited Manufacture of pre‑mixed lightweight and 2, 7 100% 100% strengthening plasters Asia Pacific Specialty Chemicals Manufacturer and supplier of specialty 1, 2, 7 Australia 100% 100% Limited products, additives and ingredients Aushold Pty Limited Non‑operating holding company 2, 7 Australia 100% 100% Multichem Pty Limited Import and distribution of specialty chemicals 2, 10 Australia 100% 100% Nuplex Industries (Aust) Pty Limited Manufacture, import and distribution of synthetic 2, 7, 10 Australia 100% 100% resins and emulsions, metal driers, paper‑making chemicals and food ingredients Nuplex Operations (Aust) Pty Limited Non‑operating holding company 2, 7 Australia 100% 100% Quaker Chemical (Australasia) Pty Limited Distributor of specialty products 2, 10 Australia 49% 49% RPC Pipe Systems Pty Limited Manufacture and distribution of GRP piping 2, 10 Australia 50% 50% Nuplex Producao de Resinas Ltda Manufacture and distribution of synthetic resins 2, 4, 9 Brazil 100% 100% Nuplex Resins (Changshu) Co Limited* Manufacture and distribution of synthetic resins 2, 3, 13 China 100% 0% Nuplex Resins (Foshan) Co Limited* Manufacture and distribution of synthetic resins 2, 3, 13 China 100% 100% Nuplex Resins (Suzhou) Co Limited* Manufacture and distribution of synthetic resins 2, 3, 13, 14 China 100% 100% Nuplex Industries GmbH Non‑operating holding company 2, 5, 12, 16 Germany 100% 100% Nuplex Resins GmbH Manufacture and distribution of synthetic resins 2, 5, 9, 16 Germany 100% 100% Nuplex Industries (Hong Kong) Limited Non‑operating 2, 7 Hong Kong 100% 100% PT Nuplex Raung Resins Manufacture and distribution of synthetic resins 2, 3, 13 Indonesia 80% 80% Synthese (Malaysia) Sdn bhd Manufacture and distribution of synthetic resins 2, 3, 5, 13 Malaysia 62% 62% Nuplex Industries BV Non‑operating holding company 2, 7 Netherlands 100% 100% Nuplex Resins BV Manufacture and distribution of synthetic resins 2, 5, 7, 8, 12, 15 Netherlands 100% 100% Nuplex Sino Chemicals BV Non‑operating holding company 2, 7 Netherlands 100% 100% Nuplex Singapore Pte Ltd Administration 1, 2, 13, 14 Singapore 100% 100% Nuplex Resins (Thailand) Limited Non‑operating holding company 2, 7 Thailand 100% 100% Synthese (Thailand) Co Limited* Manufacture and distribution of synthetic resins 2, 5, 13 Thailand 47.5% 47.5% Innospec Valvemaster Limited* (formerly Octel Valvemaster Limited) Distributor of specialty products 1, 2 United Kingdom 50% 50% Nuplex Industries UK Limited Non‑operating holding company 2, 7 United Kingdom 100% 100% Nuplex Resins Limited Manufacture and distribution of synthetic resins 2, 7 United Kingdom 100% 100% Silvertown Land Holdings Limited Property holding company 2, 7 United Kingdom 100% 100% Nuplex Resins LLC Manufacture and distribution of synthetic resins 2, 4, 7 United States 100% 100% Cong Ty Nuplex Resins (Vietnam) Manufacture and distribution of synthetic resins 1, 2, 11, 13 Vietnam 100% 100%
All the above companies have a balance date of 30 June, except companies marked “*” which are 31 December for statutory compliance purposes. ** Nuplex executives acting as Directors of the above companies are as follows: 1 Emery Severin. 2 Ian Davis. 3 Lai Wei Young. 4 Mike Kelly. 5 Paul Kieffer. 6 Robert Skarvan. 7 James Williams. 8 Pieter Geuze. 9 Norm Stallard. 10 Sam Bastounas. 11 John Prineas. 12 Ardi van Wijk. 13 Ruben Mannien. 14 Clare Yong. 15 Steven van den Biggelaar. 16 Herbert Witossek.
88 NUPLE X INdustrIES LIMITED 26.i D sposal of business assets Disposal of interests in the year to 30 June 2013 On 30 November Nuplex Industries Limited sold the inventory, plant and equipment of its Plaster Systems business for consideration of NZD2.1 million. A loss of NZD797 thousand was recognised on this disposal.
27. Related parties The Company has a related party relationship with its subsidiaries and associates (see note 25) and with its Directors and executive officers.
Transactions with subsidiaries and associates Transactions with subsidiaries and associates are carried out on an arm’s length basis. The Group transacts in the normal course of business with its associates on commercial terms. In addition to dividends disclosed in note 12, the following amounts were received from associates during the year: 2013 2012
Management fees 354 270 Toll manufacturing fees 1,876 1,701 Sale of goods and services 2,797 2,445
The following transactions are carried out between the Company and its subsidiaries: 2013 2012
Sale of goods and services 5,943 3,500 Purchases of goods and services (7,236) (5,408) Intragroup management charges (5,804) (3,164)
• Dividends received from subsidiaries – refer note 3 • Interest received and paid – refer note 7 • Loans to subsidiaries and associates – refer note 11 • Current receivables – refer note 11 • Current payables – refer note 16
Transactions with key management personnel None of the key management personnel were members of the defined benefit retirement schemes referred to in note 18. The key management personnel compensation was as follows: (NZD in thousands) 2013 2012
Directors’ remuneration – short-term benefits 953 925 Executive officers’ remuneration: Short-term benefits 7,744 7,245 Post-employment benefits 394 461 Long-term incentives (32) 621 Share‑based payments accrued 986 987 9,092 9,314
During the year to 30 June 2013 the number of members of the Nuplex executive team increased from 11 to 12.
2013 annual report 89 N otes to the Financial Statements continued For the year ended 30 June 2013
28.ni Reco c liation of the Net Profit with the Net Cash Flows from Operating Activities Group Company (NZD in thousands) 2013 2012 2013 2012
Profit for the period 45,295 64,507 3,588 32,013 Non‑cash items: Depreciation 26,114 22,783 1,111 1,162 Tax 16,803 19,289 1,396 2,899 Amortisation 7,015 5,013 1 4 Impairment 13,362 – – – Provisions 1,946 (4,392) 434 (339) Doubtful debts provisions 289 (1,339) (103) – Intercompany dividends and interest – – 53 (24,324) Equity earnings of associate (1,843) 1,829 – – 63,686 43,183 2,892 (20,598) Classified as investing/financing: Loss/(profit) on sale of business, property, plant and equipment 753 (113) 410 – 753 (113) 410 – (Increase)/Decrease in working capital: Receivables (3,599) (49,053) 3,392 (555) Inventories (10,684) (8,362) (959) 256 Creditors 32,063 21,245 8,935 8,369 17,780 (36,170) 11,368 8,070 Income tax (paid)/received (16,941) (24,236) 2,044 (1,280) Dividend received from associate 1,215 1,251 – – Cash flow from operating activities 111,788 48,422 20,302 18,205
Reconciliation of statement of financial position working capital movements to operating cash‑flow 2013 2012
Creditors Creditors and Total and Total current working current working (NZD in thousands) Receivables Inventories provisions capital Receivables Inventories provisions capital
Balance as at 1 July 361,835 234,354 (316,680) 279,509 310,713 196,508 (280,843) 226,378 Balance as at 30 June 369,460 238,312 (351,394) 256,378 361,835 234,354 (316,680) 279,509 Statement of financial position movement (7,625) (3,958) 34,714 23,131 (51,122) (37,846) 35,837 (53,131) Retranslation of foreign currency balances 4,315 (5,206) (1,159) (2,050) (8,472) (3,897) 7,974 (4,395) Business investment/ divestment impacts – (563) 7,002 6,439 9,202 30,795 (23,896) 16,101 Movement in provision for doubtful debts (289) – – (289) 1,339 – – 1,339 Movement in provision for obsolete stock – (957) – (957) – 2,586 – 2,586 Movement in provisions – – (432) (432) – – 310 310 Movement in hedges – – (8,062) (8,062) – – 1,020 1,020 Working capital cash‑flow from operating activities (3,599) (10,684) 32,063 17,780 (49,053) (8,362) 21,245 (36,170)
90 NUPLE X INdustrIES LIMITED Fe iv -year Statistical Summary For the year ended 30 June 2013
(NZD in thousands) 2013 2012 2011 2010 2009 E arnings Sales 1,664,911 1,615,897 1,575,014 1,459,933 1,493,693 EBITDA (Earnings before Interest, Tax, Depreciation, Abnormals and Amortisation) 126,418 131,038 130,905 139,436 91,530 EBITDA as % of Sales 7.6% 8.1% 8.3% 9.6% 6.1% Depreciation and amortisation 33,129 27,796 22,365 22,849 24,566 Interest (net) 16,609 13,983 16,577 20,706 31,028 Share of (profits)/losses of associates (1,843) 1,829 (1,907) (2,131) 42 Minority Interests 2,367 1,974 2,728 2,772 2,342 Tax on operating profits 19,377 19,289 23,174 23,796 9,966 Operating profit 56,779 66,167 67,968 71,444 23,586 Unusual items after tax 13,851 3,634 1,425 7,234 6,857 Net profit 42,928 62,533 66,543 64,210 16,729
S hareholder returns Equity 562,775 563,560 560,732 523,330 521,622 Operating profit as % of average equity 10.2% 11.8% 12.5% 13.7% 5.3% EBITDA as % of average total funds employed 15.0% 17.1% 19.3% 19.5% 12.1% Return on Funds Employed1 11.1% 13.0% 15.8% 16.2% 8.5% Shares on issue at 30 June (‘000) 198,126 196,748 196,748 192,233 189,798 Dividend per share (cents) 21.0 21.0 21.0 21.0 8.5 Dividend % of operating profit 73% 62% 61% 56% 68% NZ Imputation per share (cents) 1.4 0.0 0.0 0.0 0.0 Australian imputation 0% 24% 55% 59% 100%
A sset Backing Total assets 1,258,297 1,223,062 1,032,053 1,004,294 1,046,749 Tangible assets 1,039,019 1,007,276 879,662 844,196 879,715 Net tangible assets (NTA) 343,497 347,774 408,341 363,232 354,588 NTA as % of tangible assets 33.1% 34.5% 46.4% 43.0% 40.3% NTA per share $1.73 $1.77 $2.08 $1.89 $1.87 Interest bearing debt (net of all cash) 197,808 220,084 73,921 72,360 129,194 Net Debt as % of tangible assets 19.0% 21.8% 8.4% 8.6% 14.7% Debt as % of total funds employed 23% 26% 11% 11% 17%
1. Earnings before interest, tax and unusual items divided by average funds employed.
2013 annual report 91 shareholder information For the year ended 30 June 2013
DE IR CTors’ ShareholdINGS 2013 2012
Robert M Aitken – beneficial 152,424 152,424 Emery S Severin – beneficial 240,000 240,000 David A Jackson – beneficial 58,371 56,996 Jeremy CR Maycock – beneficial 30,000 30,000 Peter M Springford – beneficial 20,461 19,979
Number of Percent of T WEnty LarGEST SHAREHOLDERS AS AT 2 september 2013 Shares Issued Capital
Accident Compensation Corporation 17,423,553 8.79 HSBC Nominees (New Zealand) Limited 14,146,574 7.14 National Nominees New Zealand Limited 12,457,462 6.29 BNP Paribas Nominees (NZ) Limited 8,943,227 4.51 Citicorp Nominees Pty Limited 6,770,889 3.42 National Nominees Limited 6,755,108 3.41 JP Morgan Nominees Australia Limited 6,163,201 3.11 Citibank Nominees (New Zealand) Limited 5,842,679 2.95 New Zealand Superannuation Fund Nominees Limited 5,323,232 2.69 HSBC Nominees (New Zealand) Limited A/C State Street 5,283,030 2.67 JPMorgan Chase Bank NA 5,158,834 2.60 HSBC Custody Nominees (Australia) Limited 5,031,978 2.54 Masfen Securities Limited 4,772,039 2.41 TEA Custodians Limited 3,205,881 1.62 FNZ Custodians Limited 2,367,617 1.20 Investment Custodial Services Limited 2,108,175 1.06 Superlife Trustee Nominees Limited 1,300,238 0.66 Investment Custodial Services Limited 1,219,573 0.62 NZPT Custodians (Grosvenor) Limited 1,206,580 0.61 Custodial Services Limited 1,129,920 0.57 Total 116,609,790 58.86
92 NUPLE X INdustrIES LIMITED SU L BStantIA SECURITY HOLDERS AS AT 2 SEPTEMBER 2013 The following persons are deemed to be substantial security holders in accordance with section 26 of the Securities Markets Act 1988 (as recorded in the Company’s Register of Substantial Shareholders): Number of Percent of Shares Issued Capital
Allan Gray Australia Pty Limited 23,355,187 11.87% Accident Compensation Corporation 17,382,304 8.77% Delta Lloyd Asset Management NV 12,092,683 6.10%
AMP Limited 12,016,331 6.06%
D BTNIStrI U IO OF SHAREHOLDERS AND SHAREHOLDINGS (2 SEPTEMBER 2013)
Holding Range Holder Count Shares Percentage
1 to 1,000 1,591 765,465 0.39% 1,001 to 5,000 3,470 9,690,024 4.89% 5,001 to 10,000 1,815 13,326,043 6.73% 10,001 to 100,000 1,757 40,673,728 20.53% 100,001 to 1,000,000 72 15,945,909 8.05% >1,000,000 21 117,724,658 59.42% Total 8,726 198,125,827 100%
There are 212 shareholders, holding a total of 7,003 shares, holding between 1 and 99 ordinary shares (a non-marketable parcel of shares under the NZSX Listing Rules). There are 342 shareholders, holding a total of 24,807 shares, holding less than a marketable parcel of shares under the Listing Rules of the Australian Securities Exchange.
C Lasses OF Shares AND VOTING RIGHTS The Company has fully paid ordinary shares on issue. At a general meeting every ordinary shareholder present in person or by proxy, attorney or authorised representative has one vote on a show of hands, and on a poll, one vote for every fully paid share held.
2013 annual report 93 statutory information For the year ended 30 June 2013
DE IR CTors The following Directors held office during the year ended 30 June 2013: Robert M Aitken Company Chairman; member ex‑officio of all Board Sub‑Committees Emery S Severin Managing Director & Chief Executive Officer Barbara J Gibson Human Resources Committee, Chair; member of the Safety Health and Environment Committee David A Jackson Audit Committee, Chairman Jeremy C R Maycock Human Resources Committee Peter M Springford Safety Health and Environment Committee, Chairman; member of the Audit Committee
In accordance with Regulation 10.6 of the Company’s constitution, Robert Aitken and Jeremy Maycock retire by rotation and, being eligible, offer themselves for re‑election.
M EetINGS During year ended 30 June 2013 Directors meetings were held and attended by Directors as per the following table: Human Special Audit Resources SHE Nomination Board Sub‑ Board Meetings Committee Committee Committee Commmittee Committee
Robert M Aitken 11/11 4/4 6/6 3/3 2/2 2/2 Emery S Severin 11/11 – – – 2/2 2/2 Barbara J Gibson 11/11 – 6/6 3/3 2/2 – David A Jackson 11/11 4/4 – – 2/2 2/2 Jeremy C R Maycock 11/11 – 6/6 – 2/2 – Peter M Springford 11/11 4/4 – 3/3 2/2 –
Board meetings were held at the registered office of the company and at subsidiary company locations. The Audit Committee met to discharge its responsibilities as outlined in the Audit Committee Charter. The Human Resources Committee met to discharge its responsibilities as outlined in the Human Resources Committee Charter. The SHE Committee met to discharge its responsiblities as outlined in the SHE Committee Charter. The Nomination Committee met to discharge its responsibilities as outlined in the Nomination Committee Charter. The Special Board Sub‑Committee was an ad hoc committee of the Board established on two occasions to approve the release of financial statements at the half‑year and full year reporting.
DE IR CTors’ R MUNERATION The following amounts were paid to each director in the form of remuneration and benefits:
Robert M Aitken $300,801 Fees for the 2013 financial year Barbara J Gibson $169,923 Fees for the 2013 financial year David A Jackson $163,643 Fees for the 2013 financial year Jeremy C R Maycock $146,183 Fees for the 2013 financial year Emery S Severin $1,966,961 (AUD) Total remuneration for the 2013 financial year* Peter M Springford $171,180 Fees for the 2013 financial year * Includes provisioned items
DE IR CTors’ interests in equity securities The Relevant Interests of Directors in Equity Securities at 30 June 2013 was as follows:
Robert M Aitken 152,424 Ordinary Shares David A Jackson 58,371 Ordinary Shares Jeremy C R Maycock 30,000 Ordinary Shares Emery S Severin 240,000 Ordinary Shares 1,800,000 Performance Rights Peter M Springford 20,461 Ordinary Shares
94 NUPLE X INdustrIES LIMITED SHARE DealINGS The Board has received the following disclosures of dealings by Directors in the Company’s ordinary shares: Acquisitions Number of Shares Consideration Date
David A Jackson 1,375 (Dividend Reinvestment Plan) NZD4,200.61 12‑Oct‑12 Peter M Springford 482 (Dividend Reinvestment Plan) NZD1,472.45 12‑Oct‑12
Disposals Nil
D ISCLosures OF INTEREST Robert M Aitken Director SAI Global Limited Barbara J Gibson Chairman Warakirri Asset Management Pty Limited Director GrainCorp Limited David A Jackson Chairman The New Zealand Refining Company Limited Director Fonterra Co‑Operative Group Limited Chairman The Dame Malvina Major Foundation Jeremy C R Maycock Chairman AGL Energy Limited Chairman Port of Brisbane Pty Limited Director The Smith Family Peter M Springford Chairman McKechnie Aluminium Solutions Limited Director The New Zealand Refining Company Limited Director Rakon Limited Director NZ Wood Products Ltd Director NZ Frost Fans Ltd Trustee The Graeme Dingle Foundation
DE IR CTors’ INdeMNITY INSURANCE As permitted by Regulation 13.4 of the Company’s Constitution, directors and employees have been insured against liability for any act or omission in their capacity as directors and employees. Insurance has also been obtained to indemnify directors and employees for costs incurred in defending or settling claims in such liability. The insurance does not cover liabilities arising from criminal actions. To comply with s162(8) of the Companies Act 1993, directors have certified that the cost of the insurance is fair to the Company.
2013 annual report 95 statutory information continued For the year ended 30 June 2013
E MPloyee R MUNERATION During the year the following numbers of current and former employees, not being directors of the company received remuneration of at least NZ$100,000. NZ Employees Overseas Employees 100,000 – 110,000 8 119 110,000 – 120,000 4 95 120,000 – 130,000 8 74 130,000 – 140,000 3 52 140,000 – 150,000 11 39 150,000 – 160,000 3 29 160,000 – 170,000 1 25 170,000 – 180,000 12 180,000 – 190,000 13 190,000 – 200,000 1 12 200,000 – 210,000 1 14 210,000 – 220,000 2 10 220,000 – 230,000 8 230,000 – 240,000 1 6 240,000 – 250,000 1 250,000 – 260,000 4 260,000 – 270,000 9 270,000 – 280,000 5 280,000 – 290,000 4 290,000 – 300,000 1 6 300,000 – 310,000 2 320,000 – 330,000 1 330,000 – 340,000 2 340,000 – 350,000 1 350,000 – 360,000 2 370,000 – 380,000 2 380,000 – 390,000 3 390,000 – 400,000 1 400,000 – 410,000 1 450,000 – 460,000 2 460,000 – 470,000 1 480,000 – 490,000 1 510,000 – 520,000 1 530,000 – 540,000 2 570,000 – 580,000 1 600,000 – 610,000 1 610,000 – 620,000 1 630,000 – 640,000 1 680,000 – 690,000 1 710,000 – 720,000 1 870,000 – 880,000 1 990,000 – 1,000,000 1 2,200,000 – 2,300,000 1 44 568
96 NUPLE X INdustrIES LIMITED Corporate Directory
Dire ctors Ee x cutive Management Robert Aitken, Chairman Emery Severin Emery Severin, Managing Director Managing Director & Chief Executive Officer Barbara Gibson Josie Ashton David Jackson Director, Corporate Communications Jeremy Maycock Sam Bastounas Peter Springford Regional President, Australia and New Zealand Paul Davey A uditors Vice President, Human Resources PricewaterhouseCoopers Ian Davis Chief Financial Officer S olicitors Clive Deetlefs Allens Linklaters Vice President Operations Bell Gully Mike Kelly Regional President, The Americas I nsurance Brokers Paul Kieffer Marsh Limited Regional President Europe, Middle East and Africa S hare Registrars Ruben Mannien Computershare Investor Services Limited Regional President, Asia Private Bag 92119 Hasan Shafi Auckland Vice President Corporate Development and Planning Bankers William Weaver Vice President Technology Westpac Banking Corporation James Williams Commonwealth Bank of Australia Vice President General Counsel & Company Secretary Australia and New Zealand Banking Group Limited Hong Kong Shanghai Banking Corporation
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Corporate Office Level 5, 182 Blues Point Road North Sydney NSW 2060, Australia Locked Bag No. 6 Botany 1455, NSW, Australia Phone +61 2 8036 0901 Fax +61 2 8036 0916
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