CORPORATION Annual Report 2019 - 2020 Financial Year Index Corporate Directory 2 ADFC 3 Chairman & Executive Director’s Report 4 ADFC Board 6 ADFC Management & Advisory Committee 7 Key Metrics 8 Directors’ Report 9 Auditor’s Independence Declaration 12 Corporate Governance 13 Statement of Profit or Loss and Other 14 Comprehensive Income Statement of Financial Position 15 Statement of Changes in Equity 16 Statement of Cash Flows 17 Notes to the Financial Statements 18 Directors’ Declaration 30 Independent Auditor’s Report 31 CORPORATION AUSTRALIAN DAIRY FARMERS CORPORATION LIMITED ACN 610 590 200 Suite 222A, 757 Bourke Street, Docklands, Victoria, 3008 T: +61 3 9909 2208 | E: [email protected] | W: adfc.org.au Corporate Directory Registered office Principal place of Business Suite 222A Suite 222A 757 Bourke Street 757 Bourke Street Docklands Victoria 3008 Docklands Victoria 3008 T: +61 3 9909 2208 T: +61 3 9909 2208 W: adfc.org.au W: adfc.org.au Executive Director & Chairman Bank Scott Sieben National Australia Banking Group Directors Auditor Rod Slattery Grant Thornton Audit Pty Ltd Darin Blain Peter Mulheron Gerard Droppert Company Secretary Solicitor (shared role) HWL Ebsworth Lawyers Ron Page Paul Casey Australian Dairy Farmers Corporation Ltd Consolidated Annual Report 2019-2020 2 Australian Dairy Farmers Corporation Australian Dairy Farmers Corporation (ADFC) is an independent dairy co-operative run by Australian dairy farmers. Our farmers, based in north, south west and east Victoria, for FY21, currently supply around 250 million litres of quality milk to ADFC’s key customers. These companies use our milk to make premium dairy products that are sold in Australia and overseas. ADFC was established in 2012 with a firm vision: to look after dairy farmers and make sure they receive a fair price for their milk. We work with our farmers to give them every opportunity to be profitable so they can grow their businesses with confidence. The co-operative is guided by four values: Collaboration – we must not compete with our partners, but work together to maximise the efficiency for all Co-operation – our farmers are all members and shareholders and are prepared to share the risk and success of what we do Choice - our milk pricing system enables our farmers to choose what is best for them Cost-effective – a low-cost model underpins everything we do Quality Award Winners at ADFC AGM 2019 Australian Dairy Farmers Corporation Ltd Consolidated Annual Report 2019-2020 3 Chairman & Executive Director’s Report A year to remember in which a record milk price was achieved for ADFC farms supplying milk in 2019/20. This was a year of growth, and upon reflection, ADFC strategically positioned itself as a collective to supply approximately 350 million litres of milk from 160 farms in FY20 (146 Farm Supplier Shareholders). That volume supplied five key customers to achieve the strong closing milk price of July-December $7.35 kg/MS and January-June of $7.75 kg/MS. This year we introduced our new pricing model for all suppliers, a six on six pricing structure, the first to do so again, and based on feedback, has been favourably accepted by our shareholders. Our unique payment structure allows our farmers to achieve a cash flow that supports their ability to be profitable and sustains their farming practices they choose to use. ADFC entered the Gippsland region and successfully secured milk supply by collecting approximately 66 million litres of milk and appointed a new farmer director to the ADFC board. The successful nominee from three applicants was Gerald Droppert. The board are looking forward to Gerald bringing to the table his knowledge and commitment to serve the next 3 years as a director of ADFC. Our largest region, Western Victoria, grew its milk supply to around 178 million litres, showing strong growth. ADFC also held an election in this region for 1 board position which received 2 nominees, one of which was a renomination with Darin Blain retaining his seat on the ADFC Board. Northern Victoria showed continued steady growth with additional suppliers and increased supply to approximately 108 million litres of milk from the region. ADFC sent milk to 7 manufacturing or transfer sites for the financial year on behalf of its customers.As a result of a successful year comes challenges for a business like ADFC to remain relevant where we need to continue to adapt to ongoing and dynamic change yet ensure our focus singularly remains on returning a competitive farm gate milk price. Australian Dairy Farmers Corporation Ltd Consolidated Annual Report 2019-2020 4 With the introduction of the mandatory dairy code and the broader industry wary of a business like ADFC growing stronger, created challenging times leading up to the new season. Now more than ever the ADFC Board and Management team continue to work through new opportunities that protects ADFC’s success by remaining consistently true to its core values. The dairy industry was forced to change with the introduction of the Dairy Code and now, all the more so, ADFC’s model of providing farmers with co-operative values that demonstrates continuously the advantages of supplying an open and transparent company to generate the best farm gate price possible. As always, I would like to immensely thank our farmers who have supplied milk to ADFC to date and commit to continue to supply and support a company that, in my opinion, is key to a transparent successful dairy industry. ADFC would not be the business it has become without our farmers supplying us exceptional quality milk for the business to then supply our customers. To our management team comprising Paul Casey and Ron Page, a small but very professional and experienced team, your commitment to ADFC is unrivalled. To the ADFC Board of Directors, Peter Mulheron my Vice Chair, Darin Blain, Gerald Droppert and our Non-Supplier Director Rod Slattery, thank you for your commitment to ADFC and providing guidance and direction where it counts. In support of the Board I would like to acknowledge the value the ADFC Advisory Committee brings to Board deliberations and decisions, thank you. And finally, but not least, to my wife Jade and family, thank you. I could not commit to ADFC without the extra help, support and understanding I receive from each of you. As we move into the new season and adapt to the new code, ADFC remain faithful to developing and growing our business. We certainly look forward to hopefully getting together in the near future and sharing the possibilities that may be ahead of ADFC in these unprecedented times. Take care. Yours Sincerely, Scott Sieben Chairman & Executive Director Australian Dairy Farmers Corporation Ltd Consolidated Annual Report 2019-2020 5 The Board Chairman and Executive Director – Scott Sieben Scott has been on the ADFC Board since its inception in 2012 and accepted the Chairman’s position in February 2013 and the Executive Director role in 2017. Scott is a member of the Australian Institute of Company Directors and is studying for his Diploma of Business Management. Scott and his wife, Jade, have a dairy farm at Torrumbarry in Northern Victoria where they milk 230 cows on 180 hectares. Director – Darin Blain Darin was elected to the ADFC Board in November 2016. Darin has more than 26 years of experience as a dairy farmer and he and his wife, Sally, currently milk around 270 cows on 220 hectares in Timboon in Victoria’s south west. He also has extensive experience working in the broader dairy industry and has provided insight and advice to businesses and farmers about budgets, commodity markets and forecasts Director and Vice Chairman – Peter Mulheron Peter joined the ADFC Board in April 2017. He has been a dairy farmer for over 40 years and took over the family farm 23 years ago – a farm that had been in the family for over 100 years. Peter and his wife, Trish, and their 23-year-old son James, milk around 220 cows at Swan Marsh in south west Victoria. Peter is committed to ADFC’s vision and is keen to help grow and develop the business. Director – Gerald Droppert Gerald was elected to the ADFC Board in October 2019. Starting and operating a laser grading business, Gerald, along with his wife Jenny, then proceeded to start milking 140 cows on a 428acre farm in Tinamba in Gippsland in 1996. Over the years this farm has been expanded and renovated and they currently milk 550 cows on 780 acres. Gerald has a great understanding and empathy of the challenges dairy farmers face in the industry, having experienced a number over the years. Independent Director – Rod Slattery Rod joined the ADFC Board in June 2017 as a Non-Supplier Director. Rod is a Chartered Accountant and has over 30 years of experience working in a professional environment, with PPB Advisory (17 years) and PwC (18 years). He has provided strategic advice to all levels of agribusiness, in consultation with financiers and advisors to achieve the best outcomes for all stakeholders. Rod is based in regional Victoria (small farm on the Bellarine Peninsula) and is sensitive to the economic and personal impact unique to dairy families and local communities. Australian Dairy Farmers Corporation Ltd Consolidated Annual Report 2019-2020 6 Management Team Executive Director – Scott Sieben Scott Sieben has been on the ADFC Board since its inception in 2012, accepting the Chairman’s position in 2013 and the Executive Director role in 2017. Scott is a member of the Australian Institute of Company Directors and is studying for his Diploma of Business Management. Operations Manager & Company Secretary – Ron Page Ron Page has been with ADFC from the outset and has helped create the unique company that it is today.