727040 Devondale Murray Goulburn Annual Report 2014
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Devondale Murray Goulburn
Annual Report 2014
Devondale Murray Goulburn Annual Report 2014
In this Annual Report
2 Performance overview
4 Building a ‘rst choice dairy foods company’
6 MG’s target growth regions
8 From the Chairman
10 Managing Director’s Message
12 Our brands
16 Building world’s best operations
20 Year in Review
26 Board of Directors
28 Executive Leadership Team
30 Corporate Governance Statement
37 Financial Statements
Devondale Murray Goulburn* is Australia’s largest dairy foods
company. In 2013–14, the Company received approximately
3.4 billion litres^, or 37 per cent, of Australia’s milk and generated
sales revenue in excess of $2.9 billion. MG was formed in 1950
and remains 100 per cent dairy farmer controlled, with over
2,500 supplier/shareholders and more than 2,400 employees.
MG is also Australia’s largest dairy food exporter to the major
markets of Asia, the Middle East and North Aica, and the
Americas. MG produces a range of ingredient and nutritional
products, supplies the food service industries globally and its
agship Devondale brand is sold nationally.
* Devondale Murray Goulburn (also MG, the Company or the Co-operative) includes Murray Goulburn Co-operative Co. Limited ABN 23 004 277 089
and subsidiaries. Devondale Murray Goulburn’s Annual Report can be viewed or downloaded om the Company’s website www.mgc.com.au.
^ Includes MG’s majority owned subsidiary, Tasmanian Dairy Products Co Ltd.
Devondale Murray Goulburn Annual Report 2014 1
2008–09
2009–10
2010–11
2011–12
2012–13
2,329,285
2,163,441
2,287,492
2,367,231
2,385,099
2,916,5212013–14
2008–09
2009–10
2010–11
2011–12
2012–13
3,261
2,864
2,827
2,936
3,119*
3,391*2013–14
2008–09
2009–10
2010–11
2011–12
2012–13
746,411
718,542
690,836
739,545
776,634*
784,299*
2013–14
Performance
overview
Strong demand om key markets in Asia and the
Middle East drove prices for world dairy ingredients
to new highs in 2013–14, delivering double digit
revenue growth for MG and a welcome record
nal farmgate milk price for supplier/shareholders.
Year ended
30 June 2014
Year ended
30 June 2013 Change (%)
Sales revenue ($ million) 2,917 2,385 22
Reported statutory net prot aer tax ($ million) 29.3 34.9 (16)
Final available milk price ($/kg ms) 6.81 4.97 37
Ordinary dividend declared or paid – per share (cents) 8 8 0
Ordinary dividend declared or paid – total value ($ million) 22.1 21.1 5
Sales revenue
(A$ 000)
Milk intake
(million litres)
Production
(tonnes)
* Includes MG’s majority owned subsidiary, Tasmanian Dairy Products Co Ltd.
2 Devondale Murray Goulburn Annual Report 2014
2008–09
2009–10
2010–11
2011–12
2012–13
727,040
719,003
788,469
759,035
686,487
745,891
2013–14
2008–09
2009–10
2010–11
2011–12
2012–13
1,577,529
1,519,281
1,530,134
1,632,228
1,659,054
1,763,436
2013–14
Asia 77% Middle East/Aica 7%
e Americas 4% Other 12%
Total assets
(A$ 000)
2013–14 Sales revenue
Total revenue
$2.9 billion
(including MG Trading stores)
Equity
(A$ 000)
2013–14 Export volume
Total volume
324,000 tonnes
International 51% Domestic 49%
Devondale Murray Goulburn Annual Report 2014 3
Building a ‘rst choice
dairy foods company’
(i) In order to measure an increase in underlying milk price, rather than use the available milk price paid to suppliers each year, an implied milk price is used, which is based on forecasted
available milk price om FY2012 plus the value of annual dividends. e available milk price targets are normalised for the movements in dairy commodity prices, foreign exchange and
impacts of ination as well as other one o items such as opening inventory.
(ii) Rabobank 2014.
Vision and Strategy 2017
At MG, our goal is to li farmgate returns by at least $1.00 per
kilogram of milk solids(i) by 2017 and drive industry growth.
Our ‘Vision and Strategy 2017’ sets down our plan to get there –
outlining our vision to become a rst choice dairy foods company
for farmers, customers and consumers and our two strategic
focal points: Operational Excellence – our strategy to reshape our
business so that we can become the most ecient supplier of
dairy foods; and Innovation – to drive our shi to higher value
products in the growth categories of nutritional powders, consumer
cheese and dairy beverages.
e strategy recognises that global demand for dairy foods is
strong and growing, particularly in Asia where dairy decit regions
are expected to import an additional 25 billion litres by 2020(ii).
It acknowledges that milk production in Australia has declined
to such an extent that Australia is at risk of losing relevance in
global trade and that farmgate returns need to be higher if MG
is to encourage existing and new supplier/shareholders to grow
milk production once again.
MG intends to invest up to $500 million over the next ve years
to ensure we have the right manufacturing capability and capacity
to respond to the extraordinary growth opportunities ahead for
Australian dairy.
e strategy aims to deliver a $1.00 per kilogram of milk
solids(i) li in farmgate returns to benet our more than 2,500
supplier/shareholders across Australia and cement MG’s position
as Australia’s leading dairy foods company, a co-operative
100 per cent controlled by dairy farmers, dedicated to maximising
the price paid to farmers for their milk. By improving farmgate
returns and farm protability, MG believes farm business owners
will invest and increase milk production. Historically growth
of three per cent per annum has been achievable.
Preserve a
�positive image of�
Australian dairy
Increase
competitiveness
of Australian
dairy farming
Facilitate on-farm�
investment to�grow
milk supply
>3% pa
Australian
milk supply
growth
(equivalent to
incremental EBIT
of ~$300m pa
by FY2017
over FY2012)
$1.00
/kg ms(i)
4 Devondale Murray Goulburn Annual Report 2014
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First choice dairy
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farmers, customers
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Our Vision
and Strategy
Operational Excellence
Drive operating excellence
to become the most ecient
supplier of dairy foods.
Innovation
Shi to higher value dairy products
porolio with a focus on nutritional
powders (baby, toddler formula),
consumer cheese and dairy beverages.
5
Middle East/
North Aica
China
South East
Asia
Europe
Pacific
Islands
e
Americas
Japan
Devondale Murray Goulburn’s target regions
MG’s target
growth regions
We have our sights set on the growth
markets, particularly South East Asia,
China and the Middle East and North
Aica where the outlook for dairy foods
is strong. MG will ‘look north and go north’,
particularly to Asia, which is expected
to be the growth engine for dairy food
demand for many years to come.
3.4 billion*
litres of milk received
784,299*
tonnes of dairy product produced
324,000
tonnes of dairy product exported
31
countries where MG products are sold
* Includes MG’s majority owned subsidiary, Tasmanian Dairy Products Co Ltd.
6 Devondale Murray Goulburn Annual Report 2014
Middle East/
North Aica
China
South East
Asia
Europe
Pacific
Islands
e
Americas
Japan
Devondale Murray Goulburn Annual Report 2014 7
e past year has been an exceptional
season for Devondale Murray Goulburn’s
supplier/shareholders, who have enjoyed record
farmgate milk prices and excellent seasonal
conditions. 2013–14 was also a milestone year
for MG, as we took decisive action announcing
signicant new inastructure investment,
witnessed further growth in MG’s milk intake
and saw the Co-operative maintain its righul
place as the dairy partner of choice for farmers.
It was an outstanding year for MG. e nal milk price was
$6.81 per kilogram of milk solids on an available weighted
average basis, a 37 per cent increase over last year,
delivering a welcome boost to farm incomes.
e Board declared an unanked nal dividend of eight per cent
on ordinary shares and ve per cent for B and C class preference
shares. For ordinary shares, this equates, for the average
shareholder, to $0.09 per kilogram of milk solids, in addition
to the farmgate milk price paid to supplier/shareholders. In
addition, an unanked special dividend of $0.25 per A class
preference share was paid to A class preference shareholders
as part of the cancellation of those shares.
Total payments to supplier/shareholders(i) for the year were
more than $1.7 billion, representing 61 per cent of MG’s sales(i),
compared to 50 per cent of sales last year. When combining the
nal milk price of $6.81 with the dividend of eight cents per share,
the total return to supplier/shareholders was on average
$6.90 per kilogram of milk solids.
Net prot aer tax was $29.3 million, down om $34.9 million
in the previous year.
Pleasingly, MG’s milk supply grew strongly by eight per cent in
2013–14 to 3.4 billion litres(i), against a backdrop of at Australian
milk production growth of 0.4 per cent(ii). MG’s share of Australia’s
milk pool is now 37 per cent, up om 33 per cent a year ago with
milk supply growing across all regions, particularly in western
Victoria as the region recovers om a poor season in 2013. MG’s
milk supply was also boosted by our entry into the New South Wales
(NSW) milk market – where in our rst 10 months we collected
approximately 100 million litres om new member suppliers.
Investing for future growth
In 2012, the Board endorsed a ve year vision and strategy for
our Co-operative to transform MG and build a ‘rst choice dairy
foods company for farmers, customers and consumers’ –
through achieving operational excellence and driving innovation.
Since then, MG has focused on actioning that strategic plan and
announced a number of investments. ese investments are
being made to upgrade ageing inastructure and ensure we
have world’s best manufacturing capability to meet and serve the
growing needs of international consumers and customers. ey
include the $160 million investment to build our two chilled milk
processing facilities in Melbourne and Sydney; and $19 million
for two new high speed UHT lines at Leongatha – which together
represent the most signicant investment in dairy inastructure
undertaken in Australia for at least a decade.
Dening the right capital structure for MG
Recognising the scale of investment required to reinvigorate
and revitalise MG, in mid-2013 the MG Board announced that
a comprehensive capital structure review would be undertaken
to determine the best way to prudently fund the transformation
of MG’s manufacturing footprint.
MG has identied that capital investments up to $500 million will
be required over the next three to ve years to rejuvenate our
manufacturing and supply chain inastructure.
e capital structure review was instigated to examine the
best way to raise these funds and involved a comprehensive
review of all available options, including: increasing bank debt;
sale and leaseback of assets; retention of prots; raising additional
equity om supplier/shareholders; and raising capital om
external investors.
e review determined that the recommended proposed capital
structure – a funding model that maintains 100 per cent farmer
control, but allows external investors to invest into MG via a
separate, non-voting unit trust – is the most eective and ecient
capital structure for MG to pursue.
From the Chairman
(i) Includes Tasmanian Dairy Products Co Ltd.
(ii) Dairy Australia.
8 Devondale Murray Goulburn Annual Report 2014
Since rst describing the recommended capital structure
at the 2013 Annual General Meeting (AGM), MG has undertaken
an extensive consultation process with MG supplier/shareholders
to discuss the proposal and ensure it meets the needs of the
Co-operative now and into the future. is process has involved
three rounds of supplier consultation meetings across all dairy
regions and feedback om suppliers has resulted in a number
of modications being made to the proposal. A fourth round of
capital structure supplier meetings is planned towards the end
of the 2014 calendar year.
roughout the consultation process with suppliers, a key area
of interest has been how we align the interests of MG supplier/
shareholders and external investors. MG has developed a Farmgate
Milk Price (FMP)/dividend model that retains FMP as the primary
measure of success and aligns higher dividends with higher FMP.
I look forward to further engagement with supplier/shareholders
on the best capital structure for MG and am condent that we will
be in a position to present a nal, recommended capital structure
to supplier/shareholders for approval in the year ahead.
A class preference shares
In early June 2014, we were very pleased that both MG’s
ordinary and A class preference shareholders passed the special
resolutions presented at the meetings of the respective shareholder
groups. Shareholders voted to cancel all the A class preference
shares on issue and pay A class preference shareholders
$1.25 per share in return. e A class preference share was
an old class of share that had been closed to new shareholders
for more than a decade. is class consisted of mainly very
small shareholdings, 20 per cent of which could no longer be
contacted. In these circumstances, the Board’s view was that
a cancellation of the A class preference shares was the right
way forward and represented the best outcome for both A class
preference shareholders and our current supplier/shareholders.
Adding balance sheet strength
During 2013–14, the Company’s balance sheet grew in strength
due in large part to the sale of MG’s stake in Warrnambool Cheese
and Buer Factory Company Holdings Limited (WCB), but also
through the sale and leaseback of the Integrated Logistics Centre
(ILC) at Laverton.
e WCB sale delivered cash proceeds of $93 million and
the sale and leaseback arrangement for the ILC delivered
$93 million in additional cash ow.
ese proceeds were welcome and support MG’s plans to
reinvest in our business, grow market share in Australia and
expand internationally.
While we were disappointed to have missed out on the opportunity
to acquire WCB, the sale of our stake represented an excellent
nancial outcome for the Company and we remain proud of the
role we played in the bidding process, to drive a genuine auction
for these important Australian dairy assets.
Giving back to the community
In addition to the primary role MG plays in supporting
Australia’s dairy farmers through driving farmgate milk prices
higher, the Company also looks for opportunities to support
the broader community.
For the past three years, MG has partnered with Foodbank to
support its work to match the food industry’s surplus food with the
welfare sector’s need. MG donates quality, nutrition-rich products,
primarily UHT milk, that have a real, daily impact on individuals
and communities. During the year, MG donated the equivalent of
761,958 kilograms of dairy foods, which went towards the provision
of more than one million meals to satis the immediate hunger
needs of vulnerable Australians. MG also donated $110,000 to
an industry-funded eort to supply milk to underprivileged families.
In May, we announced a cash contribution of $300,000 to support
the wider Warrnambool community’s eorts to raise $5 million to
build a specialist cancer centre in the western region. e cancer
centre will ensure those ghting cancer in the region will no longer
have to travel long distances for specialist treatment.
A high performing team
In closing I would like to take this opportunity to thank and pay
tribute to the management and sta of MG for the role everyone
has played in this remarkable year for the Company. On behalf
of the Board, I thank you for your service and dedication to the
Co-operative. In particular, I wish to acknowledge and thank
Gary Helou and his management team for their strong leadership.
ere was one change to the composition of the MG Board during
the year. We welcomed new Director Duncan Morris, who was
elected to the Board via the western region, following the retirement
of Don Howard aer 16 years of service. During his time on the
Board, Don oversaw signicant change at MG and in our industry
and was always a passionate advocate for change within MG. We
are indebted to his service.
I also want to thank my fellow Directors for their ongoing support
and dedication to MG in a year when their services were called
on more equently than is usually the case.
Finally, I wish to extend my thanks to you – our supplier/shareholders.
roughout the course of the year we have sought and received
your support as we continue on our path to revitalise and
reinvigorate MG so that we are well placed to take advantage
of the extraordinary opportunities for Australian dairy.
I look forward to welcoming you to the AGM in November.
Philip Tracy
Chairman
Devondale Murray Goulburn Annual Report 2014 9
Managing Director’s Message
At MG, we are commied to delivering a $1.00 per kilogram
of milk solids(i) increase in the farmgate milk price by 2017 and
we are the only Australian dairy foods company to publicly set
such a target.
Having launched MG’s ‘Vision and Strategy 2017’ two years ago
– our ve year plan to drive growth in the farmgate milk price
by becoming a ‘rst choice dairy foods company for farmers,
customers and consumers’ in our chosen markets – we have
made good progress.
Our Vision and Strategy 2017 is grounded in the knowledge that
if Australia is to assume its righul place as a globally relevant
dairying nation, we must grow milk production enabling supply
to meet the rising demand for dairy foods, particularly in
international markets. Most especially, we must ‘look north and
go north’ as Asia is clearly the epicentre driving growth in demand
for high quality dairy foods. Now and into the future MG and
Australian dairy have the prime opportunity to build sustainable
long term growth given our proximity to these markets and
impeccable record as a source of quality, clean and safe food.
is opportunity is too great to pass up.
But we know we can’t just ‘ick the switch’ and double milk
production overnight. It will take investment and a sustained
increase in the farmgate milk price to motivate Australia’s
farmers to invest in their businesses and grow production.
Our Vision and Strategy 2017 is our plan to get there. It has
two critical strategic focal points: Operational Excellence – our
strategy to reshape our business so that we can become the most
ecient supplier of dairy foods; and Innovation – to drive our shi
to higher value products in the growth categories of nutritional
powders, consumer cheese and dairy beverages.
To support our strategy, we have identied capital investments
of $500 million over the next three to ve years to invest in cuing
edge, automated manufacturing technology to drive eciency and
innovation. ese are critical investments to beer connect our
nutritional powders, consumer cheese and dairy beverage supply
chain assets with our target markets.
To fund this level of investment, we reviewed available funding
options and recommended that MG considers a new capital
structure, which maintains our co-operative structure and
100 per cent farmer control and raises external capital via the
issue of units, which would be listed on the Australian Securities
Exchange (ASX). We believe this is an innovative funding structure
to raise non-voting capital, that delivers prot related returns
to external investors, but keeps 100 per cent control in the hands
of MG’s supplier/shareholders.
is approach will diversi MG’s source of investment funds
away om traditional bank debt and deliver MG the nancial
strength, exibility and stability to invest in our growth strategy.
A strong year for MG
Looking at MG’s nancial performance, it was an outstanding
year for the Company. roughout the year, global demand for
dairy foods remained strong and prices for key dairy ingredients
such as whole milk powder stayed at near record levels for an
unprecedented period. ese external factors, combined with our
continued focus on improving performance through reducing costs
and investing to support innovation and value growth, underpinned
the full year result and drove a record high farmgate return.
As is our custom, MG opened early and high, seing a
benchmark for other industry players to follow and giving our
supplier/shareholders condence for the season ahead. e
nal weighted average milk price for the 2013–14 season was
$6.81 per kilogram of milk solids, a 37 per cent increase on
the previous year and a record price for MG.
An unanked nal dividend of eight per cent on ordinary shares
and ve per cent for B and C class preference shares was also
declared. For ordinary shares, this equated on average to
$0.09 per kilogram of milk solids, in addition to the farmgate milk
price paid to supplier/shareholders. An unanked special dividend
of $0.25 per A class preference share was paid to A class
preference shareholders as part of the cancellation of those shares.
It has been a strong year for Devondale
Murray Goulburn and the Australian dairy
industry. Aer a decade of challenges, Australian
dairy roared back to life, spurred on by strong
milk prices, heightened interest in Australia’s
dairy assets and a reinvigorated MG advocating
for industry growth and higher farmgate returns.
(i) In order to measure an increase in underlying milk price, rather than use the available milk price paid to suppliers each year, an implied milk price is used, which is based
on forecasted available milk price om FY2012 plus the value of annual dividends. e available milk price targets are normalised for the movements in dairy commodity prices,
foreign exchange and impacts of ination as well as other one o items such as opening inventory.
10 Devondale Murray Goulburn Annual Report 2014
Total payments to supplier/shareholders(ii) for the year were
more than $1.7 billion, representing 61 per cent of MG’s sales(ii),
compared to 50 per cent of sales last year. When combining the
nal milk price of $6.81 with the dividend of eight cents per share,
the total return to supplier/shareholders was on average
$6.90 per kilogram of milk solids.
MG’s milk supply grew strongly by eight per cent in 2013–14
to 3.4 billion litres(ii), compared to a stagnant total Australian
milk production. Our share of Australia’s milk pool increased
to 37 per cent, up om 33 per cent a year ago with milk supply
growing across all regions, including NSW, South Australia
and Tasmania.
Net prot aer tax was $29.3 million, slightly down om
$34.9 million in the prior year. Our balance sheet was strengthened,
with total equity increasing by $59 million, including a $36 million
gain om the sale of our stake in WCB, which was recognised
directly in equity. As at 30 June 2014, MG had total assets
of $1.76 billion and total equity of $746 million.
Strong revenue growth of 22 per cent to $2.9 billion was delivered
om across our businesses, particularly in international exports
where we saw 30 per cent growth year-on-year to $1.5 billion.
Exports now account for more than 51 per cent of MG’s revenue.
Strong growth was delivered in the strategic segment of nutritional
powders, up 19 per cent, as well as a 77 per cent growth
in international consumer and food service dairy foods.
Our achievements
Across MG, the team continued the foundation work that began in
2012–13 to ensure the Company is well positioned to capitalise on
the signicant opportunities we see ahead for growth in dairy foods.
A year of construction to build two new state-of-the-art chilled
milk processing plants culminated in the ocial opening in July
of the Melbourne plant, with Sydney commencing operation
in early August.
ese facilities are the new home of Devondale’s daily pasteurised
milk brand and the processing base for the groundbreaking
10 year agreement to supply chilled milk for Coles’ private label.
Both sites employ world-leading technology and quality standards
that will assist in positioning MG as the nation’s most ecient
producer of daily pasteurised milk – a market that currently
accounts for around 20 per cent of total Australian milk production.
During the year we also delivered on a number of previously
announced capital investments including $19 million to increase
UHT capacity at Leongatha, $5 million to strengthen our
consumer buer capability at Koroit and $2 million to increase
cheese capacity at Cobram.
With these investments commissioned and operational, our focus
now is on delivery of the three new capital projects announced
in May. Worth a combined $126 million, these projects will further
support transformation of MG’s manufacturing footprint. ey include:
• $74 million investment in consumer cheese at Cobram;
• $38 million in infant nutrition at Koroit and Cobram; and
• $14 million in dairy beverages at Edith Creek.
Together they will deliver world-leading technology with
state-of-the-art automation for processing and packaging a range
of dairy foods destined for Asian and Australian consumers.
Innovation is a central focus. We are investing in our brands
and supply chain to ensure we can navigate a new path to
meet and serve the growing needs of farmers, consumers
and customers for Australian made dairy foods.
At home in Australia, we further strengthened our agship
Devondale brand, with new TV advertisements to support UHT,
consumer cheese and the launch of Devondale Smoothies. ese
eorts have had a clear impact with Devondale being recognised
during the year as a top 15 Australian brand in the annual list of
the nation’s top 100 brands, compiled by Brand Finance Australia.
In international dairy foods, a new team with extensive experience
in Asian markets was recruited to support our retail, food service
and private label business in Asia. is team will be key to building
connectivity into these markets and leveraging the inastructure
investments we are making to customise dairy foods to suit
dierent market and customer requirements. We also launched
Devondale UHT in Vietnam and are on track to introduce a new
consumer convenience UHT oering specically tailored
to China in 2014–15.
Building a safe work environment
Our commitment to building a safe workplace remains a priority.
We have invested signicantly to improve health and safety across
all areas of MG and to ensure that every member of our team has
had safety training so that we build a shared understanding of the
role everyone plays in creating a safe workplace. Since launching
our safety program Goal Zero, last year, we have seen a vast
improvement in our safety record and while I commend the MG
team for this strong turnaround, our goal remains rm – zero
injuries at MG.
In closing, I would like to pay tribute to and thank the incredible
people behind the Company. Firstly, my sincere thanks to our
Chairman, Philip Tracy, and our Board of Directors – whose
experience and counsel I value highly. To the broader MG team,
thank you. I am indebted to you for your passion, hard work and
commitment to the business as we continue our transformation
and pursue growth.
Finally, to the farming families across Australia who support
the co-op ideal and entrust their milk to MG, thank you for
your ongoing support and be assured we remain focused and
commied to driving sustainable growth in the farmgate milk price.
Gary Helou
Managing Director
(ii) Includes Tasmanian Dairy Products Co Ltd.
Devondale Murray Goulburn Annual Report 2014 11
Our brands
Australian milk is predominantly produced
on pasture-based systems where dairy cows
graze esh green pastures every day.
Retail Ingredients and Nutritionals
12 Devondale Murray Goulburn Annual Report 2014
Farm services Joint ventures
Devondale Murray Goulburn Annual Report 2014 13
Who are these caretakers of the
morning, who harvest liquid gold*…
At Devondale Murray Goulburn, we
are a proud co-operative of more than
2,500 Australian dairy farmer/suppliers
who join together each and every day
to produce 37 per cent of Australia’s
nest milk for the world to enjoy.
* Excerpt om Ode to the Dairy Farmer by Robbie Brammall.
14 Devondale Murray Goulburn Annual Report 2014
Devondale Murray Goulburn Annual Report 2014 15
Building world’s
best operations
We have begun the largest investment in
dairy inastructure undertaken in Australia
for more than a decade, as we transform
Devondale Murray Goulburn and pursue
our goal to become the nation’s most
ecient producer of dairy foods.
16 Devondale Murray Goulburn Annual Report 2014
Across MG we are investing in the future of the Australian
dairy industry to deliver higher farmgate returns for our
supplier/shareholders. Several key investment projects were
commissioned during the year and a further $126 million investment
in manufacturing capability and capacity was announced.
MG has commissioned its new world class Melbourne and Sydney
chilled milk processing plants. e plants were designed and built
in around 18 months and utilise the latest in milk processing and
lling technology, operating at high speeds with minimum labour
and energy requirements.
Known as the Devondale Dairy Beverages Centres (Melbourne
and Sydney) the plants use world-leading technology and quality
standards that will assist in positioning MG as the nation’s most
ecient producer of daily pasteurised milk, thereby delivering
strong ongoing returns to MG’s dairy farmer/shareholders.
At Koroit (western Victoria), MG’s investment of $5 million to build
a new retail buer line was commissioned in November 2013 and
is operating at capacity servicing the requirements for Devondale
buer in Australia and international markets. Two new high speed
UHT lines at Leongatha were also commissioned in 2013–14 and
are fully operational.
e year also saw a comprehensive review of MG’s existing
manufacturing footprint. Consequently further investments in key
inastructure were announced to ensure MG has the capability
and capacity it needs to meet growing demand for Australian
made dairy foods, particularly in international markets. ree new
capital projects worth a combined $126 million will be undertaken
at the Company’s existing sites over the next 12 to 18 months and
involve investment in world-leading technology with state-of-the-art
automation for processing and packaging a range of dairy foods
destined for Asian and Australian consumers. e projects
announced were:
• A $74 million investment at Cobram to build a world class
cheese cut and wrap facility to serve Australian and Asian
consumer and food service markets.
• A $38 million investment at Koroit and Cobram to increase
capacity for production of nutritionals for growing international
infant nutrition markets.
• A $14 million investment at Edith Creek to install and commission
a exible small format cup and bole lling line to commercialise
a range of dairy beverage products for consumer markets in
Australia and Asia.
Devondale Murray Goulburn Annual Report 2014 17
Our new Devondale Dairy Beverages
Centres in Melbourne and Sydney
were designed, built and commissioned
in 18 months. The chilled milk facilities
are world-class, featuring complete
end-to-end automation, utilising the latest
milk processing and lling technology
to operate at high speeds with energy
eciency. Each plant is capable of
processing 50,000 litres of milk per
hour and producing 150 million litres
of chilled milk per year.
18 Devondale Murray Goulburn Annual Report 2014
Devondale Murray Goulburn Annual Report 2014 19
Year in Review
Business Operations
In April 2014, Business Operations was formed bringing together
MG’s Operations function and the Ingredients and Nutritionals
business. e newly created Business Operations unit also has
responsibility for ensuring MG’s workplaces are safe and that
MG’s product quality, manufacturing eciency and environmental
practices position MG as the dairy foods supplier of choice with
farmers, customers and consumers.
Building a safe workplace for our people
At MG our approach to safety begins with a belief that in any
circumstance harm and damage can be prevented and that
as an organisation we have a responsibility to do everything
practicable to prevent workplace injury and illness.
Our Goal Zero safety program is designed to drive safety
awareness, improve our health and safety performance and
ultimately eliminate workplace injury across all our workplace
locations including manufacturing sites, MG Trading stores,
eld services and oce locations.
Since launching Goal Zero in 2012–13, MG has invested in
safety training for people across all levels of the organisation and
improved safety procedures and measures across all sites. During
the year, MG’s second ‘stop for safety’ one-hour program was
held focusing on Goal Zero initiatives and to raise awareness and
further identi opportunities to improve safety. A two-day Safety
Leadership Conference was also held for people managers and
compulsory safety training at senior and middle management
levels was rolled out.
is year, these initiatives have supported further signicant
reductions in lost time injury equency rates and lost time injuries
and while we are very pleased with the improvement in our safety
record, MG will not rest until we have zero workplace injuries.
Quality and cost management remain a core focus
In line with MG’s aim to become Australia’s preferred supplier
of dairy foods, Business Operations continuously seeks
opportunities to improve quality, productivity and eciency.
During the year, our drive for greater automation and process
control across operations resulted in further signicant reductions
in both cost and quality claims and led to an additional $50 million
in cost savings being achieved.
Investing in milk collection inastructure
e roll out of owmeters and retractable hoses commenced
at MG during the year, with Gippsland suppliers the rst to have
collections measured by owmeters. e northern and western
regions are scheduled to follow in the second half of 2014.
e introduction of owmeters across the tanker eet brings
MG into line with global industry best practice and delivers a
range of commercial, quality and safety benets, including more
accurate measurement of milk volume, improved sampling and
a safer environment for tanker drivers and suppliers.
MG also invested in 52 new Volvo prime movers and 22 tankers,
which were on the road during the peak season, assisting with
operational eciencies and at the same time delivering improved
safety benets for MG drivers.
Volvos feature market-leading technology, including advanced
electronic braking systems and an electronic stability program
to help prevent the potential for trac accidents and tanker
rollovers. ey also lead the way in cabin strength for driver
safety and are environmentally iendly, complying with ‘Euro 5’
emission standards.
20 Devondale Murray Goulburn Annual Report 2014
A sustainable business into the future
At MG, we maintain a strong commitment to building a sustainable
business, which goes beyond simply ensuring we comply with
relevant legislation.
We want to be industry leaders when it comes to sustainable
performance and have identied 10 key areas to focus our eorts
including: environmental noise, air emissions, odour, surface
water, land and groundwater, waste, energy use, water use,
ora and fauna, and greenhouse gas.
Aspirational targets have been set and during the year MG
continued to see a positive progression towards achieving our
targets. In particular, MG delivered a substantial reduction
in energy consumption and greenhouse gas emissions despite
an increase in production output.
A number of initiatives have driven these positive results
including the impact of a porolio of energy and greenhouse gas
abatement projects, the requirement of sites to reduce energy
by ve per cent per year, the Energy Blitz program and subsequent
eciency activities.
During 2013–14, we continued to be a signatory to the Australian
Packaging Covenant (APC). e APC was established by industry
and government to reduce the impact that packaging has on the
environment, particularly on packaging going to domestic landlls.
Ingredients and Nutritionals
MG’s Ingredients and Nutritionals business is a globally
recognised and respected supplier of bulk and customised dairy
ingredients and nutritional milk powders, primarily in the key
markets of North Asia, South East Asia, Australia, Sri Lanka and
USA. Today, MG is the world’s second largest supplier of dairy
ingredients, with the business accounting for almost half of
MG’s annual revenue.
Strong trading conditions led to price growth across all
commodity groups during the year, largely driven by increased
demand for milk powder om China and buer om Russia.
For MG’s Ingredients and Nutritionals business it was a very
strong year with net sales revenue in 2013–14 up 23 per cent
to $1.6 billion.
MG’s infant nutrition Cobram facility was one of the rst Australian
manufacturers approved by the Chinese authorities to supply
infant formula into China. is followed a comprehensive review
by Chinese authorities of infant formula manufacturers and has
led to tighter regulations around infant nutrition. Our Chinese plant
in Qingdao also received certication, providing MG with both
a premium export range and a locally manufactured range
of infant nutrition products.
MG made good progress towards establishing its reputation
as a reliable supplier of nutritional powders to world-leading
nutritional customers. e investments announced at Cobram and
Koroit to upgrade our powders capability and capacity will also
support MG to capitalise expected growth for nutritional powders.
e MG Ingredients team also continued to leverage long standing
customer relationships and its intimate understanding of customer
needs to develop ideal ingredient solutions for customers.
Devondale Murray Goulburn Annual Report 2014 21
Year in Review
MG Dairy Foods
MG Dairy Foods encompasses all consumer and food service
sales, as well as marketing and innovation, in both domestic and
international markets. e business is charged with taking our
brands to the world.
Dairy Foods Australia
In Australia, where there are multiple dairy companies competing
in a low growth dairy market, trading conditions remain competitive.
In this environment, MG seeks to dierentiate itself om other
dairy companies through maintaining strong relationships with
key customers and investing in brand innovation and marketing
support to drive sales growth.
Despite a challenging trading environment, with continuing food
deation impacting margins and further growth of private labels
leading to deep discounting amongst branded products, MG was
able to deliver double digit net sales revenue and volume growth
in 2013–14. Sales growth was underpinned by the ongoing
strength of MG’s agship Devondale brand, growth across the
Liddells range, increased private label volumes, and continued
strong growth in food service sales.
In the domestic market, MG invested behind its key dairy
brands – Devondale and Liddells – to drive ‘cut through’ with
consumers and to build a point of dierence. For Devondale,
new television advertisements were released to support the
Devondale range of products – om UHT though to cheese
slices and buer. e advertisements use humour to highlight
everyday household challenges, such as running out of milk,
and provide a Devondale solution.
e launch of Devondale Smoothies was an important extension
of the brand. e product is an example of the work MG is doing
to expand and extend the dairy category in Australia to drive
growth. Smoothies were developed in response to research that
showed that consumers, particularly mothers, wanted a great
tasting dairy product for their children that is highly nutritious
and low in sugar.
For Liddells, it was another year of strong sales growth. e brand
continues to resonate with consumers and is now the number one
lactose ee dairy brand in Australia. Given its success, several
brand extensions were launched, including Liddells chilled milk,
cream cheese and cheese shred, with more new products
planned for the year ahead.
Dairy Foods International
Dairy Foods International was established in 2012–13 to drive
growth of MG’s consumer dairy foods business in China,
South East Asia, the Middle East and the Pacic. e business
has focused on developing customised products to meet the
sophisticated needs of consumers and establishing product
distribution for consumers in these regions.
During the year, Devondale UHT milk was relaunched in Vietnam,
supported by a marketing campaign to communicate the unique
benets of Australian milk. In China, where Devondale UHT is an
established brand, sales continue to grow strongly and it is one
of the country’s biggest selling imported milk brands.
New cheese and buer products were also launched in Singapore,
Malaysia and Hong Kong and a dedicated team was recruited
to focus on building MG’s food service business across Asia.
22 Devondale Murray Goulburn Annual Report 2014
8%
increase in MG’s milk intake
37%
of Australia’s total milk supply
20%
growth in MG Trading stores’ sales
Year in Review
Supplier/Shareholder Relations
MG’s Shareholder Relations function oversees milk supply,
commercial raw milk sales and purchases, MG Trading,
shareholder services and corporate aairs.
Milk supply received exfarm increased by eight per cent in
2013–14 to 3.4 billion litres, including the southern milk pool, the
NSW/Sydney region and Tasmania(i). is represents exceptionally
strong growth when compared to Australia’s national milk pool,
which grew by 0.4 per cent and led to MG’s market share growing
by four percentage points. MG now represents 37 per cent of
Australia’s total milk supply.
Importantly, milk supply grew across all supply regions. In northern
Victoria and southern Riverina milk intake was up 1.8 per cent,
Gippsland was 3.3 per cent higher and in the western region,
which includes western Victoria and South Australia, milk supply
grew strongly, up eight per cent on the prior year.
Since announcing MG’s entry into the NSW/Sydney region in
mid-2013, MG has received an overwhelming response om dairy
farmers, with approximately 50 per cent of dairy farm businesses
in the region choosing to join the Co-operative.
MG’s majority owned subsidiary Tasmanian Dairy Products Co Ltd
also continued to grow milk supply in northern Tasmania om its
dedicated group of suppliers.
Improvements to MG’s quality structure
Making high quality and safe dairy foods is vital to MG and milk
quality at the farmgate is an important element of this outcome.
Accordingly, during 2013–14 MG completed a comprehensive
review of our raw milk quality systems, which included feedback
om our supplier consultative groups. e review showed that
the great majority of MG suppliers produce high quality milk for
most of the year. Following the review, the Board and management
recommended changes to the system including a move om ve
quality bands to four, aligning MG’s quality bands with the end use
of suppliers’ milk.
Supporting the Next Generation
MG announced the Next Generation package in 2012–13 to address
some of the key barriers to growth, including access to capital
and skilled labour. In 2013–14, the rst full year of operations
for the package, more than $50 million in investment in dairy
farm businesses has been facilitated with a number of suppliers
accessing one or more of the suite of Next Generation initiatives:
nancial support for young farmers, farming families and new
entrants seeking to grow their business or enter the industry;
access to employment and immigration resources to address
labour market shortages; and leasing partnerships through
MG’s preferred investment providers.
MG Trading
With 23 stores and ve fertiliser stores servicing most of the
south east dairy region, MG Trading is focused on reducing
the cost of farm inputs and supporting increased protability
through providing competitively priced products and services.
Sales om MG Trading stores grew by 20 per cent during the
year to $237 million, on the back of higher farmgate returns,
improved store layouts, an expanded oering and competitive
pricing. MG also opened two new stores – Warragul and Colac
– in the second half of 2013–14, which had a positive impact
on sales growth.
MG Trading continued to develop and enhance its oering during
the year opening new fertiliser depots at Timboon and Katamatite
and launching a tailored dairy farm insurance oer in conjunction
with Marsh Advantage Insurance, and a competitively priced fuel
oer in partnership with Reliance BP.
(i) Includes MG’s majority owned subsidiary Tasmanian Dairy Products Co Ltd.
Devondale Murray Goulburn Annual Report 2014 23
Our People by Location
Note: International count is a manual entry
and wil increase headcount accordingly.
Regional 76%
Metro 17%
International 7%
Organisation by Operation
*Employees of Shareholder Relations and
Business Operations located at FWP are
deemed Corporate.
^ Development and Optimisation, Ingredients
and Nutritionals, PMO and Capital Projects,
Safety and Environmental Sustainability,
Technical Excellence employees are deemed
Business Operations Support
Manufacturing 52%
MG Trading 76%
Logistics 18%
Corporate 11%*
Business Operations Support 4 %^
Field Services 2%
Year in Review
Our People
Ensuring MG people are supported and engaged to maximise
their business contribution is an essential part of MG’s journey
to become a rst choice dairy foods company.
MG’s people related initiatives are focused on accelerating
MG’s ability to leverage its people capability, enhance
performance, achieve operational excellence and facilitate
transformation. MG’s People and Culture function partners
with MG’s business leaders and people to activate and drive
activities that will deliver a high performance organisation.
Supporting our people at work
In 2013–14, further progress was made towards building people
management processes.
A new online plaorm, ‘People Central’ was launched to house
and deliver further eciencies for key people management
processes, including the Company-wide performance management
program. ‘People Central’ facilitates the alignment of key
performance measures throughout the business.
MG’s new online internal information portal was also launched
to improve our ability to share, collaborate and manage information
across multiple sites, geographies and teams. With more than
2,400 people working for MG it is critical that key procedures,
processes and information can be streamlined and accessed
online across distance and time zones.
e ‘Ready, Set, Go’ employee on-boarding and induction program
was introduced to provide new employees with important
information about MG’s business, operations and way of working.
Investing in our people through training and development
continued during the year. In addition to the considerable
investment MG makes to support safety training, Workplace
Behaviours Training, including a Code of Conduct Reesher,
was rolled out for all employees.
Employee engagement
A key focus throughout 2013–14, our employee engagement
was enhanced by the successful renegotiation of our
Transport Enterprise Agreement and a new Greenelds
Enterprise Agreement covering MG’s new Devondale Dairy
Beverages Centres.
We have also put in place a preferred supplier approach for
recruitment, which is generating savings, and our inaugural
talent review was completed, establishing a clear plaorm
to activate our Learning and Development Framework.
* Employees of Shareholder Relations and Business Operations located at FWP are deemed Corporate.
^ Development and Optimisation, Ingredients and Nutritionals, PMO and Capital Projects, Safety and
Environmental Sustainability, Technical Excellence employees are deemed Business Operations Support.
Manufacturing 52%
Logistics 18%
MG Trading 13%
Corporate 11%*
Business Operations Support 4%^
Field Services 2%
Regional 76%
Metro 17%
International 7%
24 Devondale Murray Goulburn Annual Report 2014
ere are more than 2,400
dedicated and passionate people
who make up the MG team, with
76 per cent employed in regional
Australia, providing direct support
to our supplier/shareholders through
the trading stores, eld services,
milk collections and processing.
Devondale Murray Goulburn Annual Report 2014 25
Board of Directors
1. Philip W. Tracy
BEc/BComm, CA, SIA, GAICD
Philip was elected to the Board in 2009 and elected Chairman
in 2011. He is also Chairman of the Remuneration and Nominations
Commiee and a member of the Supplier Relations Commiee.
Philip is a dairy farmer, milking over 2,000 cows at Yanakie
in Gippsland, Victoria. He is a Chartered Accountant and has
a Bachelor of Economics and Commerce and is a graduate
of the Australian Institute of Company Directors.
2. Gary Helou
BE (Hons), MComm, FAICD, FAIM
Gary was appointed as Managing Director in October 2011.
Gary brings experience om a broad range of roles encompassing
the international and domestic food and agricultural industries.
Prior to joining Murray Goulburn, he was Chief Executive Ocer
of SunRice for 11 years. Gary held senior leadership roles
in Hong Kong, Singapore and Indonesia with Pacic Brands
Food Group and Indofood. He has a Chemical Engineering Degree
and a Master of Commerce (Marketing) om the University
of New South Wales.
3. Kenneth W. Jones
Adv. Dip. Ag., MAICD
Kenneth (Ken) was elected to the Board in 2008 and elected
Deputy Chairman in 2011. He is a member of the Compliance
Commiee, Supplier Relations Commiee and Remuneration
and Nominations Commiee.
Ken is a dairy farmer, milking 430 cows at Kergunyah in north
east Victoria. He has an Advanced Diploma in Agriculture and
is a member of the Australian Institute of Company Directors.
4. Natalie Akers
BPPM (Hons), BA, GAICD
Natalie was elected to the Board in 2011. She is a member
of the Compliance Commiee and Supplier Relations Commiee.
Natalie is a dairy farmer, milking 700 cows at Tallygaroopna
in northern Victoria. She has a Bachelor of Public Policy and
Management with honours, a Bachelor of Arts and has completed
the Fairley Leadership Program. Natalie has pursued a professional
career in agriculture, including water policy and dairy research
and development. Natalie is also a graduate of the Australian
Institute of Company Directors.
5. William T. Bodman
BSc (Ag), GAICD
William (Bill) was elected to the Board in 2009 and was joint Deputy
Chairman om 2011 to November 2012. He is a member of the
Finance, Risk and Audit Commiee and Supplier Relations Commiee.
Bill is a dairy farmer, milking 420 cows on two farms at Won Wron
in Gippsland, Victoria. He has a Bachelor of Agricultural Science
Degree om La Trobe University and is a graduate of the
Australian Institute of Company Directors.
6. Peter J.O. Hawkins
BCA (Hons), FAICD, SF Fin, FAIM, ACA (NZ)
Peter was elected to the Board in 2009 as a Special Director.
He is Chairman of the Finance, Risk and Audit Commiee and
a member of the Remuneration and Nominations Commiee.
Peter has had a 41 year career in the banking and nancial
services industry in Australia and overseas at both the highest
levels of management and directorship of major organisations.
He held various senior management and directorship positions
with Australia and New Zealand Banking Group Limited om 1971
to 2005, including Managing Director of ANZ Banking Group (NZ)
Ltd om 1992 to 1995 and was also a director of BHP (NZ) Steel
Limited om 1990 to 1991, ING Australia Limited om 2002
to 2005 and Esanda Finance Corporation om 2002 to 2005.
He is currently a director of Westpac Banking Corporation, Mirvac
Limited Group, Liberty Financial Pty Limited, Treasury Corporation
of Victoria, Clayton Utz and Minerva Financial Group Pty Ltd.
1
4
2
5
3
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26 Devondale Murray Goulburn Annual Report 2014
7. Michael F. Ihlein
BBus (Acc), FCPA, FAICD, F Fin
Michael (Mike) was elected to the Board in 2012 as a Special
Director. He is Chairman of the Compliance Commiee and
a member of the Remuneration and Nominations Commiee.
Mike is a highly experienced international executive with extensive
knowledge of international business and nance. He held senior
management and directorship positions with Brambles Limited om
2004 to 2009, including Executive Director and Chief Executive
Ocer (2007 to 2009) and Executive Director and Chief Financial
Ocer (2004 to 2007). Mike also held various senior management
and directorship positions with Coca-Cola Amatil Limited, including
Executive Director and Chief Financial Ocer (1997 to 2004)
and Managing Director, Poland (1995 to 1997).
He is currently a director of Scentre Group, CSR Limited, Snowy
Hydro Limited and Chair of the Australian eatre for Young People.
8. Maxwell Jelbart
Maxwell (Max) was elected to the Board in 2012. He is a member
of the Compliance Commiee and Supplier Relations Commiee.
Max is a dairy farmer, milking 1,000 cows at Leongatha South and
350 cows at Caldermeade in Gippsland. He is a Nueld Farming
Scholar, a member of the Nueld Australia Investment Commiee
and a board member of Marcus Oldham College.
9. Edwin Duncan Morris (Duncan Morris)
Dip. Bus. Studies (Accounting), CPA, GAICD
Duncan was elected to the Board in 2013. He is a member
of the Finance, Risk and Audit Commiee and Supplier
Relations Commiee.
Duncan is an accountant and dairy farmer, milking 260 cows
at Cobden, western Victoria. He has spent most of his accounting
career in public practice, primarily aending to the accounting
and taxation needs of dairy farmers. Duncan has had signicant
board experience with local community organisations and is
a graduate of the Australian Institute of Company Directors.
10. Graham N. Munzel
GAICD
Graham was elected to the Board in 2008. He is a member
of the Finance, Risk and Audit Commiee and Supplier
Relations Commiee.
Graham is a dairy farmer, milking 290 cows at Gunbower
in northern Victoria. He is a graduate of the Australian
Institute of Company Directors.
11. John P. Pye
Adv. Dip. Ag., MAICD
John was elected to the Board in 2005. He is Chairman
of the Supplier Relations Commiee and a member of the
Finance, Risk and Audit Commiee and Remuneration and
Nominations Commiee.
John is a dairy farmer, milking 500 cows at Bessiebelle in
western Victoria. He has an Advanced Diploma in Agriculture
and is a member of the Australian Institute of Company Directors.
He is a member of Powercor’s Customer Consultative Commiee
and a former Director of Southern Rural Water Authority
(2002 to 2010).
12. Martin J. Van de Wouw
MAICD
Martin was elected to the Board in 2010. He is a member of
the Compliance Commiee and Supplier Relations Commiee.
Martin is a dairy farmer, milking 280 cows at Princetown in
western Victoria. He has supplied Murray Goulburn for 37 years.
He has completed numerous farm management courses and
is involved with the West Vic Dairy Board and United Dairy
Farmers of Victoria. He is also a member of the Australian
Institute of Company Directors.
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10
8
11
9
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Devondale Murray Goulburn Annual Report 2014 27
Executive Leadership Team
1. Gary Helou
BE (Hons), MComm, FAICD, FAIM
Managing Director
Gary Helou was appointed as Managing Director in October 2011.
Gary brings experience om a broad range of roles encompassing
the international and domestic food and agricultural industries.
Prior to joining Murray Goulburn, he was Chief Executive Ocer
of SunRice for 11 years. He held senior leadership roles in Hong
Kong, Singapore and Indonesia with Pacic Brands Food Group
and Indofood.
Gary has a Chemical Engineering Degree and a Master of
Commerce (Marketing) om the University of New South Wales.
2. Brad Hingle
Chief Financial Ocer
Brad Hingle was appointed Chief Financial Ocer in January 2014.
Prior to joining Murray Goulburn, Brad was the Chief Financial
Ocer of SunRice, where he spent 14 years and held a number
of senior roles. Brad has also held senior roles at Deloie Consulting
in Australia as well as at Dunlop Tyres and Mondi Limited in
South Aica. He has studied Cost and Management Accounting.
3. David Mallinson
Dip Bus, PG Cert Finance, MBA, CPA, FNIA, GAICD
Executive General Manager Business Operations
David Mallinson was appointed Executive General Manager
Business Operations in April 2014. David was previously General
Manager Project Management Oce and Capital Projects om
October 2013.
Prior to joining Murray Goulburn David was Fonterra Australia/
New Zealand’s Chief Financial Ocer for six years, having held
various senior roles within the merged business and senior roles
in Bonlac Foods Ltd and United Milk Tasmania. David has also
previously worked for ANZ and Cadbury Schweppes.
David holds various qualications including a Master of Business
Administration om Monash University and he completed
the Executive Development Program at Stanford University
(USA) in 2004.
1 32
28 Devondale Murray Goulburn Annual Report 2014
4. Robert Poole
BAgSci, MBL
Executive General Manager Shareholder Relations
Robert Poole was appointed Executive General Manager
Shareholder Relations in November 2011. Prior to this
appointment Robert was Murray Goulburn’s General Manager
Industry and Government Aairs for three years. Robert has held
a number of senior roles throughout his career including Deputy
Chief Executive Ocer of Australian Dairy Farmers’ Federation,
General Manager of the Australian Dairy Herd Improvement
Scheme and a Regional Manager with Rural Finance Corporation.
In 2011–12 Robert also held leadership roles within the dairy
industry including President of the Australian Dairy Products
Federation and Deputy Chairman of the Australian Dairy
Industry Council.
Robert studied science (Agriculture) at Melbourne University
and was inducted as a Master of Business Leadership at
RMIT University in 2004.
5. Fiona Smith
BSc, LLB, GDipGov, FGIA
Company Secretary and General Counsel
Fiona Smith was appointed Company Secretary and General
Counsel in January 2012.
Prior to joining Murray Goulburn, Fiona was Deputy Company
Secretary at BHP Billiton Limited for four years. She has also
been employed as General Counsel/Company Secretary of Gasnet
Australia, an ASX listed company for seven years and has held
a number of senior legal positions including principal solicitor
with the Australian Government Solicitor. She has over 25 years’
legal experience.
Fiona has a Bachelor of Science and a Bachelor of Laws om the
Australian National University and a Graduate Diploma in Applied
Corporate Governance. Fiona is also a Fellow of the Governance
Institute of Australia.
6. Aditya Swarup
BA (Hons)/Economics, MBA
Executive General Manager Strategy
Aditya Swarup was appointed Executive General Manager
Strategy in 2012.
Aditya has broad experience in strategy consulting and corporate
roles within a broad range of industries including food, agribusiness,
manufacturing and resources across Australia and Asia.
Prior to joining Murray Goulburn, Aditya spent six years at SunRice
as General Manager of Corporate Strategy. Before SunRice, Aditya
spent over eight years in strategy consulting roles, including Monitor
Group and Accenture, advising several large Australian corporates.
Aditya has an MBA om Melbourne Business School, University
of Melbourne (1997) and a Bachelor of Arts (with Honours) and
Economics om the University of Delhi (1991).
4 65
Devondale Murray Goulburn Annual Report 2014 29
1. Introduction
is section of the Annual Report outlines Murray Goulburn’s
governance amework for the year ended 30 June 2014.
Murray Goulburn remains commied to ensuring that its policies
and practices reect a high standard of corporate governance.
e Board considers that Murray Goulburn’s governance
amework and adherence to that amework are fundamental in
demonstrating that the Directors are accountable to shareholders
and are appropriately overseeing the management of risk and the
future direction of the Company.
As an unlisted company, Murray Goulburn is not required
to comply with the ASX Corporate Governance Principles
and Recommendations; however, the Board voluntarily issues
a Corporate Governance Statement to enhance transparency
and communication with stakeholders in relation to the
Company’s corporate governance practices.
Murray Goulburn’s key governance documents, including
the Constitution, Board and Board Commiee Charters and
key policies are available on the Company’s website at
www.mgc.com.au/our-story/governance.
2. Role and Responsibilities of the Board
BOARD
e role of the Board is to represent shareholders, as a whole,
and to promote and protect the interests of the Company. Its
principal objective is to create and enhance shareholder value
but in a manner that is consistent with the co-operative objective
of maximising supplier returns. e Board is accountable to the
shareholders for the Company’s performance and governance.
e Board has adopted a Board Charter, which sets out its
key responsibilities, the maers it has reserved for its own
consideration and decision making and the authority it has
delegated to the Managing Director. e Board’s responsibilities,
as set out in the Board Charter, include:
• the appointment, remuneration and succession planning of the
Managing Director and the Managing Director’s direct reports;
• approval of the corporate strategy, including seing corporate
objectives, performance objectives and approving the annual
operating budget;
• overseeing risk management, internal controls and ethical
and legal compliance, which includes reviewing procedures
to identi the main risks associated with the Company’s
businesses and the implementation of appropriate systems
to manage these risks;
• monitoring corporate performance and implementation
of corporate objectives, strategy and policy;
• approving major capital expenditure, acquisitions and
divestitures, and monitoring capital management;
• monitoring and reviewing management processes aimed
at ensuring the integrity of nancial and other reporting;
• developing and reviewing the Company’s corporate
governance principles and policies; and
• performing such other functions as are prescribed by law.
In addition, the Board has specically reserved certain
maers for its decision, including those set out in the
approved delegations of authority.
DELEGATION TO MANAGEMENT
e Board has delegated to the Managing Director and, through
the Managing Director, to other senior executives, responsibility
for the day-to-day management of the Company’s aairs and
implementation of the corporate objectives, strategy and policy
initiatives. e Managing Director and the broader management
team are required to operate in accordance with Board approved
policies and delegations of authority.
e Managing Director remains accountable to the Board for
the exercise of authority that is delegated. e Board monitors
the decisions and actions of the Managing Director, and the
performance of the Company, to gain assurance that progress
is being made towards the approved corporate objectives and
the delegations of authority are being complied with. e Managing
Director, with the support of management, provides regular
reports to the Board and its Commiees to enable them to
discharge their duties eectively. Senior executives also aend
all scheduled Board meetings, by invitation, where they present,
discuss and provide input on their respective areas of responsibility.
INDEPENDENT PROFESSIONAL ADVICE
e Board and its Commiees may access independent experts
and professional counsel for advice where appropriate and may
invite any person om time to time to aend meetings of the Board.
ACTIVITIES DURING THE YEAR
A key activity of the Board during the year has been governing
the Company having regard to its strategic objectives, as well
as the goal to li farmgate returns and drive industry growth, and
the vision to drive operating excellence and shi to a higher value
dairy products porolio. e Board has focused on the principal
objectives of creating and enhancing shareholder value and
maximising supplier returns. Within this context, the Board
approved various maers, including:
• investments totalling $126 million in consumer cheese
at Cobram ($74 million), infant nutrition at Koroit and
Cobram ($38 million) and dairy beverages at Edith Creek,
Tasmania ($14 million);
• the takeover oer for Warrnambool Cheese and Buer
Factory Company Holdings Limited (WCB) and the subsequent
acceptance of Saputo Inc.’s oer, which ultimately delivered
to the Company cash proceeds of $93 million;
• six step ups in the milk price paid by the Company
throughout the year;
• the opening milk price for nancial year 2015; and
• the proposal to undertake a selective capital reduction and
cancellation of the A class preference shares, which was
ultimately approved by shareholders at the general and
A class preference shareholder meetings held on 6 June 2014.
Importantly, during the year the Board has also overseen
the construction of the two new state-of-the-art chilled milk
processing plants in Melbourne and Sydney, with the plants
ocially opened in July 2014 and August 2014, respectively.
In addition to the above maers, the Board spent a signicant
amount of time considering a potential capital structure to provide
access to equity capital to eectively fund strategic operational
and commercial initiatives to deliver a sustainable increase
Corporate Governance Statement
30 Devondale Murray Goulburn Annual Report 2014
in the annual farmgate milk price, consistent with the Company’s
overarching strategy. e potential capital structure will be the
subject of further Board consideration during nancial year 2015.
3. Structure of the Board
MEMBERSHIP AND MEETINGS
e Board currently has 12 Directors. Of these, nine, including
the Chairman, are elected om the shareholder base (Supplier
Directors), one is the Managing Director and two are
Special Directors.
e Supplier Directors must be current suppliers to the Company
and each must hold at least 10,000 ordinary shares to be eligible
for election.
e Special Directors are selected by taking into account the
skills and competencies that the Board considers are necessary
to augment the direct industry knowledge and other expertise
provided by the Supplier Directors.
During the year, Duncan Morris joined the Board as a Supplier
Director following the annual Director election process undertaken
in accordance with the Company’s Constitution. In eect,
Mr Morris replaced Don Howard, who retired om the Board
aer 16 years as a Supplier Director. As is required with all new
Non-executive Directors, Mr Morris conrmed his acceptance
of the appointment on the standard terms, which are available on
the Company’s website at www.mgc.com.au/our-story/governance.
At the 2012 Annual General Meeting, shareholders approved
various amendments to the Constitution, which included an
increase in the maximum number of Special Directors, giving
the Board the capacity to appoint a third Special Director. During
the year, the Remuneration and Nominations Commiee (with the
assistance of an external recruitment consultant) commenced
identiing potential candidates for this additional directorship
having regard to the skills and experience that would best
complement those held by existing Directors. is process will
continue with a view to the Board appointing a third Special
Director during nancial year 2015.
e Chairman is Philip Tracy and the Deputy Chairman
is Ken Jones. e Chairman and Deputy Chairman are both
Supplier Directors who the Board considers to be independent,
having regard to the guidelines adopted by the Board to assist
in considering independence (as described in Section 4 of this
Corporate Governance Statement).
e Company Secretary, Fiona Smith, is accountable to
the Board, through the Chairman, on all maers to do with
the proper functioning of the Board.
e Directors of the Company, their length of service and
their biographical details are set out on pages 26 to 27.
e Board met 23 times during the year, with 10 scheduled
monthly meetings and 13 ad hoc meetings (predominantly
to consider maers relating to the Company’s takeover oer
for WCB). Details of the number of meetings aended by each
Director are set out in the Directors’ Report on page 40.
At the commencement of each scheduled monthly meeting,
the Board holds a closed session (aended by Non-executive
Directors only), which provides Non-executive Directors with
an opportunity to raise issues in the absence of management.
COMMITTEES
To assist the Board to carry out its responsibilities, the
Board has established a Finance, Risk and Audit Commiee,
a Remuneration and Nominations Commiee, a Compliance
Commiee and a Supplier Relations Commiee.
Other commiees are established om time to time to deal
with specic maers. For example, a commiee was established
in 2013 to specically consider maers relating to the Company’s
capital structure.
Each of the permanent Commiees has a Charter, which sets
out the membership structure, roles and responsibilities and
meeting procedures.
Generally, these Commiees review maers on behalf
of the Board and, as determined by the relevant Charter:
• refer maers to the Board for decision, with
a recommendation om the Commiee; or
• determine maers (where the Commiee acts with delegated
authority), which the Commiee then reports to the Board.
e Company Secretary provides secretarial support
for each Commiee.
ere were a number of changes made to the membership
of each Commiee during the year as a result of the review
undertaken by the Board in December, following the change
in the Board composition.
FINANCE, RISK AND AUDIT COMMITTEE
Role and responsibilities
e role of the Finance, Risk and Audit Commiee is to assist the
Board in fullling its responsibilities in respect of the Company’s
external audit functions, internal audit functions, risk management
and identication, preparation of nancial statements and
reporting systems, and internal accounting and control systems.
e Commiee’s key responsibilities and functions are:
• the appointment, independence and remuneration of the
Internal and External Auditors;
• to oversee the internal audit functions generally and approve
the annual internal audit plan;
• to assist the Board in relation to the reporting of nancial
information;
• to assist the Board in relation to the approval, application
and amendment of accounting policies;
• to manage the process of identication and management
of material risk;
• to review the dra annual budget before it is submied to the
Board for approval; and
• to oversee any other nancial review maers delegated to the
Commiee by the Board om time to time.
Membership and meetings
e Commiee consists of:
• a minimum of three members of the Board, all of whom are
Non-executive Directors;
• a majority of independent Directors (as dened in the Board
Charter); and
• an independent Chair, who is not Chair of the Board.
Devondale Murray Goulburn Annual Report 2014 31
e members of the Finance, Risk and Audit Commiee during
the year were:
Name Membership Status for FY2014
Peter Hawkins (Chairman) Member for the entire period
Bill Bodman Member for the entire period
Ken Jones Member until 18 December 2013
Duncan Morris Member since 18 December 2013
Graham Munzel Member for the entire period
John Pye Member since 18 December 2013
Martin Van de Wouw Member until 18 December 2013
Two members of the Commiee have formal accounting
qualications and experience, with the Chairman having signicant
experience in the banking and nancial services industry in
Australia and overseas at both the highest levels of management
and directorship of major organisations, including Australia and
New Zealand Banking Group entities, BHP (NZ) Steel Limited,
ING Australia Limited and Esanda Finance Corporation.
Other Directors, members of management and the External
Auditor may aend meetings of the Commiee at the invitation
of the Commiee Chair. All Board members are expected to
aend the Finance, Risk and Audit Commiee meetings at which
the half year and annual nancial statements and reports
are considered.
e Finance, Risk and Audit Commiee met six times during
the period. Information on meeting aendance by Commiee
members is included in the Directors’ Report on page 40.
Activities during the year
e key activities undertaken by the Finance, Risk and Audit
Commiee during the year include:
• reviewing the scope of the annual internal and external
audit plans for 2014 and overseeing the work performed
by the auditors;
• reviewing signicant accounting, nancial reporting and related
issues raised by management, the Internal Auditor and the
External Auditor;
• regularly reviewing the Company’s key risks and risk
management program;
• reviewing and monitoring improvements to the Company’s
internal control and accounting practices;
• reviewing and recommending to the Board the approval
of the Company’s annual and half year nancial statements;
• reviewing the performance, tenure and independence
of the External Auditor, together with their assurances that
all applicable independence requirements were met; and
• reviewing the performance of the Internal Auditor.
External audit
e Finance, Risk and Audit Commiee reviews the External
Auditor’s scope of work, including the external audit plan, to
ensure it is appropriate, having regard to the Company’s key risks.
e External Auditor reports to the Commiee at each meeting
and is given an opportunity to raise issues with the Commiee
in the absence of management. e Commiee also reviews
the performance and independence of the External Auditor
on an annual basis.
e External Auditor aends the Company’s Annual General
Meeting and is available to answer questions om shareholders
relevant to the audit.
During the year, the Commiee facilitated the process to
replace the Company’s External Auditor, including making
a recommendation to the Board regarding the appointment
of PricewaterhouseCoopers (which was ultimately approved
by shareholders at the Annual General Meeting held in
November 2013), agreeing the compensation and terms
of their engagement and monitoring the transition.
Internal audit
Ernst and Young (EY) has been engaged to carry out the
Company’s internal audit function. EY’s role as the Company’s
Internal Auditor is to determine, independently of the External
Auditor, whether adequate and eective systems of risk
management and internal control are in place. e Internal Auditor
prepares its scope of work (including the annual internal audit plan)
having regard to the Company’s strategic imperatives, key risks,
key processes and reasonable site coverage and the Finance, Risk
and Audit Commiee reviews the internal audit plan to ensure it is
appropriate. e relationship with the Internal Auditor is managed
by the Company Secretary and General Counsel; however, the
Internal Auditor (represented by the Internal Audit Partner and
Internal Audit Director) reports directly to the Commiee at each
meeting on the progress against the internal audit plan, as well
as detailed ndings and corresponding management actions
in relation to reviews undertaken in accordance with that plan.
e Internal Auditor is also given an opportunity to raise issues
with the Commiee in the absence of management.
Risk management
e Board has adopted the Risk Management Policy, which sets
out the objectives regarding risk management and outlines the
approach to managing risks.
e Policy recognises that the eective identication and
management of risk reduces the uncertainty associated in
executing the Company’s business strategies. e Board plays
a key role in the oversight of key risks by providing strategic
guidance on all aspects of risk management across the Company,
reviewing and approving annually (including in nancial year
2014) the Company risk prole, reviewing, ratiing and
monitoring systems of risk management and seing the risk
management tone and expectations across the Company.
e Company is considered to have a material environmental
risk exposure in that each of its sites requires an Environment
Protection Authority licence and must comply with the conditions
of that licence in its operations. In order to manage this risk, the
Company has in place an eective monitoring program to ensure
each site complies with its licence.
e Board is supported in its role of overseeing risk by the
Finance, Risk and Audit Commiee, which reviews the ongoing
risk management program, procedures, auditing and operational
risk management as well as evaluating the adequacy and
eectiveness of the management reporting and control systems
associated with nancial and operational risk management.
Corporate Governance Statement continued
32 Devondale Murray Goulburn Annual Report 2014
To facilitate the Finance, Risk and Audit Commiee’s oversight of
the Company’s risk management program, management reports
to the Commiee in an open and transparent manner, including
the provision of quarterly business risk reports, which set out
new and emerging risks, an overview of incidents and events,
and an update on key risks. ese reports comprise information
prepared in accordance with:
• Company wide mandatory requirements for risk identication,
assessment (in accordance with the risk rating matrix),
response, monitoring and reporting; and
• Company wide mandatory requirements for incident management,
which include classication in accordance with the incident
rating matrix (aligned with the risk rating matrix) and timely
notication of incidents to appropriate internal stakeholders.
Further, the Managing Director and the Chief Financial Ocer
make representations to the Board in respect of the Company’s
half year and annual nancial statements that, in their opinion, the
nancial records of the Company have been properly maintained,
the nancial statements comply with the appropriate accounting
standards and give a true and fair view of the nancial position
and performance of the Company, and that the opinion has been
formed on the basis of an adequate system of risk management
and internal control that is operating eectively.
Enhancements were made to the risk management program
during the year by:
• requiring all key business risks outside tolerance to be identied,
assessed and managed; and
• progressing the development of an internal control amework.
REMUNERATION AND NOMINATIONS COMMITTEE
Role and responsibilities
e primary role of the Remuneration and Nominations Commiee
is to assist the Board to perform its functions in relation to all key
management personnel remuneration issues and the Company’s
human resources strategy generally.
e Commiee also has a secondary role in relation to the
process for identiing and selecting Special Directors, as well
as the director induction and training programs.
e Commiee’s key responsibilities and functions are to:
• oversee the Company’s remuneration, recruitment, retention
and termination policy and procedures and its application to the
Managing Director and the Managing Director’s direct reports,
and its general application to all Company employees;
• assess the performance of the Managing Director and assist
the Chair with reviews of the Managing Director’s performance;
• review and recommend arrangements for the executive
directors and the Managing Director’s direct reports, including
contract terms, annual remuneration and participation in the
Company’s short and long term incentive plans;
• review and recommend to the Board executive succession
plans, including the succession of the Managing Director;
• oversee the Company’s human resources strategy with a view
to conrming to the Board that appropriately talented and
trained people are available to achieve the corporate objectives;
• make recommendations to the Board regarding the appointment
of Special Directors om time to time, including the identication
and selection of potential candidates; and
• oversee the director induction and training programs.
Membership and meetings
e Commiee must consist of:
• a minimum of three members of the Board, all of whom are
Non-executive Directors;
• a majority of independent Directors (as dened in the Board
Charter); and
• an independent Director as Chair.
e members of the Commiee during this period were:
Name Membership Status for FY2014
Philip Tracy (Chairman) Member for the entire period
Peter Hawkins Member for the entire period
Michael Ihlein Member for the entire period
Ken Jones Member for the entire period
John Pye Member since 18 December 2013
Other Directors and members of management may aend
meetings of the Commiee at the invitation of the Commiee Chair.
e Remuneration and Nominations Commiee met six times
during the period. Information on meeting aendance by Commiee
members is included in the Directors’ Report on page 40.
Activities during the year
e key activities undertaken by the Commiee during the period
in relation to the Company’s remuneration amework, the policies
and practices regarding the remuneration of Directors, as well
as the contractual arrangements, remuneration and performance
evaluation of other members of key management personnel,
are reected in the Remuneration Report on pages 41 to 54.
e Commiee also oversaw:
• the director induction program, with new Director, Duncan
Morris inducted following his appointment in November 2013; and
• the director training program, with Directors participating in
eight sessions during the year, which were designed to develop
and maintain the skills and knowledge needed to perform their
role as Directors of the Company eectively.
Further, the Commiee, with the assistance of an external
recruitment consultant, commenced identiing potential
candidates for the third Special Director position during the year.
It is expected that the Commiee will be in a position to make
a recommendation to the Board in relation to the appointment
of a third Special Director during nancial year 2015.
Devondale Murray Goulburn Annual Report 2014 33
COMPLIANCE COMMITTEE
Role and responsibilities
e role of the Compliance Commiee is to assist the Board
to oversee and monitor the performance of the procedures and
processes implemented by management to ensure the Company’s
compliance with key legislative and regulatory requirements
relevant to the Company’s operations and business.
e Commiee’s key responsibilities and functions include:
• reviewing, assessing and monitoring the Company’s activities
and overall performance having regard to the Company’s
compliance with key legislative and regulatory requirements;
• overseeing and monitoring management’s implementation
of procedures and processes to ensure the Company’s
compliance with key legislative and regulatory requirements
relevant to the Company’s operations and business; and
• advising the Board and the Finance, Risk and Audit Commiee
on the overall performance of the Company having regard
to the Company’s compliance with key legislative and regulatory
requirements.
Membership and meetings
e Commiee must consist of:
• a minimum of three members of the Board, all of whom are
Non-executive Directors;
• a majority of independent Directors (as dened in the Board
Charter); and
• an independent Chair, who is not Chair of the Board.
e members of the Commiee during this period were:
Name Membership Status for FY2014
Michael Ihlein (Chairman) Member for the entire period
Natalie Akers Member for the entire period
Don Howard Member until 22 November 2013
Max Jelbart Member for the entire period
Ken Jones Member since 18 December 2013
John Pye Member until 18 December 2013
Martin Van de Wouw Member since 18 December 2013
Other Directors, members of management and the External
Auditor may aend meetings of the Commiee at the invitation
of the Commiee Chair.
e Compliance Commiee met eight times during the period,
including three joint meetings with the Supplier Relations
Commiee to consider maers relating to the farm milk quality
review. Information on meeting aendance by Commiee
members is included in the Directors’ Report on page 40.
Activities during the year
e key activities undertaken by the Compliance Commiee during
the year include:
• reviewing the procedures, policies, systems and processes
in place to ensure compliance with applicable laws and
regulations, through regular detailed reports om management,
with a particular focus on occupational
health and safety, environment and quality and food safety;
• receiving reports on signicant occupational health and safety,
environment and quality and food safety incidents, including
outcomes of investigations and remedial and preventative
actions taken by management;
• overseeing the maers considered and discussed
by management’s Executive Safety Leadership Commiee
by reviewing minutes of its meetings; and
• reviewing the culture with respect to the observance
of appropriate ethical standards, including receiving reports
on maers raised by employees and contractors via the
Ethics Hotline.
In addition, the Compliance Commiee, in conjunction with
the Supplier Relations Commiee, considered the outcomes
of the independent farm milk quality review and made
recommendations to the Board in relation to the improvement
opportunities identied.
SUPPLIER RELATIONS COMMITTEE
Role and responsibilities
e primary role of the Supplier Relations Commiee is to
review and monitor the Company’s eectiveness in engaging
with suppliers and its relationship with suppliers generally,
and to provide advice and guidance for management with
regard to the Company’s communication strategy with suppliers,
including the Company’s provision of regular updates of major
Company developments.
e Commiee’s key responsibilities include:
• approving the overall strategy for communication with
shareholders developed by management;
• reviewing and monitoring the interface between the Company
and suppliers and reviewing maers that are likely to aect
that interface, including signicant corporate communications;
• reviewing the standard terms and conditions for the supply
of milk to the Company and making recommendations
to management or the Board as appropriate;
• reviewing parameters for the variation by management
of the standard terms and conditions for the supply of milk
to the Company and making recommendations to the Board;
• where information relating to suppliers or milk supply is to be
materially relied upon by the Board, considering and advising
the Board on the reasonableness of this information;
• receiving and considering reports om the Field Services
Group in relation to their interactions with and services
provided to suppliers;
• receiving and considering reports relating to the MG Trading
stores in relation to their interactions with and services provided
to suppliers;
• reviewing any proposed amendments to Company policies
or procedures that could aect the Company’s relationship
with its suppliers, and making recommendations to the Board;
• providing advice and guidance for management with
regard to management’s processes for managing questions
and complaints lodged with the Company by suppliers; and
• providing advice and guidance for management in relation
to any complaints lodged by suppliers.
Corporate Governance Statement continued
34 Devondale Murray Goulburn Annual Report 2014
Membership and meetings
All Supplier Directors are members of the Commiee, as follows:
Name Membership Status for FY2014
John Pye (Chairman) Member for the entire period
Natalie Akers Member for the entire period
Bill Bodman Member for the entire period
Don Howard Member until 22 November 2013
Max Jelbart Member for the entire period
Ken Jones Member for the entire period
Duncan Morris Member since 18 December 2013
Graham Munzel Member for the entire period
Philip Tracy Member for the entire period
Martin Van de Wouw Member for the entire period
e Special Directors and Managing Director have a standing
invitation to join each meeting of the Commiee. Members
of management and the External Auditor may also aend
meetings at the invitation of the Commiee Chair.
e Supplier Relations Commiee met eight times during
the period, including three joint meetings with the Compliance
Commiee to consider maers relating to the farm milk quality
review. Information on meeting aendance by Commiee
members is included in the Directors’ Report on page 40.
Activities during the year
e key activities undertaken by the Supplier Relations Commiee
during the year include:
• receiving and considering regular reports om management
on the activities undertaken by the Field Services team, including
in relation to milk supply and the various services and programs
available to suppliers;
• receiving and considering regular reports om management
in relation to the activities undertaken by the MG Trading team,
including in relation to Trading Stores and the corresponding
property porolio;
• receiving regular reports on the management of credit provided
by the Company to suppliers;
• considering signicant industry issues including the Company’s
position in relation to unconventional gas exploration and
genetic modication;
• considering the milk payment system for nancial year 2015;
• considering the shareholder communications strategy; and
• receiving reports on the Supplier Development Program.
In addition, the Supplier Relations Commiee, in conjunction
with the Compliance Commiee, considered the outcomes of the
independent farm milk quality review and made recommendations
to the Board in relation to the improvement opportunities identied.
4. Independence, Performance Evaluation
and Remuneration
INDEPENDENCE AND CONFLICTS OF INTEREST
As all Supplier Directors have a supply relationship with the
Company, they will generally not be classied as independent
if the usual best practice denitions are applied. e Board has,
however, adopted guidelines, similar to an ASX listed company
to assist in considering independence. e Board only considers
Directors to be independent of management where they are
ee om any business or other relationship that can materially
interfere with, or could reasonably be perceived to interfere with,
the exercise of unfeered and independent judgement.
A copy of the guidelines can be found at Aachment 1 to the
Board Charter at www.mgc.com.au/our-story/governance.
On this basis, all Directors except for the Managing Director
are considered to be independent.
Under the Corporations Act 2001 and general law, Directors must
avoid situations where their interests and those of the Company
conict. e Board has adopted the Related Party and Conicts
of Interest Policy to provide guidelines to Directors in complying
with their obligations.
As Supplier Directors are constitutionally required to be suppliers
of milk to the Company, there is an acknowledged inherent conict
of interest when the Board is required to consider seing the milk
price. To manage this particular conict, the Board has adopted
a set of protocols, which include:
• each Director acknowledging that the interests of the Company
as a whole must take priority over any personal interest they
have and they must not favour one group of suppliers over
another group unless to do so is fair and in the best interests
of the Company as a whole;
• proposals for both the opening milk price and changes to that
milk price are to be initiated and developed by management
who then submit the proposals to the full Board for approval;
• such proposals are only submied to the Board if management
is of the opinion that the proposal is in the best interests of the
Company as a whole (recognising the co-operative objectives
of the Company) and management must include the rationale
for supporting the proposal;
• Board discussion of a proposal to change the milk price will
be chaired by a Special Director, and if there is an equality
of votes on whether the change to the milk price should be
adopted, that Special Director will have a casting vote; and
• to avoid perceived or actual interference by Directors in
management’s initiation and development of milk price proposals:
• Directors reain om discussing the milk price with
management outside formal Board processes;
• all queries om suppliers in relation to milk price are
directed to management within Shareholder Relations; and
• Directors reain om discussing with suppliers any
proposals to change the milk price.
PERFORMANCE EVALUATION
e Board conducts periodic evaluations of its performance,
the performance of Board Commiees, the Chairman, individual
Directors and the governance processes that support the Board’s
work. is includes analysis of how the Board and its Directors are
functioning, the time spent by the Board considering maers and
whether the Charters of the Board and its Commiees have been
met. e Board assesses its performance through a combination
of internal reviews and externally facilitated evaluation.
During the year, an externally facilitated evaluation of the
Board, its Commiees, the Chairman and individual Directors
was undertaken. Overall, the review indicated that the Board
and its Commiees are continuing to function eectively and
in accordance with the respective Charters. e review also
highlighted a number of improvement opportunities that are
in the process of being implemented and monitored by the Board.
Devondale Murray Goulburn Annual Report 2014 35
REMUNERATION
Details of the Company’s remuneration policy and practices
and the remuneration paid to Directors and key management
personnel are set out in the Remuneration Report on pages 41
to 54 of this Annual Report.
5. Conduct and ethics
We have in place a Code of Conduct, which applies to all
Directors, employees, contractors, agents and representatives
of the Company.
e key values underpinning the Code of Conduct are:
• actions must be governed by the highest standards
of integrity and fairness;
• all decisions must be made in accordance with the spirit
and leer of applicable law; and
• business must be conducted honestly and ethically, with
skill and the best judgement, and for the benet of customers,
employees, shareholders and the Company alike.
e Code of Conduct provides clear direction and advice on
general workplace behaviour and how to conduct business both
domestically and internationally, interacting with shareholders,
business partners and the communities in which we operate.
6. Continuous Disclosure and Communications
with Shareholders
e Company appreciates the importance of timely and adequate
disclosure to its shareholders, and is commied to making timely
and balanced disclosure of all material maers and eective
communication with its shareholders so as to give them ready
access to balanced and clear information.
As an unlisted public company, Murray Goulburn has continuous
disclosure obligations under the Corporations Act 2001 and
has put in place mechanisms designed to ensure compliance
with those requirements, including the Public Disclosure
Policy adopted by the Board. ese mechanisms also ensure
accountability at a senior executive level for that compliance.
One of the key communication tools is the Company website.
e website contains details of the Company’s Constitution, Board
and Board Commiee Charters, core governance policies, press
announcements and communications to shareholders
and the Company’s nancial information. All shareholders are
encouraged to access the website on a regular basis and provide
relevant feedback.
In addition, the Company regularly communicates with its
shareholders through supplier meetings that are held throughout
Victoria, South Australia and New South Wales at least twice
a year, as well as its Annual General Meeting. For convenience
and environmental purposes, shareholders are given the option
to receive communications om, and send communications
to, the Company (including its share registry) electronically.
Shareholders are encouraged to make their views known
and raise any issues directly with management.
7. Diversity
e Company submied its annual public report on gender
equality to the Workplace Gender Equality Agency (WGEA)
in March 2014, which included the following results:
• Board – one of the 12 Directors (eight per cent) is female;
• senior executives – three of the 11 senior executives
(27 per cent) are female; and
• employees – 584 of the 2,455 Company employees
(24 per cent) are female.
Following the submission to the WGEA, the Company implemented
a formal diversity statement. e statement sets out the Company’s
commitment to an inclusive workplace that embraces and
promotes diversity, where high performing people choose to work.
It also outlines the underpinning principles, accountabilities and
objectives in enhancing diversity at Murray Goulburn.
e Board sets measurable objectives to monitor progress
in addressing any diversity imbalance issues. In 2014 the Board
endorsed the following objectives in building diversity awareness
at Murray Goulburn:
1. Supplier Development Program – to increase the rate of female
participation each year.
2. Candidacy Araction Rates (including external hires and
internal promotions) – to ensure and increase females sourced
and identied on long and short lists for all key leadership roles,
including directorship positions.
3. Employee Turnover/Retention Proling – to assess rates
and reasons by age, tenure and gender.
Assessment of these objectives and review of progress will
be carried out on an annual basis and reported to shareholders.
is Corporate Governance Statement has been approved
by the Board of Directors.
Corporate Governance Statement continued
36 Devondale Murray Goulburn Annual Report 2014
Financial
Statements
38 Directors’ Report
41 Remuneration Report 2014
56 Consolidated Statement of Comprehensive Income
57 Consolidated Statement of Financial Position
58 Consolidated Statement of Changes in Equity
60 Consolidated Statement of Cash Flows
61 Notes to the Financial Statements
93 Directors’ Declaration
94 Independent Auditor’s Report
96 Auditor’s Independence Declaration
Devondale Murray Goulburn Annual Report 2014 37
Your Directors present the following report for the nancial year ended 30 June 2014.
Directors
e Directors listed on page 40 each held oce as a Director of the Company at all times during or since the end of the nancial
year, except for:
• ED Morris – appointed 22 November 2013
• DF Howard – resigned 22 November 2013
Company Secretaries
F Smith (BSC/LLB, Grad Dip Applied Governance, FGIA) joined the Company and was appointed as a Company Secretary
in January 2012. She has experience in company secretarial roles arising om time spent in such roles in listed companies.
D Page (B. Bus., CA) joined the Company in 2003 and was appointed as a Company Secretary in 2011.
Principal Activities
e principal activities of the consolidated entity constituted by the Company and the entities it controlled during the year have been:
• the processing of the whole milk of its shareholder suppliers and the manufacture, marketing and distribution of dairy products; and
• the operation of retail stores as a service to the suppliers.
No signicant change in the nature of these activities occurred during the year.
Dividends Paid or Recommended
e following dividends were paid or recommended in respect to:
$000
Final dividend paid in September 2013
On Ordinary Shares at $0.08 per share unanked 21,027
On A Class Preference Shares at $0.08 per share unanked 1,179
On B Class Preference Shares at $0.05 per share unanked 485
On C Class Preference Shares at $0.08 per share unanked 2,592
25,283
On A Class Preference Shares, special dividend of $0.25 per share unanked 3,623
Total dividends paid during the nancial year ended 30 June 2014 28,906
Final dividend recommended for payment during September 2014
(Dividends declared subsequent to 30 June 2014 and therefore not recognised)
On Ordinary Shares at $0.08 per share unanked 22,104
On B Class Preference Shares at $0.05 per share unanked 493
On C Class Preference Shares at $0.05 per share unanked 1,754
24,351
Review of Operations
e consolidated entity reported prot aer income tax of $29.3 million (2013: $34.9 million) for the nancial year ended 30 June 2014.
Consolidated sales revenue was $2,916 million (2013: $2,385 million) for the nancial year ended 30 June 2014, an increase
of 22 per cent on the prior year. Consolidated prot aer income tax of $29.3 million (2013: $34.9 million) for the nancial year
ended 30 June 2014 was 16 per cent lower than the prior year. is reects a weighted average available milk price of
$6.81/kg MS (2013: $4.97/kg MS) for the entity’s Victorian Milk Pool.
Directors’ Report
38 Devondale Murray Goulburn Annual Report 2014
Future Developments
Disclosure of information regarding likely developments in the operations of the consolidated entity in future nancial years and the
expected results of those operations are likely to result in unreasonable prejudice to the consolidated entity. Accordingly, this information
has not been disclosed in this report.
No signicant change in the state of aairs of the consolidated entity occurred during the nancial year.
Events Subsequent to Balance Date
With the exception of the declaration of dividends detailed in Note 7 ‘Unrecognised Amounts’, no other maers or circumstances have
arisen since the end of the nancial year that signicantly aected or may signicantly aect the operations of the consolidated entity,
the results of those operations, or the state of aairs of the consolidated entity in nancial years subsequent to the nancial year ended
30 June 2014.
Environmental Regulations
Murray Goulburn maintains a strong focus on doing the right thing by the environment and the community.
We continue to report in line with federal environmental reporting requirements including our annual energy use and greenhouse gas
emissions under the National Greenhouse and Energy Reporting Act 2007, our direct carbon cost liability under the Clean Energy Act
2011, and until June 2014 our energy eciency opportunities under the Energy Eciencies Opportunities Act 2006. We also report our
annual environmental performance at our licensed sites through requirements outlined by the various state based environment related
Acts and authorities.
During the nancial year ended 30 June 2014, the Victorian Environment Protection Authority served three statutory notices in relation
to environmental performance at our milk processing sites. Two were served to our Rochester site relating to waste stockpiling and
odour, and one served to our Cobram site relating to environmental noise. We take these notices seriously and instituted corrective
measures to address the issues at both sites. e Rochester notices were both complied with and subsequently revoked and the
Cobram notice will be complied with within the required time ame.
We were also charged a late payment penalty for a shorall error, which was made in our mid-year carbon report. e error, which
we identied ourselves, was a timing error and did not aect our overall carbon quantity reported or tax payment. A provisional unit
shorall interest charge of $6,107 was paid. A late payment penalty of $3,030 was issued, however, it was waived following our request.
Remuneration
e Remuneration Report containing the remuneration of key management personnel (KMP) is provided on pages 41 to 54.
During the nancial year the Company paid a premium to insure the Directors and senior managers of the Company. e liabilities
insured include costs and expenses that may be incurred in defending civil or criminal proceedings that may be brought against the
ocers in their capacity as ocers of the consolidated entity. e policy prohibits the disclosure of the premium paid to insure the
Company’s ocers.
Auditor’s Independence Declaration
Our auditors have provided the Board of Directors with a signed Independence Declaration in accordance with section 307C of the
Corporations Act 2001. is declaration is included at page 96 of this nancial report.
e Company is of the kind referred to in ASIC Class Order 98/0100 dated 10 July 1998, and in accordance with that Class Order
amounts in the Directors’ Report and the nancial report have been rounded o to the nearest thousand dollars.
Devondale Murray Goulburn Annual Report 2014 39
Each Director’s aendance at meetings held during the year is set out in the table below.
Full Meetings Finance, Remuneration Supplier
of Directors Risk & Audit Compliance & Nominations Relations
23 held 6 held 8 held 6 held 8 held
PW Tracy Dairy Farmer 23 * * 6 7 (8)
Chairman B. Ec & Comm, CA, SIA, GAICD,
Foster Director since 2009
G Helou BE (Hons) MComm, FAICD, FAIM, 22 (23) * * * *
Managing Director Director since 2011
Melbourne
KW Jones Dairy Farmer 23 3 (3) 4 (4) 6 8
Deputy Chairman Advanced Diploma Agr., MAICD,
Gundowring Director since 2008
N Akers Dairy Farmer 22 (23) * 8 * 8
Tallygaroopna B (Hons) Public Policy and Mgt,
B. Arts, GAICD, Director since 2011
WT Bodman Dairy Farmer 23 6 * * 8
Won Wron B. Agr. SC., GAICD,
Director since 2009
PJO Hawkins Special Director 20 (23) 6 * 6 *
Melbourne BCA (Hons), FAICD, SF Fin, FAIM,
ACA (NZ), Director since 2009
DF Howard Dairy Farmer 12 (12) * 4 (4) * 3 (3)
Camperdown Dip. Company Directors (ANU),
MAICD, Director until 22 November 2013
MF Ihlein Special Director 22 (23) * 8 6 *
Sydney BBus (Acc), FCPA, FAICD,
F Fin, Director since 2012
ML Jelbart Dairy Farmer 23 * 8 * 8
Leongatha Director since 2012
ED Morris Dairy Farmer 11 (11) 3 (3) * * 5 (5)
Cobden Dip. Bus. Studies (Accounting), CPA,
MAICD, Director since 22 November 2013
GN Munzel Dairy Farmer 23 6 * * 8
Gunbower GAICD,
Director since 2008
JP Pye Dairy Farmer 23 3 (3) 4 (4) 3 (3) 8
Bessiebelle Advanced Diploma Agr., MAICD,
Director since 2005
MJ Van de Wouw Dairy Farmer 23 3 (3) 4 (4) * 8
Timboon MAICD, Director since 2010
* Not a member of the relevant commiee.
e Managing Director has a standing invitation to aend all Board Commiee meetings.
Directors’ Report continued
40 Devondale Murray Goulburn Annual Report 2014
is Remuneration Report provides an outline of the Board’s
policy for determining the nature and amount of remuneration
of the key management personnel (KMP) of the Company and
the relationship between this remuneration policy and the
Company’s performance.
e report covers the following:
1. Introduction to Remuneration
2. Remuneration Governance
3. Key Management Personnel
4. Executive Remuneration Strategy
5. Executive Remuneration Structure
6. Short Term Incentive Plan and Link to Performance
7. Long Term Incentive Plan and Link to Performance
8. Remuneration Summary Table
9. Executive Contracts
10. Non-executive Director Remuneration
11. Shareholdings
1. Introduction to Remuneration
As disclosed in last year’s Remuneration Report, there were
a number of changes made to the remuneration amework in
2013 with the most signicant being the introduction of a Long
Term Incentive Plan (LTIP) for the Managing Director. is year
the Board considered it important to align the interests of the KMP
with those of shareholders by introducing an at-risk component to
their remuneration, which rewards sustainable long term value
growth for both shareholders and the Company. As a result, the
eligibility to participate in the LTIP was extended to KMP during the
2014 nancial year. is is also aligned to the Managing Director’s
remuneration structure and a more detailed explanation of the
LTIP can be found in Section 7 of this report.
FINANCIAL YEAR 2014 REMUNERATION REVIEW
Financial year 2014 saw an improved performance for the
Company primarily driven by a stronger demand in world dairy
ingredients leading to high dairy commodity prices during the
year. ese higher prices combined with a continued focus
by management on lowering internal costs and growing markets
resulted in high farmgate prices, which supported a strong
recovery in cash and fodder positions for our shareholders
in the second half of the year. e Company also increased
its milk supply by approximately eight per cent on nancial year
2013 volumes. As a result, this performance has resulted in
payments under the Short Term Incentive Plan (STIP) for KMP
covered by this report.
2. Remuneration Governance
e Board has the overall responsibility for approving the
remuneration policy of the Company and ensuring that the
Company’s remuneration arrangements are appropriate and
align with the interests of shareholders. To assist it in its role,
the Board has established the Remuneration and Nominations
Commiee whose role is to oversee the Company’s remuneration
policy and amework with particular reference to its application
to the Managing Director and his direct reports. e remuneration
arrangements for all other executives are determined by the
Managing Director or relevant managers.
In performing its function in this area, the Board – through the
Remuneration and Nominations Commiee – seeks and considers
advice om remuneration consultants who are independent
of management. As part of its review of the Managing Director’s
overall remuneration package, including consideration of the LTIP,
the Commiee obtained the advice of Ernst and Young (EY). EY was
engaged by the Board and reported directly to the Commiee.
During the year, EY provided particular advice in the following areas:
• benchmarking the Managing Director’s total remuneration
package against comparable companies;
• benchmarking the Managing Director’s direct reports total
remuneration package against comparable companies resulting
in the LTIP being extended to the KMP covered in this report; and
• provision of ongoing information and commentary on the design of
the LTIP including performance target monitoring and assessment.
During 2014 no remuneration recommendations, as dened
by the Corporations Act 2001, were provided by EY.
Remuneration Report 2014
Devondale Murray Goulburn Annual Report 2014 41
3. Key Management Personnel
Murray Goulburn has determined KMP to be the Non-executive
Directors, Managing Director and selected members of the
Executive Leadership Team. e 2014 nancial year KMP
disclosed in this report are:
Name Position
Non-executive Director
PW Tracy Chairman
KW Jones Deputy Chairman
N Akers Non-executive Director
WT Bodman Non-executive Director
PJO Hawkins Special Director (Non-executive)
DF Howard Non-executive Director
(to 22 November 2013)
MF Ihlein Special Director (Non-executive)
ML Jelbart Non-executive Director
ED Morris Non-executive Director
(om 22 November 2013)
GN Munzel Non-executive Director
JP Pye Non-executive Director
MJ Van de Wouw Non-executive Director
Executive Director
G Helou Managing Director
Executive
D Mallinson Executive General Manager Business
Operations (om 3 April 2014)
D Noonan Chief Financial Ocer
(to 13 January 2014)
B Hingle Chief Financial Ocer
(om 13 January 2014)
F Smith Company Secretary/General Counsel
e report incorporates the disclosure requirements of Australian
Accounting Standard AASB 124 Related Party Disclosures, as well
as those prescribed by the Corporations Act 2001. e information
provided in this Remuneration Report has been audited as required
by the Corporations Act 2001. e remuneration reported in this
report is for the period that the individual served in the relevant
capacity during the year.
4. Executive Remuneration Strategy
e Board recognises that to deliver transformational change
the Company needs to be able to aract, motivate and retain high
quality employees and executives. e objective of the executive
remuneration strategy is to motivate and reward outstanding
performance and align executives’ and shareholders’ interests.
e overall objective of the remuneration policy is to provide
remuneration that:
• creates and enhances sustainable long-term value
by maximising returns for all shareholders;
• provides market competitive and equitable remuneration;
• recognises and rewards high performing individuals; and
• encourages behaviours that support a high performing
organisation.
e remuneration amework for the KMP covered by this report
contains a mix of xed remuneration and variable at-risk pay
to reward performance.
e Company’s remuneration policy for the KMP covered by
this report targets the median position for total remuneration
of the relevant market. In undertaking the review of the Managing
Director’s remuneration, this year the Board considered the relative
market comparator group to be companies within the ASX 200 with
similar revenue bases while also taking into account the Company
is an unlisted public company.
Remuneration Report 2014 continued
42 Devondale Murray Goulburn Annual Report 2014
Objective
Remuneration
Remuneration
Components
Remuneration Focus
Aract and retain top
executive talent
Pay for role size,
responsibility and
competence
Pay for superior
annual performance
against Group,
business unit
and individual plans
Pay for superior longer
term performance
against milk price growth
and Return on
Capital Employed
Motivate and reward
outstanding performance
Align executive and
shareholder wealth
Paid salary, benefits
and superannuation
Fixed remuneration At-risk remuneration
Managing Director:
Other KMP:
Short Term Incentive
ree-year cash plan
Long Term Incentive
Short Term Incentive Long Term Incentive
Annual cash bonus
5. Executive Remuneration Structure
KMP covered by this report are rewarded based on the following remuneration components:
Remuneration Component Purpose
Fixed remuneration Fixed remuneration rewards the day to day accountabilities of the position and is made up of base
salary (including salary sacrice benets and applicable inge benets), xed allowances and Company
contributions to superannuation (paid at the legislative minimum).
Short Term Incentive (STI) STI is an annual at-risk cash component of remuneration and is performance based. Performance
(under the STIP) is assessed on the achievement of approved key performance indicators (KPIs).
Long Term Incentive LTI is an at-risk cash component of remuneration and is based on superior performance over
(LTI) (under the LTIP) a three-year period. Performance is rewarded depending on the Company’s achievement of approved
three-year performance targets in milk price growth and on return on capital employed. Performance
is measured and any payment made at the end of the three-year period.
2014 EXECUTIVE PAY MIX
is year the Board approved eligibility of the LTIP for the KMP – further details on the LTIP can be found in Section 7 of this report.
As shown in the diagram below, the remuneration structure of the Managing Director and other KMP comprises both xed and at-risk
remuneration. e total remuneration mix varies between the Managing Director and his direct reports.
e Managing Director’s total remuneration mix is made up of 50 per cent xed remuneration and a maximum of 50 per cent at-risk
remuneration. Of the at-risk remuneration, 40 per cent is STI and 60 per cent is LTI. For all other KMP covered by this report, total
remuneration mix is made up of 57 per cent xed remuneration and a maximum of 43 per cent at-risk remuneration. Of the at-risk
remuneration, 33 per cent is STI and 67 per cent is LTI.
Devondale Murray Goulburn Annual Report 2014 43
Company FY2014 STI
bonus pool not generated
Performance measure not achieved
Performance measure achieved
Performance Measure 1
MILK PRICE PERFORMANCE
Aain Board approved milk price
FY2014 BONUS PAYMENT
Individual payment determined at
the discretion of the Board
Performance Measure 4
INDIVIDUAL PERFORMANCE
Achievement of individual KPIs
Performance Measure 3
BUSINESS UNIT/FUNCTION PERFORMANCE
All critical and high risk internal
audit issues resolved
Company FY2014 STI
bonus pool reduced
Company FY2014 STI
bonus pool fully retained
Business Unit/Function FY2014
STI bonus pool reduced
Business Unit/Function FY2014
STI bonus pool fully retained
Performance Measure 2
SAFETY PERFORMANCE
LTIFR reduced by Board
approved percentage
6. Short Term Incentive Plan and Link to Performance
e STIP is an annual cash based plan aimed at rewarding participants for the achievement of Company, business unit/function and
individual performance plans.
STI POOL FUNDING
e size of the annual Company STI pool available to be distributed to eligible participants is determined by the Board. e pool is based
on performance relative to nancial and non-nancial outcomes.
PERFORMANCE MEASURES
Awards are determined by the achievement of four categories of nancial and non-nancial performance measures with STI targets
agreed with the Board at the beginning of the nancial year.
e achievement of the milk price budget is a ‘gateway’ which means that if the milk price budget is not aained then, subject to
the Board exercising its discretion, the STI pool does not open to any participant. Both the safety measure and the internal audit
measures are sequential ‘modiers’ in that if they are not achieved, there is a reduction in the available STI pool. e following
diagram shows how these performance measures interact with each other.
Remuneration Report 2014 continued
44 Devondale Murray Goulburn Annual Report 2014
6. Short Term Incentive Plan and Link to Performance continued
e Board selected these performance measures as it believes they align the KMP’s interests with the Company’s performance and
management values. Performance against each performance measure is assessed by the Remuneration and Nominations Commiee
for the Managing Director and by the Managing Director for the other executive KMP. Once performance measures have been assessed,
the Board approves the amount of STI payable. e Board believes the method of assessment is rigorous and provides a balanced
evaluation of the KMP. All STI cash awards referable to performance during the 2014 nancial year are payable post year end.
Performance Measure Application Description
Financial – milk price Gateway As the most critical performance measure, aaining milk price budget acts as a gateway
performance to the payment of any STI for the Company. If the milk price budget is not achieved, no STI
will be payable. Milk price budget is set by the Board at the beginning of the nancial year.
It includes both the aainment of a Board set milk price within the budget and the payment
of a dividend out of prot, not retained earnings.
Safety Modier e reduction in the Lost Time Injury Frequency Rate (LTIFR) is a key measure of success
for the Company. Each year, the Board sets a percentage reduction that is challenging to
achieve. If the Company does not achieve the target, the STI pool is reduced.
Internal audit Modier Internal audit reviews the performance of pre-agreed processes and reports these reviews
to the Finance, Risk and Audit Commiee, which in turn reports its ndings to the Board. All
ndings are allocated a rating and management provides an agreed rectication time ame.
For any items that have been identied as ‘critical’ or ‘high risk’, the responsible business
unit/function needs to resolve these issues within the agreed time ame. If they remain
unresolved, the responsible business unit/function STI pools are reduced.
Individual KPIs Modier Individual KPIs are set for all participants in the STIP and all KMP covered by this report
have their KPIs approved by the Board. All individual KPIs are linked to the delivery of
business strategy of the Company and typically include nancial, operational excellence,
strategy and leadership objectives. e nal amount the KMP is paid is determined by their
performance against these KPIs, taking into account whether their available amount has
been reduced as a result of failure to achieve safety targets or addressing internal audit
recommendations as described above.
e Board will consider revising the STI structure during the 2015 nancial year with a view to potentially introducing threshold, target
and stretch levels for each performance measure.
Devondale Murray Goulburn Annual Report 2014 45
6. Short Term Incentive Plan and Link to Performance continued
e table below summarises the outcomes of the performance measures for 2014.
Area of Focus Typical Achievements Required Company Performance
Financial Achieve milk price performance Exceeded
Safety Percentage reduction in LTIFR on previous year Exceeded
Internal Audit Resolve any ‘critical’ or ‘high risk’ recommendations in agreed time ame Achieved
Further details on the achievements during the year are as follows:
FINANCIAL
• Despite the challenging conditions of a high Australian dollar and uctuating commodity prices, the nal milk price of $6.81 per kilogram
of milk solids outperformed the milk price budget by 14.5 per cent.
As required by the Corporations Act 2001, the following table summarises the Company’s ve-year earnings and dividends.
$000 $000 $000
Financial year ended 30 June 2014 2,916,521 29,297 24,351
Financial year ended 30 June 2013 2,385,099 34,904 28,906
Financial year ended 30 June 2012 2,367,231 14,467 31,525
Financial year ended 30 June 2011 2,287,492 36,319 29,937
Financial year ended 30 June 2010 2,163,441 28,041 26,077
* All amounts reect dividends paid in relation to the period except the amount for the nancial year ended 30 June 2014, which reects the dividend
declared for that period.
All shares in the Company are traded at a xed $1.00 per share.
SAFETY
• is year had a continued focus on safety and the executives continued to show strong leadership in driving a step change in safety
throughout the business with a number of key initiatives including:
• the implementation of safety performance dashboards across all areas of the Company and a Company performance scorecard;
• the introduction of Health & Wellbeing and Safety Leadership Programs; and
• hosting the internal Annual Safety Conference and annual Stop for Safety initiative where all employees stopped for one hour
to participate in a workplace safety activity.
• As a result, the Company achieved a 37 per cent reduction in the LTIFR to 8.13.
INTERNAL AUDIT
• e internal audit program, introduced in 2012, continued with EY as the Internal Auditor with an increased focus on nalising all high
risk ndings. As in the previous year, at the end of the nancial year, the Internal Auditor undertook a review of all outstanding high
risk nding recommendations and management actions taken to close out these ndings.
• e Internal Auditor concluded that all high risk ndings were either completed by 30 June 2014 or sucient management action had
been undertaken to reduce their risk rating om high.
Remuneration Report 2014 continued
46 Devondale Murray Goulburn Annual Report 2014
6. Short Term Incentive Plan and Link to Performance continued
SHORT TERM INCENTIVE OUTCOMES
e STI payments for 2014 reect the strong achievements by the Company and of individual KMP against the applicable performance
measures. e table below shows the percentage of STI payments awarded and forfeited for KMP.
Short Term Incentive
Name Percentage of Available STI Awarded Percentage of Available STI Forfeited
Managing Director
G Helou 85 15
Executive
D Mallinson 75 25
D Noonan 60 40
B Hingle 79 21
F Smith 100 0
7. Long Term Incentive Plan and Link to Performance
e LTIP is designed to provide a longer term focus on economic value growth and alignment to the business strategy and the interests
of suppliers/shareholders.
e KMP included in this report (excluding those that ceased to be KMP during the year) were oered eligibility to the LTIP following
a benchmarking exercise undertaken by EY in which the total remuneration mix was compared against peers within a comparator
group of ASX 200 companies. is comparator group was chosen on the basis that it represents companies of similar operational size
and business complexity to MG, and om which key executive talent would typically be aracted om. As a result, an opportunity was
identied to introduce a long term incentive for the KMP to beer align the current remuneration structure and quantum with the comparator
group. e Board agreed to the introduction of the LTIP for the KMP reporting to the Managing Director during nancial year 2014.
Following the introduction of the LTIP in nancial year 2013 for the Managing Director only, the Board reviewed the LTIP design for
the other KMP to ensure related costs are sustainable, aligned with business performance and supplier/shareholder and the KMP’s
expectations. Given the Board’s continued focus on these areas, the LTIP guiding principles are unchanged om nancial year 2013:
LTIP Design Principle Description
Shareholder alignment Promotes a focus on economic value growth and an alignment to the long term interests of shareholders.
Simplicity and transparency Clear and easy for individuals to understand the plan mechanics, linkages between performance and
reward outcomes.
Performance linked Opportunities and payments are explicitly linked to the successful and pre-determined long term
performance outcomes of the Company.
Valued Complements the total remuneration amework and encourages the correct long term behaviours.
Market competitive Design reects contemporary market practice and delivers competitive remuneration aiding employee
araction and retention.
Governance Aligned to regulatory and legislative requirements and operated within a prudent risk management amework.
Aordability Related costs are sustainable for the Company and aligned to the nancial performance of the business
and supported by shareholders.
Devondale Murray Goulburn Annual Report 2014 47
7. Long Term Incentive Plan and Link to Performance continued
PERFORMANCE MEASURES
e Company’s stated business objective is to signicantly increase the farmgate milk price. e LTIP has two equally weighted and
independently assessed performance measures, which are both focused on achieving this return to suppliers/shareholders through
measuring and rewarding increases in the underlying milk price and at the same time ensuring that capital employed in achieving
this increase is used in the most ecient form. e LTIP is made up of the following elements:
Element Description
Award Conditional rights to receive cash payment subject to meeting pre-determined performance hurdles.
e LTIP is based on two independent and separately assessed performance hurdles being:
• Implied Milk Price Growth (IMPG) (50 per cent weighting).
• Return on Capital Employed (ROCE) (50 per cent weighting).
Quantum opportunity Quantum is based on a percentage of xed remuneration as determined by the Board. e quantum
opportunities are based on achieving varying levels of performance with opportunities also
available for achieving performance between levels:
Managing Director
reshold performance: 15 per cent of xed remuneration
Target performance: 30 per cent of xed remuneration
Stretch performance: 60 per cent of xed remuneration
Other KMP
reshold performance: 12.5 per cent of xed remuneration
Target performance: 25 per cent of xed remuneration
Stretch performance: 50 per cent of xed remuneration
Quantum opportunities also exist for performance achieved between the performance hurdles
stated above. As there are two independent and separately assessed performance hurdles,
to achieve the maximum total opportunity, both hurdles will need to be achieved at the stretch
level of performance. e minimum total value available is nil.
Performance period ree-year performance period om 1 July 2013 to 30 June 2016 with no retesting opportunity
available at the end of the performance period.
IMPG hurdle • e purpose of the IMPG hurdle is to focus the KMP on delivering an optimal return to
suppliers/shareholders through an increase in underlying milk price, while also making
sure that there are sucient funds available for reinvestment back into the business.
• In order to measure an increase in underlying milk price, rather than using the available milk
price paid to suppliers each year, an implied milk price is used that is based on forecasted
available milk price targets plus the value of annual dividends. e available milk price targets
are normalised for the movements in dairy commodity prices, foreign exchange and impacts
of ination as well as other one o items such as opening inventory.
• In order to ensure there are sucient funds available for reinvestment back into the business,
increases or decreases in retained earnings are translated into adjustments to the implied
milk price.
IMPG target seing • Targets are set by determining a performance hurdle to be achieved by the end of the three-
year period, using the year prior to the grant year as the base year. For example, the current
grant performance will be assessed on the IMPG om nancial year 2013 over a three-year
period by comparing the actual result in nancial year 2016 to the nancial year 2013 amount.
• e performance hurdle is formed on the basis of three annual notional targets that in aggregate,
equal the three-year performance hurdle.
• e hurdles and related components within the hurdle are based on forecasted levels of nancial
performance, including forecasted ination (wage, energy/utilities, transport) and Company
initiatives. is is then normalised to remove the impact of commodity prices and exchange rates.
• ree levels of growth targets are set – threshold (80 per cent of target), target (100 per cent
of target) and stretch (110 per cent of target). In order for any amount to be payable, at least
80 per cent of the forecast increase in implied milk price needs to be achieved over the
three-year period.
Remuneration Report 2014 continued
48 Devondale Murray Goulburn Annual Report 2014
7. Long Term Incentive Plan and Link to Performance continued
Element Description
ROCE hurdle • e purpose of the ROCE hurdle is to focus the KMP on achieving the maximum return
to suppliers/shareholders by incentivising the most cost ecient use of capital.
• In order to achieve the growth in milk price, signicant capital will need to be employed.
e Board considers that it is important to focus management’s aention on the most ecient
use of this capital.
• e ROCE hurdle is measured by calculating the total return to shareholders (based on total
payments for milk plus dividends paid in that nancial year) as a percentage of the three-year
rolling average of annual capital employed.
ROCE target seing • ROCE hurdle is determined by the Board based on the anticipated levels of capital employed
to deliver the signicant increase in milk price.
• In seing the ROCE hurdle, the Board looks at the forecasted levels of nancial performance
including forecasted ination performance, which is then normalised for currency movements
and commodity price uctuations.
• ree levels of ROCE targets are set – threshold (96 per cent of target), target (100 per cent
of target) and stretch (104 per cent of target). In order for any amount to be payable, at least
96 per cent of the ROCE hurdle needs to be achieved over the three-year period.
Vesting schedule Vesting (or entitlement to payment) occurs according to the following schedule for proportion
of the LTIP award (subject to each performance measure).
Implied Milk Price Growth
Achievement of hurdle Proportion of LTIP award (for the 50 per cent
related to the IMPG hurdle) that is made available
Below threshold 0 per cent
reshold (80 per cent of target) 50 per cent
Between threshold and target Straight line correlation between 50 per cent
and 100 per cent of LTIP award opportunity
Target (100 per cent of target) 100 per cent
Between target and stretch Straight line correlation between 100 per cent
and 200 per cent of LTIP award opportunity
Stretch (110 per cent of target) 200 per cent
Return on Capital Employed
Achievement of hurdle Proportion of LTIP award (for the 50 per cent related
to the ROCE hurdle) that is made available
Below threshold 0 per cent
reshold (96 per cent of target) 50 per cent
Between threshold and target Straight line correlation between 50 per cent
and 100 per cent of LTIP award opportunity
Target (100 per cent of target) 100 per cent
Between target and stretch Straight line correlation between 100 per cent
and 200 per cent of LTIP award opportunity
Stretch (104 per cent of target) 200 per cent
Adjustments to performance hurdles Performance hurdles can be amended at the discretion of the Board during the performance
period, but only following a change to the target seing approach and/or assessment methodology
as agreed by the Board or to prevent the participant om receiving an inappropriate benet
in certain circumstances.
Devondale Murray Goulburn Annual Report 2014 49
Remuneration Report 2014 continued
7. Long Term Incentive Plan and Link to Performance continued
Element Description
Adjustments to LTIP award outcomes Following the end of a performance period, the Board may take into account certain items or
factors that may have assisted or hindered the participant in achieving the performance hurdles
(beyond those already factored into the forecasted targets e.g. adjustments for retained earnings
in the implied milk price). e Board has the discretion to adjust the outcome either upwards
or downwards to account for such items or factors or to prevent the participants receiving
an inappropriate benet in certain circumstances. e Board will also take into account the
Company’s performance against that of its competitors.
Cessation of employment On leaving the Company, rights awarded under the plan vest as follows:
• Resignation/termination with cause – all rights are forfeited, subject to Board discretion.
• Resignation for any other reason – rights will remain on foot and vest subject to performance
against existing hurdles, subject to Board discretion.
Summary of 2013–14 LTIP Grant
Grant date 23 October 2013 for the Managing Director
14 May 2014 for other KMP
Performance hurdle IMPG and ROCE
IMPG assessment e hurdle will not be assessed for vesting until the three-year performance period is completed
(30 June 2016)
ROCE assessment e hurdle will not be assessed for vesting until the three-year performance period is completed
(30 June 2016)
Payment date Any payment will be made by 30 November 2016
50 Devondale Murray Goulburn Annual Report 2014
8. Remuneration Summary Table
Long Post
Term Employment
Annual Long Proportion of
Leave Service Subtotal Remuneration
Salary and STI Cash Non- Accrued Leave of Leave LTI Cash Super- Performance
Executive Allowances Bonus monetary(iv) (v) annuation Total Related
2014
G Helou 1,612,955 552,500 222,124 2,387,579 7,997 26,506 34,503 325,000 17,775 2,764,857 31.7
B Hingle(i) 270,856 45,261 – 316,117 18,954 4,105 23,059 91,667 7,406 438,249 31.2
D Mallinson(ii) 153,693 70,313 908 224,914 11,860 2,566 14,426 108,333 4,444 352,117 50.7
D Noonan(iii) 236,932 37,419 – 274,351 (8,350) 4,278 (4,072) – 9,403 279,682 13.4
F Smith 532,224 137,500 – 669,724 24,630 9,681 34,311 91,667 17,775 813,477 28.2
Total 2,806,660 842,993 223,032 3,872,685 55,091 47,136 102,227 616,667 56,803 4,648,382
2013
G Helou 1,562,959 598,500 220,361 2,381,820 101,295 25,640 126,935 315,000 16,470 2,840,225 32.2
M Beniston 331,732 66,997 24,129 422,858 16,312 11,915 28,227 – 16,470 467,555 14.3
K Mentiplay 554,685 142,789 12,477 709,951 11,226 9,369 20,595 – 16,470 747,016 19.1
D Noonan 433,529 84,375 – 517,904 17,727 7,222 24,949 – 16,470 559,323 15.1
R Poole 345,533 54,257 22,299 422,089 15,048 12,812 27,860 – 16,470 466,419 11.6
F Smith 467,349 128,835 – 596,184 17,594 9,223 26,817 – 16,470 639,471 20.1
Total 3,695,787 1,075,753 279,266 5,050,806 179,202 76,181 255,383 315,000 98,820 5,720,009
Remuneration disclosed relates to the period during which each executive ocer qualied as KMP.
(i) B Hingle was appointed Chief Financial Ocer on 13 January 2014. e consolidated entity paid $125,086 in relocation costs, which
are not considered to form part of Mr Hingle’s remuneration.
(ii) D Mallinson was appointed Executive General Manager Business Operations on 3 April 2014.
(iii) D Noonan ceased to quali as KMP on 13 January 2014.
(iv) Non-monetary compensation includes the provision of motor vehicles and travel benets.
(v) LTI cash incentives reects an accrual associated with the Managing Director’s anticipated maximum performance of $975,000 LTIP
opportunity (i.e. $975,000/three years = $325,000 per annual accrual). e accrual for the other participating KMP reects
one-third of their anticipated maximum potential entitlement.
Devondale Murray Goulburn Annual Report 2014 51
Remuneration Report 2014 continued
9. Executive Contracts
e Company has entered into employment contracts with all KMP. e employment contracts have no xed term and outline the
components of remuneration to be paid. All employment contracts are capable of termination by the Company or the KMP on either
six months’ wrien notice (for the Managing Director) or three months’ notice (for other KMP). e Company may terminate employment
immediately by providing payment in lieu of notice. Any termination payment is calculated on xed remuneration as at the date
of termination. e details of those contracts with the relevant KMP can be seen in the table below:
Name Title Date of Contract
G Helou Managing Director 3 October 2011
D Mallinson Executive General Manager Business Operations 3 April 2014
D Noonan Chief Financial Ocer 23 March 2012
B Hingle Chief Financial Ocer 13 January 2014
F Smith Company Secretary/General Counsel 9 January 2012
10. Non-executive Director Remuneration
Non-executive Director remuneration is dealt with separately om executive remuneration and is determined with regard for the need
of the Company to have appropriately experienced and qualied Board members. It also takes into account the considerable amount
of time that the Directors are required to devote.
For 2014, the following Non-executive Director fee structure (inclusive of superannuation contributions) was in operation:
Chairman’s remuneration $240,000
Other Non-executive Director remuneration
Base annual fee $85,000
Plus additional fees for:
Deputy Chairman $40,000
Finance, Risk and Audit Commiee $15,000
Compliance Commiee $15,000
Supplier Relations Commiee $15,000
Total fees $1,175,000
52 Devondale Murray Goulburn Annual Report 2014
10. Non-executive Director Remuneration continued
Post
Employment
Fees and Non Super-
Salary Monetary(vi) annuation Total
Non-executive Director $ $ $ $
2014
PW Tracy 222,225 27,232 17,775 267,232
N Akers 77,803 – 7,197 85,000
WT Bodman 77,803 – 7,197 85,000
PJO Hawkins 91,533 – 8,467 100,000
DF Howard(i) 30,874 – 2,856 33,730
MF Ihlein 91,533 – 8,467 100,000
ML Jelbart 77,803 – 7,197 85,000
KW Jones 114,416 – 10,584 125,000
ED Morris(ii) 47,237 – 4,369 51,606
GN Munzel 77,803 – 7,197 85,000
JP Pye 91,533 – 8,467 100,000
MJ Van de Wouw 77,803 – 7,197 85,000
Total 1,078,366 27,232 96,970 1,202,568
2013
PW Tracy 191,080 23,784 17,197 232,061
N Akers 71,025 – 6,392 77,417
WT Bodman 78,338 – 7,050 85,388
PJO Hawkins 82,112 – 7,390 89,502
DF Howard 74,740 – 6,727 81,467
MF Ihlein(iii) 61,826 1,127 5,564 68,517
ML Jelbart(iv) 46,375 – 4,174 50,549
KW Jones 97,997 – 8,820 106,817
GN Munzel 71,025 – 6,392 77,417
JP Pye 82,112 – 7,390 89,502
JT Vardy(v) 26,250 – 2,363 28,613
MJ Van de Wouw 71,025 – 6,392 77,417
Total 953,905 24,911 85,851 1,064,667
(i) DF Howard resigned om the Board of Directors on 22 November 2013.
(ii) ED Morris was appointed to the Board of Directors on 22 November 2013.
(iii) MF Ihlein was appointed to the Board of Directors on 30 October 2012.
(iv) ML Jelbart was appointed to the Board of Directors on 28 November 2012.
(v) JT Vardy resigned om the Board of Directors on 28 November 2012.
(vi) Non-monetary compensation includes provision of a motor vehicle to the Chairman and travel related costs.
Directors are not entitled to participate in performance based remuneration programs, namely the STIP or LTIP.
With the exception of JP Pye, Directors are not entitled to retirement benets. At 30 June 2014, JP Pye had an accrued benet
payable on retirement of $128,450.
Devondale Murray Goulburn Annual Report 2014 53
11. Shareholdings
Direct and indirect shareholdings of Directors in the parent entity alloed to them in their capacity as suppliers of milk to the Company:
Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary
Shares Held at Shares Shares Held at Shares Held at Shares Shares Held at
1 July 2012 Acquired 30 June 2013 1 July 2013 Acquired 30 June 2014
No. No.(iv) No. No. No.(iv) No.
PW Tracy 1,242,496 102,779 1,345,275 1,345,275 139,714 1,484,989
N Akers 204,333 48,355 252,688 252,688 34,209 286,897
WT Bodman 138,523 26,912 165,435 165,435 18,644 184,079
DF Howard 552,969 64,101 617,070 617,070 3,128 (ii)
ML Jelbart 1,148,977 191,901 1,340,878 1,340,878 115,100 1,455,978
KW Jones 193,797 56,854 250,651 250,651 23,995 274,646
ED Morris (iii) (iii) (iii) 28,671 3,721 32,392
GN Munzel 196,271 33,083 229,354 229,354 17,434 246,788
JP Pye 233,441 34,903 268,344 268,344 19,993 288,337
MJ Van de Wouw 366,458 41,862 408,320 408,320 5,476 413,796
JT Vardy 884,420 108,055 (i) (i) (i) (i)
5,161,685 708,805 4,878,015 4,906,686 381,414 4,667,902
(i) JT Vardy resigned om the oce of Director during the previous nancial year and accordingly his shareholdings
at 30 June 2013 and 2014 are not disclosed.
(ii) DF Howard resigned om the oce of Director during the current nancial year and accordingly his shareholdings
at 30 June 2014 are not disclosed.
(iii) ED Morris was appointed to the oce of Director during the current nancial year and accordingly his shareholdings
prior to 1 July 2013 are not disclosed.
(iv) All shares were issued for a value of $1, and accordingly the value of the issued shares equals $381,414 (2013: $708,805).
Other KMP
No other KMP hold shares in the Company as at 30 June 2014. Shares are not awarded as part of KMP remuneration,
nor does the value of the Company’s shares enter into the determination of any part of KMP remuneration.
Signed in accordance with a resolution of the Board of Directors
PW Tracy
Director
Melbourne
26 August 2014
Remuneration Report 2014 continued
54 Devondale Murray Goulburn Annual Report 2014
2014 2013
Note $000 $000
Sales revenue 2 2,916,521 2,385,099
Cost of sales (2,571,469) (2,067,009)
Gross prot 345,052 318,090
Other income 2 30,761 4,336
Share of prot (loss) of associates 13 (10,889) 837
Distribution expenses (152,682) (143,522)
Selling and marketing expenses (73,700) (53,889)
Administration expenses (58,306) (49,728)
Finance costs 3 (27,156) (28,022)
Other expenses (20,833) (9,049)
Prot before income tax 32,247 39,053
Income tax expense 4 (2,950) (4,149)
Prot for the year 29,297 34,904
Equity holders of the parent 24 27,936 29,396
Non-controlling interest 1,361 5,508
Prot for the year 29,297 34,904
e accompanying notes form part of these nancial statements.
Consolidated Statement of Prot or Loss
Devondale Murray Goulburn Annual Report 2014 55
2014 2013
Note $000 $000
Prot for the year 29,297 34,904
Other comprehensive income
Items that will not be classied subsequently to prot or loss:
Increment (decrement) on revaluation of land and buildings 23 – 54,833
Net change in fair value of equity instruments measured at fair
value through other comprehensive income 23 54,434 541
Income tax relating to items that will not be reclassied subsequently 4 (15,320) (16,450)
Items that may be reclassied subsequently to prot or loss:
Transfer to income statement on cash ow hedges 23 31,410 (11,008)
Gain (loss) on cash ow hedges taken to equity 23 3,258 (43,566)
Exchange dierences arising on translation of foreign operations 23 (984) 4,553
Income tax relating to items that may be reclassied subsequently 4 (10,092) 15,006
Total comprehensive income for the year 92,003 38,813
Equity holders of the parent 90,642 33,305
Non-controlling interest 1,361 5,508
Total comprehensive income for the year 92,003 38,813
e accompanying notes form part of these nancial statements.
Consolidated Statement of Comprehensive Income
56 Devondale Murray Goulburn Annual Report 2014
2014 2013
Note $000 $000
Current assets
Cash 30(a) 13,858 11,809
Receivables 8 536,252 442,137
Inventories 9 366,512 291,207
Current tax receivable 1,700 –
Other 10 8,652 3,636
Derivative nancial instruments 18 1,736 49
Total current assets 928,710 748,838
Non-current assets
Investments accounted for using the equity method 13 16,994 20,607
Other nancial assets 11 161 35,876
Property, plant and equipment 14 796,044 832,005
Intangible assets 15 16,121 16,121
Other 10 5,406 5,607
Total non-current assets 834,726 910,216
Total assets 1,763,436 1,659,054
Current liabilities
Payables 16 371,196 321,973
Borrowings 17 149,886 205,496
Current tax payable 363 727
Provisions 19 46,415 44,394
Derivative nancial instruments 18 36 35,546
Total current liabilities 567,896 608,136
Non-current liabilities
Payables 16 1,921 1,425
Borrowings 17 380,893 324,475
Provisions 19 7,933 7,852
Deferred tax liabilities 20 58,902 30,679
Total non-current liabilities 449,649 364,431
Total liabilities 1,017,545 972,567
Net assets 745,891 686,487
Equity
Issued capital 22 268,741 262,677
Reserves 23 183,215 179,496
Retained earnings 24 287,089 233,915
Parent entity interest 739,045 676,088
Non-controlling interest 25 6,846 10,399
Total equity 745,891 686,487
e accompanying notes form part of these nancial statements.
Consolidated Statement of Financial Position
Devondale Murray Goulburn Annual Report 2014 57
Transactions with Foreign
Issued Capital Revaluation General Hedge Revaluation Allotment Interests Translation Retained to Owners of Non-controlling
Capital Reserve Reserve Reserve Reserve Reserve Reserve Reserve Reserve Earnings the Parent Interests Total
$000 $000 $000 $000 $000 $000 $000 $000 $000 $000 $000 $000 $000
Note 22 Note 23 Note 23 Note 23 Note 23 Note 23 Note 23 Note 23 Note 23 Note 24 Note 25
Balance at 1 July 2012 248,271 36,916 117,820 5,257 17,463 (3,910) 2,971 2,354 303 233,724 661,169 97,866 759,035
Prot or (loss) for the year – – – – – – – – – 29,396 29,396 5,508 34,904
Other comprehensive income – – 38,383 – (38,202) 541 – – 3,187 – 3,909 – 3,909
Total comprehensive income – – 38,383 – (38,202) 541 – – 3,187 29,396 33,305 5,508 38,813
Payment of dividends – – – – – – – – – (31,525) (31,525) – (31,525)
Issue of ordinary shares to milk suppliers 9,993 – – – – – – – – – 9,993 – 9,993
Dividend reinvestment plan issues 4,413 – – – – – – – – – 4,413 – 4,413
Transferred to retained earnings (net of tax) – – (2,320) – – – – – – 2,320 – – –
Allotment of shares to suppliers – – – – – – (2,971) – – (2,971) – (2,971)
Shares to be issued in lieu of milk payments – – – – – – 1,957 – – – 1,957 – 1,957
Non-controlling interest in subsidiaries disposed – – – – – – – – – – – (8,454) (8,454)
Shares bought back and cancelled – – – – – – – – – – – (84,492) (84,492)
Dierence on acquisition of interest in subsidiary – – – – – – – (253) – – (253) – (253)
Other – – – – – – – – – – – (29) (29)
Balance at 30 June 2013 262,677 36,916 153,883 5,257 (20,739) (3,369) 1,957 2,101 3,490 233,915 676,088 10,399 686,487
Prot or (loss) for the year – – – – – – – – – 27,936 27,936 1,361 29,297
Other comprehensive income – – – – 24,268 39,114 – – (676) – 62,706 – 62,706
Total comprehensive income – – – – 24,268 39,114 – – (676) 27,936 90,642 1,361 92,003
Payment of dividends – – – – – – – – – (28,906) (28,906) – (28,906)
Issue of ordinary shares to milk suppliers 16,799 – – – – – – – – – 16,799 – 16,799
Dividend reinvestment plan issues 3,752 – – – – – – – – – 3,752 – 3,752
Transferred to retained earnings (net of tax) – – (18,432) – – (35,712) – – – 54,144 – – –
Allotment of shares to suppliers – – – – – – (1,957) – – (1,957) – (1,957)
Shares bought back and cancelled (14,487) – – – – – – – – – (14,487) – (14,487)
Dierence on acquisition of interest in subsidiary – – – – – – – (2,886) – – (2,886) (4,914) (7,800)
Balance at 30 June 2014 268,741 36,916 135,451 5,257 3,529 33 – (785) 2,814 287,089 739,045 6,846 745,891
e accompanying notes form part of these nancial statements.
Consolidated Statement of Changes in Equity
58 Devondale Murray Goulburn Annual Report 2014
Transactions with Foreign
Issued Capital Revaluation General Hedge Revaluation Allotment Interests Translation Retained to Owners of Non-controlling
Capital Reserve Reserve Reserve Reserve Reserve Reserve Reserve Reserve Earnings the Parent Interests Total
$000 $000 $000 $000 $000 $000 $000 $000 $000 $000 $000 $000 $000
Note 22 Note 23 Note 23 Note 23 Note 23 Note 23 Note 23 Note 23 Note 23 Note 24 Note 25
Balance at 1 July 2012 248,271 36,916 117,820 5,257 17,463 (3,910) 2,971 2,354 303 233,724 661,169 97,866 759,035
Prot or (loss) for the year – – – – – – – – – 29,396 29,396 5,508 34,904
Other comprehensive income – – 38,383 – (38,202) 541 – – 3,187 – 3,909 – 3,909
Total comprehensive income – – 38,383 – (38,202) 541 – – 3,187 29,396 33,305 5,508 38,813
Payment of dividends – – – – – – – – – (31,525) (31,525) – (31,525)
Issue of ordinary shares to milk suppliers 9,993 – – – – – – – – – 9,993 – 9,993
Dividend reinvestment plan issues 4,413 – – – – – – – – – 4,413 – 4,413
Transferred to retained earnings (net of tax) – – (2,320) – – – – – – 2,320 – – –
Allotment of shares to suppliers – – – – – – (2,971) – – (2,971) – (2,971)
Shares to be issued in lieu of milk payments – – – – – – 1,957 – – – 1,957 – 1,957
Non-controlling interest in subsidiaries disposed – – – – – – – – – – – (8,454) (8,454)
Shares bought back and cancelled – – – – – – – – – – – (84,492) (84,492)
Dierence on acquisition of interest in subsidiary – – – – – – – (253) – – (253) – (253)
Other – – – – – – – – – – – (29) (29)
Balance at 30 June 2013 262,677 36,916 153,883 5,257 (20,739) (3,369) 1,957 2,101 3,490 233,915 676,088 10,399 686,487
Prot or (loss) for the year – – – – – – – – – 27,936 27,936 1,361 29,297
Other comprehensive income – – – – 24,268 39,114 – – (676) – 62,706 – 62,706
Total comprehensive income – – – – 24,268 39,114 – – (676) 27,936 90,642 1,361 92,003
Payment of dividends – – – – – – – – – (28,906) (28,906) – (28,906)
Issue of ordinary shares to milk suppliers 16,799 – – – – – – – – – 16,799 – 16,799
Dividend reinvestment plan issues 3,752 – – – – – – – – – 3,752 – 3,752
Transferred to retained earnings (net of tax) – – (18,432) – – (35,712) – – – 54,144 – – –
Allotment of shares to suppliers – – – – – – (1,957) – – (1,957) – (1,957)
Shares bought back and cancelled (14,487) – – – – – – – – – (14,487) – (14,487)
Dierence on acquisition of interest in subsidiary – – – – – – – (2,886) – – (2,886) (4,914) (7,800)
Balance at 30 June 2014 268,741 36,916 135,451 5,257 3,529 33 – (785) 2,814 287,089 739,045 6,846 745,891
e accompanying notes form part of these nancial statements.
Devondale Murray Goulburn Annual Report 2014 59
2014 2013
Note $000 $000
Receipts om customers 2,892,570 2,426,267
Payments to suppliers and employees (2,936,397) (2,280,948)
(43,827) 145,319
Dividends received 1,761 1,267
Interest received 3,196 3,781
Interest paid (27,617) (27,750)
Income taxes paid (2,518) (5,040)
Net cash inow (oulow) om operating activities 30(b) (69,005) 117,577
Payments for property, plant and equipment (85,125) (99,885)
Investment in associated company 13 (8,000) (6,000)
Payments to acquire nancial assets (2,788) (13,067)
Proceeds om the sale of property, plant and equipment 96,362 3,633
Proceeds om the sale of nancial assets 92,937 –
Payments for investments in subsidiaries (7,800) (8,775)
Net cash inow (oulow) om investing activities 85,586 (124,094)
Buy-back of shares in non-controlling interests – (40,675)
Dividends paid (25,154) (27,112)
Proceeds om the issue of ordinary shares 16,799 9,993
Payment for shares bought back (14,487) –
Proceeds om borrowings 209,073 173,347
Repayment of borrowings (200,683) (131,420)
Net cash oulow om nancing activities (14,452) (15,867)
Net increase (decrease) in cash 2,129 (22,384)
Cash at the beginning of the year 11,809 34,193
Eect of exchange rate uctuations on cash held (80) –
Cash at the end of the year 30(a) 13,858 11,809
e accompanying notes form part of these nancial statements.
Consolidated Statement of Cash Flows
60 Devondale Murray Goulburn Annual Report 2014
is general purpose nancial report has been prepared in
accordance with the Corporations Act 2001, Accounting Standards
and Interpretations, and complies with other requirements of
the law. Accounting Standards include Australian equivalents to
International Financial Reporting Standards (‘A-IFRS’), which ensure
that the consolidated nancial statements and accompanying notes
comply with International Financial Reporting Standards (‘IFRS’).
e nancial statements were authorised for issue by the Directors
on 26 August 2014. e nancial report has been prepared on
the basis of historical cost, except for the revaluation of certain
non-current assets and nancial instruments. e consolidated
entity is a for-prot entity.
e nancial report is presented in Australian dollars and all
values are rounded to the nearest thousand dollars ($000),
unless otherwise indicated, in accordance with ASIC Class
Order 98/0100, which does apply to the consolidated entity.
In applying the consolidated entity’s accounting policies, below,
management continually evaluates judgements, estimates and
assumptions based on experience and other factors, including
expectations of future events that may have an impact on the
consolidated entity. All judgements, estimates and assumptions
made are believed to be reasonable based on the most current
set of circumstances available to management. Actual results
may dier om the judgements, estimates and assumptions.
Certain comparative information has been reclassied to align
with current year expense classication. is amendment has
no eect on the prot before income tax or the total comprehensive
income for the year aributable to equity holders of the parent
or the non-controlling interests.
e consolidated nancial statements incorporate the assets
and liabilities of all entities controlled by Murray Goulburn
Co-operative Co. Limited (‘Company’) as at 30 June 2014 and
the results of all controlled entities for the year then ended om
the date on which the Company obtained control. e eects
of all transactions between entities in the consolidated entity are
eliminated in full. e Company and its controlled entities together
are referred to in this nancial report as the consolidated entity.
On acquisition, the assets, liabilities and contingent liabilities
of a subsidiary are measured at their fair values at the date
of acquisition. Any excess of the cost of acquisition over the fair
values of the identiable net assets acquired is recognised as
goodwill. If, aer reassessment, the fair values of the identiable
net assets acquired exceed the cost of acquisition, the deciency
is credited to prot and loss in the period of acquisition.
e interest of non-controlling shareholders in the equity
of controlled entities is shown separately in the consolidated
balance sheet.
e Group recognises non-controlling interests in an acquired
entity at the non-controlling interest’s proportionate share
of the acquired entity’s net identiable assets.
Current tax represents income taxes payable or recoverable
in respect of the taxable prot or loss for the period. Current
tax is recognised in the income statement, except when it relates
to items credited or debited directly to equity, and is calculated
based on tax rates and tax laws current as at reporting date.
Deferred tax is accounted for using the liability method in respect
of temporary dierences arising om dierences between the
carrying amount of assets and liabilities in the nancial statements
and the corresponding tax base of those items. Deferred tax
is recognised in the income statement except (i) when it relates
to items credited or debited directly to equity, in which case the
deferred tax is also recognised directly in equity, or (ii) where
it relates to items arising om the initial recognition of assets and
liabilities, other than as a result of business combinations, which
aects neither taxable income nor accounting prot. Furthermore,
a deferred tax liability is not recognised in relation to taxable
temporary dierences arising om goodwill.
Deferred tax assets are recognised to the extent that it is
probable that sucient taxable amounts will be available against
which deductible temporary dierences or unused tax losses
can be utilised.
Deferred tax is measured at the rate of income tax expected to apply
in the period in which the benet will be received or the liability
will become payable based on applicable tax rates and tax laws.
Deferred tax assets and liabilities are oset as the consolidated entity
intends to sele its current tax assets and liabilities on a net basis.
e Company and certain of its wholly owned Australian
entities are part of a tax consolidated group. Murray Goulburn
Co-operative Co. Limited is the head entity in the tax consolidated
group. Tax expense/income, deferred tax assets and deferred
tax liabilities arising om temporary dierences of the members
of the tax consolidated group are recognised in the separate
nancial statements of the members of the tax consolidated
group using a ‘group allocation’ approach. Under this approach
each entity prepares a notional taxable income or loss as if it
were a taxpayer in its own right except that distributions made and
received, capital gains and losses, gains or losses om intra-group
debt forgiveness and similar items arising on transactions
within the tax consolidated group are treated as having no tax
consequence. e tax expense/income, deferred tax assets and
deferred tax liabilities arising om temporary dierences of the
members of the tax consolidated group is allocated to each entity
with reference to the individual entities notional tax calculation.
Current tax liabilities and assets and deferred tax assets arising
om unused tax losses and tax credits of the members of the tax
consolidated group are recognised by the Company (as head
entity in the tax consolidated group).
Due to the existence of a tax funding arrangement between the
entities in the tax consolidated group, amounts are recognised
as payable to or receivable by the Company and each member
of the group in relation to the tax contribution amounts paid or
payable between the parent entity and the other members of
the tax consolidated group in accordance with the arrangement.
Further information about the tax funding arrangement is detailed
in Note 4 to the nancial statements.
Notes to the Financial Statements
Devondale Murray Goulburn Annual Report 2014 61
continued
Where the tax contribution amount recognised by each member
of the tax consolidated group for a particular period is dierent to
the aggregate of the current tax liability or asset and any deferred
tax asset arising om unused tax losses and tax credits in respect
of that period, the dierence is recognised as a contribution om
(or distribution to) equity participants.
e consolidated entity enters into a variety of derivative nancial
instruments to manage its exposure to foreign exchange and interest
rate risk, including forward exchange contracts, currency options
and interest rate swaps. Further details of derivative nancial
instruments are disclosed in Note 28.
Derivatives are initially recognised at fair value at the time of
entering a derivative contract and are subsequently remeasured
to fair value at each reporting date. e fair value calculation
of derivative nancial instruments is measured by using valuation
techniques based on observable market prices or rates. e
resulting gain or loss is recognised in prot or loss immediately
unless the derivative is designated and eective as a hedging
instrument, in which event the timing of the recognition in
prot or loss depends on the nature of the hedge relationship.
e consolidated entity designates certain derivatives as either
fair value hedges when they hedge the exposure to changes in
the fair value of recognised assets, liabilities or rm commitments
or cash ow hedges when they hedge exposure to variability
in cash ows of highly probable forecast transactions.
Fair value hedge
Changes in the fair value of derivatives that are designated and
quali as fair value hedges are recorded in prot or loss together
with any changes in the fair value of the hedged asset or liability
that is aributable to the hedged risk.
Hedge accounting is discontinued when the hedge instrument
expires or is sold, terminated, exercised, no longer qualies for
hedge accounting or the consolidated entity revokes the hedge
relationship. e adjustment to the carrying amount of the hedged
item arising om the hedged risk is amortised to prot or loss
om that date.
e eective portion of changes in the fair value of derivatives
that are designated and quali as cash ow hedges are deferred
in equity. e gain or loss relating to the ineective portion is
recognised in prot or loss. Amounts deferred in equity are
transferred to prot or loss in the period when the hedged item
is recognised in prot or loss.
Hedge accounting is discontinued when the hedge instrument
expires or is sold, terminated, exercised, no longer qualies for
hedge accounting or the consolidated entity revokes the hedge
relationship. Any cumulative gain or loss deferred in equity at
that time remains in equity and is recognised when the forecast
transaction is ultimately recognised in prot or loss. When a
forecast transaction is no longer expected to occur, the cumulative
gain or loss that was deferred in equity is recognised immediately
in prot or loss.
Changes in the fair value of any derivative instruments that
do not quali for hedge accounting are recognised immediately
in prot or loss.
Foreign currency transactions during the year are converted
to Australian currency at the exchange rate ruling at the date
of the transaction. Foreign currency monetary items at balance date
are translated at the exchange rate ruling at that date. Exchange
dierences are recognised in the income statement in the period
in which they arise except for dierences on transactions entered
into to hedge certain foreign currency risks – refer Note 1(c) above.
Land and buildings are measured at fair value. Plant and
equipment are included at cost being the purchase consideration
determined as at the date of acquisition plus costs incidental to the
acquisition less impairment. e cost of xed assets constructed
within the consolidated entity includes the cost of materials and
direct labour. All xed assets including buildings and capitalised
leasehold assets, but excluding eehold land, are depreciated
over their estimated useful lives commencing om the time the
asset is held ready for use.
Any revaluation increase arising on the revaluation of land and
buildings is credited to the asset revaluation reserve, except to the
extent that it reverses a revaluation decrease for the same asset
previously recognised as an expense in prot or loss, in which
case the increase is credited to the income statement to the extent
of the decrease previously charged. A decrease in carrying amount
arising on the revaluation of land and buildings is charged as an
expense in prot or loss to the extent that it exceeds the balance,
if any, held in the asset revaluation reserve relating to a previous
revaluation of that asset.
When an item of land and buildings is revalued, any accumulated
depreciation at the date of the revaluation is eliminated against the
gross carrying amount of the asset and the net amount restated
to the revalued amount of the asset. e amount of the adjustment
arising on the restatement or elimination of accumulated depreciation
forms part of the increase or decrease in carrying amount.
e gain or loss on disposal of all xed assets, including revalued
assets, is determined as the dierence between the carrying
amount of the asset at the time of disposal and the proceeds
of disposal, and is included in the income statement of the group
in the year of disposal. Any realised revaluation increment relating
to the disposed asset that is included in the asset revaluation
reserve is transferred to retained earnings.
Depreciation is calculated using the straight line method
(2013: straight line method) to write o the net cost or revalued
amount of each item of property, plant and equipment (excluding
land) over its expected useful life to the consolidated entity.
e expected useful lives are as follows:
• Buildings – 25 to 50 years
• Plant and equipment – 5 to 25 years
• Vehicles – 3 to 8 years
• Tankers – 10 to 20 years
Notes to the Financial Statements continued
continued
62 Devondale Murray Goulburn Annual Report 2014
e carrying amount of assets is reviewed each balance date
to identi any indication that those assets have suered an
impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent
of the impairment loss (if any). Where the asset does not generate
cash ows that are independent om other assets, the consolidated
entity estimates the recoverable amount of the cash generating
unit to which the asset belongs.
e recoverable amount is the greater of fair value less costs
to sell and value in use. In assessing value in use, the estimated
future cash ows are discounted to their present value using
a pre-tax discount rate that reects current market assessments
of the time value of money and the risks specic to the asset.
If the recoverable amount of an asset (or cash generating unit)
is estimated to be less than its carrying amount, the carrying
amount of the asset (or cash generating unit) is reduced to its
recoverable amount. Impairment losses are recognised in the
income statement unless the asset is carried at valuation, in which
case the impairment loss is recognised as a revaluation decrease
to the extent of any previous increase.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (or cash generating unit) is increased to the
revised estimate of its recoverable amount, but only to the extent
that the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment loss
been recognised for the asset (or cash generating unit) in prior
years. A reversal of an impairment loss is recognised in prot
or loss immediately.
Investments in associated companies are accounted for under
the equity method in the consolidated nancial statements.
Trade receivables, loans and other receivables are recorded
at amortised cost, using the eective interest method, less
impairment through the allowance account.
e eective interest method is a method of calculating the
amortised cost of a nancial asset and of allocating interest
income over the relevant period. e eective interest rate
is the rate that exactly discounts estimated future cash receipts
(including fees and transaction costs) through the expected life
of the nancial asset or, where appropriate, a shorter period.
Listed shares held by the consolidated entity that are traded in
an active market are stated at fair value. Gains and losses arising
om changes in fair value are recognised in other comprehensive
income and accumulated in the investments revaluation reserve.
Where the investment is disposed of the cumulative gain or loss
previously accumulated in the investments revaluation reserve
is transferred to retained earnings. Dividends are recognised in
prot or loss when the consolidated entity’s right to receive the
dividends is established.
Revenues, expenses and assets are recognised net of the
amount of Goods and Services Tax (GST), except:
i. where the amount of GST incurred is not recoverable
om the taxation authority. In this case the GST is recognised
as part of the cost of acquisition of an asset or as part of an
item of expense; or
ii. for receivables and payables which are recognised
inclusive of GST.
e net amount of GST recoverable om, or payable to, the
taxation authority is included as part of receivables or payables.
Cash ows are included in the cash ow statement on a gross
basis. e GST component of cash ows arising om investing
and nancing activities that is recoverable om, or payable
to, the taxation authority is classied as operating cash ows.
Intangible assets are recorded at cost less impairment. All potential
intangible assets acquired in a business combination are identied
and recognised separately om goodwill where they satis
the denition of an intangible asset and their fair value can be
measured reliably.
Leased assets classied as nance leases are capitalised as
xed assets. A nance lease eectively transfers om the lessor
to the lessee substantially all the risks and benets incidental
to the ownership of the leased asset. e amount initially brought
to account is the fair value or, if lower, the present value of
minimum lease payments. Capitalised leased assets are amortised
on a reducing balance basis over the estimated useful life of the
asset. Finance lease payments are allocated between interest
expense and reduction of lease liability over the term of the lease.
e interest expense is determined by applying the interest rate
implicit in the lease to the outstanding lease liability at the beginning
of each lease payment period.
Leases in which a signicant portion of the risks and rewards
of ownership are not transferred to the consolidated entity as
lessee are classied as operating leases. Payments made under
operating leases (net of any incentives received om the lessor)
are charged to prot and loss on a straight line basis over the
term of the lease.
Lease income om operating leases where the consolidated entity
is a lessor is recognised in income on a straight line basis over
the lease term.
Dairy produce stocks are valued at the lower of cost and net
realisable value. Cost comprises direct materials, direct labour,
maturation costs and an allocation of manufacturing overheads.
Stores, packing materials and Murray Goulburn Trading stocks,
have been valued at the lower of cost and net realisable value.
Net realisable value represents the estimated selling price less
selling, marketing and distribution costs.
continued
Devondale Murray Goulburn Annual Report 2014 63
An associate is an entity over which the consolidated entity
has signicant inuence and that is neither a subsidiary nor
an interest in a joint venture. Signicant inuence is the power
to participate in the nancial and operating policy decisions of the
investee but to not control or have joint control over those policies.
e results, assets and liabilities of associates are incorporated
in these nancial statements using the equity method of accounting.
Under the equity method, investments in associates are carried
in the consolidated statement of nancial position at cost as adjusted
for post-acquisition changes in the consolidated entity’s share
of the net assets of the associate, less any impairment in the value
of individual investments. Any excess of the cost of acquisition
over the consolidated entity’s share of the net fair value of the
identiable assets, liabilities and contingent liabilities of the associate
recognised at the date of acquisition is recognised as goodwill. e
goodwill is included within the carrying amount of the investment
and is assessed for impairment as part of that investment. Any
excess of the consolidated entity’s share of the net fair value of
the identiable assets, liabilities and contingent liabilities over the
cost of acquisition, aer reassessment, is recognised immediately
in prot or loss.
Goodwill, representing the excess of the cost of acquisition over
the fair value of the assets and liabilities acquired, is recognised
as an asset and, for the purpose of impairment testing, is allocated
to the cash generating unit to which it relates. Goodwill is tested
for impairment annually or where an indicator of impairment
is identied. Goodwill is not amortised, however, any impairment
is recognised immediately in prot or loss.
Trade payables and other accounts payable are recognised when
the consolidated entity becomes obliged to make future payments
resulting om the purchase of goods and services. Payables are
initially measured at fair value and subsequent to initial recognition
are measured at amortised cost using the eective interest method
with interest expense recognised on an eective yield basis.
e eective interest method is a method of calculating the
amortised cost of a nancial liability and of allocating interest
expense over the relevant period. e eective interest rate is
the rate that exactly discounts estimated future cash payments
through the expected life of the nancial liability or, where
appropriate, a shorter period.
Provisions are recognised when the consolidated entity has
a present obligation, the future sacrice of economic benets
is probable and the amount of the provision can be measured
reliably. e amount recognised as a provision is the best estimate
of the consideration required to sele the present obligation at
the reporting date. Where a provision is measured using the cash
ows estimated to sele the present obligation, its carrying amount
is the present value of those cash ows.
Provision is made for benets accruing to employees in respect
of wages and salaries, annual leave, long service leave and sick
leave when it is probable that selement will be required and
they are capable of being measured reliably.
Provisions are measured at their nominal values using the
remuneration rate expected to apply at the time of selement
where they are expected to be seled within 12 months.
Provisions not expected to be seled within 12 months are
measured at the present value of the estimated future cash
oulows in respect of services provided up to balance date.
Borrowings are recorded initially at fair value, net of transaction
costs. Subsequent to initial recognition, borrowings are measured
at amortised cost with any dierence between the initial
recognised amount and the redemption value being recognised
in prot and loss over the period of the borrowing using the
eective interest method.
Interest expense is recognised using the eective interest method.
Borrowing costs aributable to qualiing assets are capitalised
as part of the cost of those assets.
Revenue om the sale of goods and disposal of assets is recognised
when the consolidated entity has transferred to the buyer the
signicant risks and rewards of ownership of the goods. Revenue
is disclosed net of returns, trade allowances, rebates and amounts
collected on behalf of third parties. Interest revenue is recognised
on a time proportion basis using the eective interest method.
Dividend revenue is recognised when the consolidated entity’s
right to receive the dividends is established.
e nancial information for the parent entity, Murray Goulburn
Co-Operative Co. Limited, as disclosed in Note 31, has been
prepared on the same basis as the consolidated nancial
statements except as outlined below:
Investments in subsidiaries and associates – investments in
subsidiaries and associates are accounted for at cost in the nancial
statements of Murray Goulburn Co-Operative Co. Limited. Dividends
received om associates are recognised in the parent entity’s
prot or loss when the right to receive the dividend is established.
continued
Notes to the Financial Statements continued
64 Devondale Murray Goulburn Annual Report 2014
e following are critical estimates and judgements made by
management in the process of applying the consolidated entity’s
accounting policies:
Inventories – the net realisable value of inventories is the estimated
selling price in the ordinary course of business less estimated
costs to sell. Key assumptions, including the expected selling price,
require the use of management judgement and are reviewed
semi-annually.
Taxation – the consolidated entity is subject to taxation in several
dierent tax jurisdictions, but most particularly Australia, Singapore
and China. Signicant judgement is required in determining the
provision for income taxes payable in each jurisdiction. ere
are some transactions and calculations for which the ultimate tax
determination is uncertain. Entities within the consolidated entity
may be subject to audit om the various taxation authorities om
time to time. e consolidated entity recognises a receivable
or liability for any tax that may, as a result of such audit, become
refundable by or payable to a tax authority as a result of audit
issues when the cash ow associated with the refund or payable
becomes probable. Where the nal tax outcome of such maers
is dierent om the amounts that were initially recorded as either
receivable or payable, the dierences will generally impact the
calculation of deferred tax balances and tax expense.
Fixed assets at fair value – om time to time, the consolidated
entity engages independent advisers to ascertain the fair value
of land and building assets. Key assumptions made by these experts
in the determination of fair value include: the likely selling price
of assets for which a market is likely to exist, the likely replacement
value of other assets where a market for sale may not exist
and the net present value of cash ows, which the assets may
generate over their useful lives. In determining net present values,
judgement is required in respect to adopting a discount rate and
in the estimation of gross cash ows over periods of time.
Except for the changes below, the consolidated entity has
consistently applied the accounting policies set out within this
nancial report to all periods presented in these consolidated
nancial statements.
e consolidated entity has adopted the following new standards
and amendments to standards, including any consequential
amendments to other standards, with a date of initial application
of 1 July 2013:
• AASB 10 Consolidated Financial Statements, AASB 11 Joint
Arrangements, AASB 12 Disclosure of Interests in Other Entities,
AASB 128 Investments in Associates and Joint Ventures,
AASB 127 Separate Financial Statements and AASB 2011–7
Amendments to Australian Accounting Standards arising om
the Consolidation and Joint Arrangement Standards and
AASB 2012–10 Amendments to Australian Accounting
Standards – Transition Guidance and other Amendments
together represent a suite of related standards covering the
accounting and disclosure requirements for consolidated
nancial statements, associates, joint arrangements and o
balance sheet vehicles.
• AASB 13 Fair Value Measurement and AASB 2011–8
Amendments to Australian Accounting Standards arising om
AASB 13 combine guidance for all fair value measurements
required in other standards.
• AASB 119 Employee Benets and AASB 2011–10 Amendments
to Australian Accounting Standards arising om AASB 119
amend disclosure, presentation and accounting to dened
benet plans and other employee benets.
e following new or amended accounting standards and
interpretations issued by the AASB have been identied as those
that may have a material impact on the Group in the period
of initial application.
AASB 9 Financial Instruments
AASB 9 Financial Instruments addresses the classication,
measurement and de-recognition of nancial liabilities and
includes rules relating to hedge accounting.
e new standard is not applicable until 1 January 2018 but
is available for early adoption. e consolidated entity early adopted
the classication and measurement components of AASB 9 in
a previous nancial period, with the exception of those relating
to hedge accounting.
ere will be no impact on the consolidated entity’s accounting
for nancial assets or nancial liabilities on full adoption of the
standard. e new hedging rules will align hedge accounting
more closely with the Group’s risk management practices and,
as a general rule, it will be easier to apply hedge accounting once
the standard is adopted in full. e new standard also introduces
expanded disclosure requirements and changes in presentation
with regards to nancial instruments.
e consolidated entity has not yet completed the analysis on
how its own hedging arrangements would be aected by the
new rules, and therefore has not yet decided whether to adopt
any parts of AASB 9 early. In order to apply the new standard’s
hedging rules, the Group would have to adopt AASB 9 and the
consequential amendments to AASB 7 Financial Instruments:
Disclosures and AASB 139 Financial Instruments: Recognition
and Measurement in their entirety.
continued
Devondale Murray Goulburn Annual Report 2014 65
2014 2013
Note $000 $000
Revenue
Sales revenue 2,916,521 2,385,099
2,916,521 2,385,099
Other income
Interest received or receivable om:
• other persons 3,202 3,615
Dividends received om other corporations 1,037 721
Net gain on sale of Integrated Logistics Centre 26,522 –
30,761 4,336
Sales and other income 2,947,282 2,389,435
2014 2013
Note $000 $000
Borrowing costs
Interest paid or payable to:
• other persons 27,156 28,022
27,156 28,022
Depreciation of:
• buildings 8,870 8,237
• plant and equipment and vehicles 44,367 45,813
14 53,237 54,050
Impairment (reversal) of non-current property, plant and equipment (1,402) (1,261)
Net (gain) on sale and scrapping of non-current assets (1,195) (717)
Write down of inventories to net realisable value 10,669 1,207
Rental expense on operating leases 22,620 10,722
Research and development expenditure 5,800 6,813
Employee benets (including restructuring costs) 242,129 212,469
Notes to the Financial Statements continued
66 Devondale Murray Goulburn Annual Report 2014
2014 2013
$000 $000
Tax expense comprises:
Current tax expense 139 4,936
Deferred tax expense (benet) 2,811 (787)
Income tax expense 2,950 4,149
e prima facie income tax expense on pre-tax accounting prot reconciles
to the income tax expense in the nancial statements as follows:
Prot before income tax expense 32,247 39,053
Income tax calculated at the Australian statutory tax rate of 30% 9,674 11,716
Dividends as a co-operative(i) (8,672) (9,457)
Eect of tax rates in foreign jurisdictions (24) (1,787)
Equity accounted loss/(prot) 3,471 59
Current year losses for which no deferred tax asset was recognised – 3,776
Previously unrecognised tax losses now recouped to reduce current tax expense (877) –
Sundry items (251) (17)
Under (over) provision for income tax in prior year (371) (141)
Income tax expense 2,950 4,149
(i) As a co-operative, the head entity in the Australian tax consolidated group is able to claim a tax deduction for unanked dividends
paid to shareholders. Dividends are claimed as a deduction in the nancial year in which they are paid unless they are paid within
three months subsequent to the conclusion of the prior nancial year, in which case they are deductible in the calculation of that
earlier year’s taxable income. Dividends declared post year end have been held to be deductible on this basis.
Devondale Murray Goulburn Annual Report 2014 67
continued
Transfer
Balance to Income to Income to Equity Balance
$000 $000 $000 $000 $000
2014
Gross deferred tax liabilities
Property, plant and equipment (78,643) 7,983 – – (70,660)
Consumables (7,415) 863 – – (6,552)
Investments – – 15,305 (15,320) (15)
Cash ow hedges (1,519) – 983 (977) (1,513)
Other (1,502) (7,668) – 308 (8,862)
(89,079) 1,178 16,288 (15,989) (87,602)
Gross deferred tax assets
Provisions 15,573 627 – – 16,200
Tax losses 26,778 (11,413) (15,305) – 60
Cash ow hedges 10,406 – (10,406) – –
Other 5,643 6,797 – – 12,440
58,400 (3,989) (25,711) – 28,700
Net deferred tax liability (30,679) (2,811) (9,423) (15,989) (58,902)
2013
Gross deferred tax liabilities
Property, plant and equipment (59,609) (2,584) – (16,450) (78,643)
Consumables (7,619) 204 – – (7,415)
Cash ow hedges (7,485) – 3,302 2,664 (1,519)
Other (391) 255 – (1,366) (1,502)
(75,104) (2,125) 3,302 (15,152) (89,079)
Gross deferred tax assets
Provisions 18,900 (3,327) – – 15,573
Tax losses 25,502 1,276 – – 26,778
Cash ow hedges – – – 10,406 10,406
Other 680 4,963 – – 5,643
45,082 2,912 – 10,406 58,400
Net deferred tax liability (30,022) 787 3,302 (4,746) (30,679)
All available tax losses have been brought to account and are included in the net deferred tax liability, except for:
• pre-tax consolidation losses of $215,715 ($64,715 tax eected); and
• carried forward losses of non-wholly owned controlled entities.
e Company and its wholly owned entities are part of a tax consolidated group. e head entity within the tax consolidated group
is Murray Goulburn Co-operative Co. Limited. e members of the tax consolidated group are identied in Note 12.
All operating entities within the tax consolidated group have entered into a tax funding arrangement and a tax sharing agreement
with the head entity.
Under the terms of the tax funding arrangement, each of the entities in the tax consolidated group has agreed to pay a tax equivalent
payment to or om the head entity, based on the current tax liability or current tax asset of the entity. Such amounts are reected
in amounts receivable om or payable to other entities in the tax consolidated group.
Notes to the Financial Statements continued
68 Devondale Murray Goulburn Annual Report 2014
Compensation of key management personnel is included in the Remuneration Report within the Directors’ Report. Total amounts
paid as remuneration to key management personnel of the consolidated entity include:
2014 2013
$ $
Total short term employee benets (excluding annual leave) 4,978,284 6,029,622
Total annual and long service leave benets 102,227 255,383
Total long term employee benets 616,667 315,000
Total post employment employee benets 153,773 184,671
Total termination benets – –
Total remuneration 5,850,951 6,784,676
2014 2013
$000 $000
• audit and review the nancial report 365,000 342,000
• assurance related services 17,850 28,905
• other consulting services 100,471 250,700
483,321 621,605
(b) Related practice of the parent entity auditor
• audit and review the nancial report 45,000 –
• corporate nance services – 90,480
528,321 712,085
• audit and review the nancial report 36,050 –
• assurance related services 9,000 –
• other consulting services 10,000 –
55,050 –
e auditor of the parent entity is PricewaterhouseCoopers (2013: Deloie Touche Tohmatsu).
Devondale Murray Goulburn Annual Report 2014 69
2014 2013
Note $000 $000
Recognised amounts
Dividends in relation to the 2013 nancial year (2012 nancial year)
Fully Paid Ordinary Shares
Final dividend of 8 cents (2013: 12 cents) per share unanked 21,027 27,551
Fully Paid A Class Non-cumulative Non-redeemable Preference Shares
Final dividend of 8 cents (2013: 8 cents) per share unanked 1,179 1,208
Fully Paid B Class Non-cumulative Non-redeemable Preference Shares
Final dividend of 5 cents (2013: 5 cents) per share unanked 485 514
Fully Paid C Class Non-cumulative Non-redeemable Preference Shares
Final dividend of 8 cents (2013: 8 cents) per share unanked 2,592 2,252
Dividends in relation to the 2014 nancial year (2013 nancial year)
Fully Paid A Class Non-cumulative Non-redeemable Preference Shares
Special dividend of 25 cents per share unanked (as part of share buy-back and cancellation) 3,623 –
Total dividends recognised 24 28,906 31,525
Dividends recognised during the current year dier to unrecognised amounts
in the prior year below due to movements in issued capital during the period between
30 June 2013 and the actual payment of the dividend.
Unrecognised amounts
Dividends in relation to the 2014 nancial year (2013 nancial year)
Fully Paid Ordinary Shares
Final dividend of 8 cents per share unanked (2013: 8 cents per share unanked) 22,104 21,081
Fully Paid A Class Non-cumulative Non-redeemable Preference Shares
Final dividend of nil cents (2013: 8 cents per share unanked) – 1,183
Fully Paid B Class Non-cumulative Non-redeemable Preference Shares
Final dividend of 5 cents per share unanked (2013: 5 cents per share unanked) 493 454
Fully Paid C Class Non-cumulative Non-redeemable Preference Shares
Final dividend of 5 cents per share unanked (2013: 8 cents per share unanked) 1,754 2,378
24,351 25,096
Adjusted anking account balance 12,390 10,887
e nal dividends for Ordinary and A, B and C Class Preference Shares, in respect of the nancial year, were declared by the Board
subsequent to the nancial year end and have therefore not been recognised as a liability at 30 June.
e values of the unrecognised dividends disclosed above are based on the respective dividend rates declared and the total of shares
outstanding at 30 June and shares to be issued out of the share allotment reserve. e nal value of the unrecognised dividends may
change when paid, depending on movements in shareholdings between 30 June and the date of payment.
Unrecognised dividends are unanked and therefore do not impact on the adjusted anking account balance.
Notes to the Financial Statements continued
70 Devondale Murray Goulburn Annual Report 2014
2014 2013
$000 $000
Current
Trade receivables 463,484 389,733
Less: provision for impairment of receivables (1,934) (1,762)
461,550 387,971
Other receivables 74,702 54,166
536,252 442,137
All receivables are recorded at amortised cost.
Credit risk associated with these receivables is addressed in Note 28(c). e fair value of receivables is documented in Note 28(d).
e consolidated entity reviews the recoverability of receivables by reference to internal credit assessment and historical and ongoing
customer payment trends. Trade receivables of $1,934,000 (2013: $1,762,000) in the consolidated entity have been assessed as
impaired and provided for in the provision for impairment of receivables.
2014 2013
$000 $000
Movements in the provision for impairment of receivables:
Balance at the beginning of the year 1,762 1,643
Impairment losses recognised on receivables 264 284
Impairment losses reversed – –
Amounts wrien o as uncollectible (92) (165)
1,934 1,762
Trade receivables of customers past due but considered recoverable are not provided for in the provision for impairment of receivables.
e consolidated entity does not hold any collateral over these balances. Ageing of past due but not impaired trade receivables:
0 – 30 days 4,058 8,914
30 – 60 days 10,732 10,394
60 – 90 days 4,629 3,778
90+ days 9,208 6,101
28,627 29,187
Devondale Murray Goulburn Annual Report 2014 71
2014 2013
$000 $000
Finished goods
• at cost 227,410 235,260
• at net realisable value 91,299 10,103
Packaging and manufacturing materials 47,803 45,844
366,512 291,207
AMOUNTS RECOGNISED IN PROFIT OR LOSS
Inventories recognised as expense during the year ended 30 June 2014 amounted to $2.571 billion (2013: $2.067 billion). ese
were included in cost of goods sold. Write downs of inventories to net realisable value amounted to $10.7 million (2013: $1.2 million).
ese write downs were recognised as an expense during the year ended 30 June 2014 and are also included in cost of goods sold.
2014 2013
$000 $000
Current
Prepayments 5,206 3,636
Deferred capital raising costs 3,446 –
8,652 3,636
Non-current
Other 5,406 5,607
5,406 5,607
2014 2013
$000 $000
Investments
Shares in quoted corporations at fair value 161 35,876
161 35,876
Shares in quoted corporations are Level 1 nancial instruments recorded at fair value using quoted prices. As at 30 June 2013,
the consolidated entity had an investment in Warrnambool Cheese and Buer Factory Company Holdings Limited. is investment
was sold during the 2014 nancial year. A prot of $51.017 million, before tax, was realised on the sale.
Notes to the Financial Statements continued
72 Devondale Murray Goulburn Annual Report 2014
Place of
Entity 2014 2013 Incorporation Class of Share
Parent entity
Murray Goulburn Co-operative Co. Limited(a) N/A N/A Australia Ordinary
Murray Goulburn Trading Pty Ltd(b) 100 100 Australia Ordinary
Murray Goulburn Investment Limited (deregistered 13 July 2014) 100 100 Australia Ordinary
MG Nutritionals Pty Ltd(b) 100 100 Australia Ordinary
Meiji-MGC Dairy Co Pty Ltd(b) 100 100 Australia Ordinary
Lavery International Pty Ltd(b) 100 100 Australia Ordinary
Classic Food Holdings Pty Ltd(b) 100 100 Australia A,B,C,D,E
Classic Foods Pty Ltd 100 100 Australia Ordinary
Murray Goulburn Dairy (Qingdao) Co., Ltd 100 100 China N/A
Murray Goulburn Nutritional (Qingdao) Co., Ltd. 100 100 China N/A
Provico Pty Ltd 51.0 51.0 Australia Ordinary
MG Agrilink Pty Ltd(b) 100 100 Australia Ordinary
MG Shares Pty Ltd(b) 100 100 Australia Ordinary
Tasmanian Dairy Products Co Ltd(d) 76.0 56.1 Australia Ordinary
Devondale Foundation Limited (a company limited by guarantee)(e) – – Australia N/A
Murray Goulburn International Pty Ltd(b) 100 100 Australia Ordinary
Murray Goulburn Asia Holding Company Pte Ltd 100 100 Singapore Ordinary
Murray Goulburn SEA Pte Ltd 100 100 Singapore Ordinary
Murray Goulburn Procurement Company Pte Ltd 100 100 Singapore Ordinary
MG Project Inverloch Pty Ltd(b) 100 100 Australia Ordinary
MG Project Inverloch (Finance) Pty Ltd(b) 100 100 Australia Ordinary
Murray Goulburn Superannuation Pty Ltd(b) 100 100 Australia Ordinary
MG Employees Equity Limited (deregistered 25 December 2013) – 100 Australia Ordinary
(a) Murray Goulburn Co-operative Co. Limited is the head entity within the tax consolidated group.
(b) ese wholly owned entities are members of the tax consolidated group.
(c) An additional entity, namely, Murray Goulburn Nominees Pty Ltd, is benecially owned by Murray Goulburn Co-operative Co. Limited.
(d) During the 2014 nancial year, the parent entity acquired a further 19.9 per cent interest in Tasmanian Dairy Products Co Ltd for
$7.8 million in cash consideration.
(e) Murray Goulburn Co-operative Co Limited is considered to control this entity due to certain of its Directors siing on Devondale
Foundation Limited’s Board.
Devondale Murray Goulburn Annual Report 2014 73
continued
Murray Goulburn Co-operative Co. Limited and Murray Goulburn Trading Pty Ltd are entities that are party to a deed of cross
guarantee. e consolidated Statement of Financial Position of entities, which are party to the deed of cross guarantee, is:
2014 2013
$000 $000
STATEMENT OF FINANCIAL POSITION
Current assets
Cash 2,889 4,605
Receivables 571,963 450,096
Inventories 336,288 274,285
Derivative nancial instruments 1,736 49
Other 8,288 3,434
Total current assets 921,164 732,469
Non-current assets
Receivables 5,016 5,899
Investment in subsidiaries 54,844 49,044
Investment in associates 31,839 25,034
Other nancial assets 161 35,876
Property, plant and equipment 691,354 727,046
Intangible assets 4,155 4,155
Total non-current assets 787,369 847,054
Total assets 1,708,533 1,579,523
Current liabilities
Payables 348,702 311,851
Borrowings 148,386 197,100
Current tax payable 363 –
Derivative nancial instruments 36 35,546
Provisions 46,208 44,279
Total current liabilities 543,695 588,776
Non-current liabilities
Payables 1,000 1,000
Borrowings 343,309 286,646
Provisions 7,933 7,852
Deferred tax liabilities 63,710 30,798
Total non-current liabilities 415,952 326,296
Total liabilities 959,647 915,072
Net assets 748,886 664,451
Equity
Issued capital 268,741 262,677
Reserves 134,499 127,219
Retained earnings 345,646 274,555
Total equity 748,886 664,451
MOVEMENT IN RETAINED EARNINGS
Balance at the beginning of the nancial year 274,555 272,329
Net prot 45,853 31,430
Dividends provided for or paid (28,906) (31,525)
Transfer om reserves 54,144 2,321
Balance at the end of the nancial year 345,646 274,555
Notes to the Financial Statements continued
74 Devondale Murray Goulburn Annual Report 2014
continued
e consolidated income statement of entities, which are party to the deed of cross guarantee, is:
2014 2013
$000 $000
STATEMENT OF PROFIT OR LOSS
Sales revenue 2,913,168 2,367,701
Cost of sales (2,571,348) (2,057,377)
Gross prot 341,820 310,324
Other income 31,222 5,025
Impairment of associates (1,157) –
Distribution expenses (149,678) (140,893)
Selling and marketing expenses (65,856) (50,372)
Administration expenses (60,010) (49,609)
Finance costs (23,514) (34,371)
Other expenses (19,419) (8,393)
Prot before income tax 53,408 31,711
Income tax (expense) benet (7,555) (281)
Prot for the period 45,853 31,430
STATEMENT OF COMPREHENSIVE INCOME
Prot for the year 45,853 31,430
Other comprehensive income
Items that will not be classied subsequently to prot or loss:
Increment (decrement) on revaluation of land and buildings – 55,082
Net change in fair value of equity instruments measured at fair value through other comprehensive income 54,434 541
Income tax relating to items that will not be reclassied subsequently (15,320) (16,525)
Items that may be reclassied subsequently to prot or loss:
Transfer to income statement on cash ow hedges 31,410 (11,008)
Gain (loss) on cash ow hedges taken to equity 3,258 (43,566)
Income tax relating to items that may be reclassied subsequently (10,401) 16,373
Total comprehensive income for the year 109,234 32,327
Devondale Murray Goulburn Annual Report 2014 75
2014 2013
$000 $000
Investments in associated companies 16,994 20,607
Ownership Ownership
2014 2013
Intermix Australia Pty Ltd Food ingredient processing 33.3 33.3
Dairy Technical Services Ltd Dairy analytical and technical services 25.3 25.3
Australian Milk Products Pty Ltd Exporter of dairy products 50.0 50.0
MGM (Aust) Pty Ltd Retail of dairy products 0.0 50.0
Progenex Pty Ltd Retail of dairy products 0.0 50.0
Nedfarm Milk production – dairy cale 40.0 40.0
Danone Murray Goulburn Pty Ltd Retail of dairy products 50.0 50.0
All associates are incorporated in Australia.
Investments in associated companies are accounted for in the consolidated nancial statements using the equity method of accounting.
2014 2013
Movement in Investments in Associated Companies $000 $000
Equity accounted amount at the beginning of the nancial year 20,607 14,316
Acquisition of interests in associates 8,000 6,000
Share of (loss)/prot aer income tax (10,889) 837
Dividends received om associates (724) (546)
Equity accounted amount at the end of the nancial year 16,994 20,607
Associate entities do not have any contingent liabilities.
Aggregate assets of associates is $119,630,000 (2013: $111,532,000).
Aggregate liabilities of associates is $73,152,000 (2013: $70,733,000).
Aggregate revenue of associates is $164,420,000 (2013: $159,833,000).
Aggregate prot/(loss) of associates is $(15,671,000) (2013: $3,171,000).
Notes to the Financial Statements continued
76 Devondale Murray Goulburn Annual Report 2014
2014 2013
$000 $000
Land and buildings
Freehold land at fair value(i) 57,311 76,971
Buildings at fair value(i) 305,274 328,978
less accumulated depreciation and impairment losses (9,333) (484)
295,941 328,494
Total land and buildings 353,252 405,465
Plant and equipment
At cost 1,165,894 1,128,704
less accumulated depreciation and impairment losses (806,367) (773,564)
Total plant and equipment 359,527 355,140
Vehicles
At cost 46,781 53,924
less accumulated depreciation (30,090) (28,307)
Total vehicles 16,691 25,617
In the course of construction 66,574 45,783
Total property, plant and equipment 796,044 832,005
(i) Valuations of land and buildings
e basis of the valuation of land and buildings is fair value being market value for existing use of all eehold land and buildings.
Land and building assets at fair value are considered to be Level 3 non-nancial assets.
e fair value of those assets was determined by an independent registered valuer. In respect to Level 3 land, fair value was derived
using the sales comparison approach. For land, sales prices of comparable unimproved land in close proximity to the consolidated
entity’s land assets were used as a basis for the valuation and were adjusted for dierences in key aributes such as property size
and property improvements. For certain Level 3 building assets, most particularly largely generic warehousing facilities, valuations
were determined by reference to a capitalisation of market based rental yields for comparable premises adjusted for key aributes
such as available storage space measured in square metres. In respect to certain other Level 3 building assets, fair value was
determined using a depreciated replacement cost methodology.
e revaluation to fair value of land and building assets was last undertaken as at 30 June 2013. Directors have assessed
the carrying value of land and buildings as at 30 June 2014 and are satised that it is not materially dierent om its fair value.
is is in accordance with a policy of revaluing property progressively to ensure that the carrying value of land and buildings
does not dier materially om their fair value.
Devondale Murray Goulburn Annual Report 2014 77
continued
RECONCILIATIONS
Reconciliations of the carrying amounts of each class of property, plant and equipment are set out below.
Land and Plant and In Course of
Buildings Equipment Vehicles Construction Total
Consolidated $000 $000 $000 $000 $000
Carrying amount at 1 July 2012 328,047 296,048 37,055 75,014 736,164
Additions (including transfers om capital work in progress) 34,110 95,576 1,490 (31,291) 99,885
Net revaluations through asset revaluation reserve 54,833 – – – 54,833
Reversal of impairment loss of non-current assets 1,273 (12) – – 1,261
Disposals (4,561) (1,005) (3,109) – (8,675)
Depreciation (8,237) (35,994) (9,819) – (54,050)
Eect of movement in exchange rates – 527 – 2,060 2,587
Carrying amount at 30 June 2013 405,465 355,140 25,617 45,783 832,005
Additions (including transfers om capital work in progress) 22,322 40,791 1,002 21,010 85,125
Net revaluations through asset revaluation reserve – – – – –
Reversal of impairment loss of non-current assets – 1,402 – – 1,402
Disposals (65,413) (1,208) (2,024) – (68,645)
Depreciation (8,870) (36,463) (7,904) – (53,237)
Eect of movement in exchange rates (252) (135) – (219) (606)
Carrying amount at 30 June 2014 353,252 359,527 16,691 66,574 796,044
Notes to the Financial Statements continued
78 Devondale Murray Goulburn Annual Report 2014
2014 2013
$000 $000
Goodwill at cost 12,121 12,121
Brand names at cost 4,000 4,000
Total intangible assets 16,121 16,121
Intangible assets recognised by the consolidated entity have an indenite useful life. As such, they were assessed for possible
impairment during the year ended 30 June 2014 and no impairment was evident.
RECONCILIATIONS
ere was no movement in goodwill or brand names at cost during 2014 or 2013. In considering impairment, management has
considered relevant forecasted cash ow projections.
2014 2013
$000 $000
Current
Trade payables 56,391 98,793
Payable to farmer suppliers 175,279 131,513
Sundry payables and accrued expenses 139,526 91,667
371,196 321,973
Non-current
Other 1,921 1,425
1,921 1,425
All payables are recorded at amortised cost. e fair value of payables is documented in Note 28(d).
Devondale Murray Goulburn Annual Report 2014 79
2014 2013
$000 $000
Current
Bank loans 118,039 192,558
Private placement senior notes 31,847 12,938
149,886 205,496
Non-current
Bank loans 253,504 162,750
Private placement senior notes 127,389 161,725
380,893 324,475
e bank loans and private placement senior notes are covered by negative pledge agreements between the parent entity and
its nanciers.
All borrowings are recorded at amortised cost. Private placement notes are designated as eective cash ow hedges with the exception
of $53,078,556 (2013: $53,908,000).
e fair value of borrowings is documented in Note 28(d).
2014 2013
$000 $000
Foreign currency derivatives assets 1,736 49
Foreign currency derivatives liabilities 36 35,546
Foreign currency derivatives represent unrealised gains and losses on foreign exchange contracts that are hedges against sales.
Unrealised gains and losses on foreign currency hedge contracts are deferred in equity or recognised in prot or loss as appropriate.
Foreign currency derivatives are Level 2 nancial instruments recorded at fair value using observable market inputs.
Notes to the Financial Statements continued
80 Devondale Murray Goulburn Annual Report 2014
2014 2013
$000 $000
Current
Other – 1
Employee benets(i) 46,415 44,393
46,415 44,394
Non-current
Employee benets 7,933 7,852
7,933 7,852
e current provision for employee benets includes annual and long service leave referable to unconditional, vested entitlements.
e entitlements are presented as current liabilities albeit the consolidated entity does not expect to sele the full amount of accrued
leave within the next 12 months.
e following amounts reect leave that is not expected to be taken or paid within the next 12 months.
(i) Current leave obligations expected to be seled aer 12 months 29,067 27,801
2014 2013
Note $000 $000
Deferred tax liability 4 58,902 30,679
e consolidated entity is not aware of any contingent liabilities.
Devondale Murray Goulburn Annual Report 2014 81
2014 2013
$000 $000
Issued capital 268,741 262,677
Number of Shares
Ordinary Preference Preference Preference
Movements in Issued Capital Shares (a) Shares (b) Shares (c) Shares (d) Total
Balance at 30 June 2012 225,757,565 15,174,833 10,103,587 26,446,565 277,482,550
Shares issued 9,992,219 – – – 9,992,219
Bonus shares issued 23,270,268 – – – 23,270,268
Dividend reinvestment plan issues 4,390,786 21,241 414 14 4,412,455
Transfers (1,857,027) (407,625) (1,014,877) 3,279,529 –
Balance at 30 June 2013 261,553,811 14,788,449 9,089,124 29,726,108 315,157,492
Shares issued 16,818,948 – – – 16,818,948
Dividend reinvestment plan issues 3,731,734 20,287 359 50 3,752,430
Transfers (5,805,836) (321,470) 773,424 5,353,882 –
Share buy-back and cancellations – (14,487,266) – – (14,487,266)
Balance at 30 June 2014 276,298,657 – 9,862,907 35,080,040 321,241,604
Changes to the then Corporations Law abolished the par value concept in relation to share capital om 1 July 1998. erefore, the
Company does not have a limited amount of authorised capital and issued shares do not have a par value. All shares are fully paid.
(a) Ordinary Shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the
number of shares held. On a show of hands, every holder of ordinary shares present at a meeting in person or by proxy is entitled
to one vote and upon a poll each share is entitled to one vote. Upon ceasing supply of milk to the Company, shareholders’ ordinary
shares are converted into a class of non-cumulative, non-redeemable preference shares as determined by the Board.
(b) A class eight per cent non-cumulative non-redeemable Preference Shares
A Class eight per cent non-cumulative, non-redeemable Preference Shares entitled holders to receive, out of prots available for
dividend, a preferential dividend at a rate of eight per cent per annum. All shares were bought back and cancelled during 2013–14.
(c) B class non-cumulative, non-redeemable Preference Shares
B Class non-cumulative, non-redeemable Preference Shares entitle holders to receive, out of prots available for dividend, a preferential
dividend at a variable rate. ese holders have no voting rights at a general meeting of the Company, but can convert their shares
into ordinary shares, by resolution of the Directors, if any holder becomes a supplier to the Company.
(d) C class non-cumulative non-redeemable Preference Shares
C Class non-cumulative, non-redeemable Preference Shares entitle holders to receive, out of prots available for dividend, a preferential
dividend at a variable rate. ese holders have no voting rights at a general meeting of the Company, but can convert their shares into
ordinary shares, by resolution of the Directors, if any holder becomes a supplier to the Company.
Notes to the Financial Statements continued
82 Devondale Murray Goulburn Annual Report 2014
continued
CAPITAL RISK MANAGEMENT
e consolidated entity manages its capital to ensure that entities within the Group will be able to continue as a going concern and to
maintain an optimal capital structure to reduce the cost of capital and ensure access to adequate capital to sustain future development.
In order to maintain or adjust the capital structure, the consolidated entity may adjust the amount of share equity milk deductions, adjust
the level of dividends paid to shareholders, issue new shares or sell assets to reduce debt. Management continually monitor the capital
structure by reference to the consolidated entity’s gearing ratio. e gearing ratio is calculated as net debt divided by total capital where
net debt is borrowings less cash and total capital is equity, including minority interest, plus net debt.
e consolidated entity’s strategy is to maintain its gearing ratio within 30 to 60 per cent.
2014 2013
$000 $000
Total borrowings 530,779 529,971
less cash (13,858) (11,809)
Net debt 516,921 518,162
Total equity 745,891 686,487
Total capital 1,262,812 1,204,649
Gearing ratio 40.9% 43.0%
2014 2013
$000 $000
Capital reserve (i) 36,916 36,916
Asset revaluation reserve 135,451 153,883
General reserve (i) 5,257 5,257
Hedge reserve 3,529 (20,739)
Investment revaluation reserve 33 (3,369)
Share allotment reserve – 1,957
Transactions with non-controlling interests reserve (785) 2,101
Foreign currency translation reserve 2,814 3,490
183,215 179,496
(i) ere have been no movements in the capital reserve or general reserve in the current or prior years.
Devondale Murray Goulburn Annual Report 2014 83
continued
2014 2013
Note $000 $000
MOVEMENTS IN RESERVES
Asset revaluation reserve
Balance at the beginning of the nancial year 153,883 117,820
Increment (decrement) on revaluation of land and buildings 14 – 54,833
Related income tax 4 – (16,450)
Transfer to retained earnings (26,331) (3,315)
Related income tax 7,899 995
Balance at the end of the nancial year 135,451 153,883
Hedge reserve
Balance at the beginning of the nancial year (20,739) 17,463
Transferred to income statement 31,410 (11,008)
Related income tax 4 (9,423) 3,302
Gains (losses) on cash ow hedges 3,258 (43,566)
Related income tax 4 (977) 13,070
Balance at the end of the nancial year 3,529 (20,739)
Investment revaluation reserve
Balance at the beginning of the nancial year (3,369) (3,910)
Net change in fair value of equity instruments measured at fair value through other comprehensive income 54,434 541
Related income tax 4 (15,320) –
Transfer to retained earnings (51,017) –
Related income tax 15,305 –
Balance at the end of the nancial year 33 (3,369)
Share allotment reserve
Balance at the beginning of the nancial year 1,957 2,971
Allotment of shares to suppliers (1,957) (2,971)
Shares to be issued in lieu of milk payments – 1,957
Balance at the end of the nancial year – 1,957
Transactions within the non-controlling interests reserve
Balance at the beginning of the nancial year 2,101 2,354
Dierence on acquisition of Murray Goulburn Dairy (Qingdao) Co., Ltd – (253)
Dierence on acquisition of Tasmanian Dairy Products Co Ltd (2,886) –
Balance at the end of the nancial year (785) 2,101
Foreign currency translation reserve
Balance at the beginning of the nancial year 3,490 303
Translation of foreign operations (984) 4,553
Related income tax 4 308 (1,366)
Balance at the end of the nancial year 2,814 3,490
Notes to the Financial Statements continued
84 Devondale Murray Goulburn Annual Report 2014
continued
NATURE AND PURPOSE OF RESERVES
Capital reserve
e capital reserve is used to accumulate realised capital prots.
Asset revaluation reserve
e asset revaluation reserve is used to record increments and decrements on the revaluation of non-current assets.
General reserve
e general reserve is used om time to time to transfer prots om retained earnings. ere is no policy of regular transfer.
Hedge reserve
e hedge reserve represents hedging gains and losses recognised on the eective portion of cash ow hedges. e cumulative
deferred gain or loss on the hedge is recognised in prot or loss when the hedged transaction impacts the prot or loss.
Investment revaluation reserve
e investment revaluation reserve represents accumulated gains and losses arising on the revaluation of investments that have been
recognised through other comprehensive income.
Share allotment reserve
e share allotment reserve reects the value of shares to be alloed to suppliers. e allotments arise om deductions made om milk
payments during the year.
Transactions within the non-controlling interests reserve
is reserve is used to account for transactions involving non-controlling interests in accordance with accounting standards.
Foreign currency translation reserve
e foreign currency translation reserve represents exchange dierences relating to the translation om the functional currencies
of the Group’s foreign controlled entities into Australian dollars.
Devondale Murray Goulburn Annual Report 2014 85
2014 2013
Note $000 $000
Balance at the beginning of the nancial year 233,915 233,724
Net prot aributable to members of the parent entity 27,936 29,396
Dividends provided for or paid 7 (28,906) (31,525)
Transfer om reserves (net of tax) 23 54,144 2,320
Balance at the end of the nancial year 287,089 233,915
2014 2013
$000 $000
Non-controlling interests comprises:
49 ordinary shares in Provico Pty Ltd (2013: 49) 935 1,004
121 ordinary shares in Tasmanian Dairy Products Co Ltd (2013: 221) 5,911 9,395
6,846 10,399
2014 2013
$000 $000
a) Operating lease commitments
• Due within 1 year 42,719 9,999
• Due within 1–5 years 145,451 21,283
• Due longer than 5 years 148,734 11,172
336,904 42,454
Operating leases relate to factories, trading stores, warehousing facilities, oce space, and vehicles, with lease terms of between one
and 30 years. Some leases have an option to extend the lease term. e consolidated entity does not have an option to purchase the
leased assets at expiry of the lease period.
b) Capital expenditure commitments
Contracted capital expenditure commitments due within one year 20,432 157,468
With the exception of the declaration of dividends detailed in Note 7 ‘Unrecognised Amounts’, no maers or circumstances have arisen
since the end of the nancial year that signicantly aected or may signicantly aect the operations of the consolidated entity, the results
of those operations, or the state of aairs of the consolidated entity in nancial years subsequent to the nancial year ended 30 June 2014.
Notes to the Financial Statements continued
86 Devondale Murray Goulburn Annual Report 2014
Risk management is carried out by the treasury and nance departments under policies approved by the Board of Directors.
Financial risks are managed in accordance with wrien policies overseen by the Board.
e consolidated entity does not enter into or trade nancial instruments, including derivative nancial instruments, for speculative
purposes. e use of nancial derivatives is governed by the consolidated entity’s policy approved by the Board of Directors, which
provides wrien principles on the use of nancial derivatives. Compliance with policy and exposure limits is reviewed continuously
by senior management and by the Board of Directors.
e consolidated entity’s activities expose it primarily to the nancial risks of changes in foreign currency exchange rates and interest
rates. e consolidated entity enters into a variety of derivative nancial instruments to manage its exposure to foreign currency and
interest rate risk, including forward foreign currency and foreign currency option contracts to hedge the exchange rate risk arising
on the sale of exported dairy goods in $US (US dollar), and interest rate swaps to hedge fair value risk associated with rate uctuations.
Details of the signicant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement
and the basis on which income and expenses are recognised, in respect of nancial instruments are disclosed in Note 1 to the nancial
statements and below.
Foreign currency risk management
e Group undertakes transactions denominated in foreign currencies, hence exposures to exchange rate uctuations arise. Exchange
rate exposures are managed within approved policy parameters utilising forward foreign exchange contracts and foreign exchange options.
Forward foreign exchange contracts
e consolidated entity maintains a policy of matching anticipated future cash ows in foreign currencies, i.e. highly probable sales,
for cash ow hedge accounting purposes, with forward exchange contracts in the same currency and with closely corresponding
selement dates.
At balance date, the entity has US$180 million (2013: US$420 million) forward exchange contracts outstanding with maturity dates
not exceeding one year, of which US$53.1 million (2013: US$27 million) relate to receivables at balance date and US$126.9 million
(2013: US$393 million) to future transactions. e fair value of these contracts at balance date is a gain of $1.7 million
(2013: loss of $35.5 million).
Unrealised gains or losses at year end on specic hedges in the form of forward exchange contracts, in respect of unseled sales
transactions, are deferred and recognised in the hedge reserve to match against the underlying hedge transaction. Forward exchange
contracts are classied as Level 2 nancial instruments, as their fair value measurement is derived om inputs other than quoted
prices that are observable for the asset or liability.
Currency options
During the year the consolidated entity entered into a range of US$ currency options with varying maturities and strike rates.
By simultaneously purchasing and selling options in barrier type structures, the entity has eectively capped an exchange rate
should the A$ (Australian dollar) strengthen whilst maintaining the exibility to improve the exchange rate should the A$ trade
at more favourable levels.
At balance date, there were $nil currency options outstanding (2013: $nil).
Private placement senior notes
e private placement is designated in a cash ow hedge relationship and is hedging highly probable forecast sales denominated
in US$ to be invoiced at the time of each loan repayment. e eective portion of changes in the fair value of the private placement
due to foreign currency changes is recognised directly in equity via the hedge reserve.
Foreign currency sensitivity
e consolidated entity is exposed to US dollars (US$). e following table details the consolidated entity’s sensitivity to a one per cent
increase and decrease in the Australian dollar (A$) against the US$ as at balance date. e sensitivity includes outstanding foreign
currency derivatives and foreign currency denominated monetary items and adjusts their translation at the period end for
a one per cent change in foreign currency rates.
2014 2013
$000 $000
Other equity A$ strengthens 1% – increase (decrease) 1,669 3,774
A$ weakens 1% – increase (decrease) (1,703) (3,850)
Prot or loss A$ strengthens 1% – increase (decrease) (12) 16
A$ weakens 1% – increase (decrease) 13 (16)
Devondale Murray Goulburn Annual Report 2014 87
continued
Trade and other receivables, trade payables and accruals and loans om the State Government of Victoria are non-interest bearing.
e A$ overdra bears interest at a oating rate based on the bank’s corporate overdra reference rate. e US$ bank overdra
bears interest at a oating rate based on the Federal Reserve’s Target Rate. US$ cash on hand yields interest at the US Interbank
Bid Rate. A$ cash on hand bears interest at a oating rate based on the targeted cash rate of the Reserve Bank of Australia.
Bank loans consist of short term and long term US$ and A$ revolving loan facilities, on which interest is payable at oating rates.
Rates on US$ loans are based on LIBOR. Rates on A$ loans are based on BBR.
e 2009 private placement will be repaid as follows and bears interest at the following xed rates: US$30.0 million, 4.83 per cent
(29 October 2014), US$17.0 million, 5.44 per cent (29 October 2016), US$89.0 million, 5.81 per cent (29 October 2019),
US$14.0 million, 5.96 per cent (29 October 2021).
An analysis of borrowings by maturities is provided in paragraph (e) below.
Interest rate sensitivity
e consolidated entity’s sensitivity to a 50 basis point increase or decrease, representing management’s assessment of the
possible change in interest rates applicable to debt facilities subject to variable rates, holding all other variables constant would
be a decrease/increase in net prot of $1.86 million (2013: $1.22 million decrease/increase).
e maximum exposure to credit risk at balance date in relation to nancial assets is the carrying amount, net of any allowances,
of those assets as indicated in the Statement of Financial Position. e consolidated entity has adopted a policy of dealing with
creditworthy counterparties assessed by reference to their nancial position, internal and external credit assessment and historical
trading experience. Concentrations of credit risk are minimised by undertaking transactions with a large number of customers and
counterparties in various countries.
Other receivables current includes amounts receivable om suppliers and om GST paid.
e fair value of other nancial assets and nancial liabilities, excluding derivative instruments, are determined in accordance with
generally accepted pricing models based on discounted cash ow analysis using prices om observable current market transactions.
To calculate the fair value of derivative instruments, use is made of discounted cash ow analysis using the applicable yield curve
for the duration of the instruments for non-optional derivatives and option pricing models for optional derivatives.
e carrying amount recorded in the nancial statements represents the fair value of all assets and liabilities, determined in accordance
with the accounting policies in Note 1 to the nancial statements, except for those mentioned below. e fair value is derived by discounting
the expected future cash ows by the current interest rates for assets and liabilities with similar risk proles.
e fair value of the private placement at balance date is $186.2 million (2013: $203.4 million).
e fair value of a government loan of $1.0 million at balance date is $0.9 million (2013: $0.8 million).
Notes to the Financial Statements continued
88 Devondale Murray Goulburn Annual Report 2014
continued
Liquidity risk is managed by maintaining adequate borrowing facilities, by continuously monitoring forecast and actual cash ows
and matching the maturity proles of nancial assets and liabilities. Included in Note 30(c) is a listing of additional undrawn facilities that
are available to reduce liquidity risk.
e following table analyses the consolidated entity’s non-derivative nancial liabilities. e amounts disclosed in the table are the
contractual undiscounted cash ows:
Total
Contractual Carrying
0–12 months 1–2 years 2–5 years 5+ years Cash Flows Amount
$000 $000 $000 $000 $000 $000
At 30 June 2014
Non-interest bearing 370,196 – 1,000 – 371,196 371,196
Variable rate 125,700 18,283 254,099 2,222 400,304 371,543
Fixed rate 39,717 7,357 37,499 113,238 197,811 159,236
Consolidated 535,613 25,640 292,598 115,460 969,311 901,975
At 30 June 2013
Non-interest bearing 357,519 – 1,000 – 358,519 358,519
Variable rate 203,753 124,521 17,548 32,947 378,769 355,308
Fixed rate 22,187 40,338 39,082 121,483 223,090 174,663
Consolidated 583,459 164,859 57,630 154,430 960,378 888,490
Total nancial facilities available to the consolidated entity and the extent to which they are utilised at balance date are set out
in Note 30(c).
Devondale Murray Goulburn Annual Report 2014 89
Transactions between related parties are on normal commercial terms and conditions unless otherwise stated.
Transactions between the parent entity and its associates include the sale of goods, the purchase of goods and the provision
of technical and consultancy services by the parent entity. Transactions are on normal commercial terms and conditions.
Direct and indirect shareholdings of Directors in the parent entity, alloed to them in their capacity as suppliers of milk to the company:
Shares Held at Shares Held at Shares Held at Shares Held at
1 July 2012 Acquired 30 June 2013 1 July 2013 Acquired 30 June 2014
Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary
No. No.(iv) No. No. No.(iv) No.
PW Tracy 1,242,496 102,779 1,345,275 1,345,275 139,714 1,484,989
N Akers 204,333 48,355 252,688 252,688 34,209 286,897
WT Bodman 138,523 26,912 165,435 165,435 18,644 184,079
DF Howard 552,969 64,101 617,070 617,070 3,128 (ii)
ML Jelbart 1,148,977 191,901 1,340,878 1,340,878 115,100 1,455,978
KW Jones 193,797 56,854 250,651 250,651 23,995 274,646
ED Morris (iii) (iii) (iii) 28,671 3,721 32,392
GN Munzel 196,271 33,083 229,354 229,354 17,434 246,788
JP Pye 233,441 34,903 268,344 268,344 19,993 288,337
MJ Van de Wouw 366,458 41,862 408,320 408,320 5,476 413,796
JT Vardy 884,420 108,055 (i) (i) (i) (i)
5,161,685 708,805 4,878,015 4,906,686 381,414 4,667,902
(i) JT Vardy resigned om the oce of Director during the previous nancial year and accordingly his shareholdings
at 30 June 2013 and 2014 are not disclosed.
(ii) DF Howard resigned om the oce of Director during the current nancial year and accordingly his shareholdings
at 30 June 2014 are not disclosed.
(iii) ED Morris was appointed to the oce of Director during the current nancial year and accordingly his shareholdings
prior to 1 July 2013 are not disclosed.
(iv) All shares were issued for a value of $1, and accordingly the value of the issued shares equals $381,414 (2013: $708,805).
Directors of the parent Company supply milk to the consolidated entity, are able to purchase goods at Murray Goulburn Trading Pty Ltd
stores at commercial prices and can obtain loans om the consolidated entity in the same manner as all other supplier shareholders.
Total purchases of goods and services om Murray Goulburn Trading Pty Ltd by Directors and their related entities was $2,323,111
(2013: $3,786,832) and the balance outstanding as at 30 June 2014 was $433,782 (2013: $1,553,947). All transactions are on the
same terms and conditions available to other supplier shareholders.
PW Tracy holds an interest in Southern Stockfeeds, which has provided products to Murray Goulburn Trading Pty Ltd on normal
commercial terms and conditions. e total amount purchased was $598,103 (2013: $531,976), with a balance outstanding at
nancial year end of $2,499 (2013: $15,754). Further, during the year, Southern Stockfeeds paid $11,825 (2013: $10,693) to the
consolidated entity for services provided in collecting Southern Stockfeeds accounts receivable.
Aggregate of loans to three (2013: four) Directors as at nancial year end: $25,846 (2013: $120,080).
Total interest paid by Directors: $8,394 (2013: $2,739).
Details regarding loans outstanding at the reporting date to Directors and their related parties, where the individual’s aggregate loan
balance exceeded $100,000 at any time in the reporting period, are as follows:
• ML Jelbart: total loan at nancial year end: $nil (2013: $nil); peak loan balance during the year: $nil (2013: $101,697); interest paid:
$nil (2013: $nil).
PJO Hawkins is a director of Westpac Banking Corporation, which is one of the banks on the consolidated entity’s banking panel.
All transactions with Westpac Banking Corporation are on normal terms and conditions.
R Poole holds an interest in 54,312 (2013: 54,312) C class preference shares in the Company.
Notes to the Financial Statements continued
90 Devondale Murray Goulburn Annual Report 2014
2014 2013
$000 $000
For the purposes of the statement of cash ows, cash includes cash on hand, deposits on call
and investments in money market instruments, net of bank overdras.
Cash at the end of the year as shown in the statement of cash ows is reconciled to the
statement of nancial position as follows:
Cash per statement of nancial position 13,858 11,809
Cash per statement of cash ows 13,858 11,809
Prot for the period 29,297 34,904
Depreciation 53,237 54,050
Movement in doubul debts provision 172 119
Reversal of impairment aributable to non-current assets (1,402) (1,261)
Loss (gain) on disposal of xed assets (27,717) 717
Share of (prot) loss of associated company 11,613 (291)
(Gain) loss om dened benet superannuation fund – (3,631)
Change in operating assets and liabilities
Decrease (increase) in trade receivables (87,700) (52,024)
Decrease (increase) in other receivables and prepayments (25,170) 15,383
Decrease (increase) in inventories (75,305) 73,685
Increase (decrease) in trade payables and amounts due to suppliers 49,441 (5,723)
Increase (decrease) in provisions 1,737 2,436
Increase (decrease) in deferred tax liability 2,792 (787)
Net cash inow (oulow) om operating activities (69,005) 117,577
Credit facility 1,023,083 682,345
Amount utilised 528,595 304,351
Unused credit facility 494,488 377,994
e major facilities consist of a bank overdra facility repayable at call, and loan facilities which are subject to yearly review to ensure
that the required nancial ratios are met.
Nil.
Devondale Murray Goulburn Annual Report 2014 91
2014 2013
$000 $000
Total current assets 854,891 690,431
Total non-current assets 783,094 840,959
Total assets 1,637,985 1,531,390
Total current liabilities 598,354 562,198
Total non-current liabilities 331,289 343,499
Total liabilities 929,643 905,697
Net assets 708,342 625,693
Issued capital 268,741 262,677
Retained earnings 307,320 238,323
Reserves
Capital reserve 24,290 24,290
Asset revaluation reserve 101,781 119,906
General reserve 2,648 2,648
Hedge reserve 3,529 (20,739)
Investment revaluation reserve 33 (3,369)
Share allotment reserve – 1,957
Total equity 708,342 625,693
Prot for the year 44,066 28,608
Total comprehensive income (loss) 108,604 (12,634)
Guarantee provided under the deed of cross guarantee 18,708 25,955
e Company is not aware of any contingent liabilities.
Plant and equipment 19,806 156,673
Murray Goulburn Co-operative Co. Limited is a company limited by shares, incorporated and domiciled in Australia.
Its registered oce and principal place of business is:
Freshwater Place, Level 15,
2 Southbank Boulevard, Southbank,
Victoria, 3006
Notes to the Financial Statements continued
92 Devondale Murray Goulburn Annual Report 2014
In the Directors’ opinion:
(a) ere are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable;
(b) e aached nancial statements are in compliance with International Financial Reporting Standards, as stated
in note 1 to the nancial statements;
(c) e aached nancial statements and notes thereto are in accordance with the Corporations Act 2001, including compliance
with accounting standards; and
(d) e aached nancial statements and notes thereto give a true and fair view of the consolidated entity’s nancial position
as at 30 June 2014 and performance for the nancial year ended on that date.
At the date of this declaration, the Company is within the class of companies aected by ASIC Class Order 98/1418. e nature
of the deed of cross guarantee is such that each company which is party to the deed guarantees to each creditor payment in full
of any debt in accordance with the deed of cross guarantee.
In the Directors’ opinion, there are reasonable grounds to believe that the Company and the companies to which the ASIC Class Order
applies, as detailed in Note 12 to the nancial statements, will, as a group, be able to meet any obligations or liabilities to which they are,
or may become, subject by virtue of the deed of cross guarantee.
is declaration is made in accordance with a resolution of the Directors.
PW Tracy
Director
Melbourne
26 August 2014
Directors’ Declaration
Devondale Murray Goulburn Annual Report 2014 93
Independent Auditor’s Report
94 Devondale Murray Goulburn Annual Report 2014
Devondale Murray Goulburn Annual Report 2014 95
Auditor’s Independence Declaration
96 Devondale Murray Goulburn Annual Report 2014
Murray Goulburn Co-operative Co. Limited
Level 15 Freshwater Place 2 Southbank Boulevard
Southbank Victoria 3006 Australia
PO Box 4307 Melbourne Victoria 3001 Australia
Telephone: +61 3 9040 5000
www.mgc.com.au
Photograph of Gary Helou on pages 10, 26 and 28 courtesy of David Charles
www.mgc.com.au
Devondale Murray Goulburn Annual Report 2014
