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Adding ValueQueensland Sugar Limited

Annual report 2011/12

Queensland Sugar Limited Annual Report 2011/12

CONTENTS

About QSL 1

Chairman’s report 2

Chief Executive Officer’s report 3

QSL people and community 4

QSL executive team 5

Corporate governance 6

Statutory financial report 9

ABOUT QSL

QSL is a leader in raw sugar marketing and logistics and works on behalf of over 3000 Australian cane growers and seven milling companies to export Queensland raw sugar to refineries around the globe. Since QSL was formed on 24 December 1999 we have managed more than 90 per cent of Australia’s raw sugar exports.

QSL’S MISSION VISION AND STRATEGY Consistent with our vision to be Asia-Pacific’s leading raw sugar marketing and logistics company, throughout 2011/12 QSL focussed on three clear strategic priorities:

�� Maximising returns for members

�� Enhancing product and service offerings for members

�� Focusing on growing our business for the benefit of members

We delivered against these strategic initiatives by adding value through our core activities of pricing, financing, marketing and logistics.

PRICING QSL manages its sugar export program as a pooling system, where growers and millers throughout the state elect to ‘pool’ their sugar together to be priced. Each QSL managed pool allows suppliers to price collectively and share the revenues and costs associated with marketing that sugar.

FINANCINGQSL runs a comprehensive currency and sugar hedging program to assist our grower and miller members to sell in the international marketplace and provide forward pricing for future seasons. QSL borrows funds to operate the Advances Scheme that allows the Queensland sugar cane industry to maintain cash flows prior to physical sales and deliveries being completed.

We use our credit rating to minimise the cost of borrowing funds and to maximise returns.

MARKETINGQSL typically markets 3.0 million tonnes of raw sugar directly to customers in Asia. In addition, it supplies the US and Europe under quota arrangements. QSL’s traditional markets have been Japan, Korea, Malaysia and New Zealand, while recent growth markets have included Indonesia and China. South East Asia is the fastest growing raw sugar market in the world and Australia’s proximity to these markets means it is well placed to capture the benefits from this regional growth going forward.

QSL’s quality control program allows QSL to offer our customers a consistency in sugar quality that is unmatched in the global market.

LOGISTICSQSL is one of the largest and most efficient bulk sugar terminal operators in the world, using integrated storage, shipping and logistics management to ensure customers receive a reliable and consistent supply of raw sugar.

We operate six terminals in Queensland with a combined storage capacity of 2.5 million tonnes of raw sugar. Each terminal is leased from Sugar Terminals Limited, with management, terminal operations and maintenance provided by QSL. QSL also arranges the shipping for the majority of export sales, chartering up to 100 bulk vessels each year. QSL staff control the loading processes at each port, ensuring priority access to port berths and avoiding costly shipping delays.

FUTURE FOCUSThroughout 2012/13 QSL will continue to focus on creating value for our:

�� Marketing customers by providing a reliable and consistent source of quality raw sugar at a competitive price

�� Grower and milling members by providing cost-effective access to:

– The highest returning raw sugar markets in the Asia-Pacific region

– Funding, pricing and logistics services

�� Employees by creating a safe, enjoyable and rewarding working environment where people can achieve their potential.

1Queensland Sugar Limited Annual Report 2011/12

CHAIRMAN’S REPORTMIKE CARROLL

QSL FINANCIAL PERFORMANCE AND POSITION2011/12 2010/11 2009/10 2008/09 2007/08

(AUD MILLIONS) (AUD MILLIONS) (AUD MILLIONS) (AUD MILLIONS) (AUD MILLIONS)

NET SURPLUS 0.7 2.3 6.3 1.8 (0.1)

ASSETS – Current 265.2 339.8 248.1 463.6 142.7

– Non-current 73.3 149.8 98.5 104.7 64.7

TOTAL ASSETS 338.5 489.6 346.6 568.3 207.4

LIABILITIES – Current 277.9 351.3 239.8 450.4 130.4

– Non-current 17.4 95.9 66.5 83.8 43.7

TOTAL LIABILITIES 295.3 447.2 306.3 534.2 174.1

NET ASSETS 43.2 42.4 40.3 34.1 33.3

QSL SUGAR POOL2011/12 2010/11 2009/10 2008/09 2007/08

Seasonal Pool Return (PER TONNE NET IPS) $518.16 $428.32* $508.77 $333.58 $275.80

Pool Volume (PER TONNE IPS) 2,338,382 2,287,525 3,018,194 3,027,620 3,297,428

Pool Sales Value (AUD BILLIONS) 1.3 1.4 1.7 1.2 1.1* Average Seasonal Pool return

2 Queensland Sugar Limited Annual Report 2011/12

On behalf of the QSL Board it is our pleasure to present this annual report to our members.QSL performed well during the 2011/2012 year with all the pools we manage achieving strong returns.

On the revenue side, our results were underpinned by strong customer relations in our Asian markets and effective pricing while operating within our relatively conservative risk limits.

On the expense side, this result was enhanced by:

�� Keeping a tight control on sales and marketing costs

�� Efficient operations at the terminals

�� Strong performance in our chartering activity

�� Offsetting our marketing costs with other activities such as buying and selling other origin sugar

�� Using the surplus terminal capacity for other income generating activities.

QSL continues to add value to growers by advancing funds on a prudent basis through the Advances Scheme. The funding for this scheme remains competitively priced with our S&P rating supporting our commercial paper program and our bankers keen to maintain their credit lines.

With an eye to the future, good progress has been made on maintaining the bulk sugar terminals. Our ability to accurately manage the weight and quality of the sugar we ship is an important competitive advantage.

We are also pleased to see the release of a longer term pricing product, which we hope will contribute to our members’ confidence in investing in their businesses and increasing Queensland’s sugar production.

We consider this year’s results a credit to the executive team at QSL given the amount of change they have had to work with.

There was significant change to the Supply Agreements and the structure of the Pools. These were completed and in

place before the start of the new season and pleasingly all milling group members recommitted to another year of supply under the agreements.

Another change was the appointment of a new Chief Executive Officer on 1 February 2012. Your Board appreciates the very positive feedback we have received on the appointment of Greg Beashel and what we have achieved in the short space of his leadership.

Greg, in turn, has worked hard to refresh the leadership team at QSL and change the organisational structure to improve our effectiveness. The Board is now comfortable with the depth of leadership at QSL and will keep challenging and stretching them to create greater value for our members.

The Board is very conscious that QSL exists purely to create value for our members and recognises that the company’s future very much depends on this.

As we put plans in place for next year’s Board activities we are scheduling a series of meetings with our members and other key industry stakeholders. It is important to us that you are clear on what we are doing, why we are doing it and how we think it will create value for you. We also appreciate your thoughts and ideas on what else we can do to create additional value.


CHIEF EXECUTIVE OFFICER’S REPORTGREG BEASHEL

INTRODUCTION

In business and life it is important to do what you say you are going to do. It sounds easy but it doesn’t always happen. I want to deal with reliable people and organisations who get things done and don’t surprise on the downside. That is the sort of company I want QSL to be.

At last year’s Annual General Meeting, I outlined our vision and goals for the year ahead in relation to the four key areas of our business; marketing, logistics, financing and pricing. I am pleased to report that this year our performance has surpassed expectations and we have met or exceeded the goals we set ourselves for the year:

�� An all time record Seasonal Pool return of $518/per tonne net IPS

�� A corporate surplus of $13.3M generated from our other origin sugar business, non sugar terminal income and our investment in Sugar Terminals Limited

�� Rolling over of a new Raw Sugar Supply Agreement incorporating changes from the 2010 season review to 30 June 2016

�� Successful implementation of our first multi year pool “QSL Forward Season Pool”.

Of course, these results would not have been achieved without a strong team that is aligned and committed to delivering results.

I want to acknowledge the contribution of our dedicated staff to the results we have achieved. Their efforts throughout the year have been inspiring, as well as effective and I thank all of them for this and the support they have shown me during my first year as CEO.

I would also like to acknowledge the support of our customers, suppliers and members. Our goal is to have a mutually beneficial relationship with our business partners who are so critical to the success of our company.

The remainder of this report contains an overview of QSL’s solid performance for the period and highlights our achievements.

In addition, it provides an update on our efforts:

�� In the communities where we operate

�� The worth of our people

�� The importance we place on safety

�� Respect for the environment.

0

200

100

300

400

500

600$/TONNE NET IPS

07/08 11/1208/09 09/10 10/11

QSL SEASONAL POOL RETURNS

JUL 07 JAN 08 JUL 08 JAN 09 JUL 09 JAN 10 JUL 10 JAN 11 JUL 11 JAN 12 JUL 12

AUD/USD1.1

1.0

0.9

0.8

0.7

0.6

0.5

AUD-USD EXCHANGE RATE

JUL 07 JAN 08 JUL 08 JAN 09 JUL 09 JAN 10 JUL 10 JAN 11 JUL 11 JAN 12 JUL 12

40363228242016128

US c/lb

RAW SUGAR ICE 11

* Average Seasonal Pool return

QSL MARKETING COSTS2011/12 2010/11 2009/10 2008/09 2007/08

(AUD MILLIONS) (AUD MILLIONS) (AUD MILLIONS) (AUD MILLIONS) (AUD MILLIONS)

QSL marketing charge $7.1 $6.9 $8.0 $8.2 $7.8

Payment to mill owners $1,207.1 $1,080.8 $1,518.4 $1,010.5 $887.8

Marketing charge % 0.6% 0.6% 0.5% 0.8% 0.9%

QSL PEOPLE AND COMMUNITYQUEENSLAND SUGAR LIMITED


vessel, at our Lucinda Terminal since Tropical Cyclone Yasi (3 February 2010) caused more than $50 million damage. The New Ambition received a cargo of 27,000 tonnes before setting sail for an American refinery, marking the successful conclusion to the major repair project that included work on the structural, mechanical, hydraulic and electrical systems of the facility’s jetty, conveyor system and ship loader.

OUR COMMUNITIESThe introduction of Industry Relationship Managers in February has improved communication between QSL, growers and millers and led to increased involvement in regional industry and sugar-community events. Corporate social responsibility efforts have included assistance via financial and in-kind support for many industry events throughout the year.

Support of industry and community groups also extends to QSL’s involvement at a range of regular industry gatherings, including CANEGROWERS and ACFA’s Branch and Board meetings, Mill information meetings, regional Productivity Awards nights, BSES and Productivity Board shed meetings and other grower and miller forums.

HEALTH, SAFETY AND THE ENVIRONMENTProviding a safe and healthy workforce is critical to QSL. QSL encourages the reporting and recording of safety hazards and incidents and is currently undertaking a whole of business review into safety attitudes, behaviours and performance in an effort to continually improve QSL’s safety culture and keep our team safe.

QSL is also committed to a high level of environmental performance. It is pleasing to report that no breaches of the company’s environmental licenses have occurred this year.

OUR PEOPLEQSL’s team of highly capable and committed employees continue to be the driving force behind the success of the business.

With a number of new team members joining the business this year QSL is focussed on creating a safe workplace with a culture that attracts, retains and engages talented individuals dedicated to delivering the best outcomes for our members.

Employing approximately 160 employees, QSL manages seven sites – six bulk sugar handling terminals located at Cairns, Mourilyan, Lucinda, Townsville, Mackay and Bundaberg and a corporate office located in Brisbane.

While our highly dedicated team at the terminals ensure that growers’ sugar is quality controlled, stored and then loaded into ships safely and efficiently, in the background the remainder of the QSL team focus on maximising returns for our members through activities such as risk management, pricing, financing and marketing.

In addition to our continued efforts managing and maintaining site assets on behalf of Sugar Terminals Limited, QSL recently celebrated a significant milestone with the successful loading of the first

QSL EXECUTIVE TEAMAS AT JULY 2012

MARGARET PASCOECOMPANY SECRETARY/LEGAL COUNSEL

Maggie joined QSL in June 2012, having spent a number of years working in the financial services industry as a lawyer and company secretary. Her most recent role was working as legal counsel for a large corporate super fund. Maggie’s breadth of experience covers investments, governance, commercial, trust law, compliance and risk matters.

Maggie is a Chartered Secretary, holds a Bachelor of Law from Monash University and Post Graduate qualifications in Governance from Chartered Secretaries Australia.

BRENT CASEYGENERAL MANAGER, SALES AND BUSINESS DEVELOPMENT

Brent joined QSL in December 2009. Prior to being appointed as General Manager Sales and Business Development, Brent was responsible for the Business Development function at QSL which involved executing the other origin strategy as well as looking at alternative income streams from the STL assets. Before joining QSL, Brent worked for BP internationally in the areas of business development, performance management and oil trading. Brent is responsible for the marketing of pool sugar, QSL’s chartering activities, and diversifying QSL’s earnings base outside of the Sugar Pool, including other-origin trading and supply chain services. Brent has a Bachelors Degree (Accounting and Finance) and a Masters Degree (Economics) from Lincoln University in New Zealand.

BELINDA WATTONGENERAL MANAGER, HUMAN RESOURCES AND COMMUNICATIONS

Belinda joined QSL in July 2012. Belinda has vast experience in providing commercial Human Resources solutions to public, private and not for profit organisations in varying industry sectors including electricity, transport and logistics, hospitality and finance.

Belinda’s breadth of experience includes developing and executing people strategies, organisational and leadership development, industrial relations and remuneration management.

Belinda has a Degree in Commerce and a Masters of Applied Law – Litigation and Dispute Resolution.

MATTHEW WEDMAIERCHIEF FINANCIAL OFFICER

Matt joined QSL in April 2010 as Chief Financial Officer and is responsible for the accounting, financial risk management, reporting and ICT functions of QSL.

He holds an MBA, is a Chartered Accountant and a Fellow of Financial Services Institute of Australasia. He has over 15 years of practical management and finance experience and has previously held roles at KPMG, Suncorp-Metway and the Bank of Queensland.

DAMIAN ZIEBARTHGENERAL MANAGER, OPERATIONS

Damian joined QSL in May 2012. He is an operations professional with over 25 years’ experience in the heavy manufacturing industry.

Prior to joining QSL, Damian worked as the Australian Operations Manager for Incitec Pivot Ltd, managing chemical manufacturing facilities, shipping and packaging facilities, anhydrous ammonia distribution assets and laboratory services.

He has extensive sugar industry experience, having spent 11 years in milling and refining operations domestically for Bundaberg Sugar and internationally with Tate & Lyle Sugars.

Damian has a Degree in Mechanical Engineering and a Masters of Engineering.

Left to right: Maggie Pascoe, Brent Casey, Belinda Watton, Matthew Wedmaier, Damian Ziebarth

Queensland Sugar Limited Annual Report 2011/12 5

QUEENSLAND SUGAR LIMITEDQSL is a public company limited by guarantee, incorporated under the Corporations Act 2001. The principal object of the company, without limiting its powers under the law, is to promote the development of the sugar industry.

The company has 30 members representing the Australian sugar industry. These members consist of:

�� seven mill owner members

�� twenty-three grower representative members, comprising:

– twenty-one elected holders, who are growers elected to represent the 21 sugar-growing regions in Queensland

– two representatives, one appointed by each of the organisations representing cane growers, Australian Cane Farmers Association Limited and Queensland Cane Growers Organisation Limited.

These members are able to exercise voting rights at meetings as outlined in QSL’s Constitution.

A copy of QSL’s Constitution is available at QSL’s website at www.qsl.com.au/about-qsl/corporate-structure/qsl-constitution

THE QSL BOARD OF DIRECTORSROLE OF THE BOARDQSL’s Board of Directors is responsible for establishing an effective corporate governance framework and providing strategic guidance for the company, while ensuring effective oversight of management with the objective of promoting the development of the sugar industry.

The Board has adopted a Board Charter to cover matters such as its role, induction of directors, Board proceedings, the working relationship between it and management, and directors’ declarations of interests.

The Board is responsible to QSL’s members for the strategic direction of QSL, for the monitoring of risk and governance, and for the overall performance of QSL. More specifically, the responsibilities of the Board include the following:

�� guiding the culture of the organisation

�� strategy, planning and policy development

�� oversight of QSL’s management

�� monitoring compliance and risk management

�� delegation of authority

�� health, safety and wellbeing of employees

�� stakeholder liaison and communication.

Monitoring review and oversight of risk management, in particular financial risk is a key function of the Board. Policies and procedures are in place to manage QSL’s strategic and operational risks. The Board ensures the overall risk management framework remains appropriate for QSL’s business at all times and regularly reviews individual policies.

Specific policies are also in place to govern the management of sugar price and foreign exchange risk. Speculative transactions are not permitted and hedging is only permitted within policy parameters.

As part of QSL’s commitment to managing exposure to significant business risk, the company also has policies and associated procedures covering areas such as:

�� customer and trade credit

�� liquidity risk management

�� credit risk - financial institutions

�� credit risk - suppliers

�� financial delegations and authorities

�� environmental management and compliance

�� corporate risk management

�� financial risk management

�� conflicts of interest management

�� freight risk management

�� trade practices law compliance

�� workplace health and safety

�� equal opportunity and anti-discrimination

�� media and disclosures policy

�� privacy.

COMPOSITION OF THE BOARDQSL’s Constitution provides for a Board consisting of up to a maximum of four Non-Executive Directors and a Managing Director. Three of the four current Non-Executive Directors were originally appointed to the Board in January 2009, and have been reappointed since then. Guy Cowan was appointed for a three year term and was reappointed in January 2012 for a further three year term, whilst Nicole Birrell and Mark Sage were initially appointed to one year terms and were reappointed by the Board Selection Committee for further three year terms commencing January 2010.

The terms for Nicole Birrell and Mark Sage expire on 31 December 2012. QSL’s Chairman Michael Carroll was appointed to the Board in January 2012 for a three year term.

APPOINTMENT OF DIRECTORSNon-Executive Directors are appointed to the QSL Board by QSL’s Board Selection Committee. The role and composition of the Board Selection Committee are set out in QSL’s Constitution. The Board Selection Committee comprises four members – two members elected for a three year term by mill owner members and two members elected for a three year term by grower representative members. Election for grower representative members was last completed in 2011.

Under the Constitution, in selecting Non-Executive Directors, the Board Selection Committee has regard to the mix of skills required for the Board to properly meet the company’s objects and carry out its Charter, including experience in the fields of corporate strategy, finance, audit and risk, human resources, employee safety, stakeholder and public relations and communications, and international trade and logistics. In assessing the suitability of candidates, the Board selection Committee also has regard to the independence of the candidate. In seeking to fulfill its role under the Constitution, the Board Selection Committee may engage the services of an external search firm. The Board Selection Committee has the flexibility, under the Constitution, to reappoint an existing Director.

REMUNERATION OF DIRECTORSThe QSL Constitution requires the aggregate fees per annum paid to Non-Executive Directors to be set by the company at a general meeting of members. The initial aggregate fees were agreed with the sugar industry representative bodies, based on remuneration previously determined by the Queensland Government for the Queensland Sugar Corporation, and were subsequently confirmed at the company’s 2001 annual general meeting.

CORPORATE GOVERNANCEQUEENSLAND SUGAR LIMITED


BOARD COMMITTEESTo assist it to carry out its functions, the Board has established three Board committees: the Audit and Risk Committee, the Remuneration and Nomination Committee, and the recently constituted Environment, Health and Safety Committee (July 2012).

Copies of QSL’s Board Committee Charters are available at QSL’s website at www.qsl.com.au/about-qsl/governance

AUDIT & RISK COMMITTEE The Audit & Risk Committee assists the Board to discharge its responsibilities via oversight of the risk management, control and compliance framework established by the Board and QSL management; and review of QSL’s risk management, finance and audit reporting. The Committee has authority from the Board to review and investigate any matter within the scope of its Charter and make recommendations to the Board in relation to any action.

The current members of the Audit & Risk Committee are Guy Cowan (Committee Chair) and Nicole Birrell. The Managing Director, the Chief Financial Officer, Company Secretary and representatives of the external and internal auditors attend meetings of this Committee by invitation.

Specific responsibilities include advising the Board on:

�� QSL’s risk management framework and risk management plan

�� the continuing appropriateness and effectiveness of QSL’s risk management policies

�� QSL’s insurance strategy

�� QSL’s compliance principles, policies, strategies, processes and controls

�� appointment and remuneration of QSL’s internal and external auditors

�� QSL’s internal audit plan and internal audit reports, and management response to findings

�� QSL’s external audit plan and external audit reports, and management response to findings

�� financial management reporting for the company.

REMUNERATION & NOMINATION COMMITTEEThe Remuneration & Nomination Committee assists the Board to discharge its responsibilities relating to the composition and performance of the Board and the remuneration of Directors, senior management and employees. The Committee has authority from the Board to review and investigate any matter within the scope of its Charter and make recommendations to the Board in relation to the outcomes.

The current members of the Remuneration & Nomination Committee are Mark Sage (Committee Chair) and Michael Carroll, with the Managing Director and Company Secretary invited to attend meetings as appropriate.

Matters dealt with by this Committee include:

�� recruitment and performance evaluation of the Managing Director and Chief Executive Officer

�� management succession planning

�� development of leadership development and performance systems

�� review of QSL’s human resources policies

�� establishment of an appropriate remuneration framework and development of policies linked to performance objectives

�� the composition, performance and remuneration of the QSL Board

�� the induction and professional development of Directors

ENVIRONMENT, HEALTH & SAFETY COMMITTEEIn July 2012 the Board approved the appointment of an Environment, Health & Safety Committee, to assist QSL fulfill its environment, health and safety obligations.

The Environment, Health & Safety Committee assists the Board to discharge its responsibilities relating to health, safety and environment issues that may affect employees, contractors and the broader community in which QSL operates. The Committee has authority from the Board to review and investigate any matter within the scope of its Charter and make recommendations to the Board in relation to the outcomes.

The current members of the Environment, Health & Safety Committee are Mark Sage (Committee Chair), Greg Beashel (CEO) and Damian Ziebarth (General Manager, Operations) with the Company Secretary invited to attend meetings as appropriate.

Matters dealt with by this Committee include:

�� providing advice and guidance to the Board to assist it to comply with its obligations in relation to environment, health and safety matters

�� reviewing the company’s environment, health and safety strategy

�� analysis of the company’s environment, health and safety performance

�� reviewing QSL’s organisational structure to ensure appropriate resources can be employed to eliminate or reduce QSL’s environment, health and safety risks

�� reviewing the design of QSL’s environment, health and safety management system

�� reviewing the environment, health and safety auditor’s findings in relation to environment, health and safety issues and recommending to the Board the annual environment, health and safety audit program.

Left to right: Guy Cowan, Maggie Pascoe, Mike Carroll, Nicole Birrell, Mark Sage, Greg Beashel


BOARD EVALUATIONWith the change in Chairman the Board is reviewing its processes for evaluating the performance of individual Directors, Board Committees and the Board as a whole.

BUSINESS CONDUCTThe Board has adopted a Code of Ethics requiring Directors, management, employees, agents, contractors and brokers to act with integrity and objectivity, and maintain high standards and ethical behaviour in the execution of their duties.

Under the Code, all those associated with QSL must act in accordance with the fundamental principles of integrity, objectivity, confidentiality, ethical behaviour, professional standards and consultation.

The Board has also adopted a Code of Conduct for Directors and employees which cover such matters as conflicts of interest, confidentiality, company property, gifts and entertainment.

INDEPENDENT ADVICEQSL recognises that there may be occasions when the Board as a whole, or Directors as individuals, believes it to be in their interests and in the interests of the company to seek independent professional advice on matters such as accounting, taxation or law, at the company’s expense.

Requests for the provision of such advice are directed to the Chairman or in the case of the Chairman seeking advice, to the Chair of the Audit and Risk Committee. Any advice obtained is shared with the full QSL Board.

EVALUATION OF PERFORMANCE OF THE EXECUTIVE TEAMThe CEO is responsible for the performance of each member of the Executive Team and their succession. All members of the Executive Team have written position descriptions, employment contracts and annual Key Performance Indicators (‘KPIs’) to assess performance each year. The Executive Team meets regularly to review business performance and strategic issues, and to build alignment across the business.

The CEO reviews the performance of the Executive Team individually and collectively against their agreed KPIs. The Board and its Committees also monitor the performance of the Executives through regular reporting and face to face meetings.

The Remuneration and Nomination Committee and the Board formally review the performance of the CEO each year against agreed KPIs.

Performance reviews of the CEO and the members of the Executive Team were conducted for the year ended 30 June 2012.

CORPORATE RISK MANAGEMENT POLICYQSL has adopted a Corporate Risk Management Policy, which is based on the standard for risk management:-AS/NZ ISO 31000:2009/Risk Management. The Policy provides an effective framework for the management of risk and serves as an effective tool for management decision making. It is designed to provide a formal, systematic and recognised framework for the identification and mitigation of risks.

DIVERSITYQSL is committed to developing a workplace culture that is diverse, inclusive and representative of the communities within which it operates.

QSL has policies and practices in place which promote the principles of diversity. QSL is also compliant with the Equal Opportunity for Women in the Workplace Act 1999 as determined by the Equal Opportunity for Women in the Workplace Agency.

For the year ended 30 June 2012, the proportion of women employed in permanent roles across QSL was:

Board 20%

Executive 25%

Other Workforce 16%

Overall Workforce 17%

MANAGEMENT ASSURANCE TO DIRECTORSThe CEO and CFO have provided the following declaration to the Board in relation to the production of QSL’s full year financial statements and reports, as required by Section 295A of the Corporations Act 2001, namely in their opinion to the best of their knowledge and belief:

�� The financial records of QSL for the year ended 30 June 2012, have been properly maintained in accordance with Section 286 of the Corporations Act 2001;

�� QSL’s financial statements and notes to those statements for the year ended 30 June 2012, comply with the relevant accounting standards;

�� QSL’s financial statements and notes to those statements for the year ended 30 June 2012, give a true and fair view of the financial position and performance of the company;

�� The statements referred to above are founded on a system of risk management and internal compliance and control which implements the policies adopted by the Board; and

�� QSL’s risk management and compliance and control system is operating effectively in all material respects in relation to financial reporting risks.

Supporting this declaration are certifications of assurance provided by relevant management including finance managers within QSL. These certifications comprise representations and responses to questions concerning QSL’s financial results, disclosure processes and controls and other matters in relation to QSL’s external reporting obligations.

The effective control environment established by the Board supports this declaration provided by the CEO and the CFO. Further this declaration provides a reasonable, but not absolute, level of assurance of QSL’s risk management, internal compliance and control systems, but does not imply a guarantee against any adverse events or more volatile conditions and outcome that may occur in the future.

CORPORATE GOVERNANCE CONTINUEDQUEENSLAND SUGAR LIMITED



STATUTORY FINANCIAL REPORT

CONTENTSDirectors’ Report 10

Auditor’s Independence Declaration 14

Consolidated Statement of Comprehensive Income 15

Consolidated Statement of Financial Position 16

Consolidated Statement of Changes in Equity 17

Consolidated Statement of Cash Flows 18

Notes to the Financial Statements 19

Independent Auditor’s Report 42


DIRECTORS’ REPORTFOR THE YEAR ENDED 30 JUNE 2012 QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES

The Directors of Queensland Sugar Limited (‘QSL’ or ‘Parent Entity’) present their report on QSL and its Controlled Entities (‘Consolidated Entity’) for the year ended 30 June 2012 and the auditor’s report thereon.

DIRECTORS

The names and details of QSL’s Directors in office during the financial year and until the date of this report are as follows. Directors were in office for the entire period unless otherwise stated.

MICHAEL CARROLL BAGSC, MBA, FAICD

CHAIRMAN OF THE BOARD AND MEMBER OF THE REMUNERATION & NOMINATION COMMITTEE – APPOINTED WITH EFFECT FROM 1 JANUARY 2012

Mike joined QSL as its Chairman on 1 January 2012. He has more than 25 years’ experience in food and agribusiness in executive and non-executive roles, with other current directorships including Meat and Livestock Australia Ltd, Warrnambool Cheese & Butter Factory Holdings Ltd, Select Harvests Ltd, Sunny Queen Pty Ltd and Rural Finance Corporation of Victoria.

During his executive career, Mike established and led the agribusiness division of the National Australia Bank, following senior management roles in marketing, investment banking and corporate advisory services. Prior to this he worked for a number of companies in agricultural research and product development. His family has been involved in agriculture for over 130 years and he has a strong personal commitment to Australian agriculture.

Mike holds a Bachelor of Agricultural Science from La Trobe University and a Master of Business Administration from the University of Melbourne’s Melbourne Business School. He has also completed the Advanced Management Program at Harvard Business School, Boston.

NICOLE BIRRELL MSC, FAICD

DIRECTOR AND MEMBER OF THE AUDIT & RISK COMMITTEE

Nicole has over 25 years’ experience in wholesale and investment banking in Australia and the UK and board involvement across the finance, agriculture and information technology sectors. She has particular expertise in strategic and operational risk management, financial markets and regulatory compliance.

Nicole is currently a Director of SMS Management & Technology Ltd and Superpartners Pty Ltd and a Member of Wheat Exports Australia. Nicole was formerly a Director of Grains Research and Development Corporation and of AusBulk Ltd.

In each of these organisations, Nicole is or was also the Chair or a member of the Board committee responsible for carrying out audit, compliance and risk oversight.

Nicole holds a Bachelor of Applied Economics from the University of Antwerp (Belgium) and a Master of Science (International Relations) from London School of Economics & Political Science.

GUY COWAN BSC (HONS), FCA (UK), MAICD

DIRECTOR AND CHAIRMAN OF THE AUDIT & RISK COMMITTEE

Guy has had nine years’ experience as a chartered accountant with Price Waterhouse (now PricewaterhouseCoopers) and KPMG, in addition to 23 years’ international experience in commercial and finance roles in the oil and gas industry.

Prior to February 2005 he was Chief Financial Officer of Shell Oil in the USA, and from February 2005 until February 2009, Guy was CFO of Fonterra Co-operative Group Limited, the New Zealand-based world leading exporter of dairy products that accounts for more than one third of the international dairy trade.

In addition to his role on the QSL Board, Guy holds directorships with UGL (formerly United Group Limited), Coffey International Limited and Beak and Johnston Pty Ltd.

MARK SAGE BCOM (HONS), GAICD

DIRECTOR AND CHAIRMAN OF THE REMUNERATION & NOMINATION COMMITTEE

Mark has over 25 years’ management experience in a public company environment. Mark has particular expertise in international business development, with extensive experience in retail and commodity markets in the Asian, Middle East and Pacific regions and brings to the QSL Board broad expertise in export marketing, logistics, human resources and commodity markets trading.

Mark’s executive roles included: Managing Director International, Goodman Fielder Group; Human Resources Director, Goodman Fielder Limited; and Export Manager Building Materials, CSR Limited.

Mark has a strong background in change management and has experience in leading change in large organisations including acquisitions and divestments in Australia, New Zealand and the Asia Pacific region, business integration and major internal change programs driving productivity and capability improvement.

Mark holds Australian Institute of Company Directors qualifications, and in addition to his role on the QSL Board, holds non-executive directorships with Paradise Foods Ltd, the Emerald Agribusiness Group Pty Ltd and is Chairman of Philp Brodie Grains.

GREG BEASHEL BE CHEM (HONS), MBA, MAICD

MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER – APPOINTED ON 1 FEBRUARY 2012

Greg joined QSL in June 2000. Prior to being appointed as Managing Director and Chief Executive Officer on 1 February 2012, Greg was responsible for operations including port terminal management, capital and maintenance management, shipping operations, chartering and trade finance.

Before joining QSL, Greg spent seven years with CSR in a range of roles including operations, sugar marketing, hedging and trading. He has extensive experience in sugar refining and a strong understanding of customer perspectives and requirements. Greg is a graduate of the AGSM MBA Executive program and has a Bachelor of Chemical Engineering (Hons) from the University of New South Wales.


ALAN WINNEY MBA, AMP (WHARTON), MAICD

CHAIRMAN OF THE BOARD AND MEMBER OF THE REMUNERATION & NOMINATION COMMITTEE – RESIGNED ON 31 DECEMBER 2011

Alan joined QSL as its Chairman on 1 January 2009 and retired from the Board on 31 December 2011.

NEIL TAYLOR AMP (WHARTON), BA (HONS)

MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER – RESIGNED ON 25 OCTOBER 2011

Neil joined QSL as its Managing Director and Chief Executive Officer on 3 August 2009 and resigned on 25 October 2011.

DIRECTORS’ MEETINGS

The number of meetings of QSL’s Directors (including meetings of Committees of Directors) and the number of meetings attended by each Director during the financial year were:

BOARD OF DIRECTORS AUDIT & RISK COMMITTEE REMUNERATION & NOMINATION COMMITTEE

HELD 1 ATTENDED HELD 1 ATTENDED HELD 1 ATTENDED

Michael Carroll 2 8 8 - - 3 3

Guy Cowan 14 14 9 9 - -

Nicole Birrell 14 14 9 9 - -

Mark Sage 14 13 - - 4 4

Greg Beashel 3 7 7 - - - -

Alan Winney 4 6 6 - - 1 1

Neil Taylor 5 4 4 - - - -

1 Represents the number of meetings held during the time the Director held office during the year.2 Michael Carroll was appointed to the Board as Chairman effective 1 January 2012.3 Greg Beashel was appointed Director effective 1 February 2012.4 Alan Winney resigned as Chairman effective 31 December 2011.5 Neil Taylor resigned as a Director effective 25 October 2011.

COMPANY SECRETARY

MARGARET PASCOE BA, LLB, GRAD DIP APP FIN & INV, GRAD DIP APP CORP GOV

LEGAL COUNSEL AND COMPANY SECRETARY – APPOINTED ON 4 JUNE 2012

Maggie joined QSL in June 2012, having spent a number of years working in the financial services industry as a lawyer and company secretary. Her most recent role was working as legal counsel for a large corporate super fund. Maggie’s breadth of experience covers investments, governance, commercial, trust law, compliance and risk matters.

SAMANTHA KYLE-LITTLE MSC, MPA, BA

GENERAL MANAGER CORPORATE SERVICES AND COMPANY SECRETARY – RESIGNED ON 4 JUNE 2012

Samantha was appointed as Company Secretary on 5 October 2009 and ceased working with QSL on 4 June 2012.


PRINCIPAL OPERATIONS

The principal operations of the Consolidated Entity are the marketing of raw sugar, the management of financial risk in connection with such marketing, and ancillary services in transport and logistics.

SIGNIFICANT CHANGES

There were no significant changes in the state of affairs or in the nature of QSL’s or its Controlled Entity’s principal operations during the year.

REVIEW OF OPERATIONS AND RESULTS

A review of the Consolidated Entity’s operations and results for the year ended 30 June 2012 is set out below:

MARKETING ACTIVITIES

The 2012 financial year saw QSL provide marketing services to eight Queensland milling companies (‘Suppliers’) (2011: eight) under Raw Sugar Supply Agreements (‘RSSAs’) and subsequently sell 2.3 million tonnes of Australian raw sugar (2011: 2.2 million tonnes). The 2012 financial year production continued to be affected by the adverse weather events experienced in the 2011 financial year and export tonnage remained lower than average.

The recent consolidation of the sugar industry continued during the year with Sucrogen Limited acquiring the milling assets of Proserpine Co-Operative Sugar Milling Association and Mackay Sugar Limited acquiring the assets of Mossman Central Mill Company Limited. Due to these acquisitions, QSL will market raw sugar on behalf of six milling companies in the 2012 season.

All Suppliers rolled over their RSSAs during the financial year and QSL will market sugar on their behalf until at least the end of the 2016 financial year with the exception of MSF Sugar Limited (‘MSF’). MSF gave notice of termination under its RSSA in the prior year and QSL will cease marketing raw sugar on its behalf from the 2015 financial year.

REVENUES

QSL recorded sales revenue from Australian raw sugar for the 2012 financial year of $1,312.5 million, a decrease of $56.4 million (4%) from the previous year as lower average prices offset the increase in export tonnage. Despite the overall drop in sales revenue, QSL recorded the highest ever price for the QSL Seasonal Pool of A$518.16 per tonne IPS (International Pol Scale) net of the allocation from the QSL Shared Pool. Consistent with prior years, QSL continues to be focused on marketing raw sugar to Asian markets.

Other origin sugar sales and purchases continued during the 2012 financial year with QSL selling and purchasing 506,000 tonnes of non-Australian raw sugar (2011: 548,000 tonnes) primarily from Thailand and Brazil in order for QSL to meet customer demand and maintain its marketing presence in a growing Asian market. QSL will continue to buy and sell other origin sugar in the 2013 financial year.

EXPENSES

Payments to Suppliers for the year ended 30 June 2012 were $1,207.1 million, an increase of $126.4 million from the prior year. The prior year payments to Suppliers were adversely affected by 2010 season delivery shortfall costs of $105.5 million. These delivery shortfall costs were due to a severe La Niña weather event that resulted in a large amount of sugar cane remaining unharvested. These severe in-season weather conditions resulted in QSL incurring net costs in relation to unwinding futures and foreign currency positions as well as the physical costs of substituting non-Australian sugar in order to meet existing Australian sugar sales commitments. The current year was not affected by similar weather events.

Freight and brokerage costs are down by $22.9 million this year compared to the prior year due to a downturn in the world shipping market. Operating lease rental costs of $43.7 million reflected a $0.6 million increase due to an increased lease fee payable to the owners of the bulk sugar terminals, Sugar Terminals Limited (‘STL’). Borrowing costs decreased by $1.6 million to $17.8 million from the prior year, reflecting the lower short-term interest rate environment.

NET SURPLUS

The non-pooling activities deliver the net surplus for the group in a financial year. Non-pooling activities produced an operating result of $13.3 million before any corporate charges, an increase of $1.5 million from the prior year result of $11.8 million.

The amount of non-Australian raw sugar sold and purchased during the year increased to 506,000 tonnes (2011: 280,000 tonnes) and this increase in tonnage resulted in a contribution of $10.2 million for the year, an increase of $4.6 million from the prior period result of $5.6 million. Other activities also recorded an increase from the prior year with a contribution of $1.4 million as opposed to a shortfall in the prior period of $0.9 million.

Offsetting these results was a decrease in the return from equity investments of $5.3 million from the prior year. The prior year included the gains from the one-off disposal of QSL’s shares in Tully Sugar Limited and there were no similar transactions in the current financial year.

Higher financing charges of $12.6 million (2011: $9.5 million) were levied by the Pools due to increased non-pooling activities (2012: 506,000 tonnes, 2011: 280,000 tonnes).

The resulting net surplus for the year was $0.7 million, $1.6 million lower than the prior period result of $2.3 million. QSL will continue to use the proceeds of future non-pooling activities to promote and develop the Queensland sugar industry, as required by its constitution.

BANKING AND FINANCE

There have been no changes to the $500 million syndicated standby credit facility during the year. This standby credit facility and the commercial paper program continued to be used to fund the advances program and manage pricing on behalf of RSSA participants. The syndicated credit facility expires at 30 June 2013.

During the year QSL maintained its strong credit rating with Standard & Poor’s of A1 (short-term) and A (long-term).

DIRECTORS’ REPORT CONTINUED

FOR THE YEAR ENDED 30 JUNE 2012 QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES


EVENTS AFTER REPORTING DATE

Other than the items reported in Note 21 of the annual report, no matter or circumstance has arisen since the end of the reporting period that has significantly affected or may significantly affect:

�� the Consolidated Entity’s operations in future financial years;

�� the result of those operations in future financial years; or

�� the Consolidated Entity’s state of affairs in future financial years.

LIKELY DEVELOPMENTS

The Consolidated Entity will continue to provide marketing of raw sugar, the management of financial risk in connection with such marketing and ancillary services in transport and logistics.

ENVIRONMENTAL REGULATION

The Consolidated Entity’s operations are subject to significant environmental regulation under Commonwealth and Queensland law, particularly with regard to air, noise, water, waste management and site contamination at its bulk sugar terminal operations.

The Consolidated Entity has established procedures to monitor and manage compliance with existing environmental regulations and new regulations as they come into force.

Directors are not aware of any significant breaches of environmental regulation during the reporting period.

INDEMNITIES AND INSURANCE

The Constitution of QSL provides that the company, to the extent permitted by law, must indemnify each person who is, or has been, a Director or Secretary of the company against any liability (resulting directly or indirectly from facts or circumstances relating to the person serving in that capacity in relation to the company):

�� to any person (other than the company) which does not arise out of conduct involving the lack of good faith or conduct known to the person to be wrongful;

�� for costs and expenses incurred by the person in defending proceedings, whether civil or criminal, in which judgement is given in favour of the person or in which the person is acquitted, or in connection with any application in relation to such proceedings in which the court grants relief to the person under the Corporations Act 2001.

The Constitution of the company also provides that the Board of Directors may authorise the company to, and the company may, enter into any insurance policy for the benefit of any person who is, or has been, a Director, Secretary, auditor, employee or other officer of the company. The obligation of the company to indemnify persons as set out in the preceding paragraph is reduced to the extent that a person is entitled to an indemnity in respect of that liability under a contract of insurance. The company has paid, or has agreed to pay, premiums in respect of contracts insuring against liability, persons who are or have been officers of the company, namely, any past, present or future Director or Officer of the company. The contracts prohibit disclosure of the extent of the cover and amounts of the premium.

AUDITOR INDEPENDENCE

The auditor’s independence declaration is set out on page 14 and forms part of the Directors’ Report for the year ended 30 June 2012.

ROUNDING OF AMOUNTS

Unless otherwise shown in the financial report, amounts have been rounded to the nearest $1,000 (where rounding is applicable and where noted ($’000)) under the option available to the Controlled Entity under ASIC CO 98/0100. QSL is a company to which the Class Order applies.

The Directors’ Report is signed for and on behalf of the Directors in accordance with a resolution of the Board of Directors of QSL.

Michael Carroll Chairman

17 September 2012


AUDITOR’S INDEPENDENCE DECLARATION FOR THE YEAR ENDED 30 JUNE 2012 QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES


NOTE 2012 2011$’000 $’000

REVENUES FROM CONTINUING OPERATIONSSales of Australian raw sugar 1,312,521 1,368,920

Sales of non-Australian raw sugar 3 342,196 354,462

Net foreign currency exchange gain/(loss) 14,092 (43,404)

Interest income 640 566

Dividend income 3 1,689 1,463

Gain on disposal of equity investments 3 – 5,569

Other revenues 1,404 1,502

1,672,542 1,689,078

EXPENSES FROM CONTINUING OPERATIONSPayments to Suppliers for Australian raw sugar 1,207,129 1,080,756

Purchases of non-Australian raw sugar 3 320,518 334,067

Freight and brokerage 4 51,207 74,073

Operating lease rental 4 43,720 43,136

Salaries and employee benefits 18,269 17,209

Borrowing costs 4 17,822 19,457

Depreciation 4 1,755 1,334

2010 season delivery shortfall costs 5 – 105,544

Research funding to the sugar industry 3 50 925

Other expenses 6 11,421 10,306

1,671,891 1,686,807

NET SURPLUS ATTRIBUTABLE TO MEMBERS OF QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES 651 2,271

OTHER COMPREHENSIVE INCOME FOR THE YEARNet gain/(loss) on available-for-sale financial assets 96 (186)

TOTAL COMPREHENSIVE INCOME FOR THE YEAR 747 2,085

The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED 30 JUNE 2012 QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES


NOTE 2012 2011$’000 $’000

ASSETS

CURRENT ASSETSCash and cash equivalents 16(b) 11,188 503

Trade and other receivables 7 132,616 126,909

Inventories 8 73,418 69,754

Other assets 9 48,025 142,662

TOTAL CURRENT ASSETS 265,247 339,828

NON-CURRENT ASSETSAvailable-for-sale financial assets 10 21,638 19,623

Other receivables 11 14,124 24,684

Property, plant and equipment 12 11,464 11,962

Other assets 9 26,062 93,503

TOTAL NON-CURRENT ASSETS 73,288 149,772

TOTAL ASSETS 338,535 489,600

LIABILITIES

CURRENT LIABILITIESTrade and other payables 13 136,074 209,077

Interest bearing liabilities 14 139,161 140,304

Provisions 15 2,668 1,913

TOTAL CURRENT LIABILITIES 277,903 351,294

NON-CURRENT LIABILITIESTrade and other payables 13 15,655 93,602

Provisions 15 1,781 2,255

TOTAL NON-CURRENT LIABILITIES 17,436 95,857

TOTAL LIABILITIES 295,339 447,151

NET ASSETS 43,196 42,449

EQUITYReserves 24,235 24,139

Retained surpluses 18,961 18,310

TOTAL EQUITY 43,196 42,449

The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.

CONSOLIDATED STATEMENT OF FINANCIAL POSITIONFOR THE YEAR ENDED 30 JUNE 2012 QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES


CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 30 JUNE 2012 QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES

RETAINED EARNINGS

RESERVES TOTAL EQUITY

Capital Available-for-sale$’000 $’000 $’000 $’000

BALANCE AT 1 JULY 2010 16,039 23,242 1,083 40,364

Net surplus for the year 2,271 – – 2,271

Other comprehensive income – – (186) (186)

Total comprehensive income for the year 2,271 – (186) 2,085

BALANCE AT 30 JUNE 2011 18,310 23,242 897 42,449

BALANCE AT 1 JULY 2011 18,310 23,242 897 42,449

Net surplus for the year 651 – – 651

Other comprehensive income – – 96 96

Total comprehensive income for the year 651 – 96 747

BALANCE AT 30 JUNE 2012 18,961 23,242 993 43,196

The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.


CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 30 JUNE 2012 QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES

NOTE 2012 2011$’000 $’000

CASH FLOWS FROM OPERATING ACTIVITIES

Receipts from customers (inclusive of GST) 1,659,819 1,656,657

Payments to Suppliers for Australian raw sugar (inclusive of GST) (1,304,117) (1,272,953)

Payments to third party sugar suppliers for non-Australian raw sugar (inclusive of GST) (320,518) (334,043)

Payments to suppliers and employees (inclusive of GST) (140,927) (214,554)

Payments for 2010 season delivery shortfall – (105,544)

GST recovered 135,151 133,598

Interest and other costs of finance paid (17,822) (19,457)

Interest received 604 566

Other receipts/(payments) (34,979) 82,267

NET CASH FLOWS (USED IN) OPERATING ACTIVITIES 16(a) (22,789) (73,463)

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of available-for-sale financial assets (1,919) (15,170)

Proceeds from sale of Tully Sugar Limited shares 26,440 –

Purchase of property, plant and equipment (1,839) (3,153)

Proceeds from sale of property, plant and equipment 1,415 185

Dividends received 1,689 1,463

NET CASH FLOWS FROM/(USED IN) INVESTING ACTIVITIES 25,786 (16,675)

CASH FLOWS FROM FINANCING ACTIVITIES

Set-off loans repayments/(advanced) to Suppliers 10,632 (37,008)

Other loans advanced to Suppliers (904) –

NET CASH FLOWS FROM/(USED IN) FINANCING ACTIVITIES 9,728 (37,008)

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 12,725 (127,146)

Cash and cash equivalents at beginning of the year (139,801) (12,171)

Effects of exchange rate changes on the cash and cash equivalents (897) (484)

CASH AND CASH EQUIVALENTS AT END OF YEAR 16(b) (127,973) (139,801)

The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.


NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2012 QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES

1 CORPORATE INFORMATION

The financial report of QSL and its Controlled Entities for the year ended 30 June 2012 was authorised for issue in accordance with a resolution of the Directors on 17 September 2012.

QSL is a company limited by guarantee incorporated in Australia. The Consolidated Entity’s principal activity is the sale of raw sugar for export. The operations of the Parent Entity include the management of the six Bulk Sugar Terminals located in Queensland as well as the marketing of raw sugar for export to an existing and mature customer base.

QSL’s Controlled Entities comprise of QSL Investments (No1) Pty Ltd and QSL Investments (No2) Pty Ltd. On 20 March 2012, the Board passed a resolution to wind up Transu Limited due to its inactivity, reporting requirements and tax obligations.

The registered office of QSL is located at Level 14, 348 Edward Street, Brisbane, Queensland.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(A) BASIS OF ACCOUNTING

The financial report is a general purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board. The financial report has also been prepared under the historical cost convention, except for inventory, derivative financial instruments and available-for-sale investments, which have been measured at fair value. The carrying values of recognised assets and liabilities that are hedged items in fair value hedges, and are otherwise carried at cost, are adjusted to record changes in the fair values attributable to the risks that are being hedged.

The financial report includes consolidated financial statements of QSL and its Controlled Entities with supplementary information about the Parent Entity included in Note 25 to the financial statements.

The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($000) unless otherwise stated.

(B) PRINCIPLES OF CONSOLIDATION

The consolidated financial statements comprise the financial statements of QSL and its Controlled Entities. Under the Corporations Amendment (Corporate Reporting Reform) Act 2010 supplementary information about the Parent Entity is included in Note 25 to the financial statements.

The financial statements of the Controlled Entities are prepared for the same reporting period as the Parent Entity, using consistent accounting policies. In preparing the consolidated financial statements, all intercompany balances and transactions, income and expenses and surplus and losses resulting from intra-group transactions have been eliminated in full.

(C) STATEMENT OF COMPLIANCE

The financial report complies with Australian Accounting Standards as issued by the Australian Accounting Standards Board and International Financial Reporting Standards (‘IFRS’) as issued by the International Accounting Standards Board.

The Consolidated Entity prepares one set of consolidated financial statements and provides supplementary information about the Parent Entity, QSL in Note 25 of the financial statements.

Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective and have not been adopted by the Consolidated Entity for the annual reporting period ended 30 June 2012 are outlined below:

�� AASB 9 Financial Instruments

�� AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB9

�� AASB 124 Related Party Disclosures (revised)

�� AASB 2009-12 Amendments to Australian Accounting Standards

�� AASB 1048 Interpretation of Standards

�� AASB 1053 Applications of Tiers of Australian Accounting Standards

�� AASB 1054 Australian Additional Disclosures

�� AASB 2012-2 Amendments to Australian Accounting Standards arising from reduced disclosure requirements

�� AASB 2010-4 Further Amendments to Australian Accounting Standards arising from Annual Improvements

�� AASB 2010-5 Amendments to Australian Accounting Standards

�� AASB 2010-6 Amendments to Australian Accounting Standards – Disclosures on Transfers of Financial Assets

�� AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9

�� AASB 2011-1 Amendments to Australian Accounting Standards arising from the Trans-Tasman Convergence project

�� AASB 2011-2 Amendments to Australian Accounting Standards arising from the Trans-Tasman Convergence project – reduced disclosure regime

�� AASB 2011-5 Amendments to Australian Accounting Standards – Extending Relief from Consolidation, the Equity Method and Proportionate Consolidation

�� AASB 2011-9 Amendments to Australian Accounting Standards – Presentation of Other Comprehensive Income

�� AASB 10 Consolidated Financial Statements

�� AASB 13 Fair Value Measurement

�� AASB 119 Employee Benefits

�� AASB 2012-3 Amendments to Australian Accounting Standards – Offsetting Financial Assets and Liabilities

The Consolidated Entity is currently considering the impact of these new and amended standards and interpretations.


NOTES TO THE FINANCIAL STATEMENTS CONTINUED


2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED

(D) REVENUE RECOGNITION

(i) Sales of raw sugar

Sales to customers are made on commercial terms with settlement generally on a cash against documents or letter of credit basis, predominantly in United States (‘US’) dollars. Sales are recognised when the bill of lading is signed by the ship’s master and it is probable that the economic benefits will flow to the Consolidated Entity and can be reliably measured. Sales revenue also includes transactions relating to foreign exchange, sugar futures and options operations and is net of rebates, discounts and allowances.

(ii) Dividend Income

Revenue is recognised when the Consolidated Entity’s right to receive the payment is established.

(iii) Interest Income

Interest income is recorded using the effective interest rate method.

(E) FUTURES AND OPTIONS MARKET HEDGING

Transactions in sugar futures and options are carried out as part of the range of pricing mechanisms for physical sales of sugar. The results of such transactions are linked with the appropriate sugar sales contracts and are thus included in sales revenue. At reporting date, those relating to future years are accounted for as derivatives (refer Note 2(g)).

(F) FOREIGN CURRENCY TRANSLATION

The US dollar is the principal currency in which sugar is traded. The financial statements are presented in Australian dollars, which is the Consolidated Entity’s functional and presentation currency.

Transactions denominated in foreign currencies are initially recorded in the functional currency at the exchange rates prevailing at the date of the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of foreign currency denominated monetary assets and liabilities using rates applicable at reporting date are recognised in the Consolidated Statement of Comprehensive Income.

Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the reporting date.

(G) DERIVATIVES

Derivative instruments are used by the Parent Entity to manage commodity and foreign currency exposures connected with the sale of each season’s Australian raw sugar production and purchases and sales of non-Australian third party sugar. The Parent Entity does not trade in derivatives. In accordance with the Parent Entity’s Financial Risk Management Policy, derivatives are entered into to manage defined sugar price and currency exposures. These exposures relate to known or anticipated sales of raw sugar. Derivatives are stated at fair value with any gains or losses arising from changes in fair value taken directly to the Consolidated Statement of Comprehensive Income.

Forward foreign currency and sugar swap contract terms do not exceed five years. Sugar futures and option contracts are entered into with terms no greater than three years. Details of open contracts at reporting date are provided in Note 26.

Amounts receivable or payable at reporting date under sugar futures and options and foreign currency transactions relating to future pools’ production are recognised as amounts owing to or amounts owing from future pools, and are included in the Statement of Financial Position on a net basis with gains or losses arising from changes in the value of amounts owing to or amounts owing from future pools taken directly to the Consolidated Statement of Comprehensive Income (refer to Notes 9 and 13).

(H) CASH AND CASH EQUIVALENTS

For the purposes of the Consolidated Statement of Cash Flows, cash includes cash on hand and at bank, money market positions, securities and funding swaps connected with the pooling and sale of raw sugar, net of interest bearing liabilities.

Cash and cash equivalents are stated at the lower of cost and net realisable value.

(I) TRADE AND OTHER RECEIVABLES

(i) Trade Receivables

Trade receivables, which are generally settled against documents when each vessel is loaded, are recognised and carried at original invoice amount less an allowance for any uncollectible amounts.

(ii) Amounts Owing from Suppliers

Following the adverse weather events experienced in the 2011 financial year, the Consolidated Entity has made available three year set-off loans to all Suppliers (‘Set-Off loans’). As at 30 June 2012, these amounts are classified as current and non-current receivables according to the expected repayment schedule of these loans (refer to Notes 7 and 11).

An allowance for doubtful debts is made when there is objective evidence that the Consolidated Entity will not be able to collect the debts. Bad debts are written off as incurred.

(J) INVENTORIES

Materials and general store items used for maintenance at bulk sugar terminals are expensed in the year in which they are incurred.

Raw sugar stock on hand at reporting date has been valued at the lower of cost and net realisable value. The cost of stock on hand in respect of each season’s production has been determined as the respective weighted average of pool prices payable to Suppliers as calculated in accordance with RSSAs.

In respect of the following season’s stock on hand, where the final pool price has not been established, the cost has been determined on the basis of the weighted average of forecast pool prices at reporting date. Where sales of the following season’s production are made prior to reporting date, those stocks are valued on the basis of the net proceeds expected to be received from those shipments.



(J) INVENTORIES CONTINUED

Raw sugar on hand comprises stock on hand at bulk sugar terminals at reporting date. Sugar stocks are recognised when sugar is received and property to the sugar passes to the Consolidated Entity. In relation to the determination of pool prices each season, any raw sugar on hand at reporting date is valued as follows:

(i) sugar priced – valued at the lower of cost and net realisable value and converted to Australian dollars at the exchange rate ruling at reporting date; and

(ii) sugar unpriced – valued at reporting date on the basis of the Intercontinental Exchange (‘ICE’) No 11 or No 16 futures settlement price for the quoted positions or market day average prices in respect to specific contracts of sale and converted to Australian dollars at the exchange rate ruling at reporting date.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

(K) CURRENT ASSETS

Current assets comprise cash at bank and on hand, term deposits, debtors, other receivables relating to the Set-Off loans, prepayments, raw sugar stock on hand, amounts owing from future pools, unrealised gains on foreign currency transactions and unrealised gains on sugar futures and options contracts.

(L) PROPERTY, PLANT AND EQUIPMENT

Plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses. Such costs include the costs of replacing parts that are eligible for capitalisation when the cost of replacing the part is incurred.

(i) Depreciation

Depreciation is provided on a straight-line basis on all property, plant and equipment, other than freehold and leasehold land, over the estimated useful life of the assets as follows:

ASSET CLASS 2012 2011

Freehold buildings 50 years 50 years

Leasehold improvements lease term lease term

Plant and equipment 4 to 25 years 4 to 25 years

The assets’ residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each reporting date.

(ii) Impairment

The carrying values of plant and equipment are reviewed for impairment at each reporting date, with the recoverable amount being estimated when events or changes in circumstances indicate that the carrying value may be impaired.

The recoverable amount of plant and equipment is the higher of fair value less costs to sell and value in use. Impairment exists when the carrying value of an asset or cash-generating unit exceeds its estimated recoverable amount. The asset or cash-generating unit is then written down to its recoverable amount.

(iii) Derecognition and disposal

An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal.

Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the Consolidated Statement of Comprehensive Income in the year the asset was derecognised.

Freehold buildings are valued at the cost to the Consolidated Entity at the time of purchase.

(M) IMPAIRMENT OF ASSETS

The Consolidated Entity assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Consolidated Entity makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of its fair value less costs to sell and its value in use determined for the individual asset, unless the asset does not generate cash inflows that are largely independent of those from the other assets and the asset’s value in use cannot be estimated to be close to its fair value. In such cases the asset is tested for impairment as part of the cash-generating unit to which it belongs. When the carrying amount of the asset or cash-generating unit exceeds its recoverable amount, the asset or cash-generating unit is considered impaired and is written down to its recoverable amount.

In assessing value in use, the estimated cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses relating to continuing operations are recognised in those expense categories consistent with the function of the impaired asset unless the asset is carried at the revalued amount (in which case the impairment loss is treated as a revaluation decrease).

An assessment is also made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in the prior years. Such reversal is recognised in the Consolidated Statement of Comprehensive Income unless the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation increase. After such a reversal the depreciation charge is adjusted in future years to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.





(N) OTHER NON-CURRENT ASSETS

Expenditure carried forward

Significant items of carry forward expenditure having a benefit or relating to more than one year are written off over the years to which such expenditure relates.

(O) LEASED ASSETS

Operating leases

Operating leases are those where the lessor effectively retains substantially all the risks and benefits incidental to ownership of the leased property. Lease payments of this type are not capitalised and rental payments are expensed each year as incurred. Disclosure of these lease commitments is made in Note 17.

(P) CURRENT LIABILITIES

Current liabilities comprise all amounts owing at reporting date and payable within 12 months, including amounts due to Suppliers.

(Q) TRADE AND OTHER PAYABLES

Trade payables and other payables are carried at amortised cost and represent liabilities for goods and services provided to the Consolidated Entity prior to the end of the financial year that are unpaid and arise when the Consolidated Entity becomes obliged to make future payments in respect of the purchase of those goods and services.

(R) INTEREST BEARING LOANS AND BORROWINGS

All loans and borrowings are initially recognised at fair value of the consideration received less directly attributable transaction costs.

After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method.

(S) PROVISIONS

Provisions are recognised when the Consolidated Entity has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects the risks specific to the liability.

When discounting is used, the increase in provision due to the passage of time is recognised in finance costs.

(T) EMPLOYEE LEAVE BENEFITS

(i) Wages, salaries, annual leave and sick leave

Liability for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled within 12 months of the reporting date are recognised in other payables in respect of employees’ services up to the reporting date. They are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised when the leave is taken and are measured at the rates paid or payable.

(ii) Long service leave

The liability for long service leave is recognised in the provision for employee benefits and measured at the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience in employee departures, and years of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity that match as closely as possible the estimated future cash outflows.

(U) POST-EMPLOYMENT BENEFITS

Defined Benefit Plan

The Consolidated Entity contributes to one defined benefits superannuation plan on behalf of certain eligible employees.

In respect of QSL’s defined benefits superannuation plan, any contributions made to the superannuation plan by the Consolidated Entity are recognised against surpluses when due.

Employees of QSL who have a defined benefit plan are members of QSuper (refer Note 19).

For employees who are members of QSuper, the Treasurer of Queensland, based on advice received from the State Actuary, determines employer contributions for superannuation expenses.

No liability is recognised for accruing the above superannuation benefits in these financial statements, the liability being held on a whole-of-government basis and reported in the whole-of-government financial report prepared pursuant to AAS 31 – Financial Reporting by Governments.

(V) NATURE AND PURPOSE OF RESERVES

(i) Capital reserve

The capital reserve represents the value of equity transferred from Queensland Sugar Corporation in 2000, which was deducted from pool proceeds to fund purchases of property, plant and equipment.

(ii) Available-for-sale reserve

Changes in the fair value of equity investments, classified as available-for-sale financial assets, are taken to the available-for-sale reserve. Amounts are recognised in the Consolidated Statement of Comprehensive Income when the associated assets are sold or impaired.



(W) INCOME TAX

Parent Entity

In accordance with sections 50-1 and 50-40 of the Income Tax Assessment Act 1997, QSL is exempt from income tax.

Controlled Entities

The Controlled Entities account for current tax assets and liabilities by measuring the amount expected to be recovered from or payable to the taxation authorities based on the current year’s taxable income. The tax rates and tax laws used to compute the amounts are those that are enacted or substantively enacted by the reporting date.

Deferred tax is provided on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised.

The carrying amount of deferred tax assets is reviewed at reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised.

Unrecognised deferred tax assets are reassessed at reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority.

Current and deferred tax is recognised as an expense in the Consolidated Statement of Comprehensive Income except when it relates to items credited or debited directly to equity, in which case the deferred tax is also recognised directly in equity, or where it arises from an initial accounting for a business acquisition, in which case it is taken into account in the determination of goodwill.

(X) DEFERRED INCOME AND EXPENSES

Income and expenses have been carried forward only in circumstances relating to future sales proceeds, the receipt of which is reasonably assured.

(Y) GOODS AND SERVICES TAX

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 from the Australian Taxation Office (‘ATO’), it is recognised as part of the cost of the acquisition of an asset or as a part of the item of expense; or

(ii) For receivables or payables, which are recognised inclusive of GST, the net amount of GST recoverable from or payable to the ATO is shown under current receivables or payables.

(Z) BORROWING COSTS

Borrowing costs are recognised as an expense when incurred.

(AA) MAKE GOOD PROVISION

Provision has been made for the present value of anticipated costs of future restoration of leased office premises. The provision includes future cost estimates associated with office dismantling. The calculation of this provision requires assumptions such as the applicable environmental legislation and engineering cost estimates. These uncertainties may result in future actual expenditure differing from the amounts currently provided. The provision recognised is reviewed annually and updated based on the facts and circumstances available at the time. Changes to the estimated future costs are recognised in the Consolidated Statement of Financial Position by adjusting both the asset or expense (if applicable) and provision. The related carrying amounts are disclosed in Note 15.

(AB) RENTAL INCENTIVE

Provision has been made for the present value of fit-out incentive benefit of the leased office premises as specified in the Incentive Deed between Harburg Investments Pty Ltd and QSL which concludes on 30 April 2018. The provision represents the present value of the total incentive benefit of $1,048,800 over the remaining five years of the lease in accordance with Interpretation 115. The related carrying amounts are disclosed in Note 15.

(AC) COMPARATIVES

Where necessary, comparative information has been reclassified to achieve consistency in disclosure with current financial year amounts and other disclosures.




3 INCOME AND EXPENSES FROM NON-POOLING ACTIVITIES

Pooling activities are those that directly relate to the sale of Australian raw sugar under the RSSAs and the payment of these proceeds net of financing, terminal operations and marketing costs to Suppliers. The following revenues and expenses relate to those activities not directly concerned with pooling activities.

2012 2011$’000 $’000

Non-Australian raw sugar activitiesSales of non-Australian raw sugar 342,196 354,462

Purchases of non-Australian raw sugar (320,518) (334,067)

Freight and brokerage (5,406) (11,208)

Salaries and employee costs (716) (376)

Direct selling expenses (2,743) (1,072)

Other expenses (2,643) (2,104)

10,170 5,635

Equity investment activitiesDividend income 1,689 1,463

Gain on disposal of equity investments a – 5,569

1,689 7,032

Other activitiesGain on sale of non-current assets 833 -

Other income 4,317 3,435

Salaries and employee costs (1,677) (1,211)

Other expenses (2,073) (3,101)

1,400 (877)

NON-POOLING ACTIVITIES (PRE-CORPORATE CHARGE) 13,259 11,790

Research funding to the sugar industry b (50) (925)

Internal financing cost on non-Australian Raw Sugar Activities c (11,008) (6,313)

Internal financing cost on Equity Investment Activities c (1,269) (1,723)

Internal financing cost on Other Activities c (281) (558)

(12,608) (9,519)

NET SURPLUS 651 2,271

a Relates to the gain on the disposal of shares in Tully Sugar Limited (‘TSL’). QSL’s 19.9% interest in TSL was contracted for disposal to Mackay Sugar Limited at $43 per share in June 2011, with proceeds received in the 2012 financial year.

b Relates to amount contributed to the sugar industry for research and development related expenditure.c Relates to internal corporate financing costs for the relevant activity from the Pools. This internal corporate charge reduces borrowing costs for the Pools.


2012 2011$’000 $’000

4 EXPENSES FROM CONTINUING OPERATIONS

Freight and brokerage

Sea freight 51,207 72,770

Road freight – 717

Selling brokerage – 586

TOTAL FREIGHT AND BROKERAGE 51,207 74,073

Operating lease rental

Minimum lease payments

Sugar Terminals Limited for bulk sugar terminals 43,278 42,626

Other property 442 510

TOTAL OPERATING LEASE RENTAL 43,720 43,136

Borrowing costs expense

Short-term debt 12,246 13,037

Other 5,576 6,420

TOTAL BORROWING COSTS EXPENSE 17,822 19,457

Depreciation expense

Plant and equipment 1,568 1,158

Buildings on freehold land 48 56

Leasehold improvements 139 120

TOTAL DEPRECIATION EXPENSE 1,755 1,334

5 2010 SEASON SHORTFALL DELIVERY COSTS

Season Shortfall Delivery Costs – 105,544

The 2010 Season was adversely affected by severe in-season weather conditions that resulted in a large quantity of sugar cane being left unharvested. The sugar delivery shortfall resulted in QSL incurring net costs in relation to unwinding futures and foreign currency positions as well as substituting non-Australian sugar in order to meet existing sugar sales commitments.

6 OTHER EXPENSES FROM CONTINUING OPERATIONS

Other Expenses 11,421 10,306

This amount includes recoveries under the Storage and Handling Agreements for users of the bulk sugar terminals for storage, handling and outloading of raw sugar not covered by the RSSAs. These recoveries of $14.7 million offset operating expenditure in the Consolidated Statement of Comprehensive Income (2011: $15.1 million).


2012 2011$’000 $’000

7 TRADE AND OTHER RECEIVABLES

CURRENTTrade debtors a 67,028 57,792

Other debtors

Futures margins and deposits 4,929 3,617

GST receivable 9,998 5,768

Loan (set-off) agreements with Suppliers b 13,156 12,324

Receivable from sale of Tully Sugar Limited Shares c – 26,440

Insurance receivable d 19,815 1,987

Receivables – terminal users 3,510 3,978

Receivables – Sugar Terminals Limited e 4,506 7,064

Other 9,674 7,939

65,588 69,117

TOTAL TRADE AND OTHER RECEIVABLES (CURRENT) 132,616 126,909

a Contractual terms and conditions, any collateral held and the timing of the payments are set out in Note 26(v)(b).b To mitigate the impact of the severe weather on the 2010 season, QSL offered to enter into set-off loans with Suppliers (refer Note 11). These loans have

a term of three years and were offered to all Suppliers. Any drawdowns under these loans were required to be completed by 22 July 2011. QSL offered loans totalling $73.7 million under this facility. $37.0 million was drawn as at 30 June 2011 with a further $2.3 million drawn after year-end and before 22 July 2011. Any undrawn amounts at 22 July 2011 are unable to be drawn.

c During the 2011 financial year QSL sold its holding of Tully Sugar Limited with cash proceeds received in the 2012 financial year.d In the prior financial year, the Lucinda bulk sugar terminal was damaged by Cyclone Yasi. QSL is managing the restoration works and this amount is

a receivable under the insurance policy held by the owner of the terminal, Sugar Terminals Limited.e Under the sub-lease agreement with STL, QSL purchases capital items on behalf of STL. These receivables relate to these capital purchases.

2012 2011$’000 $’000

8 INVENTORIES

Bulk Australian raw sugar 73,418 69,754

TOTAL INVENTORIES 73,418 69,754

9 OTHER ASSETS

CURRENTUnrealised gains on:

Foreign currency contracts 40,402 136,361

Sugar futures and option contracts 2,119 –

42,521 136,361

Deferred expenditure and prepayments relating to the next year:

Prepaid expenditure 3,842 4,052

Amounts owing from future pools a 1,662 2,249

5,504 6,301

TOTAL OTHER ASSETS (CURRENT) 48,025 142,662

NON-CURRENTUnrealised gains on foreign currency contracts 26,062 75,811

Deferred expenditure and prepayments relating to a future year:

Amounts owing from future pools b – 17,692

TOTAL OTHER ASSETS (NON-CURRENT) 26,062 93,503

a Represents unrealised losses on sugar hedges, foreign exchange hedges and option contracts which will be allocated against next year’s raw sugar sales.b Represents unrealised losses on sugar hedges, foreign exchange hedges and option contracts which will be allocated against future years’ raw sugar sales.




2012 2011$’000 $’000

10 AVAILABLE-FOR-SALE FINANCIAL ASSETS

NON-CURRENTShares at fair value a 21,638 19,623

a QSL holds 13.5% (2011: 12.3%) of the G (Grower) class of share capital of Sugar Terminals Limited (‘STL’), a company that owns bulk raw sugar storage facilities in Queensland. Under a sub-lease with STL, QSL operates and maintains these facilities until 31 December 2013. The STL G class shares are traded on the National Stock Exchange of Australia. Given the illiquid or thinly traded market in STL G class shares, QSL’s investment in STL has been valued using an independent valuation methodology rather than the market value pursuant to AASB 139 Financial Instruments: Recognition and Measurement. This is consistent with the approach adopted in the prior year.

QSL also holds shares in the Intercontinental Exchange, Inc which is listed on the New York Stock Exchange.

Available-for-sale investments consist of investments in ordinary shares, and therefore have no fixed maturity date or coupon rate.

2012 2011$’000 $’000

11 OTHER RECEIVABLES

NON-CURRENTLoan (set-off) agreements with Suppliers a 13,220 24,684

Other loans to Suppliers 904 –

TOTAL OTHER RECEIVABLES (NON-CURRENT) 14,124 24,684

a To mitigate the impact of the severe weather on the 2010 season, QSL offered to enter into set-off loans with Suppliers (refer Note 7). These loans have a term of three years and were offered to all Suppliers. Any drawdowns under these loans were required to be completed by 22 July 2011. QSL offered loans totalling $73.7 million under this facility. $37.0 million was drawn as at 30 June 2011 with a further $2.3 million drawn after year-end and before 22 July 2011. Any undrawn amounts at 22 July 2011 are unable to be drawn.

12 PROPERTY, PLANT AND EQUIPMENT

Freehold land:

At cost 590 960

Leasehold land:

At cost 195 195

Leasehold improvements:

At cost 1,209 1,506

Accumulated depreciation (361) (502)

848 1,004

Buildings on freehold land:

At cost 321 683

Accumulated depreciation (58) (280)

263 403

Plant and equipment:

At cost 14,164 15,683

Accumulated depreciation (4,596) (6,283)

9,568 9,400

TOTAL PROPERTY, PLANT AND EQUIPMENT 11,464 11,962




2012 2011$’000 $’000

12 PROPERTY, PLANT AND EQUIPMENT CONTINUED

Reconciliations

Reconciliations of the carrying amounts of freehold land, leasehold land, leasehold improvements, buildings on freehold land and plant and equipment at the beginning and end of the financial year are set out below.

Freehold land:

Carrying amount at the beginning of the year 960 960

Disposals (370) –

Carrying amount at the end of the year 590 960

Leasehold land:

Carrying amount at the beginning and end of the year 195 195

Leasehold improvements:

Carrying amount at the beginning of the year 1,004 1,436

Additions – 56

Disposals (17) –

Impairment – (368)

Depreciation expense (139) (120)

Carrying amount at the end of the year 848 1,004

Buildings on freehold land:

Carrying amount at the beginning of the year 403 461

Disposals (92) (2)

Depreciation expense (48) (56)

Carrying amount at the end of the year 263 403

Plant and equipment:

Carrying amount at the beginning of the year 9,400 7,916

Additions 2,023 3,191

Disposals (287) (338)

Impairment – (211)

Depreciation expense (1,568) (1,158)

Carrying amount at the end of the year 9,568 9,400

TOTAL PROPERTY, PLANT AND EQUIPMENT 11,464 11,962

13 TRADE AND OTHER PAYABLES

CURRENTCreditors

Suppliers 88,942 73,317

Trade creditors 3,064 1,061

92,006 74,378

Other creditors

Unrealised losses on sugar futures and options contracts 33,372 125,195

Other 10,696 9,504

44,068 134,699

TOTAL TRADE AND OTHER PAYABLES (CURRENT) 136,074 209,077


2012 2011$’000 $’000

13 TRADE AND OTHER PAYABLES CONTINUED

NON-CURRENTOther creditors

Unrealised losses on sugar futures and option contracts 7,103 93,499

Deferred income relating to a future year:

Amounts owing to future pools a 8,510 –

Other 42 103

TOTAL TRADE AND OTHER PAYABLES (NON-CURRENT) 15,655 93,602

a Represents unrealised gains on sugar hedges, foreign exchange hedges and option contracts which will be allocated against future years’ raw sugar sales.

14 INTEREST BEARING LIABILITIES

CURRENTUnsecured

Securities – commercial paper a 108,151 103,593

Money market b 31,010 36,711

TOTAL INTEREST BEARING LIABILITIES (CURRENT) 139,161 140,304

a Represents funding for advances to Suppliers, sugar futures settlements and margins.b These short-term loans are repayable within 30 days.

15 PROVISIONS

MAKEGOOD

a

RENTAL INCENTIVE

STAFF INCENTIVE

ANNUAL LEAVE

LONG SERVICE

LEAVE

SICK LEAVE

TOTAL

$’000 $’000 $’000 $’000 $’000 $’000 $’000

Balance at 1 July 2010 375 891 958 1,223 1,911 52 5,410

Arising during the year – – (146) 1,297 159 24 1,334

Utilised (200) (131) (688) (1,189) (470) (41) (2,719)

Discount rate adjustment – 33 – – 110 – 143

BALANCE AT 30 JUNE 2011 175 793 124 1,331 1,710 35 4,168

REPRESENTED AS:Current – 131 124 1,331 292 35 1,913

Non-Current 175 662 – – 1,418 – 2,255

TOTAL 175 793 124 1,331 1,710 35 4,168

BALANCE AT 1 JULY 2011 175 793 124 1,331 1,710 35 4,168

Arising during the year – – 763 1,269 172 29 2,233

Utilised – (131) (124) (1,271) (583) (35) (2,144)

Discount rate adjustment – 61 – – 131 – 192

BALANCE AT 30 JUNE 2012 175 723 763 1,329 1,430 29 4,449

REPRESENTED AS:Current – 131 763 1,329 416 29 2,668

Non-Current 175 592 – – 1,014 – 1,781

TOTAL 175 723 763 1,329 1,430 29 4,449

a In May 2010 the Parent Entity commenced an 8 year lease agreement with Harburg Investments Pty Ltd. In accordance with the lease agreement the Parent Entity must restore its leased premises to the original condition upon expiry of the agreement. The provision has been calculated using a rate per square metre giving a provision of $175,000.




2012 2011$’000 $’000

16 CASH AND CASH EQUIVALENTS

(A) RECONCILIATION OF THE OPERATING SURPLUS TO THE NET CASH FLOWS FROM OPERATIONS

Surplus attributable to the members of QSL and its Controlled Entities for the year 651 2,271

Adjustments for:

Depreciation of non-current assets 1,755 1,334

Gain on sale of fixed assets (833) –

Net foreign currency loss 897 484

Dividend income classified as an investing cash flow (1,689) (1,463)

Net gain on the sale of Tully Sugar Limited shares – (5,569)

Impairment and write-off of non-current assets – 579

Changes in assets and liabilities:

(Increase)/decrease in trade and other receivables (31,315) (29,581)

(Increase)/decrease in inventory (3,664) 55,499

(Increase)/decrease in other current assets 94,636 (81,816)

(Increase)/decrease in non-current assets 67,441 (31,089)

Decrease in trade and other payables (73,003) (12,810)

(Decrease)/increase in non-current payables (77,946) 29,940

(Decrease)/increase in provisions 281 (1,242)

NET CASH USED IN OPERATING ACTIVITIES (22,789) (73,463)

(B) RECONCILIATION OF CASH AND CASH EQUIVALENTS

Cash and cash equivalents balance comprises:

Cash on hand 11,188 503

Money market liabilities (31,010) (36,711)

Securities – commercial paper liabilities (108,151) (103,593)

TOTAL CASH AND CASH EQUIVALENTS (127,973) (139,801)

(C) FINANCING FACILITIES AVAILABLE

At reporting date, the following financing facilities had been negotiated and were available:

Commercial paper program

In conjunction with a number of Australian financial institutions, the Parent Entity has a $1 billion (2011: $1 billion) Australian dollar revolving commercial paper borrowing program entered into for the purposes of funding advance payments to Suppliers and associated responsibilities. The commercial paper program is used to the extent of the backing of the syndicated standby credit facilities referred to below.

Syndicated standby credit facilities

The Parent Entity has a committed 500 million (2011: $500 million) Australian dollar syndicated standby facility which expires on 30 June 2013 and is undrawn as at 30 June 2012. This facility is for general funding of activities including sugar price risk management operations and can be used to fund the net current asset deficiency existing at balance date. This deficiency was created by the funding of loans to Suppliers under the Loan (set-off) agreements (refer Note 7).

Letter of credit issuance facility

The Parent Entity has in place a committed letter of credit issuance facility which matures on 31 October 2012. The facility is for issuing standby letters of credit in lieu of performance bonds in connection with contract tender terms. At 30 June 2012, nil funds (2011: US$ nil) had been drawn against the facility of US$10.0 million (2011: US$10.0 million).

Uncommitted funding facilities

In addition, the Parent Entity had available at 30 June 2012 uncommitted facilities with various financial institutions of $125.0 million (2011: $175.0 million). As at 30 June 2012, $30.5 million (2011: $36.7 million) had been utilised.


2012 2011$’000 $’000

17 COMMITMENTS

(A) CAPITAL EXPENDITURE COMMITMENTS

Estimated capital expenditure contracted for at reporting date, but not provided for, payable

Not later than one year 2,203 301

(B) LEASE EXPENDITURE COMMITMENTS

Operating leases (non-cancellable):

Minimum lease payments

Not later than one year 43,438 43,132

Later than one year but not later than five years 23,223 65,223

Later than five years 507 1,139

AGGREGATE LEASE EXPENDITURE CONTRACTED FOR AT REPORTING DATE 67,168 109,494

Amounts not provided for:

Rental commitments – STL a 63,934 105,629

Other property 3,234 3,865

AGGREGATE LEASE EXPENDITURE CONTRACTED FOR AT REPORTING DATE 67,168 109,494

a The Parent Entity has entered into a 5 year agreement with STL effective from 1 January 2009. The terms of the agreement are largely the same as prior agreements. The key features are:

– Fixed charge of $42.0 million per annum (subject to quantum of capital expenditure)

– Capital expenditure above or below a set threshold adding to or reducing the fixed charge

18 NON-HEDGED FOREIGN CURRENCY BALANCES

The Australian dollar equivalents of non-hedged foreign currency balances included in the accounts are as follows:

US Dollars

Current assets 11,908 66,940

Current liabilities (33,431) (31,780)

19 EMPLOYEE BENEFITS AND SUPERANNUATION COMMITMENTS

Employee benefits

Accrued wages, salaries and on-costs 834 540

Provisions for employee benefits (current) 2,537 1,782

Provisions for employee benefits (non-current) 1,014 1,418

TOTAL EMPLOYEE BENEFITS AND SUPERANNUATION COMMITMENTS 4,385 3,740

AMOUNT CONTRIBUTED BY QSL TO THE QSUPER DEFINED BENEFIT PLAN 119 328

20 CONTINGENT LIABILITIES

There are no known contingent liabilities at 30 June 2012 of a material nature.

21 SUBSEQUENT EVENTS

There are no known events of a material nature that have occurred after 30 June 2012.




2012 2011$ $

22 DIRECTOR AND EXECUTIVES DISCLOSURES

Compensation of Key Management Personnel and Directors

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Consolidated Entity, directly or indirectly, including any Director. The Directors, the Chief Executive Officers and the General Managers of the Consolidated Entity have been classified as Key Management Personnel.

Short-term benefits 2,405,926 2,009,592

Post employment benefits 155,894 181,850

Other long-term benefits 208,069 191,989

Termination benefits a 553,766 389,986

TOTAL COMPENSATION 3,323,655 2,773,417

a Termination benefits only includes the bona fide portion of any termination payment.

23 AUDITORS’ REMUNERATION

Amounts received or due and receivable for auditing services by Ernst & Young for the Consolidated Entity:

– audit or review of the financial report 127,715 109,727

– internal audit services – 23,690

– 2010 season delivery shortfall review – 26,800

– other non-audit services 68,752 53,165

196,467 213,382

Amounts received or due and receivable for auditing services by PricewaterhouseCoopers for the Consolidated Entity:

– internal audit services 159,006 132,500

– taxation services 36,150 11,850

– other non-audit services 87,488 29,331

282,644 173,681

TOTAL AUDITORS’ REMUNERATION 479,111 387,063

24 RELATED PARTY DISCLOSURES

Under raw sugar supply contracts with a number of milling companies in Queensland which first came into effect on 1 January 2006 and new supply agreements entered into in 2012, QSL purchases those milling companies’ (Suppliers) sugar production destined for the export market. Under the terms of supply contracts with Suppliers, sugar on receival becomes the absolute property of QSL, free of all encumbrances or adverse claims. In return Suppliers receive a right of payment for the sugar delivered, to be calculated in accordance with the pricing options and other provisions within the contracts. The amount in respect to each season’s production is determined by QSL, following the sale and pricing of that season’s production on commercial terms, and progressive payments are made in accordance with the terms of the contracts. The final payment to each Supplier is made in July each year in respect to sugar production in the previous calendar year.

Suppliers in turn make payments to cane growers for cane delivered to their mill, based on cane payment formulae incorporated into the local collective agreement for each area and advance payments received from QSL. Where applicable, the pool price forms part of the cane payment formulae.

All other related party transactions are on normal commercial terms and conditions.


25 PARENT ENTITY INFORMATION AND CONTROLLED ENTITIES

(A) CONTROLLED ENTITIES

CONTROLLED ENTITY COUNTRY OF INCORPORATION

PERCENTAGE OWNERSHIP

DATE OF INCORPORATION

QSL Investments (No1) Pty Ltd Australia 100% 16/10/09

QSL Investments (No2) Pty Ltd Australia 100% 16/10/09

On 20 March 2012, Transu Limited, a 100% Controlled Entity of QSL, was deregistered. Transu Limited was incorporated on 24/11/10 in Australia.

(B) PARENT ENTITY DISCLOSURES

2012 2011$’000 $’000

Information relating to QSL:

Current assets 265,244 339,828

TOTAL ASSETS 323,330 474,047Current liabilities 277,903 351,294

TOTAL LIABILITIES 280,276 431,513

Reserves 18,819 24,139

Retained surpluses 24,235 18,395

TOTAL EQUITY 43,054 42,534

NET SURPLUS 765 2,298

TOTAL COMPREHENSIVE INCOME 861 2,112

Commitments

All expenditure commitments in Note 17 relate to the Parent Entity.

Contingent Liabilities

There are no contingent liabilities that relate to the Parent Entity, as disclosed in Note 20.

Guarantees

The Parent Entity guarantees all the debts of the Controlled Entities.

26 FINANCIAL RISK MANAGEMENT AND INSTRUMENTS

The Consolidated Entity’s principal financial instruments comprise of cash and short-term deposits, short-term loans and derivatives. The Consolidated Entity’s activities expose it to a variety of financial risks: market risk (including currency risk and commodity price risk), credit risk and liquidity risk. The Consolidated Entity uses a variety of derivative financial instruments to manage specifically identified foreign currency and commodity price risks. The Consolidated Entity does not use derivative or financial instruments for speculative or trading purposes.

The use of financial derivatives is governed by risk management policies approved by the Board of Directors. The policies provide specific principles in relation to foreign exchange risk, commodity price risk, credit risk, the use of financial and non-financial derivatives and the management of liquidity. Compliance with these policies and procedures is reviewed by the Directors monthly and as part of the internal audit function on a regular basis.

(I) FOREIGN EXCHANGE RISK

The Consolidated Entity is primarily exposed to the risk of adverse movements in the A$/US$ exchange rate. The Consolidated Entity uses a variety of foreign exchange risk management instruments including foreign exchange contracts and currency options to manage exchange rate risk on the Australian dollar value of US dollar receipts from the sale of raw sugar arising from committed and anticipated sales. Foreign currency options entitle the Consolidated Entity to buy or sell US dollars at an agreed rate of exchange, while forward exchange contracts commit the Consolidated Entity to sell US dollars at an agreed rate of exchange.

Risk management transactions have been accounted for on a basis consistent with the accounting for the underlying transaction. Gains and losses on specific risk transactions related to committed future sales are deferred until the date of sale and included in the measurement of the sales transaction.




26 FINANCIAL RISK MANAGEMENT AND INSTRUMENTS CONTINUED

(I) FOREIGN EXCHANGE RISK CONTINUED

The following table summarises by contract maturity the Australian dollar notional value of forward exchange contracts and foreign currency options. Foreign currency amounts are translated at rates current at reporting date. Contracts to sell US dollars are entered into to offset the proceeds from the sale of the raw sugar.

Foreign exchange contracts a WEIGHTED AVERAGE

EXCHANGE RATES

CONTRACT MATURITIES

< 1 year 1-2 years 2-3 years 3-4 years 4-5 years Total$’000 $’000 $’000 $’000 $’000 $’000

2012Sell US dollars 0.9356 668,773 207,060 92,462 24,708 – 993,003

2011Sell US dollars 0.8532 651,755 254,959 98,009 30,074 10,646 1,045,443

Currency options a WEIGHTED AVERAGE

EXCHANGE RATES

CONTRACT MATURITIES


2012Purchased AUD Call against USD 1.0354 111,066 – – – – 111,066

Sold AUD Put against USD 0.9786 117,518 – – – – 117,518

TOTAL 228,584 – – – – 228,584

2011Purchased AUD Call against USD 1.0391 96,233 – – – – 96,233

Sold AUD Call against USD 1.0000 (30,000) – – – – (30,000)

Sold AUD Put against USD 0.9468 105,615 – – – – 105,615

Purchased AUD Put against USD 0.8900 (33,708) – – – – (33,708)

TOTAL 138,140 – – – – 138,140

a $66.5 million of net foreign exchange contract and currency option gains (2011: $214.1 million) have been deferred as the gains represent amounts owed to future years’ pools (refer Note 9). The expected timing of recognition based on the fair values at 30 June 2012 are: one year or less $40.4 million gain (2011: $138.2 million gain), one to two years $15.0 million gain (2011: $53.6 million gain), two to three years $8.4 million gain (2011: $15.5 million gain), three to four years $2.7 million gain (2011: $5.0 million gain) and four to five years $nil (2011: $1.7 million gain).

The following table details the Consolidated Entity’s sensitivity for financial instruments held at reporting date to movements in the exchange rate of the Australian dollar to the US dollar, with all other variables held constant. The 10% sensitivity is based on reasonable possible changes, over a financial year, using the observed range of actual historic rates for the preceding five year period.

Price change sensitivity EXCHANGE RATE EXCHANGE RATE10% DECREASE 10% INCREASE

2012 2011 2012 2011$’000 $’000 $’000 $’000

Amounts owed to future pools (99,308) (94,613) 82,754 81,604

As at 30 June 2012, had the Australian dollar been 10% weaker/ stronger against the US dollar with all other variables held constant, surplus for the year would have been unchanged as a result of amounts owed to or from future years’ pools absorbing any impact of foreign exchange fluctuations.



(II) COMMODITY PRICE RISK

The following tables summarise the notional contract amounts, maturity dates and average contract rates for sugar futures, sugar option and sugar swap contracts outstanding at reporting date. The notional contract amounts are denominated in Australian dollars derived from the settlement price of the respective futures contract and converted to Australian dollars at the hedge settlement rate at reporting date.

The sugar futures and sugar options contracts are entered into to manage adverse movements in the ICE No 11 and No 16 sugar price arising from known and anticipated sales that have not been price fixed or price protected. The exposure to price risk arises from sugar sales contracts where the pricing mechanism is against the ICE No 11 and No 16 sugar price.

Sugar futures contracts a WEIGHTED AVERAGE

PRICE

b

CONTRACT MATURITIES


2012ICE No 11 Contract 22.00 (51,570) (39,252) – – – (90,822)

TOTAL (51,570) (39,252) – – – (90,822)

2011ICE No 11 Contract 25.17 (58,254) – – – – (58,254)

TOTAL (58,254) – – – – (58,254)

a $51.3 million of net price risk instrument losses (2011: $227.9 million loss) have been deferred as the losses represent amounts owed from future years’ pools. The expected timing of recognition based on the fair values at 30 June 2012 are: one year or less $44.3 million loss (2011: $134.4 million loss), one to two years $2.6 million loss (2011: $78.9 million loss), two to three years $2.9 million loss (2011: $11.3 million loss), three to four years $1.5 million loss (2011: $2.8 million loss).

b US cents per pound

Sugar options WEIGHTED AVERAGE

PRICE

c

CONTRACT MATURITIES


2011Purchased Puts d 23.88 25,008 – – – – 25,008

Sold Calls d 24.14 10,618 – – – – 10,618

TOTAL 35,626 – – – – 35,626

c US cents per poundd Exchange Traded Options

There were no sugar options at 30 June 2012.

Sugar swaps WEIGHTED AVERAGE

PRICE

CONTRACT MATURITIES

< 1 Year 1-2 years 2-3 years 3-4 years 4-5 years Total$’000 $’000 $’000 $’000 $’000 $’000

2012Australian dollar swaps 425.00 e 4,868 – – – – 4,868US dollar swaps 19.97 f 328,815 200,043 81,643 27,821 – 638,322

2011Australian dollar swaps 429.75 e 6,085 9,132 – – – 15,217US dollar swaps 17.41 f 411,658 280,978 94,860 27,848 9,503 824,847

e Australian dollars per tonnef US cents per pound





(II) COMMODITY PRICE RISK CONTINUED

The following table details the Consolidated Entity’s sensitivity of financial instruments held at reporting date to movements in the sugar price with all other variables held constant. The 30% sensitivity is based on reasonable price changes, over a financial year, based on the result of volatility of the prompt sugar price on the ICE.

Price change sensitivity SUGAR PRICE SUGAR PRICE30% DECREASE 30% INCREASE

2012 2011 2012 2011$’000 $’000 $’000 $’000

Amounts owed to future pools (158,652) (218,529) 158,652 218,529

The Consolidated Entity’s sensitivity to sugar price risk at reporting date is not representative of the sensitivity throughout the year as the year-end exposure does not reflect the exposure during the year due to in-season sugar pricing undertaken.

As at 30 June 2012, had the sugar price been 30% weaker/ stronger with all other variables held constant, surplus for the year would have been unchanged as a result of amounts owed to or from future years’ pools absorbing any impact of sugar price fluctuation.

(III) INTEREST RATE RISK

The Consolidated Entity does not enter into financial instruments to manage cash flow risks associated with interest rate movements on borrowings. Short-term loans totalling $138.7 million (2011: $140.3 million) are repayable within 3 months (2011: 3 months) at an interest rate of 4.0% (2011: 4.4%). Cash totalling $10.7 million (2011: $0.5 million) comprises bank and short-term investments maturing overnight at an interest rate of 3.9% (2011: 5.1%) and 0.2% (2011: nil) for investments in Australia and the United States, respectively. All remaining financial assets and liabilities are non-interest bearing.

(IV) LIQUIDITY RISK

Liquidity risk management requires maintaining sufficient cash, committed and uncommitted facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. Details of credit facilities and their maturity profile are detailed in Note 16.

The table below analyses the Consolidated Entity’s financial liabilities including derivative financial instruments into relevant maturity groupings based on the remaining period at the reporting date to maturity date. The amounts are not discounted.

CONTRACT MATURITIES


2012Current payables 3,064 – – – – 3,064

Borrowings (including interest) 139,161 – – – – 139,161

Commodity financial instruments a 33,372 2,630 2,934 1,539 – 40,475

Foreign currency financial instruments (40,402) (14,963) (8,380) (2,719) – (66,464)

TOTAL 135,195 (12,333) (5,446) (1,180) – 116,236

2011Current payables 1,061 – – – – 1,061

Borrowings (including interest) 140,304 – – – – 140,304

Commodity financial instruments a 125,195 78,876 11,279 2,811 533 218,694

Foreign currency financial instruments (136,361) (53,641) (15,456) (5,037) (1,677) (212,172)

TOTAL 130,199 25,235 (4,177) (2,226) (1,144) 147,887

a Settlement of commodity and foreign currency financial instruments will be offset by revenue from the sale of commodities.



(V) CREDIT RISK

(a) Financial instruments

The exposure to credit risk arises from the potential failure of counterparties to meet their obligations under the respective contracts at maturity. Credit risk is managed as part of the financial risk management program. Credit ratings of financial institutions are utilised and limits and risk weightings are applied by the Consolidated Entity to monitor and control credit risk relating to financial instruments. No collateral or security is required by the Consolidated Entity in dealing with these financial institutions.

At reporting date, the Consolidated Entity had no significant concentrations of credit risk to a single counterparty or group of counterparties. The Consolidated Entity’s exposure to credit risk from financial instruments is indicated by the carrying amounts of those financial assets on the Consolidated Statement of Financial Position.

(b) Trade debtors

Sales of raw sugar are recognised when the Bill of Lading is signed by the ship’s master. Exposure to credit risk in the event of non-performance by customers is minimised by a policy of making sales on a C&F or CIF basis, with settlement generally on cash against documents basis or by letter of credit. Sales are predominantly in US dollars (refer Note 2(d)).

Credit risks are managed by periodically assessing and monitoring the credit worthiness of customers. Collateral in the form of cash deposits is required in situations where credit risk is not at an acceptable level.

At reporting date, the Consolidated Entity had no significant concentration of credit risk with any single counterparty or group of counterparties.

The geographic concentrations of credit risk are disclosed in the following table:

2012 2011$’000 $’000

Asia 36,831 37,598

New Zealand 8,600 20,184

North America 4 10

TOTAL 45,435 57,792

(c) Credit risk against supplier customers

Under RSSAs, Suppliers are able to price raw sugar committed to future years’ pools by the Consolidated Entity entering into derivative contracts. The RSSAs limit the quantity of raw sugar that each Supplier can price from a given season’s forecast production. Currently forward pricing is able to be undertaken for 2012, 2013, 2014 and 2015 seasons. Credit limits have been set for each Supplier under the Credit Risk Policy – RSSA Suppliers and the mark-to-market position of forward pricing is monitored weekly and reported to Directors on a monthly basis.





(VI) FAIR VALUE

The estimate of the fair values of each class of financial instrument is as follows:

CARRYING AMOUNT NET FAIR VALUE

2012 2011 2012 2011$’000 $’000 $’000 $’000

FINANCIAL ASSETS

FOREIGN EXCHANGE RISK EXPOSUREForward exchange rate contracts

Sell USD 66,877 211,220 44,942 171,983

Currency options

Purchased AUD Call against USD – 2,895 1,747 11,002

Purchased AUD Put against USD – – – 5

TOTAL FOREIGN EXCHANGE RISK EXPOSURE 66,877 214,115 46,689 182,990

COMMODITY PRICE RISK EXPOSURESugar futures contracts (11,402) 1,506 (11,402) 1,506

Sugar options

Purchased Puts a – 2,640 – 1,002

TOTAL COMMODITY RISK EXPOSURE (11,402) 4,146 (11,402) 2,508

OTHER FINANCIAL INSTRUMENTSAvailable-for-sale: shares at fair value 21,638 19,623 21,638 19,623

TOTAL 77,113 237,884 56,925 205,121

FINANCIAL LIABILITIES

FOREIGN EXCHANGE RISK EXPOSURECurrency options

Sold AUD Call against USD – (1,943) – (5,268)

Sold AUD Put against USD (413) – (1,382) (548)

TOTAL FOREIGN EXCHANGE RISK EXPOSURE (413) (1,943) (1,382) (5,816)

COMMODITY PRICE RISK EXPOSURESugar options

Sold Puts a – (1,662) – (449)

Sugar swap

Australian dollars (442) (2,313) (442) (2,313)

US dollars (39,480) (215,097) (39,480) (215,097)

TOTAL COMMODITY RISK EXPOSURE (39,922) (219,072) (39,922) (217,859)

TOTAL (40,335) (221,015) (41,304) (223,675)

a Exchange Traded Options



(VI) FAIR VALUE CONTINUED

The following tables provide an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Level 1 to 3 based on the degree to which fair value is observable:

�� Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for financial assets or liabilities;

�� Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

�� Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

2012$’000

Level 1 Level 2 Level 3 Total

FINANCIAL ASSETS

FOREIGN EXCHANGE INSTRUMENTSForward exchange rate contracts

Sell USD – 44,942 – 44,942

Currency options

Purchased AUD Call against USD – 1,747 – 1,747

OTHER FINANCIAL INSTRUMENTSAvailable-for-sale: shares at fair value 450 – 21,188 21,638

TOTAL 450 46,689 21,188 68,327

2011$’000


FINANCIAL ASSETS

FOREIGN EXCHANGE INSTRUMENTSForward exchange rate contracts

Sell USD – 171,983 – 171,983

Currency options

Purchased AUD Call against USD – 11,002 – 11,002

Purchased AUD Put against USD – 5 – 5

COMMODITY INSTRUMENTSSugar future contracts 1,506 – – 1,506

Sugar Options

Purchased Puts a – 1,002 – 1,002

OTHER FINANCIAL INSTRUMENTSAvailable-for-sale: shares at fair value 387 – 19,236 19,623

TOTAL 1,893 183,992 19,236 205,121


There have been no movements of financial assets or financial liabilities between levels during the year.





(VI) FAIR VALUE CONTINUED

Reconciliation of Level 3 fair value measurements

NET FAIR VALUE

2012 2011$’000 $’000

OPENING BALANCE 19,236 24,722Acquisitions during the year 1,952 15,385

Consideration on sale of interest in TSL shares b – (26,440)

Gain on sale of TSL shares – 5,569

CLOSING BALANCE 21,188 19,236

b The investment in shares of Tully Sugar Limited was disposed of in June 2011.

2012$’000



FOREIGN EXCHANGE INSTRUMENTSCurrency options

Sold AUD Put against USD – (1,382) – (1,382)

COMMODITY INSTRUMENTSSugar futures contracts (11,402) – – (11,402)

Sugar swap

Australian dollars – (442) – (442)

US dollars – (39,480) – (39,480)

TOTAL (11,402) (41,304) – (52,706)

2011$’000



FOREIGN EXCHANGE INSTRUMENTSCurrency options

Sold AUD Call against USD – (5,268) – (5,268)

Sold AUD Put against USD – (548) – (548)

COMMODITY INSTRUMENTSSugar options

Sold Puts a – (449) – (449)

Sugar swap

Australian dollars – (2,313) – (2,313)

US dollars – (215,097) – (215,097)

TOTAL – (223,675) – (223,675)



In the Directors’ opinion:

(a) The financial statements and notes set out on pages 15 to 40 for the year ended 30 June 2012 are in accordance with the Corporations Act 2001, including:

(i) complying with Accounting Standards (including the Australian Accounting Interpretations) and Corporations Regulations 2001, and

(ii) giving a true and fair view of the Consolidated Entity’s financial position as at 30 June 2012 and of its performance for the financial year ended on that date

(b) The financial statements and notes also comply with International Financial Reporting Standards as disclosed in Note 2(c)

(c) There are reasonable grounds to believe that the Consolidated Entity will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the Directors.

Michael Carroll Chairman

17 September 2012

DIRECTORS’ DECLARATIONFOR THE YEAR ENDED 30 JUNE 2012 QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES


AUDITORS’ INDEPENDENT REPORTFOR THE YEAR ENDED 30 JUNE 2012 QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES


NOTES

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Queensland Sugar Limited ABN 76 090 152 211

Level 14 348 Edward Street Brisbane Queensland 4000

GPO Box 891 Brisbane Queensland 4001 Australia

Telephone +61 7 3004 4400 Facsimile +61 7 3004 4499

[email protected] www.qsl.com.au

Adding Value - QSL Annual Report 2011... · 2019-07-04 · Chief Executive Officer’s report 3 QSL...

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