2015 Annual Report

An Australian, farmer owned dairy co-operative since 1895

 corporate directory NORCO AGRIBUSINESS HEATHERBRAE
– GOLDMIX AND GRAIN TRADING 9 Hank St HEATHERBRAE NSW 2324
Registered Office Ph: 02 4987 6500 Fax: 02 4987 6099
Norco Co-operative Limited GOLDMIX STOCKFEEDS KEMPSEY
ARBN 009 717 417 / ABN 17 009 717 417 Krauss Ave SOUTH LISMORE NSW 2480 3 Kemp St WEST KEMPSEY NSW 2440
‘Windmill Grove’, 107 Wilson Street Ph: 02 6621 3042 Fax: 02 6621 9170 Ph: 02 6562 6393 Fax: 02 6563 1020
SOUTH LISMORE NSW 2480
T: 02 6627 8000 F: 02 6621 9673 GOLDMIX STOCKFEEDS KINGAROY
W: www.norco.com.au 2814 Murgon – Gayndah Road 97 River Road KINGAROY QLD 4610
WINDERA QLD 4605 Ph: 07 4163 6310 Fax: 07 4162 4992
Financiers/Bankers Ph: 07 4168 6186 Fax: 07 4168 6214
St George Bank KYOGLE
Level 13, 182 George Street GOLDMIX CREST SEEDS
Willis Street KYOGLE NSW 2474
SYDNEY NSW 2000 316 Anzac Ave TOOWOOMBA QLD 4350 Ph: 02 6632 2920 Fax: 02 6632 1221
Ph: 07 4630 2318 Fax: 07 4630 2348
Auditors LISMORE
Ernst & Young Chartered Accountants GRAIN TRADING – TOOWOOMBA
105 Wilson Street
Level 5 Waterfront Place, 1 Eagle Street 300 Anzac Ave TOOWOOMBA QLD 4350 SOUTH LISMORE NSW 2480
BRISBANE QLD 4000 Ph: 07 4637 3315 Fax: 07 4637 3399 Ph: 02 6627 8266 Fax: 02 6621 2286
Solicitors MACKSVILLE
Thomsons Geer Lawyers NORCO RURAL BRANCHES
Tilly Willy St MACKSVILLE NSW 2447
BRISBANE QLD 4000 Ph: 02 6568 4057 Fax: 02 6568 2308
S+P Lawyers ALSTONVILLE
LISMORE NSW 2480 MURGON
17 Kays Lane Russelton Estate
Piper Alderman Lawyers ALSTONVILLE NSW 2477 21 Lamb Street MURGON QLD 4605
SYDNEY NSW 2000 Ph: 02 6628 8315 Fax: 02 6628 5765 Ph: 07 4168 3060 Fax: 07 4168 2996

ARMIDALE MURWILLUMBAH
BRANCH directory 252 Mann Street ARMIDALE NSW 2350 17 Buchanan Street
Ph: 02 6771 4669 Fax: 02 6771 1187 MURWILLUMBAH NSW 2484
Ph: 02 6672 2311 Fax: 02 6672 5120
head offices BEAUDESERT
STUARTS POINT
9A Thiedeke Rd BEAUDESERT QLD 4285
NORCO CORPORATE Ph: 07 5541 4882 Fax: 07 5541 1025 906 Stuarts Point Road
STUARTS POINT NSW 2441
‘Windmill Grove’, 107 Wilson Street BELLINGEN Ph: 02 6569 0955 Fax: 02 6569 0983
SOUTH LISMORE NSW 2480
(PO Box 486 LISMORE NSW 2480) 1076 Waterfall Way TAREE
Ph: 02 6627 8000 Fax: 02 6621 9673 BELLINGEN NSW 2454
Ph: 02 6655 9792 Fax: 02 6655 2266 5 Grey Gum Road TAREE NSW 2430
NORCO RURAL Ph: 02 6551 2999 Fax: 02 6551 2522
BOWRAVILLE
‘Windmill Grove’, 107 Wilson Street, TENTERFIELD
SOUTH LISMORE NSW 2480 51 Carbin St BOWRAVILLE NSW 2449
Ph: 02 6564 8648 Fax: 02 6564 7425 445 Rouse St TENTERFIELD NSW 2372
(PO Box 3107 LISMORE DC NSW 2480) Ph: 02 6736 5902 Fax: 02 6736 2270
Ph: 02 6627 8000 Fax: 02 6622 1730 BUNDABERG
WAMURAN
NORCO AGRIBUSINESS 71 Gavin St BUNDABERG QLD 4670
Ph: 07 4151 7883 Fax: 07 4154 4341 1055 D’Aguilar Highway
‘Windmill Grove’, 107 Wilson Street WAMURAN QLD 4512
SOUTH LISMORE NSW 2480 CASINO Ph: 07 5496 6500 Fax: 07 5496 6406
(PO Box 3107 LISMORE DC NSW 2480)
136 Dyraaba Street CASINO NSW 2470 WINDERA DEPOT
Ph: 02 6627 8000 Fax: 02 6622 1730
Ph: 02 6661 2100 Fax: 02 6662 6007
2814 Murgon – Gayndah Road
MILK SUPPLY
COFFS HARBOUR WINDERA QLD 4605
‘Windmill Grove’, 107 Wilson Street Ph: 07 4168 6186 Fax: 07 4168 6214
5/24 Isles Drive
SOUTH LISMORE NSW 2480
SOUTH COFFS HARBOUR NSW 2450 WOOLGOOLGA
(PO Box 486, LISMORE NSW 2480)
Ph: 02 6658 0393 Fax: 02 6658 0374
Ph: 02 6627 8029 Fax: 02 6622 7410 16 Featherstone Drive
DUNGOG WOOLGOOLGA NSW 2456
Stroud Road DUNGOG NSW 2420 Ph: 02 6654 2905 Fax: 02 6654 1031
NORCO FOODS
Ph: 02 4992 1087 Fax: 02 4992 3000 WOOLGOOLGA CARTON SERVICES
NORCO MILK – LABRADOR GAYNDAH 8 Bosworth Road
59 Dalgangal Rd GAYNDAH QLD 4625 WOOLGOOLGA NSW 2456
Cnr Pine Ridge Road & Gold Coast Hwy
Ph: 07 4140 8542 Ph: 02 6654 8078 Fax: 02 6654 0103
LABRADOR QLD 4215
(PO Box 530, SOUTHPORT QLD 4215)
GLEN INNES
Ph: 07 5511 7200 Fax: 07 5594 0101 NORCO RURAL BRANCHES
165 Lang St GLEN INNES NSW 2370 – NORCO BOWDLERS
NORCO MILK – RALEIGH Ph: 02 6732 2162 Fax: 02 6732 5642
North Street RALEIGH NSW 2454
contents Ph: 02 6692 0000 Fax: 02 6655 4447
GLOUCESTER NORCO BOWDLERS – TOOWOOMBA
Cnr Church & Phillip Streets 300 Anzac Ave TOOWOOMBA QLD 4350
ICE CREAM BUSINESS UNIT GLOUCESTER NSW 2422 Ph: 07 4637 3300 Fax: 07 4637 3399
Corporate Profile  2 Norco Rural / Agribusiness 16
Union St SOUTH LISMORE NSW 2480 Ph: 02 6558 9600 Fax: 02 6558 9666
NORCO BOWDLERS – ALLORA
Facts at a Glance  4 Financial Management 18 (PO Box 486, LISMORE NSW 2480)
GRAFTON 120 Allora – Clifton Rd ALLORA QLD 4362
Ph: 02 6627 8000 Fax: 02 6621 6120
Chairman’s Report 5 Norco People 19 19 Queen Street GRAFTON NSW 2460 Ph: 07 4666 2210 Fax: 07 4666 3520
Ph: 02 6643 5630 Fax: 02 6642 7245
Directors’ Report 20 NORCO BOWDLERS – QUINALOW
Chief Executive Officer’s Report 8
3 Myall Street QUINALOW QLD 4403
Business Unit Reports: Auditor’s Independence Declaration 27 Phone: 07 4692 1333

Norco Foods Corporate Governance Statement 29

- Sales and Marketing 13 Financial Statements  36

- Operations 14 Independent Auditor’s Report 62

Milk Supply 15 Corporate and Branch Directories 65

www.norco.com.au 65
Norco’s Purpose
• We encourage and support people to grow as individuals and
Norco’s purpose is to build wealth, security and sustainability
contributors to our organisation.
for our shareholders, business partners and employees.
• We respect our heritage and legacy.
We achieve this by:
• We respect our natural environment.
• maintaining a diverse and strong range of businesses;
Responsible
• being a competitive regional purchaser and supplier of milk;
and • We are responsible for preserving the co-operative principles.
• creating integrated solutions for our partners. • We are responsible for our actions and our performance.
• We are responsible for providing a safe work environment.
Norco’s Values Efficient
Norco applies a common set of values to everything it does. • We seek to add value in everything we do.
These values include: Innovation
Respect • We seek to consistently improve through innovation.
• We respect our shareholders, employees, business partners Community
and customers.
• We seek active involvement in our communities.
• We respect a diversity of views and opinions.

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 corporate profile

How does one adequately describe a co-operative the speed of technological advancements as the Co-
business that has been a part of the fabric of the North operative moved from the nineteenth to twentieth
Coast of New South Wales since 1895? The words century. The Co-operative then had to find a market for
resilient, sustainable, adaptable and iconic come to the butter and ensure that the farmers received a fair
mind, or perhaps just one word resonates above all return for their produce.
others as the most appropriate description – NORCO.
Even though 120 years have passed and in that time
It was 120 years ago on 5 June 1895 when the Byron the business has grown and reinvented itself over and
Bay Creamery first made butter from locally supplied over to keep pace with consumer trends, some things
cream. The history of Norco is quite complicated and in don’t change. The very reasons the Co-operative
fact there was a great deal of uncertainty in those early started all those years ago still ring true today. Just like
times. Just imagine the public meetings that needed to in 1895, Norco’s Members collectively come together
be held and the distances travelled by the Co-operative with a common purpose to have their milk produce
leaders in trying to garner the support of both individual marketed. Members democratically participate in the
cream suppliers and fragmented factories that quite Co-operative, are all treated equally and ultimately
possibly could not envisage a cohesive and organised determine the future of the Co-operative as the owners
future for the fledgling dairy industry in the region. of the business. The leaders of today’s Norco consult
We then need to consider the capital that had to be and communicate with the Members to ensure that
raised and the risks taken to underwrite the purchase there is a willingness to travel on the strategic path as
of property, plant and equipment and how quickly set by the Board. As was the case at the turn of the
that infrastructure would need to be replaced due to twentieth century, the world today is also moving at a

2
fast pace, with infrastructure needing to be upgraded
on a continual basis to meet the growing needs of
consumers in relation to higher quality and more
efficiently produced foods.

However, on reflection, there seems to be one

overwhelming point of difference about the Co-
operative that has transcended through time and the
generations of people involved in the business and
which almost gives Norco a heartbeat. There is an
acknowledgement that each generation is simply the
custodian of the Co-operative’s substantial assets that
have been built up over time and there is a communal
sense of responsibility that these assets need to be
My memories of Norco
passed on to the next generation in an even better
condition than that in which they were received – to A review of 120 years of Norco operations has
ensure the continued future of NORCO. unearthed some close links between the co-
operative and the Reading family.
It is safe to say that Norco’s 326 Active Members on
220 farms, 750 employees, the growing customer Retired engineer, Frank Reading, has been delving into
base, business partners and the communities that the family records that reveal the association goes back
business operates in, are all grateful that Norco exists to Norco’s very roots when his great-uncle, George
today as a strong, vibrant and successful Co-operative. Reading, was chairman from 1896 to 1903, and his
grandfather Fred (George’s brother) was chairman in
The 2015 Annual Report is full of facts and figures
1909 and 1913 and a director for 32 years.
relating to the current performance of Norco in the
2014/15 financial year, including: Frank’s father, Hugh, was an engineer of note who
undertook many engineering assignments for
• Net Profit $3.105 million versus last year’s $500,000.
Norco, installing key equipment in the factories.
• EBITDA of $10.643 million (up 38.4 percent on last In fact Hugh supervised the installation of plant
year). and equipment at the Lismore and Murwillumbah

• All business unit results are favourable to the 2013/14 factories before being appointed as Norco’s

financial year. assistant chief engineer and workshop manager.

Hugh retired from Norco in 1946 to establish his
• Total debt $33.8 million which is $0.5 million less than
own business, Readings Engineering Works.
2013/14 despite a 20 percent growth in sales.
Frank joined his father and worked for Readings for
• Members’ total milk supply 211 million litres (which is
52 years, including some 30 years as manager. He
a record) – up 29 percent on 2013/14.
acknowledges having Norco to thank for his career
• Average milk price before patronage and dividend of in engineering, explaining that:
56.48 cents per litre versus 53.25 cents per litre for
“At the age of eight I would visit the Norco workshop
2013/14.
after school to watch and talk with the tradesmen
• Record Suppliers’ Patronage reward payment of $1.1 as they went about their work, and being intrigued
million. with the machinery and the smells of oils.”

And by the way, from those humble beginnings in 1895

when the turnover for the first full year was in the region Photo of Frank Reading holding a picture
of 30,000 pounds, now in our 120th year we are proud of his father Hugh Reading made in India
to be able to say that our Co-operative is now a half entirely out of mineral sands
billion dollar business, with a record turnover of $510
million achieved in 2014/15.

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 facts at a glance

total net profit millions $

2014/15 3.1 2013/14 0.5 2012/13 0.4 2011/12 5.7 2010/11 4.2

staff employed
AVERAGE MILK PRODUCTION
as at 30 june 2015 PER MEMBER FARM
Business Unit No. Financial Year  000’s Litres
Norco Foods 509 2014/15 968
Norco Rural 177 2013/14 933
Norco Agribusiness 48 2012/13 947
Corporate 18 2011/12 923
(includes permanent, part-time and casual staff) 2010/11 851

NUMBER OF MEMBER FARMS TOTAL MEMBERS’ MILK INTAKE

Financial Year  No. Financial Year  Millions Litres
2014/15 218 2014/15 211
2013/14 181 2013/14 163
2012/13 159 2012/13 151
2011/12 160 2011/12 149
2010/11 161 2010/11 137

TOTAL MEMBER RETURNS cents per litre

FINANCIAL AVE BASE STEP UPS AVE TOTAL DIVIDEND SUPPLIERS’ TOTAL AVE
YEAR MILK PRICE MILK PAY PATRONAGE MEMBER RETURNS

2014/15 56.48 - 56.48 0.22* 0.52 57.22

2013/14 53.25 - 53.25 0.14 0.51 53.90

2012/13 51.50 0.24 51.74 - 0.45 52.19
2011/12 51.28 1.43 52.71 0.30 0.42 53.43
2010/11 50.54 1.50 52.04 0.23 0.41 52.68

*Dividend proposed for consideration at 2015 Annual General Meeting

4
 chairman’s report

It is with immense pleasure that on behalf of the Board Route trade and export opportunities
of Directors I am able to provide some commentary
Norco has continued its expansion in the Route trade
on what has been an extremely busy and rewarding
to ensure that we have a mix of customers to meet a
financial year for our members and Norco.
strategy goal set by the Board. Not only is the Norco
The summary highlights for the 2014/15 financial Route business growing on a geographical basis both
year are as follows: north and south of the traditional Norco territory,
but the product offering has also been improved and
• Net Profit $3.105 million versus last year’s $500,000.
diversified to cater for the desire of consumers to
• Sales $510 million. have a wide range of milk products to choose from.

• All business unit results are favourable to the As reported last year, in June 2014 Norco commenced
2013/14 financial year. a program to export fresh milk to China in commercial

• Record Suppliers’ Patronage reward payment of $1.1 volumes. While progress has been steady resulting in

million. Norco achieving reasonable success, an unexpected

benefit of this program has been the wide exposure
• 6% dividend allowed for in the upcoming year on the
Norco has received to date. The significant awareness
back of the profit result.
that has been generated both within Australia and
• Both debtors’ days and creditors’ days are lower than internationally as a result of embarking on this
last year. program adds weight to the Norco story and our point
of difference. The Board of Directors is treating export
• Working capital is lower than last year despite a 20
as a longer term project which we believe will not only
percent growth at the sales line.
provide an alternative value stream for our members’
The value of strong relationships fresh milk but we are also excited by the prospects that

Our commitment to develop long standing relationships are unfolding in relation to the export opportunities for

that add value to Norco and our members has, and our ice cream business.

will continue to provide significant benefits for some Members / Milk Suppliers
time, in particular in relation to milk price and reduced
To service the growth in the Norco business, new
exposure to international dairy commodity volatility.
member farms have been acquired to meet the need
A good example is the success Norco has enjoyed for additional milk supply to satisfy the ever growing
with the Coles contract, firstly in ice cream and now customer base. The decision by the Board to introduce
in fresh milk. Our ability to provide service and product a regional milk price, which is effective from 1 January
quality equal to our competitors whilst remaining a 2016, was driven by the need to create a sustainable
100% Australian Farmer Owned Co-operative, is a milk supply in the Queensland and northern New
substantially unique proposition in the market place South Wales regions and also recognising that as
and in the dairy industry. Norco expands beyond its traditional areas in the

The commencement of the Coles contract to supply south, there are different pricing structures offered by

fresh milk in south east Queensland and northern New our competitors. Even though we proudly operate as a

South Wales from 1 July 2014 has been managed Co-operative, it is not in our members’ best interests

extremely well. The capital expenditure program as a whole to allow the Co-operative to become

required to service the volume was completed well uncompetitive in the market place when sourcing milk

in advance of the start of the contract to ensure a or engaging with new customers. The overall benefit to

smooth transition for both Coles and Norco. all members will be greater and will be shared amongst
all through profit distributions and retained earnings
More recently we have been able to negotiate a longer
for future capital projects.
term contractual arrangement with Aldi to supply
the Sydney market. Norco has maintained a long The overall diversity of Norco’s business continues to

standing relationship with Aldi since its entry into the provide benefits to our members. The transformation

Australian retail market and moving to a long term of the Rural Retail / Agribusiness division over the

contract provides for greater security for our Raleigh last several years supports our strategy of increasing

manufacturing facility. member returns through avenues other than milk

5 5
 price. It is pleasing to see the Suppliers’ Patronage
Scheme at its highest reward level since the inception
of the scheme and the usage of the interest free
accounts within the Rural / Agribusiness division is
also supporting members / milk suppliers with cash
flow to grow their dairy businesses without having
Denzil Thomas
to pay a bank for the use of funds. With significant
What Norco means to us improvement in the beef and horticultural sectors
in the last quarter of 2014/15, our expectation is
Denzil and Audrey Thomas of Possum Creek have
for a sustained overall improvement in the 2015/16
been Norco milk suppliers for 50 years, however the
financial year for Rural Retail / Agribusiness.
association between the Thomas family and Norco goes
back even further. Board of Directors

Denzil’s father Harry purchased the Possum Creek The Board continues to remain committed to
property in 1918 and started supplying 10 gallon cans extending our knowledge base. The introduction of
of cream to the Byron Bay factory. He married Mary in master classes within the Board room to enhance our
1919 and they had six children, with Denzil being the strategy development has been beneficial over the
youngest. Denzil has fond memories helping his father last twelve months. Additionally, in the coming months,
in the dairy and piggery and riding his favourite horse the Board will also consider filling the Independent
“Titch”. After leaving school at 16, Denzil remained on Director position formally held by Mr David Hodges.
the farm to help his father work the dairy and piggery. The Directors will consider and assess the skill set
that they believe will add the maximum value to the
In 1954 Denzil and Audrey married and then later built
Board and if a suitable candidate is found they will be
their home on the family property while working the farm
recommended to our members.
with Denzil’s parents. Some years after the death of his
father in 1959, Denzil and Audrey were able to secure At the 2014 Annual General Meeting we farewelled
the farm with the support of Denzil’s siblings. Denzil two long standing and well respected Directors. Mr
and Audrey have also welcomed four children into their David Hodges finished his Independent Director role
family; twins Margaret and Susan, followed by David and after completing two, three year terms. Over this
then Geoffrey. period of time, David contributed greatly to the Board
process in areas such as strategy, policy development
Norco records indicate that Denzil and Audrey
and member related issues. As a result of David’s input
became the milk suppliers on 1 July 1965 and Denzil
and guidance, there have been major improvements
has confirmed this, meaning that not only is Norco
made to the rigour relating to strategy development
celebrating its milestone of 120 years, but Denzil and
over this time and we would like to thank David for
Audrey are also celebrating 50 years as Norco milk
his commitment and dedication to Norco and to our
suppliers in their own right.
members.
In explaining why he and Audrey value their long term
Mr Tom Cooper retired from the Board after serving
association with Norco, Denzil advised: “Norco provides
as a Director for 12 years, having been first elected
us with a sense of stability. We can depend on Norco to
on 13 November 2002. By way of background, on 25
take all our milk and we in turn make full use of Norco
June 2014 members approved changes to Norco’s
for our supplies of grain, fodder, seed and fertiliser etc.
Rules relating to the geographical boundaries of the
We are happy with the service and the staff are always
Northern and Central Regions. As a result of these
pleasant and obliging, in fact most of our farm inputs
changes, Tom was no longer eligible to serve as a
come from Norco and Goldmix Stockfeeds.”
Supplier Director for the Northern Region at the
Norco has a rich history of “family farms” that have end of his then current term. Regardless of the Rule
loyally supplied Norco with quality milk over many years, changes, after 12 years’ service Tom decided not to
and in some cases, over several generations dating back offer himself for re-election. During his 12 years of
to 1895. service, Tom always demonstrated a great amount of
compassion and care for all the members and was very

6
much a supporter of the co-operative structure. This after the date of cancellation in accordance with
was most evident when the Co-operative acquired Section 163 of the Co-operatives National Law (CNL).
many new members in south east Queensland in
As a result, the Board will be recommending to
recent times. Tom would ensure that each and every
members via a Special Postal Ballot in November
new member was welcomed into the Co-operative
2015 that the current scheme be amended so that it
and that they were given a comprehensive overview of
has a secondary purpose, being to use funds collected
the business. Tom was also a strong supporter of the
(that exceed the amount required for the purpose
Rural Retail / Agribusiness division and took an active
of repayment of former members’ capital) to assist
interest in helping to return that business unit to the
in funding existing and future capital projects as
profitability it enjoys today. Being a team player, Tom
approved by the Board of Directors.
always actively participated in Board meetings and
strategy sessions and in addition to providing his own Finally I would like to thank our members for their
views, he was always willing to consider the views of continuing support and our staff for their incredible
all Directors around the Board table to assist in good dedication and commitment to meeting the
decision making processes. requirements of our loyal customers. Without the
continuing support of everyone involved in the Co-
With the changes to the regional boundaries approved
operative we could not have achieved what has truly
and in place for the 2014 Election of Directors
been a successful year.
program as described above, Mr Heath Hoffman was
successful in being elected to the Board to fill the
vacancy created in the Northern Region.

In my 2014 Chairman’s Report, I discussed the

circumstances relating to Mr Peter Neal vacating his
GREG McNAMARA
office as a Supplier Director on 30 June 2014. In a
letter dated 13 February 2015, I retracted comments Chairman
made in the 2014 Annual Report and apologised to Board of Directors
Peter and his family for publishing information that was
not factually correct. The letter acknowledged that
there had been no changes to the farm ownership and
operation of the Neal family farm and that in fact the
reason Peter was no longer an active member was due
to Norco’s interpretation of the active member Rules.

Peter subsequently took the steps necessary to comply

with Norco’s interpretation of the active member Rules
and the Board approved his reinstatement as an active
member. As a result, Peter was then able to nominate
for the casual vacancy in the Southern Region which
had been created as a result of his vacation of office
on 30 June 2014. Peter was re-elected unopposed to
the Norco Board on 24 September 2014.

Compulsory Share Acquisition Scheme

Norco has made significant progress in the repayment

of former members’ capital as a result of the continued
operation of the Compulsory Share Acquisition
Scheme over recent years. In the last financial year
$570,704 has been repaid to former members and
we are now in a maintenance phase in relation to the
repayment of cancelled and forfeited shares, whereby
the shares of former members are repaid one year

7
 CHIEF EXECUTIVE OFFICER’S report

Business overview 2014/15 equipment as well as our people. To give you a sense of
the magnitude of the growth, our sales have grown over
The 2014/15 financial year has been another
45 percent in the last three years.
successful one for our Co-operative in terms of
achieving and exceeding all financial Key Performance Our Norco Foods business division, consisting of the
Indicators (KPI’s) as set by the Norco Board. Our Co- Ice Cream Business Unit (ICBU), Norco Milk and Milk
operative has exceeded our financial budget once Supply, achieved a 51 percent increase in EBITDA over
again. The collective final results for the Co-operative the 2013/14 year. This was an excellent outcome and
for the financial year ending 30 June 2015 have again the demand was managed exceptionally well by our
improved, taking into account the difficult trading Foods’ teams throughout the year. Milk Supply was
conditions in the market place as well as the ongoing down on last year due to the average milk pay increase
turnaround of the Front End business re-acquired on 9 of 3.23 cents per litre. A further 0.5 cents per litre
November 2012. This continues to show the strength increase for the base has been successfully achieved
of our brand and members / milk suppliers, as well as for the commencement of the 2015/16 financial year
the commitment, calibre and talent of all our people in for members / milk suppliers who have entered into a
the Co-operative. five year contract. Norco Milk’s EBITDA was up 65.7
percent on last year predominantly due to the Coles’
The final result for 2014/15 has enabled us to not only
contract volume and Route business improvement.
take a longer term strategic position to further improve
ICBU was up by 12.4 percent on last year’s EBITDA
the farm gate returns for our members / milk suppliers but
which was driven by higher volume, better margins and
to also plan well ahead for required capital reinvestment.
also the returns from the plastics division.
Our heritage as a 120 year old Australian Farmer Owned
Co-operative has allowed us to strategically position our Our Rural / Agribusiness division again had a strong
brand and further enhance the point of difference and result in 2014/15 with a collective result that was
competitive edge that we have in the market place. Our up on last year’s EBITDA by 3.6 percent, before
diversified business model, geographical positioning, patronage (Rural up 1.5 percent / Agribusiness up
quality of product and strong long term relationships by 6.4 percent). This was driven by better trading
have again been significant drivers in achieving these results achieved from our Rural Stores, Goldmix
financial results. The co-operative structure and values Lismore Stockfeed Mill and also by the Grain Trading
that we collectively uphold are, without a doubt, proving business. The Rural Stores team continue to focus on
that our members / milk suppliers can rely on the co- operational efficiencies, improved buying, customer
operative to manage their supply in the market place service and gross margins as well as now planning
and this is reflected in our continuous solid growth as the expansion of the Rural network over the next few
well as the returns being achieved for our members / milk years. The Suppliers’ Patronage Scheme was up 37.6
suppliers at the farm gate. percent on last year with $1.1 million of patronage
rewards paid out to our members / milk suppliers for
We have collectively finished the 2014/15 financial
shopping with Norco. This is a record for the business
year at an EBITDA (Earnings before Interest, Tax,
compared to last year’s $766,000.
Depreciation and Amortisation) level of $10.643
million which is 38.4 percent up on last year. This is Corporate costs increased on last year by 8.3 percent.
an excellent result taking into account that we have This was due to the increased size of our overall business,
been able to put an average 3.23 cents per litre now with a collective turnover of over $500 million. The
increase into our base farm gate milk price. This is also increase was due to higher IT and corporate costs, such
a material improvement on the prior year especially as travel for export and managing a larger business.
when you consider all the capital projects that have Corporate continues to manage and implement tight
been successfully implemented during the year. Our cost and overheads control. This is reflected in Norco’s
total debt at the end of the 2014/15 year was $33.8 Corporate costs as a percentage of sales consistently
million; this is $.5 million down on the previous year being better than the industry standard for a company
due to finance lease payments made on the moulding of our size. As we strengthen our financial position and
equipment at Labrador. With the explosive growth and implement long term opportunities we will continue to
financial achievement we have experienced in the past put further focus on the development of our people and
few years, we will need to further invest in our plant and succession planning.

8
Human Resources (HR) have continued to adapt and - IT and systems development to meet business growth
resource as necessary to meet the growing needs requirements.
of our business units. With our clear focus being on
- People - professional development and succession
business growth, at the same time we need to keep our
planning.
people safe in all aspects of Work Health and Safety
(WHS). Our HR team is building further training and - Manage and meet all banking covenants.
development platforms for all our teams in respect of • Rural / Agribusiness Division:
best practices in WHS as well as individual professional
- Continue to focus on the ongoing financial
development programs.
improvement and market share growth of the Rural /
Again this year there are a number of accomplishments Agribusiness division.
from all the teams at Norco. I have listed below some of
- Explore further opportunities for expansion of the
the key achievements from the 2014/15 financial year,
Rural Stores network.
including.
- Ongoing strategies to address profitability of our
• Continued development of our export opportunities in
Toowoomba site.
fresh milk and ice cream.
- Improve Rural Stores buying power, network sales,
• Route business sales were up by 16.5 percent on
service and market share.
previous year.
- Increase volumes through the Lismore and Windera
• EBITDA of $10.643 million (up 38.4 percent on last
Goldmix Stockfeed Mills and further capital
year).
reinvestment as required.
• Net profit up on last year by 520.8 percent.
- Training and development of our sales people.
• Collective Co-operative sales increased 20 percent.
- Focus on training, reinvestment and upgrades in all
• Average milk price increase to our members of 3.23 aspects of WHS best practice at our sites.
cents per litre achieved for 2014/15 and another 0.5
• Foods Division:
cents per litre budgeted from 1 July 2015.
- Focus on Norco branded product market share and
• Members’ volume was up 29.3 percent on last year.
point of difference.
• The Rural / Agribusiness division net profit result was
- Ongoing development of strategic alliances with key
6.5 percent up on last year.
business partners.
• The net profit achieved in ICBU was up 21.1 percent
- Consistent milk volume pre selling.
on last year.
- Continued growth and development of our ice cream
• Met and exceeded all banking covenants.
business.
• Suppliers’ Patronage Scheme rewards up 37.6 percent
- Improvement of milk price at farm gate.
on last year (record amount of $1.1 million paid out).
- Ongoing research and development of future export
• Norco Milk sales up 53.4 percent on last year.
opportunities.
• Debtors’ days improved by 4.9 days. This has enabled
- Continued focus on the turnaround and profitability in
the Co-operative to in turn pay creditors earlier, on
the Route trade.
average by 4.4 days.
- Capital upgrades at all Norco owned sites to enhance
• New high speed filler project for Raleigh ($2.4 million)
business development.
approved in 2014/15 is ahead of schedule and due
for commissioning in August 2015. - Training and development of our teams.

Our 2015/16 key points of focus are: • Human Resources:

• Corporate: - Focus on WHS best practice across all business units.

- Continue to focus on cost controls and efficiencies in - Training and professional development requirements
all overheads. for our teams.

9
 -B
 etter communication processes and clear strategic
directional focus for all our business units.

• Focus of Senior Management Team:

- Improve core businesses profitability.

- Ongoing development of core strategic partnerships

across all business units.

- Continued improvement of asset values and goodwill

appreciation of the Co-operative.

- Competitive farm gate milk price and increased

shareholder returns through ongoing profit growth
across all divisions.

- Enhance the levels of service, support and

communication to members / milk suppliers and
customers.

- Achieve / exceed KPI’s and budget.

- Strengthening, positioning and ongoing sustainability

of the Co-operative.

- Ongoing focus on employee training, development,

mentoring and career/succession planning across
business units.

- Continued investment and strive towards best

practice in all aspects of WHS.

- Focus on long term strategic plans.

In conclusion, I would like to thank all Norco employees,

members, milk suppliers, stakeholders and customers
for your support, input and loyalty to the Co-operative
throughout the 2014/15 financial year. I look forward
to working with you all as we continue to strive to
strengthen the business in the 2015/16 financial year.
We are unique as a truly 120 year old Australian Farmer
Owned Co-operative. We have positioned ourselves
to take advantage of future opportunities to improve
and grow our Co-operative to ensure our long term
sustainability.

(signature)

BRETT KELLY

Chief Executive Officer

10
 Board of Directors and Management 1991

Front row: DC Macrae, AW Hoskins (Gen. Manager), WR Noble (Chairman), RG Everingham (Deputy Chairman), AG Binney (dec’d)
Back row: GE McDonald (dec’d), RA Armstrong, KB Weatherstone, LC Cork (ded’d), WJ Jarrett, BWC Patch, RG Hancock (Secretary)

Norco’s more recent history remembered

With a backdrop of past newspaper cuttings on the table and around the walls of the Norco board room, four men
who played key roles in shaping what the co-operative is today came together to re-live the highs and lows of
challenges during the 1970’s, 80’s and 90’s when the very future of the north coast dairy industry was on the line.

Warren Noble (a director for 24 years and chairman for 10 years), Ray Everingham (a director for 16 years
and deputy chairman for some 13 years), Alan Hoskins (general manager for 10 years) and Graeme Hancock
(commercial manager / secretary for 13 years) all shared a few instances of key issues during their respective
terms with the co-operative.

Interestingly, there was something common to all as they looked back during their terms of office – the pursuit of
opportunities that had the potential to improve the co-operative, including joint ventures with other dairy companies.

Warren Noble, referring to the Sydney milk ‘war’, paid tribute to former Norco chairmen, Roley Johnston and
Alex Armstrong, whose efforts, he said, saved the north coast dairy industry. In his time on the board it pleased
him to see the introduction of meetings between directors and suppliers on their own turf. The amalgamation
of other dairy companies with Norco was another key development, and notably allowing Norco to enter the
Queensland milk market.

Ray Everingham said that the Norco Pauls Milk joint venture agreement back in the mid 1990’s heralded a
change of direction for Norco from its traditional butter, cheese and milk powder businesses, enabling Norco
to modernise its milk plants and laying the platform for what the co-operative is today.

Alan Hoskins recalled three highlights during his term as general manager - the fight for the north coast to
access the Sydney milk market; a partnership with Baskin Robbins and Sara Lee in ice cream manufacture; and
the Norco Pauls Milk joint venture agreement. The ice cream venture, he said, enabled Norco staff to visit the
USA for training in the manufacture of premium ice cream.

Graham Hancock also mentioned mergers as one of the highlights during his term of office, in particular the
purchase of the PDS rural stores business and the effect this had on Norco’s expansion program in rural stores.
He too mentioned the impact that the Norco Pauls Milk joint venture agreement has had on Norco.

11
 Locals supporting their local Norco milk

The Norco link with Murwillumbah has turned full circle

with the opening of an IGA supermarket store on the
site of what used to be the Norco butter and milk
factory. Norco operated the factory until 1996 on the
banks of the Tweed River and later sold the property.

The site was more recently purchased by Mr Brett

and Mrs Leanne Bugg and it now houses their second
Murwillumbah IGA store in which the Norco heritage
lives on, being an exclusive Norco milk provider.
It’s a unique business venture that re-introduces
locally produced milk to a site that once boasted the
production of 1420 tons of butter in one year, and
reflects the owners’ desire to promote local produce in
their store.

It made sense to incorporate the flavour of Norco into

the new business, according to the Buggs. “We wanted
to build this store around local products and the local
community, so it’s important to stock product that the
locals want from their local suppliers, and that means
local Norco milk,” owner Brett Bugg said at the store’s
official opening on 30 April 2015.

“Norco is local and residents are loyal towards their

locally produced milk,” he said.

David Blunden, Norco Milk franchisee

Brett & Leanne Bugg

12
 NORCO FOODS

Sales and Marketing new locations. Just a few short years ago we sold
very little milk in the Toowoomba market. Today we
Andrew Burns
send more than two semi trailer loads of milk a week
General Manager Sales & Marketing Norco Foods
into this growing Norco market. It’s the same story for
the Sunshine Coast, where we are growing out of our
Norco Milk
current distribution location. Brisbane, our closest
The geographic reach of the Norco brand is growing capital city, has seen outstanding growth for Norco
beyond our traditional boundaries and we continue over the last few months and that trend will continue
to increase our number of products with new and as we invest our time and marketing resources into
exciting offers that attract a premium. our closest major population base. The 2015/16 year
The 2014/15 year has proven to be a challenging will be another challenging yet rewarding one as we
yet rewarding one for the milk sales team at Norco continue to stretch our supply base and enter new
Foods. We should never underestimate the strength markets primarily north and south.
of the Norco name in our heartland; however we Ice Cream
must remind ourselves that outside our home base,
2014/15 has been another record year on the back
there still remain significant opportunities to grow
of increasing production underpinned by the desire of
brand recognition.
the major retailers to grow their own brand presence.
So how do we win in the market place and grow We have been, and continue to be, the largest supplier
our distribution base? Unlike others in the market of house brand products to Coles, Woolworths and
place, price isn’t our primary focus; it’s our quality, Aldi while continuing to drive innovations with national
our heritage, our service and our point of difference. and international brand owners.
Every day our sales representatives, account With a warm summer and a growing number of
managers and distributors service our loyal product lines we now produce, our teams did well
customers and consumers, restocking shelves to manage the complexities of sales, production
with fresh deliveries of our award winning products. and logistics during 2014/15. It’s through the
However, we not only replenish the traditional professionalism of our teams and the quality of the
range of Norco products stocked. In addition, the products we produce, starting with the quality of
team has a firm focus on providing customers, both raw materials (milk and cream), that Norco is held
existing and new, with an extended and innovative in high regard and as a result, our relationships with
product portfolio. our clients are strong. It’s important for us not to
During the 2014/15 year we launched a number rest however and to continually challenge ourselves
of new product initiatives that provided Norco and our business to continually improve and to be
milk with a growing range of premium offers that seen as a supplier of choice.
support our stability and diversity in the market Export
place. We are proud to have launched a range of new
With cautious steps our exports of fresh milk into
Norco branded products including 100% Jersey
China continue to grow. It’s a very difficult market
milk, Lactose Free milk and a revamped range of
to win in and our experiences to date support such
custard that will all aid in supporting the desire of
a claim. Fresh milk deliveries continue to be flown
the market for innovative products and offers that
into China weekly and it is pleasing to see our
provide a point of difference. Add to these products
product on the retail shelves within the major cities
our Norco Non-Homogenised milk which continues
of Shanghai and Guangzhou. However, it will take us
to grow every day and we really have a growing
more time and resources to succeed in this market,
range of alternatives that give our loyal consumers
as we continue to seek out reliable partners to work
products that meet their expectations.
with. The year ahead will prove to be an important
Our relationship with the major retailers is also one in this regard.
strong, allowing us to incrementally grow the Norco
On the ice cream side, we are increasing our
brand on the back of major supply contracts. These
footprint, with product produced in Lismore now
supply contracts allow us to invest capital into our
available in Japan, China, Philippines, USA, and
plants whilst providing a secure, long term home for
shortly Taiwan. These are indeed exciting times for
our Members’ milk.
our export business, as we take Norco from the
Our market place is growing and we continue to reach domestic markets to the world.

13
 Operations Our team focus on continuous improvement of
quality, manufacture and distribution, together with
Robert Vandermaat
the development of our staff was exceptional. This
General Manager Operations Norco Foods
will continue to be a focus to ensure we supply the
best quality products and service to our customers.
With record sales achieved by the Norco Foods’
With increased throughput at all sites our production,
Sales and Marketing team, the performance of our
milk intake and distribution areas have achieved their
factory operations and New Product Development
targets for quality and efficiency. A large amount of
teams has been impressive throughout the
this achievement can be credited to the standardising
year in servicing those record sales. The volume
of systems across all three Foods’ sites.
through our plants has continued to grow with a
three percent increase in the Ice Cream Business First time quality results for the year are the highest
Unit (ICBU) volume and a 58 percent increase in achieved to date which is a credit to all staff given the
Norco Milk production primarily due to the Coles’ record production levels. Our ability to develop and
contract that commenced 1 July 2014. We have trial new products for the market must be recognised
accomplished this growth while also reducing and commended because in 2014/15 our teams
storage costs and improving transport efficiencies. released 27 new ice cream lines, three specialty milk
products and a cold fill custard range of products.
Focus on continuous improvement and quality
Highlights for the 2014/15 year include:
Working in an environment where customers are
seeking lower cost solutions and demand a quality • The first full year of Coles’ production at Labrador
product, continuous improvement has been, and along with the export of fresh milk for the China
will remain, the centre of attention for our three market.
processing facilities at Labrador, Raleigh and Lismore. • Substantially completed the new export filler
project at Raleigh expanding our capability to
Of the 45 million litres of ice cream processed at
pack for both the export and domestic markets
our ICBU site, 41 percent was manufactured using
(being commissioned during August 2015).
Norco packaging and at our two Norco Milk factories
at Labrador and Raleigh, all our requirements for 2 • The introduction of a new Norco fleet to service
and 3 litre milk bottles were manufactured on site. our milk depots.
New cooling systems for our injection moulders • Three new milk depots to accommodate our
at Lismore has given us the ability to refine the growing Route volume and distribution reach.
quality of our tubs and lids, in turn improving the
Work Health and Safety
quality of finished product and creating efficiencies
in the ICBU. Working closely with our suppliers The health, safety and wellbeing of our people is
was of high importance during this growth year as critical to the success of our business. Regardless
without the raw materials being available we could of where our people are located or the type of
not achieve our production targets to support the work they perform, we strive to create a working
record sales. All these factors combined to ensure environment that is free from occupational
a strong finish to 2014/15 and a good start to the injury. Identifying and managing risk is a critical
2015/16 year ahead. component of our management approach.

14
 Milk Supply

Rob Randall litre translating to an overall average milk price

General Manager Norco Milk Supply before patronage and dividend of 56.48 cents per
litre.
In the 2014/15 financial year, Norco Milk Supply
• Average BMCC results for the year reduced to
experienced a significant step-change in managing
196. This represents the fifth year in a row that
the milk volumes received from our members / milk
average cell counts have decreased, providing real
suppliers. The total members’ milk received was
benefits to our supply chain and confirming our
211 million litres, up 48 million litres or 29 percent
reputation to strive for quality.
from 2013/14. The driver of this growth in milk
supply has been the increased demand for Norco Farm Services
milk products through the retail and route sales
Our Norco Farm Services team welcomed Dr Mark
channels. This significant growth in milk supply
Callow to the team during September 2014. Mark
has been achieved through the acquisition of new
brings a wealth of knowledge from his previous role
members / milk suppliers and from growth within
at the University of Queensland and builds on the
our existing farmer base.
strength of our team.
While it is important to note the continuing negative
Through both co-operation with industry
impacts of the shortfall of milk in the Queensland
organisations and internally driven activity,
market, in an environment of variable seasonal
there has been a marked increase in research,
conditions during 2014/15 (both difficult and
development, education and extension involvement
reasonable) and the continued high input costs
with our members / milk suppliers during the year.
experienced by dairy farmers, in overall terms Norco’s
This significant drive will continue in 2015/16.
milk suppliers have increased milk intake volumes on
a year-on-year comparative basis in all regions. Commodities report

Another major positive development for Norco and The milk commodity market had a significant
the dairy industry as a whole, has been the number decline in value in the 2014/15 financial year.
of new start-up farms approved by the Board to The combination of world milk supply growth, the
supply Norco. In 2014/15, a total of seven new decline of China’s milk powder purchases and the
start-up farms have been accepted, mainly in Russian trade embargo, have contributed to prices
Queensland and northern New South Wales. While declining from record highs in early 2014 to record
these farms are generally small in volume at the lows by mid 2015.
commencement of supply, this development could For Norco, the impact has been managed through
be said to represent a significant positive change in the overall supply volume strategy with a lower
confidence for the northern dairy industry. proportion of milk being exposed to the commodity
In summary for 2014/15: market. However, the decline in pricing remains a
concern for the local and world dairy market where
• Norco members’ total milk supply for the year was
we have seen record low farm gate pricing in New
211 million litres – up 29 percent from the prior year.
Zealand and declining prices elsewhere, including
• The average milk pay increase was 3.23 cents per in southern Australia.

15
 norco rural / Agribusiness

Damon Bailey Norco Rural continued to deliver on its growth

General Manager Norco Rural / Agribusiness strategy with the addition of two new branches.
In November 2014 Norco and Wamuran Co-
operative announced the conversion of Wamuran
The Norco Rural / Agribusiness division continued Co-operative’s ‘Suncoast Rural’ into a Norco Rural
to deliver on its strategic plan of sales growth, profit Agency. Wamuran is located on Queensland’s
improvement and regional expansion in 2014/15. Sunshine Coast approximately 15 minutes west
Both Norco Rural and Agribusiness delivered year of Caboolture. The Wamuran region is an intense
on year trading improvements combined with a horticultural area being a significant producer of
significant increase in patronage reward payments strawberries and pineapples. The area also contains
to members. beef, dairy and equine markets and additionally
The regions within which Norco Rural operates captures a large number of smaller lifestyle or
predominantly enjoyed reasonable to good hobby farm clients.
seasonal conditions during 2014/15, the In June 2015, Norco and Jordan Rural Supplies
exception being the New South Wales Northern announced the opening of a Norco Rural agency at
Tablelands. Unfortunately this area encountered Gayndah. Gayndah is located in the South Burnett
its second year of below average rainfall and was region of Queensland and is approximately 70
subjected to extremely difficult and challenging kilometres north of our Goldmix Stockfeed Mill
seasonal conditions. This has resulted in significant located at Windera, and 100 kilometres northwest
reductions in livestock numbers throughout the of Norco Rural Murgon. The addition of Wamuran
New England. The Darling Downs and South and Gayndah strengthens Norco Rural’s presence
Burnett regions also experienced extended periods in south east Queensland, and fills gaps within
of dry weather, particularly during the first half of our regional footprints within the South Burnett
the financial year, but conditions were generally and Sunshine Coast. In total, seven Norco Rural
manageable. locations have been added to our business since
On the coastal areas we enjoyed fair to reasonably January 2013, three of these being located in our
favourable conditions throughout 2014/15 with southern territory and four in our northern territory.
timely rainfall events ensuring our pasture, cropping Major projects undertaken during 2014/15
and horticultural clientele were able to implement included the incorporation of Hunter Rural and the
management and farming programs as planned and Murgon ‘greenfield’ operation into Norco Rural. Both
on time. sites commenced as business units within Norco
Rural during June 2014. The Wamuran business
unit came on line in November 2014, followed
by Gayndah in June 2015.

The past year has seen a significant

change in the way the business
focuses on Workplace
Health and Safety (WHS).

16
 Lismore Rural Store staff members

2014/15 saw the revamp of the group’s safety The Norco Rural division delivered a strong sales
committees and the way these committee performance with sales up 9.11 percent year
meetings are conducted. In addition, a renewed on year and a solid increase in gross profit of 8.5
emphasis was placed on the training needs and percent which was primarily driven by sales growth.
requirements of our employees, with a focus on Margin was slightly adverse by 0.08 percent
both practical and theoretical training. A significant and is a reflection of the product mix and follows
amount of work has gone into this area which has three years of margin improvement. A significant
delivered positive outcomes including a 33 percent increase of 15.4 percent in sundry income was
year on year reduction in the number of workers’ delivered and follows last year’s improvement of 6
compensation claims. More work is required and percent. The positive increase in sundry income is a
will remain a major focus point for management reflection of Norco Rural’s commitment to industry
and staff. leading suppliers and brands, and supporters of
R & D products.
In terms of capital programs, several major
projects were undertaken during 2014/15. In the The Agribusiness Mills based in Windera and
Agribusiness division, our Goldmix Stockfeed Mill Lismore entered 2014/15 off the back of strong
at Windera took delivery of a new Kenworth T359 demand and record volumes in 2013/14. Strong
8 x 4 bulk delivery vehicle with a custom imported demand continued into the first half of 2014/15,
Walinga aluminium tanker. The unit provides weight but a significant seasonal break in December
savings and increased carrying capacity above our 2014 – January 2015 resulted in an abundance
older units. At our Goldmix Stockfeed Mill at Lismore, of paddock feed and a reduction in demand for
the pellet production line underwent a complete manufactured feed products. Despite the drop in
reconfiguration which included the installation of a demand, combined volumes across our two mills
new pellet cooling, sieving, crumbling and transfer were slightly favourable to the previous year.
system. This has improved efficiency and capacity
The Norco Grain division that sits within
of our pellet production system. For the coming
Agribusiness continued its strong performance in
year capital projects already underway include
2014/15 with a 37 percent increase in gross sales
improvements at our Bellingen Rural Store site,
and a 41 percent increase in volume traded. As a
the continued rollout of pallet racking upgrades
total business unit Agribusiness produced a 16
throughout the business and replacement of the
percent increase in sales.
Lismore Mill bulk grain storage and reclaim system.
Patronage
Financial Performance
Patronage payments to members during 2014/15
The combined business units of Norco Rural
increased to a level never before seen. Total
and Agribusiness delivered an EBITDA result
patronage payments to Norco members for the
of $3.977 million. This result is adverse to the
year totalled $1.054m. This represents a 37.6
previous year by $0.197 million or 4.7 percent.
percent year on year increase and follows on from
Norco Rural produced a 1.5 percent improvement
the previous increase of 22.2 percent. Sales to
in EBITDA year on year and Agribusiness produced
members by the Norco Rural and Agribusiness
an increase in EBITDA of 6.4 percent. The driver of
divisions increased by 40 percent and 93 percent
the adverse result to last year is the significant year
of members transacted with the Co-operative
on year increase in patronage payments. Patronage
during the year.
payments to members were up $0.3 million and this
produced the adverse EBITDA result.

17
 FINANCIAL MANAGEMENT

Camille Hogan million of capital expenditure which has been spent

Chief Financial Officer at Raleigh on the new high speed filler. This was
able to be achieved as a result of the significant
reduction in debtor days. Total debt at year end,
In the 2014/15 year Norco achieved a net profit including the Labrador moulding equipment finance
of $3,105,000 versus the prior year’s $500,000 lease, is $33.8 million versus the prior year’s $34.3
and an EBITDA of $10.6 million versus the prior million. The total debt of $33.8 million includes
year’s $7.7 million. Both these financial results $31.9 million of core debt with St George, $1.8
were significantly favourable to 2013/14 and were million of finance leases and $0.1 million of Norco
driven by a higher sales volume in the Ice Cream Capital Units. During the year, Norco worked with
Business Unit (ICBU), the volume upside from St George to replace the working capital overdraft
the Coles contract in Norco Milk and improved facility with an invoice discounting facility. This
trading in Rural Retail / Agribusiness. Norco’s allows Norco to borrow against the Norco Foods’
total debt, which includes finance leases, reduced debtor book during the month to best manage its
by $0.5 million during the year from $34.3 million cash flow. This is not a factoring facility where the
to $33.8 million as a result of scheduled finance debt is sold to St George, rather it is a short term
lease payments made on the Labrador moulding loan facility secured against the debtor book to
equipment. In accordance with the facility, there manage Norco’s monthly cash flow. The new facility
was no requirement to repay any debt to St George gives the business a lot more flexibility than the
Bank during the 2014/15 financial year, with the overdraft system.
next repayment due on 1 October 2015.
Bank covenants
Higher EBITDA in 2014/15
Norco again met all bank covenants set by St
The $2.9 million EBITDA improvement over the George. Norco’s EBITDA Leverage, which is total
2013/14 result was driven by strong performance debt divided by EBITDA for the full year, was
across the business units. The EBITDA for the 3.05 versus the result of 3.98 in 2013/14. This
ICBU was up 12.4 percent due to volume growth. improvement is a function of increasing profit and
Norco Milk’s EBITDA was favourable by 65.7 reducing total debt. The Interest Cover Ratio, which
percent, driven by the volume lift resulting from is the number of times EBITDA covers financial
the commencement of the Coles contract on 1 commitments, achieved a result of 3.59 versus the
July 2014 and the improvement in Route Trade prior year’s 2.86.
volume. The EBITDA for the Milk Supply business
Working capital
was adverse 17.8 percent due to paying a higher
milk price which benefits our members. The Rural Working capital (made up of debtors, creditors
Retail business unit EBITDA improved by 1.5 and inventory) as at 30 June 2015 was $11.7
percent due to higher volume and rebates, while the million versus the prior year’s $12.6 million, with
Agribusiness EBITDA was up 6.4 percent, driven the decrease due to the reduction in debtor days
by higher volume at the Lismore Mill and higher despite a 20 percent increase in sales.
sales from the Norco Grain division. Return on
Dry former member repayments
Capital Employed (ROCE) doubled to 5.0 percent
in 2014/15 driven by the improved profit position. Using the funds derived from the Compulsory Share
Acquisition Scheme, Norco repaid $570,704 to
Debtor and creditor days
“dry” former members this financial year. This takes
Debtor days were materially lower at 31.0 active member capital to 89 percent of issued
compared to 35.9 days in 2013/14 which is a capital compared to 88 percent in 2013/14.
significant improvement and a record for the
business. Creditor days were 32.2 versus 36.6
days for the previous year which was able to be
achieved as a result of the record debtor days.

Debt stable

Norco’s core debt with St George remained at

$31.9 million in 2014/15 which is a pleasing result
given the growth of the business and the $2.4

18
 NORCO PEOPLE

Yasmin Lawrence the entire business in relation to health and safety. By

Human Resources Manager increasing the competencies of all workers in relation
to WHS we aim to see a reduction in incidents and
injuries related to unsafe behaviours and attitude.
With Norco celebrating its 120th Birthday in 2015 it
gave us a chance to reflect on the reasons why what
started as a small farmer co-operative has continued to
grow and thrive in difficult circumstances and against
the odds while so many other businesses have failed. As Notice of Acceptance of an Enforceable
in any similar scenario, there is a range of contributing Undertaking under Part 11 of the Work Health
factors, but certainly one of the big ones is people. and Safety Act 2011.

Norco is lucky to have a talented and dedicated On 25 July 2013, a Worker of Norco Co-

workforce who truly believe in the past, present and operative Limited sustained a serious injury

future success of the business. Out of the 750 people whilst operating a Compactor at Goldmix

that work at Norco, 116 of them have been at Norco Stockfeed, 14-17 Krauss Avenue, South

for over 20 years. The collective knowledge and Lismore.

experience of these people, combined with the fresh The WorkCover Authority of NSW investigated
ideas of our newer employees is one of the factors the incident and subsequently alleged that
that gives us an edge over our competitors – we know Norco Co-operative Limited contravened
what to do and how to do it well. section 19(1) of the Work Health and Safety
Act 2011.
The Human Resources team have had a busy year:
filling vacancies to increase our team due to business This notice has been placed under the
growth; providing training and development across terms of an enforceable undertaking and
the business; working with managers on performance acknowledges acceptance of an undertaking,
improvement which then links to business that is enforceable under the Act, from Norco
improvement; and ensuring our teams were working Co-operative Limited, ABN 17 009 717 417
together in a harmonious way. as settlement of the abovementioned alleged
contravention.
Work Health and Safety
The undertaking requires the following actions:
Without doubt throughout Norco’s 120 year history
• Conduct Executive Work Health and Safety
the business has seen ten-fold change in relation to
Workshops;
Work Health and Safety (WHS).
• Develop online Work Health and Safety and
Twentieth century industrial machines were seriously Human Resources induction modules for
dangerous. Workers had genuine reason to fear the staff;
machines they used every day. Occupational injury
• Implement a Human Resources Information
and death were a serious threat to worker’s lives and
System with Work Health and Safety and
livelihoods. Workers didn’t have the kinds of basic
Training modules;
safety practices and compensation schemes that we
• Implement and maintain an accredited
take for granted these days.
Occupational Health and Safety Management
Today Norco’s top priority is the safety of all workers. System;
During the past 12 months the WHS team and • Update and publish “Managing Dairy Farm
business unit have made significant improvements to Safety” Farmer Resources; and
providing a safe workplace especially related to plant • Develop a two part Farm Safety for Children
and equipment, and other high risk activities such as video.
electrical safety.
The full enforceable undertaking and general
Most recently the WHS team has expanded to information about enforceable undertakings is
include a WHS Training Officer who is responsible for available at www.workcover.nsw.gov.au.
developing skills, knowledge and competencies across

19
 directors’ report

The Directors present their report together with the To supplement the existing skill base of the Board
financial reports for Norco Co-operative Limited (‘the and to ensure all Directors are able to gain an equal
Co-operative’) for the year ended 30 June 2015 and knowledge of various aspects of Norco’s business,
the Auditors’ report thereon. the program of master classes continued during
the 2014/15 financial year. Master class topics
The Board of Directors currently comprises six
are predetermined by the Board in consultation with
supplier Directors (non executive) and no Independent
the Chief Executive Officer and presented by senior
Directors.
managers of the business on a regular basis. During
Norco’s Directors bring a range of skills and experience 2014/15, Directors received presentations relating
to the Board, including detailed knowledge of the to export credit terms and Customer Relationship
dairy and agricultural sectors, extensive experience in Management (CRM) software which has been recently
business planning and strategy, strong leadership and introduced into the Norco Milk business.
interpersonal skills. In addition, there is a commitment
The Board of Directors continue to be committed
to achieving a harmonious balance between Norco’s
to ongoing training and professional development.
strategic business objectives and the needs of
During the year, Directors have had the opportunity to
shareholders.
attend a range of industry conferences and to use their
During October 2014, one and one-half days were memberships in the Australian Institute of Company
dedicated to holding a strategic workshop involving Directors (AICD) to attend various AICD educational
Directors and the Senior Management Team. In courses and functions (some of which are listed below
addition, each monthly Board meeting has time in the individual Director profiles). Collectively, the
allocated for Directors and management to discuss Board also undertook in-house training sessions in
strategic issues. relation to Work Health and Safety and also Prevention
of Discrimination, Harassment and Bullying.

Board Meeting 1902

20
DIRECTORS

Gregory J McNamara – Chairman

Greg McNamara has been a director of Norco Co-operative Limited for 19 years and is from the Central
Region. In addition to his role as Chairman of the Board of Directors, he is Chairman of the Remuneration
Advisory Committee and a member of the Milk Supply Advisory Committee, Brand Management Advisory
Committee and Communication Committee.

Greg runs a 300 head dairy herd in partnership with his wife Sue and son Todd at Goolmangar. He has
extensive experience across the agricultural sector, including dairy, beef, pigs, horticulture and animal
genetics.

In his role as Chairman, during 2014/15 Greg has led the Board through some challenging discussions and
decisions relating to issues such as developing Norco’s future growth strategy, the introduction of regional
milk pricing from 1 January 2016 and positioning Norco to be a competitive force in both the domestic
and international market places to ensure Members receive appropriate rewards for their support. Greg’s
approach, whether communicating with Members, major stakeholders or with fellow Board members, is to
be consultative and communicate effectively to ensure that the best outcome possible is achieved for the
Co-operative as a whole.

Greg is a member of the Australian Institute of Company Directors and is a keenly sought after speaker for
industry events and forums. During August 2014, Greg was a speaker at the DIAA Queensland Conference
and later in the year he was involved in a PPB Advisory panel discussion and was a speaker at the Maximising
Agribusiness Competitiveness Forum. He attended the Dairy Futures Co-operative Research Centre and
met with Dairy Australia executives as part of a Norco Board and management delegation. Greg has also
attended many industry events such as the Australian Dairy Farm Investment Forum, the Ag in the Asian
Century Conference, the QDO Conference, the Agricultural Competitiveness Green Paper Roundtable and
the Australia and New Zealand Co-operative Leaders’ Forum. Greg is also a Board member of the NSW
Business Chamber.

Anthony (Tony) W Wilson – Deputy Chairman

Tony Wilson was elected as a director on 4 March 2009 and is from the Northern Region. He is Chairman of
the Milk Supply Advisory Committee and is also a member of the Audit and Risk Management Committee,
Member Services Committee and Communication Committee.

Together with his wife Jillian and sons Nicholas and James, Tony lives and farms at The Risk, 20 kms NW
of Kyogle milking a herd of 260 cows that are Holstein based, with a crossbreeding program in place. Tony
has studied and gained a BA, Dip Ed at UNE, Armidale. Tony also has an interest in agri-politics which has
developed over many years and has been focussed on the welfare of the dairy farming community.

Tony and his family operate a robotic dairy which has created considerable interest within the regional dairy
industry and with the general public.

Tony is a member of the Australian Institute of Company Directors. He was invited to join the Norco Rural
Stores Managers’ Conference which was held in New Zealand in July 2014. During August 2014, Tony
attended the Dairy Futures Co-operative Research Centre and met with Dairy Australia executives as part of
a Norco Board and management delegation. In addition, Tony has been a presenter at the QDO Conference
and the New Generation Dairy Farmers Forum. He has also attended the Queensland Government Dairy
Industry Roundtable with the Agriculture Minister and the Australian Dairy Conference in Devonport.

21
 Heath B J Hoffman - Director

Heath was elected to the Board of Directors on 12 November 2014 and is a supplier Director from the
Northern Region. He is a member of the Milk Supply Advisory Committee, Brand Management Advisory
Committee and Member Services Committee.

Heath is a member of a family partnership that owns and operates a dairy farm near Warwick milking 250
Holstein cows on a full TMR (total mixed ration) system. As a fifth generation farmer, Heath has a strong
passion for the dairy industry and wants Norco and its farmers to succeed and prosper. Heath and his family
have been supplying milk to Norco for eight years and views this time with Norco as being his most positive
in the industry which Heath puts down to being part of a Co-operative model.

Heath brings to the Norco Board a loyal, open minded and common sense approach with considerable
business skills and industry knowledge and a desire to provide fair representation for all Norco Members.
Heath is an affiliate member of the Australian Institute of Company Directors and recently completed the
AICD Company Directors’ Course during August 2015.

Michael C Jeffery - Director

Michael Jeffery was elected as a director on 14 November 2012 and is from the Southern Region. Michael
is the Chairman of the Brand Management Advisory Committee and a member of both the Milk Supply
Advisory Committee and the Member Services Committee.

Michael has been farming at Austral Eden near Kempsey in a family partnership for 26 years and milks a
herd of 300 cows. He has extensive business, marketing and dairy industry experience, including in overseas
countries and has held a number of positions including directorships in dairy related export, consulting
and genetics businesses. In addition, Michael has been a state delegate of both the NSW Dairy Farmers’
Association and Holstein Australia for five years. He had been on LiveCorp’s China Live Export Industry
Working Group Committee for two years and as part of the NorcoNet communication network, has been
Chairman of the Nambucca / Kempsey group for three years. Michael also holds an Advanced Diploma in
Agriculture. More recently, Michael has been appointed as an Alternate Delegate to the Dairy Connect Farm
Group Board and is the current Chairman of the Kempsey Dairy Industry Group, a position he has held for
four years.

Michael is a member of the Australian Institute of Company Directors. During August 2014, Michael
attended the Dairy Futures Co-operative Research Centre and met with Dairy Australia executives as part
of a Norco Board and management delegation. In addition, Michael has attended several industry events
such as the NSW Dairy Forum, the New Generation Dairy Farmers Forum and the Mid North Coast Food
Forum where he was a member of the Forum Panel. Michael represented Norco at the NSW Dairy Industry
Strategy meeting at Camden, attended the Maximising Agribusiness Competitiveness Forum and during
January 2015 travelled to China with members of Norco’s management team.

22
Peter W Neal - Director

Peter’s first term as a director was from 11 November 2009 to 30 June 2014. He was re-elected to the
Board on 24 September 2014 and is from the Southern Region. Following his re-election to the Board,
Peter serves as Chairman of the Audit and Risk Management Committee and is a member of the Milk
Supply Advisory Committee and Remuneration Advisory Committee.

Peter and his family own and operate a 600 cow dairy near Taree, and has been dairying for 47 years first
with his parents and now with his sons, who represent the fifth generation on this farm and wish to continue
dairying in the future for their children.

Peter has experience on boards with 14 years on NSW Dairyfarmers’ Association and 10 years on the NSW
Dairy Industry Development Company (DIDCO – now Dairy NSW), with four years as chairman. Currently
Peter chairs his local North Oxley Island drainage union and the Manning Delta Landholders Protection
Committee. In addition, Peter has a Diploma of Agriculture from Hawksbury Agricultural College.

Peter is a graduate and member of the AICD and during 2014/15 has attended the AICD Company
Directors’ Course Update, the Australia and New Zealand Co-operative Leaders’ Forum and the Maximising
Agribusiness Competitiveness Forum.

Leigh Shearman - Director

Leigh was elected as a director on 14 November 2012 and is from the Central Region. Leigh is Chairperson
of the Member Services Committee and a member of both the Audit and Risk Management Committee and
Milk Supply Advisory Committee.

With her partner Donald Shedden, Leigh owns and operates a dairy farm at Goolmangar just outside Lismore
in Northern New South Wales milking 180 cows. Leigh also has experience across a broad agricultural base
gained over many years, including beef, horticulture and intensive piggery farming. She has also owned
and operated a retail franchise and has worked in the banking industry for 10 years. Leigh has a Diploma
in Rural Business Management, Diploma of Agriculture and Certificate III Financial Services. Leigh is the
vice chairperson of the Far North Coast Dairy Industry Group Inc (DIG), secretary of Subtropical FNC,
chairperson of the Goolmangar Water Users Association and a member of the Steering Committee for the
Northern Rivers Resource Efficiency Focus Farm.

Leigh is a strong believer in the benefits of being part of a co-operative and is confident that this model will
ensure the long term sustainability of Norco’s members and other stakeholders associated with, and reliant
on, a strong and progressive Norco business.

Leigh is a member of the Australian Institute of Company Directors. During the year Leigh attended the
QDO Conference, was a speaker at the PEI Agri Investor Australia Forum 2015 and also presented to a
local Probus group.

Note: In accordance with a Board resolution which is presently effective until December 2015, the full
Board currently constitutes the Milk Supply Advisory Committee.

23
 DIRECTOR ELECTIONS – 2014/15

As a result of Rule changes approved by Members Mr David Hodges finished his Independent Director role
at a Special General Meeting held on 25 June 2014 at the 2014 Annual General Meeting after completing
relating to the definition of the regional boundaries, the two, three year terms. Mr Hodges was not nominated
retiring Director for the Northern Region, Mr TJ Cooper, by the Board as a candidate for a further term as
was no longer eligible to serve as a Supplier Director Independent Director.
for the Northern Region. Regardless of the Rule
The positions of Chairman and Deputy Chairman are
changes, however, after 12 years’ service as a Supplier
voted on annually by the directors following the Annual
Director Mr Cooper decided not to offer himself for re-
General Meeting.
election. The retiring Director for the Central Region,
Mr GJ McNamara, being eligible, offered himself for re- Directors’ Meetings
election. The number of Board meetings (including meetings of
Member nominations for the Northern Region vacancy the Audit and Risk Management Committee and Milk
were received from Mr PJ Rough and Mr HBJ Hoffman Supply Advisory Committee) and number of meetings
and accordingly a postal ballot was held for the attended by each of the directors of the Co-operative
Northern Region resulting in Mr Hoffman being elected during the financial year are listed in the table below.
for a three year term effective from the 2014 Annual During the course of the 2014/15 financial year
General Meeting on 12 November 2014. As there were there were also seven directors’ meetings held by
no Member nominations received from the Central teleconference and two Milk Supply Advisory Committee
Region, Mr McNamara was re-elected unopposed meetings held by teleconference. Teleconferences
for a three year term effective from the 2014 Annual are organised to discuss and resolve specific issues
General Meeting on 12 November 2014. that cannot be held over until the next scheduled
A casual vacancy was created in the Southern Region monthly meeting and generally the duration of such
as a result of Mr PW Neal’s vacation of office on 30 teleconferences is one hour or less. Teleconferences
June 2014. The circumstances regarding Mr Neal’s are a cost effective and practical way for directors to
vacation of office and subsequent reinstatement as discuss specific issues in a timely manner given that
an active member are discussed in the Chairman’s their residences are spread over a large geographic area.
Report commencing on page 5. With Mr Neal’s active At the Board meeting held on 17 and 18 December
membership resolved, he was able to nominate for the 2014 it was resolved that the full Board will continue
casual vacancy. Mr Neal was re-elected unopposed to to sit on the Milk Supply Advisory Committee until at
the Norco Board on 24 September 2014 and as Mr least the December 2015 Board meeting, at which
Neal is filling a casual vacancy, he is due to retire at the time the annual review of Committee memberships will
2016 Annual General Meeting. take place.

Audit and Risk Management Milk Supply Advisory

Directors’ Meetings
Committee Meetings Committee Meetings

A B A B A B
GJ McNamara 12 12 - - 11 11
AW Wilson 12 12 6 6 11 11
TJ Cooper 4 4 - - 4 4
DR Hodges 4 4 3 3 4 4
HBJ Hoffman 8 8 - - 7 7
MC Jeffery 12 12 - - 11 11
PW Neal 10 10 8 8 9 9
L Shearman 12 12 9 9 11 11

A Reflects the number of meetings held during the time the director held office during the year B Number of meetings attended

24
CORPORATE INFORMATION any item, transaction or event of a material and unusual
nature which, in the opinion of the directors, is likely to
Corporate structure
significantly affect the operations of the Co-operative,
Norco Co-operative Limited is a co-operative limited by the results of those operations or the state of affairs of
shares which is incorporated and domiciled in Australia. the Co-operative in subsequent financial years.

Nature of operations and principal activities Future developments

The principal activities of the Co-operative during the In the opinion of the directors, disclosure of information
financial year were the processing, manufacture and regarding the likely developments in the operations of
sale of dairy products, the manufacture and sale of Norco in future financial years and the expected results
stockfeeds and rural retailing. of those operations is likely to result in unreasonable

Employees prejudice to the Co-operative. Accordingly, this

information has not been disclosed in this report.
The Co-operative employed 494 full-time, 70 part-
time permanent and 188 casual employees at 30 June Indemnification and insurance of Directors and

2015 (2014: 465 full-time, 66 part-time permanent Officers

and 174 casual employees). The Co-operative has entered into agreements to

Results of operations indemnify all directors named at the beginning of this

report, former directors and current and former officers
The net amount of the operating profit for the financial
of the Co-operative against all liabilities to persons
year of the Co-operative after providing for income tax
(other than to the Co-operative or to a related body
was $2.3 million (2014: $0.3 million profit).
corporate) which arise out of the performance of their
Derivatives and other financial instruments normal duties as a director or officer, unless the liability
relates to conduct involving a lack of good faith.
The Co-operative’s activities expose it to changes in
interest rates, foreign exchange rates and commodity The Co-operative has agreed to indemnify the directors
prices. It is also exposed to credit, liquidity and cash and officers against all costs and expenses incurred in
flow risks from its operations. During the year, the defending an action that falls within the scope of the
Board has maintained policies and procedures in indemnity and any resulting payments. The relevant
each of these areas to manage these exposures. insurances cover legal liabilities and associated
Management reports to the Board on a monthly basis costs arising from the performance of their duties as
on the monitoring of and compliance with the policies directors and officers and compensation for loss or
in place. injury sustained in the course of such duties.

Dividends Options over unissued shares

Dividends paid during the 2014/15 financial year Options over unissued shares have not been granted
totalled $255,000 (being a dividend rate of 3.0% [three to any person or director since the end of the previous
percent] on issued capital), declared and approved by financial year to date of this report.
Members at the 2014 Annual General Meeting, which
Directors’ benefits
was held on 12 November 2014.
Since the end of the previous financial year, except as
Operations review
declared below, no director of the Co-operative has
The directors’ have reviewed the Co-operative’s received or become entitled to receive any benefit
operations during the financial year and the results of (other than a benefit included in the aggregate amount
those operations, which are discussed in the Chairman’s of emoluments received or due and receivable by
Report and Chief Executive Officer’s Report for the directors shown in the financial statements or the
financial year ended 30 June 2015 (see pages 5 and 8). fixed salary of a full time employee of the Co-operative
or of a related corporation) by reason of a contract
Events subsequent to balance date
made by the Co-operative or a related corporation
During the interval between the end of the financial with the director or with a firm of which the director is
year and the date of this report, there has not arisen a member, or with a company in which the director has

25
 a substantial financial interest, except for that benefit National Law (NSW) and, in addition, excludes himself
which may be deemed to accrue to those directors in from any discussions or decisions relating to these
their capacity as dairy farmers in the supply of milk to entities.
the Co-operative in the ordinary course of business.
Rounding off of amounts
Directors’ declarations of interest
The amounts in this report and the accompanying
On 28 May 2015, Mr GJ McNamara advised that financial statements have been rounded to the nearest
as a Director of the NSW Business Chamber, the one thousand dollars in accordance with the Co-
organisation Kaytone has been asked to submit a operatives National Law (NSW).
proposal to be the sole supplier of casual workers for
Auditor’s independence declaration to the directors
Norco’s Labrador milk factory. Kaytone is a part of the
NSW Business Chamber and so Mr McNamara has The directors received a declaration of independence
declared his interest in accordance with Section 208 of from the Co-operative’s auditor, Ernst & Young. A copy
the Co-operatives National Law (NSW) and, in addition, of that declaration is included after this Directors’
excludes himself from any discussions or decisions Report.
relating to this entity. Appreciation
On 31 July 2014 Mr AW Wilson advised that he has The efforts and contribution of our management
been appointed to the Community Advisory Group of and staff during the year were greatly appreciated by
the North Coast Local Land Services organisations. directors.
Mr Wilson has declared his interest in accordance with
Signed in accordance with a resolution of the directors.
Section 208 of the Co-operatives National Law (NSW)
and, in addition, excludes himself from any discussions
or decisions relating to this entity.

On 24 June 2015 Mr MC Jeffery advised that he has

been appointed as an Alternate Delegate to the Dairy
Connect Farm Group Board. Mr Jeffery has declared GJ McNamara AW Wilson
his interest in accordance with Section 208 of the Chairman Deputy Chairman
Co-operatives National Law (NSW) and, in addition, Lismore, 30 September 2015
excludes himself from any discussions or decisions
relating to this entity.

On 4 August 2015 Ms L Shearman advised that she

is no longer the Chairperson of the Far North Coast
Dairy Industry Group (DIG) but still holds the executive
position of Vice Chairperson. Ms Shearman is also the
Secretary of the Far North Coast Subtropical Regional
Group and has declared her interest in accordance with
Section 208 of the Co-operatives National Law (NSW)
and, in addition, excludes herself from any discussions
or decisions relating to these entities.

On his re-election to the Board on 24 September 2014,

Mr PW Neal declared that he is Chairman and Director of
the North Oxley Island Drainage Union, Chairman of the
Mid Coast Dairy Advancement Group and Chairman of
the Manning Delta landholders Protection Committee.
On 4 August 2015 Mr Neal advised that he is no
longer Chairman or a member of the Mid Coast Dairy
Advancement Group. Mr Neal has declared his interest
in accordance with Section 208 of the Co-operatives

26
 Ernst & Young and Norco
– a valued business partnership

“EY is proud to have been associated with Norco as

its auditor for over 15 years. In this time we have
seen Norco move from a business with significant
uncertainty as to whether it would continue as a
going concern, to today being one of the largest co-
operatives in Australia,” said EY Partner Brad Tozer.

“Records confirm that during the period since

2001, Norco has returned over $920 million in
milk payments and dividends to members through
purchasing nearly 2 billion litres of milk, just to name
a few of the benefits the co-operative has provided
to members. Through the collective strength of the
members, management, board and the co-operative
working model, these results and other tangible and
intangible benefits have been achieved for members
and the community at large.

As we continue to work with Norco, we see

significant potential for growth. Unique to co-
operatives (as opposed to other corporate
structures) are propositions such as member control
and goal alignment, democratic governance by
members, re-investment of profits, creation of social
value and member education, just to name a few. All
these principles that underpin the structure of a co-
operative deliver value now and into the future for
members and the community.”

27
 Ken Wadsworth, Norco member and milk supplier

28
 CORPORATE GOVERNANCE STATEMENT

This statement outlines the main corporate election as a supplier Director in accordance with
governance practices that were in place throughout the Rules and, if elected, serve a term of three years
the 2014/15 financial year, unless otherwise stated. after which time they retire. Independent Directors,
These practices are dealt with under the headings: when nominated and elected, are elected for a
Board of Directors and its Committees; Internal term of three years after which time they retire. The
Control Framework; Ethical Standards; Business Risks Directors regularly consider whether or not the skills
and Emergency Planning; and The Role of Members. and characteristics which might be contributed by
Independent Directors should be added to the Board
Board of Directors and its Committees
to maximise its effectiveness. Independent Directors
The Board of Directors is responsible for the overall are to be nominated by the Board and elected by
corporate governance of the Co-operative including members. Mr David Hodges’ term as an Independent
strategic direction and enhancing organisational Director concluded at the 2014 Annual General
performance, the sound management of its Meeting after having completed two, three year terms.
business and assets, confirming financial objectives, Mr Hodges was not nominated by the Board for a
understanding and managing risks to maximise further term.
opportunities, establishing goals for management
Regarding potential conflicts of interest, it is the
and monitoring performance against those goals. The
practice of the Norco Board to open every meeting
Board of Directors is also responsible for reporting
by giving Directors the opportunity to declare any
to members and being accountable to, and focussed
actual or potential conflicts. If a conflict of interest
on the needs of members and meeting statutory
should arise, the Director concerned takes no part in
and regulatory requirements. To give further effect,
discussions at the Board meeting on the issue, nor
the Audit and Risk Management Committee assists
exercises any influence over other Board members.
in the execution of the Board’s responsibilities. The
Milk Supply Advisory Committee, Member Services The total remuneration package for Directors is voted
Committee and Brand Management Advisory on at each Annual General Meeting. The amount paid
Committee also meet regularly and play an important may vary between Directors depending on their level
role in assisting the Board of Directors in managing the of responsibilities. Remuneration of Directors is set
important relationship between the Co-operative and out in the notes to the financial statements.
the members. The Board Committees are discussed
Board Corporate Governance Policy and Emerging
further below.
Corporate Governance Issues
To better understand the operations of the Co-
The purpose of the Corporate Governance Policy
operative’s businesses the Board receives regular
Statement is to provide guidance to Directors and
management reports, presentations and briefing
management on how the Co-operative is to be
papers on key aspects and makes site visits to the Co-
governed in practice. The document was developed
operative’s operations.
having regard to the Co-operatives National Law (NSW)
Composition of the Board and Norco’s Rules. All current Directors have signed
Deed Polls and Statutory Declarations to ensure
Under the Rules of the Co-operative the Board of
their commitment to the Corporate Governance
Directors is comprised of a minimum of six non-
Policy Statement and the duties and responsibilities
executive (supplier) Directors who represent the
specifically addressed in the Deed Polls.
members from the Northern, Central and Southern
regions. Each region is represented by two supplier A review of the Corporate Governance Policy Statement
Directors, with Directors serving a three year term. At is undertaken annually by the Directors to ensure that
each Annual General Meeting two Directors retire in issues of governance are dealt with in accordance with
accordance with the Rules of the Co-operative. The the policy. At the same time, the policy is reviewed to
Rules also allow for two Independent Directors to be ensure it is still relevant and up to date.
elected to the Board. Currently the positions for both
It is also pleasing to report that all current Directors
Independent Directors remain vacant.
have attended and completed the AICD Company
An active member of the Co-operative may seek Directors’ Course.

29
 Co-operatives National Law in NSW • review of the audit and annual financial statements
and interim financial information and the adequacy of
As reported last year, on 3 March  2014 the Co-
existing external audit arrangements with particular
operatives National Law (CNL) came into operation,
emphasis on the scope and quality of the audit; and
repealing and replacing the Co-operatives Act 1992.
Leading up to the 2014 Annual General Meeting, • risk management reporting systems are in place to
the Board undertook a review of Norco’s Rules with effectively identify and manage strategic, operational
the assistance of Norco’s lawyer to ensure that, as and financial risks. To give further effect to identifying
a consequence of the introduction of the CNL, the and quantifying risks faced by the Co-operative, a
Rules correctly reflected the terminology and law as risk register has been developed which is managed
specified in the CNL. The members considered and under the scope of the Audit and Risk Management
voted unanimously in favour of the proposed Rule Committee. The risk register details the probability
changes at the 2014 Annual General Meeting held on and impact of various business risks and creates a
12 November 2014. risk score together with a mitigation plan.

Board Committees The Audit and Risk Management Committee reviews

the performance of the external auditors on an annual
The Directors seek to achieve best practice in
basis and meets them during the year as follows:
corporate governance and accountability through the
following Board Committees which assist the Board in • to review the results and findings of the audit, the
the execution of its responsibilities. These committees adequacy of financial and operating controls, and to
are subject to Charters which have been approved by monitor the implementation of any recommendations
the Board and which define their respective roles and made; and
responsibilities.
• to review the draft financial statements and the audit
Audit and Risk Management Committee report and to make the necessary recommendation
to the Board for the approval of the financial
The objective of the Audit and Risk Management
statements.
Committee is to assist the Board of Directors in
fulfilling its statutory and fiduciary responsibilities The Committee is comprised of three Directors and
relating to accounting and reporting practices of meets at least six times per year. The Chairperson
the Co-operative and subsidiaries. The Committee of the Co-operative shall not be a member of the
advises on the establishment and maintenance of an Committee.
overall framework of internal control and appropriate
Milk Supply Advisory Committee
ethical standards for the management of the Co-
operative. The Committee gives the Board additional The objective of the Milk Supply Advisory Committee
assurance regarding the quality and reliability of is to provide properly considered recommendations
financial information prepared for use by the Board to the Board of Directors in relation to the adoption
in determining policies for inclusion in financial of policies pertaining to certain matters regarding the
statements. The Audit and Risk Management acquisition of milk by the Milk Supply business unit
Committee also embraces, as part of its Charter, the and the sale of that milk to its external and internal
Co-operative’s Risk Management Program. customers.

The Audit and Risk Management Committee ensures: In giving effect to this objective, the Committee will
make recommendations to the Board of Directors in
• compliance with statutory responsibilities relating to
relation to policies regarding:
financial disclosure;
• the sourcing of milk by the Milk Supply business unit,
• focus on significant changes in accounting
with specific reference to -
policies, standards and practices or other reporting
requirements likely to affect developments in - the terms under which such milk is to be acquired
financial reporting; (including but not limited to price): and

• regular reviews of operations and policies are - the location(s) from which such milk is to be
conducted; acquired; and

30
• the sale of milk by the Milk Supply business unit, with farm base by assisting with succession planning,
specific reference to the terms under which that milk mental health issues and social networking / support;
is sold (including but not limited to price).
• providing and disseminating information from external
The composition of the Milk Supply Advisory sources relating to issues such as the education
Committee consists of the full Board, Chief Executive and training of potential Directors, government
Officer and General Manager Milk Supply. The assistance and climate variability; and
Committee meets at least every quarter.
• providing support to the Norco farm base through
Brand Management Advisory Committee the management of issues such as exceptional
circumstances, disaster recovery planning and other
The objective of the Brand Management Advisory
critical farm issues (such as tick infestations).
Committee is to provide properly considered
recommendations to the Board of Directors in relation The Committee is comprised of four Directors and
to matters that affect Norco’s brands and to the meets at least every quarter.
adoption of policies pertaining to specific issues such
Communication Committee
as animal welfare issues for both Norco and Norco’s
milk suppliers / members. The objective of the Communication Committee is
to make properly considered recommendations to
In giving effect to this objective, the Committee will
the Board of Directors in relation to the adoption of
make recommendations to the Board of Directors in
policies pertaining to corporate communication.
relation to policies regarding:
The Committee recognises that effective
• Animal welfare – including all aspects of animal
communication relies on “listening as well as speaking”.
welfare pertaining to the Norco farm base,
Consequently, in seeking to achieve its objective the
understanding the requirements of retail customers,
Committee will make recommendations to the Board
ensuring Norco has robust policies and procedures
of Directors in relation to policies regarding:
and working with, and making representations to, a
range of stakeholders that have an interest in animal • the Co-operative’s overall strategy in relation to
welfare; and corporate communications;

• Norco brands – including protecting and adding value • the Co-operative’s major corporate communications
and ensuring that the reputation of the Norco brands and announcements, ensuring all stakeholders
are maintained and improved upon as well as the are considered and that such communications
promotion of the Norco Brands. and announcements are through the appropriate
nominated spokesperson;
The Committee is comprised of three Directors and
the General Manager Milk Supply and meets at least • communication plans for crisis / disaster situations;
every quarter. • joint communications which may affect another
Member Services Committee organisations or individuals, or by which Norco may
be affected; and
The objective of the Member Services Committee
is to make properly considered recommendations to • the terms under which an appointment or
the Board of Directors in relation to the adoption of engagement (if any) of a public relations firm is made
policies pertaining to non milk supply, member issues. to assist Norco with corporate communications.

In giving effect to this objective, the Committee will The Committee is comprised of two Directors and
make recommendations to the Board of Directors in meets on an as needs basis.
relation to policies regarding: Remuneration Advisory Committee
• developing and encouraging the sustainability of The objective of the Remuneration Advisory
the Norco farm base through initiatives such as Committee is to make properly considered
improving farming techniques, study tours and recommendations to the Board of Directors in relation
improving business skills; to the remuneration of the Senior Management Team,
• assisting with the ongoing wellbeing of the Norco Chief Executive Officer and Board of Directors and

31
 in relation to incentive programs within the Norco businesses are being acquired and divested.
business.
• Executive authority limits – the Co-operative
In giving effect to this objective, the Committee will: has clearly defined financial authority limits for
management positions in relation to capital
• monitor and review all Senior Management Team
expenditure, foreign exchange, forward purchase
remuneration;
agreements, forward grain sale agreements and
• evaluate, monitor and review any Short Term Incentive general expenses.
(STI) and Long Term Incentive (LTI) programs that
Quality Accreditation
may be in operation in the Norco business;
The Norco Foods division strives to ensure that its
• evaluate the performance of the Chief Executive
products are of the highest standard. The Lismore Ice
Officer and make recommendations in relation to the
Cream Business Unit has accreditation in HACCP with
remuneration of the Chief Executive Officer; and
the NSW Food Authority, SQF 2014 Level 3, Coles
• make recommendations to the Board in relation to Quality Assurance, Woolworths Quality Assurance
Director remuneration. Standard, U.S. Food and Drug Administration

The Committee is comprised of two Directors and registered and has an Approved Arrangement with

the Chief Executive Officer and meets on an as needs AQIS for export. The Labrador milk factory has HACCP

basis. accreditation with Safe Foods QLD, SQF 2014 Level

3, Coles Quality Assurance, Woolworths Quality
INTERNAL CONTROL FRAMEWORK
Assurance Standard, NCS HACCP accreditation and
The Board acknowledges that it is responsible for the has an Approved Arrangement with AQIS for export.
overall internal control framework, but recognises that The Raleigh milk factory has NSW Food Authority
no cost-effective internal control system will preclude HACCP accreditation, SQF 2014 Level 3, NASAA
all errors and irregularities. To assist in discharging and ACO accreditation (both for organic milk) and
this responsibility, the Board has instigated an internal has an Approved Arrangement with AQIS for export.
control framework which can be categorised under the Raleigh is also Kosher certified for the production of
following headings: al A2 products.

• Corporate Strategy – there are clearly defined short, In the Norco Agribusiness unit both the Goldmix
medium and long term strategic objectives set Stockfeeds manufacturing mills at Lismore New
and reviewed by the Board of Directors on at least South Wales and Windera Queensland have FeedSafe
an annual basis and an operational strategic plan accreditation under the Stockfeed Manufacturers’
developed by management to meet these objectives. Association of Australia and HACCP accreditation.
Strategic issues are considered at each meeting of Norco is a member of the Stockfeed Manufacturers’
the Board of Directors. Association of Australia.

• Financial reporting - there is a comprehensive Norco Rural Retail staff are AgSafe accredited
budgeting system with an annual budget approved for the handling, transport and recommendation
by the Board. Monthly actual results are reported of agricultural chemical products. The Rural Retail
against budget and revised rolling year end forecasts premises are AgSafe accredited for the storage and
are prepared monthly. handling of agricultural chemical products.

• Quality and integrity of personnel - the Co-operative’s Safety

policies are detailed in a policy and procedures
Norco is committed to the safety and wellbeing of staff
manual. New policies and procedures are developed,
across its entire operations. Norco strives to comply
or amendments made to existing policies and
with the provisions of a safe working environment
procedures, as the need arises.
and continues to make safety an integral part of our
• Investment appraisal - the Co-operative has clearly organisation, which is essential if we are to continue
defined guidelines for capital expenditure. These building a successful business into the future. On page
include annual budgets, detailed appraisal and review 19 of this report are details regarding an Enforceable
procedures and due diligence requirements where Undertaking that Norco has entered into with the

32
WorkCover Authority of NSW relating to a serious is communicated to members as follows:
injury sustained by a Norco employee at the Goldmix
• The Annual Report is distributed to all members. The
Stockfeed mill on 25 July 2013. On a monthly basis,
Annual Report includes relevant information about
the Board of Directors receives management reports
the operations of the Co-operative for the financial
detailing the safety performance for the business and
year just ended, changes in the state of affairs of the
monitors this performance closely. The Board also
Co-operative and details of future developments,
receives a copy of all minutes of the various site WHS
in addition to the other disclosures required by the
committee meetings that are held.
Cooperatives Legislation;
Environment
• Meetings are held at least twice yearly with supplier
Norco aims to ensure that the highest standard of members at various locations to personally inform
environmental care is achieved. The Co-operative them about the affairs of the Co-operative;
recognises that it has a responsibility to ensure that
•In addition to the meetings with supplier members,
its operations are sensitive to the environment and
a more informal communication network called
comply with the letter and spirit of all applicable
‘NorcoNet’ is active in some localities within the
environmental legislation.
Norco supply area. The purpose of ‘NorcoNet’ is to
ETHICAL STANDARDS bring small groups of members together on a regular
basis to form a local network to discuss general dairy
All Directors, managers and employees are expected
industry issues and issues that relate to the Co-
to act with the utmost integrity and objectivity, striving
operative;
at all times to enhance the reputation and performance
of Norco. Every employee has a nominated manager or • The preparation and distribution of a monthly Norco
supervisor to whom they may refer any issue arising Bulletin and ad hoc newsletters;
from their employment.
•Some proposed major changes in the Co-operative
BUSINESS RISKS AND EMERGENCY PLANNING which relate to the core businesses are required by
the Cooperatives National Law (NSW) to be submitted
Management has identified, and continues to identify,
to a vote of members; and
business risks and potential emergencies with the aim
of minimising any consequential adverse effects on • Communication is a two-way process, and the
the Co-operative. Board encourages individual members or groups of
members to apply to attend Board Committee and /
Business risks arise from such matters as:
or meetings by appointment.
• action by competitors and industry rationalisation;
The Board encourages full participation of members
• government policy changes; at the Annual General Meeting to ensure a high

• physical loss of assets through fire or another natural level of accountability and identification with the

disaster and the resultant business interruption that Co-operative’s strategies and goals. Due to the

may occur; geographical spread of members, the holding of the

Annual General Meeting is rotated between the three
• the impact of exchange rate movements on the price
member regions. Important issues are presented to the
of raw materials and on sales
members as single resolutions for their consideration.
• variations in interest rates;
The members are responsible for the election of
• difficulties in sourcing raw materials; and Directors.

• the purchase, development and use of information

systems, and other emergencies that may occur.

THE ROLE OF MEMBERS

The Board of Directors aims to ensure that the

members are informed of all major developments
affecting the Cooperative’s state of affairs. Information

33
 Photo credits and contributions – thank you

In addition to thanking our Norco employees,

Co-operative members and customers for your
time and participation in the 2015 Annual Report
photography which is greatly appreciated, the
Co-operative would like to acknowledge and provide
sincere thanks to the following for contributing to,
and participating in, the historical content contained
in the 2015 Annual Report:

Mr Donald Maughan and the Richmond – Tweed

Regional Library (Eric Wright Collection)

Mr Frank Reading

Mr Denzil and Mrs Audrey

Thomas

Messrs Warren Noble, Ray

Everingham, Alan Hoskins
and Graeme Hancock

Mr Brett and Mrs Leanne

Bugg

Mr Kevin Elsley

34
35
 FINANCIAL STATEMENTS

Janelle Foster, Ice Cream Business Unit employee

36
 Statement of profit or loss
and other comprehensive income
for the year ended 30 June 2015

2015 2014
Before Before
Significant Significant Significant Significant
Items Items (1) Total Items Items (1) Total
Notes $000 $000 $000 $000 $000 $000
Revenue 4.1 510,909 - 510,909 430,729 - 430,729

Milk payments to suppliers (123,529) - (123,529) (87,962) - (87,962)

Cost of sales (264,705) - (264,705) (242,231) - (242,231)
Employee expenses 4.2 (60,347) - (60,347) (49,906) - (49,906)
Depreciation expense 4.3 (5,681) - (5,681) (5,385) - (5,385)
Borrowing costs expense (2,552) - (2,552) (2,448) - (2,448)
Occupancy expenses (4,800) - (4,800) (4,442) - (4,442)
Administration and other costs 4.4 (46,162) - (46,162) (37,940) - (37,940)
(Loss)/profit on disposal of non-current
assets (28) - (28) 85 - 85
Restructure costs - (153) (153) - (138) (138)
Profit/(loss) before tax from ordinary
activities before income tax expense
and member distributions 3,105 (153) 2,952 500 (138) 362

Member distributions 6 - (298) (298) - (46) (46)

Profit/(loss) before income tax 3,105 (451) 2,654 500 (184) 316

Income tax expense 5 - - - - - -

Net profit/(loss) attributable to members 3,105 (451) 2,654 500 (184) 316

Other comprehensive income

Other comprehensive income to

be reclassified to profit or loss in
subsequent periods:
Net gain/(loss) on cash flow hedges (391) - (391) - - -
Other comprehensive loss for the year,
net of tax (391) - (391) - - -
Total comprehensive income/(loss) for
the year, net of tax 2,714 (451) 2,263 500 (184) 316

(1) Significant items are items of income and expense, presented separately due to their nature and size.

The above Statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.

37
 Statement of financial position
As at 30 June 2015

2015 2014
Notes $000 $000
Assets
Current assets
Cash assets and cash equivalents 18.2 4,226 1,802
Trade and other receivables 7 47,437 47,489
Inventories 8 32,020 29,647
Other assets 527 488
Total current assets 84,210 79,426

Non-current assets
Investments 9 3 3
Property, plant and equipment 10 55,177 53,735
Intangible assets and goodwill 11 37,038 37,101
Total non-current assets 92,218 90,839
Total assets 176,428 170,265

Liabilities
Current liabilities
Trade and other payables 12 59,146 56,665
Interest-bearing loans and borrowings 14 2,160 589
Derivative financial instruments 15 78 -
Employee benefit liabilities 13 9,085 8,235
Total current liabilities 70,469 65,489

Non-current liabilities
Trade and other payables 12 398 398
Interest-bearing loans and borrowings 14 31,632 33,669
Derivative financial instruments 15 313 -
Employee benefit liabilities 13 1,340 1,309
Total non-current liabilities 33,683 35,376
Total liabilities 104,152 100,865

Net assets attributable to members 72,276 69,400

Members’ interest 16.1 8,783 8,170

Net assets 63,493 61,230

Equity
Retained earnings 24,797 22,143
Reserves 17 38,696 39,087
Total equity 63,493 61,230

The above Statement of financial position should be read in conjunction with the accompanying notes.

38
 Statement of changes in equity
for the year ended 30 June 2015

Cash flow Asset

Retained hedge revaluation
earnings reserve reserve Total equity
$000 $000 $000 $000
At 1 July 2014 22,143 - 39,087 61,230

Profit for the year 2,654 - - 2,654

Other comprehensive income - (391) - (391)
Total comprehensive income 2,654 (391) - 2,263

At 30 June 2015 24,797 (391) 39,087 63,493

Cash flow Asset

Retained hedge revaluation
earnings reserve reserve Total equity
$000 $000 $000 $000
At 1 July 2013 21,827 - 39,087 60,914

Profit for the year 316 - - 316

Other comprehensive income - - - -
Total comprehensive income 316 - - 316

At 30 June 2014 22,143 - 39,087 61,230

The above Statement of changes in equity should be read in conjunction with the accompanying notes.

39
 Statement of cash flows
for the year ended 30 June 2015

2015 2014
Notes $000 $000
Operating activities
Receipts from customers 510,655 424,381
Payments to suppliers and employees (374,819) (333,859)
Interest received 306 330
Interest paid (2,552) (2,448)
Milk supplier payments (123,529) (87,962)
Net cash flows from operating activities 18.1 10,061 442

Investing activities
Proceeds from sale of property, plant and equipment 170 101
Purchase of property, plant and equipment (7,321) (8,196)
Net cash flows used in investing activities (7,151) (8,095)

Financing activities
Suppliers’ share contribution 613 659
Repayment of member deposits (335) (598)
Distributions paid to members (298) (46)
Payment of finance lease liabilities (466) (190)
Proceeds from borrowings - 5,142
Net cash flows (used in)/from financing activities (486) 4,967

Net increase/(decrease) in cash and cash equivalents 2,424 (2,686)

Cash and cash equivalents at opening balance date 1,802 4,488
Cash and cash equivalents at 30 June 18.2 4,226 1,802

The above Statement of cash flows should be read in conjunction with the accompanying notes.

40
 Notes to the financial statements
for the year ended 30 June 2015

1. Corporate information (b) Changes in accounting policy, disclosures, standards and

The financial statements of Norco Co-operative Limited and its interpretations
controlled entities (the Co-operative) for the year ended 30 June
(i) Changes in accounting policies, new and amended standards
2015 were authorised for issue in accordance with a resolution of
and interpretations
the directors on 30 September 2015.
The accounting policies adopted are consistent with those of the
Norco Co-operative Limited is a Co-operative under the Co- previous financial year, with the exception of Derivative Financial
operatives National Law (NSW), incorporated and domiciled in Instruments and hedge accounting. Refer Note 2(x).
Lismore, Australia. The Co-operative operates out of its registered
(ii) Accounting Standards and Interpretations issued but not
place of business at “Windmill Grove” 107 Wilson Street, South
yet effective
Lismore, New South Wales. The principal operations of the Co-
Certain Australian Accounting Standards and Interpretations have
operative are the processing, manufacture and sale of dairy
recently been issued or amended but are not yet effective and have
products, the manufacture of stockfeed and rural retailing.
not been adopted by the Co-operative for the annual reporting
2. Summary of significant accounting policies period ended 30 June 2015. The directors have not early adopted
(a) Basis of preparation any of these new or amended standards or interpretations. The
The general purpose financial report has been prepared on the directors have not yet fully assessed the impact of these new or
basis of historical cost (except for certain land and building amended standards (to the extent relevant to the Co-operative)
assets where in 2004 fair value was deemed to be cost) and in and interpretations.
accordance with the requirements of the Corporations Act 2001.
(c) Statement of compliance
Cost is based on the fair values of the consideration given in
The financial report complies with Australian Accounting
exchange for assets.
Standards, which include International Financial Reporting
In the application of Australian equivalents to International Standards (IFRS) as issued by the International Accounting
Financial Reporting Standards (‘AIFRS’) management is required Standards Board.
to make judgements, estimates and assumptions about carrying
The accounting policies are consistent with those of the previous
values of assets and liabilities that are not readily apparent from
financial year. Norco Co-operative Limited has not made a formal
other sources. The estimates and associated assumptions are
written election to early adopt any new and amended Australian
based on historical experience and various other factors that are
Accounting Standards as of 30 June 2015. For Australian
believed to be reasonable under the circumstance, the results of
Accounting Standards and Interpretations that have recently
which form the basis of making the judgements. Actual results
been issued or amended but are not yet effective and have not
may differ from these estimates.
been adopted by the Group for the annual reporting period ended,
The estimates and underlying assumptions are reviewed on an the Group has assessed there will be no material impact on the
ongoing basis. Revisions to accounting estimates are recognised presentation of the financial statements.
in the period in which the estimate is revised if the revision affects
(d) Basis of consolidation
only that period, or in the period of the revision and future periods
The financial statements comprise the financial statements of
if the revision affects both current and future periods.
the Co-operative and its subsidiaries as at 30 June 2015. Control
Judgements made by management in the application of AIFRS is achieved when the Co-operative is exposed, or has rights, to
that have significant effects on the financial statements and variable returns from its involvement with the investee and has the
estimates with a significant risk of material adjustments in the next ability to affect those returns through its power over the investee.
year are disclosed, where applicable, in the relevant notes to the Specifically, the Co-operative controls an investee if and only if the
financial statements. Accounting policies are selected and applied Co-operative has:
in a manner which ensures that the resulting financial information
• Power over the investee (i.e. existing rights that give it the current
satisfies the concepts of relevance and reliability, thereby ensuring
ability to direct the relevant activities of the investee);
that the substance of the underlying transactions or other events
is reported. Exposure, or rights, to variable returns from its involvement with
• 
the investee; and
The accounting policies set out below have been applied in
preparing the financial statements for the year ended 30 June The ability to use its power over the investee to affect its
• 
2015 and the comparative information presented in these returns.
financial statements for the year ended 30 June 2014.
Generally, there is a presumption that a majority of voting rights
The financial report is presented in Australian dollars and all results in control. To support this presumption, and when the
values are rounded to the nearest thousand dollars ($’000) unless Co-operative has less than a majority of the voting or similar
otherwise stated under the option available to the Co-operative rights of an investee, the Co-operative considers all relevant facts
under class order 98/100. The Co-operative is an entity to which and circumstances in assessing whether it has power over an
the class order applies. investee, including:

41
 • 
The contractual arrangement with the other vote holders of the period; or
investee;
There is no unconditional right to defer the settlement of the
• 
• 
Rights arising from other contractual arrangements; and liability for at least twelve months after the reporting period.

• 
The Co-operative’s voting rights and potential voting rights. The Co-operative classifies all other liabilities as non-current.

The Co-operative re-assesses whether or not it controls an Deferred tax assets and liabilities are classified as non-current
investee if facts and circumstances indicate that there are changes assets and liabilities.
to one or more of the three elements of control. Consolidation of
(f) Revenue recognition
a subsidiary begins when the Co-operative obtains control over
Revenue is recognised to the extent that it is probable that the
the subsidiary and ceases when the Co-operative loses control
economic benefits will flow to the Co-operative and the revenue
of the subsidiary. Assets, liabilities, income and expenses of a
can be reliably measured. The following specific recognition
subsidiary acquired or disposed of during the year are included in
criteria must also be met before revenue is recognised:
the Statement of profit or loss and other comprehensive income
from the date the Co-operative gains control until the date the Co- Sale of goods
operative ceases to control the subsidiary. Revenue is recognised when the significant risks and rewards of
ownership of the goods have passed to the buyer and the costs
Profit or loss and each component of other comprehensive
incurred or to be incurred in respect of the transaction can be
income (OCI) are attributed to the equity holders of the parent
measured reliably. Risk and rewards of ownership are considered
of the Co-operative and to the non-controlling interests, even
passed to the buyer at the time of delivery of the goods to the
if this results in the non-controlling interests having a deficit
customer.
balance. When necessary, adjustments are made to the financial
statements of subsidiaries to bring their accounting policies into Rendering of services
line with the Co-operative’s accounting policies. All intra-group Revenue is recognised on the basis of services provided, measured
assets and liabilities, equity, income, expenses and cash flows in accordance with agreed parameters between the customer and
relating to transactions between members of the Co-operative the Co-operative.
are eliminated in full on consolidation.
Interest income
A change in the ownership interest of a subsidiary, without a Revenue is recognised as interest accrues using the effective
loss of control, is accounted for as an equity transaction. If the interest method. This is a method of calculating the amortised
Co-operative loses control over a subsidiary, it derecognises cost of a financial asset and allocating the interest income over
the related assets (including goodwill), liabilities, non-controlling the relevant period using the effective interest rate, which is
interest and other components of equity while any resultant gain the rate that exactly discounts estimated future cash receipts
or loss is recognised in profit or loss. Any investment retained is through the expected life of the financial asset to the net carrying
recognised at fair value. amount of the financial asset.

(e) Current versus non-current classification Dividends

The Co-operative presents assets and liabilities in the Statement Dividend revenues are recognised when control of a right to
of financial position based on current/non-current classification. receive consideration for the investment in assets is attained,
An asset is current when it is: usually evidenced by approval of the dividend at a meeting of
shareholders.
• 
Expected to be realised or intended to be sold or consumed in
the Co-operative’s normal operating cycle; Government grants
Grants received for the construction of non-current assets are
Held primarily for the purpose of trading;
• 
deferred and recorded as revenue over the life of the funded asset.
• 
Expected to be realised within twelve months after the reporting
(g) Borrowing costs
period; or
Borrowing costs consist of interest and other costs that an
• 
Cash or a cash equivalent unless restricted from being entity incurs in connection with the borrowing of funds. All loans
exchanged or used to settle a liability for at least twelve months and borrowings are initially recognised at the fair value of the
after the reporting period. consideration received less directly attributable transaction costs.

The Co-operative classifies all other assets as non-current. (h) Leases

The determination of whether an arrangement is, or contains a
A liability is current when:
lease is based on the substance of the arrangement. It requires
It is expected to be settled in the Co-operative’s normal
•  an assessment of whether the fulfilment of the arrangement
operating cycle; is dependent on the use of a specific asset or assets and the
arrangement conveys a right to use the asset.
• It is held primarily for the purpose of trading;
Co-operative as a lessee
• 
It is due to be settled within twelve months after the reporting
Finance leases are capitalised at the commencement of the

42
lease at the inception date fair value of the leased property or, Maintenance spares are recognised as inventories and expensed
if lower, at the present value of the minimum lease payments. when utilised.
Lease payments are apportioned between finance charges and
(l) Foreign currency translation
reduction of the lease liability so as to achieve a constant rate of
Both the functional and presentation currency of Norco Co-
interest on the remaining balance of the liability. Finance charges
operative Limited and its controlled entities is Australian dollars.
are recognised in finance costs in the Statement of profit or loss
and other comprehensive income. Transactions in foreign currencies are initially recorded in the
functional currency by applying the exchange rates ruling at
Capitalised leased assets are depreciated over the shorter of the
the date of the transaction. Monetary assets and liabilities
estimated useful life of the asset and the lease term if there is no
denominated in foreign currencies are retranslated at the rate of
reasonable certainty that the Co-operative will obtain ownership
exchange ruling at the balance sheet date.
by the end of the lease term.
(m) Taxes
Operating lease payments are recognised as an expense in the
Current income tax
Statement of profit or loss and other comprehensive income
Current income tax assets and liabilities for the current year are
on a straight-line basis over the lease term. Lease incentives
measured at the amount expected to be recovered from or paid
are recognised in the Statement of profit or loss and other
to the taxation authorities. The tax rates and tax laws used to
comprehensive income as an integral part of the total lease
compute the amount are those that are enacted or substantively
expense.
enacted, at the reporting date in the countries where the Co-
Co-operative as a lessor operative operates and generates taxable income.
Leases in which the Co-operative retains substantially all the
Deferred tax
risks and benefits of ownership of the leased asset are classified
Deferred tax is provided using the liability method on temporary
as operating leases. Initial direct costs incurred in negotiating an
differences between the tax bases of assets and liabilities and
operating lease are added to the carrying amount of the leased
their carrying amounts for financial reporting purposes at the
asset and recognised as an expense over the lease term on the
reporting date.
same basis as rental income.
Deferred tax liabilities are recognised for all taxable temporary
(i) Cash and cash equivalents
differences except:
Cash and short-term deposits in the Statement of financial position
comprise cash at bank and in hand and short-term deposits with When the deferred income tax liability arises from the initial
• 
an original maturity of three months or less. For the purposes of recognition of goodwill or of an asset or liability in a transaction
the Statement of cash flows, cash and cash equivalents consist that is not a business combination and that, at the time of the
of cash and cash equivalents as defined above, net of outstanding transaction, affects neither the accounting profit nor taxable
bank overdrafts. profit or loss.

(j) Trade and other receivables • 

In respect of taxable temporary differences associated with
Trade receivables, which generally have 30-90 day terms, are investments in subsidiaries, associates and interests in joint
recognised and carried at original invoice amount less an allowance arrangements, when the timing of the reversal of the temporary
for any uncollectable amounts. differences can be controlled and it is probable that the
temporary differences will not reverse in the foreseeable future.
An allowance for doubtful debts is made when there is objective
evidence that the Co-operative will not be able to collect the Deferred tax assets are recognised for all deductible temporary
debts. Bad debts are written off when identified. differences, the carry forward of unused tax credits and any unused
tax losses. Deferred tax assets are recognised to the extent that
(k) Inventories
it is probable that taxable profit will be available against which the
Inventories are valued at the lower of cost and net realisable
deductible temporary differences, and the carry forward of unused
value.
tax credits and unused tax losses can be utilised, except:
Costs incurred in bringing each product to its present location and
• 
When the deferred tax asset relating to the deductible temporary
condition are accounted for as follows:
difference arises from the initial recognition of an asset or
Raw materials: purchase cost on a first in, first out basis.
•  liability in a transaction that is not a business combination and,
at the time of the transaction, affects neither the accounting
Finished goods and work in progress: cost of direct materials
• 
profit nor taxable profit or loss.
and labour and a proportion of manufacturing overheads based
on normal operating capacity but excluding borrowing costs. • 
In respect of deductible temporary differences associated
with investments in subsidiaries, associates and interests in
Net realisable value is the estimated selling price in the ordinary
joint arrangements, deferred tax assets are recognised only
course of business, less estimated costs of completion and the
to the extent that it is probable that the temporary differences
estimated costs necessary to make the sale.
will reverse in the foreseeable future and taxable profit will

43
 be available against which the temporary differences can be are reviewed, and adjusted if appropriate, at each financial year end.
utilised.
Impairment
The carrying amount of deferred tax assets is reviewed at each The carrying values of items of property, plant and equipment
reporting date and reduced to the extent that it is no longer are reviewed for impairment at each reporting date, with
probable that sufficient taxable profit will be available to allow recoverable amounts being estimated when events or changes in
all or part of the deferred tax asset to be utilised. Unrecognised circumstances indicate that the carrying value may be impaired.
deferred tax assets are reassessed at each reporting date and
The recoverable amount of property, plant and equipment is the
are recognised to the extent that it has become probable that
higher of fair value less costs to sell and value in use. In assessing
future taxable profits will allow the deferred tax asset to be
value in use, the estimated future cash flows are discounted to
recovered.
their present value using a pre-tax discount rate that reflects
Unrecognised deferred income tax assets are reassessed at each current market assessments of the time value of money and the
balance sheet date and are recognised to the extent that it is no risks specific to the asset.
longer probable that sufficient taxable profit will be available to
For an asset that does not generate largely independent cash
allow all or part of the deferred income tax asset to be utilised.
inflows, the recoverable amount is determined for the cash-
Goods and services tax (GST) generating unit to which the asset belongs, unless the asset’s
Revenues, expenses and assets are recognised net of the amount value in use can be estimated to be close to its fair value.
of GST, except:
An impairment exists when the carrying value of an asset or
• 
When the GST incurred on a purchase of assets or services is cash-generating unit exceeds its estimated recoverable amount.
not recoverable from the taxation authority, in which case the The asset or cash-generating unit is then written down to its
GST is recognised as part of the cost of acquisition of the asset recoverable amount.
or as part of the expense item, as applicable.
Derecognition and disposal
• 
When receivables and payables are stated with the amount of An item of property, plant and equipment is derecognised upon
GST included. disposal or when no further future economic benefits are expected
from its use or disposal.
The net amount of GST recoverable from, or payable to, the
taxation authority is included as part of receivables or payables in Any gain or loss arising on derecognition of the asset (calculated
the Statement of financial position. as the difference between the net disposal proceeds and the
carrying amount of the asset) is included in profit or loss in the year
Cash flows are included in the Statement of cash flows on a gross
the asset is derecognised.
basis and the GST component of cash flows arising from investing
and financing activities, which is recoverable from, or payable to, (o) Intangible assets
the taxation authority is classified as part of operating cash flows. Intangible assets acquired separately are measured on initial
recognition at cost. The cost of intangible assets acquired
Commitments and contingencies are disclosed net of the amount
in a business combination are their fair value as at the date
of GST recoverable from, or payable to, the taxation authority.
of acquisition. Following initial recognition, intangible assets
(n) Property, plant and equipment are carried at cost less any accumulated amortisation and
Items of property, plant and equipment including buildings and accumulated impairment losses. Internally generated intangibles,
leasehold property, but excluding freehold land, are measured excluding capitalised development costs, are not capitalised and
at cost less accumulated depreciation and less any impairment the related expenditure is reflected in the Statement of profit
losses recognised. Freehold land is held at cost and is not or loss and other comprehensive income in the year in which the
depreciated. expenditure is incurred.
Plant and equipment is depreciated on a straight-line basis over The useful lives of intangible assets are assessed as either finite
the estimated useful life of the assets, units of output, life of or indefinite.
project or other appropriate basis.
Intangible assets with finite lives are amortised over the useful
Leasehold improvements are depreciated over the period of the economic life and assessed for impairment whenever there is
lease or estimated useful life, whichever is shorter, using the an indication that the intangible asset may be impaired. The
straight-line method. amortisation period and the amortisation method for an intangible
asset with a finite useful life are reviewed at least at the end of
The following estimated useful lives are used in the calculation of
each reporting period. Changes in the expected useful life or the
depreciation:
expected pattern of consumption of future economic benefits
- Buildings 2 - 5% embodied in the asset are considered to modify the amortisation
- Plant and vehicles 10 - 33% period or method, as appropriate, and are treated as changes in
- Leasehold plant and equipment 10 - 20% accounting estimates. The amortisation expense on intangible
The assets’ residual values, useful lives and amortisation methods assets with finite lives is recognised in the Statement of profit or

44
loss and other comprehensive income as the expense category (q) Impairment of non-financial assets
that is consistent with the function of the intangible assets. The Co-operative assesses, at each reporting date, whether there
is an indication that an asset may be impaired. If any indication
Intangible assets with indefinite useful lives are not amortised,
exists, or when annual impairment testing for an asset is required,
but are tested for impairment annually, either individually or at
the Co-operative estimates the asset’s recoverable amount. An
the cash-generating unit level. The assessment of indefinite
asset’s recoverable amount is the higher of an asset’s or cash-
life is reviewed annually to determine whether the indefinite life
generating unit’s (CGU) fair value less costs of disposal and its
continues to be supportable. If not, the change in useful life from
value in use. Recoverable amount is determined for an individual
indefinite to finite is made on a prospective basis.
asset, unless the asset does not generate cash inflows that are
Gains or losses arising from derecognition of an intangible asset largely independent of those from other assets or groups of
are measured as the difference between the net disposal proceeds assets. When the carrying amount of an asset or CGU exceeds
and the carrying amount of the asset and are recognised in the its recoverable amount, the asset is considered impaired and is
Statement of profit or loss and other comprehensive income written down to its recoverable amount.
when the asset is derecognised.
In assessing value in use, the estimated future cash flows are
(p) Goodwill discounted to their present value using a pre-tax discount rate that
Goodwill acquired in a business combination is initially measured reflects current market assessments of the time value of money
at cost being the excess of the cost of the business combination and the risks specific to the asset. In determining fair value less
over the Co-operative’s interest in the net fair value of the costs to sell, recent market transactions are taken into account.
acquiree’s identifiable assets, liabilities and contingent liabilities. If no such transactions can be identified, an appropriate valuation
model is used. These calculations are corroborated by valuation
Following initial recognition, goodwill is measured at cost less any
multiples, quoted share prices for publicly traded companies or
accumulated impairment losses.
other available fair value indicators.
Goodwill is reviewed for impairment annually or more frequently
An assessment is also made at each reporting date as to whether
if events or changes in circumstances indicate that the carrying
there is any indication that previously recognised impairment
value may be impaired.
losses may no longer exist or may have decreased. If such
For the purpose of impairment testing, goodwill acquired in a an indication exists, the recoverable amount is estimated. A
business combination is, from the acquisition date, allocated previously recognised impairment loss is reversed only if there
to each of the Co-operatives cash-generating units, or groups has been a change in the estimates used to determine the asset’s
of cash-generating units, that are expected to benefit from the recoverable amount since the last impairment loss was recognised.
synergies of the combination, irrespective of whether other assets If that is the case the carrying amount of the asset is increased
or liabilities of the Co-operative are assigned to those units or to its recoverable amount. That increased amount cannot exceed
groups of units. Each unit or group of units to which the goodwill the carrying amount that would have been determined, net of
is so allocated: depreciation, had no impairment loss been recognised for the
• 
Represents the lowest level within the Co-operative at which asset in prior years. Such reversal is recognised in profit or loss
the goodwill is monitored for internal management purposes; unless the asset is carried at revalued amount, in which case the
and reversal is treated as a revaluation increase. After such a reversal
the depreciation charge is adjusted in future periods to allocate
• 
Is not larger than a segment based on the Co-operative’s primary the asset’s revised carrying amount, less any residual value, on a
reporting format determined as if applying AASB 8 Operating systematic basis over its remaining useful life.
Segments.
(r) Trade and other payables
Impairment is determined by assessing the recoverable amount Trade payables and other payables are carried at amortised cost
of the cash-generating unit (group of cash-generating units), to and represent liabilities for goods and services provided to the
which the goodwill relates. When the recoverable amount of the Co-operative prior to the end of the financial year that are unpaid
cash-generating unit (group of cash-generating units) is less then and arise when the Co-operative becomes obliged to make
the carrying amount, an impairment loss is recognised. When future payments in respect of the purchase of these goods and
goodwill forms part of a cash-generating unit (group of cash- services.
generating units) and an operation within that unit is disposed of,
the goodwill associated with the operation disposed of is included (s) Interest bearing loans and borrowings
in the carrying amount of the operation when determining the All loans and borrowings are initially recognised at the fair value
gain or loss on disposal of the operation. Goodwill disposed of of the consideration received less directly attributable transaction
in this manner is measured based on the relative values of the costs.
operation disposed of and the portion of the cash-generating After initial recognition, interest-bearing loans and borrowings
unit retained. Impairment losses recognised for goodwill are not are subsequently measured at amortised cost using the effective
subsequently reversed. interest method.

45
 Gains or losses are recognised in profit or loss when the net assets of the joint venture. Joint control is the contractually
liabilities are derecognised. agreed sharing of control of an arrangement, which exists only
when decisions about the relevant activities require unanimous
(t) Provisions
consent of the parties sharing control.
General
Provisions are recognised when the Co-operative has a present The considerations made in determining significant influence or
obligation (legal or constructive) as a result of a past event, it is joint control are similar to those necessary to determine control
probable that an outflow of resources embodying economic over subsidiaries.
benefits will be required to settle the obligation and a reliable
The Co-operative’s investments in its associate and joint venture
estimate can be made of the amount of the obligation. When
are accounted for using the equity method.
the Co-operative expects some or all of a provision to be
reimbursed, for example, under an insurance contract, the Under the equity method, the investment in an associate or a joint
reimbursement is recognised as a separate asset, but only when venture is initially recognised at cost. The carrying amount of the
the reimbursement is virtually certain. The expense relating to any investment is adjusted to recognise changes in the Co-operative’s
provision is presented in the Statement of profit or loss and other share of net assets of the associate or joint venture since the
comprehensive income net of any reimbursement. acquisition date. Goodwill relating to the associate or joint venture
is included in the carrying amount of the investment and is neither
Wages, salaries and sick leave
amortised nor individually tested for impairment.
Liabilities for wages and salaries, including non-monetary benefits
and accumulating sick leave which are expected to be settled The Statement of profit or loss and other comprehensive income
within 12 months of the reporting date are recognised in respect reflects the Co-operative’s share of the results of operations of
of employees’ services up to the reporting date. They are measured the associate or joint venture. Any change in other comprehensive
at the amounts expected to be paid when the liabilities are settled. income of those investees is presented as part of the Co-operative’s
Expenses for non-accumulating sick leave are recognised when other comprehensive income. In addition, when there has been a
the leave is taken and are measured at the rates paid or payable. change recognised directly in the equity of the associate or joint
venture, the Co-operative recognises its share of any changes,
Long service leave and annual leave
when applicable, in the Statement of changes in equity. Unrealised
The Co-operative does not expect its long service leave or
gains and losses resulting from transactions between the Co-
annual leave benefits to be settled wholly within 12 months of
operative and the associate or joint venture are eliminated to the
each reporting date. The Co-operative recognises a liability for
extent of the interest in the associate or joint venture.
long service leave and annual leave measured as the present
value of expected future payments to be made in respect of The aggregate of the Co-operative’s share of profit or loss of
services provided by employees up to the reporting date using the an associate and a joint venture is shown on the face of the
projected unit credit method. Consideration is given to expected Statement of profit or loss and other comprehensive income
future wage and salary levels, experience of employee departures, outside operating profit and represents profit or loss after tax and
and periods of service. Expected future payments are discounted non-controlling interests in the subsidiaries of the associate or
using market yields at the reporting date on national government joint venture.
bonds with terms to maturity and currencies that match, as closely
The financial statement of the associate or joint venture is
as possible, the estimated future cash outflows.
prepared for the same reporting period as the Co-operative. When
(u) Member’s interest necessary, adjustments are made to bring the accounting policies
In periods before 1 July 2004, members units in the Co-operative in line with those of the Co-operative.
were recorded in equity as contributed equity. On 1 July 2004,
After application of the equity method, the Co-operative
the Co-operative re-classified these instruments to non-current
determines whether it is necessary to recognise an impairment
interest bearing liabilities in accordance with generally accepted
loss on its investment in its associate or joint venture. At each
International Accounting Practice. Any distributions paid on these
reporting date, the Co-operative determines whether there is
instruments are treated as a borrowing cost.
objective evidence that the investment in the associate or joint
This position which was clarified by UIG 2 Members’ Shares in venture is impaired. If there is such evidence, the Co-operative
Co-operative Entities and Similar Instruments, which the Co- calculates the amount of impairment as the difference between
operative adopted effective 1 July 2004. the recoverable amount of the associate or joint venture and its
carrying value, then recognises the loss as ‘Share of profit of an
(v) Norco capital units
associate and a joint venture’ in the Statement of profit or loss and
Norco Capital Units are carried at the principal amount. Interest is
other comprehensive income.
accrued at the entitlement rate and is included in “Interest Bearing
Liabilities.” Upon loss of significant influence over the associate or joint control
over the joint venture, the Co-operative measures and recognises
(w) Investments in joint venture
any retaining investment at its fair value. Any difference between
A joint venture is a type of joint arrangement whereby the parties
the carrying amount of the associate or joint venture upon loss
that have joint control of the arrangement have rights to the

46
of significant influence or joint control and the fair value of the If the forecast transaction or firm commitment is no longer
retained investment and proceeds from disposal is recognised in expected to occur, the cumulative gain or loss previously
the Statement of profit or loss and other comprehensive income. recognised in equity is transferred to the income statement. If
the hedging instrument expires or is sold, terminated or exercised
(x) Derivative financial instruments and hedge accounting
without replacement or rollover, or if its designation as a hedge is
Initial recognition and subsequent measurement
revoked, any cumulative gain or loss previously recognised in other
The Co-operative uses derivative financial instruments, such as comprehensive income remains in other comprehensive income
interest rate swaps, to hedge interest rate risk. Such derivative until the forecast transaction or firm commitment affects profit
financial instruments are initially recognised at fair value on or loss.
the date on which a derivative contract is entered into and are
3. Significant accounting judgements, estimates and
subsequently remeasured at fair value. Derivatives are carried
assumptions
as financial assets when the fair value is positive and as financial
Significant judgements
liabilities when the fair value is negative.
The preparation of the financial statements requires management
Any gains or losses arising from changes in the fair value of
to make judgments, estimates and assumptions that affect the
derivatives are taken directly to profit or loss, except for the
reported amounts in the financial statements. Management
effective portion of cash flow hedges, which is recognised in OCI
continually evaluates its judgments and estimates in relation to
and later reclassified to profit or loss when the hedge item affects
assets, liabilities, contingent liabilities, revenue and expenses.
profit or loss.
Management bases its judgments and estimates on historical
For the purpose of hedge accounting, a hedge is classified as: experience and on other various factors it believes to be
reasonable under the circumstances, the result of which form
• 
Cash flow hedges: when hedging the exposure to variability
the basis of the carrying values of assets and liabilities that are
in cash flows that is either attributable to a particular risk
not readily apparent from other sources. Actual results may differ
associated with a recognised asset or liability or a highly
from these estimates under different assumptions and conditions.
probable forecast transaction or the foreign currency risk in an
unrecognised firm commitment. Management has identified the following critical accounting
policies for which significant judgments, estimates and
At the inception of a hedge relationship, the Co-operative formally
assumptions are made. Actual results may differ from these
designates and documents the hedge relationship to which it
estimates under different assumptions and conditions and may
wishes to apply hedge accounting and the risk management
materially affect financial results or the financial position reported
objective and strategy for undertaking the hedge. The
in future periods.
documentation includes identification of the hedging instrument,
the hedged item or transaction, the nature of the risk being hedged Further details of the nature of these assumptions and conditions
and how the entity will assess the effectiveness of changes in may be found in the relevant notes to the financial statements.
the hedging instrument’s fair value in offsetting the exposure to
Impairment of non-financial assets other than goodwill
changes in the hedged item’s fair value or cash flows attributable
The Co-operative assesses impairment of all assets at each
to the hedged risk. Such hedges are expected to be highly effective
reporting date by evaluating conditions specific to the Co-
in achieving offsetting changes in fair value or cash flows and are
operative and to the particular asset that may lead to impairment.
assessed on an ongoing basis to determine that they actually have
These include product and manufacturing performance,
been highly effective throughout the financial reporting periods for
technology, economic and political environments and future
which they were designated.
product expectations. If an impairment trigger exists the
Hedges that meet the strict criteria for hedge accounting are recoverable amount of the asset is determined.
accounted for as described below:
Provision for doubtful debts
Cash flow hedges The Co-operative assesses the ability to recover debtors through
The effective portion of the gain or loss on the hedging instrument a periodic review of overdue debtors. An allowance for doubtful
is recognised in OCI in the cash flow hedge reserve, while any debts is made when there is objective evidence that the Co-
ineffective portion is recognised immediately in the statement of operative will not be able to collect the debts. Bad debts are
profit or loss as other operating expenses. written off when identified.
The Co-operative uses interest rate swaps to hedge the exposure Provision for inventory obsolescence
to cash flow movements in loan movements. The Co-operative The Co-operative periodically reviews the inventory ledger to
has entered into interest rate swaps which are economic hedges, identify inventory items that may be held in excess of their net
which are fair valued by comparing the contracted rate to the realisable value. For such items that are identified, a provision for
future market rates for contracts with the same length of maturity. inventory obsolescence amount is raised which represents the
The $0.4 million of swaps have been designated as effective amount for which the Co-operative may not recover through use
interest rate swaps and therefore satisfy the accounting standard of sale of the goods. Obsolete stock is written off when identified.
requirements for hedge accounting.

47
 4. Revenue and expenses

4.1 Revenue
2015 2014
$000 $000
Sale of goods 510,440 428,662
Interest received 306 330
Other 163 1,737
510,909 430,729

4.2 Employee expenses

2015 2014
$000 $000
Salaries and wages (including contractors) 51,194 41,213
Workers compensation 3,258 3,824
Superannuation costs 3,631 3,003
Payroll tax 2,264 1,866
60,347 49,906

4.3 Depreciation expense

2015 2014
$000 $000
Plant and equipment 5,029 4,773
Buildings 465 453
Leased assets 187 159
5,681 5,385
4.4 Administration and other costs
Administration and other costs include the following:
2015 2014
$000 $000
Provision for employee benefits 863 783
Inventory obsolescence 78 90
Doubtful/bad debts 68 56
Minimum lease payments recognised as an operating lease expense 43 37

5. Income tax expense

The major components of income tax expense for the years ended 30 June 2015 and 2014 are:
Statement of profit or loss and other comprehensive income

2015 2014
$000 $000
Current income tax:
Current income tax charge - -
Adjustments for current tax of prior periods - -

Deferred tax:
Relating to origination and reversal of temporary differences - -
Income tax benefit/(expense) reported in the Statement of profit or loss and other
comprehensive income - -

A reconciliation between tax expense and the product of accounting profit before income tax multiplied by Co-operative applicable
income tax rate is as follows:

48
 2015 2014
$000 $000
Accounting profit before income tax 2,654 316

At Australia’s statutory income tax rate of 30% (2014: 30%) 796 95

Non deductible amounts 347 108

Movement in temporary differences (334) 92
Income tax loss movement (624) (3,350)
Adjustment in respect of current income tax of previous years (185) 3,055
- -
Tax losses
At 30 June 2015, the Co-operative had an estimated gross $9.6m in carry forward losses (2014: $13.0m). These tax losses have
not been brought to account in the Statement of financial position. There are no available franking credits.

Temporary differences - not recorded

The Co-operative has a surplus of deductible temporary differences. The deferred tax asset associated with these differences has
not been recognised at 30 June 2015.
2015 2014
$000 $000
Unrecognised deferred tax assets and liabilities
Provision for bad debts 275 272
Provision for employee benefits 3,128 2,856
Provision for obsolescence 340 281
3,743 3,409

6. Member distributions
2015 2014
$000 $000
Expensed in the period 298 46

7. Trade and other receivables

2015 2014
$000 $000
Trade receivables 47,018 47,423
Provision for doubtful debts (1,034) (906)
45,984 46,517

Other receivables 1,453 972

47,437 47,489

Doubtful debts
Carrying amount of doubtful debts $000
Opening balance year 2013 1,346
(Reduction)/addition in provision (496)
Amount provided for during the year 56
Ending balance year 2014 906

Opening balance year 2014 906

(Reduction)/addition in provision 60
Amount provided for during the year 68
Ending balance year 2015 1,034

49
 Trade receivables are generally on 30 day terms. An allowance for doubtful debts is made where there is objective evidence that a
trade receivable is impaired. The carrying value of trade and other receivables approximates fair value.

At 30 June, the ageing analysis of trade receivables is as follows (in $000’s):

< 30 30-60 61-90 91+
Total days days days days
$000 $000 $000 $000 $000
2015 47,018 32,207 10,099 3,158 1,554
2014 47,423 28,907 13,091 2,904 2,521

Receivables past due but not considered impaired are: $5,293,000 (2014: $6,661,999). Payment terms have not been renegotiated,
however communications with counterparties have satisfied management that payment will be received in full.

8. Inventories
2015 2014
$000 $000
Raw materials 7,403 6,689
Finished goods 25,651 22,896
Work in progress 381 1,000
Provision to net realisable value (1,415) (938)
Total inventories at the lower of cost and net realisable value 32,020 29,647

An allowance for inventory obsolescence is made where there is objective evidence that inventories are carried in excess of their
net realisable value.

9. Investments
2015 2014
$000 $000
Shares
Unlisted corporations, at cost 3 3

10. Property, plant and equipment

2015 2014
$000 $000
Land and buildings
At cost 28,814 28,427
Accumulated depreciation (4,794) (4,390)
Net carrying amount 24,020 24,037

Plant and vehicles

At cost 66,878 91,780
Accumulated depreciation (39,625) (68,562)
Net carrying amount 27,253 23,218

Assets under lease

At cost 1,860 2,972
Accumulated depreciation (217) (788)
Net carrying amount 1,643 2,184

Capital expenditure work in progress

At cost 2,261 4,296
Net carrying amount 2,261 4,296

50
 2015 2014
$000 $000
Total property, plant and equipment
At cost 99,813 127,475
Accumulated depreciation (44,636) (73,740)
Net carrying amount 55,177 53,735

Reconciliation of carrying amounts at the beginning and the end of the year
2015 2014
$000 $000
Reconciliation
Reconciliations of the carrying amounts of each class of property, plant and equipment

Land and buildings

At 1 July 24,037 24,226
Reclassification 306 44
Transfers 142 220
Depreciation expense (465) (453)
At 30 June 24,020 24,037

Plant and vehicles

At 1 July 23,218 23,636
Disposals (198) -
Reclassification (306) (44)
Transfers 9,568 4,399
Depreciation expense (5,029) (4,773)
At 30 June 27,253 23,218

Assets under lease

At 1 July 2,184 523
Additions - 1,860
Disposals - (40)
Transfers (354) -
Depreciation expense (187) (159)
At 30 June 1,643 2,184

Capital expenditure work in progress

At 1 July 4,296 695
Additions 7,321 8,220
Transfers (9,356) (4,619)
At 30 June 2,261 4,296

Total property, plant and equipment

At 1 July 53,735 49,080
Additions 7,321 10,080
Disposals (198) (40)
Depreciation expense (5,681) (5,385)
At 30 June 55,177 53,735

There were no impairment losses recognised in the 2015 or 2014 financial years.
Leased manufacturing plant is pledged as security for the related finance lease liabilities.
Freehold land, buildings and plant and equipment are subject to a fixed and floating first charge of the Co-operative’s assets as disclosed in
note 14(c). All assets and undertakings are pledged as security on the interest bearing liabilities of the Co-operative and controlled entities.
All assets acquired under finance lease were acquired for nil cash flow and are considered to be a non-cash financing and investing activity.

51
 11. Intangible assets and goodwill
2015 2014
$000 $000

Acquired goodwill 34,309 34,372

Trademark 2,729 2,729
Net carrying amount 37,038 37,101

(a) Impairment testing of goodwill

Goodwill acquired through business combinations has been allocated at an entity level to the relevant cash generating units
(CGU’s). The CGU’s for the Co-operative are Norco Foods, Norco Rural Retail and Norco Agribusiness. The goodwill acquired and
trademark are allocated to the Norco Foods CGU.
The discount rate applied to cash flow projections is 12% pre-tax (2014: 14%).
Key assumptions used in the value in use calculation are:
• Revenue: based on projected growth predictions;
• Cost of sales: based on revenue growth; and
• Other costs: based on rural store growth and expected wage increases.
No reasonably possible change in the key assumptions noted would result in an impairment.

12. Trade and other payables

2015 2014
Current $000 $000
Trade payables and accrued expenses 59,146 56,330
Member deposits - 335
59,146 56,665

Non-current
Other payables 398 398

Trade payables are generally on 30 day terms. The fair value of trade and other payables approximates their carrying value.

13. Employee benefit liabilities

2015 2014
$000 $000
Current
Employee entitlements 9,085 8,235

Non-current
Employee entitlements 1,340 1,309

14. Interest-bearing loans and borrowings

2015 2014
$000 $000
Current
Lease liability 374 467
Norco Capital Units 111 122
Term loans - secured 1,675 -
2,160 589
Non-current
Lease liability 1,397 1,759
Term loans - secured 30,235 31,910
31,632 33,669
52
Term loans are secured by a fixed and floating charge over the assets of Norco Co-operative Limited.
During the period, the Group’s St George finance facility of $31.985 million was amended and is scheduled to expire on 31 October 2016.
Under the finance facility, the facility limit will reduce by a fixed amount immediately after each quarter end date. As at 30 June 2015,
the fixed amounts payable over the next twelve months have been classified as a current liability. The remainder of the liability has been
classified as non-current at 30 June 2015.
Refer to Note 14(d) for financing facilities available to the Co-operative.

(a) Fair values

The carrying amount of the Co-operative’s current and non-current borrowings approximates their fair value. The fair values have
been calculated by discounting the expected future cash flows at prevailing market interest rates.

(b) Interest rate, foreign exchange and liquidity risk

Details regarding interest rate, foreign exchange and liquidity risk is disclosed in Note 29.

(c) Assets pledged as security

The carrying amounts of assets pledged as security for current and non-current interest bearing liabilities are:
2015 2014
$000 $000
Property asset charges 53,534 51,551
Leased asset charges 1,643 2,184
Trademark 2,729 2,729
Total assets pledged as security 57,906 56,464

There are no specific terms and conditions related to the above pledges.

(d) Interest rate, foreign exchange and liquidity risk

The following financing facilities are available for the Co-operative at 30 June:
2015 2014
$000 $000
Term loan facilities
Used facilities 31,910 31,910
Unused facilities 75 1,075
31,985 32,985
Bank overdrafts
Used facilities - -
Unused facilities - 9,000
- 9,000
Invoice discounting facilities
Used facilities - -
Unused facilities 17,000 -
17,000 -

Bank guarantees and finance leases

Used facilities 25 25
Unused facilities 575 78
600 103
Business credit card facility
Used facilities 43 40
Unused facilities 97 100
140 140

Other
Used facilities - 100
Unused facilities - 1,117
- 1,217
Total finance facilities
Used facilities 31,978 32,075
Unused facilities 17,747 11,370
49,725 43,445
53
 15. Derivative financial instruments
2015 2014
$000 $000
Financial liabilities at fair value through OCI
Current
Interest rate swap contracts - cash flow hedges 78 -
Non-current
Interest rate swap contracts - cash flow hedges 313 -

The Co-operative has entered into interest rate swaps which are economic hedges, which are fair valued by comparing the contracted
rate to the future market rates for contracts with the same length of maturity. The $30 million of swaps have been designated as effective
interest rate swaps and therefore satisfy the accounting standard requirements for hedge accounting. The timing of the interest rate
payments for the swaps are in line with the interest rate payments of the bank facility.

16. Members’ interest

16.1 Movements in shares on issue

$000
Opening balance - 7,511,000 fully paid shares 7,511
Transferred to deposits ex-shareholders (201)
Subscriptions 860
At 1 July 2014 8,170

Opening balance - 8,170,000 fully paid shares 8,170

Transferred to deposits ex-shareholders (241)
Subscriptions 854
At 30 June 2015 8,783

16.2 Terms and conditions of contributed equity

Contributed equity has rights in accordance with the Co-operatives National Law (NSW).

17. Reserves
Asset revaluation reserve
Effective 1 July 2004, the Co-operative changed the valuation basis applied to non-current land and buildings. Under historical AGAAP, the
Co-operative carried land and buildings at fair value. From 1 July 2004, the Co-operative deemed the fair value to be cost. The asset revaluation
reserve represents the historical accumulation of revaluation adjustments. The reserve will no longer be available to offset decrements in the
value of land and buildings and will be transferred to retained earnings on depreciation and/or disposal of land and buildings.
Cash flow hedge reserve
This reserve records the portion of the gain or loss on a hedging instrument in a cash flow hedge that is determined to be an effective hedge.

18. Statement of cash flows reconciliation

18.1 Cash flow reconciliation

2015 2014
$000 $000
Reconciliation of net profit after tax to net cash flows from operations:
Profit before tax from continuing operations 2,654 316
Adjustments for:
Depreciation of property, plant and equipment 5,681 5,385
Member distribution expense 298 46
Net profit/(loss) on disposal of property, plant and equipment 28 (84)
Changes in assets and liabilities:
(Increase)/decrease in trade and other receivables 52 (6,612)
(Increase)/decrease in inventories (2,311) (4,232)
(Increase)/decrease in other assets (39) (74)
Increase/(decrease) in trade and other payables 2,817 4,946
Increase/(decrease) in provisions 881 751
Net cash flows from operating activities 10,061 442
54
18.2 Reconciliation of cash
2015 2014
$000 $000
Cash on hand and with financial institutions 4,226 1,802

19. Controlled entities

% equity interest Investment $000
Principal
Name activities 2015 2014 2015 2014
Logan Valley Dairies Pty Ltd Dormant 100% 100% 165 165
Norco Wholesalers Pty Ltd* Wholesaler 100% 100% - -
Fieldco Pty Ltd* Dormant 100% 100% - -
Norcofields Pty Ltd* Dormant 100% 100% - -
Beaudesert Milk Pty Ltd* Dormant 100% 100% - -
Norco Milk Pty Ltd** Dormant 100% 100% - -
Gold Coast Pty Ltd Property Holder 100% 100% 15,783 15,783
ACN 146 859 074 Pty Ltd* Dormant 100% 100% - -
800% 800% 15,948 15,948
* Investment <$101
** 100 shares at $1 each

20. Commitments
Capitalised finance lease commitments for plant and vehicles:

2015 2014
$000 $000
Within one year 416 516
After one year but not more than five years 1,465 1,781
More than five years - 119
Total minimum lease payments 1,881 2,416
Deduct future finance charges (114) (190)
1,767 2,226

Non-cancellable operating lease commitments for equipment, land and buildings:

2015 2014
$000 $000
Within one year 2,512 2,514
After one year but not more than five years 3,766 4,509
More than five years - 36
6,278 7,059

Cancellable operating lease commitments for vehicles and plant:

2015 2014
$000 $000
Within one year 1,053 761
After one year but not more than five years 1,921 809
2,974 1,570

21. Contingent liabilities

Legal Actions
The directors are not aware of any material legal actions being brought against the Co-operative, its controlled entities or any joint venture
to which the Co-operative holds an interest which has not been provided for.
Bank Guarantees
Contingent liabilities exist in respect of bank guarantees given to various parties that amount to $25,000 (2014: $25,000) and are not
included as creditors.
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 22. Financial guarantee contracts
The Co-operative has no outstanding financial guarantee contracts at 30 June 2015 (2014: Nil).

23. Capital management

The Co-operative manages its capital structure through regular reviews of its exposure to debt and members as shareholders.
The Co-operative has no set levels for equity and debt. The management of the Co-operative views members shares as equity.
Member’s interests are managed in line with the requirements of the Co-operatives National Law (NSW). The Co-operative has
complied with all requirements of the Co-operatives National Law (NSW) during the year.

24. Related party disclosures

Material transactions and balances with related parties are as follows:
Net trading Net trading Goods and
debt payable debt payable services
(current) (non-current) purchased
$000 $000 $000
Wholly owned group
Norco Wholesalers Pty Limited
2015 36,233 - 434,805
2014 28,356 - 340,278
Logan Valley Dairies Pty Limited
2015 - 397 -
2014 - 397 -

Shareholdings in controlled entities are outlined in Note 19.

Sales to and purchases from related parties are made in arm’s length transactions both at normal market prices and on normal
commercial terms.

25. Directors and executive disclosures

25.1 Key management personnel

(i) The directors of Norco Co-operative Limited during the financial year were:
Greg McNamara (Non-Executive Chairman)
Peter Neal (Non-Executive) (Appointed 24/09/2014)
Anthony Wilson (Non-Executive Deputy Chairman)
Michael Jeffery (Non-Executive)
Leigh Shearman (Non-Executive)
Heath Hoffman (Non-Executive) (Appointed 12/11/2014)
Thomas Cooper (Non-Executive) (Ceased 12/11/2014)
David Hodges (Independent Director) (Ceased 12/11/2014)

(ii) The executives of Norco Co-operative Limited during the financial year were:
Brett Kelly (Chief Executive Officer)
Camille Hogan (Chief Financial Officer)
Mark Myers (Co-operative Secretary)
Yasmin Lawrence (Human Resource Manager)
Andrew Burns (GM Sales and Marketing Norco Foods)
Ian Foote (GM Operations Norco Foods) (a)
Damon Bailey (GM Norco Rural/Agri)
Rob Randall (GM Milk Supply)
Robert Vandermaat (GM Operations Norco Foods) (b)

(a) Resigned as GM Operations Norco Foods effective 22 December 2014.

(b) Acting GM Operations Norco Foods from 1 December 2014. Appointed in the position as at 28 May 2015.

56
25.2 Compensation of key management personnel and Directors
2015 2014
$ $
Short term - wages and salaries 1,934,035 1,868,626
Incentive - 57,900
Superannuation 159,109 135,026
Non-cash 26,167 15,000
Total compensation 2,119,311 2,076,552

Total KMP excluding Directors 9 8

The above amounts only relate to the cash and other benefits paid to key management personnel for the period of their employment
with the Co-operative or for the period they held a position as a key management person.

25.3 Transactions with and balances with key management personnel

Purchases
Purchases of milk from key management personnel and related entities are on the same commercial terms and conditions as
enjoyed by other non key management personnel members.

Sales
Sale of farm supplies and stores to key management personnel and related entities are on the same commercial terms and
conditions as enjoyed by other non key management personnel members.

25.4 Share transactions

2015 2014
Aggregate number of shares held by Co-operative key management personnel
and their related entities at 30 June 540,866 501,622
Aggregate number of shares acquired by key management personnel and their
related entities during the year 66,288 48,162

26. Superannuation commitments

All employees participate in an employer sponsored defined contribution/accumulation style superannuation plan. Contributions
by the Co-operative of 9.5% of employees’ wages and salaries are legally enforceable except employees of the Ice Cream division
who are paid 11% superannuation commitments in line with their Enterprise Bargaining Agreement.

27. Auditors’ remuneration

The auditor of Norco Co-operative Limited is Ernst & Young.
2015 2014
$ $
Amounts received or due and receivable by Ernst & Young for:
An audit or review of the financial report 135,200 131,400
Other services
Financial statement compilation 10,800 10,800
146,000 142,200

57
 28. Information relating to Norco Co-operative Limited (the Parent)
2015 2014
$000 $000
Information relating to Norco Co-operative Limited:
Current assets 84,210 78,402

Total assets 160,646 153,467

Total liabilities (103,163) (98,860)
Net assets attributable to members 57,483 54,607

Members interest 12,008 11,395

Net assets 45,475 43,212

Asset revaluation reserve 31,214 31,214

Cash flow hedge reserve (391) -
Retained profits 14,652 11,998
Total equity 45,475 43,212

Profit of the Parent entity 2,654 316

Total comprehensive income of the Parent 2,263 316

Details of any guarantees entered into by the Parent entity in relation to the debts of its subsidiaries
The Parent’s share of the jointly controlled entities financial guarantees is included in disclosures in Note 22.
Details of any contingent liabilities of the Parent entity
The Parent’s share of the jointly controlled entities contingent liabilities is included in disclosures in Note 21.
Details of any contractual commitments by the Parent entity for the acquisition of property, plant or equipment
The Parent’s share of the jointly controlled entities commitments is included in disclosures in Note 20.

29. Financial risk management objectives and policies

The Co-operative’s principal financial liabilities, other than derivatives, comprise of loans and borrowings, trade and other payables,
and financial guarantee contracts. The main purpose of these financial liabilities is to finance the Co-operative’s operations and
to provide guarantees to support its operations. The Co-operative’s principal financial assets include loans, trade and other
receivables, and cash and short-term deposits that derive directly from its operations.

The Co-operative is exposed to market risk, credit risk and liquidity risk. The Co-operative’s senior management oversees the
management of these risks. The Co-operative’s senior management is supported by the Audit and Risk Management Committee
that advises on financial risks and the appropriate financial risk governance framework for the Co-operative. The Audit and Risk
Management Committee provides assurance to the Co-operative’s senior management that the Co-operative’s financial risk-taking
activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in
accordance with the Co-operative’s policies and risk objectives. All derivative activities for risk management purposes are carried
out by specialist teams that have the appropriate skills, experience and supervision. It is the Co-operative’s policy that no trading in
derivatives for speculative purposes shall be undertaken. The board of directors reviews and agrees policies for managing each of
these risks which are summarised below.

Risk exposures and responses

Interest rate risk

The Co-operative’s exposure to interest rates relates primarily to the Co-operative’s long term debt and associated obligations. The level
of debt is disclosed in Note 14.
At balance date, the Co-operative had the following mix of financial assets and liabilities exposed to Australian variable interest rate risk:

58
 2015 2014
$000 $000
Financial assets and liabilities
Cash and cash equivalents 4,226 1,802
Interest-bearing loan - (31,910)
Derivative financial instruments (391) -
Net exposure 3,835 (30,108)

Interest rate swap contracts outlined in Note 15, with a fair value of $391,000 (loss) are exposed to fair value movements if interest
rates change. The Co-operative’s policy is to manage its finance costs using variable rate debt with an appropriate level of instruments
to fix interest exposure. The Co-operative constantly analyses its interest rate exposure. To manage this mix in a cost-efficient manner,
the Co-operative has entered into interest rate swaps, in which they agree to exchange, at specified intervals, the difference between
fixed and variable rate interest amounts calculated by reference to an agreed-upon notional principal amount. Consideration is given
to potential renewals of existing positions, alternative financing and the mix of fixed and variable interest rates.

The following sensitivity analysis is based on the interest rate risk exposures in existence at the reporting date:

Judgements of reasonably possible movements: Post tax profit Equity

Higher/(Lower) Higher/(Lower)
2015 2014 2015 2014
$’000 $’000 $’000 $’000
+1.0% (100 basis points) (42) (319) (834) (319)
-1.0% (100 basis points) 42 319 834 319

The movements in post-tax profit are due to the movement in fair value of cash, based on movements in interest rates only.

Significant assumptions used in the interest rate sensitivity analysis include:

• A price sensitivity of derivatives based on a reasonably possible movement of interest rates at balance
dates by applying the change as a parallel shift in the forward curve.
• The net exposure at balance date is representative of what the Co-operative was and is expecting to be
exposed to in the next twelve months from balance date.

Foreign currency risk

The Co-operative has no material exposure to foreign currency therefore this is not an applicable risk.

Commodity price risk

The Co-operative’s exposure to commodity price risk is present through the grain purchasing requirements for the Agribusiness
business. It is the Co-operatives policy to secure grain quantities and prices through forward grain contracts. As these contracts
are regular advance purchase contracts for process inputs, derivative accounting is not applied and contract fair value movements
are not recorded.

Credit risk
Credit risk arises from the financial assets of the Co-operative, which comprise cash and cash equivalents and trade and other
receivables. The Co-operative’s exposure to credit risk arises from potential default of the counter party, with a maximum exposure
equal to the carrying amount of these instruments. Exposure at balance date is addressed in each applicable note.

The Co-operative does not hold any credit derivatives to offset its credit exposure.

The Co-operative trades only with recognised, creditworthy third parties, and as such collateral is not requested nor is it the Co-
operative’s policy to securitise its trade and other receivables.

It is the Co-operative’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures
including an assessment of their independent credit rating, financial position, past experience and industry reputation. Risk limits
are set for each individual customer in accordance with parameters set by the board. These risk limits are regularly monitored.

In addition, receivable balances are monitored on an ongoing basis with the result that the Co-operative’s exposure to bad debts
is not significant.

There are no significant concentrations of credit risk within the consolidated entity.

59
 Liquidity risk
The Co-operative’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts,
bank loans, finance leases and committed available credit lines.

The table below reflects contractual finance principal repayments and interest resulting from recognised financial liabilities as of 30
June 2015. Cash flows for financial liabilities without fixed amount or timing are based on the conditions existing at 30 June 2015.

The remaining contractual maturities of the consolidated entity’s and parent entity’s financial liabilities are presented with an
analysis of the financial assets.
2015 2014
$000 $000
0-1 year 61,125 56,116
1-5 years 32,098 33,948
Over 5 years - 119
93,223 90,183

Maturity analysis of financial assets and liability based on management’s expectation.

The risk implied from the values shown in the table below reflects a balanced view of cash inflows and outflows. Leasing obligations,
trade payables and other financial liabilities mainly originate from the financing of assets used in our ongoing operations such as
property, plant, equipment and investments in working capital e.g. inventories and trade receivables. These assets are considered
in the consolidated entity’s overall liquidity risk.
1 to 5 Over
Year ended 30 June 2015 <12 months years 5 years Total
$000 $000 $000 $000
Cash and cash equivalents 4,226 - - 4,226
Trade and other receivables 47,437 - - 47,437
Interest-bearing loans and borrowings (1,675) (30,235) - (31,910)
Finance leases (416) (1,465) - (1,881)
Trade and other payables (59,146) (398) - (59,544)
Net maturity (9,574) (32,098) - (41,672)

1 to 5 Over
Year ended 30 June 2014 <12 months years 5 years Total
$000 $000 $000 $000
Cash and cash equivalents 1,802 - - 1,802
Trade and other receivables 47,489 - - 47,489
Interest-bearing loans and borrowings - (31,910) - (31,910)
Finance leases (516) (1,781) (119) (2,416)
Trade and other payables (56,665) (398) - (57,063)
Net maturity (7,890) (34,089) (119) (42,098)

Fair value
The methods for estimating fair value are outlined in the relevant notes to the financial statements.

30. Events after the reporting period

There have been no significant events occurring after the reporting period which may affect either the Co-operative’s operations
or results of those operations or the Co-operative’s state of affairs.

60
 DIRECTORS’ DECLARATION

In accordance with a resolution of the directors of Norco Co-operative Limited, I state that:

In the opinion of the directors:

(a) the financial statements and notes of the Co-operative are in accordance with the Corporations Act 2001
and Co-operatives National Law (NSW), including:

(i) giving a true and fair view of the Co-operative’s financial position as at 30 June 2015 and of its
performance for the year ended on that date; and

(ii) complying with Accounting Standards, as required by the Co-operatives National Law (NSW); and

(b) there are reasonable grounds to believe that the Co-operative will be able to pay its debts as and when they
become due and payable.

On behalf of the Board

G.J. McNamara

Chairman

Lismore

30 September 2015

61
62
63
 Looking back... to 30 June 1965
On 30 June 1965 the number one song on the Australian music chart was “Crying in the Chapel” by Elvis Presley
and the Wheels “Car of the Year” was the XP Falcon.

In relation to Norco, the board of directors consisted of 12, with Mr JA Stockdale the chairman and Mr AJ Barlow
the deputy chairman. Directors were Messrs TB Armstrong, HE Gibson, CH Hall, JA Johnston, RL Johnston, JS
McKeand, CT Mustard, RA Robson, WA Slater and GA Steel. The general manager was Mr JK Donaldson and the
secretary Mr John T Swain.

One of the two special resolutions proposed by the Board to members at the 1965 Annual General Meeting
related to the introduction of decimal currency on 14 February 1966 and included as part of the resolution “.....each
of the issued shares of stock units of £1 each in the capital of the society be subdivided into two shares or stock
units of $1 each so that existing members at the time of conversion to decimal currency shall thereafter hold two
$1 shares or stock units for every £1 share or stock unit previously held.”

This must have been a great change for the co-operative and the report even contained a comparative balance
sheet for 30 June 1965 expressed in both pounds and dollars as an example.

Butter production for the year was 23,276,147 lbs (10,391 tons) with a final pay rate of 4/1 lb butterfat. The total
milk handled for the year was 4,670,386 gallons, cheese production was 713 tons and the number of pigs killed
was 22,502. Turnover in the stores department was a record according to the report, with a rebate of ninepence in
the pound paid on rebatable purchases.

64
 corporate directory NORCO AGRIBUSINESS HEATHERBRAE
– GOLDMIX AND GRAIN TRADING 9 Hank St HEATHERBRAE NSW 2324
Registered Office Ph: 02 4987 6500 Fax: 02 4987 6099
Norco Co-operative Limited GOLDMIX STOCKFEEDS KEMPSEY
ARBN 009 717 417 / ABN 17 009 717 417 Krauss Ave SOUTH LISMORE NSW 2480 3 Kemp St WEST KEMPSEY NSW 2440
‘Windmill Grove’, 107 Wilson Street Ph: 02 6621 3042 Fax: 02 6621 9170 Ph: 02 6562 6393 Fax: 02 6563 1020
SOUTH LISMORE NSW 2480
T: 02 6627 8000 F: 02 6621 9673 GOLDMIX STOCKFEEDS KINGAROY
W: www.norco.com.au 2814 Murgon – Gayndah Road 97 River Road KINGAROY QLD 4610
WINDERA QLD 4605 Ph: 07 4163 6310 Fax: 07 4162 4992
Financiers/Bankers Ph: 07 4168 6186 Fax: 07 4168 6214
St George Bank KYOGLE
Level 13, 182 George Street GOLDMIX CREST SEEDS
Willis Street KYOGLE NSW 2474
SYDNEY NSW 2000 316 Anzac Ave TOOWOOMBA QLD 4350 Ph: 02 6632 2920 Fax: 02 6632 1221
Ph: 07 4630 2318 Fax: 07 4630 2348
Auditors LISMORE
Ernst & Young Chartered Accountants GRAIN TRADING – TOOWOOMBA
105 Wilson Street
Level 5 Waterfront Place, 1 Eagle Street 300 Anzac Ave TOOWOOMBA QLD 4350 SOUTH LISMORE NSW 2480
BRISBANE QLD 4000 Ph: 07 4637 3315 Fax: 07 4637 3399 Ph: 02 6627 8266 Fax: 02 6621 2286
Solicitors MACKSVILLE
Thomsons Geer Lawyers NORCO RURAL BRANCHES
Tilly Willy St MACKSVILLE NSW 2447
BRISBANE QLD 4000 Ph: 02 6568 4057 Fax: 02 6568 2308
S+P Lawyers ALSTONVILLE
LISMORE NSW 2480 MURGON
17 Kays Lane Russelton Estate
Piper Alderman Lawyers ALSTONVILLE NSW 2477 21 Lamb Street MURGON QLD 4605
SYDNEY NSW 2000 Ph: 02 6628 8315 Fax: 02 6628 5765 Ph: 07 4168 3060 Fax: 07 4168 2996

ARMIDALE MURWILLUMBAH
BRANCH directory 252 Mann Street ARMIDALE NSW 2350 17 Buchanan Street
Ph: 02 6771 4669 Fax: 02 6771 1187 MURWILLUMBAH NSW 2484
Ph: 02 6672 2311 Fax: 02 6672 5120
head offices BEAUDESERT
STUARTS POINT
9A Thiedeke Rd BEAUDESERT QLD 4285
NORCO CORPORATE Ph: 07 5541 4882 Fax: 07 5541 1025 906 Stuarts Point Road
STUARTS POINT NSW 2441
‘Windmill Grove’, 107 Wilson Street BELLINGEN Ph: 02 6569 0955 Fax: 02 6569 0983
SOUTH LISMORE NSW 2480
(PO Box 486 LISMORE NSW 2480) 1076 Waterfall Way TAREE
Ph: 02 6627 8000 Fax: 02 6621 9673 BELLINGEN NSW 2454
Ph: 02 6655 9792 Fax: 02 6655 2266 5 Grey Gum Road TAREE NSW 2430
NORCO RURAL Ph: 02 6551 2999 Fax: 02 6551 2522
BOWRAVILLE
‘Windmill Grove’, 107 Wilson Street, TENTERFIELD
SOUTH LISMORE NSW 2480 51 Carbin St BOWRAVILLE NSW 2449
Ph: 02 6564 8648 Fax: 02 6564 7425 445 Rouse St TENTERFIELD NSW 2372
(PO Box 3107 LISMORE DC NSW 2480) Ph: 02 6736 5902 Fax: 02 6736 2270
Ph: 02 6627 8000 Fax: 02 6622 1730 BUNDABERG
WAMURAN
NORCO AGRIBUSINESS 71 Gavin St BUNDABERG QLD 4670
Ph: 07 4151 7883 Fax: 07 4154 4341 1055 D’Aguilar Highway
‘Windmill Grove’, 107 Wilson Street WAMURAN QLD 4512
SOUTH LISMORE NSW 2480 CASINO Ph: 07 5496 6500 Fax: 07 5496 6406
(PO Box 3107 LISMORE DC NSW 2480)
136 Dyraaba Street CASINO NSW 2470 WINDERA DEPOT
Ph: 02 6627 8000 Fax: 02 6622 1730
Ph: 02 6661 2100 Fax: 02 6662 6007
2814 Murgon – Gayndah Road
MILK SUPPLY
COFFS HARBOUR WINDERA QLD 4605
‘Windmill Grove’, 107 Wilson Street Ph: 07 4168 6186 Fax: 07 4168 6214
5/24 Isles Drive
SOUTH LISMORE NSW 2480
SOUTH COFFS HARBOUR NSW 2450 WOOLGOOLGA
(PO Box 486, LISMORE NSW 2480)
Ph: 02 6658 0393 Fax: 02 6658 0374
Ph: 02 6627 8029 Fax: 02 6622 7410 16 Featherstone Drive
DUNGOG WOOLGOOLGA NSW 2456
Stroud Road DUNGOG NSW 2420 Ph: 02 6654 2905 Fax: 02 6654 1031
NORCO FOODS
Ph: 02 4992 1087 Fax: 02 4992 3000 WOOLGOOLGA CARTON SERVICES
NORCO MILK – LABRADOR GAYNDAH 8 Bosworth Road
59 Dalgangal Rd GAYNDAH QLD 4625 WOOLGOOLGA NSW 2456
Cnr Pine Ridge Road & Gold Coast Hwy
Ph: 07 4140 8542 Ph: 02 6654 8078 Fax: 02 6654 0103
LABRADOR QLD 4215
(PO Box 530, SOUTHPORT QLD 4215)
GLEN INNES
Ph: 07 5511 7200 Fax: 07 5594 0101 NORCO RURAL BRANCHES
165 Lang St GLEN INNES NSW 2370 – NORCO BOWDLERS
NORCO MILK – RALEIGH Ph: 02 6732 2162 Fax: 02 6732 5642
North Street RALEIGH NSW 2454
contents Ph: 02 6692 0000 Fax: 02 6655 4447
GLOUCESTER NORCO BOWDLERS – TOOWOOMBA
Cnr Church & Phillip Streets 300 Anzac Ave TOOWOOMBA QLD 4350
ICE CREAM BUSINESS UNIT GLOUCESTER NSW 2422 Ph: 07 4637 3300 Fax: 07 4637 3399
Corporate Profile  2 Norco Rural / Agribusiness 16
Union St SOUTH LISMORE NSW 2480 Ph: 02 6558 9600 Fax: 02 6558 9666
NORCO BOWDLERS – ALLORA
Facts at a Glance  4 Financial Management 18 (PO Box 486, LISMORE NSW 2480)
GRAFTON 120 Allora – Clifton Rd ALLORA QLD 4362
Ph: 02 6627 8000 Fax: 02 6621 6120
Chairman’s Report 5 Norco People 19 19 Queen Street GRAFTON NSW 2460 Ph: 07 4666 2210 Fax: 07 4666 3520
Ph: 02 6643 5630 Fax: 02 6642 7245
Directors’ Report 20 NORCO BOWDLERS – QUINALOW
Chief Executive Officer’s Report 8
3 Myall Street QUINALOW QLD 4403
Business Unit Reports: Auditor’s Independence Declaration 27 Phone: 07 4692 1333

Norco Foods Corporate Governance Statement 29

- Sales and Marketing 13 Financial Statements  36

- Operations 14 Independent Auditor’s Report 62

Milk Supply 15 Corporate and Branch Directories 65

www.norco.com.au 65
 2015 Annual Report

An Australian, farmer owned dairy co-operative since 1895