DYNO NOBEL LIMITED. — Annual Report 2021

Nov 14, 2021

Appendix 4E Preliminary final report

ABN 42 004 080 264

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||||||
|---|---|---|---|---|
|Financial year ended|Previous financial year ended|
|(current period)|(previous corresponding period)|
|30 September 2021|30 September 2020|
|Results for announcement to the market|
|Extracts of the Incitec Pivot Limited results for the financial year ended 30 September 2021|$A mill|
|Revenues from ordinary activities|up|$A mill 406.3 (10.3%)|to|4,348.5|
|Net profit for the financial year attributable|
|to members of Incitec Pivot Limited|up|$A mill 25.7 (20.8%)|to|149.1|
|Profit after tax excluding individually material items|
|attributable to members of Incitec Pivot Limited|up|$A mill 170.4 (90.5%)|to|358.6|

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|---|---|---|
|Franked amount|
|Amount per security|per security|
|Dividends|cents|cents|
|Current Period|
|Interim dividend|1.0|1.0|
|Final dividend|8.3|1.2|
|Previous corresponding period|
|Interim dividend|nil|nil|
|Final dividend|nil|nil|

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Record date for determining entitlements to the final dividend: 2 December 2021

Payment date of final dividend: 16 December 2021

The Dividend Reinvestment Plan remains suspended until further notice and will not be in operation for the 2021 final dividend.

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|---|---|---|
|Current period|Previous corresponding period|
|Net tangible asset backing per ordinary security|$1.22|$1.12|

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Net tangible assets include the right-of-use assets recognised under AASB 16 Leases.

The information should be read in conjunction with the consolidated financial report, which is set out on pages 46 to 82.

For the profit commentary and any other significant information needed by an investor to make an informed assessment of Incitec Pivot’s results please refer to the accompanying Incitec Pivot Limited Profit Report.

Conduit foreign income component:

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|||||
|---|---|---|---|
|Current period|Previous corresponding period|
|Interim dividend|Interim dividend|
|Ordinary|nil|Ordinary|nil|
|Final dividend|Final dividend|
|Ordinary|7.1 cents|Ordinary|nil|

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1

Contents

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|---|---|
|Directors' Report|3|
|Auditor’s Independence Declaration|44|
|Financial Report|45|
|Audit Report|84|

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Annual General Meeting

The Annual General Meeting will be held as follows:

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|---|---|
|Location|The Annual General Meeting will be held|
|as a virtual meeting via an online platform.|
|Date|17 December 2021|
|Time|11.00 am (AEDT)|
|Approximate date the annual report will be available|25 November 2021|

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Compliance Statement

This report has been prepared under accounting policies which comply with the Corporations Act 2001 (Cth), the Accounting Standards and other mandatory professional reporting requirements in Australia, and the Corporation Regulations 2001 (Cth).

This report uses the same accounting policies as the financial statements prepared under the Corporations Act 2001 (Cth). This gives a true and fair view of the matters disclosed. The financial report is based on accounts which have been audited.

For further information, please contact:

Investor Relations

Geoff McMurray T: 03 8695 4553 M: 0418 312 773 E: geoff.mcmurray@incitecpivot.com.au

2

DIRECTORS’ REPORT

The directors of Incitec Pivot Limited (the Company or IPL) present their report together with the financial report of the Company and its controlled entities (the Group) for the year ended 30 September 2021 and the auditor’s report.

The following sections of the Annual Report form part of, and are to be read in conjunction with, this Directors’ Report:

• » Board of Directors

• » Operating and Financial Review (OFR)

• » Remuneration Report

• » Auditor’s Independence Declaration

Directors

Particulars of the qualifications, other directorships, experience and special responsibilities of each Director as at the date of this report are set out in the Board of Directors section.

During the financial year, the following changes to the composition of the Board of Directors occurred:

• » Mr Biltz was appointed as a director on 1 December 2020

• » Ms McGrath retired as a director on 18 December 2020 (at the conclusion of the Company’s 2020 Annual General Meeting)

• » Ms Dwyer was appointed as a director on 20 May 2021

Directors’ meetings

The number of Board and Board Committee meetings attended by each of the directors of the Company during the financial year are listed below:

Director – Current(1)(2)	Board Audit and Risk Management Committee Remuneration Committee Nominations Committee Health, Safety, Environment and Community Committee Additional Meetings(3)
	Held Attended Held Attended Held Attended Held Attended Held Attended Held Attended
B Kruger(4)	8 8 – 5 2 4 2 2 6 6 5 5
G Biltz(5)	7 7 – – – – – – 5 5 2 2
B Brook	8 8 5 5 4 4 2 2 – 3 5 5
T Dwyer(6)	3 3 2 2 2 2 – 1 – 2 – –
X Liu(7)	8 8 5 5 – 4 – – 6 6 3 3
G Robinson(8)	8 8 4 4 4 4 2 2 – 4 3 3
J Johns	8 8 – 5 – 4 – – 6 5 5 5
Director – Former
R McGrath(9)	2 2 1 1 – – – – 2 2 1 1

Chairman Member

(1) ‘Held’ indicates the number of meetings held during the period that the director was a member of the Board or Committee.

(2) ‘Attended’ indicates the number of meetings attended. Directors who are not members of the Board Committees do attend Committee meetings from time to time (as non-executive directors have a standing invitation to attend all Committee meetings).

(3) Reflects the number of additional formal Board meetings attended by each director during the financial year, and includes attendance at Board Sub-Committee meetings where any two directors are required to form a quorum.

(4) Mr Kruger was a member of the Remuneration Committee until 20 May 2021 and attended two scheduled meetings during the period he was a member.

(5) Mr Biltz was appointed as a director on 1 December 2020 and as a member of the Health, Safety, Environment and Community Committee with effect from 18 December 2020.

(6) Ms Dwyer was appointed as a director on 20 May 2021 and as a member of the Audit and Risk Management Committee and the Remuneration Committee with effect from 20 May 2021.

(7) Dr Liu was appointed Chairman of the Health, Safety, Environment and Community Committee with effect from 18 December 2020.

(8) Mr Robinson was appointed as a member of the Audit and Risk Management Committee and the Nominations Committee with effect from 18 December 2020.

(9) Ms McGrath retired as a director on 18 December 2020.

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Directors’ interests in share capital

The relevant interests of each director in the share capital of the Company as at the date of this report is disclosed in the Remuneration Report.

Company Secretary

Ms Richa Puri was appointed to the role of Company Secretary on 8 August 2019. Ms Puri (LLB (Hons), B. Com (Accounting), FGIA, GAICD) is a corporate lawyer and governance adviser with over 15 years relevant professional experience. She has practiced as a lawyer for legal firms in Australia and has experience in providing in-house legal, governance and company secretarial advice to ASX listed companies.

Principal activities

The principal activities of the Group during the course of the financial year were the manufacture and distribution of industrial explosives, industrial chemicals and fertilisers, and the provision of related services. No significant changes have occurred in the nature of these activities during the financial year.

Dividends

Dividends since IPL’s 2020 Annual Report:

		Total
	Dividend	amount	Franked	Date of
Dividend type	per share	$mill	percentage	payment
Paid during the fnancial year 2020 fnal dividend Nil		Nil	N/A	N/A
2021 interim dividend To be paid after end of	1.0 cent 19.4 the fnancial year		100% franked	2 Jul 2021
2021 fnal dividend	8.3 cents	161.2	14% franked	16 Dec 2021

Review and results of operations

A review of the operations of the Company during the financial year, the results of those operations and the Company’s financial position is contained in the OFR.

Significant changes in the state of affairs

There have been no significant changes to the Group’s state of affairs during the financial year other than the position with respect to Gibson Island. On 8 November 2021, IPL announced that it was unable to secure an economically viable long-term gas supply for its Gibson Island plant beyond its current gas supply arrangements which expire at the end of December 2022 and accordingly manufacturing operations at the site will cease at that date. The financial impact of the closure has been accounted for in the 2021 financial year. Further details are provided in the OFR and note 12 to the financial statements.

Events subsequent to reporting date

In November 2021, the Board determined to pay a final dividend for the Company of 8.3 cents per share, 14% franked, to be paid on 16 December 2021. The record date for entitlement to this dividend is 2 December 2021. The total dividend payment will be $161.2m.

On 8 November 2021, IPL announced that manufacturing operations at Gibson Island will cease at the end of December 2022.

Other than the matters reported on above, the directors have not become aware of any other significant matter or circumstance that has arisen since the end of the financial year, that has affected or may affect the operations of the Group, the results of those operations, or the state of affairs of the Group in subsequent years, which has not been covered in this report.

Likely developments

The OFR contains information on the Company’s 2021 financial performance and prospects for future financial years, and refers to likely developments in the Company’s operations and the expected results of these operations in future financial years. Information on likely developments in the Company’s operations for future financial years and the expected results of those operations together with details that could give rise to material detriment to the Company (for example, information that is commercially sensitive, confidential or could give a third party a commercial advantage) have not been included in this report where the directors believe it would likely result in unreasonable prejudice to the Company.

Environmental regulation and performance

The operations of the Group are subject to environmental regulation under the jurisdiction of the countries in which those operations are conducted including Australia, United States of America, Mexico, Chile, Canada, Indonesia, Papua New Guinea and Turkey. The Group is committed to complying with environmental legislation, regulations, standards and licences relevant to its operations.

The environmental laws and regulations generally address certain aspects and potential impacts of the Group’s activities in relation to, among other things, air and noise quality, soil, water, biodiversity and wildlife. The Group operates under a Global Health, Safety and Environment Management System which sets out guidelines on the Group’s approach to environmental management, including a requirement for sites to undertake an Environmental Site Assessment.

In certain jurisdictions, the Group holds licences for some of its operations and activities from the relevant environmental regulator. The Group measures its compliance with such licences and reports statutory non-compliances as required.

Measurement of the Group’s environmental performance, including determination of areas of focus and assessment of projects to be undertaken, is based not only on the actual impact of incidents, but also upon the potential consequence, consistent with IPL’s risk-based focus.

During the year, the Group has continued to focus on licence compliance and identification and mitigation of environmental risks. Remediation works have progressed at a number of sites in Australia and the United States.

Environmental performance has seen a substantial improvement with zero Significant Environmental Incidents reported in the 2021 financial year. This result has highlighted the importance of delivering specific environmental improvement plans to achieve sustainable improvement. The implementation of our Compliance Management Framework, with a continued focus on environmental compliance across the organisation through automation, increased controls, and improved practices has delivered significant improvement in our environmental performance.

During the 2021 financial year, a Penalty Infringement Notice (PIN) for $13,345 was issued to Phosphate Hill operations on 18 December 2020 by the Department of Environment and Science (DES) for an incident that occurred in the 2020 financial year. This fine was issued for the contravention of a condition of the site environmental licence relating to the capacity of a gypsum storage facility spillway. The DES was advised proactively of this situation in September 2020. Construction works to rectify the spillway capacity are underway.

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In the United States, ongoing compliance monitoring and implementation of physical improvements at both the Carthage and Louisiana, Missouri sites is progressing to plan. Both sites submit quarterly reports to the Environmental Protection Agency (EPA) documenting the status of this progression and to date have met all Consent Decree milestones.

Indemnities and insurance

The Company’s Constitution provides that, to the extent permitted by law, the Company must indemnify any person who is, or has been, a director or secretary of the Company against any liability incurred by that person including any liability incurred as an officer of the Company or a subsidiary of the Company and legal costs incurred by that person in defending an action.

The Constitution further provides that the Company may enter into an agreement with any current or former director or secretary or a person who is, or has been, an officer of the Company or a subsidiary of the Company to indemnify the person against such liabilities.

In accordance with the Company’s Constitution, the Company has entered into Deeds of Access, Indemnity and Insurance with each director of the Company and certain officer’s and members of senior management. Pursuant to those deeds, the Company has paid a premium in respect of a contract insuring directors and officers of the Group against any liability for costs and expenses incurred by them in defending civil or criminal proceedings involving them as such officers, with some exceptions. The contract of insurance prohibits disclosure of the nature of the liability insured against and the amount of the premium paid.

Auditor independence and non-audit services

Deloitte Touche Tohmatsu (Deloitte) was appointed as the Company’s external auditor at the 2011 Annual General Meeting and continues in office in accordance with section 327B(2) of the Corporations Act 2001. Mr Tim Richards is the Company’s lead audit partner for the 2021 financial year.

The Group may decide to engage the auditor, Deloitte, for the provision of non-audit services, where such services are not in conflict with their role as auditor and their expertise and/or detailed experience with the Company may allow cost efficiencies for the work.

Deloitte provided non-audit services to the amount of $70.4k during the year ended 30 September 2021 (refer to note 23 to the financial statements).

The lead auditor has provided a written declaration that no professional engagement for the Group has been carried out during the year that would impair Deloitte’s independence as auditor. A copy of the auditor’s independence declaration is set out on page 44 and forms part of this report.

Proceedings on behalf of IPL

No application has been made under section 237 of the Corporations Act 2001 in respect of IPL, and there are no proceedings that a person has brought or intervened in on behalf of IPL under that section.

Rounding

As the Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, the amounts shown in this report and in the financial statements have been rounded off, except where otherwise stated, to the nearest one hundred thousand dollars.

The Directors’ Report, which includes the OFR and the Remuneration Report, is signed in accordance with a resolution of the directors of Incitec Pivot Limited.

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Brian Kruger Chairman

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Jeanne Johns Managing Director & CEO

15 November 2021

The Board has considered the position and, in accordance with advice received by the Audit and Risk Management Committee, is satisfied that the provision of non-audit services during the year by Deloitte is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 and does not compromise the external auditor’s independence.

The Board also notes:

• » the engagements for all non-audit services provided by Deloitte were reviewed by the Chief Financial Officer, and where relevant, approved by the Audit and Risk Management Committee, in accordance with the Committee’s Charter and the Company’s policy on the engagement of the external auditor for the provision of non-audit services to ensure they do not impact the integrity and objectivity of the auditor; and

• » the non-audit services provided by Deloitte did not undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own work, acting in a management or decision making capacity for the Group, acting as an advocate for the Group or jointly sharing economic risks or rewards.

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6
DIRECTORS’ REPORT
Incitec Pivot Limited
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OPERATING & FINANCIAL REVIEW

Group Overview

IPL is a leading supplier in the resources and agricultural sectors with an unrelenting focus on Zero Harm. With a team of 5000 plus dedicated employees, the Company adds value to its customers through manufacturing excellence, leading technology solutions, innovation and world class services focused on the needs of its customers. Sustainability is interlinked with IPL’s strategy which is aimed at delivering sustainable growth and shareholder returns, while proactively managing those issues most material to the long-term sustainability of our business, the broader environment, and the communities in which we operate.

IPL operates through three business units, details of which are set out in this review:

• » Dyno Nobel Americas;

• » Dyno Nobel Asia Pacific; and

• » Fertilisers Asia Pacific.

Through Dyno Nobel, the Company plays a critical role in releasing the worlds natural resources, to help build infrastructure and generate the energy we need to live in a modern world.

Through Incitec Pivot Fertilisers’ 100-year heritage in Australian agriculture, IPL plays an important role in enabling sustainable food production to meet the rapidly rising demand for food around the world.

IPL leverages its nitrogen manufacturing expertise with a global approach to standards and processes, complemented and enhanced by regional oversight and operational discipline.

The Company has operations in Australia, North America, Europe, Asia, Latin America and Africa.

Dyno Nobel Americas

The Dyno Nobel Americas business comprises three businesses:

• » Explosives;

• » Agriculture & Industrial Chemicals; and

• » Waggaman operations.

Explosives

Dyno Nobel is the second largest industrial explosives distributor in North America by volume. It provides ammonium nitrate, initiating systems and services to the Quarry & Construction sector across the US; the Base & Precious Metals sector in the US mid-West, US West and Canada; and to the Coal sector in the Powder River Basin, Illinois Basin and Appalachia.

In North America, Dyno Nobel manufactures ammonium nitrate at its Cheyenne, Wyoming and Louisiana, Missouri plants. The Cheyenne, Wyoming plant is adjacent to the Powder River Basin, North America’s most competitive thermal coal mining region and is well positioned to service Base & Precious Metals in Western US. The Louisiana, Missouri plant has a competitive logistic footprint from which to support mining in both the Illinois Basin and Appalachia, as well as Quarry & Construction in the US mid-West.

Agriculture & Industrial Chemicals

The Dyno Nobel Americas business manufactures and distributes nitrogen-based fertilisers in the United States from its St Helens, Oregon and Cheyenne, Wyoming plants. Nitrogen based fertilisers and other industrial chemical products are also produced as a by-product at the Louisiana, Missouri plant.

Waggaman Operations

The Dyno Nobel Americas business manufactures and distributes ammonia at its Waggaman, Louisiana plant in the United States. Ammonia produced at Waggaman is used in Dyno Nobel’s manufacturing process and is also sold to third parties under long term contractual arrangements.

Dyno Nobel Asia Pacific

Through Dyno Nobel Asia Pacific, IPL provides ammonium nitrate based industrial explosives, initiating systems and services to the Metallurgical Coal and Base & Precious Metals sectors in Australia, and internationally to a number of countries including Indonesia, Papua New Guinea and Turkey through its subsidiaries and joint ventures. Ammonium nitrate is often sold in conjunction with proprietary initiating systems and services.

Dyno Nobel is the second largest industrial explosives distributor in Australia by volume, which in turn is the world’s third largest industrial explosives market. In Australia, Dyno Nobel primarily supplies its products to metallurgical coal mines in the east and to iron ore mines in the west.

In Australia, Dyno Nobel manufactures ammonium nitrate at its Moranbah ammonium nitrate plant, which is located in the Bowen Basin, the world’s premier metallurgical coal region. It also sources third party ammonium nitrate including in Western Australia to service the Iron ore and Underground sectors.

Initiating systems are manufactured in Australia at Dyno Nobel’s Helidon, Queensland facility and are also sourced from IPL facilities in the Americas and from DetNet (South African joint venture).

Fertilisers Asia Pacific

IPL’s Fertilisers business in Australia is the largest domestic manufacturer and supplier of fertilisers by volume.

Internationally, the Fertilisers business sells to major offshore agricultural markets in Asia Pacific, the Indian subcontinent, Brazil and the United States. It also procures fertilisers from overseas manufacturers to meet domestic seasonal peaks. Much of this activity is conducted through Quantum Fertilisers Limited, a Hong Kong based subsidiary.

The Fertilisers business manufactures the following fertilisers at three locations:

• » Phosphate Hill: Di/mono-ammonium phosphate (DAP/MAP);

• » Gibson Island (manufacturing to cease from the end of December 2022): Ammonia (Big N), Granulated ammonium sulphate (GranAm) and Urea; and

• » Geelong: Single Super Phosphate (SSP).

Initiating systems are manufactured at Dyno Nobel’s facilities in Connecticut, Kentucky, Illinois, Missouri, Chile and Mexico, and are also sourced from DetNet South Africa (Pty) Ltd (DetNet), an IPL electronics joint venture.

7

GROUP SUMMARY

GROUP SUMMARY
IPL GROUP	Year ended 30 September
	FY21 A$m FY20 A$m Change A$m
Reported Revenue and Earnings
Revenue EBITDA ex IMIs EBIT ex IMIs	4,348.5 3,942.2 406.3 934.9 730.5 204.4 566.4 374.5 191.9
NPAT ex IMIs	358.6 188.2 170.4
IMIs after tax	(209.5) (64.8) (144.7)
Group NPAT	149.1 123.4 25.7
Shareholder Returns
Cents Per Share Earnings per share ex IMIs Total Dividend	18.5 10.9 9.3 –
Credit Metrics	30-Sep-21 30-Sep-20
Net debt(1) Net debt / EBITDA (ex IMIs)(2) Interest Cover(3)	(1,004.2) (1,028.7) 1.1x 1.4X 9.7x 6.1x

Net Profit After Tax (NPAT) excluding Individually Material Items (ex IMIs)

IPL reported NPAT ex IMIs of $359m, an increase of 91% compared to $188m in the pcp.

Individually Material Items (IMIs)

NPAT for FY21 includes $209m (FY20: $65m) of after-tax IMIs relating to the closure of IPLs manufacturing facilities at Gibson Island, Queensland, and the non-cash impairment of manufacturing assets at IPLs plant in Cheyenne, Wyoming. The cash costs of these items (pre-tax) are $84m.

Shareholder Returns and Dividends

Earnings per share (EPS) ex IMIs of 18.5 cents per share increased by 7.6 cents per share compared to FY20 EPS of 10.9 cents.

A final dividend of 8.3 cents per share 14% franked has been declared, representing a 50 percent payout ratio of NPAT ex IMIs.

Net Debt

Net debt decreased by $25m to $1,004m at 30 September 2021 (pcp: $1,029m) and Net Debt/EBITDA ex IMIs decreased to 1.1x (pcp: 1.4x). The Group’s investment grade credit ratings were maintained:

• » S&P: BBB (stable outlook)

Zero Harm

IPL’s Company values are at the core of how it operates, with the health, safety and wellbeing of its people being the most important of its values. IPL’s Total Recordable Injury Frequency Rate[ (4)] (TRIFR) for the rolling twelve-month period ended 30 September 2021 was 0.87, which is above IPLs target of 0.70, and an increase from 0.58 at 30 September 2020. The Company maintained its strong environmental safety record with zero Significant Environmental Incidents[ (5)] during the year (pcp: 1). There were 38 Process Safety Incidents[ (6)] recorded in FY21 (pcp:24). IPL recorded a small increase in Potential High Severity Incidents[ (7)] with 36 (pcp: 34). IPL has refreshed its safety programs to drive improvement in FY22.

FINANCIAL PERFORMANCE

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Year ended 30 September
FY21 FY20 Change
INCOME STATEMENT A$m A$m %
Revenue
Business Revenue
DNA 1,588.7 1,506.5 5%
DNAP 937.8 999.2 (6%)
Fertilisers APAC 1,894.6 1,502.0 26%
Eliminations (72.6) (65.5) (11%)
Group Revenue 4,348.5 3,942.2 10%
EBIT
Business EBIT ex IMIs
DNA 189.9 230.8 (18%)
DNAP 140.2 149.3 (6%)
Fertilisers APAC 268.4 26.2 924%
Eliminations (1.8) (0.1) nm
Corporate (30.3) (31.7) 4%
Group EBIT ex IMIs 566.4 374.5 51%
EBIT margin 13.0% 9.5%
NPAT
Underlying interest expense [ (8) ] (107.4) (130.0) 17%
Non-cash unwinding liabilities (5.4) (5.7) 5%
Net borrowing costs (112.8) (135.7) 17%
Tax expense ex IMIs (95.0) (50.6) (88%)
NPAT excluding IMIs 358.6 188.2 91%
IMIs after tax (209.5) (64.8) (223%)
Group NPAT 149.1 123.4 21%
Financial Key Performance Indicators
ROIC 5.8% 3.6% 61%
Free Cashflow [ (9) ] 267 199 34%
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• not meaningful

• » Moody’s: Baa2 (stable outlook)

(1) Net Debt comprises the net of interest-bearing liabilities, cash and cash equivalents, and the fair value of derivative instruments economically hedging the Group’s interest bearing liabilities and excludes lease liabilities.

• (2) Net debt/EBITDA ratio (for debt covenant purposes). EBITDA is calculated using 12 month rolling EBITDA ex IMIs, minus lease depreciation. Net Debt is translated at the 12 month average AUD:USD FX rate.

• (3) Interest Cover = 12 month rolling EBITDA (minus lease depreciation) ex IMIs/net interest expense before accounting adjustments.

• (4) TRIFR is calculated as the number of recordable incidents per 200,000 hours worked and includes contractors. TRIFR results are subject to finalisation of the classification of any pending incidents. Prior year end number was restated due to finalisation of classification of incidents pending at the time of previous publication date.

• (5) Significant Environmental Incidents as assessed against IPL’s internal risk matrix with actual consequences of 5 or higher on a 6-level scale.

• (6) Tier 1 and Tier 2 Process Safety Incidents as defined by the Center for Chemical Process Safety.

• (7) Potential High Severity Incidents (excluding near misses and hazards) with potential safety consequences of 5 or higher on a 6-level scale.

• (8) Underlying interest expense represents total borrowing costs less non-cash interest unwind, representing the discount unwind on the Group’s long-term liabilities.

• (9) Free cashflow = operating cashflows less investing cashflows (excluding investing cashflows from derivatives) less lease liability principal payments.

8

FY21 Business Review

The Group reported FY21 Earnings Before Interest and Tax (EBIT) of $566m, an increase of $191m compared to pcp. Major movements for the year were as follows:

Manufacturing Performance: The $47m net decrease was primarily incurred due to unplanned outages in North America. FY21 production rates in Australia were largely in line with nameplate.

Hurricanes: Production at the Waggaman, LA, plant was impacted by two separate hurricanes. In order to protect staff and equipment, in anticipation of Hurricane Ida, the Waggaman plant was proactively brought down and secured. Despite Hurricane Ida being the second-most damaging and intense hurricane on record to make landfall in the U.S. State of Louisiana, the site suffered only minor physical damage. Once power was restored to the Waggaman site, the plant was quickly brought back to full production.

Manufacturing Plant Turnarounds: FY21 was a heavy period for turnarounds, with the impact of COVID-19 causing some activity to be deferred from FY20 into FY21. The 4 turnarounds undertaken during the year had a negative impact on earnings of $122m. The planned turnarounds were undertaken at Mt. Isa, Qld, St. Helens, OR, Waggaman, LA and Moranbah, Qld.

Americas Explosives: $20m net increase (excluding Response Plan benefits and the negative impact from manufacturing). Customer growth (principally in metals), COVID-19 demand recovery and increased earnings from technology was partially offset by a $7m earnings decline from soft US thermal coal demand.

Asia Pacific Explosives: $3m net decrease (excluding Response Plan savings and the impact of the Moranbah turnaround). Increased earnings from technology and premium product sales were offset by the impacts of contract re-basing (now complete), loss of a metals customer and lower international earnings (largely COVID-19 related).

Asia Pacific Fertilisers: $8m net decrease (excluding Response Plan savings and negative impacts related to planned turnarounds and a non-repeat insurance recovery received in FY20). A 2.7% increase in total fertiliser volumes sold was offset by costs related to an increased investment in distribution assets ($5m) and higher depreciation charges ($10m) as a result of the FY20 turnaround at Gibson Island.

Commodity Prices & Foreign Exchange: $350m net increase. The favourable impact of $446m from higher commodity prices was partially offset by a $96m negative impact from a higher average A$:US$ exchange rate.

Interest

Underlying interest expense[ (1)] of $107m decreased $23m, or 17%, compared to pcp. The decrease was mainly due to lower debt following the $646m equity raising in 2020 having a favourable impact of $20m. This was partially offset by a $14m increase relating to the buyback of long-term bonds. A favourable movement in the A$:US$ exchange rate and lower interest rates compared to pcp benefited interest expense by approximately $8m and $9m respectively. Interest expense also includes Lease interest, Amortisation of line fees and Provision discount unwind expense.

Tax

The Group’s effective tax rate on operating profit of 21% is unchanged from the 21% reported in the pcp. Tax expense (excluding IMIs) of $95m was $44m higher than the pcp, consistent with higher earnings.

Individually Material Items

NPAT includes the following items, classified as IMIs:

	Gross	Tax	Net
IMIs	A$m	A$m	A$m
Non-cash impairment of Cheyenne
manufacturing assets	107.4	(28.0)	79.4
Gibson Island gas manufacturing plant closure
– Cash cost of closure	83.5	(25.1)	58.4
– Non-cash impairment of assets	102.5	(30.8)	71.7
Total	293.4	(83.9)	209.5

Cheyenne Impairment

The further structural decline in thermal coal markets has been identified as an indicator of impairment that impacts DNA’s Cheyenne manufacturing plant, and specifically the nitric acid production utilisation rates. The future reconfiguration of the plant to reduce Nitric acid production capacity in line with lower market volumes, resulted in an impairment of $107.4m.

Gibson Island manufacturing plant closure

Despite extensive efforts, IPL had been unable to secure an economically viable long-term gas supply for its Gibson Island plant beyond its current contract. As a result, IPL decided to cease manufacturing operations at the site at the end of the current gas supply arrangements, which expire in December 2022. The majority of the cash costs associated with the closure ($58m after tax) are expected to be incurred in FY23. IPL’s Brisbane fertiliser distribution capability will continue beyond the closure of the manufacturing operations.

Response Plan: $40m net benefit from sustainable cost savings (pcp: $20m). The full Response Plan target of $60m has been delivered 12 months early and is now complete.

(1) Underlying interest expense represents total borrowing costs less non-cash interest unwind, representing the discount unwind on the Group’s long-term liabilities.

9

FINANCIAL POSITION

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Year ended 30 September
BALANCE SHEET 30 Sep 30 Sep Change
A$m 2021 2020 A$m
Assets
TWC – Fertilisers APAC (120.6) (151.1) 30.5
TWC – Explosives 241.3 165.9 75.4
Group TWC 120.7 14.8 105.9
Net PP&E 3,928.9 4,071.7 (142.8)
Lease assets 214.5 221.1 (6.6)
Intangible assets 3,000.9 3,019.7 (18.8)
Total Assets 7,265.0 7,327.3 (62.3)
Liabilities
Environmental & restructure liabilities (242.7) (161.7) (81.0)
Tax liabilities (415.0) (437.0) 22.0
Lease liabilities (242.5) (247.7) 5.2
Net other asset/(liabilities) 8.0 (248.9) 256.9
Net debt (1,004.2) (1,028.7) 24.5
Total Liabilities (1,896.4) (2,124.0) 227.6
Net Assets 5,368.6 5,203.3 165.3
Equity 5,368.6 5,203.3 165.3
Key Performance Indicators
Net Tangible Assets per Share 1.22 1.12
Fertilisers APAC – Ave TWC % Rev [ (1)] 15.3% 19.1%
Explosives – Ave TWC % Rev [ (1)] 16.9% 17.2%
Group – Average TWC % Rev [ (1) ] 16.2% 18.1%
Credit Metrics
Net debt (1,004.2) (1,028.7)
Net debt / EBITDA (ex IMIs) 1.1x 1.4x
Interest Cover 9.7x 6.1x
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Major movements in the Group’s Balance Sheet during the year include:

Assets

• » Trade Working Capital (TWC) : Net increase of $106m. The movement was mainly due to the lower utilisation of trade working capital financing facilities of $80m and increases in the Australian dollar equivalent of US dollar denominated inventory. Underlying trade working capital (excluding the impact of financing facilities) as a percentage of sales decreased by 2% compared with the pcp, reflecting strong cash flow focus.

• » Net Property, Plant & Equipment (PP&E) : Decrease of $143m. Mainly driven by the depreciation charge for the year of $303m and impairment of assets of $213m. This is partially offset by accrual spend on sustenance and turnaround capital expenditure of $318m and minor growth capital expenditure of $52m.

Liabilities

• » Environmental & restructure liabilities : Increase of $81m. Largely due to Gibson Island manufacturing closure provisions.

• » Net Other assets/(liabilities): Decrease of $257m. Mainly due to market value movements and maturities of derivative hedging instruments (excluding debt hedges) of $293m, partially offset by an increase in capital accruals of $21m.

• » Net Debt : Decrease of $25m. Mainly due to strong cash generation driven by rising commodity prices offset by a reduction in the use of trade working capital financing facilities (-$80m), payments related to sustenance capital expenditure (-$304m) and a $274m decrease in balance sheet derivatives. Further details of movements in Net Debt are provided in the Cashflow section of this report.

Net Debt & Debt Hedges

NET DEBT	Maturity	Facility	Drawn	Undrawn
A$m	Month/Year	Amount	Amount	Amount
Syndicated Term Loan	04/24	768.6	–	768.6
EMTN / Regulation S notes	02/26	100.2	100.2	–
Medium Term Notes	03/26	431.3	431.3	–
EMTN / Regulation S Notes	08/27	425.8	425.8	–
US Private Placement Notes	10/28	348.2	348.2	–
US Private Placement Notes	10/30	348.2	348.2	–
Total Debt		2,422.3	1,653.7	768.6
Fair value and other adjustments			(4.4)
Loans to JVs, associates/other short term		facilities	19.5
Cash and cash equivalents			(651.8)
Fair value of hedges			(12.8)
Net debt			1,004.2
Net debt/EBITDA			1.1x

The fair value of Net debt hedges at 30 September 2021 was an asset of $13m, a decrease of $274m compared to the balance at 30 September 2020 of $287m. The decrease was mainly due to the unwind of derivatives that hedged the foreign exchange rate exposure of the Group’s USD borrowings.

	30 Sep	30 Sep
	2021	2020	Change
FINANCIAL INDEBTEDNESS	A$m	A$m	A$m
Net debt (excluding hedges)	1,017	1,316	(299)
Lease liabilities	243	248	(5)
Trade workingcapital fnancingfacilities	332	412	(80)
Total Financial Indebtedness	1,592	1,976	(384)

Financial indebtedness reduced by $384m through the year. Net debt (excluding hedges) reduced by $299m mainly due to strong operating cashflows ($730m - excluding $80m of trade working capital facilities reduction) offset by sustenance capital expenditure ($304m) and growth capital expenditure ($51m). Reliance on trade working capital financing facilities has been reduced by over $300m since March 2020 to a sustainable level of $332m at year end.

• » Intangible Assets: Decrease of $19m. Mainly driven by the amortisation charge for the year of $23m and the impact of foreign currency translation of non-A$ denominated assets of $8m. These movements were partially offset by additions (including goodwill) of $12m.

(1) Average TWC as % of revenue = 13-month average trade working capital excluding financing facilities/12 months rolling revenue.

10

Credit Metrics

Net Debt/EBITDA: The ratio of 1.1x improved by 0.3x compared with the pcp. The improvement is primarily a result of higher earnings in FY21 with EBITDA (ex IMIs) improving 28% over the pcp.

Interest Cover : Improved to 9.7x (pcp: 6.1x).

Credit Ratings: Investment Grade credit ratings remained unchanged:

• » S&P: BBB (stable outlook)

• » Moody’s: Baa2 (stable outlook)

Debt Facilities

IPL has sufficient liquidity and headroom with $769m of available undrawn committed debt facilities at 30 September 2021.

The average tenor of the Group’s debt facilities at 30 September 2021 is 5.1 years (September 2020: 5.1 years). No committed debt facilities are due to mature until April 2024.

In March 2021, IPL cancelled its US domiciled Syndicated Term facility (US$500m) and its Australian domiciled Syndicated Term facility (A$122m and US$109m). Both facilities were due to mature in October 2021. These cancelled facilities were replaced by a Syndicated Term facility domiciled in Australia and consisting of two tranches: Tranche A has a limit of A$490m and Tranche B has a limit of US$200m. The facility matures in April 2024.

In November 2020, following invitations to the holders of the Group’s outstanding notes under the EMTN and AMTN programmes to tender their notes, IPL repurchased US$94m of its US$400m Reg-S bond and A$19m of its A$450m AMTN bond.

Trade Working Capital Facilities

IPL uses TWC facilities to effectively manage the Group’s cash flows, which are impacted by seasonality, demand and supply variability.

Capital Allocation

IPL’s capital allocation process is centralised and overseen by the Group’s Corporate Finance function. Capital is invested on a prioritised basis and all submissions are assessed against risk factors including HSE, sustainability, operational, financial and other strategic risks. Capital is broadly categorised into major growth capital, minor growth capital and sustenance capital.

The table below includes a summary of cash spend per business on growth and sustenance capital:

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Year ended 30 September
FY21 FY20 Change
IPL GROUP A$m A$m A$m
Capital Expenditure
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DNA	24.6	18.6	6.0
DNAP	18.6	34.7	(16.1)
Fertilisers	8.0	6.9	1.1
Minorgrowth capital	51.2	60.2	(9.0)
DNA	165.5	50.8	114.7
DNAP	75.8	25.5	50.3
Fertilisers	62.5	141.9	(79.4)
Sustenance	303.8	218.2	85.6
Total	355.0	278.4	76.6

There were no major growth capital spend items in FY21. Minor growth spend of $51m in FY21 included plant efficiency projects and other projects supporting volume growth and technology investments.

Sustenance capital spend in FY21 of $304m was $86m higher than pcp, largely due to the heavy turnaround program in FY21 plus the additional costs previously disclosed related to the post turnaround issues at Waggaman, LA. Turnaround spend across the Group for FY21 was $150m. The remaining sustenance spend was made up of various sustenance projects with the vast majority of project values being less than $5m each.

The Group has a non-recourse receivable purchasing agreement to sell certain domestic and international receivables to an unrelated entity in exchange for cash. As at 30 September 2021, receivables totalling $124m (30 September 2020: $116m) had been sold under the receivable purchasing agreement.

IPL also offers suppliers the opportunity to use supply chain financing. The Group evaluates supplier arrangements against several indicators to assess whether to classify outstanding amounts as payables or borrowings. The balance of the supply chain finance program, classified as payables, at 30 September 2021 was $208m (30 September 2020: $296m).

11

CASH FLOW

CASH FLOW
CASH FLOW	Year ended 30 September
	FY21 A$m FY20 A$m Change A$m
Operating Cash Flow
EBITDA ex IMIs Net Interest paid Net income tax paid TWC movement (excl FX movements) Proft from JVs and associates Dividends received from JVs Environmental and site clean-up Restructuring costs Other Non-TWC	934.9 730.5 204.4 (108.7) (135.5) 26.8 (33.1) (13.7) (19.4) (126.1) (8.4) (117.7) (41.9) (32.3) (9.6) 44.6 30.9 13.7 (4.8) (8.0) 3.2 (19.1) (8.0) (11.1) 4.4 (10.4) 14.8
Operating Cash Flow	650.2 545.1 105.1
Investing Cash Flow
Minor growth capital Sustenance Payments – Central Petroleum Joint operation Proceeds from asset sales Repayments from JV Acquisition of subsidiaries & non-controlling interests Payments for settlement of derivatives	(51.2) (60.2) 9.0 (303.8) (218.2) (85.6) (4.4) (9.8) 5.4 5.7 7.4 (1.7) 19.9 – 19.9 (8.5) (23.4) 14.9 (0.1) (75.2) 75.1
Investing Cash Flow	(342.4) (379.4) 37.0
Financing Cash Flow
Dividends paid to members of IPL Lease liability payments Purchase of IPL shares for employees Proceeds on issue of shares Realised market value gain on derivatives Non-cash loss on translation of US$ Net Debt Non-cash movement in Net Debt	(19.4) (30.7) 11.3 (41.4) (41.9) 0.5 (1.0) (1.3) 0.3 – 645.5 (645.5) 8.5 10.3 (1.8) (225.9) (78.2) (147.7) (4.1) (6.7) 2.6
Financing Cash Flow	(283.3) 497.0 (780.3)
Change to Net debt Openingbalance Net debt	24.5 662.7 (638.2) (1,028.7) (1,691.4) 662.7
Closing balance Net debt	(1,004.2) (1,028.7) 24.5

Operating Cash Flow

Operating cash flows of $650m increased by $105m compared to the pcp. Significant movements included:

EBITDA: Increased by $204m driven by favourable realised commodity price movements ($446m) partially offset by unfavourable movements in the A$:US$ exchange rate ($96m). Reduced manufacturing volumes resulting from planned turnarounds ($122m), extreme weather events ($32m) and unplanned plant outages ($47m) negatively impacted earnings. Downstream business earnings (excluding manufacturing, Response Plan savings and non-controllables) remained relatively flat compared with the pcp. The Response Plan delivered an additional $40m of sustainable cost savings, $10m ahead of the FY21 target.

Net Interest Paid: Decreased by $27m, principally as a result of lower average drawn debt levels following the Group’s $646m equity raising in 2020, favourable foreign exchange movements and lower interest rates. This was partially offset by one-off interest payments relating to bond repurchases.

TWC Movement: $118m increase compared to the pcp largely as a result of lower usage of trade working capital financing facilities (down $80m on pcp).

Dividends received from JV’s: Increased by $14m as a result of timing of payments and increased profits from JVs.

Restructuring costs: Increased $11m due to payments against the Group’s Response Plan provisions raised in the FY20 financial year.

Other Non-TWC: Improved $15m compared to the pcp largely as a result of timing of payments and accruals.

Investing Cash Flow

Net investing cash outflows of $342m decreased $37m as compared to the pcp. Significant movements included:

Capital spend: Higher sustenance spend reflecting the heavy turnaround program in FY21 plus the additional costs previously disclosed related to the post turnaround issues at Waggaman, LA.

Loan repayment from JV: Cash inflow of $20m reflects the repayment of a loan provided to Queensland Nitrates Pty Ltd.

Financing Cash Flow

Net financing cash outflow of $283m was $780m unfavourable compared with the pcp. Significant movements included:

Proceeds on issue of shares: The $646m unfavourable movement reflects the FY20 equity issue. No new equity was issued in FY21.

Foreign Exchange on Net Debt : The year on year movement of $148m mainly reflects the net impact of the unwind of Net Debt hedges. The unwinding of the hedges was undertaken to simplify the balance sheet and align reported Net Debt with the Group’s cash position.

12

DYNO NOBEL AMERICAS

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EBIT US$m
180 Waggaman Explosives AG & IC
160 155
20 141
140 4
70 11
120 (21) 10 (11)
(12)
100 (7)
80
60
(77)
40
20
Increase Decrease Total
0
FY20 Hurricanes Manufacturing/ Commodities Manufacturing/ Coal COVID Customer Response Manufacturing/ Commodities FY21
EBIT Turnarounds Turnarounds Recovery Growth Plan Turnarounds EBIT
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Dyno Nobel Americas	Year ended 30 September
	FY21 US$m FY20 US$m Change %
Explosives Waggaman Ag& IC	883.3 768.4 15 175.9 124.5 41 133.5 126.0 6
Total Revenue	1,192.7 1,018.9 17
Explosives Waggaman Ag& IC	126.7 121.1 5 3.6 32.4 (89) 10.9 1.3 738
EBIT	141.2 154.8 (9)
EBIT margin Explosives Waggaman Ag & IC	14.3% 15.8% 2.0% 26.0% 8.2% 1.0%
A$m
Revenue	1,588.7 1,506.5 5
EBIT	189.9 230.8 (18)

Dyno Nobel Americas FY21 earnings of US$141m decreased US$14m or 9% compared to the pcp. Outlined below are the major earnings movements during the year for each business.

Explosives

Business Performance

Explosives earnings for FY21 of US$127m was US$6m higher than the pcp. principally due to the following:

EBIT Margins: The pass through of higher US gas prices on sales of bulk ammonium nitrate has a negative impact on explosives EBIT margins. After adjusting for the impact of manufacturing outages and gas pass throughs, EBIT margins were 16%.

Customer Growth: $11m growth in volumes, primarily driven by customer growth in Canada (Gold) and metals mining in western USA. Chile continues to see incremental volume increases through successful trials of premium products. Quarry & Construction volumes in the second half recovered from a slow first half to leave the full year just 1% down on the pcp.

COVID-19 Recoveries: US$10m from increased international and domestic sales of initiating systems as a result of general recoveries from the COVID-19 lows of FY20.

Coal Volumes: US$7m decline (unchanged from the first half). As forecast at the half year, coal volumes in the second half improved and were 2% above the pcp. This was a significant improvement on the first half where the business was impacted by bankruptcies in this sector.

Response Plan: US$4m benefit from sustainable operational productivity measures, including cost efficiency gains.

Manufacturing: The negative earnings impact of US$12m reflects the previously announced outages at the Cheyenne, WY. and Louisiana, MO plants. These plants recovered well and performed to plan in the second half.

Market Summary

Quarry & Construction

43% of Explosives revenue was generated from the Quarry & Construction sector in FY21 (43% pcp). After a slow, weather impacted first half, where volumes were down 5% on the pcp., volumes recovered through the second half to finish down just 1% on a full year basis.

Base & Precious Metals

39% of Explosives revenue was generated from the Base & Precious Metals sector in FY21 (35% pcp). Volumes grew by 22% during the year with revenues growing 27% compared to the pcp. The primary drivers of these increases were gold volumes in Canada and sales into the metals markets in western regions of the US. Product trials in Chile continue to be successful with volumes increasing over the pcp.

Coal

18% of Explosives revenue was generated from the Coal sector in FY21 (22% pcp). Volumes were down 12% versus the pcp. with customer closures in the Illinois coal basin adversely impacting DNA volumes compared to the overall market, which was flat year on year. Excluding the impact of the bankruptcies, DNA volumes into the coal sector were down 1% on the pcp.

13

Agriculture & Industrial Chemicals (Ag & IC)

AG & IC	Year ended 30 September
	FY21 US$m FY20 US$m Change %
US$m
Total Revenue	133.5 126.0 6
EBIT	10.9 1.3 738
EBIT margin	8.2% 1.0%

Business Performance

Ag & IC FY21 earnings of US$11m was US$10m more than the pcp., due to the following:

Manufacturing/Turnaround: Earnings were negatively impacted by US$11m in FY21 because of the planned outage at the St. Helens, OR plant (US$5m), minor production issues (US$2m) and additional depreciation (US$3m).

Commodity Prices: Favourable Urea and UAN pricing improved earnings by US$20m versus the pcp.

Waggaman Operations

Waggaman Operations
WAGGAMAN	Year ended 30 September
	FY21 FY20 Change %
Thousand metric tonne
Ammonia manufactured at Waggaman Ammonia sold	437.2 729.0 (40) 563.5 730.0 (23)
US$m
External Revenue Internal Revenue	175.9 124.5 41 39.0 40.0 (3)
Total Revenue	214.9 164.5 31
EBIT	3.6 32.4 (89)
EBIT margin	2.0% 26.0%

Business Performance

Waggaman earnings of US$4m, decreased US$29m compared to the pcp due to the following:

Turnaround – Planned: As previously disclosed, the FY21 turnaround negatively impacted earnings by US$58m.

Adverse Weather: As previously announced, the Waggaman site was proactively shut ahead of Hurricane Ida in order to protect site personnel and the plant. Despite the intensity of the storm, the site only suffered minor physical damage. Once power was restored, the plant was brought back to full production as per plan. The negative earnings impact of this outage, and a minor hurricane related outage from earlier in the year, was US$21m.

Manufacturing Reliability: In total, the Waggaman plant produced 437k metric tonnes of Ammonia which was 40% lower than the pcp. Sales of Ammonia reduced by 23% compared to the pcp, with shortfalls in produced ammonia being replaced by third party supplies. Gas efficiency was adversely impacted by the plant outages, with gas usage per metric tonne of ammonia produced averaging 40 mmbtu/mt (35 pcp).

Pre-turnaround, the plant had interruptions to production that resulted in 4 weeks of total downtime, the most consequential of which was caused by the failure of the regional power grid in the New Orleans area from Hurricane Zeta.

As previously disclosed, the plant went through its first major turnaround during FY21. The plant entered the planned turnaround with several known maintenance issues, all of which were addressed as part of the turnaround activities. During the discovery phase and subsequent re-start process, a number of unexpected issues emerged including issues with the ammonia cooler, dry gas seals and the induced draft fan. These issues caused a further 6.5-week delay to full production.

While the ammonia cooler (heat exchanger) was repaired during the turnaround, the initial fabrication issues prevented a permanent repair, requiring a replacement of the cooler in the next 6-18 months. An outage of up to 3 weeks is expected during FY22 or FY23 to allow installation. To date, the cooler has performed well with no signs of accelerated deterioration.

The plant operated at nameplate production until it was deliberately brought down to protect the site personnel and the plant ahead of Hurricane Ida. Once power was restored to the site, the plant was re-started and brought back to full production as per plan. The disclosed estimate of a 4 week outage from Hurricane Ida was shortened by 4 days due to a flawless re-start.

Post turnaround, and post the outage for Hurricane Ida, the plant has been operating reliably and in line with nameplate capacity. Gas efficiency has improved to efficiency levels previously achieved.

Excluding the impact of the planned turnaround and adverse weather events, the additional outages referenced above had a negative earnings impact of US$19m.

Ammonia Price: A strong upswing in ammonia prices in the second half favourably impacted full year earnings by US$70m.

Discount to Tampa Ammonia price: The average discount to the Tampa benchmark, allowing for the one-month lag embedded in sales contracts, was approximately 5% in FY21. The FY21 average discount has been impacted by timing differences in the lost production and the rapid increase of the ammonia price, particularly in the second half of the financial year. “through the cycle” pricing for internal sales to the DNA Explosives business impacts the calculated average discount to the benchmark, particularly when ammonia prices are elevated.

Approximately 20% of nameplate production is sold to the DNA Explosives business at prices that are not linked to movements in the Tampa benchmark. The remaining sales are priced at the Tampa benchmark price, less a discount that ranges between 6% and 8%, with the higher end of the range applying to prices above US$500/t.

Other Manufacturing

Manufacturing performance in the Explosives and Ag & IC businesses during FY21 was as follows:

Cheyenne, Wyoming: Cheyenne ammonia operations were impacted by an unplanned outage caused by a bearing failure on the reciprocal compressor. As a result, ammonia production was down 5% compared to pcp. Nitric Acid production increased by 4% compared to pcp.

Louisiana, Missouri: Louisiana operations were impacted by an unplanned outage caused by blade failure on the axial compressor. As a result, Nitric Acid production decreased by 14% compared with pcp.

St Helens, Oregon: Urea and ammonia production from the St Helens plant decreased 19% and 16% respectively, compared to the pcp., mainly due to the planned turnaround.

14

DYNO NOBEL ASIA PACIFIC

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EBIT A$m
150 149
14
145 (3)
9 140
140
135
(12)
(15)
130 (2)
125
Increase Decrease Total
120
FY20 W.A. Contracts Contract Technology Turnaround International Response FY21
Actual EBIT (Previously Disclosed) Renewals Plan Actual EBIT
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DYNO NOBEL ASIA PACIFIC	Year ended 30 September
	FY21 FY20 Change %
Thousand metric tonne
Ammonium Nitrate – manufactured at Moranbah Ammonium Nitrate sold	346.5 371.3 (7) 683.7 762.6 (10)
A$m
Australian Coal Base & Precious Metals International	471.6 472.4 (0) 377.3 415.5 (9) 88.9 111.3 (20)
Total Revenue	937.8 999.2 (6)
EBIT	140.2 149.3 (6)
EBIT margin	15.0% 14.9%

Business Performance

Dyno Nobel Asia Pacific FY21 earnings of $140m, decreased $9m compared to the pcp. due to the following:

Market Summary

Australian Metallurgical Coal

50% of Dyno Nobel Asia Pacific revenue for the year was generated from the Australian Metallurgical Coal sector, most of which was from supply to mines in the Bowen Basin.

Volumes from the Metallurgical Coal sector were flat year on year as miners successfully diversified their customer base (primarily to India) in response to bans imposed by China on imports of Australian coal from November 2020.

Base & Precious Metals

40% of Dyno Nobel Asia Pacific revenue was generated from the Base & Precious Metals sector, which comprises iron ore mines in Western Australia and hard rock and underground mines throughout Australia.

Volumes from the sector decreased 13% compared to pcp, mainly due to the previously disclosed loss of a metals customer.

International

Technology: $14m increase on the pcp, in line with guidance provided in FY20, technology growth has more than offset recontracting impacts.

Contract Renewals: $12m net decrease, driven by the loss of a metals customer and lower ammonium nitrate pricing on contract renewals in Australia, offset in part by new metals business.

Turnaround: As per previous guidance, the impact of the Moranbah turnaround was $15m.

Response Plan: $9m increase, driven by sustainable cost savings, mainly across the Commercial business and the Moranbah plant.

W.A. Contracts: $3m decrease, final impact from contracts lost in FY18 in Western Australia, in line with previous guidance.

10% of Dyno Nobel Asia Pacific revenue was generated internationally in Indonesia, Turkey and Papua New Guinea.

Volumes decreased by 30% compared to the pcp. Volumes in the Indonesian business were significantly impacted due to mining activity being disrupted by COVID-19. Volumes in the Turkish business (Nitromak) have been impacted by reduced construction.

Manufacturing

Allowing for the impact of the planned turnaround, Moranbah performed well producing 347k mt of ammonium nitrate during the year. Although the plant was in the last phase of its operating cycle, the plant produced at nameplate (excluding the outage for the turnaround).

International: $2m net decrease. The Indonesian business was impacted by lower demand which was mainly a result of COVID-19. The Turkish business was impacted by a slowdown in construction activity and a weaker Turkish Lira.

15

FERTILISERS ASIA PACIFIC

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----- Start of picture text -----

EBIT A$m
400 Distribution Manufacturing Non-Controllables
312
268
(75)
50 21
7 4 3
26 (5) (10)
(7)
25
(7)
Increase Decrease Total
0
FY20 Volumes & Response PDC Manufacturing Turnarounds FY19 Qld Response Depreciation Commodities Foreign FY21
Actual EBIT Margins Plan Upgrades Reliability Rail Outage Plan Exchange Actual EBIT
– Insurance
Recovery in FY20
----- End of picture text -----

FERTILISERS ASIA PACIFIC	Year ended 30 September
	FY21 FY20 Change %
Thousand metric tonne
Phosphate Hill production (ammonium phosphates) Gibson Island production (urea equivalent)	958.4 979.3 (2) 498.5 400.5 24
A$m
Manufacturing Distribution	836.4 554.4 53 1,058.2 947.6 11
Fertilisers APAC Revenue Manufacturing Distribution	1,894.6 1,502.0 26 208.8 (28.4) nm* 59.6 54.6 9
Fertilisers APAC EBIT	268.4 26.2 924
EBIT margin	14.2% 1.7%

• Not meaningful

Business Performance

Fertilisers Asia Pacific earnings of $268m was $242m higher than the pcp. Major movements for the year were due to the following:

Volumes and Margins: Increased distribution volumes more than offset a slight decline in EBIT margins for a net improvement of $7m for the year.

PDC Upgrades: Upgrades to primary distribution centres, primarily at Gibson Island, resulted in increased costs ($5m) being incurred for the sourcing of alternative storage facilities and associated logistics costs.

Manufacturing Reliability: $3m net increase at last years pricing, largely due to higher production volume at Phosphate Hill (excluding planned Ammonia shutdown).

Planned Plant Shutdowns: $7m decrease. A planned shutdown of Ammonia production at Phosphate Hill (aligned with Mt. Isa’s Sulphuric Acid plant shut, which coincided with Glencore’s copper smelter shut) negatively impacted earnings by $13m compared to the pcp. This was partially offset (+$5m) by higher production of Urea at the Gibson Island plant compared to FY20 which was impacted by a turnaround in that period.

1H19 Queensland Rail Outage – Insurance recovery: The FY20 result included a non-recurring insurance receipt of $7m in relation to losses incurred from the 2019 Queensland rail outage.

Depreciation: The FY20 turnaround at Gibson Island and the FY21 turnaround at Mt. Isa resulted in higher depreciation charges of approximately $10m.

Response Plan: Savings of $25m predominantly from sustainable reductions in operational expenses at Phosphate Hill and Gibson Island.

Foreign Exchange and Commodity Prices: $237m net increase, due to higher global fertiliser prices improving the result by $312m (after allowing for a negative $5m impact from tiered gas pricing at Gibson Island), partially offset by unfavourable movements in the A$:US$ exchange rate impacting the result by $75m.

Market Summary

Total Fertilisers Asia Pacific sales volumes of 3,220k metric tonnes was 3% higher than FY20 sales of 3,136k metric tonnes. Agronomic conditions have been generally favourable with La Nina rain events increasing soil moisture and water storage levels, producing the highest sales volume since 2005.

The favourable water levels supported good sales of liquid fertilisers which were up 30% year on year.

Global fertilisers prices traded significantly higher in FY21 with realised Ammonium Phosphate prices improving by more than 72% compared with the pcp. The supply and demand dynamic remains broadly favourable to support strong prices in the near term.

Progress on the soil health strategy continues, highlighted by the introduction of Precision Ag and an increase in Nutrient Advantage earnings.

Manufacturing

Manufacturing performance in the Fertilisers Asia Pacific business in FY21 was as follows:

Phosphate Hill

Ammonium phosphates production decreased to 958k mt, down 2% on pcp mainly due to a planned shutdown at Mt. Isa which impacted the supply of Sulphur. Plant reliability for the year was 96%, an improvement of 3% over the prior year.

Ammonium phosphates cost per tonne was impacted by a number of factors, the most consequential being the increased cost of sulphur. Increased freight, gas (CPI) and depreciation costs were partially offset by Response Plan savings.

Gibson Island

The plant produced 499k mt of urea equivalent product, up 24% on pcp. The majority of this improvement is due to FY20 being impacted by a planned major turnaround.

16

OUTLOOK AND SENSITIVITIES

IPL does not generally provide profit guidance, primarily due to the variability of commodity prices and foreign exchange movements. Instead, IPL provides an outlook for business performance expectations and sensitivities to key earnings drivers based on management’s current view at the time of this report.

Outlook

COVID-19

To date, IPL has not been materially impacted by COVID-19. The extent of the future impact of COVID-19 on the Group’s operational and financial performance depends on certain developments, including the duration and spread of the outbreak (including the impact of variants), regulations imposed by governments with respect to ongoing management of the pandemic, and the impact of the pandemic on the global economy, including commodity prices, customer demand, supply chains and inflation.

Capital Expenditure

Subject to currency fluctuations, underlying sustenance capital spend for FY22 is expected to be approximately $320m with the final two large manufacturing turnarounds scheduled for FY22. A further $50m of one-off sustenance expenditure is expected to be spent on:

• » upgrades of Brisbane area distribution assets ($25m); and

• » installation of equipment to provide steam independence at Waggaman, Louisiana ($25m).

Land sales to the value of $50m are expected to offset sustenance expenditure for a net total spend of $320m.

Explosives Technology

• » Targeting technology driven Explosives EBIT growth of 10% between FY20 and FY22.

Dyno Nobel Americas

• » Apart from a potential outage of up to 3 weeks to allow installation of a replacement cooler (if required), the Waggaman plant is expected to produce at nameplate capacity in FY22. The operational earnings of Waggaman remain subject to movements in ammonia and natural gas prices.

• » Agriculture & Industrial Chemicals earnings remain subject to movements in global fertilisers prices, particularly Urea.

• » Coal demand is expected to decline by 5% through FY22. Potential carbon legislation could pose further risk to coal demand going forward.

• » A planned turnaround at Cheyenne in the second half of FY22 is expected to result in 6-8 weeks of lost production.

• » Quarry and Construction is expected to continue a slow recovery driven by residential and infrastructure. Growth from the US Federal Government infrastructure bill is likely to take time to filter through to volumes and may not produce material upside in FY22. Volume growth of 3% to 5% is expected.

• » Elevated commodity prices should support demand in the Base and Precious Metals sector. Dyno volume growth expected to be slightly above market growth.

Dyno Nobel Asia Pacific

• » Moranbah is expected to operate at nameplate capacity post the FY21 turnaround.

• » With Moranbah foundation customer contracts having been renegotiated, the negative earnings impact (compared to prior periods) resulting from contract re-basing is not expected to impact DNAP earnings going forward.

• » Recovery in earnings from the International businesses is expected but remains subject to customer demand and COVID-19 management within the offshore markets.

• » In line with previous disclosure, the unfavourable Western Australian supply arrangements cease in FY22 resulting in a boost to earnings (compared to FY21) of approximately $11m. Investments in capital required to support customer needs and future growth, combined with Moranbah turnaround expenditure will result in depreciation increasing by approximately $6m in FY22 compared with FY21.

Fertilisers Asia Pacific

• » Fertilisers earnings will continue to be dependent on global fertilisers prices, the A$:US$ exchange rate and weather conditions.

• » Weather conditions across Eastern Australia remain favourable, with many cropping and pasture districts receiving above average rainfall. Increased soil moisture levels in most districts on the East Coast, coupled with high dam levels is expected to drive demand for fertiliser.

• » Farm economics are expected to remain favourable through FY22 with farmer cashflows supportive of strong fertiliser demand.

• » A planned turnaround at Phosphate Hill in the second half of FY22 is expected to result in 6-8 weeks of lost production.

• » Phosphate Hill is expected to run at 90% of nameplate capacity through to the May 2022 turnaround, and at 100% namplate capacity thereafter.

• » Based on FY21 realised DAP price and average AUD:USD exchange rate, the earnings impact from the 6-8 week FY22 turnaround is approximately $73m.

• » Gibson Island is expected to produce at rates in line with FY21. The forecast costs of closure have been included as an IMI in the FY21 result. The majority of the cashflow related to the closure will occur in FY23.

Group

Corporate: Corporate costs are expected to be approximately $37m in FY22, which includes investments in Energy Transition ($2m), International business development ($3m) and HR Organisational Development and Diversity.

Borrowing Costs: Net borrowing costs for FY22 are expected to be approximately $104m, due to the impact of lower average borrowings.

Taxation: IPL’s effective tax rate for FY22 is expected to be between 23% and 25%.

Hedging Program: 67% of estimated FY22 US$ linked fertilisers sales are hedged at a rate of $0.77 with full participation down to $0.725. The remaining 33% is unhedged.Sensitivities

The table provides sensitivities to key earnings drivers excluding the impact of hedging.

impact of hedging.
Commodity Americas Ammonia(1) Natural Gas(2)	Proxy Index CFR Tampa Henry Hub	EBIT Sensitivities +/- US$10/mt = +/-U$6.6m +/- US$0.10/mmbtu = -/+ US$2.2m
Urea(3)	FOB NOLA	+/- US$10/mt = +/-U$1.8m
FX EBIT Translation(4)		+/- A$/US$0.01 = -/+ A$3.5m
Asia Pacifc
AP(5)	FOB China/Saudi	+/- US$10/mt = +/-A$11.5m
Urea(6)	FOB Middle East	+/- US$10/mt = +/-A$3.6m
FX EBIT Transactional(5)(6)		+/- A$/US$0.01 = -/+A$10.3m

Note: Proxy Index prices are available on Bloomberg.

(1) Based on 800k mt Waggaman plant nameplate production less internal sales volumes of 143k mt.

(2) Based on 800k mt Waggaman plant nameplate production less internal sales volumes of 143k mt.and gas efficiency of 33.6 mmbtu/tonne of ammonia.

(3) Based on St Helens plant capacity of 175k mt of urea equivalent product.

(4) Based on actual FY19 Dyno Nobel Americas EBIT (excluding Non-Recurring Items) of US$200m and an average foreign exchange rate of A$/U$ 0.75.

• (5) Based on Phosphate Hill plant nameplate production of 1 million tonnes less an allowance for 7 weeks lost production resulting from the planned turnaround; average market forecast price DAP price of US$524; and an average foreign exchange rate of A$/U$ 0.75.

• (6) Based on actual FY21 Gibson Island production sold subject to urea price movement of 364k mt; average realised FY21 urea price of US$373; an average foreign exchange rate of A$/U$ 0.75; and tiered pricing on Gibson Island gas contracts.

17

PRINCIPAL RISKS

Set out below are the principal risks and uncertainties associated with IPL’s business and operations. These risks, which may occur individually or concurrently, could significantly affect the Group’s business and operations. The ongoing impacts of the COVID-19 pandemic have the potential to exacerbate some of the risks described below. There may be additional risks unknown to IPL and other risks, currently believed to be immaterial, which could become material. In addition, any loss from such risks may not be recoverable in whole or in part under IPL’s insurance policies. The treatment strategies noted below are not exhaustive and do not remove the risks; while in some cases they may either partially or fully mitigate the exposure, residual risk remains.

The Group’s process for managing risk is set out in the Corporate Governance Statement.

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Broad Risk Category Description and potential consequences Treatment strategies employed by IPL
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Strategy	IPL operates in highly competitive markets with varying competitor	»	IPL seeks to maintain or develop competitive cost positions
	dynamics and industry structures. The actions of established or		in its chosen markets, whilst maintaining quality product
	potential competitors could have a negative impact on sales and		and service offerings.
	market share and hence the Group’s fnancial performance.
		»	IPL continues to invest in new technologies and premium product
	In respect of IPL’s advanced technologies, there is a risk that the		offerings in order to meet the needs of its customers while
	intellectual property may be replicated or challenged, resulting		limiting both IPL’s, and its customers’, carbon footprints.
	in potential loss of business.
		»	Where IPL is a party to a joint venture without having operational
	IPL’s fertiliser operations compete against global manufacturers		control, oversight of the joint venture’s operations, governance
	many of whom have lower input costs and may enjoy regulatory		practices and risk management activities is maintained through
	and economic advantages.		membership on the entity’s Board of Directors, Board Audit
			and Risk Management Committee and/or Committee of
	A number of entities in the IPL Group currently undertake or are		Management. In addition, IPL receives regular operational
	parties to joint ventures in different jurisdictions. Where IPL does		and fnancial reports and conducts periodic audits.
	not have operational control over these joint ventures, there is
	a risk that IPL’s fnancial performance or reputation may be	»	IPL monitors long term growth trends in the mining sector
	adversely impacted.		through industry forecasts of commodities demand, which
			are shifting away from thermal coal towards the metals
	The global energy transition that is occurring in response to climate		required for the energy transition. These trends have been
	change is changing market dynamics and presents strategic risks		incorporated into IPL’s business strategy through aligning its
	and opportunities for IPL. These may include a rapid transition away		explosives business growth with predicted customer demand
	from fossil fuels, which would likely signifcantly decrease demand		profles by segment and the delivery of technology solutions
	for thermal coal, and a shift to new technologies, such as renewable		to leverage these. The IPL Decarbonisation and Energy Steering
	hydrogen.		Committee provides ongoing focus and executive sponsorship
			of projects and strategic opportunities as it seeks to leverage
			key decarbonisation megatrends to exploit new proftable
			markets in its core geographies.
Health, Safety,	IPL’s operations are inherently high risk. IPL operates 15 key	»	A comprehensive Health, Safety, Environment and Community
Environment &	manufacturing and assembly sites and is exposed to operational		(HSEC) management system is in place.
Community	risks associated with the manufacture, transportation and storage of fertilisers, ammonium nitrate, initiating systems, industrial chemicals and industrial explosives products.	»	Where remedial obligations are identifed, an analysis is undertaken to assess any potential costs. Where applicable, provisions are made in the accounts in line with relevant
	These operational risks include an unintended detonation of		accounting standards.
	explosives, or unintended toxic release or fre/explosion during manufacture, transportation or storage.	»	HSEC risk identifcation, mitigation and management strategies are employed at all times and across all sites.
	IPL’s business, and that of its customers and suppliers, is subject to	»	Systems and procedures, including Standard Operating
	environmental laws and regulations that require specifc operating		Procedures and Work Instructions, are established, documented,
	licences and impose various requirements and standards. Changes		implemented and maintained to reduce HSEC risk in all work
	in these laws and regulations, failure to abide by the laws and/		activities.
	or licensing conditions, or changes to licence conditions, may have a detrimental effect on IPL’s operations and fnancial performance. Where IPL vacates a site, additional environmental remediation obligations may arise. Depending on the extent and nature of	»	Appropriate workers’ compensation programs are in place globally to assist employees who have been injured while at work, including external insurance coverage.
	contamination, remediation obligations could be signifcant.	»	The Group has strict processes around the stewardship,
	Due to the nature of industrial and agricultural chemicals, IPL’s		movement and safe handling of dangerous goods and other chemicals.
	operations have the potential to impact on local communities.
	This may include unintended chemical releases, or noise, dust	»	IPL has measures in place to monitor, manage and prevent
	and/or odour pollution.		potential negative impacts on local communities which may
			arise. Where required by law, sites communicate regularly with
			the community regarding Community Safety Plans which describe
			the emergency procedures that should be followed to keep the
			community safe in the unlikely event of a potential incident.

18

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Climate Change	IPL acknowledges the mainstream science on the existence of	»	IPL has been increasing its disclosures against the Task Force
	climate change. The Company has developed a Net Zero Pathway and		on Climate-Related Financial Disclosures (TCFD) guidelines
	has set an ambition to achieve Net Zero emissions by 2050, or sooner		since 2018. The risks and opportunities faced by the Group,
	if practicable. Climate change is a material and strategic issue for the		including the physical risks associated with climate change,
	business and IPL faces a number of transitional and physical risks		have informed IPL’s climate change strategy. Like other business
	across the Group that will require ongoing and active management.		risks and opportunities, those associated with the physical
			impacts of climate change and the global energy transition
	The impact of carbon emissions, and governments’ policies and		require strong oversight and strategic management. Risks and
	actions to limit them, may have an impact on IPL’s operations and		opportunities have been incorporated into the Group’s strategy,
	supply chains. The extent of the physical and transitional impacts		and comprehensive governance structures are in place to manage
	will be infuenced by factors such as whether there are policies and		them. These are described in Chapter 1 of the IPL Climate Change
	actions aimed at a rapid decarbonisation of the global economy, or		Report (2021).
	whether less stringent approaches are taken. Physical impacts could
	include more severe extreme weather events, such as droughts,	»	Through engagement with an expert third party in 2021,
	foods and hurricanes. Transitional impacts may include changes		a comprehensive assessment has been completed of IPL’s
	to regulations that could result in an increase to the cost base or		physical and transitional risks and opportunities associated
	operating cost of plants, and market shifts. A detailed discussion		with climate change. The assessment was conducted in line
	of the risks and opportunities identifed through IPL’s comprehensive		with TCFD guidelines using four future climate related scenarios
	assessment can be found in the IPL Climate Change Report (2021).(1)		created specifcally for IPL. These were 1.5º, 2º, Inevitable Policy
			Response (IPR) and Current Trajectory (3º+) scenarios. These
			scenarios, the risks and opportunities identifed, their materiality
			and the management strategies for each are reported in detail
			in Chapter 4 of the IPL Climate Change Report (2021).
COVID-19	The COVID-19 pandemic has presented a range of challenges across	»	Employee health and welfare has been at the core of IPL’s
	the IPL Group. At all times the focus has been on the health and		COVID-19 response. Flexible work arrangements have been put
	safety of the Group’s employees, including their mental well-being		in place, where practical. Mental health awareness sessions
	while still ensuring business continuity. The COVID-19 pandemic		have been held for employees and the Employee Assistance
	has created a risk that an infection outbreak may occur at one or		Program continues to be available globally for those who require
	more manufacturing and/or distribution sites, which could impact		additional assistance.
	minimum operator requirements and result in reduced production
	and/or output from one or more manufacturing and/or distribution	»	Crisis Management Teams exist at various levels of management
	sites. Additionally, there may be increased downtime due to		across the business to monitor the situation at a local level and
	staggered shift times and increased cleaning requirements.		escalate concerns as required. Physical distancing, face masks
			and staggered shifts have been introduced as far as practical.
			Where not practical, alternative controls such as plexi-glass
			screens have been implemented at work stations and employees
			are encouraged to work from home where they can. Increased
			hygiene and cleaning routines have been implemented and
			record keeping and contact tracing procedures are in place across
			the Group.
Compliance	IPL’s business, and that of its customers and suppliers, is subject	»	Corporate functions are in place to provide suffcient support
	to various laws, policies and regulatory provisions across the		and guidance to ensure regulatory risks are identifed and
	jurisdictions in which it operates, including anti-bribery and		addressed, including regular reviews of country regulatory risk,
	corruption laws, sanctions, anti-trust laws, modern slavery, domestic		comprehensive checks of customers and suppliers for compliance
	or international laws relating to import and export quotas, tariffs and		with relevant sanctions and modern slavery laws, and the
	geopolitical risks relating to countries with which IPL, or its customers		undertaking of due diligence processes as required.
	and suppliers, engages to buy or sell products and materials.
		»	IPL has dedicated resources to manage and monitor business
	Failure to abide by, or changes in, these laws and regulatory		processes against the compliance requirements for ethical
	provisions in any of the countries in which IPL operates or in which		procurement, including modern slavery.
	it has dealings may adversely impact its business, fnancial condition
	and operations, or the business, fnancial condition and operations	»	Where possible, IPL appoints local business leaders and
	of IPL’s customers and suppliers, including reputational damage to		management teams who bring a strong understanding of the
	IPL as well as legal action, and could impact on the willingness of		local operating environment and strong customer relationships.
	parties, including fnanciers, to transact with IPL.
		»	IPL has a compliance management module in its primary HSEC-
	IPL is also exposed to potential legal and other claims or disputes		management software system which is used to actively monitor
	in the course of its business and in connection with its operations.		compliance and licence requirements across the business.
	Additionally, IPL manufactures or produces product to specifc	»	IPL engages with governments and other key stakeholders
	customer and industry specifcations and statutory parameters.		to ensure potential adverse impacts of regulatory changes
	The Group is exposed to fnancial and reputational risk if these		are understood and, where possible, mitigated.
	standards, requirements and limits are not met.
		»	Regular training is provided to relevant staff on their obligations
			and reporting requirements under appropriate anti-bribery and
			corruption laws.
		»	IPL provides a whistleblower hotline where employees and third
			parties can anonymously notify the Group’s General Counsel and
			Chief Risk Offcer of any suspected fraudulent, illegal or unethical
			activity.
		»	IPL operates and manufactures products using detailed quality
			management systems. Quality assurance plans are in place for
			manufactured products intermediaries, procured products and
			raw materials.

(1) Refer to IPL’s Climate Change Policy (available on IPL’s website) for further details on the Company’s support for the international climate agreement developed at the 2015 Paris Conference of Parties.

19

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People	Despite the initial impact on employment from the COVID-19	»	IPL’s People Strategy is focused on developing a diverse and
	pandemic, labour markets for highly-skilled roles remain challenging,		inclusive business with the right people in the right roles, who
	particularly in Australia and the United States, where IPL’s main		are inspired and engaged. This includes controls such as building
	manufacturing assets are located.		leadership capability aligned to an IPL culture that supports IPL’s
			employee value proposition, market competitive STI and LTI
	IPL has operations in regional and remote locations where it		programs and inclusion and diversity strategies.
	can be diffcult to attract and retain critical and diverse talent.
	A shortage of skilled people or loss of key personnel could disrupt	»	The Group has policies and procedures, including fexible
	IPL’s business operations or adversely affect IPL’s business and		working arrangements and competitive compensation structures,
	fnancial performance.		designed to help attract and retain the workforce.
		»	Management identifes critical roles and implements policies
			to help ensure that appropriate succession and retention plans
			are in place for those roles.
Manufacturing	IPL’s manufacturing systems are vulnerable to equipment	»	The Group continues to make manufacturing reliability a key
	breakdowns, energy or water disruptions (including high baseline		strategic driver for the business. The objectives are to achieve
	water stress, resulting from climate change), natural disasters and		safe, reliable and cost competitive operations underpinned by
	severe weather events, unforeseen human error, sabotage, terrorist		High Reliability Organisation (HRO) mindsets. Key priorities
	attacks and other unforeseen events which may disrupt IPL’s		include stabilising production at Waggaman, Louisiana through a
	operations and materially affect its fnancial performance.		Reliability Taskforce and specifc tactical plans to deliver reliability
			improvement and build capability across US Nitrogen plants.
	Natural gas is the major input required for the production of		Focused improvements are underway to improve the consistency
	ammonia and therefore is a critical feedstock for IPL’s nitrogen		and effciency of Turnaround and Capital Project execution.
	manufacturing operations. Competitive and economic availability of
	natural gas is key when sourcing supply, as this impacts the variable	»	IPL undertakes business continuity planning and disaster
	cost of production of ammonia and signifcantly infuences the plants’		preparedness across all sites.
	overall competitive position.
		»	Global industrial special risk insurance is obtained from a
	There is a risk that a reliable, committed source of natural gas at		variety of highly rated insurance companies to ensure the
	economically viable prices may not be available for the Australian		appropriate coverage is in place with regard to damage to
	manufacturing operations.		the Group’s plants and property and the associated costs
			arising from business interruptions.
	Sulphuric acid is a major raw material required for the production
	of ammonium phosphates. Approximately 50-60% of Phosphate	»	The Group has medium term gas contracts in place for its
	Hill’s sulphuric acid comes from processing metallurgical gas sourced		Australian manufacturing sites. The contracts have various
	from Glencore’s Mt Isa Mines copper smelting facility. Sulphuric acid		tenures and pricing mechanisms. IPL explores new gas supply
	supply into Phosphate Hill would likely be negatively impacted, from		arrangements as an ongoing part of its operations, including
	a volume and/or price perspective, should the Mt Isa Mines copper		through exploration activities on the tenement awarded
	smelter close.		to Central Petroleum Limited (Central) by the Queensland
			government in March 2018, in respect of which IPL has
	IPL moved from a global manufacturing model to a new regional		entered into a 50:50 joint venture with Central.
	model during 2021 which has required management of signifcant
	business change which may result in some short term risks in relation	»	The US natural gas market is a well-supplied and liquid market.
	to operating effciencies, resourcing constraints and project execution.		The Americas business has short term gas supply arrangements
			in place for its gas needs with market referenced pricing
			mechanisms.
		»	In respect of the Americas business, there is an ability to hedge
			gas prices in accordance with policies approved by the Board.
		»	The Group has several sources of sulphuric acid for supply for
			Phosphate Hill including its Mt Isa operations, which produces
			sulphuric acid from burning imported elemental sulphur,
			and purchasing directly from a domestic smelter. In addition,
			Phosphate Hill uses phosphoric acid reclaimed from its gypsum
			stacks in place of sulphuric acid.
		»	The Group has started a life of mine project at Phosphate Hill
			with one leg of the work specifcally looking at alternative
			sources of sulphuric acid for the Phosphate Hill operation to
			mitigate any potential loss of sulphuric acid from a Glencore
			smelter closure.
		»	The Group seeks to maintain or achieve low cost positions
			in its chosen markets, which helps its businesses to compete
			in changing and competitive environments.
		»	The new regional manufacturing model is designed to enhance
			operational effciencies in the medium to longer term by
			integrating manufacturing sites with their regional supply chains,
			frontline operations and customer facing functions. However, a
			global reliability and asset strategy will remain in place to ensure
			that manufacturing standards, reliability improvements and
			capital investments are optimised across the Group.

20

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Customer	IPL has strong relationships with key customers for the supply	»	The Group attempts to diversify its customer base to reduce
	of products and services, and these relationships are fundamental		the potential impact of the loss of any single customer.
	to the Group’s fnancial performance. The loss of key customer(s)
	may have a negative impact on the Group’s fnancial performance.	»	Where practical, for customers in the Explosives sector, IPL prefers
			to engage in long term customer contractual relationships.
	Customer(s)’ inability to pay their accounts when they fall due,
	or inability to continue purchasing from the Group due to fnancial	»	The Group manages customer credit risks by monitoring and
	distress, may expose the Group to customer credit risks.		actively managing overdue amounts within policy guidelines, and
			through endeavouring to negotiate contractual terms that provide
			protection to address customer non-payment or fnancial distress.
		»	When appropriate, the Group purchases trade credit insurance
			to minimise credit risk.
Supply Chain	Timely and economic supply of key raw materials represents a	»	Integrated Business Planning (IBP) and inventory processes
	potential risk to the Group’s ability to manufacture and supply		assist in optimising inventory to reduce price risk of stock on
	products. In some markets in which IPL operates, economic supply		hand and provide fexibility to mitigate the impacts of short term
	of key raw materials is reliant on only a few external parties and		disruptions.
	in some cases, only one.
		»	Where possible, fexible supply chain and alternative sourcing
	In some markets, the availability of transportation routes for moving		solutions are explored and maintained as a contingency.
	raw materials and fnished product, such as rail, barge, truck and
	ship, as well as the methods for transporting key raw materials	»	Reviews of single-point sensitivity exposures within IPL’s supply
	directly to sites, such as pipelines, underground aquifers and		chain are undertaken. Where material risks are identifed,
	electricity networks, are reliant on only a few external parties.		contingency plans are developed, including identifcation of
	There is a risk that if these transportation routes or methods		alternative sources of supply, additional storage capacity and
	are disrupted, IPL’s manufacturing and distribution capacities		increased safety stock.
	may be reduced.
		»	Plants have storage capacity, as well as logistics capability,
	There is a risk that if production is not sold and effectively moved		that allows for offtake to be distributed via various channels,
	from site, plant uptime and earnings could be negatively impacted		including via rail, truck, barge and pipeline.
	should storage at site become full. Additionally, severe weather
	events, such as fooding and signifcant storms, in addition to the	»	More detail on management strategies to mitigate the impacts
	continued impacts of COVID-19 on global supply chain logistics,		of future extreme weather events on IPL’s supply chains can
	can also impact IPL’s supply chains, plant uptime and earnings.		be found in the IPL Climate Change Report (2021).
Commodity Price	Pricing for fertilisers, ammonia, ammonium nitrate and certain	»	IPL manages commodity price risk via a trading book approach
	other industrial chemicals is linked to internationally traded		which allows the business to better manage its short and
	commodities (for example, ammonia, ammonium phosphates		medium-term exposures to commodity price fuctuations,
	and urea). Some raw materials, such as phosphate rock, is also		while taking into account its commercial obligations and
	an internationally traded commodity. The pricing of internationally		the associated price risks.
	traded commodities is based on international benchmarks and
	is affected by global supply and demand forces, therefore price	»	To ensure volume and price commitments are upheld, the
	fuctuations in these products, combined with fuctuations in		Group has frm and enforceable customer supply contracts.
	foreign currency exchange rates, particularly the A$/US$ rate,
	could adversely affect IPL’s manufacturing operations and	»	The Group may enter into derivative contracts, where
	fnancial performance.		available on a needs basis, to mitigate commodity price risk.
			However, in some instances price risk exposure cannot be
	Weaker hard and soft commodity prices (particularly coal, iron ore,		economically mitigated by either contractual arrangements
	gold, corn, wheat, cotton and sugar) could have an adverse impact		or derivative contracts.
	on the Group’s customers and has the potential to impact the
	customers’ demand, impacting volume and market prices.
Demand	The current global economic and business climate and any sustained	»	Diversifcation across explosives and fertilisers markets in
	downturn in the North American, South American, Asian, European or		numerous geographical locations helps manage exposures:
	Australian economies may adversely impact IPL’s overall performance		IPL’s international explosives businesses operate across
	by affecting demand for industrial explosives, industrial chemicals		geographically diverse locations with exposures to diverse
	and fertilisers and related products and services, and proftability in		sectors including coal, iron ore, quarry & construction and
	respect of them.		metals mining; IPL’s Australian fertilisers business operates
			in all Australian States other than Western Australia and has
	The balance between supply and demand of the products that		diversity across market segments and customers serviced.
	IPL manufactures and sells can greatly infuence prices and plant
	utilisation. The structural shift in the North American energy sector,	»	Continuous review of country specifc risks helps proactive
	which has seen a movement away from coal-fred energy production		management of potential exposures.
	towards natural gas has increased competitive pressure on some of
	IPL’s major existing customers (giving rise to increased cost pressure	»	The IBP process incorporates forecasting on a rolling 24-month
	on inputs to their supply such as explosives) and has also resulted		basis which enables scenario planning and some supply
	in reduced demand for their outputs.		fexibility. Forecasts are based on typical weather conditions
			and are reviewed on an ongoing basis as the seasons progress
	Reduced demand for steel inputs (in particular iron ore and		to help align supply to changing demand.
	metallurgical coal) can lead to a decrease in demand for
	explosives in these industries.
	Seasonal conditions (particularly rainfall), are a key factor for
	determining demand and sales of explosives and fertilisers. Any
	prolonged change in weather patterns and severity of adverse weather
	conditions, as well as changes to growing regions in the Fertiliser
	business, could impact the future proftability and prospects of IPL.

21

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Broad Risk Category Description and potential consequences Treatment strategies employed by IPL
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Finance	The appreciation or depreciation of the A$ against the US$ may	»	IPL’s capital management strategy is aimed at maintaining an
	materially affect IPL’s fnancial performance through the translation		investment grade credit profle, an appropriate mix of A$/US$
	of US$ denominated sales, borrowings and related interest payable.		debt, funding fexibility by accessing different debt markets and
			reducing refnancing risk by ensuring a spread of debt maturities.
	Other fnancial risks that can impact IPL’s earnings and/or ability to		A detailed discussion of fnancial risks is included in Note 17
	operate include the cost and availability of funds to meet its business		(Financial Risk Management).
	needs, movements in interest rates and the imposition or removal
	of tariffs.	»	Financial risk management is undertaken in accordance with
			policies, including hedging strategies, that are approved by
	While IPL currently forecasts that it will have suffcient funds to meet		the Board.
	its business needs and to service its debt requirements, no assurance
	can be given that, in the future, IPL will continue to have suffcient	»	IPL engages with governments and other key stakeholders to
	funds to meet its fnancial covenants, debt repayment obligations,		ensure potential adverse impacts of proposed fscal and/or tax
	or be able to refnance its debt prior to its expiry.		changes are understood and, where possible, mitigated.
	Changes in tax legislation or compliance requirements in the
	jurisdictions in which IPL operates, or changes in the policy or
	practices of the relevant tax authorities in such jurisdictions,
	may result in additional compliance costs and/or increased
	risk of regulatory action.
Security	IPL’s operations are vulnerable to sabotage, terrorist attacks	»	IPL undertakes business continuity planning and disaster
	and other unforeseen events which may disrupt IPL’s operations		preparedness across all sites.
	and supply chain and materially affect its fnancial performance.
		»	The Group has strict processes around the stewardship,
			movement and safe handling of dangerous goods and
			other chemicals.
		»	IPL’s explosives and fertiliser storage facilities are ft-for-purpose
			and appropriately secured to minimise the risk of an unknown
			loss of product.
Cyber	Sensitive data, pertaining to IPL, its employees, associates,	»	Policies, procedures and practices are in place regarding the use
	customers or suppliers, may be lost or exposed, resulting in		of company information, personal storage devices, IT systems
	a negative impact to reputation or competitive advantage,		and IT security.
	and potential breach of regulatory compliance obligations.
		»	A data breach response plan has been established to respond
	IPL’s information technology and/or operating technology		to, and mitigate the effects of, any instances of sensitive data
	may be the target of cyber-attacks which could result in		breaches that may occur.
	commercial, fnancial, health and safety, environmental,
	community or reputational impacts. The potential consequences	»	External testing is performed to assess the security controls
	include harm to personnel or the environment, loss of business		of the Group’s IT systems.
	or customer, fnancial loss, interference with compliance with
	regulations, interruption to operational business or processes,	»	Security Operations Centre, threat intelligence, advanced threat
	interruption to the ability to make, sell and ship product and		analytics, system/network controls and industry standard cyber
	damage to plant operating equipment.		frameworks are collectively leveraged for the prevention and
			detection of, and response against, cyber threats.
		»	Incident Response Plans, including Disaster Recovery
			arrangements, are in place to help IPL effectively respond
			to and recover from a cyber security incident.

22

REMUNERATION REPORT

Introduction from the Chairman of the Remuneration Committee

Short-term incentive

Dear Shareholders,

After two years of no STI payments to Executive KMP, 2021 resulted in payments of slightly above half of the maximum levels. This was driven by a stretch Headline NPAT result, a target result for HSE and positive executive personal strategic metrics. The Adjusted NPAT result did not reach threshold due mainly to lower production from Waggaman. The CEO’s STI result also was lower than other KMP, primarily due to the influence of Waggaman. For perspective and aligned with the better Executive STI outcomes in 2021, was the Company’s share price increased in excess of 40% during the 2021 financial year.

On behalf of Incitec Pivot Limited’s (IPL or the Company) Remuneration Committee and the Board, I am pleased to present the Remuneration Report for 2021 which sets out the remuneration information for the Managing Director & Chief Executive Officer, Executive Key Management Personnel (KMP) and the Non-executive Directors.

Our approach

The Remuneration Committee’s objective is to ensure our remuneration framework delivers outcomes with a clear link to company and individual performance, and to IPL’s long-term strategy and values. We were pleased to again receive strong support for our Remuneration Report at the 2020 Annual General Meeting.

Section 4.1 outlines additional information on the Company’s 2021 performance and resulting STI outcomes are provided in section 4.3 of this report.

Long-term incentive

Financial Year 2021 in review

For the 2018/21 LTI plan with the performance period ended on 30 September 2021, the performance conditions were relative Total Shareholder Returns (TSR) (weighted at 40%); Growth in Return on Equity (ROE) (weighted at 30%); and the delivery of Long Term Value Metrics (formerly Strategic Initiatives) (weighted at 30%). No performance rights will vest for the TSR component, as the Company delivered relative Total Shareholder Return below the median of the S&P/ASX 100 for the performance period. No performance rights relating to the ROE objective will vest, as the minimum level of ROE performance was not achieved. There will be partial vesting of 50% of performance rights emanating from achievements against the Long Term Value Metrics measures, which delivers an overall outcome of 15% across all measures.

Setting financial targets for 2021 was challenging. Volatility in commodity markets combined with the ongoing impact of Covid-19 introduced more potential variability in expected results. During the year, business results were lifted by a substantial upturn in commodity prices and strong operating performance at Phosphate Hill. These factors more than compensated for substantial reliability issues encountered at Waggaman during the plant’s first major maintenance shutdown. Unlike the prior two financial years, better than expected economic conditions for our products had an overall positive impact for Executive KMP incentive plan outcomes, as outlined below and in more detail throughout this report.

Health, Safety & Environment (HSE) outcomes for the year were mixed. Very positive outcomes were achieved in both Environment Incidents and Significant Event Management, however, these were somewhat offset by below expectation results for Personal Safety (TRIFR) and Process Safety. HSE remains a critical focus for our license to operate and ensuring the safety of all employees and the communities we work with.

More information on the LTI program, including the 2018 – 2021 performance, is provided in sections 3.3 and 4.4 of this report.

2022 Remuneration framework

Environment, Social & Governance (ESG) outcomes including objectives relating to safety, diversity, energy efficiency and greenhouse gas emissions have been included in relevant Executive KMP remuneration outcomes for several years now. This focus will be increased in the 2022 financial year, with relevant Executive KMP having a separate ESG element to their STI measures addressing the challenges and opportunities associated with greenhouse gas emissions and climate change. Additionally, the LTI 2021/24 Plan will include a new ESG metric focused on climate change and the reduction of greenhouse gas emissions in our operations.

Headline NPAT of $358.6 million was a positive result and was driven by strong commodity prices. Whilst the Adjusted NPAT[ (1)] results collectively did not reach threshold, the Waggaman performance outcomes weighed heavily on what were otherwise around threshold across all three major business units.

Overall performance on strategy areas, as outlined in the report, has been solid.

Executive changes for FY21 & FY22

There will be changes to people and structure of the Executive Team during 2022. Sunil Salhotra has recently joined in the role of Chief Strategy and Sustainability Officer and brings with him deep strategy and planning experience from within the resources sector. A new CFO will be announced in the new calendar year, and the new Manufacturing structure will be settled in time for the AGM. Decisions on the Executive KMP representation for the 2022 report will be made once the final structure is in place.

Also, as a result of the 2021 manufacturing performance and the change to a regional manufacturing model, the MD&CEO and the Regional Presidents will have a new 2022 STI objective dedicated to manufacturing reliability for our operations.

We continue to review market trends to ensure our remuneration framework supports the execution of our strategies to increase shareholder value as well as retaining and motivating our key talent and ensuring alignment with our shareholders and other key stakeholders. We believe these adjustments for 2022 will assist the Company navigating through the dynamic and uncertain business conditions ahead. More information on the changes to the 2022 Remuneration framework can be found in section 5 of this report.

Tim Wall, President – Global Manufacturing & HSE ceased being a KMP on 16 July 2021 and left the company on 15 October 2021. The duties for this role were reassigned geographically to the President – Dyno Nobel Americas, and the President – Dyno Nobel Asia Pacific for the remainder of the financial year.

Long serving executive and current CFO, Nick Stratford, has resigned and will leave the company during the 2022 financial year. Nick will exit the organisation according to his contractual terms outlined in section 3.6 of this report.

We look forward to ongoing dialogue with, and the support of our shareholders, and welcome your feedback and comments on any aspect of this Report.

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Fixed remuneration

There were no adjustments to fixed remuneration during the 2021 financial year.

Greg Robinson Chairman

A new regional manufacturing model will be introduced in the 2022 financial year that may result in fixed remuneration adjustments to some Executive KMP.

(1) Adjusted NPAT means that results have been normalised to remove the impact of foreign exchange and commodity price movements

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REMUNERATION REPORT CONTENTS

• 25 1. Introduction 25 2. Executive Remuneration & Governance 25 2.1 Executive remuneration overview 27 2.2 Executive remuneration strategy 27 2.3 Executive remuneration governance

• 27 3. 2021 Executive Remuneration Framework

• 27 3.1 Overview

• 28 3.2 Fixed annual remuneration

• 28 3.3 Short-term incentive

• 30 3.4 Long-term incentive

• 31 3.5 LTI performance conditions 33 3.6 Executive service agreement terms

• 34 4. Remuneration Outcomes in 2021 Financial Year & Link to the 2021 Financial Year Performance

• 34 4.1 Analysis of relationship between the Company’s performance, shareholder wealth and remuneration

• 34 4.2 2021 Fixed annual remuneration outcomes 35 4.3 2021 STI outcomes

• 36 4.4 LTI 2018/21 outcomes

• 37 4.5 Performance related remuneration 39 4.6 Further details of Executive remuneration 41 5. Overview of Remuneration Changes for the 2021 Financial Year 41 6. Non-executive Director Remuneration 42 7. Shareholdings in IPL 43 8. Other KMP Disclosures

1. Introduction

The directors of Incitec Pivot Limited (IPL or the Company) present the Remuneration Report prepared in accordance with the Corporations Act 2001 (Cth) for the Company for the year ended 30 September 2021. This Remuneration Report is audited.

This Remuneration Report sets out remuneration information for Key Management Personnel (KMP) who had authority and responsibility for planning, directing and controlling the activities of the Company during the 2021 financial year, being each of the Non-executive Directors and designated Executives. The use of the term “Executives” in this report is a reference to the Managing Director & Chief Executive Officer (MD&CEO) and certain direct reports during the 2021 financial year. Refer to Table 1 below for all individuals comprising IPL’s KMP for the 2021 financial year. All KMP held their positions for the entirety of the 2021 financial year, unless noted otherwise.

Table 1 – Individuals forming IPL’s KMP for the 2021 reporting period

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Non-executive Directors
Current
Mr Brian Kruger Chairman and Independent, Non-executive Director
Mr George Biltz [ (1)] Independent, Non-executive Director
Mr Bruce Brook Independent, Non-executive Director
Ms Tonianne Dwyer [ (2)] Independent, Non-executive Director
Dr Xiaoling Liu Independent, Non-executive Director
Mr Gregory Robinson Independent, Non-executive Director
Former
Ms Rebecca McGrath [ (3) ] Independent, Non-executive Director
Executives
Current
Ms Jeanne Johns Managing Director & Chief Executive Officer
Mr Nicholas Stratford Chief Financial Officer
Mr Greg Hayne President, Dyno Nobel Asia Pacific
Dr Braden Lusk President, Dyno Nobel Americas
Mr Stephan Titze President, Incitec Pivot Fertilisers
Former
Mr Tim Wall [ (4)] President, Global Manufacturing & HSE
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(1) Mr Biltz commenced as an Independent, Non-executive Director with effect from 1 December 2020.

• (2) Ms Dwyer commenced as an Independent, Non-executive Director with effect from 20 May 2021.

• (3) Ms McGrath retired as an Independent, Non-executive Director on 18 December 2020.

(4) Mr Wall ceased as a KMP on 16 July 2021. The duties for this role were reassigned geographically to the President – Dyno Nobel Americas, and the President – Dyno Nobel Asia Pacific for the remainder of the financial year.

2. Executive Remuneration & Governance

2.1 Executive remuneration overview

In alignment with its remuneration strategy, the Board’s policy on Executive remuneration is that it comprises both a fixed remuneration component (FAR) and “at risk” or performancerelated components (short term incentive (STI) and long term incentive (LTI)) where:

• (i) the majority of Executive remuneration is “at risk”; and

• (ii) the level of FAR for Executives is benchmarked against that paid for similar positions at the median of comparator groups of ASX companies:

Comparator groups

• S&P ASX listed companies with market capitalisation between 50% and 200% of IPL market capitalisation.

– S&P ASX 100 listed companies.

• A select group of 21 S&P ASX listed companies from the Industrials, Materials and Energy Sectors, consisting of: Adelaide Brighton, AGL Energy, ALS, Ampol Australia, Atlas Arteria, Aurizon, BlueScope Steel, Boral, Brickworks, CIMIC Group, Cleanaway, CSR, Downer EDI, Fletcher Building, Orica, Origin Energy, Orora, Qube, Reliance Worldwide, Seven Group and Sims.

For roles located outside Australia, market-specific data is used as an additional reference point for benchmarking purposes.

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A summary of the Company’s approach to Executive remuneration for the 2021 financial year, including performance conditions and their link to the overall remuneration strategy is set out below:

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Performance Conditions Remuneration Strategy/Performance Link
Fixed Annual Considerations Set to attract, retain and motivate the right talent to deliver
Remuneration » Scope of individual’s role on IPL’s strategy and contribute to the Company’s financial
Salary and » Individual’s level of knowledge, skills and expertise and operational performance.
other benefits » Company and individual performance For the Company’s Executives, the aim is to set fixed
(including statutory » Market benchmarking remuneration at market relevant levels and link any future
superannuation). increases to individual performance and effectiveness whilst
Refer section 3.2 for continuing to have regard to market relevance.
more details
Short Term Zero Harm ‘gate’ To align with the Company’s commitment to “Zero Harm
Incentive The award payable for the Zero Harm performance condition for Everyone, Everywhere”.
Annual incentive may be forfeited in the event of a fatality or major incident
opportunity having regard to its circumstances.
delivered 50/50
in cash/restricted
shares for the Safety measures (generally 10% of STI award) In assessing the safety balanced scorecard, the Board may,
MD&CEO (if Minimum » Safety performance balanced scorecard across the in its discretion, have regard to the results achieved against
Shareholding dimensions of behavioural safety and process safety the measures comprising the scorecard without applying a
Requirement (MSR) management comprising input and output measures. specific weighting to any particular measure.
has yet to be
achieved) or 100%
in cash if MSR has Net Profit After Tax (NPAT) ‘gate’ To ensure awarded STI aligns not only with underlying
been achieved. For Requires achievement of a designated Group NPAT as performance, but also with the overall profitability of the
all other Executives determined by the Board business. Commodity price impacts could result in poor
opportunity delivered 75/25 » A minimum NPAT performance level must be achieved profitability which would be inconsistent with stretch bonus payouts.
for the gate to open. If the NPAT performance level gate
in cash/restricted
is not achieved, all non-safety components of the STI will
shares (if MSR has
be capped at target.
yet to be achieved)
or 100% in cash
if MSR has been Financial measures To ensure robust alignment of performance in a particular
achieved. (generally a maximum of 70% of STI award, incorporating Business Unit with reward for the Executive managing that
business unit.
Refer section 3.3 metrics relevant to an Executive’s area of influence)
for more details » Group NPAT Performance conditions are designed to support the financial
» Group Adjusted NPAT direction of the Company (the achievement of which is
» Business Unit Adjusted EBIT (Earnings Before Interest and intended to translate through to shareholder return) and
Tax) are clearly defined and measurable.
» Manufacturing Reliability
Strategic objectives Key strategic and growth objectives targeted at delivering
(generally, a maximum of 20% of STI award) aligned to ongoing benefit to the Company.
personal strategic objectives. Examples include:
» Greenhouse gas reduction targets
» Cost reduction initiatives
» Cash conversion requirements
» Product innovation
Long Term Performance conditions Performance conditions designed to encourage Executives
Incentive Distinct categories of performance that are weighted to align to focus on the key performance drivers which underpin
Three-year incentive with the Group’s focus over the three-year period that each sustainable growth in shareholder value. The mix of
opportunity performance conditions is designed to ensure the share
tranche of the plan spans.
delivered through price growth is supported by the Company’s absolute ROIC
performance rights. » Relative total shareholder return (TSR) performance as well as long term value metrics, and not
Refer section 3.4 and » Long Term Value Metrics (formerly Strategic initiatives) market factors alone.
3.5 for more details » Return on invested capital (ROIC)
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Minimum Shareholding

Executive KMP are required to attain and maintain a Minimum Shareholding Requirement to better align Executive and Shareholder interests. It requires the MD&CEO to defer 50% of any STI awarded until holding the equivalent of 100% of Fixed Annual Remuneration (FAR) in IPL shares. This must be achieved within 5-years, or direct purchases of shares would be required. Other Executive KMP must defer 25% of any STI awarded until holding the equivalent of 50% of FAR in IPL shares.

Total Remuneration

The combination of these elements is designed to attract, retain and motivate appropriately qualified and experienced individuals, encourage a strong focus on performance, support the delivery of outstanding returns to shareholders and align Executive and stakeholder interests through share ownership.

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2.2 Executive remuneration strategy

IPL’s purpose is to unlock the potential in the Earth to help people grow. IPL embraces a set of Strategic Value Drivers that underpin the Company’s business and form the platform for the Company’s future earnings growth and shareholder returns. The company’s commitment to addressing climate change challenges and looking for opportunities in the decarbonization of the world’s energy systems is at the heart of the business strategy and integrated across all the Strategic Value Drivers:

Zero Harm – Broadening and setting year-on-year improvement objectives across key metrics including environmental care and process safety.

Talented and Engaged People – One IPL collaborative culture with engaged, diverse and inclusive teams focused on customers and value creation.

Customer Focus – Partnering with our customers to create added value and practical solutions for today and the future.

Manufacturing Excellence – Driving consistently high performance across all of our assets and investigating ways to address our greenhouse gas emissions.

Leading Technology Solutions – Innovation on the ground with practical innovations that our customers can use today to improve their operations and environmental outcomes.

Profitable Growth – Focus on opportunities that are distinctive to our differentiated technology, core markets, core capabilities and market segments.

Under the Strategic Value Driver of ‘Talented and Engaged People’, IPL recognises that to generate competitive returns for its shareholders, it requires talented people who are capable, committed and motivated. IPL’s remuneration strategy is designed to support the objectives of the business and to enable the Company to attract, retain and reward Executives of the requisite skill and calibre.

The key principles of the Company’s remuneration strategy are to:

• » reward strategic outcomes at both the Group and business unit level that create top quartile long term shareholder value;

• » require integrity and encourage disciplined risk management in business practice;

• » drive strong alignment with shareholder interests through delivering part of the reward in the form of equity;

• » structure the majority of executive remuneration to be “at risk” and linked to demanding financial and non-financial performance objectives;

• » attract and retain the best available talent;

• » reward Executives for high performance within their role and responsibilities, and ensure rewards are competitive within the industry and market for their role in respect of pay level and structure; and

• » ensure the remuneration framework is simple, transparent and easily implemented.

2.3 Executive remuneration governance

The remuneration of the Executives is set by the Board, having regard to recommendations from the Remuneration Committee.

Where appropriate, the Remuneration Committee of the Board engages external advisors to provide input into the process of reviewing Executive and Non-executive Director remuneration. For the 2021 financial year, the Remuneration Committee received market and benchmarking data from various sources, but this information did not constitute a remuneration recommendation for the purposes of the Corporations Act 2001 (Cth).

Further information in relation to the Board and the Remuneration Committee can be found in IPL’s Corporate Governance Statement available on IPL’s website.

3. 2021 Executive Remuneration Framework

3.1 Overview

The charts below set out the theoretical breakdown of the Executives’ total remuneration package for the 2021 financial year. The FAR component is inclusive of cash and superannuation only, whilst “at risk” compensation is based on maximum entitlement that could potentially be awarded under the STI and LTI plans.

The restricted shares component of the STI (50% for the MD&CEO, 25% for other Executive KMP) must be deferred until an Executive’s Minimum Shareholding Requirement is attained.

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MD&CEO Other Executives
STI – cash/ STI – cash/
restricted shares 38% restricted shares 40%
Fixed At Risk Fixed At Risk
25% 75% 33% 67%
FAR
LTI
25% LTI FAR
27%
37% 33%
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3.2 Fixed annual remuneration

Executives receive their fixed remuneration in a variety of forms, including cash, superannuation, and any applicable fringe benefits. The Executives’ FAR is set by reference to appropriate benchmark information for each Executive’s role, level of knowledge, skill, responsibilities and experience. The level of remuneration is reviewed annually in alignment with the financial year and with reference to, among other things, Company and individual performance and market data provided by an appropriately qualified and independent external data specialist.

3.3 Short-term incentive

The STI is an annual “at risk” incentive which is dependent on the achievement of particular performance measures. The following table summarises the STI plan that applied in the 2021 financial year (2021 STI):

What was the performance The performance period for the 2021 STI was the financial year from 1 October 2020 to 30 September 2021. period?

Who was eligible for the STI? The MD&CEO and all other Executives participated in the 2021 STI.

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What was the target and Target STI opportunity was 100% of FAR for the MD&CEO, and 60% of FAR for all other Executives. Maximum STI opportunity
maximum STI opportunity? (for stretch outcomes) was 150% of FAR for the MD&CEO, and 120% of FAR for all other Executives.
What were the Performance Performance conditions under the STI are determined by the Board for each financial year. The performance conditions
Conditions and Measures? for the 2021 STI are set out below:
Performance Conditions Measures to assess satisfaction Rationale for the Performance Conditions
of Performance Conditions
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	Group Financial Performance Group NPAT (Net Proft After Tax). Group Adjusted NPAT(1) To align with the Company’s strategic intent of achieving top quartile performance as measured against S&P/ASX listed 100 companies.
	Business Unit Financial Performance Business Unit Adjusted EBIT (Earnings Before Interest and Tax)(1) Manufacturing reliability. To ensure robust alignment of performance in a particular business unit with reward for the Executive managing that business unit.
	Zero Harm Safety performance balanced scorecard across the dimensions of behavioural and process safety management comprising input and output measures.(2) To align with the Company’s commitment to “Zero Harm for Everyone, Everywhere”. In 2017, the Company adopted its second fve-year Global HSE Strategy to continue to drive improvement in the Group’s health, safety and environmental performance.
	Strategic Outcomes Measures based on performance criteria for the execution and implementation of strategic objectives and business priorities. These include measures related to greenhouse gas reduction targets, cost reduction initiatives, cash conversion requirements and product innovation. Tailored to individual Executive’s role, to drive performance and behaviours consistent with achieving critical aspects of the Group’s strategy.

(1) Adjusted means that results have been normalised to remove the impact of foreign exchange and commodity price movements.

(2) In assessing the safety balanced scorecard, the Board may, in its discretion, have regard to the results achieved against the measures comprising the scorecard without applying a specific weighting to any particular measure. The balanced scorecard category measures include: Personal Safety, Process Safety; Environmental; Significant Event Management and the Zero Harm Plan.

Where any Individually Material Item (IMI) is separately recognised in the financial report, the Board will have discretion to include or exclude the IMI for the purpose of determining any STI award, taking into account the nature of the IMI and having regard to whether, in the circumstances, it would be appropriate for the IMI to be attributable to Management.

Determination of the extent to which each of the above measures was satisfied was based on a review by the Board of the audited financial report and performance of the Group for the financial year, following the annual performance review process for the Executives.

Are there minimum For the 2021 financial year, to ensure STI awards are aligned with business performance outcomes, the Board determined that performance levels an “STI Financial Gate” would operate. The STI Financial Gate reflects a requirement to exceed a designated level of the Group’s which must be achieved NPAT performance, or all non-safety components of the STI will be capped at a maximum of target payment. before awards can be made under the STI? The STI Financial Gate does not apply to any awards payable in relation to the Zero Harm performance condition, reflecting the

The STI Financial Gate does not apply to any awards payable in relation to the Zero Harm performance condition, reflecting the primacy of safety.

In relation to the Zero Harm performance condition, the Board retains a discretion to forfeit all or part of the award payable for this performance condition in the event of a fatality or major incident having regard to the circumstances of the incident.

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What were the weightings for the STI performance measures?

The weighting of Executives’ STI performance measures (as a percentage of 100%) for 2021 were:

Table 2

Table 2
	Financial Non-fnancial/ Business/Strategic
	Group NPAT Group Adjusted NPAT Business Unit Adjusted EBIT Safety Strategic Outcomes
Executives – Current
J Johns* Managing Director & CEO	40% 30% 10% 20%
N Stratford* Chief Financial Offcer	40% 30% 10% 20%
G Hayne** President, Dyno Nobel Asia Pacifc	40% 30% 10% 20%
B Lusk** President, Dyno Nobel Americas	40% 30% 10% 20%
S Titze** President, Incitec Pivot Fertilisers	40% 30% 10% 20%
Executives – Former
T Wall**(1)(2) President, Global Manufacturing	40% 30% 10% 20%

Group role *Business Unit role (1) Mr Wall’s business unit measures were based on manufacturing reliability and turnaround execution.

(2) Mr Wall ceased as a KMP on 16 July 2021. The duties for this role were reassigned geographically to the President - Dyno Nobel Americas, and the President - Dyno Nobel Asia Pacific for the remainder of the financial year.

Is there an STI deferral	A mandatory 25% STI deferral (50% for the MD&CEO) continues until an Executive’s Minimum Shareholding Requirement (MSR)
component?	is achieved. The MSR is 50% of FAR for Executives (100% for the MD&CEO).
How is the STI delivered?	The STI is delivered partly in cash and partly in the form of restricted shares. The split between cash and restricted shares
	is determined based on each participant’s shareholding under the MSR.
Was there a mechanism for	The 2021 STI included a clawback provision, which requires the repayment of all or part of any STI awarded within three years
clawback?	after a payment is made, in the event of a material misstatement or omissions in IPL’s fnancial statements which results in a
	restatement of the audited fnancial report, on where a participant has materially breached their obligations to the Company.

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3.4 Long-term incentive

The LTI is the long term incentive component of remuneration for Executives. The LTI is provided in the form of performance rights.

What LTI plans were applicable for the 2021 fnancial year?	The LTI Plans applicable during the 2021 fnancial year were the: » Long Term Incentive Performance Rights Plan for 2018/21 (LTI 2018/21); » Long Term Incentive Performance Rights Plan for 2019/22 (LTI 2019/22); and » Long Term Incentive Performance Rights Plan for 2020/23 (LTI 2020/23) (together, theLTI Plans). Under the LTI Plans, participants are entitled to acquire ordinary shares in the Company, on a one right to one share basis, for no consideration at a later date. The performance rights are issued by Incitec Pivot Limited and the entitlement of the participants to acquire ordinary shares is subject to the satisfaction of certain conditions. As no shares are provided to participants until vesting, performance rights have no dividend entitlement. Performance rights expire on vesting or lapsing of the rights.
What is the purpose of the LTIs?	The LTI is designed to link reward with the key performance drivers which underpin sustainable growth in shareholder value. As rights under the LTI Plans result in share ownership on the achievement of demanding targets, the LTI ties remuneration to Company performance, as experienced by shareholders. The arrangements also support the Company’s strategy for retention and motivation of the Executives.
What is the process for determining eligibility?	The decision to grant performance rights under the LTI Plans and to whom they will be granted is made annually by the Board, noting that the grant of performance rights to the MD&CEO is subject to shareholder approval. Grants of performance rights to participants are based on a percentage of the relevant Executive’s FAR.
What is the maximum LTI opportunity under the LTI Plans?	The maximum LTI opportunities under each LTI Plan are: » for the MD&CEO, 150% of FAR; and » for all other Executives, 80% of FAR.
How was the number of performance rights calculated under the LTI Plans?	For the LTI 2018/21 the number of performance rights issued to a participant was based on the market value of the Company’s volume weighted average share price over the 20 business days up to but not including the frst day of the relevant performance period. For LTI 2019/22 and LTI 2020/23, the number of performance rights issued to a participant was based on the market value of the Company’s shares over the 5 business days immediately after the release of the Company’s full year results in the frst year of the performance period, being 12 November 2019 and 10 November 2020 respectively. Each issuance was determined by dividing the dollar value of the relevant participant’s LTI opportunity by these outcomes.
What are the performance conditions, performance periods and status of current LTI Plans?	LTI Plan Performance Conditions Weighting of Performance Condition Performance Period Status
	LTI 2018/21 » TSR Condition » Long Term Value Metrics Condition (formerly Strategic Initiatives) » ROE Growth Condition 40% 30% 30% 1 October 2018 to 30 September 2021 Testing to occur after completion of performance period.
	LTI 2019/22 » TSR Condition » Long Term Value Metrics Condition » Absolute ROIC Condition 40% 30% 30% November 2019 to November 2022 (TSR condition only) 1 October 2019 to 30 September 2022 (other conditions) Testing to occur after completion of performance period.
	LTI 2020/23 » TSR Condition » Long Term Value Metrics Condition » Absolute ROIC Condition 40% 20% 40% November 2020 to November 2023 (TSR condition only) 1 October 2020 to 30 September 2023 (other conditions) Testing to occur after completion of performance period.

The performance conditions are determined by the Board annually. Refer to section 3.5 for a discussion of the performance conditions.

30

When are the performance	After the expiry of the relevant performance period, the Board determines whether the performance conditions of the relevant
conditions measured?	LTI Plans are satisfed. The performance conditions are tested once, at the end of the relevant performance period. If the
	performance conditions are satisfed and the rights vest, the participant is entitled to receive ordinary shares in the Company.
	The participant does not pay for those shares.
	To the extent the performance conditions are not satisfed during the performance period, the performance rights will lapse.
What happens if a	Generally, the performance rights granted under the LTI Plans will lapse on a cessation of employment except where the
participant leaves the	participant has died, becomes totally and permanently disabled, is retrenched, retires or is terminated without cause. In those
Company?	circumstances (subject to Board discretion), the number of performance rights retained by the participant will be reduced pro
	rata to refect the proportion of days worked during the relevant performance period and will be tested in the ordinary course.
In what other circumstances	The Board may provide a notice to the participants specifying that the performance rights will vest at a time stipulated in the
may the performance rights	notice on the occurrence of one of the following events in relation to the Company:
vest (which may be before or after the expiry of the performance period) under	» a takeover bid; » a change of control;
the LTI Plans?	» the Court ordering a meeting be held in connection with a scheme for the reconstruction of the Company or its
	amalgamation with any other companies; or
	» a voluntary or compulsory winding-up.
Is there a mechanism for	The LTI Plan includes a clawback provision, which requires the repayment of vested awards where payment has exceeded the
clawback?	restated position. This includes overpayments resulting from a material misstatement or omissions in IPL’s fnancial statements
	on where a participant has materially breached their obligations to the Company.

3.5 LTI performance conditions

For the LTI 2018/21, the performance conditions are measured by reference to the TSR Condition, a Long Term Value Metrics (formerly Strategic Initiatives) Condition and growth in Return on Equity (ROE Growth Condition). For the LTI 2019/22 and LTI 2020/23, the ROE Growth Condition has been replaced by a Return on Invested Capital (Absolute ROIC Condition). Details of the performance conditions for each of the LTI 2018/21, LTI 2019/22 and LTI 2020/23 are set out below.

TSR Condition

The TSR Condition (applicable to each of LTI 2018/21, LTI 2019/22 and LTI 2020/23) requires growth in the Company’s TSR to be at or above the median of the companies in the comparator group, being the S&P/ASX 100. This condition provides shareholder alignment as it takes into account the Company’s share price movement as well as dividends paid, relative to other organisations comparable to the Company.

The S&P/ASX 100 has been chosen as the comparator group because, having regard to the business segments in which the Company operates and, specifically, the absence of a sufficient number of direct comparator companies, the Board considers the S&P/ASX 100 to represent the most appropriate, and objective, comparator group. It also represents the group of companies against which the Company competes for shareholder capital. The Board has the discretion to vary the comparator group at any time, including to remove companies from, or include companies in, the comparator group.

The table below sets out the TSR Condition, and the percentage of the performance rights that will vest based on satisfaction of this condition.

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Relative TSR ranking of IPL % of performance rights subject to the TSR Condition that will vest
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Less than 50th percentile	Nil
At or greater than 50th percentile but less than 75th percentile	Pro rata from 50% on a straight-line basis
At 75th percentile or greater	100%

Long Term Value Metrics (formerly Strategic Initiatives) Condition

The Long Term Value Metrics Condition relates to the delivery of significant aspects of the Board approved strategy. For the LTI 2018/21, LTI 2019/22 and LTI 2020/23, the Long Term Value Metrics Condition comprises components aligned with the Company’s strategic drivers: Manufacturing Excellence, Profitable Growth and Customer, Practical Technology & Innovation. Each of these strategic drivers has a direct impact on financial outcomes.

31

The table below summarises the Long Term Value Metrics components for the LTI 2018/21, the LTI 2019/22 and the LTI 2020/23:

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Scorecard
Long Term Value Rationale Measurement criteria Performance goals
Metrics Condition
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Manufacturing	Manufacturing Excellence is an	Performance in relation to this	Manufacturing volume:
Excellence (1)	improvement system, through which the Company seeks to enhance productivity on a sustainable basis. The LTI performance goals in relation to Manufacturing Excellence target delivering sustainable year on year improvements in reliability and effciency.	component comprise performance goals related to: » Manufacturing volume » Manufacturing unit cost improvement	For LTI 2018/21, LTI 2019/22 and LTI 2020/23 – Achievement of target volumes of particular products at specifed manufacturing plants. Manufacturing unit cost: For LTI 2019/22 – Improvement in the unit cost of Initiating Systems.
Proftable Growth (1)	Proftable Growth focuses on	Performance in relation to this	Cumulative productivity benefts:
	opportunities that include capitalising on our core capabilities. LTI performance goals in relation to this item focus on incentivising the delivery of sustainable productivity	component comprise performance goals related to: » Cumulative productivity benefts	For LTI 2018/21 – Delivery of cumulative savings over the performance period against targets approved by the Board.
	improvements.
Customer, Practical	IPL’s growth strategy includes	Performance in relation to this	Revenues from technologies:
Technology & Innovation (1)	providing value added differentiated products & services, and innovations to meet the challenges of customers,	component is assessed against a Scorecard comprising performance goals related to:	For LTI 2018/21 and LTI 2019/22 – Annual growth in technology sales from 2018 and 2019 baselines.
	to assure sustainable earnings and maximise shareholder return.	» Revenues from technologies » Margin from technologies	Margin from technologies: For LTI 2020/23 – Measured on an underlying
		» Net Promoter Score	explosives operating margin basis from 2020 baseline.
		» Key customer retention	Net Promoter Score (NPS):
			For LTI 2018/21 and LTI 2019/22 – Improvement
			in NPS over 2020 baseline.
			Key customer retention:
			For LTI 2018/21, LTI 2019/22 and LTI 2020/23 –
			Quantitative targets against 2018, 2019 and 2020
			baselines assessed by the Board.

(1) The Long Term Value Metrics Condition applies to 30% of the performance rights in the grants for LTI 2018/21 and LTI 2019/22, and 20% in the grant for LTI 2020/23.

Details of the scorecards and specific performance goals for each component of the Long Term Value Metrics Condition were notified to Executives on commencement of each applicable LTI plan. These performance goals involve commercial-in-confidence quantitative targets and, as such, detailed performance goals are not disclosed, but performance against the goals is disclosed at the end of the performance period. For the LTI 2018/21, these details are set out in section 4.4. For the LTI 2019/22 and LTI 2020/23, the relevant details will be set out in the 2022 Remuneration Report and the 2023 Remuneration Report respectively.

The Board will determine the outcome for the relevant component of the Long Term Value Metrics Condition under each LTI plan having regard to the results achieved against the performance goals across the entirety of the Scorecard for that component. If the Board determines that all of the performance goals in respect of a component of the Long Term Value Metrics Condition have been achieved, all of the performance rights subject to that component will vest.

If not all performance goals in respect of a component of the Long Term Value Metrics Condition are met over the performance period, the extent to which that component of the Long Term Value Metrics Condition has been satisfied (if at all) will be determined by the Board. In doing so, the Board will have regard to the results achieved against the performance goals across all of the components of the relevant Scorecard, without applying a specific weighting to any particular performance goal.

32

ROE Growth Condition

The ROE Growth Condition was introduced in 2016 and applies to the LTI 2018/21. The ROE Growth Condition measures the compound annual growth in ROE over the performance period. ROE was considered an appropriate measure at that time, as it was a widely recognised and reported metric and reflected the levers required to create shareholder value. It does not however, focus on the efficient deployment of capital to the extent that the Board requires currently, so was replaced by a ROIC condition for LTI 2019/22 and LTI 2020/23 (see below).

The table below sets out the ROE Growth Condition, and the percentage of performance rights that will vest based on satisfaction of this condition:

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ROE Compound Annual Growth Rate % of performance rights subject to the ROE Growth Condition that will vest
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Less than 7%	Nil
At or above 7% but less than 11%	Pro rata from 50% on a straight-line basis
11% or greater	100%

Absolute ROIC Condition

The Absolute ROIC Condition was introduced for the LTI 2019/22, to replace the ROE Growth Condition. ROIC has been selected as it is a key determinant of efficient use of the capital entrusted to management by shareholders. It also reflects factors that improve shareholder value, including operational efficiency, capital efficiency, asset utilisation and profitability.

The table below sets out the Absolute ROIC Condition for the LTI 2020/23, and the percentage of performance rights that will vest based on satisfaction of this condition:

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Absolute ROIC Targets % of performance rights subject to the Absolute ROIC Condition that will vest
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Less than 6.0%	Nil
At or above 6.0% but less than 6.4%	Pro rata from 50% on a straight-line basis
6.4% or greater	100%

3.6 Executive service agreement terms

Remuneration and other terms of employment for the Executives are formalised in service agreements. Most Executives are engaged on similar contractual terms, with minor variations to reflect differing circumstances. Each agreement is unlimited in term; however, each agreement provides that the Company may terminate an Executive’s employment immediately for cause without any separation payment, save for accrued amounts such as leave, or otherwise without cause, with or without notice, in which case the Company must pay a separation payment plus accrued amounts such as leave.

The notice period to be provided by the Executives is set out in the table below:

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Current Executives Notice period to be provided by the Executive
J Johns 52 weeks
N Stratford 26 weeks
G Hayne 26 weeks
B Lusk 26 weeks
S Titze 26 weeks
Former Executives Notice period provided by the Executive
T Wall [ (1) ] 26 weeks
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(1) Mr Wall ceased as a KMP on 16 July 2021.

The separation payment included in each Executive’s contract is capped at an amount equivalent to a specified number of weeks of FAR for the Executive. Ms Johns’ separation payment is equal to 52 weeks of FAR as at the date of termination (subject to the provisions relating to termination benefits in Part 2D.2 of the Corporations Act 2001). All other Executives’ contracts provide for a separation payment of 26 weeks of FAR, save for Mr Stratford’s and Mr Hayne’s contracts which provided for a separation payment equal to 52 weeks of FAR (subject to the terminations provisions in the Corporations Act).

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4. Remuneration Outcomes in 2021 Financial Year & link to 2021 Financial Year Performance

4.1 Analysis of relationship between the Company’s performance, shareholder wealth and remuneration

In considering the Company’s performance, the benefit to shareholders and appropriate remuneration for the Executives, the Board, through its Remuneration Committee, has regard to financial and non-financial indices, including the indices shown in the below table in respect of the current financial year and the preceding four financial years.

Table 3 – Indices relevant to the Board’s assessment of the Company’s performance and the benefit to shareholders.

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2017 2018 2019 2020 2021
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NPAT before IMIs and excluding non-controlling interests ($m)	318.7	347.4	152.4	188.2	358.6
EPS before IMIs (cents)	18.9	20.9	9.5	10.9	18.5
Dividends per share (DPS) paid in the fnancial year (cents)	9.1	9.4	7.5	3.4	1.0
DPS declared in respect of the fnancial year (cents)	9.4	10.7	4.7	–	9.3
Share price ($) (Financial Year End)(1)	3.60	3.98	3.39	2.03	2.94
TSR (%) at Financial Year End	28	11	(15)	(40)	45
TSR (%) over 3 years(2)	36	14	30	(37)	(25)
On-market share buyback ($m)	–	(210.3)	(89.7)	–	–
Equity Raising (net of cost) ($m)	–	–	–	645.5	–

(1) Share Price as at the end of the 2016 financial year was $2.82.

(2) TSR is calculated in accordance with the rules of the LTI 2014/17, LTI 2015/18, LTI 2016/19, LTI 2017/20 and LTI 2018/21 as applicable over the three-year performance period, having regard to the volume weighted average price of the shares over the 20 business days up to but not including the first and last day of the performance period.

Relationship between the Company’s performance and STI outcomes for Executive KMP

The below graph shows the relationship between the Company’s performance and STI awards for Executive KMP in respect of the year. For the 2021 financial year, Group NPAT (before IMIs and excluding non-controlling interest) increased by 90.5% to $358.6m. The financial gate for the STI opened as outlined in section 4.3 of this report, resulting in Executives earning on average, 58.9% of Maximum 2021 STI awards.

Relationship between the Company’s performance and Executive KMP LTI outcomes

The below graph shows the relationship between IPL’s Absolute TSR, its percentile ranking relative to its S&P/ASX 100 peer group over the three years that each tranche operated, and the overall LTI vesting percentage that occurred for each tranche. The LTI 2017/20 that vested in the 2021 financial year delivered 0% of the 50% TSR opportunity and 10% of total opportunity available for that tranche.

Note: The absolute TSR for IPL and for the ASX 100 has been calculated using the methodology noted in footnote (2) Table 3.

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Group performance and STI outcomes IPL Absolute TSR %, LTI Vesting %,
$mill $mill % ASX 100 Percentile Ranking %
600 6.0 50 70
40
50
500 5.0 30
20 30
400 4.0
10
10
300 3.0 0
-10
-10
200 2.0 -20 -30
-30
100 1.0 -50
-40
- - -50 2017 2018 2019 2020 2021 -70
2017 2018 2019 2020 2021
Total STI awarded NPAT before IMIs and excluding IPL Absolute TSR [ (1)] IPL Percentile Ranking in ASX 100 LTI Vesting
non-controlling interests
LTI Vesting
Total STI awarded IPL Absolute TSR
IPL Percentile Ranking in ASX 100
NPAT before IMIs and excluding non-controlling interests
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(1) IPL Absolute TSR is based on 3-year outcomes

4.2 2021 Fixed annual remuneration outcomes

There were no adjustments made to Executive KMP Fixed Annual Remuneration (FAR) levels for the 2021 period.

34

4.3 2021 STI outcomes

The following table outlines detailed STI outcomes for the MD&CEO.

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Measure Weighting Weighted Threshold Target Stretch Commentary
(at Target) Outcome
Health, Safety & Environment
Personal Safety (TRIFR) and Process Safety (CCPS Tier 1 & Tier 2) results
Balanced 10% 100% were below expectations this year. This was offset somewhat with very
Scorecard positive outcomes across both Environmental Incidents and Significant Event
Management. The overall outcome was assessed as being on-target for FY21.
Headline Financial
Headline NPAT (excluding individually material items) delivered a result
Group
Headline 40% 150% well above the stretch target. This result was assisted strongly by favourable
commodity price movements that helped to deliver 100% of maximum
NPAT
opportunity for this metric.
Adjusted Financial
The Adjusted NPAT outcome fell short of the budgeted threshold for this
Group
Adjusted 30% 0% metric. The major contributor to this result was the below budget result
delivered by the Waggaman ammonia plant in Louisiana. The final result
NPAT
was 0% of the maximum opportunity available for this metric.
Individual Objectives
This year’s objectives covered five key categories: 1) Greenhouse Gas
Balanced Emissions Reductions; 2) Explosives Growth Agenda; 3) Gas Strategy;
20% 40% 4) Manufacturing Excellence Implementation; and 5) Technology Strategy.
Scorecard
Performance against the balanced scorecard was assessed as delivering
8% of the maximum opportunity available for this metric.
Overall STI Outcome 52% % of Maximum Opportunity Awarded
Stretch Between Target & Stretch Target Between Threshold & Target Threshold Below Threshold
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The Board approved STI outcomes for all Executive KMP on 12 November 2021. The CEO received a target result for Health, Safety & Environment, a stretch result for Group Headline NPAT and no reward for Group Adjusted NPAT. Notwithstanding a strong performance against her personal strategic objectives, the Board exercised its discretion and moderated this component to reflect challenges during the year including the manufacturing performance at Waggaman.

Other Executive KMP also received a stretch result for their 40% Group Headline NPAT component. All except the President – Dyno Nobel Asia Pacific also received no reward for their Adjusted NPAT/EBIT component. The President – Dyno Nobel Asia Pacific received between threshold and target for his Adjusted EBIT component. The main negative factor on Group Adjusted NPAT was the sub optimal manufacturing performance of Waggaman during the financial year. Health, Safety & Environment outcomes were above target for the President – Dyno Nobel Asia Pacific, and between threshold and target for the President – Dyno Nobel Americas, and President – Global Manufacturing & HSE, and Individual Strategic Objectives delivered a range of outcomes that are reflected in the differentiated results in table 4.

Table 4 – Short term incentives awarded for the year ended 30 September 2021

Details of the vesting profile of the STI payments awarded for the year ended 30 September 2021 as remuneration to each Executive are set out below:

out below:
	Short term incentive for theyear ended 30 September 2021
	Cash STI $000 Minimum share holding allocation (A) $000 Included in remuneration $000 % earned of maximum opportunity % forfeited of maximum opportunity
Executives – Current
J Johns	1,279 – 1,279 52 48
N Stratford	648 – 648 60 40
G Hayne	400 134 534 66 34
B Lusk(1)	432 144 576 63 37
S Titze	351 117 468 60 40
Executives – Former
T Wall (2)	469 – 469 53 47
	Deferred Short term incentive for theyear ended 30 September 2021
Executives – Current
J Johns (3)	– – 23 100 –

(A) Under the terms of the 2021 STI, to the extent that Executives have not achieved their Minimum Shareholding Requirement the following applies: 50% of the MD&CEO’s award is delivered in cash and the remainder is delivered in restricted shares. For all other Executives, 75% of their award is delivered in cash and the remainder is delivered in restricted shares. Cash is generally paid and shares generally allocated around December.

(1) Dr Lusk’s STI payment was converted from US$ to A$ at the year-end rate 30 September 2021, being $1.3971.

(2) Mr Wall ceased as a KMP on 16 July 2021. The duties for this role were reassigned geographically to the President – Dyno Nobel Americas, and the President – Dyno Nobel Asia Pacific for the remainder of the financial year.

(3) Under the terms of the 2018 STI in which Ms Johns participated the total STI award was $2.09m, of this 50% was paid in cash in 2018. The remaining 50% was awarded in the form of performance rights of which 25% vested in fully paid ordinary shares on 30 November 2019 and the remaining 25% of the award vested in fully paid ordinary shares on 30 November 2020. In both cases, vesting was subject to Ms Johns meeting a service condition determined by the Board. The value of the rights was calculated at grant date using the Black Scholes option pricing model as disclosed in the footnotes under Table 7.

35

4.4 LTI 2018/21 outcomes

The performance period for the LTI 2018/21 ended on 30 September 2021. Following testing against the performance conditions, the Board determined that 15% of the performance rights granted under the plan will vest (with the remaining 85% to lapse). Details in relation to each of the performance conditions are set out below.

The number of rights vested and lapsed will be reported in the 2022 Remuneration Report.

TSR Condition

In relation to the TSR Condition, the Company’s relative TSR performance over the period did not achieve median percentile performance of the comparator group of S&P/ASX 100 companies. Accordingly, 0% of the performance rights granted subject to the TSR Condition will vest (out of a maximum of 40% of performance rights granted under the plan).

Long Term Value Metrics (formerly Strategic Initiatives) Condition

In relation to the Long Term Value Metrics Condition – the Board assessed this component against a balanced scorecard and determined the outcome partially achieved the performance goals across the entirety of the scorecard. The Board has determined that 50% of the performance rights granted subject to this condition will vest (out of a maximum of 30% of performance rights granted under the plan). Commentary on the performance against the scorecard is set out in the following table.

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Long Term Value Performance Goals Threshold Target Stretch Commentary
Metric Condition
Phosphate Hill and Gibson Island achieved target rates
Achievement of Manufacturing
Manufacturing Production Rates across six of production throughout 2021. Two other sites delivered
production rates of between threshold and target, and
Excellence major facilities within IPL’s
two sites operated below threshold levels, Waggaman
US and Australian operations.
and Cheyenne.
The goal for cumulative
productivity benefits was to
Profitable A stretch level of cumulative productivity benefits was
deliver a minimum aggregate
Growth delivered across the measurement period.
dollar saving over the three-
year performance period.
Revenues from Technologies: The stretch target for this metric was cumulative
cumulative growth in total improvement over the 2018 baseline which was achieved.
margin from sales of certain
technologies.
Net Promoter Score: The stretch objective for this measure was improvement over
Customer,
Practical improvement in NPS the 2018 baseline. Noticeable improvement was delivered
over the initial baseline. which equated to a target level of achievement.
Technology &
Innovation
Key Customer Retention:
the retention of IPL’s top
10 customers by size and/or Target objective of retention was achieved at a margin level
strategic importance, whilst no worse than the expected forecast.
not sacrificing margin above
forward outlook.
Having regard to the outcomes in relation to the input
Vesting for this and output measures, the Board determined that 50%
50%
component (%) of the performance goals were delivered against the
balanced scorecard.
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Stretch Between Target & Stretch Target Between Threshold & Target Threshold Below Threshold

ROE Growth Condition

In relation to the ROE Growth Condition, the Company’s performance over the period did not achieve a 7% Compound Annual Growth Rate. Accordingly, 0% of the performance rights granted subject to the ROE Growth Condition will vest (out of a maximum 30% of performance rights granted under the plan).

36

4.5 Performance related remuneration

Table 5 – Details of performance rights granted and vested in the year ended 30 September 2021 and the vesting profile of performance rights granted as remuneration.

LTI

Details of performance rights vested and forfeited set out in the table below relate to the performance rights granted under the LTI 2017/20 (performance period: 1 October 2017 to 30 September 2020) which, following testing in November 2020 resulted in the Board determining that 10% vested. In relation to the LTI 2018/21 (performance period: 1 October 2018 to 30 September 2021), following testing in November 2021, the Board determined that 15% of the performance rights will vest. This will be reported in the 2022 Remuneration Report.

STI

Details of performance rights in relation to short term incentive plans are set out in the table below.

						Financial
						year in
						which	Maximum
		Granted				grant	value of
		during 2021 as	Exercised	Vested		vested	outstanding
		remuneration (A)	in year	in year	Forfeited	or could	rights (B)
Key Management Personnel	Grant date	$000	$000	%	in year %	vest	$000
Executives – Current J Johns
Long term incentive rewards
LTI 2017/20	30January2018	–	156	10	90	2020	–
LTI 2018/21	5 February2019	–	–	–	–	2021	1,605
LTI 2019/22	13January2020	–	–	–	–	2022	1,755
LTI 2020/23	14January2021	2,386	–	–	–	2023	2,386
Short term incentive rewards
Performance period: 23 October 2017 to 30 November 2020	5 February 2019	–	311	100	–	2021	–
N Stratford
Long term incentive rewards
LTI 2017/20	30January2018	–	41	10	90	2020	–
LTI 2018/21	5 February2019	–	–	–	–	2021	443
LTI 2019/22	13January2020	–	–	–	–	2022	528
LTI 2020/23	14 December 2020	698	–	–	–	2023	698
G Hayne
Long term incentive rewards
LTI 2017/20	1 March 2018	–	27	10	90	2020	–
LTI 2018/21	5 February2019	–	–	–	–	2021	332
LTI 2019/22	13January2020	–	–	–	–	2022	382
LTI 2020/23	14 December 2020	520	–	–	–	2023	520
B Lusk
Long term incentive rewards
LTI 2020/23	14 December 2020	593	–	–	–	2023	593
S Titze
Long term incentive rewards
LTI 2018/21	5 February2019	–	–	–	–	2021	314
LTI 2019/22	13January2020	–	–	–	–	2022	371
LTI 2020/23	14 December 2020	504	–	–	–	2023	504
Executives – Former T Wall(1) Long term incentive rewards
LTI 2018/21	5 February2019	–	–	–	–	2021	399
LTI 2019/22	13January2020	–	–	–	32	2022	289
LTI 2020/23	14 December 2020	578	–	–	65	2023	201
Short term incentive rewards
Performanceperiod: 1 November 2018 to 30 September 2020	5 February2019	–	80	100	–	2020	–

(A) The value of rights granted in the year is the fair value of those rights calculated at grant date using a Black-Scholes option-pricing model. The value of these rights is included in the footnotes under Table 7. This amount is allocated to the remuneration of each Executive over the vesting period (that is, in the 2021, 2022 and 2023 financial years).

(B) The maximum value of outstanding rights is based on the fair value of the performance rights at the grant date. This may be different to the value of the rights in the event that they vest. The minimum value of rights yet to vest is zero, as the performance criteria may not be met.

(1) Mr Wall ceased as a KMP on 16 July 2021. Mr Wall’s balance of rights represents the performance rights pro-rated according to his exit date of 15 October 2021.

37

Modification of terms of equity-settled share-based payment transactions

No terms of equity-settled share-based payment transactions (including rights) granted to a KMP have been altered or modified by the issuing entity during the reporting period.

Table 6 – Movements in rights over equity instruments in the Company

The movement during the reporting period in the number of rights over shares in the Company, held directly, indirectly or beneficially, by each KMP, including their related parties, is as follows:

Key Management Personnel	Number of Rights
	Opening balance Granted as compensation(A) Vested(B) Forfeited(C) Closing balance
Executives – Current
J Johns Long term incentive rewards Short term incentive rewards	2,013,675 1,164,111 (67,415) (606,742) 2,503,629 134,115 – (134,115) – –
N Stratford (1) Long term incentive rewards	563,803 340,715 (17,629) (158,668) 728,221
G Hayne Long term incentive rewards	401,857 253,643 (11,690) (105,217) 538,593
B Lusk Long term incentive rewards	– 289,187 – – 289,187
S Titze Long term incentive rewards	273,375 246,072 – – 519,447
Executives – Former
T Wall(2) Long term incentive rewards Short term incentive rewards	328,264 282,036 – (240,135) 370,165 34,651 – (34,651) – –

(A) For the 2021 financial year, this represents the rights granted to Executives during the reporting period under the LTI 2020/23. The grant of rights under the LTI 2020/23 to Ms Johns was approved by shareholders at the Company’s 2020 Annual General Meeting.

(B) For the 2021 financial year, this represents the number of rights vested during the reporting period under short term incentive rewards and the LTI 2017/20. Each right entitled the participating Executive to acquire a fully paid ordinary share in IPL for zero consideration.

(C) For the 2021 financial year, this represents rights that were forfeited by Executives during the period under the LTI 2017/20. In addition, in the case of Mr Wall who ceased as a KMP on 16 July 2021, this represents a portion of his rights held under the LTI 2019/22 and LTI 2020/23.

(1) Mr Stratford will cease as a KMP during the 2022 financial year. His balance of rights will be forfeited on exiting the Company.

(2) Mr Wall ceased as a KMP on 16 July 2021. His balance of rights represents the performance rights pro-rated according to his exit date of 15 October 2021.

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4.6 Further details of Executive remuneration

Table 7 – Executive remuneration

Details of the remuneration for each Executive for the year ended 30 September 2021 in accordance with Accounting Standards are set out below:

Details of the remuneration for are set out below:	each Executive for the year ended 30 September 2021 in accordance with Accounting Standards	each Executive for the year ended 30 September 2021 in accordance with Accounting Standards
	Short-term benefts Post employment beneft Other long term benefts (C) Termination benefts Share-based payments
		Accounting values
	Salary & Fees Short term incentive & other bonuses (A)	Other short term benefts (B) Superannuation benefts Current period expense (D) Prior periods expense write- back (D) Total share- based payments Total
	Year $000 $000	$000 $000 $000 $000 $000 $000 $000 $000
Executive KMP – Current
J Johns Managing Director & CEO	2021 1,640 1,302 2020 1,640 175	43 – 25 1,723 (501) 1,222 4,232 11 – 17 – 1,458 (538) 920 2,763
N Stratford Chief Financial Offcer	2021 878 648 2020 890 –	1 22 16 503 (136) 367 1,932 312 21 24 – 451 (141) 310 1,557
G Hayne President, Dyno Nobel Asia Pacifc	2021 648 534 2020 649 –	1 22 13 372 (100) 272 1,490 – 21 32 – 297 (93) 204 906
B Lusk (1) President, Dyno Nobel Americas	2021 741 576 2020 192 –	67 – – 198 – 198 1,582 226 – – – – – – 418
S Titze President, Fertilisers	2021 628 468 2020 629 488	– 22 6 – 359 (75) 284 1,408 – 21 5 – 228 – 228 1,371
Executives – Former
T Wall (2) President, Global Manufacturing	2021 573 469 2020 724 58	1 17 7 183 248 (96) 152 1,402 – 21 6 – 275 – 275 1,084
F Micallef (3) Chief Financial Offcer	2020 686 –	– 16 16 468 202 (301) (99) 1,087
Total Executives	2021 5,108 3,997 2020 5,410 721	113 83 67 183 3,403 (908) 2,495 12,046 549 100 100 468 2,911 (1,073) 1,838 9,186

(A) For Ms Johns this includes STI rights granted on 5 February 2019 under the 2018 STI.

For Ms Johns this includes STI rights granted on 5 February 2019 under the 2018 STI.
	Fair value per share treated as rights at grant date
J Johns
Performance period: 23 October 2017 to 30 November 2020	$3.22

(B) Other short term benefits include rent and mortgage interest subsidies, relocation allowances and other allowances, where applicable.

• (C) Other long term benefits represent long service leave accrued during the reporting period.

(D) In accordance with accounting standards, remuneration includes the amortisation of the fair value at grant date of performance rights issued under the LTI Plans that are expected to vest, less any write-back on performance rights lapsed or expected to lapse as a result of actual or expected performance against non-market hurdles (“Option Accounting Value”). The value disclosed in the above Table 7 represents the portion of fair value allocated to this reporting period and is not indicative of the benefit, if any, that may be received by the Executive should the performance conditions with respect to the relevant long term incentive plan be satisfied.

			Fair value per share treated as rights at grant date
LTI	2017/20	– TSR	$1.98
LTI	2017/20	– LongTerm Value Metrics(formerly Strategic Initiatives)	$3.42
LTI	2017/20	– ROE Growth	$3.42
LTI	2018/21	– TSR	$1.82
LTI	2018/21	– LongTerm Value Metrics(formerly Strategic Initiatives)	$3.13
LTI	2018/21	– ROE Growth	$3.13
LTI	2019/22	– TSR	$1.58
LTI	2019/22	– LongTerm Value Metrics(formerly Strategic Initiatives)	$2.99
LTI	2019/22	– Absolute ROIC	$2.99
LTI	2020/23	– TSR	$1.69
LTI	2020/23	– LongTerm Value Metrics	$2.29
LTI	2020/23	– Absolute ROIC	$2.29

(1) Dr Lusk became a KMP on 1 July 2020 and the disclosures for the 2020 financial year are from that date and do not represent a full financial year. Fixed remuneration payments were converted from US$ to A$ at the average rate for 1 July 2020 to 30 September 2020, being $1.3982, and 1 October 2020 to 30 September 2021, being $1.3296.

(2) Mr Wall ceased being a KMP on 16 July 2021. Disclosure for the 2021 year is from 1 October 2020 to 16 July 2021. Termination benefits accrued for Mr Wall in the 2021 financial year include a separation payment of $183,314 in accordance with his contract of employment.

(3) Mr Micallef ceased being a KMP on 30 June 2020. Disclosure for the 2020 year is from 1 October 2019 to 30 June 2020. Termination benefits accrued for Mr Micallef in the 2020 financial year included a separation payment of $467,657 in accordance with his contract of employment.

39

Table 8 – Actual Pay

The table below provides a summary of actual remuneration paid to the Executives in the 2021 financial year. The accounting values of the Executives’ remuneration reported in accordance with the Accounting Standards may not always reflect what the Executives have actually received, particularly due to the valuation of share based payments. The table below seeks to clarify this by setting out the actual remuneration that the Executives have been paid and rights that vested over the last twelve months.

Executive remuneration details prepared in accordance with statutory requirements and the Accounting Standards are presented in Table 7 of this report.

			Short term
			incentive	Other		Other
		Salary & Fees	& other bonuses (A)	short term benefts (B)	Superannuation benefts	long term benefts (C)	Termination benefts	Total
	Year	$000	$000	$000	$000	$000	$000	$000
Executive KMP – Current
J Johns Managing Director & CEO	2021 2020	1,640 1,640	311 –	28 11	– –	156 –	– –	2,135 1,651
N Stratford (1) Chief Financial Offcer	2021 2020	878 890	– –	1 312	22 21	41 –	– –	942 1,223
G Hayne President, Dyno Nobel Asia Pacifc	2021 2020	648 649	– 62	1 –	22 21	27 121	– –	698 853
B Lusk (2) President, Dyno Nobel Americas	2021 2020	741 192	42 –	67 226	– –	– –	– –	850 418
S Titze President, Incitec Pivot Fertilisers	2021 2020	628 629	– 488	- –	22 21	– –	– –	650 1,138
Executives – Former
T Wall(3)	2021	573	80	1	17	–	–	671
President, Global Manufacturing	2020	724	–	–	21	–	–	745
F Micallef(4)	2020	686	–	–	16	–	–	702
Chief Financial Offcer
Total Executives	2021	5,108	433	98	83	224	–	5,946
	2020	5,410	550	549	100	121	–	6,730

(A) For Mr Titze, this represents a special incentive paid during the 2020 financial year. For Mr Hayne, this represents a special discretionary bonus payment made in December 2019. For Dr Lusk, this represents a short-term incentive relating to the 2020 financial year prior to him becoming a KMP. For Ms Johns and Mr Wall, this represents rights that vested under short-term incentive awards in the 2021 financial year.

(B) Other short term benefits include rent and mortgage interest subsidies, relocation allowances and other allowances, where applicable.

(C) Other long term benefits include long service leave paid on cessation of employment and from 2021 financial year, the value of shares that vested under the Group’s LTI plans. Long Term Incentives include all plan-related instruments that vested during the year. The theoretical cash price is based on the IPL share price on the day that shares were purchased. For Mr Hayne in prior year, this includes a cash payment relating to long term incentive plan for the periods prior to him becoming a KMP.

(1) Mr Stratford spent the first 9 months of the 2020 performance year as President, Dyno Nobel Americas (a US-based role) prior to being appointed to the CFO role for the final 3 months of the 2020 financial year.

(2) Dr Lusk became a KMP on 1 July 2020 and the disclosures for the 2020 financial year are from that date and do not represent a full financial year.

(3) Mr Wall ceased as a KMP on 16 July 2021 and the disclosures for the 2021 financial year are up until that date and do not represent a full financial year.

(4) Mr Micallef ceased as a KMP on 30 June 2020 and the disclosures for the 2020 financial year are up until that date and do not represent a full financial year.

40

5. Overview of Remuneration Changes for the 2022 Financial Year

Some important changes have been made to the STI and LTI programs for the 2022 financial year. The changes reflect strategic business priorities over the coming years. Emphasis will be on aligning to the new manufacturing regional management model being initiated and increasing focus on ESG, particularly the reduction of greenhouse gas emissions.

Fixed salary increases for some Executive KMP may result from the move to the regional manufacturing model. This would be as recognition of additional complexity that will impact some roles under this new structure.

The STI has an adjusted Manufacturing Reliability metric in response to the 2021 manufacturing results and the change to a regionally led manufacturing model. The MD&CEO as well as the Regional Presidents in North America and Asia Pacific will share responsibility for improving Manufacturing Reliability under this metric.

Targeted climate change objectives, previously incorporated within the Strategic Objectives section of STI scorecards, will now be incorporated under a separate Environmental, Social & Governance (ESG) category that will extend to all Executive KMP. All Executive KMP will have 10% allocated to this new ESG metric. The CEO’s scorecard will include reinvigoration of the leadership, objectives and culture for IPL, particularly as COVID restrictions are expected to reduce. The new weightings for each Executive KMP for the 2022 financial year are outlined in the following table:

following table:
	Financial Non-fnancial/Business/Strategic
	Group NPAT Group Adjusted NPAT Business Unit Adjusted EBIT Manufacturing Reliability Safety ESG Strategic Outcomes
Managing Director & CEO	30% 20% 15% 10% 10% 15%
Chief Financial Offcer	30% 40% 10% 10% 10%
President, Dyno Nobel Asia Pacifc	30% 30% 10% 10% 10% 10%
President, Dyno Nobel Americas	30% 20% 20% 10% 10% 10%
President, Incitec Pivot Fertilisers	30% 30% 10% 10% 10% 10%

With the increasing practical and technological challenges to reduce greenhouse gas emissions both in the short term and longer term, the LTI 2021/24 will also have a new 10% ESG component. This component will target IPL achieving its 2025 and 2030 targets on climate change and focus on investing in new technologies to create other meaningful opportunities for IPL to decrease greenhouse gas emissions in the longer term. Introducing the new 10% ESG component results in a reduction in the ROIC component from 40% to 35% and Long Term Value Metric from 20% to 15%.

The Board will continue to monitor and consider any trends that may become apparent with respect to remuneration (both domestically and internationally) and look to incorporate changes that may contribute to the efficacy of the Company’s overall remuneration structure.

6. Non-executive Director Remuneration

IPL’s policy is to:

• » remunerate Non-executive Directors by way of fees and payments which may be in the form of cash and superannuation benefits; and

• » set the level of Non-executive Directors’ fees and payments to be consistent with the market and to enable the IPL Group to attract and retain directors of an appropriate calibre.

Non-executive Directors are not remunerated by way of options, shares, performance rights, bonuses nor by incentive-based payments.

Non-executive Directors receive a fee for being a director of the Board and Non-executive Directors, other than the Chairman of the Board, receive additional fees for either chairing or being a member of a Board Committee. The level of fees paid to a Non-executive Director is determined by the Board after an annual review and reflects a Non-executive Director’s time commitments and responsibilities.

For the 2021 financial year, there were no increases to Non-executive Directors’ fees. Fees paid to Non-executive Directors amounted to $1,549,000 which was within the $2,000,000 maximum aggregate fee pool approved by shareholders at the 2008 Annual General Meeting. For the 2022 financial year, the Board has determined that there will be no increase in Non-executive Director fees, which have remained unchanged since 1 October 2014.

The table below sets out the Board and Committee fees as at 30 September 2021:

Board Fees	Chairperson $532,500 Members $177,500
Committee Fees	Audit and Risk Management Committee Chairperson $47,200 Members $23,600
	Remuneration Committee Chairperson $35,400 Members $17,700
	HSEC Committee Chairperson $35,400 Members $17,700
	Nominations Committee Chairperson N/A Members $8,250

41

Table 9 – Non-executive Directors’ remuneration

Details of the Non-executive Directors’ remuneration for the financial year ended 30 September 2021 are set out in the following table:

	Board and Committee Fees Cash allowances and other short term benefts (A) Post-employment benefts Other long term benefts
	Fees Superannuation benefts Total
	Year $000 $000 $000 $000 $000
Non-executive Directors – Current
B Kruger, Chairman 2021 511 – 22 – 533 2020 512 – 21 – 533
G Biltz (1) 2021 162 – – – 162
B Brook 2021 245 – 6 – 251 2020 240 – 11 – 251
T Dwyer (2) 2021 73 – 7 – 80
X Liu (3) 2021 227 – 5 – 232 2020 176 – 8 – 184
G Robinson(4) 2021 217 – 21 – 238 2020 151 – 14 – 165
Non-executive Directors – Former
R McGrath (5) 2021 53 – – – 53 2020 239 – 5 – 244
J Breunig (6),(7) 2020 81 15 – – 96
K Fagg AO(8) 2020 47 – 4 – 51
Total Non-executive Directors 2021 1,488 – 61 – 1,549 2020 1,446 15 63 – 1,524

(A) Cash allowances and other short term benefits include travel allowances.

(1) Mr Biltz was appointed as an Independent, Non-executive Director with effect from 1 December 2020. The disclosures for the 2021 financial year do not represent a full financial year.

(2) Ms Dwyer was appointed as an Independent, Non-executive Director with effect from 20 May 2021. The disclosures for the 2021 financial year do not represent a full financial year.

(3) Dr Liu was appointed as an Independent, Non-executive Director with effect from 25 November 2019. The disclosures for the 2020 financial year do not represent a full financial year.

(4) Mr Robinson was appointed as an Independent, Non-executive Director with effect from 25 November 2019. The disclosures for the 2020 financial year do not represent a full financial year.

(5) Ms McGrath retired from the Board as an Independent, Non-executive Director on 18 December 2020.

(6) Mr Breunig resides in the United States and received a travel allowance of $5,000 per trip to Australia to attend Board and/or Committee meetings.

(7) Mr Breunig resigned from the Board as an Independent, Non-executive Director on 28 February 2020.

(8) Ms Fagg retired from the Board as an Independent, Non-executive Director on 20 December 2019.

7. Shareholdings in IPL

The Minimum Shareholding Requirement for Non-executive Directors is an initiative to better align Director and Shareholder interests and requires each Director to hold the equivalent of 100% of their base Board fee in IPL shares and/or rights to shares (that have been fully sacrificed for under IPL’s Non-executive Director Fee Sacrifice Plan) at the completion of 5-years of service. As at 30 September 2021, all Directors (excluding those joining the IPL Board during the current financial year) were required to hold 20% of their base Board fee per annum in IPL shares and/or rights to shares. All Directors satisfied this requirement.

Table 10 – Movements in rights in the Company

IPL’s Non-executive Director Fee Sacrifice Plan (the Plan) commenced in 2019. Three six-monthly tranches of rights issued under the Plan has so far vested into shares. The next tranche of rights are scheduled to vest in November 2021. These rights, as well as those that subsequently convert to shares, combine to form part of the Non-executive Director’s Minimum Shareholding Requirement (MSR) that is outlined in further detail in the next section of the report.

The movement during the reporting period in the number of rights for each Non-executive Director, including their related parties, is set out in the table below:

in the table below:
Number of Rights (A)	$’000
Opening balance Rights acquired Vested (B) Forfeited Closing balance Non-executive Directors – Current B Kruger 26,062 44,264 (51,401) – 18,925 G Biltz – – – – – B Brook 17,374 23,201 (34,267) – 6,308 T Dwyer – – – – – X Liu 7,239 17,908 (15,685) – 9,462 G Robinson – – – – –	Maximum value of outstanding rights (C)
	53
	–
	18
	–
	27
	–

(A) Includes movements of rights acquired under the Plan.

(B) For the 2021 financial year, this represents the number of rights vested during the reporting period under the Plan.

(C) Value of outstanding rights based on 20 Day VWAP – 4 March 2021 to 31 March 2021.

42

Table 11 – Movements in shares in the Company

The movement during the reporting period in the number of shares in the Company held directly, indirectly or beneficially, by each KMP, including their related parties, is set out in the table below:

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Number of Shares [ (A)]
Opening balance Shares acquired Shares disposed [ (B)] Closing balance [ (C)]
Non-executive Directors – Current
B Kruger 42,017 51,401 – 93,418
G Biltz – 100,000 – 100,000
B Brook 32,313 34,267 – 66,580
T Dwyer – – – –
X Liu 43,000 15,685 – 58,685
G Robinson 67,020 – – 67,020
Non-executive Directors – Former
R McGrath 40,008 – – 40,008
Executive Director – Current
J Johns 617,995 201,530 – 819,525
Executives – Current
N Stratford [ (1)] 47,079 17,629 (6,376) 58,332
G Hayne 23,633 11,690 – 35,323
B Lusk – – – –
S Titze – – – –
Executives – Former
T Wall [ (2)] 44,651 34,651 – 79,302
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(A) Includes fully paid ordinary shares and shares acquired under IPL’s incentive plans. Details of these plans are set out in note 18, Share-based payments.

(B) Shares disposed include withholding tax payments.

(C) Where a director or an Executive has ceased to be a KMP during the reporting year, the balance stated in this column represents the number of shares held as at the date the Director or Executive ceased to be a KMP.

(1) Mr Stratford had 6,376 shares sold on his behalf to fulfill United States withholding tax obligations associated with his 17,629 shares acquired under IPL’s Long Term Incentive Plan.

(2) Mr Wall ceased as a KMP on 16 July 2021.

8. Other KMP Disclosures

Loans to KMP

In the year ended 30 September 2021, there were no loans to key management personnel and their related parties (2020: nil).

Other KMP transactions

In the year ended 30 September 2021, there were no transactions entered into during the year with key management personnel (including their related parties).

43

Deloitte Touche Tohmatsu A.B.N. 74 490 121 060

477 Collins Street Melbourne VIC 3000 Tel: +61 3 9671 7000 www.deloitte.com.au

The Board of Directors Incitec Pivot Limited Level 8, 28 Freshwater Place Southbank Victoria 3006

15 November 2021

Dear Board Members

Incitec Pivot Limited

In accordance with section 307C of the Corporations Act 2001 , I am pleased to provide the following declaration of independence to the directors of Incitec Pivot Limited.

As lead audit partner for the audit of the financial statements of Incitec Pivot Limited for the financial year ended 30 September 2021, I declare that to the best of my knowledge and belief, there have been no contraventions of:

(i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and

• (ii) any applicable code of professional conduct in relation to the audit.

Yours sincerely

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DELOITTE TOUCHE TOHMATSU

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A T Richards Partner Chartered Accountants

Liability limited by a scheme approved under Professional Standards Legislation Member of Deloitte Asia Pacific and the Deloitte organisation

44

FINANCIAL REPORT CONTENTS

• 46 Introduction

• 46 Content and Structure of the Financial Report

• 47 Consolidated Statement of Profit or Loss and Other Comprehensive Income

• 48 Consolidated Statement of Financial Position

• 49 Consolidated Statement of Cash Flows

• 50 Consolidated Statement of Changes in Equity

• 51 Notes to the Consolidated Financial Statements

• 83

• 84

• Directors’ Declaration on the Consolidated Financial Statements set out on pages 46 to 82 Independent Auditor’s Report

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45
Incitec Pivot Limited
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Introduction

This is the consolidated financial report of Incitec Pivot Limited (the Company , IPL , or Incitec Pivot ) a company domiciled in Australia, and its subsidiaries including its interests in joint ventures and associates (collectively referred to as the Group ) for the financial year ended 30 September 2021.

Content and Structure of the Financial Report

The notes to the financial statements and the related accounting policies are grouped into the following distinct sections in the 2021 financial report. The accounting policies have been consistently applied to all years presented, unless otherwise stated.

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Section Description
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Financial performance	Provides detail on the Group’s Consolidated Statement of Proft or Loss and Other Comprehensive Income and
	Consolidated Statement of Financial Position that are most relevant in forming an understanding of the Group’s
	fnancial performance for the year.
Shareholder returns	Provides information on the performance of the Group in generating shareholder returns.
Capital structure	Provides information about the Group’s capital and funding structures.
Capital investment	Provides information on the Group’s investment in tangible and intangible assets, and the Group’s future capital
	commitments.
Risk management	Provides information about the Group’s risk exposures, risk management practices, provisions and contingent
	liabilities.
Other	Provides information on items that require disclosure to comply with Australian Accounting Standards and the
	requirements under the Corporations Act. 2001.

Information is included in the notes to the financial report only to the extent it is considered material and relevant to the understanding of the financial report. A disclosure is considered material and relevant if, for example:

• » the dollar amount is significant in size (quantitative factor)

• » the item is significant by nature (qualitative factor)

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• » the Group’s result cannot be understood without the specific disclosure (qualitative factor)

• » it relates to an aspect of the Group’s operations that is important to its future performance.

46

Consolidated Statement of Profit or Loss and Other Comprehensive Income

For the year ended 30 September 2021

For the year ended 30 September 2021
	Notes	2021 $mill	2020 $mill
Revenue	(2)	4,348.5	3,942.2
Financial and other income	(2)	33.4	43.4
Share of proft of equity accounted investments	(14)	41.9	32.3
Operating expenses
Changes in inventories of fnished goods and work in progress		104.2	(121.3)
Raw materials and consumables used and fnished goods purchased for resale		(2,158.5)	(1,707.4)
Employee expenses		(701.5)	(723.8)
Depreciation and amortisation	(2)	(368.5)	(356.0)
Financial expenses	(2)	(114.7)	(139.6)
Purchased services		(198.6)	(200.0)
Repairs and maintenance		(181.5)	(181.2)
Outgoing freight		(286.6)	(287.6)
Lease payments – operating leases		(25.9)	(26.7)
Asset impairment write-downs and site exit costs		(270.5)	(57.3)
Other expenses		(61.5)	(66.1)
Proft before income tax		160.2	150.9
Income tax expense	(3)	(11.1)	(27.5)
Proft for the year attributable to members of Incitec Pivot Limited		149.1	123.4
Other comprehensive income, net of income tax
Items that will not be reclassified subsequently to profit or loss
Actuarial gain/(loss) on defned beneft plans	(20)	30.8	(9.0)
Income tax relating to items that will not be reclassifed subsequently to proft or loss		(8.3)	2.5
Items that may be reclassified subsequently to profit or loss		22.5	(6.5)
Fair value loss on cash fow hedges	(17)	(20.8)	(4.3)
Cash fow hedge loss/(gain) transferred to proft or loss	(17)	22.4	(19.0)
Exchange differences on translating foreign operations		(22.9)	(354.5)
Net gain on hedge of net investment	(17)	25.3	125.5
Income tax relating to items that may be reclassifed subsequently to proft or loss		6.9	49.3
		10.9	(203.0)
Other comprehensive income for the year, net of income tax		33.4	(209.5)
Total comprehensive income for the year attributable to members of Incitec Pivot Limited		182.5	(86.1)
Earnings per share
Basic (cents per share)	(5)	7.7	7.1
Diluted (cents per share)	(5)	7.7	7.1

47

Consolidated Statement of Financial Position

As at 30 September 2021

Consolidated Statement of Financial As at 30 September 2021	Position
	Notes	2021 $mill	2020 $mill
Current assets
Cash and cash equivalents	(8)	651.8	554.6
Trade and other receivables	(4)	487.6	373.9
Inventories	(4)	577.7	474.4
Other assets		46.9	47.2
Other fnancial assets	(17)	55.4	79.8
Total current assets		1,819.4	1,529.9
Non-current assets
Trade and other receivables	(4)	29.4	26.9
Other assets		27.1	25.8
Other fnancial assets	(17)	33.6	56.1
Equity accounted investments	(14)	324.8	326.3
Property, plant and equipment	(9)	3,928.9	4,071.7
Right-of-use lease assets	(10)	214.5	221.1
Intangible assets	(11)	3,000.9	3,019.7
Deferred tax assets	(3)	12.0	13.5
Total non-current assets		7,571.2	7,761.1
Total assets		9,390.6	9,291.0
Current liabilities
Trade and other payables	(4)	1,229.3	1,049.4
Lease liabilities	(10)	45.0	41.5
Interest bearing liabilities	(8)	18.8	21.2
Other fnancial liabilities	(17)	47.2	93.6
Provisions	(16)	101.3	102.3
Current tax liabilities		86.8	21.5
Total current liabilities		1,528.4	1,329.5
Non-current liabilities
Trade and other payables	(4)	21.0	16.2
Lease liabilities	(10)	197.5	206.2
Interest bearing liabilities	(8)	1,650.0	1,849.1
Other fnancial liabilities	(17)	46.3	65.3
Provisions	(16)	209.0	125.5
Deferred tax liabilities	(3)	340.2	429.0
Retirement beneft obligation	(20)	29.6	66.9
Total non-current liabilities		2,493.6	2,758.2
Total liabilities		4,022.0	4,087.7
Net assets		5,368.6	5,203.3
Equity
Issued capital	(7)	3,806.2	3,806.2
Reserves		(208.7)	(221.8)
Retained earnings		1,771.1	1,618.9
Total equity		5,368.6	5,203.3

48

Consolidated Statement of Cash Flows

For the year ended 30 September 2021

Consolidated Statement of Cash Flows For the year ended 30 September 2021
	Notes	2021 $mill	2020 $mill
		Infows (Outfows)	Infows (Outfows)
Cash fows from operating activities
Proft after tax for the year		149.1	123.4
Adjusted for non-cash items
Net fnance cost		112.8	135.7
Depreciation and amortisation	(2)	368.5	356.0
Write-down of property, plant and equipment	(9)	213.1	16.3
Impairment of intangible assets	(11)	–	41.0
Share of proft of equity accounted investments	(14)	(41.9)	(32.3)
Net gain on sale of property, plant and equipment	(2)	(0.3)	(1.6)
Non-cash share-based payment transactions	(18)	3.2	2.4
Income tax expense	(3)	11.1	27.5
Changes in assets and liabilities
Increase in receivables and other operating assets		(127.4)	(47.1)
(Increase)/decrease in inventories		(100.6)	112.3
Increase/(decrease) in payables, provisions and other operating liabilities		159.8	(70.2)
Adjusted for cash items		747.4	663.4
Dividends received	(14)	44.6	30.9
Interest received		1.9	3.9
Interest paid		(110.6)	(139.4)
Income tax paid		(33.1)	(13.7)
Net cash fows from operating activities		650.2	545.1
Cash fows from investing activities
Payments for property, plant and equipment and intangibles		(355.0)	(278.4)
Proceeds from sale of property, plant and equipment		5.7	7.4
Payments for acquisition of subsidiaries, non-controlling interest and equity investments		(8.5)	(23.4)
Payments towards investment in joint arrangement		(4.4)	(9.8)
Loan payments from equity accounted investees		19.9	–
Payments from settlement of net investment hedge derivatives		(0.1)	(75.2)
Net cash fows from investing activities		(342.4)	(379.4)
Cash fows from fnancing activities
Repayment of borrowings	(8)	(157.9)	(1,487.6)
Proceeds from borrowings	(8)	–	723.0
Proceeds from equity raising		–	645.5
Dividends paid to members of Incitec Pivot Limited	(6)	(19.4)	(30.7)
Lease liability payments		(41.4)	(41.9)
Realised market value gain on derivatives		8.5	10.3
Purchased shares for IPL employees		(1.0)	(1.3)
Net cash fows from fnancing activities		(211.2)	(182.7)
Net increase/(decrease) in cash and cash equivalents held		96.6	(17.0)
Cash and cash equivalents at the beginning of the year		554.6	576.4
Effect of exchange rate fuctuations on cash and cash equivalents held		0.6	(4.8)
Cash and cash equivalents at the end of the year	(8)	651.8	554.6

49

Consolidated Statement of Changes in Equity

For the year ended 30 September 2021

			Cash		Foreign
			fow	Share-based	currency	Fair
		Issued	hedging	payments	translation	value	Retained	Total
		capital	reserve	reserve	reserve	reserve	earnings	equity
	Notes	$mill	$mill	$mill	$mill	$mill	$mill	$mill
Balance at 1 October 2019		3,136.8	(48.3)	26.0	22.1	(19.7)	1,570.9	4,687.8
Adoption of AASB 16 Leases		–	–	–	–	–	(14.3)	(14.3)
Proft for the year		–	–	–	–	–	123.4	123.4
Total other comprehensive income for the year		–	(16.0)	–	(187.0)	–	(6.5)	(209.5)
Dividends paid	(6)	–	–	–	–	–	(54.6)	(54.6)
Shares issued during the year		669.4	–	–	–	–	–	669.4
Purchased shares for IPL employees		–	–	(1.3)	–	–	–	(1.3)
Share-based payment transactions	(18)	–	–	2.4	–	–	–	2.4
Balance at 30 September 2020		3,806.2	(64.3)	27.1	(164.9)	(19.7)	1,618.9	5,203.3
Balance at 1 October 2020		3,806.2	(64.3)	27.1	(164.9)	(19.7)	1,618.9	5,203.3
Proft for the year		–	–	–	–	–	149.1	149.1
Total other comprehensive income for the year		–	0.9	–	10.0	–	22.5	33.4
Dividends paid	(6)	–	–	–	–	–	(19.4)	(19.4)
Purchased shares for IPL employees		–	–	(1.0)	–	–	–	(1.0)
Share-based payment transactions	(18)	–	–	3.2	–	–	–	3.2
Balance at 30 September 2021		3,806.2	(63.4)	29.3	(154.9)	(19.7)	1,771.1	5,368.6

Cash flow hedging reserve

This reserve comprises the cumulative net change in the fair value of the effective portion of cash flow hedging instruments related to hedged transactions that have not yet occurred.

Share-based payments reserve

This reserve comprises the fair value of rights recognised as an employee expense under the terms of the 2018/21, 2019/22 and 2020/23 Long Term Incentive Plans.

Foreign currency translation reserve

Exchange differences arising on translation of foreign controlled operations are taken to the foreign currency translation reserve. The relevant portion of the reserve is recognised in the profit or loss when the foreign operation is disposed of.

The foreign currency translation reserve is also used to record gains and losses on hedges of net investments in foreign operations.

Fair value reserve

This reserve represents the cumulative net change in the fair value of equity instruments. The annual net change in the fair value of investments in equity securities (including both realised and unrealised gains and losses) is recognised in other comprehensive income.

50

Notes to the Consolidated Financial Statements

For the year ended 30 September 2021

Basis of preparation	52	52
Financial performance 1 Segment report	53
2 Revenue and expenses	55
3 Taxation	56
4 Trade and other assets and liabilities	57
Shareholder returns 5 Earnings per share	58
6 Dividends	58
Capital structure 7 Capital management	59
8 Net debt	60
Capital investment
9 Property, plant and equipment	62
10 Leases	63
11 Intangibles	64
12 Impairment of goodwill and non-current assets	65
13 Commitments	67
14 Equity accounted investments	67
15 Investments in subsidiaries, joint arrangements and associates	68
Risk management 16 Provisions and contingencies	70
17 Financial risk management	71
Other
18 Share-based payments	79
19 Key management personnel disclosures	79
20 Retirement beneft obligation	80
21 Deed of cross guarantee	81
22 Parent entity disclosure	81
23 Auditor’s remuneration	82
24 Events subsequent to reporting date	82

51

Notes to the Consolidated Financial Statements: Basis of preparation For the year ended 30 September 2021

Basis of preparation and consolidation

The consolidated financial statements of the Group have been prepared under the historical cost convention, except for certain financial instruments that have been measured at fair value.

The financial results and financial position of the Group are expressed in Australian dollars, which is the functional currency of the Company and the presentation currency for the consolidated financial statements. Where applicable, comparative disclosures have been reclassified for consistency with the current period.

The consolidated financial statements were authorised for issue by the directors on 15 November 2021.

Subsidiaries

Subsidiaries are entities that are controlled by the Group. The financial results and financial position of the subsidiaries are included in the consolidated financial statements from the date control commences until the date control ceases.

A list of the Group’s subsidiaries is included in note 15.

Joint arrangements and associates

A joint venture is an arrangement where the parties have rights to the net assets of the venture.

A joint operation is an arrangement where the parties each have rights to the assets and liabilities relating to the arrangement.

Associates are those entities in respect of which the Group has significant influence, but not control, over the financial and operating policies of the entities.

Investments in joint ventures and associates are accounted for using the equity method. They are initially recognised at cost, and subsequent to initial recognition, the consolidated financial statements include the Group’s share of the profit or loss and other comprehensive income of the investees.

The interests in joint operations are brought to account recognising the Group’s share of jointly controlled assets; liabilities; expenses; and income from the joint operation.

A list of the Group’s joint arrangements and associates is included in note 15.

Statement of compliance

The consolidated financial statements are general purpose financial statements which have been prepared in accordance with Australian Accounting Standards (including Australian Interpretations) and the Corporations Act 2001. The consolidated financial statements of the Group comply with International Financial Reporting Standards ( IFRS ) and interpretations. The Company is a for-profit entity.

The resulting accounting estimates will, by definition, seldom equal the subsequent related actual result. The estimates and judgments that have a significant risk of causing a material adjustment to the carrying amounts of the assets and liabilities within the next financial year are set out in the notes.

Rounding of amounts

The Company is of a kind referred to in ASIC Legislative Instrument, ASIC Corporations (Rounding in Financial/ Directors’ Reports) Instrument 2016/191, issued by the Australian Securities and Investments Commission dated 24 March 2016 and, in accordance with that Legislative Instrument, the amounts shown in this report and in the financial statements have been rounded, except where otherwise stated, to the nearest one hundred thousand dollars.

Impact of COVID-19 pandemic

The Group continues to actively manage the risks arising from COVID-19 on the health and safety of its people and the business continuity of the Group’s operations. The Group’s operations are in industries that have been deemed as providing ‘essential services’ by governments and continue to run in line with the required safety and health guidelines. IPL has also implemented a financial Response Plan that commenced in FY20 to deliver sustained cost savings from business efficiencies and improvement of free cash flow by FY22. The extent of the future impact of COVID-19 on the Group’s operational and financial performance will depend on certain developments, including the containment strategies imposed by governments and duration of the COVID-19 pandemic, and the subsequent impact of these strategies on the operations of customers, employees and vendors.

Accounting standards issued

The Group adopted all amendments to Standards and Interpretations issued by the Australian Accounting Standards Board ( AASB ) that are relevant to its operations and effective for the current year. The adoption of these revised Standards and Interpretations did not have a material impact on the Group’s result.

Certain new accounting Standards and Interpretations have been issued that are not mandatory for the 30 September 2021 reporting period and have not been early adopted by the Group. These Standards and Interpretations are not expected to have a material impact on the Group in the current or future reporting periods or on foreseeable future transactions.

Key estimates and judgments

Key accounting estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectation of future events that may have a financial impact on the Group and that are believed to be reasonable under the circumstances.

52

Notes to the Consolidated Financial Statements: Financial performance For the year ended 30 September 2021

1. Segment report

The Group operates a number of strategic divisions that offer different products and services and operate in different markets. For reporting purposes, these divisions are known as reportable segments. The results of each segment are reviewed monthly by the executive management team (the chief operating decision makers) to assess performance and make decisions about the allocation of resources.

Description of reportable segments

Asia Pacific

Fertilisers Asia Pacific ( Fertilisers APAC ): manufactures and sells fertilisers in Eastern Australia and the export market. It also manufactures, imports and sells industrial chemicals to the agricultural sector and other specialist industries.

Americas

Dyno Nobel Americas ( DNA ): manufactures and sells industrial explosives and related products and services to the mining, quarrying and construction industries in the Americas (Canada, Mexico and Chile) and initiating systems to businesses in Australia, Turkey and South Africa. It also manufactures and sells industrial chemicals to the agricultural sector and other specialist industries.

Corporate

Corporate costs include all head office expenses that cannot be directly or reasonably attributed to the operation of any of the Group’s businesses.

Group Eliminations ( Group Elim ): represent elimination of sales and profit in stock arising from intersegment sales.

Dyno Nobel Asia Pacific ( DNAP ): manufactures and sells industrial explosives and related products and services to the mining industry in the Asia Pacific region and Turkey.

Asia Pacific Eliminations ( APAC Elim ): represent elimination of sales and profit in stock arising from Fertilisers APAC sales to DNAP.

Reportable segments – financial information

30 September 2021 Notes	Asia Pacifc	Americas DNA $mill Group Elim $mill Corporate(i) $mill Consolidated Group $mill
	Fertilisers APAC $mill DNAP $mill APAC Elim $mill Total $mill
Revenue from external customers (2) Share of profts of equity accounted investments (14) EBITDA(ii) Depreciation and amortisation (2)	1,894.6 937.8 (25.8) 2,806.6 – 14.5 – 14.5 382.1 219.5 – 601.6 (113.7) (79.3) – (193.0)	1,588.7 (46.8) – 4,348.5 27.4 – – 41.9 359.9 (2.1) (24.5) 934.9 (170.0) 0.3 (5.8) (368.5)
EBIT(iii) Net interest expense Income tax expense (excluding IMIs)	268.4 140.2 – 408.6	189.9 (1.8) (30.3) 566.4 (112.8) (95.0)
Proft after tax(iv) Individually material items (net of tax) (2)		358.6 (209.5)
Proft attributable to members of IPL		149.1
Segment assets Segment liabilities	1,558.4 2,588.1 – 4,146.5 (1,059.9) (236.4) – (1,296.3)	4,450.4 – 781.7 9,378.6 (669.0) – (1,716.5) (3,681.8)
Net segment assets(v) Deferred tax balances (3)	498.5 2,351.7 – 2,850.2	3,781.4 – (934.8) 5,696.8 (328.2)
Net assets		5,368.6

(i) Corporate assets and liabilities include the Group’s interest bearing liabilities and derivative assets and liabilities.

(ii) Earnings Before Interest, related income tax expense, depreciation and amortisation and individually material items.

(iii) Earnings Before Interest, related income tax expense and individually material items.

(iv) Profit after tax (excluding individually material items).

(v) Net segment assets exclude deferred tax balances.

53

Notes to the Consolidated Financial Statements: Financial performance For the year ended 30 September 2021

30 September 2020 Notes	Asia Pacifc	Americas DNA $mill Group Elim $mill Corporate(i) $mill Consolidated Group $mill
	Fertilisers APAC $mill DNAP $mill APAC Elim $mill Total $mill
Revenue from external customers (2) Share of profts of equity accounted investments (14) EBITDA(ii) Depreciation and amortisation (2)	1,502.0 999.2 (18.5) 2,482.7 – 11.8 – 11.8 129.0 230.7 – 359.7 (102.8) (81.4) – (184.2)	1,506.5 (47.0) – 3,942.2 20.5 – – 32.3 396.3 (0.3) (25.2) 730.5 (165.5) 0.2 (6.5) (356.0)
EBIT(iii) Net interest expense Income tax expense (excluding IMIs)	26.2 149.3 – 175.5	230.8 (0.1) (31.7) 374.5 (135.7) (50.6)
Proft after tax(iv) Individually material items (net of tax) (2)		188.2 (64.8)
Proft attributable to members of IPL		123.4
Segment assets Segment liabilities	1,536.0 2,564.9 – 4,100.9 (770.1) (282.4) – (1,052.5)	4,436.5 – 740.1 9,277.5 (639.2) – (1,967.0) (3,658.7)
Net segment assets(v) Deferred tax balances (3)	765.9 2,282.5 – 3,048.4	3,797.3 – (1,226.9) 5,618.8 (415.5)
Net assets		5,203.3

(i) Corporate assets and liabilities include the Group’s interest bearing liabilities and derivative assets and liabilities.

(ii) Earnings Before Interest, related income tax expense, depreciation and amortisation and individually material items.

(iii) Earnings Before Interest, related income tax expense and individually material items.

(iv) Profit after tax (excluding individually material items).

(v) Net segment assets exclude deferred tax balances.

Geographical information – secondary reporting segments

The Group operates in four principal countries being Australia (country of domicile), USA, Canada and Turkey.

In presenting information on the basis of geographical information, revenue is based on the geographical location of the entity making the sale. Assets are based on the geographical location of the assets.

	Australia	USA	Canada	Turkey	Other/Elim	Consolidated
30 September 2021	$mill	$mill	$mill	$mill	$mill	$mill
Revenue from external customers	2,739.7	1,278.3	285.7	38.9	5.9	4,348.5
Non-current assets other than fnancial
assets and deferred tax assets	3,435.3	3,863.0	99.1	2.4	125.8	7,525.6
Trade and other receivables	258.9	142.6	73.5	12.5	29.5	517.0
	Australia	USA	Canada	Turkey	Other/Elim	Consolidated
30 September 2020	$mill	$mill	$mill	$mill	$mill	$mill
Revenue from external customers	2,399.0	1,237.5	249.8	50.5	5.4	3,942.2
Non-current assets other than fnancial
assets and deferred tax assets	3,549.2	3,942.2	80.6	2.0	117.5	7,691.5
Trade and other receivables	215.9	98.6	46.7	11.2	28.4	400.8

54

Notes to the Consolidated Financial Statements: Financial performance For the year ended 30 September 2021

2. Revenue and expenses

Individually material items

Profit after tax includes the following expenses whose disclosure is relevant in explaining the financial performance of the Group:

Notes 2021 $mill 2020 $mill Revenue External sales 4,348.5 3,942.2 Total revenue 4,348.5 3,942.2 Financial income Interest income 1.9 3.9 Other income Royalty income and management fees 29.5 27.3 Net gain on sale of property, plant and equipment 0.3 1.6 Other income from operations 1.7 10.6 Total fnancial and other income 33.4 43.4	Proft after tax includes the following expenses whose disclosure is relevant in explaining the fnancial performance of the Group: 30 September 2021 Gross $mill Tax $mill Net $mill
	Cheyenne manufacturing plant impairment 107.4 (28.0) 79.4
	Gibson Island manufacturing plant closure - Impairment of assets 102.5 (30.8) 71.7 - Closure costs(1) 83.5 (25.1) 58.4
	Total individually material items(2) 293.4 (83.9) 209.5
	(1) Closure costs include employee redundancies ($26.1m) and decommission and other closure related costs ($57.4m). (2) Refer to note 12 for further details surrounding the individually material items. 30 September 2020
	Gross $mill Tax $mill Net $mill
	Impairment of intangible assets(3) 41.0 (10.7) 30.3
	Business restructuring costs(4) Employee redundancies 24.8 (6.8) 18.0 Impairment of operating assets, site exit and other direct costs 22.1 (5.6) 16.5
	Total individually material items 87.9 (23.1) 64.8

	30 September 2020
		Gross	Tax	Net
		$mill	$mill	$mill
	Impairment of intangible assets(3)	41.0	(10.7)	30.3
	Business restructuring costs(4)
	Employee redundancies	24.8	(6.8)	18.0
	Impairment of operating assets, site exit
	and other direct costs	22.1	(5.6)	16.5
	Total individually material items	87.9	(23.1)	64.8

Expenses

Profit before income tax includes the following specific expenses:

	2021	2020
	Notes $mill	$mill
Depreciation and amortisation
Depreciation
property, plant and equipment	(9) 303.0	290.7
leases	(10) 42.5	40.7
Amortisation	(11) 23.0	24.6
Total depreciation and amortisation	368.5	356.0
Recoverable amount write-down
property, plant and equipment	(9) 213.1	16.3
intangible assets	(11) –	41.0
Total recoverable amount write-down	213.1	57.3
Amounts set aside to provide for: impairment losses on trade and other receivables	(4) 0.4	6.1
inventory losses and obsolescence	(4) 1.4	0.2
employee entitlements	(16) 7.7	8.5
environmental liabilities legal and other provisions	(16) 4.1 (16) 0.5	1.9 2.4
restructuring and rationalisation costs	(16) 83.5	29.3
Research and development expense	20.7	18.9
Defned contribution superannuation
expense	32.8	33.5
Defned beneft superannuation expense	(20) 2.7	2.9
Financial expenses
Interest on lease liabilities	(10) 5.6	5.9
Unwinding of discount on provisions Net interest expense on defned beneft obligation	(16) 5.4 (20) 1.8	5.7 1.4
Interest expenses on fnancial liabilities	101.9	126.6
Total fnancial expenses	114.7	139.6

(3) During the year ended 30 September 2020 intangible assets were impaired by $41.0m following a detailed review of the Group’s technology and software products and offerings given the continued enhancement of the Group’s technology portfolio.

(4) Costs incurred directly due to the business restructure which include redundancies and related costs, asset impairment write downs, and site exit and reconfiguration costs.

Key accounting policies

Revenue

Revenue is measured at the fair value of the consideration received or receivable by the Group. Amounts disclosed as revenue are net of returns, trade allowances and amounts collected on behalf of third parties. Revenue is recognised for the major business activities on the following basis:

• » Sale of goods and services: revenue from the sale of goods and services is recognised at the point in time when the performance obligations under the customer contract are satisfied. This is typically when control of goods or services is transferred to the customer. The fee for the service component is recognised separately from the sale of goods.

• » Take-or-pay revenue: revenue is recognised in line with the sale of goods policy. In circumstances where goods are not taken by the customer, revenue is recognised when the likelihood of the customer meeting its obligation to ‘take goods’ becomes remote.

• » Interest income is recognised as it accrues using the effective interest method.

The Group disaggregates its revenue per reportable segment as presented in note 1, as the revenue within each business unit is affected by economic factors in a similar manner.

Goods and services tax

Revenues, expenses, assets and liabilities (other than receivables and payables) are recognised net of the amount of goods and services tax ( GST ). The only exception is where the amount of GST incurred is not recoverable from the relevant taxation authorities. In these circumstances, the GST is recognised as part of the cost of the asset or as part of the item of expenditure.

Other income

Other income from operations represents gains that are not revenue. This includes royalty income and management fees from the Group’s joint ventures and associates, and income from contractual arrangements that are not considered external sales.

55

Notes to the Consolidated Financial Statements: Financial performance For the year ended 30 September 2021

3. Taxation

Income tax expense for the year

Income tax expense for the year
2021	2020
$mill	$mill
Current tax expense Current year 96.7	25.1
Adjustments in respect ofprioryears 1.8	(1.7)
98.5	23.4
Deferred tax expense Currentyear (87.4)	4.1
Total income tax expense 11.1	27.5

Income tax reconciliation to prima facie tax	payable 2021 $mill	2020 $mill
Proft before income tax Tax at the Australian tax rate of 30% (2020: 30%) Tax effect of amounts which are not deductible/ (taxable) in calculating taxable income: Joint venture income Sundry items Difference in overseas tax rates Adjustments in respect ofprioryears Income tax expense attributable toproft	160.2 48.1 (11.7) (17.7) (9.4) 1.8 11.1	150.9 45.3 (8.1) (4.2) (3.8) (1.7) 27.5

Tax amounts recognised directly in equity

The aggregate current and deferred tax arising in the financial year and not recognised in net profit or loss but directly charged to equity is $1.4m for the year ended 30 September 2021 (2020: credit of $51.8m).

Net deferred tax assets/(liabilities)

Deferred tax balances comprise temporary differences attributable to the following:

to the following:
	2021	2020
	$mill	$mill
Employee entitlements provision Retirement beneft obligations	19.7 8.7	21.7 18.4
Provisions and accruals	95.1	51.1
Lease liabilities Tax losses	69.1 188.4	70.6 170.3
Property, plant and equipment	(565.7)	(554.0)
Right-of-use lease assets	(60.8)	(62.9)
Intangible assets	(87.2)	(91.2)
Joint venture income Financial instruments	(12.7) 18.2	(13.1) (12.4)
Other	(1.0)	(14.0)
Net deferred tax liabilities	(328.2)	(415.5)
Presented in the Statement of Financial Position as follows: Deferred tax assets 12.0		13.5
Deferred tax liabilities Net deferred tax liabilities	(340.2) (328.2)	(429.0) (415.5)

Movements in net deferred tax liabilities

The table below sets out movements in net deferred tax balances for the period ended 30 September:

for the period ended 30 September:
	2021	2020
	$mill	$mill
Opening balance at 1 October	(415.5)	(482.5)
Adoption of AASB 16 Leases	–	6.0
Credited/(debited) to the proft or loss	87.4	(4.1)
Charged to equity	(1.4)	51.8
Foreign exchange movements	1.3	13.3
Closing balance at 30 September	(328.2)	(415.5)

Key accounting policies

Income tax expense

Income tax expense comprises current tax (amounts payable or receivable within 12 months) and deferred tax (amounts payable or receivable after 12 months). Tax expense is recognised in the profit or loss, unless it relates to items that have been recognised in equity (as part of other comprehensive income). In this instance, the related tax expense is also recognised in equity.

Current tax

Current tax is the expected tax payable on the taxable income for the year. It is calculated using tax rates applicable at the reporting date, and any adjustments to tax payable in respect of previous years.

Deferred tax

Deferred tax is recognised for all taxable temporary differences and is calculated based on the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is measured at the tax rates that are expected to be applied when the asset is realised or the liability is settled, based on the laws that have been enacted or substantively enacted at the reporting date.

Deferred tax assets are recognised only to the extent that it is probable that future taxable profits will be available against which the assets can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefits will be realised.

Offsetting tax balances

Tax assets and liabilities are offset when the Group has a legal right to offset and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

Tax consolidation

For details on the Company’s tax consolidated group refer to note 22.

Key estimates and judgments

Uncertain tax matters

The Group is subject to income taxes in Australia and foreign jurisdictions and as a result the calculation of the Group’s tax charge involves a degree of estimation and judgment in respect of certain items. In addition, there are transactions and calculations relating to the ordinary course of business for which the ultimate tax determination is uncertain. The Group recognises liabilities for potential tax audit issues in deferred tax liabilities based on management’s assessment of whether additional taxes may be payable and calculates the provision in accordance with the applicable accounting standards including IFRIC 23 Uncertainty over income tax treatments. Where the final tax outcome of these matters is different from the amounts that were initially recorded, these differences impact the current and deferred tax provisions in the period in which such determination is made. Certain long standing matters across the Group were resolved during the year and are reflected in the “Sundry items” disclosure line above.

56

Notes to the Consolidated Financial Statements: Financial performance For the year ended 30 September 2021

4. Trade and other assets and liabilities

The Group’s total trade and other assets and liabilities consists of inventory, receivables and payables balances, net of provisions for any impairment losses.

	Trade	Other	Total
30 September 2021	$mill	$mill	$mill
Inventories	577.7	–	577.7
Receivables	470.8	46.2	517.0
Payables	(927.8)	(322.5)	(1,250.3)
	120.7	(276.3)	(155.6)
	Trade	Other	Total
30 September 2020	$mill	$mill	$mill
Inventories	474.4	–	474.4
Receivables	338.9	61.9	400.8
Payables	(798.5)	(267.1)	(1,065.6)
	14.8	(205.2)	(190.4)

Inventories by category:

Inventories by category:
	2021	2020
Raw materials and stores Work-in-progress	$mill 130.9 77.9	$mill 131.8 62.6
Finished goods	382.2	293.5
Provisions	(13.3)	(13.5)
Total inventories balance	577.7	474.4

Provision movement:

Provision movement:
	Trade
	receivables	Inventories
30 September 2021	$mill	$mill
Carrying amount at 1 October 2020	(22.3)	(13.5)
Provisions made during the year Provisions written back during the year	(0.4) 0.9	(1.4) 1.0
Amounts written off against provisions	3.4	0.7
Foreign exchange rate movements	1.2	(0.1)
Carryingamount at 30 September 2021	(17.2)	(13.3)

Receivables ageing and credit loss provision

Included in the following table is an age analysis of the Group’s trade receivables, along with credit loss provisions against these balances at 30 September:

balances at 30 September:
		Credit loss
	Gross	provision	Net
30 September 2021	$mill	$mill	$mill
Current	455.3	(0.7)	454.6
30–90 days	18.4	(2.2)	16.2
Over 90 days Total	14.3 488.0	(14.3) (17.2)	– 470.8

30 September 2020	Gross $mill	Credit loss provision $mill	Net $mill
Current 30–90 days Over 90 days	332.3 3.0 25.9	(3.1) (1.0) (18.2)	329.2 2.0 7.7
Total	361.2	(22.3)	338.9

The graph below shows the Group’s trade working capital (trade assets and liabilities) performance over a five year period.

13 month rolling average trade working capital*/ Annual net revenue

==> picture [227 x 125] intentionally omitted <==

----- Start of picture text -----

27.5%
25.0%
22.5%
20.0%
17.5%
15.0%
12.5%
10.0%
7.5%
5.0%
2.5%
0.0%
FY17 FY18 FY19 FY20 FY21
Explosives (DNA, DNAP) Fertilisers Group
----- End of picture text -----

• Trade working capital is reported gross of debtor factoring and supply chain financing arrangements.

Key accounting policies

Inventories

Inventories are valued at the lower of cost and net realisable value. The cost of manufactured goods is based on a weighted average costing method. For third party sourced goods, cost is net cost into store.

Trade and other receivables

Trade and other receivables are initially recognised at fair value plus any directly attributable transaction costs. Subsequent to initial measurement they are measured at amortised cost less any provisions for expected impairment losses or actual impairment losses. Credit losses and recoveries of items previously written off are recognised in the profit or loss.

Where substantially all risks and rewards relating to a receivable are transferred to a third party, the receivable is derecognised.

To manage cash inflows which are impacted by seasonality and demand and supply variability, the Group has a nonrecourse receivable purchasing agreement to sell certain receivables to an unrelated entity in exchange for cash. As at 30 September 2021, receivables totalling $124.2m (2020: $115.9m) had been sold under this arrangement. The receivables were derecognised upon sale as substantially all risks and rewards associated with the receivables passed to the purchaser.

Trade and other payables

Trade and other payables are stated at cost and represent liabilities for goods and services provided to the Group prior to the end of financial year, which are unpaid at the reporting date.

To manage the cash flow conversion cycle on some products procured by the Group, and to ensure that suppliers receive payment in a time period that suits their business model, the Group offers some suppliers the opportunity to use supply chain financing. At 30 September 2021, the balance of the supply chain finance program was $207.9m (2020: $296.4m). The Group evaluates supplier arrangements against a number of indicators to assess if the payable continues to have the characteristics of a trade payable or should be classified as borrowings. These indicators include whether the payment terms exceed customary payment terms in the industry. At 30 September 2021, the Group has assessed that on balance the payables subject to supplier financing arrangements did not meet all of the characteristics to be classified as borrowings and accordingly the balances remained in trade and other payables.

57

Notes to the Consolidated Financial Statements: Shareholder returns For the year ended 30 September 2021

Key estimates and judgments

The expected impairment loss calculation for trade receivables considers the impact of past events, and exercises judgment over the impact of current and future economic conditions when considering the recoverability of outstanding trade receivable balances at the reporting date. In establishing the expected impairment loss provision, the Group also assessed the impact of COVID-19 and its potential to affect customers’ repayment ability. Subsequent changes in economic and market conditions may result in the provision for impairment losses increasing or decreasing in future periods.

5. Earnings per share

2021 Cents per share 2020 Cents per share
Basic earnings per share including individually material items 7.7 7.1
excluding individually material items 18.5 10.9
Diluted earnings per share including individually material items 7.7 7.1
excluding individually material items 18.4 10.8
Number Number
Weighted average number of ordinary shares used in the calculation of basic earnings per share 1,942,225,029 1,734,434,874
Weighted average number of ordinary shares used in the calculation of diluted earnings per share 1,946,321,171 1,738,277,711

Reconciliation of earnings used in the calculation of basic and diluted earnings per share

		2021	2020
	Notes	$mill	$mill
Proft attributable to ordinary shareholders		149.1	123.4
Individually material items after income tax	(2)	209.5	64.8
Proft attributable to ordinary shareholders
excluding individually material items		358.6	188.2

The graph below shows the Group’s earnings per share and dividend payout over the last five years.

==> picture [245 x 173] intentionally omitted <==

----- Start of picture text -----

Company performance and dividends declared
Cents
35
30
25
20
15
10
5
0
FY17 FY18 FY19 FY20 FY21
Earnings per Share (including individually material items)
Earnings per Share (before individually material items)
Dividend declared in respect of the financial year
----- End of picture text -----

6. Dividends

Dividends paid or declared by the Company in the year ended 30 September were:

September were:
	2021	2020
	$000	$000
Ordinary shares
Final dividend of 3.4 cents per share, 30 percent	–	54,591
franked, paid 8 January 2020(1)
Interim dividend of 1.0 cents per share, fully	19,422	–
franked, paid 2 July 2021
Total ordinary share dividends	19,422	54,591

(1) The dividend paid in the 2020 financial year in cash was $30.7m, and $23.9m was satisfied by the issue of 7,658,312 ordinary shares under the Company’s Dividend Reinvestment Plan.

Since the end of the financial year, the directors have determined to pay a final dividend of 8.3 cents per share, 14% franked, to be paid on 16 December 2021. The record date for entitlement to this dividend is 2 December 2021. The total dividend payment will be $161.2m.

The financial effect of this dividend has not been recognised in the 2021 Consolidated Financial Statements and will be recognised in subsequent Financial Reports.

The dividend reflects a payout ratio of approximately 50 percent of net profit after tax (before individually material items).

58

Notes to the Consolidated Financial Statements: Capital structure

For the year ended 30 September 2021

Franking credits

Franking credits available to shareholders of the Company were $10.1m (2020: $8.9m).

Key accounting policies

A provision for dividends payable is recognised in the reporting period in which the dividends are paid. The provision is for the total undistributed dividend amount, regardless of the extent to which the dividend will be paid in cash.

7. Capital management

Capital is defined as the amount subscribed by shareholders to the Company’s ordinary shares and amounts advanced by debt providers to any Group entity. The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern while providing returns to shareholders and benefits to other stakeholders.

The Group’s key strategies for maintenance of an optimal capital structure include:

• » Aiming to maintain an investment grade credit profile and the requisite financial metrics.

• » Securing access to diversified sources of debt funding with a spread of maturity dates and sufficient undrawn committed facility capacity.

• » Optimising over the long term, to the extent practicable, the Group’s Weighted Average Cost of Capital (WACC), while maintaining financial flexibility.

In order to optimise its capital structure, the Group may undertake one or a combination of the following actions:

• » change the amount of dividends paid to shareholders and/or offer a dividend reinvestment plan with or without a discount and/or with or without an underwriting facility when appropriate;

Key financial metrics

The Group uses a range of financial metrics to monitor the efficiency of its capital structure, including EBITDA interest cover and Net debt/ EBITDA before individually material items. Financial metric targets are maintained inside debt covenant restrictions. At 30 September the Group’s position in relation to these metrics was:

		Target range	2021	2020
	Net debt/EBITDA (times) Interest cover(times)	equal or less than 2.5 equal or more than 6.0	1.1 9.7	1.4 6.1

These ratios are impacted by a number of factors, including the level of cash retained from operating cash flows generated by the Group after paying all of its commitments (including dividends or other returns of capital), movements in foreign exchange rates, changes to market interest rates and the fair value of hedges economically hedging the Group’s net debt.

Self-insurance

The Group also self-insures for certain insurance risks under the Singapore Insurance Act. Under this Act, authorised general insurer, Coltivi Insurance Pte Limited (the Group’s self-insurance company), is required to maintain a minimum amount of capital. For the financial year ended 30 September 2021, Coltivi Insurance Pte Limited maintained capital in excess of the minimum requirements prescribed under this Act.

Issued capital

Ordinary shares

Ordinary shares issued are classified as equity and are fully paid, have no par value and carry one vote per share and the right to dividends. Incremental costs directly attributable to the issue of new shares are recognised as a deduction from equity, net of any related income tax benefit.

Issued capital as at 30 September 2021 amounted to $3,806.2m (1,942,225,029 ordinary shares).

• » return capital or issue new shares to shareholders;

• » vary discretionary capital expenditure;

• » raise new debt funding or repay existing debt balances; and

• » draw down additional debt or sell non-core assets to reduce debt.

59

Notes to the Consolidated Financial Statements: Capital structure For the year ended 30 September 2021

8. Net debt

The Group’s net debt comprises the net of interest bearing liabilities, cash and cash equivalents, and the fair value of derivative instruments economically hedging the foreign exchange rate and interest rate exposures of the Group’s interest bearing liabilities at the reporting date. The Group’s net debt at 30 September is analysed as follows:

		2021	2020
	Notes	$mill	$mill
Interest bearing liabilities Cash and cash equivalents Fair value of derivatives	(17)	1,668.8 (651.8) (12.8)	1,870.3 (554.6) (287.0)
Net debt		1,004.2	1,028.7

At 30 September 2021, the Group’s Net debt/EBITDA before individually material items was 1.1 times (2020: 1.4 times). Refer to note 7 for detail on the key financial metrics related to the Group’s capital structure.

Interest bearing liabilities

The Group’s interest bearing liabilities are unsecured and expose it to various market and liquidity risks. Details of these risks and their mitigation are included in note 17.

The following table details the interest bearing liabilities of the Group at 30 September:

2021	2020
$mill	$mill
Current Other current loans 2.2 Loans from joint ventures 16.6	4.8 16.4
18.8	21.2
Non-current Other non-current loans 0.7	5.2
Fixed interest rate bonds 1,649.3	1,843.9
1,650.0	1,849.1
Total interest bearing liabilities 1,668.8	1,870.3

Fixed Interest Rate Bonds

The Group has on issue the following fixed interest rate bonds:

• » USD500m of Notes as a private placement in the US market. USD250m has a fixed rate semi-annual coupon of 4.03 percent and matures in October 2028 and USD250m has a fixed rate semi-annual coupon of 4.13 percent and matures in October 2030.

• » HKD560m 7 year bond as a private placement in the Regulation S debt capital market. The bond has a fixed rate annual coupon of 4.13 percent and matures in February 2026.

• » AUD431.3m 7 year bond on issue in the Australian debt capital market. The bond was issued in March 2019 for AUD450m and reduced by AUD18.7m as a result of the buy-back in November 2020. The bond has a fixed rate semi-annual coupon of 4.30 percent and matures in March 2026.

• » USD305.7m 10 year bond on issue in the Regulation S debt capital market. The bond was issued in August 2017 for USD400m and reduced by USD94.3m as a result of the buy-back in November 2020. The bond has a fixed rate semiannual coupon of 3.95 percent and matures in August 2027.

Bank Facilities

In March 2021, IPL cancelled its US domiciled Syndicated Term facility (USD500m) and its Australian domiciled Syndicated Term facility (AUD122m and USD109m). Both facilities were due to mature in October 2021. These cancelled facilities were replaced by a Syndicated Term facility domiciled in Australia and consisting of two tranches: Tranche A has a limit of AUD490m and Tranche B has a limit of USD200m. The facility matures in April 2024.

As at 30 September 2021, the Group has committed undrawn financing facilities of $768.6m.

Tenor of interest bearing liabilities

The Group’s average tenor of its drawn interest bearing liabilities at 30 September 2021 is 6.3 years (2020: 7.3 years) and the average tenor of its total debt facilities is 5.1 years (2020: 5.1 years).

The table below includes detail on the movements in the Group’s interest bearing liabilities.

Cash fow 30 September 2021 1 October 2020 $mill Proceeds from borrowings $mill Repayments of borrowings $mill	Non-cash changes Reclassifcation $mill Foreign exchange movement $mill Funding costs & fair value adjustments $mill 30 September 2021 $mill
Current Other loans 4.8 – (7.2) Loans from joint ventures 16.4 – – Non-current Other loans 5.2 – – Fixed interest rate bonds 1,843.9 – (150.7)	4.5 0.1 – 2.2 – 0.2 – 16.6 (4.5) – – 0.7 – (8.1) (35.8) 1,649.3
Total liabilities from fnancingactivities 1,870.3 – (157.9)	– (7.8) (35.8) 1,668.8
Derivatives held to hedge interest bearing liabilities (287.0) – –	– 233.6 40.6 (12.8)
Debt after hedging 1,583.3 – (157.9)	– 225.8 4.8 1,656.0

60

Notes to the Consolidated Financial Statements: Capital structure For the year ended 30 September 2021

For the year ended 30 September 2021	021
Cash fow 30 September 2020 1 October 2019 $mill Proceeds from borrowings $mill Repayments of borrowings $mill	Cash fow	Non-cash changes Acquisition of Subsidiaries $mill Reclassifcation $mill Foreign exchange movement $mill Funding costs & fair value adjustments $mill 30 September 2020 $mill
Current Other loans 12.6 – (13.8) Loans from joint ventures 17.0 0.3 – Fixed interest rate bonds 1,183.8 – (1,172.6) Non-current Other loans 7.4 – – Bank facilities 293.0 – (301.2) Fixed interest rate bonds 1,142.6 722.7 –		1.0 5.8 (0.8) – 4.8 – – (0.9) – 16.4 – – (10.6) (0.6) – 4.0 (5.8) (0.4) – 5.2 – – 5.4 2.8 – – – (59.4) 38.0 1,843.9
Total liabilities from fnancingactivities 2,656.4 723.0 (1,487.6)		5.0 – (66.7) 40.2 1,870.3
Derivatives held to hedge interest bearing liabilities (388.6) – –		– – 136.5 (34.9) (287.0)
Debt after hedging 2,267.8 723.0 (1,487.6)		5.0 – 69.8 5.3 1,583.3

Interest rate profile

The table below summarises the Group’s interest rate profile of its interest bearing liabilities, net of hedging, at 30 September:

	2021	2020
	$mill	$mill
Fixed interest rate fnancial instruments	942.2	1,746.5
Variable interest rate fnancial instruments	726.6	123.8
	1,668.8	1,870.3

Detail on the Group’s interest hedging profile and duration is included in note 17.

Funding profile

The graph below details the Group’s available funding limits, its maturity dates and drawn funds at 30 September 2021:

==> picture [245 x 140] intentionally omitted <==

----- Start of picture text -----

AUDm
600
Available limits Drawn funds
400
200
0
Bank facility Bank facility Reg S Bond Reg S USPP Tranche 1 USPP Tranche 2
AUD490m USD200m HKD560m AUD431.3m USD305.7m USD250m USD250m
Maturity Apr 24 Apr 24 Feb 26 Mar 26 Aug 27 Oct 28 Oct 30
Date
----- End of picture text -----

The Group has undrawn financing facilities of $768.6m (2020: $974.0) at 30 September 2021.

Cash and cash equivalents

Cash and cash equivalents at 30 September 2021 were $651.8m (2020: $554.6m) and consisted of cash at bank of $251.9m (2020: $105.1m) and short term investments of $399.9m (2020: $449.5m).

Key accounting policies

Interest bearing liabilities

Interest bearing liabilities are initially recognised at fair value less any directly attributable borrowing costs. Subsequent to initial recognition, interest bearing liabilities are measured at amortised cost using the effective interest method, with any difference between cost and redemption value recognised in the profit or loss over the period of the borrowings.

The Group derecognises interest bearing liabilities when its obligation is discharged, cancelled or expires. Any gains and losses arising on derecognition are recognised in the profit or loss.

Interest bearing liabilities are classified as current liabilities, except for those liabilities where the Group has an unconditional right to defer settlement for at least 12 months after the year end, which are classified as non-current.

Cash and cash equivalents

Cash includes cash at bank, cash on hand and short term investments, net of bank overdrafts.

Borrowing costs

Borrowing costs include interest on borrowings and the amortisation of premiums relating to borrowings.

Borrowing costs are expensed as incurred, unless they relate to qualifying assets (refer note 9). In this instance, the borrowing costs are capitalised and depreciated over the asset’s expected useful life.

61

Notes to the Consolidated Financial Statements: Capital investment

For the year ended 30 September 2021

9. Property, plant and equipment

		Freehold land	Machinery, plant
		and buildings	and equipment	Work in progress	Total
	Notes	$mill	$mill	$mill	$mill
At 30 September 2019
Cost		1,047.2	5,248.7	196.8	6,492.7
Accumulated depreciation		(329.2)	(1,973.5)	–	(2,302.7)
Net book amount		718.0	3,275.2	196.8	4,190.0
Year ended 30 September 2020
Opening net book amount		718.0	3,275.2	196.8	4,190.0
Additions		9.5	–	283.3	292.8
Subsidiaries acquired		1.8	9.0	0.4	11.2
Disposals		(0.5)	(4.2)	(1.1)	(5.8)
Depreciation	(2)	(29.8)	(260.9)	–	(290.7)
Impairment of assets	(2)	(2.6)	(8.5)	(5.2)	(16.3)
Reclassifcation from work in progress		8.4	247.7	(256.1)	–
Foreign exchange movement		(16.8)	(88.5)	(4.2)	(109.5)
Closingnet book amount		688.0	3,169.8	213.9	4,071.7
At 30 September 2020
Cost		1,040.7	5,335.2	213.9	6,589.8
Accumulated depreciation		(352.7)	(2,165.4)	–	(2,518.1)
Net book amount		688.0	3,169.8	213.9	4,071.7
Year ended 30 September 2021
Opening net book amount		688.0	3,169.8	213.9	4,071.7
Additions		2.3	2.2	377.8	382.3
Disposals		(1.1)	(4.3)	–	(5.4)
Depreciation	(2)	(28.4)	(274.6)	–	(303.0)
Impairment of assets	(2)	–	(213.1)	–	(213.1)
Reclassifcation from work in progress		26.9	331.0	(357.9)	–
Foreign exchange movement		(0.3)	(5.2)	1.9	(3.6)
Closingnet book amount		687.4	3,005.8	235.7	3,928.9
At 30 September 2021
Cost		1,067.3	4,860.0	235.7	6,163.0
Accumulated depreciation		(379.9)	(1,854.2)	–	(2,234.1)
Net book amount		687.4	3,005.8	235.7	3,928.9

Key accounting policies

Property, plant and equipment is measured at cost, less accumulated depreciation and any impairment losses. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.

Borrowing costs in relation to the funding of qualifying assets are capitalised and included in the cost of the asset. Qualifying assets are assets that take more than 12 months to get ready for their intended use or sale. Where funds are borrowed, generally a weighted average interest rate is used for the capitalisation of interest.

Property, plant and equipment is subject to impairment testing. For details of impairment of assets, refer note 12.

Depreciation

Property, plant and equipment, other than freehold land, is depreciated on a straight-line basis. Freehold land is not depreciated. Depreciation rates are calculated to spread the cost of the asset (less any residual value), over its estimated useful life. Residual value is the estimated value of the asset at the end of its useful life.

Estimated useful lives for each class of asset are as follows:

• » Buildings and improvements 20 – 50 years » Machinery, plant and equipment 3 – 50 years

Residual values and useful lives are reviewed and adjusted where relevant when changes in circumstances impact the use of the asset.

62

Notes to the Consolidated Financial Statements: Capital investment For the year ended 30 September 2021

10. Leases

The Group has lease contracts for various items of property, plant and equipment used within its operations and office premises. These assets have lease terms ranging between 1 to 48 years for land and buildings, and 1 to 8 years for machinery, plant and equipment.

The carrying value of right-of-use lease assets and lease liabilities is presented below:

Amounts recognised in the income statement

Amounts recognised in the income statement relating to the Group’s lease arrangements are as follows:

	Depreciation	Notes (2)	2021 $mill 42.5	2020 $mill 40.7
	Interest	(2)	5.6	5.9
	Total		48.1	46.6

Right-of-use lease assets

Right-of-use lease assets
			Machinery,
Year ended 30 September 2020 Opening net book amount	Notes	Land and buildings $mill –	plant and equipment $mill –	Total $mill –
Adoption of AASB 16 Leases		156.1	59.9	216.0
Additions		28.0	22.4	50.4
Disposals		(0.4)	(0.8)	(1.2)
Depreciation	(2)	(17.7)	(23.0)	(40.7)
Foreign exchange movement		(0.9)	(2.5)	(3.4)
Closingnet book amount		165.1	56.0	221.1
At 30 September 2020
Cost Accumulated depreciation Net book amount		180.6 (15.5) 165.1	76.4 (20.4) 56.0	257.0 (35.9) 221.1
Year ended 30 September 2021
Opening net book amount		165.1	56.0	221.1
Additions		15.8	22.1	37.9
Disposals		(1.1)	(0.5)	(1.6)
Depreciation Foreign exchange movement Closingnet book amount	(2)	(19.7) (0.1) 160.0	(22.8) (0.3) 54.5	(42.5) (0.4) 214.5
At 30 September 2021
Cost		192.2	93.1	285.3
Accumulated depreciation		(32.2)	(38.6)	(70.8)
Net book amount		160.0	54.5	214.5

Lease liabilities

Lease liabilities
	2021 $mill	2020 $mill
Opening carrying amount at 1 October	247.7	–
Adoption of AASB 16 Leases	–	243.7
Additions	37.9	50.4
Disposals	(1.4)	(0.7)
Payments made during the year	(47.0)	(47.8)
Interest unwind	5.6	5.9
Foreign exchange movement	(0.3)	(3.8)
Carryingamount at 30 September	242.5	247.7
Current	45.0	41.5
Non-current	197.5	206.2

Key accounting policies

All leases except for short term or low value leases are recognised on the balance sheet as a right-of-use asset and a corresponding lease liability. Short term (12 months or less) and low value leases are recognised in the profit or loss as a lease expense.

Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentive received. Right-of-use assets are depreciated on a straight line basis in the profit or loss over the lease term.

Lease liabilities are recognised by the Group at the commencement date of the lease and are measured at the present value of lease payments to be made over the lease term. Lease payments include fixed payments and variable lease payments that depend on an index or rate.

Key estimates and judgments

Extension options - The Group considers whether an option to extend a lease is reasonably certain on a lease-by-lease basis, which considers the importance of the lease to the Group’s operations and its economic incentive to extend the lease. The lease term is reassessed upon the occurrence of a significant event or change in circumstance.

Incremental borrowing rate – To calculate the present value of lease payments, the Group uses an incremental borrowing rate at the commencement date of the lease. The incremental borrowing rate reflects the duration and the financing characteristics of the lease. Where the interest rate implicit in the lease is not readily available, the Group uses its incremental borrowing rate applicable to a portfolio of leases with reasonably similar characteristics.

Refer to note 17 for the maturity profile of the Group’s committed lease liabilities before discounting.

63

Notes to the Consolidated Financial Statements: Capital investment

For the year ended 30 September 2021

11. Intangibles

11. Intangibles
				Patents, trademarks
		Software	Goodwill	& customer contracts	Brand names	Total
	Notes	$mill	$mill	$mill	$mill	$mill
At 30 September 2019
Cost		166.2	2,724.5	309.9	318.5	3,519.1
Accumulated amortisation		(98.6)	–	(241.0)	–	(339.6)
Net book amount		67.6	2,724.5	68.9	318.5	3,179.5
Year ended 30 September 2020
Opening net book amount		67.6	2,724.5	68.9	318.5	3,179.5
Additions		11.7	–	–	–	11.7
Subsidiaries acquired		–	1.9	1.6	–	3.5
Impairment of assets	(2)	(41.0)	–	–	–	(41.0)
Amortisation	(2)	(6.7)	–	(17.9)	–	(24.6)
Foreign exchange movement		(3.8)	(88.3)	(2.3)	(15.0)	(109.4)
Closing net book amount		27.8	2,638.1	50.3	303.5	3,019.7
At 30 September 2020
Cost		129.8	2,638.1	298.5	303.5	3,369.9
Accumulated amortisation		(102.0)	–	(248.2)	–	(350.2)
Net book amount		27.8	2,638.1	50.3	303.5	3,019.7
Year ended 30 September 2021
Opening net book amount		27.8	2,638.1	50.3	303.5	3,019.7
Additions		6.5	4.6	0.8	–	11.9
Amortisation	(2)	(7.0)	–	(16.0)	–	(23.0)
Foreign exchange movement		0.2	(5.9)	(0.8)	(1.2)	(7.7)
Closing net book amount		27.5	2,636.8	34.3	302.3	3,000.9
At 30 September 2021
Cost		107.1	2,636.8	298.4	302.3	3,344.6
Accumulated amortisation		(79.6)	–	(264.1)	–	(343.7)
Net book amount		27.5	2,636.8	34.3	302.3	3,000.9

Allocation of indefinite life intangible assets

The Group’s indefinite life intangible assets are allocated to groups of cash generating units ( CGU s) as follows:

30 September 2021 Goodwill $mill Brand names $mill Total $mill Fertilisers APAC 186.4 – 186.4 Dyno Nobel Asia Pacifc (DNAP) 908.5 40.3 948.8 Dyno Nobel Americas (DNA) 1,541.9 262.0 1,803.9 2,636.8 302.3 2,939.1	30 September 2020 Goodwill $mill Brand names $mill Total $mill
	Fertilisers APAC 186.4 – 186.4 Dyno Nobel Asia Pacifc (DNAP) 908.5 40.3 948.8 Dyno Nobel Americas (DNA) 1,543.2 263.2 1,806.4
	2,638.1 303.5 2,941.6

64

Notes to the Consolidated Financial Statements: Capital investment For the year ended 30 September 2021

Key accounting policies

Goodwill

Goodwill on acquisition of subsidiaries is measured at cost less any accumulated impairment losses. Goodwill is tested for impairment annually, or more frequently if events or circumstances indicate that it might be impaired.

Brand names

Brand names acquired by the Group have indefinite useful lives and are measured at cost less accumulated impairment. They are tested annually for impairment, or more frequently if events or circumstances indicate that they might be impaired.

Other intangible assets

Other intangible assets acquired by the Group have finite lives.

They are stated at cost less accumulated amortisation and impairment losses.

Subsequent expenditure

Subsequent expenditure on intangible assets is capitalised only when it increases the future economic benefits of the asset to which it relates. All other such expenditure is expensed as incurred.

Impairment testing of assets

DNA Cheyenne manufacturing plant

The further structural decline in thermal coal markets has been identified as an indicator of impairment that impacts DNA’s Cheyenne manufacturing plant, and specifically the nitric acid production utilisation rates. The future reconfiguration of the plant to reduce Nitric acid production capacity in line with lower market volumes, resulted in an impairment of $107.4m.

Gibson Island

IPL was unable to secure an economically viable long-term gas supply for its Gibson Island plant beyond its current contract. As a result, IPL decided to cease manufacturing operations at the site at the end of the current gas supply arrangements which expire in December 2022. IPL’s Brisbane fertiliser distribution capability will continue beyond the closure of the manufacturing operations.

The financial impact of the closure of the manufacturing operations are as follows:

• » Cash costs of closure: $83.5m (pre-tax);

• » Non-cash impairment of assets: $102.5m.

Key assumptions

Amortisation

Goodwill and brand names are not amortised.

For intangible assets with finite lives, amortisation is recognised in the profit or loss on a straight-line basis over their estimated useful life. The estimated useful lives of intangible assets in this category are as follows:

»	Software	3 – 10 years
»	Product trademarks	4 – 10 years
»	Patents	13 – 15 years
»	Customer contracts	10 – 17 years

Useful lives are reviewed at each reporting date and adjusted where relevant.

Details of the key assumptions used in the recoverable amount calculations at 30 September are set out below:

				Terminal value	Terminal value
	Key assumptions	1 – 5	years	(after 5years)
		2021	2020	2021	2020
		US$	US$	US$	US$
	DAP(1)	427 to 541	330 to 441	520	510
	Gas (DNA CGU)(2)	3.00 to 3.50	2.46 to 2.95	3.50	3.21
	Ammonia(3)	356 to 480	252 to 315	454	435
	AUD:USD(4)	0.74 to 0.76	0.73 to 0.74	0.74	0.72

(1) Di-Ammonium Phosphate price (FOB Tampa – USD per tonne).

(2) Henry Hub natural gas price (USD per mmbtu).

(3) Ammonia price (CFR Tampa – USD per tonne).

(4) AUD:USD exchange rate.

12. Impairment of goodwill and noncurrent assets

Impairment testing of goodwill

The Group performs annual impairment testing as at 30 September for intangible assets with indefinite useful lives. More frequent reviews are performed for indicators of impairment of all the Group’s assets, including operating assets.

For both DNAP and Fertilisers APAC, the gas price assumption for impairment testing purposes for the period after the current gas contracts expire, is based on external long term gas production cost forecasts of between $6.90 and $8.00 per gigajoule.

Fertiliser prices, foreign exchange rates and natural gas prices are estimated by reference to external market publications and market analyst estimates, and are updated at each reporting date.

Discount and growth rates

Since 30 September 2020, the Group announced the impact of the extension of turnaround activities and one-off outages at some of its US manufacturing facilities. In addition, the Group is actively managing the risks arising from COVID-19. To date there are no known significant long term structural changes that affect the future cash flows of the CGUs as a result of these events. As a result, the recoverable amounts of IPL’s CGUs continued to exceed their carrying amounts at 30 September 2021.

The post-tax discount rate used in the calculations is 9% for the Fertilisers APAC CGU (2020: 9%) and 8.5% for the DNA and DNAP CGUs (2020: 8.5%). The rate reflects the underlying cost of capital adjusted for market and asset specific risks.

The terminal value growth rate represents the forecast consumer price index (CPI) of 2.5% (2020: 2.5%) for all CGUs. Sensitivity analyses on the discount and growth rates, considering the current volatile market conditions, are provided below.

65

Notes to the Consolidated Financial Statements: Capital investment For the year ended 30 September 2021

Sensitivity analyses

Included in the table below is a sensitivity analysis of the recoverable amounts of the CGUs and, where applicable, the impairment charge considering reasonable change scenarios relating to key assumptions at 30 September 2021.

Each of the sensitivities below assumes that a specific assumption moves in isolation, while all other assumptions are held constant. A change in one assumption could be accompanied by a change in another assumption, which may increase or decrease the net impact.

Post-tax discount rate Terminal value growth rate Natural gasprice +0.5% -1.0% +AU$1 per gigajoule DNAP AU$mill AU$mill AU$mill Change in recoverable amount (194.5) (295.3) (61.7) Impairment charge – (55.4) – Post-tax discount rate AUD:USD exchange rate	Post-tax discount rate Ammonia price Terminal value growth rate Natural gas price
	+0.5% -US$50 per tonne -1.0% +US$1 per mmbtu
	DNA US$mill US$mill US$mill US$mill
	Change in recoverable amount (319.7) (391.0) (486.5) (268.2) Impairment charge – – – – Terminal value growth rate DAP Price Natural gas price
+0.5% +5c	-1.0% -US$50 per tonne +AUD1 per gigajoule
Fertilisers APAC AU$mill AU$mill	AU$mill AU$mill AU$mill
Change in recoverable amount (110.2) (360.9) Impairment charge – –	(154.2) (629.5) (45.4) – – –

Impairment of other property, plant and equipment

During the year ended 30 September 2021 other property, plant and equipment was impaired by $3.2m (2020: $16.3m) as a result of the Group’s fixed asset verification procedures and the abandonment of certain assets following a strategic review of the Group’s operating assets.

Key accounting policies

Impairment testing

The Group performs annual impairment testing as at 30 September for intangible assets with indefinite useful lives. More frequent reviews are performed for indicators of impairment of all the Group’s assets, including operating assets. The identification of impairment indicators involves management judgment. Where an indicator of impairment is identified, a formal impairment assessment is performed. The Group’s annual impairment testing determines whether the recoverable amount of a CGU or group of CGUs, to which goodwill and/or indefinite life intangible assets are allocated, exceeds its carrying amount.

Transition of the world’s energy systems and sustainability forms part of our strategy and these have been considered in the market data utilised to assess growth rates for each CGU.

Impairment losses

An impairment loss is recognised whenever the carrying amount of an asset (or its CGU) exceeds its recoverable amount. Impairment losses are recognised in the profit or loss.

Impairment losses recognised in respect of CGUs are allocated against assets in the following order:

• » Firstly, against the carrying amount of any goodwill allocated to the CGU.

• » Secondly, against the carrying amount of any remaining assets in the CGU.

An impairment loss recognised in a prior period for an asset (or its CGU) other than goodwill may be reversed only if there has been a change in the estimates used to determine the recoverable amount of the asset (or its CGU) since the last impairment loss was recognised. When this is the case, the carrying amount of the asset (or its CGU) is increased to its recoverable amount.

A CGU is the smallest identifiable group of assets that generate cash flows largely independent of cash flows of other groups of assets. Goodwill and other indefinite life intangible assets are allocated to CGUs or groups of CGUs which are no larger than one of the Group’s reportable segments.

Determining the recoverable amount

The recoverable amount of an asset is determined as the higher of its fair value less cost of disposal and its value-in-use. Value-in-use is a term that means an asset’s value based on the expected future cash flows arising from its continued use in its current condition, discounted to present value. For discounting purposes, a post-tax rate is used that reflects current market assessments of the risks specific to the asset. The Group has prepared value-in-use models for the purpose of impairment testing as at 30 September 2021, using five year discounted cash flow models based on Board approved forecasts. Cash flows beyond the five year period are extrapolated using a terminal value growth rate.

66

Notes to the Consolidated Financial Statements: Capital investment For the year ended 30 September 2021

Key estimates and judgments

The Group is required to make significant estimates and judgments in determining whether the carrying amount of its assets and/or CGUs has any indication of impairment, in particular in relation to:

• » key assumptions used in forecasting future cash flows;

• » discount rates applied to those cash flows; and

• » the expected long term growth in cash flows.

Such estimates and judgments are subject to change as a result of changing economic, operational, environmental and weather conditions. Actual cash flows may therefore differ from forecasts and could result in changes in the recognition of impairment charges in future periods.

13. Commitments

Capital expenditure commitments

Capital expenditure contracted but not provided for or payable at 30 September:

at 30 September:
	2021	2020
	$mill	$mill
No later than oneyear	39.1	68.9
	39.1	68.9

14. Equity accounted investments

The Group has performed an analysis of the statements of financial position and the results of each of its joint ventures and associates (as listed in note 15) at 30 September 2021 and considers them to be individually immaterial to the Group. As a result, no individual disclosures are included for the Group’s investments in joint ventures and associates.

Included in the table below is the summarised financial information of the Group’s joint ventures and associates at 30 September:

Carrying amount of joint ventures and associates

	Carrying amount at 1 October	2021 $mill 326.3	2020 $mill 357.7
	Share of net proft	41.9	32.3
	Share in joint venture transferred to controlled entities	–	(6.1)
	Dividends received	(44.6)	(30.9)
	Foreign exchange movement	1.2	(26.7)
	Carrying amount at 30 September	324.8	326.3
	Carrying amount of investments in:
	Joint ventures	250.0	254.5
	Associates	74.8	71.8
	Carrying amount of investments in joint
	ventures and associates	324.8	326.3

Transactions between subsidiaries of the Group and joint ventures and associates

ventures and associates
	2021	2020
	$mill	$mill
Sales of goods/services	348.9	391.1
Purchase of goods/services	(53.2)	(55.6)
Management fees/royalties	29.5	27.3
Interest income	–	0.3
Interest expense	(0.4)	(0.4)
Dividend income	44.6	30.9

Joint ventures and associates transactions represent amounts that do not eliminate on consolidation.

Outstanding balances arising from transactions with joint ventures and associates

	2021	2020
	$mill	$mill
Amounts owing to related parties	6.4	3.1
Amounts owing from related parties	72.1	59.7
Loans with joint ventures and associates
Loans to joint ventures and associates	–	19.9
Loans from joint ventures and associates	16.6	16.4

Outstanding balances arising from transactions with joint ventures and associates are on standard market terms.

67

Notes to the Consolidated Financial Statements: Capital investment

For the year ended 30 September 2021

15. Investments in subsidiaries, joint arrangements and associates

The following list includes the Group’s principal operating subsidiaries and subsidiaries that are party to the Deed of Cross Guarantee dated 30 September 2008. Other than as noted below, there were no changes in the Group’s existing shareholdings in its subsidiaries, joint ventures and associates in the financial year.

Subsidiaries

Subsidiaries
Name of entity Ownership interest Company Incitec Pivot Limited(1) Controlled Entities – operating Incorporated in Australia Incitec Fertilizers Pty Limited(1) 100% TOP Australia Pty Limited(1) 100% Southern Cross Fertilisers Pty Ltd(1) 100% Southern Cross International Pty Ltd(1) 100% Incitec Pivot LTI Plan Company Pty Limited 100% Incitec Pivot Explosives Holdings Pty Limited(1) 100% Queensland Operations Pty Limited 100% Incitec Pivot Investments 1 Pty Ltd(1) 100% Incitec Pivot Investments 2 Pty Ltd 100% Incitec Pivot US Holdings Pty Ltd 100% Incitec Pivot Finance Australia Pty Ltd(1) 100% Dyno Nobel Pty Limited 100% Dyno Nobel Europe Pty Ltd 100% Dyno Nobel Management Pty Limited 100% Industrial Investments Australia Finance Pty Limited 100% Dyno Nobel Asia Pacifc Pty Limited(1) 100% Dampier Nitrogen Pty Ltd 100% DNX Australia Pty Ltd(1) 100% Dyno Nobel Moranbah Pty Ltd(1) 100% Dyno Nobel Moura Pty Limited(1) 100% Incited Pivot Queensland Gas Pty Ltd 100% Incorporated in USA Incitec Pivot US Investments 100% Incitec Pivot Management LLC 100% Incitec Pivot Finance LLC 100% Dyno Nobel Australia LLC 100% Dyno Nobel SPS LLC 100% Dyno Nobel Holdings IV LLC 100% Dyno Nobel Holdings USA III, Inc. 100% Dyno Nobel Holdings USA II 100% Dyno Nobel Holdings USA II, Inc. 100% Dyno Nobel Holdings USA, Inc. 100% Dyno Nobel Inc. 100% Dyno Nobel Transportation Inc. 100% Simsbury Hopmeadow Street LLC 100% Dyno Nobel Holdings V LLC 100% Tradestar Corporation 100% CMMPM, LLC 100% CMMPM Holdings L.P. 100% Dyno Nobel Louisiana Ammonia, LLC 100% Nobel Labs, LLC 100% Mine Equipment & Mill Supply Company 100% Controlled Explosives, Inc. 100% Drisk Insurance Inc. 100% Falconi Construction, Inc 100% Alpha Dyno Nobel 100%	Name of entity Ownership interest
	Ş Controlled Entities – operating (continued) Incorporated in Canada Dyno Nobel Canada Inc. 100% Dyno Nobel Transportation Canada Inc. 100% Dyno Nobel Nunavut Inc. 100% Incitec Pivot Finance Canada Inc. 100% Polar Explosives 2000 Inc. 100% Dene Dyno Nobel (Polar) Inc. 100% Dyno Nobel Waggaman Inc. 100% Incorporated in Hong Kong Incitec Pivot Holdings (Hong Kong) Limited 100% Quantum Fertilisers Limited 100% Incorporated in Singapore Coltivi Insurance Pte Ltd 100% Incorporated in Chile Dyno Nobel Explosivos Chile Limitada 100% Incorporated in Peru Dyno Nobel Peru S.A. 100% Incorporated in Mexico Dyno Nobel Mexico, S.A. de C.V.(2) 99% Incorporated in Papua New Guinea DNX Papua New Guinea Ltd(2) 100% Incorporated in Indonesia PT DNX Indonesia 100% Incorporated in Turkey Nitromak Dnx Kimya Sanayii Anonim Sirketi 100% Incorporated in Romania RomNitro Explosives SRL 100% Incorporated in Albania Nitro Industria Kimike Shpk 100% (1) A party to Deed of Cross Guarantee dated 30 September 2008. (2) This entity has a 31 December fnancial year end.

68

Notes to the Consolidated Financial Statements: Capital investment For the year ended 30 September 2021

Joint arrangements and associates

Name of entity Ownership interest Joint ventures Incorporated in USA Buckley Powder Co.(1) 51% IRECO Midwest Inc. 50% Wampum Hardware Co. 50% Western Explosives Systems Company 50% Warex Corporation 50% Warex, LLC 50% Warex Transportation, LLC 50% Vedco Holdings, Inc. 50% Virginia Explosives & Drilling Company, Inc. 50% Austin Sales LLC 50% Virginia Drilling Company, LLC 50% DetNet Americas, Inc. 50% Incorporated in Canada Qaaqtuq Dyno Nobel Inc.(2) 49% Dene Dyno Nobel (DWEI) Inc.(3) 49% Incorporated in Australia Queensland Nitrates Pty Ltd 50% Queensland Nitrates Management Pty Ltd 50% Incorporated in South Africa DetNet South Africa (Pty) Ltd 50% Sasol Dyno Nobel (Pty) Ltd 50% Incorporated in Mexico DNEX Mexico, S. de R.L. de C.V. 49% Explosivos de la Region Lagunera, S.A. de C.V. 49% Explosivos de la Region Central, S.A. de C.V. 49% Nitro Explosivos de Ciudad Guzmán, S.A. de C.V. 49% Explosivos y Servicios Para la Construcción, S.A. de C.V. 49%

Name of entity Ownership interest

Associates Incorporated in USA Maine Drilling and Blasting Group 49% Independent Explosives 49% Maine Drilling and Blasting, Inc. 49% MD & B, Inc. 49% MD Drilling and Blasting, Inc. 49% Incorporated in Canada Labrador Maskuau Ashini Ltd 49% Innu Namesu Ltd 49% Joint operations IPL has a 50% interest in an unincorporated joint operation with Central Petroleum Limited for the development of gas acreage in Queensland, Australia, which commenced in the 2018 fnancial year. (1) Due to the contractual and decision making arrangement between the shareholders of the entities, despite the legal ownership exceeding 50 percent, this entity is not considered to be a subsidiary. (2) Due to legal requirements in the Canadian Northwest Territories, the Group cannot own more than 49 percent of shares in Qaaqtuq Dyno Nobel Inc. However, under the joint venture agreement, the Group is entitled to 75 percent of the proft of Qaaqtuq Dyno Nobel Inc. (3) Due to legal requirements in the Canadian Northwest Territories, the Group cannot own more than 49 percent of shares in Dene Dyno Nobel (DWEI) Inc. However, under the joint venture agreement, the Group is entitled to 100 percent of the proft of Dene Dyno Nobel (DWEI) Inc.

69

Notes to the Consolidated Financial Statements: Risk management

For the year ended 30 September 2021

16. Provisions and contingencies

Provisions at 30 September 2021 are analysed as follows:

	Employee	Restructuring and		Asset retirement	Legal	Total
	entitlements	rationalisation	Environmental	obligations	and other	provisions
30 September 2021	$mill	$mill	$mill	$mill	$mill	$mill
Carrying amount at 1 October 2020	62.9	28.1	41.1	92.5	3.2	227.8
Provisions made during the year	7.7	83.5	4.1	12.5	0.5	108.3
Provisions written back during the year	(1.0)	–	–	–	–	(1.0)
Payments made during the year	(6.3)	(19.1)	(4.2)	(0.6)	–	(30.2)
Interest unwind	0.6	0.1	1.1	3.6	–	5.4
Foreign exchange movement	–	(0.5)	0.1	0.4	–	–
Carryingamount at 30 September 2021	63.9	92.1	42.2	108.4	3.7	310.3
Current	59.1	17.3	20.2	1.0	3.7	101.3
Non-current	4.8	74.8	22.0	107.4	–	209.0

Key accounting policies

Provisions are measured at management’s estimate of the expenditure required to settle the obligation. This estimate is based on a “present value” calculation, which involves the application of a discount rate to the expected future cash flows associated with settlement. The discount rate takes into account factors such as risks specific to the liability and the time value of money.

Employee entitlements

Provisions are made for liabilities to employees for annual leave, long service leave and other employee entitlements. Where the payment to employees is expected to take place in 12 months time or later, a present value calculation is performed. In this instance, the corporate bond rate is used to discount the liability to its present value.

Restructuring and rationalisation

Provisions for restructuring or rationalisation are only recognised when a detailed plan has been approved and the restructuring or rationalisation has either commenced or been publicly announced.

Environmental

Provisions relating to the remediation of soil, groundwater, untreated waste and other environmental contamination are made when the Group has an obligation to carry out the clean-up operation as a result of a past event. In addition, a provision will only be made where it is possible to reliably estimate the costs involved.

Asset retirement

In certain circumstances, the Group has an obligation to dismantle and remove an asset and to restore the site on which it is located. The present value of the estimated costs of this process is recognised as part of the asset that is depreciated and also as a provision.

At each reporting date, the provision is remeasured in line with changes in discount rates and the timing and amount of future estimated cash flows. Any changes in the provision are added to or deducted from the related asset, other than changes associated with the passage of time. This is recognised as a borrowing cost in the profit or loss.

Legal and other

There are a number of legal claims and other exposures, including claims for damages arising from products and services supplied by the Group, that arise from the ordinary course of business. A provision is only made where it is probable that a payment or restitution will be required and the costs involved can be reliably estimated.

Key estimates and judgments

Provisions are based on the Group’s estimate of the timing and value of outflows of resources required to settle or satisfy commitments and liabilities known to the Group at the reporting date.

Contingencies

The following contingent liabilities are considered unlikely. However the directors consider they should be disclosed:

• » Under the terms of the ASIC Legislative Instrument, ASIC Corporations (Wholly-owned Companies) Instrument 2016/785, issued by the Australian Securities and Investments Commission dated 17 December 2016, which relieved certain wholly-owned subsidiaries from the requirement to prepare audited financial statements, IPL and certain wholly-owned subsidiaries (identified in note 15) have entered into an approved deed for the cross guarantee of liabilities. No additional liabilities subject to the Deed of Cross Guarantee at 30 September 2021 are expected to arise to IPL or the relevant subsidiaries.

• » The Group is regularly subject to investigations and audit activities by the revenue authorities of jurisdictions in which the Group operates. The outcome of these investigations and audits depends upon several factors which may result in further tax payments or refunds of tax payments already made by the Group over and above existing provisions. Refer to note 3 for further details.

• » Contingent liabilities arise in the normal course of business and include a number of legal claims, environmental cleanup requirements and bank guarantees.

The Directors are of the opinion that no additional provisions are required in respect of these matters, as it is either not probable that a future sacrifice of economic benefits will be required or the amount is not capable of reliable measurement.

70

Notes to the Consolidated Financial Statements: Risk management

For the year ended 30 September 2021

17. Financial risk management

The Group is exposed to financial risks including liquidity risk, market risk and credit risk. This note explains the Group’s financial risk exposures and its objectives, policies and processes for measuring and managing these risks.

The Board of Directors (the Board ) has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Board established the Audit and Risk Management Committee ( ARMC ) which is responsible for, amongst other things, the monitoring of the Group’s risk management plans. The ARMC is assisted in its oversight role by the Group’s Risk Management function. The Risk Management function performs reviews of the Group’s risk management controls and procedures, the results of which are reported to the ARMC. The ARMC reports regularly to the Board on its activities.

The Group’s financial risk management framework includes policies to identify, analyse and manage the Group’s financial risks. These policies set appropriate financial risk limits and controls, identify permitted derivative instruments and provide guidance on how to monitor and report financial risks and adherence to set limits. Financial risk management policies, procedures and systems are reviewed regularly to ensure they remain appropriate given changes in market conditions and/or the Group’s activities.

Financial risks

Liquidity risk: The risk that the Group is not able to refinance its debt obligations or meet other cash outflow obligations when required.

Source of risk

Exposure to liquidity risk derives from the Group’s operations and from the external interest bearing liabilities that it holds.

Risk mitigation

Liquidity risk is managed by ensuring there are sufficient committed funding facilities available to meet the Group’s financial commitments in a timely manner.

This includes stress testing of critical assumptions such as input costs, sales prices, production volumes, exchange rates and capital expenditure.

The Group aims to hold a minimum liquidity buffer of at least $500m in undrawn non-current committed funding to meet any unforeseen cash flow requirements. Details on the Group’s committed finance facilities, including the maturity dates of these facilities, are included in note 8.

The Group’s forecast liquidity requirements are continually reassessed based on regular forecasting of earnings and capital requirements.

Outstanding financial instruments

The Group’s exposures to liquidity risk are set out in the tables below:

30 September 2021 Contractual cash fows(1) $mill 0 – 12 months $mill 1 – 5 years $mill more than 5 years $mill Non-derivative fnancial liabilities Interest bearing liabilities 1,668.8 18.8 531.8 1,118.2 Interest payments 462.8 55.0 286.0 121.8 Trade and other payables 1,250.3 1,229.3 21.0 – Lease liabilities 223.0 44.6 87.2 91.2 Bank guarantees 127.5 22.7 23.8 81.0 Total non-derivative cash outfows 3,732.4 1,370.4 949.8 1,412.2 Derivative fnancial (assets)/liabilities Forward exchange contracts (25.6) (13.1) (12.5) – Foreign exchange options 7.9 7.9 – – Cross currency interest rate swaps 0.6 (0.8) 1.4 – Interest rate swaps 17.1 3.5 11.9 1.7 Commodity swaps 7.1 7.1 – – Commodity options – – – – Net derivative cash outfows/(infows) 7.1 4.6 0.8 1.7	30 September 2020 Contractual cash fows(1) $mill 0 – 12 months $mill 1 – 5 years $mill more than 5 years $mill
	Non-derivative fnancial liabilities
	Interest bearing liabilities 1,870.3 21.2 4.0 1,845.1 Interest payments 541.4 55.3 299.3 186.8 Trade and other payables 1,065.6 1,049.4 16.2 – Lease liabilities 235.4 41.1 95.8 98.5 Bank guarantees 134.2 43.5 10.0 80.7
	Total non-derivative cash outfows 3,846.9 1,210.5 425.3 2,211.1
	Derivative fnancial (assets)/liabilities Forward exchange contracts 61.1 61.1 – – Foreign exchange options Cross currency interest rate swaps (48.0) (46.8) – (1.2) Interest rate swaps 17.2 13.4 18.0 (14.2) Commodity swaps (3.2) (3.1) (0.1) – Commodity options 0.1 0.1 – –
	Net derivative cash outfows/(infows) 27.2 24.7 17.9 (15.4)

(1) Contractual cash flows are not discounted, and are based on foreign exchange rates at year end. Any subsequent movements in foreign exchange rates could impact the actual cash flows on settlement of these assets and liabilities.

71

Notes to the Consolidated Financial Statements: Risk management

For the year ended 30 September 2021

Market risk: The risk that changes in foreign exchange rates, interest rates and commodity prices will affect the Group’s earnings, cash flows and the carrying values of its financial instruments. Foreign exchange risk

Source of risk

The Group is exposed to changes in foreign exchange rates (primarily in USD) on the following transactions and balances:

• » Sales and purchases

• » Trade receivables and trade payables

• » Interest bearing liabilities

The Group is also exposed to foreign exchange movements (primarily in USD) on the translation of the earnings, assets and liabilities of its foreign operations.

Risk mitigation

Foreign exchange exposure to sales and purchases is managed by entering into formal hedging arrangements.

The Group hedges both specific transactions and net exposures by entering into foreign exchange rate derivative contracts.

The translation risk of USD denominated interest bearing liabilities and net investments in foreign operations and their earnings is also managed by entering into foreign exchange rate derivative financial instruments.

Outstanding financial instruments and sensitivity analysis

The table below summarises the Group’s exposure to movements in the AUD:USD exchange rate and the derivative financial instruments that are in place to hedge these exposures at 30 September:

	2021	2020
	USD mill	USD mill
Transactional exposures
Trade and other receivables	0.4	5.8
Trade and other payables	(376.2)	(378.5)
Interest bearingliabilities	–	(1,200.0)
Gross exposure(before hedging)	(375.8)	(1,572.7)
Hedge of transactional exposures
Trade and other payables
Forward exchange contracts	372.1	352.3
Interest bearing liabilities Forward exchange contracts Total hedge contract values	– 372.1	1,200.0 1,552.3
Net exposure(after hedging)	(3.7)	(20.4)
	2021	2020
	USD mill	USD mill
Hedge of forecast sales and purchases Forward exchange contracts	(139.3)	(138.8)
Cross currency interest rate swaps	(151.6)	–
Foreign exchange options	(400.0)	(300.0)
Total hedge contract values	(690.9)	(438.8)

	Net contract		Net contract
	amounts		amounts
	mill	Strike(1)	mill	Strike(1)
Foreign exchange options	2021	2021	2020	2020
Contracts maturing within 1 year
Sold AUD Call	–	–	USD 60	0.78
Bought AUD Call	USD 400	0.81	USD 300	0.74
Sold AUD Put	USD 89	0.77	USD 160	0.71

(1) AUD:USD foreign exchange rate

Foreign exchange rates

The AUD:USD foreign exchange rates used by the Group to translate its foreign denominated earnings, assets and liabilities are set out below:

	2021	2020
	AUD:USD	AUD:USD
30 September foreign exchange rate	0.7180	0.7148
Average foreign exchange rate for theyear	0.7521	0.6783

Foreign exchange rate sensitivity on outstanding financial instruments

The table below shows the impact of a 1 cent movement (net of hedging) in the AUD:USD exchange rate on the Group’s profit and equity before tax in relation to foreign denominated assets and liabilities at 30 September:

2021 USD mill 2020 USD mill Translational exposures Net investment in foreign operations 2,195.7 2,520.4 Gross exposure(before hedging) 2,195.7 2,520.4 Hedge of translational exposures Cross currency interest rate swaps (251.4) (373.0) Forward exchange contracts – (930.0) Interest bearingliabilities (500.0) – Total hedge contract values (751.4) (1,303.0) Net exposure (after hedging) 1,444.3 1,217.4

equity before tax in relation to foreign denominated assets and liabilities at 30 September: + 1c AUD:USD AUD mill 2021 - 1c AUD:USD AUD mill 2021 + 1c AUD:USD AUD mill 2020 - 1c AUD:USD AUD mill 2020

Foreign exchange sensitivity – (net of hedging) Trade and other receivables and payables – (proft or loss) 0.1 (0.1) 0.4 (0.4) Hedge of forecast transactions – (equity) 7.3 (7.5) 8.5 (8.7) Investments in foreign operations –(equity) (27.6) 28.4 (23.5) 24.2

72

Notes to the Consolidated Financial Statements: Risk management For the year ended 30 September 2021

Sensitivity to foreign exchange rate movements during the year (unhedged)

The table below shows the impact of a 1 cent movement in the AUD:USD foreign exchange rate on the Group’s profit before tax, in relation to sales and earnings during the year that were denominated in USD.

denominated in USD.
	+ 1c AUD:USD AUD mill	- 1c AUD:USD AUD mill	+ 1c AUD:USD AUD mill	- 1c AUD:USD AUD mill
	2021	2021	2020	2020
USD Fertiliser sales from
Australian plants	(11.0)	11.3	(7.8)	8.1
North American USD
earnings	(2.5)	2.5	(3.3)	3.4

The fertiliser sales sensitivity calculation is based on actual tonnes manufactured by the Australian fertiliser plants and sold during the year, the average AUD:USD exchange rate for the year, and the average USD fertiliser price.

The North American earnings translation sensitivity calculation is based on the earnings before interest and tax from the North American business for the year and the average AUD:USD exchange rate for the year.

Market risk

Interest rate risk

Source of risk

Exposure to interest rate risk is a result of the effect of changes in interest rates on the Group’s outstanding interest bearing liabilities and derivative instruments.

Risk mitigation

The exposure to interest rate risk is mitigated by maintaining a mix of fixed and variable interest rate borrowings and by entering into interest rate derivative instruments.

Outstanding financial instruments and sensitivity analysis

The tables below include the Group’s derivative contracts that are exposed to changes in interest rates at 30 September:

	Average	Average	Average	Average
Interest rate swaps	pay/(rec) fxed rate LIBOR	pay/(rec) fxed rate BBSW	pay/(rec) fxed rate HIBOR		Duration (years)	Net contract amounts mill
2021
Less than 1 year Less than 1 year	2.00% (1.64%)	– –	– –		0.2 0.7	USD 50 USD 600
Less than 1 year	–	(0.20%)	–		1.0	AUD 181
1 to 5 years	–	(0.25%)	–		2.0	AUD 181
1 to 5 years	2.36%	–	–		1.9	USD 550
1 to 5 years	(0.52%)	–	–		3.1	USD 600
1 to 5 years Later than 5 years	– (2.02%)	– –	(4.13%) –		4.4 6.2	HKD 560 USD 200
2020
Less than 1 year	3.58%	–	–		0.2	USD 500
1 to 5 years	–	(0.20%)	–		2.0	AUD 200
1 to 5 years	3.14%	–	–		2.7	USD 600
1 to 5 years	(1.70%)	–	–		1.6	USD 600
Later than 5 years	(2.02%)	–	–		6.2	USD 200
Later than 5 years	–	–	(4.13%)		5.4	HKD 560

Interest rate sensitivity on outstanding financial instruments The following table shows the sensitivity of the Group’s profit before tax to a 1 per cent change in interest rates. The sensitivity is calculated based on the Group’s interest bearing liabilities and derivative financial instruments that are exposed to interest rate movements and the AUD:USD exchange rate at 30 September:

	+ 1%	- 1%	+ 1%	- 1%
	AUD mill	AUD mill	AUD mill	AUD mill
Interest rate sensitivity	2021	2021	2020	2020
LIBOR	(7.7)	7.7	(0.7)	0.7
BBSW	0.7	(0.7)	0.1	(0.1)

The sensitivity above is also representative of the Group’s interest rate exposures during the year.

73

Notes to the Consolidated Financial Statements: Risk management

For the year ended 30 September 2021

Market risk

Commodity price risk

Source of risk

Exposure to changes in commodity prices is by virtue of the products that the Group sells and its manufacturing operations, and can be categorised into five main commodities, namely: Ammonia, Ammonium Nitrate, Ammonium Phosphate, Urea and Natural Gas.

Risk mitigation

Where possible, commodity price risk exposure is managed by entering into long term contracts with customers (i.e Ammonium Nitrate and Ammonia) or derivative contracts for input cost (i.e US natural gas). However, in some instances price risk exposure cannot be economically mitigated by either contractual arrangements or derivative contracts by virtue of the products that the Group sells.

Outstanding financial instruments and sensitivity analysis

The table below includes the Group’s derivative contracts that are exposed to changes in natural gas prices at 30 September:

	Total	Price/	Total	Price/
	volume	Strike	volume	Strike
	(MMBTU)(1)	USD(2)	(MMBTU)(1)	USD(2)
Naturalgas	2021	2021	2020	2020
Contracts maturing	within 1 year
Natural gas swaps
fxed payer	610,000	2.52	961,800	2.54
Natural gas options
Bought Call	–	–	5,150,000	3.44
Sold Put	–	–	5,150,000	2.56
Contracts maturing	between 1 and 5 years
Natural gas swaps
fxed payer	70,000	2.58	680,000	2.53

(1) Million Metric British Thermal Units

(2) Nymex Henry Hub gas price

Natural gas price sensitivity on outstanding financial instruments The table below shows the sensitivity of the Group’s equity before tax to a change of US$1 per MMBTU in the US Henry Hub natural gas price. The sensitivity is based on natural gas derivative contracts held by the Group at 30 September. Gains or losses recognised in equity will be reclassified to the profit or loss as the underlying forecast transaction occurs:

	+ US$1 per	- US$1 per	+ US$1 per	- US$1 per
	1 MMBTU	1 MMBTU	1 MMBTU	1 MMBTU
Natural gas price	AUD mill	AUD mill	AUD mill	AUD mill
sensitivity	2021	2021	2020	2020
Henry Hub USD	0.9	(0.9)	7.0	(7.0)

Sensitivity to natural gas price movements during the year

The table below shows the sensitivity of the Group’s profit before tax to a change of US$1 per MMBTU in the US Henry Hub natural gas price. The sensitivity is based on the average natural gas price, the average AUD:USD exchange rate (excluding the impact of hedging) and the current annual natural gas consumption of the Group’s manufacturing operations in the Americas that are exposed to changes in natural gas prices:

	+ US$1 per	- US$1 per	+ US$1 per	- US$1 per
	1 MMBTU	1 MMBTU	1 MMBTU	1 MMBTU
Natural gas price	AUD mill	AUD mill	AUD mill	AUD mill
sensitivity	2021	2021	2020	2020
Henry Hub USD	(16.7)	16.7	(31.3)	31.3

Sensitivity to fertiliser price and ammonia movements during the year

The table below shows the sensitivity of the Group’s profit before tax to a US$10 per tonne change in Ammonium Phosphates, Urea and Ammonia prices. The sensitivity is based on actual tonnes manufactured and sold by the Group that is sensitive to commodity price changes and the average AUD:USD exchange rate (excluding the impact of hedging) for the year:

	+ US$10	- US$10
	per tonne	per tonne
Price sensitivity	AUD mill	AUD mill
2021
Granular Urea (FOB Middle East)	4.9	(4.9)
DAP/MAP (FOB China/Saudi)	12.6	(12.6)
Urea (FOB NOLA)	1.6	(1.6)
Ammonia(FOB Tampa)	4.2	(4.2)
2020
Granular Urea (FOB Middle East)	4.1	(4.1)
DAP/MAP (FOB Tampa)	14.4	(14.4)
Urea (FOB NOLA)	1.8	(1.8)
Ammonia(FOB Tampa)	8.9	(8.9)

74

Notes to the Consolidated Financial Statements: Risk management For the year ended 30 September 2021

Included in the table below are details of the Group’s derivative instruments at 30 September 2021, classified by hedge accounting type and market risk category:

market risk category:
30 September 2021 Note	Balance at 30 September 2021	During theperiod
	Carrying amount of hedging instrument asset Carrying amount of hedging instrument liability Fair value hedge adjustment of hedged item Balance of gains/ (losses) in reserves before tax	Gains/ (losses) recognised in reserves(1) Reclassifcation of (gains)/ losses from reserves to proft or loss(1,5)
Cash flow hedges Foreign exchange risk on forecast sales & purchases Forward exchange contracts Foreign exchange options Cross currency interest rate swaps Discontinued hedge(2) Commodity price risk on forecast purchases Commodity swaps Commodity options Discontinued hedge(2) Interest rate risk on highly probable debt Interest rate swaps Cross currency interest rate swaps Discontinued hedge(2)	42.3 (16.8) – 8.7 16.7 (24.4) (12.5) 0.8 – – (4.8) – – – (7.9) 1.9 (9.0) – (6.9) – – – – – – – (4.2) 0.1 (30.8) – 8.8 0.1 – – 0.1 – – – (68.5)	10.3 – (12.2) – (4.8) – (17.7) 12.5 (10.1) – (0.4) – 2.4 (2.2) 28.6 – – – (16.9) 12.1
Total cash fow hedges	61.9 (81.0) – (87.2)	(20.8) 22.4
Net investment hedges Foreign exchange risk on foreign operation Cross currency interest rate swaps Forward exchange contracts Interest bearing liabilities Discontinued hedge(2)	– (1.5) – (25.0) – – – – – – – (49.4) – – – (508.3)	(98.3) – (90.5) – (49.4) – 263.5 –
Total net investment hedges	– (1.5) – (582.7)	25.3 –
Fair value hedges Foreign exchange risk on HKD borrowings Cross currency interest rate swaps Interest rate risk on fxed USD, HKD and AUD bonds(3) Interest rate swaps Cross currency interest rate swaps Discontinued hedge	0.1 – – – 23.7 (10.7) (7.8) – – (0.3) – – – – 2.9 –	– – – – – – – –
Total fair value hedges (8)	23.8 (11.0) (4.9) –	– –
Held for trading(4) Cross currencyinterest rate swaps	0.3 – – –	– –
Total held for trading	0.3 – – –	– –
Equity instruments	3.0 – – (17.0)	– –
Total net	89.0 (93.5) (4.9) (686.9)	4.5 22.4

• (1) Gains or losses recognised in the reserves will be reclassified to the same line item in the profit or loss as the underlying hedged item when the underlying forecast transaction occurs.

(2) Gains or losses on discontinued hedges that were in cash flow hedge or net investment hedge relationships remain in the reserves until the underlying transactions occur or upon disposal of the underlying net investment. Any changes in the market value of the discontinued hedges are recognised in the profit or loss from discontinuation.

(3) Interest rate swap contracts effectively convert USD500m, AUD181m and HKD560m of the Group’s fixed interest rate borrowings to floating interest rates. The fair value hedge adjustment of a hedged item where the hedging instrument is discontinued remains in the carrying amount of the hedged item and is amortised to the profit or loss over the life of the hedged item.

(4) Derivatives which are classified as held for trading are in economic hedge relationships that do not qualify for hedge accounting. These hedges are effective economic hedges or offsetting hedges based on contractual amounts and cash flows over the life of the underlying item.

(5) At 30 September 2021, there were no gains/losses that were transferred from reserves to profit or loss in relation to ineffective hedges.

75

Notes to the Consolidated Financial Statements: Risk management For the year ended 30 September 2021

Included in the table below are details of the Group’s derivative instruments at 30 September 2020, classified by hedge accounting type and market risk category:

market risk category:
30 September 2020 Note	Balance at 30 September 2020	During theperiod
	Carrying amount of hedging instrument asset(1) Carrying amount of hedging instrument liability(1) Fair value hedge adjustment of hedged item(8) Balance of gains/ (losses) in reserves before tax	Gains/ (losses) recognised in reserves(2) Reclassifcation of (gains)/ losses from reserves to proft or loss(2,7)
Cash flow hedges Foreign exchange risk on forecast sales & purchases Forward exchange contracts Foreign exchange options Discontinued hedge(3) Commodity price risk on forecast purchases Commodity swaps Commodity options Discontinued hedge(3) Interest rate risk on highly probable debt Interest rate swaps Interest rate options Cross currency interest rate swaps Discontinued hedge(3)	31.8 (54.8) – (1.6) 1.1 – – (0.3) – – – (2.7) 4.3 (0.9) – 3.2 0.5 – – 0.4 – – – (4.4) 0.1 (69.5) – (19.8) – – – – 0.1 – – 0.1 – – – (63.7)	(1.8) – (0.3) – 16.3 (20.7) 3.9 – 0.4 – (1.0) 0.2 2.4 – 19.2 – (0.4) – (43.0) 1.5
Total cash fow hedges	37.9 (125.2) – (88.8)	(4.3) (19.0)
Net investment hedges Foreign exchange risk on foreign operation Cross currency interest rate swaps Forward exchange contracts Discontinued hedge(3)	37.9 – – 73.3 75.3 (339.0) – 90.5 – – – (771.8)	73.3 – 90.5 – (38.3) –
Total net investment hedges	113.2 (339.0) – (608.0)	125.5 –
Fair value hedges Foreign exchange risk on USD and HKD borrowings(4) Cross currency interest rate swaps Forward exchange contracts Interest rate risk on fxed USD, HKD and AUD bonds(5) Interest rate swaps Cross currency interest rate swaps Discontinued hedge	10.8 (1.4) – – 300.9 (75.3) (245.5) – 51.9 – (45.7) – 0.1 – – – – – 1.0 –	– – – – – – – – – –
Total fair value hedges (8)	363.7 (76.7) (290.2) –	– –
Held for trading(6) Forward exchange contracts Cross currencyinterest rate swaps	0.1 (0.1) – – 0.1 – – –	– – – –
Total held for trading	0.2 (0.1) – –	– –
Offsetting contracts(1)	(382.1) 382.1 – –	– –
Equity instruments	3.0 – – (17.0)	– –
Total net	135.9 (158.9) (290.2) (713.8)	121.2 (19.0)

(1) Balances are included in other financial assets/liabilities in the Statement of Financial Position. Financial assets and financial liabilities that are subject to enforceable master netting arrangements are offset in the Statement of Financial Position.

(2) Gains or losses recognised in the reserves will be reclassified to the same line item in the profit or loss as the underlying hedged item when the underlying forecast transaction occurs.

(3) Gains or losses on discontinued hedges that were in cash flow hedge or net investment hedge relationships remain in the reserves until the underlying transactions occur or upon disposal of the underlying net investment. Any changes in the market value of the discontinued hedges are recognised in the profit or loss from discontinuation.

(4) The total fair value of derivatives hedging the Group’s interest bearing liabilities is $287.0m. The derivatives hedging the foreign currency exposure of the Group’s USD and HKD borrowings have a contract value of USD1,200m and HKD560m, and are economic hedges of an equivalent amount of the Group’s USD and HKD borrowings.

(5) Interest rate swap contracts effectively convert USD500m, HKD560m and AUD450m of the Group’s fixed interest rate borrowings to floating interest rates. The fair value hedge adjustment of a hedged item where the hedging instrument is discontinued remains in the carrying amount of the hedged item and is amortised to the profit or loss over the life of the hedged item.

(6) Derivatives which are classified as held for trading are in economic hedge relationships that do not qualify for hedge accounting. These hedges are effective economic hedges or offsetting hedges based on contractual amounts and cash flows over the life of the underlying item.

(7) At 30 September 2020, there were no gains/losses that were transferred from reserves to profit or loss in relation to ineffective hedges.

(8) Fair value adjustment of hedged items includes the revaluation of debt that was refinanced during the year.

76

Notes to the Consolidated Financial Statements: Risk management For the year ended 30 September 2021

Credit risk: The risk of financial loss to the Group as a result of customers or counterparties to financial assets failing to meet their contractual obligations.

Source of risk

The Group is exposed to counterparty credit risk from trade and other receivables and financial instrument contracts that are outstanding at the reporting date.

Risk mitigation

The Group minimises the credit risk associated with trade and other receivables balances by undertaking transactions with a large number of customers in various countries.

The creditworthiness of customers is reviewed prior to granting credit, using trade references and credit reference agencies. Credit limits are established and monitored for each customer, and these limits represent the highest level of exposure that a customer can reach. Trade credit insurance is purchased when required.

The Group mitigates credit risk from financial instrument contracts by only entering into transactions with counterparties that have sound credit ratings and, where applicable, with whom the Group has a signed netting agreement. Given their high credit ratings, the Group does not expect any counterparty to fail to meet its obligations.

Credit risk exposure

The Group’s maximum exposure to credit risk at 30 September is the carrying amount, net of any provision for impairment, of the financial assets as detailed in the table below:

	2021	2020
	$mill	$mill
Trade and other receivables	517.0	400.8
Cash and cash equivalents	651.8	554.6
Derivative assets	86.0	132.9
	1,254.8	1,088.3

Financial assets and financial liabilities that are subject to enforceable master netting arrangements and are intended to be settled on a net basis are offset in the Statement of Financial Position. At 30 September 2021, the amount netted in other financial assets and other financial liabilities is nil (2020: $382.1m).

Fair value

Fair value of the Group’s financial assets and liabilities is calculated using a variety of techniques depending on the type of financial instrument as follows:

• » The fair value of financial assets and financial liabilities traded in active markets (such as equity securities and fixed interest rate bonds) is the quoted market price at the reporting date.

• » The fair value of financial assets and financial liabilities not traded in active markets is calculated using discounted cash flows. Future cash flows are calculated based on observable forward interest rates and foreign exchange rates.

• » The fair value of forward exchange contracts, interest rate swaps, cross currency interest rate swaps, commodity swaps and forward contracts is calculated using discounted cash flows, reflecting the credit risk of various counterparties. Future cash flows are calculated based on the contract rate, observable forward interest rates and foreign exchange rates.

• » The fair value of option contracts is calculated using the contract rates and observable market rates at the end of the reporting period, reflecting the credit risk of various counterparties. The valuation technique is consistent with the Black-Scholes methodology and utilises Monte Carlo simulations.

• » The fair value of commodity swaps and commodity forward contracts is calculated using their quoted market price, where available. If a quoted market price is not available, then fair value is calculated using discounted cash flows. Future cash flows are estimated based on the difference between the contractual price and the current observable market price, reflecting the credit risk of various counterparties. These future cash flows are then discounted to present value.

• » The nominal value less expected credit losses of trade receivables and payables are assumed to approximate their fair values due to their short term maturity.

Fair value hierarchy

The table below analyses financial instruments carried at fair value by valuation method. The different levels have been defined as follows:

• » Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

• » Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

• » Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

		Level 1	Level 2	Level 3
	2021	$mill	$mill	$mill
	Derivative fnancial assets Derivative fnancial liabilities Investment in EquityInstrument	– – –	86.0 (93.5) –	– – 3.0
		Level 1	Level 2	Level 3
	2020	$mill	$mill	$mill
	Derivative fnancial assets	–	132.9	–
	Derivative fnancial liabilities Investment in EquityInstrument	– –	(158.9) –	– 3.0

Fair value of financial assets and liabilities carried at amortised cost Cash and cash equivalents, trade and other receivables, and trade and other payables are carried at amortised cost which equals their fair value.

Interest bearing liabilities are carried at amortised cost and have a carrying value of $1,668.8m (2020: $1,870.3m) – refer to note 8. The fair value of the interest bearing financial liabilities at 30 September 2021 was $1,763.5m (2020: $1,949.2m) and was based on the level 2 valuation methodology.

77

Notes to the Consolidated Financial Statements: Risk management For the year ended 30 September 2021

Key accounting policies

Foreign currency transactions and balances

The Group presents its accounts in Australian dollars. Foreign currency transactions are translated into Australian dollars using the exchange rates at the date the transaction occurs.

Monetary assets (such as trade receivables) and liabilities (such as trade creditors) denominated in foreign currencies are translated into Australian dollars using the exchange rate at 30 September. Non-monetary items (for example, plant and machinery) that are measured at historical cost in a foreign currency are not re-translated.

Foreign exchange gains and losses relating to transactions are recognised in the profit or loss with the exception of gains and losses arising from cash flow hedges and net investment hedges that are recognised in other comprehensive income.

Foreign operations

The assets and liabilities of the Group’s foreign operations are translated at applicable exchange rates at 30 September. Income and expense items are translated at the average exchange rates for the period.

Foreign exchange gains and losses arising on translation are recognised in the foreign currency translation reserve ( FCTR ). If and when the Group disposes of the foreign operation, these gains and losses are transferred from the FCTR to the profit or loss.

Derivatives and hedging

The Group uses contracts known as derivative financial instruments to hedge its financial risk exposures.

On entering into a hedging relationship, the Group formally designates and documents details of the hedge, risk management objective and strategy for entering into the arrangement. The Group applies hedge accounting to hedging relationships that are expected to be highly effective in offsetting changes in fair value, i.e. where the cash flows arising from the hedge instrument closely match the cash flows arising from the hedged item.

Hedge accounting is discontinued when:

• » The hedging relationship no longer meets the risk management objective.

• » The hedging instrument expires or is sold, terminated or exercised.

• » The hedge no longer qualifies for hedge accounting.

Derivatives are measured at fair value. The accounting treatment applied to specific types of hedges is set out below.

Cash flow hedges

Changes in the fair value of effective cash flow hedges are recognised in equity, in the cash flow hedge reserve. To the extent that the hedge is ineffective, changes in fair value are recognised in the profit or loss.

Fair value gains or losses accumulated in the reserve are taken to profit or loss when the hedged item affects profit or loss. When the hedged item is a non-financial asset, the amount recognised in the reserve is transferred to the carrying amount of the asset when the asset is purchased.

Net investment hedges

Hedges of a net investment in a foreign operation are accounted for in a similar way as cash flow hedges. Gains or losses on the effective portion of the hedge are recognised directly in equity (in the FCTR) while any gains or losses relating to the ineffective portion are recognised in the profit or loss.

On disposal of the foreign operation, the cumulative value of gains or losses recognised in the FCTR are transferred to profit or loss.

Fair value hedges

The change in the fair value of the hedging instrument and the change in the hedged item are recognised in the profit or loss.

Hedge ineffectiveness

The Group aims to transact only highly effective hedge relationships, and in most cases the hedging instruments have a 1:1 hedge ratio with the hedged items. However, at times, some hedge ineffectiveness can arise and is recognised in profit or loss in the period in which it occurs. Key sources of hedge ineffectiveness for the Group are as follows:

• » Maturity dates of hedging instruments not matching the maturity dates of the hedged items.

• » Credit risk inherent within the hedging instrument not matching the movement in the hedged item.

• » Interest rates of the Group’s financing facilities not matching the interest rates of the hedging instrument.

• » Forecast transactions not occurring.

Classification of financial instruments

Financial instruments are classified into the following categories:

• » Amortised cost (cash and cash equivalents, interest bearing liabilities and trade and other receivables and payables).

• » Fair value through other comprehensive income (listed equity securities).

• » Fair value through profit or loss (derivative financial instruments except those that are in a designated hedge relationship).

78

Notes to the Consolidated Financial Statements: Other For the year ended 30 September 2021

18. Share-based payments

Incentive Plans

The Long Term Incentive Plans (LTIs) are designed to link reward with the key performance drivers that underpin sustainable growth in shareholder value. With regard to the 2018/21, 2019/22 and 2020/23 LTIs, the performance conditions comprise relative total shareholder return, the delivery of certain long term value metrics and growth in return on equity for the LTI 2018/21 plan and absolute return on invested capital for the LTI 2019/22 and LTI 2020/23 plans.

Certain Executives have been awarded performance rights under Short Term Incentive Plans (STIs) based on financial, safety and strategic outcomes.

These arrangements support the Company’s strategy for retention and motivation of its executives.

Expenses arising from share-based payment transactions

Total expenses arising from share-based payment transactions recognised during the period as part of employee benefit expense were as follows:

	2021 $mill	2020 $mill
Accounting value of performance rights issued
under the LTI and STI performance plans	3.2	2.4
	2021	2020
	Number	Number
Number of performance rights outstanding
under the LTI and STI performance plans	6,285,054	5,082,644

19. Key management personnel disclosures

Key management personnel remuneration

	Short-term employee benefts Post-employment benefts	2021 $000 10,706 144	2020 $000 8,141 163
	Other long-term benefts	67	100
	Termination benefts	183	468
	Share-basedpayments	2,495 13,595	1,838 10,710

Determination of key management personnel and detailed remuneration disclosures are provided in the Remuneration Report.

Loans to key management personnel

In the year ended 30 September 2021, there were no loans to key management personnel and their related parties (2020: nil).

Other key management personnel transactions

In the year ended 30 September 2021, there were no transactions entered into during the year with key management personnel (including their related parties).

Details of the movements in LTI and STI performance rights are disclosed in the Remuneration Report.

Key accounting policies

The rights to shares granted to employees under the terms of the plans are measured at fair value. The fair value is recognised as an employee expense over the period that employees become unconditionally entitled to the rights. There is a corresponding increase in equity, which is reflected in the share based payments reserve.

The amount recognised as an expense is adjusted to reflect the actual number of rights taken up, once related service and other non-market conditions are met.

79

Notes to the Consolidated Financial Statements: Other

For the year ended 30 September 2021

20. Retirement benefit obligation

The Group operates a number of defined benefit plans in the Americas and Asia Pacific to provide benefits for employees and their dependants on retirement, disability or death.

The Group also makes contributions to defined contribution schemes.

Financial position and performance

Net defined benefit obligation at 30 September

	2021 $mill	2020 $mill
Present value of obligations Fair value ofplan assets Net defned beneft obligation	307.2 (277.6) 29.6	321.9 (255.0) 66.9

Maturity profile of the net defined benefit obligation

The expected maturity analysis of the undiscounted defined benefit obligation is as follows:

Within next 10 years Within 10 to 20 years	2021 $mill 200.3 116.4	2020 $mill 207.2 127.8
In excess of 20years	43.0	41.8

Return on plan assets for the year ended 30 September

	2021	2020
	$mill	$mill
Actual return onplan assets	33.9	15.1

Composition of plan assets at 30 September

The percentage invested in each asset class: Equities Fixed interest securities	2021 8% 85%	2020 43% 42%
Property	3%	7%
Other	4%	8%

Movements in plan assets/liabilities

Amounts recognised in Other Comprehensive Income

Gains/(losses) arising from changes	Notes	2021 $mill	2020 $mill
in actuarial assumptions		1.9	(16.2)
Return on plan assets greater than discount rate Total proft/(losses) recognised in other comprehensive income Amounts recognised in Proft or Loss Net interest expense Defned beneft superannuation expense	(2) (2)	28.9 30.8 (1.8) (2.7)	7.2 (9.0) (1.4) (2.9)

Key assumptions and sensitivities

Principal actuarial assumptions

	Principal actuarial assumptions
	Discount rate (gross of tax)	2021 2.3% – 7.7%	2020 2.0% – 6.9%
	Future salaryincreases	2.0% – 5.0%	2.0% – 5.0%

Sensitivity analysis

The sensitivity analysis is based on a change in a significant actuarial assumption while holding all other assumptions constant. The following table summarises how the defined benefit obligation as at 30 September 2021 would have increased/(decreased) as a result of a change in the respective assumption by 1 percentage point:

	1 percentage point:
		1 percent	1 percent
		increase	decrease
	Discount rate	(26.8)	32.2
	Rate of salaryincrease	1.3	(1.2)

Key accounting policies

All employees of the group are entitled to benefits from the Group’s superannuation plan on retirement, disability or death or can direct the group to make contributions to a defined contribution plan of their choice. The Group’s superannuation plan has a defined benefit section and a defined contribution section. The defined benefit section provides defined lump sum benefits based on years of service and final average salary. The defined contribution section receives fixed contributions from group companies and the Group’s legal or constructive obligation is limited to these contributions.

The liability or asset recognised in the Consolidated Statement of Financial Position in respect of defined benefit superannuation plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets.

Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the period in which they occur, directly in other comprehensive income. They are included in retained earnings in the Consolidated Statement of Changes in Equity and in the Consolidated Statement of Financial Position.

Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognised immediately in profit or loss as past service costs.

Contributions to the defined contribution section of the Group’s superannuation fund and other independent defined contribution superannuation funds are recognised as an expense as they become payable.

Key estimates and judgments

The present value of the defined benefit obligation at the reporting date is based on expected future payments arising from membership of the fund. This is calculated annually by independent actuaries considering the expected future wage and salary levels of employees, experience of employee departures and employee periods of service.

Expected future payments are discounted using market yields on corporate bonds at the reporting date, which have terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.

80

Notes to the Consolidated Financial Statements: Other

For the year ended 30 September 2021

21. Deed of cross guarantee

Entities that are party to a Deed of Cross Guarantee are included in note 15. The Statement of Profit or Loss and Other Comprehensive Income and the Statement of Financial Position for this closed group are shown below:

Statement of Profit or Loss and Other Comprehensive Income

Statement of Proft or Loss and Other Comprehensive Income
2021 $mill	2020 $mill
Proft before income tax 177.5 Income tax beneft 5.7 Proft for theyear 183.2	9.1 29.3 38.4
Retained profts at 1 October 1,401.4 Proft for the year 183.2 Other movements in retained earnings 4.5 Dividendpaid (19.4) Retainedprofts at 30 September 1,569.7	1,437.1 38.4 (19.5) (54.6) 1,401.4

Statement of Financial Position

Statement of Financial Position
2021 $mill	2020 $mill
Current assets Cash and cash equivalents 566.4	495.0
Trade and other receivables 235.3	86.2
Inventories 385.3	294.3
Other assets 20.3	18.3
Other fnancial assets 64.6	76.6
Total current assets 1,271.9	970.4
Non-current assets Other fnancial assets 5,045.4	5,063.1
Property, plant and equipment 2,066.0	2,159.9
Right-of-use lease assets 123.9 Intangible assets 240.2 Deferred tax assets 229.7 Total non-current assets 7,705.2 Total assets 8,977.1 Current liabilities Trade and other payables 1,051.0 Lease liabilities 21.4	132.1 246.2 200.6 7,801.9 8,772.3 963.2 20.5
Other fnancial liabilities 52.9 Provisions 77.2	93.2 67.6
Current tax liabilities 82.4	16.8
Total current liabilities 1,284.9	1,161.3
Non-current liabilities Trade and other payables 204.2	272.2
Lease liabilities 125.6	135.2
Interest bearing liabilities 1,236.4	1,290.6
Other fnancial liabilities 46.3	65.3
Provisions 165.4	84.4
Deferred tax liabilities 348.0	389.3
Retirement beneft obligation 17.0	26.8
Total non-current liabilities 2,142.9	2,263.8
Total liabilities 3,427.8	3,425.1
Net assets 5,549.3	5,347.2
Equity Issued capital 3,806.2	3,806.2
Reserves 173.4	139.6
Retained earnings 1,569.7	1,401.4
Total equity 5,549.3	5,347.2

22. Parent entity disclosure

Throughout the financial year ended 30 September 2021 the parent company of the Group was Incitec Pivot Limited.

Parent entity guarantees in respect of debts of its subsidiaries

The parent entity is part of a Deed of Cross Guarantee, under which each entity guarantees the debt of the others.

Statement of Profit or Loss and Other Comprehensive Income

Comprehensive Income
	2021	2020
Results of theparent entity	$mill	$mill
Proft for the year	76.5	66.1
Other comprehensive income	10.3	(23.8)
Total comprehensive income for theyear	86.8	42.3

Statement of Financial Position

	Statement of Financial Position
		2021	2020
		$mill	$mill
	Current assets	930.2	538.3
	Total assets	8,847.2	8,406.6
	Current liabilities	1,003.7	779.2
	Total liabilities	4,531.3	4,232.7
	Net assets	4,315.9	4,173.9
	Share capital	3,806.2	3,806.2
	Reserves	(72.4)	(153.1)
	Retained earnings	582.1	520.8
	Total equity	4,315.9	4,173.9

Parent entity contingencies and commitments

Contingent liabilities of Incitec Pivot Limited are disclosed in note 16.

in note 16.
	2021	2020
Capital expenditure – commitments	$mill	$mill
Contracted but not yet provided for and payable:
Within oneyear	6.5	2.4

Tax consolidation

The Company and its wholly-owned Australian resident entities have formed a tax consolidated group. As a result it is taxed as a single entity. The head entity of the tax consolidated group is Incitec Pivot Limited.

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Notes to the Consolidated Financial Statements: Other For the year ended 30 September 2021

23. Auditor’s remuneration

23. Auditor’s remuneration
	2021	2020
	$000	$000
Deloitte and related network frms Audit or review of fnancial reports Group Subsidiaries andjoint operations	1,218.5 583.8	1,183.1 550.8
	1,802.3	1,733.9
Other assurance and agreed-upon procedures under other legislation or contractual arrangements not required to be provided bythe auditor	70.4	40.0
Other services:
Tax compliance services	–	10.3
Total remuneration	– 1,872.7	10.3 1,784.2
Non-Deloitte audit frms
Audit services	8.3	28.4
Other non-audit services	–	26.8
Total remuneration of non-Deloitte audit frms	8.3	55.2

24. Events subsequent to reporting date

Dividend

In November 2021, the Board has determined to pay a final dividend for the Company of 8.3 cents per share,14% franked, to be paid on 16 December 2021. The record date for entitlement to this dividend is 2 December 2021. The total dividend payment will be $161.2m.

Gibson Island manufacturing plant

On 8 November 2021, IPL announced that manufacturing operations at Gibson Island will cease at the end of December 2022. Further details are provided in note 12.

Other than the matters reported on above, the directors have not become aware of any other significant matter or circumstance that has arisen since the end of the financial year, that has affected or may affect the operations of the Group, the results of those operations, or the state of affairs of the Group in subsequent years, which has not been covered in this report.

From time to time, the auditors provide other services to the Group. These services are subject to strict corporate governance procedures which encompass the selection of service providers and the setting of their remuneration. The Audit and Risk Management Committee must approve individual non audit engagements provided by the Group’s auditor above a value of $100,000, as well as where the aggregate amount exceeds $250,000 per annum.

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Directors’ Declaration

on the Consolidated Financial Statements set out on pages 46 to 82

In accordance with a resolution of the directors of Incitec Pivot Limited (the Company ), we state that:

1. In the opinion of the directors:

2. (a) the consolidated financial statements and notes, set out on pages 46 to 82, are in accordance with the Corporations Act 2001, including:

   • (i) giving a true and fair view of the financial position of the Company and the Group as at 30 September 2021 and of their performance for the year ended on that date; and

   • (ii) complying with Accounting Standards in Australia (including the Australian Accounting Interpretations) and the Corporations Regulations 2001;

3. (b) the financial report also complies with International Financial Reporting Standards as disclosed on page 52; and

4. (c) there are reasonable grounds to believe the Company will be able to pay its debts as and when they become due and payable.

5. There are reasonable grounds to believe that the Company and the controlled entities identified in note 15 will be able to meet any obligations or liabilities to which they are or may become subject by virtue of the Deed of Cross Guarantee between the Company and those subsidiaries pursuant to ASIC Corporations (Wholly-owned Companies) Instrument 2016/785.

6. The directors have been given the declaration by the Chief Executive Officer and the Chief Financial Officer as required by section 295A of the Corporations Act 2001 for the financial year ended 30 September 2021.

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Brian Kruger Chairman

Melbourne, 15 November 2021

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Jeanne Johns Managing Director & CEO

Melbourne, 15 November 2021

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Deloitte Touche Tohmatsu A.B.N. 74 490 121 060 477 Collins Street Melbourne VIC 3000 Tel: +61 3 9671 7000 www.deloitte.com.au

Independent Auditor’s Report to the members of Incitec Pivot Limited

Report on the Audit of the Financial Report

Opinion

We have audited the financial report of Incitec Pivot Limited (the “Company”) and its subsidiaries (the “Group”), which comprises the consolidated statement of financial position as at 30 September 2021, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information, and the directors’ declaration.

In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001 , including:

• (i) giving a true and fair view of the Group’s financial position as at 30 September 2021 and of its financial performance for the year then ended; and

• (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001 .

Basis for Opinion

We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.

We confirm that the independence declaration required by the Corporations Act 2001 , which has been given to the directors of the Company , would be in the same terms if given to the directors as at the time of this auditor’s report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report for the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Liability limited by a scheme approved under Professional Standards Legislation Member of Deloitte Asia Pacific and the Deloitte organisation

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Key Audit Matter	How the scope of our audit responded to the KeyAudit Matter
Gibson Island manufacturing plant closure Refer to Note 2 Individually material items and Note 12 Impairment of goodwill and non- current assets The Group recorded material asset impairment write-downs and closure costs relating to the Gibson Island manufacturing plant. The determination and recognition of the asset impairment write-downs and closure costs were subject to management’s estimates and assumptions.	Our procedures included, but were not limited to: • Understanding the relevant controls and process that management has undertaken to determine the asset impairment write-downs and closure costs • Assessing and challenging the treatment of closure costs and impairment of Gibson Island assets by: o Assessing management’s estimation of closure costs by agreeing costs on a sample basis to external information, employment contracts and cost build- ups; o Assessing whether the provisions were appropriately recognised in accordance with IAS 37_Provisions,_ _Contingent Liabilities and Contingent Assets;_and o Agreeing the carrying value of manufacturing plant assets impaired to the asset register at 30 September 2021. • Assessing the appropriateness of the disclosures included in the Notes to the financial statements.
Provisions for uncertain tax positions Refer to Note 3 Taxation and Note 16 Provisions and contingencies The Group operates across a large number of jurisdictions and is subject to investigations and audit activities by revenue authorities on a range of tax matters during the normal course of business, including transfer pricing, indirect taxes and transaction related tax matters. The outcomes of these investigations and audits depend upon several factors and as a result management exercise judgement in the determination of the tax position and the estimates and assumptions, including the probability of potential outcomes, in relation to the provision for taxes.	Our procedures included, but were not limited to: • Understanding the relevant controls and process that management has undertaken to identify and assess uncertain tax positions, including the monitoring and consideration of guidance issued by regulatory authorities • In conjunction with our tax specialists: o Understanding the current status of tax assessments and investigations and the process to monitor developments in ongoing investigations and tax audit activities; o Assessing how the Group has accounted for uncertain tax positions in accordance with IFRIC 23_Uncertainty_ over income tax treatments; o Challenging the probabilities management has applied in determining the tax position and the estimates and assumptions in relation to the provision for taxes; and o Reviewing recent rulings and correspondence with local tax authorities, to assess that the tax provisions have been appropriately recorded or adjusted to reflect the latest external developments. • Assessing the appropriateness of the disclosures included in the Notes to the financial statements.

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Carrying value of goodwill and non-current assets

Our procedures included, but were not limited to:

• Understanding the relevant controls and process that management has undertaken to assess the recoverable amount

Refer to Note 2 Individually material items, Note 9 Property, plant and equipment, Note 11 Intangibles and Note 12 Impairment of goodwill and non-current assets

• In conjunction with our valuation specialists:

• Evaluating the appropriateness of the model used by management to calculate the value-in-use of the CGUs and Cheyenne manufacturing assets.

As at 30 September 2021, the Group held goodwill of $2,636.8 million, intangible assets of $364.1 million and property, plant and equipment of $3,928.9 million, allocated to its group of cash generating units (CGUs).

• Assessing and challenging the key inputs to the DNAP terminal value and Cheyenne impairment model by:

• § Corroborating the key independent market based assumptions built into the terminal value to external analysts’ reports, published industry growth rates and industry reports;

The assessment of the recoverable amount is subject to a high level of judgement and is based on management’s view of key variables and market conditions. The Group has prepared a value-in-use model to determine the recoverable amount of each CGU.

• § Corroborating the key non-market based assumptions by comparing Board approved forecasts to historical performance to test the accuracy of management’s projections;

• The Group’s Dyno Nobel Asia Pacific (‘DNAP’) § Agreeing contracted volumes and pricing model is highly sensitive to changes in assumptions in the model to the Board approved terminal value assumptions, including natural forecasts; gas prices, commodity prices, terminal value § Comparing the discount rates applied to the growth rate and discount rate.

• § Comparing the discount rates applied to the terminal value with an independently developed rate; and

The Group also recorded material asset impairment write-downs relating to the § Performing a range of sensitivity analysis on the Cheyenne plant during the current period terminal value with other assumptions including which was subject to management’s discount rates, natural gas prices, commodity estimates and assumptions in relation prices and foreign exchange rates. determining the impairment amount. • Assessing the appropriateness of the disclosures included in the Notes to the financial statements.

Other Information

The directors are responsible for the other information. The other information comprises the Directors’ Report, which we obtained prior to the date of the auditor’s report, and also includes the following information which will be included in the Group’s annual report (but does not include the financial report and our auditor’s report thereon): About Us company information, Performance and Outlook, Sustainability, Corporate Governance and additional securities exchange information, which is expected to be made available to us after that date.

Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

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Responsibilities of the Directors for the Financial Report

The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error.

In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Auditor’s Responsibilities for the Audit of the Financial Report

Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report.

As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

• Conclude on the appropriateness of the director’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group’s audit. We remain solely responsible for our audit opinion.

We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

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We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on the Remuneration Report

Opinion on the Remuneration Report

We have audited the Remuneration Report included in pages 23 to 43 of the Director’s Report for the year ended 30 September 2021.

In our opinion, the Remuneration Report of the Incitec Pivot Limited, for the year ended 30 September 2021, complies with section 300A of the Corporations Act 2001 .

Responsibilities

The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001 . Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

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DELOITTE TOUCHE TOHMATSU

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A T Richards Partner Chartered Accountants Melbourne, 15 November 2021

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Terry Ludeman Partner Chartered Accountants Melbourne, 15 November 2021

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