QSL: Working for YOU QUEENSLAND SUGAR LIMITED ANNUAL REPORT 2015/16

Transcription

1 QSL: Working for YOU QUEENSLAND SUGAR LIMITED ANNUAL REPORT 2015/16

2 CONTENTS Key Achievements 1 Chairman s Report 2 Managing Director and Chief Executive Officer s Report 3 Value Offering 4 Value Snapshot 6 Marketing 7 Logistics 9 Environment, Health and Safety 10 Pricing 11 Financing 13 QSL Members 14 Our People 15 Leadership Team 16 Corporate Governance 19 Remuneration Report 21 Statutory Financial Report 22 QSL Members THIRTY REPRESENTATIVES OF AUSTRALIAN SUGAR MILLS AND CANE GROWERS Leadership Team QSL Board of Directors GUY COWAN SARAH SCALES GREG BEASHEL GREG BEASHEL MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER ROBERT HINES CHIEF FINANCIAL OFFICER SUSAN CAMPBELL COMPANY SECRETARY AND LEGAL COUNSEL ANDREW HARRISON TECHNICAL MARKETING MANAGER JOANNE NUGENT GENERAL MANAGER HUMAN RESOURCES DOUGALL LODGE GENERAL MANAGER TRADING AND RISK AARON SEARLE FINANCIAL CONTROLLER MIKE PANKE TERMINAL MANAGER MACKAY AND BUNDABERG STEPHEN STONE TREASURER CAIRNS MOURILYAN LUCINDA TOWNSVILLE BRYCE WENHAM FINANCE MANAGER, SUPPLIER RELATIONS DAMIAN ZIEBARTH GENERAL MANAGER OPERATIONS MACKAY OUR LOCATIONS BUNDABERG BRISBANE QUEENSLAND SUGAR LIMITED ANNUAL REPORT 2015/16

3 ABOUT QSL KEY ACHIEVEMENTS FOR 2015/2016 Meeting our 5 for 5 multi-year safety target, with a Total Recordable Injury Frequency Rate (TRIFR) of 5 as at 30 June PURPOSE: To serve the interests of growers and millers for the long-term prosperity of the Queensland sugar industry Maximised returns through the strategic use of innovative price risk management products and tactical risk management, with 2015-Season QSLmanaged pools outperforming the market benchmark on a weighted average basis by $19.61 per tonne IPS (International Polarisation Scale) net. Coordinated the successful receipt of $1.9 billion in customer payments, with 98% of shipments delivered in full and on time. Secured enhanced marketing returns above the Free On Board (FOB) physical market premium average and maintained our position as the largest marketer of Queensland sugar. Reduced our funding costs by entering into a US$200 million syndicated inventory financing agreement and leveraging flexibility within our core $500 million syndicated credit agreement to reduce line fees. Expanded grower payment and pricing options via delivery of an accelerated Advance payments schedule for the Guaranteed Floor Pool, with plans to introduce 10-tonne minimum orders for our Target Price Contract product and a longer in-season Fixed Contract pricing window from the 2017 Season. Maintained our strong environmental record, with no reportable offences during the reporting period. GOAL: To create prosperity for growers and millers by maximising the pool price Introduced use of Near Infrared Spectroscopy in export quality management. Received industry recognition for QSL s commitment to youth training and noted improvements in QSL s annual Women s Gender Equality Agency compliance report. Delivered the Cairns Bulk Sugar Terminal Shed 2 re-roofing project safely, on time and under budget. Undertook our inaugural measurement of QSL s organisational culture using the Human Synergistics Organisational Cultural Inventory. Implemented the use of advanced coatings to extend the life of the Bulk Sugar Terminals marine concrete structures to potentially 100 years. Successfully executed the second year of our Korean Long Term Contract. QUEENSLAND SUGAR LIMITED ANNUAL REPORT 2015/16 1

4 CHAIRMAN S REPORT GUY COWAN The past year has proven to be a pivotal one for our business, with significant developments regarding Marketing Choice set to lay the foundations of a new era for QSL and the Queensland sugar industry as a whole. In spite of challenging negotiations, the implementation of Marketing Choice provides a unique opportunity for industry to work together to shape the way forward. As the saying goes, the secret of change is to focus all your energy, not on fighting the old, but on building the new. And QSL is well and truly focused on building the new. As a fixture of the Queensland sugar industry for nearly a century, it may be tempting to dismiss QSL as a relic of the pre-deregulation era, somehow wedded to the ways of the past. But to do so fails to recognise our history of innovation. We are the masters of reinvention. Since our origins as the Queensland Sugar Board back in 1923, through to our emergence as the Queensland Sugar Corporation in 1991, and subsequent evolution as QSL in 2000, we have been at the forefront of a raft of significant industry advancements for our state. From the first bulk sugar cargoes, to the Advance payments system and grower pricing options envied around the world, we look upon this new era of Marketing Choice as not only the next chapter in the history of our industry, but the next stage of our own corporate evolution. Driven by our constitutional requirement to serve the interests of growers and millers for the long-term prosperity of the Queensland sugar industry, we see ourselves as our industry s trusted partner, with this enduring focus also reflected in our corporate values: Build partnerships Be Real Aim High Be the Solution Believe T.E.A.M. (Trust, Empathy, Accountability, Morals) works These values were created by our people and reflect not only their aspirations, but QSL s wider business approach. And I am proud to say that the turmoil of the past few years has failed to dull our team s efforts in this regard. They remain a key element of QSL s success as well as a great source of support for the Board, and I thank them for their ongoing commitment and service. So as the long-awaited global raw sugar deficit gathers momentum and our international competitors jockey for position, our industry must be at its best if we are to take the next step and capture the full potential of the opportunities at hand. We are off to a positive start for the 2016 Season, with the QSL pricing team already securing impressive returns from the recent uplift in ICE 11 prices, despite the production risk considerations associated with the current wet harvest. QSL continues to enjoy strong relationships with our Raw Sugar Supply Agreement (RSSA) signatories Bundaberg Sugar, Isis Central Mill and Mackay Sugar, and we look forward to working with them well into the future. We also remain committed to providing quality logistics, pricing and financing to our other miller members, with new On-Supply Agreements set to supplement our current contracted RSSA tonnages with Grower Economic Interest in sugar (GEI in sugar) nominations from next season. I am also pleased to advise that we are having positive negotiations with Sugar Terminals Limited (STL) for an ongoing operating agreement for the six bulk sugar terminals. Such an arrangement would help to protect and maximise the immense strategic value of these important assets, as well as providing our industry with stability regarding their future management and use. We continue to innovate across our pricing, marketing, financing and logistics streams in response to the needs of our members and the industry we serve, with new products, services and contractual arrangements evidence of why we remain a leader in our field. Our unique value proposition is unparalleled and at the industry s disposal, so we ask you to consider how you can better tap in to our strengths and expertise to further your own business objectives. QSL does not fear the future. To the contrary, we are eager to embrace it and we call upon the rest of the industry we serve to join our efforts to capitalise on the promise ahead. 2 QUEENSLAND SUGAR LIMITED ANNUAL REPORT 2015/16

5 MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER S REPORT GREG BEASHEL The 2015/16 Financial Year was another watershed one for our business, with a strong financial performance setting the company up well for expected stronger competition. The bear market experienced for much of the year brought the important work of the QSL team to the fore, with our decision to use discretion and lock in prices early in a falling market proving to be the right call. And while the efforts of our marketing and pricing teams often bear the weight of performance expectations for those millers and growers using our services, it is truly a combined effort in delivering well on all our service offerings and contractual undertakings to clients that ultimately results in the returns passed back to the industry we serve. On the pricing front, the continuing global raw sugar surplus saw early pricing opportunities above US13 c/lb slip away, with the ICE 11 falling below US 11 c/lb during the first half of the year, before a tightening of trade flows in 2016 rallied prices. These tumultuous market conditions resulted in a Passive Management Benchmark (PMB) outcome (see PMB definition page 12) of $A per tonne IPS net. Despite this undeniably tough year on the markets, I am pleased to advise that QSL surpassed the PMB during the reporting period, securing a weighted average return of $A per tonne IPS net, some $19.61 per tonne IPS net above the benchmark. This result was no small feat and is the fifth year that QSL s weighted average return for its managed pools has surpassed the PMB. QSL s best-performing in-season pool was the 2015 QSL Actively Managed Pool, which returned $ per tonne IPS net, $43.87 above the PMB. Our 3-Season Pool was the best-performing QSL-managed pool overall, returning $ per tonne IPS net, $71.65 above the PMB. These pricing results were underpinned by the work of the QSL marketing team, which, despite volatile physical and freight market environments, was able to secure enhanced premiums above the Free On Board physical premium average. Through their efforts QSL was also able to retain our preferred supply position with many of our key customers and maintain access to reliable counterparties. Much of the credit for our enduring relationships with our most valued customers is also attributable to the great work of the QSL logistics team. Their efficient and effective operation of Sugar Terminal Limited s six bulk sugar terminals ensured the Queensland sugar industry retained its long-standing reputation and competitive advantage as the most reliable raw sugar export system in the world. During the past year the QSL logistics team worked closely with our Miller Members and their appointed marketing companies, including QSL, to coordinate 112 ship loadings and the shipment of over 4 million tonnes of Queensland raw sugar, ensuring 98% of these shipments were delivered in full and on time. This work was achieved within our safety target of a Total Recordable Injury Frequency Rate of 5 as of 30 June We also maintained our impressive environmental performance, with our strong and ongoing commitment to our environmental operating conditions resulting in no environmental offences during the reporting period. QSL s logistics team also oversaw the faultless receipt of $1.9 billion in customer payments, working closely with our customers to expedite the payment process by promoting speed of document execution and payment. QSL s finance team made an invaluable contribution to our final result as well, securing a new US$200 million Syndicated Inventory Facility and temporarily reducing the limit on our existing $500 million core syndicated credit agreement during non-peak times to capture savings in funding costs and line fees. QSL Finance also increased payment and pricing options for both growers and millers using QSL s pricing products, delivering an accelerated Advance payments schedule for the Guaranteed Floor Pool and increasing forward pricing options by reducing minimum orders to 50 tonnes for our Target Price Contract product. It is efforts such as these throughout the entire QSL business that contribute to our overall success, and ultimately help to determine the value we subsequently pass back to the industry we serve. As we work to implement Marketing Choice arrangements for the coming season, our performance during the past year and our ability to deliver in the future will be in the spotlight like never before. We welcome this new challenge and remain confident that the QSL value proposition will continue to remain compelling as the new Queensland sugar industry landscape takes shape in the year to come. QUEENSLAND SUGAR LIMITED ANNUAL REPORT 2015/16 3

6 VALUE OFFERING Queensland Sugar Limited (QSL) is a not-for-profit, income tax-exempt organisation owned by the Queensland sugar industry. Its membership is structured to have equal representation between growers and millers, with all net value returned to the industry we serve. QSL is focused on maximising returns while reducing overall costs. It does this by moving Queensland raw sugar exports through an end-toend supply chain model, providing a significant advantage in managing risks and seeking to outperform market benchmarks. Considerable value is achieved and economies of scale are reached when Queensland s raw sugar exports are moved through this industry-collaborative system. QSL has seven Mill Owner Members and 23 Grower Representative Members who represent 4000 growers across the state. We provide four main value offerings: pricing, financing, marketing and logistics. PRICING QSL offers a range of pricing products to millers and growers tailored to different risk appetites. These options include QSL-managed pools, individual forward pricing and miller-managed pricing pools. Our experienced and professional pricing team actively monitors the sugar futures and foreign exchange markets. Their pricing decisions are based on this market knowledge and the unique risk parameters set for each QSL pool product. This team has a track record of outperforming market benchmarks. FINANCING QSL provides ongoing cost-effective financing to millers throughout the season who subsequently pass this on to growers. This payment is on receipt of sugar at a bulk sugar terminal (BST) and is often in advance of the sugar being sold or the payment received from the customer. Incremental payments are made throughout the season based on a proportional amount of QSL s current estimate of the final weighted average pool price that the miller will receive for raw sugar supplied under the RSSA. QSL draws on a syndicated facility agreement to fund the Advances Program. MARKETING (SELLING) QSL has long-term relationships with customers who value its producer-seller model. Its marketing strategy platform is based on developing long-term and sustainable relationships with highreturning customers and having strong supply chain relationships where value can be optimised. This approach puts the customer first and has a focus on reliably delivering high-quality sugar best suited to each customer s operations. QSL sells the majority of Queensland s export raw sugar into the Asian market. LOGISTICS QSL manages the highly effective storage, handling and shipping of bulk raw sugar, providing logistics services for QSL s export tonnage and sales arranged by our milling suppliers. It operates six bulk sugar terminals (BSTs) under a lease with Sugar Terminals Limited, and takes delivery of raw sugar, blends it to achieve the quality that meets customers needs and then loads all shipments leaving Queensland s shores. QSL has a strong on-time and in-full delivery track record, collectively managing the terminals to keep costs down while maximising shipping flexibility. Throughout the operations process the key focus remains the safety of our people, with our BST teams working collectively to maximise safety learnings across the business. 4 QUEENSLAND SUGAR LIMITED ANNUAL REPORT 2015/16

7 SNAPSHOT OF VALUE OFFERING GROWERS Sell cane to Millers $ $ MILLERS Crush to raw sugar Raw sugar supply agreement (RSSA) with QSL Sell to domestic market and have option to sell their economic interest sugar internationally QSL Maximise net returns that are passed through to millers and growers FINANCING PRICING MARKETING (SELLING) LOGISTICS Obtain financing from banks at low interest rate MILLERS GROWERS Access to low-cost financing Access to A$500m syndicated debt facility and US$200m syndicated inventory facility Stable, ongoing income through regular advance payments. Knowledge, expertise and experience in pricing and managing Futures Market $/t POOLS Priced collectively Costs and revenues shared $ Knowledge and expertise in sugar market trading Competitive forward pricing versus other alternatives Seek to outperform market benchmarks Offer a range of pooling options to price sugar based on market risks and returns Manage international market risks including: Sugar price falls Foreign exchange changes. Sell to International Market Strong relationships with high-returning customers in Asia Pacific region Target customers who will pay a premium (eg value Australian sugar) above ICE11 Seek to outperform market benchmarks Generate revenue streams through Other-Origin sugar trading Manage counter-party risks (ensuring customer meets terms of contract). Bundaberg Operate safe and efficient storage and shipping of raw sugar TERMINALS Cairns Reduce risks in changes to crop estimates (eg disease, weather) by combining tonnage to meet sales commitments Ensure reliable delivery of shipments with access to six terminal and storage facilities Flexibility in managing quality of sugar (eg colour and filterability) with options to blend or separate sugar as required Match sugar quality to customer preference through access to bulk tonnage Reduce logistics costs (eg freight rates) by combining tonnage and shipping in large vessels Attractive freight rates through bundling shipping orders Strong relationship with ship owners providing flexibility in movement and access to vessels Cost efficiences through operating six terminals as one. Lucinda QSL Harvest Pool Mackay Mourilyan Townsville QSL Guaranteed Floor Pool QSL Actively Managed Pool QSL 2-Season Forward Pool Monitoring, analysing and hedging ICE11 and ICE16 Supplier Pools International customers Asia/USA/Europe US Quota Pool Note: Information current as at September 2016 and may change. QUEENSLAND SUGAR LIMITED ANNUAL REPORT 2015/16 5

8 VALUE SNAPSHOT KEY HIGHLIGHTS 2015/2016 QSL outperformed the market benchmark for QSL-managed pools by a weighted average of $19.61 per tonne IPS net The Shared Pool allocation was -$1.42 per tonne million tonnes of raw sugar were marketed by QSL during the 2015/16 Financial Year million tonnes of raw sugar were handled through the Bulk Sugar Terminals during the reporting period QSL loaded 112 vessels during the year 98% of deliveries were made in full and on time A total of 53,914 trucks were unloaded during the period at the Cairns, Mourilyn, Mackay and Bundaberg Bulk Sugar Terminals A total of 51,348 train wagons were unloaded during the period at the Lucinda, Townsville and Mackay Bulk Sugar Terminals QSL s weighted average cost of funds was 2.85% (excluding line fees) OVERALL VALUE CREATED IN THE QSL-MANAGED ICE 11 POOLS COMPONENTS OF TOTAL QSL-MANAGED ICE 11 POOLS VERSUS THE PASSIVE MANAGEMENT BENCHMARK FOR THE 2015 SEASON $A/TONNE IPS $440 $430 $420 Gross CFR Premium +$38.98 Freight and Execution Costs -$23.54 Polarisation Premium +$13.96 Storage and Handling -$20.88 $410 $400 $390 $380 Gross ICE 11 Pools $ Quality & Brand Costs -$3.70 Marketing Services Costs -$1.69 Shared Services Costs Shared Services Rebate -$0.84 +$0.58 Finance Costs Shared Pool -$4.29 -$1.42 Net ICE 11 Pools $ $19.61 Value added above benchmark $370 $360 $ Passive Management benchmark $350 $0 This graph shows the components that make up the QSL ICE 11 Shared Pool and highlights the value created above the Passive Management Benchmark (see page 12 for PMB definition). Overall QSL secured strong 2015 Season pool price returns and outperformed the market by an average of $19.61 per tonne IPS for QSL-managed pools. (To convert tonne IPS to tonne actual multiply by a conversion factor of 1.037) The information in the graphs and tables and in the pricing and marketing updates is of a general or summary nature and, whilst care is taken in their preparation, the reliability, accuracy or completeness of them is not guaranteed. The updates on marketing and pricing activities do not constitute financial product or investment advice. You should seek your own financial advice. Past performance is provided for reference only and may not be indicative of future performance. Costs and charges may vary from year to year. QSL cannot guarantee the performance of any pool. 6 QUEENSLAND SUGAR LIMITED ANNUAL REPORT 2015/16

9 MARKETING KEY ACHIEVEMENTS Secured enhanced marketing returns above the FOB physical market premium average Maintained position as largest marketer of Queensland origin sugar Successfully executed the second year of Korean Long Term Contract The 2015 Season delivered a volatile physical market, with historical levels for Free On Board (FOB) Queensland physical premiums equivalent to levels from Thailand or Brazil during the period. The US$50 per metric tonne range in values illustrated in the graph below reflects a shift in the global supply-and-demand picture from a multi-year surplus to a deficit. Indonesia s tariff disparity for ASEAN-origin raw sugar (i.e. sugar produced by Association of Southeast Asian Nations Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam) at a preferential import tariff rate versus other origin meant that Thai FOB premiums for raw sugar were supported during the second half of the season and have continued to remain firm while this difference exists. These values traded between being at a discount to a premium of approximately US$25 per metric tonne. The freight market was also very unstable during the reporting period, falling to levels not seen since the Global Financial Crisis back in Despite this challenging marketing environment, QSL was able to maintain access to reliable counterparties and retain our preferred supply position into many of our key customers in Asia. We appreciate this ongoing support from our longterm customer refinery partners and remain committed to meeting their needs in the future. However, the range of potential outcomes during the past financial year highlights the significance of the QSL marketing team s contribution to the overall pool results and the importance of having clear benchmarks to understand a marketer s performance in this area. As the Queensland raw sugar industry starts to transition into the new era of Marketing Choice for the 2017 Season, it is timely to recap some of the key elements of the QSL marketing package that not only underpin our strong reputation in the marketplace but also help to differentiate the QSL offering from our competitors. In order to achieve optimal results in pricing pool returns, raw sugar marketing must be more than just about selling raw sugar to a refinery customer. The process must start with the raw sugar product to be sold and the quality of that sugar. A strong knowledge of each customer market and its different tariff levels, quality requirements and customs regulations for raw sugar imports is also essential. QSL has been managing this supply and demand relationship on behalf of the industry we serve for up to 50 years in some markets, managing through multiple challenges during this time. It is within this environment that the Queensland sugar industry s collaborative raw sugar quality scheme developed, covering a number of target specifications at a mill level to ensure that the product delivered to the bulk sugar terminals will maintain its quality over the expected storage period. This incoming sugar quality is then coupled with strong oversight and flexible management of quality by the QSL logistics team across each of the six terminals along the Queensland coast, so that we can respond to each customer quality requirement. There is no other producer in the world that has this level of quality oversight and flexibility. PHYSICAL PREMIUMS (FOB QLD EQUIVALENT) Points (100pts = US$22.04) /02/15 27/03/15 27/04/15 27/05/15 27/06/15 27/07/15 27/08/15 27/09/15 27/10/15 27/11/15 27/12/15 27/01/16 27/02/16 27/03/16 27/04/16 Thais Brazil This graph illustrates recent strength in the cash premium for raw sugars. Tighter sugar availability in the far-east combined with a growing statistical deficit has underpinned cash values. See disclaimer on page 6. QUEENSLAND SUGAR LIMITED ANNUAL REPORT 2015/16 7

10 MARKETING CONTINUED The second primary element of difference in the QSL marketing offering is the delivery. Each refinery customer has a different discharge port and storage capability at their receiving location. QSL currently manages all of its sales to export markets on a Cost and Freight (CFR) basis, chartering approximately 70 vessels per year. We do this for three key reasons: 1. We need to manage the timing of the ship arrival to ensure we stay within our storage footprint in the terminals. This is particularly important in conditions such as the 2015 Season, where we had extra sugar production towards the end of the season. 2. We generate value for our customers through a just-in-time delivery service. Our customers know that once QSL has despatched the sugar it will arrive at their ports within the designated time to help manage their stock levels. 3. We leverage our direct participation in the freight market and ability to maintain a scale of chartering and partnership with ship owners. The short turnaround time at the QSL ports and our strong performance history make us an attractive customer for international shipping companies, which we use to secure competitive freight rates. And finally, QSL s level of service and sustainability is second to none. As a marketer of Queensland raw sugar to some of our key customers for nearly half a century, we have a proud history of meeting our customers needs and helping them to create value in their own businesses. As a new generation of customers become increasingly interested in the sustainability credentials of the Queensland raw sugar product, QSL is working closely with the Smartcane BMP program and is well positioned to maintain access to our blue-chip customers. When QSL is negotiating with existing and potential customers regarding raw sugar supply, all of the elements outlined above comprise QSL s value proposition as a reliable producer-seller. By comparison, many of our global trade house competitors will buy their sugar from multiple producers or other trade houses with the aim to set minimum quality standards in their contracts. They tend to have a separate agreement with refiners to supply sugar from a number of different origins, such as Thailand, Brazil, Guatemala, Cuba or Queensland. Refiners are usually only prepared to give this level of flexibility to the traders at a discount to the market. In contrast, some refinery customers are keen to secure access to a reliable supply of Queensland raw sugar via longer-term agreements with QSL, and willing to pay a premium for this. We expect that this will remain an important part of our marketing opportunities well into the future and look forward to providing unmatched value to our refinery customers in the years to come. 8 QUEENSLAND SUGAR LIMITED ANNUAL REPORT 2015/16

11 LOGISTICS KEY ACHIEVEMENTS 98% of shipments delivered in full and on time Cairns Shed 2 re-roofing project delivered safely, on time and under budget Faultless receipt of $1.9 billion in customer payments Introduction of Near Infrared Spectroscopy in export quality management Advanced coatings used to extend the life of BST marine concrete structures to potentially 100 years QSL retained its reputation as a world-class logistics operator during the 2015/16 financial year, producing a 98% Delivered In-Full On-Time (DIFOT) performance result. In a constantly-changing operations environment affected by multiple external factors beyond our control, this was no easy feat and was only achieved by seamless communications between our customers and QSL s marketing team, quality and logistics manager and terminal operations teams. One of QSL s strengths is our after-sales service and faultless receipt of $1.9 billion in customer payments. We continue to ensure payment before ships arrive at their destination by presenting documentation with no discrepancies for customs clearance and no interbank transfer errors. All too often within international trade houses, documentation can be delayed due to problems with discrepancies, negotiations and the multiple parties involved in the sales chain. QSL works closely with our customers to expedite this process by promoting speed of document execution and payment. The recently negotiated Japan-Australia Economic Partnership Agreement opened up even greater opportunities to sell Australian sugar to our longstanding customer, Japan. The Japanese raw sugar market comes with exacting standards on quality to meet their needs. During the reporting period QSL introduced the use of Near Infrared Spectroscopy (NIR) to control raw sugar blending when loading ships, which provides accurate results for Pol, moisture and other quality information within a minute of loading the sample into the machine. Also at the terminals, Cairns Bulk Sugar Terminal s Shed 2 was successfully re-roofed during the 2015/16 financial year. This project, which was completed in September 2015 in readiness to store the last of the 2015-Season Cairns-district crop, was part of QSL s wider and ongoing roof replacement program which has already seen work completed at the Mackay and Lucinda bulk sugar terminals. Each individual project in this program must be completed in the short window between the end of the cyclone season each year and a mid-point in the annual harvest. But despite this added challenge, QSL has secured the safe and timely delivery of all of these projects undertaken to date within their allocated budgets. The Townsville BST achieved Phytosanitary certification during the reporting period. This export quality standard is a prerequisite for export to China and is administered by the Australian Federal Department of Agriculture and Water Resources. The Townsville terminal now joins our Lucinda and Mourilyan operations with this special ability, making 60% of Queensland s raw sugar production capable of being shipped to China if required. In addition to expanding terminal capabilities, during the past two years QSL operations has turned its mind to extending the life of the terminal facilities. The concrete marine structures at the six bulk sugar terminals are exposed to the extremes of Queensland s climate. QSL hopes to extend the viability of these structures to up to 100 years through the use of advanced coating products designed to reduce the ingress of chlorine and oxygen, and retard the associated degradation of the core reinforcing steel. TONNES HANDLED THROUGH THE BULK SUGAR TERMINALS LAST 5 SEASONS TOTAL TONNES ACTUAL ( 000) 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, Storage and handling (domestic) RSSA This graph reflects the tonnage of raw sugar handled at the six bulk sugar terminals over the last five seasons. It shows the amount that is handled through storage and handling agreements and the Raw Sugar Supply Agreements. QSL achieves cost reductions in the area of chartering by managing the majority of Queensland s export raw sugar in bulk and optimising the flexibility provided through the six bulk sugar terminals it manages. In the 2015/16 Financial Year, QSL handled million tonnes of raw sugar. See disclaimer on page 6. QUEENSLAND SUGAR LIMITED ANNUAL REPORT 2015/16 9

12 ENVIRONMENT, HEALTH AND SAFETY KEY ACHIEVEMENTS Development and implementation of Safety Leadership Resilience Program Review of EHS Strategy and implementation of Strategy Introduction of Physical, Psychological and Social Risk Program and tools Development and implementation of QSL Way Training program TRIFR result of 5 as at 30 June 2016, in line with a TRIFR of 5 for 5 years target No environmental offences during reporting period This year saw the culmination of QSL s Environment Health and Safety (EHS) Strategy, with a Total Recordable Injury Frequency Rate (TRIFR) result for the year of 5 (calculated at per million hours worked, as per Australian standard), meeting our TRIFR target of 5 for 5 (i.e. TRIFR of 5 or less for five years). Following this success, the strategy was subsequently reviewed across the business as an opportunity to reflect, learn and develop the next phase of our EHS risk maturity via the development of the EHS Strategy. Our Safety Leadership Team provided specialised insights to assist with the strategy s future implementation, with a continued focus on developing people through language, leadership and learning. QSL appreciates that the TRIFR target is only a symbol of our success and that it provides a tool to help communicate how we have been progressing. We also implemented a number of programs and tools during the past financial year to progress our EHS education efforts, including: SAFETY LEADERSHIP RESILIENCE PROGRAM This program focused on understanding individual leadership and communication capabilities with progression into developing group skills. Participants then completed structured operational exercises to assist with development. INTRODUCTION OF PHYSICAL, PSYCHOLOGICAL AND SOCIAL RISK PROGRAM AND TOOLS As QSL s risk maturity developed, an enhanced way of understanding and communicating risk was created through the use of specialised tools, training and practice. Traditional risk assessment focuses on physical risk and neglects the importance of how psychological and social risk plays a part in how we manage risk in our daily activities. The implementation of this program assists by further enhancing how we make decisions about risk. ROOT CAUSE ANALYSIS PROGRAM The Root Cause Analysis Program was implemented across all QSL operational sites to provide an opportunity to analyse and discuss opportunities for enhancement. This tool is used for a range of operational activities, with learnings shared across the business. THE QSL WAY In line with our focus on integrating tools to support our people, we developed The QSL Way. The program includes key EHS information for all QSL employees in a familiar language, with the training material provided in eight components that scaffold each employee s knowledge as they become ready to progress. It is delivered internally through the use of competent and approved QSL employees and is integrated with the QSL learning management system. ROLLING 12-MONTH INCIDENT STATISTICS FOR THE PERIOD ENDING JUN TRIFRs 2 Jul Aug Sep Oct Nov Dec Jan Months Target 12 month rolling average Feb Mar Apr May Jun 0 10 QUEENSLAND SUGAR LIMITED ANNUAL REPORT 2015/16

13 PRICING KEY ACHIEVEMENTS QSL-managed pools for the 2015 Season outperformed the market benchmark on a weighted average basis by $19.61 per tonne IPS net The 3-Season Forward Pool produced the highest return with $ per tonne net The Actively Managed Pool was the strongest performing in-season pool at $ per tonne IPS net QSL s use of innovative price risk management products and tactical risk management played a key role in maximising returns SUGAR The 2015/16 Financial Year saw a season characterised by increasing price volatility, yet the overhang of sugar stocks at destination continued to weigh on prices. Market participants grappled with the negative market sentiment reflective of a five-year surplus cycle. As the season progressed, however, the market became increasingly aware that production forecasts were indicating a much tighter sugar trade balance ahead. The influence of a broadly weaker Brazilian currency again had a profound effect on ICE 11 raw sugar futures as Brazilian suppliers rushed to hedge current and future production, given the advantage of their lower currency. Each attempt by prices to move higher was met with waves of Brazilian producer selling. The impact of Brazil s currency devaluation effectively extended the price effect of a sugar surplus cycle by a further season. Ironically, the Real has now seemingly reversed its fortunes which is feeding into more positive sentiment. Despite the highly regulated nature of the sugar market which has somewhat insulated production from weaker world prices, sentiment in the latter half of the 2015 Season was more reflective of a move to a period of deficit. Demand was certainly a factor, with global consumption stronger than anticipated. The main driver, however, has been the eventual production response to the extended period of weaker sugar prices. With a two-year global deficit for forecast at circa 15 million tonnes, dry growing conditions in the Northern Hemisphere and aging cane in Brazil have increasingly fuelled the positive market sentiment. The 2015 Season closed with the turning of the tide for sugar market sentiment. Prices will now have to rise to levels incentivising increased production or where the release of strategic inventory levels becomes economic. Whilst analysts now suggest a minimum of two seasons will be required to address the production deficit, we believe sugar futures will also see increased levels of investor support as global interest rates track historical lows, forcing investors to seek higher returns elsewhere. CURRENCY The Australian dollar again provided some relief to sugar export prices during the 2015 Season. Our currency averaged a level of US75 cents during the period, after commencing the season closer to the US86 cents level. Unfortunately the Brazilian Real devaluation more than offset the cost of production benefit the Australian sugar industry enjoyed from weaker currency levels. Looking ahead, it appears likely that economic conditions will continue to see a benign environment for the Australian dollar. Recovering commodity prices are reflective of a more positive outlook for Chinese economic growth, and in turn, Australia s terms of trade. More broadly, however, forecasts for US growth remain generally upbeat and will drive a stronger US$ and higher US interest rate macro environment. Such competing drivers are likely to result in less volatility for currency markets, with a range of US70-80 cents forecast for the 2016 Season. RAW SUGAR ICE 11 15/16 FINANCIAL YEAR US c/lb JUL 15 SEP 15 NOV 15 JAN 16 MAR 16 MAY 16 JUL 16 This graph represents the trend of the raw sugar ICE 11 price for the prompt futures contract for the 2015/16 Financial Year. The average sugar price for the 2015/16 Financial Year was US c/lb. See disclaimer on page 6. QUEENSLAND SUGAR LIMITED ANNUAL REPORT 2015/16 11

14 PRICING CONTINUED AUD/USD CURRENCY 15/16 FINANCIAL YEAR AUD/USD JUL 15 SEP 15 NOV 15 JAN 16 MAR 16 MAY 16 JUL 16 This graph shows the trend of the Australian dollar against the United States dollar for the 2015/16 Financial Year. The average Australian dollar price for the 2015/16 Financial Year was US cents (weekly close). See disclaimer on page 6. QSL POOL PRICES FOR 2015 SEASON 15/16 FINANCIAL YEAR POOL PRICE*/IPS TONNE (A$) $460 $440 $420 $400 $380 $360 $ QSL HARVEST POOL $ QSL ACTIVELY MANAGED POOL $12.48 $43.87 $37.18 $ $ $ $ QSL FORWARD SEASON POOL (2 YEAR) $66.10 $ $ QSL FORWARD SEASON POOL (3 YEAR) $ QSL GUARANTEED FLOOR POOL $ TOTAL QSL MANAGED ICE11 POOLS $71.65 $ $19.61 $ $340 $320 $0 Performance above benchmark A$ per mt IPS Benchmark This graph presents the net pool performance above the benchmark for the QSL-Managed Pools for the 2015 Season. The Passive Management Benchmark is the price achieved if no market view was taken by following an evenly spread sales pattern, adjusted for applicable constraints such as infrastructure, storage and time available to price. This performance above the benchmark highlights the dollar value per QSL-managed pool that QSL provides to suppliers (millers) and growers. In the 2015 Season, QSL outperformed the market benchmark on a weighted average basis by $19.61 per tonne IPS. The Guaranteed Floor Pool achieved a net price of $ per tonne IPS however this pool has not been benchmarked as the price was locked-in at the start of the season. The US Quota Pool, which was priced on the ICE16, achieved a net price of $ per tonne IPS. See disclaimer on page 6. *After Shared Pool allocation 12 QUEENSLAND SUGAR LIMITED ANNUAL REPORT 2015/16

15 FINANCING KEY ACHIEVEMENTS Entered into a US$200m Syndicated Inventory Financing agreement Faster Advances schedule for the Guaranteed Floor Pool 10-tonne minimum Target Price Contract orders and a longer in-season Fixed Contract pricing window planned for the 2017 Season During the past financial year, QSL expanded its funding options by entering into a US$200 million Syndicated Inventory Facility (SIF) with its current funding banks. This facility is a sale-and-repurchase arrangement using sugar inventory at the terminal, giving QSL additional access to short-term committed funding. It is cost effective as funding costs are lower because the funding is secured against the value of the inventory. This facility is in addition to the A$500m syndicated credit agreement which has been the core committed facility agreement for many years. This core syndicated credit agreement has the flexibility to temporarily reduce the limit in non-peak times when funding requirements are lower. The limit was decreased during the past financial year, saving the industry $300,000 in line fees. QSL s Guaranteed Floor Pool offering for the 2016 Season incorporated an accelerated Advances Program. This pool will advance 90% of its estimated value by December 2016 compared to approximately 75% for the other QSL-managed pools. QSL has been able to offer an alternative payment arrangement on this pool due to the price certainty and the ease of passing on the additional costs of finance. The Guaranteed Floor Pool is different to other QSL pools in that it has a guaranteed minimum rate of return locked in, known as the floor. Final returns for this pool may in fact be higher than the floor because participants receive 50 cents for every dollar achieved above a nominated Strike Price, but regardless of this, the pool has a known minimum return. Using these guaranteed returns, QSL has been able to alter the Advances schedule for this pool in order to provide our Suppliers with the ability to access an increased rate of Advances prior to Christmas. Following on from the introduction of reduced minimum order sizes for the Target Price Contract during the 2015 Season (which allowed the Supplier the flexibility to price in metric tonne or 1 lot increments) QSL made preparations to further improve its forward pricing products. The minimum nomination for the Target Price Contract will be further reduced to 10 tonnes from the 2017 Season, providing even more opportunities for Suppliers and their growers to lock in smaller quantities of target prices up to three years in advance of the current season. QSL also intends to extend the in-season Fixed Contract pricing window from the 2017 Season, moving from a closing date of 15 September each year to 15 April of the following year, giving Suppliers an additional seven months to complete their nominated pricing in this pool. DEBT PROFILE 15/16 FINANCIAL YEAR A$m $50 -$50 -$150 -$250 -$350 -$450 -$550 -$650 -$750 JUL 15 AUG 15 SEP 15 OCT 15 NOV 15 DEC 15 JAN 16 FEB 16 MAR 16 APR 16 MAY 16 JUN 16 This graph reflects QSL s outstanding debt balance during the financial year. QSL pays Advance payments to suppliers (millers) on receipt of raw sugar, who pass payments onto growers, before it is sold or payment is received from the customer. Therefore the debt profile fluctuates throughout the year depending on the receipt and sale of sugar. Sugar was held for longer this financial year due to significant market carry, resulting in this debt profile. See disclaimer on page 6. QUEENSLAND SUGAR LIMITED ANNUAL REPORT 2015/16 13

16 QSL MEMBERS QSL works on behalf of its members to promote the development of the sugar industry. Under its constitution, QSL has two types of members Mill Owner Members and Grower Representative Members. MILL OWNER MEMBERS QSL currently has seven Mill Owner Members: Bundaberg Sugar Limited Isis Central Sugar Mill Company Limited Mackay Sugar Limited Wilmar Sugar Australia Ltd MSF Sugar Limited Tully Sugar Limited W H Heck & Sons Pty Limited GROWER REPRESENTATIVE MEMBERS QSL has a total of 23 Grower Representative Members. Under QSL s Constitution, Grower Representative Members consist of one representative from each single mill area, and where a mill area is part of a mill group (eg. Mackay), a number of representatives from the mill area equal to the number of mills in the mill group. QSL currently has 21 Elected Holders who began their current three-year term in August Burdekin Elected Holder Ramon Poli stood down from his position in April 2016 and has been replaced by Denis Pozzebon. In addition to these elected Grower Representative Members, there is a representative from both CANEGROWERS and the Australian Cane Farmers Association (ACFA). The current ACFA-appointed member is ACFA Chairman Don Murday. The current CANEGROWERS-appointed member is CANEGROWERS Queensland Chairman Paul Schembri. Region Mill Area Grower Representative Mossman Mossman Mill Gerard Puglisi Tableland Tableland Mill Nirmal Chohan Mulgrave Mulgrave Mill Jeffrey Day Northern South Johnstone Mill Barry Stubbs Tully Tully Mill Thomas Harney Herbert River Victoria and Macknade mills Michael Pisano and Vince Russo Burdekin Kalamia, Invicta, Pioneer and Inkerman mills Russell Jordan, Roger Piva, David Lando, Denis Pozzebon Proserpine Proserpine Mill Mark Blair Central Farleigh, Marian and Racecourse mills Anthony Ross, Frank Perna, Philip Deguara Plane Creek Plane Creek Mill Kevin Borg Southern Bingera and Millaquin mills Tony Castro and Kelvin Griffin Isis Isis Mill Joe Russo Maryborough Maryborough Mill Jeffrey Atkinson Rocky Point Rocky Point Mill Richard Skopp Note: CANEGROWERS and ACFA each occupy one Grower Representative Member position (2) 14 QUEENSLAND SUGAR LIMITED ANNUAL REPORT 2015/16

17 OUR PEOPLE KEY ACHIEVEMENTS Undertook inaugural measurement of our organisational culture using the Human Synergistics Organisational Cultural Inventory (OCI) QSL completed the second year of its current three-year People and Culture plan during the past financial year. The plan focuses on ensuring QSL can pursue its future business strategy with confidence by knowing our people have the right skills and are supported by the right systems to make it happen. This strategy is built around three key principles. Our culture and values are unique. They are, and will continue to be, a source of competitive advantage. We strive to be envied by the industry, and valued by our staff for the way we can leverage our culture to achieve new levels of performance. We have leaders worth following and our technical capability is unrivalled. Working in small, highly productive teams across our six bulk sugar terminals and our Brisbane office, we continue to invest in our people to ensure they are ready, willing and able to maximise returns, outperform the market and enhance our operational productivity in a challenging and complicated environment. Our work is worth doing. Our business vision and purpose focuses on goals greater than ourselves. Our full team feels connected to our future strategy and can see how they can be personally and professionally rewarded by it. OUR QSL VALUES Our QSL values continued to underpin our success and performance during the year. They represent the behaviours and principles that have been the foundation of our success in the past and that should not be compromised in how we respond to challenges in the future. Informed by discussions with our people and inputs from our members and customers alike, our five core values define and inform how we think, act and behave. They are important to us personally and we see them as a source of competitive advantage in the future. RECOGNISING COMMITMENT AND TALENT QSL is proud of its long-standing ability to grow and nurture talent. This year saw three QSL team members celebrate 35 years of service with our business. QSL values and celebrates this enduring commitment made by our people and recognises Ray Balanzategui, Mark Rassmussen and Ron Horton for their outstanding contribution to our business during this time. The trio now joins the 6% of our team who have previously achieved this milestone. During the reporting period a number of our apprentices also achieved industry recognition for outstanding performance and commitment: Mitch Vermeer, a fourth-year apprentice at the Cairns terminal, won the Dale Kennedy Memorial Award for electrical apprentices Jye Thomas, a second-year apprentice based at our Lucinda terminal, was awarded the Most Outstanding Engineering Apprentice in his year Strengthened the quality of internal communications across the business, with monthly CEO Unplugged video hook-ups and the QSL Turbinado internal magazine Received industry recognition for QSL s commitment to youth training Noted improvements in QSL s annual Women s Gender Equality Agency compliance report Aiden Tennet, a third-year electrical apprentice based at the Lucinda Terminal, was nominated for Most Outstanding Electrical Apprentice for his second year performance In addition to these individual awards, QSL was honoured to receive an award from East Coast apprenticeships (Bundaberg) as Host Employer of the Year in recognition of our commitment to youth training. FOSTERING INDUSTRIAL HARMONY QSL maintains working relationships with the three unions that represent our team members at the six bulk sugar terminals. The Australian Workers Union (AWU); The Electrical Trades Union (ETU); and The Australian Manufacturing Workers Union (AMWU) During the past financial year, QSL worked with the in-house union delegates and representatives from their unions to identify areas for greater harmonisation and consistency of application of the QSL Bulk Terminals Agreement (EBA) across all sites. This work and constructive debate has been critical in supporting the recent implementation of QSL s enhanced time-and-attendance system. QSL ENGAGEMENT AND RETENTION Employee voluntary turnover remained at a characteristically low level of 6.96% for the 12 months ended 30 June 2016, against broader industry benchmarking of approximately 15%. While turnover is an important metric to gauge performance, it is also valuable to understand what our retention performance looks like. Over 48% of our team has worked with QSL for at least five years. In fact, over 16% of our team has been with QSL for over 20 years. With such a stable pipeline of both leaders and talent within the business, QSL believes it is in a strong position, despite the complexity of current industry arrangements. QSL remains committed to the engagement of our people, and that our people themselves remain motivated and committed to change and build QSL for the future. QUEENSLAND SUGAR LIMITED ANNUAL REPORT 2015/16 15

18 LEADERSHIP TEAM GREG BEASHEL MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER Greg joined QSL in June Prior to being appointed as Managing Director and Chief Executive Officer in February 2012, Greg was responsible for QSL s operations including port terminal management, capital and maintenance management, shipping operations, chartering and trade finance. Before joining QSL, Greg spent seven years with CSR in a range of roles including operations, sugar marketing, hedging and trading. He has extensive experience in sugar refining and a strong understanding of customer perspectives and requirements. Greg is responsible for overseeing the strategic direction of the business with the goal of maximising pool returns for members. QUALIFICATIONS: Bachelor of Chemical Engineering (Hons) Graduate of the Australian Graduate School of Management MBA Executive Program Graduate of the Australian Institute of Company Directors. ROBERT HINES CHIEF FINANCIAL OFFICER Rob joined QSL in April 2013, having more than 26 years experience working in corporate finance. His breadth of experience covers mergers and acquisitions, capital funding, strategic financial advice, liquidity management, and corporate and financial risk management. Prior to joining QSL, Robert was a Director, CFO Advisory at KPMG and held CFO roles with several leading Queensland companies including QIC Limited, Bank of Queensland Limited, Energex Retail, Tarong Energy and Suncorp. Rob is responsible for the accounting, financial risk management, reporting, and information and technology functions of QSL. QUALIFICATIONS/MEMBERSHIPS: Bachelor of Financial Administration Graduate Diploma of Advanced Accounting Graduate Diploma in Applied Finance and Investment Senior Fellow of FINSIA and Fellow of the Australian Institute of Company Directors, Chartered Accountants Australia and New Zealand and Australian Society of CPAs. SUSAN CAMPBELL COMPANY SECRETARY AND LEGAL COUNSEL Susan Campbell joined QSL as Company Secretary and Legal Counsel in October 2013 and is responsible for QSL s corporate governance functions and the management of QSL s legal issues. Susan has held a number of equivalent positions in other companies, including with North Queensland Bulk Ports Corporation. Prior to QSL, Susan held the role of General Counsel and Company Secretary at Ergon Energy, having developed from the role of Group Legal Counsel. Susan brings more than 25 years experience in private practice and corporate in-house roles, specialising in commercial and corporate law. QUALIFICATIONS: Bachelor of Commerce Bachelor of Laws (Hons) Graduate Diploma Securities Institute of Australia Graduate Diploma Applied Corporate Governance Graduate Certificate Business Administration 16 QUEENSLAND SUGAR LIMITED ANNUAL REPORT 2015/16

19 ANDREW HARRISON TECHNICAL MARKETING MANAGER Andrew joined QSL in February 2003, having worked in senior technical roles in a refinery and several Queensland sugar mills. Andrew works within the Marketing Team as Technical Marketing Manager and is responsible for relationships with QSL s customers in Japan, China, Taiwan, USA and New Zealand, as well as providing technical assistance across all other markets. Previous to this role, Andrew was the Manager Quality and Logistics at QSL and was responsible for ensuring the quantity and quality of supply received across QSL s terminals matched customers expectations while optimising storage to maximise pool returns. QUALIFICATIONS: Sugar Technologist DOUGALL LODGE GENERAL MANAGER TRADING AND RISK Dougall has been involved in the global sugar market for around 20 years across a variety of roles within both producers and sugar users. He joined QSL in March 2014 after around 15 years of working within Coca-Cola s global procurement teams in Australia and Asia. Dougall started his career with CSR Raw Sugar Marketing. Dougall manages QSL s Marketing and Treasury functions and is responsible for the delivery of pool returns. QUALIFICATIONS: Bachelor of International Business Diploma in Export Management MIKE PANKE TERMINAL MANAGER (MACKAY AND BUNDABERG) Mike joined QSL in July 2012, having worked in senior roles in the fertiliser, chemical and hi-tech manufacturing industries. Mike is responsible for the management of the Mackay and Bundaberg bulk sugar terminals and the highly effective handling, storage and shipping of bulk sugar at those terminals. QUALIFICATIONS: Military Engineer Registered Quality Systems Auditor JOANNE NUGENT GENERAL MANAGER HUMAN RESOURCES Joanne joined QSL in May With experience in the infrastructure, engineering, construction and finance sectors, Joanne has a track record in change management, human resource management and building people capability in a project and professional services environment. Her past achievements have resulted from being an influential people manager driving commercial performance, continuous improvement and employee alignment and engagement to the achievement of business strategy. She has significant experience in HR leadership, implementing major organisational change initiatives, organisational design and restructuring programs, due diligence and integration planning for mergers and acquisitions and organisational and culture development. Joanne focuses on the People and Culture strategy for QSL. With her team, she is responsible for fostering a diverse and dynamic culture within the business that reflects the business s values, drives superior performance and enhances the potential of the business and our people. QUALIFICATIONS: Diploma in Company Directorship (Australian Institute of Company Directors) Graduate Certificate in Change Management Bachelor of Business: Advanced major in Human Resource Management QUEENSLAND SUGAR LIMITED ANNUAL REPORT 2015/16 17

20 LEADERSHIP TEAM CONTINUED AARON SEARLE FINANCIAL CONTROLLER Aaron joined QSL in June 2010, having extensive experience in audit, accounting and finance roles in a range of industries including manufacturing, property and financial services. Aaron is responsible for a number of the finance and accounting functions within the organisation including management and statutory reporting, indirect taxes, non-pooling activities and project work. He is also responsible for management accounting and reporting in relation to bulk sugar terminals. Recently Aaron has been responsible for the commercial management of the non-sugar related storage activities. QUALIFICATIONS: Bachelor of Economics Bachelor of Commerce Chartered Accountant, Chartered Accountants Australia and New Zealand Graduate Diploma of Applied Finance Master of Applied Finance STEPHEN STONE TREASURER Steve joined QSL in March 2010, having extensive experience working in Australia and internationally in a number of trading and risk management roles in the banking industry. Steve uses his experience in managing risk and in-depth knowledge of risk management products to deliver solid returns for the QSL-managed pools. QUALIFICATIONS: Bachelor of Commerce Master of Commerce BRYCE WENHAM FINANCE MANAGER, SUPPLIER RELATIONS Bryce has a long history of working in the sugar industry in marketing and finance roles. Bryce has been with QSL for 16 years in various senior roles including: Marketing Manager, Commercial Services Manager and Financial Manager - Supplier Relations. Bryce manages the direct relationship with QSL s suppliers and maintains an in-depth understanding of growers needs. He is responsible for the negotiation and management of Raw Sugar Supply Agreements with suppliers and providing pooling and loan products, and general support to members. QUALIFICATIONS: Bachelor of Business Graduate Diploma of Applied Finance and Investment DAMIAN ZIEBARTH GENERAL MANAGER OPERATIONS Damian joined QSL in May He is an operations professional with over 25 years experience in heavy manufacturing industries. Prior to joining QSL, Damian worked as the Australian Operations Manager for Incitec Pivot Ltd. His breadth of experience includes 11 years in milling and refining operations domestically for Bundaberg Sugar and internationally with Tate & Lyle Sugars. Damian is responsible for overseeing QSL s integrated storage, shipping and logistics management to ensure the reliable delivery of raw sugar that meets customer requirements. QUALIFICATIONS: Bachelor in Mechanical Engineering Masters of Engineering 18 QUEENSLAND SUGAR LIMITED ANNUAL REPORT 2015/16

21 CORPORATE GOVERNANCE Queensland Sugar Limited (QSL) is a public company limited by guarantee, incorporated under the Corporations Act The principal object of the company, without limiting its powers under the law, is to promote the development of the sugar industry. The company has 30 members representing the Australian sugar industry, consisting of: seven Mill Owner Members 23 Grower Representative Members, comprising: 21 elected holders, who are growers elected to represent the 21 sugar-growing regions in Queensland two representatives, one appointed by each of the organisations representing cane growers, Australian Cane Farmers Association Limited and Queensland Cane Growers Organisation Limited. The voting rights of members are outlined in QSL s Constitution. A copy of QSL s Constitution is available at QSL s website at about-qsl/corporate-structure/qslconstitution THE QSL BOARD OF DIRECTORS ROLE OF THE BOARD The Board has in place a Board Charter that sets out its role and responsibilities, with the objective of promoting the development of the sugar industry. The Board is responsible to QSL s members for the strategic direction of QSL, monitoring of risk and governance, and overall performance of QSL. Other responsibilities of the Board include guiding the culture of QSL; strategy, planning and policy development; oversight of QSL s management; monitoring compliance and risk management; health & safety and wellbeing of employees and contractors; and stakeholder liaison and communication. The Board Charter is available at QSL s website at In addition, a key function of the Board includes monitoring, reviewing and overseeing risk management, in particular financial risk. Policies and procedures are in place to manage QSL s strategic, financial and operational risks. A key QSL policy regarding risk management is the Corporate Risk Management Policy. Specific policies are in place to govern the management of sugar price and foreign exchange risk. Speculative transactions are not permitted and hedging is only permitted within policy parameters. As part of QSL s commitment to managing exposure to significant business risk, the company also has policies and procedures in place covering areas such as Fraud and Corruption and Whistle blower policies, Code of Ethics and Conduct, Appropriate Workplace Behaviour and Privacy; Competition and Consumer law compliance and Work Health & Safety Policy and an Environmental Policy. COMPOSITION OF THE BOARD There are currently three Directors on the Board of QSL. QSL s Constitution provides for a Board of a maximum of four independent Non-Executive Directors (and a minimum of three independent Directors), plus a Managing Director/CEO. There is an option in QSL s Constitution for Mill Owner Members and Grower Representative Members to elect Mill Owner Directors and Grower Directors respectively, but this option has not been exercised. At general meetings of QSL members held on 8 December 2015 and 5 July 2016, resolutions were put to QSL members to amend the industry director appointment process, as detailed in the respective notices of meetings sent to QSL members. The proposed constitutional changes considered and passed at both these meetings are currently before the Federal Court and if validated by the Court, it may be that industry directors will be appointed to the QSL Board. The constitutional changes proposed at the 5 July 2016 meeting do not change the position in the QSL Constitution that there must be a minimum of three independent Directors on the QSL Board. There are currently two independent Non-Executive Directors on the QSL Board, being Guy Cowan (Chairman) and Sarah Scales. Chris Leon resigned as an independent Non-Executive Director on the QSL Board on 4 July 2016 and a process is now underway to fill that vacancy. Once this vacancy is filled, the membership of the Committees (described below) will be reviewed. Greg Beashel is the Managing Director/ CEO of QSL. Details about the current Directors are in the Directors Report in the Financial Statements. APPOINTMENT OF DIRECTORS Independent Non-Executive Directors are appointed to the QSL Board by QSL s Board Selection Committee. The Board Selection Committee comprises four members: two members elected for a three-year term by Mill Owner Members and two members elected for a three-year term by Grower Representative Members. Under the Constitution, when selecting independent Non-Executive Directors, the Board Selection Committee has regard to the mix of skills required for the Board to properly meet the company s objectives, as well as the independence of the candidate. QUEENSLAND SUGAR LIMITED ANNUAL REPORT 2015/16 19

22 CORPORATE GOVERNANCE CONTINUED BOARD COMMITTEES There are currently three Board committees to assist the Board to carry out its functions: the Audit and Risk Committee, the Trading Risk Committee, and the People & Operations Committee. Each Committee has authority from the Board to review and investigate any matter within the scope of its Charter and make recommendations to the Board. Copies of QSL s Board Committee Charters, which sets out each Committee s area of responsibilities, are available at QSL s website at AUDIT AND RISK COMMITTEE The Audit and Risk Committee assists the Board to discharge its responsibilities via oversight of the enterprise risk management, control and compliance framework established by the Board and QSL management; and review of QSL s risk management, finance and audit reporting. The current members of the Audit and Risk Committee are Guy Cowan (Committee Chair) and Sarah Scales (previously included Chris Leon). The Managing Director, the Chief Financial Officer, Risk & Compliance Manager and representatives of the external and internal auditors attend meetings of this Committee by invitation. TRADING RISK COMMITTEE The Trading Risk Committee assists the Board to discharge its responsibilities via oversight of risk management, control and compliance measures established by the Board and management relating to commodity and foreign currency hedging, marketing and sale of sugar and chartering activities. The current members of the Trading Risk Committee are Sarah Scales (Committee Chair) and Guy Cowan. The Managing Director, the Chief Financial Officer, GM Trading & Risk and representatives of external and internal auditors attend meetings of this Committee by invitation. PEOPLE AND OPERATIONS COMMITTEE The People & Operations Committee assists the Board to discharge its responsibilities relating to workplace health & safety, environmental compliance as well as people issues. The current member of the People and Operations Committee is Guy Cowan, with Chris Leon previously being on this Committee as Chair, prior to his resignation on 4 July The Managing Director, Company Secretary, GM Human Resources and GM Operations are invited to attend meetings as appropriate. From left: Guy Cowan, Sarah Scales, Greg Beashel 20 QUEENSLAND SUGAR LIMITED ANNUAL REPORT 2015/16