Home' Nufarm Annual Report : Nufarm Annual Report 2017 Contents 31. Financial risk management and financial instruments (continued)
Credit risk (continued)
Impairment losses (continued)
Some receivables are secured by collateral from customers such as guarantees and charges on assets. In some countries
credit insurance is undertaken to reduce credit risk. The past due receivables not impaired are considered recoverable.
In the crop protection industry, it is normal practice to vary the terms of sales depending on the climatic conditions experienced
in each country. The movement in the allowance for impairment in respect of trade receivables during the year was as follows:
Balance at 1 August
Provisions made during the year
Provisions used during the year
Provisions acquired through business combinations
Balance at 31 July
The allowance account for trade receivables is used to record the impairment losses unless the group is satisfied that no
recovery of the amount owing is possible. At that point the amount is considered irrecoverable and is written off against
the receivable directly.
Liquidity risk is the risk that the group will encounter difficulty in meeting the obligations associated with its financial liabilities
that are settled by delivering cash or another financial asset. The group’s approach to managing liquidity is to ensure, as far as
possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions,
without incurring unacceptable losses or risking damage to the group’s reputation.
Sales and operating profit are seasonal and are weighted towards the first half of the calendar year in Australia/New Zealand,
North America and Europe, reflecting the planting and growing cycle in these regions while in Latin America the sales and
operating profit is weighted towards the second half of the calendar year. This seasonal operating activity results in seasonal
working capital requirements.
The principal source of liquidity consists of cash generated from operations. Working capital fluctuations due to seasonality
of the business are supported by the short term funding available from the group’s trade receivable securitisation facility.
As at 31 July 2017, the key group facilities include a group trade receivables securitisation facility, a US$325 million senior
unsecured notes offering due in October 2019, and a senior secured bank facility of $505 million (31 July 2017: $485 million).
On 20 July 2017, an additional lender was added to the senior secured bank facility (SFA), which was previously refinanced on
29 January 2016, and the total facility amount increased to $505 million (31 July 2016: $485 million). Of this, $30 million is due
in January 2018, $435 million is due in January 2019, and $40 million is due in January 2021 (31 July 2016: $30 million due in
January 2018, $415 million due in January 2019, and $40 million due in January 2021). The SFA includes covenants of a type
normally associated with facilities of this kind, and the group was in compliance with these covenants throughout the financial
year. The facility is undrawn at 31 July 2017 (2016: $4 million).
On 23 August 2011, Nufarm executed a group trade receivables securitisation facility. The facility provides funding that
aligns with the working capital cycle of the company. Subsequent to execution, on 15 April 2015 a monthly facility limit was
introduced to reflect the cyclical nature of the trade receivables being used to secure funding under the program. The monthly
facility limit is set at $300 million for four months of the financial year, $375 million for three months of the financial year, and
at $225 million for five months of the financial year (31 July 2016: facility limit was set at $300 million for four months of the
financial year, $375 million for three months of the financial year, and at $225 million for five months of the financial year).
The US$325 million senior unsecured notes (the ‘notes’) due in October 2019 were completed on 8 October 2012.
The majority of debt facilities that reside outside the notes, SFA and the group trade receivables securitisation facility are
regional working capital facilities, primarily located in Latin America and Europe, which at 31 July 2017 totalled $528 million
(2016: $588 million).
NUFARM LIMITED ANNUAL REPORT 2017
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