QSL: Working for YOU Report...QSL: Working for YOU 2 ueenlan uar te Annual Report 2017/18 Our Members QSL works on behalf of its members to promote the development of the Queensland

Queensland Sugar Limited Annual Report 2017/18

QSL: Working for YOU

2 | Queensland Sugar Limited Annual Report 2017/18

Our MembersQSL works on behalf of its members to promote the development of the Queensland sugar industry. Under our constitution, we have two types of members – Mill Owner Members and Grower Representative Members.

Mill Owner MembersThe owners of Queensland sugar mills are eligible to be members of QSL. We currently have seven (7) Mill Owner Members:

� Bundaberg Sugar Limited� Isis Central Sugar Mill Company Limited� Mackay Sugar Limited� Wilmar Sugar Australia Limited� MSF Sugar Limited� Tully Sugar Limited� W H Heck & Sons Proprietary Limited

Grower Representative MembersQSL has 23 Grower Representative Members – 21 elected Members representing 21 Queensland mill areas, and two appointed Members representing peak industry groups Queensland Cane Growers Organisation Limited (CANEGROWERS) and the Australian Cane Farmers Association (ACFA). Elected representatives serve three-year terms, with the next election process due in 2020.

� Gerard Puglisi – Mossman Mill Area� Nirmal Chohan – Tableland Mill Area� Jeffrey Day – Mulgrave Mill Area� Barry Stubbs – Northern Region Mill Area� Thomas Harney – Tully Mill Area� Michael Pisano – Herbert River Mill Area� Vince Russo – Herbert River Mill Area � Mark Vass – Burdekin Mill Area� Owen Menkens – Burdekin Mill Area� Russell Jordan – Burdekin Mill Area� Roger Piva – Burdekin Mill Area� Mark Blair – Proserpine Mill Area� Francis Perna – Central Mill Area� Anthony Ross – Central Mill Area� Gregory Plath – Central Mill Area� Kevin Borg – Plane Creek Mill Area� Kelvin Griffin – Southern Mill Area� Allan Dingle – Southern Mill Area� Joe Russo – Isis Mill Area� Jeffrey Atkinson – Maryborough Mill Area� Richard Skopp – Rocky Point Mill Area� Don Murday – ACFA representative� Paul Schembri – CANEGROWERS representative

Our Purpose

Contents

Queensland Sugar Limited (QSL) is a not-for-profit, pass-through organisation devoted to serving the interests of Queensland cane growers and sugar millers for the long-term prosperity of our state’s sugar industry.

Established in 2000 to replace the Queensland Sugar Corporation, QSL is Queensland’s leading provider of sugar marketing and terminal services, and employs approximately 160 people at 11 sites around the state.

Our separate Marketing and Operations divisions are supported by a shared Corporate Services function, which together with our income and payroll-tax exemption status, helps to maximise the value returned to the industry we serve.

Our Business 3Chairman’s Report 4Chief Executive Officer’s Report 5Highlights 6

QSL MarketingChief Operating Officer’s Report 7Marketing and Pricing 9Grower Services & Supplier Relations 11

QSL OperationsGeneral Manager’s Report 12Environment, Health and Safety 14

QSL Corporate ServicesChief Financial Officer’s Report 15Our People 16Corporate Governance 17

Statutory Financial Report 19

3Queensland Sugar Limited Annual Report 2017/18 |

QSL is a public company limited by guarantee and incorporated under the Corporations Act 2001.

Unlike our competitors, we are a pass-through organisation which operates on a cost-recovery basis, returning all net value created through our activities to the industry we serve and the thousands of Queensland cane growers and sugar millers who choose to use our services.

Driven by the best interests of our members and the long-term prosperity of the Queensland sugar industry rather than corporate profits or shareholder dividends, we are a registered charitable institution and as such, are exempt from income and payroll taxes.

QUEENSLAND SUGAR LIMITEDA not-for-profit, pass-through organisation serving the Queensland sugar industry

QSL MEMBERS30 representatives of Australian sugar mills and cane growers

QSL BOARDGuy Cowan – Chairman & Independent Director

Sarah Scales – Independent DirectorCraig Doyle – Independent Director

Greg Beashel – Managing Director (Executive)

QSL CORPORATE SERVICESGreg Beashel – Chief Executive Officer Aaron Searle – Chief Financial OfficerJoanne Nugent – GM Human Resources

Susan Campbell – Company Secretary and Legal CounselFinance, Accounting, Legal, Company Secretarial, Human Resources,

Environment, Health and Safety, IT, Communications

QSL MARKETINGRobert Hines – Chief Operating Officer

Grower Services & Supplier RelationsPricing services

Marketing and sales

QSL OPERATIONSDamian Ziebarth – General Manager

Quality & LogisticsTerminal operations

EngineeringTerminal Environment, Health and Safety

STORAGE & HANDLING AGREEMENTQSL Marketing accesses terminal facilities for

marketing purposes

OPERATING AGREEMENTQSL Operations manages

STL terminal facilities

SUGAR TERMINALS LIMITED (STL)Publicly listed owner of Queensland’s six bulk sugar terminals

Our Business


The past year ushered in a new era for QSL, with the implementation of Marketing Choice, the transition to new terminal operating arrangements and our new competitive operating environment reshaping the way we do business on nearly every front.

It’s certainly been a significant transformation, but one that has not altered our wider corporate intent.

QSL has always been driven by our purpose to serve the long-term interests of the Queensland sugar industry, and so while our marketing focus has expanded from ‘wholesale’ arrangements with millers to include new ‘retail’ relationships with growers, and from a sub-lessee of Queensland’s terminals to a terminal operator for Sugar Terminals Limited, our corporate mission remains the same – to maximise the value we deliver to all members of the industry we serve.

Both millers and growers are members of our company and are important to us. So while we spent much time in the past year developing an extensive new range of products and services to support our new relationship with growers around the state, we recognise that we must work to support every aspect of the supply chain that underpins our industry’s success.

QSL has long served Queensland’s milling interests and operated our state’s terminals, and we believe we still offer a range of services, expertise and synergies that are difficult to replicate. We continue to work closely with Bundaberg Sugar and Isis Central Sugar Mill to provide the full range of services available under the traditional Raw Sugar Supply Agreement contractual format, but we appreciate that the needs and priorities of Queensland’s millers vary.

To this end, we’re currently negotiating an On-Supply Agreement with Mackay Sugar which will enable Mackay growers to continue to access QSL marketing services into the future. We’re also working with representatives of the new Far Northern Milling Company to provide support to enable Mossman Mill growers to access QSL pricing and receive payment if the local mill transitions to their ownership.

We also remain committed to working with MSF Sugar, Tully Sugar and Wilmar to improve existing Marketing Choice arrangements and identify potential new products and services which could add value.

And on the international stage, we continue to speak out for the entire Australian sugar industry and fight for fairer trade arrangements through our work with the Global Sugar Alliance and government free-trade initiatives.

The low sugar prices experienced during the current season have not only made our work to maximise returns more challenging, but have highlighted just why our ongoing commitment to innovation across every aspect of our business is so important.

To effectively serve the needs of the Queensland sugar industry, QSL must not only continue to implement efficiencies and cost savings, but also provide the new tools and services required to effectively navigate a volatile world sugar market and ever-changing operating environment.

I believe my fellow Directors and the QSL management team have already proven they can meet this challenge, and I’d like to thank them for their tireless efforts and continued support during the past year. The value of a stable Board, capable management team and dedicated employees cannot be underestimated, and I am proud to say that QSL boasts all three.

I’d also like to acknowledge the unwavering support of our international customers throughout the recent transition to marketing choice, with the renewal of the long-term contract with our South Korean refiners a highlight of the reporting period and a powerful example of the customer loyalty QSL has cultivated over many decades.

As Australia’s largest and most experienced provider of sugar marketing and operations services, our perspective is unique and our credentials are unsurpassed. The benefits of QSL are for all of industry and we will continue to work with this in mind as the next phase of our industry’s evolution unfolds.

Guy Cowan, QSL Chairman and Independent Director

Chairman’s Report


The 2017 Season marks our first full year under the new Marketing Choice arrangements which saw the introduction of a number of significant changes to our business to reflect our new operating environment. These significant changes included:

�� The first year of operations under our new contract with Sugar Terminals Limited (STL) whereby QSL operates Queensland’s six sugar terminals on STL’s behalf and STL is responsible for contracting terminal services to sugar marketers.

�� A new competitive landscape for sugar marketing resulting in major changes to our products and processes.

�� A new offering where QSL contracts directly with sugar farmers for marketing services.

�� We transitioned to these new arrangements while keeping a tight rein on expenditure, with initiatives such as a new lease agreement for our corporate office and reductions in staff, travel and professional costs resulting in a reduction in our Brisbane office cost base in addition to other cost-saving measures across our Marketing and Operations units.

In light of the challenges of the past few years and the changes outlined above, it would have been easy to lose focus, but I’m proud to say that the QSL team delivered on all fronts again during the past year.

QSL remained the largest marketer of Queensland sugar in the 2017 Season. Our Marketing team went on to outperform most of our competitors and exceed the benchmark (market average) price by $29.95/tonne IPS to finish the season with a weighted average return of $414.56/t IPS net for its managed pools.

During the reporting period our Operations division also successfully transitioned to new operating arrangements at our terminals under our new Operating Agreement with STL. Despite handling multiple clients and nearly 4 million tonnes of sugar, they notched up another faultless delivery record, with 100% of all shipments from Queensland bulk sugar terminals delivered in full and on time.

This is the kind of excellence that QSL is known for, and it is this commitment to providing the very best service to industry that drives us forward. We thank all those who have supported us during the past year, and we look forward to finding new ways to benefit your business in the year to come.

Greg Beashel, Managing Director and Chief Executive Officer

Chief Executive Officer’s Report


Highlights

Marketing

Corporate Services

Operations

Enterprise Agreement

renegotiated for another 3 years

New time & attendance

system in place across all BSTs

Corporate office move

cut lease costs

Revised Finance Facility

delivered flexibility & savings

106 vessels loaded

Loaded

3,382,906 tonnes of sugar for shipment

100%delivered in full & on time

Unloaded 47,311 trucks and

52,998 train wagons Received 3,918,809 tonnes

of sugar at 6 terminals

QSL-managed pools outperformed

the market average by

$29.95/tonne IPS

Marketing Choice successfully implemented Made first direct

payments to growers

Highest returning QSL-managed pool =

2-Season Forward

$507/t Net IPS

Mental health first aiders

at every terminal

Certified for AS4801 (Safety) and ISO 14001

(Environment)

The Shared Pool was

+$1.54/tonne IPS net,outperforming the weighted average benchmark by

$8.39/tonne IPS

$ $


Rob Hines, Chief Operating Officer

QSL Marketing

Chief Operating Officer’s Report

The 2017/2018 financial year and the corresponding 2017 Season were the first where Queensland cane growers could access choice in marketing for their Grower’s Economic Interest in sugar (GEI Sugar).

Despite the introduction of competition for tonnage previously managed by QSL under Raw Sugar Supply Agreements (RSSAs), QSL remained the largest marketer of Queensland sugar during the 2017 Season.

Although protracted On-Supply Agreement (OSA) negotiations with Wilmar in a falling market resulted in a delayed start to pricing for growers in Wilmar milling districts and negatively impacted pool results, QSL’s performance in its first year of this new competitive operating environment has been strong, outperforming most of our competitors and exceeding the benchmark (market average) by $29.95/tonne IPS to finish the season with a weighted average across QSL-managed pools of $414.56/t IPS net.

The QSL 2-Season Forward Pool was our strongest performer, with a final result of $507.32/tonne IPS net.

For the first time, QSL’s Shared Pool results varied between milling regions due to differences in the On-Supply and Raw Sugar Supply Agreement arrangements between QSL and its supplying Millers. However, the weighted average ICE 11 QSL Shared Pool result also outperformed benchmark by $8.39/tonne IPS to finish at +$1.54/tonne IPS.

Ingham Office

Ayr OfficeProserpine Office

Sarina Office

Brisbane Corporate Office for Grower Services and Marketing teams

QSL MARKETING: OUR LOCATIONS

2017 SEASON POOL PRICES (AFTER SHARED POOL ALLOCATION)17/18 FINANCIAL YEAR

$0

$100

$200

$300

$400

$500

$600

Performance above averagebenchmark A$ per mt IPS

Net Performance Benchmark

POOL

PRI

CE*/

IPS

TONN

E (A

$)

$29.85$418.76

$388.91 $405.40

QSL ACTIVELY MANAGED POOL

$42.12

$447.52

$384.61$29.95$414.56

$372.88

$401.61$28.73

QSL HARVESTPOOL

$470.24

$37.08

$507.32

QSL ACTIVELY MANAGED POOL (WILMAR GROWERS)

QSL 2-SEASON FORWARD POOL

TOTAL QSL MANAGEDICE11 POOLS

*After Shared Pool allocation This graph presents the net pool performance above the benchmark for the QSL-Managed Pools for the 2017 Season. The Performance Benchmark represents the price achieved if no market view was taken by following an evenly spread sales pattern, adjusted for applicable constraints such as infrastructure, storage, production risk constraints (Harvest Pool) 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 2017 Season, QSL outperformed the Performance Benchmark on a weighted average basis by $29.95 per tonne IPS. A weighted average shared pool was utilised in the calculation of the above results, and as such, actual prices may vary as a result of regional specific costs. The Guaranteed Floor Pool has not been benchmarked as the price was locked-in at the start of the season. The Guaranteed Floor Pool achieved a net price of $370.12 per tonne IPS for growers in Wilmar milling districts, and a net IPS pool price of $518.61 for all other growers. The US Quota Pool, which was priced on the ICE 16, achieved a weighted average net price of $578.91 per tonne IPS. See disclaimer on page 8.


OVERALL VALUE CREATED IN THE QSL-MANAGED ICE 11 POOLS COMPONENTS OF TOTAL QSL-MANAGED ICE 11 POOLS VERSUS THE NET PERFORMANCE BENCHMARK FOR THE 2017 SEASON

$A/T

ONNE

IPS

$0

$390

$410

$430

$470

$370

$350

$450

Net ICE 11Pools

$414.56

$413.02

+$35.44 -$25.50

Storage andHandling

Costs

-$3.79-$3.92

Finance Costs Regional Specific Costs

Loyalty Bonus

Shared pool including

loyalty bonus

Valueaddedabovebenchmark

Performancebenchmark

$384.61

$29.95

Gross ICE 11Pools

Net Market Premiums

-$2.13 +$1.44 +$1.54

Marketingand SharedServices

Costs

This graph shows the components that make up the QSL ICE 11 Shared Pool and highlights the value created above the Performance Benchmark, which is the benchmark that QSL internally measures its performance. This is similar to the Passive Management Benchmark, however is adjusted for the constraints of the Harvest Pool.

(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 information included in the Annual Report is of a general or summary nature and, whilst care is taken in the preparation of that information, its reliability, accuracy or completeness is not guaranteed. The information on marketing and pricing activities does not constitute financial product or investment advice and growers need to seek their own financial advice when making pricing and pool selection decisions and read the full Pricing Pool Terms which are available at www.qsl.com.au. QSL cannot guarantee the performance of any pool. Past performance is provided for reference only and may not be indicative of future performance. In addition, costs and charges may vary from year to year.

Pool results are presented on a weighted average basis.

EXPLANATORY NOTESNet Market Premiums include:AUD Free on Board return QueenslandPort differential levyPort differential rebateSupplementary Commitment premium costAccounting allocationsBrand allowancesStorage and Handling costs include:All costs associated with using the Bulk Sugar Terminals payable to Sugar Terminals LtdFinance costs include:Finance facilities chargesFinance charges

Marketing and Shared Services Costs include:Marketing costsQSL Shared Services costsRegional costs include, where applicable:Quality Scheme costsOSA incremental costsNon-recoverable Harbour DuesSupplier sugar quality allocationsLoyalty Bonus includes, where applicable:QSL Shared Services Charge RebateSupplementary Commitment Premium

Marketing Report Continued


Sugar FuturesDuring the 2017 Season the ICE No. 11 contract largely retreated to three-year lows of 10.86c/lb under the weight of an oversupplied global sugar market. Record crops and sugar exports from many countries combined with large white sugar stockpiles and sluggish demand to result in a significant and sustained sell-off across the second half of the financial year.

Prices began the year well, trending up to yearly highs prior to Christmas before retracting more than 4c/lb from 15.45c/lb in late November 2017. Much of this contraction was driven by a dramatic increase in production out of Thailand and India between January and June 2018, with both countries recording crops well above initial estimates, increasing global oversupply forecasts to above 11.5 million tonnes.

QSL’s pricing team maximised the use of discretion, forward selling heavily and implementing several actively traded option strategies with the aim of enhancing pool returns above the performance benchmark.

The DollarFor the first time since the Sydney Olympics, the AUD forward curve is paying positive carry, whereby interest rate differentials between the Australian Dollar (AUD) and the United States Dollar (USD) result in future returns for buyers of the AUD being lower than they are today. The Reserve Bank of Australia (RBA) continues to watch and wait (22 months and counting at 1.5%) while the US Federal Reserve pushed ahead on their rate-rise pathway to maintain their steady return to ‘normal’ growth and inflation levels.

This resulted in a broad scale sell-off of the AUD from January 2018 highs above 0.8100 to June 2018 lows of below 0.7400. With no movement from the RBA likely until 2019 and the expectation of further rate rises in the US, this differential is likely to weigh on the AUD/USD further.

Additionally, the rise of populism and protectionism in world politics continues to weigh on risk sentiment and trade, which will provide additional headwinds for the AUD.

9.00

0

12.00

14.00

18.00

17.00US c/

lb

15.00

16.00

13.00

10.00

11.00

JUL 17 SEP 17 NOV 17 JAN 18 MAR 18 JUL 18MAY 18

RAW SUGAR ICE 11 17/18 FINANCIAL YEAR

ICE 11: This graph represents the trend of the raw sugar ICE 11 price for the prompt futures contract for the 2017/18 Financial Year. The average sugar price for the 2017/18 Financial Year was US 13.45 c/lb. See disclaimer on page 8.

0.70

0.73

0

0.90

AUD/

USD

JUL 17

0.75

JUL 18MAR 18 MAY 18JAN 18NOV 17SEP 17

0.78

0.80

0.83

0.85

0.88

AUD/USD CURRENCY 17/18 FINANCIAL YEAR

This graph shows the trend of the Australian dollar against the United States dollar for the 2017/18 Financial Year. The average Australian dollar price for the 2017/18 Financial Year was US 0.77534 cents (weekly close). See disclaimer on page 8.

Mark Hampson, QSL Executive Manager Marketing and Risk

Marketing and Pricing

QSL Marketing


Physical PremiumsFollowing a similar pattern to the futures market, physical sugar premiums for the Far East market reacted negatively in the second half of the financial year, largely due to an oversupply of Thai sugar, and contracted by ~1c/lb during the period. Unfortunately this contraction occurred during a relatively bullish sea freight market which further impinged on Queensland raw sugar values. While the freight market has now stabilised, the wash up of the Thai crop has not yet been completed and premiums remain soft year-on-year.

Insulating Queensland growers from the onslaught of the excess global supply in the sugar market was a key focus for the QSL marketing team during the 2017 Season. Investing even further in key destination relationships and markets, aggressively forward selling and maximising value via our supply chain assisted the delivery of above-market returns to the QSL Shared Pool.

The successful renegotiation of the 15th Korean Long-Term contract in a new competitive marketing environment, as well as the further development of Japan as a key destination for a Hi-pol Brand underpinned the QSL marketing program and reaffirmed QSL as both a trusted and reliable marketer of Queensland raw sugar.

SummaryThe decline in the AUD somewhat softened the heavy blow felt by the falling ICE 11 futures price, however little could be done to completely buffer Australian sugar producers from the fundamental forces of supply and demand.

Whilst returns for cane farmers are generally under pressure as this cyclical downturn unfolds, Queensland producers are regarded as some of most technologically advanced and world-leading in their farming practices, and so are well placed to deal with current market challenges. To this end, it was a fantastic opportunity for QSL to host a tour party of Queensland growers on the Inaugural QSL Japanese Sugar Study Tour in May of this year. The tour group spent a week in Japan meeting with key QSL customers and visiting parts of the logistics, processing and distribution supply chain for one of the largest destinations for Queensland raw sugar, connecting these growers from around the state to the scale and depth of the markets they underpin.

After the first full year of a competitive marketing environment, the QSL pools yielded results not only above benchmark but above that of many of our competitors. This performance not only reconfirms our value offering to the industry and our suppliers, but further enhances the stoic and trusted QSL brand within the global sugar trade.

Marketing and Pricing Continued


The implementation of Marketing Choice for Queensland cane growers necessitated an entirely new approach to grower relationships for QSL, as we moved from being a sugar marketing ‘wholesaler’ dealing only with sugar mills for GEI Sugar origination, to a ‘retailer’ contracting directly with growers.

While previous pool nomination and payment arrangements remained largely unchanged for growers in the Bundaberg, Isis, Mackay, MSF Sugar and Tully Sugar milling districts during the inaugural season of Marketing Choice, due to the terms of our On-Supply Agreement with Wilmar, QSL secured Grower Pricing Agreements directly with growers supplying this miller. As a result of this new contractual relationship, QSL began taking pricing product nominations and grower-managed pricing orders directly from these contracted growers – rather than via their miller, as had previously been the case – and also began to pay these growers direct.

The QSL Direct online portal created to facilitate these new arrangements was well received by growers and highly reliable, and during the reporting period was further expanded to provide a number of enhanced reporting functions, including a cash flow forecaster as well as quarterly and annual payment reports.

Our regional offices in Ingham, Ayr, Proserpine and Sarina emerged as valued and popular resources for our grower clients, while our Grower Services Team delivered an active and multi-faceted engagement program right throughout the state, working with growers, collectives and local professional services such as accountants and solicitors to provide tailored support and information when and where it was needed most.

Our ProductsWhile QSL’s managed pool offerings remained largely unchanged, we expanded our grower-managed pricing products to enable growers to price incrementally in the current season.

The QSL In-Season Target Price Contract and In-Season Fixed Price Contract pools enabled both large and small growers to price against each of the four ICE #11 contracts available each year, increasing their ability to capture market increases against specific contracts and extending their pricing window to the April following harvest.

Growers using our grower-managed pricing products were also able to receive Accelerated Advances, which delivered 90% of Advances payments for any completed pricing by the end of the year.

Bryce Wenham, Finance Manager – Supplier Relations

Grower Services & Supplier Relations

During the 2017 Season QSL had new On-Supply Agreements in place with MSF Sugar, Tully Sugar and Wilmar, while existing Raw Sugar Supply Agreements remained on foot with Bundaberg Sugar, Isis Central Sugar Mill and Mackay Sugar. On 1 December 2017 Mackay Sugar advised that they would not renew their Raw Sugar Supply Agreement beyond the 2019 Season and would seek to transition to an On-Supply Agreement. At the time of publication, negotiations for this agreement were continuing.

QSL Marketing


Damian Ziebarth, QSL Operations General Manager

General Manager’s Report

QSL’s new Operating Agreement with Sugar Terminals Limited (STL) came into place during 2017, heralding a new chapter for QSL Operations.

Under the agreement, QSL remains one of the largest and most experienced sugar terminal operators in the world, managing Queensland’s six bulk sugar terminals on behalf of the asset owner, STL. Marketers and terminal users, including QSL Marketing, now contract directly with STL for terminal access.

The agreement commenced on 1 July 2017 (it included transitional arrangements for 2017-Season sugar received prior to this date) and has an initial five-year term, with a three-year rolling term thereafter.

The new arrangements outlined above led to a significant revision of stock management practices, as the QSL Operations team reworked the existing logistics management system designed for a single marketing plan to cater for multiple terminal customers. Ring-fencing provisions within QSL were also expanded to include a new co-location with QSL Operations and STL in Brisbane and additional communications protocols to maximise the new synergies between QSL Operations and STL while also protecting the confidential nature of the terminal customers’ commercially sensitive marketing plans and operations requests.

Despite the challenges associated with the in-season transition to these new operating arrangements, the QSL Operations team produced a 100% Delivered In-Full On-Time (DIFOT) performance result, with every terminal customer receiving the full volume of requested sugar at the quality they specified and the time they wanted it.

QSL Operations

QSL OPERATIONS: OUR LOCATIONS

Cairns Bulk Sugar Terminal

Mourilyan Bulk Sugar Terminal

Townsville Bulk Sugar Terminal

Lucinda Bulk Sugar Terminal

Mackay Bulk Sugar Terminal

Bundaberg Bulk Sugar Terminal

Brisbane Operations Team Office


Operations Report Continued

Key ProjectsShed Re-Roofing: Cairns Bulk Sugar Terminal’s Shed #1 was successfully re-roofed during the 2017/18 financial year. This project, which was completed in September 2017 in readiness to store the last of the 2017-Season Cairns-district crop, was part of QSL’s wider and ongoing roof replacement program which has already seen work completed at the Mackay, Lucinda, Mourilyan and Cairns 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 Operations has secured the safe and timely delivery of all of these projects undertaken to date within their allocated budgets. The re-roofing team is now working on the two sheds at the Bundaberg Bulk Sugar Terminal.

Structure Protection: With the terminals’ oldest raw sugar storage sheds now 60 years old, the QSL Operations team is continuously exploring opportunities to extend the life of terminal structures. To this end, the six-kilometre roadway on the Lucinda Jetty was this year protected with a product called Silane. This sealer repels moisture and salt from entering concrete structures, which in turn prevents moisture from reaching the reinforcing steel and compromising structural integrity. By applying it to the Lucinda Jetty girders, we estimate we have extended their useful life by at least 30 years.

Lucinda jetty roadway girders: Before sealer treatment.

Lucinda jetty roadway girders: After sealer treatment.

TONNES HANDLED THROUGH THE BULK SUGAR TERMINALSLAST 5 SEASONS

0

1,000

2,000

3,000

4,500

4,000

500

1,500

2,500

3,500

TOTA

L TON

NES

ACTU

AL (’

000)

Tonnage

2016201520142013 2017

3,766,266

3,916,361

4,211,774

4,092,376

3,796,779

This graph reflects the tonnage of raw sugar handled at the six BSTs over the last five seasons. It shows the amount that is handled through storage and handling agreements and the Raw Sugar Supply Agreements. See disclaimer on page 8.

Phyto Sanitary Accreditation: To export raw sugar to China, a shipment must be accompanied by a ‘Phyto Sanitary’ accreditation issued by the Australian Government. This certification attests that the cargo is free from injurious pests and diseases.

For the Government to have confidence in the exporter, three prerequisites must be achieved:

1. The facility is accredited for export by storing the product in a clean and contamination-free manner.

2. The facility can segregate a 3kg subsample for inspection for every 10 tonnes loaded.

3. The cargo is inspected by Government-accredited inspectors during loading.

During recent years the QSL Operations team has sought to improve the terminal facilities necessary to allow Phyto Sanitary accreditation at all six Bulk Sugar Terminals. This was finally achieved during the reporting period, enabling any of the terminals to now export to China.

Other key achievements during the reporting period include:

�� Modified rail molasses unloading facility introduced at Townsville BST to cater for new wagon format

�� 100% compliance with rigid Japanese import restrictions

�� Facilitated increased number of site tours for terminal customers and their clients

�� Increased blending activities to enable customers to value-add

�� Integrated new rail wagon style for increased payload into Townsville BST


Our view has continued to be that Environment, Health and Safety (EHS) is a mission-critical enabler and strategically QSL has maintained a justifiable focus. We consider EHS in the same way we do our other critical objectives, and drive performance via the same systems we use in other functions of our business. The foundations of our EHS strategy are:

Language;

Learning; and

Leadership

In June 2018 the QSL EHS management system underwent a comprehensive audit and assessment process which saw QSL Operations receive certification under AS/NZS 4801:2001, the Australian standard for occupational health and safety management systems, and ISO 14001:2015, the international standard for environmental management systems. The certification process delivered a range of benefits, including enhanced regulatory compliance and improved efficiency and effectiveness across all aspects of our operations. These certifications provide independent third-party assurance to customers and industry stakeholders that QSL’s EHS system is organised and used with clarity and consistency.

Environment and sustainability continue to be an important area of focus for QSL. We are committed to minimising effects on the environment and continue to identify sustainable alternatives. As an example, we have implemented a regime of mechanical cleaning methods which have resulted in a sharp reduction in water use as well as reductions in wastewater generation.

In the area of mental health, 10 QSL employees were trained in mental health first aid to help prevent suicide by equipping them with the skills and confidence to intervene where and when necessary.

The second round of QSL’s EHS employee recognition program – the Compass Awards – was completed during the reporting period. Nominations were submitted against one of three criteria:

�� Learn Through Participation;�� Develop Risk Maturity; and �� Foster Discovery.

The winners were selected from a strong field of nominations and were recognised for innovative achievements ranging from supporting and mentoring local suppliers to improve their EHS systems, to adopting best practice opportunities from bulk water storage providers and identifying smart solutions to identified safety issues.

The past year also saw the further development of the Front Line Leader (FLL) training program for all supervisors and managers within the QSL Operations team – critical roles in the context of the day-to-day terminal operations. The QSL FLL program addresses a range of ‘soft skills’, including understanding how our people think, knowing what to observe, how to engage with others, and how to influence groups.

Despite the efforts detailed above and promising lead indicators, the QSL Operations team experienced three recordable injuries during the reporting period, these being two soft-tissue injuries (strains) and an incidence of welder’s flash. Treatment and support was provided to all three workers to allow them to resume normal duties as soon as possible, with the learnings from these incidents shared across all of our sites.

QSL recognises EHS is a complex field, and so we continue to focus not only on the physical (workspace) aspects but also on the individual (headspace) and team (group-space) attributes that affect the way we make decisions that impact our safety and the safety of others.

Rob Cooper, Manager – Operational Risk & Leadership

Terminal Environment, Health and Safety

ROLLING 12-MONTH INCIDENT STATISTICS FOR THE PERIOD ENDED JUNE 2018

5555

OOOO

5 5

1 1 1

5 5 5

Jul Aug Sep Oct Nov Dec JanMonths

TRIFRs

No o

f TRI

s

Feb Apr May Jun

10

8

6

4

2

0

1.5

1.2

0.9

0.6

0.3

0Mar

5 5 5

0

2.4 2.5

7.4 7.4 7.5 7.5

No of Total Recordable Injuries (TRIs)Total Recordable Injury Frequency Rate (TRIFRs)TRIFR Target

QSL Operations


As a stand-alone function, QSL Corporate Services negates the costly duplication of support services within QSL’s separate Marketing and Operations units by providing shared in-house expertise, capturing synergies which ultimately benefit all those who use QSL.

Its primary functions include:

�� Finance and Accounting – The provision of accounting, finance and payroll services across the whole company. Additionally, the team manages funding across the organisation to ensure financing is sourced at the lowest cost.

�� Legal and Governance – The QSL Legal and Governance function manages the legal risks at QSL, which includes legal compliance, negotiation, review and drafting of contracts and the management of any legal claims. This function also includes establishing and maintaining corporate governance frameworks for QSL as well as managing the QSL Board process and providing Company Secretarial support to the QSL Board.

�� People and Culture – This function is responsible for developing systems and strategies targeted at sourcing, engaging, rewarding, developing and retaining high-quality employees who are driven to achieving outstanding business targets and generating superior results and performance for the benefit of the industry. It is committed to establishing a stable pipeline of leaders and talent aligned to our values, so there is no perceived risk with our performance.

�� Environment, Health and Safety (EHS) – The EHS function oversees the development and implementation of the health, safety and training programs within QSL to ensure these assist our people to make good decisions about the work they undertake.

�� Information, Communications and Technology (ICT) – This team designs, maintains and supports QSL’s unified communications and information technology infrastructure and develops and maintains specialised enterprise applications, so that QSL can leverage information and technology in an efficient, productive and secure manner.

�� Communications – The provision of external communications across multiple platforms, including the QSL website, social media pages, corporate publications, presentations and media content.

Key Corporate Services highlights from the past year include:

Financing Facilities RenewedQSL renewed its committed financing arrangements with its existing syndicate members in May 2018 for a further 18 months. The facility limit has been reduced to A$400 million, saving considerable finance charges, with the facility comprised of a A$250 million Syndicated Facility Agreement (SFA) and a A$150 million Syndicated Inventory Facility (SIF).

Further flexibility was also included in the renewed facilities, including the ability to draw down the funding in both Australian and United States dollars.

Under the new facility QSL may request a further 12-month extension to the maturity date of the SFA prior to 31 March 2019.

The renewed arrangements continue to allow a seasonally based flexible solution, providing the company’s core liquidity requirements at a competitive rate on a revolving basis.

QSL continues to also have a number of uncommitted facilities with financiers for short-term money-market funding.

AwardQSL’s funding arrangements with ANZ won Best Trade Finance Solution – Australia at this year’s The Asset Triple A Treasury, Trade & Risk Management Awards. The annual awards recognise Asian corporates and banking institutions that have executed the most effective and innovative treasury, cash management, capital and trade finance, and risk management solutions in the region.

Aaron Searle, Chief Financial Officer

Chief Financial Officer’s Report

QSL Corporate Services


Our QSL People StrategyQSL’s People and Culture strategy takes purposeful action to ensure QSL has the right talent and capability to deliver performance supported by the right people and performance systems to make it happen. This strategy strives to achieve three key goals:

�� QSL culture and values are unique, and are a source of competitive advantage.

�� We have leaders worth following and our technical capability is unrivalled. We focus on developing a stable pipeline of both leaders and talent across all parts of the business so there are no perceived risks to our organisational performance.

�� Our work is worth doing. Our business vision and purpose focuses on goals greater than ourselves.

QSL’s Diversity and Inclusion commitmentQSL’s success is prefaced on our ability to engage with a more diverse set of customers and stakeholders. It demands that we think differently. A more diverse workforce is seen as one important response to achieving this competitive advantage. QSL further progressed its diversity and inclusion initiatives during the year and is pleased to report:

�� An overall 2% increase in gender representation across all dimensions of the business, achieved through structured recruitment and retention programs;

�� The establishment of our female mentoring network, formalising external mentoring relationships for five of our high-performing females with senior executives across a range of organisations; and

�� In May 2018, Alisha Fretwell (QSL’s first female mechanical apprentice) from Townsville was awarded the TORGAS ‘most outstanding engineering apprentice (1st year)’ award for the region.

QSL Engagement and RetentionManagement and the Board have been mindful of staff retention risks for the last three years, acknowledging that protracted uncertainty in the business (and industry) had the potential to significantly impact staff retention and undermine both QSL’s ability to respond to the transformative changes required and industry confidence in our service offering. Staff retention has informed most of QSL’s people and culture initiatives over this time, including staff secondments to special projects, the identification of high-potential talent supported by succession and development planning, and our focus on communications, culture and leadership development.

Celebrating and recognising achievementsThis year saw Judy Ryan (Mourilyan) and Glen La Spina (Townsville) celebrate 30 years of service with QSL, while Christine Schuman (Townsville) marked 25 years service.

FY18 also saw a number of our apprentices achieve industry recognition for outstanding performance and commitment through the TORGAS Apprentice Awards.

RemunerationQSL continued its long association with Korn Ferry Hay Group (KFHG) during the reporting period, ensuring all decisions around its Total Reward Framework were well informed and supported by timely, independent, market-aligned benchmarking.

The Board Remuneration sub-committee has oversight into the design and effectiveness of QSL’s Total Reward and Remuneration framework, including specific details of remuneration packages for the Chief Executive Officer and Managing Director, Executives and Directors. The Committee continues to monitor the effectiveness and market competitiveness of QSL’s reward and remuneration mechanisms.

QSL reviews its Total Reward Framework annually. Given the changes to QSL’s operating environment, KFHG undertook a detailed independent review of remuneration and job evaluation for a number of key positions in August 2017, and relevant adjustments to remuneration and incentive eligibility were made. With this level of scrutiny and independent reference, QSL continues to remunerate staff conservatively yet competitively to market, mitigating possible risks of loss of critical talent and capability, while also ensuring costs are sustainable for the future.

Director RemunerationBoard Fees remain well under the Board Fee cap, last set and reviewed in 2001.

The last review and change of Board Fees occurred in November 2015. In May 2017, the Remuneration Committee commissioned an updated independent report from KFHG on Director Remuneration, given the substantial increase in risk being managed by QSL and the Board with particular reference to the Grower Direct model and QSL’s new competitive landscape. The benchmarking report noted that while current Board fees were set at a very conservative level to market, the Board approved to freeze Board fees again for a third year.

Joanne Nugent, General Manager Human Resources

Our People



Queensland Sugar Limited (QSL) is a public company limited by guarantee, incorporated under the Corporations Act 2001. The principal object of the company, without limiting its powers under the law, is to promote the development of the sugar industry.

The company has 30 members (refer page 2) 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 (ACFA) and Queensland Cane Growers Organisation Limited (CANEGROWERS).

The voting rights of members are outlined in QSL’s Constitution. A copy of QSL’s Constitution is available in the Corporate Structure section of QSL’s website (www.qsl.com.au).

The QSL Board of Directors

Role of the BoardThe 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 and safety and the wellbeing of employees and contractors; and stakeholder liaison and communication. The Board Charter is available in the Governance section of QSL’s website (www.qsl.com.au).

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 in place covering areas such as Fraud and Corruption and Whistle blower Policies, Code of Ethics and Conduct, Appropriate Workplace Behaviour, Privacy, Competition and Consumer Law Compliance Policies as well as Work Health and Safety and Environmental Policies.

Composition of the BoardThere are currently four 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/Chief Executive Officer. 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 at this point in time there are no industry directors on the QSL Board.

There are currently three independent Non-Executive Directors on the QSL Board, these being Guy Cowan (Chairman), Sarah Scales and Craig Doyle.

Greg Beashel is the Managing Director and Chief Executive Officer of QSL. Details about the current Directors are in the Directors’ Report in the Financial Statements.

Appointment of DirectorsIndependent 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.

Board CommitteesThere are currently four Board committees to assist the Board to carry out its functions: the Audit and Risk Committee, the Trading Risk Committee, the People and Operations Committee and the Remuneration 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.

QSL’s Board Committee Charters set out each Committee’s area of responsibilities, and are available in the Governance section of QSL’s website (www.qsl.com.au).

Audit and Risk CommitteeThe Audit and Risk Committee (ARC) 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 ARC are Guy Cowan (Committee Chair), Sarah Scales and Craig Doyle. The Managing Director, the Chief Financial Officer, Chief Operating Officer, Risk and Compliance Manager and representatives of the external and internal auditors attend meetings of this Committee by invitation.

Corporate Governance

Susan Campbell, Company Secretary/Legal Counsel



Trading Risk CommitteeThe Trading Risk Committee (TRC) 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 TRC are Sarah Scales (Committee Chair) and Guy Cowan. The Managing Director, the Chief Financial Officer, Chief Operating Officer, Executive Manager Trading and Risk, Risk and Compliance Manager, and representatives of external and internal auditors attend meetings of this Committee by invitation.

People and Operations CommitteeThe People and Operations Committee (POC) assists the Board to discharge its responsibilities relating to workplace health and safety, environmental compliance, and people issues.

The current members of the POC are Craig Doyle (Committee Chair) and Guy Cowan. The Managing Director, General Manager Operations, Company Secretary and General Manager Human Resources are invited to attend meetings as appropriate.

Remuneration CommitteeThe Remuneration Committee (REMC) was established in early 2017 to discharge its responsibilities relating to the composition, remuneration and performance of the Board, as well as remuneration and performance of QSL employees and remuneration strategies/policies for QSL.

The current members of the REMC are Craig Doyle (Committee Chair), Guy Cowan and Sarah Scales. The Managing Director and General Manager Human Resources are invited to attend meetings as appropriate.

From left: Guy Cowan, Sarah Scales, Craig Doyle, Greg Beashel

Corporate Governance Continued

ContentsDirectors’ Report 20

Auditor’s Independence Declaration 24

Consolidated Statement of Comprehensive Income 25

Consolidated Statement of Financial Position 26

Consolidated Statement of Changes in Equity 27

Consolidated Statement of Cash Flows 28

Notes to the Financial Statements 29

Independent Auditor’s Report 45


Statutory Financial Report

DIRECTORS’ REPORTFOR THE YEAR ENDED 30 JUNE 2018 QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES

The Directors of Queensland Sugar Limited (‘QSL’ or ‘Parent Entity’) present their report on QSL and its Controlled Entities (‘Consolidated Entity’) for the year ended 30 June 2018 and the auditor’s report thereon.

DIRECTORS

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

GUY COWAN BSc (Hons), FCA (UK), MAICD

CHAIRMAN OF THE BOARD, CHAIRMAN OF THE AUDIT & RISK COMMITTEE, MEMBER OF THE TRADING RISK COMMITTEE, MEMBER OF THE PEOPLE & OPERATIONS COMMITTEE AND MEMBER OF THE REMUNERATION COMMITTEE

Guy joined the QSL Board on 1 January 2009 and was appointed Chairman at QSL on 1 January 2015. Guy has had nine years’ experience as a chartered accountant with Price Waterhouse (now PricewaterhouseCoopers) and KPMG, in addition to 23 years’ international experience in commercial and finance roles in the oil and gas industry.

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

In addition to his role on the QSL Board, Guy holds directorships with Buderim Group Limited (Chair), Santos Limited, Winson Group Pty Ltd, and Ability First Australia.

SARAH SCALES BAgSc, GAICD

NON-EXECUTIVE DIRECTOR OF THE BOARD, CHAIRMAN OF THE TRADING RISK COMMITTEE, MEMBER OF THE AUDIT & RISK COMMITTEE AND MEMBER OF THE REMUNERATION COMMITTEE

Sarah joined the QSL Board as a Non-Executive Director on 1 January 2013. Sarah’s term expired on 31 December 2015, and was then reappointed for a further period expiring on 28 January 2017. Sarah was then appointed for a three year term expiring in January 2020.

Sarah brings to the role more than 25 years of senior management experience working in domestic and international agribusiness. This includes six years working as the General Manager AWB International Limited looking after the Single Desk wheat business for AWB Limited.

Sarah has extensive experience in business strategy development and soft commodity marketing with specific skills in the area of managing pools and price risk, including foreign exchange and commodity derivatives. Through her company, Clear Point Consulting, Sarah provides strategic management advice to agribusinesses and new entrants to the Australian agriculture sector.

Sarah’s non-executive directorships include The Pastoral Pork Company Pty Ltd, Agracom Pty Ltd, Aroona Holding Pty Ltd and related entities, Busselton Farm Pty Ltd and AustOn Corporation Pty Ltd.

CRAIG DOYLE MBA(TechMgmt), AssocDipSc, PostGradDipMgt

NON-EXECUTIVE DIRECTOR OF THE BOARD, CHAIRMAN OF THE PEOPLE & OPERATIONS COMMITTEE, CHAIRMAN OF THE REMUNERATION COMMITTEE AND MEMBER OF THE AUDIT & RISK COMMITTEE

Craig joined the QSL Board as a Non-Executive Director on 11 October 2016.

Craig is the Chief Executive Officer at Mackay Regional Council. Prior to this, Craig was CEO of Gladstone Ports Corporation and Executive General Manager of Australia’s largest sugar business – Wilmar Sugar.

Craig has held numerous senior executive roles specialising in operations, project management, and commercial, including international greenfield and brownfield growth projects spanning the Australian refined and raw sugar industries and other areas.

In addition to his role on the QSL Board, Craig holds directorships with Northern Australia Services, Mackay Regional Enterprises and Regional Capitals Australia.

GREG BEASHEL BE Chem (Hons), MBA, GAICD

MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER

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

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

COMPANY SECRETARY

SUSAN CAMPBELL BComm, LLB (Hons), GradDip Sec Institute, GradDip App Corp Gov, GradCert Bus Admin

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/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.


SIGNIFICANT CHANGES

There were no significant changes in the state of affairs or in the nature of QSL’s or its Controlled Entity’s principal operations during the year. However, during the year, a number of contractual relationships changed, resulting in a difference to the way the services are delivered to the Queensland sugar industry.

PRINCIPAL OPERATIONS AND OBJECTIVES

The Consolidated Entity has separated the business activities into two segregated businesses, QSL Marketing and QSL Operations, which are supported by QSL’s Corporate Services division.

The principal operations of QSL Marketing is the marketing of raw sugar, the management of financial risk in connection with such marketing, financing of the Advances program and ancillary services in logistics. In pursuing these short and long term objectives, the company seeks to maximise the returns to marketing clients through revenues generated from pooling activity, enhancing its product and service offering to clients and focusing on adding value for the benefit of clients who have elected to utilise QSL Marketing’s services. The company’s strategy of maximising pool returns is achieved by keeping a tight control of costs, outperforming relevant benchmarks and optimising pool returns by purchasing and selling raw sugar from other origins.

The principal operations of QSL Operations is the safe and efficient operations of the Bulk Sugar Terminals (‘BST’) in accordance with the Operating Agreement (‘OA’) with Sugar Terminals Limited (‘STL’). The BST operations are performed for the whole of industry on a cost recovery basis in the best interests of the Queensland sugar industry. This part of the business is “ring-fenced” to ensure that there is no conflict of interest in terms of sharing logistical information to any party.

The principal operations of QSL Corporate Services is to support both business units by sharing resources including corporate governance, finance, legal, information technology, human resources and payroll.

The company measures its performance against key performance indicators. The most significant key performance indicator for QSL Marketing is in relation to the revenues generated for marketing clients from pooling activity against relevant benchmarks, while for QSL Operations it is efficient and safe operation of the BSTs.

REVIEW OF OPERATIONS AND RESULTS

A review of the Consolidated Entity’s operations and results for the year ended 30 June 2018 is set out below:

QSL’s Activities

The 2018 financial year saw a considerable change to QSL’s contractual relationships with the milling companies and STL. The decision of Wilmar Sugar Australia Limited, Tully Sugar Limited and MSF Sugar Limited to terminate their Raw Sugar Supply Agreements (‘RSSAs’) for the 2017 season (from 1 July 2017) resulted in STL terminating the sub-lease with QSL and appointing QSL Operations as the BST operator. This resulted in STL getting more involved in the BST operations and becoming the counterparty of the Storage & Handling Agreements (‘SHA’) with all BST users, including QSL’s marketing division (QSL Marketing). Under the OA with STL, QSL is required to comply with certain “ring-fencing” provisions to ensure that QSL’s operations division, which provides BST operating services to the whole of industry, do not have a conflict of interest between QSL’s marketing clients and other marketers of raw sugar.

During the prior year, all Queensland sugar milling companies held RSSAs with QSL requiring all bulk raw sugar for export to be supplied and marketed by QSL. Under the RSSA, Suppliers were able to sell their Mill Economic Interest (‘MEI’), approximately around one-third of the mill’s production, directly to their end customers if they elected to do so.

DIRECTORS’ REPORT CONTINUED

FOR THE YEAR ENDED 30 JUNE 2018 QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES

DIRECTORS’ MEETINGS

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

BOARD OF DIRECTORS

AUDIT & RISK COMMITTEE (A&RC)

TRADING & RISK COMMITTEE (TRC)

PEOPLE & OPERATIONS

COMMITTEE (POC)

REMUNERATION COMMITTEE (REM)

HE

LD1

ATTE

ND

ED

HE

LD

ATTE

ND

ED

HE

LD

ATTE

ND

ED

HE

LD

ATTE

ND

ED

HE

LD

ATTE

ND

ED

Guy Cowan 18 18 5 5 5 5 5 5 4 4

Sarah Scales 18 18 5 5 5 5 5 42 4 4

Craig Doyle 18 18 5 5 5 53 5 5 4 4

Greg Beashel4 18 175 5 5 5 5 5 5 4 4

1 Represents the number of meetings held during the time the Director held office during the 2017/18 year2 Sarah Scales is not a member of POC but attended the meetings by invitation3 Craig Doyle is not a member of TRC but attended the meetings by invitation4 Greg Beashel is not a member of the Board Committees, but attends meetings by invitation5 Greg Beashel was overseas on QSL business for one board teleconference




REVIEW OF OPERATIONS AND RESULTS CONTINUED

QSL’s Activities (continued)

Marketing Choice legislation (Sugar Industry (Real Choice in Marketing) Amendment Act 2015) was passed by Queensland State Parliament in December 2015 requiring marketing choice to be given to growers. This legislation is supported by the federal code of conduct for sugar marketers (Competition and Consumer (Industry Code—Sugar) Regulations 2017). MSF Sugar Limited and Tully Sugar Limited signed an On-Supply Agreement (‘OSAs’) on 29 September 2016 and 15 December 2016, respectively, to allow their growers choice in selecting QSL as their Marketer for the 2017 season. On 22 May 2017, Wilmar Sugar Australia Limited signed an OSA allowing their growers to elect QSL as marketer of their raw sugar for the 2017 season and beyond. Mackay Sugar Limited, Bundaberg Sugar Limited, Isis Central Sugar Mill and WH Heck & Sons Pty Ltd held a RSSA with QSL during the 2018 financial year (2017 season).

On 7 June 2017, QSL signed a strategic OA for an initial five year term with a three year rolling term thereafter. Under this OA, QSL Operations performs the operational services, maintenance and repairs, and capital works program at the BSTs under the supervision of STL. QSL Operations charges service fees to STL on a cost recovery basis without mark-up or margin. This OA has certain “ring fencing provisions” to ensure that QSL’s activities are clearly segregated between marketing activities (QSL Marketing business) and BST operational activities (QSL Operations business). To facilitate this physical separation, QSL Operations’ corporate office has co-located with STL, on a separate floor to QSL Marketing.

Revenues

QSL recorded sales revenue from raw sugar for the 2018 financial year of $962.1 million (1.9 million tonnes), a decrease of $1,304.9 million from the previous year’s revenue of $2,267.0 million (3.9 million tonnes). The lower sales revenue number compared to the prior year is as a result of significantly reduced tonnage supplied to QSL and lower pool values. During the prior year, all Queensland milling companies utilised QSL’s marketing services for all export tonnages (2016 season: 3.7 million tonnes). Due to the changes in contractual arrangements with Suppliers for the 2017 season, QSL was supplied with 1.7 million tonnes of raw sugar during the 2018 financial year.

Consistent with prior years, QSL continues to be focused on marketing raw sugar to Asian markets to obtain the highest net return for pooling participants. QSL continues to transact in other origin sugar activities to complement the existing marketing program by allowing pool sales to be fulfilled through either supplying Queensland sugar or by supplying sugar from other destinations in order for QSL to meet customer demand and maintain its marketing presence in a growing Asian market.

Additionally with the changes to marketing arrangements within the industry in the 2018 financial year, QSL received service fees of $38.5 million from STL for the operation of its six BSTs (2017: $nil, due to the sub-lease between the two parties and $50.8 million in rental was paid). The OA has an initial five year term with a three year rolling term thereafter. QSL Operations performs the operational services, maintenance and repairs, and capital works program at the BSTs under the supervision of STL. QSL Operations charges service fees to STL on a cost recovery basis without mark-up or margin. The corresponding costs are included in the Expenses from Continuing Operations.

Expenses

Payments to Suppliers for the year ended 30 June 2018 were $863.1 million, a decrease of $1,239.5 million from the prior year’s payments to Suppliers of $2,102.6 million. This was predominately the result of reduced tonnage due to the change in supply tonnages as a result of contractual changes mentioned above, and lower pool values.

Freight and brokerage costs were down by $13.9 million this year compared to the prior year of $47.5 million primarily due to lower tonnage. Operating lease rental costs decreased by $50.7 million to $0.5 million due to the termination of the sub-lease with STL. The sub-lease with STL was terminated on 30 June 2017 with an OA between the two parties commencing on 1 July 2017. The significant change between the two contractual arrangements is that under the OA, STL is the counterparty to the SHAs and thus, is contracting directly with marketers and BST users, including QSL Marketing. As a result, from 1 July 2017 QSL no longer incurs operating lease rental expense from STL. QSL Marketing incurred storage and handling charges of $44.1 million for the year ended 30 June 2018 (2017: $nil). Borrowing costs decreased by $10.8 million to $7.2 million from the prior year due to lower advance rate payments as a result of lower net sugar returns and reduced tonnage.

Net Surplus / (Deficit)

QSL’s activities delivered a $0.1 million deficit (2017: $nil) for the Consolidated Entity in the 2018 financial year due to a receivable that could not be recovered through the pooling arrangements. All net returns have been passed back to RSSA participants through the Shared Pool. QSL will continue to maximise pool returns and pass net pool returns through to those using QSL’s marketing service. All net costs in relation to the OA are passed onto STL for recovery under the OA.

Banking and Financing

QSL’s funding arrangements supports both QSL Marketing and QSL Operations businesses. QSL’s funding has both committed and uncommitted facilities to support the company’s activities. QSL’s funding requirements are met by the limits contained in the committed facilities. The committed facilities comprise of a syndicated credit facility (‘SFA’) and a Syndicated Inventory Facility (‘SIF’).

QSL had the use of A$500m SFA and a US$200m SIF in committed funding during the year, which was due for expiry in June 2018. This was used to fund the 2017 season financing requirements. The SFA limit was adjusted downwards during the year based on seasonal requirements and to save finance charges.

Prior to expiry, QSL renewed its committed financing arrangements with its existing syndicate members in May 2018 for a further 18 months to 30 September 2019. The facility limit has been reduced to A$400m due to expected lower prices in the upcoming season, saving considerable finance charges. The renewed facility comprises of a A$250m SFA and a A$150m SIF. Further flexibility has been included in the renewed facilities including drawing down the funding in both Australian dollars and United States dollars. Under the new facility, QSL may request a further 12 month extension to the maturity date of the SFA prior to 31 March 2019. The renewed arrangements continue to allow a seasonally based flexible solution providing the company’s core liquidity requirements at a competitive rate on a revolving basis.

QSL continues to have a number of uncommitted facilities with financiers for short-term money market funding. As at 30 June 2018, $33.6m of uncommitted funding was utilised (2017: $nil).


EVENTS AFTER REPORTING DATE

Other than the items reported in Note 20 of the financial report, no matter or circumstance has arisen since the end of the reporting period that has significantly affected or may significantly affect:

� The Consolidated Entity’s operations in future financial years

� The result of those operations in future financial years

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

LIKELY DEVELOPMENTS

The Consolidated Entity will continue to provide marketing of raw sugar, the management of financial risk in connection with such marketing and ancillary services in transport and logistics for those mill owners and growers that choose QSL’s Marketing division as their Marketer of raw sugar. Additionally QSL will continue to provide BST operational services for all users under the OA with STL.

QSL will continue to promote the development of the Queensland sugar industry in accordance with the objects set out in its Constitution.

GUARANTEE AMOUNT BY MEMBERS

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

� seven mill owner members; and

� 23 grower representative members

For each class of membership in the Company the amount which a member of that class is liable to contribute if the Company is wound up is $100 per member. The total amount that mill owner members and grower representative members of the Company are liable to contribute if QSL is wound up is $700 and $2,300 respectively, totalling $3,000.

ENVIRONMENTAL REGULATION

The Consolidated Entity’s operations are subject to significant environmental regulation under Commonwealth and Queensland law, particularly with regard to air, noise, water, waste management and site contamination at its BST operations. The Directors are not aware of any significant breaches of environmental regulation during the reporting period.

INDEMNITIES AND INSURANCE

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

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

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

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

AUDITOR INDEPENDENCE

The auditor’s independence declaration is set out on page 24 and forms part of the Directors’ Report for the year ended 30 June 2018.

ROUNDING OF AMOUNTS

Unless otherwise shown in the financial report, amounts have been rounded to the nearest $1,000 (where rounding is applicable and where noted ($’000)) under the option available to the Controlled Entities under ASIC Corporations (rounding in Financial/Directors Report) Instrument 2016/191. QSL is a company to which the Class Order applies.

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

Guy Cowan Chairman

4 September 2018




AUDITOR’S INDEPENDENCE DECLARATION FOR THE YEAR ENDED 30 JUNE 2018 QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES

A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation

Ernst & Young 111 Eagle Street Brisbane QLD 4000 Australia GPO Box 7878 Brisbane QLD 4001

Tel: +61 7 3011 3333 Fax: +61 7 3011 3100 ey.com/au

Auditor’s independence declaration to the directors of Queensland Sugar Limited As lead auditor for the audit of Queensland Sugar Limited for the financial year ended 30 June 2018, I declare to the best of my knowledge and belief, there have been:

a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and

b) no contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Queensland Sugar Limited and the entities it controlled during the financial year. Ernst & Young Paula McLuskie Partner 04 September 2018


CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED 30 JUNE 2018 QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES

Note2018 $’000

2017 $’000

CONSOLIDATED STATEMENT OF PROFIT OR LOSS

REVENUES FROM CONTINUING OPERATIONSSales of raw sugar 962,137 2,266,976

Service fee revenue from STL 38,465 -

Net foreign currency exchange loss (4,499) (1,807)

Interest income 235 557

Share investment income 3 2,921 2,432

Other revenues 667 1,625

999,926 2,269,783

EXPENSES FROM CONTINUING OPERATIONSPayments for raw sugar 863,102 2,102,599

Freight and brokerage 4 33,597 47,468

Storage and handling charges payable to STL 44,098 -

Operating lease rental 4 491 51,233

Salaries and employee benefits 22,771 24,820

Borrowing costs 4 7,247 18,013

Depreciation 2,923 3,214

Research funding to the sugar industry - 1,079

Other expenses 5 25,821 21,357

1,000,050 2,269,783

NET SURPLUS/(DEFICIT) ATTRIBUTABLE TO MEMBERS OF QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES (124) -

OTHER COMPREHENSIVE INCOME FOR THE YEAR

Items that may be reclassified subsequently to profit or lossNet gain on available-for-sale financial assets 272 279

TOTAL COMPREHENSIVE INCOME FOR THE YEAR ATTRIBUTABLE TO MEMBERS OF QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES 148 279

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


CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAS AT 30 JUNE 2018 QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES

Note

2018 $’000

2017 $’000

ASSETS

CURRENT ASSETSCash and cash equivalents 15 311 26,656

Trade and other receivables 6 42,454 36,472

Inventories 7 92,347 137,935

Prepayments 1,996 2,039

Other financial assets 8 23,892 47,358

TOTAL CURRENT ASSETS 161,000 250,460

NON-CURRENT ASSETSAvailable-for-sale financial assets 9 25,160 24,468

Property, plant and equipment 10 19,083 19,825

Other financial assets 8 4,074 9,743

TOTAL NON-CURRENT ASSETS 48,317 54,036

TOTAL ASSETS 209,317 304,496

LIABILITIES

CURRENT LIABILITIESTrade and other payables 11 59,496 87,585

Other financial liabilities 12 33,243 53,091

Interest bearing liabilities 13, 15 58,571 100,000

Provisions 14 7,239 7,181

TOTAL CURRENT LIABILITIES 158,549 247,857

NON-CURRENT LIABILITIESOther financial liabilities 12 4,085 9,743

Provisions 14 819 1,180

TOTAL NON-CURRENT LIABILITIES 4,904 10,923

TOTAL LIABILITIES 163,453 258,780

NET ASSETS 45,864 45,716

EQUITYReserves 25,646 25,374

Retained surpluses 20,218 20,342

TOTAL EQUITY 45,864 45,716

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


CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 30 JUNE 2018 QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES

RETAINED SURPLUSES

RESERVES TOTAL EQUITY

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

BALANCE AT 1 JULY 2016 20,342 23,242 1,853 45,437

Net surplus/(deficit) - - - -

Other comprehensive income - - 279 279

Total comprehensive income - - 279 279

BALANCE AT 30 JUNE 2017 20,342 23,242 2,132 45,716

BALANCE AT 1 JULY 2017 20,342 23,242 2,132 45,716

Net surplus/(deficit) (124) - - (124)

Other comprehensive income - - 272 272

Total comprehensive loss (124) - 272 148

BALANCE AT 30 JUNE 2018 20,218 23,242 2,404 45,864

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


*

CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 30 JUNE 2018 QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES

2018 2017NOTE $’000 $’000

CASH FLOWS FROM OPERATING ACTIVITIES

Receipts from customers (inclusive of GST)* 1,378,997 2,870,693

Payments for raw sugar (inclusive of GST)* (1,339,295) (2,599,859)

Payments to suppliers and employees (inclusive of GST) (123,693) (162,951)

GST recovered 85,873 220,791

Interest and other borrowing costs paid (7,247) (18,013)

Interest received 235 557

Cash settlements of derivative instruments 19,250 (134,074)

Other receipts 658 9,611

NET CASH FLOWS FROM OPERATING ACTIVITIES 14,778 186,755

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of available-for-sale financial assets (453) -

Purchase of property, plant and equipment (2,452) (3,638)

Proceeds from sale of property, plant and equipment 280 294

Dividends and franking credits received 2,921 2,432

NET CASH FLOWS FROM/(USED IN) INVESTING ACTIVITIES 296 (912)

CASH FLOWS FROM FINANCING ACTIVITIES

Other loan repayments from Suppliers - 319

NET CASH FLOWS FROM FINANCING ACTIVITIES - 319

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 15,074 186,162

Cash and cash equivalents at beginning of the year (73,344) (259,503)

Effects of exchange rate changes on the cash and cash equivalents 10 (3)

CASH AND CASH EQUIVALENTS AT END OF YEAR 15 (58,260) (73,344)

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

* Under the Syndicated Inventory Financing agreement (‘SIF’), refer to Note 15, QSL transfers the legal title of the sugar to the financing bank as collateral for the amount borrowed. Upon repayment of the SIF the legal title is transferred back to QSL. The transfer to/from the bank is subject to GST however the transfer to/from the bank is not recognised as revenue/expense in the consolidated statement of profit or loss as the significant risks and rewards of ownership remain with QSL, this results in the amounts disclosed above differing by more than 10% (GST) to the revenue/expense disclosed in the Consolidated Statement of Profit or Loss.


1 CORPORATE INFORMATION

The financial report of QSL and its Controlled Entities for the year ended 30 June 2018 was authorised for issue in accordance with a resolution of the Directors on 4 September 2018.

QSL is a company limited by guarantee and incorporated in Australia. The Consolidated Entity’s principal activities are the sale of raw sugar for export and the operation of the six BSTs located in Queensland.

QSL’s Controlled Entities comprise of QSL Investments (No1) Pty Ltd and QSL Investments (No2) Pty Ltd.

The registered office of QSL is located at Suite A, Level 12, 348 Edward Street, Brisbane, Queensland.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) BASIS OF PREPARATION

The financial report is a general purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards – Reduced Disclosure Requirements and other authoritative pronouncements of the Australian Accounting Standards Board. The financial report has also been prepared under the historical cost convention, except for derivative financial instruments and available-for-sale investments, which have been measured at fair value.

The financial report includes consolidated financial statements of QSL and its Controlled Entities with supplementary information about the Parent Entity included in Note 23 to the financial statements.

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

(b) BASIS OF CONSOLIDATION

The consolidated financial statements comprise the financial statements of QSL and its Controlled Entities as at 30 June 2018. Under the Corporations Amendment (Corporate Reporting Reform) Act 2010 supplementary information about the Parent Entity is included in Note 23 to the financial statements.

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

(c) STATEMENT OF COMPLIANCE

The financial report is a general purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards – Reduced Disclosure Requirements and other authoritative pronouncements of the Australian Accounting Standards Board. Queensland Sugar Limited is a not-for-profit entity for financial reporting purposes under Australian Accounting Standards. The consolidated financial statements for the Group are tier 2 general purpose financial statements which have been prepared in accordance with Australian Accounting Standards – Reduced Disclosure Requirements (AASB-RDRs). The Consolidated Entity prepares one set of consolidated financial statements and provides supplementary information about the Parent Entity, QSL in Note 23 of the financial statements.

(d) CASH AND CASH EQUIVALENTS

Cash in the Consolidated Statement of Financial Position includes cash on hand and at bank, which are subject to insignificant risk of changes in value.

(e) REVENUE RECOGNITION

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Consolidated Entity and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes. The specific recognition criteria described below must also be met before revenue is recognised.

(i) Sales of raw sugar

Sales to customers are made on commercial terms with settlement generally on a cash against documents or letter of credit basis, predominantly in United States (‘US’) dollars. Sales are recognised when the transfer of title and risk occurs and it is probable that the economic benefits will flow to the Consolidated Entity and can be reliably measured. Sales revenue also includes transactions relating to foreign exchange, sugar futures and options operations and is net of rebates, discounts and allowances. Sales revenue and derivatives are presented on a net basis as the derivatives are entered into to hedge exposure on sales contracts resulting in offsetting that accurately reflects the substance of the transaction.

(ii) Service fee revenue from STL

Service fee revenue from STL is recognised when the Consolidated Entity is entitled to recover all costs incurred in providing operational services under the Operating Agreement. These fees represent the recovery of operating costs free of any mark-ups or margins. The associated matching costs recovered are included in the Expenses from Continuing Operations.

(iii) Dividend and franking credit income

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

(iv) Interest income

Interest income is recorded using the effective interest rate method.

(f) FUTURES AND OPTIONS MARKET HEDGING

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

(g) FOREIGN CURRENCY TRANSLATION

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

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

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

NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2018 QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES



2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED

(h) DERIVATIVES

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

Forward foreign currency and sugar swap contract terms do not exceed five years. Sugar futures and option contracts are entered into with terms no greater than three years. Details of open contracts at reporting date are provided in Note 24.

Amounts receivable or payable at reporting date under sugar futures and options and foreign currency transactions relating to future pools’ production are recognised as amounts owing to or amounts owing from future pools, and are included in the Statement of Financial Position on a net basis (netting performed in accordance with AASB132) with gains or losses arising from changes in the value of amounts owing to or amounts owing from future pools taken directly to the Consolidated Statement of Profit or Loss (refer to Notes 8 and 12).

In relation to the fair value hierarcy, exchange traded instruments are valued using Level 1 inputs while Over-the-Counter (‘OTC’) instruments are valued using Level 2 inputs.

(i) FAIR VALUE MEASUREMENT

QSL measures financial instruments, such as, derivatives, and non-financial assets, at fair value at each reporting date.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

� In the principal market for the asset or liability, or

� In the absence of a principal market, in the most advantageous market for the asset or liability

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

QSL uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities

Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable

Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

For the purpose of fair value disclosures, QSL has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.

(j) TRADE AND OTHER RECEIVABLES

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

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

(k) INVENTORIES

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

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

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

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

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

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

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

(l) CURRENT ASSETS

Current assets comprise cash at bank and on hand, term deposits, debtors, other receivables relating to the pre-crop loans, prepayments, raw sugar stock on hand, amounts owing from future pools, unrealised gains on foreign currency transactions and unrealised gains on sugar futures and options contracts that are expected to be realised within 12 months from reporting date. The Consolidated Entity classifies all other assets as non-current.




(m) PROPERTY PLANT AND EQUIPMENT

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

(i) Depreciation

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

Asset Class 2018 2017

Buildings 50 years 50 years

Plant and equipment 4 to 25 years 4 to 25 years

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

(ii) Impairment

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

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

(iii) Derecognition and disposal

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

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

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

(n) IMPAIRMENT OF ASSETS

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

In assessing value in use, the estimated cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the

risks specific to the asset. Impairment losses relating to continuing operations are recognised in those expense categories consistent with the function of the impaired asset unless the asset is carried at the revalued amount (in which case the impairment loss is treated as a revaluation decrease).

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

(o) OTHER NON-CURRENT ASSETS

Expenditure carried forward

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

(p) LEASED ASSETS

Operating leases

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

(q) CURRENT LIABILITIES

Current liabilities comprise all amounts owing at reporting date and payable within 12 months, including amounts due to Suppliers. The Consolidated Entity classifies all other liabilities as non-current.

(r) TRADE AND OTHER PAYABLES

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

(s) INTEREST BEARING LOANS AND BORROWINGS

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

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




(t) PROVISIONS

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

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

(u) EMPLOYEES LEAVE BENEFITS

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

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

(ii) Long service leave

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

(v) POST-EMPLOYMENT BENEFITS

Defined Benefit Plan

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

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

Employees of QSL who have a defined benefit plan are members of QSuper (refer Note 18).

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

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

(w) NATURE AND PURPOSE OF RESERVES

(i) Capital reserve

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

(ii) Available-for-sale reserve

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

(x) INCOME TAX

Parent Entity

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

Controlled Entities

The Controlled Entities are income tax paying entities. However, the Controlled Entities have made tax losses as a result of excess franking credits from the dividends from their holding in STL G class shares. These Controlled Entities continue to carry forward their tax losses to offset their taxable income. No deferred tax asset has been recognised in relation to these tax losses.

(y) DEFERRED INCOME AND EXPENSES

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

(z) GOODS AND SERVICE TAX

Revenues, expenses and assets are recognised net of the amount of Goods and Services Tax (‘GST’), except:

(i) Where the amount of GST incurred is not recoverable from the Australian Taxation Office (‘ATO’), it is recognised as part of the cost of the acquisition of an asset or as a part of the item of expense; or

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

(aa) BORROWING COSTS

Borrowing costs are recognised as an expense when incurred.

(ab) COMPARATIVES

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


2018 $’000

2017 $’000

3 SHARE INVESTMENT INCOME

Dividends from STL G class shares 2,211 2,136

Refund of franking credits (STL G class shares) 710 296

TOTAL SHARE INVESTMENT INCOME 2,921 2,432

4 EXPENSES FROM CONTINUING OPERATIONS

Freight and brokerage

Sea freight 33,597 47,468

TOTAL FREIGHT AND BROKERAGE 33,597 47,468

Operating lease rental

Minimum lease payments

BSTs (to STL) - 50,800

Other property 491 433

TOTAL OPERATING LEASE RENTAL 491 51,233

Borrowing costs expense

Interest expense 4,118 12,289

Facility fees and bank charges 3,129 5,724

TOTAL BORROWING COST EXPENSE 7,247 18,013

5 OTHER EXPENSES FROM CONTINUING OPERATIONS

Other Expenses 25,821 21,357 These expenses predominately relate to operating expenditure incurred in operating the six BSTs. During 2018 these expenses were incurred under the Operating Agreement (‘OA’) with STL. In the prior year, these expenses were incurred in operating the BSTs under the sub-lease agreement with STL.

Under the OA, QSL Operations provide BST logistics services for all SHA users under the direction of STL. These services are provided directly to STL on a cost-recovery pass-through basis. The revenue for these services is reflected in QSL’s Statement of Profit or Loss as “Service fee revenue from STL”.

In the prior year, expenses were recovered by QSL were under the SHAs between QSL and users of the BSTs for storage, handling and outloading of raw sugar. Included in the Other Expenses figure above for 30 June 2017 is an off-setting SHA recovery amount of $6.4m.




2018 2017$’000 $’000

6 TRADE AND OTHER RECEIVABLES

CURRENTTrade debtors 10,911 14,256

Other debtors

Futures margins and deposits 5,973 1,391

GST receivable 3,810 6,850

Receivables – STL a 15,337 4,138

Other 6,423 9,837

31,543 22,216

TOTAL TRADE AND OTHER RECEIVABLES (CURRENT) 42,454 36,472

a Under the OA with STL, QSL purchases capital items on behalf of STL. This receivable relates to these capital purchases and service fees payable under the OA.

7 INVENTORIES

Bulk Australian raw sugar 92,347 137,935

TOTAL INVENTORIES 92,347 137,935

At 30 June 2018, 137,376 tonnes of 2017 season raw sugar and 91,563 tonnes of 2018 season raw sugar remained on hand totalling 228,939 tonnes of inventory. At 30 June 2017, 203,774 tonnes of 2016 season and 75,594 tonnes of 2017 season raw sugar remained on hand totalling 279,368 tonnes of inventory.

8 OTHER FINANCIAL ASSETS

CURRENTUnrealised gains on derivatives:

Foreign currency contracts 954 20,490

Sugar futures and option contracts 21,025 24,278

Sugar receivable a 1,913 2,590

TOTAL OTHER FINANCIAL ASSETS (CURRENT) 23,892 47,358

NON-CURRENTUnrealised gains on derivatives:

Foreign currency contracts - 3,647

Sugar futures and option contracts 4,074 6,096

TOTAL OTHER FINANCIAL ASSETS (NON-CURRENT) 4,074 9,743

a Pertaining to the supply of sugar pursuant to the Sugar Inventory Loan Agreement between QSL and Wilmar dated 22 May 2018 in relation to GEI Sugar.


2018 2017$’000 $’000

9 AVAILABLE-FOR-SALE FINANCIAL ASSETS

NON-CURRENT

Shares at fair value a 25,160 24,468

a QSL holds 15.0% (2017: 14.8%) of the G (Grower) class of share capital of Sugar Terminals Limited (‘STL’), a company that owns bulk raw sugar storage facilities in Queensland. Under an OA with STL during the 2018 financial year, QSL operated and maintained these facilities of behalf of the asset owner, STL. The STL G class shares are traded on the National Stock Exchange of Australia. Given the illiquid or thinly traded market in STL G class shares, QSL’s investment in STL has been valued using a Directors’ Valuation to determine a fair value pursuant to AASB 139 Financial Instruments: Recognition and Measurement. QSL has determined that fair value for the investment in STL is cost, consistent with the prior year. These investments have been classified as Level 3 in terms of the fair value hierarchy as inputs are unobservable.

QSL also holds shares in the Intercontinental Exchange, Inc which is listed on the New York Stock Exchange. These shares are classified as Level 1 in relation to the the fair value hierarchy as the value of the shares are based on quoted market prices. Available-for-sale investments consist of investments in ordinary shares, and therefore have no fixed maturity date or coupon rate.

10 PROPERTY, PLANT AND EQUIPMENT

Land and buildings:

At cost 2,156 2,156

Accumulated depreciation (1,644) (1,623)

512 533Plant and equipment a:

At cost 25,180 24,750

Accumulated depreciation (6,609) (5,458)

18,571 19,292

TOTAL PROPERTY, PLANT AND EQUIPMENT 19,083 19,825

a Plant and equipment relates predominately to BST sugar loading equipment (“yellow goods” including front end loaders, excavators) and IT equipment in relation to inloading and outloading raw sugar from the BSTs.

Reconciliations

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

Land and buildings:

Carrying amount at the beginning of the year 533 611

Depreciation expense (21) (78)

Carrying amount at the end of the year 512 533

Plant and equipment:

Carrying amount at the beginning of the year 19,292 18,745

Additions 2,452 4,009

Disposals (271) (326)

Depreciation expense (2,902) (3,136)

Carrying amount at the end of the year 18,571 19,292

TOTAL PROPERTY, PLANT AND EQUIPMENT 19,083 19,825




2018 2017$’000 $’000

11 TRADE AND OTHER PAYABLES

CURRENTCreditors

Queensland sugar suppliers 46,854 78,289

Trade creditors 2,852 2,632

Other 9,790 6,664

TOTAL TRADE AND OTHER PAYABLES 59,496 87,585

12 OTHER FINANCIAL LIABILITIES

CURRENTUnrealised losses on derivatives:

Unrealised loss on sugar futures and option contracts 52 -

Deferred income relating to the next year:

Amounts owing to future pools a 33,146 53,091

Prepaid income 45 -

TOTAL OTHER FINANCIAL LIABILITIES (CURRENT) 33,243 53,091

a Represents unrealised and deferred gains on sugar hedges, foreign exchange hedges and option contracts which will be allocated against next year’s raw sugar sales in relation to 2018 season tonnage

NON-CURRENT Unrealised loss on foreign currency contracts 491 -

Deferred income relating to a future period:

Amounts owing to future pools b 3,594 9,743

TOTAL OTHER FINANCIAL LIABILITIES (NON-CURRENT) 4,085 9,743

b Represents unrealised gains on sugar hedges, foreign exchange hedges and option contracts which will be allocated against future years’ raw sugar sales in relation to tonnage for the 2019 season and beyond

13 INTEREST BEARING LIABILITIES

CURRENTSecured

Syndicated credit facility agreement (committed) a 25,000 100,000

Short-term facilities (uncommitted) b 33,571 -

TOTAL INTEREST BEARING LIABILITIES (CURRENT) 58,571 100,000

a Represents funding for the advances program, sugar futures settlements and margins, and general working capitalb Uncommitted short-term facilities providing funding for the advances program, sugar futures settlements and margins,

and working capital under various uncommitted bank facilities


14 PROVISIONS MAKEGOOD a

RENTAL INCENTIVE

STAFF INCENTIVE

ANNUAL LEAVE

LONG SERVICE

LEAVE

SICK LEAVE b

TOTAL

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

BALANCE AT 1 JULY 2016 219 240 2,961 1,361 2,191 28 7,000

Arising during the year - - 3,383 1,357 604 29 5,373

Utilised (114) (240) (2,280) (1,152) (75) (27) (3,888)

Discount rate adjustment - - - - (124) - (124)

BALANCE AT 30 JUNE 2017 105 - 4,064 1,566 2,596 30 8,361

REPRESENTED AS:

Current 105 - 3,311 1,566 2,169 30 7,181

Non-Current - - 753 - 427 - 1,180

TOTAL 105 - 4,064 1,566 2,596 30 8,361

BALANCE AT 1 JULY 2017 105 - 4,064 1,566 2,596 30 8,361

Arising during the year - - 2,939 1,419 547 24 4,929

Utilised (105) - (3,449) (1,556) (246) (22) (5,378)

Discount rate adjustment - - - - 146 - 146

BALANCE AT 30 JUNE 2018 - - 3,554 1,429 3,043 32 8,058

REPRESENTED AS:

Current - - 3,229 1,429 2,549 32 7,239

Non-Current - - 325 - 494 - 819

TOTAL - - 3,554 1,429 3,043 32 8,058

a In May 2010 the Parent Entity commenced a lease agreement for its Brisbane office space, which concluded on 30 April 2018. A new agreement has been made for reduced office space with the current landlord on different floors in the same building for a period of 5 years until 30 April 2023. The landlord accepted a lower make good payment for the old premises amounting to $105,000, which was paid during the 2018 financial year. There are no significant make good requirements for the new premises at the conclusion of the new lease

b QSL provides sick leave for a small number of eligible BST employees as outlined in the QSL Bulk Terminals Agreement




2018 2017$’000 $’000

15 CASH AND CASH EQUIVALENTS

For the purposes of the statement of cash flows, cash and cash equivalents comprise the following at 30 June:

Cash on hand 311 26,656

Short-term facilities (uncommitted) (33,571) -

Syndicated credit facility agreement (committed) (25,000) (100,000)

TOTAL CASH AND CASH EQUIVALENTS (58,260) (73,344)

(a) FINANCING FACILITIES AVAILABLE

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

(i) Committed Facilities

Syndicated credit facility agreement (SFA)

During the year, QSL continued to have access to a syndicated credit facility. The facility was restructured in May 2018 with the syndicate members for a further 18 months. The facility terms are similar, however, the limit reduced from A$500 million to A$250 million, due to a lower expected funding requirement. As at 30 June 2018, A$25.0 million (2017: A$100.0 million) had been drawn against the facility. The facility expires on 30 September 2019. The new SFA can be drawn in Australian or United States dollars. Under the new facility QSL may request a further 12 month extension to the maturity date of the SFA prior to 31 March 2019.

Syndicated Inventory Financing agreement (SIF)

QSL continued to utilise this funding as required during the year. This facility is sale and repurchase arrangement using sugar inventory at the BSTs. This facility was restructured in May 2018 with the syndicate members for a further 18 months, expiring on 30 September 2019. The SIF has a A$150.0 million limit which was undrawn at 30 June 2018 (2017: undrawn). The new SIF can be drawn in Australian or United States dollars. Under the new facility QSL may request a further 12 month extension to the maturity date of the SIF prior to 31 March 2019.

(ii) Uncommitted Facilities

Other funding facilities

At 30 June 2018, the Parent Entity had additional available facilities with various financial institutions of A$84.0 million (2017: A$83.0 million). As at 30 June 2018, the uncommitted facilities were drawn by $33.6 million (2017: undrawn). These facilities were available but are generally uncommitted and used as an alternative to the syndicated facilities when it is economical to do so. The Parent Entity does not rely on these facilities as they are uncommitted funding facilities.


2018 2017$’000 $’000

16 CAPITAL EXPENDITURE COMMITMENTS Estimated capital expenditure contracted for at reporting date, but not provided for, payable

Not later than one year 277 93

17 LEASE EXPENDITURE COMMITMENTS Operating leases (non-cancellable):

Minimum lease payments

Not later than one year 310 412

Later than one year but not later than five years 1,291 1,306

Later than five years - 295

AGGREGATE LEASE EXPENDITURE CONTRACTED FOR AT REPORTING DATE 1,601 2,013

Amounts not provided for:

Other property 1,601 2,013

AGGREGATE LEASE EXPENDITURE CONTRACTED FOR AT REPORTING DATE 1,601 2,013

18 EMPLOYEE BENEFITS AND SUPERANNUATION COMMITMENTSEMPLOYEE BENEFITS

Accrued wages, salaries and on-costs 368 1,131

Provisions for employee benefits (current) 7,239 7,076

Provisions for employee benefits (non-current) 819 1,180

TOTAL EMPLOYEE BENEFITS AND SUPERANNUATION COMMITMENTS 8,426 9,387

AMOUNT CONTRIBUTED BY QSL TO THE QSUPER DEFINED BENEFIT PLAN 100 94

19 CONTINGENT LIABILITIES

On 23 June 2015, Wilmar Sugar Australia Limited (‘Wilmar’) commenced legal proceedings against QSL in relation to certain costs associated with the 2010 sugar production season, claiming damages of $60.860 million plus interest and costs. The matter was heard in the Queensland Supreme Court in late February 2018. QSL rejects Wilmar’s claims and vigorously defended them. On that basis, no liability has been recorded in the financial statements.

20 SUBSEQUENT EVENTS

There are no known events of a material nature that have occurred after 30 June 2018.




2018 2017$ $

21 DIRECTOR AND EXECUTIVES DISCLOSURES

Compensation of Key Management Personnel and Directors

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

TOTAL COMPENSATION 3,509,091 3,460,310

22 RELATED PARTY DISCLOSURES

Queensland cane growers and sugar millers can elect to use QSL’s marketing and pricing services for raw export sugar in which they have an ‘economic interest’ (QSL Marketing). QSL purchases this nominated sugar from supplying growers and millers through either a Raw Sugar Supply Agreement (‘RSSA’) or On-Supply Agreement (‘OSA’). Isis Central Sugar Mill and Queensland Commodity Services Pty Ltd (a wholly-owned subsidiary of Mackay Sugar Limited) have RSSAs in place with QSL at least until 30 June 2020 (the end of the 2019 season). Bundaberg Sugar Limited have extended their RSSA until 30 June 2021 (the end of the 2020 season) whilst W H Heck & Sons Pty Limited have a RSSA until 30 June 2022 (the end of the 2021 season). Tully Sugar, MSF Sugar and Wilmar are contracted under OSAs. On 1 December 2017, Mackay Sugar Limited provided notice that it will terminate its RSSA from the end of the 2019 season.

Under the terms of the RSSA, nominated sugar becomes the absolute property of QSL upon receival at the BST, free of all encumbrances or adverse claims. Under the OSAs with Tully Sugar and MSF Sugar the title to sugar is transferred to QSL weekly in arrears upon receival at the BST. Under the OSA with Wilmar, title to sugar is transferred to QSL upon payment after the receival at the BST. In return, growers and millers marketing through QSL receive a right of payment for the sugar delivered, to be calculated in accordance with the pricing options and other provisions within their contracts. The amount due to each participating grower and miller is determined by QSL, following the sale and pricing of that season’s supplied sugar on commercial terms, with progressive payments made in accordance with the terms of the contracts. The final payment to each marketing customer is made in July each year in respect to sugar production in the previous calendar year.

In most instances QSL pays supplying millers who in turn make payments to participating cane growers for the cane they delivered to their mill, based on cane payment formulas incorporated into the local collective agreement for each area and advance payments received from QSL. Where applicable, the pool price forms part of the cane payment formulas. Growers who supply Wilmar mills and elect QSL as their marketer receive their advance payment directly from QSL rather than their miller.

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


23 PARENT ENTITY INFORMATION AND CONTROLLED ENTITIES

(a) CONTROLLED ENTITIES

QSL has two controlled entities:

CONTROLLED ENTITY COUNTRY OF INCORPORATION

PRINCIPAL ACTIVITIES OWNERSHIP

QSL Investments (No1) Pty Ltd Australia Holding company for STL G class shares

QSL Investments (No2) Pty Ltd Australia Holding company for STL G class shares

(b) PARENT ENTITY DISCLOSURES

2018 2017$’000 $’000

Information relating to QSL:

Current assets 175,107 264,675

TOTAL ASSETS 208,222 303,509Current liabilities 158,549 247,857

TOTAL LIABILITIES 163,453 258,780

Retained surpluses 19,123 19,355

Reserves 25,646 25,374

TOTAL EQUITY 44,769 44,729

NET SURPLUS / (LOSS) (232) (940)

TOTAL COMPREHENSIVE INCOME / (LOSS) 40 (661)

Commitments

All expenditure commitments in Note 16 relate to the Parent Entity.

Contingent Liabilities

All contingent liabilities in Note 19 relate to the Parent Entity.

Guarantees

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




24 FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value measurement for assets as at 30 June:

The following table provides the fair value measurement of the Consolidated Entity financial assets and liabilities:

2018 2017$’000 $’000

FINANCIAL ASSETS

FOREIGN EXCHANGE INSTRUMENTSForward exchange rate contracts 647 17,125

Sell USD b

Currency options

Purchased AUD Call against USD b 555 1,269

COMMODITY INSTRUMENTSSugar futures contracts a 11,604 5,362

Sugar swaps

Australian dollars b 6,976 8,318

US dollars b 18,119 21,581

OTHER FINANCIAL INSTRUMENTSAvailable-for-sale: shares at fair value 25,160 24,468

TOTAL 63,061 78,123

a Exchange Traded Options b Over-the-Counter (‘OTC’)

Exchange traded futures and options are valued using fair values of exchange traded futures and options determined by reference to the corresponding published price quotations in an active market (Level 1 inputs).

Over-the-Counter (‘OTC’) instruments are valued using fair values of OTC instruments (swaps and options) determined by reference to the observable forward curve for commodity instruments or spot rate for foreign currency instruments (Level 2 inputs).

Available-for-sale instruments:

- Shares in STL G class shares are based on a valuation technique as there is no observable market for these shares (Level 3)

- Shares in the ICE are based on quoted market prices on an active market via a listed exchange (Level 1).


24 FAIR VALUE OF FINANCIAL INSTRUMENTS CONTINUED

2018 2017$’000 $’000

FINANCIAL LIABILITIES

FOREIGN EXCHANGE INSTRUMENTSCurrency options

Sold AUD Call against USD b - (446)

Sold AUD Put against USD b (1,811) (694)

COMMODITY INSTRUMENTSSugar options

Purchased Calls a - (24)

TOTAL (1,811) (1,164)

a Exchange Traded Options b Over-the-Counter (‘OTC’)

Exchange traded futures and options are valued using fair values of exchange traded futures and options determined by reference to the corresponding published price quotations in an active market (Level 1 inputs).

Over-the-Counter (‘OTC’) instruments are valued using fair values of OTC instruments (swaps and options) determined by reference to the observable forward curve for commodity instruments or spot rate for foreign currency instruments (Level 2 inputs).



DIRECTORS’ DECLARATIONFOR THE YEAR ENDED 30 JUNE 2018 QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES

In accordance with a resolution of the Directors’ of Queensland Sugar Limited, I state that:

In the opinion of the Directors:

(a) The financial statements and notes set out on pages 25 to 43 for the year ended 30 June 2018 are in accordance with the Corporations Act 2001, including:

(i) giving a true and fair view of the Consolidated Entity’s financial position as at 30 June 2018 and of its performance for the financial year ended on that date

(ii) complying with Accounting Standards (including the Australian Accounting Interpretations) and Corporations Regulations 2001.

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

This declaration is made on behalf of the Board.

Guy Cowan Chairman

4 September 2018


INDEPENDENT AUDITOR’S REPORTFOR THE YEAR ENDED 30 JUNE 2018 QUEENSLAND SUGAR LIMITED AND ITS CONTROLLED ENTITIES


Ernst & Young 111 Eagle Street Brisbane QLD 4000 Australia GPO Box 7878 Brisbane QLD 4001

Tel: +61 7 3011 3333 Fax: +61 7 3011 3100 ey.com/au

Independent auditor's report to the members of Queensland Sugar Limited

Opinion

We have audited the financial report of Queensland Sugar Limited (the Company) and its subsidiaries (collectively the Group), which comprises the consolidated statement of financial position as at 30 June 2018, the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, notes to the financial statements, including a summary of significant accounting policies, and the directors' declaration.

In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including:

a) giving a true and fair view of the consolidated financial position of the Group as at 30 June 2018 and of its consolidated financial performance for the year ended on that date; and

b) complying with Australian Accounting Standards – Reduced Disclosure Requirements 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 and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Information other than the financial report and auditor’s report thereon

The directors are responsible for the other information. The other information is the directors’ report accompanying the financial report.

Our opinion on the financial report does not cover the other information and accordingly 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.


INDEPENDENT AUDITOR’S REPORT CONTINUED



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 – Reduced Disclosure Requirements 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 Group’s ability to continue as a going concern, disclosing, as applicable, matters relating 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 have 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 judgment 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 directors’ 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 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. Ernst & Young Paula McLuskie Partner Brisbane 04 September 2018

INDEPENDENT AUDITOR’S REPORT CONTINUED



Queensland Sugar Limited ABN 76 090 152 211

Level 12 348 Edward Street Brisbane Queensland 4000

GPO Box 891 Brisbane Queensland 4001 Australia

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

[email protected] www.qsl.com.au

Documents

QSL: Working for YOU Report...QSL: Working for YOU 2 ueenlan uar te Annual Report 2017/18 Our Members QSL works on behalf of its members to promote the development of the Queensland