100% FARMER OWNED NORCO ANNUAL REPORT 2016

AN AUSTRALIAN FARMER OWNED DAIRY CO-OPERATIVE

Norco’s Purpose
Thank you to our Norco employees, Co-operative members, Norco Milk distributors
Norco’s purpose is to build wealth, security and sustainability for our
and customers who feature in the annual report photography.
shareholders, business partners and employees.
Your time and participation is greatly appreciated.
We achieve this by:
• maintaining a diverse and strong range of businesses;
• being a competitive regional purchaser and supplier of milk; and
• creating integrated solutions for our partners.

Norco’s Values
Norco applies a common set of values to everything it does.
These values include:
Respect
• We respect our shareholders, employees, business partners and cus-
tomers.
• We respect a diversity of views and opinions.
• We encourage and support people to grow as individuals and contrib-
utors to our organisation.
• We respect our heritage and legacy.
• We respect our natural environment.
Responsible
• We are responsible for preserving the co-operative principles.
• We are responsible for our actions and our performance.
• We are responsible for providing a safe work environment.
Efficient
• We seek to add value in everything we do.
Innovation
• We seek to consistently improve through innovation.
Community
• We seek active involvement in our communities.

norco.com.au
 100% FARMER OWNED
AN AUSTRALIAN FARMER OWNED DAIRY CO-OPERATIVE

CONTENTS Norco Foods - Sales and Marketing 12 Directors’ Report 20

Norco Foods - Operations 14 Auditor’s Independence Declaration 27
Corporate Profile 2 Milk Supply 15 Corporate Governance Statement 29
Facts at a Glance 3 Norco Rural / Agribusiness 16 Financial Statements 34
Chairman’s Report 4 Financial Management 18 Independent Auditor’s Report 57
Chief Executive Officer’s Report 8 Norco People 19 Corporate and Branch Directories 59
1
 CORPORATE PROFILE

The wonderful milestone of Norco Co-operative Limited achieving 120 years of continuous operations
on 5 June 2015 was cause for celebration and some quiet reflection, as reported in last year’s 2015
Annual Report. Equally important for Norco’s Members in 2014/15 was that the 120 year celebrations
coincided with a significant uplift in both base milk price and Total Average Member Returns.

Not to be distracted by the results achieved in 2014/15, there was a strong desire by the Board of
Directors, management and staff to ensure that 2015/16 delivered an even better outcome to our
Members. To this end, it is pleasing to report that there has been a further uplift in both milk price
and Total Average Member Returns for the 2015/16 financial year. The milk price moved from 56.48
cents per litre in 2014/15 to 57.30 cents per litre in 2015/16 and for the same period the Total Average
Member Returns increased from 57.22 cents per litre to 58.06 cents per litre. A six percent dividend
and record Suppliers’ Patronage Scheme reward payments also contributed to the record Total
Average Member Returns.

While these gains may seem modest to some, Norco’s ability to not only hold milk price, but to
increase it, should not be underestimated and is a testament to the work done by the Co-operative
in ensuring that all contracts add value to our Members’ quality milk and that our exposure to, and
reliance on, dairy commodity markets is reduced.

In recent times there has been much commentary about the dire situation being faced by dairy
farmers in Australia’s southern regions. As a 100% farmer owned dairy co-operative since 1895,
everyone involved with Norco is saddened by these events but it only serves to strengthen our resolve
that there must to be a vibrant dairy industry in northern Australia now and into the future so that
consumers can continue to purchase and enjoy the taste of quality assured, fresh Norco milk produced
on our Members’ farms 365 days a year.

There is of course more to Norco than processing our Members’ milk. Our Norco Rural / Agribusiness
division is integral in its contribution to the overall success of the Co-operative as a commercially
driven business and also plays an important role in providing Members with the opportunity to
improve their Total Average Member Returns by purchasing from the division and receiving Suppliers’
Patronage Scheme rewards.

Overall, there is a degree of satisfaction that a net profit of $2.003 million has been achieved for the
2015/16 financial year given that the uplift in milk price mentioned earlier resulted in an additional
$1.8 million being paid to our Members for their milk over and above the payments they received
in 2014/15. On top of this, the business had to manage a large spring flush during the year that
impacted the bottom line by $0.7 million. The EBITDA (Earnings before Interest, Tax, Depreciation
and Amortisation) result of $9.7 million was adverse to the $10.6 million achieved in 2014/15. Further
highlights from the 2015/16 financial year include:

• Total sales of $541 million, a 5.9 percent increase over 2014/15.

• Core debt as at 30 June 2016 of $29.92 million, a reduction of $1.99 million from the previous year.

• Suppliers’ Patronage Scheme rewards up 9.7 percent on last year, with a record amount of $1.156
million paid out.

• Record debtor days of 27.2 days achieved versus the prior year’s 31.0.

2
 FACTS AT A GLANCE

TOTAL AVG. TOTAL NET PROFIT

$
2M
MEMBER RETURNS 2015/16

58.06
TOTAL MEMBER SUPPLY
2015/16

CENTS PER 2014/15 3.1M 2012/13 0.4M

2013/14 0.5M 2011/12 5.7M
LITRE

AVG. MILK PRICE 57.30 DIVIDEND 0.24*

STEP UPS - SUPPLIERS’ PATRONAGE 0.52
AVG. TOTAL MILK PAY 57.30 *DIVIDEND PROPOSED FOR CONSIDERATION

2014/15
AT 2016 ANNUAL GENERAL MEETING

2013/14 2012/13 2011/12

STAFF EMPLOYED

806
AVG. MILK PRICE 56.48 53.25 51.50 51.28 AS AT 30 JUNE 2016
INCLUDES PERM.,PARTTIME & CASUAL STAFF
STEP UPS   0.24 1.43
AVG. TOTAL MILK PAY 56.48 53.25 51.74 52.71
DIVIDEND 0.22 0.14  0.30
SUPPLIERS’ PATRONAGE 0.52 0.51 0.45 0.42
TOTAL AVG. MEM. RETURNS 57.22 53.90 52.19 53.43

NORCO FOODS 573 NORCO RURAL 171

NORTHERN REGION 5 YR NORCO AGRIBUSINESS 43 CORPORATE 19

CONTRACT AVG. MILK PRICE

57.28
2015/16
NO. OF FARMS

218
CENTS PER 2015/16
LITRE

SOUTHERN REGION 5 YR 2014/15 218 2012/13 159

CONTRACT AVG. MILK PRICE 2013/14 181 2011/12 160

57.52
2015/16

CENTS PER
LITRE
AVG. MILK
PRODUCTION
2015/16 PER MEMBER FARM

1,016
THOUSAND’S LITRES

TOTAL MEMBERS’ MILK INTAKE

222 2015/16 MILLION LITRES

2014/15 211
2013/14 163
2012/13 151
2011/12 149
2014/15 968
2013/14 933
2012/13 947
2011/12 923

3
 CHAIRMAN’S REPORT

It is with great satisfaction that on behalf of the Board, I present
to you my report for the 2015/16 financial year, a year in which
both the domestic and global markets presented not only
challenges, but opportunities for our Co-operative.
The highlights for the 2015/16 year include:
• Total sales of $541 million, a 5.9 percent increase over 2014/15.
• Net profit of $2.003 million versus the prior year’s $3.105 million
and an EBITDA of $9.7 million versus the prior year’s $10.6
million.
• An additional $1.8m paid to our Members / Milk Suppliers via a
higher average milk price.
• Core debt as at 30 June 2016 of $29.92 million, a reduction of
$1.99 million from the previous year.
• Record Suppliers’ Patronage Scheme payments of $1.156
million paid out to Members / Milk Suppliers.
Market conditions and strategy
At the beginning of the 2015/16 financial year we were witness
to continued low opening milk price announcements in
traditionally strong dairy regions such as New Zealand. While it
is a fact that Norco does not have a large exposure to the world
commodity market with 98 percent of our product destined for
the domestic market, it would be at our peril to ignore important
global indicators regarding dairy commodities. To do so may
result in Norco being uncompetitive in the market place.
It is imperative that a business like Norco has a strategic plan
in place that addresses issues such as our competitiveness so
that we can create a sustainable business for our Members, who
first and foremost, need a sustainable and competitive milk
price to ensure there continues to be a vibrant dairy industry in
northern Australia. The Board’s strategy and the management
team’s actions to implement that strategy continued throughout
2015/16 and included:
1. Mix of customers – having longer term contracts with major
retailers gives Norco scale and allows us to be competitive
but in order to reduce our potential exposure to such large
retail customers we have invested in the Route Trade to allow
growth of the Norco footprint outside our traditional areas.
We also continue to invest in export to further reduce our
exposure to the domestic market. Having retail contracts, an
improved Route Trade volume and a growing export business
is the best way to achieve volume through our factories.
2. Ice Cream – investing in our Ice Cream Business Unit (ICBU)
has been identified as the best way of adding value to our
Members’ milk outside of the fresh milk market. The ICBU is a
large profit contributor but is near capacity so investment is a
high priority to allow Norco to increase volume and add profit
to the bottom line. In 2015/16 the ICBU achieved a net profit
of $4.3 million.
3. Rural / Agribusiness division – not only does this business
contribute to profit, having achieved a net profit in 2015/16
of $3.6 million (after patronage payments), in addition the
business also adds value to Members in the form of Suppliers’
Patronage Scheme payments (in 2015/16 this totalled $1.156
million), interest free accounts and free advice from staff.
The strategy for Rural / Agribusiness is to continue to deliver
consistent profits back to the business to contribute to the
milk price.
4. Sustainable Members – it is the role of the Board and
management to provide growth opportunities for our
Members by securing additional contracts for fresh milk and
ice cream and also by making sure that we have a home for all
Members’ milk.

4
In a market place where competitors held or reduced milk prices
during the year, it is pleasing that Norco, on average, was able
to pass on an additional 0.82 cents per litre over the 2014/15
milk price which equated to $1.8 million. When this milk price
improvement is added back to the net profit of $2.003 million,
there was in fact a trading improvement over 2014/15. On top of
this, the business had to manage a large spring flush during the
year that impacted the bottom line by $0.7 million due to the
exceptional season experienced by Members.
The world’s growing population and the “dining room boom”
is seeing the demand for food increase against a backdrop of
a decline in available agricultural land. Improving Australia’s
position as a reliable food supplier is not just an issue for the
Federal Government but for all of us associated with primary
industries including dairy. Generally speaking, there have only
been modest productivity gains in agriculture over recent years.
It is apparent that advances in technology and innovation will
be the cornerstone of increasing productivity to take advantage
of this opportunity in agriculture. A challenge that comes from
advances in technology is that we need to up skill our people
to take full advantage of the opportunities. This can come in the
form of onsite training, institutional education or even bringing
in new people to our businesses and in my view, this is what will
make Norco an exciting place to be. The challenge for Norco is
to create an environment whereby our people – by that I mean
Members, employees and business partners, are prepared to
work together to find new ways to improve our business.
Working collaboratively is not new for Norco, after all we
are a co-operative. However, the findings from the Federal
Government’s Agricultural Competitiveness White Paper
included an initiative to help build stronger farmers through
collaborative and innovative business approaches. Norco is
proud to be a founding member of the Cooperatives Alliance
based in the Northern Rivers of New South Wales and the work
of the Alliance was instrumental in helping to secure the White
Paper funding to allow the Southern Cross University to deliver
a pilot programme with the aim being to improve farm gate
returns through accessing new markets and realising greater
returns along the supply chain.
In the latter part of 2015/16 the whole Australian dairy
industry was challenged by the severe downturn in milk
prices announced to the majority of milk suppliers in southern
Australia’s major dairy regions. While it is not in anyone’s interest
for Norco to comment on this situation, first and foremost our
thoughts are with the many thousands of dairy farmers affected
by these announcements and secondly, we must ensure
through careful planning that we are not exposed to such
volatility in the future.
Ironically, the unfortunate events relating to the southern
dairy industry became very public as a result of the Federal
Government’s involvement and the high profile the issue was
given on national television. There was an unprecedented
level of public support shown for the industry with consumers’
anger targeted towards supermarket house brand milk. In
May 2016 it became apparent that consumers had changed
their buying patterns, turning away from house brand milk to
private brands such as Norco. The influence of social media in
swaying consumers towards private label brands should not
be underestimated. At this point it is too early to say whether
the swing is permanent and management is watching this very
closely.
For Norco, this created both an opportunity and a challenge.
The opportunity related to a favourable product mix and overall
higher milk sales however the challenge for Norco is that the
5
 Co-operative has a major contract with Coles to supply their
house brand milk in Queensland and northern New South Wales
which suffered as a result of the change in consumer buying. To
the credit of Coles and also as a result of the excellent relationship
between the two parties, management successfully negotiated
to expand our branded distribution into all Coles stores serviced
from their distribution centre in Brisbane. This now means that
Norco milk is distributed to, and sold in each and every Coles
store from Port Macquarie in New South Wales to Port Douglas in
Queensland, an increase of some 80 plus stores.
Norco’s unique proposition of being a 100% Australian farmer
owned dairy co-operative that has been in business since 1895
is a statement of truth and one that consumers can rely on when
making a conscious decision to support the Norco brand.
Members
As foreshadowed in last year’s report, Regional Milk Pricing was
introduced on 1 January 2016. The commercial reasons for the
Board introducing this program were well documented in my
report last year and while it is fair to say that it has not been
well received by those Members who are affected by regional
pricing in Norco’s southern milk supply area, the Board, through
a rigorous budgeting process, has been able to keep the pricing
differential to a minimum moving into the 2016/17 financial
year. Norco’s pricing in our southern region remains extremely
competitive when compared to other milk processors operating
in that region.
The Board was pleased to be able to recommend to Members
at the 2015 Annual General Meeting a 6 percent dividend on
shares held which was approved. Members and Milk Suppliers
also continue to have access to Interest Free Extended
Accounts (IFEA’s) to assist with their purchase of farming
requisites from the Rural / Agribusiness division. As a result
of the support shown by Members and Milk Suppliers for
their Rural / Agribusiness division, record Suppliers’ Patronage
Scheme payments were made in 2015/16 of $1.156m which is
9.7 percent favourable to 2014/15. All of these payments and
benefits are made available to Members in addition to Norco’s
competitive milk pricing and contribute to the “Total Member
Return” which is an important consideration when comparing
Norco, as a 100% farmer owned dairy Co-operative, to other milk
processors in Australia.
On 14 December 2015 Members approved an amendment
to the terms and conditions of the existing Compulsory Share
Acquisition Scheme by Special Postal Ballot. This amendment
authorises the scheme to have a secondary purpose, being
to use funds collected (that exceed the amount required for
the primary purpose of repayment of former Members’ capital
subscriptions) to assist in funding existing and future capital
projects as approved by the Board of Directors.
In relation to the scheme’s primary purpose which is to repay the
capital of former Members, I am pleased to advise that a further
$487,440 was repaid during the 2015/16 financial year and we
6
continue to be in a maintenance phase with repayments made
to former Members one year after the date of cancellation in
accordance with the Co-operatives National Law (CNL). At this
stage, it is envisaged that the excess funds collected which are
not required to repay the capital of former Members will be used
in the near future as there are significant capital works to be
undertaken at the Lismore Ice Cream Business Unit.
Board of Directors
At the 2015 Annual General Meeting Ms Leigh Shearman
(Supplier Director Central Region) and Mr Michael Jeffery
(Supplier Director Southern Region) were declared elected
for their second terms, after initially joining the Board in 2012.
There was a ballot to determine the successful candidate for the
Central Region after Mrs Maureen McDonald nominated for the
position as well as Leigh offering herself for re-election. In what
turned out to be a very close result, Leigh was re-elected to the
Board. Michael was re-elected unopposed to the Board.
Not long after the 2015 Annual General Meeting, Mr Peter Neal
tendered his resignation with effect from 23 November 2015. As
Peter’s three year term was due to conclude at the 2016 Annual
General Meeting, it was decided that the vacancy would remain
unfilled until the usual Election of Directors process leading up
to the 2016 AGM. A further consideration for the Board is that
Mr Tony Wilson’s term as a Director from the Northern Region is
due to conclude at the 2016 Annual General Meeting as a result
of regional boundary adjustments approved at a Special General
Meeting on 25 June 2014. In preparing for two new Directors
to be elected to the Board later this year, a very successful and
well-attended three day intensive governance and education
programme for Members was held during April 2016.
The Board continues to undertake a program of Director
education which can be in the form of onsite training, exposure
to the expertise of external consultants and attendance at
industry events, with the key outcome being to ensure a high
standard of governance is achieved.
In closing, I would like to thank our Members for their continuing
support of the Co-operative, our management and staff for
their dedication and commitment to growing our business
and to both our loyal and new customers who have made
the conscious decision to make Norco their preferred brand,
whether buying Norco milk or rural merchandise – thank you.
Your collective support of the Co-operative is appreciated and
ensures that the communities within which we operate will
continue to be strong and resilient.
GREG McNAMARA
Chairman
Board of Directors
7
 Business overview 2015/16 an EBITDA (Earnings before Interest, Tax, Depreciation and
Amortisation) level of $9.715 million. This is a great result taking
The 2015/16 financial year has been a difficult one to navigate
into account that we have been able to put $1.8 million into our
through, however a solid result has been realised for our Co-
farm gate milk price versus the prior year. Our total core debt as
operative in terms of achieving all financial KPI’s as set by the Board
at 30 June 2016 reduced to $29.92 million due to $1.99 million
of Directors. The collective final results for the Co-operative for the
being paid back through the financial year. With the continuous
financial year ending 30 June 2016 has seen us achieve budgeted
solid growth and financial achievements we have experienced
profit. This is a great result taking into account the volatile trading
in the past few years, we will need to further invest in our plant
conditions in the market place. This once again shows the ongoing
and equipment as well as our people. Our collective sales for our
growth and strength of our brand as well as the commitment,
Co-operative have grown 5.9 percent this year.
focus and talent of all our people in the Co-operative.
Our Norco Foods business division, consisting of the Ice Cream
The final result for 2015/16 has enabled us to not only take a
Business Unit (ICBU), Norco Milk and Milk Supply, achieved
strategic position to hold a highly competitive farm gate price
an EBITDA of $8.597 million. This is a great result taking into
for our Members as we move into 2016/17, but to also plan
account the increased farm gate price we have paid and the
ahead to manage the current uncertainty in the market place,
ongoing market pricing pressures. The fluctuating demand was
in particular the flow on effects from the turmoil experienced
managed exceptionally well by our Foods’ teams throughout
in the southern regions of Australia. Our heritage as a 121 year
the year. Milk Supply was down on last year due to the average
old Australian farmer owned co-operative has allowed us to
milk pay collective increase as well as the higher spring flush
strategically position our brand and further enhance the point
volume. Norco Milk’s sales were up 5.5 percent on last year
of difference and competitive edge that we have versus our
predominantly due to the Coles’ contract volume, Route Trade
competitors. Our diversified business model, geographical
business improvement and the surge in branded sales at the
positioning, quality of product and strong long term
end of the financial year. ICBU sales were up by 3.8 percent on
relationships have again been significant drivers in achieving
last year which was driven by higher volume and demand.
these financial results. The solid direction, management and
performance of the co-operative model, as practiced throughout Our Rural / Agribusiness division again had a strong result in
Norco, is proving again that our Members can control their own 2015/16 with a collective result that was favourable to last
destiny in terms of market place supply. year’s EBITDA by 9.5 percent after Suppliers’ Patronage Scheme
(SPS) payments (Rural up 12.8 percent / Agri up by 1.1 percent).
We are the only true 100% Australian dairy farmer owned
This was driven by better trading results achieved from both
co-operative competing in a market of multinational owned
our Rural Stores, our Windera Mill and also by the Grain Trading
processors in the main stream.
business. Our Toowoomba store is now trading profitably and
We have collectively finished the 2015/16 financial year at completed the year with a profit of $137,000. The Rural team

8
 CHIEF EXECUTIVE OFFICER’S REPORT
continue to focus on operational efficiencies, improved buying,
customer service and gross margins as well as ongoing planning
of the expansion of the Rural network over the next few years.
The SPS was up 9.7 percent on last year in terms of the increased
patronage rewards we paid out to our Members for shopping
with Norco.
Corporate costs improved on last year by 3.8 percent after
allowing for the sale of the redundant Beenleigh depot. This
is an excellent result considering the increased size of our
overall business, now with a collective turnover of $541 million.
Corporate continue to manage and implement tight cost and
overheads control. This is reflected in consistently being below
the industry standard for a company of our turnover size. Our
corporate costs were 0.77 percent of total sales versus the prior
year’s 0.84 percent and these results are materially below the
best practice measure of 1.3 percent. As we consolidate our
financial position and implement long term opportunities we
will continue to put further focus on the development of our
people, their skill sets and succession planning.
We have recently appointed an experienced Human Resources
General Manager, Tom McAtee, to further enhance and
resource as necessary all aspects of our Human Resources (HR)
management team to meet the growing needs of our business
units. While we are strategically focused on business growth, at
the same time we need to keep our people safe in all aspects of
Work Place Health and Safety (WPHS). Our HR team continues
to build further training and development platforms for all our
teams in respect of best practices in WPHS as well as individual
professional development programs.
Again this year there are a number of accomplishments from
all the teams at Norco. I have listed below some of the key
achievements from the 2015/16 financial year, including:
• Continued careful development of our export opportunities in
fresh milk and ice cream.
• Improved Route Trade business sales up by 12.3 percent on the
previous year.
• Net profit, though down on last year due to increased milk
price, was on budget as planned for the 2015/16 year.
• Collective Co-operative sales increase of 5.9 percent.
• Increase of $1.8 million achieved in our farm gate milk price for
2015/16.
• All spring milk was paid at base rates and no litres were paid at
the manufacturing rate.
• Our average milk price to our Members was 0.82 cents per litre
up on last year.
• Our Members’ volume was up 5 percent on last year and
achieved a record volume of 221 million litres.
• The Rural / Agribusiness division, after Suppliers’ Patronage
Scheme payments, achieved a net profit improvement of 14.2
percent up on last year.
• ICBU achieved a sales improvement of 3.8 percent up on last
year.
• Core debt reduction by $1.99 million to $29.92 million.
• Met all banking covenants.
• Suppliers’ Patronage Scheme up 9.7 percent on last year (record
amount of $1.156 million paid out).
• Norco Milk sales up 5.5 percent on last year.
• Toowoomba store now in profit.
9
 • Lost Time Injuries reduced by 14 percent on last year.
• Debtors’ days improved by 3.82 days. This has resulted in
improved cash flow across the business.
Our 2016/17 key points of focus are:
• Corporate:
- Continue to focus on cost controls and efficiencies in all
overheads.
- IT and systems development to meet business growth
requirements.
- People, professional development and succession planning.
- Manage and meet all banking covenants.
• Rural / Agribusiness Division:
- Continued focus on ongoing financial improvement and
market share growth of the Rural / Agribusiness division.
- Explore further opportunities for expansion of the Rural
network.
- Ongoing financial improvement of our Toowoomba site.
- Improved Rural Stores buying, improve Rural Store network
sales, service and market share.
- Ongoing quality assurance.
- Increase volumes through Agribusiness mills.
- Further capital reinvestment as required in mills.
- Training and development of our sales people.
- Focus on training, reinvestment and upgrades in all aspects of
WPHS best practice at our sites.
• Foods Division:
- Focus on Norco branded product market share and point of
difference.
- Quality assurance processes, systems and training
improvements.
- Ongoing development of strategic alliances with Norco
partners.
- Consistent milk volume pre-selling.
- Continued growth and development of our ice cream
business.
- Improvement of milk price at farm gate.
- Ongoing research and development of future export
opportunities.
- Continued market share growth and improvement of
profitability in the Route Trade business.
- Capital improvements on all Norco owned sites for business
development.
10
- Training and development of our teams.
• Human Resources:
- Focus on WPHS best practice across all business units.
- Training and professional development requirements for our
teams.
- Succession planning.
- Improved communication processes and clear strategic
directional focus for all our business units.
• Focus of Senior Management Team:
- Improve core businesses’ profitability.
- Ongoing development of core strategic partnerships across
all business units.
- Continued improvement of asset values and goodwill
appreciation of the Co-operative.
- Competitive farm gate milk price and improved shareholder
returns through ongoing profit improvement across all
divisions.
- Improve Member / Milk Supplier customer service, support
and communication.
- Achieve/exceed Key Performance Indicators and budget.
- Strengthening positioning and ongoing sustainability of the
Co-operative.
- Ongoing focus on employee training, development,
mentoring and career/succession planning across business
units.
- Continued investment and improvement in all aspects Work
Place Health and Safety.
- Focus on long term strategic plans.
In conclusion, I would like to thank all Norco employees,
Members / Milk Suppliers, stakeholders and customers for your
support, input and loyalty to the Co-operative throughout the
2015/16 financial year. I look forward to again working with
you all to continue to strengthen and improve the long term
sustainability of Norco in the 2016/17 financial year. Thank you all
again and well done everyone.
BRETT KELLY
Chief Executive Officer
11
 BUSINESS UNIT REPORTS

NORCO FOODS
SALES AND MARKETING

The 2015/16 year was certainly a year of growth for Norco Foods
and the Sales and Marketing teams. In last year’s report I wrote
about our growth initiatives and product developments that
we had implemented and launched. This year we have seen the
true full year benefit of those initiatives and a continued focus
to drive our depth of distribution whilst moving into new areas
of opportunity. Additionally, as a result of the devastating milk
pricing news delivered to dairy farmers in southern Australia,
we witnessed and were involved in an amazing groundswell
of sentiment that led to heartfelt support demonstrated by
consumers making a conscious decision to support branded
milk products instead of supermarket house brands.
Let’s first look into the sales growth and the reasons Norco
continues to win within the competitive market place in which
we operate.
It all starts with our 100% Australian farmer owned dairy co-
operative that has been in business since 1895. This simple but
emotive statement is Norco’s tangible point of difference as it
clearly defines that Norco is:

12
a) Farmer owned; Our export business continues to progress with assorted milk
b) 100% Australian; and and ice cream products produced by Norco now sold in China,
Japan, Philippines, America and New Zealand. Although a
c) A co-operative where the profits are distributed back to our
difficult market to manage, export is of strategic importance to
Members.
us. We continue to grow our existing clients whilst searching for
In addition to this is the quality of our milk, our production new exciting opportunities.
capabilities, our brands and our product offers, all of which allow
our Sales team to highlight these features to our clients. With
such an important point of difference that we offer to the market
place, it certainly provides us with a unique story that resonates
throughout our region and client base.

Our area of distribution continues to grow, with Toowoomba

and the Sunshine Coast providing incremental gains week on
week and in a relatively small amount of time. It is pleasing to
report that we have a growing business base in Sydney which
we aim to focus on heavily in the coming months. While we
grow the fringes, we continue to develop our heartland and we ANDREW BURNS
are also strengthening our position in Brisbane. General Manager Sales and Marketing Norco Foods
Our relatively new specialised white milk products that provide
a price premium for us, such as Jersey, Lactose free and
Unhomogenised, continue to build in sales providing us with
incremental opportunities to appeal to a wider consumer base
in addition to those consumers who enjoy our regular favourite
full cream and lite milk varieties.

I touched on the recent events experienced in southern Australia

towards the end of the 2015/16 financial year that saw a massive
swing nationally from house brands to brand owners. This
unprecedented event driven by all forms of media including
Facebook, saw consumers making the conscious decision to
walk away en masse from house branded milk to branded offers.
Norco has been impacted by this shift because our supermarket
house brand contract volume has declined and as a brand
owner Norco must compete with the offerings of other brand
owners when consumers make the decision to move from
supermarket house brands. However, as a result of our excellent
relationship, we were able to negotiate and expand our branded
distribution into all Coles stores serviced from their distribution
centre in Brisbane. This now means that Norco milk is distributed
to, and sold in each and every Coles store from Port Macquarie in
New South Wales to Port Douglas in Queensland, an increase of
some 80 plus stores. At the time of writing this report, the switch
to branded milk products continues.

13
 NORCO FOODS our footprint in the Route Trade business, with the Distribution
OPERATIONS team meeting these logistical challenges. The team has achieved
outstanding results with current delivery in full and on time to
our customers of 98.66 percent for this period. Our team remains

The 2015/16 financial year has seen another successful period for focused on continual improvement and customer service.

Norco Foods Operations. With ever increasing volumes through Our main focus will be to continue to supply the best quality

all three of our manufacturing sites, our focus is centred on products and service.

reducing costs, operating efficiencies, safety of our people and Our manufacturing teams’ commitment to continuous
the quality of our products. improvement of line efficiencies resulted in increased

We were able to accomplish outstanding results in all areas of production outputs while ensuring quality product for end users.

our business reflecting the depth of talent within our group and First time quality results for the year are once again the highest

the dedication of our staff in the Foods team. achieved to date which is a credit to all staff given the increasing
production demands.
The implementation of our Focus on Safety working group at
our three processing facilities has resulted in achieving excellent Highlights for the 2015/16 year include:

results and improvements to our safety records. The health, • New milk depots to accommodate our growing Route Trade
safety and wellbeing of our people remain our highest priority business volume and distribution reach.
and identifying and managing risk is a critical component of our
• New products launched at our Ice Cream facility at Lismore.
continued commitment to providing a safe workplace.
• Investment in quality, our people, our equipment and our
We have seen excellent results on the quality front this year with
suppliers.
reductions in customer complaints by 23.5 percent across the
Foods business and our First Time Quality at 98.9 percent. This • Board approval for new storage vats at Lismore.
has been a direct result of the Norco Foods Standards being
• Approval for waste water treatment plant upgrades at both
implemented by our Quality team along with investment in
Raleigh and Labrador.
equipment, training and maintaining good work practices.

Our Procurement team’s results have been outstanding in

2015/16. The importance of the supply of quality ingredients and
packaging cannot be understated. By building new relationships
and continuing with strategic long term relationships with
suppliers, Norco can ensure delivery on our quality guarantee.
The professional way our Procurement team work with our
suppliers ensures our manufacturing sites have stock for forecast
production. This is vital for Norco in ensuring that we deliver
to our customers on time and in full. Our stock level reduction ROBERT VANDERMAAT
continues to improve year on year as we work towards a ‘just in General Manager Operations Norco Foods
time’ practice on deliveries and production.

With 36 Norco milk depots spread from the Sunshine Coast

down to Sydney, we continue to increase volume and grow

14
 MILK SUPPLY
For the majority of our supply regions, 2015-16 brought favourable
conditions in many aspects. While many challenges remain, a steady
farm gate milk price, lower costs (fuel, fertiliser and grain prices),
historically high cattle prices and more favourable climate conditions
over extended periods resulted in strong growth in Member supplied
milk volume, increased stored feed on farm and reinvestment for
on-farm infrastructure. These are all indicators of confidence within the
Norco milk supply base when compared to previous years.
The growth in milk volumes particularly in spring 2015, did create
a challenge for the business and lower returns were experienced
due to the low commodity market pricing however on balance, the
ongoing strategy of positioning the majority of Members’ milk to the
drinking milk sales markets continued to provide conditions where
no manufacturing pricing was required within the year. However
the dynamic of continuing low commodity returns and higher milk
production in spring remains a financial risk and challenge for the whole
Co-operative, for both Members and the commercial business. Our
ongoing strategy is to pay the highest milk price the business can afford
whilst retaining sufficient profit in the business to provide growth. This
is the benefit of being a co-operative as our Members are also our Milk
Suppliers who are our 100 percent focus.
2015-16 Summary
• Member milk supply increase in total to 221.6m litres for 2015/16, up
10.6m litres or 5 percent compared to 2014/15.
• Total average farm gate milk price was 57.30 cents per litre (cpl) versus
56.48 cpl for 2014/15, a 0.82 cpl or 1.45 percent increase.
• Northern Region average farm gate price was 57.28 cpl, Southern
Region average farm gate price was 57.52 cpl versus the prior year’s
total average of 56.48 cpl.
• Manufacturing litres paid at base prices for the second year in a row.
• Milk supplied to Norco Milk increased 3.4 percent or 5.3m litres over
2014/15.
• For Norco farms that have supplied milk in both 2014/15 and 2015/16
there was an overall growth in volume of 6.2 percent for the 2015/16
year.
• On this basis and by region, volume growth included 4.8 percent for
QLD, North Coast NSW 4.2 percent, Central North Coast 12.2 percent
and Norco’s Southern region 5.3 percent.
Milk Supply programs 2015-16
The Board provided an offer to all Members / Milk Suppliers between 1
July 2015 and 30 April 2016, to extend their current three year Milk Supply
Agreement (MSA) a further two years. This was a significant success with
95 percent of farms choosing the option to extend their MSA.
The introduction of Regional Milk Pricing from 1 January 2016 provided
the basis for future growth in each region based on the relevant market
returns. As a part of this program, the Board provided a number of
commitments on farm gate pricing to provide longer term security. The
value of these commitments can now be seen with the significant farm
gate price decreases in the NSW region for processors impacted by the
Victorian milk price.
For milk logistics and transport costs, the Milk Supply team and freight
contractors worked closely to improve farm access points to allow
B-double access (Northern Rivers), improve load in facilities at Norco
factories and organise milk swaps with other processors to reduce
freight costs. Further developments such as increased vat capacity at
factory, load out facilities at Lismore and further increases in on-road
tanker volumes are in the works.
The Board and Milk Supply staff made significant investments in Member
/ Milk Supplier education through Governance training, offers to assist
attendance at conferences and industry training days, the Northern Rivers
Resource Efficenticy Focus Farm project, inter-regional study tours and
two study tours to New Zealand. All were considered a great success and
further investment by Norco in Member / Milk Supplier education and
training will certainly continue in the coming years.
ROB RANDALL
General Manager Milk Supply
15
 NORCO RURAL /
AGRIBUSINESS
2015/16 was a year of consolidation for the Norco Rural /
Agribusiness division. With seven retail sites added to the group
during the last three years, it was a period to focus on the
integration of these business units into Norco and to place focus
on operations of the broader group.
The seasonal conditions we experienced during 2015/16 were
without doubt exceptional. The seasonal break that occurred
in January 2015 continued into the new financial year and set
the scene for what has been a great year. Across the Norco Rural
/ Agribusiness division territory all regions have enjoyed very
good and timely rainfall events, with many regions enjoying the
best seasonal conditions seen for a long time. Many have stated
that the past year has been the best season they have ever had.
From a commodity price perspective the business also enjoyed
strong demand and/or strong commodity sale prices. Beef is
definitely the shining light with sale prices continually on the up
and up throughout the year. Values have been at levels never
seen before and the beef sector has now enjoyed a very strong
couple of years. The horticultural industry has endured some
challenges with major rainfall events and wind damage in some
localised regions. However, sale prices have been strong and
16
this has underpinned major activity in this market segment,
particularly the macadamia and blueberry industries. Despite the
turmoil that engulfed the southern dairy industry, the northern
dairy market maintained its market price and as a business we
continued to see strong demand from this customer base.
After considerable expansion in the number of retail outlets
operating under the Norco banner, 2015/16 represented an
opportunity for the business and management to focus on
operational aspects of our business. A number of improvements
have been made which are reflected in our year on year
increase in profitability and improvements in key operational
performance measures. One major structural change
implemented was the transition of the Norco Kingaroy retail
operation from a corporate site to an agency operation. This
transition has resulted in ongoing improvements within this
business unit.
Work Health and Safety
2015/16 was year two of a renewed and intense focus on WHS
within the Rural / Agribusiness division. Significant safety works
and programs have been rolled out across the group and this
focus is ongoing. Considerable progress has been made and
whilst an 85 percent reduction in claim costs has been achieved Total sales within Norco Agribusiness were down this year.
across the two years, improvement in the frequency of claims However, despite subdued demand and lower sales, the division
remains a key management focus. recorded a net profit increase of 4.7 percent and a 2 percent
improvement in ROCE.
Financial performance
Suppliers’ Patronage Scheme
The combined EBITDA result of the Norco Rural / Agribusiness
division after the Suppliers’ Patronage Scheme was an Norco Member spend was up 8.5 percent year on year and
improvement of 9.5 percent to $4.357 million. Rural recorded a the number of Members transacting with the Co-operative
12.8 percent increase in EBITDA and Agribusiness produced a 1.1 was stable at 92 percent. 2015/16 was another record year for
percent increase in EBITDA. Suppliers’ Patronage Scheme (SPS) payments to Members with
SPS payments up 9.7 percent to $1.156 million.
Rural delivered strong sales growth of 10.4 percent, with the
latter part of the year producing sales numbers not seen for
many years. Late season field days, primarily Farmfest and
Primex, produced solid sales results and this in combination with
several in-store promotion events during May and June resulted
in our run through to the end of the financial year being much
stronger than forecast.

The strong late season sales had an impact on product mix

and this combined with strong competitor price pressure saw
a small decline in GP margin. However, this was countered by
a 2.2 percent increase in the number of transactions facilitated DAMON BAILEY
combined with a 7.6 percent increase in the average transaction General Manager Rural / Agribusiness
value.

Our focus on supporting strong and reputable R&D brands

produced another solid increase in sundry income of 7 percent.
The Rural Retail net profit was favourable 14.4 percent and the
ROCE generated by the division was favourable 2.3 percent to
last year.

The favourable seasonal conditions that underpinned Rural’s

result actually dampened demand for bulk and bagged
manufactured feeds from our two feed mills. With ample
supplies of quality paddock feed across our territory, overall
demand for feed products was depressed and total volume
manufactured by our agribusiness division was down 10
percent. Grain and protein tonnages traded by our Norco Grain
business unit were up 6.3 percent.

17
 FINANCIAL MANAGEMENT million of finance leases and $0.1 million of Norco Capital Units.

Bank covenants

In the 2015/16 year Norco achieved a net profit of $2.003 million versus
the prior year’s $3.105 million and an EBITDA of $9.7 million versus
the prior year’s $10.6 million. This financial result was unfavourable to
2014/15 however it was after the business paid an additional $1.8m
to our Members / Milk Suppliers via a higher average milk price so, in
trading terms, the base business performed better than the prior year.
The total sales finished the year at $541 million which was 5.9 percent
higher than the prior year’s $511 million and all business units achieved
a sales increase other than Agribusiness and that was due to the good
season that our Members / Milk Suppliers experienced. The ice cream
sales increase was 3.8 percent, Norco Milk achieved 5.5 percent, Rural
Retail achieved 10.4 percent and the Agribusiness sales decreased
2.6 percent. Norco Milk and the Ice Cream Business Unit (ICBU) both
achieved record volumes in the 2015/16 year and the Rural Retail
business achieved a record sales result.
Debtor and creditor days
Debtor days achieved a record of 27.2 days versus the prior year’s
31.0 which is a significant improvement and a pleasing record for the
business. Creditor days were consistent at 32.3 days versus 32.2 days
for the previous year.
Norco again met all bank covenants set by St George. Norco’s EBITDA
Leverage, which is total debt divided by EBITDA for the full year, was
3.01 versus the result of 3.05 in 2014/15. This improvement is driven by
the reducing total debt. The Interest Cover Ratio, which is the number
of times EBITDA covers financial commitments, achieved a result of
3.22 versus the prior year’s 3.59.
Working capital
Working capital (made up of debtors, creditors and inventory) as at
30 June 2016 was $10.5 million versus the prior year’s $11.7 million,
with the decrease due to the reduction in debtor days and reduced
inventory at the ICBU.
Dry Former Member repayments
Using the funds derived from the Compulsory Share Acquisition
Scheme, Norco repaid $487,440 to Dry Former Members this financial
year. This takes active Member capital to 92 percent of issued capital
compared to 89 percent in 2014/15.

Debt reduction
Norco’s core bank debt reduced by $1.99 million during the year from
$31.9 million to $29.92 million as a result of scheduled repayments.
Norco’s total debt including finance leases and Norco Capital Units is
now $31.437m versus the prior year’s $33.8m. The total debt of $31.437 CAMILLE HOGAN
million includes $29.92 million of core debt with St George, $1.4 Chief Financial Officer

18
 NORCO PEOPLE
Over the past year, the Human Resources (HR) team has
focused on continuous improvement to increase efficiency
and accountability, while improving services to our internal
customers and streamlining HR processes. The team also
continues to provide leadership with regards to corporate
projects such as implementing contemporary HR information
systems and negotiating the renewal of Enterprise Bargaining
Agreements across major divisions of Norco.
are important, these have helped to improve our safety
performance and we are pleased to report that in February 2016
Norco achieved third party certification across the entire Co-
operative for our WHS Management System against Australian
Standard 4801. We also focused heavily on identifying and
improving areas of recurring incidents, hazardous manual tasks
and improving hazard identification processes.

As Norco continues to grow and integrate continuous

improvement into business planning, human resources will play
a critical role in ensuring that we have a high-performing and
engaged workforce equipped to deliver ever better results for
the Co-operative.
TOM McATEE
Work Health and Safety General Manager Human Resources
“Is what you are about to do safe?” This question has been posed
to Norco staff throughout the year and is aimed at ensuring all
employees are taking responsibility for working safely. Everyone
knowing that they make a difference helps Norco to provide safe
workplaces.

Our focus on safety has resulted in a 24 percent reduction in the

number of injuries recorded and a 10 percent reduction in the
Total Recordable Injury Frequency Rate over the past 12 months.
These are pleasing results for the Co-operative.

Safety however is ultimately about people − not numbers.

The policies, standards, programmes and targets we set

19
 DIRECTORS’ REPORT

The Directors present their report together with the financial reports for Norco Co-operative
Limited (‘the Co-operative’) for the year ended 30 June 2016 and the Auditors’ report thereon.

The Board of Directors currently comprises five supplier Directors (non executive) and no
Independent Directors. There is currently one supplier Director vacancy in the Southern Region as a
result of Mr PW Neal’s resignation effective from 23 November 2015.

The Directors bring a range of skills and experience to the Board room, including a detailed
understanding of the dairy industry and wider agricultural sectors, extensive experience in
business planning and strategy and strong leadership. In coming together as a Board, the Directors
have a shared desire to achieve a successful balance between Norco’s strategic business objectives
and the needs of Members.

However, the Directors also acknowledge that they must continually strive to learn more about the
Norco business and the market place within which Norco operates, both domestically and globally.
Continually improving the knowledge and skills base, in the Board room, assists to ensure that
the Directors are able to govern the Co-operative in the most effective manner possible, using all
relevant information and tools available to them.

During 2015/16 the Board engaged the services of two consultants to sit alongside Directors,
being Dr Brindha Gunasingham FCA and Ms Tanya Crowther, both of whom contributed greatly
to the overall performance of the Board. Ms Crowther continues to be contracted by the Board
to provide her services. In addition, several well respected individuals have been invited to make
presentations to the Board and management team during the year. Mr Norman Repacholi of Dairy
Australia provided insightful and timely information on the domestic and global milk markets. Ms
Jingmin Qian of Jing Meridian assisted in better understanding cross cultural issues and learnings
in relation to the Asian market place. Mr Brad Tozer of Ernst & Young facilitated and delivered a
session on cost allocations and Mrs Kerry Kempton of the NSW Department of Primary Industries
discussed the findings from the NSW Dairy Farm Monitor project.

The Directors also continue to be committed to their ongoing professional development and
during the year have had the opportunity to attend, and represent Norco, at a range of industry
conferences. All Directors are members of the Australian Institute of Company Directors (AICD) and
encouraged to attend various AICD educational courses and functions (some of which are listed
below in the individual Director profiles).

Strategic discussions play an important role at each and every Board meeting which allows the
Directors and the management team to look forward and discuss emerging opportunities and
trends as well as future challenges. In addition, a yearly strategic workshop involving Directors and
the management team is held which underpins the Co-operative’s strategic plan.

20
Gregory J McNamara – Chairman

Greg McNamara has been a director of Norco Co-operative

Limited for 20 years and is from the Central Region. In addition to
his role as Chairman of the Board of Directors, he is a member of
the Member Services Committee.

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

A primary focus for Greg during 2015/16 in his role as Chairman

has been to ensure that the Board and management continue
to implement the strategic plan of having a growing, diverse
and competitive business so that our Members’ can be rewarded
with a sustainable and competitive milk price. Greg is also an
innovative thinker and is always exploring opportunities to bring
people together to work collaboratively to improve the Norco
business.

Greg is a member of the Australian Institute of Company

Directors and is a keenly sought after speaker for industry events
and forums. During the 2015/16 year, Greg was a speaker at both
the ABARES Outlook Conference and the PEI Agri Investor Forum
and also attended the Australia and New Zealand Co-operative
Leaders’ Forum. Whenever possible, Greg always tries to make
time in his busy schedule to speak to various local seniors’
groups, as members of these groups often have close ties with
the dairy industry and are valued supporters of the Co-operative.
Greg is also a Board member of the New South Wales Business
Chamber.

More recently, Greg has accepted the role of Chairperson of the

Industry Advisory Group (IAG) within the Farm Co-operatives
and Collaboration Pilot Program (FCCPP). The FCCPP is an
Agricultural Competitiveness White Paper initiative of the
Commonwealth Government which encourages farmers to work
together to improve farm gate returns by providing advice and
resources to farmers and farmer groups looking to establish co-
operatives and collaborative business models.

21
 Anthony (Tony) W Wilson – Deputy Chairman
Tony Wilson was elected as a director on 4 March 2009 and
is from the Northern Region. He is Chairman of the Audit
and Risk Management Committee.
Together with his wife Jillian and sons Nicholas and James,
Tony lives and farms at The Risk, 20 kms north west of
Kyogle milking a herd of 260 cows that are Holstein based,
with a crossbreeding program in place. Tony has studied
and gained a BA, Dip Ed at UNE, Armidale. Tony also has
an interest in agri-politics which has developed over many
years and has been focussed on the welfare of the dairy
farming community.
Tony and his family operate a robotic dairy which is now
well established. This innovative robotic dairy is not only a
favourite stop-over for groups of dairy farmers but for the
wider community also. The family’s willingness to “open
their door” to dairy farmers wanting to see and experience
an operational robotic dairy is a testament to their sense of
community and their passion for the future of the industry.
Tony is a member of the Australian Institute of Company
Directors (AICD). He again supported the Norco Rural Stores
Managers’ Conference, this time held locally in July 2015.
During the year, Tony was a speaker at both the QDO-DIAA
Annual Conference and the Ag in the Asian Century National
Export and Innovation Conference. Tony was the Board’s
representative on the Norco study tour to the North Island
of New Zealand 13-18 June 2016 with a group of Norco milk
suppliers. As part of his ongoing professional development,
Tony also attended the AICD Company Directors’ Course
Update in May 2016.
22
Heath B J Hoffman - Director
Heath was elected to the Board of Directors on 12
November 2014 and is a supplier Director from the Northern
Region. He is a member of the Audit and Risk Management
Committee.
Heath is a member of a family partnership that owns and
operates a dairy farm near Warwick milking 300 Holstein
cows on a full TMR (total mixed ration) system. In nearing
the end of his second year as a Director, Heath now has a
firm understanding of the complex Norco business and the
market place in which Norco operates. Heath’s time on the
Board has cemented his view that Norco, as a co-operative,
has a significant role to play in ensuring there is a successful
future for the northern dairy industry.
Heath is an affiliate member of the Australian Institute of
Company Directors and completed the AICD Company
Directors’ Course in August 2015. Heath was one of three
Norco Directors who attended the Australian Dairy Industry
Conference in Shepparton Victoria during the year and
spent an additional two days in Victoria visiting farms as part
of the pre-conference tour. Heath also travelled to the South
Island of New Zealand with a group of Norco milk suppliers
as part of the Norco study tour.
Michael C Jeffery - Director
Michael Jeffery was elected as a director on 14 November
2012 and is from the Southern Region. Michael is a member
of the Audit and Risk Management Committee.
Michael has been farming at Austral Eden near Kempsey
in a family partnership for 27 years and milks a herd of
300 cows. He has extensive business, marketing and dairy
industry experience, including in overseas countries and
has held a number of positions including directorships in
dairy related export, consulting and genetics businesses. In
addition, Michael has been a state delegate of both the NSW
Dairy Farmers’ Association and Holstein Australia for five
years. He had been on LiveCorp’s China Live Export Industry
Working Group Committee for two years and as part of the
NorcoNet communication network, has been Chairman of
the Nambucca / Kempsey group for three years. Michael also
holds an Advanced Diploma in Agriculture. More recently,
Michael has been appointed as an Alternate Delegate to
the Dairy Connect Farm Group Board and is the current
Chairman of the Kempsey Dairy Industry Group, a position
he has held for four years.
Michael is a member of the Australian Institute of Company
Directors and has also completed the AICD Finance for
Directors course. During the year, Michael attended the
Australian Dairy Industry Conference in Shepparton Victoria.
With the Chairman, Michael attended the Australia and
New Zealand Co-operative Leaders’ Forum in May 2016,
visited milk processing and rural retail businesses in New
Zealand and also represented Norco at the ADIC Investment
Planning Workshop.
Leigh Shearman - Director
Leigh was elected as a director on 14 November 2012 and
is from the Central Region. Leigh is Chairperson of the
Member Services Committee.
Leigh owns and operates a dairy farm at Goolmangar just
outside Lismore milking 180 cows. Leigh also has experience
across a broad agricultural base gained over many years,
including beef, horticulture and intensive piggery farming.
She has also owned and operated a retail franchise and
has worked in the banking industry for 10 years. Leigh
has a Diploma in Rural Business Management, Diploma
of Agriculture and Certificate III Financial Services. Leigh is
the vice chairperson of the Far North Coast Dairy Industry
Group Inc (DIG), secretary of Subtropical FNC, chairperson
of the Goolmangar Water Users Association and a member
of the Steering Committee for the Northern Rivers Resource
Efficiency Focus Farm.
Leigh is a strong believer in the benefits of being part of a
co-operative and is confident that this model will ensure
the long term sustainability of Norco’s members and other
stakeholders associated with, and reliant on, a strong and
progressive Norco business.
Leigh is a member of the Australian Institute of Company
Directors. Leigh was one of three Norco Directors who
attended the Australian Dairy Industry Conference in
Shepparton Victoria during the year and spent an additional
two days in Victoria visiting farms as part of the pre-
conference tour. Leigh was the Board’s representative on the
Norco study tour to the South Island of New Zealand 4-9
October 2015 with a group of Norco milk suppliers.
Note: At the directors’ meeting held on 16 and 17 December
2015 it was determined that the operation of both the
Milk Supply Advisory Committee and Brand Management
Advisory Committee would be suspended and that any
items previously considered by these committees would be
incorporated into the directors’ meetings until further notice.
23
 DIRECTOR ELECTIONS – 2015/16 During the course of the 2015/16 financial year there were also
five directors’ meetings held by teleconference. Teleconferences
The retiring Directors Ms L Shearman (Central Region) and Mr
are organised to discuss and resolve specific issues that cannot
MC Jeffery (Southern Region) being eligible, offered themselves
be held over until the next scheduled monthly meeting and
for re-election. A member nomination was also received from
generally the duration of such teleconferences is one hour or
Mrs M McDonald (Central Region) and accordingly a postal
less. Teleconferences are a cost effective and practical way for
ballot was held for the Central Region resulting in Ms Shearman
directors to discuss specific issues in a timely manner given that
being re-elected for a three year term effective from the 2015
their residences are spread over a large geographic area.
Annual General Meeting on 11 November 2015. As there were
no member nominations received from the Southern Region, Mr
Jeffery was re-elected unopposed for a three year term effective
CORPORATE INFORMATION
from the 2015 Annual General Meeting on 11 November 2015.

A casual vacancy was created in the Southern Region when Mr

PW Neal tendered his resignation effective from 23 November Corporate structure
2016. Mr Neal was due to retire at the 2016 Annual General Norco Co-operative Limited is a co-operative limited by shares
Meeting. At the Directors’ meeting held on 16 and 17 December which is incorporated and domiciled in Australia.
2015, it was resolved that the casual vacancy created by Mr
Neal’s resignation would be filled at the time and in the manner
specified under rule 46 of the Rules of the Co-operative. Nature of operations and principal activities
Accordingly, the vacancy will be filled as part of the ordinary
The principal activities of the Co-operative during the financial
election of Directors programme leading up to the 2016 Annual
year were the processing, manufacture and sale of dairy
General Meeting.
products, the manufacture and sale of stockfeeds and rural
The positions of Chairman and Deputy Chairman are voted on retailing.
annually by the directors following the Annual General Meeting.

Directors’ Meetings
The number of Board meetings (including meetings of the Audit
and Risk Management Committee and Milk Supply Advisory
Committee) and number of meetings attended by each of the
directors of the Co-operative during the financial year are:
Employees
The Co-operative employed 510 full-time, 69 part-time
permanent and 227 casual employees at 30 June 2016
(2015: 494 full-time, 70 part-time permanent and 188 casual
employees).

Audit and Risk Management Milk Supply Advisory Committee

Directors’ Meetings Committee Meetings Meetings*
A B A B A B
GJ McNamara 12 12 - - 4 4
AW Wilson 12 12 7 7 4 4
HBJ Hoffman 12 12 5 5 4 4
MC Jeffery 12 12 5 5 4 4
L Shearman 12 12 2 2 4 4
PW Neal 5 5 2 2 4 4

A Reflects the number of meetings held during the time the director held office during the year B Number of meetings attended
* The last meeting of the Milk Supply Advisory Committee before being suspended was on 29 October 2015.

24
Results of operations
The net amount of the operating profit for the financial year of
the Co-operative after providing for income tax was $721,000
(2015: $2.3 million profit).
Derivatives and other financial instruments
The Co-operative’s activities expose it to changes in interest
rates, foreign exchange rates and commodity prices. It is
also exposed to credit, liquidity and cash flow risks from its
operations. During the year, the Board has maintained policies
and procedures in each of these areas to manage these
exposures. Management reports to the Board on a monthly basis
on the monitoring of and compliance with the policies in place.
Dividends
Dividends paid during the 2015/16 financial year totalled
$528,000 (being a dividend rate of 6.0% [six percent] on issued
capital), declared and approved by Members at the 2015 Annual
General Meeting, which was held on 11 November 2015.
Operations review
The directors’ have reviewed the Co-operative’s operations
during the financial year and the results of those operations,
which are discussed in the Chairman’s Report and Chief
Executive Officer’s Report for the financial year ended 30 June
2016 (see pages 4 and 8).
Events subsequent to balance date
During the interval between the end of the financial year and
the date of this report, there has not arisen any item, transaction
or event of a material and unusual nature which, in the opinion
of the directors, is likely to significantly affect the operations of
the Co-operative, the results of those operations or the state of
affairs of the Co-operative in subsequent financial years.
Future developments
In the opinion of the directors, disclosure of information
regarding the likely developments in the operations of Norco
in future financial years and the expected results of those
operations is likely to result in unreasonable prejudice to the Co-
operative. Accordingly, this information has not been disclosed
in this report.
Indemnification and insurance of Directors and Officers
The Co-operative has entered into agreements to indemnify all
directors named at the beginning of this report, former directors
and current and former officers of the Co-operative against
all liabilities to persons (other than to the Co-operative or to a
related body corporate) which arise out of the performance of
their normal duties as a director or officer, unless the liability
relates to conduct involving a lack of good faith.
The Co-operative has agreed to indemnify the directors and
officers against all costs and expenses incurred in defending
an action that falls within the scope of the indemnity and any
resulting payments. The relevant insurances cover legal liabilities
and associated costs arising from the performance of their duties
as directors and officers and compensation for loss or injury
sustained in the course of such duties.
Options over unissued shares
Options over unissued shares have not been granted to any
person or director since the end of the previous financial year to
date of this report.
Directors’ benefits
Since the end of the previous financial year, except as declared
below, no director of the Co-operative has received or become
entitled to receive any benefit (other than a benefit included
in the aggregate amount of emoluments received or due and
receivable by directors shown in the financial statements or
the fixed salary of a full time employee of the Co-operative or
25
 of a related corporation) by reason of a contract made by the Appreciation
Co-operative or a related corporation with the director or with
The efforts and contribution of our management and staff
a firm of which the director is a member, or with a company in
during the year were greatly appreciated by directors.
which the director has a substantial financial interest, except for
that benefit which may be deemed to accrue to those directors Signed in accordance with a resolution of the directors.
in their capacity as dairy farmers in the supply of milk to the Co-
operative in the ordinary course of business.

Directors’ declarations of interest

GJ McNamara AW Wilson
On 29 June 2016 Mr GJ McNamara advised that he has Chairman Deputy Chairman
accepted the position of Chairperson of the Industry Advisory
Group under the Farm Co-operatives and Collaboration Pilot Lismore, 28 September 2016
Program, an initiative under the Commonwealth Government’s
Agricultural Competitiveness White Paper. Mr McNamara has
declared his interest in accordance with Section 208 of the Co-
operatives National Law (NSW) and, in addition, excludes himself
from any discussions or decisions relating to this entity.

Rounding off of amounts

The amounts in this report and the accompanying financial

statements have been rounded to the nearest one thousand
dollars in accordance with the Co-operatives National Law
(NSW).

Auditor’s independence declaration to the directors

The directors received a declaration of independence from the

Co-operative’s auditor, Ernst & Young. A copy of that declaration
is included after this Directors’ Report.

26
27
28
CORPORATE GOVERNANCE STATEMENT
This statement outlines the main corporate governance
practices that were in place throughout the 2015/16 financial
year, unless otherwise stated. These practices are dealt with
under the headings: Board of Directors and its Committees;
Internal Control Framework; Ethical Standards; Business Risks and
Emergency Planning; and The Role of Members.
Board of Directors and its Committees
The Board of Directors is responsible for the overall corporate
governance of the Co-operative including strategic direction and
enhancing organisational performance, the sound management
of its business and assets, confirming financial objectives,
understanding and managing risks to maximise opportunities,
establishing goals for management and monitoring
performance against those goals. The Board of Directors is also
responsible for reporting to members and being accountable to,
and focussed on the needs of members and meeting statutory
and regulatory requirements. To give further effect, the Audit
and Risk Management Committee assists in the execution of the
Board’s responsibilities. The Member Services Committee meets
regularly and plays an important role in assisting the Board of
Directors in managing the important relationship between
the Co-operative and the members. The Milk Supply Advisory
Committee and Brand Management Advisory Committee also
met regularly up to 29 October 2015, however at the December
2015 Board meeting Directors suspended these two committees
until further notice. Any items previously considered by these
committees are now incorporated into the monthly Directors’
meeting.
To better understand the operations of the Co-operative’s
businesses the Board receives regular management reports,
presentations and briefing papers on key aspects and makes site
visits to the Co-operative’s operations.
Composition of the Board
Under the Rules of the Co-operative the Board of Directors
is comprised of a minimum of six non-executive (supplier)
Directors who represent the members from the Northern,
Central and Southern regions. Each region is represented by two
supplier Directors, with Directors serving a three year term. At
each Annual General Meeting two Directors retire in accordance
with the Rules of the Co-operative. The Rules also allow for two
Independent Directors to be elected to the Board. Currently
there is one supplier Director position vacant (Southern Region)
and both Independent Director positions remain vacant.
An active member of the Co-operative may seek election
as a supplier Director in accordance with the Rules and, if
elected, serve a term of three years after which time they retire.
Independent Directors, when nominated and elected, are
elected for a term of three years after which time they retire.
The Directors regularly consider whether or not the skills and
characteristics which might be contributed by Independent
Directors should be added to the Board to maximise its
effectiveness. Independent Directors are to be nominated by the
Board and elected by members.
Regarding potential conflicts of interest, it is the practice of
the Norco Board to open every meeting by giving Directors
the opportunity to declare any actual or potential conflicts. If
a conflict of interest should arise, the Director concerned takes
no part in discussions at the Board meeting on the issue, nor
exercises any influence over other Board members.
The total remuneration package for Directors is voted on at
each Annual General Meeting. The amount paid may vary
between Directors depending on their level of responsibilities.
Remuneration of Directors is set out in the notes to the financial
statements.
Board Corporate Governance Policy and Emerging Corporate
Governance Issues
The purpose of the Corporate Governance Policy Statement is
to provide guidance to Directors and management on how the
Co-operative is to be governed in practice. The document was
developed having regard to the Co-operatives National Law
(NSW) and Norco’s Rules. All current Directors have signed Deed
Polls and Statutory Declarations to ensure their commitment to
the Corporate Governance Policy Statement and the duties and
responsibilities specifically addressed in the Deed Polls.
A review of the Corporate Governance Policy Statement is
undertaken annually by the Directors to ensure that issues of
governance are dealt with in accordance with the policy. At the
same time, the policy is reviewed to ensure it is still relevant and
up to date.
It is also pleasing to report that all current Directors have
attended and completed the AICD Company Directors’ Course.
29
 Co-operatives National Law in NSW
The Co-operative continues to operate under the Co-operatives
National Law (CNL) which was introduced on 3 March 2014.
Board Committees
The Directors seek to achieve best practice in corporate
governance and accountability through the following Board
Committees which assist the Board in the execution of its
responsibilities. These committees are subject to Charters which
have been approved by the Board and which define their
respective roles and responsibilities.
Note: At the Directors’ meeting held on 16 and 17 December
2015 it was determined that the operation of both the Milk
Supply Advisory Committee and Brand Management Advisory
Committee would be suspended and that any items previously
considered by these committees would be incorporated into the
Directors’ meetings until further notice.
Audit and Risk Management Committee
The objective of the Audit and Risk Management Committee
is to assist the Board of Directors in fulfilling its statutory and
fiduciary responsibilities relating to accounting and reporting
practices of the Co-operative and subsidiaries. The Committee
advises on the establishment and maintenance of an overall
framework of internal control and appropriate ethical standards
for the management of the Co-operative. The Committee
gives the Board additional assurance regarding the quality and
reliability of financial information prepared for use by the Board
in determining policies for inclusion in financial statements. The
Audit and Risk Management Committee also embraces, as part
of its Charter, the Co-operative’s Risk Management Program.
The Audit and Risk Management Committee ensures:
• compliance with statutory responsibilities relating to financial
disclosure;
• focus on significant changes in accounting policies, standards
and practices or other reporting requirements likely to affect
developments in financial reporting;
• regular reviews of operations and policies are conducted;
• review of the audit and annual financial statements and interim
financial information and the adequacy of existing external
audit arrangements with particular emphasis on the scope and
quality of the audit; and
30
• risk management reporting systems are in place to effectively
identify and manage strategic, operational and financial risks.
To give further effect to identifying and quantifying risks faced
by the Co-operative, a risk register has been developed which is
managed under the scope of the Audit and Risk Management
Committee. The risk register details the probability and impact
of various business risks and creates a risk score together with a
mitigation plan.
The Audit and Risk Management Committee reviews the
performance of the external auditors on an annual basis and
meets them during the year as follows:
• to review the results and findings of the audit, the adequacy
of financial and operating controls, and to monitor the
implementation of any recommendations made; and
• to review the draft financial statements and the audit report
and to make the necessary recommendation to the Board for
the approval of the financial statements.
The Audit and Risk Management Committee also reviews the
Co-operative’s Executive Authority Limits on at least an annual
basis to ensure that the delegated levels of authority are
appropriate for key employee positions.
The Committee is comprised of three Directors and meets at
least six times per year. The Chairperson of the Co-operative shall
not be a member of the Committee.
Milk Supply Advisory Committee
The objective of the Milk Supply Advisory Committee is to
provide properly considered recommendations to the Board
of Directors in relation to the adoption of policies pertaining
to certain matters regarding the acquisition of milk by the Milk
Supply business unit and the sale of that milk to its external and
internal customers.
In giving effect to this objective, the Committee will make
recommendations to the Board of Directors in relation to policies
regarding:
• the sourcing of milk by the Milk Supply business unit, with
specific reference to -
- the terms under which such milk is to be acquired
(including but not limited to price): and
- the location(s) from which such milk is to be acquired; and
• the sale of milk by the Milk Supply business unit, with specific
reference to the terms under which that milk is sold (including
but not limited to price).
The composition of the Milk Supply Advisory Committee
consists of the full Board, Chief Executive Officer and General
Manager Milk Supply. The Committee meets at least every
quarter.
Brand Management Advisory Committee
The objective of the Brand Management Advisory Committee is
to provide properly considered recommendations to the Board
of Directors in relation to matters that affect Norco’s brands and
to the adoption of policies pertaining to specific issues such as
animal welfare issues for both Norco and Norco’s milk suppliers
/ members.
In giving effect to this objective, the Committee will make
recommendations to the Board of Directors in relation to policies
regarding:
• Animal welfare – including all aspects of animal welfare
pertaining to the Norco farm base, understanding the
requirements of retail customers, ensuring Norco has robust
policies and procedures and working with, and making
representations to, a range of stakeholders that have an interest
in animal welfare; and
• Norco brands – including protecting and adding value
and ensuring that the reputation of the Norco brands are
maintained and improved upon as well as the promotion of the
Norco Brands.
The Committee is comprised of three Directors and the General
Manager Milk Supply and meets at least every quarter.
Member Services Committee
The objective of the Member Services Committee is to make
properly considered recommendations to the Board of Directors
in relation to the adoption of policies pertaining to non milk
supply, member issues.
In giving effect to this objective, the Committee will make
recommendations to the Board of Directors in relation to policies
regarding:
• developing and encouraging the sustainability of the Norco
farm base through initiatives such as improving farming
techniques, study tours and improving business skills;
• assisting with the ongoing wellbeing of the Norco farm base
by assisting with succession planning, mental health issues and
social networking / support;
• providing and disseminating information from external
sources relating to issues such as the education and training
of potential Directors, government assistance and climate
variability; and
• providing support to the Norco farm base through the
management of issues such as exceptional circumstances,
disaster recovery planning and other critical farm issues (such
as tick infestations).
The Committee is comprised of up to three Directors and meets
at least every quarter.
The following Committees meet only on an as needs basis:
Communication Committee
The objective of the Communication Committee is to make
properly considered recommendations to the Board of Directors
in relation to the adoption of policies pertaining to corporate
communication.
The Committee recognises that effective communication relies
on “listening as well as speaking”. Consequently, in seeking to
achieve its objective the Committee will make recommendations
to the Board of Directors in relation to policies regarding:
• the Co-operative’s overall strategy in relation to corporate
communications;
• the Co-operative’s major corporate communications and
announcements, ensuring all stakeholders are considered and
that such communications and announcements are through
the appropriate nominated spokesperson;
• communication plans for crisis / disaster situations;
• joint communications which may affect another organisations
or individuals, or by which Norco may be affected; and
• the terms under which an appointment or engagement (if any)
of a public relations firm is made to assist Norco with corporate
communications.
The Committee is comprised of two Directors and meets on an
as needs basis.
Remuneration Advisory Committee
The objective of the Remuneration Advisory Committee is to
make properly considered recommendations to the Board
of Directors in relation to the remuneration of the Senior
Management Team, Chief Executive Officer and Board of
Directors and in relation to incentive programs within the Norco
business.
31
 In giving effect to this objective, the Committee will:
• monitor and review all Senior Management Team remuneration;
• evaluate, monitor and review any Short Term Incentive (STI) and
Long Term Incentive (LTI) programs that may be in operation in
the Norco business;
• evaluate the performance of the Chief Executive Officer and
make recommendations in relation to the remuneration of the
Chief Executive Officer; and
• make recommendations to the Board in relation to Director
remuneration.
The Committee is comprised of two Directors and the Chief
Executive Officer and meets on an as needs basis.
INTERNAL CONTROL FRAMEWORK
The Board acknowledges that it is responsible for the overall
internal control framework, but recognises that no cost-effective
internal control system will preclude all errors and irregularities. To
assist in discharging this responsibility, the Board has instigated
an internal control framework which can be categorised under
the following headings:
• Corporate Strategy – there are clearly defined short, medium
and long term strategic objectives set and reviewed by
the Board of Directors on at least an annual basis and an
operational strategic plan developed by management to
meet these objectives. Strategic issues are considered at each
meeting of the Board of Directors.
• Financial reporting - there is a comprehensive budgeting
system with an annual budget approved by the Board. Monthly
actual results are reported against budget and revised rolling
year end forecasts are prepared monthly.
• Quality and integrity of personnel - the Co-operative’s policies
are detailed in a policy and procedures manual. New policies
and procedures are developed, or amendments made to
existing policies and procedures, as the need arises.
• Investment appraisal - the Co-operative has clearly defined
guidelines for capital expenditure. These include annual budgets,
detailed appraisal and review procedures and due diligence
requirements where businesses are being acquired and divested.
• Executive authority limits – the Co-operative has clearly defined
financial authority limits for management positions in relation
to capital expenditure, foreign exchange, forward purchase
agreements, forward grain sale agreements and general
expenses.
32
Quality Accreditation
The Norco Foods division strives to ensure that its products
are of the highest standard. The Lismore Ice Cream Business
Unit is licensed by NSW Food Authority and has certification
against SQF 2014 Level 3, Coles Quality Assurance, Woolworths
Quality Assurance Standard, ALDI Quality Assurance, U.S. Food
and Drug Administration registered and has an Approved
Arrangement with Department of Agriculture for export. The
Labrador milk factory is licensed by SafeFood QLD and has
certification against SQF 2014 Level 3, Coles Quality Assurance,
ALDI Quality Assurance and has an Approved Arrangement with
Department of Agriculture for export. The Raleigh milk factory
is licensed with NSW Food Authority and certified for SQF 2014
Level 3, ALDI Quality Assurance, NASAA and ACO accreditation
(both for organic milk) and has an Approved Arrangement with
Department of Agriculture for export. Raleigh is also Kosher
certified for the production of all A2 products.
In the Norco Agribusiness unit both the Goldmix Stockfeeds
manufacturing mills at Lismore New South Wales and Windera
Queensland have FeedSafe accreditation under the Stockfeed
Manufacturers’ Association of Australia and HACCP accreditation.
Norco is a member of the Stockfeed Manufacturers’ Association
of Australia.
Norco has attained accreditation against AS4801:2001 -
Occupational Health and Safety Management Systems,
encompassing all Norco Rural Stores. Norco Rural Stores are
audited internally in line with AS4801 as well as the requirements
under the following Australian Standards:
• AS 3833:2007 – The storage and handling of mixed classes of
dangerous goods, in packages and IBC’s.
• AS 4775:2007 – Emergency eyewash and shower equipment.
Rural employees are trained in the internal Norco Agvet course
delivered by the WHS Team.
The Norco Agvet course has been developed from specific
requirements within the above mentioned standards as well as
following nationally accredited units of competency relating to:
• AHCCHM101A – Follow basic chemical safety rules.
• AHCCHM304A – Transport, handle and store chemicals.
Safety
Norco is committed to the safety and wellbeing of staff across
its entire operations. Norco strives to comply with the provisions
of a safe working environment and continues to make safety
an integral part of our organisation, which is essential if we are
to continue building a successful business into the future. On
a monthly basis, the Board of Directors receives management
reports detailing the safety performance for the business and
monitors this performance closely. The Board also receives a
copy of all minutes of the various site WHS committee meetings
that are held.
Environment
Norco aims to ensure that the highest standard of environmental
care is achieved. The Co-operative recognises that it has a
responsibility to ensure that its operations are sensitive to
the environment and comply with the letter and spirit of all
applicable environmental legislation.
ETHICAL STANDARDS
All Directors, managers and employees are expected to act
with the utmost integrity and objectivity, striving at all times
to enhance the reputation and performance of Norco. Every
employee has a nominated manager or supervisor to whom
they may refer any issue arising from their employment and
there is a suite of Human Resource policies and procedures
that assist in ensuring employees’ conduct is of the highest
standard possible. In addition, the Corporate Governance Policy
Document serves to provide guidance to Directors on how the
Co-operative should be governed from a practical perspective.
BUSINESS RISKS AND EMERGENCY PLANNING
Management has identified, and continues to identify, business
risks and potential emergencies with the aim of minimising any
consequential adverse effects on the Co-operative.
Business risks arise from such matters as:
• action by competitors and industry rationalisation;
• government policy changes;
• physical loss of assets through fire or another natural disaster
and the resultant business interruption that may occur;
• the impact of exchange rate movements on the price of raw
materials and on sales
• variations in interest rates;
• difficulties in sourcing raw materials; and
• the purchase, development and use of information systems,
and other emergencies that may occur.
THE ROLE OF MEMBERS
The Board of Directors aims to ensure that the members are
informed of all major developments affecting the Cooperative’s
state of affairs. Information is communicated to members as
follows:
• The Annual Report is distributed to all members. The Annual
Report includes relevant information about the operations
of the Co-operative for the financial year just ended, changes
in the state of affairs of the Co-operative and details of future
developments, in addition to the other disclosures required by
the Cooperatives Legislation;
• Meetings are held at least twice yearly with supplier members
at various locations to personally inform them about the affairs
of the Co-operative;
• In addition to the meetings with supplier members, a more
informal communication network called ‘NorcoNet’ is active in
some localities within the Norco supply area. The purpose of
‘NorcoNet’ is to bring small groups of members together on a
regular basis to form a local network to discuss general dairy
industry issues and issues that relate to the Co-operative;
• The preparation and distribution of a monthly Norco Bulletin
and ad hoc newsletters;
• Some proposed major changes in the Co-operative which
relate to the core businesses are required by the Cooperatives
National Law (NSW) to be submitted to a vote of members; and
• Communication is a two-way process, and the Board
encourages individual members or groups of members
to apply to attend Board Committee and / or meetings by
appointment.
The Board encourages full participation of members at the
Annual General Meeting to ensure a high level of accountability
and identification with the Co-operative’s strategies and goals.
Due to the geographical spread of members, the holding of the
Annual General Meeting is rotated between the three member
regions. Important issues are presented to the members as
single resolutions for their consideration.
The members are responsible for the election of Directors.
33
 FINANCIAL STATEMENTS

STATEMENT OF PROFIT OR LOSS

AND OTHER COMPREHENSIvE INCOME
FOR THE yEAR ENDED 30 JuNE 2016

2016 2015
Before Significant Total Before Significant Total
Significant Items (1) Significant Items (1)
Items Items
Notes $000 $000 $000 $000 $000 $000
Revenue 4.1 541,138 - 541,138 510,909 - 510,909

Milk payments to suppliers (132,695) - (132,695) (123,529) - (123,529)

Cost of sales (280,555) - (280,555) (264,705) - (264,705)
Employee expenses 4.2 (65,598) - (65,598) (60,347) - (60,347)
Depreciation expense 4.3 (5,853) - (5,853) (5,681) - (5,681)
Borrowing costs expense (2,496) - (2,496) (2,552) - (2,552)
Occupancy expenses (4,959) - (4,959) (4,800) - (4,800)
Administration and other costs 4.4 (47,219) - (47,219) (46,162) - (46,162)
Profit/(loss) on disposal of
non-current assets 240 - 240 (28) - (28)
Restructure costs - (88) (88) - (153) (153)
Profit/(loss) before tax from
ordinary activities before
income tax expense and
member distributions 2,003 (88) 1,915 3,105 (153) 2,952

Member distributions 6 - (535) (535) - (298) (298)

Profit/(loss) before income tax 2,003 (623) 1,380 3,105 (451) 2,654

Income tax expense 5 - - - - - -

Net profit/(loss) attributable to
members 2,003 (623) 1,380 3,105 (451) 2,654

Other comprehensive income

Other comprehensive income to

be reclassified to profit or loss in
subsequent periods:
Net loss on cash flow hedges - (659) (659) - (391) (391)
Other comprehensive loss for
the year, net of tax - (659) (659) - (391) (391)
Total comprehensive
income/(loss) for the year, net
of tax 2,003 (1,282) 721 3,105 (842) 2,263

(1) Significant items are items of income and expense, presented separately due to their nature and size.
The above Statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes.

34
STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2016

2016 2015
Notes $000 $000
Assets
Current assets
Cash assets and cash equivalents 18.2 4,805 4,226
Trade and other receivables 7 49,152 47,437
Inventories 8 30,958 32,020
Other assets 1,300 527
Total current assets 86,215 84,210

Non-current assets
Investments 9 3 3
Property, plant and equipment 10 54,774 55,177
Intangible assets and goodwill 11 37,038 37,038
Total non-current assets 91,815 92,218
Total assets 178,030 176,428

Liabilities
Current liabilities
Trade and other payables 12 61,479 59,146
Interest-bearing loans and borrowings 13 2,141 2,160
Derivative financial instruments 14 274 78
Employee benefit liabilities 15 8,978 9,085
Total current liabilities 72,872 70,469

Non-current liabilities
Trade and other payables 12 398 398
Interest-bearing loans and borrowings 13 29,295 31,632
Derivative financial instruments 14 776 313
Employee benefit liabilities 15 1,314 1,340
Total non-current liabilities 31,783 33,683
Total liabilities 104,655 104,152

Net assets attributable to members 73,375 72,276

Members’ interest 16.1 9,161 8,783

Net assets 64,214 63,493

Equity
Retained earnings 26,177 24,797
Reserves 17 38,037 38,696
Total equity 64,214 63,493

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

35
 STATEMENT OF CHANGES IN EquITy
FOR THE yEAR ENDED 30 JuNE 2016

Cash flow Asset

Retained hedge revaluation
earnings reserve reserve Total equity
$000 $000 $000 $000
As at 1 July 2015 24,797 (391) 39,087 63,493

Profit for the year 1,380 - - 1,380

Other comprehensive loss - (659) - (659)
Total comprehensive income/(loss) 1,380 (659) - 721

At 30 June 2016 26,177 (1,050) 39,087 64,214

Cash flow Asset

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

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

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

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

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

36
STATEMENT OF CASH FLOWS
FOR THE yEAR ENDED 30 JuNE 2016

2016 2015
Notes $000 $000
Operating activities
Receipts from customers 539,185 510,655
Payments to suppliers and employees (395,406) (374,819)
Interest received 239 306
Interest paid (2,496) (2,552)
Milk supplier payments (133,219) (123,529)
Net cash flows from operating activities 18.1 8,303 10,061

Investing activities
Proceeds from sale of property, plant and equipment 513 170
Purchase of property, plant and equipment (5,724) (7,321)
Net cash flows used in investing activities (5,211) (7,151)

Financing activities
Suppliers’ share contribution 378 613
Repayment of member deposits - (335)
Distributions paid to members (535) (298)
Payment of finance lease liabilities (366) (466)
Repayment of borrowings (1,990) -
Net cash flows used in financing activities (2,513) (486)

Net increase in cash and cash equivalents 579 2,424

Cash and cash equivalents at opening balance date 4,226 1,802
Cash and cash equivalents at 30 June 18.2 4,805 4,226

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

37
 NOTES TO THE FINANCIAL STATEMENTS
FOR THE yEAR ENDED 30 JuNE 2016

1. Corporate information
The financial statements of Norco Co-operative Limited
and its controlled entities (the Co-operative) for the
year ended 30 June 2016 were authorised for issue
in accordance with a resolution of the directors on 28
September 2016.
Norco Co-operative Limited is a for-profit Co-
operative under the Co-operatives National Law (NSW),
incorporated and domiciled in Lismore, Australia. The Co-
operative operates out of its registered place of business
at “Windmill Grove” 107 Wilson Street, South Lismore,
New South Wales. The principal operations of the Co-
operative are the processing, manufacture and sale of
dairy products, the manufacture of stockfeed and rural
retailing.
2. Significant accounting policies
Significant accounting policies
a) Basis of preparation
The general purpose financial report has been prepared
on the basis of historical cost (except for certain land
and building assets where in 2004 fair value was deemed
to be cost) and in accordance with the requirements of
the Corporations Act 2001. Cost is based on the fair values
of the consideration given in exchange for assets.
In the application of Australian equivalents to
International Financial Reporting Standards (‘AIFRS’)
management is required to make judgements, estimates
and assumptions about carrying values of assets and
liabilities that are not readily apparent from other
sources. The estimates and associated assumptions
are based on historical experience and various other
factors that are believed to be reasonable under the
circumstance, the results of which form the basis of
making the judgements. Actual results may differ from
these estimates.
The estimates and underlying assumptions are reviewed
on an ongoing basis. Revisions to accounting estimates
are recognised in the period in which the estimate is
revised if the revision affects only that period, or in the
period of the revision and future periods if the revision
affects both current and future periods.
Judgements made by management in the application
of AIFRS that have significant effects on the financial
statements and estimates with a significant risk of
material adjustments in the next year are disclosed,
where applicable, in the relevant notes to the financial
statements. Accounting policies are selected and
applied in a manner which ensures that the resulting
financial information satisfies the concepts of relevance
and reliability, thereby ensuring that the substance of
the underlying transactions or other events is reported.
The accounting policies set out below have been
applied in preparing the financial statements for the year
ended 30 June 2016 and the comparative information
presented in these financial statements for the year
ended 30 June 2015.
The financial report is presented in Australian dollars
and all values are rounded to the nearest thousand
dollars ($’000) unless otherwise stated under the option
available to the Co-operative under ASIC Corporations
(Rounding in Financial/Directors’ Reports) Instrument
2016/191. The Co-operative is an entity to which the
instrument applies.
b) Changes in accounting policy, disclosures,
standards and interpretations
i) Changes in accounting policies, new and amended
standards and interpretations
The accounting policies adopted are consistent with
those of the previous financial year.
ii) Accounting Standards and Interpretations issued
but not yet effective
Australian Accounting Standards and Interpretations that
have recently been issued or amended but are not yet
effective and have not been adopted by the Co-operative
for the annual reporting period ending 30 June 2016,
outlined in the table below:

Reference Title Summary Application Application

date of date for
standard Co-operative
AASB 9 Financial AASB 9 (December 2014) is a new standard 1 January 1 July 2018
Instruments which replaces AASB 139. This new version 2018
supersedes AASB 9 issued in December 2009
(as amended) and AASB 9 (issued in December 2010).
AASB 9 includes requirements for a simpler
approach for classification and measurement of
financial assets compared with the requirements
of AASB 139. There are also some changes
made in relation to financial liabilities.
AASB 15 Revenue from The core principle of AASB 15 is that an entity 1 January 1 July 2018
Contracts with recognises revenue to depict the transfer of 2018
Customers promised goods or services to customers in an
amount that reflects the consideration to which
the entity expects to be entitled in exchange for
those goods or services. An entity recognises
revenue in accordance with that core principle
by applying the five step process.
AASB 16 Leases The key features of AASB 16 in relation to the 1 January 1 July 2019
Company is that lessees are required to 2019
recognise assets and liabilities for all leases with a
term of more than 12 months, unless the
underlying asset is of low value.

The impact of these changes in standards and interpretations is in the process of being quantified.

38
c) Statement of compliance
The financial report complies with Australian
Accounting Standards, which include International
Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board.
d) Basis of consolidation
The financial statements comprise the financial
statements of the Co-operative and its subsidiaries as
at 30 June 2016. Control is achieved when the Co-
operative is exposed, or has rights, to variable returns
from its involvement with the investee and has the
ability to affect those returns through its power over
the investee. Specifically, the Co-operative controls an
investee if, and only if, the Co-operative has:
• Power over the investee (i.e. existing rights that give
it the current ability to direct the relevant activities of
the investee);
• Exposure, or rights, to variable returns from its
involvement with the investee; and
• The ability to use its power over the investee to affect its
returns.
Generally, there is a presumption that a majority of voting
rights results in control. To support this presumption
and when the Co-operative has less than a majority of the
voting or similar rights of an investee, the Co-operative
considers all relevant facts and circumstances in assessing
whether it has power over an investee, including:
• The contractual arrangement with the other vote
holders of the investee;
• Rights arising from other contractual arrangements; and
• The Co-operative’s voting rights and potential voting
rights.
The Co-operative re-assesses whether or not it controls
an investee if facts and circumstances indicate that there
are changes to one or more of the three elements of
control. Consolidation of a subsidiary begins when
the Co-operative obtains control over the subsidiary
and ceases when the Co-operative loses control of
the subsidiary. Assets, liabilities, income and expenses
of a subsidiary acquired or disposed of during the year
are included in the Statement of profit or loss and other
comprehensive income from the date the Co-operative
gains control until the date the Co-operative ceases to
control the subsidiary.
Profit or loss and each component of other
comprehensive income (OCI) are attributed to the
equity holders of the parent of the Co-operative and
to the non-controlling interests, even if this results in
the non-controlling interests having a deficit balance.
When necessary, adjustments are made to the financial
statements of subsidiaries to bring their accounting
policies into line with the Co-operative’s accounting
policies. All intra-group assets and liabilities, equity,
income, expenses and cash flows relating to transactions
between members of the Co-operative are eliminated in
full on consolidation.
A change in the ownership interest of a subsidiary,
without a loss of control, is accounted for as an equity
transaction. If the Co-operative loses control over a
subsidiary, it derecognises the related assets (including
goodwill), liabilities, non-controlling interest and other
components of equity, while any resultant gain or loss
is recognised in profit or loss. Any investment retained is
recognised at fair value.
e) Current versus non-current classification
The Co-operative presents assets and liabilities in the
Statement of financial position based on current/non-
current classification. An asset is current when it is:
• Expected to be realised or intended to be sold or
consumed in the Co-operative’s normal operating cycle;
• Held primarily for the purpose of trading;
• Expected to be realised within twelve months after the
reporting period; or
• Cash or a cash equivalent unless restricted from being
exchanged or used to settle a liability for at least
twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
• It is expected to be settled in the Co-operative’s normal
operating cycle;
• It is held primarily for the purpose of trading;
• It is due to be settled within twelve months after the
reporting period; or
• There is no unconditional right to defer the settlement
of the liability for at least twelve months after the
reporting period.
The Co-operative classifies all other liabilities as non-
current.
Deferred tax assets and liabilities are classified as non-
current assets and liabilities.
f) Revenue recognition
Revenue is recognised to the extent that it is probable
that the economic benefits will flow to the Co-
operative and the revenue can be reliably measured.
The following specific recognition criteria must also be
met before revenue is recognised:
Sale of goods
Revenue is recognised when the significant risks and
rewards of ownership of the goods have passed to the
buyer and the costs incurred or to be incurred in respect
of the transaction can be measured reliably. Risk and
rewards of ownership are considered passed to the buyer
at the time of delivery of the goods to the customer.
Rendering of services
Revenue is recognised on the basis of services provided,
measured in accordance with agreed parameters
between the customer and the Co-operative.
Interest income
Revenue is recognised as interest accrues using the
effective interest method. This is a method of calculating
the amortised cost of a financial asset and allocating
the interest income over the relevant period using the
effective interest rate, which is the rate that exactly
discounts estimated future cash receipts through the
expected life of the financial asset to the net carrying
amount of the financial asset.
Dividends
Dividend revenues are recognised when control of a right
39
 to receive consideration for the investment in assets is
attained, usually evidenced by approval of the dividend
at a meeting of shareholders.
Government grants
Grants received for the construction of non-current
assets are deferred and recorded as revenue over the life
of the funded asset.
g) Borrowing costs
Borrowing costs consist of interest and other costs that
an entity incurs in connection with the borrowing of
funds. All loans and borrowings are initially recognised
at the fair value of the consideration received less
directly attributable transaction costs.
h) Leases
The determination of whether an arrangement is,
or contains a lease is based on the substance of
the arrangement. It requires an assessment of whether
the fulfilment of the arrangement is dependent on the
use of a specific asset or assets and the arrangement
conveys a right to use the asset.
Co-operative as a lessee
Finance leases are capitalised at the commencement
of the lease at the inception date fair value of the
leased property or, if lower, at the present value of
the minimum lease payments. Lease payments are
apportioned between finance charges and reduction
of the lease liability so as to achieve a constant rate of
interest on the remaining balance of the liability. Finance
charges are recognised in finance costs in the Statement
of profit or loss and other comprehensive income.
Capitalised leased assets are depreciated over the shorter
of the estimated useful life of the asset and the lease
term if there is no reasonable certainty that the Co-
operative will obtain ownership by the end of the lease
term.
Operating lease payments are recognised as an
expense in the Statement of profit or loss and other
comprehensive income on a straight-line basis over
the lease term. Lease incentives are recognised in the
Statement of profit or loss and other comprehensive
income as an integral part of the total lease expense.
Co-operative as a lessor
Leases in which the Co-operative retains substantially all
the risks and benefits of ownership of the leased asset
are classified as operating leases. Initial direct costs
incurred in negotiating an operating lease are added to
the carrying amount of the leased asset and recognised
as an expense over the lease term on the same basis as
rental income.
i) Cash and cash equivalents
Cash and short-term deposits in the Statement of
financial position comprise cash at bank and in hand and
short-term deposits with an original maturity of three
months or less. For the purposes of the Statement of cash
flows, cash and cash equivalents consist of cash and cash
equivalents as defined above, net of outstanding bank
overdrafts.
j) Trade and other receivables
Trade receivables, which generally have 30-90 day terms,
are recognised and carried at original invoice amount
40
less an allowance for any uncollectable amounts.
An allowance for doubtful debts is made when there is
objective evidence that the Co-operative will not be able to
collect the debts. Bad debts are written off when identified.
k) Inventories
Inventories are valued at the lower of cost and net
realisable value.
Costs incurred in bringing each product to its present
location and condition are accounted for, as follows:
• Raw materials: purchase cost on a first in, first out basis.
• Finished goods and work in progress: cost of direct
materials and labour and a proportion of manufacturing
overheads based on normal operating capacity but
excluding borrowing costs.
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.
Maintenance spares are recognised as inventories and
expensed when utilised.
l) Foreign currencies
Both the functional and presentation currency of
Norco Co-operative Limited and its controlled entities
is Australian dollars.
Transactions in foreign currencies are initially recorded in
the functional currency by applying the exchange rates
ruling at the date of the transaction. Monetary assets
and liabilities denominated in foreign currencies are
retranslated at the rate of exchange ruling at the
balance sheet date.
m) Taxes
Current income tax
Current income tax assets and liabilities for the
current year are measured at the amount expected to
be recovered from or paid to the taxation authorities.
The tax rates and tax laws used to compute the amount
are those that are enacted or substantively enacted,
at the reporting date in the countries where the Co-
operative operates and generates taxable income.
Deferred tax
Deferred tax is provided using the liability method on
temporary differences between the tax bases of assets
and liabilities and their carrying amounts for financial
reporting purposes at the reporting date.
Deferred tax liabilities are recognised for all taxable
temporary differences, except:
• When the deferred income tax liability arises from the
initial recognition of goodwill or an asset or liability
in a transaction that is not a business combination
and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss.
• In respect of taxable temporary differences associated
with investments in subsidiaries, associates and
interests in joint arrangements, when the timing
of the reversal of the temporary differences can be
controlled and it is probable that the temporary
differences will not reverse in the foreseeable future.
Deferred tax assets are recognised for all deductible
temporary differences, the carry forward of unused
tax credits and any unused tax losses. Deferred tax
assets are recognised to the extent that it is probable
that taxable profit will be available against which
the deductible temporary differences, and the carry
forward of unused tax credits and unused tax losses
can be utilised, except:
• When the deferred tax asset relating to the
deductible temporary difference arises from the
initial recognition of an asset or liability in a transaction
that is not a business combination and, at the time of
the transaction, affects neither the accounting profit
nor taxable profit or loss.
• In respect of deductible temporary differences
associated with investments in subsidiaries, associates
and interests in joint arrangements, deferred tax
assets are recognised only to the extent that it is
probable that the temporary differences will reverse
in the foreseeable future and taxable profit will be
available against which the temporary differences can
be utilised.
The carrying amount of deferred tax assets is reviewed
at each reporting date and reduced to the extent that
it is no longer probable that sufficient taxable profit will
be available to allow all or part of the deferred tax asset
to be utilised. Unrecognised deferred tax assets are re-
assessed at each reporting date and are recognised
to the extent that it has become probable that future
taxable profits will allow the deferred tax asset to be
recovered.
Unrecognised deferred income tax assets are reassessed
at each balance sheet date and are recognised to the
extent that it is no longer probable that sufficient
taxable profit will be available to allow all or part of the
deferred income tax asset to be utilised.
Goods and services tax (GST)
Revenues, expenses and assets are recognised net of the
amount of GST, except:
• When the GST incurred on a purchase of assets or
services is not recoverable from the taxation authority,
in which case the GST is recognised as part of the
cost of acquisition of the asset or as part of the
expense item, as applicable.
• When receivables and payables are stated with the
amount of GST included.
The net amount of GST recoverable from, or payable to,
the taxation authority is included as part of receivables
or payables in the Statement of financial position.
Cash flows are included in the Statement of cash flows
on a gross basis and the GST component of cash flows
arising from investing and financing activities, which is
recoverable from, or payable to, the taxation authority is
classified as part of operating cash flows.
Commitments and contingencies are disclosed net of
the amount of GST recoverable from, or payable to, the
taxation authority.
n) Property, plant and equipment
Items of property, plant and equipment including
buildings and leasehold property, but excluding
freehold land, are measured at cost less accumulated
depreciation and less any impairment losses recognised.
Freehold land is held at cost and is not depreciated.
Plant and equipment is depreciated on a straight-line
basis over the estimated useful life of the assets, units of
output, life of project or other appropriate basis.
Leasehold improvements are depreciated over the
period of the lease or estimated useful life, whichever
is shorter, using the straight-line method.
The following estimated useful lives are used in the
calculation of depreciation:
- Buildings 2- 5%
- Plant and vehicles 10- 33%
- Leasehold plant and equipment 10- 20%
The assets’ residual values, useful lives and amortisation
methods are reviewed, and adjusted if appropriate, at
each financial year end.
Impairment
The carrying values of items of property, plant and
equipment are reviewed for impairment at each reporting
date, with recoverable amounts being estimated when
events or changes in circumstances indicate that the
carrying value may be impaired.
The recoverable amount of property, plant and equipment
is the higher of fair value less costs to sell and value in
use. In assessing value in use, the estimated future
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.
For an asset that does not generate largely independent
cash inflows, the recoverable amount is determined for
the cash-generating unit to which the asset belongs,
unless the asset’s value in use can be estimated to be
close to its fair value.
An 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.
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 profit or loss in the year the asset is
derecognised.
o) Intangible assets
Intangible assets acquired separately are measured
on initial recognition at cost. The cost of intangible
assets acquired in a business combination is their fair
value as at the date of acquisition. Following initial
recognition, intangible assets are carried at cost less
any accumulated amortisation and accumulated
impairment losses. Internally generated intangibles,
excluding capitalised development costs, are not
capitalised and the related expenditure is reflected in
the Statement of profit or loss and other comprehensive
income in the year in which the expenditure is incurred.
The useful lives of intangible assets are assessed as either
finite or indefinite.
41
 Intangible assets with finite lives are amortised over
the useful economic life and assessed for impairment
whenever there is an indication that the intangible
asset may be impaired. The amortisation period and
the amortisation method for an intangible asset with
a finite useful life are reviewed at least at the end of
each reporting period. Changes in the expected useful
life or the expected pattern of consumption of future
economic benefits embodied in the asset are considered
to modify the amortisation period or method, as
appropriate, and are treated as changes in accounting
estimates. The amortisation expense on intangible assets
with finite lives is recognised in the Statement of profit
or loss and other comprehensive income as the expense
category that is consistent with the function of the
intangible assets.
Intangible assets with indefinite useful lives are not
amortised, but are tested for impairment annually,
either individually or at the cash-generating unit level.
The assessment of indefinite life is reviewed annually
to determine whether the indefinite life continues to
be supportable. If not, the change in useful life from
indefinite to finite is made on a prospective basis.
Gains or losses arising from derecognition of an
intangible asset are measured as the difference between
the net disposal proceeds and the carrying amount of
the asset and are recognised in the Statement of profit or
loss and other comprehensive income when the asset is
derecognised.
p) Goodwill
Goodwill acquired in a business combination is
initially measured at cost being the excess of the cost
of the business combination over the Co-operative’s
interest in the net fair value of the acquiree’s identifiable
assets, liabilities and contingent liabilities.
Following initial recognition, goodwill is measured at
cost less any accumulated impairment losses.
Goodwill is reviewed for impairment annually or more
frequently if events or changes in circumstances indicate
that the carrying value may be impaired.
For the purpose of impairment testing, goodwill
acquired in a business combination is, from the
acquisition date, allocated to each of the Co-operatives
cash-generating units, or groups of cash-generating
units, that are expected to benefit from the synergies of
the combination, irrespective of whether other assets or
liabilities of the Co-operative are assigned to those units
or groups of units. Each unit or group of units to which
the goodwill is so allocated:
• Represents the lowest level within the Co-operative
at which the goodwill is monitored for internal
management purposes; and
• Is not larger than a segment based on the Co-operative’s
primary reporting format determined as if applying
AASB 8 Operating Segments.
Impairment is determined by assessing the recoverable
amount of the cash-generating unit group of cash-
generating units), to which the goodwill relates. When
the recoverable amount of the cash-generating unit
(group of cash-generating units) is less than the
carrying amount, an impairment loss is recognised.
42
When goodwill forms part of a cash-generating unit
(group of cash-generating units) and an operation within
that unit is disposed of, the goodwill associated with
the operation disposed of is included in the carrying
amount of the operation when determining the gain or
loss on disposal of the operation. Goodwill disposed of
in this manner is measured based on the relative values
of the operation disposed of and the portion of the cash-
generating unit retained. Impairment losses recognised
for goodwill are not subsequently reversed.
q) Impairment of non-financial assets
The Co-operative assesses, at each reporting date,
whether there is an indication that an asset may be
impaired. If any indication exists, or when annual
impairment testing for an asset is required, the Co-
operative estimates the asset’s recoverable amount. An
asset’s recoverable amount is the higher of an asset’s
or cash-generating unit’s (CGU’s) fair value less costs
of disposal and its value in use. Recoverable amount is
determined for an individual asset, unless the asset does
not generate cash inflows that are largely independent
of those from other assets or groups of assets. When
the carrying amount of an asset or CGU exceeds its
recoverable amount, the asset is considered impaired
and is written down to its recoverable amount.
In assessing value in use, the estimated future 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. In determining fair value less costs of disposal,
recent market transactions are taken into account. If no
such transactions can be identified, an appropriate
valuation model is used. These calculations are
corroborated by valuation multiples, quoted share prices
for publicly traded companies or other available fair
value indicators.
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 an 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
prior years. Such reversal is recognised in profit or loss
unless the asset is carried at revalued amount, in which
case the reversal is treated as a revaluation increase.
After such a reversal the depreciation charge is adjusted
in future periods to allocate the asset’s revised carrying
amount, less any residual value, on a systematic basis
over its remaining useful life.
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 Co-operative prior to the end of the
financial year that are unpaid and arise when the
Co-operative becomes obliged to make future payments
in respect of the purchase of these goods and services.
s) Interest-bearing loans and borrowings
All loans and borrowings are initially recognised
at the 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.
Gains or losses are recognised in profit or loss when the
liabilities are derecognised.
t) Provisions
General
Provisions are recognised when the Co-operative has a
present obligation (legal or constructive) 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. When the Co-operative expects
some or all of a provision to be reimbursed, for example,
under an insurance contract, the reimbursement
is recognised as a separate asset, but only when the
reimbursement is virtually certain. The expense relating
to any provision is presented in the Statement of profit
or loss and other comprehensive income net of any
reimbursement.
Wages, salaries and sick leave
Liabilities for wages and salaries, including non-monetary
benefits and accumulating sick leave which are expected
to be settled within 12 months of the reporting date
are recognised 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.
Expenses for non-accumulating sick leave are recognised
when the leave is taken and are measured at the rates
paid or payable.
Long service leave and annual leave
The Co-operative does not expect its long service leave
or annual leave benefits to be settled wholly within
12 months of each reporting date. The Co-operative
recognises a liability for long service leave and annual
leave measured as 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 of employee departures, and periods
of service. Expected future payments are discounted
using market yields at the reporting date on corporate
bonds with terms to maturity and currencies that match,
as closely as possible, the estimated future cash outflows.
u) Members’ interest
In periods before 1 July 2004, members’ units in the Co-
operative were recorded in equity as contributed equity.
On 1 July 2004, the Co-operative re-classified these
instruments to non-current interest bearing liabilities
in accordance with generally accepted International
Accounting Practice. Any distributions paid on these
instruments are treated as a borrowing cost.
This position which was clarified by UIG 2 Members’
Shares in Co-operative Entities and Similar Instruments,
which the Co-operative adopted effective 1 July 2004.
v) Norco capital units
Norco Capital Units are carried at the principal amount.
Interest is accrued at the entitlement rate and is included
in “Interest-bearing liabilities”.
w) Derivative financial instruments and hedge
accounting
Initial recognition and subsequent measurement
The Co-operative uses derivative financial instruments,
such as interest rate swaps, to hedge interest rate risk.
Such derivative financial instruments are initially
recognised at fair value on the date on which a
derivative contract is entered into and are subsequently
remeasured at fair value. Derivatives are carried as
financial assets when the fair value is positive and as
financial liabilities when the fair value is negative.
Any gains or losses arising from changes in the fair value
of derivatives are taken directly to profit or loss, except
for the effective portion of cash flow hedges, which is
recognised in other comprehensive income (OCI) and
later reclassified to profit or loss when the hedge item
affects profit or loss.
For the purpose of hedge accounting, a hedge is
classified as:
• Cash flow hedges: when hedging the exposure to
variability in cash flows that is either attributable to
a particular risk associated with a recognised asset
or liability or a highly probable forecast transaction
or the foreign currency risk in an unrecognised firm
commitment.
At the inception of a hedge relationship, the Co-
operative formally designates and documents the
hedge relationship to which it wishes to apply hedge
accounting and the risk management objective and
strategy for undertaking the hedge. The documentation
includes identification of the hedging instrument, the
hedged item or transaction, the nature of the risk being
hedged and how the entity will assess the effectiveness of
changes in the hedging instrument’s fair value in offsetting
the exposure to changes in the hedged item’s fair value or
cash flows attributable to the hedged risk. Such hedges
are expected to be highly effective in achieving offsetting
changes in fair value or cash flows and are assessed on
an ongoing basis to determine that they actually have
been highly effective throughout the financial reporting
periods for which they were designated.
Hedges that meet the strict criteria for hedge
accounting are accounted for, as described below:
Cash flow hedges
The effective portion of the gain or loss on the hedging
instrument is recognised in OCI in the cash flow hedge
reserve, while any ineffective portion is recognised
immediately in the statement of profit or loss as
other operating expense.
The Co-operative uses interest rate swaps to hedge the
exposure to cash flow movements in loan movements.
The Co-operative has entered into interest rate swaps
which are economic hedges, which are fair valued by
comparing the contracted rate to the future market
rates for contracts with the same length of maturity. The
$1.1 million (30 June 2015: $0.4 million) of swaps have
been designated as effective interest rate swaps and
43
 therefore satisfy the accounting standard requirements
for hedge accounting.
If the forecast transaction or firm commitment is no
longer expected to occur, the cumulative gain or loss
previously recognised in equity is transferred to the
income statement. If the hedging instrument expires
or is sold, terminated or exercised without replacement
or rollover, or if its designation as a hedge is revoked,
any cumulative gain or loss previously recognised
in other comprehensive income remains in other
comprehensive income until the forecast transaction or
firm commitment affects profit or loss.
x) Fair value measurement
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 principal or the most advantageous market must be
accessible by the Co-operative.
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.
The Co-operative 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
At each reporting date, the Valuation Committee analyses
the movements in the values of assets and liabilities
which are required to be remeasured or re-assessed
as per the Co-operative’s accounting policies. For this
analysis, the Valuation Committee verifies the major
inputs to contracts and other relevant documents.
The Valuation Committee, in conjunction with the Co-
operative’s external valuers, also compares the changes
in the fair value of each asset and liability with
44
relevant external sources to determine whether the
change is reasonable.
For the purpose of fair value disclosures, the Co-operative
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.
3. Significant accounting judgements, estimates and
assumptions
Significant judgements
The preparation of the financial statements requires
management to make judgments, estimates and
assumptions that affect the reported amounts in
the financial statements. Management continually
evaluates its judgments and estimates in relation
to assets, liabilities, contingent liabilities, revenue
and expenses. Management bases its judgments
and estimates on historical experience and on other
various factors it believes to be reasonable under the
circumstances, the result of which form the basis of
the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may
differ from these estimates under different assumptions
and conditions.
Management has identified the following critical
accounting policies for which significant judgments,
estimates and assumptions are made. Actual results
may differ from these estimates under different
assumptions and conditions and may materially affect
financial results or the financial position reported in
future periods.
Further details of the nature of these assumptions and
conditions may be found in the relevant notes to the
financial statements.
Impairment of non-financial assets other than goodwill
The Co-operative assesses impairment of all assets at
each reporting date by evaluating conditions specific to
the Co-operative and to the particular asset that
may lead to impairment. These include product and
manufacturing performance, technology, economic and
political environments and future product expectations.
If an impairment trigger exists the recoverable amount of
the asset is determined.
Provision for doubtful debts
The Co-operative assesses the ability to recover
debtors through a periodic review of overdue
debtors. An allowance for doubtful debts is made when
there is objective evidence that the Co-operative will
not be able to collect the debts. Bad debts are written
off when identified.
Provision for inventory obsolescence
The Co-operative periodically reviews the inventory
ledger to identify inventory items that may be held in
excess of their net realisable value. For such items that
are identified, a provision for inventory obsolescence
amount is raised which represents the amount for which
the Co-operative may not recover through use of sale of
the goods. Obsolete stock is written off when identified.
 2016 2015
$000 $000

4. Revenue and expenses

4.1 Revenue
Sale of goods 540,684 510,440
Interest received 239 306
Other 215 163
541,138 510,909
4.2 Employee expenses
Salaries and wages (including contractors) 57,416 52,606
Workers compensation 1,704 1,846
Superannuation costs 4,007 3,631
Payroll tax 2,471 2,264
65,598 60,347
4.3 Depreciation expense
Plant and equipment 5,198 5,029
Buildings 468 465
Leased assets 187 187
5,853 5,681
4.4 Administration and other costs
Administration and other costs include the following:
Provision for employee benefits 339 863
Inventory obsolescence 59 78
Doubtful/bad debts 57 68
Minimum lease payments recognised as an operating lease expense 69 43

5. Income tax expense

The major components of income tax expense for the years ended 30 June 2016 and 2015 are:
Current income tax:
Current income tax charge - -
Adjustments for current tax of prior periods - -

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

A reconciliation between tax expense and the product of accounting profit before income tax multiplied by Co-operative
applicable income tax rate is as follows:
Accounting profit before income tax 1,380 2,654

At Australia’s statutory income tax rate of 30% (2015: 30%) 414 796

Non deductible amounts 249 347

Movement in temporary differences (112) (334)
Tax loss movement (551) (809)
- -

Tax losses
At 30 June 2016, the Co-operative had an estimated gross $9.0m in carry forward losses (2015: $10.0m). These tax losses have
not been brought to account in the Statement of financial position. There are no available franking credits.
Temporary differences - not recorded
The Co-operative has a surplus of deductible temporary differences. The deferred tax asset associated with these
differences has not been recognised at 30 June 2016.

45
 2016 2015
$000 $000
Unrecognised deferred tax assets and liabilities
Provision for bad debts 230 275
Provision for employee benefits 3,088 3,128
Provision for obsolescence 203 340
3,521 3,743

6. Member distributions
Expensed in the period 535 298

7. Trade and other receivables

Trade receivables 47,406 47,018
Provision for doubtful debts (768) (1,034)
46,638 45,984

Other receivables 2,514 1,453

49,152 47,437

Doubtful
debts
Carrying amount of doubtful debts $000
Opening balance year 2014 906
(Reduction)/addition in provision 60
Amount provided for during the year 68
Ending balance year 2015 1,034

Opening balance year 2015 1,034

(Reduction)/addition in provision (323)
Amount provided for during the year 57
Ending balance year 2016 768

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

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

< 30 30-60 61-90
Total days days days 91+ days
$000 $000 $000 $000 $000
2016 47,406 33,454 9,768 3,010 1,174
2015 47,018 32,207 10,099 3,158 1,554

Receivables past due but not considered impaired are: $3,855,000 (2015: $5,293,000). Payment terms have not been
renegotiated, however communications with counterparties have satisfied management that payment will be received
in full.
2016 2015
$000 $000

8. Inventories
Raw materials 6,922 7,403
Finished goods 24,712 26,032
Provision to net realisable value (676) (1,415)
Total inventories at the lower of cost and net realisable value 30,958 32,020

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

46
 2016 2015
$000 $000

9. Investments
Shares
Unlisted corporations, at cost 3 3

10. Property, plant and equipment

Land and buildings
At cost 28,679 28,814
Accumulated depreciation (5,262) (4,794)
Net carrying amount 23,417 24,020
Plant and vehicles
At cost 70,296 66,878
Accumulated depreciation (42,122) (39,625)
Net carrying amount 28,174 27,253
Assets under lease
At cost 1,860 1,860
Accumulated depreciation (404) (217)
Net carrying amount 1,456 1,643
Capital expenditure work in progress
At cost 1,727 2,261
Net carrying amount 1,727 2,261
Total property, plant and equipment
At cost 102,562 99,813
Accumulated depreciation (47,788) (44,636)
Net carrying amount 54,774 55,177
Reconciliation of carrying amounts at the beginning and the end of the year
Land and buildings
At 1 July 24,020 24,037
Disposals (135) -
Reclassification - 306
Transfers - 142
Depreciation expense (468) (465)
At 30 June 23,417 24,020
Plant and vehicles
At 1 July 27,253 23,218
Disposals (139) (198)
Reclassification - (306)
Transfers 6,258 9,568
Depreciation expense (5,198) (5,029)
At 30 June 28,174 27,253
Assets under lease
At 1 July 1,643 2,184
Transfers - (354)
Depreciation expense (187) (187)
At 30 June 1,456 1,643
Capital expenditure work in progress
At 1 July 2,261 4,296
Additions 5,724 7,321
Transfers (6,258) (9,356)
At 30 June 1,727 2,261
Total property, plant and equipment
At 1 July 55,177 53,735
Additions 5,724 7,321
Disposals (274) (198)
Depreciation expense (5,853) (5,681)
At 30 June 54,774 55,177

47
 There were no impairment losses recognised in the 2016 or 2015 financial years.

Leased manufacturing plant is pledged as security for the related finance lease liabilities.
Freehold land, buildings and plant and equipment are subject to a fixed and floating first charge of the Co-operative’s
assets as disclosed in note 13(c). All assets and undertakings are pledged as security on the interest bearing liabilities of
the Co-operative and controlled entities.
All assets acquired under finance lease were acquired for nil cash flow and are considered to be a non-cash financing and
investing activity.
2016 2015
$000 $000

11. Intangible assets and goodwill

Acquired goodwill 34,309 34,309
Trademark 2,729 2,729
Net carrying amount 37,038 37,038

(a) Impairment testing of goodwill

Goodwill acquired through business combinations has been allocated at an entity level to the relevant cash generating
units (CGUs). The CGUS for the Co-operative are Norco Foods, Norco Rural Retail and Norco Agribusiness. The goodwill
acquired and trademark are allocated to the Norco Foods CGU.

The discount rate applied to cash flow projections is 12% pre-tax (2015: 12%).
Key assumptions used in the value in use calculation are:
• Revenue: based on projected growth predictions;
• Cost of sales: based on revenue growth; and
• Other costs: based on rural store growth and expected wage increases.
No reasonably possible change in the key assumptions noted would result in an impairment.

12. Trade and other payables

Current
Trade payables and accrued expenses 61,479 59,146

Non-current
Other payables 398 398

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

13. Interest-bearing loans and borrowings

Current
Lease liability 380 374
Norco Capital Units 111 111
Term loans - secured 1,650 1,675
2,141 2,160

Non-current
Lease liability 1,025 1,397
Term loans - secured 28,270 30,235
29,295 31,632

Term loans are secured by a fixed and floating charge over the assets of Norco Co-operative Limited.

During the period, the Group’s St George finance facility was amended and is scheduled to expire on 31 October 2018. Under the
finance facility, the facility limit will reduce by a fixed amount immediately after each quarter end date. As at 30 June 2016, the
fixed amounts payable over the next twelve months have been classified as a current liability. The remainder of the liability
has been classified as non-current at 30 June 2016.
Refer to Note 13(d) for financing facilities available to the Co-operative.

48
(a) Fair values
The carrying amount of the Co-operative’s current and non-current borrowings approximates their fair value. The fair values
have been calculated by discounting the expected future cash flows at prevailing market interest rates.
(b) Interest rate, foreign exchange and liquidity risk
Details regarding interest rate, foreign exchange and liquidity risk is disclosed in Note 29.

(c) Assets pledged as security

The carrying amounts of assets pledged as security for current and non-current interest bearing liabilities are:

2016 2015
$000 $000
Property asset charges 53,318 53,534
Leased asset charges 1,456 1,643
Trademark 2,729 2,729
Total assets pledged as security 57,503 57,906

There are no specific terms and conditions related to the above pledges.
(d) Financing facilities
The following financing facilities are available for the Co-operative at 30 June:
Term loan facilities
Used facilities 29,920 31,910
Unused facilities 4,100 75
34,020 31,985
Invoice discounting facilities
Used facilities - -
Unused facilities 17,000 17,000
17,000 17,000
Bank guarantees and finance leases
Used facilities 44 25
Unused facilities 556 575
600 600
Business credit card facility
Used facilities 23 43
Unused facilities 117 97
140 140
Total finance facilities
Used facilities 29,987 31,978
Unused facilities 21,773 17,747
51,760 49,725

14. Derivative financial instruments

Financial liabilities at fair value through OCI

Current
Interest rate swap contracts - cash flow hedges 274 78

Non-current
Interest rate swap contracts - cash flow hedges 776 313

The Co-operative has entered into interest rate swaps which are cashflow, which are fair valued by comparing the contracted
rate to the future market rates for contracts with the same length of maturity. The $30 million of swaps have been designated
as effective interest rate swaps and therefore satisfy the accounting standard requirements for hedge accounting. The
timing of the interest rate payments for the swaps are in line with the interest rate payments of the bank facility.
The Co-operative has applied fair value factors in accordance with IFRS13. The inputs used in the valuation
method are classified as Level 2.

49
 2016 2015
$000 $000

15. Employee benefit liabilities

Current
Employee entitlements 8,978 9,085

Non-current
Employee entitlements 1,314 1,340

16. Members’ interest

16.1 Movements in shares on issue $000
Opening balance - 8,170,000 fully paid shares 8,170
Transferred to deposits ex-shareholders (164)
Repurchases of cancelled shares (77)
Subscriptions 854
At 1 July 2015 8,783

Opening balance - 8,783,000 fully paid shares 8,783

Repurchases of cancelled shares (487)
Subscriptions 865
At 30 June 2016 9,161

16.2 Terms and conditions of contributed equity

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

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

2016 2015
$000 $000

18. Statement of cash flows reconciliation

18.1 Cash flow reconciliation
Reconciliation of net profit before tax to net cash flows:
Profit before tax 1,380 2,654
Adjustments for:
Depreciation of property, plant and equipment 5,853 5,681
Member distribution expense 535 298
Net (gain)/loss on disposal of property, plant and equipment (240) 28
Changes in assets and liabilities:
(Increase)/decrease in trade and other receivables (1,714) 52
(Increase)/decrease in inventories 1,062 (2,311)
(Increase)/decrease in other assets (773) (39)
Increase/(decrease) in trade and other payables 2,333 2,817
Increase/(decrease) in provisions (133) 881
Net cash flows from operating activities 8,303 10,061

50
 2016 2015
$000 $000

18.2 Reconciliation of cash

Cash on hand and with financial institutions 4,805 4,226

19. Controlled entities

% equity interest Investment $000
Principal
Name activities 2016 2015 2016 2015
Logan Valley Dairies Pty Ltd Dormant 100% 100% 165 165
Norco Wholesalers Pty Ltd* Wholesaler 100% 100% - -
Fieldco Pty Ltd* Dormant 100% 100% - -
Norcofields Pty Ltd* Dormant 100% 100% - -
Beaudesert Milk Pty Ltd* Dormant 100% 100% - -
Norco Milk Pty Ltd** Dormant 100% 100% - -
Gold Coast Pty Ltd Property 100% 100% 15,783 15,783
Holder
ACN 146 859 074 Pty Ltd* Dormant 100% 100% - -
800% 15,948 15,948
* Investment <$101
** 100 shares at $1 each
2016 2015
$000 $000
20. Commitments
Capitalised finance lease commitments for plant and vehicles:

Within one year 416 416

After one year but not more than five years 1,049 1,465
Total minimum lease payments 1,465 1,881
Deduct future finance charges (38) (114)
1,427 1,767
Non-cancellable operating lease commitments for equipment, land and buildings:
Within one year 2,338 2,512
After one year but not more than five years 2,082 3,766
4,420 6,278
Cancellable operating lease commitments for vehicles and plant:
Within one year 991 1,053
After one year but not more than five years 1,663 1,921
2,654 2,974

21. Contingent liabilities

Legal Actions
The directors are not aware of any material legal actions being brought against the Co-operative, its controlled entities or any
joint venture to which the Co-operative holds an interest which has not been provided for.
Bank Guarantees
Contingent liabilities exist in respect of bank guarantees given to various parties that amount to $44,250 (2015: $25,000) and
are not included as creditors.

22. Financial guarantee contracts

The Co-operative has no outstanding financial guarantee contracts at 30 June 2016 (2015: Nil).

23. Capital management

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

51
 24. Related party disclosures
Material transactions and balances with related parties are as follows:
Net trading Net trading Goods and
debt payable debt payable services
(current) (non-current) purchased
$000 $000 $000
Wholly owned group
Norco Wholesalers Pty Limited
2016 37,957 - 455,504
2015 36,233 - 434,805
Logan Valley Dairies Pty Limited
2016 - 397 -
2015 - 397 -
Shareholdings in controlled entities are outlined in Note 19.
Sales to and purchases from related parties are made in arm’s length transactions both at normal market prices and on normal
commercial terms.

25. Directors and executive disclosures

25.1 Key management personnel
(i) The directors of Norco Co-operative Limited during the financial year were:
Greg McNamara (Non-Executive Chairman)
Peter Neal (Non-Executive) (a)
Anthony Wilson (Non-Executive Deputy Chairman)
Michael Jeffery (Non-Executive)
Leigh Shearman (Non-Executive)
Heath Hoffman (Non-Executive)
(ii) The executives of Norco Co-operative Limited during the financial year were:
Brett Kelly (Chief Executive Officer)
Camille Hogan (Chief Financial Officer)
Mark Myers (Co-operative Secretary)
yasmin Lawrence (Human Resource Manager) (b)
Andrew Burns (GM Norco Foods)
Damon Bailey (GM Norco Rural and Wholesale)
Rob Randall (GM Milk Supply)
Robert Vandermaat (GM Operations Norco Foods)
Tom McAtee (GM Human Resources) (c)
(a) Resigned as Non-Executive Director on 23 November 2015.
(b) Resigned as Human Resource Manager effective 29 April 2016.
(c) Appointed as GM Human Resources on 18 April 2016.
2016 2015
$ $
25.2 Compensation of key management personnel and Directors

Short term - wages and salaries 2,015,796 1,934,035

Incentives - -
Superannuation 196,875 159,109
Non-cash 34,143 26,167
Total compensation 2,246,814 2,119,311

Total KMP excluding Directors 9 9

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

25.3 Transactions with and balances with key management personnel

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

52
 2016 2015

25.4 Share transactions

Aggregate number of shares held by Co-operative key management personnel
and their related entities at 30 June 433,062 540,866
Aggregate number of shares acquired by key management personnel and their
related entities during the year 29,037 66,288

26. Superannuation commitments

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

2016 2015
$ $
27. Auditors’ remuneration
The auditor of Norco Co-operative Limited is Ernst & Young (Australia).
Amounts received or due and receivable by Ernst & Young (Australia) for:
An audit or review of the financial report 135,200 135,200
Other services
Financial statement compilation 10,800 10,800
Tax services 7,500 -
153,500 146,000

2016 2015
$000 $000
28. Information relating to the Norco Co-operative Limited (the Parent)
Information relating to Norco Co-operative Limited:
Current assets 85,844 84,210

Total assets 161,877 160,646

Total liabilities (105,220) (103,163)
Net assets attributable to members 56,657 57,483

Members’ interest 12,439 12,008

Net assets 44,218 45,475

Asset revaluation reserve 31,214 31,214

Cash flow hedge reserve (1,050) (391)
Retained profits 16,031 14,652
Total equity 46,195 45,475
Profit of the Parent entity 1,380 2,654
Total comprehensive income of the Parent 721 2,263

Details of any guarantees entered into by the Parent entity in relation to the debts of its subsidiaries
The Parent’s share of the jointly controlled entities financial guarantees is included in disclosures in Note 22.
Details of any contingent liabilities of the Parent entity
The Parent’s share of the jointly controlled entities contingent liabilities is included in disclosures in Note 21.

Details of any contractual commitments by the Parent entity for the acquisition of property, plant or equipment
The Parent’s share of the jointly controlled entities commitments is included in disclosures in Note 20.

29. Financial risk management objectives and policies

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

53
 The Co-operative is exposed to market risk, credit risk and liquidity risk. The Co-operative’s senior management
oversees the management of these risks. The Co-operative’s senior management is supported by the Audit and
Risk Management Committee that advises on financial risks and the appropriate financial risk governance
framework for the Co-operative. The Audit and Risk Management Committee provides assurance to the
Co-operative’s senior management that the Co-operative’s financial risk-taking activities are governed by
appropriate policies and procedures and that financial risks are identified, measured and managed in accordance
with the Co-operative’s policies and risk objectives. All derivative activities for risk management purposes are
carried out by specialist teams that have the appropriate skills, experience and supervision. It is the
Co-operative’s policy that no trading in derivatives for speculative purposes shall be undertaken. The board of
directors reviews and agrees policies for managing each of these risks which are summarised below.

Risk exposures and responses

Interest rate risk

The Co-operative’s exposure to interest rate risks relates primarily to the Co-operative’s long term debt and associated
obligations. The level of debt is disclosed in Note 13.

At balance date, the Co-operative had the following mix of financial assets and liabilities exposed to Australian variable interest
rate risk:

2016 2015
$000 $000
Financial assets and liabilities
Cash and cash equivalents 4,805 4,226
Derivative financial instruments (1,050) (391)
Net exposure 3,755 3,835
Interest rate swap contracts outlined in Note 14, with a fair value of $1,049,949 (loss) are exposed to fair value
movements if interest rates change. The Co-operative’s policy is to manage its finance costs using variable rate
debt with an appropriate level of instruments to fix interest exposure. The Co-operative constantly analyses its
interest rate exposure. To manage this mix in a cost-efficient manner, the Co-operative has entered into interest
rate swaps, in which they agree to exchange, at specified intervals, the difference between fixed and variable rate
interest amounts calculated by reference to an agreed-upon notional principal amount. Consideration is given to
potential renewals of existing positions, alternative financing and the mix of fixed and variable interest rates.
The following sensitivity analysis is based on the interest rate risk exposures in existence at the reporting date:
Judgements of reasonably possible movements Post tax profit Equity
Higher/(Lower) Higher/(Lower)
2016 2015 2016 2015
$’000 $’000 $’000 $’000
+1.0% (100 basis points) (48) (42) 11 (4)
-1.0% (100 basis points) 48 42 (11) 4

The movements in post-tax profit are due to the movement in fair value of cash, based on movements in interest rates only.
Significant assumptions used in the interest rate sensitivity analysis include:

• A price sensitivity of derivatives based on a reasonably possible movement of interest rates at balance dates by applying the
change as a parallel shift in the forward curve.
• The net exposure at balance date is representative of what the Co-operative was and is expecting to be exposed to in the
next twelve months from balance date.
Foreign currency risk
The Co-operative has no material exposure to foreign currency therefore this is not an applicable risk.

Commodity price risk

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

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

54
The Co-operative does not hold any credit derivatives to offset its credit exposure.
The Co-operative trades only with recognised, creditworthy third parties, and as such collateral is not requested nor is it the
Co-operative’s policy to securitise its trade and other receivables.

It is the Co-operative’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures
including an assessment of their independent credit rating, financial position, past experience and industry reputation. Risk
limits are set for each individual customer in accordance with parameters set by the board. These risk limits are regularly
monitored.
In addition, receivable balances are monitored on an ongoing basis with the result that the Co-operative’s exposure to
bad debts is not significant.

There are no significant concentrations of credit risk within the consolidated entity.
Liquidity risk
The Co-operative’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank
overdrafts, bank loans, finance leases and committed available credit lines.
The table below reflects contractual finance principal repayments and interest resulting from recognised financial liabilities as
of 30 June 2016. Cash flows for financial liabilities without fixed amount or timing are based on the conditions existing at 30
June 2016.
The remaining contractual maturities of the consolidated entity’s and parent entity’s financial liabilities are presented with
an analysis of the financial assets.
2016 2015
$000 $000
0-1 year 63,923 61,125
1-5 years 29,717 32,098
93,640 93,223

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

The risk implied from the values shown in the table below reflects a balanced view of cash inflows and outflows.
Leasing obligations, trade payables and other financial liabilities mainly originate from the financing of assets
used in our ongoing operations such as property, plant, equipment and investments in working capital e.g.
inventories and trade receivables. These assets are considered in the consolidated entity’s overall liquidity risk.
1 to 5 Over
Year ended 30 June 2016 <12 months years 5 years Total
$000 $000 $000 $000

Cash and cash equivalents 4,805 - - 4,805

Trade and other receivables 49,152 - - 49,152
Interest-bearing loans and borrowings (2,141) (28,270) - (30,411)
Finance leases (416) (1,049) - (1,465)
Trade and other payables (61,478) (398) - (61,876)
Net maturity (10,078) (29,717) - (39,795)

1 to 5 Over
Year ended 30 June 2015 <12 months years 5 years Total
$000 $000 $000 $000

Cash and cash equivalents 4,226 - - 4,226

Trade and other receivables 47,437 - - 47,437
Interest-bearing loans and borrowings (1,675) (30,235) - (31,910)
Finance leases (416) (1,465) - (1,881)
Trade and other payables (59,146) (398) - (59,544)
Net maturity (9,574) (32,098) - (41,672)

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

30. Events after the reporting period

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

55
 DIRECTORS’ DECLARATION

In accordance with a resolution of the directors of Norco Co-operative Limited, I state that:
In the opinion of the directors:
(a) the financial statements and notes of the Co-operative are in accordance with the Corporations Act
2001 and Co-operatives National Law (NSW), including:
(i) giving a true and fair view of the Co-operative’s financial position as at 30 June 2016 and of
its performance for the year ended on that date; and
(ii) complying with Accounting Standards, as required by the Co-operatives National Law (NSW);
and
(b) there are reasonable grounds to believe that the Co-operative will be able to pay its debts as and
when they become due and payable.

On behalf of the Board

G.J. McNamara
Chairman
Lismore
28 September 2016

56
57
58
 CORPORATE DIRECTORY

REGISTERED OFFICE FINANCIERS/BANKERS SOLICITORS

Norco Co-operative Limited St George Bank Thomson Geer Lawyers
ARBN 009 717 417 / Level 12, Waterfront Place BRISBANE QLD 4000
ABN 17 009 717 417 1 Eagle Street
S+P Lawyers
‘Windmill Grove’, BRISBANE QLD 4000
LISMORE NSW 2480
107 Wilson Street
SOuTH LISMORE NSW 2480 AUDITORS Piper Alderman Lawyers
Ernst & Young SYDNEY NSW 2000
Telephone: 02 6627 8000
Chartered Accountants
Facsimile: 02 6621 9673
Level 51, 111 Eagle Street
Web: www.norco.com.au
BRISBANE QLD 4000

BRANCH DIRECTORY

HEAD OFFICES NORCO FOODS NORCO AGRIBUSINESS –

NORCO CORPORATE
‘Windmill Grove’, 107 Wilson St
SOUTH LISMORE NSW 2480
(PO Box 486 LISMORE NSW 2480)
Phone: 02 6627 8000
Fax: 02 6621 9673
NORCO RURAL
‘Windmill Grove’, 107 Wilson St
SOUTH LISMORE NSW 2480
(PO Box 3107 LISMORE DC NSW 2480)
Phone: 02 6627 8000
Fax: 02 6622 1730
NORCO AGRIBUSINESS
‘Windmill Grove’, 107 Wilson St
SOUTH LISMORE NSW 2480
(PO Box 3107 LISMORE DC NSW 2480)
Phone: 02 6627 8000
Fax: 02 6622 1730
NORCO MILK – LABRADOR
Cnr Pine Ridge Road & Gold Coast
Highway
LABRADOR QLD 4215
(PO Box 530, SOUTHPORT QLD 4215)
Phone: 07 5511 7200
Fax: 07 5594 0101
NORCO MILK – RALEIGH
North Street
RALEIGH NSW 2454
Phone: 02 6692 0000
Fax: 02 6655 4447
ICE CREAM BUSINESS UNIT
Union Street
SOUTH LISMORE NSW 2480
(PO Box 486, LISMORE NSW 2480)
Phone: 02 6627 8000
Fax: 02 6621 6120
GOLDMIX & GRAIN TRADING
GOLDMIX STOCKFEEDS
Krauss Avenue
SOUTH LISMORE NSW 2480
Phone: 02 6621 3042
Fax: 02 6621 9170
GOLDMIX STOCKFEEDS
2814 Murgon – Gayndah Road
WINDERA QLD 4605
Phone: 07 4168 6186
Fax: 07 4168 6214
GRAIN TRADING – TOOWOOMBA
300 Anzac Avenue
TOOWOOMBA QLD 4350
Phone: 07 4637 3315
Fax: 07 4637 3399

MILK SUPPLY
‘Windmill Grove’, 107 Wilson St
SOUTH LISMORE NSW 2480
(PO Box 486, LISMORE NSW 2480)
Phone: 02 6627 8029
Fax: 02 6622 7410

59

NORCO RURAL BRANCHES

ALLORA GAYNDAH MURGON

120 Allora – Clifton Road 59 Dalgangal Road 21 Lamb Street
ALLORA QLD 4362 GAYNDAH QLD 4625 MURGON QLD 4605
Phone: 07 4666 2210 Phone: 07 4140 8542 Phone: 07 4168 3060
Fax: 07 4666 3520 Fax: 07 4168 2996
GLEN INNES
ALSTONVILLE 165 Lang Street MURWILLUMBAH
17 Kays Lane GLEN INNES NSW 2370 17 Buchanan Street
Russelton Estate Phone: 02 6732 2162 MURWILLUMBAH NSW 2484
ALSTONVILLE NSW 2477 Fax: 02 6732 5642 Phone: 02 6672 2311
Phone: 02 6628 8315 Fax: 02 6672 5120
Fax: 02 6628 5765 GLOUCESTER
Cnr Church & Phillip Streets QUINALOW
ARMIDALE GLOUCESTER NSW 2422 3 Myall Street
252 Mann Street Phone: 02 6558 9600 QUINALOW QLD 4403
ARMIDALE NSW 2350 Fax: 02 6558 9666 Phone: 07 4692 1333
Phone: 02 6771 4669
Fax: 02 6771 1187 GRAFTON STUARTS POINT
19 Queen Street 906 Stuarts Point Road
BEAUDESERT GRAFTON NSW 2460 STUARTS POINT NSW 2441
9A Thiedeke Road Phone: 02 6643 5630 Phone: 02 6569 0955
BEAUDESERT QLD 4285 Fax: 02 6642 7245 Fax: 02 6569 0983
Phone: 07 5541 4882
Fax: 07 5541 1025 HEATHERBRAE TAREE
9 Hank Street 5 Grey Gum Road
BELLINGEN HEATHERBRAE NSW 2324 TAREE NSW 2430
1076 Waterfall Way Phone: 02 4987 6500 Phone: 02 6551 2999
BELLINGEN NSW 2454 Fax: 02 4987 6099 Fax: 02 6551 2522
Phone: 02 6655 9792
Fax: 02 6655 2266 KEMPSEY TENTERFIELD
3 Kemp Street 445 Rouse Street
BOWRAVILLE WEST KEMPSEY NSW 2440 TENTERFIELD NSW 2372
51 Carbin Street Phone: 02 6562 6393 Phone: 02 6736 5902
BOWRAVILLE NSW 2449 Fax: 02 6563 1020 Fax: 02 6736 2270
Phone: 02 6564 8648
Fax: 02 6564 7425 KINGAROY TOOWOOMBA
97 River Road 300 Anzac Ave
BUNDABERG KINGAROY QLD 4610 TOOWOOMBA QLD 4350
71 Gavin Street Phone: 07 4163 6310 Phone: 07 4637 3300
BUNDABERG QLD 4670 Fax: 07 4162 4992 Fax: 07 4637 3399
Phone: 07 4151 7883
Fax: 07 4154 4341 KYOGLE WAMURAN
Willis Street 1055 D’Aguilar Highway
CASINO KYOGLE NSW 2474 WAMURAN QLD 4512
136 Dyraaba Street Phone: 02 6632 2920 Phone: 07 5496 6500
CASINO NSW 2470 Fax: 02 6632 1221 Fax: 07 5496 6406
Phone: 02 6661 2100
Fax: 02 6662 6007 LISMORE WINDERA DEPOT
105 Wilson Street 2814 Murgon – Gayndah Road
COFFS HARBOUR SOUTH LISMORE NSW 2480 WINDERA QLD 4605
5/24 Isles Drive Phone: 02 6627 8266 Phone: 07 4168 6186
SOUTH COFFS HARBOUR Fax: 02 6621 2286 Fax: 07 4168 6214
NSW 2450
Phone: 02 6658 0393 MACKSVILLE WOOLGOOLGA
Fax: 02 6658 0374 Tilly Willy Street 16 Featherstone Drive
MACKSVILLE NSW 2447 WOOLGOOLGA NSW 2456
DUNGOG Phone: 02 6568 4057 Phone: 02 6654 2905
Stroud Road Fax: 02 6568 2308 Fax: 02 6654 1031
DUNGOG NSW 2420
Phone: 02 4992 1087
Fax: 02 4992 3000

60
Norco’s Purpose
Thank you to our Norco employees, Co-operative members, Norco Milk distributors
Norco’s purpose is to build wealth, security and sustainability for our
and customers who feature in the annual report photography.
shareholders, business partners and employees.
Your time and participation is greatly appreciated.
We achieve this by:
• maintaining a diverse and strong range of businesses;
• being a competitive regional purchaser and supplier of milk; and
• creating integrated solutions for our partners.

Norco’s Values
Norco applies a common set of values to everything it does.
These values include:
Respect
• We respect our shareholders, employees, business partners and cus-
tomers.
• We respect a diversity of views and opinions.
• We encourage and support people to grow as individuals and contrib-
utors to our organisation.
• We respect our heritage and legacy.
• We respect our natural environment.
Responsible
• We are responsible for preserving the co-operative principles.
• We are responsible for our actions and our performance.
• We are responsible for providing a safe work environment.
Efficient
• We seek to add value in everything we do.
Innovation
• We seek to consistently improve through innovation.
Community
• We seek active involvement in our communities.

norco.com.au
100% FARMER OWNED NORCO ANNUAL REPORT 2016
AN AUSTRALIAN FARMER OWNED DAIRY CO-OPERATIVE