Penrice 2011 Annual Report

PENRICE SODA HOLDINGS LIMITED 2011 ANNUAL REPORT
ABOUT PENRICE
Company Profile
Penrice Soda Holdings Limited is an Australian public company. It holds leading positions in the supply of soda ash, sodium bicarbonate and limestone in its domestic market and exports to 28 other nations. Headquartered in Adelaide, South Australia, Penrice employs 259 people. It has been listed on the Australian Securities Exchange since 2005, while the Companys origins date back to 1935. Today, Penrice is the only manufacturer in Australia of soda ash and sodium bicarbonate and is a significant supplier of limestone and civil construction materials. Key end-users of Penrice products include world majors in glass manufacturing and mining, food and medical care organisations both in Australia and overseas, and large infrastructure projects. Penrices strategy is to build on its reputation as a reliable and quality supplier, using its technology to build share in higher value markets and to penetrate new high growth markets while improving operating efficiencies.
Operations
The operations of the Penrice Group are centred on two South Australian based divisions its Chemicals business at Osborne in suburban Adelaide, and the Quarry & Mineral facility at Angaston in the Barossa Valley. The Company is committed to working safely and applying industry best practice to the health, safety and well-being of employees, contractors, suppliers, customers and communities in which it operates.
products and applications as diverse as food, pharmaceuticals, medical, personal care and stock feed. Over the past 10 years, Penrice has expanded the capacity of its sodium bicarbonate plant from 24,000 tonnes per annum to 100,000 tonnes per annum.
Quarry & Mineral

Penrice owns and operates the largest crystalline limestone mine in South Australia. The mine supplies limestone into the chemical process at Penrices Osborne Chemicals business. It is also a significant supplier of functional inputs to glass and cement manufacture, mineral processing and stock feed, and a supplier of aggregates and other materials to a variety of end-uses, such as civil and construction, roading, landfill, and landscaping.
Chemicals
Penrices Chemicals business manufactures soda ash and sodium bicarbonate using the Solvay process. It operates the largest soda ash plant in South East Asia and one of the five largest sodium bicarbonate plants in the world. The major inputs salt and limestone are both naturally occurring and locally supplied. Soda ash is sold in the Australian market as a vital ingredient in products ranging from glass containers (especially wine and beer bottles), flat glass for building and construction, and powder detergents. It is also used in the mining and water treatment industries. Sodium bicarbonate is a specialty chemical used in a variety of
Commitment
Penrice is a united, achievement-focused Company committed to producing quality products, providing excellent customer service and secure supply. The Penrice culture encourages and challenges its people to build on this to maintain a competitive edge and through this achieve growth and future prosperity.
CONTENTS Chairmans Report Managing Director & Chief Executive Ofcers Report Sustainability Report Executive Team Directors Directors Report Corporate Governance Statement Financial Statements Income Statement Statement of Comprehensive Income Statement of Financial Position Statement of Changes in Equity Cash Flow Statement Notes to the Financial Statements Directors Declaration Independent Auditors Report ASX Additional Information Financial History Corporate Information
2 4 8 11 12 13 29 34 35 36 37 38 39 40 100 101 102 103 104
YEAR IN REVIEW PROFIT SUMMARY (A$M) Normalised loss of $1.4 million due to impact on Chemical business of strong Australian dollar and forced plant shutdown caused by third party steam supply failure. Reported loss of $26.2 million includes $21.7 million impairment charge largely on Chemical business reecting outlook for continuing tough operating environment. Quarry and Mineral business cash ow improved $2.1 million from previous year with gross margin increasing $1.1 million and total costs decreasing $0.9 million. Strategic review underway, protability improvement initiatives implemented. Sales revenue Normalised EBITDA* Depreciation/amortisation Normalised EBIT* Net interest expense Tax* Normalised NPAT* After tax unrealised gain/(loss) on hedges After tax signicant once off items Statutory NPAT Underlying earnings per share* (cents) Statutory earnings per share (cents) Interim dividend per share (cents) Final dividend per share (cents) Gearing [net debt/(net debt + equity)] % Interest cover [EBITDA*/net interest] (times) 2011 152.9 15.7 (9.6) 6.1 (8.7) (1.2) (1.4) Nil 24.7 (26.2) (1.5) (28.7) Nil Nil 53% 1.8 2010 160.4 23.3 (8.8) 14.5 (8.2) (1.0) 5.3 1.0 Nil 6.3 6.6 7.8 Nil Nil 42% 2.8 % change** (5) (33) (9) (58) (6) (20)
*Excludes unrealised hedge gain/(loss), signicant once off items. **Percentage changes based on numbers to $000.
CHAIRMANS REPORT
It gives me no pleasure to report that 201011 has been another difcult year for Penrice, with an operating loss incurred, impairment charges booked on assets and no dividend declared.
It is also of little comfort that the Company is not alone among Australian manufacturers large and small in facing trading pressures. At least there has been extensive debate recently of how the increased value of the Australian dollar and the so-called two speed economy are eroding export returns, increasing import competition, challenging competitiveness and dampening demand. As a result, more people now have a better understanding of pressures that Penrice has been experiencing for some time. Penrice obviously cannot inuence these macro factors directly. We are adjusting our business where possible so that we can remain sustainable in the face of continued external pressures. This takes time and there are no silver bullets and no magic wands. The Managing Director & Chief Executive Ofcers report provides a comprehensive assessment of the Companys operations for the year to 30 June 2011. I will focus on the steps the Company is taking to enhance its position and summarise the issues we are confronting. While the current management team inherited an under-invested and inefcient manufacturing plant and a mine requiring substantial short term investment to keep operating, different factors contributed to the nal FY2011 result; four dominated: the exchange rate the Osborne soda ash plant forced outage the cost of coke, and the inability of major customers, the glass manufacturers, to purchase their forecast demand. Sales of the Companys soda ash are heavily concentrated to the glass manufacturers. These companies are themselves facing similar headwinds to Penrice. For example, in each of the
18 months to June 2011 monthly sales of beer in Australia have declined an unprecedented situation. In part, the relatively cool, wet summer was not conducive to beer consumption. In the 201011 year, 88 million fewer wine bottles were lled than the previous year. Since then, one of Australias largest wine producers has announced that one of its consignments will, for the rst time, be exported in bulk for bottling in the United Kingdom, displacing a further 80 million bottles. The other major glass consumer the housing and construction industry remains more subdued than expected, reecting uncertain global and domestic economic conditions, while imports of at glass have been increasing, squeezing margins. We estimate that the exchange rateinduced earnings reduction in FY2011 versus an average over three years is in the range of $13 to $15 million, which relates to reduced AUD receipts from our export business, domestic market pricing pressures and domestic demand. Had our earnings not been so affected, debt levels would be falling, there would have been no impairment charge on assets, and dividends would be owing to shareholders. FUTURE FOCUS The Board considers that debt levels are too high. Our banks fully understand the challenges facing the Company and remain supportive. In the context of reviewing our banking agreement, which was completed soon after 30 June and announced to the market, we committed to reduce debt levels and undertake a broad strategic review of the Companys operations. The strategic review is designed to improve performance and thereby returns to shareholders. The deleveraging plan will consider all options, including asset sales and raising equity.
PENRICE SODA HOLDINGS LIMITED 2011 Annual Report
Already, a number of initiatives have been taken or will shortly commence: Penrice has recently won a substantial contract to supply soda ash to a new glass line in South Australia. We have secured new customers for sodium bicarbonate in the premium food and pharmaceutical segment in Japan, following damage caused to local suppliers by the earthquake and tsunami earlier this year. We have successfully completed a re-line of one of the six kilns at the soda ash plant, following which plant performance has improved. We have begun supplying signicant quantities of aggregate material to a major road project in metropolitan Adelaide. We have secured EPA approval to enable calsilt to be stored and used in a blend to produce a quality landll at our Gillman site, not only assisting with a signicant by-product problem at Osborne but potentially opening up new commercial outlets for blended ll. A number of alternative materials have been identied that substitute effectively for coke currently used in chemical processing with substantial cost reductions available; some signicant substitution has been achieved already and plans are in development to bring further materials into use. We have negotiated improved terms for the supply of electricity to the Osborne plant. Major efciencies and quality improvements have been identied as being available through the installation of a new and much more efcient bag packing line in the bicarbonate plant and consideration is being given to making the appropriate investment. We have negotiated improved prices for bicarbonate and soda ash where market conditions allow, especially
in exports, to assist in clawing back the impact of the falling US dollar. We have reviewed workforce levels across the Company, trimming staff numbers by approximately 10 percent. We have commenced a major new program of drilling at the Angaston mine, designed to prove and enhance the value of the limestone resource to JORC compliance. Collectively, these initiatives through higher sales, increased margins and improved operating efciencies illustrate the Companys determination to offset the competitiveness challenges it faces. They represent a range of efciency enhancements and productivity improvements that policy analysts have been advocating for manufacturing businesses. Penrices growing involvement with the coal seam gas industry is potentially a game changer for the Company. During the past year we announced the formation of a consortium with GE Power and Water to provide the technology that can remove salts occurring in the water streams associated with coal seam gas extraction. Recent extensive community concern has been expressed, including in evidence before a Senate Committee, about the damage that might be done to the environment by the discharge of this brine water into the environment. The Penrice /GE Power and Water Consortium may well provide the technology solution and is focussed on demonstrating its feasibility. In commercialising this solution, Penrice intends to operate the plant and market the salts which comprise common salt, soda ash and sodium bicarbonate in varying proportions according to the particular aquifers involved. The fact that these products could then be sold into eastern Australian markets at present prohibitive or very costly to service from Adelaide due to high
coastal shipping freight rates is a further advantage. We hope to have more to say on this business initiative shortly. APPRECIATION TO BOARD AND STAFF At the end of August 2011, Barbara Gibson retired from the Board after over ve years of service. I express my appreciation to Barbaras chemicals expertise and general contribution to Board deliberations. In view of the current focus on costs across the Company, we have decided to operate with a smaller Board. Finally, I acknowledge the diligence and commitment displayed by my Board colleagues and by Penrices senior management team, under Managing Director & Chief Executive Ofcer Guy Roberts, and the entire workforce in what has unquestionably been a year of relentless pressure.
David Trebeck Chairman
PENRICE SODA HOLDINGS LIMITED
2011 Annual Report
MANAGING DIRECTOR & CHIEF EXECUTIVE OFFICERS REPORT

The past year has been a challenging one for Penrice. In addition to facing continuing difcult trading conditions, the forced shutdown of the Chemicals plant in October and unseasonal wet weather resulted in a revised outlook forecast in February and the issuance of a prot guidance downgrade in May. We reported a disappointing after-tax loss of $26.2 million for the year ended 30 June 2011. Excluding non-recurring items, the normalised loss was $1.4 million, in line with our revised prot guidance. The strengthening Australian dollar, which averaged US$1.00 in FY2011 versus US $0.88 in the previous year, had a signicant impact upon earnings, including upon US dollar Chemical business export earnings which were eroded by approximately $4 million. The largest non-recurring items were impairment charges of $16 million pretax relating to the Chemicals business and $10 million pre-tax in relation to landll inventory, reecting current tough operating conditions and lower demand forecast. Despite the difcult trading environment, we delivered an improved cash outcome in the Quarry & Mineral business through lower inventory build and a dedicated ongoing project to improve working capital management also assisted cash ow. The Group booked operating cash ow of $5 million for FY2011, a decrease of $2 million despite a fall of $7.6 million in normalised EBITDA (excluding signicant once off items). CASH FLOW
15,000 10,000 5,000 0
$000
Capital investment increased to $13.2 million, from $12.9 million in FY2010, with major projects being investment of $2.3 million in the new Gillman site, $0.7 million in a kiln reline, the $0.5 million acquisition of buffer land around the Angaston mine, and investment of $0.8 million in the decarbonator reboiler project. Borrowings increased by $8.3 million as a consequence of current cash ow constraints. Over the year we continued to investigate and introduce cost saving initiatives and implement plant efciency improvements. This process is on-going, with the announced strategic review targeting further improvements to operating performance in addition to initiatives to reduce debt and improve cash ow. CHEMICALS Chemicals business revenue was $127.6 million, 6% lower than the previous year. Normalised EBITDA was $14.0 million, down 8%. The forced shutdown of the Chemicals plant for several days over October following the failure of a third-party steam supplier, resulted in lost production and ongoing operational issues particularly in the kilns section. These interruptions to plant operations resulted in an 8% decline in soda ash production on the prior year and contributed to approximately $5 million of pre-tax losses to the reported earnings for this business. This has been partially off-set by an initial insurance recovery of $0.5 million. In response to the ongoing operating issues caused by this outage, planned maintenance work was brought forward on two of the six kilns, the rst of which was completed in July. This work is already contributing to a pleasing increase in output and improved reliability, with a second kiln reline planned for the second half of FY2012.
-5,000 -10,000 -15,000 -20,000 -25,000
FY 2007
FY 2008
FY 2009
FY 2010
FY 2011
OPERATING CASH FLOW
INVESTING CASH FLOW
NET FREE CASH
The expected improvement in operating cash ow in FY2011 was impacted by the strong AUD and the forced plant shutdown cause by third party steam failure.
2011 Annual Report
SODA ASH SALES

350,000 105,000
SODA ASH REVENUE FY2011 FY2010
310,000 SALES (TONNES)
90,000 REVENUE ($ 000)
270,000
75,000
230,000
60,000
190,000
45,000
150,000
FY 2007 FY 2008 FY 2009 FY 2010 FY 2011

DOMESTIC ASH EXPORT ASH REVENUE
30,000
Ash sales fell 6% reecting softer demand due to stronger AUD
54% 16% 9% 7% 12% 2%
CONTAINER GLASS FLAT GLASS DETERGENTS MINING INDUSTRIAL WATER
53% 15% 11% 9% 11% 1%
The strong Australian dollar hurt Chemicals business earnings. The higher dollar reduced receipts from sodium bicarbonate export sales, in spite of volume and US dollar price growth, and increased competition from imports in the domestic market, putting pressure on margins. The strength of the Australian dollar also eroded the competitive position of some of our domestic customers, particularly in the glass making sector. This was particularly the case in the second half, when some of our major customers cut back production reecting a loss of market share. Through the rst half, domestic demand for both soda ash and sodium bicarbonate was also affected by the unusually wet weather and oods in eastern Australia in the summer months, which impacted activity in key sectors such as manufacturing, construction and farming. After reassessing the expected cash ows from the Chemicals business, an impairment charge of $16 million pre-tax relating to this business was taken. This reects the tough operating
conditions and our updated projections of the exchange rate and demand growth forecasts. In response to the steep rise in coke prices in FY2011, we introduced an alternative less costly material as a kiln fuel; however, savings from this measure were offset by further rises in coke prices. Overall, the increase in coke costs in 2011 reduced earnings by $2 million compared to the previous year. Alternative fuel materials will continue to be used at increased rates in FY2012, while the range of materials available for use as substitutes will be expanded. SODA ASH Domestic demand for soda ash weakened in the second half, which was contrary to customer expectations. Local glass makers faced softer demand in both the at glass and packaging glass segments, while the strong Australian dollar increased competition from imports. On a positive note, we recently won a contract to supply signicant quantities of soda ash to a newly commissioned glass furnace in South Australia.
Our proprietary technology to produce soda ash and sodium chloride from water associated with coal seam gas extraction was further proved up during the year. A consortium has been formed with GE Power and Water for construction of a pilot plant expected to be operational in the FY2012. If this proves as successful as is expected, there are excellent prospects for commercialisation of the process. Price increases were announced in the domestic market and will be introduced over FY2012. In spite of the soft demand conditions, there is condence that these prices will be maintained given rising prices internationally and reduced exports from China. SODIUM BICARBONATE Export demand for sodium bicarbonate remained strong and sales volumes grew by 4% on the previous year and prices in US dollars increased. However, once US dollar export receipts were translated into Australian dollars, revenue was down. We estimate that a one cent rise in the Australian dollar reduces export revenue by
2011 Annual Report
approximately $300,000 per annum, other things being equal. In FY2011, the rise in the Australian dollar is estimated to have reduced export receipts by $4 million versus the prior year. During the year sales of premium grade sodium bicarbonate commenced to new food and pharmaceutical customers in Japan, following that countrys devastating earthquake in March, which impacted local supply. The sodium bicarbonate price increases announced since the end of June have been accepted in most export markets and are expected to make a positive contribution to earnings in FY2012. In the domestic market, sodium bicarbonate demand was impacted by the extreme weather events on the Australian east coast. However, domestic market share was maintained partly due to a successful anti-dumping suit against Chinese imports. The sodium bicarbonate plant ran well and is producing at capacity.
QUARRY AND MINERAL Our focus in the Quarry & Minerals business over FY2011 was on achieving increased sales of higher value industrial minerals and aggregates to new customers. Sales revenue to external customers increased 1% on FY2010 despite 211,000 fewer tonnes being sold, with gross margins improving by $1.1 million. This was achieved in the absence of any large civil projects, such as supply to the Northern Expressway project which bolstered last years sales. Normalised EBITDA was $5.3 million, down 54% as a result of a higher proportion of mining costs being expensed compared to the previous year. Total mine costs this year were $20.4 million, with $19.3 million expensed and $1.1 million capitalised. This compares to last year, where total costs were $21.3 million, with $12.3 million expensed and $9.0 million capitalised. The reduction in capitalised costs was a result of a lower level of inventory build, which was down $5.3 million. The $0.9 million reduction in total mine costs reect a planned 50% reduction in extraction rates,
a smaller mine operating eet and reduced labour costs. Pleasingly, the business has continued its recent trend of improving net free cash ow, with FY2011 being an outow of $0.8 million which was $2.1 million better than the previous year. The Angaston mine has now moved into a new phase of minimal overburden extraction. Inventory build was just 200,000 tonnes of aggregates, worth $1.2 million, down from $6.4 million in the prior year. Demand for aggregates is increasing to more than 1 million tonnes per annum and aggregates inventory is expected to be sold out during the next ve years at current sales rates. There was zero inventory build of landll during FY2011 and landll extraction will be minimal over the next ve years. Given lower than expected levels of landll sales in recent periods, and dependency of demand on the timing of large-scale projects, an impairment charge of $10 million pre-tax was taken on the landll inventory held on balance sheet. Aggregate inventory carrying value of $19.8 million remained
SODIUM BICARBONATE SALES

100,000 40,000
SODIUM BICARBONATE REVENUE FY2011 FY2010
80,000 SALES (TONNES)
35,000 REVENUE ($ 000)
60,000
30,000
40,000
25,000
20,000
20,000
FY 2007 FY 2008 FY 2009 FY 2010 FY 2011

DOMESTIC BICARB EXPORT BICARB
15,000
REVENUE
Sales levels at plant capacity with increased export sales reecting growth opportunity. Revenue down due to stronger AUD.
40% FOOD 16% INDUSTRIAL 0% MINING & MINERAL PROCESSING 23% PERSONAL CARE / PHARMACEUTICAL 20% STOCKFEEDS 1% WATER
35% 13% 4% 23% 24% 1%
QUARRY AND MINERAL SALES

2,500 SALES (THOUSANDS OF TONNES) 2,250 2,000 1,750 1,500 1,250 1,000 750 500 250 0 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 REVENUE ($ 000) MILLIONS OF TONNES
EXTRACTION TONNES OVERVIEW 10 YEAR PERIOD

7 6 5 4 3 2 1 0 FY FY FY FY FY FY FY FY FY FY 2005 2006 2007 2008 2009 2010 2011 2012* 2013* 2014*
*FY2012 onwards is forecast 5 year average INDUSTRIAL MINERALS AGGREGATE LAND FILL
FY 2007 FY 2008 FY 2009 FY 2010 FY 2011

CEMENT/LIME CHEMICAL CIVIL REVENUE
CHEMICAL OSBORNE LIMESTONE
TOTAL EXTRACTION
Sales volumes decreased due to the absence of a major road project in FY2011. Despite this, revenue increased as a result of new higher margin chemical business and sales mix.
The results for FY2011 were in line with the Companys current 5 year mine plan to reduce overburden removal and aggregate and landll inventory build to improve cash ows.
unchanged and at the end of FY2011 total landll and aggregate inventory stood at $29.5 million. During FY2011 infrastructure works on the Gillman site, costing $2.3 million, was progressed. With all necessary approvals now in place, this site will be lled in a manner to render it suitable for later development with by-product from the Osborne plant and landll from the Angaston mine, demonstrating the capability of our landll for numerous other development opportunities in the vicinity. OUR PEOPLE AND COMMUNITIES We continue to aim for zero injuries throughout our operations and continue to implement additional safety measures as we work towards this goal. We have completed a difcult year, and I would like to thank all of the Penrice team for their continuing support and efforts. This is particularly so in the current environment where the expectation of a continuing high Australian dollar has necessitated
a focus upon operational changes to lower costs and improve performance. LOOKING AHEAD We remain focused on improving operating margin and cash ow performance in the current year. To achieve this, we will continue implementation of our cost cutting, price rise and efciency initiatives arising from the strategic review. As announced, a labour cost reduction programme has been implemented which resulted in a 10% cut in stafng numbers, generating savings of around $2 million in FY2012. We have announced price increases, principally in the export business, which will materially improve margins. We have started a major drilling programme at the Angaston mine to achieve JORC compliance, so as to better understand and value the mine. A new mine plan is expected to be completed by April 2012. These initiatives, and further planned outcomes of the strategic review, will make a positive contribution to earnings in the current year, and help
to offset the impact of the expected continuing strong Australian dollar, and soft demand. We have an updated banking agreement in place which includes an additional $10 million short term working capital facility, the majority of which is repayable at the end of September 2012. This facility covers immediate and forecast liquidity and capital investment requirements. We will also accelerate the considerable potential of our coal seam gas water treatment opportunities; the construction of a pilot plant and completion of technology proving trials in the 2012 nancial year will deliver fee-based income and prospects for commercialisation are high.
Guy Roberts Managing Director & Chief Executive Ofcer
2011 Annual Report
SUSTAINABILITY REPORT
Sustainability for Penrice means addressing the environmental, community, social and governance issues that are material to our business. Central to this policy is the Companys strong commitment to the safety of the people we work with, and the communities and environments within which we operate. We strive to continually improve our performance in these areas, and reduce the impact that our activities have on our people, the environment and our communities. To this end we have a suite of short and long term programs designed to reach our new performance goals and reduce our footprint.
developing and implementing a best practice safety management system embedding the right behaviour in all our people, and nding solutions for the physical safety hazards that we face as in any mining and manufacturing environment. Penrices progress in the past six years in reducing workplace injuries and illnesses from a recordable injury rate of 14 to 2.69 represents a signicant improvement. Our performance for FY2011 of 2.69 was up on FY2010 despite continued improvements in our safety management system. An increase of contractor injuries contributed heavily to the overall increased of the injury rate. In response to this a campaign was launched to insure the behaviours contractors exhibit on a daily basis is consistent with the Penrice safety vision. The Company continues to be well placed to achieve the best practice levels to which it aspires. A Penrice focus this year has been to further embed the Safety Foundations core principles, involving all of the Companys employees and principal contactors. Safety incident reporting continues to be a pillar on our performance as does an increased concentration on management accountability and proactive hazard and risk assessment. During the year, the Group invested signicantly in safety improvements across our operations covering procedures, people and equipment. This effort will help to ensure an even more solid foundation for the desired safe workplace at Penrice. The Company is moving into its third year of a three year intensive program that will implement best practice safety procedures, safety leadership and safe behaviour at all levels in the organisation. MAJOR HAZARD FACILITY An intrinsic part of Penrices manufacturing process for soda ash and
ALL WORKER RECORDABLE CASE RATE

INJURY PER 200,000 HRS WORKED
sodium bicarbonate, is the storage and use of large quantities of chemicals. As a consequence of anticipated regulatory change in South Australia, our Osborne operation is likely to be categorised as a Major Hazard Facility, which is in line with requirements in other Australian states. The Company has undergone a formal review by SafeWork SA in 2009 and has since developed a comprehensive Safety Management System. This effort will be tested further in late 2011 when an independent audit review is undertaken by a specialist Major Hazardous Facilities consultant. The ndings from this review will ensure the Company is well placed to meet the high regulatory standards required of a Major Hazard Facility, when the legislation is enacted in 2012. COMMUNITY WORKING WITH OUR KEY STAKEHOLDERS Penrice has been a company of signicance and achievement in South Australia for over 70 years, and we understand that the way we conduct our business affects the various communities in which we operate. That includes a responsibility to understand and resolve social and environmental issues. Penrice has in place stafng, processes and systems to better understand community perspectives, and has updated our community complaints and issues reporting and recording systems to improve our responsiveness. As part of our commitment to working better within the communities in which we operate, we actively participate in independently chaired consultative forums for both Penrice sites the Penrice Community Consultation Group (PCCG) with the community around our Angaston mine in country South Australia and a community forum for our chemical operations located at Osborne, South Australia. These committees are made up of representatives from Local
16 14 12 10 8 6 4 2 0 FY FY FY FY FY FY FY 2005 2006 2007 2008 2009 2010 2011

ALL WORKER RCR
SAFETY NO INJURIES TO ANYONE EVER As a mining and manufacturing Company, it goes without saying that safety is critical to the way we work at Penrice. Our belief is that all injuries and environmental incidents are preventable, and in line with that belief, we have reconrmed our safety vision no injuries to anyone ever and have adopted our environmental vision of zero harm and waste. Our safety focus, which is led at Board and Executive Management level, is underpinned by three elements:
8
TOWNS WATER CONSUMPTION (M3/MT PRODUCT)

5.00 4.00 3.00 2.00 1.00 0.00
ENERGY CONSUMPTION (GJ/MT PRODUCT)

8.80 8.60 8.40 8.20 8.00 7.80 7.60 7.40
FY 2005
FY 2006
FY 2007
FY 2008
FY 2009
FY 2010
FY 2011
FY FY FY FY FY FY FY FY 2005 2006 2007 2008 2009 2010 2011 2011*

* Normalised for forced plant shutdown and subsequent plant reliability issues.
Government, community members, the Environmental Protection Agency (EPA), Department of Primary Industries and Resources of South Australia (PIRSA) and Penrice. Both forums meet on a quarterly basis, to discuss and share information around the Companys operations and performance to agreed environmental outcomes and criteria. Penrice believes this is a strong indication of our commitment to listen to and understand our community stakeholders and to work to improve and ultimately resolve community issues. ENVIRONMENT ZERO HARM AND WASTE An economically and environmentally sustainable future is high on the list of Penrice priorities. We have an operational improvement program that addresses the environmental impact from our businesses. Our Environmental Management System focuses on meeting requirements of the international standard ISO 14001, and we are licensed by the EPA in South Australia. WATER USE We continue to focus on reducing the water used by our operations, and in particular lowering the amount of towns water used per tonne of product produced. With the installation and commissioning of the Reverse Osmosis
desalination plant in 2006, our use of towns water was reduced by 0.9 Gl per annum a 56% reduction. The majority of fresh water used at Penrices operations is utilised for the generation of steam. The water from the desalination plant is of a greater purity than that of towns water and has resulted in 1,800 tonnes per annum less sulphuric acid and caustic soda being used to further process water for use in our businesses. Buoyed by the good progress which Penrice has made in water savings, a project was initiated in Q3 of FY2010 to further reduce the amount of towns water and retain only a small portion for potable applications. This project was focused on reusing existing process water waste streams and was commissioned in June 2010. This project has ensured the recovery waste streams and allowed them to be directed to feed the lime slaking plant. The water which was being used for lime slaking is directed to a new Reverse Osmosis (RO) plant. The permeate from the RO plant is used as process softened water (replacing towns water), and the rejected water from the RO plant is now used in the slaking plant to supplement the waste water streams. As a result of making these changes, a further saving of 0.4 Gl per annum of
towns water has been made in FY2011. This makes the future usage of towns water only 0.3 Gl pa, down from 1.6Glpa in 2005. ENERGY & GREENHOUSE GAS EMISSIONS The operations of the Penrice Group use a range of energy sources including gas, electricity, steam and coke in producing soda ash and sodium bicarbonate. Energy use is closely monitored to ensure the conservation programme remains on target. The Company continues to make a steady improvement in the consumption of energy with the GigaJoule of energy use per metric tonne of product being 8.26 GJ/MT in FY2011. Although higher than the previous year, this was caused by the xed cost component of steam consumption being spread across fewer production tonnes resulting from the forced plant shutdown and subsequent plant reliability issues. When normalising for these issues the energy consumption would have been 7.97 GJ/ MT, much in line with recent years but an improvement on historical usage. Penrice is a participant in the Australian Governments Energy Efciency Opportunities (EEO) program, and after identifying a number of areas for signicant energy savings, we have established plans that are expected to result in further improvement.
2011 Annual Report 9
GREENHOUSE GAS Penrice is a signicant greenhouse gas emitter and is subject to the National Greenhouse and Energy Reporting Scheme (NGERS) and is likely to be impacted by any Australian Governments Carbon Scheme. We have continued to report formal greenhouse gas inventory under NGERS as required by legislation. CARBON SCHEME In early 2011 the Company was accepted as an Energy Intensive Trade Exposed Entity. If the proposed Carbon Scheme is enacted Penrice will be eligible for the highest level of free permit allocation of 94.5%. The current view of the likely nancial impact of the scheme on Penrice is that it will introduce signicant cost to the manufacturer of soda ash and sodium bicarbonate. Penrice fully supports a carbon reduction mechanism to reduce green house gas emission. In order to meet the expectation of all stakeholders Penrice believes this will only be achieved through a global pricing mechanism. WASTE WATER EFFLUENT All storm water and cooling water drains located within our Osborne site are discharged to the local marine environment, the Port River, after the removal of solids in our onsite solids recovery plant. AMMONIA Penrice continues its commitment to reducing its load of nitrogen on the Port River. Penrice nished 2010 calendar year meeting the required reduction of ammonia discharged to the Port River as outlined in the 2005 2010 Environmental Improvement Program (EIP). As a sign of our continued commitment to reducing our environmental impact the Company has agreed to a new EIP for a further 5 years that encompasses dust
10
TONNES OF AMMONIA TO PORT RIVER

1200 1000 800 600 400 200 0
CY 2005
CY 2006
CY 2007
CY 2008
CY 2009
CY 2010
management and ammonia and solids discharge to the Port River. In early 2011 the revised ve year environmental improvement plan (EIP) was approved by the EPA. The revised EIP commits to a 15 tonne per year reduction of ammonia to the Port River for the next 5 years. The EIP will be valid until December 2015. Penrice has also continued to support the targets set within the Adelaide Coastal Waters Study and has agreed with the EPA to meet a 2025 target of 300 tonnes of Ammonia discharged to the Port River. AIR QUALITY In accordance with our EPA operating licence, we monitor the release of contaminants to the atmosphere. This program includes the monitoring of chimney stacks on site that discharge particulates (dust) to the atmosphere, and also the continuous monitoring of particulates on the plant with two dust monitoring stations. The FY2010 emissions were compliant with legislation. At our Angaston operation we have undertaken extensive air quality investigation and monitoring as part of our commitment to the PCCG. The EPA undertook dust emission monitoring over a 12 month period
which conrmed that our operations are compliant with all standards and regulations. Our commitment to lower the emissions further has included automating dust suppressant systems on xed plant and installing dust monitoring equipment that complements our daily operational activities. LICENCE COMPLIANCE The Company is pleased to report continued compliance with all relevant environmental legislation, including our EPA operating licences and our EPA Environment Improvement Programs (EIP). QUALITY Penrice manufactures product to high quality standards and maintains manufacturing systems accredited to the Quality Management System international standards ISO 9001 and Food Safety Management System ISO 22000 which enables the supply into both food and pharmaceutical markets. Penrice produces pharmaceutical grade sodium bicarbonate which meets British Pharmacopoeia 2010 and European Pharmacopoeia (6th Edition) specications.
EXECUTIVE TEAM
FRANK LUPOI
Chief Financial Ofcer & Company Secretary FCPA, BA (Acc) (Uni SA) Frank joined Penrice in May 2008. Prior to joining Penrice, Frank was with ASX listed Adelaide Bank for 18 years, the last four years as its CFO. Prior to this, Frank spent six years with the South Australian Gas Company in various accounting roles. General Manager Chemical Operations BEng (Hons) Chemical Engineering (Queens Uni, Belfast) Declan commenced with Penrice in May 2008 in the role of General Manager Chemical Operations. He brings an extensive and successful international career in senior management positions gained from roles held with Adelaide Brighton Cement, Shark Bay Salt and Botswana Ash Pty Ltd. General Manager Quarry and Mineral Grad Dip Human Factors in Safety Mgt (Uni SA) (current) Darrin joined Penrice in December 2007. He has 20 years of experience in operational risk management. Having contributed signicant improvement to the safety and environment management systems at Penrice, he was promoted to the role of GM Quarry and Mineral in May 2010. Darrin has held senior roles with GM Holden, National Foods and Local Government. General Manager Chemicals Business Dip Ag Science (CSU), Grad Dip Ed (CSU), Grad Bus Studies (UNE) Brett joined Penrice in April, 2010 and possesses over 20 years experience in sales and marketing management, procurement and distribution in chemical commodities. Bretts previous roles were held with Elders and Incitec Pivot.
ANDREW CANNON
General Manager Supply Chain MBA (Merit) (Uni of Newcastle), BSc Agriculture (Hons) (Melb Uni), MAICD, GAICD Andrew joined Penrice in November 2007. He is an experienced supply chain professional in domestic and international markets within the chemical, agricultural and mining sectors. Andrews previous senior management roles were held with Elders, Tennant Limited, Incitec Limited and Western Mining Fertilisers.
DECLAN MACKLE
ROY DOVETON
General Manager Major Projects BSc Eng (Mech) (Hons), Mgmt Dip (Uni SA) Roy joined Penrice in 1994. With over 25 years of experience in chemical and industrial manufacturing includes management responsibility for major projects, production management and maintenance. Roys previous experience was gained from senior roles with Sappi Kraft Tugela (Pulp & Paper) and Iscor Newcastle (Iron & Steel).
DARRIN WRIGHT
MARNIE BROKENSHIRE
General Manager Human Resources BBus, Grad Dip HRM/IR (RMIT), Grad Cert Change Mgmt (AGSM) Marnie joined Penrice in May 2007. She is a Human Resources specialist with more than 15 years experience in senior generalist roles. She has worked nationally and internationally with GM Holden, Sensis, Deloitte Consulting and Monsanto.
BRETT SMITH
2011 Annual Report
11
DIRECTORS
DAVID GROVES
GUY ROBERTS
DAVID TREBECK
BARBARA GIBSON
ANDREW FLETCHER
JOHN HIRST
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DIRECTORS REPORT
The Board of Directors of Penrice Soda Holdings Limited has pleasure in submitting this report for the year ended 30 June 2011 as follows. Directors The names and details of the Companys Directors in ofce during the nancial year, including other directorships held for the past three years, and until the date of this report are as follows. Directors were in ofce for this entire period unless otherwise stated. It should be noted that the Company had a Remuneration and Nomination Committee in place throughout the 2011 nancial year and up until 23 August 2011. From 23 August 2011, the Company has had a Nomination Committee and a Remuneration Committee. Further details are available in the Corporate Governance Statement.
DAVID B. TREBECK Chairman Commenced as Director September 2007 (Appointed Chairman 29 October 2009) Bachelor of Science in Agriculture (Hons) (University of Sydney) Master of Economics (University of New England) Fellow, Australian Institute of Company Directors Churchill Fellowship Centenary of Federation Medal 2001 Experience David is a Director of ASX listed Graincorp Limited and PrimeAg Australia Ltd, a former Commissioner of the National Water Commission and a Director of several other companies. During 2008 he served on a Government Panel reviewing Australias biosecurity and quarantine arrangements. David is a former Managing Director of ACIL Consulting Pty Ltd and a former Director of Incitec Pivot Limited, Incitec Limited and Pipers Brook Vineyard Limited. During the past three years David also served on the following boards: Graincorp Limited * PrimeAg Australia Ltd * Maersk Australia Pty Ltd * Institute of Public Affairs National Water Commission Brumbies Rugby Audit & Risk Committee
GUY R. ROBERTS Managing Director & Chief Executive Ofcer Commenced as Director December 2006 Bachelor of Law (University of Adelaide) Graduate Diploma in Legal Practice (University of Adelaide) Experience Guy is an experienced international chemical company executive who was with the Orica Australia group (formerly ICI Australia) for 15 years prior to being appointed Managing Director & Chief Executive Ofcer of Penrice in 2007. He has wide experience in chemical, plastics and consumer markets in Australia, New Zealand, Asia and the United States all of which are relevant to Penrices operations. Guy held a number of senior Executive positions with Orica, including Managing Director and General Manager roles in chemical manufacturing and distribution, plastics manufacturing and distribution, paint manufacturing and retailing in Australia and New Zealand. His nal Orica position prior to joining Penrice involved particular responsibility for setting Oricas strategic growth agenda in water treatment and was General Manager of Orica Watercare, the leading supplier of industrial and water treatment chemicals and equipment in Australia and New Zealand, and with operations in the United States and the United Kingdom. Guy is also a former barrister and solicitor with Minter Ellison Lawyers and Senior Legal Counsel with Orica, responsible for major projects, mergers and acquisitions across the Groups portfolio in Australia, New Zealand, Asia, United States and the United Kingdom. Guy also currently serves on the following boards: Adelaide Festival Centre Foundation Business SA Committee for Economic Development of Australia SA (CEDA) National Lime Association of Australia
* Indicates a current Directorship Special Responsibilities Member of Audit and Risk Management Committee Chair of Nomination Committee Member of Remuneration Committee
2011 Annual Report
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Directors report (continued)
ANDREW V. FLETCHER Deputy Chairman Commenced as Director April 2005 Bachelor of Engineering (Civil) (University of Adelaide) Fellow, Institution of Engineers Australia Fellow, America Society of Civil Engineers Foundation Fellow, Australian Institute of Company Directors
BARBARA J. GIBSON Commenced as Director November 2005 Retired as Director 31 August 2011 Bachelor of Science (Biochemistry) (Monash University) Fellow of the Australian Academy of Technological Sciences and Engineering Centenary of Federation Medal 2003 Experience Barbara was formerly the Group General Manager of Chemicals for Orica Limited, a $1.3 billion business and the largest Chemicals business in Australia, and a member of the Orica Group Executive. She has extensive experience in running science based businesses and technology development. During the past three years Barbara has also served as a Non-Executive Director on the following boards: Nuplex Industries Limited * Warakirri Asset Management Pty Ltd (Chairman) * Graincorp Limited * Biota Holdings Limited St Barbara Limited
Experience Andrew is currently the Chief Executive Ofcer of Defence SA. His previous executive appointments include Senior Vice President Global Infrastructure and Asia Pacic for Kellogg Brown & Root from 2001 until 2005, and Senior Vice President Asia Pacic for Brown & Root Services from 1998 until 2000. During the past three years Andrew has also served on the following boards: Defence SA Advisory Board * SA Environment Protection Authority Board * Member of SA Economic Development Board * Indicates a current Directorship Special Responsibilities Chairman of Audit and Risk Management Committee Member of Nomination Committee
* Indicates a current Directorship Special Responsibilities Member of Nomination Committee Member of Remuneration Committee (Barbara was Chair of the Remuneration and Nomination Committee up until 21 February 2011 and then was a member of the Remuneration and Nomination Committee post this date.)
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JOHN W.A. HIRST Commenced as Director September 2007 Experience John has over 40 years experience in the international chemical industry, and from 2001 to mid 2010 was Managing Director of ASX and NZX listed, Nuplex Industries Limited, a leading manufacturer and distributor of functional chemical based materials with global operations. During the past three years John has also served on the following board: Nuplex Industries Limited Special Responsibilities Member of Nomination Committee Chair of Remuneration Committee Member of Audit and Risk Management Committee (John was appointed Chair of the Remuneration and Nomination Committee on 21 February 2011. Prior to that date, he was a member of the Remuneration and Nomination Committee.)
DAVID F. GROVES Commenced as Director December 2010 Bachelor of Commerce (University of Wollongong) Master of Commerce (University of New South Wales) Chartered Accountant Fellow, Australian Institute of Company Directors
Experience David is Deputy Chairman of Equity Trustees Limited and a non-executive director of Tassal Group Ltd, Pipers Brook Vineyard Pty Ltd and Kambala, a leading Australian girls school in Sydney. He is a member of MIR Management Limited Advisory Council and also an executive director of a number of private investment companies. David is a former director of Graincorp Limited and Mason Stewart Publishing and a former executive with Macquarie Bank Limited and its antecedent, Hill Samuel Australia. During the past three years David served on the following boards: Equity Trustees Limited * Tassal Group Limited * Pipers Brook Vineyard Pty Ltd * Graincorp Limited
* Indicates a current Directorship Special Responsibilities Member of Audit and Risk Management Committee Member of Nomination Committee Member of Remuneration Committee
2011 Annual Report
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DIRECTORS INTERESTS No Director has any interest in a contract or proposed contract with the Company or any of its subsidiaries other than as disclosed in the Directors benets section of this report. The relevant direct or indirect interest of each Director in the shares issued by the Company as notied by the Directors to the Australian Securities Exchange in accordance with S205G(I) of the Corporations Act 2001, at the date of this report is as follows: Director D.B. Trebeck A.V. Fletcher B.J. Gibson J.W.A. Hirst D.F. Groves Name of holder and nature of interest DB & DJ Trebeck as Trustee for Fairo Superannuation Fund Andrew Fletcher & Associates Pty Ltd Superannuation Fund Sunday Agencies Pty Ltd Superannuation Fund Hirst Supernnuation Fund Pty Ltd ATF The Hirst Superannuation Fund Superdeck Pty Ltd as Trustee for D, K, C & E Superfund DB Management Pty Ltd as Trustee for The D&B Family Trust J.W. Skipsey (Power of Attorney) Kathryn Groves Edwina Groves G.R. Roberts Number of ordinary shares 715,989 168,349 62,931 87,608 500,598 488,530 117,000 83,900 5,000 105,063
G.R. Roberts
DIRECTORS MEETINGS The number of Directors meetings and meetings of Committees of Directors held during the year and the number of meetings attended by each Director is as follows: Audit & Risk Management Committee Meetings Eligible Scheduled Meetings Meetings Attended 4 4 4* 4 4 2 2 4* Nomination & Remuneration Committee Meetings Eligible Scheduled Meetings Meetings Attended 4* 4 4 4 4 2 2 4 4
A.V. Fletcher B.J.Gibson J.W.A Hirst D.F. Groves G.R. Roberts
Board Meetings Eligible Scheduled Meetings Meetings Attended 14 14 14 14 14 14 8 8 14 14
* Although not a member of the committee, the Director attended.
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Principal activities The principal activities of the Company consist of the manufacture, distribution and sales of soda ash and sodium bicarbonate and the mining, distribution and sale of quarry and mineral products. 30 June 2011 $000 (26,206) Nil 30 June 2010 $000 6,277 Nil
The amended agreement provides an additional $10.0 million funding facility to be available until 31 March 2012, which then reduces to $8.0 million until 30 September 2012, being the termination date for this new facility. The remaining facilities have no changes to their maturity date, being the maturity date of the Banking Agreement of 31 March 2013. LIKELY DEVELOPMENTS AND FUTURE RESULTS A detailed review of the likely developments and future results is included in the Managing Director & Chief Executive Ofcers Report. ENVIRONMENTAL REGULATION AND PERFORMANCE The Company holds licences issued by the Environment Protection Authority (EPA), which enables discharge to the environment from the consolidated entitys operations. All environmental performance obligations are monitored and are subjected, from time to time, to Government Agency audits and site inspections. The consolidated entity has a policy of at least complying, but in most cases, exceeding its environmental performance obligations. There have been no known breaches of the consolidated entitys licence conditions during the nancial year. A detailed review of environmental regulation and performance is included in the Sustainability Report. DIVERSITY Penrice considers that business performance, productivity and job satisfaction are enhanced by a diverse workforce, senior management team, and Board, and as a consequence is committed to promoting a culture where diversity is encouraged. The measurable objectives set by the Board for the reporting period have been achieved. These were to: Develop and implement a policy on diversity that reects the companys objective to create a diverse workforce with specic focus on gender, age, and equal opportunity Update recruitment policies and procedures to reect the companys policy to encourage women into Board, senior leadership positions and non traditional roles within engineering and operations Implement regular training to all employees to increase the awareness of the importance of diversity and equal opportunity Provide for specic programs for the professional development and training of women within our workforce Introduce a market competitive paid parental leave policy in line with Commonwealth legislation to encourage women into our workplace and to return after parental leave.
Result Operating prot/(loss) after income tax Dividends
2011: No interim dividend was paid and no nal dividend has been declared. 2010: No interim or nal dividend was paid. EMPLOYEES The consolidated entity employed 259 employees at 30 June 2011 (2010 257 employees). REVIEW OF OPERATIONS A review of operations of the consolidated entity during the nancial year and the results of those operations are included earlier in the Managing Director & Chief Executive Ofcers Report. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS There has been no signicant change in the State of Affairs of the Company. SIGNIFICANT EVENTS AFTER THE BALANCE DATE Banking Agreement As at 30 June 2011, Penrice was in negotiation with its banks and had reached agreement in principle to amend its nance facilities as announced to the ASX on Friday 12 August 2011. This agreement cancelled a $1.8 million amortisation payment due on 30 June 2011 and amended the termination date of its $7.0 million facility to 30 November 2012 or a later date to be agreed in writing. Previously the termination date for this facility was 31 August 2011. Whilst this amendment does cancel the $1.8 million amortisation payment and defers payment of the $7.0 million facility beyond the 12 month period from balance date, it is considered a non-adjusting subsequent event under accounting standards and does not change the classication of the liability at 30 June 2011. As a result, $8.8 million remains a current liability in the nancial statements. No repayments are due within the next 12 months.
2011 Annual Report
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In the reporting period, we have had two employees benet from the improved provisions for paid parental leave. We have been able to increase the number of women shortlisted in the recruitment process for vacant positions and have conducted diversity training for all employees. Further, employees have been sponsored to attend women-specic AICD courses and other like professional development training to support the progression of high performing women within our workforce. INDEMNIFICATION OF OFFICERS The Company has paid a premium for Directors and Executive Ofcers liability insurance in respect of Directors and Executive Ofcers of the Company as permitted by the Corporations Act 2001. The terms of the policy prohibit disclosure of details of the insurance cover and premium. The Company has agreed to indemnify the current Directors of the Company against all liabilities to another person (other than the Company or a related body corporate) that may arise from their position as Directors of the Company and its controlled entities, except where the liability arises out of conduct involving lack of good faith. The Access, Indemnity and Insurance Deed stipulates that the Company will meet the full amount of any such liabilities including costs and expenses. SHARE OPTIONS AND RIGHTS As at the date of this Report there were 878,068 performance rights allocated in respect of the LTI plan for FY2010 which are subject to a 3 year performance period and will be eligible for vesting under the plan at the conclusion of FY2012 and 1,913,073 performance rights allocated in respect of the LTI plan for FY2011 which are subject to a 3 year performance period and will be eligible for vesting under the plan at the conclusion of FY2013. Refer to the remuneration report for further details.
REMUNERATION REPORT (AUDITED)

The Directors of Penrice Soda Holdings Limited present the Remuneration Report (which forms part of the Directors Report) prepared in accordance with section 300A of the Corporations Act 2001 and its Regulations for the Company and its controlled entities for the year ended 30 June 2011. This report outlines the remuneration arrangements in place for the specied Directors and Executives of Penrice Soda Holdings Limited, collectively the Key Management Personnel (KMP). SUMMARY Executive salaries were frozen as a result of 2011 performance year No short term amounts under incentive schemes become payable for the 2011 nancial year as a consequence of Company under performance There are no benets available for the 2011 nancial year rising from any long term incentive scheme Executives as a consequence earned between 53% and 77% of their approved Total Annual Remuneration Directors Fees remained unchanged REMUNERATION COMMITTEE The Remuneration Committee of the Board of Directors of the Company is responsible for determining, reviewing, and recommending compensation arrangements for the NonExecutive Directors, the Managing Director and Executives. The Remuneration Committee obtains independent advice on the appropriateness of remuneration packages, taking particular note of trends in comparative companies. Remuneration packages can include a mix of xed remuneration and performance-based remuneration. The expected outcomes of the remuneration structure are: attraction of quality management to the Company; retention and motivation of key executives; and performance incentives which allow executives to share the rewards of the success of the Company. The Remuneration Committee further considers: capacity to pay; relevant employment market conditions; and external market data and comparable relativities. Details of the composition and responsibilities of the Remuneration Committee can be found on page 31. REMUNERATION STRUCTURE In accordance with best practice corporate governance, the structure of Non-Executive Director and Executive remuneration are separate and distinct; they comprised the following elements:
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REMUNERATION REPORT (AUDITED) (CONTINUED)
Compensation type Fixed remuneration Fees Salary Compulsory Superannuation Other Benets At risk remuneration Post employment Short term incentive (STI) Long term incentive (LTI) Termination payments
DIRECTORS Non-executive Executive
EXECUTIVE
DETAILS OF KEY MANAGEMENT PERSONNEL (KMP) As deemed under AASB 124 Related Party Disclosures, Key Management Personnel (KMP) include Non-Executive Directors and members of the Executive Team, consisting of an Executive Director and the most highly remunerated Executives listed below, who have authority and responsibility for planning, directing and controlling the major activities of Penrice. In this report, Executive refers to Executive Key Management Personnel. NonExecutive Directors have no involvement in the day to day management of the business. Years service in current Role 4.5 3.2 3.2 1.2 1.2 3.7 3.2 4.2 Start date in current role 19/12/2006 01/05/2008 07/04/2008 01/05/2010 12/04/2010 15/10/2007 07/04/2008 07/05/2007
Name Executive Guy Roberts Frank Lupoi Declan Mackle Darrin Wright Brett Smith Andrew Cannon Roy Doveton Marnie Brokenshire Non-Executive David Trebeck Andrew Fletcher Barbara Gibson John Hirst David Groves
Role Managing Director & Chief Executive Ofcer Chief Financial Ofcer & Company Secretary General Manager, Chemical Operations General Manager, Quarry & Mineral General Manager, Chemicals Business General Manager, Supply Chain General Manager, Major Projects General Manager, Human Resources
Chairman Deputy Chairman Non-Executive Director Non-Executive Director Non-Executive Director
1.7 6.2 5.6 3.7 0.5
29/10/2009 01/04/2005 23/11/2005 01/09/2007 20/12/2010
David Groves was appointed a Non-Executive Director effective 20 December 2010. David Trebeck was appointed a Non-Executive Director effective 20 September 2007. Michael Carter, previously General Manager, Quarry & Mineral retired July 1, 2010. There were no other changes of Key Management Personnel between reporting date and the date the nancial report was authorised for issue.
2011 Annual Report
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NON-EXECUTIVE DIRECTOR REMUNERATION STRATEGY The Board sets Non-Executive director fees within the aggregate remuneration of $500,000 which was set at the time of the Companys listing. These fees include both committee and superannuation benets paid in accordance with the Superannuation Guarantee Levy (SGL). Fees are set at a level to attract and retain Directors of the highest calibre with relevant and complementary experience, and reect their risk, time commitments and responsibilities. NonExecutive Directors are not entitled to any form of incentive or any payments related to the companys performance that may otherwise impinge on independence and impartiality. The Board may pay additional remuneration to Non-Executive directors for signicant extra work however no such payments were made in 2011. In addition, Non-Executive directors are entitled to be reimbursed for reasonable travel and other expenses while engaged in the business of the Company. The amount of aggregate remuneration required and the manner in which it is apportioned amongst Directors is reviewed annually. The Board considers advice from external consultants as well as the fees paid to Non-Executive Directors of comparable companies when undertaking the annual review process and seeks shareholder approval when required. NON-EXECUTIVE DIRECTOR REMUNERATION The fee received by each Non-Executive director in 2011 was $63,900 in relation to their service as a Director of the Board and as a member of any Board Committee for the year. The Chairman received a fee of $126,690 reecting the additional time commitments in fullling this role. Chairs of the Audit and Risk Committee, and the Remuneration Committee received an additional fee of $5,100. The Chairman does not receive any additional fees for being the Chair of the Nomination Committee. Total remuneration for Non-Executive directors for the year ending 30 June 2011 was $362,511. Details are provided on page 25 of this report. Non-Executive Director fees were not increased in 2011.
EXECUTIVE REMUNERATION STRATEGY Penrices Executive Remuneration Strategy encompasses the Managing Director, General Managers and Secretaries of the Parent and the Group. The Executive Remuneration Strategy is to strike a balance between rewarding performance and sustaining and growing the business protably. Its intent is to: Attract, motivate and retain the right people; Pay competitive, median market aligned total compensation; Pay for performance with a transparent process linking outcomes and reward, with clear and meaningful targets; and Create an environment where Executives act, feel, and are encouraged to be owners of the business. The Company recognises that to date it has underperformed investors expectations. Consequently, the current focus of the Company is to achieve and then sustain above average returns to shareholders. Having an effective Executive is a key element in this and hence attracting and retaining the right people is critical to success. The Directors believe that retention of the current Executive at this time is critical to achieving that aim and that competitive remuneration must therefore be maintained. EXECUTIVE REMUNERATION The Company remunerates the Executive commensurate with their position and responsibilities, so as to: link reward with the strategic goals and prot performance of the Company; align the interests of Executives with those of shareholders; ensure total remuneration is competitive by market standards; and minimise risk. Remuneration is structured to contain both xed and at-risk components to drive culture and behaviour towards higher performance. The mix between xed and at-risk elements varies across the Executive and the table below shows the percentage of Total Annual Remuneration that is at risk against both Short Term and Long Term objectives:
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% OF TOTAL ANNUAL REMUNERATION AT RISK Name Guy Roberts Frank Lupoi Declan Mackle Darrin Wright Brett Smith^ Andrew Cannon Roy Doveton Marnie Brokenshire Role MD & CEO CFO & Company Secretary General Manager General Manager General Manager General Manager General Manager General Manager Short term incentive 2010 2011 21% 21% 13% 18% 14% 20% 14% 20% n/a 15% 12% 12% 12% 12% 12% 12% Long term incentive 2010 2011 26% 26% 25% 24% 14% 13% 14% 13% n/a 11% 12% 12% 12% 12% 12% 12% Total at Risk 2010 2011 47% 47% 38% 42% 28% 33% 28% 33% n/a 26% 24% 24% 24% 24% 24% 24%
^ Appointed 12 April 2010 The above table reects target performance. It is usual practice to provide Executives with stretch targets for key STI measures. In the event that these targets are met, a loading of 20% on STI earned becomes payable. This is consistent with the Boards strategy of linking rewards with shareholder interests. Incentive payments are based on the FAR as at September 1. Executive performance against plan, corporate behaviour, and overall contribution to Company performance is reviewed annually. The payment of any STI or LTI incentive earned is entirely dependent upon each Executive achieving a minimum satisfactory standard. EXECUTIVE FIXED ANNUAL REMUNERATION (FAR) Fixed annual remuneration (FAR) is the aggregate of salary, compulsory superannuation payments and other benets paid to each member of the Executive. It may be taken in agreed form. It is reviewed annually based on Company, business unit and individual performance, capacity to pay, relevant comparative market data and, where appropriate, external advice on policies and practices. The Remuneration Committee has access to professional advice independent of management. The Company seeks to pay in the median range. FAR was reviewed effective September 1, 2010 and the average increase across the Executives was 3% (excluding promotion increase relating to General Manager, Quarry and Mineral). Not all Executives received an increase. FAR was reviewed effective September 1, 2011 and there were no increases to any Executive FAR other than for Brett Smith. The following table provides FAR for Executives with effect from 1 September: FAR AS AT 1 SEPTEMBER 2009 2010 $500,000 $300,000 $225,500 $195,000 n/a $213,000 $194,500 $214,000 $520,000 $320,000 $235,000 $226,000 $193,000 $218,000 $194,500 $214,000
Name Executive Guy Roberts Frank Lupoi Declan Mackle Darrin Wright Brett Smith Andrew Cannon Roy Doveton Marnie Brokenshire
Role Managing Director & Chief Executive Ofcer Chief Financial Ofcer & Company Secretary General Manager, Chemical Operations General Manager, Quarry & Mineral* General Manager, Chemicals Business ^ General Manager, Supply Chain General Manager, Capital Projects General Manager, Human Resources
2011
$520,000 $320,000 $235,000 $226,000 $210,000 $218,000 $194,500 $214,000
* Appointed 1 May 2010, previously General Manager Safety, Health, Environment and Quality ^ Appointed 12 April 2010
PENRICE SODA HOLDINGS LIMITED 2011 Annual Report 21
The actual FAR payments provided in the tables in pages 25 and 26 vary from the above due to the disconnect between the July to June nancial year being reported and the salary review period being September to August. EXECUTIVE VARIABLE ANNUAL REMUNERATION SHORT TERM INCENTIVE (STI) The STI program is a cash based incentive linked to the achievement of the Companys predominantly nancial targets which are set annually. It places a substantial percentage of each Executives earnings at risk, yet is both achievable under reasonable circumstances, and cost effective. The Managing Director & Chief Executive Ofcer reviews the performance of individual Executives and the Chairman reviews the performance of the Managing Director & Chief Executive Ofcer against a standard covering nancial and non nancial measures. Non nancial measures include safety, health and environmental performance, behaviours
and skills development, and projects with longer term strategic benets. In the event that a minimum personal performance rating is not met, no STI is payable under any circumstance. Executives with superior and outstanding individual performance may receive additional STI payments up to a maximum of 120% but only in the event that the Company achieves a predetermined, Board approved, stretch target. The aggregate of annual STI payments available for the Executive is subject to the approval of the Remuneration Committee. In the Companys current circumstances, operating prot and positive cash ow are the principal STI targets. For the 2011 nancial year the target was to achieve net prot after tax (NPAT) and net free cash ow at a budget level which was above the previous nancial years actual NPAT and net free cash ow result.
Results of Net Prot After Tax and Net Free Cash Flow are shown in the following table. $000 Net Free cash out ow NPAT Earnings per Share (cents) 2007 (1,402) 6,724 14.9 2008 (19,731) 7,254 16.1 2009 (22,178) 7,149 12.9 2010 (5,845) 6,277 7.8 2011 (8,218) (26,206) (28.7)
Having not met the specic performance objectives for the nancial year 2011, no STI payments were payable. There were no STI payments earned in the prior year. STI EARNED IN FINANCIAL YEAR 2010 2011 $0 $0 $0 $0 $0 n/a $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Name Guy Roberts Frank Lupoi Declan Mackle Darrin Wright Brett Smith Andrew Cannon Roy Doveton Marnie Brokenshire
Role Managing Director & Chief Executive Ofcer Chief Financial Ofcer & Company Secretary General Manager, Chemical Operations General Manager, Quarry & Mineral General Manager, Chemicals Business General Manager, Supply Chain General Manager, Capital Projects General Manager, Human Resources
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EXECUTIVE VARIABLE ANNUAL REMUNERATION LONG TERM INCENTIVE (LTI) The LTI Scheme is equity or cash based and provides eligible Executives with an additional reward for achieving Penrices long term strategic and nancial objectives, hence aligning compensation with shareholders risks and rewards. It is measured over a three year period. The current plan focusses on two areas of performance: Earnings per share growth as an absolute measure it has direct relevance to shareholders and potential to pay dividends; Total shareholder return as a relative measure it reects superior performance compared witha general investment market. As a consequence of performance targets not being met, there were no benets for participating Executives arising from the LTI Plan for FY2009 (Performance period FY2009 FY2011). Details of the structure of the LTI Scheme are as follows: The performance year commences on 1 July and continues until the next 30 June. The Company grants Performance Rights to each eligible participant at the commencement of each performance year. Each grant will specify the value of the grant, vesting period, and vesting conditions. The vesting period or performance measurement period for the annual grants under the Scheme is three (3) years. The participant will receive 100% of the annual grant of Performance Rights at the commencement of each performance year. The quantum of each annual grant is calculated rstly as a percentage of each Executives FAR determined by size and function of the role (Hay Evaluation), and then as follows: Number of Performance rights = Fixed Annual Remuneration for the Participant x LTI% / Adjusted Value of a Performance Right. The value of a performance right (prior to any adjustment/discount) is the VWAP (volume weighted average price) of share trading for 15 days immediately prior to the commencement of the measurement period. A discount (adjusted value of a performance right) may be applied on account of the grant being subject to vesting conditions effectively reducing the value of the Performance Rights. This discount is considered in light of the initial vesting conditions and its application is subject to change at the discretion of the Board in respect of each grant.
Each grant will be subjected to vesting conditions or performance measures. The Scheme currently incorporates two performance measures (that is EPS and TSR) which align executive reward with shareholder interests. These function as vesting conditions with various hurdles required to be met before any vesting of Performance Rights will occur. Each measure is weighted equally as a vesting condition and considered separately in the calculation of vesting. Denitions EPS Earnings: is statutory net prot after tax. Shares: is the daily average number of shares on issue in the performance measurement period. Board discretion shall apply to the calculation of EPS growth so that eligible participants are neither advantaged nor disadvantaged by capital raisings or reductions, or any other factors not reective of underlying business performance. TSR Dividend paid in the performance measurement period plus the movement in the share price from the VWAP for the twenty trading days immediately prior to the commencement of the performance measurement period (1 July Year One) up to the VWAP for the twenty trading days immediately prior to the end of the performance measurement period (30 June Year Three).
TSR performance is ranked relative to companies in a comparator group consisting of the smallest 50 companies other than Penrice in the ASX Small Industrials Index. The hurdle is tested initially at the end of the Performance Period being the end of the three year period and if required is then subject to retesting at the end of the fourth year following the grant. The Company may in its discretion decide to pay earned Performance Rights in cash and/or shares and will take into account expressed wishes on behalf of an eligible participant in that regard. A participant must remain employed by the Company as at 30 June in the third year of the performance measurement period to be eligible to receive the Performance Rights. If a participant is terminated on account of redundancy or redeployment all earned Performance Rights shall be paid and unearned Performance Rights will be forfeited, unless otherwise determined by the Board. In the case of retirement and resignation as a consequence of ill health or death, all earned Performance Rights shall be paid soon after termination. Takeovers/Ownership Change all granted Performance Rights will be paid out (issued) upon takeover.
2011 Annual Report
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While the tables on pages 25 and 26 show remuneration related to LTI, Executives received no cash or equity benet and the amounts represent an expense for the Company in accordance with AASB-2 Share Based Payments. EMPLOYMENT CONTRACTS Managing Director & Chief Executive Ofcer The Managing Director & Chief Executive Ofcer, Mr Guy Roberts, is employed under a rolling common law employment contract. The current employment contract commenced on 19 December 2006. Under the terms of this contract: Mr Roberts receives xed annual remuneration (FAR) which is reviewed annually effective 1 September. Mr Roberts is eligible for participation in the STI scheme with a quantum of 40% of FAR and the LTI scheme with a quantum of 50% of FAR. Mr Roberts may resign from his position and thus terminate this contract by giving 12 months written notice. The Company may terminate this employment agreement by providing 12 months written notice or providing payment in lieu of the notice period (based on the FAR of Mr Roberts remuneration). If in the Companys reasonable opinion, the CEO fails to exercise reasonable skill and care in the performance of the CEOs duties, having rst been provided with not less that 28 days notice of the details of the alleged failure to exercise reasonable skill and care, and having failed to rectify that failure within that time, the employment agreement may immediately terminate without notice. The Company may terminate this employment agreement at any time without notice or compensation in lieu, in the case of serious or wilful misconduct. Employment Contracts Other Executives All Executives have common law employment contracts. The Company may terminate the employment by providing four (4) months written notice or providing payment in lieu of the notice period (based on FAR) in the event of redundancy or termination. In the event of voluntary resignation, the Executive is required to provide three (3) months written notice which the Company may elect to pay in lieu. The Company may terminate the contract at any time without notice if serious misconduct has occurred. Where termination with cause occurs the Executive is only entitled to that portion of remuneration that is xed, and only up to the date of termination. On termination with cause, any unvested performance rights will immediately be forfeited.
24
SHORT TERM
POST EMPLOYMENT BENEFITS
LONG TERM BENEFITS
SHARE BASED PAYMENTS
Superannuation
Long Service Leave
STI (b)
Non Monetary Benets (a)
Performance Related Pay % (c)
Total Salary & Fees LTI No. of Pref Rights Vested (d) LTI(c) Total
TABLE 1: COMPENSATION OF KEY MANAGEMENT PERSONNEL 30 JUNE 2011
Non Executives D Trebeck A Fletcher B Gibson J Hirst D Groves ^ $10,461 $38,312 $7,597 $35,295 $2,796 $126,690 $69,010 $67,973 $64,973 $33,865 0.00% 0.00% 0.00% 0.00% 0.00%
$116,229 $30,698 $60,376 $29,678 $31,069
Executives G Roberts F Lupoi D Mackle D Wright B Smith A Cannon R Doveton M Brokenshire $274,915 $28,813 $151,046 $2,701,690 $25,000 $26,330 $19,408 $16,750 $16,515 $24,289 $36,292 $15,870 $13,155 $3,079 $2,243 $1,902 $683 $1,864 $1,581 $4,306 $67,609 $33,197 $12,181 $9,768 $3,686 $8,325 $7,821 $8,459 $615,140 $365,806 $251,703 $246,688 $206,821 $232,004 $197,524 $223,493
$460,977 $303,200 $217,871 $192,502 $164,703 $186,054 $151,830 $177,250
$48,399 $25,766 $21,234 $11,472 $17,608
10.99% 9.08% 4.84% 3.96% 1.78% 3.59% 3.96% 3.78%
$2,122,437
$124,479
Notes ^ Appointed 20 December 2010
2011 Annual Report
(a) Non monetary benets relate to salary sacrice motor vehicles unless otherwise noted. (b) STI performance hurdle not met for performance year FY2011. (c) The share base payment expense represents a proportion of the value of the rights granted in FY2010 and FY2011 in accordance with AASB2 Share Based Payments. The FY2010 grants relate to performance hurdles over the three year period FY20102012 and the FY2011 grants over FY20112013. As such, no vesting or payments in relation to these LTI schemes have yet been made. (d) LTI performance hurdle not met for the FY2009 scheme, relating to the three year period FY20092011, and therefore no rights were vested.
25
TABLE 2: COMPENSATION OF KEY MANAGEMENT PERSONNEL 30 JUNE 2010
26
SHORT TERM
POST EMPLOYMENT BENEFITS
SHARE BASED LONG TERM BENEFITS PAYMENTS
Superannuation
Performance Related Pay %
Non Monetary Benets (b)
Salary & Fees Long Service Leave LTI No. of Pref Rights Issued (e) STI (c) LTI(d) Total
Cash Bonus (a)
Directors G Roberts D Trebeck ^ A Fletcher B Gibson J Hirst J Heard^^ $37,151 $9,757 $54,046 $29,558 $6,399 $18,134 $2,324 $30,338 $645,996 $103,947 $69,760 $69,470 $63,280 $54,832 22.50% 0.00% 0.00% 0.00% 0.00% 0.00% 97,423
$412,784 $94,190 $15,714 $39,912 $56,881 $36,698
$115,000
$48,399
Executives F Lupoi D Mackle~ D Wright B Smith* A Cannon R Doveton M Brokenshire M Carter $339,855 $15,541 $59,056 $2,795,826 $28,624 $18,657 $15,003 $3,561 $16,656 $39,535 $14,461 $48,313 $1,049 $810 $635 $60 $796 $3,949 $1,053 $4,865 $8,790 $3,223 $3,575 $3,735 $3,693 $3,885 $1,817 $363,340 $249,094 $215,793 $43,192 $226,865 $218,649 $222,226 $249,382
$269,877 $207,301 $166,704 $39,571 $185,066 $150,257 $176,117 $179,387
$55,000 $7,000 $7,000 $12,000 $6,000 $7,000 $15,000
$12,103 $22,876 $8,612 $15,215 $19,710
17.56% 4.10% 4.90% 0.00% 6.94% 4.43% 4.90% 6.74%
11,691 12,340 12,243 12,665 14,289 160,651
$2,030,459
$224,000
$126,915
Notes ^ Appointed 29 October 2009 ^^ Retired 29 October 2009 ~ Non monetary benet amount relates to Reimbursement of relocation expenses * B Smith commenced on 12 April 2010
(a) (b) (c) (d)
Paid in recognition of delivery of key strategic corporate initiatives in FY2009. Non monetary benets relate to salary sacrice motor vehicles unless otherwise noted. STI performance hurdle not met for performance year FY2010. The share base payment expense represents a proportion of the value of the rights issued in FY2008 & FY2010 in accordance with AASB2 Share Based Payments. No actual payments have been made. (e) Performance rights issued relate to allocation under LTI scheme for FY2008 which vested on 1 July 2010.
TABLE 3: COMPENSATION PERFORMANCE RIGHTS FOR FY2011 Compensation performance rights granted and vested during the year Granted Vested subject to service condition Fair Value per No. Granted Date Perf Right ($) No. % Vesting Date Directors G Roberts Executives F Lupoi D Mackle A Cannon B Smith R Doveton D Wright M Brokenshire 824,703 1/9/10 0.24 30/6/13
406,008 149,081 103,722 91,828 92,541 143,371 101,819 1,913,073
1/9/10 1/9/10 1/9/10 1/9/10 1/9/10 1/9/10 1/9/10
0.24 0.24 0.24 0.24 0.24 0.24 0.24
30/6/13 30/6/13 30/6/13 30/6/13 30/6/13 30/6/13 30/6/13
TABLE 4: COMPENSATION PERFORMANCE RIGHTS FOR FY2010 Compensation performance rights granted and vested during the year Granted Vested subject to service condition Fair Value per No. Granted Date Perf Right ($) No. % Vesting Date Directors G Roberts Executives F Lupoi D Mackle A Cannon R Doveton D Wright M Brokenshire 387,939 1/2/10 0.64 30/6/12
190,011 69,671 46,790 46,173 45,128 49,165 834,877
1/2/10 1/2/10 1/2/10 1/2/10 1/2/10 1/2/10
0.64 0.64 0.64 0.64 0.64 0.64
30/6/12 30/6/12 30/6/12 30/6/12 30/6/12 30/6/12
An additional 43,191 performance rights were issued to other employees.
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27
TABLE 5: VALUE OF PERFORMANCE RIGHTS AWARDED, EXERCISED AND LAPSED DURING THE 2011 FINANCIAL YEAR Remuneration consisting of performance rights for the year % 31.6%
Value of Perf Rights Granted during year $ Directors G Roberts Executives F Lupoi D Mackle A Cannon B Smith R Doveton D Wright M Brokenshire 195,042
Value of Perf Rights exercised during year $
Value of Perf Rights lapsed during year $
96,021 35,258 24,530 21,717 21,886 33,907 24,080 452,441
26.2% 14.0% 10.6% 10.5% 11.1% 13.7% 10.8%
ROUNDING OF AMOUNTS The entity is a Company of the kind specied in the Australian Securities and Investments Commission class order 98/0100. In accordance with the class order, amounts in the nancial statements and Directors report have been rounded to the nearest thousand dollars unless specically stated otherwise.
AUDITORS INDEPENDENCE DECLARATION TO THE DIRECTORS OF PENRICE SODA HOLDINGS LIMITED In relation to our audit of the nancial report of Penrice Soda Holdings Limited for the nancial year ended 30 June 2011, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct.
NON-AUDIT SERVICES The following non-audit services were provided by the entitys auditor, Ernst & Young. The Directors are satised that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act. The nature and scope of each type of nonaudit service provided means that auditor independence was not compromised. Ernst & Young received or are due to receive the following amount for the provision of non-audit services: Other assurance services Taxation Total $59,967 $123,196 $183,163
Ernst & Young
This report has been signed in accordance with a resolution of the Directors. Signed at Adelaide this 27th day of September 2011.
Mark Phelps Partner 27 September 2011

Ernst & Young Building 121 King William Street, Adelaide SA 5000 Adelaide GPO Box 1271 Adelaide SA 5001 Tel: +61 8 8417 1600 Fax: +61 8 8417 1775 www.ey.com/au
David Trebeck Chairman
Guy Roberts Managing Director and Chief Executive Ofcer
28
CORPORATE GOVERNANCE STATEMENT
The Board of Directors of Penrice Soda Holdings Limited is responsible for establishing the corporate governance framework of the consolidated Group. The Board has considered the ASX Corporate Governance Councils published guidelines as well as its Corporate Governance Principles and Recommendations and is pleased to report that its practices are largely consistent with those of the Councils guidelines. The Board guides and monitors the business and affairs of Penrice Soda Holdings Limited on behalf of the shareholders by whom they are elected and to whom they are accountable.
STRUCTURE OF THE BOARD The names of the Directors, their qualications, experience and their period of ofce are stated in the Directors Report. An independent Director is a Director who is not a member of management (a nonexecutive Director) and who: holds less than ve percent of the voting shares of the Company and is not an ofcer of, or otherwise associated, directly or indirectly, with a shareholder of more than ve percent of the voting shares of the Company; has not within the last three years been employed in an executive capacity by the Company or another group member, or been a Director after ceasing to hold any such employment; within the last three years has not been a principal or employee of a material professional adviser or a material consultant to the Company or another group member; is not a material supplier or customer of the Company or another group member, or an ofcer of or otherwise associated, directly or indirectly, with a material supplier or customer; has no material contractual relationship with the Company or another group member other than as a Director of the Company; and is free from any interest and any business or other relationship that could, or could reasonably be perceived to materially interfere with the Directors ability to act in the best interests of the Company. All the non-executive Directors at the time of this report are considered independent. The Chairman of the Board and the Chairman of the Audit and Risk Management Committee are each considered to be independent Directors.
The roles of Chairman and Managing Director & Chief Executive Ofcer are not exercised by the same individuals. Penrice Soda Holdings Limiteds Board Charter is available in the Corporate Governance section at www.penrice.com.au. BOARD SIZE AND COMPOSITION At the date of this Corporate Governance Statement, the Board comprises four independent nonExecutive Directors and one Executive Director. The constitution requires a minimum of three and a maximum of eight Directors. The Board currently has ve Directors and may review this from time to time. The Nomination Committee determines the necessary and desirable competencies of the Board members and will make recommendations to the Board on the composition of the Board and its Committees, including the appointment and removal of members. The Companys constitution requires that at the Annual General Meeting, one third of the non-Executive Directors who have held ofce for the longest period, or if their number is not a multiple of three, then the number nearest to but not more than one third of the Directors, must retire. A retiring Director is eligible for re-election. BOARD ROLE AND RESPONSIBILITY The Boards role and responsibilities are formalised in the Board Charter. The Charter also denes the matters that are reserved for the Board and its Committees and the Board members access rights to information and independent advice, among other matters. Directors may obtain independent, professional advice relevant to Penrices affairs to assist them in carrying out their duties as directors at Penrices
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expense subject to approval of the Chairman. Such approval is not to be unreasonably withheld. The Penrice Soda Holdings Limiteds Board, as the representative of the Companys shareholders, is responsible for the overall governance of the Company and its responsibilities include: appoint and remove the Chief Executive Ofcer and senior executives, and determine the conditions of service, remuneration (including termination benets) and the remuneration policy of senior executives; monitor and assess the performance of the Chief Executive Ofcer and the Companys executive team; approve the remuneration (including nancial incentives) of the Chief Executive Ofcer and executive team; recommend the appointment of and review the performance of, Directors; oversee succession plans for the Board, Chief Executive Ofcer and executive team; establish incentive plans for Directors, executives and employees; establish and appoint the members of subcommittees of the Board, including the Nomination Committee, Remuneration Committee and the Audit and Risk Management Committee; provide input into, and approve, the business plan, budget and compliance policies of the Company as prepared by management; approve the Companys annual accounts, reports and other public documents; monitor the strategic and nancial objectives and performance against the business plan and budget; monitor business risks and oversee the risk management strategy; oversee the audit, compliance and nancial and operation risk management functions of the Company;
delegate an appropriate level of authority to management; oversee the Companys employeerelations and legal, ethical, social and environmental behaviour; approve all material acquisitions, divestments, contracts and capital expenditure; ensure appropriate and responsible funding is available to the Company; oversee the Companys nancial reporting and communication to shareholders, the investment community and shareholder relations generally (including effectively communicating the Companys nancial position, trading performance and prospects to stakeholders); and ensure that the Penrice Group has appropriate corporate governance structures in place including standards of ethical behaviour and promoting a culture of corporate and social responsibility. AUDIT AND RISK MANAGEMENT COMMITTEE The Audit and Risk Management Committee has a documented charter, approved by the Board. All members must be non-Executive Directors. The Chairman may not be the Chairman of the Board. The current members of the Audit and Risk Management Committee are: Andrew V. Fletcher (Chairman) Non-Executive Director David B. Trebeck Non-Executive Director (ex ofcio) John Hirst Non-Executive Director David Groves Non-Executive Director For details of Directors attendance at meetings of the Audit and Risk Management Committee refer to the Directors Report. Refer also to the Directors Report for details of the
qualications of the members of this committee. The committee advises on the establishment and maintenance of a framework of internal controls and ethical standards for the management of the consolidated entity. This includes internal controls to deal with the effectiveness of signicant business processes, the safeguarding of assets, the maintenance of proper accounting records and the reliability of nancial information as well as nonnancial considerations. The committee also provides the Board with additional assurances regarding the reliability of nancial information for inclusion in the nancial reports. Penrice Soda Holdings Limiteds Audit and Risk Management Committee Charter is available in the Corporate Governance section at www.penrice.com.au. AUDITOR INDEPENDENCE The independence of the external auditor is of particular importance to shareholders and the Board. The Board requires: Rotation of the senior audit partner every ve years; Annual conrmation by the auditor that it has satised all professional regulations relating to auditor independence; and Specic exclusion of the audit rm from work which may give rise to a conict. In accordance with the Corporations Act 2001 and, based on the advice of the Audit and Risk Management Committee, the Directors have satised themselves that the provision of nonaudit services during the year by the auditor is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001.
30
THE REMUNERATION AND NOMINATION COMMITTEE The Company had a Remuneration and Nomination Committee in place up until 23 August 2011, and then separate Remuneration and Nomination Committees after this date. The Remuneration and Nomination Committee operated under a Board approved charter as disclosed in last years annual report, a copy of which is available upon request. The Company separated the Committees into two for the purpose of more fulsome compliance with the relevant ASX principles and best practice. For details of Directors attendance at meetings of the Remuneration and Nomination Committee, refer to the Directors report. NOMINATION COMMITTEE The Board has a Nomination Committee, which meets at least annually to ensure that the Board continues to operate within the established guidelines. The Nomination Committee was approved by the Board to operate as a separate committee effective 23 August 2011. The purpose of the Nomination Committee is to recommend to the Board the composition of the Board and its Committees, director appointments and removal, director induction, continuing development and performance assessment and a process to ensure diversity obligations are met. In particular, the Committee is to undertake the functions of the Nomination Committee set out in the ASX Corporate Governance Councils Corporate Governance Principles and Recommendations 2nd Edition (ASX Principles). The Committee is appointed by the Board and shall consist of the Chairman of the Board and all Non Executive Directors in ofce at the time, of whom
at least three shall be independent Directors. The Chairman of the Board shall chair the Committee. The current members of the Nomination Committee are: David Trebeck Non-Executive Director (Chairman) Andrew Fletcher Non-Executive Director John Hirst Non-Executive Director David Groves Non-Executive Director Penrices Nomination Committee Charter has been approved by the Board and is available in the Corporate Governance section at www.penrice.com.au. REMUNERATION COMMITTEE The Board has a Remuneration Committee which meets at least twice annually to ensure that the Board continues to operate within the established guidelines. The Remuneration Committee was approved by the Board to operate as a separate committee effective 23 August 2011. The purpose of the Remuneration Committee is to fulll its corporate governance requirements and provide recommendations to the Board in relation to strategic human resource policies, remuneration of non executive directors, remuneration framework for the Managing Director & Chief Executive Ofcer, and executives including direct reports to the Managing Director & Chief Executive Ofcer. In particular, the Committee is to undertake the functions of the Remuneration Committee set out in the ASX Corporate Governance Councils Corporate Governance Principles and Recommendations 2nd Edition (ASX Principles). The current members of the Remuneration Committee are: John Hirst Non-Executive Director (Chairman)
David Trebeck Non-Executive Director David Groves Non-Executive Director The Remuneration Committee reviews and makes recommendations to the Board on remuneration packages and policies applicable to the Managing Director, senior executives and Directors themselves. It is also responsible for share schemes, incentive performance packages, superannuation entitlements, retirement and termination entitlements and fringe benets policies. Remuneration levels are competitively set to attract and retain appropriately qualied and experienced executives. The Remuneration Committee obtains independent advice on the appropriateness of remuneration packages, given trends in comparative companies. Remuneration packages can include a mix of xed remuneration and performance-based remuneration. The expected outcomes of the remuneration structure are: retention and motivation of key executives; attraction of quality management to the Company; and performance incentives which allow executives to share the rewards of the success of the Company. For a full discussion of the Companys remuneration philosophy and framework and the remuneration received by Directors and Executives during the year, please refer to the Remuneration Report, which is contained within the Directors Report. Penrices Remuneration Committee Charter has been approved by the Board and is available in the Corporate Governance section at www.penrice.com.au.
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BOARD PERFORMANCE EVALUATION The performance of the Board and Executives is reviewed regularly against both measurable and qualitative indicators. During the reporting period, the Nomination and Remuneration Committee conducted performance evaluations that involved an assessment of each Board member and Executives performance against specic and measurable qualitative and quantitative performance criteria. The performance criteria against which Directors and Executives are assessed is aligned with the Companys nancial and non-nancial objectives. Any Director whose performance is consistently unsatisfactory will be asked to retire. DIVERSITY The Company considers that business performance, productivity and job satisfaction are enhanced by a diverse workforce, senior management team, and Board, and as a consequence is committed to promoting a culture where diversity is embraced. As part of this commitment, the Company has developed a Diversity Policy (Policy). The Policy is targeted at facilitating diversity within the workforce, management, and Board structure, and where considered desirable, addressing underrepresentation within specic work place groups. The following were identied as the key Diversity objectives: Gender; Age; Equal Opportunity. The Board sets measurable objectives for achieving both Company wide, and Board specic, diversity aims each year which may include: The proportion of women employees in the whole organisation and executive positions and on the board; The gender pay equity gap across the organisation;
The selection criteria for board and senior executive positions to ensure the broadest candidate pool; Programs targeting the development of broader and advanced skills relating to career advancement for members of the diversity focus groups into executive and board positions; Ensuring that each vacant position at board and senior executive level has at least one woman on the shortlist of candidates; Placing diversity as a regular agenda item on Board and/or Nomination Committee meetings; Linking the achievement of these objectives to key performance indicators for the board and the senior executive team. A summary of the Boards progress against diversity objectives is set out in the Directors report in this annual report. The Companys Diversity policy has been approved by the Board and is available in the Corporate Governance section at www.penrice.com.au. ROLE AND FUNCTION OF EXECUTIVES The Board has delegated to the Managing Director, responsibility for the conduct of the affairs and day to day management of the Company. Delegation is subject to matters reserved for Board approval as detailed in the Board of Directors Charter. In addition there are seven Executives reporting to the Managing Director who have been delegated responsibility for managing areas of the business including: sales, marketing, nancial and treasury management, operations and production facilities, capital projects, human resources, raw material purchasing, distribution, strategic planning, legal compliance, regulatory affairs and corporate secretarial. The performance of Executives is reviewed periodically by the Managing Director against appropriate measures
set by the Managing Director and the Remuneration Committee relative to the Executives role. The Remuneration Committee has oversight in relation to the setting of goals to be achieved by Executives in connection with both shortterm and long-term incentive schemes and monitors the performance of Executives in relation to the achievement of those goals. In accordance with this process, a performance evaluation for Executives has taken place during the reporting period. CONTINUOUS DISCLOSURE Penrice has written policies and procedures designed to ensure compliance with ASX Listing Rule disclosure requirements and to enforce accountability at Executive level for that compliance. The Board has endorsed these policies. The Company is committed to dealing fairly, transparently and openly with both current and prospective shareholders using available channels and technologies to reach widely and communicate promptly. The Company commits to facilitating participation in shareholder meetings and dealing promptly with shareholder enquiries. This commitment is formalised in the Shareholder Communications Policy which is available in the Corporate Governance section at www.penrice.com.au. COMMUNICATION WITH SHAREHOLDERS Penrice has a communications policy to promote communication with shareholders. The Companys website is where shareholders can obtain market announcements, press releases, notice of meetings and nancial statements. The external auditor, Ernst & Young, attends the annual general meeting and is available to answer shareholder questions about the conduct of the audit and the preparation and content of the
32
auditors report. Penrices Shareholder Communications Policy is available in the Corporate Governance section at www.penrice.com.au. CODE OF CONDUCT Penrice has adopted a code of conduct to guide compliance with legal and other obligations to legitimate stakeholders. A copy of the code of conduct is provided to all employees and Directors on joining Penrice. Penrices Code of Conduct and Code of Conduct-Directors are available in the corporate governance section at www.penrice.com.au. DIRECTOR AND EMPLOYEE SHARE TRADING POLICY All information obtained or obtainable as a Director or employee of the Company is the property of the Company and may not be used for any purpose other than in the conduct of the affairs of the Company. All information of the Company is strictly condential and must not be disclosed to any entity, except as required in the ordinary course of the operations of the Company, or used by Directors or employees for personal benet or gain. As a matter of law, Directors and Company employees may not buy or sell shares in the Company if they possess information that, if disclosed publicly, might have a material effect on the price or value of the Companys shares. The key elements of the Share Trading Policy are: Strict recognition of the entitys closed periods The restrictions on trading that apply to the entitys key management personnel Any trading which is not subject to the entitys trading policy Any exceptional circumstances in which the entitys key management
personnel may be permitted to trade during a prohibited period with prior written clearance; and the procedures for obtaining prior written clearance for trading. Penrices Director and Employee Share Trading Policy is available in the Corporate Governance section at www.penrice.com.au. CEO AND CFO ASSURANCE The Board receives regular reports about the nancial condition and operational results of the Company and its controlled entities. The Board has received and considered the assurance received from the CEO and CFO that the declaration in accordance with section 295A of the Corporations Act 2001 is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to nancial reporting risks. The Company uses an enterprise wide risk management process and conducts annual reviews of its key risks. The annual review encompasses strategic, nancial, operational and compliance risks and the enterprise wide risk prole is updated accordingly. Action plans and controls are identied to manage and mitigate the risks to an acceptable level. The internal audit function is outsourced to KPMG and operates to provide independent assurance over the control environment. This internal audit function works to complement other assurance functions, both internal and external, already in place and operating. RISK MANAGEMENT The Board has overall responsibility for ensuring that there is a sound system of risk management and internal compliance and control across the business. It also has responsibility for establishing risk management policies and the risk appetite of the
Company, and ensuring that these are implemented. Specic monitoring and evaluation of the effectiveness of risk management and the internal control environment are delegated to the Audit and Risk Management Committee. The Committee approves the Companys accounting policies, reporting practices and production of nancial statements, and monitors the application of appropriate management controls. It considers external audit reports and other independent reports, and reviews the adequacy of the Companys procedures and internal controls in order to manage the companys material business risks. Risk and compliance processes and reporting procedures provide assurance to the Board and the Audit and Risk Management Committee that the preparation of the nancial statements and the control systems underlying them are adequate. The enterprise wide risk management framework has enabled the business to identify and assess strategic, operational, compliance and reporting risks and controls, respond promptly and appropriately and continue to monitor risks and issues as they evolve. Throughout the year the Board has been appraised on the status of risk management. The Companys risk management structures and procedures are continually improved and have been enhanced or updated during the year. Penrices Risk Management Policy is available in the Corporate Governance section on the Penrice website at www.penrice.com.au. The Board considers material business risks with reference to materiality set in accordance with the accounting standards and other qualitative factors deemed relevant. Risks are reviewed and challenged on a regular basis to ensure they are relevant, appropriately assessed and rated and are being appropriately managed.
2011 Annual Report
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FINANCIAL STATEMENTS
Income Statement Statement of Comprehensive Income Statement of Financial Position Statement of Changes in Equity Cash Flow Statement Notes to the Financial Statements Note 1: Corporate Information Note 2: Statement of signicant accounting policies Note 3: Financial risk management objectives and policies Note 4: Income statement items Note 5: Income tax Note 6: Dividends paid Note 7: Segment information Note 8: Earnings per share Note 9: Net tangible assets per security Note 10: Notes to the cash ow Statement Note 11: Trade and other receivables Note 12: Inventories Note 13: Derivative nancial instruments Note 14: Other assets Note 15: Property, plant and equipment Note 16: Intangibles Note 17: Other assets/liabilities Note 18: Trade and other payables Note 19: Interest bearing liabilities Note 20: Provisions Note 21: Interest bearing liabilities Note 22: Provisions Note 23: Contributed equity Note 24: Retained earnings and reserves Note 25: Economic dependency Note 26: Remuneration of auditors Note 27: Employee entitlements Note 28: Share based payment plans Note 29: Commitments and contingent liabilities Note 30: Related party disclosures Note 31: Key management personnel Note 32: Parent entity information Note 33: Events occuring after balance date Directors Declaration Independent Auditors Report ASX Additional Information Financial History Corporate Information
35 36 37 38 39 40 40 40 58 64 65 68 68 72 72 73 75 76 77 78 79 81 82 82 83 83 84 85 86 87 88 88 88 91 94 95 96 99 99 100 101 102 103 104
34
INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2011
Note Continuing Operations Sales of goods Interest revenue Other revenue Revenue Cost of sales Gross Prot Distribution expenses Other operating expenses Administration expenses Impairment expense 2d, 4 Exchange gains/(losses) Unrealised exchange gains on foreign currency options and forwards Unrealised (losses)/gains on fair value of interest rate swaps Borrowing costs 4 (Loss)/prot from continuing operations before income tax Income tax benet/(expense) Net (loss)/prot after income tax for the period attributable to the owners of the parent entity 5 4 4 4 4 2011 $000 152,934 98 891 153,923 (115,044) 38,879 (25,433) (8,377) (4,174) (26,000) 690 85 (18) (8,715) (33,063) 6,857 (26,206) Cents Basic (loss)/earnings per share Diluted (loss)/earnings per share 8 8 (28.7) (28.7)
Consolidated 2010 $000 160,376 101 350 160,827 (105,102) 55,725 (29,185) (7,568) (3,900) (568) 630 726 (8,214) 7,646 (1,369) 6,277 Cents 7.8 7.7
The above Income Statement should be read in conjunction with the accompanying notes
STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2011

Note 2011 $000 Net (loss)/prot for the period Other comprehensive income, net of tax: Cash ow hedges gains/(losses) taken to equity Deferred tax on cash ow hedges Net cash ow hedge gain/(losses) taken to equity Actuarial losses recognised directly through retained earnings Deferred tax on actuarial losses Net actuarial losses recognised directly through retained earnings (26,206) Consolidated 2010 $000 6,277
2,176 (653) 1,523 (1,181) 354 (827)
(1,551) 465 (1,086) (245) 73 (172)
27 5
Total other comprehensive income/(losses) for the period, net of tax Total comprehensive (loss)/income
696 (25,510)
(1,258) 5,019
The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes
36 PENRICE SODA HOLDINGS LIMITED 2011 Annual Report
STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2011
Note 30 June 2011 $000 Current Assets Cash and cash equivalents Trade and other receivables Inventories Income tax receivable Derivative nancial instruments Other current assets Total Current Assets NonCurrent Assets Property, plant and equipment Intangibles Deferred tax assets Total NonCurrent Assets Total Assets Current Liabilities Trade and other payables Interest bearing liabilities Income tax payable Derivative nancial instruments Provisions Total Current Liabilities NonCurrent Liabilities Interest bearing liabilities Deferred tax liabilities Provisions Derivative nancial instruments Other noncurrent liabilities Total NonCurrent Liabilities Total Liabilities Net Assets Equity Contributed equity Cash ow hedge reserve Share based payments reserve Retained (losses)/earnings Total Equity 10 11 12 5 13 14 5,163 16,738 51,049 110 891 2,579 76,530
Consolidated 30 June 2010 $000 5,444 21,931 63,069 649 91,093
15 16 5
99,440 8,688 10,666 118,794 195,324
94,587 20,922 3,824 119,333 210,426
18 19 5 13 20
29,803 10,715 205 5,639 46,362
29,190 2,639 2 1,137 5,485 38,453
21 5 22 13 17
70,042 8,094 2,249 62 692 81,139 127,501 67,823
69,872 6,853 1,612 595 25 78,957 117,410 93,016
23 24 24 24
80,236 437 189 (13,039) 67,823
80,074 (1,086) 34 13,994 93,016
The above Statement of Financial Position should be read in conjunction with the accompanying notes
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2011

Cash ow Share based Hedge payments reserve reserve $000 $000 (1,086) 1,523 1,523 34
Contributed equity $000 At 1 July 2010 Loss for period Other comprehensive income for the period Total comprehensive income/(loss) for the period Transactions with owners in their capacity as owners: Share based payments October 2009 capital raising Balance at 30 June 2011 80,074
Retained earnings $000 13,994 (26,206) (827) (27,033)
Total $000 93,016 (26,206) 696 (25,510)
162 80,236
437
155 189
(13,039)
155 162 67,823
At 1 July 2009 Prot for period Other comprehensive income for the period Total comprehensive income/(loss) for the period Transactions with owners in their capacity as owners: Share based payments Capital raising Balance at 30 June 2010
53,615
(1,086) (1,086)
43
7,889 6,277 (172) 6,105
61,547 6,277 (1,258) 5,019
26,459 80,074
(1,086)
(9) 34
13,994
(9) 26,459 93,016
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes
CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2011
Note 2011 $000 Inow/(Outow) Cash ows from operating activities Receipts from customers Payments to suppliers and employees Interest received Interest and other costs of nance paid Income taxes refund/(paid) Net cash ows provided by / (used in) operating activities Cash ows from investing activities Payments for property, plant and equipment Proceeds from sale of plant and equipment Payments for intangibles (mine development & software) Net cash ows (used in) investing activities Cash ows from nancing activities Proceeds from issues of shares Proceeds from loans Payments for loans Payments for nance leases Net cash ows provided by nancing activities Net increase/(decrease) in cash held Cash at beginning of the nancial period Cash at the end of the nancial period 10
Consolidated 2010 $000 Inow/(Outow)
10
174,965 (163,770) 98 (7,584) 1,306 5,015
179,921 (163,886) 101 (7,398) (1,675) 7,063
(13,232) (13,232)
(9,785) 31 (3,154) (12,908)
8,317 (381) 7,936 (281) 5,444 5,163
25,979 (12,700) (624) 12,655 6,810 (1,366) 5,444
The above Cash Flow Statement should be read in conjunction with the accompanying notes
Notes to the Financial Statements for the year ended 30 June 2011
NOTE 1: CORPORATE INFORMATION

This consolidated nancial report of Penrice Soda Holdings Limited for the year ended 30 June 2011 was authorised for issue in accordance with a resolution of the Directors on 20 September 2011. Penrice Soda Holdings Limited is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange. The nature of the operations and principal activities of the Group are described in the Directors Report.
NOTE 2: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation This report is a set of general purpose nancial statements that are prepared in accordance with the requirements of the Corporations Act 2001 and Australian Accounting Standards. This report has also been prepared on a historical cost basis, except for derivative nancial instruments that are measured at fair value. This 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 Group under ASIC Class Order 98/100. The Group is an entity to which the class order applies. Where necessary, comparative gures have been adjusted to conform with changes in presentation in the current year nancial statements. The nancial report has been prepared on the basis that the consolidated Group can continue to meet its nancial obligations as and when they fall due and can therefore continue normal activities, including the settlement of liabilities and the realisation of assets in the ordinary course of business. In the current year the Group incurred trading losses and cash outows from operations after capital expenditure. On 12 August 2011, the Group announced the commencement of a strategic review program, with a dual view of improving the operating performance of the Group and deleveraging, to return the Group to more normal credit metrics. The strategic review will also contemplate the sale of material components of its business and associated deleveraging. Successful completion of the strategic review and restoring the Groups nancial position to a longer term sustainable debt prole is critical to the ability of Penrice to continue as a going concern. The directors believe that at the date of the signing of the nancial statements there are reasonable grounds to believe that, having regard to the matters set out above, the Group will continue to have the support of its nanciers and will meet the obligations as and when they fall due. Should the directors not achieve appropriate operating performance and deleveraging, there is signicant uncertainty whether the Group will continue as a going concern and therefore whether it will realise its assets and extinguish its liabilities in the normal course of business and at amounts stated in the nancial report. a) COMPLIANCE WITH IFRS The nancial report complies with Australian Accounting Standards as issued by the Australian Accounting Standards Board and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. b) AUSTRALIAN ACCOUNTING STANDARDS Australian Accounting Standards and interpretations that have recently been issued or amended but are not yet effective have not been adopted for the annual reporting period ending 30 June 2011. The tables below outline each of these amended standards and the expected change in accounting policy when applied, if any.
40
Notes to the Financial Statements for the year ended 30 June 2011 NOTE 2: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Reference AASB 9
Title Financial Instruments
Summary AASB 9 includes requirements for the classication and measurement of nancial assets resulting from the rst part of Phase 1 of the IASBs project to replace IAS 39 Financial Instruments: Recognition and Measurement (AASB 139 Financial Instruments: Recognition and Measurement). These requirements improve and simplify the approach for classication and measurement of nancial assets compared with the requirements of AASB 139. The main changes from AASB 139 are described below. Financial assets are classied based on (1) the objective of the entitys business model for managing the nancial assets; (2) the characteristics of the contractual cash ows. This replaces the numerous categories of nancial assets in AASB 139, each of which had its own classication criteria. AASB 9 allows an irrevocable election on initial recognition to present gains and losses on investments in equity instruments that are not held for trading in other comprehensive income. Dividends in respect of these investments that are a return on investment can be recognised in prot or loss and there is no impairment or recycling on disposal of the instrument. (c) Financial assets can be designated and measured at fair value through prot or loss at initial recognition if doing so eliminates or signicantly reduces a measurement or recognition inconsistency that would arise from measuring assets or liabilities, or recognising the gains and losses on them, on different bases.
Application date of standard* 1 January 2013
Impact on Group nancial report The Group has not yet determined the extent of the impact of the amendments, if any.
Application date for Group* 1 July 2013
2011 Annual Report
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Reference AASB 124 (Revised)
Title Related Party Disclosures (December 2009)
Summary The revised AASB 124 simplies the denition of a related party, clarifying its intended meaning and eliminating inconsistencies from the denition, including: (a) the denition now identies a subsidiary and an associate with the same investor as related parties of each other; (b) entities signicantly inuenced by one person and entities signicantly inuenced by a close member of the family of that person are no longer related parties of each other; and (c) the denition now identies that, whenever a person or entity has both joint control over a second entity and joint control or signicant inuence over a third party, the second and third entities are related to each other. A partial exemption is also provided from the disclosure requirements for governmentrelated entities. Entities that are related by virtue of being controlled by the same government can provide reduced related party disclosures.
42
Reference AASB 200911
Title Amendments to Australian Accounting Standards arising from AASB 9 [AASB 1, 3, 4, 5, 7, 101, 102, 108, 112, 118, 121, 127, 128, 131, 132, 136, 139, 1023 & 1038 and Interpretations 10 & 12]
Summary The revised Standard introduces a number of changes to the accounting for nancial assets, the most signicant of which includes: two categories for nancial assets being amortised cost or fair value removal of the requirement to separate embedded derivatives in nancial assets strict requirements to determine which nancial assets can be classied as amortised cost or fair value, Financial assets can only be classied as amortised cost if (a) the contractual cash ows from the instrument represent principal and interest and (b) the entitys purpose for holding the instrument is to collect the contractual cash ows an option for investments in equity instruments which are not held for trading to recognise fair value changes through other comprehensive income with no impairment testing and no recycling through prot or loss on derecognition reclassications between amortised cost and fair value no longer permitted unless the entitys business model for holding the asset changes changes to the accounting and additional disclosures for equity instruments classied as fair value through other comprehensive income
AASB 200912
Amendments to Australian Accounting Standards [AASBs 5, 8, 108, 110, 112, 119, 133, 137, 139, 1023 & 1031 and Interpretations 2, 4, 16, 1039 & 1052]
This amendment makes numerous editorial 1 January changes to a range of Australian Accounting 2011 Standards and Interpretations. In particular, it amends AASB 8 Operating Segments to require an entity to exercise judgement in assessing whether a government and entities known to be under the control of that government are considered a single customer for the purposes of certain operating segment disclosures. It also makes numerous editorial amendments to a range of Australian Accounting Standards and Interpretations, including amendments to reect changes made to the text of IFRSs by the IASB.
The Group has not yet determined the extent of the impact of the amendments, if any.
1 July 2011
2011 Annual Report
43
Title Amendments to Australian Interpretation Prepayments of a Minimum Funding Requirement
Summary
Application date of standard*
These amendments arise from the issuance 1 January of Prepayments of a Minimum Funding 2011 Requirement (Amendments to IFRIC 14). The requirements of IFRIC 14 meant that some entities that were subject to minimum funding requirements could not treat any surplus in a dened benet pension plan as an economic benet. The amendment requires entities to treat the benet of such an early payment as a pension asset. Subsequently, the remaining surplus in the plan, if any, is subject to the same analysis as if no prepayment had been made.
AASB 20104
Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project [AASB 1, AASB 7, AASB 101, AASB 134 and Interpretation 13]
Emphasises the interaction between 1 January quantitative and qualitative AASB 7 2011 disclosures and the nature and extent of risks associated with nancial instruments. Claries that an entity will present an analysis of other comprehensive income for each component of equity, either in the statement of changes in equity or in the notes to the nancial statements. Provides guidance to illustrate how to apply disclosure principles in AASB 134 for signicant events and transactions. Clarify that when the fair value of award credits is measured based on the value of the awards for which they could be redeemed, the amount of discounts or incentives otherwise granted to customers not participating in the award credit scheme, is to be taken into account. This standard is as a consequence of phase 1 July 2011 1 of the joint Trans-Tasman Convergence project of the AASB and FRSB. This standard, with AASB 2011-1 relocates all Australian specic disclosures from other standards to one place and revises disclosures in the following areas: (a) Compliance with Australian Accounting Standards (b) The statutory basis or reporting framework for nancial statements (c) Whether the nancial statements are general purpose or special purpose (d) Audit fees (e) Imputation credits
1 July 2011
AASB 1054 Australian Additional Disclosures
1 July 2011
44
Title Amendments to Australian Accounting Standards
Summary This Standard makes numerous editorial amendments to a range of Australian Accounting Standards and Interpretations, including amendments to reect changes made to the text of IFRS by the IASB.
[AASB 1, 3, 4, 5, 101, 107, These amendments have no major impact 112, 118, 119, on the requirements of the amended 121, 132, 133, pronouncements. 134, 137, 139, 140, 1023 & 1038 and Interpretations 112, 115, 127, 132 & 1042] AASB 20106 Amendments to Australian Accounting Standards Disclosures on Transfers of Financial Assets [AASB 1 & AASB 7] Amendments to Australian Accounting Standards Presentation of Other Comprehensive Income [AASB 101] AASB 2011-4 Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure Requirements [AASB 124] This Standard makes amendments to remove individual key management personnel disclosure requirements from AASB 124. The amendments increase the disclosure requirements for transactions involving transfers of nancial assets. Disclosures require enhancements to the existing disclosures in IFRS 7 where an asset is transferred but is not derecognised and introduce new disclosures for assets that are derecognised but the entity continues to have a continuing exposure to the asset after the sale. This Standard requires entities to group items presented in other comprehensive income on the basis of whether they are potentially reclassiable to prot or loss in subsequent periods (reclassication adjustments).
1 July 2011
1 July 2011
AASB 20119
1 July 2012
1 July 2012
1 July 2013
1 July 2013
2011 Annual Report
45
Reference AASB 10
Title Consolidated Financial Statements
Summary AASB 10 establishes a new control model that applies to all entities. It replaces parts of AASB 127 Consolidated and Separate Financial Statements dealing with the accounting for consolidated nancial statements and UIG-112 Consolidation Special Purpose Entities. The new control model broadens the situations when an entity is considered to be controlled by another entity and includes new guidance for applying the model to specic situations, including when acting as a manager may give control, the impact of potential voting rights and when holding less than a majority voting rights may give control. This is likely to lead to more entities being consolidated into the group. Consequential amendments were also made to other standards via AASB 20117 and amendments to AASB 127.
AASB 11
Joint Arrangements
AASB 11 replaces AASB 131 Interests 1 January in Joint Ventures and UIG-113 Jointly2013 controlled Entities Non-monetary Contributions by Ventures. AASB 11 uses the principle of control in AASB 10 to dene joint control, and therefore the determination of whether joint control exists may change. In addition it removes the option to account for jointly controlled entities (JCEs) using proportionate consolidation. Instead, accounting for a joint arrangement is dependent on the nature of the rights and obligations arising from the arrangement. Joint operations that give the venturers a right to the underlying assets and obligations themselves is accounted for by recognising the share of those assets and obligations. Joint ventures that give the venturers a right to the net assets is accounted for using the equity method. This may result in a change in the accounting for the joint arrangements held by the group. Consequential amendments were also made to other standards via AASB 20117 and amendments to AASB 128.
1 July 2013
AASB 12
Disclosure of Interests in Other Entities
AASB 12 includes all disclosures relating to an entitys interests in subsidiaries, joint arrangements, associates and structures entities. New disclosures have been introduced about the judgements made by management to determine whether control exists, and to require summarised information about joint arrangements, associates and structured entities and subsidiaries with non-controlling interests.
1 January 2013
1 July 2013
46
Reference AASB 13
Title Fair Value Measurement
Summary AASB 13 establishes a single source of guidance under AASB for determining the fair value of assets and liabilities. AASB 13 does not change when an entity is required to use fair value, but rather, provides guidance on how to determine fair value when fair value is required or permitted. Application of this denition may result in different fair values being determined for the relevant assets. AASB 13 also expands the disclosure requirements for all assets or liabilities carried at fair value. This includes information about the assumptions made and the qualitative impact of those assumptions on the fair value determined. Consequential amendments were also made to other standards via AASB 20118.
AASB 119
Employee Benets
The main change introduced by this 1 January standard is to revise the accounting for 2013 dened benet plans. The amendment removes the options for accounting for the liability, and requires that the liabilities arising from such plans is recognized in full with actuarial gains and losses being recognized in other comprehensive income. It also revised the method of calculating the return on plan assets. Consequential amendments were also made to other standards via AASB 201110.
1 July 2013
* designates the beginning of the applicable annual reporting period
2011 Annual Report
47
c) BASIS OF CONSOLIDATION The consolidated nancial statements are those of the consolidated entity, comprising Penrice Soda Holdings Limited and its subsidiaries (the Group). Subsidiaries are all those entities over which the Group has the power to govern the nancial and operating policies so as to obtain benets from their activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether a group controls another entity. The nancial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. In preparing the consolidated nancial statements, all intercompany balances and transactions, income and expenses and prot and losses resulting from intragroup transactions have been eliminated in full. Subsidiaries and special purpose entities are fully consolidated from the date on which control is obtained by the Group and cease to be consolidated from the date on which control is transferred out of the Group. The acquisition of subsidiaries is accounted for using the acquisition method of accounting. The acquisition method of accounting involves recognising at acquisition date, separately from goodwill, the identiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree. The identiable assets acquired and the liabilities assumed are measured at their acquisition date fair values. d) SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS The preparation of the nancial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the nancial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements and estimates on historical experience and on other various factors it believes to be reasonable under the circumstances, the result of which forms the basis of the carrying values of assets and liabilities that are not readily apparent from other sources. Management has identied the following critical accounting policies for which signicant judgements, estimates and assumptions are made. Actual results may differ from these estimates under different assumptions and conditions and may materially affect nancial results or the nancial position reported in future periods. Further details of the nature of these assumptions and conditions may be found in the relevant notes to the nancial statements. Climate Change Plan Under the current proposal, as recently announced by the Federal Government, Penrice will be impacted by the Carbon scheme. There is uncertainty around the workings and hence the impact on the Group of the proposed scheme which is due to commence on 1 July 2012. Penrice has been formally recognised as an Emissions Intensive Trade Exposed (EITE) entity under its renewable energy target legislation and will receive the full assistantce rate which in the rst year of operation will be 94.5%. An estimate of the impact of this carbon scheme has been included in the assessment of the value in use of the cashgenerating units (CGU) required under impairment testing. Further details of the assumptions are detailed below in Impairment of Goodwill and other assets Impairment of Goodwill and other assets The Group determines whether goodwill and other non nancial assets are impaired at least on an annual basis. This requires an assessment of the value in use, using discounted cash ow methodology, of the CGU to which the goodwill and other assets are allocated. The Group has calculated the net present values for the Chemical Business CGU, Quarry and Mineral Business CGU and landll inventory asset. Landll has been identied as a surplus asset for the purposes of analysing the Quarry and Mining Business as its cash ows are most accurately assessed independently from the Quarry and Mineral business. For each segment the Group has prepared a detailed impairment analysis, based on the nancial budget for year ended 30 June 2012 and the subsequent 4 year period included in the 10 year business plan. Key drivers used in the models are as follows: Chemical: foreign exchange (AUD:USD), product demand growth, hard coking coal costs. Quarry: pricing and cost increases, product demand growth. Landll: pricing and margin, timing of major infrastructure projects.
48
Using a pre tax discount rate of 12%, the key assumptions used in the models are as follows: FX USD/AUD Hard coking coal US$/t Volume Growth FY2012 1.03 268 1% FY2013 1.00 210 1% FY2014 0.96 200 1% FY2015 0.93 200 1% FY2016 0.90 200 1%
Gross margins based on known and anticipated raw material price uctuations and the sales pricing structures in place for contracted and non contracted business; Carbon emission obligation in 2012, 2013 and 2014 based on a xed price of $23.00, $24.15 and $25.40 per tonne respectively and 3% thereafter; Carbon emission allocation of free permits covering 94.5% of direct emissions. As per draft Bill, this level of assistance will reduce by 1.3% per annum; and Raw materials price ination estimates are obtained from published indices, directly from suppliers or from the contracted pricing mechanisms in place. Forecast gures are used if data is publicly available otherwise past actual raw material price movements have been used as an indicator of future price movements. The directors have determined that the following impairment exists, and was recorded at 30 June 2011: $000 Chemical goodwill Chemical other assets* Chemical total impairment Q&M landll Total impairment charge Asset Value write off 11,717 4,283 16,000 10,000 26,000 Tax Effect (1,285) (1,285) (3,000) (4,285) After Tax Impairment charge 11,717 2,998 14,715 7,000 21,715
*Chemical other assets includes; coke inventory valuation ($1,871k), consumable stores ($1,644k), low quality nished goods ($768k). Dened benet fund Various actuarial assumptions are required when determining the Groups dened benet fund obligations. These include assumptions regarding discount rates for plan liabilities, salary rates, expected return on plan assets in future years, contribution tax rate, and administration expenses. Further details on the dened benet fund are provided in Note 27. Employee benets provisions Provisions for employee benets include provisions for annual leave and long service leave. As noted in 2w), the calculation of long service leave includes the use of assumptions and judgements regarding future salary increases, employee departures, periods of service, and timing of future payments. Remediation provision As noted in 2(t) below, the Group recognises a provision for remediation in respect of dredging of the Port River and the remediation of the Osborne manufacturing site and Angaston mine site. Key judgements and assumptions in estimating this remediation provision include timing of remediation and the extent of remediation work required. These may be impacted in the future by changes to environmental legislation, technology, and the extent of remediation required. The Group has an agreement with both the S.A. Government and the operator of the Port River, Flinders Ports Pty Limited, in relation to the dredging of the Port River. The agreement requires Penrice to dredge this material over a 10 year period. Penrice has maintained a provision to dredge this material and this provision will be adequate to cover the costs over the remaining period. Recovery of deferred tax assets Deferred tax assets are recognised for deductible temporary differences and carry forward losses as management considers that it is probable that future taxable prots will be available to utilise those temporary differences.
2011 Annual Report
49
Share based payment transactions The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by an external valuer using a Monte-Carlo simulation model. The accounting estimates and assumptions relating to equity-settled-share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact expenses and equity. Estimation of useful lives of assets The estimation of the useful lives of assets has been based on historical experience as well as manufactures warranties (for plant and equipment), lease terms (for leased equipment) and turnover policies (for motor vehicles). In addition, the condition of the assets is assessed at least once per year and considered against remaining useful life. Aggregates/Landll The Group uses an independent source to produce a volumetric survey of storage dumps, stated in cubic metres. From this, a conversion factor known as a density factor is applied, to convert cubic metres to metric tonnes. The density factor initially came from a series of samples that was taken from across the Mine site by an independent laboratory employed to determine the density of the product. Since then, the average density is constantly compared to density ranges for products of similar geological composition to the Groups products. This information is publicly available from a number of sources in the UK, Europe, USA and Australia. e) INCOME TAX EXPENSE Income tax on the prot or loss for the period comprises current and deferred tax. Income tax expense is recognised in the Income Statement except to the extent that it relates to items recognised directly through equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the period, using tax rates enacted or substantively enacted at the balance date, and any adjustment to tax payable in respect of previous years. Deferred income tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for nancial reporting purposes and the amounts used for taxation purposes. Deferred income tax liabilities are recognised for all taxable temporary differences except: when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting prot nor taxable prot or loss; or when the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, and the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income tax assets are recognised for all deductible temporary differences to the extent that it is probable that taxable prot will be available against which the temporary differences can be utilised, except: when the deferred income tax asset 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 prot nor taxable loss; or when the deductible temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable prot will be available against which the temporary difference can be utilised. The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufcient taxable prot will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable prot will allow the deferred tax asset to be recovered. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.
50
Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable Group and the same taxation authority. Income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend. Tax consolidation legislation Penrice Soda Holdings Limited and its whollyowned Australian controlled entities implemented the tax consolidation legislation as of 31 May 2004. The head entity, Penrice Soda Holdings Limited and the controlled entities in the tax consolidated Group continue to account for their own current and deferred tax amounts. The Group has applied the group allocation approach in determining the appropriate amount of current taxes and deferred taxes to allocate to members of the tax consolidated Group. In addition to its own current and deferred tax amounts, Penrice Soda Holdings Limited also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused credits assumed from controlled entities in the tax consolidated Group. Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable from or payable to other entities in the Group. Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are recognised as a contribution to (or distribution from) whollyowned tax consolidated entities. f) GOODS AND SERVICES TAX (GST) Revenues, expenses and assets are recognised net of the amount of GST except: where the GST incurred on a purchase of goods and 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; and 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 Balance Sheet. Cash ows are included in the Cash Flow Statement on a gross basis and the GST component of cash ows arising from investing and nancing activities, which is recoverable from, or payable to, the taxation authority are classied as operating cash ows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. g) FOREIGN CURRENCY TRANSACTIONS The functional currency is determined by each individual entity within the Group, whereas the presentational currency of the Group is determined by the parent entity. The presentational currency of the Group is Australian Dollars. Foreign currency items are translated to Australian currency on the following bases: transactions are converted at exchange rates approximating those in effect at the date of each transaction; amounts payable and receivable are translated at the rates available on the close of business on balance date; and exchange differences relating to monetary items are included in the Income Statement, as exchange gains or losses, in the period when the exchange rates change. h) CASH AND CASH EQUIVALENTS Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and shortterm deposits with an original maturity of three months or less that are readily convertible to known amounts of cash and which are subject to an insignicant risk of changes in value. For the purposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as dened above, net of outstanding bank overdrafts. Bank overdrafts are included within interest bearing loans and borrowings in current liabilities on the balance sheet.
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i) TRADE AND OTHER RECEIVABLES Trade receivables, which generally have 3060 day terms, are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less any allowance for impairment. Collectability of trade receivables is reviewed on an ongoing basis at an operating unit level. An impairment provision is recognised when there is objective evidence that the Group will not be able to collect the receivable. Financial difculties of the debtor, default payments or debts more than 90 days overdue are considered objective evidence of impairment. The amount of the impairment loss is the receivable carrying amount compared to the present value of estimated future cash ows, discounted at the original effective interest rate. Bad debts are written off when identied. j) DERIVATIVE FINANCIAL INSTRUMENTS The consolidated Group uses derivative nancial instruments to hedge its exposure to foreign exchange and interest rate risk arising from operational, nancing and investment activities, refer Notes 3 and 13. Derivative nancial instruments are recognised initially at fair value on the date the instrument is entered into. Subsequent to initial recognition, derivative nancial instruments are remeasured to fair value. Held for trading derivative assets and liabilities are classied as current in the statement of nancial position. Derivative assets and liabilities are classied as noncurrent when the remaining maturity is more than 12 months, or current when the remaining maturity is less than 12 months. The gain or loss on re-measurement to fair value is recognised immediately in the income statement unless the derivative is designated and is effective as a hedging instrument, in which event, the timing and the recognition of prot or loss depends on the nature of the hedging relationship. The consolidated Group designates derivatives as hedges of the exposure to variability in cash ows attributable to a recognised asset or liability or highly probable forecast transaction (cash ow hedges). The fair value of various derivative nancial instruments used for hedging purposes are disclosed in Note 3 and 13. The consolidated Group documents, at the inception of the transaction, the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The consolidated Group also documents its assessment, both at hedge inception and on an ongoing basis, as to whether the derivatives that are used in hedging transactions have been and will continue to be highly effective in offsetting changes in fair values or cash ows of hedged items. Where derivative instruments do not qualify for hedge accounting, changes in the fair value are recognised immediately in the income statement. Cash ow hedge Where a derivative nancial instrument is designated as a hedge of the variability in cash ows of a recognised asset or liability, or a highly probable forecast transaction, the effective part of any gain or loss on the derivative nancial instrument is recognised directly in equity in the hedging reserve. The change in the fair value that is identied as ineffective is recognised immediately in the income statement. Amounts accumulated in equity are transferred to the income statement in the periods when the hedged item affects prot or loss (for instance, when the forecast sale that is hedged takes place). However, when the forecast transaction that is hedged results in the recognition of a nonnancial asset (for example, inventory) or a nonnancial liability, the gains and losses previously deferred in equity are transferred from equity and included in the measurement of the initial cost or carrying amount of the asset or liability. When a hedging instrument expires or is sold, terminated or exercised, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement.
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k) INVENTORIES Inventories including raw materials and nished goods 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 rstin, rstout basis. The cost of purchase comprises the purchase price including purchases of raw materials, import duties and other taxes (other than those subsequently recoverable by the Group from the taxing authorities), transport, handling and other costs directly attributable to the acquisition of raw materials. Volume discounts and rebates are included in determining the cost of purchase. Finished goods and goods for resale cost of direct materials and labour and a proportion of variable and xed manufacturing overheads based on normal operating capacity. Costs are assigned on the basis of weighted average costs. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make their sale. Aggregates and Landll In mining operations, it is necessary to remove overburden and other waste materials to access ore and minerals which can be economically be extracted. The process of removing overburden and waste materials is referred to as stripping. Penrice produces two main types of stripping by-products, aggregates and landll, for which Penrice has determined that there is a market for their sale. On the basis that there is a market for the sale of these products and the products have a saleable value, aggregates and landll volumes are classied as inventories of nished goods. Based upon current contracted sales volumes, the inventories of these products will be realised over a period greater than 12 months. However, as this is considered to be within the normal operating cycle and the volumes are ready for sale with no further processing required, they are classied as current assets under AASB 101: Presentation of Financial Statements. Finished goods Finished goods comprise of chemicals inventories, and inventories of limestone, aggregates and landll. Inventories of chemicals, limestone and aggregate are valued at cost. The cost per tonne of chemicals and limestone is as discussed above. The cost per tonne at which aggregates are recognised is limited to the cost of removal of the aggregates, including drilling, blasting, loading and haulage, and those costs directly linked to the removal of aggregate volumes. Landll is valued at net realisable value per metric tonne, which is lower than the cost per tonne of removal of this byproduct from the mine. Quantities of nished goods are assessed primarily through volumetric surveys which are carried out at half year and full year end. For further details on the judgements and estimates used in quantifying nished goods, refer to Note 2(d), and for the periods over which the volumes of aggregates and landll are expected to be realised, refer Note 12. Production spares and consumable goods Production spares and consumable stores are included in inventories and expensed on a usage basis and are stated net of slow moving or obsolete items. l) PROPERTY, PLANT AND EQUIPMENT All plant and equipment is carried at cost less accumulated depreciation and any impairment of value. The carrying amounts of these noncurrent assets are reviewed annually to ensure they do not exceed their recoverable amount. Property, plant and equipment are depreciated over their useful economic lives. Life 40 years 440 years 3 years 10 years 37 years Method Straight Line Straight Line Straight Line Straight Line Straight Line
Buildings Plant and equipment Computer equipment Furniture and xtures Vehicles
The costs of acquisition or improvements to leasehold properties are amortised over the unexpired period of the lease, including any lease renewal period where Penrice has sole discretion to renew, or the estimated useful life of the improvements, whichever is the shorter. Major spares purchased specically for particular plant are included in the cost of plant, except for those listed in inventories, and are depreciated accordingly.
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An item of property, plant and equipment is derecognised upon disposal or when no further future economic benets are expected from its use or disposal. m) IMPAIRMENT OF NON FINANCIAL ASSETS OTHER THAN GOODWILL The Group assesses impairment of all assets at each reporting date by evaluating conditions specic to the Company 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. All non nancial assets have been tested for impairment in the current period. Refer Note 2(d) for methodology, key drivers and assumptions. n) NONCURRENT ASSETS CONSTRUCTED BY THE GROUP The cost of noncurrent assets constructed by the Group includes the cost of all materials used in construction, direct labour on the project and an appropriate proportion of variable and xed overhead costs based upon a time cost allocation methodology. o) MINE RESERVES The Group has a marble mine at Angaston consisting of freehold and leasehold land. The marble reserves are not brought to account in the groups nancial statements. p) INVESTMENTS IN CONTROLLED ENTITIES All investments in controlled entities are initially recognised by the parent entity at cost, being the fair value of the consideration given, including acquisition charges associated with the investment. Subsequent to the initial investment, investments in controlled entities are carried by the parent entity at cost less accumulated impairment losses. q) EXPLORATION AND EVALUATION COSTS Costs arising from exploration and evaluation activities are carried forward provided such costs are expected to be recouped through successful development, or by sale, or where exploration and evaluation activities have not, at reporting date, reached a stage to allow a reasonable assessment regarding the existence of economically recoverable reserves. Costs are amortised over ve years given further exploration and evaluation costs are expected to be incurred at that stage. As at 30 June 2011, all costs have been fully amortised. These costs are reviewed for impairment when facts and circumstances suggest the carrying amount is in excess of the recoverable amount. r) INTANGIBLES Goodwill Goodwill acquired in a business combination is initially measured at cost of the business combination being the excess of the consideration transferred over the fair value of the Groups net identiable assets acquired and liabilities assumed. If this consideration transferred is lower than the fair value of the net identiable assets of the subsidiary acquired, the difference is recognised in prot of loss. Goodwill is allocated to the cashgenerating units for the purpose of impairment testing. Impairment is determined by assessing the recoverable amount of the cash generating unit to which the goodwill relates. When the recoverable amount of the cash generating unit is less than the carrying amount, an impairment loss is recognised. When goodwill forms part of a cash generating unit 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. Software Expenditure on signicant commercial development, including major software applications and associated systems, is capitalised and amortised on a straightline basis over the period of time during which the benets are expected to arise, typically between three to ten years.
Software costs are capitalised as intangible assets if they are separable or arise from contractual or other legal rights and it is probable that the expected future economic benets attributable to the asset will ow to the consolidated Group, and the cost of the asset can be measured reliably. Mine Development Costs Mine development costs consist of top soil which was required by law to be removed from land that is being used a repository for landll. This top soil will be used in mine remediation over ten years and is amortised on a straight line basis. s) TRADE AND OTHER PAYABLES Trade payables and other payables are carried at amortised cost and represent liabilities for goods and services provided to the Group prior to the end of the nancial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. The amounts are unsecured and are usually paid within 3062 days of recognition. t) PROVISIONS Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outow of resources embodying economic benets will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are measured at the present value of managements best estimate of the expenditure required to settle the present obligation at the balance sheet date using a discounted cash ow methodology. Present value is based on the anticipated timing of when the cash outows are expected to occur. When discounting is used, the increase in the provision due to the passage of time is recognised as a borrowing cost. A provision for dividends is not recognised as a liability unless the dividends are declared on or before the balance date. When the Group 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 Income Statement net of any reimbursement. Provisions are recognised for annual leave and long service leave, as discussed under 2(w) below, and for remediation. The Group has an agreement with both the S.A Government and the operator of the Port River, Flinders Ports Pty Limited, in relation to the dredging of the Port River. The agreement requires Penrice to dredge this material over a 10 year period. Penrice has maintained a provision to dredge this material and this provision will be adequate to cover the costs over the remaining period. The Group completed the rst campaign in late 2008 and the completion of the remediation is expected to be completed over the next 45 years. Remediation provisions exist in relation to the cessation of operations at the Angaston mine. u) INTEREST-BEARING LIABILITIES All loans are measured at the fair value of the consideration received net of issue costs associated with the borrowing. They are then measured at amortised cost using the effective interest method. Amortised cost is calculated by taking into account any issue costs, and any discount or premium on settlement. Borrowings are classied as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date. v) BORROWING COSTS Borrowing costs are recognised as an expense when incurred. The Group currently holds qualifying assets. As such, borrowing costs directly associated with these assets have been capitalised (including any other associated costs directly attributable to the borrowing and temporary investment income earned on the borrowing). w) EMPLOYEE BENEFITS Employee leave benets Wages, salaries, annual leave and sick leave Liabilities for wages and salaries, including nonmonetary benets, annual leave and accumulating sick leave expected to be settled in 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 nonaccumulating sick leave are recognised when the leave is taken and are measured at the rates paid or payable.
Long Service Leave The liability for long service leave is recognised and 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 the periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currencies that match, as closely as possible, the estimated future cash outows. Share based payment transactions Subject to shareholder approval, Penrice provides benets to its key management personnel in the form of share based payments, whereby employees render services in exchange for shares or rights over shares (equitysettled transactions). The cost of equitysettled transactions is measured by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by an external valuer using MonteCarlo simulation model. In valuing equitysettled transactions, no account is taken of any vesting conditions, other than (if applicable): Non-vesting conditions that do not determine whether the Group receives the services that entitle the employees to receive payment in equity or cash, and Conditions that are linked to the price of the shares of Penrice Soda Holdings Limited. The cost of equitysettled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/ or service conditions are fullled (the vesting period), ending on the date on which the relevant employees become fully entitled to the award (the vesting date). At each subsequent reporting date until vesting, the cumulative charge to the Income Statement is the product of: the grant date fair value of the award; the current best estimate of the number of awards that will vest; and the expired portion of the vesting period. The charge to the Income Statement for the period is the cumulative amount as calculated above less the amounts already charged in previous periods. There is a corresponding credit to equity in a separate share based payments reserve. Equitysettled awards granted by Penrice Soda Holdings Limited to employees of subsidiaries are recognised in the parents separate nancial statements as an additional investment in the subsidiary with a corresponding credit to equity. As a result, the expense recognised by Penrice Soda Holdings Limited in relation to equitysettled awards only represents the expense associated with grants to employees from the parent company. The expense recognised by the Group is the total expense associated with all such awards. If the terms of an equitysettled award are modied, as a minimum an expense is recognised as if the terms had not been modied. An additional expense is recognised for any modication that increases the total fair value of the sharebased payment arrangement, or is otherwise benecial to the employee, as measured at the date of modication. If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modication of the original award, as described in the previous paragraph. x) RECOGNITION OF REVENUES Revenue is recognised and measured at the fair value of the consideration received or receivable to the extent it is probable that the economic benets will ow to the Group and the revenue can be reliably measured. The following specic recognition criteria must also be met before revenue is recognised: Sale of goods Revenue is recognised when the signicant risks and rewards of ownership of the goods have passed to the buyer. Risks and rewards of ownership are considered passed to the buyer once the title has passed. Interest revenue Revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of nancial assets and allocating the interest income over the relevant period using the effective interest rate, which
56
is the rate that exactly discounts estimated future cash receipts through the expected life of the nancial asset to the net carrying amount of the nancial asset. Dividend Revenue Revenue is recognised when the right to receive the payment is established. y) GENERAL MAINTENANCE The costs of maintenance of manufacturing plant and equipment are charged to the Income Statement in the period in which they are incurred. The operating costs of a major plant shutdown are capitalised and subsequently amortised over the remainder of the nancial year. z) CONTRIBUTED EQUITY Contributed equity is recognised at the fair value of the consideration received by the Group. Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received. aa) EARNINGS PER SHARE Basic earnings per share is calculated as net prot attributable to members of the parent, adjusted to exclude any costs of servicing equity (other than dividends), divided by the weighted average number of ordinary shares, adjusted for any bonus element. Diluted earnings per share is calculated as net prot attributable to members of the parent, adjusted for: costs of servicing equity (other than dividends); the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and other nondiscretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares, divided by the weighted average number of ordinary shares and dilutive potential ordinary shares. ab) LEASED ASSETS Leases are classied at their inception as either operating or nance leases based on the economic substance of the agreement so as to reect the risks and benets incidental to ownership. Finance Leases Leases which effectively transfer substantially all of the risks and benets incidental to ownership of the leased item to the Group are capitalised at their fair value if lower or, the present value of minimum lease payments. Leased assets are amortised over the life of the relevant lease or, where ownership is expected on the expiration of the lease, over the expected useful life of the asset. Lease payments are allocated between interest expense and reduction in the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Operating Leases The minimum lease payments of operating leases, where the lessor effectively retains substantially all of the risks and benets of ownership of the leased item, are recognised as an expense on a straightline basis. ac) CHANGE IN ACCOUNTING ESTIMATES Consistent with the Groups accounting policy, during the nancial year 2011 the remaining useful lives of the assets of the Group were reassessed. Re-ling of specic assets has resulted in a decrease in the depreciation charge for the year of $503k.
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NOTE 3: FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Groups principal nancial instruments comprise receivables, payables, bank loans, nance leases, cash and short-term deposits and derivatives. The Group manages its exposure to key nancial risks, including interest rate and currency risk in accordance with the Groups nancial risk management policy. The objective of the policy is to support the delivery of the Groups nancial targets whilst protecting future nancial security. The Group enters into derivative transactions, principally interest rate swap and forward currency contracts. The purpose is to manage the interest rate and currency risks arising from the Groups operations and its sources of nance. The main risks arising from the Groups nancial instruments are interest rate risk, foreign currency risk, credit risk and liquidity risk. The Group uses different methods to measure and manage different types of risks to which it is exposed. These include monitoring levels of exposure to interest rate and foreign exchange risk and assessments of market forecasts for interest rate, foreign exchange and commodity prices. Ageing analyses and monitoring of specic credit allowances are undertaken to manage credit risk. Liquidity risk is monitored through the modelling of future rolling cash ow forecasts. The Board reviews and agrees policies for managing each of these risks as summarised below. The primary responsibility for identication and control of nancial risks rests with the Audit and Risk Management Committee under the authority of the Board. The Board reviews and agrees policies for managing each of the risks identied below, including the hedging cover of foreign currency and interest rate risk, credit allowances, and future cash ow forecast projections. It is, and has been throughout the year, the Groups policy that no trading in nancial instruments shall be undertaken. All new hedge contracts entered into were designated as qualifying hedges for hedge accounting purposes. Any hedge that is not designated as a hedge in accordance with AASB139 Financial Instruments: Recognition and Measurement does not qualify for hedge accounting and is classied as held for trading as its mark to market position is reected directly to the income statement. RISKS EXPOSURES AND RESPONSES Interest rate risk The Groups exposure to market interest rates relates primarily to the Groups long-term debt obligations and interest rate swaps in place at balance date. The level of debt is disclosed in Note 21 and further details on interest rate swaps are provided in Note 13. At balance date, the Group had the following mix of non derivative nancial assets and liabilities exposed to Australian variable interest rate risk. Consolidated 2011 2010 $000 $000 Financial Assets Cash and cash equivalents Financial Liabilities Bank Loan Net Exposure 5,163 5,444
(75,300) (70,137)
(59,300) (53,856)
Derivative nancial instruments in the form of interest rate swap contracts, outlined in Note 13, with a fair value of ($267k) (2010: $709k) and a notional value of $52.3m; (2010: $59.3m) are exposed to fair value movements if interest rates change. These derivative contracts have various start and end dates, giving a varying degree of cover over the next two years. Further detail is contained in Note 13. In addition to the $52.3m swaps the Group has a $3.5m twelve month xed rate loan contract (start date: 14 October 2010 end date: 14 October 2011).
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Notes to the Financial Statements for the year ended 30 June 2011 NOTE 3: FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED)
The Groups policy is to manage its nance costs using a mix of xed and variable rate debt. The Groups senior debt facility is a variable rate facility and derivatives are used to swap a proportion of variable rates to xed rates. In broad terms, the framework takes a 3 year view and operates within band limits within time periods. The bands require a minimum to maximum range of 40% to 80% of borrowings at xed interest rates for 0-12 months, 30% to 70% for 12 to 24 months and 20% to 60% for 24 to 36 months. It is acknowledged that derivative mark to market fair value exposure is a by-product of the Groups attempt to manage its cash ow volatility arising from interest rate changes. To manage this risk in a cost-efcient manner, the Group enters into interest rate swap contracts, in which the Group agrees to exchange, at specied intervals, the difference between xed and variable rate interest amounts calculated by reference to an agreed upon notional principal amount. These swaps are designed to hedge underlying variable rate debt obligations. At 30 June 2011, after taking into account the effect of interest rate swaps, approximately 58% of the Groups borrowings during FY2011 are at a xed rate of interest (2010: 87%). This % will vary throughout the year as contracts mature and further contracts are entered into. The Group constantly analyses its interest rate exposure. Within this analysis, consideration is given to potential renewals of existing positions, alternative nancing, alternative hedging positions and the mix of xed and variable interest rates. The following sensitivity analysis is based on the interest rate exposures on nancial assets and liabilities in existence at the balance sheet date. At 30 June 2011, if interest rates had moved, as illustrated in the table below, with all other variables held constant, prot and equity would have been affected as follows: Post tax prot Higher/(Lower) 2011 $000 Impact of interest rate movement on Balance Sheet exposures at balance date Judgements of reasonably possible movements: +1.0% (100 basis points) -0.5% (50 basis points) 2010 $000 Other Comprehensive Income Higher/(Lower) 2011 $000 2010 $000
(192) 96
(28) 14
The above calculations take into account the exposures as at balance date and an interest rate movement that is then annualised. The movement does not take into account the addition of new or maturity of existing derivative instruments such as interest rate swaps during the year or the progressive draw down or pay back of debt over the course of the year. Post tax prot Higher/(Lower) 2011 2010 $000 $000 Impact of interest rate movement on Interest Rate Swaps at balance date (mark to market impact) +1.0% (100 basis points) -0.5% (50 basis points) Other Comprehensive Income Higher/(Lower) 2011 2010 $000 $000
52 (8)
13 (3)
158 (99)
341 (176)
The mark to market prot and loss impact of the interest rate swaps is calculated based on the swaps notional value as at 30 June 2011. The exposure to the mark to market hedge movements are of a non cash nature and are reected through the P&L for non qualifying hedges and Equity for those interest rate swaps that qualify for hedge accounting.
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Post tax prot Higher/(Lower) 2011 $000 Net Movements +1.0% (100 basis points) -0.5% (50 basis points) (140) 88 2010 $000 (15) 11
Other Comprehensive Income Higher/(Lower) 2011 $000 158 (99) 2010 $000 341 (176)
The overall prot and loss impact of the interest rate swaps, given a change in interest rates, comprises a change in the mark to market value of the derivative (non cash impact of $52k for +1%) and a change in interest expense. With derivatives in place at balance date, the impact of a movement in interest rates would affect the prot and loss by the amount that is not hedged, in addition to the movement in the fair value of the non-qualifying derivative instruments. The +1%/-0.5% sensitivities are the Groups estimate of reasonably possible changes in interest rates over the following nancial year, based on recent interest rate trends. FOREIGN CURRENCY RISK At 30 June 2011, the Group had the following exposure to US$ foreign currency from non derivative nancial assets and nancial liabilities that are not designated as cash ow hedges: Consolidated 2011 2010 $000 $000 Financial Assets Cash and cash equivalents Debtors Financial Liabilities Creditors Net exposure 792 4,159 4,951 1,061 3,890 1,591 5,291 6,882 733 6,149
As a result of signicant export sales which are transacted in USD, the Groups income and balance sheet can be affected signicantly by movements in the USD/AUD exchange rates. The Group seeks to mitigate the effect of its foreign currency exposure by entering into hedge contracts including option and forward exchange contracts. All new hedges qualify as effective hedges in accordance with AASB 139 Financial Instruments: Recognition and Measurement and mark to market movements in their fair valuation are taken to equity. The Group constantly analyses its exchange rate exposure. Within this analysis consideration is given to potential renewals of existing positions, alternative nancing, alternative hedging positions and the mix of option or xed rate contracts. It operates within a policy framework that limits the amount of cash ow risk the group carries in relation to foreign exchange risk. In broad terms, the framework takes a 3 year view and operates within band limits within time periods. The bands allow for a minimum to maximum range of 45% to 80% of FX exposure for 0-12 months, 20% to 60% for 12 to 24 months and 0% to 40% for 24 to 36 months. The following sensitivity analysis is based on the foreign exchange rate risk exposures from non derivative nancial assets and nancial liabilities in existence at the balance sheet date. At 30 June 2011, had the Australian Dollar moved, as illustrated in the table below, with all other variables held constant, prot and equity would have been affected as follows:
60
Post tax prot Higher/(Lower) 2011 2010 $000 $000 Impact of foreign exchange rate movement on Balance Sheet exposures at balance date Judgements of reasonably possible movements: AUD/USD +10% AUD/USD -5%
Other Comprehensive Income Higher/(Lower) 2011 2010 $000 $000
(248) 143
(391) 227
Post tax prot Higher/(Lower) 2011 2010 $000 $000 Impact of foreign exchange rate movement on Foreign Currency Derivatives at balance date (mark to market impact) Judgements of reasonably possible movements: Mark to market impact USD/AUD +10% Mark to market impact USD/AUD -5% Net Movements Mark to market impact USD/AUD +10% Mark to market impact USD/AUD -5%
Other Comprehensive Income 2011 2010 $000 $000
5 (5)
225 (130)
1,384 (781)
(248) 143
(386) 222
225 (130)
1,384 (781)
The +10%/-5% sensitivity is the Groups estimate of reasonably possible changes to exchange rates over the following nancial year, based on recent exchange rate trends. Management believe the balance date risk exposures are representative of the risk exposure inherent in the nancial instruments. Derivative nancial instruments in the form of forward exchange contracts, outlined in Note 13, with a fair value of $891k (2010: $(1,024k)) and a notional value of $3.8m, (2010: $19m), are exposed to fair value movements if exchange rates change. The prot and loss impact on the mark to market of forward exchange contracts is calculated based on the movement between the instruments notional value and its fair value as at 30 June 2011. The mark to market hedge movements are of a non cash nature and as all hedge contracts entered into qualify for hedge accounting, the majority of their mark to market movement is reected in equity. The above tables do not take into account the forward sales of products denominated in USD and the possible impact on protability. Penrice has some natural hedging from the procurement of products and services that are denominated in USD such as imported soda ash, coking coal and shipping costs. Therefore the balance of international chemical sales, less US dollar denominated purchases, less derivative cover is the net exposure to currency uctuations. PRICE RISK The Group produces and sells soda ash and sodium bicarbonate domestically and internationally. Its long term exposure to commodity price risk for its domestic sales is traditionally limited as a result of high transport costs of imported product relative to the product price. In FY2011 the material strengthening of the AUD/USD has increased the price risk due to imported product being substantially cheaper to land in Australia. The Groups sales into international markets is exposed to international pricing movements, but is limited to an extent by the higher quality offering of its sodium bicarbonate product. The Groups sales of mine products into the domestic market have normal pricing risk to competitive rates.
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CREDIT RISK Credit risk arises from the nancial assets of the Group, which comprise cash and cash equivalents, trade and other receivables, derivative instruments and the granting of nancial guarantees. The Groups 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. The Group does not hold any credit derivatives to offset its credit exposure. The Group minimises concentrations of credit risk in relation to trade receivables by undertaking transactions with a large number of customers. Credit risk in trade receivables is managed in the following ways: A risk assessment process is used for new customers to assess whether credit should be granted and, if so, setting an appropriate limit; Letter of credit facilities are in place for overseas customers where the Group believes a credit risk exists. These are conrmed by National Australia Bank; and Payment terms are generally 30-60 days from end of month of supply. LIQUIDITY RISK The Groups objective is to maintain a balance between continuity of funding and exibility through the use of bank loans, nance leases, operating leases and working capital management. The table below reects all contractually xed pay-offs and receivables for settlement, repayments and interest resulting from recognised nancial assets and liabilities, including derivative nancial instruments as at 30 June 2011. Cash ows for nancial assets and liabilities without xed amount or timing are based on the conditions existing at 30 June 2011. Maturity analysis of nancial assets and liabilities are based on managements expectation. The contractual maturities of the Groups nancial assets and liabilities are: Year ended 30 June 2011 CONSOLIDATED Financial Assets Cash and cash equivalents Trade and other receivables Derivatives FX contracts < 6 months $000 612 months $000 15 years $000 Total $000
5,163 16,738 652 22,553
239 239
5,163 16,738 891 22,792
CONSOLIDATED Financial Liabilities Trade and other payables Interest bearing loans & borrowings (1) Derivatives Interest Rate Swaps Financial guarantees
29,803 10,061 111 508 40,483 (17,930)
736 94 830 (591)
70,095 62 70,157 (70,157)
29,803 80,892 267 508 111,470 (88,678)
Net Outow
Note (1) As at 30 June 2011, Penrice was in negotiation with its banks and reached agreement in principle to amend its nance facilities as announced to the ASX on Friday 12 August 2011. This agreement cancelled a $1.8 million amortisation payment due on 30 June 2011, and amended the termination date of a $7.0 million facility to 30 November 2012 or a later date to be agreed in writing. Previously the termination date for this facility was 31 August 2011. Whilst this amendment does cancel the amortisation payment and defers payment of the $7.0 million facility beyond the 12 month period from balance date, it is considered a non-adjusting subsequent event under accounting standards and does not change the classication of the liability at 30 June 2011. As a result, $8.8 million remains a current liability in the nancial statements. No repayments are due within the 12 months to 30 June 2012.
Year ended 30 June 2010 CONSOLIDATED Financial Assets Cash and cash equivalents Trade and other receivables Derivatives CONSOLIDATED Financial Liabilities Trade and other payables Interest bearing loans & borrowings Derivatives Financial guarantees
< 6 months $000
612 months $000
15 years $000
Total $000
5,444 21,931 27,375
5,444 21,931 27,375
29,190 461 480 750 30,881 (3,506)
2,178 619 2,797 (2,797)
69,872 633 70,505 (70,505)
29,190 72,511 1,732 750 104,183 (76,808)
Net Outow
The group expects to meet the above nancial liabilities through effective management of future cash ows. Leasing obligations, trade payables and other nancial liabilities mainly originate from the nancing of assets used in ongoing operations such as property, plant, equipment and investments in working capital e.g. inventories and trade receivables. These assets are considered in the Groups overall liquidity risk. FAIR VALUE The Group estimates the fair value of its derivative nancial instruments using market observable inputs. The fair value of the nancial instruments as well as the methods used to estimate the fair value are summarised in the table below. Year ended 30 June 2011 Valuation Valuation Technique Technique market non market Quoted observable observable Market Price inputs inputs (Level 1) (Level 2) (Level 3) $000 $000 $000 Year ended 30 June 2010 Valuation Valuation Technique Technique market non market Quoted observable observable Market Price inputs inputs (Level 1) (Level 2) (Level 3) $000 $000 $000
CONSOLIDATED Financial Liabilities Derivative instruments Foreign exchange contracts Interest rate swaps
891 (267) 624
(1,023) (709) (1,732)
The Group uses valuation techniques such as present value techniques, comparison to similar instruments for which market observable prices exist and other relevant models used by market participants. These techniques use both observable and unobservable market inputs. Financial instruments that use valuation techniques with only observable market inputs or unobservable inputs that are not signicant to the overall valuation include interest rate swaps and foreign exchange contracts not traded on a recognised exchange.
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63
NOTE 4: INCOME STATEMENT ITEMS

Consolidated Prot from continuing operations is stated after crediting/charging the following amounts: Product sales Other revenues Interest from unrelated entities Other revenue items Other revenues Total revenues Depreciation Land, improvements and buildings Manufacturing plant and equipment Total depreciation Amortisation Amortisation of mine development and software Total amortisation Impairment Chemical goodwill Chemical other assets Raw materials Finished goods Consumable stores Chemical total impairment Quarry & Mineral landll Total impairment charge Borrowing costs Interest paid or payable Amortisation of loan facility fees Finance charges related to leases Other borrowing costs (1) Total borrowing costs Employee benet expense Wages and salaries Share based payment expense Workers compensation costs Dened benet plan expense Dened contribution plan expense Long service leave provision Total employee benets expense Other expense items Government royalties on mineral production Operating lease rentals Net (gain) /loss on sale of plant and equipment 2011 $000 152,934 98 891 989 153,923 504 8,631 9,135 468 468 11,717 1,871 768 1,644 16,000 10,000 26,000 6,689 730 98 1,198 8,715 24,583 155 921 193 3,110 132 29,094 113 3,824 (86) 2010 $000 160,376 101 350 451 160,827 497 8,078 8,575 244 244 6,408 560 141 1,105 8,214 23,817 61 898 333 2,360 13 27,482 116 3,936 22
(1) Other borrowing costs include the non cash interest charge for the Dened Benet Fund of $821k (2010: $815k) as prescribed by AASB 119 Employee Benets.
64
NOTE 5: INCOME TAX
Consolidated 2011 $000 (a) THE MAJOR COMPONENTS OF INCOME TAX EXPENSE ARE: Current income tax: Current income tax (benet)/expense Current income tax (over)/under provided in prior year Deferred income tax: Deferred income tax (benets)/expense Deferred income tax under/(over) provided in the prior year Total income tax (benet)/expense reported in the Income Statement (b) DEFERRED INCOME TAX CHARGED DIRECTLY TO EQUITY Equity raising costs Actuarial gains/(losses) on dened benet superannuation fund Cash ow hedge reserve Other Total deferred income tax charged directly to equity (c) TAX EXPENSE RECONCILIATION (Loss)/Prot from ordinary activities Prima facie tax (benet)/expense thereon at 30% Under/(over) provided in prior years Research and development expenditure Investment allowance Expenditure not allowable for income tax purposes Other Total income tax (benet)/expense (d) INCOME TAX (RECEIVABLE)/PAYABLE Income tax (receivable)/payable 2010 $000
(2,809) (960) (3,769) (4,079) 991 (3,088) (6,857)
1,300 749 2,049 214 (894) (680) 1,369
(354) 653 299
(465) (73) (465) (15) (1,018)
(33,063) (9,919) 30 (495) 3,537 (10) (6,857)
7,646 2,294 (146) (577) (186) 19 (35) 1,369
(110)
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65
Notes to the Financial Statements for the year ended 30 June 2011 NOTE 5: INCOME TAX (CONTINUED)
Opening balance $000 (e) DEFERRED TAX BALANCE 2011 CONSOLIDATED: Taxable and deductible temporary differences arising from the following: Deferred tax assets Provisions Inventory Leases Dened Benet Fund Capital raising costs Cash ow hedge reserve Tax Losses Inventory impairment Other Deferred tax liabilities Cash ow hedge reserve Intangibles Inventory Depreciation Other
Charge to Charge to income equity $000 $000
Movement between DTA & DTL $000
Tax Losses $000
Closing balance $000
2,125 296 363 7 416 479 138 3,824 (21) (804) (5,842) (186) (6,853)
237 (77) (114) (154) (10) (13) 4,284 (8) 4,145 (127) 344 (1,243) (28) (1,054) 3,091
354 (653) (299) (299)
187 187 (187) (187)
2,809 2,809
2,362 219 249 207 406 2,809 4,284 130 10,666 (187) (148) (460) (7,085) (214) (8,094)
Net deferred tax charge to income and equity per Note 5(a) & (b)
66
Notes to the Financial Statements for the year ended 30 June 2011 NOTE 5: INCOME TAX (CONTINUED)
Opening balance $000 (f) DEFERRED TAX BALANCE 2010 CONSOLIDATED: Taxable and deductible temporary differences arising from the following: Deferred tax assets Sale and restructure costs Provisions Inventory Leases Dened Benet Fund Capital raising costs Cash ow hedge reserve Other Deferred tax liabilities Intangibles Inventory Depreciation Other
Charge to income $000
Charge to equity $000
Movement between DTA & DTL $000
Closing balance $000
8 2,072 204 323 154 74 681 3,516 (1,865) (6,378) (8,243)
(8) 53 92 40 (220) (123) 14 (558) (710) (21) 1,061 536 (186) 1,390 680
73 465 465 15 1,018 1,018
2,125 296 363 7 416 479 138 3,824 (21) (804) (5,842) (186) (6,853)
Net deferred tax charge to income and equity per Note 5(a) & (b)
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67
NOTE 6: DIVIDENDS PAID

There have been no dividends paid or declared since the end of the preceding nancial year. DIVIDEND REINVESTMENT PLAN (DRP) The Penrice Soda Holdings Dividend Reinvestment Plan commenced on 16 April 2008 and remains in operation. No nal dividend for the 2011 nancial year has been declared and the DRP will not be utilised at this time. Franking credit balance The amount of franking credits available for the subsequent years are: Franking account balance as at the end of the year at 30% (2010: 30%) The amount of franking credits available for future reporting periods: Impact on the franking account of dividends proposed of declared before the nancial report was authorised for issue but not recognised as a distribution to equity holders during the period 2,310 2,310 2,310 3,512 3,512 3,512 2011 $000 2010 $000
NOTE 7: SEGMENT INFORMATION
IDENTIFICATION OF OPERATING AND REPORTABLE SEGMENTS The Group has identied its three operating segments based on the internal reports that are reviewed and used by the Managing Director & Chief Executive Ofcer and The Board (the chief operating decision makers CODM) in assessing performance and in determining the allocation of resources. The operating segments are identied by the Group based on their location and type of operation, the manner in which the product is sold and the nature of the product. The operating segments are soda ash, sodium bicarbonate and quarry & mineral. Discrete nancial information about each of these operating businesses is reported to the CODM and executive management team on at least a monthly basis. The reportable segments are based on aggregated operating segments determined by the similarity of the products produced and sold, as these are the sources of the Groups major risks and have the most effect on the rates of return. CHEMICAL BUSINESS The reporting segment Chemical business is the aggregation of two operating segments, being soda ash and sodium bicarbonate. Soda ash produced is predominantly sold in the Australian market as a vital ingredient in products ranging from glass containers (especially wine and beer bottles), at glass for building and construction and washing powder. It is also used in the mining and water treatment industries. Sodium bicarbonate is a product which is also used in a diverse range of applications such as pharmaceutical, food, stock feed, personal care products and industrial applications such as detergents, cleaning products and ue gas treatment.
68
Notes to the Financial Statements for the year ended 30 June 2011 NOTE 7: SEGMENT INFORMATION (CONTINUED)
The nature of the products and the production process is similar as are the methods used to distribute the products to the customers. The Group believe the soda ash and sodium bicarbonate operating segments have similar economic characteristics. Both the soda ash and sodium bicarbonate operating segments have a reasonably wide variation in margin for their different products and customers, with the sodium bicarbonate segment more heavily exposed to variation in margin due to the impact of foreign exchange. The end result is that due to product and customer mix and foreign exchange impact, overall margins will depend on what part of the business cycle the business is operating in. Over the medium term the overall margins that can be achieved in these two operating segments will be similar. Therefore these two operating segments have been aggregated into one reporting segment. QUARRY & MINERAL BUSINESS The Groups Quarry & Mineral business is located at the Penrice mine at Angaston in South Australia. While the mine supplies limestone into the chemical process at Penrices Osborne plant, it is also a signicant supplier of aggregates and other materials to a variety of end-uses, such as civil and construction, roads, landll, glass and mineral processing. CUSTOMER CONCENTRATION Glass manufacturing is a major customer group for the chemicals segment, which accounts for more than 42% (FY2010 39%) of the total group revenue, equating to $65m (FY2010 $63m) for this reporting period. Of this, sales to one customer accounted for $34m (FY2010 $34m) of revenue earned. ACCOUNTING POLICIES AND INTER-SEGMENT TRANSACTIONS It is the Groups policy that if items of revenue and expense are not allocated to operating segments, then any associated assets and liabilities are also not allocated to segments. This is to avoid asymmetrical allocations within segments which the Group believe would be inconsistent. The following items and associated assets and liabilities are not allocated to operating segments as they are not considered part of the core operations of any segment: Interest income Other income Borrowing costs Fair value gains/losses on derivatives Corporate costs which are unable to be allocated on a reasonable basis Income tax expense and deferred tax assets and liabilities The Group accounts for intersegment sales and transfers as if the sales or transfers were to third parties at an arms length price. Each segment is responsible for the management of working capital which comprises of trade debtors, trade creditors and inventory.
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Year ended 30 June 2011 Revenue Sales to external customers Inter-segment revenues Total segment revenue Non-segment revenues Interest from unrelated entities Other income insurance recovery other Total consolidated revenue Result Normalised EBITDA before unallocated expenses as reported to CODM Unallocated expenses Normalised EBITDA as reported to CODM Depreciation & amortisation Normalised EBIT as reported to CODM Borrowing costs Normalised loss before tax as reported to CODM Income tax expense Normalised net prot after tax as reported to CODM
Chemical $000
Quarry & Mineral $000
Eliminations/ unallocated $000
Consolidated $000
127,563 127,563
25,371 6,052 31,423
(6,052) (6,052)
152,934 152,934
98 500 391
98 500 391 153,923
14,028 14,028 (8,001) 6,027
5,344 5,344 (1,602) 3,742
489 (4,173) (3,684) (3,684)
19,861 (4,173) 15,688 (9,603) 6,085 (8,715) (2,630) 1,243 (1,387) 59 (13) (3,150)
Tax effected unrealised exchange gains on foreign currency options and forwards Tax effected unrealised exchange gains on fair value of interest rate swaps Tax effected insurance events, net of recovery Tax effected impairment Chemical Business Quarry & Minerals Prot from continuing operations after income tax Segment assets as at 30 June 2011 are as follows: Property, plant & equipment Intangibles Working capital 77,701 219 13,128 91,048 21,739 8,469 36,497 66,687
(14,715) (7,000) (26,206)
98,440 8,688 49,607 157,815
70
Year ended 30 June 2010 Revenue Sales to external customers Inter-segment revenues Total segment revenue Non-segment revenues Interest from unrelated entities Other income Total consolidated revenue Result Normalised EBITDA before unallocated expenses as reported to CODM Unallocated expenses Normalised EBITDA as reported to CODM Depreciation & amortisation Normalised EBIT as reported to CODM Borrowing costs Normalised prot before tax as reported to CODM Income tax expense Normalised net prot after tax as reported to CODM
Chemical $000
Quarry & Mineral $000
Eliminations/ unallocated $000
Consolidated $000
135,359 135,359
25,017 6,328 31,345
(6,328) (6,328)
160,376 160,376
101 350
101 350 160,827
15,182 15,182 (7,319) 7,863
11,590 11,590 (1,500) 10,090
451 (3,900) (3,449) (3,449)
27,223 (3,900) 23,323 (8,819) 14,504 (8,214) 6,290 (962) 5,328 441 508 6,277
Tax effected unrealised exchange gains on foreign currency options and forwards Tax effected unrealised exchange gains on fair value of interest rate swaps Prot from continuing operations after income tax Segment assets as at 30 June 2010 are as follows: Property, plant & equipment Intangibles Working capital 75,525 12,135 16,060 103,720 19,062 8,787 39,750 67,599
94,587 20,922 55,810 171,319
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NOTE 8: EARNINGS PER SHARE
Basic earnings per share based on operating prot after income tax (cents) Diluted earnings per share based on operating prot after income tax (cents) Weighted average number of ordinary shares on issue used in the calculation of basic earnings per share Weighted average number of ordinary shares on issue used in the calculation of diluted earnings per share Earnings used in calculating basic and diluted earnings per share ($000)
2011 (28.7) (28.7) 91,361,523 91,361,523 (26,206)
2010 7.8 7.7 80,825,576 81,355,875 6,277
The weighted average number of shares used for the purposes of calculating diluted earnings per share reconciles to the number used to calculate basic earnings per share as follows: 2011 Weighted average number of ordinary shares on issue for basic earnings per share Executive share options and performance rights Weighted average number of ordinary shares on issue used in the calculation of diluted earnings per share 91,361,523 91,361,523 2010 80,825,576 530,299 81,355,875
There are 2,472,296 executive share options excluded from the calculation of diluted earnings per share because they are antidilutive for the 2011 period presented. These executive share options could potentially dilute basic earnings per share in the future.
NOTE 9: NET TANGIBLE ASSETS PER SECURITY
Net tangible asset backing per ordinary security (cents)
2011 65
2010 79
72
NOTE 10: NOTES TO THE CASH FLOW STATEMENT
Consolidated 2011 $000 (a) CASH AND CASH EQUIVALENTS Cash at bank and in hand Reconciliation to cash ow statement For the purposes of the cash ow statement cash and cash equivalents comprise the following at 30 June: Cash at bank (b) RECONCILIATION OF NET PROFIT AFTER INCOME TAX TO CASH FLOWS FROM OPERATIONS Net (loss)/prot after income tax Depreciation/amortisation Net (gain)/loss on sale of noncurrent assets Net fair value change in derivatives Impairment expense Share based payment expense Non cash dened benet fund expense Amortised borrowing costs Other Change in operating assets and liabilities: Decrease in receivables (Increase) in inventories (excluding impairment) (Increase) in deferred tax assets (Increase)/decrease in other assets (Increase)/decrease in income tax receivable Increase/(decrease) in trade creditors and accruals (Decrease)/increase in deferred tax liabilities (Decrease) in other provisions Net cash inow from operating activities 5,163 2010 $000 5,444
5,163 5,163
5,444 5,444
(26,206) 9,603 (86) (67) 26,000 155 (514) 310 253 5,193 (2,263) (6,842) (1,930) (112) 613 1,241 (24) 5,015
6,277 8,819 22 (925) (63) (734) 201 2,791 (7,088) (690) 1,986 322 (3,767) 58 (148) 7,063
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73
Notes to the Financial Statements for the year ended 30 June 2011 NOTE 10: NOTES TO THE CASH FLOW STATEMENT (CONTINUED)
(c) AT 30 JUNE, THE FOLLOWING FINANCE FACILITIES HAD BEEN NEGOTIATED AND WERE AVAILABLE Note Total facilities: bank loan current bank loan non current Facilities used at reporting date: bank loan Facilities unused at reporting date: bank loan 2011 $000 8,800 70,000 78,800 78,800 2010 $000 1,800 70,000 71,800 71,800
19
78,800
71,800
As at 30 June 2011, Penrice was in negotiation with its banks and reached agreement in principle to amend its facilities as announced to the ASX on Friday 12 August 2011. This agreement cancelled a $1.8 million amortization payment due on 30 June 2011, and amended the termination date of its $7.0 million facility to 30 November 2012 or a later date to be agreed in writing. Previously the termination date for this facility was 31 August 2011. The amended agreement provides an additional $10 million funding facility to be available until 31 March 2012, which then reduces to $8 million until 30 September 2012 being the termination date for this new facility. For more information on banking arrangements, please see Note 21, 33.
74
NOTE 11: TRADE AND OTHER RECEIVABLES
Consolidated 2011 $000 Trade debtors, net Non trade amounts owing by: Unrelated parties Total current trade and other receivables 15,479 2010 $000 21,678
1,259 16,738
253 21,931
(a) ALLOWANCE FOR IMPAIRMENT LOSS Trade receivables are non-interest bearing and are generally on 3062 day terms. A provision for impairment loss is recognised when there is objective evidence that an individual trade receivable is impaired. A provision of $7k for impairment losses has been recognised for the year (2010: $7k) against those amounts that are >90 days past due. Net of provision for impairment loss, the ageing of trade receivables is: Total $000 15,486 (7) 15,479 21,678 (7) 21,671 030 Days $000 15,084 15,084 21,455 21,455 3160 Days $000 260 260 125 125 6190 Days $000 32 32 41 41 +91 Days $000 110 (7) 103 63 (7) 56
2011 Consolidated Less provision for doubtful debts
2010 Consolidated Less provision for doubtful debts
Those amounts that are considered impaired and have been provided for. Those amounts in 60-91+ days ageing category are considered past due but not impaired. (b) FAIR VALUE AND CREDIT RISK Due to the short term nature of these receivables, their carrying value is assumed to approximate their fair value. The maximum exposure to credit risk is the fair value of the receivables. Collateral is not held as security. (c) FOREIGN EXCHANGE AND INTEREST RATE RISK Details regarding foreign exchange and interest rate exposure are disclosed in Note 3.
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NOTE 12: INVENTORIES
Consolidated 2011 $000 Raw Materials Raw Materials (at cost) (1) Finished Goods Chemical (at cost) Chemical (at net realisable value) (2) Quarry & Mineral Limestone (at cost) Quarry & Mineral Aggregates (at cost) Quarry & Mineral Landll (at net realisable value) (3) Production spares & consumable goods Quarry & Mineral (at cost) Chemical (at net realisable value) (4) Total current inventories 3,045 2010 $000 4,597
7,736 158 4,489 19,827 9,657
8,900 3,708 18,645 19,777
1,184 4,953 51,049
854 6,588 63,069
Note: (1) Impairment charge of $1,871k has been applied to coke stock to reect the average density factor and moisture content of stock holdings. (2) Impairment charge of $768k has been applied to greasy ash to reect the net realisable value of this product as a result of additional processing and loss factor in production, previously carried at cost. (3) Impairment charge of $10,000k has been applied against the carrying value of landll to reect the change in expected timing of major infrastructure projects and associated sales and cash ows. (4) Impairment charge of $1,644k has been applied to against the carrying value of aged and slow moving stores and spares parts. Inventory recognised as an expense for the year totalled $115,044k (2010: $105,102k) included in this amount is $1,124k (2010: $1,620k) in relation to the difference between the cost of extracting landll and its carrying value. Aggregates and landll are classied as inventories of nished goods on the basis that these volumes are ready for sale with no further processing required, and that there is a market for the sale of these products. Based upon current contracted sales volumes, the inventories of these products will be realised over a period greater than 12 months. However, this is considered to be within the normal operating cycle, and therefore the products are classied as current assets under AASB 101: Presentation of Financial Statements. Based on 2012 sales forecasts of aggregates, it is estimated that inventory levels represent approximately 3 years sales. With regard to landll, sales in 2011 were in small volumes primarily to the civil market as a blended product for road base but forecast sales for 2012 are greater than 2011. The major market being targeted is the landll market in the greater northern Adelaide region, in which large quantities of landll in the order of millions of tonnes are required for land developments in a large number of low lying areas. There are currently several such developments in the early stages of planning, all of which could potentially be supplied by Penrice. The Group is actively pursuing these opportunities. It is therefore difcult to give an estimate for the time required to sell out the existing inventory. Additions of landll and aggregate volumes in future years will continue to decline as extraction rates reduce in the next phase of the mine plan.
76
NOTE 13: DERIVATIVE FINANCIAL INSTRUMENTS
Current
Interest rate swaps 112 months $000 (205) (205) Interest rate swaps $000 (62) (62)
Foreign exchange contracts $000 891 891 Foreign exchange contracts $000
2011 Total $000 686 686 2011 Total $000 (62) (62)
2010 Current $000 (1,137) (1,137) 2010 Current $000 (596) (596)
Current (112 months) Total current derivatives Non-current
Non-current (1 year+) Total non-current derivatives
Interest Rate Swaps The Group has entered into interest rate swaps, to swap oating rate interest to xed rate interest. At 30 June 2011, the notional amount of the interest rate swap contracts was $52.3m (2010: $59.3m) at a weighted average xed rate of 6.04% (2010: 5.87%). The interest payable and receivable on the swap contract is settled net on a quarterly basis until expiry. The notional amount of interest rate swap contracts classied as current was $27.1m (2010: $40.3m) with these contracts having various start and end dates. The weighted average balances and xed rates for these contracts are shown in the table below. Notional Value AUD $000 35,717 18,400 27,058 Weighted Average Interest Rate % 5.9 5.8
Period Fixed interest rate contracts Fixed interest rate contracts Average current notional value 1 Jul 11 31 Dec 11 1 Jan 12 30 Jun 12
Foreign Exchange Contracts The Group enters into foreign exchange contracts to manage its USD revenue exposures from its export chemical business. These are economic cash ow hedges. At 30 June 2011 the notional amount of the forward exchange contracts was USD $3.8m (2010: USD $19.2m) at a weighted average rate of 0.84 USD: 1.0 AUD. The weighted average balances and exchange rates for these contracts are shown in the table on the following page.
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Notes to the Financial Statements for the year ended 30 June 2011 NOTE 13: DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
Period Foreign Exchange Contracts Foreign Exchange Contracts 1 Jul 11 31 Dec 11 1 Jan 12 30 Jun 12
Notional Value USD $000 2,800 1,000 3,800
Weighted Average Exchange rate USD:AUD 0.85 0.83 0.84
Interest rate risk Information regarding interest rate risk exposure is set out in Note 3. Foreign exchange risk Information regarding foreign exchange risk exposure is set out in Note 3. Credit risk Credit risk arises from the potential failure of counter parties to meet their obligations at maturity of contracts. This can arise on derivative nancial instruments with unrealised gains. Management has established limits to ensure that, at any time, the fair value of favourable contracts outstanding with any individual counter party is recoverable. The Groups derivative contracts are placed with its incumbent banks, NAB and Westpac.
NOTE 14: OTHER ASSETS
Consolidated Current Prepayments Total other current assets 2011 $000 2,579 2,579 2010 $000 649 649
78
NOTE 15: PROPERTY, PLANT & EQUIPMENT
Year ended 30 June 2011 Land & Improvements at Cost $000 Gross Carrying amount Balance as at 1 July 2010 Additions Reclassication transfer Transfer from intangibles Disposals Balance as at 30 June 2011 Accumulated Depreciation Balance as at 1 July 2010 Disposals Depreciation Expense Balance as at 30 June 2011 Net Book Value As at 1 July 2010 As at 30 June 2011
Consolidated Buildings at Cost $000 Plant & Equipment at Cost $000 Total $000
6,422 437 181 45 7,085
15,630 439 16,069
163,893 13,109 (181) (121) 176,700
185,945 13,985 45 (121) 199,854
(44) (8) (52)
(2,418) (496) (2,914)
(8,896) 79 (8,631) (97,448)
(91,358) 79 (9,135) (100,414)
6,378 7,033
13,212 13,155
74,997 79,252
94,587 99,440
Plant and equipment with a carrying amount of $1,266k (2010: $1,379k) are pledged as securities for the nance lease liability as disclosed in Notes 19 and 21. First mortgages of land and buildings have been granted as security on bank loans (refer Note 21). Included in plant and equipment at 30 June 2011 is an amount of $9,470k (2010: $5,914k) related to expenditure for plant in the course of construction. Plant and equipment with a gross carrying amount of $46,914k (2010: $44,114k) has been fully depreciated at 30 June 2011, but remains in use at the reporting date.
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Notes to the Financial Statements for the year ended 30 June 2011 NOTE 15: PROPERTY, PLANT & EQUIPMENT (CONTINUED)
Year ended 30 June 2010 Land & Improvements at Cost $000 Gross Carrying amount Balance as at 1 July 2009 Additions Transfer from intangibles Disposals Balance as at 30 June 2010 Accumulated Depreciation Balance as at 1 July 2009 Disposals Depreciation expense Balance as at 30 June 2010 Net Book Value As at 1 July 2009 As at 30 June 2010
Consolidated Buildings at Cost $000 Plant & Equipment at Cost $000 Total $000
6,152 112 158 6,422
14,828 802 15,630
154,784 9,325 (216) 163,893
175,764 10,239 158 (216) 185,945
(35) (9) (44)
(1,930) (488) (2,418)
(80,983) 165 (8,078) (88,896)
(82,948) 165 (8,575) (91,358)
6,117 6,378
12,898 13,212
73,801 74,997
92,816 94,587
80
NOTE 16: INTANGIBLES
Year ended 30 June 2011 Goodwill $000 Gross Carrying amount Balance as at 1 July 2010 Transfer to Plant, Property & Equipment Write offs Impairment (1) Balance at 30 June 2011 Accumulated Amortisation Balance as at 1 July 2010 Amortisation Balance at 30 June 2011 Net Book Value As at 1 July 2010 As at 30 June 2011
Consolidated Exploration and Mine Development evaluation costs Costs $000 $000
Software $000
Total $000
18,008 (11,717) 6,291
315 (45) (4) 266
2,586 2,586
523 523
21,432 (45) (4) (11,717) 9,666
(266) (266)
(150) (258) (408)
(94) (210) (304)
(510) (468) (978)
18,008 6,291
49
2,436 2,178
429 219
20,922 8,688
Note: (1) Chemical Business goodwill of $11,717k has been written off as a result of impairment testing of this cash generating unit. Year ended 30 June 2010 Goodwill $000 Gross Carrying amount Balance as at 1 July 2009 Additions Transfer to Plant, Property & Equipment Write offs Balance at 30 June 2010 Accumulated Amortisation Balance as at 1 July 2009 Amortisation Balance at 30 June 2010 Net Book Value As at 1 July 2009 As at 30 June 2010 Exploration and evaluation costs $000 Consolidated Mine Development Costs $000
Software $000
Total $000
18,008 18,008
441 45 (158) (13) 315
2,586 2,586
523 523
18,449 3,154 (158) (13) 21,432
(266) (266)
(150) (150)
(94) (94)
(266) (244) (510)
18,008 18,008
175 49
2,436
429
18,183 20,922
Impairment testing of goodwill Goodwill acquired through business combinations has been allocated to two individual cash generating units, which are reportable segments for impairment testing as follows: Chemical Business; and Quarry and Mineral Business The recoverable amount of both cash generating units has been determined based on a value-in-use of calculation using cash ow projections based on the nancial budget for the year ended 30 June 2012 and forecasts for the subsequent four-year
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Notes to the Financial Statements for the year ended 30 June 2011 NOTE 16: INTANGIBLES (CONTINUED)
period included in the 10 year business plan. A pre-tax discount rate applied to cash ow projections is 12.0% (2010: 11.0%) key drivers and assumptions are disclosed in Note 2d. The Directors have determined that impairment exists and Chemical business goodwill has been written-off. Consolidated 2011 $000 Carrying amount of goodwill allocated to each business unit Osborne production facility Angaston mine Total goodwill 2010 $000
6,291 6,291
11,717 6,291 18,008
NOTE 17: OTHER LIABILITIES

Consolidated Non-current Dened benet fund liability Total other non-current liabilities Details of the dened benet fund are included in Note 27. 2011 $000 (692) (692) 2010 $000 (25) (25)
NOTE 18: TRADE AND OTHER PAYABLES

Consolidated Current Trade creditors Non trade creditors and other payables Total current trade and other payables Trade creditors are non-interest bearing and are normally settled on 3062 day terms. (a) FAIR VALUE Due to the short term nature of these payables, their carrying value is assumed to approximate their fair value. (b) INTEREST RATE, FOREIGN EXCHANGE AND LIQUIDITY RISK Information regarding interest rate, foreign exchange and liquidity risk exposure is set out in Note 3. 2011 $000 16,921 12,882 29,803 2010 $000 16,298 12,892 29,190
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NOTE 19: INTEREST BEARING LIABILITIES
Consolidated Current Secured: Bank Loan (1) Finance lease liabilities Unsecured: Other Total current interest bearing liabilities Securities provided for nance leases are disclosed under Note 21. Note (1) As at 30 June 2011, Penrice was in negotiation with its banks and reached agreement in principle to amend its nance facilities as announced to the ASX on Friday 12 August 2011. This agreement cancelled a $1.8 million amortisation payment due on 30 June 2011, and amended the termination date of a $7.0 million facility to 30 November 2012 or a later date to be agreed in writing. Previously the termination date for this facility was 31 August 2011. Whilst this amendment does cancel the amortisation payment and defers payment of the $7.0 million facility beyond the 12 month period from balance date, it is considered a non-adjusting subsequent event under accounting standards and does not change the classication of the liability at 30 June 2011. As a result, $8.8 million remains a current liability in the nancial statements. No repayments are due within the next 12 months. 2011 $000 8,800 318 9,118 1,597 10,715 2010 $000 1,800 839 2,639 2,639
NOTE 20: PROVISIONS
Consolidated Current Employee benets Other Total current provisions 2011 $000 5,624 15 5,639 2010 $000 5,470 15 5,485
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NOTE 21: INTEREST BEARING LIABILITIES
Consolidated Non-current Finance lease liabilities (a) Bank loan (b) Total non-current interest bearing liabilities (a) 2011 $000 512 69,530 70,042 2010 $000 372 69,500 69,872
The nance leases have an average lease term of 3.3 years (2010: 3.4 years) at an average interest rate of 9% (2010: 9%) with xed residual values at the end of the leases based on Australian Taxation Ofce minimum residuals. The Group is obligated to pay out these residual values at the end of the lease terms. There are no restrictions imposed by these lease agreements. Penrice utilises oating rate bills for its debt funding and has hedges in place to hedge the interest rate risk on a portion of the oating rate bills, as set out in Note 13.
(b)
Fair values The carrying amount of the Groups current and non-current interest bearing liabilities approximate their fair value. The oating rate bills are predominantly 90 day BBSY bills and at balance date the interest rate ranged from 8.4% to 8.6% (includes 90 day BBSY rate plus bank margin). Interest rate and liquidity risk Details regarding interest rate and liquidity risk are disclosed in Note 3. Assets pledged as security The lease liability is secured by a charge over the leased assets. The carrying amount of these plant and equipment assets is $1,266k (2010: $1,379k). The bank loan is secured by a xed and oating charge over the assets of the Group. Refer Note 15.
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NOTE 22: PROVISIONS
Consolidated Non-current Employee benets Dredging Remediation Total non-current provisions 2011 $000 563 871 815 2,249 2010 $000 533 871 208 1,612
Movements in provisions Wharf Dredging Carrying amount at the beginning of the period Amounts utilised during the period Carrying amount at the end of the period Remediation Carrying amount at the beginning of the period Amounts utilised during the period Amounts charged during the period Carrying amount at the end of the period
871 871
875 (4) 871
208 607 815
189 19 208
Wharf Dredging The group has an agreement with both the S.A. Government and the operator of the Port River, Flinders Ports Pty Limited, in relation to the dredging of the Port River. The agreement requires Penrice to dredge the material over a 10 year period. Penrice has maintained a provision to dredge this material over a 10 year period. Remediation Provision The remediation provision relates to the activities of the Osborne manufacturing plant operations and the Angaston mine operation.
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NOTE 23: CONTRIBUTED EQUITY
Consolidated 2011 $000 Contributed equity Ordinary shares fully paid 80,236 80,236 2010 $000 80,074 80,074
In accordance with changes to the Corporations law effective 1 July 1998, the shares issued do have a par value and there is no limit on the authorised share capital of the Group. Year Ended 30 June 2011 Shares Balance at the start of the period Issued during year Dividend Reinvestment Plan Share Placement Share Purchase Plan Share Purchase Plan underwritten Rights Issue Costs of October 2009 equity raising net of deferred tax Balance at the end of the period 91,361,523 $000 80,074 Shares 52,963,202 Year ended 30 June 2010 $000 53,615
91,361,523
162 80,236
7,944,480 30,453,841 91,361,523
6,753 21,318 (1,612) 80,074
Capital management When managing capital, the Groups objective is to ensure the entity continues as a going concern as well as to maintain optimal returns to shareholders and benets for other stakeholders. The Group also aims to maintain a capital structure that ensures the lowest cost of capital available to the entity. The Group continually reviews the capital structure to take advantage of favourable costs of capital or high returns on assets. As the market is constantly changing, the Group may change the amount of dividends to be paid to shareholders, issue new shares or sell assets to reduce debt. During the 2011 nancial year, the Board paid dividends of $Nil (2010: $Nil). The Penrice Soda Holdings Dividend Reinvestment Plan commenced on 16 April 2008 and remains in operation. Shares are allocated under the Plan at the issue price which is the average market price during the pricing period, less any discount (if any) determined by the Board, rounded to the nearest cent. The Plan was utilised for the 2008 nal dividend, paid on 24 October 2008 and as a result 421,499 shares were issued upon reinvestment of dividends. No dividends have been paid subsequent to this date and therefore the dividend reinvestment plan has not been utilised since that time. The Board monitors capital through various measures, including the gearing ratio [net debt/(net debt+total equity)]. The gearing ratios based on continuing operations at 30 June 2011 and 2010 were as follows:
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Notes to the Financial Statements for the year ended 30 June 2011 NOTE 23: CONTRIBUTED EQUITY (CONTINUED)
Consolidated 2011 $000 Total borrowings (1) Less cash and cash equivalents Net debt Total equity Total net debt + equity Gearing ratio [Net debt/(Net debt+total equity)] (1) Borrowings include short and long term borrowings and include nance lease liabilities. The gearing ratio as at 30 June 2011 of 53% is outside the Boards desired range. The reasons for the increased gearing have been documented elsewhere in this report and the Board has announced a strategic review of the Groups operations will be conducted in FY2012 to improve operating performance and reduce debt and gearing to more normal credit metrics. 80,757 (5,163) 75,594 67,823 143,417 53% 2010 $000 72,511 (5,444) 67,067 93,016 160,083 42%
NOTE 24: RETAINED EARNINGS AND RESERVES
Consolidated 2011 $000 (a) MOVEMENTS IN RETAINED EARNINGS: Retained earnings at the beginning of the period Net (loss)/prot for the period Less dividend paid Actuarial (losses) on dened benet fund recognised directly through retained earnings Retained earnings at the end of the period (b) MOVEMENTS IN SHARE BASED PAYMENTS RESERVE: Balance at start of period Share-based payment expense for the period Purchase of shares on market Balance at end of period (c) MOVEMENTS IN CASH FLOW HEDGE RESERVE: Balance at start of period Derivatives movement for the period Balance at end of period 13,994 (26,206) (827) (13,039) 2010 $000 7,889 6,277 (172) 13,994
34 155 189
43 63 (72) 34
(1,086) 1,523 437
(1,086) (1,086)
The share based payments reserve is used to record the value of share based payments provided to employees, including key management personnel, as part of their remuneration. Refer to Note 28 for further details.
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NOTE 25: ECONOMIC DEPENDENCY

Subsidiary companies have long term customer supply agreements with three major corporates for the supply of soda ash and colour blending product for use in glass production, as well as limestone sand from the Quarry. The major inputs for the production of soda ash are steam, salt, limestone, coke and water. Penrice sources its steam pursuant to a xed price take-or-pay contract that expires in 2018 and salt under a xed price contract that runs to 2019 with Penrice having options to extend the salt contract to 2033.
NOTE 26: REMUNERATION OF AUDITORS
Consolidated 2011 $000 Amounts received or due and receivable by Ernst & Young for: Audit or review of the nancial statements Other services: Taxation Other Total remuneration of auditors 2010 $000
214,791 123,196 59,967 397,954
222,353 91,445 35,390 349,188
NOTE 27: EMPLOYEE ENTITLEMENTS
Consolidated 2011 The number of full-time equivalents employed as at 30 June are: 259 2010 257
Employees are eligible to receive benets from the Penrice Retirement Trust (the Fund). A benet is payable on retirement, death, disablement or leaving service, in accordance with the Funds Trust Deed and Rules. The Fund is a resident regulated superannuation fund that complies with superannuation laws. The Fund provides lump sum benets, calculated either on a dened benet basis (qualifying employees commenced prior to 1 December 1997) or on an accumulation basis. Dened benets reect a members period of Fund membership and nal average salary. Members of the Fund contribute, in general, at a rate that is from 1% to 7% of salary. Penrice contributes to the Fund in accordance with the recommendation of the actuary. Mercer Human Resource Consulting Pty Ltd carried out an actuarial investigation of the Fund as at 30 June 2009. The June 2011 actuarial estimates below were performed for the purposes of AASB119 Employee Benets disclosures and were provided by Mercer Human Resource Consulting Pty Ltd.
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Notes to the Financial Statements for the year ended 30 June 2011 NOTE 27: EMPLOYEE ENTITLEMENTS (CONTINUED)
Employer contributions to the Groups dened benet plan are based on recommendations by the funds actuary. The method used at the last review to determine the employer contribution recommendations was the projected accrual benet funding method. The following tables summarise the components of net benet expense recognised in the Income Statement and the Fund status recognised in the Statement of Financial Position. Consolidated PENRICE RETIREMENT TRUST (a) NET BENEFIT EXPENSE Service cost Interest cost Expected return on assets Superannuation expense (b) NET DEFINED BENEFIT ASSET/(LIABILITY) INCLUDED IN THE STATEMENT OF FINANCIAL POSITION Fair value of plan assets Present value of dened benet obligation Total net dened benet liability recognised on the Statement of Financial Position (Note 17) (c) CHANGES IN THE PRESENT VALUE OF THE DEFINED BENEFIT OBLIGATION Opening dened benet obligation Current service cost Interest cost Contributions by plan participants Actuarial gains Benets paid Taxes, premiums and expenses paid Transfers in closing dened benet obligation Closing dened benet obligation 2011 $000 597 821 (1,225) 193 2010 $000 629 815 (1,111) 333
17,511 18,203 692
18,126 18,151 25
18,151 597 821 429 992 (2,731) (207) 151 18,203
17,572 629 815 462 748 (1,800) (275) 18,151
The dened benet obligation consists entirely of amounts from plans that are wholly or partly funded. The service cost and expected return on plan assets components of superannuation expense are recognised in the other expenses line within the Income Statement. Interest cost is recognised within borrowing costs in the Income Statement.
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Consolidated 2011 2010 $000 $000 (d) CHANGES IN THE FAIR VALUE OF THE PLAN ASSETS Opening fair value of plan assets Expected return on plan assets Actuarial gains/(losses) Employer contributions Contributions by plan participants Benets paid Taxes, premiums and expenses paid Transfers in Closing fair value of plan assets (e) THE PERCENTAGE INVESTED IN EACH CLASS OF ASSET Australian equity International equity Fixed income Property Cash Alternatives /Other (f) AMOUNTS RECOGNISED IN STATEMENT OF COMPREHENSIVE INCOME Actuarial (losses) recognised in the year in the Statement of comprehensive income Cumulative actuarial (losses) recognised in the Statement of Comprehensive income
18,126 1,225 (189) 707 429 (2,731) (207) 151 17,511 % 27 29 13 10 10 11 2011 $000 (1,181) (2,467) 2011 $000
17,058 1,111 503 1,067 462 (1,800) (275) 18,126 % 29 32 12 10 7 10 2010 $000 (245) (1,286) 2010 $000 2009 $000 2008 $000 2007 $000
(g) HISTORICAL INFORMATION FOR THE CURRENT AND PREVIOUS PERIODS Present value of dened benet obligation Fair value of plan assets Decit/(surplus) in plan Experience adjustments (gain)/loss - Plan assets Experience adjustments (gain)/loss - Plan liabilities
18,203 17,511 692 189 730 2011 $000 % 4.60%pa 7.00%pa 3.0%pa in 2011/12, 4.0% pa thereafter
18,151 18,126 25 (503) 653 2010 $000 % 4.80% pa 7.00% pa 2.5% pa in 2010/11 and 2011/12, 4.0% pa thereafter
17,572 17,058 514 3,843 (2,760)
19,179 19,648 (469) 3,469 (2,807)
22,968 24,244 (1,276) (2,268) 2,419
(h) PRINCIPAL ACTUARIAL ASSUMPTIONS Discount rate Expected rate of return on plan assets Expected salary increase rate
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(i) FAIR VALUE OF PLAN ASSETS The fair value of Plan assets includes no amounts relating to: any of the Groups own nancial instruments; or any property occupied by, or other assets used by, the Group. (j) ACTUAL RETURN ON PLAN ASSETS 2011 $000 1,036 Consolidated 2010 $000 1,614
(k) EXPECTED RATE OF RETURN ON PLAN ASSETS The expected return on assets assumption is determined by weighting the expected long term return for each asset class by the target allocation of assets to each asset class and allowing for the correlations of the investment returns between asset classes. The returns used for each asset class are net of investment tax and investment fees and asset based fees. (l) EXPECTED CONTRIBUTIONS The Group expects to contribute $564k to the dened benet superannuation fund in 2011/12.
NOTE 28: SHARE-BASED PAYMENT PLANS

The share-based payment plans are described below. There have been no cancellations or modications to the existing plan during 2011 and 2010. Share based payments were expensed during FY2011 for the FY2010 and FY2011 plans. (a) RECOGNISED SHARE-BASED PAYMENT EXPENSES The expense recognised for employee services received during the year is shown in the table below: Consolidated 2011 $000 Expense arising from equity-settled share-based payment transactions Total expense arising from share-based payment transactions 155 155 2010 $000 63 63
(b) TYPES OF SHARE BASED PAYMENT PLANS Performance Rights Plan (PRP) The performance rights plan is designed to align participants interests with those of shareholders by rewarding stakeholders for increasing the value of the Groups shares. Penrices PRP is a long term incentive scheme with a performance period of three years made up of two equal tranches. One tranche of the PRP is subject to a relative Total Shareholder Return (TSR) hurdle, where Penrices TSR performance is ranked relative to companies in a comparator group consisting of the smallest 50 companies other than Penrice in the ASX Small Industrials Index. The hurdle is tested initially at the end of the 3 year Performance Period and if required is then subject to retesting at the end of the fourth year following the grant.
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Notes to the Financial Statements for the year ended 30 June 2011 NOTE 28: SHARE-BASED PAYMENT PLANS (CONTINUED)
The second tranche of the PRP is subject to an absolute EPS growth hurdle, measuring the average EPS growth over the 3 year performance period. This tranche is also required to pass a threshold of positive TSR at the testing date before vesting conditions can apply. Penrice performance rights, for the 3 year performance period commencing 1 July 2011 have been granted to 8 eligible employees. Summary of Performance Criteria for the three Year Performance period In assessing whether the relative TSR hurdle has been met, the Group receives independent data from an external advisor, who provides both the Groups TSR and that of the pre-selected peer group. The vesting scale for the TSR tranche is as follows: Relative TSR <P40 P40 to <P50 P50 >P50 & <P80 P80 % of Rights in Grant to Vest 0% Pro rata 50% Pro rata 100%
As the performance hurdle of the TSR tranche is related to the share price of Penrice, it is deemed to be a market based performance hurdle and therefore in accordance with AASB2 Share-based Payment, allowance has been made for the impact of this hurdle in determining the awards fair value. Therefore for this tranche the actual amount of Share Based Payments are expensed using the grant date fair value, which makes allowance for the performance hurdle. The performance criteria for the EPS component of the PRP plan is as follows: Absolute EPS Growth Vesting Scale Absolute EPS Growth* 3% pa >3% & <6% pa 6% pa >6% & <9%pa 9% pa % of Rights in Grant to Vest 0% Pro rata 50% Pro rata 100%
* The absolute EPS growth hurdle is the average EPS growth for the 3 year performance period of the respective tranche. As the performance hurdle of the EPS growth tranche is not directly related to the share price of Penrice, it is deemed to be an internal (or non market based) performance hurdle and therefore in accordance with AASB2 Share-based Payment, allowance cannot be made for the impact of this hurdle in determining the awards fair value. The impact of the EPS performance hurdle is instead taken into account during the expensing process. In this case, the actual number of Share Based Payments that ultimately vest is expensed using the grant date fair value, which makes no allowance for the performance hurdle. Under AASB2 Share-based Payment estimates can be made for the number of SBPs expected to vest, however the total expense must be trued up when the actual number of SBPs vesting is known. The amount taken up in FY2011 for this plan under AASB2 Share-based Payment is $154,887 (FY2010 $40,620) which has been accounted for as a personnel cost in the income statement.
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(c) SUMMARIES OF RIGHTS GRANTED UNDER PRP ARRANGEMENTS The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of, and movements in performance rights granted during the year: 2011 No. PRP Outstanding at the beginning of the year Cancelled during the year Granted during the year Forfeited/lapsed during the year Exercised during the year Expired during the year Outstanding at the end of the year Exercisable at the end of the year 1,049,923 1,913,073 (171,855) 2,791,141 2011 WAEP 2010 No. 171,855 878,068 1,049,923 171,855 2010 WAEP
The outstanding balance as at 30 June 2011 is represented by 2,791,141 (2010: 1,049,923) performance rights over ordinary shares with an exercise price of $nil each, exercisable upon meeting the performance hurdles noted above. The FY2008 PRP 171,855 performance rights vested on 1 July 2010. (d) WEIGHTED AVERAGE REMAINING CONTRACTUAL LIFE The weighted average remaining contractual life for the performance rights outstanding as at 30 June 2011 is: PRP FY2010 FY2011 Total Performance Rights 878,068 1,913,073 2,791,141 Weighted Ave Contractual life Years 1 2
(e) WEIGHTED AVERAGE FAIR VALUE The weighted average fair value of rights granted during FY2011 was $0.23c (FY2010 $0.62c) for TSR tranche and $0.24c (FY2010 $0.67c) for EPS growth tranche. (f) PERFORMANCE RIGHTS PRICING MODEL The Penrice performance rights plan has been valued independently using Black Scholes methodology to produce MonteCarlo simulations. The Black Scholes model is a valuation model, that takes into account current security price at grant date, exercise price (if applicable), time to expiration, risk free rate and security price volatility. It calculates the expense to Penrice at the grant date, and then can be used to mark to market the expense at subsequent reporting periods as likelihood of vesting (for nonmarket based hurdles) and employee turnover is considered. The Monte-Carlo simulation model allows for the incorporation of the market based performance hurdles that must be met before the SBP vests to the holder. The Monte-Carlo simulation is used to determine the fair value of the TSR element. In accordance with the rules of the PRP, the model simulates the Groups TSR and compares it against the peer group over the three year performance period of each grant.
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Option pricing model: Performance Rights Pricing Dividend yield (pa) Expected volatility (pa) Risk-free interest rate (pa) Rights exercise price ($) Weighted average share price at measurement date ($) Expected life of right (years) Model used Fair value of rights granted ($) Performance Rights 2011 0% year 1, 5% subsequent yrs 51% 4.36% 0.335 2.83 Monte Carlo Relative TSR $0.232; EPS $0.241 Performance Rights 2010 0% year 1, 5% subsequent yrs 46% 4.54% 0.885 2.42 Monte Carlo Relative TSR $0.615; EPS $0.670
NOTE 29: COMMITMENTS AND CONTINGENT LIABILITIES

Consolidated 2011 $000 (a) CAPITAL EXPENDITURE CONTRACTED FOR IS PAYABLE AS FOLLOWS: Not later than one year (b) FINANCE LEASE EXPENDITURE CONTRACTED FOR IS PAYABLE AS FOLLOWS: Not later than one year Later than one year but not later than ve years Less: Future nance charges Net nance lease liability (c) OTHER COMMITTED EXPENDITURE Reconciled to: Current liability (Note 19) Non-current liability (Note 21) Total other committed expenditure (d) OPERATING LEASE EXPENDITURE CONTRACTED FOR IS PAYABLE AS FOLLOWS: Not later than one year Later than one year but not later than ve years Total operating lease expenditure 317 2010 $000
436 529 965 (135) 830
657 723 1,380 (169) 1,211
318 512 830
839 372 1,211
4,760 13,859 18,619
5,885 13,088 18,973
The Group utilises a series of power by the hour (PBH) rental agreements for large capacity trucks and loaders used at the Angaston mine. Each agreement runs until either a maximum time period, or a specied number of operating hours has been reached. The remaining contracted time periods range from 3 months to 4 years, or, 1,800 to 18,000 operating hours. The agreements contain minimum annual hourly rental charges, which total the amounts shown above as committed operating lease expenditure. The minimum commitments are comparable to the amounts expended in the current year under the agreement. The parent entity and all controlled entities in the Group are parties to various guarantees and indemnities pursuant to the Groups banking facilities. The Group has entered into nancial bank guarantees with third parties arising in the normal course of business totalling $507,600 (2010: $750,000). For Employee Contract Commitments refer to Note 31.
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NOTE 30: RELATED PARTY DISCLOSURES

The following were controlled entities at 30 June 2011. The nancial years of all controlled entities are the same as that of the parent entity. Book value of investment 2011 $1 $58,470,413 $23,187,037 $32,882,321 $2 Book value of Investment % of Shares 2010 held 2010 $1 100 $58,470,413 100 $23,187,037 100 $32,882,321 100 $2 100
Name of Controlled Entity Penrice Pty Limited PSP SPV Pty Limited Penrice Finance Pty Limited Penrice Holdings Pty Ltd Penrice Soda Products Pty Ltd
Country of Incorporation Australia Australia Australia Australia Australia
Class of Shares Ordinary Ordinary Ordinary Ordinary Ordinary
% of Shares held in 2011 100 100 100 100 100
ULTIMATE PARENT Penrice Soda Holdings Limited is the ultimate Australian parent Company, which owns Penrice Pty Limited directly and the other companies indirectly. WHOLLY-OWNED GROUP TRANSACTIONS Loans Loans made by Penrice Soda Holdings Limited to its subsidiaries have no set repayment date, and as such have been classied as current receivables. Interest is not charged on the amount outstanding. Dividends Penrice Soda Holdings Limited did not receive a dividend during the period (2010: $Nil) from Penrice Pty Limited, a wholly owned subsidiary. Key management personnel (KMP) Details relating to KMP, including remuneration paid, are included in Note 31. Employees Contributions to superannuation funds on behalf of employees are disclosed in Note 4.
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NOTE 31: KEY MANAGEMENT PERSONNEL
(a) DETAILS OF DIRECTORS AND SPECIFIED EXECUTIVES WHO ARE DEEMED TO BE THE KEY MANAGEMENT PERSONNEL OF THE COMPANY: Specied Directors David Trebeck, Chairman Guy Roberts Andrew Fletcher Barbara Gibson (Retired 31 August 2011) John Hirst David Groves (Appointed 20 December 2010) Specied Executives Frank Lupoi Declan Mackle Darrin Wright Brett Smith Andrew Cannon Roy Doveton Marnie Brokenshire Chairman (Non Executive) Director and Chief Executive Ofcer Director (Non Executive) Director (Non Executive) Director (Non Executive) Director (Non Executive)
Chief Financial Ofcer and Group Secretary General Manager Chemical Operations General Manager Quarry & Mineral General Manager Chemicals Business General Manager Supply Chain General Manager Major Projects General Manager Human Resources
(b) COMPENSATION OF KEY MANAGEMENT PERSONNEL Compensation by category 2011 $000 Short term benets Post employment benets Long term benets Share based payments Total Compensation No compensation is borne by the parent entity. 2,247 275 29 151 2,702 Consolidated 2010 $000 2,381 340 16 59 2,796
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Notes to the Financial Statements for the year ended 30 June 2011 NOTE 31: KEY MANAGEMENT PERSONNEL (CONTINUED)
(c) COMPENSATION PERFORMANCE RIGHTS Compensation performance rights Compensation performance rights granted and issued during the year ended 30 June 2011 1 Jul 10 Perf Rights Directors G Roberts Executives F Lupoi D Mackle B Smith A Cannon R Doveton D Wright M Brokenshire 485,362 Granted as remuneration Perf Rights 824,703 Vested Perf Rights # (97,423) Net Change Other 30 Jun 11 Perf Rights 1,212,642
190,011 69,671 59,130 58,416 56,819 61,830 981,239
406,008 149,081 91,828 103,722 92,541 143,371 101,819 1,913,073
(12,340) (12,243) (11,691) (12,665) (146,362)
596,019 218,752 91,828 150,512 138,714 188,499 150,984 2,747,950
# Performance rights for FY2008, vested 1 July 2010. None of the performance rights are exercisable until 1 July 2012. Compensation performance rights granted and issued during the year ended 30 June 2010 1 Jul 09 Perf Rights Directors G Roberts Executives F Lupoi D Mackle M Carter* A Cannon R Doveton D Wright M Brokenshire 97,423 Granted as remuneration Perf Rights 387,939 Vested Perf Rights Net Change Other 30 Jun 10 Perf Rights 485,362
14,289 12,340 12,243 11,691 12,665 160,651
190,011 69,671 46,790 46,173 45,128 49,165 834,877
190,011 69,671 14,289 59,130 58,416 56,819 61,830 995,528
* Michael Carter retired 1 July 2010
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Notes to the Financial Statements for the year ended 30 June 2011 NOTE 31: KEY MANAGEMENT PERSONNEL (CONTINUED)
(d) SHAREHOLDINGS OF KEY MANAGEMENT PERSONNEL 30 June 2011 Balance at 1 July 10 Directors* D. Trebeck A. Fletcher J. Hirst B. Gibson D. Groves (appointed 20 December 2010) Executives* G. Roberts F. Lupoi D. Mackle D. Wright B. Smith A. Cannon R. Doveton M. Brokenshire * Includes direct, indirect and related party ^ Balance at date of appointment 20 December 2010 30 June 2010 Balance at 1 July 09 Directors* D. Trebeck A.V. Fletcher J. Hirst B. Gibson J.H. Heard (Retired October 2009) Executives* G. Roberts F. Lupoi D. Mackle D. Wright B. Smith A. Cannon R. Doveton A. Kuhndt (KMP until April 2010) M. Brokenshire M. Carter (Retired 1 July 2010) * Includes direct, indirect and related party 142,326 45,566 25,072 41,954 133,373 Acquired / (sold) during the year 273,663 72,783 12,536 20,977 166,687 Balance at 30 June 10 or at cessation of employment 415,989 118,349 37,608 62,931 300,060 415,989 118,349 37,608 62,931 1,095,028^ Acquired / (sold) during the year 300,000 50,000 50,000 100,000 Balance at 30 June 11 or at cessation of employment 715,989 168,349 87,608 62,931 1,195,028
7,640 26,850 700 26,067 74,790 12,550
97,423 11,691 12,340 (493) 12,665
105,063 26,850 12,391 38,407 74,297 25,215
5,093 17,900 700 10,711 125,550 100,719 12,274 131,674
2,547 8,950 15,326 (50,760) 276 8,326
7,640 26,850 700 26,067 74,790 100,719 12,550 140,000
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NOTE 32: PARENT ENTITY INFORMATION
2011 $000 Current assets Total assets Current liabilities Total liabilities Issued capital Cashow hedge reserve Share based payments reserve Retained earnings Total Shareholders equity Prot or (loss) of the Parent entity Total other comprehensive income/(loss) of the parent entity 77,113 77,113 80,162 437 189 (3,675) 77,113 4,032 1,523 5,555
2010 $000 72,713 72,713 1,647 1,647 80,000 (1,086) 34 (7,881) 71,067 (1,812) (1,086) (2,898)
For details of guarantees entered into by the parent entity in relation to its subsidiaries refer to Note 29.
NOTE 33: EVENTS OCCURRING AFTER BALANCE DATE
BANKING AGREEMENT As at 30 June 2011, Penrice was in negotiation with its banks and reached agreement in principle to amend its nance facilities as announced to the ASX on Friday 12 August 2011. This agreement cancelled a $1.8 million amortisation payment due on 30 June 2011, and amended the termination date of its $7.0 million facility to 30 November 2012 or a later date to be agreed in writing. Previously the termination date for this facility was 31 August 2011. Whilst this amendment does cancel the $1.8 million amortisation payment and defers payment of the $7.0 million facility beyond the 12 month period from balance date, it is considered a non-adjusting subsequent event under accounting standards and does not change the classication of the liability at 30 June 2011. As a result, $8.8 million remains a current liability in the nancial statements, even though no repayments are due within the next 12 months. The amended agreement provides an additional $10 million funding facility to be available until 31 March 2012, which then reduces to $8 million until 30 September 2012 being the termination date for this new facility. The remaining facilities have no changes to their maturity date, being the maturity date of the Banking Agreement of 31 March 2013.
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DIRECTORS DECLARATION
In accordance with a resolution of the directors of Penrice Soda Holdings Limited, we state that: In the opinion of the directors: (a) the nancial statements and notes of the consolidated entity are in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the consolidated entitys nancial position as at 30 June 2011 and of its performance for the year ended on that date; and (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; (b) (c) (d) the Financial Statements and notes also comply with International Reporting Standards as disclosed in Note 2. there are reasonable grounds to believe that the consolidated entity will be able to pay its debts as and when they become due and payable. this declaration has been made after receiving the declarations required to be made to the Directors in accordance with section 295A of the Corporations Act 2001 for the nancial year ending 30 June 2011.
On behalf of the Board
David B. Trebeck Chairman
Guy R. Roberts Managing Director & Chief Executive Ofcer
Adelaide, 27 September 2011
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INDEPENDENT AUDITORS REPORT
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101
ASX ADDITIONAL INFORMATION
Additional information required by the Australian Stock Exchange Limited Listing Rules not disclosed elsewhere in this report is set out below. The information is current at 5 September 2011. DISTRIBUTION OF EQUITY SECURITY HOLDERS Ordinary share capital 91,361,523 fully paid ordinary shares are held by 3,509 shareholders All issued ordinary shares carry one vote per share and carry the rights to dividends The number of shareholders, by size of holding, in each class is: 1 to 1,000 442 1,001 to 5,000 1,071 5,001 to 10,000 654 10,001 to 100,000 1,218 100,001 and Over 124 Total 3,509 The number of shareholders holding less than a marketable parcel of ordinary shares is 1,140. SUBSTANTIAL SHAREHOLDERS By way of notice dated 3 August 2011 London City Equities Limited and its related parties and bodies corporate together, as a substantial shareholder, notied a change of substantial shareholding from 7,578,077 (8.29% of voting power) to 6,075,061 (6.65% of voting power). By way of notice dated 9 June 2011 Hunter Hall Investment Management Ltd, as a substantial shareholder, gave notication of it ceasing to be a substantial shareholder. By way of notice dated 9 November 2010 Invesco Australia Limited, as a substantial shareholder, gave notication of it ceasing to be a substantial shareholder. ON MARKET BUY BACK There is no current on market buy back. TWENTY LARGEST HOLDERS OF QUOTED SECURITIES AS AT 5 SEPTEMBER 2011 Ordinary Shareholders London City Equities Limited HSBC Custody Nominees (Australia) Limited Mr Victor John Plummer Phillip Securities Pte Ltd Brian Gregory Wright & Wendy Joy Wright ABN Amro Clearing Sydney Nominees Pty Ltd Ms Patricia Gladys Wright D B Management Pty Limited Mr Dirk Keizer & Mrs Lena Keizer Mr Ian David Forrest & Mrs James Gareth Forrest Mrs Diana Jeannette Trebeck & Mr David Bruce Trebeck Winpar Holdings Limited Mr Ian David Forrest Superdeck Pty Ltd Mr David John Nancarrow Nandi Holdings (Cootamundra) Pty Ltd DB Management Pty Ltd Big Red LLC Brazil Farming Pty Ltd Mr Alistair Peter Wright Mr Koo Sing Kuang & Mrs Lai Wah Kuang Mr Harry Karst Total
Number of ordinary shares held 4,997,811 4,946,378 2,500,000 1,946,526 1,911,000 1,752,430 1,487,500 1,018,307 820,000 800,000 715,989 600,000 600,000 500,598 500,000 500,000 488,530 461,732 452,920 428,500 419,261 411,000 28,258,482
Percentage of capital held 5.47% 5.41% 2.74% 2.13% 2.09% 1.92% 1.63% 1.11% 0.90% 0.88% 0.78% 0.66% 0.66% 0.55% 0.55% 0.55% 0.53% 0.51% 0.50% 0.47% 0.46% 0.45% 31%
FINANCIAL HISTORY
Year Ended ($ Million unless otherwise stated) Prot and Loss Sales revenue Normalised earnings before interest, tax, depreciation and amortisation * Depreciation Normalised earnings before interest and tax * Net interest expense Normalised net prot before tax* Tax benet/(expense) Normalised net prot after tax* After tax unrealised gain/(loss) on hedges After tax signicant once off items Net prot after tax Group Balance Sheet Cash Trade and other receivables Inventories Other current assets Property, plant and equipment Intangibles Deferred tax assets Other non-current assets Total assets Current borrowings Trade and other payables Tax payable Other current liabilities Non-current borrowings Deferred tax liabilities Other non current liabilities Total liabilities Net assets Share capital Retained prots Total shareholders funds Share information Return on shareholders funds (%) Normalised earnings per share (cents)* Statutory earnings per share (cents)~ Total dividend (cents) Interim dividend (cents) Final dividend (cents) Other information Gearing [net debt / (net debt+equity)] Interest cover [EBITDA* / net interest} times * excludes unrealised hedge losses/gains, signicant once off items ~ Restated EPS for FY2009 due to rights issues during FY2010
June 2011
June 2010
June 2009
June 2008
June 2007
152.9
160.4
162.3
135.1
134.2 19.1
15.7 (9.6) 6.1 (8.7) (2.6) 1.2 (1.4) (24.8) (26.2)
23.3 (8.8) 14.5 (8.2) 6.3 (1.0) 5.3 1.0 6.3
27.0 (7.4) 19.6 (8.6) 11.0 (2.0) 9.0 (1.9) 7.1
19.8 (5.5) 14.3 (5.9) 8.4 (1.8) 6.6 0.7 7.3
(5.4) 13.7 (4.3) 9.4 (2.7) 6.7 6.7
5.2 16.7 51.0 3.4 99.4 8.9 10.7 195.3 10.7 29.8 5.8 70.0 8.1 3.1 127.5 67.8 80.2 (12.4) 67.8
5.4 22.0 63.0 0.7 94.6 20.9 3.8 210.4 2.6 29.2 0.0 6.6 69.9 6.9 2.2 117.4 93.0 80.1 12.9 93.0
0.7 24.7 56.0 3.0 92.8 18.1 3.5 198.8 2.7 32.9 1.2 5.7 84.6 8.3 1.9 137.3 61.5 53.6 7.9 61.5
4.3 19.0 38.4 3.7 77.1 18.8 3.6 0.5 165.4 1.6 24.9 2.0 4.2 74.0 9.0 1.5 117.2 48.2 44.3 3.8 48.2
2.2 16.9 20.6 0.7 62.7 21.8 3.5 1.3 129.7 0.5 18.7 1.3 5.3 47.9 8.0 2.3 84.0 45.7 44.0 1.7 45.7
(1.5) (28.7) Nil Nil Nil
6.8% 6.6 7.8 Nil Nil Nil
13.0% 18.1 12.9 Nil Nil Nil
15.5% 14.6 16.1 10.5 5.0 5.5
14.8% 14.9 14.9 10.0 5.0 5.0
53% 1.8
42% 2.8
59% 3.1
59% 3.4
52% 4.4
2011 Annual Report
103
CORPORATE INFORMATION
PENRICE SODA HOLDINGS LIMITED ABN 83 109 193 419 DIRECTORS D.B. Trebeck (Chairman) G.R. Roberts (Managing Director & Chief Executive Ofcer) A.V. Fletcher D.F. Groves J. W.A. Hirst GROUP SECRETARY F Lupoi PRINCIPAL REGISTERED OFFICE Solvay Road Osborne, South Australia 5017 Telephone: (08) 8402 7000 Facsimile: (08) 8402 7250 BANKERS National Australia Bank Westpac Banking Corporation
SHARE REGISTRY Link Market Services Limited Level 1, 333 Collins Street Melbourne, Victoria 3000 EXTERNAL AUDITORS Ernst & Young INTERNAL AUDITORS KPMG SOLICITORS Kelly & Co. INTERNET ADDRESS www.penrice.com.au STOCK EXCHANGE The group is listed on the Australian Stock Exchange. The home exchange is Adelaide. OTHER INFORMATION Penrice Soda Holdings Limited, incorporated and domiciled in Australia, is a publicly listed group limited by shares.
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PENRICE SODA HOLDINGS LIMITED 2011 ANNUAL REPORT

Quarry & Mineral

2 4 8 11 12 13 29 34 35 36 37 38 39 40 100 101 102 103 104

PENRICE SODA HOLDINGS LIMITED 2011 Annual Report

David Trebeck Chairman

PENRICE SODA HOLDINGS LIMITED

2011 Annual Report

MANAGING DIRECTOR & CHIEF EXECUTIVE OFFICERS REPORT

-5,000 -10,000 -15,000 -20,000 -25,000

OPERATING CASH FLOW

INVESTING CASH FLOW

NET FREE CASH

PENRICE SODA HOLDINGS LIMITED

2011 Annual Report

SODA ASH SALES

SODA ASH REVENUE FY2011 FY2010

310,000 SALES (TONNES)

90,000 REVENUE ($ 000)

FY 2007 FY 2008 FY 2009 FY 2010 FY 2011

Ash sales fell 6% reecting softer demand due to stronger AUD

54% 16% 9% 7% 12% 2%

CONTAINER GLASS FLAT GLASS DETERGENTS MINING INDUSTRIAL WATER

53% 15% 11% 9% 11% 1%

PENRICE SODA HOLDINGS LIMITED

2011 Annual Report

SODIUM BICARBONATE SALES

SODIUM BICARBONATE REVENUE FY2011 FY2010

80,000 SALES (TONNES)

35,000 REVENUE ($ 000)

FY 2007 FY 2008 FY 2009 FY 2010 FY 2011

35% 13% 4% 23% 24% 1%

PENRICE SODA HOLDINGS LIMITED 2011 Annual Report

QUARRY AND MINERAL SALES

EXTRACTION TONNES OVERVIEW 10 YEAR PERIOD

FY 2007 FY 2008 FY 2009 FY 2010 FY 2011

CHEMICAL OSBORNE LIMESTONE

Guy Roberts Managing Director & Chief Executive Ofcer

PENRICE SODA HOLDINGS LIMITED

2011 Annual Report

ALL WORKER RECORDABLE CASE RATE

16 14 12 10 8 6 4 2 0 FY FY FY FY FY FY FY 2005 2006 2007 2008 2009 2010 2011

PENRICE SODA HOLDINGS LIMITED 2011 Annual Report

TOWNS WATER CONSUMPTION (M3/MT PRODUCT)

ENERGY CONSUMPTION (GJ/MT PRODUCT)

FY FY FY FY FY FY FY FY 2005 2006 2007 2008 2009 2010 2011 2011*

PENRICE SODA HOLDINGS LIMITED

TONNES OF AMMONIA TO PORT RIVER

PENRICE SODA HOLDINGS LIMITED 2011 Annual Report

PENRICE SODA HOLDINGS LIMITED

2011 Annual Report

PENRICE SODA HOLDINGS LIMITED 2011 Annual Report

PENRICE SODA HOLDINGS LIMITED

2011 Annual Report

Directors report (continued)

PENRICE SODA HOLDINGS LIMITED 2011 Annual Report

Directors report (continued)

PENRICE SODA HOLDINGS LIMITED

2011 Annual Report

Directors report (continued)

A.V. Fletcher B.J.Gibson J.W.A Hirst D.F. Groves G.R. Roberts

Board Meetings Eligible Scheduled Meetings Meetings Attended 14 14 14 14 14 14 8 8 14 14

* Although not a member of the committee, the Director attended.