Home' Nufarm Annual Report : Nufarm Annual Report Contents INFORMATION ON THE COMPANY CONTINUED
• use strategic alliances and other
commercial arrangements with
industry leaders to maximise the
value of our platform: we have
an important strategic alliance
with Sumitomo Chemical as well
as a range of business relationships
with other major companies in
the sector, ranging from supply
agreements, licensing arrangements,
toll manufacturing and distribution
arrangements. We believe these
arrangements provide opportunities
to maximise the value of our product
development, manufacturing and
distribution platforms as well as
increasing our customer base by
providing access to additional
products or new markets or
creating supply chain efficiencies.
• continue to maximise free cash flow
and strengthen our balance sheet:
we are focused on maximising our
free cash flow through our continued
disciplined approach to financial
management. In particular, we are
focused on further improving our
working capital management as
it relates to procurement as well
as management of inventory
Due to the scope of our operations and
the industry in which we are engaged,
there are numerous factors that may
have an effect on our results and
operations. The following describes the
material risks that could affect Nufarm.
Weather conditions may significantly
affect our results of operations and
Fluctuations in commodity prices,
foreign currency exchange rates and
in currency values could have a material
adverse effect on our results of
operation and financial condition.
We are subject to extensive regulation
and stringent environmental, health and
safety laws that may adversely affect
our operational and financial position.
Business, operational and financial risks
We sell our products in competitive
markets, and the success of our
competitive strategy depends
on developing new products and
retaining customers and distributors.
Our collaboration relationships with
other major crop protection companies
may change or be terminated.
We may not be able to obtain funding
on acceptable terms, or at all, due to
a deterioration of the credit and capital
markets. This may hinder or prevent us
from meeting our future capital needs
and from refinancing our existing
We are dependent on effective
procurement strategies and on the
continuing efficient operation of our
manufacturing plants to be able to
deliver cost-competitive products
We may become involved in future
legal proceedings, which may result
in substantial expense and may divert
our attention from our business.
Management of principal risks
Our approach to managing key risks
is outlined below.
Principal risk area
Risk management approach
Risks arise from variable weather
conditions, fluctuations in commodity
prices and currency rates, actions by
governments or regulators.
The diversification of our portfolio of products, geographies and currencies is a
key strategy for reducing volatility. The managing director’s review and business
review describe external factors and trends affecting our results and note 31 to
the financial statements outlines the group’s financial risk management strategy,
including market and currency risk. We engage with government authorities and
other key stakeholders to ensure the potential impacts of proposed regulatory
changes are understood and where possible mitigated.
Business, operational and financial risks
Risks arise from a competitive market
place, identifying and developing
innovative solutions, legal proceedings,
accessing and sourcing capital from
financial markets, management of
manufacturing facilities and supply
chain. In addition, relationships with
commercial counterparties we transact
with may change.
We support our growth strategy through established investment approval and
review processes that apply to all major capital decisions and we invest in new
product development and innovation projects that help keep our businesses
competitive. We seek to establish a capital structure that is appropriate for our
business model and provides a platform to support our growth strategy. We analyse
risks to monitor volatilities and key financial ratios. Credit limits and review processes
are established for all customers and financial counterparties. Note 31 to the
financial statements outlines our financial risk management strategy.
We engage expert advisers to ensure our intellectual property is protected
and potential impacts of legal proceedings are mitigated.
We seek to ensure that adequate operating margins are maintained through
operating cost-effective manufacturing facilities. Global sourcing arrangements
have been established to ensure continuity of supply and competitive costs for
key supply inputs. Through the application of our risk management processes,
we identify material catastrophic operational risks and implement appropriate
risk management controls and business continuity plans.
NUFARM LIMITED ANNUAL REPORT 2014 | 21
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