Annual Report 2001/02Mackay Sugar Co-operative Association Limited

Mackay Sugar

The AssociationThe Mackay Sugar Co-operative Association Limited, formed in 1988, is

Queensland’s largest private company and produces more than 20 percentof Australia’s raw sugar at its four Mackay mills. Through a 25 percent

interest in Sugar Australia Pty Ltd and the New Zealand Sugar Company itis also a major participant in sugar refining and marketing in Australia

and New Zealand.

Mackay Sugar Co-operativeAssociation Limited ABN 12 057 463 671

Corporate OfficePeak Downs Highway,Racecourse, via MackayPO Box 5720,Mackay Mail Centre,Queensland 4741 Australia

Phone (07) 4953 8200Facsimile (07) 4953 8340Web: www.mkysugar.com.auEmail: info@mkysugar.com.au

ManagementR J (Ron) Swindells

Chief Executive OfficerJ S (John) Pollock,

Manager FinanceP J (Peter) Gill

General CounselD W (Doug) Neville

Manager Operations

AuditorsBennett Partners

Corporate SolicitorsMcCullough RobertsonS B Wright, Wright & Condie

BankersRabo Australia LtdQueensland Treasury CorporationABN AMRO Australia LtdNational Australia Bank

Notice of Meeting

Notice is hereby given that the15th Annual General Meeting

of theMackay Sugar Co-operative Association Limited

will be held in theMackay Entertainment Centre,

Gordon Street, Mackayon

Tuesday 26th November 2002,commencing at

9.00 a.m.

ContentsSummary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1Chairman’s Comment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2Operations Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4Sugar Refining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9Six-year Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Directors’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11Concise Financial Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17Directors’ Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

DirectorsG R (Graham) Davies, Chairman

C E (Eddie) Westcott, Deputy Chairman

A (Andrew) Barfield(from 1.12.2001)

A S (Andrew) Cappello(from 1.12.2001)

T V (Tom) Deguara(to 30.11.2001)

I W (Ian) DonaldsonI L (Ian) FraserW T (Bill) Hobbs

(to 30.11.2001)

M F D (Malcolm) PrattB B W (Barry) Sheedy

M A (Albert) Volker

CoverFrom growing, transporting and milling caneto sugar refining and distribution, MackaySugar participates in every link of the currentsugar value chain. The worth of this strategicpositioning was again evident during 2001/02in the profits generated by the Association’srefining interests. While Mackay Sugar and itsgrower members are strategically positionedto adapt to any shape the sugar industry maytake, the challenge now is to again lead theway in identifying and embracing new value-adding opportunities.

page one

Summary

Sugar Production• Tonnes Cane Processed - 5.016M (4.663M last year)

Though still more than two million tonnes short of the productive

capacity of the total Mackay Sugar cane growing area, improved

growing conditions and continuing replacement of cane varieties

susceptible to the fungal disease Orange rust resulted in a 7.6 percent

increase on the previous year in the cane processed by the

Association’s four factories.

• Sugar Content - 14.77 CCS (12.60 last year)Dry conditions positively influenced the cane’s sugar content, resulting

in a 17.2 percent increase in CCS to 14.77.

• Tonnes Sugar Produced - 755 866 (590 845 last year)This cane crop and CCS resulted in a 27.9 percent increase in sugar

output to 755 866 tonnes IPS sugar, the best result for three years.

Financial Performance• Operating Revenue - $272.1M ($167.1M last year)

The improved sugar production, coupled with a $331.60 per tonne final

price for sugar ($253/tonne in 2000/01) and increased returns from

molasses, resulted in operating revenue jumping 62.8 percent to

$272.1 million.

• Operating Loss - $1.219M ($14.3M last year)Notwithstanding this substantial improvement in operating revenue and

an extensive cost-cutting program, the Association still suffered a

$1.219 million operating loss. However this was a $13.066 million

positive turnaround from the disastrous 2000/01 financial result.

The Year Ahead• Profit in Prospect

Although experiencing a slump in sugar prices compared with

2001/2002, the improved crop prospects (6.2 million tonnes of cane)

and resultant sugar production of about 900 000 tonnes should result

in a profit for the first time in three years.

Annual Report 2001/02

98/99 99/00 00/01 01/02 02/03

Cane Milled(Million Tonnes)

6.2

(est

.)

7.7

76

6.6

28

5.0

16

4.6

63

98/99 99/00 00/01 01/02 02/03

Sugar Produced(‘000 Tonnes IPS)

90

1 (

est

.)

96

7

91

6

76

5

59

1

98/99 99/00 00/01 01/02 02/03

Average Sugar Price($/Tonne IPS)

24

0 (

est

.)

35

2.1

25

4.5

33

1.6

25

3

98/99 99/00 00/01 01/02 02/03

Operating Profit/Loss($ Million)

5.0

(es

t.)

-1.2

19

.13

-7.1

0

-14

.3

page two

Chairman’s Comment

Mackay Sugar’s run of poor crops continued in the 2001 season.

Coupled with another disappointing price for our sugar, this resulted in a net loss for our Co-operative of $1.219 million.

Pleasingly though, with a crop in excess of six million tonnes looking likely for the 2002 season,we are forecasting a return to profit for the financial year ending June 2003.

Contributing to this profit outlook are the savings measures already identified and implementedas the Board and management pursue our stated objective of reducing annual costs by $10million. These cost reductions are to be in place for the year ending June 2004. They will involvesome further significant but necessary changes for the business.

This is why my introductory remarks this year will focus on the future and the changes we mustmake to ensure that our region remains a viable sugar producing area.

As was pointed out in an October 1987 letter to the members in the district’s (then) individualmills, the aim of the (then) proposed Mackay Sugar was “...to create and maintain a financiallyviable co-operative sugar milling sector which would maximise the returns to growers from caneproduction and sugar manufacture in the Pioneer Valley...”. And this still remains the aim of theBoard and everyone associated with the Co-operative.

Industry Must Be ‘Regionally-Focused’

In releasing its Sugar Industry Reform Program in September the Federal Government noted themain findings of Clive Hildebrand’s independent assessment of sugar production in Australia, andparticularly his comments about:

• The need for a regionally-focused, business-oriented approach to the majority of industrymatters; and

• The need for the industry to move from “a one-size-fits-all” approach to developingregionally-based plans that strongly reflect local priorities.

It could be said that in this region we made an important first step towards this type of approachwith the formation of Mackay Sugar 14 years ago.

It is fair to question why decisions affecting Mackay’s cane and sugar producers have to bedetermined by a majority vote of the representatives from all sugar districts in Queensland.

Also, although legislative changes in recent years have improved the situation somewhat, whyshould changes to the industry in our area - particularly technical ones - be limited because suchchanges may not suit the Bundaberg, Far Northern or other sugar producers.

State Development Minister, the Hon. TomBarton was one of a number of Federal andState parliamentarians to visit MackaySugar during the past year. Mr. Barton ispictured in the Mackay Sugar Board roomwith Chairman Graham Davies, ManagerFinance John Pollock and ManagerOperations, Doug Neville.

page three

What We Must Do to Survive

After careful consideration of these and other major issues identified by the Hildebrand Report andthe proposed reform program, I am convinced that to ensure we maintain a viable sugar industry inthe Pioneer Valley into the future:

• We must accept and build on the Federal/State Government Sugar Industry Reform Package...

(Not because we believe that it affords us all the assistance we need, but because it is almostcertainly the best we can hope to achieve);

• With sugar prices threatening to hover around the current levels, we must continue to pursuesavings in all aspects of Mackay Sugar’s operations...

(In this regard, we must look further than the cost-cutting steps that have been - and continueto be - taken. For example, can we afford to maintain the sacrosanctity of a twenty-two weekprocessing season and the considerable under-utilisation of capital investment that this entails?).

• We must act as a true co-operative and look at the end result rather than at our individual returnsas growers and millers as many of us have been inclined to do until now...

(The returns - now or in the foreseeable future - are just not big enough for the growing andmilling sectors to stand apart);

• We must forget about the likely effect of our actions on other sugar producing areas...

(If this means divorcing ourselves from the industry’s State bodies except for issues of commonbenefit to the industry as a whole, then that is what we must do);

• We should prepare to adapt to a new system of sugar marketing in the event that the single deskis abandoned for domestic sales of sugar...

(As a major refiner, having absolute control of your own raw sugar production has the potentialto offer benefits in this and other value-adding operations);

• We must take ‘a whole of value chain systems approach’ to all aspects of our operations...

(The Government’s Sugar Industry Reform Package offers immediate funding for projects relatingto alternate uses for cane such as ethanol, biofuels, co-generation and bio-plastics);

• If, as the Hildebrand Report and the Government’s Assistance Plan suggests, the industry has torationalise into more economical farm units or farm co-operatives, then we must accept theinevitability of this...

(While I do not wish to see any grower forced out of the industry, many growers who wish toeither maintain a viable operation or simply stay in cane farming will almost certainly need toadopt a different approach to do this. Longer term, viability could be achieved in a number ofways including better utilisation of capital through co-operative farming or ownership of farmingequipment or the leasing of neighbouring farms to increase production area. On the other handthe addition of some form of supplementary or off-farm income could provide a way forward).

Our Future is in Our Hands

While support for these and other dramatic changes proposed by Hildebrand and theGovernment’s Reform Package may be distasteful to many in the industry, in light of the Brazil sugarindustry’s ever-growing and depressing influence on the world market price for sugar and ourdependence on that same world market, I am convinced that we must ‘bite the bullet’ and make theproposed changes quickly to ensure the viability of the industry in our district. While the currentproblems are largely not of our making, they are OUR problems and WE must deal with them.

As Clive Hildebrand also pointed out in his assessment of our sugar industry “...the industry’s bestchance to survive and flourish is largely up to itself (and) on its willingness to change...“.

Graham Davies, Chairman.

Chief Executive’s Comment

Operations Report

With Farleigh, Marian andRacecourse mills completingoperations on 15 October andPleystowe closing three dayslater, the average time lost dueto breakdown during the 15.7week season was five percent.

With only 2.23 and 2.98 losttime percent available timerespectively, Pleystowe andRacecourse Mills performedexcellently. Shredder bearingfailures and continuous panproblems shut down Farleigh for 108hours, while a broken roller shaft and canefeeding problems cost Marian valuableprocessing time.

The average time lost in factories due tocane supply improved from 61 hours in2000/01 to only 35 hours, due largely tovery dry conditions throughout the season.The nil time lost through industrialdisputes (219 hours average last year) wasa pleasing result.

Factory EfficiencyThe ability of a sugar factory to recoversugar from its cane supply is measured bythe factor ‘overall recovery’ and, during theyear under review, the 90.5 percent sugarrecovered by the Association’s fourfactories was the best since 1993 season.

This improved factory efficiency resultedfrom the reduction in the sugar lost inbagasse, mud and molasses revealed bythe Operational Performance Table on thefollowing page.

Crop Well Below Potential Although the 5.016 million tonnes caneprocessed by Mackay Sugar during the2001 season was 7.6 percent more than inthe Orange rust-devastated 2000 season,the crop was again well below potential.

The major factors contributing to thedisappointing results summarised in theperformance table (opposite page) were:

• the weather, where both the recordheavy rainfall during November 2000and below-average falls from May toSeptember 2001 depressed growth andcontributed to lower yields;

• Orange rust which, while not as severeas in 2000, still significantly reducedthe yield of Q124 which constituted 64percent of the crop at that time;

• the build up of Pachymetra root rotresulting from repeated planting ofQ124; and

• the continuing residual effects of thedamage to fields caused by the super-wet harvest in 1998.

The average cane yield, although some 10percent higher than for the 2000 season,was still a disappointing 61.90 tonnes perhectare (56.09 last year).

Sugar ProducedFortunately, this low cane yield waspartially compensated for by a 17.2percent increase in the CCS in cane to14.77 (12.60 in 2000/01). This resulted inan almost 30 percent increase in sugaryield to 9.15 tonnes per hectare (7.06 lastyear and Mackay Sugar’s worst ever).

However, although the resulting sugarproduction of 755 866 tonnes of IPS sugarwas 27.9 percent better than 2000/01, itwas still only about 70 percent of MackaySugar’s capacity.

Crushing Rate & Lost TimeWith a 3 July start date to the season andno great pressure to ‘push’ factoryoperations because of crop size, the targetcrushing rate was reduced to assist withdifficult harvesting operations and tobenefit recovery of sugar in the factory.

In the event however, increased CCS andfibre levels in cane and some evaporatorscale problems at Racecourse Mill furtherreduced the milling rate to 2 128 tonnescane per hour - 9.1 percent less than the2 341 achieved in 2000/01.

97/98 98/99 99/00 00/01 01/02

Green Cane Harvest(% of Crop)

91

.2

85

.6

88

.4

94

.2

85

.7

The recent upward trend ingreen cane harvest was haltedby the need to burn Orangerust-affected Q124 prior to itsploughout and replacementwith rust-resistant varieties.

With a continued improvement in crop size so importantto Mackay Sugar, Mirani West grower Jeff Bradshawhelped by Lana Fisher are doing their bit, seen here backfilling ‘misses’ in a plant cane block.

page four

Operations Report

Sugar QualityQueensland Sugar Ltd (QSL) operates aRaw Sugar Quality Incentive Schemewhich pays premiums for high qualitysugar and applies discounts to poorerquality sugar and, in past years, MackaySugar has been one of the State’s topperformers under this scheme.

However, in the year under review, whilecompliance with most sugar quality factorswas generally satisfactory, difficulties inmeeting requirements relating to the twoquality compliance parameters over whichthe factory operator has little controlresulted in only Farleigh Mill being able toproduce a small amount of premiumquality sugar.

Molasses ProductionThe increase in the tonnage of caneprocessed and the improved quality of thatcane resulted in a seasonal molassesproduction of 146 928 tonnes whichincluded 7 880 tonnes from theRacecourse Refinery. (Total production of143 700 tonnes in 2000/01).

This low production again necessitated therationing of molasses to some of ourtraditional customers.

Spot sales also had to cease when millingoperations concluded. However, despitelimited production and the lengthy non-crush period, contract customers were allable to be satisfied.

page five

Season 2001 2000 Change(Financial Year) (2001-02) (2000-01)

ProductionTonnes cane milled 5 015 670 4 662 553 + 7.6%Sugar content - CCS (i) 14.77 12.60 + 17.2%Tonnes sugar produced - IPS (ii) 755 866 590 845 + 27.9%

Field PerformanceCane production area (ha) (iii) 99 787 97 963 + 1.9%Cane area harvested (ha) 81 028 83 129 - 2.5%Tonnes cane/ha 61.90 56.09 + 10.4%Tonnes sugar/ha (iv) 9.15 7.06 + 29.6%% Crop harvested green 91.16 94.23 - 3.3%

Factory PerformanceMilling rate (tonnes cane/hr) 2 128 2 341 - 9.1%Milling loss - in bagasse (v) 3.92 4.79 - 18.2%(% sugar) - in mud (vi) 0.54 0.58 - 6.9%

- in molasses (vii) 6.03 7.34 - 17.8%Time loss - cane supply stops 35 61 - 42.6%(hours) - factory stops 129 144 - 10.4%

- industrial stops 0 219

Operational Performance

(i) CCS (Commercial Cane Sugar) is a measure of the percentage of cane sugar recoverable as pure sugar.(ii) IPS (International Pol Scale) is a measure of the commercial value of raw sugar. (iii) Cane Production Area (Assignment) is the particular area within a grower’s land description from which he is entitled to supply

cane to a mill.(iv) Sugar Yield expressed as tonnes CCS.(v) Bagasse is the residue remaining after the extraction of juice in one or more mills in a sugar mill.(vi) Mud is the residue discharged from mud filters after clarification of cane juice.(vii) Molasses is a by-product of the sugar milling and refining processes. It is a brown viscous syrup and is used for stockfeed and

fermentation purposes.

The WorkforceIn the year under review, Mackay Sugarand its workforce again faced thechallenges of cost reductions aimed atmaintaining viability in the face ofcontinuing crop and sugar pricedownturns.

The Hildebrand Assessment of the sugarindustry commissioned by the FederalGovernment in February 2002 furtheracknowledges the industry’s currentdifficult circumstances.

Mackay Sugar has not been exempt fromthis situation with reductions in bothcapital and maintenance budgets meaningthat fewer people are being employed bythe Association.

A decision not to operatePleystowe factory in season 2002because of another disappointingcrop also impacted on workforcenumbers.

These factors resulted in reducedemployment opportunities withseasonal and fixed term numbersfluctuating according to thedemands of production.

The accompanying graph showsthis reduction in overall numbersand highlights the compositionalchange in permanent and seasonalemployment categories.

A Voluntary Redundancy & EarlyRetirement program offered to wagesemployees in May eventually resulted in 36applications being accepted.

In addition to this, the number of salariedpositions across Mackay Sugar wasreduced by more than 20 through acombination of redundancies, retirements,natural attrition and secondments.

Operations Report

Also as part of the shorter term cost-cutting strategy will be the savings frompostponing next year’s intake ofapprentices.

However, Mackay Sugar remainscommitted to the training of young peopleentering the sugar industry, with 77apprentices employed full-time this year.

TrainingThe Association has continued to invest intraining and development for its people,notwithstanding the challenging economicconditions confronting the industry.

This investment has also extended beyondthe workforce this year. Training in the useof the Mackay Sugar website and the newfarm mapping application (FMapWeb) wasprovided to more than 400 shareholdersand harvesting contractors.

This training was conducted in a specialfacility designed and built in vacant officespace at Racecourse Mill. This venuefeatures twelve desktop workstationslinked together via a network server toensure high speed operation and access tothe internet.

The new facility is an example of bestpractice in computer training. Routinelyused by Mackay Sugar people for trainingin a wide range of computer-baseddisciplines such as maintenancemanagement and safety induction, it willagain be an invaluable resource as theAssociation further develops its interactivelinks with shareholders.

page six

1998 1999 2000 2001 2002

The WorkforceSeasonal Permanent

29

1

39

2

38

4

43

0

36

3

54

9

76

1

77

2

59

9

74

1

Reductions in Mackay Sugar’scapital and maintenancespending have contributed toan overall decrease inworkforce numbers, and acompositional change in theemployment categories.

A new computer training facility was established at theRacecourse site during the year. More than 400members of the co-operative and harvesting contractorsmade first use of the facility receiving training in the useof the Mackay Sugar web site and the new farmmapping application. The facility is widely used byemployees and will continue to be the base for furthertraining for members and contractors.

Operations Report

Workplace Health & SafetyDuring the year under review theAssociation achieved its best lost timeinjury frequency rate (LTIFR) sinceformation in 1988. The fall from 23.1 to18.8 was supported by a 31 percentdecline in severity rate (from 232 to 160)and a 22 percent decline in the durationrate (from 11 to 8.5 days).

Among initiatives contributing to thisimprovement were:

• Safety refresher training for allemployees in response to a number oflegislative and procedural changes;

• A trial tagout/lockout system developedby employee representatives;

• The Generic Induction program forcontractors introduced during the year,to improve safety awareness of peoplecarrying out work on Mackay Sugarsites;

• The weekly safety awareness meetingsfor apprentices, to minimise the riskand occurrence of injury; and

• The introduction of a new range ofgloves which resulted in a reduction inhand injuries across the group.

Continuous improvementemphasis was maintainedwith a number of desktopsafety audits identifying areasto be addressed by the newSafety Management Systemcurrently being introduced.

The new system, which isbased on clearly defined roles,responsibilities and riskmanagement principles, willbe supported by regularsafety awareness workshopsand training in safetymanagement procedures.

page seven

97/98 98/99 99/00 00/01 01/02

Injury Frequency Rate(Lost time injuries permillion hours worked)

18

.8

25

25

23

.1

24

.5

The 18.7 percent decrease inthe lost time injury frequencyrate (LTIFR) for 2001/02 wassupported by a 31 percentdecline in the severity rate anda 22 percent decline in theduration rate.

Mackay Sugar traffic officer Terry (Dusty) Graham and bininspector Noel Wales in the Marian traffic office. Introduced totraffic offices this year were the upgraded electronic mimicboards. The boards are displayed in each of Mackay Sugar’s trafficoffices via data projector and have contributed markedly to saferand closer management of cane transport operations.

Zarb Road Transport has continued its close association withMackay Sugar during the past year. Zarbs are contracted to cartcane, raw sugar, molasses, bagasse and coal for Mackay Sugar.Mackay Sugar field officer Chris Marsh (l) discusses the day’sprogress with Zarb employee Brian Smith.

Mackay Sugar Workplace Health & Safety Officer for theRacecourse site, Nathan Smith (left) with engineering apprenticesZane Robertson and Lincoln Grady. Continued development ofsystems aimed at improvement of safety in the workplace hasbeen stated as a high priority by Board and management in thepast year.

Operations Report

Field & Factory Changes forSeason 2002A number of problems identified during the2001 season in both factory and field as‘high risk’ for the current season were ableto be corrected.

For example, at Farleigh and Pleystowemills, inefficient air heaters on the boilers,and evaporator vessels with increasingtube failures and showing signs of a totalfailure were re-tubed.

Similarly, failing outdated controlequipment on the Marian Mill panstage wasreplaced and the demanning program onthe low-grade fugal station was completed,while the severely deteriorated watercooling towers at Racecourse Mill werereplaced to ensure continued operation.

In the field, the Satellite-image CropForecasting has been enhanced byimproved farm maps and increased growerinput to individual farm estimates.

Also, following substantial upgrading ofthe interactive Mackay Sugar websitewww.mkysugar.com.au and the conduct ofcomprehensive computer and websitetraining for growers prior to thecommencement of this season’s harvest,the majority of Association members nowregularly access:

• The latest Association newsletters,press releases, boardroom commentand harvest/milling progress;

• Their own farm maps which, in turn,can be superimposed on districtsatellite images, aerial photographsand soil maps;

• Harvest group railway siding rosters;

• Their own cane harvest and deliveryinformation; and

• Cane variety performance details.

The increasing utilisation of both thewebsite and the Association’s ‘InteractiveVoice Response’ system, which providesround-the-clock information to growersabout their daily harvest allotments, binweights and CCS, is certainly assistingMackay Sugar’s canegrower/shareholdersto better manage their businesses.

‘PEP’ Program On TrackOf course Satellite-image Crop Forecastingand the interactive website are but part ofthe Profit Enhancement Program (PEP) forcane supply developed in 1999 (outlined inthe 2000/01 Annual Report).

The aim is to assist insulate Mackay Sugaragainst the vagaries of crop, climate andsugar price and also to assist membersfurther develop their farming businesses.

Although improvements continue to bemade in all cane supply/transportoperational areas, it is pleasing to reportthat only two of the ten systems initiallyidentified for improvement by PEP andlisted in last year’s Report, have not beenimplemented.

These are the development of thecentralised traffic control at Pleystowewhich is being held up because aneconomically viable replacement system isnot yet available, and increased loadingson road transport vehicles which will not bepossible until there is a more flexibleregulatory attitude to vehicle length andaxle loadings.

PEP also identified issues being targeted inconsultation with CANEGROWERS Mackaywhich could lead to further significanteconomies in the longer term, includingmiller/grower arrangements relating toexpansion opportunities, cane supply andprocessing agreements, and cane analysisprograms.

page eight

New Facilities, Growth &InvestmentNew packing machine capability wasinstalled at the Mackay Port facility and atYarraville refinery. The retail market isbecoming increasingly sophisticated withcustomer demands for a wider range ofpackaging types and sizes, with retailersand consumers looking for innovation andease-of-use features.

At New Zealand Sugar, the capacity ofsugar blending and one-tonne baghandling facilities is being increased tomeet actual and expected demand growthfrom customers, and Chelsea Refinery iswell advanced in the installation of anactivated carbon decolourising plantsimilar to those found at Racecourse andYarraville.

This upgrade will enable the century-oldchar plant to be decommissioned, withflow-on benefits to capacity, productquality and cost. A new evaporator wasalso commissioned at Chelsea, withenergy-saving and environmental benefits.

OutlookNow under Group CEO John Burman,Sugar Australia and New Zealand Sugarhave developed and are implementing amore systematic approach to securing andenhancing their position with customers,achieving operational excellence andimproving asset utilisation.

Significant changes to the structure andresponsibilities of senior managers supportthese business themes, and managementremains confident about prospects for thetwo companies.

page nine

Sugar Refining

PerformanceThe twenty-five percent-owned SugarAustralia/New Zealand Sugar Companybusinesses both produced good results,and continued to make a welcomecontribution to Mackay Sugar.

Sugar Australia was able to increase itsmarket share in the domestic, retail andfood and beverage sectors by taking amore assertive stance in the market place,and benefiting from competitors’ supplyfailures. The company also increased itsshare of the retail sugar business throughits success in tendering for certain housebrand business.

New Zealand Sugar’s sales continued toclimb on the strength of its own sales ofexport sugars and sugar blends, and itsmanufacturing customers’ growing sales offoodstuffs, many of which are targeted atexport markets.

Both companies have a favourable positionwith forward sales to large food andbeverage customers.

The safety performance of the twobusinesses also continued to improve andrecently Mackay Port completed threeyears without a lost-time injury, and NewZealand Sugar two years. Theseachievements are a credit to all involved.

Export sales from Australia on MV Pioneerwere well ahead of budget, and marginallyahead of the previous year. This exportbusiness is always opportunistic,depending on market circumstances, butthe extra export sales and strong domesticdemand meant that the Pioneer was wellutilised during the year.

Well-known visitors to the Sugar Australia Mackay Port facility during the past year were Queensland Bull's cricketers ScottPrestwidge and Michael Kasprowicz. Sugar Australia through its Queensland's Own white sugar brand is a major sponsor ofthe Junior Bull's coaching and development program.

page ten

Six-year Financial Performance

*Note: The financial comparatives for the years from 1 July 1996 to 30 June 1998 include the results of the refinery joint ventures.Due to a change in accounting requirements the refinery joint venture financial results have been excluded from a numberof the comparatives for the years ended 30 June 1999 onwards.

(i) CCS/Commercial Cane Sugar is the percentage of sugar canerecoverable as raw sugar.

(ii) IPS: International Pol Scale, a measure of the commercialvalue of raw sugar.

(iii) Operating profit/(loss) before additional price paid for cane and IncomeTax.

Production *2001/02 *2000/01 *1999/00 *1998/99 1997/98 1996/97

Tonnes cane milled 5 015 670 4 662 553 6 627 533 7 776 198 7 443 172 7 511 435Sugar content - CCS (i) 14.77 12.60 13.50 12.12 14.28 13.85Tonnes sugar produced - IPS (ii) 755 866 590 845 915 597 967 167 1 076 672 1 068 287

Profit & Loss ($’000)Operating revenue 272 115 167 056 256 082 355 229 453 578 448 906Net interest 5 441 6 389 4 255 3 954 4 613 2 170Depreciation 17 376 17 082 16 479 17 740 13 869 12 570Operating profit/(loss) (iii) (1 219) (14 285) (7 104) 19 132 22 571 21 121Retained profits 179 672 180 891 195 176 202 280 193 148 185 583

Balance Sheet ($’000)Current assets 34 223 32 526 46 791 73 748 108 139 87 358Non-current assets 358 086 459 080 440 061 448 935 435 750 314 100Total assets 392 309 491 606 486 852 522 683 543 889 401 458Current liabilities 104 957 99 967 69 460 112 057 121 272 97 525Non-current liabilities 25 082 41 122 52 590 38 719 59 842 32 339Total liabilities 130 039 141 089 122 050 150 776 181 114 129 864Total members’ equity 262 270 350 517 364 802 371 907 362 775 271 594

Capital Expenditure ($’000)Expenditure 5 344 5 631 18 686 21 613 53 122 40 892

RatiosNet interest cover (times) 0.78 (1.24) (0.67) 5.84 5.89 10.73Return on members’ equity (0.46)% (4.08)% (1.95)% 5.14% 6.22% 7.78%Net debt : members’ equity 32.00% 28.60% 20.74% 15.37% 20.91% 17.67%Current assets : current liabilities 0.33 0.33 0.67 0.66 0.89 0.90Members’ equity : total assets 0.67 0.71 0.75 0.71 0.67 0.68Total assets : total liabilities 3.02 3.48 3.99 3.47 3.00 3.09

A group of innovative Mackay Sugar canegrowers has taken up the challenge ofgetting their farming operations 'back ontrack' to competitiveness with the Brazilianindustry, through their participation in the"Back on Track" farming project. The Boardof Mackay Sugar has committed $200 000to the project which will run over five yearsand aims to develop a more cost effectiveand sustainable way of growing sugar canein the Mackay district. ABC Television'sLANDLINE program featured the projectduring a sugar industry story in March 2002and “Back on Track” project members areshown here during filming for the show.

Directors’ Report

The Directors present their report and thefinancial statements of the Mackay SugarCo-operative Association Limited for theyear ended 30 June 2002.

In terms of the Cooperatives Act 1997(Qld), the Association has complied withthe requirements of the Corporations Act2001 in the presentation of this report andthe associated financial statements.

DirectorsThe names and profiles of Directors inoffice from 1 July 2001 to the date of thisreport follow. A record of Board Meetingattendance during the year under review isset out on page 12.

G R (Graham) Davies - Chairman

Elected Director and Chairman sinceincorporation of Mackay Sugar Co-operative Association Ltd in 1988. Caneand cattle producer with wide experiencein sugar industry organisational matters.Chairman of the Queensland RuralAdjustment Authority and Mackay SugarManufacturers Association. Director ofSugar Australia Pty Ltd, New ZealandSugar Company Ltd, Queensland Sugar Ltdand Mackay Port Authority.

C E (Eddie) Westcott - Deputy Chairman

Elected Director since incorporation andDeputy Chairman since 1992. Caneproducer for more than 30 years with wideexperience in co-operative sugar millingmatters. Director of the Co-operativeFederation of Queensland. Member ofPioneer Valley Water Board. Millers’representative on the Mackay CaneProtection and Productivity Board.

A (Andrew) Barfield B.Ag.Sc MBA MAICD

Elected Director at Annual Meeting 1December 2001. Cane producer for 15years. Deputy Chairman of Sugar Researchand Development Corporation. 1998Nuffield Scholar. Former Chairman ofCANEGROWERS Pleystowe Area Committee.

A S (Andrew) Cappello Elected Director at Annual Meeting 1December 2001. Cane producer for 20years. Chairman of Pioneer Valley WaterBoard, Director of the Australian NationalCommittee for Irrigation and DrainageBoard, Member of the SunWater CustomerCouncil and Rural Water Use EfficiencyManagement Group, Millers’ representativeon the Mackay Cane Protection andProductivity Board.

T V (Tom) Deguara (to 30.11.2001)

Elected Director since incorporation. Caneproducer for some 40 years with wideexperience in co-operative sugar millingmatters. Director of Rodney Industries andMember of Eton Irrigation Area WaterAdvisory Committee.

I W (Ian) Donaldson FICA

Independent Director since incorporation.Immediate Past Chairman of Hall ChadwickQueensland (Chartered Accountants),Chairman of City Pacific Limited Group,Performance Plus Funds ManagementLimited, Brooklyn Park Olive Groves Ltd,Australian Green & Gold Ltd, Four WheelDrive Services Pty Ltd, and the LeukaemiaFoundation of Australia. Ian is also a Directorof many other companies.

I L (Ian) Fraser FCPA

Independent Director since February 1999.Extensive business experience includingManaging Director of Pioneer Sugar Mills Ltd,Clyde Industries Ltd, Australian ChemicalHoldings Ltd and TNT Australia Pty Ltd.Currently Chairman of The Gas MarketCompany Ltd, Environmental RecoveryServices Ltd, Forest Place Group Ltd, and aDirector of Yates Ltd.

W T (Bill) Hobbs (to 30.11.2001)

Elected Director since 1992. Cane producerfor 40 years with wide experience in sugarindustry organisational matters. MemberPioneer Valley River Improvement Trust.

M F D (Malcolm) PrattElected Director since 1991. Cane producerfor some 35 years with broad experience insugar industry and regional water resourcesorganisational matters. Member of MackayRegional Water Resources Committee.

B B (Barry) Sheedy FCPA (Ret.)

Elected Director since 1996. Varied sugarindustry experience including managementof the Farleigh Co-operative Sugar MillingAssociation Ltd and Manager Finance &Administration of Mackay Sugar. Millers’representative on the Mackay CaneProtection and Productivity Board and aMackay City Councillor.

M A (Albert) VolkerElected Director since incorporation. Caneproducer for 35 years with wide experiencein co-operative sugar milling matters. Millers’representative on and Deputy Chairman ofthe Mackay Cane Protection and ProductivityBoard. Member Mackay Regional WaterResources Committee.

page eleven

The Concise Financial Statements at pages18 to 21 of this Report and the Discussion& Analysis regarding those statements atpage 17 further explain the Association’soperating result for the year under review.

Additional PaymentsBecause of the operating loss, noadditional payments for cane wereapproved for the 2001 season.

Changes in State of AffairsThere was no significant change in thestate of affairs of the Association otherthan those advised in other sections of thisreport, or in the accounts or in the notesthereto.

After Balance Date EventsSince the end of the financial year and thedate of this report, Mackay Sugar hasarranged a funding package under which itwill repay all of its $66 million of borrowingfrom Queensland Treasury Corporation andreplace it with borrowing from itscommercial lenders. The effect on theStatement of Financial Position of thistransaction would be to transfer $46million of interest bearing liabilities fromcurrent to non-current.

Future DevelopmentsThe Board continues to explore ideas andprojects to advance the Association.However, until any such idea becomes afirm commercial proposal, untimely andearly disclosure could result inunreasonable prejudice to the Association.

page twelve

Directors’ Report

Board Meeting Attendance

Primary Activities of theAssociationPrimary activities of the co-operative are:

(a) to acquire, transport and processsugar cane to produce raw sugar,raw sugar products and by-productsand to manufacture, transport,store, market and distribute thoseproducts and by-products;

(b) to manufacture, transport, store,market and distribute refined sugar,syrups, raw sugar for humanconsumption and similar productsand by-products; and

(c) to produce, market and distributeelectricity and other value-addedcommodities through the use ofproducts and by-products arisingfrom the activities in (a) and/or (b)above.

There was no significant change in thenature of the Association’s primaryactivities during the financial year.

Review of OperationsA detailed review of the operations of theAssociation during the year under review,and the results of these operations, areincluded in ‘Operations Report’ at pages 4-8 of this Report.

Operating ResultDespite the 5.016 million tonne cane cropstill being well below the district’s potentialproduction, the higher-than-average sugarcontent (CCS) of 14.77 resulted in 755 866tonnes IPS sugar being produced (590 845tonnes in 2001/02).

This improved sugar production, coupledwith a $331.60 per tonne final price forsugar ($253/tonne in 2000/01) andincreased returns for molasses, resulted inoperating revenue jumping to $272.1million. This was a 62.8 percentimprovement on the $167.1 millionrevenue from the 2000/01 crop.

However, despite this substantialimprovement in operating revenue and anextensive cost cutting program, theAssociation still suffered a $1.219 millionoperating loss. Though disappointing, thisresult represents a $13.066 millionpositive turnaround from the disastrous2000/01 financial result.

(a) Meetings held while a member. (b) Meetings attended.*Attendance not required at two special ‘local issues’ meetings.

Regular Meetings Special MeetingsDirector

Held(a) Attended(b) Held(a) Attended(b)

G R Davies 11 11 8 8

C E Westcott 11 11 8 7

A Barfield 7 7 6 6

A S Cappello 7 7 6 6

T V Deguara 4 4 2 2

I W Donaldson 11 11 8 6*

I L Fraser 11 11 8 6*

W T Hobbs 4 4 2 2

M F D Pratt 11 11 8 7

B B W Sheedy 11 11 8 8

M A Volker 11 11 8 8

Directors’ Report

Environmental IssuesMackay Sugar is subject to environmentalregulations under various State andFederal laws primarily relating to air anddischarges to water and land.

During the season under review theAssociation generally complied with allrelevant environmental legislation with noliquid effluent discharge from effluentponds at Marian, Pleystowe andRacecourse mills. Although algal growth inthe treatment ponds resulted in some ofthe treated effluent from Farleigh millexceeding the licence limit for suspendedsolids, no environmental harm wasobserved as a result of these discharges.

The 2000/01 Annual Report advised that,following a request from theEnvironmental Protection Agency (EPA),Mackay Sugar had commissionedconsultants to perform an environmentalimpact investigation into Mackay Sugar’sactivities and discharges. The consultants’report was completed and submitted toEPA Mackay.

Mackay Sugar has been operating under afive-year Environmental Management Plan(EMP) in relation to non-compliantemissions from the Farleigh, Marian No. 2and Pleystowe boiler stacks.

Considerable development work during thecurrent plan period has identified the mostsuitable approach to achieve compliance.

However, financial constraints resultingfrom the well-documented crop failuresand low prices in recent years haveprevented this work from proceeding.

Mackay Sugar is currently discussing amilestoned extension of the EMP with theEnvironmental Protection Agency.

During the year also, the Associationcontinued to further develop action plansrelating to stormwater and wastemanagement, storage of flammable andcombustible goods etc.

Development continued on thecomputerised Integrated EnvironmentalManagement System with particularemphasis on staff training in its operation.

page thirteen

Mackay Sugar's Marty Eiteneuer (left), Jeanette Toon and Dave Langham discuss the establishment of a new vegetationzone close to the Association's Marian factory. Dust from the adjacent stored bagasse pile had potential to cause anuisance to nearby residents and the more than 2000 native trees will provide an attractive and effective buffer.

Directors’ Report

Corporate GovernanceThe Board of Directors of Mackay Sugar isresponsible for the corporate governanceof the Association and the followingstatement outlines the principalgovernance practices in place during thefinancial year under review.

(a) Board of DirectorsIn accordance with the rules of theAssociation the Board is comprised of ninenon-executive Directors, seven of whomare elected by shareholders and two". . . with special skills, whose services areconsidered to be of benefit to theAssociation . . ." appointed by the electedBoard members.

Elected Directors serve on the Board forthree years, with elections being held ineach consecutive year of each three yearperiod for the two directors, two directors,and three directors respectively who shallhave been longest in office. Elections areconducted at each Annual GeneralMeeting.

(b) Board ResponsibilitiesThe Board of Directors guides andmonitors the business and affairs ofMackay Sugar on behalf of shareholdersensuring they are conducted in a propermanner. The Board is responsible toshareholders for:

• the overall performance of MackaySugar and the charting of its directionand objectives;

• developing the strategies and policyguidelines to achieve these objectives;

• monitoring key performance indicatorsof the business;

• maintaining a high standard foraccountability for all activities ofMackay Sugar including compliancewith laws and ethical behaviour;

• ensuring that risks are identified andthat appropriate risk managementprocedures are in place; and

• protecting shareholders’ interests andmaking sure they are kept fullyinformed.

In fulfilling this role the Board overseescompliance with the requirements of theregulators and ensures that appropriaterisk management and associated internalcontrols are in place. The Board maydelegate authority to management, butnot responsibility.

Current practice calls for the Board to meeteleven times during the year atapproximately monthly intervals. Howeverthis may be varied by the Directors whocan also add other meetings when deemednecessary.

During the year under review, in additionto these eleven regular meetings, eightspecial Board meetings considered issuesrelating to the difficult crop and economiccircumstances confronting the Association.

page fourteen

The Board of Directors met on eleven occasions for regular meetings during the year under review and also on eight extraoccasions at special board meetings. Pictured clockwise from front left are Barry Sheedy, Malcolm Pratt, Ian Donaldson,Eddie Westcott (Deputy Chairman), Peter Gill (General Counsel), Graham Davies (Chairman), Ron Swindells (ChiefExecutive Officer), Andrew Cappello, Albert Volker, Ian Fraser and Andrew Barfield.

Directors’ Report

(c) Board CommitteesAlthough the Board generally operates as awhole across the range of itsresponsibilities, Directors also serve onone or more of the seven committees setup to support the Board in its work and toprovide a more detailed focus for itsgovernance responsibilities.

The role of these committees is to considerin advance or in more detail, matterssubsequently addressed by the wholeBoard.

The membership of these committees as at30 June 2002 and a brief description oftheir respective roles follows. Whereappropriate the committees also havesenior management as members.

• The Audit Committee is comprised ofMessrs I W Donaldson, A Barfield,M F D Pratt, B B Sheedy and C EWestcott and assists the Board infulfilling its financial responsibilitiesrelating to the general accountingpractices of the Association. Thecommittee serves as an independentand objective party to review thefinancial information presented byMackay Sugar to shareholders,regulators and the general public anddetermines the adequacy of theAssociation’s operating, accounting andaudit controls.

• The Finance Committee establishescorporate governance of theAssociation’s financial functions notcovered by the Audit Committee. WithMessrs G R Davies and C E Westcott asDirector members, this committeereviews operating and capital budgetsprior to submission to the Board andmonitors Mackay Sugar’s overallfinancial position regarding net debt,borrowing and interest rates. Long-term planning responsibilities includeensuring financial forecasts areconsistent with the Strategic Plan, andthat sufficient funding is available tomeet Association needs.

• The Compliance Committee whichhas Messrs I L Fraser, A S Cappello, B BSheedy and M A Volker as membershas been established to help MackaySugar identify laws and regulationswhich apply to the Association, and tooversee the development of processesto ensure compliance with these lawsand regulations.

• The Structure/Ownership SharesCommittee has Messrs I W Donaldson,A Barfield, G R Davies and M F D Prattas members. This committee is chargedwith investigation of alternative modelsand changes which would ensure thatthe structure of the Association remainsappropriate to changing circumstances.

• The Remuneration Committee hasMessrs G R Davies and C E Westcott asmembers and reviews remunerationpolicies and procedures and establishesstaff salary packages.

• The Water Conservation Committeeincludes Messrs M F D Pratt, B BSheedy and M A Volker as Directormembers and aims to increase suppliesof affordable irrigation water for theMackay Sugar area.

• The Annual Report Committeecomprises Messrs C E Westcott, ABarfield, A S Cappello and M F D Prattand is responsible for the productionand legislative compliance of thisreport.

(d) Risk ManagementIn order to ensure that key business andfinancial risks which could affect MackaySugar are effectively managed, theAssociation has in place a managementprogram for Mackay Sugar’s people,processes and property.

(e) Management StructureThe management of the Association, itsoperations and administration, isdelegated by the Board to the ChiefExecutive, who is supported by a team ofmanagers.

This team operates within an agreedframework of strategic plans, budgets,targets, standards and policies approvedby the Board which maintains appropriateservices, procedures and internalmechanisms to ensure that managementand employees act efficiently and in thebest interests of shareholders.

(f) Code of EthicsMackay Sugar is committed to maintainingthe highest ethical standards in all of itsoperations. Directors and employees areexpected to act with the utmost integrityand objectivity to maintain theAssociation’s reputation.

page fifteen

Rounding of AmountsThe Association has applied the reliefavailable to it in Australian SecuritiesInvestment Class Order 98/100 and,accordingly, amounts in this report andassociated financial statements have beenrounded to the nearest thousand dollarswhere appropriate.

Directors’ Report

Indemnification of OfficersThe Association has paid premiums toinsure Directors and Officers againstliabilities for costs and expenses incurredby them in defending any legalproceedings arising out of their conductwhile acting for the Association, other thanconduct involving a wilful breach of duty inrelation to the Association.

page sixteen

Mackay Sugar field officer Chris Marsh discusses harvest progress with North Coast grower Frank Caruana following one ofa number of breakaway cane fires experienced during the 2002 crushing season. On average, Mackay Sugar has four fieldofficers in the field on weekdays during the crush providing field support for cane consignment and road transport issueswhich cannot be addressed via Communications Centre contact.

G R Davies C E WestcottChairman Deputy Chairman

Signed at Mackay on behalf of the Board this twenty-sixth day of September 2002.

Concise Financial Report

Discussion & Analysis of Financial StatementsThe financial statements and disclosures in the following concise financial report have beenderived from the 2001/02 Financial Report of Mackay Sugar Co-operative AssociationLimited. A copy of the full financial report and auditor’s report will be sent to any member,free of charge, upon request.

This discussion and analysis is provided to assist members to understand the followingfinancial report.

Statement of Financial PerformanceThe Statement of Financial Performance must show the profit for the period as well aschanges in shareholder reserves. Its predecessor, the Profit and Loss Statement, was onlyrequired to show the profit or loss for the period.

The net loss after income tax for the 2001/02 financial year was $1.219 million which wasan improvement of $13.066 million on the previous year’s result. The asset revaluationreserve was reduced by $87.0 million.

The milling business reversed record losses from last year to be close to the break-even level.The 2001 season crop, whilst still disappointing at 5.016M tonnes, was up 7.61% on the 2000crop. The break-even result was mainly attributable to a sugar price increase of $78.60. Theprice paid by Queensland Sugar Limited for the 2001 season crop was $331.60 per tonne IPSsugar, a significant improvement on the 2000 season’s price of $253.00 per tonne.

The refining business in both Australia and New Zealand recorded increased earnings overlast year due to improved margins and increased sales.

Corporate costs fell due to reduced business restructure costs whilst finance costs reduceddue to lower interest rates and lower levels of debt. Corporate and finance costs are notallocated to the milling and refining business units.

Directors have a responsibility to ensure that the value of assets in the accounts are notoverstated and as a result of the downturn in the sugar industry, the value of the millingassets were reduced by $87.0 million to $258.0 million. This reduction effectively reversesthe $83.6 million revaluation of the milling assets taken directly to the revaluation reserve in1998 when crops and prices were excellent. It should be emphasized that the devaluation isnot a loss and is only required to be shown in the Statement of Financial Performancebecause of the changed reporting requirements outlined above.

Statement of Financial PositionTotal Members Equity reduced by $88.2 million mainly as a result of the milling assetdevaluation. Other than this, there were no major changes to the Statement of FinancialPosition.

Statement of Cash FlowsCash flows from operating activities increased by $37.6 million to a surplus of $18.3 milliondue mainly to the better milling result. Capital expenditure was again tightly controlledremaining similar to that of the previous year at $5.1 million. The Sugar Australia jointventure’s cashflow was $2.4 million in excess of its profit. This shows in the cashflow as aninvesting activity as it reduces the value of our refining investment.

The only movements from financing activities were a $12.9 million reduction in InterestBearing Deposits and a further $2.7 million provided to shareholders to facilitate thereplacement of Orange rust-affected cane variety Q124. Cash on hand remained constant at$11 million.

Net debt decreased by $16.0 million to $84.2 million. However the ratio Net Debt : Members’Equity increased from 28.6 percent to 32.0 percent as a result of the plant and equipmentdevaluation.

page seventeen

Concise Financial Report

Statement of Financial Performancefor the year ended 30 June 2002

Note 2002 2001$'000 $'000

Sales 258 842 156 272Cane purchases and allowances (168 737) (98 460)

---------------------------------------- --------------------------------------

Gross Profit 90 105 57 812Other revenues 2 3 999 3 604Maintenance (30 717) (27 786)Operating (22 246) (21 203)Overheads (27 459) (28 891)Borrowing expenses (5 441) (6 389)Depreciation (17 376) (17 082)Share of net profits of associates and jointventures accounted for using the equity method 7 916 5 986

---------------------------------------- --------------------------------------

Profit (Loss) from ordinary activities (1 219) (33 949)and before income tax

Income from allocation of Sugar Terminals Limited Shares - 19 664---------------------------------------- --------------------------------------

Profit (Loss) before income tax (1 219) (14 285)

Income tax expense relating to ordinary activities - ----------------------------------------- --------------------------------------

Net Profit (Loss) from ordinary activitiesafter income tax expense attributable tomembers of the Co-operative (1 219) (14 285)

Net increase (decrease) in asset revaluation reserve (87 028) ----------------------------------------- --------------------------------------

Total changes in equity other than thoseresulting from transactions withowners as owners (88 247) (14 285)

---------------------------------------- --------------------------------------

The accompanying notes form part of this concise financial report.

page eighteen

Concise Financial Report

Statement of Financial Positionas at 30 June 2002

2002 2001$'000 $'000

ASSETSCurrent AssetsCash 10 981 11 029Receivables 14 053 11 276Inventories 9 189 10 198Other - 23

---------------------------------------- --------------------------------------

Total Current Assets 34 223 32 526---------------------------------------- --------------------------------------

Non-Current AssetsReceivables 7 768 7 162Property, plant and equipment 258 000 357 414Investments 90 940 92 977Intangibles 1 378 1 527

---------------------------------------- --------------------------------------

Total Non-Current Assets 358 086 459 080---------------------------------------- --------------------------------------

TOTAL ASSETS 392 309 491 606---------------------------------------- --------------------------------------

LIABILITIESCurrent LiabilitiesPayables 15 518 14 763Interest bearing liabilities 85 073 81 989Provisions 4 366 3 215

---------------------------------------- --------------------------------------

Total Current Liabilities 104 957 99 967---------------------------------------- --------------------------------------

Non-Current LiabilitiesInterest bearing liabilities 20 000 36 000Provisions 5 082 5 122

---------------------------------------- --------------------------------------

Total Non-Current Liabilities 25 082 41 122---------------------------------------- --------------------------------------

TOTAL LIABILITIES 130 039 141 089---------------------------------------- --------------------------------------

NET ASSETS 262 270 350 517---------------------------------------- --------------------------------------

MEMBERS' EQUITYContributed equity 1 1Asset revaluation reserve 82 597 169 625Retained profits 179 672 180 891

---------------------------------------- --------------------------------------

TOTAL MEMBERS' EQUITY 262 270 350 517---------------------------------------- --------------------------------------

The accompanying notes form part of this concise financial report.

page nineteen

Concise Financial Report

Statement of Cash Flowsfor the year ended 30 June 2002

2002 2001$'000 $'000Inflows Inflows

(Outflows ) (Outflows)

Cash flows from operating activities

Receipts from sugar sales and other sales 258 186 158 240Payments to members for cane supplied (167 942) (101 061)Payments to suppliers and employees (75 679) (74 626)Distributions received from associated entities 7 544 927Interest received 1 358 1 194Other revenue 1 663 3 604Interest paid (6 799) (7 583)

---------------------------------------- --------------------------------------

Net cash provided by (used in) operating activities 18 331 (19 305)---------------------------------------- --------------------------------------

Cash flows from investing activities

Distributions received from associated entities 2 409 -Payments for property, plant and equipment (5 344) (5 631)Proceeds on sale of property, plant and equipment 199 354

---------------------------------------- --------------------------------------

Net cash used in investing activities (2 736) (5 277)---------------------------------------- --------------------------------------

Cash flows from financing activities

Increase in borrowings - 25 000 Increase in growers’ loans (2 727) (6 721)Decrease in unsecured deposits (12 916) (5 640)

---------------------------------------- --------------------------------------

Net cash provided by (used in) financing activities (15 643) 12 639---------------------------------------- --------------------------------------

Net decrease in cash held (48) (11 943)Cash at 1 July 2001 11 029 22 972

---------------------------------------- --------------------------------------

Cash at 30 June 2002 10 981 11 029---------------------------------------- --------------------------------------

The accompanying notes form part of this concise financial report.

page twenty

Concise Financial Report

Notes to the Concise Financial Report for the year ended 30 June 2002

Note 1: Basis of preparation of the Concise Financial Report

The concise financial report has been prepared in accordance with Accounting StandardAASB1039: Concise Financial Reports, and the Corporations Act 2001.

The financial statements, specific disclosures and other information included in the concisefinancial report are derived from and are consistent with the full financial report of Mackay SugarCo-operative Association Limited. The concise financial report cannot be expected to provide asdetailed an understanding of the financial performance, financial position and financing andinvesting activities of the co-operative as the full financial report.

The accounting policies have been consistently applied and are consistent with those of theprevious financial year.

Note 2: Revenue 2002 2001$’000 $’000

Operating RevenueSales 258 842 156 272Interest received 1 358 1 194Share of associated companies operating profit 3 293 2 983Share of joint ventures operating profit 4 623 3 003Other revenue 3 999 3 604

---------------------------------------- --------------------------------------

272 115 167 056

Non-operating RevenueProceeds on sale of non-current assets 199 354

---------------------------------------- --------------------------------------

272 314 167 410---------------------------------------- --------------------------------------

Directors’ Declaration

The directors of Mackay Sugar Co-operative Association Limited declare that the concise financial reportof the co-operative for the financial year ended 30 June 2002, as set out on pages 11 to 21:

(a) complies with Accounting Standard AASB 1039: Concise Financial Reports; and

(b) has been derived from and is consistent with the full financial report of Mackay Sugar Co-operativeAssociation Limited.

This declaration is made in accordance with a resolution of the Board of Directors.

G R Davies I W DonaldsonDirector Director

Dated this twenty-sixth day of September, 2002.

page twenty-one

Auditor’s Report

27 September, 2002

Independent Audit Report to the Members ofMackay Sugar Co-operative Association Limited

Scope

We have audited the concise financial report of Mackay Sugar Co-operative Association Limited for the

financial year ended 30 June 2002 in order to express an opinion on it to the members of the co-operative.

The Association’s Directors are responsible for the concise financial report.

Our audit has been conducted in accordance with Australian Auditing Standards to provide reasonable

assurance whether the concise financial report is free of material misstatement. We have also performed an

independent audit of the full financial report of Mackay Sugar Co-operative Association Limited for the year

ended 30 June 2002. Our audit report on the full financial report was not subject to any qualification.

Our procedures in respect of the audit of the concise financial report included testing that the information in

the concise financial report is consistent with the full report, and examination on a test basis, of evidence

supporting the amounts, discussion and analysis, and other disclosures which were not directly derived from

the full financial report. These procedures have been undertaken to form an opinion whether, in all material

respect, the concise financial report is presented fairly in accordance with Accounting Standard AASB 1039:

Concise Financial Reports.

The audit opinion expressed in this report has been formed on the above basis.

Audit Opinion

In our opinion the concise financial report of Mackay Sugar Co-operative Association Limited complies with

Accounting Standard AASB 1039: Concise Financial Reports.

BENNETT PARTNERS DARRYL CAMILLERI

Partner

Partners:Darryl CamilleriDavid WattsChris SammutPaul Hinton

Bennett PartnersChartered Accountants

First Floor, 122 Wood Street P.O. Box 92, Mackay. 4740Phone: (07) 4951 1455 Fax: (07) 4951 4824

e-mail: enquiries@bennettpartners.com.au website: www.bennettpartners.com.au

Bennett & Camilleri Pty.ACN 010 430 314

ABN 65 010 430 314

ABN 59 281 397 611

page twenty-two

page twenty-three

Glossary

Bagasse

The residue after extraction of juices from cane in one or more mills in a sugar mill.

BIBO

BIBO is the bulk in/bulk or bag out transport and handling of white sugar by purpose-builtrefined sugar ships. The MV Pioneer is the only such carrier servicing the Australian sugarindustry.

Cane

The raw material delivered to a sugar mill by a farmer for processing into raw sugar andmolasses.

Cane Production Area (Assignment)

A cane production area entitles a grower to enter a supply agreement with a particularmillowner for the supply of cane grown on a particular number of hectares situated withinthe boundaries of land of a particular description.

CCS

Commercial Cane Sugar or CCS is a measure of the percentage of sugar cane recoverableas pure sugar. Each delivery of a farmer’s cane is sampled and analysed to determine itsCCS content.

Direct Consumption Raw Sugar/ DC Raws

DC sugar is raw sugar produced to food grade standards for marketing direct tocustomers.

Dunder

The liquid residue from the molasses fermentation process that produces alcohol. High inpotash, it is used to fertilise cane.

IPS/International Pol Scale

IPS is a measure of the commercial value of raw sugar.

Lost Time Injury Frequency Rate (LTIFR)

The number of lost time injuries sustained for each one million manhours worked.

Molasses

Molasses is a by-product of the sugar milling and refining processes. It is a brown viscoussyrup and is used for stockfeed and fermentation purposes.

Mud/Mill Mud

Mud/mill mud is the residue discharged from the mud filters in a sugar mill after theclarification of cane juice.

Polarisation/Pol

The sucrose content of sugar, e.g. “98 pol” sugar would contain about 98 percent sucrose.

Raw Sugar

Raw sugar is the straw coloured impure crystalline sugar produced by a sugar mill. Itusually contains 98-99 percent sucrose and is not considered fit for human consumption.

Refined Sugar/White Sugar

Refined or white sugar is produced by the further processing of raw sugar to food-gradestandards and contains almost 100 percent sucrose. Refined sugar is the property of therefiner and is marketed direct to customers.

page twenty-four

Mackay Sugar Co-operative Association Limited ABN 12 057 463 671

Corporate OfficePeak Downs Highway,

Racecourse, via MackayPO Box 5720,

Mackay Mail Centre,Queensland 4741 Australia

Phone (07) 4953 8200Facsimile (07) 4953 8340

Web: www.mkysugar.com.auEmail: info@mkysugar.com.au

Business ServicesFarleigh/Miclere Road, Farleigh, via Mackay

PO Box 5720, Mackay Mail Centre, Queensland 4741Phone (07) 4953 8800

Facsimile (07) 4953 8888

Field & Factory OperationsEungella Road, Pleystowe, via Mackay

Post Office Pleystowe, Queensland 4741Phone (07) 4953 8555

Facsimile (07) 4953 8590

Design/Edit: Jim Crane & Reg Price • Production: David Falknau/Clear Logic • Principal Photography: Daryl Wright • Printing: Payne Print