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 Cane SupplyJ H (John) King

Manager Factory Operations

AuditorsBennett Partners

Corporate SolicitorsMcCullough RobertsonS B Wright, Wright & Condie

BankersNational Australia BankQueensland Treasury CorporationABN AMRO Australia LtdRabo Australia Ltd

Notice of MeetingNotice is hereby given that the 14th Annual General Meeting

of the Mackay Sugar Co-operative Association Limitedwill be held in the

Mackay Entertainment Centre, Gordon Street, Mackayon Friday 30th November 2001,

commencing at 9.00 a.m.

ContentsSummary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1From the Chairman’s Desk . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2Chief Executive Comment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Sugar Manufacture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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 ChairmanT V (Tom) DeguaraI W (Ian) Donaldson

I L (Ian) FraserW T (Bill) Hobbs

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

M A (Albert) Volker

CoverMackay Sugar shareholders haveadapted quickly to the newcommunication options available tothem. Up to 90 percent have useraccess to the the Mackay Sugarwebsite via computer. Growers andharvesting contractors have beenaveraging more than 200 calls perday by radio or telephone to MackaySugar’s new ‘Com Centre’ during the2001 crushing.

Summary

Sugar Production• Cane Crop — 29.6 percent

The residual effects of the super wet 1998 season resulted in a verylight initial crop which was then devastated by pests and disease to anactual production of 4.663 million tonnes cane (6.628 million in1999/00).

• Sugar Content — 6.7 percentThe abnormal growing conditions coupled with the disease and pestproblems reduced the sugar content of cane to 12.60 CCS (13.50 in1999/00).

• Sugar Production — 35.5 percentThe reduced sugar content and the smallest cane crop since the flood-ravaged 1991 season saw sugar production fall 35.5 percent to only590 845 tonnes IPS sugar which was more than 400 000 tonnes downon Mackay Sugar’s proven production capability in recent years.

Financial Performance• Operating Revenue — 34.8 percent

The substantially reduced sugar and molasses production together witha sugar price of $253 per tonne - the lowest for 15 years - reducedrevenue by $89.0 million to $167.1 million ($256.1 million in 1999/00).

• Operating Loss — $14.3 millionThe combined effect of a small crop, poor quality of cane and a verylow price for sugar resulted in the Association recording a $14.3 millionoperating loss for the year, even after taking into account income fromthe allocation of shares in Sugar Terminals Limited of $19.7 million.

Future Prospects• Another Difficult Year

Although the sugar price for the current crop is predicted to be some34 percent higher than the $253 per tonne IPS sugar received in theyear under review, adverse growing conditions have again resulted in apoor crop which, near the time of writing, has been estimated at 5.1million tonnes which if achieved, will produce approximately 765 000tonnes of sugar resulting in a disappointing profit of $1.2 million.

1

Annual Report 2000/01

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

Cane Milled(Million Tonnes)

7.4

43

7.7

76

6.6

28

5.1

(est

.)

4.6

63

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

Sugar Produced(‘000 Tonnes IPS)

10

77

96

7

91

6

76

5 (

est

.)

59

1

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

Average Sugar Price($/Tonne IPS)

33

5.2

35

2.1

25

4.5

25

5 (

est

.)2

55

(est

.)3

40

(est

.)

25

3

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

Operating Profit/Loss($ Million)

22

.57

1.2

(Est

.)

19

.13

-7.1

0

-14

.3

to shareholders during the past year to assist withthe replacement of our major variety Q124 followingits devastation from Orange rust.

The Board has extended the Plant Loan Scheme foranother year to further assist with the replacementof Q124 and, at the time of writing this Report inlate September, applications had been received fora further $3.5 million dollars in loan funds.

The onset of Orange rust and the consequent loss ofour major variety Q124 has been a severe setbackfor the District and has demonstrated the high riskposed to both our farm and milling businesses bytoo much dependence on a particular cane variety.Diversification is essential and all of us should nowbe targeting the cultivation of a mixture of varietieson our farms to limit this risk in the future, andnever again should we allow one variety - no matterhow prolific it is - to become 90 percent of the totalcane supply to our factories.

Our Future

Earlier in these comments I said that historyrevealed that rural co-operatives thrived duringperiods of adversity and difficulty. This view isreinforced by John Rouse of the Rural DevelopmentDivision of the United Nations Food and AgriculturalOrganisation (FAO) whose research has revealedthat ‘...challenging times encourage a return to thebasic co-operative values of self-help and collectiveaction upon which the co-operative movement wasfounded more than 150 years ago...’ .

During the past year we have ‘helped ourselves’through our willingness to, among other initiatives,adopt a new cane harvest control system and theaccelerated replacement of the rust-affected varietyQ124.

Later in this Report the Board comments that thekey to Mackay Sugar maintaining its place as aleading sugar producer is increased throughput -either by improved farm practices or by expansion -and the aim now for the Co-operative must be totarget, as a minimum, the almost 1.1 million tonnessugar production levels of the very successful 1996and 1997 seasons.

To this end, approval should be given in the nearfuture to expanding Mackay Sugar’s cane-lands bymore than 3 500 hectares which, on reflection,should have been proceeded with three years ago.However we must also lift our productivity throughimproved and more innovative farm practicesincluding those referred to by the Board on page 8of this Report.

The challenge for our Association during the currentdownturn in production and profit is to ensure thatour approach to correcting this situation is by wayof decisive and collective action, or as FAO’s JohnRouse says, we must ’...return to the basic co-operative values of self-help and collective actionupon which the co-operative movement wasfounded more than 150 years ago...’.

2Graham Davies, Chairman.

These are indeed difficult times forMackay Sugar with poor crops andlow world sugar prices combiningto see the Co-operative record aloss of $14.3 million. Of course,this loss would have been

significantly worse but for theallocation to the Association ofSugar Terminals Limitedshares that have beenintroduced into our booksat a value of $19.7 million.

However, despite this loss and the continued poorcane and sugar production during the currentseason, the Board of Directors remains confidentthat the changes we are introducing and the costreductions we are pursuing will position theCo-operative to take advantage of the ‘improvedtimes’ that will inevitably follow in our notoriouslycyclic industry.

At the 1997 Australian Sugar Convention and inreply to the question ‘Does the Future Belong toCo-operative or Corporate Sugar Mills?’, Icommented that history had shown time and again,through economic depressions and naturalcalamities, that rural co-operatives thrived duringperiods of adversity and difficulty.

Although ‘thriving’ does not apply to MackaySugar’s current economic situation, it is verypleasing to me and my fellow Board members thatthis term can certainly be applied to theCo-operative with respect to the adoption of thenew approaches and new technologies introducedby the Board in the past year to cut costs andincrease production.

However, although this preparedness to adoptchange clearly demonstrates the determination ofthe Co-operative to succeed in the face of adversityand represents the way ahead for this industry,some have found the changes difficult to digest.

Further Training Planned

New - and more economic - ways of approachingthe cane harvest and supply have been animportant component in moving forward in theseadverse times and have reaffirmed Mackay Sugar asan industry leader. Also they have laid thefoundations for further cost-saving changes and,with the continued acceptance by shareholders ofthe need to do this, the Association is poised toexpand shareholder/website interactivity and otherinternet services during the next twelve months.

Training arranged in preparation for the 2001 launchof ‘www.mkysugar.com.au’ was attended by morethan 1600 shareholders and their families, and thesimilar training programs relating to these newdevelopments to be scheduled prior to the 2002crush will help overcome difficulties someshareholders may be experiencing with the newsystems.

Plant Loan Scheme

While reducing the cost of transport and milling isessential to Mackay Sugar’s future, equallyimportant is crop size and, in this regard, more than$6 million dollars in ‘planting loans’ were advanced

From the Chairman’s Desk

CPA/Assigned Area Tonnes Cane ProcessedHarvested Area Crop Model Prediction

3

In reviewing the fortunes of the local sugar industryover the past few years, the quotation "The art ofprophecy is very difficult - especially with respect tothe future", attributed to Mark Twain, is certainly anapt one.

During the period from 1994 to 1998, when cropyields averaged 94 to 107 tonnes of cane perhectare, much time was spent in planning theexpansion pathway for Mackay Sugar. For example,a crop size model was developed jointly by MackaySugar and CANEGROWERS in an attempt to predictcane production increases resulting from increasedarea under cane (horizontal expansion) andexpected yield improvements due to the adoption ofnew technology (vertical expansion).

The model forecast production of approximatelyeight million tonnes for the 1999, 2000 and 2001seasons.

In tandem with the development of the crop sizemodel, a number of cane transport and factoryexpansion scenarios were analysed. An expansionmodel that took into account capital, operating andmaintenance costs was then developed to identifythe preferred expansion routes. The high cost ofcapital and its detrimental impact on the rate ofreturn was identified as a key constraint toexpansion.

Consequently, the focus of R & D expenditure wason tackling this hurdle. As well, cogeneration inconjunction with milling expansion was identified asa potential means of improving investment returns.

However, a couple of years ago this rose-colouredview of the future began to take on a darker hue.Firstly, the crop for the 1999 season cut out at 6.6million tonnes of cane, a victim of the very wetconditions experienced during the 1998 harvest andthe dry conditions which prevailed for much of the1999 harvest.

And then there was the 2000 season. The averageyield of 56 tonnes of cane per hectare and crop of4.66 million tonnes of cane was a victim of Orangerust, Pachymetra root rot, residual effects of the1998 super wet crushing season and perhaps otheragricultural influences that we probably don't knowenough about.

Ron Swindells, Chief Executive.

Chief Executive’s Comment

Unfortunately the low crops of the 1999and 2000 seasons were coupled withrecord low sugar prices in real terms tobatter the financial positions of growerand miller alike.

All the more reason for concern isthat the above decline in cropsize occurred despite thereasonably steady increasein harvested area that hasoccurred since 1992.

So what does all this meanfor Mackay Sugar?

Well, to state the obvious, it highlights the greatimportance of a reliable cane supply. The impact onour bottom line of lifting the crop from 5 to 7.5million tonnes of cane amounts to tens of millions ofdollars.

Consequently, we must ensure that our Research,Development and Extension focus is firmly onimproving productivity to provide verticalexpansion.

This is doubly the case given the increasingrestrictions that are being placed on horizontalexpansion of the industry. In the interim, our millingoperations have been placed on a reasonably leanmaintenance diet. As well, capital expenditure hasbeen restricted and will be directed to projects thatreduce our costs, and improve our efficiencies andcompliance.

The publisher Malcolm Forbes wrote that "Whenthings are bad, we take comfort in the thought thatthey could always be worse. And when they are, wefind hope in the thought that things are so bad theyhave to get better". Let's hope and pray that theworst is over and that better times are in front of us.Reliable cane production will help ensure this futuresuccess, for both our canegrower/shareholders andtheir sugar co-operative.

90

91

92

93

94

95

96

97

98

99

00

100000

95000

90000

85000

80000

75000

70000

65000

60000

9

8

7

6

5

4

3

Crushing Season

Can

e P

roce

ssed

(M

illi

on

To

nn

es)

Are

a (

Hect

are

s)

Another Disappointing HarvestAlthough pre-season estimates indicated that the 2000 cane crop could be up to6.7 million tonnes, the residual effects of the 1998 super-wet, the devastatingeffect of the cane leaf fungal disease Orange rust and severe pest problemsresulted in only 4.663 million tonnes of cane being harvested in a 15-weekseason concluding on 12th October.

This crop was about three million tonnes less than those processed in recentnormal growth years, and almost two million down on the 1999/00 canethroughput which resulted in the Association’s first financial loss since thedisastrous crop of 1991/92.

The average cane yield of 56.09 tonnes per hectare, was down 30.9 percent on1999/00 and about 60% of the yield expected in a year of normal cane growth.

Sugar ProductionThe sugar content of the cane was also very disappointing at 12.60 CCS (13.50in 1999/00). Although the effect of an unusually dry harvest on the already-stressed cropcontributed to this, the impact of Orange rust disease in Q124 variety on plantphotosynthesis (essential to sucrose conversion in the cane) was mainly to blame.

The small cane crop and this poor CCS resulted in sugar production for the year totalling only590 845 tonnes of IPS sugar which was 35.5 percent less than the depleted production of1999/00, and more than 400 000 tonnes down on the Association’s proven sugar productioncapability in recent years.

Not only was the sugar yield of 7.06 tonnes per hectare down 35.5 percent on the previousyear, it was also Mackay Sugar’s worst performance to date.

Crushing Rate & Lost TimeIt could be argued that the best operational strategy in a limited-production year, withabnormally low fibre content would be to slow factory crushing rates to improve efficiency.In the year under review Mackay Sugar increased hourly crushing rate by 2.6 percent to2 341 tonnes cane per hour (2 281 in 1999/00).

Down 10 percent on normal, the low fibre meant that insufficient fuel was available from thissource for factories. An increased crushing rate was essential to continued milling operations.However factories still suffered fuel shortages and incurred extra costs totalling $1.44 millionon an extraordinary range of supplementary fuels including coal, oil, sawdust, woodchip,cotton and green waste.

The time lost in the factories through lack of cane supply increased on average by 36 hoursper factory (144 percent). However the 61 hours average loss per factory was an excellentresult considering the poor cane yield per hectare and the resultant difficulties experiencedby harvester operators in maintaining harvest rate in such a sparse crop. The dedicatedefforts of the harvesting sector to maintain cane supply is acknowledged.

Although the shortened season contributed to the 25 percent reduction in ‘factory break-down’ hours, the result was pleasing considering the restriction on capital expenditure pre-season. Apart from a four-day stoppage at Racecourse Mill when No. 1 Mill pressure-feederchute failed as a result of excessive dirt in the cane supply, and two days lost at Farleigh Millthrough bearing failure on No. 1 Mill gearing, the most significant stoppages related to theshortages and quality of boiler fuel referred to earlier.

The ten days lost at the factories through industrial disputes was disappointing and a directresult of initial Union concern about the Association’s Voluntary Redundancy & EarlyRetirement (VRER) scheme.

Factory EfficiencyFrequent industrial stoppages and the production of ‘special’ sugars to meet marketingdemands contributed to a reduced recovery of sugar from cane of 88.15 percent (89.67 inthe previous year). However the main contributor to this performance downturn was thedisease and pest-infected crop which was of low purity and low fibre and had very poormilling characteristics.

4

96/97 97/98 98/99 99/00 00/01

Green Cane Harvest(% of Crop)

63

.0

85

.6

88

.4

94

.2

85

.7

One of the main reasons forthe increased proportion ofcane harvested green was thelack of trash on cane affectedby Orange rust.

Sugar Manufacture

Sugar Manufacture

For example, in order to reduce bagasse moisture and conserve steam, less water was addedto milling trains and mud filters which action contributed to the 19.5 percent increase in sugarlost in bagasse and the 5.5 percent extra sugar lost in filter mud. Sugar lost in molasses alsoincreased slightly to 7.34 percent (7.10 percent in 1999/00).

MolassesWith a much smaller cane crop, molasses production was also down with only 143 700tonnes, including 7 500 tonnes from the Racecourse Refinery, being produced. (210 000tonnes in 1999/00).

This low production necessitated the rationing of molasses to a number of our traditionalcustomers such as CSR Distilleries Sarina and transport companies. Spot sales to customersalso ceased when milling operations concluded.

Despite the reduced production and the very long non-crush period, the demand of contractcustomers was able to be satisfied and sales to domestic customers increased by almostthree percent to 35 500 tonnes.

Sugar QualityDespite the difficulties associated with processing the very poor crop, Mackay Sugar producedexcellent quality sugar and proved to be the best performer in the State in terms of the RawSugar Quality Incentive Scheme operated by Queensland Sugar Ltd (QSL). The sugarmanufactured by the Association during the 2000 season received 24.6 percent of thepremiums paid by QSL for high quality sugar, which is a credit to everyone involved.

While each of the Association’s four factories performed well, Farleigh Mill topped the Statefor each of the three different quality sugars it manufactured — Brands 1, JA and IHP.

5

Season 2000 1999 Change(Financial Year) (2000-01) (1999-00)

ProductionTonnes cane milled 4 662 553 6 627 533 - 29.6%Sugar content - CCS (i) 12.60 13.50 - 6.7%Tonnes sugar produced - IPS (ii) 590 845 915 597 - 35.5%

Field PerformanceCane production area (ha) (iii) 97 963 97 301 + 0.7%Cane area harvested (ha) 83 129 81 683 + 1.8%Tonnes cane/ha 56.09 81.14 - 30.9%Tonnes sugar/ha (iv) 7.06 10.95 - 35.5%% Crop harvested green 94.23 85.69 + 10.0%

Factory PerformanceMilling rate (tonnes cane/hr) 2 341 2 281 + 2.6%Milling loss - in bagasse (v) 4.79 4.01 + 19.5%(% sugar) - in mud (vi) 0.58 0.55 + 5.5%

- in molasses (vii) 7.34 7.10 + 3.4%Time loss - cane supply stops 61 25 + 144.0%(hours) - factory stops 144 192 - 25.0%

- industrial stops 219 57 + 284.2%

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.

Sugar Manufacture

The WorkforceAt 30th June 2001, Mackay Sugar had 726 people on its payroll. However when harvest andprocessing of the 2001/02 cane crop commenced in July, some 300 extra seasonal andtemporary employees were engaged.

The year under review was a challenging one for Mackay Sugar and its workforce with bothhaving to face up to severe cost reduction programs aimed at ensuring continued viability inthe face of losses resulting from crop and sugar price downturns.

Essential to the achievement of these aims was the introduction of the Voluntary Redundancy& Early Retirement (VRER) scheme and the negotiation of an Enterprise BargainingAgreement (EBA) covering the next two seasons. It is pleasing to report that both of thesemajor organisational challenges were worked through and resolved with the workforce.

The Voluntary Redundancy & Early Retirement scheme was a necessary first step insignificantly changing some of Mackay Sugar’s traditional field and factory practices. VRERwas ultimately accepted by 140 full-time wages and salaried employees, all of whom wereoffered support programs including Job Transition and Early Retirement Workshops andfinancial advice.

Negotiations relating to Enterprise Agreement No 4 covering the period 1st May 2001 to30th April 2003 concluded with an acceptance vote by all employees on 13th June. (TheAgreement was ratified by the Queensland Industrial Relations Commission on 6th August).The opportunity is taken here to express sincere appreciation to Mackay Sugar’s ‘people’ fortheir approach to industrial relations issues during the difficult past year.

Our last Report commented that ‘increased emphasis is being placed on communication withour workforce’ and, to this end, an Employee Information Meeting was held in Februaryto better acquaint all employees with Mackay Sugar’s business operations along with currentand future plans for improvement.

The wide range of subjects covered by Senior Management at this meeting included the sugarmarket and Association outlook, industry growth and ownership, value-adding and co-generation opportunities, and the challenges for the workforce in the changing industryenvironment. It is expected that similar employee updates will occur in future years.

Employee training and development continued to be a key focus of the Association withemphasis both on multi-skilling and up-skilling in all operational areas to meet the challengesof the changing industry. At 30th June this year Mackay Sugar employed 82 full-timeapprentices. Of these, sixteen juniors commenced their contracts in January and 14 adultsfrom the existing workforce commenced in February.

Mackay Sugar is committed to providing a safe and healthy workplace free fromdiscrimination, and to maximising productivity through multi-skilling, efficient work practicesand people management.

6

Racecourse Cane Supply and Factory Operations are the 2000-01 winners of the CEO's Safety Awards. Pictured with theperpetual trophy are (from left): Paul Aslette and Andrew Watson - Cane Supply, Carl Costigan - Racecourse SafetyCommittee member and Noel Skippen - Racecourse Factory Manager.

Sugar Manufacture

Workplace Health & SafetyAlthough Mackay Sugar’s lost time injury frequency rate (LTIFR) improved by 6.1percent during the year, this was accompanied by a disappointing increase in theseverity and duration rates of the fewer injuries suffered.

These rate increases accelerated a major review of the health and safety program andthe following key initiatives aimed at improving performance have been identified:• Further training in safety management systems for managers;• Review of the safety system development and implementation process;• A re-induction program for all current employees;• Development of an intranet to provide better access to information; and• Implementation of a ‘permit to work’ system to assist in controlling workplace risks.

As these improvements are implemented, emphasis will also be placed on consolidatingcompliance with existing safe work procedures through auditing and training.

Best practice workforce health and safety continues to be a priority goal and MackaySugar will continue to manage risk in the workplace by identifying and reducing hazardsthrough a structured assessment process.

2000/01 ‘Positives’Many would question whether anything good can come out of a year during which MackaySugar had its worst sugar production for nine years valued at the worst sugar price for 15years and which ended with a record loss. Nevertheless the year under review did producesome 'positives' for Mackay Sugar.

For example, the very disappointing financial resultaccelerated the need to introduce for the 2001 season, the‘new look’ cane harvest management system. Foreshadowedin the last Annual Report for introduction from 2002 onwards,this system utilises satellite imagery for crop estimation andthe latest communication technology for grower contact.

Although, as was only to be expected, there have been someteething problems with the radically-different Satellite-imageCrop Forecasting. Calibration of image output and computermodelling has progressed to the stage where furtherenhancements are being developed for 2002 season.

Grower/Field Officer contact via the new CommunicationsCentre manned by experienced field staff is also proving itsworth. Open 16 hours daily and linked to all traffic offices, the'Com Centre' is handling about 200 phone calls and 60 radiocontacts per day from growers and contractors seeking tomanage harvesting operations.

Another popular communications tool is the Mackay SugarWebsite which came online mid–year and provides each grower with up-to-the-minuteharvest, crush and industry information.

The development of this facility followed a group purchase of computers by shareholdersearlier this year and the comprehensive training sessions that followed. Up to 90 percent offarms are now using this facility which also contains Mackay Sugar and general sugarindustry news and has links to Queensland Sugar Ltd, BSES and other industry serviceorganisations.

Since cane harvest began in July, the password-protected individual farm information inwww.mkysugar.com.au has been accessed upwards of 350 times per day by growers andcontractors seeking information such as bin allotment details, siding rosters and rakeinformation.

7

96/97 97/98 98/99 99/00 00/01

Injury Frequency Rate(Lost time injuries permillion hours worked)

39

25

25

23

24

.5

The 6.1 percent decrease in thelost time injury frequency rate(LTIFR) for 2000/01 wasmarred by an increase in theseverity and duration rates ofthe injuries suffered.

Mackay Sugar’s Information Technology department has beenheavily involved in the development of the co-operative’s newwebsite. Analyst/programmers Tony Raines (seated) and AldoDurelli discuss a new refinement to the ‘Reports’ section of the site.

Sugar Manufacture

Potential For Further EconomiesThis new system of cane supply is part of a long-term Profit Enhancement Program (PEP) forCane Supply aimed at assisting the Association become better insulated against the vagariesof crop, climate and sugar price, and having goals of service to shareholders, safety to meetall expectations, and cost reduction and increased crop size to remain in business.

Developed early in 1999 for introduction over a number of years, the PEP program targetsoperational economies in Mackay Sugar's cane supply/transport system in the followingoperational areas by 'doing things better by doing them differently':

• Crop forecasting — satellite image approach is operational this season;

• Siding rosters — a siding roster system for contractors has been well used in its first year,and will be further developed;

• Grower advice — ‘www.mkysugar.com.au’ and ‘Com Centre’ are up and running and otheravenues for improvement are being investigated;

• Consignment of cane — use of the website for consignment is being explored;

• Cane railway maintenance — group-wide management is being developed;

• Cane transport engineering — mobile servicing units in place and group-widemanagement to be implemented;

• Cane trains — driver-only trains and multiple-locomotive units under development;

• Traffic control — transition to centralised operations at Pleystowe to commence in 2003;

• Locomotive driver training — simulator training already being used to improve operationsand will be developed further to improve safety and compliance;

• Road transport — investigating system changes, and road research is being planned;

• Miller/grower arrangements — expansion opportunities, cane supply and processingagreements, cane quality and analysis programs are being developed in consultation withCANEGROWERS Mackay.

The Way AheadWhile the pursuit of such cost economies in bothfield and factory is essential to the continuedviability of the Co-operative, the key to the Mackayregion maintaining its place as a leading sugarproducer is increased throughput — either byimproved farm practices or by expansion.

Trials by the BSES to correct sodic soil problems bybetter utilising the filter mud, boiler ash and dunderproduced during sugar milling and distilleryoperations continue to show encouraging results.The co-ordinated application of these by-products togeographically-logged soda areas appears to havethe potential to greatly improve cane yield.

With up to 98 percent of a block subject to soilcompaction during some harvest operations andrecent research revealing that there can be a 15percent decrease in cane yield in this compactedsoil, there is also yield potential in changingcultivation and harvest practices.

In this regard the growing of cane in two to threemetre beds separated by permanent 'controlledtraffic' areas accommodating all cultivation andharvest operations, should also be researched.

With survival in an ever-tightening economic situation dependent on Mackay Sugar and itsgrowers using every tool available, the Association is committed to increasing the tonnage ofcane produced in the region — both horizontally (more area) and vertically (better yield).

8

Queensland Rail’s 3000 class locomotive simulator was stationed atPleystowe for eight weeks prior to the 2001 crush. Eighty-seven MackaySugar loco drivers were put through their paces on the simulator duringthe training program.

Sugar Refining

Sales and ProfitThe 25 percent owned Sugar Australia/New Zealand Sugar businesses continued to generateprofits for the Association.

However, despite an increase in refined sugar sales volumes during the year, profits wereadversely affected by the steep and unpredicted increase in the world market price for rawsugar which resulted in refining margins being squeezed.

Despite these low raw/white premiums, export sales of bulk white sugar via the BIBO refinedsugar ship 'MV Pioneer' were maintained at last year's 90 000 tonne level with deliveries toSri Lanka, Philippines and Taiwan.

New Facilities & InvestmentAt Racecourse Refinery new facilities are producing specialty sugars including DC raw sugarand coffee crystals, while at Yarraville a new phosphatation clarification plant will process awider range of raw sugars. In New Zealand new energy-efficient blending facilities willincrease Chelsea Refinery's capabilities to service the growing export market for sugar-basedfood ingredients.

All refinery production and packing facilities are experiencing higher levels of customer andregulatory expectations with regard to food hygiene standards. The group is proceeding withHACCP (Hazard Analysis and Critical Control Point) accreditation. HACCP is a quality-controltechnique, used extensively in the food industry, which focuses on the critical points wherecontamination may occur and establishes processes and procedures to reduce or eliminatecontamination risks. Also, a new computerised business system across Australia and NewZealand has improved customer service and reduced costs.

Looking to the FutureWith raw sugar prices trending lower in recent times, both refining margins and the demandfor product are expected to stabilise.

However, as own-label packaged sugar gains market share, and with new retailers and theabsorption of the Franklins supermarket chain adding to the complexity of an already highly-competitive retail market in Australia, the coming years will be challenging to say the least.

Of concern also is the decline in per capita consumption of sugar both in Australia and NewZealand, particularly at the retail level, and a public relations program to raise the industry'sprofile in sugar promotion and advertising is aimed at reversing this loss.

On the positive side New Zealand Sugar is a leading exporter of sugar/milk powder blends toJapan and the continued growth of this market has enabled New Zealand Sugar to achieverecord sales volumes. Sugar Australia has entered the blends market and the ability to supplyexport markets from both sides of the Tasman should provide a marketing advantage in thelonger term.

9

Sugar Australia’s BIBO ship the ‘MV Pioneer’ taking on a cargo for the Philippines earlier this year. A further 90 000 tonnesof refined sugar was exported using Pioneer in the year ending June 2001. In the left of the picture is the new raw sugarshiploader, part of the new $23 million dollar raw sugar wharf and loading facility.

Six-year Financial Performance

10

*Note: The financial comparatives for the years from 1 July 1995 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 *2000/01 *1999/00 *1998/99 1997/98 1996/97 1995/96

Tonnes cane milled 4 662 553 6 627 533 7 776 198 7 443 172 7 511 435 6 953 836Sugar content - CCS (i) 12.60 13.50 12.12 14.28 13.85 13.52Tonnes sugar produced - IPS (ii) 590 845 915 597 967 167 1 076 672 1 068 287 962 859

Profit & Loss ($’000)Operating revenue 167 056 256 082 355 229 453 578 448 906 444 454Net interest 6 389 4 255 3 954 4 613 2 170 685Depreciation 17 082 16 479 17 740 13 869 12 570 12 002Operating profit/(loss) (iii) (14 285) (7 104) 19 132 22 571 21 121 25 003Retained earnings 180 891 195 176 202 280 193 148 185 583 179 278

Balance Sheet ($’000)Current assets 32 526 46 791 73 748 108 139 87 358 94 734Non-current assets 459 080 440 061 448 935 435 750 314 100 286 954Total assets 491 606 486 852 522 683 543 889 401 458 381 688Current liabilities 99 967 69 460 112 057 121 272 97 525 86 710Non-current liabilities 41 122 52 590 38 719 59 842 32 339 29 689Total liabilities 141 089 122 050 150 776 181 114 129 864 116 399Total members’ equity 350 517 364 802 371 907 362 775 271 594 265 289

Capital Expenditure ($’000)Expenditure 5 631 18 686 21 613 53 122 40 892 16 859

RatiosNet interest cover (times) (1.24) (0.67) 5.84 5.89 10.73 37.50Return on members’ equity (4.08)% (1.95)% 5.14% 6.22% 7.78% 9.42%Net debt : members’ equity 28.60% 20.74% 15.37% 20.91% 17.67% 9.91%Current assets : current liabilities 0.33 0.67 0.66 0.89 0.90 1.09Members’ equity : total assets 0.71 0.75 0.71 0.67 0.68 0.70Total assets : total liabilities 3.48 3.99 3.47 3.00 3.09 3.28

As part of Mackay Sugar’scane transport restructure,loco schedules in manyareas have beenstreamlined this year toimprove bin deliveries.Here, the Calenlocomotive directed bydriver’s assistant SteveLindores positions a loadof cane bins from theNorth Coast on to the fullyard pushers at Farleigh.

Directors’ Report

The Directors present their report and the financial statements of the Mackay SugarCo-operative Association Limited for the year ended 30 June 2001.

In terms of the Cooperatives Act 1997 (Qld), the Association has complied with therequirements of the Corporations Act 2001 in the presentation of this report and theassociated financial statements.

DirectorsThe names and profiles of Directors in office from 1 July 2000 to the date of this report follow.A record of Board Meeting attendance during the year under review is set out on page 12.

G R (Graham) Davies, ChairmanElected Director and Chairman since incorporation of Mackay Sugar Co-operative AssociationLtd in 1988. Cane and cattle producer with wide experience in sugar industry organisationalmatters. Chairman of the Queensland Rural Adjustment Authority and Mackay SugarManufacturers Association. Director of Sugar Australia Pty Ltd, New Zealand Sugar CompanyLtd, Queensland Sugar Ltd and Mackay Port Authority.

C E (Eddie) Westcott, Deputy ChairmanElected Director since incorporation and Deputy Chairman since 1992. Cane producer formore than 30 years with wide experience in co-operative sugar milling matters. Director ofCo-operative Federation of Queensland. Member of Pioneer Valley Water Board.

T V (Tom) DeguaraElected Director since incorporation. Cane producer for some 40 years with wide experiencein co-operative sugar milling matters. Director of Rodney Industries and Member of EtonIrrigation Area Water Advisory Committee.

I W (Ian) Donaldson FICAIndependent Director since incorporation. Chairman of Hall Chadwick Queensland (CharteredAccountants), First Mortgage Corp Aust Ltd, Brooklyn Park Olive Groves Ltd, Australian Green& Gold Ltd, City Pacific Ltd, the Leukaemia Foundation of Australia, and a Director of manyother companies.

I L (Ian) Fraser FCPAIndependent Director appointed in 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 Market Company Ltdand a Director of Sugar Research & Development Corporation, Environmental RecoveryServices Ltd, Medibank Private Ltd and Yates Ltd.

W T (Bill) HobbsElected Director since 1992. Cane producer for 40 years with wide experience in sugarindustry organisational matters. Member Pioneer Valley River Improvement Trust.

M F D (Malcolm) PrattElected Director since 1991. Cane producer for some 35 years with broad experience in sugarindustry and regional water resources organisational matters. Member of Mackay RegionalWater Resources Committee.

B B (Barry) SheedyElected Director since 1996. Varied sugar industry experience including management of theFarleigh Co-operative Sugar Milling Association Ltd and Manager Finance & Administration ofMackay Sugar. Millers' representative on the Mackay Cane Protection and Productivity Boardand a Mackay City Councillor.

M A (Albert) VolkerElected Director since incorporation. Cane producer for 35 years with wide experience inco–operative sugar milling matters. Millers’ representative on and Deputy Chairman of theMackay Cane Protection and Productivity Board. Member Mackay Regional Water ResourcesCommittee.

11

Primary Activities of the AssociationThe primary activities of the co-operative are:

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

(b) to manufacture, transport, store, market and distribute refined sugar, syrups, rawsugar for human consumption and similar products and by-products; and

(c) to produce, market and distribute electricity and other value-added commoditiesthrough the use of products and by-products arising from the activities in (a) and/or(b) above.

There was no significant change in the nature of the Association’s primary activities duringthe financial year.

Review of OperationsA detailed review of the operations of the Association during the year under review, and theresults of these operations, are included in ‘Sugar Manufacture’ at pages 4-8 of this Report.

Although pre-season estimates indicated that the 2000 cane crop could be up to 6.7 milliontonnes, the residual effects of the 1998 super-wet and severe pest problems resulted in only4.663 million tonnes of cane being harvested.

The sugar content of the cane was also very disappointing at 12.60 CCS (13.50 in 1999/00)mainly due to the impact of Orange rust disease on plant photosynthesis essential to sucroseconversion in the cane.

The small cane crop and this poor CCS resulted in the sugar production for the year beingonly 590 845 tonnes of IPS sugar which was 35.5 percent less than the depleted productionof 1999/00, and more than 400 000 tonnes down on the Association’s proven sugarproduction capability in recent years.

Operating ResultThis reduced production and the worst sugar price for 15 years saw operating revenue fall to$167.1 million ($256.1 million in 1999/00). Despite extensive cost cutting and othereconomies, the Association suffered a loss of $14.285 million - its second in a row ($7.104million loss in 1999/00). This disappointing result would have been even worse except forincome from the allocation of shares in Sugar Terminals Limited decreasing the loss by$19.664 million.

Over Award PaymentsBecause of the operating loss, no over award payments were approved for the 2000 season.

Changes in State of AffairsThere was no significant change in the state of affairs of the Association other than thoseadvised in other sections of this report, or in the accounts or in the notes thereto.

After Balance Date EventsIn the opinion of Directors, no matter orcircumstance other than the financialimpact of the vastly reduced cane cropreferred to in other sections of thisreport, has arisen in the interval betweenthe end of the financial year and the dateof this report which has significantlyaffected, or may significantly affect, theoperation of the Association, the resultsof those operations, or the state ofaffairs of the Association in subsequentfinancial years.

Directors’ Report

12

Regular Meetings Special MeetingsDirector

Held Attended Held Attended

G R Davies 10 10 3 3

C E Westcott 10 9 3 3

T V Deguara 10 10 3 3

I W Donaldson 10 10 3 3

I L Fraser 10 8 3 2

W T Hobbs 10 10 3 3

M F D Pratt 10 10 3 3

B B W Sheedy 10 10 3 3

M A Volker 10 10 3 3

Board Meeting Attendance

Directors’ Report

Future DevelopmentsThe Board continues to explore ideas and projects to advance the Association. However, untilany such idea becomes a firm commercial proposal, untimely and early disclosure couldresult in unreasonable prejudice to the Association.

Environmental IssuesMackay Sugar is subject to environmental regulations under various State and Federal lawsprimarily relating to emissions to air and discharges to water and land.

Having been granted a single environmental authority (licence) for all of Mackay Sugar'ssites, the Association has completed a request from the Environmental Protection Authority(EPA) for an environmental impact investigation into Mackay Sugar's emissions anddischarges. Consultants worked with relevant Association staff on these investigations andthe final report is now being considered by EPA (Mackay).

In relation to non-compliant emissions from Farleigh, Marian No. 2 and Pleystowe boilerstacks, the five-year Environmental Management Plan remains in force until 30th August2003. In the meantime, the developmental conversion of the dry dust collectors to wetseparators is continuing on one of Pleystowe's boilers.

As part of a continuing review of Mackay Sugar's impact on the environment, a number ofaction plans for stormwater and waste management, flammable and combustible goodsstorage, environmental audits, and incidents and complaints were reviewed and updated tomeet changing standards. Further development of Mackay Sugar's computerised IntegratedEnvironmental Management System is continuing.

During the year under review, Mackay Sugar generally complied with all relevantenvironmental legislation relating to its activities in regard to emissions to air, and dischargesto water and land. Exceptions to compliance were in the area of treated effluent dischargesfrom factory effluent ponds. Some of the discharges were non-compliant for suspended solidsand biochemical oxygen demand. This non-compliance can be attributed to algal growth andits subsequent decay in treatment ponds prior to discharge. No environmental harm wasobserved as a result of these discharges.

13

Unlike the situation that existed in the 2000 crushing season where low fibre in the diseased cane created serious fuelshortages for each of Mackay Sugar’s four factories, more than 35 000 tonnes of bagasse will be stored during the 2001season for use as boiler fuel at Racecourse during the maintenance season. This greenhouse-friendly bagasse fuel willdisplace about $500 000 worth of coal.

Directors’ Report

Corporate GovernanceThe Board of Directors of Mackay Sugar is responsible for the corporate governance of theAssociation and the following statement outlines the principal governance practices in placeduring the financial year under review.

(a) Board of DirectorsIn accordance with the rules of the Association the Board is comprised of nine non-executiveDirectors, seven of whom are elected by shareholders and two ". . . with special skills, whoseservices are considered to be of benefit to the Association . . ." appointed by the electedBoard.

Elected Directors serve on the Board for three years, with elections being held in eachconsecutive year of each three year period for the two directors, two directors, and threedirectors respectively who shall have been longest in office. Elections are conducted at eachAnnual General Meeting.

(b) Board ResponsibilitiesThe Board of Directors guides and monitors the business and affairs of Mackay Sugar onbehalf of all shareholders ensuring it is conducted in a proper manner. It is responsible toshareholders for:

• the overall performance of Mackay Sugar and the charting of its direction and objectives;

• developing the strategies and policy guidelines to achieve these objectives;

• monitoring key performance indicators of the business;

• maintaining a high standard for accountability for all activities of Mackay Sugar includingcompliance with laws and ethical behaviour;

• ensuring that risks are identified and that appropriate risk management procedures arein place; and

• protecting shareholders' interests and making sure they are kept fully informed.

In fulfilling this role the Board oversees compliance with the requirements of the regulatorsand ensures that appropriate risk management and associated internal controls are in place.The Board may delegate authority to management, but not responsibility.

Current practice calls for the Board to meet eleven times during the year at approximatelymonthly intervals. This may be varied by the Directors who can also add other meetings whendeemed necessary. During the year under review only ten meetings were held with the June2001 meeting not held until early July 2001.

14

Pictured during a break in proceedings at a recent Mackay Sugar Board of Directors meeting are (standing from left)Peter Gill (General Counsel), Ian Donaldson, Malcolm Pratt, Bill Hobbs, Albert Volker, Ian Fraser and Barry Sheedy.Seated (from left) are Eddie Westcott (Deputy Chairman), Graham Davies (Chairman), Dr. Ron Swindells (ChiefExecutive Officer) and Tom Deguara.

Directors’ Report

(c) Board CommitteesAlthough the Board generally operates as a whole across the range of its responsibilities,Directors also serve on one or more of the seven committees set up to support the Board inits work and to provide a more detailed focus for its governance responsibilities.

The role of these committees is to consider in advance or in more detail, matterssubsequently addressed by the whole Board.

The membership of these committees as at 30 June 2001 and a brief description of theirrespective roles follows. Where appropriate the committees also have senior management asmembers.

• The Audit Committee is comprised of Messrs I W Donaldson, W T Hobbs, M F D Pratt,B B Sheedy and C E Westcott and assists the Board in fulfilling its financial responsibilitiesrelating to the general accounting practices of the Association. The committee serves asan independent and objective party to review the financial information presented byMackay Sugar to shareholders, regulators and the general public and determines theadequacy of the Association’s operating, accounting and audit controls.

• The Finance Committee establishes corporate governance of the Association’s financialfunctions not covered by the Audit Committee. With Messrs G R Davies and C E Westcottas Director members, this committee reviews operating and capital budgets prior tosubmission to the Board and monitors Mackay Sugar’s overall financial position regardingnet debt, borrowing and interest rates. Long-term planning responsibilities includeensuring financial forecasts are consistent with the Strategic Plan, and that sufficientfunding is available to meet Association needs.

• The Compliance Committee which has Messrs T V Deguara, I L Fraser, B B Sheedy andM A Volker as members has been established to help Mackay Sugar identify laws andregulations which apply to the Association, and to oversee the development of processesto ensure compliance with these laws and regulations.

• The Ownership/Structure Committee has Messrs G R Davies, T V Deguara, I WDonaldson and M F D Pratt as members. This committee is charged with investigation ofalternative models and changes which would ensure that the structure of the Associationremains appropriate to changing circumstances.

• The Remuneration Committee, which has Messrs G R Davies and C E Westcott asmembers, reviews remuneration policies and procedures and establishes staff salarypackages.

• The Water Conservation Committee includes Messrs M F D Pratt, B B Sheedy and M AVolker as Director members and aims to increase supplies of affordable irrigation waterfor the Mackay Sugar area.

• The Annual Report Committee comprises Messrs M F D Pratt, B B Sheedy and C EWestcott and is responsible for the production and legislative compliance of this report.

(d) Risk ManagementIn order to ensure that key business and financial risks which could affect Mackay Sugar areeffectively managed, the Association has in place a management program for Mackay Sugar’speople, processes and property.

(e) Management StructureThe management of the Association, its operations and administration, is delegated by theBoard to the Chief Executive, who is supported by senior executive staff.

This team operates within an agreed framework of strategic plans, budgets, targets,standards and policies approved by the Board which maintains appropriate services,procedures and internal mechanisms to ensure that management and employees actefficiently and in the best interests of shareholders.

15

Directors’ Report

(f) Code of EthicsMackay Sugar is committed to maintaining the highest ethical standards in all of itsoperations. Directors and employees are expected to act with the utmost integrity andobjectivity to maintain the Association's reputation.

Indemnification of OfficersThe Association has paid premiums to insure Directors and Officers against liabilities for costsand expenses incurred by them in defending any legal proceedings arising out of theirconduct while acting for the Association, other than conduct involving a wilful breach of dutyin relation to the Association.

Rounding of AmountsThe Association has applied the relief available to it in Australian Securities Investment ClassOrder 98/100 and, accordingly, amounts in this report and associated financial statementshave been rounded to the nearest thousand dollars where appropriate.

GR Davies CE WestcottChairman Deputy Chairman

Signed at Mackay on behalf of the Board this twenty-seventh day of September 2001.

16

In a first for sugar cane, Mackay Sugar shareholders invested heavily in fungicide protection for their Q124 crops during thelead-up to the 2001 season. Early indications suggest that while yields have not improved to the extent that was hoped for,the need to apply fungicide will remain with growers until they have replaced their Q124 cane. The fungicide was appliedusing mainly ground-rig spray units earlier in the growing season but as the crop matured helicopters and fixed-wingaircraft joined the spray campaign against orange rust. (Photo courtesy ‘Sugar Times’).

Concise Financial Report

Discussion & AnalysisThe financial statements and disclosures in the following concise financial report have beenderived from the 2001 Financial Report of Mackay Sugar Co-operative Association Limited. Acopy of the full financial report and auditor's report will be sent to any member, free ofcharge, upon request.

This discussion and analysis is provided to assist members to understand the concise financialreport.

Statement of Financial PerformanceThe net loss after income tax for 2000/01 was $14.3 million. This was $7.2 million below theprevious year's result.

A significant milling loss was incurred as a result of continuing low sugar prices and adisastrous crop of only 4.663 million tonnes.

The refining business in Australia recorded a decrease in profitability due to increased rawsugar prices and increased competition in the domestic market. New Zealand SugarCompany's earnings were also down slightly.

The overall result would have been much worse except for the allocation of shares in SugarTerminals Limited (STL) which decreased the loss by $19.7 million.

RevenueThe price paid by Queensland Sugar Limited for the 2000 crop was $253.00 per tonne,slightly below the price of $254.50 per tonne for the previous season.

As a result of a smaller crop, operating revenue was down $89.0 million to $167.1 million.

CostsMill operating costs were reduced as a result of the disastrous crop. As well, a decision wasmade to reduce costs through a voluntary redundancy and early retirement scheme, whichreduced full-time employee numbers by approximately 20 percent.

Whilst incurring significant costs, the benefit of the reduction will flow through to futureyears.

Statement of Financial PositionAssets increased by $4.8 million to $491.6 million, mainly due to the inclusion of STL sharesoffset by a reduction in cash. Liabilities increased by $19.0 million to $141.1 million becauseof increased borrowing.

Statement of Cash FlowsCash outflows from operating activities increased by $19.1 million to a deficit of $19.3 milliondue mainly to a decrease in profit. Cash outflows from investing activities reduced by $13.1million to $5.3 million.

A $20 million asset purchase facility and a $5 million overdraft facility were drawn downduring the year. The only other movement from financing activities was a $5.6 millionreduction in Interest Bearing Deposits.

Loans of $6.7 million were provided to shareholders to facilitate planting and computerpurchases. The end result was that cash on hand reduced by $11.9 million to $11.0 million.

Net debt increased by $24.6 million to $100.2 million. The ratio Net Debt : Members' Equityincreased to 28.6 percent.

17

Concise Financial Report

Statement of Financial Performancefor the year ended 30 June 2001

Note 2001 2000$'000 $'000

Sales 156 272 240 042Cane purchases and allowances (98 460) (153 508)

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

Gross Profit 57 812 86 534Other revenues 2 3 604 3 411Maintenance (27 786) (32 462)Operating (21 203) (25 479)Overheads (28 891) (28 470)Borrowing expenses (6 389) (4 269)Depreciation (17 082) (16 479)Share of net profits of associates and jointventures accounted for using the equity method 5 986 10 110

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

Profit (Loss) from ordinary activities (33 949) (7 104)and before income tax

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

Profit (Loss) before income tax (14 285) (7 104)

Income tax attributable to operating profit - ----------------------------------------- --------------------------------------

Net Profit (Loss) after income tax (14 285) (7 104)---------------------------------------- --------------------------------------

The accompanying notes form part of this concise financial report.

18

Concise Financial Report

Statement of Financial Positionas at 30 June 2001

2001 2000$'000 $'000

ASSETSCurrent AssetsCash 11 029 22 972Receivables 11 276 13 308Inventories 10 198 10 463Other 23 48

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

Total Current Assets 32 526 46 791---------------------------------------- --------------------------------------

Non-Current AssetsReceivables 7 162 376Property, plant and equipment 357 414 369 417Investments accounted for using the equity method 92 977 68 256Intangibles 1 527 2 012

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

Total Non-Current Assets 459 080 440 061---------------------------------------- --------------------------------------

TOTAL ASSETS 491 606 486 852---------------------------------------- --------------------------------------

LIABILITIESCurrent LiabilitiesAccounts payable 14 763 12 974Interest Bearing Liabilities 81 989 52 629Provisions 3 215 3 857

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

Total Current Liabilities 99 967 69 460---------------------------------------- --------------------------------------

Non-Current LiabilitiesAccounts payable - 250Interest Bearing Liabilities 36 000 46 000Provisions 5 122 6 340

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

Total Non-Current Liabilities 41 122 52 590---------------------------------------- --------------------------------------

TOTAL LIABILITIES 141 089 122 050---------------------------------------- --------------------------------------

NET ASSETS 350 517 364 802---------------------------------------- --------------------------------------

MEMBERS' EQUITYShare capital 1 1Asset revaluation reserve 169 625 169 625Retained earnings 180 891 195 176

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

TOTAL MEMBERS' EQUITY 350 517 364 802---------------------------------------- --------------------------------------

The accompanying notes form part of this concise financial report.

19

Concise Financial Report

Statement of Cash Flowsfor the year ended 30 June 2001

2001 2000$'000 $'000Inflows Inflows

(Outflows ) (Outflows)

Cash flows from operating activities

Receipts from sugar sales and other sales 158 240 238 127Payments to members for cane supplied (101 061) (170 022)Payments to suppliers and employees (74 626) (86 966)Distributions received from associated entities 927 19 546Interest received 1 194 2 534Other revenue 3 604 3 411Interest paid (7 583) (6 789)

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

Net cash used in operating activities (19 305) (159)---------------------------------------- --------------------------------------

Cash flows from investing activities

Payments for property, plant and equipment (5 631) (18 686)Proceeds on sale of property, plant and equipment 354 336

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

Net cash used in investing activities (5 277) (18 350)---------------------------------------- --------------------------------------

Cash flows from financing activities

Increase in borrowings 25 000 - Increase in growers’ loans (6 721) -Decrease in unsecured deposits (5 640) (9 404)

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

Net cash provided by (used in) financing activities 12 639 (9 404)---------------------------------------- --------------------------------------

Net decrease in cash held (11 943) (27 913)Cash at 1 July 2000 22 972 50 885

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

Cash at 30 June 2001 11 029 22 972---------------------------------------- --------------------------------------

The accompanying notes form part of this concise financial report.

20

Concise Financial Report

Notes to the Concise Financial Report for the year ended 30 June 2001

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 2001 2000$’000 $’000

Operating RevenueSales 156 272 240 042Interest received - other 1 194 2 534Share of associated companies operating profit 2 983 3 138Share of Joint Ventures operating profit 3 003 6 972Other revenue 3 604 3 411

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

167 056 256 097

Non-operating RevenueProceeds on sale of non-current assets 354 336

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

167 410 256 433---------------------------------------- --------------------------------------

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 2001, 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-seventh day of September, 2001.

21

Auditor’s Report

22

27 September, 2001

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 2001 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 2001. 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

Glossary

23

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 process. It is a brown viscous syrup and isused 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.

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

Factory OperationsEungella Road, Pleystowe, via Mackay

PO Box 5720, Mackay Mail Centre, Queensland 4741Phone (07) 4953 8312

Facsimile (07) 4953 8590

Cane SupplyEungella Road, Pleystowe, via Mackay

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

Facsimile (07) 4953 8590

24

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