fpq annual report 2008-09 - queensland parliament · 2009. 10. 19. · fpq annual report 2008-09 5...

Forestry Plantations Queensland Forestry Plantations Queensland Office

Annual Reports 2008-09

Profitable sustainableplantation forests

About these annual reportsForestry Plantations Queensland (FPQ, the “Corporation”) was established on 1 May 2006 under the Forestry Plantations Queensland Act 2006 to manage Queensland’s state-owned softwood and hardwood forest plantations.

The Forestry Plantations Queensland Office (FPQO, the “Office”), a public service office under section 21 of the Public Service Act 2008, was also established on 1 May 2006 (under the former Public Service Act 1996) as a provider of forest plantation management services to FPQ. FPQO also has custodial responsibility for State Plantation Forests, a category of State Forest used for plantation production.

Both entities report to the same two Queensland Government Ministers. These Ministers are titled “responsible Ministers” in the case of FPQ and “administering Ministers” for FPQO. At 30 June 2009, these Ministers were Queensland Treasurer and Minister for Employment & Economic Development, the Hon. Andrew Fraser MP; and Minister for Primary Industries, Fisheries and Rural & Regional Queensland, the Hon. Tim Mulherin MP.

This document includes the annual reports for FPQ and FPQO for the 2008-09 financial year and reports on performance and achievements against FPQ’s Operational Plan for 2008-09. The Operational Plan is an annual performance contract with FPQ’s responsible Ministers as required under the Forestry Plantations Queensland Act 2006 and is a key part of the governance framework for the Corporation. The Operational Plan also sets out FPQ’s operational and financial targets and performance criteria; and outlines performance targets for FPQO. In their annual reports, FPQ and FPQO respond to performance criteria taken from the Operational Plan, listing performance against each criterion.

The FPQ and FPQO annual reports comply with Queensland’s Financial Administration and Audit Act 1977 and Financial Management Standard 1997 and, for FPQ, the Forestry Plantations Queensland Act 2006. They also comply with the Queensland Government’s Annual Report Guidelines for Queensland Government Agencies.

Photographs: Front and back cover: Exotic Pine, Toolara Nursery

Inside cover: Danbulla State Plantation Forest

Page 1: Top photos, Toolara Nursery; bottom, hoop pine seedlings

Page 3: Danbulla State Plantation Forest

Page 9: View from Kelly fire tower, Toolara State Plantation Forest

Page 11: Beerburrum State Plantation Forest

Page 14: Toolara State Plantation Forest

Page 18: Exotic pine, Toolara Nursery

0: Hoop pine, Imbil State Plantation Forest

Page 22: Hardwood plantation

Page 24: Loading exotic pine

Page 28: Hoop pine, Imbil State Plantation Forest

Page 68: Toolara forestry office and depot, hoop pine pruning

Page 69: Human Resource Director Paul Davey

FPQ Annual Report 2008-09



Letter of complianceThe Hon Andrew Fraser MPQueensland Treasurer and Minister for Employment & Economic DevelopmentGPO Box 611 BRISBANE QLD 4001

The Hon Tim Mulherin MPMinister for Primary Industries, Fisheries and Rural & Regional Queensland GPO Box 46BRISBANE QLD 4001

Dear Ministers

I am pleased to present the 2008-09 Annual Reports for Forestry Plantations Queensland and Forestry Plantations Queensland Office.

I certify that these Annual Reports comply with:

• the prescribed requirements of the Financial Accountability and Audit Act 1977 and the Financial Management Standard 1997, and

• the detailed requirements set out in the Annual Reporting Guidelines for Queensland Government Agencies.

A checklist outlining the annual reporting requirements can be accessed at http://www.premiers.qld.gov.au/publications/assets/annual-report-guidelines-2008-2009.doc.

Yours sincerely

Dr Warren Hoey Chief Plantation Forestry Officer - Forestry Plantations QueenslandChief Executive - Forestry Plantations Queensland Office

CONTENTS

4 About FPQ5 Advisory Board Chair’s message6 Key achievements 2007–087 Performance summary8 Chief Executive’s report9 FPQ in profile11 Corporate Governance14 Business performance

17 Corporation performance18 Exotic pine20 Hoop pine22 Hardwoods24 Technical Services28 Business Services30 Scientific names and glossary31 FPQ financial statements




About FPQFPQ’s core business is the commercial management of Queensland’s state-owned plantation assets, including:

• Exotic pine plantation forests• Hoop pine plantation forests• Hardwood plantation forests.

The Queensland Government established FPQ to enhance the competitiveness and commerciality of its state-owned plantation assets and thereby underpin a robust and competitive timber processing sector in the state.

FPQ’s business objectives

To operate as a responsible commercial plantation forest manager and maximise the market value of its assets consistent with:

• Best practice principles for sustainable plantation forest management

• The directions of its responsible Ministers• The operation and financial parameters of its

Operational Plan• The Queensland Government’s commitments for

hardwood plantations.

FPQ’s core values

In achieving its business objectives, FPQ seeks to deliver commercial, social and community outcomes consistent with being a good corporate citizen. In so doing, the Corporation is guided by its core values, including:

• Sustainable Growth. Growing through business synergies and commercial partnerships

• Professionalism and Responsibility: Acting with integrity in dealings with stakeholders

• Delivering Value: Setting high standards for financial performance and delivering value to customers and stakeholders

• Leadership, Learning and Innovations: Creating positive change, building business expertise and embracing challenges and opportunities

• Relationships: Building trust, teamwork and effective communication.


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It is my pleasure to introduce FPQ’s Annual Report for 2008-09, representing the Corporation’s third full year of trading.

FPQ, like most other businesses around the globe, has been marked by ongoing weakness in economic activity and a drop in revenue and sales. FPQ has met the challenge presented by these market conditions, increasing efficiencies and reducing overheads and expenditure. This has enabled FPQ to maintain a trading surplus, while strengthening the Corporation to emerge from current conditions as a more effective and sustainable organisation.

While financial news may have dominated the headlines for the year, FPQ has continued to achieve its community, social and environmental targets. The Corporation has successfully introduced its Visitor Management Strategy to balance the role of its commercial plantation estate as both an industrial workplace and an arena for recreation. FPQ has also had its operations successfully re-accredited by independent auditors as meeting the requirements of the Australian Forestry Standard. This re-certification is proof that FPQ has not only maintained a

high standard of forest management since formation, but has continued to improve its practices in line with community expectations for forest managers.

On behalf of the FPQ Advisory Board, I would like to congratulate all members of FPQ for their efforts in affecting business change and improvement throughout the year, and recognise their commitment to building a stronger and more sustainable organisation in which to work. I know I speak for all Board members when I say that I continue to be impressed by the calibre, loyalty and dedication of staff and their enthusiasm for transforming the Corporation to a modern and efficient forest grower.

I would, for my own part, also like to recognise the contributions of my fellow Board members. The Advisory Board has applied its considerable business, community and environmental expertise to lead the successful reform of this enterprise, improving both current commercial returns and the overall value of the business. The full worth of this effort should be recognised as we look ahead to further reform of the state’s plantation growing interests and the eventual sale of FPQ.

Finally, I would like to thank FPQ’s responsible Ministers, the Honourable Andrew Fraser MP, Treasurer and Minister for Employment & Economic Development, and the Honourable Tim Mulherin MP, Minister for Primary Industries, Fisheries and Rural & Regional Queensland. The achievement of the Government’s expectations for FPQ, and the delivery of a more effective, open and competitive plantation sector in Queensland could not be achieved without the Ministers’ ongoing support.

The Honourable Con Sciacca AOChair, FPQ Advisory Board1

1Mr Sciacca resigned as Chair of the FPQ Advisory Board in August 2009.


Key achievements for FPQ and FPQO in 2008-09 included:

Product

• 1.55 million cubic metres of plantation timber removals (2007-08: 2.06 million cubic metres; 2006-07: 1.98 million cubic metres)

• 6,613 hectares of additional land secured for exotic pine and hardwood plantations (2007-08: 7,003 hectares; 2006-07: 2,415 hectares)

• $2.2 million invested in development and innovation to improve the quality, productivity, cost-effectiveness and ongoing sustainability of FPQ’s plantations (2007-08: $2.5 million; 2006-07: $2.9 million)

Financial

• $72.4 million in timber sales (2007-08: $93.8 million; 2006-07: $84.1 million)

• $11.2 million trading surplus (2007-08: $29.6 million; 2006-07: $13.5 million)

• $3.3 million dividend to be paid to Queensland Treasury (2007-08: $13.4 million; 2006-07: $5.4 million)

Environment

• 6.4 million trees planted (2007-08: 5.8 million trees; 2006-07: 6.4 million trees)

• Independent audit in June 2009 confirmed FPQ’s ongoing certification to the Australian Forestry Standard to July 2011

• $50,000 provided to industry to assist with Australian Forestry Standard Chain of Custody certification for timber products

Community

• 176 State Plantation Forest visitor permits issued (2007-08: 176 visitor permits)

• The Pumicestone catchment, in which FPQ is the major land manager, was jointly rated south-east Queensland’s healthiest catchment by the SEQ Healthy Waterways Partnerships “Report Card 2008”.

• Visitor Use Strategy implemented to manage legitimate visitation to State Plantation Forests and interaction with commercial activities.

Our people

• A new Enterprise Agreement, providing pay increases and training allowances. ratified on 24 March 2009, current to 31 October 2011

• Second student intake of FPQO’s Diploma of Management, delivered by the Royal Melbourne Institute of Technology, complete their studies

• FPQO Health Incentive Scheme accessed by 64 per cent of staff (2007-08: 63 per cent; 2006-07: 90 per cent) with significant improvements in individual health assessments

• Injury and incident reports reduced by 35 per cent on 2007-08 reports.

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Financial measures

Operating surplus / (deficit) after income tax equivalents1$3.5M $85.5M ($28.2M)

Trading surplus (after interest and before tax and revaluation, treating sales as income)2

$11.2M $29.6M $13.5M

Proceeds from plantation timber removals (excluding miscellaneous forest products)

$72.4M $93.8M $84.1M

Dividend payable from the year's trading3$3.3M $13.4M* $5.4M

Current ratio 8.3 3.9 7.0

Product measures

Softwood plantation establishment 6,110 ha 5,646 ha 6,541 ha

Hardwood plantation establishment 1,664 ha 1,503 ha 1,279 ha

Plantation timber sales 1.55M m3 2.06M m3 1.98M m3

Environmental measures

Sound Practice Indicator (SPI) passes496% 95% 97%

Sustainable Forest Management System external audit non-compliances

3 6 1

Community measure

Visitor permits issued 176 176 106

Staff measures

Lost time injuries per million work hours 19.78 26.20 44.88

Employee safety – average days lost due to injury 8.79 14.9 10.5

1 Includes the increment in the net market value of growing timber in plantations (partially unrealised) in accordance with Australian Accounting Standard (AASB) 141 Agriculture.2 Represents the surplus from trading operations during the year before tax and excluding the unrealised increment/decrement in the value of standing plantation assets.3 Dividends are normally paid to Queensland Treasury in the year following the trading year for which they are declared. *The 2008-09 dividend included a $2.8M adjustment to the 2007-08 dividend.4 To check compliance with set environmental and other procedures and outcomes, FPQ uses a Sound Practice Indicator (SPI) and checklist system covering plantation forestry field operations from plantation tending to harvest management.


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In last year’s annual report I reflected upon the likelihood of a slowing building and construction market and the potential for a “moderation” in timber sales as a result. The market downturn we have witnessed since then has proven anything but moderate. Latest available data1 point to a 44 per cent decline in Queensland housing commencements during the first quarter of 2009 compared with the same period in 2008. The housing construction industry is a key end user of FPQ’s plantation timber products, which are predominantly sawn into structural timber products for domestic use.

In 2008-09, these market conditions have impacted upon FPQ and its customers. FPQ has suffered a decline in both timber removals and sales income, with direct impacts upon earnings and profitability for the year. At the same time, FPQ has extended its support for customers throughout the downturn. This support has included deferring the application of price reviews and assisting customers target plantation areas and resources for harvest that assist customer strategic and market planning.

I also reflected upon the various business reforms that have been made since the formation of FPQ, and that the full value of these would be realised during tough times. The year has proven this to be a modest reflection on FPQ as well. The year has been a successful one in terms of delivering increased business efficiency and ongoing cost reductions. These achievements have enabled FPQ to maintain a trading surplus and deliver returns to owners. At the same time the business has been strengthened on a number of fronts:

• Expanding its output capacity with the expansion of its plantation estates • Building new business systems to operate as a stand-alone enterprise• Adopting operational practices to meet commercial benchmarks, exemplified by the recent review and

overhaul of FPQ’s clonal forestry and research and development programs.

The successes and progress of FPQ owes much to a successful partnership with the Corporation’s Advisory Board and to the leadership and support of the Board’s Chair, the Honourable Con Sciacca AO. During the year, the Queensland Government implemented an “Independent Review of Queensland Government Boards, Committees and Statutory Authorities”. The review found FPQ’s Advisory Board to be “essential, effective and well balanced”, a finding with which I agree. The outstanding commitment of the Advisory Board was key to meeting the various challenges of the year and providing the Corporation with a strong basis for meeting next year’s challenges as a stronger and more capable organisation.

While the threat of further declines in economic conditions appears to be abating, it is likely that market conditions will remain subdued for the year ahead. FPQ will continue to focus on increasing its operational efficiency and continue to review performance against commercial benchmarks. These ongoing reforms will strengthen FPQ’s capacity to withstand market cycles and other business demands while maintaining profitability. While we continue to operate and improve the Corporation, we will also be working with the Queensland Treasury and other stakeholders to realise the State Government’s commitment for the sale of FPQ. This sale will mark the coming of age for the State Plantation business, and herald the maturity and competitiveness of the Queensland plantation timber industry.

I also take this opportunity of thanking FPQO staff for their dedication, enthusiasm and professionalism that has enabled FPQ to achieve a reasonable performance outcome in what has been a decidedly difficult year for the industry.

Dr Warren HoeyChief Plantation Forestry Officer1Australian Bureau of Statistics. Number of dwelling units commenced in Queensland for the quarter ending March 2009 (A401479X). Comparison is made against the number of commencements in the quarter ending March 2008.


FPQ’s core business is the commercial management of state-owned exotic pine, hoop pine and hardwood sawlog plantation assets.

At 30 June 2009, FPQ managed more than 211,000 hectares of plantation lands2. Ninety-five per cent of these plantations are established with softwoods with the remainder being allocated to hardwood plantation production.

FPQ has its corporate office in South Brisbane and has regionally located centres along Queensland’s eastern seaboard as follows:

• Exotic pines –

• Beerburrum Forest Management Area (FMA) at Beerburrum, Passchendaele (near Stanthorpe) and Pechey (near Crows Nest)

• Fraser Coast FMA at Toolara (near Gympie),

Tuan (near Maryborough) and Elliott River (near Bundaberg)

• Capricorn FMA at Byfield (near Yeppoon)

• Ingham FMA at Ingham and Atherton.

• Hoop pine –

• Mary Valley FMA at Imbil, Brooyar (near Kilkivan), Jimna and Gallangowan

• Burnett FMA – Yarraman and Kalpowar (near Monto).

• Hardwood plantations –

• Aggregations of plantations around Kingaroy and

Wondai, near Gayndah and Mundubbera, and smaller areas between Beerburrum and Gympie.

FPQ operates plantation nurseries at Beerburrum, Toolara and Ingham, providing seedlings for the majority of the Corporation’s planting needs.

The forest and timber industry

FPQ supplies three-quarters of log timber used each year by Queensland’s plantation timber industry.

The Corporation has an established customer base that purchases and processes plantation products in Queensland, mostly for the Queensland domestic market. FPQ estimates its plantations directly and

2 Includes areas of fallow plantation lands acquired as at 30 June 2009 and as yet unplanted; and plantation not currently included for asset valuation purposes.

FPQ in profile


indirectly support some 6,000 jobs throughout the state, comprising 2,500 jobs in the plantation growing and timber processing sectors; 1,500 jobs in secondary processing and support services; and a further 2,000 jobs that are dependent upon consumption expenditure in the sector. In addition, these industries record direct turnover (essentially a measure of the industry’s total sales) in the order of $1 billion and add some $0.5-0.7 billion in value to timber products produced in the state.

In addition to underpinning significant commercial investment, FPQ’s plantations give rise to a range of landscape and environmental benefits and additional carbon sequestration, grazing, beekeeping and

recreation opportunities.

Like almost all business during 2008-09, Queensland’s plantation timber industry suffered because of the global economic downturn. In Queensland, the number of new dwellings being built was severely reduced. This has impacted upon demand in the residential building industry, the sector that is the main consumer of structural timber, the key product that drives both FPQ’s and sawlog processors’ income. As a consequence FPQ’s plantation timber sales were much reduced and much of the timber which was scheduled for harvest remained standing in the forest estate.

FPQ in profile

Ingham

Capricorn

Burnett

Beerburrum

Mary Valley

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KINGAROY

PROSERPINE

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PECHEY

BYFIELD

YARRAMAN

ATHERTON

CARDWELL

PASSCHENDAELE

KALPOWAR

Exotic Forest Management Area

Hoop Forest Management Area

0 100 200 300 400 50050

Kilometres

Fraser Coast

BRISBANE

KILKIVAN

BUNDABERG

STANTHORPE

PALEN CREEK

TUAN

JIMNAGYMPIE

BEERBURRUM

MARYBOROUGH

Forest Management Areas


FPQ’s Chief Executive (the holder of the Statutory position referred to in the Forestry Plantation Queensland Act 2006 as the Chief Plantation Forestry Officer) is Dr Warren Hoey. Dr Hoey chairs a monthly formal executive meeting that is attended by the executive team. A weekly informal executive meeting is also held to oversee FPQ operations, ensure the effective implementation of FPQ’s Operational Plan and respond to emergent challenges and opportunities in the sector.

Corporate structure

At 30 June 2009, FPQ’s senior management team comprised: Chief Executive – Dr Warren Hoey Deputy Chief Executive – Mr Garry Hannigan General Manager Business Services – Dr Tony Costantini General Manager Technical Services – Mr David West General Manager Exotics – Mr David SayerActing General Manager Hoop – Mr Michael RobinsonGeneral Manager Hardwood – Mr Leigh Kleinschmidt.

FPQ’s corporate structure at 30 June 2009 is detailed in the following table:

Business Services

Technical Services Exotic Pine Directorate Hoop Pine Directorate Hardwoods Directorate

• Legal• Business Support• Planning and

Strategy• Business

Development• Human Resources• Finance• Information and

Communications Technology

• Plantation Mapping and Resources

• Sustainability• Carbon• Engineering,

Fleet and Communications

• Visitor Management

• Risk Management• Plantation

Development and Innovation

• Beerburrum FMA• Fraser Coast FMA• Capricorn FMA• Ingham FMA• Nurseries

• Mary Valley FMA• Burnett FMA• Workshops

• Operations• Plantation

Development

Corporate governance


FPQ Audit and Risk Management Committee

FPQ has an Audit and Risk Management Committee, which meets quarterly or more frequently if required, reports directly to the Chief Executive, and has the necessary powers to:• monitor and advise on

• audits and associated plans• the effectiveness of internal control systems and

procedures • the operation of FPQ’s internal audit functions• statutory financial statement completeness and

compliance• the prevention and control of fraudulent activity• other matters as specified by the committee’s

terms of reference• ensure FPQ risks and their sources are successfully

managed• ensure the Corporation’s risk management program

is implemented and maintained.

The Audit and Risk Management Committee has seven members, three of whom are independent of FPQ management. The remaining four positions are held by FPQ executive members. Representatives of FPQ’s internal audit team and Queensland Audit Office (QAO) attend each meeting. In addition to providing the Chief Executive with advice on audit, risk management and other governance issues, the committee provides assurance to the FPQ Chief Executive regarding the certification of the Corporation’s annual financial statements.

Identified audit issues are resolved internally, or through consultation and negotiation with Queensland Treasury, QAO or other relevant experts as necessary. No material issues arose during 2008-09.

FPQ regulatory compliance

The Corporation has continued its rollout of its electronic document and records management system (eDRMS), and associated best practice tools and guidelines, during 2008-09. This system, in addition to documented procedures and staff awareness training, ensures that FPQ meets recordkeeping responsibilities under the Public Records Act 2002. The eDRMS system was available at all major FPQ locations at 30 June 2009, with the exception of some more remote centres that were expected to be online by August 2009.

FPQ’s Policies and Procedural Framework also incorporates revised and new business standards that meet the Corporation’s compliance with the Queensland Government’s Information Standard IS 40 – Recordkeeping. The Corporation also employs its Queensland State Archivist-approved Disposal Authority for FPQ Functional Records.

FPQ Advisory Board

An FPQ Advisory Board was appointed by the Corporation’s responsible Ministers on 1 March 2007 for a term of three years. The Advisory Board meets approximately every six weeks, or more frequently if required, to provide strategic guidance on key FPQ business and issues and oversee the Corporation’s commercial activities. Nine Advisory Board meetings were held during 2008-09.

Consistent with the Forestry Plantations Queensland Act 2006 and the terms of the responsible Ministers’ appointment of the Advisory Board, the Board has been delegated the strategic, leadership, risk management and accountability responsibilities needed to shape the commercial management of the Corporation.

Advisory Board member profiles

The FPQ Advisory Board has five members, at 30 June 2009 being:

• The Hon Con Sciacca AO (Chair) – providing specific expertise in business, legal, government and community

• Adjunct Professor Joan Sheldon AM – providing specific expertise in business, government, management and community

• Mr Warwick Marler – providing specific expertise in business, legal and commercial

• Mr Bill Brett – providing specific expertise in business, timber industry, housing and development industry and commercial

• Professor Ian Lowe AO – providing specific expertise in academia, environment, government and community.

Advisory Board governance

The FPQ Advisory Board has a Board Charter and Code of Ethics to guide members’ activities and corporate governance practices.

The Advisory Board also has two subcommittees: • An Audit and Risk Management Subcommittee,

comprising Mr Marler and Adjunct Professor Sheldon. This committee represents the Advisory Board’s interests to the FPQ Audit and Risk Management Committee.

• A Business Strategy Subcommittee has representation from two board members, Professor Lowe and Mr Brett.

Four Audit and Risk Management Subcommittee meetings and five Business Strategy Subcommittee meetings were held during 2008-09.



Advisory Board costs

Remuneration for the Advisory Board Chair is $41,080 per annum. The remaining four Advisory Board members each receive $19,760 remuneration per annum plus a supplement of $4,160 for participation on subcommittees, or $5,720 if they chair a subcommittee. Remuneration for Advisory Board members, including their participation on subcommittees, is detailed at Note 20 in FPQ’s financial statements. Total Advisory Board costs (remuneration plus travel and meeting expenses) from 1 July 2008 to 30 June 2009 were $149,396.

Committee costs

The Advisory Board’s Business Strategy and Audit and Risk Management subcommittees and the FPQ Audit and Risk Management Committee incurred no costs during 2008-09, save for remuneration to Advisory Board members as detailed.

Sale of FPQ

On 2 June 2009, the Queensland Government announced its intention to undertake a significant asset sale program. The Infrastructure Investment (Assets Restructuring and Disposal) Act 2009 was then passed by State Parliament to facilitate the restructure and disposal of particular businesses, assets and liabilities of government entities. The Act grants extensive powers to the Minister (in this case, the Treasurer) to direct the restructuring, disposal or other processes necessary for the sale program with respect to “declared projects”. Under section 5(1)(f ) of the Act the disposal of all or part of the businesses, assets and liabilities of FPQ is a “declared project”. The sales process will be led by a sales team headed by Queensland Treasury. The sales team will work out specific details of the sale and undertake a detailed vendor due diligence process.

The sale of FPQ includes only the sale of standing plantation timber and infrastructure related to its management. It does not include State Plantation Forest lands, which the Government has indicated will remain in state ownership. A further condition of sale is that recreation in State Plantation Forests will continue. Other matters associated with the sale, such as beekeeping access and permitting arrangements will be considered as part of the sale due diligence process. The Government is also seeking specialist advice as to whether the sale of FPQ will include hardwood plantations. If the hardwood plantations are included, it will be a condition of sale that commitments under the Government’s Western Hardwoods Plan (which undertakes to have 20,000 hectares of hardwood plantations growing by 2015) will be honoured by any purchaser.



The global economic downturn

The global economic downturn of 2008-09 had a significant impact on both growers and processors in plantation forestry industries across the globe. In Queensland, it severely reduced the number of new residential dwellings being built. This sector of the building industry is the main consumer of structural timber that is the end product driving both FPQ and sawlog processors’ income. New Dwelling Approvals in Queensland fell to around 1,425 units in January 2009 before increasing to approximately 2,390 units in June 2009, still well below the long-term monthly average of around 3,000 units3.

As a consequence, by 30 June 2009 FPQ’s harvest volumes were down to 80 per cent of forecast, with operating income $25.2 million below budget and $21.0 million below operating income for 2007-08. These reductions were partially offset by operational savings, with expenditure at 30 June 2009 being $8.0 million below budget, due to efficiency improvements and reduced field operations.

FPQ’s income was reduced to less than 80 per cent of forecast values, as customers sought to take advantage

of less affected landscape timber markets by milling cheaper, lower quality logs. During the economic downturn, processors managed reduced sawlog inputs into their mills and avoided wholesale staff retrenchments by managing overtime, scheduling maintenance and managing staff leave. Importantly, mills tried to provide continuity of work for their harvesting and haulage contractors so this important contractor capacity was not lost from the market when it recovers.

Timber industry support

FPQ has supported, and continues to support, the economic and community benefits of a strong competitive regional timber processing sector. To this end, during 2008-09 FPQ invested significant funds and made significant efforts to protect and grow the competitiveness of the plantation processing sector, including:

• Maintaining Australian Forestry Standard Environmental Certification of its sustainable plantation management and investing $50,000 in Chain of Custody certification for processors

• Investing $2.2 million in development and

3Source: Australian Bureau of Statistics. Total number of New Dwelling Unit approvals in Queensland. Data series A422366V

Business performance


innovation to improve wood properties and plantation productivity (see below)

• Investing $15.4 million to acquire 6,613 hectares of new land to expand the plantation estate

• Delivering more than 11,000 hectares of new eucalypt sawlog plantations under the Queensland Government’s South East Queensland Forests Agreement and Western Hardwoods Plan. FPQ will have established 20,000 hectares of these plantations by 2015

• Deferring price increases that were due under some supply contracts with processors

• Undertaking harvest scheduling to meet specific requirements of processors.

Removals

During 2008-09, 1.55 million cubic metres of plantation timber were harvested from FPQ’s plantation forests, a decrease of almost 25 per cent on 2007-08’s total of 2.06 million cubic metres.

The 2008-09 total (compared with the 2007-08 total) included:

Financial

FPQ achieved timber sales of $72.4 million in 2008-09, a decrease of 23 per cent on the previous financial year. Operating expenses, including interest, for 2008-09 were $72.6 million, a decrease of 2.5 per cent on the previous year. FPQ’s trading surplus (before income tax equivalents), or the surplus of timber sales plus non-timber income over expenses, was $11.2 million, a significant decrease on the $29.6 million for the previous financial year. This reflected the similarly significant decrease in harvest volumes and income from timber sales due to the global economic downturn. FPQ’s responsible Ministers approved a dividend of $3.3 million be paid to Queensland Treasury during 2009-10 based on the Corporation’s 2008-09 trading performance.

Plantation establishment

FPQ planted a total of 7,774 hectares of plantations in 2008-09. Of the 2008-09 total:

• 5,338 hectares of exotic pine were planted on new lands and recently harvested lands (an 8.5 per cent increase on 2007-08’s total of 4,919 hectares)

• 772 hectares of hoop pine were planted on new lands and recently harvested lands (a 6.1 per cent increase on 2007-08’s total of 727 hectares)

• 1,664 hectares of hardwoods were planted on newly acquired lands (a 10.7 per cent increase on 2007-08’s total of 1,503 hectares).

The Corporation planted an estimated 6.4 million trees in 2008-09 (compared with 5.8 million planted in 2007-08).

Land acquisition

In line with FPQ’s commitment to facilitate timber industry growth and competitiveness by expanding Queensland’s plantation forests, during 2008-09 the Corporation acquired 6,613 hectares of new plantation lands for a total investment of $15.4 million.

Capital investments

FPQ made $22.0 million in capital investments during 2008-09. The largest component of this was $15.4 million for land acquisition, land improvements and plantation acquisitions for the Corporation’s expanding softwood and hardwood plantations.

Capital investments for 2008-09 (compared with 2007-08) included:


Capital investments 2008-09 2008-09

Buildings and improvements $175,124 $268,000

Computer hardware and software, furniture and fittings

$2,056,915 $540,000

Heavy plant $973,262 $1,290,000

Land, land improvements and plantation acquisitions

$15,434,892 $20,206,000

Motor vehicles $2,529,070 $295,000

Office equipment and amenities $83,464 $156,000

Plant and equipment $212,576 $2,776,000

Road construction $513,697 $106,000

Total $21,979,000 $25,637,000

Exotic Pine 2008-09 2007-08Sawlog 0.91M m3 1.26M m3

Pulp wood 0.20M m3 0.27M m3

Round wood 0.05M m3 0.07M m3

Hoop Pine 2008-09 2007-08Sawlog 0.36M m3 0.42M m3

Pulp wood 0.03M m3 0.03M m3


Research and development

During 2008-09, FPQ invested $2.2 million on plantation development and innovation and associated technical services to improve its commercial plantation performance and sustainability (compared with $2.5 million in 2007-08). This investment is focused on the Corporation’s plantation products: exotic pine, hoop pine and hardwood plantations. FPQ’s development and innovation activities supported the Corporation’s sustainable plantation management systems, specifically in areas of “low input” plantation silviculture, fire protection, water quality, chemical use and pest and disease protection. FPQ initiated an extensive review of its exotic clonal program during 2008-09, resulting in this program’s rationalisation and subsequent closure of the Corporation’s tissue culture facility in Gympie (see page 27).

Beerburrum office and nursery relocation

FPQ continued to assist a number of state government bodies in 2008-09 with planning associated with the proposed Caboolture-Landsborough rail and road upgrade. When it proceeds, this upgrade will impact on the entire Beerburrum forestry office complex and a large part of the Beerburrum Nursery. From 2007-08, FPQ began planning for replacement office facilities and during 2008-09 has scaled back the production of exotic pine at the Beerburrum nursery with a corresponding increase at the Toolara Nursery near Gympie.

Travel

International

Official overseas travel for FPQO staff, working for FPQ under a Work Performance Agreement (see page 71), is included in FPQ’s Operational Plan and requires the approval of FPQ’s responsible Ministers. No overseas travel was undertaken by FPQ or FPQO staff in 2008-09.

Domestic

FPQ expended $516,100 on domestic travel during 2008-09, including payments for airfares, accommodation, meals, taxis and private vehicle mileage, but excluding vehicle hire. This amount included domestic airfare expenditure of $73,113.

Corporate entertainment and hospitality

FPQ is required to report on corporate entertainment and hospitality over $5,000 undertaken during the

year in review. It is mandatory to provide details in the table as shown.

For FPQ, there were no corporate entertainment and hospitality events costing more than $5,000 during 2008-09.

ConsultanciesConsultancy services paid by FPQ during 2008-09 totalled $14,932 (excluding GST), as detailed below:

Outlook for 2009-10

A recovery in Queensland plantation timber industry sales is largely dependent upon a recovery in building activity. Towards the end of 2008-09 there were early signs of an overall improvement in this sector and an improving outlook for the economy in general. Although improving, it remains that a return to the record building levels of 2006 to 2008 is unlikely in the near future. The Queensland and Federal governments’ various support packages for first home buyers and social housing and infrastructure have helped strengthen underlying demand in the Queensland plantation forestry sector during 2008-09 and are likely to continue to do so in the coming period.

In its Queensland Economic Review dated June 2009, the Queensland Treasury Office of Economic and Statistical Research (OESR) forecast that increased housing activity from these policy stimuli should translate into a recovery in new home construction in 2009-10. This will occur against a background where investment in other dwellings, particularly high rise complexes, was forecast to fall, partly weighed down by tighter credit conditions for commercial investors.

While there is a time lag in new dwelling construction increases resulting in increased uptake of FPQ’s plantation products, it can be reasonably expected that the Corporation, in whatever form it may take in the future, can expect strong growth from 2010-11.


Event Date Cost ($)Nil Not applicable Nil

Expenditure Description Number Total 08-09

Management

Review of FPQ’s research and development program

1 $14,932

Total $ 14,932


Corporation performance


FPQ contracts annually with its responsible Ministers to deliver its core operational program of growing and supplying plantation products, and reports progress against these in its quarterly reports and published annual accounts. In addition to delivering the core plantation program, responsible Ministers and FPQ agree to a number of business objectives for the Corporation each year. This section reports on the Corporation’s 2008-09 performance in the following program areas:

• Exoticpine• Hooppine• Hardwood• TechnicalServices• BusinessServices


FPQ’s exotic pine plantations are the mainstay of the Corporation’s business, providing the majority of plantation sales and economic returns. A large sawmilling and panel industry, located mostly in south-east Queensland, processes timber from these plantations into structural building products including plywood and sawn lumber products. Lower grade logs and processing residues are manufactured into reconstituted panel products or exported as woodchip.

Exotic pine plantations represent 73 per cent of FPQ’s plantation area and are comprised of slash pine (16 per cent), Caribbean pine (35 per cent), hybrids of slash and Caribbean pine (40 per cent) with the balance being a mixture of mostly radiata pine and loblolly pine.

Operational performance

Final crop removals, and hence sales income, were significantly lower than forecast. Meanwhile, FPQ’s pursuit of operational efficiencies, and favourable weather conditions that allowed for reduced fire preparedness expenditure, resulted in significant operational expenditure savings compared with budget. These significant cost savings were not sufficient to fully offset reductions in sales, and hence the overall trading surplus was significantly lower than expected.

The following exotic pine performance criteria were included in FPQ’s Operational Plan 2008-09:

Forecast OutcomeFinal crop removals: 1.3 million m3 0.9 million m3

Thinnings removals: 200,000 m3 253,409 m3

Area to be planted/re-planted: 5,291 ha 5,338 ha

Budget OutcomeSales income: $74.6 million $50.9 millionOperating expenditure: $42.6 million $38.0 millionOperating surplus: $32 million $12.9 million

Financial performance

Exotic pine


Results for operating expenditure and the number of hectares planted compare favourably with the 2007-08 financial year. Expenditure was reduced by 3 per cent ($38 million, down from $39 million), while the area planted was increased by around 8.5 per cent (5,338 hectares, up from 4,919 hectares). Sales of plantation timber were down significantly compared to the previous year, both in terms of cubic metres harvested (1.16 million, down from 1.6 million) and income ($50.9 million, down from $69.9 million).

Specific business objectives

Complete and implement Exotic Pine Sawlog General Value Review

The exotic pine sawlog five yearly General Value Review was determined in November 2008 and resulted in price increases of up to 4.1 per cent across supply zones. To assist FPQ’s customers during a period of difficult market conditions, all price increases and indexed price reviews from November 2008 were suspended until October 2009.

Drive efficiency improvements relating to the total cost of establishing and managing exotic plantations while still achieving acceptable quality standards

FPQ has achieved expenditure savings during 2008-09 by implementing a “low input” philosophy for its plantation establishment, developing silvicultural systems that take advantage of reduced inputs for operations such as site preparation and weed control. These have the dual benefits of being more cost-effective and reducing environmental impacts. FPQ’s silvicultural guidelines now encourage the use of “low input” methods, including the retention of planting mounds on second-rotation planting sites and revised weed control guidelines, greatly reducing the need for post-plant herbicide treatments. The Corporation is currently developing reporting processes for more timely measurement of expenditure savings and will be implementing these in 2009-10.

Review fire preparedness and management structures and implement recommendations

FPQ’s exotic pine product group took part in an extensive review of the Corporation’s fire preparedness and management structures, with a specialist’s report received in April 2009. Key recommendations will be implemented throughout 2009-10. (See page 27 for further details of this review).

Improve knowledge of existing and future plantation wood quality and evaluate impacts of genetics, environment and silviculture and suitability for various product applications

FPQ is conducting a Sub Tropical Pine project in conjunction with the Forest and Wood Products Association. The project will improve knowledge of existing and future plantation wood quality and evaluate impacts of genetics, environment and silviculture and suitability for various product applications. It is due for completion in August 2010. Interim reports are significantly contributing to knowledge of the current resource, as well as directing future assessments of wood quality and marketing opportunities.

Other

New sawlog agreement

FPQ and Mareeba Softwoods in north Queensland have been discussing the terms of a proposed new sawlog agreement since February 2008. Mareeba Softwoods Pty Ltd is seeking a sawlog supply contract for the company’s partially constructed mill at Mareeba. At 30 June 2009, FPQ and Mareeba Softwoods were jointly funding a study to evaluate optimum processing and marketing options for the new agreement that would provide an acceptable sawlog price for both parties.

Outlook for 2009-10

While recognising that the Queensland Government’s plan to sell FPQ to the private sector (see page 13) may impact on the Corporation’s initiatives, the organisation will continue to pursue operational efficiencies during 2009-10, particularly in relation to site preparation and plantation maintenance costs. FPQ will also continue to work with its timber processing customers to better understand their needs so both parties can extract a fair and equitable return from the business relationship.

Exotic pine


FPQ’s hoop pine resource represents 22 per cent of the Corporation’s total plantation area and supports a diverse processing sector producing high-grade plywood and sawn wood products for domestic and export markets, food-grade products and lower-grade sawn wood and residue material for domestic commodity products such as pallets, particleboard and export woodchip.


Forest product removals were lower than forecast, but not as subdued as other business areas. Hoop pine product performance is more strongly tied to renovation and wood component export markets than to new building construction. Although subdued, these markets remained relatively unaffected compared with the general economy. FPQ also achieved significant operational savings in this product and, as a result, the product trading surplus was only slightly down on forecast.

The following hoop pine performance criteria were included in FPQ’s Operational Plan 2008-09:

Forecast OutcomeFinal crop removals: 340,000 m3 325,403 m3

Thinnings removals: 110,000 m3 59,093 m3

Area to be planted/re-planted: 749 ha 772 ha

Budget OutcomeSales income: $25.1 million $22.8 millionOperating expenditure: $11.5 million $10.8 millionOperating surplus: $13.6 million $12.0 million


Hoop pine


Results for operating expenditure and the number of hectares planted also compare favourably with the 2007-08 financial year. Expenditure was reduced by 5 per cent ($10.8 million, down from $11.3 million), while the area planted was increased by around 6 per cent (772 hectares, up from 727 hectares). Sales of plantation timber were below the previous year, both in terms of cubic metres harvested (384,496 down from 451,930) and income ($22.8 million, down from $26.5 million).


Complete investigation of south-east Queensland hoop pine estate rationalisation options

The estate rationalisation project was completed, with the result that FPQ can now quantify productivity and profitability classes across its hoop pine estate.

Achieve and maintain prices equivalent to those achievable in a competitive market through a General Value Review process, reconfiguring north Queensland wood supply arrangements and completing a south-east Queensland thinning resource outlook report

FPQ successfully resolved issues relating to its 2007 hoop pine General Value Review in early 2009. It has also continued to conduct periodic price reviews, but in order to support processors during the market downturn, deferred the application of these. FPQ’s revised outlook for thinning grade material from south-east Queensland plantations has been completed and was followed by a round of industry consultation and offers of future resource sales. As a result FPQ has reached five year supply agreements with four customers.

Expand the application of low-impact residue retention site preparation techniques to very steep sites

Ongoing development of site preparation techniques in conjunction with accurate post-harvest residue mapping has allowed low input techniques to be applied to around half of very steep replanting sites. Improved employee safety as well as cost efficiencies have resulted from this project.

Develop response strategies to the escalating cost of herbicide

FPQ successfully reduced the quantity of herbicides applied by changing silvicultural practices and the mix of herbicides used to reduce the level of usage and offset the effects of rising herbicide prices.

Other

Fire tower

In late 2004, timber specialists from the former Department of Primary Industries and Fisheries reported significant internal decay in the legs of the timber Jimna fire tower with a likely decrease in its structural integrity. A further independent engineering report concluded the only option for retaining a fire tower at the site would be the demolition of the timber structure and the construction of a new structural steel tower.

Following an application seeking endorsement for the removal of the tower from the Queensland Heritage Register, the Queensland Heritage Council commissioned an independent review of the engineering reports, this review also confirming significant decay in the tower’s legs as well as in the upper structure and indicating that there could be other weak points as yet undetected. The Queensland Heritage Council then asked that the structure be stabilised rather than dismantled.

At 30 June 2009, FPQ was reviewing its commercial options for the tower, specifically alternative stabilisation options and associated maintenance schedules, which will require the approval of the Environmental Protection Agency. With the de-commissioning of the timber tower, FPQ erected an alternate lower cost video surveillance camera on a nearby steel mast to provide protection for its Jimna hoop pine plantation areas.

Outlook for 2009-10

The market for plantation hoop pine products should remain stable during 2009-10, supported through the economic downturn by continuing uptake of timber for housing refurbishment.

Hoop pine


FPQ’s major hardwood species are spotted gum and western white gum. Hardwood plantations account for approximately 5 per cent of the Corporation’s plantation area. Land for FPQ’s hardwood plantations is obtained mainly through freehold purchase by FPQ and through FPQ/landowner joint venture and land rental agreements.

Arising from the South East Queensland Forests Agreement Hardwood Plantation Program and the Western Hardwoods Plan, the Queensland Government committed to establishing 20,000 hectares of hardwood sawlog plantations by 2015. More than 11,000 hectares of these hardwood plantations had been planted by 30 June 2009.


During 2008-09, FPQ purchased 362 hectares of freehold land, with a further 426 plantable hectares secured through land rental agreements. This total represented an almost 50 per cent decrease on the 1,566 hectares of land acquired in 2007-08 and a 42 per cent decrease on

the 1,361 hectares of land acquired in 2006-07.

These land acquisition figures highlight the fact that, despite the economic downturn, land prices in the rural sector remain buoyant and it remains a challenge for FPQ to purchase suitably priced and available freehold land. During 2008-09, a number of land rental opportunities were frustrated by tightened mortgagees’ requirements. Nonetheless, by adding to land acquired in 2008-09 a further 592 hectares of land secured over and above the 2007-08 target, FPQ met its 2008-09 land acquisition target.

Operating expenses for the program were down slightly on budget forecasts, due mainly to a streamlining of operations to focus on key species and planting nodes. At this stage of FPQ’s hardwood plantations, product income reflects government funding of the program, through FPQ’s Community Service Obligation agreement with the Queensland Government.

The following hardwood performance criteria were included in FPQ’s Operational Plan 2008-09:

Forecast OutcomeHardwood area to be planted: 1,500 ha 1,664 ha

Plantation establishment for 2008-09 represented a 10.7 per cent increase on the 1,503 hectares established in 2007-08.

Hardwoods


The total area planted was 11 per cent greater than that achieved during the 2007-08 financial year (1,664 hectares, up from 1,503 hectares) while operational expenditure was up by 8 per cent ($7.9 million, up from $7.3 million).


Encourage industry and market interest in hardwood early age products

FPQ continued to support research and investment into the wood properties of its hardwood plantations and the commercial use of these as they mature.

Address key challenges in relation to assuring the supply of genetically improved planting stock, silvicultural improvement, better wood properties, and pest and disease control

FPQ has completed an overhaul of its species requirements and strategies for obtaining improved planting stock. The Corporation has concentrated its establishment program on two key species and has set out programs to secure access to superior seed for these. To achieve this, FPQ has contributed to and undertaken research and development towards improved genetics and has developed relationships with alternative providers of improved seed stock. Queensland Primary Industries and Fisheries has established advance seed orchards that can provide improved seed of spotted gum and western white gum. In addition, FPQ is a contributing partner to a number of the Plantation Hardwoods Research Fund projects sponsored by the Queensland Department of Tourism, Regional Development and Trade that have a focus on wood quality.

Adopt chemicals, equipment and strategies that improve soil health and nutrient status, water quality and reduce emissions

In 2008-09, FPQ completed its assessment of various soil fertility management regimes. The outcome of this assessment was the development of new fertiliser

processes that enabled the Corporation to halve its fertiliser application rates. FPQ also introduced options in grazing agreements that enabled the Corporation to vary stock numbers in accordance with pasture assessments. This enabled FPQ to better control the impact of cattle on soils, pasture and the crop of hardwood trees.

Review operational service delivery with a view to reducing travel costs and achieving efficiency through co-location

FPQ has identified the Kingaroy/Wondai/Gayndah zone as its key focus for future expansion. With this in mind FPQ will progressively move to base its operating capacity in this location. In 2008-09, one staff member within the FPQ Hardwoods group had transferred from Gympie to Wondai, and future appointments will be based in the same zone.

Other

While good seasonal conditions enabled FPQ to surpass its hardwood establishment target (see above), extreme cold weather experienced in June 2009 resulted in significant and widespread frost damage. It is estimated that around 100-150 hectares of new plantations may have been severely impacted across the Moreton, Somerset, and South and North Burnett regions. The frost killed some younger plants and killed the tops of some older plants, which may reshoot. Some areas will require replanting following further field assessment to determine the extent of any recovery.

FPQ has evaluated nursery production and species deployment options for its hardwood program. As a consequence, the Corporation has ceased production of the Corymbia hybrid stock and discontinued its western white gum genetic improvement project due to high production costs and poor propagation. FPQ will instead focus on using spotted gum and western white gum seedlings in the field.

Outlook for 2009-10

With governments and the community placing a greater emphasis on the role trees play as carbon sinks and their ability to lessen climate change, FPQ’s hardwood plantations are well positioned to contribute financially and environmentally to these outcomes.

Hardwoods

Budget OutcomeProduct income: $0.1 million $0.4 millionCommunity Service Obligation payments: $6.7 million $6.6 millionOperating expenditure: $8.9 million $7.9 millionInvestment in land acquisition: $7.0 million $1.5 million



FPQ’s Technical Services division is responsible for the delivery of the Corporation’s commercial forest management operations and gives policy advice to the FPQ executive on strategic issues associated with the Corporation’s plantations.

Social responsibility

Sustainability

FPQ is committed to continued improvement in its operations to enhance sustainability outcomes by adopting forest management systems based on sound scientific principles, applied research and societal expectations.

One of the most recent independent scientific reports on the health of south-east Queensland’s waterways and catchments provided support for FPQ’s sustainable forest management. “Report Card 2008”, issued in October 2008 by the SEQ Healthy Waterways Partnership, found that freshwater streams in the Pumicestone catchment were “in very good condition” with improvements on 2007 results for most study indicators. There are more than 21,000 hectares of FPQ’s plantation forests in the Pumicestone catchment area, which generate more than $9 million in annual timber sales. Only one other catchment, the “Mid Brisbane Catchment” below Wivenhoe Dam, secured this rating, the highest for the catchments studied. The Corporation

maintains water quality monitoring sites throughout the state and works in partnership with universities and other scientific organisations to monitor groundwater on a continuing basis.

Comprehensive information on FPQ’s Sustainable Forest Management activities is available to the public via the Corporation’s website.

Visitor management

As part of the commercial reforms to Queensland’s state-owned forestry sector in 2006, FPQ now manages public access to State Plantation Forests.

Individual members of the public are no longer required to obtain a permit to visit State Plantation Forests. Permits were replaced in 2007 with regulatory signage at major entrances to FPQ’s plantations. Individual visitor regulation through signage is more convenient for the public and ensures that visitors are made fully aware of their responsibilities when visiting a commercial forest environment. Group and commercial activities in State Plantation Forests still require permits. During 2008-09, FPQ issued 176 visitor permits (the same number that was issued in 2007-08), including:

• 73 permits for organised group activities including four-wheel-drive club events, orienteering, sled dog racing and weddings

Technical Services


• 19 permits for competitive events including car rallies and equestrian endurance rides

• 41 permits for commercial activities including commercial tours and film production

• 28 permits for scientific research purposes.

In addition, 15 permits to traverse were issued for individual visitors to isolated areas of State Plantation Forests in which regulatory signage had yet to be installed. FPQ does not anticipate issuing permits to traverse in 2009-10 as all planned regulatory signage is now in place.

Wet weather caused the closure of some State Plantation Forests to the public during 2008-09, including the Beerburrum and Byfield State Plantation Forests that were closed for extended periods over the summer months after prolonged flooding caused road washouts and timber falls.

Unfortunately, illegal use of motor vehicles in State Plantation Forests continues as a significant social, business, safety and environmental issue, particularly in south-east Queensland. During 2008-09, FPQ continued to work with police, local government, the Queensland Parks and Wildlife Service (QPWS) and community representatives to address the matter through a combination of education and enforcement initiatives. FPQ is also an active member of the Queensland Government’s Interdepartmental Trail Bike Working Group that is examining options to address trail bike-related issues.

Comprehensive information on FPQ’s Visitor Management initiatives, including permit applications and a schedule of permit fees, is available to the public via the Corporation’s website. The website also provides information on the status of forest access during periods of bad weather, commercial harvesting activities, or road works and other infrastructure projects.

Business competitiveness

As part of FPQ’s commitment to its Australian Forestry Standard certification, the Corporation only pursues plantation forest expansion on previously cleared freehold land. Associated with this expansion is the sustainability and carbon sequestration benefits associated with reforesting previously cleared agricultural land. During 2008-09, FPQ reforested approximately 2,924 hectares of cleared land with plantations (compared with 2,000 hectares in 2007-08) that sequester carbon, enhance water, soil and air quality and reduce soil erosion and salinity.

Increasing productivity and efficiency

Prices for fuel, herbicide, fertiliser and other plantation inputs remained at relatively high levels during 2008-09,

following significant increases in 2007-08. In response to FPQ’s continuing focus on improved business performance and increases in inputs costs, a suite of “low input” techniques for plantation establishment has been introduced. These techniques have reduced herbicide and fertiliser inputs, while analysis established that long-term tree growth and survival are not compromised. This program also benefits FPQ’s financial returns and further reduces FPQ’s already low carbon footprint.

Minimising business risk

Pests and disease

As a major commercial land manager, FPQ is an active participant on the Queensland Government’s State Land Pest Management Committee. The Corporation also regularly reviews its pest management policies and procedures to ensure they are consistent with the State Land Pest Management Policy and associated legislation. FPQ seeks to manage pests on areas under its control by adopting a pro-active approach to planning based on coordination, partnerships and information sharing, and participates in planning processes to develop local government pest management plans where relevant.

During 2008-09, FPQ worked with Queensland Primary Industries and Fisheries and the National Sirex Coordination Committee to manage a suspected outbreak of Sirex wood wasp at a private forestry plantation near Stanthorpe. A single specimen of the wasp was found in 2008 as part of FPQ’s routine pest monitoring and represented the first detection of the wasp in Queensland. In response, the National Sirex Control Strategy has been implemented, which includes a range of surveillance and control measures designed to limit the pest’s impact on the plantation sector. In the absence of an effective management response, Sirex-related tree deaths in affected areas of southern Australia can be significant. Accordingly FPQ will continue to work with Queensland Primary Industries and Fisheries, the National Sirex Coordination Committee and its customers to ensure that the threat is managed to minimise long term adverse impacts.

Comprehensive information on FPQ’s pest management activities, including its Pest Management Strategy 2008, is available to the public via the Corporation’s website.

Fire

FPQ relies on a system of fire fighter training, firebreaks, hazard reduction burning, surveillance and rapid fire suppression to manage the threat of wildfires in and around its forests. Stray matches, sparks from worn trailer axles, power lines blown together by winds, careless campers and arsonists have all caused fire losses to forests in the past. Fire keeps forestry workers on contestant vigil and, at 30 June 2009, 362 of FPQ’s 458

Technical Services


staff were accredited fire fighters.

Each year, FPQ coordinates inter-agency fire exercises to ensure fire fighting staff are well trained and practised in a range of wildfire suppression techniques. The exercises also enhance communication between agencies and maintain all fire fighters’ familiarity with the Australasian Inter-Agency Incident Management System, which has been adopted by Australian fire and land management agencies and the Australian Council of State Emergency Services. Due to weather conditions affecting the timing of these activities, none of these exercises actually occurred in the 2008-09 reporting period. However, fire training exercises took place in the Beerburrum and Burnett FMAs in May 2008 and the Beerburrum FMA in July 2009 and the Ingham FMA in August 2009.

In February 2009, six FPQ fire fighters from the Beerburrum, Fraser Coast and Mary Valley FMAs assisted Victorian fire fighters with that state’s bushfire emergency. FPQ staff helped Hancock Victoria Plantations in its fire suppression activities in the Eildon area in central Victoria.

Specialist fire preparedness review

FPQ employed the services of an Australasian fire specialist with extensive experience in strategic and operational responses to Australian wildfires to undertake a review of the Corporation’s fire protection in February 2009. The review encompassed FPQ’s overall fire protection program including its land management arrangements; relationships with external stakeholders; fire fighter training program and risk management program; plant, equipment and other resources and its fire communications protocols. The review’s report was presented to the FPQ Executive in April 2009. Key recommendations will be implemented throughout 2009-10.

Hazard reduction burning

During 2008-09, 19,294 hectares of State Plantation Forest were subjected to hazard reduction burning (compared with 11,478 hectares in 2007-08) to reduce the build-up of grass and other organic forest litter that can fuel wildfires in the summer months.

Surveillance cameras

FPQ’s fifth fire surveillance camera began operating in the Elliott River State Plantation Forest, near Bundaberg, in May 2009. Other FPQ fire surveillance cameras are on Bribie Island and near Passchendaele, Jimna and Woodford. At 30 June 2009, a sixth fire camera was being installed at Brooyar, near Kilkivan, to provide coverage of the Brooyar State Plantation Forest. Surveillance cameras provide real time high-definition colour imaging and are remotely linked by microwave signal to designated FPQ fire control rooms.


This section reports performance of the Technical Services division against performance criteria included in FPQ’s Operational Plan 2008-09:

Implement outcomes arising from a review of FPQ’s clonal program

Clonal forestry involves propagating trees from cuttings of parent trees selected for their superior attributes. This differs from more conventional propagation techniques, involving the raising of individual seedlings. FPQ inherited a significant clonal propagation program from the former DPI Forestry, which in the late 1990s adopted a high-technology, sophisticated clonal system to produce exotic pine plants.

A review of this program in mid-2008 concluded that FPQ’s production clones had significant operational and technical deficiencies related to physiological aging of the plants. Subsequently, FPQ ceased planting the clones in the field, but continued to evaluate available technology to solve problems associated with physical aging of selected clones. During 2008-09, FPQ’s tissue culture facility at Gympie completed an extensive evaluation of the most promising technologies available. Despite the Corporation’s best endeavours, it was confirmed there was no affordable and timely commercial solution to the physical aging of selected clonal material and the activities of this facility were discontinued.

Develop a framework to account for plantation sequestered carbon by 2008

Despite continuing uncertainty regarding the introduction of the proposed Carbon Pollution Reduction Scheme (CPRS) and its detail, FPQ continued to work with the Australian Government’s Department of Climate Change to customise a nationally recognised accounting tool that will account for carbon stocks in the Corporation’s plantations.

These delays are not expected to impact significantly on the role of plantation sequestration in the CPRS. However, it remains that only plantations established after 1 January 1990 on land cleared prior to that date will be eligible to participate in CPRS carbon offset arrangements. For FPQ, this means that a maximum of 20,000 hectares, or less than 10 per cent of the Corporation’s plantation lands, meet this criterion. Second or third rotation plantations are not eligible, as they also do not meet the specified criterion.

FPQ will continue to monitor CPRS developments and refine its resources systems to ensure that carbon credits

Technical Services


generated from its eligible plantations can be identified and measured. The consideration of FPQ’s position on trading in carbon credits awaits further developments in this area, specifically the final form and passage of the CPRS legislation and any international developments arising from the Copenhagen round of negotiations on a replacement for Kyoto protocol.

Obtain re-certification to the Australian Forestry Standard

FPQ holds independent certification to the Australian Forestry Standard for its commercial forest management. The AFS sets criteria for sustainable forest management and has international status via mutual recognition with other national certification schemes granted by the Program for the Endorsement of Forest Certification Schemes.

AFS certification recognises FPQ as a leading environmental agency and confirms that its plantations are sustainably managed from an economic, social, environmental and cultural perspective. The Corporation has held AFS certification since its formation in May 2006 and an external audit in June 2009 confirmed the organisation’s continuing certification.

Foster industry uptake of Chain of Custody certification

FPQ’s AFS certification also gives Queensland’s timber industry access to a Chain of Custody process for green labelling products as coming from sustainably managed forest resources when sourced from FPQ’s plantations. The Chain of Custody process is an innovative mechanism for timber processors to demonstrate the sustainability of their products and a number of Queensland timber business are thus certified, including Hyne and Son, Boral Plywood, Yarraman Pine and Carter Holt Harvey. FPQ provided $50,000 in funding in June 2008 as part of a $150,000 State Government grant to assist the Queensland timber industry with Chain of Custody certification initiatives.

New commercial arrangements with radio network clients negotiated and in place by end of 2008

The restructure of FPQ’s wireless voice, video and data communication services has been completed. The restructure has simplified FPQ’s wireless communication network to service core plantation areas, while facilitating the sale of surplus communication assets to the Queensland Parks and Wildlife Service.

Review current commercial heavy fleet capability and future requirements by March 2009

A review of FPQ’s heavy fleet capability and future requirements was undertaken in 2008-09 with the Corporation’s Advisory Board advised of key findings in February 2009. These included reducing the heavy plant fleet and reviewing the Corporation’s replacement strategy to reduce capital expenditure and risks associated with fleet disposal in a potentially depressed market. The review’s findings provided for a reduction in 2008-09 budgeted capital expenditure of $1.28 million and for this lower level of capital expenditure to be maintained up to and including the 2010-11 financial year.

Finalise and implement a visitor use strategy and operating guidelines in a manner that addresses statutory requirements and minimises commercial business impacts

In May 2009, FPQ’s responsible Ministers endorsed the Corporation’s Visitor Use Strategy for the management of visitor access to State Plantation Forests. A Visitor Use Strategy Implementation Working Group was subsequently formed, including representatives from the timber industry, timber contractors and Timber Queensland to develop strategies and guidelines to manage the risks associated with allowing public access to commercial forests. By June 2009, a framework had been developed to help assess visitor use of roads close to commercial operations, to manage risks associated with potential public interaction with timber harvesting and haulage equipment, and to develop a visitor management training package for FPQ staff and industry contractors that develop harvest plans, work on harvesting sites, or drive on haulage roads. FPQ will continue to consult with its customers and stakeholders as part of the ongoing implementation of its Visitor Use Strategy, risk mitigation and sustainable forest management practices.

Technical Services


FPQ maintains a comprehensive corporate business service capacity, including:

• Operational business support including finance, records, office services, procurement and sales administration

• Financial management services including strategic and tactical services and financial management

• Human resource management services including strategic, tactical and operational human resource management in the areas of workplace health and safety and injury management, employee and industrial relations and human resource development

• Information and communication technology capacity

• Legal services

• Strategic planning and new business development services.


This section reports performance of the Business Services division against performance criteria included in FPQ’s Operational Plan 2008-09:

FPQ stand-alone information and communication technology infrastructure in place

Following the formation of FPQ in May 2006, plans were in place to provide the Corporation with a stand-alone information and communication technology (ICT) infrastructure to allow its separation from ICT managed by the former Department of Primary Industries and Fisheries. The project to facilitate this was FPQ’s Domain Upgrade and Migration Project, managed by external information technology consultants Technology Effect. By 30 June 2009 stand-alone ICT infrastructure was in place for the Corporation state-wide, with ongoing maintenance and service provided by external contractors SureBridge IT.

New human resource computing software adopted

FPQ has identified a need to untie itself from existing arrangements for the provision of human resources and payroll services, and to develop a business solution more in line with its commercial mandate. Early in 2009, FPQ completed a process of identifying its preferred option for providing human resources and payroll capability and subsequently commenced a procurement

Business Services


process to identify a preferred supplier. Delivery of the system commenced in March 2009 and, at 30 June 2009, was progressing on-time and on-budget for completion in October 2009. The new system will see FPQ owning and operating its own SAP HR system, compatible with its existing SAP Finance capability, while ongoing system maintenance will predominantly be delivered by external service providers. Human resources and payroll administration are the last of FPQ’s arrangements to be “untied” from central government service provision under FPQ’s commercialisation charter.

Business case completed for additional computing software to update or replace FPQ’s Finance Module, SAP Sales and Distribution Module and SAP Budget Module business systems

FPQ’s decision to proceed with development of its SAP HR module to suit its business requirement has delayed assessment of further SAP modules. Further assessment of business needs will be undertaken during the 2009-10 financial year.

New FPQ web platform implemented

Stand-alone web platforms for FPQ’s internet and intranet were implemented and fully operational by 30 June 2009. The proprietary software Intranet Dashboard was used as the platform for the Corporation’s intranet Forweb, while external contractors Ice Media were employed to work with FPQ to develop and maintain the Corporation’s internet site. In line with Queensland Government sustainability initiatives, the majority of the Corporation’s internal and internal publications are now provided online.

Business Services


Scie

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Scientific names of commercial tree species mentioned in the FPQ annual report are:

Caribbean pine Pinus caribaea var. hondurensis

Hoop pine Araucaria cunninghamii

Hybrid pine Pinus elliotti var. elliotti x Pinus caribaea var. hondurensis

Loblolly pine Pinus taeda

Radiata pine Pinus radiata

Slash pine Pinus elliotti var. elliotti

Spotted gum Corymbia citriodora subsp. variegata and subsp. henryii

Western white gum Eucalyptus argophloia

Glossary

Carbon sequestration The long-term storage of carbon in trees or other natural elements.

Carbon sinks Something that “soaks” up carbon, in this context a growing plantation absorbs carbon from the atmosphere and stores it in growing timber and timber products.

Chain of Custody The ability to audit the progression of timber along the production line to its source, in this context to FPQ’s AFS-certified plantation forests.

Clone A group of plants originating as parts of the same individual, in this case from buds or cuttings.

Fallow Areas of land previously under trees or crops that are cleared and waiting replanting.

Salinity In this context, salt content in soil or water. Salinity can be minimised in many cases by planting trees.

Silviculture The science and practice of growing and tending trees.

Thinning Removing selected trees from young plantations to allow healthier trees to mature with less competition for sunlight and nutrients. The removed “thinnings” are sold to specialised timber processors that can mill the material into a range of products.

Tissue culture Growing small pieces of plant material in sterile and controlled conditions. The tissue produced can be used to propagate rooted plants.


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ewThe comparative financial statements in the following section report on FPQ’s operations for 2008-09 with comparative figures provided for 2007-08.

Trading Performance

The Australian Accounting Standard AASB 141 Agriculture requires that changes in the value of biological assets (the plantations) be recognised as Revenues in the Corporation’s Income Statement. Changes in biological assets during a year can result from “biological transformations” and movements in expected future costs of producing logs, log values and discount rates. Biological transformations include both realised asset movements (harvest of logs) and non-realised asset movements (plantation growth, new plantings and natural degeneration). The movements due to influences other than from the biological transformations are inherently volatile and, as a result, FPQ’s reported Operating Surplus/Deficit can vary significantly from year to year in a manner that is not correlated with the Corporation’s realised asset movements (log harvests).

For this reason, FPQ uses the concept of “trading results” to monitor and measure trading performance and to base recommendations for dividend distributions. The definition of trading surplus/deficit adopted by FPQ excludes unrealised biological asset movements and recognises realised biological asset movements (log harvest) as revenue:

2008-09($ million)

2007-08($ million)

Operating Surplus before income tax equivalents (from accounts)

Exclude –

gain in revaluation of biological assets

Recognise –

gain realised through plantation sales

5.0

-66.0

+72.2

122.1

-186.6

+94.1

Trading surplus 11.2 29.6


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ewFor the 2008-09 financial year, FPQ’s trading surplus was $11.2 million, representing a significant decline over the previous year. This decline was driven primarily by decreased plantation sales (mostly in exotic pine sales). The current world-wide recession has severely impacted the building industry and consequently FPQ as the primary supplier of timber products to that industry. Cost management prevented a further decline in financial performance.

Income Statement

FPQ delivered an operating surplus (after income tax equivalents) of $3.5 million in 2008-09 compared to an operating profit of $85.5 million in the 2007-08 financial year. This decline is income driven and is due to a substantial reduction under the heading “Gain on revaluation of biological assets”. The reduction has been caused by changes (many detrimental) in the variables used in determining the net present value of the plantation forests over the 2008-09 financial year.

The small net decrease in standing plantation values for the year can be attributed to increases in plantation value (from decreased costs, increased prices and additional experimental type resources being brought into the valuation) being more than offset by reductions in plantation value (resulting from improvements in forest growth and form models as well as the deferral of harvesting emanating from the global financial crisis). Minor changes in the weighted average cost of capital had a negligible impact on the change in plantation values.

The value of increases in FPQ plantation forests (after adding back timber removals during the year) is reported as income in the Income Statement (as required by the Australian Accounting Standards).

Revenue for the year decreased to $77.5 million due almost exclusively to the reduction in the value of standing plantations as detailed above.

FPQ was able to deliver savings in workforce costs and minimised increases in a range of other corporate and works program costs. The savings were realised mainly across the activity areas of seed and nursery production, plantation establishment and administration. The reductions in establishment costs can be attributed primarily to reduced plantings as a consequence of adverse planting conditions, mainly wet weather, during the year.

Balance Sheet and Statement of Changes in Equity

FPQ’s Balance Sheet remained strong throughout the year despite a sharp downturn in trading arising out of the global financial crisis.

During 2008-09, FPQ again invested funds in plantation land ($15.4 million) continuing its modest business growth strategy. This strategy is evidenced by increased asset values under property, plant and equipment.

Cash was also applied to meeting dividend commitments to shareholders. Payables under current liabilities have reduced commensurate with the lower dividend recorded for the current year.

Deferred tax liability has increased by $4.3M in line with movements in standing plantation value and the effect of the current year’s tax result.

Cash Flow Statement

The Cash Flow Statement completes FPQ’s major financial statements and provides details on the sources and uses of funds over the reporting period. It highlights balances held, and movement in, cash resources.

During 2008-09, FPQ trading activities were cash positive, with net cash received from operating activities of $19.2 million.

Throughout the period in review, the Corporation also invested in assets ($20.4 million) with most of that investment going towards an expansion of the land asset base required for future forest plantation expansion, a key factor for FPQ’s business growth.

Additionally, in accordance with the Forestry Plantations Queensland Act 2006, a dividend of $13.4 million was paid to Queensland Treasury in December 2008. Such commercial returns to shareholders are pleasing and continue a positive flow of dividends to Queensland Treasury since state-owned plantations were first commercialised, prior to FPQ’s formation.

Disclaimer: The materials presented on this site are provided by the Queensland Government for information purposes only. Users should note that the electronic versions of financial statements on this site are not recognised as the official or authorised version. The electronic versions are provided solely on the basis that users will take responsibility for verifying their accuracy, completeness and currency. Although considerable resources are used to prepare and maintain the electronic versions, the Queensland Government accepts no liability for any loss or damage that may be incurred by any person acting in reliance on the electronic versions.


CONTENTS PAGE

INCOME STATEMENT 34

BALANCE SHEET 35

STATEMENT OF CHANGES IN EQUITY 36

CASH FLOW STATEMENT 37

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS 38

OBJECTIVES AND PRINCIPAL ACTIVITIES 38

1 CORPORATE INFORMATION 38

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 38

3 GAIN/(LOSS) ON REVALUATION OF BIOLOGICAL ASSETS INCLUDING IMPACTS ON 46

UNREALISED REVENUE RESERVE

4 INDICATIVE PHYSICAL QUANTITIES OF BIOLOGICAL ASSETS AND NET VALUATION 47

INCREMENT /(DECREMENT)

5 DEPRECIATION AND AMORTISATION 47

6 BORROWING COSTS 47

7 OTHER OPERATING EXPENSES 48

8 INCOME TAX EQUIVALENTS 49

9 CASH AND CASH EQUIVALENTS 50

10 RECEIVABLES 50

11 INVENTORIES 50

12 PROPERTY, PLANT AND EQUIPMENT 51

13 INTANGIBLE ASSETS 55

14 OTHER FINANCIAL ASSETS 55

15 BIOLOGICAL ASSETS 55

16 PAYABLES 56

17 DIVIDEND 56

18 OTHER FINANCIAL LIABILITIES 57

19 ASSET REVALUATION RESERVE BY CLASS 57

20 BOARD REMUNERATION 57

21 RECONCILIATION OF NET OPERATING RESULT TO NET CASH PROVIDED BY (USED IN) 58

OPERATING ACTIVITIES

22 INTEREST IN JOINT VENTURES 59

23 CONTROLLED ENTITY 59

24 CONTINGENT LIABILITIES - LITIGATION IN PROGRESS 59

25 COMMITMENTS FOR EXPENDITURE 60

26 DEPOSITS HELD IN TRUST 60

27 FINANCIAL INSTRUMENTS 61

28 RELATED PARTY DISCLOSURES 64

29 FUTURE DEVELOPMENTS 65

CERTIFICATE OF FORESTRY PLANTATIONS QUEENSLAND 66

INDEPENDENT AUDITOR’S REPORT 67

for the year ended 30 June 2009FPQ Financial Statements


2009 200820082009

This Income Statement is to be read in conjunction with the notes to the financial statements.

Note $'000 $'000

Income

Revenue

Forest product sales - non-plantation timber 3(b) 218 705

Specialised forest industry services 390 151

Other revenue 3(c) 11,163 9,113

Gains

Net gain on disposal of property, plant and equipment (219) (68)

Gain on revaluation of biological assets 2.7,3(a) 65,984 186,590

Total income 77,536 196,491

Expenses

Work performance arrangement fee and associated costs 29,679 31,240

Contracted forestry, professional, technical and other services 17,824 17,522

Hire of plant and equipment 1,417 1,644

Motor vehicle expenses 3,190 2,824

Occupancy costs 1,784 1,898

Forest maintenance expenses 3,536 3,693

Materials 802 1,493

Depreciation and amortisation 5 4,943 5,051

Finance/Borrowing costs 6 5,131 5,137

Other operating expenses 7 4,273 3,908

Total expenses 72,579 74,410

Operating surplus/(deficit) before income tax equivalents 4,957 122,081

Income tax equivalents 8 (1,481) (36,627)

Operating surplus/(deficit) after income tax equivalents 3,476 85,454

for the year ended 30 June 2009Income Statement


2009 200820082009

This Balance Sheet is to be read in conjunction with the notes to the financial statements.

Note $'000 $'000

Current assets

Cash and cash equivalents 9 39,653 54,153

Receivables 10 13,923 17,861

Inventories 11 2,326 2,451

Total current assets 55,902 74,465

Non-current assets

Property, plant and equipment 12 145,204 122,455

Intangible assets 13 1,530 138

Other financial assets 14 - 40

Total non-current assets 146,734 122,633

Biological assets

Plantation growing timber 15(i) 1,167,427 1,173,637

Wollemi Pine 15(ii) - 261

Total biological assets 1,167,427 1,173,898

Total assets 1,370,063 1,370,996

Current liabilities

Payables 16 6,742 18,888

Total current liabilities 6,742 18,888

Non-current liabilities

Other financial liabilities 18 76,153 76,153

Deferred tax liability 8 146,344 142,008

Total non-current liabilities 222,497 218,161

Total liabilities 229,239 237,049

Net assets 1,140,824 1,133,947

Equity

Capital 1,084,181 1,084,181

Retained surplus 37,187 36,964

Reserves

- Asset revaluation reserve 19 19,456 12,802

Total equity 1,140,824 1,133,947

as at 30 June 2009Balance Sheet


2009 200820082009

This Statement of Changes in Equity is to be read in conjunction with the notes to the financial statements.

Note $'000 $'000

Capital

Balance at beginning of financial year 1,084,181 1,084,242

Administrative restructure - assets/liabilities transferred - (61)

Balance at end of financial year 1,084,181 1,084,181

Retained surplus

Balance at beginning of financial year 36,964 (35,212)

Operating surplus / (deficit) 3,476 85,454

Dividend payable 17 (3,261) (13,356)

Transfer between reserves:

Asset revaluation reserve 8 78

Balance at end of financial year 37,187 36,964

Asset revaluation reserve

Balance at beginning of financial year 12,802 9,459

Deferred tax 19 (2,855) (1,466)

Transfer to retained surplus for:

Asset revaluation reserve 19 (8) (78)

Increment / (decrement) on revaluation of:

Land 19 6,230 6,006

Infrastructure 19 1,930 -

Buildings 19 1,357 (1,119)


Total equity 1,140,824 1,133,947

Total equity at beginning of financial year 1,133,947 1,058,489

Operating surplus / (deficit) 3,476 85,454

Non-owner changes in equity:

Asset revaluation net increment 19 9,517 4,887

Deferred tax 8 (2,855) (1,466)

Transactions with owners as owners:

Non-reciprocal transfer of assets and liabilities - (61)

Dividends 17 (3,261) (13,356)

Total equity at end of financial year 1,140,824 1,133,947

for the year ended 30 June 2009Statement of Changes in Equity


2009 200820082009

This Cash Flow Statement is to be read in conjunction with the notes to the financial statements.

Note $'000 $'000

Cash flows from operating activities

Inflows:

Receipts from customers 78,358 99,041

Interest received 3,114 3,810

Grants and subsidies received 6,620 3,015

GST collected on sales 7,588 9,781

GST input tax credits received from ATO 6,722 6,714

Outflows:

Payments to suppliers and employees (63,526) (62,464)

Borrowing costs (5,129) (5,284)

GST paid to suppliers (6,715) (6,820)

GST remitted to ATO (7,735) (9,785)

Grants and subsidies paid (49) -

Stamp duty paid - (4)

Net cash provided by (used in) operating activities 21 19,248 38,004

Cash flows from investing activities

Inflows:

Proceeds from sale of property, plant and equipment 1,608 783

Outflows:

Payment for property, plant and equipment (22,000) (25,631)

Payment for loans and advances - 149

Net cash provided by (used in) investing activities (20,392) (24,699)

Cash flows from financing activities

Outflows:

Dividends paid 17 (13,356) (5,435)

Borrowing redemptions - (267)

Net cash provided by (used in) financing activities (13,356) (5,702)

Net increase / (decrease) in cash held (14,500) 7,603

Cash at the beginning of the financial year 54,153 46,550

Cash at the end of the financial year 9 39,653 54,153

for the year ended 30 June 2009Cash Flow Statement


Objectives and principal activities

Forestry Plantations Queensland’s strategic business objective is to undertake commercial management of Queensland’s state-owned plantation forests, and maximise the market value of its assets consistent with best practice for sustainable forest management.

Its principal activities are the commercial management of Queensland’s state-owned plantation forestry assets.

1. Corporate Information

This financial report covers Forestry Plantations Queensland (FPQ). FPQ is a corporation sole established under the Forestry Plantations Queensland Act 2006 on 1 May 2006 as a result of the State Government’s reform of its commercial forest management activities. FPQ is controlled by the State of Queensland which is the ultimate parent. The head office and principal place of business of FPQ is Level 2, 104 Melbourne Street, South Brisbane.

As part of the reform process, two entities, FPQ and Forestry Plantations Queensland Office (FPQO), were established. FPQO is a Queensland public service office established under the Public Service Act 2008. Under the Forestry Act 1959, FPQ manages state plantation forests, sells forest products from those forests, and may own and use other property for plantation-related purposes. FPQO provides work performance services to FPQ under a Work Performance Agreement and maintains custody of the crown land allocated for forest production purposes. As a consequence, FPQ employs minimal staff.

2. Summary of significant accounting policies

The significant accounting policies that have been adopted in the preparation of the financial statements are as follows:

2.1 Basis of accounting

The financial report is a general purpose financial report and has been prepared in accordance with applicable Australian Accounting Standards, the Treasurer’s Minimum Reporting Requirements for the year ending 30 June 2009, and other authoritative pronouncements.

The accounts have been prepared on an accrual basis and except where stated otherwise, in accordance with the historical cost convention.

2.2 Cash and cash equivalents

For the purposes of the Balance Sheet and the Cash Flow Statement, cash assets include all cash and cheques receipted but not banked at 30 June, as well as deposits at call with financial institutions.

2.3 Grants and Subsidies

Under AASB 120 Accounting for Government Grants and Disclosure of Government Assistance, a government grant is not recognised until there is reasonable assurance that the entity will comply with the conditions attaching to it, and that the grant will be received. Grants, contributions, donations and gifts that are non-reciprocal in nature are recognised as revenue in the year in which FPQ obtains control over them. There are no unfulfilled conditions or other contingencies attaching to these grants.

2.4 Trade and other receivables

Trade debtors are recognised at the nominal amounts due at the time of sale or service delivery. Settlement on trade debtors is within 30 days from the end of the month in which the sale is invoiced. All trade debtors are secured by cash deposit or other financial guarantee.

Other receivables generally arise from transactions outside the usual operating activities of FPQ and are recognised at their assessed values. Terms are net 30 days.

The collectability of receivables is assessed periodically with provision being made for impairment where necessary. All known bad debts were written off at 30 June.

2.5 Inventories

Finished goods

Inventories in this category are valued at lower of cost and net realisable value.

Raw materials and stores

Raw materials and stores are valued at the lower of cost and net realisable value. Cost is assigned on a weighted average basis and includes expenditure incurred in acquiring the inventories and bringing them to their existing condition.

Net realisable value is determined on the basis of FPQ’s normal selling pattern. Expenses associated with marketing, selling and distribution are deducted to determine net realisable value.

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2.6 Biological assets

Under AASB 141 Agriculture, a biological asset is defined as ‘a living animal or plant’.

FPQ assets falling into this category consist mainly of plantation growing timber. The Wollemi pine stock reported in 2007-08 was a saleable biological asset which was propagated for sale as part of a commercial venture.

FPQ reports its biological assets at Fair Value. Fair Value is the amount for which an asset could be exchanged or a liability settled, between knowledgeable, willing parties in an arms length transaction (AASB 141).

As there is no observable active and liquid market for FPQ’s forest assets, FPQ has, in accordance with the provisions of AASB 141, adopted the Net Present Value (NPV) methodology as the most appropriate alternative for estimating the fair value of its plantations. Wollemi pine

There is no observable active market for FPQ’s wollemi pine plants as there is no stable supply/demand interaction or a stable market price. Consequently, cost has been adopted as the only reliable value that can be used as an analogue for the fair value.

Plantation growing timber

FPQ’s plantation growing timber resources are comprised principally of exotic and native pine species distributed along the eastern seaboard of Queensland with the majority located in South East Queensland.

All current stands of plantation growing timber have been included in the valuation with the exception of:• Plantings of minor species, small and

fragmented plantation areas and areas subject to experimental treatments which experience suggests are non-productive; and

• Hardwood plantations of merchantable and unmerchantable age which are immaterial to the valuation.

Other biological assets

The biological assets represented by tree seed orchards, tree hedges and nursery seedlings have been assessed and, on the basis that these assets are not material in the context of financial reporting by FPQ, they have not been recognised. This position is re-assessed annually but is not expected to change.

Valuation of plantation biological assets

The NPV methodology

NPV is calculated as the net of the future cash inflows and outflows associated with forest production activities discounted back to current values at the specified Weighted Average Cost of Capital (WACC).

Under the NPV methodology, valuation changes arise mainly from:• Changes in timber volume associated with

growth and also changes to the overall estate as a result of annual planting and harvesting activity;

• Changes in timber prices;• Changes in forest production costs; and• Changes in the WACC rate used in the

discounted cash flow calculation.

Assumptions underpinning the NPV calculation are:

• Forest valuations are based on the expected volumes of merchantable timber that will be realised from existing stands, given current management strategies and stand recovery rates.

• Only the current crop is valued. The cash flow analysis is based on the anticipated timing of the harvest of existing stands, which has been derived from harvest plans developed for the entire estate.

• Volume increments are determined both by periodic re-measurement of samples of plantations and by modelling growth from the date of the most recent measurement to the date of harvest.

• Prices used in the NPV calculation are based on current selling prices at balance date unless market intelligence indicates that such prices are not indicative of future trends.

• The estimated cost of growing the existing stand until maturity is taken to account in determining the net cash flows.

• Costs used in the NPV analysis are three year rolling averages of actual costs for individual plantation operations, inflation adjusted to the current period. Three year averages eliminate significant annual variations caused by things such as variable climatic, topographic and/or silvicultural factors (for example high rainfall years increase the weed spectrums to be controlled). It is also assumed that current (3 year rolling average) costs are the best indicator of future costs.

• Notional costs, particularly imputed land usage charges relating to State owned plantation land which FPQ currently accesses at no charge (refer Note 2.11), have not been included in the calculation.

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• All costs incurred in developing and managing the trees in forests are recognised as cash outflows in the NPV calculation except for capital items (e.g. buildings, major roads, heavy plant) which are deemed to have a life independent of the plantation. Usage of these assets is recognised through the application of an annual capital usage charge which is treated as a cash outflow for the purposes of the plantation valuation.

• The discount rate used is based on the Weighted Average Cost of Capital formula in conjunction with the Capital Asset Pricing Model. The discount rate is expressed in real terms, before income tax, and has been set with reference to benchmarked forestry industry risk margins relative to overall market risk margins. The use of ‘real’ discount rates effectively assumes that both prices and costs will rise over time in line with inflation and allows for all prices and costs to be expressed in current dollar terms.

Source of valuation of biological assets

The fair value (based on NPV) of the plantation growing timber has been determined by appropriately qualified staff employed by FPQ using advanced modelling techniques/methods. The net present value calculations utilised for the forest valuation are underpinned by a computerised plantation decision support system.

The modelling component of the system used for plantation valuation is reviewed every five years by an independent expert with the latest review performed in June 2007 by Dr. Jerry Leech, Dip For., M.Sc., Ph.D. The report found the system including the growth and yield modelling components to be ‘robust, complete, coherent and consistent, and in line with best practice’. Results derived from the system are extensively tested on an on-going basis by appropriately qualified FPQ personnel.

2.7 Income recognition for biological assets

FPQ primarily sells biological assets (i.e. trees) ‘at stump’ rather than selling the non-living produce of such assets (i.e. logs). While the recognition of ‘gains on revaluation’ during the reporting period is the same under both scenarios, an entity marketing log produce would further record sales of logs as revenue with an approximately equal offset for ‘deemed cost of sales’.

In FPQ’s case all income relating to plantation forests is recognised as ‘gains on revaluation’ each year as the forests grow in value. This treatment

is in accordance with the requirements of AASB 141 Agriculture. Accordingly the sale of the tree at maturity does not constitute income as it has already been recognised over the life of the tree through the annual revaluation process. Sales represent the disposal of an asset.

2.8 Reserving policy for unrealised gains/losses

FPQ revalues its plantation growing timber annually and recognises the change in net present value as a gain or a loss in the Income Statement in accordance with the treatment required in AASB 141 Agriculture. A reserve account has been created to isolate unrealised gains within the equity account. Unrealised gains on revaluation are transferred to the Biological Assets Unrealised Revenue Reserve. Gains previously brought to account and subsequently realised on disposal (sale of timber) are transferred out of the reserve and become available for distribution. The reserve is adjusted annually for the net movement in unrealised gains and the realisation of prior periods’ gains through current year sales. Transfers in any year will be determined by Management after considering the position of the Retained Surplus account.

2.9 Acquisition of assets

Actual cost is used for the initial recording of all non-current physical and intangible asset acquisitions. Cost is determined as the value given as consideration plus costs incidental to the acquisition, including all other costs incurred in getting the assets ready for use, including architects’ fees and engineering design fees. However, any training costs are expensed as incurred.

Where assets are received free of charge from another Queensland government entity, (whether as a result of machinery-of-government changes, or other involuntary transfer), the acquisition cost is recognised as the gross carrying amount in the books of the transferor immediately prior to the transfer, together with any accumulated depreciation.

Assets acquired at no cost or for nominal consideration, other than from an involuntary transfer from another Queensland government entity, are recognised at a Nil or nominal value in accordance with AASB 116 Property, Plant and Equipment. If the asset is land, buildings or infrastructure, then the asset is revalued to fair value after initial recognition.No

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2.10 Property, plant and equipment

Except for intangible assets, all items of property, plant and equipment with a cost or other value equal to or in excess of $1,000 are recognised in the financial statements in the year of acquisition. Items with a lesser value are expensed in the year of acquisition.

2.11 Land

FPQ carries out its forestry establishment, management and marketing operations principally on Crown land allocated for forest production purposes. While control of this land is vested with FPQO, FPQ is granted full and exclusive access to State Plantation Forests under a deed of profit a prendre to carry out its operations in accordance with the Forestry Act 1959. In consideration of the grant of this right FPQ has paid one dollar.

Only land controlled by FPQ has been recognised as an asset in the Balance Sheet. This land includes specified freehold and Crown land parcels held for operational purposes.

2.12 Revaluations of non-current physical assets

Land, buildings and infrastructure are measured at fair value in accordance with AASB 116 Property, Plant and Equipment, and Queensland Treasury’s Non-Current Asset Policies for the Queensland Public Sector. All other non-current assets, principally plant and equipment and intangibles, are measured at cost.

Non-current physical assets measured at fair value are comprehensively revalued at least once every five years with interim valuations, using appropriate indices, being otherwise performed on an annual basis, where there has been a material variance in the index. Only those assets, the total values of which are material, compared to the value of the class of assets to which they belong, are comprehensively revalued.

Any revaluation increment arising on the revaluation of an asset is credited to the asset revaluation reserve (ARR) of the appropriate class, except to the extent it reverses a revaluation decrement for that same asset previously recognised as an expense, in which case the increase is recognised in profit or loss. A revaluation decrement is charged as an expense, except to the extent that it reverses a previous increment for that same asset and a positive balance exists in the ARR for that asset.

On revaluation, accumulated depreciation is

restated proportionately with the change in the carrying amount of the asset and any change in the estimate of the remaining useful life.

Separately identified components of assets are measured on the same basis as the assets to which they relate.

2.13 Intangible assets

Intangible assets with a cost or other value greater than $50,000 are recognised in the financial statements, items with a lesser value being expensed. Each intangible asset is amortised over its estimated useful life to FPQ, less any anticipated residual value. However, the residual value is zero for all internally-developed intangible assets not held for sale.

It has been determined that there is not an active market for any of FPQ’s intangible assets. As such, these assets are recognised and carried at cost less accumulated amortisation and accumulated impairment losses.

Expenditure on research activities relating to internally-generated intangible assets is recognised as an expense in the period in which it is incurred.

Costs associated with the development of computer software have been capitalised and are amortised on a straight-line basis over the period of expected benefit to FPQ.

2.14 Amortisation and depreciation of intangible assets and property, plant and equipment

Land is not depreciated as it has an unlimited useful life.

Property, plant and equipment is depreciated on a straight-line basis so as to allocate the net cost or revalued amount of each asset, less its estimated residual value, progressively over its estimated useful life to FPQ. Assets under construction (work-in-progress) are not depreciated until they reach service delivery capacity.

Where assets have separately identifiable components that are subject to regular replacement, these components are assigned useful lives distinct from the asset to which they relate and are depreciated accordingly. Any expenditure that increases the originally assessed capacity or service potential of an asset is capitalised and the new depreciable amount is depreciated over the remaining useful life of the asset to FPQ.

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The depreciable amount of improvements to or on leasehold property is allocated progressively over the estimated useful lives of the improvements or the un-expired period of the lease, whichever is shorter. The unexpired period of leases includes any option period where exercise of the option is probable.

Plant and equipment acquired under a finance lease is amortised on a straight line basis over the term of the lease, or where it is likely that FPQ will obtain ownership of the asset, the expected useful life of the asset to FPQ.

For each class of depreciable asset the following average estimated useful lives were used:

2.15 Impairment of non-current assets

All non-current physical and intangible assets are assessed for indicators of impairment on an annual basis. If an indicator of possible impairment exists, FPQ determines the asset’s recoverable amount. Any amount by which the asset’s carrying amount exceeds the recoverable amount is recorded as an impairment loss.

The asset’s recoverable amount is determined as the higher of the asset’s fair value, less costs to sell, and value-in-use. In assessing value-in-use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

An impairment loss is recognised immediately in the Income Statement, unless the asset is carried at a revalued amount. When the asset is measured at a revalued amount, the impairment loss is offset against the asset revaluation reserve of the relevant class to the extent available.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does

not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income, unless the asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

2.16 Leases

A distinction is made in the financial statements between finance leases that effectively transfer from the lessor to the lessee substantially all the risks and benefits incidental to ownership, and operating leases under which the lessor retains substantially all risks and benefits.

Where a non-current physical asset is acquired by means of a finance lease, the asset is recognised at the lower of the fair value of the leased property and the present value of the minimum lease payments. The lease liability is recognised at the same amount. Lease payments are allocated between the principal component of the lease liability and the interest expense.

Operating lease payments are representative of the pattern of benefits derived from the leased assets and are expensed in the periods in which they are incurred.

2.17 Payables

Trade Creditors are recognised upon receipt of the goods or services ordered and are measured at the agreed purchase/contract price gross of applicable trade and other discounts. Amounts owing are generally settled on 7, 14 or 30-day terms.

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Asset class: Asset sub-class Estimated useful life (years)

Buildings Land improvements 28.3

Buildings 31.8

Infrastructure Access Roads 31.1

Plant and equipment Plant and equipment 7.2

Leasehold improvements 10.0

Intangible Software 6.2


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Recognition

Financial assets and financial liabilities are recognised in the Balance Sheet when FPQ becomes party to the contractual provisions of the financial instrument.

Classification

Financial instruments are classified and measured as follows:• Cash and cash equivalents – held at fair value

through profit and loss• Receivables – held at amortised cost• Payables – held at amortised cost• Borrowings – held at amortised cost• Available for sale shares – held at cost

Borrowings are held at amortised cost using the effective interest method.

FPQ does not enter into transactions for speculative purposes, nor for hedging. Apart from cash and cash equivalents, FPQ holds no financial assets classified at fair value through profit and loss.

All other disclosures relating to the measurement and financial risk management of financial instruments held by FPQ are included in note 27.

2.19 Dividend payable

Dividend payable is recognised when declared by the Responsible Ministers on or before reporting date. The dividend is payable to the Queensland Government.

The dividend payable is based on a percentage of the estimated operating surplus (currently 50%) after adjusting out non-cash amounts related to deferred tax and movements in unrealised gains/losses for the year which affect distributable profit.

2.20 Interest-bearing liabilities

Borrowings are recognised at amortised cost with interest being expensed as it accrues. Borrowings are also disclosed at their fair market value in Note 27.

2.21 Taxation

As a for-profit corporation sole, FPQ is subject to the payment of income tax equivalents in accordance with the requirements of the National Tax Equivalents Regime. In addition, FPQ is subject to Commonwealth taxation laws

in relation to Fringe Benefits Tax (FBT) and Goods and Services Tax (GST).

Income tax equivalents

Income tax equivalents on the Income Statement is comprised of current and deferred tax. Income tax equivalents are recognised in the Income Statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the Balance Sheet date, and any adjustments to tax payable in respect of previous years.

Deferred tax is recognised using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.

The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the Balance Sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Deferred tax assets and deferred tax liabilities are offset when there is a legally enforceable right to offset current tax assets and current tax liabilities, and when the deferred tax balances relate to the same taxation authority.

Goods and services tax

Revenues, expenses and assets are recognised net of the amount of goods and services tax, except:

• where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense; or

• for receivables and payables which are recognised inclusive of GST.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables.


The GST component of all cash flows which is recoverable from, or payable to, the Australian Taxation Office is separately classified and reported within operating cash flows.

2.22 Employee Benefits

Wages, salaries, recreation leave and sick leave

Wages, salaries and recreation leave due but unpaid at reporting date are recognised in the Balance Sheet at the nominal salary rates. Payroll tax and workers’ compensation insurance are a consequence of employing employees, but are not counted in an employee’s total remuneration package. They are not employee benefits and are recognised separately as employee related expenses. Employer superannuation contributions and long service leave levies are regarded as employee benefits.

All accrued recreation leave is disclosed as a current liability in the financial statements as past trends indicate that leave accrued approximates to leave taken, on an annual basis.

Prior history indicates that on average, sick leave taken each reporting period is less than the entitlement accrued. This is expected to continue in future periods. Accordingly, it is unlikely that existing accumulated entitlements will be used by employees and no liability for unused sick leave entitlements is recognised.

As sick leave is non-vesting, an expense is recognised for this leave as it is taken.

Long service leave

Under the Queensland Government’s long service leave scheme, a levy is made on FPQ to cover the cost of employees’ long service leave. The levies are expensed in the period in which they are paid or payable. Amounts paid to employees for long service leave are claimed from the scheme quarterly in arrears.

No provision for long service leave is recognised in the financial statements, the liability being held on a whole-of–Government basis and reported in the financial report prepared pursuant to AASB 1049 Whole of Government & General Government Sector Financial Reporting.

Superannuation

Employer superannuation contributions are paid to QSuper, the superannuation plan for Queensland Government employees, at rates determined by the State Actuary. Contributions are expensed in the period in which they are

paid or payable. FPQ’s obligation is limited to its contribution to QSuper.

No liability is recognised for accruing superannuation benefits in these financial statements, the liability being held on a whole-of-Government basis and reported in the financial report prepared pursuant to AASB 1049 Whole of Government & General Government Sector Financial Reporting.

2.23 Insurance

FPQ’s non-current physical assets and other risks are insured through the Queensland Government Insurance Fund, premiums being paid on a risk assessment basis. In addition, FPQ pays premiums to WorkCover Queensland in respect of its obligations for employee compensation.

2.24 Interests in joint ventures

FPQ currently has a financial interest in a number of joint ventures involving the production of biological assets.

Contributions by FPQ towards the biological assets are expensed as incurred in line with FPQ’s biological assets accounting policy (refer Note 2.6). The assets embodied in FPQ’s share of the joint venture outputs have been assessed and, on the basis that these assets are not material, have not been recognised in the Balance Sheet. This position will be re-assessed annually. Details of the expenses incurred by FPQ in the current financial year in regard to these joint ventures are disclosed at Note 22.

2.25 Financial reporting by segments

FPQ operates principally in the forestry industry within Queensland.

2.26 Non-reciprocal transfers of assets and liabilities

Non-reciprocal transfers of assets and liabilities between wholly-owned Queensland Public Sector entities are accounted for as adjustments to capital in accordance with Interpretation 1038 Contributions by Owners Made to Wholly Owned Public Sector Entities.

2.27 Deposits held in trust

Security, tender and other deposits administered by FPQ in a trust capacity are not recognised in the financial statements but are disclosed for information purposes in Note 26.No

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2.28 Borrowing costs

Borrowing costs are recognised as expenses in the period in which they are incurred.

Borrowing costs include:• Interest on short-term and long-term

borrowings;• Ancillary administration charges; and• Loan guarantee charges.

2.29 Issuance of financial statements

The financial statements are authorised for issue by the Chief Plantation Forestry Officer and the Director of Finance at the date of signing the Management Certificate.

2.30 Rounding and comparatives

Amounts included in the financial statements are in Australian dollars and have been rounded to the nearest $1,000 or, where that amount is $500 or less, to zero. Sub-totals and totals may not add up due to rounding, but the overall discrepancy is no greater than two.

Comparative information has been restated when necessary to be consistent with disclosures in the current reporting period.

2.31 Judgements

The preparation of financial statements requires the determination and use of certain critical accounting estimates, assumptions, and management judgements that have the potential to cause a material adjustment to the carrying amounts of assets and liabilities within the next financial year. Such estimates, judgements and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in future periods as relevant.

Estimates and assumptions that have a potential significant effect are outlined in the following financial statement notes:

Valuation of Biological Assets – note 2.6Valuation of Property, Plant and Equipment – note 12

2.32 New and Revised Accounting Standards

FPQ did not voluntarily change any of its accounting policies during 2008-09. Any Australian accounting standards and interpretations issued, or amended and applicable for the first time in the 2008-09 financial year have had either no, or minimal impact on FPQ.

FPQ is not permitted to early adopt a new or amended accounting standard ahead of the specified commencement date unless approval is obtained from the Treasury Department. Consequently, FPQ has not applied any Australian accounting standards and interpretations that have been issued but are not yet effective. FPQ will apply these standards and interpretations in accordance with their respective commencement dates.

At the date of authorisation of the financial report one of the new or amended Australian accounting standards with future commencement dates will have a material impact on FPQ. Detail of this impact is set out below.

FPQ will need to comply with the revised version of AASB 101 Presentation of Financial Statements from 2009-10. This revised standard does not have measurement or recognition implications. However, in line with the new concept of comprehensive income, there will be changes to the line items that are currently presented in FPQ’s Income Statement and Statement of Changes in Equity. Ignoring other potential impacts on the operating result, if the revised AASB 101 was applied in 2008-09, FPQ would have reported comprehensive income of $10.1 million for the year. The increase in the asset revaluation reserve for 2008-09 would therefore not have been included in the Statement of Changes in Equity. In addition, where there have been retrospective accounting policy changes, retrospective re-statement of items in the financial statements, or re-classification of financial statement items during the current reporting period, the revised AASB 101 will require a Statement of Financial Position to be presented as at the beginning of the earliest comparative period included in the financial statements.

All other Australian accounting standards and interpretations with future commencement dates are either not applicable to FPQ or have no material impact.

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2009 2008 Note $'000 $'000

3(a)(i) Gain/(loss) in valuation of biological assets

Native pine 25,875 47,190

Exotic pine 40,294 139,118

Wollemi pine (185) 282

Total 2.7 65,984 186,590

3(a)(ii) Gain/(loss) realised on disposal of biological assets

Native pine 22,473 25,569

Exotic pine 49,906 68,223

Wollemi pine (185) 282

Total 72,194 94,074

3(a)(iii) Movement in unrealised gains

Net gain/(loss) transferred to unrealised revenue reserve (1)

(6,210) 92,516

At 30 June 2009 there were insufficient funds in the Unrealised Revenue Reserve to enable an adjustment for the 2008-09 financial results.At 30 June 2008 there were insufficient balances within the Retained Surplus Account to enable the transfer and quarantining of unrealised gains in total to the Unrealised Revenue Reserve. Accordingly no reserving of unrealised gains was effected for 2007- 08.

2009 2008 $'000 $'000

3(b) Forest product sales - non-plantation timber

Seeds and seedlings 218 705

Total 218 705

3(c) Other revenue

Workshop charges 158 238

Fees and permits 294 266

Interest 2,863 3,913

Plant hire 234 507

Grants and subsidies 6,620 3,015

Other sundry revenue 994 1,174

Total 11,163 9,113

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Plantation Timber QuantityHectares/Plants

VolumeM3

Increment(Decrement)

Native Pine 43 ha 21,841 25,875

Exotic Pine 136 ha 54,047 40,294

Wollemi Pine - - (185)

2008’000 ’000 $’000

Plantation Timber QuantityHectares/Plants

VolumeM3

Increment(Decrement)

Native Pine 42 ha 21,939 47,190

Exotic Pine 131 ha 54,083 139,118

Wollemi Pine 66 plants - 282

4. Indicative physical quantities of biological assets and net valuation increment /(decrement)

5. Depreciation and amortisation

2009 2008 $'000 $'000

Depreciation and amortisation

Infrastructure 1,251 1,246

Buildings 917 1,077

Plant and equipment 2,450 2,640

Intangibles 325 88

Total 4,943 5,051

6. Borrowing costs

2009 2008 $'000 $'000

Finance/borrowing costs

Interest expense - QTC loan 4,670 4,678

Administration charges - QTC Loan 80 78

Loan guarantee fee - QTC loan 381 381

Total 5,131 5,137


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2009 2008 Note $'000 $'000

Other expenses

Travel expenses 516 533

Bad and impaired debts 104 -

Impairment - Buildings 611 344

Impairment - Shares 40 -

Audit fees (1) 131 127

Insurance premiums - Qld Government Insurance Fund

2.23 32 70

Employee expenses (2) 690 427

Computer expenses 830 950

Minor equipment 395 447

Other 924 1,010

Total 4,273 3,908

Total external audit fees relating to the 2008–09 financial year are estimated to be $127,000 (2008: $127,000). There are no non-audit services included in this amount.Refer to note 2.22 for information relating to the components of employee benefits and employee related expenses. The number of employees including both full-time employees and part-time employees measured on a full-time equivalent basis is 3 (2008: 2)

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2009 2008 $'000 $'000

Income Tax Expense

Current tax (4,775) (4,566)

Deferred tax 6,256 41,193

1,481 36,627

Deferred expense comprises:

Deferred tax asset (DTA) 399 114

Deferred tax liability (DTL) 5,857 41,079

6,256 41,193

Reconciliation of income tax expense to prima facie tax payable

Profit from ordinary activities 4,957 122,081

Tax at the Australian tax rate of 30 % (2008: 30%) 1,487 36,624

Tax effect of:

Non-deductible/(Non-assessable) items - Balance (6) 3

Income tax expense 1,481 36,627

Amounts recognised directly in equity

Deferred tax - debited (credited) directly to equity 2,855 1,466

2,855 1,466

Deferred tax liablilty

Comprises:

Biological assets - standing timber 233,422 226,967

Property, plant and equipment 9,012 6,634

Inventory 579 620

Interest receivable 36 112

Other 29 32

243,078 234,365

Reduced by DTA comprising:

Tax losses (96,622) (91,847)

Doubtful debts (31) -

Biological asset - Wollemi Pine - (289)

Other (81) (221)

146,344 142,008

Movement for the year:

Opening balance 142,008 103,915

Charge to income statement 1,481 36,627

Charged direct to equity (ARR) 2,855 1,466

Closing balance 146,344 142,008


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2009 2008 $'000 $'000

Cash on hand 11 15

Cash at bank (1) 39,642 54,138

Total 39,653 54,153

Interest is earned on cash balances at floating rates of interest ranging between 0.65% and 2.90% (2008: 6.1% and 7.15%).(1)

10. Receivables

2009 2008 $'000 $'000

Current

Trade debtors 13,624 17,151

13,624 17,151

Less - Provision for impairment (103) -

13,521 17,151


Other debtors 281 338

Total 13,923 17,861

11. Inventories

2009 2008 $'000 $'000

Finished goods

Seeds and seedlings - at cost 359 246

Raw materials and stores

Miscellaneous - at cost 1,967 2,205

Total 2,326 2,451


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2009 2008 $'000 $'000

Land

At fair value (1) 91,934 70,345

Buildings

At fair value (1) 29,374 27,491

Accumulated depreciation (11,385) (9,984)

Accumulated impairment (2,075) (1,463)

15,914 16,044

Access roads

At fair value (1) 38,232 33,281


16,645 15,456

Plant and equipment

At cost 31,644 33,219


17,446 18,675

Capital works in progress

At cost 3,265 1,935

Property, plant and equipment

At cost 34,909 35,154

At fair value (1) 159,540 131,117


Accumulated impairment (2,075) (1,463)

Total 145,204 122,455

All land, buildings and infrastructure are carried at fair value, while all other asset classes are carried at cost in accordance with Queensland Treasury’s Non-Current Asset Policies for the Queensland Public Sector.

Land, buildings and infrastructure were revalued using ‘fair value’ principles as at 30 June 2006, by the following independent expert valuers: Australian Valuation Office, J.A. Forson, AAPI.

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Land Buildings Infrastructure

Cost 71,533 18,916 9,071

Accumulated depreciation - (7,982) (3,881)

Net book value 71,533 10,934 5,190

12.1 Disclosure of revalued property, plant and equipment carrying amounts at cost

2008$’000 $’000 $’000


Cost 56,174 19,210 8,561

Accumulated depreciation - (7,682) (3,463)

Net book value 56,174 11,528 5,098

12.2 Fully depreciated assets

The strategic management of fully depreciated assets falls within FPQ’s Strategic Capital Investment and Asset Management Plan 2008-2012. The gross cost of fully depreciated assets represents only 7% of the total gross cost of property, plant and equipment. The disposal and replacement of these items will be managed under the existing arrangements for disposal and replacement of assets per the Strategic Capital Investment and Asset Management Plan 2008-2012.

2009 2008 $'000 $'000

Significant asset classes

Buildings 1,049 1,115

Infrastructure 613 575

Plant and equipment 4,314 4,738

Software 639 339

Total significant asset classes 6,615 6,767

If land, buildings and infrastructure were measured using the cost model the carrying amounts would be as follows:


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2009$’000 $’000 $’000


Carrying amount at 1 July 2008 70,345 16,044 15,456

Acquisitions 15,360 45 -

Disposals - (216) -

Transfer between classes - 211 510

Revaluation Increments/(decrements) 6,229 1,357 1,930

Impairment losses - (611) -

Depreciation/Amortisation - (916) (1,251)

Carrying amount at 30 June 2009 91,934 15,914 16,645

2009$’000 $’000 $’000

Plant and equipment


Total


Acquisitions 654 5,920 21,979

Disposals (1,606) - (1,822)

Transfer between classes 2,174 (4,590) (1,695)

Revaluation Increments/(decrements) - - 9,516

Impairment losses - - (611)

Depreciation/Amortisation (2,451) - (4,618)


2008 figures over page

2009 continued


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Acquisitions 20,188 46 -

Disposals - (184) -

Transfer between classes - 318 84

Revaluation Increments/(decrements) 6,006 - -

Impairment losses - (1,463) -

Depreciation/Amortisation - (1,077) (1,247)


2008$’000 $’000 $’000

Plant and equipment


Total


Acquisitions 2,285 3,118 25,637

Disposals (720) - (904)

Transfer between classes 2,399 (2,801) -

Revaluation Increments/(decrements) - - 6,006

Impairment losses - - (1,463)

Depreciation/Amortisation (2,640) - (4,964)


2008 continued


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2009 2008 $'000 $'000

Internal use software

At cost 2,495 778

Accumulated amortisation (965) (640)

Total 1,530 138

Intangibles reconciliation

Software Software

Carrying amount at start of year 138 226

Acquisitions 1,717 -

Amortisation (325) (88)

Carrying amount at end of year 1,530 138

14. Other financial assets

2009 2008 $'000 $'000

Other financial assets

Shares - Wollemi Australia Pty Ltd 40 40

Less Impairment - Shares (40) -

Total - 40

15. Biological assets

2009 2008 Note $'000 $'000

(i) Plantation growing timber

Carrying amount at the start of the year 1,173,637 1,081,122

Decrease from disposals / sales 3a(ii) (72,379) (93,792)

Gain / (loss) from changes in fair values 3a(i) 66,169 186,307

Carrying amount at the end of the year 1,167,427 1,173,637

(ii) Wollemi pine

Carrying amount at the start of the year 261 955

Decrease from disposals / sales (76) (976)

Gain / (loss) from changes in fair values (185) 282

Carrying amount at the end of the year - 261


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2009 2008Change $'000 $'000

Discount Rate (Weighted Average Cost of Capital) +1% (124,290) (119,071)

-1% 150,224 143,516

Expected future sales values +5% 72,148 72,141

-5% (72,148) (72,141)

Expected future costs +5% (13,776) (13,460)

-5% 13,776 13,460

16. Payables

2009 2008 $'000 $'000

Current

Trade creditors 1,041 2,225

Work Performance arrangement fee payable 250 663

Accrued interest, loan guarantee fee and other costs of finance 1,566 1,564

Tax payable - Fringe benefits 42 30

- GST payable 733 880

- Less GST receivable (912) (919)

Accrued expenses 742 982

Prepaid royalties, grants and other revenue received in advance 19 -

Dividend payable 3,261 13,356

Other payables - 107

Total 6,742 18,888

17. Dividend

2009 2008 Note $'000 $'000

Movement in dividend payable

Balance at the beginning of the financial year 13,356 5,435

Payable recognised for the year 3,261 13,356

Reduction in payable as a result of payments (13,356) (5,435)

Total 2.19 3,261 13,356


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2009 2008$'000 $'000

Non-current

Queensland Treasury Corporation borrowings (1) 76,153 76,153

Total 76,153 76,153

The loan is in a $A denominated amount and recognised at book value, interest being expensed as it accrues. No interest has been capitalised during the current or comparative reporting period. The book interest rate is 6.12%. The market value of the loan at 30 June, as notified by the Queensland Treasury Corporation, was $79,281,740 (2008: $75,577,100). This represents the value of the debt if FPQ repaid the loan in full at balance date. As it is the intention of FPQ to hold its debt at existing levels on an ‘interest only’ basis, no adjustment provision has been made to ledger the difference between book and market value of the debt. The intention to hold debt at current levels was confirmed and approved by the responsible Ministers on 5 June 2008. As a consequence, no part of the loan balance outstanding has been reported as a ‘current’ liability (ie payable within the next twelve months). Refer Note 6 for information relating to borrowing costs associated with this loan.

(1)

19. Asset revaluation reserve by class

2009$’000 $’000 $’000 $’000

Land Buildings Infrastructure Total

Balance 1 July 2008 5,161 2,514 5,127 12,802

Revaluation increments 6,230 1,376 1,930 9,536

Impairment losses through equity - (19) - (19)

Tax effect on ARR (1,869) (407) (579) (2,855)

Transfer to Retained Earnings - (8) - (8)

Balance 30 June 2009 9,522 3,456 6,478 19,456

20. Board Remuneration

2009 2008Fees and expenses

The Honourable Con Sciacca (Chair) 41,080 39,567

Adjunct Professor Joan Sheldon AM 25,580 23,502

Mr Warwick Marler 25,480 24,552

Mr Bill Brett 25,480 23,744

Professor Ian Lowe AM 23,920 22,483

Total 141,540 133,848

Remuneration received, or due and receivable by Board Members from FPQ in connection with management of FPQ was as follows (in whole $)

The asset revaluation reserve represents the net effect of upwards and downwards revaluations of assets to fair value.


21. Reconciliation of net operating result to net cash provided by (used in) operating activities

2009 2008 Note $'000 $'000

Profit from ordinary activities after income tax equivalents

3,476 85,454

Non-cash items:

Unrealised biological assets (increment)/decrement 3(a)(iii) 6,210 (92,516)

Depreciation and amortisation 4,943 5,051

Asset write-downs and decrements (reversals) 651 393

(Gain)/loss on disposal of non-current assets 214 68

Income tax equivalents 1,481 36,627

Changes in assets and liabilities:

(Increase)/decrease in inventories 125 136

(Increase)/decrease in biological assets (Wollemi) 261 694

(Increase)/decrease in receivables 3,949 827

(Increase)/decrease in prepayments (11) 43

(Increase)/decrease in GST input tax credits receivable

7 (106)

Increase/(decrease) in employee benefits 6 21

Increase/(decrease) in other liabilities 19 (6)

Increase/(decrease) in GST payable (147) (4)

Increase/(decrease) in payables (1,936) 1,322

Net cash provided by operating activities 19,248 38,004

Reconciliation of cash

For the purpose of the Cash Flow Statement, cash includes cash on hand and deposits at call which are readily convertible to cash and which are used in the day-to-day cash management function of FPQ. Cash at the end of the reporting period as shown in the Cash Flow Statement is reconciled to the related items in the Balance Sheet as detailed in Note 9.

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22. Interest in joint ventures

FPQ holds an interest in a number of joint ventures. These are all in the category of jointly controlled operations. Inputs to these joint ventures are recorded and accumulated over the life of the venture with the outputs being shared in proportion to the investment or as otherwise agreed in the Joint Venture Deed. Investments in these ventures are currently classified by the output as follows:

Private Forestry Plantations Ventures:These are designed to establish commercially viable timber plantations on privately owned, and Crown lands. FPQ has a share in 110 of these ventures. Contributions to these joint ventures for 2008-09 totalled $235,940 (2008: $546,660).

Seed Orchard Venture:This venture was designed to produce and sell improved tree seed from an orchard established for the purpose. Contributions to this joint venture for 2008-09 totalled $Nil (2008: Nil).

No commercial output was derived from these joint venture operations during the year.

23. Controlled entity

Wollemi Australia Pty Ltd (WA) was established on 28 May 2001 as a joint venture company to manage the propagation and worldwide marketing of the Wollemi Pine under license from the Royal Botanic Gardens in Sydney. Up until 31 May 2007 FPQ held a 50% interest in this company (1 ordinary share at $1) which is incorporated in Australia and conducts its business primarily via sub-licensing arrangements.

On 31 May 2007 FPQ acquired the only other ordinary share in this company and assumed full control of the business. This now qualifies the company as a controlled ‘public sector entity’.

Because the amount of the investment and the transactions of WA are not considered material, the entity is not consolidated with Forestry Plantation Queensland’s financial statements. This situation is not expected to change.

Additionally WA’s statements are special purpose financial statements which are prepared to meet the needs of management, the primary users of the report. The statements are prepared in accordance with the measurement and recognition principles of applicable Accounting Standards but do not necessarily meet the disclosure requirements of all those standards. The financial statements of WA are audited by the Queensland Auditor-General.

24. Contingent liabilities – Litigation in progress

Litigation in progress relates to commercial disputes and/or damages claims. The jurisdiction of all contingent liability matters as at 30 June 2009 is as follows:

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2009 2008Supreme Court 1 1

District Court 0 1

Other 1 1

FPQ’s legal advisers and management believe that it would be misleading to estimate the final amounts payable, if any, in respect of the litigation filed in the courts. FPQ has insurance cover with Queensland Government Insurance Fund. The costs of any successful claims against FPQ may, depending on the circumstances, be met by the insurer.


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2009 2008$'000 $'000

Not later than one year 1,797 1,507

Later than one year and not later than five years 2,493 2,573

Later than five years - -

Total 4,290 4,080

Non-cancellable operating lease commitments

Commitments under operating leases at reporting date are inclusive of anticipated GST and are payable as follows:

Capital expenditure

Plant and equipment payable within 1 year ($‘000): $2,028 (2008: $1,684).

Recurrent expenditure - land rental commitments

Commitments for payment of land rentals in respect of hardwood plantation agreements in place as at the reporting date are payable as follows:

2009 2008$'000 $'000

Not later than one year 493 428

Later than one year and not later than five years 1,972 1,713

Later than five years 7,826 7,052

Total 10,291 9,193

Land rentals payable by FPQ are disclosed at nominal amounts. While the agreements provide that land rentals payable by FPQ are to be adjusted by CPI annually, rental commitments have been disclosed at nominal amounts due to the difficulty in estimating future changes in CPI over an extended period (average remaining life of existing agreements is 20.18 years).

(1)

26. Deposits held in trust

Security, tender and other deposits are held by FPQ in trust primarily as guarantees for performance under timber sales agreements and contracts. Deposits held as at 30 June 2009 amounted to $250,905 (2008:$ 220,184). These deposits are not recognised in the financial statements but are reported for information purposes. Transactions and balances relating to these deposits are subject to audit by the Queensland Auditor-General.


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2009 2008Category Note $'000 $'000

Financial Assets

Cash 9 39,653 54,153

Receivables 10 13,923 17,861


Total 53,576 72,014

Financial Liabilities

Payables 16 6,742 18,888

Other financial liabilities - QTC Borrowings 18 76,153 76,153

Total 82,895 95,041

Categorisation of Financial Instruments

FPQ has the following categories of financial assets and financial liabilities:

Financial Risk Management

FPQ’s activities expose it to a variety of financial risks – credit risk, liquidity risk, market risk, and interest rate risk.

Financial risk management is implemented pursuant to Government and FPQ policies. These policies provide written principles for overall risk management and seek to minimise potential adverse effects on the financial performance of FPQ.

Further detail on each risk exposure is outlined below.

Credit Risk

Credit risk exposure refers to the situation where FPQ may incur financial loss as a result of another party to a financial instrument failing to discharge their obligation.

The maximum exposure to credit risk at balance date in relation to each class of recognised financial assets is the gross carrying amount of those assets inclusive of any provisions for impairment.

The following table represents FPQ’s maximum exposure to credit risk based on contractual amounts net of any allowances:

2009 2008Maximum Exposure to Credit Risk Note $'000 $'000

Financial Assets

Cash 9 39,653 54,153

Receivables 10 13,923 17,861


Total 53,576 72,014


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and• Trade debtors are secured by either cash deposit, or other financial guarantee.

No financial assets and financial liabilities have been offset and presented net in the Balance Sheet.

No financial assets have had their terms renegotiated so as to prevent them from being past due or impaired, and are stated at the carrying amounts as indicated. The method for calculating any provisional impairment for risk is based on past experience, current and expected changes in economic conditions and changes in client credit ratings. The recognised impairment loss is $142,496 for the current year. This is an increase of $142,496 from 2008 and is due to uncertainty surrounding the ability of a customer to pay an outstanding debt, and the ability of the same corporation to buy back preference shares currently held by FPQ.

Of the financial assets that have not been impaired, $12,678,221 (99.7% of the total owing) is either not yet due or less than one month overdue. Debtors outstanding over 60 days amount to $38,596. For the 2007-08 reporting period, $16,041,061 (96.7% of the total owing) of the financial assets not impaired were either not yet due or less than one month overdue, and $547,351 were outstanding over 60 days.

Of the impaired financial assets, $382,920 is over 60 days overdue and $40,419 is either not yet due or less than one month overdue. There were no impaired financial assets in the 2007-08 reporting period.

Liquidity Risk

Liquidity risk refers to the situation where FPQ may encounter difficulty in meeting obligations associated with financial liabilities.

FPQ is exposed to liquidity risk through its trading in the normal course of business and borrowings from Queensland Treasury Corporation.

FPQ manages liquidity risk through the use of a liquidity management strategy. This strategy aims to reduce the exposure to liquidity risk by ensuring FPQ has sufficient funds available to meet employee and supplier obligations as they fall due. This is achieved by ensuring that minimum levels of cash are held within the various bank accounts so as to match the expected duration of the various employee and supplier liabilities.

The contractual maturity analysis of financial liabilities, calculated based on cash flows relating to the repayment of the principal amount outstanding at balance date, is set out in the following table.


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1 year or less

1 to 5 years

Greater than 5

years Total

Financial instruments Note $'000 $’000 $’000 $'000

Financial liabilities

Payables 16 6,742 - - 6,742

Other - QTC borrowings 18 - - 76,153 76,153

Total 6,742 - 76,153 82,895

Liquidity Risk Tables

2008Maturity Date

1 year or less

1 to 5 years

Greater than 5

years Total

Financial instruments Note $'000 $’000 $’000 $'000

Financial liabilities

Payables 16 18,888 - - 18,888

Other - QTC borrowings 18 - - 76,153 76,153

Total 18,888 - 76,153 95,041

Market Risk

FPQ does not trade in foreign currency and is not materially exposed to commodity price changes. FPQ is exposed to interest rate risk through its borrowings from Queensland Treasury Corporation, and cash deposited in interest bearing accounts. Details have been disclosed in the liquidity and interest risk tables. FPQ does not undertake any hedging in relation to interest risk and manages its risk as per the liquidity risk management strategy.

Interest Rate Risk

The following interest rate sensitivity analysis depicts the outcome of profit and loss if interest rates would change by +/- 1% from the year-end rates applicable to FPQ’s financial assets and liabilities. With all other variables held constant, FPQ would have a surplus and equity increase/(decrease) of $365,000 (2008: $220,000). This is mainly attributable to FPQ’s exposure to variable interest rates on its borrowings from Queensland Treasury Corporation.


2009

Financial Instruments Carrying Amount

2009 Interest Rate Risk

-1% +1%

Profit Equity Profit Equity

Cash 39,653 (397) (397) 397 397

QTC Borrowings 76,153 762 762 (762) (762)

Overall effect on profit and equity 365 365 (365) (365)

2008

Financial Instruments Carrying Amount

2008 Interest Rate Risk

-1% +1%

Profit Equity Profit Equity

Cash 54,153 (542) (542) 542 542

QTC Borrowings 76,153 762 762 (762) (762)

Overall effect on profit and equity 220 220 (220) (220)

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Fair Value

The fair value of financial assets and liabilities must be estimated for recognition and measurement and for note disclosure purposes.

The fair value of trade receivables and payables are assumed to approximate their nominal value less estimated credit adjustments.

The carrying amounts of all financial assets and financial liabilities, except the borrowings from Queensland Treasury Corporation are representative of their fair value. The fair value of the QTC borrowings is the market value advised by QTC.

Financial Instruments Carrying Amount Fair Value

2009 2008 2009 2008

$’000 $’000 $’000 $'000

Other - QTC borrowings 76,153 76,153 79,282 75,577

Total 76,153 76,153 79,282 75,577

28. Related Party disclosures

Entities subject to common control

FPQ is a Queensland corporation sole, with all shares held by the shareholding Ministers on behalf of the State of Queensland. All State of Queensland controlled entities meet the definition of a related party of FPQ.

FPQ transacts with other State of Queensland controlled entities, including Government Departments, Government Owned Corporations, Corporations Sole, and Public Service Offices. All material transactions are negotiated on terms equivalent to those that prevail in arm’s length transactions.

The value of these material related party transactions and balances, as reported in the balance sheet and income statement, are disclosed below:


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Nature of transaction Note $'000 $'000

Other financial liability Loan with Queensland Treasury Corporation (QTC).

18 76,153 76,153

Payables - creditors Payable to FPQO for work performance services and accrued interest expense to QTC.

16 1,816 2,227

Dividend payable Dividend payable is to the Queensland Government (refer Note 2.19).

16 3,261 13,356

Work Performance Agreement Fee

Work performance services between FPQ and FPQO.

29,679 31,240

Interest expense QTC loan interest includes administration fee and loan guarantee fee.

6 5,131 5,137

29. Future Developments

Disposal of all or part of the businesses, assets and liabilities of FPQ

On 2 June 2009 the Queensland Government announced its intention to undertake a significant asset sale program.

The Infrastructure investment (Assets Restructuring and Disposal) Act 2009 has been passed to facilitate the restructure and disposal of particular businesses, assets and liabilities of government entities. The Act grants extensive powers to the Minister to direct the restructuring, disposal or other processes necessary for the sale program with respect to ‘declared projects’. Under section 5(1)(f ) the disposal of all or part of the businesses, assets and liabilities of FPQ is a ‘declared project’.

At balance sheet date, there is significant uncertainty around the timing and nature of the disposal and therefore management considers that the criteria to reclassify the relevant non-current assets or disposal group as ‘held for sale’ in accordance with AASB 5 Non Current Assets Held for Sale and Discontinued Operations as amended have not been met.


Certificate of Forestry Plantations Queensland These general purpose financial statements have been prepared pursuant to section 46F(1) of the Financial Administration and Audit Act 1977 (the Act) and other prescribed requirements. In Accordance with Section 46F(3) of the Act we certify that in our opinion:

the prescribed requirements for the establishment and keeping of the accounts have been complied with in all material respects; and

the statements have been drawn up to present a true and fair view, in accordance with prescribed accounting standards, of the transactions of Forestry Plantations Queensland for the financial year ended 30 June 2009 and of the financial position as at the end of that year.

(i)

(ii)

Cert

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STUART SANDERSON B.Com (CPA) DR W A HOEY

Director, Finance Chief Plantation Forestry Officer


PAUL HORNE CA Queensland Audit Officeas Delegate of the Auditor-General of Queensland Brisbane28 August 2009

INDEPENDENT AUDITOR’S REPORT

To the Chief Plantation Forestry Officer of the Forestry Plantations Queensland

Matters Relating to the Electronic Presentation of the Audited Financial Report

The auditor’s report relates to the financial report of Forestry Plantations Queensland for the financial year ended 30 June 2009 included on Forestry Plantations Queensland‘s website. The Chief Plantation Forestry Officer is responsible for the integrity of the Forestry PlantationsQueensland‘s website. I have not been engaged to report on the integrity of the Forestry Plantations Queensland‘s website. The auditor’s report refers only to the statements named below. It does not provide an opinion on any other information which may have been hyperlinked to/from these statements. If users of the financial report are concerned with the inherent risks arising from electronic data communications they are advised to refer to the hard copy of the audited financial report, available from Forestry Plantations Queensland, to confirm the information included in the audited financial report presented on this website.

These matters also relate to the presentation of the audited financial report in other electronic media including CD Rom.

Report on the Financial Report

I have audited the accompanying financial report of Forestry Plantations Queensland which comprises the balance sheet as at 30 June 2009, and the income statement, statement of changes in equity and cash flow statement for the year ended on that date, a summary of significant accounting policies, other explanatory notes and certificates given by the Chief Plantation Forestry Officer and officer responsible for the financial administration of Forestry Plantations Queensland.

The Chief Plantation Forestry Officer’s Responsibility for the Financial Report

The Chief Plantation Forestry Officer is responsible for the preparation and fair presentation of the financial report in accordance with prescribed accounting requirements identified in the Financial Administration and Audit Act 1977 and the Financial Management Standard 1997, including compliance with applicable Australian Accounting Standards (including the Australian Accounting Interpretations). This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor’s Responsibility

My responsibility to express an opinion on the financial report based on the audit is prescribed in the Auditor-General Act 2009. This Act, including transitional provisions, came into operation on 1 July 2009 and replaces the previous requirements contained in the Financial Administration and Audit Act 1977.

The audit was conducted in accordance with the Auditor-General of Queensland Auditing Standards, which incorporate the Australian Auditing Standards. These auditing standards require compliance with relevant ethical requirements relating to audit engagements and that the audit is planned and performed to obtain reasonable assurance whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of risks of material misstatement in the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control, other than in expressing an opinion on compliance with prescribed requirements. An audit also includes evaluating the appropriateness of accounting policies and the reasonableness of accounting estimates made by the Chief Plantation Forestry Officer, as well as evaluating the overall presentation of the financial report including any mandatory financial reporting requirements as approved by the Treasurer for application in Queensland.

I believe that the audit evidence obtained is sufficient and appropriate to provide a basis for my audit opinion.

Independence

The Auditor-General Act 2009 promotes the independence of the Auditor-General and QAO authorised auditors. The Auditor-General is the auditor of all Queensland public sector entities and can only be removed by Parliament.

The Auditor-General may conduct an audit in any way considered appropriate and is not subject to direction by any person about the way in which audit powers are to be exercised. The Auditor-General has for the purposes of conducting an audit, access to all documents and property and can report to Parliament matters which in the Auditor-General’s opinion are significant.

Auditor’s Opinion

In accordance with s.40 of the Auditor-General Act 2009 –

a)b)

I have received all the information and explanations which I have required; andin my opinion–

i)

ii)

the prescribed requirements in respect of the establishment and keeping ofaccounts have been complied with in all material respects; andthe financial report has been drawn up so as to present a true and fair view, inaccordance with the prescribed accounting standards of the transactions of theForestry Plantations Queensland for the financial year 1 July 2008 to 30 June 2009and of the financial position as at the end of that year.

FPQO Annual Report 2008-09

Queensland OfficeForestry Plantations


The Forestry Plantations Queensland Office (FPQO, the “Office”), a public service office under section 29(1) of the Public Service Act 2008, was established on 1 May 2006 (under the former Public Service Act 1996) as a provider of forest plantation management services to FPQ, notably human resources, on a commercial basis.

FPQO also has custodial responsibility for State Plantation Forests, a category of State Forest used for plantation production. FPQO’s strategic imperatives are to:

• develop and maintain forest management knowledge, expertise and capacity

• fulfil its obligations to FPQ under its Work Performance Agreement with the Corporation (see below), including the delivery of FPQ’s Operational Plan

• assume custodial responsibility for Queensland’s state-owned plantation forest lands

• provide FPQ with appropriate access to these forests for the purpose of managing and dealing with plantation and related natural resource products.

On 2 May 2006, FPQO executed a Deed of Profit à Prendre with FPQ, giving the Corporation access rights

to plantations and related plantation products in State Plantation Forests to undertake commercial production and sale of natural resource products, such as plantation timber and other vegetative matter.

Staffing

To enable FPQ to carry out its business operations, FPQO has a Work Performance Agreement with the Corporation. Under this arrangement, FPQO employees perform FPQ’s business responsibilities and assist in delivering its Operational Plan.

At 30 June 2009, FPQO employed 458 staff, equating to 436 full-time equivalents (FTE), with 90 per cent of these working in regional plantation forestry centres. Due to the seasonal nature of FPQ’s commercial operations, FPQO’s staff numbers vary over the course of a year, with staffing levels typically fluctuating with silvicultural operational requirements. A break-down of the 436 FTE as at 30 June was: casual 35 FTE; contract 7 FTE; temporary 20 FTE and permanent 374 FTE.

FPQO’s FTE staff numbers were reduced by 8.1 per cent during 2008-09 (the Office employed 474 FTE staff at 30 June 2008) due primarily to management considering optimal staffing levels at the various FPQO work sites and changes in nursery production technology. The reduction in FTE numbers did not involve forced redundancies.

FPQ Office


Voluntary early retirements and deployment

Five FPQO staff took voluntary early retirement packages during 2008-09, at a total cost to the Office of $356,045. FPQO had five deployed staff during 2008-09.

Enterprise bargaining

On FPQO’s formation, employees who transferred from the former DPI Forestry remained covered under the DPI Forestry Certified Agreement 2005 (EA5) that nominally expired on 31 October 2007. This expiry date was extended by mutual agreement between FPQO management, staff and unions to allow a new one-year FPQO Enterprise Agreement (EA1) to be developed. This agreement was ratified by the Queensland Industrial Relations Commission (QIRC) on 27 February 2008.

By 30 June 2008, FPQO management, staff representatives and union delegates had begun preliminary deliberations prior to developing a new Enterprise Agreement to take effect from 1 November 2008. This Enterprise Agreement (EA2) was ratified by the QIRC on 24 March 2009 following overwhelming support through an FPQO employee ballot. EA2 will operate for three years, from 1 November 2008 to 31 October 2011, and allows for three staged pay increases totalling 12.5 per cent over the life of the agreement. The first pay increase (4.5 per cent) was effective from 1 November 2008.

The Queensland Government has stated that the honouring of EA2’s employee provisions would be a condition of the proposed sale of FPQ (see page 13).

Workplace health and safety

FPQO is committed to ensuring its employees work in a safe environment and has implemented strategies specifically targeting injury management. These strategies include early incident notification, upskilling of workplace rehabilitation coordinators, improving processes with, and the relationship between, FPQO and WorkCover Qld, and focusing on causal factors rather than injury types. In 2008-09, WorkCover Qld premiums for FPQO staff, paid by FPQ, totalled $93,379 (including a discount for early payment).

Injury and incident reports for 2008-09 numbered 74, a 35 per cent reduction on 2007-08’s total of 115 and a 106 per cent reduction on 2006-07’s total of 153.

WHS system review

A major review of FPQO’s workplace health and safety management system was undertaken in 2008-09 by human resources consultants Noel Arnold and Associates. While the report gave FPQO’s workplace health and safety management system a solid “pass”, it detailed components of the system that required strengthening if the organisation’s corporate workplace

health and safety expectations were to be met. In particular, the review found that there was a need for strengthening formal risk assessment processes, as they applied to the strategic management of organisation-wide hazards and risks. The report also identified a need to increase awareness of workplace health and safety management accountabilities and responsibilities.

FPQO has commissioned a range of initiatives in response to the review’s findings, including a budget review to ensure sufficient funding is provided to accommodate various remedial measures. Notwithstanding the State Government’s June 2009 decision to sell FPQ to private enterprise, milestones to be achieved by December 2009 include:

• Reviewing and updating current workplace health and safety procedures to reflect the current organisation, structure and legislative changes

• Establishing a stand-alone Workplace Health and Safety Committee to oversee the development and implementation of a new FPQO Workplace Health and Safety Strategy and Implementation Plan

• Developing a rolling Workplace Health and Safety Strategic Plan that clearly articulates objectives, strategies, key performance measures and targets for FPQO workplace health and safety

• Introducing a formal induction process for senior management and senior staff to inform them of their workplace health and safety roles and responsibilities

• Developing a communication strategy to regularly inform staff of their workplace health and safety accountabilities and responsibilities

• Developing a corporate Workplace Health and Safety Risk Register.

Health assessments

FPQO’s Safety and Wellbeing (SAW) Program was implemented during 2006 and has continued to enhance working conditions and overall health for FPQO employees, leading to greater productivity for the Office. FPQO’s 2009 voluntary health assessments, conducted across the state by Wesley Corporate Health in March 2009, delivered key elements of the SAW Program. Statewide, 64 per cent of FPQO staff participated in the 2009 assessments. Staff were surveyed to determine their individual health risk levels based on factors such as age, diet, body mass index, blood pressure and blood glucose and cholesterol levels.

The assessments also comprised a flu vaccination, skin cancer check, height and weight, vision and cardiac risk assessments and bowel cancer screening. In cases where participants were found to have adverse assessments,

FPQ Office


FPQ Office

they were referred to their general practitioner.

The level of staff participation in this initiative remains high and 2009 results showed significant improvements in the vital areas of body mass index, blood sugar, cholesterol blood pressure and smoking. Individual results from the health assessments remain confidential, although general findings are reported to support targeted training and educational programs for FPQO staff to improve health and productivity.

Health incentive scheme

FPQO introduced a Health Incentive Scheme during 2007-08, providing funding for staff to develop and participate in locally coordinated health programs. This funding continued in 2008-09 and led Brisbane and Beerburrum FPQO staff to participate in “Biggest Loser” style weight loss competitions during the year. The competitions gave staff the opportunity to combine healthy diets with an exercise regime of their choice to achieve a healthier lifestyle. In FPQ’s Brisbane central office, staff involved in the competition lost a total 82 kilos of weight by the competition’s close in August 2008.

Diploma of Management

FPQO’s second intake of students for its Diploma of Management undertook their final assessment at the Office’s Brisbane central office through the first half of 2009. The qualification, issued through the Royal Melbourne Institute of Technology, consists of 11 competencies and includes on-the-job coaching, work projects and formal tertiary-level training. The course targets FPQO’s middle managers and future leaders, with a specific emphasis on forestry in a commercial environment.

Offered for the first time in 2007-08, the diploma is the first qualification of its type for FPQO staff. The 2008-09 intake comprised 20 FPQO staff, including eight female staff.

Graduates-in-training

FPQO employed three graduate foresters-in-training in 2009. This brings the total number of graduates accepted by the former DPI Forestry and FPQO to 82 since the graduate training program started in 1997.

Under the provisions of the program, graduates work for FPQO for 12 months in a temporary capacity and can then apply for permanent positions when their training is complete, depending on available vacancies and other criteria being met.

Consultancies

FPQO required no consultancy services during 2008-09.


FPQO’s Code of Conduct (also applicable to FPQ) was developed and implemented in 2007-08. The code is designed to meet the needs of a commercial business and adheres to all obligations of the Public Sector Ethics Act 1994.

Whistleblowers Protection Act 1994

During 2008-09, no public interest disclosures were received by FPQO or referred to FPQO by any Legislative Assembly member under Section 28A of the Whistleblowers Protection Act 1994. In addition, no public interest disclosures were requested of FPQO, or made by FPQO during the period in review.

Outlook for 2009-10

While recognising that the Queensland Government’s plan to sell FPQ to the private sector (see page 13) may impact on FPQO’s activities, during 2009-10 the Office will continue to work to deliver FPQ’s Operational Plan and continue to pursue efficiency improvements, in line with its Work Performance Agreement with FPQ, and will help in preparing the Corporation for sale. FPQO will manage, develop and deploy its staff as required in accordance with relevant public sector human resource directives.

Representing the State of Queensland, FPQO will also undertake necessary administrative and custodial responsibilities for State Plantation Forests and will monitor the implementation of the Deed of Profit à Prendre between FPQO and FPQ with respect to these areas.


The Office has again met its contractual obligations in providing commercial labour-related forest management services to FPQ to enable the Corporation to achieve its objectives. The following comments are provided in relation to the published financial statements.

Income statement

For the 2008-09 financial year, the organisation has again achieved a balanced financial result after recovering total expenditure incurred in providing services (including other organisational costs) from its client, FPQ. Costs incurred in service delivery are lower than in the previous year due jointly to increased operational efficiencies and to some reductions in demand for services.

Balance sheet

The net assets of the entity have increased during the year as a direct result of the revaluation of land ($14.3 million). The change in values is evident in both the Balance Sheet and the Statement of Changes in Equity.

Cash Flow Statement

The Cash Flow Statement is the fourth and last of FPQO’s major financial statements and highlights the sources and uses of funds over the reporting period. This statement highlights the existence of satisfactory cash balances for operational business purposes. The organisation has maintained its liquidity and cash position over the financial year.

Disclaimer: The materials presented on this site are provided by the Queensland Government for information purposes only. Users should note that the electronic versions of financial statements on this site are not recognised as the official or authorised version. The electronic versions are provided solely on the basis that users will take responsibility for verifying their accuracy, completeness and currency. Although considerable resources are used to prepare and maintain the electronic versions, the Queensland Government accepts no liability for any loss or damage that may be incurred by any person acting in reliance on the electronic versions.

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for the year ended 30 June 2009FPQO Financial Statements

CONTENTS PAGE

INCOME STATEMENT 74

BALANCE SHEET 74

STATEMENT OF CHANGES IN EQUITY 75

CASH FLOW STATEMENT 76

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS 77

1 CORPORATE INFORMATION 77

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 77

3 OTHER REVENUE 81

4 EMPLOYEE EXPENSES 81

5 OTHER OPERATING EXPENSES 82

6 RECEIVABLES 82

7 PROPERTY 83

8 PAYABLES 83

9 ACCRUED EMPLOYEE BENEFITS 83

10 RECONCILIATION OF NET OPERATING RESULT TO NET CASH PROVIDED BY (USED IN) 84

OPERATING ACTIVITIES

11 ASSET REVALUATION RESERVE BY CLASS 84

12 CONTINGENT LIABILITY - WORKERS' COMPENSATION CLAIMS 84

13 FINANCIAL INSTRUMENTS 84

CERTIFICATE OF FORESTRY PLANTATIONS QUEENSLAND OFFICE 87

INDEPENDENT AUDITOR’S REPORT 88


20082009Note $'000 $'000

Income

Work performance arrangement fee 29,374 30,934

Other Revenue 3 183 360

Total income 29,557 31,294

Expenses

Employee expenses 4 29,513 31,276

Other operating expenses 5 44 18

Total expenses 29,557 31,294

Operating surplus/(deficit) - -

for the year ended 30 June 2009Income Statement

This Income Statement is to be read in conjunction with the notes to the financial statements.

20082009Note $'000 $'000

Current assets

Cash & cash equivalents 4,809 4,778

Receivables - debtors 6 585 891

Total current assets 5,394 5,669

Non-current assets

Land 7 216,177 201,842

Total non-current assets 216,177 201,842

Total assets 221,571 207,511

Current liabilities

Payables 8 457 392

Accrued employee benefits 9 3,167 3,507

Total current liabilities 3,624 3,899

Total liabilities 3,624 3,899

Net assets 217,947 203,612

Equity

Capital 131,814 131,814

Retained surplus - -

Reserves

- Asset revaluation reserve 11 86,133 71,798

Total equity 217,947 203,612

as at 30 June 2009Balance Sheet

This Balance Sheet is to be read in conjunction with the notes to the financial statements.


20082009

This Statement of Changes in Equity is to be read in conjunction with the notes to the financial statements.

Note $'000 $'000

Capital


Net assets transferred / assumed to / from other departments - 47


Retained surplus

Balance at beginning of financial year - -

Operating surplus / (deficit) - -

Balance at end of financial year - -

Asset revaluation reserve


Increment / (decrement) on revaluation of land 11 14,335 51,125


Total equity 217,947 203,612

Total equity at beginning of financial year 203,612 152,440

Operating surplus / (deficit) - -

Non-owner changes in equity:

Asset revaluation net increment 14,335 51,125

Transactions with owners as owners:

Non-reciprocal transfer of assets and liabilities - 47

Total equity at end of financial year 217,947 203,612

for the year ended 30 June 2009Statement of Changes in Equity


20082009

This Cash Flow Statement is to be read in conjunction with the notes to the financial statements.

Note $'000 $'000

Cash flows from operating activities

Inflows:

Receipts from customers 29,829 31,685

GST input tax credits from ATO 1 -

GST collected from customers 2,978 3,097

Interest received 189 333

Other 8 3

Outflows:

Payments to suppliers and employees (30,000) (31,229)

GST paid to suppliers (4) -

GST remitted to ATO (2,923) (3,145)

Other (47) (10)

Net cash provided by (used in) operating activities 10 31 734

Cash flows from financing activities

Net cash provided by (used in) financing activities - -

Cash flows from investing activities

Net cash provided by (used in) investing activities - -

Net increase / (decrease) in cash held 31 734

Cash at the beginning of the financial year 4,778 4,044

Cash at the end of the financial year 4,809 4,778

for the year ended 30 June 2009Cash Flow Statement


1. Corporate information

This financial report covers the Forestry Plantations Queensland Office (FPQO). FPQO is a Queensland public service office established under the Public Service Act 2008. FPQO is controlled by the State of Queensland which is the ultimate parent. The head office and principal place of business of FPQO is Level 2, 104 Melbourne Street, South Brisbane.

FPQO was established in accordance with Public Service Departmental Arrangement Notice (No. 6) 2006 on 1 May 2006 as a result of the State Government’s reform of the commercial forest management activities previously undertaken by DPI Forestry, which was a commercial business unit of the Department of Primary Industries and Fisheries (DPI&F).

This commercial reform process also provided for the establishment of Forestry Plantations Queensland (FPQ), a corporation sole established under the Forestry Plantations Queensland Act 2006 as the entity responsible for the future management of the State’s commercial plantation activities.

FPQO delivers operational plan outcomes for FPQ under a Work Performance Agreement as well as maintaining custody of the crown land allocated for forest production purposes.

This entity’s principal client, Forestry Plantations Queensland, has been nominated for sale by the State Government. For further information refer to the financial statements of Forestry Plantations Queensland.

2. Summary of significant accounting policies

The significant accounting policies that have been adopted in the preparation of the financial statements are as follows:

2.1 Basis of accounting

The financial report is a general purpose financial report and has been prepared in accordance with applicable Australian Accounting Standards, the Treasurer’s Minimum Reporting Requirements for the year ending 30 June 2009, and other authoritative pronouncements.

The accounts have been prepared on an accrual basis and, except where stated otherwise, in accordance with the historical cost convention.

2.2 Cash assets

For the purposes of the Balance Sheet and the Cash Flow Statement, cash assets include all cash and cheques receipted but not banked at 30 June as well as deposits at call with financial institutions.

2.3 Receivables

Debtors are recognised at nominal amounts due at the time of service delivery. Terms are net 30 days. A provision for impairment is made when collection of the full amount is no longer probable. Bad debts are written off as incurred.

2.4 Land

FPQ carries out its forestry establishment, management and marketing operations principally on Crown land allocated for forest production purposes by FPQO. While control of this land remains with FPQO, FPQ is granted full and exclusive access to State Plantation Forests, under a deed of profit a prendré, to carry out its operations in accordance with the Forestry Act 1959. In consideration of the grant of this right FPQ has paid one dollar.

2.5 Revaluations of land

Land is measured at fair value in accordance with AASB 116 Property, Plant and Equipment, and Queensland Treasury’s Non-Current Asset Accounting Policies for the Queensland Public Sector.

Land is comprehensively revalued at least once every five years with interim valuations, using appropriate indices, being otherwise performed on an annual basis, where there has been a material variance in the index.

Any revaluation increment arising on the revaluation of the land is credited to the Asset Revaluation Reserve (ARR), except to the extent it reverses a revaluation decrement for that same class of assets previously recognised as an expense, in which case the increase is recognised in the Income Statement. A revaluation decrement is charged as an expense, except to the extent that it reverses a previous increment for that same class of assets and a positive balance exists in the ARR for that asset class.

2.6 Impairment of land

All land is assessed for indicators of impairment on an annual basis. If an indicator of possible impairment exists, FPQO determines the asset’s recoverable amount. Any amount by which the

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asset’s carrying amount exceeds the recoverable amount is recorded as an impairment loss.

The asset’s recoverable amount is determined as the higher of the asset’s fair value less costs to sell, and its value in use. An impairment loss is offset against the asset revaluation reserve for land to the extent reserve funds are available with any remaining balance recognised in the Income Statement.

2.7 Payables

Trade creditors are recognised upon receipt of the goods or services ordered and are measured at the agreed purchase/contract price gross of applicable trade and other discounts. Amounts owing are generally settled on 7, 14 or 30 day terms.

2.8 Financial Instruments

Recognition

Financial assets and financial liabilities are recognised in the Balance Sheet when FPQO becomes party to the contractual provisions of the financial instrument.

Classification

Financial instruments are classified and measured as follows:

• Cash and cash equivalents – held at fair value through profit and loss

• Receivables – held at amortised cost• Payables – held at amortised cost

FPQO does not enter into transactions for speculative purposes, nor for hedging. Apart from cash and cash equivalents, FPQO holds no financial assets classified at fair value through profit and loss.

All other disclosures relating to the measurement and financial risk management of financial instruments held by FPQO are included in note 13.

2.9 Employee benefits

Wages, salaries, recreation leave and sick leave

Wages, salaries and recreation leave due but unpaid at reporting date are recognised in the Balance Sheet at the nominal salary rates. Payroll tax and workers’ compensation insurance are a consequence of employing employees, but are not counted in an employee’s total remuneration package. They are not employee benefits

and are recognised separately as employee related expenses. Employer superannuation contributions and long service leave levies are regarded as employee benefits.

All accrued recreation leave is disclosed as a current liability in the financial statements as past trends indicate that leave accrued approximates to leave taken, on an annual basis.

Prior history indicates that on average, sick leave taken each reporting period is less than the entitlement accrued. This is expected to continue in future periods. Accordingly, it is unlikely that existing accumulated entitlements will be used by employees and no liability for unused sick leave entitlements is recognised.

As sick leave is non-vesting, an expense is recognised for this leave as it is taken.

Long service leave

Under the Queensland Government’s long service leave scheme, a levy is made on FPQO to cover the cost of employees’ long service leave. The levies are expensed in the period in which they are paid or payable. Amounts paid to employees for long service leave are claimed from the scheme quarterly in arrears.

No provision for long service leave is recognised in the financial statements, the liability being held on a whole-of–Government basis and reported in the financial report prepared pursuant to AASB 1049 Whole of Government and General Government Sector Financial Reporting.

Superannuation

Employer superannuation contributions are paid to QSuper, the superannuation plan for Queensland Government employees, at rates determined by the State Actuary. Contributions are expensed in the period in which they are paid or payable. FPQO’s obligation is limited to its contribution to QSuper.

No liability is recognised for accruing superannuation benefits in these financial statements, the liability being held on a whole-of-Government basis and reported in the financial report prepared pursuant to AASB 1049 Whole of Government and General Government Sector Financial Reporting.

Executive Remuneration

The executive remuneration disclosures in the employee expenses note in the financial statements include:

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• the aggregate remuneration of all senior executive officers (including the Chief Executive Officer) whose remuneration for the financial year is $100,000 or more; and

• the number of senior executives whose total remuneration for the financial year falls within each successive $20,000 band, commencing at $100,000.

The remuneration disclosed is all remuneration paid or payable, directly or indirectly, by FPQO or any related party in connection with the management of the affairs of the entity or any of its subsidiaries, whether as an executive or otherwise. For this purpose, remuneration includes:

• wages and salaries;• accrued leave (that is, the increase/decrease

in the amount of annual and long service leave owed to an executive, inclusive of any increase in the value of leave balances as a result of salary rate increases or the like);

• performance pay paid, or due and payable, in relation to the financial year, provided that a liability exists (namely a determination has been made prior to the financial statements being signed), and can be reliably measured even though the payment may not have been made during the financial year;

• accrued superannuation (being the value of all employer superannuation contributions during the financial year, both paid and payable as at 30 June);

• car parking benefits and the cost of motor vehicles, such as lease payments, fuel costs, registration/insurance, repairs/maintenance, and fringe benefit tax on motor vehicles incurred by FPQO during the financial year, both paid and payable as at 30 June, net of any amounts subsequently reimbursed by the executives;

• housing, being the market value of the rent or rental subsidy, where rent is part-paid by the executive during the financial year, both paid and payable as at 30 June;

• allowances (which are included in remuneration agreements of executives, such as airfares or other travel costs paid to/for executives whose homes are situated in a location other than the location they work in); and

• fringe benefits tax included in remuneration agreements.

The disclosures apply to all senior executives appointed under the Public Service Act 2008 and classified as SES1 and above, with remuneration above $100,000 in the financial year. ‘Remuneration’ means any money, consideration

or benefit, but excludes amounts:

• paid to an executive by FPQO or a subsidiary where the person worked during the financial year wholly or mainly outside Australia during the time the person was so employed; or

• in payment or reimbursement of out-of-pocket expenses incurred for the benefit of the entity or any of its subsidiaries.

In addition, separate disclosure of separation and redundancy/termination benefit payments is included.

2.10 Insurance

FPQO’s risks are insured through the Queensland Government Insurance Fund, premiums being paid on a risk assessment basis.

2.11 Non-reciprocal transfers of assets and liabilities

Non-reciprocal transfers of assets and liabilities between wholly-owned Queensland Public Sector entities are accounted for as adjustments to capital in accordance with Interpretation 1038 Contributions by Owners Made to Wholly Owned Public Sector Entities.

2.12 Taxation

FPQO is a State body as defined under the Income Tax Assessment Act 1936 and is exempt from Commonwealth taxation with the exception of Fringe Benefits Tax (FBT) and Goods and Services Tax (GST). As such, GST credits receivable from/payable to the ATO and FBT liabilities are recognised and accrued.

2.13 Issuance of financial statements

The financial statements are authorised for issue by the Chief Executive and the Director of Finance at the date of signing the Management Certificate.

2.14 Judgement and assumptions

FPQO has made no judgements or assessments which may cause a material adjustment to the carrying amounts of assets and liabilities within the next reporting period.

2.15 Rounding

Amounts included in the financial statements are in Australian dollars and have been rounded to the nearest $1000, or where that amount is $500 or less, to zero. Sub-totals and totals may not add

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due to rounding, but the overall discrepancy is no greater than two.

Comparative information has been restated when necessary to be consistent with disclosures in the current reporting period.

2.16 New and Revised Accounting Standards

FPQO did not voluntarily change any of its accounting policies during 2008-09. Any Australian accounting standards and interpretations issued, or amended and applicable for the first time in the 2008-09 financial year have had either no, or minimal impact on FPQO.

FPQO is not permitted to early adopt a new or amended accounting standard ahead of the specified commencement date unless approval is obtained from the Treasury Department. Consequently, FPQO has not applied any Australian accounting standards and interpretations that have been issued but are not yet effective. FPQO will apply these standards and interpretations in accordance with their respective commencement dates.

At the date of authorisation of the financial report one of the new or amended Australian accounting standards with future commencement dates will have a material impact on FPQO. Detail of this impact is set out below.

FPQO will need to comply with the revised version of AASB 101 Presentation of Financial Statements from 2009-10. This revised standard does not have measurement or recognition implications. However, in line with the new concept of comprehensive income, there will be changes to the line items that are currently presented in FPQO’s Income Statement and Statement of Changes in Equity. Ignoring other potential impacts on the operating result, if the revised AASB 101 was applied in 2008-09, FPQO would have reported comprehensive income of $14.3 million for the year. The increase in the asset revaluation reserve for 2008-09 would therefore not have been included in the Statement of Changes in Equity. In addition, where there have been retrospective accounting policy changes, retrospective re-statement of items in the financial statements, or re-classification of financial statement items during the current reporting period, the revised AASB 101 will require a Statement of Financial Position to be presented as at the beginning of the earliest comparative period included in the financial statements.

All other Australian accounting standards and interpretations with future commencement dates are either not applicable to FPQO or have no material impact.

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2009 2008 $'000 $'000

Interest - Other 175 356

Commissions - Other 3 4

Other 5 -

Total 183 360

4. Employee expenses

2009 2008 $'000 $'000

Employee benefits

Wages and salaries 25,076 26,707

Employer superannuation contributions 2,699 2,770

Long service leave levy 427 451

Employee related expenses

Payroll tax 1,312 1,346

Workers' compensation premium (4) (3)

Other employee related expenses 3 5

29,513 31,276

The number of employees including both full-time and part-time employees measured on a full-time equivalent basis at 30 June.

436 474


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2009 2008

The number of senior executives who received or were due to receive total remuneration of $100,000 or more:

$300 000 to $319 999 - 1

$320 000 to $339 999 - -

$340 000 to $359 999 1 -

Total 1 1

$'000 $'000

Total remuneration of executives shown above * 346 301

* The amount calculated as executive remuneration in these financial statements includes the direct remuneration received, as well as items not directly received by senior executives, such as the movement in leave accruals and fringe benefits tax paid on motor vehicles. This amount will therefore differ from advertised executive remuneration packages which do not include the latter items.

The total separation and redundancy/termination benefit payments during the year to executives shown above.

- -

5. Other operating expenses

2009 2008 $'000 $'000

Other expenses

Bad & doubtful debts - 1

Audit fees 10 10

Insurance premiums - Qld Government Insurance Fund 30 -

Other 4 7

Total 44 18

6. Receivables

2009 2008 $'000 $'000

Current

Trade debtors 250 663


Other debtors 326 205

Total 585 891

Total external audit fees relating to the 2008–09 financial year are estimated to be $10,300 (2008: $10,000). There are no non-audit services included in this amount.


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2009 2008 $'000 $'000

Land

At fair value (1) 216,177 201,842

Land movement reconciliation

Carrying amount at start of year 201,842 150,717

Net Revaluation Increments/Decrements 14,335 51,125

Carrying amount at end of year 216,177 201,842

Valuation of property, plant and equipment

All land is carried at fair value, in accordance with Queensland Treasury’s Non-Current Asset Policies for the Queensland Public Sector.

(1)

Land is revalued on a 3 year rolling basis by the independent expert valuer, State Valuation Service.

8. Payables

2009 2008 $'000 $'000

Current

Tax payable - Payroll 119 98

- GST payable 270 218

Accrued expenses 68 76

Total 457 392

9. Accrued employee benefits

2009 2008 $'000 $'000

Current

Accrued recreation leave 2,647 2,783

Accrued long service leave levy 115 108

Other accrued employee benefits 405 616

Total 3,167 3,507


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2009 2008 $'000 $'000

Surplus(deficit) from ordinary activities - -

Changes in assets and liabilities:

(Increase)/decrease in receivables 469 728

(Increase)/decrease in GST input tax credits receivable (3) -

(Increase)/decrease in prepayments (163) -

Increase/(decrease) in employee benefits (136) 54

Increase/(decrease) in GST payable 55 (48)

Increase/(decrease) in payables (191) -

Net cash provided by operating activities 31 734

11. Asset revaluation reserve by class

2009 2008 $'000 $'000

Opening balance of asset revaluation reserve for land assets 71,798 20,673

Revaluation increment - Land 14,335 51,125

Balance 30 June 2009 86,133 71,798

12. Contingent liability – workers’ compensation claims

Claims relating to employees for personal injuries suffered during the course of their employment are dealt with by WorkCover. Damages and costs arising from workers’ compensation claims will also be met by WorkCover, and therefore do not represent a contingent liability for FPQO.

Categorisation of financial instruments

FPQO has the following categories of financial assets and financial liabilities:

13. Financial instruments

2009 2008Category Note $'000 $'000

Financial Assets

Cash 4,809 4,778

Receivables 6 585 891

Total 5,394 5,669

Financial Liabilities

Payables 8 457 392

Total 457 392

The asset revaluation reserve represents the net effect of upwards and downwards revaluations of assets to fair value.


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FPQO’s activities expose it to a variety of financial risks – credit risk, liquidity risk, market risk, and interest rate risk.

Financial risk management is implemented pursuant to Government and FPQO policies. These policies provide written principles for overall risk management and seek to minimise potential adverse effects on the financial performance of FPQO.

Further detail on each risk exposure is outlined below.

Credit risk

Credit risk exposure refers to the situation where FPQO may incur financial loss as a result of another party to a financial instrument failing to discharge their obligation.

The maximum exposure to credit risk at balance date in relation to each class of recognised financial assets is the gross carrying amount of those assets inclusive of any provisions for impairment.

The following table represents FPQO’s maximum exposure to credit risk based on contractual amounts net of any allowances.

2009 2008Maximum Exposure to Credit Risk Note $'000 $'000

Financial assets

Cash 4,809 4,778

Receivables 6 585 891

Total 5,394 5,669

No collateral is held as security relating to the financial assets held by FPQO.

No financial assets and financial liabilities have been offset and presented net in the Balance Sheet.

No financial assets have had their terms renegotiated so as to prevent them from being past due or impaired, and are stated at the carrying amounts as indicated. Credit risk in respect of debtors is managed by implementing net 30 day payment terms. Receivables overdue as at 30 June 2009 are not material. There is no impairment of financial assets for the 2008-09 financial period, nor was there any impairment of financial assets in the 2007-08 financial period.

Exposure to credit risk is monitored on a regular basis.

Liquidity Risk

Liquidity risk refers to the situation where FPQO may encounter difficulty in meeting obligations associated with financial liabilities.

FPQO is exposed to liquidity risk through its trading in the normal course of business.

FPQO manages liquidity risk through the use of a liquidity management strategy. This strategy aims to reduce the exposure to liquidity risk by ensuring FPQO has sufficient funds available to meet employee and supplier obligations as they fall due.


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FPQO does not trade in foreign currency and is not materially exposed to commodity price changes. FPQO is exposed to interest rate risk through cash deposited in interest bearing accounts. FPQO does not undertake any hedging in relation to interest risk and manages its risk as per the liquidity risk management strategy.

Interest rate risk

Interest is earned on cash balances at floating interest rates ranging from 2.85% to 7.10% (2008: 5.42% to 6.86%).

Fair value

The fair value of financial assets and liabilities must be estimated for recognition and measurement and for note disclosure purposes.

The fair value of trade receivables and payables are assumed to approximate their nominal value less estimated credit adjustments.

The carrying amounts of all financial assets and financial liabilities are representative of their fair value.


Certificate of Forestry Plantations Queensland Office These general purpose financial statements have been prepared pursuant to section 40(1) of the Financial Administration and Audit Act 1977 (the Act), and other prescribed requirements. In Accordance with Section 40(3) of the Act we certify that in our opinion:

the prescribed requirements for the establishment and keeping of the accounts have been complied with in all material respects; and

the statements have been drawn up to present a true and fair view, in accordance with prescribed accounting standards, of the transactions of Forestry Plantations Queensland Office for the financial year ended 30 June 2009 and of the financial position as at the end of that financial year.

(i)

(ii)

STUART SANDERSON B.Com (CPA) DR W A HOEY

Director, Finance Chief Executive

Cert

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Que

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PAUL HORNE CA Queensland Audit Office(as Delegate of the Auditor-General of Queensland) Brisbane28 August 2009

INDEPENDENT AUDITOR’S REPORT

To the Accountable Officer of the Forestry Plantations Queensland Office

Matters Relating to the Electronic Presentation of the Audited Financial Report

The auditor’s report relates to the financial report of Forestry Plantations Queensland Office for the financial year ended 30 June 2009 included on Forestry Plantations Queensland‘s website. The Accountable Officer is responsible for the integrity of the Forestry Plantations Queensland Office‘s website. I have not been engaged to report on the integrity of the Forestry Plantations Queensland Office‘s website. The auditor’s report refers only to the statements named below. It does not provide an opinion on any other information which may have been hyperlinked to/from these statements. If users of the financial report are concerned with the inherent risks arising from electronic data communications they are advised to refer to the hard copy of the audited financial report, available from Forestry Plantations Queensland Office, to confirm the information included in the audited financial report presented on this website.

These matters also relate to the presentation of the audited financial report in other electronic media including CD Rom.

Report on the Financial Report

I have audited the accompanying financial report of Forestry Plantations Queensland Office which comprises the balance sheet as at 30 June 2009, and the income statement, statement of changes in equity and cash flow statement for the year ended on that date, a summary of significant accounting policies, other explanatory notes and certificates given by the Accountable Officer and officer responsible for the financial administration of Forestry Plantations Queensland Office.

The Accountable Officer’s Responsibility for the Financial Report

The Accountable Officer is responsible for the preparation and fair presentation of the financial report in accordance with prescribed accounting requirements identified in the Financial Administration and Audit Act 1977 and the Financial Management Standard 1997, including compliance with applicable Australian Accounting Standards (including the Australian Accounting Interpretations). This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor’s Responsibility

My responsibility to express an opinion on the financial report based on the audit is prescribed in the Auditor-General Act 2009. This Act, including transitional provisions, came into operation on 1 July 2009 and replaces the previous requirements contained in the Financial Administration and Audit Act 1977.

The audit was conducted in accordance with the Auditor-General of Queensland Auditing Standards, which incorporate the Australian Auditing Standards. These auditing standards require compliance with relevant ethical requirements relating to audit engagements and that the audit is planned and performed to obtain reasonable assurance whether the financial reportis free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of risks of material misstatement in the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control, other than in expressing an opinion on compliance with prescribed requirements. An audit also includes evaluating the appropriateness of accounting policies and the reasonableness of accounting estimates made by the Accountable Officer, as well as evaluating the overall presentation of the financial report including any mandatory financial reporting requirements as approved by the Treasurer for application in Queensland.

I believe that the audit evidence obtained is sufficient and appropriate to provide a basis for my audit opinion.

Independence

The Auditor-General Act 2009 promotes the independence of the Auditor-General and QAO authorised auditors. The Auditor-General is the auditor of all Queensland public sector entities and can only be removed by Parliament.

The Auditor-General may conduct an audit in any way considered appropriate and is not subject to direction by any person about the way in which audit powers are to be exercised. The Auditor-General has for the purposes of conducting an audit, access to all documents and property and can report to Parliament matters which in the Auditor-General’s opinion are significant.

Auditor’s Opinion

In accordance with s.40 of the Auditor-General Act 2009 –

a)b)

I have received all the information and explanations which I have required; andin my opinion–

i)

ii)

the prescribed requirements in respect of the establishment and keeping ofaccounts have been complied with in all material respects; andthe financial report has been drawn up so as to present a true and fair view, inaccordance with the prescribed accounting standards of the transactions of theForestry Plantations Queensland Office for the financial year 1 July 2008 to30 June 2009 and of the financial position as at the end of that year.


Published by Forestry Plantations Queensland/Forestry Plantations Queensland Office, PO Box 3196, South Brisbane Qld 4101.

Copyright

Copyright protects this publication. Except for purposes permitted by the Copyright Act, reproduction by any means (photocopying,

electronic, mechanical, recording or otherwise) is prohibited without the prior written permission of the

Chief Executive, Forestry Plantations Queensland, PO Box 3196, South Brisbane Queensland 4101.

Disclaimer

While every care has been taken in preparing these annual reports, Forestry Plantations Queensland and Forestry Plantations Queensland Office accept no responsibility for decisions or actions taken as a result

of any data, information, statement or advice, expressed or implied, contained herein.

Printed September 2009

ISSN 1837-0195

Obtaining copies of these annual reports

Consistent with Queensland Government sustainability initiatives, only limited copies of these annual reports have been printed. If printed copies

are desired, they can be obtained, subject to availability, by telephoning FPQ Corporate Affairs on (07) 3895 3321; international +61 7 3895 3321. A

limited number of these annual reports, pressed to CD-Rom, can also be provided. Electronic copies of these annual reports, in similar PDF format,

can be downloaded from the FPQ website at www.fpq.net.au, see Home > Publications > FPQ Annual Reports.

Feedback

These annual reports are important documents representing community communication and accountability. FPQ and FPQO value comments

and welcome feedback from readers. To provide feedback, readers can complete an electronic survey available on the FPQ website at at www.

fpq.net.au, see Home > Publications > FPQ Annual Reports.

Interpreter service

The Queensland Government is committed to providing accessible services to Queenslanders from all culturally and linguistically diverse

backgrounds. If you have difficulty in understanding these annual reports, you can contact FPQ on telephone (07) 3895 3346, international

+61 7 3896 3346, to arrange an interpreter to effectively communicate the report to you.


For further information contact:Forestry Plantations Queensland (07) 3895 3303Forestry Plantations Queensland Office (07) 3895 3363www.fpq.net.au

Forestry Plantations Queensland is independently certified to the Australian Forestry Standard AFS4708 for the commercial

management of its softwood and hardwood plantations, nurseries, defined forest areas and forest management services. This

standard has international status via mutual recognition with other national certification schemes granted by the Programme for the

Endorsement of Forest Certification Schemes.

Annual Reports2008-09

Profitable sustainableplantation forests

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