Adelaide Brighton Ltd 2013 Annual Report
Company profile
Adelaide Brighton is a leading integrated construction materials and industrial lime producer which supplies a range of
products into building, construction, infrastructure and mineral processing markets throughout Australia. The Company’s
principal activities include the production, importation, distribution and marketing of clinker, cement, industrial lime,
premixed concrete, construction aggregates and concrete products. Adelaide Brighton originated in 1882 and is now
an S&P/ASX100 company with 1,300 employees and operations in all Australian states and territories.
Cement
Concrete Products
Contents
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64
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Highlights and financial summary
Chairman’s report
Managing Director’s report
Finance report
Map of operations
Review of operations
Cement and Lime
Concrete and Aggregates
Concrete Products
Joint ventures
Sustainability
People, health and safety
Corporate governance
Diversity policy
Directors
Shareholder information
Financial statements index
Directors’ report
Remuneration report
Financial statements
Directors’ declaration
Auditor’s independence declaration
Independent audit report
Financial history
Adelaide Brighton is the second largest
supplier of cement and clinker products in
Australia with major production facilities
and market leading positions in the resource
rich states of South Australia and Western
Australia. It is also market leader in the
Northern Territory. In addition to domestic
production, the Company is the largest
importer of cement, clinker and slag into
Australia with an unmatched supply
network that enables efficient access to
every mainland capital city market. This
network includes significant distribution
joint ventures in Victoria and Queensland.
Industrial Lime
Adelaide Brighton is the largest producer of
industrial lime in Australia, with production
assets in Western Australia and South
Australia. Industrial lime is an important
product for the mineral processing industry
in resources rich markets, particularly for
the production of alumina and gold, of
which Australia is a leading producer.
Concrete and Aggregates
Adelaide Brighton has a growing presence
in the premixed concrete and aggregates
industry in the eastern states of Australia,
augmented by joint venture operations. It has
strategic aggregates reserves west of Sydney,
in regional New South Wales, south east
Queensland and regional Victoria through its
wholly owned and joint venture operations.
Adelaide Brighton holds the leading position
in the Australian masonry products market,
with operations in Queensland, New South
Wales, Victoria, Tasmania and South
Australia.
Joint ventures and associates
Adelaide Brighton has a number of
significant investments in joint ventures
and associates in construction materials
production and distribution. These include
major cement distribution joint ventures
in Queensland (Sunstate Cement), Victoria
(Independent Cement and Lime) and
New South Wales; regional concrete and
aggregates positions in Victoria, Queensland
and New South Wales; and a 30%
investment in a Malaysian white cement and
clinker producer (Aalborg Portland Malaysia),
which supplies the Australian market.
Sustainability
Adelaide Brighton’s commitment to
sustainable development is demonstrated
through a range of actions implemented
across a balanced program of initiatives.
Adelaide Brighton believes that setting
and achieving sustainability objectives
throughout the organisation assists long
term competitive business performance.
Cover: South Road “superway”: normal
Portland cement and fly ash supplied by
Adelaide Brighton Cement’s Birkenhead plant
Highlights and fi nancial summary
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Revenue of $1,228.0 million - a 3.8% increase over the previous corresponding period
Earnings before interest, tax, depreciation and amortisation (EBITDA) of $293.3 million -
2.1% higher than 2012
Earnings before interest and tax (EBIT) of $222.7 million - up 0.3% over 2012
Profi t before tax of $208.6 million - 0.5% higher than 2012
Net profi t attributable to members (NPAT) of $151.1 million - down 1.2% over 2012
Excluding a $7.6 million gain in 2012 from fair value accounting on an acquisition,
2013 NPAT was $5.8 million (3.9%) higher than 2012
Earnings per share decreased by 1.3% to 23.7 cents (24.0 cents in 2012)
Final fully franked dividend of 12.0 cents per share, comprising a fi nal ordinary dividend
of 9.0 cents plus a special dividend of 3.0 cents
Total full year dividends of 19.5 cents per share (fully franked) up from 16.5 cents
(fully franked) in the prior year
Cash fl ow from operations increased by $40.4 million to $227.3 million during the year
Net debt1 declined $62.5 million over the year to $248.0 million and gearing2 declined
to 23.4% at year end (30.9% in 2012)
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Interest cover improved to 15.8 times EBIT (15.2 times EBIT in 2012)
($ Millions)
Revenue
2013
2012
1,228.0
1,183.1
Depreciation and amortisation
(70.6)
(65.2)
Earnings before interest and tax
Net interest3
Profi t before tax
Tax expense
Net profi t after tax
Non-controlling interests
222.7
(14.1)
208.6
(57.5)
151.1
-
222.1
(14.6)
207.5
(54.6)
152.9
0.1
Net profi t attributable to members
151.1
153.0
1
Net debt is calculated as
total borrowings less cash
and cash equivalents
2
Net debt/equity
3
Interest shown gross in the
Income Statement with
interest income included
in revenue
4
Includes special dividend of
3.0 cents per share in 2013
Earnings per share (cents)
Total dividends – fully franked (cents/share)4
Net debt ($ millions)
Net debt/equity (%)
23.7
19.5
248.0
23.4%
24.0
16.5
310.5
30.9%
Financial information for
the 31 December 2012 year
has been restated due to
changes in accounting
policies as set out in
Note 42
$m
160
150
140
130
120
110
100
Net profi t
after tax
c/share
Dividends
24
20
16
12
8
4
0
Return on funds
employed
%
22
20
18
16
14
12
10
Gearing: net
debt to equity
%
35
30
25
20
15
10
5
$m
240
220
200
180
160
140
120
Cash fl ow from
operations
Times
Interest cover
EBITDA basis
22
20
18
16
14
12
10
09
10
11 12 13
09
10
11 12 13
09
10
11
12
13
09
10
11 12 13
09
10
11 12 13
09
10
11 12 13
Interim Final Special
* In line with changes to accounting policies effective 1 January 2013
1
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2013
Chairman’s report
In 2013, Adelaide Brighton’s successful execution of its long term strategy continued to deliver strong returns
for shareholders and ensured the Company remained well positioned for continued solid performance.
Year in review
Strategy
Leadership
I am pleased to report that Adelaide Brighton
achieved net profit after tax (NPAT) of $151.1
million for the year to 31 December 2013, a
slight decline of 1.2%. This result was achieved
on record revenue of $1,228.0 million, up
3.8% on the previous year.
Adelaide Brighton’s successful strategy
which combines operational improvement,
development of its lime business and vertical
integration remains unchanged. It is the
cornerstone of continued strong returns to
shareholders.
In 2013, execution of this strategy has
included further diversifying the product
range and enhancing Adelaide Brighton’s
unique position in lime supply to the resources
sector. Additionally, ongoing investment in the
reliability and sustainability of our key cement
and lime production assets has delivered
significant results.
Vertical integration through the development
of quarry and premixed concrete operations
has further improved the Company´s
competitive position in the highly integrated
Australian market.
Moreover, the establishment of the Company’s
industry leading network of import facilities
with favourable long term international
supply arrangements has underpinned
competitiveness, efficiency and returns on
capital.
A key priority for the Board is enhancing long
term shareholder value through growth. In
this regard, Adelaide Brighton will continue
to pursue organic and acquisitive growth in
a measured and low risk manner in order to
maximise long term shareholder value.
The Board is pleased with this result in
an environment of subdued housing and
commercial construction activity that
prevailed for much of the year, particularly
on the east coast of Australia.
Weakness in east coast construction was once
again offset by the infrastructure and resource
sectors in South Australia, Western Australia
and the Northern Territory, where your
Company has market leading positions.
Excluding a one-off tax gain in the previous
year, our underlying net profit rose 3.9%,
which is encouraging given we are yet to
see the full benefit of our major capital
investment program and signs of an
improving housing market were only in
evidence late in the year.
Total fully franked dividends declared for
2013 were 19.5 cents per share, which is
comprised of ordinary dividends of 16.5 cents
and a special dividend of 3.0 cents.
Record cash flow in 2013 was reflected
in a decline in gearing to 23.4%. Our
strong balance sheet provides capacity
to fund value enhancing acquisitions,
organic growth opportunities and where
financial circumstances allow, to continue
to investigate and implement capital
management activities to maximise
shareholder returns.
In December 2013, the Board announced that
Adelaide Brighton’s long serving Managing
Director and Chief Executive Officer, Mark
Chellew, would retire following the 2013
Annual General Meeting. At the time of the
announcement, Martin Brydon, Adelaide
Brighton’s then Executive General Manager
Cement and Lime, was promoted to the
Deputy CEO role and he will become the
Chief Executive Officer following Mr Chellew’s
retirement. Martin brings to the CEO role more
than 30 years industry experience, including
his leadership of the Cement and Lime
business for the past nine years.
Over nearly 13 years in charge of Adelaide
Brighton, Mark has been one of the most
successful ASX listed company chief
executives and generated significant value
for our shareholders.
This is reflected in Adelaide Brighton´s number
two ranking in the S&P/ASX200 Accumulation
Index (excluding GICS Financials, BHP
Billiton, Rio Tinto, Newcrest Mining) for total
shareholder return between July 2001 and
June 2013. This represents total shareholder
return growth over the period of around
1200%.
In his time at Adelaide Brighton, Mark’s
achievements have been considerable and
the impact of his leadership and established
business relationships will be enduring. On
behalf of the Board, I thank Mark for his
dedication and commitment.
Through this period Mark has built an
exceptional senior management team with
significant depth and experience. Together
with the priority the Board has placed on
succession planning, Martin’s transition to
the role of Chief Executive will be seamless
for the company, its employees, its
customers and suppliers.
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2013
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Safety performance
The safety and health of our employees
and contractors is core to every aspect of
our business. The Company is committed to
achieving a safe, productive and healthy work
environment through the continued progress
of its safety standards, systems and change
in culture. Our progress is refl ected in the
improvement in safety outcomes measured
in lost time injury frequency rate (LTIFR).
In 2013, we recorded an LTIFR of 1.7, a
signifi cant annual improvement over
each of the last two years.
Board and governance
The Board is committed to conducting
business ethically and in accordance with high
standards of corporate governance. Adelaide
Brighton believes its policies and practices are
consistent with good corporate governance
appropriate for its current circumstances,
including the ASX Corporate Governance
Council Principles and Recommendations.
The Directors continue to monitor and
evaluate the composition of the Board to
ensure the appropriate balance and range
of experience and skills. The Board holds
meetings at a range of Company sites across
Australia in order to provide Directors with
exposure to the diversity of the Group’s
operations and geographic spread.
The Board engages with key stakeholders in
order to ensure remuneration policies are
transparent and appropriate to maximise
long term growth in shareholder returns.
The Nomination, Remuneration and
Governance Committee of the Board engaged
a consulting fi rm to advise on remuneration
to ensure both best practice and legal
requirements were met.
Sustainability and the environment
Adelaide Brighton is committed to sustainable
operations by conducting its business
responsibly and in a manner designed to
protect employees, adjacent communities
and the natural environment.
We do this by continually analysing our
activities and considering the needs of all
stakeholders to identify key opportunities for
improvement and sustainable development.
That is, our economic success and licence
to operate is bolstered by a focus on
sustainability and the environment.
People
On behalf of your Directors, I acknowledge the
hard work and commitment of all employees
over the past year.
Again, I thank Mark Chellew for his dedication
and strong leadership of Adelaide Brighton,
and Martin Brydon for building on his already
admirable 30 years of service to Adelaide
Brighton by accepting the opportunity to lead
our great company through its next stage
of growth.
Finally, I thank our customers, shareholders
and joint venture partners for their continuing
loyalty and support.
Les Hosking
Chairman
For example, the recent $46 million
investment in the two lime kilns at
Munster, Western Australia, to limit particle
emissions from the site, benefi ted not only
the environment and local community but
also resulted in an increase in the kilns’
production capacity by 25% and delivered
important operational improvements. Adelaide
Brighton continued its program of proactive
community, government and regulatory
authority engagement during the year. This
is an important part of our relationship with
communities adjacent to our operations,
specifi cally our major manufacturing sites
at Birkenhead and Angaston (South Australia)
and Munster (Western Australia).
The Company’s focus on management of
energy sources and uses has also delivered
signifi cant benefi ts. Since 2009, increases in
the cost of energy, including gas, electricity
and the carbon tax incurred by Adelaide
Brighton have increased costs by more than
$40 million, an increase of more than 40%.
Over this period, Adelaide Brighton has limited
its energy costs, use of energy and carbon
emissions through fuel switching and the use
of alternative fuels and, in so doing, mitigated
approximately $27 million in potential
energy cost increases.
Risk Management
Adelaide Brighton’s risk management
framework is a key factor in the Group’s
ongoing profi table performance. The Audit,
Risk and Compliance committee of the Board
oversees the Company’s risk management
framework encapsulating fi nancial, operating,
regulatory and environmental risks. These
risks are reviewed and mitigation strategies
modifi ed on a regular basis to ensure that
changes in risk are refl ected appropriately.
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ADELAIDE BRIGHTON LTD ANNUAL REPORT 2013
Managing Director’s report
Record revenue and cash flow as mining and infrastructure demand offsets weakness
in east coast construction markets, augmented by operational improvement.
Performance
I am pleased to report that resource and
infrastructure demand have again enabled
Adelaide Brighton to deliver record revenue
in 2013 despite continued weakness in
residential and commercial construction,
particularly in east coast markets.
Revenue of $1,228.0 million was up 3.8%
on 2012 while earnings before interest
and tax (EBIT) increased 0.3% to a record
$222.7 million. Excluding the $7.6 million gain
on acquisition in 2012, Group EBIT margin of
18.1% was stable. Net profit after tax (NPAT)
declined 1.2% to $151.1 million, although
excluding a one-off tax gain in the previous
year, underlying NPAT increased 3.9%.
Operating cash flow improved by
$40.4 million to a record $227.3 million
due to the stronger underlying operating
performance and effective management of
working capital. Strong cash flow and lower
capital expenditure allowed a $62.5 million
net debt reduction and gearing fell to
23.4% at year end.
These results were driven principally by
continued demand from projects in South
Australia; the resources sector in Western
Australia and the Northern Territory; and
a residential recovery in New South Wales.
Demand improved further in the second half
of the year in Queensland but was lower in
Victoria. Demand from residential building
generally improved in major markets in the
second half of the year, while activity in the
non-residential building sector remained
subdued.
EBIT margins were maintained, supported by
initial returns on recent capital investment
and cost management programs, despite
energy and labour cost pressures, increased
depreciation charges and a reduction in
the contribution from joint ventures.
Operational improvement delivered EBIT
benefits of $20.2 million, including $8.0
million cost savings from the newly
commissioned grinding mill at Birkenhead,
South Australia.
Energy costs increased almost 10% driven
by higher electricity prices in South Australia
and the $4.2 million NPAT cost of the carbon
tax. Adelaide Brighton employs a number
of strategies to mitigate rising energy costs
including: fixed price energy contracts for a
portion of energy requirements; the use of
alternative fuels; careful demand management
during extreme price movements; and a
continual focus on operational improvements.
Cement and lime volume was essentially
flat in 2013, reflecting the mixed demand
environment. While non-residential
construction activity remains subdued,
residential construction recovered in the
second half of the year. Sales to Victoria for
the year declined. Clinker sales to Sunstate
Cement improved throughout the year,
with strengthening demand in south east
Queensland in the second half.
Overall lime sales volumes declined 3% in
2013. Demand from the alumina sector
improved but sales to the non-alumina sector
declined, due to gold mine closures. Recent
major investments in the two lime kilns
at Munster, Western Australia have lifted
production capacity by 25% and delivered
significant operational and environmental
improvements.
The concrete and aggregates and concrete
products businesses saw improving returns
during the year. After a soft first half, a
volume recovery in concrete in the second
half delivered slight volume growth in 2013,
in line with market demand. Subdued
conditions in Victoria were offset by increased
volumes in New South Wales and Queensland
driven by stronger demand in the second
half. Demand from the housing sector has
improved in most markets, led by strength in
the multi-residential sector in Sydney.
Adelaide Brighton’s joint ventures and
associate generally reported lower earnings
in 2013 as a result of demand weakness and
pricing pressure in the Queensland, New South
Wales and Victorian construction markets.
Returns from Aalborg Portland Malaysia
were above expectations. The US$18.6 million
planned capacity expansion is progressing
well and is expected to be commissioned
in the second half of 2014.
Strategy
In 2013, Adelaide Brighton continued the
successful long term strategy to grow
shareholder value through investment in
three key areas:
Operational improvement;
Growth in the lime business; and
Vertical integration into downstream markets.
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The Company has recently completed a
$112 million investment program to improve
capacity, efficiency and sustainability in the
Cement and Lime Division. These programs,
which are expected to be accretive to long
term shareholder value, have resulted in
improved environmental performance
and significant additional lime capacity at
Munster, Western Australia, and expanded
cement milling capacity at Birkenhead,
South Australia.
The $60 million upgrade and expansion of the
Birkenhead, South Australia, site - completed
in the first half of 2013 - has increased
cement milling capacity by 750,000 tonnes
per annum, upgraded ship loading facilities
and installed new facilities to process slag.
The project contributed $8 million to EBIT
in 2013, which was held back by a cyclical
downturn in the Victorian cement market.
However, it is anticipated that through the
cycle, returns from the project will be
accretive to shareholder value.
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2013
4
Cockburn Cement
Munster plant Kiln 5
bag house filter
5
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2013
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2013
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2013
6
South Australian Health
and Medical Research:
normal Portland cement
and fly ash supplied by
Adelaide Brighton Cement
Adelaide Brighton has installed bag house
filters on the two Munster lime kilns at
a cost of $46 million. These investments
have resulted in an improvement in the
environmental performance of the kilns
through reduced emissions, an increase in
lime production capacity of about 250,000
tonnes per annum and have delivered
efficiency benefits of $3 million in 2013.
The management of energy costs again
delivered significant cost benefits during
2013. Since 2009 increases in the cost of
energy, including gas, electricity and the
carbon tax have increased costs by more than
40% or more than $40 million per annum.
Additionally, it is estimated that over this
period Adelaide Brighton has mitigated a
further $27 million in potential energy cost
increases through fuel switching and the
use of alternative fuels.
During 2013, we renewed contracts with key
customers of cement and lime, underpinning
the efficient utilisation of our manufacturing
and distrubution capacity.
Adelaide Brighton is Australia’s largest
importer of cement, clinker and blast furnace
slag, utilising more than 1.6 million tonnes of
imported product in 2013. This is expected to
increase to about two million tonnes by 2016
with the rationalisation of clinker production
at Munster.
Significant progress has been made in the
10 year, $130 million land sales program in
preparing properties for sale. Cash proceeds
from asset sales for the year of $6.5 million
mainly relate to the sale of land.
Munster clinker rationalisation
In February 2014, the Directors approved
a strategy to rationalise the production of
clinker at its Munster site in Western Australia.
Subject to all necessary legal and supply chain
arrangements, it is intended that by 2016 all
of the 400,000 tonnes of clinker previously
produced at Munster will be replaced by
imported clinker, which will be milled into
cement utilising the Kwinana import facility
and the existing cement mills at Munster.
The rationalisation of clinker production
is expected to result in an annualised EBIT
improvement of approximately $5 million. In
2014, cement EBIT will also be impacted by a
redundancy provision and asset write-off of
approximately $8 million. Subject to obtaining
the necessary consent, over the next 2-3 years
we expect to realise significant value from the
sale of quarry land at the Munster site.
Outlook
Final thanks
As I come to the end of a 13 year term as
CEO of Adelaide Brighton, I acknowledge
the hard work and dedication of my fellow
employees throughout this time, a period
of unprecedented change and growth that
has resulted in the much stronger and more
sustainable business that exists today.
With high quality assets, a healthy balance
sheet, great customers and exceptional
employees, Adelaide Brighton is well
positioned to take advantage of opportunities
for further growth in the attractive Australian
resources and construction market.
I sincerely thank my senior management team
and the board for its guidance and support
through my time at Adelaide Brighton. I wish
my colleague Martin Brydon success in his
new role as CEO and, I am sure that under his
guidance, Adelaide Brighton will continue to
be a great place to work, an excellent product
supplier, a good neighbour in our community,
and an attractive investment for shareholders.
In conclusion, it has been a privilege to be
the CEO of Adelaide Brighton during the
last 13 years. During this time, I have been
fortunate to work with an exceptional
management team who have overcome
enormous challenges. I have also had
excellent guidance and mentoring by a
Chairman and Board who have encouraged
and supported our endeavours.
I would also like to express my thanks to
my former Chairman, Directors and senior
management who have either retired or
moved on to different challenges in
other companies.
Adelaide Brighton has gone through
significant change over the last 13 years and
I remain confident the Company has a Board
and management team that will take the
Company forward over the coming years.
Once again, my sincere thanks to all our
stakeholders for supporting me over the
last 13 years.
Adelaide Brighton expects demand for cement
and clinker in 2014 to be similar to 2013.
Demand from projects in Western Australia
and the Northern Territory, and a recovery in
the residential sector is expected to balance
continued weakness in the non-residential
sector and a decline in project demand in
South Australia.
The operational improvement program
and extracting further benefits from the
recently commissioned capital upgrades and
enhancements will be a particular focus to
support margins in the current financial year.
In particular, we hope to consolidate returns
from the cement mill upgrade at Birkenhead
in South Australia, which were only partly
realised in 2013.
Lime sales volumes are likely to be similar
to 2013 with increased demand from the
alumina sector expected to offset weakness
in demand from gold producers. The threat of
small scale lime imports in Western Australia
and the Northern Territory remains but further
price increases are expected from major
contracts.
The removal of the carbon tax by 1 July 2014
could provide an after tax benefit of about
$2 million compared to 2013. However there
is political uncertainty around the repeal
process and a significant component of these
savings depend on a reduction in energy costs
from suppliers.
Assuming the value of the Australian dollar
remains at around Yen90 and USD0.90,
product import costs are expected to
increase by approximately $6 million, prior
to mitigation through price increases.
Management will continue to focus on
efficiency across all product groups as
demand improves due to an anticipated
recovery in residential construction.
Land sale proceeds in 2014 are anticipated
to yield $9 million, mostly in the first half.
While there are positive cash flow, efficiency
and returns outcomes from the land sale
program the impact on accounting profit was
immaterial in 2013 and is expected to remain
so in 2014.
The Company’s strong cash flow and
balance sheet provides capacity to fund
value enhancing acquisitions, organic growth
opportunities and to consider, subject to
the capital requirements of the business,
efficient capital management to maximise
shareholder returns.
Mark Chellew
Managing Director
7
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2013
Finance report
Adelaide Brighton paid a special dividend supported by strong operating
cash flow and a decline in net debt to below the target range.
Sales and profits
In 2013, Adelaide Brighton revenue increased
by 3.8% to $1,228.0 million. Infrastructure
projects in South Australia and resource
projects in Western Australia and the Northern
Territory offset weakness in non-residential
and residential construction. Residential
demand began to improve late in the year,
most notably in New South Wales. Across
main product lines, volume growth was mixed.
Lime, cement and clinker volume was largely
stable, while concrete volume increased and
aggregates and concrete products volumes
were slightly lower than 2012.
Net profit after tax (NPAT) declined 1.2% to
$151.1 million. Excluding a $7.6 million fair
value accounting gain in the previous year,
NPAT increased by $5.8 million or 3.9% on
2012. Earnings before interest and tax (EBIT)
increased 0.3% to $222.7 million. Higher input
costs were balanced by modest price increases,
operational efficiency and benefits from
capital investment. Energy costs increased by
approximately 10% on 2012, due largely to
rising electricity costs in South Australia.
Contributions from joint ventures and
associate declined due to difficult markets in
Victoria and Queensland, depressing earnings
from Independent Cement and Lime and
Sunstate Cement. Competitive pressures in
these markets inhibited price increases to
recover rising costs. Demand improved in
the second half of the year in Queensland but
Victoria remained depressed due to subdued
residential demand.
EBIT margin
Group EBIT margin declined from 18.8%
to 18.1% in 2013. Excluding the fair value
accounting gain in 2012, EBIT margins were
stable.
In the wholly owned operations, EBIT margins
were flat or higher across all major product
groups. Lime margins increased due to higher
prices and the operational benefits of recent
capital investment. Cement margins were
stable with prices and volumes flat. An
$8 million EBIT benefit from cement milling
upgrades at Birkenhead was offset by input
cost increases.
Overall, cost savings and the recently
completed major capital program delivered
EBIT benefits of $20.2 million in 2013, which
was a key factor in maintaining margins
amid rising energy costs.
Shareholder returns
Adelaide Brighton declared a final ordinary
dividend for 2013 of 9.0 cents per share and
a special dividend of 3.0 cents per share,
both franked to 100%. Including the ordinary
interim dividend of 7.5 cents per share paid
in October 2013, total 2013 dividends are
19.5 cents per share. This is 18.2% higher
than total dividends declared for 2012.
The 2013 dividend payout ratio of 82.3% of
net profit is higher than the Board’s target
payout range of 65% to 75%. The high payout
ratio is supported by strong cash flow and a
decline in gearing to 23.4% at year end, which
is below the target range of 25% to 45% net
debt to equity.
Revenue
by state
Revenue by
segment
Revenue by
product group
Western Australia
Victoria
New South Wales
South Australia
Queensland
Other
Engineering
Residential
Non-residential
Mining
Cement
Concrete and aggregates
Lime
Concrete products
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2013
8
The special dividend also takes into
consideration Adelaide Brighton’s capital
expenditure outlook and the availability of
franking credits.
EBIT return on funds employed declined from
18.0% to 17.0% in 2013 refl ecting the recent
signifi cant capital expenditure program, the
benefi ts of which have only been partially
realised. Further improvements to earnings
from the program are expected. Adelaide
Brighton’s returns continue to exceed
the cost of capital.
Adelaide Brighton has maintained strong
total shareholder return (capital appreciation
plus dividends) over the last decade compared
to its peer group, which has supported
S&P ASX 100 Index inclusion since 2012.
Cash fl ow
Operating cash fl ow increased by $40.4 million
to $227.3 million due to stronger underlying
operating performance and management of
working capital. Working capital, including
provisions, decreased from December 2012
primarily due to the timing of cash fl ow
related to the carbon tax. An increase in trade
and other debtors of $12.2 million, as a result
of higher sales and a slight increase in debtor
days, was largely offset by an increase in trade
and other creditors of $10.4 million.
Capital expenditure decreased from
$150.0 million to $67.9 million in 2013 as a
result of the commissioning of major projects.
Asset sales contributed $6.5 million to cash
fl ow, largely from the initial projects in the
$130 million land sale program. Expenditure
on development projects and acquisitions
declined from $90.6 million to $14.6 million.
Stay in business capital expenditure of
$52.3 million represents 74% of depreciation
and amortisation.
Tax expense of $57.5 million increased by
$2.9 million in 2013. The effective tax rate of
27.6% was up from 26.3% in 2012 as a result
of the non-taxable gain on acquisition of
$7.6 million recognised in 2012. Adelaide
Brighton’s underlying average tax rate
approximates the Australian corporate rate
of 30%. Equity accounted earnings from joint
ventures and associate reported in the Group
results reduces the reported tax rate to the
range of 27% to 28% in most years.
Borrowings
Net debt decreased by $62.5 million to
$248.0 million and net debt to equity gearing
declined to 23.4%.
The Company renegotiated its credit facilities
during 2013, extending the maturity and
reducing the credit margins paid on the
facility. The $500 million of total facilities
have the following maturity profi le:
Facility expiry date Facility value
1 July 2015 $300 million
1 July 2016 $200 million
Interest and taxation
Net fi nance costs of $14.1 million were
$0.5 million lower than 2012. This was due to
lower average borrowings and lower interest
rates. Capitalised interest also declined due
to the completion of the $112 million capital
expenditure program.
Michael Kelly
Chief Financial Offi cer
$m
1700
1600
1500
1400
1300
1200
1100
Total assets
c/share
Earnings
25
24
23
22
21
20
19
Payout ratio
%
100
90
80
70
60
50
40
$m
160
150
140
130
120
110
100
Revenue and net
profi t after tax
$bn
1.3
1.2
1.1
1.0
0.9
0.8
0.7
09
10
11 12 13
09
10
11 12 13
09
10
11
12
13
09
10
11 12 13
* In line with changes to accounting policies effective 1 January 2013
Ordinary dividend
Special dividend
NPAT
Revenue
9
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2013
Map of operations
Cement and Lime
Cement and Lime
Cement and Lime
Cement and Lime
Cement and Lime
Cement and Lime
Cement and Lime
Cement and Lime
Cement and Lime
Cement and Lime
Cement and Lime
Cement and Lime
Cement and Lime
Cement and Lime
Cement and Lime
Cement and Lime
Cement and Lime
Cement and Lime
Concrete and Aggregates
Concrete and Aggregates
Concrete and Aggregates
Concrete and Aggregates
Concrete and Aggregates
Concrete and Aggregates
Concrete and Aggregates
Concrete and Aggregates
Concrete and Aggregates
Concrete and Aggregates
Concrete and Aggregates
Concrete and Aggregates
Concrete and Aggregates
Concrete and Aggregates
Concrete and Aggregates
Concrete and Aggregates
Concrete and Aggregates
Concrete and Aggregates
Concrete Products
Concrete Products
Concrete Products
Concrete Products
Concrete Products
Concrete Products
Concrete Products
Concrete Products
Concrete Products
Concrete Products
Concrete Products
Concrete Products
Concrete Products
Concrete Products
Concrete Products
Concrete Products
Concrete Products
Concrete Products
Joint Ventures
Joint Ventures
Joint Ventures
Joint Ventures
Joint Ventures
Joint Ventures
Joint Ventures
Joint Ventures
Joint Ventures
Joint Ventures
Joint Ventures
Joint Ventures
Joint Ventures
Joint Ventures
Joint Ventures
Joint Ventures
Joint Ventures
Joint Ventures
Adelaide Brighton Cement
Morgan Cement
Birkenhead
Cement, drymix, fl y ash
Port Kembla / Vales Point
Cement, fl y ash
Northern Cement
Darwin
Cement
Mataranka
Lime
Angaston
Cement, lime
Blanchetown
Gypsum
Cockburn Cement
Munster
Lime, cement, drymix
Dongara
Lime
Exmouth
Limestone
Rawlinna
Limestone
Hy-Tec
Queensland
New South Wales
Victoria
Premixed concrete,
aggregates, sand
Adbri Masonry
Queensland
New South Wales
Victoria
South Australia
Tasmania
Concrete products
Sunstate Cement (50%)
Batesford Quarry (50%)
Brisbane
Cement, drymix
Geelong
Limestone, sand
Independent Cement and Lime
(50%)
Melbourne
Cement, lime, drymix, slag, fl y ash
Thorton / Kembla Grange
Cement, drymix, fl y ash
Burrell Mining (50%)
Queensland
New South Wales
Concrete products
Aalborg Portland Malaysia
Mawsons (50%)
Regional Victoria / Southern NSW
Premixed concrete, aggregates
Ipoh, Malaysia
Cement
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2013
10
Adelaide Brighton supplies the Australian infrastructure, building and
Adelaide Brighton supplies the Australian infrastructure, building and
Adelaide Brighton supplies the Australian infrastructure, building and
resources industries. The Company has market leading positions in cement
resources industries. The Company has market leading positions in cement
resources industries. The Company has market leading positions in cement
and clinker, lime and concrete masonry and is an emerging force in
and clinker, lime and concrete masonry and is an emerging force in
and clinker, lime and concrete masonry and is an emerging force in
pre-mixed concrete and aggregates. Adelaide Brighton is the largest
pre-mixed concrete and aggregates. Adelaide Brighton is the largest
pre-mixed concrete and aggregates. Adelaide Brighton is the largest
importer of cementitious materials into Australia and through its effi cient
importer of cementitious materials into Australia and through its effi cient
importer of cementitious materials into Australia and through its effi cient
import supply chain has access to every mainland capital city market.
import supply chain has access to every mainland capital city market.
import supply chain has access to every mainland capital city market.
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11
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2013
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2013
Cement and lime
Capital investment and operational improvement supported margin growth despite rising energy costs and a subdued pricing
environment. In 2013, sales volumes of cement and clinker increased marginally, underpinned by projects in South Australia
and resource projects in Western Australia and the Northern Territory. Non-residential construction remained subdued and
sales to Victoria declined as the residential market softened. Clinker sales to Queensland improved throughout 2013, with
strengthening demand from south east Queensland in the second half of the year.
Lime volumes were below expectations as
higher volumes to the alumina sector were
offset by the impact of reduced demand
from gold producers. A number of gold mines
closed during the year as a result of the
decline in the international gold price. Prices
improved overall as contracts with major
customers lifted prices but outside of these
the still relatively high Australian dollar and
competitive markets restricted prices.
The division completed a $112 million capital
investment program at key operating sites. The
investments have improved the environmental
performance, capacity and effi ciency of the
lime kilns at Munster, Western Australia,
and expanded cement milling capacity at
Birkenhead, South Australia.
Benefi ts from the capital program and cost
initiatives delivered EBIT savings in excess of
$20 million, including $8 million from the new
cement mill at Birkenhead, $3 million from the
Munster kiln upgrades and $5 million from
energy cost initiatives.
The Birkenhead upgrade allows the
replacement of imported cement with
domestically produced cement, while
the Munster kiln upgrade increased lime
production capacity by 25% and improved
the effi ciency of the operation delivering
lower production costs. This further enhances
our cost position at Munster relative to lime
imports.
Energy costs continue to rise much faster than
infl ation. Higher electricity prices in South
Australia contributed to a 10% increase in
our energy costs over 2012. The carbon tax
impacted net profi t after tax by $4.2 million
in 2013, after mitigation activities. There is
a potential after tax earnings benefi t of
$2 million from the repeal of the carbon tax.
However, this is subject to the legislative
repeal process and lower costs being passed
through from energy suppliers.
Adelaide Brighton is Australia’s largest
importer of cement and clinker, utilising its
unrivalled network of import terminals that
provide cost effective access to all mainland
capital city markets and regional north west
Western Australia. The network allows the
Company to maintain fl exibility in supply
to key markets, optimising the utilisation
of manufacturing facilities.
In February 2014 the Company’s Board
approved a strategy to rationalise the
manufacture of clinker at the Munster site.
Subject to all necessary legal and supply chain
arrangements being in place, it is intended
that by 2016 all 400,000 tonnes of clinker
previously produced at Munster will be
replaced with imported clinker. The imported
clinker will be ground into cement using the
existing Kwinana and Munster cement mills.
The rationalisation of clinker production
is expected to result in an annualised EBIT
improvement of circa $5 million. In 2014,
cement EBIT will also be impacted by a
redundancy provision and asset write-off of
approximately $8 million. Subject to obtaining
the necessary consent, over the next 2-3 years,
we expect to realise signifi cant value from
the sale of quarry land at the Munster site.
The import strategy is supported by long
term supply agreements with two Japanese
suppliers for grey clinker and Aalborg Portland
Malaysia Sdn. Bhd. (APM) for white clinker.
APM is the Company’s 30% owned associate,
a manufacturer of white clinker based in
Ipoh, Malaysia. APM is well progressed in the
expansion project which will increase its white
clinker capacity by 150,000 tonnes per annum
to 330,000 tonnes per annum from 2015 at
a cost of US$18.6 million. This self funded
project is anticipated to be completed in the
latter part of 2014. A supply agreement with
APM has secured Adelaide Brighton’s supply
of white clinker for 10 years from 2015, which
will provide a replacement for the off-white
clinker currently produced at Munster.
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2013
12
A number of key customer contracts were
renewed during the year. We extended
the supply agreement for a major cement
customer in Western Australia on similar
terms until December 2016. In addition,
formal agreements were executed with one
of two Western Australian major alumina
producers for the continued supply of
their lime requirements for ten years. An
amendment was executed with the second
major lime customer varying the terms of
their lime supply agreement which expires
in 2021. The variation means that Adelaide
Brighton now expects to supply circa 100%
of the customer’s requirement for lime
during the contract term.
The Company further developed the use of
ground granulated blast furnace slag, a by-
product of the steel manufacturing industry,
as a supplementary cementitious material
into the Australian market. The anticipated
completion in early 2014 of a slag dryer at
the Port Kembla, New South Wales, cement
grinding operation will mean that the
Company has the capability to include slag
into cement at all grinding sites in Australia.
The use of slag reduces our carbon footprint
while replacing cement clinker with a lower
cost alternative and allowing for the sale of
specialist products such as low heat cement.
Martin Brydon
Deputy Chief
Executive Offi cer
Tonnes
’000
Adelaide Brighton
cement ground
(inc. imported clinker)
Tonnes
’000
Adelaide Brighton
lime production
3000
2800
2600
2400
2200
2000
1800
1200
1150
1100
1050
1000
950
900
09
10
11 12 13
09
10
11 12 13
‘000 tonnes
10000
9500
9000
8500
8000
7500
7000
6500
Australian cement production
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12 13
S
B
A
:
e
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S
Adelaide Oval
redevelopment:
normal Portland
cement, fl y ash and
Brightonlite cement
supplied by Adelaide
Brighton Cement
13
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2013
Concrete and Aggregates
Concrete volumes increased in 2013, mostly due to a stronger second half. The recovery in demand in the second half
of the year was led by New South Wales and an improving Queensland market. The Victorian market was weaker
due to softness in both residential and non-residential activity.
The residential construction market improved
toward the end of the year in most markets
and demand from Sydney multi-residential
projects was particularly strong. The
improvement in Queensland demand evident
in the second half follows several years of
declining volumes.
In the eastern states, the overall market
for concrete grew by an estimated 0.8% in
2013. In the second half of the year demand
growth was estimated at 2.1% on the previous
corresponding period. New South Wales and
Queensland refl ected growth in the second
half while Victoria remained subdued.
Despite better concrete volumes in 2013,
aggregate volumes declined due to delays
to sections of the Pacifi c Highway upgrade.
The highly strategic Austen Quarry has again
improved results on increased volumes
and better pricing. It is anticipated that
the strategic value of this asset will further
improve as the gravel quarries currently
supplying much of the Sydney market
rapidly deplete.
The successful installation of an air separation
unit at the Austen Quarry has improved the
quality of manufactured sand from the site
through a reduction in fi ne materials in the
product. This has enhanced the value of the
product to customers and its competitiveness
with natural sand, which is depleting within
the Sydney basin.
Earnings improved in both concrete and
aggregates despite the mixed operating
environment due to modest price increases
and operational improvement. Cost reductions
were achieved from transport effi ciencies such
as adjusting the mix of trucks in the fl eet and
reviewing maintenance services.
Despite cost increases, highly competitive
market conditions in Queensland and Victoria
have restricted price increases. Further price
increases for concrete and aggregates have
been announced for April 2014.
‘000m3
Australian concrete production by State
9000
8000
7000
6000
5000
4000
3000
2000
1000
0
‘000m3
30000
28000
26000
24000
22000
20000
18000
16000
14000
12000
S
B
A
:
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o
S
George Agriogiannis
Executive General Manager
Concrete and Aggregates
Australian concrete production
e
t
a
m
i
t
s
e
C
B
A
,
S
B
A
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e
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98
99
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01
02
03
04
05
06
07
08
09
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11 12
13
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
NSW Vic Qld SA WA Tas NT ACT
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2013
14
Hy-Tec’s North Melbourne
plant supplied in-situ
concrete using a slipform
method for the new
Tullamarine Airport tower.
The 79 metre high tower,
equivalent to a 20 storey
building, involved pouring
concrete for a continuous
24 hours a day, 7 days a
week, at a rate of 300mm
every hour, until the top
was reached.
Image courtesy of Hansen Yuncken Photograph by Anthony McKee
15
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2013
Concrete Products
Concrete Products EBIT increased due to the benefi ts of business restructuring. Adelaide Brighton is Australia’s largest
manufacturer of concrete masonry products, servicing key eastern seaboard building and construction markets. Earnings improved
despite subdued market conditions continuing across the eastern states for much of the year. Profi ts increased from $0.4 million
in 2012 to $2.1 million in 2013 due to cost savings from restructuring the business and price increases.
Sales improved modestly as increases to
selling prices offset the impact of lower
volumes. Demand increased in the second
half of the year, led by stronger residential
demand in New South Wales. While the
Queensland market showed positive signs late
in the year, the Victorian market remained
weak. Competitive pressures continued in the
comparatively weak demand environment,
limiting price rises.
Following initial work in 2012, restructuring
of the concrete products division continued
in 2013. Rationalisation of the production
footprint, alignment of the sales force to
better match customer requirements and
rightsizing of back offi ce functions resulted
in reduced labour costs. Redundancy costs
of $1.5 million were incurred in 2013. The
benefi ts of restructuring have only partially
been realised, with further benefi ts
anticipated to be delivered in 2014.
Adelaide Brighton is upgrading theproduction
plant at Stapylton, Queensland. The installation
of the latest generation HESS masonry machine
will lower productioncosts and, with its fast
product change over times, improve production
fl exibility to meet customer demand.
The trend of growth in higher end masonry
products continues, with the business focused
on development of value added products
that match consumer demand for quality
products of distinction. Integrated into this
product development is the use of alternative
raw materials to improve the sustainability
outcomes of our operations.
Above and right: a selection of
Adbri Masonry concrete products
Steve Rogers
Executive General Manager
Concrete Products
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2013
16
17
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2013
Joint Ventures
Adelaide Brighton’s Joint Ventures provide Adelaide Brighton, in conjunction with our own operations,
an unmatched network for the effi cient supply and distribution of products across Australia.
Sunstate Cement Limited (50%)
Mawson Group (50%)
Burrell Mining Services (50%)
Sunstate Cement Limited (Sunstate) is a
joint venture between Adelaide Brighton and
Boral. A leading supplier to Queensland’s
construction industry, Sunstate has a cement
milling, storage and distribution facility at
Fisherman Islands, Port Brisbane. Clinker is
supplied to Sunstate via seaborne shipments
from the Adelaide Brighton Angaston plant
and imports from Asia.
Sunstate reported lower earnings in 2013 due
to competitive pressures limiting the ability
to recover increases to input costs. The south
east Queensland market continues to be
challenging but a recovery in demand was
evident in the second half.
Independent Cement and Lime Pty Ltd
(50%)
Independent Cement and Lime Pty Ltd (ICL),
a joint venture between Adelaide Brighton
and Barro Group Pty Ltd, is a specialist supplier
of cement and cement blended products
throughout Victoria and New South Wales
and is the exclusive distributor of cement
for Adelaide Brighton and any related body
corporate in these states.
Independent Cement and Lime reported a
reduced contribution to Group earnings due
to weak Victorian demand, higher input costs,
competitive pricing and volume pressures.
Mawson Group (Mawsons) is a joint venture
between Adelaide Brighton and BA Mawson
Pty Ltd. Mawsons is the largest premixed
concrete and quarry operator in northern
regional Victoria. Mawsons also operates
in southern regional New South Wales
where it holds leading market positions.
Mawsons reported a decline in earnings and
lower volumes due to the weaker general
construction market, the completion of fl ood
reconstruction projects and pressure on prices.
Batesford Quarry (50%)
Batesford Quarry is an unincorporated joint
venture between Adelaide Brighton, E&P
Partners and Geelong Lime Pty Ltd. Batesford
Quarry, situated at Fyansford Quarry near
Geelong in Victoria, undertakes quarrying and
manufacturing, marketing and distribution of
various limestone and quarry products.
Batesford Quarry earnings improved as
demand growth supported volumes.
Burrell Mining Services is an unincorporated
joint venture between Adelaide Brighton and
Burrell Mining Products. With operations in
New South Wales and Queensland, Burrell
Mining Services manufactures a range of
concrete products exclusively for the coal
mining industry.
Earnings from Burrell Mining Services
declined moderately as adverse weather
impacted on mining activities and the
subdued outlook for coal mining led to
a contraction in demand.
Aalborg Portland Malaysia Sdn. Bhd. (30%)
Aalborg Portland Malaysia Sdn. Bhd. (APM)
is a joint venture between Cementir (70%)
and Adelaide Brighton. APM manufactures
and sells white cement and clinker. It sells
products to the domestic Malaysian market
and exports to markets throughout south
east Asia and Australia.
Earnings from APM were better than
expectations and broadly in line with 2012.
The prior year was supported by government
investment allowances. 2013 was the fi rst
full year of returns from the investment.
The US$18.6 million planned capacity
expansion is progressing well and is expected
to be commissioned in the second half
of 2014.
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2013
1618
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under the Australian Government’s National Offset Carbon Standard.
under the Australian Government’s National Offset Carbon Standard.
under the Australian Government’s National Offset Carbon Standard.
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l
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19
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2013
Sustainability Report
This report should be read in conjunction with other sections of this Annual Report and financial statements.
The Directors’ Report, Corporate Governance Statement and reports on Remuneration and People, Health and Safety
also contain information relevant to the sustainability performance of the Group.
The Adelaide Brighton Group includes
Adelaide Brighton Limited and the entities
it controls (the Group), as well as a number
of joint ventures. This report excludes
information about the joint ventures as
the Group does not control their operations
and they are not material to the Group’s
sustainability reporting.
While the Group’s financial year ends on
31 December, most government sustainability
related reporting requires information to
be provided for the year to 30 June. So that
statistical and graphical data provided in
this Sustainability Report can be compared
with other publicly available information,
the information in this report relates to
the year ended 30 June 2013, unless
otherwise indicated.
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In this report, the following resources
have been considered:
The Global Reporting Initiative G4
Sustainability Reporting Guidelines.
ESG Reporting Guide for Australian
Companies prepared by the Australian
Council of Superannuation Investors
and the Financial Services Council.
The Cement Sustainability Initiative
of the World Business Council for
Sustainable Development.
Relevant industry practice.
Energy and greenhouse gas emissions
information complies with the definitions
and boundaries contained in the National
Greenhouse and Energy Reporting Act.
Key performance indicator
Discussion in Annual Report
Alternative fuels and energy consumption
Alternative raw materials
Carbon emissions
Energy by source
Page 21
Page 21
Page 21
Page 21
Participation of women in the Company
Page 37 - Diversity Report
Restricted duties injury frequency rate
Lost time injury frequency rate
Employment by geography
Employment by employment status
Employment by contract type
Employee turnover by age group
Employee turnover by gender
Employee turnover by geography
% of employees on EBAs vs staff
Page 26
Page 26
Page 26
Page 25
Page 25
Page 25
Page 26
Page 26
Page 26
Other reports
Discussion in Annual Report
Coverage of organisation defined
benefit plan obligations
Direct economic value added
(sales, costs, employee
compensation, retained earnings)
Page 87 - 89 - Note 23
Page 64 - Income Statement
Page 77 - Note 3 and 4
Monetary value of fines and total number
of non-monetary sanctions for non-
compliance with laws and regulations
Page 45 - Directors’ Report
Environmental Performance
The Board oversees and approves the
sustainability framework, key performance
indicators and the scope of this report.
The key performance indicators listed below
have been assessed to be the Group’s material
sustainability performance indicators.
For further information about
the sustainability report
email adelaidebrighton@adbri.com.au
or telephone 08 8223 8005.
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2013
20
Adelaide Brighton understands that every
decision made and action taken has an impact
on the social, environmental and economic
environments in which it operates. These
environments need to be closely managed to
ensure the long term success of the business.
Our activities are under constant review and
we are always looking to embrace new and
innovative ways of carrying out our day
to day business.
The Group has facilities in all states and
territories of Australia and many operate in
or near local communities or sensitive areas
of the natural environment. Our objective is
to minimise the impact on these areas and
to exceed mandatory compliance standards,
while delivering strong internal performance.
The operating environment for the Group
continues to become more demanding with
regard to sustainable performance.
Carbon emissions
Carbon emissions from our energy intensive
activities of clinker, cement and lime
production were reported for the first time
under the Carbon Tax arrangements in 2013.
There is political uncertainty about both the
fate of the Carbon Tax and the government’s
Direct Action Plan. In the meantime, Adelaide
Brighton is contributing to submissions about
these issues through peak industry bodies.
We continue to work towards reducing our
emissions. As shown in the carbon emissions
graph, our operations recorded an overall
reduction in Scope1 emissions across the
business in 2013. This was due to changes
in production volumes, the fuel mix and
an improvement in the methodology of
greenhouse gas calculations.
We have a well developed strategy of
reducing greenhouse gas emissions
through improved efficiency and the use
of alternative fuels and raw materials.
Alternative fuels
The use of alternative fuels, including
construction and demolition waste, carbon
powder and waste oil, is a key part of our
greenhouse gas emissions strategy and
reduces our consumption of natural gas
and coal. We are working towards
doubling, by 2016, alternative fuels as
a replacement for natural gas.
In 2013 major improvements were made
to the fuel firing process at the Birkenhead
site which has allowed for increased use of
construction and demolition waste fuel to
substitute natural gas.
Where economically viable, the Angaston
plant has been trialling the use of waste oil
as an alternative fuel source to natural gas.
At the Mataranka lime plant in the Northern
Territory, waste oil continues to be used as
a main fuel source.
Alternative raw materials
Alternative raw materials are used in the
manufacturing process to supplement or
replace traditional materials obtained from
non-renewable sources. By using these
alternative materials we divert them from
being sent to landfill and reduce the burden
on non-renewable resources.
This also provides substantial reduction in
greenhouse gas emissions from the cement
manufacturing process. The key alternative
raw materials used are granulated blast
furnace slag and fly ash.
‘000
tonnes
Carbon
emissions
Terajoules
Alternative fuels
energy consumption
4000
3800
3600
3400
3200
3000
2800
1200
1000
800
600
400
200
0
%
10
9
8
7
6
5
4
%
substitution
Alternative
raw materials
‘000t GHG
savings
17
16
15
14
13
12
11
600
550
500
450
400
350
300
09
10
11
12
13
09
10
11
12
13
09
10
11
12
13
Demolition material
Industrial Waste
Waste oil
% Alternative fuels
of total energy
% SCM1 substitution
GHG saving
1By-products of industrial
processes - slag from steel
manufacturing industry
and fly ash from coal fired
power stations
Energy by
source
Source of greenhouse
gas emmission in a
cement plant
Natural gas
Coal
Electricity
Demolition material
Liquid fuels
Waste oil
Industrial waste
50% of greenhouse gas
emissions occur as the raw
meal is heated and carbon
dioxide is driven off in
order to form the necessary
chemical conversion of
limestone to calcium oxide:
CaCO3 > CaO + CO2
As long as cement making
relies on the calcination of
limestone, these emissions
will be impossible to avoid.
35% of greenhouse gas
emissions occur as a result
of burning fuels (coal,
gas and diesel) to create
thermal energy.
15% is produced as a result
of the indirect emissions
resulting from the use
of electricity. Cement
grinding is the largest
single electricity user in
the cement plant. Raw
meal grinding and moving
material around a plant
are other significant
sources of electricity use.
Slag, a by-product from steel manufacture,
and fly ash, a by-product from coal fired
power stations, is used in the cement
manufacturing process to reduce carbon
emissions while ensuring high quality
products. In 2013, the cement mill expansion
project at Birkenhead, South Australia,
resulted in substantially increased use of slag.
Slag consumption will be further expanded
in 2014 with the completion of a slag dryer
at our Port Kembla, New South Wales site,
which, when complete, gives the Group
capability to include slag into cement at
all grinding sites in Australia.
The use of slag and fly ash extends to the
production of our premixed concrete and
concrete products. The substitution of slag
and fly ash in premixed concrete and concrete
products increased significantly in 2013.
In our grey masonry block, substitution
doubled in 2013.
Improvement initiatives
Adelaide Brighton continually works to
improve its environmental performance and
reduce its impact on the local environment
and community. Initiatives undertaken
during 2013 include:
21
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2013
Cockburn Cement Senior
Environmental Adviser
checking ambient air
monitor located in the
Munster Quarry 10
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2013
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2013
22
Birkenhead hydrocarbon plume remediation
Dust reduction initiatives
Adelaide Brighton acquired land in 2007
adjacent to our Birkenhead plant in South
Australia. The groundwater two metres below
the surface of the land was contaminated by
a hydrocarbon fuel plume. An extensive 12
month remediation process was undertaken
to remove contaminates, with multiple
extraction wells used to remove ground water
and process it through a treatment plant.
Over six million litres of groundwater was
processed, removing over 25,000 litres of oil
which was disposed of to a registered waste
facility. Subsequent testing of the primary
area has confirmed the success of
the remediation project revealing a 94%
reduction in fuel thickness in the plume.
Ongoing water monitoring at the site
occurs every six months to monitor
residual contamination.
Munster
The installation of bag house filters to lime
Kiln 6 in 2012 and lime Kiln 5 in 2013 has
resulted in a significant decrease in particulate
emissions - 90% on Kiln 5 and 93% on Kiln 6.
This is 60% below licensing limit for Kiln 5
and 80% for Kiln 6.
Real time data showing the emissions
from each kiln is published on the sites
community website:
http://www.cockburncementcommunity.com.
au/environment/operating-licence/cems-data/
A continuous emissions monitoring system
(CEMS) monitors and records particulate
emissions from the kiln stacks. A cycle check
of CEMS is performed daily to ensure the
system is operating correctly. This cycle check
results in a spike in the reported reading as
highlighted by the spike in the chart below.
Readings during the cycle check do not
represent actual particulate emission levels.
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Installation of two additional dust monitors
to increase the capability to monitor ambient
dust around the Birkenhead plant. The
monitors continually measure ambient dust
and provide vital data for the Birkenhead air
dust monitoring program. There are monitors
within the boundary of the Birkenhead
site and two at strategic locations in the
surrounding community.
Rapid rise doors (which open and close
in seconds) were installed at Angaston and
Birkenhead sites to minimise potential for
dust escaping to the atmosphere.
A new annex on the clinker gantry shed at
Birkenhead, provides space for larger trucks
and semi-trailers to enter the clinker gantry
shed, while the automated rapid rise doors
seal the storage facility reducing the
potential for dust to escape during loading
operations and truck movements.
An automated enclosed truck wash capable
of handling all vehicles leaving the site was
also installed at the Birkenhead plant.
Alternative fuel use at quarries
Implementation of a project to assess the
use of gas in generators at quarry sites as
a replacement for diesel fuel. Gas produces
lower emissions and provides a cost benefit
to the business. Assessment of the potential
for the change in fuel will continue in 2014.
Mandatory reporting
Adelaide Brighton provides environmental
reporting to local, state and national
authorities related to water, land and air.
Where required our operating sites are
responsible for local and state environmental
reporting while national reporting is
undertaken on a Group basis.
Adelaide Brighton is required to report
on three national environment schemes:
National Greenhouse and Energy
Reporting (NGER);
Energy Efficiency Opportunities (EEO); and
National Pollutant Inventory (NPI).
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mg/m3
Munster Kiln 5 particulate emissions on 24/12/2013
60
50
40
30
20
10
0
Cycle check
d
e
t
i
m
i
L
t
n
e
m
e
C
n
r
u
b
k
c
o
C
:
e
c
r
u
o
S
m
a
0
0
2
1
.
m
a
3
4
2
1
.
m
a
6
2
1
.
m
a
9
0
2
.
m
a
2
5
2
.
m
a
5
3
3
.
m
a
8
1
4
.
m
a
1
0
5
.
m
a
4
4
5
.
m
a
9
2
6
.
m
a
2
1
7
.
m
a
5
5
7
.
m
a
8
3
8
.
m
a
1
2
9
.
m
a
4
0
0
1
.
m
a
7
4
0
1
.
m
a
0
3
1
1
.
m
p
3
1
2
1
.
m
p
6
5
2
1
.
m
p
9
3
1
.
m
p
2
2
2
.
m
p
5
0
3
.
m
p
8
4
3
.
m
p
1
3
4
.
m
p
4
1
5
.
m
p
7
5
5
.
m
p
0
4
6
.
m
p
3
2
7
.
m
p
6
0
8
.
m
p
9
4
8
.
m
p
2
3
9
.
m
p
5
1
0
1
.
m
p
8
5
0
1
.
m
p
1
4
1
1
.
Kiln 5 (mg/m3) Internal target Licence limit 8 minute average
>
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>
>
Activities undertaken under each scheme:
This is the fifth year that Adelaide Brighton
has reported its greenhouse gas emissions,
energy consumption and energy production
data under NGER. Reporting requirements
were expanded to facilitate the Carbon Tax.
The Group received an unqualified audit
opinion on data reported for the purposes
of the Carbon Tax.
The EEO program was designed to encourage
large energy using businesses to increase
their energy efficiency by attempting to
improve the identification, evaluation and
implementation of cost-effective energy
savings opportunities. For Adelaide Brighton,
the EEO program began its second five year
assessment cycle in 2012. Our Dongara and
Munster (Western Australia) and Birkenhead
and Angaston (South Australia) sites will
undertake site assessments to identify and
investigate opportunities.
The NPI tracks pollution across Australia,
providing communities with access to
information about emissions and transfers
of toxic substances. Currently, eight sites
within Adelaide Brighton report under the
NPI scheme. During 2013, the Birkenhead
site 2012 NPI data was audited by the South
Australian Environmental Protection Authority
confirming the quality of our reporting.
Water usage
All business divisions seek to reduce water
usage. Projects undertaken in 2013 included:
The Munster, Western Australia, plant
participated in the Water Efficiency
Management Program overseen by the
Water Corporation, for businesses using
more than 20,000 kL of water per year.
This initiative assesses water use to identify
inefficiencies, set targets and create an
action plan and report on actions taken.
The program continues in 2014.
An enclosed automated truck wash was
installed at Birkenhead which recycles 98%
of the water used.
Stormwater management planning at all
concrete plants examined opportunities to
utilise rain water. Recycled water (captured
rainwater and re-used mains water) is used
at the majority of New South Wales concrete
plants. A conversion program is underway
for those sites that do not use recycled
water. The design of all new concrete plants
incorporates the capture of natural rain
water to minimise the use of mains water.
23
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2013
Community support
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Sydney Children’s Hospital Foundation -
children’s therapist in the Outpatients and
Emergency Departments.
Variety the Children’s Charity - benefitting
sick, disabled and disadvantaged children.
Scholarship in the School of Engineering at
the University of Wollongong - to encourage
a higher proportion of women into
engineering.
City of Port Adelaide Enfield Community
Christmas parade.
Indigenous scholarship for secondary
schooling program.
Camp Quality - a children’s family
cancer charity.
Diamond Jubilee Trust Australia - program
for avoidance of blindness and vision loss.
Lithgow Bushfire Appeal to assist recovery
and rebuilding of affected areas.
Workplace giving program to support
Variety the Children’s Charity.
>
The Moorebank concrete products plant
in New South Wales is using up to 8,000
litres per annum of treated recycled water
in the production process. Secured from a
sustainable resource recovery management
company, this water would otherwise have
entered the sewage network. Use of treated
recycled water is being investigated at our
other concrete products sites.
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Removal of invasive flora species, typically
olive and pine trees, and planting of native
trees and shrubs at the Angaston, South
Australia site.
Austen Quarry continued rehabilitation of its
overburden emplacement area and planting
of native seedlings grown onsite where final
landform of the quarry has been achieved.
This ensures the quarry is returned to its
natural state.
Megalitres
Mains water
usage
‘000
tonnes
Process waste
to landfill
600
500
400
300
200
100
0
09
10
11
12
13
Cement and lime
Concrete and aggregates
Concrete products
160
140
120
100
80
60
40
20
0
09
10
11
12
13
Cement and lime
Concrete and aggregates
Concrete products
Cement and lime kiln dust
Cement kiln dust (CKD) and lime kiln dust
(LKD) are waste materials from the production
of cement and lime that have traditionally
gone to landfill within our quarries. Adelaide
Brighton is investigating reuse of CKD and LKD
within the cement and lime manufacturing
process.
Early trials at Birkenhead, South Australia,
have been positive while other alternative uses
of the waste material are also being examined.
Community interaction and support
Adelaide Brighton aims to have a positive
impact on the communities in which we
operate through selective and considered
support of education at tertiary institutions
and local schools, community groups,
hospitals, and organisations that provide
community assistance programs. We believe
in positive engagement, consultation and
openness with communities.
Landcare and rehabilitation
Community interaction
A comprehensive earth care program
operates throughout the business aimed
at reducing our impact on the natural
environment and local community. Land
improvement initiatives undertaken include
rehabilitation of quarry areas, community
tree planting, creation and maintenance
of wetland areas and site revegetation.
Rehabilitation projects in 2013 include:
Locally propagated indigenous plants were
planted at the Birkenhead, South Australia,
wetland, which is home to a variety of birds,
reptiles, insects and aquatic life. The project
provides local schools and community groups
with the opportunity to learn about the
wetland ecosystem.
The Munster, Western Australia, wetlands
provide a habitat for a variety of native flora
and fauna and also captures rainwater for
reuse in the wet kiln process.
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The Angaston, South Australia, plant
provided funding for a cycle path between
Angaston and Nuriootpa in the Barossa Valley.
The cycle path passes the northern perimeter
of the Angaston plant and was constructed
for walkers and cyclists.
Adelaide Brighton’s Tinda Creek Quarry in
New South Wales, was used as a staging
post and water bombing helicopter refuelling
site during the devastating Sydney Blue
Mountains bushfire in October 2013.
Adelaide Brighton provides assistance to the
South Australian Indigenous Law Student
Mentoring Program to support law students
both during study and in the transition to
legal practice after graduation.
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2013
24
People, health and safety
Adelaide Brighton employs around 1300 people across 91 locations across Australia. We believe that a safe, tolerant and
diverse workforce and environment creates opportunities for our people and enables them to reach their potential.
Employee turnover by age group
Investing in future success
%
turnover
35
30
25
20
15
10
5
0
We have a structured approach to people
management and development, which
is integrated with health, safety and
environment. This approach relies on group
standards, policies and practices that are
maintained centrally but administered
locally where business is done.
At the core of our Group standards is the
Code of Conduct. The Code of Conduct
outlines our commitment to conducting our
business in a lawful and ethical manner and
provides our people with a framework for
decision making. This supports personal and
corporate integrity, reputation and success.
The Code of Conduct is regularly reviewed
to ensure its appropriateness in the dynamic
operating environment.
Safety and health
Safety is an integral part of our day to day
operations in all that we do. Our safety
standards and systems apply to employees,
contractors and any visitor on site. Over the
last three years we have progressively updated
our safety systems and processes to ensure
that we have current, usable procedures and
operational tools that our people can rely
on to help them assess and mitigate risks
in the workplace.
In addition we have been focusing on
what it means to be a “safety leader” in our
business. Our expectation is that all employees
act as role models for each other to ensure the
safest possible outcome. This approach aims
to build a sustainable safety culture.
In 2013 we recorded a lost time injury
frequency rate of 1.7 down from a frequency
rate of 2.5 in 2012 and 5.3 in 2011. This
reflects a significant annual improvement
over each of the last two years.
0
2
<
5
2
-
1
2
0
3
-
6
2
5
3
-
1
3
0
4
-
6
3
5
4
-
1
4
0
5
-
6
4
5
5
-
1
5
0
6
-
6
5
5
6
-
1
6
0
7
-
6
6
+
0
7
Employee by
employment status
Employee by
contract status
Full time
Part time
Casual
Diversity
Permanent
Fixed term
Workplace diversity is an important factor
in providing an inclusive and balanced
environment in our business. Given the
traditionally male dominated industry in
which we operate, the attraction of women
remains a significant challenge for us. In an
effort to increase the level of gender diversity
in our workforce we sponsor the Women
in Engineering program at Wollongong
University and an Undergraduate Engineering
Scholarship targeted at female engineers.
In addition, where possible we provide
flexible employment opportunities and
paid parental leave.
In 2013, we continued the rollout of our
Leading with Strengths leadership and
development program we initiated in the
previous year. The program, aimed specifically
at female employees, is to provide tools for
them to develop their individual strengths
and talents and build better business
relationships and career opportunities.
Adelaide Brighton has a long history of
employing vacation students and university
graduates across our business. Our aim is
develop both technical expertise and
leaders of the future.
Our student vacation program employs
undergraduate engineers typically for a
period of two to three months. During this
time students are assigned a business related
project that is operationally important as well
as meeting the requirements of their degree.
The students are supervised and mentored
during their placement. Our overall aim is
to make working with the team at Adelaide
Brighton their preference when they
complete their studies.
Adelaide Brighton’s graduate program offers
new multi-discipline graduates just over two
years experience working on larger projects,
generally covering a six to seven month
period. Graduates work in the different
divisions, locations and disciplines to gain an
understanding of the career opportunities at
Adelaide Brighton. Graduates’ project work
is supervised with mentoring provided over
the course of the program.
Sam Toppenberg
Executive General Manager
Human Resources
25
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2013
Employee turnover
by geography
Employees
by geography
% Employees
on EBA vs staff
Employee
turnover by gender
%
100
80
60
40
20
0
EBA
Staff
Female
Male
Continuers
Turnover
Queensland
South Australia
New South Wales
Western Australia
Victoria
Tasmania
Northern Territory
ACT
South Australia
Western Australia
New South Wales
Queensland
Victoria
Northern Territory
Tasmania
ACT
Frequency
Restricted duties injury
frequency rate
Frequency
Lost time injury
frequency rate
8
7
6
5
4
3
2
1
0
35
30
25
20
15
10
5
0
09
10
11
12
13
Cement and lime
Concrete and aggregates
Concrete products
Total ABL
09
10
11
12
13
Cement and lime
Concrete and aggregates
Concrete products
Total ABL
Cockburn Cement
Munster plant
employee
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2013
26
Corporate Governance Statement
The Board is committed to conducting the Company’s business ethically and in accordance with high standards of corporate
governance. To this end, the Board (together with the Company’s management) regularly reviews the Company’s policies, practices
and other arrangements governing and guiding the conduct of the Company and those acting on its behalf. This statement provides
an outline of the main corporate governance practices that the Company had in place during the past financial year. The Board
believes that the Company’s policies and practices are consistent in all substantial respects with good corporate governance practice
in Australia appropriate for the circumstances of the Company, including the ASX Corporate Governance Council Principles and
Recommendations. A summary of how each of the recommendations has been addressed is set out below.
ASX Corporate Governance Council Principles and Recommendations (ASX Principles)
The following table summarises how the Company meets the ASX Principles (as applicable to the Company for the 2013 financial year),
and provides reference to where the specific recommendations are dealt with in this statement:
ASX Principle / Recommendation
Compliance
Reference
Principle 1:
Lay solid foundations for management and oversight
1.1
1.2
1.3
Establish the functions reserved to the Board and those reserved to management
Disclose the process for evaluating the performance of senior executives
Provide the information indicated in the Guide to reporting on Principle 1
Principle 2:
Structure the Board to add value
2.1
2.2
2.3
2.4
2.5
2.6
A majority of the Board should be independent Directors
The chair should be an independent Director
The roles of chair and chief executive officer should not be exercised by the same individual
The Board should establish a nomination committee
Disclose the process for evaluating the performance of the Board, its committees and individual Directors
Provide the information indicated in the Guide to reporting on Principle 2
Section 1.1
Section 1.2.3
Section 1.2.1
Section 1.2
Section 1.2
Section 2.1
Section 1.2.3
3
3
3
3
3
3
3
3
3
Principle 3:
Promote ethical and responsible decision-making
3.1
3.2
3.3
3.4
3.5
Establish a code of conduct and disclose the code or a summary of the code
3
Section 4.1
Establish a diversity policy and disclose the policy or a summary of that policy. The policy should include
requirements for the Board to establish measurable objectives for achieving gender diversity and for the
Board to assess annually both the objectives and progress in achieving them.
Section 1.2.6
and pages 36, 37
3
Disclose the measurable objectives for achieving gender diversity set by the Board in accordance with the
diversity policy and progress towards them.
3
Pages 36, 37
Disclose the proportion of women employees in the whole organisation, women in senior executive
positions and women on the Board.
Provide the information indicated in the Guide to reporting on Principle 3
Page 37
3
3
27
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2013
ASX Principle / Recommendation
Compliance
Reference
Principle 4:
Safeguard integrity in financial reporting
4.1
4.2
4.3
4.4
The Board should establish an audit committee
The audit committee should be structured so that it:
> consists only of non-executive Directors
> consists of a majority of independent Directors
> is chaired by an independent chair, who is not chair of the Board, and
> has at least three members
The audit committee should have a formal charter
Provide the information indicated in the Guide to reporting on Principle 4
Principle 5: Make timely and balanced disclosure
5.1
Establish written policies and procedures designed to ensure compliance with ASX Listing Rule disclosure
requirements and to ensure accountability at a senior executive level for that compliance and disclose
those policies or a summary of those policies
5.2
Provide the information indicated in the Guide to reporting on Principle 5
Principle 6:
Respect the rights of shareholders
6.1
6.2
Design a communications policy for promoting effective communication with shareholders and
encouraging their participation at general meetings and disclose their policy or a summary of that policy
Provide the information indicated in the Guide to reporting on Principle 6
Principle 7:
Recognise and manage risk
Section 2.1
Section 2.1
Section 2
Section 5.1
Section 5.2
3
3
3
3
3
3
3
3
Establish policies for the oversight and management of material business risks and disclose a
summary of those policies
3
Section 3.1
7.1
7.2
7.3
The Board should require management to design and implement the risk management and internal
control system to manage the Company’s material business risks and report to it on whether those risks
are being managed effectively. The Board should disclose that management has reported to it as to the
effectiveness of the Company’s management of its material business risks
The Board should disclose whether it has received assurance from the chief executive officer and the
chief financial officer that the declaration provided in accordance with section 295A of the Corporations Act
is founded on a sound system of risk management and internal control and that the system is operating
effectively in all material respects in relation to financial reporting risks
7.4
Provide the information indicated in the Guide to reporting on Principle 7
Principle 8:
Remunerate fairly and responsibly
8.1
8.2
8.3
8.4
The Board should establish a remuneration committee
The remuneration committee should be structured so that it:
> consists of a majority of independent Directors
> is chaired by an independent chair, and
> has at least three members
Clearly distinguish the structure of non-executive Directors’ remuneration from that of
executive Directors and senior executives
Provide the information indicated in the Guide to reporting on Principle 8
3
Section 3.1
3
3
3
Section 3.1
Section 2.1
3
Section 2.1
Section 2.1
3
3
1
The Board lays solid foundations
for management and oversight
1.1
Role of the Board
The role of the Board of Directors is to
protect and optimise the performance of
the Group and, accordingly, the Board
takes accountability for reviewing and
approving strategic direction, establishing
policy, overseeing the financial position
and monitoring the business and affairs
of the Group on behalf of shareholders.
Details of the skills, experience and expertise
of each Director and their period of office are
set out on page 38 and 39 of this report.
The Board operates in accordance with the
general principles set out in its charter, which
is available from the corporate governance
section of the Company’s website at
www.adbri.com.au.
In accordance with the provisions of the
Company’s constitution, the Board has
delegated a number of powers to Board
committees (see section 2 following) and
responsibility for the day-to-day management
of the Company to the Managing Director
and Chief Executive Officer (CEO) and senior
management. The respective roles and
responsibilities of the Board and management
are outlined further in the Board charter.
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2013
28
The Board has also reserved for itself the following specific responsibilities:
Strategy and monitoring
Monitoring the business and
affairs / relations with management
Risk management, compliance
and internal controls
Input into and approval of management’s
development of corporate strategy, including
setting performance objectives and approving
operating budgets.
Selecting, appointing and evaluating from
time to time the performance of, determining
the remuneration of, and planning for the
successor of, the CEO.
Monitoring and reviewing corporate
performance and implementation of strategy
and policy.
Reviewing procedures for appointment of
senior management, monitoring performance
and reviewing executive development
activities. This includes ratifying the
appointment and the removal of the Chief
Financial Officer and the Company Secretary.
Approval of the Company’s capital structure
and gearing targets.
Approval of specified matters exceeding
delegated authority levels, including major
capital expenditure and major acquisitions
and divestitures.
Reviewing and guiding systems of risk
management and internal control and
ethical and legal compliance.
Monitoring and reviewing processes aimed
at ensuring integrity of financial and other
reporting, and providing assurance to
approve the Group’s financial reports.
Monitoring and reviewing policies and
processes in place relating to occupational
health and safety, compliance with laws, and
the maintenance of high ethical standards.
Input into and approval of the Company’s
policy in relation to, and monitoring
implementation of, sustainable resource use
and the impact of the Company’s operations
on the environment, community and
stakeholders.
1.2 The Board is structured to add value
The Board ensures that its members
have the time and commitment to
devote to the role
>
Prior to appointment, Directors provide details
of other commitments and acknowledge that they
will have adequate time to meet expectations
>
Directors to consult with the Chairman before
accepting outside appointments
>
Letter of appointment sets out Director’s term
of appointment, powers, expectations and
rights and obligations.
Board keeps informed of regulatory and industry
Board and Director performance is regularly
developments to challenge status quo and
evaluated to facilitate continuous improvement
strengthen knowledge base (see 1.2.4)
(see 1.2.3)
>
>
Directors expected to participate in ongoing education
>
Board, Committee and individual Director
For 2013, the Board’s program was developed
performance reviewed annually
having regard to significant business and industry
>
Directors to undergo a performance appraisal
developments the Company was facing and
before standing for re-election
was presented by the Company’s management
>
One third of the non-executive Directors retire
>
Directors keep themselves informed and up
(and are eligible for re-election) at each AGM
to date, of their own initiative, with general
developments relevant to the role of a non-
executive Director in an S&P/ASX200 company
The Board is committed to a majority of
The Board is structured to add value and Board
Board members have access to management
independent views being brought to bear in
decision-making is enhanced through education
and independent advice to assist in discharge
decision-making (see 1.2.1 below)
and support
of their duties
>
>
>
Directors expected to bring independent views and
>
Broad mix of skills, diversity and experience
>
Access to senior executives and to any further
judgment to discussions
reflecting the character of the Group’s business to
information required to make informed decisions
Five of the seven Board members are independent
best guide, review and challenge management
>
Right to seek independent professional advice
Board has adopted Financial Services Council Blue
>
Independent Chairman leads the Board, facilitates
at the Company’s expense to assist in effective
Book definition of director independence
constructive decision-making, and manages
discharge of duties
Board/ management relationship
>
To maintain independent oversight, roles of
Chairman and Managing Director are undertaken
by different individuals.
Comprehensive induction processes
equip directors to perform in their role
Conflicts are managed (see 1.2.2)
>
Actual and perceived conflicts considered
Comprehensive induction process upon appointment
and managed on an ongoing basis
Obligation on new Directors to familiarise themselves
>
n
Protocols around disclosure, and procedures
with Company’s practices through induction process
around management of potential conflicts
>
>
or by making enquiries of the Chairman, the
have been adopted
n
Company Secretary or management
29
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2013
1.2.1
Directors’ independence
1.2.3
Performance evaluation
1.2.4
Ongoing education
In general, Directors are considered
independent where they are free of any
interest and any business or other relationship
which could, or could reasonably be perceived,
to interfere materially with the Director’s
ability to act in the best interests of the
Company. An assessment will be made on a
case-by-case basis of whether the Director’s
ability to act in the best interests of the
Company has been materially impaired.
In ensuring that the Board comprises Directors
with a broad range of skills and experience
reflecting the character of the Group’s
business, the Board may from time to time
appoint Directors who are not considered to
be independent. It is, however, the Board’s
policy that it should comprise a majority
of independent Directors to ensure that
independent oversight is maintained.
In the context of his executive position with
the Company, Mr M Chellew is not considered
to be independent. Having regard to the
guidelines of independence adopted by the
Board, the Directors are of the view that Mr
R D Barro is the only non-executive Director
who is not considered “independent” by virtue
of his position as the Managing Director
and a shareholder of Barro Group Pty Ltd,
which has a 50% interest in the joint venture,
Independent Cement & Lime Pty Ltd (ICL), and
is a substantial shareholder in the Company.
ICL has an ongoing trading relationship with
the Barro Group of companies.
1.2.2
Conflicts of interest
Directors are expected to avoid any action,
position or interest which conflicts (or may
be perceived to conflict) with their position as
a Director of the Company. In particular, the
Board is cognisant of Mr Barro’s interest in
Barro Group Pty Ltd, a significant shareholder
in the Company and 50% joint venture
partner in ICL.
During the year, in order to avoid actual and/
or perceived conflicts of interest in Board
decision-making, Board procedures were
followed such that where the possibility of a
material conflict arose, the Board considered
the nature and extent of the potential conflict
and whether it would be appropriate for
the relevant Director to participate in Board
discussion and decision-making in relation
to the issue. Where there was a real potential
for a conflict of interest, information was not
provided to the Director, and, in accordance
with the Corporations Act 2001, the Director
did not participate in, or vote at, the meeting
where the matter was considered.
For the 2013 financial year, a performance
evaluation was led by the Chairman to assess
the performance of individual Directors, the
Board as a whole, various aspects of the
Board committees such as their performance,
membership, roles and charters, and the
Board’s and Directors’ interaction with
management.
As part of this comprehensive review of
the Board’s performance, processes and
operations, the Chairman facilitates individual
discussions with each Director which also
reviews their individual performance. The
discussions also included a peer review of
the Board Chairman’s performance by
the other Directors.
The Chairman reports to the Board concerning
the performance evaluation process and
the findings of these reviews. As a result of
recommendations arising from the internal
Board review, initiatives are introduced
to ensure the continued effectiveness of
the Board’s performance and to enable
its sustained focus on key issues for the
Company. The implementation of these
initiatives is overseen by the Chairman.
Executives and managers are also subject
to an annual performance review in which
performance is measured against agreed
business objectives. The performance of
the CEO is assessed by the Board against
objectives related to the Company’s strategy,
business plans and the financial performance
of the business.
For the 2013 financial year, the performance
of the CEO and the CEO’s achievement
of the agreed objectives was reviewed by
the Chairman, the then Nomination and
Remuneration Committee and the Board.
The performance of the Company’s senior
executives during 2013 was reviewed by
the CEO, and by the then Nomination and
Remuneration Committee, led by the CEO and
the Executive General Manager,
Human Resources.
The Committee and the Board considered
the performance of Martin Brydon, Executive
General Manager - Cement & Lime, and the
relevant circumstances of the Company,
as part of the Committee’s and the Board’s
decision to promote Martin Brydon to the
position of Chief Executive Officer when
Mark Chellew retires in May, 2014.
The Board’s ongoing education calendar
incorporated site visits in 2013 to
the Company’s key cement and lime
manufacturing facilities at Birkenhead, South
Australia and Munster, Western Australia.
Presentations were given by management
and external experts concerning factors
which impacted, or were likely to impact,
the business, and various opportunities.
The Board is informed by expertise from
within the Company on matters such as
energy supply arrangements and business
and product development. The Board held
a number of sessions with senior personnel
from organisations operating in a range of
fields relevant to the Company’s operations
and future direction, in order to stay
abreast of key and developing issues and
opportunities which were or might be
relevant to the Company.
1.2.5
Board and CEO succession planning
The Board regularly reviews the size and
composition of the Board to ensure the
appropriate skills, perspective and expertise
are represented.
As announced to the ASX on 13 December
2013, the Board’s long term management
succession plan for the CEO was implemented,
leading to Martin Brydon’s promotion to
the Deputy Chief Executive Officer position
from 1 February 2014, with Martin assuming
the Chief Executive Officer role upon Mark’s
retirement following the Annual General
Meeting in May 2014, ensuring a smooth
transition of leadership responsibilities
within the Company.
The then Nomination and Remuneration
Committee also reviewed the succession plans
for the senior management team during the
year, to ensure that appropriate plans have
been implemented for the mid to long term.
1.2.6
Diversity
The Board, having adopted a Diversity Policy
for the Group in 2011, has established
measurable diversity objectives to enhance
gender diversity across the organisation.
Further information of the Group’s progress
with the gender diversity objectives
(in accordance with the ASX Corporate
Governance Council Principles and
Recommendations) is set out on pages
36 and 37.
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2013
30
2
Committees of the Board
2.1
Key standing committees
To assist the Board in fulfilling its
responsibilities, the Board has established a
number of committees with responsibility for
particular areas.
Each committee has a specific charter or
constitution. The charters for the Audit,
Risk and Compliance Committee and the
Nomination, Remuneration and Governance
Committee are available on the corporate
governance section of the Company’s website
at www.adbri.com.au. The Board periodically
reviews each Board committee’s charter, role
and responsibilities.
Generally, minutes of committee meetings
are tabled at the next Board meeting after
the minutes have been prepared. Additional
requirements for specific reporting by the
committees are addressed in the charter of
the individual committees.
As a result of the Board’s continued focus on
governance, during 2013 the then Nomination
and Remuneration Committee reviewed the
Board’s committees and their membership.
As a result the Board decided in November
2013 to assign the governance responsibilities
of the Corporate Governance Committee to
the Board’s Nomination and Remuneration
Committee (and for the committee to be
renamed the Nomination, Remuneration and
Governance Committee) given the strong
emphasis that the Board places on the link
between governance and both remuneration
and succession. The corporate social
responsibility and sustainability responsibilities
of the Corporate Governance Committee were
assigned to the Board’s Safety, Health and
Environment Committee and the Corporate
Governance Committee was dissolved. The
charters of these two continuing Board
committees were revised accordingly.
Members
during 2013
Audit, Risk and
Compliance Committee
G F Pettigrew (Chairman)
L V Hosking
A M Tansey
Details of these Directors’
qualifications are set out on
page 38 and 39 of this report.
Composition
>
>
Key functions
>
>
>
>
>
>
>
>
Consist of a minimum of three
members, all of whom are
independent non-executive
Directors.
The chair must be an independent
non-executive Director who is not
Chairman of the Board.
To review, assess (and recommend
to the Board for approval) the
annual financial reports, the half-
year financial report, including
reviewing the results of external
audit and assessing all external
reporting for its adequacy for
shareholder needs;
To review the appropriateness of
accounting principles adopted by
management in the composition
and presentation of financial
reports and to approve any change
in the accounting principles applied
in preparing the Company and
Group reports;
To evaluate the independence of
the external auditors and to monitor
the implementation of the Board’s
policy in relation to the provision
of non-audit services by the
Company’s auditor;
To recommend to the Board
the appointment, removal and
remuneration of the external
auditors, to review the terms
of their engagement, the scope
and quality of the audit and to
assess performance;
To determine the scope of the
internal audit function and
ensure that it has adequate
resources to fulfil its role, to
assess its performance including
independence, effectiveness and
appropriate coordination with
external auditors;
To determine whether new policies
or training should be implemented
to safeguard against possible risks
or non-compliance with applicable
laws, regulations or Company
policies;
To monitor compliance with the
Company’s policies and procedures
that recognise the Company’s
business, environmental and
statutory responsibilities; and
To report the results of the
Committee’s review of risk
management and internal
compliance and control systems
to the Board.
31
Nomination Remuneration and Governance
Committee (called Nomination and
Remuneration Committee during 2013)
A M Tansey (appointed a member and
Chairman from 19 February 2013)
L V Hosking (acting Chairman to 19 February 2013)
G F Pettigrew
K B Scott-Mackenzie
The Board appointed A M Tansey as Chairman of
the then Nomination and Remuneration Committee
with effect from 19 February 2013, on which date
L V Hosking ceased to be acting Chairman of the
Committee but continues as a member.
Details of these Directors’ qualifications are set
out on page 38 and 39 of this report.
>
Consist of a minimum of three members,
all of whom are independent non-executive
Directors.
>
>
>
>
>
>
>
>
>
>
>
The role of the Committee is to assist and advise
the Board on matters relating to the appointment
and remuneration of the non-executive Directors,
the CEO and other senior executives, and best
practice corporate governance appropriate to the
circumstances of the Company.
Remuneration, including incentives
To review (and recommend to the Board) the fees
paid to non-executive Directors;
To review (and recommend to the Board) the
compensation arrangements for the CEO, including
short term and long term incentives;
To review and approve recommendations from
the CEO on total levels of remuneration, for senior
executives;
To oversee the implementation of the Company’s
short term and long term incentive arrangements,
including reviewing performance targets for
senior executives, reviewing recommendations
from the CEO on senior executives’ participation
in short and long term incentive schemes, making
relevant awards and assessing the extent to which
performance conditions are satisfied;
Succession planning, appointments
and review of performance
To review management succession planning and
specifically the CEO and senior executives reporting
to the CEO;
To review the appointments and terminations to
senior executive positions reporting to the CEO;
To assess the appropriate mix of skills, experience
and expertise required on the Board and assess the
extent to which these required skills are represented
on the Board;
To establish processes for the identification
of suitable candidates for appointment to the
Board, engage appropriate search firms to assist
in identifying suitable candidates and make a
recommendation regarding the most appropriate
candidates to the Board which ultimately will
appoint the new Directors;
To oversee or design induction and ongoing training
and education programs for the Board to ensure
that non-executive Directors are provided with
adequate information regarding the operations
of the business, the industry and their legal
responsibilities and duties;
To monitor the tenure of Board members,
considering succession planning and identifying
the likely order of retirement by rotation of
non-executive Directors;
(continued next page)
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2013
31
Key functions
(continued)
Key activities
during 2013
Audit, Risk and
Compliance Committee
>
>
>
>
>
>
>
>
>
Ongoing review and consideration
of financial and non-financial
risks and the Company’s system of
identifying and managing risks;
Considering the impact arising
from the implementation of the
carbon tax and related regulatory
requirements, the Company’s
accounting for these and the
impact of the possible repeal of
the carbon tax;
Reviewing the Company’s exposure
to and management of slow paying
debtors and bad debts;
Monitoring the performance,
outcomes and actions of the
Company’s internal audit program;
Receiving the external auditors’
reports, monitoring issues reported
and actions taken;
Reviewing and overseeing of the
Company’s 2012 Full Year, 2013
Half Year and Full Year Financial
Reporting and associated audit;
Establishing the internal audit
plan for 2014 and reviewing
and approving the internal and
external auditors’ fees;
Monitoring the Group’s insurance
renewal programme; and
Reviewing the Group’s accounting
policies and treatment of particular
issues, including detailed review
during the year of accounting for
the Company’s joint ventures and
accounting for Defined Benefit
Superannuation.
>
>
>
>
>
>
>
>
>
>
>
>
Nomination Remuneration and Governance
Committee (called Nomination and
Remuneration Committee during 2013)
To establish processes for the review of the
performance of individual non-executive Directors,
the Board as a whole and the operation of Board
committees; and
Corporate governance
To oversee, develop and review the Company’s
corporate governance framework and systems.
Overseeing and making recommendations to the
Board concerning the succession of Martin Brydon
to the position of Chief Executive Officer following
the retirement of Mark Chellew in 2014, including
Martin Brydon’s remuneration arrangements and
Executive Service Agreement;
Considering developments in executive
remuneration practices and engaging external
consultants to advise and assist the Committee and
the Board to ensure that, in setting the Company’s
short and long term compensation metrics, the
Board has regard to emerging market practices,
and that the Company’s structure and setting of
compensation and has responded adequately to
the input of stakeholders. The 2013 review included
market reviews of all aspects of remuneration
structure and quantum, and extensive Committee
and Board review and consideration of these
matters;
Reviewing and recommending to the Board the
level of annual fixed and incentive compensation
arrangements for the CEO and reviewing and
approving the CEO’s recommendations for the
senior executive team;
Reviewing and recommending to the Board the
Company’s long term incentive (“LTI”) awards
to be awarded to the incoming Chief Executive
Officer, including the applicable performance
conditions, and reviewing and approving the CEO’s
recommendations for awards to the continuing
senior executive team in 2014, including the
applicable performance conditions and their
respective levels of participation;
Reviewing the annual Functional component
objectives applicable to the short term incentive
(“STI”) for the CEO and the senior executive team
for 2013;
Reviewing the attainment of STI and LTI
performance conditions by the CEO and the senior
executive team;
Reviewing the structure of the Board’s committees,
including considering committee structures of
comparable organisations;
Reviewing and recommending to the Board the
base fees payable to non-executive Directors and
additional fees payable for membership of Board
committees for 2014, as a result of which no non-
executive Directors’ fees increased, the fees paid to
the Chairman were decreased at his request, and
lower fees were paid as a result of the dissolution
of the Corporate Governance Committee and
the transfer of its responsibilities to other Board
committees;
Overseeing the implementation of diversity
measures to facilitate the achievement of the
diversity objectives as contained in the Diversity
Policy to address diversity in the Board’s
composition, the senior executive team and the
broader Company;
Reviewing and reporting to the Board on the
performance of the CEO and the senior executive
team and succession plans for the CEO, senior
executives and other key positions in the Company.
(continued next page)
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2013
32
Attendance
Consultation
Audit, Risk and
Compliance Committee
Details of attendance at Committee
meetings are set out on page 45 of
this report.
Representatives of the
Company’s external auditors,
PricewaterhouseCoopers, including
the lead audit partner, attend (either
in person or by telephone) for the
whole of the Committee’s meetings.
It is also the practice of the
Committee to meet with the
Company’s auditors without any
member of management present.
Members of management may
attend meetings of the Committee
at the invitation of the Committee
Chairman. It is the practice of
the Committee that the CEO, the
Chief Financial Officer and the
Company Secretary attend all Audit,
Risk and Compliance Committee
meetings. The Group Risk Manager
generally attends meetings of the
Committee when non-financial
risk management matters are
considered.
In fulfilling its responsibilities, the
Committee has rights of access
to management and to auditors
(external and internal) without
management present, and may
seek explanations and additional
information.
Nomination Remuneration and Governance
Committee (called Nomination and
Remuneration Committee during 2013)
Details of attendance at Committee meetings
are set out on page 45 of this report.
Generally when the SH&E Committee
meeting is held prior to a Board
meeting, the SH&E Committee Chairman
subsequently reports to the Board about
the Committee’s proceedings.
2.2.2
Corporate Governance Committee
The Corporate Governance Committee which
in 2013 comprised of A M Tansey (Chairman
from 19 February 2013) and L V Hosking
(Acting Chairman to 19 February 2013),
was responsible in 2013 for overseeing the
Company’s implementation and compliance
with best practice in corporate governance
applicable to the circumstances of the
Company. Committee meetings were held in
conjunction with Board meetings, so that all
of the Company’s Directors are present and
are also attended by the CEO, the Company
Secretary and General Counsel, and the
Chief Financial Officer.
The Committee monitored relevant
regulatory developments during 2013
and monitored the annual review of the
Company’s charters and policies to ensure
they comply with regulatory requirements
and remain up to date with good
governance guidelines.
During 2013 the Nomination and
Remuneration Committee reviewed the
Board’s committees and their membership,
and as a result the Board decided in
November 2013 to dissolve the Corporate
Governance Committee and to assign
its governance responsibilities to the
Board’s Nomination and Remuneration
Committee (and for the committee to be
renamed the Nomination, Remuneration
and Governance Committee) and corporate
social responsibility and sustainability
responsibilities to the Board’s Safety, Health
and Environment Committee. The charters
of these two continuing Board committees
were revised accordingly.
2.2.3
Independent Directors’ Committee
The role of the Independent Directors’
Committee is to investigate and consider
corporate proposals made to the Company.
The Committee comprises Directors who do
not have any conflict of interest concerning
the matters considered by the Committee.
The members of the Committee during 2013
were L V Hosking (Chairman), G F Pettigrew,
K B Scott-Mackenzie and M P Chellew (CEO).
Details of members’ attendance at each of
these Committee meetings in 2013 are
set out on page 45.
It has been the practice of the Committee, on
occasions when relevant, to invite other Directors
to attend Committee meetings. Additionally, one
Committee meeting in 2013 was held concurrently
with a Board meeting.
Members of management, particularly the Executive
General Manager, Human Resources or the CEO,
may also attend meetings of the Committee at the
invitation of the Committee Chairman, whenever
particular matters arise that require management
participation, such as reviewing senior executive
performance, succession planning or the CEO’s
recommendations to the Committee.
The Chairman of the Committee received reports
directly from expert consultants concerning the
remuneration arrangements and executive service
agreements of the CEO and the Company’s senior
executives.
2.2
Other Board committees
2.2.1
Safety Health and Environment Committee
The members of the Safety, Health and
Environment Committee (SH&E Committee)
during 2013 were K B Scott-Mackenzie
(Chairman), G F Pettigrew, and R D Barro.
M P Chellew attended meetings of the SH&E
Committee in his executive position as CEO.
The Committee has a broad role in reviewing
general and specific occupational health and
safety and environmental matters across
the Group. Committee meetings are also
attended by the Company’s Executive General
Manager, HR & SH&E, Chief Financial Officer
and its General Counsel. As set out above,
in November 2013 the Board decided to
assign the corporate social responsibility and
sustainability responsibilities of the Corporate
Governance Committee (which was dissolved)
to the SH&E Committee. The charter of the
committee was revised to reflect this, and for
other routine updates.
33
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2013
3
The Board recognises and manages risk and safeguards the integrity of financial reporting
3.1
Framework The Board has approved the following framework within which the Company discharges its risk management function
Leading a culture of compliance and ensuring that risk management practices are appropriate
and effective in the context of the Company’s business objectives
Oversight: The Board, through the Audit, Risk and Compliance Committee, is responsible for reviewing and guiding
the Company’s risk management policies and compliance and control systems. These policies and systems provide
for management to identify and manage both financial and non-financial risks to the Company’s businesses.
The Board, through the Committee, regularly review the effectiveness of the Company’s risk management
system and management of identified business risks.
Purpose: The Company’s risk management framework is designed to ensure strategic, operational, legal,
reputation and financial risks are identified, assessed, effectively and efficiently managed and monitored
to enable achievement of the Company’s business objectives.
Internal controls framework
Financial risk
>
A robust control environment is fundamental to the
The Managing Director and Chief Financial Officer
effectiveness of the Company’s risk management
have made the following certifications to the Board:
framework. Delegations of authority and Board and
>
That the Company’s financial reports present a true
management accountability is clearly demarcated.
and fair view, in all material respects, of the financial
>
All Directors, executives and employees are required
condition and performance of the Company and the
to adhere to the Code of Conduct (described below)
consolidated entity and are in accordance with
and the Board actively promotes a culture of quality
relevant accounting standards;
and integrity.
>
That the Company has adopted an appropriate system
>
Accounting, financial reporting and internal control
of risk management and internal compliance and
policies and procedures designed to manage business
control which implements the policies adopted by the
risks (both financial and non-financial) have been
Board and forms the basis for the statement given
established at the Board and executive management
above; and
levels. These are designed to safeguard the assets
>
That the Company’s risk management and internal
and interests of the Company, and ensure the
compliance and control system to the extent it relates
integrity of financial reporting. The Board nonetheless
to financial reporting is operating efficiently and
acknowledges that it has ultimate responsibility for
effectively in all material respects.
the accuracy and approval of the Group’s’ financial
reports. The Board acknowledges that it is also
Non-financial risk
responsible for the overall internal control framework,
Management has also reported to the Board on
and to assist in discharging this responsibility, the
strategic and operational issues, including an
Board has instigated an internal control framework
assessment of the material business risks facing the
that can be described as follows:
Company and the effectiveness of the systems and
policies in place to manage those risks.
>
>
>
>
Financial reporting
Operating unit controls
Functional speciality reporting
Comprehensive budgeting system with an annual
>
Financial controls and procedures including
>
The Group has identified a number of key areas
budget reviewed and approved by the Board
information systems controls are in operation
which are subject to regular reporting to the Board,
Monthly actual results are reported against budget
throughout the consolidated entity
such as safety and environment, risk management,
and revised forecasts for the year are prepared
>
Operating units confirm compliance with these
taxation, finance and administration
regularly
procedures to the Board annually
>
>
Procedures to ensure that price sensitive
information is reported to the ASX in a timely
manner (see section 5 below)
Investment appraisal
>
Clearly defined guidelines for capital expenditure
e.g. annual budgets, detailed appraisal and review
procedures, levels of delegated authority and due
diligence requirements where businesses are being
acquired or divested
Delegated authorities and restrictions
>
Comprehensive procedure which provides a
framework that enables employees to operate
and act within clearly defined and
communicated parameters.
n
n
Internal audit
Assists the Board in ensuring compliance
with internal controls
The Audit, Risk and Compliance Committee reviews
>
>
and approves the selection and engagement of
internal auditors, the internal audit program to
be conducted, and the scope of the work to be
performed at each location
>
Internal auditors provide the Committee with
comments and recommendations about the
identification of areas perceived to be of a greater
level of risk than others, and any areas requiring
particular scrutiny
>
The Committee receives and reviews the reports
of the internal auditors
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2013
34
3.2
Audit Services
The Company and Audit, Risk and Compliance
Committee policy is to appoint external
auditors who clearly demonstrate quality
and independence. The performance of the
external auditor is considered annually.
PricewaterhouseCoopers remains the external
auditor of the Company for the Group’s
financial report for the year ended
31 December 2013.
The Board has adopted a policy in relation
to the provision of non-audit services by
the Company’s external auditor. It is based
on the principle that work that may detract
from the external auditor’s independence and
impartiality (or that may be perceived as doing
so) should not be carried out by the external
auditor. Details and the break down of fees
for non-audit services and an analysis of
fees paid or payable to external auditors
are provided in Note 33 to the Financial
Statements.
4
The Board is committed to promoting
ethical and responsible decision-making
4.1
Code of conduct and whistleblower program
The Company is committed to upholding
the highest ethical standards of corporate
behaviour. A Code of Conduct has been
adopted, which requires that all Directors,
senior management and employees act with
the utmost integrity and honesty. It aims to
further strengthen the Company’s ethical
climate by promoting practices that foster
the Company’s key values of:
Acting with fairness, honesty and integrity;
Providing a safe and healthy work
environment for all employees;
Being aware of and abiding by laws
and regulations;
Individually and collectively contributing to
the wellbeing of shareholders, customers,
the economy and the community;
Maintaining the highest standards of
professional behaviour;
Avoiding or managing conflicts of interest;
and
Striving to be a good corporate citizen,
and to achieve community respect.
>
>
>
>
>
>
>
The Code of Conduct is publicly available on
the Company’s website at www.adbri.com.au.
The Code of Conduct is reviewed and updated
from time to time, ensuring that the Code
remains relevant to the Company’s values
and practices.
The Company has also adopted policies
requiring compliance with (among others)
occupational health and safety, environmental,
privacy, diversity, equal employment
opportunity, harassment, fair treatment, and
competition and consumer law. The Company
monitors the effectiveness of these policies.
Employees are encouraged to attend training
or seminars presented by the Company, or
external service providers, to ensure that they
remain up-to-date with relevant industry and
regulatory developments.
The Code requires all officers, employees,
contractors, agents or people associated
with the Company to report any potential
breaches to the Company Secretary under the
whistleblower program. This may be
done anonymously.
4.2
Shareholdings of Directors and employees
The Board has a policy that in general,
Directors and Officers may not buy or sell
Adelaide Brighton Ltd shares except during
periods (known as ‘Trading Windows’) provided
that prior approval is obtained. The Trading
Windows cover the period of one month
following the annual and half year results
announcements in addition to the period
from the release of the Company’s annual
report until one month after the annual
general meeting. The policy also defines
certain periods where trading is not permitted
under any circumstances (known as ‘Blackout
Periods’), which cover the two months
preceding lodgement of half year and annual
results announcements, in addition to any
instance when a Director is trading for short-
term gain. In all cases, Directors and Officers
are prohibited from trading in securities when
they are in possession of “inside information”.
The Board also has a policy that prohibits
executives from hedging (or otherwise locking
in a profit over) unvested securities issued
under the Company’s Share Plans.
The Company’s Share Trading Policy and the
Award/Share Hedging Policy are available on
the Company’s website at www.adbri.com.au.
5
The Board is committed to timely and
balanced disclosure and respects the
rights of shareholders
5.1
Continuous disclosure
The Company is committed to providing
relevant and timely information to its
shareholders and to the broader market,
in accordance with its obligations under
the Corporations Act 2001 and the ASX
continuous disclosure regime.
The Company’s Continuous Disclosure
Policy is available on the Company’s website
and sets out guidelines and processes to
be followed in order to ensure that the
Company’s continuous disclosure obligations
are met. Material information must not be
selectively disclosed prior to being announced
to the ASX. These policies and procedures
are supplemented by the Shareholder
Communications Policy (also published on
the Company’s website) which includes
arrangements the Company has in place to
promote communication with shareholders
and encourage effective participation at
general meetings.
The Company Secretary has been nominated
as the person responsible for communicating
with the ASX. This role includes responsibility
for ensuring compliance with the continuous
disclosure requirements and overseeing and
coordinating (with the Group Corporate
Affairs Adviser) information disclosure to
the ASX, analysts, brokers, shareholders,
the media and the public.
5.2
Communication with shareholders
The Company’s website contains copies
of annual reports, financial accounts,
presentations, media releases and other
investor relations publications. All relevant
announcements made to the market, and
any related information, are also posted
on the Company’s website.
The Board encourages full participation
of shareholders at the Annual General
Meeting in order to promote a high level of
accountability and discussion of the Group’s
strategy and goals.
The external auditor will attend the Annual
General Meeting and be available to answer
shareholder questions about the conduct of
the audit and the preparation and content
of the auditors’ report.
Marcus Clayton
General Counsel and
Company Secretary
35
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2013
Diversity Policy
Adelaide Brighton is committed to the promotion of diversity within our organisation, and recognises that removing barriers to diversity
enables us to attract and retain the best people with the appropriate skills to contribute to the continuing success of our business.
Our Diversity Policy outlines five core objectives which form the foundations of our approach to diversity and upon which we measure
our performance in this area. An overview of these objectives, and our progress towards achieving these objectives for the 2013
financial year, are set out below.
Objectives
To promote a culture of diversity (which
includes gender, skills, experience, and
cultural background)
Diversity measures to facilitate
achievement of objectives
Progress
Leadership programs targeted at our female
management and frontline employees
focussing on their strengths and contribution
to the broader workplace to be rolled out
across the organisation.
In 2012, 70% of our female employees
completed the program. In 2013,
40% completed the optional follow up.
A number of individual coaching
arrangements remain in place across the
business. In 2014, we are planning a broader
program aimed at our managers and
supervisors.
Company-wide training in workplace policies
(including diversity, bullying and harassment,
Equal Employment Opportunity).
Employee inductions include information on
Company policies such as equal employment
opportunity and bullying.
To ensure that recruitment and selection
processes are based on merit
The Board and Nomination, Remuneration
and Governance Committee review Adelaide
Brighton’s diversity achievements relative
to the industry structure in which the
Company operates.
Internal review of Adelaide Brighton’s
recruitment practices and systems to ensure
that employment decisions are made without
regard to factors that are not applicable
to the inherent requirements of a position
and that unconscious gender bias does not
influence outcomes.
To provide talent management and
development opportunities for all employees
Ongoing talent recognition and in-house
leadership programs for employees.
Sponsor or encourage professional
networking, coaching and mentoring
programs to give female employees
the opportunity to connect with other
professionals.
In 2013, the Board and then Nomination
and Remuneration Committee discussed the
Company’s diversity measures and the need
to develop a positive workplace culture.
Recruitment mentoring training continues
across the business with a view to eliminate
any unconscious bias that may occur. 16% of
all new hires in 2014 were female.
Selection of recruitment agencies employed
by Adelaide Brighton is based on their
commitment to providing diverse candidate
pools.
Various development programs provided
for recognised employees and tailored to
individual needs ranging from external
training and education, mentoring and/or
specific on the job training.
Where identified, these programs continue
to be supported across the organisation.
Sponsor MBA or post-graduate studies for
high potential female employees.
Adelaide Brighton supports external study and
development for high potential employees.
(continued next page)
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2013
36
Objectives
Diversity measures to facilitate
achievement of objectives
Progress
(To provide talent management and
development opportunities for all
employees - continued)
To reward and remunerate fairly
To provide flexible work practices
Continued sponsorship of the Women in
Engineering program at the University of
Wollongong in 2013 that provides both
a financial benefit and work placement
opportunity.
The Company has attended career expos at
the University of Adelaide and the University
of Wollongong and sponsored Engineering
awards at University of Wollongong.
The gender pay parity review was completed
in 2013 as part of Adelaide Brighton’s annual
remuneration review processes.
As with 2012, of the women who commenced
and finished maternity leave in 2013, 100%
have returned to work in either a full or part
time capacity.
In recognition of the low numbers of females
entering into engineering and manufacturing
vocations:
> implement programs designed to engage
female graduate engineers;
> offer undergraduate scholarship
opportunities and sponsor vacation work
programs to engage female students who
are entering tertiary education to consider
engineering as a career option; and
> strive for gender balance in the
recruitment of graduates each year.
Adelaide Brighton has a policy to provide
equal pay for equal work.
As part of the annual salary review process,
Adelaide Brighton undertakes a review of pay
parity.
Pay parity is also considered at the time of
hiring new employees, to eliminate potential
gaps in pay arising from hiring decisions.
Adelaide Brighton seeks to provide suitable
working arrangements for employees
returning from maternity leave.
Flexible working arrangements are available
to all employees under our flexible work
policy, to recognise that employees may have
different domestic responsibilities throughout
their career. This includes opportunities to
work part time and from home or a remote
location.
We also offer 12 weeks’ paid parental leave
for the primary carer.
Formal review of all part time work
arrangements to ensure roles are appropriate
to maintain career development.
Adelaide Brighton is committed to the
regular review of its objectives to ensure
that these continue to be appropriate
and relevant. The Board is committed to
build upon the achievements to date and
reinforce the continued efforts in promoting
and cultivating a culture of diversity and
inclusiveness.
The proportion of women across Adelaide
Brighton’s workforce is reflective of the
generally low level of female representation in
the building, manufacturing and construction
materials industries in which we operate.
We recognise that the available pool of
female candidates in engineering roles
relevant to our business operations is limited,
and this impacts our ability to increase the
number of female new hires in the short
term. In an effort to make our Company (and
industry) more attractive to women, we have
focussed on measures designed to increase
the proportion of female graduates and to
support the leadership development of female
employees who are recognised as having
future potential. We believe that, over time,
our diversity objectives and measures will
achieve an improvement in the level of female
representation across the organisation.
The following table shows the proportional
representation of women employees at
various levels within the Adelaide Brighton
Group (as at 31 December 2013):
16% Board
14% Senior executives
17% Senior managers
(Direct reports to senior executives)
12% Total workforce
A copy of Adelaide Brighton’s Diversity Policy
is available in the corporate governance
section of Adelaide Brighton’s website.
37
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2013
Directors
Les Hosking
Age 69
Experience
Raymond Barro BBus, CPA, FGIA, FCIS
Age 52
Graeme Pettigrew FIPA, FAIM, FAICD
Age 65
Experience
Experience
Non-executive Director since August 2008.
Over 24 years experience in the premixed
concrete and construction materials industry.
Managing Director of Barro Group Pty Ltd.
Special responsibilities
Member, Safety, Health and Environment
Committee.
Independent non-executive Director
since June 2003.
Extensive experience in commercial and
financial matters with 16 years experience
as Chief Executive of the Sydney Futures
Exchange and former Chief Executive Officer
of Axiss Australia and Managing Director
of National Electricity Market Management
Company (NEMMCO).
Director, AGL Energy Limited (appointed
November 2008) and Australian Energy
Market Operator Limited (appointed July
2009) and Chairman, Carbon Market
Institute Limited (appointed October 2010).
Special responsibilities
Appointed Chairman 17 May 2012.
Member, Audit, Risk and Compliance
Committee.
Member, Nomination, Remuneration
and Governance Committee.
Member, Independent Directors’ Committee.
Independent non-executive Director
since August 2004.
Extensive experience in the building materials
industry and former Chief Executive Officer of
CSR Building Products and broad management
experience gained in South East Asia and the
United Kingdom through former positions as
Managing Director of Chubb Australia Limited
and Wormald Security Australia Pty Ltd.
Director, Capral Ltd (appointed June 2010) and
Holocentric Pty Ltd (appointed 18 September
2012). Former Director, Bisalloy Steel Group Ltd
(formerly Atlas Group Holdings Ltd) (appointed
April 2006 and resigned 30 September 2013),
Knauf Plasterboard Pty Limited (formerly
Lafarge Plasterboard Pty Ltd) (appointed June
2005 and resigned November 2012).
Special responsibilities
Chairman, Audit, Risk and Compliance
Committee.
Member, Nomination, Remuneration
and Governance Committee.
Member, Safety, Health and Environment
Committee.
Member, Independent Directors’ Committee.
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2013
38
Ken Scott-Mackenzie BE(Mining), Dip Law
Age 63
Arlene Tansey FAICD, MBA, JD, BBA
Age 56
Mark Chellew BSc, ME, Grad Diploma Mgt
Age 57
Experience
Managing Director since September 2001.
Mechanical Engineer with over 32 years
experience in the heavy building materials
and related industries gained in Australia
and the United Kingdom.
Previously held the position of Managing
Director of Blue Circle Cement in the United
Kingdom and senior management positions
within the CSR group of companies in
Australia and the United Kingdom.
Director, Transpacific Industries Group Ltd
(appointed 1 March 2013).
Special responsibilities
Member, Independent Directors’ Committee.
Experience
Independent non-executive Director
since July 2010.
Mining Engineer with over 40 years
experience in infrastructure, construction
and mining services gained in Australia and
South Africa, as well as extensive experience
in financial, legal and commercial aspects
of projects.
Chairman, Macmahon Holdings Limited
(appointed Chairman in November 2009
and a Director in May 2009) and Chairman,
Linking Melbourne Authority (appointed
May 2013). Former Chairman, Murchison
Metals Ltd (appointed Director in May
2011 and Chairman in July 2011.
Resigned November 2012).
Special responsibilities
Chairman, Safety, Health and
Environment Committee.
Member, Nomination, Remuneration
and Governance Committee.
Member, Independent Directors’ Committee.
Experience
Independent non-executive Director
since April 2011.
Extensive experience as a senior executive
in business and the financial services
industry gained in Australia and the United
States with a background in investment
banking and securities law.
Director, Primary Health Care (appointed
August 2012), Lend Lease Funds Management
Limited (appointed October 2010), Lend Lease
Real Estate Investments Limited (appointed
October 2010), Hunter Phillip Japan Limited
(appointed March 2013) and Australian
Research Alliance for Children and Youth
Limited (appointed September 2013).
Former Director, Pacific Brands Limited
(appointed March 2010 and retired October
2013) and Police Citizens Youth Clubs
NSW Ltd (appointed June 2004 and retired
in July 2012). External Member, Serco
Asia Pacific Advisory Board.
Special responsibilities
Chairman, Nomination, Remuneration
and Governance Committee.
Member, Audit, Risk and Compliance
Committee.
39
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2013
Shareholder information
Enquiries about your shareholding
Direct credit of dividends
Enquiries or notifications by
shareholders regarding their
shareholdings or dividends should
be directed to Adelaide Brighton’s
share registry:
Computershare Investor Services
Pty Limited
Level 5, 115 Grenfell Street
Adelaide SA 5000
Telephone 1800 339 522
International 613 9415 4031
Facsimile 1300 534 987
International 618 8236 2305
When communicating with the
share registry, shareholders
should quote their current address
together with their Security
Reference Number (SRN) or Holder
Identification Number (HIN) as it
appears on their Issuer Sponsored/
CHESS statement.
Online services
Shareholders can access information
and update information about their
shareholding in Adelaide Brighton
Limited via the internet by visiting
Computershare Investor Services
Pty Ltd website:
www.investorcentre.com
Some of the services available online
include: check current holding
balances, choose your preferred
annual report option, update
address details, update bank details,
confirm whether you have lodged
your TFN, ABN or exemption, view
your transaction and dividend
history or download a variety of
forms.
Enquiries about Adelaide
Brighton Ltd
Enquiries about Adelaide Brighton
Ltd should be directed to:
Group Corporate Affairs Adviser
Adelaide Brighton Ltd
GPO Box 2155
Adelaide SA 5001
Telephone 08 8223 8005
Facsimile 08 8215 0030
Email
adelaidebrighton@adbri.com.au
Annual general meeting
The annual general meeting of
shareholders will be held at the
InterContinental, North Terrace,
Adelaide, South Australia on
Wednesday 21 May 2014 at
10.00 am.
ADELAIDE BRIGHTON LTD ANNUAL REPORT 2013
Combining multiple shareholdings
BNP Paribas Noms Pty Ltd
Dividends can be paid directly into
a bank or other financial institution.
Payments are electronically credited
on the dividend payment day and
subsequently confirmed by mailed
payment advice. Application forms
are available from our share registry,
Computershare Investor Services
Pty Ltd or visit the website at www.
computershare.com.au/easyupdate/
abc to update your banking details.
If you have multiple shareholding
accounts that you want to
consolidate into a single account,
please advise the share registry,
Computershare Investor Services
Pty Limited, in writing.
Change of address
Shareholders who are Issuer
Sponsored should notify any change
of address to the share registry,
Computershare Investor Services
Pty Limited, by telephone or in
writing quoting your security holder
reference number, previous address
and new address. Broker Sponsored
(CHESS) holders should advise their
sponsoring broker of the change.
Registered office
Level 1, 157 Grenfell Street
Adelaide SA 5000
Telephone 08 8223 8000
Facsimile 08 8215 0030
Stock exchange listing
Adelaide Brighton Ltd is listed on
the Australian Securities Exchange
and trades under the symbol “ABC”.
Adelaide is Adelaide Brighton Ltd’s
home exchange.
Communications
Our internet site www.adbri.
com.au offers access to our ASX
announcements and news releases
as well as information about our
operations.
Substantial shareholders
Barro Properties Pty Ltd, by a notice
of change of interests of substantial
shareholder dated 13 June 2013,
informed the Company that it, or
an associate had a relevant interest
in 208,914,531 ordinary shares or
32.7% of the Company’s issued
share capital.
8.94
8.86
6.70
5.91
1.81
1.53
1.39
1.02
0.66
0.37
0.37
0.33
0.33
0.31
0.29
0.29
0.27
0.26
0.24
Top twenty largest shareholders as at 27 March 2014
Number of % of
ordinary issued
Shareholder shares held capital
Barro Properties Pty Ltd
165,888,012
25.98
J P Morgan Nominees Australia Limited
HSBC Custody Nominees (Australia) Limited
Barro Group Pty Ltd
National Nominees Limited
Citicorp Nominees Pty Ltd
J P Morgan Nominees Australia
Argo Investments Ltd
UBS Wealth Management Australia Nominees Pty Ltd
Milton Corporation Limited
Custodial Services Limited
57,077,257
56,583,968
42,744,804
37,719,052
11,572,317
9,759,888
8,849,933
6,504,449
4,224,264
2,357,886
2,336,531
Citicorp Nominees Pty Limited
2,091,939
HSBC Custody Nominees (Australia) Limited
Australian United Investment Company Limited
Bond Street Custodians Limited
UBS Nominees Pty Ltd
Sandhurst Trustees Ltd
AMP Life Limited
Questor Financial Services Limited
2,088,714
2,000,000
1,865,000
1,839,898
1,724,940
1,700,052
1,559,037
Total top 20 shareholders
Total remaining holders balance
420,487,941 65.86
217,968,747 34.14
Voting rights
All shares at 27 March 2014 were of one class with equal voting rights being one
vote for each shareholder and, on a poll, one vote for each fully paid ordinary share.
Shares held as at 27 March 2014 Number of shareholders % of issued capital
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - over
Total shareholders
Less than a marketable parcel of 128 shares
Unquoted securities
3,466
9,262
4,898
4,400
213
22,239
756
0.26
4.20
5.73
15.88
73.93
100.00
6,262,180 Awards issued to the CEO and other members of the senior executive
team under the Adelaide Brighton Ltd Executive Performance Share Plan as part of
the Company’s long term incentive program. The Awards are not quoted and do not
participate in the distribution of dividends and do not have voting rights. The total
number of participants in the Adelaide Brighton Ltd Executive Performance Share
Plan and eligible to receive the Awards is seven.
On market buy back
At 27 March 2014 there is no on-
market buy back of the Company’s
shares being undertaken.
40
Directors’ report ................................................................................................................................................ 42
Remuneration report........................................................................................................................................ 47
Income statement ............................................................................................................................................. 64
Statement of comprehensive income ......................................................................................................... 65
Balance sheet ..................................................................................................................................................... 66
Statement of changes in equity .................................................................................................................. 67
Statement of cash fl ows................................................................................................................................. 68
Notes
Summary of signifi cant accounting policies ...................................................................................... 69
1
Critical accounting estimates and assumptions ............................................................................... 76
2
Revenue and other income ..................................................................................................................... 77
3
Expenses ...................................................................................................................................................... 77
4
Income tax expense .................................................................................................................................. 78
5
Current assets - cash and cash equivalents ....................................................................................... 79
6
Current assets - trade and other receivables ..................................................................................... 79
7
Current assets - inventories ................................................................................................................... 80
8
9
Current assets - assets classifi ed as held for sale ............................................................................ 80
10 Non-current assets - receivables .......................................................................................................... 80
11 Non-current assets - joint arrangements and associate ................................................................ 81
12 Non-current assets - property, plant and equipment ...................................................................... 82
13 Non-current assets - deferred tax assets ........................................................................................... 83
14 Non-current assets - intangible assets ............................................................................................... 83
15 Carbon asset and liability ........................................................................................................................ 84
16 Current liabilities - trade and other payables ................................................................................... 85
17 Current liabilities - borrowings ............................................................................................................. 85
18 Current liabilities - provisions ............................................................................................................... 86
19 Current liabilities - other liabilites ....................................................................................................... 86
20 Non-current liabilities - borrowings .................................................................................................... 86
21 Non-current liabilities - deferred tax liabilities ................................................................................ 86
22 Non-current liabilities - provisions ...................................................................................................... 87
23 Non-current liabilities - retirement benefi t obligations ................................................................. 87
24 Contributed equity.................................................................................................................................... 90
25 Reserves and retained earnings ............................................................................................................. 91
26 Dividends ..................................................................................................................................................... 92
27 Financial risk management .................................................................................................................... 92
28 Fair value measurements ........................................................................................................................ 95
29 Contingencies ............................................................................................................................................ 95
30 Commitments for expenditure ............................................................................................................... 95
31 Share-based payment plans ................................................................................................................... 96
32 Key management personnel disclosures .............................................................................................. 97
33 Remuneration of auditors ..................................................................................................................... 100
34 Related parties ......................................................................................................................................... 101
35 Subsidiaries and transactions with non-controlling interests .................................................... 102
36 Deed of cross guarantee........................................................................................................................ 103
37 Reconciliation of profi t after income tax to net cash infl ow from operating activities ....... 104
38 Earnings per share .................................................................................................................................. 105
39 Events occurring after the balance sheet date ................................................................................ 105
40 Segment reporting .................................................................................................................................. 105
41 Parent entity fi nancial information .................................................................................................... 107
42 Changes to Accounting Policies .......................................................................................................... 107
Directors’ declaration .................................................................................................................................... 110
Auditor’s independence declaration ......................................................................................................... 110
Independent audit report .............................................................................................................................. 111
Financial history .............................................................................................................................................. 112
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ADELAIDE BRIGHTON LTD ANNUAL REPORT 2013
41
Directors’ report
Directors’ report
The Directors present their report on the
consolidated entity (the Group) consisting of
Adelaide Brighton Ltd (the Company) and the
entities it controlled at the end of, or during, the
year ended 31 December 2013.
Directors
The Directors of the Company, at any time
during or since the end of the financial year and
up to the date of this report, are:
L V Hosking
R D Barro
G F Pettigrew
K B Scott-Mackenzie
A M Tansey
M P Chellew
Principal activities
During the year the principal activities of
the Group consisted of the manufacture and
distribution of cement, and cementitious
products, lime, premixed concrete, aggregates,
sand and concrete products.
Review of operations
A summary of the financial results for the year
ended 31 December 2013 is set out below:
($ Million)
Revenue
Depreciation and amortisation
Earnings before interest and tax (“EBIT”)
Net interest
Profi t before tax
Income tax expense
Net profi t after tax
Attributable to:
Members of Adelaide Brighton Ltd
Non-controlling interests
2013
20121
1,228.0
1,183.1
(70.6)
222.7
(14.1)
208.6
(57.5)
151.1
151.1
-
(65.2)
222.1
(14.6)
207.5
(54.6)
152.9
153.0
(0.1)
Basic earnings per share (cents)
Ordinary dividend per share (cents)
Special dividend per share (cents)
Franking (%)
Net debt
Net debt/equity (%)
1 Financial information for the 31 December 2012 year has been restated due to changes in accounting policies as set out in Note 42 to the
23.7
16.5
3.0
100%
248.0
23.4%
24.0
16.5
-
100%
310.5
30.9%
1 Financial Statements.
2013 net profit after tax attributable to members
of the Company decreased 1.2% compared to
the prior year to $151.1 million. Excluding a $7.6
million gain in 2012 from fair value accounting
on an acquisition, net profit after tax (NPAT)
was $5.8 million (3.9%) higher than 2012.
Revenue of $1,228.0 million increased by 3.8%
due to continued demand from project work
in South Australia and the resources sector in
Western Australia and the Northern Territory
and a recovery in residential construction in
New South Wales which offset lower demand
in Victoria. Demand from the non-residential
building sector remain subdued, while residential
building generally improved across the majority
of markets in the second half of the year.
Earnings before interest and tax (EBIT) increased
by 0.3% to $222.7 million. Excluding the gain
on acquisition of $7.6 million in 2012, EBIT
margin (EBIT divided by revenue) was stable
despite input cost pressures, particularly energy
and labour costs, higher depreciation costs
and a reduction in contribution from joint
ventures. The benefit from the Company’s capital
investments and operational improvement
program and modest increases in selling
prices offset the impact of the higher costs.
Operational improvement initiatives delivered
$20.2 million in benefits in the year, including
$8.0 million in cost savings resulting from the
newly commissioned grinding mill at Birkenhead,
South Australia.
Profit before tax increased 0.5% to $208.6
million. Net interest decreased by 3.4% to
$14.1 million due to reduced borrowings and
historically low interest rates that more than
offset the impact of a reduction in capitalised
interest.
Cement
Cement and clinker sales volumes increased
marginally due to demand from projects in
South Australia and resource projects in Western
Australia and the Northern Territory. While
non-residential demand remained subdued,
residential demand improved in the second
half of the year. Despite an improvement in
the second half of the year, sales to Victoria
declined for the year, negatively impacted by a
weak residential sector. Clinker sales to Sunstate
Cement improved throughout the year, with
strengthening demand in south east Queensland.
Selling price increases were modest due to
competitive pressures and the high Australian
Dollar. EBIT margins were in line with 2012 as
higher input costs were offset by the benefits
of operational improvements. Energy costs
increased at almost 10% over the prior year,
driven by higher electricity prices in South
Australia and the $4.2 million NPAT impact of
the carbon tax. The Company employs a number
of strategies to mitigate rising energy costs
including the use of fixed price contracts for
a portion of energy requirements, the use of
alternate fuels, management of demand during
extreme price movements and the continual
review for operational improvement.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
42
Operational improvement programs delivered
benefits of $20.2 million. Of this, approximately
$8 million relates to the new cement mill at
Birkenhead, approximately $5 million to the
management of energy costs, including the use
of alternative fuels and circa $3 million from
labour and overhead savings.
Adelaide Brighton is Australia’s largest importer
of cement and clinker and has an unmatched
network of import terminals that provide cost
competitive access to all mainland capital
city markets and regional north west Western
Australia. Adelaide Brighton imports of
cementitious products, including clinker, cement
and blast furnace slag, were approximately 1.6
million tonnes in 2013.
The use of foreign exchange hedges initiated in
the first half of the year and a higher proportion
of imports being denominated in Japanese
Yen maintained margins on imported products
despite the weakening of the Australian Dollar.
Lime
Lime sales volumes were consistent with 2012
which was below expectations. Sales volumes
to the non-alumina sector declined during the
year with gold mine closures resulting in an
annualised reduction in overall volumes of 3%.
Demand from the alumina sector improved
versus the previous year.
The Company completed the capital investment
in the two lime kilns at the Munster, Western
Australia plant, delivering a benefit to EBIT
of $3.0 million during the year. In addition to
increasing production capacity by 25%, the
upgrade has provided significant operating and
environmental improvements, positioning the
Company to effectively compete with imported
product.
Modest price growth and efficiency
improvements offset rising input costs, including
energy, labour and depreciation, to increase EBIT
and EBIT margins.
Concrete and Aggregates
Concrete volumes improved modestly, as a
recovery in demand in the second half of the
year offset a soft first half. Volumes increased
in New South Wales and Queensland, offsetting
subdued conditions in Victoria. Demand from
the housing sector has improved in most
markets, led by strength in the multi-residential
market in Sydney.
Aggregate sales volumes declined marginally
due to delays in sales to sections of the Pacific
Highway upgrade until late in the year and into
2014. Returns from the Austen quarry in New
South Wales continue to improve with better
pricing and volumes increasing in line with
market demand.
Modest price increases were achieved across the
majority of markets despite the mixed operating
environment. Pricing pressure was evident in
Queensland and Victoria.
Concrete Products
Sales volumes declined in 2013 due to subdued
demand. Sales to the commercial sector
declined, while the residential sector improved,
particularly in the second half of the year, led by
New South Wales.
Profitability improved modestly over 2012
through improved prices and cost savings.
Redundancy costs as a result of the continued
rightsizing of the business were $1.5 million,
compared to $1.2 million in 2012. The
mothballing of excess capacity and reduction
in labour costs led to an improvement in
profitability in the second half of the year. The
restructuring reduced costs, while maintaining
flexibility to participate in the market recovery.
Joint Ventures and Associate
Independent Cement and Lime (ICL) reported a
decline in earnings as demand softened due to
weakness in the Victorian market, higher input
costs and competitive pressures on prices and
volumes.
Sunstate Cement reported lower earnings, with
the south east Queensland market continuing to
be challenging although a recovery in demand
was evident in the second half of the year.
Competitive pressures limited the ability to
recover increases to input costs.
The Mawsons concrete and aggregates joint
venture reported a decline in earnings and
volumes as a result of the weaker general
construction market, completion of flood
reconstruction projects and pressure on prices.
Aalborg Portland Malaysia Sdn. Bhd. (APM)
earnings were better than expected and broadly
in line with 2012. The prior year was supported
by the recognition of government investment
allowances, while 2013 reflects the first full year
of returns from Adelaide Brighton’s investment
in APM.
Operational results
Cash Flow
Cash flow from operations increased by
$40.4 million to $227.3 million due to strong
underlying operating performance and
management of working capital. The substantial
completion of the major capital expenditure
program in the Cement and Lime division and
improved proceeds from the sale of property
reduced the cash outflow from investing
activities by $86.0 million. Capital expenditure of
$67.9 million included:
> $13.9 million for the upgrade of Munster kiln 5
and 6 projects;
> $4.7 million on the upgrade of Birkenhead,
including new cement mill and upgrade of ship
loading facilities; and
> $0.9 million relating to deferred settlement on
acquisitions from prior years.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
43
The improvement in operating cash flow and
reduction in cash outflow from investing
allowed for the repayment of $60.2 million in
borrowings throughout the year.
Balance Sheet
Working capital decreased in 2013 primarily due
to the timing of cash flows related to the carbon
tax. Inventory, trade and other receivables
and trade and other payables increased by
$1.5 million, $12.2 million and $10.4 million
respectively. Carbon tax assets and liabilities at
December 2013 reflect a full year of the carbon
tax, compared to only a half year at December
2012, with a resulting increase in provisions,
while carbon tax assets are relatively stable
given the timing of industry assistance.
Net debt decreased $62.5 million to $248.0
million, reducing the net debt to equity gearing
ratio to 23.4%, which is below the lower end
of the Board’s target range of 25% to 45%.
The Company refinanced its $500 million debt
facilities during the year, extending the maturity
profile and improving borrowing margins. The
maturity profile of the debt facilities is:
Facility expiry date 1 July 2015
1 July 2016
Facility value
$300 million $200 million
A recovery in the market values of investments
of Adelaide Brighton’s defined benefit fund,
higher discounting rates associated with
increasing government bond rates and
contributions from the Company have reduced
the funding shortfall in the plan from
$8.0 million in 2012 to $0.5 million.
Income Statement
Other income declined from $9.7 million to
$4.7 million in 2013, as the 2012 other income
included the $7.6 million fair value accounting
gain.
Finance costs declined from $17.1 million
to $15.9 million due to lower levels of debt
and low interest rates, offsetting a reduction
in capitalised interest associated with the
completion of the Company’s $112 million
capital expenditure program.
Tax expense of $57.5 million increased
$2.9 million over 2012, with the effective tax
rate increasing from 26.3% to 27.6%. The 2012
effective tax rate benefitted from the non-
taxable accounting gain of $7.6 million.
An actuarial gain of $7.6 million was recognised
in other comprehensive income as a result
of the improvement in investment values
and favourable changes in other actuarial
assumptions relating to the Group’s defined
benefit superannuation plan.
Cement
Operational improvement
The $60 million upgrade and expansion of the
Birkenhead, South Australia, site was completed
in the first half of 2013. The expenditure
increased cement milling capacity by
750,000 tonnes per annum, upgraded ship
loading facilities, and installed new facilities to
process slag.
The additional milling capacity at Birkenhead
allows the replacement of imported cement with
domestically produced cement. Returns on this
investment are currently below medium term
projections due to a cyclical downturn in the key
Victorian market. However, returns remain above
Adelaide Brighton’s cost of capital and it is
anticipated that through the cycle, returns from
the project will be in line with expectations.
The management of energy costs again delivered
significant cost benefits during 2013. Since
2009 increases in the cost of energy, including
gas, electricity and the carbon tax incurred by
Adelaide Brighton have increased costs by more
than $40 million, an increase in excess of 40%.
In addition to this, it is estimated that over this
period Adelaide Brighton has mitigated a further
$27 million in potential energy cost increases
through fuel switching and the use of
alternative fuels. The Company has a program
to reduce energy costs and is actively working
on contractual arrangements with suppliers and
assessment of the viability of alternate fuels.
Rationalisation of domestic clinker manufacture
The rationalisation of clinker production at
the Munster site is expected to result in an
annualised EBIT improvement of circa
$5 million. In 2014, cement EBIT will also be
impacted by a redundancy provision and asset
write-off of approximately $8 million.
Import strategy
Adelaide Brighton is Australia’s largest importer
of cementitious materials (cement, clinker and
blast furnace slag), importing 1.6 million tonnes
of product in 2013. This is expected to increase
to circa 2.0 million tonnes by 2016 due to the
rationalisation of clinker production at Munster
in Western Australia. This industry leading
position underpins supply chain efficiency in
procurement, transport, storage and distribution.
The use of imported materials allows the Group
to supply customers with competitively priced
product into a range of markets where demand
exceeds the Group’s manufacturing capacity.
The import strategy is supported by long term
supply agreements with two Japanese suppliers
for grey clinker and Aalborg Portland Malaysia
Sdn. Bhd. (APM) for white clinker.
Dividends paid or declared by the Company
During the 2013 financial year, the following
dividends were paid:
> A final dividend in respect of the year ended
31 December 2012 of 9.0 cents per share (fully
franked) was paid on 16 April 2013. This dividend
totalled $57,364,874.
> An interim dividend in respect of the year ended
31 December 2013 of 7.5 cents per share (fully
franked) was paid on 9 October 2013. This
dividend totalled $47,884,281.
Since the end of the financial year the
Directors have approved the payment of a final
dividend of 12.0 cents per share (fully franked),
comprising a final ordinary dividend of 9.0 cents
per share and a special dividend of 3.0 cents per
share. The final dividend is to be paid on
15 April 2014.
State of affairs
No significant changes occurred in the state of
affairs of the Group during the financial year.
Events subsequent to the end of the
financial year
In February 2014, the Directors approved a
strategy to rationalise the production of clinker
at its Munster site in Western Australia. It
is proposed to reduce the volume of clinker
produced at the site during 2014. Subject to all
necessary legal and supply chain arrangements
being in place, it is intended that by 2016 all
of the 400,000 tonnes of clinker previously
produced at Munster will be replaced by
imported clinker, which will be milled into
cement utilising the Kwinana import facility and
the existing cement mills at Munster.
As at the date of this report, no other matter
or circumstance has arisen since 31 December
2013 that has significantly affected, or may
significantly affect the Group’s operations, the
results of those operations, or the Group’s state
of affairs in future financial years.
Likely developments and expected results of
operations
The Company anticipates demand for cement
and clinker in 2014 to be similar to 2013 levels.
Demand from projects in Western Australia
and the Northern Territory, and a recovery in
the residential sector is expected to balance
continued weakness in the non-residential
sector and a decline in project demand in
South Australia.
The operational improvement program
and extracting further benefits from the
recently commissioned capital upgrades
and enhancements will be a particular focus
to support margins in the current financial
year. In particular, the Company will focus on
consolidating returns from the cement mill
upgrade at Birkenhead in South Australia, which
were only partly realised in 2013.
Lime sales volumes are expected to be similar to
2013 with increased demand from the alumina
sector expected to offset weakness in demand
from gold producers. The threat of small scale
lime imports in Western Australia and the
Northern Territory remains but further price
increases are expected from major contracts.
It is anticipated that the removal of the carbon
tax by 1 July 2014 could provide an after tax
benefit of circa $2 million compared to 2013.
However there is political uncertainty around
the repeal process and a significant component
of these savings is dependent on a reduction in
energy costs from suppliers.
While first half 2014 imports have been
fully hedged for foreign currency risk, the
deterioration in the Australian Dollar will
increase the direct cost of imported materials
for Adelaide Brighton. Assuming the value of the
Australian Dollar remains at around Yen90 and
USD0.90, costs are expected to increase by circa
$6 million, prior to mitigation through price
increases.
Management will continue to focus on efficiency
in masonry, pre-mixed concrete and aggregates
as demand improves due to an anticipated
recovery in residential construction. Further
improvements in concrete and aggregates, and
concrete masonry products prices are expected
with price increases announced for 2014.
Adelaide Brighton has implemented a successful
long term strategy to grow shareholder value
through investment in three key areas:
> Operational improvement;
> Growth in the lime business; and
> Vertical integration into downstream markets.
The Company has recently completed its
$112 million investment to improve capacity,
efficiency and sustainability in the Cement
and Lime division. These programs which
are expected to be accretive to long term
shareholder value, have improved the
environmental performance and provided
additional capacity to our lime kilns at Munster,
Western Australia, and expanded cement milling
capacity at Birkenhead, South Australia.
In 2013, reduced capital expenditure and
strong operating cash flow has allowed debt
repayments, leading to a reduction in gearing
from 30.9% to 23.4%, a position that provides
the Company with capacity to undertake
value accretive acquisitions. The Company will
continue to pursue organic and acquisitive
growth in a measured and low risk manner
to maximise long term shareholder value. The
Company’s first priority is enhancing long term
shareholder value through growth. Capital
management remains an important tool to
ensure optimal utilisation of the balance sheet
and maximise total shareholder return.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
44
APM is an integrated white clinker and white
cement producer in Malaysia, 30% owned by
Adelaide Brighton. APM is well progressed in
its expansion project which will increase its
white clinker capacity by 150,000 tonnes per
annum to 330,000 tonnes per annum from
2015 at a cost of US$18.6 million. This self
funded project is anticipated to be completed in
the latter part of 2014. A supply agreement with
APM has secured Adelaide Brighton’s supply
of white clinker for 10 years from 2015. This
will provide a replacement for the off-white
clinker currently produced at Munster and has
enabled the Munster clinker rationalisation.
The investment in APM is expected to return in
excess of Adelaide Brighton’s cost of capital over
the long term.
Lime
Capacity improvement and environmental
expenditure
Adelaide Brighton has installed dust filters on
the two Munster lime kilns at a cost of
$46 million. These investments have resulted
in an improvement in the environmental
performance of the kilns through reduced
emissions and have increased lime production
capacity by about 250,000 tonnes per annum.
Attractive competitive position
The improved efficiency and expanded capacity
of the lime production facilities at Munster
further enhances our cost competitive position
relative to lime imports. While the threat of
small scale imports continues, the weakening
in the Australian Dollar will increase the cost
of imported lime, improving the offering of the
Company to customers.
Concrete and Aggregates – vertical integration
Adelaide Brighton continues to evaluate
potential acquisition opportunities in line with
its strategy of selected downstream vertical
integration. The expansion of Adelaide Brighton’s
position in aggregates continues to be a key
factor in future strategic growth.
Land sales
The Company expects to realise approximately
$130 million from its significant land bank over
the next decade. Significant progress was made
in 2013 in preparing the properties for the sale
process. Cash proceeds from asset sales for the
year of $6.5 million mainly relate to the sale of
land. Land sale proceeds in 2014 are anticipated
to be circa $9 million, mostly in the first half.
While there are positive cash flow, efficiency and
returns outcomes from the land sale program,
the impact on accounting profit was immaterial
in 2013 and is expected to remain so in 2014.
Environmental performance
The Group is subject to various Commonwealth,
State and Territory laws concerning the
environmental performance of Adelaide
Brighton’s operations.
The Group monitors environmental performance
by site and business division, and information
about the Group’s performance is reported
to and reviewed by the Group’s senior
management, the Board’s Safety, Health &
Environment Committee, and the Board.
In 2013 Hy-Tec Industries Pty Ltd’s Mascot,
New South Wales plant received administrative
fines and costs of about $5,000, issued by
the Mosman Municipal Council arising from
concrete spilled on to a local road. Immediately
after the spill, Hy-Tec called in cleaning
contractors, who cleaned the road.
Cockburn Cement Limited (‘Cockburn’) has an
ongoing dialogue with the WA Department of
Environment Regulation (‘DER’) concerning its
Munster operations, and responds as required to
investigations and requests for information. DER
has asserted non-compliance with Cockburn’s
environmental licence and alleged breaches
of the Environment Protection Act 1986 (WA).
Consequently Cockburn is defending legal
proceedings brought by DER (when it was the
DEC) in the Magistrates Court of WA arising
from the conduct of a contractor at Munster in
2010. One charge in these proceedings has been
discontinued. A trial of the remaining charge is
expected to be held during 2014.
Directors’ meetings
The number of Directors’ meetings and meetings
of committees of Directors held during the
financial year and the number of meetings
attended by each Director is as follows:
Director
Board
Meetings
A
H
L V Hosking
R D Barro
G F Pettigrew
K B Scott-
Mackenzie
A M Tansey
M P Chellew
A Number of meetings attended
10
10
10
10
1291 10
10
10
10
10
1283 10
Audit, Risk
and
Nomination
Corporate
and
Compliance Remuneration Governance
Committee
Committee
Committee
Independent
Directors’
Committee
A
4
4
H
4
4
4
4
A
3
3
3
2
H
3
3
3
222
A
3
H
3
3
3
A
0
0
0
0
H
0
0
0
0
SH&E
Committee
A
H
2
2
2
2
2
2
H Number of meetings held during period of office
1 Apology – on leave overseas
2 Appointed a Member and Chairman of Committee from 19 February 2013.
3 Managing Director not required to attend two Board meetings (19 November 2013 and 12 December 2013) due to nature of the business
3 being considered.
Throughout 2013, the general business of the
Corporate Governance Committee was dealt
with at the Company’s Board Meetings and no
separate committee meetings were held.
Particulars of the Company’s corporate
governance practices, including the roles of each
Board Committee, are set out on pages
27 to 35 of this report.
Directors’ interests
The relevant interest of each Director in the
share capital of the Company at the date of this
report is as follows:
L V Hosking
R D Barro
G F Pettigrew
K B Scott-Mackenzie
A M Tansey
M P Chellew
Ordinary shares
4,739
209,875,800
7,739
5,000
10,000
448,366
Full details of the interests in share capital
of Directors of the Company are disclosed in
Note 32 to the Financial Statements on page 99
of this report. Full details of the Managing
Director’s interests in Awards of the Company
are set out in the Remuneration Report on
pages 47 to 63 of this report.
Director and executive remuneration
Details of the Company’s remuneration policies
and the nature and amount of the remuneration
of the Directors and certain senior executives are
set out in the Remuneration Report on pages 47
to 63 of this report.
Company Secretaries
The Company’s principal Company Secretary
is Marcus Clayton, who has been employed by
the Company in the two separate offices of
General Counsel and Company Secretary since
24 February 2003. He is a legal practitioner
admitted in South Australia with 26 years
experience.
Two other employees of the Company also
hold the office of Company Secretary to assist
with secretarial duties should the principal
Company Secretary be absent: the Company’s
Chief Financial Officer, Michael Kelly, a
Certified Practising Accountant who has been
a Company Secretary since 23 November 2010
and the Group’s Corporate Affairs Adviser,
Luba Alexander, who has been a Company
Secretary since 22 March 2001.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
45
Indemnification and insurance of officers
Proceedings on behalf of the Company
Rounding off
The Company is of a kind referred to in ASIC
Class Order 98/100 relating to the “rounding
off” of amounts in the Directors’ report. In
accordance with that Class Order, amounts in
the financial report and Directors’ report have
been rounded off to the nearest one hundred
thousand dollars, unless otherwise stated.
Shares under option
The details of shares under option at the date of
this report are set out in Notes 31 and 32.
Registered Office
The registered office of the Company is Level 1,
157 Grenfell Street, Adelaide, SA 5000.
Dated 5 March 2014
Signed in accordance with a resolution of the
Directors
Mark Chellew
Managing Director
No person has applied for leave of the Court to
bring proceedings on behalf of the Company or
to intervene in any proceedings to which the
Company is a party for the purpose of taking
responsibility on behalf of the Company for all
or any part of those proceedings. The Company
was not a party to any such proceedings during
the year.
Non-audit services
The Company may decide to employ the auditor
on assignments additional to their statutory
audit duties where the auditor’s experience and
expertise with the Company and the Group are
important.
Details of the amounts paid or payable to
PricewaterhouseCoopers for audit and non-audit
services provided during the year are set out in
Note 33 to the Financial Statements on page 100
of this report.
The Board of Directors has considered the
position and, in accordance with the advice
received from the Audit, Risk and Compliance
Committee, is satisfied that the provision of
the non-audit services is compatible with the
general standard of independence for auditors
imposed by the Corporations Act 2001. The
Directors are satisfied that the provision of
non-audit services by the auditor, as set in
Note 33, did not compromise the auditor’s
independence requirements of the Corporations
Act 2001 for the following reasons:
> All non-audit services have been reviewed by
the Audit, Risk and Compliance Committee to
ensure they do not impact the impartiality and
objectivity of the auditor; and
> None of the services undermine the general
principles relating to auditor independence
as set out in APES 110 Code of Ethics for
Professional Accountants.
Auditor’s independence declaration
A copy of the auditor’s independence declaration
as required under section 307C of the
Corporations Act 2001 is set out on page 110.
Rule 9 of the Company’s constitution provides
that the Company indemnifies each person who
is or who has been an “officer” of the Company
on a full indemnity basis and to the full extent
permitted by law, against liabilities incurred by
that person in their capacity as an officer of the
Company or of a related body corporate.
Rule 9.1 of the constitution defines “officers” to
mean:
> Each person who is or has been a Director,
alternate Director or executive officer of the
Company or of a related body corporate of
the Company who in that capacity is or was a
nominee of the Company; and
> Such other officers or former officers of the
Company or of its related bodies corporate as
the Directors in each case determine.
Additionally the Company has entered into
Deeds of Access, Indemnity and Insurance with
all Directors of the Company, its wholly owned
subsidiaries, and nominee Directors on the Board
of Independent Cement & Lime Pty Ltd. These
deeds provide for indemnification on a full
indemnity basis and to the full extent permitted
by law against all losses or liabilities incurred by
the person as an officer of the relevant company.
The indemnity is a continuing obligation and is
enforceable by an officer even if he or she has
ceased to be an officer of the relevant company
or its related bodies corporate.
The Company was not liable during 2013 under
such indemnities.
Rule 9.5 of the constitution provides that the
Company may purchase and maintain insurance
or pay or agree to pay a premium for insurance
for “officers” (as defined in the constitution)
against liabilities incurred by the officer in his or
her capacity as an officer of the Company or of
a related body corporate, including liability for
negligence or for reasonable costs and expenses
incurred in defending proceedings, whether civil
or criminal.
During the year the Company paid the premiums
in respect of Directors’ and Officers’ Liability
Insurance to cover the Directors and Secretaries
of the Company and its subsidiaries, and the
General Managers of each of the divisions of
the Group, for the period 1 May 2013 to
30 April 2014. Due to confidentiality obligations
under that policy, the premium payable and
further details in respect of the nature of the
liabilities insured against cannot be disclosed.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
46
Remuneration report
The Remuneration Report is set out under the
following main headings:
Summary of remuneration matters in 2013
and changes in 2014
The Board seeks to appropriately motivate,
reward and retain our senior executive team in
the context of the broader community sentiment
regarding executive pay.
The Company’s success over an extended period,
as described below, has been achieved by a long
term stable management team. Shareholder
and community expectations about senior
executives’ terms and conditions of employment
have developed and changed over recent years.
The Board recognises that the senior executives’
service agreements entered into several years
ago do not necessarily align fully with latest
practices. The Board and its Nomination,
Remuneration and Governance Committee
have considered this at length, including
taking independent advice from a number of
executive remuneration experts. The incoming
Chief Executive Officer has been employed on
modern terms which superseded and replaced
his previous executive service agreement (as
Executive General Manager, Cement and Lime). A
new general form of executive service agreement
embodying current best practice has been
introduced for new executive appointments. The
Group’s executive service arrangements have in
all cases provided a common interest between
executives and shareholders, by linking the
rewards which accrue to senior executives to the
creation of value for shareholders. The Board is
alert to the need to keep up with shareholder
and community expectations concerning
executive remuneration, and to implement
new practices as appropriate for the Group’s
circumstances.
Introduction – 2013 overview and 2014
remuneration developments
Section 1 – Policy and structure of executive
remuneration
Section 2 – Group performance 2013
Section 3 – CEO and senior executive
remuneration
Section 4 – Non-executive Directors’ fees
Introduction - 2013 overview and 2014
remuneration developments
The Directors of Adelaide Brighton Limited
present the Remuneration Report for Adelaide
Brighton Limited (the Company) and the
Group for the year ended 31 December 2013
in accordance with section 300A of the
Corporations Act. This Remuneration Report,
which forms part of the Directors’ Report, has
been audited by PricewaterhouseCoopers.
This report sets out remuneration information
for key management personnel, which
encompasses the non-executive Directors, the
Managing Director & CEO (the CEO) and certain
members of the senior executive team, and
explains how the Group’s performance for the
2013 financial year has driven remuneration
outcomes for our senior executives.
The Board ensures remuneration policies are
clearly aligned with Group strategy, which
is focused on maintaining and growing
shareholder value. The economic environment
and conditions were challenging for
construction materials companies in 2013.
The senior executive team was effective in
executing the Group’s strategy during 2013 in
these challenging conditions. Shareholders have
realised the benefits with strong growth in total
shareholder return. This is described in more
detail below.
As announced to the market on 13 December
2013, Mr Mark Chellew, the Company’s long
serving Managing Director and Chief Executive
Officer will retire from the Company following
the Annual General Meeting on 21 May 2014. Mr
Martin Brydon, who has been serving as Deputy
Chief Executive Officer since 1 February 2014,
will become Chief Executive Officer from 22
May 2014. The Company has entered into new
contractual arrangements with Mr Brydon. While
this report relates to remuneration policy and
outcomes during the 2013 year, we have also
set out developments in remuneration that have
been agreed in respect of the 2014 year.
In 2013 Adelaide Brighton again delivered a
strong financial performance, posting record
Revenue, Earnings Before Interest and Tax (EBIT)
and Profit Before Tax (PBT). Net Profit After Tax
(NPAT) declined by $1.8 million versus 2012,
however the prior year included a non-taxable
benefit of $7.6 million related to a gain on fair
value accounting for an acquisition. The Board
views this as a strong performance given the
headwinds faced during the year, including
rising energy costs, the carbon tax, increasing
labour costs and ongoing weakness in residential
and non-residential activity. The result reflects
the strategic positions the Company has built
over the long term, the ongoing focus on
operational improvement programs and strength
in demand from the resource sector. Operational
improvement programs delivered benefits of
$20.2 million. Of this, approximately $8 million
relates to the new cement mill capacity at
Birkenhead, approximately $5 million to the
management of energy costs, including the use
of alternative fuels, $3 million from improved
efficiency at the Munster lime kilns and circa
$3 million from labour and overhead savings.
While the improvement in performance is
modest, as can be seen from the graphs below,
Adelaide Brighton has outperformed its listed
Australian peer group over the past six years.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
47
A summary of the key remuneration outcomes
for the 2013 financial year and certain other
changes approved by the Board for 2014 is set
out below. Further information regarding 2014
developments will be reported on in the 2014
Remuneration Report.
Fixed remuneration
As foreshadowed in our 2012 report, the
Nomination and Remuneration Committee
(as it was previously called) approved a 3.5%
increase to the fixed remuneration of all senior
executives, including the CEO’s remuneration,
which became effective on 1 January 2013.
The Committee undertook a comprehensive
review of fixed remuneration in the latter part
of 2013.
In particular, the Committee considered levels
of fixed remuneration, levels of incentive
opportunity and the performance conditions
that must be satisfied to earn those incentives,
the contractual arrangements with senior
executives and changes in market practice.
The Board took these factors into account when
setting the remuneration arrangements for the
new Chief Executive Officer.
Refer also to the discussion on page 50
concerning “Developments for 2014”.
Short Term Incentive (STI)
Last year, the Company received questions from
some stakeholders as to the Board’s approach
in setting targets under the STI. Specifically,
the Company received questions around our
financial targets being set at levels which do not
necessarily require an increase in the previous
year’s actual profit figure.
In approving financial targets under the STI the
Board considers a number of factors, including
the industry in which we operate and the
extraneous factors including market conditions,
that impact our financial performance and
those of our competitors (details of which are
set out in Section 2.2). In particular, Adelaide
Brighton’s business is heavily dependent on the
building industry and construction markets. As
shown in the graph on the next page, demand
has declined significantly over the last six
years, leading to a fall over that period in the
production of premixed concrete in Australia
over that period.
Comparables earnings
EBIT (before abnormal items)
Index: 2007 = 100
$m
200
150
100
50
0
*
7
0
0
2
*
8
0
0
2
*
9
0
0
2
*
0
1
0
2
*
1
1
0
2
2
1
0
2
3
1
0
2
Adelaide Brighton
CSR (building products)
Boral
Source: Company financial reports and Adelaide Brighton
Note:
*Comparative information for these years has not been restated to reflect changes to accounting
*policies. Refer Note 42 to the 2013 Financial Statements.
EBIT as reported and adjusted in the company reports to exclude abnormal items (note Adelaide
Brighton had no abnormal items over the period). Yearly data for Adelaide Brighton and Boral is for the
12 months to 31 December and CSR for 12 months to 30 September of the same year.
Comparables earnings
EBIT margin
EBIT/
Revenue %
25
20
15
10
5
0
*
7
0
0
2
*
8
0
0
2
*
9
0
0
2
*
0
1
0
2
*
1
1
0
2
2
1
0
2
3
1
0
2
Adelaide Brighton
CSR (building products)
Boral
Source: Company financial reports and Adelaide Brighton
Note:
*Comparative information for these years has not been restated to reflect changes to accounting
*policies. Refer Note 42 to the 2013 Financial Statements.
EBIT as reported and adjusted in the company reports to exclude abnormal items (note Adelaide
Brighton had no abnormal items over the period). Yearly data for Adelaide Brighton and Boral is for the
12 months to 31 December and CSR for 12 months to 30 September of the same year.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
48
Australian premixed concrete production
Moving average total – 12 months
‘km3
30,000
29,000
28,000
27,000
26,000
25,000
24,000
23,000
7
0
c
e
D
8
0
c
e
D
9
0
c
e
D
0
1
c
e
D
1
1
c
e
D
2
1
c
e
D
3
1
c
e
D
Source: Australia Bureau of Statistics and Adelaide Brighton
Our Company has performed extremely well in these challenging market conditions, with our
Profit Before Tax (PBT) increasing every year over this period. Through our strategy of operational
improvement, downstream investment and growth in the lime business, Adelaide Brighton has
managed to grow profitability over this period while others in our industry have suffered declining
profitability and substantial asset impairment charges against profit (while Adelaide Brighton has not
written off any assets).
Adelaide Brighton Ltd
Profi t before tax
$m
220
200
180
160
140
120
100
*
7
0
0
2
*
8
0
0
2
*
9
0
0
2
*
0
1
0
2
*
1
1
0
2
2
1
0
2
3
1
0
2
Source: Adelaide Brighton
*Comparative information for these years has not been restated to reflect changes to accounting
*policies. Refer Note 42 to the 2013 Financial Statements.
In this context, the Board is satisfied with the
rigour applied in the current approach to setting
annual targets, and that the financial conditions
provide sufficiently challenging targets to
incentivise our management team to achieve
annual business objectives in order to support
our longer term growth.
In relation to 2013, as in previous years, the
annual short term incentive comprised 80%
financial targets and 20% functional targets.
PBT for 2013 was $208.6 million, an increase
of 0.5% from 2012. However, excluding the
impact of a $7.6 million gain from fair value
accounting for an acquisition from the 2012
result, underlying PBT was up by 4.4% or
$8.7 million. In setting the 2013 budget the
Board took account of the underlying 2012
result, as well as the unpredictable economic
environment and the cost challenges facing the
Group and industry in general, including energy
costs and the carbon tax. The resulting 2013
PBT was greater than 110% of budget, meaning
that the financial target was met at Tier 4. This
resulted in STI opportunities for the CEO and
senior executives of 100% and 80% respectively
of Fixed Annual Remuneration (FAR).
Functional targets for the CEO and senior
executives (comprising 20% of the available STI
performance incentive) were met at between
88% and 94%.
Long term incentive (LTI)
As previously foreshadowed, over recent years
the Company has transitioned to making annual
grants under the Executive Performance Share
Plan with a single four year performance period.
The first of these grants, the ‘2013 Awards’,
was made during the year. The 2013 Awards are
subject to a single four year performance period
and will be tested and become exercisable to the
extent of any vesting from 1 May 2017.
During 2013, Tranche 2 of the 2010 Awards
was tested for earliest exercise in May 2013.
These vested at 88%, having exceeded the 75th
percentile against the relative total shareholder
return performance condition and having
achieved just over 75% vesting against the
compound annual growth in Earnings Per Share
(EPS) target based on EPS growth over the
performance period.
Non-executive Directors
Non-executive Director base and Committee
fees were increased by 3.5% for the 2013
financial year, to be in line with market median
rates. As set out on page 50 in the discussion
of “Developments for 2014”, no non-executive
Director fees have increased in 2014, and the
Chairman and the Chairman of the Nomination,
Remuneration and Governance Committee will
receive reduced fees in 2014.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
49
Remuneration governance
Developments for 2014
As a result of the Board’s continued focus on
governance, and as noted in the Corporate
Governance Statement on pages 27 to 35,
during the year the remit of the Nomination and
Remuneration Committee (as it was previously
called) was expanded to include responsibility
for governance. The Board considers it
appropriate that responsibility for governance
sits within the Nomination and Remuneration
Committee given the strong emphasis that the
Board places on the link between governance
and both remuneration and succession.
The Nomination, Remuneration and Governance
Committee (NRG Committee) has considered the
Board’s ability to claw back remuneration from
executives in appropriate circumstances.
The rules of the long term incentive plan have,
for some time, provided the Board with a
broad ability to claw back awards on offer to
an executive and to make adjustments to any
unvested awards, if considered appropriate.
The Board has considered the introduction of a
deferred short term incentive component.
Specifically, the Committee considered this
in the context of Adelaide Brighton’s current
remuneration framework, including the long
term incentive which is subject to a four year
performance period. On the basis that, at any
time, senior executives have at least four years’
worth of LTI opportunity subject to share price
fluctuations, the Committee considers that
senior managers’ interests are sufficiently
aligned to the long term interests of our
shareholders.
While the Board is aware of the move by some
companies to introduce a deferred component
in order to provide a mechanism to adjust
for performance in the event of material
misstatement of financial position, in light of
the generally consistent performance of the
Company and the known cyclicality of the
industry, the Board does not consider that this
in itself warrants a change to the Company’s
current remuneration arrangements (as any
irregularities would likely be identified during
the relevant performance year).
The Committee has also considered the
Company’s position in respect of minimum
shareholdings for Non-executive Directors.
Further details are set out on page 62.
Non-executive Directors: Following a review
of the fees paid to non-executive Directors, at
the Chairman’s request his annual fee has been
reduced by 12.5% to $310,500 in the 2014 year.
This fee for chairing the Board is now three
times the base fee paid to other non-executive
Directors. The base fee for non-executive
Directors remains at the same level as for 2013,
being $103,500 per annum. Ms Tansey was
the Chairman of the Corporate Governance
Committee, and her fees for 2014 have also
reduced as that Committee has been dissolved.
All other non-executive Directors’ fees for 2014
remain the same as for 2013.
Fixed remuneration: The new CEO’s fixed
remuneration has been set at $1.3 million per
annum for the 2014 year. Following annual
remuneration reviews concluded late in 2013,
some senior executives received a 2% increase
over 2013 FAR, to address internal relativities
and reflecting the fact that fixed remuneration
for these executives was originally set a little
below market while the executives gained
experience in their current roles. FAR for other
senior executives was held at the same level as
2013.
Overview of remuneration components
Long term incentive: While the Board has
confirmed that the current structure of the
long term incentive, including the four year
performance period and the Total Shareholder
Return (TSR) and EPS growth targets, remains
an appropriate long term incentive scheme for
the Group, the level of participation in the long
term incentive has been reduced for all senior
executives.
Further information regarding each of these
developments will be reported on in the 2014
Remuneration Report.
Future direction
The Board is alert to the need to keep up with
shareholder and community expectations
concerning executive remuneration, and to
implement new practices as appropriate for the
Group’s circumstances. Consistent with this,
the incoming Chief Executive Officer has been
employed on modern terms and a new general
form of executive service agreement embodying
current best practice has been introduced for
new executive appointments. These provide for
a greater degree of discretion in favour of the
Board. Additionally, the Board will continue to
review the Group’s short term and long term
incentive schemes.
An overview of the components of remuneration for Directors and senior executives is set out below:
Remuneration
component
Fees
Fixed
remuneration
Salary
At-risk
remuneration
Short term
incentive
Post-
employment
Long term
incentive
Superannuation
Notice periods &
termination
payments
Directors
Non-Executive
Executive
Senior
Executives
Discussion in
Remuneration
Report
pages 62, 63
pages 48, 51, 56, 62
pages 48, 49, 51,
55-58, 62
pages 49, 51-54,
58-62
pages 62, 63
page 61
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
50
Section 1 – Policy and structure of executive
remuneration
to the degree of individual performance, role,
responsibility and future potential within the
Group);
The remuneration policy seeks to support
the Group’s objective to be perceived as “an
employer of choice” by:
1.1 Executive remuneration policy and
objectives
The Company’s remuneration strategy and policy
are set by the Board and overseen by the NRG
Committee.
In determining the executive remuneration
framework, the Board has adopted a policy that
aims to:
> be competitive in the markets in which the
> drive leadership performance and behaviours
that reinforce the Group’s short and long term
strategic objectives;
> offering remuneration levels which are
competitive relative to those offered by
comparable employers; and
> provide a common interest between executives
and shareholders by linking the rewards that
accrue to executives to the creation of value for
shareholders;
> have regard to market practice and market
conditions; and
> providing strong and transparent links between
individual and Group performance and rewards.
The Board aims to achieve a balance between
fixed and performance related (or ‘at-risk’)
components of remuneration for each role
and seniority level. The diagram below shows
the policy implementation and remuneration
arrangements as they apply to executives:
Group operates in order to attract, motivate and
retain a highly capable executive team (and each
individual’s remuneration is set with reference
> provide transparency and clarity on what is paid,
to whom and on what basis remuneration has
been paid.
Be competitive in the market to attract
and retain talent, and motivate to achieve
outstanding performance
Fixed remuneration
Between 40-60% of total target remuneration
> Set with reference to the long term individual performance, role, responsibility and potential
(and then benchmarked to a competitive market rate for comparable roles within the comparator
group adopted, which is currently the companies comprising the ASX51-150).
> Executive can take in form agreed with the Company (in general, this is in the form of cash, car
and superannuation and includes the cost of fringe benefits tax).
Reinforce the Company’s short and long term
objectives by conducting business in line
with the Company’s purpose, principles and
commitments
Performance-based remuneration – ‘at risk’
Between 40-60% of total target remuneration
STI
Performance measured by:
Link reward to the creation of shareholder
value to encourage the achievement of
growth of the Company’s business
> ‘Financial Target’ (80% of STI opportunity) relating to Group performance against budget.
> ‘Functional Targets’ (20% of STI opportunity) relating to personal performance.
LTI
Performance measures based on EPS and TSR link executive reward with key performance drivers
which underpin sustainable growth in shareholder value.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
51
1.2 Responsibility for setting remuneration
The NRG Committee is responsible for reviewing
and making recommendations to the Board on
Director and executive remuneration policy and
structure.
The Board, based on the recommendations of the
NRG Committee, establishes the remuneration of
the CEO, including his participation in the short
term and long term incentive schemes.
The NRG Committee, based on the
recommendations of the CEO, approves the
remuneration of senior executives reporting to
the CEO, including their participation in both
short term and long term incentive schemes.
The NRG Committee follows protocols
around the engagement and use of external
remuneration consultants to ensure ongoing
compliance with legislation. This is to ensure
that any remuneration recommendation from
an external consultant is free from the undue
influence by any member of the Company’s key
management personnel to whom it relates.
In 2013, the NRG Committee engaged
3 degrees consulting to undertake a review of
the Company’s senior executive remuneration
arrangements in the context of current
market practice and provide advice and
recommendations as to the quantum and
structure. 3 degrees consulting also assisted with
a recommendation in relation to the quantum
and structure of remuneration for Martin Brydon
upon his appointment as Deputy Chief Executive
Officer and then Chief Executive Officer. Under
the terms of engagement, 3 degrees consulting
provided remuneration advice (inclusive of
‘remuneration recommendations’ as defined
in section 9B of the Corporations Act 2001)
and was paid $76,750 exclusive of GST for
these services. For each of the remuneration
recommendations, the Board is satisfied that
the recommendations were made free from
any undue influence. In addition, 3 degrees
consulting provided a formal declaration
confirming that the recommendations provided
were free from ‘undue influence’ by the
members of the key management personnel
(KMP) to whom the recommendations related.
3 degrees consulting was also engaged to assist
with the retirement of the CEO Mark Chellew,
and various issues relating to the transition to
the new Chief Executive Officer, to assist with
preparation of the 2013 remuneration report
and certain other governance and remuneration
related services and was paid $138,975
(excluding GST) for these services.
Section 2 - Group performance 2013
2.1 The link between performance and the
long term incentive (LTI)
The Company’s long term incentive
arrangements for the CEO and senior executives
(described in section 3.5 below) are judged
against two performance measures – total
shareholder return (TSR) and earnings per share
(EPS). The Board believes these performance
conditions align executive rewards with the long
term creation of shareholder wealth, through
which senior executives focus on medium to
longer term strategic decision making.
TSR measures the change in shareholder wealth
over time – being the dividends paid by the
Company, changes in share price and any return
of capital over the relevant period.
EPS divides earnings by the number of shares
on issue (which includes the effect of capital
raisings).
The table below shows details of dividends paid,
the closing price of Adelaide Brighton shares on
31 December in each of the past five years and
details of operating cash flow.
Shareholders’ wealth improvement from year 2009 to year 2013
Financial year ended 31 December
2013
2012
2011 *
2010 *
2009 *
Closing share price ($ as at 31 December)
3.67
3.12
2.89
3.30
2.75
Total dividends per share (cents)
19.52
16.5
16.5
21.51
13.5
Franked dividends
100%
100%
100%
100%
100%
Operating cash fl ow
$227.3m
$186.9m
$151.3m
$188.5m
$188.1m
Earning per share – EPS (cents)
23.7
24.0
23.3
23.9
20.4
1 Includes 5.0 cent special dividends
2 Includes 3.0 cent special dividend
* Comparative information for these years has not been restated to reflect changes to accounting policies. Refer Note 42 to the 2013 Financial
* Statements.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
52
As can be seen from the table above, the
Company has generated growth in EPS and
maintained a strong dividend payout ratio to
profit earned, with the payout ratio ranging
from 66% to 90%. Tranche 2 of the 2010 Awards
granted to senior executives was measured
at 88% based on performance against the
applicable TSR and EPS performance conditions
measured from 2009 to 2012.
The graphs on this page illustrate the TSR and
EPS performance measures from 2009 to 2013.
The first graph shows Adelaide Brighton’s EPS
performance since 2009, with the Company
delivering compound average growth in EPS of
3.8%. The second graph shows the performance
of Adelaide Brighton’s share price, with
dividends reinvested, versus the S&P/ASX200
Accumulation Index from 1 October 2009 to
31 December 2013. The Adelaide Brighton
share price has outperformed the S&P/ASX200
Accumulation Index, reflecting the strength of
the Group’s strategy. The third graph illustrates
Adelaide Brighton’s Total Shareholder Return
against that of comparable peers in the
construction materials industry over the period
1 January 2009 to 31 December 2013.
Earnings per share (cents)
25
24
23
22
21
20
19
18
*
9
0
0
2
*
0
1
0
2
*
1
1
0
2
2
1
0
2
3
1
0
2
Source: Adelaide Brighton
*Comparative information for these years has not been restated to reflect changes to accounting
*policies. Refer Note 42 to the 2013 Financial Statements.
Growth of ABC share price (dividends reinvested) vs S&P/ASX200 Accumulation Index
%
100
75
50
25
0
-25
9
0
0
2
t
c
O
0
1
0
2
n
a
J
0
1
0
2
r
p
A
0
1
0
2
l
u
J
0
1
0
2
t
c
O
1
1
0
2
n
a
J
1
1
0
2
r
p
A
1
1
0
2
l
u
J
1
1
0
2
t
c
O
2
1
0
2
n
a
J
2
1
0
2
r
p
A
2
1
0
2
l
u
J
2
1
0
2
t
c
O
3
1
0
2
n
a
J
3
1
0
2
r
p
A
3
1
0
2
l
u
J
3
1
0
2
t
c
O
3
1
0
2
c
e
D
ABC share price (dividends renivested)
S&P/ASX200 Accumulation Index
Source: ASX/First Advisers Pty Ltd
Total shareholder return (share price plus dividend reinvested)
vs S&P/ASX200 Accumulation Index1
%
150
100
50
0
-50
-100
1 Historical share prices and dividends adjusted
for capital reorganisations. Dividends reinvested
at DRP price, or at share price on ex-dividend
date if no DRP active.
9
0
n
a
J
9
0
l
u
J
0
1
n
a
J
0
1
l
u
J
1
1
n
a
J
1
1
l
u
J
2
1
n
a
J
2
1
l
u
J
3
1
n
a
J
3
1
l
u
J
3
1
c
e
D
ABC
Boral
CSR
S&P/ASX200 Accum
Source: ASX, IRESS, First Advisers Pty Ltd
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
53
Looking at the Company’s longer term
performance, the first graph to the right shows
Adelaide Brighton’s EPS performance since 2002.
The Company has delivered compound average
growth in EPS of 8.3%. The second graph shows
the performance of Adelaide Brighton’s share
price, with dividends reinvested, versus
the S&P/ASX200 Accumulation Index from
1 January 2002 to 31 December 2013. The
Adelaide Brighton share price has outperformed
the S&P/ASX200 Accumulation Index, reflecting
the success of the Group’s strategy. The third
graph illustrates Adelaide Brighton’s Total
Shareholder Return against that of comparable
peers in the construction materials industry over
the period 1 January 2002 to 31 December 2013.
Earnings per share (cents)
25
23
21
19
17
15
13
11
9
7
5
*
2
0
0
2
*
3
0
0
2
*
4
0
0
2
*
5
0
0
2
*
6
0
0
2
*
7
0
0
2
*
8
0
0
2
*
9
0
0
2
*
0
1
0
2
*
1
1
0
2
2
1
0
2
3
1
0
2
Source: Adelaide Brighton
*Comparative information for these years has not been restated to reflect changes to accounting
*policies. Refer Note 42 to the 2013 Financial Statements.
Growth of ABC share price (dividends reinvested) vs S&P/ASX200 Accumulation Index
%
700
600
500
400
300
200
100
0
-100
2
0
n
a
J
2
0
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3
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3
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4
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4
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5
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5
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6
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6
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7
0
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7
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8
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8
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9
0
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9
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0
1
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1
1
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1
1
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2
1
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3
1
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3
1
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3
1
c
e
D
ABC share price (dividends renivested)
S&P/ASX200 Accumulation Index
Source: ASX/First Advisers Pty Ltd
Total shareholder return (share price plus dividend reinvested)
vs S&P/ASX200 Accumulation Index1
%
900
800
700
600
500
400
300
200
100
0
-100
1 Historical share prices and dividends adjusted
for capital reorganisations. Dividends reinvested
at DRP price, or at share price on ex-dividend
date if no DRP active.
2
0
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2
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5
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ABC
Boral
CSR
S&P/ASX200 Accum
Source: ASX, IRESS, First Advisers Pty Ltd
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
54
2.2 The link between annual earnings, the
short term incentive (STI) and Adelaide
Brighton’s longer term business objectives
In 2013 Adelaide Brighton reported record
sales of $1,228.0 million up 3.8% on 2012,
supported by continued demand from projects
in South Australia and the resources sector in
Western Australia and the Northern Territory.
Earnings before interest and tax (EBIT) increased
0.3% to a record $222.7 million. Group EBIT
margin was 18.1%. Excluding the $7.6 million
gain on acquisition in 2012, EBIT margin was
stable. Adelaide Brighton faced energy and
labour cost pressures, increased depreciation
charges and a reduction in the contribution
from joint ventures. Despite these pressures,
underlying EBIT margins were maintained as
a result of benefits from capital investments
and cost management programs. Operational
improvement delivered EBIT benefits of $20.2
million, including $8.0 million cost savings
resulting from the newly commissioned grinding
mill at Birkenhead, South Australia.
The Group’s PBT for 2013 was $208.6 million.
The Managing Director and senior executives
satisfied the Financial Component of the
performance conditions applicable to the 2013
STI as the Group achieved more than 110%
of budgeted PBT after exceptional, abnormal
or extraordinary items (no adjustment for
exceptional, abnormal or extraordinary items
was made in 2013). Tier 4 of the STI was reached,
resulting in an STI opportunity of 80% for the
senior executives and 100% for the Managing
Director.
> dynamics of the construction and resources
industry: demand in our markets of operation
correlate to activity levels in the construction
industry. As noted above the pre-mix concrete
industry in Australia remains at levels which are
circa 12% below the peak of 2008. Demand in
certain resource markets has plateaued over the
past couple of years. Further subdued residential
activity and a declining commercial sector have
resulted in a difficult trading environment,
particularly for certain products such as
concrete masonry.
> exchange rates: a strong Australian dollar has
resulted in increasing pressure on prices and
has attracted imports, particularly dumped lime
imports in Western Australia and the Northern
Territory. As part of its focus on operating
costs and logistics, management has worked
to develop Adelaide Brighton’s clinker and
cementitious import business by expanding
capacity at port facilities, entering into long term
supply agreements with suppliers and making
a 30% investment in a Malaysian white cement
and clinker producer (Aalborg Portland Malaysia
Sdn. Bhd.).
> energy considerations: as a primary input for
production, higher energy prices have an impact
on our operating margins. The management
team continues to work to mitigate this impact,
however cost increases from energy continue
to outstrip general inflation, while the high
Australian dollar constrains the pass through of
these increased costs to customers.
Earnings improvement from 2009 to 2013
> carbon tax: despite awaiting a change in
government policy and our previous indication
that the carbon tax is not expected to materially
impact the Company’s long term growth
strategy, the carbon tax impacted 2013 NPAT by
$4.2 million (net of mitigation). It is expected
that the carbon tax in 2014 could lower net
profit after tax by between $2 million and
$4 million, prior to further mitigation, depending
on the length of the period in 2014 when the
tax applies.
Our management team has not only responded
to these external pressures over recent years,
but has generated positive return for longer
term shareholders in this very challenging
environment and we have outperformed our
industry competitors. Accordingly, the Board
strongly believes that our short term incentive
targets need to be set in this context in order
to continue to attract and motivate a highly
capable senior executive team who can drive
the continued delivery of strong results for
shareholders over the longer term.
The table below sets out the Group’s
performance over a number of key performance
indicators – sales revenue, earnings before
interest and tax (EBIT), EBIT margin, profit before
tax (PBT) and net profit after tax (NPAT) – over
the past five financial years.
Financial year ended 31 December
2013
2012
2011 *
2010 *
2009 *
Sales revenue - $ million
1,228.0
1,183.1
1,100.4
1,072.9
987.2
Earnings before interest and tax (EBIT) - $ million
222.7
222.1
223.4
216.2
185.3
EBIT margin - %
18.1%
18.8%
20.3%
20.2%
18.8%
Profi t before tax (PBT) - $ million
208.6
207.5
206.4
202.2
168.6
Net profi t after tax (NPAT) - $ million
151.1
152.9
148.4
151.5
123.1
* Comparative information for these years has not been restated to reflect changes to accounting policies. Refer Note 42 to the 2013 Financial
* Statements.
In accordance with the STI program 80% of
the maximum STI opportunities were payable
based on achievement of Financial Targets and
20% of the maximum based on achievement
of Functional Targets. The achievement of
functional targets for the CEO and senior
executives were met at between 88% and 94%.
As foreshadowed in the Introduction, last
year the Company received questions from
some stakeholders as to the Board’s approach
in setting targets under the STI. Specifically,
the Company received questions around our
financial targets being set at levels which do not
necessarily require an increase in the previous
year’s actual profit figure.
In approving financial targets under the STI, the
Board considers a number of factors, including
the industry in which we operate and the
extraneous factors that impact our performance
which include:
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
55
The Group’s committed senior executive team,
who have overseen a consistent strategy over
the five year period shown in the table above,
have delivered strong results over the past five
years:
> an improvement in EBIT from $185.3 million
in 2009 to $222.7 million in 2013, a 20.2%
increase;
> PBT increase from $168.6 million in 2009 to
$208.6 million in 2013, a 23.7% increase; and
> an increase in NPAT from $123.1 million in 2009
to $151.1 million in 2013, a 22.7% increase.
As a result of securing long term customer
contracts, supply contracts for clinker and the
successful implementation of the Company’s
capital expenditure program, management is
confident that the Group is strategically well
positioned to continue to maximise shareholder
returns.
Executives
Position
Managing Director and CEO
Managing Director
M P Chellew
Senior executives
G Agriogiannis
M Brydon
M Kelly
S B Rogers
*Executive General Manager, Cement and Lime until 31 January 2014
Executive General Manager, Concrete and Aggregates
Deputy Chief Executive Offi cer*
Chief Financial Offi cer
Executive General Manger, Concrete Products
3.1 Components of executive remuneration
The executive remuneration framework for the
CEO and all senior executives consists of the
following components:
> Fixed remuneration – guaranteed base salary
(inclusive of superannuation) expressed as a
dollar amount that the executive may take in a
form agreed with the Company.
> Performance based remuneration – incentive
markets in which the Group operates), growth
and comparable roles within comparable
companies. There are no guaranteed increases
on review.
For the 2013 year, fixed remuneration increases
across the senior executive team (including the
KMP) averaged 3.5%.
3.4 At-risk remuneration -
Short Term Incentive (STI)
Section 3 - CEO and senior executive
remuneration
During the year, the Company examined the
roles of the members of the senior executive and
determined that the executives whose details
are set out in this report are those that meet
the definition of key management personnel.
That is, that these executives had the authority
and responsibility for planning, directing and
controlling the activities of the Company and
the Group during the 2013 financial year.
There has not been any change to the level of
responsibility of other senior executive members.
or ‘at-risk’ components which comprise of an
annual short term incentive and long term
incentives, awarded at set levels for target or
stretch (outstanding) performance.
3.2 Aligning management with long term
shareholder value
The Board considers that, at present, the LTI
sufficiently aligns the interests of our executives
with shareholders. Specifically, the LTI operates
over a four year performance period and, based
on the Company’s strong performance, has
vested at least 78.4% over the period 2009 -
2012. Accordingly, at any time, our executives
have at least four years’ worth of LTI opportunity
aligned with the interests of shareholders.
3.3 Fixed remuneration
The amount of fixed remuneration for an
individual executive is set with regard to the
size and nature of an executive role, the long
term performance of an individual and his or her
future potential within the Group. Executives
may elect to have a combination of benefits
provided out of their fixed remuneration,
including cash, additional superannuation and
the provision of a motor vehicle. The fixed
remuneration of the CEO and senior executives
for 2013 is outlined in section 3.7.
Fixed remuneration is reviewed annually under
normal circumstances, as provided under the
Service Agreements for executives, having regard
to relevant factors including performance,
market conditions (both generally and in the
3.4.1 Summary of STI program
What is the STI and who participates?
The STI program links specific annual
performance targets (predominantly financial)
with the opportunity to earn cash incentives
based on a percentage of fixed remuneration.
Participation in the STI is generally offered to
the CEO and senior executives who are able to
have a direct impact on the Group’s performance
against the relevant performance hurdles.
Does the STI include a deferred component?
The NRG Committee is cognisant of the general
market trend towards requiring a component
of the STI to be deferred into equity, for reasons
including to create a greater alignment with
interests of shareholders.
The NRG Committee considered this in
the context of Adelaide Brighton’s current
remuneration framework, including the long
term incentive which is subject to a four year
performance period. On the basis that, at any
time, senior executives have at least four years’
worth of LTI opportunity subject to share price
fluctuations, the Committee considers that
senior managers’ interests are sufficiently
aligned to those of our shareholders.
Accordingly, the Committee has determined not
to implement a deferred component at this time.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
56
What is the maximum amount the executives can earn?
Maximum STI opportunity
2013 Group performance against budget
Initial Target (Tier 1)
90% - 99%
Target (Tier 2)
100%
CEO
12%
60%
% of fi xed remuneration
Senior executives
10%
50%
Partial Stretch (Tier 3)
101% - 109%
64% - 96%
53% - 77%
Stretch (Tier 4)
110% or greater
100%
80%
How are performance criteria set?
The performance criteria are set by the Board
and agreed with the executive, in general, by the
end of February in each year.
What were the performance conditions for the
2013 STI program?
For the 2013 financial year, the performance
conditions comprised a mix of financial and
non-financial performance measures:
1 80% is tested on the Group’s performance
against budget (Financial Target); and
2 20% is tested on both the Group’s performance
against its budget and the senior executive/CEO
meeting personal targets agreed with the
CEO/Board (Functional Targets).
Accordingly, the cash bonus is dependent
on both the Group’s performance and the
individual’s performance.
Why were these performance conditions chosen?
The key financial measure used is Profit Before
Tax (PBT), which the Board believes is an
appropriate annual performance target, aligned
to Group budget.
PBT is defined for STI purposes as net profit
after interest but before income tax expense
which may be adjusted for exceptional,
abnormal, extraordinary items and the effect of
acquisitions made during the financial period.
A percentage of the executive’s 2013 STI is
also subject to additional personal (functional)
performance hurdles appropriate to each
executive’s role.
What are personal or functional performance
hurdles?
Personal or Functional (performance) Targets
for each financial year are agreed with the
CEO and the senior executives, and are set to
drive leadership performance and behaviours
consistent with achieving the Group’s objectives.
These require the achievement of outcomes
which advance the Group’s interests, in some
instances in the short term while other actions
are steps to longer term goals, or which enhance
the Board’s prudent approach to financial and
operational management.
These include specific initiatives consistent
with strategic plans, investigations and
implementation of value adding growth
and business sustaining options (including
acquisitions and organic growth initiatives
and further developing and executing specific
aspects of strategic plans), safety performance,
succession planning, individual business unit
profit targets, negotiation of certain significant
long term and short term customer and
supply contracts, compliance with regulatory
authorities’ requirements and other specific
personal or functional performance objectives
which align the interests of Company executives
and shareholders. Further details of the
achievement of these performance targets by
senior executives in 2013 are set out in section
3.4.2 below.
How is performance against the performance
conditions assessed?
In respect of the Financial Targets, the Board
reviews the budgeted targets for the year,
focusing on the PBT financial measure, and
assesses the degree to which the Group met
these targets. Where applicable, exceptional,
abnormal, extraordinary factors, which may have
affected the Group’s performance during the
year, are considered and where necessary, the
Group’s performance may be adjusted for the
purposes of assessing performance against the
target.
When is performance against criteria determined
and the cash award paid?
Assessment of performance against the
performance hurdles for the relevant year is
determined at the first meeting of the NRG
Committee and the Board subsequent to the
balance date, in conjunction with finalisation
of the Group’s full year results (generally in
February), and is normally paid to the executive
by March.
What happens to the STI award on cessation of
employment?
In general, where an executive’s employment
is terminated by the Company (other than for
cause) during the course of a performance year,
the executive is entitled to a pro-rata STI for that
proportion of the current financial year elapsed
on the termination date. In general, where an
executive’s employment ceases by reason of
resignation, any STI opportunity lapses.
3.4.2 2013 STI outcomes
As indicated in section 2.2, the Financial Target
component of the STI, comprising 80% of the
CEO’s and the senior executives’ potential STI
opportunity is assessed against the Group’s
PBT, which achieved above 110% of budget. The
remaining 20% of the potential STI opportunity,
which is assessed against individual’s Functional
Targets, is determined on each individual’s
success in achieving their respective personal
targets. During 2013, the CEO and the senior
executives accomplished a number of objectives
and projects which contributed to the Group’s
performance in 2013 and which will reinforce
future performance.
Examples of personal Functional Target
objectives achieved by the CEO and the senior
executives during 2013 included:
Operating enhancement / business sustaining
> Met targets for management of working capital
> Successfully completed Munster kiln 5 baghouse
filter and significantly improved lime production
> Anticipated and responded to developing east
coast gas price issue with extensive assessment
of energy supply options and successfully
pursued target energy supply arrangements
The Board also considers the NRG Committee’s
assessment of the CEO’s performance against
the agreed Functional Targets, and that of the
senior executives (based on the recommendation
of the CEO).
> Achieved concrete products contract
manufacturing arrangement, mitigating
transport and other logistics costs in a regional
area and freeing land for sale
> Extension to the VERSA range has been
successfully manufactured and put to the
market
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
57
Value adding growth and development
STI for the 2013 and 2012 financial years
> Negotiations and investigations have created
opportunities for business and land acquisitions
which are likely to be executed over 2014 and
later, for growth and entry into new areas for
the existing cement, concrete and aggregates
businesses. Assessed and rejected inapt
opportunities.
> Created further land divestment opportunities to
be realised in ensuing years
Safety and environment
> Achieved safety performance improvement
> Achieved reduced emissions at Munster on
successful completion of Munster kiln 5
baghouse filter
> Enhanced relations through extensive
consultation and engagement with community
stakeholders at key manufacturing sites
Other
> Succession planning up to date, ready for CEO
transition
> Achieved financial management targets and
assessment of appropriate capital management
> Reviewed options and implemented direction for
shared services
These accomplishments contributed to
individuals achieving their personal targets,
which varied between 88% and 94% of the
Functional Targets.
Overall, the achievement of the Financial
and Functional Targets resulted in the STI
opportunity being awarded at Tier 4 of the STI.
Specific information relating to the percentage
of the 2013 and 2012 STI which was paid and
the percentage that was forfeited for the CEO
and senior executives of the Company and
Group is set out in the following table.
CEO &
senior
executives
M P Chellew
G Agriogiannis
M Brydon
M Kelly
S B Rogers
Year
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
STI opportunity
as % of fixed
remuneration1
Actual STI
as a % of STI
opportunity
% of STI
opportunity
payment not
achieved1
%
100.0
100.0
80.0
80.0
80.0
80.0
80.0
80.0
80.0
80.0
%
97.6
97.7
98.0
93.0
98.8
97.1
98.1
97.7
98.0
93.8
%
2.4
2.3
2.0
7.0
1.2
2.9
1.9
2.3
2.0
6.2
Actual STI
payment2
$
1,697,069
1,641,360
371,640
340,752
752,619
714,656
532,036
511,948
368,800
341,057
1 Where the actual STI payment is less than maximum potential, the difference is forfeited and does not become payable in subsequent years.
2 2013 and 2012 STI constituted a cash bonus granted during 2013 and 2012 respectively. The 2013 STI was determined in conjunction with the
2 finalisation of 2013 results and paid in February 2014. Similarly, the 2012 STI was determined in conjunction with the finalisation of 2012 results
2 and paid in February 2013.
3.5 At-risk remuneration -
Long Term Incentive (LTI)
3.5.1 Summary of the Executive
Performance Share Plan
As explained in previous Remuneration Reports,
the Board decided to move towards making
annual grants of Awards under the LTI Plan with
a single four year performance period, to all
senior executives who are eligible to participate
in the LTI Plan. The annual grant of Awards
commenced in the 2013 financial year.
The current Awards that have been issued under
the Plan are the “2010 Award”, “2012 Award”
and the “2013 Award”. The Board intends to
make a grant in 2014 to be known as the “2014
Award”.
Details of previous grants are set out in the table
in section 3.5.2. The Board proposes that the
2014 Award will be made on substantially the
same terms to the 2013 Award.
A summary of the Executive Performance Share
Plan as it applies to the 2013 Award follows.
What is the Plan and who participates?
The Group’s LTI arrangements are designed to
link executive reward with sustainable growth in
shareholder value.
influence the generation of shareholder wealth
and thus have a direct impact on the Group’s
performance against the relevant performance
hurdles.
What are the performance conditions and why
were they chosen?
Awards are measured against a TSR performance
condition (as to 50% of each Award) and an EPS
performance condition (as to the other 50%).
The Board considers these performance
conditions to be appropriate because they
ensure that a proportion of each executive’s
remuneration is linked to the generation of
profits (expressed on a per share basis) and
shareholder value.
In particular, the use of a relative TSR based
hurdle:
> ensures alignment between comparative
shareholder return and reward for the executive;
and
> provides a relative, external market performance
measure, having regard to those companies
with which the Group competes for capital,
customers and talent.
An EPS growth based hurdle:
> links executive reward to a fundamental
indicator of financial performance; and
The Plan provides for grants of Awards to eligible
executives, each Award being an entitlement to
a fully paid ordinary share in Adelaide Brighton
Ltd, subject to the satisfaction of performance
conditions, on terms and conditions determined
by the Board.
> links directly to the Group’s long term objectives
of maintaining and improving earnings.
The use of dual performance measures combines
a strong external market based focus through
share price growth and dividends (TSR), and a
non-market based measure aimed at driving
improved Company results and the creation of
shareholder wealth (EPS).
Participation in the Plan is generally offered
to the CEO and executives who are able to
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
58
How is the TSR performance condition measured?
The Company’s TSR performance must equal or exceed the growth in the returns of the median
company of the S&P / ASX 200 Accumulation Index (XJO Al), excluding all GICS Financial companies
and selected resources companies over the period from 31 December 2012 to 31 December 2016.
The 2013 Awards vest progressively in accordance with the following scale:
TSR growth relative percentile ranking
% of Awards subject to TSR hurdle to vest
Below 50%
50%
Between 50% and 75%
75% or above
Nil
50%
Pro rata
100%
How is the EPS performance condition measured?
The EPS performance hurdle requires the compound annual growth in EPS of the Company over the
relevant performance period to equal or exceed 5% per annum before any Awards will vest.
Awards under the 2013 Award are to vest progressively in accordance with the following scale:
Compound annual growth in EPS
% of Awards subject to EPS hurdle to vest
Below 5% per annum
5% per annum
Between 5% and 10% per annum
10% per annum or above
Nil
50%
Pro rata
100%
What happens on the exercise of Awards?
Awards become exercisable (subject to satisfaction of relevant performance conditions) on 1 May of the
relevant year. Shares are delivered to the executive on exercise of the Awards. Awards are granted at no
cost to the executive and no amount is payable by the executive on exercise of the Awards. See below
for details of the relevant earliest exercise date of Awards and expiry date of unexercised Awards.
Is re-testing permitted?
No. Re-testing of either of the performance conditions applicable to a tranche of Awards is not
permitted.
What are participation levels in the 2013 Awards?
The CEO and each of the senior executives participate in the 2013 Awards at the following levels:
Target
(% of fi xed remuneration)
Maximum
(% of fi xed remuneration)
M P Chellew
M Kelly and M Brydon
G Agriogiannis and S B Rogers
60%
1.42.5%
1. 32.5%
120%
185%
165%
Participation levels have been reviewed during the year and have been reduced for all senior executives
for the proposed 2014 Award.
What happens to Awards that are not yet
exercisable on cessation of employment?
If an executive resigns or is terminated for cause,
the Awards in respect of any tranche that is not
exercisable will generally be forfeited.
The Plan Rules provide that in other
circumstances a pro rata number of Awards,
reflecting the part of the LTI earned or accrued
up to termination, may become exercisable
either at the time of termination of employment
or at the end of the original performance period
applicable to a tranche.
In addition, a number of executives with pre-
2009 contracts have a specific entitlement
built into their Service Agreement, which
entitles them to pro rata vesting of Awards in
the event of Company initiated termination of
employment.
Is there a claw-back provision?
Yes. The Plan Rules allow the Board to claw-back
any Awards on offer to an executive and to
make adjustments to any unvested Awards, if
considered appropriate.
What other conditions apply to the Awards?
An executive’s entitlement to shares under an
Award may also be adjusted to take account of
capital reconstructions and bonus issues. In the
event of a takeover bid (or other transaction
likely to result in a change in control of the
Company), an executive will only be allowed
to exercise his or her Awards to the extent
determined by the Board as provided in the Plan
Rules.
The Plan Rules contain a restriction on removing
the “at-risk” aspect of the instruments granted
to executives. Plan Participants may not enter
into any transaction designed to remove the
“at-risk” aspect of an instrument before it
becomes exercisable (eg. hedging the Awards).
Any shares allocated to the executive following
exercise of an Award may only be dealt with in
accordance with the Company’s Share Trading
Policy and subject to the generally applicable
insider trading prohibitions.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
59
3.5.2 Current Awards – 2010, 2012, 2013 and 2014 Award
Award
Grant and exercise dates
Outcomes
2010
Granted in May 2010 with effect from 1 January 2010
(to coincide with the start of the performance period)
and divided into 3 tranches as follows:
99.3% of Tranche 1 of the 2010 Awards vested on 1 May 2012 based on
ranking 83rd against the TSR comparator group for the period and achieving
EPS growth of just below 100% vesting.
■ Tranche 1: 30% of Award – became exercisable on 1 May 2012
■ Tranche 2: 30% of Award – became exercisable on 1 May 2013
■ Tranche 3: 40% of Award – earliest exercise date is 1 May 2014
During 2013, Tranche 2 of the 2010 Awards was tested for earliest exercise in
May 2013. These vested at 88% having exceeded the 75th percentile against
the relative total shareholder return performance condition and having
achieved just over 75% vesting against the compound annual growth in EPS
target based on EPS growth over the performance period.
Any unexercised 2010 Awards will expire on 30 September 2014.
Tranche 3 of the 2010 Awards will be tested in 2014 with the earliest exercise
date in May 2014.
For further details of the requisite target ranges for vesting of the TSR and EPS
performance conditions of the 2010 Award, please refer to the Company’s 2010
Remuneration Report.
Performance periods have commenced but are not yet concluded.
2012
As a transitional measure, the 2012 Awards were granted in
May 2012 with effect from 1 January 2012 (to coincide with
the start of the performance period) and are divided into
2 tranches as follows:
■ Tranche 1: 50% of Award – earliest exercise date is 1 May 2015
■ Tranche 2: 50% of Award – earliest exercise date is 1 May 2016
Any unexercised 2012 Awards will expire on 30 September 2016.
2013
The Board made the first grant of annual Awards in May 2013,
with effect from 1 January 2013:
Performance periods have commenced but are not yet concluded.
■ 100% of Award – earliest exercise date is 1 May 2017
These 2013 Awards are subject to a single 4 year performance
period and will be tested and become exercisable to the extent
of any vesting from 1 May 2017. Any unexercised 2013 Awards
will expire on 30 September 2017.
2014
The Board intends to make a further grant of annual Awards
in 2014, with effect from 1 January 2014:
Awards not yet granted.
■ 100% of Award – earliest exercise date is 1 May 2018.
These 2014 Awards are subject to a single 4 year performance
period and will be tested and become exercisable to the extent
of any vesting from 1 May 2018. Any unexercised 2014 Awards
will expire on 30 September 2018.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
60
3.5.3 Movements in Awards during 2013
Details of the movement in Awards held by the CEO and senior executives during the 2013 financial year is set out below.
Movement in Awards during the year
CEO &
senior
executives
M P Chellew
G Agriogiannis
M Brydon
M Kelly
S B Rogers
Balance at
31 Dec 2012
Granted
2013 Awards1
Exercised/
Number of
vested Awards lapsed/
forfeited
during the year
Tranche 2
2010 Awards2
Balance at
31 Dec 2013
Value of Value per share
at the date of
exercise4
Awards at
grant date3
Value at
lapse date5
2,716,648
426,054
951,792
728,612
424,538
670,920
99,074
260,248
185,285
98,317
475,200
85,800
158,400
132,000
85,800
64,800
11,700
21,600
18,000
11,700
2,847,568
427,628
1,032,040
763,897
425,355
$
1,019,799
150,592
399,480
281,634
150,918
$
3.3984
3.4091
3.4091
3.4057
3.4091
$
220,911
39,887
73,637
61,364
39,887
Total
5,247,644
1,313,844
937,200
127,800
5,496,488
2,002,423
-
435,686
1 As the Awards granted in 2013 only vest on satisfaction of performance conditions which are to be tested in future financial periods, none of the 2013 Awards as set out above vested or were forfeited during the year.
2 All 937,200 Awards which were exercisable during 2013 were in fact exercised, being Tranche 2 of the 2010 Awards. The number of Awards vested during the period and exercisable at 31 December 2013 is nil. The number
of Awards vested but not yet exercisable at 31 December 2013 is nil.
3 Value of Awards granted during 2013 as at grant date.
4 The value per share at the date of exercise is the Value Weighted Closing Price which is the average of the closing price and number of Adelaide Brighton Limited shares traded on the Australian Securities Exchange for the
five trading days before the exercise date, but not including the day of exercise. The aggregate value of Awards that vested during the year is $3,189,481 based on the Value Weighted Closing Price.
5 The value at lapse date of options that were granted as part of remuneration and that lapse during the year because a vesting condition was not satisfied. The value is determined at the time of lapsing, but assuming the
Name
Notice periods
Separation payments1
M Brydon
(from 1 February 2014)
6 months’ notice by either party
(or payment in lieu)
6 months fixed remuneration where
the Company terminates on notice.
In the event of termination for
‘Fundamental Change’2, average
annual fixed remuneration over
the 3 years immediately preceding
termination.
G Agriogiannis
M Kelly
S B Rogers
3 months’ notice by either party
(or payment in lieu)
9 months fixed remuneration where
the Company terminates on notice.
3 months’ notice by executive
5 weeks’ notice by Company
(or payment in lieu)
12 months fixed remuneration
where the Company terminates on
notice, or where executive is able to
terminate for ‘Fundamental Change’2.
Entitlement under the Company
Redundancy Policy (if applicable).
1 In the case of resignation, no separation payment is made to the executive (only amounts due and payable up to the date of ceasing
employment including accrued leave entitlements and unpaid salary).
2 A ‘Fundamental Change’ includes circumstances where there has been a substantial diminution of responsibility, a material reduction in status
or (for executives other than the CEO) a relocation of the relevant position.
On termination of employment for any reason,
the CEO and other senior executives are
prohibited from engaging in any activity that
would compete with the Group for a period of
up to six months in order to protect the Group’s
business interests. In the event of resignation, at
the option of the Company, Mr Brydon and Mr
Kelly may be paid a monthly amount equivalent
to the executive’s monthly fixed remuneration
at the time of termination during the period of
restraint to support the enforceability of the
restraint.
condition was satisfied.
3.6 Service Agreements and termination
payments
The remuneration and other terms of
employment for the CEO and senior executives
are set out in formal employment contracts
referred to as Service Agreements. All Service
Agreements are for an unlimited duration
and details of the executives’ entitlements
on termination are set out below. All Service
Agreements may be terminated immediately for
serious misconduct, in which case executives
are not entitled to any payment on termination
other than remuneration and leave entitlements
up to the date of termination.
As announced to the ASX on 13 December 2013,
the Managing Director and CEO, Mr Chellew, will
retire on 21 May 2014 after 13 years leading
the Company. Mr Chellew will not receive
any severance payment on his retirement. Mr
Chellew is eligible to receive a pro rata payment
of his short term incentive for 2014 subject to
meeting the applicable performance conditions.
In accordance with approval previously
received from shareholders and consistent
with Mr Chellew’s service agreement, Awards
outstanding under the EPSP on the date of
his retirement (comprising the 2012 and 2013
Awards) will vest on a pro rata basis and be
exercisable by Mr Chellew. Also in accordance
with his service agreement the Company will
pay Mr Chellew an amount equal to six months
of his fixed remuneration in relation to a non-
compete and restraint undertaking which will
preclude Mr Chellew working for or assisting
any of the Group’s competitors following his
retirement. Further details of these entitlements
will be disclosed in the 2014 Remuneration
Report.
As noted above, the Company has entered into
new contractual arrangements with Mr Brydon,
and his new remuneration came into effect on
1 February 2014 on his commencement as
Deputy Chief Executive Officer.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
61
3.7 2013 Remuneration
Details of the remuneration paid to the CEO and key management personnel of the Company and the Group, during the 2013 financial year is set out below.
Remuneration for the 2013 and 2012 financial years
Short-term benefits
Post-employment benefits
Other
Super-
annuation
contributions
Termination
benefits
Total
Share based
payments1
Long term
incentive
Year
Fixed
salary
$
2013 1,713,800
1,659,612
2012
454,030
2013
2012
438,000
935,078
2013
903,877
2012
652,925
2013
2012
630,000
445,408
2013
429,500
2012
STI
$
1,697,069
1,641,360
371,640
340,752
752,619
714,656
532,036
511,948
368,800
341,057
M P Chellew
G Agriogiannis
M Brydon
M Kelly
S B Rogers
$
25,000
20,388
20,000
20,000
17,122
16,123
25,000
25,000
25,000
25,000
Total for the
Company and Group 2012
2013 4,201,241
4,060,990
3,722,163
3,549,773
112,122
106,510
$
-
-
-
-
-
-
-
-
-
-
-
-
$
$
$
-
-
-
163,100 3
-
-
-
-
-
-
-
163,100
752,820
547,795
155,049
146,123
217,527
186,542
170,157
149,945
102,107
93,281
4,188,689
3,869,155
1,000,718
1,107,975
1,922,346
1,821,198
1,380,117
1,316,893
941,315
888,838
1,397,661
1,123,686
9,433,186
9,432,534
%2
18
14
15
13
11
10
12
11
11
10
1 In accordance with the requirements of the Accounting Standards, remuneration includes a proportion of the notional value of equity compensation granted or outstanding during the year. The notional value of equity
instruments which do not vest during the reporting period is determined as at the grant date and is progressively allocated over the vesting period. The amount included as remuneration is not related to or indicative of the
benefit (if any) that individual executives may ultimately realise should the equity instruments vest. The notional value of Awards as at the date of their grant has been determined in accordance with the accounting policy
Note 1(v)(iv).
2 % of remuneration for the financial year which consists of the amortised annual value of Awards issued under the Adelaide Brighton Limited Executive Performance Share Plan.
3 G Agriogiannis commenced employment on 27 June 2011, and received a sign-on payment and relocation benefits that were not paid until 2012.
Section 4 - Non-executive Directors’ fees
4.1 Board policy on non-executive Director
fees
The total amount of fees paid to non-executive
Directors is determined by the Board on the
recommendation of its NRG Committee within
the maximum aggregate amount approved
by shareholders. The remuneration of the
non-executive Directors consists of Directors’
fees, committee fees and superannuation
contributions. These fees are not linked to the
performance of the Group in order to maintain
the independence and impartiality of the non-
executive Directors.
While the Board has considered minimum
shareholding guidelines for Directors, it has
determined that it does not currently consider it
appropriate to require a particular holding given
that this is a matter for individual preference.
In setting fee levels, the NRG Committee, which
makes recommendations to the Board, takes into
account:
> the level of remuneration necessary to attract
and retain Directors of a suitable calibre.
> the Group’s existing remuneration policies;
> independent professional advice;
> fees paid by comparable companies;
> the general time commitment and
responsibilities involved;
> the risks associated with discharging the duties
attached to the role of Director; and
Non-executive Directors’ fees for 20131
Total fees, including committee fees, were set
within the maximum aggregate amount of
$1,300,000 per annum approved at the 2013
Annual General Meeting.
Non-executive Director base and Committee fees
were increased by 3.5% for the 2013 financial
year.
Fees payable to non-executive Directors in the
2013 financial year are set out below (and are
inclusive of contributions to superannuation).
Board
Audit, Risk and Compliance Committee
Nomination and Remuneration Committee
Safety, Health and Environment Committee
Corporate Governance Committee
1 At present, there are no fees payable for the Independent Directors’ Committee.
2 The Chairman of the Board receives no additional fees for Committee work.
Chairman
$
354,746 2
24,840
24,840
15,525
10,350
Member
$
103,500
13,973
13,973
10,350
Nil
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
62
As indicated above, the fees payable to non-
executive Directors for the 2014 financial year
will remain at the same level as for the 2013
financial year. The fee payable to the Chairman
has been reduced by 12.5% for the 2014
financial year to an amount of $310,500 (or
three times the fee of a non-executive Director).
Following the dissolution of the Corporate
Governance Committee, no fee will be paid in
2014 concerning that Committee’s fee.
In accordance with the Company’s constitution,
Directors are also permitted to be paid
additional fees for special duties or exertions.
Such fees may or may not be included in the
aggregate amount approved by shareholders, as
determined by the Directors. No such fees were
paid during the year.
Directors are also entitled to be reimbursed for
all business related expenses, including travel, as
may be incurred in the discharge of their duties.
4.2 Fees paid to non-executive Directors
Details of fees paid to non-executive Directors
for the years ended 31 December 2013 and
31 December 2012 are set out below.
Non-executive Directors’ remuneration for the 2013 and 2012 fi nancial years
Committee fees
Non-executive Director Year (incl. superannuation) (incl. superannuation)
Directors’ fees
Fees and allowances
Post-employment
benefits
Superannuation
contributions1
R D Barro
G F Pettigrew
L V Hosking (Chairman)2 2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
C L Harris
(former Chairman)3
K B Scott-Mackenzie
A M Tansey
Total
2013
2012
$
354,746
251,279
103,500
100,000
103,500
100,000
103,500
100,000
103,500
100,000
-
130,394
768,746
781,673
Total
$
$
- 354,746
17,899
269,178
10,350 113,850
10,000
110,000
49,163 152,663
47,500
147,500
29,498 132,998
28,500
128,500
45,506 149,006
121,000
21,000
-
-
130,394
-
134,517 903,263
906,572
124,899
$
23,449
20,263
9,520
9,083
13,878
13,409
11,121
11,682
12,463
9,991
-
11,854
70,431
76,282
1 Superannuation contributions are made on behalf of non-executive Directors which satisfy the Group’s obligations under applicable
Superannuation Guarantee Charge legislation.
2 LV Hosking commenced as Chairman of the Board on 17 May 2012. For 2012, $55,580 relates to the period served as a non-executive Director
(1 January 2012 to 16 May 2012) and $213,598 for the period served as Chairman (17 May 2012 to 31 December 2012).
3 Former Board Chairman C L Harris retired on 17 May 2012.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
63
Income statement
For the year ended 31 December 2013
($ Million)
Revenue from continuing operations
Cost of sales
Freight and distribution costs
Gross profi t
Other income
Marketing costs
Administration costs
Finance costs
Share of net profi ts of joint ventures and associate accounted for using the equity method
Profi t before income tax
Income tax expense
Profi t for the year
Profi t attributable to:
Owners of the Company
Non-controlling interests
Earnings per share for profi t from continuing operations attributable to the
ordinary equity holders of the Company:
Basic earnings per share
Diluted earnings per share
Consolidated
Notes
2013
3
3
4
11(b)
5(a)
38
38
1,228.0
(745.6 )
(196.1 )
286.3
4.7
(21.3 )
(69.4 )
(15.9 )
24.2
208.6
(57.5 )
151.1
151.1
-
151.1
Cents
23.7
23.4
2012
1,183.1
(720.4 )
(187.3 )
275.4
9.7
(22.0 )
(66.2 )
(17.1 )
27.7
207.5
(54.6 )
152.9
153.0
(0.1 )
152.9
Cents
24.0
23.8
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
THE ABOVE INCOME STATEMENT SHOULD BE READ IN CONJUNCTION WITH
THE NOTES TO THE FINANCIAL STATEMENTS
64
Statement of comprehensive income
For the year ended 31 December 2013
($ Million)
Profi t for the year
Other comprehensive income
Items that may be reclassifi ed to profi t or loss
Exchange differences on translation of foreign operations
Income tax relating to these items
Items that will not be reclassifi ed to profi t or loss
Actuarial gains/(losses) on retirement benefi t obligation
Income tax relating to these items
Other comprehensive income for year, net of tax
Total comprehensive income for the year
Total comprehensive income for the year attributable to:
Owners of the Company
Non-controlling interests
Total comprehensive income for the year
Notes
5(c)
23(b)
5(c)
Consolidated
2013
151.1
2012
152.9
1.0
-
7.6
(2.3 )
6.3
-
-
1.7
(0.5 )
1.2
157.4
154.1
157.4
-
157.4
154.2
(0.1 )
154.1
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
THE ABOVE STATEMENT OF COMPREHENSIVE INCOME
SHOULD BE READ IN CONJUNCTION WITH THE NOTES TO THE FINANCIAL STATEMENTS
65
Balance sheet
As at 31 December 2013
($ Million)
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Carbon units
Assets classifi ed as held for sale
Total current assets
Non-current assets
Receivables
Joint arrangements and associate
Property, plant and equipment
Intangible assets
Carbon units
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Borrowings
Current tax liabilities
Provisions
Provision for carbon emissions
Other liabilities
Total current liabilities
Non-current liabilities
Borrowings
Deferred tax liabilities
Provisions
Retirement benefit obligations
Provision for carbon emissions
Other non-current liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Capital and reserves attributable to owners of the Company
Non-controlling interests
Total equity
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
THE ABOVE BALANCE SHEET SHOULD BE READ IN CONJUNCTION WITH
THE NOTES TO THE FINANCIAL STATEMENTS
66
Consolidated
Notes
2013
2012
2011
6
7
8
15(b)
9
10
11
12
14
15(b)
16
17
18
15(b)
19
20
21
22
23(b)
15(b)
24
25(a)
25(b)
11.1
182.4
136.3
52.5
382.3
7.9
390.2
31.4
138.5
889.7
183.9
-
8.8
170.2
134.8
48.0
361.8
1.9
363.7
29.6
129.0
902.5
184.8
3.5
13.1
170.0
123.9
-
307.0
-
307.0
27.2
94.3
851.4
182.9
-
1,243.5
1,633.7
1,249.4
1,613.1
1,155.8
1,462.8
105.4
-
19.0
26.7
39.7
20.4
211.2
259.1
64.3
28.5
0.5
8.2
0.1
360.7
571.9
95.0
20.0
7.7
26.1
25.2
19.5
99.2
0.7
8.2
21.8
-
4.6
193.5
134.5
299.3
66.7
31.2
8.0
8.4
0.1
413.7
607.2
258.7
69.8
35.0
9.6
-
0.1
373.2
507.7
955.1
694.6
2.3
255.3
952.2
2.9
955.1
1,061.8
1,005.9
699.1
4.3
355.6
1,059.0
2.8
1,061.8
696.6
2.1
304.4
1,003.1
2.8
1,005.9
Notes
Contributed
equity
Reserves
Non-controlling
interests
Total
Statement of changes in equity
For the year ended 31 December 2013
Attributable to owners of Adelaide Brighton Ltd
Consolidated
($ Million)
Balance at 1 January 2013
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners in their capacity
as owners:
Dividends provided for or paid
Executive performance share plan
26
24(b)/25(a)
Balance at 31 December 2013
Balance at 1 January 2012
Adjustment on change in accounting
policy (net of tax)
Restated total equity at the beginning
of the financial year
42 (b)
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners in their
capacity as owners:
Dividends provided for or paid
Executive performance share plan
26
24(b)/25(a)
Balance at 31 December 2012
Retained
earnings
304.4
151.1
5.3
156.4
1,003.1
151.1
6.3
157.4
(105.2 )
-
(105.2 )
(105.2 )
3.7
(101.5 )
355.6
1,059.0
257.3
954.2
(2.0 )
255.3
153.0
1.2
154.2
(105.1 )
-
(105.1 )
(2.0 )
952.2
153.0
1.2
154.2
(105.1 )
1.8
(103.3 )
696.6
-
-
-
-
2.5
2.5
699.1
694.6
-
694.6
-
-
-
-
2.0
2.0
696.6
2.1
-
1.0
1.0
-
1.2
1.2
4.3
2.3
-
2.3
-
-
-
-
(0.2 )
(0.2 )
2.1
Total
equity
1,005.9
151.1
6.3
157.4
(105.2 )
3.7
(101.5 )
1,061.8
957.1
(2.0 )
955.1
152.9
1.2
154.1
(105.1 )
1.8
(103.3 )
2.8
-
-
-
-
-
-
2.8
2.9
-
2.9
(0.1 )
-
(0.1 )
-
-
-
304.4
1,003.1
2.8
1,005.9
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
THE ABOVE STATEMENT OF CHANGES IN EQUITY SHOULD BE READ IN CONJUNCTION WITH
THE NOTES TO THE FINANCIAL STATEMENTS
67
Statement of cash fl ows
For the year ended 31 December 2013
($ Million)
Cash fl ows from operating activities
Receipts from customers (inclusive of goods and services tax)
Payments to suppliers and employees (inclusive of goods and services tax)
Joint venture distributions received
Interest received
Interest paid
Other income
Receipts from sale of carbon units
Income taxes paid
Income taxes refunded
Consolidated
Notes
2013
2012
1,334.0
(1,084.6 )
16.4
1.8
(16.0 )
5.0
20.0
(49.7 )
0.4
1,297.7
(1,070.2 )
21.6
2.5
(18.8 )
4.3
-
(54.9 )
4.7
Net cash infl ow from operating activities
37
227.3
186.9
Cash flows from investing activities
Payments for property, plant, equipment and intangibles
Payments for acquisition of businesses, net of cash acquired
Payments for acquisition of interest in associate
Proceeds from sale of property, plant and equipment
Loans to joint venture entities
Repayment of loans from other parties
Net cash (outfl ow) from investing activities
Cash flows from financing activities
Proceeds from issue of shares
Repayment of borrowings
Proceeds from borrowings
Dividends paid to Company’s shareholders
Net cash (outfl ow) from fi nancing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of the year
(66.9 )
(0.6 )
(0.4 )
6.5
(1.9 )
0.1
(63.2 )
3.7
(60.2 )
-
(105.2 )
(161.7 )
2.4
8.8
(0.1 )
11.1
(121.3 )
-
(28.7 )
3.2
(2.4 )
-
(149.2 )
3.3
-
59.8
(105.1 )
(42.0 )
(4.3 )
13.1
-
8.8
26
6
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
THE ABOVE STATEMENT OF CASH FLOWS SHOULD BE READ IN CONJUNCTION WITH
THE NOTES TO THE FINANCIAL STATEMENTS
68
Notes to the consolidated fi nancial statements
1 Summary of significant accounting policies
Adelaide Brighton Ltd (the Company) is a
company limited by shares, incorporated and
domiciled in Australia whose shares are publicly
traded on the Australian Securities Exchange
(ASX).
The financial report was authorised for issue by
the Directors on 5 March 2014. The Directors
have the power to amend and reissue the
financial statements.
The principal accounting policies adopted in
the preparation of these consolidated financial
statements are set out below. With the exception
of the accounting policies disclosed in Note 42,
these policies have been consistently applied to
all the years presented. The financial statements
are for the consolidated entity consisting of
Adelaide Brighton Ltd and its subsidiaries.
(a) Basis of preparation
These general purpose financial statements have
been prepared in accordance with Australian
Accounting Standards and Interpretations issued
by the Australian Accounting Standards Board
and the Corporations Act 2001. The Company is
a for-profit entity for the purpose of preparing
the financial statements.
Comparative information has been re-stated
to reflect the current year classification of
expenses in the Income Statement and cash flow
definitions in the Statement of Cash Flows.
Historical cost convention
These financial statements have been prepared
under the historical cost convention, except
for the circumstances when fair value method
has been applied as detailed in the accounting
policies below.
Compliance with IFRS
The consolidated financial statements of
Adelaide Brighton Limited also comply with
International Financial Reporting Standards
(IFRS) as issued by the International Accounting
Standards Board (IASB).
(b) Principles of consolidation
(i) Subsidiaries
The consolidated financial statements
incorporate the assets and liabilities of all
subsidiaries controlled by Adelaide Brighton
Ltd as at 31 December 2013 and the results of
all subsidiaries for the year then ended. The
Company and its subsidiaries together are
referred to in this financial report as “the Group”.
Subsidiaries are all those entities over which the
Group has control. The Group controls an entity
when the Group is exposed to, or has rights to,
variable returns from its involvement with the
entity and has the ability to affect those returns
through its power to direct the activities of the
entity.
Joint operations
Interests in joint operations are accounted for
using the proportionate consolidation method.
Under this method, the Group has recognised its
share of assets, liabilities, revenues and expenses.
Details of the joint operations are set out in
Note 11.
Subsidiaries are fully consolidated from the
date on which control is transferred to the
Group. They are deconsolidated from the date
that control ceases. The acquisition method
of accounting is used to account for business
combinations by the Group (refer to Note 1(h)).
Intercompany transactions, balances and
unrealised gains on transactions between
Group companies are eliminated. Unrealised
losses are also eliminated unless the transaction
provides evidence of the impairment of the asset
transferred. Accounting policies of subsidiaries
have been changed where necessary to ensure
consistency with the policies adopted by the
Group.
(ii) Employee Share Trust
The Group has formed a trust to administer the
Group’s employee share scheme. The company
that acts as the Trustee is consolidated as
the company is controlled by the Group. The
Adelaide Brighton employee share plan trust is
not consolidated as it is not controlled by the
Group.
(iii) Associate entity
The interest in associate is accounted for
using the equity method, after initially being
recorded at cost. Under the equity method, the
share of the profits or losses of the associate
is recognised in the income statement, and the
share of post-acquisition movements in reserves
is recognised in other comprehensive income.
Profits or losses on transactions establishing the
associate and transactions with the associate
are eliminated to the extent of the Group’s
ownership interest until such time as they are
realised by the associate on consumption or
sale, unless they relate to an unrealised loss that
provides evidence of the impairment of an asset
transferred.
Joint ventures
Interests in joint ventures are accounted for
using the equity method. Under this method,
the interests are initially recognised in the
consolidated balance sheet at cost and adjusted
thereafter to recognise the Group’s share
of the post-acquisition profits or losses and
movements in other comprehensive income in
the income statement and other comprehensive
income respectively.
When the Group’s share of losses in a joint
venture equals or exceeds its interests in the
joint venture (which includes any long term
interests that, in substance, form part of the
Group’s net investment in the joint venture), the
Group does not recognise further losses, unless
it has incurred obligations or made payments on
behalf of the joint venture.
Unrealised gains on transactions between the
Group and its joint ventures are eliminated to
the extent of the Group’s interest in the joint
ventures. Unrealised losses are also eliminated
unless the transaction provides evidence of an
impairment of the asset transferred. Accounting
policies of the joint ventures have been changed
where necessary, to ensure consistency with the
policies adopted by the Group.
(v) Non-controlling interests
Non-controlling interests in the results and
equity of subsidiaries are shown separately in
the consolidated income statement and balance
sheet respectively. The Group treats transactions
with non-controlling interests that do not result
in a loss of control as transactions with equity
owners of the Group. For purchases from or
sales to non-controlling interests, the difference
between any consideration paid and the relevant
share acquired of the carrying value of net
assets of the subsidiary is deducted from equity.
(iv) Joint arrangements
(c) Segment reporting
Investments in joint arrangements are
classified as either joint operations or joint
ventures depending on the contractual rights
and obligations of the Group to the joint
arrangement.
Operating segments are reported in a manner
consistent with the internal reporting provided
to the chief operating decision maker. The chief
operating decision maker, who is responsible for
allocating resources and assessing performance
of the operating segments, has been identified
as the Chief Executive Officer.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
69
1 Summary of significant accounting policies
(e) Revenue recognition
(continued)
(d) Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements
of each of the Group’s entities are measured
using the currency of the primary economic
environment in which the entity operates (‘the
functional currency’). The consolidated financial
statements are presented in Australian dollars,
which is Adelaide Brighton Ltd’s functional and
presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated
into the functional currency using the exchange
rates prevailing at the dates of the transactions.
Foreign exchange gains and losses resulting
from the settlement of such transactions and
from the translation at year end exchange rates
of monetary assets and liabilities denominated in
foreign currencies are recognised in the income
statement.
Revenue is measured at the fair value of
consideration received or receivable. Amounts
disclosed as revenue are net of returns, trade
allowances and duties and taxes paid. Revenue
is recognised for the major business activities as
follows:
(i) Sales revenue
Revenue from the sale of goods is measured at
the fair value of the consideration received or
receivable, net of returns, trade discounts and
volume rebates. Revenue is recognised when
the significant risks and rewards of ownership
have been transferred to the buyer, recovery of
the consideration is considered probable, the
associated costs and possible return of goods
can be estimated reliably, there is no continuing
management involvement with the goods
and the amount of revenue can be measured
reliably. Sales of services are recognised in the
accounting period in which the services are
rendered.
(iii) Foreign operations
The results and financial position of all the
foreign operations that have a functional
currency different from the presentation
currency are translated into the presentation
currency as follows:
> Assets and liabilities for each balance sheet
presented are translated at the closing rate at
the date of that balance sheet;
(ii) Deferred income
Income received in advance in relation to
contracts is deferred in the balance sheet and
recognised as income on a straight-line basis
over the period of the contract.
(iii) Interest income
Interest income is recognised using the effective
interest rate method.
(iv) Dividends
> Income and expenses for each income statement
and statement of comprehensive income are
translated at average exchange rates (unless
this is not a reasonable approximation of the
cumulative effect of the rates prevailing on
the transaction dates, in which case income
and expenses are translated at the dates of the
transactions); and
> All resulting exchange differences are recognised
in other comprehensive income.
On consolidation, exchange differences arising
from the translation of any net investment in
foreign entities, and of borrowings and other
financial instruments designated as hedges
of such investments, are recognised in other
comprehensive income.
When a foreign operation is sold or any
borrowings forming part of the net investment
are repaid, a proportionate share of such
exchange differences is reclassified to profit or
loss, as part of the gain or loss on sale where
applicable.
Dividends are recognised as revenue when the
right to receive payment is established.
(f) Income tax
The income tax expense or revenue for the
period is the tax payable on the current period’s
taxable income based on the applicable income
tax rate for each jurisdiction adjusted by
changes in deferred tax assets and liabilities
attributable to temporary differences between
the tax bases of assets and liabilities and their
carrying amounts in the financial statements,
and to unused tax losses.
Deferred tax assets and liabilities are recognised
for temporary differences at the tax rates
expected to apply when the assets are recovered
or liabilities are settled, based on those tax rates
which are enacted or substantively enacted
for each jurisdiction. The relevant tax rates are
applied to the cumulative amounts of deductible
and taxable temporary differences to measure
the deferred tax asset or liability. An exception
is made for certain temporary differences
arising from the initial recognition of an asset
or a liability. No deferred tax asset or liability
is recognised in relation to these temporary
differences if they arose in a transaction, other
than a business combination, that at the time of
the transaction did not affect either accounting
or taxable profit or loss.
Deferred tax assets are recognised for deductible
temporary differences and unused tax losses
only if it is probable that future taxable amounts
will be available to utilise those temporary
differences and losses. Deferred tax liabilities
and assets are not recognised for temporary
differences between the carrying amount and
tax bases of investments in controlled entities
where the parent entity is able to control
the timing of the reversal of the temporary
differences and it is probable that the
differences will not reverse in the foreseeable
future.
Deferred tax assets and liabilities are offset
when there is a legally enforceable right to
offset current tax assets and liabilities and when
the deferred tax balances relate to the same
taxation authority. Current tax assets and tax
liabilities are offset where the entity has a legally
enforceable right to offset and intends either to
settle on a net basis, or to realise the asset and
settle the liability simultaneously.
Current and deferred tax is recognised in profit
and loss, except to the extent it relates to items
recognised in other comprehensive income or
directly in equity. In this case, the tax is also
recognised in other comprehensive income or
directly in equity, respectively.
Tax consolidation
Adelaide Brighton Ltd and its wholly owned
Australian subsidiaries implemented the tax
consolidation legislation as of 1 January 2004.
Adelaide Brighton Ltd, as the head entity in the
tax consolidated Group, recognises current tax
liabilities and tax losses (subject to meeting
the “probable test”) relating to all transactions,
events and balances of the tax consolidated
Group as if those transactions, events and
balances were its own.
The entities in the tax consolidated Group are
part of a tax sharing agreement which, in the
opinion of the Directors, limits the joint and
several liability of the wholly-owned entities in
the case of default by the head entity, Adelaide
Brighton Ltd. Amounts receivable or payable
under an accounting tax sharing agreement
with the tax consolidated entities are recognised
separately as tax-related amounts receivable or
payable. Expenses and revenues arising under
the tax sharing agreement are recognised as a
component of income tax expense.
The wholly-owned entities fully compensate
Adelaide Brighton Ltd for any current tax
payable assumed and are compensated by
Adelaide Brighton Ltd for any current tax
receivable and deferred tax assets relating to
unused tax losses or unused tax credits that
are transferred to Adelaide Brighton Ltd under
the tax consolidation legislation. The funding
amounts are determined by reference to the
amounts recognised in the wholly-owned
entities’ financial statements.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
70
1 Summary of significant accounting policies
(h) Business combinations
(continued)
(f) Income tax (continued)
Individual tax consolidated entities recognise
tax expenses and revenues and current and
deferred tax balances in relation to their own
taxable income, temporary differences and tax
losses using the separate taxpayer within the
group method. Entities calculate their current
and deferred tax balances on the basis that they
are subject to tax as part of the tax consolidated
Group.
Deferred tax balances relating to assets that
had their tax values reset on joining the tax
consolidated Group have been remeasured
based on the carrying amount of those assets
in the tax consolidated Group and their reset
tax values. The adjustment to these deferred
tax balances is recognised in the consolidated
financial statements against income tax expense.
(g) Leases
Leases of property, plant and equipment where
the Group, as lessee, has substantially all the
risks and rewards of ownership are classified
as finance leases. Finance leases are capitalised
at the lease’s inception at the lower of the fair
value of the leased property and the present
value of the minimum lease payments. The
corresponding rental obligations, net of finance
charges, are included in borrowings. Each lease
payment is allocated between the liability and
finance charges so as to achieve a constant
rate on the finance balance outstanding. The
property, plant and equipment acquired under
finance leases is depreciated over the asset’s
useful life or over the shorter of the asset’s
useful life and the lease term if there is no
reasonable certainty that the Group will obtain
ownership at the end of the lease term.
The interest element of the finance cost is
charged to the income statement over the lease
period so as to produce a constant periodic
rate of interest on the remaining balance of the
liability for each period.
Leases in which a significant portion of the
risks and rewards of ownership are retained
by the lessor are classified as operating leases.
Payments made under operating leases (net
of any incentives received from the lessor)
are charged to the income statement on a
straightline basis over the period of the lease.
The acquisition method of accounting is used to
account for all business combinations, including
business combinations involving equities or
businesses under common control, regardless
of whether equity instruments or other assets
are acquired. The consideration transferred
for the acquisition of a subsidiary comprises
the fair values of the assets transferred, the
liabilities incurred and the equity interests issued
by the Group. The consideration transferred
also includes the fair value of any contingent
consideration arrangement and the fair value of
any pre-existing equity interest in the subsidiary.
Acquisition-related costs are expensed as
incurred. Identifiable assets acquired and
liabilities and contingent liabilities assumed
in a business combination are, with limited
exceptions, measured initially at their fair values
at the acquisition date. On an acquisition-by-
acquisition basis, the Group recognises any
non-controlling interest in the acquiree either
at fair value or at the non-controlling interest’s
proportionate share of the acquiree’s net
identifiable assets.
The excess of the consideration transferred, the
amount of any non-controlling interest in the
acquiree and the acquisition-date fair value
of any previous equity interest in the acquiree
over the fair value of the Group’s share of the
net identifiable assets acquired is recorded as
goodwill. If those amounts are less than the
fair value of the net identifiable assets of the
subsidiary acquired and the measurement of all
amounts has been reviewed, the difference is
recognised directly in profit or loss as a bargain
purchase.
Where settlement of any part of cash
consideration is deferred, the amounts payable
in the future are discounted to their present
value as at the date of exchange. The discount
rate used is the entity’s incremental borrowing
rate, being the rate at which a similar borrowing
could be obtained from an independent financier
under comparable terms and conditions.
Contingent consideration is classified either
as equity or a financial liability. Amounts
classified as a financial liability are subsequently
remeasured to fair value with changes in fair
value recognised in the income statement.
(i) Impairment of assets
Goodwill and intangible assets that have
an indefinite useful life are not subject to
amortisation and are tested annually for
impairment or more frequently if events or
changes in circumstances indicate that they
might be impaired. Other assets are tested for
impairment whenever events or changes in
circumstances indicate that the carrying amount
may not be recoverable.
An impairment loss is recognised for the amount
by which the asset’s carrying amount exceeds
its recoverable amount. The recoverable amount
is the higher of an asset’s fair value less costs
to sell and value in use. For the purposes of
assessing impairment, assets are grouped at
the lowest levels for which there are separately
identifiable cash flows which are largely
independent of the cash flows from other assets
or groups of assets (cash generating units).
Non-financial assets other than goodwill that
suffered an impairment are reviewed for possible
reversal of the impairment at each reporting
date.
(j) Cash and cash equivalents
For the purpose of presentation in the statement
of cash flows, cash and cash equivalents
includes cash on hand, term deposits and
deposits held at call with financial institutions,
other short term, highly liquid investments with
original maturities of three months or less that
are readily convertible to known amounts of
cash and which are subject to an insignificant
risk of changes in value and bank overdrafts.
Bank overdrafts are shown within borrowings in
current liabilities on the balance sheet.
(k) Trade receivables
Trade receivables are recognised initially at fair
value and subsequently measured at amortised
cost, less provision for doubtful receivables.
Trade receivables are typically due for settlement
no more than 30 to 45 days from the end of the
month of invoice.
The collectability of trade receivables is
reviewed regularly. Debts which are known to
be uncollectible are written off by reducing
the carrying amount directly. A provision for
doubtful receivables is established when there
is objective evidence that the Group will not
be able to collect all amounts due according
to the original terms of receivables. Significant
financial difficulties of the debtor, probability
that the debtor will enter bankruptcy or financial
reorganisation, and default or delinquency in
payments are considered indicators that the
trade receivable is impaired. The amount of the
provision is the difference between the asset’s
carrying amount and the estimated cash flows.
Cash flows relating to short term receivables are
not discounted if the effect of discounting is
immaterial.
The amount of the provision is recognised in
the income statement. When a trade receivable
for which a provision for doubtful receivables
has been recognised becomes uncollectible in
a subsequent period, it is written off against
the provision account. Subsequent recoveries
of amounts previously written off are credited
against expenses in the income statement.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
71
1 Summary of significant accounting policies
(o) Non-current assets (or disposal groups) held
(ii) Complex assets
(continued)
(l) Inventories
Raw materials and stores, work in progress and
finished goods are stated at the lower of cost
and net realisable value. Cost comprises direct
materials, direct labour and an appropriate
proportion of variable and fixed overhead
expenditure, the latter being allocated on the
basis of normal operating capacity. Costs are
assigned to individual items of inventory on the
basis of weighted average costs.
Net realisable value is the estimated selling
price in the ordinary course of business less the
estimated costs of completion and the estimated
costs necessary to make the sale.
(m) Financial assets
The Group classifies its financial assets in the
following categories: loans and receivables, and
financial assets at fair value through profit or
loss. The classification depends on the purpose
for which the financial assets were acquired.
Management determines the classification of its
financial assets at initial recognition.
(i) Loans and receivables
Loans and receivables are non-derivative
financial assets with fixed or determinable
payments that are not quoted in an active
market. They are included in current assets,
except for those with maturities greater than
12 months after the balance sheet date.
for sale
Non-current assets (or disposal groups) are
classified as held for sale and stated at the
lower of their carrying amount and fair value
less costs to sell if their carrying amount will be
recovered principally through a sale transaction
rather than through continuing use and a sale is
considered highly probable.
An impairment loss is recognised for any
initial or subsequent write down of the
asset (or disposal group) to fair value less
costs to sell. A gain is recognised for any
subsequent increases in fair value less costs
to sell an asset (or disposal group), but not
in excess of any cumulative impairment loss
previously recognised. A gain or loss not
previously recognised by the date of the sale
of the noncurrent asset (or disposal group) is
recognised at the date of de-recognition.
Non-current assets (including those that are
part of a disposal group) are not depreciated or
amortised while they are classified as held for
sale. Interest and other expenses attributable to
the liabilities of a disposal group classified as
held for sale continue to be recognised.
Non-current assets classified as held for sale
and the assets of a disposal group classified as
held for sale are presented separately from the
other assets in the balance sheet. The liabilities
of a disposal group classified as held for sale are
presented separately from other liabilities in the
balance sheet.
The costs of replacing major components
of complex assets are depreciated over the
estimated useful life, generally being the period
until next scheduled replacement.
(iii) Leasehold property
The cost of improvements to or on leasehold
properties is amortised over the unexpired
period of the lease or the estimated useful life,
whichever is the shorter. Amortisation is over
5 – 30 years.
(iv) Other fixed assets
Freehold land is not depreciated. Depreciation on
other assets is calculated using the straight line
method to allocate their cost or deemed cost
amounts, over their estimated useful lives, as
follows:
> Buildings
> Plant and equipment
20 – 40 years
3 – 40 years
The assets’ residual values and useful lives are
reviewed, and adjusted if appropriate, at each
balance sheet date. An asset’s carrying amount
is written down immediately to its recoverable
amount if the asset’s carrying amount is
greater than its estimated recoverable amount
(Note 1(i)). Gains and losses on disposals are
determined by comparing proceeds with carrying
amount. These are included in the income
statement.
(q) Intangible assets
(i) Goodwill
Goodwill is measured as described in Note
1(h). Goodwill on acquisitions of subsidiaries
is included in intangible assets. Goodwill on
acquisition of joint ventures is included in
investments in joint ventures.
Goodwill is not amortised. Instead, goodwill
is tested for impairment annually or more
frequently if events or changes in circumstances
indicate that it might be impaired, and is carried
at cost less accumulated impairment losses.
Gains and losses on the disposal of an entity
include the carrying amount of goodwill relating
to the entity sold. Goodwill is allocated to cash
generating units which are expected to benefit
from the business combination in which the
goodwill arose, for the purpose of impairment
testing. Each of those cash generating units are
consistent with the Group’s reporting segments.
(ii) Lease rights
Lease rights acquired have a finite useful life.
Amortisation is calculated using the straight-line
method to allocate the cost over their estimated
useful lives, which varies from 2 to 20 years.
(ii) Financial assets at fair value through profit or
(p) Property, plant and equipment
loss
Financial assets at fair value through profit
or loss are financial assets held for trading. A
financial asset is classified in this category if
acquired principally for the purpose of selling in
the short term. Derivatives are classified as held
for trading unless they are designated as hedges.
Assets in this category are classified as current
assets where they are expected to be realised
within 12 months of balance sheet date.
(n) Derivatives
Derivatives are initially recognised at fair value
on the date a derivative contract is entered
into and are subsequently remeasured to their
fair value at each reporting date. Derivative
instruments entered into by the Group do not
qualify for hedge accounting. Changes in the
fair value of any derivative instrument that does
not qualify for hedge accounting are recognised
immediately in the income statement and are
included in finance costs.
Property, plant and equipment are shown at
historical cost less accumulated depreciation and
accumulated impairment losses. Cost includes
expenditure that is directly attributable to the
acquisition of the assets.
Subsequent costs are included in the asset’s
carrying amount or recognised as a separate
asset, as appropriate, only when it is probable
that future economic benefits associated with
the item will flow to the Group and the cost of
the item can be measured reliably. The carrying
amount of any component accounted for as a
separate asset is derecognised when replaced.
All other repairs and maintenance are charged
to profit or loss during the reporting period in
which they are incurred.
(i) Mineral reserves
Mineral reserves are amortised based on annual
extraction rates over the estimated life of the
reserves. The remaining useful life of each asset
is reassessed at regular intervals. Where there
is a change during the period to the useful life
of the mineral reserve, amortisation rates are
adjusted prospectively from the beginning of the
reporting period.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
72
1 Summary of significant accounting policies
(continued)
(q) Intangible assets (continued)
(iii) IT development and software
Costs incurred in developing products or
systems and costs incurred in acquiring software
and licences that will contribute to future period
financial benefits through revenue generation
and/or cost reduction are capitalised to software
and systems. Costs capitalised include external
direct costs of materials and service and direct
payroll and payroll related costs of employees’
time spent on the project. Amortisation is
calculated on a straight-line basis over periods
generally ranging from 5 to 10 years.
IT development costs include only those costs
directly attributable to the development phase
and are only recognised following completion of
technical feasibility and where the Group has an
intention and ability to use the asset.
(r) Borrowings
Borrowings are initially recognised at fair value,
net of transaction costs incurred. Borrowings
are subsequently measured at amortised cost.
Any difference between the proceeds (net of
transaction costs) and the redemption amount
is recognised in the income statement over the
period of the borrowings using the effective
interest method. Borrowings are classified
as current liabilities unless the Group has an
unconditional right to defer settlement of
the liability for at least 12 months after the
reporting date.
(s) Borrowing costs
Borrowing costs incurred for the construction of
any qualifying asset are capitalised during the
period of time that is required to complete and
prepare the asset for its intended use or sale.
Other borrowing costs are expensed.
(t) Trade and other payables
These amounts represent liabilities for goods and
services provided to the Group prior to the end
of financial year which are unpaid. The amounts
are unsecured and are usually paid within
30 - 60 days of recognition.
(u) Provisions
Provisions are recognised if, as a result of a
past event, the Group has a present legal or
constructive obligation that can be estimated
reliably, and it is probable that an outflow of
economic benefits will be required to settle the
obligation.
Where there are a number of similar obligations,
the likelihood that an outflow will be required
in settlement is determined by considering the
class of obligations as a whole. A provision is
recognised even if the likelihood of an outflow
with respect to any one item included in the
same class of obligations may be small.
Provisions are measured at the present value of
management’s best estimate of the expenditure
required to settle the present obligation at the
reporting date. Provisions are determined by
discounting the expected future cash flows
at a pre-tax rate that reflects current market
assessments of the time value of money and
the risks specific to the liability. The increase
in the provision due to the passage of time is
recognised as interest expense.
(i) Dividends
Provision is made for the amount of any
dividend declared, being appropriately
authorised and no longer at the discretion of the
entity, on or before the end of the period but not
distributed at balance date.
(ii) Workers’ compensation
Certain entities within the Group are self insured
for workers’ compensation purposes. For self-
insured entities, provision is made that covers
accidents that have occurred and have been
reported together with an allowance for incurred
but not reported claims. The provision is based
on an actuarial assessment.
(iii) Restructuring costs
Liabilities arising directly from undertaking a
restructuring program, not in connection with
the acquisition of an entity, are recognised
when a detailed plan has been developed,
implementation has commenced, by entering
into binding sales agreement or making detailed
public announcements such that the affected
parties are in no doubt that the restructuring
program will proceed. The cost of a restructuring
program provided for is the estimated future
cash flows from implementation of the plan.
(iv) Provisions for close down and restoration costs
Close down and restoration costs include the
dismantling and demolition of infrastructure
and the removal of residual materials and
remediation of disturbed areas. Provisions for
close down and restoration costs do not include
any additional obligations which are expected
to arise from future disturbance. The costs are
estimated on the basis of a closure plan. The cost
estimates are reviewed annually during the life
of the operation, based on the net present value
of estimated future costs.
Estimate changes resulting from new
disturbance, updated cost estimates, changes to
the lives of operations and revisions to discount
rates are capitalised within property, plant and
equipment. These costs are then depreciated
over the lives of the assets to which they relate.
The amortisation or ‘unwinding’ of the discount
applied in establishing the net present value of
provisions is charged to the income statement in
each accounting period. The amortisation of the
discount is shown in finance costs.
(v) Employee benefits
(i) Short-term obligations
Liabilities for wages and salaries, including
non-monetary benefits, annual leave and
accumulating sick leave expected to be settled
within 12 months after the end of the period in
which the employees render the related service
are recognised in respect of employees’ services
up to the end of the reporting period and are
measured at the amounts expected to be paid
when the liabilities are settled. The liability
for annual leave and accumulating sick leave
is recognised in the provision for employee
benefits. All other short-term employee benefit
obligations are presented as payables.
(ii) Other long term employee benefit obligations
The liability for long service leave and annual
leave which is not expected to be settled within
12 months after the end of the period in
which the employees render the related service
is recognised in the provision for employee
benefits and measured as the present value
of expected future payments to be made in
respect of services provided by employees up
to the end of the reporting period using the
projected unit credit method. Consideration
is given to expected future wage and salary
levels, experience of employee departures and
periods of service. Expected future payments are
discounted using market yields at the end of the
reporting period on national government bonds
with terms to maturity and currency that match,
as closely as possible, the estimated future cash
outflows.
(iii) Retirement benefit obligations
Except those employees that opt out of the
Group’s superannuation plan, all employees
of the Group are entitled to benefits from the
Group’s superannuation plan on retirement,
disability or death. The Group has a defined
benefit section and defined contribution
section within its plan. The defined benefit
section provides defined lump sum benefits on
retirement, death, disablement and withdrawal,
based on years of service and final average
salary. The defined benefit plan section is closed
to new members. The defined contribution
section receives fixed contributions from Group
companies and the Group’s legal or constructive
obligation is limited to these contributions.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
73
(x) Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing
the profit attributable to equity holders of the
Company, excluding any costs of servicing equity
other than ordinary shares, by the weighted
average number of ordinary shares outstanding
during the year.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures
used in the determination of basic earnings per
share to take into account the after income
tax effect of interest and other financing costs
associated with dilutive potential ordinary shares
and the weighted average number of shares
assuming conversion of all dilutive potential
ordinary shares.
(y) Rounding of amounts
The Company is of a kind referred to in Class
Order 98/100, issued by the Australian Securities
and Investments Commission, relating to the
‘’rounding off’’ of amounts in the financial
report. Amounts in the financial report have
been rounded off in accordance with that Class
Order to the nearest one hundred thousand
dollar, unless otherwise stated.
(z) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised
net of the amount of associated GST, unless
the GST incurred is not recoverable from the
taxation authority. In this case it is recognised as
part of the cost of acquisition of the asset or as
part of the expense.
Receivables and payables are stated inclusive of
the amount of GST receivable or payable. The
net amount of GST recoverable from, or payable
to, the taxation authority is included with other
receivables or payables in the balance sheet.
Cash flows are presented on a gross basis. The
GST components of cash flows arising from
investing or financing activities which are
recoverable from, or payable to the taxation
authority, are presented as operating cash flows.
(aa) Financial guarantee contracts
Financial guarantee contracts are recognised
as a financial liability at the time the guarantee
is issued. The liability is initially measured at
fair value and subsequently at the higher of
the amount determined in accordance with
AASB 137 Provisions, Contingent Liabilities and
Contingent Assets and the amount initially
recognised less cumulative amortisation, where
appropriate.
1 Summary of significant accounting policies
(continued)
(v) Employee benefits (continued)
A liability or asset in respect of defined benefit
superannuation plans is recognised in the
balance sheet, and is measured as the present
value of the defined benefit obligation at
the reporting date less the fair value of the
superannuation fund’s assets at that date.
The present value of the defined benefit
obligation is based on expected future payments,
which arise from membership of the fund
to the reporting date, calculated annually by
independent actuaries using the projected
unit credit method. Consideration is given
to expected future wage and salary levels,
experience of employee departures and periods
of service.
Expected future payments are discounted using
market yields at the reporting date on national
government bonds with terms to maturity and
currency that match, as closely as possible, the
estimated future cash outflows.
Actuarial gains and losses arising from
experience adjustments and changes in actuarial
assumptions are recognised in the period in
which they occur, outside profit or loss directly
in the statement of comprehensive income.
They are included in retained earnings in the
statement of changes in equity and in the
balance sheet.
Past service costs are recognised immediately in
profit or loss.
Contributions to the defined contribution fund
are recognised as an expense as they become
payable. Prepaid contributions are recognised
as an asset to the extent that a cash refund or a
reduction in the future payments is available.
(iv) Share-based payments
Share-based compensation benefits are provided
to executives via the Adelaide Brighton Ltd
Executive Performance Share Plan (‘the Plan’).
The fair value of the Awards granted excludes
the impact of any non-market vesting conditions
(e.g. earnings per share). Non-market vesting
conditions are included in assumptions about
the number of Awards that are expected to
become exercisable. At each balance sheet date,
the entity revises its estimate of the number of
Awards that are expected to become exercisable.
The employee benefit expense recognised each
period takes into account the most recent
estimate. The impact of the revision to original
estimates, if any, is recognised in the income
statement with a corresponding entry to equity.
The Plan is administered by the Adelaide
Brighton employee share plan trust; see Note
1(b)(ii).
(v) Short-term incentives
The Group recognises a liability and an expense
for short-term incentives available to certain
employees on a formula that takes into
consideration agreed performance targets.
The Group recognises a provision where
contractually obliged or where there is a
past practice that has created a constructive
obligation.
(vi) Termination benefits
Termination benefits are payable when
employment is terminated before the normal
retirement date, or when an employee accepts
voluntary redundancy in exchange for these
benefits. The Group recognises termination
benefits at the earlier of the following dates:
(a) when the Group can no longer withdraw
the offer of those benefits; and (b) when the
entity recognises costs for a restructuring that
is within the scope of AASB 137 and involves
the payment of terminations benefits. In the
case of an offer made to encourage voluntary
redundancy, the termination benefits are
measured based on the number of employees
expected to accept the offer. Benefits falling due
more than 12 months after balance sheet date
are discounted to present value.
(w) Contributed equity
The fair value of Awards granted under the Plan
is recognised as an employee benefit expense
with a corresponding increase in equity. The fair
value is measured at grant date and recognised
over the period during which the employees
become unconditionally entitled to the Awards.
The fair value at grant date is independently
determined using a pricing model that takes
into account the exercise price, the term of the
Award, the vesting and performance criteria,
the impact of dilution, the non-tradeable nature
of the Award, the share price at grant date, the
expected dividend yield and the risk-free interest
rate for the term of the Award.
Ordinary shares are classified as equity.
Incremental costs directly attributable to the
issue of new shares or options are shown in
equity as a deduction, net of tax, from the
proceeds. Incremental costs directly attributable
to the issue of new shares or options, for the
purpose of acquisition of a business, are not
included in the cost of the acquisition as part of
the purchase consideration.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
74
1 Summary of significant accounting policies
(i) Investments in subsidiaries, associate and joint
(continued)
(ab) Carbon Accounting
An entity within the Group is a Liable Entity
under the Clean Energy Legislation (the Scheme)
and also qualifies for assistance under the Jobs
and Competitiveness Program (JCP). The Group
is required to surrender eligible emission units
to the Clean Energy Regulator (the Regulator)
for covered emissions, while units are available
based upon production volumes of eligible
products.
(i) Provision for Carbon Emissions
Where a facility is anticipated to produce
covered emissions in excess of the threshold in
an assessment year, a provision is recognised
for the cost of eligible emission units as covered
emissions are emitted. A provision for unit
shortfall charges is recognised at the time a
shortfall in units surrendered to the Regulator
occurs or at the time a shortfall has been
identified. The provision is recognised in the
income statement as incurred unless qualifying
for an alternative treatment under another
accounting standard or policy.
The measurement of the provision for carbon
emissions is in accordance with the Group’s
accounting policy for provisions, see Note 1(u).
(ii) Carbon Unit Asset
An asset is recognised at fair value for JCP units
as they are received or become receivable. Units
received in advance are recognised as deferred
income and released to the income statement as
eligible production activity is undertaken.
During the initial fixed price period of the Clean
Energy Legislation, units purchased from the
Regulator are automatically surrendered to the
Regulator as a remission of liability under the
Scheme and are recognised as a reduction of the
provision for carbon emissions.
Carbon units are classified into current and
non-current based upon the anticipated timing
of disposal of the unit, either through remission
of liability under the Scheme or sale.
(ac) Parent entity financial information
The financial information for the parent entity,
Adelaide Brighton Limited (‘the Company’),
disclosed in Note 41 has been prepared on
the same basis as the consolidated financial
statements, except as set out below.
arrangements
Investments in subsidiaries, associate and
joint arrangements are accounted for at cost
in the financial statements of the Company.
Such investments include both investments
in shares issued by the subsidiary and other
parent entity interests that in substance form
part of the parent entity’s investment in the
subsidiary. These include investments in the
form of interest-free loans which have no fixed
repayment terms and which have been provided
to subsidiaries as an additional source of long
term capital. Trade amounts receivable from
subsidiaries in the normal course of business
and other amounts advanced on commercial
terms and conditions are included in receivables.
Dividends received from associates are
recognised in the parent entity’s profit or loss,
rather than being deducted from the carrying
amount of these investments.
(ii) Tax consolidation legislation
The Company and its wholly-owned Australian
controlled entities have implemented the tax
consolidation legislation.
The Company and the controlled entities in the
tax consolidated Group account for their own
current and deferred tax amounts. These tax
amounts are measured as if each entity in the
tax consolidated Group continues to be a stand
alone taxpayer in its own right.
In addition to its own current and deferred
tax amounts, the Company also recognises
the current tax liabilities (or assets) and the
deferred assets arising from unused tax losses
and unused tax credits assumed from controlled
entities in the tax consolidated Group.
The entities have also entered into a tax
funding agreement under which the wholly-
owned entities fully compensate the Company
for any current tax payable assumed and are
compensated by Adelaide Brighton Limited for
any current tax receivable and deferred tax
assets relating to unused tax losses or unused
tax credits that are transferred to Adelaide
Brighton Limited under the tax consolidation
legislation. The funding amounts are determined
by reference to the amounts recognised in the
wholly-owned entities’ financial statements.
The amounts receivable/payable under the tax
funding agreement are due upon receipt of the
funding advice from the head entity, which is
issued as soon as practicable after the end of
each financial year. The head entity may also
require payment of interim funding amounts to
assist with its obligations to pay tax instalments.
Assets or liabilities arising under tax funding
agreements with the tax consolidated entities
are recognised as current amounts receivable
from or payable to other entities in the Group.
Any difference between the amounts assumed
and amounts receivable or payable under the
tax funding agreement are recognised as a
contribution to (or distribution from) wholly-
owned tax consolidated entities.
(iii) Financial guarantees
Where the Company has provided financial
guarantees in relation to loans and payables
of subsidiaries for no compensation, the fair
values of these guarantees are accounted for as
contributions and recognised as part of the cost
of the investment.
(iv) Share based payments
The grant by the Company of options over its
equity instruments to employees of subsidiary
undertakings in the Group is treated as a
receivable from that subsidiary undertaking.
(ad) New accounting standards and
interpretations
Certain new accounting standards and
interpretations have been published that are
not mandatory for 31 December 2013 reporting
periods. The Group’s assessment of the impact
of these new standards and interpretations is set
out below.
AASB 9 Financial Instruments, AASB 2009-
11 Amendments to Australian Accounting
Standards arising from AASB 9, AASB 2010-7
Amendments to Australian Accounting Standards
arising from AASB 9 (December 2010) and AASB
2012-6 Amendments to Australian Accounting
Standards - Mandatory Effective Date of AASB 9
and Transition Disclosures (effective for annual
reporting periods beginning on or after
1 January 2015)
AASB 9 Financial Instruments addresses the
classification, measurement and derecognition
of financial assets and financial liabilities.
The standard is not applicable until 1 January
2015 but is available for early adoption. When
adopted, the standard will not have a material
impact on the financial statements. The Group
has not yet decided when to adopt AASB 9.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
75
1 Summary of significant accounting policies
(continued)
AASB 2013-3 Amendments to AASB 136
Recoverable Amount Disclosures for Non-
Financial Assets (effective 1 January 2014)
Provisions for close down and restoration
costs at the end of the year was $27.6m (2012:
$32.2m).
(b) Impairment of assets
The Group tests annually whether goodwill,
other intangible assets with an indefinite life
and other non-current assets have suffered any
impairment, in accordance with the accounting
policies stated in Notes 1(i) and 1(q). The
recoverable amounts of cash generating units
have been determined based on value-in-use
calculations. These calculations require the use
of assumptions. For detailed assumptions refer
to Note 14 (b).
Estimates and judgements are continually
evaluated and are based on historical experience
and other factors, including expectations of
future events that may have a financial impact
on the Group and that are believed to be
reasonable under the circumstances.
(ad) New accounting standards and
interpretations (continued)
AASB 1053 Application of Tiers of Australian
Accounting Standards and AASB 2010-2
Amendments to Australian Accounting Standards
arising from Reduced Disclosure Requirements
(effective 1 July 2013)
On 30 June 2010 the AASB officially introduced
a revised differential reporting framework in
Australia. Under this framework, a two-tier
differential reporting regime applies to all
entities that prepare general purpose financial
statements. The Company is listed on the ASX
and is therefore not eligible to adopt the new
Australian Accounting Standards – Reduced
Disclosure Requirements. As a consequence,
the two standards will have no impact on the
financial statements of the Group.
AASB 2011-4 Amendments to Australian
Accounting Standards to Remove Individual Key
Management Personnel Disclosure Requirements
(effective 1 July 2013)
In July 2011 the AASB decided to remove the
individual key management personnel (KMP)
disclosure requirements from AASB 124 Related
Party Disclosures, to achieve consistency with
the international equivalent standard and
remove a duplication of the requirements with
the Corporations Act 2001. While this will reduce
the disclosures that are currently required in
the notes to the financial statements, it will not
affect any of the amounts recognised in the
financial statements. The amendments apply to
reporting periods beginning from 1 July 2013
and cannot be adopted early.
AASB Interpretation 21 Levies (effective
1 January 2014)
Interpretation 21 was issued by the AASB in June
2013. It sets out the accounting for an obligation
to pay a levy imposed by a government in
accordance with legislation. The interpretation
clarifies that a liability must be recognised when
the obligating event occurs, being the event that
triggers the obligation to pay the levy. The Group
has reviewed the levies it is currently paying and
determined that the accounting for these levies
will not have a material impact on the Group.
No adjustments will therefore be necessary to
any of the amounts recognised in the financial
statements.
The AASB has made small changes to some of
the disclosures that are required under AASB
136 Impairment of Assets. These may result in
additional disclosures if the Group recognises an
impairment loss or the reversal of an impairment
loss during the period. They will not affect any
of the amounts recognised in the financial
statements. The Group intends to apply the
amendment from 1 January 2014.
Defined Benefit Plans: Employee Contributions -
Amendments to IAS 19 (effective 1 January 2014)
The IASB has made an amendment to IAS 19
Employee Benefits which clarifies the accounting
for contributions by employees or third parties
towards the cost of a defined benefit plan. In
particular, they allow contributions that are
linked to service, and that do not vary with
the length of employee service, to be deducted
from the cost of benefits earned in the period
that the service is provided. The adoption of the
amendments will not have a material impact on
the Group.
Annual Improvements to IFRSs 2010-2012 and
2011-2013 cycle (effective 1 July 2014)
In December 2013, the IASB approved a number
of amendments to International Financial
Reporting Standards as a result of the annual
improvements project. While the AASB has
not yet made equivalent amendments to the
Australian Accounting Standards, they are
expected to be issued in the first quarter of
2014. The Group will apply the amendments
from 1 January 2015.
2 Critical accounting estimates and
assumptions
The Group makes estimates and assumptions
concerning the future. The resulting accounting
estimates will, by definition, seldom equal
the related actual results. The estimates and
assumptions that are significant to the carrying
amounts of assets and liabilities in the next
financial year are discussed below.
(a) Provisions for close down and restoration
costs
Restoration provisions are based on estimates
of the cost to rehabilitate currently disturbed
areas based on current costs and legislative
requirements. The Group progressively
rehabilitates as part of the mining process.
Cost estimates are continually evaluated and
are based on historical experience and other
factors, including expectations of future events
that are believed to be reasonable under
the circumstances. The detailed accounting
treatment is set out in Note 1(u)(iv).
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
76
($ Million)
3 Revenue and other income
Revenue from continuing operations
Sales of goods
Interest from joint ventures
Interest from other parties
Royalties
Other income
Net gain on disposal of property, plant and equipment
Insurance recovery
Fair value accounting gain on prior year acquisition
Rental income
Other income
Consolidated
2013
2012
1,225.5
0.8
1.0
0.7
1,228.0
0.4
-
-
2.9
1.4
4.7
1,180.1
0.9
1.6
0.5
1,183.1
-
0.2
7.6
1.6
0.3
9.7
Revenue and other income (excluding share of net profi ts of joint ventures and
associate accounted for using the equity method)
1,232.7
1,192.8
4 Expenses
Profit before income tax includes the following specific expenses:
Depreciation
Buildings
Plant and equipment
Mineral reserves
Total depreciation
Amortisation of intangibles
Other charges
Defined superannuation contribution expense
Employee benefits expense
Operating lease rental charge
Bad and doubtful debts – trade debtors
Provision for inventory
Finance costs
Interest and finance charges paid / payable
Unwinding of the discount on restoration provisions and retirement benefit obligation
Exchange (gains) on foreign currency contracts
Total finance costs
Amount capitalised (a)
Finance costs expensed
3.8
61.7
3.6
69.1
1.5
9.4
148.2
3.3
1.5
0.7
16.0
1.2
(0.1 )
17.1
(1.2 )
15.9
3.7
56.7
3.7
64.1
1.1
9.1
144.7
3.6
1.1
0.3
18.7
0.8
-
19.5
(2.4 )
17.1
(a) The rate used to determine the amount of borrowing costs to be capitalised is the average interest rate applicable to the Group’s outstanding borrowings
during the year, in this case 4.2% p.a (2012: 5.3% p.a.).
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
77
($ Million)
5 Income tax expense
(a) Numerical reconciliation of income tax expense to prima facie tax payable
Profi t before income tax expense
Tax at the Australian tax rate of 30% (2012: 30%)
Tax effect of amounts which are not deductible (taxable) in calculating taxable income:
Non allowable expenses
Non assessable capital profits
Rebateable dividends
Fair value adjustment
Previously unrecognised tax losses used to reduce deferred tax liability
Under (over) provided in prior years
Aggregate income tax expense
Aggregate income tax expense comprises:
Current taxation provision
Net deferred tax (Note 13 & 21)
(Over)/under provided in prior year
(b) Amounts recognised directly in equity
Aggregate current and deferred tax arising in the reporting period and not recognised
in net profit or loss but directly (credited) debited to equity
Current tax
Net deferred tax
Consolidated
2013
2012
208.6
62.6
0.3
(0.7 )
(4.4 )
-
(0.5 )
0.2
57.5
61.0
(3.2 )
(0.3 )
57.5
(0.8 )
(0.8 )
(1.6 )
207.5
62.3
0.3
-
(5.3 )
(2.3 )
-
(0.4 )
54.6
51.0
2.5
1.1
54.6
(0.5 )
(0.1 )
(0.6 )
(c) Tax expense relating to items of other comprehensive income
Actuarial gains on retirement benefi t obligation (Note 13)
2.3
0.5
(d) Tax losses
Unused tax losses for which no deferred tax asset has been recognised:
Capital losses
16.3
17.4
This benefit for tax losses will only be obtained if:
(i) the Group derives future assessable income of a nature and of an amount sufficient to enable the benefit from the deductions for the losses to be realised,
(ii) the Group continues to comply with the conditions for deductibility imposed by tax legislation, and
(iii) no changes in tax legislation adversely affect the Group in realising the benefit from the deductions for the losses.
The accounting policy in relation to tax consolidation legislation is set out in Note 1(f).
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
78
($ Million)
6 Current assets – cash and cash equivalents
Cash at bank and in hand
Term deposits
Cash and cash equivalents
(a) Offsetting
The Group has an offsetting agreement with its bank for cash facilities. The agreement allows
the Group to manage cash balances on a total basis, offsetting individual cash balances
against overdrafts. The gross value of the balance is as follows:
Cash balances
Cash overdrafts
Net cash balance
(b) Risk exposure
The Group’s exposure to interest rate risk is discussed in Note 27. The maximum exposure to credit risk
at the end of the reporting period is the carrying amount of each class of cash and cash equivalents
mentioned above.
7 Current assets – trade and other receivables
Trade receivables
Provision for doubtful receivables
Amounts receivable from joint ventures
Prepayments
Other receivables
(a) Past due but not impaired
Consolidated
2013
2012
9.1
2.0
11.1
11.1
-
11.1
6.9
1.9
8.8
8.8
-
8.8
150.7
(1.6 )
149.1
24.1
5.5
3.7
182.4
142.1
(0.7 )
141.4
20.5
5.5
2.8
170.2
Included in the Group’s trade receivables balance are debtors with a carrying value of $8.4 million (2012: $7.7 million) which are past due but not impaired.
The Group has not provided for these amounts as there has not been a significant change in credit quality or the amounts relate to debtors for which there
is no recent history of default. The Group believes these amounts are still recoverable. The ageing analysis is as follows: 60 days $6.8 million, over 90 days
$1.6 million (2012: 60 days $7.2 million, over 90 days $0.5 million).
(b) Impaired trade receivables
As at 31 December 2013 current trade receivables of the Group with a nominal value of $2.7 million (2012: $1.2 million) were impaired. The amount of the
provision was $1.6 million (2012: $0.7 million). The individually impaired receivables mainly relate to customers which are in unexpectedly difficult economic
situations. It was assessed that a portion of the receivables is expected to be recovered.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
79
($ Million)
7 Current assets – trade and other receivables (continued)
(b) Impaired trade receivables (continued)
The ageing of these receivables is as follows:
1 to 3 months
3 to 6 months
Over 6 months
Movement in provision for doubtful receivables
Opening balance at 1 January
Amounts written off during the year
Provision for doubtful receivables recognised during the year
Closing balance at 31 December
(c) Fair value and credit, interest and foreign exchange risk
Due to the short-term nature of these receivables, their carrying value is assumed to approximate their fair value.
All receivables are denominated in Australian dollars. Information concerning the fair value and risk management
of both current and non-current receivables is set out in Note 27.
8 Current assets – inventories
Engineering spare parts stores
Raw materials and work in progress
Finished goods
9 Current assets – assets classified as held for sale
Plant and equipment
Land and buildings
10 Non-current assets – receivables
Loans to joint ventures
Other non-current receivables
Consolidated
2013
2012
-
2.0
0.7
2.7
0.7
(0.6 )
1.5
1.6
34.9
43.0
58.4
136.3
0.6
7.3
7.9
27.8
3.6
31.4
-
0.2
1.0
1.2
1.8
(2.2 )
1.1
0.7
30.4
40.7
63.7
134.8
-
1.9
1.9
25.5
4.1
29.6
Details of the fair values, effective interest rate and credit risk are set out in Note 27. The maximum exposure to credit risk at the end of the reporting period is
the carrying amount of each class of receivables mentioned above.
(a) Impaired receivables and receivables past due
None of the non-current receivables are impaired or past due but not impaired.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
80
11 Non-current assets – joint arrangements and associate
(a) Interests in joint arrangements and associate
Name
Principal place of business
Ownership interest
2013
%
2012
%
Activities
Burrell Mining Services JV
Batesford Quarry
Sunstate Cement Ltd
Independent Cement and Lime Pty Ltd
E.B. Mawson & Sons Pty Ltd and
Lake Boga Quarries Pty Ltd
Aalborg Portland Malaysia Sdn. Bhd.
New South Wales and Queensland
Victoria
Queensland
New South Wales and Victoria
New South Wales and Victoria
Malaysia
50
50
50
50
50
30
50
50
50
50
50
30
Concrete products for the coal mining industry
Limestone products
Cement milling and distribution
Cementitious product distribution
Premixed concrete and quarry products
White clinker and cement manufacture
All joint arrangements and associates are equity accounted in accordance with Note 1(b)(iv) except Burrell Mining and Batesford, which are considered joint
operations and are proportionately consolidated.
Each of the above joint arrangements has a balance sheet date of 30 June which is different to the Group’s balance sheet date of 31 December. Financial
reports as at 31 December for the joint arrangements are used in the preparation of the Group financial statements. Aalborg has a 31 December balance date.
(b) Summarised financial information for joint ventures and associate
The following tables provide summarised financial information for the joint ventures and associate which are individually immaterial and accounted for using
the equity method.
Total non-material
Consolidated
($ Million)
Investment in joint ventures and associate
Profit from continuing operations
Other comprehensive income
Total comprehensive income
Joint ventures
Associate
2013
104.8
22.6
-
22.6
2012
98.5
25.9
-
25.9
2013
33.7
1.6
-
1.6
2012
30.5
1.8
-
1.8
2013
138.5
24.2
-
24.2
2012
129.0
27.7
-
27.7
(c) Contingent liabilities in respect of joint ventures
The Group has an unrecognised contingent liability to acquire the interest it does not own in certain of its joint ventures. Acquisition of the interest is subject
to the occurrence of certain future events which affect both the probability and value of the interest. The minimum value of the contingent liability is
$25 million (2012: $20 million).
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
81
12 Non-current assets – property, plant and equipment
Consolidated at 31 December 2013
($ Million)
Freehold
land
Buildings
Leasehold
property
Plant &
equipment
Leased
assets
Mineral
reserves
Asset
retirement
cost
In course
of con-
struction
At cost
Accumulated depreciation
130.5
-
138.8
(50.9 )
Net book amount
130.5
87.9
9.0
(2.2 )
6.8
1,225.4
(726.6 )
498.8
Reconciliations
Carrying amount at
1 January 2013
Additions
Disposals
Reclassification
Depreciation/
amortisation expense
Carrying amount at
31 December 2013
130.3
5.5
(0.7 )
(4.6 )
68.3
1.3
(0.1 )
22.2
6.8
0.2
-
0.2
471.3
39.0
(3.4 )
53.2
-
(3.8 )
(0.4 )
(61.3 )
130.5
87.9
6.8
498.8
-
-
-
-
-
-
-
-
-
Consolidated at 31 December 2012
Freehold
land
130.3
-
130.3
125.0
7.2
-
(1.9 )
($ Million)
At cost
Accumulated depreciation
Net book amount
Reconciliations
Carrying amount at
1 January 2012
Additions
Disposals
Reclassification
Depreciation/
amortisation expense
Carrying amount at
31 December 2012
115.3
(47.0 )
68.3
69.6
0.7
(0.1 )
1.8
8.6
(1.8 )
6.8
3.6
3.5
-
-
1,167.8
(696.5 )
471.3
451.6
34.6
(4.4 )
45.9
-
-
-
0.8
-
-
(0.8 )
-
-
155.8
(24.4 )
131.4
134.8
-
-
-
8.8
(4.1 )
4.7
4.7
0.2
-
-
Total
1,697.9
(808.2 )
29.6
-
29.6
889.7
86.3
22.9
-
(79.6 )
902.5
69.1
(4.2 )
(8.6 )
(3.4 )
(0.2 )
-
(69.1 )
131.4
4.7
29.6
889.7
155.8
(21.0 )
134.8
137.7
0.5
(0.2 )
0.2
8.6
(3.9 )
4.7
3.6
1.4
-
-
Total
1,672.7
(770.2 )
86.3
-
86.3
902.5
59.5
74.3
-
(47.5 )
851.4
122.2
(4.7 )
(2.3 )
-
(3.7 )
(0.3 )
(56.4 )
130.3
68.3
6.8
471.3
(3.4 )
(0.3 )
-
(64.1 )
134.8
4.7
86.3
902.5
Buildings
Leasehold
property
Plant &
equipment
Leased
assets
Mineral
reserves
Asset
retirement
cost
In course
of con-
struction
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
82
($ Million)
13 Non-current assets – deferred tax assets
The balance comprises temporary differences attributable to:
Share based payment reserve
Defined benefit obligations
Provisions
Other assets
Tax losses
Deferred tax assets – before offset
Offset deferred tax liability (Note 21)
Net deferred tax assets – after offset
Movements:
Opening balance at 1 January – before offset
Recognised in the income statement
Recognised in other comprehensive income
Recognised in equity
(Under) provision in prior year
Closing balance at 31 December – before offset
Consolidated
2013
2012
2.1
0.1
41.9
1.2
1.2
46.5
(46.5 )
-
44.3
2.9
(2.3 )
1.6
-
46.5
1.5
2.4
36.6
2.6
1.2
44.3
(44.3 )
-
30.9
14.3
(0.5 )
0.1
(0.5 )
44.3
($ Million)
Goodwill
Software
Other intangibles
Total
Consolidated
14 Non-current assets – intangible assets
31 December 2013
Cost
Accumulated amortisation
Carrying amount at 31 December 2013
Opening balance at 1 January 2013
Additions in current year
Amortisation charge
Closing balance at 31 December 2013
31 December 2012
Cost
Accumulated amortisation
Carrying amount at 31 December 2012
Opening balance at 1 January 2012
Additions in current year
Amortisation change
Closing balance at 31 December 2012
170.6
-
170.6
170.6
-
-
170.6
170.6
-
170.6
170.6
-
-
170.6
14.5
(3.9 )
10.6
11.5
0.5
(1.4 )
10.6
14.0
(2.5 )
11.5
9.7
2.6
(0.8 )
11.5
3.2
(0.5 )
2.7
2.7
0.1
(0.1 )
2.7
3.1
(0.4 )
2.7
2.6
0.4
(0.3 )
2.7
188.3
(4.4 )
183.9
184.8
0.6
(1.5 )
183.9
187.7
(2.9 )
184.8
182.9
3.0
(1.1 )
184.8
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
83
($ Million)
14 Non-current assets – intangible assets (continued)
(a) Impairment tests for goodwill
Goodwill is allocated to the Group’s cash-generating units (CGUs) identified according to business segments.
A segment level summary of the goodwill allocation on a non-aggregation basis is presented below.
Cement and Lime
Concrete
Cement, Lime and Concrete CGU
Concrete Products CGU
Consolidated
2013
2012
131.0
30.8
161.8
8.8
170.6
131.0
30.8
161.8
8.8
170.6
The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash flow projections based on 2013 actual results
and 2014 financial budgets approved by management. The growth rate does not exceed the long term average growth rate for the business in which the CGU
operates.
(b) Key assumptions used for value-in-use calculations
Cement, Lime and Concrete
Concrete Products
Gross margin1
2013
%
36.3
25.1
2012
%
38.3
26.9
Growth rate2
2013
2012
%
1.7
2.0
%
1.7
1.2
Discount rate3
2013
%
10.0
10.0
2012
%
10.3
10.3
1 Budgeted gross margin (excluding fixed production costs)
2 Weighted average growth rate used to extrapolate cash flows beyond the specific market forecast period of up to 8 years.
3 Pre-tax discount rate applied to cash flow projections
The assumptions have been used for the analysis of each CGU within the business segment. Management determined budgeted gross margin based on the
past performance and its expectations for the future. The discount rates used are pre-tax and reflect specific risks relating to relevant segments.
15 Carbon asset and liability
(a) Background
The Federal Government introduced a price on carbon emissions from 1 July 2012 through the introduction of the Clean Energy Legislation (the Scheme). An
entity within the Group is a Liable Entity under the Scheme and is required to surrender eligible emission units to the Clean Energy Regulator (the Regulator)
in order to satisfy its liability for carbon emissions. The Group is also eligible to receive assistance under the Jobs and Competitiveness Program (JCP), where
the Scheme provides units to industries that qualify as Emissions Intensive Trade Exposed.
The Scheme requires entities with operational control of a facility where certain emissions exceed 25,000 tonnes of carbon dioxide equivalence (tCO2 -e) to
remit to the Regulator an equivalent number of eligible emission units to pay for their emissions. During the initial years of the Scheme, restrictions are placed
on utilising eligible emission units that are not issued by the Regulator.
The Group has operational control of a large number of facilities across Australia, however as a result of the threshold, only a limited number of sites related
to the production of cement clinker and lime are directly liable under the Scheme. The production of cement clinker and lime require energy use to heat raw
materials to produce chemical reactions necessary for the manufacturing process. Both the energy use for heat and the chemical reaction produce emissions
that are covered by the Scheme.
The accounting policy for carbon is set out in Note 1(ab).
The Group is directly liable for certain emissions associated with sites that exceed the threshold. In addition to this, the Group incurs non-direct costs
associated with the Scheme as a result of suppliers passing on the cost through higher charges. These costs form part of operating costs such as electricity
charges.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
84
($ Million)
15 Carbon asset and liability (continued)
(b) Carbon balances recognised
(i) Carbon unit asset
Carbon units on hand
Classified as:
Current
Non-current
(ii) Provision for carbon emissions
Provision for carbon emissions
Classified as:
Current
Non-current
The movement in provision for carbon emissions is set out below:
Opening balance
Liability for covered emissions
Carbon units remitted to Regulator
Closing balance
16 Current liabilities – trade and other payables
Trade payables and accruals
Trade payables - joint ventures
Risk exposure
Information about the Group’s exposure to foreign exchange risk is provided in Note 27.
17 Current liabilities – borrowings
Bank loans
Details of the Group’s exposure to interest rate changes and fair value of borrowings are set out in Note 27.
Consolidated
2013
2012
52.5
52.5
-
52.5
47.9
39.7
8.2
47.9
33.6
61.6
(47.3 )
47.9
98.9
6.5
105.4
51.5
48.0
3.5
51.5
33.6
25.2
8.4
33.6
-
33.6
-
33.6
90.6
4.4
95.0
-
20.0
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
85
($ Million)
18 Current liabilities – provisions
Employee benefits
Workers’ compensation
Restoration provisions
Other provisions
Movements in each class of provision during the financial year, other than employee benefits, are set out below.
Consolidated
2013
2012
18.9
1.3
5.3
1.2
26.7
19.5
0.7
4.8
1.1
26.1
Workers’
compensation
Restoration
provisions
Other
provisions
0.7
1.5
-
(0.9)
1.3
4.8
-
2.5
(2.0)
5.3
1.1
0.9
-
(0.8 )
1.2
Consolidated
2013
2012
3.2
17.1
0.1
20.4
2.9
16.1
0.5
19.5
259.1
299.3
84.2
8.3
18.3
110.8
(46.5 )
64.3
111.0
(0.1 )
-
(0.1 )
110.8
84.2
7.6
19.2
111.0
(44.3 )
66.7
100.7
17.9
(7.6 )
-
111.0
($ Million)
Opening balance at 1 January 2013
Charged to income statement
Provisions reclassified from non-current
Payments
Closing balance at 31 December 2013
($ Million)
19 Current liabilities – other liabilities
GST liability
Deferred income – JCP assistance
Other liabilities
20 Non-current liabilities – borrowings
Unsecured
Bank loans
Details of the Group’s exposure to interest rate changes and fair values of borrowings are set out in Note 27.
21 Non-current liabilities – deferred tax liabilities
The balance comprises temporary differences attributable to:
Property, plant and equipment
Inventories
Other
Deferred tax liabilities – before offset
Offset deferred tax assets (Note 13)
Net deferred tax liabilities – after offset
Movements:
Opening balance at 1 January – before offset
Recognised in the income statement
Acquired in business combinations
(Over) provision in prior year
Closing balance at 31 December – before offset
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
86
($ Million)
22 Non-current liabilities – provisions
Employee benefits
Restoration provisions
Movement in each class of provision during the financial year, other than employee benefits, are set out below.
($ Million)
Opening balance at 1 January 2013
Charged to income statement – unwinding of discount to finance costs
Credited to income statement – unused amounts reversed
Additional provision recognised – charged to asset retirement cost
Provisions reclassifi ed to current
Closing balance at 31 December 2013
Consolidated
2013
2012
6.2
22.3
28.5
3.8
27.4
31.2
Restoration
provisions
27.4
1.0
(3.9 )
0.3
(2.5 )
22.3
23 Non-current liabilities – retirement benefit
obligations
> Administration of the Plan and payment to the
beneficiaries from Plan assets when required in
accordance with the Plan rules;
There are a number of risks to which the Plan
exposes the Company. The more significant risks
relating to the defined benefits are:
(a) Superannuation plan
> Management and investment of the Plan assets;
> Investment risk – the risk that investment
Other than those employees that have opted
out, employees are members of the consolidated
superannuation entity being the Adelaide
Brighton Group Superannuation Plan (‘the
Plan’), a sub-plan of the Mercer Super Trust
(‘MST’). The MST is a superannuation master
trust arrangement governed by an independent
trustee, Mercer Investment Nominees Ltd. The
Plan commenced in the MST on 1 August 2001.
The Superannuation Industry (Supervision)
legislation (SIS) governs the superannuation
industry and provides a framework within
which superannuation plans operate. The SIS
Regulations require an actuarial valuation
to be performed for each defined benefit
superannuation plan every three years, or every
year if the plan pays defined benefit pensions.
Plan assets are held in trusts which are subject
to supervision by the prudential regulator.
Funding levels are reviewed regularly. Where
assets are less than vested benefits, being those
payable upon exit, a management plan must be
formed to restore the coverage to at least 100%.
The Plan’s Trustee is responsible for the
governance of the Plan. The Trustee has a legal
obligation to act solely in the best interests of
Plan beneficiaries. The Trustee has the following
roles:
and
> Compliance with superannuation law and other
applicable regulations.
The prudential regulator, the Australian
Prudential Regulation Authority (APRA), licenses
and supervises regulated superannuation plans.
Membership is in either the Defined Benefit
or Accumulation sections of the Plan.
The accumulation section receives fixed
contributions from Group companies and the
Group’s legal or constructive obligation is limited
to these contributions. The following sets out
details in respect of the defined benefit section
only.
Defined benefit members receive lump sum
benefits on retirement, death, disablement
and withdrawal, and are guaranteed benefits
to the equivalent of the notional balance they
would have received as accumulation members
through additional contributions from the
Group. The defined benefit section of the Plan
is closed to new members. All new members
receive accumulation only benefits. During
the 12 months to 31 December 2013, all new
employees, who are members of this fund, have
become members of the accumulation category
of the Plan.
returns will be lower than assumed and the
Company will need to increase contributions to
offset this shortfall.
> Salary growth risk – the risk that wages and
salaries (on which future benefit amounts will
be based) will rise more rapidly than assumed,
increasing defined benefit amounts and thereby
requiring additional employer contributions.
> Legislative risk - the risk that legislative changes
could be made which increase the cost of
providing the defined benefits.
> Timing of members leaving service – a
significant amount of benefits paid to members
leaving may have an impact on the financial
position of the Plan, depending on the financial
position of the Plan at the time they leave. The
impact may be positive or negative, depending
upon the circumstances and timing of the
withdrawal.
The defined benefit assets are invested in the
Mercer Growth investment option. The assets
are diversified within this investment option
and therefore the Plan has no significant
concentration of investment risk.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
87
23 Non-current liabilities – retirement benefit obligations (continued)
(b) Balance sheet amounts
The amounts recognised in the balance sheet and the movements in the net defined benefit obligation over the year are as follows:
($ Million)
At 1 January 2013
Current service cost
Interest expense/(income)
Transfers in
Remeasurements
Return on plan assets, excluding amounts included in interest expense/(income)
(Gain)/loss from change in financial assumptions
Experience (gains)/losses
Contributions:
Employers
Plan participants
Payments from Plan:
Benefi t payments
At 31 December 2013
At 1 January 2012
Current service cost
Interest expense/(income)
Remeasurements
Return on plan assets, excluding amounts included in interest expense/(income)
Loss from change in financial assumptions
Experience losses
Contributions:
Employers
Plan participants
Payments from Plan:
Benefi t payments
At 31 December 2012
Present value
of obligation
Fair value of
plan assets
59.0
(51.0 )
2.2
1.7
0.2
4.1
-
(2.0 )
1.5
(0.5 )
-
1.0
(8.2 )
55.4
-
(1.5 )
(0.2 )
(1.7 )
(7.1 )
-
-
(7.1 )
(2.3 )
(1.0 )
8.2
(54.9 )
59.3
(49.7)
2.3
1.9
4.2
-
1.2
1.2
2.4
-
1.3
(8.2)
59.0
-
(1.7)
(1.7)
(4.1)
-
-
(4.1)
(2.4)
(1.3)
8.2
(51.0)
Total
8.0
2.2
0.2
-
2.4
(7.1 )
(2.0 )
1.5
(7.6 )
(2.3 )
-
-
0.5
9.6
2.3
0.2
2.5
(4.1 )
1.2
1.2
(1.7 )
(2.4 )
-
-
8.0
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
88
23 Non-current liabilities – retirement benefit obligations (continued)
(c) Categories of plan assets
The major categories of plan assets are as follows:
Australian equity
International equity
Fixed income
Property
Cash
Other
Total
31 December 2013
31 December 2012
Un-quoted
in %
Un-quoted
$ million
14.8
17.0
9.9
7.1
4.4
1.7
27%
31%
18%
13%
8%
3%
$ million
13.3
14.8
9.7
7.1
3.6
2.5
in %
26%
29%
19%
14%
7%
5%
54.9
100%
51.0
100%
The assets set out in the above table are held in the Mercer Growth investment fund which does not have a quoted price in an active market. There are no
amounts relating to the Company’s own financial instruments, and property occupied by, or other assets used by, the Company.
(d) Actuarial assumptions and sensitivity
The significant actuarial assumptions used were as follows:
Discount rate - % p.a.
Future salary increases - % p.a.
Consolidated
2013
2012
%
3.9
2.0 in first year
then 4.0 thereafter
%
3.1
3.0 in first year
then 4.0 thereafter
The sensitivity of the defined benefit obligation to changes in the significant assumptions is:
Change in assumption
Increase in assumption
Decrease in assumption
Impact on defined benefit obligation
Discount rate
Future salary increases
0.50 ppts
0.50 ppts
Decrease by 2.1%
Increase by 1.7%
Increase by 2.2%
Decrease by 1.6%
Comparative information has not been provided for the sensitivity analysis as permitted by the transitional provisions of the revised standard.
The above sensitivity analysis is based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and
changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions
the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been
applied as when calculating the defined benefit liability recognised in the balance sheet.
(e) Defined benefit liability and employer contributions
The Group makes contributions to the Plan of between 10% and 13% of member salaries and made additional quarterly contributions of $150,000 in 2013.
Following a review of the Plan’s financial position in 2013, measured on the basis of the coverage of plan asset to vested benefits, these additional
contributions have been suspended. An actuarial review of the Plan is due for completion in 2014, at which time contribution rates will be reset by the actuary
in order to ensure that the Plan has sufficient assets to meet its obligations.
Expected contributions to the defined benefit plan for the year ending 31 December 2014 are $1.7 million.
The weighted average duration of the defined benefit obligation is 6 years (2012: 8 years).
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
89
($ Million)
24 Contributed equity
(a) Share capital
Issued and paid up capital
638,456,688 (2012: 637,387,488) ordinary shares, fully paid
(b) Movements in ordinary share capital
Opening balance at 1 January
1,069,200 shares issued under Executive Performance Share Plan (2012: 1,109,678) (i)
Closing balance at 31 December
Consolidated
2013
2012
699.1
696.6
696.6
2.5
699.1
694.6
2.0
696.6
(i) Ordinary shares issued under the Adelaide Brighton Ltd Executive Performance Share Plan (refer Note 31).
(c) Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up the Company in proportion to the number of and amounts paid on
the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote and, on a poll, each share
is entitled to one vote.
Ordinary shares have no par value and the Company does not have a limited amount of authorised capital.
(d) Dividend reinvestment plan
In February 2010 the Company suspended the dividend reinvestment plan with immediate effect until further notice.
(e) Capital risk management
The Group’s objectives when managing capital are to safeguard their ability to continue as a going concern, so that they can continue to provide returns for
shareholders and benefits for other stakeholders, and to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, issue shares as well as issue new debt
or redeem existing debt. The Group monitors capital on the basis of the gearing ratio.
The Company has an implied BBB+ credit rating and chooses not to apply for an official credit rating. The gearing ratio at 31 December 2013 and 31 December
2012 was as follows:
($ Million)
Total borrowings
Less: cash and cash equivalents
Net debt
Total equity
Gearing ratio
(f) Employee share scheme and options
Information relating to the employee share schemes, including details of shares issued under the schemes is set out in Note 31.
Consolidated
2013
259.1
(11.1 )
248.0
1,061.8
2012
319.3
(8.8 )
310.5
1,005.9
23.4 %
30.9 %
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
90
($ Million)
25 Reserves and retained earnings
(a) Reserves
Foreign currency translation reserve
Share-based payment reserve
Foreign currency translation reserve
Opening balance at 1 January
Currency translation differences arising during the year
Closing balance at 31 December
Share-based payment reserve
Opening balance at 1 January
Awards expense
Deferred tax
Over provision of tax in prior periods
Issue of shares to employees
Closing balance at 31 December
Nature and purpose of reserves
Foreign currency translation
Exchange differences arising on translation of foreign controlled entities and the foreign associate are recognised in other
comprehensive income as described in Note 1(d) and accumulated in a separate reserve within equity. The cumulative
amount is reclassified to profit or loss when the net investment is disposed of.
Share-based payment
The share-based payment reserve is used to recognise the fair value of Awards issued but not exercised.
(b) Retained earnings
Opening balance at 1 January
Net profit for the year
Actuarial gain on defined benefit obligation (net of tax)
Dividends
Closing balance at 31 December
Consolidated
2013
2012
1.0
3.3
4.3
-
1.0
1.0
2.1
2.1
0.3
0.5
(1.7 )
3.3
-
2.1
2.1
-
-
-
2.3
1.2
-
0.1
(1.5 )
2.1
304.4
151.1
5.3
(105.2 )
355.6
255.3
153.0
1.2
(105.1 )
304.4
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
91
($ Million)
26 Dividends
Dividends paid during the year
2012 final ordinary dividend of 9.0 cents (2011: 9.0 cents) per fully paid ordinary share, franked at 100%
(2011: 100%) paid on 16 April 2013
2013 interim dividend of 7.5 cents (2012: 7.5 cents) per fully paid ordinary share, franked at 100%
(2012: 100%) paid on 9 October 2013
Total dividends paid in cash
Consolidated
2013
2012
57.4
57.3
47.8
105.2
47.8
105.1
Dividend not recognised at year end
Since the end of the year the Directors have recommended the payment of a final dividend of 12.0 cents (2012: 9.0 cents)
per fully paid share, franked at 100% (2012: 100%). The aggregate amount of the proposed final dividend to be paid on
15 April 2014, not recognised as a liability at the end of the reporting period, is
76.6
57.4
Franked dividend
The franked portion of the dividend proposed as at 31 December 2013 will be franked out of existing franking credits or
out of franking credits arising from the payment of income tax in the year ending 31 December 2014.
Franking credits available for subsequent fi nancial years based on a tax rate of 30% (2012: 30%)
107.3
89.0
The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for:
(a) franking credits that will arise from the payment of any current tax liability
(b) franking debits that will arise from the payment of dividends recognised as a liability at the reporting date
(c) franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date.
The impact on the franking account of the dividend recommended by the Directors since year end, but not recognised as a liability at year end, will be a
reduction in the franking account of $32.8 million (2012: $24.6 million).
27 Financial risk management
The Group’s activities expose it to a variety
of financial risks: market risk (including
currency risk and interest rate risk), credit
risk and liquidity risk. The Group’s overall
risk management program focuses on the
unpredictability of financial markets and seeks
to minimise potential adverse effects on the
financial performance of the Group.
The Board approves written principles for overall
risk management, as well as policies covering
specific areas, such as foreign exchange risk,
interest rate risk, credit risk, use of derivative
and non-derivative financial instruments and
investment of excess liquidity. The Group does
not enter into or trade financial instruments,
including derivative financial instruments, for
speculative purposes.
Derivatives are initially recognised at fair value
at the date a derivative contract is entered into
and are subsequently remeasured at their fair
value at each reporting date. The Company does
not utilise hedge accounting as permitted under
Australian Accounting Standards.
The Group’s Corporate Treasury Function
provides services to the business, co-ordinates
access to domestic financial markets and
monitors and manages the financial risks
relating to the operations of the Group. The
Group Corporate Treasury Function reports
on a monthly basis an analysis of key market
exposures.
(a) Market risk
(i) Foreign exchange risk
The Group uses different methods to measure
different types of risk to which it is exposed.
These methods include sensitivity analysis in the
case of interest rate, foreign exchange and other
price risks, and ageing analysis for credit risk. The
Group uses derivative financial instruments in
the form of foreign exchange forward contracts
to hedge certain currency risk exposures.
The Group’s activities through its importation
of cement, clinker, slag and equipment expose
it to foreign exchange risk arising from various
currency exposures, primarily with respect to the
US Dollar and the Japanese Yen.
Foreign exchange risk arises from commercial
transactions and recognised assets and liabilities
that are denominated in a currency that is
not the entity’s functional currency. The risk is
measured using sensitivity analysis and cash
flow forecasting.
The Group enters into foreign exchange forward
contracts to hedge its foreign exchange risk
on these overseas trading activities against
movements in the Australian dollar.
The Group Treasury’s risk management policy is
to hedge commitments for purchases for up to
six months forward. Longer hedge positions are
deemed too expensive versus the value at risk
due to the respective currencies’ interest rate
spread. Derivative instruments entered into by
the Group do not qualify for hedge accounting.
(ii) Interest rate risk
The Group’s main interest rate risk arises from
bank borrowings. Borrowings issued at variable
rates expose the Group to interest rate risk.
Due to the historically low levels of gearing,
Group policy is to take on senior debt facilities
on a one to five year term with fixed bank
lending margins associated with each term.
Cash advances to meet short and medium
term borrowing requirements are drawn down
against the senior debt lending facilities on a
30, 60 or 90 day basis, at a variable lending rate
comprising the fixed bank margin applied to the
daily bank bill swap rate effective at the date
of each bank bill. During both 2013 and 2012,
the Group’s borrowings at variable rates were
denominated in Australian Dollars.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
92
27 Financial risk management (continued)
(a) Market risk (continued)
The Group analyses its interest rate exposure on a dynamic basis. Periodically, various scenarios are simulated taking into consideration refinancing, renewal
of existing positions, alternative financing and hedging. Based on these scenarios, the Group calculates the impact on forecast profit and loss of a defined
interest rate shift. The scenarios are run only for liabilities that represent the major interest-bearing positions. Based on the latest calculations performed, the
impact on profit and equity of a 100 basis-point movement would be a maximum increase/decrease of $2.2 million (2012: $2.8 million). A 100 basis-point
sensitivity has been selected as this is considered reasonable given the current level of both short term and long term Australian dollar interest rates.
(iii) Summarised sensitivity analysis
The following table summarises the sensitivity, on a pre-tax basis, of the Group’s financial assets and financial liabilities to interest rate risk.
($ Million - consolidated)
Notes
Carrying
value
Sensitivity
-1.0%
+1.0%
Carrying
value
Sensitivity
-1.0%
+1.0%
2013
2012
Financial assets
Cash
Receivables
Financial liabilities
Borrowings
Payables
Total increase/(decrease)
6
7 & 10
17 & 20
16
11.1
213.8
224.9
259.1
105.4
364.5
(0.1)
(0.3)
(0.4)
2.6
-
2.6
2.2
0.1
0.3
0.4
(2.6)
-
(2.6)
(2.2)
8.8
199.8
208.6
319.3
95.0
414.3
(0.1)
(0.3)
(0.4)
3.2
-
3.2
2.8
0.1
0.3
0.4
(3.2 )
-
(3.2 )
(2.8 )
Foreign currency risk is immaterial as the majority of sales and assets are denominated in Australian Dollars, while the Group’s purchases that are in foreign
currency are settled at the time of the transaction, consequently payables are generally in Australian Dollars. All borrowings are denominated in Australian
Dollars.
(b) Credit risk
Credit risk is managed on a Group basis using delegated authority limits. Credit risk arises from cash and cash equivalents, derivative financial instruments and
deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables and committed transactions.
For banks and financial institutions, only independently rated parties with a minimum rating of ‘A’ are accepted. For trading credit risk, Credit Control assesses
the credit quality of the customer, taking into account its financial position, past experience, external credit agency reports and credit references. Individual
risk limits are set based on internal or external ratings in accordance with delegated authority limits set by the Board. The compliance with credit limits by
credit approved customers is regularly monitored by line credit management. Sales to non-account customers are settled either in cash, major credit cards or
electronic funds transfer, mitigating credit risk.
Credit risk further arises in relation to financial guarantees given to certain parties. Such guarantees are only provided in exceptional circumstances and are
subject to appropriate approval.
The Group has no significant concentration of credit risk. The Group has policies and procedures in place to ensure that sales are made to customers with
an appropriate credit history. In relation to a small number of customers with uncertain credit history, the Group has taken out personal guarantees in order
to cover credit exposures. As at 31 December 2013, the Group held no collateral over outstanding debts. Consequently, the maximum exposure to credit risk
represents the carrying value of receivables and derivatives. Derivative counterparties and cash transactions are limited to high credit quality institutions.
(c) Liquidity risk
The ultimate responsibility for liquidity risk management rests with the Board which has established an appropriate risk management framework for the
management of the Group’s short, medium and long term funding and liquidity management requirements. The Group’s Corporate Treasury Function manages
liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows
and matching the maturity profiles of financial assets and liabilities. Included below is a statement of undrawn facilities that the Group and Company has at
its disposal to further reduce liquidity risk.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
93
($ Million)
27 Financial risk management (continued)
(c) Liquidity risk (continued)
Financing arrangements
Unrestricted access was available at balance date to the following lines of credit:
Credit standby arrangements
Total facilities
Bank overdrafts
Bank facilities – external parties
Used at balance date
Bank overdrafts
Bank facilities – external parties
Unused at balance date
Bank overdrafts
Bank facilities – external parties
Maturity profile of bank facilities. Maturing on:
1 July 2013
1 July 2014
1 July 2015
1 July 2016
Consolidated
2013
2012
4.0
500.0
504.0
-
259.1
259.1
4.0
240.9
244.9
-
-
300.0
200.0
500.0
4.0
500.0
504.0
-
319.3
319.3
4.0
180.7
184.7
200.0
140.0
160.0
-
500.0
The table below analyses the Group’s financial liabilities that will be settled on a gross basis. The amounts disclosed are the contractual undiscounted cash
flows. The interest rate used is 3.8% (2012: 4.7%) based on current bank borrowing rates and current expectations.
($ Million)
<6 months
6-12 months
1-2 years
>2 years
Total
Contractual maturities of financial liabilities
31 December 2013
Trade payables
Bank borrowings
31 December 2012
Trade payables
Bank borrowings
105.4
-
105.4
95.0
-
95.0
-
-
-
-
20.5
20.5
-
268.9
268.9
-
313.4
313.4
-
-
-
-
-
-
105.4
268.9
374.3
95.0
333.9
428.9
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
94
28 Fair value measurements
Fair value hierarchy
(i) Recognised fair value measurements
The Group measures and recognises financial assets at fair value through profit or loss (FVTPL) at fair value on a recurring basis. Derivative instruments
entered into by the Group do not qualify for hedge accounting and are classified in this category. Forward exchange contracts with a fair market value of
$0.1 million (2012: nil) have been entered into by the Group, with the fair value determined using forward exchange market rates at the balance sheet date
(level 1). Assets associated with the Carbon Tax of $52.5 million (2012: $51.5 million) are measured at fair value determined in accordance with the price of
units in the market (level 1).
(ii) Disclosed fair values
The Group also has a number of assets and liabilities which are not measured at fair value, but for which fair values are disclosed in the notes.
The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to their short-term nature.
The fair value of non-current receivables for disclosure purposes is based predominantly on the recoverable loan amount to joint ventures and external parties
(level 3).
The interest rate for current and non-current borrowings is reset on a short term basis, generally 30 to 90 days, and therefore the carrying value of current
and non-current borrowings equal their fair values (level 2).
($ Million)
29 Contingencies
Details and estimates of maximum amounts of contingent liabilities are as follows:
(a) Guarantees
Bank guarantees
Guarantees of joint venture borrowings
(b) Litigation
Consolidated
2013
2012
15.6
30.6
14.3
17.7
At the time of preparing this financial report some companies included in the Group are parties to pending legal proceedings,
the outcome of which is not known. The entities are defending, or prosecuting, these proceedings. The Directors have assessed
the impact on the Group from the individual actions.
No material losses are anticipated in respect of any of the above contingent liabilities.
30 Commitments for expenditure
(a) Capital commitments – property, plant & equipment
Capital expenditure contracted for at the reporting date but not recognised as liabilities is as follows:
Within one year
8.3
17.9
(b) Lease commitments – operating leases
Commitments in relation to operating leases contracted for at the reporting date, but not recognised as liabilities,
are payable as follows:
Within one year
Later than one year but not later than five years
Later than fi ve years
5.3
13.0
17.1
35.4
5.6
14.1
22.4
42.1
Commitments for operating lease payments relate mainly to rental leases on property. The Group leases various properties under non-cancellable operating
leases which contain varying terms, escalation clauses and renewal rights. On renewal, the terms of the leases are either renegotiated or the expiry date is
extended under pre-negotiated terms.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
95
31 Share-based payment plans
(a) Employee Share Plan
The establishment of the Adelaide Brighton Ltd
Employee Share Plan was approved by special
resolution at the Annual General Meeting of the
Company held on 19 November 1997. Subject
to the Board approval of grants, all full time
employees of the Company and its controlled
entities who have been continuously employed
by the Company or a controlled entity for a
period of one year are eligible to participate in
the plan. Casual employees and contractors are
not eligible to participate in the Plan.
No shares were issued under the Employee Share
Plan during the year (2012 – nil). In subsequent
years, the Board will decide whether, considering
the profitability of the Company and the
demands of the business, further invitations to
take up grants of shares should be made.
(b) Executive Performance Share Plan
The Adelaide Brighton Ltd Executive Performance
Share Plan (‘the Plan’ or ‘EPSP’) provides for
grants of Awards to the Managing Director and
eligible executives. This plan was approved by
shareholders at the Annual General Meeting
held on 19 November 1997. In accordance with
the requirements of the ASX Listing Rules, the
Awards since granted to the Managing Director
have been approved by shareholders.
Under the Plan, eligible executives are granted
Awards (each being an entitlement to a fully
paid ordinary share of Adelaide Brighton Ltd,
subject to the satisfaction of performance
conditions) on terms and conditions determined
by the Board.
2013 Award
Under the Plan, Participants were invited to
apply to take up an Award up to a maximum
number of shares, exercisable no earlier than
1 May 2017. The total number of Awards granted
under the 2013 Award was 1,502,150 with nil
exercised by 31 December 2013. The grant date
of the 2013 Awards is set out on page 97.
2012 Award
Under the Plan, Participants were invited to
apply to take up an Award up to a maximum
number of shares, divided into two equal
tranches exercisable no earlier than 1 May 2015
and 1 May 2016 respectively. The total number
of Awards granted under the 2012 Award was
3,140,030 with nil exercised by 31 December
2013. During the period nil Awards (2012:
3,140,030) were granted. The grant date of the
2012 Awards is set out on page 98.
2010 Award
Under the Plan, Participants were invited to
apply to take up an Award up to a maximum
number of shares, divided into three tranches
exercisable no earlier than 1 May 2012, 1 May
2013 and 1 May 2014 respectively. The total
number of awards originally granted under
the 2010 Award was 4,155,000 with 2,178,878
exercised by 31 December 2013. During the
period, nil Awards (2012: nil) were granted and
145,800 Awards lapsed (2012: 7,822). The grant
date of the 2010 Awards is set out on page 98.
Performance conditions
Detailed discussion of 2013 Award, 2012 Award
and 2010 Award performance conditions is set
out in the Remuneration Report on pages 47 to
63.
During 2013, 1,069,200 shares were issued under
the Plan on the exercise of Tranche 2 under the
2010 Award, following the Board’s determination
that:
> Earnings per share exercise condition applicable
to 75.9% of exercisable Awards had been
satisfied for Tranche 2; and
> Total Shareholder Return exercise condition
applicable to 100% of exercisable Awards had
been satisfied for Tranche 2.
The value per share at the date of exercise is
the Value Weighted Closing Price which is the
average of the closing price and number of
Adelaide Brighton Limited shares traded on
the Australian Securities Exchange for the five
trading days before the exercise date, but not
including the day of exercise. The aggregate
value of Awards exercised during the year is
$3,634,368 (2012: $3,411,571).
Balance of Awards
As at 31 December 2013, if the exercise
conditions are satisfied and the remaining
balance of all currently approved Awards are
exercised, the Company would be obliged to
transfer:
1,620,000 shares to the Participants under the
2010 Award (2012: 2,835,000 shares)
3,140,030 shares to the Participants under the
2012 Award (2012: 3,140,030 shares)
1,502,150 shares to the Participants under the
2013 Award (2012: nil shares)
The Plan does not entitle the Participants to
participate in any other share issues of the
Company and the unexercised Awards do not
attract dividend or voting rights. The Plan is
accounted for by the Company in accordance
with Note 1(v)(iv), with $2,089,093 (2012:
$1,206,942) recognised as an expense during the
year.
The weighted average remaining contractual life
of Awards outstanding at the end of the period
was 1.8 years (2012: 1.9 years).
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
96
($ Million)
32 Key management personnel disclosures
(a) Compensation of key management personnel
Short-term employee benefits
Post-employment benefits
Share-based payments
Termination benefi ts
Consolidated
2013
2012
8.8
0.2
1.4
-
10.4
8.4
0.2
1.1
-
9.7
The Company has applied the exemption under Amendment to Australian Accounting Standard - Key Management Personnel Disclosures by Disclosing Entities
which exempts disclosing companies from the application of AASB 124 paragraphs AUS 29.2 to AUS 29.6 and AUS 29.7.1 and AUS 29.7.2 as the requirements
are now incorporated into the Corporations Act and are provided in the section titled Remuneration Report included in the Directors’ Report designated as
audited on pages 47 to 63.
(b) Award holdings of key management personnel
The number of Awards granted as compensation and details of Awards vested, exercised or lapsed during the year are disclosed in the Remuneration Report
on page 61.
For the purposes of pricing model inputs, the share price for calculation of the Award value is based on the closing published share price at grant date. The
assessed fair value at grant date of Awards granted to the individuals is allocated equally over the period from grant date to vesting date. Fair values at the
grant date are independently determined using a pricing model that takes into account the exercise price, the term of the Awards, the lack of marketability,
the impact of TSR vesting condition (applicable to 50% of Awards), the expected future dividends and the risk free interest rate for the term of the Award.
2013 Awards grant – pricing model inputs
Number of
awards
Grant
date
Share price at
grant date
Value per
Award at
grant date
Expected
annual
dividends
Risk-free
interest
rate
Lack of
marketability
discount
TSR
condition
discount
M P Chellew
G Agriogiannis
M Brydon
M Kelly
S B Rogers
670,920
99,074
260,248
185,285
98,317
23/5/13
27/5/13
28/5/13
23/5/13
28/5/13
$/share
3.30
3.30
3.32
3.30
3.32
$
1.52
1.52
1.54
1.52
1.54
$/share
% p.a.
% p.a.
0.17
0.17
0.17
0.17
0.17
2.81
2.81
2.81
2.81
2.81
3.00
3.00
3.00
3.00
3.00
%
50
50
50
50
50
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
97
32 Key management personnel disclosures (continued)
(b) Award holdings of key management personnel (continued)
2012 Awards grant – pricing model inputs
Number of
awards
Grant
date
Share price at
grant date
Value per
Award at
grant date
Expected
annual
dividends
Risk-free
interest
rate
Lack of
marketability
discount
TSR
condition
discount
M P Chellew
Tranche 1
Tranche 2
G Agriogiannis
Tranche 1
Tranche 2
M Brydon
Tranche 1
Tranche 2
M Kelly
Tranche 1
Tranche 2
S B Rogers
Tranche 1
Tranche 2
728,324
728,324
99,277
99,277
265,896
265,896
189,306
189,306
98,519
98,519
17/05/12
17/05/12
17/05/12
17/05/12
17/05/12
17/05/12
17/05/12
17/05/12
17/05/12
17/05/12
2010 Awards grant – pricing model inputs
$/share
$
$/share
% p.a.
% p.a.
2.89
2.89
2.89
2.89
2.89
2.89
2.89
2.89
2.89
2.89
1.475
1.270
1.475
1.270
1.475
1.270
1.475
1.270
1.475
1.270
0.18
0.18
0.18
0.18
0.18
0.18
0.18
0.18
0.18
0.18
2.79
2.79
2.79
2.79
2.79
2.79
2.79
2.79
2.79
2.79
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
%
50.0
50.0
50.0
50.0
50.0
50.0
50.0
50.0
50.0
50.0
Number of
awards
Grant
date
Share price at
grant date
Value per
Award at
grant date
Expected
annual
dividends
Risk-free
interest
rate
Lack of
marketability
discount
TSR
condition
discount
M P Chellew
Tranche 1
Tranche 2
Tranche 3
G Agriogiannis
Tranche 1
Tranche 2
Tranche 3
M Brydon
Tranche 1
Tranche 2
Tranche 3
M Kelly
Tranche 1
Tranche 2
Tranche 3
S B Rogers
Tranche 1
Tranche 2
Tranche 3
540,000
540,000
720,000
-
97,500
130,000
180,000
180,000
240,000
150,000
150,000
200,000
97,500
97,500
130,000
04/06/10
04/06/10
04/06/10
-
21/11/11
21/11/11
04/06/10
04/06/10
04/06/10
04/06/10
04/06/10
04/06/10
04/06/10
04/06/10
04/06/10
$/share
$
$/share
% p.a.
% p.a.
2.81
2.81
2.81
-
2.87
2.87
2.81
2.81
2.81
2.81
2.81
2.81
2.81
2.81
2.81
1.585
1.330
1.095
-
1.785
1.565
1.585
1.330
1.095
1.585
1.330
1.095
1.585
1.330
1.095
0.17
0.18
0.19
-
0.17
0.17
0.17
0.18
0.19
0.17
0.18
0.19
0.17
0.18
0.19
4.79
4.79
4.79
-
3.20
3.20
4.79
4.79
4.79
4.79
4.79
4.79
4.79
4.79
4.79
3.0
3.0
3.0
-
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
3.0
%
50.0
50.0
50.0
-
50.0
50.0
50.0
50.0
50.0
50.0
50.0
50.0
50.0
50.0
50.0
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
98
32 Key management personnel disclosures (continued)
(c) Shareholdings of key management personnel
The movement during the reporting period in the number of ordinary shares in Adelaide Brighton Ltd held directly, indirectly or beneficially, by each key
management person, including their related parties, is as follows:
Number of shares held in Adelaide Brighton Limited at 31 December 2013
Non-executive Directors
L V Hosking
R D Barro
G F Pettigrew
K B Scott-McKenzie
A M Tansey
Executive Director
M P Chellew
Senior executives
G Agriogiannis
M Brydon
M Kelly
S B Rogers
Total
Number of shares held in Adelaide Brighton Limited at 31 December 2012
Non-executive Directors
L V Hosking
R D Barro
G F Pettigrew
K B Scott-McKenzie
A M Tansey
C L Harris1
Executive Director
M P Chellew
Senior executives
G Agriogiannis
M Brydon
M Kelly
Total
Balance at
Received on
start of year exercise of EPSP
Other changes
Balance at
end of year
4,739
193,307,036
7,739
5,000
5,000
-
-
-
-
-
-
16,568,764
-
-
5,000
4,739
209,875,800
7,739
5,000
10,000
448,366
475,200
(475,200 )
448,366
-
5,000
5,000
-
85,800
158,400
132,000
85,800
(85,800 )
(155,000 )
(137,000 )
(85,800 )
-
8,400
-
-
193,787,880
937,200
15,634,964
210,360,044
Balance at
Received on
start of year exercise of EPSP
Other changes
Balance at
end of year
4,739
169,087,036
7,739
5,000
5,000
100,479
-
-
-
-
-
-
-
24,220,000
-
-
-
(100,479 )
4,739
193,307,036
7,739
5,000
5,000
-
448,366
536,220
(536,220 )
448,366
-
5,000
5,000
-
178,740
148,950
-
(178,740 )
(148,950 )
-
5,000
5,000
169,668,359
863,910
22,255,611
193,787,880
1 C L Harris retired 17 May 2012, therefore his equity holding has been reduced to nil at 31 December 2012 through ‘other changes’.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
99
32 Key management personnel disclosures (continued)
(d) Other transactions with key management personnel
R D Barro, a Director of Adelaide Brighton Ltd, is Managing Director of Barro Group Pty Ltd. Barro Group Pty Ltd and Adelaide Brighton Ltd, through its 100%
owned subsidiary, Adelaide Brighton Management Ltd, each control 50% of Independent Cement and Lime Pty Ltd, a distributor of cement and lime in Victoria
and New South Wales.
During the year, the Barro Group of companies purchased goods and materials from and sold goods, materials and services to Independent Cement and Lime
Pty Ltd and the Group. The Barro Group of companies also purchased goods and materials from Sunstate Cement Ltd, a company in which the Group has a
50% share and other entities in the Group.
M P Chellew, an executive Director of Adelaide Brighton Ltd and M Brydon and M Kelly, senior executives of Adelaide Brighton Ltd, have been Directors of
Sunstate Cement Ltd during the reporting period. M Brydon is also a Director of Independent Cement and Lime Pty Ltd. G Agriogiannis, a senior executive of
Adelaide Brighton Ltd and M Kelly are also Directors of the Mawsons Group. During the year, the Group traded significantly with Independent Cement and
Lime Pty Ltd, Sunstate Cement Ltd and the Mawsons Group, which are all joint ventures of the Group.
All transactions involving the Barro Group Pty Ltd and Adelaide Brighton Ltd and its subsidiaries, Independent Cement and Lime Pty Ltd and its subsidiaries,
Sunstate Cement Ltd and the Mawsons Group were conducted on standard commercial terms.
From time to time Directors of the Company or its controlled entities, or their related parties, may purchase goods from the Group. These purchases are on the
standard commercial terms and conditions.
($)
Aggregate amounts of the above transactions with the Directors and their related parties:
Sales to Director related parties
Purchases from Director related parties
33 Remuneration of auditors
During the year the following fees were paid or payable for services provided by the auditor of the parent entity,
its related practices and non-related audit firms:
(a) Audit services
PricewaterhouseCoopers Australian firm
Audit and review of fi nancial statements
Total remuneration for audit services
(b) Non-audit services
PricewaterhouseCoopers Australian firm
Other assurance services
Total remuneration for non-audit services
Consolidated
2013
2012
45,019,728
41,908,399
49,525,545
44,047,982
692,540
692,540
685,771
685,771
92,798
92,798
90,330
90,330
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
100
34 Related parties
(a) Key management personnel
Disclosures relating to key management personnel are set out in Note 32.
(b) Controlled entities
Details of interests in controlled entities are set out in Note 35. The ultimate parent Company is Adelaide Brighton Ltd.
(c) Joint arrangement and associate entities
Details of interests in joint arrangement and associate entities are set out in Note 11(a). The nature of transactions with joint arrangement and associate
entities is detailed below:
Adelaide Brighton Cement Ltd and Morgan Cement International Ltd supplied finished products and raw materials to Sunstate Cement Ltd and Independent
Cement and Lime Pty Ltd. Hy-Tec Industries Pty Ltd, Hy-Tec Industries (Victoria) Pty Ltd, Hy-Tec Industries (Queensland) Pty Ltd, Adbri Masonry Group Pty Ltd
and Adelaide Brighton Cement Ltd purchased finished products, raw materials and transportation services from Sunstate Cement Ltd and Independent Cement
and Lime Pty Ltd.
All transactions are on normal commercial terms and conditions and transactions for the supply are covered by shareholder agreements.
(d) Transactions with related parties
The following transactions occurred with related parties:
($’000)
Sales of goods
- Joint venture entities
Purchases of materials and goods
- Joint venture entities
Interest revenue
- Joint venture entities
Dividend and distribution income
- Joint venture entities
Superannuation contributions
- Contributions to superannuation funds on behalf of employees
- Reimbursement of superannuation contribution by joint venture entity
Loans advanced to/(from):
- Joint venture entities
(e) Outstanding balances arising from sales/purchases of goods and services
The following balances are outstanding at the reporting date in relation to transactions with related parties:
Current receivables
- Joint venture entities (interest)
- Joint venture entities (trade)
Non-current receivables
- Joint venture entities (loans)
Current payables
- Joint venture entities (trade)
Consolidated
2013
2012
188,147
176,916
64,008
43,946
757
891
16,337
21,559
11,666
22
2,445
11,585
152
2,403
378
23,690
27,808
6,450
417
20,132
25,362
4,392
Outstanding balances are unsecured and repayable in cash. No provisions for doubtful receivables have been raised in relation to any outstanding balances.
(f) Loans to related parties
A loan to a joint venture entity, Independent Cement and Lime Pty Ltd, has interest charged at the ruling commercial rates on the outstanding balance. Interest
revenue brought to account by the Group during the reporting year on this loan was $756,557 (2012: $891,091).
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
101
35 Subsidiaries and transactions with non-controlling interests
Name of entity
Adelaide Brighton Ltd
Adelaide Brighton Cement Ltd2
Adelaide Brighton Cement Inc
Adelaide Brighton Cement Investments Pty Ltd2
Adelaide Brighton Management Ltd2
Adelaide Brighton Cement International Pty Ltd1
Adelaide Brighton Intellectual Property Pty Ltd1
Cement Resources Consolidated Pty Ltd1
Cockburn Cement Ltd2
Hy-Tec Industries (Queensland) Pty Ltd2
Northern Cement Ltd2
Premier Resources Ltd2
Adbri Masonry Group Pty Ltd2
Adelaide Brighton Cement Ltd
Exmouth Limestone Pty Ltd1
Adelaide Brighton Cement Inc
Adelaide Brighton Cement (Florida) Inc
Adelaide Brighton Cement (Hawaii) Inc
Hileah (Florida) Management Inc
Adelaide Brighton Management Ltd
Accendo Pty Ltd1
Global Cement Australia Pty Ltd1
Hurd Haulage Pty Ltd2
K.C. Mawson Pty Ltd1
Adelaide Brighton Cement International Pty Ltd
Adelaide Brighton Cement Inc
Fuel & Combustion Technology International Ltd
Fuel & Combustion Technology International Ltd
Fuel & Combustion Technology International Inc
Northern Cement Ltd
Mataranka Lime Pty Ltd1
Cockburn Cement Ltd
Cockburn Waters Pty Ltd1
Hydrated Lime Pty Ltd1
Chemical Unit Trust
Kalgoorlie Lime & Chemical Company Pty Ltd1
Premier Resources Ltd
Hy-Tec Industries Pty Ltd2
Hy-Tec Industries (Victoria) Pty Ltd2
Bonfoal Pty Ltd1
Aus-10 Rhyolite Pty Ltd1
Morgan Cement International Pty Ltd2
Hy-Tec Industries (Victoria) Pty Ltd
CRC2 Pty Ltd1
CRC3 Pty Ltd1
Hy-Tec Industries (Victoria) No 1 Pty Ltd1
Hy-Tec Industries (Victoria) No 2 Pty Ltd1
Sheltacrete Pty Ltd1
Adbri Masonry Group Pty Ltd
Adbri Masonry Pty Ltd2
Adbri Mining Products Pty Ltd1
C&M Masonry Products Pty Ltd2
Betta Brick Pty Ltd1
C&M Brick (Bendigo) Pty Ltd1
C&M Design/Construct Pty Ltd1
Place of
incorporation
Class of
shares
Ownership interest
held by the Group
2013
%
2012
%
South Australia
Washington USA
South Australia
South Australia
South Australia
South Australia
South Australia
Western Australia
Victoria
Northern Territory
New South Wales
Victoria
Western Australia
Florida USA
Hawaii USA
Florida USA
South Australia
New South Wales
New South Wales
Victoria
Washington USA
United Kingdom
Pennsylvania USA
South Australia
Western Australia
Western Australia
Western Australia
Western Australia
New South Wales
Victoria
New South Wales
New South Wales
New South Wales
Victoria
Victoria
Victoria
Victoria
Victoria
Queensland
Queensland
Victoria
Victoria
Victoria
Victoria
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Units
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
100
80
100
100
100
100
100
100
100
100
100
100
51
100
100
100
100
100
100
100
20
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
80
100
100
100
100
100
100
100
100
100
100
51
100
100
100
100
100
100
100
20
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
1 Small proprietary company as defined by the Corporations Act and is not required to be audited for statutory purposes.
2 These controlled entities have been granted relief from the necessity to prepare financial reports in accordance with Class Order 98/1418 issued by the Australian Securities & Investments Commission.
2 For further information see Note 36.
Unless otherwise stated, the subsidiaries as listed above have share capital consisting solely of ordinary shares, which are held directly by the Group, and the
proportion of ownership interests held equals to the voting rights held by the Group. The country of incorporation or registration is also their principal place
of business.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
102
36 Deed of cross guarantee
As at the date of this report, Adelaide Brighton Ltd, Adelaide Brighton Cement Ltd, Cockburn Cement Ltd, Adelaide Brighton Cement Investments Pty Ltd,
Adelaide Brighton Management Ltd, Northern Cement Ltd, Premier Resources Ltd, Hy-Tec Industries Pty Ltd, Hy-Tec Industries (Victoria) Pty Ltd, Hy-Tec
Industries (Queensland) Pty Ltd, Morgan Cement International Pty Ltd, Adbri Masonry Group Pty Ltd, C&M Masonry Products Pty Ltd, Adbri Masonry Pty Ltd
and Hurd Haulage Pty Ltd are parties to a Deed of Cross Guarantee (the Deed) under which each company guarantees the debts of the others. By entering into
the Deed, the wholly-owned entities have been relieved from the requirement to prepare a financial report and Directors’ report under Class Order 98/1418 (as
amended) issued by the Australian Securities & Investments Commission. The above companies represent a ‘Closed Group’ for the purposes of the Class Order,
and as there are no other parties to the Deed that are controlled by the Company, they also represent the ‘Extended Closed Group’.
During the year, to take into account changes that have been made to ASIC’s Class Order 98/1418 over recent years, the Closed Group revoked the Deed
of Cross Guarantee that had been in effect in previous years and each of the members of the Closed Group entered into a new Deed of Cross Guarantee
reflective of the current requirements of ASIC’s Class Order. The new Deed of Cross Guarantee was in effect at the end of the 2013 financial year.
Set out below is a consolidated balance sheet as at 31 December 2013 of the Closed Group.
($ Million)
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Carbon units
Assets classifi ed as held for sale
Total current assets
Non-current assets
Receivables
Joint arrangements and associate
Other financial assets
Property, plant and equipment
Intangible assets
Carbon units
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Borrowings
Current tax liabilities
Provisions
Provision for carbon emissions
Other liabilities
Total current liabilities
Non-current liabilities
Borrowings
Deferred tax liabilities
Provisions
Retirement benefit obligations
Provision for carbon emissions
Other non-current liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Total equity
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
103
2013
2012
7.8
185.6
127.3
52.5
373.2
7.9
381.1
31.4
101.7
10.2
808.2
183.2
-
3.6
171.2
125.1
48.0
347.9
1.9
349.8
29.5
95.7
10.2
816.8
184.3
3.5
1,134.7
1,515.8
1,140.0
1,489.8
87.3
-
17.1
26.4
39.7
20.4
66.1
20.0
5.7
25.8
25.2
19.5
190.9
162.3
259.1
53.5
28.4
0.5
8.2
0.1
349.8
540.7
975.1
699.1
4.4
271.6
975.1
299.3
55.3
31.1
8.0
8.4
0.1
402.2
564.5
925.3
696.6
2.1
226.6
925.3
36 Deed of cross guarantee (continued)
Set out below is a condensed consolidated income statement, a consolidated statement of comprehensive income and a summary of movements in
consolidated retained profits for the year ended 31 December 2013 of the Closed Group.
($ Million)
Profit before income tax
Income tax expense
Profi t for the year
Retained earnings 1 January
Retained earnings on members entering / leaving Closed Group
Profit for the year
Other comprehensive income
Dividends paid
Retained earnings 31 December
37 Reconciliation of profit after income tax to net cash inflow from operating activities
($ Million)
Profit for the year
Doubtful debts
Depreciation and amortisation
Share based payments expense
Finance charges on remediation provision
(Gain) / loss on sale of non-current assets
Share of un-distributed profits of joint ventures
Non-cash retirement benefits expense
Profit on acquisition of businesses
Capitalised interest
Other
Net cash provided by operating activities before changes in assets and liabilities
Changes in operating assets and liabilities, net of effects from purchase of controlled entity:
(Increase) in inventories
Decrease in prepayments
(Increase) in receivables
Increase / (decrease) in trade creditors
Increase / (decrease) in provisions
Increase / (decrease) in taxes payable
(Decrease) / increase in deferred taxes payable
(Decrease) in other operating assets and liabilities
2013
200.4
(55.5 )
144.9
226.6
-
144.9
5.3
(105.2 )
271.6
2012
200.0
(52.5 )
147.5
193.9
(10.9 )
147.5
1.2
(105.1 )
226.6
Consolidated
2013
151.1
(0.9 )
70.6
(0.1 )
1.0
(0.4 )
(7.9 )
5.3
-
(1.2 )
(0.7 )
218.6
(1.5 )
-
(13.1 )
9.4
13.0
11.3
(2.8 )
(7.6 )
2012
152.9
(1.1 )
65.2
(1.3 )
0.4
1.5
(6.2 )
1.8
(7.6 )
(2.4 )
(2.8 )
200.4
(10.9 )
1.1
(0.3 )
(3.9 )
(1.8 )
(0.3 )
4.5
(1.9 )
Net cash infl ow from operating activities
227.3
186.9
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
104
(Cents)
38 Earnings per share
Basic earnings per share
Diluted earnings per share
(Number)
Weighted average number of shares used as the denominator
Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share
Adjustment for calculation of diluted earnings per share:
Awards
Weighted average number of ordinary shares and potential ordinary shares used as the denominator
in calculating diluted earnings per share
($ Million)
Reconciliation of earnings used in calculating earnings per share
Basic and diluted earnings per share
Profit after tax
Profi t attributable to non-controlling interests
Profi t attributable to ordinary equity holders of the Company used in calculating basic and diluted earnings per share
39 Events occurring after the balance sheet date
Consolidated
2013
2012
23.7
23.4
24.0
23.8
Consolidated
2013
2012
638,099,312
637,014,563
6,262,180
5,975,030
644,361,492
642,989,593
Consolidated
2013
2012
151.1
-
151.1
152.9
0.1
153.0
In February 2014, the Directors approved a strategy to rationalise the production of clinker at its Munster site in Western Australia. It is proposed to reduce
the volume of clinker produced at the site during 2014. Subject to all necessary legal and supply chain arrangements being in place, it is intended that by
2016 all of the 400,000 tonnes of clinker previously produced at Munster will be replaced by imported clinker, which will be milled into cement utilising the
Kwinana import facility and the existing cement mills at Munster.
The financial effects of this event have not been brought to account at 31 December 2013. A provision for redundancy and asset write-off of approximately
$8 million will be recognised in 2014.
As at the date of this report, no other matter or circumstance has arisen since 31 December 2013 that has significantly affected, or may significantly affect
the Group’s operations, the results of those operations, or the Group’s state of affairs in future financial years.
40 Segment reporting
(a) Description of segments
Management has determined the operating segments based on the reports reviewed by the Managing Director. These reports are evaluated regularly in
deciding how to allocate resources and in assessing performance.
The two reportable segments have been identified as follows;
> Cement, Lime and Concrete
> Concrete Products
The operating segments Cement and Lime and separately Concrete individually meet the quantitative thresholds required by AASB 8 as well as meeting the
aggregation criteria allowing them to be reported as one segment. Concrete Products meets the quantitative threshold therefore is reported as a separate
segment. The Cement, Lime and Concrete Products Joint Ventures form part of the above two reportable segments as they meet the aggregation criteria.
The major end-use markets of Adelaide Brighton’s products include residential and non-residential construction, engineering construction, alumina and steel
production and mining.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
105
40 Segment reporting (continued)
(b) Segment information provided to the Managing Director
The segment information provided to the Managing Director for the reportable segments for the year ended 31 December 2013 is as follows:
2013
($ Million)
Total segment operating revenue
Inter-segment revenue
Revenue from external customers
Depreciation and amortisation
EBIT
2012
($ Million)
Total segment operating revenue
Inter-segment revenue
Revenue from external customers
Depreciation and amortisation
EBIT
Cement, Lime
and Concrete
Concrete
Products
All other
segments
1,201.7
(25.7 )
1,176.0
55.0
226.5
124.4
-
124.4
7.4
2.1
88.9
-
88.9
8.3
(5.9 )
Cement, Lime
and Concrete
Concrete
Products
All other
segments
1,147.3
(37.1 )
1,110.2
49.9
220.9
123.7
-
123.7
7.9
0.4
86.1
-
86.1
7.4
0.8
Total
1,415.0
(25.7 )
1,389.3
70.7
222.7
Total
1,357.1
(37.1 )
1,320.0
65.2
222.1
Sales between segments are carried out at arms length and are eliminated on consolidation.
The operating revenue assessed by the Managing Director includes revenue from external customers and a share of revenue from the joint ventures and
associates in proportion to the Group’s ownership interest, excluding freight, interest and royalty revenue. A reconciliation of segment operating revenue to
revenue from continuing operations is provided as follows:
($ Million)
Total segment operating revenue
Inter-segment revenue elimination
Freight revenue
Interest revenue
Royalties
Elimination of joint venture and associate revenue
Revenue from continuing operations
The Managing Director assesses the performance of the operating segments based on a measure of EBIT.
This measurement basis excludes the effect of net interest. A reconciliation of the EBIT to operating profit
before income tax is provided as follows:
EBIT
Net interest
Profi t before income tax
(c) Other segment information
Consolidated
2013
1,415.0
(25.7 )
128.3
1.8
0.7
(292.1 )
1,228.0
2012
1,357.1
(37.1 )
129.4
2.6
0.5
(269.4 )
1,183.1
222.7
(14.1 )
208.6
222.1
(14.6 )
207.5
Revenues of approximately $157.2 million (2012: $144.2 million) are derived from a single customer. These revenues are attributable to the Cement, Lime and
Concrete segment.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
106
41 Parent entity financial information
(a) Summary financial information
The individual financial statements for the Company show the following aggregate amounts:
($ Million)
Balance sheet
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
Shareholders’ equity
Issued capital
Reserves
Share-based payments
Retained earnings
Total shareholders’ equity
Profi t for the year
Total comprehensive income
2013
2012
1,051.3
1,572.1
475.6
736.0
836.1
692.0
3.3
140.7
836.0
128.3
128.3
803.0
1,334.4
204.4
525.1
809.3
689.6
2.2
117.5
809.3
158.0
158.0
(b) Guarantees entered into by the parent entity
Bank guarantees
2.5
2.1
(c) Contingent liabilities of the parent entity
The parent entity did not have any contingent liabilities as at 31 December 2013 or 31 December 2012 other than the Bank guarantees detailed above.
42 Changes to accounting policies
(a) Summary of changes
The Group has adopted Australian Accounting
Standards and Interpretations issued by the
Australian Accounting Standards Board (AASB)
that have mandatory application from 1 January
2013. The nature and effect of the changes in
accounting policies are further explained below.
(i) Stripping costs
Interpretation 20 requires the cost of removing
overburden from a surface mine, commonly
referred to as stripping costs, to be recognised
as an asset if the costs can be attributed to an
identifiable component of the ore body (reserve),
the costs relate to the improved access to
that component can be measured reliably and
it is probable that future economic benefits
associated with the stripping activity (improved
access to the reserve) will flow to the entity.
The Group previously recognised an asset for
stripping costs on a total site basis, recognising
an expense in the income statement as
reserves were extracted. A site by site review
of previously deferred stripping costs indicated
that the majority of stripping costs deferred
as an asset by the Group were not able to be
attributed to identifiable components of the
reserve and consequently did not meet the
initial recognition criteria of Interpretation 20. In
accordance with the transitional requirements of
the Interpretation, the Group has retrospectively
applied the policy resulting in the carrying value
of the deferred stripping asset of $4.2 million
that did not meet the initial recognition criteria
to be recognised in retained earnings, net of tax
expense.
(ii) Employee benefits
The AASB released a revised standard on
the accounting for employee benefits (AASB
119 Employee Benefits) which requires the
recognition of all re-measurements of defined
benefit liabilities/assets immediately in other
comprehensive income (removal of the so-called
‘corridor’ method) and the calculation of a net
interest expense or income by applying the
discount rate to the net defined benefit liability
or asset. This replaces the expected return on
plan assets that is currently included in the
income statement. The standard also introduces
a number of additional disclosures for defined
benefit liabilities/assets and guidance on
the timing of the recognition of termination
benefits.
As this accounting standard is operative from
1 January 2013, the Group has retrospectively
applied the requirements of the standard.
(iii) Joint arrangements
AASB 11 introduces a principles based approach
to joint arrangements. This standard classifies
joint arrangements into two categories, Joint
Ventures or Joint Operations, depending upon
the exposure the investor has to the ownership
in the underlying assets and obligation for
liabilities of the joint arrangement. Joint
Ventures are equity accounted, while Joint
Operations are proportionally consolidated.
The Group has previously recognised all
joint ventures using the equity method of
accounting. Two joint ventures, Burrell Mining
Services JV and Batesford Quarry, qualify as
Joint Operations, while the remainder meet the
criteria as a Joint Venture and continue to be
equity accounted.
Due to the nature of the two entities, the change
in accounting method for the Joint Operations
does not impact on the Net Assets in the
Consolidated Balance Sheet, nor the Profit after
tax in the Consolidated Income Statement.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
107
42 Changes to accounting policies (continued)
(b) Impact on financial statements
The restatement of the affected financial statement line items for the prior periods is as follows:
Balance sheet 2012 (extract)
($ Million)
Cash and cash equivalents
Trade and other receivables
Inventories
Investments accounted for using the equity method
Property, plant & equipment
Intangible assets
Total assets
Trade and other payables
Provisions
Deferred tax liabilities
Retirement benefi t obligations
Total liabilities
Net assets
Retained earnings
Total equity
Balance sheet 2011 (extract)
($ Million)
Cash and cash equivalents
Trade and other receivables
Inventories
Investments accounted for using the equity method
Property, plant & equipment
Intangible assets
Total assets
Trade and other payables
Provisions
Deferred tax liabilities
Retirement benefi t obligations
Total liabilities
Net assets
Retained earnings
Total equity
2012
7.0
169.6
138.7
132.1
901.4
184.9
Increase/
(Decrease)
2012
(Restated)
1.8
0.6
(3.9 )
(3.1 )
1.1
(0.1 )
8.8
170.2
134.8
129.0
902.5
184.8
1,616.7
(3.6 )
1,613.1
94.5
26.0
67.7
9.0
608.6
1,008.1
306.6
0.5
0.1
(1.0 )
(1.0 )
(1.4 )
(2.2 )
(2.2 )
95.0
26.1
66.7
8.0
607.2
1,005.9
304.4
1,008.1
(2.2 )
1,005.9
2011
11.0
168.9
127.9
97.2
851.0
183.0
Increase/
(Decrease)
2011
(Restated)
2.1
1.1
(4.0 )
(2.9 )
0.4
(0.1 )
13.1
170.0
123.9
94.3
851.4
182.9
1,466.2
(3.4 )
1,462.8
98.5
21.7
70.7
10.9
509.1
957.1
257.3
957.1
0.7
0.1
(0.9 )
(1.3 )
(1.4 )
(2.0 )
(2.0 )
(2.0 )
99.2
21.8
69.8
9.6
507.7
955.1
255.3
955.1
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
108
42 Changes to accounting policies (continued)
(b) Impact on financial statements (continued)
Income statement (extract)
($ Million)
Revenue from continuing operations
Cost of sales
Freight and distribution costs
Administration costs
Finance costs
Share of net profi ts of joint venture entities accounted for using the equity method
Profit before income tax
Income tax expense
Profi t for the year
Profit is attributable to:
Equity holders of the Company
Non-controlling interests
Statement of comprehensive income (extract)
($ Million)
Profit for the year
Actuarial gain on retirement benefit obligation
Income tax relating to components of other comprehensive income
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Total comprehensive income for the year is attributable to:
Equity holders of the Company
Non-controlling interests
Total comprehensive income for the year
Profit
Increase/
(Decrease)
2012
(Restated)
2012
1,176.2
(716.1 )
(187.2 )
(62.7 )
(18.9 )
30.2
209.2
(55.1 )
154.1
154.2
(0.1 )
154.1
6.9
(4.3 )
(0.1 )
(3.5 )
1.8
(2.5 )
(1.7 )
0.5
(1.2 )
(1.2 )
-
(1.2 )
Other
Comprehensive
Income
Increase/
(Decrease)
2012
154.1
0.3
(0.1 )
0.2
154.3
154.4
(0.1 )
154.3
(1.2 )
1.4
(0.4 )
1.0
(0.2 )
(0.2 )
-
(0.2 )
1,183.1
(720.4 )
(187.3 )
(66.2 )
(17.1 )
27.7
207.5
(54.6 )
152.9
153.0
(0.1 )
152.9
2012
(Restated)
152.9
1.7
(0.5 )
1.2
154.1
154.2
(0.1 )
154.1
Basic and diluted earnings per share for the prior year have also been restated. The amount of the correction for both basic and diluted earnings per share was
a decrease of 0.1 cents per share.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
109
Directors’ declaration
Auditors’ declaration
In the Directors’ opinion:
Auditor’s Independence Declaration
As lead auditor for the audit of Adelaide
Brighton Ltd for the year ended 31 December
2013, I declare that to the best of my
knowledge and belief, there have been:
a) no contraventions of the auditor independence
requirements of the Corporations Act 2001 in
relation to the audit; and
b) no contraventions of any applicable code of
professional conduct in relation to the audit.
This declaration is in respect of Adelaide
Brighton Ltd and the entities it controlled
during the period.
K R Reid
Partner
PricewaterhouseCoopers
Adelaide
5 March 2014
Liability limited by a scheme approved under Professional
Standards Legislation.
PricewaterhouseCoopers
ABN 52 780 433 757
91 King William Street, Adelaide SA 5000
GPO Box 418, Adelaide SA 5001
Telephone +61 8 8218 7000
Facsimile +61 8 8218 7999
www.pwc.com.au
(a) the financial statements and notes set out on
pages 64 to 109 are in accordance with the
Corporations Act 2001, including:
(i) complying with Accounting Standards, the
Corporations Regulations 2001 and other
mandatory professional reporting requirements;
and
(ii) giving a true and fair view of the consolidated
entity’s financial position as at 31 December
2013 and of its performance for the financial
year ended on that date; and
(b) there are reasonable grounds to believe that the
Company will be able to pay its debts as and
when they become due and payable; and
(c) at the date of this declaration, there are
reasonable grounds to believe that the members
of the Extended Closed Group identified in
Note 36 will be able to meet any obligations
or liabilities to which they are, or may become,
subject by virtue of the Deed of Cross Guarantee
described in Note 36.
Note 1(a) confirms that the financial
statements also comply with International
Financial Reporting Standards as issued by the
International Accounting Standards Board.
The Directors have been given the declarations
by the Managing Director and Chief Financial
Officer required by section 295A of the
Corporations Act 2001.
This declaration is made in accordance with a
resolution of the Directors.
Mark Chellew
Managing Director
Dated 5 March 2014
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
110
Independent audit report
Report on the financial report
We have audited the accompanying fi nancial
report of Adelaide Brighton Limited (the
Company), which comprises the balance sheet
as at 31 December 2013, the income statement,
statement of comprehensive income, statement
of changes in equity and statement of cash
fl ows for the year ended on that date, a
summary of signifi cant accounting policies,
other explanatory notes and the directors’
declaration for Adelaide Brighton Group (the
consolidated entity). The consolidated entity
comprises the Company and the entities it
controlled at the year’s end or from time to
time during the fi nancial year.
Directors’ responsibility for the financial
report
The directors of the Company are responsible
for the preparation of the fi nancial report
that gives a true and fair view in accordance
with Australian Accountant Standards and the
Corporations Act 2001 and for such internal
control as the directors determine is necessary
to enable the preparation of the fi nancial
report that is free from material misstatement,
whether due to fraud or error. In Note 1,
the directors also state, in accordance with
Accounting Standard AASB 101 Presentation
of Financial Statements, that the fi nancial
statements comply with International Financial
Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion
on the fi nancial report based on our audit.
We conducted our audit in accordance with
Australian Auditing Standards. Those standards
require that we comply with relevant ethical
requirements relating to audit engagements
and plan and perform the audit to obtain
reasonable assurance whether the fi nancial
report is free from material misstatement.
An audit involves performing procedures to
obtain audit evidence about the amounts
and disclosures in the fi nancial report. The
procedures selected depend on the auditor’s
judgement, including the assessment of the
risks of material misstatement of the fi nancial
report, whether due to fraud or error. In making
those risk assessments, the auditor considers
internal control relevant to the consolidated
entity’s preparation and fair presentation
Auditor’s opinion
In our opinion, the remuneration report of
Adelaide Brighton Limited for the year ended
31 December 2013 complies with section 300A
of the Corporations Act 2001.
PricewaterhouseCoopers
K R Reid
Partner
Adelaide
5 March 2014
Liability limited by a scheme approved under Professional
Standards Legislation.
PricewaterhouseCoopers
ABN 52 780 433 757
91 King William Street, Adelaide SA 5000
GPO Box 418, Adelaide SA 5001
Telephone +61 8 8218 7000
Facsimile +61 8 8218 7999
www.pwc.com.au
of the fi nancial 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. An audit also
includes evaluating the appropriateness
of accounting policies used and the
reasonableness of accounting estimates made
by the directors, as well as evaluating the
overall presentation of the fi nancial report.
We believe that the audit evidence we have
obtained is suffi cient and appropriate to
provide a basis for our audit opinion.
Independence
In conducting our audit, we have complied
with the independence requirements of the
Corporations Act 2001.
Auditor’s opinion
In our opinion:
(a) the fi nancial report of Adelaide Brighton
Limited is in accordance with the Corporations
Act 2001, including:
(i) giving a true and fair view of the consolidated
entity’s fi nancial position as at 31 December
2013 and of its performance for the year ended
on that date; and
(ii) complying with Australian Accounting
Standards (including the Australian Accounting
Interpretations) and the Corporations
Regulations 2001.
(b) the fi nancial report and notes also comply with
International Financial Reporting Standards as
disclosed in Note 1.
Report on the Remuneration Report
We have audited the remuneration report
included in pages 47 to 63 of the directors’
report for the year ended 31 December 2013.
The directors of the Company are responsible
for the preparation and presentation of the
remuneration report in accordance with
section 300A of the Corporations Act 2001.
Our responsibility is to express an opinion on
the remuneration report, based on our audit
conducted in accordance with Australian
Auditing Standards.
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
111
Financial history
Year ended
($ Million unless stated)
Dec
2013
Dec8
2012
Dec9
2011
Dec9
2010
Dec9
2009
Dec9
2008
Dec9
2007
Dec9
2006
Dec9
2005
Dec7,9
2004
Dec9
2003
Dec9
2002
Dec9
2001
Statements of financial performance
Sales revenue
1,228.0 1,183.1 1,100.4 1,072.9
987.2 1,022.4
888.4
794.7
717.3
683.4
630.6
486.8
387.8
Depreciation and amortisation
(70.6)
(65.2)
(57.8)
(52.8)
(56.8)
(56.8)
(52.4)
(51.8)
(47.0)
(51.4)
(52.3)
(45.1)
(41.0)
Earnings before interest & tax
222.7
222.1
219.88 216.2
185.3
189.1
171.3
148.8
134.1
119.6
97.0
80.0
46.9
Net interest earned (paid)
(14.1)
(14.6)
(17.0)
(14.0)
(16.7)
(33.8)
(21.7)
(15.2)
(14.0)
(14.7)
(12.6)
(13.1)
(16.3)
Profit before tax, abnormal &
extraordinary items
208.6
207.5
206.4
202.2
168.6
155.3
149.6
133.6
120.1
104.9
84.4
66.9
30.6
Tax expense
(57.5)
(54.6)
(58.0)
(50.8)
(45.4)
(34.5)
(35.7)
(31.0)
(29.2)
(11.8)
(25.8)
(16.2)
-
-
-
0.1
-
-
-
0.1
-
(0.1)
-
-
-
-
-
(0.5)
-
-
1.3
-
(1.1)
(0.9)
-
-
-
-
-
Profit from discontinued operations
Non-controlling interests
Net profit after tax attributable
to members
Group balance sheet
Current assets
151.1
153.0
148.4
151.5
123.1
120.8
113.9
102.1
90.9
93.3
57.7
50.7
30.6
390.2
363.7
307.8
274.1
308.8
290.8
233.1
224.7
211.0
196.2
173.3
143.3
119.0
Property, plant & equipment
889.7
902.5
851.0
760.6
774.3
801.9
742.5
694.2
665.6
613.5
620.1
561.3
510.7
Receivables
Investments
Intangibles
31.4
29.6
138.5
129.0
27.2
97.2
30.4
87.7
30.4
72.5
28.4
67.6
29.5
66.9
27.5
40.8
23.3
38.1
19.1
35.6
12.2
33.6
12.5
30.8
11.7
27.6
183.9
184.8
183.0
179.1
169.0
169.4
164.4
164.6
165.0
165.5
166.4
146.6
147.2
Other non-current assets
0.0
3.5
0.0
0.0
0.0
0.0
2.7
22.9
19.0
19.7
17.1
28.5
37.0
Total assets
1,633.7 1,613.1 1,466.2 1,331.9 1,355.0 1,358.1 1,239.1 1,174.7 1,122.0 1,049.6 1,022.7
923.0
853.2
Current borrowings & creditors
105.4
115.0
99.2
106.4
106.5
98.4
145.5
125.8
323.5
294.6
306.3
Current provisions
105.8
78.5
34.5
52.6
55.4
44.5
49.5
54.1
58.2
48.1
42.3
58.3
54.8
49.9
43.8
Non-current borrowings
259.1
299.3
258.7
150.2
200.5
410.5
281.9
210.7
1.0
1.1
1.5
200.8
228.5
Deferred income tax & other
non-current provisions
Total liabilities
Net assets
Share Capital
Reserves
Retained Profits
Shareholders’ equity attributable to
members of the company
101.6
114.4
116.7
88.4
95.6
102.8
94.3
109.1
105.3
116.8
97.0
83.3
77.0
571.9
607.2
509.1
397.6
458.0
656.2
571.2
499.7
488.0
460.6
447.1
397.2
399.2
1,061.8 1,005.9
957.1
934.3
897.0
701.9
667.9
675.0
634.0
589.0
575.6
525.8
454.0
699.1
696.6
694.6
692.7
690.4
540.4
514.0
513.3
513.3
512.8
512.8
512.1
462.4
4.3
2.1
2.3
2.6
2.9
3.5
14.5
13.3
355.6
304.4
257.3
236.0
200.6
155.0
136.4
139.8
14.0
98.4
12.8
54.1
30.4
30.6
30.9
22.4
-19.9
-42.2
1,059.0 1,003.1
954.2
931.3
893.9
698.9
664.9
666.4
625.7
579.7
565.6
522.8
451.0
Non-controlling interests
2.8
2.8
2.9
3.0
3.1
3.0
3.0
8.6
8.3
9.3
10.0
3.0
3.0
Total shareholders’ funds
1,061.8 1,005.9
957.1
934.3
897.0
701.9
667.9
675.0
634.0
589.0
575.6
525.8
454.0
Share information
Net Tangible Asset Backing ($/share)
1.38
1.29
1.22
1.19
1.15
0.97
0.93
0.94
0.87
0.78
0.76
0.70
0.65
Return on funds employed
17.0% 18.0% 19.4% 20.0% 17.3% 18.0% 18.1% 16.7% 15.9% 13.4% 12.7% 11.7%
7.1%
Basic earnings per share (¢/share)
Diluted earnings (¢/share)
Total dividend (¢/share)
Interim dividend (¢/share)
Final dividend (¢/share)
Special dividend (¢/share)
23.7
23.4
24.0
23.8
23.3
23.2
23.9
23.7
20.4
20.3
22.2
22.0
21.0
20.8
18.8
16.4
16.8
16.2
17.2
14.6
19.51
16.51
16.51
21.51
13.51
15.01
18.51
18.51
10.51
7.51
9.01
3.01
7.51
9.01
-
7.51
9.01
-
7.51
9.01
5.01
5.51
8.01
-
6.51
8.51
-
6.01
9.01
3.51
5.01
7.51
6.01
4.251
6.251
-
7.51
3.51
4.01
-
10.7
10.7
6.0
9.9
9.9
5.25
2.752
2.54
3.251,6
2.753
-
-
6.5
6.5
4.0
2.05
2.04
-
23.4% 30.9% 26.0% 15.9% 19.6% 55.3% 48.4% 33.6% 35.8% 31.4% 37.7% 34.6% 45.6%
Gearing
11 Fully franked
12 60% franked
13 35% franked
14 20% franked
15 13% franked
17 Restated for AIFRS
16 Dividend declared after year end as
18 Restated for changes to accounting policies (Note 42)
a result of Boral Ltd Takeover Offer
19 Except as noted, financial history has not been restated
of Adelaide Brighton Ltd
ADELAIDE BRIGHTON LTD AND ITS CONTROLLED ENTITIES
FOR THE YEAR ENDED 31 DECEMBER 2013
112
This report is printed carbon neutral by Finsbury Green an ISO14001: 2004
(Environmental Management Systems) certified company on 100% post consumer
recycled carbon neutral manufactured paper accredited by the Forest Stewardship
Council (FSC), which promotes environmentally appropriate, socially beneficial and
economically viable management of the world’s forests. The printing process uses digital
printing plates, eliminating film and associated chemicals, and vegetable-based inks
made from renewable sources. All paper waste during the printing process is recycled.
The printer of this report is an independently audited carbon neutral printer who
proactively reduces emissions then offsets the balance with providers approved under
the Australian Government’s National Offset Carbon Standard.
The Adelaide Brighton logo, the MCI logo, the Cockburn Cement logo, the Swan Cement logo, the Northern Cement logo,
the Hy-Tec logo and the Adbri Masonry logo are trade marks of Adelaide Brighton Ltd or its related bodies corporate.
Adelaide Brighton Ltd
ABN 15 007 596 018
Level 1
157 Grenfell Street
Adelaide
South Australia 5000
GPO Box 2155
Adelaide SA 5001
Telephone 08 8223 8000
Facsimile 08 8215 0030
Web www.adbri.com.au
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