Building a
better Australia
Annual Report 2020
I
Adbri Limited Annual Report 2020 Section Contents
Our business at a glance
Chairman’s Report
CEO Review
Finance Report
Cement and Lime
Concrete and Aggregates
Concrete Products
Joint Ventures
Sustainability Report 2020
Tax Transparency Report
Executive Team
Board of Directors
Financial Statements
02
03
05
10
12
14
16
18
20
46
48
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53
Cockburn Cement supplied over 100,000 tonnes of
cement and slag to the Forrestfield Airport Link, WA.
You know
us by what
we’ve built.
When we first started making cement in 1882 there were
just over two million people living in Australia. Today, over
25 million people live in bustling cities and towns that were
built using cement, aggregates, concrete and lime products
that were manufactured in one of our 162 plants and
quarries around Australia.
But what we’re most proud of is what we’ve built –
A better Australia.
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01
Adbri Limited Annual Report 2020 Section
Our business at a glance
Chairman’s Report
# 1Lime producer in the
mineral processing
sector
# 1Concrete products
manufacturer
# 2Cement and clinker supplier
to the construction sector
#4Concrete and aggregates
producer
I am pleased to report to our shareholders a robust 2020 performance, particularly
in the context of the COVID-19 pandemic. The Company delivered pleasing financial
results, significantly improved safety and reduced carbon emissions, despite facing
one of the most challenging years in its history as a result of the global health and
economic crisis.
In August 2020, we launched our new company name,
Adbri Limited. This was also an opportunity to reflect on our
long and proud history and look to our future. Building a
better Australia – our purpose as a Company – drives all our
work, as we deliver for our customers, community and our
people. Our promise – Always Ready – underpins the
way we work across the Company.
Challenging operating conditions
Our CEO, Nick Miller provides information of Adbri’s
response to the COVID-19 pandemic in his report.
However, I wanted to personally commend all of our
employees, contractors, customers and suppliers for their
support and ongoing efforts during 2020 and into 2021.
During the year, employees went to extraordinary lengths,
whether at their usual work location or at home, to continue
working throughout the period, safely keeping Adbri running
and delivering for its stakeholders.
The Company was able to satisfy customer demand for
our products throughout the year while maintaining social
distancing, hygiene and other protocols to manage the risk
of COVID-19 infections. One employee tested positive for
COVID-19 during 2020, who recovered from the infection
and returned to work on full duties. These instances were
handled in accordance with protocols Management had in
place for this situation.
For much of 2020, we saw the continuation of softness in the
east coast residential construction market, impacting demand
for our products. Following several years where annual
dwelling approvals were in excess of 200,000, approvals
started to decline in 2019, continuing into late 2020 to levels
not seen since mid-2013. In the last few months of the
year, approvals increased due to the Federal Government’s
HomeBuilder and other State Government stimulus measures.
Looking forward, the improvement in housing approvals,
combined with the announcement of significant Government
spending on infrastructure projects will provide a foundation
for construction materials demand, complementing the
strong demand from the mining sector.
Shareholder returns
Reported profit increased from $47.3 million in 2019 to
$93.7 million in 2020 primarily as a result of lower impairment
charges. Underlying net profit of $115.6 million declined 6.0%
on 2019, however the result exceeded Adbri’s withdrawn
guidance set in early 2020 by 4.4%. This result demonstrates
the benefits of the Company’s balanced exposure to the
Australian construction and mining sectors, with both
sectors successfully managing the challenges associated
with COVID-19 to continue to operate throughout the year,
largely uninterrupted.
Underlying earnings of 17.7 cents per share were 6.3%
below 2019, while return on funds employed of 10.9% was
generally stable.
The Company has maintained a strong balance sheet, with
net debt of $372.1 million representing leverage of 1.4 times
underlying EBITDA and gearing of 30.5%, both within the
Board’s target range. This has placed the Company in a position
to continue to pay dividends, with a fully franked final dividend
for 2020 of 7.25 cents per share having been approved, bringing
total dividends for the year to 12.0 cents per share.
The Board maintains a sustainable dividend policy, targeting
a payout ratio of 65-75% of earnings. The 2020
full year dividend of 12.0 cents per share
represents a 68% payout ratio, towards
the middle of this target range, reflecting
prudence in an uncertain COVID-19 market
44
Quarries
93
Concrete plants
16
9
Cement and lime
facilities and depots
Concrete product
facilities
“Looking forward, the improvement in housing approvals, combined with the
announcement of significant Government spending on infrastructure projects
will provide a foundation for construction materials demand, complementing
the strong demand from the mining sector.
Raymond Barro
Chairman
02
Adbri Limited Annual Report 2020 Our business at a glance
Adbri Limited Annual Report 2020 Chairman’s Report
03
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environment and the higher anticipated capital expenditure
outlook as a result of the Kwinana Upgrade Project.
This $199.0 million project is anticipated to be operational in
mid-2023, providing significant operational and cost savings,
reducing future capital expenditure requirements and
creating long-term shareholder value.
Board composition and governance
Your Board is committed to the Australian Securities
Exchange Corporate Governance Principles and
Recommendations, including a majority of independent
directors. Vanessa Guthrie has taken responsibility as the
Lead Independent Director following the departure of Zlatko
Todorcevski in June 2020, and in August 2020, Vanessa was
also appointed to the Deputy Chair position, in addition to
continuing as the Lead Independent Director.
The Board acknowledges that following the resignation
of Zlatko, there has been a period without a majority of
independent directors, with any conflicts managed in line
with the Board Protocol governing potential conflicts and
interests that has been in place since 2005 and amended
as required since then.
The Company is actively seeking an additional independent
director with suitable skills and experience to complement
the existing Board.
Sustainability
The Group recognises its social licence to operate is intrinsic
to creating long-term value to all stakeholders – keeping
our people, customers and members of the public safe,
providing employment to local communities, taxes to
Local, State and Federal Governments, and materials that
are essential to building a better Australia – in addition to
providing shareholders a return for the use of their capital.
We are continuing to progress initiatives against our 5-year
sustainability targets. Our Sustainability Report provides full
details, and I am pleased to report an improvement in safety
outcomes, with the total recordable injury frequency rate
(TRIFR)1 reducing 47.2% and a decline in total scope 1 and 2
carbon emissions of 2.3%.
Stakeholder engagement
Stakeholder engagement changed in 2020 as a result
of COVID-19, with restrictions on travel and face-to-face
meetings. The year saw the first virtual Annual General
Meeting for many companies including Adbri, with
ever-changing social distancing and lockdown measures
being experienced across all states and territories. While
this displaced the normal physical meeting which typically
provides an opportunity for shareholders to meet with
Directors and Management, virtual meetings provide the
benefit of broader participation by shareholders.
Arrangements for the 2021 Annual General Meeting are
underway, with the Company planning a hybrid meeting,
with both physical and virtual participation, subject to
circumstances at the time of the meeting.
1. Adbri aligned TRIFR to be in accordance with the Office of the Federal Safety
Commissioner methodology for 2020. Comparative information for 2019 was restated.
I look forward to welcoming you to that meeting and I
thank shareholders for their patience and understanding as
arrangements are finalised, subject to ongoing restrictions
due to COVID-19.
Acknowledgements
On behalf of the Board, I would like to acknowledge our CEO
Nick Miller and the Executive team for their commitment,
dedication and resolve to deliver for our stakeholders during
some extraordinarily challenging circumstances.
We also thank our shareholders, employees, customers
and the communities in which we operate, for their continued
support.
The entire Adbri team is focused on achieving our vision,
executing our strategy and creating long-term value for our
shareholders.
Financial summary
20 19
$M
$M
Revenue
1,454.2
1,517.0
Earnings before interest, tax, depreciation
and amortisation (“EBITDA”)
262.7
271.6
Depreciation, amortisation and
impairments
Earnings before interest and tax
(“EBIT”)
Net finance cost1
Profit before tax
Tax expense
Net profit after tax
Non-controlling interests
Net profit attributable to members
Underlying EBITDA
Underlying EBIT
Underlying net profit after tax
Underlying net profit after tax excluding
property
Basic earnings per share (“EPS”) (cents)
Underlying EPS (cents)
Ordinary dividends per share -
fully franked (cents)
Net debt2 ($ million)
Leverage ratio3 (times)
Gearing4 (%)
Return on funds employed5 -
underlying (%)
(115.1)
(189.7)
147.6
(20.4)
127.2
(33.6)
93.6
0.1
93.7
272.3
178.9
115.6
114.9
14.4
17.7
12.0
372.1
1.4
30.5
81.9
(18.5)
63.4
(16.2)
47.2
0.1
47.3
280.0
186.4
123.0
123.0
7.3
18.9
5.0
423.3
1.5
35.4
10.9
11.2
1. Net finance cost is the net of finance costs shown gross in the income statement
with interest income included in other income.
2. Net debt is calculated as total borrowings less cash and cash equivalents.
3. Leverage ratio is net debt / trailing 12 month underlying EBITDA.
4. Gearing is net debt / equity.
5. Return on funds employed is underlying EBIT / average monthly funds employed.
CEO Review
I have the pleasure of presenting the 2020 Annual Report, my third as Chief
Executive Officer, and the first report under our new Company name, Adbri Limited.
Market demand in 2020
Demand in 2020 was initially slow as a result of the impact
of extreme events on the east coast. This included bushfires,
with the associated disruption to construction in metropolitan
areas due to smoke, followed by significant rain that resulted
in flooding.
Construction and mining, two key end markets for Adbri,
remained robust against the impact of COVID-19 throughout
the year as these industries were regarded by Government
as ‘essential services’ and continued to operate largely
uninterrupted. This was offset by a slowing of overall demand
from construction in 2020, due to the decline in residential
and multi-residential construction and delayed spending on
infrastructure projects despite the large Government stimulus
proposed in the future.
Housing approvals were subdued for much of 2020, lifting
later in the second half following the announcement of the
Government HomeBuilder stimulus. Approvals for 2020 were
5.2% higher than 2019, buoyed by activity in the four months
to December 2020, increasing 17.0% over the same period
in 2019, with detached housing offsetting lower approvals
for apartments.
Both Federal and State Governments engaged directly with
business in the design of appropriate stimulus measures to
respond to the impact of COVID-19. Measures were focused
on the creation of jobs, including significant Government
stimulus for infrastructure projects and residential housing.
As a result of the gestation period between announcement
and physical construction activity actually commencing, these
measures only impacted demand toward the end of 2020.
While the year has proved incredibly challenging given the
impact of the COVID-19 pandemic and a slowing construction
market, it is pleasing to report that Adbri has responded
to these challenges strongly to deliver a financial and non-
financial performance that exceeded expectations.
At Adbri, our purpose – Building a better Australia – drives
everything that we do. Our promise – Always Ready –
underpins how we work. We are dedicated to delivering high
performance products on time, every time. Our decisions are
guided by our four pillars: safety, customer focus, inclusivity
and sustainable growth and I will address our key operational
progress in 2020 through the lens of these four pillars.
Proactive COVID-19 response
In a year in which the COVID-19 pandemic brought an
incredible level of disruption to many parts of the economy,
the performance of the business has been pleasing and is
testament to the efforts of all employees. The Group took a
proactive approach to managing the impact of COVID-19 on
our business and our employees, establishing cross-functional
crisis management teams that met regularly throughout 2020,
co-ordinating measures to respond to the pandemic.
Our non-operational staff were moved quickly to remote
working in order to protect their wellbeing and assist in limiting
the potential risk of infection at production sites, with up to
a third of our staff located off-site. Implementation of social
distancing protocols, contactless loading and delivery, control
room duplication, increased security and testing for site entry,
the use of video conferencing and remote commissioning,
deep cleaning and sanitising, along with increased COVID-19
awareness training, introduction of pandemic leave and rollout
of COVID-19 mock audits were all key elements of our success
in keeping our operations open during this challenging period.
The Group incurred $6.5 million in additional operational costs
as a result of managing the impact of COVID-19. However,
importantly all our sites were able to remain open for business
and provided continuity of supply to our customers throughout
the period - a testament to the efforts and diligence of the
entire Adbri team.
“Adbri’s earnings exceeded expectations despite the challenging
conditions during the year from COVID-19, competitive pressures
in slowing markets and rising input costs.
Nick Miller
Chief Executive Officer
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04
Adbri Limited Annual Report 2020 Chairman’s Report
Adbri Limited Annual Report 2020 CEO Review
05
Demand in Western Australia improved during 2020 as a
result of a recovery in residential construction on the back of
a robust mining market, supported by buoyant iron ore and
gold prices.
Construction in South Australia was subdued for much of
the year following the completion of infrastructure projects in
2019, notably the Northern Connector. The Group benefitted
from a number of projects during the year, with spending
on Defence and road projects, combined with residential
subdivision work curtailing the decline in volumes.
Victorian demand remained stronger than anticipated for
much of the year, moderating when stage 4 Government
restrictions were implemented as customers navigated
staffing limitations on construction sites. Volumes recovered
late in the year following the lifting of restrictions, with second
half concrete volumes only 4.4% lower than the
prior corresponding period despite the extended period
of restrictions.
New South Wales demand was subdued as residential
construction, particularly multi-residential activity, continued
to decline in the Sydney market before some improvement
late in the year as the HomeBuilder stimulus program lifted
housing starts.
Construction in Queensland moderated as a result of lower
residential construction. The market was further disrupted
by the expansion of downstream concrete capacity and
increased competition in cement supply.
The Northern Territory experienced subdued market conditions
as major project works in the Defence and airport sectors
concluded. Demand from resources remained robust.
$63.0M (-^)
improvement in operating cash flow.
Financial performance
Adbri’s earnings exceeded expectations despite the
challenging conditions during the year from COVID-19,
competitive pressures in slowing markets and rising input
costs. Underlying net profit after tax (NPAT) declined 6.0%
to $115.6 million, a favourable result compared to our
withdrawn guidance of an expected reduction of 10%.
Conditions in the second half of 2020 were favourable
despite the impact of stage 4 restrictions in Victoria and
economic slowdown due to COVID-19, with underlying NPAT
growth over 2019 on a modest 1.0% decline in revenue.
Group earnings for the year did not benefit from the receipt
of Government support from the JobKeeper program,
with Adbri repaying the small amount received from this
COVID-19 measure, in the second half of 2020.
Earnings benefitted from lower costs delivered through
the Group’s cost-out and business improvement program,
as well as improving demand in the Western Australian
market which offset slowing demand in east coast markets
and some moderation in selling prices. The financial result
highlights the benefit of the Group’s balanced geographic
and sector exposure.
Western Australian margins improved due to robust demand,
while cement and lime margins declined in other states due
to the lower volumes, partially offset by lower costs.
Concrete and aggregates margins improved due to delivery
of cost reduction initiatives and residential subdivision work
that drove aggregate volumes higher in the second half of
the year, more than offsetting the impact of lower concrete
volumes and prices.
The Concrete Products division benefitted from higher
retail demand for masonry products during the pandemic,
driven by increased home renovation and landscaping
improvement activities, implementation of cost reduction
initiatives, with earnings increasing 33.3%.
The uncertainty in operating conditions during the year
as a result of COVID-19 intensified efforts to maintain tight
financial discipline. Operating working capital reduced by
$48.2 million, contributing to an improvement in operating
cash flow by $63.0 million to $256.2 million.
Revenue*
Net profit after tax
Earnings per share
Dividends approved
$M
1,650
1,600
1,550
1,500
1,450
1,400
1,350
1,300
1,250
$M
210
180
150
120
90
60
30
0
Cents
Cents per share
35
30
25
20
15
10
5
0
30
25
20
15
10
5
0
16
17
18
19
20
16
17
18
19
20
16
17
18
19
20
16
17
18
19
20
* Prior year (2015 – 2017) revenue
numbers have been restated to
accord with the adoption of AASB15
Reported
Underlying
Reported
Underlying
Ordinary interim dividend
Ordinary final dividend
Special dividend
Progress toward building a better Australia
Despite the unprecedented challenges, we made
substantial progress across our four pillars, helping us
contribute to our overarching purpose of building a
better Australia.
Our Pillars
We are Always Ready to be the best in everything
we do. Our decisions are guided by our four pillars.
Safety
Customer Focus
We put safety first
We deliver on our promises
We care about each-
other’s wellbeing
We are agile in meeting
our customers’ needs
We live by our Life
Saving Rules
We build long-term
partnerships that add value
Work Safe, Home Safe
We act with integrity
Customer Focus
• Meeting our customers’ needs is critical to the continuity
of our business.
• We build partnerships that deliver long-term value for our
customers and continue to develop our footprint, products
and facilities to better meet the needs of customers.
• The Birkenhead dry-mix upgrade was commissioned
in 2020. The upgrade of equipment producing bagged
product for the South Australian market will lower production
costs and introduce improved packaging to the market.
• Following commissioning of the Scotchy Pocket quarry in
mid-2019, sales volumes exceeded the target set for the
quarry of 350,000 tonnes in the first full year of operation.
The quarry supplies material to the Group’s concrete plants
on the Sunshine Coast as well as third-party customers
and is well located to participate in the upgrade of the
Bruce Highway at the northern end of the Sunshine Coast.
Inclusivity
• The Group provided pandemic leave as an additional
leave entitlement, with 115 people utilising this leave in
2020, ensuring our employees had the confidence to
self-isolate if there was a risk of a COVID-19 infection.
Initiatives focused on the physical and mental
health of our employees were implemented, including
technologies to ensure communication was maintained
with all employees throughout the year.
•
• Delivery of our first Reconciliation Action Plan (RAP)
including interactive cultural training for our Management,
which will help us further develop Adbri’s relationship
with Aboriginal and Torres Strait Islander peoples.
Inclusivity
Sustainable Growth
Sustainable Growth
We work together
We embrace differences
We create value for
our investors and our
communities
We respect and
listen to each other
We contribute to a
sustainable future
We empower our people
We learn and innovate
We invest in our people
Safety
• The health and safety of our people has always been
Adbri’s first priority and, following the initial improvement
in safety outcomes reported for 2019, it is pleasing to see
the continued focus by employees in 2020 result in an
even better safety record across the Group.
• The Group’s Total Recordable Injury Frequency Rate
(TRIFR) decreased from 10.6 at December 2019 to 5.6
by 2020, a 47.2% reduction that reflects the impact of
the Group’s four-part ‘step change’ program. Initiatives
in 2020 have focused on visible leadership, critical risk
management, musculoskeletal care and safe transport.
• The Group continues to look to technology to play
a role in improving the management of safety and
the environment, with the implementation in 2020 of
enhanced monitoring of environmental performance,
and the trial of safety proximity devices and truck driver
monitoring systems.
• We increased our exposure to infrastructure projects
during 2020 including construction of schools, upgrades
to the Melbourne tram network and Defence projects.
As a result of the longer lead-time for infrastructure
projects, the improved exposure to the infrastructure
sector provides a foundation for earnings in future periods.
• Adbri acquired land at Badgerys Creek for the planned
development of a concrete plant to supply into
construction projects at the Western Sydney Aerotropolis.
• The Board approved the $199.0 million Kwinana Upgrade
Project. Following construction and commissioning,
the facility is expected to be operational by mid-2023,
consolidating the Group’s Western Australian cement
grinding operations onto one site.
• The Group received approval from the South Australian
Environment Protection Authority to increase the usage
rate of Refused Derived Fuel (RDF) at the Birkenhead
plant to 25 tonnes per hour (tph). RDF usage improves
the carbon footprint of the plant as a low emission fuel
source that displaces fossil fuel in the form of natural gas,
used in the kiln at the site. The use of RDF will also lower
operational unit costs.
33.3% (-^)
increase in earnings in the Concrete Products division,
driven by increased home renovation and improvement
activities during the pandemic.
06
Adbri Limited Annual Report 2020 CEO Review
Adbri Limited Annual Report 2020 CEO Review
07
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Revenue by product group
Concrete and Aggregates
Cement
Lime
Concrete Products
9%
12%
in-sourcing specialised transport services, consolidation
of back-office functions into a shared service environment,
reduced fuel and natural gas costs, plant efficiency
improvements and workforce planning.
The Kwinana Upgrade Project is an important component of
retaining our cost-competitive position. In addition to reducing
the requirement for future capital spending and providing
enhanced sustainability benefits through reduced truck
movements, lower carbon emissions and efficient equipment,
the project is anticipated to deliver annualised cash cost
savings of circa $19.0 million in the first full year of operation.
42%
37%
Vertical integration
Revenue by market
Non-residential and engineering
Residential
Mining operations
18%
The Group continues to identify opportunities to grow the
business, expanding its vertically integrated footprint in the
construction materials market. Growth through acquisition,
as well as greenfield or brownfield opportunities are
considered as part of the strategic review process to identify
potential attractive investments that enhance the Group’s
vertically integrated model.
In 2020, growth activities focused on the operational
performance of recent capital investments such as the
Pinkenba concrete plant commissioned in 1H20 and the
Scotchy Pocket quarry commissioned in 2H19. Planning
for a new concrete plant has commenced for the Badgerys
Creek site, acquired early in 2020.
45%
37%
Land development
Revenue by state
Victoria
Western Australia
New South Wales
Queensland
South Australia
Other
4%
15%
25%
16%
22%
18%
Strategic initiatives
Cost reduction and operational improvement
Remaining cost-competitive in the manufacture of products
for customers is an ongoing focus of Management given the
increased threat of imported products to the domestic market.
The Group initiated a cost reduction program in late 2019
targeting the delivery of $30.0 million of gross savings in 2020.
The focused efforts throughout the year have delivered
actual cost savings of $35.5 million, exceeding the target by
$5.5 million, through reduced contracted road freight including
Land ownership is a central part of the manufacturing
operations of the Group. However, as sites become surplus
to operational requirements, the Group has a strategy of
maximising value to shareholders through development or
divestment. An active list of land opportunities is monitored
by the Executive team and individual strategies developed to
maximise value.
Land development activities in 2020 have been focused on
two holdings in the Geelong region.
Remediation works at the Hilltop site, previously part of
the Geelong cement works in Fyansford, consisted of the
demolition of silo structures and environmental rehabilitation
of the site. Opportunities for development of the site are being
considered, including discussions with potential partners.
Adbri’s land holdings at the Batesford Quarry operations are
located in the Western Geelong Growth Area (WGGA), an
area to the west of Geelong which has been identified for
future residential and related development. Framework plans
and precinct structure plans for the WGGA are progressing
with Geelong City Council and the Victorian Government.
Transform lime business
Adbri has low cost lime production facilities, strategically
located to supply the mining sector in Western Australia,
South Australia and the Northern Territory. Given the Group’s
proven ability to reliably supply lime product to Alcoa over
nearly 50 years, it was disappointing that Alcoa advised in
July 2020 that the contract would not be renewed past the
current contract, that ends on 30 June 2021. The loss of
the Alcoa volumes to import competition will reduce sales
volumes, impacting production and workforce requirements
at our Munster site. The Alcoa contract represented annual
revenue of $70.0 million.
In January 2021, we announced a 5-year extension to our
supply contract for lime to South32, extending the term from
2024 to 2029.
The Group announced a pre-tax impairment charge of $21.7
million primarily as a result of the decision to mothball Munster
kiln 5 following completion of the Alcoa contract in June 2021.
The Group undertook a strategic review of its lime business
following the notice from Alcoa. In addition to cost mitigation
initiatives, the strategic review explored a range of options and
opportunities, with the objective of increasing shareholder value.
The Group's preferred strategy is to increase our exposure
to the growing quicklime market and to remain a key supplier
to the mining and infrastructure sectors. At its core, this
would involve expanding the Group’s current strong local
manufacturing footprint, providing customers with enhanced
product options, whilst remaining competitive with imports.
In strengthening our manufacturing footprint, we expect
to achieve superior customer outcomes through stable
and reliable local manufacturing, decreasing supply chain
disruption risk. This should drive improved shareholder value
through long-term customer relationships.
Management are pursuing the development of feasibility
studies for several exciting prospects for our lime business
including:
•
the development of a lime kiln operation in Kalgoorlie with
raw material supply to be drawn from our high quality
Rawlinna deposit, currently in care and maintenance;
increasing production capacity at our Dongara site;
•
• exploring limestone supply options for the reactivation of
a lime kiln operation at our Kwinana site; and
the development of our various associated land holdings.
•
I look forward to presenting you with further information on
these opportunities, which have the potential to secure long-
term demand and to grow our lime business, when the plans
are sufficiently developed.
Sustainability
Operating a sustainable business is a fundamental part
of who we are. Societal expectations to maintain a social
licence to operate, are increasing, including managing the
risk of climate change.
During 2020, Adbri built on the initial work conducted in
2019 on consolidating Group efforts into a sustainability
framework and an initial report as part of the Task Force
on Climate-related Financial Disclosures (TCFD). We made
progress against our 5-year sustainability targets, with key
results reflected in an improvement in safety with Adbri’s
TRIFR reducing by 47.2% to 5.6 and a decrease in total
scope 1 and scope 2 greenhouse gas emissions by 2.3%
through increased usage of RDF and higher rates of natural
gas usage displacing coal as a fuel.
The Group is active in reducing its carbon footprint through
investment in renewable energy, the use of alternate fuels and
alternate cementitious materials, although emissions from
the production of cement and lime are considered difficult to
abate. Despite this, Adbri is looking to participate in research
that would assist in reducing process emissions as part of its
action on climate change.
Further details are set out in the Sustainability Report.
2021 outlook
Government stimulus measures are anticipated to
benefit demand for construction materials in 2021, as the
improvement in housing approvals in 2H20 translate to
commencements and planned infrastructure projects move
to the construction phase. January 2021 trading was ahead
of expectations and February has commenced strongly,
with the exception of Victoria during the government-
imposed lockdown period. However, trading conditions are
expected to remain challenging as the stimulus measures
do not completely offset underlying weakness in east coast
construction markets. The production outlook for gold, nickel,
iron ore and alumina remains strong.
Earnings in the second half will be negatively impacted
by the expected completion of the Alcoa lime contract on
30 June 2021 and the anticipated commencement of a
competing cement import terminal in New South Wales,
partially offset by continued cost reduction.
Pressure from input cost inflation is expected to continue in
2021, with the Group continuing cost reduction and operational
improvement initiatives as part of our ongoing program. As part
of this, Adbri announced in December 2020 the streamlining
of our operational model, reducing our three divisions into two
from 1 January 2021. Incremental cost savings in 2021 are
expected to be circa $20.0, million however are likely to be
partially offset by headwinds in the order of $10.0 million.
Capital expenditure is anticipated to be elevated in 2021
due to the commencement of the Kwinana Upgrade Project
and planned refurbishment of the MV Accolade, the Group’s
ship that transports limestone from the Klein Point quarry to
Birkenhead as part of clinker production, with total capital
expenditure anticipated to be circa $200.0 million.
Subject to the completion of satisfactory sales
processes, surplus land sales are expected to crystallise
$20.0 - 30.0 million in proceeds over the next 2 years.
Due to the inherent market uncertainty, it is difficult to
provide more specific guidance at this time.
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Conclusion
Our performance during a difficult year demonstrates the
quality of the Group’s vertically integrated business model
and balanced geographic and sector exposure. While
COVID-19 continues to impact the world in the early stages
of 2021, the Company remains confident of the longer-term
fundamentals for growth in the Australian economy that will
drive value for Adbri shareholders.
Finally, I would like to sincerely thank our Directors,
employees, contractors, customers, suppliers and joint
venture partners for their significant effort, flexibility and
support that contributed to a robust result for the year.
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Artist’s impression of Kwinana Upgrade Project
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Adbri Limited Annual Report 2020 CEO Review
Adbri Limited Annual Report 2020 CEO Review
09
Finance Report
Full year reported NPAT increased from $47.3 million to $93.7 million in 2020.
Reported profit includes non-cash impairment charges totalling $15.2 million
after tax and non-recurring significant items totalling $6.7 million after tax
resulting in an underlying NPAT of $115.6 million.
Sales and profit
Revenue declined 4.1% to $1.45 billion, with improved sales
of lime and concrete products offset by the impact of lower
residential construction activity on cement and concrete
volumes. Improvements in the average pricing for cement,
lime and concrete products, offset moderate reductions in
aggregate and concrete selling prices. Bagged products
and retail masonry products (e.g. pavers, retaining walls)
experienced strong demand, while demand for low grade
aggregate also increased.
Western Australian demand for construction materials and
lime improved as a result of a recovery in residential and
commercial construction, as well as strong demand in the
mining sector, lifting volumes for both cement and lime.
Pricing for cement improved, although average prices for
lime decreased marginally.
Residential demand in New South Wales continued to
decline compared to 2019, with total annual dwelling
approvals to December 2020 declining 2.2% compared to
2019, with continuing weakness in the over-supplied multi-
residential market offsetting growth in detached housing.
The reduction in demand led to lower volumes across
concrete, cement and concrete products in the state.
Demand in South Australia was subdued following completion
of supply to infrastructure projects in 2019, principally the
Northern Connector Project. Concrete and cement volumes
declined, however, infrastructure project work and residential
subdivisions supported demand for aggregates.
Despite limitations on personnel numbers at construction
sites during stage 4 lockdown restrictions in Victoria, revenue
was largely in line with 2019, while slowing residential
demand and the completion of infrastructure projects in
2019 reduced demand in the Northern Territory.
Underlying NPAT declined 6.0% to $115.6 million, as a
result of lower revenue, partially offset by the benefit from
cost savings.
Operational cost initiatives exceeded the Group’s initial
forecast, delivering pre-tax cost savings of $35.5 million.
Net of $20.0 million in input costs increases, the benefit
to 2020 of $15.5 million was in excess of the targeted
$10.0 million in net savings for the period.
Cost savings were delivered across a range of areas including
road freight, fuels, consolidation of back office functions into a
shared services environment, investment in production plant
to improve efficiencies and workforce planning.
Additional operational costs due to the impact of COVID-19
of $6.5 million were incurred during 2020 as a result of
spending on consumables such as sanitiser and site
security, and inefficiencies in major shut downs due to social
distancing restrictions, as well as establishment costs
to support working from home for approximately
400 employees.
Cash flow
Operating cash flow increased 32.6% to $256.2 million due
to improved working capital and lower payment of income
tax, offsetting lower distributions from joint ventures and
higher interest payments.
A focus on production efficiencies and lower revenue led to
an improvement in operating working capital of $48.2 million,
while a reduction in tax instalments and a higher refund of
income tax due to overpayments in prior periods reduced
net income tax payments by $34.6 million.
Cash distributions from joint ventures declined in line with the
reduction in earnings, while interest payments increased as a
result of higher cash and gross debt holds during the year as
part of measures taken to ensure the Company maintained
liquidity as the impact of COVID-19 on financial markets was
being assessed.
Investment in capital increased $44.8 million to $136.4 million.
Stay-in-business capital of $78.9 million represented 84%
of depreciation, and development capital projects totalled
$57.5 million. Development projects included the purchase
of land at Badgerys Creek in line with the vertical integration
strategy for a future concrete plant to service the Western
Sydney Aerotropolis, completion of the Pinkenba concrete
plant, the Birkenhead dry-mix upgrade, the purchase of
long-term aggregate reserves and a project to improve dust
efficiencies at the Birkenhead site.
Dividend payments of $63.6 million represent the final
dividend for 2019 of 5.0 cents per share and the interim
dividend for 2020 of 4.75 cents per share, a reduction of
5.25 cents per share on the dividend payments during 2019.
$35.5M (-^)
in pre-tax cost savings, $5.5 million in excess of target.
Return on funds
employed
Cash flow
from operations
%
$M
25
20
15
10
5
0
300
250
200
150
100
50
0
16
17
18
19
20
16
17
18
19
20
Reported
Underlying
Leverage
Interest cover
Times
Times
1.8
1.6
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0
35
30
25
20
15
10
5
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16
17
18
19
20
16
17
18
19
20
Reported
Underlying
Reported
Underlying
Net debt to equity
Total assets
%
50
45
40
35
30
25
20
15
10
5
0
$M
2,200
2,100
2,000
1,900
1,800
1,700
1,600
16
17
18
19
20
16
17
18
19
20
$51.2M (^-)
reduction in net debt to $372.1 million at
31 December 2020.
Balance sheet and capital management
Adbri maintained its strong balance sheet through good
cash flow and capital management. Net debt reduced
by $51.2 million to $372.1 million at 31 December 2020,
representing a leverage ratio of 1.4 times underlying EBITDA
and gearing of 30.5%, while interest cover was 13.3 times
underlying EBITDA. These metrics remain within the Board’s
target of 1-2 times underlying EBITDA for leverage and 25-
45% for gearing.
Liquidity, representing the undrawn component of the Group’s
$900.0 million debt facilities and cash balances, is strong at
circa $525.0 million. Tenor for borrowing facilities provides
flexibility, with the weighted average term of 4.6 years.
The Company has complied with its bank agreement
terms and maintains significant headroom within its
banking covenants.
Shareholder returns
Total fully franked dividends approved for 2020 of 12.0 cents
per share represent a 68% payout ratio on underlying net
profit after tax. Adbri’s capital management objectives are to:
• ensure an efficient balance sheet to optimise the cost of
capital and thereby shareholder returns through the use
of prudent debt levels;
• maintain investment grade credit metrics to optimise
funding cost;
•
retain balance sheet flexibility to fund capital projects and
acquisitions; and
• distribute surplus capital to shareholders in an efficient
manner.
Approved dividends of 12.0 cents per share for 2020 is a
reduction from approved dividends for 2019 of 15.0 cents
per share and is towards the middle of the Board’s target
range of 65-75% of earnings. Approved dividends at the
middle to lower end of the Board’s target range reflect
elevated capital requirements over the next three years as
a result of the recently announced $199.0 million Kwinana
Upgrade Project and ongoing volatility and uncertainty in the
outlook due to COVID-19. The Kwinana Upgrade Project is
anticipated to be completed in mid-2023, providing long-
term value to shareholders by reducing costs and reducing
future stay-in-business capital requirements.
Underlying return on funds employed declined marginally
from 11.2% to 10.9% due to lower profits during the year,
however remains above the Company’s cost of capital. Capital
management and cost reduction were key priorities, allowing
the Company to deliver relatively stable returns in an otherwise
challenging year for the construction materials sector.
10
Adbri Limited Annual Report 2020 Finance Report
Adbri Limited Annual Report 2020 Finance Report
11
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Our business
Market conditions
Margins
Demand for cement remained challenging in 2020 outside of
Western Australia, where demand improved with the mining
sector remaining robust despite the challenges from the
COVID-19 pandemic. Construction activity in other markets
was lower, resulting in cement volumes declining 7.1%
compared to the prior comparative period and clinker volumes
reducing by 23.0%. Federal and State Government stimulus
measures targeted at the construction sector were welcomed
but did not significantly improve demand during the year.
Western Australian cement volumes increased as the
State’s economy recovered, with an improving residential
construction market, increased infrastructure spend and
growth in mining demand. Demand in other states was
subdued due to declining residential construction activity
and slower demand from infrastructure. Slowing demand
was most significant in South Australia, with the prior
comparative period including the balance of the Northern
Connector Project which concluded early in the period,
and in New South Wales on the back of a subdued multi-
residential market. Clinker volumes were impacted by
demand dynamics of Sunstate Cement in the Queensland
market, with lower offtake from our joint venture partner.
Lime volumes improved 4.2%, with strong demand from
Western Australian customers led by the non-alumina
market as the gold sector remained buoyant, offsetting
lower demand in South Australia and the Northern Territory.
In mid-2020, the Company announced that Alcoa had
advised the contract to supply lime to their Western
Australian alumina refineries would not be extended beyond
the end of the existing contract on 30 June 2021. The Group
announced an impairment to Munster kiln 5 which will be
mothballed following completion of the contract, and a
strategic review of the lime operations as discussed earlier in
this Annual Report.
Cement prices increased 1.4% on the prior comparative
period, benefitting from improved volumes in the Western
Australian market. Prices moderated in South Australia and
the Northern Territory, while improving in New South Wales
and Western Australia.
Lime prices declined 1.8%. Higher pricing in the alumina
sector as a result of contractual price adjustments were
more than offset by the mix impact of lower volumes in
South Australia and the Northern Territory and a decline
in prices to the non-alumina sector in Western Australia.
Margins improved in the Western Australian market as a
result of higher cement and lime volumes, coupled with
improved pricing and cost savings. However, this was offset
by lower margins in South Australia and New South Wales,
which were impacted by lower volumes, resulting in earnings
for the division declining during the period.
The Group’s cost reduction program delivered cost savings
to the Cement and Lime division, across a range of areas
including fuel prices, production efficiencies, resource
recovery and reduced administration costs. These savings
were partially offset by the impact of COVID-19 on operations
which resulted in higher costs for consumables, security,
pandemic leave and the reduced efficiency of maintenance
shutdowns as a result of social distancing requirements.
Building a better Australia
In December 2020, the Adbri Board approved the
Kwinana Upgrade Project, which will consolidate the Group’s
Western Australian cement grinding operations onto one site.
Following an estimated two-year construction period, the
$199.0 million project will improve efficiency of the operations,
with reduced maintenance and transport costs, and lower
energy requirement through state-of-the-art equipment.
The project is anticipated to deliver annual cash operating
cost savings of circa $19.0 million in the first full year
following commissioning, as well as reducing the need for
ongoing capital expenditure that would have been required
for the existing aging plant. Non-financial benefits delivered
by the project will include reduced truck movements through
the local community and lower carbon emissions as a result
of the improved efficiency.
The Birkenhead dry-mix packing plant upgrade was
commissioned during 2020, a challenging process due to
the travel restrictions placed on technicians from overseas
and major equipment suppliers that required innovative
solutions to maintain project timelines. The upgraded plant
provides state-of-the-art equipment to meet demand for
packaged products in the South Australian market, providing
improvements to health and safety, in addition to operational
flexibility. As part of the upgrade, new packaging provides
customers with better product storage durability.
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Cement
and Lime
Adbri carries a broad range of packaged products for our retail customers.
12
Adbri Limited Annual Report 2020 Section
Adbri Limited Annual Report 2020 Cement and Lime
13
Our business
Market conditions
Building a better Australia
The scale-up of the Scotchy Pocket quarry supported the
Group’s vertical integration strategy, following commissioning
in the second half of 2019. In addition to providing
aggregates to the Group’s Sunshine Coast concrete plants,
the quarry provides a platform for the Group to participate
in infrastructure projects in the region. The supply of quarry
products into the upgrade of the Bruce Highway, as part of
the Cooroy to Curra project near Gympie at the northern
end of the Sunshine Coast, commenced in late 2020 with
demand for quarry products from this project expected to
continue through to the end of 2022.
The vertical integration strategy was further enhanced with
the acquisition of land in the Badgerys Creek area, situated
within the Western Sydney Aerotropolis, with planning
underway for the construction of a concrete plant.
The Group continues to review acquisitions, joint ventures
and greenfield developments in attractive markets which
broaden our operational footprint and improve our product
offering to customers as we continue to grow our Concrete
and Aggregates business across Australia.
Concrete and Aggregates footprint
Hy-Tec
Central
Davalan Concrete
Direct Mix Concrete
Mawsons Joint Venture
The concrete and aggregates market remained challenging in
2020, driven largely by the downturn in east coast residential
building activity coupled with the economic and operational
disruption caused by the COVID-19 pandemic. In addition, the
first quarter of the year was negatively impacted by bushfires
which were followed by floods across the eastern seaboard.
Fiscal stimulus measures announced in 2020 by State and
Federal Governments included a strong focus on actions
to increase spending in the construction sector to boost
employment and generate economic activity. Improved
demand as a result of the Government stimulus measures
only became evident during the final quarter and had limited
impact on the overall year’s performance. The outlook
remains positive based on the current order book and
the various Governments’ forward pipeline of proposed
infrastructure spend.
Lower demand from the already slowing residential
construction market and impact of COVID-19 disruptions led
to an 8.3% reduction in concrete volumes compared to 2019,
with the most significant impact felt in New South Wales.
The completion of key infrastructure projects in South Australia
and the Northern Territory also contributed to lower volumes
during the period.
Conversely, aggregate sales volumes increased by 5.0%
reflecting strong demand for our quarry products across
infrastructure, road maintenance and civil projects,
combined with an improvement in residential subdivision in
the second half driven in part by the Federal Government’s
housing stimulus program, particularly in the Queensland
market. Slowing demand increased competitive pressures
and reduced volume in higher priced markets such as New
South Wales and the Northern Territory, and led to an overall
reduction in concrete selling prices by 2.4%. Concrete selling
prices in the Victorian and South Australian markets were
relatively stable. Underlying prices for our clean aggregates
remained stable during the period, however the higher
demand for lower grade and fill products resulted in a 5.1%
reduction in average aggregate selling prices.
Margins
Underlying earnings before interest and tax improved
significantly compared to 2019. The benefits from the Group’s
cost-out and operational improvement program including
the insourcing of targeted transport services, and higher
aggregate volumes, offset the impact of lower concrete
volumes and subdued concrete and aggregate prices.
Our brands
Concrete and
Aggregates
Exposed aggregate driveways are a popular choice for homeowners.
14
Adbri Limited Annual Report 2020 Section
Adbri Limited Annual Report 2020 Concrete and Aggregates
15
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The business progressed with its concrete brick initiative
and while sales were lower due to lower residential demand,
a number of key projects were delivered including Victorian
school projects which used over 500,000 bricks and the
award-winning Napier Street project (pictured). In 2020,
these new bricks were successfully produced for the first
time in New South Wales and Queensland, adding to the
existing capability in Victoria and Tasmania and providing
full coverage across the attractive east coast market.
A strong focus on building the market as well as the
continued development of the product and its inherent
environmental benefits provides a positive outlook for 2021.
Victorian School Building Authority’s
(VSBA) schools project
Adbri Masonry is helping build better schools and
improved education facilities one brick at a time.
In 2020, we supplied over 500,000 Architectural
Concrete Bricks to the Victorian School Building
Authority (VSBA) to help transform schools
into leading edge learning environments and
neighbourhood facilities.
For the first stage of this project, Adbri delivered
premium locally produced concrete bricks to eight
schools as a part of the Victorian Government’s
$7.2 billion investment in education and training
facilities. The bricks were selected by the
consulting architects for their contemporary
design that features multiple colours and textures
including the highly detailed honed finish.
With the support of four skilled bricklaying
contractors, Adbri’s architectural bricks have
brought to life these new state-of-the-art learning
environments, where the next generation of
students in Merrifield, Thoroughbred, Truganina,
Wollahra, Rockbank, Pakenham, Cranbourne and
Pascoe Vale can thrive.
Our business
Market conditions
The Concrete Products business saw solid demand in the
retail sector through much of the year following a slow start
to 2020 due to bushfires and flooding impacting demand.
Demand for masonry products was robust for much of the
year as the retail products sector demand offset the impact
of lower commercial volumes.
Our concrete products became a focus of residential
consumer spend as COVID-19 restrictions and lockdowns
hindered spending on other items such as hospitality,
restaurants and tourism. Demand was strong across all retail
channels and regions for much of the year as consumers
directed discretionary household spend towards home
renovations and landscape improvements.
Sales to the commercial and residential construction sectors
remained challenging, however second half performance
improved following a fire and flood impacted first quarter.
Increased second half demand was aided by increased
residential demand in North Queensland and commercial
demand in New South Wales and south east Queensland.
Margins
Underlying EBIT increased year on year, from $6.0 million in
2019 to $8.0 million in 2020. Demand from the higher margin
retail sector and the benefit from cost initiatives offset the
impact of lower demand from the commercial and residential
construction sectors. Underlying EBITDA margins increased
from 8.8% in 2019 to 9.7% in 2020.
Sales volumes supported cost efficient production
processes at manufacturing sites, with operational sites
continuing to implement cost-out initiatives, optimise working
capital and improve manufacturing efficiencies. With these
initiatives, Concrete Products achieved a year-on-year cost
reduction and reduced working capital compared to the
previous corresponding period.
Building a better Australia
Concrete Products maintains its commitment to sustainability
matters such as the environment, diversity and inclusion.
In 2020, the business invested $0.6 million to install solar
panels across its major facilities in Victoria, New South Wales
and Queensland, expected to generate 600kW of electricity
representing up to 22% of our energy requirements at these
sites and reducing our greenhouse emissions by 574 tonnes
annually.
Our brand
Concrete
Products
The Napier Street Apartments which feature Adbri’s concrete
architectural bricks won a 2020 Think Brick Award.
16
Adbri Limited Annual Report 2020 Section
Adbri Limited Annual Report 2020 Concrete Products
17
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ICL is building a new dry-mix bagging plant at Yarraville, Victoria.
Joint
Ventures
Our joint venture businesses
Our joint venture businesses enable access to important
markets and products whilst providing vertical integration for
our fully owned operations.
Earnings from Adbri’s joint venture businesses decreased
from $31.5 million in 2019 to $26.9 million in 2020. Volumes
in the Victorian market were strong, despite the challenges
of COVID-19. However, cement volumes in New South
Wales and Queensland were impacted by slower market
conditions and in Queensland lower shareholder offtake by
our Sunstate joint venture partner. The Sunstate result was
the major driver of the lower overall contribution from our
joint ventures. Offshore, the effects of COVID-19 were more
pronounced, impacting our Malaysia-based Aalborg Portland
joint venture with lockdown periods affecting production and
sales during the course of the year.
Independent Cement and Lime Pty Ltd
(ICL) (50%)
Aalborg Portland Malaysia Sdn. Bhd.
(Aalborg) (30%)
ICL is a joint venture between Adbri and Barro Group Pty
Ltd. It is a major supplier of bulk and packaged cementitious
products throughout Victoria and New South Wales and
remains the exclusive distributor for Adbri in these states.
Bulk volumes remained resilient in Victoria, despite COVID-19
related restrictions for the construction industry, while
packaged product sales benefitted from an increase in retail
activity over the period. In New South Wales, lower volumes
were largely offset by cost-out initiatives. This solid demand
profile saw ICL earnings largely stable year-on-year.
Sunstate Cement Limited (Sunstate) (50%)
Sunstate is a joint venture between Adbri and Boral
Limited. With a leading cement milling, storage, packaging
and distribution capability, Sunstate is a key supplier to
Queensland’s construction industry.
As expected, sales volumes to our joint venture partner
decreased in 2020, whilst competition in the south east
Queensland construction materials market increased.
The dry-mix and package markets remained robust assisted
by strong retail demand. Continued manufacturing efficiency
efforts assisted in offsetting some of the lower volume,
however earnings contribution to Adbri reduced by
$6.9 million compared to 2019.
Mawson Group (Mawsons) (50%)
Mawsons is a joint venture between Adbri and BA Mawson
Pty Ltd. The largest regional premixed concrete and quarry
operator in northern Victoria, Mawsons also operates in
southern New South Wales. Traditional positions have
been bolstered by further acquisitions over recent years,
reinforcing Mawsons position as a key aggregates and
premixed concrete supplier in the region, with leading
positions in many of the markets it serves.
Strong regional construction demand in Victoria during 2020
saw the earnings contribution from Mawsons grow by 32.1%
compared to 2019. The outlook for regional construction in
Victoria continues to look positive into 2021, underpinned
by infrastructure projects including safety improvements,
improved housing demand in regional Victoria and high
agricultural yields as rainfall returned after a period of
prolonged drought. Fiscal stimulus through the HomeBuilder
scheme is also expected to provide demand support during
the first half of 2021.
Aalborg manufactures white cement and clinker from its
plant at Ipoh, located in northern Malaysia. Its bulk and
packaged white cement products are sold domestically in
Malaysia and exported to other markets across south east
Asia and Australia.
Although an operational improvement program continued to
provide efficiencies, 2020 earnings were severely impacted
by the effects of COVID-19 across Malaysia and the broader
south east Asian region. The plant itself was forced to shut
down for several weeks during a nationwide lockdown, and
several key markets such as Singapore and the Philippines
saw demand reduce due to their own restrictions. The net
impact was a reduction in earnings contribution to Adbri of
$0.2 million over the year.
Burrell Mining Services (Burrell) (50%)
Burrell is an unincorporated joint venture between Adbri
and Burrell Mining Products. It manufactures a range of
concrete products exclusively for the coal mining industry at
its production facilities in Queensland and New South Wales.
Burrell earnings contribution to Adbri for 2020 was
$0.1 million lower than 2019, impacted by demand and
price headwinds affecting the coal market.
Batesford Quarry (50%)
Batesford Quarry is an unincorporated joint venture
between Adbri, E&P Partners and Geelong Lime Pty Ltd.
Batesford Quarry, situated at Fyansford near Geelong in
Victoria, undertakes quarrying, processing, marketing and
distribution of limestone and quarry products.
Batesford Quarry earnings were steady. Demand for
agricultural lime products is expected to remain stable
into 2021 off the back of positive sentiment from Victorian
agricultural markets.
32.1% (-^)
growth in earnings contribution from Mawsons, driven
by strong regional construction demand in Victoria.
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Adbri Limited Annual Report 2020 Joint Ventures
Adbri Limited Annual Report 2020 Joint Ventures
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Sustainability
Report
2020
Overview
A sustainable future
At Adbri we are committed to a sustainable future. A future where all our people go home safely, our customers are at the
heart of what we do, our people and workplaces are inclusive, and where we grow value for our investors and communities
whilst taking care of our environment and addressing climate-related impacts. This future is supported by our strategic pillars
of safety, customer focus, inclusivity and sustainable growth that we introduced during the year to build a common culture
and values across the Group.
Approach
Adbri’s sustainability strategy focuses on assessing
risk and identifying opportunities to improve social,
environmental and economic outcomes. We are respectful
of our social licence to operate and we recognise that
contributing to a sustainable future is essential for our long-
term business success. We will achieve this by fostering
responsible business practices and engaging our people
and communities in ‘Building a better Australia’.
Global alignment
The United Nations defined 17 Sustainable Development
Goals (SDGs) that address important challenges facing
the world as part of the United Nations 2030 Agenda for
Sustainable Development. Adbri’s purpose, pillars and
Sustainability Framework are aligned to the SDGs, of
which four SDGs represent the material areas where
Adbri contributes to a sustainable future.
SDG
SDG objective
Adbri’s commitment
Promote sustained, inclusive and
sustainable economic growth, full and
productive employment and decent
work for all.
Adbri is committed to enhancing our diverse and inclusive culture, and our
aim of ‘Work Safe, Home Safe’ for the protection of our people and the
environment, every day.
Build resilient infrastructure,
promote inclusive and sustainable
industrialisation and foster innovation.
We continue to develop and invest in product quality and research low
carbon technologies to build sustainable and resilient products and
manufacturing processes for a future low carbon industry.
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Ensure sustainable consumption and
production patterns.
We are committed to reducing our impact on the environment and local
communities from our activities, products and services. Adbri assesses
our climate risk exposure and adopts measures to achieve improved social
and environmental outcomes, including supporting a circular economy and
reducing waste to landfill.
Take urgent action to combat climate
change and its impacts.
We continue to take action to reduce carbon emissions for a low carbon
future through our production processes, building resilience and ensuring
our people, local communities and other stakeholders are engaged on our
sustainability journey.
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Adbri Limited Annual Report 2020 Section
Adbri Limited Annual Report 2020 Sustainability Report
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Governance
Adbri’s Board and Management are committed to the highest
standards of corporate governance: actively managing our risks
and opportunities which is essential for long-term sustainable
performance and value creation for all stakeholders.
Board approach
In 2020, the Safety, Health, Environment and Community
Committee was renamed to the Safety, Health, Environment
and Sustainability (SHES) Committee to better reflect the
Company’s focus on sustainability.
The SHES Committee charter sets out its role to monitor
and oversee, on behalf of the Board, the effectiveness of
safety, health and environment practices, and to assist and
advise the Board in relation to corporate social responsibility
and sustainability. The SHES Committee works within the
Group’s risk framework to identify, manage, and report risks
and opportunities through oversight of:
• Management and employee roles and accountabilities,
and expectations of contractors;
•
resources and processes to identify, manage, report and
reduce SHES risks;
• consultation and communication with employees,
contractors, suppliers and customers on SHES matters;
• processes for complying with our legislative obligations;
• protection of the health, safety and wellbeing of
employees, contractors and visitors;
• provision of an early injury intervention program, return
to work opportunities for injured employees, effective
rehabilitation and equitable claims management; and
• avoidance, reduction and control of waste and pollutants
to reduce adverse environmental impacts.
Management approach
The Management team recognises that sustainability is
an important component of the Company’s purpose of
‘Building a better Australia’ by managing our operations
in a safe and sustainable manner. SHES key performance
indicators are embedded into Executive remuneration,
with non-financial performance components of short-term
incentives including a range of metrics to drive performance
in the areas of leadership, people, diversity, health, safety
and environment.
“Our integrated HSE System provides
standards and a framework for achieving
our SHE objectives, whilst the Sustainability
Framework priorities and targets
provide the foundation for environmental
sustainability performance, including taking
action on climate change.
Continuous improvement in sustainability is driven through
Management working groups:
•
•
•
the Safety, Health, Environment Committee (SHEC)
oversee the implementation and execution of Adbri’s
Health, Safety and Environment (HSE) Strategy and
make decisions related to associated risks;
the Executive Sustainability Steering Committee (ESSC),
which focuses on environmental sustainability including
climate change; and
the Executive Management Team, which provides
oversight for the effective management of our business.
Challenges and opportunities
Sustainability presents both challenges and opportunities for Adbri. Our response to these has helped us increase revenue
through development of new products, reduction of our carbon footprint, reduce costs and better management of risks.
It is our intent to extend on our current efforts by continuing to drive sustainable development and innovation to improve
long-term value for our stakeholders.
Key challenges / opportunities
Climate action
Environmental
stewardship
We assess and report climate change risks and opportunities to stakeholders and continue to reduce our impact by
taking action to set a path to a low carbon future, contributing to net zero carbon emissions by 2050. Adbri works with
Governments and stakeholders to support climate change regulation and policies that provide for a sustainable future.
We are committed to the protection of the environment. We seek continual improvement in our performance
through assessment and management of environmental risk, operational compliance and integrating
environmentally sustainable practices into all areas of the business. This includes pollution management, reduction
of waste and consumption of natural resources as part of promoting a circular economy, improve water and land
management practices to protect biodiversity and ecosystems, and rehabilitation of land under our care.
Health, safety and
wellbeing
We strive to continually improve the health and safety performance of our sites. Adbri’s HSE Management System,
training and business culture help to protect the wellbeing of our workers and minimise the health, safety and
environmental risks, hazards and impacts associated with our activities, products and services.
Diversity and
inclusion
Adbri is committed to an inclusive workplace, one of the Company’s four pillars, promoting and valuing diversity. We
know that a diverse and inclusive culture enhances our working environment and results in better business outcomes.
Community
Technology
We are committed to being a socially responsible member of the communities in which we operate, valuing our
stakeholders and continue to seek ways to improve outcomes and engagement with our local communities.
We invest in technology and innovation to enhance the efficiency, productivity, quality and sustainability of
our business. We also participate directly, or through partnerships and collaboration, in research to develop
technologies for the production of construction materials.
Economic vitality
Our social licence to operate is built on our commitment to sustainability. Integral to this is providing local
employment opportunities, producing necessary goods and services, and payment of taxes to Local, State and
Federal Governments. We operate the business efficiently and responsibly manage our risks, supporting Australia’s
economy with a diverse and vertically integrated business that supports economic growth.
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Adbri Limited Annual Report 2020 Sustainability Report
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The Accolade operates a dual fuel system that includes natural gas to lower emissions.
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Sustainability framework
Adbri’s Sustainability Framework, adopted in 2019, provides
a focus for prioritising our efforts in alignment with SDGs that
are material to the Company to drive measurable performance
for the long-term success of the business.
The framework covers two strategic goals:
1. fostering a sustainable and responsible business; and
2. enhancing engagement with people and communities.
Within the framework we have set focus areas to drive action
within the company:
•
reducing adverse environmental impacts;
• developing low carbon products;
• engaging our people in sustainability initiatives; and
• building strong relationships with local communities.
Priorities are set for each focus area with 5-year targets
that use 2019 as a baseline. Beyond these 2025 targets,
Adbri is considering our longer-term risks and opportunities
relating to climate change and increasing demand for
sustainable production.
Climate
action
Economic
vitality
Environmental
stewardship
Sustainable
Future
Sustainable and
Responsible Business
Engaged People and
Communities
Health, safety
and wellbeing
Technology
Communities
Diversity and
inclusion
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Strategic
Goals
Challenges and
opportunities
Current initiatives
Future priorities
5-Year Targets
Alignment to SDGs
Reduce
adverse
environmental
impacts
Δ Emission intensive
Δ Using raw material
core products
substitutes
Δ Waste (excess
Δ Using alternative fuels
concrete, packaging,
use of recycled
materials)
Δ Plant design not all to
current best practice
Δ Responsible sourcing and
screening of products
Δ Diverting waste from landfill
Δ Progressive rehabilitation
Δ Developing TCFD
disclosures
Δ Implementing roadmap
to deliver on TCFD
recommendations
Δ Responsible use
of buffer land
(planting trees, solar
installations)
Δ Complete product
lifecycle assessments
Δ Waste minimisation
and recycling strategy
Δ Improve efficiency of
operations (energy
efficiency and plant
upgrades)
Δ Renewable energy
Δ 7% carbon emission
reduction
Δ 50% kiln fuel to
be sourced from
alternative fuel in SA
Δ 25% reduction in
process waste to
landfill
SDG 9: Industry,
Innovation and
Infrastructure
SDG 12: Responsible
Consumption and
Production
SDG 13: Climate
Action
Δ Use of renewable energy
strategy
sources including wind and
solar
Δ Improving environmental
compliance through
technology
Δ Reduce the use of
potable water in
industrial processes
Δ Business case to
introduce hybrid /
electric vehicles and
trucks
Low carbon
products
Δ Regulatory
Δ Developing geopolymer
Δ Develop carbon-
impediments to
replacing Portland
clinker cement
Δ Lack of scalable
demand for greener
products
Δ Produce cement
with 20% limestone
capability
capability
Δ Recycle cement packaging
Δ Environmental product
disclosure
Δ Creating products to
customer specifications
at Birkenhead, including
production of low carbon
products
neutral / low carbon
products via R&D
investment and
strategic initiatives
Δ Grow portfolio of
sustainable products
Δ Look to acquire
businesses providing
sustainable products
and solutions
Δ 20% increase in
the tonnage of
alternative raw
materials use
SDG 9: Industry,
Innovation and
Infrastructure
SDG 12: Responsible
Consumption and
Production
SDG 13: Climate
Action
People
Δ Reduce harm to our
people (physical and
mental health)
Δ Implementing Safety ‘Step
Δ Wellbeing strategy,
Change’ Program
including mental health
Δ 10% reduction in
TRIFR every year
SDG 8: Decent work
and economic growth
Δ Review of Diversity and
Δ Progress our
Δ Workforce diversity
Inclusion Policy
and inclusion
Δ Establish brand
identity
Δ Access to information
Δ Developing Reflect RAP
Δ Implementing graduate
program
Δ Inaugural Modern Slavery
statement
Δ Brand working group
established
reconciliation journey
through the RAP
stages
Δ Common values,
goals and operating
principles
Δ Company initiatives
for employees, e.g.
plastic, lighting, waste,
energy
Δ Develop digital strategy
Δ Innovate RAP
approved
Δ 30% female NEDs
Δ 20% female
employees
Δ Digital platform
established
to improve
communication
Communities
Δ Reduce the negative
Δ Developing cohesive
impact and contribute
positively to the
communities in which
we operate
messaging and branding for
communities and investors
i.e. sustainability strategy
and reporting
Δ Investor engagement
Δ Strategic community
engagement initiatives
Δ Supporting local
employment
Δ Enhance external
communications
Δ Community
engagement strategy
Δ Visible community
partnerships
Δ Local employment
focus
Δ Community
investment aligned
with the community
engagement
strategy
Δ Maintain
regular external
communications
SDG 8: Decent work
and economic growth
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Adbri Limited Annual Report 2020 Sustainability Report
Adbri Limited Annual Report 2020 Sustainability Report
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Performance highlights
Sustainability priorities
Reduce
environmental
impacts
2.3% (^-)
reduction in GHG
carbon emissions
9.1% (^-)
reduction in mains
potable water usage
initial climate change scenario
analysis completed
Reduce adverse environmental impacts
In our continuing journey to reduce environmental and
climate-related impacts, we have developed a range
of initiatives as part of our strategic goal to reduce
environmental impacts, including materials and energy
efficiency improvements through the use of raw material
substitutes and alternative fuels.
22% (^-)
UP
TO
expected reduction in electricity usage at four key
Adbri Masonry sites with the installation of solar arrays.
Low carbon
products
4,896 T (-^)
increase in alternative
raw material usage
17.3% (^-)
reduction in coal usage
at Munster
Engaged
people
47.2% (^-)
reduction in total recordable
injury frequency rate
28% (-^)
proportion of female
new hires
724
critical risk control self-
assessments completed
Engaged
communities
3
Aboriginal and Torres
Strait Islander organisation
sponsorships
55+
organisations supported
Reduce adverse environmental impacts -
Performance metrics, targets and progress
Material topics
Measure
2020
2019
Targets
Total GHG emissions
(scope 1 and 2)1
tCO2e
2,332,553
2,387,020
5-year target of
7% GHG emission reduction
from 2019 baseline
Scope 1
GHG emissions1
Scope 2
GHG emissions1
tCO2e
tCO2e
2,125,121
2,156,481
207,432
230,539
Total energy consumption1
GJ
14,286,867
14,782,120
Progress
Improvement -
2.3% reduction
Improvement -
1.5% reduction
Improvement -
10.0% reduction
Improvement -
3.4% reduction
Alternative fuel use in SA2
%
25%
23% 5-year target of 50% kiln fuel to
be sourced from alternative fuel
in SA from 2019 baseline
Improvement -
2 percentage point increase
representing an increase of 2.5%
tonnage of alternate fuel use
Process waste
to landfill3
Tonnes
177,703
204,723
5-year target of 25% reduction
in process waste to landfill from
2019 baseline
Improvement -
13.2% reduction
Mains potable water usage ML
1,206
1,327
N/A
Reportable environmental
incidents
Number
Incidents with environmental
consequences
Number
1
181
1
N/A
325
N/A
Improvement -
9.1% reduction
Stable -
No change
Improvement -
44.3% reduction
1. Greenhouse gas (GHG) emissions and energy consumption are measured and reported in line with the Australian National Greenhouse and Energy Reporting Act 2007.
GHG is reported in tonnes of carbon dioxide equivalent (tCO2e).
2. Alternate fuels used at clinker and lime production facilities, sourced from recovered materials that displace a portion of traditional virgin fossil fuels and reduce waste to landfill.
The emissions calculation methodology was adjusted in 2020 to provide a more precise figure, with 2019 comparative figure revised to enable a like-for-like comparison.
3. Process wastes are wastes produced through clinker and lime production that are sent to a final disposal destination. Additional waste streams have been included in current
period. 2019 comparative revised to enable a like-for-like comparison.
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Adbri Limited Annual Report 2020 Sustainability Report
Adbri Limited Annual Report 2020 Sustainability Report
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Reduce adverse environmental impacts -
Achievements
Initiatives
Progress
Using alternative fuels
Δ Alternative fuels use in SA increased by 2 percentage points from 23% in 2019 to 25% in 2020, an
increase in energy from all alternative fuel types used of 32,831 GJ.
Responsible sourcing and
screening of products
Diverting waste from
landfill to beneficial uses
Δ In 2020, 105,792 tonnes of RDF, an engineered fuel that is recovered from waste that would otherwise
go to landfill, was used to substitute a portion of our fuel needs from natural gas at the Birkenhead
plant. Regulatory approval was received to increase throughput of RDF from 15 tonnes per hour (tph)
to 25 tph.
Δ Angaston and Mataranka plants utilised 5,143 kilolitres (kL) of recycled waste oil as a fuel replacement
for traditional fossil fuels.
Δ Our procurement policy addresses a range of factors to help Adbri select the best fit-for-purpose
products and services for our business using best practice principles. Three key principles in our
policy include:
- maintain competitive and transparent bidding processes;
- maintain accountability and probity; and
- consider and mitigate financial, environmental, health and safety risks.
Δ Waste diversion activities during 2020, in addition to the alternative fuels and raw materials initiatives
outlined above, included:
- lime kiln dust re-use projects including agricultural applications and road construction material;
- increased recycling of cement kiln dust and commitment to a $6.0 million recycling project to reduce
waste production from the Birkenhead kiln; and
- onsite recovery and recycling of solid and liquid concrete wastes for beneficial re-use back into the
production process or for manufacture of new product lines.
Progressive rehabilitation
(and responsible use of
buffer land)
Δ Progressive rehabilitation of land, particularly at our quarries, reduces the impact of these activities
at the site at any one time. As activities shift from extraction of resources in older areas, proactive
rehabilitation is undertaken through landscaping and planting to rejuvenate the natural landscape.
For example, at our Austen quarry, we have been undertaking progressive rehabilitation since 2004,
with over 15,000 trees, shrubs and ground covers planted, including planting of vulnerable species.
Developing TCFD
disclosures and
implementing
roadmap to deliver on
recommendations
Use of renewable energy
sources including wind
and solar
Improve efficiency of
operations (energy efficiency
and plant upgrades)
Δ Adbri has committed to reporting in line with TCFD recommendations. In our TCFD program we
continue to progress all four streams of work:
- governance and oversight;
- climate change policy, strategy and metrics;
- climate risk management supporting projects; and
- scenario analysis.
Δ Adbri is undertaking a scenario analysis exercise where climate models are used to assess physical
and transition risks.
Δ Adbri increased its usage of renewable energy, installing solar panels with capacity of 500kW at sites
in our Concrete Products division, reducing electricity consumption by up to 22% at the four sites.
This initiative complements the Group’s electricity purchase agreement with a renewable energy
generator, that provides over 55% of Adbri’s electricity needs from renewable sources.
Δ Our Concrete Products division has reduced natural gas consumption by between 50% and 80% at
three sites by upgrading product curing systems.
Δ A solar analysis calculator was developed to allow staff to conduct energy reviews. This calculator is
used to evaluate the potential and capacity for solar panels at individual sites, promoting the benefits of
green energy.
Δ Our Sustainability Framework identifies plant upgrades and energy efficiency as a future priority.
This is an ongoing initiative as we invest in the long-term sustainability of the business.
Δ The majority of our clinker and lime is produced using energy efficient dry-process kilns, with state-of-
the-art technology including staged preheaters and precalciners.
Δ Over the past three years we have also completed energy audits on our key operations, resulting in the
upgrade of two large process fans at the Birkenhead site in 2020 to improve energy efficiency.
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Reduce the use of potable
water in industrial processes
Δ A range of initiatives have also been ongoing to increase water use efficiency including the use of
treated recycled water from vehicle wash stations and increasing fresh water capture and containment.
Δ Potable mains water consumption decreased from 1,327 ML in 2019 to 1,206 ML in 2020 (down 9.1%
across Adbri).
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We closely monitor the impacts of our
operations to ensure we are a good neighbour.
Improving environmental
compliance through
technology
Δ A centralised compliance management and review system was developed during 2020 to improve
management activities across environmental obligations. This assists sites to manage and centrally report
environmental compliance against licence conditions, providing up-to-date performance information.
Δ A summary of our environmental performance is included on page 60 of the Directors’ Report.
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Protecting the pied oystercatcher
For the past three years the team at our Dunbogan
sand quarry has created and maintained a breeding
ground for a pair of threatened pied oystercatchers who
call the quarry home.
With around 200 oystercatcher breeding pairs remaining
in New South Wales, the team has erected a predator-
proof fence around the nest to allow the family of pied
oystercatchers to flourish within the operating quarry site.
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Water savings at Sellicks Hill quarry
Sellicks Hill quarry has reduced its reliance on
mains water for dust suppression with the completion
of water infrastructure upgrades during the year.
The initiative consisted of entering into a supply
agreement to access recycled water for the site,
investing in associated infrastructure to support
the connection and extension to the existing off-
site supply network, on-site water and pumping
infrastructure, and the installation of a large capacity
holding tank. This has resulted in an 80% improvement
in pumping efficiency, with recycled water providing
between 60% and 70% of water required at the
site, reducing use of potable water by 51 ML since
November 2019.
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A move to lower emission products has improved the
conversion of waste streams to either inputs into the
production of construction materials or as an energy source.
The International Energy Agency (IEA) has developed a
technology roadmap for the cement industry, building on
a long-standing collaboration between the IEA and the
Cement Sustainability Initiative (CSI) of the World Business
Council for Sustainable Development (WBCSD). The main
element of the roadmap is the decoupling of cement
production from direct GHG emissions through initiatives
such as:
•
improving energy efficiency;
• switching to fuels that are less carbon intensive;
•
•
reducing the clinker to cement ratio; and
implementing emerging and innovative technologies
such as carbon capture.
The Group’s sustainability strategy, initiatives and priorities
as outlined in our framework are aligned to the IEA roadmap.
TCFD scenario analysis
Scenario analysis provides an insight into the resilience of an
organisation’s strategy to different climate-related scenarios.
Scenarios are a hypothetical view of the future, allowing an
assessment of the impact on Adbri under different climate
scenarios that may occur as a result of global emissions,
and also what might occur as a result of global and local
trends and initiatives in policy and technology advancement.
These ‘What if…’ scenarios then help Adbri refine business
strategies.
Adbri completed a climate change scenario analysis for the
first time in 2020, looking at both physical and transitional
risks associated with climate change. Three scenarios were
included in the analysis, developed using climate scenarios
from the Intergovernmental Panel on Climate Change
(IPCC) and sector impacts utilising IEA scenarios. Utilising
these external sources leverages recognised inputs to aid
comparison of the data.
Task Force on Climate Related Financial Disclosure
(TCFD)
Adbri committed to phase in reporting in accordance
with the TCFD. The disclosures are based around the TCFD
recommendations within four areas of Governance, Strategy,
Risk Management and Metrics.
TCFD governance
Adbri’s governance processes for sustainability set out in
this report, incorporates climate change risk.
TCFD strategy
Adbri’s Sustainability Framework provides the Group’s
sustainability strategic goals that include climate change,
setting out details of initiatives, priorities and near-term
targets. Key climate change issues that were used to guide
the development of the strategy present both risks and
opportunities to Adbri as set out below:
Short-term
(<5 years)
Medium-term
(5-20 years)
Long-term
(>20 years)
Δ Price for GHG
emissions that
are not matched
internationally, leading
to deterioration of
competitive cost
position, resulting in
higher costs / lower
margins
Δ Material
specifications for
construction projects
are changed,
reducing demand
for the Company’s
products, reducing
volumes and
profitability
Δ Rising sea levels
adversely impact
operations in coastal
areas. Significant
operations associated
with the Cement and
Lime division are
situated in coastal
locations
Δ Transition to
renewable energy
– higher costs
and potential
for disruption to
production due to
intermittent supply
Δ A substitute
for Portland
clinker-based
cement becomes
commercially viable,
stranding current
cement production
assets
Climate change risks have the potential to increase costs
that are not recoverable in the markets due to competitive
pressures. For example, where these costs are not imposed
evenly on all participants, such as in a scenario where there
is a lack of global co-ordination for a price on carbon. The
Group’s Australian-based manufacturing facilities compete
with suppliers of clinker, cement and lime located throughout
the Asia Pacific region while the Group also sources
cementitious products from suppliers in the region.
The 3 scenarios are summarised below:
Scenario name
No action
Stated policy
Sustainable development
Temperature target
4.0ºC
2.7ºC
1.7ºC
IPCC / IEA reference
IPCC RCP 8.5 / IEA 6DS
IEA Stated policy
IEA sustainable development
Summary
This scenario represents emissions trend in
recent years, with an absence of efforts to
stabilise GHG, global temperature rises 4ºC
this century. High risk of extreme weather
events, coastal flooding, lower crop yields
and the continued use of fossil fuels.
Represents scenario based on
current stated policy ambitions.
Achieving country net-zero
target is not automatically
assumed.
Limits impact of physical risk from
climate change, however, requires
a rapid and wholesale change in
energy markets.
2040 carbon price
US$0/t
US$24-44/t
US$125-140/t
Reason for using
scenario
This is considered a worst-case climate
scenario. Provides a basis for assessing
high impact physical risks.
Scenario based on current
plans and policies, aligning to
Australian commitments and
current policies.
Scenario meets Paris target of
“well below 2ºC”, representing
effective action on climate change.
Provides a basis for assessing
high impact transition risks.
These scenarios consider trends and factors such as carbon intensity, energy prices and sourcing, water stress,
extreme weather events and underlying demand for the Company’s products.
Provided below is a summary of the key opportunities and risks identified through the scenario analysis process.
Opportunities and risks have been rated between neutral to high based on the impact to Adbri earnings.
As this is our first experience of working with climate scenarios, we will continue to assess the opportunities and risks
identified. This assessment will inform our ongoing response to climate change.
No Action
Stated policy
Sustainable Development
Local production benefits
from increased risk of
disruption to shipping imports
Δ Rising sea levels, increased flooding risk and
extreme weather increase demand for concrete,
cement and aggregates
Δ Demand for low carbon
cementitious products
increases, providing
opportunity for new
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Δ High investment cost of carbon
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Δ Carbon price increases local
production cost, with risk of
competitiveness with overseas
production
High
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Our sustainability strategy is
aligned to the International Energy
Agency Technology Roadmap for
the cement industry.
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Adbri Limited Annual Report 2020 Sustainability Report
Adbri Limited Annual Report 2020 Sustainability Report
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Low Carbon Products
Adbri recognises that low carbon products will play a critical role in addressing climate change and allow us to add value
for our customers. We are investing in the development of new innovative products, as well as collaborating with industry
partners to meet our customers’ changing needs.
Low carbon products -
Performance metrics, targets and progress
Material topics
Measure 20 19 Targets
Progress
Alternative raw materials1
Tonnes
1,287,403
1,282,507
5-year target of 20% increase in
tonnage from 2019 baseline
0.4% increase
1. Alternative raw materials are wastes or by-products from other industrial processes that are diverted for re-use as beneficial feedstock.
The 2019 value has been adjusted to provide the financial year value – previously provided as calendar year value.
Low carbon products -
Achievements
Initiatives
Progress
Using raw material
substitutes
Δ Total alternative raw materials use has increased from 2019 by 4,896 tonnes.
Δ Alternative raw materials used in cement production processes involves diverting secondary materials of
industrial by-products from landfill for beneficial use in production, including cementitious substitutes of
blast furnace slag, used foundry sand and mill scale.
Δ Trials of manufactured sand produced from recycled glass to reduce the volume of river sand used in the
process to manufacture concrete products at the Townsville plant.
Developing geopolymer
capability
Δ Adbri has a well-developed pipeline of low carbon and other innovative products including development
of alternative binders and new supplementary cementitious materials. The Company has built internal
capability to innovate in the low carbon products space, leveraging expertise and developments outside
of Adbri through strategic partnerships, research support and working with industry on the development
standards.
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TCFD risk management
As part of the Group’s risk management process, climate
change has been identified as a strategic risk on the basis
that Adbri’s core products of cement and lime are energy
and GHG emissions intensive, potentially impacting future
operating and financial performance. The Group operates
a risk management framework which includes reporting of
strategic risks to the Board’s Audit, Risk and Compliance
Committee and the Board. In addition, specific risks
associated with sustainability, including climate change,
are included in the SHES Committee agenda. The risk
framework categorises risks by reviewing the likelihood,
impact, timing and mitigations in place to come to an
overall assessment that allows determination of the overall
significance of risks.
The Group seeks to manage climate change risk in the
short-term through improved efficiency of production
processes, switching to low emissions fuels including the
use of biomass, and leveraging the use of clinker substitutes.
To manage long-term climate change risk, the Group is also
investing in the development of non-clinker-based substitute
products, advancing research in low carbon cement and lime
through participation in cooperative research centres (CRC)
including the Heavy Industry Low-carbon Transition CRC,
and monitoring the commercialisation of carbon capture use /
storage technology.
20 19
%
Change
1,038
1,196
99
2,333
0.62
1.14
1,129
1,174
84
2,387
0.68
1.06
(8.1)
1.9
17.9
(2.3)
(8.8)
7.5
TCFD Metrics
CO2-e emissions by product1
Cement
Lime
Other
Total Group
Emission intensity by product2
Cement3
Lime
1. Scope 1 and scope 2 in thousand tonnes CO2-e
2. Tonnes CO2-e /tonne
3. Emissions intensity of cement from locally produced clinker
Adbri’s progress compared to the IEA key indicators
Clinker to cement ratio
Thermal efficiency – Gj/t clinker
Electricity intensity – kWh/t cement
Alternate fuel usage (% of thermal energy)1
Direct CO2 intensity of cement – tCO2-e/t cement
1. Integrated clinker / cement facilities
2.3% (^-)
in emissions across the Group.
IEA 2ºC scenario
low-variability case
Adbri
2030
2014
0.64
3.30
87.00
17.50
0.52
0.65
3.50
91.00
5.60
0.54
20 19
0.77
4.30
0.79
4.80
114.00
119.00
25.00
0.62
23.00
0.68
Recycle cement
packaging
Δ Adbri partnered with Mondi Frantschach (PEFC and FSC certified) and Pope Packaging to produce
rain resistant bags for cement and lime products. Product advantages include durability, rain resistance
and water repellence, and support for the Australian National Packaging Covenant 2025 Targets.
Sustainability benefits include improved efficiency of plant and material usage, reduced product wastage,
and improved recycling.
Environmental product
disclosure
Grow portfolio of
carbon-neutral / low
carbon products via R&D
investment and strategic
initiatives
Δ Adbri Management is progressing the development of Environmental Product Disclosures for a range of
products.
Δ Detailed product development work has been conducted to identify the potential to use an alumina
silicate by-product material, derived from the refining of lithium, as a suitable supplementary cementitious
material. Work conducted includes extensive laboratory and field trials. This work will continue into 2021,
providing a further circular economy opportunity that provides low carbon and waste reduction benefits.
Δ Adbri participates in cooperative research centres to improve performance of products, including the
Heavy Industry Low-carbon Technology CRC and the Smartcrete CRC.
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Maintaining supply of
key supplementary
cementitious materials
Δ As the global supply of fly ash and slag as key supplementary cementitious materials tightens, Adbri
remains a leader in identifying new and reliable sources of these established construction materials and
ensuring robust supply chains are in place to ensure our customers’ needs are managed.
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Adbri Limited Annual Report 2020 Sustainability Report
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Green star concrete
During the year, Hy-Tec has been supplying low
carbon concrete to customers in the Greater Sydney
area. The use of up to 50% slag and fly ash, a by-
product of iron and steel making and power generation
respectively, is helping reduce the amount of Portland
Cement used in the Group’s concrete.
This concrete provides green credit points as
outlined by Green Building Council of Australia and
is currently being utilised on Australian infrastructure
projects, including the Sydney Opera House
accessibility works.
In addition, while not captured in these emission reduction
figures, the Group continues to support renewable energy
via supply agreements for the provision of electricity from
renewables.
As the emissions profile for our business varies across our
operations, each area can contribute to Adbri’s emissions
reduction efforts in different ways. Cement and lime
production is dominated by process emissions and kiln
fuel usage, whilst emission from concrete and aggregates
operations are dominated by fuel usage and concrete
products manufacturing by electricity use.
Scope 3 emissions
Adbri has commenced collecting ‘scope 3’ emissions
representing indirect carbon emissions created by third
parties ‘on our behalf’ so that we can continue to operate.
For example, purchased goods / imports, transport of raw
materials such as clinker and slag, fuel extraction such as
natural gas, electricity transmission and business air travel.
This helps to better account for our entire carbon impact
beyond what the NGER legislation requires and forms
part of our disclosure in line with TCFD recommendations.
We have commenced with scope 3 emissions that are
considered most material to our business. We will continue
to assess scope 3 reporting with reviews to refine and define
materiality boundaries during 2021.
Our carbon emissions reduction initiatives in the nearer term
are focused on investments to expand the use of alternative
fuels, continuing technological efficiency optimisation
and expansion of low carbon production with the use of
alternative materials in support of a circular economy and life
cycle thinking. To progressively reduce our emissions, we
have set a 5-year target of 7% carbon emission reduction
from a 2019 baseline. Since 2010, Adbri’s carbon footprint
from our scope 1 emissions (process emissions, kiln
fuels, vehicle fuel, and stationary plant fuel), and scope 2
emissions (electricity purchased from the grid used at our
sites) has reduced circa 1 million t CO2-e or 31%, of which
8.7% was in the last 5 years.
Adbri’s total scope 1 and 2 emissions reduced by 2.3%
compared to 2019 which is equivalent to:
•
taking nearly 11,800 cars off the road; or
• powering nearly 6,300 homes for a year.
Adbri’s total emissions vary with production volumes as
a result of the process emissions from clinker and lime
production being the main contributors to the Group’s total
carbon emissions. Over time, the Group’s production footprint
has changed, with closure of low efficiency clinker production
facilities to concentrate production at more energy-efficient
sites. Adbri’s emissions reduction is further improved with a
range of initiatives underway across the business.
At Adbri’s 2020 Annual General Meeting, the Company
announced the transition away from using coal at the Munster
plant in Western Australia. Significant progress has already
been made with coal usage as a kiln fuel at the Munster site
reducing by 17.3% in 2020, displaced by natural gas and
reducing emissions by 17,182 tCO2-e. The complete transition
from coal has been delayed on account of cessation of the
Alcoa lime supply contract. Further reductions in coal usage
are anticipated in 2021 and 2022.
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Low carbon future
Taking action to address our carbon emissions is a key part
of our sustainability journey to address the shared global
challenge of climate change. In a carbon constrained world,
we strive to further reduce our carbon footprint and forge
a path to our low carbon future and contributing to the UN
SDG #13 Climate Action and Paris Agreement 2050 net zero
carbon ambitions.
The process of calcination of limestone to produce lime
and clinker accounts for approximately 60% of our carbon
emissions. In order to achieve the transition that aligns with
carbon neutral 2050 ambitions, step change technology
advances will be a necessary component. Consequently,
in addition to further evolving current circular economy
initiatives in the alternative fuels and low carbon product
space, priority areas beyond 2025 as part of a low carbon
future include tracking the feasibility and development of
carbon capture storage and engagement in research and
development partnerships.
Total group carbon emissions
000 Tonnes
NGER scopes 1 & 2 emissions
Energy by source
2,500
2,400
2,300
2,200
2,100
2,000
16
17
18
19
20
Clinker and lime production
Carbon emissions
Process emissions
Kiln fuels
Electricity
Non-kiln on-site fuels
Transport fuels
2% 2%
9%
28%
59%
Natural gas
Coal
Refuse derived fuel
Electricity
Liquid fuels
Recovered waste oil
1%
7%
9%
9%
19%
55%
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Women make up 15% of Adbri's workforce.
Engaged people
Our people are our most important asset, with safety and
inclusivity representing two of Adbri’s pillars which guide the
Company’s decisions. Adbri is committed to providing a safe
and inclusive workplace that values and promotes diversity.
Creating a culture that embraces difference and is inclusive
will ensure Adbri continues to be a great place for everyone
to work. We measure our performance in this regard through
employee engagement surveys. Our aim is to reduce harm
to our people both now and into the future, supported by our
vision, ‘Work Safe, Home Safe’.
In 2019, the Adbri Executive together with the Board,
endorsed Adbri’s Safety ‘Step Change’ program, setting out
a cultural change initiative that has continued throughout
2020 despite disruptions due to the COVID-19 pandemic,
resulting in a 47.2% reduction in our people injured on our
worksites, the lowest recorded in Adbri’s history.
Engaged people -
Performance metrics, targets and progress
Health and Safety performance is evaluated based on
historical (lagging) performance metrics, such as Total
Recordable Injury Frequency Rate (TRIFR), Lost Time Injury
Frequency Rate (LTIFR), Medically Treated Injury Frequency
Rate (MTIFR), Restricted Duties Injury Frequency Rate (RDIFR),
and forward looking indicators, such as High Potential
Incidents (HPIs), near misses and hazards, and employee
engagement. As a Company we are increasing our focus on
lead indicators in order to prevent injuries. Employee wellbeing
is also considered by evaluating the utilisation of the Employee
Assistance Program (EAP) and proactive training.
Compliance is monitored by the Executive and the Board
SHES Committee to determine effectiveness of risk
management processes and to ensure controls are working
as intended, including interactions with regulators. Internal
audit function is a key component of governance and
audits and inspections are conducted on a regular basis
and the results of these audits and inspections reported to
both the Executive and the Board SHES Committee with
management plans to rectify any improvements identified.
Material topics
Measure 20 19 Targets
Progress
Total recordable injury frequency rate
Adbri methodology
Total recordable injury frequency rate
(TRIFR) OFSC2 methodology
HRS1
HRS
Lost time injury frequency rate
HRS1
High potential incidents
Number
7.4
5.6
1.7
54
2.5
N/A
37
N/A
16.2
10.6
Set a 5-year target of 10%
reduction in TRIFR every year
Improvement -
54.3% reduction
Set a 5-year target of 10%
reduction in TRIFR every year
Improvement -
47.2% reduction
HSE near misses
Number
486
874
N/A
HSE hazards
Number
2,922
3,211
N/A
Female Non-executive Directors (NEDs) %
Female employees
%
50%
15%
43%
15%
1. Measured as per million person-hours worked.
2. Office of the Federal Safety Commissioner.
Maintain a 5-year target of
30% female NEDs
Set a 5-year target of 20% female
employees from 2019 baseline
No change
Improvement -
32.0% reduction
Improvement -
45.9% increase
Improvement -
44.4% reduction
Improvement -
9.0% reduction
Exceeded target
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Engaged people -
Achievements
Initiatives
Achievements
Safety step change
program - critical risk
management
Δ Adbri’s Critical Risk Program was introduced in 2019 as a strategic priority to ensure our systems and
standards are designed and maintained to eliminate or minimise critical HSE risks across Adbri operations
and activities. Self-assessments tools were implemented during 2020, to build on the program, verifying
critical controls are in place and effective for managing critical risks.
Δ 724 critical risk control self-assessments were undertaken in 2020, supporting increased risk awareness and
recognition of compliance to critical risk controls to keep our people safe.
Safety step
change program -
musculoskeletal care
and wellbeing
Δ Adbri’s InitialCare program (early intervention program) was introduced with the goal to address variable
medical treatment / intervention provided following a workplace injury. The InitialCare program provides
employees immediate phone access to specialised triage nurses for advice and support as soon as a
workplace injury occurs, as well as up to four medical and physiotherapy appointments, if required.
Δ 63 employees participated in the program for musculoskeletal injuries, with 48% of cases resulting in a ‘self-
management’ outcome requiring no physiotherapy or medical treatment.
Safety step change
program - safe
transport
Δ Following Adbri’s Professional Driver Forums conducted in 2019, a key focus in 2020 was to further consult
with our professional drivers to deliver training programs to support greater knowledge on important vehicle
operational systems and defensive driving practices. Examples include the ‘Driving Down Hill, Managing
Steep Descents’ training program.
Safety step change
program - visible
leadership
Review of diversity
and inclusion policy
Δ The increase in skill level is showing a definitive reduction in both minor and severe road accidents, with a
32% reduction in heavy vehicle accidents recorded.
Δ The Visible Leadership Observations, which includes our Ride with a Driver Observations, continue to foster
a culture of recognition of safe behaviours, sharing lessons learnt and best practice initiatives across teams.
Δ 216 Visible Leadership discussions were reported in 2020.
Δ An updated Diversity and Inclusion Policy was launched to staff during 2020. The Policy outlines
Adbri’s commitment to being an inclusive workplace that values and promotes diversity. For us diversity
encompasses gender, marital and family status, sexual orientation, gender identity, ethnicity, age, disabilities,
religious beliefs, cultural background, socio-economic background, perspective and experience.
Δ A Diversity and Inclusion Strategy to achieve our commitment was finalised during the year with five focus
areas of culture, communication, capability, connection and community.
Δ Quantitative data from the annual review of company culture revealed that Adbri is making a substantial effort
to adhere to inclusion principles in line with the communicated importance of “embracing differences” under
the Company’s inclusivity pillar.
Δ Recruitment data highlights an improvement in gender diversity in hiring activities, with females representing
30% of applicants (2019: 18%) and 28% of new hires (2019: 20%).
Δ The Executive team participated in externally facilitated “Conscious Inclusion” workshops.
Developing Reflect
Reconciliation Action
Plan (RAP)
Δ As part of Reconciliation Action Week, Adbri launched its inaugural Reflect RAP. A number of milestones
have been achieved within the RAP including:
- cultural learning program provided to 248 employees responsible for managing people, including
Directors, the Executive team and Management;
- Acknowledgement of Country incorporated into key external meetings including the 2020 Annual General
Meeting and 2020 Half Year Results; and
- financial support to Aboriginal and Torres Strait Island organisations with a strong focus on education of
$60,000.
Implementing graduate
program
Δ Three graduates participated in Adbri’s inaugural Graduate Program in 2020, with each graduate partaking
in three rotations within the business. Graduates were supported by mentors as part of our investment in
developing talent.
Inaugural modern
slavery statement
Δ Adbri released a Modern Slavery Policy in 2020, with associated analysis of key risks across the supply chain
and engagement with suppliers to complete a declaration on their processes.
Δ The Group is committed to eliminating modern slavery within our operations and supply chain by:
- within our operations: ensuring employees work voluntarily, paying at-least the minimum wage, training
staff on modern slavery and assessing modern slavery risks annually; and
- within our supply chain: engage contractors and suppliers that uphold Adbri’s commitment of eliminating
modern slavery, due diligence of suppliers and assisting suppliers to identify modern slavery within their
operations and supply chain.
Δ 672 suppliers completed modern slavery declarations, a 100% completion rate.
Δ Employees and suppliers can access an external Whistleblower Program to report suspected breaches of
the Modern Slavery Policy.
Δ As part of the rebrand of Adbri, we commenced embedding a common purpose, promise, story and pillars
across the Group.
Δ Our 2020 staff engagement survey included questions on culture to provide base level data to track our progress.
Common values
and goals
Digital strategy
Δ In August 2020 an internal communication tool called ‘Cooee’ was launched to foster engagement with staff.
Protecting against COVID-19
R U OK?
In 2020, Adbri sites participated in a ‘R U OK?’
Day morning tea with Kit Kats to remind everyone
that any day is the day to ask, “Are you OK?” and
support those struggling with life.
To strengthen the support Adbri provides to its
people, we trained mental health first aiders and
conducted online mental health awareness training.
The health and wellbeing of our people and
customers was paramount as we responded to
COVID-19. With less than a few days’ notice, 400
employees transitioned to remote working, to
minimise COVID-19 risks to our operational staff
whilst keeping our manufacturing facilities safely
“open for business”.
The strong governance approach adopted by our
Crisis Management Team and Pandemic Co-
ordination Team allowed us to adapt our processes
as we introduced social distancing and increased
hygiene measures at all our sites, while upgrading
our systems to facilitate working remotely. COVID
Safe Plans were developed for all Adbri sites
with 2,678 COVID hygiene audits, and 374 mock
scenario COVID-19 emergency response scenario
tests completed.
To support our people in helping keep our
communities safe, Adbri created a special leave
arrangement, ‘Isolation Leave’ that enabled
employees and Lorry Owner Drivers (LODs) to
continue to be paid their normal wages while waiting
on test results for COVID-19. 103 employees and 12
LODs accessed a total of 374 days Isolation Leave,
with only one employee contracting COVID-19 from a
family member and no downtime to our operations.
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mock scenario COVID-19 emergency response
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28%
of employees transitioned to remote working with less
than a few days’ notice.
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Adbri Limited Annual Report 2020 Sustainability Report
Adbri Limited Annual Report 2020 Sustainability Report
41
Employment by employment status
Employment by geography
Engaged communities
Community investment spend by focus area
Full-time
Part-time
Casual
2% 1%
South Australia
New South Wales
Queensland
Western Australia
Victoria
Northern Territory
Tasmania
2% 1%
13%
14%
33%
Adbri strives to be a good neighbour and to be a part of
the communities in which we operate. Our people are
local people, people who are part of the community and
understand where we can make the most difference.
Wherever possible we look locally to build economic
prosperity in our towns and cities. We work with local
community groups, providing financial support to schools,
sporting clubs and community groups.
Health and wellbeing
Education
Community and environment
Industry
7%
20%
38%
97%
16%
21%
35%
% Employees on EBA vs staff
Gender diversity
EBA
Staff
40%
60%
%
100
90
80
70
60
50
40
30
20
10
0
Board
Senior Executives
Senior Managers
Total Workforce
Male
Female
Lost time injury frequency rate
Total reportable injury frequency rate
Total lost time injuries per million hours worked
Total recorded injuries per million hours worked
6
5
4
3
2
1
0
60
50
40
30
20
10
0
16
17
18
19
20
16
17
18
19
20
Cement and Lime
Concrete and Aggregates
Concrete Products
Total
32.0% (^-)
Cement and Lime
Concrete and Aggregates
Concrete Products
Total
47.2% (^-)
Engaged communities -
Performance metrics, targets and progress
Material topics
Measure
20 19 Targets
Progress
Community investment
$
203,204
263,221
Community investment aligned
with strategy
Ongoing investment
in communities
Achievements
Current initiatives
Achievements
Developing cohesive
messaging and branding
for communities and
investors
Δ Following approval from shareholders in May 2020, the Company rebranded to Adbri Limited, creating an
opportunity to improve the connection of our brands with the inclusion of ‘an Adbri Company’ tagline as
part of our strategy to build a national brand presence.
Strategic community
engagement initiatives
Δ COVID-19 restrictions required us to adapt new ways to engage with the community. Our Community
Liaison Group at Birkenhead met virtually for the first time to ensure we remained connected with the
community.
Δ Extensive consultation was undertaken with stakeholders for the $199.0 million upgrade of Kwinana
seeking community / stakeholder input into the development and approval processes.
Supporting local
employment
Δ In recognition of the importance of local employment and in line with our RAP, Adbri entered into a
three-year labour hire partnership with Tecside to encourage Aboriginal employment opportunities.
Δ Procurement guidelines were implemented that recognise the important role of small and medium
businesses in creating strong regional economies.
Adbri bushfire fund
Adbri Community Rebuild Fund was established
during the year to support communities impacted
by the bushfires during the summer of 2019 / 2020.
The fund, which commits up to $250,000 of Adbri
Masonry products to help rebuild local community
assets, is currently finalising details with several
recipients to create long-term community benefit.
42
Adbri Limited Annual Report 2020 Sustainability Report
Adbri Limited Annual Report 2020 Sustainability Report
43
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Building diverse talent
During the year we continued to partner with the
Kwinana Industries Council (KIC) to encourage young
people to pursue careers in our sector. In addition
to our sponsorship of the iWOMEN project which
provides opportunity for students to meet women in
non-traditional female roles, we also partnered with
KIC to support their 2020 iCONFERENCE. This event
brought together all students who had participated in
iWOMEN, iMEN and iSCIENCE during the year and
built on their learnings from their iPROJECT. Initiatives
such as these are helping us build a future pipeline of
diverse talent in our industry.
Embedding reconciliation
To formalise Adbri’s reconciliation journey, we launched
our inaugural Reflect Reconciliation Action Plan (RAP)
during the year at the Warriappendi School in Adelaide.
Our RAP looks for ways to create employment, education,
empowerment and economic development opportunities
for Aboriginal and Torres Strait Islander peoples.
In addition to partnering with the Warriappendi School
who developed the artwork that is featured on our RAP, we
have also supported the South Coogee Primary School in
Western Australia (pictured below) in creating a mural telling
the story of the six Noongar seasons in their playground.
We supported Warriappendi School with a donation of pavers.
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Adbri Limited Annual Report 2020 Sustainability Report
Adbri Limited Annual Report 2020 Sustainability Report
45
S
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Tax Transparency Report
This Report is prepared in accordance with Adbri’s voluntary adoption of the
Tax Transparency Code and provides information regarding Adbri’s tax contribution,
its approach to tax strategy and governance, and its international related party
dealings during the year ended 31 December 2020. Adbri publishes this Report
on a voluntary basis as part of its commitment to tax transparency.
Disclosures – Part A
Effective company tax rate
The Australian company tax rate for entities of the size of
Adbri is currently 30% of taxable income. Taxable income
represents gross income minus amounts that are treated as
deductible or exempt under the tax law.
The Effective Tax Rate (“ETR”), being tax expense divided by
profit before tax, for Adbri’s Australian operations is 26.9%
for the year ended 31 December 2020.
The ETR differs to the company tax rate due to non-
temporary differences, which represent amounts that are
recognised as assessable or deductible for accounting
purposes or tax purposes, but not both.
Income tax expense is an accounting concept that is
different to income tax payable. Income tax expense reflects
the amount of income that is assessable for tax purposes
regardless of the timing. In contrast, income tax payable
reflects the amount of income that is assessable in the
current year.
The ETR is presented under three scenarios below:
accounting profit; accounting profit excluding equity
accounted earnings; and accounting profit excluding equity
accounted earnings and income tax expense excluding
capital losses recognised. The reason for this is to provide
maximum transparency.
In accordance with accounting standards, the share of after-
tax profits generated by Adbri’s joint ventures and associates
is recognised by the Group in the income statement. Adbri
also maintains a balance of capital losses that may be
recouped to offset capital gains incurred for tax purposes.
During the year ended 31 December 2020, $0.1m of capital
losses were recognised to offset capital gains. The inclusion
of equity accounted earnings in accounting profit, and the
inclusion of capital losses recognised in income tax expense,
may distort the ETR and removing these items from the ETR
provides a more transparent representation.
The global ETR recognises the accounting profit attributable
to Adbri’s minority interest in our Malaysia-based associate.
Additional information in relation to Adbri’s international
related party dealings is provided under Part B of this
Report.
Australian operations
Australian operations –
excluding equity accounted earnings
Australian operations – excluding equity
accounted earnings and capital losses
recognised
20 19
26.9%
25.6%
29.5%
35.4%
29.5%
35.4%
Global operations
26.7%
25.0%
Global operations –
excluding equity accounted earnings
Global operations –
excluding equity accounted earnings and
capital losses recognised
29.5%
35.4%
29.5%
35.4%
2020 Effective Tax Rate
%
35
30
25
20
15
10
5
0
ETR accounting profit
ETR excluding equity
accounted earnings
ETR excluding equity
accounted earnings &
losses recognised
Australian operations
Global operations
Australian corporate tax rate
Adjusting for equity accounted earnings and capital losses
not previously recognised, Adbri has an effective tax rate of
29.5% for the year ended 31 December 2020.
Reconciliation of accounting profit to income tax
expense and income tax payable
The reconciliation of accounting profit to income tax expense
and income tax payable contained in this Report is published in
a summarised form in Note 7 in the 2020 Financial Statements.
20 19
Accounting profit before tax
Prima facie tax payable (at 30 percent)
Tax effect of non-temporary differences
(at 30%):
Non-allowable expenses
Non-assessable income
Rebateable dividends
Goodwill impairment
Other deductions
Income tax expense
Tax effect of temporary differences
(at 30%):
Higher accounting depreciation compared
to tax depreciation
Accounting impairment of fixed assets
Timing of deduction for consumables
Timing of deduction for provisions
Deduction for accruals on payment
Timing of deduction on prepayments
Timing of deduction for right-of-use leases
Other timing differences
Income tax payable
Income tax expense – current year
Under/(over) provision in prior years
Total income tax expense recognised
$M
127.2
38.2
0.3
(3.2)
(1.2)
-
(0.2)
33.9
(0.2)
6.0
(0.6)
1.2
0.4
1.0
(1.4)
(0.3)
40.0
33.9
(0.3)
33.6
Adbri reflects these commitments in its approach to taxation,
with a high focus on meeting its various tax obligations.
Strong internal expertise and processes, combined with
engagement of expert advisers, ensures Adbri is fully
compliant with its taxation obligations.
Adbri also seeks to maintain a professional and transparent
relationship with taxation authorities. Adbri was recently
reviewed by the Australian Taxation Office as part of the
Top 1,000 Streamlined Assurance Review program. In their
final report, dated May 2019, the Australian Taxation Office
awarded Adbri a ‘High’ level of assurance (being the highest
assurance rating achievable) overall and for each of the key
areas reviewed (namely, ‘Significant and new transactions’,
‘Specific tax risks’ and ‘Alignment between accounting and
tax results’).
International related party dealings
Adbri has limited international related party dealings.
The Group holds a 30% equity interest in Aalborg Portland
Malaysia Sdn Bhd (“APM”), a manufacturer of white clinker
and cement based in Ipoh, Malaysia. The majority 70%
owner of APM is Aalborg Portland A/S, a Danish subsidiary
of a multinational cement and concrete producer, Cementir
Holding N.V. Adbri is not related to Cementir Holding N.V.
As Adbri holds a minority interest in APM, it does not have
effective control of APM nor is it involved in the day-to-day
management of the Company. In addition, the shareholders’
agreement specifically requires that any related party
agreements, arrangements or dealings must be on arm’s
length terms as if conducted by two independent parties.
As a result of these measures, Adbri’s dealings with APM,
which are limited to the purchase of clinker, are conducted
on a commercial arm’s length basis.
Tax contribution summary
Adbri paid / will pay in excess of $54.0 million in Federal, State
and Territory taxes in respect of the 2020 year.
$M
63.4
19.0
0.5
(2.1)
(4.0)
2.6
(0.1)
15.9
(1.6)
15.0
0.2
2.5
(0.9)
0.4
-
(0.1)
31.4
15.9
0.3
16.2
Identification of material temporary and
non-temporary differences
Material adjustments for non-temporary items that reduce
income tax expense relate primarily to differences in the
accounting and tax treatment of income derived from joint
ventures and associated entities as outlined above.
Adjustments for temporary differences relate to differences
in the timing between an amount being derived/incurred for
accounting purposes and the amount being assessable/
deductible for tax purposes. During the year, temporary
differences related primarily to differences in the timing of
deductions for expenses such as depreciation, provisions,
accruals, prepayments and consumables.
Taxes borne by Adbri
Fringe benefits tax1
Payroll tax2
Corporate income tax3
Property tax
Total
Taxes collected by Adbri
Goods and services tax (GST)
PAYG withholding (employees)
Total
20 19
$M
1.2
9.3
40.0
4.1
54.6
$M
1.3
9.9
32.8 4
2.5
46.5
145.7 5
44.3
190.0
151.0
48.6
199.6
Disclosures – Part B
Tax strategy and governance
Adbri is committed to the highest standards of corporate
governance and its approach to taxation aligns with its Tax
Risk Management and Governance Policy and Code of
Conduct. Adbri is committed to being a responsible corporate
citizen and actively seeks to contribute to the wellbeing of
shareholders, customers, the economy and the community.
1. Fringe benefits tax paid in respect of the year ended 31 March 2020.
2. Payroll tax paid in respect of the year ended 30 June 2020.
3. Corporate income tax paid is based on the year end provision and will be finalised
when the income tax return for the year ended 31 December 2020 is due for
lodgement in mid-2021.
4. Prior year income tax paid has been updated from the amount shown in the 2019
Tax Transparency Report to reflect the final income tax liability per the income tax
return which was due and lodged in mid-2020 (after the 2019 Tax Transparency
Report was published).
5. Net GST collected $47.1 million (2019: $52.1 million) after input tax credits on behalf
of taxation authorities.
In this Tax Transparency Report references to ‘Adbri’, ‘the Group’ and ‘our’ refer to
Adbri Limited and its wholly owned subsidiaries.
This Tax Transparency Report has not been independently audited. However,
disclosures made in Part A of this Tax Transparency Report are consistent with
disclosures made in the audited financial statements.
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Adbri Limited Annual Report 2020 Tax Transparency Report
Adbri Limited Annual Report 2020 Tax Transparency Report
47
Executive Team
Nick Miller
Chief Executive Officer
Theresa Mlikota
Chief Financial Officer
Brett Brown
Chief Operating Officer, Cement and Lime
Andrew Dell
Chief Operating Officer, Concrete, Aggregates and Masonry
Marcus Clayton
General Counsel and Company Secretary
Michael Miller
Executive General Manager, Marketing and International Trade
Rebecca Irwin
Executive General Manager, Corporate Affairs and Sustainability
Tarmo Saar
Executive General Manager, Strategic Projects
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Adbri Limited Annual Report 2020 Executive Team
Adbri Limited Annual Report 2020 Executive Team
49
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Board of Directors
Raymond Barro
BBus, CPA, FGIA, FCIS
Chairman
Age: 59
Vanessa Guthrie
Hon DSc, PhD, BSc (Hons)
Ken Scott-Mackenzie
BE (Mining), Dip Law
Deputy Chair and Lead Independent Director
Age: 60
Independent Non-executive Director
Age: 70
Geoff Tarrant
BBus
Non-executive Director
Age: 52
Rhonda Barro
Non-executive Director
Age: 66
Emma Stein
BSc (Physics Hons), MBA, FUWS, FAICD
Independent Non-executive Director
Age: 60
Ken has been a Director since
2010 and is the Chairman of the
Safety, Health, Environment and
Sustainability Committee, a member
of the Nomination and Governance
Committee, Audit, Risk and
Compliance Committee and People
and Culture Committee.
Ken was CEO of a major construction
company in Australia. He has over
40 years’ experience in infrastructure,
construction and mining services
gained in Australia and Africa, as well as
extensive experience in financial, legal
and commercial aspects of projects.
Raymond was appointed Chairman
in May 2019, after having been
appointed to the Board in August
2008. Raymond is also a member of
the Safety, Health, Environment and
Sustainability Committee.
Raymond has over 25 years’
experience in the premixed concrete
and construction materials industry.
In addition to his significant industry
insights, Raymond brings extensive
leadership experience and financial
expertise to the role.
Current directorships
Managing Director,
Barro Group Pty Ltd.
Vanessa has been a Director since
February 2018 and is the Chair of
the People and Culture Committee
and Nomination and Governance
Committee and a member of the
Safety, Health, Environment and
Sustainability Committee.
Vanessa has extensive experience
in the mining and resources industry.
In addition to her former role as a
CEO, Vanessa has led a number of
strategic functions in operations as
well as sustainability and stakeholder
engagement. With qualifications
in geology, Vanessa also brings
significant technical knowledge to the
role.
Current directorships
Santos Limited
Appointed July 2017
Tronox Holdings PLC
Appointed March 2019
Lynas Rare Earths Ltd
Appointed October 2020
Australian Broadcasting Corporation
Former directorships
Vimy Resources Limited
Appointed October 2017
Retired November 2018
Geoff has been a Director since
February 2018 and is a member
of the Audit, Risk and Compliance
Committee.
Geoff has extensive experience in the
finance industry across Australia, the
United Kingdom and Asia. Geoff has
particular expertise in mergers and
acquisitions and capital markets.
As the Executive Chairman of a leading
construction software company, Geoff
also brings valuable IT and technology
experience to the role.
Current directorships
Chairman,
Zuuse Limited.
Rhonda has been a Director since
May 2019 and is a member of the
People and Culture Committee.
She has over 40 years’ experience
in the construction materials industry
and executive management in line
and functional areas. Rhonda has
significant expertise and insights in
customer and stakeholder relations.
Rhonda has held numerous leadership
roles in community organisations
and is a Fellow of the Williamson
Leadership Program.
Current directorships
Executive Director,
Barro Group
Director,
Independent Cement and Lime Pty Ltd
St Vincent’s Institute of Medical
Research Foundation Board
Emma has been a Director since
October 2019 and is Chairman of the
Audit, Risk and Compliance Committee
and a member of the People and
Culture Committee and Nomination
and Governance Committee.
Emma has over 30 years’ experience
in Board and senior executive
positions in the building materials, oil
and gas, energy and utilities, mining
and resources, water and waste
management sectors.
As a former CEO, Emma is well
versed in capital investment decisions,
risk management frameworks and
servicing major industrial customer
relationships. Emma has led the
implementation of mergers and
acquisitions as well as new enterprise
wide IT systems and processes.
Current directorships
Alumina Limited
Appointed February 2011
Worley Limited
Appointed December 2020
Former directorships
Cleanaway Waste Management Limited
Appointed August 2011
Retired December 2020
Infigen Energy Limited
Appointed September 2017
Delisted from ASX on 5 November 2020
50
Adbri Limited Annual Report 2020 Board of Directors
Adbri Limited Annual Report 2020 Board of Directors
51
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Financial
Statements
2020
Contents
Directors’ report
Remuneration report
People and Culture Chair’s letter
1. Key management personnel
2. Remuneration governance
3. Executive remuneration policy and framework
4. 2020 Executive remuneration approach
54
63
63
65
65
66
67
12 Leases
13 Intangible assets
14 Impairment tests
15 Provisions
Capital structure and risk management
16 Borrowings
17 Share capital
5. Linking executive remuneration to company performance
71
18 Dividends
6. Non-executive directors’ fees
7. Key management personnel disclosure tables
Income statement
Statement of comprehensive income
Balance sheet
Statement of changes in equity
Statement of cash flows
Notes to the Financial Statements
1 Summary of significant accounting policies
Financial Performance Overview
2 Segment reporting
3 Critical accounting estimates and assumptions
4 Earnings per share
74
75
77
78
79
80
81
82
82
84
84
85
86
19 Reserves and retained earnings
20 Financial risk management
Group structure
21 Joint arrangements and associate
22 Subsidiaries
23 Deed of cross guarantee
24 Parent entity financial information
25 Retirement benefit obligations
26 Share-based payment plans
Other
27 Related party
28 Events occurring after the reporting period
29 Commitments for capital expenditure
5 Revenue from contracts with customers and other income 87
30 Remuneration of auditors
6 Expenses
7
Income tax
8 Note to statement of cash flows
Balance Sheet Items
9 Trade and other receivables
10 Inventories
11 Property, plant and equipment
87
88
90
93
93
94
94
31 Contingency
Directors’ Declaration
Auditor’s Independence Declaration
Independent Auditor’s Report
to the members of Adbri Limited
Financial History
Information for Shareholders
52
Adbri Limited Annual Report 2020 Section
Adbri Limited Annual Report 2020 Financial statements
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103
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113
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115
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117
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123
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53
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Directors’ report
The Directors present their report on the consolidated entity (the Group) consisting of Adbri Limited (the Company) and the entities it
controlled at the end of, or during, the year ended 31 December 2020.
Directors
Review of Operations (continued)
UNDERLYING RESULTS
Revenue from contracts with customers
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:
Earnings before interest, tax, depreciation, amortisation and impairments
RD Barro
VA Guthrie
RR Barro
(Chairman)
(Deputy Chairman and Lead Independent Director from 26 August 2020,
Lead Independent Director 15 June 2020 – 25 August 2020, Independent Director to 15 June 2020)
KB Scott-Mackenzie
ER Stein
GR Tarrant
Z Todorcevski
(Deputy Chairman and Lead Independent Director, ceased 14 June 2020)
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
Information on the principal activities, operations and financial position of the Group and its business strategies and prospects is set
out in the Chairman’s report, Chief Executive Officer’s review, divisional and financial reviews on pages 3 to 19 of this Annual Report.
A summary of the financial results for the year ended 31 December 2020 is set out below:
STATUTORY RESULTS
Revenue from contracts with customers
Earnings before interest, tax, depreciation, amortisation and impairments
Depreciation, amortisation and impairments
Earnings before interest and tax (“EBIT”)
Net finance cost1
Profit before tax
Income tax expense
Net profit after tax
Attributable to:
Members of Adbri Limited (“NPAT”)
Non-controlling interests
Basic earnings per share (cents)
Ordinary dividend per share (cents)
Franking (%)
Net debt2 ($ million)
Net debt/equity (%)
1. Net finance cost is the net of finance costs shown gross in the income statement and interest income included in other income.
2. Net debt is calculated as total borrowings less cash and cash equivalents.
CONSOLIDATED
20 19
$M
1,454.2
262.7
(115.1)
147.6
(20.4)
127.2
(33.6)
93.6
93.7
(0.1)
14.4
12.0
100.0
372.1
30.5
$M
1,517.0
271.6
(189.7)
81.9
(18.5)
63.4
(16.2)
47.2
47.3
(0.1)
7.3
5.0
100.0
423.3
35.4
The results were impacted by a number of significant items. The table on page 55 sets out the underlying financial results for the year ended
31 December 2020 which have been adjusted for significant items. An explanation of the significant items and reconciliation of reported results
to underlying results is provided on page 55.
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CONSOLIDATED
20 19
$M
1,454.2
$M
1,517.0
272.3
(93.4)
178.9
(20.4)
158.5
(43.0)
115.5
115.6
(0.1)
17.7
1.4
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186.4
(18.5)
167.9
(45.0)
122.9
123.0
(0.1)
18.9
1.5
Depreciation and amortisation
Earnings before interest and tax (“EBIT”)
Net finance cost1
Profit before tax
Income tax expense
Net profit after tax
Attributable to:
Members of Adbri Limited (“NPAT”)
Non-controlling interests
Basic earnings per share (cents)
Leverage ratio2 (times)
1. Net finance cost is the net of finance costs shown gross in the income statement and interest income included in other income.
2. Leverage ratio is calculated as net debt/trailing 12 months underlying EBITDA.
Net Profit after Tax
Full year reported NPAT increased 98.1% on 2019 to $93.7 million.
Underlying NPAT declined 6.0% from $123.0 million in 2019 to $115.6 million.
Property profits contributed $0.7 million to NPAT in the year, compared to nil in 2019.
Reconciliation of underlying profit
Underlying measures of profit exclude significant items of revenue and expenses, such as the costs related to restructuring,
rationalisation and acquisitions, to highlight the underlying financial performance across reporting periods. Profits from the Group’s
long-term land sales program are included in underlying profit despite the timing being difficult to predict.
The following table reconciles underlying earnings measures to statutory results.
20
INCOME
TAX
PROFIT
BEFORE TAX
PROFIT
AFTER TAX
PROFIT
BEFORE TAX
19
INCOME
TAX
PROFIT
AFTER TAX
$M
$M
$M
$M
$M
$M
127.3
(0.1)
127.2
21.7
2.7
6.9
–
158.5
0.1
(33.6)
–
(33.6)
(6.5)
(0.8)
(2.1)
–
(43.0)
–
93.7
(0.1)
93.6
15.2
1.9
4.8
–
115.5
0.1
63.5
(0.1)
63.4
96.1
0.9
7.1
0.4
167.9
0.1
(16.2)
–
(16.2)
(26.3)
(0.3)
(2.1)
(0.1)
(45.0)
–
47.3
(0.1)
47.2
69.8
0.6
5.0
0.3
122.9
0.1
158.6
(43.0)
115.6
168.0
(45.0)
123.0
YEAR ENDED 31 DECEMBER
Statutory profit attributable to
members
Minority interest
Statutory profit
Impairment
Doubtful debts
Corporate restructuring costs
Acquisition expenses
Underlying profit
Minority interest
Underlying profit attributable to
members
Note: Figures may not add due to rounding
Impairment
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54
Adbri Limited Annual Report 2020 Directors’ Report
Adbri Limited Annual Report 2020 Directors’ Report
55
The Group has recognised a pre-tax non-cash impairment charge of $21.7 million in the period primarily associated with the cessation
of the Alcoa contract from July 2021 and consequential placement of kiln 5 assets at Munster into care and maintenance. In the prior
comparative period, a pre-tax non-cash impairment charge of $96.1 million was recognised, reflecting the updated outlook for the
Group and the reassessment of carrying values following the initial review of business plans and strategies by the new Chief Executive
Officer.
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Review of Operations (continued)
Doubtful debts
Business Risks and Mitigation (continued)
RISK
DETAILS
MITIGATION
In late 2017, Adbri became aware of certain financial discrepancies which related to transactions whereby it had been underpaid for
products supplied. The Group completed its analysis with the assistance of forensic accountants KPMG and recognised a provision
for doubtful debts and costs in its 2017 results. Further costs relating to the recovery of unpaid amounts have been incurred in the
period. The Group expects, in time, that amounts recovered will exceed the costs incurred in the recovery process.
Macro-
economic
conditions
Corporate restructuring costs
Redundancies and one-off employment costs of $6.9 million were recognised in the period ($7.1 million in prior comparative period).
These costs related to restructuring within the Group including a provision of $5.0 million to improve operational efficiency in response
to the proposed closure of kiln 5 at Munster.
Acquisition expenses
No acquisition costs were expensed during the period compared to $0.4 million in the prior comparative period.
Dividends Paid or Declared by the Company
During the 2020 financial year, the following dividends were paid:
• A final ordinary dividend in respect of the year ended 31 December 2019 of 5.0 cents per share (fully franked) was paid on
28 April 2020. This dividend totalled $32,613,318; and
• An interim dividend in respect of the year ended 31 December 2020 of 4.75 cents per share (fully franked) was paid on 7 October
2020. This dividend totalled $30,982,673.
Since the end of the financial year, the Directors have approved the payment of a final ordinary dividend of 7.25 cents per share (fully
franked). The final dividend is to be paid on 22 April 2021. The record date for the final ordinary dividend is 8 April 2021.
Regulatory
compliance
Business Risks and Mitigation
Adbri’s risk management framework, as outlined in the Corporate Governance Statement, incorporates effective risk management
into all facets of the business. Planning processes, including budgets and strategic plans, incorporate a risk management component.
These are integrated into reports to the Board and respective Board Committees throughout the year. The key risks to the Adbri
Group and mitigation actions are outlined below. The risks are not set out in any particular order and do not comprise every risk we
encounter in conducting our business. Rather, they are the most significant risks that we believe we should be monitoring and seeking
to mitigate or otherwise manage at this point in time.
RISK
DETAILS
MITIGATION
Serious
Injury or
Fatality
Adbri operates across many locations,
undertaking cement, lime, concrete and
concrete product manufacturing and
distribution activities.
Serious safety risks could lead to injury or
fatality to persons while undertaking these
activities or attending these locations. This
may impact production performance or the
Company’s ability to continue production.
Further, an employer who is found to be
engaged in negligent conduct that results
in a workplace death, may face penalties,
imprisonment, legal costs and reputational
impacts.
The Company’s health and safety performance
may also impact a customer’s willingness
to trade in Adbri’s products, which may in
turn impact sales volumes. Health and safety
performance will also impact the Company’s
ability to attract and retain key talent.
Adbri has a strong focus on safety and a track record of safe performance.
Continuous improvement and sustaining excellence in safety remain a key
priority for the Group. Adbri’s Safety “Step Change” program introduced the
“Work Safe, Home Safe” vision, in combination with critical risk management,
lifesaving rules, the early intervention program (initialCARE) to support
preventative musculoskeletal injuries.
Safe transport initiatives and Visible Leadership, as well as ICAM investigation
training and further development of our monitoring and reporting systems
have contributed to the ongoing reduction in our recordable injuries.
Adbri has active ongoing consultation, communication and coordination
with workers through HSE Committees, business communications, HSE
alerts, toolbox meetings and sharing “what looks good” initiatives. Incident
notification and investigations are important routine actions to remind
personnel of our “Work Safe, Home Safe” message and to take steps to
prevent recurrences.
Adbri’s Site Pass, an online contractor licence / insurance verification and
induction system supports effective communication of Adbri’s site safety
issues and management to all of the Group’s stakeholders.
The Group employs dedicated professionals to manage health and safety
outcomes and to provide the Group’s employees with adequate education
and training with respect to health and safety matters in the workplace.
The Group maintains workers’ compensation insurance or a self-insured
licence in each State and Territory which provides financial protection to
workers and the organisation against losses which may arise with respect to
workplace injuries.
The Group’s health and safety policies and processes are routinely subject to
internal and external audits.
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Adbri has diversified its business both geographically within
Australia and through vertical integration. This diversity has
balanced the exposure of the business to fluctuations across its
customer base of construction, infrastructure and mining sectors.
Adbri maintains long-term contracts with major resource customers
and raw material suppliers to minimise loss of business and
earnings through market cycles.
Adbri operates mainly in residential, non-residential and
infrastructure construction markets, as well as supplying
product to the resources sector. Its financial performance
is closely tied to the performance of those markets.
The resources, residential, industrial, commercial and
infrastructure construction markets are cyclical and are
affected by various factors beyond the Group’s control
including: commodity price performance and investment
into mining projects, the performance of the Australian
Federal and State economies, the application of fiscal
and monetary policies and regulatory compliance, the
allocation and timing of Government funding for public
infrastructure and other building programs, the level of
demand for building products and construction materials
and services generally, the availability and cost of labour,
raw materials and transport services, as well as the price
and availability of fuel and energy. Adbri supplements its
local Australian production with imported materials. The
supply of imported materials is therefore dependent upon
economic conditions in countries outside of Australia,
particularly Japan, Indonesia and other south east Asian
countries.
With production and distribution sites across all
States and Territories of Australia, Adbri is subject to
significant regulatory requirements across areas such as
environmental, labour, occupational health and safety,
and taxation laws.
Non-compliance with regulatory requirements could lead
to substantial penalties and impositions on operations.
The Group employs a range of initiatives to meet or exceed
regulatory compliance including:
• employment of specialists to support operational staff in areas
such as human resources, health, safety and environment and
sustainability;
• regular training and competency testing of employees;
• inclusion of regulatory compliance within the internal audit scope;
Movement
to a low
carbon
economy
(climate
change)
The recognition of the impact of greenhouse gas
emissions on climate change and the potential impacts
on the environment have driven a movement toward
a low carbon economy. A range of actions are being
undertaken by Governments, the corporate sector and
individuals in recognition of climate change, including
imposing a price on carbon and changes in product
specifications.
Production of clinker, an intermediary product in the
production of cement, and lime are carbon emissions
intensive. The movement to a low carbon economy could
potentially increase the cost of production and reduce
demand.
and
• policies and procedures designed to instil and foster a culture
going beyond mere compliance.
Adbri’s strategy of cost reduction and operational improvement
includes focus on improved efficiency in the manufacturing process
for clinker and lime. The program has delivered savings over a long
period, with further improvements anticipated which will reduce the
emissions intensity of production. The focus on improvement has
delivered a reduction in total scope 1 and scope 2 emissions of
31.1% since 2010.
The Group can leverage its access to products from emissions
efficient suppliers as a result of the Company’s import strategy.
The use of alternate products with cementitious properties, such as
fly ash and ground granulated slag, has increased.
In addition, the use of renewable energy sources such as wind and
solar has increased.
Adbri is also working with partners in the development of alternate
products to replace Portland cement.
The Group has adopted a road map to implement the
recommendations released by the Task Force on Climate-
related Financial Disclosures, which are detailed in Adbri’s 2020
Sustainability Report.
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56
Adbri Limited Annual Report 2020 Directors’ Report
Adbri Limited Annual Report 2020 Directors’ Report
57
Business Risks and Mitigation (continued)
Business Risks and Mitigation (continued)
RISK
DETAILS
MITIGATION
RISK
DETAILS
MITIGATION
Social
licence to
operate
Non-compliance with licence conditions and negative
community sentiment may impact the Company’s ability
to continue to operate near the community it services.
It may also expose the Company to the risk of fines.
This is potentially exacerbated by increasing residential
encroachment and community expectations as well
as increasing regulatory and investor expectations for
continuous improvement.
Adbri works in close collaboration with the communities
in which it operates and seeks to limit any adverse
impacts of its operations through process improvements,
environmental improvement plans and operating within
the limits of our licences with respect to matters such as
emissions, odour and other environmental impacts.
Adbri is committed to meeting societal expectations
with respect to modern slavery law, environmental and
community matters and actively seeks to reduce or
negate any negative impacts upon the community in
which it operates.
Energy
pricing
Production of cement and lime are energy-intensive and
consequently access to reliable, cost-effective energy is
required. Price and reliability are factors in the selection of
suitable energy sources for production.
Access to
capital
The Group is capital intensive and relies on banks and
other institutions to source its funding needs. A failure
to access sufficient liquidity may limit the Company’s
ability to grow its earnings and may prevent the Company
paying its debts as and when they fall due. Further,
where the Company does not maintain access to multiple
funding sources across a range of tenors, it may be
subjected to increased establishment and interest costs.
Change of
Control
Adbri’s major shareholder, the Barro Group, currently
hold a beneficial interest in 43% of the Company’s stock.
The Barro Group can also increase their shareholding by
3% every 6 months, under the Corporations Law “creep
provisions”.
As a substantial shareholder in Adbri, Barro currently
holds three Adbri board positions.
Adbri is at considerable risk of a change of control
event, should the Barro Group choose to increase their
shareholding to exceed 50%.
A change in control could have material impacts on
the business, including increased Directors and Officers
insurance costs, joint venture agreements, sales
contracts, self-insurance status and potential market
disclosures.
The Group sets high standards and has documented processes to
manage community and environmental risks. These are routinely
audited internally and independently.
The Group operates under a comprehensive community
engagement and communication strategy which covers a wide
range of key stakeholders and community groups.
The Group invests heavily to minimise its impact on the
environment and the communities that it operates in and has
made strong progress to minimise its emissions, odour and carbon
footprint through regular investments. With respect to cement
production in Western Australia, the upgrade and relocation of
cement production from Munster to Kwinana, is likely to decrease
the Company’s carbon footprint and will reduce industrial activity
near neighbouring residents.
Adbri is implementing a program addressing modern slavery risks in
its operations and supply chain through working with each vendor
to identify any modern slavery risks in their operations. Vendors
who do not satisfy Adbri’s risk criteria will not be engaged.
A transition from coal to gas and from gas to Refuse Derived Fuel
(RDF) will assist to improve the Company’s carbon emissions and
will also improve community sentiment towards the Company.
The Group employs a portfolio approach to energy procurement,
looking to diversify the sourcing risk at competitive prices.
This portfolio approach has resulted in a mix of contracted
arrangements for the supply of energy and spot purchases on gas
trading markets.
Adbri adopts a conservative approach to capital management and
seeks to maintain investment grade metrics whilst ensuring the
balance sheet can withstand market shocks and retain the flexibility
to fund capital projects and make investments which deliver
earnings growth.
The Group manages its capital within preferred defined leverage
and gearing limits and utilises its dividend policy to ensure it has
enough capital to grow the asset base of the business.
Adbri completed its debt refinancing in November 2019 resulting
in the establishment of $900.0 million in debt and cash advance
facilities plus $50.0 million in contingent instrument facilities
provided by nine financiers. Tenor of these facilities averages
4.6 years at 31 December 2020.
Adbri’s corporate and financial profile continues to be very strong
leading to competition for its business by major banks / financiers.
As a listed entity, the Company can also readily access equity
markets to meet the funding needs of the business.
The Board maintain strong governance protocols to ensure any
conflicts of interest are managed appropriately.
The Board seeks to maintain a majority of independent directors
and seeks to ensure that board committee chair positions are
held by independent directors. Board composition, including a
majority of independent Directors, a Lead Independent Director/
Deputy Chair, and the Board’s Governance Framework were
revised as announced to the ASX on 26 March 2019. Adbri is
actively recruiting a further independent director to restore majority
independent representation.
The Group’s debt funding facilities which were renegotiated in
November 2019, specifically accommodate a change in control
brought about by the Barro Group increasing its shareholding,
ensuring that it will not constitute an event of default or review
requiring repayment.
The Australian Competition and Consumer Commission has
concluded that the Barro Group’s 43% shareholding did not
represent a substantial lessening of competition in the sector.
Foreign
currency
The Group imports a range of materials to supplement
capacity of local production facilities, with approximately
2.3 million tonnes of product imported in 2020. As a
result of these purchases primarily being denominated
in United States Dollars and Japanese Yen, the Group is
exposed to fluctuations in the strength of the Australian
Dollar against these currencies.
Interest
rates
The Group’s debt portfolio is exposed to changes in
interest rates, which may result in increased interest
costs.
Competitive
landscape
Australia, with its relatively open access to global
participants, is a competitive market. Heightened
competition combined with fluctuations in the
macroeconomic environment can lead to product price
volatility and impact upon the financial performance of
the Group.
The Group manages exposure to foreign exchange risk through
a formalised hedging policy. Committed purchases that expose
the Group to foreign currency risk are hedged through agreed
hedging products up to a period of nine months. In addition,
where practical, contractual arrangements with suppliers include
provisions to limit the risk of foreign currency to the Group.
The Group manages exposure to interest rate risk through a
formalised hedging program. A portion of the Group’s drawn debt
is hedged at fixed rates for a period of 5 years to limit the risk of
increases in interest rates to the Group.
Through a focus on cost control and productivity improvement,
the Group’s production facilities are efficient and competitive.
These facilities are supported by a distribution network throughout
Australia, ensuring that Adbri can provide a competitive value
offering to customers. The Group utilises technology to provide
more meaningful data to improve margin and cost and engages
proactively with its customer base to ensure their operational needs
are fully met. We continue to develop our product range to address
the changing needs of our customers and the increased focus on
delivering products with a greener environmental footprint.
Key
equipment
failure
Production
quality
The production of cement and lime involves large
scale manufacturing sites in order to obtain economies
of scale. Where we undertake new capital projects,
there is a risk of project delays or increased cost. The
business also relies on portside infrastructure and
dedicated vessels for the storage and transportation
of raw materials. The failure of key equipment in the
manufacturing and logistics process including delays to
shutdown or dry-docking works, can disrupt production.
Business continuity planning identifies risks with key equipment
and alternate strategies being developed to mitigate risks including
holding “critical spares” of key equipment, holding sufficient
inventory and contractual arrangements to supplement domestic
production where required. To the extent that production is
disrupted for periods exceeding 20 days, the Group maintains
business interruption insurance which responds in relation to land
based assets. Project governance, risk assessment and controls
are formalised for major capital projects.
The Group’s key products of cement, lime, concrete,
aggregates and concrete products are sold in accordance
with relevant quality standards and customer specifications.
Materials used in production are natural products and
therefore normal variability of the characteristics could result
in fluctuations in quality of the end product.
Products that do not meet the relevant quality standard
could result in end-use customers being financially
disadvantaged.
The Group has quality assurance processes across all products,
including the monitoring of inputs into the production process
and testing of final product to ensure compliance with relevant
standards. The skills of internal quality personnel are continually
updated and supplemented using external experts where required.
The Group has product liability insurance which covers the Group’s
legal liability to pay compensation and costs for personal injury
or property damage arising from the supply of non-compliant
products.
Trade credit Contractual arrangements with customers include the
provision of short-term trade credit for product supplied.
The Group is therefore exposed to the credit risk for a
portion of its sales.
Changes in macroeconomic conditions and customer
specific issues impacting cash flows available to settle
purchases, factor into the level of risk associated with
trade credit outstanding.
Fraud,
bribery and
corruption
The Group operates in an environment that exposes it
to the risk of loss from fraud, bribery and corruption.
Operating in a commercial environment with the
movement of funds into and out of the Company gives
rise to the risk that economic benefits can be obtained
through inappropriate acts by employees, suppliers,
customers or third parties.
Cyber
attack
Risk of cyber attack or breach of information security
leading to unauthorised access and loss of or disruption
to Group data or computer-controlled systems
Potential loss of data or records and interruption to
operations.
Trade credit risk is managed through assessment of individual
customer credit limits in accordance with delegated authority levels
approved by the Board, which is monitored along with ageing of
balances outstanding.
The Group’s Code of Conduct outlines the key principles that
govern the Company’s behaviour and actions which make clear
there is zero tolerance for practices considered to be bribery, fraud
or corruption. Employees and contractors are required to adhere to
this code as part of their ongoing employment.
Process controls are periodically reviewed to incorporate enhanced
fraud, bribery and corruption prevention measures, which are
tested through the internal audit program.
Adbri has long standing systems and procedures to safeguard
security of its information. These controls are routinely reviewed
and upgraded or reinforced as necessary to ensure their adequacy.
Adbri has a spread of hardware and IT systems across sites and
the Adbri business, diluting the impact of any individual target
Adbri IT security systems and procedures incorporating proprietary
threat protection and other security controls provide protection
against both internal and external parties. Controls are regularly
tested by internal and external audit.
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Adbri Limited Annual Report 2020 Directors’ Report
59
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State of Affairs
Directors’ Meetings
Other than set out in the Chairman’s report, Chief Executive Officer’s review, operating and financial review on pages 3 to 19 of this
Annual Report, no significant changes occurred in the state of affairs of the Group during the financial year.
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:
Events subsequent to the end of the financial year
No matter or circumstance has arisen since 31 December 2020 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 Chairman’s report, Chief Executive Officer’s review, divisional and financial review on pages 3 to 19 of this Annual Report refer to
likely developments in Adbri’s operations in future financial years and the expected results of those operations.
Environmental performance
The Group’s operations are subject to various Commonwealth, State and Territory environmental regulation.
Environmental performance is monitored 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 and Sustainability Committee, and the Board.
The Group’s major operations have ongoing dialogue with the relevant authorities responsible for monitoring or regulating the
environmental impact of Group operations. Group entities respond as required to requests made by regulatory authorities, including
requests for action to be taken, for information to be provided, and for site inspections.
DIRECTOR
BOARD MEETINGS
AUDIT, RISK &
COMPLIANCE COMMITTEE
PEOPLE AND CULTURE
COMMITTEE
RD Barro
VA Guthrie
RR Barro
KB Scott-Mackenzie2
ER Stein3
GR Tarrant
Z Todorcevski4
A
16
16
16
15
16
16
7
H
16
16
16
16
16
16
7
A Number of meetings attended.
H Number of meetings held during period of office.
A
–
–
–
3
6
6
3
H
–
–
–
3
6
6
3
A
–
5
5
5
5
–
–
H
–
5
5
5
5
–
–
SAFETY, HEALTH,
ENVIRONMENT AND
SUSTAINABILITY
COMMITTEE1
NOMINATIONS
& GOVERNANCE
COMMITTEE
A
4
4
–
4
–
–
–
H
4
4
–
4
–
–
–
A
–
2
–
2
2
–
–
H
–
2
–
2
2
–
–
1. Safety, Health, Environment and Sustainability Committee formerly named Safety, Health and Community Committee. Change of name effective 25 February 2020.
2. Mr Scott-Mackenzie did not participate in one Board meeting which was convened at short notice and the Company was not able to contact him prior to the meeting
commencing. Mr Scott-Mackenzie was appointed to the Audit, Risk & Compliance Committee on 14 June 2020.
3. Ms Stein was appointed as Chair of the Audit, Risk and Compliance Committee from 14 June 2020.
4. Mr Todorcevski resigned effective 14 June 2020.
During 2020, Group entities received regulatory notices issued by Government authorities responsible for environmental matters.
Group companies responded to regulatory notices as required and addressed issues raised by regulatory authorities.
Directors’ Interests
There were a small number of instances during 2020 where, despite the proactive environmental management processes of Group
companies and the responses provided to requests by regulatory authorities, regulatory authorities sought to impose penalties or fines
on a Group company. These are described below.
On 3 May 2019, Hy-Tec Industries (Queensland) Pty Ltd (Hy-Tec) self-reported to the New South Wales Environment Protection
Authority (NSW EPA) a water discharge event from Hy-Tec’s Tumbulgum quarry in northern New South Wales. In response, on
29 January 2020, the NSW EPA issued Hy-Tec with a Penalty Infringement Notice (PIN) for $15,000, which Hy-Tec paid.
Significant rain in January and February 2020 caused overflows of rainwater and sediment from the Tumbulgum quarry, which were
discussed with the NSW EPA at that time and subsequently. On 11 November 2020, the NSW EPA issued Hy-Tec with a PIN for
$15,000 concerning an alleged contravention of the conditions of Hy-Tec’s Environment Protection Licence No. 3430, together with an
Official Caution about information Hy-Tec provided concerning Hy-Tec’s performance under its Soil and Water Management Plan.
Hy-Tec disagreed with the NSW EPA, paying the amount of the PIN without any admission. Hy-Tec considered that no harm resulted
from the water or sediment which overflowed during the heavy rain and which was promptly addressed by Hy-Tec. Hy-Tec reviewed
and enhanced its water management at the Tumbulgum quarry, including upgrades to the sediment basin and the construction of a
new spillway, and considers that the water management at that site is suitable. Hy-Tec continues to have constructive discussions with
the NSW EPA concerning the Tumbulgum quarry.
On 5 November 2019, Cockburn Cement Limited (Cockburn Cement) was informed that the Western Australia Department of
Water and Environmental Regulation (DWER) was conducting an investigation into alleged offences against the Western Australian
Environmental Protection Act 1986 (the Act). DWER informed Cockburn Cement that it was investigating alleged unreasonable odour
emissions from Cockburn Cement’s Munster plant between January and April 2019. Cockburn Cement denied the allegations and
denied that it had committed any offence.
On 29 July 2020, DWER commenced a prosecution against Cockburn Cement. Cockburn Cement has been charged with 15 charges
pursuant to s49(5) of the Act of causing an unreasonable emission (odour) from Cockburn Cement’s operations at Munster, Western
Australia. Cockburn Cement denies the charges and has entered a plea of not guilty to each charge. The date for the trial has not yet
been set.
Further details of the Group’s environmental performance are contained in the 2020 Sustainability Report.
Director profiles
Qualifications, experience, and other directorships and special responsibilities of Directors are set out on pages 50 - 51 of the Annual
Report.
RD Barro
VA Guthrie
RR Barro
KB Scott-Mackenzie
ER Stein
GR Tarrant
ORDINARY SHARES
279,178,329
105,000
278,787,781
20,000
30,676
–
Full details of the interests in share capital of Directors of the Company are set out in the Remuneration Report on pages 63 to 76 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 63 to 76 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 Fellow of the Governance Institute of Australia Ltd and a
legal practitioner admitted in South Australia in 1987.
The Group’s General Manager Corporate Finance and Investor Relations, Darryl Hughes, was appointed an additional Company
Secretary on 11 December 2019, to assist with secretarial duties should the principal Company Secretary be absent.
Indemnification and Insurance of Officers
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.
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Additionally, the Company has entered into Deeds of Access, Indemnity and Insurance with all Directors of the Company and its
wholly-owned subsidiaries. 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.
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Adbri Limited Annual Report 2020 Directors’ Report
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The Company was not liable during 2020 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.
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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, the Executives and any other Officers of each of the divisions of the Group, for the
period 1 May 2020 to 30 April 2021. 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.
Proceedings on Behalf of the Company
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 30 to the Financial Statements on page 124 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 out in
Note 30, 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 126.
Rounding Off
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 relating to the
“rounding off” of amounts in the Directors’ report. In accordance with that instrument, 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
Unissued ordinary shares under option relate to Awards associated with the Company’s Executive Performance Share Plan.
Outstanding Awards at the date of this report are as follows:
DATE AWARDS GRANTED
EXPIRY DATE
NUMBER OF AWARDS
1 January 2017
1 January 2018
1 January 2019
1 January 2020
Total
30 September 2021
30 September 2022
30 September 2023
30 September 2024
142,813
121,837
535,533
957,495
1,757,678
Remuneration report
People and Culture Chair’s letter
Dear Shareholders
On behalf of the Board and as Chair of the People and Culture Committee, I am pleased to present the Adbri Limited 2020
Remuneration Report.
Company response to COVID-19
The Chairman’s and Chief Executive Officer’s reports provide the detailed actions undertaken to manage the impact of the COVID-19
pandemic on the Company. These actions resulted in the Company delivering robust financial and strong safety performance, and
ending the year well placed from a cash, balance sheet and overall business perspective, given the difficulties posed by COVID-19.
Countries across the world have experienced the personal and economic impact of COVID-19. While Australia has been less impacted
compared to other countries, significant time and extraordinary effort by the Board, Executive and employees has been required to
steer the Company through the initial crisis period and then to navigate the major changes required to continue our operations, largely
uninterrupted in what has been a challenging year.
A key priority for the Management team has been ensuring the safety and wellbeing of not just our staff, but also our suppliers and
customers who have operational interactions with the Company. The actions we undertook together were successful, with only one
confirmed COVID-19 case across the Group’s employees and lorry-owner-drivers, while keeping sites open and available to supply
customers as needed.
In the early stages of the COVID response, the Company was able to maintain operations with only a very small reach into
Government sponsored COVID-19 support measures such as JobKeeper. As the year progressed, the performance of the business
did not warrant any further reliance on Government support and as a result, the Group did not receive a direct net benefit from
Government, having repaid the small benefit initially received. This is a pleasing outcome in the circumstances.
In addition to the financial performance, the Group has delivered on improved sustainability outcomes, in particular:
• a reduction in greenhouse gas emissions by 2.3%;
• a reduction in the total recordable injury frequency rate by 47.2%; and
• an increase in the proportion of females newly appointed to positions within the Group from 20% in 2019 to 28% in 2020.
Remuneration in 2020
Summarised below are the remuneration outcomes for 2020 which are detailed more fully later in this report.
The significant social and economic disruption of COVID-19 tested the Company’s resilience during 2020. I am pleased to report
the Executive team has delivered robust underlying profit performance, strong cash flows and balance sheet while maintaining
outstanding safety results and continuity of our operations in the COVID-19 pandemic environment.
However, this performance has been tempered by the loss of the contract for the supply of lime to Alcoa from 1 July 2021. While the
Company is disappointed with the loss of a significant long-term customer, Adbri is focused on earnings opportunities as part of the
development of its lime strategy. Overall remuneration outcomes for Executives reflect the financial and operational performance for
the year and have been aligned with the outcomes for shareholders.
The exercise price for these Awards is nil. Further details of Awards are set out in Note 26 and the Remuneration Report.
Non-executive Director fees
Registered Office
The registered office of the Company is Level 1, 157 Grenfell Street, Adelaide, South Australia 5000.
Corporate Governance Statement
As set out in the 2019 Remuneration Report, no increases to Directors fees were proposed for 2020. Similarly, no increase to
Director’s fees are proposed for 2021, consistent with benchmarking results for our sector.
Following the resignation of Zlatko Todocevski in June 2020, the fee for the position of Deputy Chair and Lead Independent Director
was reviewed. We reduced the base fee, while including committee fees with the net result of this change being a reduction in total
fees received by the Deputy Chair and Lead Independent Director, a position I have the privilege of holding.
The corporate governance statement is available on the Adbri Limited website and may be accessed via the following link:
www.adbri.com.au/who-we-are/corporate-governance
Executive fixed remuneration
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Signed in accordance with a resolution of the Directors.
Raymond Barro
Chairman
Dated 23 February 2021
Executive fixed remuneration increases approved by the Board in 2019 for 2020, ranged between 1.0 – 2.6% in line with the
remuneration principle of attracting, motivating and retaining appropriate management. However, in the current low wage inflation
environment, there are no increases to Executive remuneration in 2021 except those relating to changes in roles that result from the
divisional restructure as announced by the Group in December 2020.
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Adbri Limited Annual Report 2020 Remuneration Report
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People and Culture Chair’s letter (continued)
STI outcomes
The Group’s STI is consistently assessed with reference to underlying financial performance, which is subject to adjustments for significant
items, both positive and negative. On an underlying basis, the Group’s result exceeded the expectation set early in the year before the
full impacts of the COVID-19 outbreak were understood. This is an outstanding effort from the Executive team and staff. This result is to
be commended, particularly when considered in light of the challenges presented by COVID-19 and is reflected in the assessment for
operating cash flow exceeding the STI stretch target of 110.0% and underlying NPAT achieving 97.6% of the stretch target.
Further, with significant progress on delivering on key actions, the majority of non-financial objectives were also met, in particular,
the Group’s significantly improved safety record. Overall, the STI for all Executives other than the Chief Executive Officer was initially
assessed in the range of 79.4 – 93.6% of the total potential maximum STI. The STI for the Chief Executive Officer was initially
assessed at 91.8% of the total potential maximum STI.
The Board recognise the need to align rewards paid to Executives with the shareholder experience and that the loss of the Alcoa
contract from July 2021 did not impact underlying performance conditions included in the STI assessment. Consequently, the Board
exercised its discretion to reduce the level of award made to Executives with respect to the Group NPAT measure – reducing the
award based on achieving 97.6% of the stretch target to the threshold level of 50.0%. This reduced the overall award to Executives,
excluding the Chief Executive Officer and the former Executive General Manager (EGM), Cement and Lime, Brad Lemmon, to a range
of 71.5 – 81.3% of the total potential maximum STI. STIs awarded were further reduced for Executives who previously benefitted
from retention payments in line with the terms of those retention arrangements, which required future STI and LTI awards to be offset
against payments received in July 2019. The STI for the Chief Executive Officer was reduced to an overall award of 62.5% of the total
potential maximum STI. The STI award for the former EGM, Cement and Lime, Brad Lemmon was reduced to $110,000 as part of his
agreed termination arrangements.
This outcome reflects a balance between the achievements delivered by the Executive team in an otherwise difficult year and the
impact of the non-renewal of the Alcoa contract on shareholder value, Company market position and our employees.
LTI outcomes
Executive alignment with shareholders is an important component of the Company’s remuneration policy, with long-term improvement
in shareholder value incorporated into the design of the LTI plan.
During 2020, the 2016 Award was tested for both the Total Shareholder Returns (TSR) and Earnings Per Share (EPS) performance
conditions. Results across the performance period of the Award for both conditions failed to meet the threshold for vesting and as a
consequence all Awards lapsed, without any vesting to Executives.
This outcome reflects the lower share price and earnings of the Group as competition and slower residential construction markets led to
lower earnings in the 2019 and 2020 years and highlights the alignment of the design, to incentivise Executives to drive shareholder value.
Changes to LTI for 2021
As part of the ongoing work to align Executive remuneration with delivering long-term value to shareholders, the LTI plan will be
augmented to:
•
introduce a vesting performance measure for efficient use of capital employed, with 25% of LTI awards to be tested on a return on
capital employed measure. The current earnings per share measure will reduce to 25% of LTI awards;
the number of Awards issued to Executives will be calculated with reference to Adbri’s 10-day volume weighted average price
(VWAP) on either side of the release of the Company’s annual results; and
•
• shares that vest to Executives following testing of the performance conditions, will be subject to a 12 month holding period.
These changes are expected to better align rewards to Executives with the shareholder experience over the long-term. The
introduction of a return on capital employed measure, will help ensure that near-term decision making, delivers benefits to
shareholders over the longer term.
Conclusion
The Board remains focused on ensuring remuneration is structured to attract, motivate and retain an Executive team that enhances
long-term value creation for shareholders, while also providing transparency on remuneration principles and targets. In response to
the challenges presented by COVID-19, the Committee and Board have decided that there will be no salary increase for Directors, the
Chief Executive Officer or other KMP in 2021, except for those changing roles that result from the divisional restructure.
As Chair of the People and Culture Committee, I am committed to ensuring our remuneration framework provides a solid foundation
for retaining and incentivising the best talent to deliver the Group’s strategy which is aligned with value creation for shareholders. The
framework is maintained against changing market conditions and societal expectations.
Thank you for your interest in reviewing our Remuneration Report
The Directors of Adbri Limited (the Company) present the Remuneration Report (Report) for the Company and the Group for the
financial year ended 31 December 2020. The Report outlines the remuneration arrangements in place for the Key Management
Personnel (KMP) of the Company and is prepared in accordance with section 300A of the Corporations Act 2001 (Cth). This Report,
which forms part of the Directors’ Report, has been audited by PricewaterhouseCoopers.
1. Key management personnel
The KMP of Adbri comprise all Directors and those Executives who have authority and responsibility for the planning, directing
and controlling the activities of the Group. In this Report, ‘Executives’ refers to members of the Group Executive team identified
as KMP.
The KMP detailed in this Report for the 2020 financial year are:
NAME
EXECUTIVES
Nick Miller
Theresa Mlikota
Brett Brown
Andrew Dell
Brad Lemmon
NON-EXECUTIVE DIRECTORS
Current
Raymond Barro
Vanessa Guthrie1
Rhonda Barro3
POSITION
Chief Executive Officer (CEO)
Chief Financial Officer
Executive General Manager, Concrete and Aggregates
Executive General Manager, Concrete Products
Executive General Manager, Cement and Lime
Chairman
Deputy Chair and Lead Independent Director2
Non-executive Director
Ken Scott-Mackenzie3
Independent Non-executive Director
Emma Stein3
Geoff Tarrant
Former
Independent Non-executive Director
Non-executive Director
TERM
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Zlatko Todorcevski
Deputy Chairman and Lead Independent Director
Until 14 June 2020
1 Chair of People and Culture Committee.
2
3 Member of People and Culture Committee.
Independent Director to 15 June 2020, Lead Independent Director from 15 June – 25 August 2020, Deputy Chair and Lead Independent Director from 26 August 2020.
2. Remuneration governance
The governance of remuneration outcomes is a key focus of the Board and the People and Culture (P&C) Committee.
Remuneration policies are regularly reviewed to ensure that remuneration for Executives continues to remain aligned to
shareholder value.
Our governance framework for determining remuneration is outlined below:
BOARD
P&C COMMITTEE
MANAGEMENT
The Board approves:
• The overall remuneration policy;
• Non-executive Director
remuneration and senior Executive
remuneration; and
The P&C Committee is delegated
responsibility by the Board to review
and make recommendations on:
• The remuneration policies and
framework for the Group;
• The remuneration of the CEO,
• Non-executive Director
including his participation in the
short-term and long-term incentive
schemes.
remuneration;
• Remuneration for Executives; and
• Executive incentive arrangements
including setting targets and
assessing performance.
Provides information relevant to
remuneration decisions and makes
recommendations to the P&C
Committee
Obtains remuneration information from
external advisors to assist the P&C
Committee (i.e. factual information,
legal advice, accounting advice, tax
advice).
(-^) (^-)
(-^)
(-^)
(-^)
CONSULTATION
WITH
SHAREHOLDERS
AND OTHER
STAKEHOLDERS
REMUNERATION CONSULTANTS AND OTHER EXTERNAL ADVISORS
• Provide independent advice, information and recommendations relevant to remuneration decisions.
In performing their duties and making recommendations to the Board, the Chairman of the P&C
•
Committee seeks independent advice from external advisors on various remuneration related matters.
• Any advice or recommendations provided by external advisers is used to assist the Board – it is not a
substitute for the Board and P&C Committee process.
Vanessa Guthrie
Chair of People and Culture Committee
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65
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3. Executive remuneration policy and framework
3.1. Remuneration policy
4. 2020 Executive remuneration approach
4.1. Fixed annual remuneration (FAR)
The Board ensures remuneration policies are clearly aligned with the Group strategy, which is focused on maintaining
and growing long-term shareholder value. In determining Executive remuneration, the Board has adopted a policy that is
guided by the following principles.
Remuneration principles
ATTRACT AND RETAIN
PAY-FOR-PERFORMANCE
BEHAVIOURS AND CULTURE
Provide remuneration that attracts,
rewards, motivates and retains a
highly capable Executive team.
Reward individual performance,
responsibility and potential.
Drive leadership, performance and
behaviours that reinforce the Group’s
short and long-term strategic and
operational objectives.
The amount of fixed remuneration for an individual Executive (expressed as a total amount of salary and other benefits,
including superannuation contributions) is set with regard to the size and nature of an Executive’s role, the long-term
performance of an individual, their future potential within the Group and market practice. The Company’s stated approach
is also to set fixed remuneration at relatively modest levels compared to peers for Executives who are new to their roles
and to then progressively increase remuneration based on individual performance in that role.
Fixed remuneration is reviewed annually having regard to relevant factors including performance, market conditions
(both generally and in the markets in which the Group operates), growth and comparable roles within peer companies
and similar roles across a comparator group comprising those companies in the ASX 51-150. For someone who has
performed successfully in their role for a number of years, FAR set between the median and 75th percentile of the
comparator would be expected. In 2019, Executive FAR was aligned with the market resulting in increases ranging
between 1.0 - 2.6% for 2020.
SHAREHOLDER ALIGNMENT
MARKET COMPETITIVE
TRANSPARENT
4.2. Short-term incentive
Provide a common interest between
Executives and shareholders by
linking the rewards that accrue to
Executives to the creation of
long-term value for shareholders.
3.2. Remuneration Framework
Have regard to market practice and
market conditions.
Provide transparency and clarity on
what, to whom and on what basis
remuneration has been paid.
Adbri’s STI is the Company’s ‘at risk’ short-term incentive component of the remuneration mix for Executives.
A summary of the key features of the 2020 STI is as follows:
FEATURE
DESCRIPTION
Participants
The CEO and Executives who are able to have a direct impact on the Group’s performance against the
relevant performance hurdles.
Deferral
50% of STI awards will be deferred into rights (unless otherwise determined by the Board).
In line with the remuneration policy, Executive remuneration is divided into a fixed component and “at-risk” components
that include both short and long-term elements. The components of the remuneration framework are summarised below.
PERFORMANCE CONDITIONS
PURPOSE AND DELIVERY
OPPORTUNITY
CEO
OTHER
EXECUTIVES
REMUNERATION MIX %1
D
E
X
F
I
FIXED ANNUAL
REMUNERATION
(FAR)
Purpose
Provide competitive base pay to attract and retain the
skills needed to manage the business.
Delivery
Cash salary and other benefits (including statutory
superannuation).
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SHORT-TERM
INCENTIVE (STI)
Purpose
To reward achievement of performance targets linked to
the Group’s annual business objectives.
LONG-TERM
INCENTIVE (LTI)
Delivery
Cash (50%)
Deferred rights to receive fully paid ordinary shares (50%)
Purpose
To focus Executives on the Group’s long-term business
strategy to create and protect shareholder value over a
four-year performance period
Delivery
Rights to receive fully paid ordinary shares (100%)
As set out in
section 4.1
and 7.2 of
this report
CEO
104% of FAR
Other
executives
62% – 83%
of FAR
CEO
100% of FAR
Other
executives
40% – 70%
of FAR
%
3
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Executives are also eligible for the receipt of shares issued in accordance with the Adbri’s Tax-Exempt Employee Share
Plan (TEES Plan) as set out in Note 26 of the Financial Statements.
Reason metric
was chosen
The Board believes these financial measures align the interests of Executives with shareholders, ensuring
the KMP are rewarded on the Group’s annual business objectives and creating sustainable value for
shareholders from both earnings and cash flow. Stretch targets provide incentives beyond budget to
enhance shareholder returns.
All performance conditions are set by the Board and agreed with the Executive.
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. These include the dynamics of the construction and resources
industries, exchange rates and cost considerations.
Our Management team has responded well to external pressures under difficult market conditions.
Accordingly, the Board strongly believes that our STI targets need to be set in this context in order to
continue to attract and motivate a highly capable Executive team who can drive the continued delivery of
long-term value to shareholders.
Performance
conditions
Financial metrics are compared to budget, with the Board retaining discretion to adjust actual results in
assessing performance. Financial metrics represent 80% of the STI opportunity based on:
FINANCIAL MEASURE
GROUP EXECUTIVE
DIVISIONAL EXECUTIVE
Group net profit after tax (NPAT)
Divisional earnings before interest and tax (EBIT)
Group operating cash flow
Total financial measures weighting
50%
N/A
30%
80%
35%
20%
25%
80%
Non-financial metrics represent 20% of the STI opportunity and are based on stretch targets across a
range of areas agreed with the Executive in order to drive performance outside of pure financial results that
contribute to long-term value creation for shareholders.
REWARD OPPORTUNITY
STI vesting
schedule
STI outcomes of financial targets vest progressively in accordance with the following scale:
FINANCIAL TARGET ACHIEVED
STI % FOR FINANCIAL TARGET
Below 95%
95%
Between 95% and 110%
110% or above
Nil
50%
Pro rata
100%
Non-financial objectives are set at a stretch level of performance
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4. 2020 Executive remuneration approach (continued)
4. 2020 Executive remuneration approach (continued)
4.2. Short-term incentive (continued)
FEATURE
DESCRIPTION
GOVERNANCE
Assessment
against measures
All performance conditions under the STI are clearly defined and measurable.
Underlying NPAT is used as the primary measure for setting and measuring Group financial performance
for the purposes of the STI as this closely reflects shareholder experience, utilising underlying NPAT at the
Group level and EBIT for Divisional performance. Operating cashflow recognises the importance of cash
management to drive shareholder value through an ability to return capital to shareholders.
In respect of the financial targets, the Board compares the actual results against the budget for the year
and assesses the degree to which the Group met those targets. In addition to considering the treatment of
significant items in calculating underlying earnings for alignment with the Group’s remuneration policy, the
Board considers adjustments for exceptional, abnormal or extraordinary factors which may have affected the
Group’s performance during the year.
The Board also considers the P&C Committee’s assessment of the CEO’s performance against the agreed
non-financial targets, and that of Executives (based on the recommendation of the CEO).
The Board chose the assessment method as it provides objective evidence of achievement of the
performance conditions.
Timing of the
award
Assessment of performance against the performance hurdles for the relevant year is determined at the
February meeting of the P&C Committee and the Board, in conjunction with finalisation of the Group’s full
year results.
The cash component is paid following the release of the Company’s full year results in February. The
remainder of the award (the Deferred Rights) is made available as reasonably practicable after the
announcement of the Company’s full year result based on the 10-day VWAP following release of the
Company’s annual results.
Deferred rights
– disposal
restrictions and
dividends
Deferred Rights awarded as part of the 2020 STI are divided into two equal tranches:
• the Deferred Rights in Tranche 1 and the shares acquired on their exercise may not be sold or otherwise
disposed of until after 31 December 2022 (2-year disposal restriction); and
• the Deferred Rights in Tranche 2 and the shares acquired on their exercise may not be sold or otherwise
disposed of until after 31 December 2023 (3-year disposal restriction).
No dividends (or voting rights) are received on the Deferred Rights during the disposal restriction period.
On exercise, the Deferred Rights are converted to shares. The shares issued may not be sold or otherwise
disposed of until the restriction period ends. During the restriction period, shares are eligible to receive
dividends and attract voting rights.
Board discretion
The Board has absolute discretion in relation to assessing performance and determining the amount, if any,
of STI awards.
Clawback
The STI Plan Rules provide the Board with a broad ability to clawback awards if considered appropriate.
In addition to the STI Plan Rules, the Board also has a formal Clawback Policy which provides the Board
with the ability to reduce, forfeit or require repayment of incentives which vest (or may vest) in the case of a
material misstatement in Company financial results, serious misconduct by a participant or in circumstances
where incentive awards or vesting is based on incorrect information not of a financial nature.
CESSATION OF EMPLOYMENT OR A CHANGE OF CONTROL
Cessation
The Board has ultimate discretion to determine the treatment of awards on cessation.
If an Executive resigns or is terminated for cause, all STI entitlements will be forfeited.
The STI Plan Rules provide that in other circumstances, and at the discretion of the Board, award
opportunities will be pro rata reduced to reflect the proportion of the measurement period not worked.
Any disposal restrictions applicable to shares acquired upon the exercise of Deferred Rights will be lifted on
cessation of employment.
Change of control
In the event of a takeover bid (or other transaction likely to result in a change in control of the Company), the
Board has absolute discretion to take any action as provided under the STI Plan Rules.
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4.3. Long-term incentive
The Company makes annual grants of Awards under the Executive Performance Share Plan (Plan) to all Executives who
are eligible to participate.
A summary of the key features of the Plan as it applies to the 2020 LTI Award are as follows:
FEATURE
DESCRIPTION
Participants
The LTI is offered to Executives whose behaviour and performance have a direct impact on the Group’s
long-term performance.
VESTING, PERFORMANCE CONDITIONS AND REWARD OPPORTUNITY
Performance period
The 2020 Awards will be tested on results up to 31 December 2023 and become exercisable to the
extent of any vesting from 1 May 2024.
Exercise of Awards
Shares are delivered to the Executive on the exercise of the Awards. Awards are granted at no cost
to the Executive and no amount is payable by the Executive on the exercise of the Awards. Any
unexercised 2020 Awards will expire on 30 September 2024.
Performance metrics
and rationale for the
chosen metrics
The LTI Award is subject to relative total shareholder return (TSR) (50%) and compound annual growth in
earnings per share (EPS) (50%).
The TSR has been chosen because it provides a link between Executive remuneration and changes
in value experienced by shareholders over the performance period, incentivising outcomes aligned to
shareholders.
The EPS has been chosen because dividends form a fundamental value proposition to shareholders in
the sector in which Adbri operate.
TSR vesting
schedule
The Company’s TSR performance must equal or exceed the growth in the returns of the median
companies 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 2019 to 31 December 2023.
The 2020 Awards vest progressively in accordance with the following scale:
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TSR GROWTH RELATIVE
PERCENTILE RANKING
Below 50th percentile
50th percentile
Between 50th and 75th percentile
75th percentile or above
% OF AWARDS SUBJECT TO TSR
HURDLE TO VEST
Nil
50%
Pro rata
100%
EPS vesting
schedule
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 vest.
The Board retains overall discretion to make adjustments in favour of, or against, Management to ensure
that they do not enjoy a windfall gain nor suffer an unfair penalty for matters that were not in their control
or reasonable foresight.
Awards under the 2020 Award are to vest progressively in accordance with the following scale:
COMPOUND ANNUAL GROWTH
IN EPS
% OF AWARDS SUBJECT TO TSR
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%
Re-testing
Re-testing of either of the performance conditions applicable to a tranche of Awards is not permitted.
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4. 2020 Executive remuneration approach (continued)
5. Linking executive remuneration to company performance
4.3. Long-term incentive (continued)
FEATURE
DESCRIPTION
GOVERNANCE
Assessment against
measures
The Board obtains external reports in relation to the TSR measure, while EPS is assessed following
completion of the audit of the financial results for the relevant year.
The Board chose the assessment method as it provides objective evidence of achieving the
performance condition.
Clawback
The rules of the Plan have, for some time, provided the Board with a broad ability to clawback Awards if
considered appropriate.
In addition to the rules of the Plan, the Board also has a formal Clawback Policy which provides the
Board with the ability to reduce, forfeit or require repayment of incentives which vest (or may vest) in the
case of a material misstatement in Company financial results, serious misconduct by a Participant or
in circumstances where incentive awards or vesting is based on incorrect information not of a financial
nature.
Other conditions
An Executive’s entitlement to shares under an Award may also be adjusted to take account of capital
reconstructions and bonus issues.
The rules of the Plan 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 (e.g. hedging the Awards).
Until the Awards vest, Executives have no legal or beneficial interest in Adbri Limited shares, no
entitlement to receive dividends and no voting rights in relation to any securities granted under the 2020
Award, or any of the other 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.
CESSATION OF EMPLOYMENT OR A CHANGE OF CONTROL
Cessation
The Board has ultimate discretion to determine the treatment of Awards on cessation.
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 Board may at any time waive in whole or in part any performance condition and additional terms in
relation to any Awards granted.
The rules of the Plan provide that in other circumstances, and at the discretion of the Board, 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.
Change of control
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 under the rules of the Plan.
4.4. Executive service agreements
The remuneration and other terms of employment for Executives are set out in formal employment contracts referred to
as ‘Service Agreements’. All Service Agreements are for an unlimited duration and details of 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. The key terms of the Executive Service Agreements are outlined below:
EXECUTIVE
NOTICE PERIOD
SEPARATION PAYMENTS1
CEO
12 months’ notice by either party (or payment in lieu)
Other KMP
6 months’ notice by either party (or payment in lieu)
12 months’ fixed annual remuneration where the
Company terminates on notice
6 months’ fixed annual remuneration where the
Company terminates on notice
1. In the case of resignation, the Board has discretion as to whether a separation payment is made to the Executive (in addition to other amounts due and payable
up to the date of ceasing employment).
5.1. Financial performance
In Adbri’s 2019 Annual Report we indicated that 2020 would be impacted by subdued construction materials markets and
competitive pressures to persist, with earnings expected to be 10% lower than 2019. In addition, in February 2020 when
the 2019 Annual Report was released, COVID-19 was in its initial stages and the implication for Australia and the sectors
serviced by the Group was not known.
The Executive team have managed the impact of COVID-19 exceptionally well, with almost uninterrupted operation of sites
throughout the year to meet customer demand and pro-actively supporting staff, whether continuing to work from site
or home, while delivering on cost reduction targets. Demand has been volatile during 2020 as customers have navigated
the changes caused by COVID-19, including restrictions that have required changes to operating processes, requiring
adaptation by the Company to match these conditions.
Despite these challenging conditions, underlying earnings of $115.6 million exceeded expectations whilst also absorbing
additional costs due to COVID-19. In addition, operating cash flows were strong, growing to $256.2 million.
A 5-year summary of key financial performance metrics of the Company is set out below.
2016
2017
2018
2019
2020
CAGR %
Sales
NPAT reported
NPAT underlying
Share price
$m
$m
$m
$/share
Dividends approved
cents/share
Franking
Operating cash flow
%
$m
Basic earnings per share
cents
TSR – 1 year
%
1,396.2
1,559.6
1,630.6
1,517.0
1,454.2
186.3
187.5
5.43
28.0
100.0
248.4
28.7
20.2
182.7
197.8
6.52
24.5
100.0
224.2
28.1
24.6
185.3
190.9
4.27
28.0
100.0
244.7
28.5
(30.2)
47.3
123.0
3.46
5.0
100.0
193.2
7.3
(17.8)
93.7
115.6
3.35
12.0
100.0
256.2
14.4
0.3
0.6
(14.7)
(11.1)
(6.7)
(15.0)
N/A
2.2
(14.8)
Sales revenue and earnings over this 5-year period has been driven by the higher levels of construction, the recent
recovery in the mining sector, and spending on growth capital that has included acquisitions, and greenfield and
brownfield developments.
The Executive team has identified and implemented strategies to reduce the impact of the more recent decline in earnings
which has been caused by competitive pressures and declining residential construction activity. Specific actions initiated
have included an increased focus on infrastructure sector demand for construction materials through increased team
capabilities to leverage the Group’s existing vertically integrated offering, a cost reduction program and stronger working
capital and balance sheet management. While these actions have delivered cost benefits in 2020, actions to increase
exposure to the infrastructure sector have increased capabilities within the Group which will deliver growth over time as
this exposure matures and projects reach the construction phase.
5.2. Short-term incentives – performance assessment
FINANCIAL PERFORMANCE – 80%
PERFORMANCE MEASURE
PERFORMANCE ASSESSMENT
• Group net profit after
tax (NPAT);
• Earnings before
interest and tax
(EBIT) for divisions;
and
• Group operating cash
flow
Performance for Group NPAT was resilient to the impacts of
COVID-19, with underlying earnings of $115.6 million exceeding
Adbri’s withdrawn guidance by 4.4%. Group NPAT was initially
assessed as meeting the stretch target for STI assessment.
Divisional EBIT similarly performed well given the impact of
COVID-19, with Concrete and Aggregates meeting stretch, Cement
and Lime met partial stretch and Concrete Products met the STI
threshold performance.
A strong focus on managing operations and cost-out program
throughout the year resulted in operating cash flow outperforming
budget and meeting stretch performance for STI.
RESULT
NPAT:
97.6% of stretch
Divisional EBIT:
50-100%
Operating cash flow:
100%
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5. Linking executive remuneration to company performance (continued)
5. Linking executive remuneration to company performance (continued)
5.2. Short-term incentives – performance assessment (continued)
5.3. Short-term incentive – outcomes
NON-FINANCIAL PERFORMANCE – 20%
PERFORMANCE MEASURE
REASON CHOSEN
PERFORMANCE ASSESSMENT
Employee engagement
Improvement in employee
engagement, reflected through
an increase in engagement score
compared to the last employee
survey in 2018.
Employees are important to delivering
long-term growth, and are the key
link to customers, suppliers and the
communities in which we operate.
Establishing a culture that delivers
on the elements of the Company’s
pillars. Positive employee
engagement is a critical part in
delivering on these values which will
add long-term value to shareholders.
COVID-19 limited the ability of
Management to personally engage
with employees throughout the year.
While various technologies were used
to communicate with employees
during 2020, this was not as effective
as face-to-face discussions.
Consequently, employee engagement
levels remained at similar levels to
2018 at 70%.
Business continuity
Maintenance of site operations,
uptime availability and utilisation of
plants throughout the year.
Supporting customers with reliable
supply of high-quality products
throughout the challenging operating
conditions expected during 2020 is
considered important to providing
long-term value for shareholders.
Significant efforts were made by
Management and staff to implement
processes and procedures at sites to
remain operational, particularly during
periods of lockdown in some States.
All production sites remained
operational throughout the year,
maintaining availability for supply
of product to customers, meeting
stretch targets despite challenging
operating conditions.
RESULT
0%
100%
100%
Satisfactory performance across
HSE is fundamental to maintaining
the Company’s social licence
to operate. While safety has
always been important at Adbri,
changing the safety culture to drive
performance improvement requires
significant effort in order to protect
long-term value for shareholders.
HSE has been an area of
considerable focus, incorporating
the Group’s Safety Step-Change
and Visible Leadership programs.
Significant time investment by
Executives resulted in Visible
Leadership by Executives being
assessed as meeting stretch target.
A reduction in TRIFR of 47.2%
exceeded the stretch target.
Individual KPIs were assessed for all
KMP by the Board and CEO.
0-100%
Specific objectives for Executives are
aimed at delivery of key performance
objectives that, while not necessarily
immediately providing a financial
return, set the foundation for
long-term improvement in value
to shareholders.
Health, Safety and Environment
(HSE)
Delivery of the Visible Leadership
program and improvement in safety
targets through a reduction in
TRIFR. The STI has a gateway for
fatalities, with no STI payable if a
fatality occurs.
Other KPIs
A range of other STI objectives have
been set for individual Executives
that reflect their influence on
business performance, including:
• increased use of alternate fuels;
• improved environmental
performance;
• penetration into infrastructure
projects;
• improvement in resource
recoveries; and
• development and implementation
of the Group’s technology and
innovation platforms.
The Group announced on 2 July 2020 that Alcoa, a major customer for lime produced at the Munster operation in
Western Australia, had advised the contract would not be extended beyond the current contract that ends on 30 June 2021.
While the Group NPAT was assessed as meeting 97.6% of the stretch target as set out above, the Board has exercised its
discretion to discount the initial assessment to threshold performance to align Executive STI awards with the shareholder
experience. Consequently, the STI award for Executives (other than the CEO) has been reduced from 87.5% of the available
award to 50.0% for this measure only. This reduced the overall award to Executives excluding the Chief Executive Officer and
the former Executive General Manager, Cement and Lime, to a range of 71.5 - 81.3% of the total potential maximum STI. The
total STI award for all measures for the CEO was reduced from 91.8% to 62.5% of the total potential maximum STI.
The STI award with respect to Brad Lemmon was reduced from the initial assessment of performance against targets to
limit the overall award to $110,000 as part of his agreed termination arrangements.
This reflects a balance between the achievements delivered by the Executive team in an otherwise difficult year and the impact
of the non-renewal of the Alcoa contract on shareholder value, the Company's market position and our employees.
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Performance across both financial and non-financial objectives exceeded many of the targets set by the Board, reflecting
the significant efforts of the Executive team in a challenging year.
The table below summarises the STI outcomes for Executives for 2020.
MAXIMUM
POTENTIAL STI
OPPORTUNITY1
ACTUAL
STI AS % OF
STI MAXIMUM
LAPSED
STI
ACTUAL STI
TOTAL2
CASH
STI
EQUITY
DEFERRED
(2 YEARS)
EQUITY
DEFERRED
(3 YEARS)
ACTUAL STI PAID IN THE FORM OF
Nick Miller
1,584,960
$
Theresa Mlikota
Brett Brown
Andrew Dell3
Brad Lemmon4
567,216
384,134
277,083
470,995
%
62.5
74.6
81.3
–
23.4
%
37.5
25.4
18.7
25.03
76.6
$
$
$
$
990,660
423,300
312,300
–
495,300
211,650
156,150
–
110,000
110,000
247,650
105,825
78,075
–
–
247,650
105,825
78,075
–
–
1. Where the actual STI payment is less than the maximum potential, the difference is forfeited and does not become payable in subsequent years.
2. The 2020 STI was determined in conjunction with the finalisation of 2020 financial results in relation to all Executives.
3. Andrew Dell’s STI was assessed at 75% of his maximum STI opportunity. However, in line with disclosures in the 2018 Remuneration Report, vesting of STI to
Andrew Dell was offset against the balance outstanding of retention payments made in 2019, reducing his 2020 STI to nil.
4. The STI award for Brad Lemmon was reduced from the initial assessment of performance against targets to limit the overall award to $110,000 as part of his
agreed termination arrangements.
5.4. Long-term incentive – performance assessment and outcomes
In 2020, Adbri tested the 2016 Award for vesting in accordance with the conditions of Adbri’s LTI scheme.
Vesting conditions are based on performance over the vesting period, incorporating both a market-based element
calculated on relative TSR against a comparator group and a profitability element measured as the increase in EPS.
Across the performance period of the 2016 Award:
• Adbri’s TSR was (10.4)%, placing the return at the 22nd percentile which is below the vesting threshold for TSR of
50% and accordingly the TSR component of the award did not vest.
• The compound annual growth in EPS over the performance period of (36.6)%, which is lower than the threshold of
5.0% and accordingly the EPS component of the award did not vest.
Performance conditions for the 2016 Award were not met, resulting in no Awards vesting.
The LTI Award reflects slower market demand for the Company’s products over the vesting period, as well as increased
competition and higher costs. The Company continues to address these matters as part of its strategic initiatives which
are outlined in the Annual Report.
AWARDS
HELD AT 1
JAN 2020
GRANTED
DURING THE
YEAR 1
EXERCISED
/ VESTED
DURING THE
YEAR 2
LAPSED /
FORFEITED
DURING THE
YEAR 3
HELD AT 31
DEC 2020 4
VALUE
OF 2020
AWARDS
AT GRANT
DATE 5
FAIR VALUE
OF 2020
AWARD AT
GRANT DATE
VALUE PER
SHARE AT
THE DATE OF
EXERCISE 6
NUMBER
NUMBER
NUMBER
NUMBER
NUMBER
$
$/AWARD
Nick Miller
271,915
Theresa Mlikota
66,019
Brett Brown
Andrew Dell
44,146
132,998
Brad Lemmon
198,345
473,910
148,400
71,786
55,233
88,019
–
–
–
–
–
–
–
–
745,825
214,419
115,932
(38,396)
149,835
(53,302)
233,062
831,712
260,442
128,497
102,457
154,473
1.75
1.76
1.79
1.85
1.75
$
–
–
–
–
–
1. This represents the maximum number of Awards granted in 2020 that may vest to each Executive. As the Awards granted in 2020 only vest on satisfaction
of performance conditions which are to be tested in future financial periods, none of these Awards vested or were forfeited during the year. At the end of the
applicable performance period, any Awards that have not vested will expire. Awards were granted to Executives between 21 June to 14 July 2020.
2. During 2020, only the 2016 Awards were eligible for testing. The threshold conditions for vesting of these Awards were not met and all 2016 Awards lapsed.
The number of Awards that vested during the period and were exercisable at 31 December 2020 is nil. The number of Awards that vested but were not yet
exercisable at 31 December 2020 is nil.
3. This includes the portion of 2016 Awards that reached the end of their performance period on 31 December 2019 that did not meet the performance conditions
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4. Awards subject to performance conditions which remain unvested (2017, 2018, 2019 and 2020 Awards), and which will be tested for vesting during the period
2021 to 2024.
5. Fair value of Awards granted during 2020 as at grant date.
6. The value per share at the date of exercise is the Volume Weighted Closing Price which is the average of the closing price and number of Adbri 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 nil.
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6. Non-executive directors’ fees
6.1. Policy and approach to setting Director fees
FEATURE
DESCRIPTION
Overview of policy Non-executive Directors receive a base fee in relation to their service as a Director of the Board, and an
additional fee for membership of, or for chairing a committee.
Aggregate fees
approved by
shareholders
Base fees for 2020
The role of Deputy Chair and Lead Independent Director carries additional responsibilities, requiring
additional time commitment to the role. Following changes to the Board in June 2020, the fee structure
for the Deputy Chair and Lead Independent Director role was reviewed by the Board. Total remuneration
reduced following the review, with a reduction in base fees partially offset by the payment of committee
fees which were previously excluded from this role.
During 2020, the Board Nomination and Governance (NG) Committee was initiated for the first time.
Considering overall Director remuneration, the Board determined that no committee fees would be payable
for membership of the NG Committee.
The total amount of fees paid to Non-executive Directors is determined by the Board on the
recommendation of its P&C Committee within the maximum aggregate amount approved by
shareholders. The remuneration of 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 Non-executive Directors.
In setting fee levels, the P&C Committee takes into account:
• independent professional advice;
• fees paid by comparable companies;
• the general time commitment and responsibilities involved; and
• the level of remuneration necessary to attract and retain Directors of a suitable calibre.
Total fees, including committee fees, were set within the maximum aggregate amount of $1,600,000 per
annum, approved at the 2017 Annual General Meeting.
Fees for the Chairman and Non-executive Directors are reviewed annually and considered against peer
companies. Fees payable to Non-executive Directors are inclusive of contributions to superannuation.
The table below provides the annual fees payable to Directors.
BASE FEES (BOARD)
Chairman
Deputy Chair and Lead Independent Director1
Non-executive Director
COMMITTEE FEES
$
147,900
265,200
132,600
COMMITTEE
CHAIR
COMMITTEE
MEMBER
$
$
Fee for each committee except Nomination and Governance Committee
30,600
15,300
Nomination and Governance Committee
–
–
1. From 15 June 2020, the Deputy Chair and Lead Independent Director of the Board receives a base Board fee and fees for
committee work. Up to 14 June 2020, the Deputy Chairman and Lead Independent Director of the Board received a base Board
fee of $377,400, with no additional fee for committee work.
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.
6.2. Non-executive Directors’ minimum shareholding requirement
Adbri’s Non-executive Director Minimum Shareholding Policy enhances Board alignment with shareholder interests and
encourages Non-executive Directors to accumulate and maintain a meaningful level of ownership in Adbri.
During their tenure on the Board, Non-executive Directors are expected to acquire (within five years of their appointment)
a shareholding equivalent in value to one year’s base fees (Minimum Shareholding) and thereafter to maintain at least that
level of shareholding throughout their tenure. Non-executive Directors who are in office when this policy was adopted will
have 5 years from July 2018 to achieve the minimum shareholding requirement.
Details of the current shareholdings for Non-executive Directors as at 31 December 2020 are provided in section 7.3.
7. Key management personnel disclosure tables
7.1. Non-executive Directors’ statutory remuneration
NON-EXECUTIVE DIRECTOR
YEAR
Current Non-executive Directors
Raymond Barro
Vanessa Guthrie
Rhonda Barro
Ken Scott-Mackenzie
Emma Stein
Geoff Tarrant
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Former Non-executive Director
Zlatko Todorcevski
2020
2019
FEES AND ALLOWANCES
DIRECTORS’
BASE FEES (INCL.
SUPERANNUATION)
COMMITTEE FEES
(INCL.
SUPERANNUATION)
TOTAL
POST-EMPLOYMENT
BENEFITS
SUPERANNUATION
CONRIBUTIONS1
132,600
132,600
204,927
132,600
132,600
85,037
132,600
132,600
132,600
31,708
132,600
132,600
188,700
377,400
15,300
15,300
45,900
45,900
15,300
9,812
54,246
45,900
38,946
7,318
15,300
15,300
–
–
147,900
147,900
250,827
178,500
147,900
94,849
186,846
178,500
171,546
39,026
147,900
147,900
188,700
377,400
12,831
12,831
5,424
15,486
12,831
8,228
16,210
15,486
14,883
3,385
12,831
12,831
–
32,742
1. Superannuation contributions are made on behalf of Non-executive Directors which satisfy the Group’s obligations under applicable Superannuation Guarantee
Charge legislation.
7.2. Executive statutory remuneration
SHORT-TERM BENEFITS
EXECUTIVE
YEAR
CASH
SALARY
CASH STI 1
OTHER
BENEFITS2
POST-EM-
PLOYMENT
BENEFIT
SUPERAN-
NUATION3
EQUITY BASED BENEFITS
DEFERRED
STI 1
TAX-EXEMPT
EMPLOYEE
SHARE PLAN
LONG-TERM
INCENTIVE 4
TOTAL
% OF REMU-
NERATION
CONSISTING
OF AWARDS5
Nick Miller
2020 1,455,551
495,300
–
24,185
495,300
2019 1,307,363
–
450,000
21,969
–
Theresa Mlikota 2020
660,339
211,650
–
21,411
211,650
2019
465,781
–
250,000
14,901
–
Brett Brown
2020
440,289
156,150
2019
436,077
Andrew Dell
2020
420,043
2019
413,051
–
–
–
–
–
–
394,5366
13,923
24,000
24,000
Brad Lemmon
2020
541,100
110,000
–
25,000
2019
530,000
–
691,2726
25,000
21,491
156,150
–
–
–
–
–
–
–
–
–
999
997
999
997
999
997
88,102 2,558,438
3,066 1,782,398
22,821
1,127,871
1,310
731,992
13,220
788,299
866
451,863
11,069
456,111
–
–
832,584
677,099
– 1,247,269
3.4
0.2
2.0
0.2
1.7
0.2
2.4
–
–
–
1. STI includes amounts relating to performance accrued at the end of each year but not paid until the subsequent year.
2. Other benefits relate to a sign-on bonus for Nick Miller and Theresa Mlikota and pro-rata portion of retention for Andrew Dell and Brad Lemmon.
3. Includes Company contributions to superannuation and allocations by employees made by way of salary sacrifice of fixed remuneration.
4. 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 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 the 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 in Note 26.
5. Percentage of remuneration for the financial year which consists of the amortised annual value of Awards issued under the Adbri Limited Executive
Performance Share Plan.
6. These amounts relate to a retention payment granted to Mr Dell and Mr Lemmon in 2018, the full details of which were disclosed in the 2018 Remuneration
Report. The payments are not ‘additional’ lump sum payments, but have been structured such that it brings forward the vesting of part of future STI and LTI.
Accordingly, following payment of these amounts, existing or future STI or LTI Awards will be adjusted downwards to reflect the prepayment of these incentives.
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Adbri Limited Annual Report 2020 Remuneration Report
Adbri Limited Annual Report 2020 Remuneration Report
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7. Key management personnel disclosure tables (continued)
7.3. Equity holdings of Key Management Personnel
Income statement
A summary of KMP current shareholdings in the Company as at 31 December 2020 is set out below. The balances
reported include shares held directly, indirectly or beneficially by each KMP or close members of their family or an entity
over which the person or the family member has either direct or indirect control, joint control or significant influence as at
31 December 2020.
While the Board has introduced minimum shareholding guidelines for Non-executive Directors, the Board consider
Executives’ interests are aligned to those of our shareholders through the LTI and STI Deferral (as the LTI and STI Deferral
are subject to share price fluctuations). The Board continues to review alignment as part of the design of future Executive
incentives.
BALANCE AT
BEGINNING
OF YEAR
GRANTED AS REMUNERATION DURING THE YEAR
LTI
TEES
DEFERRED
STI
NET
MOVEMENT
DUE TO OTHER
CHANGES
BALANCE AT
END OF YEAR
Current Executives
Nick Miller
Theresa Mlikota
Brett Brown
Andrew Dell
Brad Lemmon
8,000
–
17,905
10,025
14,655
Current Non-executive Directors
Raymond Barro1
Vanessa Guthrie
Rhonda Barro2
Ken Scott-Mackenzie
Emma Stein
Geoff Tarrant
279,178,329
5,000
278,787,781
20,000
–
–
Former Non-executive Directors
Zlatko Todorcevski3
50,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
503
503
503
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
34,000
42,000
–
(15,000)
–
–
–
–
3,408
10,528
15,158
279,178,329
100,000
105,000
–
–
30,676
–
(50,000)
278,787,781
20,000
30,676
–
–
1. The balances relating to Mr Barro include shares owned by entities over which Mr Barro has a significant influence, or which he jointly controls, but he does not
control these entities himself.
2. The balances relating to Ms Barro include shares owned by entities over which Ms Barro has a significant influence, or which she jointly controls, but she does
not control these entities herself.
3. Mr Todorcevski resigned as a Non-executive Director effective 14 June 2020.
FOR THE YEAR ENDED 31 DECEMBER 2020
Continuing operations
Revenue from contracts with customers
Cost of sales
Freight and distribution costs
Gross profit
Other income
Marketing costs
Administration costs
Finance costs
Impairment
Share of net profits of joint ventures and associate accounted for using the equity method
Profit before income tax
Income tax expense
Profit for the year
Profit is attributable to:
Owners of the Company
Non-controlling interests
Earnings per share for profit from continuing operations attributable to the ordinary
equity holders of the Company:
Basic earnings per share
Diluted earnings per share
The above income statement should be read in conjunction with the accompanying notes.
CONSOLIDATED
20 19
NOTES
$M
$M
5
5
6
2,14
21(a)
7(a)
1,454.2
(938.4)
(278.5)
237.3
5.7
(20.6)
(77.8)
(22.6)
(21.7)
26.9
127.2
(33.6)
93.6
93.7
(0.1)
1,517.0
(983.7)
(282.8)
250.5
5.1
(24.4)
(83.1)
(20.1)
(96.1)
31.5
63.4
(16.2)
47.2
47.3
(0.1)
CENTS
CENTS
4
4
14.4
14.3
7.3
7.2
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Adbri Limited Annual Report 2020 Remuneration Report
Adbri Limited Annual Report 2020 Financial Statements
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Statement of comprehensive income
Balance sheet
FOR THE YEAR ENDED 31 DECEMBER 2020
NOTES
Profit for the year
Other comprehensive income
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign operations
Changes in the fair value of cash flow hedges
Income tax relating to these items
Items that will not be reclassified to profit or loss
Actuarial gain on retirement benefit obligation
Income tax credit relating to these items
Other comprehensive (loss) / income for the year, net of tax
Total comprehensive income for the year
Total comprehensive income for the year is attributable to:
Owners of the Company
Non-controlling interests
Total comprehensive income for the year
19(a)
19(a)
7(c)
25(b)
7(c)
CONSOLIDATED
20 19
$M
93.6
(0.1)
(9.3)
2.7
0.1
–
(6.6)
87.0
87.1
(0.1)
87.0
$M
47.2
0.4
(0.7)
0.2
2.3
(0.6)
1.6
48.8
48.9
(0.1)
48.8
The above statement of comprehensive income should be read in conjunction with the accompanying notes.
AS AT 31 DECEMBER 2020
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Current tax assets
Total current assets
Non-current assets
Receivables
Retirement benefit asset
Investments accounted for using the equity method
Property, plant and equipment
Right-of-use assets
Intangible assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Lease liabilities
Provisions
Other current liabilities
Total current liabilities
Non-current liabilities
Borrowings
Lease liabilities
Deferred tax liabilities
Provisions
Other non-current liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Reserves
Retained earnings
Capital and reserves attributable to owners of the Company
Non-controlling interests
Total equity
The above balance sheet should be read in conjunction with the accompanying notes.
CONSOLIDATED
20 19
NOTES
$M
$M
8(a)
9
10
9
25(b)
21
11
12
13
12
15
16
12
7(f)
15
17
19(a)
19(b)
94.0
200.7
152.1
5.7
452.5
45.6
4.1
197.8
1,059.1
82.7
281.1
1,670.4
2,122.9
172.0
3.9
37.7
7.7
221.3
466.1
84.8
63.7
65.0
–
679.6
900.9
1,222.0
740.1
(6.2)
485.8
1,219.7
2.3
1,222.0
116.8
218.7
155.2
28.5
519.2
43.6
4.5
184.8
1,033.7
84.6
283.3
1,634.5
2,153.7
144.9
5.7
33.8
8.6
193.0
540.1
81.9
74.6
66.7
0.1
763.4
956.4
1,197.3
739.0
0.2
455.7
1,194.9
2.4
1,197.3
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Adbri Limited Annual Report 2020 Financial Statements
Adbri Limited Annual Report 2020 Financial Statements
79
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Statement of changes in equity
Statement of cash flows
ATTRIBUTABLE TO OWNERS OF ADBRI LIMITED
SHARE CAPITAL
RESERVES
CONSOLIDATED
NOTES
$M
Balance at 1 January 2020
739.0
Profit / (loss) for the year
Other comprehensive loss
Total comprehensive income / (loss)
for the year
Transactions with owners in their
capacity as owners:
Dividends provided for or paid
Executive Performance Share Plan
18
17(b),
19(a)
Employee Equity Participation Share Plan
17(b)
Balance at 31 December 2020
Balance at 1 January 2019
Profit / (loss) for the year
Other comprehensive income / (loss)
Total comprehensive income / (loss)
for the year
Deferred hedging gains and losses
and cost of hedging transferred to the
carrying value of inventory purchased in
the period
Transactions with owners in their
capacity as owners:
Dividends provided for or paid
Executive Performance Share Plan
18
17(b),
19(a)
Employee Equity Participation Share Plan
17(b)
Balance at 31 December 2019
–
–
–
–
–
1.1
1.1
740.1
734.4
–
–
–
–
–
3.5
1.1
4.6
739.0
RETAINED
EARNINGS
$M
455.7
93.6
0.1
TOTAL
$M
1,194.9
93.6
(6.6)
93.7
87.0
(63.6)
(63.6)
–
–
0.3
1.1
(63.6)
485.8
(62.2)
1,219.7
504.5
1,243.1
47.3
1.7
49.0
47.3
1.6
48.9
$M
0.2
–
(6.7)
(6.7)
–
0.3
–
0.3
(6.2)
4.2
–
(0.1)
(0.1)
(1.1)
–
(1.1)
–
(97.8)
(97.8)
(2.8)
–
(2.8)
0.2
–
–
(97.8)
455.7
0.7
1.1
(96.0)
1,194.9
NON-
CONTROLLING
INTERESTS
$M
2.4
(0.1)
–
(0.1)
–
–
–
–
TOTAL
EQUITY
$M
1,197.3
93.5
(6.6)
86.9
(63.6)
0.3
1.1
(62.2)
2.3
1,222.0
2.5
(0.1)
–
(0.1)
–
–
–
–
–
2.4
1,245.6
47.2
1.6
48.8
(1.1)
(97.8)
0.7
1.1
(96.0)
1,197.3
FOR THE YEAR ENDED 31 DECEMBER 2020
Cash flows 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
Income taxes paid
Income tax refunds
Net cash inflow from operating activities
Cash flows from investing activities
Payments for property, plant, equipment and intangibles
Proceeds from sale of property, plant and equipment
Loans to joint venture entities
Repayment of loans from other parties
Net cash (outflow) from investing activities
Cash flows from financing activities
Proceeds from issues of shares
Drawdown of borrowings
Repayment of borrowings
Principal elements of lease payments
Dividends paid to Company’s shareholders
Net cash (outflow) from financing activities
Net (decrease) / increase 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 end of year
CONSOLIDATED
20 19
NOTES
$M
$M
1,639.9
(1,362.6)
1,671.7
(1,434.2)
8(b)
17(b)
8(d)
8(d)
8(d)
18
16.5
1.9
(22.0)
1.3
(50.0)
31.2
256.2
(136.4)
4.5
(2.0)
0.5
(133.4)
1.1
460.0
(535.0)
(7.8)
(63.6)
(145.3)
(22.5)
116.8
(0.3)
94.0
21.0
0.6
(15.6)
3.1
(64.9)
11.5
193.2
(91.6)
4.7
(2.7)
0.6
(89.0)
4.3
19.7
–
(7.5)
(97.8)
(81.3)
22.9
93.9
–
116.8
The above statement of changes in equity should be read in conjunction with the accompanying notes.
The above statement of cash flows should be read in conjunction with the accompanying notes.
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Adbri Limited Annual Report 2020 Financial Statements
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Notes to the Financial Statements
1 Summary of significant accounting policies
Adbri Limited (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 23 February 2021. 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 either set out below
or included in the accompanying notes. Unless otherwise stated, these policies have been consistently applied to all the years
presented. Unless otherwise stated, the financial statements are for the consolidated entity consisting of Adbri Limited 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 restated where appropriate to enhance comparability.
(i) Historical cost convention
The financial statements have been prepared on a historical cost convention, except for the circumstances where
the fair value method has been applied as detailed in the accounting policies.
(ii) Compliance with IFRS
The consolidated financial statements of Adbri Limited also comply with International Financial Reporting Standards
(IFRS) as issued by the International Accounting Standards Board (IASB).
(iii) New and amended standards adopted by the Group
New standards and amendments applied for the first time for the annual reporting period commencing 1 January
2020 did not have any impact on the amounts recognised in the current or prior periods and are not expected to
significantly affect future periods.
(b) Principles of consolidation
(i)
Subsidiaries
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries controlled by Adbri
Limited as at 31 December 2020 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 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.
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(d)).
Intercompany transactions, balances and unrealised gains on transactions between Group companies are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the
transferred asset. 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 schemes. The company that acts as the
Trustee is consolidated as the company is controlled by the Group. The share scheme trusts are not consolidated
as they are not controlled by the Group.
(iii) 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 changes in ownership 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.
1 Summary of significant accounting policies (continued)
(c) 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 Adbri Limited’s functional and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates 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 or deferred in equity if the gain or loss relates to a qualifying cash flow hedge.
(iii) Foreign operations
The results and financial position of 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 the
•
balance sheet;
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, the associated
exchange differences are reclassified to profit or loss, as part of the gain or loss on sale where applicable.
(d) Business combinations
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, and 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.
(e) Rounding of amounts
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The Company is of a kind referred to in the Australian Securities and Investments Commission Corporations (Rounding
in Financial / Directors’ Report) Instrument 2016 /191, relating to the “rounding off” of amounts in the financial report.
Amounts in the financial report have been rounded off in accordance with that instrument to the nearest one hundred
thousand dollars, unless otherwise stated.
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(f) 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.
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Adbri Limited Annual Report 2020 Notes to the Financial Statements
83
Adbri Limited Annual Report 2020 Notes to the Financial Statements
Financial Performance Overview
2 Segment reporting (continued)
(b) Segment information provided to the CEO (continued)
2 Segment reporting
(a) Description of segments
The operating revenue includes revenue from external customers and a share of revenue from the joint ventures and
associate 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:
Management has determined the operating segments based on the reports reviewed by the CEO. These reports include
segmental information on the basis of product groups and are used to regularly evaluate how to allocate resources and in
assessing performance.
A disaggregation of revenue using existing segments and the timing of the transfer of goods and services (at a point in
time versus over time) is considered by Management to be adequate for the Group’s circumstances.
The two reportable segments have been identified as follows:
• Cement, Lime, Concrete and Aggregates
• Concrete Products
The operating segments Cement, Lime, Concrete and Aggregates individually meet the quantitative thresholds required by
AASB 8 Operating Segments as well as meeting the aggregation criteria allowing them to be reported as one segment.
In considering aggregation of these segments, Management assessed revenue growth and gross margin as the economic
indicators to determine that the aggregated operating segments share similar economic characteristics.
The major end-use of Adbri’s products include residential and non-residential construction, engineering construction,
industrial manufacturing and mining sectors within Australia.
(b) Segment information provided to the CEO
The segment information provided to the CEO for the reportable segments is as follows:
31 DECEMBER 2020
Total segment operating revenue
Inter-segment revenue
Revenue from external customers
CEMENT, LIME,
CONCRETE AND
AGGREGATES
CONCRETE
PRODUCTS
$M
1,262.9
(89.0)
1,173.9
$M
146.1
–
146.1
UNALLOCATED
TOTAL
$M
–
–
–
$M
1,409.0
(89.0)
1,320.0
Depreciation and amortisation
(83.6)
(6.1)
(3.7)
(93.4)
Impairment:
Property, plant and equipment
EBIT
Underlying EBIT
Share of net profits of joint ventures and associate entities
accounted for using the equity method
31 DECEMBER 2019
Total segment operating revenue
Inter-segment revenue
Revenue from external customers
(20.6)
170.4
199.8
26.9
$M
1,354.8
(97.2)
1,257.6
(1.1)
7.0
8.0
–
$M
142.3
–
142.3
Depreciation and amortisation
(82.7)
(6.5)
Impairment:
Receivables and other debtors
Inventory
Property, plant and equipment
Asset retirement provision
Intangible assets
Goodwill
Total impairment
EBIT
Underlying EBIT
Share of net profits of joint ventures and associate entities
accounted for using the equity method
(0.4)
(10.8)
(44.9)
(3.0)
(2.6)
–
(61.7)
152.9
215.8
31.5
–
(13.7)
(8.1)
–
–
(8.8)
(30.6)
(24.6)
6.0
–
Sales between segments are carried out at arm’s length and are eliminated on consolidation.
–
(29.8)
(28.9)
–
$M
–
–
–
(4.4)
–
–
(2.0)
–
(1.8)
–
(3.8)
(46.4)
(35.4)
(21.7)
147.6
178.9
26.9
$M
1,497.1
(97.2)
1,399.9
(93.6)
(0.4)
(24.5)
(55.0)
(3.0)
(4.4)
(8.8)
(96.1)
81.9
186.4
–
31.5
84
Adbri Limited Annual Report 2020 Notes to the Financial Statements
Total segment operating revenue
Inter-company revenue elimination
Freight revenue
Other product
Royalties
CONSOLIDATED
20 19
$M
1,409.0
(89.0)
128.0
5.6
0.6
$M
1,497.1
(97.2)
104.9
11.6
0.6
Revenue from continuing operations
1,454.2
1,517.0
The performance of the operating segments is based on a measure of underlying Earnings Before Interest and Tax (EBIT).
This measurement basis excludes the effect of significant items and net interest. A reconciliation of the EBIT to operating
profit before income tax is provided as follows:
Underlying EBIT
Significant items (refer pages 55 to 56)
Net interest
Profit / (loss) before income tax
(c) Other segment information
CONSOLIDATED
20 19
$M
178.9
(31.3)
(20.4)
127.2
$M
186.4
(104.5)
(18.5)
63.4
Revenues of $218.1 million (2019: $252.1 million) are derived from a single customer. These revenues are attributable to the
Cement, Lime, Concrete and Aggregates segment.
3 Critical accounting estimates and assumptions
The Group makes estimates and assumptions in preparing the financial statements. The resulting accounting estimates will, by
definition, seldom equal the related actual results. This note provides an overview of the areas that involved a higher degree of
judgement or complexity and of items which are more likely to be materially adjusted due to estimates and assumptions differing
to actual outcomes. The areas involving significant estimates and assumptions are listed below.
•
•
• Provisions for close-down and restoration costs – Note 15
• Retirement benefit obligations – Note 25
Inventories – Note 10
Impairment tests – Note 14
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Adbri Limited Annual Report 2020 Notes to the Financial Statements
4 Earnings per share
Accounting policy – 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.
5 Revenue from contracts with customers and other income
Accounting policy – revenue recognition
Revenue is recognised for the major business activities as follows:
(i)
Revenue from contracts with customers
Revenue from the sale of goods is recognised when control of the product has transferred, being where goods are
shipped to the customer, risk of loss has been transferred to the customer and there is objective evidence that all criteria
for acceptance has been satisfied.
(ii)
Interest income
Finance income comprises interest income recognised on financial assets. Interest income is recognised as it accrues
using the effective interest rate method.
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Basic earnings per share
Diluted earnings per share
CONSOLIDATED
20 19
CENTS
CENTS
14.4
14.3
7.3
7.2
CONSOLIDATED
20 19
SHARES
SHARES
Weighted average number of shares used as the denominator
Weighted average number of ordinary shares used as the denominator in calculating earnings
per share
652,129,815
651,542,678
Adjustments for calculation of diluted earnings per share:
Awards
1,757,678
1,063,600
Revenue
Revenue from contracts with customers
Royalties
Other income
Interest from joint ventures
Interest from other parties
Net gain on disposal of property, plant and equipment
Rental income
Other income
CONSOLIDATED
20 19
$M
$M
1,453.6
0.6
1,454.2
1,516.4
0.6
1,517.0
0.2
2.0
0.3
1.3
1.9
5.7
0.7
0.9
0.3
1.5
1.7
5.1
Total revenue from contracts with customers and other income
1,459.9
1,522.1
Weighted average number of ordinary and potential ordinary shares used as the denominator in
calculating diluted earnings per share
653,887,493
652,606,278
The Group has an active strategy of managing its property portfolio to drive additional value into the business. During the
year the Group realised a net gain on the sale of properties of $0.7 million (2019: nil) which is recognised in other income.
Reconciliation of earnings used in calculating earnings per share
Basic and diluted earnings per share
Profit after tax
Loss attributable to non-controlling interests
Profit attributable to the ordinary equity holders of the Company used in calculating diluted
earnings per share
CONSOLIDATED
20 19
$M
$M
93.6
0.1
93.7
47.2
0.1
47.3
86
Adbri Limited Annual Report 2020 Notes to the Financial Statements
6 Expenses
Profit before income tax includes the following specific expenses:
Depreciation
Amortisation of intangibles
Impairment of goodwill
Impairment of other assets
Receivables and other debtors
Inventory
Property, plant and equipment
Asset retirement provision
Other intangible assets
Total Impairment
Other charges
Employee benefits expenses
Superannuation expense
CONSOLIDATED
20 19
NOTES
11, 12
13
13, 14
10
11
13, 14
$M
91.2
2.2
–
–
–
21.7
–
–
21.7
181.7
13.4
$M
91.2
2.4
8.8
0.4
24.5
55.0
3.0
4.4
96.1
190.6
13.4
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Adbri Limited Annual Report 2020 Notes to the Financial Statements
6 Expenses (continued)
In 2020, an impairment charge has been taken against specific assets expected to be placed into care and maintenance.
The impairment charge relates primarily to plant and equipment that was specifically utilised in servicing the Alcoa contract
which ceases in July 2021.
The impairment recorded as a result of value-in-use cash flow modelling and balance sheet review in the period by segment is
disclosed in Notes 2 and 14.
Accounting policy – borrowing costs
Borrowing costs incurred for the construction of any qualifying asset are capitalised into the cost base of the asset 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.
Finance costs
Interest and finance charges paid / payable for lease liabilities and financial liabilities not at fair value
through profit or loss
Unwinding of the discount on restoration provisions
Total finance costs
Amount capitalised1
Total finance costs
CONSOLIDATED
20 19
$M
$M
22.8
0.3
23.1
(0.5)
22.6
20.0
0.9
20.9
(0.8)
20.1
1. 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, being 1.54% p.a. (2019: 2.5% p.a.).
7
Income tax
Accounting policy – income tax
The income tax expense or credit 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 and to previously unused tax losses. The current income tax charge is calculated on the basis of tax laws
enacted or substantively enacted at the end of the reporting period.
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.
Tax consolidation
Adbri Limited and its wholly-owned Australian subsidiaries implemented the Australian tax consolidation legislation as of
1 January 2004. Adbri Limited, 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, Adbri Limited.
Amounts receivable or payable under a 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.
7
Income tax (continued)
Accounting policy – income tax (continued)
The wholly-owned entities fully compensate Adbri Limited for any current tax payable assumed and are compensated by
Adbri Limited for any current tax receivable and deferred tax assets relating to unused tax losses or unused tax credits that
are transferred to Adbri Limited under the tax consolidation legislation. The funding amounts are determined by reference to
the amounts recognised in the wholly-owned entity’s financial statements.
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.
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(a) Numerical reconciliation of income tax expense to prima facie tax payable
CONSOLIDATED
20 19
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Profit before income tax expense
Tax at the Australian tax rate of 30.0% (2019: 30.0%)
Tax effect of amounts which are not deductible (taxable) in calculating taxable income:
Goodwill impairment
Non-allowable expenses
Non-assessable income
Rebateable dividends
Other deductions
Under / (over) provided in prior years
Aggregate income tax expense
Aggregate income tax expense comprises:
Current tax on profits for the year
Net deferred tax expense / (benefit)
Under / (over) provided in prior year
(b) Amounts recognised directly in equity
Aggregate current and deferred tax arising in the reporting year not recognised in net profit or
loss or other comprehensive income but directly debited or credited to equity:
Current tax
Net deferred tax expense / (benefit)
(c) Tax expense relating to items of other comprehensive income
Actuarial gains / (losses) on retirement benefit obligation
Changes in the fair value of cash flow hedges
(d) Tax losses
Unused tax losses for which no deferred tax asset has been recognised:
Revenue losses
Capital losses
$M
127.2
38.2
–
0.3
(3.2)
(1.2)
(0.2)
(0.3)
33.6
40.0
(6.1)
(0.3)
33.6
–
(0.1)
(0.1)
–
2.7
2.7
0.7
11.1
$M
63.4
19.0
2.6
0.5
(2.1)
(4.0)
(0.1)
0.3
16.2
31.4
(15.5)
0.3
16.2
(1.0)
1.1
0.1
(0.6)
0.2
(0.4)
0.6
11.2
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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.
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Adbri Limited Annual Report 2020 Notes to the Financial Statements
89
Adbri Limited Annual Report 2020 Notes to the Financial Statements
7
Income tax (continued)
(e) Non-current deferred tax assets
The balance comprises temporary differences attributable to:
Share-based payment reserve
Provisions
Lease liabilities
Other assets
Deferred tax assets – before offset
Offset deferred tax liability (Note 7(f))
Net deferred tax assets – after offset
Movements:
Opening balance at 1 January – before offset
Recognised in the income statement
Recognised in other comprehensive income
Under / (over) provision in prior year
Closing balance at 31 December – before offset
(f) Non-current deferred tax liabilities
The balance comprises temporary differences attributable to:
Property, plant and equipment
Right-of-use assets
Inventories
Other
Deferred tax liabilities – before offset
Offset deferred tax assets (Note 7(e))
Net deferred tax liabilities – after offset
Movements:
Opening balance at 1 January – before offset
Recognised in the income statement
Recognised in equity
(Over) / under provision in prior year
Closing balance at 31 December – before offset
8 Note to statement of cash flows
(a) Cash and cash equivalents
Accounting policy – cash and cash equivalents
CONSOLIDATED
20 19
$M
$M
0.2
39.6
26.5
6.4
72.7
(72.7)
–
67.2
5.4
0.1
–
72.7
82.9
25.1
13.8
14.6
136.4
(72.7)
63.7
141.8
(3.6)
–
(1.8)
136.4
0.1
40.0
26.2
0.9
67.2
(67.2)
–
33.7
36.3
(1.8)
(1.0)
67.2
86.5
25.4
13.2
16.7
141.8
(67.2)
74.6
122.9
18.8
(0.7)
0.8
141.8
Cash and cash equivalents includes cash on hand, term deposits and deposits held at call with financial institutions and
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.
Current
Cash at bank and in hand
Term deposits
Cash and cash equivalents
CONSOLIDATED
20 19
$M
$M
91.2
2.8
94.0
113.9
2.9
116.8
90
Adbri Limited Annual Report 2020 Notes to the Financial Statements
8 Note to statement of cash flows (continued)
(a) Cash and cash equivalents (continued)
(i) Offsetting
The Group has an offsetting agreement with its bank for cash facilities. This agreement allows the Group to manage
cash balances on a total basis, offsetting individual cash balances against overdrafts. The value of all overdrafts at
31 December 2020 was $nil (2019: $nil).
(ii) Risk exposure
The Group’s exposure to interest rate risk is discussed in Note 20. 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.
(b) Reconciliation of profit after income tax to net cash inflow from operating activities
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Profit for the year
Doubtful debts
Impairment of goodwill
Depreciation, amortisation and other impairment
Share-based payments
Finance charges on remediation provision
Interest on lease liabilities
(Gain) / loss on sale of non-current assets
Share of profits of joint ventures, net of dividends received
Non-cash retirement benefits expense
Non-cash remediation obligation / (asset increase)
Capitalised interest
Other
Net cash provided by operating activities before changes in assets and liabilities
Change in operating assets and liabilities, net of effects from purchase of business
combinations:
Decrease / (increase) in inventories
(Increase) / decrease in prepayments
Decrease / (increase) in receivables
Increase / (decrease) in trade creditors
Increase / (decrease) in provisions
Increase / (decrease) in taxes payable
(Decrease) / increase in deferred taxes payable
(Decrease) / increase in other operating assets and liabilities
Net cash inflow from operating activities
(c) Net debt reconciliation
Cash and cash equivalents
Borrowings
Net debt
CONSOLIDATED
20 19
$M
93.6
–
–
115.1
(0.2)
0.3
3.1
(0.3)
(10.3)
0.5
1.7
(0.5)
1.7
204.7
3.1
(2.1)
20.1
27.1
2.2
22.8
(10.9)
(10.8)
256.2
$M
47.2
1.3
8.8
180.9
(2.7)
(0.9)
3.0
(0.3)
(10.5)
0.4
(20.2)
(0.8)
1.1
207.3
(3.2)
(0.8)
3.0
11.1
21.1
(22.9)
(14.0)
(8.4)
193.2
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94.0
(466.1)
(372.1)
116.8
(540.1)
(423.3)
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91
Adbri Limited Annual Report 2020 Notes to the Financial Statements
8 Note to statement of cash flows (continued)
(d) Reconciliation of movements of liabilities to cash flows arising from financing activities
Balance Sheet Items
OTHER ASSETS
LIABILITIES FROM FINANCING ACTIVITIES
9 Trade and other receivables
CASH/
BANK
OVER-
DRAFT
LIQUID
INVEST-
MENT
FINANCE
LEASES
DUE
WITHIN
1 YEAR
FINANCE
LEASES
DUE AFTER
1 YEAR
BORROW.
DUE
WITHIN
1 YEAR
BORROW.
DUE AFTER
1 YEAR
LEASES
DUE
WITHIN
1 YEAR
LEASES
DUE
AFTER
1 YEAR
TOTAL
$M
$M
$M
$M
$M
$M
$M
–
(7.5)
7.5
–
$M
$M
–
(424.8)
(83.7)
–
(0.3)
(91.2)
10.7
(0.3)
(518.7)
–
(19.7)
–
Accounting policy – trade and other receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost, less loss allowance
provision. Trade receivables are typically due for settlement no more than 30 to 45 days from the end of the month of invoice.
The Group holds the trade receivables with the objective of collecting the contractual cash flows and therefore measures them
subsequently at amortised cost using the effective interest rate.
The Group applies the simplified approach to providing for expected credit losses for all trade receivables as set out in
Note 20(b).
The amount of the provision is recognised in the income statement. When a trade receivable for which a loss allowance
provision 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.
Net debt as at
1 January 2019
Recognised on
adoption of AASB 16
Cash flows
Acquisition – leases
Other non-cash
movements
Net debt as at
31 December 2019
Lease liabilities
Net debt excluding
lease liabilities at
31 December 2019
Cash flows
Other non-cash
movements
Acquisition – leases
Net debt as at
31 December 2020
Lease liabilities
Net debt excluding
lease liabilities at
31 December 2020
93.9
–
22.9
–
–
116.8
–
116.8
(22.8)
–
–
94.0
–
94.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1.7)
(5.7)
2.1
(5.3)
(540.1)
(540.1)
75.0
(1.0)
–
(466.1)
–
(5.7)
5.7
–
7.8
(6.1)
–
(4.0)
4.0
(81.9)
81.9
(510.9)
87.6
–
–
(423.3)
60.0
4.8
(7.6)
(2.3)
(7.6)
(84.7)
(460.8)
84.7
88.7
(466.1)
–
–
(372.1)
Current
Trade receivables
Loss allowance provision (see note 20(b))
Amounts receivable from joint ventures
Prepayments
Other receivables
Total current
Non-current
Loans to joint ventures
Other non-current receivables
Total non-current
Movement in loss allowance provision
Opening balance at 1 January
Amounts written off during the year
Loss allowance provision recognised during the year
Closing balance at 31 December
CONSOLIDATED
20 19
$M
$M
167.5
(17.9)
149.6
31.9
9.6
9.6
200.7
44.5
1.1
45.6
19.1
(1.2)
–
17.9
185.2
(19.1)
166.1
32.5
7.5
12.6
218.7
42.5
1.1
43.6
19.1
(0.6)
0.6
19.1
Fair value and credit, interest and foreign exchange risk
Due to the short-term nature of current 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 20(b).
The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of receivables
mentioned above.
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92
Adbri Limited Annual Report 2020 Notes to the Financial Statements
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Adbri Limited Annual Report 2020 Notes to the Financial Statements
10
Inventories
Accounting policy – 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. Cost includes the reclassification from equity of any gains or
losses on qualifying cash flow hedges relating to purchases of raw materials. Costs of engineering spare parts and stores 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.
Inventory quantities are verified through stocktakes where inventory is either counted or, in the case of bulk materials, volumetric
surveys are converted to weight using density factors. Volumetric surveys are performed by independent surveyors utilising
aerial and laser surveys.
11 Property, plant and equipment (continued)
Accounting policy – property, plant and equipment (continued)
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.
CONSOLIDATED
FREEHOLD
LAND
BUILDINGS
LEASEHOLD
PROPERTY
PLANT AND
EQUIPMENT
MINERAL
RESERVES
ASSET
RETIREMENT
COST
IN COURSE OF
CONSTRUC-
TION
TOTAL
$M
$M
$M
$M
$M
$M
$M
$M
31 DECEMBER 2020
At cost
214.7
153.4
9.6
1,544.1
215.5
55.2
75.1
2,267.6
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Current
Finished goods
Raw materials and work-in-progress
Engineering spare parts stores
Inventory expense
CONSOLIDATED
20 19
$M
$M
60.8
58.1
33.2
152.1
60.8
61.3
33.1
155.2
Inventories recognised as expense during the year ended 31 December 2020 and included in cost of sales amounted to
$898.0 million (2019: $909.9 million).
Accumulated depreciation
and impairment
Net book amount
Reconciliation
Carrying amount at
1 January 2020
Additions
Disposals
Remeasurement
reclassification
Impairment loss
Depreciation / amortisation
Carrying amount
at 31 December 2020
31 DECEMBER 2019
–
214.7
190.5
25.2
(1.0)
–
–
–
(78.1)
75.3
80.0
0.3
–
–
–
(5.4)
4.2
(1,051.4)
492.7
(58.2)
157.3
4.7
–
–
–
–
511.9
77.3
(3.3)
–
(21.7)
(71.5)
153.2
10.3
–
–
–
(6.2)
(15.4)
39.8
42.8
0.3
–
(2.9)
–
(0.4)
–
(1,208.5)
75.1
1,059.1
50.6
20.61
–
3.9
–
–
1,033.7
134.0
(4.3)
1.0
(21.7)
(83.6)
(5.0)
(0.5)
214.7
75.3
4.2
492.7
157.3
39.8
75.1
1,059.1
There was no material adjustment to inventories net realisable value in 2020 (2019: $24.5 million).
At cost
190.5
153.0
9.7
1,500.5
205.2
56.5
50.7
2,166.1
11 Property, plant and equipment
Accounting policy – property, plant and equipment
Property, plant and equipment is 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 up to 50 years.
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.
(ii) Major plant replacement
The costs of replacing major components of complex assets are depreciated over the estimated useful life, generally being
the period until the next scheduled replacement 5 – 10 years.
(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 residual values and useful lives of assets 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. Gains and losses on disposals are determined by comparing proceeds with the
asset’s carrying amount. These are included in the income statement.
94
Adbri Limited Annual Report 2020 Notes to the Financial Statements
Accumulated depreciation
and impairment
Net book amount
Reconciliation
Carrying amount at
1 January 2019
Additions
Disposals
Impairment loss
Depreciation / amortisation
Carrying amount
at 31 December 2019
–
190.5
(73.0)
80.0
193.0
1.1
(2.2)
(1.4)
–
83.7
3.2
–
(2.3)
(4.6)
(5.0)
4.7
5.2
0.1
–
–
(0.6)
(988.6)
511.9
(52.0)
153.2
531.7
80.2
(2.2)
(25.0)
(72.8)
178.4
0.6
–
(21.6)
(4.2)
(13.7)
42.8
24.0
22.2
–
(2.0)
(1.4)
(0.1)
50.6
(1,132.4)
1,033.7
45.7
1,061.7
7.61
–
(2.7)
–
115.0
(4.4)
(55.0)
(83.6)
190.5
80.0
4.7
511.9
153.2
42.8
50.6
1,033.7
1. Additions to in course of construction assets are net of transfers to other asset categories.
12 Leases
Accounting policy – leases
The Group leases various offices, warehouses and plant and equipment. Rental contracts are typically made for fixed periods
with most having a tenure of up to 10 years. There are a small number of leases that extend beyond the 10-year lease period
including one lease with a lease term of 50 years. Many leases also have extension options. Lease terms are negotiated on an
individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants
other than the security interests in the leased assets that are held by the lessor. Leased assets may not be used as security for
borrowing purposes. At the inception of a contract, the Group assesses whether the contract is or contains a lease based on
whether the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present
value of the following lease payments:
•
•
fixed payments (including in-substance fixed payments), less any lease incentives receivable;
variable lease payments that are based on an index or a rate, initially measured using the index or rate as at the
commencement date;
• amounts expected to be payable by the Group under residual value guarantees;
•
the exercise price of a purchase option if the Group is reasonably certain to exercise that option; and
• payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option.
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Adbri Limited Annual Report 2020 Notes to the Financial Statements
12 Leases (continued)
Accounting policy – leases (continued)
Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which
is generally the case for leases in the Group, the lessee’s incremental borrowing rate is used, being the rate that the individual
lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar
economic environment with similar terms, security and conditions.
To determine the incremental borrowing rate, the Group:
• uses recent third party financing received by the individual lessee as a starting point, adjusted to reflect changes in financing
conditions since third party financing was received; and
• makes adjustments specific to the lease term.
The Group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included
in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease
liability is reassessed and adjusted against the right-of-use asset.
Right-of-use assets are measured at cost comprising the following:
•
the amount of the initial measurement of lease liability;
• any lease payments made at or before the commencement date less any lease incentives received;
• any initial direct costs; and
•
restoration costs.
Right-of-use assets are depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. If the
Group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset’s
useful life.
Each lease payment is allocated between the liability and finance cost. 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.
Payments associated with short-term leases of equipment and vehicles and all leases of low-value assets are recognised on a
straight-line basis as an expense in the income statement. Short-term leases are leases with a lease term of 12 months or less.
Low-value assets comprise IT equipment and small items of office furniture.
Contracts may contain both lease and non-lease components. The Group allocates the consideration in the contract to the
lease and non-lease components based on their relative stand-alone prices.
The standard specifically excludes leases to explore for or use minerals and non-regenerative resources, therefore any leases of
quarry assets continue to be accounted for consistently with prior periods.
(i)
Amounts recognised in the balance sheet
The balance sheet shows the following amounts relating to leases:
Right-of-use assets
Property
Plant and equipment
Lease liabilities
Current
Non-current
CONSOLIDATED
20 19
$M
$M
55.2
27.5
82.7
3.9
84.8
88.7
52.4
32.2
84.6
5.7
81.9
87.6
Additions to the right-of-use assets during the 2020 financial year were $7.6 million (2019: $0.3 million).
96
Adbri Limited Annual Report 2020 Notes to the Financial Statements
12 Leases (continued)
(ii) Amounts recognised in the income statement
The income statement shows the following amounts relating to leases:
Depreciation charge of right-of-use assets
Property
Plant and equipment
Interest expense (included in finance cost)
Expense relating to short-term leases (included in cost of goods sold and administrative
expenses)
Expense relating to variable lease payments not included in lease liabilities (included in cost of
goods sold and administrative expenses)
CONSOLIDATED
20 19
$M
4.2
3.4
7.6
3.1
–
45.8
56.5
$M
4.2
3.4
7.6
3.0
0.2
44.5
55.3
The total cash outflow for leases in 2020 was $43.8 million (2019: $43.3 million).
(iii) Lorry owner-drivers
The Group has contracts with a number of lorry owner-drivers who are used for delivering concrete in an operationally
flexible manner that supplement the Group’s owned fleet. The contracts include the supply of a vehicle and driver with
terms of up to 10 years. These contracts are treated as embedded leases, as the arrangements convey the right to
control the use of the lorry in exchange for consideration. In circumstances where these contracts contain minimum or
fixed payments relating to the underlying asset, these amounts would be used to calculate the valuation of the lease
liability and right-of-use asset.
As the payments made under these agreements are wholly variable, they are not reflected in the measurement of lease
liabilities or right-of-use assets and are expensed when incurred. The amounts are dependent on deliveries made and
services performed with no minimum fixed payments. The following amounts are the estimated future cash outflows the
Group will pay to contracted lorry owner-drivers based on the current fleet under existing terms.
Estimated cash outflows payable to lorry owner-drivers under existing contract terms,
but not recognised as liabilities:
Within one year
Later than one year but not later than five years
Later than five years
(iv) Extension and termination options
20 19
$M
$M
52.0
102.5
7.7
162.2
35.6
105.8
19.1
160.5
Extension and termination options are included in a number of property and equipment leases across the Group.
These are used to maximise operational flexibility in terms of managing the assets used in the Group’s operations.
In cases where these options exist, they are exercisable only by the Group and not by the respective lessor.
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97
Adbri Limited Annual Report 2020 Notes to the Financial Statements
13 Intangible assets
Accounting policy – intangible assets
(i) Goodwill
14
Impairment tests (continued)
(a) Goodwill is allocated to the Group’s CGUs.
A segment-level summary of the goodwill allocation presented below:
Goodwill is measured as described in Note 1(d). Goodwill on acquisitions of subsidiaries is included in intangible assets.
Goodwill on acquisition of joint ventures is included in the investment 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 (CGUs) which are expected to benefit from the business combination for the purpose of
impairment testing. Each of those CGUs are consistent with the Group’s reporting segments.
(ii) Software
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.
31 DECEMBER 2020
Cost
Accumulated amortisation and impairment
Carrying amount at 31 December 2020
Opening balance at 1 January 2020
Reclassification
Amortisation charge
Closing balance at 31 December 2020
31 DECEMBER 2019
Cost
Accumulated amortisation and impairment
Carrying amount at 31 December 2019
Opening balance at 1 January 2019
Reclassification
Impairment charge
Amortisation charge
Closing balance at 31 December 2019
CONSOLIDATED
GOODWILL
SOFTWARE
OTHER
INTANGIBLES
$M
$M
$M
272.5
–
272.5
272.5
–
–
272.5
281.3
(8.8)
272.5
281.3
–
(8.8)
–
272.5
20.8
(17.9)
2.9
4.2
0.6
(1.9)
2.9
20.1
(15.9)
4.2
7.7
–
(1.7)
(1.8)
4.2
10.8
(5.1)
5.7
6.6
(0.6)
(0.3)
5.7
11.4
(4.8)
6.6
10.5
(0.6)
(2.7)
(0.6)
6.6
TOTAL
$M
304.1
(23.0)
281.1
283.3
–
(2.2)
281.1
312.8
(29.5)
283.3
299.5
(0.6)
(13.2)
(2.4)
283.3
14
Impairment tests
Goodwill is not subject to amortisation and is tested annually for impairment or more frequently if events or changes in
circumstances indicate that goodwill might be impaired. Other assets are tested for impairment at each reporting date or
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 its 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 known as a CGU. Non-financial assets,
other than goodwill that suffered an impairment, are reviewed for possible reversal of the impairment,
at each reporting date.
98
Adbri Limited Annual Report 2020 Notes to the Financial Statements
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20 19
$M
272.5
–
272.5
$M
272.5
–
272.5
Cement, Lime, Concrete and Aggregates segment
Concrete Products segment
The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash flow
projections based on 2021 financial budgets approved by the Board, external forecasts of market growth rates and
expected operating margins and capital expenditure. Projected cash flows are forecast for a period of greater than five
years to incorporate the construction cycle into demand assumptions for modelling purposes. The growth rate does not
exceed the long-term average growth rate for the industry in which the CGU operates.
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Cement, Lime, Concrete and Aggregates
Concrete Products
GROWTH RATE1
DISCOUNT RATE2
20 19 20 19
%
1.2
1.4
%
1.3
1.4
%
10.8
11.9
%
10.2
10.7
1. Weighted average growth rate used to extrapolate cash flows beyond the specific market forecast period of five years.
2. Pre-tax discount rate applied to cash flow projections.
Significant estimate – key assumptions used for value-in-use calculations
The Group tests annually whether goodwill, other intangible assets with an indefinite life and other non-current assets have
suffered any impairment. The recoverable amounts of CGUs have been determined based on value-in-use calculations.
These calculations require the use of assumptions detailed above.
Estimates and judgements are continually evaluated utilising historical experience coupled with expectations of future
events that may have a financial impact on the Group and that are believed to be reasonable.
With the uncertainty presented by COVID-19, low case sensitivities have been utilised for the purposes of testing for
impairment. Declines in sales growth rates have been used to assess the impact on earnings potential, in conjunction with
a ‘U’ shaped recovery. Long-term growth rates used for the purpose of the impairment test are low. Discount rates are
pre-tax and reflect specific risks relating to the relevant CGUs.
(c)
Impairment charge
In 2020, an impairment charge has been taken against specific assets expected to be placed into care and maintenance.
The impairment charge relates primarily to plant and equipment that was specifically utilised in servicing of the Alcoa
contract which ceases in July 2021. Impairment of assets in Concrete Products has resulted from the consolidation of
activities between locations.
The following table summarises the total impairment recorded as a result of value-in-use cash flow modelling and balance
sheet reviews in the period by segment.
CEMENT, LIME,
CONCRETE AND
AGGREGATES
CONCRETE
PRODUCTS
UNALLOCATED
TOTAL
2020
Property, plant and equipment
2019
Receivables and other debtors
Inventory
Property, plant and equipment
Intangible assets
Goodwill
$M
20.6
0.4
10.8
47.9
2.6
–
61.7
$M
1.1
–
13.7
8.1
–
8.8
30.6
$M
–
–
–
2.0
1.8
–
3.8
$M
21.7
0.4
24.5
58.0
4.4
8.8
96.1
99
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Adbri Limited Annual Report 2020 Notes to the Financial Statements
14
Impairment tests (continued)
15 Provisions (continued)
(d)
Impact of possible changes in key assumptions
Significant estimates – future cost to rehabilitate
The values assigned to the key assumptions are based on Management’s assessment of future performance in each
of the CGUs with reference to historical experience, future estimates and internal and external factors. The estimated
recoverable amounts are highly sensitive to changes in key assumptions.
While the estimated recoverable amount of each of the CGUs is greater than the carrying values at 31 December 2020,
assessment of adverse changes in certain key assumptions does not result in an impairment of goodwill to be recognised.
As illustrated below, the following changes to assumptions would not result in any impairments.
Cement, Lime, Concrete and Aggregates
CHANGES TO ASSUMPTIONS
MARKET
GROWTH RATE1
-1%
LOWER
PRICING2
-1%
DISCOUNT
RATE3
+1%
LOWER
VOLUME4
-10%
$M
–
$M
–
$M
–
$M
–
Concrete Products
1. Market growth rate adjustments apply as a reduction from the assumed CGU growth rates for the internal forecast period, being the initial five years of cash
–
–
–
–
flow modelling.
2. Lower pricing adjustments assume pricing of goods and services sold are less than estimated over the internal forecast period.
3. Discount rate adjustments assume the rate is higher than those used in cash flow model.
4. A further 10 percentage point reduction in forecast growth rates for 2021 and 2022.
15 Provisions
Accounting policy – 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. Non-employee benefit 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)
Short-term employee benefit 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 employees render the related service are recognised in
respect of employees’ services up to the end of the reporting period. These 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)
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 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 high quality corporate bonds with terms to maturity and currency
that match, as closely as possible, the estimated future cash outflows.
(iii) Workers’ compensation
Certain entities within the Group are self-insured for workers’ compensation purposes. For self-insured entities, provision
is made that covers incidents 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.
(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 based on the net present value
of the estimated future costs of a closure plan.
Estimated changes resulting from new disturbance, updated cost estimates including information from tenders, 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 period as part of finance costs.
100
Adbri Limited Annual Report 2020 Notes to the Financial Statements
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Restoration provisions are based on estimates of the future cost to rehabilitate currently disturbed areas using current costs,
forecast cost inflation factors and rehabilitation requirements. The Group progressively rehabilitates land as part of the quarrying
process. Cost estimates are evaluated at least annually, based on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the circumstances.
Provision for close-down and restoration costs at the end of the year was $60.2 million (2019: $61.9 million).
Current
Employee benefits
Restoration provisions
Other provisions
Non-current
Employee benefits
Restoration provisions
CONSOLIDATED
20 19
$M
$M
29.2
1.9
6.6
37.7
6.7
58.3
65.0
26.2
2.0
5.6
33.8
6.8
59.9
66.7
The current portion of employee benefits includes all of the accrued annual leave and the unconditional entitlements to long
service leave where employees are entitled to pro-rata payments in certain circumstances. However, based on past experience,
the Group does not expect all employees to take the full amount of accrued leave or require payment within the next 12 months.
The following amounts reflect leave that is not expected to be taken or paid within the next 12 months.
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CONSOLIDATED
20 19
$M
4.7
$M
3.1
Movements in each class of provision during the financial year, other than employee benefits, are set out below:
Opening balance at 1 January 2020
Additional provision recognised – charged to income statement
Additional provision recognised – charged to balance sheet
Charged to income statement – unwind of discount
Payments
Closing balance at 31 December 2020
RESTORATION
PROVISIONS
OTHER
PROVISIONS
$M
61.9
–
1.6
0.3
(3.6)
60.2
$M
5.6
2.0
–
–
(1.0)
6.6
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101
Adbri Limited Annual Report 2020 Notes to the Financial Statements
Capital structure and risk management
17 Share capital (continued)
(d) Dividend reinvestment plan
16 Borrowings
Accounting policy – 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.
Non-current
Bank loans – unsecured
CONSOLIDATED
20 19
$M
$M
466.1
540.1
The Group complied with the terms of borrowing agreements during the year.
Details of the Group’s exposure to interest rate changes is set out in Note 20(a)(iii). Due to the short-term fixed interest rates of
the borrowings, the carrying value approximates the fair value.
17 Share capital
Accounting policy – share capital
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.
(a) Share capital
Issued and paid up capital
Fully paid
(b) Movements in ordinary shares capital
Opening balance 1 January 2019
Shares issued under Executive Performance Share Plan
Shares issued under Employee Share Plan
Closing balance at 31 December 2019
Shares issued under Employee Share Plan
Closing balance 31 December 2020
(c) Ordinary shares
20 19 20 19
SHARES
SHARES
$M
$M
652,266,367
651,723,127
740.1
739.0
NUMBER OF
SHARES
650,610,606
887,363
225,158
651,723,127
543,240
652,266,367
TOTAL
$M
734.4
3.5
1.1
739.0
1.1
740.1
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.
Under the Dividend Reinvestment Plan (DRP), holders of ordinary shares may elect to have all or part of their dividend
entitlements satisfied by the issue of new ordinary shares rather than by being paid in cash. Shares are issued under the
DRP at a price determined by the Board. The operation of the DRP for any dividend is at the discretion of the Board,
which suspended the DRP in February 2015, and has not been reactivated since that time.
(e) Capital risk management
The Group’s objectives when managing capital are to safeguard the ability to continue as a going concern, continuing to
provide returns for shareholders and benefits for other stakeholders, and to maintain an optimal capital structure to reduce
the cost of capital while maintaining the flexibility to grow.
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 leverage
ratio. Adbri’s target leverage ratio is 1.0 to 2.0 times underlying EBITDA.
The leverage ratio is calculated as follows:
Total borrowings (excluding lease liabilities)
Less: cash and cash equivalents
Net debt
Underlying EBITDA
Leverage ratio
(f)
Employee share scheme and options
CONSOLIDATED
20 19
$M
466.1
(94.0)
372.1
272.3
1.4
$M
540.1
(116.8)
423.3
280.0
1.5
Information relating to the employee share scheme, including details of shares issued under the scheme, is set out in Note 26.
18 Dividends
Dividends paid during the year
2019 Final dividend of 5.0 cents (2018: 15.0 cents) per fully paid ordinary share,
franked at 100% (2019: 100%) paid on 28 April 2020
2020 Interim dividend of 4.75 cents (2019: nil cents) per fully paid ordinary share, franked at 100%
(2019: 100%)
Total dividends – paid in cash
Dividends not recognised at year end
CONSOLIDATED
20 19
$M
$M
32.6
31.0
63.6
97.8
–
97.8
Since the end of the year the Directors have recommended the payment of a final (fully franked) dividend
of 7.25 cents per fully paid ordinary share (2019 – 5.0 cents). The aggregate amount of the proposed final
dividend to be paid on 22 April 2021, not recognised as a liability at the end of the reporting period, is:
47.3
32.6
Franked dividend
The franked portion of the dividend proposed as at 31 December 2020 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 2021.
Franking credits available for subsequent reporting periods based on a tax rate of 30.0%
131.0
115.1
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, and
(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 $20.3 million (2019: $14.0 million).
102
Adbri Limited Annual Report 2020 Notes to the Financial Statements
103
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Adbri Limited Annual Report 2020 Notes to the Financial Statements
19 Reserves and retained earnings
(a) Reserves
Reserves
Foreign currency translation reserve
Share-based payment reserve
Cash flow hedge reserve
Foreign currency translation
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
Award expense
Deferred tax
Issue of shares to employees
Closing balance 31 December
Cash flow hedge reserve
Opening balance at 1 January
Revaluation – gross
Reclassified to the carrying amount of inventory
Deferred tax on movement in reserve
Closing balance 31 December
Nature and purpose of other reserves
Foreign currency translation
CONSOLIDATED
20 19
$M
$M
2.0
(1.1)
(7.1)
(6.2)
2.1
(0.1)
2.0
(1.4)
0.2
0.1
–
(1.1)
(0.5)
(9.3)
–
2.7
(7.1)
2.1
(1.4)
(0.5)
0.2
1.7
0.4
2.1
1.4
0.5
(1.1)
(2.2)
(1.4)
1.1
(0.7)
(1.1)
0.2
(0.5)
Exchange differences arising on translation of the foreign controlled entity are recognised in other comprehensive income
as described in Note 1(c) and accumulated in a separate reserve within equity. The cumulative amount is reclassified to
income statement when the net investment is disposed of.
Share-based payments
The share-based payments reserve is used to recognise the fair value of awards issued but not exercised. Refer Note 26.
Cash flow hedge reserve
The cash flow hedge reserve is used to recognise the effective portion of gains or losses on derivatives that are
designated and qualify as cash flow hedges described in Note 20. The accumulated amount of a hedging instrument is
transferred to the carrying value of inventory on recognition or, for hedges of items that are not non-financial assets or
non-financial liabilities, to the income statement at the time of recognising the item in the income statement.
(b) Retained earnings
Opening balance 1 January
Net profit for the year
Actuarial (loss) / gain on defined benefit obligation net of tax
Dividends
Closing balance 31 December
CONSOLIDATED
20 19
$M
455.7
93.6
0.1
(63.6)
485.8
$M
504.5
47.3
1.7
(97.8)
455.7
20 Financial risk management
The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange, interest rate risk, and
electricity price 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 where the Group’s exposure is
material.
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.
The Group uses different methods to measure different types of risk to which it is exposed, which are reviewed at intervals
appropriate to the individual risk. These methods include sensitivity analysis in the case of interest rate, foreign exchange and
other price risks, and ageing analysis for credit risk.
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The Group uses derivative financial instruments in the form of foreign exchange forward contracts and options to hedge certain
currency risk exposures, price caps to hedge the price risk related to certain electricity purchases and swaps to hedge the
interest rate risk related to the long-term borrowings at variable rates.
Where all relevant criteria are met, hedge accounting is applied to remove the accounting mismatch between the hedging
instrument and the hedged item. This will effectively result in recognising interest expense at a fixed interest rate for the hedged
floating rate loans and inventory at the fixed foreign currency rate for the hedged purchases.
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(a) Market risk
(i)
Foreign exchange risk
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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 commitments and highly probable 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 Forward Exchange Contracts (FEC) and options to hedge its foreign exchange risk on
these overseas trading activities against movements in foreign currency exposure to the Australian Dollar. FECs
and options are entered into for a duration in line with forecast purchases and currency matched to the underlying
exposure. Ineffectiveness of the hedge can arise primarily from changes in the timing of foreign currency payments
compared to the duration of the FEC or option.
The Group treasury risk management policy is to progressively hedge up to 100% of material highly probable
purchases up to nine months forward on a rolling basis. Longer-dated hedge positions are deemed too expensive
versus the value-at-risk due to the respective currencies’ interest rate spread.
As at the end of the reporting period, the Group had the following exposure to foreign exchange risk, expressed in
Australian Dollars:
Forward foreign exchange contracts:
Buy foreign currency
Sell Australian Dollar (cash flow hedges)
Net exposure – liability / (asset)
(ii) Electricity price risk
CONSOLIDATED
20 19
$M
$M
47.8
(45.8)
2.0
77.5
(76.6)
0.9
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The Group’s electricity purchases may include market-based pricing mechanisms, exposing cash flows to future
movements in the underlying price of electricity in certain markets. Electricity price risk is assessed on the basis of
forward projections of the Group’s electricity demand and forecast market pricing to calculate a Value At Risk (VAR)
measure. Hedging the price risk is considered when the VAR outweighs the cost of risk mitigation alternatives.
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The Group considers and utilises where effective, futures electricity price caps (Caps) to manage this risk exposure.
Caps are available for the relevant markets that the Group has price risk, matching the underlying price exposure
of the Group. Ineffectiveness of the hedge arises from differences in the quantity of actual electricity purchases
compared to the nominal quantity of the hedging instrument.
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104
Adbri Limited Annual Report 2020 Notes to the Financial Statements
105
Adbri Limited Annual Report 2020 Notes to the Financial Statements
20 Financial risk management (continued)
(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, and financial guarantees. Financial
guarantees are only provided in exceptional circumstances and are subject to approval in accordance with the Board
approved delegated authorities.
For banks and financial institutions, only independently rated parties with investment grade ratings are accepted.
Derivative counterparties and cash transactions are limited to high credit quality institutions.
For trading credit risk, the Group assesses the credit quality of the customer, taking into account its financial position, past
experience, external credit agency reports and credit references. Individual customer risk limits are set based on internal
approvals 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. In relation to a small number of customers
with uncertain credit history, the Group has required the provision of personal guarantees from customers in order to
cover credit exposures.
The Company applies the simplified approach to providing for expected credit losses, which permits the use of the lifetime
expected loss provision for all trade receivables. The loss allowance provision as at 31 December 2020 is determined
as set out below, which incorporates past experience and forward looking information, including the outlook for market
demand and forward looking interest rates.
CONSOLIDATED
20
19
Current
More than 30 days past due
More than 60 days past due
More than 90 days past due
Total
EXPECTED
LOSS RATE
GROSS CARRYING
AMOUNT
PROVISION
AMOUNT
EXPECTED
LOSS RATE
GROSS CARRYING
AMOUNT
PROVISION
AMOUNT
%
–
0.2
1.8
80.4
$M
173.8
3.1
0.2
22.3
199.4
$M
–
–
–
17.9
17.9
%
0.1
0.2
2.0
74.9
$M
129.9
55.7
7.0
25.1
217.7
$M
0.1
0.1
0.1
18.8
19.1
The gross carrying amount includes external receivables of $167.5 million (2019: $185.2 million) and joint venture
receivables of $31.9 million (2019: $32.5 million).
20 Financial risk management (continued)
(a) Market risk (continued)
(iii)
Interest rate risk
The Group’s main interest rate risk arises from bank borrowings with variable rates which expose the Group to
interest rate risk. Due to the historically low levels of gearing, debt facilities have been on terms of one to three
years, with fixed bank lending margins associated with each term. During 2019, debt facilities were renegotiated with
terms of five to ten years. Cash advances to meet short and medium-term borrowing requirements are drawn down
against the debt facilities on periods up to 90 days, at a variable lending rate comprising the fixed bank margin
applied to the daily bank bill swap rate effective at the date of each cash advance. In addition, cash advances on
long-term ten-year facilities are drawn at fixed rates for the term of the facility.
During 2020 and 2019, the Group’s borrowings were denominated in Australian Dollars.
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.
Following analysis of the Group’s exposure to interest rate risk, the Group may utilise interest rate swaps to manage
the risk of future changes in variable interest rates.
As at the end of the reporting period, the Group had the following exposure to variable and fixed rate financial
instruments:
CONSOLIDATED
20
19
WEIGHTED
AVERAGE
INTEREST RATE
BALANCE
WEIGHTED
AVERAGE
INTEREST RATE
BALANCE
%
$M
%
$M
0.6%
1.5%
94.0
366.1
1.2%
2.1%
116.8
440.1
3.7%
100.0
3.7%
100.0
Variable rate instruments:
Cash at bank, on hand and at call
Debt facilities
Fixed rate instruments:
Debt facilities (fixed rate)
(iv) Summarised sensitivity analysis
Foreign currency risk relating to assets and liabilities at year end 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, liabilities recognised at 31 December are generally in Australian Dollars.
All borrowings are denominated in Australian Dollars.
Recognised liabilities for electricity purchases are not impacted by price movements due to the prices being fixed at
the time of consumption of the electricity.
The following table summarises the sensitivity of the Group’s floating rate borrowings to interest rate risk at the end
of the reporting period. The current low interest rate environment has resulted in bank bill swap rates being close
to zero. The Group’s borrowing agreements include a floor on the swap rate of zero percent, limiting the potential
benefit of further declines in interest rates. Due to the asymmetrical impact of interest rate changes on the Group 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 for interest expense in both 2020 and 2019, while the impact of a
decrease in interest income for 2020 is limited to reducing variable market borrowing rates to zero.
20
CONSOLIDATED
19
IMPACT ON
POST-TAX
PROFIT
IMPACT ON
EQUITY
IMPACT ON
POST-TAX
PROFIT
IMPACT ON
EQUITY
$M
0.2
–
$M
0.2
–
$M
(2.3)
2.3
$M
(2.3)
2.3
Interest rates – increase by 1%
Interest rates – decrease by 1%
106
Adbri Limited Annual Report 2020 Notes to the Financial Statements
107
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Adbri Limited Annual Report 2020 Notes to the Financial Statements
20 Financial risk management (continued)
(c) Liquidity risk
20 Financial risk management (continued)
(c) Liquidity risk (continued)
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 treasury function manages liquidity risk by maintaining adequate cash 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 credit standby facilities that the
Group has at its disposal to further reduce liquidity risk.
FINANCIAL ARRANGEMENTS
Unrestricted access was available at balance date to the following lines of credit:
Credit standby arrangements
Total facilities
Bank overdrafts
Bank facilities
Used at balance date
Bank overdrafts
Bank facilities
Unused at balance date
Bank overdrafts
Bank facilities
Maturity profile of bank facilities:
21 November 2024
21 November 2026
21 November 2029
CONSOLIDATED
20 19
$M
$M
4.0
900.0
904.0
–
470.0
470.0
4.0
430.0
434.0
750.0
50.0
100.0
900.0
4.0
900.0
904.0
–
545.0
545.0
4.0
355.0
359.0
750.0
50.0
100.0
900.0
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. For bank facilities, the cash flows have been estimated using interest rates
applicable at the end of the reporting period.
CONSOLIDATED
<6 MONTHS 6-12 MONTHS
1-2 YEARS
> 2 YEARS
TOTAL
CARRYING
AMOUNT
(ASSETS) /
LIABILITIES
CONTRACTUAL MATURITIES OF FINANCIAL LIABILITIES
$M
$M
$M
$M
$M
$M
31 December 2020
Non-derivatives
Trade payables
Bank facilities
Lease liabilities
Bank guarantees
Derivatives
Gross-settled forward foreign exchange
contracts (cash flow hedges):
(inflow)
outflow
31 December 2019
Non-derivatives
Trade payables
Bank facilities
Lease liabilities
Bank guarantees
Derivatives
Gross-settled forward foreign exchange
contracts (cash flow hedges):
(inflow)
outflow
172.0
4.7
3.6
3.7
–
4.7
3.4
2.4
184.0
10.5
(39.5)
37.8
(1.7)
144.9
7.9
3.5
4.0
160.3
(8.3)
8.0
(0.3)
–
7.9
3.2
0.2
11.3
(58.2)
57.4
(0.8)
(19.3)
19.2
(0.1)
–
18.6
6.3
0.1
25.0
–
–
–
–
31.8
5.6
2.5
39.9
–
–
–
–
498.6
154.1
27.2
679.9
–
–
–
–
595.9
154.0
26.4
776.3
172.0
526.6
167.4
33.4
899.4
(47.8)
45.8
(2.0)
144.9
643.5
166.3
33.1
987.8
172.0
466.1
88.7
–
726.8
–
–
–
144.9
540.1
87.6
–
772.6
–
–
–
(77.5)
76.6
(0.9)
–
–
–
(d) Financial instruments, derivatives and hedging activity
Information about the impairment of trade and other receivables, their credit quality and the Group’s exposure to credit
risk can be found in (b) above.
Accounting policy – financial instruments
The Group classifies its financial assets in the following categories: financial assets at amortised cost, financial assets at
fair value through profit or loss and hedging instruments. The classification depends on the purpose for which the financial
assets were acquired, which is determined at initial recognition based upon the business model of the Group.
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108
Adbri Limited Annual Report 2020 Notes to the Financial Statements
109
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Financial assets at amortised cost
The Group classifies its financial assets at amortised cost if the asset is held with the objective of collecting
contractual cash flows and the contractual terms give rise on specified dates, to cash flows that are solely payments
of principal and interest. These include trade receivables and bank term deposits. Bank term deposits are non-
derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are
financial assets at amortised cost and are included in current assets, except for those with maturities greater than
12 months after the balance sheet date. Refer to Note 9 for details relating to trade receivables.
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Adbri Limited Annual Report 2020 Notes to the Financial Statements
20 Financial risk management (continued)
20 Financial risk management (continued)
(d) Financial instruments, derivatives and hedging activity (continued)
(d) Financial instruments, derivatives and hedging activity (continued)
Accounting policy – financial instruments (continued)
(ii)
Financial assets through profit or loss
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. Derivatives are initially recognised at fair value on the date
a derivative contract is entered into, and they are subsequently remeasured to their fair value at the end of each
reporting period. The accounting for subsequent changes in fair value depends on whether the derivative is
designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain
derivatives as either:
• hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedges); or
• hedges of a particular risk associated with the cash flows of recognised assets and liabilities and highly probable
forecast transactions (cash flow hedges).
At inception of the hedge relationship, the Group documents the economic relationship between hedging
instruments and hedged items including whether changes in the cash flows of the hedging instruments are expected
to offset changes in the cash flows of hedged items. The Group documents its risk management objective and
strategy for undertaking its hedge transactions.
The fair values of derivative financial instruments designated in hedge relationships are disclosed below. Movements
in the hedging reserves in shareholders’ equity are shown in Note 19. The fair value of a hedging derivative is
classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months;
it is classified as a current asset or liability when the remaining maturity of the hedged item is less than 12 months.
Trading derivatives are classified as a current asset or liability.
Derivatives are only used for economic hedging purposes and not as speculative investments. However, where
derivatives do not meet the hedge accounting criteria, they are classified as ‘held for trading’ for accounting
purposes and are accounted for at fair value through profit or loss. They are presented as current assets or liabilities
to the extent they are expected to be settled within 12 months after the end of the reporting period.
(iii) Cash flow hedges that qualify for hedge accounting
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges
is recognised in the cash flow hedge reserve within equity. The gain or loss relating to the ineffective portion is
recognised immediately in profit or loss.
Where option contracts are used to hedge forecast transactions, the Group designates only the intrinsic value of the
options as the hedging instrument.
Gains or losses relating to the effective portion of the change in intrinsic value of the options are recognised in the
cash flow hedge reserve within equity. The changes in the time value of the options that relate to the hedged item
(‘aligned time value’) are recognised within other comprehensive income (OCI).
When forward contracts are used to hedge forecast transactions, the Group generally designates only the change in
fair value of the forward contract related to the spot component as the hedging instrument. Gains or losses relating
to the effective portion of the change in the spot component of the forward contracts are recognised in the cash
flow hedge reserve within equity. The change in the forward element of the contract that relates to the hedged item
(‘aligned forward element’) is recognised within OCI.
The Group enters into interest rate swaps that have similar critical terms as the hedged item, such as reference rate,
maturities and notional amount. The Group does not hedge 100% of its loans, therefore the hedged item is identified
as a proportion of the outstanding loans up to the notional amount of the swaps. As all critical terms matched
during the year, there is an economic relationship.
Hedge ineffectiveness for interest rate swaps is assessed using the same principles as for hedges of foreign
currency purchases. It may occur due to:
•
• differences in critical terms between the interest rate swaps and loans.
the credit value / debit value adjustment on the interest rate swaps which is not matched by the loan, and
Hedge ineffectiveness in relation to the interest rate swaps was negligible for 2020.
Amounts accumulated in equity are reclassified in the periods when the hedged item affects profit or loss, as follows:
• Where the hedged item subsequently results in the recognition of a non-financial asset (such as inventory), both
the deferred hedging gains and losses and the deferred time value of the option contracts or deferred forward
points, if any, are included within the initial cost of the asset. The deferred amounts are ultimately recognised in
profit or loss as the hedged item affects profit or loss (for example through cost of sales).
• The gain or loss relating to the effective portion of interest rate swaps hedging variable rate borrowings is
recognised in profit or loss within finance cost at the same time as the interest expense on the hedged borrowings.
When a hedging instrument expires, or is sold or terminated, or when a hedge no longer meets the criteria for
hedge accounting, any cumulative deferred gain or loss and deferred costs of hedging in equity at that time remains
in equity until the forecast transaction occurs, resulting in the recognition of a non-financial asset such as inventory.
When the forecast transaction is no longer expected to occur, the cumulative gain or loss and deferred costs of
hedging that were reported in equity are immediately reclassified to profit or loss.
(iv) Derivative instruments that do not qualify for hedge accounting
Certain derivative instruments 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 profit or loss.
110
Adbri Limited Annual Report 2020 Notes to the Financial Statements
Hedging instruments
Financial instruments entered into by the Group for the purpose of managing foreign currency risk associated with its
highly probable inventory purchases and electricity price risk with its highly probable electricity purchases, and interest
rate risk with its highly probable interest payments qualify for hedge accounting.
The effects of applying hedge accounting on the Group’s financial position and performance are as follows:
CONSOLIDATED
20
19
Hedging instrument – forward foreign exchange contracts
Carrying amount (liability) / asset – $ million
Notional amount US Dollars – $ million
Notional amount Yen – $ million
Notional amount Euro – $ million
Notional amount Singapore Dollars – $ million
Maturity date
Hedge ratio
Change in intrinsic value of outstanding hedging instruments since 1 January – $ million
Change in value of hedged item used to determine hedge effectiveness – $ million
Weighted average hedge rate – US Dollars
Weighted average hedge rate – Yen
Weighted average hedge rate – Euro
(2.0)
38.4
3.7
0.3
5.4
(0.8)
67.6
8.8
1.1
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Jan-Sep 2021
Jan-Sep 2020
1:1
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–
1:1
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A$1 : US$0.7352
A$1 : US$0.694
A$1 : Yen 78.1
A$1 : Yen 74.5
A$1 : Euro 0.6074
A$1 : Euro 0.6146
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Weighted average hedge rate – Singapore Dollars
A$1 : S$0.9852
Hedging instrument – interest rate swap
Carrying amount (liability) / asset – $ million
Notional amount – $ million
Maturity date
Hedge ratio
Weighted average variable rate – % p.a.
Weighted average fixed rate – % p.a.
Reconciliation of hedging reserves disclosed in Note 19(a)
(8.7)
300.0
21 Nov 2024
– 7 Jan 2025
1:1
0.08
0.98
–
–
–
–
–
–
COST OF
HEDGING
SPOT
COMPONENT
OF CURRENCY
FORWARDS
INTEREST
RATE SWAPS
TOTAL HEDGE
RESERVE
Opening balance 1 January 2019
Add: change in fair value of hedging instrument
Add: costs of hedging deferred and recognised in OCI
Less: reclassified to cost of inventory
Less: deferred tax
Closing balance 31 December 2019
Add: change in fair value of hedging instrument
Add: costs of hedging deferred and recognised in OCI
Less: reclassified to cost of inventory
Less: reclassified from OCI to profit and loss
Less: deferred tax
Closing balance 31 December 2020
$M
0.1
–
0.1
(0.1)
–
0.1
–
(0.1)
(0.1)
–
–
(0.1)
$M
1.0
(0.9)
–
(1.0)
0.3
(0.6)
(1.8)
–
0.6
–
0.6
(1.2)
$M
–
–
–
–
–
–
(8.7)
–
–
0.5
2.4
(5.8)
$M
1.1
(0.9)
0.1
(1.1)
0.3
(0.5)
(10.5)
(0.1)
0.5
0.5
3.0
(7.1)
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111
Adbri Limited Annual Report 2020 Notes to the Financial Statements
20 Financial risk management (continued)
(d) Financial instruments, derivatives and hedging activity (continued)
Fair value measurement
Fair value hierarchy
The fair value of financial assets and liabilities must be estimated for recognition and measurement or for disclosure
purposes. The carrying amounts of financial instruments disclosed in the balance sheet approximate their fair values.
AASB 13 Fair Value Measurement requires disclosure of fair value measurements by level of the following fair value
measurement hierarchy:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly
(as prices) or indirectly (derived from prices); and
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Group structure
21 Joint arrangements and associate
Accounting policy – joint arrangements and associate
(i)
Associate entity
The interest in an 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.
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(i)
Recognised fair value measurements
(ii)
Joint arrangements
The Group measures and recognises derivatives used for hedging foreign currency risk, interest rate risk and
electricity price risk at fair value on a recurring basis. The Group held liabilities in relation to forward exchange
contracts of $2.0 million (2019: liabilities of $0.8 million) at the end of the reporting period. The Group recognised
liabilities in relation to interest rate swaps of $8.7 million (2019: $nil). There were no electricity price caps at
31 December 2020 or 31 December 2019. The fair values of the forward exchange contracts are measured with
reference to forward interest rates and exchange rates at balance date and the present value of the estimated future
cash flows (level 2). The fair value of interest rate swaps is measured with reference to the interest rates at balance
date and the present value of future cash flows (level 2).
(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 to these financial statements.
The carrying value less impairment provision of current trade receivables and payables are assumed to approximate
their fair values due to their short-term nature. For non-current receivables, the fair values are also not significantly
different to their carrying amounts as a commercial rate of interest is charged to the counterparty (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).
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.
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.
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 statement of
other comprehensive income respectively. Dividends received are recognised as a reduction in the investment in the joint
venture.
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.
(a) Summarised financial information for joint ventures and associate
The following table provides summarised financial information for the joint ventures and associate which are individually
immaterial and accounted for using the equity method.
Investment in joint ventures and associate
Profit from continuing operations
Total comprehensive income
JOINT VENTURES
ASSOCIATE
CONSOLIDATED
20 19 20 19 20 19
$M
153.5
25.6
25.6
$M
142.5
29.9
29.9
$M
44.3
1.3
1.3
$M
42.3
1.6
1.6
$M
197.8
26.9
26.9
$M
184.8
31.5
31.5
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Adbri Limited Annual Report 2020 Notes to the Financial Statements
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113
Adbri Limited Annual Report 2020 Notes to the Financial Statements
21 Joint arrangements and associate (continued)
(b)
Interests in joint arrangements and associate
NAME
PRINCIPAL PLACE OF BUSINESS
Aalborg Portland Malaysia Sdn. Bhd.1
Malaysia
Batesford Quarry2
Victoria
Burrell Mining Services JV2
New South Wales and
Queensland
E.B. Mawson & Sons Pty Ltd and Lake
Boga Quarries Pty Ltd3
New South Wales and
Victoria
Independent Cement and Lime Pty Ltd3 New South Wales and
Peninsula Concrete Pty Ltd3
Sunstate Cement Ltd3
1. Associate.
2. Joint operation.
3. Joint venture.
Victoria
South Australia
Queensland
OWNERSHIP INTEREST
20 19
%
30
50
50
50
50
50
50
%
30
50
50
50
50
50
50
ACTIVITIES
White clinker and cement
manufacture
Limestone products
Concrete products for the coal
mining industry
Premixed concrete and quarry
products
Cementitious product distribution
Premixed concrete
Cement milling and distribution
Each of the above entities, except Aalborg Portland Malaysia Sdn. Bhd., 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.
(c)
Interests in respect of joint ventures
The Group can acquire the interest it does not own in the Mawsons joint venture. On exercise, the enterprise value is
calculated with reference to 7 times average EBITDA (based on preceding two financial years’ performance) less debt.
No liability has been recognised for this amount. The minimum amount payable to acquire the remaining interest is
$90.0 million (2019: $32.5 million), representing an increase in business performance.
22 Subsidiaries
The Group’s material subsidiaries at 31 December 2020 are set out below. The subsidiaries have share capital consisting solely
of ordinary shares, which are held directly by the Group, and the proportion of ownership interests held equal to the voting
rights held by the Group. The country of incorporation or registration is also their principal place of business.
NAME OF ENTITY
PLACE OF INCORPORATION
CLASS OF SHARES
Adbri Masonry Group Pty Ltd
Adbri Masonry Pty Ltd
Adelaide Brighton Cement Investments Pty Ltd
Adelaide Brighton Cement Ltd
Adelaide Brighton Management Ltd
Aus-10 Rhyolite Pty Ltd
Cockburn Cement Ltd
Exmouth Limestone Pty Ltd
Hurd Haulage Pty Ltd
Hy-Tec Industries Pty Ltd
Hy-Tec Industries (Queensland) Pty Ltd
Hy-Tec Industries (Victoria) Pty Ltd
Morgan Cement International Pty Ltd
Northern Cement Ltd
Premier Resources Ltd
Screenings Pty Ltd
Southern Quarries Pty Ltd
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
Ord
OWNERSHIP INTEREST
HELD BY THE GROUP
20 19
%
100.0
100.0
100.0
100.0
100.0
100.0
100.0
51.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
%
100.0
100.0
100.0
100.0
100.0
100.0
100.0
51.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
23 Deed of cross guarantee
As at the date of this report, Adbri Limited, 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, Hurd Haulage Pty Ltd, Aus-10 Rhyolite Pty
Ltd, Screenings Pty Ltd, Southern Quarries Holdings Pty Ltd, Direct Mix Holdings Pty Ltd, Southern Quarries Pty Ltd, Central
Pre-Mix Concrete Pty Ltd and Hy-Tec (Northern Territory) 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, wholly-owned entities classified as a
“Closed Group” are relieved from the requirement to prepare a financial report and Directors’ report under ASIC Corporations
(Wholly-owned companies) Instrument 2016 / 785 (formerly Class Order 98 / 1418 (as amended) issued by the Australian
Securities and Investments Commission).
Direct Mix Holdings Pty Ltd is ineligible for relief under the Instrument and is classified as a member of the “Extended Closed
Group” for the purposes of the Instrument.
Set out below is a consolidated balance sheet as at 31 December 2020 of the Closed Group.
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CLOSED GROUP
20 19
$M
$M
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Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Current tax assets
Other financial assets
Total current assets
Non-current assets
Receivables
Retirement benefit asset
Joint arrangements and associate
Other financial assets
Property, plant and equipment
Right-of-use assets
Intangible assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Lease liabilities
Provisions
Other current liabilities
Total current liabilities
Non-current liabilities
Borrowings
Deferred tax liabilities
Lease liabilities
Provisions
Other non-current liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Reserves
Retained earnings
Total equity
89.6
232.3
151.5
5.9
–
479.3
45.5
4.1
110.0
4.1
1,004.4
82.5
277.1
1,527.7
2,007.0
170.8
3.8
37.5
3.6
215.7
466.1
64.4
84.7
64.9
0.1
680.2
895.9
1,111.1
740.1
(9.8)
380.8
1,111.1
112.6
218.3
154.4
28.6
0.2
514.1
42.6
4.5
102.0
21.4
997.3
84.3
277.0
1,529.1
2,043.2
143.8
5.6
32.8
8.5
190.7
540.1
75.5
81.7
66.6
0.1
764.0
954.7
1,088.5
739.0
(2.0)
351.5
1,088.5
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Adbri Limited Annual Report 2020 Notes to the Financial Statements
115
Adbri Limited Annual Report 2020 Notes to the Financial Statements
23 Deed of cross guarantee (continued)
Set out below is a condensed consolidated statement of comprehensive income and a summary of movements in consolidated
retained earnings for the year ended 31 December 2020 of the Closed Group.
24 Parent entity financial information (continued)
(a) Summary financial information
The individual financial statements for the Company show the following aggregate amounts:
Profit before income tax
Income tax expense
Profit for the year
Retained earnings 1 January
Profit for the year
Other comprehensive income
Dividends paid
Retained earnings 31 December
24 Parent entity financial information
CLOSED GROUP
20 19
$M
126.8
(33.8)
93.0
351.5
93.0
(0.1)
(63.6)
380.8
$M
57.2
(16.5)
40.7
406.9
40.7
1.7
(97.8)
351.5
The financial information for the parent entity, Adbri Limited (“the Company”), has been prepared on the same basis as the
consolidated financial statements, except as set out below.
(i)
Investments in subsidiaries, associates and joint 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 tax 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 Adbri
Limited for any current tax payable assumed and are compensated by Adbri Limited for any current tax receivable and
deferred tax assets relating to unused tax losses or unused tax credits that are transferred to Adbri 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.
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Balance Sheet
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
Shareholders’ equity
Share capital
Reserves
Share-based payments
Foreign currency translation reserve
Retained earnings
Total shareholders’ equity
(Loss) / profit for the year
Total comprehensive (loss) / income
20 19
$M
$M
2,659.9
3,233.7
1,781.2
2,406.7
827.0
2,586.2
2,949.8
1,584.9
2,126.3
823.5
732.9
731.9
(1.1)
(1.2)
96.4
827.0
(14.3)
(14.3)
(1.5)
–
93.1
823.5
(13.2)
(13.2)
(b) Guarantees entered into by the parent entity
Bank guarantees
14.9
4.4
(c) Contingent liabilities of the parent entity
The parent entity did not have any contingent liabilities as at 31 December 2020 or 31 December 2019 other than the
bank guarantees shown above.
25 Retirement benefit obligations
Accounting policy – 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.
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 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 high quality corporate 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 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 the income statement.
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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 future payments is available.
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(iv) Share-based payments
Significant estimate – key assumptions
The grant by the Company of options over its equity instruments to the employees of subsidiary undertakings in the Group
is treated as a receivable from that subsidiary undertaking.
The present value of defined benefit superannuation plan obligations depends on a number of factors that are determined on an
actuarial basis using a number of assumptions. These include selection of discount rates, future salary increases and expected
rates of return. The balances of these obligations are sensitive to changes in these assumptions.
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Adbri Limited Annual Report 2020 Notes to the Financial Statements
117
Adbri Limited Annual Report 2020 Notes to the Financial Statements
25 Retirement benefit obligations (continued)
(a) Superannuation plan details
25 Retirement benefit obligations (continued)
(b) Balance sheet amounts
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:
• administration of the Plan and payment to the beneficiaries from Plan assets when required in accordance with the
plan rules;
• management and investment of the Plan assets; 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.
During the 12 months to 31 December 2020, all new employees, who are members of this fund, have become members
of the accumulation category of the Plan.
There are a number of risks to which the Plan exposes the Company. The more significant risks relating to the defined
benefits are:
•
investment risk – the risk that investment 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.
The amounts recognised in the balance sheet and the movements in the net defined benefit obligation over the year are
as follows:
PRESENT VALUE
OF OBLIGATION
FAIR VALUE OF
PLAN ASSETS
NET OBLIGATION/
(ASSET)
At 1 January 2020
Current service cost
Interest expense / (income)
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:
Benefit payments
At 31 December 2020
At 1 January 2019
Current service cost
Interest expense / (income)
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:
Benefit payments
At 31 December 2019
(c) Categories of plan assets
The major categories of plan assets are as follows:
$M
44.4
1.3
0.7
2.0
–
0.4
(0.2)
0.2
0.7
(6.6)
40.7
43.6
1.2
1.1
2.3
–
1.5
1.9
3.4
–
0.8
(5.7)
44.4
$M
(48.9)
–
(0.8)
(0.8)
(0.3)
–
–
(0.3)
(0.7)
(0.7)
6.6
(44.8)
(46.1)
–
(1.2)
(1.2)
(5.7)
–
–
(5.7)
(0.8)
(0.8)
5.7
(48.9)
$M
(4.5)
1.3
(0.1)
1.2
(0.3)
0.4
(0.2)
(0.1)
(0.7)
–
–
(4.1)
(2.5)
1.2
(0.1)
1.1
(5.7)
1.5
1.9
(2.3)
(0.8)
–
–
(4.5)
Australian equity
International equity
Fixed income
Property
Cash
Other
Total
20
UNQUOTED
19
UNQUOTED
$M
12.1
13.9
8.5
9.0
0.9
0.4
44.8
%
27%
31%
19%
20%
2%
1%
100%
$M
13.7
16.6
6.4
6.8
2.0
3.4
48.9
%
28%
34%
13%
14%
4%
7%
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.
118
Adbri Limited Annual Report 2020 Notes to the Financial Statements
119
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Adbri Limited Annual Report 2020 Notes to the Financial Statements
25 Retirement benefit obligations (continued)
(d) Actuarial assumptions and sensitivity
The significant actuarial assumptions used were as follows:
Discount rate – % p.a.
Future salary increases – % p.a. – first year
Future salary increases – % p.a. – second year
Future salary increases – % p.a. – thereafter
The sensitivity of the defined benefit obligation to changes in the significant assumptions is:
20 19
0.9
1.0
1.0
2.0
1.9
1.6
1.6
3.0
31 December 2020
Discount rate
Future salary increases
31 December 2019
Discount rate
Future salary increases
CHANGE IN ASSUMPTION
INCREASE IN ASSUMPTION
DECREASE IN ASSUMPTION
IMPACT ON DEFINED BENEFIT OBLIGATION
0.50 ppts
0.50 ppts
0.50 ppts
0.50 ppts
Decrease by 1.4%
Increase by 0.4%
Increase by 2.5%
Decrease by 1.5%
Decrease by 1.5%
Increase by 1.6%
Increase by 1.0%
Decrease by 1.0%
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 made contributions to the Plan at rates of between 6% and 9% of member salaries. Expected contributions to
the defined benefit plan for the year ending 31 December 2020 are $nil (2019: nil).
26 Share-based payment plans (continued)
(b) Executive Performance Share Plan
The Plan provides for grants of Awards to eligible executives. This plan was approved by shareholders at the Annual
General Meeting held on 19 November 1997.
Under the Plan, eligible Executives are granted Awards (each being an entitlement to a fully paid ordinary share of
Adbri Limited, subject to the satisfaction of performance conditions) on terms and conditions determined by the Board.
On exercise of the Award following vesting, participants are issued shares of the Company. Detailed discussion of
performance conditions is set out in the Remuneration Report on pages 63 to 76.
The exercise price for each Award is $nil.
MOVEMENT IN NUMBER OF AWARDS OUTSTANDING
Outstanding at beginning of the year
Granted
Exercised
Expired
Outstanding at the end of the year
Exercisable at the end of the year
20 19
1,063,600
1,678,766
957,495
–
(263,417)
560,887
(887,363)
(288,690)
1,757,678
1,063,600
–
–
The average value per share at the earliest exercise date during the year was not applicable for 2020 as no awards vested
during the year (2019: $4.33). The value per share is calculated using the Volume Weighted Closing Price which is the
average of the closing price and number of Adbri 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 fair value of Awards at the grant date is independently determined using a pricing model. 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 impact of the Award’s performance conditions has been incorporated into the valuation through the use of a
discount for lack of marketability and TSR vesting conditions. Volatility of the Company’s share price has been considered
in valuing the Awards. However, the independent valuer has reached the conclusion that the volatility is not a factor in
assessing the fair value of the Awards.
The tables below set out the key assumptions used by the independent valuer in their valuation model to assess the fair
value of the Awards.
The weighted average duration of the defined benefit obligation is 5 years (2019: 5 years).
Awards granted in 2020 – weighted average pricing model inputs
26 Share-based payment plans
Accounting policy – share-based payments
Share-based compensation benefits are provided to Executives via the Company’s Executive Performance Share Plan
(“the Plan” or “EPSP”).
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.
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 Group’s employee share plan trust; see Note 1(b)(ii).
(a) Employee Share Plan
The Group operate two general employee share plans:
•
•
the Employee Share Plan (ES Plan) established in 1997; and
the Tax-Exempt Employee Share Plan (TEES Plan) established in 2018.
Subject to the Board approval of grants, employees that meet the eligibility criteria can participate in the Plan.
In 2020, the Board approved the issue of 543,240 shares under the TEES Plan (2019: 225,158 shares), while no shares
were issued under the ES Plan (2019: nil). In subsequent years, the Board will decide whether, considering the profitability
of the Company, and demands of the business, further invitations to take up grants of shares should be made.
120
Adbri Limited Annual Report 2020 Notes to the Financial Statements
Share price at grant date – per share
Expected future dividends – per share
Risk-free interest rate – % p.a.
Lack of marketability discount – % p.a.
TSR condition discount
Earliest exercise date
2020 AWARDS
$3.12
$0.36
0.40
4.40
50%
1 May 24
Awards granted in 2019 – weighted average pricing model inputs
Share price at grant date – per share
Expected future dividends – per share
Risk-free interest rate – % p.a.
Lack of marketability discount – % p.a.
TSR condition discount
Earliest exercise date
2019 AWARDS
$3.27
$0.44
0.83
4.30
50%
1 May 23
The Plan does not entitle the Participants to participate in any other share issues of the Company and the unexercised
Awards do not attract dividends or voting rights. The Group recognised share-based payments expense of $160,128
during the year (2019: $340,331).
The weighted average remaining contractual life of Awards outstanding at the end of the period was 2.6 years
(2019: 2.3 years).
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Adbri Limited Annual Report 2020 Notes to the Financial Statements
Other
27 Related party
(a) Compensation of Key Management Personnel
Short-term employee benefits
Post-employment benefits
Share-based payments
CONSOLIDATED
20 19
$M
5.7
0.2
1.0
6.9
$M
7.4
0.2
0.5
8.1
(b) Other transactions with Key Management Personnel
RD Barro, a Director of Adbri Limited, is Managing Director of Barro Group Pty Ltd. RR Barro, a Director of Adbri Limited,
is a Director of the Barro Group Pty Ltd. Barro Group Pty Ltd and Adbri Limited, 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.
Nick Miller, the Chief Executive Officer and Brad Lemmon, a senior Executive of Adbri Limited, were Directors of Sunstate
Cement Ltd and Independent Cement and Lime Pty Ltd. Brett Brown, a senior Executive of Adbri Limited was a Director
of the Mawson Group.
During the year, the Group traded significantly with Independent Cement and Lime Pty Ltd, Sunstate Cement Ltd, the
Mawson Group, which are all joint ventures of the Group.
(c) Controlled entities
All transactions involving Barro Group Pty Ltd and Adbri Limited and its subsidiaries, Independent Cement and Lime Pty
Ltd and its subsidiaries, Sunstate Cement Ltd and the Mawson Group were conducted on standard commercial terms.
Transactions entered into during the year with Directors of the Company and the Group, or their related parties, are
on standard commercial terms and conditions, and include the purchase of goods from the Group and the receipt of
dividends from the Company.
FINANCIAL ARRANGEMENTS
Aggregate amounts of the above transactions by subsidiaries and joint ventures with the
Directors and their related parties:
Sales to Director related parties
Purchases from Director related parties
CONSOLIDATED
20 19
$
$
93,827,229
81,626,641
24,137,726
25,962,003
Details of interests in controlled entities are set out in Note 22. The ultimate parent company is Adbri Limited.
(d) Joint arrangement and associate entities
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, Independent Cement and Lime Pty Ltd and Peninsula Concrete Pty Ltd. Hy-Tec Industries Pty
Ltd, Hy-Tec Industries (Victoria) Pty Ltd, Hy-Tec Industries (Queensland) Pty Ltd, Adbri Masonry Group Pty Ltd, Adelaide
Brighton Cement Ltd and Cockburn Cement Ltd purchased finished products, raw materials and transportation services
from Sunstate Cement Ltd, Independent Cement and Lime Pty Ltd and Aalborg Portland Malaysia Sdn. Bhd.
All transactions are on standard commercial terms and conditions and transactions for the supply are covered by
shareholder agreements.
27 Related party (continued)
(e) Transactions with other related parties
The following transactions occurred with related parties:
Sales of goods:
Joint venture entities
Purchases of materials and goods:
Joint venture entities
Associate entities
Interest revenue:
Joint venture entities
Dividend and distribution income:
Joint venture entities
Superannuation contributions:
CONSOLIDATED
20 19
$000
$000
273,854
285,058
120,874
6,563
118,459
6,837
246
664
11,116
20,984
Contributions to superannuation funds on behalf of employees
13,319
12,541
Loans advanced to:
Joint venture entities
2,672
3,459
(f) Outstanding balances arising from sales / purchases of goods and services
The following balances are outstanding at the end of the reporting year 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
20 19
$000
$000
32
26,016
664
31,838
44,507
41,803
18,325
5,813
(g) Loans to / from related parties
A loan to a joint venture entity, Independent Cement and Lime Pty Ltd, has interest charged at commercial rates on
the outstanding balance. Interest revenue brought to account by the Group during the reporting year on this loan was
$245,667 (2019: $664,833).
28 Events occurring after the reporting period
No matter or circumstance has arisen since 31 December 2020 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.
29 Commitments for capital expenditure
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Capital expenditure contracted for at the reporting date but not recognised as liabilities is as follows:
Within one year
CONSOLIDATED
20 19
$M
$M
17.6
18.1
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122
Adbri Limited Annual Report 2020 Notes to the Financial Statements
123
Adbri Limited Annual Report 2020 Notes to the Financial Statements
30 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:
Directors’ Declaration
In the Directors’ opinion:
Audit services
PricewaterhouseCoopers Australian firm
Audit and review of financial statements
Non-audit services
PricewaterhouseCoopers Australian firm
Other assurance services
31 Contingency
Details and estimates of maximum amounts of contingent liabilities are as follows:
Bank guarantees
Litigation
CONSOLIDATED
20 19
$
$
907,881
751,356
218,353
154,694
CONSOLIDATED
20 19
$M
33.4
$M
33.2
(a)
the financial statements and notes set out on pages 77 to 124 are in accordance with the Corporations Act 2001,
including:
(i)
(ii)
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional
reporting requirements, and
giving a true and fair view of the consolidated entity’s financial position as at 31 December 2020 and of its
performance for the financial year ended on that date, and
(b)
(c)
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
at the date of this declaration, there are reasonable grounds to believe that the members of the Extended Closed Group
identified in Note 23 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 23.
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 Chief Executive Officer 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.
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.
Raymond Barro
Chairman
Dated: 23 February 2021
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124
Adbri Limited Annual Report 2020 Notes to the Financial Statements
Adbri Limited Annual Report 2020 Directors’ Declaration
125
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Auditor’s Independence Declaration
Independent Auditor’s Report
to the members of Adbri Limited
(formerly known as Adelaide Brighton Limited)
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As lead auditor for the audit of Adbri Limited for the year ended
31 December 2020, 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 Adbri Limited and the entities it
controlled during the period.
M. T. Lojszczyk
Partner
Adelaide 23 February 2021
PricewaterhouseCoopers
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of Adbri Limited (the
Company) and its controlled entities (together the Group) is in
accordance with the Corporations Act 2001, including:
(a) giving a true and fair view of the Group's financial position as
at 31 December 2020 and of its financial performance for the
year then ended
(b) complying with Australian Accounting Standards and the
Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
•
•
the consolidated balance sheet as at 31 December 2020
the consolidated statement of comprehensive income for the
year then ended
the consolidated statement of changes in equity for the year
then ended
the consolidated statement of cash flows for the year then
ended
the consolidated income statement for the year then ended
the notes to the consolidated financial statements, which
include a summary of significant accounting policies
the directors’ declaration.
•
•
•
•
•
Basis for opinion
We conducted our audit in accordance with Australian Auditing
Standards. Our responsibilities under those standards are further
described in the Auditor’s responsibilities for the audit of the
financial report section of our report.
We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinion.
Independence
We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and
the ethical requirements of the Accounting Professional & Ethical
Standards Board’s APES 110 Code of Ethics for Professional
Accountants (including Independence Standards) (the Code) that
are relevant to our audit of the financial report in Australia. We
have also fulfilled our other ethical responsibilities in accordance
with the Code.
Our audit approach
An audit is designed to provide reasonable assurance about
whether the financial report is free from material misstatement.
Misstatements may arise due to fraud or error. They are
considered material if individually or in aggregate, they could
reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed
enough work to be able to give an opinion on the financial
report as a whole, taking into account the geographic and
management structure of the Group, its accounting processes
and controls and the industry in which it operates.
Materiality
• For the purpose of our audit we used overall Group
materiality of $5.987 million, which represents approximately
4% of the Group’s profit before tax and impairment.
• We applied this threshold, together with qualitative
considerations, to determine the scope of our audit and the
nature, timing and extent of our audit procedures and to
evaluate the effect of misstatements on the financial report
as a whole.
• We chose Group profit before tax because, in our view,
it is the benchmark against which the performance of the
Group is most commonly measured. We also adjusted for
impairment as it is an unusual or infrequently occurring item
impacting profit and loss.
• We utilised a 4% threshold based on our professional
judgement, noting it is within the range of commonly
acceptable thresholds.
Audit Scope
• Our audit focused on where the Group made subjective
judgements; for example, significant accounting estimates
involving assumptions and inherently uncertain future events.
• We conducted an audit of the most significant components
being Cement and Lime (primarily focusing on the South
Australian and Western Australian businesses which comprise
the bulk of these operations) and corporate entities which, in
our view, were financially significant to the financial report.
• Additionally, we performed specific risk focused audit
procedures in relation to the Group's Cement and Lime
component in the Northern Territory and New South Wales,
Concrete and Aggregates components in New South Wales,
Victoria and South Australia and Concrete Products.
• We also performed specific risk focused audit procedures
over Independent Cement and Lime Pty Ltd and Sunstate
Cement Ltd, which contribute to the Group's share of net
profits from joint ventures and associates. Other auditors
audited the financial reports for Independent Cement and
Lime Pty Ltd and Sunstate Cement Ltd for the year ended
30 June 2020. We determined the level of involvement we
needed to have to be able to conclude whether sufficient
appropriate audit evidence had been obtained for our
opinion on the Group financial report as a whole, including
review of the work of these other auditors. Due to the
different balance dates utilised by these joint ventures, we
performed audit procedures for the period 1 July 2020 to
(and as at)
31 December 2020, including substantive analytical
procedures over the financial results, to obtain sufficient
evidence in respect of the results for the year ended and
financial position as at 31 December 2020 for our opinion.
• Outside the operations identified above, the Group
includes components which individually and collectively
do not contribute materially to the overall Group result.
We have obtained an understanding of these operations
and performed analytical procedures.
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126
Adbri Limited Annual Report 2020 Auditor’s Independence Declaration
Adbri Limited Annual Report 2020
Independent Auditor’s Report
127
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the financial
report for the current period. The key audit matters were
addressed in the context of our audit of the financial report
as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters. Further, any
commentary on the outcomes of a particular audit procedure is
made in that context. We communicated the key audit matters to
the Audit, Risk and Compliance Committee.
KEY AUDIT MATTER
HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER
Recoverability of goodwill and property, plant
and equipment
Our procedures included, amongst others:
• developing an understanding of how the Group identified assumptions and
(Refer to notes 11, 13 & 14)
The financial report of the Group includes goodwill of
$272.5 million and property, plant and equipment of
$1,059.1 million as at 31 December 2020.
To determine whether the carrying value of these
assets was recoverable, the Group prepared
discounted cash flow models (the impairment models).
The Group recognised a pre-tax impairment charge
of $21.7 million for the year ended 31 December
2020. These impairment models are driven by
significant estimates and judgement about future
growth rates, discount rates and terminal values.
This was a key audit matter given the financial
significance of the Group’s recorded goodwill and
property, plant and equipment balances and the
judgement and subjectivity involved in determining
assumptions around growth rates and discount rates.
Estimation of close down and restoration
costs provision
(Refer to note 15)
Provisions for close down and restoration costs
associated with quarries and other disturbed areas
of $60.2 million were recognised as at 31 December
2020.
The provision is determined through estimating the
expected costs to perform the remediation works
at the end of the useful life of the site, which are
evaluated annually. Expected costs are based on
current costs (including information from tenders)
and the rehabilitation requirements. The costs are
adjusted for inflation over the useful life of the site and
discounted to present value in a model.
This was a key audit matter based on the significance
of the total balance, and the estimation uncertainty
associated with the long forecast period of elements
of the provision.
sources of data
• developing an understanding of the relevant key controls associated with
developing the impairment models
• assessing whether the Cash Generating Units (CGUs) identified by the Group and
the assets and liabilities allocated to them was consistent with our knowledge of
the Group’s operations and internal reporting
• evaluating whether judgements made in selecting the method, significant
assumptions and data for developing the impairment model give rise to indicators
of possible bias by the Group
• together with PwC experts, evaluating the appropriateness of significant
assumptions in the context of Australian Accounting Standards. This included:
– comparing growth rate assumptions to alternative assumptions used in the
industry or market.
– evaluating the appropriateness of the discount rate applied by the Group by
comparing to a discount rate independently calculated by PwC experts.
– comparing the forecast cash flows used to develop the impairment models to the
most up-to-date budgets and business plans formally approved by the Board.
– evaluating the appropriateness of inputs used to calculate the terminal value of
each CGU
– evaluating the Group’s historical ability to forecast future cash flows by
comparing budgets with reported actual results for the past year.
– discussing with Management the plans, goals, and objectives of the Group,
and considering the feasibility and intent to carry out such courses of action.
– assessed the competency, objectivity and methods applied by the expert
engaged by the Group to assist in determining their discount rate.
We have also evaluated the reasonableness of the disclosures against the
requirements of Australian Accounting Standards.
Our procedures included, amongst others:
• obtaining the model prepared by the Group and assessing whether the design
and assumptions in the model meet the measurement objectives of Australian
Accounting Standards, are appropriate in the circumstance and whether
judgements have been applied consistently.
• evaluating the integrity of the model, assessing whether significant assumptions
and the data were maintained and applied consistently including assessing the
mathematical accuracy of the model.
• assessing the completeness of the provision through comparing the sites used
in developing the provision in the prior year to those used in the current model,
meeting minutes, legal reviews and contracts performed during the audit.
• for a sample of locations:
– assessing the nature, timing and extent of rehabilitation work to be performed
by inspecting rehabilitation plans
– comparing the nominal cost to rehabilitate for each respective provision within
the model to internal assessment results
– performing enquiries with Site Managers and Site Engineers to obtain an
understanding of how nominal costs to rehabilitate are determined and any
significant changes during the period that would impact the estimates made.
• for sites being actively remediated, comparing actual costs incurred to
rehabilitate, to what was previously estimated to assess the ability of the Group to
accurately determine future costs to rehabilitate similar sites.
• evaluating whether judgements made in selecting the method, significant
assumptions and data for developing the estimate give rise to indicators of
possible bias by the Group
We evaluated the adequacy of the disclosures made in note 15, against the
requirements of Australian Accounting Standards.
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KEY AUDIT MATTER
HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER
Measurement of stockpiled inventory
(Refer to note 10)
The Group had $58.1 million of raw material and work in
progress inventory on hand as at 31 December 2020.
Raw materials and work in progress inventory in bulk
quantities is held in stockpiles.
To determine the quantity (in tonnes) of the stockpiled
inventory, the Group engaged external surveyors who
determined the volumetric measure (cubic meters)
of the inventory. The Group then converted the
volumetric measure to tonnes using density factors
(tonnes per cubic meter).
Our procedures included:
• assessing the competency, objectivity and methods applied by the expert
engaged by the Group to assist in performing the volumetric surveys.
• developing an understanding and performing testing of the operating effectiveness
of relevant controls associated with determination of density factors
• for a sample of stockpiled inventory locations,
– obtaining and inspecting the external survey result. Also, reconciling the
external survey reports to the Group’s conversion calculation.
– assessing the mathematical accuracy of the conversion calculation.
• assessing the density factors used in the current year to convert the stockpiles
from cubic meters to tonnes by comparing to prior year density factors for the
same raw material and whether any indicators of management bias exist.
This was a key audit matter based on the subjectivity in the
Group’s process to determine and apply density factors.
We have also evaluated the adequacy of the disclosures made in note 10 against
the requirements of Australian Accounting Standards.
Other information
The directors are responsible for the other information. The other
information comprises the information included in the annual
report for the year ended 31 December 2020, but does not
include the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other
information and accordingly we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial report, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial report or our knowledge obtained in the audit,
or otherwise appears to be materially misstated.
If, based on the work we have performed on the other
information that we obtained prior to the date of this auditor’s
report, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have
nothing to report in this regard.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the
preparation of the financial report that gives a true and fair
view in accordance with Australian Accounting Standards and
the Corporations Act 2001 and for such internal control as the
directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from
material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible
for assessing the ability of the Group to continue as a going
concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless
the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the
financial report
Our objectives are to obtain reasonable assurance about
whether the financial report as a whole is free from material
misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with the Australian Auditing Standards
will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken
on the basis of the financial report.
A further description of our responsibilities for the audit of
the financial report is located at the Auditing and Assurance
Standards Board website at: https://www.auasb.gov.au/admin/
file/content102/c3/ar1_2020.pdf. This description forms part of
our auditor's report.
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 63 to
76 of the directors’ report for the year ended 31 December 2020.
In our opinion, the remuneration report of Adbri Limited for the
year ended 31 December 2020 complies with section 300A of
the Corporations Act 2001.
Responsibilities
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.
PricewaterhouseCoopers
M. T. Lojszczyk
Partner
Adelaide 23 February 2021
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PricewaterhouseCoopers, ABN 52 780 433 757
Level 11, 70 Franklin Street, Adelaide SA 5000, GPO Box 418, Adelaide SA 5001
T: +61 8 8218 7000, F: +61 8 8218 7999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
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128
Adbri Limited Annual Report 2020
Independent Auditor’s Report
Adbri Limited Annual Report 2020
Independent Auditor’s Report
129
Financial History
YEAR ENDED
(AS MILLION UNLESS STATED)
DEC
2020
DEC
2019
DEC
2018
DEC1
2017
DEC
2016
DEC
2015
DEC2
2014
DEC
2013
DEC3
2012
DEC
2011
Statement of financial performance
Sales revenue
1,454.2 1,517.0 1,630.6 1,559.6 1,396.2 1,413.1 1,337.8 1,228.0 1,183.1 1,100.4
Depreciation, amortisation and impairments
(115.1)
(189.7)
(87.4)
(82.5)
(78.1)
(77.8)
(75.0)
(70.6)
(65.2)
(57.8)
Earnings before interest and tax
147.6
81.9
265.4
267.6
266.1
298.6
247.5
222.7
222.1
223.4
Net interest earned (paid)
(20.4)
(18.5)
(14.4)
(12.1)
(11.5)
(13.0)
(15.0)
(14.1)
(14.6)
(17.0)
Property, plant and equipment
1,059.1 1,033.7 1,061.7 1,037.2
978.4
986.1
994.2
889.7
902.5
452.5
519.2
500.6
474.8
390.1
403.1
387.4
390.2
363.7
Profit before tax
Tax expense
Non-controlling interests
Net profit after tax attributable to members
Group balance sheet
Current assets
Receivables
Investment
Intangibles
Right-of-use assets
Other non-current assets
Total assets
Current provisions
Current lease liabilities
Non-current borrowings
Deferred income tax and other
non-current provisions
127.2
63.4
251.0
255.5
254.6
285.6
232.5
208.6
207.5
206.4
(33.6)
(16.2)
(65.8)
(72.7)
(68.4)
(77.8)
(59.9)
(57.5)
(54.6)
(58.0)
0.1
93.7
0.1
0.1
(0.1)
0.1
0.1
0.1
–
0.1
–
47.3
185.3
182.7
186.3
207.9
172.7
151.1
153.0
148.4
45.6
43.6
39.9
37.3
34.4
32.9
32.7
31.4
29.6
197.8
184.8
173.9
160.3
151.2
142.2
139.9
138.5
129.0
281.1
283.3
299.5
299.9
270.3
272.9
266.4
183.9
184.8
183.0
82.7
4.1
84.6
4.5
–
2.5
–
3.5
–
2.3
–
1.3
–
–
–
–
–
3.5
–
–
2,122.9 2,153.7 2,078.1 2,013.0 1,826.7 1,838.5 1,820.6 1,633.7 1,613.1 1,466.2
37.7
3.9
33.8
5.7
34.6
49.0
50.6
55.4
44.2
105.8
78.5
–
–
–
–
–
–
–
466.1
540.1
518.7
428.9
309.6
329.5
390.1
259.1
299.3
258.7
128.7
141.4
134.5
130.1
129.0
122.4
126.9
101.6
114.4
116.7
307.8
851.0
27.2
97.2
99.2
34.5
–
Current borrowings and creditors
179.7
153.5
144.7
159.2
117.4
123.9
122.7
105.4
115.0
Non-current lease liabilities
84.8
81.9
–
–
–
–
–
–
–
–
Total liabilities
Net assets
Share capital
Reserves
Retained earnings
900.9
956.4
832.5
767.2
606.6
631.2
683.9
571.9
607.2
509.1
1,222.0 1,197.3 1,245.6 1,245.8 1,220.1 1,207.3 1,136.7 1,061.8 1,005.9
957.1
740.1
739.0
734.4
733.1
731.4
729.2
727.9
699.1
696.6
694.6
(6.2)
0.2
4.2
1.9
2.9
1.2
3.3
4.3
2.1
2.3
485.8
455.7
504.5
508.2
483.3
474.3
402.8
355.6
304.4
257.3
Information for Shareholders
Annual General Meeting (AGM)
The 2021 Annual General Meeting of Adbri Limited will be held on Friday 21 May 2021.
In accordance with Listing Rule 3.13.1, Adbri advises that the closing date for receipt of director nominations for consideration
at the AGM is Wednesday 17 March 2021.
Securities exchange listing
Adbri Limited is quoted on the official list of the Australian Securities Exchange and trades under the symbol “ABC”.
Adelaide is Adbri Limited’s home exchange.
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Registered office
Level 1, 157 Grenfell Street
Adelaide SA 5000
Telephone: 08 8223 8000
Facsimile: 08 8215 0030
Enquiries about your shareholding
Enquiries or notifications by shareholders regarding their shareholdings or dividends should be directed to Adbri’s share registry:
Computershare Investor Services Pty Limited
Level 5, 115 Grenfell Street
Adelaide SA 5000
Telephone: 1800 339 522
Facsimile: 1300 534 987
International: +613 9415 4031
International: +613 9473 2408
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 Adbri 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.
Direct credit of dividends
Dividends can be paid directly into an Australian bank or other financial institution. Payments are electronically credited on the
dividend payment day and subsequently confirmed with a 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.
Shareholders’ equity attributable to members
of the Company
1,219.7 1,194.9 1,243.1 1,243.2 1,217.6 1,204.7 1,134.0 1,059.0 1,003.1
954.2
Dividend Reinvestment Plan (DRP)
Non-controlling interests
2.3
2.4
2.5
2.6
2.5
2.6
2.7
2.8
2.8
2.9
Total shareholders’ funds
1,222.0 1,197.3 1,245.6 1,245.8 1,220.1 1,207.3 1,136.7 1,061.8 1,005.9
957.1
Adbri’s DRP is currently suspended until further notice. In future, if the DRP is reactivated, it will be notified by way of an ASX
announcement.
Share information
Net tangible asset backing ($ / share)4
Return on funds employed %
Basic earnings per share (¢ / share)
Diluted earnings (¢ / share)
Total dividend (¢ / share)5
Interim dividend (¢ / share)5
Final dividend (¢ / share)5
Special dividend (¢ / share)5
Gearing %6
1.44
9.1
14.4
14.3
12.0
4.75
7.25
–
1.40
4.9
7.3
7.2
5.0
–
5.0
–
30.5
35.4
1.45
16.1
28.5
28.4
28.0
9.0
11.0
8.0
34.1
1.46
16.7
28.1
28.0
24.5
8.5
12.0
4.0
29.8
1.46
17.5
28.7
28.6
28.0
8.5
11.5
8.0
23.6
1.44
19.8
32.0
31.9
27.0
8.0
11.0
8.0
24.6
1.34
17.7
26.9
26.8
17.0
7.5
9.5
–
1.38
17.0
23.7
23.4
19.5
7.5
9.0
3.0
1.29
18.0
24.0
23.8
16.5
7.5
9.0
–
1.22
19.4
23.3
23.2
16.5
7.5
9.0
–
31.6
23.4
30.9
26.0
1 Restated for changes to accounting policies (Note 1 (b) to the 2018 Financial Statements)
2 Restated for final acquisition accounting values for businesses purchased in 2014
3 Restated for changes to accounting policies (Note 42 to the 2013 Financial Statements)
4 Assets for the purposes of net tangible assets, includes right-of-use assets associated with leases recognised in accordance with AASB 16
5 Fully franked
6 Calculated as net debt to equity
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.
Investor information other than that relating to a shareholding can be obtained from:
General Manager Corporate Finance and Investor Relations
Adbri Limited
Level 9 Aurora Place
88 Phillip Street
Sydney NSW 2000
Telephone: 02 8248 9903
Email:
info@adbri.com.au
Communications
Our internet site www.adbri.com.au offers access to our ASX announcements and news releases as well as information about our
operations.
130
Adbri Limited Annual Report 2020 Financial History
Adbri Limited Annual Report 2020
Information for Shareholders
131
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Substantial shareholders
Barro Properties Pty Ltd, by a notice of change of interests of substantial shareholder dated 12 September 2018, informed the
Company that it or an associate had a relevant interest in 279,710,424 ordinary shares or 43.0% of the Company’s issued share capital.
Vanguard Group, Inc by notice of initial substantial shareholder dated 4 November 2020, informed the Company that it or an associate
had a relevant interest in 32,660,839 ordinary shares or 5.007% of the Company’s issued share capital.
On market buy back
At 23 February 2021 there is no on-market buy back of the Company’s shares being undertaken.
Twenty largest shareholders shown in the Company’s Register of Members as at 5 February 2021
SHAREHOLDER
Barro Properties Pty Ltd
HSBC Custody Nominees (Australia) Limited
JP Morgan Nominees Australia Limited
Barro Group Pty Ltd
Citicorp Nominees Pty Limited
Carltonbridge Pty Ltd
Argo Investments Ltd
Cloverdew Pty Ltd
National Nominees Limited
Churchbridge Pty Ltd
Ageflow Pty Ltd
Rayonbridge Pty Ltd
BNP Paribas Noms Pty Ltd
BNP Paribas Nominees Pty Ltd
Sunstone Finance Pty Ltd
HSBC Custody Nominees (Australia) Limited
HSBC Custody Nominees (Australia) Limited
HSBC Custody Nominees (Australia) Limited – A/C2
BNP Paribas Noms (NZ) Ltd
Australian Executor Trustees Limited
Total top 20 shareholders
Total remaining shareholders balance
Voting rights
NUMBER OF ORDINARY
SHARES HELD
% OF
ISSUED CAPITAL
215,285,359
104,828,247
44,382,005
32,412,619
32,166,616
11,416,000
7,681,385
6,580,000
6,529,641
5,040,000
3,630,000
3,574,000
3,499,803
3,311,239
2,000,000
1,906,980
1,500,000
1,454,538
1,437,656
1,354,174
489,990,262
162,276,105
33.00
16.06
6.80
4.97
4.93
1.75
1.18
1.01
1.00
0.77
0.56
0.55
0.54
0.51
0.31
0.29
0.23
0.22
0.22
0.21
75.12
24.88
All shares at 5 February 2021 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 5 February 2021
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 157 shares
Unquoted securities
NUMBER OF
SHAREHOLDERS
% OF ISSUED
CAPITAL
5,134
8,900
3,797
3,313
136
21,280
1,094
0.37
3.85
4.37
11.96
79.45
100.00
The Adbri logo, the MCI logo, the Cockburn Cement logo, the Swan Cement logo, the Northern Cement
logo, the Hy-Tec logo, the Adbri Masonry logo, the Southern Quarries logo, the Direct Mix logo, the Penrice
Quarry & Mineral logo, the Central Pre-Mix logo, the Central Quarries logo and the Davalan logo are trade
marks of Adbri Limited or its related bodies corporate.
The Sunstate Cement logo is a registered trade mark of Sunstate Cement Ltd used with permission.
The I logo is a registered trade mark of Independent Cement and Lime Pty Limited used with permission.
The Mawson logo is a registered trade mark of E. B. Mawson & Sons Pty Ltd used with permission.
Batesford Quarry logo is a trade mark of Adelaide Brighton Cement Ltd. and Geelong Lime Pty Ltd.
The Burrell logo is a trade mark of Burrell Mining Products, Inc used with permission.
The Aalborg Portland logo is a trade mark of Cementir Holding N.V. used with permission.
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1,757,678 Awards issued to the senior Executive team under the Adbri Limited 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 Adbri Limited Executive Performance Share Plan and eligible to receive the
Awards is seven.
Morgan Cement
Port Kembla
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132
Adbri Limited Annual Report 2020
Information for Shareholders
Adbri Limited Annual Report 2020 Section
133
adbri.com.au
Registered Office
Level 1, 157 Grenfell Street
Adelaide SA 5000
+61 8 8223 8000
ABN 15 007 596 018
134
Adbri Limited Annual Report 2020 Section