2021 Annual Report
Our people deliver
Adbri is a team of 1,500 people around
Australia with a single purpose and
promise. Individually and collectively,
they demonstrated in 2021 that we
always deliver – for customers, for
shareholders, and for a better Australia.
In a changing world, our people are
key to Adbri’s plans to keep growing
and transforming.
Acknowledgment of Country
We acknowledge the Aboriginal and Torres Strait Islander
peoples as the Traditional Custodians of the lands
and waters of Australia. We recognise their continuing
custodianship of Country and culture and pay respect to
their Elders past, present and emerging.
Introduction and overview
Our business at a glance
2021 highlights
Chairman’s report
Managing Director & CEO’s review
Finance report
Operational updates
Cement and Lime
Concrete and Aggregates
Masonry
Joint ventures
Sustainability report
Our approach to sustainability
Economic vitality and technology solutions
Healthy, safe and engaged people
Positive contribution to communities
Reduce adverse environmental impacts
Responding to climate change
Lower carbon products
Building a better Australia
Tax transparency report
Executive Leadership Team
Board of Directors
Financial statements
02
02
04
06
08
12
16
18
20
22
24
26
28
36
37
42
46
49
54
56
58
62
64
66
Delivering for a better Australia
Delivering for shareholders
Contributing to a safe, healthy and
sustainable future for Australians, their
communities and the environment is a
fundamental part of Adbri’s culture.
As an ASX-listed leader, we employ people who
understand Adbri’s responsibility to shareholders.
Our people add value through their dedication to
productivity, efficiency and improvement.
View our
Sustainability report
Page 26
View our
Financial statements
Page 66
About this report
Information on likely developments in the Group’s business strategies, prospects and operations for future financial years and the expected results that
could result in unreasonable prejudice to the Group (for example, information that is commercially sensitive, confidential or could give a third party a
commercial advantage) has not been included in this report. The categories of information omitted include forward-looking estimates and projections
prepared for internal management purposes, information regarding Adbri’s operations and projects, which are developing and susceptible to change,
and information relating to commercial contracts.
02
Our business at a glance
An industry pioneer
since 1882
Adbri produces and distributes
cement, lime, concrete, aggregates,
masonry products and industrial
minerals that have helped build a
better Australia for 140 years.
Today, Adbri is proudly one of this
country’s largest cement, lime and
concrete producers.
Our business
1,500
people
200+ national
locations1
63
quarries1
31
cement and
lime facilities
and depots1
108
concrete
plants1
7 masonry
facilities
1. Includes joint ventures.
Building a Better Australia
to the mineral
processing sector
#1 Lime producer
#1 Concrete masonry
products supplier
Our strategic pillars
Safety
We put safety first
We care about each other’s
wellbeing
We live by our Life Saving Rules
Work Safe, Home Safe
Customer Focus
We deliver on our promises
We are agile in meeting our
customers’ needs
We build long-term partnerships
that add value
We act with integrity
03
Our purpose
Building a Better Australia
Building a Better Australia is what we do
at Adbri. It’s how we contribute socially
and economically as a company and
as individuals.
Our promise
Always Ready
Key financials
Total Revenue
$1.57b
Reported NPAT
attributable to members
$116.7m
Total Assets
$2.3b
clinker supplier to
construction sector
#2 Cement and
#4 Concrete and
aggregates producer
Inclusivity
We work together
We embrace differences
We respect and listen to each other
We empower our people
Sustainable Growth
We create value for our investors
and our communities
We contribute to a sustainable future
We learn and innovate
We invest in our people
Adbri 2021 Annual ReportOperational updatesFinancial statementsSustainability reportIntroduction and overview 04
2021 highlights
Financial
Adbri’s geographic and sector diversity and our team’s
disciplined focus on executing strategy, allowed us to deliver
a robust financial performance in 2021 for our shareholders.
Our reported net profit after tax (NPAT) attributable to members
increased by 25%, while revenue increased by 8%.
$116.7m
reported NPAT
attributable to
members
$1569.2m
Revenue
$m
1,600
1,200
800
400
0
$119.1m
Underlying net profit
after tax
$m
18.3 c/share
Underlying earnings
per share
c/share
Dividends
approved
c/share
200
150
100
50
0
35
30
25
20
15
10
5
0
30
25
20
15
10
5
0
2 017
2 018
2 019
2 0 2 0
2 0 21
2 017
2 018
2 019
2 0 2 0
2 0 21
2 017
2 018
2 019
2 0 2 0
2 0 21
2 017
2 018
2 019
2 0 2 0
2 0 21
Reported
Underlying
Reported
Underlying
Ordinary interim dividend
Ordinary final dividend
Special dividend
Revenue by product group
Revenue by market
Revenue by state
Cement
Lime
Non-residential
and engineering
Residential
WA
SA
VIC
39%
Concrete and
aggregates
41%
10%
Masonry
10%
43%
Mining
15%
42%
20%
18%
22%
NSW
QLD
18%
18%
Other
4%
05
Operations
Sustainability
In 2021, the Australian economy continued to face disruption
from COVID, which included temporary construction
shutdowns in New South Wales, Victoria, South Australia and
the Northern Territory. Thanks to the efforts of our people
in following COVIDSafe measures, we limited the impact of
the virus at our workplaces and delivered for our customers,
our shareholders, and for a better Australia.
In 2021, we announced our aspiration of net zero emissions by
2050. During the year we developed Adbri’s Position on Climate
Change and progressed our Net Zero Emissions (NZE) Roadmap,
which will be released prior to the 2022 Annual General Meeting.
Cement, aggregate,
concrete and masonry
volumes
increased during the year
Four significant
lime supply
agreements secured –
South32, Northern Star,
Newmont Boddington and Alcoa
First sod
turned at Kwinana
Upgrade project in WA
Three acquisitions aligned with our
vertical integration
strategy – Milbrae, Metro Quarry Group,
Zanows (subject to completion) – expanding
our geographical footprint in NSW, Vic and Qld
Land sale agreement
to divest our Hilltop holdings in Geelong
Healthy, safe and
engaged people 6.3
TRIFR in 2021
Positive
contributions to
communities
70+
community
organisations
supported
Reduce adverse
environmental
impacts
0
reportable
environmental
incidents in 2021
Responding to
climate change
2%
decrease in
Scope 1 + 2
emissions in 2021
Lower carbon
products
Type GL
cement
trials commenced
Adbri 2021 Annual ReportOperational updatesFinancial statementsSustainability reportIntroduction and overview 06
Chairman’s report
Robust financial performance
I am pleased to report a robust performance from Adbri in 2021.
We ended the year well-placed to continue with our growth
strategy and maintain our significant contribution to Australia’s
economic recovery. The COVID pandemic has made the last
two years one of the most demanding periods in Adbri’s history,
and I am extremely proud of how our people responded with
dedication and perseverance so they could deliver our promise
of being Always Ready.
Delivering for our stakeholders
Adbri’s geographic and sector diversity and our team’s
disciplined focus on executing our strategy ensured we delivered
a robust financial performance in 2021.
Sales volumes, excluding lime, increased compared to 2020.
This was despite a high degree of variability in demand for
construction materials throughout the year, influenced by
government restrictions and short-term industry shutdowns
in several key markets. Our agile and flexible workforce
stood tall throughout the global supply chain crisis to ensure
we met customer demand, which rebounded strongly
once temporary shutdowns were lifted. Our cost base was
impacted by COVID-related costs and delays, including
scheduled work on our limestone supply ship, the Accolade,
and additional maintenance.
Looking ahead, we expect strong market conditions to continue
across the construction, infrastructure and mining sectors.
Government stimulus for infrastructure development and
residential demand will support a strong outlook for construction
materials. Nationally, home builds and residential construction
approvals were at record levels, indicating a continued strong
pipeline for construction materials.
Strong shareholder returns
Adbri delivered a reported net profit after tax (NPAT) attributable to
members of $116.7 million in 2021, an increase of 25% on the prior
year. Our profit performance was driven by strong volume growth
across all product lines, excluding lime. Lime demand was robust
despite the reduction in Alcoa volumes. A focused recovery
program resulted in new contracts secured from Northern Star,
Newmont and South32, as well as ongoing sales to Alcoa.
Underlying NPAT of $119.1 million includes profit after tax on
the sale of property of $6.1 million and significant items of
$2.4 million translating to earnings of 18.3 cps (on an underlying
basis) which compares with 17.7 cps in 2020.
Adbri’s robust profit performance and strong balance sheet
position underpinned the Board’s decision to announce a fully
franked final dividend of 7.0 cents per share. Total dividends
for the year were 12.5 cents per share and were in line with the
Board’s targeted payout ratio of 65–75% of underlying earnings.
Committing to a sustainable future
Climate-related risk is far-reaching, affecting economies,
asset classes and industry as well as societies and the
physical environment. At Adbri, we respect our social licence
to operate and understand why our continued support for all
aspects of sustainability is vital for both our business and the
broader community.
We continued to progress long-term projects with sustainability
benefits during the year, including increasing the use of
refuse derived fuel (RDF) as an alternative fuel at Birkenhead,
and refreshing our strategy for supplementary cementitious
materials (SCMs).
We began constructing the strategically important Kwinana
Upgrade project in Western Australia. This project will provide
greater efficiencies in our Western Australian cement operations,
with reduced electricity and diesel use, and lower greenhouse
gas emissions (GHG) compared to the existing operations.
Our people are at the centre of Adbri’s commitment to
a sustainable future. This means providing an inclusive
workplace where everyone goes home safely. Throughout
2021, we continued to make progress against Adbri’s five-year
sustainability targets, as described in our 2021 Sustainability
Report. Adbri supports the Taskforce on Climate-Related
Financial Disclosures (TCFD) and is progressively reporting
against the framework.
At Adbri’s Annual General Meeting (AGM) in May 2021,
I announced our aspiration to achieve net zero carbon
emissions by 2050 and we will deliver our roadmap ahead
of the 2022 AGM. As a hard-to-abate industry, the challenges
of achieving net zero will require innovation and future
investment in technology and research partnerships.
Advancing key strategies
Adbri’s strategy is built on our purpose of Building a Better
Australia. It focuses on transformation and sustainable growth.
During 2021, we completed two strategically significant
acquisitions on Australia’s eastern seaboard that extended and
complemented Adbri’s vertically integrated footprint. A third
acquisition is expected to complete in early 2022. Along with our
cost-competitive offering, this exposure ensures we are strongly
positioned to continue capitalising on the increased demand
for construction materials, and will also provide increased
pull-through of our higher value products.
Progress on the Company’s lime strategy continued in 2021. We
completed a pre-feasibility study for a new kiln in Kalgoorlie, which
received Board approval to progress to the definitive feasibility
study (DFS) stage. This study is anticipated to take 12–18 months
and we look forward to updating stakeholders as it progresses.
In December 2021, we completed the sale of our Hilltop land in
Geelong. This forms a small part of Adbri’s much broader strategy
to realise significant value for shareholders by progressively
developing and divesting our surplus land portfolio.
07
Adbri delivered a robust
financial performance in 2021
Reported NPAT
attributable to members
$116.7m
NPAT increase
25%
Creating a stronger Board
Financial summary
During the year, we further strengthened your Board. In June 2021,
Michael Wright joined as an Independent Non-executive Director.
Michael has extensive expertise across the global resources
and industrial sectors in Australia, Asia, Africa and the Americas.
He is also the current Executive Chairman and CEO of Thiess.
Michael’s strong industry knowledge and focus on safety and
sustainability make him a valuable addition to the Board.
In October 2021, Nick Miller was appointed to the Board as
Managing Director & CEO. Nick has been integral in developing
and executing Adbri’s transformational agenda and long-term
growth strategy since he joined as CEO in January 2019. He
has guided the business through unprecedented operating
challenges caused by the COVID pandemic, and we look forward
to his continuing leadership in building a more sustainable and
competitive business in his expanded role.
The Board remains committed to having a majority of
independent directors. We are currently searching for an
additional Independent Non-executive Director to restore a
majority independent Board following Nick’s appointment.
The Board continues to apply Adbri’s Conflict Protocol and
Governance Framework.
Acknowledgements
The many challenges of 2021 revealed the strength of our
people and the depth of their skills, capabilities and experience.
On behalf of the Board, I would like to commend Nick Miller,
his Executive Leadership Team and all our people for their
commitment, dedication and resolve as they have continued to
deliver for our stakeholders.
We also thank Adbri’s customers, partners and the communities
in which we operate, as well as our shareholders, for their
continued support.
Our people are the key to transforming and growing our
business responsibly and sustainably as we respond to market
changes, execute our strategy and create long-term value for our
shareholders. As we move into 2022 and beyond, our people will
form the basis of Adbri’s future plans and success.
Raymond Barro
Chairman
Revenue
Earnings before interest, tax,
depreciation and amortisation (EBITDA)
Depreciation, amortisation
and impairments
Earnings before interest and tax
(EBIT)
Net finance cost1
Profit before tax
Tax expense
Non-controlling interests
Net profit attributable to
members (NPAT)
Underlying EBITDA
Underlying EBIT
Underlying net profit after tax excluding
property attributable to members
Underlying net profit after tax including
property attributable to members
Basic earnings per share (EPS) (cents)
Underlying EPS (cents)
Ordinary dividends per share –
fully franked
Net debt2 ($million)
Leverage ratio3 (times)
Gearing4 (%)
Underlying return on funds employed5 (%)
Reported return on funds employed6 (%)
2021
$m
2020
$m
1,569.2
1,454.2
270.8
262.7
(95.9)
(115.1)
174.9
147.6
(19.1)
155.8
(39.1)
–
116.7
274.2
178.3
113.0
(20.4)
127.2
(33.6)
0.1
93.7
272.3
178.9
114.9
119.1
115.6
17.9
18.3
12.5
437.4
1.6
34.5
10.6
10.4
14.4
17.7
12.0
372.1
1.4
30.5
10.9
9.1
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
and excludes lease liabilities.
3. Leverage ratio is net debt/trailing 12 month underlying EBITDA.
4. Gearing is net debt/equity.
5. Underlying return on funds employed is underlying EBIT/average monthly
funds employed.
6. Reported return on funds employed is EBIT/average monthly funds
employed.
Adbri 2021 Annual ReportOperational updatesFinancial statementsSustainability reportIntroduction and overview 08
Managing Director
& CEO’s review
A year of change and growth
I am pleased to report that Adbri made solid progress
across all divisions during the year. Your Company
delivered for our customers, shareholders and
communities, while demonstrating ongoing commitment
to Adbri’s purpose of Building a Better Australia.
Delivering for our customers
Our people’s experience of confronting the uncertainties
of the pandemic in 2020 and our comprehensive and
proactive crisis management approach, ensured Adbri
was in a strong position to meet any new challenges
head-on in 2021.
In the context of dynamic market conditions that included
short-term shutdowns of the construction industry
in New South Wales, Victoria, South Australia and the
Northern Territory, Adbri remained strong across our key
end markets. Outside government-mandated shutdowns,
the infrastructure, commercial, residential construction
and home renovation markets grew in all states, with
demand for construction materials well supported by
government stimulus measures.
Pleasingly, cement volumes and pricing improved on our
2020 numbers. The anticipated drop in year-on-year lime
volumes was partially reduced through ongoing supply
agreements until January 2023 with Alcoa, and several
other new or extended contracts. Our cement and lime
exposure in the South Australian and Western Australian
resources sector provide a significant diversification
benefit for the business.
Strong underlying residential and commercial markets
underpinned growth across Adbri’s Concrete and
Aggregates division. Major infrastructure works also
drove increased volumes following a targeted tendering
program where we have secured 47% of concrete and
aggregate tenders bid in the year. In total, concrete and
aggregate volumes increased by 9% and 22% respectively
compared to 2020.
Building on 2020, the market remained extremely
buoyant for Adbri’s masonry products, with households
across the country continuing to channel their
discretionary spending into home improvements and
renovations. Sales volumes grew by 6% on the prior year,
however challenges from supply shortages and shipping
and pallet costs impacted margins.
2022 outlook
Adbri is well-positioned to
benefit from favourable market
conditions in the construction
and resources sector.
Adbri is focused on continuing
to execute its cost reduction
program which is expected
to deliver incremental gross
savings in excess of $10 million
in 2022.
Our 2022 capital expenditure
program of $250 – $300
million includes approximately
$150 million for the Kwinana
Upgrade project, and excludes
business acquisitions.
09
Delivering for our shareholders
The Group delivered robust financial results for the full year which
supported improved returns for our shareholders. Despite COVID
disruptions, Adbri recorded full year revenue of $1.57 billion,
8% higher than the prior year, driven by volume growth across all
products with the exception of lime.
The management team continued to execute on its planned
cost reduction program with discipline, delivering gross
savings of $26.1 million. However, the Group experienced
a number of COVID-related earnings impacts including
lockdowns, the Accolade’s delayed return from its refurbishment
and increased demurrage.
Notwithstanding those COVID headwinds, the Group recorded
a robust 2021 underlying EBIT result of $178.3 million, in line
with the prior corresponding period. Reported NPAT was
$116.7 million, a 25% increase on 2020.
Adbri maintains a healthy balance sheet, with cash on hand of
$124.7 million and net debt of $437.4 million. Combined with
the extension of our $950 million debt and guarantee facilities
announced after the year end, we have significant flexibility and
headroom to pursue future opportunities for value creation.
Building a Better Australia
Our people’s commitment to Adbri’s four strategic pillars – safety,
customer focus, inclusivity and sustainable growth – supported
many achievements during 2021 and has placed us in a strong
position for 2022 and into the future.
Safety
Keeping our people, customers and communities safe is of
paramount importance to Adbri and the pandemic has led to a
new layer of safety measures. In May, we introduced vaccination
leave of up to four hours leave per medical appointment to
encourage our people to protect themselves and others by
participating in government vaccination programs. We also
undertook a company-wide survey to understand our people’s
perspectives on COVID-related issues. The Group instigated a
policy of up to 10 days of supplementary paid COVID leave per
state to support employees where sites closed to either comply
with restrictions or respond to subsequent reduced customer
demand. As we move into endemic management, this leave will
be replaced with accrued entitlements.
As in 2020, Adbri’s Safety Step Change program helped to
change behaviours and shone a spotlight on our critical risk
areas. Developed in consultation with our employees, this
risk-based program is making Adbri’s workplaces safer for the
long-term. During the year we made strong progress in our
safety lead indicators such as critical control audits and visible
leadership, however we did record a 12% increase in our total
recordable injury frequency rate (TRIFR) compared with 2020.
Since 2019, our TRIFR has reduced overall by 41%.
Full year revenue
Revenue increased
$1.57b
8%
I am proud of how our people are supporting Adbri’s continued
focus on safety excellence. In November 2021, these efforts
were recognised when Adbri won the South Australian Premier’s
Award in Energy and Mining for Health and Safety in the
Resources Sector with our Safety Step Change program.
Customer focus
On 1 January 2021, we consolidated three divisions into two,
appointing a Chief Operating Officer for each. As well as better
aligning our organisational structure with Adbri’s business
strategy, the new structure allows us to work even more closely
with our customers, be more focused on sustainability and drive
efficiency across the Group.
In addition to Alcoa, we also secured contracts to supply lime to
customers previously reliant on imports. We closed the year with
a strong lime volume run-rate with substantial quantities locked
in for 2022. These successes demonstrate the value of offering
a locally produced, quality lime product to customers in the
resources sector, particularly when supply chains are disrupted.
During the year, we also invested in a customer-focused
initiative to create consistency in how we engage with our
customers across the Group. Client satisfaction measures
are being introduced to help gauge how we are progressing
in this area.
Inclusivity
The Adbri Executive Leadership Team understands and
appreciates the benefits of a fairer and more inclusive culture.
We aim for our workforce to be as diverse as the communities
in which we operate and are committed to giving our people a
voice wherever possible.
We are proud to have been participants in the 2021 NAIDOC
and National Reconciliation Week celebrations, which provided
an opportunity to show how Adbri recognises and respects the
diverse cultures in our business. During the year we delivered on
our Reflect Reconciliation Action Plan (RAP) commitments and
are looking to progress to an Innovate RAP with targets in 2022.
Adbri 2021 Annual ReportOperational updatesFinancial statementsSustainability reportIntroduction and overview 10
Managing Director & CEO’s review continued
Sustainable growth
Ongoing cost reduction and operational improvement remain
key priorities in Adbri’s plans to achieve sustainable growth. We
will also continue to enhance our capability in infrastructure as
we target projects where Adbri has a competitive advantage.
In 2021, we commenced an end-to-end South Australian cement
manufacturing process benchmarking study that harnesses
the international knowledge of a European technical advisory
group with extensive global cement manufacturing expertise.
This review has identified key areas for improvement that will
help focus our investment for future years. We also signed a new
long-term gas sales agreement with Senex, complementing the
RDF used to power our low cost and lower emissions operations
in South Australia. Under the terms of the seven-year agreement,
Senex will supply natural gas to Adbri, from January 2023 up until
2030, from the Moomba Gas Supply Hub at a fixed price in line
with current market levels.
The Group continued to identify and pursue opportunities to
grow our vertically integrated business model. Our Mawsons
joint venture acquired the Millbrae concrete and aggregate
business, broadening its footprint in regional New South Wales.
This was followed by the purchase of Metro Quarry Group
through a 50/50 joint venture with Barro Group in Victoria.
In late 2021, the Group announced it was acquiring Zanows
to increase our concrete and quarry footprint in the strategic
South East Queensland market. This transaction is expected to
complete in early 2022.
We also continued to develop options for increasing exposure
to the lime market and as outlined in the Chairman’s Report, we
will undertake a definite feasibility study for a new lime kiln in
Kalgoorlie. This new kiln would be in addition to our existing lime
manufacturing facilities.
Land ownership is an important component of the Group’s
operations to support our sustainable growth, however at times
specific sites may become surplus to requirements. Adbri has
a land strategy in place to maximise value for shareholders
through either development or divestment. This is evidenced by
the recent sale agreement to divest our Hilltop land holdings in
Geelong. The Group will continue to identify opportunities from
its surplus land portfolio and has gone through an RFP process
with land developers to identify potential partners and options.
Delivering for our future
Operating a sustainable business is a fundamental part of
Adbri’s role as an industry leader. We believe in doing business
responsibly; keeping our people and communities safe; meeting
the needs of our customers; and creating long-term value for
our shareholders. In 2022, we will release our Net Zero Emissions
(NZE) Roadmap, outlining our aspiration of net zero emissions
by 2050.
2021 marked the beginning of the Group’s involvement as
a core partner in the Heavy Industry Low-carbon Transition
Cooperative Research Centre (HILT CRC) and a member of
the Material and Embodied Carbon Leaders Alliance (MECLA).
As a participant in an industry where emissions are difficult to
abate, technology developments and partnerships with industry,
government and research institutions will be critical to achieving
net zero by 2050.
1.5 million tonnes
capacity in Western Australia when the
Kwinana Upgrade project is operational
It is exciting to see construction begin on the Kwinana Upgrade
project, which will consolidate Adbri’s two existing cement
production facilities in Western Australia into a single modern
facility, with a 1.5 million tonne capacity. Meanwhile, we are
progressively increasing the use of alternative fuels at Birkenhead
to reduce carbon emissions and embed a circular economy into
our operations. We also continued to bolster our supply chain of
SCMs to use as an alternative to emissions-heavy Portland clinker
in cement and concrete production.
Looking ahead
Adbri is well positioned to benefit from favourable market
conditions in the construction and resources sector in 2022.
The outlook for Australia’s mineral sector is strong with high
prices, good volume growth and a weak Australian dollar driving
a surge in export volumes as the world economy rebounds from
the impact of the pandemic. This is expected to drive strong
demand for cement and lime.
Residential construction is buoyant across all states,
underpinning a strong order book until at least the middle
of 2022, while multi-residential activity is also beginning to
increase. Heightened activity in the commercial industrial
sector and our increasing exposure to a healthy pipeline of
infrastructure projects will support demand for cement, concrete
and aggregates, despite project timetables being pushed out
due to impacts from COVID, labour, and supply chain challenges.
Lime volumes are anticipated to reduce, entirely due to lower
Alcoa volumes. Lime pricing is expected to improve with new
customers seeking reliable local supply as a result of supply
chain disruptions.
Adbri is focused on continuing to execute its cost reduction
program which is expected to deliver incremental gross savings
of more than $10 million in 2022, helping to mitigate predicted
cost headwinds in areas including pallets, shipping, labour and
west coast gas supply.
Our 2022 capital expenditure program of $250 – $300 million
includes approximately $150 million for the Kwinana
Upgrade project, but excludes business acquisitions.
We expect higher earnings in our cement, concrete, aggregates,
masonry and joint venture businesses to offset lower earnings
from the lime business. Overall, full year earnings will benefit
from contributions from our recently acquired assets,
including Milbrae, Metro Quarry Group and Zanows (subject
to completion), and improved operational efficiencies. Net
proceeds from surplus land sales over the next 12 months
are expected to be at least $20 million.
11
(L–R) Mayor Carroll Adams, Kwinana Council; Theresa Mlikota, Adbri CFO; the Hon.
Roger Cook MLA; Dr Vanessa Guthrie AO, Adbri Deputy Chair; and Brett Brown,
Adbri COO – Cement & Lime at the Kwinana Upgrade project sod turning
In conclusion
Thank you to the Board of Directors and the broader Adbri team
for your dedication, responsiveness and flexibility that enabled us
to deliver on Adbri’s promise in 2021. Combined with the Group’s
vertically integrated business model and balanced geographic
exposure, our people’s hard work meant Adbri performed well in
a year challenged by COVID disruption.
Underlying EBIT
$178.3m
I also extend my appreciation to our customers, contractors,
suppliers, joint venture partners and shareholders. I look forward
to continuing to work with you in 2022 and beyond as we
progress the Company’s strategic goals and together build a
better Australia.
Nick Miller
Managing Director & Chief Executive Officer
Operating a sustainable business
is a fundamental part of Adbri’s
role as an industry leader.
We believe in doing business
responsibly; keeping our people
and communities safe; meeting
the needs of our customers; and
creating long-term value for our
shareholders.
Adbri 2021 Annual ReportOperational updatesFinancial statementsSustainability reportIntroduction and overview
12
Finance report
Full year reported NPAT
attributable to members
increased from $93.7 million
to $116.7 million in 2021.
Reported profit includes property sale profits
totalling $6.1 million after tax and non‑recurring
significant items totalling $2.4 million after tax.
Underlying profit including property sales totalled
$119.1 million, an increase of 3% from $115.6 million
in 2020. Excluding property sale profits, the
underlying NPAT of $113.0 million was marginally
lower than last year.
Sales and profit
Revenue increased 8% to $1.57 billion, with improved sales
volumes across all product categories except lime, where sales
were lower following the reduction in contracted volumes from
Alcoa. Pleasingly, strong sales demand was experienced across
all sectors including residential, non-residential, infrastructure/
engineering and mining.
Cement pricing improved in all key markets, in particular,
South Australia, New South Wales and Western Australia.
However, this was offset by lower lime pricing across major gold
and alumina contracts. Concrete pricing varied from market
to market but was stable overall. In the first half of the year, we
experienced concrete pricing pressure in the New South Wales
and Queensland markets, until demand lifted considerably in
the second half of the year. Aggregate pricing was stable overall,
with the key driver of price variances being sales mix. Bagged
products and retail masonry products (e.g. pavers, retaining walls)
continued to experience strong demand, while demand for low
grade aggregate also increased.
Return on funds employed
%
20
15
10
5
0
2 017
2 018
2 019
2 0 2 0
2 0 21
Reported
Underlying
Interest cover
Times
30
25
20
15
10
5
0
Cash flow from
operations
Cash flow from operations
$m
300
250
200
150
100
50
0
Leverage
Times
2.0
1.5
1.0
0.5
0
2 017
2 018
2 019
2 0 2 0
2 0 21
2 017
2 018
2 019
2 0 2 0
2 0 21
Underlying
Reported
Net debt to equity
Total assets
%
40
30
20
10
0
$b
2.5
2.0
1.5
1.0
0.5
0
2 017
2 018
2 019
2 0 2 0
2 0 21
2 017
2 018
2 019
2 0 2 0
2 0 21
2 017
2 018
2 019
2 0 2 0
2 0 21
Reported
Underlying
13
Supply from our Birkenhead facility into Melbourne was
constrained due to extended shutdowns, which required higher
levels of imported cement to meet Victorian demand. Victorian
demand was very strong, with cement volumes (imported and
domestically produced) increasing by over 9% compared to the
prior comparative period, at slightly higher pricing than 2020.
This increase in demand was driven by ongoing residential and
commercial activity. Stabilised fill supplied to the Mickleham
Quarantine Facility also supported Victorian volumes. Concrete
and aggregate volumes were impacted by COVID lockdowns
and labour shortages, curtailing output. Pricing for concrete and
aggregates was marginally higher than in 2020. The demand
outlook for this market is strong with good order book visibility
for the first half of 2022 in the residential and multi-residential
market, as well as the commercial warehousing market.
The New South Wales market experienced a strong recovery, with
sales volumes of cement, concrete and aggregates increasing
by 5%, 6% and 23% respectively. Cement and aggregate pricing
were both stable, while concrete pricing was marginally lower
before volumes recovered. Residential and commercial/industrial
warehousing demand were the key drivers of volume, with
residential (including multi-residential) and infrastructure demand
expected to positively impact 2022 volumes.
Queensland demand was stronger than anticipated, driven by
residential demand, both multi-residential and single dwelling.
This residential demand, along with infrastructure projects,
assisted to build out volumes for our more recently established
Scotchy Pocket quarry and Pinkenba concrete plant. Demand
for our products remains strong into 2022, however supply chain
risks and workforce challenges have the ability to cap residential
construction demand as we compete with the mining sector
for labour resources. Pricing in this market was marginally lower
than last year for concrete, a situation we expect will reverse in
2022 due to high demand. Infrastructure demand is expected
to be stronger, driven by roads and school projects and the
commencement of the Brisbane Airport Corporation apron
upgrade project.
Northern Territory cement volumes increased 22% over the prior
year. Both concrete and aggregate demand increased, driven
by infrastructure projects, including supply to the RAAF Base
Tindal Stage 6 redevelopment and the Health Precinct project in
Alice Springs.
Masonry volumes were stronger across all markets, except
Victoria (impacted by lockdowns) and Western Australia, which
was stable. Residential demand remains strong, demonstrating
that discretionary spend continues to be injected into home
renovations and improvements. Infrastructure spending is
expected to continue to drive masonry demand across all
markets through government spending on schools, defence,
prisons and ongoing demand from the commercial sector,
including warehousing and retail precincts.
The demand for cementitious materials in Western Australia
increased significantly. This demand was driven from all sectors
including major mining infrastructure projects such as Koodaideri
and Iron Bridge. Demand for higher margin packaged products
continued strongly, as discretionary incomes continued to be
invested in home improvements and renovations. Demand
for lime remained strong, in spite of the reduction in volumes
sold to Alcoa following their shift towards imported lime from
July 2021. Logistical challenges for importers saw demand
shift to locally produced lime later in the year which aided in
the recovery of lime volumes, as did the commencement of
operations at Capricorn Metals Karlawinda Gold project, which
also drove an increase in lime demand. This resulted in lime sales
volumes being 88% of 2020. We expect 2022 volumes to be in
the order of 80% of 2020. Lime pricing in this market was stable
for non-alumina customers and lower for alumina customers,
although pricing improved towards the end of the period as
new customers shifted from imports to local lime production to
secure reliable supply.
Domestic demand for cement in South Australia was marginally
higher than last year, supported by ongoing residential demand
and infrastructure project delivery including the Osborne North
Development project. Concrete and aggregate demand were
9% and 22% higher respectively compared to 2020. Home
builders continue to report strong order books into 2022, as
well as continued demand for civil works for new subdivision
activity. Commercial construction activity in the Adelaide CBD is
being driven by the development of government office buildings
and hotels. Pricing of cement into the domestic market was
marginally lower with the resetting of some key contracts, while
pricing of concrete and aggregates was marginally higher due
to strong demand.
$2.3b
total assets
Adbri 2021 Annual ReportOperational updatesFinancial statementsSustainability reportIntroduction and overview 14
Finance report continued
2021 challenges
2021 presented ongoing challenges, with COVID impacting our
operations more materially through site lockdowns, shipping
delays due to quarantining and congestion at ports, and the
delayed return of the Accolade, which undertook refurbishment
in Singapore. The impact of these items totalled $14.4 million.
The Company also experienced an extended shutdown period
at its Birkenhead plant and maintenance issues at Munster
which impacted production (and unit cost) during the period.
The impacts of these items totalled $5.9 million.
In spite of this, the team delivered our targeted cost out initiatives
(gross savings of $26.1 million) and recovered significant volumes
in our main lime market, Western Australia, where many mining
companies returned to a more reliable domestic supply. We also
grew our cement, concrete and aggregate volumes nationally.
Underlying NPAT including property sales increased 3% to
$119.1 million. Excluding property sales, underlying NPAT was
marginally lower than 2020. Reported NPAT attributable to
members of $116.7 million was 25% higher than 2020.
Cash flow
Operating cash flow of $195.2 million was lower than 2020,
but was in line with expectations, recognising the benefit of
tax refunds in 2020. Receivables rose towards the end of 2021,
driven by higher turnover levels. Debtor collections improved
dramatically, with DSO days reducing from 45.8 to 40.4.
Cash distributions from joint ventures increased in line with the
rise in earnings. Interest payments decreased as average gross
debt levels were lower compared with 2020, where higher cash
and gross debt holds were taken as we monitored the impact
of COVID on financial markets.
3%
underlying NPAT increased
to $119.1 million including
property sales
$140.5m
capital expenditure
Investment in capital increased marginally to $140.5 million.
Stay-in-business capital of $106.0 million represented 110%
of depreciation, and development capital projects totalled
$34.5 million. Development projects included the purchase of
a pugmill and road access works for our Scotchy Pocket quarry,
upgrade of our Birkenhead drymix plant, and $14.1 million for
the Kwinana Upgrade project, which is currently on track for
commissioning in mid-2023. Taking into consideration current
information on inflationary pressures on steel, logistics and
labour, the project is expected to be delivered at a cost in the
order of $200 million.
The Company also injected $32.2 million into our new 50/50 joint
venture, B & A Sands Pty Ltd, to acquire the Metro Quarry Group’s
sand assets in Victoria.
Dividend payments of $83.2 million were $19.6 million higher
than 2020 and represent the final dividend for 2020 of 7.25 cents
per share and the interim dividend for 2021 of 5.5 cents per share,
an increase of 3.0 cents per share on the dividends paid in 2020.
Balance sheet and capital management
Adbri maintained its strong balance sheet through working
capital management and considered investment expenditure.
Net debt increased by $65.3 million to $437.4 million at
31 December 2021, driven by key investment spending in new
acquisitions and the Kwinana Upgrade project. The Group’s
credit metrics remain strong with a leverage ratio of 1.6 times
underlying EBITDA and gearing (net debt/equity) of 34.5%, while
interest cover was 14.4 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
debt and overdraft facilities and cash balances, is strong at circa
$453.7 million. The Group’s financing facilities were extended
in early 2022, increasing the weighted average term to 5.1 years,
when measured from the reporting date.
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 2021 of 12.5 cents per
share represent a 68% payout ratio on underlying net profit after
tax. Adbri’s capital management objectives remain the same and
are focused to:
– ensure an efficient balance sheet to optimise the cost of
capital and thereby shareholder returns while maintaining
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.
15
Approved dividends of 12.5 cents per share for 2021
represent an increase of 0.5 cents per share on the 2020
dividends approved and is towards the middle of the Board’s
target range of 65–75% of underlying earnings. Dividends at
the middle to lower end of the Board’s target range reflect
the elevated capital requirements for the Kwinana Upgrade
project over the next 18 months.
Underlying return on funds employed declined marginally
from 10.9% to 10.6%, given heightened capital investment
levels which will deliver increased earnings over time and
the previously announced loss of contracted volumes from
Alcoa and a competing cement import terminal in New
South Wales. Underlying margins were further negatively
impacted by COVID and production impacts, most of
which we expect to be non-recurring. Taking account of
$16.2 million in non-recurring items, the return on funds
employed would have increased to 11.6%. The return on
funds employed remains above the Company’s cost of
capital. Capital management, production and cost reduction
remain key priorities, allowing the Company to continue to
deliver relatively stable returns in a dynamic and challenging
market environment.
12.5 cps
total fully franked dividends
approved for 2021
68%
payout ratio on
underlying NPAT
Adbri 2021 Annual ReportOperational updatesFinancial statementsSustainability reportIntroduction and overview 16
Operational updates
17
Cement revenue increased by
12%
Concrete and Aggregates
revenue increased by
14%
Masonry revenue increased by
2%
Joint venture businesses
contributed
$33.3m
Our people deliver
for customers
An organisation’s true character is revealed
under pressure. Despite unexpected
challenges in 2021, Adbri’s people went above
and beyond to meet our customers’ needs.
By being collaborative, innovative, responsive
and practical, we helped Australia’s
infrastructure, mining and construction
industries build a better Australia.
Adbri 2021 Annual ReportIntroduction and overviewFinancial statementsSustainability reportOperational updates 18
Operational updates continued
Cement and Lime
2021 was a year of transformation
and resilience for Cement and Lime.
As demand fluctuated in line with market conditions and
government restrictions, the business maintained certainty
of supply to customers, increased sales volumes and
expanded and diversified our customer base. We look to
the future with long‑term asset investments that will help
mitigate risk, improve efficiency and reduce future costs.
Looking ahead
– The demand outlook for heavy construction
materials is strong and is expected to be
driven by ongoing residential demand,
infrastructure projects and commercial and
industrial developments.
– Adbri’s strong position in the resilient
resources sector should continue to support
cement and lime volumes.
– Our local manufacturing capability is an
increasingly important point of difference
compared to imports as global supply chain
issues threaten security of supply.
– The ongoing Birkenhead operational
efficiency program will help to improve our
production costs, as well as improving our
sustainability credentials.
– The Kwinana Upgrade project will undertake
the bulk of construction activities in 2022.
– We continue to execute on our lime
volume recovery strategy, as well as
working on our broader lime strategy in
Western Australia.
– A definite feasibility study will commence
for a new kiln at Kalgoorlie. The study is
anticipated to take 12–18 months.
Cement revenue
increased by
12%
19
Performance: a year of transformation
Major activities: positioning for the future
Construction sector demand fluctuated during the year, with
cement volumes increasing compared to 2020. Temporary
government lockdowns closed the construction sector in Victoria,
New South Wales, South Australia and the Northern Territory
temporarily impacting demand, with the sector rebounding
strongly once lifted. The infrastructure, commercial, residential
construction and home renovation markets grew in most states.
Our Birkenhead operation has commenced a transformational
operational efficiency program. In addition, the once-in-50-year
upgrade to kiln 4 was undertaken as part of the extended
maintenance closure in January 2021. Long-term benefits include
increasing clinker and cement production volumes, improving
plant reliability and energy efficiency, reducing shipping, and
improving the consistency of materials.
We improved operational efficiency and cost per tonne at
Birkenhead by increasing the alternative fuel substitution rate
from about 28% in 2020 to about 35% in 2021. We are targeting
up to 40% as we increase throughput to 25 tonnes per hour in
2022, in line with our current regulatory approvals.
Successful SCM trials enabled us to file our first patent
application in 2021. We will continue investigating lower carbon
products and working to increase our market penetration. For
more information, see the 2021 Sustainability Report.
Next year we will look to maximise lime production from kiln 6
at Munster, while kiln 5 will be operated on a campaign-only
basis to meet the current lime demand. The first sod was turned
at the Kwinana Upgrade project, which will increase cement
production capacity and deliver substantial costs savings
when commissioned.
In July, Senex Energy signed a fixed-price agreement to
supply natural gas to our South Australian cement operation.
This removes pricing volatility for a tranche of our natural gas
requirements through to 2029, and along with our increased use
of alternative fuels, supports Birkenhead’s position as a lower
carbon cement manufacturing plant, positioning us well against
high embodied carbon cement imports in a lower carbon future.
In February 2021, the Accolade went into dry dock in Singapore
for a comprehensive overhaul that will greatly improve its
reliability, safety and longevity. When the upgrade was delayed
for around six weeks due to COVID-related working restrictions,
alternative transport strategies ensured customer supply. These
unexpected one-off costs impacted profit in 2021.
Cement sales performed better in 2021 than in 2020, rising by 12%.
The resources sector in Western Australia and South Australia
remained strong. Adbri’s high level of exposure to this market was
beneficial and resulted in a 7% increase in cement volumes to
the Western Australian and South Australian resources industry
in 2021 compared with the previous year.
Lime volumes reduced by 12% year-on-year as Alcoa volumes
reduced (announced in 2020). The impact was better than
anticipated, due to supply arrangements with Alcoa extending
through to the end of the year and the successful execution of
our lime volume recovery strategy. This resulted in a contract
extension with South32 and new agreements with resources
companies Northern Star and Newmont Boddington, as well
as the recently announced supply agreement with Alcoa until
31 January 2023, reinforcing Adbri’s reputation for reliable
domestic supply of lime. It also diversified supply away from the
alumina sector, reducing our reliance on one sector.
Construction industry demand peaks and troughs presented
a significant challenge that we managed through a strong
customer focus. Fixed long-term supply contracts for imported
materials and shipping shielded the business from supply chain
challenges. Adbri’s vertically integrated business model and
local manufacturing capabilities provided customers with supply
certainty during a continued global pandemic.
With demand high for cement, prices increased overall by 1%.
This substantially offset the 5% decrease in lime prices following
the resetting of some contracts. The outlook for cement and lime
prices in 2022 is favourable, particularly against the backdrop of
shipping constraints and delays.
Unplanned one-off costs such as the extended closure of the
Birkenhead facility for one of our largest maintenance programs,
and the Accolade’s delayed return from Singapore after a major
refurbishment, impacted margins. This, coupled with lower Alcoa
lime volumes and increased shipping demurrage costs, resulted
in an overall decrease in divisional earnings and margins.
Our brands
The first sod was turned at the
Kwinana Upgrade project, which
will increase cement production
capacity and deliver substantial
savings when commissioned.
Adbri 2021 Annual ReportIntroduction and overviewFinancial statementsSustainability reportOperational updates 20
Operational updates continued
Concrete and
Aggregates
Overall market conditions
were strong for Concrete and
Aggregates, despite COVID
restrictions temporarily impacting
some states and sectors.
The robust housing and civil infrastructure markets
drove increased volumes and the team delivered strong
results, highlighting the strength of Adbri’s sector and
geographic diversification strategy.
Looking ahead
– Strong market conditions are expected
to continue in all states for Concrete and
Aggregates, with anticipated government
infrastructure stimulus expected to provide
strong demand support for construction
materials well into the future.
– The construction sector has a pipeline
of over $196 billion of projects in the
next two years. Where Adbri has a strong
competitive advantage this creates
significant opportunity to supply to projects
across the transport, energy and other civil
works sectors.
– We anticipate industry-wide cost headwinds
in fuel, labour and plant and equipment due
to supply constraints. However, we expect
market price increases to offset these costs
as demand tightens.
– The Zanows acquisition is expected to
complete in early 2022. This is expected to
unlock associated synergies and efficiencies,
benefiting our Queensland customers and
overall business performance.
– While the new Western Sydney Airport and
Badgerys Creek Aerotropolis is associated
with multiple infrastructure projects,
government planning is still underway.
Once this is complete, we are well prepared
to tender for projects and apply for
development approval for a new concrete
plant in the area.
21
Performance: infrastructure and residential demand
drove volume
In 2021, Adbri’s Concrete and Aggregates businesses benefited
from strong market conditions and the flow-on effects of
previously secured infrastructure projects. The HomeBuilder
grant program continued to support residential housing
construction demand along the east coast, driving increases in
volumes and margins.
Compared to 2020, concrete volumes increased by 9%, despite
temporary construction industry restrictions in some markets
and states due to the pandemic. Strong underlying housing and
civil markets led to higher concrete demand in Queensland, New
South Wales and South Australia. Demand in Victoria was slower
in early 2021 due to delays in the commencement of some key
projects in metropolitan Melbourne, and the impact of COVID
restrictions on construction customers. However, demand
accelerated later in the year.
Demand for aggregates was high, growing 22% during the year.
Major civil and project works in South Australia, Queensland and
the Northern Territory underpinned this growth due to the strategic
locations of our quarries to our customers and key projects.
Concrete prices were consistent across most markets, however
Victoria grew by 1%. Aggregate pricing increases were also
modest, due to competitive market conditions early in 2021.
Our vertically integrated
footprint and cost-competitive
offering continue to position us
strongly in all market sectors.
Major activities: focus on growth strategies
In November 2021, Adbri announced the acquisition of Zanows’
Concrete and Quarries, an integrated business in greater
Brisbane operating two concrete plants (with approval for one
more) as well as sand and hard rock quarries that service internal
and external customers. The $58 million acquisition (subject to
normal closing adjustments) strengthens our local customer
offering and provides a reliable long-term supply of high-quality
alluvial sands and hard rock materials in a tightening market.
The Concrete and Aggregate division’s vertically integrated
footprint and cost-competitive offering continue to position us
strongly in all market sectors in 2022. Our targeted tendering
approach in the infrastructure segment has delivered strong
wins, especially in the South East Queensland region, where our
Scotchy Pocket quarry’s unique positioning assisted Adbri to
secure projects on the Sunshine Coast.
Our successes in this region included the Bruce Highway Cooray
to Curra (sections 1 and 2) upgrade, as well as the Pumicestone
Road to Steve Irwin Way section. More broadly, we supplied
projects such as the Banksia Station upgrade in NSW, Sydney
International Motorsports Park, Brisbane International Airport
apron works, RAAF Edinburgh AIR 555 pavement package in
South Australia and the RAAF Base Tindal Stage 6 redevelopment
in the Northern Territory.
We continued to progressively rehabilitate our quarries during
the year, with many community groups invited onto our sites
to assist in tree planting. For more information, see the 2021
Sustainability Report.
Our brands
Revenue increased
14%
Concrete volumes increased
9%
Aggregate volumes increased
22%
Adbri 2021 Annual ReportIntroduction and overviewFinancial statementsSustainability reportOperational updates 22
Operational updates continued
Masonry
There was robust demand for
Adbri’s masonry products in 2021
as Australians continued to divert
their discretionary spend into home
improvements and renovations.
Looking ahead
– The demand outlook for Masonry in 2022
is positive. The Australian commercial
building and home renovation sectors
are expected to remain strong, although
volumes may be impacted once national
and international borders open and
discretionary spending flows away from
home improvement to travel and hospitality.
– Demand should be strengthened by
greater exposure to landscaping masonry
products due to a more diversified product
offering and re-ranging of some product
segments by major retail customers.
– We anticipate international cost pressures
arising from a disrupted global supply
chain and the impact of a worldwide timber
shortage on pallet pricing will continue,
putting pressure on margins.
– Price increases are projected to offset
cost headwinds in 2022 and have been
communicated to customers.
Increase in demand from
residential product sector
21%
Growth in the
commercial sector
14%
23
Major activities: focus on product innovation and
efficiencies
Supporting the Group’s commitment to making ongoing
sustainability improvements, the Masonry division continued
to expand Adbri’s range of sustainable building and paving
products, including concrete bricks.
We also investigated new opportunities to reduce operational
costs as part of Adbri’s Group-wide cost efficiency program,
leading to lower cartage costs and higher pallet recoveries.
However, the impact of these opportunities has somewhat
been offset by higher timber costs and transport freight across
the industry.
Our brand
Performance: Stable earnings against cost headwinds
In 2021, Masonry delivered underlying EBIT of $8.1 million, a 1%
improvement on the previous year. Underlying EBITDA margins
for the reporting period were consistent with the prior year.
Overall, sales revenue increased by 2% compared to the prior year
driven by supply of tolling products to competitors in New South
Wales and North Queensland. Earnings were underpinned by our
key markets of retail landscaping, commercial construction and
civil construction products.
In the commercial and engineering segments, we experienced
year-on-year demand growth of 14% and 2% respectively, despite
lockdowns in New South Wales and Victoria. This demand was
driven by commercial and government projects.
As in 2020, the residential market boomed for Adbri’s
landscaping products, which are typically higher value.
Australians continued to channel their spare time and
discretionary spending into home improvements and renovations
during government restrictions. There was a dip in sales across all
states in the first half of the year, when trading eased. However,
the mid-year resumption of rolling lockdowns across the country
drove higher demand from June onwards.
Throughout the year, the business was challenged by the rising
cost and availability of input materials including timber for
pallets, colour oxide pigments, steel and packaging products
due to local and worldwide supply shortages and increased
shipping costs.
Underlying pricing remained relatively stable throughout 2021.
However, a change in product mix meant there was a higher
proportion of lower-value commercial products.
Pricing strategies are being applied to improve margins in 2022.
Customer recognition
continued in 2021
In 2021, the landscaping design produced by masterplan
architects BVN for stage 2 of the Charles Sturt University
Macquarie campus development was Highly Commended for
the Think Brick Bruce Mackenzie Landscape Award.
The Think Brick Awards celebrate excellence in the use of bricks,
blocks, pavers and roofing tiles. Designs incorporating Adbri’s
masonry products have won 10 of these awards since 2014.
The shortlisted design features Adbri Brickpave pathways. They
connect large courtyards that are the centrepiece of the design,
which uses brick to honour the rich red clay of the local area.
Adbri 2021 Annual ReportIntroduction and overviewFinancial statementsSustainability reportOperational updates 24
Operational updates continued
Joint ventures
Adbri’s joint venture businesses
play an important role in the
Group’s vertical integration strategy.
Their diversified geographic footprint delivers major
benefits including de‑risking our earnings, expanding
our customer base and providing touchpoints to deliver
critical infrastructure into regional areas. They are
significant contributors to our earnings and deliver strong
margins and returns due to their unique positioning in their
discrete markets.
In 2021, our joint venture businesses
contributed $33.3 million to Group earnings,
a 24% increase on 2020. Positive market
conditions and the impact of government
stimulus packages in Victoria, New South
Wales and Queensland drove higher offtake
from both internal and external customers
for most Australian joint ventures, despite
COVID restrictions.
During the year, Mawson Group strengthened
Adbri’s regional growth story with their
strategic purchase of Milbrae. This further
diversified Mawsons’ revenue base while
improving access to raw materials and
expanding Adbri’s vertically integrated
footprint in regional Victoria and New South
Wales. We also completed the acquisition of
Metro Quarry Group in a joint venture with the
Barro Group to secure critical sand to support
our Victorian concrete businesses.
Joint venture businesses contributed
$33.3m
Contribution to Group earnings increased
24%
Growth through strategic acquisitions
Adbri Group’s vertically integrated footprint expanded this year with two more joint venture acquisitions.
A 50/50 joint venture between Adbri and Barro Group, the
Metro Quarry Group (MQG) acquisition was completed on
19 November 2021. This included two quarries south-east of
Melbourne with 50 million tonnes of sand reserves, providing our
Melbourne concrete businesses with long-term, secure access to
natural sand in the competitive Victorian market.
During 2021, our Mawsons joint venture acquired the Milbrae
concrete and aggregate business. With 13 quarries and seven
concrete plants in the New South Wales Riverina region, Milbrae
offers procurement and operational synergies and access to
new markets. The transaction became effective on 1 July 2021
and was completed on 30 September 2021.
25
Independent Cement and Lime Pty Ltd
(50% ownership)
Mawson Group
(50% ownership)
A joint venture between Adbri and Barro Group, Independent
Cement and Lime (ICL) is our exclusive cement distributor in
Victoria and New South Wales, where it supplies cement and
cement blended products to industries and retailers.
Mawson Group (Mawsons) supplies aggregates and premixed
concrete to the construction industry. A joint venture between Adbri
and BA Mawson Pty Ltd, it has over 80 concrete and quarry assets
across New South Wales and Victoria.
ICL’s contribution to Adbri’s earnings rose by $1.9 million, a 13%
improvement on 2020. Despite interruptions from construction
industry restrictions, bulk volumes in Victoria were buoyant
and rose slightly in New South Wales, underpinned by strong
demand from the metropolitan and regional housing markets.
ICL’s total revenue increased 2%, and cost control and efficiency
investments saw EBIT margins rise accordingly.
High demand from the Victorian dwelling and infrastructure
construction sectors is expected to continue in 2022, while we
anticipate New South Wales volumes to decrease in 2022 with
the establishment of a competing import terminal.
Mawsons’ success continued in 2021, contributing $1.7 million
more to Group earnings than the previous year. This was due to
increased earnings from the Milbrae acquisition in the middle of the
year. High demand remained for quarry products as construction
accelerated across regional Victoria, with home builders taking
advantage of favourable land availability and pricing. Significant
rains stimulated agricultural economies, and HomeBuilder grants
further drove demand. The infrastructure and commercial sectors
were similarly positive, with road and rail projects rolling out
statewide. Along with the positive outlook for regional construction,
we expect the Milbrae acquisition to further strengthen Mawsons’
earnings in 2022.
Batesford Quarry
(50% ownership)
Aalborg Portland Malaysia Sdn. Bhd
(30% ownership)
An unincorporated joint venture between Adbri, E&P Partners and
Geelong Lime Pty Ltd, Batesford Quarry produces and distributes
limestone and quarry products in Victoria and New South Wales.
Aalborg Portland Malaysia (Aalborg) has been manufacturing
and distributing white cement to domestic and international
customers for more than a quarter of a century.
Farmers use limestone as a fertiliser and soil enhancer, so
favourable growing conditions in Victoria led to the strongest
year of agricultural lime sales to date, which increased earnings
by 119%, or $1.9 million, compared to 2020. We anticipate 2022
results will be similar due to steady demand for agricultural lime
and quarry products.
After a positive start to 2021 where earnings increased,
COVID had a negative impact when government shutdowns
closed the Malaysian plant for nearly two months. This
supply disruption resulted in a decline in earnings.
Sunstate Cement Ltd
(50% ownership)
Burrell Mining Services
(50% ownership)
Sunstate Cement (Sunstate) is a joint venture between Adbri
and Boral, supplying cement to the construction industry in
Queensland.
A joint venture between Adbri and Burrell Mining Products,
Burrell Mining Services (Burrell) produces secondary roof
support products for underground mines.
Sunstate’s sales volumes and profits increased 36% and 115%
respectively in 2021, leading to a $3.8 million uplift in its Group
earnings contribution. Strong demand across all South East
Queensland construction sectors, increased offtake by our
joint venture partner and provision of supplementary supply
to a wholesale competitor underpinned the strong result. The
investment in an advanced packaging plant has increased
sales in this market. With high demand for cement expected to
continue in 2022, the outlook is positive.
In 2021, some key customers faced operational changes
impacting sales volumes, and in Queensland delayed
mining projects led to flatter sales, with Burrell contributing
$0.2 million less to Group earnings than in 2020. The market
is likely to remain stable in 2022 and we will continue to work
to expand the product opportunities with new mines and
product applications.
Adbri 2021 Annual ReportIntroduction and overviewFinancial statementsSustainability reportOperational updates 26
Sustainability report
Our people deliver
for a better Australia
Contributing to a safe, healthy and
sustainable future for Australians, our
communities and the environment is
a fundamental part of Adbri’s culture.
Whether we are putting safety first or
developing lower carbon products,
supporting local businesses or hosting
community groups, our people are
Always Ready to make Australia a
better place.
Scope
Adbri Limited (the Company) reports on controlled
entities as held at year ended 31 December 2021.
Joint ventures are excluded unless stated otherwise.
Greenhouse gas emissions, alternative fuel data and
water usage is reported as at financial year 30 June 2021,
consistent with regulatory reporting requirements,
unless otherwise stated. All financial data is reported in
Australian dollars. References to ‘Adbri’, ‘the Company’,
‘we’ and ‘our’ are to Adbri Limited. Any restatements are
noted in the Report.
2727
Message from our
sustainability leaders
Operating a sustainable business is a fundamental part
of Adbri’s role as an industry leader. We believe in doing
business responsibly; keeping our people and communities safe;
meeting the needs of our customers; and creating long-term
value for our shareholders. This is essential for achieving Adbri’s
purpose of Building a Better Australia.
In 2021, we publicly announced our aspiration of net zero
emissions by 2050 and will launch our Net Zero Emissions (NZE)
Roadmap ahead of the next Annual General Meeting (AGM).
Our disclosures in this Report reflect Adbri’s commitment to
the Task Force on Climate-Related Financial Disclosures (TCFD)
recommendations. As a hard-to-abate industry, the challenges of
achieving net zero will require future investment in technology
and partnerships.
Despite ongoing challenges from the COVID pandemic, we
made progress towards our 2024 sustainability targets this
year. Since 2019, we recorded a 41% reduction in our total
injury frequency rate (TRIFR). Disappointingly, in 2021 our TRIFR
increased by 12%, however our lead indicators such as critical
control audits and visible leadership continued to improve.
We approach 2022 with a heightened focus on our safety
performance. Scope 1 and Scope 2 greenhouse gas (GHG)
emissions have reduced by 4% since 2019. We continued to
trial lower carbon product solutions and in our Birkenhead
operations use refuse derived fuel (RDF). During the year we
had no reportable environmental incidents. We responded to
community concerns relating to odour emissions at our Munster
operations and worked with the Department of Water and
Environmental Regulation (DWER) to gain approval to undertake
engineering works for an odour reduction trial. We look forward
to the trial occurring in 2022.
Our achievements this year relied on the passion and
commitment of Adbri’s workforce and we thank them for
contributing to our success.
Rebecca Irwin
Chief Sustainability &
People Officer
Nick Miller
Managing Director &
Chief Executive Officer
Adbri 2021 Annual ReportIntroduction and overviewOperational updatesFinancial statementsSustainability report 28
Our approach to sustainability
Adbri’s sustainability approach is built on strong
relationships with our people, customers, suppliers,
partners, shareholders and the communities where
we operate.
We aim for continuous, company-wide improvement along
the entire value chain. We identify areas with the most material
sustainability impact and focus our activities on these areas.
Sustainability topics across Adbri’s clinker, cement and concrete value chain
Raw material extraction
(inc. aggregate production)
Clinker production
& transport
Cement
production
Concrete production
Masonry production
– Workforce health, safety and wellbeing
– Workforce diversity and inclusion
– Employee development and engagement
– Climate response and decarbonisation
– Water management
– Energy management
– Circular economy and waste management
– Technology
– Environmental compliance and data management
– Noise, dust, odour and visual amenity mitigation
– Managing community expectations and social
licence to operate
– Sustainable procurement
– Workforce health, safety
and wellbeing
– Workforce diversity and inclusion
– Employee development and
engagement
– Climate response and
decarbonisation
– Water management
– Energy management
– Biodiversity management and
land rehabilitation
– Circular economy and waste
management
International import
of raw materials
Domestic sea freight of
manufactured product
Concrete use, end of life
& recyclability
– Circular economy and
waste management
Built environment
Transport & logistics
– Circular economy and
waste management
– Pricing integrity and
anti-trust compliance
– Sustainable products and
innovation
– Customer experience
– Workforce health, safety
and wellbeing
– Workforce diversity
and inclusion
– Employee development
and engagement
– Climate response and
decarbonisation
– Sustainable transport
Adbri processes
External processes
29
Sustainability topics across Adbri’s lime processing value chain
Raw material extraction
Lime production
– Workforce health, safety and wellbeing
– Workforce diversity and inclusion
– Employee development and engagement
– Climate response and decarbonisation
– Biodiversity management
– Water management
– Workforce health, safety and wellbeing
– Workforce diversity and inclusion
– Employee development and engagement
– Climate response and decarbonisation
– Water management
– Energy management
– Circular economy and waste management
– Technology
– Environmental compliance and data
management
– Noise, dust, odour, visual amenity mitigation
– Managing community expectations and
social licence to operate
– Sustainable procurement
Resource &
mineral processing
Agriculture
Transport & logistics
– Circular economy and waste management
– Pricing integrity and anti-trust compliance
– Sustainable products and innovation
– Customer experience
– Climate response and
decarbonisation
– Sustainable transport
Adbri processes
External processes
Adbri 2021 Annual ReportIntroduction and overviewFinancial statementsOperational updatesSustainability report 30
Our approach to sustainability continued
Governance
Risk management
Adbri’s Board is responsible for reviewing and approving
management strategy, which incorporates sustainability
objectives to mitigate material sustainability risks and identifies
sustainability opportunities. Board members apply the highest
governance standards to monitoring how this strategy is
implemented, including compliance with Modern Slavery, TCFD
and other international standards as appropriate. Where possible,
we are incorporating sustainability criteria into decisions
relating to change management, acquisitions and divestments.
The Board regularly reviews Adbri’s sustainability performance
and approves the content in this Report.
The Board’s Safety, Health, Environment and Sustainability
(SHES) Committee monitors and oversees the effectiveness
of sustainability practices, performance and continuous
improvement. This assessment may involve consulting with the
Board’s Audit, Risk and Compliance Committee and People and
Culture Committee. The Board’s performance and effectiveness
and that of each Committee, is reviewed every year and
improvements are made where required.
The Board delegates responsibility for day-to-day oversight
of managing material risks to Adbri’s Managing Director &
CEO. Sustainability strategy is led by our Chief Sustainability
& People Officer. Our sustainability performance
influences executive remuneration, which is linked to
sustainability-related targets (see the Remuneration Report).
For more information on Adbri’s Board committees, including
composition, skills, independence and continuing education (see
the Directors’ Report). Their terms of reference are available at
www.adbri.com.au/who-we-are/corporate-governance/.
Adbri’s approach to risk management is guided by our Group
risk appetite. It is underpinned by sound risk management
principles and the standards of behaviour outlined in Adbri’s
Code of Conduct. Our Risk Management Procedure outlines
the process for operationally monitoring and managing risk
plans, controls and performance and for reporting on them
to the Executive Leadership Team and the Audit, Risk and
Compliance Committee. Our risk register includes climate
change and environmental, social and governance (ESG) issues
as material risks.
Adbri’s internal audit team regularly audits and inspects sites
to evaluate risk management activities and performance, and
identifies any control deficiencies. They report the results to the
Board for information and action. The reports include remedial
plans and audit team members follow up on implementation,
supported by an external audit program.
All Adbri’s managers are committed to sustainability and actively
manage risk. They are encouraged, supported and guided by:
– a Sustainability Framework that underpins Adbri’s sustainability
performance, including five-year targets
– an integrated health, safety and environment management
system (HSEMS), which provides standards and a framework
for achieving objectives
– input and advice from the Executive Leadership Team
– personal key performance indicators based on key SHES areas
– Adbri’s Code of Conduct; Diversity and Inclusion Policy;
Health, Safety and Environmental Policy; Anti-bribery and
Corruption Policy; and Speak Up (whistleblower) Policy.
As a responsible business, Adbri
has sound governance practices
and policies that protect our
market reputation by mitigating
ethical and financial risks and
ensuring we comply with relevant
laws and regulations.
Image caption
31
Our stakeholders
Understanding the views and growing expectations of Adbri’s
stakeholders by regularly engaging with them is essential so we
can respond effectively and keep meeting their changing needs.
Our approach is open and inclusive.
Based on regular feedback from our key internal stakeholders,
the table shows the topics of interest raised by our stakeholder
groups and how we engaged with them in 2021. In 2022, we
plan to engage Adbri’s external stakeholders as part of our
materiality assessment.
Who
Topics of interest
How we engage
Primary stakeholders
Communities
Customers
Government (local, state,
federal) and regulators
Joint venture partners
Shareholders, financiers
and insurers
Suppliers
Workforce
Secondary stakeholders
Education/academia/
research bodies
Industry groups
Media
Site tours, feedback mechanisms, sponsorships
and partnerships, fact sheets, Community Liaison
Groups (CLGs), websites:
www.cockburncementcommunity.com.au
www.adelaidebrightoncommunity.com.au
www.angastoncommunity.com.au
www.morgancementcommunity.com.au
Site visits, market tenders, meetings, phone calls,
emails, website, online orders, product
information, technical support, feedback
mechanisms
Meetings, website, publications,
phone calls, emails
Meetings, site visits, phone calls, emails
Annual Reports, half year updates, investor
briefings, market announcements,
Annual General Meetings, conferences,
phone calls, emails
– Health, safety and wellbeing
– Indigenous rights
– Investment in community
– Local employment
– Managing environmental impacts
– Opportunities/challenges
– Product availability
– Economic vitality
– Compliance with regulations
– Lower carbon products
– COVID-safe deliveries
– Regulatory and legal compliance
– Taxes
– Local employment
– Managing environmental impacts
– Contributions to communities
– Health, safety and wellbeing
– Regulatory and legal compliance
– Collaboration opportunities
– Economic vitality
– Share price performance and dividends
– Health and safety performance
– Compliance with regulations
– Impact of a low carbon economy
– Acquisitions and divestments
– Corporate governance
– Ethical behaviour
– Sustainable finance
– Options for capital raising/debt
– Climate change
– Strategy and outlook
– Contract and payment terms and conditions
– Business and collaboration opportunities
– Economic vitality
– Responsible practices and alignment with Modern Slavery legislation
Contractual arrangements, market tenders and
other out-to-market opportunities, meetings,
phone calls, emails, toolbox meetings, reviews
– Health, safety and wellbeing
– Career advancement and wage growth
– Diversity, inclusion and employee rights
– Organisational structure and strategy
– Economic vitality
– Climate change
– Strategy and outlook
– Lower carbon product solutions
– Low carbon future
– Health, safety and wellbeing
– Low carbon transition
– Economic vitality
– Acquisitions and divestments
– Impact of low carbon economy
– Corporate governance
Intranet, newsletters, MD & CEO briefings, toolbox
meetings, surveys, videos, text messages,
team meetings and town halls, internal forums,
collaboration tool
Partnerships
Participating in working groups
Memberships, round table discussions,
phone calls, emails
Media releases, journalist interviews, phone calls,
emails
Non-government
organisations (NGOs)
– Managing environmental impacts
– Impact of low carbon economy
Annual General Meetings, phone calls, emails,
feedback mechanisms
Adbri 2021 Annual ReportIntroduction and overviewFinancial statementsOperational updatesSustainability report 32
Our approach to sustainability continued
Materiality
Focusing on what matters most
This year Adbri undertook a materiality assessment to determine
the sustainability topics that are most important to our key
stakeholders and our business. Based on Account Ability’s
five-part Materiality Test, the process involved an independent
assessment of relevant internal policies, risk and strategy
documents, media coverage, peer and industry publications
and internal stakeholder interviews. Our Executive Leadership
Team prioritised and validated the topics, and the Adbri Board
endorsed the outcomes.
To ensure we are listening to and responding to their needs,
we plan to engage external stakeholders every two years in this
process, starting in 2022.
The topics inform the scope and content of this Sustainability
Report.
Materiality matrix*
– Energy management
– Meeting growing stakeholder
expectations
– Waste-derived resources
& circular economy
– Business conduct & ethics
– Climate response & decarbonisation
– Customer experience
– Economic vitality
– Managing community expectations &
social licence to operate
– Pricing integrity & anti-trust compliance
– Workforce diversity & inclusion
– Workforce health, safety & wellbeing
– Cyber security
– Enterprise bargaining
– Executive remuneration &
succession planning
– Land utilisation
– Supply chain logistics
– Sustainable procurement
– Sustainable transport
– Employee development &
engagement
– Environmental compliance
& data management
– Sustainable products & innovation
– Biodiversity
– Sustainability branding
– Sustainability due diligence
– Water management
Influence on Adbri’s current & future values
* Topics within each arc are arranged in alphabetical order and are of equivalent priority.
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33
We progressively
undertake rehabilitation
works at our sites to
improve biodiversity and
visual amenity.
Materiality matrix*
Adbri 2021 Annual ReportIntroduction and overviewFinancial statementsOperational updatesSustainability report 34
Our approach to sustainability continued
Our Sustainability Framework
Adbri’s Sustainability Framework identifies two primary goals:
engaged people and communities; and a sustainable and
responsible business.
To achieve these goals, we have identified five focus areas with
associated challenges and opportunities. These guide Adbri’s
sustainability decision-making and provide a holistic, strategic
framework for our activities.
Stakeholders expect us to operate responsibly, so we strengthen
Adbri’s social licence by prioritising our efforts. To assess our
performance, we have set five-year targets that are due for
completion in 2024, using a baseline of 2019 metrics.
Goal
Focus area
5-year targets
Progress
(against 2019 baseline)
SDG alignment and commitments
2021 material topics
Challenges
Opportunities
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s
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Healthy, safe
and engaged
people
10% reduction in TRIFR
every year
2021: 6.3 (12% increase from 2020)
Overall: 41% reduction against baseline
Innovate Reconciliation
Action Plan (RAP) approved
2021: Delivered Reflect RAP
commitments, started planning for
Innovate RAP
30% female
Non-executive Directors
2021: 38%
3
8
Good health and wellbeing
Decent work and
economic growth
Enhance Adbri’s diverse and inclusive culture.
Protect our people from harm through our
commitment to ‘Work Safe, Home Safe’.
Promote mental health and wellbeing.
20% female employees
2021: 16%
Respect and support the rights of our employees.
Overall: 1% increase against baseline
Digital platform established
to improve communications
2021: Updated platform implemented,
averaging 500 active users per month
over the first five months
– Workforce health, safety and wellbeing
– Visible safety leadership during a global
– Expand leading safety indicators
– Diversity and inclusion
pandemic with restricted travel
– Employee development and engagement
– Reduce harm to our people (mental and
– Virtual connectivity
– Establish Adbri brand identity
– Business conduct and ethics
physical health)
– Increase diversity and inclusivity, beyond
gender, in our operations
Positive
contribution to
communities
Reduce
adverse
environmental
impacts
Responding to
climate change
Lower carbon
products
Maintain regular external
communications
Community investment
aligned with community
engagement strategy
Ongoing communication activities
8
Decent work and
economic growth
2021: Investment aligned, with
$264k invested
50% kiln fuel to be sourced
from alternative fuel in
South Australia
2021: 25% (same as 2020)
Overall: 2% increase against baseline
25% reduction in process
waste to landfill
2021: 1% increase from 2020
Overall: 12% decrease against baseline
Through maintaining economic vitality and
sustainable growth, make a positive contribution
to the communities where we operate.
Mitigate the risk of modern slavery in our
supply chain.
Measure the economic value Adbri generates.
9
12
Industry, innovation
and infrastructure
Responsible consumption
and production
Introduce efficiencies into our processes to
reduce our impact on the environment from
production and our final products.
Progressively rehabilitate land disturbed by
our operations.
7% GHG emissions reduction
2021: 2% reduction
13
Climate action
Overall: 4% reduction against baseline
24% supplementary
cementitious materials
as a proportion of final
cementitious product1
2021: 20% (1% decrease from 2020)
Overall: 1% decrease against baseline
Take action to reduce GHG emissions for a low
carbon future by improving our production
processes, building resilience, setting ambitious
targets, investing in emerging technologies and
ensuring our stakeholders are engaged.
9
12
Industry, innovation
and infrastructure
Responsible consumption
and production
Develop and invest in product quality and
research low carbon technologies to build
sustainable and resilient products and
manufacturing processes.
Collaborate to develop technology solutions.
Promote sustainable choices for consumers.
– Managing community expectations and social
– Engage with our local communities
– Measure our contribution to communities
– Meet demands caused by increasing
where we operate
stakeholder expectations
– Improve customer experience platform
– Meeting growing stakeholder expectations
– Engage Indigenous suppliers
– Eliminate modern slavery risks from supply chains
licence to operate
– Customer experience
– Indigenous engagement
– Sustainable procurement
– Build local prosperity in towns and cities
where we operate
– Engage with Aboriginal and Torres Strait
Islander communities
– Circular economy and waste resources
– Emissions-intensive core products
– Further alternative fuel use to reduce waste
– Energy management
– Waste (excess concrete, packaging, using
to landfill and reduce our reliance on fossil fuels
– Environmental compliance and data
management
recycled materials)
– Improve environmental risk management
– Plant design not all to current best practice
through technology
– Managing emissions to air
– Water consumption in production and site
management practices
– Develop beneficial uses for waste
generated onsite
– Responsible management of buffer land
– Climate response and decarbonisation
– Hard-to-abate cement and lime production
– Implement our Net Zero Emissions Roadmap
– Energy management
processes which will require breakthrough
(due for release in 2022); Improve operational
technologies that are not yet commercially
energy efficiency through plant upgrades,
available at scale to fully decarbonise
– Sustainable products and innovation
– Regulatory impediments to replacing Portland
– Grow a portfolio of lower carbon/carbon neutral
– Lack of scalable demand for lower carbon
– Participate in partnerships and research
products for the built environment
clinker cement
products today
increase uptake of alternative fuels, fuel
switching to use lower emissions-intensity
supply options
– Partnerships and collaboration with
industry and other businesses to develop
decarbonisation solutions
to develop technologies to produce
construction materials
– Produce cement with up to 20% limestone content
– Provide environmental product disclosures (EPDs)
to inform more sustainable consumer choices
– Acquire businesses providing sustainable
products and solutions
1. In 2021, we replaced our target of 20% increase in the tonnage of raw materials used with this target (see page 54 for further details).
35
The Framework is supported by Adbri’s four company strategic
pillars of safety, customer focus, inclusivity and sustainable
growth. Our focus areas within the Framework align with the
global objectives of the United Nations’ Sustainable Development
Goals (SDGs), as indicated by the SDGs numbering within the
Framework. This Report includes examples of how our business
and our people support these goals.
In 2021 we made progress against our five-year targets, with the
exception of TRIFR which did not achieve a 10% reduction and
our waste target which increased by 1%. In addition, our new
supplementary cementitious material (SCMs) target saw a minor
decrease of 1% against 2020.
Goal
Focus area
5-year targets
SDG alignment and commitments
2021 material topics
Challenges
Opportunities
– Workforce health, safety and wellbeing
– Diversity and inclusion
– Employee development and engagement
– Business conduct and ethics
– Visible safety leadership during a global
pandemic with restricted travel
– Reduce harm to our people (mental and
physical health)
– Increase diversity and inclusivity, beyond
gender, in our operations
– Expand leading safety indicators
– Virtual connectivity
– Establish Adbri brand identity
– Managing community expectations and social
licence to operate
– Customer experience
– Meeting growing stakeholder expectations
– Indigenous engagement
– Sustainable procurement
– Engage with our local communities
– Meet demands caused by increasing
stakeholder expectations
– Engage Indigenous suppliers
– Measure our contribution to communities
where we operate
– Improve customer experience platform
– Eliminate modern slavery risks from supply chains
– Build local prosperity in towns and cities
where we operate
– Engage with Aboriginal and Torres Strait
Islander communities
– Circular economy and waste resources
– Energy management
– Environmental compliance and data
management
– Emissions-intensive core products
– Waste (excess concrete, packaging, using
recycled materials)
– Plant design not all to current best practice
– Managing emissions to air
– Water consumption in production and site
management practices
– Further alternative fuel use to reduce waste
to landfill and reduce our reliance on fossil fuels
– Improve environmental risk management
through technology
– Develop beneficial uses for waste
generated onsite
– Responsible management of buffer land
7% GHG emissions reduction
2021: 2% reduction
Overall: 4% reduction against baseline
13
Climate action
– Climate response and decarbonisation
– Energy management
– Hard-to-abate cement and lime production
processes which will require breakthrough
technologies that are not yet commercially
available at scale to fully decarbonise
– Implement our Net Zero Emissions Roadmap
(due for release in 2022); Improve operational
energy efficiency through plant upgrades,
increase uptake of alternative fuels, fuel
switching to use lower emissions-intensity
supply options
– Partnerships and collaboration with
industry and other businesses to develop
decarbonisation solutions
– Sustainable products and innovation
– Regulatory impediments to replacing Portland
– Grow a portfolio of lower carbon/carbon neutral
clinker cement
– Lack of scalable demand for lower carbon
products today
products for the built environment
– Participate in partnerships and research
to develop technologies to produce
construction materials
– Produce cement with up to 20% limestone content
– Provide environmental product disclosures (EPDs)
to inform more sustainable consumer choices
– Acquire businesses providing sustainable
products and solutions
Progress
(against 2019 baseline)
10% reduction in TRIFR
2021: 6.3 (12% increase from 2020)
every year
Overall: 41% reduction against baseline
Innovate Reconciliation
2021: Delivered Reflect RAP
Action Plan (RAP) approved
commitments, started planning for
Healthy, safe
and engaged
people
30% female
Non-executive Directors
Innovate RAP
2021: 38%
Good health and wellbeing
3
8
Decent work and
economic growth
Enhance Adbri’s diverse and inclusive culture.
Protect our people from harm through our
commitment to ‘Work Safe, Home Safe’.
Promote mental health and wellbeing.
20% female employees
2021: 16%
Respect and support the rights of our employees.
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s
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S
Positive
contribution to
communities
Reduce
adverse
environmental
impacts
Responding to
climate change
Lower carbon
products
Overall: 1% increase against baseline
Digital platform established
2021: Updated platform implemented,
to improve communications
averaging 500 active users per month
over the first five months
Maintain regular external
Ongoing communication activities
communications
Community investment
aligned with community
engagement strategy
2021: Investment aligned, with
$264k invested
50% kiln fuel to be sourced
2021: 25% (same as 2020)
from alternative fuel in
South Australia
Overall: 2% increase against baseline
25% reduction in process
2021: 1% increase from 2020
waste to landfill
Overall: 12% decrease against baseline
24% supplementary
cementitious materials
as a proportion of final
cementitious product1
2021: 20% (1% decrease from 2020)
Overall: 1% decrease against baseline
8
Decent work and
economic growth
Through maintaining economic vitality and
sustainable growth, make a positive contribution
to the communities where we operate.
Mitigate the risk of modern slavery in our
supply chain.
Measure the economic value Adbri generates.
9
12
Industry, innovation
and infrastructure
Responsible consumption
and production
Introduce efficiencies into our processes to
reduce our impact on the environment from
production and our final products.
Progressively rehabilitate land disturbed by
our operations.
Take action to reduce GHG emissions for a low
carbon future by improving our production
processes, building resilience, setting ambitious
targets, investing in emerging technologies and
ensuring our stakeholders are engaged.
9
12
Industry, innovation
and infrastructure
Responsible consumption
and production
Develop and invest in product quality and
research low carbon technologies to build
sustainable and resilient products and
manufacturing processes.
Collaborate to develop technology solutions.
Promote sustainable choices for consumers.
Adbri 2021 Annual ReportIntroduction and overviewFinancial statementsOperational updatesSustainability report
36
Economic vitality
and technology solutions
Adbri’s pillar of sustainable growth guides our
investment in Australia’s people, communities
and economy. Our products help build the homes
and infrastructure that are essential for a thriving
society. Protecting Adbri’s economic vitality
by being a low‑cost, lower carbon, high‑quality
Australian producer is integral to delivering on
our sustainability strategy. We invest in research
and partnerships to support our future operational
plans, while developing sustainable products that
meet consumer demands.
Our management approach
We operate our assets efficiently and responsibly using a
risk-based approach. Through organic growth, acquisitions, joint
ventures and greenfield projects, Adbri is pursuing an agenda
of sustainable growth and transformation. The Board regularly
reviews capital needs to preserve Adbri’s ability to deliver stable
shareholder returns while remaining agile enough to respond to
investment opportunities.
Adbri’s business and improvement and growth strategy is based
on five key areas for 2021 and beyond:
– operational efficiency
– lime business transformation
– vertical integration
– actively manage land holdings
– enhancing our capabilities in the infrastructure sector.
For every $1 Adbri spends, we
generate another $1.30 for the
Australian economy.
2021 achievements
Adbri delivered a reported NPAT attributable to members of
$116.7 million in 2021, an increase of 25% on the prior year. Our
profit performance was driven by strong volume growth across
all product lines, excluding lime. For full details about Adbri’s
financial performance, see our 2021 Financial Statements.
Our economic performance will allow Adbri to reinvest in the
business through capital investment upgrades, innovation,
capacity expansion and major capital projects such as the
Kwinana Upgrade.
Strategic investments supported Adbri’s competitive advantage
of being a vertically integrated business with diverse products
and markets and an Australia-wide footprint. In the long term,
these are expected to lead to increased operational and
financial performance and deliver a return on capital invested
to shareholders.
To ensure we remain competitive, our company-wide efficiency
and continuous improvement programs seek out opportunities
for short and long-term cost savings. Our cost reduction program
delivered $26.1 million in gross cost savings.
The Managing Director & CEO’s review and operational reports in
our 2021 Annual Report describe these activities in detail.
Throughout the year, Adbri contributed to Australia’s economic
success in multiple ways, with national benefits. In 2021, we used
a third party to model our economic impact on Australia for the
period of 1 July 2020 – 30 June 2021, which included:
– $3.2 billion – Adbri’s gross value add to the Australian
economy in 2020/21
– $626.4 million – Our contribution to the South Australian
economy (direct and indirect)
– 11,520 – Number of full-time equivalent positions we indirectly
supported across Australia.
For further details about Adbri’s financial performance and
contribution to the Australian economy, see our 2021 Financial
Statements and Tax Transparency Report.
Employee numbers
1,600
1,600
1,280
1,280
7
3
5
,
1
8
6
5
,
1
0
0
5
,
1
0
0
4
,
1
8
0
4
,
1
960
960
640
640
320
320
0
0
NPAT attributable
to members
$m
200
150
100
50
0
2 017
2 018
2 019
2 0 2 0
2 0 21
2 0 2 0
2 0 21
2 019
2 018
2 017
Reported
Underlying
Healthy, safe and
engaged people
Adbri’s vision of Work Safe, Home Safe drives
our business to improve. Our safety first culture,
effective management system and promotion of
healthy lifestyles have delivered improvements
in our safety performance and work environment
since 2019. Developing a diverse workforce and
inclusive culture supports high performance
by providing a positive organisational culture
where everyone can thrive. We seek to create
workplaces that reflect the diversity of our
customers and communities and welcome people
from all backgrounds.
Engaged people and a strong
workplace culture underpin
Adbri’s four strategic pillars and
our company’s success.
37
Our management approach
Our commitment to workforce health, safety and wellbeing is
supported by Adbri’s HSEMS. To mitigate safety and wellbeing
risks, we identify critical risk controls and conduct annual safety
audits, as well as offering health assessments and lifestyle
management programs to employees.
Adbri’s health, safety and environment (HSE) software system,
Cintellate, collects and analyses data so we can monitor
and respond to real time HSE trends and risk management
obligations. Increasingly, we focus on lead indicators such as
hazard reports and near misses so we can improve our injury
prevention programs.
Our 2020–25 Diversity and Inclusion Strategy supports our
goals to increase female representation and create a more
inclusive environment. We continue to challenge ourselves to find
innovative ways to progress our targets.
In 2022, to progress these objectives we will submit an Innovate
RAP to Reconciliation Australia. This RAP will set targets for
Aboriginal and Torres Strait Islander peoples employment.
Metrics
Fatality
Total recordable injury frequency rate (TRIFR) OFSC1 methodology2
TRIFR (Employee) OFSC1 methodology2
TRIFR (Contractor) OFSC1 methodology2
Lost time injury frequency rate2
High potential incidents
High potential incident frequency rate
HSE near misses
HSE hazards
Critical control verifications in field
Critical control audits
Visible leadership reviews/walks
Female Non-executive Directors %
Female employees %
1. Office of the Federal Safety Commissioner.
2. Measured as per million person-hours worked.
2021
2020
2019
0
6.3
6.8
6.2
2.3
50
9.6
529
3,199
1,210
87
611
38
16
0
5.6
7.7
3.5
1.7
54
10.9
486
2,922
699
109
218
50
15
0
10.6
14.6
5.1
2.5
37
7.4
874
3,211
–
48
217
43
15
Adbri 2021 Annual ReportIntroduction and overviewFinancial statementsOperational updatesSustainability report 38
Healthy, safe and engaged people continued
2021 achievements
Protected our people
Thanks to Adbri’s Safety Step Change Program (see case study)
and the efforts of all our workforce, we continue to achieve
good health and safety performance and have made significant
strides in critical risk management, visible leadership, safe
transport and wellbeing. Despite pandemic restrictions, the
program remained a priority, achieving a 41% reduction in TRIFR
since 2019 (pre-pandemic). However in 2021, our TRIFR was 6.3,
up 12% on 2020 and as such, we did not meet our target. We are
resolved to continue to improve our safety performance.
We enhanced our reporting efficiency by using Adbri’s mobile
application, ROAM, in the field, enabling a 9% increase in hazard
and near miss reporting. Heavy vehicle incidents are a key
risk area and more than 50% of drivers completed safe driving
programs, including rollover prevention training.
We continued to support the wellbeing of our people, including
providing an ongoing Employee Assistance Program. During the
year we held site-based events to encourage open discussion
of mental health topics, as well as holding a webinar with an
ambassador from R U OK Day?
Supported fair labour practices
Adbri continues to maintain an inclusive relationship with
our people and unions, including a positive experience with
Enterprise Agreements (EAs). During 2021, 20 Adbri Enterprise
Agreements were successfully negotiated. At the end of the year,
59% of Adbri workers were employed under EAs.
Improved attraction
The Australian skills shortage is a challenge faced by many
businesses. To mitigate this risk, we aim to be a candidate’s
preferred employer. To attract and retain the best people, we
want to be known for developing our employees, maintaining a
positive organisational culture and being a fair employer.
During 2021, we established an in-house recruiting team to
increase our external market presence and define Adbri’s
employee value proposition, with a primary focus on attraction
and positioning Adbri as an employer of choice in a competitive
labour market.
Strengthened diversity and inclusion
One of our people aspirations is that the next generation of
talent wants to work at Adbri because we are known for offering
an inclusive workplace culture that thrives on diversity. We are
delivering this through our 2020–25 Diversity and Inclusion
Strategy, which was designed with feedback from our people on
what is working well and where we can improve.
In 2021, Adbri made positive steps towards our 2025 target of
20% female representation by employing 85 new female hires,
representing 24% of all hires in the period. For more information,
refer to the Diversity Report in the 2021 Adbri Corporate
Governance Statement.
www.adbri.com.au/who-we-are/corporate-governance/.
Expanded employee engagement
The need for more frequent engagement was a key outcome of
our last employee survey, so we implemented several initiatives
in 2021.
Designed to acknowledge outstanding contributions to our four
strategic pillars, the inaugural Adbri’s Champion Awards attracted
137 nominations. Between them, the winners helped Adbri to:
increase onsite pedestrian safety; diversify our quarry product
range; welcome an autistic community member to our site; and
improve our debtor days.
Providing new ways for people to communicate is important
for fostering collaboration and increasing engagement. In
August, we rolled out the social networking app Yammer and are
averaging around 500 active users each month. In 2022, we will
expand its usage to non-computer user employees.
There was no employee engagement survey in 2021 as we
reviewed the current tool. The survey will recommence in early
2022, using a new employee experience platform that links
insights to actions and includes practical tools for building
employee commitment and driving retention.
Invested in learning and development
To support Adbri’s sustainable growth pillar, we rolled out several
people development programs, including a cloud-based learning
management system, iLearn@Adbri. This platform standardises
learning across the business and tracks employee progress to
improve outcomes.
Our two-year graduate program provides Adbri with a pipeline
of future leaders and technical experts, and participants with
invaluable practical experience. In February, we welcomed
four (50% female) more graduates, all with an engineering
background. Two current graduates will transfer from the
program to permanent roles with Adbri next year.
Collaborated on sustainable workplace initiatives
The 360 members of Adbri’s Green Team, our voluntary
employee sustainability action group, achieved the following
this year:
– coordinating Adbri’s first Group-wide celebration of Planet
Ark’s National Tree Day in June, starting with a joint planting
with Adelaide High School students of 1,350 native trees at our
Penrice quarry site
– asking each Adbri site to nominate one recycling initiative
for National Recycling Week, which provided some great
local ideas and highlighted how operations can learn from
each other
– organising and helping to deliver climate change online
learning sessions, which were attended by more than
160 people.
To keep the broader workforce informed, Adbri launched a staff
environmental newsletter.
Lost time injury frequency rate by divisions
Total lost time injuries per million hours worked
Gender diversity
6
4
2
0
2017
2018
2019
2020
2021
Cement and
Lime
Concrete and
Aggregates
Masonry
Total
Total reportable injury frequency rate by divisions
Total recorded injuries per million hours worked
45
40
35
30
25
20
15
10
5
0
2017
2018
2019
2020
2021
39
Female
16%
Male
84%
62%
38%
71%
29%
76%
24%
Total workforce
(Male)
Total workforce
(Female)
Board
(Male)
Board
(Female)
Senior executives
(Male)
Senior executives
(Female)
Cement and
Lime
Concrete and
Aggregates
Masonry
Total
Senior management
(Male)
Senior management
(Female)
Employment by geography
South Australia
Victoria
32%
13%
New South Wales
Northern Territory
21%
2%
Queensland
Tasmania
17%
1%
Western Australia
14%
1,500 Total
employees
in 2021
Adbri 2021 Annual ReportIntroduction and overviewFinancial statementsOperational updatesSustainability report
40
Healthy, safe and engaged people continued
Case study
Strengthening our COVID response
When planning Adbri’s response to the Delta variant in 2021, and
Omicron in the latter part of 2021, we built on our 2020 crisis
management and business continuity experience. Our primary
goal remains protecting our people’s physical and mental health
while maintaining supply to customers.
As well as remote working, site protection, toolbox talks and
control room duplication measures introduced in 2020, we
deployed a Rapid Antigen Testing program as a successful
screening control, we strengthened individual support by
introducing COVID in 2021 supplementary pay, isolation leave
and vaccination leave, and provided dining vouchers for staff
impacted by extended lockdowns.
By aligning with government guidelines, including compliance
with vaccination mandates, we are not aware of any employee
contracting COVID in 2021 where an Adbri site was the source
of transmission.
With COVID predicted to become endemic, we began exploring
opportunities to keep everyone safe, including considering
compulsory vaccination as a condition of workplace entry for
employees, contractors and suppliers who are not medically
exempt. An employee survey indicated mixed views on
mandating, with vaccination rates across Adbri consistent with
community vaccination rates. In 2022, the Group will continue to
adopt a risk-based approach to managing COVID based onsite
and role requirements.
Our primary goal
is to protect our
people’s physical and
mental health while
maintaining supply
to customers.
Rapid antigen tests are used in high
risk areas of our operations to reduce
transmission of the COVID virus
Case study
Keeping our people safe
In two years, Adbri has inducted over 3,000 people in a Safety
Step Change program with the aim to reduce the potential for
fatality or serious harm to our people. A key element is the Critical
Risk and Visible Leadership program. Mandatory infield critical
risk controls minimise or eliminate high potential risks, combined
with expected behaviours for Adbri’s employees, contractors and
visitors to keep each other safe.
To evaluate our safety performance we measure more than
30 lead and lag indicators on a monthly basis, including visible
leadership, critical risk control verifications, high potential
near-miss incidents, safety communications, and ensure learnings
from critical employee reviews are shared across the Group.
In 2021, the Safety Step Change program won the South
Australian Cement, Concrete and Aggregates Australia (CCAA)
Health and Safety Innovation Award and the South Australian
Premier’s Award in Energy and Mining for Health and Safety in
the Resources Sector. The Cockburn Cement Kwinana team won
the Health and Safety Innovation Award at the Western Australia
CCAA awards for their mobile plant alert system.
41
3,000+
people inducted through Adbri’s
Safety Step Change program
41%
reduction in TRIFR since 2019
Steven Marshall, Premier of South Australia, with
Adbri’s Group Manager – Health, Safety & Environment,
Kellie Collins at the 2021 Premier’s Awards
Adbri 2021 Annual ReportIntroduction and overviewFinancial statementsOperational updatesSustainability report 42
Positive contribution to
communities
In 2022, Adbri will celebrate 140 years of being
part of Australian communities. Being a socially
responsible company requires us to manage
community and government expectations actively
and effectively. Through continuous engagement,
we aim to understand their aspirations and concerns,
provide timely and appropriate responses, and invest
in community projects that matter.
Responding to our stakeholders’
concerns and making
meaningful contributions to our
communities helps to deliver on
our commitment to be a socially
responsible company.
Our management approach
We engage with our neighbours in many ways, including
community websites, providing news and information, and
holding group and one-on-one meetings. We analyse the
data from neighbourhood feedback hotlines to identify and
map operational areas for improvement. Local community
engagement plans guide activities at our Birkenhead and
Munster sites. The plans are reviewed every year and updated in
response to community feedback.
Our partnerships, sponsorships, in-kind support and donations
help schools, sporting clubs, care agencies and community
services to improve local people’s quality of life. We contribute
to regional development by supporting and facilitating programs
that link our industry with local schools and universities.
Buying goods from regional suppliers and employing local
people are also important as a direct demonstration of our
community commitment. We apply a sustainable procurement
approach to supplier sourcing policies and practices so we can
assess the impact of our choices across the supply chain.
Ultimately, our approach is to address any concerns early, be a
valued regional employer and purchaser, and make meaningful
contributions to our communities.
Community investment spend by focus area
Education
45%
Community and
environment
27%
Health and wellbeing
Industry
20%
8%
Community investment
2021
2020
2019
$246,161
$203,204
$263,221
43
Yira Yarkiny (‘Standing Tall’) is one supplier that applied
successfully following a formal process based on competitive
pricing and qualitative criteria such as compliance. A 100%
Aboriginal owned and operated company in Western Australia,
Yira Yarkiny was appointed in May to supply Adbri’s on-demand
requirements for static security guards at our Munster and
Kwinana sites.
To improve our people’s cultural awareness at work and in
the community, we invested in additional training during
NAIDOC week.
Embedded modern slavery commitments
Adbri is committed to helping our regional small and medium
business partners become responsible employers so they can
positively impact their communities. Strengthening their key
governance areas also mitigates supply chain risks for Adbri.
With the Modern Slavery Act 2018 increasing expectations and
obligations around corporate behaviour, we began consulting
with the majority of our joint venture partners in 2021. We aimed
to raise awareness, outline our approach, and discuss how we
can work together to meet these commitments.
We also extended our modern slavery training to include
operational employees, integrated it into the induction program
for new employees, and provided regular employee updates
about key activities. We want to ensure everyone at Adbri
understands what modern slavery is and feels empowered
to report breaches. Our commitments are detailed in Adbri’s
2020 Modern Slavery Statement
www.adbri.com.au/sustainability/sustainable-future/.
Enhanced customer experience measurement
Outstanding service is integral to Adbri’s brand promise.
We actively identify and manage global and national supply
chain risks, tailoring our operations to changing circumstances.
To ensure Adbri’s high-quality customer experience
keeps improving, we invested in a major engagement and
satisfaction measurement program with robust tools and
performance metrics.
2021 achievements
Engaged frequently with our communities
To provide our local communities with easy-to-access
information and community engagement platforms, Adbri
launched new community websites in 2021: Adelaide Brighton
Cement, Cockburn Cement, Angaston and Morgan Cement. All
four contain information about our operations and environmental
performance, invite feedback and allow users to subscribe to
regular electronic mail-out updates.
Representing six stakeholder groups, the Birkenhead
Community Liaison Group (CLG) has been an important two-way
communication channel for a decade. During 2021, it held five
virtual and in-person meetings, with a focus on alternative fuels
and raw materials, Birkenhead’s Environmental Improvement
Plan, and day-to-day operational updates.
Munster in Western Australia is a key operational site for Adbri’s
cement and lime businesses. During 2021, we engaged with
the local community and key stakeholders by providing regular
updates on key projects for Munster, including removing the
redundant clinker kiln chimney stacks to improve visual amenity,
and the future consolidation of the cement milling manufacturing
to Kwinana. For further details on our Munster operation refer to
page 47.
The Munster and Kwinana sites partnered with the Kwinana
Industries Council to deliver a range of educational programs
to students, which included educational operational site tours
throughout the year for over 100 local high school students.
Progressed our reconciliation journey
Engaging with Aboriginal and Torres Strait Islander peoples is
an important part of our approach to diversity and inclusion.
In 2020, we released Adbri’s Reflect Reconciliation Action Plan
(RAP) which focuses on building opportunities for Aboriginal and
Torres Strait Islander communities in employment, education,
empowerment and economic development. Reconciliation
Australia extended the RAP deadline by six months in 2021 so
we could complete actions that were delayed by pandemic
restrictions. Our RAP is available at
www.adbri.com.au/sustainability/people/.
Adbri continued to support Aboriginal and Torres Strait Islander
students through a scholarship at St Peter’s College in Adelaide
and by contributing to the Aurora Education Foundation’s
culturally immersive High School Program, as well as supporting
an Indigenous program in a local primary school in Western
Australia. Adbri also donated to Curtin University in Western
Australia to support the five-year Moorditj Yorga Scholarship.
The scholarship helps First Nations women to enter and succeed
at the university so they can return to their communities as strong
leaders and role models.
As part of our Indigenous procurement strategy and
commitment to economic development, we established a panel
of Aboriginal and Torres Strait Islander suppliers during 2021.
This aligned with Adbri’s ‘buy local’ strategy and our RAP.
Adbri 2021 Annual ReportIntroduction and overviewFinancial statementsOperational updatesSustainability report 44
Positive contribution to communities continued
Case study
Supporting future scientists and engineers
Adbri is involved in several community programs that address
the chronic shortage of people with science, technology,
engineering and maths (STEM) skills across the industry.
In June, Adelaide Brighton Cement was the major sponsor for the
South Australian 2021 Science and Engineering Challenge. Held
every year, the Challenge aims to increase student numbers and
success rates for tertiary level science and engineering courses by
changing perceptions of these subjects. More than 1,200 students
and 104 teachers from 51 schools attended to experience aspects
of these disciplines they would not see at school.
Our Kwinana site team hosted 30 students from the Kwinana
Industries Council (KIC) iSCIENCE program in November. The
program is a Senior Secondary Pathway for Year 10 students who
intend to follow ATAR STEM subjects in Years 11 and 12 and are
considering applying to university. The students learned about
cement and lime manufacturing and gained an insight into local
STEM-based career opportunities.
1,200
students
104
teachers
51
schools
attended the South Australian 2021
Science and Engineering Challenge
Encouraging students to build STEM skills will
assist in growing our industry’s future talent
Case study
Meeting a community need
Rapid Bay on the Fleurieu Peninsula in South Australia is a popular
diving, fishing and camping destination. As local landowners,
Adbri has a long association with the community.
In 2021, the District Council of Yankalilla partnered with us to apply
for funding under the Australian Government’s Building Better
Regions Fund (BBRF) to develop Rapid Bay’s first purpose-built
public amenities block. The BBRF aligns strongly with Adbri’s
commitment to build a better Australia as it helps to create jobs,
drive economic growth and strengthen regional communities.
The Fund provided a grant of $210,000 and in October, we
announced Adbri would match that contribution. With a unique
design that reflects the coastal location, the amenities block
will provide visitors with family friendly changing rooms, toilets,
showers, benches, storage and fish-cleaning facilities.
45
The District Council of
Yankalilla partnered with
us to apply for funding
under the Australian
Government’s Building
Better Regions Fund
$420k
total cost of the project
$210k
contribution from Adbri in 2022
Rapid Bay is internationally known as a dive
site to view the rare Leafy Sea Dragon
Adbri 2021 Annual ReportIntroduction and overviewFinancial statementsOperational updatesSustainability report 46
Reduce adverse
environmental impacts
Adbri has a strategic goal to reduce adverse
environmental impacts. We do this in a number
of ways, including adopting a circular economy
approach to minimise waste generation and
diverting waste from landfill. We seek ways to use
industrial by‑products as alternative fuels and SCMs
to reduce our reliance on natural resources and
reduce our carbon footprint.
As a significant landholder, we adopt sustainable short-term
and long-term land use strategies and identify opportunities for
protecting and enhancing the biodiversity our land supports.
We also recognise our role in the responsible consumption
and discharge of water. Details on the risks and opportunities
associated with climate change are covered in the Responding
to climate change section of this report. See page 49.
Our management approach
Environmental management is an essential part of maintaining
our social licence to operate. We adopt a systematic approach
to mitigate risk and identify management strategies to ensure
that our operations do not result in unacceptable environmental
impacts. Our Obligation Management System and HSEMS
supports the environmental commitments outlined in our
Health, Safety and Environment Policy. This policy outlines the
responsibilities of employees and contractors, and our HSE
objectives including to avoid, reduce or control waste and
pollutants to reduce adverse environmental impacts.
We embed environmentally sustainable awareness and practices
throughout our business, invest in continual improvement, and
collaborate with government, academia and our industry on
solutions. To ensure our people understand Adbri’s obligations,
commitments and expectations, we provide regular training.
Our responsible use of water
and land resources and circular
economy approach to waste
management will reduce adverse
environmental impacts.
Metrics
Alternative fuel use in South Australia1 %
Process waste to landfill2 (t)
Mains potable water usage (Ml)
Number of reportable environmental incidents
Number of fines in relation to environmental licences
Penalties
2021
25
2020
25
2019
23
179,335
177,703
204,723
1,091
0
0
Nil
1,206
1
1,327
1
1
$15,000
1
$15,000
1. Alternative fuels used at clinker and lime production facilities are sourced from recovered materials that displace a portion of traditional virgin fossil fuels
and reduce waste to landfill.
2. Process wastes are wastes produced through clinker and lime production that are sent to a final disposal destination.
47
2021 achievements
Diverted waste from landfill
Cockburn Cement, Munster operations
A $2 million investment in 2021 means we now have the capacity
to recover 75% of cement kiln dust at our Birkenhead plant and
repurpose it for products and offsite civil works. In Western
Australia, our Dongara team diverted 9% of lime kiln dust (LKD)
from disposal to reuse in agriculture, while we also conducted
trials with Munster LKD with the road construction industry.
Investing a further $8 million allowed us to fully recover hot
clinker process dust and redirect it back into production. We can
now reuse 20,000 tonnes of this valuable resource a year that
would otherwise be directed to landfill.
Rehabilitated quarries
We progressively undertake landscaping and planting to
rejuvenate the natural landscape around our quarries to protect
native flora and fauna and improve visual amenity. During 2021,
we progressively rehabilitated approximately 2.6 hectares of
land at Penrice and Austen quarries with tree planting. We
also continued to evaluate the visual amenity and flora/fauna
health of previously rehabilitated sites against required
rehabilitation criteria.
Limestone from Adbri’s Klein Point quarry in South Australia that
does not meet the chemical specification for clinker production
is used in the quarry’s rehabilitation. The area is then covered with
topsoil to return the terminal areas to a landform that supports
future agriculture.
Our Batesford quarry joint venture is also well advanced in land
rehabilitation with the quarry to be converted to a 30m deep
lake covering 164 hectares. The 5km lake perimeter will become
part of a link to three significant local waterways and a future
recreational asset for the community. We are progressing the
planting of 120,000 plants and spreading 120,000m3 of mulch.
When completed, over 168,000 plants will cover the 30 hectares
of green space.
Similarly, when quarrying began at our South Australian Moculta
site in 1981, agricultural land clearing had removed the original
vegetation. In 2021, we updated the extensive native vegetation
rehabilitation plan for the quarry and its surrounds and began
implementing Stage 1. This will enhance tracts of remnant native
vegetation and improve opportunities for fauna habitat.
Reduced potable water in industrial processes
Industrial water is a major contributor to the manufacturing of
concrete. Efficient water use is therefore a focus area for all our
concrete plants, with the aim of creating a closed water loop
onsite. During the year, Adbri’s Queensland concrete team
designed site processes that capture and reuse recycled water
for all concrete batching, with minimal loads requiring fresh
potable water. To support our efforts in improving water efficiency
we continually look for ways to achieve savings. This has seen
us implement a range of initiatives including using non-water
alternatives for dust suppression and designing our site layout and
operations to minimise wind erosion and dust generation.
Across the Group, Adbri’s use of potable water decreased
by 9.5% compared to 2020 and by 17.6% compared to 2019.
Our Cockburn Cement Ltd (CCL) facility at Munster was
established in 1955 to supply cement and lime to the Western
Australian market. Today, residential growth means the Kwinana
industrial area, where CCL’s Munster site is located, operates
in close proximity to the communities of Munster, Beeliar and
Yangebup. This presents unique challenges; with emissions, dust
and energy source key areas of interest for the community.
In 2019, to help understand odour concerns we undertook
independent investigations. These identified that an odour can
be generated in the stacks when shell sand, the raw material
for lime production, is heated between 400°C and 600°C. We
have since developed an engineering solution that has shown
approximate odour removal efficiencies of between 70–90% in
laboratory scale trials. In February 2021, we applied to DWER for
approval to trial the solution at full-scale, with a Works Approval
obtained in August 2021. Global supply chain challenges and
subsequent impact on the supply of components, combined
more recently with defects with supplied manufactured
components discovered when being installed onsite, have
delayed the trial. We look forward to commencing the trial in
Autumn 2022 and sharing the results with the community.
Disappointingly, on 29 July 2020 DWER commenced a
prosecution against CCL relating to alleged unreasonable
odour emissions from our Munster plant between January
and April 2019. CCL asserts that it operates within applicable
requirements, denies the charges and has entered a plea of
not guilty to each of the 15 charges pursuant to section 49(5)
of the Western Australian Environmental Protection Act 1986
(WA) of causing an unreasonable emission (odour) from CCLs
operations at Munster. On 24 January 2022, CCL received a
second prosecution notice charging it with six charges of the
same offence, alleged to have occurred in the period from
21 January 2020 to 3 April 2020. Refer to the Directors’ Report
for details.
At our 2020 AGM, we announced our intention to phase out
coal at Munster by early 2021. In our 2020 Sustainability Report,
we noted significant progress in reducing the amount of coal
we use at Munster and complete transition from coal to gas had
been delayed following the loss of the Alcoa lime contract and
subsequent changes in our production profile at the Munster
kilns. In the 2021 calendar year, coal represented approximately
50% of our fuel mix at Munster, a significant reduction from 2017
when it peaked at above 80%. The use of coal is close to the
minimal technical limit of our kiln when using the dual fuel mix.
In early 2022, we secured a one-year agreement to supply
some of the previously lost Alcoa volume. In light of this we
are reassessing our fuel mix and continue to assess options to
reduce and phase out coal in line with our aspiration to have net
zero emissions by 2050.
We remain committed to engaging with the community;
keeping them informed on our progress and ensuring we are a
considerate neighbour. We also remain committed to working
constructively with DWER on delivering practical outcomes for
the community.
Adbri 2021 Annual ReportIntroduction and overviewFinancial statementsOperational updatesSustainability report 48
Reduce adverse environmental impacts continued
Case study
Trialling hybrid plant
With the anticipated growth of sustainable transport options
in Australia and our commitment to reducing Adbri’s energy
consumption, we are identifying opportunities to improve
transport efficiency and decarbonise our fleet. Finding
alternatives to diesel, such as hydrogen and renewable electricity,
is a major priority to reduce our reliance on fossil fuels.
In 2021, our Tinda Creek quarry in regional New South Wales
invested in a hybrid electric Komatsu excavator. Designed
to reduce fuel consumption and consequently lower CO2
emissions, it combines a diesel internal combustion engine with
a generator and electric motors.
Compared to a traditional excavator the hybrid used 3.4 l/h less
fuel on average over a six-month period while operating under
more difficult conditions. Following this success, we are further
evaluating Adbri’s fleet options.
We are identifying
opportunities to
improve transport
efficiency and to
decarbonise our fleet.
3.4 l/h
less fuel than a
traditional excavator
The Tinda Creek quarry team trialling a
new hybrid excavator
Responding to
climate change
Adbri operates two emissions‑intensive
and hard‑to‑abate processes – the integrated
manufacture of clinker and cement and lime
production. We have demonstrated a strong
performance over the past decade in reducing our
operational emissions. In 2021 we announced our
aspiration to achieve net zero emissions by 2050,
with our NZE Roadmap to be released prior to our
2022 Annual General Meeting.
The key challenge is associated with our process emissions as
a result of the calcination process required to produce both
cement and lime. The technologies needed to decarbonise
our process emissions are not yet commercial at scale. We
are committed to focusing in the near-medium term on using
conventional approaches to abate our fuel-related emissions,
while we work in collaboration with key partners to demonstrate
emerging technologies to reduce our process emissions.
Our approach
Our Position on Climate Change outlines our acceptance
of the climate change science, the role of lime, cement and
concrete in the transition to a low carbon economy and our
commitment to collaborative action. Collaboration is the key
to commercialise at scale breakthrough technologies that are
required to decarbonise our value chain by 2050 in line with the
Paris Agreement goals.
We are a supporter of the Task Force on Climate-Related
Financial Disclosures (TCFD) and are working to align our
disclosures with the TCFD’s recommendations across the four
areas of Governance, Strategy, Risk Management and Metrics
& Targets. We are reviewing the TCFD changes made in
October 2021 and plan to address additional requirements
in future disclosures.
49
We actively engaged with investors and stakeholders on our
approach to climate change, including industry organisations
and Climate Action 100+. We also provided support to the
Cement Industry Federation and Manufacturing Australia in the
development of their roadmaps.
Governance
The Adbri Board has accountability for determining the strategic
direction of the Company and oversees our response to climate
change, including strategy discussions, investment decisions,
risk management and performance against our commitments.
To ensure a focused approach, climate change is a standing item
for the Board’s SHES Committee meetings. For the first time this
year’s Directors’ skill matrix includes climate change.
Climate change is one of our most material risks, and includes
risks associated with physical climate change impacts
and the transition to a low carbon future. The Audit, Risk &
Compliance Committee supports the Board with the oversight
of climate-related risk management, although the Board retains
overall accountability for Adbri’s risk profile. Our Corporate
Governance Statement outlines more information about our
Board Committees.
During 2021, the Board engaged on climate change
issues including:
– Board readiness check to self-assess current and intended
target state for climate change risk governance and identify
actions required to be a leader across its value chain
– discussions on energy supply, technology developments and
investor, shareholder, industry association and government
views on climate change issues as presented by expert
advisers to inform Board decision making
– regular briefings and engagement on the NZE Roadmap
– considered sustainability impacts on strategy and
investment decisions.
Adbri’s Position on Climate Change
Adbri accepts the Intergovernmental Panel on Climate Change’s evidence that warming of the planet is unequivocal, that human
influence is the main driver and physical impacts are unavoidable.
We believe:
We are committed to:
– The world must pursue the Paris Agreement goals with
increased collective ambition to accelerate action to limit the
impacts of climate change
– Business has a critical role to play in responding to scientific
evidence and addressing the risks and uncertainties of
climate change
– The challenge of significantly cutting global emissions will
require transformations across the economy, including the
built environment
– Cement, concrete and lime products have a critical role to play
in the transition to a low carbon economy
– Lime and cement manufacturing are both hard-to-abate
processes, however there are energy-related abatement
actions available in the short and medium-term
– Technologies required for our net zero emissions goal are not
yet commercial at scale, but we anticipate can be developed
through innovation, investment and cooperative partnerships
– Government policies will play a critical role in enabling action
aligned to the Paris Agreement.
– Identifying and integrating commercial responses to climate
change into our strategies as we plan for sustainable growth
– Reducing our operational greenhouse gas emissions in line
with our public targets as we transition to a low carbon future
– Listening to our employees and communities and
collaborating with our suppliers, JV partners and customers
– Producing lower carbon products for our customers to
support their sustainability goals
– Adapting to the potential physical impacts of climate change
by working with experts to build our knowledge and enhance
the resilience of our assets
– Partnering with others to develop technologies and solutions
to ensure our business remains profitable and market leading
– Building our capacity and resourcing across the business
through training and skills development to support our journey
to net zero emissions
– Engaging with governments to adopt appropriate policies to
support sustainable manufacturing in Australia
– Transparently reporting our performance against our
commitments using international frameworks, including the
Task Force on Climate-Related Financial Disclosures.
Adbri 2021 Annual ReportIntroduction and overviewFinancial statementsOperational updatesSustainability report 50
Responding to climate change continued
The Managing Director & CEO is responsible for converting Board
strategy into implementation plans. Management is accountable
for implementing these plans, with a linkage between targets and
executive remuneration.
Climate strategy
In May 2021, we announced our aspiration to achieve
net zero greenhouse gas (GHG) emissions by 2050 and
committed to releasing our NZE Roadmap prior to the 2022
Annual General Meeting.
During 2021, we made good progress and have benchmarked
ourselves against NZE roadmaps in other regions, including
the United Kingdom, European Union and United States of
America, as well as contributing our expertise to local association
roadmaps developed by the Cement Industry Federation and
Manufacturing Australia. The Intergovernmental Panel on Climate
Change’s (IPCC) Sixth Assessment Report has also helped inform
our thinking. We also referenced the Science Based Target
initiative (SBTi) guidelines in our approach to target setting.
As an energy-intensive business, our NZE Roadmap will build
on our track record of reducing GHG emissions and outline
interim targets on the pathway to net zero emissions by 2050.
Collaboration, research partnerships and future developments
in technology will all have a role to play in Adbri’s transition to a
lower carbon future.
Scenario analysis
A key element of the TCFD Strategy recommendations is to
describe the resilience of the organisation’s strategy, taking into
consideration different climate-related scenarios, including a
scenario based on an average global temperature increase of
2°C or lower.
Adbri disclosed its first climate change scenario analysis in our
2020 Sustainability Report, including an assessment of three
scenarios, drawing on scenario analysis from the IPCC and the
International Energy Agency (IEA):
– No action scenario – 4.0°C
– Stated Policy Scenario – 2.7°C
– Sustainable Development Scenario – 1.7°C.
We have continued to review the IEA’s reports to understand
developments in the World Energy Outlook and technology
pathways which inform the core scenario analysis. IEA’s flagship
report Net Zero by 2050 – A Roadmap for the Global Energy
Sector, released in 2021, has also been very helpful in assessing
international trends impacting on the transition to net zero
emissions in line with the Paris Agreement goals.
Risk management
Adbri has identified climate change as a strategic risk and
opportunity for our business. Our risk assessment is aligned with
the TCFD approach and includes an analysis of transitional and
physical risks.
Transition risks
Policy and legal
– Regulations for Australian carbon pricing
schemes
– Regulatory changes which limit our strategic
choices
– Lack of policy harmonisation across
governments
– Slow progress on the approval of new standards
for lower carbon cement and concrete products
– More stringent resource regulations, such as the
use of alternative fuels
– Greater competition for water
– Tighter limits on regulatory permits
Technology
– Electricity market rules and/or lack of
infrastructure build-out of transmission create
congestion in the pipeline of new renewable
generation which limits the availability of
competitive renewable Power Purchase
Agreements
– Rate of progress and investment in technology to
support the transition to a low carbon economy
– Risks associated when integrating new
technologies with existing systems
– High investment costs today of carbon capture
and storage technologies and alternative fuels
such as hydrogen
Market
– A substitute for Portland clinker-based cement
becomes commercially viable
– Supply risks associated with SCMs including slag
and fly ash
– Energy market conditions lead to higher
fuel costs
– Slow customer uptake for lower carbon products
Reputation
– We cannot prove alignment with Paris Agreement
goals and meet stakeholder expectations
– Shareholder actions if investors lose confidence
– Limits on external funding and insurance
– Inability to attract and retain employees
Physical risks
Acute
Chronic
– More intense weather events, e.g. storms,
flooding, fires and extreme heat days
– Slow-onset climate risks (rising sea levels,
changing rainfall patterns) that can impact on
our assets
To manage our climate change transition risks, we are developing
our NZE Roadmap, investing in the development of lower carbon
products and advancing research in lower carbon cement and
lime through key partnerships. We will continue to work to better
understand our exposure to physical risks.
51
Metrics and targets
Our five-year targets from a FY19 baseline are a 7% reduction
in GHG emissions; and for 50% kiln fuel to be sourced from
alternative fuel in SA. In FY21, Adbri further reduced our
total operational GHG emissions, Scope 1 and Scope 2,
by 43,104 tonnes CO2e (2%) vs our FY20 performance.
This represents a total of 4% reduction against our FY19
baseline. Since FY10, Adbri has reduced our Scope 1
and Scope 2 GHG emissions by 32%.
Our overall energy consumption in FY21 reduced year-on-year
against FY19 and FY20. Our improved thermal efficiency
and electrical efficiency in our integrated clinker/cement
manufacturing has been a positive factor in our lower energy
use. Lower emissions from our Birkenhead site (9% below FY20)
Total operational GHG emissions (Scope 1 and 2) tCO2e1
Scope 1 GHG emissions tCO2e1
Scope 2 GHG emissions tCO2e1
Scope 3 GHG emissions tCO2e
Total energy consumption (GJ)1
were largely offset by the increased emissions at our Munster
site (6% above FY20). Overall, our clinker and cement production
was slightly down, while lime production was up slightly in FY21
compared with FY20.
Clinker and lime production generated 92% of Adbri’s total
operational emissions, with the remaining 8% attributed to
electricity and diesel usage downstream in cement, concrete and
lime activities.
FY21
FY20
FY19
2,289,449
2,332,553
2,387,020
2,092,331
2,125,121
2,156,481
197,118
207,432
230,539
1,012,808
N/A
N/A
14,175,950
14,286,867
14,782,120
1. GHG emissions and energy consumption are measured and reported in line with the Australian National Greenhouse and Energy Reporting Act 2007.
CO2e emissions by product1 (kt)
Emission intensity by product2,3
FY19
FY20
FY21
1,129
1,174 84 2,387
1,038
941
1,196
99
2,333
1,242
106
2,289
Cement
Lime
FY21
FY20
FY19
0.64
1.13
0.62
1.14
0.68
1.06
Cement
Lime
Other
Clinker to
cement ratio
Thermal efficiency
Electrical intensity
Alternative fuel usage
GJ/t clinker4
kWh/t cement4
% of thermal energy5
9
7
.
0
7
7
.
0
8
7
.
0
0.8
0.6
0.4
0.2
0
.
8
4
.
3
4
0
4
.
5.0
4.0
3.0
2.0
1.0
0
120
9
1
1
4
1
1
8
0
1
90
60
30
0
50
40
30
20
10
0
5
2
5
2
3
2
F Y19
F Y 2 0
F Y 21
F Y19
F Y 2 0
F Y 21
F Y19
F Y 2 0
F Y 21
F Y19
F Y 2 0
F Y 21
1. Scope 1 and Scope 2 kt CO2e.
2. Scope 1 + Scope 2 tonnes CO2e/tonne product.
3. Emissions intensity of cement from locally produced clinker.
4. South Australian integrated clinker/cement plants only.
5. South Australia clinker and lime kilns.
Adbri 2021 Annual ReportIntroduction and overviewFinancial statementsOperational updatesSustainability report
52
Responding to climate change continued
Operational GHG emissions (Scope 1 + Scope 2)
‘000 tonnes
2,500
2,400
2,300
2,200
2,100
2,000
Clinker
& lime
production
Total operational GHG
emissions (Scope 1 & 2)
2 017
2 018
2 019
2 0 2 0
2 0 21
Operational GHG emissions
(Scope 1 + Scope 2) by source
Scope 3 GHG emissions
Energy consumption by source (TJ)
Process emissions
(lime and clinker)
Kiln fuels
Purchased goods
Natural gas
Coal
60%
28%
84%
58%
16%
Electricity
9%
Transport fuels
1%
Non-kiln onsite
fuels
Upstream fuel &
energy-related activities
2%
9%
Upstream transportation
& distribution
7%
Electricity
9%
Liquid fuels
8%
Refuse derived
fuel
8%
Recovered
waste oil
1%
53
2021 achievements
Advanced towards net zero emissions goals
Accounting for Scope 3 emissions
Scope 3 emissions include all indirect emissions across our value
chain (excluding emissions from purchased electricity which
are considered as Scope 2), including imported clinker and
cement, upstream emissions associated with production and
supply of energy (e.g. production and transportation of gas to
our sites), embedded carbon in the inputs to our operations, and
transportation of our inputs and outputs.
We are disclosing our known Scope 3 emissions for the first time
in this report. This reporting forms part of our commitment to
increased disclosures in line with TCFD recommendations. We
continue to work through the process of Scope 3 emission data
collection and have not yet achieved our aspirational level of
engagement with our suppliers and customers. As a result, the
Scope 3 emissions data reported for FY21 contains the material
sources of emissions but is not comprehensive. The biggest
gaps are Scope 3 categories: purchased goods – sourced
within Australia; capital items; JV contributions; and downstream
transportation and distribution associated with contractors who
deliver products to our customers.
Our total Scope 3 emissions for FY21 were 1,012,808 tonnes
CO2e. The main contribution was from the emissions from
purchased goods, dominated by the importation of clinker.
We have also included the upstream transportation and
distribution emissions for imported products. The remaining
category that we have included for FY21 was the upstream fuel
and energy-related activities, with the main contributions from
upstream activities associated with natural gas production and
fossil fuel electricity generation.
We will continue to collaborate with our suppliers and customers
as they seek opportunities to reduce their emissions and we
strive to improve our data management systems to capture the
full range of Scope 3 categories. This work will lay the foundation
for us to set Scope 3 targets in the future.
In 2021 we announced our aspiration to achieve net zero
emissions by 2050. We progressed our NZE Roadmap and
developed Adbri’s Position on Climate Change.
Improved energy and process efficiency
As outlined in the Cement and Lime update we are reviewing our
end-to-end cement manufacturing process in South Australia.
This involves accessing international experts to benchmark our
operations globally to reduce the cost per tonne of cement,
as well as GHG emissions.
In October we also turned the ceremonial sod for our new
cement facility in Kwinana, Western Australia which will provide
greater efficiencies in our Western Australian cement operations,
with reduced electricity and diesel use, and lower greenhouse
gas emissions, compared to the existing operations.
Entered technology research partnerships
Partnering on technology development is key to unlocking
decarbonisation solutions. In March 2021, Adbri entered into
a Heads of Agreement with industrial process technology
company Calix. The agreement covers the co-development of
a Calix calciner for lime production with CO2 capture.
We also became a core partner of the Heavy Industry
Low-carbon Transition Cooperative Research Centre (HILT CRC)
which is a leading collaboration to transform the heavy industry
sector for a low carbon economy. We also joined the Material
and Embodied Carbon Leaders Alliance (MECLA) in NSW which
brings together a wide range of industry, government, research
and NGO representatives. These initiatives support and build on
our existing SmartCrete CRC partnership to deliver breakthrough
advancements in the cement and concrete products market.
Reduced our GHG emissions
Throughout 2021, we sought new ways to reduce operational
emissions. For example, the Group’s Hy-Tec business replaced
two smaller secondary plant generator set units with a single
larger engine unit that uses less fuel. This saves 100,000 litres of
diesel a year and reduces annual CO2 emissions.
Aligned with our short-term target to reduce our operational
emissions, we have now invested $942,000 in solar PV
installations behind the meter at six Masonry and five Concrete
sites. The total installed capacity at the end of 2021 was 7.9MW.
These investments reduce our Scope 2 emissions, as well as
energy costs.
Adbri 2021 Annual ReportIntroduction and overviewFinancial statementsOperational updatesSustainability report 54
Lower carbon products
Innovation in our production processes enables
Adbri to produce lower carbon products that
help our customers to meet their decarbonisation
targets. Customer demand for lower carbon
products is increasing, driven by industry,
consumer and government expectations.
Our management approach
Technology developments and innovative thinking, as well as
industry, government and research partnerships are all playing
a critical role in our ability to meet customer demand for lower
carbon choices. Adbri is investing in research and development
for lower carbon raw materials, product substitutes and
alternative fuel sources.
Metrics
Adbri’s Sustainability Framework has previously set a target to
increase the tonnage of alternative raw materials used in our
products. However, we acknowledge the overall target will not be
met by 2024 as it requires significant technological advances and
market acceptance. These have not yet been forthcoming, and
therefore our ability to increase the use of these materials has
been limited without risking our ability to deliver the highest
quality products.
In recognition of the available opportunities and current efforts
to decarbonise our product range, Adbri has developed a
replacement target of 24% SCMs as a proportion of final
cementitious product sales. This includes sales of both cement
products which incorporate SCMs as part of their composition,
as well as stand-alone ‘ready to use’ SCM sales such as fly ash
and ground-granulated blast furnace slag.
Case study
Lower carbon cement
shows promise
General purpose limestone cement (Type GL) is an AS3972
compliant product that is manufactured with up to 20%
of limestone mineral addition substituting for clinker,
the emissions-intensive component of cement. Type GL
cement can be used as an alternative to Type GP (general
purpose) and Type SL (shrinkage limited) cements for most
forms of construction. It is being used extensively in Europe
and North America.
In 2021, Adbri trialled GL cement in pre-mix concrete
products to see if we could meet growing market
expectations without compromising product performance
or AS3972 standards compliance.
Laboratory tests on a batch of Adbri-produced GL cement
showed it performed similarly to our GP and SL cement
products. For in-field trials, we supplied ready-mixed
concrete containing our GL cement in varying strength
grades to 40 construction customers who were open to
product innovation. These were used to build driveways,
kerbs, piling works and other common applications as our
researchers observed and undertook various tests. The
workability, pumpability, placement and finishability were
equal to that of our SL and GP cements and customer
feedback was uniformly positive.
Using the learnings of these initial trials, we are planning
further field trials to determine the performance of Type GL
cement in more demanding concrete applications such as
precast and post tensioned concrete.
Lower carbon GL cement trials were held during the year
Metrics
Supplementary cementitious materials as a proportion of final cementitious product1
2021
20%
2020
21%
2019
21%
1. This replaces the ‘Alternative raw materials’ metric used in 2019 and 2020. In 2021, we achieved a 1% improvement against the discontinued metric.
55
2021 achievements
Focused on lower carbon products
Influenced standards
Research, technology and collaboration are central to lower
carbon product development in our industry. During 2021,
Adbri continued to be an engaged partner in the SmartCrete
Cooperative Research Centre (CRC), which facilitates research
for the concrete supply chain, including sustainable concrete
development. Adbri is reviewing several potential projects of
interest that will provide the opportunity for active involvement
during 2022.
We built on our geopolymer capability during the year
and its potential application in producing lower carbon
binders, investigating specific applications and lodging one
provisional patent.
Comprehensive tests and trials during October proved that
Type GL cement has great potential for our lower carbon
product portfolio – see the case study on page 54.
Progressed our SCM ambitions
Adbri uses SCMs as an alternative to emissions-heavy Portland
clinker in cement and concrete production. Adbri has continued
to bolster its supply chain of these materials from post-industrial
recycled content such as ground-granulated blast furnace slag
and fly ash, as well as investigating new novel SCM sources.
In 2021, we refreshed our SCM strategy, which is designed to
meet our Company’s needs through to 2030.
As one of the lead authors, Adbri made a significant contribution
in 2021 to the formation of a new Australian Standard (AS3582.4)
that allows the use of new and emerging SCMs. In addition, we
continued to invest significant resources into the research and
application of these new materials.
Built our sustainability credentials
To provide greater transparency to our customers regarding the
environmental impacts of our products, we progressed work on
EPDs. We will continue to advance this work in 2022.
During the year, Adbri applied to join the Australian Packaging
Covenant Organisation and register all our brands. This will help
Adbri to meet our National Environment Protection Measure
obligations and Australia’s 2025 national packaging targets. We
also investigated some new sustainable packaging initiatives to
action in 2022.
Adbri was the first company to
use RDF for Australian cement
manufacturing to reduce our
reliance on traditional fossil fuels.
We further improved our RDF
usage rate after gaining additional
approvals from SA EPA.
Case study
Proud to be a RDF pioneer
Refuse derived fuel (RDF) is produced by a third party who
processes industrial waste products to produce an alternative
fuel source. As well as reducing demand for fossil fuels, it diverts
waste from landfill. RDF use has the added benefit of being a key
efficiency driver by reducing fuel costs and providing recyclable
by-products.
Adbri started using RDF at our Birkenhead plant in 2003.
Since then, we have used 1.3 million tonnes of RDF, which has
significantly reduced the Group’s GHG emissions and the cost
per tonne to produce cement.
The SA Environment Protection Authority (SA EPA) licence allows
Adbri to use 25 tonnes per hour of RDF, which displaces on
average 40% of the total Birkenhead plant clinker manufacturing
process natural gas requirement across the calciner and the
kiln. From 2020 to 2021, our RDF substitution rate at Birkenhead
increased from about 28% to about 35% in 2021. In 2022, our
target is up to 40% kiln fuel replacement at Birkenhead and we
have a target of 50% alternative fuel by 2024.
RDF has been used at our Birkenhead plant since 2003
Adbri 2021 Annual ReportIntroduction and overviewFinancial statementsOperational updatesSustainability report 56
Building a better Australia
In 2022, we will be half‑way through delivering
Adbri’s Sustainability Framework. We have a solid
foundation to build on as Adbri continues making
a positive economic and social contribution to
Australia and its people.
The health and safety of our people will remain our priority as
we continuously embed our ‘Work Safe, Home Safe’ culture.
We will increase our activities to support mental health and shape
a workplace that values inclusivity.
The Framework and our material risks – particularly climate
change and decarbonisation – will shape Adbri’s future
sustainability activities.
Key focus areas
Embed our ‘Work Safe,
Home Safe’ culture.
Stakeholder expectations will also play an increasingly significant
role, with customers and other key groups being included in our
materiality survey in 2022 so we can capture their views.
Create a shared culture and
values across the Group.
As we progress towards building a consistent way of doing
business, we will focus on creating a shared culture and
values across the Group that aligns with our purpose
and pillars.
Reducing our GHG emissions will be a major driver as
Adbri works towards medium and long-term targets in the
NZE Roadmap. To be released in 2022, it will build on the
emissions reduction target in our Framework. We will also
continue to enhance our environmental management systems
as we work towards ISO 14001 accreditation.
As part of Adbri’s local employment focus priority, and to mitigate
modern slavery risks in our supply chain, we will work with
suppliers to strengthen relationships and define our ‘local’
spend to track our performance. This will include identifying
opportunities for more Indigenous businesses to join the Adbri
supplier panel. We will also progress our reconciliation
journey by submitting an Innovate RAP to Reconciliation
Australia for endorsement.
The Kwinana Upgrade project will move to the major
construction stage, representing a significant step in our core
strategy of improving operational efficiency and lowering
GHG emissions, compared to our existing operations. We
will continue to consider sustainability impacts when making
investment and capital decisions.
Throughout 2022, we will continue to assess our sustainability
risks and opportunities across our operations and make progress
against our targets. Our people are key to generating and
implementing ideas that make a difference to our operations.
We will continue to foster our employee-led Green Team as one
of the ways we harness ideas that can make an impact on our
operations, with solutions shared across Adbri.
Release our
Net Zero Emissions Roadmap.
Work with suppliers to
strengthen relationships.
Progress our
reconciliation journey.
Kwinana Upgrade
project construction.
Feedback
Adbri welcomes all feedback on the 2021 Sustainability Report.
If you have any questions or comments, please email
info@adbri.com.au. For more information about specific
topics, see the Adbri website at www.adbri.com.au.
57
Helping to close the gap
Located near Adbri’s Munster plant on Whadjuk
country, Beeliar Primary School has one of Perth’s
highest populations of primary-school-aged Aboriginal
students. In 2021, Cockburn Cement helped the school
to launch Mooditch Koolingar Wadi (‘Strong Children
Club’) to provide after-school homework and activities
sessions for Noongar children. The Club engages
the students through cultural activities, reading,
homework support, outdoor play and healthy afternoon
snacks. It is a priority activity for Adbri’s RAP as it is
connecting Aboriginal students with the wider
school community.
Adbri 2021 Annual ReportIntroduction and overviewFinancial statementsOperational updatesSustainability report 58
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 2021.
Adbri publishes this report on a voluntary basis
as part of its commitment to tax transparency.
Disclosure – 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 25.4% for the
year ended 31 December 2021.
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 2021, $0.9m 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 Malaysian based associate.
Additional information in relation to Adbri’s international related
party dealings is provided under Part B of this report.
2021
%
25.4
28.5
29.2
25.3
28.5
29.2
2020
%
26.9
29.5
29.5
26.7
29.5
29.5
Australian operations
Australian operations – excluding
equity accounted earnings
Australian operations – excluding
equity accounted earnings and
capital losses recognised
Global operations
Global operations – excluding
equity accounted earnings
Global operations – excluding
equity accounted earnings and
capital losses recognised
2021 effective tax rate
35%
30%
25%
20%
15%
10%
5%
0
.
5
8
2
.
5
8
2
2
.
9
2
2
.
9
2
.
4
5
2
.
3
5
2
ETR
accounting
profit
ETR excluding
equity accounted
earnings
ETR excluding
equity accounted
earnings & capital
losses
recognised
Australian
operations
Global
operations
Adjusting for equity accounted earnings and capital losses not
previously recognised, Adbri has an effective tax rate of 29.2% for
the year ended 31 December 2021.
Sustainability report
59
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 2021 Financial Statements.
Accounting profit before tax
Prima facie tax payable (at 30%)
Tax effect of non-temporary differences (at 30%):
Non-allowable expenses
Non-assessable income
Rebateable dividends
Other deductions
Previously unrecognised capital losses
Income tax expense
Tax effect of temporary differences (at 30%):
Higher tax depreciation compared to accounting depreciation
Differences in net losses on disposals and write-offs recognised for accounting compared to tax
Accounting impairment of fixed assets
Income recognised earlier for tax purposes
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
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.
2021
$m
155.8
46.7
2020
$m
127.2
38.2
0.2
(4.9)
(1.7)
–
(0.9)
39.4
(7.6)
(1.7)
0.3
(1.6)
(0.3)
(3.4)
0.6
0.4
(1.4)
0.6
25.3
39.4
(0.3)
39.1
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 2021 Annual ReportIntroduction and overviewFinancial statementsOperational updates 60
Tax transparency report continued
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.
Adbri reflects these commitments in its approach to taxation,
with a high focus on meeting its various tax obligations.
Strong internal expertise and internal 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 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’). Adbri
has continued to maintain this ‘High’ level of assurance.
Tax contribution summary
Adbri paid/will pay in excess of $39.8 million in Commonwealth,
state and territory taxes in respect of the 2021 year.
Taxes borne by Adbri
Fringe benefits tax
Payroll tax
Corporate income tax3
Property tax
Total
Taxes collected by Adbri
Goods and services tax (GST)
PAYG withholding (employees)
Total
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 Italian 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.
2021
$m
0.61
9.22
25.3
4.7
39.8
2021
$m
157.65
45.3
202.9
2020
$m
1.2
9.3
40.94
4.1
55.5
2020
$m
145.7
44.3
190.0
1. Fringe benefits tax paid in respect of the year ended 31 March 2021.
2. Payroll tax paid in respect of the year ended 30 June 2021.
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 2021 is due
for lodgement in mid-2022.
4. Prior year income tax paid has been updated from the amount shown in the 2020 Tax Transparency Report to reflect the final income tax liability per the
income tax return which was due and lodged in mid-2021 (after the 2020 Tax Transparency Report was published).
5. Net GST collected $47.3 million (2020: $47.1 million) after input tax credits on behalf of taxation authorities.
Sustainability report
6161
In 2021 we sold
4.6 million tonnes of
cementitious materials.
Adbri 2021 Annual ReportIntroduction and overviewOperational updatesFinancial statements 62
Executive Leadership Team
Nick Miller
Managing Director
& Chief Executive
Officer
Theresa Mlikota
Chief Financial Officer
Brett Brown
Chief Operating Officer –
Cement & Lime
Andrew Dell
Chief Operating Officer –
Concrete, Aggregates
& Masonry
Sustainability report
63
Rebecca Irwin
Chief Sustainability &
People Officer
Michael Miller
Chief Strategy Officer
Marcus Clayton
General Counsel &
Company Secretary
Adbri 2021 Annual ReportIntroduction and overviewFinancial statementsOperational updates 64
Board of Directors
Raymond Barro
BBus, CPA, FGIA, FCIS
Dr Vanessa Guthrie AO
PhD, BSc (Hons), FAICD, FTSE
Nick Miller
NZCE (Civil), BE (Hons),
FIPENZ, GAICD
Ken Scott-Mackenzie
BE (Mining), Dip Law
Chairman
Raymond was appointed Chairman
in May 2019. He has over 30 years’
experience in the premixed concrete
and construction materials industry.
As well as his significant industry
insights, Raymond brings extensive
leadership experience and financial
expertise to the role. Raymond is
Managing Director of Barro Group
Pty Ltd.
Board member since
August 2008
Member
Safety, Health, Environment and
Sustainability Committee
Deputy Chair and Lead
Independent Director
Managing Director &
Chief Executive Officer
Independent
Non-executive Director
Ken has extensive experience
in the financial, legal and
commercial aspects of delivering
multi-billion-dollar projects. He
has worked in the infrastructure,
construction and mining services
industries for 40 years across
Australia and Africa.
Ken has held Chief Executive
Officer roles of major construction
companies in Australia, including
Bilfinger Berger Australia and
Abigroup. He is a former Vice
President of the Australian
Constructors Association.
The combination of commercial
management capability and
leadership experience in large and
diversified organisations means
Ken adds considerable depth to the
Adbri Board.
Board member since
July 2010
Chair
Safety, Health, Environment and
Sustainability Committee
Member
Nomination and Governance
Committee; Audit, Risk and
Compliance Committee; People
and Culture Committee, ceased as
member in October 2021
Nick joined Adbri as Chief
Executive Officer in January 2019.
In October 2021, he was appointed
Managing Director & Chief Executive
Officer and joined the Board.
Nick has more than 30 years’
experience in the construction and
resources sectors. He is a former
Managing Director of Fulton Hogan,
a large resource-based contractor
specialising in construction
materials, infrastructure services
and civil construction activities.
Prior to joining Adbri, Nick was
Managing Director & Chief Executive
Officer of Broadspectrum, which
provides operations, maintenance
and construction services to the
resources, infrastructure and
property sectors.
Nick’s commercial expertise,
operational excellence, strategic
insight, people leadership and
safety focus are major assets for the
Adbri Board.
Board member since
October 2021
Member
Safety, Health, Environment and
Sustainability Committee
Former directorships
– Broadspectrum Limited
Appointed May 2018, retired
December 2018
– Fulton Hogan Limited
Appointed July 2009, ceased
October 2017
Vanessa is a highly experienced
Non-executive Director who has
worked in mining and resources for
30 years.
Her career includes multiple
leadership roles across operations
and sustainability, including
environment, community,
Indigenous affairs, corporate
development and sustainability.
Vanessa’s understanding of the
resources sector and its operational
environment is underpinned
by qualifications in geology,
environment, law and business
management. She was awarded
an Honorary Doctor of Science
from Curtin University in 2017 for
her contribution to sustainability,
innovation and policy leadership
in the resources industry and
was awarded an Officer of the
Order (AO) in 2021. Vanessa is a
Fellow of the Australian Academy
of Technological Sciences and
Engineering and Australian Institute
of Company Directors, former Chair
of the Minerals Council of Australia,
and actively promotes gender
diversity in the resources sector.
Board member since
February 2018
Chair
People and Culture Committee;
Nomination and Governance
Committee
Member
Safety, Health, Environment and
Sustainability Committee
Current directorships
– Santos Limited
Appointed July 2017
– Lynas Rare Earths Limited
Appointed October 2020
Former directorships
– Vimy Resources Limited
Appointed October 2017,
ceased November 2018
Operational updates
Sustainability report
65
Geoff Tarrant
BBus
Rhonda Barro
Emma Stein
BSc (Physics Hons), MBA,
FUWS, FAICD
Michael Wright
B Eng (Civil), Master Eng
Science, Harvard AMP
Non-executive Director
Non-executive Director
Geoff has extensive experience in
the finance industry across Australia,
the United Kingdom and Asia. He has
particular expertise in mergers and
acquisitions and capital markets.
During his career, Geoff has held
senior finance roles with Citigroup,
National Australia Bank, Price
Waterhouse and Deutsche Bank,
where he was Vice Chairman
Australia New Zealand for 17 years.
As Executive Chairman and
co-founder of a global construction
and building operations software
company Payapps Limited, he
also brings valuable technology
knowledge and experience to
his directorship.
Board member since
February 2018
Member
Audit, Risk and Compliance
Committee
Rhonda has over 45 years’
experience in the construction
materials industry and executive
management, in both line and
functional areas. She is a Director
of Barro Group Pty Ltd.
She offers significant expertise in
customer and stakeholder relations
to the Board.
Rhonda has held numerous
leadership roles in community
organisations. She is a Fellow
of the Williamson Leadership
Program, which promotes a broader
and deeper understanding of
approaches to leadership and its
relationship to societal challenges.
Board member since
May 2019
Member
People and Culture Committee
Independent
Non-executive Director
Independent
Non-executive Director
Emma has held board and executive
positions in Australia, NZ, the United
Kingdom and Europe. Over her
career, she has worked across the
renewable and traditional energy,
water catchment and assets, waste
and the circular economy, mining
services and resources, engineering,
industrial & building materials sectors.
Emma was awarded an Honorary
Fellow by Western Sydney University
for her service to the university.
Having held senior roles, including
Chief Executive Officer, Emma is
well-versed in capital investment
decisions, mergers and acquisitions
and risk management frameworks.
She is particularly experienced
balancing ESG perspective with
profitable outcomes, including
finding optimum decarbonisation
pathways for hard-to-abate industries
and companies moving away from
their traditional energy domains.
Sustainability in renewables also
requires careful asset selection
including energy firming.
Board member since
October 2019
Chair
Audit, Risk and Compliance
Committee
Member
People and Culture Committee;
Nomination and Governance
Committee
Michael is an experienced director
and executive with over 30 years’
experience across the global
resources and industrial sectors
in Australia, Asia, Africa and
the Americas.
He has held senior leadership and
Chief Executive Officer positions in
multinational mining services and
contracting businesses covering
multiple disciplines, including
mining, construction, general
engineering, environmental services
and utility operations.
He is currently Executive Chairman
and CEO of Thiess and was formerly
Chief Executive Officer of ASX-listed
CIMIC Group.
Michael sits on the boards of the
Sustainable Minerals Institute and
the Minerals Council of Australia,
where he chairs the Safety and
Sustainability Committee and the
Safety & Health Subcommittee.
His extensive industry expertise,
skillset and focus on safety and
sustainability complement the mix
of experience, skills, and knowledge
of other Adbri Board members.
Board member since
June 2021
Member
Safety, Health, Environment and
Sustainability Committee; People
and Culture Committee; Nomination
and Governance Committee.
Current directorships
Former directorships
– Cimic Group Limited
Appointed December 2017,
ceased February 2020
– Worley Limited
Appointed December 2020
Former directorships
– Alumina Limited
Appointed February 2011,
ceased May 2021
– Cleanaway Waste Management
Limited
Appointed August 2011,
retired December 2020
– Infigen Energy Limited
Appointed September
2017. Delisted from ASX on
5 November 2020.
Adbri 2021 Annual ReportIntroduction and overviewFinancial statements 6666
Financial statements
Our people deliver
for shareholders
As an ASX-listed leader, we employ
people who understand Adbri’s
responsibility to shareholders. Our
people continually add value through
their dedication to productivity,
efficiency and improvement. Thanks
to their can-do attitude and nimble
approach, Adbri finished 2021 as
a profitable, resilient and more
sustainable company, with strong
long-term growth prospects.
67
132
132
132
133
134
135
145
145
147
147
149
150
154
155
157
157
157
158
159
160
161
164
166
Financial statements 2021
Capital structure and risk management
17.
Borrowings
18. Share capital
19. Dividends
20. Reserves and retained earnings
21.
Financial risk management
Group structure
22.
Joint arrangements and associate
23. Subsidiaries
24. Deed of cross guarantee
25. Parent entity financial information
26. Retirement benefit obligations
27. Share-based payments plans
28. Related party
29. Events occurring after the reporting period
30. Commitments for capital expenditure
31. Remuneration of auditors
32. Contingency
Directors’ declaration
Auditor’s independent declaration
Independent auditor’s report to the members
of Adbri Limited
Financial history
Information for shareholders
Directors’ report
Remuneration report
People and Culture Chair’s letter
1.
2.
3.
4.
5.
Key management personnel
Remuneration governance
Executive remuneration policy and framework
2021 Executive remuneration approach
Linking executive remuneration to
company performance
6. Non-executive Directors’ fees
7.
Executive service agreements and statutory
remuneration tables
8.
Additional statutory disclosures
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the financial statements
1.
Summary of significant accounting policies
Financial performance overview
2.
3.
4.
5.
6.
7.
8.
Segment reporting
Critical accounting estimates and assumptions
Earnings per share
Revenue from contracts with customers
and other income
Expenses
Income tax
Note to statement of cash flows
Balance sheet items
9.
Trade and other receivables
10.
Inventories
11.
12.
13.
Assets held for sale
Property, plant and equipment
Leases
14.
Intangible assets
15.
Impairment tests
16. Provisions
68
81
81
84
85
85
87
94
98
100
101
102
103
104
105
106
107
107
111
111
112
113
114
115
116
119
121
121
122
122
123
125
127
128
130
Adbri 2021 Annual ReportIntroduction and overviewOperational updatesSustainability reportFinancial statements
68
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 2021.
Directors
The Directors of the Company, at any time during or since the end of the financial year and up to the date of this report, are:
– RD Barro (Chairman)
– Dr VA Guthrie AO (Deputy Chair and Lead Independent Director)
– ND Miller (appointed as Managing Director on 5 October 2021)
– RR Barro
– KB Scott-Mackenzie
– ER Stein
– GR Tarrant
– MJM Wright (appointed on 25 June 2021)
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 masonry.
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, Managing Director & Chief Executive Officer’s review, operational and financial reports on pages 6–25 of
this Annual Report.
A summary of the financial results for the year ended 31 December 2021 is set out below:
Statutory results
Revenue from contracts with customers
Earnings before interest, tax, depreciation, amortisation and impairment
Depreciation, amortisation and impairments
Earnings before interest and tax (EBIT)
Net finance cost1
Profit before tax
Income tax expense
Net profit after tax
Attributed to:
Members of Adbri Ltd (NPAT)
Non-controlling interests
Basic earnings per share (cents)
Ordinary dividend per share (cents)
Franking (%)
Net debt2 ($million)
Net debt/equity (%)
Net debt/net debt + equity
Consolidated
2021
$M
1,569.2
270.8
(95.9)
174.9
(19.1)
155.8
(39.1)
116.7
116.7
–
17.9
12.5
100.0
437.4
34.5
25.6
2020
$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
23.3
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 (net of capitalised borrowing costs), less cash and cash equivalents and excludes lease liabilities.
69
The results were impacted by a number of significant items. The table below sets out the underlying financial results for the year ended
31 December 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 69–70.
Underlying results
Revenue from contracts with customers
Earnings before interest, tax, depreciation, amortisation and impairments
Depreciation and amortisation
Earnings before interest and tax (EBIT)
Net finance cost1
Profit before tax
Income tax expense
Net profit after tax (NPAT)
Attributed to:
Members of Adbri Ltd
Non-controlling interests
Basic earnings per share (cents)
Leverage ratio2 (times)
Consolidated
2021
$M
1,569.2
274.2
(95.9)
178.3
(19.1)
159.2
(40.1)
119.1
119.1
–
18.3
1.6
2020
$M
1,454.2
272.3
(93.4)
178.9
(20.4)
158.5
(43.0)
115.5
115.6
(0.1)
17.7
1.4
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 and excludes lease liabilities.
Net profit after tax
Full year reported NPAT increased 25% on 2020 to $116.7 million.
Underlying NPAT increased 3.0% from $115.6 million in 2020 to $119.1 million.
Property profits contributed $6.1 million to NPAT in the year, compared to $0.5 million in 2020.
(a) 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 result.
FULL YEAR ENDED 31 DECEMBER
Statutory profit attributable to members
Minority interest
Statutory profit
Impairment
Change in loss provision
Corporate restructuring costs
Acquisition costs
Underlying profit
Minority interest
Underlying profit attributable
to members
Profit
before
tax
$M
155.8
–
155.8
–
(3.3)
5.9
0.8
159.2
–
159.2
2021
Income
tax
$M
Profit
after tax
$M
(39.1)
–
(39.1)
–
1.0
(1.8)
(0.2)
(40.1)
–
(40.1)
116.7
–
116.7
–
(2.3)
4.1
0.6
119.1
–
119.1
Profit
before
tax
$M
127.3
(0.1)
127.2
21.7
2.7
6.9
–
158.5
0.1
158.6
2020
Income
tax
$M
Profit
after tax
$M
(33.6)
–
(33.6)
(6.5)
(0.8)
(2.1)
–
(43.0)
–
(43.0)
93.7
(0.1)
93.6
15.2
1.9
4.8
–
115.5
0.1
115.6
Adbri 2021 Annual ReportIntroduction and overviewOperational updatesSustainability reportFinancial statements 70
Directors’ report continued
Review of operations continued
(a) Reconciliation of underlying profit continued
Impairment
In the prior corresponding period, the Group recognised a pre-tax non-cash impairment charge of $21.7 million, primarily associated
with the cessation of the long-term Alcoa contract.
Change in loss provision
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. The Group recovered funds following successful litigation resulting in cash receipts
of $8.4 million (net of GST) and recognising a net credit of $3.3 million to profit before tax after deducting the carrying value of the
related debtors balance and recovery costs.
Corporate restructuring costs
Redundancies and one-off corporate costs of $5.9 million were recognised in the period ($6.9 million in prior comparative period
which included a provision of $5.0 million in response to the closure of kiln 5 at Munster).
Acquisition expenses
During the year the Group incurred $0.8 million in assisting with the Mawsons joint venture acquisition for Milbrae.
Dividends paid or declared by the Company
During the 2021 financial year, the following dividends were paid:
– A final ordinary dividend in respect of the year ended 31 December 2020 of 7.25 cents per share (fully franked) was paid on
22 April 2021. This dividend totalled $47,315,515; and
– An interim dividend in respect of the year ended 31 December 2021 of 5.5 cents per share (fully franked) was paid on
6 October 2021. This dividend totalled $35,894,542.
Since the end of the financial year, the Directors have approved the payment of a final ordinary dividend of 7.0 cents per share
(fully franked). The final dividend is to be paid on 11 April 2022. The record date for the final ordinary dividend is 28 March 2022.
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.
71
Risk details mitigation
Risk
description
Risk scenario
Mitigation
Adbri has been taking action to reduce its energy consumption
and GHG emissions and we regularly review our approach.
We have invested in the innovative use of alternative fuels in
our kilns to reduce the consumption of fossil fuels such as gas.
We also use low carbon materials such as slag and fly ash to
substitute for emissions-intensive clinker in our cement and as
additions in concrete manufacturing.
Our 2019 Sustainability Framework set a number of short-term
targets focused on emissions reduction. The five-year targets,
set on 2019 baselines include:
– 7% carbon emissions reduction
– 50% kiln fuel to be sourced from alternative fuel in South
Australia
– 25% reduction in process waste to landfill.
In May 2021, Adbri announced its aspiration to achieve net zero
carbon emissions by 2050 as part of its commitment to a low
carbon future, and committed to releasing a NZE Roadmap
ahead of the 2022 AGM.
Adbri has also contributed to the Cement Industry Federation
Roadmap and we are working with Manufacturing Australia
on their roadmap. Collaboration with industry partners,
governments and research institutes is a key step in
developing options to reduce emissions, especially for our
hard-to-abate sector.
Climate
change
Greenhouse gas (GHG) emissions are
driving climate change. The potential
impacts on the environment, economy,
and communities, underpin international
agreements to accelerate the transition to
a low carbon economy. A range of actions
are being undertaken by governments,
regulators, the corporate sector and
individuals, consistent with global
agreements, including the Paris Agreement.
One potential response is the re-introduction
of a regulated price on carbon in Australia.
Adbri’s manufacturing includes the process
of calcination of limestone to produce clinker
and lime. This chemical reaction produces
carbon dioxide. No current technology is
commercially available at scale to eliminate
these process emissions which account for
over half of Adbri’s total operational GHG
emissions. For this reason, clinker and lime
manufacturing are considered hard-to-abate
industrial processes.
The transition to a low carbon economy
could potentially impact the cost of
production, useful lives of assets, research
and development and capital expenditure
aligned to the Company’s NZE Roadmap,
financial expenses, provisions and
contingent liabilities and a reduction in
demand from customers if Adbri’s products
do not meet the market’s expectations in
terms of innovation and emissions intensity.
Apart from the transition impacts, Adbri
also has physical assets that could be
impacted by more intense, acute weather
events or slow onset events such as rising
sea levels or changes to rainfall patterns.
In addition, there is the potential that
Adbri’s actions or inactions may not meet
stakeholder expectations resulting in
regulatory action and/or fines and/or a drop
in share price/class action.
Adbri’s actions in response to climate
change may also impact on its ability
to retain and attract employees.
Adbri 2021 Annual ReportIntroduction and overviewOperational updatesSustainability reportFinancial statements 72
Directors’ report continued
Risk details mitigation continued
Risk
description
Risk scenario
Mitigation
Environ-
mental,
Social and
Governance
(ESG)
consider-
ations
Macro-
economic
conditions
There are growing regulatory pressures and
stakeholder demands for businesses to be
accountable for their ESG performance.
ESG factors include conservation of
the natural world, air and water pollution,
climate change and GHG emissions, social
aspects such as gender and pay equality,
Indigenous rights and reconciliation, data
protection and privacy and boardroom
governance.
Adbri’s operational footprint and activities
are often near residential areas and the
general community.
There is a risk that Adbri may not meet
community and/or other stakeholder
expectations regarding its business
activities or other ESG performance,
potentially leading to stricter licencing
conditions, higher compliance costs
and/or a loss of investor confidence.
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.
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 that are
cyclical and 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; and 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 in Japan, Indonesia and other
South-East Asian countries.
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.
Adbri works closely with its communities 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 potential
environmental impacts.
Priorities and key focus areas have been established by Adbri
within its sustainability framework to drive action and mitigation
of ESG risks including:
– Reducing any adverse environmental impacts
– Developing lower carbon products
– Circular economy approach to use of refuse derived fuel
replacing fossil fuels
– Engaging our people and being an inclusive employer
– Building strong relationships with local communities
– Implementing a Reconciliation Action Plan
– Engaging with the finance and investment community.
Maintaining sound practices to avoid financial related risks
and delivering a return on invested capital for shareholders.
Adbri has diversified its business both geographically and
by sector within Australia and through vertical integration.
This diversity has balanced the exposure of the business
to fluctuations across the regions and its customer base of
construction, infrastructure and mining sectors.
Adbri maintains long-term contracts with major customers and
raw material suppliers to minimise loss of business and earnings
through market cycles.
During 2021, Adbri made or participated in two business
acquisitions: our Mawsons joint venture acquired the
Milbrae concrete and quarry business in NSW, and Adbri
and Barro acquired Metro Quarry Group in Victoria via
a 50/50 joint venture. On 4 November 2021, Adbri also
announced that it had signed an agreement to acquire the
Zanows’ Concrete and Quarries business in Queensland.
This acquisition is scheduled to complete in the first quarter of
calendar year 2022.
These acquisitions progress the Company’s vertical
integration strategy.
73
Risk
description
Risk scenario
Mitigation
Competitive
landscape/
loss of
customer
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.
There are also risks of increased
competition by overseas suppliers directly
entering local markets or customers moving
to a self-supply model through imports.
Regulatory
compliance
With production and distribution sites
across all states and territories of Australia,
Adbri is subject to significant regulatory
requirements in areas such as environment,
licences to operate, employment,
occupational health and safety, and
taxation laws.
Non-compliance or changes to regulatory
requirements could lead to substantial
penalties and cost impositions on
operations.
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 engages proactively with its customer base to
ensure their operational needs are fully met. The Group is also
invested in customer relationship management (CRM) software
and is moving to increase its customer engagement using
metrics such as a net promoter score (NPS).
We continue to develop our product range to address the
changing needs of our customers and the increased focus
on delivering products with a lower carbon footprint.
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, and health, safety,
environment and sustainability;
– the use of engineering solutions to improve operations; and
– regular training and competency testing of employees.
Inclusion of regulatory compliance within the internal
audit scope; and systems, policies and procedures are
designed to instil and foster a proactive and preventative
compliance culture.
Key
equipment
failure
The production of cement and lime involves
large scale manufacturing sites, to obtain
economies of scale. 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
can disrupt production.
Predictive and preventative asset management activities and
business continuity planning identify risks with key equipment
and ensure strategies are in place to prevent or mitigate
risks including holding ‘critical spares’ of key equipment and
contractual arrangements to supplement domestic production
with imported product where required. For insurable events,
to the extent that production is disrupted for periods exceeding
20 days, the Group maintains business interruption insurance
which responds.
Adbri 2021 Annual ReportIntroduction and overviewOperational updatesSustainability reportFinancial statements 74
Directors’ report continued
Risk details mitigation continued
Risk
description
Change of
control
Serious
injury or
fatality
Risk scenario
Mitigation
Adbri’s major shareholder, the Barro Group,
currently hold a beneficial interest in 43% of
the Company’s shares. 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.
Adbri directly employs approximately
1,500 people and operates across
approximately 200 locations, undertaking
cement, lime, concrete and concrete product
manufacturing and distribution activities.
There is a range of potential safety hazards
to which Adbri’s employee and contractor
workforces and visitors are exposed. Where a
serious risk results in the worst-case scenario,
it can lead to serious injury or fatality to
persons while undertaking activities or
attending locations in connection with
the Adbri business. Apart from the direct
workers’ compensation expense, this may
adversely 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.
The Board maintains 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 Chairman, 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, following the appointment of the CEO as
Managing Director during 2021.
The Group’s funding facilities 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 event requiring repayment.
The Australian Competition and Consumer Commission
(ACCC) has concluded that the Barro Group’s 43% shareholding
will not substantially lessen competition. Major rival cement,
aggregates and premixed concrete suppliers will continue to
provide competition.
Adbri has a strong focus on safety and a track record of
safe performance. Continuous improvement and sustaining
excellence in safety remain key priorities for the Group. Adbri’s
Safety Step Change program commenced in 2019 and
introduced the Work Safe, Home Safe vision, in combination
with critical risk management, lifesaving rules, the early
intervention program (InitialCARE), safe transport initiatives
and visible leadership each contributing to the ongoing
reduction in our recordable injuries.
Ongoing consultation, communication, and coordination with
workers through HSE committees, business communications,
HSE alerts, toolbox meetings, 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 verification
and induction system, supports effective communication of
Adbri’s site safety issues and management to the Group’s
relevant stakeholders.
The Group employs dedicated professionals in the field of health
and safety 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.
Critical incident and crisis management procedures are
formalised and rehearsed in case a serious event (safety
related or otherwise) occurs, to guide the Company in its
response and management.
Should a death or very serious injury occur
at an Adbri workplace there is also the risk
of adverse media attention and loss of
reputation, leading to a drop in share price.
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.
75
Risk
description
Risk scenario
Mitigation
Foreign
currency
Production
quality
The Group imports a range of materials
to supplement the capacity of local
production facilities. These purchases are
primarily denominated in United States
Dollars and Japanese Yen. The Company
is exposed to any fluctuations in these
currencies against the Australian Dollar.
The Group’s key products of cement,
lime, concrete, aggregates and masonry
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 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 foreign currency risk to Adbri.
The Group has quality assurance processes across all products,
including the monitoring of inputs into the production process
and testing of final products to ensure compliance with relevant
standards and specifications. The skills of internal quality
control 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.
Cyber attack
Risk of cyber attack or breach of information
security leading to unauthorised access
and loss of, or disruption to, Adbri data or
computer-controlled systems
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.
Energy
pricing
Access to
capital
Potential loss of data or records, interruption
to operations, adverse reputational impacts,
and cost to respond to ransom requests.
Production of cement and lime are energy
intensive and consequently access to
reliable, cost-effective energy is required
to sustain domestic production. Price and
reliability are factors in the selection of
suitable energy sources for production.
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 from 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 expenses.
Adbri further enhanced its security posture via investing in an
external security operating centre to augment security systems,
controls and procedures to provide protection against both
internal and external parties.
Controls are regularly tested by internal and external audit.
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 its investment grade credit metrics,
ensuring the balance sheet can withstand market shocks
and retain the flexibility to fund capital projects and make
investments which deliver earnings growth.
Adbri’s strong credit profile, its ongoing and proactive
engagement with financiers, shareholders and other capital
providers provides the business with multiple avenues to meet
the ongoing funding needs of the business.
As part of its proactive capital management strategies, Adbri
completed an extension of its $950 million finance facilities
in January 2022. Accounting for the extension, the average
maturity profile was 5.1 years at 31 December 2021.
Adbri 2021 Annual ReportIntroduction and overviewOperational updatesSustainability reportFinancial statements 76
Directors’ report continued
Risk details mitigation continued
Risk
description
Risk scenario
Mitigation
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 to limit the risk of increases in
interest rates to Adbri. Detailed information regarding the
Group’s interest rate hedging is contained in the Financial
Statement note disclosures.
Adbri’s vertical integration strategy and balanced geographical
and sector exposure mitigate any potential reduction in
demand from the residential construction sector.
Adbri has a centralised procurement function and international
shipping function with resources expert in sourcing and supply
chain risk management.
Adbri is able to purchase clinker, cement and slag from their
respective spot markets.
Adbri aims to ensure the optimal operation of its manufacturing
and distribution supply chain, including optimal inventory
holdings and minimising manufacturing and distribution costs.
This includes identifying and onboarding as many suitable
vendors (e.g. freight companies) as possible to be able to
maintain competitive tension and to meet our goods and
services requirements.
To support continuity of supply, long-term supply contracts are
in place with overseas suppliers for clinker, cement and slag,
matched with dedicated shipping arrangements.
Interest
rates
The Group’s debt portfolio is exposed to
changes in interest rates, which may result
in increased interest costs.
In addition, should interest rates rise there
is likely to be a flow on effect to demand
for residential housing, in turn potentially
reducing demand for construction materials.
Supply chain
Disruption in the supply of raw materials or
other goods could impact Adbri’s ability to
manufacture and/or deliver its products and
meet market demand.
Adbri relies on imported product for
both domestic processing and supply
direct to its joint venture companies and
other customers.
Adbri is also reliant on its overseas
suppliers’ export capacity, availability of
suitable vessels and the timely delivery of
product to meet its own and its customers’
requirements.
To support continuity of supply, firm supply
and freight contracts are in place.
There are risks of loss of cargo in transit,
shipping delays, supplier production issues
or local natural disasters that may lead to
an inability to supply on time. Adbri may
need to quickly source alternative product
or put other supply arrangements in place
to meet its commitments. There is also a risk
of payment for minimum volumes where a
demand shortfall occurs.
These supply chain risks can also apply
to procurement more generally, such as
pallets, spare parts, plant and equipment
for upgrades, maintenance and everyday
production needs.
Linked to the current skills shortages
arising from COVID impacts and increasing
demand in infrastructure and mining
sectors, is increasing driver unavailability for
distribution of goods resulting in potential
supply chain disruption and increased costs.
77
Risk
description
Trade credit
Risk scenario
Mitigation
Trade credit risk is managed through the assessment of
individual customer credit limits in accordance with delegated
authority levels approved by the Board, which is monitored
along with the ageing of balances outstanding.
Contractual arrangements with customers
include the provision of short-term trade
credit for products 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, are
factored 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 information and 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.
The Group’s Code of Conduct outlines the key principles that
governs the Company’s behaviour and actions which make
clear there is zero tolerance for practices considered as 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.
State of affairs
Other than set out in the Chairman’s Report, Managing Director & Chief Executive Officer’s Review, operating and financial report
on pages 6 to 25 of this Annual Report, no significant changes occurred in the state of affairs of the Group during the financial year.
Events subsequent to the end of the financial year
No matter or circumstance has arisen since 31 December 2021 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, Managing Director & Chief Executive Officer’s Review, divisional and financial report on pages 6 to 25 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 regulations.
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.
During 2021, 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.
Adbri 2021 Annual ReportIntroduction and overviewOperational updatesSustainability reportFinancial statements 78
Directors’ report continued
Environmental performance continued
Cockburn Cement Limited
On 5 November 2019, Cockburn Cement Limited (Cockburn Cement) was informed that the Western Australian 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 asserts that it operates within applicable requirements, denies the charges and has entered a plea of not
guilty to each charge. The trial is listed for hearing from 25 July to 12 August 2022.
On 22 March 2021, DWER notified Cockburn Cement about a further investigation. On 24 January 2022, Cockburn Cement
received a second prosecution notice charging it with six charges of the same offence, alleged to have occurred in the period from
21 January 2020 to 3 April 2020. This prosecution is first before the Magistrates Court of Western Australia on 1 March 2022.
All charges will be determined by the Western Australian Courts.
Cockburn Cement maintains that it operates within applicable requirements. Further information about the Group’s environmental
performance is set out in the 2021 Sustainability Report.
Director profiles
Qualifications, experience, and other directorships and special responsibilities of Directors are set out on pages 64–65 of the
Annual Report.
Directors’ meetings
The number of Directors’ meetings and meetings of committees of Directors held during the financial year and the number
of meetings attended by each Director is as follows:
Director
Board Meetings
RD Barro
Dr VA Guthrie AO1
RR Barro
KB Scott–Mackenzie2
ER Stein3
GR Tarrant
MJM Wright4
ND Miller5
A
14
13
14
14
13
14
9
3
H
14
14
14
14
14
14
9
3
Audit, Risk &
Compliance
Committee
People & Culture
Committee
Safety, Health,
Environment &
Sustainability
Committee
Nominations
& Governance
Committee
A
–
–
–
6
6
6
–
–
H
–
–
–
6
6
6
–
–
A
–
4
4
3
4
–
1
–
H
–
4
4
3
4
–
1
–
A
4
4
–
4
–
–
2
1
H
4
4
–
4
–
–
2
1
A
–
4
–
4
4
–
–
–
H
–
4
–
4
4
–
–
–
A Number of meetings attended.
H Number of meetings held during period of office.
1. Dr Guthrie AO was unable to attend a Board meeting due to personal reasons.
2. Mr Scott-Mackenzie ceased being a member of the People and Culture Committee on 25 October 2021.
3. Ms Stein was unable to attend a Board meeting scheduled at late notice due to personal reasons.
4. Mr Wright was appointed to the Board on 25 June 2021, he was also appointed to the Safety, Health, Environment and Sustainability Committee on
26 July 2021, the People and Culture Committee on 25 October 2021 and the Nomination and Governance Committee on 25 October 2021.
5. Mr Miller was appointed as Managing Director on 5 October 2021 and was appointed to the Safety, Health, Environment and Sustainability Committee
on 25 October 2021.
Directors’ interests
RD Barro
Dr VA Guthrie AO
RR Barro
KB Scott–Mackenzie
ER Stein
GR Tarrant
MJM Wright
ND Miller1
79
Ordinary
shares
279,178,329
105,000
278,787,781
20,000
53,403
30,000
–
150,424
1. As set out in the Company’s announcement of 5 October 2021, the Board approved the grant of Performance Rights to Mr Miller with a value of $1,524,000,
subject to shareholder approval at the Company’s 2022 Annual General Meeting. Mr Miller also has awards of 1,227,357 that are subject to performance
conditions, issued under Adelaide Brighton Limited’s Executive Performance Share Plan.
Full details of the interests in share capital of Directors of the Company are set out in the Remuneration Report on pages 81–101 of this
Annual 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 81–101 of this Annual 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 as an additional Company
Secretary on 11 December 2019, to assist with secretarial duties should the principal Company Secretary be absent. Mr Hughes
resigned as an additional Company Secretary on 10 December 2021 when he took up a position within Adbri’s Mawsons joint venture.
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.
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.
The Company was not liable during 2021 under such indemnities.
Rule 9.5 of the constitution provides that the Company may purchase and maintain insurance or pay or agree to pay a premium for
insurance for ‘officers’ (as defined in the constitution) against liabilities incurred by the officer in his or her capacity as an officer of the
Company or of a related body corporate, including liability for negligence or for reasonable costs and expenses incurred in defending
proceedings, whether civil or criminal.
During the year, the Company paid the premiums in respect of Directors’ and Officers’ Liability Insurance to cover the Directors and
Secretaries of the Company and its subsidiaries, the Executives and any other officers of each of the divisions of the Group, for the
period 1 May 2021 to 30 April 2022. 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.
Adbri 2021 Annual ReportIntroduction and overviewOperational updatesSustainability reportFinancial statements 80
Directors’ report continued
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 31 to the Financial Statements on page 157 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 31, 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 160.
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 Statements 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
1 January 2018
1 January 2019
1 January 2020
1 January 2021
Total
Expiry date
30 September 2022
30 September 2023
30 September 2024
30 September 2025
The exercise price for these Awards is nil. Further details of Awards are set out in Note 27 and the Remuneration Report.
Registered office
The registered office of the Company is Level 1, 157 Grenfell Street, Adelaide, South Australia 5000.
Corporate governance statement
The Corporate Governance Statement is available on the Adbri Limited website and may be accessed via the following:
www.adbri.com.au/who-we-are/corporate-governance/
Signed in accordance with a resolution of the Directors.
Number
of
awards
80,126
481,086
869,476
993,655
2,424,343
Raymond Barro
Chairman
Dated: 24 February 2022
Remuneration report
81
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 2021
Remuneration Report.
A year of new opportunities and challenges
The 2021 financial year has been one of continued responsiveness for the Adbri Group, particularly in the context of the direct
challenges presented by the COVID pandemic. Over this period, the Group has demonstrated great flexibility to deliver a robust
financial performance and continued supply of products to all our customers, while concurrently managing the impacts to
operations created by the uncertainty of Australia’s COVID response. Despite these impacts, Adbri reported an underlying net
profit after tax including property (NPAT) of $119.1 million for the year ended 31 December 2021, 3% higher than the prior period,
and a reported net profit after tax of $116.7 million which was 25% higher than the prior period.
This financial performance was robust, particularly given the prevailing challenging conditions. The Group’s underlying and
reported NPAT results exceeded stretch targets, with strong EBIT performance for the Concrete and Aggregates and Masonry
divisions. The Executive team continued to meet the challenges of the unstable and dynamic operating environment, with
continued government-imposed COVID lockdowns impacting our operations, our supply chain networks and our shipping
channels. This imposed unexpected costs on the business, which to a large degree were offset by exceptional management
efforts to deliver increased revenue in our cement, concrete, aggregate and masonry businesses and to hit our cost savings
program targets.
The Board is also conscious of the growing focus on strategy and sustainability metrics, and their importance in measuring
and rewarding executive performance. While the Group has recognised the significance of sustainability measures through
our short-term incentive measures to date, the publication of our Net Zero Emissions Roadmap in 2022 will provide us with an
improved understanding of our pathway to net zero emissions and how this can be embedded in our business going forward.
Executive movements in 2021
On the back of what has been a challenging two years for the business and an increasingly tight labour market, retention of talent
is a key risk for the Group. Keeping our workforce safe, healthy and motivated is increasingly difficult given the physical and mental
health impacts COVID is having on the Australian community. Coupled with the highly competitive nature of the employment
market which has been exacerbated by the low level of migration of overseas talent entering the Australian workforce during
COVID border restrictions, the retention of talent is critical. A flexible approach to work and market competitive pay is a key factor
in attracting and retaining the best people for our Company.
In January 2021, Brett Brown and Andrew Dell were appointed into the newly created roles of Chief Operating Officer – Cement
and Lime and Chief Operating Officer – Concrete, Aggregates & Masonry respectively, following a restructure to better match the
changing business needs. Details of their remuneration arrangements for 2021 are outlined in later sections.
In October 2021, the Board appointed Nick Miller, the Company’s Chief Executive Officer (CEO), to the Board as Managing Director,
recognising that Nick has been instrumental in driving the transformational agenda for the Company since commencing as CEO
in January 2019. His appointment to the Board strengthens the alignment of the Managing Director to the execution of the Group’s
strategy to deliver sustained long-term business growth. Changes to the Managing Director and CEO’s remuneration package and
executive services agreement are outlined in later sections.
Remuneration in 2021
Executive fixed remuneration
Robust benchmarks were used to review executive remuneration in line with the Group’s remuneration policy and market
competitiveness. Recognising the tough business challenges that have arisen throughout 2021, the Board determined that no
executive fixed remuneration increases should be made during 2021, except those relating to the changes in roles as announced
in the December 2020 restructure.
In making this determination, the Board has continued to balance the need for an equitable executive remuneration framework
that is aligned with shareholder interests while maintaining a motivated executive team and workforce in an increasingly
competitive employment environment.
Adbri 2021 Annual ReportIntroduction and overviewOperational updatesSustainability reportFinancial statements 82
Remuneration report continued
Short-Term Incentive (STI) outcomes
The Group’s financial targets for 2021 were set in late 2020, with STI targets set slightly above industry growth forecasts to
challenge the team to improve performance across the business. In 2021, the non-financial performance conditions for the
Executive STI were also revised, with the intention of heightening executive focus on the strategic business priorities of safety,
inclusivity, customer focus and sustainable growth.
In assessing financial performance for the STI, the Board reviews all significant items, both positive and negative, and considers
whether it is appropriate to adjust for their impact on STI outcomes. In assessing financial performance for the 2021 STI, the
Board determined that a range of factors impacted Company performance including COVID-related supply chain constraints, the
delivery of major capital projects including the refurbishment of the Accolade and the Birkenhead operations, the sale of surplus
land and the considerable progress reported on strategic projects including several key acquisitions. These are discussed in
further detail on pages 12 to 16 of this Annual Report.
The Board’s overall assessment against targets resulted in the level of award for all executives, including the Managing Director
and CEO, in the range of 79% to 87%, of the potential maximum STI. However, the Board has considered the significant items that
affected performance and has moderated the overall result to 80% for all Executives. This better aligns Executive outcomes with
the shareholder experience, including dividends and value creation in the asset base.
Long-Term Incentive (LTI) outcomes
Executive alignment with shareholder interests is an important component of the Company’s remuneration policy, with long-term
improvement in shareholder value embedded in the design of the LTI Plan.
During 2021, the 2017 LTI Awards were tested for both the Total Shareholder Return (TSR) and Earnings Per Share (EPS)
performance conditions. Results against both performance conditions failed to meet the threshold for vesting, and as a result,
all Awards lapsed, without any vesting to Executives. No Board discretion was applied given the lack of growth in the share price
over the full year period.
Other Executive arrangements
In 2018, a retention payment was granted to Andrew Dell, the full details of which were disclosed in the 2018 Remuneration Report.
The payment was structured to bring forward the vesting of future STI and LTI. In subsequent years, STI and LTI Awards have been
adjusted downwards to reflect the prepayment of the retention payment, including the value of Andrew’s 2020 STI which was
adjusted downwards to zero. In September 2021, the Board determined to reduce the balance of Andrew’s outstanding retention
downwards to zero, in recognition of his ongoing service and strong performance.
Non-executive Director fees
Given the exceptional economic circumstances during the year, in line with Executive fixed remuneration, no increases were
made to Directors’ fees payable in 2021.
Managing Director and CEO Performance Award (MD Performance Award)
The appointment of the CEO to the Board as Managing Director in October 2021, included a review of the Managing Director
and CEO’s remuneration arrangements. The Board determined a remuneration adjustment for the Managing Director and CEO
was appropriate to maintain market competitiveness, and to recognise the Managing Director and CEO’s vital role in setting the
transformational agenda for Adbri and executing on Adbri’s long-term strategy. The remuneration adjustment provides continuity
and greater certainty for our shareholders in a rapidly changing environment as well as the CEO’s expansion of responsibilities that
come with the appointment as Managing Director.
To ensure alignment with shareholders’ interests and the focus on strategic growth of the Group, the Board considered that
the most effective remuneration adjustment would be a one-off LTI equity grant under the Executive Performance Share
Plan rather than adjustments to the fixed remuneration or other elements of the Managing Director and CEO’s remuneration
arrangements. The equity grant is proposed in addition to the 2022 LTI and will be subject to the achievement of strategic and
sustainable growth initiatives over a three-year period. The Performance Award vests in full on 31 December 2024 provided that
the Managing Director and CEO remains in the role at that time. The performance measures that are required to be delivered
align the Managing Director and CEO’s incentives with strategic and specific growth ambitions of the Company above and
beyond the existing LTI Plan financial measures.
Recognising the importance of this grant to shareholders, the Board determined that the MD Performance Award be subject
to shareholder approval at Adbri’s 2022 Annual General Meeting. Please see Section 4 for further detail on the
MD Performance Award.
83
Conclusion
The Board remains focused on maintaining a remuneration framework which attracts, motivates and retains a high performing
Executive team and a diverse and inclusive workforce. Remuneration structures are designed to align employee outcomes with
the shareholder experience over the long term. Governance structures are in place to ensure integrity and transparency around
the establishment of sound remuneration frameworks and the measurement of performance and remuneration outcomes.
As Chair of the People and Culture Committee, I am committed to ensuring that we can respond to the challenges of the
changing employment environment to retain the best talent, that our remuneration framework and decisions consider the
perspectives of our key stakeholders, and that the Company is appropriately resourced with a highly motivated and incentivised
workforce to deliver value to our shareholders.
Thank you for your interest in our Remuneration Report.
Dr Vanessa Guthrie AO
Chair of People and Culture Committee
Adbri 2021 Annual ReportIntroduction and overviewOperational updatesSustainability reportFinancial statements 84
Remuneration report continued
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 2021. 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.
Unless otherwise indicated, the following people were KMP for the full 2021 financial year:
Name
Executives
Nick Miller1
Theresa Mlikota
Brett Brown
Andrew Dell
Position
Managing Director and Chief Executive Officer
Chief Financial Officer
Chief Operating Officer – Cement and Lime
Chief Operating Officer – Concrete, Aggregates & Masonry
Non–executive Directors
Current
Raymond Barro
Chairman
Dr Vanessa Guthrie AO
Deputy Chair and Lead Independent Director
Rhonda Barro
Non-executive Director
Ken Scott-Mackenzie
Independent Non-executive Director
Emma Stein
Geoff Tarrant
Michael Wright2
Independent Non-executive Director
Non-executive Director
Independent Non-executive Director
1. Nick Miller was appointed to Managing Director and CEO on 5 October 2021.
2. Michael Wright was appointed as an Independent Non-executive Director on 25 June 2021.
85
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 Executive and Non-executive Director remuneration is outlined below:
Board
P&C Committee
Management
Our governance framework
The Board reviews and approves:
– The overall remuneration policy;
– Non-executive Director remuneration; and
– The remuneration of the Managing Director
and CEO, including the Managing Director
& CEO’s participation in the short-term and
long-term incentive schemes.
– Recommendation from the Managing
Director and CEO on remuneration for
Executives (other than the Managing Director
and CEO), including their participation in
incentive schemes; and Awards under
incentive schemes performance targets,
assessment of the extent to which
performance conditions have been satisfied.
Consultation with shareholders
and other stakeholders
The P&C Committee review and
make recommendations to the
Board on:
– The remuneration policies and
framework for the Group;
– Non-executive Director
remuneration; 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).
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 advisors is
used to assist the Board – it is not a substitute for the Board and P&C
Committee process.
3 Executive remuneration policy and framework
3.1 Remuneration policy
The Board ensures the remuneration policy is 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.
Attract and retain
Pay-for-performance
Behaviours and culture
Remuneration principles
Provide competitive
rewards to attract and
retain a highly capable
Executive team.
Reflect the level of
responsibility, potential
and achievement for
delivering business
strategy and results.
Differentiate reward for behaviour and performance to reinforce our
vision, strategy and operational objectives.
Have regard to market practice and market conditions to attract the
necessary skill sets, enabling the organisation to strategically foster
the ‘One Adbri’ culture of Transformation, Growth and Delivery.
Shareholder alignment
Market competitive
Transparent
Encourage sustainable
long-term growth and
value aligned to the
interests of shareholders.
Salary with benefits
appropriately assessed
and positioned against
key national markets
and peer comparator
companies.
Provide transparency and clarity on what, to whom and on what basis
remuneration has been paid.
Ensure rewards are appropriate for actual performance delivery and
outcomes.
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Remuneration report continued
3 Executive remuneration policy and framework continued
3.2 Total remuneration framework
Adbri’s remuneration strategy is designed to attract, motivate and retain high-calibre individuals for achieving high performance
and delivering solid, sustainable long-term results for shareholders, while conforming to rigorous governance and risk
management principles.
The Managing Director and CEO along with Executives, are rewarded based upon a Total Remuneration Framework. The design of
the framework is based upon our reward principles comprised of three components: fixed annual remuneration (FAR), short-term
incentive (STI) and long-term incentive (LTI) as set out below.
Executives are also eligible for the receipt of shares issued in accordance with Adbri’s Tax Exempt Employee Share Plan (TEES Plan).
See Note 27 of the Financial Statements for further details.
FAR
STI
LTI
Purpose
Provide competitive base pay
to attract and retain the skills
needed to manage the business.
To reward achievement of financial
and non-financial performance
targets linked to the Group’s
annual business objectives.
To focus Executives on the
Group’s long-term business
strategy to create and protect
shareholder value over a
four-year performance period.
Link to Adbri’s
strategy and
performance
– Determined by the role’s
– Performance is assessed
scope and complexity, and the
incumbent’s skills, experience,
knowledge and capability.
– Set with reference to market
benchmarks in the relevant
and comparable industry
sectors in Australia.
against a balanced scorecard,
comprising financial and
non-financial performance
measures.
– Financial performance
measures are set with
reference to market
conditions, relevant industry
performance, exchange rates
and associated costs.
– Seeks to align executive
remuneration with the
company’s strategic direction,
thereby creating long-term
shareholder value.
3.2.1 Remuneration structure
The following diagram sets out the remuneration structure and timing for delivery for the Managing Director and CEO and Executives.
Year 1
Year 2
Year 3
Year 4
Base salary,
statutory
superannuation
and other
benefits/
allowances
50% cash
FAR
100% cash
STI
Subject to
financial
(80%) and
non-financial
performance
(20%)
50% in cash
50% in deferred
rights
25% deferred rights
Shares allocated on exercise subject to
a disposal restriction
25% deferred rights
Shares allocated on exercise subject to a disposal restriction
LTI
Subject to
financial
performance
100%
performance
rights (Awards)
50% subject to Total Shareholder Return (TSR)
25% subject to Earnings Per Share (EPS)
25% subject to Return on Capital Employed (ROCE)
87
3.2.2 Remuneration mix
The following charts outline the target remuneration mix for Executives.
Managing Director and CEO
Other Executives (Avg)
FAR
STI
LTI
FAR
STI
LTI
33%
34%
33%
41%
34%
25%
4 2021 Executive remuneration approach
4.1 Fixed annual remuneration
FAR 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.
Brett Brown and Andrew Dell were appointed on 1 January 2021 to newly created roles of Chief Operating Officer – Cement and Lime
and Chief Operating Officer – Concrete, Aggregates & Masonry respectively, following a restructure. Details of their 2021 remuneration
are in Section 7 of this Report.
No other Executive remuneration increases were made in 2021. Following the 2021 annual remuneration review, a modest average
increase of around 3% will be made for Executives in 2022, in recognition of the competitive and challenging employment market and
to align with market remuneration levels.
4.2 Short-term incentive
Adbri’s STI is the Company’s ‘at risk’ component of the Total Remuneration Framework for Executives.
A summary of the key features of the 2021 STI is as follows:
Feature
Description
General
Eligibility
The Managing Director and CEO and Executives who are able to have a direct impact on the Group’s
performance against the relevant performance hurdles.
Opportunity
Managing Director and CEO: 100% of FAR
Other Executives: 80% of FAR
Vehicle
50% of STI awards will be delivered in cash and 50% of STI awards will be deferred into rights (Deferred Rights)
(unless otherwise determined by the Board).
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Remuneration report continued
4 2021 Executive remuneration approach continued
4.2 Short-Term Incentive continued
Feature
Description
Performance conditions
Overview
The STI is assessed against a mix of financial (80%), strategy and sustainability measures (20%), and is subject to
a safety gateway.
Financial measures are intended to align the interests of Executives with shareholders, ensure they are rewarded
on the Group’s annual business objectives and create sustainable value for shareholders from both earnings
and cash flow.
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 such as 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.
Strategy and sustainability measures 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.
Stretch targets provide incentives beyond budget to enhance shareholder returns.
All performance conditions are set by the Board.
The weightings of financial and strategy and sustainability performance conditions vary by role, as outlined below.
Financial (80%)
Group and divisional net profit after tax (NPAT)
Performance condition
Divisional earnings before interest and tax (EBIT)
Group operational cash flow
Strategy and
Sustainability (20%)
Strategy and sustainability measures
Group
Executive
Divisional
Executive
50%
N/A
30%
20%
35%
20%
25%
20%
In addition, a modifier applies to the STI, which provides the Board discretion to manage the performance on a
range of factors, including fatalities.
See Section 5.2.1 for further information on the 2021 STI performance conditions.
Performance
conditions
and
weightings
Calculation of awards
Vesting
schedule
The portion of the STI subject to financial measures will 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%
The portion of the STI subject to strategy and sustainability measures is set at a stretch level of performance.
Strategy and sustainability target achieved
STI % for strategy and sustainability target
Below threshold
Between threshold and target
At target
Stretch
80%
Pro rata
100%
120%
89
Feature
Description
Timing of
the award
Assessment of performance against the performance conditions will occur following finalisation of the Group’s
full year results. If performance is below the threshold/ranking level for any performance condition, no portion of
the STI subject to that condition will vest.
The cash component is paid following the release of the Company’s full year results in February each year.
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 2021 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 2023 (two-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 2024 (three-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 fully-paid ordinary shares in Adbri. 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.
Governance
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 of
employment
Where an Executive resigns or is terminated for cause, all STI entitlements will be forfeited. In all other
circumstances, a pro-rata portion of the STI (based on the proportion of the performance period elapsed)
will remain on foot and may be paid at the end of the performance period, to the extent that the applicable
performance conditions are satisfied at that time.
The Board retains discretion to determine a different treatment.
Change of
control
On a change of control, a pro-rata portion of the STI (based on the proportion of the performance period
elapsed) may be paid, to the extent the applicable performance conditions are satisfied at that time.
The Board retains discretion to determine a different treatment.
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4 2021 Executive remuneration approach continued
4.3 Long-term incentive
Adbri’s Executive Performance Share Plan (LTI) seeks to reward executives for creating strong shareholder value over the medium and
longer term relative to the market. A summary of the key features of the 2021 LTI are as follows:
Feature
Description
General
Eligibility
The LTI is offered to Executives whose behaviour and performance have a direct impact on the Group’s
long-term performance.
Opportunity
Managing Director and CEO: 100% of FAR
Other executives: 50% – 70% of FAR
Vehicle
Rights to receive fully paid ordinary shares in Adbri (Awards).
Performance conditions, vesting and exercise
Performance
conditions and
weightings
Awards will only vest to the extent the following performance conditions are met over the four-year period
from 1 January 2021 to 31 December 2024:
– Total Shareholder Return (TSR) – 50% weighting;
– Earnings Per Share (EPS) – 25% weighting; and
– Return on Capital Employed (ROCE) – 25% weighting.
The 2021 LTI performance conditions are outlined below. Following the annual company results
announcement concerning the final year of the performance period, the Board will evaluate and test
performance against each performance condition to determine the extent to which the 2021 LTI vests.
Condition
Detail and vesting schedule
TSR (50%
weighting)
The Company’s TSR growth over the performance period to equal or exceed the
growth in the median company in a bespoke comparator group, being a select group
of 21 companies on the S&P/ASX that Adbri competes with for capital and talent.
TSR has been chosen because it provides a link between Executive remuneration and
changes in value experienced.
The peer group for the TSR performance condition is comprised of the following
companies:
Boral Limited
Iluka Resources Limited
Orica Limited
Brickworks Limited
Incitec Pivot Limited
Orora Limited
CSR Limited
James Hardie Industries plc Oz Minerals Limited
Downer EDI Limited
Lendlease Group
Regis Resources Limited
Evolution Mining Limited
Mineral Resources Limited
Reliance Worldwide
Corporation Ltd
Fletcher Building Limited
Northern Star Resources
Limited
Sims Metal Management
Limited
IGO Limited
Nufarm Limited
St Barbara Limited
TSR growth will be measured using average share price over the three months ending
31 December 2020 and 31 December 2024 respectively.
TSR rank in bespoke peer group
Less than 50th percentile
Equal to 50th percentile
Awards subject to TSR condition that
vest (%)
0%
50%
Between 50th and 75th percentile
Pro-rata between 50% and 100%
At or above 75th percentile
100%
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Feature
Description
Performance
conditions and
weightings
continued
Condition
Detail and vesting schedule
EPS (25%
weighting)
The compound annual growth in the Company’s EPS over the performance period to equal
or exceed 5% p.a., based on the actual EPS disclosed in the audited annual accounts of the
Company for the financial year ended 31 December 2021 (as the EPS ‘base point’) and the
financial year ended 31 December 2024. The Board retains discretion to adjust earnings across
the performance period for individually material items.
EPS has been chosen because dividends form a fundamental value proposition to
shareholders in the sector in which Adbri operates.
EPS
Less than 5%
At 5%
Between 5% to 10%
At 10% or greater
Awards subject to EPS condition that
vest (%)
0%
50%
Pro-rata between 50% and 100%
100%
ROCE (25%
weighting)
The average of the Company’s ROCE in each year over the performance period to equal or
exceed 0.5% p.a. below the average of each annual budget ROCE over the relevant period.
The Board will retain absolute discretion to adjust earnings (e.g. due to acquisitions,
restructuring, capital expenditure) and funds employed across the performance period when
testing ROCE.
ROCE has been chosen to ensure that near term decision making delivers benefits to
shareholders over the longer term.
ROCE
Awards subject to ROCE condition that
vest (%)
More than 0.5% p.a. below average of
annual budget ROCE
0.5% p.a. below the average
annual budget ROCE
0%
50%
Between 0.5% p.a. below & 0.5% p.a. above
the average annual budget ROCE
Pro-rata between 50% and 100%
Above 0.5% p.a. or higher than the
average of annual budget ROCE
100%
The Board retains discretion to adjust the performance conditions or vesting schedules in exceptional
circumstances to ensure a participant is neither advantaged nor disadvantaged by matters that may
materially affect achievement of the performance conditions.
Exercise of
Awards
Following testing of the performance conditions, vested Awards will be automatically exercised. One
fully paid ordinary share in Adbri (Share) will be allocated for each vested Award.
Awards are granted at no cost to the Executive and no amount is payable by the Executive on the exercise
of the Awards.
Holding period
To strengthen the alignment between the interests of the shareholders and executives, as well as
encourage a focus on longer term shareholder value, a holding period will apply to Shares allocated upon
vesting of Awards, commencing from the date of allocation to 1 May 2026.
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4 2021 Executive remuneration approach continued
4.3 Long-term incentive continued
Feature
Description
Governance
Clawback
The rules of the Plan provide the Board with the ability to clawback Awards or Shares 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).
Under the Company’s Share Trading Policy, Company securities acquired under an incentive plan must
never be hedged prior to vesting or while subject to a holding lock or similar dealing restriction. Until the
Awards vest, Executives have no legal or beneficial interest in Shares, no entitlement to receive dividends
and no voting rights in relation to any securities granted under the 2021 LTI, 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 are subject to the generally applicable insider
trading prohibitions.
Cessation of employment or a change of control
Cessation
Where an Executive resigns or is terminated for cause, all LTI entitlements will be forfeited. In all other
circumstances, a pro-rata portion of the LTI (based on the proportion of the performance period elapsed)
will remain on foot and may vest at the end of the performance period, to the extent the applicable
performance conditions are satisfied at that time.
The Board retains discretion to determine a different treatment.
Change of control
On a change of control, a pro-rata portion of the LTI (based on the proportion of the performance period
elapsed) may vest, to the extent the applicable performance conditions are satisfied at that time.
The Board retains discretion to determine a different treatment.
93
4.4 Managing Director and CEO Performance Award (MD Performance Award)
In 2021, a review of the Managing Director and CEO’s remuneration arrangements was conducted to understand market
competitiveness, and the expansion of responsibilities as a result of being appointed to the Board in October 2021. The review
indicated that the Managing Director and CEO’s total remuneration was below Adbri’s preferred remuneration market positioning.
In addition, the Managing Director and CEO has been instrumental in setting the transformational agenda for Adbri and will remain
essential to the delivery of the Company’s strategy over the long term.
In light of this, the Board considers a remuneration adjustment is appropriate to maintain market competitiveness and reflect the
Managing Director and CEO’s critical role in executing Adbri’s transformation and growth agenda. To ensure the remuneration
adjustment is also aligned to maintaining and growing long-term shareholder value, a one-off LTI equity grant is proposed to be made
instead of adjustments to his fixed remuneration or other elements of his remuneration arrangements. This is in addition to the LTI plan
and established further strategic performance targets for the Managing Director and CEO.
The following table sets out the key terms of the MD Performance Award. The grant is subject to shareholder approval at Adbri’s 2022
Annual General Meeting, and further details are provided in the Company’s Notice of Meeting.
Feature
Description
Opportunity
100% of FAR, which will bring the Managing Director and CEO’s maximum total remuneration in line with Adbri’s
remuneration positioning policy.
Vehicle
Rights to receive fully-paid ordinary shares in Adbri (Awards)
Performance
measures
Vesting of Awards will be subject to achievement of strategic and sustainable growth initiatives over the
three-year period from 2022 to 2024.
The proposed performance measures will be aligned with the following strategic initiatives:
a. Business transformation: Initiatives related to diversifying, expanding, and optimising the Company’s asset
and market base.
b. Enhance Adbri market position: Initiatives related to enhancing the Adbri brand, reputation and recognition,
as viewed by customers, employees, stakeholders and the government.
c. Climate change response: Achievement of emission reduction targets and initiatives related to emissions
reduction technologies.
d. Creating one Adbri: Initiatives related to gender and cultural diversity and enhancing organisation capability.
The Board has set meaningful and stretch metrics to support these strategic initiatives and while the
performance targets remain commercial in confidence, details of the performance assessment and vesting
outcomes will be disclosed in subsequent Annual Reports.
4.5 Other Executive arrangements
In 2018, a retention payment was granted to Mr Dell, the full details of which were disclosed in the 2018 Remuneration Report. The
payments were not ‘additional’ lump sum payments but had been structured such that they bring forward the vesting of part of future
STI and LTI. Accordingly, following payment of these amounts, existing or future STI or LTI Awards were adjusted downwards to reflect
the prepayment of these incentives, including the value of Mr Dell’s 2020 STI being $198,114 which was adjusted downwards to zero.
In September 2021, the Board resolved to reduce the balance of outstanding retention (being $147,740) for Mr Dell down to zero, on
the basis the Company’s financial performance in recent years has created a delay in the full offset being realised in the expected
timeframe of three financial years.
Adbri 2021 Annual ReportIntroduction and overviewOperational updatesSustainability reportFinancial statements 94
Remuneration report continued
5 Linking executive remuneration to company performance
5.1 Company performance
The Group delivered a robust profit performance, with underlying net profit after tax (NPAT) of $119.1 million for the year ended
31 December 2021, 3% higher than the prior year, and a reported NPAT of $116.7 million, 25% higher than the prior period. This was a
good result in light of the challenge of change in the long-term lime contracts, the impact of government-imposed COVID shutdowns
across some of our operations and delays to our shipping and logistics channels which increased demurrage and transportation costs.
During the year, and despite significant operational disruption, the Company advanced a number of strategic initiatives to transform
the business, which will deliver long-term value for shareholders. These include:
– improvements to operational efficiency, particularly at our Birkenhead operation;
– increased market position in the infrastructure market; and
– value accretive and synergistic acquisitions that build-out our vertically integrated position in supply constrained markets.
The operational cash flow performance condition for the 2021 STI was partially met, primarily due to volume recovery and strong
working capital management. The balance sheet remains strong with gearing steady at 34.5% and leverage within the Company’s
preferred bands of 1 – 2 x EBITDA. A final dividend of 7.0 cents per share has been declared for shareholders, bringing total dividends
for the year to 12.5 cents per share.
A five-year summary of key financial performance metrics of the Company is set out below.
Sales
NPAT reported
NPAT underlying
$m
$m
$m
Share price
$/share
Dividends declared
cents/share
Franking
Operating cash flow
%
$m
Basic earnings per share
cents
5.2 STI
5.2.1 Performance assessment
2017
1,559.6
182.7
197.8
6.52
24.5
100.0
224.2
28.1
2018
1,630.6
185.3
190.9
4.27
28.0
100.0
244.7
28.5
2019
1,517.0
47.3
122.9
3.46
5.0
100.0
193.2
7.3
2020
1,454.2
93.7
115.6
3.35
12.0
100.0
256.2
14.4
2021
CAGR %
1,569.2
116.7
119.1
2.82
12.5
100.0
195.2
17.9
0.6
(10.6)
(11.9)
(18.9)
(15.5)
N/A
(3.4)
(10.7)
STI outcomes reflect Executive accountability for performance outcomes delivered throughout the year. In respect of financial targets,
the Board compares the actual results against the budget for the reporting year and assesses the degree to which the Group meets
targets. For the Managing Director and CEO and the Executive team, the Board considers performance against the agreed strategy
and sustainability targets.
The targets for the 2021 STI were set against an uncertain background, particularly due to expected declining building activity and risk
with the ongoing COVID pandemic impact. Additionally, the Board considers adjustments for exceptional, abnormal, or extraordinary
factors which may affect the Group’s performance during the year.
For 2021 results, the Board considered the material improvement in revenue, recovery of lime contract volumes and progress on cost
reduction initiatives were offset by the cost overruns related to the delayed return of the Accolade and extended shutdown time at our
Birkenhead facility. These were taken into consideration when assessing performance against STI operating cash flow and Group NPAT
performance conditions.
95
Vesting
outcome
100%
60–100%
69%
0%
92%
Performance condition
Reason chosen
Performance assessment
Financial performance – 80% weighting
Group NPAT
NPAT is used as the primary
condition for measuring
Group financial performance
as it closely reflects
shareholder experience.
Divisional EBIT
The Chief Operating Officers
of the operational divisions
have a component of the STI
attributed to the contribution
of their division, which is
assessed using EBIT.
Group NPAT was assessed as meeting the STI
stretch target. A key driver of performance was
our ability to provide our customers with reliable
domestic supply. This was delivered despite key
logistics, cost and operational challenges faced
by many Australian businesses. It is recognised
that the achievement of the stretch target has
been aided by market conditions. As such,
the profit contribution from the sale of Hilltop
land has been excluded from the performance
assessment. In addition, the Executives delivered
a number of medium and long-term strategic and
cost saving initiatives. The underlying profit after
tax excluding profit on land was $113.0 million,
meeting stretch targets.
The Cement and Lime team successfully
secured lime volumes to supply Alcoa through to
January 2023 as well as securing new customers,
delivering a significant recovery of lime volumes
to the Group and met the STI threshold
performance. The Concrete, Aggregates &
Masonry team likewise performed well and met
stretch targets.
Group operational
cash flow
Operational cash flow
recognises the importance
of cash management to drive
shareholder value through
an ability to return capital to
shareholders.
The operational cash flow measure was met
primarily due to volume recovery and strong
working capital management. Absolute working
capital levels have risen mainly due to increased
turnover levels in the last months of 2021. Debtor
days significantly improved.
Safety and sustainability performance – 20% weighting
Safety
Drive improvements
in safety from
December 2020
Inclusivity
Increase female
participation in
the workforce
The health and safety of our
people is our number one
priority. In addition to this
performance condition, a
safety gateway also applies
to the 2021 STI.
To support the achievement
of the Company’s long-term
targets with respect to
female participation in the
workforce.
Significant improvements have been made
in our lead indicator areas, however the 10%
improvement in TRIFR required was not met, with
TRIFR increasing to 6.3 in 2021.
The KPI for 2021 targeted a 16.3% female
participation rate. The Group’s actual
performance against this target was 16.1%
female participation leading to a 92% payout
against this STI. Importantly, we have activated
a range of initiatives to help reach this target
including 50% of all shortlisted candidates for a
role being female and partnerships with learning
and community organisations and labour hire
companies to increase the female candidate
talent pool.
Adbri 2021 Annual ReportIntroduction and overviewOperational updatesSustainability reportFinancial statements 96
Remuneration report continued
5 Linking executive remuneration to company performance continued
5.2 STI continued
5.2.1 Performance assessment continued
Performance condition
Reason chosen
Performance assessment
Customer focus
Drive value through
enhanced customer
engagement
Sustainable growth
(Birkenhead)
Driving better value at
Birkenhead through
increased use of RDF and
cost savings
Sustainable growth
(carbon emissions)
Reporting of a carbon
reduction roadmap to the
Board with a reduction in
scope 1 and 2 emissions
from 2019
Sustainable growth
(Managing Director and
CEO only)
Drive accretive value by
implementing agreed
strategic direction
This strategic pillar is about
maintaining a key focus on
customers and their needs.
The Executive team has
been set a challenge to
develop new core systems
and customer satisfaction
metrics and to deliver market
share growth.
A focus area for our
operational teams is driving
value for shareholders
through lower cost
operations and lower
carbon emissions through
a benchmarking study at
our major cement facility in
Birkenhead, South Australia.
STI stretch targets were met through the design
and implementation of customer care plans, the
successful implementation of a CRM platform
(Salesforce) with customer satisfaction now being
tracked through Qualtrix (both implemented
in November 2021). Future metrics will include
customer net promoter scores and customer
satisfaction index targets.
STI targets were set with respect to the levels
of RDF usage, and cost per tonne improvement
initiatives identified. The stretch target of 30%
RDF usage was met during the year. STI measures
were also set with respect to carbon reduction
targets, with the stretch target of a 3.8% reduction
for Scope 1 and 2 emissions (2019 base) being
met during 2021. Following our aspirational
commitment to net zero by 2050 we commenced
work on our Net Zero Emissions Roadmap
and provided a number of progress reports to
the Board. We have committed to release the
roadmap ahead of our 2022 AGM.
The Managing Director
and CEO was also set an
additional target to drive
accretive growth through
the delivery of a strategic
roadmap and identified
strategic projects.
The stretch targets were met through the
ongoing delivery of the Company’s vertical
integration strategy and achievement of
50% of milestone objectives for priority 1
initiatives, which included strategic acquisitions
in Victoria, New South Wales and Queensland.
Vesting
outcome
120%
120%
120%
120%
97
5.2.2 2021 STI outcomes
In 2021, cash flow targets met threshold, the NPAT target was exceeded, and a large number of strategic and cost-saving initiatives
were delivered by the Executive, despite imperfect operational performance. The Board considers that appropriate downward
adjustments have been made to ensure STI outcomes are aligned to our shareholder experience, while still being reflective of the
Executive team’s significant contributions in 2021.
The Board’s assessment, taking into account achievement of STI measures, moderating factors, and Company performance
throughout 2021, was to set the STI outcome at 80% of the potential maximum STI for Executives, to align Executive outcomes with
the shareholder experience.
The table below summarises the STI outcomes for Executives for 2021.
Maximum
potential
STI
opportunity
$
Actual STI
as % of STI
maximum
%
1,645,310
567,216
449,280
449,280
80.0
80.0
80.0
80.0
Actual STI paid in the form of
Lapsed STI
%
20.0
20.0
20.0
20.0
Actual STI
total
$
1,316,248
453,773
359,424
359,424
Cash STI
$
658,124
226,886
179,712
179,712
Equity
deferred
(2 years)
$
Equity
deferred
(3 years)
$
329,062
329,062
113,443
89,856
89,856
113,443
89,856
89,856
Nick Miller
Theresa Mlikota
Brett Brown
Andrew Dell
5.3 LTI
In 2021, Adbri tested the 2017 LTI Award for vesting against the TSR and EPS performance conditions and it was determined that
performance over the four-year performance period failed to meet the threshold for vesting performance conditions, without any
vesting to Executives.
Performance
condition
TSR
EPS
Weighting
Performance assessment
50%
50%
Adbri’s TSR growth was 29.8% placing the Company’s percentile at 17.83%,
which is below the vesting threshold for TSR of 50%.
The compound annual growth in EPS over the performance period of 14.2%
was below the vesting threshold for EPS of 50%.
Result
0%
0%
No LTI awards vested, and no Board discretion was applied in the assessment of the LTI, which aligns with the shareholder experience
given the lower share price.
Held at
1 Jan 2021
Number
745,825
214,419
115,932
149,835
Granted
during
the year1
Number
481,532
150,788
85,312
85,312
Awards
Exercised/
vested
during
the year2
Number
–
–
–
–
Executive
Nick Miller
Theresa Mlikota
Brett Brown
Andrew Dell
Lapsed/
forfeited
during
the year3
Number
–
–
–
Held at
31 Dec
20214
Number
Value
of 2021
awards at
grant date5
$
1,227,357
876,389
365,207
201,244
283,481
162,093
164,226
(32,540)
202,607
Fair
value
of 2021
award
at grant
date
$/Award
1.82
1.88
1.90
1.93
Value per
share at
the date of
exercise6
$
–
–
–
–
1. This represents the maximum number of Awards granted in 2021 that may vest to each Executive. The Awards were granted between 13 July to 23 July 2021.
As the Awards granted in 2021 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.
2. During the 2021 year, only the 2017 Awards were eligible for testing. The threshold conditions for vesting of these Awards were not met and all 2017 Awards
lapsed. The number of Awards that vested during the period and were exercisable at 31 December 2021 is nil. The number of Awards that vested but were
not yet exercisable at 31 December 2021 is nil.
3. This includes the portion of 2017 Awards that reached the end of their performance period on 31 December 2020 that did not meet the performance
conditions and were forfeited.
4. Awards subject to performance conditions which remain unvested (2018, 2019, 2020 and 2021 Awards), and which will be tested for vesting during the
period 2022 to 2025.
5. Fair value of Awards granted during 2021 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.
Adbri 2021 Annual ReportIntroduction and overviewOperational updatesSustainability reportFinancial statements 98
Remuneration report continued
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.
In line with the Board’s determination in 2020 that no committee fees would be payable for membership of
the Nomination and Governance Committee, no fees were paid to Non-executive Directors for service on the
Nomination and Governance Committee in 2021.
The total amount of fees paid to Non-executive Directors is determined by the Board on the recommendation
of its People and Culture 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 People and Culture 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.
Aggregate
fees
approved by
shareholders
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.
No Director fee increases were applied in 2021. This followed from the Board’s decision in November 2019 that
Non-executive Directors’ fees for 2020 would remain at the same rates as applied in 2019.
Base fees
for 2021
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 Director
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
0
0
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.
99
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 or within
five years of the policy being adopted, whichever is later) 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 five-years from July 2018 to achieve the minimum shareholding requirement.
Details of the current shareholdings for Non-executive Directors as at 31 December 2021 are provided in Section 8 of this report.
6.3 Non-executive Directors’ statutory remuneration
Non-executive Director
Current non-executive Directors
Raymond Barro
Dr Vanessa Guthrie AO
Rhonda Barro
Ken Scott-Mackenzie
Emma Stein2
Geoff Tarrant
Michael Wright3
Fees and allowances
Directors’
base fees
(incl. super-
annuation)
Committee
fees (incl.
super-
annuation)
132,600
132,600
265,200
204,927
132,600
132,600
132,600
132,600
132,600
132,600
132,600
132,600
70,216
15,300
15,300
45,900
45,900
15,300
15,300
58,688
54,246
45,900
38,946
15,300
15,300
7,650
Year
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
Total
147,900
147,900
311,100
250,827
147,900
147,900
191,288
186,846
178,500
171,546
147,900
147,900
77,866
Post-employment
benefits
superannuation
contributions1
12,831
12,831
–
5,424
12,831
12,831
16,988
16,210
15,547
14,883
12,831
12,831
7,070
1. Superannuation contributions are made on behalf of Non-executive Directors which satisfy the Group’s obligations under applicable Superannuation
Guarantee Charge legislation.
2. Emma Stein was appointed to the Chair – Audit Risk and Compliance Committee on 14 June 2020 explaining the increase in committee fees from 2020
to 2021.
3. Michael Wright was appointed to Non-executive Director on 25 June 2021. He was appointed to the Safety, Health, Environment and Sustainability
Committee on 26 July 2021, the People and Culture Committee on 25 October 2021 and the Nomination and Governance Committee on 25 October 2021.
Adbri 2021 Annual ReportIntroduction and overviewOperational updatesSustainability reportFinancial statements 100
Remuneration report continued
7 Executive service agreements and statutory remuneration tables
7.1 Executive service agreements
The remuneration and other terms of employment for Executives are set out in formal employment contracts referred to as ‘Service
Agreements’. Following a review of the Managing Director and CEO’s Service Agreement in 2021, a material change clause was included
in his Service Agreement to align with market practice.
The key terms of the Executive Service Agreements are outlined below:
Managing Director and CEO
Other Executives
Notice period
Severance1
Ongoing term of service with 12 months’ notice
by either party (or payment in lieu)
Ongoing term of service with six-months’ notice
by either party (or payment in lieu)
12 months’ fixed annual remuneration where
the Company terminates on notice
Six-months’ fixed annual remuneration where the
Company terminates on notice
12 months’ fixed annual remuneration where
employment is terminated due to a material
change in role
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). In the event of termination for serious misconduct, the Managing Director and CEO and Executives are not
entitled to any payment on termination other than remuneration and leave entitlements up to the date of termination.
7.2 Executive statutory remuneration
The following statutory table sets out the statutory accounting expense in whole dollars of all remuneration-related items for the
Executives (including the Managing Director and CEO) and has been prepared in accordance with the accounting standards and has
been audited.
Short-term benefits
Year
FAR
Cash
STI1
Other
benefits2
Post-
employ-
ment
benefit
Super-
annua-
tion3
Equity based benefits
Deferred
STI1
TEES
LTI4
Total
Executive
Nick Miller
2021
1,497,750
658,124
44,264
26,250
658,124
2020 1,455,551
495,300
Theresa Mlikota
2021
659,118
226,886
2020
660,339
211,650
–
–
–
24,185
495,300
22,632
226,886
21,411
211,650
Brett Brown
2021
517,368
179,712
25,000
22,632
179,712
2020
440,289
156,150
–
21,491
156,150
Andrew Dell
2021
514,333
179,712
25,000
22,917
179,712
2020
420,043
–
Former Executive
Brad Lemmon6
2020
541,100
110,000
–
–
24,000
25,000
–
–
–
–
–
–
985
999
985
999
999
212,839
3,097,351
88,102
2,558,438
62,803
1,198,325
22,821
1,127,871
34,023
959,432
13,220
788,299
60,816
983,475
11,069
456,111
–
677,099
% of
remun-
eration
consist-
ing of
awards5
6.9
3.2
5.2
2.0
3.5
1.7
6.2
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 one-off allowances to cover out-of-pocket expenses incurred by Mr Brown for relocation to South Australia, and by Mr Dell for
additional travel to the Company’s Sydney office, as a result of their appointments to the new Chief Operating Officer roles, and underpayment of the
Managing Director and CEO’s salary in 2020.
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 fair 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 Note 27.
5. Percentage of remuneration for the financial year which consists of the amortised fair value of Awards issued under the Adbri Limited Executive
Performance Share Plan.
6. Brad Lemmon ceased as KMP in his role as Executive General Manager, Cement and Lime on 31 December 2020 and his employment ceased on
1 July 2021. As part of his termination arrangements, Mr Lemmon received a payment of $110,00 in March 2021 in respect of the 2020 STI, forfeited all rights
in respect of the 2018, 2019 and 2020 LTI Awards and received a redundancy payment of $283,050 (less applicable tax).
101
8 Additional statutory disclosures
8.1 Equity holdings of KMP
A summary of KMP current shareholdings in the Company as at 31 December 2021 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 2021.
While the Board has introduced minimum shareholding guidelines for Non-executive Directors, the Board considers 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.
Current Executives
Nick Miller
Theresa Mlikota
Brett Brown
Andrew Dell
Current Non-executive Directors
Raymond Barro1
Dr Vanessa Guthrie AO
Rhonda Barro2
Ken Scott-Mackenzie
Emma Stein
Geoff Tarrant
Michael Wright
Balance at
beginning
of year
42,000
–
3,408
10,528
279,178,329
105,000
278,787,781
20,000
30,676
–
–
Granted as remuneration during the year
LTI
TEES
Deferred
STI
Net
movement
due to other
changes
Balance at
end of year
–
–
–
–
–
–
–
–
–
–
–
–
–
316
316
–
–
–
–
–
–
–
150,424
64,275
47,420
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
22,727
30,000
–
192,424
64,275
51,144
10,844
279,178,329
105,000
278,787,781
20,000
53,403
30,000
–
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.
8.2 Loans and other transactions
There are no loans to KMP outstanding in the current or prior year.
All other transactions with KMP and their related entities and other related parties are conducted on an arm’s length basis and made on
normal commercial terms and conditions.
Adbri 2021 Annual ReportIntroduction and overviewOperational updatesSustainability reportFinancial statements 102
Consolidated income
statement
For the year ended 31 December 2021
Continuing operations
Revenue from contracts with customers
Cost of sales
Freight and distribution costs
Change in loss provision
Gross profit
Other income
Marketing costs
Administration costs
Finance costs
Impairment
Share of net profits of joint ventures and associates accounted for using the equity method
Profit before income tax
Income tax expense
Profit for the year
Profit is attributable to:
Equity holders 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
Consolidated
2021
$M
2020
$M
Notes
5
9
5
6
2(b),15
22(b)
7(a)
1,569.2
(1,030.6)
(305.3)
1,454.2
(939.6)
(278.5)
7.5
240.8
11.7
(21.0)
(89.6)
(19.4)
–
33.3
155.8
(39.1)
116.7
116.7
–
1.2
237.3
5.7
(20.6)
(77.8)
(22.6)
(21.7)
26.9
127.2
(33.6)
93.6
93.7
(0.1)
Cents
Cents
4
4
17.9
17.8
14.4
14.3
The above consolidated income statement should be read in conjunction with the accompanying notes
Consolidated statement of
comprehensive income
For the year ended 31 December 2021
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 expense relating to these items
Other comprehensive income/(loss) 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
103
2020
$M
93.6
(0.1)
(9.3)
2.7
0.1
–
(6.6)
87.0
87.1
(0.1)
87.0
Consolidated
2021
$M
116.7
(0.1)
13.5
(4.0)
3.5
(1.0)
11.9
128.6
128.6
–
128.6
Notes
20(a)
20(a)
7(c)
26(b)
7(c)
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes
Adbri 2021 Annual ReportIntroduction and overviewOperational updatesSustainability reportFinancial statements 104
Consolidated balance sheet
As at 31 December 2021
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Current tax assets
Assets held for sale
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
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Reserves
Retained earnings
Notes
8(a)
9
10
11
9
26(b)
22
12
13
14
13
16
17
13
7(e)
16
18
20(a)
20(b)
Capital and reserves attributable to owners of the Company
Non-controlling interests
Total equity
The above consolidated balance sheet should be read in conjunction with the accompanying notes
Consolidated
2021
$M
124.7
223.4
153.9
14.3
14.0
2020
$M
94.0
200.7
152.1
5.7
–
530.3
452.5
87.7
7.0
215.0
1,088.2
72.6
282.1
45.6
4.1
197.8
1,059.1
82.7
281.1
1,752.6
2,282.9
1,670.4
2,122.9
187.2
4.8
36.8
1.3
172.0
3.9
37.7
7.7
230.1
221.3
562.1
76.7
81.3
63.7
783.8
1,013.9
1,269.0
741.2
3.7
521.8
1,266.7
2.3
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
1,269.0
1,222.0
Consolidated statement of
changes in equity
Attributable to owners of Adbri Limited
105
Non-
controlling
interests
$M
Total
equity
$M
2.3
1,222.0
–
–
–
–
–
–
–
116.7
11.9
128.6
(83.2)
0.5
1.1
(81.6)
2.3
2.4
(0.1)
1,269.0
1,197.3
93.5
Reserves
$M
(6.2)
–
9.4
9.4
–
0.5
–
0.5
3.7
0.2
–
Retained
earnings
$M
485.8
116.7
Total
$M
1,219.7
116.7
2.5
11.9
119.2
128.6
(83.2)
(83.2)
–
–
(83.2)
521.8
455.7
93.6
0.5
1.1
(81.6)
1,266.7
1,194.9
93.6
(6.7)
0.1
(6.6)
–
(6.6)
(6.7)
93.7
87.0
(0.1)
86.9
–
0.3
–
0.3
(63.6)
(63.6)
–
–
0.3
1.1
(63.6)
(62.2)
–
–
–
–
(63.6)
0.3
1.1
(62.2)
Consolidated
Notes
Balance at 1 January 2021
Profit/(loss) for the year
Other comprehensive
income (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
Employee Equity
Participation Share Plan
Balance at
31 December 2021
Balance at 1 January 2020
Profit/(loss) for the year
Other comprehensive
income (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
Employee Equity
Participation Share Plan
Balance at
31 December 2020
19
20(a)
18(b)
19
20(a)
18(b)
Share
capital
$M
740.1
–
–
–
–
–
1.1
1.1
741.2
739.0
–
–
–
–
–
1.1
1.1
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes
740.1
(6.2)
485.8
1,219.7
2.3
1,222.0
Adbri 2021 Annual ReportIntroduction and overviewOperational updatesSustainability reportFinancial statements 106
Consolidated statement
of cash flows
For the year ended 31 December 2021
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
Lease payments
Dividends paid to Company’s shareholders
Net cash inflow/(outflow) from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of year
Consolidated
2021
$M
2020
$M
Notes
1,699.9
(1,478.4)
1,639.9
(1,365.6)
19.0
0.3
(15.3)
4.4
(34.7)
–
16.5
1.9
(18.7)
1.3
(50.0)
31.2
8(b)
195.2
256.2
(140.5)
(136.4)
2.9
(32.2)
–
4.5
(2.0)
0.5
(169.8)
(133.4)
1.1
135.0
(40.0)
(7.5)
(83.2)
5.4
30.8
94.0
(0.1)
124.7
1.1
460.0
(535.0)
(7.8)
(63.6)
(145.3)
(22.5)
116.8
(0.3)
94.0
8(d)
8(d)
8(d)
19
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes
107
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 24 February 2022. 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 basis, 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 the Adbri Limited Group 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 2021 did not have
any impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods.
(iv) New accounting standards and interpretations not yet adopted
Certain new accounting standards, amendments to accounting standards and interpretations have been published that are not
mandatory for the 31 December 2021 reporting period and have not been early adopted by the Group. These standards, amendments
or interpretations are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable
future transactions.
(b) Climate-change related impacts
The Group makes estimates and assumptions concerning the future, including climate-related matters. There is considerable
uncertainty over assumptions under various climate change scenarios and how they may impact the Group’s business operations,
and the subsequent impact on cash flow projections. Adbri regularly assesses its assumptions to reflect the market it operates within,
the sustainability targets it sets and the commitments made to investors and other stakeholders.
The estimates and assumptions, notably those relating to assets and goodwill impairments, useful lives of assets, capital expenditure
and research and development, recovery of deferred tax assets, provisions and contingent liabilities, insurance costs and defined
benefit pension plans have been based on the available information and regulations in place as at 31 December 2021, and are aligned
with the Group’s published 2024 sustainability targets detailed in the 2021 Sustainability Report.
Adbri 2021 Annual ReportIntroduction and overviewOperational updatesSustainability reportFinancial statements 108
Notes to the financial statements continued
1 Summary of significant accounting policies continued
(b) Climate-change related impacts continued
(i) Risk management
The cement and lime industries are traditionally associated with high, hard-to-abate greenhouse emissions and Adbri is exposed to
a variety of regulatory, and voluntary, frameworks to report on and reduce emissions, some of which may be under revision. These
frameworks could affect the business activities of Adbri. Based on the Task Force on Climate-Related Financial Disclosures (TCFD)
recommendation, within Adbri’s risk management system, climate change risk is assessed noting physical and transitional risks.
This work continues to evolve. Sustainability is linked to Adbri’s core strategy to make the transition towards net zero emissions by
2050. Adbri has set intermediate targets for 2024. 2030 targets will be set as part of the Group’s NZE Roadmap which is expected to
be published prior to the Group’s 2022 Annual General Meeting.
Adbri notes the significance of many uncertainties which are likely to impact Adbri’s achievement of its net zero transition including:
– Government policies
– Effective carbon pricing mechanisms internationally
– Market demand for low-carbon products and solutions
– Availability and cost of alternative fuels and lower emissions energy
– Commercialisation of technologies that lower process emissions.
(ii) Impairment testing
Cash flow projections used in the impairment testing process are based upon financial budgets approved by the Board, external
forecasts of market growth rates, and expected operating margins and capital expenditure, including projected expenditure required
to meet the Group’s 2024 emission reduction targets.
(iii) Useful lives of assets
Useful lives of assets may be affected by climate-related matters. Any changes in useful lives, as a result of climate-related matters,
will have a direct impact on the amount of depreciation, and/or amortisation, recognised each year. Management’s assessment of
useful lives has taken into consideration the impacts of the Group’s 2024 emission reduction targets.
(iv) Capital expenditure and research and development
The Group’s research and development and capital expenditures are aligned to the Group’s strategy focussing on new and alternative
technologies and products, in line with the Group’s 2024 emission reduction targets, impacting either capital expenditure or the
Income Statement.
(v) Taxes
Climate-related matters have been considered in the assessment of the future taxable profits on which the recognition of deferred
tax assets are based. Business plans used for the recognition of deferred tax assets have been aligned with the ones used in the
impairment testing process taking into account the Group’s 2024 emission reduction targets.
109
(vi) Provisions and contingent liabilities
The Group’s provisions and contingent liabilities for the 2021 financial year have taken into consideration the Group’s current
climate-related 2024 targets.
(vii) Insurance
The change in climate may result in more regular and intense climate events which can have a significant impact on the Group’s
production with business interruption, accident or damages. This may increase the Group’s insurance costs due to higher amounts
at stake or the Group’s costs with more frequent uninsurable events.
(viii) Defined benefit pension plans
Climate-related risks alongside other risks are regularly reviewed and monitored with the Trustee of the defined benefits plan. Where
changes are made to investment or governance approaches to better manage climate-related risk, then the implications for expected
returns, and employer costs or contributions are also considered.
(c) 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 2021 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(e)).
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 Plan 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 the
consolidated 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.
(d) Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic
environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Australian
Dollars, which is 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.
Adbri 2021 Annual ReportIntroduction and overviewOperational updatesSustainability reportFinancial statements 110
Notes to the financial statements continued
1 Summary of significant accounting policies continued
(d) Foreign currency translation continued
(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 consolidated balance sheet presented are translated at the closing rate at the date of the consolidated
balance sheet;
– Income and expenses for each consolidated income statement and consolidated 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.
(e) 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 over the fair value of the Group’s share of the acquiree’s net identifiable assets 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 consolidated income statement.
(f) Rounding of amounts
The Company is of a kind referred to in the ASIC Legislative Instrument 2016/191, relating to the ‘’rounding off’’ of amounts in the
financial statements. Amounts in the financial statements have been rounded off in accordance with that instrument to the nearest
one hundred thousand dollars, unless otherwise stated.
(g) 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 incurring that GST.
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 in other receivables or liabilities in the consolidated 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.
(h) Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year which are
unpaid. The amounts are unsecured and usually paid within the Group’s standard terms. Trade and other payables are presented as
current liabilities unless payment is not due within the 12-month reporting period. They are recognised initially at their fair value and
subsequently measured at amortised cost using the effective interest method.
111
Financial performance overview
2 Segment reporting
(a) Description of segments
Management has determined the operating segments based on the reports reviewed by the Managing Director and 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
– Masonry
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 Managing Director and CEO
The segment information provided to Managing Director and CEO for the reportable segments is as follows:
31 December 2021
Total segment operating revenue
Inter-segment revenue
Revenue from external customers
Depreciation and amortisation
EBIT
Underlying EBIT
Share of net profits of joint ventures and associate entities accounted for
using the equity method
31 December 2020
Total segment operating revenue
Inter-segment revenue
Revenue from external customers
Depreciation and amortisation
Impairment:
Property, plant and equipment
EBIT
Underlying EBIT
Share of net profits of joint ventures and associate entities accounted for
using the equity method
Cement,
Lime,
Concrete
and
Aggregates
$M
1,380.0
(94.2)
1,285.8
(85.5)
205.0
203.4
33.3
Cement,
Lime,
Concrete
and
Aggregates
$M
1,262.9
(89.0)
1,173.9
(83.6)
(20.6)
170.4
199.8
26.9
Masonry
$M
Unallocated
$M
Total
$M
1,528.5
(94.2)
1,434.3
(95.9)
174.9
178.3
–
–
–
(4.5)
(38.1)
(33.2)
–
33.3
Total
$M
1,409.0
(89.0)
1,320.0
–
–
–
(3.7)
(93.4)
–
(29.8)
(28.9)
(21.7)
147.6
178.9
–
26.9
148.5
–
148.5
(5.9)
8.0
8.1
–
146.1
–
146.1
(6.1)
(1.1)
7.0
8.0
–
Masonry
$M
Unallocated
$M
Adbri 2021 Annual ReportIntroduction and overviewOperational updatesSustainability reportFinancial statements 112
Notes to the financial statements continued
2 Segment reporting continued
(b) Segment information provided to the Managing Director and CEO continued
Sales between segments are carried out at arm’s length and are eliminated on consolidation.
The operating revenue includes revenue from external customers and a share of revenue from the joint ventures and associates
in proportion to the Group’s ownership interest, excluding freight, other product revenue and royalty revenue. A reconciliation of
segment operating revenue to revenue from continuing operations is provided as follows:
Total segment operating revenue
Inter-company revenue elimination
Freight revenue
Other
Royalties
Revenue from continuing operations
Consolidated
2021
$M
2020
$M
1,528.5
1,409.0
(94.2)
127.6
5.4
1.9
(89.0)
128.0
5.6
0.6
1,569.2
1,454.2
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
Impairment
Change in loss provision
Corporate & restructuring costs
Acquisition costs
Net interest
Profit/(loss) before income tax
(c) Other segment information
Consolidated
2021
$M
178.3
–
3.3
(5.9)
(0.8)
(19.1)
155.8
2020
$M
178.9
(21.7)
(2.7)
(6.9)
–
(20.4)
127.2
Revenues of $269.3 million (2020: $218.1 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.
– Inventories – Note 10
– Impairment tests – Note 15
– Provisions for close-down and restoration costs – Note 16
– Retirement benefit obligations – Note 26
113
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.
Basic earnings per share
Diluted earnings per share
Consolidated
2021
Cents
17.9
17.8
2020
Cents
14.4
14.3
Consolidated
2021
Shares
2020
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
652,543,443
652,129,815
Adjustments for calculation of diluted earnings per share:
Awards
2,424,343
1,757,678
Weighted average number of ordinary and potential ordinary shares used as the denominator in calculating
diluted earnings per share
654,967,786
653,887,493
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
2021
$M
2020
$M
116.7
–
116.7
93.6
0.1
93.7
Adbri 2021 Annual ReportIntroduction and overviewOperational updatesSustainability reportFinancial statements 114
Notes to the financial statements continued
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 at a point in time 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. Revenue is recognised based on the price specified in the sales order, net of any discounts.
(ii) Interest income
Finance income comprises interest income recognised on financial assets at amortised cost. Interest income is recognised as it
accrues, using the effective interest rate method.
A disaggregation of revenue at a product level is provided in Note 2.
Revenue
Revenue from contracts with customers
Royalties
Other income
Net gain on disposal of property, plant and equipment
Rental income
Interest from joint ventures
Interest from other parties
Other income
Consolidated
2021
$M
2020
$M
1,567.3
1,453.6
1.9
0.6
1,569.2
1,454.2
7.0
1.7
–
0.3
2.7
11.7
0.3
1.3
0.2
2.0
1.9
5.7
Total revenue from contracts with customers and other income
1,580.9
1,459.9
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 $7.6 million (2020: $0.7 million) which is recognised in other income, partially
offset by losses on disposal of plant and equipment of $0.6 million (2020: $0.4 million).
6 Expenses
Profit before income tax includes the following specific expenses:
Depreciation
Amortisation of intangibles
Impairment of property, plant and equipment
Other charges
Employee benefits expenses
Superannuation expense
Accounting policy – borrowing costs
115
Notes
12, 13
14
Consolidated
2021
$M
94.8
1.1
–
181.3
13.2
2020
$M
91.2
2.2
21.7
181.7
13.4
Borrowing costs that are directly attributable to 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
2021
$M
2020
$M
18.8
1.2
20.0
(0.6)
19.4
22.8
0.3
23.1
(0.5)
22.6
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 1.90% p.a. (2020: 1.54% p.a.).
Adbri 2021 Annual ReportIntroduction and overviewOperational updatesSustainability reportFinancial statements 116
Notes to the financial statements continued
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 for 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.
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.
(a) Numerical reconciliation of income tax expense to prima facie tax payable
Profit before income tax expense
Tax at the Australian tax rate of 30.0% (2020 – 30.0%)
Tax effect of amounts which are not deductible (taxable) in calculating taxable income:
Non-allowable expenses
Non-assessable income
Rebateable dividends
Other deductions
Previously unrecognised capital tax losses offset against capital gains
(Over)/under 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)
(Over)/under provided in the prior year
(b) Amounts recognised directly in equity
117
2020
$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
Consolidated
2021
$M
155.8
46.7
0.2
(4.9)
(1.7)
–
(0.9)
(0.3)
39.1
25.3
14.1
(0.3)
39.1
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:
Net deferred tax expense/(benefit)
(0.1)
(0.1)
(c) Tax expense relating to items of other comprehensive income
Changes in the fair value of cash flow hedges
Actuarial (losses)/gains on retirement benefit obligation
(d) Tax losses
Unused tax losses for which no deferred tax asset has been recognised:
Revenue losses
Capital losses
This benefit for tax losses will only be obtained if:
(4.0)
(1.0)
0.7
10.2
2.7
–
0.7
11.1
(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.
Adbri 2021 Annual ReportIntroduction and overviewOperational updatesSustainability reportFinancial statements 118
Notes to the financial statements continued
7 Income tax continued
(d) Tax losses continued
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(e))
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
(e) 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(d))
Net deferred tax liabilities – after offset
Movements:
Opening balance at 1 January – before offset
Recognised in the income statement
(Over)/under provision in prior year
Closing balance at 31 December – before offset
Consolidated
2021
$M
0.4
22.2
24.4
17.2
64.2
(64.2)
–
72.7
(8.7)
0.1
0.1
64.2
Consolidated
2021
$M
93.5
22.1
14.1
15.8
145.5
(64.2)
81.3
136.4
9.4
(0.3)
145.5
2020
$M
0.2
39.6
26.5
6.4
72.7
(72.7)
–
67.2
5.4
0.1
–
72.7
2020
$M
82.9
25.1
13.8
14.6
136.4
(72.7)
63.7
141.8
(3.6)
(1.8)
136.4
119
8 Note to statement of cash flows
(a) Cash and cash equivalents
Accounting policy – cash and cash equivalents
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 held in trust
Cash and cash equivalents
(i) Offsetting
Consolidated
2021
$M
120.9
2.7
1.1
2020
$M
91.2
2.8
–
124.7
94.0
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 2021
was $4.0 million (2020: $nil).
(ii) Risk exposure
The Group’s exposure to interest rate risk is discussed in Note 21. 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
Profit for the year
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 (asset increase)/obligation
Capitalised interest
Other
Consolidated
2021
$M
116.7
95.9
(0.4)
1.2
2.9
(7.0)
(14.4)
0.6
(1.7)
(0.6)
5.3
2020
$M
93.6
115.1
(0.2)
0.3
3.1
(0.3)
(10.3)
0.5
1.7
(0.5)
1.7
Net cash provided by operating activities before changes in assets and liabilities
198.5
204.7
Change in operating assets and liabilities, net of effects from purchase of business combinations:
(Increase)/decrease in inventories
Decrease/(increase) in prepayments
(Increase)/decrease in receivables
Increase/(decrease) in trade creditors
(Decrease)/increase in provisions
(1.8)
2.0
(66.8)
15.2
(2.2)
3.1
(2.1)
20.1
27.1
2.2
Adbri 2021 Annual ReportIntroduction and overviewOperational updatesSustainability reportFinancial statements 120
Notes to the financial statements continued
8 Note to statement of cash flows continued
(b) Reconciliation of profit after income tax to net cash inflow from operating activities (continued)
Increase/(decrease) in income taxes payable
Increase/(decrease) in deferred taxes liabilities
Increase/(decrease) in other operating assets
Net cash inflow from operating activities
(c) Net debt reconciliation
Cash and cash equivalents
Borrowings – repayable after more than one year
Net debt1
Consolidated
2021
$M
8.6
17.6
24.1
195.2
2020
$M
22.8
(10.9)
(10.8)
256.2
Consolidated
2021
$M
124.7
(562.1)
(437.4)
2020
$M
94.0
(466.1)
(372.1)
1. The net debt calculation does not include lease liabilities of $81.5 million at 31 December 2021 (2020 $88.7 million).
(d) Reconciliation of movements of liabilities to cash flows arising from financing activities
Net debt as at
1 January 2020
Cash flows
Acquisition – leases
Other non-cash movements
Net debt as at 31 December 2020
Lease liabilities
Net debt excluding
lease liabilities at 31 December 2020
Cash flows
Acquisition – leases
Other non-cash movements
Net debt as at 31 December 2021
Lease liabilities
Net debt excluding
lease liabilities at 31 December 2021
Other
assets
Cash/
bank
over-
draft
$M
Liabilities from financing activities
Borrowings
due after
1 year
$M
Leases
due
within 1
year
$M
Leases
due after
1 year
$M
Total
$M
116.8
(22.8)
–
–
94.0
–
94.0
30.8
–
(0.1)
124.7
–
(540.1)
75.0
–
(1.0)
(466.1)
–
(466.1)
(95.0)
–
(1.0)
(562.1)
–
124.7
(562.1)
(5.7)
7.8
–
(6.1)
(4.0)
4.0
–
7.5
–
(8.3)
(4.8)
4.8
–
(81.9)
(510.9)
–
(7.6)
4.8
(84.7)
84.7
–
–
(2.2)
10.2
(76.7)
76.7
60.0
(7.6)
(2.3)
(460.8)
88.7
(372.1)
(56.7)
(2.2)
0.8
(518.9)
81.5
–
(437.4)
121
Balance sheet items
9 Trade and other receivables
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 method.
The Group applies the simplified approach to providing for expected credit losses for all trade receivables as set out in Note 21(c).
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.
Current
Trade receivables
Loss allowance provision
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
Closing balance at 31 December
Consolidated
2021
$M
173.2
(10.4)
2020
$M
167.5
(17.9)
162.8
149.6
36.4
7.6
16.6
31.9
9.6
9.6
223.4
200.7
76.7
11.0
87.7
17.9
(7.5)
10.4
44.5
1.1
45.6
19.1
(1.2)
17.9
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 21(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.
Adbri 2021 Annual ReportIntroduction and overviewOperational updatesSustainability reportFinancial statements 122
Notes to the financial statements continued
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 cashflow
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.
Significant estimates – bulk inventory quantities
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.
Current
Finished goods
Raw materials and work-in-progress
Engineering spare parts stores
Inventory expense
Consolidated
2021
$M
58.0
63.3
32.6
153.9
2020
$M
60.8
58.1
33.2
152.1
Inventories recognised as expense during the year ended 31 December 2021 and included in cost of sales amounted to $984.7 million
(2020: $898.0 million).
There was no material adjustment to inventories net realisable value during the year ended 31 December 2021 (2020: $nil).
11 Assets held for sale
Accounting policy – assets held for sale
Assets are classified as held for sale if it is highly probable that the carrying amount will be recovered through a sale transaction rather
than through continued use. Assets classified as held for sale are measured at the lower of the carrying amount and fair value less
costs to sell. The current balance represents property in Rosehill that is in the process of being compulsorily acquired by the New
South Wales Government.
Land
Buildings
Property plant and equipment
Consolidated
2021
$M
4.7
0.3
9.0
14.0
2020
$M
–
–
–
–
123
12 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 from 2 – 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 assets
The costs of replacing major components of complex assets are depreciated on a straight-line basis 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 on a straight-line basis 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
20 – 40 years
– Plant and equipment
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.
Adbri 2021 Annual ReportIntroduction and overviewOperational updatesSustainability reportFinancial statements 124
Notes to the financial statements continued
12 Property, plant and equipment continued
Accounting policy – property, plant and equipment continued
(iv) Other fixed assets continued
Freehold
land
$M
Buildings
$M
Leasehold
property
$M
Plant and
equip-
ment
$M
Mineral
reserves
$M
Asset
retirement
cost
$M
In course
of con-
struction
$M
Total
$M
Consolidated at
31 December 2021
Cost or fair value
206.4
154.1
9.6
1,593.8
214.3
54.2
112.2
2,344.6
Accumulated
depreciation
–
Net carrying amount
206.4
Reconciliation
Opening carrying amount
214.7
Additions
Addition transfers to asset
categories
Disposals
Reclassification to
intangibles
–
–
(3.6)
–
(82.5)
71.6
75.3
–
1.4
(0.2)
–
Reclassification to assets
held for sale
(4.7)
(0.3)
(5.9)
3.7
(1,088.8)
505.0
(61.7)
152.6
4.2
492.7
–
–
–
–
–
–
–
99.0
(1.5)
(0.7)
(9.0)
–
157.3
–
0.2
–
–
–
–
(17.5)
36.7
39.8
–
–
–
–
–
(1.2)
(1.9)
–
(1,256.4)
112.2
1,088.2
75.1
140.5
(100.6)
–
(2.8)
–
–
–
1,059.1
140.5
–
(5.3)
(3.5)
(14.0)
(1.2)
(87.4)
–
–
–
(4.6)
(0.5)
(75.5)
(4.9)
206.4
71.6
3.7
505.0
152.6
36.7
112.2
1,088.2
Cost or fair value
214.7
153.4
9.6
1,544.1
215.5
55.2
75.1
2,267.6
(78.1)
75.3
80.0
0.3
–
–
–
(5.4)
4.2
4.7
–
–
–
–
(1,051.4)
492.7
511.9
77.3
(3.3)
–
(21.7)
(58.2)
157.3
153.2
10.3
–
–
–
(15.4)
39.8
42.8
0.3
–
(2.9)
–
(5.0)
(0.5)
(71.5)
(6.2)
(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)
25.2
(1.0)
–
–
–
214.7
75.3
4.2
492.7
157.3
39.8
75.1
1,059.1
Accumulated
depreciation
Net carrying amount
Reconciliation
–
214.7
Opening carrying amount
190.5
Remeasurement
reclassification
Depreciation/
amortisation
Carrying amount at
31 December 2021
Consolidated at
31 December 2020
Additions
Disposals
Remeasurement
reclassification
Impairment loss
Depreciation/
amortisation
Carrying amount at
31 December 2020
1. Additions to assets in course of construction are net of transfers to other asset categories.
125
13 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.
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.
AASB 16 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.
Adbri 2021 Annual ReportIntroduction and overviewOperational updatesSustainability reportFinancial statements 126
Notes to the financial statements continued
13 Leases continued
Accounting policy – leases continued
(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
Additions to the right-of-use assets during the 2021 financial year were $2.2 million (2020: $7.6 million)
Lease liabilities
Current
Non-current
(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 variable lease payments not included in lease liabilities
(included in administrative expenses)
The total cash outflow for leases in 2021 was $65.0 million (2020: $43.8 million).
Consolidated
2021
$M
47.6
25.0
72.6
Consolidated
2021
$M
4.8
76.7
81.5
2020
$M
55.2
27.5
82.7
2020
$M
3.9
84.8
88.7
Consolidated
2021
$M
2020
$M
4.4
3.0
7.4
2.9
58.8
69.1
4.2
3.4
7.6
3.1
45.8
56.5
127
(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
2021
$M
2020
$M
62.3
117.3
11.5
191.1
52.0
102.5
7.7
162.2
(iv) Extension and termination options
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.
14 Intangible assets
Accounting policy – intangible assets
(i) Goodwill
Goodwill is measured as described in Note 1(e). Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill
on acquisition of joint ventures is included in the carrying amount of 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 CGUs which are expected to benefit
from the business combination for the purpose of impairment testing.
(ii) Software
Costs incurred in acquiring software and licences that the Group can control and 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 services 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.
(iii) Software as a service (SaaS) arrangements
SaaS arrangements are service contracts providing the Company with the right to access a cloud provider’s software over the contract
period. The ongoing fees incurred to access the cloud provider’s software is recognised as an operating expense when the services
are received.
Adbri 2021 Annual ReportIntroduction and overviewOperational updatesSustainability reportFinancial statements 128
Notes to the financial statements continued
14 Intangible assets continued
Accounting policy – intangible assets continued
(iii) Software as a service (SaaS) arrangements continued
Software codes developed for the Company that modify or create additional capability to existing systems and software, and which
meet the definition of an intangible asset, are recognised as software assets and are amortised over the useful life of the software, on a
straight-line basis.
31 December 2021
Cost
Accumulated amortisation and impairment
Carrying amount at 31 December 2021
Opening balance at 1 January 2021
Amortisation charge
Remeasurement
Reclassification from property, plant and equipment
Closing balance at 31 December 2021
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
15 Impairment tests
The goodwill accounting policy is described in Note 14.
(a) Goodwill is allocated to the Group’s CGUs
A segment-level summary of the goodwill allocation is presented below:
Cement, Lime, Concrete and Aggregates
Masonry
Consolidated
Goodwill
$m
Software
$m
Other
intangibles
$m
272.5
–
272.5
272.5
–
–
–
272.5
25.6
(20.9)
4.7
2.9
(1.7)
–
3.5
4.7
10.2
(5.3)
4.9
5.7
0.6
(1.4)
–
4.9
Consolidated
Goodwill
$m
Software
$m
Other
intangibles
$m
272.5
–
272.5
272.5
–
–
272.5
20.8
(17.9)
2.9
4.2
0.6
(1.9)
2.9
10.8
(5.1)
5.7
6.6
(0.6)
(0.3)
5.7
Total
$m
308.3
(26.2)
282.1
281.1
(1.1)
(1.4)
3.5
282.1
Total
$m
304.1
(23.0)
281.1
283.3
–
(2.2)
281.1
Consolidated
2021
$M
272.5
–
272.5
2020
$M
272.5
–
272.5
129
The recoverable amount of a CGU is determined based on value-in-use calculations. For 2021, these calculations use cash flow
projections based on the Board approved 2022 financial budgets, external forecasts of market growth rates, and expected operating
margins and capital expenditure in line with the Group’s 2024 emission reduction targets. Projected cash flows are forecast for a
period of greater than five years to incorporate the construction cycle into demand assumptions and to ensure cash flows reflect
the strategies to achieve the Group’s 2024 emission reduction targets. Technology and innovation required to achieve the Group’s
Net Zero Emissions (NZE) Roadmap beyond 2024 are not incorporated into these projected cash flows.
(b) Key assumptions used for value-in-use calculations
Cement, Lime, Concrete and Aggregates
Masonry
Growth rate1
Discount rate2
2021
%
1.3
1.4
2020
%
1.2
1.4
2021
%
10.1
10.7
2020
%
10.8
11.9
1. Weighted average growth rate used to extrapolate cash flows beyond the specific market forecast period of 5 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.
For example the Group’s 2024 emission reduction targets, that may have a financial impact on the Group and that are believed to
be reasonable.
With changing market dynamics, including COVID and climate-related matters, low case sensitivities are utilised to pressure test
the Group’s resilience to these changing dynamics. Sales growth, or decline rates, based on regional performance have been utilised
to assess the impact on earnings potential. Discount rates are pre-tax and reflect specific risks relating to the relevant CGU’s.
Impairment testing has incorporated the actions to achieve the Group’s intermediate 2024 emission reduction targets as a subset of
the NZE Roadmap which is under development and is expected to be published prior to the Group’s 2022 Annual General Meeting.
(c) Impairment charge
In 2021, no impairment charge has been taken.
In 2020, an impairment charge was taken against specific assets expected to be placed into care and maintenance. The impairment
charge related primarily to plant and equipment that was specifically utilised in servicing of the Alcoa contract. Impairment of assets
in Masonry has resulted from the activities at other 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.
2021
Property, plant and equipment
2020
Property, plant and equipment
Cement,
Lime,
Concrete
and
Aggregates
$M
Masonry
$M
Un-
allocated
$M
–
20.6
–
1.1
–
–
Total
$M
–
21. 7
Adbri 2021 Annual ReportIntroduction and overviewOperational updatesSustainability reportFinancial statements 130
Notes to the financial statements continued
15 Impairment tests continued
(d) Impact of possible changes in key assumptions
The values assigned to the key assumptions are based on management’s assessment of future performance in each of the CGU’s 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 CGU’s is greater than the carrying values at 31 December 2021, 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
Masonry
Changes to assumptions
Market
growth
rate1
-1%
$M
–
–
Lower
pricing2
-1%
$M
Discount
rate3
+1%
$M
–
–
–
–
Lower
volume4
-10%
$M
–
–
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 bought and 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% reduction in forecast growth rates for 2022 and 2023.
16 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 as a current provision for employee benefits as there is no
unconditional right to defer settlement of these obligations. 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 as a provision for employee benefits. These obligations are therefore
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 currencies 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.
131
(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.
Significant estimates – future cost to rehabilitate
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 $58.7 million (2020: $60.2 million).
Current
Employee benefits
Restoration provisions
Other provisions
Non-current
Employee benefits
Restoration provisions
Consolidated
2021
$M
29.8
1.3
5.7
36.8
6.3
57.4
63.7
2020
$M
29.2
1.9
6.6
37.7
6.7
58.3
65.0
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.
Current leave obligations expected to be settled after 12 months
Movements in each class of provision during the financial year, other than employee benefits, are set out below:
Consolidated
2021
$M
8.7
2020
$M
4.7
Opening balance at 1 January
Charged to income statement
Charged to balance sheet
Unwind of discount
Payments
Closing balance at 31 December
Restoration
provisions
$m
Other
provisions
$m
60.2
(0.1)
(1.0)
1.2
(1.6)
58.7
6.6
4.2
–
–
(5.1)
5.7
Adbri 2021 Annual ReportIntroduction and overviewOperational updatesSustainability reportFinancial statements 132
Notes to the financial statements continued
Capital structure and risk management
17 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
2021
$M
2020
$M
562.1
466.1
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 21(b). Due to the short-term fixed interest rates of the
borrowings, the carrying value approximates the fair value.
18 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 2020
Shares issued under Employee Share Plan
Closing balance at 31 December 2020
Shares issued under Employee Share Plan
Closing balance 31 December 2021
(c) Ordinary shares
2021
Shares
2020
Shares
2021
$M
2020
$M
652,627,555
652,266,367
741.2
740.1
Number of
shares
651,723,127
543,240
652,266,367
361,188
652,627,555
Total
$M
739.0
1.1
740.1
1.1
741.2
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up the Company in proportion to the
number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person
or by proxy, is entitled to one vote and, on a poll, each share is entitled to one vote.
Ordinary shares have no par value and the Company does not have a limited amount of authorised capital.
(d) Dividend reinvestment plan
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.
133
(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
2021
$M
562.1
(124.7)
437.4
274.2
1.6
2020
$M
466.1
(94.0)
372.1
272.3
1.4
Information relating to the employee share scheme, including details of shares issued under the scheme, is set out in Note 27.
19 Dividends
Dividends paid during the year
2020 final dividend of 7.25 cents (2019: 5.0 cents) per fully-paid ordinary share, franked at 100% (2019: 100%)
paid on 22 April 2021
2021 interim dividend of 5.5 cents (2020: 4.75 cents) per fully-paid ordinary share, franked at 100%
(2020: 100%) paid on 6 October 2021
Total dividends – paid in cash
Dividends not recognised at year end
Consolidated
2021
$M
2020
$M
47.3
35.9
83.2
32.6
31.0
63.6
Since the end of the year the Directors have recommended the payment of a final fully franked dividend
of 7.0 cents per fully-paid ordinary share (2020: 7.25 cents). The aggregate amount of the proposed final
dividend expected to be paid out of retained earnings on 11 April 2022, not recognised as a liability at the end
of the reporting period, is:
45.7
47.3
Franked dividend
The franked portion of the dividend proposed as at 31 December 2021 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 2022.
Franking credits available for subsequent reporting periods based on a tax rate of 30%
121.8
131.0
The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for:
(a) Franking credits that will arise from the payment of any current tax liability;
(b) Franking debits that will arise from the payment of dividends recognised as a liability at the reporting date; 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 $19.6 million (2020: $20.3 million).
Adbri 2021 Annual ReportIntroduction and overviewOperational updatesSustainability reportFinancial statements 134
Notes to the financial statements continued
20 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
Share-based payment expense
Deferred tax
Closing balance 31 December
Cash flow hedge reserve
Opening balance at 1 January
Revaluation – gross
Deferred tax on movement in reserve
Closing balance 31 December
Nature and purpose of other reserves
Foreign currency translation
Consolidated
2021
$M
1.9
(0.6)
2.4
3.7
2.0
(0.1)
1.9
(1.1)
0.4
0.1
(0.6)
(7.1)
13.5
(4.0)
2.4
2020
$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)
Exchange differences arising on translation of the foreign controlled entity are recognised in other comprehensive income as
described in Note 1(d) and accumulated in a separate reserve within equity. The cumulative amount is reclassified to the 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 to Note 27.
Cash flow hedges 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 21. 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 gain/(loss) on defined benefit obligation net of tax
Dividends
Closing balance 31 December
21 Financial risk management
135
Consolidated
2021
$M
485.8
116.7
2.5
(83.2)
521.8
2020
$M
455.7
93.6
0.1
(63.6)
485.8
The Group’s activities expose it to a variety of financial risks that are managed in accordance with the Company’s risk management
framework that focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial
performance where deemed material. The table below summarises the key risks and management approach.
Risk
Market risk
Foreign exchange
Exposure arising
from
Recognised financial
assets and liabilities
not denominated in
Australian Dollars
Measurement
Management
Cash flow forecasting
Sensitivity analysis
Foreign currency
forwards, options and
foreign currency bank
accounts
Interest rate
Borrowings at
variable rates
Sensitivity analysis
Interest rate swaps
Credit risk
Liquidity risk
Financial assets such as
cash, trade receivables
and derivative
financial assets
Ageing analysis
Credit ratings
Borrowings and other
liabilities
Cash flow forecasting
Investment guidelines
for counterparties
Diversification of
counterparties
Tenure of facilities is
maintained for a period
that provides flexibility
in meeting future
liquidity needs
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.
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.
Adbri 2021 Annual ReportIntroduction and overviewOperational updatesSustainability reportFinancial statements 136
Notes to the financial statements continued
21 Financial risk management continued
(a) Derivatives
The Group has the following derivative financial instruments recognised in the balance sheet:
Current asset/(liabilities)
Foreign currency forwards – cash flow hedges
Interest rate swaps – cash flow hedges ((b)(ii))
Total current derivative financial instrument assets/(liabilities)
(i) Classification of derivatives
Consolidated
2021
$M
2020
$M
0.4
2.9
3.3
(2.0)
(8.7)
(10.7)
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.
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 those with
maturities greater than 12 months after the balance sheet date. Refer to Note 9 for details relating to trade receivables.
Financial assets through profit or loss
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
transaction (cash flow hedges).
At the 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 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 20. 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 that they are expected to be settled after the end
of the reporting period.
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,
within other gains/(losses).
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 the 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) in the cost of hedging reserve within equity.
137
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 in the cost of
hedging reserve within equity.
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 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 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.
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 instruments that do not
qualify for hedge accounting are recognised immediately in profit or loss and are included in other gains/(losses).
(ii) Fair value measurement
For information about the methods and assumption used in determining the fair value of derivatives see Note 21(e).
(iii) Hedging reserves
The Group’s hedging reserves disclosed in Note 20(a) relate to the following hedging instruments:
Spot
component
of currency
forwards
$M
Cost of
hedging
$M
Interest
rate
swaps
$M
Total
hedge
reserve
$M
Opening balance 1 January 2020
Add: change in fair value of hedging instrument recognised in OCI
Add: costs of hedging deferred and recognised in OCI
Less: reclassified to cost of inventory – not included in OCI
Less: reclassified from OCI to profit and loss
Less: deferred tax
0.1
–
(0.1)
(0.1)
–
–
(0.6)
(1.8)
–
0.6
–
0.6
–
(8.7)
–
–
0.5
2.4
Closing balance 31 December 2020
(0.1)
(1.2)
(5.8)
Add: change in fair value of hedging instrument recognised
in OCI for the year
Add: costs of hedging deferred and recognised in OCI
Less: reclassified to cost of inventory – not included in OCI
Less: reclassified from OCI to profit and loss
Less: deferred tax
Closing balance 31 December 2021
–
–
–
–
–
(0.1)
1.9
–
(0.3)
0.5
(0.6)
0.3
11.6
–
–
(0.2)
(3.4)
2.2
(0.5)
(10.5)
(0.1)
0.5
0.5
3.0
(7.1)
13.5
–
(0.3)
0.3
(4.0)
2.4
Adbri 2021 Annual ReportIntroduction and overviewOperational updatesSustainability reportFinancial statements 138
Notes to the financial statements continued
21 Financial risk management continued
(a) Derivatives continued
(iii) Hedging reserves continued
Hedge effectiveness
Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness
assessments to ensure that an economic relationship exists between the hedged item and hedging instrument.
For hedges of foreign currency purchases, the Group enters into hedge relationships where the critical terms of the hedging
instrument match exactly with the terms of the hedged item. The Group therefore performs a qualitative assessment of effectiveness.
If changes in circumstances affect the terms of the hedged item such that the critical terms no longer match exactly with the critical
terms of the hedging instrument, the Group uses the hypothetical derivative method to assess effectiveness.
In hedges of foreign currency purchases, ineffectiveness may arise if the timing of the forecast transaction changes from what was
originally estimated, or if there are changes in the credit risk of Australia or the derivative counterparty.
The Group enters into interest rate swaps with similar critical terms as the hedged item, such as reference rate, reset dates, payment
dates, 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:
– the credit value/debit value adjustment on the interest rate swaps which is not matched by the loan, and
– differences in critical terms between the interest rate swaps and loans.
Hedge ineffectiveness in relation to the interest rate swaps was $0.3 million (2020: $0.5 million).
(b) Market risk
(i) Foreign exchange risk
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, Singapore Dollar, the Japanese Yen and the Euro.
Foreign exchange risk arises from commitments, highly probable transactions, and recognised assets and liabilities denominated in a
currency that is not the entity’s functional currency. The risk is measured using sensitivity analysis and cash flow forecasting.
Exposure
The Group had the following exposure to foreign exchange risk, expressed in Australian Dollars:
Cash – US Dollars
Trade receivables – US Dollars
Forward foreign exchange contracts:
Buy foreign currency
Sell Australian Dollars (cashflow hedge)
Net exposure
Consolidated
2021
$M
2.5
0.9
43.6
(44.0)
(0.4)
2020
$M
7.4
3.0
47.8
(45.8)
2.0
The aggregate net foreign exchange gains/(losses) recognised in the profit or loss was $(0.1) million (2020: $(1.1) million).
Instruments used by the Group
The Group enters into Forward Exchange Contracts (FEC), options and maintains bank accounts in foreign currency 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 hedge up to 100% of material highly probable purchases for 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.
139
Effect of hedge accounting on the financial position and performance
The effects of applying hedge accounting on the Group’s financial position and performance are as follows:
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
Weighted average hedge rate – US Dollars
Weighted average hedge rate – Yen
Weighted average hedge rate – Euro
Weighted average hedge rate – Singapore Dollars
Summarised sensitivity analysis
Consolidated
2021
2020
0.4
16.0
2.6
25.0
–
(2.0)
38.4
3.7
0.3
5.5
Jan 2022 – July 2023
Jan – Sep 2021
1:1
1:1
A$1 : US$0.7246
A$1 : US$0.7352
A$1 : Yen 82.4
A$1 : Yen 78.1
A$1 : EURO 0.6243
A$1 : EURO 0.6074
–
$1 : S$0.9852
Foreign currency risk relating to assets and liabilities at year end is immaterial as most sales and assets are denominated in Australian
Dollars. The Group’s purchases that are denominated 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.
(ii) Interest rate risk
The Group’s main interest rate risk arises from bank borrowings with variable rates which expose the Group to changes in interest
rates. To mitigate the interest rate risk on variable rate borrowings, the Company entered into an interest rate swap. Cash advances
are drawn against the debt facilities, typically for 90 days, at a variable lending rate comprising the fixed bank margin applied to the
Australian bank bill swap rate effective at the date of each cash advance. In addition, cash advances on long-term facilities, maturing in
November 2029, are drawn at fixed rates for the term of the facility.
The Group analyses its interest rate periodically. Various scenarios are simulated taking into consideration refinancing, renewal of
existing positions, alternative financing and hedging. 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.
As at the end of the reporting period, the Group had the following exposure to variable and fixed rate financial instruments:
Adbri 2021 Annual ReportIntroduction and overviewOperational updatesSustainability reportFinancial statements 140
Notes to the financial statements continued
21 Financial risk management continued
(b) Market risk
Variable rate instruments:
Cash at bank, on hand and at call
Bank facilities
Fixed rate instruments:
Bank facilities (fixed rate)
Instruments used by the Group
Consolidated
2021
2020
Weighted
average
interest
rate
Weighted
average
interest
rate
Balance
$M
Balance
$M
0.6%
1.54%
124.7
465.0
0.6%
1.5%
94.0
366.1
3.7%
100.0
3.7%
100.0
The Group uses fixed interest rate swaps to hedge movements in interest rate for a portion of variable borrowings. The swaps require
settlement of net interest receivable or payable every 3 months.
Effects of hedge accounting on the financial position and performance
The effects of the interest rate swaps on the Group’s financial position and performance are as follows:
Hedging instrument – interest rate swap
Carrying amount asset/(liability) – $ million
Notional amount – $ million
Maturity date
Hedge ratio
Weighted average variable rate – % p.a
Weighted average fixed rate – % p.a
Consolidated
2021
2.9
300
2020
(8.7)
300
21 Nov 2024 – 7 Jan 2025
21 Nov 2024 – 7 Jan 2025
1:1
0.04
0.98
1:1
0.08
0.98
141
Sensitivity analysis
The following table summarises the sensitivity of the Group’s floating rate borrowings to interest rate risk at the end of the reporting
period. A 100 basis-point sensitivity has been selected as this is considered reasonable given the current short-term and long-term
Australian Dollar interest rates.
Interest rates – increase by 1%
Interest rates – decrease by 1%
Consolidated
2021
Impact on
post-tax
profit
$m
(0.3)
(2.3)
2020
Impact on
post-tax
profit
$m
0.2
(2.3)
Impact on
equity
$m
0.2
(2.3)
Impact on
equity
$m
(0.3)
(2.3)
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, limiting the potential benefit of further declines in interest rates.
(c) 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, credit exposures to customers, including outstanding
receivables and committed transactions, and financial guarantees. Financial guarantees are provided from time to time in the ordinary
course of business activities. These guarantees are issued 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.
The Group assesses the credit quality of customers, 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. Sales to
non-account customers are settled either in cash, major credit cards or electronic funds transfer, mitigating credit risk. Customers with
uncertain credit history provide personal guarantees 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 2021 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.
2021
Gross
carrying
amount
$m
139.8
53.8
3.8
12.2
209.6
Consolidated
Loss
allowance
$m
Expected
loss rate
%
–
–
–
10.4
10.4
–
0.2
1.8
80.4
–
2020
Gross
carrying
amount
$m
173.8
3.1
0.2
22.3
199.4
Loss
allowance
$m
–
–
–
17.9
17.9
Expected
loss rate
%
–
–
–
85.2
–
Current
More than 30 days past due
More than 60 days past due
More than 90 days past due
Total loss allowance
The gross carrying amount includes external receivables of $173.2 million (2020: $167.5 million) and the Group’s share of joint venture
receivables of $36.4 million (2019: $31.9 million).
Adbri 2021 Annual ReportIntroduction and overviewOperational updatesSustainability reportFinancial statements 142
Notes to the financial statements continued
21 Financial risk management continued
(d) Liquidity risk
The ultimate responsibility for liquidity risk management rests with the Board which has established an appropriate risk management
framework to manage the Group’s short, medium and long-term funding and liquidity management requirements. The Group’s
Corporate Treasury function manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities
by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.
The Group has $950 million of bilateral financing facilities (including $890 million of cash advance and $60 million of contingent
instrument lines) at 31 December 2021. The maturities of the debt facilities were extended in early 2022. Accounting for these
extensions, the facilities have an average maturity of 5.1 years at 31 December 2021, extended from 3.5 years.
Financial arrangements
Unrestricted access was available at balance date to the following lines of credit:
Total facilities
Bank overdrafts
Bank facilities – cash advance
Bank facilities – contingent instruments
Used at balance date
Bank overdrafts
Bank facilities – cash advance
Bank facilities – contingent instruments
Unused at balance date
Bank overdrafts
Bank facilities
Bank facilities – contingent instruments
Bank facilities mature during:
November 2024
November 2026
November 2028
November 2029
Consolidated
2021
$M
2020
$M
4.0
890.0
60.0
954.0
–
565.0
27.8
592.8
4.0
325.0
32.2
361.2
105.0
695.0
50.0
100.0
950.0
4.0
900.0
50.0
954.0
–
470.0
33.4
503.4
4.0
430.0
16.6
450.6
800.0
50.0
–
100.0
950.0
143
The table below analyses the Group’s financial liabilities that will be settled on a gross basis. The amounts disclosed are the contractual
undiscounted cash flows. The cash flows have been estimated using interest rates applicable at the end of the reporting period.
Consolidated
Contractual maturities of financial
liabilities
<6
Months
$M
6-12
Months
$M
1-2
Years
$M
31 December 2021
Non-derivatives
Trade payables
Bank facilities
Lease liabilities
Bank guarantees
Derivatives
Gross-settled forward foreign exchange
contracts (cash flow hedges):
(inflow)
outflow
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
> 2
Years
$M
–
565.0
129.3
27.3
721.6
–
–
–
–
498.6
154.1
27.2
679.9
Carrying
amount
(assets)/
liabilities
$M
187.2
562.1
81.5
–
830.8
–
–
–
172.0
466.1
88.7
–
Total
$M
187.2
565.0
143.7
27.8
923.7
(43.6)
44.0
0.4
172.0
526.6
167.4
33.4
899.4
726.8
187.2
–
3.8
0.1
191.1
(21.1)
21.1
–
172.0
4.7
3.6
3.7
–
–
3.7
0.1
3.8
(18.0)
18.3
0.3
–
4.7
3.4
2.4
–
–
6.9
0.3
7.2
(4.5)
4.6
0.1
–
18.6
6.3
0.1
184.0
10.5
25.0
(39.5)
37.8
(1.7)
(8.3)
8.0
(0.3)
–
–
–
–
–
–
(47.8)
45.8
(2.0)
–
–
–
Adbri 2021 Annual ReportIntroduction and overviewOperational updatesSustainability reportFinancial statements 144
Notes to the financial statements continued
21 Financial risk management continued
(e) 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).
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
(i) Recognised fair value measurements
The Group measures and recognises derivatives used for hedging foreign currency risk and interest rate risk at fair value on a recurring
basis. The Group held assets in relation to forward exchange contracts of $0.4 million (2020: liabilities of $2.0 million) at the end of the
reporting period. The Group held assets in relation to interest rate swaps of $2.9 million (2020: liabilities of $8.7 million) at the end of
the reporting period. The fair values of the forward exchange contracts and interest rate swaps 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).
(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).
145
Group structure
22 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.
(ii) Joint arrangements
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 investments 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 consolidated income statement and consolidated statement of other
comprehensive income respectively. Dividends received are recognised as a reduction in the carrying amount of the investment.
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) Interests in joint arrangements and associate
Ownership interest
2021
2020
Name
Principal place of business
%
%
Activities
Aalborg Portland Malaysia
Sdn. Bhd.1
Batesford Quarry2
Malaysia
Victoria
Burrell Mining Services JV2
New South Wales and Queensland
B&A Sands Pty Ltd3
Victoria
E.B. Mawson & Sons Pty Ltd and
Lake Boga Quarries Pty Ltd3
Independent Cement and Lime
Pty Ltd3
New South Wales and Victoria
New South Wales and Victoria
Peninsula Concrete Pty Ltd3
South Australia
Sunstate Cement Ltd3
Queensland
30
50
50
50
50
50
50
50
White clinker and cement
manufacture
Limestone products
Concrete products for the coal
mining industry
30
50
50
–
Sand quarrying
Premixed concrete and quarry
products
Cementitious product
distribution
Premixed concrete
50
50
50
50 Cement milling and distribution
1. Associate
2. Joint operation
3. Joint venture
Adbri 2021 Annual ReportIntroduction and overviewOperational updatesSustainability reportFinancial statements 146
Notes to the financial statements continued
22 Joint arrangements and associate continued
(a) Interests in joint arrangements and associate continued
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.
Effective 1 July 2021, the Group’s Mawsons joint venture acquired Milbrae Quarries Pty Ltd, a concrete, aggregate and mobile
crushing business.
On 18 November 2021, the Group acquired the sand operations of Metro Quarry Group Pty Ltd (MQG) in a 50/50 joint venture with the
Barro Group. This includes two quarries south east of Melbourne at Lang Lang and Nyora, supplying the local and Melbourne markets
with natural sand. The Group paid $30 million into the newly established joint venture entity to fund its share of the purchase and
working capital.
The following table outlines the movement in the carrying value of equity accounted investments.
Movements in carrying value of equity accounted investments
Opening balance at 1 January
Share of equity accounted income
Dividends received
Closing balance at 31 December
(b) Summarised financial information for joint ventures and associate
Income statement 100%
Revenue
Profit before tax
Income tax expense
Net profit from continuing operations
Group’s share based on % ownership
Consolidated
2021
$M
197.8
33.3
(16.1)
215.0
2020
$M
184.8
26.9
(13.9)
197.8
Consolidated
2021
$M
2020
$M
806.2
740.4
86.0
(18.3)
67.7
33.3
70.2
(15.8)
54.4
26.9
(c) Contingent liabilities 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 the 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 (2020: $90.0 million).
147
23 Subsidiaries
The Group’s material subsidiaries at 31 December 2021 are set out below. Unless otherwise stated, the subsidiaries have share capital
consisting solely of ordinary shares, which are held directly by the Group, and the proportion of ownership interests held is 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
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
24 Deed of cross guarantee
Place of
incorporation
Class of
shares
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
2021
%
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
2020
%
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
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.
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.
Adbri 2021 Annual ReportIntroduction and overviewOperational updatesSustainability reportFinancial statements 148
Notes to the financial statements continued
24 Deed of cross guarantee continued
Set out below is a consolidated balance sheet as at 31 December 2021 of the Closed Group.
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Current tax assets
Assets held for sale
Total current assets
Non-current assets
Receivables
Investments accounted for using the equity method
Retirement benefit asset
Property, plant and equipment
Right-of-use assets
Intangible assets
Other financial 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
Closed Group
2021
$M
120.3
256.5
153.5
14.2
14.0
2020
$M
89.6
232.3
151.5
5.9
–
558.5
479.3
87.7
127.1
7.0
45.5
110.0
4.1
1,035.9
1,004.4
72.4
278.0
5.7
1,613.8
2,172.3
189.7
4.7
36.7
2.8
233.9
562.1
81.6
76.6
63.7
–
784.0
1,017.9
1,154.4
741.2
1.5
411.7
1,154.4
82.5
277.1
4.1
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
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 2021 of the Closed Group.
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
149
Closed Group
2021
$M
156.1
(39.5)
116.6
380.8
116.6
(2.5)
(83.2)
411.7
2020
$M
126.8
(33.8)
93.0
351.5
93.0
(0.1)
(63.6)
380.8
25 Parent entity financial information
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, associates 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.
(iv) Share-based payments
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.
Adbri 2021 Annual ReportIntroduction and overviewOperational updatesSustainability reportFinancial statements 150
Notes to the financial statements continued
25 Parent entity financial information continued
(a) Summary financial information
The individual financial statements for the Company show the following aggregate amounts:
Balance sheet
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
Shareholders’ equity
Share capital
Reserves
Share-based payments
Foreign currency translation
Retained earnings
Total shareholders’ equity
Loss for the year
Total comprehensive loss
(b) Guarantees entered into by the parent entity
Bank guarantees
(c) Contingent liabilities of the parent entity
2021
$M
2020
$M
2,797.4
3,363.8
1,809.3
2,530.7
833.1
2,659.9
3,233.7
1,781.2
2,406.7
827.0
734.1
732.9
(0.6)
99.6
833.1
(12.3)
(12.3)
(1.1)
(1.2)
96.4
827.0
(14.3)
(14.3)
2021
$M
10.9
2020
$M
14.9
The parent entity did not have any contingent liabilities as at 31 December 2021 or 31 December 2020 other than the bank guarantees
shown above.
26 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.
151
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the period in
which they occur in the consolidated statement of comprehensive income. They are included in retained earnings in the consolidated
statement of changes in equity and in the consolidated balance sheet. Past service costs are recognised immediately in the
consolidated income statement.
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.
Significant estimate – key assumptions
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.
(a) Superannuation plan details
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), licences 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 2021, 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.
Adbri 2021 Annual ReportIntroduction and overviewOperational updatesSustainability reportFinancial statements 152
Notes to the financial statements continued
26 Retirement benefit obligations continued
(b) Balance sheet amounts
The amounts recognised in the balance sheet and the movements in the net defined benefit obligation over the year are as follows:
At 1 January 2021
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 2021
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
Present
value of
obligation
$M
Fair value
of plan
assets
$M
Net
obligation/
(asset)
$M
40.7
(44.8)
(4.1)
1.1
0.3
1.4
–
(1.0)
2.0
1.0
–
0.6
(4.7)
39.0
44.4
1.3
0.7
2.0
–
0.4
(0.2)
0.2
–
0.7
–
(0.3)
(0.3)
(4.5)
–
–
(4.5)
(0.6)
(0.6)
4.8
(46.0)
(48.9)
–
(0.8)
(0.8)
(0.3)
–
–
(0.3)
(0.7)
(0.7)
(6.6)
40.7
6.6
(44.8)
1.1
–
1.1
(4.5)
(1.0)
2.0
(3.5)
(0.6)
–
0.1
(7.0)
(4.5)
1.3
(0.1)
1.2
(0.3)
0.4
(0.2)
(0.1)
(0.7)
–
–
(4.1)
153
(c) Categories of plan assets
The major categories of plan assets are as follows:
Australian equity
International equity
Fixed income
Property
Cash
Other
Total
31 December 2021
unquoted
31 December 2020
unquoted
$M
12.0
14.2
7.4
5.1
3.2
4.1
%
26%
31%
16%
11%
7%
9%
$M
12.1
13.9
8.5
9.0
0.9
0.4
%
27%
31%
19%
20%
2%
1%
46.0
100%
44.8
100%
The assets set out in the above table are held in the Mercer Growth Investment Fund which does not have a quoted price in an active
market. There are no amounts relating to the Company’s own financial instruments, and property occupied by, or other assets used by,
the Company.
(d) Actuarial assumptions and sensitivity
The significant actuarial assumptions used were as follows:
Discount rate – % p.a.
Future salary increases – % p.a. – first year
Future salary increases – % p.a. – second year
Future salary increases – % p.a. – thereafter
2021
2020
2.1
2.0
2.0
2.0
0.9
1.0
1.0
2.0
The sensitivity of the defined benefit obligation to changes in the significant assumptions is:
31 December 2021
Discount rate
Future salary increases
31 December 2020
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 1.2%
Increase by 1.2%
Increase by 0.7%
Decrease by 0.6%
Decrease by 1.4%
Increase by 2.5%
Increase by 0.4%
Decrease by 1.5%
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 2022 are $0.4 million (2021: $nil).
The weighted average duration of the defined benefit obligation is 4 years (2020: 5 years).
Adbri 2021 Annual ReportIntroduction and overviewOperational updatesSustainability reportFinancial statements 154
Notes to the financial statements continued
27 Share-based payments 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 share-based payments 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 vesting period during which the employees
become unconditionally entitled to the share-based payments.
The fair value at grant date is independently determined using a pricing model that takes into account the exercise price, the term of
the share-based payment, the vesting and performance criteria, the impact of dilution, the non-tradeable nature of the payment, the
share price at grant date, the expected price volatility of the underlying share, the expected dividend yield and the risk-free interest
rate for the term of the share-based payments. However, the independent valuer has reached the conclusion that the volatility is not
a factor in assessing the fair value of the share-based payments.
The fair value of the share-based payments 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(c)(ii).
(a) Employee Share Plan
The Group operates 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 2021, the Board approved the issue of 361,188 shares under the TEES Plan (2020: 543,240 shares), while no shares were issued under
the ES Plan (2020: 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.
(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.
The exercise price for each Award is $nil.
Movement in number of awards outstanding
Outstanding at beginning of the year
Granted
Expired
Outstanding at the end of the year
Exercisable at the end of the year
2021
2020
1,757,678
1,063,600
993,655
957,495
(326,990)
(263,417)
2,424,343
1,757,678
–
–
The average value per share at the earliest exercise date during the year was not applicable for 2021 or 2020 as no awards vested
during the year. 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 tables below set out the key assumptions used by the independent valuer in their valuation model to assess the fair value of the Awards.
Awards granted in 2021 – 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
Fair value at grant date
155
2021
Awards
2020
Awards
$3.50
$0.38
0.63%
4.20
50%
$3.12
$0.36
0.40%
4.40
50%
1 May 25
1 May 24
$1.86
$1.69
Awards granted in 2020 – weighted average pricing model inputs
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 $436,490 during the year
(2020: $160,128).
The weighted average remaining contractual life of Awards outstanding at the end of the period was 2.4 years (2020: 2.6 years).
28 Related party
(a) Compensation of key management personnel
Short-term employee benefits
Post-employment benefits
Share-based payments
Consolidated
2021
$M
5.6
0.2
1.7
7.5
2020
$M
5.7
0.2
1.0
6.9
(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.
Managing Director and Chief Executive Officer, Nick Miller, and Michael Miller, a senior executive of Adbri Limited, were Directors of
Sunstate Cement Ltd and Independent Cement and Lime Pty Ltd. Brett Brown, 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, and the Mawsons
Group, which are all joint ventures of the Group.
(c) Controlled entities
The ultimate parent company is Adbri Limited. Details of interests in controlled entities are set out in Note 23.
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.
Adbri 2021 Annual ReportIntroduction and overviewOperational updatesSustainability reportFinancial statements 156
Notes to the financial statements continued
28 Related party continued
(c) Controlled entities continued
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
(d) Joint arrangement and associate entities
Consolidated
2021
$000
2020
$000
92,090
17,448
93,827
24,138
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 normal commercial terms and conditions and transactions for the supply are covered by shareholder agreements.
(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
2021
$000
2020
$000
294,299
273,854
132,063
8,644
120,874
6,563
21
246
16,021
11,116
Contributions to superannuation funds on behalf of employees
13,211
13,319
Loans advanced to:
Joint venture entities
2,737
2,672
157
(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)
(g) Loans to/from related parties
Consolidated
2021
$000
2020
$000
14
32
29,351
26,016
76,709
44,507
18,722
18,325
Loans to joint venture parties increased by $32.2 million to fund the acquisition of the Metro Quarry Group via a 50/50 joint venture
with the Barro Group. 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 $21,421
(2020: $245,667).
29 Events occurring after the reporting period
On 4 November 2021, Adbri announced the acquisition of Zanows’ Concrete and Quarries in Queensland for $58 million. At the date
of this report, the acquisition has not yet completed and has not been included within the 2021 Financial Statements.
30 Commitments for capital expenditure
Significant capital expenditure contracted for at the end of the reporting year but not recognised as liabilities is as follows:
Capital expenditure contracted for at the reporting date but not recognised as liabilities is as follows:
Within one year
31 Remuneration of auditors
Consolidated
2021
$M
2020
$M
110.4
17.6
During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related network
firms and non-related audit firms:
Audit services
PricewaterhouseCoopers Australian firm
Audit and review of financial reports
Non-audit services
PricewaterhouseCoopers Australian firm
Other assurance services
Consolidated
2021
$
2020
$
767,744
907,881
64,920
218,353
Adbri 2021 Annual ReportIntroduction and overviewOperational updatesSustainability reportFinancial statements 158
Notes to the financial statements continued
32 Contingency
Details and estimates of maximum amounts of contingent liabilities are as follows:
Guarantees
Bank guarantees
Litigation
Consolidated
2021
$M
27.8
2020
$M
33.4
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.
Directors’ declaration
159
In the Directors’ opinion:
(a) the financial statements and notes set out on pages 67–158 are in accordance with the Corporations Act 2001, including:
(ii) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting
requirements, and
(iii) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2021 and of its performance for the
financial year ended on that date, and
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and
payable, and
(c) at the date of this declaration, there are reasonable grounds to believe that the members of the Extended Closed Group identified
in Note 24 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 24.
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.
Raymond Barro
Chairman
Dated: 24 February 2022
Adbri 2021 Annual ReportIntroduction and overviewOperational updatesSustainability reportFinancial statements 160
Auditor’s independence
declaration
As lead auditor for the audit of Adbri Limited for the year ended 31 December 2021, 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
24 February 2022
Independent auditor’s report to
the members of Adbri Limited
161
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 2021 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 2021
– 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
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 $7.019 million, which represents approximately 5% of the
Group’s profit before tax, excluding Hilltop property profits
and the recovery of the Concrete Supply receivable.
– 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 the
recovery of the Concrete Supply receivable previously impaired
and gain from sale of the land at Hilltop as they are unusual or
infrequently occurring items impacting profit and loss.
– We utilised a 5% threshold based on our professional
judgement, noting it is within the range of commonly
acceptable thresholds.
– the notes to the consolidated financial statements, which include
significant accounting policies and other explanatory information
Audit Scope
– 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.
– 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
and Queensland and Masonry.
– We also performed specific risk focused audit procedures over
Independent Cement and Lime Pty Ltd and E.B. Mawson &
Sons Pty Ltd for the year ended 30 June 2021. 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 2021 to (and as at) 31 December 2021, 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 2021
for our opinion.
– Outside the operations identified above, the Group includes
components which individually and collectively do not
Adbri 2021 Annual ReportIntroduction and overviewOperational updatesSustainability reportFinancial statements 162
contribute materially to the overall Group result. We have
obtained an understanding of these operations and
performed analytical procedures.
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
(Refer to Note 12, 14 & 15)
The financial report of the Group includes
goodwill of $272.5 million and property,
plant and equipment of $1,088.2 million as
at 31 December 2021.
To determine whether the carrying value
of these assets was recoverable, the Group
prepared discounted cash flow models
(the impairment models).
The Group recognised no impairment
charge for the year ended 31 December
2021. These impairment models are driven
by significant estimates and judgement in
relation to 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 16)
Provisions for close down and restoration
costs associated with quarries and other
disturbed areas of $58.7 million were
recognised as at 31 December 2021.
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 to rehabilitate given
rehabilitation requirements. The expected
costs are adjusted for inflation over the
useful life of the site and discounted to
present value.
This was a key audit matter based on
the significance of the total balance, the
complexity and judgement included in
determining the balance of restoration
provisions due to the long forecast period
associated with many of the sites.
.
Our procedures included, amongst others:
– developing an understanding of how the Group identified assumptions and 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
– 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
– evaluating the appropriateness of the discount rate applied by the Group by comparing to
market and other relevant sources
– comparing the forecast cash flows used to develop the impairment models to the most
up-to-date budgets 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 three-years
– 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 inquiries with management, review
of meeting minutes and legal contracts, and comparing the sites used in developing the
provision in prior year to those used in the current model
– 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 management to understand whether there were 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 have also evaluated the adequacy of the disclosures made in Note 16, against the
requirements of Australian Accounting Standards.
163
Key audit matter
How our audit addressed the key audit matter
Measurement of stockpiled inventory
(Refer to Note 10)
The Group had $63.3 million of raw material
and work in progress inventory on hand as
at 31 December 2021.
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).
This was a key audit matter based on the
subjectivity in the Group’s process to
determine and apply density factors.
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 design and 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
metres to tonnes by comparing to prior year density factors for the same raw material and
whether any indicators of management bias exist.
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 2021, 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
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 81–101 of the directors’ report for the year ended
31 December 2021.
In our opinion, the remuneration report of Adbri Limited for the
year ended 31 December 2021 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
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
M. T. Lojszczyk
Partner
Adelaide
24 February 2022
Adbri 2021 Annual ReportIntroduction and overviewOperational updatesSustainability reportFinancial statements
164
Financial history
Year ended
(A$ million unless stated)
Dec
2021
Dec
2020
Dec
2019
Dec
2018
Dec1
2017
Dec
2016
Dec
2015
Dec2
2014
Dec
2013
Dec3
2012
Statement of financial
performance
Sales revenue
1,569.2
1,454.2
1,517.0
1630.6
1,559.6
1,396.2
1,413.1
1,337.8
1,228.0
1,183.1
Depreciation, amortisation
and impairments
Earnings before interest and
tax
Net interest earned (paid)
Profit before tax
Tax expense
Non-controlling interests
Net profit after tax
attributable to members
Group balance sheet
(95.9)
(115.1)
(189.7)
(87.4)
(82.5)
(78.1)
(77.8)
(75.0)
(70.6)
(65.2)
174.9
(19.1)
155.8
(39.1)
–
147.6
(20.4)
127.2
(33.6)
0.1
81.9
(18.5)
63.4
(16.2)
0.1
265.4
(14.4)
267.6
(12.1)
266.1
(11.5)
298.6
(13.0)
247.5
(15.0)
222.7
(14.1)
222.1
(14.6)
251.0
255.5
254.6
285.6
232.5
208.6
207.5
(65.8)
(72.7)
(68.4)
(77.8)
(59.9)
(57.5)
(54.6)
0.1
(0.1)
0.1
0.1
0.1
–
0.1
116.7
93.7
47.3
185.3
182.7
186.3
207.9
172.7
151.1
153.0
Current assets
530.3
452.5
519.2
500.6
474.8
390.1
403.1
387.4
390.2
363.7
Property, plant and
equipment
Receivables
Investment
Intangibles
Right-of-use assets
Other non-current assets
1,088.2
1,059.1
1,033.7
1,061.7
1,037.2
978.4
986.1
994.2
889.7
902.5
87.7
215.0
282.1
72.6
7.0
45.6
197.8
281.1
82.7
4.1
43.6
184.8
283.3
84.6
4.5
39.9
173.9
299.5
–
2.5
37.3
160.3
299.9
–
3.5
34.4
151.2
270.3
–
2.3
32.9
142.2
272.9
–
1.3
32.7
139.9
266.4
–
–
31.4
138.5
183.9
–
–
29.6
129.0
184.8
–
3.5
Total assets
2,282.9
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
Current borrowings and
creditors
Current provisions
Current lease liabilities
Non-current borrowings
Deferred income tax and
other non-current provisions
Non-current lease liabilities
188.5
36.8
4.8
562.1
145.0
76.7
179.7
37.7
3.9
153.5
33.8
5.7
144.7
34.6
–
159.2
49.0
–
117.4
50.6
–
123.9
55.4
–
122.7
44.2
–
105.4
105.8
–
115.0
78.5
–
466.1
540.1
518.7
428.9
309.6
329.5
390.1
259.1
299.3
128.7
84.8
141.4
81.9
134.5
130.1
129.0
122.4
126.9
101.6
114.4
–
–
–
–
–
–
–
Total liabilities
1,013.9
900.9
956.4
832.5
767.2
606.6
631.2
683.9
571.9
607.2
Net assets
1,269.0 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
165
Year ended
(A$ million unless stated)
Share capital
Reserves
Dec
2021
741.2
3.7
Dec
2020
740.1
(6.2)
Dec
2019
739.0
0.2
Dec
2018
734.4
4.2
Dec1
2017
733.1
1.9
Dec
2016
731.4
2.9
Dec
2015
729.2
1.2
Dec2
2014
727.9
3.3
Dec
2013
699.1
4.3
Dec3
2012
696.6
2.1
Retained earnings
521.8
485.8
455.7
504.5
508.2
483.3
474.3
402.8
355.6
304.4
Shareholders’ equity
attributable to members of
the Company
1,266.7
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
Non-controlling interests
2.3
2.3
2.4
2.5
2.6
2.5
2.6
2.7
2.8
2.8
Total shareholders’ funds
1,269.0 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
Share information
Net tangible asset backing
($/share)4
Return on funds employed %
Basic earnings per share
(c/share)
Diluted earnings (c/share)
Total dividend (c/share)5
Interim dividend (c/share)5
Final dividend (c/share)5
Special dividend (c/share)5
1.51
10.4
17.9
17.8
12.5
5.5
7.0
–
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
–
Gearing %6
34.5
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
1.44
19.8
32.0
31.9
27.0
8.0
11.0
8.0
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
–
23.6
24.6
31.6
23.4
30.9
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
Adbri 2021 Annual ReportIntroduction and overviewOperational updatesSustainability reportFinancial statements 166
Information for shareholders
Annual General Meeting
The annual general meeting of shareholders will be held on Thursday 19 May 2022.
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 Monday 14 March 2022.
Security exchange listing
Adbri Ltd is quoted on the official list of the Australian Securities Exchange (ASX) and trades under the code ‘ABC’. Perth is
Adbri Limited’s home exchange.
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
International: +613 9415 4031
Facsimile: 1300 534 987
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 by mailed payment advice. Application forms are available from our share
registry, Computershare Investor Services Pty Ltd or visit the website at www.computershare.com.au/easyupdate/abc to update
your banking details.
Dividend Reinvestment Plan (DRP)
Adbri Limited’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.
Investor information other than that relating to a shareholding can be obtained from:
General Manager Corporate Finance and Investor Relations
Adbri Ltd
Level 9 Aurora Place
88 Phillip Street
Sydney NSW 2000
Telephone: 02 8248 9903
Email: info@adbri.com.au
167
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 SRN, previous address and new address. Broker Sponsored (CHESS) holders
should advise their sponsoring broker of the change.
Communications
Our internet site www.adbri.com.au offers access to our ASX announcements and news releases as well as information about our
operations.
Substantial shareholders
Barro Properties Pty Ltd, by a notice of change of interests of substantial shareholder dated 30 May 2019, 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.
On-market buy back
At 24 February 2022, 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 20 January 2022
Shareholder
Barro Properties Pty Ltd
HSBC Custody Nominees (Australia) Limited
Citicorp Nominees Pty Ltd
JP Morgan Nominees Australia Limited
Barro Group Pty Ltd
Carltonbridge Pty Ltd
Argo Investments Ltd
Cloverdew Pty Ltd
National Nominees Limited
BNP Paribas Noms Pty Ltd
Churchbridge Pty Ltd
Ageflow Pty Ltd
Rayonbridge Pty Ltd
BNP Parabas Nominees Pty Ltd
Netwealth Investments Limited
Sunstone Finance Pty Ltd
BNP Paribas Noms (NZ) Ltd
Australian Executor Trustees Limited
Brispot Nominees Pty Ltd
HSBC Custody Nominees (Australia) Limited – A/C 2
Total top 20 shareholders
Total remaining shareholders balance
1. Figures may not add due to rounding.
Number of
ordinary
shares
held
215,285,359
91,590,190
53,922,066
46,162,491
32,412,619
11,416,000
7,681,385
6,580,000
5,897,312
5,500,261
5,040,000
3,630,000
3,574,000
2,736,356
2,137,120
2,000,000
1,700,859
1,472,025
1,451,719
1,278,747
% of
issued
capital
32.99
14.03
8.26
7.07
4.97
1.75
1.18
1.01
0.90
0.84
0.77
0.56
0.55
0.42
0.33
0.31
0.26
0.23
0.22
0.20
501,468,509
151,159,046
76.841
23.16
Adbri 2021 Annual ReportIntroduction and overviewOperational updatesSustainability reportFinancial statements 168
Information for shareholders continued
Voting rights
All shares at 20 January 2022 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 at 20 January 2022
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 171 shares
Unquoted securities
Number of
shareholders
4,895
8,056
3,461
3,067
131
% of
issued
capital
0.34
3.48
3.90
11.28
80.91
19,610
100.00
1,172
As at 20 January 2022, 2,424,343 Awards were issued to the senior executive team under the Adelaide Brighton Ltd Executive
Performance Share Plan as part of the Company’s long-term incentive program. The Awards are not quoted and do not participate
in the distribution of dividends and do not have voting rights. The total number of participants in the Adelaide Brighton Ltd Executive
Performance Share Plan and eligible to receive the Awards is seven.
140 years strong
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 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 and the Milbrae logo are registered trade marks 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.
Registered Office
Level 1, 157 Grenfell Street
Adelaide SA 5000
+61 8 8223 8000
ABN 15 007 596 018
adbri.com.au