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Steppe Cement Ltd2022 Annual Report
Building a Better Australia
We’re committed to helping
build a better Australia
2022 highlights
Chairman and Interim CEO’s report
Operating and financial review
Directors’ report
Remuneration report
Financial statements
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated statement of cash flow
Notes to financial statement
Directors’ declaration
Auditor’s independence declaration
Independent auditor’s report to the members of Adbri Limited
Information for shareholders
01
02
06
11
27
48
48
49
50
51
52
53
104
105
106
111
Dongara kiln 7, Western Australia
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.
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.
Adbri Limited ABN 15 007 596 018
Adbri is a registered trademark of Adbri Limited
Cover: Adelaide Cement employees, South Australia, 1920
2022 highlights
01
Demand for Adbri’s products remained strong in 2022, with volume
growth delivered across most product lines and price increases
driving 8.4% growth in revenue year-on-year to $1.7 billion.
Full year profit was impacted by higher operating costs caused by
both inflationary pressures and wet weather events.
Operations
Completion of the
Zanows
acquisition extending
our vertical integrated
footprint in South
East Queensland
Launch of
Net Zero
Emissions
Roadmap,
including new
medium-term
2030 targets
$96.8m
cash proceeds from
the sale of non-core
property, plant and
equipment
Quicklime supply
agreement with
Alcoa
extended until
October 2024
post year end
Financial
View our operating and
financial review
Page 06
$102.6m
statutory NPAT
$118.0m
underlying NPAT,
including property sales
$1.7b
Revenue
$118.0m
Underlying1 net profit
after tax
18.1 c/share
Underlying1 earnings
per share
Dividends
approved
$m
2000
1500
1000
500
0
2018 2019 2020
2021
2022
$m
200
150
100
50
0
2018 2019 2020
2021
2022
c/share
30
20
10
0
2018 2019 2020
2021
2022
c/share
30
20
10
0
1. Underlying measures include property profits and exclude significant items.
Reported
Underlying1
Reported
Underlying1
2018 2019 2020
2021
2022
Ordinary interim dividend
Ordinary final dividend
Special dividend
Adbri 2022 Annual Report 02
Chairman and Interim CEO’s report
It was a significant year for Adbri with
the business celebrating 140 years
since its story began. We have grown
from Brighton Cement Works in South
Australia into one of the country’s
leading manufacturers of cement, lime,
concrete, aggregates, masonry products
and industrial minerals supplying
to customers in the construction,
infrastructure, mining and retail sectors.
The past year has also been one of the most challenging for the
Company in its long history. Our results were delivered against
the backdrop of a difficult macroeconomic environment which
included the global economic instability resulting in inflationary
pressures and wet weather events across Australia.
The Company also underwent a substantial leadership transition
in the latter part of the year with the former Managing Director
and CEO and Chief Financial Officer stepping down from active
duties as the Company accelerates its transformational agenda.
Safety
Safety remains of paramount importance at Adbri. We
continually aim to embed a culture of ‘Work Safe, Home Safe’.
Disappointingly, our total recordable injury frequency rate (TRIFR)
increased to 7.9 in 2022, compared to 6.3 in 2021.
At every level of the organisation Adbri acknowledges that
these numbers are too high, and while our injury severity rates
have reduced significantly, we still have more to do in delivering
safety improvements across the business. We are investing in
engineering solutions, and are focused on leadership behaviours
including visible leaderships walks, critical control verifications,
training across our workforce and contractor partners, and
workplace inspections. Measures like the visible leadership walks
are targeted at advancing a workplace culture that promotes
safety as our top priority, with leaders visiting sites and having
quality conversations with our team members.
Financial performance
Revenue grew 8.4% year-on-year, however our full year financial
performance was impacted by challenging macroeconomic
factors including supply chain constraints, labour shortages,
input cost inflation, and rain events across the eastern seaboard
of Australia that impacted our customers.
1. Underlying measures include property profits and exclude significant items.
Profit
The increase in revenue to $1.7 billion (2021: $1.6 billion) was largely
driven by price increases introduced during the year. However,
increased costs and wet weather impacted our ability to deliver
our products efficiently, which ultimately more than offset price
and volume increases across some product lines.
Statutory net profit after tax for 2022 was $102.6 million, down
from $116.7 million in 2021. On an underlying1 basis, net profit
after tax including property profits2 was $118.0 million (down
0.9% from 2021: $119.1 million). Underlying1 net profit after tax
includes $40.3 million profit from property2 (2021: $6.1 million).
Cost inflation was the major driver behind the decrease in profit,
with ongoing volatile electricity and diesel pricing experienced
across the business. General inflationary pressures were felt
across all areas of the business, including joint ventures and
operations, as rising labour, steel and energy costs impacted
indirect services such as repairs and maintenance and other
contracted services.
Balance sheet
As part of its proactive capital management strategies, Adbri
extended and increased its bank debt facilities through 2022.
This has resulted in available bank debt facilities increasing by
$50.0 million to $940.0 million with an average maturity profile
of 4.3 years as at 31 December 2022 (2021: 5.1 years). At year end,
Adbri had net debt of $576.4 million (2021: $437.4 million); up on
the prior year due to the Zanows acquisition and the Kwinana
Upgrade project, partially offset by surplus land sales.
Dividend
In October 2022, Adbri paid a fully franked interim dividend
of 5 cents per share. Considering the capital required for the
completion of the Kwinana Upgrade project, the Board has
decided not to declare a final dividend for the year. The Board
continually reviews the Company’s capacity to return funds
to shareholders.
Sustainability
We are committed to operating a sustainable business,
exemplified by the release of our Net Zero Emissions Roadmap in
May 2022. The Roadmap sets out the actions and medium-term
targets we will progress as we decarbonise our business to
meet our goal of net zero emissions by 2050, in line with the
Paris Agreement.
Further improvements were made in the use of refuse derived
fuel (RDF), particularly at our Birkenhead operation in South
Australia. The use of alternative fuels are an integral component
of our decarbonisation strategy and we are industry leading
in this regard. During the year we achieved a 12% reduction in
operational emissions against our short-term 2024 target, set
against a 30 June 2019 baseline.
Building a more diverse workforce continues to be a focus for
our business. In 2022 our female workforce remained steady
at 16%, despite a number of initiatives implemented to increase
workforce diversity. We will continue to drive these initiatives to
become a more diverse and inclusive company. Full details of
our sustainability performance, including our diversity report,
can be found in the Sustainability Report available on the Adbri
website. We will continue to regularly update our stakeholders on
our sustainability performance, including our Roadmap, as we
look to realise our ambition of net zero emissions by 2050.
2. Property profits relate to gain on Rosehill land compulsorily acquired, sale of Moorebank and Kewdale land, and exclude post-tax gain on disposal of plant
and equipment of $5.9million related to Rosehill compulsory acquisition, which is included in statutory and underlying profit.
03
South Wharf, Victoria
Delivery against strategy
Adbri’s overarching strategy is built on our purpose of
Building a Better Australia. The strategic priorities that drive
this include reducing cost and improving operational
efficiency, transforming the lime business, growing concrete
and aggregates, enhancing our capability in infrastructure
and actively managing landholdings.
Reduce cost and improve operational efficiency
Mitigating cost continues to be a core focus for the business.
The cost reduction program delivered savings for the year,
however inflationary pressures eroded these benefits.
In the latter part of the year, we decentralised our organisational
structure to drive operational efficiency and connectivity of our
support functions within the business.
The growing use of alternative fuel at our Birkenhead cement
facility continues to improve our operational efficiency, with
the substitution rate averaging 39.5% for 2022. It also forms
a major part of our decarbonisation strategy, allowing us to
reduce our reliance on natural gas and exposure to the energy
market. We will continue to assess options to increase our use
of alternative fuels such as RDF, as well as new and emerging
alternative fuels, and extending our operational efficiency
program to other parts of the business, particularly our
concrete and aggregate businesses.
The review of the Kwinana Upgrade project is largely complete,
and whilst there are capital cost pressures likely to push the final
budget above our most recent cost estimate of $290 million,
the project review work confirmed its robust economics due
to strong operational cost savings. The final component of the
review will help determine an updated capital cost estimate, and
a schedule for achieving commissioning and commencement
of operations.
Once the Kwinana Upgrade is commissioned and operational in
2024, the benefits from ceasing cement operations at Munster
and operating solely at Kwinana are estimated to deliver greater
operating cost savings than originally projected.
Construction continues, with the remaining packages of work still
to be awarded being predominately on site construction related.
These are expected to be higher costs than originally budgeted
and will be awarded in coming weeks.
Transform lime business
The Group continues to focus on its lime recovery strategy
to build volumes from new and existing customers. Revenue
from lime was in line with the prior year but this was based on
significantly lower volumes due to the partial loss of historic
volumes to Alcoa. Pleasingly, after the period end, we announced
an extension to our quicklime supply agreement with Alcoa to the
end of October 2024.
There continues to be an increasing number of customers,
who have previously relied on imports, turning to domestically
manufactured lime supply. Adbri’s position as a reliable Australian
manufacturer of lime is driving growth in the business. We are
making good progress in diversifying our customer base and
repricing to reflect our advantage over imports.
Adbri 2022 Annual Report 04
Chairman and Interim CEO’s report continued
We also welcomed two new Independent Non-executive
Directors, Mr Dean Jenkins and Ms Samantha Hogg, to the
Board in 2022. Both Mr Jenkins and Ms Hogg are strong and
experienced additions, with Ms Hogg appointed as Deputy Chair
and Lead Independent Director from 1 March 2023, following the
resignation of Dr Vanessa Guthrie AO from the Board.
On behalf of the Board and shareholders, we thank Dr Guthrie
for her valuable contribution, dedication and counsel over
the past five years. We also acknowledge the retirement,
at last year’s AGM, of Independent Non-executive Director,
Mr Ken Scott-Mackenzie after more than a decade of
dedicated service on Adbri’s Board.
Looking ahead
Under our new leadership structure we are accelerating our
transformation program aimed at improving Adbri’s resilience as
we build a better Adbri. We are focused on:
– operational efficiency improvements;
– business simplification;
– workforce development and diversity;
–
acceleration of our strategy to divest surplus assets such
as land to realise value and recycle capital; and
–
implement our Net Zero Emissions Roadmap.
Looking forward, we anticipate that State and Federal
Governments will continue to embed emission reduction targets
and measures into legislation. We are currently engaging with
governments and regulatory bodies on a number of proposed
changes, including the Safeguard Mechanism reform. Adbri
believes that cement and lime production is an important
sovereign capability that must be maintained and the reform
should continue to support domestic manufacturing and avoid
potential carbon leakage offshore.
The outlook for Australia’s mining sector remains strong as
demand for critical minerals to deliver the global energy
transition continues. This will balance possible price volatility and
demand reductions expected for other commodities.
Residential construction is anticipated to decline in 2023,
with the conclusion of the HomeBuilder scheme and rising
interest rates. However, the backlog of residential construction
works, attributed to the shortage of trades and wet weather
in 2022, will continue to underpin good order books in 2023.
Heightened activity in the industrial and infrastructure sectors
is also anticipated, supporting demand for cement, concrete
and aggregates.
The Company anticipates cost headwinds to persist in 2023.
However, the strong demand for products and the benefits of
price increases should rebuild resilience and margin.
Grow concrete and aggregates
Revenue increased for the year in our concrete and aggregates
business, despite weather impacts. We completed the
acquisition of Zanows Concrete and Quarries. This extends
our vertically integrated footprint and adds to our network of
long-term quality concrete and quarry assets in South East
Queensland. While we saw a business impact from the wet
weather conditions in 2022, by December we saw a strong
rebound for concrete, aggregates and masonry, with this
anticipated to continue into 2023.
We are actively focusing on improving operational efficiency and
integrating our recent acquisitions into the Adbri business model.
We anticipate that our recent acquisitions and joint ventures will
benefit the Group in coming years.
Enhance capability in infrastructure
Adbri is continuing to prioritise infrastructure as an area for
growth and increased exposure to this sector this year.
Key infrastructure projects secured or delivered in the year
included the Brisbane International Airport apron works, RAAF
Base Tindal Western Access Road in the Northern Territory,
Western Sydney Airport civil and pavements package and
Gold Coast Light Rail – Stage 3.
At the end of the year, we had a win ratio of 20.8% on concrete
and 40.3% on aggregate tenders submitted and awarded
throughout the year, with our infrastructure order book increasing
by $34.5 million since 31 December 2021.
Actively manage land holdings
During the second half, we finalised the sale of land holdings
at Moorebank in New South Wales and Kewdale in Western
Australia in line with our strategy of actively managing surplus
land holdings. This generated cash proceeds of $57.0 million
from the Moorebank sale and $5.7 million from the Kewdale sale.
These divestments followed the sale of Rosehill in New South
Wales, and relocation of our operations nearby, as part of the
Government’s compulsory land acquisition.
We also consulted with stakeholders and the community
regarding excess land at the Munster site as we continue to
identify opportunities where value can be maximised and
realised from our significant portfolio of surplus land holdings.
Board and leadership changes
In October and November respectively, Interim CEO, Mark
Irwin and Interim CFO, Peter Barker were appointed following
former Managing Director and CEO, Nick Miller and former Chief
Financial Officer, Theresa Mlikota, stepping down from active
duties. The Board thanks Nick and Theresa for their contributions
to Adbri, particularly in guiding the Company through the
COVID-19 pandemic.
While the Board is prioritising the recruitment process for the
permanent CEO and CFO positions, management, led by our
Interim CEO, is quickly executing on a transformational agenda.
This aims to improve the resilience of our business in the face of
the ongoing complex external business environment, applying
a wealth of experience from previous executive roles at some of
Australia’s leading industrial companies.
Acknowledgements
In the face of some very difficult external challenges
and a period of transformational change, our people
have demonstrated their capabilities and capacity to
adapt and deliver for our customers and stakeholders.
Our people are the driving force behind our growth
agenda and will be essential for our ongoing success.
We extend our thanks to Adbri’s customers, partners,
joint ventures and the communities in which we
operate, and also to our shareholders for their support.
Raymond Barro
Chairman
Mark Irwin
Interim CEO
05
Financial Summary
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
2022
2021
1,700.3
1,569.2
282.7
270.8
(125.5)
(95.9)
157.2
174.9
(20.6)
(19.1)
136.6
155.8
(34.1)
(39.1)
Non-controlling interests
0.1
–
Net profit attributable to
members (NPAT)
Underlying2 EBITDA
Underlying2 EBIT
Underlying2 net profit after tax excluding
property3 attributable to members
102.6
116.7
295.3
274.2
179.2
77.7
178.3
113.0
Underlying2 net profit after tax including
property3 attributable to members
118.0
119.1
Basic earnings per share (EPS) (cents)
Underlying2 EPS (cents)
Ordinary dividends per share –
fully franked
15.7
18.1
5.0
17.9
18.3
12.5
Net debt4 ($million)
576.4
437.4
Leverage ratio5 (times)
Gearing6 (%)
Underlying2 return on funds employed7 (%)
Reported return on funds employed8 (%)
2.0
44.3
9.5
8.4
1.6
34.5
10.6
10.4
1. Net finance cost is finance costs shown gross in the income statement
offset by interest income included in other income.
2. Underlying measures include property profits and exclude
significant items.
3. Property profits relate to gain on Rosehill land compulsorily acquired, sale
of Moorebank and Kewdale land, and exclude post-tax gain on disposal
of plant and equipment of $5.9 million related to Rosehill compulsory
acquisition, which is included in statutory and underlying profit.
4. Net debt is calculated as total borrowings less cash and cash equivalents
and excludes lease liabilities.
5. Leverage ratio is net debt/rolling 12 month underlying EBITDA (includes
property profits and excludes significant items). Net debt is calculated as
total borrowings, inclusive of capitalised borrowing costs, less cash and
cash equivalents and excludes lease liabilities.
6. Gearing is net debt/equity attributable to owners of the Company.
7. Underlying return on funds employed is underlying EBIT/net debt + equity
attributable to owners of the Company.
8. Reported return on funds employed is reported EBIT/net debt + equity
attributable to owners of the Company.
Adbri 2022 Annual Report 06
Operating and financial review
Adbri’s revenue increased by 8.4% in
2022, while full year statutory net profit
after tax reduced by 12.1%, reflective
of the challenging macroeconomic
environment, to $102.6 million.
Demand overview
The Company generally benefited from strong demand
for Adbri’s products in 2022, with volume growth delivered
across most product lines, despite the wet weather conditions
experienced on the eastern seaboard of Australia. A detailed
analysis of the risks posed by climate change is provided in
Note 1 of the Financial Statements.
Cement and cementitious materials volumes increased 4.8%
compared to the prior comparative period (pcp), driven by
increased demand from the residential sector in Victoria
and the industrial and mining sectors in South Australia and
Western Australia.
Concrete volumes were generally stable compared to the
pcp, whilst aggregate volumes increased 14.9%. The demand
for concrete and aggregates from residential, commercial
and industrial sectors was strong in the eastern states, along
with supply of aggregates to some key infrastructure projects,
including the Western Sydney Airport. Nationally, masonry
demand was lower, particularly in the retail sector as consumer
discretionary expenditure reduced.
Demand for domestically manufactured lime increased as
customers sought security from local suppliers. This increased
demand partially offset the anticipated reduction in Alcoa’s
historic contract volumes. We continue to be the key supplier
of lime and cement to the mining sector in South Australia,
Western Australia and the Northern Territory.
9.5%
$166.4m
Return on funds employed
Cash flow from operations
%
20
15
10
5
0
2018 2019 2020
2021
2022
Reported
Underlying1
$m
300
250
200
150
100
50
0
2018 2019 2020
2021
2022
2.0
Leverage
Times
2.0
1.5
1.0
0.5
0.0
2018 2019 2020
2021
2022
Underlying1
Reported
14.3
Interest cover
44.3%
Net debt to equity
$2.5b
Total assets
Times
20
15
10
5
0
2018 2019 2020
2021
2022
Reported
Underlying1
%
50
40
30
20
10
0
2018 2019 2020
2021
2022
1. Underlying measures include property profits and exclude significant items.
$b
2.5
2.0
1.5
1.0
0.5
0.0
2018 2019 2020
2021
2022
07
Earnings overview
Revenue increased by 8.4% to $1.7 billion (2021: $1.6 billion) with
strong demand across most product ranges and improved
average selling prices.
Statutory NPAT reduced by 12.1% to $102.6 million
(2021: $116.7 million), while underlying1 NPAT (including property
profits2) of $118.0 million decreased by 0.9% compared to last
year (2021: $119.1 million). A reconciliation from underlying to
statutory net profit after tax is provided in the Directors’ Report.
Excluding property profits2 and significant items, underlying
NPAT reduced by 31.2% to $77.7 million (2021: $113.0 million),
with increased revenue insufficient to mitigate the impacts of
increasing operating costs and wet weather that slowed supply.
Underlying1 EBITDA (including property profits2 of $57.6 million) of
$295.3 million was 7.7% higher than the pcp (2021: $274.2 million).
Underlying EBITDA (excluding property profits2) of $237.7 million
was 10.8% lower than the pcp (2021: $266.6 million). Underlying1 EBIT
(including property profits2) increased by 0.5% to $179.2 million
(2021: $178.3 million) as depreciation and amortisation expenses
increased from recent investment activity.
Our joint ventures and operations experienced similar conditions
to our wholly-owned operations. Earnings contribution from
joint ventures and operations were down 24.7% on 2022, driven
by higher operating costs, wet weather events, and one-off
acquisition expenses.
As at 31 December 2022, net debt was $576.4 million
(2021: $437.4 million) reflecting higher capital expenditure,
including the Kwinana Upgrade project and settlement of the
Zanows acquisition. This was partially offset by the proceeds
from property, plant and equipment sales.
Cement and lime
Strong demand across all sectors
Building on the 12% growth in national cement revenue in
2021, revenue increased by a further 6.3% in 2022. Mining
continued to drive sales in South Australia, Western Australia
and the Northern Territory, along with strong demand from
the commercial, infrastructure and residential sectors.
Supplementary cementitious materials sales were also strong
as demand for lower carbon products increased year-on-year.
In New South Wales, wet weather and the loss of an exclusive
supply contract contributed to lower sales. Demand in Western
Australia remained solid, with domestic General Purpose (GP)
cement sales up 2.9% on the prior year and supplementary
cementitious sales slightly up on the prior year.
The average selling price of GP cement increased by 9.1%
across all of our markets, excluding our supply agreement to
Independent Cement Limited (ICL). In late 2022, we secured a
one-year extension on the ICL cementitious materials supply
agreement based on similar volumes to 2022 and with pricing
terms reflective of the current market conditions. Domestic neat
supplementary cementitious materials average selling price also
increased by 3.7%.
A price increase for cement in April, alongside a significant
out-of-cycle price increase in August, partially offset widespread
rising inflationary costs. In the fourth quarter of 2022, the average
selling price for cement was up 11.9% compared with the pcp.
The longer-lead times in contracts for mining backfill binder
materials made it difficult to recover inflationary costs in 2022;
however, we will benefit from price increases in 2023.
Revenue for lime decreased by 0.9%, with a reduction in the
historical Alcoa supply volumes partly offset by growth in the
number of new customers returning to locally manufactured
lime as they sought supply chain certainty. Improved pricing
outcomes were achieved as new contracts were secured, better
reflecting price parity to imports.
The average selling price of quicklime in Western Australia
increased by 13.6% compared with 2021, while average prices in
South Australia remained stable.
The unprecedented increase in global energy costs impacted
profitability of our energy-intensive cement and lime operations.
Surging electricity prices, combined with near record gas prices
on the short-term trading market, increased manufacturing costs.
The price of our imported clinker also increased driven by similar
increases in energy prices, elevated international shipping costs
and a weaker Australian Dollar. Overall, the Cement and Lime
division was able to control costs below national inflation levels.
Concrete and aggregates
Solid demand from the residential and infrastructure sectors
Revenue from concrete and aggregates increased 12.5% on
the pcp driven by strong demand, out-of-cycle price increases,
and contribution from the Zanows acquisition, completed in
April 2022.
Concrete sales volumes were largely stable compared to pcp,
despite south-eastern Australia recording the highest rainfall
levels since 1900. Despite strong demand in New South Wales
and Queensland, volumes were below the pcp as wet weather
impacted our customers’ worksites. Victoria saw a 4.1% increase
in volume, driven by demand from the residential and industrial
sectors. Volumes in South Australia were marginally higher
compared to 2021, augmented by residential, commercial and
industrial sector demand. The Northern Territory recorded the
strongest growth with a 26.4% increase in 2022. This can be
attributed to infrastructure projects such as RAAF Base Tindal.
Following price increases in the first half of the year, as well as
out-of-cycle price increases in the second half, we achieved a
7.7% increase in the average selling price of concrete. Most of this
was achieved in the latter half of the year, with the average selling
price improving 9.4% in the third quarter, and 15.5% in the fourth
quarter against the respective pcp. Despite this improvement, we
were unable to counter the full year inflationary costs challenges
with concrete profitability adversely impacted.
Aggregate sales volumes were up 14.9% on 2021, driven by
our increased supply to infrastructure projects in Queensland,
South Australia and the Northern Territory. Aggregate price
increases were applied in the second half of the year, however
higher sales volumes of low-grade materials resulted in the
average selling price remaining stable.
1. Underlying measures include property profits and exclude significant items.
2. Property profits relate to gain on Rosehill land compulsorily acquired, sale of Moorebank and Kewdale land, and exclude post-tax gain on disposal of plant
and equipment of $5.9million related to Rosehill compulsory acquisition, which is included in statutory and underlying profit.
Adbri 2022 Annual Report 08
Operating and financial review continued
Masonry
Stable revenue with continued demand for contracting
Masonry revenue remained stable in 2022, with continued
growth in contracting revenue and price traction from
out-of-cycle price increases. Wet weather and a reduction in
discretionary expenditure impacted sales in the retail sector.
Sales volumes were lower in all states, except South Australia,
where volumes were stable compared to the prior year, and
Western Australia which experienced a modest increase.
Price increases in both the first and second half of the year
achieved an overall 6.4% growth in average selling price.
However, this did not offset rising fuel, pallets and raw
material costs.
Growth in average selling price compared to the pcp was
strong in the second half, with selling prices in the third quarter
improving 9.8% on the pcp, followed by a 7.0% improvement in
the fourth quarter compared to the pcp.
The masonry contracting business continued its strong growth
throughout the year with revenue increasing 55.3% on the pcp.
The business experienced strong demand in the South East
Queensland residential market, and also completed significant
works at the Riverina Intermodal Freight and Logistics Hub at
Wagga Wagga in New South Wales.
As announced in December 2022, the Group divested its
masonry production site in Moorebank, New South Wales,
realising a before tax accounting gain of $45.5 million.
Joint ventures and operations
Contributions to earnings from joint ventures and operations
were down on the pcp by 24.7%, driven by increased operational
and interest costs, impact of wet weather on sales, and one-off
acquisition costs.
Independent Cement and Lime Pty Ltd
(ICL/50% ownership)
ICL’s contribution to earnings decreased 8.4%, largely due
to increased production, cartage and finance costs. The
joint venture was also adversely impacted by wet weather.
Price increases were implemented in the second half
to improve performance.
Batesford Quarry
(Batesford/50% ownership)
Batesford’s contribution to earnings increased 8.6%, driven by
strong demand for agricultural lime and the benefit from price
increases implemented across all product lines.
Sunstate Cement Ltd
(Sunstate/50% ownership)
Sunstate’s contribution to earnings decreased 21.1%. The joint
venture experienced increased demand in the South East
Queensland markets, offset by inflationary pressures, including
energy and interest expenses, that impacted performance.
Price increases were implemented in July and December 2022
to address performance.
Mawsons Group
(Mawsons/50% ownership)
Mawsons’ contribution to earnings decreased 70.3%, driven
by higher fuel, repairs and maintenance costs, adverse
weather (including flooding that impacted operations in
the second half of the year), and transaction expenses
associated with the Milbrae acquisition. The Milbrae business
experienced a significant drop in revenue associated with
reduced mining activity.
Aalborg Portland Malaysia Sdn. Bhd
(Aalborg/30% ownership)
Aalborg’s contribution to earnings were down slightly on last
year. This result was impacted by higher operating costs and
unfavourable foreign exchange rates.
B&A Sands Pty Ltd
(50% ownership)
The contribution to earnings from B&A Sands, trading as Metro
Quarry Sands, was a small loss, largely due to increased repairs,
maintenance and stripping costs and one-off acquisition costs.
Adbri’s architectural bricks
featured in a new home in Victoria
09
Kwinana Upgrade project, Western Australia
Cash flow and working capital
Operating cash flow of $166.4 million was $28.8 million lower than
2021, driven by lower earnings and an increase in working capital
of $15.4 million, associated with higher receivables and inventory
levels. The Group continues to closely monitor the trading activity
of its customers, particularly in the building sector, and proactively
manages any credit default risks identified.
Capital expenditure for the year was $255.1 million
(up $114.6 million), with $91.1 million associated with the
Kwinana Upgrade project. Capital expenditure was split between
stay-in-business capital of $123.9 million (up $17.9 million on
2021) and development capital of $131.2 million (up $96.7 million
on 2021).
Stay-in-business capital expenditure included $14.5 million for the
replacement concrete site and plant following the compulsory
acquisition of the Company’s facility at Rosehill.
Business acquisition payments of $56.8 million related to
the purchase of Zanows’ concrete and quarries business,
completed on 1 April 2022.
Property, plant and equipment disposal proceeds of $96.8 million
include funds received from Sydney Metro for the Rosehill
compulsory acquisition and cost reimbursement, the sale of the
Group’s masonry plant site at Moorebank in New South Wales,
and a land sale at Kewdale, Western Australia.
Net debt and dividends
Net debt increased by $139.0 million over the year to
$576.4 million at 31 December 2022. This represented a leverage
ratio1 of 2.0 times underlying EBITDA and gearing of 44.3%,
while interest cover2 was 14.3 times underlying EBITDA. These
key credit metrics remain investment grade and within banking
covenants. The gearing ratio is within the Board’s target range
of 25–45%. The leverage ratio is at the higher end of the Board’s
target range of 1.0–2.0 times net debt/EBITDA as anticipated
during the construction of the Kwinana Upgrade project.
During the year, Adbri augmented and increased the tenor of
its bank debt facilities, with bank debt facilities increasing by
$50.0 million to $940.0 million and an average maturity profile
of 4.3 years at 31 December 2022.
The Board has decided not to declare a final dividend for the
year considering the capital required for the completion of the
Kwinana Upgrade project. The Board continually reviews the
Company’s capacity to return funds to shareholders.
Finance cost and tax
Net finance costs increased by $1.5 million to $20.6 million.
Interest and finance charges increased by $4.4 million, with
higher borrowings and interest rate rises taking effect during
the year. Interest income increased by $2.9 million, generally
in line with the increased interest rates.
In 2022, the Group drew down $153.2 million from its borrowing
facilities to fund the Zanows acquisition and the Kwinana Upgrade
project. Financing cash outflows in the year also reflect the
payment of the 2021 final dividend of $45.7 million and 2022
interim dividend of $32.6 million.
Statutory income tax expenses decreased from $39.1 million to
$34.1 million due to a decrease in pre-tax profits and favourable
deferred tax movements related to property profits3. The
effective income tax expense rate at 25.0% remained stable
compared to 2021.
1.
2.
Leverage ratio – net debt/rolling 12 months underlying EBITDA (includes property profits and excludes significant items). Net debt is calculated as total
borrowings, inclusive of capitalised borrowing costs, less cash and cash equivalents and excludes lease liabilities.
Interest cover – rolling 12 months underlying EBITDA (includes property profits and excludes significant items)/12 months net finance costs (net finance cost is
the finance costs shown gross in the income statement offset by interest income included in other income).
3. Property profits relate to gain on Rosehill land compulsorily acquired, sale of Moorebank and Kewdale land, and exclude post-tax gain on disposal of plant
and equipment of $5.9 million related to Rosehill compulsory acquisition, which is included in statutory and underlying profit.
Adbri 2022 Annual Report 10
Financial statements 2022
Capital structure and risk management
18.
19.
20.
21.
22.
Borrowings
Share capital
Dividends
Reserves and retained earnings
Financial risk management
Group structure
23.
24.
25.
26.
27.
28.
29.
Joint arrangements and associate
Subsidiaries
Deed of cross guarantee
Parent entity financial information
Retirement benefit obligations
Share-based payments plans
Related party
30.
Events occurring after the reporting period
31.
32.
Commitments for capital expenditure
Remuneration of auditors
33. Contingency
Directors’ declaration
Auditor’s independence declaration
Independent auditor’s report to the members
of Adbri Limited
Information for shareholders
79
79
79
80
81
82
91
91
93
93
95
96
100
101
103
103
103
103
104
105
106
111
Table of contents
Directors’ report
Remuneration report
People and Culture Chair’s letter
1.
2.
3.
4.
5.
6.
7.
8.
Key management personnel
Remuneration governance
Executive KMP renumeration policy
and framework
2022 Executive KMP remuneration approach
Linking Executive KMP remuneration
to company performance
Non-executive Directors’ fees
Executive KMP service agreements
and statutory remuneration tables
Additional statutory disclosures
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated statement of statement of cash flows
Notes to the financial statements
1.
2.
3.
4.
5.
6.
7.
8.
Summary of significant accounting policies
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.
10.
11.
12.
13.
14.
15.
16.
17.
Trade and other receivables
Inventories
Assets held for sale
Property, plant and equipment
Leases
Intangible assets
Business combinations
Impairment tests
Provisions
11
27
27
29
30
31
33
39
43
45
47
48
49
50
51
52
53
53
57
59
59
60
61
61
64
67
67
68
68
69
71
73
75
75
77
Directors’ report
11
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 2022.
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)
RR Barro
SL Hogg (appointed on 29 March 2022)
DS Jenkins (appointed on 23 August 2022)
ND Miller (resigned as a Director effective as at 27 October 2022)
KB Scott-Mackenzie (retired on 19 May 2022)
ER Stein
GR Tarrant
MJM Wright
Principal activities
During the year the principal activities of the Group consisted of the manufacture and distribution of cement, and cementitious
products, lime, premixed concrete, aggregates, sand and concrete masonry products.
Review of operations
Information on the principal activities, operations and financial position of the Group and its business strategies and prospects
is set out in the Chairman and Interim Chief Executive Officer’s report, and operating and financial reviews on pages 2 to 9 of
this Annual Report.
A summary of the financial results for the year ended 31 December 2022 is set out below:
Statutory results
Revenue from contracts with customers
Earnings before interest, tax, depreciation, amortisation and impairment (EBITDA)
Depreciation, amortisation and impairment
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 attributable to owners of the Company (%)
Net debt/net debt + equity (%)
Consolidated
2022
$M
1,700.3
282.7
(125.5)
157.2
(20.6)
136.6
(34.1)
102.5
2021
$M
1,569.2
270.8
(95.9)
174.9
(19.1)
155.8
(39.1)
116.7
102.6
116.7
(0.1)
15.7
5.0
100.0
576.4
44.3
30.7
–
17.9
12.5
100.0
437.4
34.5
25.6
1. Net finance cost is the finance costs shown gross in the income statement offset by 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.
Adbri 2022 Annual Report 12
Directors’ report continued
Review of operations continued
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 2022 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 13.
Underlying results
Revenue from contracts with customers
Earnings before interest, tax, depreciation and amortisation (EBITDA)
Depreciation and amortisation
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
Earnings per share (cents)
Leverage ratio2 (times)
Consolidated
2022
$M
1,700.3
295.3
(116.1)
179.2
(20.6)
158.6
(40.7)
117.9
118.0
(0.1)
18.1
2.0
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
1. Net finance cost is the finance costs shown gross in the income statement offset by interest income included in other income.
2. Leverage ratio is calculated as net debt/rolling 12 months underlying EBITDA (includes property profits and excludes significant items). Net debt is
calculated as total borrowings, inclusive of capitalised borrowing costs, less cash and cash equivalents and excludes lease liabilities.
Net profit after tax
Full year reported NPAT decreased 12.1% on 2021 to $102.6 million.
Underlying NPAT decreased 0.9% from $119.1 million in 2021 to $118.0 million.
Property profits contributed $40.3 million to NPAT in the year, compared to $6.1 million in 2021.
13
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/write-offs
Change in loss provision
Corporate restructuring and strategy costs
Acquisition costs
Joint venture acquisition costs1
Underlying profit (including property
profits2)
Minority interest
Underlying profit attributable to
members (including property profits2)
Property profits2
Underlying profit attributable to
members (excluding property profits2)
Profit
before tax
$M
2022
Income
tax
$M
Profit
after tax
$M
Profit
before tax
$M
2021
Income
tax
$M
Profit
after tax
$M
136.7
(0.1)
136.6
9.4
1.3
4.8
3.8
2.7
158.6
0.1
158.7
(57.6)
(34.1)
102.6
–
(0.1)
(34.1)
102.5
(2.8)
(0.4)
(1.5)
(1.1)
(0.8)
(40.7)
–
(40.7)
17.3
6.6
0.9
3.3
2.7
1.9
117.9
0.1
118.0
(40.3)
155.8
–
155.8
–
(3.3)
5.9
0.8
–
159.2
–
159.2
(7.6)
(39.1)
–
(39.1)
–
1.0
(1.8)
(0.2)
–
(40.1)
–
(40.1)
1.5
116.7
–
116.7
–
(2.3)
4.1
0.6
–
119.1
–
119.1
(6.1)
101.1
(23.4)
77.7
151.6
(38.6)
113.0
1. Amount included in share of net profits of joint ventures and associate accounted for using the equity method.
2. Property profits relate to gain on Rosehill land compulsorily acquired, sale of Moorebank and Kewdale land, and exclude post-tax gain on disposal of plant
and equipment of $5.9million related to Rosehill compulsory acquisition, which is included in statutory and underlying profit.
Impairment
These relate to impairment charge for properties classified as held for sale where expected sale proceeds are less than the carrying
value and associated goodwill, along with accelerated amortisation for intangible assets deemed to be not in use. There was no
impairment charge in the prior corresponding period.
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. A further $1.3 million in costs for this matter were incurred in FY22.
Corporate restructuring costs
One-off redundancies and corporate strategy costs of $4.8 million were recognised in the period.
These relate to redundancies associated with the organisational restructure and various other strategic initiatives currently underway.
Acquisition costs/joint venture acquisition costs
During the year, acquisition costs related to the following acquisitions made directly by the Group and by the joint ventures, where the
Group’s interest is equity accounted for were incurred:
–
–
–
acquisition of Zanows’ Concrete & Quarries by the Group;
acquisition of Milbrae by the Mawsons joint venture; and
acquisition of Metro Quarries Group by the B&A Sands joint venture.
Adbri 2022 Annual Report 14
Directors’ report continued
Dividends paid or declared by the Company
During the 2022 financial year, the following dividends were paid:
–
–
A final ordinary dividend in respect of the year ended 31 December 2021 of 7.0 cents per share (fully franked) was paid on
11 April 2022. This dividend totalled $45.7 million; and
An interim dividend in respect of the year ended 31 December 2022 of 5.0 cents per share (fully franked) was paid on
5 October 2022. This dividend totalled $32.6 million.
Since the end of the financial year, considering the capital required for the completion of the Kwinana Upgrade project, the Board
has decided not to declare a final dividend for the year.
Business risks and mitigation
Adbri’s risk management policy and framework incorporates effective risk management into all facets of the business. Planning
processes, including budgets and strategic plans, include a risk management component. There is regular reporting on the status
of key risks to the Board and respective Committees throughout the year. The key risks to the Adbri Group and mitigation actions are
outlined below. This is not intended as an exhaustive list of all the risks that may affect the Adbri Group. Additional risks that are not
presently known or considered to be material may arise which could adversely affect the Adbri Group.
Risk details mitigation
Risk description
Risk scenario
Mitigation
Climate change
– transition to
a low-carbon
economy
Greenhouse gas (GHG) emissions are driving climate
change and the potential impacts on the environment,
economy, and communities, underpin international
agreements such as the Paris Agreement, to accelerate
the transition to a low carbon economy. A range
of actions is being undertaken by governments,
regulators, the corporate sector, and individuals.
Governments are increasing efforts to meet their
own carbon reduction targets, be that through the
Safeguard Mechanism or a possible re-introduction
of a carbon tax. This may result in a tax on carbon
emissions, increasing production costs. 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 also
potentially impact useful lives of assets, stay in
business and research and development capital
expenditure aligned to the Company’s Net Zero
Emissions Roadmap, 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 reduced 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 has been taking action to reduce its energy
consumption and GHG emissions for over a decade
and we regularly review our approach in response to
emerging scientific knowledge, changes in climate
policy, developments in low emissions technologies
and evolving stakeholder expectations.
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 (supplementary
cementitious materials (SCMs)) to substitute for
emissions-intensive clinker in our cement and as
additions in concrete manufacturing.
Adbri set its current emissions reduction target in
2019, to deliver a 7% reduction in our operational
GHG emissions by 2024 and we are on track to
deliver on this target.
In May 2022, Adbri launched its Net Zero Emissions
(NZE) Roadmap as part of its commitment to a low
carbon future by 2050.
Key short-term actions are for 50% kiln fuel to be
sourced from alternative fuel in SA by 2024 and to
increase use of SCMs nationally.
For the longer term, there are three key parts to the
roadmap: Reduce emissions through process and
energy efficiency improvements, create new lower
carbon products with increased use of SCMs and
collaborate with key partners to realise emerging
and breakthrough technology.
15
Risk description
Risk scenario
Mitigation
Environmental,
Social and
Governance
(ESG)
considerations
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 carbon
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 licensing 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.
Macroeconomic
conditions
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, 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 dust 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 low 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
• Delivery of 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 as much as possible and raw material
suppliers to minimise loss of business and earnings
through market cycles.
During 2022, Adbri completed the acquisition of
Zanows Concrete & Quarries in South East Queensland.
This acquisition is another example of progress to the
Company’s vertical integration strategy.
Adbri 2022 Annual Report 16
Directors’ report continued
Risk details mitigation continued
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 and
importing themselves.
There is also a risk that the Group is not able
to achieve/maintain sufficient pricing to offset
inflationary costs.
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.
We continue to develop our product range to
address the changing needs of our customers and
the increased focus on delivering products with
a greener environmental footprint.
Workforce
attraction and
retention
Inability to attract and retain a suitably skilled and
diverse workforce is a risk to company performance
in the conduct of its business.
Adbri has established a flexible work policy and
guidelines for employees that can work from home to
be able to do so.
Demand for skilled labour may exceed supply
giving rise to a shortage of labour and in turn lower
production and/or sales
Investment has been made in a new recruitment
and candidate management system to improve the
process and capture identified talent.
Regulatory
compliance
Adbri may not meet its stakeholders’ expectations
in relation to the number of female or Indigenous
employees or those seeking a better work life
balance, putting more pressure on maintaining a
workforce that will deliver Adbri’s strategic initiatives
and business plans.
With production and distribution sites across all
states and territories of Australia, Adbri is subject to
significant regulatory requirements in areas such as
environmental, licences to operate, employment,
occupational health and safety, and taxation laws.
Non-compliance or changes to regulatory
requirements could lead to substantial penalties,
cost impositions on operations and loss of licence
to operate.
Key equipment
failure
The production of cement and lime involves large
scale manufacturing sites. 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 interrupt production and
adversely impact financial performance.
Gender balanced interview panels are encouraged
and females and Indigenous candidates are included
in short lists.
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.
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.
17
Risk description
Risk scenario
Mitigation
Change of control
Serious injury
or fatality
Adbri’s major shareholder, the Barro Group, currently
holds a beneficial interest in 43% of the Company’s
stock. The Barro Group can also increase their
shareholding by 3% every 6 months, under the
Corporations Law ‘creep provisions’.
As a substantial shareholder in Adbri, Barro currently
holds three Adbri board positions.
Adbri is at considerable risk of a change of control
event, should the Barro Group choose to increase
their shareholding to exceed 50%.
A change in control could have material impacts
on the business, including increased Directors’ &
Officers’ insurance costs, and impacts to joint venture
agreements, sales contracts, workers compensation
self-insurance status and potential market disclosures.
Adbri directly employs approximately 1,500 people
and operates across approximately 150 locations,
undertaking cement, lime, concrete and concrete
product manufacturing, and distribution activities.
There are 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.
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 Board maintain strong governance protocols
to ensure any conflicts of interest are managed
appropriately. The Board seeks to maintain a majority
of independent directors and seeks to ensure
that board committee chair positions are held by
independent directors.
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 did not represent a substantial lessening
of competition in the sector.
Adbri has a strong focus on safety. 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.
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.
Adbri 2022 Annual Report 18
Directors’ report continued
Risk details mitigation continued
Risk description
Risk scenario
Mitigation
Foreign currency
The Group imports a range of raw materials to support
the production of cement and concrete. In addition,
the company may import plant and equipment for
both development and maintenance capital projects.
These purchases are primarily denominated in United
States Dollars, Japanese Yen and Euro. The Company
is exposed to any fluctuations in these currencies
against the Australian Dollar.
Production
quality
The Group’s key products of cement, lime, concrete,
aggregates, and masonry products are sold in
accordance with relevant quality standards and
customer specifications.
Raw materials used in production are natural products
and therefore normal variability of the characteristics
could result in fluctuations in composition 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
raw material purchases that expose the Group to
foreign currency risk are hedged through agreed
hedging products up to a full calendar year reflecting
contractual commitments. Foreign exchange
exposure as a result of all other Company activities
where the value at risk is considered sufficient are
hedged accordingly. 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.
Potential loss of data or records, interruption to
operations, adverse reputational impacts, and cost
to respond to ransom requests.
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.
Energy pricing
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 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.
In addition, where possible alternative fuel is used
to displace gas. A refuse derived fuel (processed
combustible demolition waste) has been developed
for use in the kiln at Birkenhead and substitutes for
approximately 40% of gas, saving significant costs,
reducing emissions and avoiding waste being sent
to landfill.
19
Risk description
Risk scenario
Mitigation
Access to capital
The Group is capital intensive and relies on banks and
other institutions to source its funding needs. A failure
to access sufficient liquidity may limit the Company’s
ability to grow its earnings and may prevent the
Company 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.
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.
Adbri adopts a conservative approach to capital
management and seeks to maintain its investment
grade like 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
pro-active 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 pro-active capital management
strategies, Adbri completed an augmentation
and increased tenor of current bank debt facilities
in December 2022. This has results in bank debt
facilities of $940 million and average maturity
profile of 4.3 years at 31 December 2022.
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.
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 has formal procurement and international
shipping functions with resources expert in sourcing
and supply chain risk management.
Adbri relies on imported product for both domestic
processing and supply direct to its joint venture
companies and other customers.
If necessary, Adbri is able to purchase clinker, cement,
and slag from their respective spot markets in lieu of
contracted suppliers.
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.
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-19 impacts and increasing demand in
infrastructure and mining sectors, is increasing driver
unavailability for distribution for goods resulting in
potential supply chain disruption and increased costs.
Adbri 2022 Annual Report 20
Directors’ report continued
Risk details mitigation continued
Risk description
Risk scenario
Mitigation
Trade credit
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 factor into the level of risk associated with
trade credit outstanding.
Fraud, bribery,
and corruption
The Group operates in an environment that exposes
it to the risk of loss from fraud, bribery, and corruption.
Operating in a commercial environment with the
movement of funds into and out of the Company
gives rise to the risk that economic benefits can be
obtained through inappropriate acts by employees,
suppliers, customers or third parties.
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.
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 and Interim Chief Executive Officer’s report, and the operating and financial review on pages 3 to 9
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 2022 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 and Interim Chief Executive Officer’s report, and the operating and financial review on pages 3 to 9 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 2022, 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.
Cockburn Cement Limited
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 which charged Cockburn Cement 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, denied the charges and has entered a plea of
not guilty to each charge.
21
The trial was held from 25 July 2022 to 12 August 2022. Shortly before the trial commenced the prosecution dropped two of the fifteen
charges. Judgment was delivered on 2 December 2022. Of the remaining thirteen charges, Cockburn Cement was found not guilty
of seven charges, and guilty of six charges. The sentencing hearing for the six charges where a guilty verdict was entered, is listed on
2 March 2023. Any appeal against the guilty verdicts will be further considered after the sentencing hearing.
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. Cockburn Cement asserts that it operates within applicable requirements, denies the charges and
has entered a plea of not guilty to each charge. This prosecution has not been listed for trial as the prosecution has not yet completed
provision of disclosure.
All charges will be determined by the Courts of Western Australia.
Cockburn Cement maintains that it operates within applicable requirements and confirms that it has not received any notice alleging
breach of its operating licence conditions.
Further information about the Group’s environmental performance is set out in the 2022 Sustainability Report which can be found on
the Adbri website.
Director profiles
Raymond Barro
BBus, CPA, FGIA, FCIS
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.
Raymond is a Fellow of the Governance Institute of Australia.
Board member since
August 2008
Member
Safety, Health, Environment and Sustainability Committee
Dr Vanessa Guthrie AO
PhD, BSc (Hons), FAICD,
FTSE
Deputy Chair and Lead
Independent Director
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)
Orica Limited (Appointed February 2023)
Tronox Holdings Plc (Appointed February 2019)
Former Directorships
Vimy Resources Limited (Appointed October 2017, ceased November 2018)
Adbri 2022 Annual Report 22
Directors’ report continued
Director profiles continued
Rhonda Barro
Non-executive Director
Rhonda has over 45 years of extensive experience in the construction materials industry.
She is a Director of Barro Group Pty Ltd and offers significant insights and a deep understanding of the
industry through executive management and functional roles. She has detailed knowledge of stakeholder
engagement, customer relations and sales in the construction material sector.
She has held numerous leadership roles in community organisations and is a Fellow of the Williamson
Community Leadership Program.
Board Member since
May 2019
Member
People and Culture Committee
Samantha Hogg
BComm, MAICD
Independent
Non-executive Director
Samantha has over 25 years’ experience across the transport, infrastructure, energy and resources
sectors, domestically and offshore. In her previous role as Chief Financial Officer at Transurban Group,
she was responsible for the financing and transaction governance of a number of large acquisitions
and divestments and provided key financial guidance and controls.
She has held senior executive positions at Western Mining Company across a broad range of portfolios
including finance, strategic projects, marketing and corporate services.
She has also served as Chair or Committee Chair in both the public and private sectors, with a focus
on the infrastructure and renewable energy sectors. More recently, she has been a member of the
National COVID-19 Commission Advisory Panel and the Tasmanian equivalent, focusing on the social and
economic recovery from the pandemic.
Board member since
March 2022
Member
Audit, Risk and Compliance Committee
Current Directorships
Cleanaway Waste Management Limited (Appointed November 2019)
IGO Limited (Appointed January 2023)
Former Directorships
DeGrey Mining Limited (Appointed January 2022, ceased October 2022)
Dean Jenkins
BE (Aero) Hons, GAICD
Independent
Non-executive Director
Dean has over 25 years’ experience in the transport, manufacturing, engineering, energy and resources
sectors both domestically and overseas.
Dean has held senior executive and leadership positions including Managing Director and Chief
Executive Officer of MaxiPARTS Limited (previously called MaxiTrans), Chief Operating Officer and
Executive Director of Weir Group PLC and CEO UGL Rail.
His commercial management capability and experience in strategy, manufacturing and mineral
processing markets brings valuable experience to his directorship.
Board member since
August 2022
23
Emma Stein
BSc (Physics Hons),
MBA, FUWS, FAICD
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 as 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.
Board member since
October 2019
Chair
Audit, Risk and Compliance Committee
Member
People and Culture Committee, Nomination and Governance Committee
Current Directorships
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)
Geoff Tarrant
BBus
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 Zuuse Limited, he also brings valuable technology knowledge and experience to his
directorship.
Board member since
February 2018
Member
Audit, Risk and Compliance Committee
Michael Wright
B Eng (Civil), Master Eng
Science, Harvard AMP
Independent
Non-executive Director
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 Chair and Chief Executive Officer of Thiess and was formerly Chief Executive
Officer of ASX-listed CIMIC Group. Michael sits on the boards of University of Queensland’s Sustainable
Minerals Institute, the Minerals Council of Australia, where he chairs the Safety & Health Committee, and
is Chair of the International River Foundation.
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
Chair
Safety, Health, Environment and Sustainability Committee
Member
People and Culture Committee, Nomination and Governance Committee.
Former Directorships
Cimic Group Limited (Appointed December 2017, ceased February 2020)
Adbri 2022 Annual Report 24
Directors’ report continued
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
Audit, Risk & Com-
pliance Committee
People & Culture
Committee
Safety, Health,
Environment
&Sustainability
Committee
Nominations &
Governance
Committee
RD Barro
Dr VA Guthrie AO
RR Barro1
SL Hogg2
DS Jenkins3
ND Miller4
KB Scott-Mackenzie5
ER Stein
GR Tarrant6
MJM Wright
A
21
21
20
18
10
14
7
21
18
21
H
21
21
21
18
10
16
7
21
21
21
A Number of meetings attended.
H Number of meetings held during period of office.
A
–
–
–
5
–
–
3
8
8
–
H
–
–
–
5
–
–
3
8
8
–
A
–
5
5
–
–
–
–
5
–
5
H
–
5
5
–
–
–
–
5
–
5
A
4
4
–
–
–
3
2
–
–
4
H
4
4
–
–
–
3
2
–
–
4
A
–
2
–
–
–
–
2
2
–
2
H
–
2
–
–
–
–
2
2
–
2
1. Ms Barro was unable to attend one Board meeting convened at short notice due to personal reasons.
2. Ms Hogg was appointed to the Board on 29 March 2022, she was also appointed to the Audit, Risk and Compliance Committee on 18 May 2022.
3. Mr Jenkins was appointed to the Board on 23 August 2022.
4. Mr Miller resigned effective as at 27 October 2022.
5. Mr Scott-Mackenzie retired as a Director on 19 May 2022 and subsequently ceased being a member of the Audit, Risk and Compliance Committee and the
Safety, Health, Environment and Sustainability Committee.
6. Mr Tarrant was unable to attend three Board meetings scheduled at late notice due to personal reasons.
Directors’ interests
RD Barro
VA Guthrie
RR Barro
SL Hogg
DS Jenkins
ER Stein
GR Tarrant
MJM Wright
Ordinary
shares
279,178,329
105,000
278,787,781
–
28,000
53,403
30,000
50,000
Full details of the interests in share capital of Directors of the Company are set out in the Remuneration report on pages 27 to 47.
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 27 to 47.
25
Company Secretary
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.
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 2022 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 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 2022 to 30 April 2023. Due to confidentiality obligations under that policy, the premium payable and further details in
respect of the nature of the liabilities insured against cannot be disclosed.
Proceedings on behalf of the Company
No person has applied for leave of the Court to bring proceedings on behalf of the Company or to intervene in any proceedings
to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those
proceedings. The Company was not a party to any such proceedings during the year.
Non-audit services
The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s
experience and expertise with the Company and the Group are important.
Details of the amounts paid or payable to the Company’s previous auditors PricewaterhouseCoopers, or the Company’s current
auditors Deloitte Touche Tohmatsu for audit and non-audit services provided during the year are set out in Note 32 to the Financial
Statements on page 103 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 32, 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.
Adbri 2022 Annual Report 26
Directors’ report continued
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 105.
Rounding off
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ reports) Instrument 2016/191 relating to
the ‘rounding off’ of amounts in the Directors’ report. In accordance with that instrument, amounts in the financial report and Directors’
report have been rounded off to the nearest one hundred thousand dollars, unless otherwise stated.
Shares under option
Unissued ordinary shares under option relate to Awards associated with the Company’s Executive Performance Share Plan.
Outstanding Awards at the date of this report are as follows:
Date awards granted
1 January 2019
1 January 2020
1 January 2021
1 January 2022
1 January 2022
Total
Expiry date
30 September 2023
30 September 2024
30 September 2025
30 September 2026
31 July 2025
Number of awards
481,086
869,476
993,652
1,023,723
470,080
3,838,017
The exercise price for these Awards is nil. Further details of Awards are set out in Note 28 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:
https://www.adbri.com.au/who-we-are/corporate-governance/
Signed in accordance with a resolution of the Directors.
Raymond Barro
Chairman
Dated: 28 February 2023
Remuneration report
27
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 2022
Remuneration Report.
Executive KMP movements in 2022
In 2022, the Board considered a change in leadership would be appropriate in light of the Group’s ongoing growth and
strategic priorities.
In October 2022, Nick Miller ceased as the Company’s Managing Director (MD) and left the role of Chief Executive Officer
(CEO). Nick’s contribution, particularly his leadership on safety and managing the Company through the challenges presented
by COVID-19, were instrumental to the Group’s performance during that time. In addition, Theresa Mlikota, the Company's Chief
Financial Officer (CFO), resigned from Adbri in November 2022. Details of the remuneration arrangements for Nick and Theresa
for 2022 are outlined in Section 7.
Since that time, Mark Irwin has been leading the Company as Interim CEO, supported by Peter Barker as Interim CFO.
Mark and Peter are focused on driving commercial performance to improve margins, offsetting cost pressures, and
delivering on cost reduction and operational efficiency initiatives that support returns for Adbri's shareholders. Details of
their remuneration arrangements for 2022 are also outlined in Section 7.
The Board’s recruitment process for a permanent CEO and CFO is well underway. It is intended that Mark Irwin will
continue as Interim CEO for the time being to continue the transformational agenda that stabilises and improves the
Company performance.
Company performance
Supported by continued demand for our products, Adbri recorded revenue growth of 8.4% for the financial year ended
31 December 2022. The top line result was achieved despite significant operational challenges associated with inflationary
pressures, wet weather events, and shortages of materials and labour which together impacted the full year profit result.
Adbri reported an underlying net profit after tax excluding property and significant items (NPAT) of $77.7 million for 2022.
The Group continued to focus on operational and sustainability performance in 2022 and maintaining a strong link to our
customers and end markets. The Group’s Net Zero Emissions Roadmap was released in May 2022, with several sustainability
initiatives progressed during the year.
Remuneration in 2022
Executive KMP fixed remuneration
Executive KMP remuneration is reviewed on an annual basis with reference to the Group’s remuneration policy
and market competitiveness. A modest average increase of around 3% was made to Executive KMP Fixed Annual
Renumeration (FAR) in 2022, in recognition of the competitive and challenging employment market and to align with
market remuneration levels and reported CPI increase.
Short-Term Incentive (STI) outcomes
Following feedback from investors and considering recent trends in remuneration frameworks in 2021, the weighting of
financial and non-financial performance measures for the 2022 STI were revised to 70% and 30% weighting respectively
(as compared to 80% financial and 20% non-financial in prior years). The Board considers this change appropriate to support
a stronger Executive KMP focus on the delivery of the Group’s strategic, sustainability and inclusivity initiatives.
The Group’s financial targets for 2022 were set in late 2021, with STI targets set slightly above industry growth forecasts to
challenge the team to improve performance across the business. In 2022, the non-financial STI performance conditions for
Executive KMP were also revised, with the intention of increasing Executive KMP focus on the strategic business priorities of
safety, inclusivity and sustainability.
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. The Board’s overall assessment
of performance resulted in vesting of 11–23% of the potential maximum STI for all Executive KMP, including
the former Managing Director and CEO.
Adbri 2022 Annual Report 28
Remuneration report continued
Long-Term Incentive (LTI) outcomes
Executive KMP 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 2022, the 2018 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
Executive KMPs. No Board discretion was applied given the lack of growth in the share price over the full performance period.
MD Performance Award
In 2022, shareholders approved the grant of the MD Performance Award, being a one-off grant to the former Managing Director
and CEO to incentivise the delivery of strategic growth over 2022 to 2024.
Four performance conditions were set with annual targets that would be tested following the end of each financial year in the
performance period. 20% of the MD Performance Award will be tested against the 2022 performance targets during 2023,
in line with testing of long-term incentives under the LTI Plan. As the former Managing Director and CEO will cease employment
in October 2023, a portion of the MD Performance Award will remain on-foot for performance testing at the end of the
performance period. Further details are set out in later sections.
Non-executive Director fees
Fees for the Chairman and Non-executive Directors are reviewed annually to maintain market relativity with peer companies
and to ensure the continued attraction and retention of high calibre Directors. Following the 2021 review, a 2.2% increase was
applied to the base and committee fees for Non-executive Directors during 2022.
Conclusion
Remuneration structures are designed to align employee outcomes with the shareholder experience over the long-term. In
2022, while our Executive Team worked hard to improve Company performance under challenging headwinds, most of the STI
and LTI targets were not achieved. While this is a disappointing result, the Board recognises that our remuneration framework
and decisions must reflect Company performance and consider the perspectives of our stakeholders, ensuring that the
Company is appropriately resourced to deliver value to our shareholders.
The Board remains committed to responding to the challenges of the changing employment environment and maintaining a
remuneration framework that incentivises our executives to stretch for outstanding performance.
Thank you for your interest in our Remuneration Report.
Dr Vanessa Guthrie AO
Chair of People and Culture Committee
29
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 2022. 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 Deloitte.
1
Key management personnel
The KMP of Adbri comprise all Directors and those members of the Group Executive team who have authority and responsibility for the
planning, directing and controlling the activities of the Group. In this Report, ‘Executive KMP’ refers to members of the Group Executive
team identified as KMP.
Name
Executive KMP
Nick Miller1
Position
Status
Date as KMP
(if not full year)
Managing Director and Chief Executive Officer
(referred to as ‘former Managing Director and CEO’ in
this Report)
Part year
Ceased 27 October 2022
Mark Irwin
Interim Chief Executive Officer
Part year
Appointed 18 October 2022
Theresa Mlikota2
Chief Financial Officer
Peter Barker
Brett Brown
Andrew Dell
(referred to as ‘former CFO’ in this Report)
Part year
Ceased 11 November 2022
Interim Chief Financial Officer
Part year
Appointed 7 November 2022
Chief Operating Officer – Cement and Lime
Full year
Chief Operating Officer – Concrete, Aggregates & Masonry
Full year
Non-executive Directors
Raymond Barro
Chairman
Dr Vanessa Guthrie AO
Deputy Chair and Lead Independent Director
Rhonda Barro
Non-executive Director
Full year
Full year
Full year
Samantha Hogg
Independent Non-executive Director
Part year
Appointed 29 March 2022
Dean Jenkins
Independent Non-executive Director
Part year
Appointed 23 August 2022
Ken Scott-Mackenzie
Independent Non-executive Director
Part year
Ceased 19 May 2022
Emma Stein
Geoff Tarrant
Independent Non-executive Director
Non-executive Director
Michael Wright
Independent Non-executive Director
Full year
Full year
Full year
1. Mr. Miller ceased active duties as Managing Director and Chief Executive Officer on 17 October 2022. He resigned from the Board on 27 October 2022 and
ceased as Executive KMP on this date. Mr. Miller’s notice period ends on 15 October 2023, at which time he will formally cease employment with Adbri.
Details of Mr. Miller’s remuneration arrangements, including the treatment on cessation of employment in late 2023, are set out in later sections of the Report.
2. Ms. Mlikota resigned and ceased active duties as Chief Financial Officer on 11 November 2022. She also ceased as Executive KMP on this date. Ms. Mlikota’s
notice period ends on 2 May 2023, at which time she will formally cease employment with Adbri. Details of Ms. Mlikota’s remuneration arrangements,
including the treatment on cessation of employment in mid-2023, are set out in later sections of the Report.
Adbri 2022 Annual Report 30
Remuneration report continued
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 Executive KMP continue to remain aligned to shareholder value.
Our governance framework for determining Executive KMP and Non-executive Director remuneration is outlined below:
Our governance framework
Board
P&C Committee
Management
The Board reviews and approves:
• The overall remuneration policy;
• Non-executive Director remuneration;
• The remuneration of the Managing
Director and CEO, including the
Managing Director and CEO’s
participation in the short-term and
long-term incentive schemes;
• Recommendations from the Managing
Director and CEO on remuneration for
Executive KMP (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 KMP 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 and 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 Chair 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.
31
3
Executive KMP 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 KMP remuneration, the Board has adopted a policy that is guided by the
following principles.
Remuneration principles
Attract and retain
Pay-for-performance
Behaviours and culture
Provide competitive rewards
to attract and retain highly
capable Executive KMP.
Reflect the level of
responsibility, potential and
achievement for delivering
to 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.
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.
Executive KMP, are rewarded based upon a total remuneration framework. The design of the framework is based upon our reward
principles and is comprised of three components: fixed annual remuneration (FAR), short-term incentive (STI) and long-term incentive
(LTI) as set out below.
Executive KMP are also eligible for the receipt of shares issued in accordance with Adbri’s Tax Exempt Employee Share Plan (TEES Plan).
See Note 28 of the Financial Statements for further details.
Purpose
Link to Adbri’s strategy
and performance
FAR
STI
LTI
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 Executive KMP on the
Group’s long-term business
strategy to create and protect
shareholder value over a four-
year performance period.
• Determined by the role’s
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.
• Performance is assessed
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
KMP remuneration with
the company’s strategic
direction, thereby creating
long-term shareholder value.
Adbri 2022 Annual Report 32
Remuneration report continued
Executive KMP remuneration policy and framework continued
3
3.2 Total remuneration framework continued
3.2.1 Remuneration structure
The following diagram sets out the remuneration structure and timing for delivery for Executive KMP.
Year 1
Year 2
Year 3
Year 4
FAR
100% cash
STI
Subject to financial
(70%) and non-financial
performance (30%)
50% in cash
50% in deferred rights
Base salary, statutory
superannuation
and other benefits/
allowances
50% cash
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)
3.2.2 Remuneration mix
The following charts outline the target remuneration mix for Executive KMP.
Managing Director and CEO1
Other Executive KMP1
STI
34%
LTI
33%
FAR
33%
STI
34%
LTI
25%
FAR
41%
1.
The Managing Director and CEO Performance Award made to the former Managing Director and CEO in 2021 has not been included in the remuneration mix
on the basis it is a one-off grant and is not intended to form part of Adbri’s ongoing remuneration framework.
33
4
2022 Executive KMP 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.
In late 2022, Mark Irwin and Peter Barker were appointed to the interim CEO and CFO roles, following changes to the Group Executive
team. Details of their 2022 remuneration are in Section 7 of this Report.
An average increase of around 3% was made for Executive KMP in 2022. Following the 2022 annual remuneration review, no increases
to FAR will be made for Executive KMP in 2023.
4.2 Short-Term Incentive
Adbri’s STI is the Company’s ‘at risk’ component of the total remuneration framework for Executive KMP.
A summary of the key features of the 2022 STI is as follows:
Feature
Description
General
Eligibility
The Managing Director and CEO and other Executive KMP 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 Executive KMP: 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).
Performance conditions
Overview
The STI is assessed against a mix of financial (70%), strategy and sustainability measures (30%) and is subject to
a safety gateway.
Financial measures are intended to align the interests of Executive KMP 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 KMP 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.
Performance conditions and weightings.
Adbri 2022 Annual Report 34
Remuneration report continued
2022 Executive KMP remuneration approach continued
4
4.2 Short-Term Incentive continued
Overview
continued
The weightings of financial and strategy and sustainability performance conditions vary by role, as outlined below.
Financial (70%)
Group underlying net profit after tax (NPAT)
Performance condition
Divisional earnings before interest and tax (EBIT)
Group free cash flow
Kwinana Project – strategic growth (select
Executive KMP only)
Strategy and
Sustainability (30%)
Safety
Inclusivity
Sustainable Growth
Group
Executive
KMP
Divisional
Executive
KMP
50%
N/A
10%
10%
10%
10%
10%
30%
20%
10–20%
0–10%
10%
10%
10%
In addition, a modifier applies to the STI, which provides the Board a discretion to manage the performance on
a range of factors, including fatalities.
See Section 5.2.1 for further information on the 2022 STI performance conditions.
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
At threshold
Between threshold and target
At target
Stretch
80%
Pro rata
100%
120%
35
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. 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 2022 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 2024 (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 2025 (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. 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 KMP 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.
Adbri 2022 Annual Report 36
Remuneration report continued
2022 Executive KMP remuneration approach continued
4
4.3 Long-Term Incentive
Adbri’s Executive Performance Share Plan (LTI) seeks to reward Executive KMP for creating strong shareholder value over the medium
and longer term relative to the market.
A summary of the key features of the 2022 LTI are as follows:
Feature
Description
General
Eligibility
The LTI is offered to Executives KMP whose behaviour and performance have a direct impact on the Group’s long-
term performance.
Opportunity
Managing Director and CEO: 100% of FAR.
Other Executive KMP: 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 2022 to 31 December 2025:
• Total Shareholder Return (TSR) – 50% weighting;
• Earnings Per Share (EPS) – 25% weighting; and
• Return on Capital Employed (ROCE) – 25% weighting.
The 2022 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 2022 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 KMP remuneration and
changes in value experienced.
The peer group for the TSR performance condition is composed 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
Fletcher Building Limited Northern Star Resources
Limited
Reliance Worldwide
Corporation Ltd
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 2021 and 31 December 2025 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%
37
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 financial year ended
31 December 2022 (as the EPS ‘base point’) and the financial year ended 31 December 2025. 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%
0.5% p.a. below the average annual budget ROCE
50%
Between 0.5% p.a. below and 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 Executive KMP and no amount is payable by Executive KMP on the exercise
of the Awards.
Holding period
To strengthen the alignment between the interests of the shareholders and Executive KMP, 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 2027.
Adbri 2022 Annual Report 38
Remuneration report continued
2022 Executive KMP remuneration approach continued
4
4.3 Long-Term Incentive continued
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 KMP’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 Executive
KMP. 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 of similar dealing restriction. Until the Awards vest,
Executive KMP 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 2022 LTI, or any of the other Awards.
Any Shares allocated to the Executive KMP 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 KMP 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 be paid 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.
39
5
Linking Executive KMP remuneration to company performance
5.1 Company performance
The Group delivered underlying NPAT excluding property profits and significant items of $77.7 million for the year ended
31 December 2022, 31.2% lower than the prior year, and a reported NPAT of $102.6 million, 12.1% lower than the prior period.
This was delivered in an environment of inflationary pressures and wet weather. Revenue grew by 8.4% year-on-year to $1.7 billion,
mainly attributed to price growth during the year.
During the year, the Company advanced a number of initiatives as part of our transformational agenda to deliver improved
performance. These included:
– Completion of the Zanows acquisition, extending our vertically integrated footprint and network in South East Queensland;
–
–
Launch of Net Zero Emissions Roadmap, including new medium-term 2030 targets;
Birkenhead Type General Purpose (GP) cement verified as the lowest embodied carbon of any currently known Type GP cement
in Australia (Adbri’s Cement Environmental Product Declaration as at 18 November 2022).
– Cash sale proceeds of property, plant and equipment $96.8 million.
– Quicklime supply agreement with Alcoa extended until October 2024 announced post year end.
The free cash flow performance condition for the 2022 STI was not met. Net debt increased to $576.4 million at 31 December,
representing a leverage ratio1 of 2.0 times underlying EBITDA2. This is at the higher end of the Company’s preferred band of
1 – 2 times EBITDA, as anticipated during the construction of the Kwinana Upgrade project.
Since the end of the financial year, considering the capital required for the completion of the Kwinana Upgrade project, the Board
has decided not to declare a final dividend for the year. Total dividend for the year is 5.0 cents per share.
A 5-year summary of key financial performance metrics of the Company is set out below.
Sales ($m)
NPAT reported attributable to members ($m)
NPAT underlying attributable to members ($m)
NPAT underlying excluding property
attributable to members ($m)
Share price ($/share)
Dividends declared (cents/share)
Franking (%)
Operating cash flow ($m)
Basic earnings per share (cents)
2018
1,630.6
185.3
191.0
190.1
4.27
28.0
100.0
244.7
28.5
2019
1,517.0
47.3
123.0
123.0
3.46
5.0
100.0
193.2
7.3
2020
1,454.2
93.7
115.6
114.9
3.35
12.0
100.0
256.2
14.4
2021
1,569.2
116.7
119.1
113.0
2.82
12.5
100.0
195.2
17.9
2022
1,700.3
102.6
118.0
77.7
1.66
5.0
100.0
166.4
15.7
CAGR%
1.05
(13.7)
(11.3)
(20.0)
(21.0)
(35.0)
n/a
(9.2)
(14.0)
1. Leverage ratio – net debt/rolling 12 month underlying EBITDA (includes property profits and excludes significant items). Net debt is calculated as total
borrowings, inclusive of capitalised borrowing costs, less cash and cash equivalents and excludes lease liabilities.
2. Underlying measures include property profits and exclude significant items.
Adbri 2022 Annual Report 40
Remuneration report continued
Linking Executive KMP remuneration to company performance continued
5
5.2 STI
5.2.1 Performance assessment
STI outcomes reflect Executive KMP 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 other Executive KMP, the Board considers performance against the agreed
strategy and sustainability targets.
Performance condition
Reason chosen
Performance assessment
Vesting
outcome
Financial performance – 70% weighting
Group underlying NPAT was below
the STI target.
0%
Group NPAT
Divisional EBIT
Group free cash flow
Kwinana Project (Managing
Director and CEO, CFO and COO,
Cement & Lime only)
NPAT is used as the primary
condition for measuring Group
financial performance as it closely
reflects shareholder experience.
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.
Free cash flow recognises the
importance of cash management
to drive shareholder value through
an ability to return capital to
shareholders.
Significant investment has been
made in the Kwinana Project,
and delivery of the Kwinana
Project is crucial to Adbri’s future
cement production.
The Cement and Lime division
successfully met the STI
performance target, whereas
the Concrete, Aggregates and
Masonry division did not meet
the STI performance criteria.
The Group free cash flow was
below the STI target.
Delivery of the Kwinana Project
did not meet the target budget
and timelines.
Non-financial performance – 30% weighting
Safety
Drive improvements in safety from
December 2021
The health and safety of our
people is our number one priority.
In addition, a Visual Leadership
metric applies to the 2022 STI.
Executive KMP are required to
complete and document Visual
Leadership walks throughout
the year.
Significant improvements
have been made in our lead
indicator areas, however the 10%
improvement in Total Recordable
Injury Frequency Rate (TRIFR)
required was not met, with TRIFR
increasing to 7.9 in 2022.
Inclusivity
Increase female participation in
the workforce
To support the achievement of the
Company’s long-term targets with
respect to female participation in
the workforce.
Our aspirational 2022 target of
18.5% female participation rate has
not been met. 2022 proved to be
a challenging and unprecedented
labour market of high turnover and
talent shortages. Importantly, we
have continued to enhance our
recruitment drives and employee
benefits to attract and retain talent.
0%–59.5%
0%
0%
0%
0%
41
Vesting
outcome
120%
120%
Performance condition
Reason chosen
Performance assessment
Sustainable growth
(Birkenhead)
Driving better value at Birkenhead
through increased use of RDF and
cost savings
Sustainable growth
(supplementary cementitious
materials – SCMs)
Enhance sustainability through
increased use of SCMs
A focus area for our operational
teams is driving value for
shareholders through lower
cost operations through a
benchmarking study at our major
cement facility in Birkenhead,
South Australia. In addition,
Adbri aims to reduce adverse
environmental impacts by
using SCMs as an alternative to
emissions-heavy Portland clinker.
STI targets were set with respect
to the levels of RDF usage, and
cost per tonne improvement
initiatives identified. The stretch
target of 40% RDF usage was met
during the year. STI measures were
also set with respect to carbon
reduction targets, with the stretch
target of 22% being met during
2022. Commitment to net zero
by 2050 commenced formally
with the release of our Net Zero
Emissions Roadmap in 2022.
5.2.2 2022 STI outcomes
In 2022, only the Cement and Lime division met their earnings target. Accordingly, STI outcomes have been adjusted to reflect
imperfect operational performance and are aligned to our shareholder experience, while still being reflective of the Executive KMP’s
contributions in 2022.
The Board’s assessment, taking into account achievement of STI measures, moderating factors, and Company performance
throughout 2022, set the STI outcome at 11–23% of the potential maximum STI for Executive KMP.
The table below summarises the STI outcomes for Executive KMP for 2022. The Interim CEO and CFO were not eligible to participate
in the 2022 STI.
Maximum
STI
opportunity1
%
Actual STI
as % of STI
maximum
%
Lapsed STI
%
Actual STI
total
$
Cash
STI
$
Equity de
ferred
(2 years)
$
Equity de
ferred
(3 years)
$
ACTUAL STI PAID IN THE FORM OF
471,658
469,368
1,655,826
607,030
23
11
11
0
77
89
89
100
106,301
53,136
53,150
26,568
26,575
13,284
26,576
13,284
187,4522
93,726
46,863
46,863
03
0
0
0
Executive
Current
Brett Brown
Andrew Dell
Former
Nick Miller
Theresa Mlikota
1. The maximum STI opportunity is calculated on the basis of full year FAR.
2. Mr Miller ceased as Executive KMP on 27 October 2022 and will remain employed with the Company until 15 October 2023. Based on the terms and
conditions of the 2022 STI, the former Managing Director and CEO will receive a full STI outcome for 2022.
3. Ms Mlikota ceased as Executive KMP on 11 November 2022. Following her resignation, the entitlement to a 2022 STI outcome was forfeited accordingly.
Adbri 2022 Annual Report 42
Remuneration report continued
Linking Executive KMP remuneration to company performance continued
5
5.3 LTI
In 2022, Adbri tested the 2018 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 Executive KMP.
Perfor-
mance
condition
TSR
EPS
Weighting
Performance assessment
50
Adbri’s TSR growth was negative 43.8 placing the Company’s percentile at 9.0, which is
below the vesting threshold for TSR of 50.
50 The compound annual growth in EPS over the performance period of negative 10.8 was
below the vesting threshold for EPS of 5.0.
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.
The Interim CEO and CFO were not eligible to participate in the 2022 LTI.
Awards
Held at
1 Jan 2022
Granted
during the
year 1
Exercised
/vested
during the
year 2
Lapsed/
forfeited
during the
year 3
Held at
31 Dec
2022 4
Value of
2022
awards
at grant
date 5
Fair value of
2022 award
at grant
date
Value per
share at
the date of
exercise 6
Executive
KMP
Current
Number
Number
Number
Number
Number
$
$/Award
Brett Brown
201,243
Andrew Dell
202,606
87,959
87,532
Former
Nick Miller
1,227,357
964,1497
Theresa
Mlikota
365,206
158,486
–
–
–
–
(27,761)
289,202
262,377
98,955
98,037
–
–
2,191,5068
1,707,054
523,6929
177,506
1.13
1.12
1.77
1.12
$
–
–
–
–
1.
This represents the maximum number of Awards granted in 2022 that may vest to each Executive KMP. The Awards were granted between 24 June 2022
to 11 July 2022. As the Awards granted in 2022 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 2022 year, only the 2018 LTI Awards were eligible for vesting. The threshold conditions for vesting of these Awards were not met and all 2018 LTI
Awards lapsed. The number of Awards that vested during the period and were exercisable at 31 December 2022 is nil. The number of Awards that vested but
were not yet exercisable at 31 December 2022 is nil.
3. This includes the portion of 2018 LTI Awards granted to Mr Dell, that reached the end of their performance period on 31 December 2021 that did not meet the
performance conditions and were forfeited. For completeness, Mr Brown, Mr Miller and Ms Mlikota were not eligible to participate in the 2018 LTI.
4. Awards subject to performance conditions which remain unvested (2019, 2020, 2021 and 2022 LTI Awards), and which will be tested for vesting during the
period 2023 to 2026.
5. Fair value of Awards granted during 2022 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.
7.
This represents the total number of Awards granted to the former Managing Director and CEO in respect of the 2022 LTI (494,069 Awards) and the one-off
MD Performance Award (470,080 Awards).
8. Pursuant to the Adbri LTI Plan Rules, a pro-rata portion of Mr Miller’s 2019, 2020, 2021 and 2022 LTI Awards and the MD Performance Award will remain eligible
for testing and may vest or lapse at the end of the relevant performance period, to the extent the performance conditions are satisfied at that time. The
pro-rated portion is calculated based on the proportion of the performance period elapsed at the time of cessation of employment with Adbri in October 2023.
9. Ms Mlikota ceased as Executive KMP on 11 November 2022 following her resignation, and subsequently forfeited all entitlements to the 2019, 2020, 2021 and
2022 LTI Awards on cessation of employment.
5.4 Managing Director and CEO Performance Award (MD Performance Award)
At Adbri’s 2022 Annual General Meeting, the MD Performance Award was approved by shareholders. The MD Performance Award was
granted as a remuneration adjustment to maintain market competitiveness and to recognise the former Managing Director and CEO’s
role in executing Adbri’s strategic and growth agenda. For further details of the MD Performance Award, refer to the Company’s 2021
Annual Report and the 2022 Notice of Meeting.
As the former Managing Director and CEO will cease employment in October 2023, a portion of the MD Performance Award will
remain eligible for testing and may vest or lapse at the end of the performance period, based on the extent to which the performance
conditions are satisfied at that time.
43
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 2022.
The total amount of fees paid to Non-executive Directors is determined by the Board on the recommendation of its P&C
Committee within the maximum aggregate amount approved by shareholders. The remuneration of Non-executive
Directors consists of Directors’ fees, committee fees and superannuation contributions. These fees are not linked to the
performance of the Group in order to maintain the independence and impartiality of Non-executive Directors.
Aggregate
fees
approved by
shareholders
Base fees for
2022
In setting fee levels, the P&C Committee takes into account:
• Independent professional advice;
• Fees paid by comparable companies;
• The general time commitment and responsibilities involved; and
• The level of remuneration necessary to attract and retain Directors of a suitable calibre.
Total fees, including committee fees, were set within the maximum aggregate amount of $1,600,000 per annum,
approved at the 2017 Annual General Meeting.
Fees for the Chairman and Non-executive Directors are reviewed annually and considered against peer companies.
In 2022, a 2.2% increase was applied to the base and committee fees for Non-executive Directors to maintain market
relativity and attraction and retention of Directors.
Fees payable to Non-executive Directors are inclusive of contributions to superannuation. The table below provides
the annual fees payable to Directors.
Base fees including super (Board)
Chairman
Deputy Chair and Lead Independent Director
Non-executive Director
Committee fees including super
$
135,517
271,034
135,517
Committee
Chair
$
Committee
Member
$
Fee for each committee except Nomination and Governance Committee
31,273
15,637
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.
Adbri 2022 Annual Report 44
Remuneration report continued
Non-executive Directors’ fees continued
6
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 2022 are provided in Section 8.1 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
Geoff Tarrant
Emma Stein
Michael Wright2
Dean Jenkins3
Samantha Hogg4
Former Non-executive Directors
Ken Scott-Mackenzie5
Year
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2022
2022
2021
Fees and allowances
Directors’
base fees (incl.
superannuation)
Committee
fees (incl.
superannuation)
135,517
132,600
271,034
265,200
135,517
132,600
135,517
132,600
135.517
132,600
135,517
70,216
48,609
103,115
56,465
132,600
15,637
15,300
46,910
45,900
15,637
15,300
15,637
15,300
46,910
45,900
40,928
7,650
–
9,710
19,546
58,688
Post-
employment
benefits
superannuation
contributions1
14,052
12,831
–
–
14,052
12,831
14,052
12,831
16,959
15,547
16,416
7,070
4,619
10,568
6,910
16,988
Total
151,154
147,900
317,944
311,100
151,154
147,900
151,154
147,900
182,427
178,500
176,445
77,866
48,609
112,825
76,011
191,288
1.
Superannuation contributions are made on behalf of Non-executive Directors which satisfy the Group’s obligations under applicable Superannuation
Guarantee Charge legislation.
2. Michael Wright was appointed as Safety, Health, Environment and Sustainability Committee Chairman effective 19 May 2022.
3. Dean Jenkins was appointed to Non-executive Director on 23 August 2022.
4. Samantha Hogg was appointed to Non-executive Director on 29 March 2022 and was appointed to Audit, Risk and Compliance Committee member
effective 18 May 2022.
5. Ken Scott-Mackenzie ceased as Non-executive Director on 19 May 2022.
45
7
Executive KMP service agreements and statutory remuneration tables
7.1
Executive KMP service agreements
The remuneration and other terms of employment for Executive KMP are set out in formal employment contracts referred to as
‘Service Agreements’.
The key terms of the Executive Service Agreements are outlined below:
Notice period
Severance2
Managing Director and CEO1
Other Executive KMP
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.
Six-months’ fixed annual remuneration
where employment is terminated due to a
material change in role.
1.
2.
The table outlines the key terms of the Executive KMP Service Agreement for the former Managing Director and CEO. Further details of the contract terms for
the interim CEO and CFO are below.
In the case of resignation, the Board has discretion as to whether a separation payment is made to the Executive KMP (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 other Executive KMP
are not entitled to any payment on termination other than remuneration and leave entitlements up to the date of termination.
The Interim CEO and CFO are engaged via a third-party provider. The key terms of the contractual arrangements are outlined below.
Term of service
Six months’ fixed term contract
Interim CEO and CFO
Notice period
Severance
One week notice provided by Adbri only
No severance payments on termination of contract
Adbri 2022 Annual Report 46
Remuneration report continued
7
Executive KMP service agreements and statutory remuneration tables continued
7.2 Executive KMP statutory remuneration
The following statutory table sets out the statutory accounting expense in whole dollars of all remuneration-related items for Executive
KMP (including the former Managing Director and CEO) and has been prepared in accordance with the accounting standards and has
been audited.
Short-term benefits
Equity based benefits
Year
FAR1
Cash
STI2
Other
bene
fits3
Executive KMP
Mark Irwin
2022
219,000
Peter Barker
2022
104,000
–
–
Brett Brown
2022
531,770
53,151
–
–
–
2021
517,368
179,712
25,000
Andrew Dell
2022
528,498
26,568
–
2021
514,333
179,712
25,000
Former Executive KMP
Accrual
of
Notice
Period
and
accrued
entitle
ments4
Post-
employ-
ment
benefit
Super
annua
tion5
Def-
erred
STI2
TEES
LTI 6
Total
–
–
–
–
–
–
–
–
–
–
24,430
53,150
22,632
179,712
25,002
26,568
22,917
179,712
–
–
959
985
959
985
–
–
219,000
104,000
30,796
694,256
34,023
959,432
(786) 606,809
60,816
983,475
Nick Miller
2022
1,221,732
93,726
–
1,838,758
21,229
93,726
959
444,0408
3,714,170
2021
1,497,750
658,124
44,264
–
26,250
658,124
–
212,839 3,097,351
Theresa Mlikota
2022
597,416
–
– 823,4159
20,988
–
959
(87,151) 1,355,627
2021
659,118
226,886
–
–
22,632
226,886
–
62,803 1,198,325
% of
remu
neration
consist
ing of
awards7
0
0
4.4
3.5
(0.1)
6.2
12.0
6.9
(6.4)
5.2
1.
FAR is prorated for the period the individuals are Executive KMP.
FAR for Mr Miller and Ms Mlikota is therefore pro-rated up until the time they ceased active duties (17 October and 11 November 2022 respectively).
2. STI includes amounts relating to performance accrued at the end of each year but not paid until the subsequent year.
3. Other benefits relate to one-off allowances to cover out-of-pocket expenses incurred by Mr Brown for relocation to Adelaide, 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 former Managing
Director and CEO’s salary in 2020.
4. Accrual of notice periods and other accrued entitlements includes monthly salary paid to Mr Miller and Ms Mlikota during their notice periods
(17 October 2022 – 15 October 2023 and 11 November 2022 – 2 May 2023 respectively) and accrued annual leave. Neither Mr Miller nor Ms Mlikota have
vested long service leave. These amounts are not termination benefits. See footnote 9 for further detail on the former CFO’s arrangements.
5.
6.
Includes Company contributions to superannuation and allocations by employees made by way of salary sacrifice of fixed remuneration. Mr Miller and
Ms Mlikota is pro-rated up until the time they ceased active duties (17 October and 11 November 2022 respectively).
In accordance with the requirements of the Accounting Standards, remuneration includes a proportion of the notional value of equity compensation granted
or outstanding during the year. The notional value of equity instruments is determined as at the grant date and is progressively allocated over the vesting
period. The amount included as remuneration is not related to or indicative of the benefit (if any) that the individual Executive KMP 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 28.
7.
Percentage of remuneration for the financial year which consists of the amortised annual value of Awards issued under the Adbri Limited Executive
Performance Share Plan.
8. This represents the notional value of equity instruments for the pro-rata portion of Mr Miller’s 2019, 2020, 2021 and 2022 LTI Awards that will remain on-foot.
9. This includes payments totalling $345,704 to be made to Ms Mlikota over the six month period following cessation of employment, in respect of contractual
post-employment restrictions. These amounts are considered termination benefits.
47
8
Additional statutory disclosures
8.1 Equity holdings of Executive KMP
A summary of Executive KMP current shareholdings in the Company as at 31 December 2022 is set out below. The balances reported
include shares held directly, indirectly, or beneficially by each Executive 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 2022.
While the Board has introduced minimum shareholding guidelines for Non-executive Directors, the Board considers Executive KMP’s
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.
Granted as remuneration during the year
LTI
TEES
Deferred
STI
Net move
ment due
to other
changes
–
–
–
–
–
–
–
–
–
–
–
–
–
309
309
56,384
56,384
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
309
309
206,482
71,184
–
–
–
–
–
–
–
–
–
50,000
57,500
–
–
–
–
Balance at
beginning
of year
51,144
10,844
279,178,329
105,000
278,787,781
30,000
53,403
–
–
–
192,424
64,275
20,000
Balance at
end of year
107,837
67,537
279,178,329
105,000
278,787,781
30,000
53,403
50,000
57,500
–
399,215
135,768
20,000
Current Executive KMP
Brett Brown
Andrew Dell
Current Non-executive Directors
Raymond Barro1
Dr Vanessa Guthrie AO
Rhonda Barro2
Geoff Tarrant
Emma Stein
Michael Wright
Dean Jenkins
Samantha Hogg
Former Executive KMP
Nick Miller
Theresa Mlikota
Former Non-executive Directors
Ken Scott-Mackenzie3
1. The balances relating to Mr Barro include shares owned by entities over which Mr Barro has a significant influence, or which he jointly controls, but he does
not control these entities himself.
2. The balances relating to Ms Barro include shares owned by entities over which Ms Barro has a significant influence, or which she jointly controls, but she does
not control these entities herself.
3. The balance relating to Mr. Scott-Mackenzie include shares owned on the day Mr Scott-Mackenzie ceased to be Director.
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 2022 Annual Report 48
Consolidated income
statement
For the year ended 31 December 2022
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 associate 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
2022
$M
2021
$M
Notes
5
9
5
6
2(b), 16
23(b)
7(a)
1,700.3
(1,155.1)
(351.8)
0.7
194.1
72.5
(21.6)
(102.2)
(23.9)
(6.3)
24.0
136.6
(34.1)
102.5
102.6
(0.1)
102.5
1,569.2
(1,030.6)
(305.3)
7.5
240.8
11.7
(21.0)
(89.6)
(19.4)
–
33.3
155.8
(39.1)
116.7
116.7
–
116.7
Cents
Cents
4
4
15.7
15.6
17.9
17.8
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 2022
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/(loss) on retirement benefit obligation
Income tax credit relating to these items
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Total comprehensive income for the year is attributable to:
Owners of the Company
Non-controlling interests
Total comprehensive income for the year
49
2021
$M
116.7
(0.1)
13.5
(4.0)
3.5
(1.0)
11.9
128.6
128.6
–
128.6
Consolidated
2022
$M
102.5
0.1
14.0
(4.2)
(0.1)
–
9.8
112.3
112.4
(0.1)
112.3
Notes
21(a)
21(a)
7(c)
27(b)
7(c)
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
Adbri 2022 Annual Report 50
Consolidated balance sheet
As at 31 December 2022
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
Non-current 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
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
27(b)
23
12
13
14
22(a)
13
17
18
13
7(f)
17
19(a)
21(a)
21(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
2022
$M
139.9
248.5
172.9
15.4
18.9
2021
$M
124.7
223.4
153.9
14.3
14.0
595.6
530.3
81.5
6.6
226.5
1,218.5
71.5
307.8
17.4
87.7
7.0
215.0
1,088.2
72.6
282.1
–
1,929.8
1,752.6
2,525.4
2,282.9
215.9
5.4
39.8
5.8
187.2
4.8
36.8
1.3
266.9
230.1
716.3
77.4
100.5
61.2
955.4
1,222.3
1,303.1
741.2
13.8
545.9
562.1
76.7
81.3
63.7
783.8
1,013.9
1,269.0
741.2
3.7
521.8
1,300.9
1,266.7
2.2
2.3
1,303.1
1,269.0
51
Consolidated statement
of changes in equity
Attributable to owners of Adbri Limited
Consolidated
Notes
Balance at 1 January 2022
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
31 December 2022
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
21(a)
20
21(a)
19(b)
20
21(a)
19(b)
Share
capital
$m
741.2
–
–
–
–
–
–
–
741.2
740.1
–
–
–
–
–
1.1
1.1
741.2
Reserves
$m
3.7
–
9.9
9.9
–
0.2
–
0.2
13.8
(6.2)
–
9.4
9.4
–
0.5
–
0.5
3.7
Retained
earnings
$m
521.8
102.5
Total
$m
1,266.7
102.5
(0.1)
9.8
Non-
controlling
interests
$m
2.3
(0.1)
–
Total
equity
$m
1,269.0
102.4
9.8
102.4
112.3
(0.1)
112.2
(78.3)
(78.3)
–
–
(78.3)
545.9
485.8
116.7
2.5
0.2
–
(78.1)
1,300.9
1,219.7
116.7
11.9
119.2
128.6
(83.2)
(83.2)
–
–
(83.2)
0.5
1.1
(81.6)
–
–
–
–
2.2
2.3
–
–
–
–
–
–
–
(78.3)
0.2
–
(78.1)
1,303.1
1,222.0
116.7
11.9
128.6
(83.2)
0.5
1.1
(81.6)
521.8
1,266.7
2.3
1,269.0
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
Adbri 2022 Annual Report 52
Consolidated statement
of cash flows
For the year ended 31 December 2022
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
Payment for acquisition of businesses, net of cash acquired
Proceeds from sale of property, plant and equipment
Loans to joint venture entities
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 from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
Consolidated
2022
$M
2021
$M
Notes
1,863.3
(1,683.1)
1,699.9
(1,478.4)
17.0
1.3
(15.0)
2.0
(34.1)
15.0
19.0
0.3
(15.3)
4.4
(34.7)
–
8(b)
166.4
195.2
15
29(e)
8(d)
8(d)
8(d)
20
(255.1)
(56.8)
96.8
(3.1)
(140.5)
–
2.9
(32.2)
(218.2)
(169.8)
–
233.2
(80.0)
(8.0)
(78.3)
66.9
15.1
124.7
0.1
1.1
135.0
(40.0)
(7.5)
(83.2)
5.4
30.8
94.0
(0.1)
Cash and cash equivalents at end of year
139.9
124.7
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
53
Notes to the financial
statements
1
Summary of significant accounting policies
Adbri Limited (Adbri, or 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 28 February 2023. 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 (the Group).
(a) Basis of preparation
These 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.
Historical cost convention
(i)
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.
Compliance with IFRS
(ii)
The consolidated financial statements of the Group also comply with International Financial Reporting Standards (IFRS) as issued by
the International Accounting Standards Board (IASB).
New and amended standards adopted by the Group
(iii)
New standards and amendments applied for the first time for the annual reporting period commencing 1 January 2022 did not have
any impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods.
New accounting standards and interpretations not yet adopted
(iv)
Certain new accounting standards, amendments to accounting standards and interpretations have been published that are not
mandatory for 31 December 2022 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 Group 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.
During the development of our Net Zero Emissions (NZE) Roadmap, the Group reviewed the International Energy Agency’s (IEAs) World
Energy Outlook and noted the inclusion of a new scenario, i.e., NZE by 2050 equating to an equivalent 1.5oC scenario under the Task
Force on Climate-Related Financial Disclosures (TCFD). Detailed analysis of this new scenario and that of climate change impact on the
Group’s operations is currently underway.
The Group 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 2022, and are aligned
with the Group’s sustainability targets.
Adbri 2022 Annual Report 54
Notes to the financial statements continued
Summary of significant accounting policies continued
1
(b) Climate-change related impacts continued
Risk management
(i)
The cement and lime industries are traditionally associated with high, hard-to-abate greenhouse gas (GHG) emissions and Adbri is
exposed to a variety of regulatory, and voluntary, frameworks to report on and reduce emissions. These frameworks could affect the
business activities of Adbri, particularly the anticipated reform of the Safeguard Mechanism legislation.
The transition risks include the growing number of climate policy frameworks which may lead to an increased cost of emitting CO2 and
associated costs of fuels, coupled with more stringent obligations relating to the products brought to the market (carbon footprint of final
products over their lifecycle). The physical risks due to the impact of climate change, such as flooding, changes in precipitation patterns
or extreme variability in weather patterns, might lead to higher logistics and transportation costs and reduced production capacities.
Adbri’s risk register includes climate change and environmental, social and corporate governance (ESG) issues as material risks, with
particular focus on transitional risk.
In 2022, in order to mitigate climate change risks, the Group has been taking action to reduce energy consumption and GHG
emissions through the use of alternative fuels and supplementary cementitious materials.
In this process management has:
–
formed and released the NZE Roadmap which sets out the action plan and decarbonisation levers to achieve net zero
commitments; and
– begun scenario analysis to consider the IEA’s NZE scenario and will undertake additional work in FY23 to better understand the
risks and potential control measures.
In addition to setting a goal to reach net zero emissions by 2050, Adbri has set intermediate targets for 2024. FY30 targets have also
been set as part of the Group’s NZE Roadmap which was published prior to the Group’s 2022 Annual General Meeting.
There are many uncertainties which are likely to impact Adbri’s achievement of its net zero transition including:
– Government policies;
– Carbon pricing mechanisms internationally;
– Market demand for low-carbon products and solutions;
– Availability and cost of alternative fuels and lower emissions energy; and
– Commercialisation of technologies that lower process emissions.
Impairment testing
(ii)
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, where reliably available,
projected expenditure required to meet the Group’s 2024 emission reduction targets.
Useful lives of assets
(iii)
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 view of useful lives
has taken into consideration the impacts of the Group’s 2024 carbon emission reduction targets.
Capital expenditure and research and development
(iv)
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.
Management has recently formed a Product Innovation Council to project manage key low carbon product development ideas,
and to guide and oversee research and development capital expenditure.
Taxes
(v)
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.
55
Provisions and contingent liabilities
(vi)
The Group’s provisions and contingent liabilities for the 2022 financial year have taken into consideration the Group’s current
climate-related 2024 targets.
Insurance
(vii)
The change in climate may result in more regular and intense climate events which can have a significant impact on the Group’s
production should there be damage to premises or business interruption. This may increase the Group’s insurance costs or give rise
to 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
Subsidiaries
(i)
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries controlled by Adbri Limited as at
31 December 2022 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 15).
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.
Employee Share Plan Trust
(ii)
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.
Non-controlling interests
(iii)
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
Functional and presentation currency
(i)
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 the Group’s functional and presentation currency.
Transactions and balances
(ii)
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 2022 Annual Report 56
Notes to the financial statements continued
Summary of significant accounting policies continued
1
(d) Foreign currency translation continued
Foreign operations
(iii)
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, and the amount of any non-controlling interest in the acquiree and the acquisition date
fair value of any previous equity interest in the acquiree over the fair value of the Group’s share of the net identifiable assets acquired
is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired and the
measurement of all amounts has been reviewed, the difference is recognised directly in profit or loss as a bargain purchase.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present
value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar
borrowing could be obtained from an independent financier under comparable terms and conditions.
Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently
remeasured to fair value with changes in fair value recognised in the Consolidated Income Statement.
Rounding of amounts
(f)
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 report. Amounts in the financial report have been rounded off in accordance with that instrument to the nearest millions
of dollars, unless otherwise stated.
Goods and Services Tax (GST)
(g)
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.
Trade and other payables
(h)
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.
57
Financial performance overview
2
Segment reporting
(a) Description of segments
Management has determined the operating segments based on the reports reviewed by the Interim 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; and
– 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 Interim CEO
The segment information provided to the Interim CEO for the reportable segments is as follows:
31 December 2022
Total segment operating revenue
Inter-segment revenue
Revenue from external customers
Depreciation and amortisation
Impairment:
Property, plant and equipment
Goodwill
Other assets
Total impairment
EBIT
Underlying EBIT1
Share of net profits of joint ventures and associate entities
accounted for using the equity method
1. Underlying measures include property profits and exclude significant items.
Cement,
Lime,
Concrete and
Aggregates
$M
1,487.4
(90.4)
1,397.0
107.6
3.0
3.0
0.3
6.3
147.0
162.7
24.0
Masonry
$M
Unallocated
$M
Total
$M
1,637.2
(90.4)
1,546.8
119.2
3.0
3.0
0.3
6.3
157.2
179.2
–
–
–
6.1
–
–
–
–
(39.3)
(33.7)
–
24.0
149.8
–
149.8
5.5
–
–
–
–
49.5
50.2
–
Adbri 2022 Annual Report 58
Notes to the financial statements continued
Segment reporting continued
2
(b) Segment information provided to the Interim CEO continued
31 December 2021
Total segment operating revenue
Inter-segment revenue
Revenue from external customers
Depreciation and amortisation
Impairment
EBIT
Underlying EBIT1
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
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
148.5
–
148.5
(5.9)
–
8.0
8.1
–
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
Consolidated
2022
$M
1,637.2
(90.4)
144.4
6.4
2.7
2021
$M
1,528.5
(94.2)
127.6
5.4
1.9
Revenue from continuing operations
1,700.3
1,569.2
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 EBIT1
Impairment
Change in loss provision
Corporate & restructuring costs
Acquisition costs
JV acquisition costs
Net finance cost2
Profit/(loss) before income tax
1. Underlying measures include property profits and exclude significant items.
2. Net finance cost is the finance costs shown gross in the income statement offset by interest income included in other income.
Consolidated
2022
$M
179.2
(6.3)
(1.3)
(7.9)
(3.8)
(2.7)
(20.6)
136.6
2021
$M
178.3
–
3.3
(5.9)
(0.8)
–
(19.1)
155.8
59
(c) Other segment information
Revenues of $246.8 million (2021: $269.3 million) are derived from a single customer. These revenues are attributable to the Cement,
Lime, Concrete and Aggregates segment.
Segment assets information is as follows:
31 December 2022
Segment assets (excl goodwill)
Goodwill
31 December 2021
Segment assets (excl goodwill)
Goodwill
Cement,
Lime,
Concrete
and
Aggregates
$M
Masonry
$M
Unallocated
$M
637.3
301.4
210.4
–
1,376.3
–
Cement,
Lime,
Concrete
and
Aggregates
$M
Masonry
$M
Unallocated
$M
671.6
272.5
167.2
–
1,171.6
–
Total
$M
2,224.0
301.4
Total
$M
2,010.4
272.5
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 16
Provisions for close-down and restoration costs – Note 17
– Retirement benefit obligations – Note 27
4
Earnings per share
Accounting policy – earnings per share
Basic earnings per share
(i)
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.
Diluted earnings per share
(ii)
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
2022
Cents
15.7
15.6
2021
Cents
17.9
17.8
Adbri 2022 Annual Report 60
Notes to the financial statements continued
4
(ii)
Earnings per share continued
Diluted earnings per share continued
Weighted average number of shares used as the denominator
Weighted average number of ordinary shares used as the denominator
in calculating earnings per share
Adjustments for calculation of diluted earnings per share:
Awards
Weighted average number of ordinary and potential ordinary shares
used as the denominator in calculating diluted earnings per share
Reconciliation of earnings used in calculating 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
5
Revenue from contracts with customers and other income
Accounting policy – revenue recognition
Revenue is recognised for the major business activities as follows:
Consolidated
2022
Shares
2021
Shares
652,627,555
652,543,443
3,838,017
2,424,343
656,465,572
654,967,786
Consolidated
2022
$M
102.5
0.1
102.6
2021
$M
116.7
–
116.7
Revenue from contracts with customers
(i)
The Group supplies construction materials and industrial minerals to customers from a broad range of industry segments throughout
Australia. 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. Any
instances of product returns and warranty claims are accounted for on a case-by-case basis.
Interest income
(ii)
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 from contracts with customers
Royalties
Net gain on disposal of property, plant and equipment
Rental income
Interest from joint ventures and other parties
Other income
Consolidated
2022
$M
1,697.6
2.7
2021
$M
1,567.3
1.9
1,700.3
1,569.2
65.6
1.6
3.3
2.0
72.5
7.0
1.7
0.3
2.7
11.7
Total revenue from contracts with customers and other income
1,772.8
1,580.9
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 $57.6 million (2021: $7.6 million) and a net gain on disposal of plant and
equipment of $8.0 million (2021: loss of $0.6 million), which are recognised in other income.
6
Expenses
Profit before income tax includes the following specific expenses:
Depreciation
Amortisation of intangibles
Impairment of property, plant and equipment
Impairment of goodwill
Impairment of other assets
Other charges
Employee benefits expenses
Superannuation expense
Accounting policy – borrowing costs
61
2021
$M
94.8
1.1
–
–
–
181.3
13.2
Notes
12, 13
14
Consolidated
2022
$M
114.1
5.1
3.0
3.0
0.3
187.0
14.7
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
2022
$M
2021
$M
24.5
2.0
26.5
(2.6)
23.9
18.8
1.2
20.0
(0.6)
19.4
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 3.0% p.a. (2021: 1.9% p.a.).
7
Income tax
Accounting policy – income tax
The income tax expense or credit for the period is the tax payable on the current period’s taxable income based on the applicable
income tax rate for each jurisdiction, adjusted 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.
Adbri 2022 Annual Report 62
Notes to the financial statements continued
7
Income tax continued
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 of 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
Consolidated
Profit before income tax expense
Tax at the Australian tax rate of 30.0% (2021 – 30.0%)
Tax effect of amounts which are not deductible (taxable)
in calculating taxable income:
Non-allowable expenses
Non-assessable income
Rebateable dividends
Other adjustments
Goodwill impairment
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
2022
$M
136.6
41.0
0.2
(3.5)
(0.5)
1.4
0.9
(5.3)
(0.1)
34.1
11.7
22.5
(0.1)
34.1
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
(b) Amounts recognised directly in equity
63
Consolidated
2022
$M
2021
$M
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)
0.2
(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:
Consolidated
2022
$M
(4.2)
–
Consolidated
2022
$M
0.8
4.9
2021
$M
(4.0)
(1.0)
2021
$M
0.7
10.2
(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.
(e) Non-current deferred tax assets
The balance comprises temporary differences attributable to:
Share-based payment reserve
Provisions
Lease liabilities
Other assets
Deferred tax assets – before offset
Offset deferred tax liabilities (Note 7(f))
Net deferred tax assets – after offset
Movements:
Opening balance at 1 January – before offset
Recognised in the income statement
Acquired in business combinations
Recognised in other comprehensive income
Under/(over) provision in prior year
Closing balance at 31 December – before offset
Consolidated
2022
$M
0.3
28.2
24.8
2.6
55.9
(55.9)
–
64.2
(11.1)
1.4
(0.2)
1.6
55.9
2021
$M
0.4
22.2
24.4
17.2
64.2
(64.2)
–
72.7
(8.7)
–
0.1
0.1
64.2
Adbri 2022 Annual Report 64
Notes to the financial statements continued
7
Income tax continued
(f) Non-current deferred tax liabilities
The balance comprises temporary differences attributable to:
Property, plant and equipment
Right-of-use assets
Inventories
Other
Deferred tax liabilities – before offset
Offset deferred tax assets (Note 7(e))
Net deferred tax liabilities – after offset
Movements:
Opening balance at 1 January – before offset
Recognised in the income statement
(Over)/under provision in prior year
Closing balance at 31 December – before offset
8
Note to statement of cash flows
(a) Cash and cash equivalents
Consolidated
2022
$M
109.2
21.5
15.3
10.4
156.4
(55.9)
100.5
145.5
15.6
(4.7)
156.4
2021
$M
93.5
22.1
14.1
15.8
145.5
(64.2)
81.3
136.4
9.4
(0.3)
145.5
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
Consolidated
2022
$M
137.5
2.4
–
2021
$M
120.9
2.7
1.1
139.9
124.7
65
Offsetting
(i)
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 any individual bank accounts that are overdrawn with the rest of the bank accounts with positive cash balances.
The value of individual bank accounts that were overdrawn 31 December 2022 was $nil (2021: $nil).
Risk exposure
(ii)
The Group’s exposure to interest rate risk is discussed in Note 22. 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
2022
$M
102.5
125.5
(0.4)
2.0
2.8
(65.6)
(7.0)
0.5
(2.3)
(2.6)
(1.3)
2021
$M
116.7
95.9
(0.4)
1.2
2.9
(7.0)
(14.4)
0.6
(1.7)
(0.6)
5.3
Net cash provided by operating activities before changes in assets and liabilities
154.1
198.5
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
(Increase)/decrease in income taxes receivable
Increase/(decrease) in deferred taxes liabilities
Increase/(decrease) in other operating assets
Net cash inflow from operating activities
(17.9)
(1.3)
(23.5)
26.0
(1.9)
(1.1)
20.6
11.4
166.4
(1.8)
2.0
(66.8)
15.2
(2.2)
8.6
17.6
24.1
195.2
Adbri 2022 Annual Report 66
Notes to the financial statements continued
8
Note to statement of cash flows continued
(c) Net debt reconciliation
Cash and cash equivalents
Borrowings – repayable after more than one year
Net debt1
Consolidated
2022
$M
139.9
(716.3)
2021
$M
124.7
(562.1)
(576.4)
(437.4)
1.
The net debt calculation does not include lease liabilities of $82.8 million at 31 December 2022 (2021: $81.5 million).
(d) Reconciliation of movements of liabilities to cash flows arising from financing activities
Net debt as at 1 January 2021
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
Cash flows
Acquisition – leases
Other non-cash movements
Net debt as at 31 December 2022
Lease liabilities
Net debt excluding lease liabilities at 31 December 2022
Other
assets
Liabilities from financing activities
Cash
and cash
equivalents
$M
Borrowings
due after
1 year
$M
Leases
due within
1 year
$M
Leases
due after
1 year
$M
Total
$M
94.0
30.8
–
(0.1)
124.7
–
124.7
15.1
–
0.1
139.9
–
139.9
(466.1)
(95.0)
–
(1.0)
(562.1)
–
(562.1)
(153.2)
–
(1.0)
(716.3)
–
(716.3)
(4.0)
(84.7)
(460.8)
7.5
–
(8.3)
(4.8)
4.8
–
8.0
–
(8.6)
(5.4)
5.4
–
–
(2.2)
10.2
(76.7)
76.7
–
–
(6.6)
5.9
(77.4)
77.4
–
(56.7)
(2.2)
0.8
(518.9)
81.5
(437.4)
(130.1)
(6.6)
(3.6)
(659.2)
82.8
(576.4)
67
Balance sheet items
9
Trade and other receivables
Accounting policy – trade and other receivables
Trade receivables, including amounts receivable from joint ventures, 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 22(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 (see note 22(c))
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
2022
$M
187.0
(9.7)
177.3
36.7
8.9
25.6
2021
$M
173.2
(10.4)
162.8
36.4
7.6
16.6
248.5
223.4
81.5
–
81.5
10.4
(0.7)
9.7
76.7
11.0
87.7
17.9
(7.5)
10.4
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 22(c).
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 2022 Annual Report 68
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
2022
$M
63.4
76.1
33.4
2021
$M
58.0
63.3
32.6
172.9
153.9
Inventories recognised as expense during the year ended 31 December 2022 and included in cost of sales amounted to
$1,091.4 million (2021: $984.7 million).
There was no material adjustment to inventories net realisable value during the year ended 31 December 2022 (2021: $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. Items classified as held for sale constitute land parcels identified as not being part of the Group’s long-term strategy.
For segment reporting purposes, these assets are reflected in the Cement, Lime, Concrete and Aggregates segment.
Land
Buildings
Property plant and equipment
Consolidated
2022
$M
17.1
0.2
1.6
18.9
2021
$M
4.7
0.3
9.0
14.0
69
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.
Mineral reserves
(i)
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.
Major plant replacement assets
(ii)
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.
Leasehold property
(iii)
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.
Asset retirement cost is initially recognised in conjunction with provision for remediation for quarries. The initial recognition is on
inception of the quarry or for business acquisitions on acquisition date. Following initial recognition, asset retirement cost is depreciated
over the useful life of the quarry. Annual reviews are undertaken to assess changes to the useful life and cost calculated initially.
Adbri 2022 Annual Report 70
Notes to the financial statements continued
Property, plant and equipment continued
12
Accounting policy – property, plant and equipment continued
(iv) Other fixed assets continued
Freehold
land
$M
Buildings
$M
Leasehold
property
$M
Plant and
equipment
$M
Mineral
reserves
$M
Asset
retirement
cost
$M
In course
of con-
struction
$M
Total
$M
Consolidated at
31 December 2022
Cost or fair value
209.4
152.2
9.9
1,701.0
215.9
56.2
187.2
2,531.8
(85.0)
67.2
(6.4)
3.5
(1,135.8)
565.2
(65.4)
150.5
(19.2)
37.0
(1.5)
(1,313.3)
185.7
1,218.5
71.6
0.7
–
1.3
–
–
(1.9)
–
(4.5)
3.7
–
–
0.3
–
–
–
–
(0.5)
505.0
152.6
12.5
–
147.4
(2.2)
–
(3.2)
(0.4)
(93.9)
6.8
–
0.8
–
–
(3.0)
(1.1)
(5.6)
36.7
2.0
–
0.3
(0.1)
–
–
–
(1.9)
112.2
1,088.2
–
252.9
(175.6)
(0.4)
(1.9)
–
(1.5)
–
24.9
252.9
–
(2.7)
(1.9)
(33.5)
(3.0)
(106.4)
Accumulated
depreciation
–
Net carrying amount
209.4
Reconciliation
Opening carrying amount
206.4
Zanows acquisition
Additions
Transfers to asset
categories
Disposals
Reclassification to
intangibles
Reclassification to
assets held for sale
Impairment loss
Depreciation/amortisation
Carrying amount at
31 December 2022
Consolidated at
31 December 2021
Additions
Transfers to asset
categories
Disposals
Reclassification to
intangibles
Reclassification to
assets held for sale
Remeasurement
reclassification
Depreciation/amortisation
Carrying amount at
31 December 2021
Accumulated
depreciation
–
Net carrying amount
206.4
Reconciliation
Opening carrying amount
214.7
2.9
–
25.5
–
–
(25.4)
–
–
–
–
(3.6)
–
(4.7)
–
–
209.4
67.2
3.5
565.2
150.5
37.0
185.7
1,218.5
Cost or fair value
206.4
154.1
9.6
1,593.8
214.3
54.2
112.2
2,344.6
(82.5)
71.6
75.3
–
1.4
(0.2)
–
(0.3)
–
(4.6)
(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
–
–
–
–
(0.5)
(75.5)
(4.9)
(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)
206.4
71.6
3.7
505.0
152.6
36.7
112.2
1,088.2
71
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 as an expense
of $1.8 million (2021: $2.9 million) 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 Leases 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 2022 Annual Report 72
Notes to the financial statements continued
Leases continued
13
Accounting policy – leases continued
Amounts recognised in the balance sheet
(i)
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 2022 financial year were $2.6 million (2021: $2.2 million).
Lease liabilities
Current
Non-current
Amounts recognised in the income statement
(ii)
The income statement shows the following amounts relating to leases:
Amortisation 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 (iii))
The total cash outflow for leases in 2022 was $75.6 million (2021: $65.0 million).
Consolidated
2022
$M
49.4
22.1
71.5
Consolidated
2022
$M
5.4
77.4
82.8
2021
$M
47.6
25.0
72.6
2021
$M
4.8
76.7
81.5
Consolidated
2022
$M
2021
$M
4.7
3.0
7.7
2.8
68.9
79.4
4.4
3.0
7.4
2.9
58.8
69.1
73
Lorry owner-drivers
(iii)
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
2022
$M
71.3
126.7
14.6
212.6
2021
$M
62.3
117.3
11.5
191.1
Extension and termination options
(iv)
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
Goodwill
(i)
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 and associates is included in the carrying amount of joint ventures of the equity accounted investment.
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. Refer Note 16 for further details. 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.
Software
(ii)
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.
Adbri 2022 Annual Report 74
Notes to the financial statements continued
Intangible assets continued
14
Accounting policy – intangible assets continued
Software as a service (SaaS) arrangements
(iii)
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.
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 2022
Cost
Accumulated amortisation and impairment
Carrying amount at 31 December 2022
Opening balance at 1 January 2022
Zanows acquisition
Amortisation charge
Reclassification from property plant and equipment
Impairment loss
Closing balance at 31 December 2022
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
Consolidated
Goodwill
$M
Software
$M
Other
intangibles
$M
304.4
(3.0)
301.4
272.5
31.9
–
–
(3.0)
301.4
27.5
(22.7)
4.8
4.7
–
(1.8)
1.9
–
4.8
10.2
(8.6)
1.6
4.9
–
(3.3)
–
–
1.6
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
Total
$M
342.1
(34.3)
307.8
282.1
31.9
(5.1)
1.9
(3.0)
307.8
Total
$M
308.3
(26.2)
282.1
281.1
(1.1)
(1.4)
3.5
282.1
75
15 Business combinations
On 1 April 2022, Hy-Tec Industries (Queensland) Pty Ltd, a wholly-owned subsidiary, completed the acquisition of the business of
Zanows’ Concrete & Quarries (Zanows) for a net purchase consideration of $56.8 million ($57.5 million purchase consideration less
settlement adjustments).
Zanows operates a sand and gravel quarry, a hard rock quarry and two concrete plants, with approval for an additional concrete plant,
located in the western region of Brisbane. The business supplies sand and aggregates internally to the Adbri Concrete plants and to
a number of external customers in South East Queensland.
The purchase price allocation to determine acquired net assets and goodwill has been completed as at 31 December 2022, a summary is
per the table below:
Recognised amounts of identifiable assets acquired and liabilities assumed:
Plant and equipment
Buildings
Quarry reserve
Land
Inventory
Remediation asset
Deferred Tax Asset
Leave liabilities
Remediation provision
Total identifiable net assets
Purchase consideration net of closing adjustments
Goodwill
16
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
$M
12.5
0.7
6.8
2.9
1.1
2.0
1.4
(0.5)
(2.0)
24.9
56.8
31.9
Consolidated
2022
$M
301.4
–
301.4
2021
$M
272.5
–
272.5
Please refer Note 14 and 15 for a detailed analysis on increase in goodwill in FY22 compared to FY21.
The recoverable amount of a CGU is determined based on value-in-use calculations. For 2022, these calculations use cash flow
projections based on the Board approved 2023 financial budgets, external forecasts of market growth rates, and expected operating
margins and capital expenditure. Projected cash flows are forecast for a period of 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 NZE Roadmap beyond 2024 are not incorporated into these projected
cash flows.
Adbri 2022 Annual Report 76
Notes to the financial statements continued
16
Impairment tests continued
(b) Key assumptions used for value-in-use calculations
Cement, Lime, Concrete and Aggregates
Masonry
Growth rate1
Discount rate2
2022
%
2.5
2.5
2021
%
1.3
1.4
2022
%
8.8
9.1
2021
%
7.0
7.4
1. Weighted average growth rate used to extrapolate cash flows beyond the specific market forecast period of five years. This growth rate is based on expected
long-term performance in the market.
2. Discount rate applied to cash flow projections and is based on the Group’s weighted average cost of capital adjusted to reflect an estimate of specific risks
assumed in the cash flow projects.
Significant estimate – key assumptions used for value-in-use calculations
The Group tests annually whether goodwill and indefinite life intangible assets have suffered any impairment. Other intangible assets
and other non-current assets are tested for impairment when evidence of an impairment trigger is present. 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-19 and climate-related matters, low case sensitivities are utilised to pressure test
the Group’s resilience to these changing dynamics. Projected movements in market size 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.
(c)
Impairment charge
During the year, an impairment charge totalling $6.3 million (2021: $nil) has been taken. The impairment charge relates to business
assets, that do not form part of the Group’s long-term strategic plan and are classified as held for sale, where expected sale proceeds
are less than the carrying value and associated goodwill, where relevant.
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.
2022
Property, plant and equipment and other assets
Goodwill
Total
2021
Property, plant and equipment and other assets
Goodwill
Total
Cement,
Lime,
Concrete
and
Aggregates
$M
3.3
3.0
6.3
–
–
–
Masonry
$M
Unallocated
$M
Total
$M
–
–
–
–
–
–
–
–
–
–
–
–
3.3
3.0
6.3
–
–
–
(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.
77
While the estimated recoverable amount of each of the CGU’s is greater than the carrying values at 31 December 2022, assessment
of adverse changes in certain key assumptions does result in an impairment of goodwill to be recognised, as illustrated below:
Cement, Lime, Concrete and Aggregates impairment
Masonry impairment
Changes to assumptions
Market
growth
rate1
-0.25%
$M
21.0
–
Discount
rate2
+0.25%
$M
36.0
–
Cash flows3
-5%
$M
64.0
–
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. Discount rate adjustments assume the rate is higher than those used in cash flow model.
3. A 5% reduction in forecast cash flows.
The figures above are mathematical calculations of the impact on impairment due to a change in the respective variable. Actual results
in the future may differ from those reported and it is therefore reasonably possible, on the basis of existing knowledge, that outcomes
within the next financial year are different from management's assumptions. A movement in one of the variables above has an indirect
impact on the others. Management can be expected to respond to these variables through operational changes in response to any
upside or downside.
17
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.
Short-term employee benefit obligations
(i)
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.
Long-term employee benefit obligations
(ii)
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.
Adbri 2022 Annual Report 78
Notes to the financial statements continued
Provisions continued
17
Accounting policy – provisions continued
Provisions for close-down and restoration costs
(iv)
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 $61.1 million (2021: $58.7 million).
Current
Employee benefits
Restoration provisions
Other provisions
Non-current
Employee benefits
Restoration provisions
Consolidated
2022
$M
35.5
2.0
2.3
39.8
2.1
59.1
61.2
2021
$M
29.8
1.3
5.7
36.8
6.3
57.4
63.7
The current portion of employee benefits includes all of the accrued annual leave and the unconditional entitlements to long service
leave where employees are entitled to pro-rata payments in certain circumstances. However, based on past experience, the Group
does not expect all employees to take the full amount of accrued leave or require payment within the next 12 months. The following
amounts reflect leave that is not expected to be taken or paid within the next 12 months.
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:
Opening balance at 1 January
Charged to income statement
Charged to balance sheet
Unwind of discount
Payments
Closing balance at 31 December
Consolidated
2022
$M
5.2
2021
$M
8.7
Restoration
provisions
$M
Other
provisions
$M
58.7
(0.3)
2.2
2.0
(1.5)
61.1
5.7
5.1
–
–
(8.5)
2.3
79
Capital structure and risk management
18 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
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 22(b).
19 Share capital
Accounting policy – share capital
Consolidated
2022
$M
2021
$M
716.3
562.1
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 2021
Shares issued under Employee Share Plan
Closing balance at 31 December 2021
Shares issued under Employee Share Plan
Closing balance 31 December 2022
(c) Ordinary shares
2022
Shares
2021
Shares
2022
$M
2021
$M
652,627,555
652,627,555
741.2
741.2
Number
of shares
652,266,367
361,188
652,627,555
–
652,627,555
Total
$M
740.1
1.1
741.2
–
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.
Adbri 2022 Annual Report 80
Notes to the financial statements continued
19 Share capital continued
(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 EBITDA1.
The leverage ratio is calculated as follows:
Total borrowings (excluding lease liabilities)
Less: cash and cash equivalents
Net debt
Underlying EBITDA1
Leverage ratio2
Consolidated
2022
$M
716.3
(139.9)
576.4
295.3
2.0
2021
$M
562.1
(124.7)
437.4
274.2
1.6
1. Underlying measures include property profits and exclude significant items.
2. Leverage ratio is calculated as net debt/rolling 12 months underlying EBITDA (includes property profits and excludes significant items). Net debt is
calculated as total borrowings, inclusive of capitalised borrowing costs, less cash and cash equivalents and excludes lease liabilities.
(f)
Employee share scheme and options
Information relating to the employee share scheme, including details of shares issued under the scheme, is set out in Note 28.
20 Dividends
Dividends paid during the year
2021 final dividend of 7.0 cents (2020: 7.25 cents) per fully-paid ordinary share, franked at 100%
(2020: 100%) paid on 11 April 2022
2022 interim dividend of 5.0 cents (2021: 5.5 cents) per fully-paid ordinary share, franked at 100%
(2021: 100%) paid on 5 October 2022
Total dividends – paid in cash
Dividends not recognised at year end
Consolidated
2022
$M
2021
$M
45.7
32.6
78.3
47.3
35.9
83.2
Since the end of the year, the Board has recommended that no payment of a final dividend in respect of
the year end 31 December 2022 be made (2021: 7.0 cents per share fully franked). The aggregate amount of
the previous financial year’s proposed final dividend paid out, not recognised as a liability at the end of that
reporting period, is:
–
45.7
Franked dividend
Franking credits available for subsequent reporting periods based on a tax rate of 30%
109.4
121.8
The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for:
(a) Franking credits/debits that will arise from the payment of any current tax liability/receipt of any current tax receivable;
(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 Board since year end, but not recognised as a liability
at year end, will be a reduction in the franking account of $nil (2021: $19.6 million).
21 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
81
Consolidated
2022
$M
2021
$M
2.0
(0.4)
12.2
13.8
1.9
0.1
2.0
(0.6)
0.4
(0.2)
(0.4)
2.4
14.0
(4.2)
12.2
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
Nature and purpose of other reserves
Foreign currency translation
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 28.
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 22. 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
Consolidated
2022
$M
521.8
102.5
(0.1)
(78.3)
545.9
2021
$M
485.8
116.7
2.5
(83.2)
521.8
Adbri 2022 Annual Report 82
Notes to the financial statements continued
22 Financial risk management
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
Interest rate
Credit risk
Exposure arising
from
Movement arising
on the financial
assets and liabilities
not denominated in
Australian Dollars
Borrowings at variable
rates
Financial assets such as
cash, trade receivables
and derivative financial
assets
Measurement
Management
Cash flow forecasting
Foreign currency
forwards and foreign
currency options
Sensitivity analysis
Interest rate swaps
Ageing analysis
Investment guidelines
for counterparties
Credit ratings
Diversification of
counterparties
Liquidity risk
Borrowings and other
liabilities
Cash flow forecasting
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.
(a) Derivatives
The Group has the following derivative financial instruments recognised in the balance sheet:
Asset/(liabilities)
Foreign currency forwards – cash flow hedges
Interest rate swaps – cash flow hedges ((b)(ii))
Total derivative financial instrument assets/(liabilities)
Consolidated
2022
$M
(0.2)
17.4
17.2
2021
$M
0.4
2.9
3.3
Classification of derivatives
(i)
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.
83
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 21. 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.
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).
Adbri 2022 Annual Report 84
Notes to the financial statements continued
22 Financial risk management continued
(a) Derivatives continued
Fair value measurement
(ii)
For information about the methods and assumption used in determining the fair value of derivatives see Note 22(e).
Hedging reserves
(iii)
The Group’s hedging reserves disclosed in Note 21(a) relate to the following hedging instruments:
Opening balance 1 January 2021
Add: change in fair value of hedging instrument 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
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
Closing balance 31 December 2022
Forward
rate
component
of currency
forwards
$M
Interest
rate
swaps
$M
Total
hedging
reserves
$M
(1.2)
1.9
(0.3)
0.5
(0.6)
0.3
(0.3)
–
–
–
0.1
0.1
(5.8)
11.6
–
(0.2)
(3.4)
2.2
14.3
–
–
–
(4.3)
12.2
(7.1)
13.5
(0.3)
0.3
(4.0)
2.4
14.0
–
–
–
(4.2)
12.2
Cost of
hedging
$M
(0.1)
–
–
–
–
(0.1)
–
–
–
–
–
(0.1)
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 $0.2 million (2021: $0.3 million).
85
(b) Market risk
Foreign exchange risk
(i)
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, the Japanese Yen, the Euro, and the Great British Pound.
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
2022
$M
2.2
0.9
129.6
(129.8)
(0.2)
2021
$M
2.5
0.9
43.6
(44.0)
(0.4)
The aggregate net foreign exchange gains/(losses) recognised in the profit or loss was $(0.2) million (2021:$(0.1) 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 foreign currency exposure on import of raw material of
highly probable purchases for up to a calendar year forward, reflecting the underly tenure of the related raw material procurement
contracts. Longer-dated hedge positions are deemed too expensive versus the value-at-risk due to the respective currencies’
interest rate spread.
Effects 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
Maturity date
Hedge ratio
Weighted average hedge rate – US Dollars
Weighted average hedge rate – Yen
Weighted average hedge rate – Euro
Consolidated
2022
2021
(0.2)
99.8
10.5
19.4
0.4
16.0
2.6
25.0
Jan – Dec 2023
Jan 2022 – Jul 2023
1:1
1:1
A$1 : US$0.6800
A$1 : US$0.7246
A$1 : Yen 92.9
A$1 : Yen 82.4
A$1 : EURO 0.6394
A$1 : EURO 0.6243
Adbri 2022 Annual Report 86
Notes to the financial statements continued
22 Financial risk management continued
(b) Market risk continued
(i)
Foreign exchange risk continued
Summarised sensitivity analysis
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.
Interest rate risk
(ii)
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:
Variable rate instruments:
Cash at bank, on hand and at call
Bank facilities
Fixed rate instruments:
Bank facilities (fixed rate)
2022
Weighted
average
interest
rate
Consolidated
2021
Weighted
average
interest
rate
Balance
$M
Balance
$M
1.5%
3.6%
139.9
620.0
0.6%
1.5%
124.7
465.0
1.2%
100.0
3.7%
100.0
Instruments used by the Group
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 – 6 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
2022
17.4
300.0
2021
2.9
300.0
21 Nov 2024 – 7 Jan 2025
21 Nov 2024 – 7 Jan 2025
1:1
2.94
0.98
1:1
0.04
0.98
87
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.
Consolidated
2022
Impact on
post-tax
profit
$M
2021
Impact on
post-tax
profit
$M
Impact on
equity
$M
(1.7)
1.7
(3.9)
3.9
(0.3)
(2.3)
Impact on
equity
$M
(0.3)
(2.3)
Interest rates – increase by 1%
Interest rates – decrease by 1%
(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 joint venture
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 (including current joint venture receivables). The loss allowance provision as at 31 December 2022
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.
2022
Gross
carrying
amount
$M
141.8
62.0
4.7
15.2
223.7
Consolidated
Loss
allowance
$M
Expected
loss rate
%
–
–
–
9.7
9.7
–
–
–
85.20
85.2
2021
Gross
carrying
amount
$M
139.8
53.8
3.8
12.2
209.6
Loss
allowance
$M
–
–
–
10.4
10.4
Expected
loss rate
%
–
–
–
63.8
–
Current
More than 30 days past due
More than 60 days past due
More than 90 days past due
Total
The gross carrying amount includes external receivables of $187.0 million (2021: $173.2 million) and the Group’s share of joint venture
receivables of $36.7 million (2021: $36.4 million).
Adbri 2022 Annual Report 88
Notes to the financial statements continued
22 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 $1,000.0 million of bilateral financing facilities (including $940.0 million of cash advance and $60.0 million of
contingent instrument lines) at 31 December 2022. The maturities of the debt facilities were extended in 2022. Accounting for these
extensions, the facilities have an average maturity of 4.3 years at 31 December 2022 (2021: 5.1 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 2025
November 2026
November 2028
November 2029
Consolidated
2022
$M
2021
$M
4.0
940.0
60.0
1,004.0
–
720.0
39.6
759.6
4.0
220.0
20.4
244.4
35.0
50.0
765.0
50.0
100.0
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
1,000.0
950.0
89
The table below analyses the Group’s financial liabilities that will be settled on a gross basis. The amounts disclosed are the
contractual undiscounted cash flows. For bank facilities, the cash flows have been estimated using interest rates applicable at the
end of the reporting period.
Consolidated
< 6 Months
6–12
Months
1–2 Years
> 2 Years
Total
Carrying
amount
(assets)/
liabilities
Contractual financial liabilities amount
payable at maturity
$M
$M
$M
$M
$M
$M
31 December 2022
Non-derivatives
Trade payables
Bank facilities
Lease liabilities
Bank guarantees
Derivatives
Gross-settled forward foreign exchange
contracts (cash flow hedges):
(inflow)
outflow
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
215.9
–
4.2
0.2
220.3
(72.9)
70.0
(2.9)
187.2
–
3.8
0.1
191.1
(21.1)
21.1
–
–
–
3.9
2.7
6.6
(66.8)
62.7
(4.1)
–
–
3.7
0.1
3.8
(18.0)
18.3
0.3
–
–
7.2
4.7
11.9
(9.8)
2.9
(6.9)
–
–
6.9
0.3
7.2
(4.5)
4.6
0.1
–
720.0
127.6
32.0
879.6
(0.2)
0.1
(0.1)
–
565.0
129.3
27.3
721.6
215.9
720.0
142.9
39.6
215.9
716.3
82.8
–
1,118.4
1,015.0
(149.7)
135.7
(14.0)
187.2
565.0
143.7
27.8
923.7
18.3
–
18.3
187.2
562.1
81.5
–
830.8
–
–
–
(43.6)
44.0
0.4
–
–
–
Adbri 2022 Annual Report 90
Notes to the financial statements continued
22 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).
Recognised fair value measurements
(i)
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 $(0.2) million (2021: assets of $0.4 million) at the end
of the reporting period. The Group held assets in relation to interest rate swaps of $17.4 million (2021: 2.9 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).
Disclosed fair values
(ii)
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).
91
Group structure
23
Joint arrangements and associate
Accounting policy – joint arrangements and associate
Associate entity
(i)
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.
Joint arrangements
(ii)
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 in line with requirements of AASB 128 Investments in Associates and Joint Ventures.
As required by AASB 128, the Group has recognised its share of assets, liabilities, revenue and expenses in the joint operations.
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
Name
Principal place of business
Aalborg Portland Malaysia Sdn.
Bhd.1
Malaysia
Batesford Quarry2
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
1. Associate
2.
3.
Joint operation
Joint venture
Ownership interest
2022
%
2021
% Activities
30
50
50
50
50
50
50
50
30 White clinker and cement
manufacture
50
Limestone products
50 Masonry for the coal mining industry
50
50
Sand quarrying
Premixed concrete and quarry
products
50 Cementitious product distribution
50
Premixed concrete
50 Cement milling and distribution
Adbri 2022 Annual Report 92
Notes to the financial statements continued
Joint arrangements and associate continued
23
Accounting policy – joint arrangements and associate continued
(ii)
Joint arrangements 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 Mawson 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 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
Other
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
The Group’s share based on % ownership
Consolidated
2022
$M
215.0
24.0
(12.8)
0.3
2021
$M
197.8
33.3
(16.1)
–
226.5
215.0
Consolidated
2022
$M
2021
$M
934.9
806.2
61.6
(12.9)
48.7
24.0
86.0
(18.3)
67.7
33.3
(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 (2021: $90.0 million).
93
24 Subsidiaries
The Group’s material subsidiaries at 31 December 2022 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
25 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
2022
%
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
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
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 2022 Annual Report 94
Notes to the financial statements continued
25 Deed of cross guarantee continued
Set out below is a consolidated balance sheet as at 31 December 2022 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
2022
$M
137.8
276.2
172.4
15.6
9.2
611.2
81.5
138.6
6.6
1,175.8
71.4
303.7
21.5
1,799.1
2,410.3
215.5
5.3
39.6
5.8
2021
$M
120.3
256.5
153.5
14.2
14.0
558.5
87.7
127.1
7.0
1,035.9
72.4
278.0
5.7
1,613.8
2,172.3
189.7
4.7
36.7
2.8
266.2
233.9
716.3
100.8
77.4
61.2
–
955.7
1,221.9
1,188.4
741.2
11.3
435.9
562.1
81.6
76.6
63.7
–
784.0
1,017.9
1,154.4
741.2
1.5
411.7
1,188.4
1,154.4
95
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 2022 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
Closed Group
2022
$M
136.4
(34.0)
102.4
411.7
102.4
0.1
(78.3)
435.9
2021
$M
156.1
(39.5)
116.6
380.8
116.6
(2.5)
(83.2)
411.7
26 Parent entity financial information
The financial information for the parent entity, Adbri Limited, has been prepared on the same basis as the consolidated financial
statements, except as set out below.
Investments in subsidiaries, associates and joint arrangements
(i)
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 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.
Tax consolidation legislation
(ii)
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.
Adbri 2022 Annual Report 96
Notes to the financial statements continued
26 Parent entity financial information continued
Financial guarantees
(iii)
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.
Share-based payments
(iv)
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.
(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 reserve
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
2022
$M
2021
$M
3,022.3
3,580.7
1,765.3
2,640.9
939.8
2,797.4
3,363.8
1,809.3
2,530.7
833.1
734.1
734.1
(0.4)
(0.1)
206.2
939.8
(14.9)
(14.9)
2022
$M
12.1
(0.6)
–
99.6
833.1
(12.3)
(12.3)
2021
$M
10.9
The parent entity did not have any contingent liabilities as at 31 December 2022 or 31 December 2021 other than the bank guarantees
shown above.
27 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 the 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.
97
The present value of the defined benefit obligation is based on expected future payments, which arise from membership of the fund
to the reporting date, calculated by independent actuaries using the projected unit credit method. Consideration is given to expected
future wage and salary levels, experience of employee departures and periods of service.
Expected future payments are discounted using market yields at the reporting date on high quality corporate bonds with terms to
maturity and currency that match, as closely as possible, the estimated future cash outflows.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the period
in which they occur in the 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), licenses and supervises regulated superannuation plans.
Membership is in either the defined benefit or accumulation sections of the Plan. The accumulation section receives fixed
contributions from Group companies and the Group’s legal or constructive obligation is limited to these contributions. The following
sets out details in respect of the defined benefit section only.
Defined benefit members receive lump sum benefits on retirement, death, disablement and withdrawal, and are guaranteed benefits
to the equivalent of the notional balance they would have received as accumulation members through additional contributions from
the Group. The defined benefit section of the Plan is closed to new members.
During the 12 months to 31 December 2022, 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; and
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 2022 Annual Report 98
Notes to the financial statements continued
27 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 2022
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 2022
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
Present
value of
obligation
$M
Fair
value of
plan
assets
$M
Net
obligation/
(asset)
$M
39.0
(46.0)
1.0
0.7
1.7
–
(1.3)
(1.0)
(2.3)
–
0.4
(8.6)
30.2
40.7
1.1
0.3
1.4
–
(1.0)
2.0
1.0
–
0.6
–
(0.8)
(0.8)
2.3
–
–
2.3
(0.5)
(0.4)
8.6
(36.8)
(44.8)
–
(0.3)
(0.3)
(4.5)
–
–
(4.5)
(0.6)
(0.6)
(4.7)
39.0
4.8
(46.0)
(7.0)
1.0
(0.1)
0.9
2.3
(1.3)
(1.0)
–
(0.5)
–
–
(6.6)
(4.1)
1.1
–
1.1
(4.5)
(1.0)
2.0
(3.5)
(0.6)
–
0.1
(7.0)
99
(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 2022
unquoted
31 December 2021
unquoted
$M
9.2
8.4
6.6
3.7
3.3
5.5
%
25%
23%
18%
10%
9%
15%
$M
12.0
14.2
7.4
5.1
3.2
4.1
%
26%
31%
16%
11%
7%
9%
36.7
100%
46.0
100%
The assets set out in the above table are held in the Mercer Growth Investment Fund which does not have a quoted price in an active
market. There are no amounts relating to the Company’s own financial instruments, and property occupied by, or other assets used by,
the Company.
(d) Actuarial assumptions and sensitivity
The significant actuarial assumptions used were as follows:
Discount rate – % p.a.
Future salary increases – % p.a. – first year
Future salary increases – % p.a. – second year
Future salary increases – % p.a. – thereafter
The sensitivity of the defined benefit obligation to changes in the significant assumptions is:
2022
2021
5.0
4.0
3.0
3.0
2.1
2.0
2.0
2.0
31 December 2022
Discount rate
Future salary increases
31 December 2021
Discount rate
Future salary increases
Impact on defined benefit obligation
Change in
assumption
Increase in
assumption
Decrease in
assumption
0.50 ppts
0.50 ppts
0.50 ppts
0.50 ppts
Decrease by 0.9%
Increase by 0.9%
Increase by 0.5%
Decrease by 0.5%
Decrease by 1.2%
Increase by 1.2%
Increase by 0.7%
Decrease by 0.6%
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 to be made in 2023 for the year ending 31 December 2022 are $nil (2021: $0.4 million).
The weighted average duration of the defined benefit obligation is 4 years (2021: 4 years).
Adbri 2022 Annual Report 100
Notes to the financial statements continued
28 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 historic volatility
is not a factor that reliably predicts future volatility or leads to higher or lower Award values because the probability of favourable or
adverse price movements is substantially equal or unable to be reliably predicted. Hence, the existence of historic volatility has been
disregarded 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 operate two general employee share plans:
–
–
The Employee Share Plan (ES Plan) established in 1997; and
The Tax Exempt Employee Share Plan (TEES Plan) established in 2018.
Subject to the Board approval of grants, employees that meet the eligibility criteria can participate in the Plan.
In 2022, no shares were issued under the TEES Plan (2021: 361,188 shares), and no shares were issued under the ES Plan (2021: 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
2022
2021
2,424,343
1,757,678
1,493,803
993,655
(80,129)
(326,990)
3,838,017
2,424,343
–
–
Awards granted in 2022 include the MD Performance Awards. Refer to the Remuneration report for further detail of the MD
Performance Award.
The average value per share at the earliest exercise date during the year was not applicable for 2022 or 2021 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.
101
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. It excludes the MD Performance Awards.
Awards granted in 2022 and 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
2022
Awards
2021
Awards
$2.39
$0.40
3.29
3.0
50%
$3.50
$0.38
0.63
4.2
50%
1 May 26
1 May 25
1.12
$1.86
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 $405,778 during the year (2021: $436,490).
The weighted average remaining contractual life of Awards outstanding at the end of the period was 2.1 years (2021: 2.4 years).
29 Related party
(a) Compensation of key management personnel
Short-term employee benefits
Post-employment benefits
Share-based payments
Consolidated
2022
$000
7,308.1
189.3
563.2
2021
$000
5,601.6
172.5
1,666.9
8,060.6
7,441.0
(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.
Interim Chief Executive Officer, Mark Irwin, and Interim Chief Financial Officer, Peter Barker, were Directors of Independent Cement and
Lime Pty Ltd. Brett Brown, Chief Operating Officer of Adbri Limited was a Director of the Mawson Group, Sunstate Cement Ltd.
During the year, the Group traded significantly with Independent Cement and Lime Pty Ltd, Sunstate Cement Ltd, and the Mawsons
Group, which are all joint ventures of the Group.
All transactions involving 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.
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
(c) Controlled entities
The ultimate parent company is Adbri Limited. Details of interests in controlled entities are set out in Note 24.
Consolidated
2022
$000
2021
$000
110,127
34,568
107,614
35,776
Adbri 2022 Annual Report 102
Notes to the financial statements continued
29 Related party continued
(d)
Joint arrangement and associate entities
The nature of transactions with joint arrangement and associate entities is detailed below:
Adelaide Brighton Cement Ltd and Morgan Cement International Ltd supplied finished products and raw materials to Sunstate Cement
Ltd, Independent Cement and Lime Pty Ltd and Peninsula Concrete Pty Ltd. Hy-Tec Industries Pty Ltd, Hy-Tec Industries (Victoria) Pty
Ltd, Hy-Tec Industries (Queensland) Pty Ltd, Adbri Masonry Group Pty Ltd, Adelaide Brighton Cement Ltd and Cockburn Cement Ltd
purchased finished products, raw materials and transportation services from Sunstate Cement Ltd, Independent Cement and Lime
Pty Ltd and Aalborg Portland Malaysia Sdn. Bhd.
All transactions are on 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
Defined benefit contributions:
Contributions to defined benefit funds on behalf of employees
Loans advanced to:
Joint venture entities
Consolidated
2022
$000
2021
$000
295,208
294,299
108,729
14,440
132,063
8,644
2,609
21
17,035
16,021
528
546
3,113
2,737
(f) Outstanding balances arising from sales/purchases of goods and services
The following balances are outstanding at the end of the reporting year in relation to transactions with related parties:
Current receivables:
Joint venture entities (interest)
Joint venture entities (trade)
Non-current receivables:
Joint venture entities (loans)
Current payables:
Joint venture entities (trade)
Consolidated
2022
$000
1,005
36,651
2021
$000
14
36,393
81,488
76,709
17,326
18,722
103
(g) Loans to/from related parties
Loans to joint venture entities, Independent Cement and Lime Pty Ltd and B&A Sands Pty Ltd, have 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
$2,609,375 (2021: $21,421).
30 Events occurring after the reporting period
On 23 January 2023, the Group announced that it has extended its agreement with Alcoa of Australia Limited, which was due to expire
in January 2023. The new agreement has been extended until the end of October 2024 and is on similar terms and conditions to the
current contract.
Since the end of the financial year, considering the capital required for the completion of the Kwinana Upgrade project, the Board has
decided not to declare a final dividend for the year.
Other than the above, no matter or circumstance has occurred subsequent to 31 December 2022 that has significantly affected, or
may significantly affect, the operations of the Group, the results of those operations or the state of affairs of the Group or economic
entity in subsequent financial periods.
31 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
32 Remuneration of auditors
Consolidated
2022
$M
2021
$M
113.9
110.4
During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related network
firms practices and non-related audit firms:
Audit services
Deloitte Touche Tohmatsu Australian firm (2021: PricewaterhouseCoopers Australian firm)
Audit and review of financial reports
Non-audit services
Deloitte Touche Tohmatsu Australian firm (2021: PricewaterhouseCoopers Australian firm)
Other assurance services
33 Contingency
Details and estimates of maximum amounts of contingent liabilities are as follows:
Guarantees
Bank guarantees
Litigation
Consolidated
2022
$M
2021
$M
0.7
0.8
0.2
0.1
Consolidated
2022
$M
39.6
2021
$M
27.8
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.
Adbri 2022 Annual Report 104
Directors’ declaration
In the Directors’ opinion:
(a) the financial statements and notes set out on pages 10 to 103 are in accordance with the Corporations Act 2001, including:
(i)
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting
requirements, and
(ii) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2022 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 25 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 25.
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 Interim Chief Executive Officer and Interim Chief Financial Officer required
by section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the Directors.
Mr Raymond Barro
Chairman
Date: 28 February 2023
Auditor’s independence
declaration
105
Deloitte Touche Tohmatsu
ABN 74 490 121 060
225 George Street
Sydney, NSW, 2000
Australia
Phone: +61 2 9322 7000
www.deloitte.com.au
28 February 2023
The Board of Directors
Adbri Limited
Aurora Place, Level 9
88 Phillip Street
SYDNEY NSW 2000
Dear Board Members
AAuuddiittoorr’’ss IInnddeeppeennddeennccee DDeeccllaarraattiioonn ttoo AAddbbrrii LLiimmiitteedd
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of
independence to the directors of Adbri Limited.
As lead audit partner for the audit of the financial report of Adbri Limited for the year ended 31 December 2022, I
declare that to the best of my knowledge and belief, there have been no contraventions of:
(i)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(ii) any applicable code of professional conduct in relation to the audit.
Yours faithfully
DELOITTE TOUCHE TOHMATSU
JJaassoonn TThhoorrnnee
Partner
Chartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte organisation.
Adbri 2022 Annual Report
106
Independent auditor’s report to
the members of Adbri Limited
Deloitte Touche Tohmatsu
ABN 74 490 121 060
225 George Street
Sydney, NSW, 2000
Australia
Phone: +61 2 9322 7000
www.deloitte.com.au
IInnddeeppeennddeenntt AAuuddiittoorr’’ss RReeppoorrtt ttoo tthhee mmeemmbbeerrss ooff AAddbbrrii LLiimmiitteedd
RReeppoorrtt oonn tthhee AAuuddiitt ooff tthhee FFiinnaanncciiaall RReeppoorrtt
Opinion
We have audited the financial report of Adbri Limited (the “Company”) and its subsidiaries (the “Group”) which
comprises the consolidated balance sheet as at 31 December 2022, the consolidated income statement, the
consolidated statement of comprehensive income, the consolidated statement of changes in equity and the
consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a
summary of significant accounting policies, and the directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001,
including:
• giving a true and fair view of the Group’s financial position as at 31 December 2022 and of its financial
performance for the year then ended; and
• complying with Australian Accounting Standards and the Corporations Regulations 2001.
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 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.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the
directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
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. These 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.
KKeeyy AAuuddiitt MMaatttteerr
HHooww tthhee ssccooppee ooff oouurr aauuddiitt rreessppoonnddeedd ttoo tthhee KKeeyy AAuuddiitt MMaatttteerr
Carrying value of goodwill and property,
plant and equipment
(Refer to Notes 12, 14 & 16)
The financial report of the Group includes
goodwill of $301.4 million and property,
plant and equipment of $1,218.5 million as
at 31 December 2022.
Our procedures included but were not limited to:
• Developing an understanding of the Group’s process
and controls over the assessment of the recoverable
amount of goodwill and property, plant, and
equipment;
• Assessing whether the Cash Generating Units (CGUs)
identified by the Group and the assets and liabilities
allocated to them was consistent with the
requirements of AASB136 Impairment of Assets;
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte organisation.
To assess the recoverable amount of
goodwill and property, plant and
equipment the Group prepared discounted
cash flow value in use models (the
impairment models).
The impairment models include significant
estimates and judgement in relation to
revenue and EBIT growth rates, terminal
growth rates and discount rates.
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
revenue and EBIT growth rates, terminal
growth rate and discount rates.
107
•
In conjunction with our internal valuation specialist
evaluating the Group’s methodologies and the
documented basis for key assumptions utilised in the
impairment models;
•
• Agreeing the forecast cash flows used to develop the
impairment models to the most recent budgets
formally approved by the Board;
Evaluating how the budgeting process has incorporated
management’s strategies to achieve the Group’s 2024
emission reduction targets as set out in the Net Zero
Emissions Roadmap;
Challenging the key assumptions used in the future
cash flow forecast including revenue and EBIT growth
rates, the terminal growth rate and the discount rate
with reference to past performance and external data;
•
• Assessing the competency, objectivity and methods
applied by management’s expert engaged by the Group
to assist in determining the growth rates and discount
rates;
Evaluating the Group’s historical accuracy of
forecasting cashflows;
•
• Assessing the accuracy of the Group’s discounted
•
cashflow model including testing the mathematical
accuracy of the impairment models;
Reviewing and challenging the appropriateness of the
Group’s sensitivity analysis and disclosure thereof in
relation to key assumptions to assess the extent of
change in those assumptions that either individually or
collectively would be required for the assets to be
impaired;
• Assessing the adequacy of the disclosures included in
Notes 14 and 16 against the requirements of AASB136
Impairment of Assets .
Estimation of close-down and restoration
costs provision
(Refer to Note 17)
Provisions for close-down and restoration
costs associated with quarries and other
disturbed areas of $61.1 million were
recognised as at 31 December 2022.
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
forecast costs to rehabilitate sites given
Our procedures included but were not limited to:
• Developing an understanding of the Group’s process
•
and controls over the estimation of the close-down and
restoration costs provision;
Evaluating the Group’s methodologies and the
documented basis for key assumptions utilised in the
estimates;
• Obtaining the provision prepared by the Group and
assessing whether the design and assumptions in the
provision meet the measurement objectives of AASB
137 Provisions, Contingent Liabilities and Contingent
Assets, are appropriate in the circumstance and
whether judgements have been applied consistently;
Evaluating the provision, assessing whether significant
assumptions and the data were maintained and applied
•
Adbri 2022 Annual Report
108
Independent auditor’s report continued
current 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 and the
complexity and judgement included in
determining the balance of restoration
provisions due to the long estimated useful
lives associated with many of the sites.
consistently including assessing the mathematical
accuracy of the provision;
• Assessing the completeness of the provision through
inquiries with management, review of meeting minutes
and legal contracts, ensuring new site acquisitions are
appropriately included and comparing the sites used in
developing the provision in the prior year to those used
in the current year provision;
• Assessing the competency, objectivity and assumptions
applied by management’s internal experts when
determining the provision;
For a sample of locations:
•
o Obtaining an understanding of the legal or
constructive obligation that presently exists;
o assessing the nature, timing and extent of
rehabilitation work to be performed by
inspecting rehabilitation plans;
comparing the nominal cost to rehabilitate
each respective site included within the
provision to internal assessments;
o
•
o 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 that previously
estimated, to assess the ability of the Group to
accurately determine future costs to rehabilitate similar
sites; and
• Assessing the adequacy of the disclosures made in
Note 17 against the requirements of AASB 137
Provisions, Contingent Liabilities and Contingent Assets.
Other Information
The directors are responsible for the other information. The other information comprises the information included in
the Group’s annual report for the year ended 31 December 2022, 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 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, 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.
109
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 has no realistic
alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and
maintain professional scepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and
appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from
fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by the directors.
• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the
audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast
significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report
or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to
cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and
whether the financial report represents the underlying transactions and events in a manner that achieves fair
presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the financial report. We are responsible for the direction,
supervision and performance of the Group’s audit. We remain solely responsible for our audit opinion.
Adbri 2022 Annual Report
110
Independent auditor’s report continued
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought
to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.
From the matters communicated with the directors, we determine those matters that were of most significance in
the audit of the financial report of the current period and are therefore the key audit matters. We describe these
matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter should not be communicated in our report because the
adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such
communication.
RReeppoorrtt oonn tthhee RReemmuunneerraattiioonn RReeppoorrtt
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 27 to 47 of the Directors’ Report for the year ended 31
December 2022.
In our opinion, the Remuneration Report of Adbri Limited, for the year ended 31 December 2022, 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.
DELOITTE TOUCHE TOHMATSU
Jason Thorne
Partner
Chartered Accountants
Sydney, 28 February 2023
Penny Woods
Partner
Chartered Accountants
Adelaide, 28 February 2023
Information for shareholders
111
Annual General Meeting
The 2023 Annual General Meeting of Adbri Limited will be held on Thursday, 25 May 2023.
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, 20 March 2023.
Security exchange listing
Adbri Limited is quoted on the official list of the Australian Securities Exchange and trades under the symbol ‘ABC’.
Sydney is Adbri Limited’s home exchange.
Registered Office
Level 1, 157 Grenfell Street
Adelaide SA 5000
Telephone: 08 8223 8000
Enquiries about your shareholding
Enquiries or notifications by shareholders regarding their shareholdings or dividends should be directed to Adbri’s share registry:
Computershare Investor Services Pty Limited
Level 5, 115 Grenfell Street
Adelaide SA 5000
Telephone: 1800 339 522
Facsimile: 1300 534 987
International: +613 9415 4031
International: +613 9473 2408
When communicating with the share registry, shareholders should quote their current address together with their Security
Reference Number (SRN) or Holder Identification Number (HIN) as it appears on their Issuer Sponsored/CHESS statement.
Online services
Shareholders can access information and update information about their shareholding in Adbri Limited via the internet by visiting
Computershare Investor Services Pty Ltd website: www.investorcentre.com
Some of the services available online include: check current holding balances, choose your preferred annual report option,
update address details, update bank details, confirm whether you have lodged your TFN, ABN or exemption, view your transaction
and dividend history or download a variety of forms.
Direct credit of dividends
Dividends can be paid directly into an Australian bank or other financial institution. Payments are electronically credited on the dividend
payment day and subsequently confirmed by 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’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.
Change of address
Shareholders who are Issuer Sponsored should notify any change of address to the share registry, Computershare Investor
Services Pty Limited, by telephone or in writing quoting your security holder reference number, previous address and new address.
Broker Sponsored (CHESS) holders should advise their sponsoring broker of the change.
Investor information other than that relating to a shareholding can be obtained from:
General Manager Corporate Finance and Investor Relations
Adbri Ltd
Level 9, Aurora Place
88 Phillip Street
Sydney NSW 2000
Telephone: +61 477 999 238
Email: info@adbri.com.au
Adbri 2022 Annual Report 112
Information for shareholders continued
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
Vanguard Group (The Vanguard Group Inc, and its controlled entities), by a notice of interests of substantial shareholder dated
20 September 2022, informed the Company that it or an associate had a relevant interest in 32,732,862 ordinary shares or 5.016%
of the Company’s issued share capital.
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 28 February 2023 there is no on-market buy back of the Company’s shares being undertaken.
The twenty largest shareholders shown in the Company’s Register of Members as at
20 January 2023
Shareholder
Barro Properties Pty Ltd
HSBC Custody Nominees (Australia) Limited
Citicorp Nominees Pty Limited
J P Morgan Nominees Australia Pty Limited
Barro Group Pty Ltd
Carltonbridge Pty Ltd
Argo Investments Ltd
BNP Paribas Noms Pty Ltd
Cloverdew Pty Ltd
Churchbridge Pty Ltd
Ageflow Pty Ltd
Rayonbridge Pty Ltd
Netwealth Investments Limited
National Nominees Limited
BNP Paribas Noms (NZ) Ltd
Prudential Nominees Pty Ltd
National Exchange Pty Ltd
Sunstone Finance Pty Ltd
BNP Paribas Nominees Pty Ltd Hub24 Custodial Serv Ltd
Equity Trustees Ltd
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