CSR LIMITED ANNUAL REPORT 2018
C
S
R
L
I
M
I
T
E
D
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
8
csr.com.au
CSR LIMITED ANNUAL REPORT 2018
FINANCIAL OVERVIEW
FIVE YEAR PERFORMANCE OVERVIEW
CHAIRMAN’S MESSAGE
MANAGING DIRECTOR’S REVIEW
BUILDING PRODUCTS AND VIRIDIAN
ALUMINIUM
PROPERTY
CONTENTS
2
2
4
6
8
14
16
18 WORKING TOWARDS A SUSTAINABLE FUTURE
28 RISK MANAGEMENT
30 BOARD OF DIRECTORS
32 DIRECTORS’ REPORT
35 REMUNERATION REPORT
FINANCIAL REPORT
53
DIRECTORS’ DECLARATION
94
95
INDEPENDENT AUDITOR’S REPORT
98 SHAREHOLDER INFORMATION
ABOUT CSR
Formed in 1855, CSR is one of
Australia’s oldest manufacturing
companies. Today it is a leading
building products company
in Australia and New Zealand
and is the name behind some of
the market’s most trusted and
recognised brand names.
AGM DETAILS
CSR’s Annual General Meeting (AGM)
will be held at the Northside Conference
Centre, corner Oxley Street and Pole
Lane, Crows Nest NSW on Wednesday
27 June 2018 at 11.00am.
CSR Limited ABN 90 000 001 276
$2.6b
Revenue in YEM18
4,200+
CSR employees
220+
Manufacturing and
distribution sites
12,000+
Customers across
Australia and NZ
33%
Lost time injuries
down 33% from
five years ago
$3m
Donated to
CSR Community
Support Program
since 2003
$5m
Allocated to energy
saving reduction
projects in YEM18
17%
Reduction in waste
production from five
years ago
ABOVE: NISHI BUILDING, NEWACTON PRECINCT CANBERRA. HEBEL POWERPANEL WAS USED FOR INTERNAL WALLS. ARCHITECT: FENDER KATSALIDIS.
PHOTOGRAPHER: JOHN GOLLINGS. COVER PHOTO: COURTESY OF CARTY HOMES. PHOTOGRAPHER: RICK GATES.
CSR’S PRODUCTS BUILD
AND INSPIRE SMARTER
HOMES AND BUILDINGS
CSR’s products are a core part of the industry that creates
homes and buildings where people live, work and play.
Our scale and network brings together those in the industry
that believe in creating great spaces. We are developing
new systems to make it easier and faster to build and inspire
smarter, more connected homes and buildings.
13
Gyprock supports Perth’s most
iconic project at Optus Stadium
Gyprock was pleased to be chosen
by the wall and ceiling contractor to supply
Perth’s iconic Optus Stadium.
20
Bradford Solar’s world’s first
solar and battery powered water
treatment plant
Logan City Council has combined emerging
solar power technology and the Tesla
Powerpack to deliver a reliable and safe
solution for water disinfection.
09
CSR brands showcased in the Channel 9 series
of The Block
CSR is proud of our long association with The Block. The Block sees
couples compete against each other to renovate a property and sell it at
auction, the winner determined by the highest price above the reserve.
27
Providing mentor support
to students
CSR volunteers provide mentoring support
to over 400 students from disadvantaged
schools in New South Wales, Queensland
and Victoria.
1
CSR LIMITED ANNUAL REPORT 2018 FINANCIAL
OVERVIEW
CSR has continued its track record of growth in earnings which improved for the fifth
consecutive year.
FIVE YEAR PERFORMANCE OVERVIEW
Year ended 31 March ($ million) unless stated
OPERATING RESULTS
Trading revenue
2018
2017
2016
2015
20141
2,606.2
2,468.3
2,298.8
2,023.4
1,746.6
EARNINGS BEFORE INTEREST AND TAX (EBIT)
Building Products2
214.1
202.8
Viridian Glass
Aluminium
Property
Segment total
Corporate2,3
Restructuring and provisions
CSR EBIT
Net profit after tax (before significant items)
Net profit after tax (after significant items)
FINANCIAL POSITION
Total equity
Total assets
Net (debt)/cash
3.5
79.5
47.8
344.9
(14.8)
(6.3)
323.8
212.7
188.8
7.0
93.1
15.0
317.9
(14.0)
(5.9)
298.0
183.8
177.9
167.6
8.1
104.1
23.3
303.1
(17.7)
(8.6)
276.8
166.0
142.3
119.7
3.1
104.3
30.2
257.3
(16.8)
(5.1)
235.4
146.5
125.5
91.5
(14.9)
51.9
17.3
145.8
(14.6)
(5.5)
125.7
80.5
88.1
1,274.1
2,137.9
(14.3)
1,206.5
2,097.1
(11.4)
1,317.2
1,206.0
1,157.2
2,215.8
2,119.3
2,008.3
70.9
68.4
(28.5)
2.6
6%
323.8
9%
212.7
16%
2.5
2.3
2.0
1.7
298.0
276.8
235.4
183.8
166.0
146.5
125.7
80.5
14
15
16
17
18
14
15
16
17
18
14
15
16
17
18
TRADING REVENUE
Year ended 31 March ($ billion)
2
EBIT
Year ended 31 March ($ million)
NET PROFIT AFTER TAX
BEFORE SIGNIFICANT ITEMS
Year ended 31 March ($ million)
CSR LIMITED ANNUAL REPORT 2018 $214.1m
EBIT IN YEM18
$3.5m
EBIT IN YEM18
$79.5m
EBIT IN YEM18
$47.8m
EBIT IN YEM18
BUILDING PRODUCTS EBIT
of $214.1 million, up 6% with
higher volumes and steady
margins across most products
reflecting improved pricing and
market activity, partly offset by
higher energy costs.
VIRIDIAN EBIT of $3.5 million
was down from $7.0 million
due to operational issues at
the new commercial factory at
Ingleburn, NSW, while energy
costs increased by $4 million.
ALUMINIUM EBIT of
$79.5 million was down from
$93.1 million with the higher
realised aluminium price
and increased production
at Tomago smelter offset by
significant increases in energy
and raw material costs.
PROPERTY EBIT of
$47.8 million included the
Rosehill, NSW land sale
and settlements from Stage 4
and 5 of Chirnside Park, Vic.
KEY DATA PER SHARE
Earnings before significant items (cents)
Earnings after significant items (cents)
Dividend (cents)
Payout ratio before significant items (%)
KEY MEASURES
EBIT margin (EBIT/trading revenue) (%)
Return on funds employed (ROFE) (%)4
Gearing at 31 March (net debt/net debt plus equity) (%)
Employees (number of people employed)5
2018
2017
2016
2015
20141
42.3
37.5
27.0
64.0
12.4
23.2
1.1
4,282
36.5
35.3
26.0
71.2
12.1
21.6
0.9
32.9
28.2
23.5
71.4
12.0
20.7
n/a
29.1
24.9
20.0
68.7
11.6
18.4
n/a
16.0
17.5
10.0
62.5
7.2
9.9
2.4
4,193
3,578
3,134
2,985
1. On 1 April 2014, CSR Limited adopted a change of accounting policy over the classification of the discount unwind for the asbestos liability, resulting in a restatement of
balances for the financial year ended 31 March 2014.
2. From 1 April 2016 there was a change in internal reporting which resulted in a transfer of operating expenditure from Corporate to Building Products.
As a result, the comparative years have been updated to reflect this change.
3. Represents unallocated overhead and other revenues.
4. ROFE is calculated as EBIT before significant items for the 12 months to 31 March divided by average funds employed which excludes cash, tax balances and certain other
non-trading assets and liabilities as at 31 March.
5. Includes employees of PGH Bricks and Viridian NZ.
12.4
23.2
11.6 12.0 12.1
7.2
21.6
20.7
18.4
9.9
4,282
4,193
3,578
3,134
2,985
14
15
16
17
18
14
15
16
17
18
14
15
16
17
18
EBIT MARGIN
Year ended 31 March (%)
RETURN ON FUNDS EMPLOYED
Year ended 31 March (%)
EMPLOYEES
Year ended 31 March
3
CSR LIMITED ANNUAL REPORT 2018 CSR LIMITED ANNUAL REPORT 2018
CHAIRMAN'S
MESSAGE
Strong performance in Building Products and Property delivered earnings up 16%.
CSR delivered improved earnings for the fifth
consecutive year.
Our net profit after tax (before significant items)
was up 16% in the year to $212.7 million and our
statutory profit of $188.8 million was up 6%.
The lift in net profit was driven by a 6% increase
in Building Products earnings before interest, tax
and significant items (EBIT) of $214.1 million and
increased Property earnings of $47.8 million, up
from $15.0 million.
The growth in earnings over the last five years has
delivered higher dividends, maintaining our policy
of paying dividends between 60-80% of full year
net profit after tax (before significant items). This
year, we have resolved to pay a final dividend of
13.5 cents per share, franked at 75% which will
bring the full year dividend to 27.0 cents, up 4%.
CSR continues to maintain a strong balance sheet
with net debt of $14.3 million, slightly up on last
year. We are well advanced in the construction of
our new $75 million Hebel factory in Somersby,
NSW. Hebel is experiencing strong growth across
residential and commercial construction and this
new facility will provide additional volume to expand
into new markets as Australia’s only manufacturer
of autoclaved aerated concrete.
We are also accelerating our investment in key
property sites as the market for industrial and
residential sites remains strong. We have a
significant pipeline of development projects over
the next five to ten years.
“The growth in earnings over the last five years
has delivered higher dividends for shareholders
while our financial position remains strong.”
JEREMY SUTCLIFFE, CHAIRMAN
4
CSR LIMITED ANNUAL REPORT 2018
27.0
4%
42.3
16%
212.7
16%
26.0
23.5
20.0
36.5
32.9
29.1
183.8
166.0
146.5
10.0
16.0
80.5
14
15
16
17
18
14
15
16
17
18
14
15
16
17
18
CSR DIVIDENDS
Year ended 31 March (cents per share)
EARNINGS PER SHARE
BEFORE SIGNIFICANT ITEMS
Year ended 31 March (cents per share)
NET PROFIT AFTER TAX
BEFORE SIGNIFICANT ITEMS
Year ended 31 March ($ million)
After nearly ten years as a director, including
one as interim CEO and six as Chairman,
it is the right time to retire and allow John
to address shareholders at the 2018 AGM
about the company’s plans for the future.
I would like to thank those of you who have
supported me throughout my tenure at CSR
including the board, CSR’s managing director
Rob Sindel, his management team and especially
my over 4,200 CSR co-workers. Day in, day out,
they have been the mainstay of our success this
year and I am very grateful for their efforts. My
time at CSR has been a great period of my life,
made all the more enjoyable by those around me.
Thanks as well, to you the shareholders,
for your support in this and past years.
JEREMY SUTCLIFFE, CHAIRMAN
5 years
consecutive growth
in earnings
170%
growth in dividends
over last five years
$20m
dedicated Energy
Improvement Fund
targeting energy saving
reduction projects
PROGRESS ON OUR STRATEGY
Since 2014, CSR has more than doubled the
earnings of its Building Products business by
following a consistent strategy of improving the
profitability of our existing portfolio of businesses,
aligning production to demand and investing in
customer service and new products. We have also
invested heavily in innovation and new building
systems which will help improve construction
methods in Australia. These investments have
also ensured that we are much more resilient to
future changes in the construction cycle.
Like many manufacturing businesses, we are facing
significantly higher energy costs. CSR is a major
user of energy with total energy costs in our building
products and glass businesses of over $100 million,
up 14% from the previous year. Our teams have
managed this additional cost well with efficiency
gains and cost control to deliver stable EBIT margins
this year. We are also investing in our operations
to reduce energy use including the $20 million
CSR Energy Improvement Fund to deliver energy
saving projects across our manufacturing sites.
This year we completed two major solar projects
at our manufacturing sites at Bradford Insulation
in Ingleburn, NSW and PGH Bricks in Golden
Grove, SA.
CHAIRMAN SUCCESSION
As I highlighted at last year’s Annual General
Meeting in June 2017, this will be my final report as
Chairman of CSR. I am very pleased to confirm that
John Gillam will become Chairman on 31 May 2018,
concurrent with my retirement from the board. John
has been a valuable addition to the board since he
joined the company in December 2017. As a former
managing director of Bunnings, he brings extensive
experience and industry knowledge to the role of
Chairman of CSR.
5
CSR LIMITED ANNUAL REPORT 2018
CSR LIMITED ANNUAL REPORT 2018
MANAGING DIRECTOR’S
REVIEW
Our strategy to capitalise on the strength in the residential construction market following
investment in our operations has delivered another strong result for CSR.
Residential construction markets remained
strong during the year.
The successful execution of our strategy has
ensured that we capitalised on this strong activity.
While our earnings in Building Products have grown
consecutively over the last five years, we are also
investing for the future.
We are focused on two key areas – on our customers,
by ensuring they are at the centre of everything we
do, and secondly, by transforming CSR into a digital
leader in the construction industry.
We want to improve our customers’ experience with
a seamless process to place orders, track deliveries
and interact with CSR. We are also investing in
innovations to develop construction industry solutions
that are smarter, faster and easier to use. Most
importantly, we want to make our customers’ lives
easier, more productive and profitable.
We are also driving innovation in the construction
industry by sourcing and developing construction
systems from around the world and adapting them
for the Australian and New Zealand construction
markets. We are recognised as the leader and
innovator in building systems by the construction
industry.
SUSTAINABILITY
We have also continued to improve the sustainability
of our operations this year. We have included
additional reporting around our goals in three
key areas: the environment, our people and the
community.
Environment – To date we have exceeded our 2020
targets for waste and emissions with further work
underway to reduce water consumption and energy.
Planning is underway for sustainability targets post
2020 as we assess ways to mitigate the potential
impacts of climate change and changes in energy
supply and pricing.
“We are investing in future growth through our
digital solutions and growing our position in lightweight
building and façade systems.”
ROB SINDEL, MANAGING DIRECTOR
6
CSR LIMITED ANNUAL REPORT 2018
CSR LIMITED ANNUAL REPORT 2018
DELIVERING ON OUR STRATEGY
We are building on our strategy covering five key areas to grow our building products businesses over the medium term.
CSR’S STRATEGY
KEY BRANDS
STRATEGIC RATIONALE
LONG-TERM GROWTH
Strengthen
and invest
Smarter, faster,
easier
Changing the way
we live and work
Comfort and
energy efficiency
Customer
Increased exposure to stable
detached market
Operational flexibility
Land release
Greater share of multi-residential
market
Speed of construction
Growth and increased
share in all market segments
Market expansion from glasswool
to polyester, solar, battery storage
and ventilation
Maintain market leading position
Invest in digital capability
Doubled Rediwall capacity
New market segment offering
(aged care, townhouse and
student accommodation)
$75 million capacity expansion
New product development
Inclose façade systems
Leading energy solutions provider
to new build market
Investment in trade centres and
retail capabilities
Data analytics to provide customer
preferences and trends
People – Safety performance across most of our sites improved
this year despite higher levels of production activity. While the
overall performance of the group improved, we have more work
to do to ensure no one is injured at CSR. The focus for the year
ahead is to ensure we continue to improve safety performance
supported by programs within four key themes: Leadership, Risk
Management, Systems Performance and Healthy Body and Mind.
Community – Our community engagement covers a wide range
of activities from engagement with local communities located
near our sites to our extensive involvement with mentoring local
students where our employees donated 628 hours during the year.
In addition, CSR and its employees have donated over $3 million
to charities through the CSR Community Support Program
since 2003.
FINANCIAL RESULTS BY BUSINESS
Trading revenue from Building Products was $1.7 billion, up 6%,
with higher volumes and improved pricing across most products
and segments.
EBIT was up 6% to $214.1 million with earnings, reflecting the
benefit of improved factory performance, price increases and cost
management. The result includes investment of approximately
$10 million in a number of growth initiatives.
Viridian’s trading revenue of $368.5 million was down
3% following the sale of glass processing sites in Cairns,
Darwin and Perth.
Viridian’s EBIT of $3.5 million in YEM18 was impacted by further
losses in its Commercial business. Operational performance
has improved in recent months following a simplification of the
operating structure at Ingleburn, NSW while demand grows for
higher margin insulated glass units (IGU) in the residential and
commercial markets.
Aluminium sales volumes of 212,801 tonnes were up 1% due to
operational improvements at the Tomago smelter. Trading revenue
of $565.5 million was up 11% reflecting a 10% improvement in
the realised aluminium price.
EBIT of $79.5 million was down 15% largely due to the power
supply contract which took effect from November 2017. This
increased total power-related costs by $34.3 million for the five
months of YEM18 that the new contract was in place.
Property recorded EBIT of $47.8 million, up from $15.0 million
in the prior year. The result includes the sale of the 8-hectare site
at Rosehill, NSW and sales from Stage 4 and 5 of the 584-lot
residential development at Chirnside Park, Vic.
OUTLOOK
Looking at the outlook for the year ending 31 March 2019
(YEM19), CSR confirmed:
Building Products and Viridian – Recent building approvals
remain strong with detached housing at its highest level in two
years. This supports the current level of activity for the year
ahead. Viridian’s operational performance in Australia and New
Zealand has improved in recent months with the business on
track to improve earnings in the year ahead.
Currently 74% of net Aluminium exposure for YEM19 is hedged
at an average price of A$2,590 per tonne (excluding ingot
premiums) as of 30 April 2018. Earnings will be impacted by the
full year effect of higher power related costs.
Two Property transactions were announced in the first week
of YEM19 resulting in EBIT of approximately $37 million. This
included the completion of Stage 5 at Chirnside Park, Vic and
the sale of the 10-hectare surplus industrial site at Horsley Park,
NSW which is expected to be recorded in the second half of
the year.
ROB SINDEL, MANAGING DIRECTOR
7
BUILDING PRODUCTS
AND VIRIDIAN
CSR’s Building Products business has continued its track record of growth in earnings
which improved for the fifth consecutive year.
MARKET OVERVIEW
Total residential commencements on a
two quarter lag basis for the 12 months to
31 March 2018 of 220,000 were down 6%
compared to the previous 12 month period.
Detached housing on the east coast remained
relatively stable, down 1%, while Western Australia
was down 13%. The multi-residential market
has slowed, particularly in the high-rise segment
which was down 12%.
The non-residential market increased strongly
with the value of work done up an estimated 9%
following solid growth in approvals data over the
last three years. The alterations and additions
market is marginally down with some activity being
transferred to the “knockdown rebuild” market. The
New Zealand market remains reasonably strong
across all segments.
Detached building approvals remain strong and while
lead indicators are pointing to a softening in activity in
the multi-residential market, the pipeline of projects
underway is expected to underpin steady demand for
CSR’s products in the year ahead.
8
BUILDING PRODUCTS
Trading revenue from Building Products was
$1.7 billion, up 6%, with higher volumes and
improved pricing across most products and
segments.
EBIT was up 6% to $214.1 million with earnings
reflecting the benefit of improved factory
performance, price increases and cost management.
Approximately $10 million was invested in a number
of growth initiatives including CSR’s digital customer
platform and development of the Inclose offsite
façade system. CSR Inclose is based in a new
manufacturing facility in Port Kembla, NSW and was
recently awarded its first contract to supply a student
accommodation project at the Australian National
University in Canberra.
EBIT margin of 12.8% was down slightly from 12.9%
as improved volume, pricing and product mix offset
$9 million in higher energy costs.
6%
Building Products earnings
up 6% with growth in pricing
and volumes
46%
CSR exposure to the
detached housing market
which has remained relatively
stable over the last few years
TOP: RANDWICK
RACECOURSE FIT OUT WITH
MARTINI ABSORB XXHD
HANGING PANELS DELIVERING
MAXIMUM DESIGN
FLEXIBILITY AND SUPERIOR
ACOUSTIC PERFORMANCE.
ABOVE: MONIER HORIZON
FLAT TILES FEATURING
C-LOC COLOUR TECHNOLOGY.
CSR LIMITED ANNUAL REPORT 2018 CSR LIMITED ANNUAL REPORT 2018
“I really enjoy working
with our customers
to help deliver great
building projects
with Hebel from
detached houses
to high rise
apartments.”
JAKE BRIGHT, HEBEL
A WINNING COMBINATION
CSR brands showcased in the series of
The Block
CSR has a long standing relationship with The Block
featured on the Channel 9 Network. The Block sees
couples compete against each other to renovate
a property and sell it at auction, the winner
determined by the highest price above reserve
on auction day. CSR supplied over 20 products in
the 2017 series including logistics and technical
support from the teams at Gyprock, Bradford,
Cemintel, Hebel, Monier, PGH and Viridian.
For more information on The Block, please visit
www.csr.com.au/theblock
“We are extremely lucky
to have a long association
with CSR at The Block.
Our projects are literally
wrapped in CSR products
which create a great
thermal environment.”
JULIAN BRENCHLEY,
THE BLOCK ARCHITECT
1,672.2
1,576.9
1,466.8
1,211.2
1,029.2
214.1
202.8
167.6
119.7
91.5
116
102
106
84
110 117 117 114
68
96
14
15
16
17
18
14
15
16
17
18
BUILDING TRADING REVENUE
Year ended 31 March ($ million)
BUILDING PRODUCTS EBIT
Year ended 31 March ($ million)
14
15
16
17
18
Multi-residential
Detached housing
BUILDING PRODUCTS HOUSING STARTS
Year ended 31 March ($ million)
Source: ABS, two quarter lag
9
BUILDING PRODUCTS AND VIRIDIAN (CONTINUED)
VIRIDIAN
Trading revenue of $368.5 million was down 3% following
the sale of glass processing sites in Cairns, Darwin and
Perth.
Viridian’s EBIT of $3.5 million in YEM18 was impacted
by further losses in its Commercial business. Higher
than anticipated volumes led to operational issues and a
significant increase in costs at the recently commissioned
factory in Ingleburn, NSW. Operational performance
has improved over the last few months following a
simplification of the operating structure at Ingleburn while
demand grows for higher margin insulated glass units
(IGU) in the commercial market.
The balance of the Viridian businesses improved
performance with increased pricing and product mix,
offset by $4 million in higher energy costs. In Australia,
demand for higher performing glass in the residential
market is also increasing following new BASIX energy
targets in New South Wales which became effective in
July 2017 while in Victoria, IGU sales accounted for over
60% of revenue in YEM18.
The New Zealand business is delivering improved earnings
following the consolidation of three plants in Auckland.
77%
Viridian’s Lightbridge double
glazing insulates a home
up to 77% better than
ordinary glass
3.5
8.1
7.0
3.1
15
16
17
18
14
-14.9
VIRIDIAN EBIT
Year ended 31 March ($ million)
VIRIDIAN GLASS USED TO CREATE LIGHT-FILLED
MEETING AND LEARNING SPACES USED IN THIS
LATROBE UNIVERSITY BUILDING IN MELBOURNE.
JEWEL PROJECT SHOWCASES HEBEL’S DIVERSITY
INSIDE AND OUT
Hebel on both the interior and exterior
of the landmark Jewel residential project
at Wentworth Point in Sydney
With the Hebel High Rise Façade system, the creative
possibilities are endless.
Taking this approach, Stanisic Architects ensured a
stunning finish to the landmark Jewel residential project
developed by PAYCE and Sekisui House Australia,
recently completed at Wentworth Point in Sydney.
Hebel was used on both the exterior and interior of
the mixed-use development, which comprises 256
apartments across three buildings as well as retail,
dining and other services.
Jewel’s waterfront location at the northern tip of the
Wentworth Point peninsula demanded something special
in regard to its design, a demand that Stanisic Architects
answered by choosing Hebel to develop a façade that
could reflect the watery pattern of the harbour.
Hebel was chosen because of its lightweight nature
and also because it could be constructed on site, which
would both improve the constructibility of the project
and reduce the cost. The Hebel PowerPanel system was
also chosen for all the non-load bearing internal walls
including intertenancy and corridor walls.
10
CSR LIMITED ANNUAL REPORT 2018 CSR LIMITED ANNUAL REPORT 2018
INTENSIVE CARE
Viridian’s St. John of God Hospital, Berwick, Melbourne
Overlooking Melbourne’s high volume Princes
Freeway, Berwick’s new 210-bed facility is wrapped
in an array of Viridian EVantage SuperBlue double
glazed units. The $120 million hospital represents
the kind of smart ideas where health care technology
and art come together into a single entity.
Viridian’s new PixaGraphic digitised glass printing
process provided the hospital’s signature
Pomegranate motif to be repeated throughout,
while SuperClear glass helps illuminate the
central stairway.
VIRIDIAN EBIT
Year ended 31 March ($ million)
THE FOLKHOUSE
PGH’s contemporary extension to a character home
The Folkhouse, described as a contemporary
extension to a character pre-war home, sits quietly
atop the crest of a hillside in Balmoral, Vic. With the
existing raised cottage, The Folkhouse has been filled
in with a brick base, which certainly adds a bold and
contemporary texture to the home. The theme of
brick stems from original post-war extensions that
were of similar essence, offering a contrast resonant
with the lightweight first floor.
The integration of brick into exterior paving helps
to link the house, swimming pool, and a unique
fireplace pillar together in this project. Notably,
PGH’s bricks extend from the interior of the home
to its outdoor living area. Through this, internal
feature walls and seating are created, working
seamlessly, and offer a quintessential airy
atmosphere.
“What stands out about
this project is its sheer
size and complexity
to fit thousands of
different coloured glass
panels into what was
like working with a
jigsaw puzzle.”
CHRIS MURRAY,
VIRIDIAN COMMERCIAL
PIXAGRAPHIC GLASS
PRINTING AT THE HOSPITAL
PGH COPPER GLOW BRICKS
USED IN THE EXTENSION
11
CSR LIMITED ANNUAL REPORT 2018
BUILDING PRODUCTS AND VIRIDIAN (CONTINUED)
BUILDING
PRODUCTS
PERFORMANCE
BUSINESS
OVERVIEW
RESULTS
HIGHLIGHTS
AFS is a leader in load
bearing permanent
formwork walling solutions
to deliver faster, lower cost
construction.
Bradford supplies a full
range of thermal, acoustic
and fire insulation and
energy saving products for
homes and commercial
buildings.
Cemintel provides
engineered fibre cement
systems and internal lining
products.
Gyprock is Australia’s
leading manufacturer of
gypsum based plasterboard
products.
Hebel is Australia’s
only manufacturer of
autoclaved, aerated
Martini manufactures
Monier produces an
PGH produces a range of
Viridian is Australia’s largest
environmentally sustainable,
extensive range of concrete
over 180 colours and sizes
glass supplier and leads
high-quality thermal and
and terracotta rooftiles in
of bricks from 10 sites
the industry for quality and
concrete that is used in
acoustic polyester fibre
Australia and New Zealand.
across the east coast of
innovation.
residential, commercial and
products for a variety of
infrastructure applications.
industries.
Australia.
Increased earnings
reflecting increased
penetration and demand
from the multi-residential
market.
Earnings increased following
higher volumes and
improved pricing, despite a
significant step up in energy
costs.
Earnings were lower
following increased
competition and pricing
pressure.
Launch of the new Rediwall
product range is underway
following completion of the
manufacturing facility at
Minto, NSW.
Bradford Energy Solutions
is also growing its alliances
with a number of major
builders to provide solar
PV and battery storage as
a standard inclusion in the
new home market.
Continues to expand into
new markets with growth
from new fibre cement
façade systems and
prefinished panels.
Increased earnings across
all states with higher
volumes and pricing
reflecting the strong
east coast activity in the
residential construction
market.
Continues to improve
its customer service
experience including
store upgrades across its
60 Gyprock Trade Centres
including the opening of
four new stores in YEM18.
Continued its track record
Earnings increased
Earnings were down
Earnings were higher
The balance of the Viridian
of increasing earnings with
with growth from the
following softer market
following strong activity on
businesses improved
market share growth in all
commercial market in
demand in Queensland and
the east coast, supported
performance with increased
major segments.
both aesthetic decorative
investment in innovation
by concerted efforts to
pricing and product mix,
products and functional
and product development.
mitigate increased energy
offset by $4 million in higher
acoustic boards.
This was largely offset by
costs.
energy costs.
improved performance in
Vic and NSW.
The $75 million expansion
Continuing to work
Investment in the Elemental
Investment in new products
Demand for higher performing
of capacity at Somersby,
with Australia’s leading
lightweight roofing range
and customer service
glass is increasing following
NSW is on track for
architectural firms and
and Colour Lock technology
continues with the launch
new BASIX energy targets
completion in March 2019.
engineering consultancies
continues.
on many landmark projects
such as the Barangaroo
and Darling Harbour
developments in Sydney.
of the Corium brick cladding
in New South Wales which
solution and the opening of
became effective in July 2017
a new PGH selection centre
while in Victoria, IGU sales
in Melton, Vic.
accounted for over 60% of
revenue in YEM18.
READY FOR THE GAMES
Cemintel used for the Commonwealth Games Village
Cemintel designed a purpose made compressed sheet fibre
cement product to supply over 60,000 square metres in the
2018 Commonwealth Games Village in the Gold Coast.
The redevelopment comprised over 1,200 permanent dwellings
that provided accommodation and services for up to 7,000
athletes and officials during the games. Incorporated in the
development plan was over seven hectares of green and
open space. It is estimated that the construction of the village
injected $550 million into the local economy and 1,500 jobs
throughout design and construction.
60,000m2
of Cemintel supplied for
the Commonwealth Games
Village in the Gold Coast
12
“Cemintel worked closely
with developer Grocon
to deliver this landmark
project for the 2018
Commonwealth Games.
The solution was specially
designed to meet specific
size and performance
standards for 60,000m2
of façades across the
18 buildings.”
MATT MAHONEY, ACCOUNT
MANAGER; AND CHARLI BYE,
COLOUR AND DESIGN
CO-ORDINATOR
BUILDING
PRODUCTS
PERFORMANCE
BUSINESS
OVERVIEW
AFS is a leader in load
Bradford supplies a full
Cemintel provides
Gyprock is Australia’s
bearing permanent
range of thermal, acoustic
engineered fibre cement
leading manufacturer of
formwork walling solutions
and fire insulation and
systems and internal lining
gypsum based plasterboard
to deliver faster, lower cost
energy saving products for
products.
products.
construction.
homes and commercial
buildings.
Hebel is Australia’s
only manufacturer of
autoclaved, aerated
concrete that is used in
residential, commercial and
infrastructure applications.
Martini manufactures
environmentally sustainable,
high-quality thermal and
acoustic polyester fibre
products for a variety of
industries.
Monier produces an
extensive range of concrete
and terracotta rooftiles in
Australia and New Zealand.
PGH produces a range of
over 180 colours and sizes
of bricks from 10 sites
across the east coast of
Australia.
Viridian is Australia’s largest
glass supplier and leads
the industry for quality and
innovation.
RESULTS
Increased earnings
reflecting increased
Earnings increased following
Earnings were lower
Increased earnings across
penetration and demand
improved pricing, despite a
competition and pricing
from the multi-residential
significant step up in energy
pressure.
higher volumes and
following increased
market.
costs.
all states with higher
volumes and pricing
reflecting the strong
east coast activity in the
residential construction
market.
HIGHLIGHTS
Launch of the new Rediwall
Bradford Energy Solutions
Continues to expand into
Continues to improve
product range is underway
is also growing its alliances
new markets with growth
its customer service
following completion of the
with a number of major
from new fibre cement
experience including
manufacturing facility at
builders to provide solar
façade systems and
Minto, NSW.
PV and battery storage as
prefinished panels.
a standard inclusion in the
new home market.
store upgrades across its
60 Gyprock Trade Centres
including the opening of
four new stores in YEM18.
Continued its track record
of increasing earnings with
market share growth in all
major segments.
Earnings increased
with growth from the
commercial market in
both aesthetic decorative
products and functional
acoustic boards.
The $75 million expansion
of capacity at Somersby,
NSW is on track for
completion in March 2019.
Continuing to work
with Australia’s leading
architectural firms and
engineering consultancies
on many landmark projects
such as the Barangaroo
and Darling Harbour
developments in Sydney.
Earnings were down
following softer market
demand in Queensland and
investment in innovation
and product development.
This was largely offset by
improved performance in
Vic and NSW.
Investment in the Elemental
lightweight roofing range
and Colour Lock technology
continues.
Earnings were higher
following strong activity on
the east coast, supported
by concerted efforts to
mitigate increased energy
costs.
The balance of the Viridian
businesses improved
performance with increased
pricing and product mix,
offset by $4 million in higher
energy costs.
Investment in new products
and customer service
continues with the launch
of the Corium brick cladding
solution and the opening of
a new PGH selection centre
in Melton, Vic.
Demand for higher performing
glass is increasing following
new BASIX energy targets
in New South Wales which
became effective in July 2017
while in Victoria, IGU sales
accounted for over 60% of
revenue in YEM18.
SOARING TO NEW HEIGHTS
Gyprock supports Perth’s most iconic
project at Optus Stadium
Gyprock was pleased to be chosen by the wall and
ceiling contractor to supply the Optus Stadium
project, partnering with Cubic to guide product
specification and providing technical support on site.
Gyprock products including EC08 Complete,
Gyptone and Rigitone, were specified for the project.
200,000m2
of plasterboard was transported to the
construction site. Gyprock’s perforated
plasterboard range delivers reduced
echo and noise reverberation to create
more comfortable environments.
13
CSR LIMITED ANNUAL REPORT 2018 ALUMINIUM
EBIT lower due to higher energy costs.
25%
CSR holds an effective
25% interest in the Tomago
aluminium smelter located
near Newcastle, NSW
10%
increase in realised
aluminium price in YEM18
EBIT LOWER DUE TO HIGHER ENERGY
COSTS
EBIT of $79.5 million was down 15% largely due to
the new power supply contract which took effect from
November 2017. This increased total power-related
costs by $34.3 million for the five months of YEM18
that the new contract was in place. This included
$6.8 million linked to the delivered coal costs to
the electricity generator’s power stations, part of
the contractual arrangements in the power supply
contracts at Tomago.
Production costs were also higher following a step-
up in pot relining activity and higher raw material
costs, up $11.8 million, including coke and pitch
due to supply constraints. This was partially offset
by operational improvements at Tomago.
REALISED ALUMINIUM PRICE UP 10%
The realised aluminium price in Australian
dollars (including hedging and premiums)
was up 10% to A$2,657 per tonne.
Performance was also supported by increased
production and operational improvements.
There was significant price momentum in US$
aluminium prices during the year with the average
cash price per tonne of US$2,045 up 21% from
US$1,688 following production curtailments in China.
This provided an opportunity for Gove Aluminium
Finance (GAF – 70% CSR) to lock in hedge book
returns to reduce volatility in future earnings.
The Australian dollar averaged US77.4 cents during
the year compared to US75.3 cents in the prior year,
while the average ingot premium for the year was
US$111 per tonne, up 18% on the prior year (Platts
Metals Week – Main Japanese Port ingot premium).
ALUMINIUM REVENUE UP 11%
GAF’s sales volumes of 212,801 tonnes were up 1%
due to operational improvements at Tomago. Trading
revenue of $565.5 million was up 11% reflecting the
10% improvement in the realised aluminium price.
14
ALUMINIUM BILLETS READY FOR EXPORT TO CUSTOMERS IN
THE ASIA-PACIFIC REGION FOR USE IN MANUFACTURING A
WIDE VARIETY OF PRODUCTS
CSR LIMITED ANNUAL REPORT 2018 CSR LIMITED ANNUAL REPORT 2018
“There are still some
improvements to come
but ‘Robbie’ is working
well and the benefit is that
it takes away someone
doing repetitive work.”
BRENDAN CORR,
TOMAGO PROCESS
ENGINEER
INNOVATION STATIONS
Carbon Automation at Tomago
‘Robbie the Robot’ was first discussed as an idea a little over 18 months ago in
the Carbon department at Tomago Aluminium. Robbie is an articulated robotic
arm which is now doing the work of four people around the clock in hot, dusty,
noisy and ergonomically poor conditions … without a single complaint!
The Carbon team has also developed a replicated panel via-tablet interface for
use at loading and unloading stations. The tablet enables more effective use of
labour in the area by giving forklift operators the ability to complete most of the
normal functions from the driver’s seat.
Brendan Corr developed the system with the help of his team in Automation
and the tablet was launched in mid 2017.
565.5
79.5
2,045
532.9 530.7 511.5
455.4
104.3 104.1
93.1
51.9
1,889
1,773
1,688
1,592
14
15
16
17
18
14
15
16
17
18
14
15
16
17
18
ALUMINIUM TRADING REVENUE
Year ended 31 March ($ million)
ALUMINIUM EBIT
Year ended 31 March ($ million)
AVERAGE LME US$
ALUMINIUM CASH PRICE
Year ended 31 March (US$ per tonne)
15
PROPERTY
Property transactions continue to deliver significant earnings for CSR while we have a pipeline
of development projects over the next five to ten years.
PROPERTY EBIT OF $47.8 MILLION
CURRENT PROJECTS UNDERWAY
CSR’s Property division recorded EBIT of
$47.8 million, up from $15.0 million in the
prior year.
Chirnside
Park, Vic
$47.8m
CSR Property delivered
$47.8 million in EBIT
in YEM18
220+
CSR Property manages over
220 manufacturing and
distribution sites across
Australia and New Zealand
47.8
30.2
23.3
Progress to date: 410 lots
settled, 105 contracts
exchanged with 69 lots to be
released as construction of
Stage 6 continues
As of 31 March 2018,
this project has delivered
$31.4 million in EBIT
70ha – future residential
Approximately 1,250+ lots
Site rehabilitation underway
Rezoning approval expected
in 2018
Schofields,
NSW
Horsley Park,
NSW
30ha – surplus industrial land
Stage 1 sale announced in
April 2018
Stage 2 development
progressing
Brendale,
Qld
Marketing continues of
~30ha industrial development
17.3
15.0
14
15
16
17
18
PROPERTY EBIT
Year ended 31 March ($ million)
The result includes the sale of the 8-hectare site at
Rosehill, NSW and sales from Stage 4 and 5 of the
584-lot residential development at Chirnside Park,
Vic.
Chirnside Park development has settled 410 lots,
exchanged contracts on 105 lots with 69 lots to
be released as construction of Stage 6 continues.
As of 31 March 2018, this project has delivered
$31.4 million in EBIT.
Full zoning approval of the 70 hectare site at
Schofields, NSW is expected to be completed by
the end of 2018 with site rehabilitation underway.
16
CSR LIMITED ANNUAL REPORT 2018 CSR LIMITED ANNUAL REPORT 2018
MAXIMISING VALUE
CSR is accelerating investment in key property sites as the
market for industrial and residential sites remains strong
CSR’s Property division focuses on maximising financial returns by developing
former manufacturing sites and industrial land for sale. CSR has an inhouse
Property team which covers a wide range of activities including:
Maximising value of operational footprint
Generating returns through various stages of the development cycle
Providing an opportunistic approach to the stage development process
Managing numerous projects through rehabilitation, zoning and planning
consent
Key projects include:
Schofields, NSW – 70ha future residential
Horsley Park, NSW – 30ha surplus industrial land
Chirnside Park, Vic – 43ha residential
Brendale, Qld – 30ha industrial development
Badgery’s Creek, NSW – 200ha future development
“Working in the Property division
alongside the business units on their
freehold sites has been a wonderful
experience. Working through a myriad
of issues around town planning, re-
zoning, rehabilitation, infrastructure
and environment translates into
greater shareholder value and a
sustainable earnings stream that
supports the business long term.”
ALLISON BASFORD,
CSR PROPERTY DEVELOPMENT MANAGER
LEFT: AERIAL VIEW OF THE NEW
HEBEL FACTORY IN SOMERSBY,
NSW, ROOF NEAR TO COMPLETION
MARCH 2018.
ABOVE: AERIAL VIEW OF THE NEW
HEBEL FACTORY SITE AUGUST 2017.
17
CSR LIMITED ANNUAL REPORT 2018
WORKING
TOWARDS A
SUSTAINABLE
FUTURE
CSR remains committed to sustainable
practices throughout all of our businesses.
We understand that a sustainable
business must ensure that it minimises
its impact on the environment and
the community. Full details of CSR’s
sustainability agenda and data are
included in CSR’s Sustainability Report
which is available on CSR’s website at
www.csr.com.au.
4.5
3.0
3.1
3.3
2.4
14
15
16
17
18
LOST TIME INJURY
FREQUENCY RATE
Year ended 31 March
(per million work hours)
17.7
13.6
15.6
13.8
13.8
14
15
16
17
18
TOTAL RECORDABLE
INJURY FREQUENCY RATE
Year ended 31 March
(per million work hours)
PEOPLE
INNOVATION
CSR recognises that a sustainable workplace is one that
provides a safe, rewarding and diverse environment for
our employees.
Workplace health and safety – CSR places the same emphasis
and importance on managing safety as any other business
imperative.
Diversity – CSR believes that a diverse workforce improves
business decision making and increases workforce sustainability.
Training and development – CSR is committed to investing in its
employees and developing leadership skills.
CSR’s innovation agenda is targeting sustainable building
and energy efficient solutions.
CSR is playing a lead role in the market through its research
on key issues of heat, air and moisture in buildings and
the impact on the actual energy required for maintaining a
comfortable home.
9%
improvement in safety
LTIFR in YEM18
29%
of CSR’s directors
are women
8 stars
ongoing building science
research at CSR House
$3m
funding from the Federal Government
to support CSR IncloseTM building
façade system
45%
severity improvement in
days lost as a result of
work-related injuries
20%
women in senior
management positions
– in line with YEM17
18
3 years
CSR Connect launched three years
ago, providing 24/7 access to
accounts, pricing, payment and
delivery tracking
$20m
Energy Improvement
Fund established
CSR LIMITED ANNUAL REPORT 2018
SUSTAINABILITY SUMMARY
During the year, CSR continued to improve the sustainability of
our operations, whilst also helping our customers and the built
environment by making substantial progress in energy efficiency,
comfort and the performance of homes and buildings.
The built environment (covering residential, commercial and all other
construction) accounts for around 20% of Australia’s greenhouse gas
emissions and CSR will play a critical role in ensuring Australia can deliver its
26-28% reduction in greenhouse gas emissions between 2005 and 2030.
We also recognise that we must mitigate the climate impacts of our
businesses through the use of the best possible energy mix and managing
emissions within our manufacturing sites and supply chain.
We have made a number of investments to achieve our reduction targets
including the $20 million CSR Energy Improvement Fund to deliver energy
saving projects in addition to continuous improvement in energy efficiency
at many of our manufacturing sites. We are also investing in construction
innovation including the development of a high performance building façade
system, supported by a $3 million grant from the Federal Government.
This year we have focused our sustainability goals in three key areas: the
environment, our people and the community. Innovation is a key driver to
improve our performance across all of these areas.
Rising energy and compliance costs have also accelerated projects that may
not have been financially viable a few years ago. We have featured a few
examples in this report where innovative ideas have delivered great outcomes
for CSR and the environment and communities in which we operate.
ENVIRONMENT
COMMUNITY
CSR is committed to minimising the impact on the
environment with specific targets to reduce emissions
and raw material use.
CSR maintains ongoing dialogue with our key stakeholders
and the community to ensure we are meeting our social
licence to operate.
We are making good progress towards our 2020 goal of a
Our relationship with the community can have a significant impact
20% reduction in energy, waste and water usage (per tonne
of saleable product) using 2009/10 as the base year.
To date, we have exceeded our 2020 targets for waste
and CO2-e with further work underway to reduce water
consumption and energy use in the year ahead.
on our ability to operate each of our sites successfully.
We continue to partner with a number of organisations in line
with our commitment to operate in a sustainable manner and
to gain the confidence of the communities in which we operate.
11%
reduction in waste
sent to landfill in 2017
1%
increase in CO2-e following
increased production in 2017
628 hours
CSR volunteered with ABCN
Student Mentor Program in 2017
$108,670
donated to CSR Community
Support Program in YEM18
2020 target
exceeded 2020 target
to minimise waste production
and CO2-e emissions per tonne
of saleable product
11%
increase in potable water
usage following increased
production in 2017
8 sites
CSR volunteers have donated their
time for Business Clean Up Day
at 8 sites across Australia
438 students
mentored by CSR employees
in 2017
19
CSR LIMITED ANNUAL REPORT 2018 SUSTAINABLE BUILDINGS
OF THE FUTURE
We are developing systems to make it easier and faster to build, helping our customers to
reduce construction time and deliver better energy efficiency, comfort and design.
Innovation at CSR is building on CSR’s core values through
a number of initiatives that support the building and
construction industry:
Our digital CSR Connect online platform enables customers to
access through their phones, tablets and PCs all key customer
information on products, pricing, orders, delivery and invoicing.
Development of enhanced services and new products for our core
CSR customer journey mapping is setting the direction for our
brands
Utilising new technologies in both material science and digital
services
Building organic growth ideas using lean startup methodology
Expanding our business portfolio into adjacencies
Using a variety of investment models matched to business
maturity and risk
We have aligned our initiatives into Customer, Digital and
Collaboration.
Customer and Digital
This is based on increasing our understanding of the needs of our
customers and improving accessibility to key information:
We have direct measurable digital feedback from CSR customers
with optional comments on what we do spectacularly, what we do
well and any issues that they have experienced.
marketing and sales approach that caters for changing customer
and market needs.
Business analytics provides improved analysis of customer
preferences and trends and a range of expanded internal digital
tools to increase efficiency, all supported by CSR’s core IT system.
Collaboration
We are creating opportunities for collaboration across CSR which:
Supports the formation of cross business and cross functional
teams with the mandate to develop CSR wide initiatives.
Provides a structured lean start-up program so that employees
can pursue new ideas for the business through an inclusive and
new team environment, supported with resources from within
CSR and externally with a broad range of skills and experience.
The business will benefit from the new ideas developed and the
reaction of our staff has been very positive to the autonomy of the
team based approach and the individual learning and personal
development experience.
WORLD FIRST
Bradford Solar’s world’s first solar and battery
powered water treatment plant
This world first solar/battery powered chlorination plant supports
the Logan City Council in Queensland to manage drinking water
systems for the protection of public health and the environment
for the community. This project is also the first offgrid system
powered by Tesla Powerpack in Australia.
The plant is wholly powered by the solar and battery system
installed with 323 solar panels and provides around the clock
solar power all year round.
The project involved the Bradford team working with Tesla to
demonstrate that a solar PV generation system and commercial
Powerpack batteries work harmoniously in response to the site’s
real time energy requirements.
20
CSR LIMITED ANNUAL REPORT 2018 “Bradford Supertel prevents sound from the
HVAC motors travelling though the ducts
into the rooms while its thermal performance
helps maintain a consistent air temperature
throughout the long network of ducts.”
IAN DORAN,
BRADFORD HVAC/INDUSTRIAL ACCOUNT MANAGER
CSR LIMITED ANNUAL REPORT 2018
HIGH PERFORMANCE INSULATION
Bradford provides a high performance
solution for a major hospital air
conditioning system
The Northern Beaches Hospital is a $1 billion
development located in Frenchs Forest, NSW.
The hospital will accommodate 488 beds across
nine storeys and is due for completion in 2018.
The hospital’s Heating, Ventilation and Air
Conditioning (HVAC) system is driven by a large
central unit that pushes conditioned air out to each
room through a complex network of ducts. It is
within these ducts that Bradford provides a high
performance acoustic and thermal solution.
Bradford Supertel is a high performance insulation
that’s installed inside HVAC ducts for sound
absorption and thermal insulation. The product
prevents sound from the HVAC motors travelling
though the ducts into the rooms, while its thermal
performance helps maintain a consistent air
temperature throughout the long network of ducts.
FASTER FAÇADES
CSR’s new Inclose system makes it faster for façades
In March 2017, CSR was awarded a grant of
$3 million from the Federal Government to support
the development of the company’s innovation in
the high performance building façade system,
CSR IncloseTM. CSR is also investing $3 million of
its own funds into the project. The funding will assist
in developing the system in conjunction with the
University of Melbourne and façade engineering
consultants, the Inhabit Group.
CSR has established a factory in Port Kembla NSW,
to manufacture a new generation of advanced,
pre-fabricated unitised rainscreen façades for the
Australian commercial construction markets targeting
hotels, hospitals and educational facilities. The
product will offer safer, faster, higher performing and
more durable façade systems for Australian buildings.
Manufacturing panels at the new factory is underway.
$3.0m
funding from the Federal
Government to support
CSR IncloseTM building
façade system
21
OUR
ENVIRONMENT
Our goal is to ensure our businesses remain compliant with our operating licences,
minimise our impact on the environment and have a positive impact on the communities
in which we operate.
OUR ENVIRONMENTAL COMMITMENT
REDUCING WASTE AT CSR
CSR has an active program to reduce its impact on
the environment which is overseen by the Board
and the Workplace Health, Safety & Environment
Committee. Each business in CSR has a plan which
commits site management to:
Comply with government environmental
regulations
Identify and address key environmental risks
Improve environmental awareness of employees
and contractors
Reduce greenhouse gas emissions and
use of resources
Continued focus on improving the energy
efficiency of our operations
CSR has a number of programs to minimise waste through the transfer of waste
materials into the production of other products.
Glasswool production uses 80% recycled glass and we source around 15%
(80 tonnes per week) of our recycled glass requirements from our Viridian
factories and Viridian customers.
Gyprock transfers waste plasterboard to manufacturers of gypsum based
gardening supplies and soil conditioners.
Gyprock also has a recycling facility which takes waste plasterboard from
building sites back to the factory for recycling and reuse in the plasterboard
production process.
Cemintel fibre cement waste is used in the production of road base.
Other projects are under review including using the dust collected from air
pollution control equipment as an input into the brick manufacturing process.
exceeded 2020 target for waste
production and CO2-e emissions per
tonne of saleable product
22
“Our ability to provide waste glass from
Viridian to Bradford’s glasswool production
process is a great example of how CSR can
utilise resources from across its network of
operations to minimise waste.”
MAGDA KING, VIRIDIAN PROCESS IMPROVEMENT
ENGINEER
CSR LIMITED ANNUAL REPORT 2018 CSR LIMITED ANNUAL REPORT 2018
PROGRESS TOWARDS 2020 GOAL
We have articulated our commitment to minimise
the impact on our environment with specific
targets to reduce greenhouse gas emissions and
waste production and the consumption of energy
and water used in production.
Each CSR business unit sets goals to improve
performance and reduce their environmental
impact and these are regularly reviewed by senior
management and the Workplace Health, Safety
& Environment Committee (WHSE).
CSR’S operations are making good progress towards
our 2020 goal of a 20% reduction per tonne of
saleable product in energy consumption, in CO2-e
emissions, solid waste to landfill and potable water
usage using 2009/10 as the base year.
To date we have exceeded our targets for waste
and CO2-e emissions with further work underway to
reduce water consumption and energy use in the
year ahead.
WASTE PRODUCTION
WASTE PRODUCTION
TO LANDFILL
TO LANDFILL
Kg/Tonne of Product
Kg/Tonne of Product
POTABLE WATER
POTABLE WATER
CONSUMPTION
CONSUMPTION
Ltr/Tonne of Product
Ltr/Tonne of Product
15.0
12.0
11.3
9.0
6.0
3.0
0
3
1
.
4
1
6
6
.
3
1
2
3
.
3
1
Target 20%
off 09-10
5
5
.
2
1
7
5
.
2
1
9
2
.
0
1
6
0
.
7
3
5
.
6
-
0
1
9
0
Y
F
-
1
1
0
1
Y
F
2
1
1
1
-
Y
F
-
3
1
2
1
Y
F
-
4
1
3
1
Y
F
-
5
1
4
1
Y
F
-
6
1
5
1
Y
F
7
1
-
6
1
Y
F
500
400
376
300
200
100
0
1
7
.
9
6
4
7
2
.
6
5
4
4
4
.
2
9
4
2
4
.
0
5
4
5
2
.
7
3
4
Target 20%
off 09-10
6
1
.
8
8
3
0
5
.
6
7
3
9
9
.
4
4
3
-
0
1
9
0
Y
F
-
1
1
0
1
Y
F
2
1
1
1
-
Y
F
-
3
1
2
1
Y
F
-
4
1
3
1
Y
F
-
5
1
4
1
Y
F
-
6
1
5
1
Y
F
7
1
-
6
1
Y
F
ENERGY CONSUMPTION
ENERGY CONSUMPTION
GJ/Tonne of Product
GJ/Tonne of Product
TOTAL SCOPE CO2-e
TOTAL SCOPE CO2-e
Kg/Tonne of Product
Kg/Tonne of Product
4
5
.
3
3
5
.
3
1
6
.
3
3
4
.
3
1
4
.
3
Target 20%
off 09-10
0
2
.
3
6
0
.
3
5
0
.
3
4.0
3.0
2.8
2.0
1.0
0
4
8
.
5
2
3
2
1
.
5
1
3
3
0
.
1
0
3
Target 20%
off 09-10
7
3
.
3
1
3
4
7
.
7
0
3
9
3
.
4
8
2
2
6
.
0
6
2
2
4
.
9
5
2
350
300
260
250
200
150
100
50
0
-
0
1
9
0
Y
F
-
1
1
0
1
Y
F
2
1
1
1
-
Y
F
-
3
1
2
1
Y
F
-
4
1
3
1
Y
F
-
5
1
4
1
Y
F
-
6
1
5
1
Y
F
7
1
-
6
1
Y
F
-
0
1
9
0
Y
F
-
1
1
0
1
Y
F
2
1
1
1
-
Y
F
-
3
1
2
1
Y
F
-
4
1
3
1
Y
F
-
5
1
4
1
Y
F
-
6
1
5
1
Y
F
7
1
-
6
1
Y
F
All environmental data is for the period 1 July 2016 to 30 June 2017 to be consistent with the National Greenhouse Reporting (NGER) scheme.
$5m
allocated to energy saving
reduction projects in YEM18
ENERGY REDUCTION
CSR Energy Improvement Fund
CSR has established a $20 million fund specifically
targeting energy saving reduction projects to reduce
reliance on external providers. The key aim of
the fund which is overseen by CSR’s Energy and
Carbon Management Committee, is to bring forward
projects that may not normally have met the internal
business benchmarks and payback periods.
Four projects currently underway:
Solar project at Bradford Insulation, Ingleburn,
NSW
Biomass project at PGH Bricks, Cecil Park, NSW
Solar project at PGH Bricks, Golden Grove, SA
An off-peak electricity management project at
Hebel, Somersby, NSW
BRADFORD SOLAR PROJECT AT JOSEF CHROMY VINEYARD, TASMANIA
23
OUR
PEOPLE
People are key to our success at CSR and we recognise that a sustainable workplace
is one that is safe, rewarding and diverse for our employees.
SUPPLY CHAIN – CHAIN OF RESPONSIBILITY
Working with the Australian Logistics
Council on a CSR wide Chain of
Responsibility (COR) review
CSR is committed to the manufacture, distribution
and delivery of building products in the safest way
possible for our employees, people working within
our supply chain and the general public.
In most states across Australia once the gross
mass of a vehicle (GVM) exceeds 4.5 tonne then
that vehicle is defined as a ‘Heavy Vehicle’ and is
subject to Chain of Responsibility law.
Chain of Responsibility means that even though
contractors deliver most of CSR’s products, we
are still responsible for making sure that they are
transported and delivered safely.
In 2017, CSR launched a three year program with
the Australian Logistics Council to review our chain
of responsibility systems. This program covers
procedures for load weight and restraint, loading
and unloading, mix load mass, safe driving and
fatigue management. We have also integrated the
COR program into our new digital delivery tracking
system used by customers to track their orders
on-line.
CSR has six specific COR training modules with
over 7,600 hours of training completed in YEM18.
SAFETY INITIATIVES TO REDUCE RISK
AND HARM
Our safety strategy has led to a series of significant initiatives
to improve our safety performance including:
115 employees completed an accredited Safety Leadership
Training
Chain of Responsibility system reviewed with
operational improvements implemented
9%
improvement in safety
LTIFR in YEM18
Sub-contractor safety management system improved and implemented
Implementation of a new Workplace Health and Safety system to improve
efficiency and insights on incidents and hazards
Along with other initiatives these have resulted in improvements in key measures:
Achieved 98% against a target of 90% for the Injury Prevention Indicator
45% improvement in severity measured by days lost as a result of work-related
injuries
LTIFR decreased by 9% from 3.3 to 3.0
INJURY SEVERITY
INJURY SEVERITY
Days lost per million work hours
70
60
50
40
30
20
10
0
24
Trend line
5
1
r
p
A
0
3
5
1
n
u
J
0
3
5
1
g
u
A
1
3
5
1
t
c
O
1
3
5
1
c
e
D
1
3
6
1
b
e
F
9
2
6
1
r
p
A
0
3
6
1
n
u
J
0
3
6
1
g
u
A
1
3
6
1
t
c
O
1
3
6
1
c
e
D
1
3
7
1
b
e
F
9
2
7
1
r
p
A
0
3
7
1
n
u
J
0
3
7
1
g
u
A
1
3
7
1
t
c
O
1
3
7
1
c
e
D
1
3
8
1
b
e
F
9
2
CSR LIMITED ANNUAL REPORT 2018
DIVERSITY LEADS TO BETTER
DECISION MAKING
CSR believes that a diverse workforce improves
business decision making as well as increasing
workforce sustainability, leading to better
organisational relationships and ultimately better
solutions for our customers. Each of these helps
to improve the financial results of CSR.
LEADERSHIP AND CULTURE
CAREER MANAGEMENT
RECRUITMENT AND RETENTION
YEM18 DIVERSITY ACHIEVEMENTS
27% of attendees at CSR leadership
Insights from the female talent review
programs were women.
Over 2,500 on-line training modules
focusing on Fairness, Respect and
Diversity were completed.
Achieved gender pay equity through
established bi-annual processes and
detailed pay reporting by job grade.
Diversity reporting within the organisation
was maintained to drive more informed
recruitment decisions.
The CEO led diversity council meetings
throughout the year to implement and
review diversity initiatives.
Diversity initiatives were promoted,
shared and leveraged throughout
the organisation through targeted
communication.
were leveraged to further support female
talent within the business units.
Career opportunities and development
of women were promoted (in YEM18,
41% of internal promotions were women,
compared with 34% in YEM17).
Completed a review of workplace
flexibility policies and parental support
arrangements. Improvements include a
dedicated support service for parents
and increasing paid parental leave from
10 to 12 weeks for eligible employees.
Promoted and sponsored the Women
in Industry Awards with 10 finalists
nominated from CSR.
Female applications and appointments
fell marginally during YEM18 driven by
stronger demand for operational roles
more often applied for and filled by male
candidates.
Promoted CSR as a more diverse and
inclusive organisation.
Voluntary turnover of women held steady.
Completed two workshops with senior
leaders in CSR covering any bias that
might affect recruitment decisions.
TRAINING AND DEVELOPMENT
TRAINING HOURS AND INVESTMENT
TRAINING HOURS AND INVESTMENT
Over the past seven years we have developed a suite
of leadership training programs designed to provide
our leaders with the knowledge, skills and networks to
enable them to perform at their best. These programs
have become a well-regarded part of our employee
value proposition.
$3.2m
invested in training programs
in YEM18
27,800
hours of training
completed in YEM18
Hours
30,000
25,000
20,000
15,000
10,000
5,000
0
Training investment
Training hours
3.2
2.3
2.6
1.7
1.8
15,713
16,201
22,070
23,850
27,800
YEM14
YEM15
YEM16
YEM17
YEM18
A$ million
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
25
CSR LIMITED ANNUAL REPORT 2018 WORKING IN
THE COMMUNITY
Community engagement can have a significant impact on our ability to operate each of our
sites successfully.
CSR PARTNERSHIPS
We continue to partner with a number of organisations
in line with our commitment to operate in a
sustainable manner and to gain the confidence
of the communities in which we operate.
Businesses today need a “licence to operate” from
their communities or they may be unable to achieve
their business objectives. We actively manage our
interaction with the communities affected by our
operations.
COMMUNITY RELATIONS
Site level engagement with local communities
and neighbours affected by our operations.
COMMUNITY SUPPORT PROGRAM
Launched in 2003, CSR matches employee
contributions dollar for dollar to three charitable
organisations.
Provides volunteer support for various activities
and campaigns during the year.
STUDENT MENTOR PROGRAM
CSR commenced working with the Australian
Business and Community Network (ABCN)
in 2011 to provide mentoring and coaching
programs in schools in high need areas.
In 2017, CSR volunteers donated time to support
over 400 students.
BUILDING PRODUCT DONATIONS
CSR supports a number of charities to build
new facilities with product donations as well
as technical support and installation expertise.
community relations
site planning underway
at key sites
$3m
donated to charities
over the last 15 years
26
COMMUNITY SUPPORT PROGRAM
CSR staff have donated $3m to charity
CSR launched the CSR Community Support Program in 2003 and during that
time CSR and its employees have donated over $3 million to charity. A core
component of our community involvement is the CSR Community Support
Program, under which CSR matches employee contributions dollar for dollar
to three charitable organisations.
In the year to 31 March 2018, CSR and its employees donated $108,670 to
three charitable organisations, The Salvation Army, Youth Off The Streets and
Assistance Dogs Australia. CSR extends its relationship with its partnership
charities by providing volunteer support for various campaigns and activities
during the year.
THE SALVATION ARMY is
a national charity, offering
caring support for every
problem “from the cradle
to the grave.” Their services
are as wide-ranging and
diverse as the areas of need
in the community. They offer
services to aged care, crisis
accommodation, suicide
prevention, youth and
families at risk, telephone
counselling, to name just
a few.
YOUTH OFF THE STREETS
is a youth-specific charity,
assisting young people
dealing with issues of
substance and other
abuse, alienation from
family and community
and homelessness. Youth
Off The Streets offers a
continuum of care from
assistance on the streets;
crisis and short term
accommodation to long
term residential care,
treatment and secondary
schooling.
ASSISTANCE DOGS
AUSTRALIA is a national
charity which trains
Labradors and Golden
Retrievers to help people
with physical disabilities.
They currently have over
90 dogs around Australia,
with over 50 dogs currently
in training. The charity
requires significant funding
to achieve its goal of placing
at least 30 dogs per year
with recipients.
CSR LIMITED ANNUAL REPORT 2018 CSR LIMITED ANNUAL REPORT 2018
HELPING BUILD OUR COMMUNITIES
Helping build a home for the
Read family
CSR Gyprock, together with Cowra Plasterworks,
donated volunteer time and products to install the
plasterboard and insulation for a new home for the
Read family.
Gyprock joined many other volunteers to help build
an accessible house for the three Read children who
have a rare genetic condition which requires the use
of wheelchairs in their home in Canowindra, NSW.
Product
donations
to various charity projects
MENTORING IN PROGRESS AT CURRAN PUBLIC SCHOOL, MACQUARIE FIELDS NSW
“Our annual community day is a great
opportunity to spend time as a team and give back
to the community. It was great to work closely
with our key reseller who has been loyal to CSR
for 50 plus years – and to support the
Read family – a very worthy cause.”
CRAIG SWEENY, REGIONAL SEGMENT MANAGER NSW
GYPROCK TEAM WITH MEMBERS OF THE READ FAMILY
AUSTRALIAN BUSINESS AND COMMUNITY NETWORK
Providing mentor support to students
CSR commenced working with the Australian
Business and Community Network (ABCN) in 2011.
It is a partnership of highly committed national
business leaders and companies working on
mentoring and coaching programs in schools in
high need areas. In 2017, CSR volunteers donated
628 hours, providing mentoring support to over
400 students from disadvantaged schools in
New South Wales, Queensland and Victoria.
CSR is part of ABCN’s InterACT program which is
designed to assist students from a migrant or refugee
background to gain cultural and vocational literacy
in order to participate in Australian life. The program
focuses on ‘soft skills’ such as communication
and building relationships. There is also a critical
socialisation aspect through which students learn
to sustain a conversation with a positive role model
outside their immediate community. CSR has a team
of mentors who meet with the students over six
weeks as part of the program.
628 hours
volunteered with ABCN
Student Mentor Program
in 2017
27
RISK
MANAGEMENT
There are a number of risks in the markets in which CSR operates. A range of factors,
some of which are beyond CSR’s control, can influence performance across CSR’s businesses.
Risk Management at CSR is an iterative process, each cycle
enhances our understanding of our risks and deepens our
engagement with stakeholders including employees, contractors,
regulatory bodies, government, shareholders and the community.
A range of factors, some of which are beyond CSR’s control,
can influence the performance of CSR. CSR’s risk management
policy is available on our website at www.csr.com.au/investor-
relations-and-news/corporate-governance.
KEY AREAS OF
MATERIALITY
RISKS
Aluminium, currency
and debt markets
CSR’s results are impacted by movements in
the global US dollar price for aluminium and
currency fluctuations.
Some risks related to the aluminium operation
cannot be hedged including regional price
premiums, global relativity of price of electricity
and inputs such as petroleum coke as well as
changes to the joint venture structure.
Australian
construction markets
and competitor
activity
Approximately 50% of CSR’s total revenue is
generated from product and service supplied
into the new residential construction sector of
Australia and New Zealand which is impacted
by several macro-economic factors.
As a supplier to the construction market, CSR
is subject to a number of competitive forces
including other domestic and international
suppliers and new technologies which could
replace existing building methods.
MONITOR AND MANAGE RISK
CSR has a policy to hedge both US dollar sales
and foreign currency exposure when specific
targets are met, with the primary objective
of reducing short-to-medium term earnings
volatility. This policy is monitored regularly by
CSR’s Finance Committee which includes CSR’s
CEO, CFO, Group Treasurer and the General
Manager of Gove Aluminium Finance.
CSR regularly monitors cash flow and the
group financial position as part of the Finance
committee’s function.
Reviews of market activity are factored into
CSR’s monthly reporting, quarterly forecasting
and annual budget and planning cycles, which
in turn drive capacity and capital planning.
Furthermore, the nature of CSR’s building
products is that they are typically sold late in
the construction process, giving CSR some
visibility of changes in market conditions before
specifically impacting demand.
CSR is actively developing and acquiring new
products that increase CSR’s exposure to the
multi-residential segments.
The release of future land supply for residential
development relies on the coordination of
government and regulatory bodies with builders
and developers to deliver infrastructure and
services for new projects.
Digital and cyber
security
Digital services are increasingly used by the
construction sector. CSR’s digital development
program is critical to achieving growth in its
key markets.
CSR has developed its CSR Connect digital
platform which provides 24/7 access to all
customer account pricing, ordering, delivery
and invoicing data.
CSR faces network and data risks due to cyber
security breaches.
A cyber security improvement plan and
alignment to ISO standard is underway.
28
CSR LIMITED ANNUAL REPORT 2018 KEY AREAS OF
MATERIALITY
Employee and
community
engagement
RISKS
MONITOR AND MANAGE RISK
An engaged and diverse workforce is critical to
CSR’s long term success – to help develop new
ideas and build a workforce more representative
of our society.
CSR has developed a suite of leadership and
training programs to provide our people with the
knowledge, skills and support to enable them to
perform at their best.
This includes managing its ageing workforce,
Community relations site planning underway at
transferring technical skills and sales
relationships as well as promoting trade
apprenticeships across the building sector.
key sites.
CSR recognises that it plays an important role in
the success and prosperity of local communities
as an employer, operator of major manufacturing
sites and developer of its legacy property assets.
Energy and climate
change
CSR’s manufacturing operations use significant
amounts of energy including electricity and gas.
These energy costs are increasing, particularly
for Tomago aluminium which impacts its cost
competitiveness compared to global smelters.
The transition to a low carbon economy and
mitigating the potential impacts of climate
change as well as government regulations and
planning may impact the availability and nature
of supply, as well as how we manage our land
assets and business processes.
CSR has committed to a 20% per tonne
reduction of greenhouse gas emissions, potable
water consumption and solid waste production
to landfill per tonne of saleable product by 2020
using 2009/10 as the base year.
Where possible, CSR enters into long-term
contracts to provide greater security of energy
supply for its factories.
CSR’s Energy and Carbon Management
Committee oversees risks related to electricity
pricing and management.
Alternative energy sources including solar power
are also under review in addition to site specific
energy reduction initiatives.
The potential climate change impact on key
physical assets is under review.
Established a $20 million CSR Energy
Improvement Fund to deliver energy saving
projects across its manufacturing sites.
Product liability
Previous involvement in asbestos in Australia
and exporting asbestos to the United States.
CSR meets all valid claims in both Australia and
the United States on an equitable basis.
CSR ceased asbestos mining in 1966 and
The asbestos provision is impacted by
Supply chain and
product compliance
divested remaining interests in 1977.
CSR relies on an extensive supply chain to
manufacture and distribute its products and
services.
This supply chain can be impacted by natural,
political or technological disruptions which the
company reviews to develop alternative supply
options and minimise the risk of potential
supply issues.
movements in claim numbers, settlement
rates and values and movements in AUD/US$
exchange rate.
CSR has a quality management system to
ensure that all products manufactured or
supplied consistently meet the requirements
and specifications of international and national
quality standards and customer expectations.
Workplace health
and safety
CSR has a stated long term objective of
The board WHSE committee regularly reviews
achieving zero harm to CSR people across
all operations.
initiatives targeting improved safety performance
across our businesses.
Note: Material Risks are listed alphabetically
29
CSR LIMITED ANNUAL REPORT 2018 BOARD
OF DIRECTORS
JEREMY SUTCLIFFE LLB (HONS).
Chairman since July 2011, non-executive director since December 2008 and held the position
of interim CEO and managing director from 1 April to 31 December 2010.
Other CSR responsibilities: Member of the Remuneration & Human Resources Committee.
Experience and expertise: Jeremy was formerly Group CEO of Sims Metal Management Limited
from 2002 until 2008 and a director until 2009.
Other directorships/offices held
Non-executive director of Amcor Limited (2009 to current)
Non-executive director of Orora Limited (2013 to current)
Advisory role with Veolia Environmental Australia (2014 to current)
ROB SINDEL BENG, MBA, GAICD, FIEAust, CPEng.
Appointed to the board as an executive director in December 2010 and managing director in
January 2011. Rob joined CSR in April 2008 as executive general manager of CSR Lightweight
Systems. In October 2009, he was appointed CEO of CSR Building Products.
Other CSR responsibilities: Attends committee meetings by invitation.
Experience and expertise: Rob was formerly the managing director of Hanson’s slag cement
business in the United Kingdom, a subsidiary of the global building materials company, Heidelberg
Cement Group. Rob also held the position of commercial trading director for Hanson Aggregates
in the United Kingdom. His 30 year career in the construction industry started with Pioneer in
Australia.
Other directorships/offices held
Director (2013 to current) and chair of the Remuneration Committee (2015 to current)
of the Green Building Council of Australia
Director of the Australian Business and Community Network (2013 to current)
Member of the UNSW Australian School of Business Advisory Council
Member of the Yalari NSW Advisory Committee, an organisation that works with students
from indigenous backgrounds
JOHN GILLAM BCom, MAICD, FAIM.
Non-executive director since December 2017.
Other CSR responsibilities: Member of the Risk & Audit Committee and the Remuneration
& Human Resources Committee.
Experience and expertise: John was formerly managing director of Bunnings in Australia
and New Zealand from 2004 to early 2016 and of the expanded Bunnings Group, until
December 2016. John joined Wesfarmers Limited in 1997 and held a number of senior
leadership roles in the company over the past 20 years.
Other directorships/offices held
Chairman of BlueFit Pty Limited (2018 to current)
Director of Clontarf Foundation (2017 to current)
Director of Heartwell Foundation (2009 to current)
Director of Ruyton Girls School (2012 to current)
30
CSR LIMITED ANNUAL REPORT 2018 CHRISTINE HOLMAN PGDipBA, MBA, GAICD.
Non-executive director since October 2016.
Other CSR responsibilities: Member of the Workplace Health, Safety & Environment Committee
and the Remuneration & Human Resources Committee.
Experience and expertise: Christine was formerly commercial director at Telstra Broadcast
Services until March 2016 and chief financial officer and commercial director of Globecast Australia
until June 2015. Christine also spent seven years at Capital Investment Group involved in strategy,
business development and mergers and acquisitions. Christine has over 20 years’ experience
across the technology, private equity and digital sectors in a variety of functions including finance,
commercial, technology and marketing.
Other directorships/offices held
Non-executive director of HT&E Limited (2015 to current)
Non-executive director of The Bradman Foundation (2016 to current)
Non-executive director of the State Library of NSW Foundation (2017 to current)
Non-executive director of the T20 World Cup 2020 Cricket Board (2018 to current)
Previously a non-executive director of Vocus Group Limited (August 2017 to November 2017)
MIKE IHLEIN BBUS (Accounting), FAICD, FCPA, FFIN, MFEI.
Non-executive director since July 2011.
Other CSR responsibilities: Chairman of the Risk & Audit Committee and member of the
Workplace Health, Safety & Environment Committee.
Experience and expertise: Mike was formerly chief executive officer and executive director of
Brambles Limited until November 2009, prior to which he was Brambles’ chief financial officer for
four years. Mike also had a long career with Coca-Cola Amatil Limited including seven years as
chief financial officer and executive director and a number of senior operational, finance, business
development and treasury roles including managing director of Coca-Cola Amatil Poland.
Other directorships/offices held
Non-executive director of Scentre Group (2014 to current)
Non-executive director (2012 to current) and chair of the People & Culture Committee
(2015 to current) of Snowy Hydro Limited
Non-executive director of Spark Software sp. z o.o. (2015 to current)
Non-executive director of Kilfinan Australia Limited (2016 to current)
Previously a non-executive director of Murray Goulburn Co-operative Co Ltd (2012 to 2017)
MATTHEW QUINN BSc (HONS), ACA, ARCS, FAPI, FRICS.
Non-executive director since August 2013.
Other CSR responsibilities: Chairman of the Remuneration & Human Resources Committee
and member of the Risk & Audit Committee.
Experience and expertise: Matthew was formerly managing director of Stockland, a position
held until January 2013. Matthew’s management career with Stockland spanned 12 years,
and he has an extensive background in commercial, retail, industrial and residential property
investment and development.
Other directorships/offices held
Chairman of Class Super (Director since 2015, Chair since 2017 to current)
Chairman of Carbonxt (2013 to current)
Non-executive director of Regis Healthcare Limited (2018 to current)
Member of the Australian Business and Community Network Scholarship Foundation
PENNY WINN BCom, MBA, GAICD.
Non-executive director since November 2015.
Other CSR responsibilities: Chairman of the Workplace Health, Safety & Environment Committee
and member of the Risk & Audit Committee.
Experience and expertise: Penny was formerly director Group Retail Services with Woolworths
responsible for leading the Logistics and Information Technology divisions and the Customer
Engagement teams, a position held until October 2015. Penny has over 30 years of experience in
retail in senior management roles in Australia and overseas.
Other directorships/offices held
Non-executive director of Caltex Australia Limited (2015 to current)
Non-executive director of Goodman Limited and Goodman Funds Management Limited
(2018 to current)
Chairman of Port Waratah Coal Services Ltd (2015 to current)
Member of the UTS Business School’s Advisory Board
31
CSR LIMITED ANNUAL REPORT 2018 CSR LIMITED | DIRECTORS’ REPORT
DIRECTORS’ REPORT
The board of directors of CSR Limited (CSR) presents its report of the
consolidated entity, being CSR and its controlled entities (CSR group),
for the year ended 31 March 2018. The information appearing on
pages 32 to 52 forms part of the directors’ report and is to be read in
conjunction with the following information:
Principal activities
The principal activities of entities in the CSR group during the year
included the manufacture and supply of building products in Australia
and New Zealand.
In Australia, the CSR group has an interest in the smelting of
aluminium through its 70% interest in Gove Aluminium Finance
Limited, which owns 36.05% of the Tomago aluminium smelter
located near Newcastle, NSW.
CSR also maximises returns from the sale of its surplus land by
advancing sites through stages of the development process.
Review of operations and financial results
A review of CSR group operations and the results for the year ended
31 March 2018 is set out on the inside front cover to page 29 and
pages 53 to 94 of the annual report and forms part of the directors’
report. This includes the summary of consolidated results as well as
an overview of the group’s strategy, material risks and future
prospects.
Significant changes
There have been no significant changes to the CSR group in the
financial year ended 31 March 2018.
Events after balance sheet date
On 9 May 2018, the board resolved to pay a final dividend of 13.5
cents per ordinary share for the year ended 31 March 2018 to be paid
on 3 July 2018. This dividend will be 75% franked at the 30%
corporate tax rate.
The final dividend for the financial year ended 31 March 2018 has not
been recognised in this financial report.
On 3 April 2018, CSR announced the sale of the first tranche of
surplus land at Horsley Park, NSW. Under the terms of the sale,
approximately $30.0 million of profit before tax is expected to be
recognised in the statement of financial performance in the year
ending 31 March 2019, with settlement expected in April 2019.
No other matters or circumstances have arisen since the end of the
financial year that have significantly affected or may significantly
affect the CSR group’s operations, the results of those operations or
the CSR group’s state of affairs in future financial years.
Dividends and distributions to shareholders
Dividends through the year have been as follows:
a final dividend of 13 cents per ordinary share (50% franked at the
30.0% corporate tax rate), with respect to the financial year ended
31 March 2017, was paid on 4 July 2017; and
an interim, dividend of 13.5 cents per ordinary share (50% franked
at the 30.0% corporate tax rate) was paid on 12 December 2017
(as set out in note 16 to the financial statements on page 74).
No other distributions were paid during the year.
Options over share capital
Other than as disclosed in the Remuneration Report:
no CSR options were granted to executives or non-executive
directors during the year;
there were no unissued shares or interests in CSR subject to
options at the date of this report; and
no CSR shares or interests were issued pursuant to exercised
options during or since the end of the year.
32
Indemnities and insurance
Under rule 101 of CSR’s constitution, CSR indemnifies every person
who is or has been an officer of CSR, to the extent permitted by law
and subject to the restrictions in sections 199A and 199B of the
Corporations Act 2001 against:
liability incurred by that person as an officer of CSR (including
liabilities incurred by the officer as a director of a subsidiary of CSR
where CSR requested the officer to accept appointment as
director); and
reasonable legal costs incurred in defending an action for a liability
or an alleged liability incurred by that person as such an officer of
CSR (including such legal costs incurred by the officer as a director
of a subsidiary of CSR where CSR requested the officer to accept
appointment as director).
For the purposes of rule 101 of CSR’s constitution, ‘officer’ means a
director, secretary and executive officer of CSR (as defined in the
Corporations Act 2001).
CSR has entered into a deed of indemnity, insurance and access with
current and former directors of CSR and its subsidiaries. Under each
director’s deed, CSR indemnifies the director against all costs, losses
or liabilities, including without limitation, legal costs and expenses, on
a full indemnity basis, incurred by the director in their capacity as a
director of CSR or, in some cases as a director of a CSR subsidiary.
The deeds also provides directors certain rights of access to board
papers and require CSR to maintain insurance cover for directors. No
director or officer of CSR has received benefits under an indemnity
from CSR during or since the end of financial year.
CSR’s external auditor is not indemnified under rule 101 of CSR’s
constitution or any agreement.
During the year, CSR paid premiums in respect of insurance contracts
for the year ended 31 March 2018 and, since the end of the year,
CSR has paid, or agreed to pay, premiums in respect of such contracts
for the year ended 31 March 2019. The insurance contracts insure
against certain liability (subject to exclusion) incurred by persons who
are or have been directors or officers of CSR and its controlled
entities.
In accordance with normal commercial practice, the insurance
contract prohibits disclosure of the nature of the liability covered by,
or the premium payable under, the contract of insurance. No claims
under the indemnities have been made against CSR during or since
the end of the year.
Performance in relation to environmental regulation
The board places a high priority on environmental issues and is
satisfied that adequate systems are in place for the management of
CSR’s compliance with applicable environmental regulations under
the laws of the Commonwealth, States and Territories of Australia and
of New Zealand. CSR is not aware of any pending prosecutions
relating to environmental issues, nor is CSR aware of any
environmental issues, not provided for, which would materially
affect the business as a whole.
Political donations
CSR attended a small number of events organised by political parties
such as conferences in the year ended 31 March 2018. CSR’s
businesses are often involved in a degree of interaction with all levels
of government. CSR assists all sides of politics in the development of
policy in fields where CSR has specific expertise. No fees were paid to
attend these events (2017: $5,050) and as such disclosure to the
Australian Electoral Commission was not required.
CSR LIMITED | DIRECTORS’ REPORT
Auditor independence
There is no current or former partner or director of Deloitte Touche
Tohmatsu, CSR’s auditor, who is, or was at any time during the year
ended 31 March 2018, an officer of the CSR group. No auditor played
a significant role in the CSR group audit for the year ended 31 March
2018 in reliance on a declaration made under section 342A of the
Corporations Act 2001. The auditor’s independence declaration
(made under section 307C of the Corporations Act 2001) is set out on
page 34.
Non-audit services
Details of the amounts paid or payable to the CSR group auditor,
Deloitte Touche Tohmatsu, for non-audit services provided by that firm
during the year are shown in note 30 to the financial statements on
page 93. In accordance with written advice provided by the Risk &
Audit Committee, the directors are satisfied that the provision of non-
audit services during the year by Deloitte Touche Tohmatsu:
is compatible with the general standard of independence for
auditors imposed by the Corporations Act 2001; and
did not compromise the auditor independence requirements of the
Corporations Act 2001 in view of the materiality of the amounts,
the nature of the services and the processes established to
monitor the independence of the auditors.
Proceedings on behalf of CSR
No proceedings have been brought, or intervened in, on behalf of
CSR, nor has any application for leave been made in respect of CSR
under section 237 of the Corporations Act 2001.
Remuneration of directors and key management personnel (KMP)
The remuneration report on pages 35 to 52 provides: a summary of
the board’s remuneration policy and practices during the past year as
they apply to directors and other KMP (as defined by the Accounting
Standard AASB 124 Related Party Disclosures); the relationship
between remuneration policy and the CSR group’s performance; and
the remuneration details for each director and other KMP.
Directors’, company secretary, directors’ meetings and directors’
shareholdings
On 14 December 2017, John Gillam was appointed as a non-
executive director.
There were no other changes to the board in the year ended 31 March
2018.
Table 1: Meetings of directors
As announced on 27 March 2018, effective from 31 May 2018 John
Gillam will succeed Jeremy Sutcliffe as Chairman who will retire from
the board on the same date.
The names of directors who held office at 9 May 2018, as well as
details about current directors’ period of appointment, qualifications,
experience, special responsibilities, current directorships and
directorships for the past three years of other listed companies, are
on pages 30 and 31 and forms part of the directors’ report.
The qualifications and experience of the company secretary at 9 May
2018 are as follows:
Debbie Schroeder
BED (HONS), LLB, MAICD, AGIA.
Joined CSR in 2001 and held various roles before being appointed
Company Secretary. Debbie was previously a lawyer at Tress Cocks &
Maddox and Lander & Rogers. Debbie has extensive experience in
corporations law and corporate governance, dispute resolution,
employment law, insurance and competition and consumer law.
Debbie holds a Graduate Diploma in Applied Corporate Governance
and is an associate of the Governance Institute of Australia and the
Australian Institute of Company Directors (AICD).
The number of meetings of the company’s board of directors and each
board committee held during the year ended 31 March 2018, and the
number of meetings attended by each director are detailed in Table 1
below. The directors’ relevant interests in shares in CSR or a related
body corporate as at the date of this report are detailed in the
remuneration report on pages 50 and 52. Other than as disclosed
elsewhere in this report, no director:
has any relevant interest in debentures of, or interests in a
registered scheme made available by, CSR or a related body
corporate;
has any rights or options over shares in, debentures of or interests
in a registered scheme made available by, CSR or a related body
corporate; or
is a party to or entitled to a benefit under any contracts that confer
a right to call for or deliver shares in, debentures of or interests in
a registered scheme made available by, CSR or a related body
corporate.
Year ended
31 March 2018
Jeremy Sutcliffe3,4
John Gillam6
Christine Holman3
Michael Ihlein5
Matthew Quinn4
Penny Winn5
Rob Sindel
CSR Board
Risk & Audit
Committee
Workplace Health, Safety
& Environment Committee
Remuneration &
Human Resources
Committee
Held1
Attended2
Held1
Attended2
Held1
Attended2
Held1
Attended2
10
3
10
10
10
10
10
10
3
10
10
10
10
10
n/a
1
n/a
4
4
4
4
2
1
2
4
3
4
4
n/a
n/a
4
4
n/a
4
4
–
1
4
4
–
4
4
4
1
4
n/a
4
n/a
4
1 Meetings held while a member.
2 Meetings attended.
3 Director is not a member of the Risk & Audit Committee.
4 Director is not a member of the Workplace Health, Safety & Environment Committee.
5 Director is not a member of the Remuneration & Human Resources Committee.
6 Appointed 14 December 2017 and attended the March 2018 Workplace Health, Safety & Environment Committee meeting as part of CSR induction.
Jeremy Sutcliffe
Chairman
Sydney, 9 May 2018
Rob Sindel
Managing Director
Sydney, 9 May 2018
4
1
3
2
4
3
4
33
CSR LIMITED | AUDITOR’S INDEPENDENCE DECLARATION
The Directors
CSR Limited
Triniti 3
39 Delhi Road
North Ryde NSW 2113
9 May 2018
Dear Directors
Deloitte Touche Tohmatsu
A.B.N. 74 490 121 060
Grosvenor Place
225 George Street
Sydney NSW 2000
PO Box N250 Grosvenor Place
Sydney NSW 1220 Australia
DX 10307SSE
Tel: +61 (0) 2 9322 7000
Fax: +61 (0) 2 9322 7001
www.deloitte.com.au
CSR Limited
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the
directors of CSR Limited.
As lead audit partner for the audit of the financial statements of CSR Limited for the financial year ended 31 March 2018, I declare that to the
best of my knowledge and belief, there have been no contraventions of:
(i)
(ii)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
any applicable code of professional conduct in relation to the audit.
Yours sincerely
DELOITTE TOUCHE TOHMATSU
JA Leotta
Partner
Chartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited
34
CSR LIMITED | REMUNERATION REPORT | OVERVIEW
REMUNERATION REPORT
1 Basis of preparation
This remuneration report provides a summary of CSR’s remuneration policy and practices during the past financial year as they apply to CSR
directors and executives.
The remuneration report has been prepared in accordance with the requirements of section 300A of the Corporations Act 2001 and
Corporations Regulation 2M.3.03 and has been audited by CSR’s external auditor.
The report contains an overview which is intended to provide a ‘plain English’ explanation for shareholders of the key management personnel
(KMP) and senior executives’ actual remuneration outcomes for the year ended 31 March 2018 (YEM18) and the remuneration framework.
There are no proposed changes for the financial year ended 31 March 2019 (YEM19).
Consistent with prior years, actual remuneration of executive KMP has been included in the remuneration report in note 4. In the interests of
transparency, year-on-year analysis is also provided on aggregate remuneration for senior executives (as defined in note 2).
Overview
2 Key management personnel (KMP) and senior executives
KMP for the year ended 31 March 2018 are detailed in the table below. KMP are as defined by the Accounting Standard AASB 124 Related
Party Disclosures (AASB 124).
CSR’s KMP are the non-executive directors, the managing director and the chief financial officer. This is consistent with the assessment
performed in prior years.
Table 1: Key management personnel
Name
Non-executive directors (NEDs)
Jeremy Sutcliffe1
John Gillam1
Christine Holman
Michael Ihlein
Matthew Quinn
Penny Winn
Position
Chairman
Director
Director
Director
Director
Director
Term as KMP
Full year
Appointed 14 December 2017
Full year
Full year
Full year
Full year
Executive KMP
Rob Sindel
David Fallu
Managing Director
Chief Financial Officer
Full year
Full year
1 As announced on 27 March 2018, effective from 31 May 2018 John Gillam will succeed Jeremy Sutcliffe as Chairman who will retire from the board on the same date.
Senior executives of CSR are detailed in the table below. These senior executives are not KMP as defined by AASB 124. In some cases, where
aspects of remuneration apply to other senior roles within CSR, the term ‘executive’ is also used.
Table 2: Senior executives
Name
Ian Hardiman
Peter Moeller
Luke Murphy
Andrew Mackenzie
Nick Pezet
Andrea Pidcock
Anthony Tannous
Mark White
Position
Term as senior executive
Executive General Manager – New Business, Innovation
and Technology
Executive General Manager – Viridian
Executive General Manager – Human Resources
General Manager – Property
Executive General Manager – PGH Bricks
Executive General Manager – Lightweight Systems
Executive General Manager – Bradford
General Manager – Aluminium
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Full year
35
CSR LIMITED | REMUNERATION REPORT | OVERVIEW
3 Overview of remuneration approach and framework
CSR’s remuneration framework is based on the principles that remuneration is performance driven, aligns with shareholder interests and
provides market competitive remuneration opportunities. The key features of CSR’s executive remuneration and non-executive director fee
frameworks are outlined below, with further details provided in the body of the report.
Table 3: CSR executive remuneration framework
Feature
Explanation
Market
positioning
Fixed and
variable pay
mix
Short term
incentive
(STI) plan
Long term
incentive
(LTI) plan
Fixed remuneration is positioned at the market median against the Korn Ferry Hay Group industrial and services database
for roles of comparative size, or relative to their counterparts in related industries.
Variable remuneration provides executives the opportunity to earn upper quartile total remuneration for stretch
performance.
Total remuneration is comprised of fixed plus variable (or ‘at risk’) remuneration.
A significant proportion of the total remuneration opportunity for senior executives is variable and ‘at risk’ based on
performance.
The STI plan provides rewards to executives for achievement of business financial performance metrics (60% weighting),
individual performance goals (20% weighting), and customer objectives (20% weighting).
In addition, 20% of the total STI earned by executive KMP and senior executives is deferred into shares.
The Performance Rights Plan (PRP) provides CSR executives with grants of performance rights that vest based on:
- CSR’s three year total shareholder return (TSR) relative to the TSR of other S&P/ASX 200 index constituents (the peer
group);
- CSR’s compound annual growth in earnings per share (EPS) over three years; and
- The board’s assessment of achieving set strategic objectives in the areas of Growth, Portfolio and Digital objectives at
the end of the three year performance period (YEM17 PRP award only).
Any performance rights which vest will be converted automatically into shares.
Holders of performance rights are not entitled to dividends until the rights have vested and converted into shares.
Table 4: Non-executive director fees framework
Feature
Explanation
Market
comparison
Non-executive directors are paid a base fee for service to the board and an additional fee for service to the board
committees.
The fees are set with consideration to the fees paid in companies of a similar size and complexity.
Fee pool
The fee pool is currently $1,450,000 per annum including superannuation.
4
Actual remuneration
Actual remuneration disclosure has been prepared to provide shareholders with a view of the remuneration structure and how remuneration was
paid to the executive KMP for the year ended 31 March 2018. The board believes presenting information in this way provides shareholders with
increased clarity and transparency of the executive KMP remuneration, clearly showing the amounts awarded for each remuneration component
(fixed, short and long term) within the financial year. This disclosure differs from the statutory remuneration disclosures contained in note 12,
with a summary of the differences detailed in the table below.
Table 5: Comparison of actual and statutory remuneration disclosures
Fixed remuneration Short term
incentive
Long term incentive
Leave
accruals
Other
benefits
Actual
remuneration
disclosures
Cash salary,
superannuation
contributions and
other eligible salary
sacrifice benefits
STI award for
YEM18, inclusive
of the 20% STI
deferral, expressed
as a cash value
Value of LTIs that have vested
during the year, calculated based on
the number of shares valued using
the five day volume weighted
average price (VWAP) prior to issue
of the shares. Excludes the value of
unvested LTIs at 31 March 2018
Statutory
remuneration
disclosures
As above
STI award for
YEM18, exclusive
of STI deferral, plus
amortisation of STI
deferrals relating
to current year and
prior two years
Value of LTIs recorded in
accordance with accounting
standards (based on fair value
determined at grant date expensed
over the vesting period). The amount
relates to YEM15 to YEM18 LTI
grants
Not
included
Included
Includes Universal Share
Ownership Plan (USOP),
and other costs relating to
company business or
contractual obligations,
where the benefit has
been received
As above, except where
PRPs are granted as part
of contractual obligations.
These are expensed over
the vesting period
36
CSR LIMITED | REMUNERATION REPORT | OVERVIEW
4
Actual remuneration (continued)
Actual remuneration received by executive KMP is set out in the table below. The remuneration disclosure is prepared on the basis summarised
in table 5. No termination benefits were paid to executive KMP during the year.
Table 6: Actual remuneration received by executive KMP
Year ended 31 March 2018
$
Fixed
remuneration
Rob Sindel
David Fallu
Total
1,248,185
559,281
1,807,466
Short term
incentive1
905,673
301,433
1,207,106
Long term
incentive
1,635,336
201,670
1,837,006
Other
benefits2
4,115
–
4,115
Total
3,793,309
1,062,384
4,855,693
1 The STI award represented 103% of Mr Sindel’s target STI opportunity and 107% of Mr Fallu’s target STI opportunity for YEM18.
2 Other benefits included travel expenditure for Mr Sindel’s spouse, all of which related directly to company business.
Given the flat organisation structure of the company and following a review of senior executives against the criteria for determining executive
KMP, only the managing director and chief financial officer qualify as executive KMP. The year-on-year change in total actual remuneration for
senior executives is summarised in the table below and is prepared on the basis outlined in Table 5. The analysis excludes the executive KMP,
Mr Sindel and Mr Fallu. The year-on-year decrease in total remuneration for senior executives was driven predominantly by a decrease in the
value of LTI that vested in YEM18 compared to YEM17 due to a lower number of rights vesting. No termination benefits were paid to senior
executives during the year.
Table 7: Senior executive remuneration
Year ended
31 March
$
Fixed
remuneration
Annualised
average fixed
remuneration1
Underlying
increase in
fixed
remuneration2
Short term
incentive
Long term
incentive
Other
benefits3
Total
Change in
total
2018
2017
4,042,921
505,365
2.25%
2,204,738
1,808,054
34,268
8,089,981
(0.4%)
3,751,680
494,368
2,023,598
2,207,355
137,980
8,120,613
1 Annualised average fixed remuneration per senior executive.
2
In YEM18 there is an additional senior executive for the whole of the year, following the appointment of an Executive General Manager - New Business, Innovation and
Technology part way through YEM17. As a result, given the additional executive included the actual change in aggregate fixed remuneration is 7.8%.
3 Other benefits include USOP, travel expenditure and relocation costs, related to company business or contractual obligations. In addition, for YEM17 other benefits included
amounts paid to the Executive General Manager – Lightweight Systems to ensure no undue disadvantage upon resignation from previous employment.
5
Performance outcomes
Table 8: Summary of performance outcomes for the year ended 31 March 2018
Remuneration
Performance outcome
Total
remuneration
Total remuneration expense decreased for executive KMP and decreased for senior executives from YEM17 to YEM18
primarily due to a decrease in the value of LTI’s that vested in YEM18 compared to YEM17.
Short term
incentive (STI)
YEM18 STI increased compared to YEM17 due to the changes in both executive KMP and senior executives.
YEM18 CSR group EBIT result was moderately above target.
Long term
incentive (LTI)
The value of LTI that vested in YEM18 decreased compared to YEM17 due to a lower number of rights vesting.
In YEM18, EPS and TSR performance hurdles for the YEM15 PRP were met resulting in a full vesting of the EPS grant
and partial vesting of the TSR grant. Further detail is contained in note 9.
37
CSR LIMITED | REMUNERATION REPORT | OVERVIEW
6 Remuneration framework changes
The board continually reviews the design of the remuneration framework to ensure the design is ‘fit for purpose’. This means the remuneration
framework supports the overall business strategy, is aligned with shareholder interests, is competitive with market practices and is simple for
both participants and shareholders to understand. The board has reviewed both the STI and LTI plans with changes outlined below.
Changes impacting YEM18 remuneration
As outlined in the YEM17 remuneration report, the following amendments have been made in relation to the LTI and STI plans for YEM18:
Table 9: Changes to hurdles and weightings of the LTI plan for YEM18
Performance
hurdle
YEM18 YEM17 Detailed explanation
Relative TSR
50%
30%
This measure is consistent with market practice and aligns with shareholder interests. The S&P/ASX
200 will continue to be used as the comparator group given that CSR sits within this index.
EPS
50%
40%
EPS will continue to be measured on an averaged basis over the three year performance period
rather than point to point. The board believes this better addresses the cyclicality of the business and
incentivises participants to improve performance year on year by removing the current exposure
solely to the final year of the performance period.
The board will assess average EPS over the three year performance period and this result will then be
compared against the hurdles set by the board. The EPS performance hurdles will be set at 5% to
10% compound growth for target and stretch performance respectively.
Strategic
objectives
0%
30%
Objectives were included in the YEM17 grant and in the absence of materially different strategic
objectives it was determined that the grants would revert to the well-established performance
hurdles of relative TSR and average EPS equally weighted at 50% of grant value.
Changes to the STI plan for YEM18
Consistent with the group strategy to drive a customer centric organisation, all executive KMP and senior executives will have a customer related
objective with a weighting of 20% at target performance. This customer objective will form part of the individual component of the STI with the
financial component of the STI remaining unchanged.
In recognition of the growth of the business and the hedging in place for Aluminium in YEM18, the threshold target for the YEM18 STI plan was
increased from 90% to 95% and the stretch target was reduced from 120% to 110%.
38
CSR LIMITED | REMUNERATION REPORT | REMUNERATION POLICY
Remuneration Policy
7 Remuneration governance
CSR’s remuneration governance framework is set out below. Whilst the board retains ultimate responsibility, CSR’s remuneration policy is
implemented through the Remuneration & Human Resources Committee. The composition and functions of the Remuneration & Human
Resources Committee, which oversees remuneration issues and human resources matters, are set out in the charter available from the CSR
website. The charter was reviewed and updated during the year.
Figure 1: CSR’s remuneration governance framework
CSR Board
Overall responsibility for the remuneration strategy and outcomes for executives and non-executive directors.
Reviews and, as appropriate, approves recommendations from the CSR Remuneration & Human Resources Committee.
Remuneration & Human Resources Committee
Management and Board remuneration policy
Human Resources, Talent Management and Diversity
Monitors, recommends and reports to the board on:
Alignment of remuneration incentive policies and guidelines
for executive managers and senior employees with long-term
growth and shareholder value.
Superannuation arrangements.
Employee share plans.
Recruitment, retention and termination policies and
procedures for senior management.
Board remuneration including the terms and conditions of
appointment and retirement, non-executive remuneration
within aggregate approved by shareholders.
Overseeing induction of new non-executive directors and
evaluation of board performance.
Monitors, recommends and reports to the board on:
The adequacy of talent pools for senior management
succession.
The effectiveness of CSR's diversity policies and initiatives,
including an annual assessment of performance against
measurable objectives and the relative proportion of women
at all levels.
Management development frameworks and individual
development progress for key talent.
Monitoring surveys conducted by the company in relation to
the culture of the organisation.
Initiatives to improve and drive a strong performance culture.
Assessing performance against CSR's compliance with
The remuneration of the managing director and senior
external reporting requirements.
executives.
Managing Director and Executive General Manager –
Human Resources
Provides information to the Remuneration & Human Resources
Committee for the Committee to recommend on:
Incentive targets and outcomes.
Remuneration policy.
Long and short term incentive participation.
Individual remuneration and contractual arrangements for
executives.
External advisors
Provide independent advice, information and
recommendations relevant to remuneration decisions.
Throughout the year, the Remuneration & Human Resources
Committee and management received information from
external providers Ernst & Young, Korn Ferry Hay Group,
Herbert Smith Freehills and Mercer Consulting (Australia) Pty
Ltd related to remuneration market data and analysis,
market practice on the structure and design of incentive
programs (both long term and short term), performance
testing of existing long term incentives and legislative and
regulatory requirements.
There were no remuneration recommendations received
from external providers during the year.
39
CSR LIMITED | REMUNERATION REPORT | REMUNERATION POLICY
8 Remuneration strategy
The core elements of CSR’s remuneration strategy for the executive KMP and senior executives are outlined below.
Figure 2: CSR’s remuneration strategy and structure
Performance driven
Alignment with shareholder interests
Market competitive remuneration
opportunities
Total target executive remuneration
Fixed
At risk
Fixed remuneration
Short term incentive
Long term incentive
Fixed remuneration is targeted at the
median of the market for jobs of
comparable size and responsibility
CSR’s executives participate in an STI
plan. The STI plan is weighted 60% to
financial metrics, 20% to individual
performance metrics and 20% to
customer objectives
LTIs are provided through the
Performance Rights Plan and are linked
to:
Relative total shareholder return
Compounded annual growth in CSR’s
EPS or average compound growth in
CSR’s EPS
Delivery of strategic objectives
Refer to table 12 for further details
Base salary
Superannuation
Other eligible salary sacrifice benefits
80% cash and 20% equity
Equity is deferred for two years
Deferred equity remains at risk until
Equity with performance assessed
over three years or three to four years
vesting
The key principles on which CSR’s executive remuneration policy is based are outlined below.
Table 10: Key principles of CSR’s executive remuneration policy
Objective
Explanation
Performance driven Remuneration should reward executives based on annual performance against business plans and longer term
shareholder returns. The variable components of remuneration (both short term and long term) are driven by
challenging targets focused on both external and internal measures of financial and non-financial performance.
A significant proportion of executive remuneration is ‘at risk’. The following remuneration mix chart sets out the
remuneration mix as fixed remuneration, target STI and the maximum value of the LTI granted during the year for the
executive KMP.
Chief financial officer
Managing director
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Fixed
STI
LTI
Market competitive
remuneration
opportunities
Remuneration opportunities, including those elements which can be earned subject to performance, are set at
competitive levels that will attract, motivate and retain high quality executives.
Executive remuneration is reviewed annually. CSR aims to provide market-competitive remuneration against jobs of
comparable size and responsibility (as measured by the Korn Ferry Hay Group job evaluation system and by position
matching against equivalent roles from organisations with similar market capitalisation) as follows:
fixed remuneration for executives is targeted at market median; and
variable remuneration (through STI and LTI) provides the opportunity to earn total remuneration (fixed remuneration
plus variable remuneration) that reaches the top quartile of the market for superior performance.
40
CSR LIMITED | REMUNERATION REPORT | REMUNERATION POLICY
8 Remuneration strategy (continued)
Table 10: Key principles of CSR’s executive remuneration policy (continued)
Objective
Explanation
Alignment with
shareholder
interests
Executives’ remuneration is aligned with shareholder interests through a significant emphasis on variable
remuneration. Incentive plans and performance measures are aligned with CSR’s short and long-term success.
Ownership of CSR shares is encouraged through the use of equity as the vehicle for the LTI plan, the STI deferral plan
for executive KMP and senior executives, the Universal Share Ownership Plan (USOP) where CSR matches either
$500 or $1,000 of CSR shares purchased after tax by eligible employees and the ability to forgo part of fixed
remuneration to acquire shares up to a maximum value of $5,000 annually through the Employee Share Acquisition
Plan (ESAP).
Executive KMP and senior executives are required to hold, or make progress towards holding, a minimum CSR
shareholding equivalent to 50% of their fixed annual remuneration.
9 Composition of remuneration
The components of the fixed and variable or ‘at risk’ remuneration (STI and LTI) are detailed below.
(i)
Fixed remuneration
Fixed remuneration comprises base salary, superannuation and other eligible salary sacrifice benefits. As discussed above, fixed remuneration is
targeted at the median of the market for jobs of comparable size and responsibility. In some cases, superior performance or strong market
demand for specific job categories may justify above-median fixed remuneration.
Fixed remuneration is reviewed annually or on promotion. There are no guaranteed increases included in any executives’ contracts. Employees
are able to forgo part of their fixed remuneration to acquire CSR shares under the Employee Share Acquisition Plan (ESAP), discussed in note
9(iv), up to a maximum salary sacrifice of $5,000 annually or for other eligible salary sacrifice benefits.
(ii)
At risk remuneration – short term incentive plan
Table 11: Details of the short term incentive plan
Purpose
To drive individual and team performance to deliver annual business plans and increase shareholder value.
Frequency and
timing
Awards are determined on an annual basis with performance measured over the year to 31 March and payment
being made in July.
Financial
measures
The quantum of the STI pool is determined by EBIT before significant items, which assesses the amount of pre-tax
profit generated by the business. The STI plan is weighted 60% to EBIT financial metrics. Financial performance for
YEM18 STI awards was measured against EBIT that was assigned at the organisational level that best reflects the
role’s influence. All executives and eligible employees had 50% of their financial component aligned to the CSR
financial result (EBIT) with the remaining 50% of the financial component aligned with the financial performance
(EBIT) of the business unit which best reflects the role’s influence. Hence, the measures used in the YEM18 STI plan
are:
corporate roles: CSR EBIT before significant items (100%*); and
business unit executive roles: business unit EBIT before significant items (50%*) and CSR EBIT before significant
items (50%*).
* Expressed as a percentage of the STI financial component. STI financial component typically comprises 60% of target STI.
Return on Funds Employed (ROFE) is also assessed by the board to ensure that the effectiveness with which capital is
deployed within the business is measured and rewarded.
The financial targets are set each year by the managing director, in consultation with the business unit executives and
are approved by the board. The managing director’s targets are set each year by the board.
In recognition of the growth of the business and the hedging in place for Aluminium in YEM18, the threshold financial
performance was increased from 90% to 95% of the budget approved by the board, below which no financial
component can be paid. Target financial performance equates to the approved budget while stretch performance was
reduced from 120% to 110% of the approved budget. These parameters apply at both the CSR and business unit
level.
Individual
objectives used
(and rationale)
The STI plan is weighted 20% to individual objectives that are set for each participant and are aligned to the business
plan. These objectives include safety, health and environment, meeting customer needs and becoming supplier of
choice, leadership and development of people, sales targets, operational improvement, restructuring and
rationalisation plans, production targets, growth and other personally attributable goals.
Customer objectives The STI plan is weighted 20% to customer objectives. Customer objectives are set at a group level and business unit
level. The objectives are focussed on driving improvements in the customer experience through the use of real time
data on the order and delivery experience, adoption of our digital platform CSR Connect, building capability in
customer facing staff and improving use of data to drive customer insights and value.
41
CSR LIMITED | REMUNERATION REPORT | REMUNERATION POLICY
9 Composition of remuneration (continued)
Table 11: Details of the short term incentive plan (continued)
Assessment of
performance
against measures
Board discretion
Service condition
Equity deferral
At the end of the CSR financial year, each participant’s performance is assessed based on financial results for CSR and
the relevant businesses. A review by the executive’s manager is undertaken to determine performance against the
relevant individual objectives for each executive.
The Remuneration & Human Resources Committee approves KMP and senior executive STIs and the overall STI pool in
aggregate. STI assessments and recommendations are made by an executive’s immediate manager, as he or she is
best placed to assess the individual’s performance. All recommendations are reviewed and approved by the business
unit general manager, the human resources executive general manager and the managing director.
Payment for the individual component is normally dependent on the business financial result. Should either CSR or the
applicable business unit fail to reach threshold EBIT performance set by the board, then only 50% of the individual
component will be eligible for payment. Should both CSR and the applicable business unit not reach the EBIT threshold
set, then any payment for the individual component will be at the discretion of the board.
The payout, based on performance, is between a minimum of 0% and a maximum of 200% of target.
The intention is to minimise discretionary adjustments to the plan outcomes. However, the board and the managing
director retain discretion in certain circumstances to alter payments having regard to:
CSR’s overall financial performance;
any significant changes in AUD price for aluminium compared with the prices assumed in the budget;
occurrence of a fatality, regardless of fault;
maintenance and preservation of the company’s assets;
development and attention to customer relationships;
any short term action which causes market share loss or other damage to CSR; and
other special circumstances (e.g. acquisitions and divestments).
New starters with CSR or people promoted into eligible roles can participate in the STI with pro rata entitlements if they
have been in the role for more than three months of the relevant financial year.
For staff who retire, die or are retrenched during the performance period, the managing director and the board have
discretion in awarding a payment. No payment will be made to participants who cease employment voluntarily, or have
their employment terminated for inadequate performance or for cause, before the end of the performance year.
Under the STI deferral plan, 20% of any STI earned by executive KMP and senior executives is delivered in CSR shares.
These shares must be held in trust subject to trading restrictions and have a continued service requirement for a
minimum of two years. During this restriction period, the shares are subject to forfeiture if the executive resigns or is
terminated for cause. No further performance conditions will apply and shares will fully vest to the executive at the end
of the restriction period if the continued service requirement is met.
As the shares are awarded in lieu of a full cash STI payment and relate to an incentive that has already been earned,
the board has determined that during the restriction period, executives are entitled to all dividend and voting
entitlements applying to the shares held in trust in their name.
An important feature of the STI deferral plan rules is the clawback provisions which can allow the board to withhold
some or all of the deferred equity in the event of fraud, financial errors, misstatements or misrepresentations.
42
CSR LIMITED | REMUNERATION REPORT | REMUNERATION POLICY
9 Composition of remuneration (continued)
(iii) At risk remuneration – long term incentive plan
CSR’s LTI program aims to:
drive performance and deliver strategic objectives that create long-term shareholder value;
provide executives with the opportunity to build their interests in CSR equity; and
attract, motivate and retain the necessary executive talent to deliver and sustain business performance and increase returns to shareholders.
All securities referred to in this report are granted by CSR Limited.
Table 12: Features of the long term incentive plan – summary of the PRP
Participation
Managing director, direct reports and selected key roles are eligible subject to approval by the board.
Grant frequency
Grants are made on an annual basis.
Type of award
Grants of performance rights are subject to service requirements and performance vesting criteria. If performance
conditions are met, CSR shares will be purchased on market and transferred to participants. Refer to ‘Performance
period and conditions’ below for more detail.
Vesting and
performance
period
How is
performance
assessed
and why is
it assessed
that way?
Performance
period
and conditions
YEM16 to YEM18 PRP: Awards are subject to a three year vesting period. Immediately following completion of the vesting
period, the performance conditions (detailed below) are tested to determine whether, and to what extent, awards vest.
To the extent that performance rights have not vested following the testing, they will lapse (i.e. participants forfeit their
interests in the performance rights).
YEM14 to YEM15 PRP: Awards are subject to a three year vesting period. If some or all of the awards do not vest at the
initial three year test date, they are carried forward and the performance period is extended by 12 months and retested
over a four year performance period to determine if any additional vesting is achieved. Performance for both tranches is
measured over this extended period to try and mitigate any distortion caused by business and commodity cycles or
capital investment decisions. To the extent that performance rights do not vest as part of the retest, they will lapse.
TSR performance compared to the constituents of the S&P/ASX 200 index is considered appropriate given CSR’s
size and mix of businesses.
EPS performance hurdles were implemented in YEM12. Compound growth in EPS assesses the success of the business
in generating continued growth in earnings and aligns the effort of executive KMP and senior executives with shareholder
interests.
The weighting of PRP grants allocated to each performance hurdle is illustrated below.
Year of grant
YEM18
YEM17
YEM14 - 16
Weighting of grant
Relative TSR
(Tranche A)
EPS
(Tranche B)
Strategic objectives
(Tranche C)
50%
30%
50%
50%
40%
50%
-
30%
-
Relative TSR (Tranche A)
TSR measures the percentage growth in shareholder value, taking into account share price growth, dividends and
capital returns.
TSR performance is assessed against the constituents of the S&P/ASX 200 index defined at the start of the
performance period with the following vesting schedule applying:
TSR of CSR relative to the peer group
Proportion of Tranche A to vest
Below the 50th percentile
At the 50th percentile
0%
50%
Between the 50th percentile and the 75th percentile
Straight-line vesting between 50% and 100% (e.g. each
percentile improvement will result in an additional 2% vesting)
75th percentile or greater
100%
For the purposes of the TSR calculation, the start and end share prices will be calculated based on 10 trading days
VWAP.
43
CSR LIMITED | REMUNERATION REPORT | REMUNERATION POLICY
9 Composition of remuneration (continued)
Table 12: Features of the long term incentive plan – summary of the PRP (continued)
Performance
period
and conditions
EPS (Tranche B)
EPS is defined as net profit after tax per share before significant items. The board may adjust EPS to exclude the
effects of material business acquisitions or divestments and for certain one-off costs.
For the YEM17-18 PRP grants:
EPS is measured on an averaged basis over the three year performance period rather than point to point.
The EPS performance hurdles have been set at 5% to 10% compound growth for target and stretch performance
respectively.
Target performance is calculated by taking the total EPS from the performance period using actual EPS of the base
year and compounding 5% per annum for three years, and dividing the result by three. Stretch performance is
calculated by taking the total EPS from the performance period using actual EPS of the base year and compounding
10% per annum for three years and dividing the result by three.
The performance hurdles for the YEM18 PRP grant are illustrated below.
EPS performance
hurdle
Target
Stretch
Average EPS
growth
(% CAGR)
5.0%
10.0%
Cumulative EPS
required over
next three years
(cps)
Average EPS
required over
next three years
(cps)
120.8
132.9
40.3
44.3
YEM17
EPS (cps)
36.5
36.5
The performance hurdles for the YEM17 PRP grant are illustrated below.
EPS performance
hurdle
Target
Stretch
Average EPS
growth
(% CAGR)
5.0%
10.0%
Cumulative EPS
required over
next three years
(cps)
Average EPS
required over
next three years
(cps)
108.9
119.8
36.3
39.9
YEM16
EPS (cps)
32.9
32.9
Average EPS growth (% CAGR) between 5% and 10% will result in vesting between 50% and 100% increasing on a
straight-line basis.
For the YEM14-16 PRP grants:
The annual compound EPS growth over the period from commencement of the performance period to the test date.
The board sets a threshold vesting schedule of 7% compound growth in EPS per year, with the following vesting
schedule applying:
EPS target range (compound growth per annum)
Proportion of Tranche B to vest
Below 7% compound EPS
Equal to 7% compound EPS
0%
50%
Between 7% and 12% compound EPS
Between 50% and 100% increasing on a straight-line basis
Greater than 12% compound EPS
100%
Strategic objectives (Tranche C) – YEM17 PRP grant only
There are three objectives and each objective is equally weighted with 5% to 10% of the overall grant being allocated for
target and stretch performance respectively. The objectives as set by the board are:
Growth: A specific EBIT growth objective to be derived from new products and services beyond ‘business as usual’.
Portfolio: To increase CSR’s exposure to its core building materials businesses through strategic acquisitions and to
reduce exposure to non-core businesses through divestments. The board will have regard to profit and Return on
Funds Employed (ROFE) when assessing the contribution from any acquisitions.
Digital: Further development and execution of CSR’s digital strategy that will drive significant change in customer
engagement, improved efficiencies and superior commercial outcomes.
There is no entitlement to a capital return. However, the board may make an adjustment to the number of shares
underlying unvested performance rights that would be awarded to the participant if and when the performance rights
vested. The number of additional shares underlying the performance rights corresponds to the cash amount per share
returned to shareholders, and is intended to ensure that the value of awards of PRP holders is not eroded by capital
returns. Capital returns are included as part of TSR performance.
For all PRP grants, rights are eligible for one CSR share per one performance right on vesting.
Treatment of
capital
return
Treatment on
vesting
44
CSR LIMITED | REMUNERATION REPORT | REMUNERATION POLICY
9 Composition of remuneration (continued)
Table 12: Features of the long term incentive plan – summary of the PRP (continued)
Sales restrictions
post vesting
Treatment of
dividends
Treatment on
cessation of
employment
Shares transferred to participants on the vesting of performance rights are subject to the CSR share trading policy.
There is no entitlement to dividends on performance rights under the plan during the vesting period.
Unvested awards: Generally, a participant who ceases to be employed prior to the performance conditions being met will
forfeit their interest in the unvested shares. However, if the cessation of employment is the result of retirement,
redundancy, total or permanent disablement, death or any other special circumstances at the board’s discretion, board
policy is to retain awards in the plan subject to ongoing performance hurdles following cessation of employment, i.e.
awards remain ‘on foot’. In exercising this discretion, the board would not generally accelerate vesting and would apply
pro rata assessments for plans on foot.
Vested awards: Awards that have vested are transferred to participants immediately at the time of vesting.
Treatment on
change of control
Unvested awards: The board has discretion to allow awards to vest on a change of control of CSR (e.g. a takeover or
merger). In exercising this discretion, the board would generally apply pro rata assessments for plans on foot.
Vested awards: Awards that have vested are transferred to participants at the time of vesting.
Prohibition of
hedging
arrangements
Participants will forfeit their interests in unvested shares if they enter into any hedging transaction in relation to those
shares in breach of CSR’s Share Trading Policy.
At 31 March 2018, executive KMP confirmed in writing their beneficial interest in CSR shares, including confirming that
they had not entered into any hedging arrangements over vested or unvested CSR shares.
Table 13: Status and key dates of PRP awards
Grant
date
Valuation
per right1
Holding
period
Performance testing
windows
23 July 2013
(YEM14)
Tranche A (TSR) $1.23
Tranche B (EPS) $1.82
23 July 2013 to
22 July 2016
23 July 2014
(YEM15)
Tranche A (TSR) $2.24
Tranche B (EPS) $3.26
23 July 2014 to
22 July 2017
24 July 2015
(YEM16)
Tranche A (TSR) $1.69
Tranche B (EPS) $3.05
24 July 2015 to
31 March 2018
26 July 2016
(YEM17)
Tranche A (TSR) $2.42
Tranche B (EPS) $3.40
Tranche C (Strategic
objectives) $3.40
26 July 2016 to
31 March 2019
25 July 2017
(YEM18)
Tranche A (TSR) $1.76
Tranche B (EPS) $3.37
25 July 2017 to
31 March 2020
23 July 2016 to
22 July 2017
(Tranche A)
1 April 2016 to
31 March 2017
(Tranche B)
23 July 2017 to
22 July 2018
(Tranche A)
1 April 2017 to
31 March 2018
(Tranche B)
1 April 2015 to
31 March 2018
(Tranche A and B)
1 April 2016 to
31 March 2019
(Tranche A, B and C)
1 April 2017 to
31 March 2020
(Tranche A and B)
Expiry date
(if hurdle
not met)
Performance
status2
23 July 2017 Tranche A (TSR): Performance
condition met at 85th percentile in July
2016, resulting in maximum (100%)
vesting of the allocation grant.
Tranche B (EPS): 12% compound
growth performance condition met
with maximum (100%) vesting of the
allocation grant.
23 July 2018 Tranche A (TSR): Performance
condition met at 57th percentile in July
2017, resulting in 64.8% vesting of the
allocation grant. Final test due in July
2018.
Tranche B (EPS): 12% compound
growth performance condition met
with maximum (100%) vesting of the
allocation grant.
1 April 2018
Performance testing in progress3.
1 April 2019
Performance testing window not yet
commenced.
1 April 2020
Performance testing window not yet
commenced.
1 The value of performance rights at grant date calculated in accordance with AASB 2 Share-based Payments. Valuations are performed by a third party, Ernst & Young.
2 To ensure an independent TSR measurement, CSR engages the services of an external organisation, Mercer Consulting (Australia) Pty Ltd, to calculate CSR’s performance
against the TSR hurdles.
3 Subsequent to 31 March 2018 and up to the date of this report:
Tranche A (TSR) for YEM16 was deemed by the board to have met the performance condition at the 78th percentile resulting in 100% vesting of the allocation grant and
452,013 rights vesting. The value of these shares has not yet been determined and will be disclosed in the YEM19 remuneration report.
Tranche B (EPS) for YEM16 was deemed by the board to have met the 12% compound growth performance condition required for maximum 100% vesting resulting in
452,004 rights vesting. The value of these shares has not yet been determined and will be disclosed in the YEM19 remuneration report.
45
CSR LIMITED | REMUNERATION REPORT | REMUNERATION POLICY
9 Composition of remuneration (continued)
(iv) Other equity incentive plans
Table 14: Other equity incentive plans
Purpose
Participation
Form and quantum
of award
Universal Share Ownership Plan (USOP)
Employee Share Acquisition Plan (ESAP)
To encourage share ownership by enabling executives and employees to benefit from favourable Australian
tax treatment.
All executives and employees (except executive directors),
who have the equivalent of at least one year’s full-time
service at the date the shares are allotted.
Selected employees and directors within Australia.
Each year, the board approves the purchase of shares up
to a maximum value of $1,000 (being the limit of the tax
exemption) for each eligible participant. The award is
structured such that participants buy shares which are
then matched one for one by the company at
no additional cost to participants.
Directors and employees can forgo up to $5,000 of their
cash remuneration annually to acquire shares in the
company. The shares are purchased on market by the
CSR Share Plan trustee, who acts on instructions given in
accordance with the plan rules and the company’s Share
Trading Policy.
Vesting period
Shares vest immediately upon acquisition by participants.
The shares can only be sold three years after the date
of grant, unless the participant’s employment ceases
before then.
The shares are held in trust while the participant is
employed by CSR, unless board approval is granted to sell
or transfer shares under specific circumstances (e.g.
financial hardship). Under current Australian tax law, the
maximum period of income tax deferral on the shares
purchased is 15 years.
Absence of a
performance
condition
The plans are designed to encourage share ownership for employees and therefore do not have any performance
conditions attached.
Dividends and
voting rights
Participants are entitled to dividends and other
distributions and have full voting rights.
Participants are entitled to dividends and other
distributions and have full voting rights while the shares
are held in trust.
10 Linking remuneration to performance
A key underlying principle of CSR’s executive remuneration strategy is the link between company performance and executive reward.
(i)
STI and LTI financial measures
STI payments are based on a variety of performance metrics, both financial and non-financial.
The key financial measure in YEM18 for determining the value of STI payments was EBIT before significant items (while ROFE was maintained as
a qualifying metric). Significant items (both positive and negative) are generally excluded when measuring performance for STIs as they are not
considered part of ordinary trading results. Each year an assessment is undertaken by the board to determine whether any of these significant
items are included for the purpose of assessing STIs.
Building on the improved financial performance in YEM17, the YEM18 EBIT (before significant items) performance of CSR’s businesses
improved, increasing by 8.7% to $323.8 million.
The improvements in financial performance and specifically EBIT results moderately exceeded the EBIT target for STIs set by the board. Building
Products made strong improvements in EBIT performance, reflecting a continued focus on customer service, cost control and business growth.
Aluminium EBIT decreased with the higher realised aluminium price and increased production being offset by the significant increase in energy
and raw material costs.
Property EBIT increased following the Rosehill, NSW land sale and settlements from Stages 4 and 5 of Chirnside Park. There was a two-week
delay to some settlements of Chirnside Park and these settlements were substantially completed in April 2018. The long-term development of
the property portfolio continues to perform in-line with the boards’ expectations.
Viridian EBIT was down due to operational issues, lower volumes and exposure to higher energy costs.
LTIs have been linked to company performance as follows:
the value of performance rights (under the PRP) ultimately depends on share price performance; and
awards vest subject to CSR’s relative TSR performance compared against the constituents of the S&P/ASX 200 index and EPS growth. In
addition, the YEM17 PRP award also includes performance against specific strategic objectives in the areas of growth, portfolio and digital.
CSR’s TSR improved significantly against that of the S&P/ASX 200 index, resulting in partial vesting of the YEM15 PRPs. Subsequent to 31
March 2018 but prior to the date of this report, the board determined that the TSR tranche and the EPS tranche of the YEM16 PRP met the
performance conditions required, resulting in all of the rights vesting.
46
CSR LIMITED | REMUNERATION REPORT | REMUNERATION POLICY
10 Linking remuneration to performance (continued)
The following table summarises the clear link between company performance and incentives awarded to executive KMP, senior executives and
other eligible employees:
Table 15: Summary of financial performance and STIs and LTIs awarded
Financial performance7,8
STI
LTI
EBIT
($ million)1
TSR
(%)2
EPS
(cents)1
ROFE
(%)3
Share
price ($)4
YEM18
323.8
25.3
42.3
23.2
YEM17
298.0
45.7
36.5
21.6
YEM16
276.8
(10.9)
32.9
20.7
YEM15
235.4
17.3
29.1
18.4
YEM14
125.7
74.6
16.0
9.9
5.18
4.51
3.30
4.03
3.51
Executive
KMP
($ million)
Senior
executives
($ million)
1.25
2.25
0.9
1.2
1.5
1.3
2.0
2.2
2.6
1.7
All eligible
employees
STI as a %
of EBIT
Vested value
– Executive
KMP
($ million)6
Vested value
– Senior
executives
($ million)6
5.3%
5.5%
6.7%
9.0%
10.7%
1.8
2.8
3.6
1.7
–
1.8
2.2
3.4
1.2
–
1 EBIT and EPS are calculated before significant items.
2 TSR at 31 March sourced from Bloomberg. Relative TSR performance is disclosed in Table 13 along with the LTI vesting outcomes.
3 Return on Funds Employed (ROFE) defined in note 2 to the CSR group financial statements.
4 Closing share price at 31 March.
5 Represents approved and expensed STI for YEM18 but at the time of writing this report, this amount has not yet been paid.
6 Represents the value of PRPs vesting in the period, calculated based on the number of shares issued, valued using the five day VWAP prior to issue.
7 Dividends paid for the last five years are disclosed on page 3.
8 During the year, 172,631 shares were bought back on-market as part of CSR’s ongoing capital management strategy. There has been no impact on remuneration. Further
information is disclosed in note 15 to the CSR group financial statements.
(ii)
STI non-financial measures
For YEM18, payments approved by the board for the non-financial component of the STI averaged across executive KMP and senior executives
were on target. The following table provides some examples of key performance measures used in YEM18 to assess executive performance in
the non-financial component of the STI.
Table 16: Non-financial measures and YEM18 performance
Performance area
Measure
Workplace Health,
Safety (WHS) and
Environment
Performance
On target
Safety initiatives to reduce
risk
Chain of Responsibility system review and operational improvements.
Sub-contractor safety management system improved and implemented.
115 employees completed Safety Leadership Training.
Implemented WHS system to improve efficiency and insights on incidents and
Lost Time Injury Frequency
Rate (LTIFR)
Injury severity
hazards.
LTIFR decreased by 9% from 3.3 to 3.0.
Achieved a 45% improvement as measured by days lost as a result of work-related
injuries.
Leading safety indicators
Achieved 98% against a target of 90% for the Injury Prevention Indicator.
Energy reduction
Greenhouse gas emissions reduced in line with targets.
Four major energy reduction projects were completed or substantially completed
that were funded by CSR’s $20 million Energy Improvement Fund.
People and Culture
Above target
Leadership Development
Culture
Succession
Diversity
Additional 16.5% investment (hours) in CSR leadership programs.
Redesigned Performance Management System and successfully completed pilot.
This will now be rolled out across CSR in YEM19.
Significant progress made driving culture improvement plans. Formal assessment
of culture scheduled biannually and will be completed in February 2019.
Biannual talent and succession reviews completed and actions implemented.
CSR’s female participation in the business remained steady at 18%.
Promotions for women increased from 34% to 41% during the year.
Our measurable objectives are set out in the corporate governance report which is
available on CSR’s website.
47
CSR LIMITED | REMUNERATION REPORT | REMUNERATION POLICY
10 Linking remuneration to performance (continued)
Table 16: Non-financial measures and YEM18 performance (continued)
Performance area Measure
Innovation and
growth
Performance
On target
Product Development
Growth from New
Business or Acquisitions
Each business has targets to develop and introduce new products.
Completed seven Lean start-up initiatives involving 70 employees and generating 20
innovative concepts for future growth.
Launched CSR Inclose and PGH Corium facades businesses.
Customer
On target
Customer Experience
Advanced use of daily customer survey data to drive improvements in order and delivery
experience.
Customer focused culture
and capability
Further investment to build capability of customer facing staff and customer service
teams.
Progressed customer journey mapping by key segment to drive future improvements in
customer experience.
Specific customer objectives are included in the YEM19 STI plan.
Digital and Data Strategy
Further development of our end-to-end digital solution for our customers, including CSR
Connect platform and delivery tracking systems.
Increased use of data to drive insights and improvements for customers.
Remuneration in detail
11 Service agreements
Managing director – Executive service agreement
Rob Sindel was appointed as managing director of CSR effective 1 January 2011. Mr Sindel’s remuneration package is summarised as follows:
Table 17: Managing director’s remuneration package
Fixed
remuneration
Fixed annual remuneration of $1,255,090 inclusive of superannuation contributions effective from 1 July 2017. Fixed
remuneration is reviewed annually, but with no guarantee of an increase.
Notice period Under the Executive’s Service Agreement there is no fixed term and Mr Sindel’s employment can be terminated by:
the company giving him 12 months’ notice of termination; or
Mr Sindel giving six months’ notice of resignation.
STI
LTI
There is no minimum entitlement to an STI payment and the maximum STI opportunity is 100% of fixed annual
remuneration for exceptional performance. Achievement of target performance would result in 70% of the maximum STI
being paid. The STI is weighted 60% on financial performance, 20% on individual performance and 20% on customer
objectives.
Under the STI deferral plan rules, 20% of the STI value will be deferred into CSR shares which vest in two years. Further
detail on the STI deferral plan is contained in Table 11.
The value of any award of performance rights is currently set at a maximum of 120% of fixed annual remuneration. Grants
of performance rights are subject to performance hurdles and vesting criteria set by the board (refer to note 9 for details).
Chief financial officer – Executive service agreement
David Fallu was appointed as chief financial officer effective 2 February 2017. Mr Fallu’s remuneration package is summarised as follows:
Table 18: Chief financial officer’s remuneration package
Fixed
remuneration
Fixed annual remuneration of $562,375 inclusive of superannuation contributions effective from 1 July 2017. Fixed
remuneration is reviewed annually, but with no guarantee of an increase.
Notice period
Under the Executive’s Service Agreement, Mr Fallu’s employment can be terminated by:
the company giving him six months’ notice of termination; or
Mr Fallu giving six months’ notice of resignation.
There is no minimum entitlement to an STI payment and the maximum STI opportunity is 100% of fixed annual
remuneration for exceptional performance. Achievement of target performance would result in 50% of the maximum STI
being paid. The STI is weighted 60% on financial performance and 20% on individual performance and 20% on customer
objectives.
Under the STI deferral plan rules, 20% of the STI value will be deferred into CSR shares which vest in two years. Further
detail on the STI deferral plan is contained in Table 11.
The potential value of any award of performance rights is set at a maximum of 60% of fixed annual remuneration. Grants of
performance rights are subject to performance hurdles and vesting criteria set by the board (refer to note 9 for details).
STI
LTI
48
CSR LIMITED | REMUNERATION REPORT | REMUNERATION IN DETAIL
11 Service agreements (continued)
Table 19: Treatment of the managing director’s and chief financial officer’s incentives on termination
Circumstance
Short term incentive1
Long term incentive – unvested performance rights2
Immediate termination for cause No STI payable and clawback provisions may
Rights are forfeited.
Resignation
Notice by company, good leaver,
retirement, redundancy, death or
permanent disability
Change of control and
subsequent material change to
managing director’s role3
apply (including deferred STI).
Board discretion to award STI on a pro rata
basis (including deferred STI).
Board discretion to award STI on a pro rata
basis (including deferred STI).
STI will be paid on a pro-rata basis.
Rights are forfeited unless board determines otherwise.
Board discretion to allow awards to vest or remain
subject to performance hurdles after termination on a
pro rata basis.
The board has discretion to allow awards to vest on a
change of control of CSR (e.g. a takeover or merger). In
exercising this discretion, the board would generally
apply pro rata assessments for plans on foot.
1 Any STI payments will be paid according to the normal annual STI payment time frame (i.e. payment timing will not be accelerated).
2 Shares allocated in respect of vested performance rights are not subject to restrictions after vesting.
3 Only applies to the managing director. If the managing director resigned due to a material change in the managing director’s status (including the company undergoing a
change of control), there would be an entitlement to a payment equivalent to 12 months’ notice of termination.
12 Statutory remuneration
Managing director’s and chief financial officer’s remuneration
The remuneration table below shows an increase in total remuneration expensed for accounting purposes for executive KMP in YEM18
compared with YEM17. The inclusion of an additional executive KMP for the full year accounts for the majority of the change in total expensed
remuneration year on year.
Table 20: Executive KMP statutory remuneration
$ Year
ended
31 March
Fixed1
Variable
‘At risk’
Cash
salary
Super-
annuation
Leave
benefits
Other
benefits2
STI
expense3
LTI
expense4
Total
STI5
LTI5
Managing director – Rob Sindel
2018
2017
1,228,244
1,200,448
19,941
19,539
56,007
6,795
4,115
3,856
904,903 1,105,929
907,729 1,119,756
3,319,139
3,258,123
Chief financial officer – David Fallu6
2018
2017
539,340
84,472
19,941
4,904
Chief financial officer – Greg Barnes7
2018
2017
–
157,673
–
4,827
23,904
7,144
118,187
131,883
261,242
–
49,565
–
1,012,179
228,403
–
(94,680)
–
–
–
(67,787)
–
(314,876)
–
(314,843)
27%
28%
26%
–
–
–
33%
34%
5%
–
–
–
1 Fixed remuneration may be allocated at the executive’s discretion to cash, superannuation (subject to legislative minimums), annual and long service leave benefits, motor
vehicles and certain other benefits.
2 Other benefits included travel expenditure for Mr Sindel’s spouse, all of which directly related to company business. The other benefits for Mr Fallu represents amounts
awarded in YEM17 to ensure no undue disadvantage upon resignation from his previous employment. This includes the PRP grant of 43,000 rights which is being expensed
over the vesting period. Further information is contained in note 14.
3 STI expense for YEM18 plus amortisation of STI deferrals relating to prior years’ grants. STI payments may be allocated at the executive’s discretion to cash or additional
superannuation contributions.
4 LTI expense is as defined in the accounting standards. PRP grants are expensed over the vesting period at a valuation determined on grant date. Valuations are performed
by a third party and are detailed in table 13.
5 STI and LTI as a percentage of total remuneration.
6 Appointed 2 February 2017.
7 Following Mr Barnes’ resignation on 30 June 2016, provision for long service leave, the STI deferral expense relating to the YEM15 grant and the LTI expense relating to
PRP grants which lapsed were reversed in YEM17.
49
CSR LIMITED | REMUNERATION REPORT | REMUNERATION IN DETAIL
13 Deferred shares
Table 21: STI deferred shares for executive KMP
Managing director – Rob Sindel
Chief financial officer – David Fallu3
Number of STI deferred shares
Balance
1 April 2017
51,294
–
Granted1
36,501
–
Vested
(51,294)
–
Lapsed
Balance
31 March 20182
–
–
36,501
–
1 The value of deferred shares provided to Mr Sindel at grant date was $4.93 per share. These shares related to the YEM17 STI and were granted on 17 May 2017 and will
vest on 31 March 2019 consistent with the STI deferral plan.
2 The closing balance of deferred shares at 31 March 2018 represents unvested shares for YEM17 STI. Shares for the deferred portion for the YEM18 STI will be granted in
May 2018. The number of shares granted will be based on the on the 10 day VWAP up to 31 March 2018 of $5.24 per share.
3 Appointed 2 February 2017.
14 Performance rights
Table 22: Executive KMP performance rights
Managing director – Rob Sindel
Chief financial officer – David Fallu3
Balance
1 April 2017
1,222,350
43,000
Number of performance rights
Granted1
339,466
76,053
Vested2
(341,614)
(43,000)
Lapsed
Balance
31 March 2018
–
–
1,220,202
76,053
1 The accounting value of Mr Sindel’s and Mr Fallu’s rights granted were $870,730 and $195,077 respectively.
2 The following rights vested to ordinary shares during the year ended 31 March 2018:
Mr Sindel: (a) YEM15 Tranche B (rights vested and 207,290 shares awarded on 11 May 2017). The value of each of these shares was $4.85, representing a total value to
Mr Sindel of $1,005,356. (b) YEM15 Tranche A (rights vested and 134,324 shares awarded on 2 November 2017). The value of each of these shares was $4.69,
representing a total value to Mr Sindel of $629,980.
3 Appointed 2 February 2017. PRP grant issued to Mr Fallu for 43,000 rights vested automatically in the November 2017 trading window as Mr Fallu remained employed by
the group. The accounting value of these rights granted was $3.49. At vesting date, the value of each of these shares was $4.69, representing a total value to Mr Fallu of
$201,670.
15 Shareholdings
Table 23: Executive KMP shareholdings
Managing director – Rob Sindel
Chief financial officer – David Fallu3
Balance
1 April 2017
930,079
–
Number of CSR shares1
Acquired2
378,115
43,000
Sold or
transferred
(400,000)
–
Other
–
–
Balance
31 March 2018
908,194
43,000
1 CSR shares in which the executive KMP has a beneficial interest, including shares held by the CSR share plan trustee for vested shares from the PRP and shares held in
respect of the STI deferral plan, by the ESAP trustee or via their related parties. It also includes spouse shareholdings.
2 Represents shares allocated upon vesting of rights under the PRP and shares acquired under the STI deferral plan as detailed earlier in this report. Mr Sindel’s acquired
shares include 341,614 shares issued on vesting of PRPs and 36,501 shares acquired under the STI deferral plan. Mr Fallu’s acquired shares include 43,000 shares
issued on vesting of PRPs.
3 Appointed 2 February 2017.
50
CSR LIMITED | REMUNERATION REPORT | NON-EXECUTIVE DIRECTORS AND OTHER
Non-executive directors and other
16 Arrangements
Table 24: Non-executive director (NED) arrangements
Role
Annual fee for YEM18
Chairman base fees
Other NED base fees (including one committee membership)
Chairman of the Risk & Audit Committee
Chairman of the Remuneration & Human Resources Committee
Chairman of the Workplace Health, Safety & Environment Committee
Additional committee memberships
$352,167
$140,867
An additional $31,442
An additional $20,961
An additional $20,961
An additional $10,481 per additional committee
(applies to NEDs other than the chairman)
All fees are exclusive of any Superannuation Guarantee Contribution (SGC). No retirement allowances are payable to NEDs. NEDs do not
participate in the company’s STI or LTI plans or receive any variable remuneration, but are able to forgo fees for CSR shares under the ESAP. To
further align NEDs’ interests with those of shareholders, the company expects all NEDs to acquire a beneficial interest in CSR shares. Following
benchmarking in YEM18, effective 1 April 2018 a 2.5% fee increase was applied to the chairman’s base fees, other NED base fees and all
committee fees.
17 Fees
Table 25: Non-executive directors’ fees
Year ended 31 March
John Gillam1
Christine Holman2
Michael Ihlein
Rebecca McGrath3
Matthew Quinn
Jeremy Sutcliffe (chairman)4
Penny Winn
Total non-executive directors
YEM18
YEM17
YEM18
YEM17
YEM18
YEM17
YEM18
YEM17
YEM18
YEM17
YEM18
YEM17
YEM18
YEM17
YEM18
YEM17
Directors’ fees
Termination
benefits
Superannuation
45,160
–
151,348
64,459
172,309
168,517
–
88,654
161,828
158,267
365,683
357,600
161,828
153,569
1,058,156
991,066
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4,290
–
14,378
6,124
16,369
16,009
–
8,422
15,374
15,035
19,941
19,539
15,374
14,589
85,726
79,718
Total
49,450
–
165,726
70,583
188,678
184,526
–
97,076
177,202
173,302
385,624
377,139
177,202
168,158
1,143,882
1,070,784
1 Appointed 14 December 2017. As announced on 27 March 2018, effective from 31 May 2018 John Gillam will succeed Jeremy Sutcliffe as Chairman who will retire from
the board on the same date.
2 Appointed 25 October 2016.
3 Resigned 25 October 2016.
4 Effective 1 July 2014, Jeremy Sutcliffe’s SGC was reduced from 9.5% of his base director’s fees to the capped minimum SGC. His base fees increased by the difference
between the employer’s SGC requirement and the minimum SGC cap. The application of these arrangements continued in YEM18 consistent with any changes in SGC
legislative requirements. As announced on 27 March 2018, effective from 31 May 2018 John Gillam will succeed Jeremy Sutcliffe as Chairman who will retire from the
board on the same date.
51
CSR LIMITED | REMUNERATION REPORT | NON-EXECUTIVE DIRECTORS AND OTHER
18 Shareholdings
Table 26: Non-executive directors’ shareholdings
John Gillam2
Christine Holman3
Michael Ihlein
Matthew Quinn
Jeremy Sutcliffe (chairman)
Penny Winn
Number of CSR shares1
Balance
1 April 2017
Included in
remuneration
–
20,000
59,673
39,044
139,045
43,403
–
–
–
–
–
–
Acquired
21,510
21,532
1,035
3,484
1,035
–
Sold or
transferred
Balance
31 March 2018
–
–
–
–
(58,694)
–
21,510
41,532
60,708
42,528
81,386
43,403
1 CSR shares in which the director has a beneficial interest, including shares held under the ESAP trust or via related parties.
2 Appointed 14 December 2017.
3 Appointed 25 October 2016.
19 Other transactions with KMP
There were no other transactions, including loans between CSR and KMP (including their related parties), during YEM17 and YEM18.
52
CSR LIMITED | FINANCIAL REPORT
FINANCIAL REPORT
Consolidated financial report
Statement of financial performance
Statement of comprehensive income
Statement of financial position
Statement of changes in equity
Statement of cash flows
Notes to the financial report
Directors’ declaration
Independent auditor’s report
Shareholder information
54
55
56
57
58
59
94
95
98
Notes to the financial report
1
Basis of preparation
Financial performance overview
Segment information
2
Significant items
3
Earnings per share
4
Revenue and expenses
5
Net finance costs
6
Income tax expense
7
Business combinations
8
Balance sheet items
Working capital
9
Property, plant and equipment and intangible assets
10
Net deferred income tax assets
11
Provisions
12
Product liability
13
Capital structure and risk management
14
15
16
17
18
Borrowings and credit facilities
Issued capital
Dividends and franking credits
Reserves
Financial risk management
Group structure
19
20
21
22
23
24
Subsidiaries
Deed of cross guarantee
Non-controlling interests
Interest in joint operations
Equity accounting information
Parent entity disclosures
Other
25
26
27
28
29
30
31
Employee benefits
Related party disclosures
Subsequent events
Commitments and contingencies
Other non-current assets
Auditor’s remuneration
Other accounting policies
59
59
60
60
62
62
63
63
64
65
67
67
68
70
71
72
74
74
74
74
75
76
81
81
81
84
84
85
86
87
87
91
91
92
92
93
93
53
CSR LIMITED | FINANCIAL REPORT
Statement of financial performance
$million
Trading revenue – sale of goods
Cost of sales
Gross margin
Other income
Warehouse and distribution costs
Selling, administration and other operating costs
Share of net profit of joint venture entities
Other expenses
Profit before finance costs and income tax
Interest income
Finance costs
Profit before income tax
Income tax expense
Profit after tax
Profit after tax attributable to:
Non-controlling interests
Shareholders of CSR Limited1
Profit after tax
Earnings per share attributable to shareholders of CSR Limited
Basic (cents per share)
Diluted (cents per share)
Note
2018
2017
2
5
23
6
6
7
21
4
4
2,606.2
(1,742.4)
2,468.3
(1,634.6)
863.8
58.6
(252.2)
(358.7)
12.7
(26.4)
297.8
2.3
(12.2)
287.9
(81.3)
206.6
17.8
188.8
206.6
37.5
37.3
833.7
27.6
(233.4)
(340.2)
14.7
(26.5)
275.9
3.5
(12.6)
266.8
(61.7)
205.1
27.2
177.9
205.1
35.3
35.1
1 Net profit before significant items attributable to shareholders of CSR Limited is $212.7 million (2017: $183.8 million). Refer to note 3 of the financial statements.
The above statement of financial performance should be read in conjunction with the accompanying notes.
54
CSR LIMITED | FINANCIAL REPORT
Statement of comprehensive income
$million
Profit after tax
Other comprehensive income (expense), net of tax
Items that may be reclassified to profit or loss
Hedge profit (loss) recognised in equity
Hedge loss (profit) transferred to statement of financial performance
Exchange differences arising on translation of foreign operations
Recycling of foreign currency translation reserve on disposal of equity accounted
investment, transferred to statement of financial performance
Income tax (expense) benefit relating to these items
Items that will not be reclassified to profit or loss
Actuarial (loss) gain on superannuation defined benefit plans
Income tax benefit (expense) relating to these items
Other comprehensive income (expense) – net of tax
Total comprehensive income
Total comprehensive income attributable to:
Non-controlling interests
Shareholders of CSR Limited
Total comprehensive income
Note
2018
206.6
2017
205.1
17
17
11
25
11
13.4
25.4
2.0
–
(44.6)
(16.3)
(0.5)
(5.6)
(11.7)
18.4
(3.3)
1.0
26.8
233.4
24.7
208.7
233.4
24.1
(7.3)
(31.8)
173.3
13.6
159.7
173.3
The above statement of comprehensive income should be read in conjunction with the accompanying notes.
55
CSR LIMITED | FINANCIAL REPORT
Statement of financial position
$million
Current assets
Cash and cash equivalents
Receivables
Inventories
Other financial assets
Income tax receivable
Prepayments and other current assets
Total current assets
Non-current assets
Receivables
Inventories
Investments accounted for using the equity method
Other financial assets
Property, plant and equipment
Goodwill
Other intangible assets
Deferred income tax assets
Other non-current assets
Total non-current assets
Total assets
Current liabilities
Payables
Other financial liabilities
Tax payable
Provisions
Total current liabilities
Non-current liabilities
Payables
Borrowings
Other financial liabilities
Provisions
Deferred income tax liabilities
Other non-current liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained profits
Equity attributable to shareholders of CSR Limited
Non-controlling interests
Total equity
The above statement of financial position should be read in conjunction with the accompanying notes.
56
Note
2018
2017
31
9
9
18
29
9
23
18
10
10
10
11
29
9
18
12
14
18
12
11
25
15
17
21
13.7
295.7
467.0
11.4
7.0
10.5
805.3
76.5
57.7
43.6
13.4
834.0
98.1
45.8
151.8
11.7
1,332.6
2,137.9
305.2
19.0
5.0
177.0
506.2
3.7
28.0
10.1
308.4
7.4
–
357.6
863.8
19.1
312.5
385.7
5.9
0.5
13.1
736.8
23.4
81.6
39.9
2.9
848.2
97.1
46.7
201.2
19.3
1,360.3
2,097.1
287.3
29.9
10.3
186.1
513.6
3.7
30.5
22.9
319.8
–
0.1
377.0
890.6
1,274.1
1,206.5
1,036.2
(53.2)
244.4
1,227.4
46.7
1,274.1
1,036.8
(73.4)
191.6
1,155.0
51.5
1,206.5
CSR LIMITED | FINANCIAL REPORT
Statement of changes in equity
$million
Balance at 1 April 2017
Profit for the year
Total other comprehensive income
(expense) – net of tax
Dividends paid
On-market share buy-back
Acquisition of treasury shares
Acquisition of non-controlling interest
Share-based payments – inclusive of tax
Note
Issued
capital
1,036.8
–
–
–
(0.6)
–
–
–
16
15
17
8, 17
17
Reserves
Retained
profits
(73.4)
–
22.2
–
–
(5.8)
(2.5)
6.3
191.6
188.8
(2.3)
(133.7)
–
–
–
–
CSR
Limited
interest
1,155.0
188.8
19.9
(133.7)
(0.6)
(5.8)
(2.5)
6.3
Balance at 31 March 2018
1,036.2
(53.2)
244.4
1,227.4
Balance at 1 April 2016
Profit for the year
Total other comprehensive (expense)
income – net of tax
Dividends paid
On-market share buy-back
Acquisition of treasury shares
Acquisition of non-controlling interest
Share-based payments – inclusive of tax
16
15
17
8
17
1,041.1
–
–
–
(4.3)
–
–
–
Balance at 31 March 2017
1,036.8
20.4
–
(35.0)
–
–
(5.4)
(57.1)
3.7
(73.4)
123.2
177.9
16.8
(126.3)
–
–
–
–
1,184.7
177.9
(18.2)
(126.3)
(4.3)
(5.4)
(57.1)
3.7
191.6
1,155.0
The above statement of changes in equity should be read in conjunction with the accompanying notes.
Non-
controlling
interests
51.5
17.8
6.9
(29.5)
–
–
–
–
46.7
132.5
27.2
(13.6)
(20.4)
–
–
(74.2)
–
51.5
Total
equity
1,206.5
206.6
26.8
(163.2)
(0.6)
(5.8)
(2.5)
6.3
1,274.1
1,317.2
205.1
(31.8)
(146.7)
(4.3)
(5.4)
(131.3)
3.7
1,206.5
57
CSR LIMITED | FINANCIAL REPORT
Statement of cash flows
$million
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Dividends and distributions received
Interest received
Income tax paid
Net cash from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment and other assets
Proceeds from sale of property, plant and equipment and other assets
Purchase of controlled entities and businesses, net of cash acquired
Costs associated with acquisition of businesses
Loans and receivables advanced
Net cash used in investing activities
Cash flows from financing activities
On-market share buy-back
Net (repayment) drawdown of borrowings
Dividends paid1
Acquisition of shares by CSR employee share trust
Interest and other finance costs paid
Transactions with non-controlling interests
Net cash used in financing activities
Net decrease in cash held
Net cash at the beginning of the financial year
Effects of exchange rate changes
Net cash at the end of the financial year
Reconciliation of net profit attributable to shareholders of CSR Limited
to net cash from operating activities
Net profit attributable to shareholders of CSR Limited
Net profit attributable to non-controlling interests
Depreciation and amortisation
Impairment of assets
Costs associated with acquisition of business
Share of profits of associates not received as dividends or distributions
Net gain on purchase of associate
Share-based payments
Finance cost net of discount unwind
Profit on disposal of assets
Net change in current receivables
Net change in current inventories
Net change in current payables
Movement in product liability provision
Net change in other provisions
Movement in current and deferred tax balances
Net change in other assets and liabilities
Net cash from operating activities
Note
2018
2017
23
8
8
15
17
8
2
21
5
8
17
5
2,930.4
(2,652.7)
9.5
2.6
(40.6)
2,726.0
(2,424.6)
14.2
1.9
(52.7)
249.2
264.8
(120.6)
62.6
(0.3)
(18.5)
(2.0)
(78.8)
(0.6)
(2.5)
(163.2)
(5.8)
(4.1)
–
(176.2)
(5.8)
19.1
0.4
13.7
188.8
17.8
84.4
1.5
–
(3.2)
–
3.7
4.1
(51.0)
14.3
(57.2)
33.8
(23.4)
(0.1)
34.4
1.3
249.2
(93.2)
44.7
(3.5)
(3.4)
(5.3)
(60.7)
(4.3)
28.3
(146.7)
(5.4)
(3.4)
(126.4)
(257.9)
(53.8)
73.1
(0.2)
19.1
177.9
27.2
88.5
11.1
(1.5)
(0.5)
(4.1)
3.2
3.3
(16.9)
5.7
(15.7)
19.7
(22.1)
(2.9)
1.7
(9.8)
264.8
1 During the year ended 31 March 2018, within the $163.2 million of dividends paid, dividends to CSR Limited shareholders were $133.7 million. Of the $133.7 million in
dividends, $8.6 million was used to purchase CSR shares on-market to satisfy obligations under the Dividend Reinvestment Plan (DRP), and the remaining $125.1 million
was paid in cash.
The above statement of cash flows should be read in conjunction with the accompanying notes.
58
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | BASIS OF PREPARATION
Notes to the financial report
1 Basis of preparation
This section sets out the basis upon which the CSR group’s financial
statements are prepared as a whole. Significant and other accounting
policies that summarise the measurement basis used and are relevant
to an understanding of the financial statements are provided throughout
the notes to the financial statements. All other accounting policies are
outlined in note 31.
Rounding: Unless otherwise shown in the financial statements, amounts
have been rounded to the nearest tenth of a million dollars and are
shown by $million. CSR Limited is a company of the kind referred to in
the Australian Securities and Investments Commission (ASIC)
Corporations (Rounding in Financial/Directors’ Reports) Instrument
2016/191, dated 24 March 2016.
Statement of Compliance: CSR Limited is a limited company
incorporated in Australia whose shares are publicly traded on the
Australian Securities Exchange.
This general purpose financial report is prepared in accordance with the
Corporations Act 2001 and applicable Accounting Standards and
Interpretations, and complies with other requirements of the law. CSR
Limited is a ‘for profit’ entity. The financial report includes the
consolidated financial statements of CSR Limited and its controlled
entities (CSR group).
Accounting Standards include Australian Accounting Standards.
Compliance with Australian Accounting Standards ensures that the
financial statements and notes of the company and the CSR group
comply with International Financial Reporting Standards.
Basis of preparation: The financial report is based on historical cost,
except for certain financial assets and liabilities which are at fair value.
In preparing this financial report, the CSR group is required to make
estimates and assumptions about carrying values of assets and
liabilities. These estimates and assumptions are based on historical
experience and various other factors that are believed to be reasonable
under the circumstances. Actual results may differ from these
estimates. The estimates and underlying assumptions are reviewed on
an ongoing basis.
The accounting policies adopted are consistent with those of the
previous year, unless otherwise stated.
Basis of consolidation: The consolidated financial statements have been
prepared by aggregating the financial statements of all the entities that
comprise the CSR group, being CSR Limited and its controlled entities.
In these consolidated financial statements:
results of each controlled entity are included from the date CSR
Limited obtained control and until such time as it ceased to control
an entity; and
all inter-entity balances and transactions are eliminated.
Control is achieved where CSR Limited is exposed to, or has rights to,
variable returns from its involvement with an entity and has the ability to
affect those returns through its power to direct the activities of the
entity. Entities controlled by CSR Limited are under no obligation to
accept responsibility for liabilities of other common controlled entities
except where such an obligation has been specifically undertaken.
Business combinations: Non-controlling interests in the results and
equity of subsidiaries are shown separately in the statement of financial
performance, statement of comprehensive income, statement of
financial position and statement of changes in equity respectively. The
effects of all transactions with non-controlling interests are recorded in
equity if there is no change in control. Where there is a loss of control,
any remaining interest in the entity is remeasured to fair value and a
gain or loss is recognised in the income statement. Any losses are
allocated to the non-controlling interest in subsidiaries even if the
accumulated losses should exceed the non-controlling interest in the
individual subsidiary’s equity.
Comparative information: Where applicable, comparative information
has been reclassified in order to comply with current period disclosure
requirements, the impact of which is not material to the financial report.
Currency: Unless otherwise shown in the financial statements, amounts
are in Australian dollars, which is the CSR group’s functional currency.
New or revised accounting standards: The CSR group has adopted all
amendments to Australian Accounting Standards which became
applicable from 1 April 2017. There have been no new or revised
accounting standards which materially impacted the financial report.
New standards not yet applicable are discussed in note 31.
Critical accounting judgments and key sources of estimation
uncertainty: Critical judgments and key assumptions that management
has made in the process of applying the CSR group's accounting policies
and that have the most significant effect on the amounts recognised in
the financial statements are detailed in the notes below:
Note
Judgment/Estimation
10
12
12
Asset impairment
Measurement of provisions for restoration and
environmental rehabilitation and legal claims
Provision for uninsured losses and future claims
12, 13
Product liability
22
Classification of joint arrangements
NOTES TO THE FINANCIAL REPORT: The notes are organised into the
following sections.
Financial performance overview: provides a breakdown of individual line
items in the statement of financial performance, and other information
that is considered most relevant to users of the annual report.
Balance sheet items: provides a breakdown of individual line items in
the statement of financial position that are considered most relevant to
users of the annual report.
Capital structure and risk management: provides information about the
capital management practices of the CSR group and shareholder
returns for the year. This section also discusses the CSR group’s
exposure to various financial risks, explains how these affect the CSR
group’s financial position and performance and what the CSR group
does to manage these risks.
Group structure: explains aspects of the CSR group structure and the
impact of this structure on the financial position and performance of the
CSR group.
Other:
provides information on items which require disclosure to comply
with Australian Accounting Standards and other regulatory
pronouncements; and
provides information about items that are not recognised in the
financial statements but could potentially have a significant impact
on the CSR group’s financial position and performance.
59
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | FINANCIAL PERFORMANCE OVERVIEW
Accounting policies and inter-segment transactions
The accounting policies used by the CSR group in reporting segments
internally are the same as those disclosed in the significant
accounting policies, with the exception that significant items (i.e.
those items which by their size and nature or incidence are relevant in
explaining financial performance) are excluded from trading profits.
This approach is consistent with the manner in which results are
reported to the CODM.
Transfers of assets between segments are recognised at book value.
It is the CSR group's policy that if items of revenue and expense are
not allocated to operating segments, then any associated assets and
liabilities are also not allocated to segments. This is to avoid
asymmetrical allocations within segments which management
believes would be inconsistent. Reporting provided to the board of
directors in respect of earnings is primarily measured based on
earnings before interest and tax (EBIT), excluding significant items,
with significant items reviewed and reported separately to the CODM.
The following items are not allocated to operating segments as they
are not considered part of the core trading operations of any segment:
corporate overheads;
restructuring and provisions;
net finance cost; and
significant items.
Geographical information
The CSR group operates principally in Australia. For the year ended 31
March 2018, the CSR group's trading revenue from external
customers in Australia amounted to $2,455.9 million (2017:
$2,343.4 million), with $150.3 million (2017: $124.9 million) of
trading revenue related to other geographical areas. The CSR group's
non-current assets excluding investments accounted for using the
equity method, deferred tax assets and other financial assets from
continuing operations in Australia amounted to $1,062.6 million at 31
March 2018 (2017: $1,055.4 million), with $61.2 million (2017:
$60.9 million) related to other geographical areas.
Financial performance overview
2
Segment information
Operating and reportable segments
The CSR group has identified its operating segments based on the
internal reports that are reviewed and used by the board of directors
in their role as the chief operating decision makers (CODM) in
assessing performance and in determining the allocation of
resources. Operating segments are identified by management and the
board of directors based on the nature of the products sold and
production processes involved. Reportable segments are based on
operating segments determined by the similarity of the products
produced and sold as these are the sources of the CSR group's major
risks and have the most effect on the rates of return. Each of the
business units disclosed below has been determined as both an
operating segment and a reportable segment.
Building
Products
Glass
Aluminium
Property
Lightweight Systems (Gyprock plasterboard, Hebel
autoclaved aerated concrete products, Cemintel fibre
cement, Himmel Interior Systems and Rondo rolled
formed steel products joint venture), Insulation
(Bradford and Martini insulation, Bradford energy
solutions and Edmonds ventilation systems), AFS
walling systems, Bricks (PGH Bricks and Pavers and
New Zealand Brick Distributors joint venture) and
Roofing (Monier roofing).
The Glass business includes the operations of Viridian
in Australia and New Zealand. Viridian is Australia’s
leading architectural glass provider and the only
manufacturer of float glass and hard coated
performance products in Australia. It manufactures
clear float, coated and bulk laminate glass in Victoria
and value-added processing of glass from a number of
facilities across Australia and New Zealand.
The Aluminium business unit relates to the CSR
group’s 70% interest in Gove Aluminium Finance
Limited, which in turn holds a 36.05% interest in the
Tomago aluminium smelter (i.e. an effective interest of
25.24%). Gove Aluminium Finance Limited sources
alumina, has it toll manufactured by Tomago and then
sells aluminium into predominantly the Asian market.
Products from the aluminium business include
aluminium ingot, billet and slab.
The Property business unit generates returns typically
from the sale of former operating sites by advancing
the sites through various stages of the development
cycle. In addition, this business is currently involved in
a small number of large-scale developments in New
South Wales, Queensland and Victoria. These projects,
in most cases, are in-fill developments (currently
vacant land or discontinued operating sites within
otherwise built up areas) located in metropolitan
regions.
60
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | FINANCIAL PERFORMANCE OVERVIEW
2
Segment information (continued)
$million
Trading revenue1
EBITDA before
significant items2
Depreciation and
amortisation
Earnings before
interest, tax and
significant items
2018
2017
2018
Business segment
2018
2017
2018
Building Products
Glass
Aluminium
Property
Segment total
Corporate3
Restructuring and provisions4
1,672.2
368.5
565.5
–
2,606.2
–
–
1,576.9
379.9
511.5
–
2,468.3
–
–
265.4
18.1
97.1
48.1
428.7
(14.2)
(6.3)
Total CSR group
2,606.2
2,468.3
408.2
2017
252.2
20.3
118.0
15.3
405.8
(13.4)
(5.9)
386.5
Reconciliation of earnings before interest, tax and significant items to profit after tax
$million
Earnings before interest, tax and significant items
Net finance costs
Income tax expense
51.3
14.6
17.6
0.3
83.8
0.6
–
84.4
49.4
13.3
24.9
0.3
87.9
0.6
–
88.5
Note
6
Profit after tax before significant items (before non-controlling interests)
Less: non-controlling interests
Profit after tax before significant items attributable to shareholders of CSR Limited
Significant items after tax attributable to shareholders of CSR Limited
3
2017
202.8
7.0
93.1
15.0
317.9
(14.0)
(5.9)
298.0
2017
298.0
(0.4)
(85.0)
212.6
(28.8)
183.8
(5.9)
214.1
3.5
79.5
47.8
344.9
(14.8)
(6.3)
323.8
2018
323.8
(1.6)
(91.5)
230.7
(18.0)
212.7
(23.9)
Profit after tax attributable to shareholders of CSR Limited
188.8
177.9
Business segment
As at 31 March 2018
As at 31 March 2017
As at 31 March 2018
As at 31 March 2017
Funds employed ($million)5
Return on funds employed (%)6
Building Products
Glass
Aluminium
Property
Segment total
Corporate
Total CSR group
919.1
239.3
120.0
185.7
1,464.1
(38.8)
1,425.3
877.4
247.4
137.3
142.0
1,404.1
(36.3)
1,367.8
23.8%
1.4%
61.8%
29.2%
–
–
23.2%
22.8%
3.1%
61.1%
10.9%
–
–
21.6%
1 Trading revenue excludes net gain on disposal of assets, interest income, dividend income from other entities, share of net profit of joint venture entities and other income.
Inter-segment sales are negligible.
2 EBITDA before significant items is earnings before interest, tax, depreciation, amortisation and significant items.
3 Represents unallocated overhead expenditure and other revenues.
4 Represents restructuring and provisions. Includes legal and managerial costs associated with long-term product liabilities and minor product liability claims that arise from
time to time, certain defined benefit superannuation liabilities and expenses, other payables, non-operating revenue and other costs (excluding those categorised as
significant items).
5 Funds employed is net assets of the CSR group less certain non-trading assets and liabilities. Funds employed at 31 March 2018 is calculated as net assets of $1,274.1
million (2017: $1,206.5 million), excluding the following assets: cash of $13.7 million (2017: $19.1 million), net tax assets of $146.4 million (2017: $191.4 million), net
superannuation assets of $11.4 million (2017: $14.5 million) and interest receivable of $0.1 million (2017: $0.6 million). In addition, the following liabilities have been
excluded from funds employed: asbestos product liability provision of $289.0 million (2017: $312.4 million), net financial liabilities of $5.8 million (2017: $44.0 million)
and borrowings of $28.0 million (2017: $30.5 million).
6 Return on funds employed (ROFE) is calculated based on EBIT before significant items for the 12 months to year end divided by average funds employed. ROFE is not a
measure used for Corporate costs which are considered in the context of the CSR group result. Property ROFE varies due to timing of projects.
61
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | FINANCIAL PERFORMANCE OVERVIEW
3
Significant items
$million
Restructuring costs and asset impairments1
Supply disruption costs2
Legal disputes, warranties and land remediation3
Transaction and integration costs4
Gain on acquisition of controlled entity5
Reduction in product liability provision6
Significant items before finance costs and income tax
Discount unwind and hedging relating to product liability provision
Transaction costs included in finance costs
Interest income on tax refund7
Significant items before income tax
Income tax benefit on significant items
Income tax refund related to divested business7
Significant items after tax
Significant items attributable to non-controlling interests
Significant items attributable to shareholders of CSR Limited
Net profit attributable to shareholders of CSR Limited
Significant items attributable to shareholders of CSR Limited
Net profit before significant items attributable to shareholders of CSR Limited
Earnings per share attributable to shareholders of CSR Limited before significant items8
Basic (cents per share)
Diluted (cents per share)
2018
(18.4)
(6.1)
(1.5)
–
–
–
(26.0)
(8.3)
–
–
(34.3)
10.2
–
(24.1)
0.2
(23.9)
188.8
23.9
212.7
42.3
42.0
2017
(23.8)
–
(0.7)
(5.4)
4.1
3.7
(22.1)
(10.4)
(0.4)
2.1
(30.8)
10.7
12.6
(7.5)
1.6
(5.9)
177.9
5.9
183.8
36.5
36.3
1
During the year ended 31 March 2018, the Glass segment divested sites in Western Australia, Darwin and Cairns. Significant items recorded include the loss on disposal
and associated restructuring expenditure of $8.7 million and a provision for onerous lease costs of $8.7 million. In addition, the Aluminium segment recorded a charge of
$1.0 million for restructuring costs. During the financial year ended 31 March 2017, restructuring and relocation programs took place across the Building Products, Glass
and Aluminium segments to align the business cost base with current market conditions and secure ongoing efficiencies. In addition, in the year ended 31 March 2017,
following a routine review of plant and equipment, asset impairments were recorded in the Building Products segment to reduce the carrying value of assets to their
recoverable amount.
2 During the year ended 31 March 2018, due to the temporary closure of the Thevenard port in South Australia, the Building Products segment incurred additional costs
associated with the disruption of raw material (gypsum) supply.
3 During the financial years ended 31 March 2018 and 31 March 2017, the group recorded a charge of $1.5 million (31 March 2017: $0.7 million) as a result of the
remeasurement of provisions in relation to legal disputes, warranties and land remediation.
4 During the financial year ended 31 March 2017, the CSR group incurred costs associated with potential and completed acquisitions, including integration costs relating to
PGH Bricks & Pavers Pty Limited (formerly Boral CSR Bricks Pty Limited) which was formed on 1 May 2015 (refer note 8).
5 On 30 June 2016, the CSR group acquired the remaining 42% interest in Viridian Glass Limited Partnership (VGLP). As a result of this transaction, a gain was recognised
including the realisation of cumulative foreign exchange gains in relation to the previously held investment (refer note 8). This amount has been recognised in other income
in the statement of financial performance in the year ended 31 March 2017.
6 During the financial year ended 31 March 2017, the group reduced the product liability provision by $3.7 million to bring the prudential margin to $60.0 million or 23.8% of
the actuarially assessed product liability provision. Refer note 13.
7 During the financial year ended 31 March 2017, a tax refund (including interest) was finalised following an amendment to the capital gains tax paid in relation to the
divestment of the Sucrogen group in the year ended 31 March 2011.
8 The basis of calculation is consistent with the earnings per share disclosure in the statement of financial performance (refer note 4).
Recognition and measurement
Significant items are those which by their size and nature or incidence are relevant in explaining the financial performance of the CSR group,
and as such are disclosed separately.
4
Earnings per share
Profit after tax attributable to shareholders of CSR Limited ($million)
Weighted average number of ordinary shares used in the calculation of basic EPS (million)1
Weighted average number of ordinary shares used in the calculation of diluted EPS (million)2
Basic EPS (cents per share)
Diluted EPS (cents per share)
2018
188.8
503.1
506.5
37.5
37.3
2017
177.9
503.9
506.3
35.3
35.1
1 Calculated by reducing the total weighted average number of shares on issue of 504.3 million (2017: 505.0 million) by the weighted average number of shares purchased
on market and held in trust to satisfy incentive plans as these plans vest of 1,237,649 (2017: 1,098,543).
2 Calculated by increasing the weighted average number of shares used in calculating basic EPS by outstanding performance rights of 3,424,291 (2017: 2,430,857).
Performance rights granted under the LTI plan are included in the determination of diluted earnings per share to the extent to which they are dilutive.
62
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | FINANCIAL PERFORMANCE OVERVIEW
5 Revenue and expenses
$million
Trading revenue
Other income
Net gain on disposal of assets
Gain on acquisition of controlled entity
Other
Expenses
Significant items1
Employee benefits expense
Operating lease expense
Depreciation
Amortisation
Note
2018
2017
2,606.2
2,468.3
3, 8
3
10
10
51.0
–
7.6
26.0
594.2
70.3
76.4
8.0
16.9
4.1
6.6
26.2
581.9
67.3
81.6
6.9
1
Significant items are included within other expenses in the statement of financial performance.
Recognition and measurement
Trading revenue: measured at the fair value of the consideration receivable, and is recognised when each of the following conditions is
met:
-
-
-
-
persuasive evidence that an arrangement exists, which is usually in the form of a contractual arrangement;
the seller's price to the buyer is fixed or determinable;
the significant risks and rewards of ownership of the goods have transferred from the CSR group to the buyer; and
collectability is reasonably assured.
Net gain on disposal of assets: income is recognised when the risks and rewards have been transferred and CSR does not retain either
continuing managerial involvement to the degree usually associated with ownership, or effective control over the assets sold. The
revenue is measured as the amount receivable under the contract. It is discounted to present value if deferred payments have been
agreed and the impact of discounting is material.
Employee benefits expense: includes salaries and wages, share-based payments and other entitlements.
Operating lease expense: payments made under operating leases (net of any incentives received by the lessor) are expensed on a
straight-line basis over the period of the lease.
6 Net finance costs
$million
Interest expense and funding costs
Discount unwind and hedge gain relating to product liability provision
Discount unwind of other non-current liabilities
Foreign exchange gain
Finance costs
Interest income
Net finance costs
Finance costs included in significant items
Net finance costs before significant items
Recognition and measurement
Note
2018
2017
4.1
8.3
0.9
(1.1)
12.2
(2.3)
9.9
(8.3)
1.6
3.4
10.4
1.3
(2.5)
12.6
(3.5)
9.1
(8.7)
0.4
3
Interest income and expense are accrued on a time basis, by reference to the principal outstanding and at the applicable effective interest
rates. Funding costs are capitalised and subsequently amortised over the term of the facility. Unwinding of the interest component of
discounted assets and liabilities is treated as a finance cost.
63
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | FINANCIAL PERFORMANCE OVERVIEW
7
Income tax expense
Reconciliation of income tax expense charged to the statement of financial performance:
$million
Profit before income tax
Income tax expense calculated at 30%
(Decrease) increase in income tax expense due to:
Share of net profit of joint venture entities
Non-taxable profit on property disposals
Income tax under (over) provided in prior years1
Other items
Total income tax expense on profit
Comprising of:
Current tax expense
Deferred tax expense relating to movements in deferred tax balances
Total income tax expense on profit
Note
2018
2017
287.9
86.4
(3.7)
(1.6)
0.5
(0.3)
81.3
35.1
46.2
81.3
266.8
80.0
(4.3)
(1.9)
(11.4)
(0.7)
61.7
29.3
32.4
61.7
11
1 For the year ended 31 March 2017, includes a tax refund of $13.2 million and tax expense on interest income of $0.6 million. This relates to an amendment of the income
tax return for the year ended 31 March 2011, in relation to capital gains tax paid on the sale of the Sucrogen group.
Recognition and measurement
Current and deferred tax is recognised as an expense in the statement of financial performance except when it relates to items credited or
debited directly to equity, in which case the deferred tax is also recognised directly in equity, or where it arises from an initial accounting for
a business acquisition, in which case it is taken into account in the determination of goodwill.
Tax transparency report
The CSR group has prepared a voluntary tax transparency report which is available to view online or to download from the CSR website
(www.csr.com.au). The report sets out relevant tax information for CSR Limited and its controlled entities for the year ended 31 March 2018
and 31 March 2017.
Disclosure of company tax information
Under tax legislation the Australian Tax Office will publish in 2018 the following data for the CSR Limited tax consolidated group, PGH Bricks
& Pavers Pty Limited and Gove Aluminium Finance Limited in relation to the 2017 tax year:
Entity
CSR Limited (ABN: 90 000 001 276)
PGH Bricks & Pavers Pty Limited (ABN: 68 168 794 821)
Gove Aluminium Finance Limited (ABN: 45 001 860 073)
Total revenue1
($million)
Taxable income
($million)
Tax payable
($million)
1,791.2
179.9
517.3
Nil
37.3
115.6
Nil
8.2
31.4
1 For financial reporting and taxation purposes, items may have been classified between revenue and expenses differently. Therefore, total revenue may not reconcile to
note 2 or note 21.
Income tax is payable on profits (not total revenue) after allowing for expenses and specific adjustments under the tax law. For CSR Limited,
taxable income and tax payable were nil because CSR was entitled to utilise prior year tax losses and claim certain tax deductions that
made taxable income lower than accounting profit (for example, tax depreciation, certain restructure costs and payments of asbestos claims
settlements).
During the year ended 31 March 2018 the CSR Limited tax consolidated group utilised carried forward tax losses and moved into a tax
payable position.
64
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | FINANCIAL PERFORMANCE OVERVIEW
Details of the effect of changes in the ownership interest on the equity
attributable to owners of the CSR group is summarised as follows:
Note
$million
Carrying amount of non-controlling
interests acquired at acquisition date
Consideration paid
Less: deferred tax impact arising from PGH
Bricks joining the tax consolidation group
Less: acquisition costs
Amounts recognised in non-controlling
interests reserve at 31 March 2018
a)
b)
74.2
(126.4)
(2.5)
(4.9)
(59.6)
a) Deferred tax impact arising from PGH Bricks joining the CSR tax
consolidation group
PGH Bricks automatically entered the CSR tax consolidation group at
acquisition date. Accordingly, the tax cost base of the net assets of
PGH Bricks needed to be reset, which has resulted in an adjustment
to the deferred tax balances. As the entry into the tax consolidation
group was a direct consequence of CSR’s acquisition of the non-
controlling interest, the impact of revising the deferred tax balances
has been recorded in equity in the year ended 31 March 2018.
b) Acquisition related costs
The CSR group has incurred acquisition related costs of $4.9 million
related to legal fees, due diligence, stamp duty and other costs. These
costs were recorded in equity in the year ended 31 March 2017.
Payment of these costs occurred in the year ended 31 March 2017
($3.2 million) and the year ended 31 March 2018 ($1.7 million).
8 Business combinations
i)
Current year
During the year ended 31 March 2018, the Glass segment acquired
the business assets of two entities in New Zealand for cash
consideration of $0.3 million with goodwill of $0.2 million arising as a
result of these acquisitions.
Transactions occurring in the current period related to prior period
acquisitions
Architectural Framework Systems
The CSR group acquired 100% of Architectural Framework Systems
(AFS) on 2 April 2014 (Building Products segment). Part of the
consideration was contingent on certain pre-determined earnings
measures being achieved by the subsidiary for each of the years
ended 31 March 2015 and 31 March 2017. Earnings measures were
met for the year ended 31 March 2017 resulting in the payment of
$15.0 million in deferred consideration in the year ended 31 March
2018.
Total consideration in relation to the acquisition is $53.0 million
consisting of:
Cash consideration at acquisition date ($36.7 million);
2015 deferred consideration ($1.3 million); and
2017 deferred consideration ($15.0 million).
ii) Prior year
PGH Bricks & Pavers Pty Limited
Background
On 1 November 2016, the CSR group acquired Boral Limited’s (Boral)
40% minority interest in PGH Bricks & Pavers Pty Limited (PGH Bricks),
formerly Boral CSR Bricks Pty Limited (BCB) for cash consideration of
$126.4 million. In addition, outstanding borrowings held by PGH
Bricks of $7.5 million were repaid to Boral.
Revenue and profit contribution
If the minority interest share of PGH Bricks was excluded from the
CSR group results for the year ended 31 March 2017, profit after tax
attributable to non-controlling interests would have been $7.6 million
lower and profit after tax attributable to shareholders of CSR Limited
would have been $7.6 million higher.
Acquisition accounting for the transaction
In accordance with AASB 10 Consolidated Financial Statements, as
the CSR group has a controlling interest in PGH Bricks, the acquisition
is treated as a transaction between shareholders. As a result, the
difference between the consideration paid by the CSR group to
purchase the remaining 40% of PGH Bricks and the non-controlling
interest has been recorded in equity. In accordance with AASB 132
Financial Instruments, transaction costs associated with the purchase
of a non-controlling interest are also recorded in equity. Fair value
acquisition accounting is not required and the CSR group continues to
consolidate PGH Bricks. Effective 1 November 2016, the CSR group
has recognised 100% of the net profit after tax of PGH Bricks.
The accounting for this acquisition, the necessary tax consolidation
calculations and the net impact of this transaction on equity have
been finalised in the year ended 31 March 2018.
65
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | FINANCIAL PERFORMANCE OVERVIEW
8 Business combinations (continued)
ii) Prior year (continued)
Viridian Glass Limited Partnership
Background
The CSR group acquired a 42% interest in the glass processing joint
venture operating in New Zealand, Viridian Glass Limited Partnership
(VGLP) on 30 June 2016. Following the acquisition, the CSR group
now holds 100% of the interest in VGLP.
VGLP is a leader in the manufacture, sale and installation of glass and
related products. The primary reason for the acquisition was to
continue CSR’s growth in the Glass segment.
Revenue and profit contribution
If VGLP’s share of revenue and profit before income tax and
significant items were excluded from the CSR group results for the
year ended 31 March 2017, CSR group revenue would have been
$64.8 million lower and profit before income tax and significant items
would have been $0.9 million higher.
Acquisition related costs
Acquisition related costs expensed in the year ended 31 March 2017
were $0.2 million.
Acquisition accounting for the transaction
In accordance with AASB 3 Business Combinations, the CSR group:
remeasured its previously held equity interest in VGLP at its
acquisition-date fair value, which had no resultant gain or loss as
fair value was equivalent to book value;
transferred any other comprehensive income to the income
statement, which resulted in a gain of $5.6 million; and
recorded the VGLP business at fair value at acquisition date and
recorded the impact of acquisition date adjustments in relation to
the previously held interest, resulting in a loss of $1.5 million.
The gain of $4.1 million recognised within other income in the
statement of financial performance for the year ended 31 March
2017 has been disclosed as a significant item, refer to note 3.
The accounting and fair value of acquired net assets for this
acquisition was finalised at 31 March 2017.
Details of the effective purchase consideration and the fair value of
the VGLP assets and liabilities acquired are set out below.
$million
Consideration
Acquisition date fair value
Cash paid
Contingent consideration
Note
a )
b )
Total consideration
Assets acquired and liabilities assumed
Cash
Trade and other receivables
Inventories
Property, plant and equipment
Deferred tax assets
Other intangible assets
Trade and other payables
Borrowings from related parties
Provisions
Fair value of net assets acquired
Goodwill arising on acquisition
19.9
7.8
1.8
29.5
4.3
13.3
7.8
24.6
0.6
0.2
(9.2)
(32.8)
(3.1)
5.7
23.8
The goodwill is attributable to the workforce, profitability and growth
potential of the acquired business. It will not be deductible for tax
purposes.
a) Purchase consideration – cash outflow
$million
Consideration
Cash consideration
Less cash acquired
Outflow of cash – investing activities
b) Contingent consideration
7.8
(4.3)
3.5
In the event that certain pre-determined conditions were met up to
and including 30 June 2017, additional consideration would be
payable. The conditions were met for the specified period resulting in
deferred consideration of $1.8 million being paid in the year ended 31
March 2018.
66
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | BALANCE SHEET ITEMS
Balance sheet items
9 Working capital
i)
Current receivables
ii)
Inventories
$million
2018
2017
$million
2018
2017
Trade receivables
Allowance for doubtful debts
Net trade receivables
Property debtors1
Other loans and receivables
285.7
(8.5)
277.2
–
18.5
291.9
(8.0)
283.9
4.5
24.1
Total current receivables
295.7
312.5
Ageing
Past due 0-60 days – not impaired
Past due >60 days – not impaired
Past due 0-60 days – impaired
Past due >60 days – impaired
Movement in allowance for
doubtful debts
Opening balance
Trade debts written off
Trade debts provided
Closing balance
1
Includes no amounts past due.
Recognition and measurement
9.0
–
2.4
6.1
(8.0)
2.4
(2.9)
(8.5)
8.7
–
2.5
5.5
(8.9)
3.8
(2.9)
(8.0)
Current
Raw materials and stores
Work in progress
Finished goods
Land development projects
Total current inventories1
Non-current
Land development projects
Total non-current inventories
102.3
20.2
268.1
76.4
467.0
57.7
57.7
80.3
18.7
235.4
51.3
385.7
81.6
81.6
1 Write-down of inventories recognised as an expense for the year ended 31 March
2018 totalled $14.4 million (2017: $12.4 million).
iii) Current payables
$million
Trade payables
Other payables
Total current payables
2018
275.9
29.3
305.2
2017
240.5
46.8
287.3
Trade receivables: are recognised initially at fair value and subsequently measured at amortised cost. An allowance for doubtful debts is
raised based on a review of outstanding balances at balance date. Bad debts are written off against the allowance account and any
other change in the allowance account is recognised in the statement of financial performance.
Inventories: are valued at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary
course of business less the estimated cost of completion and costs necessary to make the sale.
- Raw materials, stores, work in progress and finished goods: costs included in inventories consist of materials, labour and
manufacturing overheads which are related to the purchase and production of inventories. The value of inventories is derived by the
method most appropriate to each particular class of inventories. The major portion is valued on either a first-in-first-out or average
cost basis.
Land development projects: cost includes the cost of acquisition, development and holding costs during development. Costs
incurred after completion of development are expensed as incurred. Land development projects not expected to be sold within 12
months are classified as non-current inventories.
-
Trade and other payables: are recognised when the CSR group becomes obliged to make future payments resulting from the purchase of
goods and services. Payables are stated at their amortised cost.
67
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | BALANCE SHEET ITEMS
10 Property, plant and equipment and intangible assets
i)
Property, plant and equipment
$million
Cost or written down value
Accumulated depreciation
Net carrying amount
Net carrying amount at 1 April
Capital expenditure
Disposed
Depreciation
Write downs and impairments
Exchange differences
Acquisitions through business combinations
Transferred from (to) intangible assets
Transferred (to) from inventories and other assets
Balance at 31 March
ii) Goodwill and other intangible assets
Land and buildings
Plant and equipment
Total
Note
2018
2017
2018
2017
2018
2017
378.9
(108.3)
270.6
291.6
0.8
(0.3)
(10.5)
(0.1)
–
–
0.5
(11.4)
270.6
389.9
1,540.9
1,476.3
1,919.8
1,866.2
(98.3)
(977.5)
(919.7)
(1,085.8)
(1,018.0)
291.6
306.4
2.1
–
563.4
556.6
78.8
(3.4)
(11.1)
(65.9)
–
(0.1)
–
(2.4)
(3.3)
(1.0)
(0.1)
0.1
(4.6)
2.9
556.6
834.0
557.2
848.2
54.9
(1.7)
(70.5)
(10.9)
(0.4)
24.6
3.7
(0.3)
79.6
(3.7)
(76.4)
(1.1)
(0.1)
0.1
(4.1)
(8.5)
848.2
863.6
57.0
(1.7)
(81.6)
(10.9)
(0.5)
24.6
1.3
(3.6)
291.6
563.4
556.6
834.0
848.2
5
8
10ii)
Goodwill
Software
Other
Total other intangible
assets
$million
Cost
Accumulated amortisation
Net carrying amount
Net carrying amount at 1 April
Capital expenditure
Disposed
Amortisation
Write downs and impairments
Exchange differences
Acquisitions through business
combinations
Transferred from (to) property,
plant and equipment
Transferred from software to other
intangible assets
Note
2018
98.1
–
98.1
97.1
–
–
–
–
0.8
0.2
–
–
5
8
10i)
2017
97.1
–
97.1
74.2
–
–
–
(0.2)
(0.7)
23.8
–
–
2018
88.0
(71.2)
16.8
16.3
3.1
(0.1)
(6.2)
–
–
–
2017
81.5
(65.2)
16.3
15.7
6.8
(0.2)
(4.9)
–
–
0.2
4.1
(1.3)
2018
2017
2018
2017
49.9
(20.9)
29.0
30.4
–
–
49.5
(19.1)
30.4
32.4
–
–
(1.8)
(2.0)
–
–
–
–
–
–
–
–
–
137.9
(92.1)
131.0
(84.3)
45.8
46.7
3.1
(0.1)
(8.0)
–
–
–
46.7
48.1
6.8
(0.2)
(6.9)
–
–
0.2
4.1
(1.3)
–
–
(0.4)
–
0.4
Balance at 31 March
98.1
97.1
16.8
16.3
29.0
30.4
45.8
46.7
Recognition and measurement
Property, plant and equipment: assets acquired are recorded at historical cost of acquisition less depreciation. Historical cost includes
expenditure that is directly attributable to the acquisition of items. 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. All other repairs and maintenance are charged to profit or loss during the
reporting period in which they are incurred. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the
end of each reporting period. 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.
Software: developed internally or acquired externally, is initially measured at cost and includes development expenditure. Subsequently,
these assets are carried at cost less accumulated amortisation and impairment losses.
Other intangible assets: including trade names and customer lists obtained through acquired businesses, are measured at fair value at
the date of acquisition. Trade names of $19.3 million (2017: $19.3 million) that have an indefinite life are assessed for recoverability
annually. See below for further detail. Customer lists and all other trade names that have a defined useful life are amortised and
subsequently carried net of accumulated amortisation. Intangible assets not obtained through acquired businesses are measured at cost.
These assets are subsequently carried at cost less accumulated amortisation and impairment losses.
68
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | BALANCE SHEET ITEMS
10 Property, plant and equipment and intangible assets (continued)
Recognition and measurement (continued)
Goodwill: represents the excess of the cost of acquisition over the fair value of the identifiable assets and liabilities acquired. Goodwill is
not amortised, but tested annually and whenever there is an indicator of impairment.
Depreciation/amortisation: assets are depreciated or amortised at rates based upon their expected economic life using the straight-line
method. Land, goodwill and trade names with indefinite lives are not depreciated or amortised. Trade names currently have an indefinite
life as the CSR group is continually investing in marketing activities to develop and maintain the trade names and there are no
contractual or other restrictions on the use of the trade names. Useful lives are as follows: buildings 10 to 40 years; plant and equipment
two to 40 years; and systems software and other intangible assets two to eight years. The average life of buildings is 27 years and plant
and equipment is nine years.
Critical accounting estimate – carrying value assessment
The CSR group tests property, plant and equipment and intangible assets for impairment to ensure they are not carried at above their
recoverable amounts:
at least annually for goodwill and trade names with indefinite lives; and
where there is an indication that the assets may be impaired (which is assessed at least each reporting date).
These tests for impairment are performed by assessing the recoverable amount of each individual asset or, if this is not possible, then the
recoverable amount of the cash generating unit (CGU) to which the asset belongs. CGUs are the lowest levels at which assets are grouped
and generate separately identifiable cash flows. The recoverable amount is the higher of an asset or a CGU’s fair value less costs of disposal
and value-in-use. The value-in-use calculations are based on discounted cash flows expected to arise from the asset or CGU. Management
judgment is required in these valuations to forecast future cash flows and a suitable discount rate in order to calculate the present value of
these future cash flows. Future cash flows take into consideration forecast changes in the building cycle, aluminium prices and exchange
rates where appropriate.
The carrying amount of goodwill forms part of the Building Products segment: $66.9 million (2017: $66.6 million) and Glass segment:
$31.2 million (2017: $30.5 million). The recoverable amounts of the cash generating units that include goodwill are determined using
discounted cash flow projections. Where a valuation is required, the valuation is determined using discounted cash flows. Cash flows are
reforecast annually, covering the next five years, and a valuation calculated using a post-tax annual discount rate of 9.0% for all segments
other than Aluminium which uses 10.0% (2017: 9.0% for all segments other than Aluminium which was 10.0%). A terminal value is used
from year five onwards including an annual growth rate, which was 2.5% in the year ended 31 March 2018 (2017: 2.5%). Discounted cash
flow projections over the period are deemed appropriate given the cyclical nature of the markets in which the CSR group operates. The five
year discounted cashflows represent financial plans forecast by management, based on the CSR group's view of the respective cycle.
If the recoverable amount of a cash generating unit is estimated to be less than its carrying amount, the carrying amount of the cash
generating unit is reduced to its recoverable amount with any impairment recognised immediately in the statement of financial
performance.
Impact of possible changes in key assumptions:
The recoverable amount of the Glass CGU is estimated to exceed the carrying amount at 31 March 2018 by $33 million. Following a
detailed impairment review of future cash flow projections, the assets are considered recoverable at 31 March 2018.
During the year ended 31 March 2018, the Glass CGU experienced reduced earnings before interest and tax compared to the prior year,
due to slower than expected growth in the Commercial business. This was due to operational performance issues at Commercial and Design
sites following a reorganisation of the business in the year ended 31 March 2017, resulting in operational inefficiencies and some
temporary loss of market share. The reorganisation involved the establishment of focused glass processing sites at Ingleburn, New South
Wales and Clayton, Victoria. Management has implemented operational improvement initiatives to address the performance issues and the
key performance and lead indicators show recent improved performance trends.
The value-in-use cash flow projections, prepared for impairment testing purposes at 31 March 2018, forecast a significant improvement in
utilisation and associated profitability in the Commercial and Design business over the period modelled. In addition, the value-in-use cash
flow projections also forecast a continued profitability improvement for Auckland, New Zealand as the site consolidation issues experienced
in the year to 31 March 2017 have stabilised and the financial performance has improved over the past year.
Given the inherent uncertainty and judgement required in forecasting, there is a risk that the forecast cash flows may not be achieved over
the modelled period.
The recoverable amount of the CGU would equal its carrying amount if any of the following key assumptions were to change as follows:
Business cash contribution reduces by 10% for each year modelled.
Post tax discount rate increases from 9.0% to 9.7%.
Long term growth rate decreases from 2.5% to 1.6%.
Reasonable possible changes in key assumptions have been considered. If the business cash contribution (after tax) reduces by 20% for
each year modelled, the recoverable amount of the CGU would reduce by $67 million and an impairment charge of $34 million would be
recorded in relation to the Glass segment assets.
No other reasonable possible changes in key assumptions have been identified which may cause the carrying amount to exceed its
recoverable amount.
69
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | BALANCE SHEET ITEMS
11 Net deferred income tax assets
$million
Net deferred income tax assets arising on temporary differences1
Net deferred income tax liabilities arising on temporary differences
Tax losses – revenue recorded as asset1
Total net deferred income tax assets
2018
141.5
(7.4)
10.3
144.4
2017
145.6
–
55.6
201.2
1 For the year ended 31 March 2018, deferred income tax assets in the statement of financial position total $151.8 million (31 March 2017: 201.2 million).
Movement in deferred income tax assets
$million
2018
Property, plant and equipment
Superannuation defined benefit plans
Product liability provision
Employee benefits provisions
Other provisions
Spares and stores
Fair value of hedges
Other individually insignificant balances
Tax losses
Total net deferred income tax assets
2017
Property, plant and equipment
Superannuation defined benefit plans
Product liability provision
Employee benefits provisions
Other provisions
Spares and stores
Fair value of hedges
Other individually insignificant balances
Tax losses
Total net deferred income tax assets
Opening
balance
Credited
(charged) to
profit or loss1
Credited
(charged) to
equity
Other
(including
transfers)2
Closing
balance
(11.7)
(4.3)
93.7
34.7
22.2
(8.3)
13.7
5.6
55.6
201.2
(11.0)
2.8
100.3
34.0
23.3
(8.7)
(4.7)
(2.4)
84.8
218.4
(2.8)
(0.1)
(7.0)
1.5
0.9
(3.9)
–
0.8
(35.6)
(46.2)
(3.4)
0.2
(6.6)
0.4
(2.3)
0.3
–
3.2
(21.1)
(29.3)
–
1.0
–
–
–
–
(11.7)
2.6
–
(8.1)
–
(7.3)
–
–
–
–
18.4
0.5
–
11.6
5.0
–
–
0.1
(0.1)
0.4
–
1.8
(9.7)
(2.5)
2.7
–
–
0.3
1.2
0.1
–
4.3
(8.1)
0.5
(9.5)
(3.4)
86.7
36.3
23.0
(11.8)
2.0
10.8
10.3
144.4
(11.7)
(4.3)
93.7
34.7
22.2
(8.3)
13.7
5.6
55.6
201.2
1
2
In the year ended 31 March 2017, the movement in tax losses of $21.1 million includes research and development tax benefits of $3.1 million included in other income in
the statement of financial performance.
For the year ended 31 March 2018, the movement of $2.5 million in ‘other’ relates to a final adjustment to the net deferred tax assets recognised on the formation of PGH
Bricks & Pavers Pty Limited (formerly Boral CSR Bricks Pty Limited). For the year ended 31 March 2017, the movement of $0.5 million in ‘other’ relates to net deferred tax
assets recognised on the acquisition of the minority interest in Viridian Glass Limited Partnership, and an adjustment to the net deferred tax assets recognised on the
formation of PGH Bricks & Pavers Pty Limited (formerly Boral CSR Bricks Pty Limited. Refer to note 8 for further details.
Recognition and measurement
Current tax: represents the amount expected to be paid in relation to taxable income for the financial year measured using tax rates and tax
laws that have been enacted or substantively enacted by the reporting date. Current tax for current and prior periods is recognised as a liability
(or asset) to the extent that it is unpaid (or refundable).
Deferred income tax: is provided in full, using the balance sheet liability method, on temporary differences arising between the carrying amounts
of assets and liabilities for financial reporting and tax purposes. Deferred tax assets and liabilities are measured at the tax rates that are
expected to apply to the period(s) when the asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that
have been enacted or substantively enacted by the reporting date.
Deferred tax assets are recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible
temporary differences or unused tax losses and tax offsets can be utilised.
Deferred tax assets and liabilities 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. A deferred tax liability is not recognised in relation to taxable temporary differences arising
from goodwill.
Tax assets and liabilities are offset when there is a legally enforceable right to offset tax assets and liabilities, when the tax balances relate to
the same taxation authority and when the CSR group intends to settle the tax assets and liabilities on a net basis. No provision for withholding
tax has been made on undistributed earnings of overseas controlled entities where there is no intention to distribute those earnings.
70
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | BALANCE SHEET ITEMS
12 Provisions
$million
Current
Employee benefits
Restructure and rationalisation
Product liability
Restoration and environmental rehabilitation
Uninsured losses and future claims
Other1
Total current provisions
Non-current
Employee benefits
Product liability
Restoration and environmental rehabilitation
Uninsured losses and future claims
Other1
Total non-current provisions
2017
Recognised/
remeasured
Settled/
transferred
Discount
unwind
113.5
9.3
29.2
8.7
5.6
19.8
186.1
5.2
283.2
1.0
22.2
8.2
319.8
58.2
6.2
32.5
3.5
10.9
15.9
(60.9)
(4.4)
(31.7)
(9.7)
(10.7)
(18.9)
127.2
(136.3)
0.1
(32.5)
0.2
–
0.4
(31.8)
2.6
–
2.2
0.5
6.1
11.4
–
–
–
–
–
–
–
–
8.3
–
0.6
0.1
9.0
2018
110.8
11.1
30.0
2.5
5.8
16.8
177.0
7.9
259.0
3.4
23.3
14.8
308.4
1
Includes provision for anticipated disposal costs of Tomago aluminium smelters spent pot lining and lease liabilities.
Recognition, measurement and critical accounting estimates
Provisions are recognised when the CSR group has a present obligation (legal or constructive) as a result of a past event, it is probable that
settlement will be required and the obligation can be reliably estimated. Provisions which are not expected to be settled within 12 months
are measured at the present value of the estimated future cash outflows to be made by the CSR group.
Provisions representing critical accounting estimates and key sources of estimation uncertainty
Product liability: provision is made for all known asbestos claims and reasonably foreseeable future claims has been determined using
reports provided by independent experts in each of Australia and the United States, and includes an appropriate prudential margin. Refer
to note 13 for further details of the key assumptions and uncertainties in estimating this liability.
Measurement of provisions for restoration and environmental rehabilitation and legal claims: the CSR group is in the process of
remediating land in relation to legacy factory sites and is involved in a number of ongoing legal disputes. The liability is immediately
recognised when the environmental exposure is identified and the rehabilitation costs can be reliably estimated. Judgment is required in
arriving at an estimate of future costs required to extinguish these obligations. Given the nature of these issues, circumstances may
change and estimates and provisions will be updated accordingly. Expert advice is relied upon (where available) and known facts at the
date of this report are considered to arrive at the best estimate for future liabilities.
Provision for uninsured losses and future claims: relates to the CSR group's self-insurance program for workers' compensation. CSR
Limited is a licensed self-insurer in New South Wales, Queensland, Victoria, Western Australia and the Australian Capital Territory for
workers compensation insurance. The provision recognises the best estimate of the consideration required to settle the present
obligation for anticipated compensation payments and is determined at each year end reporting date using reports provided by
independent experts annually.
Other provisions
Employee benefits provisions: provision is made for benefits accruing to employees in respect of wages and salaries, annual leave, long
service leave and other employee obligations when it is probable that settlement will be required and they are capable of being reliably
measured. Provisions made in respect of employee benefits expected to be settled within 12 months are measured at their nominal
values using the remuneration rate expected to apply at the time of settlement.
71
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | BALANCE SHEET ITEMS
13 Product liability
Background
Basis of provision
CSR Limited and/or certain subsidiaries (CSR) were involved in mining
asbestos and manufacturing and marketing products containing
asbestos in Australia, and exporting asbestos to the United States.
CSR’s involvement in asbestos mining, and the manufacture of
products containing asbestos, began in the early 1940s and ceased
with the disposition of the Wunderlich asbestos cement business in
1977. As a result of these activities, CSR has been named as a
defendant in litigation in Australia and the United States.
CSR includes in its financial statements a product liability provision
covering all known claims and reasonably foreseeable future asbestos
related claims. This provision is reviewed every six months. The
provision recognises the best estimate of the consideration required
to settle the present obligation for anticipated compensation
payments and legal costs as at the reporting date. The provision is net
of anticipated workers compensation payments from available
workers compensation insurers.
CSR does not believe there is any other significant source of
insurance available to meet its asbestos liabilities. CSR no longer has
general insurance coverage in relation to its ongoing asbestos
liabilities.
In determining the product liability provision, CSR has obtained
independent expert advice in relation to the future incidence and
value of asbestos related claims in each of the Australia and the
United States. CSR has appointed Finity Consulting Pty Limited as the
independent expert to estimate the Australian liabilities. CSR has
appointed Nathan Associates, Inc (previously Gnarus Advisors LLC) as
the independent expert to estimate the United States liabilities. The
independent experts make their own determination of the
methodology most appropriate for estimating CSR’s future liabilities.
The assessments of those independent experts project CSR’s claims
experience into the future using modelling techniques that take into
account a range of possible outcomes. The present value of the
liabilities is estimated by discounting the estimated cash flows using
the pre-tax rate that reflects the current market assessment of the
time value of money and risks specific to those liabilities.
Many factors are relevant to the independent experts’ estimates of
future asbestos liabilities, including:
numbers of claims received by disease and claimant type and
expected future claims numbers, including expectations as to
when claims experience will peak;
expected value of claims;
the presence of other defendants in litigation or claims involving
CSR;
the impact of and developments in the litigation and settlement
environment in each of Australia and the United States;
estimations of legal costs;
expected claims inflation; and
the discount rate applied to future payments.
There are a number of assumptions and limitations that impact on the
assessments made by CSR’s experts, including the following:
assumptions used in the modelling are based on the various
considerations referred to above;
the future costs of asbestos related liabilities are inherently
uncertain for the reasons discussed in this note;
uncertainties as to future interest rates and inflation;
the analysis is supplemented by various academic material on the
epidemiology of asbestos related diseases that is considered by
the experts to be authoritative;
the analysis is limited to liability in the respective jurisdictions of
Australia and the United States that are the subject of the analysis
of that expert and to the asbestos related diseases that are
currently compensated in those jurisdictions; and
the effect of possible events that have not yet occurred which are
currently impossible to quantify, such as medical and
epidemiological developments in the future in treating asbestos
diseases, future court and jury decisions on asbestos liabilities,
and legislative changes affecting liability for asbestos diseases.
In Australia, asbestos related personal injury claims have been made
by employees and ex-employees of CSR, by others such as contractors
and transporters and by users of products containing asbestos, by
people who lived near factories operated by former subsidiaries of
CSR, as well as residents of and visitors to Wittenoom. As at 31 March
2018, there were 256 such claims pending.
In the United States, claims are made by people who allege exposure
to asbestos fibre used in the manufacture of products containing
asbestos or in the installation or use of those products. As at 31
March 2018, there were 349 such claims pending.
CSR has been settling claims since 1989. It has been, and remains,
CSR’s policy to ensure that all legitimate asbestos related claims,
whether in Australia or the US, are resolved on a fair and equitable
basis. Where there is a demonstrated liability, CSR will seek to offer a
fair settlement and, in the case of US claimants, one that is consistent
with claim settlement values in Australia.
Default judgements have been sought and obtained against CSR in
the US, without CSR being present or represented (and for damages
that are excessive and of a nature that would not be recognised in
Australia). Australian law does not recognise the jurisdiction of US
courts in such matters. There have not been any US judgements
enforced against CSR. As at 31 March 2018, CSR had resolved
approximately 4,500 claims in Australia and approximately 137,600
claims in the United States.
Claims experience
CSR’s recent claims experience is summarised in the graphs below.
Graph 1: Five year history – claim numbers
804
1,000
800
600
400
200
0
257
365
434
290
2014
2015
2016
2017
2018
Number of claims received
Number of claims resolved
The annual amounts paid by CSR in respect of asbestos related
claims vary year on year depending on the number and types of
claims received and resolved during each year, the litigation or other
determination of particular claims or issues and any determination by
management to resolve claims that may have been received in earlier
years.
The chart below shows recent cash payments for asbestos claims.
Graph 2: Five year history – claim payments (A$ million)
33.8
31.1
27.6
29.4
31.7
2014
2015
2016
2017
2018
40
30
20
10
0
72
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | BALANCE SHEET ITEMS
13 Product liability (continued)
Basis of provision (continued)
In Australia, the methodology used by Finity Consulting Pty Limited
produces the central estimate of future asbestos liabilities which
represents the average expectation of the range of possible
outcomes. At 31 March 2018 the central estimate was A$166.7
million calculated using a discount rate of 3.75%. On an undiscounted
and inflated basis that central estimate would be A$222.5 million
over the years to 2070, being the year that the Australian
independent expert advises CSR is relevant for the estimation of
CSR’s future Australian asbestos liabilities.
In the United States the methodology used by Nathan Associates, Inc
produces a base case estimate or most likely outcome. At 31 March
2018, the base case estimate was US$51.0 million calculated using a
discount rate of 2.60%. On an undiscounted and inflated basis that
base case estimate would be US$58.5 million over the anticipated
further life of the United States liability (40 years).
The product liability provision is determined every six months by
aggregating the Australian and United States estimates noted above,
translating the United States base case estimate to Australian dollars
using the exchange rate prevailing at the balance date and adding a
prudential margin. The prudential margin is determined by the CSR
directors at the balance date, having regard to the prevailing litigation
environment, any material uncertainties that may affect future
liabilities and the applicable long-term Australian dollar to United
States dollar exchange rate. As evidenced by the analysis below, due
in particular, to the fluctuations in exchange rate, the prudential
margin has varied over the past five years. The directors anticipate
that the prudential margin will continue to fluctuate within a range
approximating 10% to 30% depending on the prevailing
circumstances at each balance date.
At 31 March 2018, a provision of $289.0 million (31 March 2017:
$312.4 million) has been made for all known claims and reasonably
foreseeable future claims, and includes a prudential margin of $55.7
million (31 March 2017: $60.0 million) above the aggregate most
likely estimate of the future asbestos liabilities in Australia and the
United States as determined by Finity Consulting Pty Limited and
Nathan Associates, Inc respectively.
Having regard to the extremely long tailed nature of the liabilities and
the long latency period of disease manifestation from exposure, the
estimation of future asbestos liabilities is subject to significant
complexity. As such, there can be no certainty that the product liability
provision as at 31 March 2018 will definitively estimate CSR’s future
asbestos liabilities. If the assumptions adopted by CSR’s experts
prove to be incorrect, the current provision may be shown to
materially understate or overstate CSR’s asbestos liability.
However, taking into account the provision already included in CSR’s
financial statements and current claims management experience,
CSR is of the opinion that asbestos litigation in Australia and the
United States will not have a material adverse impact on the CSR
group's financial condition.
CSR’s asbestos provision from 2014 to the year ended 31 March
2018 is summarised in the graph and table below.
Graph 3: Five year history – asbestos provision
500
400
300
200
100
0
369.1
350.7
334.5
312.4
289.0
2014
2015
Base case provision A$m
2016
2017
2018
Prudential margin A$m
Table 1: Five year history – asbestos provision
$million
Year ended 31 March
United States base case estimate US$
United States base case estimate A$
Australian central estimate A$
Subtotal A$
Prudential margin A$
Prudential margin %
Total product liability provision A$
2014
123.5
133.5
161.8
295.3
73.8
25.0%
369.1
2015
104.9
137.0
157.2
294.2
56.5
19.2%
350.7
2016
86.0
112.2
157.1
269.3
65.2
24.2%
334.5
2017
72.2
94.5
157.9
252.4
60.0
23.8%
312.4
2018
51.0
66.6
166.7
233.3
55.7
23.9%
289.0
73
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | CAPITAL STRUCTURE AND RISK MANAGEMENT
Capital structure and risk management
14 Borrowings and credit facilities
i)
Borrowings
Non-current borrowings – unsecured
Recognition and measurement
2018
28.0
2017
30.5
Borrowings are recorded initially at fair value, net of transaction costs. Subsequent to initial recognition, borrowings are measured at
amortised cost with any difference between the initial recognised amount and the redemption value being recognised in profit or loss over
the period of the borrowing using the effective interest rate method.
ii) Credit facilities
The CSR group has a total of $325.0 million (31 March 2017: $325.0 million) committed standby facilities with external financial institutions.
These facilities have fixed maturity dates as follows: $111.0 million in 2019, $164.0 million in 2020, with the balance of $50.0 million in 2021.
As at 31 March 2018, $297.0 million of the standby facilities were undrawn (2017: $294.5 million undrawn).
15
Issued capital
On issue 31 March 2017
On-market share buy-back – net of transaction costs2
On issue 31 March 2018
Ordinary shares
fully paid1
Issued capital
$million
504,480,858
1,036.8
(172,631)
(0.6)
504,308,227
1,036.2
1 Fully paid ordinary shares are listed on the Australian Securities Exchange and carry one vote per share and the right to dividends.
2
In the year ended 31 March 2017, 1,219,457 shares were purchased for $4.3 million (net of transaction costs) as part of the on-market share buy-back.
No shares were issued during the years ended 31 March 2018 and 31 March 2017 under employee share plans as shares in respect of the
plans were acquired on market. During the years ended 31 March 2018 and 31 March 2017, eligible shareholders were able to reinvest all or
part of their dividends in fully paid ordinary shares. Shares were acquired on-market and did not have any impact on issued capital.
Net tangible assets per ordinary share for the year ended 31 March 2018 are $2.15 (2017: $2.00). Net tangible assets per share is calculated
as net assets attributable to CSR Limited shareholders of $1,227.4 million (2017: $1,155.0 million) less intangible assets of $143.9 million
(2017: $143.8 million) divided by the number of issued ordinary shares of 504.3 million (2017: 504.5 million).
During the year ended 31 March 2016, the company announced that as part of its ongoing capital management strategy, it would undertake an
on-market share buy-back. The share buy-back was completed during the year ended 31 March 2018.
16 Dividends and franking credits
i) Dividends
Dividend type
2016 Final
2017 Interim
2017 Final
2018 Interim
2018 Final1
Cents per
share
Franking
Total
amount
$million
Date
paid/payable
Graph 1: Dividends declared relating to each financial year
– cents per share
12.0
13.0
13.0
13.5
13.5
Nil
Nil
50%
50%
75%2
60.7
5 July 2016
65.6 13 December 2016
65.6
4 July 2017
68.1 12 December 2017
3 July 2018
68.1
30.0
20.0
10.0
-
20.0
23.5
26.0
27.0
10.0
2014
2015
2016
2017
2018
1 The final dividend for the financial year ended 31 March 2018 has not been recognised in this financial report because it was resolved to be paid after 31 March 2018. The
amounts disclosed as recognised in 2018 are the final dividend in respect of the financial year ended 31 March 2017 and the interim dividend in respect of the financial
year ended 31 March 2018.
2 Final dividend of 13.5 cents per share, 75% (10.125 cents) franked at the 30.0% corporate tax rate.
ii) Franking credits
$million
Franking account balance on an accruals basis1
2018
47.0
2017
38.2
1 The above amounts are calculated from the balance of the franking account as at the end of the reporting period, adjusted for franking credits and debits that will arise
from the settlement of income tax liabilities or receivables after the end of the year.
74
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | CAPITAL STRUCTURE AND RISK MANAGEMENT
Foreign
currency
translation
reserve
Employee
share
reserve
17 Reserves
$million
Balance at 1 April 2017
Hedge profit recognised in equity
Hedge loss transferred to the statement of financial
performance
Translation of foreign operations
Income tax expense related to other comprehensive
income
Share-based payments expense
Income tax benefit related to share-based payments
expense
Acquisition of treasury shares
Non-controlling interests on acquisition of subsidiary
Balance at 31 March 2018
Balance at 1 April 2016
Hedge loss recognised in equity
Hedge profit transferred to the statement of financial
performance
Translation of foreign operations
Recycling of foreign currency translation reserve on
disposal of equity accounted investment
Income tax benefit related to other comprehensive
income
Share-based payments expense
Income tax benefit related to share-based payments
expense
Acquisition of treasury shares
Non-controlling interests on acquisition of subsidiary
Hedge
reserve
(22.2)
10.8
18.1
–
(8.7)
–
–
–
–
(2.0)
6.7
(31.3)
(10.1)
–
–
12.5
–
–
–
–
(6.6)
–
–
2.0
–
–
–
–
–
(4.6)
(0.5)
–
–
(0.5)
(5.6)
–
–
–
–
–
31.2
–
–
–
–
3.7
2.6
–
–
Share
based
payment
trust
reserve
(15.9)
–
–
–
–
–
–
Non-
controlling
interests
reserve
Other
Total
(56.6)
–
–
(3.3)
–
–
(73.4)
10.8
18.1
–
–
–
–
–
–
–
–
–
–
2.0
(8.7)
3.7
2.6
(5.8)
(2.5)
(5.8)
–
–
(2.5)
37.5
(21.7)
(59.1)
(3.3)
(53.2)
27.5
–
–
(10.5)
–
–
0.5
–
–
(3.3)
–
–
20.4
(31.3)
(10.1)
–
–
–
3.2
0.5
–
–
–
–
–
–
–
(5.4)
–
–
–
–
–
–
–
(57.1)
(56.6)
–
–
–
–
–
–
–
(0.5)
(5.6)
12.5
3.2
0.5
(5.4)
(57.1)
(3.3)
(73.4)
Balance at 31 March 2017
(22.2)
(6.6)
31.2
(15.9)
Nature and purpose of reserves
Hedge reserve: the hedge reserve is used to record gains or losses on a hedging instrument in a cash flow hedge that are recognised in
other comprehensive income. Amounts are reclassified to profit or loss when the associated hedged transaction affects profit or loss.
Foreign currency translation reserve: exchange differences arising on translation of foreign controlled entities are recognised in other
comprehensive income and accumulated in a separate reserve within equity.
Employee share reserve: the employee share reserve is used to recognise the share-based payments expense and associated income tax
recognised through other comprehensive income.
Share-based payment trust reserve: treasury shares are shares in CSR Limited that are held by the CSR Limited Share Plan Trust (‘Trust’) for
the purpose of issuing shares under the CSR employee share plans and the CSR executive incentive plans (see pages 43 to 46 of the
remuneration report for further detail). When the Trust purchases the company’s equity instruments, the consideration paid is recorded in
the share-based payments trust reserve.
Number of shares
Opening balance
Acquisition of shares by the Trust (average price of $4.39 (2017: $3.51) per share)
Issue of shares under executive incentive plans
Closing balance
2018
2017
824,219
1,325,619
(994,582)
989,753
1,540,000
(1,705,534)
1,155,256
824,219
Non-controlling interests reserve: this reserve is used to record the differences which may arise as a result of transactions with non-
controlling interests that do not result in a loss of control. Details of the nature of the amounts recognised in the year ended 31 March 2018
are set out in note 8.
Other reserves: other reserves are used to recognise the written put option the minority shareholders of the Martini business have to sell all
of their remaining interest to the group at an agreed price (based on the financial results of the business).
75
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | CAPITAL STRUCTURE AND RISK MANAGEMENT
18 Financial risk management
The CSR group’s activities expose it to a variety of financial risks:
credit risk;
liquidity risk; and
(i)
(ii)
(iii) market risk.
This note presents information about the Risk Management Policy
framework (‘framework’) and each of these risks.
The framework sets out the specific principles in relation to the use of
financial instruments in hedging exposures to commodity risk, foreign
exchange risk, interest rate risk and credit risk, in addition to the use
of derivatives and the investment of excess liquidity. The Risk
Management Policy has been approved by the board of directors.
Risk management policies and systems are reviewed regularly to
reflect changes in market conditions and the CSR group’s activities.
Compliance with the framework and procedures is reviewed by the
Finance Committee on a routine basis. The Finance Committee
membership consists of the managing director and other relevant
senior executives.
The CSR group uses a variety of derivative instruments to manage
financial and commodity price risks. During the year ended 31 March
2018 the CSR group began hedging electricity price risk using
derivative instruments. Otherwise there have been no changes in the
CSR group’s exposure to risks or the Risk Management Policies used
to manage these risks during the years ended 31 March 2018 and 31
March 2017.
The CSR group does not use derivative or financial instruments for
speculative or trading purposes.
Recognition and measurement
Derivatives are initially recognised at fair value on the date a
derivative contract is entered into and are subsequently remeasured
to their fair value at each reporting date. The resulting gain or loss is
recognised in profit or loss immediately unless the derivative is
designated and effective as a hedging instrument, in which event the
timing of the recognition in profit or loss depends on the nature of the
hedge relationship.
i)
Credit risk
Nature of the risk
Credit risk is the risk of financial loss to the CSR group if a customer
or counterparty to a financial instrument fails to meet its contractual
obligations, and arises principally from the CSR group's receivables
from customers. The carrying amount of financial assets represents
the maximum credit exposure.
Credit risk management: receivables
The CSR group's exposure to credit risk is influenced mainly by the
individual characteristics of each customer. However, management
also considers the factors that may influence the credit risk of its
customer base, including the default risk of the industry and country
in which customers operate. To manage this risk, the CSR group has a
policy for establishing credit approvals and limits under which each
new customer is analysed individually for creditworthiness before the
CSR group's standard payment and delivery terms and conditions are
offered. Sale limits are established for each customer and reviewed
regularly.
Any sales exceeding those limits require approval from the general
manager. The CSR group continuously monitors the financial viability
of its counterparties, ageing analysis and, where necessary, carries
out a reassessment of sale limits provided.
76
Concentrations of credit risk with respect to receivables are limited
due to the large number of customers and markets in which the CSR
group does business, as well as the dispersion across many
geographic areas.
The CSR group establishes an allowance for impairment that
represents its estimate of incurred losses in respect of trade and
other receivables (see note 9).
Credit risk management: derivatives
The CSR group has an established counterparty credit risk policy.
Derivatives may be entered into with banks that are rated at least A–
from rating agency Standard & Poor's or A3 from rating agency
Moody’s, unless otherwise approved by the board.
ii)
Liquidity risk
Nature of the risk
Liquidity risk is the risk that the CSR group has insufficient funds to
meet its financial obligations when they fall due.
Liquidity risk management
Liquidity risk management requires maintaining sufficient cash, bank
facilities and reserve borrowing facilities by continuously monitoring
forecast and actual cash flows and matching the maturity profiles of
financial assets and liabilities. The CSR group’s approach to managing
liquidity is to ensure, as far as possible, that it will always have
sufficient liquidity to meet its liabilities when due, without incurring
unacceptable losses or risking damage to the CSR group’s reputation.
Details of credit facilities and the maturity profile are given in note 14.
The table below analyses the undiscounted cash flows for the CSR
group’s financial liabilities and derivative financial instruments,
currently in a liability position, into relevant maturity groupings based
on the remaining period at the reporting date to maturity:
Liquidity risk
($million)
1 year
or less
1 to 3
years
3 to 5
years
Total
–
–
–
–
–
–
–
–
–
305.2
3.7
28.8
27.9
1.9
367.5
287.3
3.7
31.5
2018
Current payables
Non-current other payables
Borrowings (including
interest)
Commodity financial
instruments
Foreign currency financial
instruments1
305.2
–
0.7
–
3.7
28.1
18.5
9.4
0.6
1.3
Total
325.0
42.5
2017
Current payables
Non-current other payables
Borrowings (including
interest)
Commodity financial
instruments
Foreign currency financial
instruments1
287.3
–
0.8
–
3.7
30.7
29.6
23.0
0.9
53.5
0.6
0.1
–
0.7
Total
318.3
57.5
0.9
376.7
1
Settlement of commodity and foreign currency financial instruments will be
offset by revenue from the sale of commodities.
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | CAPITAL STRUCTURE AND RISK MANAGEMENT
Commodity price risk sensitivity – aluminium
At 31 March 2018, had the Aluminium price strengthened/weakened
by 10%, assuming a constant exchange rate on hedging contracts, the
post-tax profit arising from commodity swaps would have been
materially unchanged, mainly as a result of the effectiveness of the
hedging in place. Equity before tax would have been $52.7 million
lower/$52.7 million higher (2017: $65.5 million lower/$65.5 million
higher) had the Aluminium price strengthened/weakened by 10%,
assuming a constant exchange rate on hedging contracts arising
mainly from commodity swaps designated as cash flow hedges.
Other commodity price risks
Other commodity price risks include:
Oil: the CSR group has exposure to oil commodity prices through
an oil price linked gas purchasing contract. The A$ gas purchase
price is partially a function of the prevailing US$ oil price and
A$/US$ exchange rate. The CSR group has a policy of hedging
the oil price component of the price of gas purchased to reduce
the volatility of its energy costs.
Electricity: the CSR group has exposure to the National Electricity
Market spot electricity price through an electricity supply
agreement. The CSR group has a policy of hedging this spot price
exposure to reduce the volatility of its energy costs.
No further detailed disclosure is included on these commodity price
risks given they are not material to the CSR group.
Interest rate risk management
At the reporting date, CSR group’s interest rate exposure is limited to
the net debt balance of $14.3 million (2017: $11.4 million). The
carrying amount of the net debt balance is the same as the fair value.
The maturity profile for the cash balance of $13.7 million is less than
1 year and the maturity profile for the borrowings balance of $28.0
million is one to three years. The average interest rate on debt for the
year was 2.4% (2017: 2.4%) and the average interest rate on cash
balances for the year was 0.44% (2017: 0.44%).
At 31 March 2018, if interest rates had increased/decreased by one
percentage point per annum from the year end rates with all other
variables held constant, the post-tax profit for the year would have
been $0.2 million lower/higher (2017: $0.1 million lower/higher),
mainly as a result of higher/lower interest expense on debt balances.
18 Financial risk management (continued)
iii) Market risk
Nature of commodity price risk – aluminium
The CSR group has exposure to aluminium commodity prices which
arises from sales contracts that commit the CSR group to supply
aluminium in future years. Prices for product supplied under these
contracts are a function of the US dollar market price at the time of
delivery.
Commodity price risk management – aluminium
The CSR group has a policy of hedging its aluminium sales (net of any
linked exposure on inputs such as Alumina), where acceptable pricing
is available, to reduce the volatility of its aluminium earnings when
exchanged into Australian dollars. Eligible hedging instruments used
for hedging commodity price risk include commodity forward contracts
and commodity options. Hedging is undertaken at declining levels for
up to four years.
The price of product supplied under sales contracts comprises two
components, the London Metal Exchange (LME) Primary Aluminium
cash price, and a physical premium. Over the year ended 31 March
2017, the average of the daily LME cash price was US$2,044.4 per
tonne and the average Platts mid-point physical premium was
US$111.0 per tonne. The LME price component represented 95% of
the sum of the two. The CSR group designates the LME price
component of sales as the hedged item. Commodity forward and
option contracts are also priced against the LME Primary Aluminium
cash price. There is an established economic relationship between the
physical sales of aluminium and the commodity forward and option
contracts as they are both priced using the same reference price. As
the underlying risk of the aluminium price risk is identical to the
hedged component, the CSR group has established a hedge ratio of
1:1 for all its hedging relationships over aluminium price risk.
The CSR group does not hedge its exposure to the variability in
physical metal premiums. In the CSR group’s view, there is currently
no viable hedge instrument for physical metal premiums and this
component of the metal sales price remains unhedged.
The table below provides information about the aluminium commodity
swaps entered into by the CSR group to manage its aluminium
commodity price exposure:
Notional value
Fair value
1 year
or less
1 to 3
years
3 to 5
years
Total Asset
Liability
216.7
310.0
3.7
530.4 10.4
(23.5)
254.0
356.1
10.4
620.5
–
(49.1)
Commodity
price risk
($million)
2018
Aluminium
commodity
swaps1,2
2017
Aluminium
commodity
swaps1,2
1 The average price in US dollars per metric tonne at 31 March 2018 was
$1,990.7 (2017: $1,838.4). The average price for the individual periods does not
materially differ from the overall average price disclosed.
2 $13.1 million net of commodity contract losses (2017: $49.1 million net losses)
were deferred in 2018 as the losses relate to cash flow hedges of highly probable
forecast transactions. The expected timing of recognition based on the fair values
at 31 March 2018 is one year or less: $14.7 million loss (2017: $28.9 million
loss); one to three years: $1.4 million gain (2017: $20.0 million loss); three to
five years: $0.2 million gain (2017: $0.2 million loss).
77
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | CAPITAL STRUCTURE AND RISK MANAGEMENT
18 Financial risk management (continued)
iii) Market risk (continued)
Nature of foreign exchange risk
The CSR group’s major foreign currency exposure relates to its US dollar aluminium sales revenue and payments for raw materials and capital
equipment.
Foreign exchange risk management
The CSR group uses a variety of foreign exchange risk management instruments, including spot, forward and swap currency contracts and
currency options, to hedge foreign currency denominated receipts resulting from revenue and payments for raw materials and capital equipment
denominated in foreign currencies.
The CSR group’s policy is to hedge its net US dollar aluminium exposure to reduce the volatility of aluminium earnings, when acceptable
Australian dollar outcomes can be achieved.
Forecast US dollar receipts are based on highly probable forecast monthly sales transactions of aluminium which ensures that the underlying
foreign currency exchange risk is identical to the hedged risk component (i.e. the US dollar price). Therefore, the CSR group has established a
hedge ratio of 1:1 for all its foreign exchange hedging relationships. Hedging is undertaken at declining levels for up to four years.
The CSR group’s policy to hedge foreign exchange exposures arising from payments for raw materials are hedged for up to 18 months with a
declining hedge level over time, although higher levels can be hedged when using currency options. The policy requires that material foreign
currency denominated purchases of capital equipment be fully hedged to the domestic currency to eliminate currency exposure. Similarly, the
policy also requires that all material foreign currency assets and liabilities are hedged to the relevant entity’s domestic currency.
Foreign exchange risk sensitivity
At 31 March 2018, had the Australian dollar strengthened/weakened by 10% against the respective foreign currencies with all other variables
held constant, the post-tax profit arising from forward exchange rate agreements would have been materially unchanged, mainly as a result of
the effectiveness of the hedging in place. Equity before tax would have been $22.7 million higher/$26.8 million lower (2017: $31.7 million
higher/$36.8 million lower) had the Australian dollar strengthened/weakened by 10% against the respective foreign currencies arising mainly
from foreign forward exchange contracts designated as cash flow hedges.
The table below provides information about the CSR group’s significant exchange rate exposures in forward exchange rate agreements:
Foreign exchange risk1,3
($million)
Average
exchange rate2
Notional value
Fair value
1 year or less
1 to 3 years
Total
Asset
Liability
2018
US dollar – buy
US dollar – sell
NZ dollar – buy
NZ dollar – sell
Euro – buy
Euro – sell
Japanese yen - buy
Japanese yen - sell
Total
2017
US dollar – buy
US dollar – sell
NZ dollar – buy
NZ dollar – sell
Euro – buy
Euro – sell
Total
0.78
0.76
1.07
1.06
0.64
0.65
86.40
86.08
0.76
0.75
1.07
1.06
0.69
0.71
123.0
162.3
12.0
54.7
26.9
2.6
3.1
1.1
68.1
207.4
11.1
29.4
9.1
2.7
5.3
196.3
–
–
–
–
–
–
–
176.0
–
–
–
–
128.3
358.6
12.0
54.7
26.9
2.6
3.1
1.1
68.1
383.4
11.1
29.4
9.1
2.7
2.1
5.8
0.1
0.1
1.0
–
0.2
–
9.3
0.9
7.4
–
0.3
–
–
8.6
(0.2)
(1.4)
–
(0.2)
–
–
–
(0.1)
(1.9)
(0.1)
(0.1)
(0.3)
–
(0.2)
–
(0.7)
1 $6.8 million of net foreign exchange contract gains (2017: $6.7 million gains) have been deferred as the gains relate to cash flow hedges of highly probable forecast
transactions. The expected timing of recognition based on the fair values at 31 March 2018 is one year or less: $6.4 million gain (2017: $3.9 million gain); and one to three
years: $0.4 million gain (2017: $2.8 million gain).
2 Average rates for the individual periods do not materially differ from the overall average rates disclosed.
3 The CSR group has insignificant exchange rate exposures in GBP.
78
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | CAPITAL STRUCTURE AND RISK MANAGEMENT
18 Financial risk management (continued)
iv) Capital management
The CSR group manages its capital to ensure that entities in the CSR group will be able to continue as a going concern while maximising the
return to shareholders through the optimisation of the debt and equity balances.
The capital structure of the CSR group consists of debt which includes the borrowings disclosed in note 14, cash and cash equivalents, issued
capital and reserves disclosed in notes 15 and 17 and retained profits. The CSR group reviews the capital structure regularly and balances its
overall capital structure through the payment of dividends, new share issues, share consolidations and share buy-backs, as well as the issue of
new debt or the redemption of existing debt.
v) Fair value measurement of financial instruments
The table below provides an analysis of hedge accounted financial instruments that are measured subsequent to initial recognition of fair value,
including their levels in the fair value hierarchy:
$million
Financial assets at fair value
Commodity swaps – aluminium
Commodity swaps – oil and electricity
Forward exchange rate contracts
Other
Total
Financial liabilities at fair value
Commodity swaps – aluminium
Commodity swaps – oil and electricity
Forward exchange rate contracts
Total
2018
Level 2
2017
Level 2
10.4
3.6
9.3
1.5
24.8
23.5
3.7
1.9
29.1
–
–
8.8
–
8.8
49.1
3.0
0.7
52.8
Level 1: fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities. The CSR
group has no Level 1 financial instruments in the fair value hierarchy.
Level 2: fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the
asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on
observable market data (unobservable inputs). The CSR group has no Level 3 financial instruments in the fair value hierarchy.
There were no transfers from Level 2 to Level 1 and Level 3 in 2018 and no transfers in either direction in 2018.
The fair value amounts shown above are not necessarily indicative of the amounts that the CSR group would realise upon disposition, nor do
they indicate the CSR group’s intent or ability to dispose of the financial instrument.
Recognition and measurement
The fair value of financial instruments, including financial assets and liabilities approximates their carrying amount.
The fair values of derivative instruments are calculated using quoted market prices. Where such prices are not available, a discounted cash
flow analysis is performed using the applicable yield curve for the duration of the instruments for non-optional derivatives, and option pricing
models for optional derivatives. Foreign currency forward contracts are measured using quoted exchange rates and yield curves derived
from quoted interest rates matching maturities of the contract.
The CSR group designates its derivatives as cash flow hedges. The effective portion of changes in the fair value of derivatives that are
designated and qualify as cash flow hedges is deferred in equity. The gain or loss relating to the ineffective portion is recognised
immediately in profit or loss. Amounts deferred in equity are recycled in profit or loss in the year when the hedged item is recognised in profit
or loss.
Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and
characteristics are not closely related to those of host contracts.
79
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | CAPITAL STRUCTURE AND RISK MANAGEMENT
18 Financial risk management (continued)
vi) Cash flow hedging
The impact of hedging instruments designated in material hedging relationships as of 31 March 2018 on the statement of financial position of
the CSR group is as follows:
Commodity price risk1
Foreign exchange risk
Aluminium commodity swaps
(forecast sales)2
Forward currency contracts
(forecast sales)3
Forward currency contracts
(forecast purchases)4
2018
2017
204,000
tonnes
258,000
tonnes
10.4
23.5
(13.1)
–
49.1
(49.1)
2018
351.9
5.9
1.5
4.4
2017
376.1
2018
109.5
7.4
0.1
7.4
3.4
0.4
2.4
2017
68.6
–
0.7
(0.7)
$million
Notional amount
Carrying amount:
Asset
Liability
Changes in value of instrument used
for calculating hedge ineffectiveness
– (loss) gain
1 The CSR group has insignificant hedging relationships in oil commodity swaps and electricity swaps.
2 $1.4 million (2017: $nil) of the carrying amount of Aluminium commodity swaps are disclosed within current other financial assets and $9.0 million (2017: $nil) within non-
current other financial assets. $16.1 million (2017: $28.9 million) of Aluminium commodity swaps are disclosed within current other financial liabilities and $7.4 million
(2017: $20.2 million) within non-current other financial liabilities.
3 $4.3 million (2017: $4.6 million) of the carrying amount of forward currency contracts are disclosed within current other financial assets and $1.6 million (2017: $2.8
million) within non-current other financial assets. $0.1 million (2017: $nil) of the carrying amount of forward currency contracts are disclosed within current other financial
liabilities and $1.4 million (2017: $0.1 million) within non-current other financial liabilities.
4 $3.3 million (2017: $nil) of the carrying amount of forward currency contracts are disclosed within current other financial assets and $0.1 million (2017 $nil) within non-
current other financial assets. $0.4 million (2017: $0.7 million) of forward current contract liabilities are disclosed within current other financial liabilities.
The impact of hedged items designated in hedging relationships as of 31 March 2018 on the statement of financial position of the CSR group is
as follows:
Commodity price risk
Foreign exchange risk
Aluminium commodity swaps
(forecast sales)
Forward currency contracts
(forecast sales)
Forward currency contracts
(forecast purchases)
2018
13.1
2017
49.2
2018
(4.4)
2017
(7.4)
2018
(2.4)
2017
0.7
(13.1)
(49.1)
4.4
7.4
2.4
(0.7)
$million
Changes in value of hedged item
used for calculating hedge
ineffectiveness – gain (loss)
Cash flow hedge reserve
(continuing hedges) – gain (loss)
The below hedging relationships affected profit or loss and other comprehensive income as follows:
Commodity price risk
Foreign exchange risk
Aluminium commodity swaps
(forecast sales)
Forward currency contracts
(forecast sales)
Forward currency contracts
(forecast purchases)
2018
7.1
2017
(50.7)
2018
1.6
2017
6.6
2018
2.2
2017
(0.7)
28.9
(23.6)
(4.6)
2.8
0.7
4.5
$million
Hedge gain (loss) recognised in
other comprehensive income1
Gain (loss) reclassified from other
comprehensive income to profit or
loss before tax2
Line item in statement of
comprehensive income
Trading
revenue
Trading
revenue
Trading
revenue
Trading
revenue
Cost of sales
Cost of sales
No hedge ineffectiveness was recognised in profit or loss during the year.
1 The hedge gain (loss) recognised in other comprehensive income totalling $10.9 million gain (2017: $44.8 million loss) together with the $2.5 million gain (2017: $0.2
million gain) on oil and electricity swaps less non-controlling interests of $2.6 million (2017: $13.3 million) reconciles to the hedge gain (loss) transferred to equity in note
17.
2 The gain (loss) reclassified from other comprehensive income to profit or loss after tax totalling $25.0 million gain (2017: $16.3 million loss) together with the $0.4 million
gain (2017: $nil) on oil and electricity swaps less non-controlling interests of $7.3 million gain (2017: $6.2 million loss) reconciles to the hedge gain (loss) transferred to
statement of financial performance in note 17.
80
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | GROUP STRUCTURE
Group structure
19 Subsidiaries
Entity
2018
2017
Entity
% CSR
ownership
% CSR
ownership
2018
2017
Incorporated in Australia
A-Jacks Hardwall Plaster Pty Ltd
A-Jacks Unit Trust
AFS Systems Pty Ltd2
AFS Unit Trust
BI (Contracting) Pty Limited
Bradford Insulation Industries Pty Limited
Bradford Insulation (SA) Pty Limited1
Bricks Australia Services Pty Limited2
Buchanan Borehole Collieries Pty Ltd
CSR Building Products Limited2
CSR Developments Pty Ltd
CSR Erskine Park Trust
CSR Finance Ltd2
CSR Industrial Property Trust
CSR Industrial Property Nominees No. 1 Pty Limited
CSR Industrial Property Nominees No. 2 Pty Limited
CSR International Pty Ltd
CSR Investments Pty Limited2
CSR Investments (Asia) Pty Limited
CSR Investments (Indonesia) Pty Limited
CSR Martini Pty Limited
CSR Share Plan Pty Limited
CSR Structural Systems Pty Limited2
CSR Viridian Finance Pty Limited2
CSR Viridian Holdings Limited2
CSR Viridian International Pty Limited
CSR Viridian Investment Company Pty Limited
CSR Viridian Limited2
CSR Viridian Operations Pty Limited
CSR Viridian Properties Pty Limited
CSR-ER Nominees Pty Ltd
DMS Security Glass Pty Ltd
Don Mathieson & Staff Glass Pty Ltd
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
70
100
100
100
100
100
100
100
100
100
100
100
100
Incorporated in Australia (continued)
100 Gove Aluminium Finance Ltd
100 Midalco Pty Limited
100 High Road Capital Pty Limited3
100 Monier PGH Superannuation Pty Limited
100 PASS Pty Limited
100 PGH Bricks & Pavers Pty Limited2,4
100 Rediwall Unit Trust
100 Rivarol Pty Limited2
100 SA Independent Glass Pty Ltd
100 Seltsam Pty Limited
100 Softwood Holdings Limited1
100 Softwood Plantations Pty Limited1
100 Softwoods Queensland Pty Ltd1
100 Thiess Bros Pty Ltd
100 Thiess Holdings Pty Limited
100
100 Incorporated in New Zealand
100 CSR Building Products (NZ) Ltd
100 CSR Viridian (New Zealand) Holdings Limited
100 CSR Viridian (New Zealand) Limited
70 Viridian Glass Limited Partnership5
100 Norm Fowke Glass Limited
100 Euroglass Systems Limited
100 Glass Concepts Limited
100 National Glass Limited
100 Tasman Glass Limited
100 Viridian Glass GP Limited
100
100 Incorporated in other countries
100 CSR Guangdong Glasswool Co., Ltd (China)
100 CSR Insurance Pte Limited (Singapore)
100 PT Prima Karya Plasterboard (Indonesia)
100
70
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
79
100
100
70
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
79
100
100
In members voluntary liquidation.
1
2 These subsidiaries have been granted relief from the necessity to prepare financial reports in accordance with ASIC Corporations (Wholly-owned Companies) Instrument
2016/785.
3 During the year, Bradford Energy Finance Pty Limited changed its legal name to High Road Capital Pty Limited.
4 The CSR group held a 60% interest in Boral CSR Bricks Pty Limited (‘BCB’) until 31 October 2016 when the remaining 40% interest was acquired. Following the acquisition,
BCB has changed its legal name to PGH Bricks & Pavers Pty Limited. Refer to note 8 for further details.
5 The CSR group held a 58% interest in Viridian Glass Limited Partnership until 30 June 2016 when the remaining 42% interest was acquired. Refer to note 8 for further
details.
20 Deed of cross guarantee
CSR Limited, Bricks Australia Services Pty Limited, CSR Building Products Limited, CSR Finance Ltd, CSR Investments Pty Limited, CSR Structural
Systems Pty Limited, AFS Systems Pty Ltd (joined during the year ended 31 March 2018) CSR Viridian Finance Pty Limited, CSR Viridian Holdings
Limited, CSR Viridian Limited, PGH Bricks & Pavers Pty Limited (joined during the year ended 31 March 2017) and Rivarol Pty Limited are parties
to a deed of cross guarantee (‘the Deed’) under which each company guarantees the debts of the others. By entering into the Deed, the wholly
owned entities have been relieved from the requirement to prepare a financial report and directors’ report under ASIC Corporations (Wholly-
owned Companies) Instrument 2016/785.
The above companies represent a ‘closed group’ for the purposes of the Class Order, and as there are no other parties to the Deed that are
controlled by CSR Limited, they also represent the ‘extended closed group’.
81
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | GROUP STRUCTURE
20 Deed of cross guarantee (continued)
Set out below is a consolidated statement of financial performance, a consolidated statement of comprehensive income, a consolidated
statement of financial position and a summary of movements in consolidated retained profits for the years ended 31 March 2018 and 31 March
2017 of the closed group.
i)
Consolidated statement of financial performance
$million
Trading revenue – sale of goods
Cost of sales
Gross margin
Other income
Warehouse and distribution costs
Selling, administration and other operating costs
Share of net profit of joint venture entities
Other expenses
Profit before finance costs and income tax
Interest income
Finance costs
Profit before income tax
Income tax expense
Profit after tax
ii) Consolidated statement of comprehensive income
$million
Profit after tax
Other comprehensive income, net of tax
Items that may be reclassified to profit or loss
Hedge profit (loss) recognised in equity
Hedge loss transferred to statement of financial performance
Exchange differences arising on translation of foreign operations
Exchange differences on acquisition of controlled entity, transferred to statement of financial performance
Income tax expense relating to these items
Items that will not be reclassified to profit or loss
Actuarial (loss) gain on superannuation defined benefit plans
Income tax benefit (expense) relating to these items
Other comprehensive income – net of tax
Total comprehensive income
iii) Summary of movements in consolidated retained profits
$million
Opening retained profits
Profit for the year
Actuarial (loss) gain on superannuation defined benefit plans (net of tax)
Dividends provided for or paid
Closing retained profits
2018
2017
1,856.2
(1,142.7)
1,803.7
(1,105.9)
713.5
125.0
(221.5)
(324.4)
12.3
(24.3)
280.6
1.4
(13.3)
268.7
(54.6)
214.1
697.8
53.0
(206.6)
(310.7)
14.2
(24.4)
223.3
2.3
(13.7)
211.9
(32.5)
179.4
2018
214.1
2017
179.4
5.0
1.4
2.0
–
(1.9)
(3.3)
1.0
4.2
(0.6)
4.5
(0.5)
(5.6)
(1.0)
24.1
(7.3)
13.6
218.3
193.0
2018
127.8
214.1
(2.3)
(133.7)
205.9
2017
57.9
179.4
16.8
(126.3)
127.8
82
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | GROUP STRUCTURE
20 Deed of cross guarantee (continued)
iv) Consolidated statement of financial position
$million
Current assets
Cash and cash equivalents
Receivables
Inventories
Other financial assets
Prepayments and other current assets
Total current assets
Non-current assets
Receivables
Inventories
Investments accounted for using the equity method
Other financial assets
Property, plant and equipment
Goodwill
Other intangible assets
Deferred income tax assets
Other non-current assets
Total non-current assets
Total assets
Current liabilities
Payables
Other financial liabilities
Tax payable
Provisions
Total current liabilities
Non-current liabilities
Payables
Borrowings
Other financial liabilities
Provisions
Other non-current liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves1
Retained profits
Equity attributable to shareholders of the closed group
2018
2017
9.3
225.5
359.9
5.5
9.2
609.4
86.7
57.7
35.8
134.3
699.8
86.0
43.3
138.1
12.1
15.8
233.3
306.3
0.8
3.6
559.8
22.5
81.6
32.2
131.5
704.8
85.5
43.7
184.2
19.3
1,293.8
1,305.3
1,903.2
1,865.1
222.4
2.7
4.2
152.4
381.7
–
28.0
1.4
299.8
–
329.2
710.9
242.2
1.0
7.0
154.4
404.6
3.8
30.5
2.6
311.1
0.1
348.1
752.7
1,192.3
1,112.4
1,036.2
(49.8)
205.9
1,192.3
1,036.8
(52.2)
127.8
1,112.4
1 PGH Bricks & Pavers Pty Limited (‘PGH Bricks’) became a party to the Deed on 6 February 2017, following the acquisition of Boral Limited’s 40% minority interest in PGH
Bricks. The balance includes ($57.1) million recognised in the non-controlling interests reserve on acquisition. Refer to note 8 for further details.
83
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | GROUP STRUCTURE
21 Non-controlling interests
Set out below is summarised financial information for each subsidiary that has non-controlling interests that are material to the CSR group. The
amounts disclosed are before intercompany eliminations.
$million
Statement of financial position
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Statement of financial performance
Revenue
Profit after tax for the year
Other comprehensive (expense) income for the year
Total comprehensive income for the year
Statement of cash flows
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Net (decrease) increase in cash held
Transactions with non-controlling interests
Profit allocated to non-controlling interests2
Dividends paid to non-controlling interests
PGH Bricks & Pavers
Pty Limited1
Gove Aluminium Finance
Limited
2018
2017
2018
2017
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
179.6
19.1
–
19.1
14.4
(3.2)
(6.6)
4.6
7.6
8.3
137.5
126.6
101.2
24.4
565.5
55.2
23.1
78.3
72.4
(9.4)
(99.1)
(36.1)
16.6
29.5
155.4
130.9
98.6
28.9
511.5
63.1
(45.7)
17.4
86.1
(9.3)
(40.4)
36.4
18.9
12.1
1 As PGH Bricks & Pavers Pty Limited is wholly owned by the CSR group at 31 March 2018 the disclosure of the summarised statement of financial position is not applicable.
In the year ended 31 March 2017, the CSR group held a 60% interest in PGH Bricks & Pavers Pty Limited (formerly Boral CSR Bricks Pty Limited) until 31 October 2016
when the remaining 40% interest was acquired. Refer to note 8 for further detail. Summarised financial information for the statement of financial performance and cash
flows is for the seven month period ended 31 October 2016.
2 Profit allocated to non-controlling interests for subsidiaries that are not material for disclosure was $1.2 million for the year ended 31 March 2018 (2017: $0.7 million).
22
Interest in joint operations
The CSR group's interest in the Tomago aluminium smelter joint operation of 36.05% (2017: 36.05%) is held through a controlled entity in which
the CSR group has a 70% interest, resulting in an effective interest in the joint operation of 25.24% (2017: 25.24%).
Recognition and measurement
The shareholders of the joint operation are jointly and severally liable for the liabilities incurred by the operation and have rights to the
assets. This entity is therefore classified as a joint operation and the group recognises its direct right to the jointly held assets, liabilities,
revenues and expenses. Where the CSR group and the parties to the agreements only have rights to the net assets of each of the
operations under the arrangements, these entities will be classified as joint ventures of the CSR group and accounted for using the equity
method. Refer to note 23.
Critical accounting estimate
Investments in joint arrangements are classified as either joint operations or joint ventures. The classification depends on the contractual
rights and obligations of each investor, rather than the legal structure of the joint arrangement, and therefore requires judgment in
determining the classification. The CSR group has both joint operations and joint ventures.
84
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | GROUP STRUCTURE
23 Equity accounting information
Carrying amount ($million)
Entity1
Building products
Rondo Building Services Pty Ltd2
Gypsum Resources Trust Australia2
New Zealand Brick Distributors3
Other2
Total investment
Long-term
loan
–
12.0
–
2.4
14.4
2018
Equity
accounted
investment
18.8
–
7.9
2.5
29.2
Net
investment
Long-term
loan
2017
Equity
accounted
investment
Net
investment
18.8
12.0
7.9
4.9
43.6
–
12.0
–
2.4
14.4
14.5
–
7.8
3.2
25.5
14.5
12.0
7.8
5.6
39.9
1 The CSR group’s interest in these entities is 50% (2017: 50%).
2 Entities incorporated in Australia.
3 Entity is a limited partnership in New Zealand.
Recognition and measurement
Investments in joint venture and associate entities have been accounted for under the equity method in the CSR group financial statements.
CSR’s share of net profit/loss of joint venture entities is recorded in the statement of financial performance.
Purchases and sales of goods and services to joint venture entities are on normal terms and conditions.
i) Net investment in joint ventures
$million
Opening net investment
Share of net profit before income tax
Share of income tax
Dividends and distributions received
Write-down of equity accounted investment
Disposal of investment in joint venture
Foreign currency translation and other
Closing net investment
ii) Summarised financial information of joint venture entities
$million
Statement of financial position
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Statement of financial performance
Revenue
Share of net profit (loss) after tax
Viridian Glass New Zealand1
Rondo Pty Limited
Other
2018
39.9
18.1
(5.4)
(9.5)
(0.4)
–
0.9
43.6
2017
61.0
21.0
(6.3)
(14.2)
–
(21.4)
(0.2)
39.9
2018
2017
96.6
22.1
58.7
3.3
92.5
22.3
50.0
2.3
273.5
293.3
–
12.4
0.3
(0.3)
14.4
0.6
1 The CSR group held a 58% interest in Viridian Glass Limited Partnership until 30 June 2016 when the remaining 42% interest was acquired. Refer to note 8 for further
detail. In the year ended 31 March 2017, contribution to net profit is for the three month period ended 30 June 2016.
iii) Balances and transactions with joint venture entities
$million
Note
2018
Current loans payable to CSR
Non-current loans payable to CSR
Purchases of goods and services
Sales of goods and services
29
0.1
11.3
24.4
2.8
2017
0.1
11.3
46.3
3.3
85
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | GROUP STRUCTURE
24 Parent entity disclosures
i)
Summary financial information of CSR Limited (parent)
$million
Statement of financial position
Current assets
Non-current assets
Current liabilities1
Non-current liabilities1
Net assets
Equity
Issued capital
Reserves
Retained profits
Total equity
Statement of financial performance
Profit after tax for the year
Total comprehensive income
2018
2017
302.6
1,723.4
(517.9)
(282.4)
264.0
1,821.0
(488.1)
(334.4)
1,225.7
1,262.5
1,036.2
9.9
179.6
1,036.8
9.3
216.4
1,225.7
1,262.5
98.9
233.3
126.0
141.4
1
Included within current liabilities are the current portion of the product liability provision and uninsured losses and future claims provision of $30.0 million and $5.8 million
respectively (2017: $29.2 million and $5.6 million respectively). Included within non-current liabilities are the non-current portion of the product liability provision and
uninsured losses and future claims provision of $259.0 million and $23.3 million respectively (2017: $283.2 million and $22.2 million respectively). See notes 12 and 13
for further details.
ii) CSR Limited transactions with controlled entities
During the financial years ended 31 March 2018 and 2017, CSR Limited advanced and repaid loans, sold and purchased goods and services,
and provided accounting and administrative assistance to its controlled entities. All loans advanced to and payable to these related parties are
unsecured and subordinate to other liabilities. Loans between members of the Australian tax consolidation group are not on normal terms and
conditions.
iii) Contingent liabilities
$million
Contingent liabilities, capable of estimation, arise in respect of the following categories:
Performance guarantees provided to third parties
Bank guarantees to Harwood Superannuation Fund1
Total contingent liabilities2
Note
2018
2017
25
113.4
–
113.4
77.1
5.4
82.5
1 CSR Limited has an obligation to contribute amounts so as to ensure that the assets attributable to certain superannuation defined benefit plans are not less than 120% of
the amount required to meet the actuarial liabilities.
2 Financial guarantees disclosed above relate to bank guarantees provided to third parties to guarantee CSR Limited's performance of its liabilities of $76.9 million (2017:
$77.1 million) and guarantees provided to third parties outside of the CSR group of $36.5 million (2017: $nil). In addition, CSR Limited has undertaken to provide financial
support, as and when required, to certain wholly owned controlled entities so as to enable those entities to pay their debts as and when such debts become due and
payable.
iv) Capital commitments
CSR Limited has committed $nil to the acquisition of any property, plant and equipment as at 31 March 2018 (2017: $nil).
86
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | OTHER
Other
25 Employee benefits
i)
Superannuation commitments
During the year, the CSR group participated in a number of superannuation funds (funds) in Australia and New Zealand. The funds provide
benefits either on a cash accumulation or defined benefit basis, for employees (and spouses) on retirement, resignation or disablement, or to
their dependants on death. Employer contributions are legally enforceable, with the right to terminate, reduce or suspend those contributions
upon giving written notice to the trustees. CSR Limited and its Australian controlled entities are required to provide a minimum level of
superannuation support for employees under the Australian superannuation guarantee legislation.
Australian superannuation funds
In Australia, the CSR group participates in the Harwood Superannuation Fund and the Pilkington (Australia) Superannuation Scheme for those
employees and pensioners who are currently members of these funds and any new employees who become members.
Retirement funds
The contributions to the funds for the year ended 31 March 2018 for the CSR group were $41.8 million (2017: $41.6 million).
Accumulation funds
The benefits provided by accumulation funds are based on the contributions and income thereon held by the funds on behalf of the members.
Contributions are made as agreed between the member and the company and for the financial year ended 31 March 2018, contributions
totalled $36.1 million (2017: $35.4 million). These contributions are expensed in the year they are incurred. CSR group’s legal or constructive
obligation is limited to these contributions.
Defined benefit funds
The benefits provided by defined benefit divisions of funds (DBDs) are based on length of service or membership and salary of the member at or
near retirement. Member contributions, based on a percentage of salary, are specified by the rules of the fund. Employer contributions generally
vary based on actuarial advice and may be reduced or cease when a fund is in actuarial surplus. DBDs are closed to new members.
Changes to defined benefit obligations
The Harwood Superannuation Fund Trust Deed was amended with effect from midnight on 31 December 2011 to restructure the various plans
within the fund, including splitting the CSR Plan Division One (defined benefit) into three separate plans. The amendment reflected the
agreement between CSR Limited and Wilmar International Limited that Sucrogen Limited would assume full responsibility to fund its obligations
for defined benefit members employed by the Sucrogen business as well as its share of the funding obligation in respect of the Harwood
Pensioner DBD Plan. As such, amounts recorded for the CSR group exclude funding obligations and share of assets and liabilities which have
been assumed by Wilmar Sugar Australia Limited.
Asset backing
The last actuarial assessment for the Harwood Superannuation Fund and the Pilkington (Australia) Superannuation Scheme was completed as
at 30 June 2017. The funding requirements were reviewed as at 30 June 2017. A combination of the attained age normal and projected unit
credit funding methods were used to determine the contribution rates for the Harwood Superannuation Fund. The projected unit credit funding
method was used for the Pilkington (Australia) Superannuation Scheme.
The Trust Deed sets out minimum funding levels of 100% and 107% of actuarial liabilities respectively for the DBD CSR and DBD Harwood
Pensioner plans. The deed further requires a funding guarantee of both plans to be 120% of actuarial liabilities with the difference between the
minimum and required funding able to be provided through bank guarantees. At the time of the last actuarial review, DBD CSR had a funding
position of 175% and DBD Harwood Pensioner had a funding position of 122%. Therefore, as at 31 March 2018, CSR Limited was not required
to provide any bank guarantees to the trustee of the fund, to satisfy the balance of its commitments (2017: $5.4 million). The bank guarantees
have been disclosed in note 24.
Given the surplus position of the Harwood Pensioner plan a review of the investment strategy was undertaken to better align the assets with the
nature of the pension liability. This was completed in December 2017 and a more defensive investment strategy was implemented. There was
no requirement for any further bank guarantees as part of this change. In line with this investment strategy a minimum funding level of 103%
and the funding guarantee of 107% of actuarial liabilities has been agreed with the Trustee.
Table 1: Defined benefit plans (DBDs) sponsored by the CSR group
$million
CSR contributions
to the funds
Present value
of fund assets
Present value
of fund liability
Net defined benefit
asset
Contributions
paid
Harwood Superannuation Fund
DBD CSR and DBD
Harwood Pensioner1
DBD Monier PGH
$nil from 1 April 2017
$nil from 1 April 2017
71.4
47.5
(68.3)
(39.5)
3.1
8.0
0.1
0.9
Pilkington (Australia)
Superannuation Scheme DBD2 14.6% of eligible salary 51.0 (50.7) 0.3 1.5
1 Actuarial liabilities are determined to be past service liabilities based on membership accrued up to 31 March 2018.
2 Funds contributed by CSR are for accumulation members.
87
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | OTHER
25 Employee benefits (continued)
i)
Superannuation commitments (continued)
Key assumptions used by actuaries
Key assumptions and parameters used by the actuaries (expressed as weighted averages) are outlined below:
%
Discount rate (after tax)
Expected salary increase
Asset class allocation – Equity instruments
– Debt instruments
– Property
– Other
Impact of plans on the statement of financial performance and comprehensive income
$million
Amounts recognised in the statement of financial performance1
Current service cost
Finance cost
Interest income
Total expense included in the statement of financial performance
Actuarial (loss) gain incurred during the financial year and recognised in the statement of comprehensive income
2018
2017
3.8
3.3
30.0
52.4
2.9
14.7
4.1
3.1
44.1
39.5
4.7
11.7
2018
2017
2.7
6.2
(6.6)
2.3
(3.3)
2.9
5.9
(5.6)
3.2
24.1
Cumulative actuarial losses recognised in the statement of comprehensive income
(52.7)
(49.4)
1 Disclosed in selling, administration and other operating costs.
Impact of plans on the statement of financial position
$million
Net asset of superannuation defined benefit plans
Fair value of assets
Present value of liabilities
Net asset
Included in the statement of financial position
Non-current other assets (note 29)
Other non-current liabilities
Net asset
Movements in the fair value of the defined benefit plan assets
Assets at the beginning of the financial year
Interest income
Return on assets (in excess of interest income)
Contributions from the employer
Contributions from participants
Benefits paid
Assets at the end of the financial year
Movements in the present value of the defined benefit plan liabilities
Liabilities at the beginning of the financial year
Current service cost
Finance cost
Contributions from participants
Actuarial loss (gain)
Benefits paid
Liabilities at the end of the financial year
88
2018
2017
169.9
(158.5)
172.8
(158.3)
11.4
14.5
11.4
–
11.4
172.8
6.6
3.8
2.5
1.0
(16.8)
14.6
(0.1)
14.5
167.1
5.6
8.4
2.6
1.0
(11.9)
169.9
172.8
158.3
2.7
6.2
1.0
7.1
(16.8)
176.1
2.9
5.9
1.0
(15.7)
(11.9)
158.5
158.3
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | OTHER
25 Employee benefits (continued)
i)
Superannuation commitments (continued)
Net asset (liability) of superannuation defined benefit plans
182.2
168.8
211.0
182.5
176.1
167.1
172.8
158.3
169.9
158.5
(13.4)
(28.5)
(9.0)
14.5
11.4
2014
2015
2016
2017
2018
Present value of fund liabilities ($m)
Fair value of fund assets ($m)
Net asset (liability) ($m)
Recognition and measurement
For superannuation defined benefit plans, the cost of providing benefits is determined using the projected unit credit method, with actuarial
valuations being carried out at each reporting date. Actuarial gains and losses are recognised in full, directly in retained profits, in the year in
which they occur, and are presented in the statement of comprehensive income. Past service cost is recognised immediately to the extent
that the benefits are already vested, and otherwise is amortised on a straight-line basis over the average period until the benefits become
vested.
The defined benefit obligation recognised in the statement of financial position represents the present value of the defined benefit
obligation, adjusted for unrecognised past service cost, net of the fair value of the plan assets. Any asset resulting from this calculation is
limited to past service costs, plus the present value of available refunds and reductions in future contributions to the plan.
ii) Share-based payments
Long-term incentive (LTI) plan – Performance rights plan (PRP)
Under the LTI plan effective during the year ended 31 March 2018, eligible executives were invited to receive performance rights in the
company. Shares acquired on vesting of performance rights are fully paid ordinary shares and the amount payable to acquire these shares is
$nil.
A summary of the performance rights granted under the plan is set out below:
Number of performance rights
Opening balance
Granted during the year
Vested during the year
Lapsed during the year
Closing balance
2018
2017
3,166,010
967,666
(892,973)
–
3,727,228
1,315,620
(1,557,577)
(319,261)
3,240,703
3,166,010
There were no vested and exercisable shares at 31 March 2018 (2017: nil).
Performance rights outstanding at the end of the year have the
following expiry dates:
A summary of key valuation assumptions for rights granted in the year
ended 31 March 2018 is set out below:
Performance rights
Grant date
Expiry date
2018
2017
23 July 2014
24 July 2015
26 July 2016
25 July 2017
23 July 2018
1 April 2018
1 April 2019
1 April 2020
170,601
904,017
1,198,419
967,666
970,574
904,017
1,291,419
–
Total
3,240,703
3,166,010
Grant date
Vesting condition
Valuation method
Start of performance
period
Testing date
Expected life
Grant date share price
Volatility
Dividend yield
Risk-free rate
Fair value
25 July 2017
Relative TSR
Monte Carlo simulation
1 April 2017
25 July 2017
EPS
Binominal Tree
1 April 2017
31 March 2020 31 March 2020
2.7 years
$3.95
30%
5.9%
1.89%
$3.37
2.7 years
$3.95
30%
5.9%
1.89%
$1.76
Further details on the LTI plan and the terms of the grants during the year are detailed in the remuneration report on pages 43 to 45.
89
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | OTHER
25 Employee benefits (continued)
ii) Share-based payments (continued)
Deferred shares
Under the STI deferral plan, 20% of any STI earned by senior executives is delivered in CSR shares. These shares must be held in trust subject to
trading restrictions and have a continued service requirement for a minimum of two years from the date of allocation.
Deferred shares are administered by the CSR Share Plan Trust. The shares are acquired on market at the grant date and are held as treasury
shares until such time as they are vested. Forfeited shares are reallocated in subsequent grants. The number of shares to be granted is
determined based on the weighted average price at which the company’s shares are traded on the Australian Stock Exchange.
Number of rights to deferred shares granted
Fair value of rights at grant date
Other plans
2018
118,667
$4.93
2017
174,797
$3.51
Universal Share Option Plan (USOP): eligible employees can buy shares to a maximum value of $1,000 and receive an equivalent number of shares
for no cash consideration. The shares are acquired on market prior to issue with the cost of acquisition recognised in employee benefit expense.
Employee Share Acquisition Plan (ESAP): directors and employees can forgo up to $5,000 of their cash remuneration annually to acquire shares in
the company. The shares are purchased on market by the CSR Share Plan trustee, who acts on instructions given in accordance with the plan rules
and the company’s Share Trading Policy.
Number of shares issued under the plans
USOP1
ESAP
2018
506,664
89,217
2017
547,476
99,485
1 Number of shares issued includes the number of purchased shares issued to employees under the plan. Each participant was issued with shares to a maximum value of $1,000
based on the weighted average market price of $4.02 (2017: $3.87).
For further details on the USOP and the ESAP, refer to page 46 of the remuneration report.
Expenses arising from share-based payment transactions
$
Long term incentive plan (PRP)
Deferred shares
Other plans
Total expense
2018
3,099,880
626,950
1,019,408
2017
2,626,357
571,002
1,059,640
4,746,238
4,256,999
Recognition and measurement
Share-based payments can either be equity settled or cash settled.
Equity settled: the fair value determined at the grant date of the equity settled share-based payments is expensed on a straight-line basis
over the vesting period (with a corresponding increase to the employee share reserve), based on the CSR group's estimate of shares that
will eventually vest.
Cash settled: the ultimate expense recognised in relation to cash settled transactions will be equal to the actual cash paid to the
employees, which will be the fair value at settlement date. The expected cash payment is estimated at each reporting date and a liability
recognised to the extent that the vesting period has expired and in proportion to the amount of the awards that are expected to ultimately
vest.
90
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | OTHER
26 Related party disclosures
i)
Transactions with directors or other key management personnel
Transactions entered into during the financial year with directors of CSR Limited and other key management personnel of the CSR group and
with their closely related entities which are within normal customer or employee relationships on terms and conditions no more favourable than
those available to other customers, employees or shareholders included:
contracts of employment (see section ii) and reimbursement of expenses;
acquisition of shares in CSR Limited under the employee share plans and the dividend reinvestment plan;
dividends from shares in CSR Limited; and
sale and purchase of goods and services.
No new loans, loan repayments or loan balances occurred between the CSR group and directors and other key management personnel of the
CSR group during the financial year ended 31 March 2018 (2017: nil).
ii) Key management personnel remuneration
Total remuneration paid or payable to directors and key management personnel is set out below:
$
Short-term employee benefits
Share-based payments expense
Total
2018
4,319,706
1,155,494
5,475,200
2017
3,437,587
804,880
4,242,467
Details of remuneration and the CSR Limited equity holdings of directors and other key management personnel are shown in the remuneration
report on pages 35 to 52.
iii) Other related parties
Other than transactions with joint venture entities disclosed in note 23, no material amounts were receivable from, or payable to, other related
parties as at 31 March 2018 (2017: nil), and no material transactions with other related parties occurred during those years.
Details of payments to superannuation defined benefit plans are shown in note 25.
27 Subsequent events
With the exception of the items disclosed below, there has not arisen in the interval between 31 March 2018 and the date of this report, any
other matter or circumstance that has significantly affected or may significantly affect the operations of the CSR group, the results of those
operations or the state of affairs of the CSR group in subsequent financial years.
Dividends
For dividends resolved to be paid after 31 March 2018, refer to note 16.
Sale of surplus land at Horsley Park
On 3 April 2018, CSR announced the sale of the first tranche of surplus land at Horsley Park, New South Wales. Under the terms of the sale,
approximately $30.0 million of profit before tax is expected to be recognised in the statement of financial performance in the year ending 31
March 2019, with settlement expected in April 2019.
91
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | OTHER
28 Commitments and contingencies
i)
Commitments
$million
Operating lease and hire expenditure
Land and buildings
Plant and equipment
Total
Contracted lease and hire expenditure comprises:
Within one year
Between one and five year(s)
After five years
Total
Contracted capital expenditure comprises:
Payable within one year
2018
2017
204.0
27.9
231.9
50.5
118.1
63.3
231.9
212.8
27.6
240.4
51.1
117.6
71.7
240.4
52.6
12.6
The total of minimum rentals to be received in the future under non-cancellable sub-leases as at 31 March 2018 is not material. Contingent
rentals for 2018 and 2017 financial years were not material. The leases on most of the CSR group’s rental premises contain renewal options.
The CSR group’s decision to exercise renewal options is primarily dependent upon the profitability of business conducted at the location.
Recognition and measurement – operating leases
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the CSR group as lessee are classified as
operating leases.
ii) Contingencies
Contingencies for CSR Limited are outlined in the parent entity note 24. There are no other contingencies in relation to controlled entities within
the CSR group. Operating lease expenditure for 2018 and 2017 is disclosed in note 5.
29 Other non-current assets
$million
Loans to joint venture entities1
Other loans and receivables2
Total non-current receivables
Other assets
Superannuation defined benefit plans – fair value of surplus
Total other non-current assets
Note
25
2018
11.3
65.2
76.5
0.3
11.4
11.7
2017
11.3
12.1
23.4
4.7
14.6
19.3
1 The CSR group has provided facilities to joint venture entities on arms length terms.
2
2019. The remaining balance of other loans and receivables has no fixed payment term.
Includes a loan receivable of $52.0 million in relation to the sale of property at Rosehill in August 2017. The loan is interest bearing and due is for repayment in December
92
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | OTHER
30 Auditor’s remuneration
$
Deloitte Touche Tohmatsu in Australia
Audit or review of financial statements
Sustainability and carbon related assurance services
Other assurance and advisory services
Total auditor's remuneration
31 Other accounting policies
2018
2017
742,000
77,108
9,000
828,108
788,400
58,000
40,600
887,000
Cash and cash equivalents: net cash is defined as cash at bank and on hand and cash equivalents, net of bank overdrafts. Cash equivalents
include highly liquid investments which are readily convertible to cash, and loans which are not subject to a term facility. Cash and cash
equivalents held at 31 March 2018 included $13.7 million of cash at bank and on hand (2017: $19.1 million) and $nil short-term deposits
(2017: $nil).
Tax consolidation: Australian tax legislation allows groups, comprising a parent entity and its Australian resident wholly owned entities, to elect to
consolidate and be treated as a single entity for income tax purposes.
The CSR group has elected for those entities within the CSR group that are wholly owned Australian resident entities to be taxed as a single entity
from 1 April 2004.
Prior to the adoption of the tax consolidation system, CSR Limited, as the head entity in the tax consolidated group, agreed to compensate or be
compensated by its wholly owned controlled entities for the balance of their current tax liability/(asset) and any tax loss related deferred tax asset
assumed by CSR Limited. Due to the existence of a tax funding arrangement between the entities in the tax consolidated group, amounts are
recognised as payable to or receivable by CSR Limited and each member of the group in relation to the tax contribution amounts paid or payable
between CSR Limited and the other members of the tax consolidated group in accordance with the arrangement.
Foreign currency: all foreign currency transactions during the financial year have been brought to account using the exchange rate in effect at
the date of the transaction. Foreign currency monetary items at reporting date are translated at the exchange rate existing at that date.
Exchange differences are brought to account in profit or loss in the year in which they arise except if designated as cash flow hedges.
On consolidation, the results and financial position of foreign operations are translated as follows:
assets and liabilities are translated using exchange rates prevailing at the end of the reporting period;
exchange differences arising, if any, are recognised in the foreign currency translation reserve and recognised in profit or loss on disposal of
income and expense items are translated at the average exchange rates for the period; and
the operation.
Put option liabilities on non-controlling interests: contracts that contain an obligation to pay cash in the future to purchase minority shares held
by non-controlling interests, even if the payment is conditional on the option being exercised by the holder, are recorded as a financial liability.
The initial redemption liability is recorded against equity. The financial liability is recognised at the present value of the expected redemption
amount.
Goods and services tax: revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the
amount of GST incurred is not recoverable from the taxation authority. In these circumstances, the GST is recognised as part of the cost of
acquisition of the asset or as part of the expense.
Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from or payable to the taxation
authority is included as a current asset or liability.
Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from investing and financing
activities which are recoverable from or payable to the taxation authority are classified as operating cash flows.
New standards not yet applicable:
1
2
3
AASB 16 Leases (AASB 16): released on 23 February 2016 and will primarily affect the accounting treatment of leases by lessees and will
result in the recognition of almost all leases on the statement of financial position. The standard removes the current distinction between
operating and financing leases and requires recognition of an asset (the right to use the leased item) and a financial liability to pay rentals for
almost all lease contracts. The standard will be first applicable for the year commencing 1 April 2019 and the group is currently in the process
of quantifying the expected impact. The impact of this standard is expected to be material to the CSR group. However, until the group
undertakes a detailed review, it is not practicable to provide a reasonable estimate of the effect of this standard.
AASB 15 Revenue from contracts with customers (AASB 15): issued in December 2014 and is expected to be first applicable to CSR Limited in
the year commencing 1 April 2018, with amended comparatives. AASB 15 will replace AASB 118 Revenue, which covers contracts for goods
and services, and AASB 111 Construction Contracts, which covers construction contracts. The new standard is based on the principle that
revenue is recognised when control of a good or service transfers to a customer, that is, the ‘notion of control’ replaces the existing ‘notion of
risks and rewards’. The impact of this standard is not expected to have a material impact on the CSR group.
AASB 9 Financial instruments (AASB 9): the CSR group has adopted AASB 9 as issued in December 2013, which resulted in changes in
accounting policies and adjustments to the amounts recognised in the financial statements. The CSR group has adopted the two main phases
relating to classification and measurement of financial assets and financial liabilities (Phase 1) and hedge accounting (Phase 3). The update to
AASB 9 Financial Instruments as issued in December 2013 which includes impairment (Phase 2) has not yet been adopted by the CSR group.
Phase 2 of this standard is not expected to have a material impact on the CSR group and is first applicable for the year commencing 1 April
2018.
93
CSR LIMITED | DIRECTORS’ DECLARATION
CSR LIMITED
ABN 90 000 001 276
Directors' declaration
The directors declare that:
1
2
3
4
5
in the directors’ opinion, there are reasonable grounds to believe that CSR Limited will be able to pay its debts as and when they become
due and payable;
in the directors’ opinion, the attached financial statements are in compliance with International Financial Reporting Standards, as disclosed
in note 1;
in the directors’ opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001, including
compliance with accounting standards and giving a true and fair view of the financial position and performance of the CSR group;
the directors have been given the declarations required by section 295A of the Corporations Act 2001 from the managing director and chief
financial officer for the financial year ended 31 March 2018; and
there are reasonable grounds to believe that CSR Limited and the group entities identified in note 20 will be able to meet any obligations or
liabilities to which they are or may become subject to by virtue of the deed of cross guarantee between CSR Limited and those group
entities pursuant to ASIC Corporations (Wholly-owned Companies) Instrument 2016/785.
Signed in accordance with a resolution of the directors made pursuant to section 295(5) of the Corporations Act 2001.
Jeremy Sutcliffe
Chairman
Sydney, 9 May 2018
Rob Sindel
Managing Director
Sydney, 9 May 2018
94
CSR LIMITED | INDEPENDENT AUDITOR’S REPORT
Deloitte Touche Tohmatsu
A.B.N. 74 490 121 060
Grosvenor Place
225 George Street
Sydney NSW 2000
PO Box N250 Grosvenor Place
Sydney NSW 1220 Australia
DX 10307SSE
Tel: +61 (0) 2 9322 7000
Fax: +61 (0) 2 9322 7001
www.deloitte.com.au
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of CSR Limited (“CSR” or the “company”) and its subsidiaries (the “group”), which comprises the consolidated
statement of financial position as at 31 March 2018, the consolidated statement of financial performance, 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:
(i)
(ii)
giving a true and fair view of the group’s financial position as at 31 March 2018 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 this 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 and Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (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.
Key audit matter
How the scope of our audit responded to the key audit matter
Product Liability Provision
(Refer to Note 13 Product liability)
CSR has recognised a product liability provision of
$289.0 million as at 31 March 2018. The provision is
in respect of all known and reasonably foreseeable
future asbestos claims. The provision is determined
after considering the advice provided by management
appointed external experts in Australia and the United
States of America (“USA”), being the countries giving
rise to the liabilities.
The determination of the provision is subject to
significant judgement as to expected settlement
amounts and likelihood of future claims. In addition,
the assumptions in respect of movements in foreign
exchange rates and discount rates have a significant
impact on the estimate of provisions.
The size and complexity of the assumptions used in
determining the provision result in it being considered
as a key audit matter.
In conjunction with actuarial specialists, our procedures included, amongst
others:
assessing the competence and independence of management appointed
external experts;
assessing the appropriateness of the assumptions and methodology used in
the reports prepared by the management appointed external experts;
including:
- evaluating the reasonableness of the methodology used to calculate the
provision;
- benchmarking of the discount rates; and
- comparison of historical claims experience to assumptions used to
estimate future claims;
testing on a sample basis the accurate inclusion and exclusion of asbestos
claims in management’s liability database, which is provided to management
appointed external experts and forms the basis for the reports;
making enquiries of management appointed external experts and the
company’s internal and external legal counsel in respect of their conclusions;
agreeing the provision breakdown between liabilities relating to Australia and
the USA to the respective external experts’ reports;
testing the translation of the USA liability to Australian dollars at the
appropriate foreign currency exchange rate;
assessing the basis for the determination of the prudential margin through
enquiries of management and their consideration of the external experts’
reports; and
assessing the appropriateness of the relevant disclosures in the financial
statements.
95
CSR LIMITED | INDEPENDENT AUDITOR’S REPORT
Key audit matter
Asset valuation
(Refer to Note 10 Property, plant and equipment and
intangible assets)
At 31 March 2018 the group’s consolidated
statement of financial position includes goodwill
amounting to $98.1 million, other intangible assets
amounting to $45.8 million and property, plant and
equipment amounting to $834.0 million, comprised of
several cash generating units (CGUs).
The assessment of impairment of the company’s
goodwill, other intangible assets and property, plant
and equipment balances involved the exercise of
significant judgement in respect of key assumptions
such as discount rates, inflation, growth rates,
forecast changes in the building cycle and forecast
future cash flows, as appropriate.
Management prepare an impairment trigger analysis
to identify which CGUs should be considered further
for impairment. The Viridian CGU was identified by
management as a CGU requiring an impairment
analysis due to the low return on funds employed.
We focussed on this area as a key audit matter due to
the judgment involved in forecasting future cash flows
and the selection of assumptions.
How the scope of our audit responded to the key audit matter
In conjunction with valuation specialists, our procedures included, amongst
others:
evaluating the process used by management in the determination of those
CGUs requiring further impairment analysis as a consequence of an
impairment trigger by:
- assessing management’s determination of the company’s CGUs based on
our understanding of the business and consistency with the segment
reporting;
- evaluating management’s impairment trigger analysis based on a number
of factors including annual financial performance and external market
conditions; and
- checking that each CGU containing goodwill had been included in
management’s impairment testing;
evaluating the analysis performed by management and the conclusions
drawn in relation to the Viridian CGU by:
- critically assessing the appropriateness of the impairment model
methodology, key inputs and assumptions used in each model using our
knowledge of each business and the industry, including assessment of:
the discount rate;
the terminal growth rate;
the inflation rate;
forecast changes in the business cycle; and
forecast cash flows;
- testing, on a sample basis, the mathematical accuracy of the cash flow
models;
- agreeing relevant data to the latest board approved forecasts;
- assessing the historical accuracy of forecasting of the CGUs;
- obtaining and reading the position papers prepared by management to
support the models for this CGU;
- evaluating management’s process, including testing controls on a sample
basis in respect of the preparation and review of forecasts; and
- assessing the appropriateness of the relevant disclosures in the financial
statements.
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 March 2018, 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.
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.
96
CSR LIMITED | INDEPENDENT AUDITOR’S REPORT
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.
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,
related safeguards.
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.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report which forms part of the directors’ report and is included in pages 35 to 52 of the CSR Limited annual
report for the year ended 31 March 2018.
In our opinion, the Remuneration Report of CSR Limited for the year ended 31 March 2018, 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
J A Leotta
Chartered Accountants
Partner
Sydney, 9 May 2018
97
CSR LIMITED | SHAREHOLDER INFORMATION
20 LARGEST HOLDERS OF ORDINARY SHARES
As at 30 April 2018
RANK
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
NAME
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMS PTY LTD DRP
BNP PARIBAS NOMINEES PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
AUSTRALIAN FOUNDATION INVESTMENT COMPANY LIMITED
CITICORP NOMINEES PTY LIMITED
PRUDENTIAL NOMINEES PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA
CSR SHARE PLAN PTY LIMITED
MR ALLAN ERNEST ORMES
AMP LIFE LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
UBS NOMINEES PTY LTD
SINDEL AUSTRALIA PTY LTD
INVIA CUSTODIAN PTY LIMITED
CSR SHARE PLAN PTY LIMITED
V M NOMINEES PTY LTD
Top 20 holders of issued capital
Remaining holders balance
SUBSTANTIAL SHAREHOLDERS OF CSR LIMITED
UNITS
173,643,673
87,763,481
62,540,668
20,588,015
8,893,128
4,669,316
3,239,925
3,109,435
2,673,358
2,500,000
2,137,690
1,155,256
1,066,667
1,057,317
898,957
834,106
809,414
693,649
650,703
550,000
379,474,758
124,833,469
% OF UNITS
34.43
17.40
12.40
4.08
1.76
0.93
0.64
0.62
0.53
0.50
0.42
0.23
0.21
0.21
0.18
0.17
0.16
0.14
0.13
0.11
75.25
24.75
Dimensional Entities and its subsidiaries advised that as of 20 June 2013, it and its associates had an interest in 30.4 million shares, which
represented 6.01% of CSR’s issued capital at that time.
The Vanguard Group Inc. and its subsidiaries advised that as of 17 June 2016, it and its associates had an interest in 25.3 million shares, which
represented 5.00% of CSR’s issued capital at that time.
State Street Corporation and its subsidiaries advised that as of 23 October 2017, it and its associates had an interest in 26.5 million shares,
which represented 5.25% of CSR’s issued capital at that time.
Yarra Funds Management and its subsidiaries advised that as of 24 April 2018, it and its associates had an interest in 31.3 million shares,
which represented 6.21% of CSR’s issued capital at that time.
SHAREHOLDINGS BY GEOGRAPHIC LOCATION
Location
AUSTRALIA
NEW ZEALAND
HONG KONG
UNITED KINGDOM
UNITED STATES OF AMERICA
Other
Total
98
Units
500,216,514
2,550,015
669,614
361,448
151,157
359,479
Units %
99.19
0.51
0.13
0.07
0.03
0.07
Holders
45,548
1,284
43
245
98
227
Holders %
96.00
2.70
0.09
0.52
0.21
0.48
504,308,227
100.00
47,445
100.00
CSR LIMITED | SHAREHOLDER INFORMATION
DISTRIBUTION OF SHAREHOLDINGS
Range
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
UNMARKETABLE PARCELS
Minimum $500.00 parcel at $5.64 per unit
RECENT CSR DIVIDENDS
Holders
23,532
19,207
2,933
1,693
80
47,445
Units
11,621,783
43,093,612
20,812,472
36,612,339
392,168,021
504,308,227
Minimum parcel size
89
Holders
1,236
% of issued capital
2.30
8.55
4.13
7.26
77.76
100.00
Units
33,014
Date paid
December 2013
July 2014
December 2014
July 2015
December 2015
July 2016
December 2016
July 2017
December 2017
July 2018
Type of dividend
Dividend per share
Franking
Franked amount
per share at 30%
Interim
Final
Interim
Final
Interim
Final
Interim
Final
Interim
Final
5.0 cents
5.0 cents
8.5 cents
11.5 cents
11.5 cents
12.0 cents
13.0 cents
13.0 cents
13.5 cents
13.5 cents
0%
0%
0%
0%
0%
0%
0%
50%
50%
75%
NA
NA
NA
NA
NA
NA
NA
6.5 cents
6.75 cents
10.125 cents
99
SHAREHOLDER
INFORMATION
ANNUAL GENERAL MEETING
Wednesday 27 June 2018 at 11:00am
Northside Conference Centre
Corner Oxley Street and Pole Lane
Crows Nest NSW 2065 Australia
REGISTRY INFORMATION
CSR LIMITED
INVESTOR RELATIONS AND NEWS
All inquiries and correspondence regarding
shareholdings should be directed to CSR’s
share registry:
Computershare Investor Services Pty Limited
GPO Box 2975 Melbourne VIC 3001 Australia
CSR Limited ABN 90 000 001 276
Triniti 3, Level 5, 39 Delhi Road
North Ryde NSW 2113 Australia
Locked Bag 1345
North Ryde BC NSW 1670 Australia
The CSR Annual Report, Corporate
Governance Statement and Sustainability
Report are available to view online or
download, visit www.csr.com.au
Email investorrelations@csr.com.au
1800 676 061
Telephone
International +61 3 9415 4033
Facsimile
International +61 3 9473 2500
(03) 9473 2500
(02) 9235 8000
Telephone
International +61 2 9235 8000
Facsimile
International +61 2 8362 9013
(02) 8362 9013
www.investorcentre.com/contact
www.csr.com.au
100
CSR LIMITED ANNUAL REPORT 2018 CSR LIMITED ANNUAL REPORT 2018
FINANCIAL OVERVIEW
FIVE YEAR PERFORMANCE OVERVIEW
CHAIRMAN’S MESSAGE
MANAGING DIRECTOR’S REVIEW
BUILDING PRODUCTS AND VIRIDIAN
ALUMINIUM
PROPERTY
CONTENTS
2
2
4
6
8
14
16
18 WORKING TOWARDS A SUSTAINABLE FUTURE
28 RISK MANAGEMENT
30 BOARD OF DIRECTORS
32 DIRECTORS’ REPORT
35 REMUNERATION REPORT
FINANCIAL REPORT
53
DIRECTORS’ DECLARATION
94
95
INDEPENDENT AUDITOR’S REPORT
98 SHAREHOLDER INFORMATION
ABOUT CSR
Formed in 1855, CSR is one of
Australia’s oldest manufacturing
companies. Today it is a leading
building products company
in Australia and New Zealand
and is the name behind some of
the market’s most trusted and
recognised brand names.
AGM DETAILS
CSR’s Annual General Meeting (AGM)
will be held at the Northside Conference
Centre, corner Oxley Street and Pole
Lane, Crows Nest NSW on Wednesday
27 June 2018 at 11.00am.
CSR Limited ABN 90 000 001 276
$2.6b
Revenue in YEM18
4,200+
CSR employees
220+
Manufacturing and
distribution sites
12,000+
Customers across
Australia and NZ
33%
Lost time injuries
down 33% from
five years ago
$3m
Donated to
CSR Community
Support Program
since 2003
$5m
Allocated to energy
saving reduction
projects in YEM18
17%
Reduction in waste
production from five
years ago
ABOVE: NISHI BUILDING, NEWACTON PRECINCT CANBERRA. HEBEL POWERPANEL WAS USED FOR INTERNAL WALLS. ARCHITECT: FENDER KATSALIDIS.
PHOTOGRAPHER: JOHN GOLLINGS. COVER PHOTO: COURTESY OF CARTY HOMES. PHOTOGRAPHER: RICK GATES.
CSR LIMITED ANNUAL REPORT 2018
C
S
R
L
I
M
I
T
E
D
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
8
csr.com.au