CSR LIMITED
ANNUAL
REPORT
2019
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 26 June 2019.
CONTENTS
MANAGING DIRECTOR’S REVIEW
BUILDING PRODUCTS
FINANCIAL OVERVIEW
FIVE YEAR PERFORMANCE OVERVIEW
2
2
4 CHAIRMAN’S MESSAGE
6
8
14 PROPERTY
16 ALUMINIUM
18 INVESTING IN A SUSTAINABLE FUTURE
28 RISK MANAGEMENT
30 BOARD OF DIRECTORS
32 DIRECTORS’ REPORT
35 REMUNERATION REPORT
53 FINANCIAL REPORT
94 DIRECTORS’ DECLARATION
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.
$2.3b
Revenue in YEM19
2,900+
CSR employees
165+
Manufacturing and
distribution sites
18,000+
Customers across
Australia and New Zealand
20%
Lost time injuries down 20%
in YEM19
$158,369
Donated to CSR Community
Support Program in YEM19
PAGE 10 CSR has a long relationship with the reality TV
series The Block and its architect Julian Brenchley. The
above photo is from the latest series which featured a group
of apartments at The Gatwick in St Kilda near Melbourne.
$3m
Allocated to energy
saving reduction projects
in YEM19
2.6%
Reduction in CO2-e
emissions in 2018
CSR Limited ABN 90 000 001 276
CSR LIMITED ANNUAL REPORT 2019 A FOCUS ON
GROWTH AND
INNOVATION
CSR’s building products and services reach homes and
buildings across Australia and New Zealand where people
live, work and play. We are investing in new building
systems designed and manufactured in Australia which
help our customers reduce construction time and deliver
better energy efficiency, comfort and design.
COVER AND PAGE 21 Hebel’s $75 million
factory expansion showcases the best in class
in automation and manufacturing expertise.
PAGE 13 Bradford and Monier are
expanding their offering to enable customers
to get more value out of their roof in terms of
design and functionality while maximising
energy efficiency.
1
CSR LIMITED ANNUAL REPORT 2019
FINANCIAL
OVERVIEW
Trading revenue of $2.3 billion was up 4% on the
prior year following revenue growth in all businesses.
FIVE YEAR PERFORMANCE OVERVIEW
Year ended 31 March ($ million unless stated)
Operating results
Trading revenue
Earnings before interest and tax (EBIT)
Building Products2
Property
Aluminium
Viridian
Segment total
Corporate and restructuring and provisions2, 3
CSR EBIT
Net profit after tax (before significant items)
Net profit after tax (after significant items)
Financial position
Shareholders’ funds
Total assets
Net cash / (debt)
Key data per share
Earnings before significant items (cents)
Earnings after significant items (cents)
Dividend (cents)
Payout ratio
Key measures
Profit margin (EBIT/trading revenue) (%)
Return on funds employed (ROFE) (%)4
Continuing operations1
2019
2018
2017
2016
2015
2,322.8
2,237.7
2,468.3
2,298.8
2,023.4
206.5
214.1
202.8
38.8
36.6
–
281.9
(16.9)
265.0
181.7
78.0
47.8
79.5
–
341.4
(21.1)
320.3
210.6
188.8
15.0
93.1
7.0
317.9
(19.9)
298.0
183.8
177.9
167.6
23.3
104.1
8.1
303.1
(26.3)
276.8
166.0
142.3
119.7
30.2
104.3
3.1
257.3
(21.9)
235.4
146.5
125.5
1,231.1
1,991.1
50.0
1,274.1
1,206.5
1,317.2
1,206.0
2,136.0
2,097.1
2,215.8
2,119.3
(14.3)
(11.4)
70.9
68.4
36.1
15.5
26.0
72.0
11.4
21.8
41.9
37.5
27.0
64.4
14.3
27.8
36.5
35.3
26.0
71.2
12.1
21.6
32.9
28.2
23.5
71.4
29.1
24.9
20.0
68.7
12.0
20.7
11.6
18.4
Employees (Number of people employed)5
2,960
4,282
4,193
3,578
3,134
From continuing operations for 2018 and 2019, which excludes the Viridian Glass business which was sold on 31 January 2019.
1
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.
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 2019 excludes employees of Viridian Glass.
2
2.3
4%
2.5
2.3
2.2
2.0
320.3
265.0 17%
298.0
276.8
235.4
CSR Group EBIT from continuing
operations of $265 million was
down 17%. Good operational
performance in Building Products
and Property was offset by the
expected decline in earnings from
Aluminium following the significant
step-up in energy costs.
15
16
17
18
19
15
16
17
18
19
TRADING REVENUE1
Year ended 31 March ($ billion)
GROUP EBIT1
Year ended 31 March ($ million)
210.6
183.8
166.0
146.5
181.7
14%
21.6
20.7
18.4
27.8
21.8
BUILDING PRODUCTS
EBIT of $206.5 million,
down 4% included
$14 million invested
in innovation and new
building systems to
deliver long-term growth.
PROPERTY
EBIT of $38.8 million,
down from $47.8 million
included settlements
from Chirnside Park, VIC
and Horsley Park, NSW.
ALUMINIUM
EBIT of $36.6 million,
down from $79.5 million
as the significant step-up
in electricity costs was
partly offset by the higher
realised aluminium price.
$206.5m
EBIT IN YEM19
15
16
17
18
19
15
16
17
18
19
NET PROFIT AFTER TAX1
BEFORE SIGNIFICANT ITEMS
Year ended 31 March ($ million)
RETURN ON FUNDS EMPLOYED1
Year ended 31 March (%)
14.3
11.4
11.6 12.0 12.1
4,193
4,282
3,578
3,134
2,960
15
16
17
18
19
15
16
17
18
19
EBIT MARGIN1
Year ended 31 March (%)
EMPLOYEES5
Year ended 31 March
$38.8m
EBIT IN YEM19
$36.6m
EBIT IN YEM19
3
CSR LIMITED ANNUAL REPORT 2019
CHAIRMAN’S
MESSAGE
Delivering a strong operational
and financial position for CSR.
$131m
Total dividends
to be paid for YEM19
$100m
Share buyback launched
in March 2019
$75m
Completed $75 million
expansion of Hebel
Somersby operation
$188m
Cash proceeds from
previous transactions to
be received in YEM20
4
The 12 months ended 31 March
2019 was a significant year in
CSR’s history as we approach our
165th year in Australia in 2020.
Our strategy over the last eight
years has been to invest in our core
Building Products and Property
businesses and ensure we are more
resilient to future changes in the
construction cycle.
We have seen the results from this
work in the past year with good
operational performance in Building
Products despite the residential
construction market slowing during
the last six months.
Property also delivered another
strong result as we progress a
number of projects which will provide
a sustainable earnings stream over
the next 10 years.
The completion of the $75 million
new Hebel factory at Somersby,
NSW was a pivotal step in this
strategy. This is the most significant
expansion project undertaken by
CSR for many years. Hebel has
seen significant growth across
all key construction segments
including detached and multi-
residential housing and commercial
and infrastructure projects. This
new plant enables us to improve
efficiency and increase production
as the only manufacturer of
autoclaved aerated concrete panels
in Australia and New Zealand.
When planning for the new factory
began over three years ago, we
identified several areas where we
could develop a world class facility
which minimises raw materials and
energy use, improves safety and
leverages our product expertise.
The new factory delivers a number
of sustainable outcomes which
also reduces costs and improves
efficiency – particularly with water
and energy use.
Another key milestone this year was
the completion in January 2019
of the $222 million sale of Viridian
Glass. Viridian and its customers
operate separately from CSR’s
other building products businesses
and Viridian is exposed to high
energy intensity and increasing
import competition. This transaction
enables Viridian to align its footprint
and cost structure to operate more
effectively as a standalone business.
$100 million share buyback to
improve shareholder returns
CSR’s strong operational cash
flow will enable the company to
undertake capital management
and return surplus capital to our
shareholders with the $100 million
on-market share buyback launched
in March 2019. We have also
maintained our policy of paying
dividends between 60-80% of full
year net profit after tax (before
significant items). We have resolved
to pay a final dividend of 13.0 cents
per share, franked at 50% which
will bring the full year dividend to
26.0 cents per share. A total of
$131 million in dividends will be
paid to our shareholders this year.
The search to appoint a successor
to Rob is well progressed and is
expected to be completed prior to
CSR’s Annual General Meeting to be
held on 26 June 2019. Rob will be
assisting with the transition process
and is expected to step down from
his role later this year.
On behalf of the board, we want
to thank Rob for his service to
CSR over the past 11 years. We
wish him all the very best with
his future endeavours.
CSR is starting a new chapter in its
long history and we are in a strong
financial and operating position due
to the commitment and dedication
of the 3,000 CSR employees
across Australia and New Zealand.
A sincere thanks to all of them, and
also to our shareholders for your
continued support.
The Viridian sale ensured that CSR
ended the financial year in a very
strong financial position with net
cash of $50 million, in addition
to $188 million in cash proceeds
from previous transactions which
will be received during the current
financial year. Our strong financial
position provides flexibility to
invest in new building systems and
ongoing Property projects which are
expected to deliver increased returns
over the next few years.
Operating results
For the year ended 31 March 2019,
CSR’s net profit after tax from
continuing operations (before
significant items) was $181.7 million
and our statutory net profit was
$78.0 million which included an
after-tax loss of $60.9 million
related to the Viridian Glass
business.
Strong operating performance in
Building Products and Property was
offset by the expected decline in
earnings from Aluminium due to
the significant step-up in electricity
related costs.
Managing director succession
JOHN GILLAM, CHAIRMAN
8 MAY 2019
In December 2018, CSR’s Managing
Director and CEO Rob Sindel
indicated his intention to step
down from his position within the
coming 12 months. Rob has been
an outstanding Managing Director
at CSR. Under his leadership
over the past eight years, the
company’s financial performance
has improved dramatically, and
he has set CSR up for success by
building a more resilient business
through diversification of our
Building Products’ earnings and
the Property portfolio.
26.0
26.0 27.0
23.5
20.0
15
16
17
18
19
CSR DIVIDENDS
Year ended 31 March (cents per share)
*
41.9
*
36.1
36.5
32.9
29.1
15
16
17
18
19
EARNINGS PER SHARE
BEFORE SIGNIFICANT ITEMS
Year ended 31 March (cents per share)
* Continuing operations only
70.9
68.4
50.0
15
16
17
18
19
(11.4)
(14.3)
NET CASH/(DEBT)
Year ended 31 March ($ million)
5
CSR LIMITED ANNUAL REPORT 2019
MANAGING DIRECTOR’S
REVIEW
Adapting to changing market conditions with operations that
are safer, more efficient and have lower cost structures.
During the last few years, we
have capitalised on the strength
in the housing market and
invested in our operations to
ensure that our operational
footprint adapts to changing
market conditions.
As a result, our operations are now
safer, more efficient and have lower
cost structures.
We are also developing the next
phase of growth initiatives and
investing in our enlarged Property
portfolio. Over 10% of our revenue is
from products and services that did
not exist within the CSR portfolio
five years ago. This is continuing with
$14 million invested in a number
of growth initiatives including the
development of the Inclose façade
system. Inclose completed its
first major project this year with
the construction of a student
accommodation facility at the
Australian National University
in Canberra.
Our investments in new building
systems, digital services and
ongoing Property projects are
expected to deliver increased
returns over the next few years.
Sustainability
We have also continued to improve
the sustainability of our operations
this year. Our sustainability goals
are aligned to 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. In the
last year, our work on reducing
emissions and improving efficiency
helped drive a 2.6% reduction in
total CO2-e emissions – despite
high levels of production in line with
strong demand from the construction
market. As we approach 2020, we are
developing new targets to 2030 with
a focus on climate-related risks and
opportunities.
People – Safety continues to be a
top priority for our businesses. We
have seen a significant improvement
this year with a 20% reduction in the
rate of lost time injuries. While we are
pleased with our progress this year,
we have more work to do to ensure
no one is injured at CSR. Our focus in
the year ahead is to continue to invest
in our people and systems to develop
an engaging and proactive approach
to safety.
Community – We continue to partner
with a number of organisations to
maintain our social licence to operate
through positive interactions with the
community. This includes engagement
with local communities located near
our sites, in addition to our extensive
involvement with mentoring local
students where our employees
donated 633 hours during the year.
Outlook
Regarding the outlook for the year
ending 31 March 2020 (YEM20),
CSR confirmed:
Building Products – Volumes in
the first month of YEM20 remain
consistent with the final quarter of
YEM19. Mixed economic signals
make it difficult to predict building
activity levels for the year ahead. CSR
is making changes to its operating
footprint and overheads to mitigate
the impact on earnings. Longer-term,
demand for CSR’s building products
will be supported by housing activity
driven by population growth, high
employment and a stable environment
for interest rates.
6
WE HAVE CONTINUED
OUR INVESTMENT IN A
NUMBER OF GROWTH
INITIATIVES INCLUDING
THE CSR CONNECT DIGITAL
CUSTOMER PLATFORM.
Property – Whilst the quantum of
earnings may fluctuate due to the
timing of transactions, the ongoing
development of a number of major
projects will underpin Property
earnings over the next 10 years.
Aluminium – Currently 71% of net
aluminium exposure for YEM20
is hedged at an average price of
A$2,718 per tonne (excluding ingot
premiums) as of 30 April 2019.
Thank you and farewell
After nearly nine years as Managing
Director and CEO now is the right
time to hand over the leadership
of the company.
CSR has had a long successful
history and I am very proud to have
led the company through what has
been a period of growth in our core
Building Products and Property
businesses.
I would especially like to thank all of
our employees who have supported me
during my tenure at CSR. My time at
CSR has been an extremely rewarding
period of my life and sincere thanks to
the many friends and colleagues.
The success of the company over
such a long period is a direct
reflection of the dedication and hard
work of our employees. It is the
effort of our employees driven by
the focus on helping our customers
which has made my time at CSR so
enjoyable and rewarding.
The trust in our values and the
desire to always do the right thing
has stood CSR in good stead and
will continue to define our culture
for many years to come.
Thank you also to our Board and
shareholders, you have been so
supportive of both me and the
company. CSR will continue to thrive
driven by the collective goodwill of our
people, our customers and our many
stakeholders.
ROB SINDEL, MANAGING DIRECTOR
8 MAY 2019
CSR’S STRATEGY
STRATEGIC RATIONALE
HIGHLIGHTS
Strengthen
and invest
Smarter, faster,
easier
Changing the way
we live and work
Comfort and
energy efficiency
Customer
Investing in our people, systems and
capabilities
Optimise the business portfolio to deliver
targeted returns of 15% ROFE through
the cycle
20% improvement in safety LTIFR in YEM19
Launched Achieve@CSR performance management
system and rolled-out across all employees
Sale of Viridian Glass to focus on core building products
businesses
Delivering solutions which make it faster
and easier to build
Investing in building systems that reduce
construction complexity
Adapting to the way we live and work
is changing with greater demand for
higher density living, aged care, social
infrastructure (e.g. schools and hospitals)
Understanding the needs of people
designing, constructing and occupying
different types of buildings
Improving the comfort, quality and energy
performance of homes and buildings
Setting the standards for the built
environment
Doubled AFS Rediwall capacity at Minto, NSW
Completed first major project with Inclose façade system
at the ANU in Canberra
Completed the $75m new Hebel manufacturing site which
is expanding share in all market segments
Growth in new products including Cemintel commercial
façades and Gyprock EC08 Complete acoustic and fire rated
environmental plasterboard
Leading energy solutions provider to new build market
Continued expansion of Bradford’s suite of polyester
insulation, solar, battery storage and ventilation products
Improving the end-to-end supply chain for
our customers
Investments in digital services to
improve internal fulfilment processes
while enhancing and personalising the
customers’ journey
Reached the four year milestone for the industry-leading
digital CSR Connect platform which provides digital access
and support for products, pricing, orders, delivery and
invoicing
Expanded customer survey which provides daily digital
feedback across ordering, delivery and pick-up
7
BUILDING
PRODUCTS
Building Products trading revenue of $1.7 billion, up 1% with higher pricing and improved
product mix offsetting the moderate reduction in volumes in the second half of the year.
MARKET OVERVIEW
Total residential commencements
on a one quarter lag basis for the
12 months to 31 March 2019 of
221,700 were up 2% compared to
the previous 12 month period.
Detached housing on the east coast
of Australia increased by 3%, while
Western Australia was down 10%.
The medium density market slowed
during the period, down 3% while
the high-rise segment increased
following the commencement of a
number of major projects in Victoria.
The non-residential market has
strengthened with approvals, having
reached over $50 billion, now driving
work done activity in the commercial
and social sectors. The alterations
and additions market also improved,
while the New Zealand market
remained reasonably strong across
all segments.
1%
Trading revenue up 1% with higher pricing
and improved product mix
52%
CSR exposure to detached housing market
which has remained relatively stable over
the last few years
8
CSR LIMITED ANNUAL REPORT 2019 BUILDING PRODUCTS
PERFORMANCE
Trading revenue from Building
Products was $1.7 billion, up 1%,
with higher pricing and improved
product mix offsetting the moderate
reduction in volumes in the second
half of the year.
EBIT was $206.5 million which
included $14 million invested in
CSR’s digital customer platform,
Inclose façade system and a number
of other growth initiatives.
Inclose recently completed its first
major student accommodation
project at the Australian National
University in Canberra, ACT with the
next project underway at an inner
Sydney High School re-development.
EBIT margin of 12.2% was down
from 12.8% due to increased growth
investments and changes in product
mix including increased volumes of
imported products partly offset by
operational improvements.
1,695.9
1,672.2
1,576.9
1,466.8
1,211.2
15
16
17
18
19
BUILDING TRADING REVENUE
Year ended 31 March ($ million)
206.5
214.1
202.8
167.6
119.7
15
16
17
18
19
BUILDING PRODUCTS EBIT
Year ended 31 March ($ million)
111 116
101
103
86
116 116 118 116
119
15
16
17
18
19
BUILDING PRODUCTS HOUSING STARTS
Year ended 31 March ($ million)
Source: ABS, one quarter lag
Multi-residential
Detached housing
WALLING FROM
BASEMENT TO PENTHOUSE
When Indigo Building Group was developing its
Primrose35 project in Brisbane, it would not forgo
quality for speed (or anything else) but it was also
focused on efficiency so it chose AFS permanent
formwork walling solutions.
With its two walling systems Logicwall and
Rediwall, AFS delivered a complete solution for the
project from the basement areas right through to
the floors upstairs.
David Hunt, Director of Indigo Building Group
noted “aside from their inherent quality, the
Logicwall and Rediwall systems offer incomparable
ease and speed of construction – Logicwall let
us build a floor per day. Primrose35 was our
third development using AFS walling solutions
– we are already underway on our fourth.”
9
CSR LIMITED ANNUAL REPORT 2019
JULIAN BRENCHLEY,
LEAD ARCHITECT OF
THE BLOCK WITH
HIS OWN HOUSE
HE DESIGNED
THE BLOCK ARCHITECT
RENOVATES HIS OWN HOME
According to Julian, material
selection was not only central to
achieving the look, but to also
ensure the build and renovation
process was seamless and efficient.
“Choosing this particular type of
cladding with this style of brick
helped us to celebrate and merge
both the old and new elements of the
building perfectly.
“The products are great and the
CSR team is also super to work with.
Their technical team are exemplary
– they offer so much knowledge and
support,” concludes Julian.
Australians’ love affair with
renovating and restoring older
homes has skyrocketed since
the reality TV series The Block
began in 2003.
And if there’s one man in Australia
who knows how to breathe new
life into older properties – it’s
the hit show’s lead architect,
Julian Brenchley.
For the past 14 years, Julian and
his team have sourced the houses,
designed the exteriors and dealt
with all the planning permits for
The Block – developing luxury real
estate in hip suburbs of Sydney and
Melbourne. So, when it came time
for Julian to unleash his creative
design force on renovating his
own home, he knew exactly what
he wanted to do and the best
materials to use.
“When it came to the exterior
design, it was important to use brick
because it’s a premium product that
helps celebrate the older style of
the house, but I wanted to contrast
that with sleek, modern, fibre
cement cladding.”
He chose CSR products to help
him perfect the look and feel.
“I’ve been using CSR products for
years – on The Block and in other
projects – and I’ve always found
them great to work with,” Julian
says.
Julian used Cemintel’s BareStone
and Surround cladding for the
upper level of the house.
To provide a contrast to the sleek
cladding and complement the
heritage and style of the house,
Julian used PGH Bricks’ Balmerino
Blend, from the Dry Pressed
Architectural range, on the front
fence and ground floor of the new
extension, and in smaller parts
throughout the house.
10
GYPROCK
IN FASHION
Gyprock featured in the re-
development of Queensland’s
largest leisure and fashion
destination at Pacific Fair.
The overall goal of the Pacific Fair
$670 million redevelopment was
to seamlessly blend the existing
centre’s structure with the new
design. The project was brought
to life with an immense quantity
of building materials, machinery
and manpower, providing over 100
additional local construction jobs.
Over 15,000 litres of paint (enough
to fill 6.4 swimming pools), 168,000
tonnes of concrete and 40,000 sqm
of Gyprock plasterboard was used in
the build.
For the internal fit out of the new
cinema and foyer area, Gyprock
systems were used to meet the
THE WINNING
HOME USING HEBEL
POWERPANEL XL
fire and acoustic performance
requirements including Fyrchek.
Fyrchek is a fire and acoustic grade
board, with a specially processed
glass fibre-reinforced gypsum core
for use in fire rated wall and ceiling
systems, and where improved
acoustic performance is required.
Fit for purpose, Gyprock’s 13mm
standard plasterboard was
specified throughout the food court
and shopping areas. A great food
court and shopping area means
increased foot traffic, so it was
important to ensure the desired
outcome was achieved.
“ This is a high performance,
acoustic wall system that is cost
effective, easy to construct and
comprises lightweight building
components.”
Overall, the new centre offers
a unique shopping experience
that has attracted many new
customers from across Australia
and is a must-see attraction for
international tourists to the Gold
Coast area in Queensland.
THE REDEVELOPMENT
OF PACIFIC FAIR
SHOPPING CENTRE
FEATURES GYPROCK
IT’S A WRAP!
WINNING HOME DESIGN ACHIEVES
THE IDEAL LOOK WITH HEBEL
When Australian House & Garden magazine held
a nation-wide competition for a home that was
“My Ideal House”, Hebel PowerPanelXL was a
natural choice for the winning design.
The winner was Sydney architect Madeleine Blanchfield,
who used Hebel on both the upper and ground floors to
create a home with what she describes as a “super high
end” appearance while being easy and economical to
build. Mirvac’s New South Wales Operations Manager,
Shane Hannah, said the use of Hebel PowerPanelXL on the
house had been “a massive advantage” in many ways.
“One of the most important things about Hebel is that
it speeds up the building process,” he said. “It’s easy to
use, and once it’s installed on the outside, we can start
internal works before the render is applied.”
Once Hebel has been rendered, it’s waterproof. This
means there is no need to have drainage holes installed
throughout the build. He added that the homeowner
would benefit from the high thermal and acoustic
performance of Hebel and it is also the best option in
terms of speed of construction.
“Overall, we were very excited to achieve the look of a
super high end house with products that are very quick
and easy to use. It’s a great outcome.” said Shane.
11
CSR LIMITED ANNUAL REPORT 2019
BUILDING PRODUCTS’
PERFORMANCE
LIGHTWEIGHT SYSTEMS
CONSTRUCTION SYSTEMS
BUSINESS OVERVIEW
GYPROCK is Australia’s leading
manufacturer of gypsum based
products including plasterboard,
cornice and compounds.
CEMINTEL provides engineered
fibre cement systems and
internal lining products.
AFS is a leader in load bearing
permanent formwork walling
solutions to deliver faster, lower
cost construction.
HEBEL is Australia’s only
manufacturer of autoclaved,
aerated concrete (AAC) that is
used in residential, commercial
and infrastructure applications.
RESULTS
Earnings were down following
lower volumes due to the
moderation in demand from
multi-residential projects and
weak markets in Western
Australia, partly offset by
improved pricing.
Earnings were higher following
growth in fibre cement façade
systems and prefinished
panels. Improved operational
performance including cost
reduction and plant efficiency
initiatives also contributed to
the result.
AFS increased earnings with
growth in Rediwall volumes as
a result of increased market
penetration and following the
launch of a new product range.
Earnings were slightly ahead
of the previous year with lower
sales from the New South Wales
apartment market offset by
growth in detached housing.
HIGHLIGHTS
Investing in the customer
service experience including
store upgrades across its
60 Gyprock Trade Centre
locations.
A number of new products and
systems were launched during
the year including perforated
flexible plasterboard with
acoustic performance and a
boundary wall system for high
density developments.
12
Strong growth continues
with the commercial façade
products such as Barestone,
Surround and Territory range
which has featured in some
landmark projects including
construction of the Western
Sydney Stadium.
Added a further 25% to
capacity at the Rediwall
manufacturing facility at Minto,
NSW and purchased a new
development site in Victoria to
support market growth.
Increasing presence in the
growing markets of aged care,
townhouses and student
accommodation.
The $75 million new
manufacturing site at
Somersby, NSW opened in
April 2019 and incorporates
world leading AAC technology.
It will double capacity at lower
cost and deliver new product
capabilities.
Additionally it will include best
practice environmental and
waste management.
SOLAR ROOFING
InlineSOLAR
SOLARtile
ENERGY AND ROOFING SOLUTIONS
BRICKS
BRADFORD supplies a full
range of thermal, acoustic
and fire insulation and energy
saving products for homes and
commercial buildings.
MARTINI manufactures
environmentally sustainable,
high-quality thermal and
acoustic polyester fibre products
for a variety of industries.
MONIER is one of Australia’s
leading roofing experts, with
over 100 years of manufacturing
quality roofing products
underpinned by its commitment
to innovation.
PGH is one of Australia’s largest
manufacturers, innovators and
marketers of clay bricks, walling
systems and façade solutions
for homes and commercial
applications.
Earnings increased following
growth in Energy Solutions.
While core glasswool insulation
volumes were steady, this was
offset by higher energy and raw
material costs.
Earnings were in line with the
prior year with growth from
the commercial market in both
aesthetic decorative products
and functional acoustic boards.
Earnings were down due to
higher installation costs and
increased margin pressure in
both Australia and New Zealand.
Earnings were slightly down from
the previous year following lower
volumes from multi-residential
and commercial segments while
cost increases including energy
were recovered in pricing. PGH
is consolidating its operating
network in New South Wales and
Queensland to ensure its cost
structure and footprint are aligned
to changing market conditions.
Bradford Energy Solutions has
expanded its alliances with a
number of major builders to
provide solar PV and battery
storage as a standard inclusion
in the new build market.
Growth continues in the
commercial sector with the
business expanding into the
Western Australian market
following a bolt-on acquisition
completed in February 2019.
Bradford expanded with
a number of innovations
including the SpacerX, a
patented roof spacer system
for concealed fixed roofs
which improves speed of
construction.
Recent projects include
Google’s new office in Pyrmont,
NSW, the Hyatt Regency hotel
in Sydney and the CSIRO
building in the ACT.
Expansion of the solar roofing
range continues including
the new Inline Solar products
which provide an integrated
solar panel system into the
roofline.
Investment in the Elemental
lightweight roofing range
and Colour Lock technology
continues.
Investment in product
development continues
following the launch of PGH
Styles – an inspiring, practical
guide to choosing bricks and
external materials.
Growth of Corium and InBrick
cladding systems continues.
Corium enables the natural
look of brick to be used in mid
to high-rise buildings while
InBrick brings brick to pre-cast
concrete panels.
13
CSR LIMITED ANNUAL REPORT 2019
PROPERTY
Property transactions continue to deliver significant earnings for CSR while
we have a pipeline of development projects over the next ten years.
PROPERTY OVERVIEW
Property EBIT of $38.8 million
CSR’s Property division recorded
EBIT of $38.8 million which included
the first parcel of surplus land at
Horsley Park, NSW. The sale of the
10-hectare industrial site generated
EBIT of $32 million with cash
settlement to occur in the second
half of YEM20. Site rehabilitation
continues on the remaining
20-hectares of surplus land at
Horsley Park.
The result also includes earnings
from Chirnside Park, VIC. The
Chirnside Park development is
nearing completion. As of 31 March
2019, this project has delivered
$44 million in EBIT.
SCHOFIELDS PROJECT TO
INCLUDE 1,250+ FUTURE HOMES
Zoning nearing completion for major residential project
at Schofields
The PGH factory at Schofields, NSW is located on a 70-hectare site
in a rapidly growing residential area in northwest Sydney.
CSR Property has teamed up with PGH Bricks to re-develop this
site as a future residential estate for 1,250+ homes. Schofields
is an infill location with great access to transport infrastructure
including the new Sydney Metro Northwest due for completion
in 2019.
Work first began in 2012 to rehabilitate the quarry at the site and
begin the re-zoning process to transform the manufacturing site
and surplus lands to a future residential development.
The rezoning process is due for completion in calendar 2019 with
Stage 1 (approximately 400 lots) to begin development in YEM21.
$38.8m
CSR Property delivered
$38.8m in EBIT in YEM19
165+
CSR Property manages over 165 owned and
leased manufacturing and distribution sites
across Australia and New Zealand
14
HORSLEY PARK,
NSW
CURRENT PROJECTS UNDERWAY
CHIRNSIDE PARK, VIC
SCHOFIELDS, NSW
HORSLEY PARK, NSW
BRENDALE, QLD
Project has delivered
70ha – future residential
30ha – surplus industrial land
Marketing and construction
$44 million in EBIT as of
31 March 2019
Marketing and construction
continuing on the townhouses
and duplexes in Stage 6
during YEM20 and YEM21
Approximately 1,250+ lots
Stage 1 – 10ha sold in
Quarry rehabilitation
underway
Rezoning due for completion
in mid-2019
YEM19 for EBIT of $32 million
Stage 2 – 20ha site
development progressing
continues of ~30ha
industrial development
47.8
MAXIMISING VALUE
38.8
CSR is accelerating investment
in key Property sites as the
market for industrial and
residential sites remains strong.
CSR’s Property division focuses
on maximising financial returns by
developing former manufacturing
sites and industrial land for sale.
30.2
23.3
15.0
15
16
17
18
19
PROPERTY EBIT
Year ended 31 March ($ million)
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
15
ALUMINIUM
Higher pricing offset by increased electricity costs.
ALUMINIUM OVERVIEW
Realised aluminium price up 11%
The realised aluminium price in
Australian dollars (including hedging
and premiums) was up 11% to
A$2,939 per tonne.
Gove Aluminium Finance (GAF
– 70% CSR) sales volumes of
213,280 tonnes were slightly up
from 212,801 in the previous year.
Trading revenue of $626.9 million
was up 11%, reflecting the 11%
improvement in the realised
aluminium price.
US dollar aluminium prices traded
in a wide range during the year with
the average cash price per tonne
of US$2,035 down slightly from
US$2,045 in the prior year.
The Australian dollar averaged
72.95 US cents during the year
compared to 77.36 US cents in
the prior year, while the average
ingot premium for the year was
US$112 per tonne slightly ahead
of US$111 per tonne in the previous
year (Platts Metals Week – Main
Japanese Port ingot premium).
EBIT lower due to higher electricity
costs
EBIT of $36.6 million was down 54%
largely due to the new electricity
supply contract which took effect from
November 2017. This increased total
electricity-related costs by $61 million
compared to the prior year.
Production costs also increased
due to higher raw material costs,
up $22 million, including coke and
pitch. This was partially offset by
operational improvements at Tomago.
Alumina costs were also higher during
the year due to the weaker Australian
dollar. GAF’s current alumina contract
which is linked to the US$ aluminium
price expires in December 2019.
Secured new alumina contract
A new two-year contract is now in
place for 50% of alumina volumes
which is also linked to the US$
aluminium price. A contract for the
balance of GAF’s requirements is
expected to be finalised within the
first half of YEM20.
25.2%
CSR holds an effective
25.2% interest in the Tomago
aluminium smelter located
near Newcastle, NSW
11%
Increase in realised
aluminium prices
in YEM19
~600,000 tonnes
Tomago aluminium production each year
– some 25% of Australia’s primary
aluminium production
16
CSR LIMITED ANNUAL REPORT 2019 MAJOR
MILESTONE FOR
TOMAGO WITH
INGOT CHAIN
AUTOMATION
In 2018, Tomago celebrated
the culmination of months of
engineering and design work
with the completion of their
automated ingot-casting project.
The project is a major milestone
for Tomago, combining existing
automatic features with new
automated dams, increased launder
depth, remote monitoring and
remote operation. It also represents
a step change in operator safety
and casting machine predictability.
Cast Products Production Scheduler, Craig Rainbird
said,
“This project has immediately brought our castings
systems into the future at Tomago. It drastically
reduces interaction between operators and molten
metal, by having all four casting units run from a
central control room rather than local control panels,
and eliminates the need for operators to be near the
pouring area during cast start”.
The central control room facilitates four ingot chains
being run at once by three operators, minimising
exposure to molten metal and manual tasks, while
increasing the operator’s ability to monitor the entire
process, from hot metal delivery to removal of the
finished product.
17
626.9
532.9 530.7 511.5
565.5
15
16
17
18
19
ALUMINIUM TRADING REVENUE
Year ended 31 March ($ million)
104.3 104.1
93.1
79.5
36.6
15
16
17
18
19
ALUMINIUM EBIT
Year ended 31 March ($ million)
2,035
2,045
1,889
1,688
1,592
15
16
17
18
19
AVERAGE LME US$
ALUMINIUM CASH PRICE
Year ended 31 March (US$ per tonne)
INVESTING IN A
SUSTAINABLE FUTURE
CSR remains committed to sustainable practices by contributing to a
positive impact on the environment while also improving the energy
efficiency, comfort and performance of homes and buildings.
This will help frame our new targets
to 2030. This process includes
consultation with stakeholders to
identify key target areas for CSR and
is being undertaken with reference
to two key frameworks: Task
Force on Climate-related Financial
Disclosures (TCFD) and the United
Nations Sustainable Development
Goals (SDG).
CSR is committed to sustainable
practices by contributing to a
positive impact on the environment
while also improving the energy
efficiency, comfort and performance
of homes and buildings.
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.
SUSTAINABILITY SUMMARY
During the year, CSR continued
to improve the sustainability
of our operations across three
key areas: the environment, our
people and the community.
Innovation is a key driver to improve
our performance across all of
these areas and has led to more
investment in new technologies and
process improvements to reduce
energy and emissions intensity.
This year we are reviewing our
sustainability targets post 2020
which follows on from our four
intensity targets set by CSR in 2010.
These targets set a 2020 goal of a
20% reduction per tonne of saleable
product in energy, greenhouse
gas emissions, solid waste and
potable water usage 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.
18
3.3
3.1
2.4
3.0
2.4
15
16
17
18
19
LOST TIME INJURY
FREQUENCY RATE
Year ended 31 March
(per million work hours)
15.6
13.8
13.8
13.6
10.2
15
16
17
18
19
TOTAL RECORDABLE
INJURY FREQUENCY RATE
Year ended 31 March
(per million work hours)
307.7
284.4
257.0
260.6 259.4
15
16
17
18
19
TOTAL SCOPE CO2-e
Year ended 30 June
(Kg/tonne of product)
CSR LIMITED ANNUAL REPORT 2019
OUR PEOPLE
OUR ENVIRONMENT
OUR COMMUNITY
CSR recognises that a sustainable
workplace is one that provides a safe,
rewarding and diverse environment
for our employees.
CSR is committed to minimising the
impact on the environment with specific
targets to reduce emissions and raw
material use.
Wellbeing, health and safety – The
wellbeing, health and safety of CSR’s
employees, contractors and visitors is
a core value and good management of
safety is an absolute business imperative.
We are investing in our people and
systems to develop an engaging and
proactive approach to safety.
Diversity – CSR believes that a diverse
workforce improves business decision
making, leading to better organisational
relationships and ultimately better
solutions for our customers.
Investing in our people – This investment
enables us to deliver great customer
experiences now and into the future and
enhances the experience of our employees
and helps them achieve their best.
Culture – Our goal is to build an
achievement orientated high performance
culture at CSR.
20%
Improvement in safety
LTIFR in YEM19
33%
of CSR’s directors
are women
25%
Improvement in safety
TRIFR in YEM19
21%
CSR’s female
participation in the
business improved
to 21% from 18%.
Investments in energy saving initiatives
across our sites contributed to a 2.6%
decrease in CO2-e emissions.
Major projects included the $2 million
solar farm at PGH Bricks in Golden Grove,
South Australia which is forecast to
provide around 25% of the site’s electricity
requirements. The solar plant includes
3,088 solar panels and 31 inverters
which feed electricity into the factory.
One of our key sustainability pillars
is based on proactively maintaining
our social licence to operate through
greater interaction and positive
impacts on the community.
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.
Community relations site planning is
underway at key sites to ensure we
engage with the local communities and
neighbours affected by our operations.
This year we are reviewing our
sustainability targets post 2020 and
developing new targets to 2030 with
a focus on climate-related risks and
opportunities.
Teams across CSR have supported
a number of charities to build new
facilities with product donations
as well as technical support and
installation expertise.
2.6%
Decrease in CO2-e
emissions in 2018
16.5%
Decrease in total scope
CO2-e per tonne of
saleable product over the
last five years
2020 target
Exceeded 2020 target
to minimise waste
production and CO2-e
emissions per tonne of
saleable product
0.1%
Reduction in waste
sent to landfill
in 2018. A 14%
improvement over
the last five years
$158,369
Donated to CSR
Community Support
Program in YEM19
6 years
CSR volunteers
donated their time
for Business Clean
Up Day at sites
across Australia
633 hours
CSR volunteered
with ABCN
Student Mentor
program in 2018
519 students
Mentored by CSR
employees in 2018
19
INNOVATION
AT CSR
CSR is developing building systems and customer platforms to make it faster and easier
to build. We are helping our customers reduce construction time, access the information
they need and deliver better energy efficiency, comfort and design.
Key customer experiences are
being digitised and automated
to improve internal process
efficiencies while enhancing and
personalising the user experience.
CSR customer journey mapping
continues to set the direction for
our marketing and sales approach
that caters for changing customer
needs.
Business analytics supports
the business to make improved
decisions, from insights gathered
on customer and market related
analysis and utilising leading digital
tools and systems.
Collaboration
We continue to create opportunities
for collaboration across CSR with the
mandate to develop and implement
CSR wide initiatives.
In addition, we are continuing
with an ongoing structured lean
start-up program, ensuring new
business models and ideas are
investigated to seek both business
growth opportunities and continue
to upskill employees on innovation
methodology and new team
environments.
With over 110 participants
business wide, our lean start-up
program is highly valued by our
people for the exposure to new
thinking, experiences and personal
development.
Innovation at CSR is building
on CSR’s core values through a
number of initiatives that support
the building and construction
industry:
Development of enhanced
services and new products
for our core brands
Utilising new technologies in
both material science and
digital services
Building organic growth ideas
using lean start-up and growth
hacking methodologies
Internal incubation of new
business streams
Expanding our business
portfolio into adjacencies
Using a variety of investment
models matched to business
maturity and risk
Our initiatives are aligned into
three themes: Customer, Digital
and Collaboration.
Customer and Digital
We are focused on increasing our
understanding of the needs of
our customers, by developing and
implementing strategies based on
our findings and improving
accessibility to key information.
We receive daily digital feedback
from CSR customers regarding
their experiences across three key
areas of ordering, delivery and
pick-up of CSR products allowing
our teams to recognise what we do
well and implement improvement
programs on feedback trends.
Our industry-leading digital
CSR Connect platform enables
customers to use their phones,
tablets and PCs to access and
receive support on all key customer
information for products, pricing,
orders, delivery and invoicing.
20
CSR LIMITED ANNUAL REPORT 2019 HEBEL’S NEW
EXPANSION SHOWCASES
BEST IN CLASS
Hebel’s new $75 million
manufacturing facility
in Somersby, NSW was
completed in April 2019
and is one of CSR’s most
significant expansion
projects completed
for several years.
This landmark project
provides new capacity to
meet the growing demand
from the Australian and
New Zealand construction
market for Hebel’s innovative and quality autoclaved
aerated concrete (AAC) products. This new facility is
utilising the best technology from around the world
combined with decades of local manufacturing expertise.
The plant showcases the best practices in automation
and environmental and waste management.
Throughout the design process, Hebel liaised with a
number of stakeholders including the NSW Central Coast
Council and the NSW Office of Environment and Heritage
which included consultation with neighbouring properties.
Safety
Increased automation across the
factory including fabrication and
packaging areas to reduce manual
handling
Energy
Utilising a 10MW unmanned
boiler system to maximise steam
production
Connectivity between autoclaves
enables up to 30% of steam to be
transferred between autoclaves
with remaining steam reused back in
the boiler system
Local sourcing
Collaboration with local
manufacturers for major equipment
including the autoclaves and raw
material storage silos to ensure
quality and longevity
Raw material storage
and production
Underground storage of raw
materials to minimise manual
handling and dust emissions
Waste
Dust captured and recycled back
into the manufacturing process
Production processes can be
timed to minimise operation during
peak electricity load periods
CSR product expertise
A number of CSR products were
utilised in the construction including:
Water
Aiming to have zero water waste
from the plant by utilising a number
of water sources including storm
water captured on site
The design and construction of the plant is focused on a
number of key themes:
Water and steam reuse is
maximised in the production process
CSR INNOVATION
DELIVERING NEW
FAÇADE SYSTEMS
In response to demand for improved
façade systems in Australia and
the need for more efficient, high
performance construction solutions,
Inclose launched in 2016 as
Australia’s only dedicated panelised
rainscreeen façade manufacturer.
Inclose provides complete façade
systems, suitable for commercial or
multi-residential projects, designed
and pre-fabricated offsite at our
factory in Port Kembla, NSW. The
system has a number of sustainability
benefits including minimising
construction waste and improving
productivity on site.
AFS Rediwall incorporated in below
ground raw material storage bays
Bradford glasswool used for
200mm industrial grade insulation
for autoclaves
Hebel external panels with new
designs and coatings
In 2018, Inclose completed a major
student accommodation project at
ANU in Canberra, ACT. The project
included 6,500m2 of façade, using
a brick slip cladding and factory
installed windows in two buildings
being constructed using cross
laminated timber. Work is now
underway on a new high school
being built in inner Sydney.
21
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.
PROACTIVE SAFETY
Our safety strategy focuses
on both the leadership and
behavioural dimensions of safety
as well as the physical risks in
our operations.
We promote an engaging and
proactive approach to safety
including the use of lead indicators
that cover both behavioural and
inherent safety risks. Importantly
CSR management is held
accountable for safety performance
and driving engagement, compliance
and improvement initiatives. We
promote and support our employees
to also take personal ownership
for their safety and that of their
workmates.
HEALTHY BODY AND MIND
CSR has developed a number of
initiatives to improve overall health
and wellbeing while at work.
These include programs promoting
fitness and exercise, health checks
and mental health support.
Mental health, psychological injuries
and aggravators continue to be a
growing community and workplace
challenge. Research indicates that
one in four people are affected by
mental health concerns.
For CSR, the feedback to date is
that the most common form of
psychological injury is the result
of anxiety or stress. There are a
number of resources in CSR for
employees to help manage these
issues with further work underway
to increase awareness and assist
in identifying where help may be
needed.
22
TOTAL RECORDABLE INJURY FREQUENCY RATE
TOTAL RECORDABLE INJURY FREQUENCY RATE
(Per million work hours)
(per million work hours)
20
18
16
14
12
10
8
6
4
2
0
4
1
/
1
/
1
4
1
/
3
/
1
4
1
/
5
/
1
4
1
/
7
/
1
4
1
/
9
/
1
4
1
/
1
1
/
1
5
1
/
1
/
1
5
1
/
3
/
1
5
1
/
5
/
1
5
1
/
7
/
1
5
1
/
9
/
1
6
1
/
1
/
1
6
1
/
3
/
1
6
1
/
5
/
1
6
1
/
7
/
1
6
1
/
9
/
1
5
1
/
1
1
/
1
6
1
/
1
1
/
1
7
1
/
1
/
1
7
1
/
3
/
1
7
1
/
5
/
1
7
1
/
7
/
1
7
1
/
9
/
1
8
1
/
1
/
1
8
1
/
3
/
1
8
1
/
5
/
1
8
1
/
7
/
1
8
1
/
9
/
1
7
1
/
1
1
/
1
9
1
/
1
/
1
9
1
/
3
/
1
8
1
/
1
1
/
1
CSR LIMITED ANNUAL REPORT 2019 TRAINING AND DEVELOPMENT
YEM19 DIVERSITY ACHIEVEMENTS
Over the past eight 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.
A major training and performance
initiative this year was the launch
of Achieve@CSR. Achieve@CSR
is a contemporary performance
management framework that has
been co-designed with our employees
and was rolled-out across 2,000
employees during YEM19.
A key part of the program is a
new assessment matrix which is
linked to pay decisions. The training
program also focuses on generating
performance insights using real
time feedback through the Achieve
@CSR app to drive motivation and
improvement.
Achieve@CSR represents a significant
investment in our people and is
designed to build an achievement
orientated, high performance culture
at CSR. The scale of the roll-out
of this program contributed to the
doubling of training hours completed
this year.
A DIVERSE ENVIRONMENT
The communities and customers
we serve are diverse and our
workforce is changing as well.
CSR believes that a diverse workforce
improves business decision making,
leading to better organisational
relationships and ultimately better
solutions for our customers. Diversity
also assists in improving the financial
results at CSR.
Recruitment
and retention
Female applications
and appointments
both improved during
YEM19
Voluntary turnover of
women reduced by
5% during YEM19
Leadership
and culture
Career
Management
Completed 2,500 on-line
training modules focusing
on Fairness, Respect and
Diversity
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
Rolled out Achieve@CSR, our
new performance management
system, including specific training
and support tools for development
and career conversations
Developed a range of Experience
Maps to help employees plan
their careers
Developed Flex@CSR framework
to promote a range of flexible work
and remuneration practices
Launched Parental Assist Team to
help support women through their
parental leave and return to work
program
Insights from the female talent
review were leveraged to further
support female talent within the
business units
Promoted and sponsored the
Women in Industry Awards with
10 finalists nominated and two
category winners from CSR
TRAINING HOURS AND INVESTMENT
Training
hours
60,000
50,000
40,000
30,000
3.2
54,958
2.6
3.1
2.3
1.8
22,070 23,850
27,800
20,000
16,201
10,000
0
2014
2015
2016
2017
2018
Training
investment
A$ million
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
$3.1m
Invested in training in YEM19
54,958
Hours of training completed in YEM19
23
OUR
ENVIRONMENT
CSR is committed to contributing to an overall positive impact on the
environment and reducing reliance on non-renewable resources.
OUR ENVIRONMENTAL
COMMITMENT
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.
2020 target
Exceeded 2020 target to minimise
waste production and CO2-e emissions
per tonne of saleable product
24
CREATING 30 MILLION
SUSTAINABLE BRICKS
FROM WASTE
PGH Bricks to recycle clay waste from Melbourne’s Parkville
tunnel project to create 30 million sustainable bricks.
PGH Bricks is demonstrating its commitment to environmentally
sustainable manufacturing by utilising clay waste from Melbourne’s
Parkville tunnel project. The raw material will be converted into
new bricks, made predominantly for residential construction,
at the business’s Thomastown facility located in Victoria.
PGH is very committed to recycling this type of material as much
as possible.
“ We are very committed to recycling this type of material as much as
possible. Not only is it better for the environment – re-using waste
rather than sending it to landfill – there’s also the social benefit of its
use to build homes for new residents in the suburbs of Melbourne.”
ANDREW PEACHEY PGH BRICKS
Normally this clay is extracted from a CSR quarry, so recycling
waste from construction sites also serves to provide longevity at the
Thomastown facility.
To make way for the new underground Parkville Station (one of five
stations being built as part of the $11 billion Metro Tunnel Project)
an equivalent of 80 Olympic-sized swimming pools worth of land will
be excavated, translating to a monumental number of bricks.
CSR LIMITED ANNUAL REPORT 2019 WASTE PRODUCTION
TO LANDFILL
Kg/Tonne of Product
15.0
12.0
11.3
9.0
6.0
3.0
0
6
6
.
3
1
2
3
.
3
1
5
5
.
2
1
7
5
.
2
1
9
2
.
0
1
Target 20%
off FY10-11
6
0
.
7
4
5
.
6
7
6
.
6
-
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
8
1
7
1
-
Y
F
POTABLE WATER
CONSUMPTION
Ltr/Tonne of Product
4
4
.
2
9
4
7
2
.
6
5
4
2
4
.
0
5
4
5
2
.
7
3
4
Target 20%
off FY10-11
6
1
.
8
8
3
9
9
.
4
4
3
7
2
.
7
7
3
1
.
7
8
3
500
400
376
300
200
100
0
-
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
-
8
1
7
1
Y
F
ENERGY CONSUMPTION
GJ/Tonne of Product
1
6
.
3
3
5
.
3
3
4
.
3
1
4
.
3
0
2
.
3
Target 20%
off FY10-11
6
0
3
.
6
0
.
3
8
0
.
3
4.0
3.0
2.8
2.0
1.0
0
-
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
8
1
7
1
-
Y
F
TOTAL SCOPE CO2-e
Kg/Tonne of Product
2
1
.
5
1
3
3
0
.
1
0
3
7
3
.
3
1
3
4
7
.
7
0
3
9
3
.
4
8
2
Target 20%
off 09-10
2
6
.
0
6
2
2
4
.
9
5
2
7
9
.
6
5
2
350
300
260
250
200
150
100
50
0
PROGRESS TOWARDS 2020
SUSTAINABILITY GOALS
We have previously articulated
our commitment to contribute to
an overall positive impact on the
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
environmental impact and these
are regularly reviewed by senior
management and the Workplace
Health, Safety & Environment
Committee. 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 with further work underway
to reduce water consumption and
energy use in the year ahead.
CSR ENERGY IMPROVEMENT
FUND
In 2017, CSR 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.
In the last year, CSR has completed
three major renewable energy
projects with an investment of
$3 million.
Completed projects in YEM19:
367kW solar project at Bradford
Insulation – Ingleburn, NSW
1MW solar project at PGH Bricks
– Golden Grove, SA
Off-peak electricity management
project at Hebel Somersby, NSW
A number of new energy efficiency
projects are under review at other
sites in the CSR network.
$3m
Allocated to energy
saving reduction
projects in YEM19
THE SOLAR FARM AT GOLDEN GROVE IN SOUTH AUSTRALIA IS A
$2 MILLION INVESTMENT, CONSISTING OF 3,080 SOLAR PANELS
AND 31 INVERTERS.
-
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
8
1
7
1
-
Y
F
All environmental data is for
the period 1 July 2017 to 30
June 2018 to be consistent
with the National Greenhouse
Reporting (NGER) scheme.
25
OUR
COMMUNITY
Our relations with the community can
have a direct impact on our ability to
operate each of our sites successfully.
WORKING IN THE COMMUNITY
One of our three sustainability
pillars is based on proactively
maintaining our social licence
to operate through greater
interaction and positive impacts
on the community.
To achieve this aim, we continue
to partner with local communities
and support a number of charitable
organisations. This is in line with
our commitment to operate in a
sustainable manner.
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. In YEM19, CSR and
its employees donated $158,369
to the charities in the program
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 2018, CSR volunteers donated
time to support over 500 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
26
COMMUNITY RELATIONS
Community consultation with stakeholders at PGH in
Golden Grove, SA
PGH Bricks in Golden Grove, SA is part of a group of manufacturers
who regularly meet with local residents to discuss issues occurring
in the Golden Grove area. PGH has joined with Austral Brick,
Hanson and Clay Minerals to meet along side the EPA, Department
of State Development and the local council for bi-annual meetings
in the Tea Tree Gully local council chambers.
These meetings enable the industry to work together on solutions
to minimise the impact of manufacturing on the local residents
and enable residents and other stakeholders to agree on key
issues and opportunities.
Dust was highlighted as an area for improvement so PGH has
undertaken a number of steps to minimise dust including:
Improved enclosures in a clay storage bay
Regular dust control
Installed sprinklers around the factory to reduce dust.
CSR LIMITED ANNUAL REPORT 2019 GYPROCK BUILD
A HOUSE FOR LIFE
Gyprock part of project to build
“A House for Life”
Gyprock provided products and
technical advice for the University of
Wollongong and TAFE NSW project
to design a net-zero energy home
specifically designed for people
living with dementia and other
age-related diseases.
The project was part of the Solar
Decathlon, an international
competition that challenges
collegiate teams to design, construct
and operate solar powered houses
that are sustainable, stylish and
cost-effective.
Gyprock’s EC08 Complete was a
key product in the design for its
high level of recycled content and
superior performance against mould,
impact damage and moisture –
contributing to a healthier and more
durable home environment.
After the test build completed
in Wollongong, the project was
dismantled and transported to Dubai
for the international competition with
the team placing second overall.
AUSTRALIAN BUSINESS
AND COMMUNITY NETWORK
CSR is part of ABCN’s Business
Class program which is designed
to connect disadvantaged schools
with corporate organisations
in one-on-one partnerships to
create sustainable, positive,
long-term change. Driven by
the unique needs of the school,
each partnership is tailored to
provide strategic support and
collaborative action.
One of the highlights of the year was
the partnership between the Monier
Roofing business and Carwatha
College in Victoria. The partnership
includes career days, Victorian
Certificate of Applied Learning
(VCAL) program exploration and
staff mentoring.
A recent initiative is the Opportunity
Knocks program attended by
24 students.
The day includes discussion on
careers paths, plant tours and
sessions on sales, estimating,
customer service, construction
and finance.
Small groups also discussed
current employment, education
after high school, recruitment and
future aspirations.
The students participated in a tour
of the concrete roof tile plant at
Springvale. They learnt how roof tiles
are manufactured led by members
of the operations team.
633 hours
Volunteered with
ABCN Student
Mentor Program
27
STUDENTS FROM CARWATHA COLLEGE IN VICTORIA
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 http://www.csr.com.au/investor-
relations-and-news/corporate-governance.
MATERIALITY TABLE
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
alumina and petroleum coke, changes
to the joint venture structure or potential
operational issues at the Tomago smelter
including electricity curtailments.
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 MD, 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.
CSR is actively engaged with the Tomago operating committee
through its position on the Tomago board. Tomago undertakes
separate material risk analysis to identify and mitigate potential
operational risks.
Australian
construction markets
and competitor
activity
Approximately 75% of CSR’s total
Reviews of market activity are factored into CSR’s monthly
revenue is generated from product and
services supplied into the new residential
construction sector of Australia and
New Zealand which is impacted by
several macro-economic factors.
Changes in ownership in the construction
sector has resulted in larger customers
representing an increasing proportion of
CSR’s revenue.
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, services
and distribution networks to improve its position in the market
and provide a comprehensive service offering.
As a supplier to the construction market,
The release of future land supply for residential development
CSR is subject to a number of competitive
forces including other domestic and
international suppliers and new technologies
which could replace existing building
methods.
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.
A cyber security improvement plan and alignment to ISO27001
CSR network and data risks for cyber
standard is progressing.
security breaches.
28
CSR LIMITED ANNUAL REPORT 2019 Key areas of
materiality
Employee and
community
engagement
Energy and climate
change
Risks
Monitor and manage risk
An engaged and diverse workforce is critical
to CSR’s long term success.
This includes managing the transition to a
new MD, CSR’s aging workforce, transferring
technical skills and sales relationships as
well as promoting trade apprenticeships
across the building sector.
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.
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.
Succession and contingency planning is in place across all
business units.
New Flex@CSR program launched to support working parents
as well as promoting flexible working arrangements more broadly
across CSR.
Community relations site planning underway at key sites.
CSR’s manufacturing operations use
CSR has committed to a 20% per tonne reduction of
significant amounts of energy including
electricity and gas.
These energy costs are increasing,
particularly for Tomago aluminium which
in turn 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 energy supply as well as
how we manage our land assets and
business processes.
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 and gas 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 has
been completed with transitional climate risks to be reviewed
as part of the Taskforce on Climate Change Task Force on
Climate-related Financial Disclosures (TCFD) framework.
Work is also underway to finalise emissions targets for 2030.
Established a $20 million CSR Energy Improvement Fund to
deliver energy saving projects across its manufacturing sites.
Product liability
Previous involvement in asbestos in
CSR meets all valid claims in both Australia and the United
Australia and exporting asbestos to the
United States.
CSR ceased asbestos mining in 1966
and divested remaining interests in 1977.
States on an equitable basis.
The asbestos provision is impacted by movements in claim
numbers, settlement rates and values and movements in
AUD/US dollar exchange rate.
Supply chain and
product compliance
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 dislocation.
Changes in building codes requires ongoing
assessment to ensure products are fit for
purpose and compliant with all relevant
codes. This includes additional risks
associated with supply and install services.
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.
CSR has launched a two-year work plan to develop and
implement its sustainable procurement strategy. This process
will also align CSR with the proposed requirements of the
Australian Modern Slavery legislation.
Workplace health
and safety
CSR has a stated long term objective of
The board Workplace Health, Safety & Environment Committee
achieving zero harm to CSR people across
all operations.
regularly reviews initiatives targeting improved safety
performance across CSR’s businesses.
Note: Material risks are listed alphabetically
29
BOARD
OF DIRECTORS
JOHN GILLAM
BCom, FAICD, FAIM.
Chairman since 1 June 2018,
non-executive director since
December 2017.
Other CSR responsibilities
Member of the Remuneration &
Human Resources Committee.
Experience and expertise
John joined Wesfarmers Limited in
1997 and held a number of senior
leadership roles in the company
over 20 years, including CEO of the
Bunnings Group from 2004 to 2016,
Managing Director of CSBP from
2002 to 2004 and Chairman of
Officeworks from 2007 to 2016.
Other directorships/offices held
Chairman of BlueFit Pty Limited
(2018 to current)
Chairman of Trinity Grammar
School, Kew (2018 to current)
Director of Heartwell Foundation
(2009 to current)
Director of Clontarf Foundation
(2017 to current)
ROB SINDEL
BENG, MBA, GAICD, FIEAust.
CHRISTINE HOLMAN
PGDipBA, MBA, GAICD.
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 has extensive experience obtained
from executive management and
senior leadership gained from his
30 year career in the construction
industry both in Australia and the
United Kingdom. Rob’s experience and
expertise is in manufacturing, sales
and marketing in Business to Business
environments, strategic management
and operating in high-risk industries.
Non-executive director since October 2016.
Other CSR responsibilities
Member of the Workplace Health,
Safety & Environment Committee
and Risk & Audit 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 WiseTech Global
Limited (2018 to current)
Other directorships/offices held
Director (2013 to current) and chair
of the Remuneration Committee
(2015 to current) of the Green
Building Council of Australia
Non-executive director of Blackmores Limited
(2019 to current)
Non-executive director of The Moorebank
Intermodal Company, a Federal Government
Business Enterprise (2018 to current)
Director of Orora Limited and member
of the Human Resources Committee
(2019 to current)
Director of the Australian Business
and Community Network (2013 to
current), an organisation that works
with schools in high need areas
Member of the UNSW Australian
School of Business Advisory Council
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 HT&E
Limited (November 2015 to December 2018)
Previously a non-executive director of
Vocus Group Limited (August 2017 to
November 2017)
30
CSR LIMITED ANNUAL REPORT 2019 MATTHEW QUINN
BSc (HONS), ACA, ARCS.
PENNY WINN
BCOM, MBA, GAICD.
Non-executive director since
August 2013.
Non-executive director since
November 2015.
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
February 2017 to current)
Chairman of TSA Management
Group Holdings Pty Limited
(2018 to current)
Non-executive director of Regis
Healthcare Limited (2018 to current)
Member of the Australian Business
and Community Network Scholarship
Foundation
Previously chairman of Carbonxt
Group Limited (2013 to 2018)
Other CSR responsibilities
Chairman of the Workplace Health,
Safety & Environment Committee
and a member of the Remuneration
& Human Resources 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
Chairman of Port Waratah Coal
Services Ltd (2015 to current)
Non-executive director of Caltex
Australia Limited (2015 to current)
Non-executive director of Goodman
Limited and Goodman Funds
Management Limited (2018 to
current)
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 has 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 Kilfinan
Australia Limited (2016 to current)
Previously a non-executive director
of Murray Goulburn Co-operative
Co Ltd (2012 to 2017)
31
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 2019. 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 2019 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
The sale of the Viridian Glass business was announced on 28
November 2018 and was completed during the year ended 31 March
2019. For details of the sale refer to note 9.
On 25 February 2019, CSR announced an on-market share buy-back
of up to $100 million. The share buy-back represents a return of
surplus capital expected to be generated by CSR. The timing of the
buy-back and the number of shares to be purchased will depend on
share price levels, cash flow generation and capital requirements.
There have been no other significant changes to the CSR group in the
financial year ended 31 March 2019.
Events after balance sheet date
On 8 May 2019, the board resolved to pay a final dividend of 13.0
cents per ordinary share for the year ended 31 March 2019 to be paid
on 2 July 2019. This dividend will be 50% franked at the 30%
corporate tax rate.
The final dividend for the financial year ended 31 March 2019 has not
been recognised in this financial report.
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 13.5 cents per ordinary share (75% franked at
the 30% corporate tax rate), with respect to the financial year
ended 31 March 2018, was paid on 3 July 2018; and
an interim dividend of 13.0 cents per ordinary share (100%
franked at the 30% corporate tax rate) was paid on 11 December
2018 (as set out in note 18 to the financial statements on page
73).
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.
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 2019 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 2020. 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.
32
CSR LIMITED | DIRECTORS’ REPORT
Political donations
CSR attended a small number of events organised by political parties
such as conferences in the year ended 31 March 2019. 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 (2018: $nil) and as such disclosure to the
Australian Electoral Commission was not required.
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 2019, an officer of the CSR group. No auditor played
a significant role in the CSR group audit for the year ended 31 March
2019 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 32 to the financial statements on
page 92. 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.
Table 1: Meetings of directors
Directors, company secretary, directors’ meetings and directors’
shareholdings
On 31 May 2018 John Gillam succeeded Jeremy Sutcliffe as
Chairman, who retired from the board on the same date. There were
no other changes to the board in the year ended 31 March 2019.
The names of directors who held office at 8 May 2019, 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 8 May
2019 are as follows:
Debbie Schroeder
BED (HONS), LLB, GAICD, AGIA.
Joined CSR in 2001 and has been company secretary since 2010. In
2018, Debbie was appointed head of Risk and Internal Audit. Prior to
joining CSR, Debbie was a lawyer at Tress Cocks & Maddox and
Landers & Rogers. Debbie has extensive experience in corporations
law and corporate governance, risk management and compliance,
dispute resolution, employment law, and insurance. Debbie holds a
Graduate Diploma in Applied Corporate Governance, is an Associate
of the Governance Institute of Australia and a Graduate of 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 2019, 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 2019
CSR Board
Risk & Audit
Committee
Workplace Health, Safety &
Environment Committee
Remuneration &
Human Resources Committee
Held1
Attended2
Held1
Attended2
Held1
Attended2
Held1
Attended2
John Gillam3
Christine Holman4
Michael Ihlein5
Matthew Quinn6
Jeremy Sutcliffe7
Penny Winn8
Rob Sindel
13
13
13
13
2
13
13
13
13
13
13
2
13
13
1
n/a
4
4
n/a
4
4
3
3
4
4
1
4
4
n/a
4
4
n/a
n/a
4
4
–
4
4
–
–
4
4
4
4
n/a
4
1
n/a
4
4
4
3
4
1
4
4
1 Meetings held while a member.
2 Meetings attended.
3 A member of the Risk & Audit Committee until 31 July 2018.
4 Director was not a member of the Risk & Audit Committee during YEM19.
5 Director is not a member of the Remuneration & Human Resources Committee.
6 Director is not a member of the Workplace Health, Safety & Environment
Committee.
7 Resigned 31 May 2018.
8 Director was not a member of the Remuneration & Human Resources Committee
during YEM19.
John Gillam
Chairman
Sydney, 8 May 2019
Rob Sindel
Managing Director
Sydney, 8 May 2019
33
CSR LIMITED | AUDITOR’S INDEPENDENCE DECLARATION
The Directors
CSR Limited
Triniti 3
39 Delhi Road
North Ryde NSW 2113
8 May 2019
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 2019, 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
J L Gorton
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 2019 (YEM19) and the remuneration framework. The
report also details proposed changes for the financial year ended 31 March 2020 (YEM20).
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 2019 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)
John Gillam1
Jeremy Sutcliffe1
Christine Holman
Michael Ihlein
Matthew Quinn
Penny Winn
Position
Chairman
Chairman
Director
Director
Director
Director
Executive KMP
Rob Sindel2
David Fallu
Managing Director
Chief Financial Officer
Term as KMP
Full year
To 31 May 2018
Full year
Full year
Full year
Full year
Full year
Full year
1 Effective from 31 May 2018, John Gillam succeeded Jeremy Sutcliffe as Chairman who retired from the board on the same date.
2 On 14 December 2018, Rob Sindel announced his intention to retire from CSR. It is expected that Mr Sindel will leave CSR during YEM20. Further detail is included in note
11 of the remuneration report.
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
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
Term as senior executive
Full year
To 15 September 2018
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 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.
There are no retests for grants after the YEM15 grant.
Table 4: Non-executive director fees framework
Feature
Explanation
Market
comparison
Non-executive directors are paid a base fee for service to the board which includes one committee membership, with an
additional fee for service to subsequent board committees.
The fees are set with consideration to the fees paid in companies of a similar size and complexity and are inclusive of
superannuation.
Fee pool
The fee pool is currently $1,450,000 per annum including superannuation.
4
Actual remuneration
The actual remuneration disclosure has been prepared to provide shareholders with a view of CSR’s remuneration structure and how
remuneration was paid to the executive KMP for the year ended 31 March 2019. The board believes presenting information in this way provides
shareholders with increased clarity and transparency of 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
YEM19, 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 2019
Statutory
remuneration
disclosures
As above
STI award for
YEM19, 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
for YEM19 relates to YEM17 to
YEM19 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 2019
$
Fixed
remuneration
Rob Sindel
David Fallu
Total
1,278,625
605,594
1,884,219
Short term
incentive1
943,986
437,906
Long term
incentive
1,985,320
–
1,381,892
1,985,320
Other
benefits2
–
1,547
1,547
Total
4,207,931
1,045,047
5,252,978
1 The STI award represented 105% of Mr Sindel’s target STI opportunity and 141% of Mr Fallu’s target STI opportunity for YEM19.
2 Other benefits included USOP and travel expenditure, 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.
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
Total4
Change in
total
2019
2018
3,888,575
520,462
3.6%
2,034,160
2,133,142
16,302
8,072,179
(0.2%)
4,042,921
505,365
2,204,738
1,808,054
34,268
8,089,981
1 Annualised average fixed remuneration per senior executive. This excludes the former Executive General Manager – Viridian who left the business on 15 September 2018.
2 The underlying increase in fixed remuneration excludes the former Executive General Manager – Viridian who left on 15 September 2018. The actual change in aggregate
fixed remuneration is a decrease of 3.8%.
3 Other benefits include USOP, travel expenditure and relocation costs, related to company business or contractual obligations.
4 Total remuneration does not include a termination payment of $584,452 which was paid to Mr Moeller consistent with his contractual obligation following the strategic
review of Viridian. At the discretion of the board, and consistent with the PRP and STI deferral rules, Mr Moeller was approved as a good leaver. As a result 93,629
performance rights remain on foot for the YEM17 and YEM18 plans representing the pro-rata of the outstanding performance rights based on the percentage of the
performance period served for each plan. Deferred STI shares of 14,549 from the YEM17 and YEM18 STI plans will also be held until their original vesting dates. There was
no accelerated vesting of either performance rights or deferred STI shares. No grant of performance rights was made to Mr Moeller for the YEM19 PRP and no STI will be
awarded for YEM19.
5
Performance outcomes
Table 8: Summary of performance outcomes for the year ended 31 March 2019
Remuneration
Performance outcome
Total
remuneration
Short term
incentive (STI)
Long term
incentive (LTI)
Total remuneration expense increased for executive KMP due to the value of LTI’s that vested in YEM19 compared to
YEM18 and an increase in the STI awarded.
Senior executive total remuneration decreased for YEM19 as there was one fewer senior executive for part of the
year.
YEM19 STI increased for executive KMP compared to YEM18 due to performance relating to individual and customer
objectives.
YEM19 STI decreased for senior executives compared to YEM18 as there was one fewer senior executive for part of
the year.
YEM19 CSR group EBIT result was slightly above target.
In YEM19, EPS and TSR performance hurdles for the YEM16 PRP were met resulting in a full vesting of the EPS grant
and TSR grant.
In July 2018, the YEM15 PRP TSR was re-tested and the balance of unvested rights lapsed.
The value of LTI that vested in YEM19 increased compared to YEM18 due to a higher number of rights vesting and
increase in VWAP.
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 YEM19 remuneration
Consistent with the YEM18 remuneration report, no amendments have been made in relation to the LTI and STI plans for YEM19.
Changes impacting YEM20 remuneration
No changes have been made for the YEM20 STI plan, which is detailed in table 11.
A strategic review was completed of the LTI plan performance hurdles. The board has determined to change the performance hurdles as follows:
Table 9: Changes to hurdles and weightings of the LTI plan for YEM20
Performance
hurdle
YEM20 YEM19 Detailed explanation
Relative TSR
–
50%
Following a strategic review of performance hurdles for the PRP, relative TSR has been replaced with
absolute TSR as described below.
Absolute TSR
50%
–
Absolute TSR will be measured over the three year performance period commencing 1 April 2019.
Absolute TSR is the percentage growth in shareholder value, which measures the changes in share
price, taking into account dividends and capital returns.
The board believes absolute TSR is a more appropriate measure for the PRP as it more directly aligns
with shareholder interests and provides transparency and focus of eligible executives in driving both
earnings and share price growth.
Performance hurdles will be set by the board for absolute TSR to ensure they are sufficiently
demanding and align with shareholder interests. Targets set will consider historical TSR performance
of CSR, its cost of capital and projected earnings through the performance period. These hurdles will
be detailed in the 2019 Notice of Meeting and the Remuneration Report for the year ending 31
March 2020.
EPS
50%
50%
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.
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, shareholder value and behaviours consistent with
company values.
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.
The remuneration of the managing director and senior
executives.
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
external reporting requirements.
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
(YEM17 only)
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
(YEM15 only)
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 focussed 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, revenue and EBIT) 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.
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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 with payment
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
YEM19 STI awards was measured against EBIT at the organisational level that best reflects the role’s influence. All
executives and eligible employees had at least 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 YEM19 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 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.
The threshold financial performance is 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 is
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.
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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 and
customer 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 and customer 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 however the
managing director is capped at 100%.
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 and reputation;
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. Unless the board determines otherwise, 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.
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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 YEM19 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).
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. Following retesting in July 2018 the balance of unvested rights lapsed.
Relative 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 – YEM19
YEM17
YEM15 – YEM16
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.
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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 to 19 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 YEM17 to YEM19 PRP grants are illustrated below:
YEM19
YEM18
YEM17
EPS performance hurdle
Target
Stretch
Target
Stretch
Target
Stretch
Cumulative EPS required over next three
years (cps)
Average EPS required over next three
years (cps)
140.0
154.0
120.8
132.9
108.9
119.8
46.7
51.3
40.3
44.3
36.3
39.9
Average EPS growth (% CAGR) between 5% and 10% will result in vesting between 50% and 100% increasing on a
straight-line basis.
For the YEM15 to 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.
Treatment of
capital
return
Treatment on
vesting
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.
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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 performance 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 2019, 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 2014
(YEM15)
Tranche A (TSR) $2.24
Tranche B (EPS) $3.26
23 July 2014 to
22 July 2017
23 July 2017 to
22 July 2018
(Tranche A)
1 April 2017 to
31 March 2018
(Tranche B)
24 July 2015
(YEM16)
Tranche A (TSR) $1.69
Tranche B (EPS) $3.05
24 July 2015 to
31 March 2018
1 April 2015 to
31 March 2018
(Tranche A and B)
1 April 2018
Expiry date
(if hurdle
not met)
Performance
status2
23 July 2018 Tranche A (TSR): Performance
condition met at 57th percentile in July
2017, resulting in 64.8% vesting of the
allocation grant. Following retesting in
July 2018 the balance of unvested
rights lapsed.
Tranche B (EPS): 12% compound
growth performance condition met
with maximum (100%) vesting of the
allocation grant.
Tranche A (TSR): Performance
condition met at 78th percentile in July
2018, resulting in 100% vesting of the
allocation grant.
Tranche B (EPS): 12% compound
growth performance condition met
with maximum (100%) vesting of the
allocation grant.
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
1 April 2016 to
31 March 2019
(Tranche A, B and C)
25 July 2017
(YEM18)
Tranche A (TSR) $1.76
Tranche B (EPS) $3.37
25 July 2017 to
31 March 2020
25 July 2018
(YEM19)
Tranche A (TSR) $1.36
Tranche B (EPS) $3.60
25 July 2018 to
31 March 2021
1 April 2017 to
31 March 2020
(Tranche A and B)
1 April 2018 to
31 March 2021
(Tranche A and B)
1 April 2019
Performance testing in progress.
1 April 2020
Performance testing window not yet
commenced.
1 April 2021
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.
Subsequent to 31 March 2019 and up to the date of this report, for the YEM17 PRP:
Tranche A (TSR) was deemed by the board to have not satisfied the performance condition resulting in 100% lapsing (354,383 rights).
Tranche B (EPS) was deemed by the board to have met average EPS growth of between target and stretch resulting in 84% or 396,903 rights
vesting and the remaining balance lapsing.
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CSR LIMITED | REMUNERATION REPORT | REMUNERATION POLICY
9 Composition of remuneration (continued)
Tranche C (Growth, Portfolio and Digital)
– Growth: the board set a group target and stretch goal from growth in EBIT in a number of new products and services beyond ‘business as
usual’. Whilst there has been strong growth in several businesses including Bradford Energy, Polyester, Hebel and AFS, the group target
was not met. As a result, no vesting of this tranche occurred.
– Portfolio: the board set targets focussed on strategic acquisitions or divestments to rebalance the CSR Portfolio. Specific goals were set in
relation to the building products portfolio, rebuilding the property portfolio and management of the long tail product liability. The board
reviewed these goals and based upon the acquisition of Bricks, the divestment of Viridian and substantial rebuild of the property portfolio,
it was determined that 67% of this tranche would vest.
– Digital: the board set specific targets focussed on delivery of the digital strategy that centred on enhancing technical functionality,
digitisation of the customer experience and revenue through the digital platform CSR Connect. The board reviewed these goals and
considering the growth of engaged users on our platform, revenue generated through CSR Connect/other digital platforms and
implementation of delivery tracking for customers it was determined that 50% of this tranche would vest.
– In total, 39% or 138,204 Tranche C rights vested with the remaining balance lapsing.
(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.
All full and part time 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 YEM19 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.
For the year ended 31 March 2019 CSR’s group EBIT from continuing operations (before significant items) was $265.0 million. Strong operating
performance in Building Products and Property was offset by the expected decline in earnings from Aluminium due to the significant step-up in
energy related costs. CSR group EBIT result for YEM19 met the financial targets set by the board for STIs.
LTIs have been linked to company performance as follows:
the value of performance rights (under the PRP) ultimately depends on share price performance; and
awards vest subject to CSR’s relative TSR performance compared to the constituents of the S&P/ASX 200 index and EPS growth. In addition,
the YEM17 PRP award also includes performance against specific strategic objectives in the areas of growth, portfolio and digital.
The YEM19 performance assessment of the PRP’s is summarised in section 9 and table 13.
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CSR LIMITED | REMUNERATION REPORT | REMUNERATION POLICY
10 Linking remuneration to performance (continued)
The following table summarises the clear link between company performance and incentives awarded to executive KMP, senior executives and
other eligible employees:
Table 15: Summary of financial performance and STIs and LTIs awarded
Financial performance7
STI
LTI
EBIT
($ million)1
TSR
(%)2
EPS
(cents)1
ROFE
(%)3
Share
price ($)4
YEM19
265.0
(32.9)
36.1
21.8
YEM18
320.3
25.3
41.9
27.8
YEM17
298.0
45.7
36.5
21.6
YEM16
276.8
(10.9)
32.9
20.7
YEM15
235.4
17.3
29.1
18.4
3.32
5.18
4.51
3.30
4.03
Executive
KMP
($ million)
Senior
executives
($ million)
1.45
2.05
1.2
0.9
1.2
1.5
2.2
2.0
2.2
2.6
All eligible
employees
STI as a %
of EBIT
Vested value
– Executive
KMP
($ million)6
Vested value
– Senior
executives
($ million)6
6.3%
5.4%
5.5%
6.7%
9.0%
2.0
1.8
2.8
3.6
1.7
2.1
1.8
2.2
3.4
1.2
1 EBIT and EPS are calculated before significant items. For YEM19 and YEM18, EBIT and EPS are from continuing operations 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. ROFE for YEM19 and YEM18 is from continuing operations.
4 Closing share price at 31 March.
5 Represents approved and expensed STI for YEM19 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 2.
(ii) STI non-financial measures
For YEM19, payments approved by the board for the non-financial component of the STI averaged across executive KMP and senior executives
were above target. The following table provides some examples of key performance measures used in YEM19 to assess executive performance
in the non-financial component of the STI.
Table 16: Non-financial measures and YEM19 performance
Performance area
Measure
Workplace Health,
Safety (WHS) and
Environment
Safety initiatives to reduce
risk
Performance
Above target
Strong progress towards Chain of Responsibility Master Code with focussed
improvements in load restraint.
Sub-contractor safety management system implemented to drive safety controls
and operational efficiencies.
Implemented WHS and Injury management system to improve efficiency and
insights on incidents, hazards and injuries.
Lost Time Injury Frequency
Rate (LTIFR)
Total Recordable Frequency
Rate (TRIFR)
LTIFR decreased by 20% from 3.0 to 2.4. This reflects a 46% reduction in the
number of Lost Time Injuries.
TRIFR decreased by 25% from 13.6 to 10.2. This reflects a 64% reduction in the
number of recordable injuries.
Injury severity
Days lost as a result of work-related injuries improved by 20%.
Leading safety indicators
Achieved 95% 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
Trained approximately 2,000 employees in the redesigned performance
management system – ACHIEVE@CSR, involving 3 days training for each person to
drive alignment, engagement and motivation.
Significant progress made driving culture improvement plans. Culture survey
underway and now will include board participation in the survey and debriefs.
Results and improvement plans will be developed during YEM20.
Biannual talent and succession reviews completed and actions implemented.
CSR’s female participation in the business improved from 18% to 21%.
Developed and launched the Flex@CSR program including an updated parental
leave policy to support families whilst also serving to attract and retain essential
talent.
Measurable objectives are set out in the corporate governance statement which is
available on CSR’s website.
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10 Linking remuneration to performance (continued)
Table 16: Non-financial measures and YEM19 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.
Strong growth continues in Polyester, Solar, Cemintel, Hebel and AFS.
Customer
Above target
Customer experience
43% improvement in customer experience sentiment score as provided by our
customers based upon order and delivery experience.
Customer focussed
culture and capability
Digital and data strategy
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.
Strengthened connection between specific customer objectives and incentives through
the rollout of the YEM19 STI plan and ACHiEVE@CSR.
66% increase in revenue processed through digital platforms.
8% increase in online payment of invoices and completion of ‘paperless invoice’ project.
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 $1,286,470 inclusive of superannuation contributions effective from 1 July 2018. Fixed
remuneration is reviewed annually. Increases are not guaranteed.
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 $620,000 inclusive of superannuation contributions effective from 1 July 2018. Fixed
remuneration is reviewed annually. Increases are not guaranteed.
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, 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.
On 14 December 2018, the company announced the managing director’s intention to step down within twelve months. The board has
determined that Mr Sindel will be treated as a good leaver for the purposes of his entitlements on termination. This will result in Mr Sindel
retaining all of his deferred STI rights. Consistent with the PRP plan rules, Mr Sindel will also retain a pro rata number of his LTI rights, from each
respective grant date up to the date of his termination. These rights will remain on foot and remain subject to the performance conditions of
each grant.
Subsequent to 31 March 2019, the board has determined that Mr Sindel will not receive a fixed remuneration increase nor a YEM20 LTI grant.
Mr Sindel will be eligible for a service allowance recognising the service provided beyond the notice period and potential foregone earning
opportunities. Mr Sindel will also be eligible for a specific incentive for the achievement of goals set by the board up to the date of termination.
STI deferral will not apply for any eligible payment for the specific incentive arrangements.
12 Statutory remuneration
Managing director’s and chief financial officer’s remuneration
The remuneration table below shows a decease in total remuneration expensed for accounting purposes for executive KMP in YEM19 compared
with YEM18.
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
2019
2018
1,258,214
1,228,244
20,411
19,941
21,495
56,007
–
4,115
846,052
938,432
904,903 1,105,929
3,084,604
3,319,139
Chief financial officer – David Fallu
2019
2018
585,183
539,340
20,411
19,941
30,122
23,904
1,547
118,187
399,613
261,242
117,384
49,565
1,154,260
1,012,179
30%
27%
35%
26%
27%
33%
10%
5%
1 Fixed remuneration may be allocated at the executive’s discretion to cash, superannuation (subject to legislative minimums), motor vehicles and certain other benefits.
2 Other benefits included USOP and travel expenditure, all of which is directly related to company business.
3 STI expense for YEM19 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.
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 Fallu
Number of STI deferred shares
Balance
1 April 2018
36,501
–
Granted1
34,563
11,503
Vested
(36,501)
–
Lapsed
Balance
31 March 20192
–
–
34,563
11,503
1 The value of deferred shares provided at grant date was $5.24 per share. These shares related to the YEM18 STI and were granted in May 2018 and will vest on 31 March
2020 consistent with the STI deferral plan.
2 The closing balance of deferred shares at 31 March 2019 represents unvested shares for YEM18 STI. Shares for the deferred portion for the YEM19 STI will be granted in
May 2019. The number of shares granted will be based on the on the 10 day VWAP up to 31 March 2019 of $3.29 per share.
14 Performance rights
Table 22: Executive KMP performance rights
Managing director – Rob Sindel
Chief financial officer – David Fallu
Number of performance rights
Balance
1 April 2018
1,220,202
76,053
Granted1
294,577
70,984
Vested2
Lapsed
Balance
31 March 2019
(359,009)
(72,967)
1,082,803
–
–
147,037
1 The accounting value of Mr Sindel’s and Mr Fallu’s rights granted were $730,552 and $176,040 respectively.
2 The following rights vested to ordinary shares during the year ended 31 March 2019:
Mr Sindel: (a) YEM16 Tranche B (rights vested and 179,504 shares awarded on 10 May 2018). The value of each of these shares was $5.53, representing a total value to
Mr Sindel of $992,657. (b) YEM16 Tranche A (rights vested and 179,505 shares awarded on 10 May 2018). The value of each of these shares was $5.53, representing a
total value to Mr Sindel of $992,663.
15 Shareholdings
Table 23: Executive KMP shareholdings
Managing director – Rob Sindel
Chief financial officer – David Fallu
Balance
1 April 2018
908,194
43,000
Number of CSR shares1
Acquired2
393,572
13,360
Sold or
transferred
(400,000)
–
Other
–
–
Balance
31 March 2019
901,766
56,360
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 359,009 shares issued on vesting of PRPs and 34,563 shares acquired under the STI deferral plan. Mr Fallu’s acquired shares include 11,503 shares
acquired under the STI deferral plan, 1,371 shares acquired under ESAP and 486 shares acquired under USOP.
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 YEM19 (including superannuation guarantee)
$395,264
Chairman base fees
$158,106
Other NED base fees (including one committee membership)
An additional $35,290
Chairman of the Risk & Audit Committee
Chairman of the Remuneration & Human Resources Committee
An additional $23,526
Chairman of the Workplace Health, Safety & Environment Committee An additional $23,526
Additional committee memberships
An additional $11,764 per additional committee
(applies to NEDs other than the chairman)
Following benchmarking in YEM19, the board has determined not to increase NED fees for YEM20. However, the committee chairman fees
totaling $82,342 in the above table will be evenly distributed between the three chairmen and each will receive $27,447 from YEM20 with no
impact to aggregate fees.
Role
Annual fee for YEM20
Chairman base fees
Other NED base fees (including one committee membership)
Committee Chairman
Additional committee memberships
$395,264
$158,106
An additional $27,447
An additional $11,764 per additional committee
(applies to NEDs other than the chairman)
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.
17 Fees
Table 25: Non-executive directors’ fees
Year ended 31 March
John Gillam (chairman)1
Christine Holman
Michael Ihlein
Matthew Quinn
Jeremy Sutcliffe1
Penny Winn
Total non-executive directors
YEM19
YEM18
YEM19
YEM18
YEM19
YEM18
YEM19
YEM18
YEM19
YEM18
YEM19
YEM18
YEM19
YEM18
Directors’ fees
Termination
benefits
Superannuation
339,843
45,160
155,131
151,348
176,616
172,309
165,874
161,828
60,865
365,683
165,874
161,828
1,064,203
1,058,156
–
–
–
–
–
–
–
–
–
–
–
–
–
–
20,984
4,290
14,737
14,378
16,779
16,369
15,758
15,374
5,012
19,941
15,758
15,374
89,028
85,726
1 Effective from 31 May 2018 John Gillam succeeded Jeremy Sutcliffe as Chairman who retired from the board on the same date.
Total
360,827
49,450
169,868
165,726
193,395
188,678
181,632
177,202
65,877
385,624
181,632
177,202
1,153,231
1,143,882
51
CSR LIMITED | REMUNERATION REPORT | NON-EXECUTIVE DIRECTORS AND OTHER
18 Shareholdings
Table 26: Non-executive directors’ shareholdings
John Gillam (chairman)
Christine Holman
Michael Ihlein
Matthew Quinn
Jeremy Sutcliffe2
Penny Winn
Number of CSR shares1
Balance
1 April 2018
Included in
remuneration
21,510
41,532
60,708
42,528
81,386
43,403
–
–
–
–
–
–
Acquired
232,000
23,042
1,371
17,531
–
–
Other
Balance
31 March 2019
–
–
–
–
(81,386)
253,510
64,574
62,079
60,059
–
–
43,403
1
2
CSR shares in which the director has a beneficial interest, including shares held under the ESAP trust or via related parties.
Effective from 31 May 2018 John Gillam succeeded Jeremy Sutcliffe as Chairman who retired from the board on the same date. The ‘other’ change does not represent a
disposal of shares.
19 Other transactions with KMP
There were no other transactions, including loans between CSR and KMP (including their related parties), during YEM18 and YEM19.
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
5
Expenses
6
Net finance costs
7
Income tax expense
8
9
Discontinued operations
10 Business combinations
Balance sheet items
11 Working capital
12 Property, plant and equipment and intangible assets
13 Net deferred income tax assets
14 Provisions
15 Product liability
Issued capital
Capital structure and risk management
16 Borrowings and credit facilities
17
18 Dividends and franking credits
19 Reserves
20
Financial risk management
Group structure
21 Subsidiaries
22 Deed of cross guarantee
23 Non-controlling interests
24
25 Equity accounting information
26 Parent entity disclosures
Interest in joint operations
Other
27 Employee benefits
28 Related party disclosures
29 Subsequent events
30 Commitments and contingencies
31 Other non-current assets
32
33 Other accounting policies
Auditor’s remuneration
59
59
60
60
62
63
63
64
64
65
66
66
67
67
68
70
71
72
73
73
73
73
74
75
80
80
80
83
83
84
85
86
86
90
90
91
92
92
93
53
CSR LIMITED | FINANCIAL REPORT
Statement of financial performance
$million
Continuing operations
Trading revenue – sale of goods
Cost of sales
Gross profit
Other income
Warehouse and distribution costs
Selling, administration and other operating costs
Share of net profit of joint venture entities
Impairment expense
Other expenses
Profit before finance costs and income tax from continuing operations
Interest income
Finance costs
Profit before income tax from continuing operations
Income tax expense
Profit after tax from continuing operations
Loss after tax from discontinued operations
Profit after tax
Profit after tax attributable to:
Non-controlling interests
Shareholders of CSR Limited1
Profit after tax
Earnings per share from continuing operations attributable to shareholders of CSR Limited
Basic (cents per share)
Diluted (cents per share)
Earnings per share from profit attributable to shareholders of CSR Limited
Basic (cents per share)
Diluted (cents per share)
Note
2019
2018
5
5
25
12
7
7
8
9
23
4
4
4
4
2,322.8
(1,627.4)
2,237.7
(1,490.2)
695.4
54.8
(204.3)
(292.7)
13.8
(32.8)
(17.6)
216.6
3.6
(11.5)
208.7
(61.2)
147.5
(60.9)
86.6
8.6
78.0
86.6
27.6
27.6
15.5
15.5
747.5
58.2
(194.2)
(303.5)
12.7
–
(8.9)
311.8
2.3
(11.8)
302.3
(85.5)
216.8
(10.2)
206.6
17.8
188.8
206.6
39.6
39.3
37.5
37.3
1 Net profit from continuing operations before significant items attributable to shareholders of CSR Limited is $181.7 million (2018: $210.6 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 recognised in equity
Hedge loss transferred to statement of financial performance
Exchange differences arising on translation of foreign operations
Recycling of foreign currency translation reserve on disposal of business, 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 on superannuation defined benefit plans
Income tax benefit relating to these items
Other comprehensive income – net of tax
Total comprehensive income
Total comprehensive income attributable to:
Non-controlling interests
Shareholders of CSR Limited
Total comprehensive income
19
9, 19
13
27
13
Total comprehensive income attributable to shareholders of CSR Limited arises from:
Continuing operations
Discontinued operations
Total comprehensive income attributable to shareholders of CSR Limited
The above statement of comprehensive income should be read in conjunction with the accompanying notes.
Note
2019
86.6
2018
206.6
18.5
8.4
0.1
1.1
13.4
25.4
2.0
–
(8.1)
(11.7)
(1.6)
0.5
18.9
(3.3)
1.0
26.8
105.5
233.4
12.4
93.1
105.5
154.7
(61.6)
93.1
24.7
208.7
233.4
220.1
(11.4)
208.7
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
2019
2018
33
11
11
20
31
11
25
20
12
12
12
13
31
11
20
14
16
20
14
13
27
17
19
23
50.0
455.9
377.9
27.2
5.2
10.4
926.6
25.8
74.7
40.4
17.6
709.6
57.2
23.7
104.3
11.2
1,064.5
1,991.1
260.9
16.8
6.1
156.2
440.0
3.6
–
4.7
297.2
12.2
2.3
320.0
760.0
13.7
295.7
467.0
11.4
7.0
10.5
805.3
76.5
57.7
43.6
13.4
833.4
98.1
44.5
151.8
11.7
1,330.7
2,136.0
305.2
19.0
5.0
177.0
506.2
3.7
28.0
10.1
306.5
7.4
–
355.7
861.9
1,231.1
1,274.1
1,028.8
(38.4)
187.6
1,178.0
53.1
1,231.1
1,036.2
(53.2)
244.4
1,227.4
46.7
1,274.1
CSR LIMITED | FINANCIAL REPORT
Statement of changes in equity
$million
Balance at 1 April 2018
Profit for the year
Total other comprehensive income
(expense) – net of tax
Dividends paid
On-market share buy-back
Acquisition of treasury shares
Share-based payments – inclusive of tax
Note
Issued
capital
1,036.2
–
–
–
(7.4)
–
–
18
17
19
19
Reserves
Retained
profits
(53.2)
–
16.2
–
–
(2.6)
1.2
244.4
78.0
(1.1)
(133.7)
–
–
–
CSR
Limited
interest
1,227.4
78.0
15.1
(133.7)
(7.4)
(2.6)
1.2
Non-
controlling
interests
46.7
8.6
3.8
(6.0)
–
–
–
Total
equity
1,274.1
86.6
18.9
(139.7)
(7.4)
(2.6)
1.2
Balance at 31 March 2019
1,028.8
(38.4)
187.6
1,178.0
53.1
1,231.1
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
1,036.8
–
–
–
(0.6)
–
–
–
(73.4)
–
22.2
–
–
(5.8)
(2.5)
6.3
191.6
188.8
(2.3)
1,155.0
188.8
19.9
(133.7)
–
–
–
–
(133.7)
(0.6)
(5.8)
(2.5)
6.3
18
19
19
Balance at 31 March 2018
1,036.2
(53.2)
244.4
1,227.4
51.5
17.8
6.9
(29.5)
–
–
–
–
46.7
1,206.5
206.6
26.8
(163.2)
(0.6)
(5.8)
(2.5)
6.3
1,274.1
The above statement of changes in equity should be read in conjunction with the accompanying notes.
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 inflow 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
Proceeds from sale of Glass division, net of cash disposed1
Purchase of controlled entities and businesses, net of cash acquired
Costs associated with acquisition and disposal of businesses
Loans and receivables advanced
Net cash inflow (outflow) from investing activities
Cash flows from financing activities
On-market share buy-back
Net repayment of borrowings
Dividends paid2
Acquisition of shares by CSR employee share trust
Interest and other finance costs paid
Net cash outflow from financing activities
Net increase (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
Share of profits of associates not received as dividends or distributions
Share-based payments
Finance cost net of discount unwind
Profit on disposal of assets
Gain on sale of Glass division
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
2019
2018
25
9
10
9,10
17
19
2
23
6
19
5
9
2,933.6
(2,731.6)
14.3
3.1
(12.1)
2,930.4
(2,652.7)
9.5
2.6
(40.6)
207.3
249.2
(163.6)
49.1
137.3
(1.0)
(4.4)
(5.3)
12.1
(7.4)
(28.0)
(139.7)
(2.6)
(5.7)
(183.4)
36.0
13.7
0.3
50.0
78.0
8.6
76.1
95.5
0.5
3.3
5.0
(44.3)
(6.7)
(10.8)
(22.8)
(10.0)
(21.0)
23.9
30.1
1.9
207.3
(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
3.0
(3.2)
3.7
4.1
(51.2)
–
14.3
(57.2)
32.3
(23.4)
(0.1)
34.4
1.5
249.2
1 Cash flow from discontinued operations is disclosed in note 9 to the financial statements.
2 During the year ended 31 March 2019, within the $139.7 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 33.
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.
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.
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: As outlined below, the CSR group
has adopted all amendments to Australian Accounting Standards which
became applicable for the CSR group from 1 April 2018.
AASB 15 Revenue from Contracts with Customers (‘AASB 15’): The CSR
group has adopted AASB 15 from 1 April 2018 which resulted in
changes in accounting policies. 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’. Refer to note 5.
AASB 9 Financial Instruments (‘AASB 9’): The CSR group adopted phase
1 (classification and measurement of financial assets and liabilities)
and phase 3 (hedge accounting) of AASB 9 as issued in December
2013, which resulted in changes to accounting policies and
retrospective adjustments in the CSR Annual Report for the year ended
31 March 2015. The CSR group has adopted phase 2 (impairment,
including expected credit loss) of AASB 9 from 1 April 2018. Phase 2
has not materially impacted the financial report of the CSR group. Refer
to note 11.
New standards not yet applicable: Other than AASB 16 Leases,
standards not yet applicable are not expected to have a material impact
on the CSR group. Refer to note 30 for further disclosure on the impact
of AASB 16 Leases.
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
12
14
14
Asset impairment
Measurement of provisions for restoration and
environmental rehabilitation and legal claims
Provision for uninsured losses and future claims
14, 15
Product liability
24
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 2019, the CSR continuing group's trading revenue from
external customers in Australia amounted to $2,255.2 million (2018:
$2,177.1 million), with $67.6 million (2018: $60.6 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 in Australia amounted to $875.0 million at 31 March 2019
(2018: $1,060.5 million), with $27.2 million (2018: $61.4 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
Property
Aluminium
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, Inclose Façades, Bricks (PGH Bricks
and Pavers and New Zealand Brick Distributors joint
venture) and Roofing (Monier roofing).
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.
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.
Discontinued operations – Glass
The Glass business was disposed on 31 January 2019 and has been
reclassified as a discontinued operation. Further detail on the
disposal of the Glass business is set out in note 9. 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.
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
Business segment
2019
2018
2019
2018
2019
2018
2019
2018
Building Products
Property
Aluminium
Corporate3
Restructuring and provisions4
1,695.9
1,672.2
–
626.9
–
–
–
565.5
–
–
258.9
39.0
48.3
(14.0)
(2.2)
265.4
48.1
97.1
(14.2)
(6.3)
Continuing operations
2,322.8
2,237.7
330.0
390.1
Glass discontinued operations
318.9
368.5
18.5
18.1
Total CSR group
2,641.7
2,606.2
348.5
408.2
52.4
0.2
11.7
0.7
–
65.0
11.1
76.1
Reconciliation of earnings before interest, tax and significant items to profit after tax
$million
Continuing operations earnings before interest, tax and significant items
Net finance income (expense)
Income tax expense
Profit after tax from continuing operations before significant items (before non-controlling interests)
Less: non-controlling interests
Profit after tax from continuing operations before significant items attributable to shareholders of CSR
Limited
Significant items after tax from continuing operations attributable to shareholders of CSR Limited
Profit after tax from continuing operations attributable to shareholders of CSR Limited
Loss from discontinued operations attributable to shareholders of CSR Limited
Profit after tax attributable to shareholders of CSR Limited
51.3
0.3
17.6
0.6
–
69.8
14.6
84.4
Note
7
3
9
206.5
38.8
36.6
(14.7)
(2.2)
214.1
47.8
79.5
(14.8)
(6.3)
265.0
320.3
7.4
3.5
272.4
323.8
2019
265.0
0.1
(74.7)
190.4
(8.7)
2018
320.3
(1.2)
(90.5)
228.6
(18.0)
181.7
210.6
(42.8)
(11.6)
138.9
199.0
(60.9)
(10.2)
78.0
188.8
Business segment
As at 31 March 2019
As at 31 March 2018
As at 31 March 2019
As at 31 March 2018
Funds employed ($million)5
Return on funds employed (%)6
Building Products
Property
Aluminium
Corporate
Continuing operations
Discontinued operations - Glass
Total CSR group
947.4
224.5
140.3
(63.2)
1,249.0
–
1,249.0
919.1
185.7
120.0
(38.8)
1,186.0
239.3
1,425.3
22.1%
18.9%
28.2%
–
21.8%
–
–
23.8%
29.2%
61.8%
–
27.8%
1.4%
23.2%
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 2019 is calculated as net assets of $1,231.1
million (2018: $1,274.1 million), excluding the following assets: cash of $50.0 million (2018: $13.7 million), net tax assets of $91.2 million (2018: $146.4 million), net
superannuation assets of $8.2 million (2018: $11.4 million), net financial assets of $21.3 million (2018: nil), deferred consideration receivable of $78.5 million (2018:
$nil) and interest receivable of $0.9 million (2018: $0.1 million). In addition, the following liabilities have been excluded from funds employed: asbestos product liability
provision of $268.0 million (2018: $289.0 million), net financial liabilities of $nil (2018: $5.8 million) and borrowings of $nil (2018: $28.0 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
Significant items from continuing operations:
Impairment of Roofing assets1
Restructuring costs2
Remediation, supply disruption and other costs3
Significant items from continuing operations before finance costs and income tax
Discount unwind and hedging relating to product liability provision
Income tax benefit on significant items from continuing operations
Significant items after tax from continuing operations
Significant items attributable to non-controlling interests
Significant items from continuing operations attributable to shareholders of CSR Limited
Loss from discontinued operations after tax attributable to shareholders of CSR Limited4
9
Significant items and discontinued operations loss attributable to shareholders of CSR Limited
Net profit attributable to shareholders of CSR Limited5
Significant items and discontinued operations loss attributable to shareholders of CSR Limited
Net profit from continuing operations before significant items attributable to shareholders of CSR
Limited6
Earnings per share from continuing operations attributable to shareholders of CSR Limited before
significant items7
Basic (cents per share)
Diluted (cents per share)
Note
2019
2018
12
(32.8)
(11.6)
(4.0)
(48.4)
(8.0)
13.5
–
(0.9)
(7.6)
(8.5)
(8.3)
5.0
(42.9)
(11.8)
0.1
(42.8)
(65.3)
(108.1)
73.6
108.1
181.7
0.2
(11.6)
(12.3)
(23.9)
186.7
23.9
210.6
36.1
36.1
41.9
41.6
1 During the year ended 31 March 2019, following an impairment assessment of the Roofing cash generating unit (disclosed within the Building Products segment) an
impairment charge of $32.8 million was recognised. Refer to note 12 for further detail.
2 During the year ended 31 March 2019, the Building Products segment recorded a charge of $11.2 million and the Aluminium segment recorded a charge of $0.4 million
(2018: $0.9 million) for restructuring costs to align the business cost base with current market conditions and secure ongoing efficiencies.
3 During the year ended 31 March 2019, the CSR group recorded a charge of $4.0 million as a result of the re-measurement of land remediation and other provisions. An
amount of $1.6 million has been recorded in Other income and $5.6 million in Other expenses. 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 ($6.1 million). In
addition, the group recorded a charge of $1.5 million as a result of the re-measurement of provisions in relation to legal disputes, warranties and land remediation.
4 On 31 January 2019, the CSR group completed the sale of the Viridian glass segment. The Viridian Glass segment has been classified as a discontinued operation and all
non-trading transactions have been treated as significant for the year ended 31 March 2019. Total pre-tax significant items related to the Viridian Glass segment for the
year ended 31 March 2019 were $88.4 million. Refer to note 9 for further information. During the year ended 31 March 2018, the Glass segment divested sites in Western
Australia, Darwin and Cairns. Pre-tax 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.
5 Net profit attributable to shareholders of CSR Limited excludes net profit after tax of $4.4 million (YEM18: $2.1 million) generated by the Viridian glass segment until the
sale of the business on 31 January 2019. Net profit attributable to shareholders of CSR Limited (including net profit of discontinued operations) was $78.0 million (YEM18:
$188.8 million). Further detail of discontinued operations is contained in note 9.
6 Net profit from continuing operations before significant items of $181.7 million (YEM18: $210.6 million) excludes net profit generated by the Viridian glass segment until
the sale of the business on 31 January 2019. Net profit before significant items attributable to shareholders of CSR Limited (including net profit of discontinued operations)
was $186.1 million (YEM18: $212.7 million).
7 The basis of calculation is consistent with the earnings per share disclosure in the statement of financial performance (refer note 4). Earnings per share attributable to
shareholders of CSR Limited (including discontinued operations) was 37.0 cents per share (YEM18: 42.3 cents per share).
Recognition and measurement
Significant items are those which by their size and nature or incidence are relevant in explaining the financial performance of the CSR group,
and as such are disclosed separately.
62
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | FINANCIAL PERFORMANCE OVERVIEW
4
Earnings per share
Weighted average number of ordinary shares used in the calculation of basic EPS (million)1
Weighted average number of ordinary shares used in the calculation of diluted EPS (million)2
Profit after tax from continuing operations attributable to shareholders of CSR Limited ($million)
Basic EPS from continuing operations (cents per share)
Diluted EPS from continuing operations (cents per share)
Profit after tax attributable to shareholders of CSR Limited ($million)
Basic EPS (cents per share)
Diluted EPS (cents per share)
2019
503.2
503.8
138.9
27.6
27.6
78.0
15.5
15.5
2018
503.1
506.5
199.0
39.6
39.3
188.8
37.5
37.3
1 Calculated by reducing the total weighted average number of shares on issue of 504.1 million (2018: 504.3 million) by the weighted average number of shares purchased
on market and held in trust to satisfy incentive plans as these plans vest of 960,651 (2018: 1,237,649).
2 Calculated by increasing the weighted average number of shares used in calculating basic EPS by outstanding performance rights of 615,549 (2018: 3,424,291).
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.
5 Revenue
$million
Trading revenue from continuing operations
Other income from continuing operations
Net gain on disposal of assets
Significant items
Other
Trading revenue from discontinued operations
Recognition and measurement
Note
2019
2018
2
3
2,322.8
2,237.7
44.3
1.6
8.9
51.2
–
7.0
318.9
368.5
From 1 April 2018, the CSR group adopted AASB 15 Revenue from Contracts with Customers (‘AASB 15’) and applied the modified retrospective
approach. 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 change in accounting standard is not material to
the CSR group as the ‘notion of control’ is closely aligned to the ‘notion of risks and rewards’ for CSR revenue streams.
Sale of goods: the group sells a range of building products and aluminium. Sales are recognised when control of the products has
transferred, being when the products are delivered and accepted by the customer. A receivable is recognised when the goods are
delivered as this is the point in time that the consideration is unconditional because only the passage of time is required before the
payment is due. The group’s obligation to repair or replace faulty products under the standard warranty terms is recognised as a
provision.
Sale and installation of goods: certain CSR businesses supply and install building products. Sales are recognised over time given that
there is generally no alternative use of the product (it is generally specified based on the requirements of the building) and there is an
enforceable right to payment. Revenue from providing services is recognised in the accounting period in which the services are rendered.
For fixed-priced contracts, revenue is recognised based on the actual service provided to the end of the reporting period as a proportion
of the total services to be provided because the customer receives and uses the benefits simultaneously. For each of these contracts an
appropriate driver is determined which is then used to recognise revenue as the work is completed. In the case of fixed-price contracts,
the customer generally pays the fixed amount based on a payment schedule. If the services rendered by CSR exceed the payment, a
contract asset is recognised. If the payments exceed the services rendered, a contract liability is recognised.
Some contracts include multiple deliverables, such as the sale of product and related installation services. However, if the installation
could be performed by another party it is accounted as a separate performance obligation. Where the contracts include multiple
performance obligations, the transaction price will be allocated to each performance obligation based on the stand-alone selling price.
Revenue in relation to the sale of the product is recognised at a point in time when the product is delivered, and legal title has passed,
and the customer has accepted the goods. Estimates of revenues, cost or extent of progress toward completion are revised if
circumstances change. Any resulting increases or decreases in estimated revenues or costs are reflected in profit or loss in the period in
which the circumstances that give rise to the revision become known by management.
Sale and installation of goods revenue is disclosed within ‘trading revenue’ above and in note 2 given it is not material for separate
disclosure.
Land development and resale: the group develops and sells commercial and residential properties. Income is recognised when control
over the property has been transferred to the customer. The properties have generally no alternative use for the group due to contractual
relationships. An enforceable right to payment does not arise until after the customer has taken control of the property which is the
earlier of when title of the property passes or when the customer has physical possession of the property. As a result, income is
recognised when control of the property passes to the customer. 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. In most cases, the
consideration is due when legal title has been transferred. Land development and resale profit is disclosed within ‘net gain on disposal of
assets’ and classified as 'other income’ on the statement of financial performance and is recognised in the Property segment.
Disposal of assets: income is recognised when control of the asset passes to the purchaser. 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.
63
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | FINANCIAL PERFORMANCE OVERVIEW
6
Expenses
$million
Expenses from continuing operations
Significant items1
Employee benefits expense
Operating lease expense
Depreciation
Amortisation
Expenses from discontinued operations
Significant items1
Employee benefits expense
Operating lease expense
Depreciation
Amortisation
Note
2019
2018
3
12
12
3
12
12
50.0
464.6
51.6
57.7
7.3
88.4
120.0
18.4
10.8
0.3
8.5
454.2
47.6
62.3
7.5
17.4
140.0
22.7
14.1
0.5
1
Significant items are included within impairment expense and other expenses in the statement of financial performance.
Recognition and measurement
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.
7 Net finance costs
$million
Net finance costs from continuing operations
Interest expense and funding costs
Discount unwind and hedging relating to product liability provision
Discount unwind of other non-current liabilities
Foreign exchange gain
Finance costs
Interest income
Net finance costs
Note
2019
2018
4.8
8.0
0.8
(2.1)
11.5
(3.6)
7.9
(8.0)
(0.1)
4.0
8.3
0.8
(1.3)
11.8
(2.3)
9.5
(8.3)
1.2
Finance costs included in significant items
Net finance (income) costs before significant items
3
Net finance costs from discontinued operations
0.9
0.4
Recognition and measurement
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.
64
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | FINANCIAL PERFORMANCE OVERVIEW
8
Income tax expense
Reconciliation of income tax expense charged to the statement of financial performance:
$million
Profit before income tax from continuing operations
Loss before income tax from discontinued operations
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
Non-deductible impairment of goodwill and other assets
Income tax (over) under provided in prior years
Other items1
Total income tax expense on profit
Comprising of:
Current tax expense
Deferred tax expense relating to movements in deferred tax balances
13
Total income tax expense on profit
Income tax expense (credit) is attributable to:
Profit from continuing operations
Loss from discontinued operations
Total income tax expense on profit
1
Primarily relates to discontinued operations.
Recognition and measurement
Note
2019
208.7
(81.9)
126.8
38.0
(4.0)
–
12.3
(0.6)
(5.5)
40.2
22.0
18.2
40.2
61.2
(21.0)
40.2
2018
302.3
(14.4)
287.9
86.4
(3.7)
(1.6)
–
0.5
(0.3)
81.3
35.1
46.2
81.3
85.5
(4.2)
81.3
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 2019
and 31 March 2018.
Disclosure of company tax information
Under tax legislation the Australian Taxation Office will publish in 2019 the following data for the CSR Limited tax consolidated group and
Gove Aluminium Finance Limited in relation to the 2018 tax year:
Entity
CSR Limited (ABN: 90 000 001 276)
Gove Aluminium Finance Limited (ABN: 45 001 860 073)
Total revenue1
($million)
Taxable income
($million)
Tax payable
($million)
2,269.0
570.0
259.8
83.1
0.8
22.2
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 23.
Income tax is payable on profits (not total revenue) after allowing for expenses and specific adjustments under the tax law. For CSR Limited,
tax payable for 2018 was $0.8 million because CSR was entitled to utilise prior year tax losses and claim certain tax deductions that made
taxable income lower than accounting profit (for example, tax depreciation, certain restructure costs and payments of asbestos claims
settlements). The net amount of tax losses and rebated carried forward at the end of the year is set out below:
Value of tax losses and rebates carried forward
CSR Group
2019
($million)
10.22
2018
($million)
10.3
2 Unused tax losses for which no deferred tax asset has been recognised are $10.2 million (31 March 2018: nil). Unused tax losses were generated by a New Zealand
subsidiary that is no longer considered likely to utilise the tax losses in the foreseeable future. Unused tax losses can be carried forward indefinitely subject to meeting
ownership continuity requirements.
65
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | FINANCIAL PERFORMANCE OVERVIEW
9 Discontinued operations
i) Description
The sale of the Viridian Glass business was announced on 28
November 2018. This transaction included the sale of the glass
businesses in both Australia and New Zealand and the Viridian
property site at Dandenong, Victoria. The sale was completed on 31
January 2019 and is reported in the current period as a discontinued
operation. Financial information relating to the discontinued operation
for the period to the date of disposal is set out below.
The Viridian property site at Ingleburn was retained by CSR and
subsequently sold on 28 March 2019. This completed the divestment
of all Viridian assets.
ii) Financial performance and cash flow information
The below information presented is for the 10 months ended 31
January 2019 and the year ended 31 March 2018.
$million
Revenue (note 5)
Expenses
Profit before income tax
Income tax expense
Profit after income tax before
significant items
Impairment of assets, onerous leases
and other costs after tax, recorded as
significant items
Gain on sale of business after tax
Transaction costs after tax1
2019
318.9
2018
368.5
(312.4)
(365.5)
6.5
(2.1)
4.4
3.0
(0.9)
2.1
(65.7)
(12.3)
6.7
(6.3)
–
–
Loss from discontinued operations
(60.9)
(10.2)
Hedge profit (loss)
Exchange differences on translation
Recycling of reserves
Actuarial (loss) gain on
superannuation defined benefit plan
Other comprehensive expense from
discontinued operations, net of tax
Net cash inflow from discontinued operations:
0.6
(1.4)
1.1
(1.0)
(0.6)
(1.0)
–
0.4
iii) Details of the sale of Viridian glass
$million
Consideration received or receivable
Cash
Fair value of deferred consideration3
Total disposal consideration
Carrying amount of net assets sold
Gain on sale before income tax and
reclassification of reserves
Recycling of reserves
Income tax credit on sale
Gain on sale after income tax
2019
143.2
78.5
221.7
(220.7)
1.0
(1.1)
6.8
6.7
3
The deferred consideration is due six months after completion, being 31 July
2019.
The carrying amounts of assets and liabilities as at the date of sale
(31 January 2019) were:
$million
Cash
Trade and other receivables
Inventories
Property, plant and equipment
Deferred tax assets
Total assets
Trade and other payables
Provisions
Total liabilities
Net assets disposed
31 January
2019
5.9
44.4
82.9
128.4
22.1
283.7
30.7
32.3
63.0
220.7
(0.7)
(1.2)
10 Business combinations
i)
Current year
$million
Net cash from operating activities
Net cash from investment activities2
Net cash generated by the Glass
business
2019
21.3
126.9
148.2
2018
26.1
(10.8)
15.3
1
2
Transaction costs of $4.4 million were paid during the year ended 31 March
2019.
The 2019 cash flow includes an inflow of $137.3 million from the sale of the
business and the Ingleburn property.
The cash flows included in the statement of cash flow relating to the
disposal of the business were:
$million
Consideration received
Cash disposed
Cash proceeds net of cash disposed
2019
143.2
(5.9)
137.3
During the year ended 31 March 2019, the Building Products
segment acquired the business assets of an entity and invested in an
entity for cash consideration of $1.0 million.
ii) Prior 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.
Transactions occurring in YEM18 related to prior period acquisitions
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 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.
Contingent consideration of $1.8 million was paid in relation to
the acquisition of Viridian Glass Limited Partnership.
Transaction costs of $1.7 million related to the acquisition of
PGH Bricks & Pavers Pty Limited was paid in the year.
66
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | BALANCE SHEET ITEMS
Balance sheet items
11 Working capital
i)
Current receivables
ii)
Inventories
$million
2019
2018
$million
2019
2018
Trade receivables
Allowance for doubtful debts
Net trade receivables
Property receivable1
Deferred consideration2
Other loans and receivables
Total loans and receivables
Total current receivables
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 disposed3
Trade debts provided
Closing balance
Recognition and measurement
Current
Raw materials and stores
Work in progress
Finished goods
Land development projects
Total current inventories4
Non-current
Land development projects
Total non-current inventories
99.1
16.9
214.6
47.3
377.9
74.7
74.7
102.3
20.2
268.1
76.4
467.0
57.7
57.7
Proceeds from Horsley Park and Rosehill property sales due within 12 months.
1
2 Deferred consideration on the sale of Viridian Glass. Refer to note 9.
3 Relates to the disposal of Viridian Glass. Refer to note 9.
4 Write-down of inventories recognised as an expense from continuing operations
for the year ended 31 March 2019 totalled $12.7 million (2018: $13.5 million).
iii) Current payables
$million
Trade payables
Other payables
Total current payables
2019
238.2
22.7
260.9
2018
275.9
29.3
305.2
246.0
(7.2)
285.7
(8.5)
238.8
277.2
109.6
78.5
29.0
217.1
455.9
9.4
–
1.5
5.7
(8.5)
2.2
1.1
(2.0)
(7.2)
–
–
18.5
18.5
295.7
9.0
–
2.4
6.1
(8.0)
2.4
–
(2.9)
(8.5)
Trade receivables: are recognised initially at fair value and are subsequently measured at amortised cost. The CSR group has adopted
phase 2 of AASB 9 Financial Instruments, which requires an expected credit loss (‘ECL’) model as opposed to an incurred credit loss
model under AASB 139 Financial Instruments: Recognition and Measurement. The ECL model requires the CSR group to account for
expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial
recognition of the financial assets. AASB 9 also requires a simplified approach for measuring the loss allowance at an amount equal to
lifetime ECL for trade receivables, contract assets and lease receivables in certain circumstances. Accordingly, the CSR group’s
allowance for doubtful debts calculation applies the expected loss model and takes into consideration the likely level of bad debts
(based on historical experience) as well as any known ‘at risk’ receivables. 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
12 Property, plant and equipment and intangible assets
i)
Property, plant and equipment
$million
Cost or written down value
Land and buildings
Plant and equipment
Total
Note
2019
2018
2019
2018
2019
2018
341.0
378.9
1,306.4
1,540.9
1,647.4
1,919.8
Accumulated depreciation and impairment
(88.3)
(108.3)
(849.5)
(978.1)
(937.8)
(1,086.4)
Net carrying amount
Net carrying amount at 1 April
Capital expenditure
Disposed
Disposal of discontinued operations
Depreciation – continuing operations
Depreciation - discontinued operations
Impairments - continuing operations
Impairments - discontinued operations
Exchange differences
Acquisitions - business combinations
Transferred from (to) intangible assets
252.7
270.6
23.9
–
(37.4)
(8.0)
(1.1)
–
(0.3)
–
–
–
270.6
291.6
0.8
(0.3)
–
(9.4)
(1.1)
(0.1)
–
–
–
0.5
9
6
6
10
12ii)
Transferred from (to) inventories & other assets
5.0
(11.4)
456.9
562.8
90.9
(1.9)
(91.0)
(49.7)
(9.7)
(6.2)
(26.4)
(0.3)
0.5
(7.8)
(4.3)
562.8
556.6
78.8
(3.4)
709.6
833.4
114.8
(1.9)
833.4
848.2
79.6
(3.7)
–
(128.4)
–
(52.9)
(13.0)
(1.6)
–
(0.1)
0.1
(4.6)
2.9
(57.7)
(10.8)
(6.2)
(26.7)
(0.3)
0.5
(7.8)
0.7
(62.3)
(14.1)
(1.7)
–
(0.1)
0.1
(4.1)
(8.5)
Balance at 31 March
252.7
270.6
456.9
562.8
709.6
833.4
ii) Goodwill and other intangible assets
$million
Cost
Accumulated amortisation and
impairment
Net carrying amount
Net carrying amount at 1 April
Capital expenditure
Disposed
Amortisation - continuing operations
Amortisation - discontinued
operations
Impairments - continuing operations
6
6
Impairments - discontinued
operations
Exchange differences
Acquisitions - business combinations
10
Transferred from plant & equipment
12i)
Transferred from software to other
intangible assets
Goodwill
Software
Other
Total other intangible
assets
Note
2019
2018
2019
2018
2019
2018
2019
2018
57.2
98.1
–
–
87.8
(74.2)
89.6
(72.5)
46.1
(36.0)
48.3
133.9
(20.9)
(110.2)
137.9
(93.4)
57.2
98.1
98.1
97.1
–
–
–
–
(9.8)
(30.7)
(0.4)
–
–
–
–
–
–
–
–
–
0.8
0.2
–
–
13.6
17.1
0.3
(0.1)
(5.7)
(0.3)
(0.7)
(4.9)
0.1
–
7.8
–
17.1
17.9
3.1
(0.1)
(5.7)
(0.5)
(1.3)
–
–
–
4.1
(0.4)
10.1
27.4
–
–
(1.6)
–
(15.3)
(0.4)
–
–
–
–
27.4
28.8
–
–
(1.8)
–
–
–
–
–
–
0.4
23.7
44.5
0.3
(0.1)
(7.3)
(0.3)
(16.0)
(5.3)
0.1
–
7.8
–
44.5
46.7
3.1
(0.1)
(7.5)
(0.5)
(1.3)
–
–
–
4.1
–
Balance at 31 March
57.2
98.1
13.6
17.1
10.1
27.4
23.7
44.5
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.
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. 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.
68
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | BALANCE SHEET ITEMS
12 Property, plant and equipment and intangible assets (continued)
Recognition and measurement (continued)
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 $1.6 million (2018: $16.9 million) that have an indefinite life are assessed for recoverability
annually. 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.
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.
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.
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.
If the recoverable amount of a CGU is estimated to be less than its carrying amount, the carrying amount of the CGU is reduced to its
recoverable amount with any impairment recognised immediately in the statement of financial performance.
The carrying amount of goodwill and trade names with indefinite lives forms part of the Building Products segment: $57.2 million and
$1.6 million retrospectively (31 March 2018: $66.9 million and $16.9 million retrospectively) and Glass segment: $nil (31 March 2018:
$31.2 million of goodwill).
In accordance with AASB 136 Impairment of Assets, an impairment assessment has been performed for the Roofing CGU at 31 March
2019.
Roofing cash generating unit
The Roofing CGU has experienced a shortfall in earnings when compared to internal forecasts, with the business experiencing weaker
demand. Future cash flows from the Roofing CGU have been reforecast to reflect current trading and market conditions.
Following a detailed value in use impairment review of future cash flow projections, an impairment charge of $32.8 million has been
recorded in the statement of financial performance for 31 March 2019. This impairment charge has been allocated to goodwill ($9.8
million), other intangible assets ($16.0 million), plant and equipment ($6.2 million) and equity accounted investments ($0.8 million). Refer
to note 25. This impairment charge fully impairs all goodwill and indefinite life intangibles previously recognised for the Roofing CGU.
Given that the impairment assessment is a critical accounting estimate and the estimated recoverable amount of the Roofing CGU is now
equal to its carrying amount, key assumptions and sensitivities in relation to the impairment assessment performed for the Roofing CGU at
31 March 2019 is set out below:
Key assumptions for the Roofing CGU:
Post-tax discount rate: 10.0%
Terminal growth rate: 2.5%
Cash flows: cash flows are modelled over a five year period with a terminal value used from year six onwards. The first five years
represent financial plans forecast by management based on the CSR group’s view of business activity, with average assumptions applied
in the terminal year to ensure the cash flows are sufficiently stable to calculate the terminal value.
Impact of reasonable possible changes in key assumptions have been considered:
Post-tax discount rate increases from 10.0% to 10.5%: result in an additional impairment charge to plant and equipment of $3.5 million.
Long term growth rate decreases from 2.5% to 2.0%: result in an additional impairment charge to plant and equipment of $3.5 million.
Business cash contribution reduces by 10% for each year modelled: result in an additional impairment charge to plant and equipment of
$6.3 million.
No other reasonable possible changes in key assumptions have been identified.
Glass cash generating unit
In accordance with AASB 136 Impairment of Assets, an impairment assessment was performed for the Glass CGU at 30 September 2018.
Following a detailed value in use impairment review of future cash flow projections, an impairment charge of $63.3 million was recorded in
the statement of financial performance for 30 September 2018. This impairment charge was allocated to goodwill ($30.7 million), other
intangible assets ($5.3 million), plant and equipment ($26.7 million) and other assets ($0.6 million). This impairment charge fully impaired
all goodwill previously recognised for the Glass CGU. In addition, onerous lease provisions of $10.6 million and other provisions of $0.5
million were recorded at 30 September 2018.
The sale of the Glass CGU was announced on 28 November 2018 and completed on 31 January 2019. The Glass CGU is reported in the
current period as a discontinued operation. Refer to note 9.
69
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | BALANCE SHEET ITEMS
13 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
2019
104.3
(12.2)
–
92.1
2018
141.5
(7.4)
10.3
144.4
1 For the year ended 31 March 2019, deferred income tax assets in the statement of financial position total $104.3 million (31 March 2018: $151.8 million).
Opening
balance
Credited
(charged) to
profit or loss
Credited
(charged) to
equity
Other
(including
transfers)
Disposed1
Closing
balance
Movement in deferred income tax assets
$million
2019
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
(9.5)
(3.4)
86.7
36.3
23.0
(11.8)
2.0
10.8
10.3
Total net deferred income tax assets
144.4
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
(11.7)
(4.3)
93.7
34.7
22.2
(8.3)
13.7
5.6
55.6
Total net deferred income tax assets
201.2
1 Relates to the disposal of Viridian Glass. Refer to note 9.
Recognition and measurement
3.1
0.3
(6.3)
0.5
6.7
0.5
–
(12.7)
(10.3)
(18.2)
(2.8)
(0.1)
(7.0)
1.5
0.9
(3.9)
–
0.8
(35.6)
(46.2)
–
0.5
–
–
–
–
(8.1)
(2.1)
–
(9.7)
–
1.0
–
–
–
–
(11.7)
2.6
–
(8.1)
0.1
(11.1)
–
–
–
–
–
–
(2.4)
–
(2.3)
5.0
–
–
0.1
(0.1)
0.4
–
1.8
(9.7)
(2.5)
–
–
(8.6)
(3.4)
–
–
1.0
–
(22.1)
–
–
–
–
–
–
–
–
–
–
(17.4)
(2.6)
80.4
28.2
26.3
(11.3)
(6.1)
(5.4)
–
92.1
(9.5)
(3.4)
86.7
36.3
23.0
(11.8)
2.0
10.8
10.3
144.4
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
14 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
2018
Recognised/
remeasured
Settled/
transferred
Disposed
Discount
unwind
113.5
8.4
30.0
2.5
5.8
16.8
177.0
7.9
259.0
3.4
23.3
12.9
306.5
60.4
14.0
29.1
4.6
3.2
8.1
(59.0)
(3.3)
(29.1)
(4.8)
(3.6)
(9.8)
119.4
(109.6)
–
(29.1)
0.1
–
14.3
(14.7)
(0.4)
–
(1.2)
(0.2)
–
(1.8)
(27.0)
(0.9)
–
–
–
(2.7)
(30.6)
(1.7)
–
–
–
–
(1.7)
–
–
–
–
–
–
–
–
8.1
–
0.6
0.2
8.9
2019
87.9
18.2
30.0
2.3
5.4
12.4
156.2
5.8
238.0
2.3
23.7
27.4
297.2
1
Includes provision for anticipated disposal costs of Tomago aluminium smelters spent pot lining and onerous 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 15 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.
Restructure and rationalisation: provision is made for restructuring and rationalisation where the CSR group has a present legal or
constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and
the amount can be reliably estimated. The provision is measured at the present value of management’s best estimate of the expenditure
required to settle the present obligation at the end of the reporting period.
71
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | BALANCE SHEET ITEMS
15 Product liability
Background
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 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 2019, CSR had resolved
approximately 4,700 claims in Australia and approximately 137,800
claims in the United States.
Basis of provision
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 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 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;
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.
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, 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.
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 2019 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 is summarised in the graph and table below:
Table and Graph 1: Five year history – asbestos provision
500
400
300
200
100
0
350.7
334.5
312.4
289.0
268.0
2015
2016
Base case provision A$m
2017
2018
2019
Prudential margin A$m
$million
Year ended 31 March
2019
2018
232.3
35.7
15.4%
268.0
233.3
55.7
23.9%
289.0
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 (Australian liability 2.75% and US liability
2.1%); and
Base case estimate
Prudential margin
Prudential margin %
the discount rate applied to future payments (Australian liability
Total product liability provision
3.25% and US liability 3.60%).
72
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | CAPITAL STRUCTURE AND RISK MANAGEMENT
Capital structure and risk management
16 Borrowings and credit facilities
i)
Borrowings
Non-current borrowings – unsecured
Recognition and measurement
2019
–
2018
28.0
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 2018: $325.0 million) committed standby facilities with external financial institutions.
These facilities have fixed maturity dates as follows: $82.0 million in 2020, $161.0 million in 2022 and $82.0 million in 2023. As at 31 March
2019, $325.0 million of the standby facilities were undrawn (2018: $297.0 million undrawn).
17
Issued capital
On issue 31 March 2018
On-market share buy-back – net of transaction costs
On issue 31 March 2019
Ordinary shares
fully paid1
Issued capital
$million
504,308,227
1,036.2
(2,246,696)
(7.4)
502,061,531
1,028.8
1 Fully paid ordinary shares are listed on the Australian Securities Exchange and carry one vote per share and the right to dividends.
No shares were issued during the years ended 31 March 2019 and 31 March 2018 under employee share plans as shares in respect of the
plans were acquired on market. During the years ended 31 March 2019 and 31 March 2018, 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 2019 are $2.19 (2018: $2.15). Net tangible assets per share is calculated
as net assets attributable to CSR Limited shareholders of $1,178.0 million (2018: $1,227.4 million) less intangible assets of $80.9 million
(2018: $142.6 million) divided by the number of issued ordinary shares of 502.1 million (2018: 504.3 million).
During the year ended 31 March 2019, the company announced that as part of its ongoing capital management strategy, it would undertake an
on-market share buy-back of up to $100 million. The share buy-back commenced in March 2019 and remains ongoing.
18 Dividends and franking credits
i) Dividends
Dividend type
2017 Final
2018 Interim
2018 Final
2019 Interim
2019 Final1
Cents per
share
Franking
Total
amount
$million
Date
paid/payable
Graph 1: Dividends declared relating to each financial year
– cents per share
13.0
13.5
13.5
13.0
13.0
50%
50%
75%
100%
50%2
65.6
4 July 2017
68.1 12 December 2017
68.1
3 July 2018
65.6 11 December 2018
2 July 2019
65.3
30.0
20.0
10.0
-
20.0
23.5
26.0
27.0
26.0
2015
2016
2017
2018
2019
1 The final dividend for the financial year ended 31 March 2019 has not been recognised in this financial report because it was resolved to be paid after 31 March 2019. The
amounts disclosed as recognised in 2019 are the final dividend in respect of the financial year ended 31 March 2018 and the interim dividend in respect of the financial
year ended 31 March 2019.
2 Final dividend of 13.0 cents per share, 50% (6.5 cents) franked at the 30% corporate tax rate.
ii) Franking credits
$million
Franking account balance on an accruals basis1
2019
21.6
2018
47.0
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.
73
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | CAPITAL STRUCTURE AND RISK MANAGEMENT
19 Reserves
$million
Foreign
currency
translation
reserve
Hedge
reserve
Employee
share
reserve
Balance at 1 April 2018
Hedge profit recognised in equity
Hedge loss transferred to the statement of financial
performance
Translation of foreign operations
Reclassification to income statement on disposal of
discontinued operations
Income tax related to other comprehensive income
Share-based payments expense
Income tax related to share-based payments expense
Acquisition of treasury shares
Balance at 31 March 2019
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 related to other comprehensive income
Share-based payments expense
Income tax related to share-based payments expense
Acquisition of treasury shares
Non-controlling interests on acquisition of subsidiary
Balance at 31 March 2018
Nature and purpose of reserves
(2.0)
16.3
5.2
–
–
(6.5)
–
–
–
13.0
(22.2)
10.8
18.1
–
(8.7)
–
–
–
–
(2.0)
Share
based
payment
trust
reserve
(21.7)
–
–
–
–
–
–
–
(2.6)
Non-
controlling
interests
reserve
Other
Total
(59.1)
–
–
(3.3)
–
–
(53.2)
16.3
5.2
–
–
–
–
–
–
–
–
–
–
–
–
0.1
1.1
(6.5)
3.3
(2.1)
(2.6)
(24.3)
(59.1)
(3.3)
(38.4)
(15.9)
–
–
–
–
–
–
(5.8)
–
(56.6)
–
–
(3.3)
–
–
(73.4)
10.8
18.1
–
–
–
–
–
(2.5)
–
–
–
–
–
–
2.0
(8.7)
3.7
2.6
(5.8)
(2.5)
(4.6)
–
–
0.1
1.1
–
–
–
–
(3.4)
(6.6)
–
–
2.0
–
–
–
–
–
37.5
–
–
–
–
–
3.3
(2.1)
–
38.7
31.2
–
–
–
–
3.7
2.6
–
–
(4.6)
37.5
(21.7)
(59.1)
(3.3)
(53.2)
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 $4.73 (2018: $4.39) per share)
Issue of shares under executive incentive plans
Closing balance
2019
2018
1,155,256
550,000
(1,021,593)
824,219
1,325,619
(994,582)
683,663
1,155,256
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.
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).
74
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | CAPITAL STRUCTURE AND RISK MANAGEMENT
20 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
type and scale of risk that the CSR group is exposed to or the Risk
Management Policies used to manage these risks during the years
ended 31 March 2019 and 31 March 2018.
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.
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 measures the loss allowance at an amount that
reflects expected losses for trade and other receivables (see note 11).
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 16.
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
2019
Current payables
Non-current other payables
Borrowings (including
interest)
Commodity financial
instruments1
Foreign currency financial
instruments1
260.9
–
–
–
3.6
–
– 260.9
3.6
–
–
–
0.6
0.3
0.1
1.0
16.4
4.4
–
20.8
Total
277.9
8.3
0.1 286.3
2018
Current payables
Non-current other payables
Borrowings (including
interest)
Commodity financial
instruments1
Foreign currency financial
instruments1
305.2
–
0.7
–
3.7
28.1
18.5
9.4
0.6
1.3
– 305.2
3.7
–
28.8
–
–
–
27.9
1.9
Total
325.0
42.5
– 367.5
1
Settlement of commodity and foreign currency financial instruments will be
offset by revenue from the sale of commodities.
75
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | CAPITAL STRUCTURE AND RISK MANAGEMENT
20 Financial risk management (continued)
iii) Market risk
Nature of commodity price risk – aluminium
Commodity price risk sensitivity – aluminium
At 31 March 2019, 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 $34.3 million
lower/$34.3 million higher (2018: $52.7 million lower/$52.7 million
higher) had the Aluminium price strengthened/weakened by 10%,
assuming a constant exchange rate on hedging contracts arising
mainly from commodity swaps designated as cash flow hedges.
Other commodity price risks
Other commodity price risks include:
Oil: the CSR group has exposure to oil commodity prices through
an oil price linked gas purchasing contract. The A$ 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 cash balance of $50.0 million (2018: net debt balance of
$14.3 million). The maturity profile for the cash balance of $50.0
million is less than 1 year. The average interest rate on debt for the
year was 2.5% (2018: 2.4%) and the average interest rate on cash
balances for the year was 0.09% (2018: 0.44%).
At 31 March 2019, 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 $0.4 million lower/higher (2018: $0.2 million lower/higher),
mainly as a result of higher/lower interest expense on debt balances.
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
2019, the average of the daily LME cash price was US$2,035 per
tonne and the average Platts mid-point physical premium was
US$112 per tonne. The LME price component represented 95% of the
sum of the two. The CSR group designates the LME price component
of sales as the hedged item. Commodity forward and option contracts
are also priced against the LME Primary Aluminium cash price. There
is an established economic relationship between the physical sales of
aluminium and the commodity forward and option contracts as they
are both priced using the same reference price. As the underlying risk
of the aluminium price risk is identical to the hedged component, the
CSR group has established a hedge ratio of 1:1 for all its hedging
relationships over aluminium price risk.
The CSR group does not hedge its exposure to the variability in
physical metal premiums. In the CSR group’s view, there is currently
no viable hedge instrument for physical metal premiums and this
component of the metal sales price remains unhedged.
The table below provides information about the aluminium commodity
swaps entered into by the CSR group to manage its aluminium
commodity price exposure:
Notional value
Fair value
1 year
or less
1 to 3
years
3 to 5
years
Total Asset Liability
287.1
92.4
–
379.5 29.8
(0.2)
216.7
310.0
3.7
530.4 10.4
(23.5)
Commodity
price risk
($million)
2019
Aluminium
commodity
swaps1,2
2018
Aluminium
commodity
swaps1,2
1 The average price in US dollars per metric tonne at 31 March 2019 was
$2,123.6 (2018: $1,990.7). The average price for the individual periods does not
materially differ from the overall average price disclosed.
2 $29.6 million net of commodity contract gains (2018: $13.1 million net losses)
were deferred in 2019 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 2019 is one year or less: $20.9 million gain (2018: $14.7 million
loss); one to three years: $8.7 million gain (2018: $1.4 million gain); three to five
years: $nil (2018: $0.2 million gain).
76
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | CAPITAL STRUCTURE AND RISK MANAGEMENT
20 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 2019, 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 $20.2 million higher/$24.7 million lower (2018: $22.7 million
higher/$26.8 million lower) had the Australian dollar strengthened/weakened by 10% against the respective foreign currencies arising mainly
from foreign forward exchange contracts designated as cash flow hedges.
The table below provides information about the CSR group’s significant exchange rate exposures in forward exchange rate agreements:
Foreign exchange risk1,3
($million)
Average
exchange rate2
Notional value
Fair value
1 year or less
1 to 3 years
Total
Asset
Liability
2019
US dollar – buy
US dollar – sell
NZ dollar – buy
NZ dollar – sell
Euro – buy
Euro – sell
Japanese yen – buy
Japanese yen – sell
Total
2018
US dollar – buy
US dollar – sell
NZ dollar – buy
NZ dollar – sell
Euro – buy
Euro – sell
Japanese yen – buy
Japanese yen – sell
Total
0.72
0.77
1.06
1.06
0.63
0.63
78.46
–
0.78
0.76
1.07
1.06
0.64
0.65
86.40
86.08
45.5
215.0
10.1
9.3
8.5
0.4
1.6
–
–
64.4
–
–
–
–
–
–
123.0
162.3
5.3
196.3
12.0
54.7
26.9
2.6
3.1
1.1
–
–
–
–
–
–
45.5
279.4
10.1
9.3
8.5
0.4
1.6
–
128.3
358.6
12.0
54.7
26.9
2.6
3.1
1.1
1.0
–
0.2
–
–
–
–
–
1.2
2.1
5.8
0.1
0.1
1.0
–
0.2
–
9.3
–
(20.4)
–
(0.2)
–
–
–
–
(20.6)
(0.2)
(1.4)
–
(0.2)
–
–
–
(0.1)
(1.9)
1 $19.4 million of net foreign exchange contract losses (2018: $6.8 million gains) have been deferred 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 2019 is one year or less: $15.0 million loss (2018: $6.4 million gain); and one to
three years: $4.4 million loss (2018: $0.4 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.
77
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | CAPITAL STRUCTURE AND RISK MANAGEMENT
20 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 cash and cash equivalents, issued capital and reserves disclosed in notes 17 and 19 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
Other
Total
2019
Level 2
2018
Level 2
29.8
11.8
1.2
2.0
44.8
0.2
0.5
20.6
0.2
21.5
10.4
3.6
9.3
1.5
24.8
23.5
3.7
1.9
–
29.1
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 2019 and no transfers in either direction in 2019.
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.
78
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | CAPITAL STRUCTURE AND RISK MANAGEMENT
20 Financial risk management (continued)
vi) Cash flow hedging
The impact of hedging instruments designated in material hedging relationships as of 31 March 2019 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
2019
2018
126,500
tonnes
204,000
tonnes
29.8
0.2
42.7
10.4
23.5
36.0
2019
277.6
–
20.4
(24.8)
2018
351.9
5.9
1.5
(3.1)
2019
26.9
1.2
0.2
(1.3)
2018
109.5
3.4
0.4
3.1
$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 $21.0 million (2018: $1.4 million) of the carrying amount of Aluminium commodity swaps are disclosed within current other financial assets and $8.8 million (2018: $9.0
million) within non-current other financial assets. $0.2 million (2018: $16.1 million) of Aluminium commodity swaps are disclosed within current other financial liabilities
and $nil (2018: $7.4 million) within non-current other financial liabilities.
3 $nil (2018: $4.3 million) of the carrying amount of forward currency contracts are disclosed within current other financial assets and $nil (2018: $1.6 million) within non-
current other financial assets. $16.0 million (2018: $0.1 million) of the carrying amount of forward currency contracts are disclosed within current other financial liabilities
and $4.4 million (2018: $1.4 million) within non-current other financial liabilities.
4 $1.2 million (2018: $2.7 million) of the carrying amount of forward currency contracts are disclosed within current other financial assets and $nil (2018 $0.7 million) within
non-current other financial assets. $0.2 million (2018: $0.4 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 2019 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)
2019
(42.8)
2018
(36.1)
2019
24.8
2018
3.0
2019
1.3
2018
(3.1)
29.6
(13.1)
(20.4)
4.4
1.0
2.4
$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)
2019
28.0
2018
7.1
2019
(20.7)
2018
1.6
2019
1.0
2018
2.2
14.7
28.9
(4.1)
(4.6)
(2.2)
0.7
$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 recognised in other comprehensive income totalling $8.3 million (2018: $10.9 million gain) together with the $10.2 million gain (2018: $2.5 million gain)
on oil and electricity swaps less non-controlling interests of $2.2 million (2018: $2.6 million) reconciles to the hedge gain transferred to equity in note 19.
2 The gain reclassified from other comprehensive income to profit or loss after tax totalling $8.4 million (2018: $25.0 million gain) together with $nil gain (2018: $0.4 million
gain) on oil and electricity swaps less non-controlling interests of $3.2 million gain (2018: $7.3 million gain) reconciles to the hedge gain transferred to statement of
financial performance in note 19.
79
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | GROUP STRUCTURE
Group structure
21 Subsidiaries
Entity
2019
2018
Entity
% CSR
ownership
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 Subsidiary Finance Pty Limited2, 5
CSR Subsidiary Holdings Limited2, 5
CSR-ER Nominees Pty Ltd
DMS Security Glass Pty Ltd4
Don Mathieson & Staff Glass Pty Ltd4
Gove Aluminium Finance Ltd
High Road Capital Pty Limited3
Midalco Pty Limited
Monier PGH Superannuation Pty Limited
PASS Pty Limited
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
–
–
70
100
100
100
100
Incorporated in Australia (continued)
100 PGH Bricks & Pavers Pty Limited2
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 Viridian Glass International Pty Limited4, 5
100 Viridian Glass Investment Company Pty Limited4, 5
100 Viridian Glass Limited2, 4, 5
100 Viridian Glass Operations Pty Limited4, 5
100 Viridian Glass Properties Pty Limited4, 5
100
100
100 CSR Building Products (NZ) Ltd6
100 CSR (New Zealand) Holdings Limited5, 6
100 CSR Subsidiary (New Zealand) Limited5, 6
Incorporated in New Zealand
70 Euroglass Systems Limited4
100 Glass Concepts Limited4
100 National Glass Limited4
100 Norm Fowke Limited4
100 Tasman Glass Limited4
100 Viridian Glass GP Limited4
100 Viridian Glass Limited Partnership4
100
70
100
100
100 CSR Guangdong Glasswool Co., Ltd (China)
100 CSR Insurance Pte Limited (Singapore)
Incorporated in other countries
CSR Business Information Consulting (Shanghai)
Co. Ltd (China)
PT Prima Karya Plasterboard (Indonesia)
% CSR
ownership
2019
2018
100
100
100
–
100
100
100
100
100
100
–
–
–
–
–
100
100
100
–
–
–
–
–
–
–
100
100
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
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 YEM18, Bradford Energy Finance Pty Limited changed its legal name to High Road Capital Pty Limited.
4 On 31 January 2019 the sale of the Viridian Glass business was completed, and these entities were disposed as part of the sale transaction. Further detail is included in
note 9.
5 During the year, the following entities changed their legal names: CSR Viridian Finance Pty Limited to CSR Subsidiary Finance Pty Limited, CSR Viridian Holdings Limited to
CSR Subsidiary Holdings Limited, CSR Viridian International Pty Limited to Viridian Glass International Pty Limited, CSR Viridian Investment Company Pty Limited to Viridian
Glass Investment Company Pty Limited, CSR Viridian Limited to Viridian Glass Limited, CSR Viridian Operations Pty Limited to Viridian Glass Operations Pty Limited, CSR
Viridian Properties Pty Limited to Viridian Glass Properties Pty Limited, CSR Viridian (New Zealand) Holdings Limited to CSR (New Zealand) Holdings Limited and CSR
Viridian (New Zealand) Limited to CSR Subsidiary (New Zealand) Limited.
6 On 8 April 2019, CSR Building Products (NZ) Ltd, CSR (New Zealand) Holdings Limited and CSR Subsidiary (New Zealand) Limited amalgamated to become CSR Building
Products (NZ) Ltd under Part XIII of the Companies Act 1993.
22 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 Subsidiary Finance Pty Limited, CSR Subsidiary
Holdings Limited, PGH Bricks & Pavers Pty Limited and Rivarol Pty Limited are parties to a deed of cross guarantee (‘the Deed’) under which
each company guarantees the debts of the others. Viridian Glass Limited exited the Deed following the sale of the company on 31 January 2019.
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.
80
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | GROUP STRUCTURE
22 Deed of cross guarantee (continued)
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’.
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 2019 and 31 March
2018 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
Impairment expense
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 recognised in equity
Hedge (gain) loss transferred to statement of financial performance
Exchange differences arising on translation of foreign operations
Recycling of foreign currency translation reserve on disposal of business, 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 on superannuation defined benefit plans
Income tax benefit 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 on superannuation defined benefit plans (net of tax)
Dividends provided for or paid
Closing retained profits
2019
2018
1,832.1
(1,145.8)
1,856.2
(1,142.7)
686.3
90.7
(221.4)
(301.6)
13.9
(85.7)
(11.1)
171.1
3.2
(12.5)
161.8
(16.7)
145.1
713.5
125.0
(221.5)
(324.4)
12.3
–
(24.3)
280.6
1.4
(13.3)
268.7
(54.6)
214.1
2019
145.1
2018
214.1
11.2
(2.2)
0.1
1.1
5.0
1.4
2.0
–
(2.7)
(1.9)
(1.6)
0.5
6.4
(3.3)
1.0
4.2
151.5
218.3
2019
205.9
145.1
(1.1)
(133.7)
216.2
2018
127.8
214.1
(2.3)
(133.7)
205.9
81
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | GROUP STRUCTURE
22 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
Borrowings
Other financial liabilities
Provisions
Other non-current liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained profits
Equity attributable to shareholders of the closed group
82
2019
2018
41.3
361.8
277.0
6.1
9.1
695.3
39.2
74.7
32.5
173.4
601.4
56.1
21.3
101.7
11.2
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
1,111.5
1,293.8
1,806.8
1,903.2
191.2
0.6
6.1
135.6
333.5
–
0.3
288.0
2.3
290.6
624.1
222.4
2.7
4.2
152.4
381.7
28.0
1.4
299.8
–
329.2
710.9
1,182.7
1,192.3
1,028.8
(62.3)
216.2
1,182.7
1,036.2
(49.8)
205.9
1,192.3
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | GROUP STRUCTURE
23 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 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 in cash held
Transactions with non-controlling interests
Profit allocated to non-controlling interests1
Dividends paid to non-controlling interests2
Gove Aluminium Finance
Limited
2019
2018
151.5
122.7
91.7
25.5
626.9
24.6
12.5
37.1
13.4
(9.1)
(20.2)
(15.9)
7.4
16.2
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
1 Profit allocated to non-controlling interests for subsidiaries that are not material for disclosure was $1.2 million for the year ended 31 March 2019 (2018: $1.2 million).
2 During the year ended 31 March 2019, dividends declared to non-controlling interests included $10.6 million which was re-invested through a dividend reinvestment plan
and $5.6 million which was paid in cash. Dividends paid to non-controlling interests for subsidiaries that are not material for disclosure were $0.4 million (2018: $nil).
24
Interest in joint operations
The CSR group’s interest in the Tomago aluminium smelter joint operation of 36.05% (2018: 36.05%) is held through a controlled entity in which
the CSR group has a 70% interest, resulting in an effective interest in the joint operation of 25.24% (2018: 25.24%).
Recognition and measurement
The shareholders of the joint operation are jointly and severally liable for the liabilities incurred by the operation and have rights to the assets.
This entity is therefore classified as a joint operation and the group recognises its direct right to the jointly held assets, liabilities, revenues
and expenses. Where the CSR group and the parties to the agreements only have rights to the net assets of each of the operations under the
arrangements, these entities will be classified as joint ventures of the CSR group and accounted for using the equity method. Refer to note
25.
Critical accounting estimate
Investments in joint arrangements are classified as either joint operations or joint ventures. The classification depends on the contractual
rights and obligations of each investor, rather than the legal structure of the joint arrangement, and therefore requires judgment in
determining the classification. The CSR group has both joint operations and joint ventures.
83
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | GROUP STRUCTURE
25 Equity accounting information
Carrying amount ($million)
Entity1
Building products
Rondo Building Services Pty Ltd2
Gypsum Resources Trust Australia2
New Zealand Brick Distributors3
Other2
Total investment
2019
Equity
accounted
investment
Long-term
loan
Net
investment
Long-term
loan
2018
Equity
accounted
investment
Net
investment
–
12.0
–
–
12.0
19.0
–
7.9
1.5
28.4
19.0
12.0
7.9
1.5
40.4
–
12.0
–
2.4
14.4
18.8
–
7.9
2.5
29.2
18.8
12.0
7.9
4.9
43.6
1 The CSR group’s interest in these entities is 50% (2018: 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
Impairment of equity accounted investment
Reclassification of long-term loan to short-term loan
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
Rondo Pty Limited
Other
2019
43.6
19.7
(5.9)
(14.3)
(0.8)
(2.4)
0.5
40.4
2018
39.9
18.1
(5.4)
(9.5)
(0.4)
–
0.9
43.6
2019
2018
103.8
24.9
61.9
2.7
96.6
22.1
58.7
3.3
293.4
273.5
14.0
(0.2)
12.4
0.3
iii) Balances and transactions with joint venture entities
$million
Note
2019
2018
Current loans payable to CSR
Non-current loans payable to CSR
Current payables to joint venture entities
Purchases of goods and services
Sales of goods and services
31
3.5
14.1
5.3
31.8
6.6
0.7
11.3
4.9
24.4
6.7
84
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | GROUP STRUCTURE
26 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
2019
2018
350.8
1,743.5
(559.8)
(261.9)
302.6
1,723.4
(517.9)
(282.4)
1,272.6
1,225.7
1,028.8
8.3
235.5
1,036.2
9.9
179.6
1,272.6
1,225.7
189.0
189.6
96.2
96.9
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 $5.4 million
respectively (2018: $30.0 million and $5.8 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 $238.0 million and $23.7 million respectively (2018: $259.0 million and $23.3 million respectively). See notes 14 and 15
for further details.
ii) CSR Limited transactions with controlled entities
During the financial years ended 31 March 2019 and 2018, 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
2019
2018
27
119.6
1.3
120.9
113.4
–
113.4
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 107% 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 $83.1 million (2018:
$76.9 million) and guarantees provided to third parties outside of the CSR group of $36.5 million (2018: $36.5 million). 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 2019 (2018: $nil).
85
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | OTHER
Other
27 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 2019 for the CSR group were $43.2 million (2018: $41.8 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 2019, contributions
totalled $37.1 million (2018: $36.1 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.
The Pilkington (Australia) Superannuation Scheme Trust Deed was amended with effect from midnight on 31 January 2019 to restructure the
plan within the fund, including splitting the Pilkington (Australia) Superannuation Scheme defined benefit plan into two separate plans. The
amendment reflected the agreement between CSR Limited and Viridian Glass Limited that Viridian Glass Limited would assume full
responsibility to fund its obligations for defined benefit members employed by the Viridian Glass Limited business. The CSR group will retain the
funding obligations in respect of the Viridian pensioner defined benefit plan. As such, amounts recorded for the CSR group exclude funding
obligations and share of assets and liabilities which have been assumed by Viridian Glass Limited.
Asset backing
The last actuarial assessment for the Harwood Superannuation Fund was completed as at 30 June 2018. The funding requirements were
reviewed as at 30 June 2018. 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 a minimum funding level of 103% and a funding guarantee of 107% of actuarial liabilities for the DBD CSR and DBD
Harwood Pensioner plans. At the time of the last actuarial review, DBD CSR and DBD Harwood Pensioner had a funding position of 243% and
105% respectively. Therefore, as at 31 March 2019, CSR Limited was required to provide bank guarantees of $1.3 million to the trustee of the
fund to satisfy the balance of its commitments (2018: $nil). The bank guarantees have been disclosed in note 26.
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 (liability)
Contributions
paid
Harwood Superannuation Fund
DBD CSR and DBD
Harwood Pensioner1
DBD Monier PGH
$nil from 1 April 2018
$nil from 1 April 2018
69.9
46.9
(66.7)
(39.6)
3.2
7.3
–
0.4
Pilkington (Australia)
Superannuation Scheme DBD2 14.6% of eligible salary 17.5 (19.8) (2.3) 1.3
1 Actuarial liabilities are determined to be past service liabilities based on membership accrued up to 31 March 2019.
2 Funds contributed by CSR are for accumulation members.
86
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | OTHER
27 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
2019
2018
3.5
3.0
29.7
50.8
2.7
16.8
3.8
3.3
30.0
52.4
2.9
14.7
2019
2018
2.3
5.7
(5.7)
2.3
2.7
6.2
(6.6)
2.3
Actuarial loss incurred during the financial year and recognised in the statement of comprehensive income
(1.6)
(3.3)
Cumulative actuarial losses recognised in the statement of comprehensive income
(54.3)
(52.7)
1 Disclosed in selling, administration and other operating costs.
Impact of plans on the statement of financial position
$million
Net asset of superannuation defined benefit plans
Fair value of assets
Present value of liabilities
Net asset
Included in the statement of financial position
Non-current other assets (note 31)
Other non-current liabilities
Net asset
Movements in the fair value of the defined benefit plan assets
Assets at the beginning of the financial year
Interest income
Return on assets (in excess of interest income)
Contributions from the employer
Contributions from participants
Benefits paid
Assets at the end of the financial year
Movements in the present value of the defined benefit plan liabilities
Liabilities at the beginning of the financial year
Current service cost
Finance cost
Contributions from participants
Actuarial loss
Curtailments and settlements
Benefits paid
Liabilities at the end of the financial year
2019
2018
134.3
(126.1)
169.9
(158.5)
8.2
11.4
10.5
(2.3)
8.2
169.9
5.7
0.8
1.7
2.3
(46.1)
11.4
–
11.4
172.8
6.6
3.8
2.5
1.0
(16.8)
134.3
169.9
158.5
2.3
5.7
2.3
2.4
1.0
(46.1)
158.3
2.7
6.2
1.0
7.1
–
(16.8)
126.1
158.5
87
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | OTHER
27 Employee benefits (continued)
i)
Superannuation commitments (continued)
Net asset (liability) of superannuation defined benefit plans
211.0
182.5
250.0
200.0
150.0
100.0
50.0
0.0
176.1
167.1
172.8
158.3
169.9
158.5
126.1
134.3
(28.5)
(9.0)
14.5
11.4
8.2
2015
2016
2017
2018
2019
Present value of fund liabilities ($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 2019, 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
2019
3,240,703
911,695
(904,017)
(243,407)
2018
3,166,010
967,666
(892,973)
–
3,004,974
3,240,703
There were no vested and exercisable shares at 31 March 2019 (2018: 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 2019 is set out below:
Performance rights
Grant date
Expiry date
2019
2018
23 July 2014
24 July 2015
26 July 2016
25 July 2017
23 July 2018
1 April 2018
1 April 2019
1 April 2020
–
–
1,181,270
927,434
170,601
904,017
1,198,419
967,666
25 July 2018
1 April 2021
896,270
–
Total
3,004,974
3,240,703
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 2018
Relative TSR
25 July 2018
EPS
Monte Carlo simulation Binominal Tree
1 April 2018
1 April 2018
31 March 2021 31 March 2021
2.7 years
$4.22
30%
5.9%
2.10%
$3.60
2.7 years
$4.22
30%
5.9%
2.10%
$1.36
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 46.
88
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | OTHER
27 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
2019
130,202
$5.24
2018
118,667
$4.93
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
2019
618,943
110,117
2018
506,664
89,217
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 $3.84 (2018: $4.02).
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
2019
2018
2,705,539
566,440
1,275,194
3,099,880
626,950
1,019,408
4,547,173
4,746,238
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.
89
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | OTHER
28 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 2019 (2018: 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
2019
4,428,659
963,436
5,392,095
2018
4,319,706
1,155,494
5,475,200
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 25, no material amounts were receivable from, or payable to, other related
parties as at 31 March 2019 (2018: 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 27.
29 Subsequent events
With the exception of the items disclosed below, there has not arisen in the interval between 31 March 2019 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 2019, refer to note 18.
90
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | OTHER
30 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
2019
2018
125.0
22.1
147.1
44.4
85.4
17.3
147.1
204.0
27.6
231.6
50.5
117.8
63.3
231.6
20.4
52.6
The total of minimum rentals to be received in the future under non-cancellable sub-leases as at 31 March 2019 is not material. Contingent
rentals for 2019 and 2018 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 nature of the operations conducted and 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.
Impact of new standards not yet applicable:
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 group has selected and implemented a system solution to capture all leases in scope and perform the accounting entries in compliance with all
aspects of AASB 16. The standard will be first applicable for the year commencing 1 April 2019 and the group is currently in the final stages of
determining the final impact on the consolidated financial statements.
The estimated impact on the CSR group on the consolidated statement of financial position as at 1 April 2019 and on the consolidated statement of
financial performance for the year ending 31 March 2020 is set out below:
$million
New lease liabilities
New right-of-use (ROU) assets
Decrease in retained earnings
Increase in earnings before interest and tax (EBIT)
Decrease in net profit after tax
205 to 225
155 to 175
20 to 30
3 to 8
1 to 3
The group plans to adopt AASB 16 Leases using the modified retrospective approach. Therefore, the net effect of the new lease liabilities and right-
to-use assets, adjusted for deferred tax, will be recognised in retained earnings, with no restatement of comparative information.
To date the most significant impact identified is in respect of the ROU asset and lease liability for property leases. The nature of the expense related
to those leases will change because AASB 16 replaces the straight-line lease expense with a depreciation charge for ROU assets and interest
expense on lease liabilities.
The group plans to apply practical expedients including: low-value and short-term lease exemptions (i.e. continue to recognise operating lease
expense for low-value and short-term leases), portfolio application for forklifts and motor vehicles (i.e. use of a single discount rate to these
portfolios), exclusion of initial direct costs and outgoings on all lease portfolios.
91
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | OTHER
30 Commitments and contingencies (continued)
ii) Contingencies
Contingencies for CSR Limited are outlined in the parent entity note 26. There are no other contingencies in relation to controlled entities within
the CSR group. Operating lease expenditure for 2019 and 2018 is disclosed in note 6.
31 Other non-current assets
$million
Loans to joint venture entities1
Other loans and receivables
Total non-current receivables
Other assets
Superannuation defined benefit plans – fair value of surplus
Total other non-current assets
1 The CSR group has provided facilities to joint venture entities on arm’s length terms.
32 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
Note
27
2019
14.1
11.7
25.8
0.7
10.5
11.2
2018
11.3
65.2
76.5
0.3
11.4
11.7
2019
2018
697,000
72,000
22,000
742,000
77,108
9,000
791,000
828,108
92
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | OTHER
33 Other accounting policies
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 2019 included $50.0 million of cash at bank and on hand (2018: $13.7 million) and $nil short-term deposits
(2018: $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.
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 2019; and
there are reasonable grounds to believe that CSR Limited and the group entities identified in note 22 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.
John Gillam
Chairman
Sydney, 8 May 2019
Rob Sindel
Managing Director
Sydney, 8 May 2019
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 2019, 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 2019 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 15 Product liability)
CSR has recognised a product liability provision of
$268.0 million as at 31 March 2019. 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 12 Property, plant and equipment and
intangible assets)
At 31 March 2019 the group’s consolidated
statement of financial position includes goodwill
amounting to $57.2 million, other intangible assets
amounting to $23.7 million and property, plant and
equipment amounting to $709.6 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 analysis. The Roofing CGU was
identified by management as a CGU requiring an
impairment analysis as it contains an intangible asset
with an indefinite useful life and due to its low return
on funds employed. Subsequently, an impairment of
$32.8 million has been recognised to bring funds
employed to their recoverable amount.
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 indefinite life intangible assets had
been included in management’s impairment testing;
evaluating the analysis performed by management and the conclusions
drawn in relation to the Roofing 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 CGU;
- 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 2019, 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.
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.
96
CSR LIMITED | INDEPENDENT AUDITOR’S REPORT
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 2019.
In our opinion, the Remuneration Report of CSR Limited for the year ended 31 March 2019, 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 L Gorton
Chartered Accountants
Partner
Sydney, 8 May 2019
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte Network.
97
CSR LIMITED | SHAREHOLDER INFORMATION
20 LARGEST HOLDERS OF ORDINARY SHARES
As at 30 April 2019
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 PTY LIMITED
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMS PTY LTD
BNP PARIBAS NOMINEES PTY LTD
PRUDENTIAL NOMINEES PTY LTD
UBS NOMINEES PTY LTD
CITICORP NOMINEES PTY LIMITED
MR ALLAN ERNEST ORMES
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
SINDEL AUSTRALIA PTY LTD
LSND PTY LTD
CSR SHARE PLAN PTY LIMITED
CSR SHARE PLAN PTY LIMITED
AMP LIFE LIMITED
V M NOMINEES PTY LTD
MR BRIAN FREDERICK DITCHFIELD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
NATIONAL NOMINEES LIMITED
Top 20 holders of issued capital
Remaining holders balance
SUBSTANTIAL SHAREHOLDERS OF CSR LIMITED
UNITS
177,210,825
% OF UNITS
35.3
72,991,725
65,163,441
14,644,787
5,834,912
5,348,370
2,500,000
1,900,000
1,206,568
1,066,667
932,902
819,717
700,000
683,663
630,796
581,715
550,000
500,000
498,548
482,316
354,246,952
147,376,374
14.6
13.0
2.9
1.2
1.1
0.5
0.4
0.2
0.2
0.2
0.2
0.1
0.1
0.1
0.1
0.1
0.1
0.1
0.1
70.6
29.4
The Blackrock Group and its subsidiaries advised that as of 15 March 2019, it and its associates had an interest in 47.0 million shares, which
represented 9.31% of CSR’s issued capital at that time.
FIL Limited and its subsidiaries advised that as of 27 February 2019, it and its associates had an interest in 38.4 million shares, which
represented 7.62% of CSR’s issued capital at that time.
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 30 April 2019, it and its associates had an interest in 25.1 million shares, which
represented 5.01% 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
497,575,932
2,387,216
671,514
456,540
184,319
347,805
Units %
99.2
0.5
0.1
0.1
0.0
0.1
Holders
47,317
1,252
43
242
94
215
Holders %
96.2
2.5
0.1
0.5
0.2
0.5
501,623,326
100.0
49,163
100.0
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
Holders
23,457
19,757
3,604
2,261
84
49,163
Units
11,644,020
45,388,434
26,033,620
50,260,523
368,296,729
501,623,326
% of issued capital
2.3
9.1
5.2
10.0
73.4
100.0
Minimum $ 500.00 parcel at $ 3.56 per unit
141
Minimum parcel size
Holders
1,823
Units
100,958
RECENT CSR DIVIDENDS
Date paid
December 2013
July 2014
December 2014
July 2015
December 2015
July 2016
December 2016
July 2017
December 2017
July 2018
December 2018
Type of dividend
Dividend per share
Franking
Franked amount
per share at 30%
Interim
Final
Interim
Final
Interim
Final
Interim
Final
Interim
Final
Interim
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
13.0 cents
0%
0%
0%
0%
0%
0%
0%
50%
50%
75%
100%
NA
NA
NA
NA
NA
NA
NA
6.5 cents
6.75 cents
10.125 cents
13.0 cents
99
SHAREHOLDER
INFORMATION
ANNUAL GENERAL MEETING
Wednesday 26 June 2019
Northside Conference Centre
Corner Oxley Street and Pole Lane
Crows Nest NSW 2065 Australia
REGISTRY INFORMATION
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
1800 676 061
Telephone
International +61 3 9415 4033
Facsimile
International +61 3 9473 2500
(03) 9473 2500
www.investorcentre.com/contact
INVESTOR RELATIONS AND NEWS
CSR LIMITED
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
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
Telephone
International +61 2 9235 8000
(02) 9235 8000
www.csr.com.au
100
CSR LIMITED ANNUAL REPORT 2019 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 26 June 2019.
CONTENTS
MANAGING DIRECTOR’S REVIEW
BUILDING PRODUCTS
FINANCIAL OVERVIEW
FIVE YEAR PERFORMANCE OVERVIEW
2
2
4 CHAIRMAN’S MESSAGE
6
8
14 PROPERTY
16 ALUMINIUM
18 INVESTING IN A SUSTAINABLE FUTURE
28 RISK MANAGEMENT
30 BOARD OF DIRECTORS
32 DIRECTORS’ REPORT
35 REMUNERATION REPORT
53 FINANCIAL REPORT
94 DIRECTORS’ DECLARATION
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.
$2.3b
Revenue in YEM19
2,900+
CSR employees
165+
Manufacturing and
distribution sites
18,000+
Customers across
Australia and New Zealand
20%
Lost time injuries down 20%
in YEM19
$158,369
Donated to CSR Community
Support Program in YEM19
PAGE 10 CSR has a long relationship with the reality TV
series The Block and its architect Julian Brenchley. The
above photo is from the latest series which featured a group
of apartments at The Gatwick in St Kilda near Melbourne.
$3m
Allocated to energy
saving reduction projects
in YEM19
2.6%
Reduction in CO2-e
emissions in 2018
CSR Limited ABN 90 000 001 276
This Annual Report is printed on Nordset, an environmentally
responsible paper made carbon neutral (CN). The fibre source has
been certified according to the Forest Stewardship Council® (FSC®).
CSR.COM.AU