CSR LIMITED
Annual
Report
2020
CSR LIMITED | CONTENTS
CONTENTS
1
2
4
6
11
15
FINANCIAL OVERVIEW
CHAIRMAN’S MESSAGE
MANAGING DIRECTOR’S REVIEW
OPERATING AND FINANICAL REVIEW
SUSTAINABILITY AND PEOPLE
CORPORATE GOVERNANCE STATEMENT AND RISK
MANAGEMENT
BOARD OF DIRECTORS
28
DIRECTORS’ REPORT
30
REMUNERATION REPORT
34
56
FINANCIAL REPORT
100 DIRECTORS’ DECLARATION
101
104 SHAREHOLDER INFORMATION
INDEPENDENT AUDITOR’S REPORT
ABOUT CSR
CSR is a leading building products
company in Australia and New Zealand.
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 including Gyprock plasterboard,
Bradford insulation, Cemintel fibre cement, Hebel
autoclaved aerated concrete panels, PGH Bricks,
Monier rooftiles and AFS walling systems.
CSR generates additional earnings from its Property
division which focuses on maximising financial returns
by developing surplus former manufacturing sites and
industrial land. CSR is also a joint venture participant
in the Tomago aluminium smelter, located near
Newcastle, NSW.
COVID-19 AND CSR’S ANNUAL REPORT
CSR was nearing the end of its financial year when the
COVID-19 pandemic was declared in March 2020. The
company acted quickly to bolster CSR’s financial position
and ensure there was sufficient liquidity
to operate in the uncertain economic environment. This
has included an immediate cash preservation focus and
ceasing or deferring all non-essential expenditure. In line
with this position, CSR has streamlined its annual report
this year to reduce costs.
CSR’s Annual General Meeting (AGM) will be held on
24 June 2020 at 10am (AEST). Details on arrangements
for the AGM are included in the Notice of Meeting.
Further updates to the market can be found on the
company’s website www.csr.com.au.
CSR Limited ABN 90 000 001 276
$2.2b
Revenue in YEM20
$125m
Statutory net profit after tax
in YEM20
180+
Manufacturing and distribution
sites across Australia and NZ
18,000+
Customers across
Australia and NZ
2,800+
CSR employees
8%
Lost time injuries
down 8% in YEM20
2%
Reduction in waste
production in 2019
3%
Reduction in greenhouse
gas emissions in 2019
CSR LIMITED | FINANCIAL OVERVIEW
FINANCIAL OVERVIEW
Trading revenue of $2.2 billion was down 5% reflecting the slowdown
in residential construction.
FIVE YEAR PERFORMANCE OVERVIEW
Year ended 31 March ($ million) unless stated
Continuing operations 1
2020
2019
2018
2017
2016
Operating results
Trading revenue
Earnings before interest and tax (EBIT)
Building Products 2
Property
Aluminium
Viridian
Segment total
Corporate and restructuring and provisions 2, 3
CSR EBIT
Net profit after tax (before significant items)
Net profit after tax and discontinued operations
(after significant items)
Financial position
Shareholders' funds
Total assets
Net cash / (debt)
Key data per share
2,212.5
2,322.8
2,237.7
2,468.3
2,298.8
170.5
(1.5)
59.6
206.5
38.8
36.6
214.1
47.8
79.5
-
-
-
228.6
(11.8)
216.8
134.8
125.3
281.9
(16.9)
265.0
181.7
78.0
341.4
(21.1)
320.3
210.6
188.8
202.8
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
1,125.5
2,404.5
94.8
1,231.1
1,991.1
50.0
1,274.1
2,136.0
(14.3)
1,206.5
2,097.1
(11.4)
1,317.2
2,215.8
70.9
Earnings before significant items (cents)
Earnings after significant items and discontinued
operations (cents)
Dividend (cents)
Payout ratio
Key measures
Profit margin (EBIT/trading revenue) (%)
Return on funds employed (ROFE) (%) 4
Employees (Number of people employed) 5
27.3
25.4
14.0
51.3
9.8
17.8
2,823
36.1
15.5
26.0
72.0
11.4
21.8
2,960
41.9
37.5
27.0
64.4
14.3
27.8
4,282
36.5
35.3
26.0
71.2
12.1
21.6
4,193
32.9
28.2
23.5
71.4
12.0
20.7
3,578
1. From continuing operations for 2018 and 2019, which excludes the Viridian Glass business which was sold on 31 January 2019.
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 expenditure 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.
1
CSR LIMITED | CHAIRMAN’S MESSAGE
CHAIRMAN’S MESSAGE
Retaining CSR’s position of operational and financial strength.
As of 31 March 2020, CSR had net cash
of $95 million and a strong liquidity
position which ensures we are well
prepared for the year ahead. Since the
year end, we have secured additional
facilities of $200 million to ensure we
have additional liquidity and strengthen
our financial position.
A key part of our strategy to bolster our
financial position was to take a cash
preservation approach across all of our
businesses. This ensured we could focus
on business critical and safety related
expenditure.
We also applied this approach to our
capital management programs. As a
result, CSR’s on-market share buyback
was paused. Prior to being paused the
share buyback returned over $69 million
to shareholders since its commencement
in March 2019.
Due to the uncertain economic
environment, the board has also made
the prudent decision that no final
dividend will be paid this year.
In December 2019 shareholders
received dividends of $69 million
comprising an interim (10 cents per
share) and special dividend (4 cents per
share) following receipt of deferred
Property proceeds during the first half of
the year.
We will continue to review our financial
position and resume our capital
management programs when it is
appropriate to do so in the future.
While our lives today remain focused on
the COVID-19 pandemic, you will recall
that just over four months ago, we were
witnessing the devastating bushfires and
the huge impact on many communities in
Australia. We have since raised a total of
$50,000 from employee donations and
matching by CSR for the Salvation Army
Bushfire appeal. We will also be
supporting other charity bushfire projects
with CSR product donations as the
rebuild continues.
While the financial year ended 31 March
2020 (YEM20) clearly came to an
unusual close for CSR, I am pleased to
share some of our significant
achievements with you.
We ended the year with a solid result in
our Building Products business. The
residential market has slowed after a
period of very high activity over the last
few years. Increased diversification of
our business in both product and market
positioned us well against this backdrop.
As a result, our revenue was down 6%,
which was ahead of the weakness in the
residential building market which was
down on average 21%.
In Property, while no transactions were
completed during the year, we
announced the $142.5 million sale of
industrial land at Horsley Park, NSW.
Aluminium delivered a stronger result
which benefitted from the lower
Australian dollar.
Our statutory net profit was $125.3
million, up significantly from $78.0
million in the prior year which included
impairment charges from the Viridian
Glass business (sold on 31 January
2019).
CSR’s net profit after tax from continuing
operations (before significant items) was
$134.8 million, down 26%.
COVID-19 Response
As the COVID-19 pandemic emerged
toward the end of our financial year, CSR
acted quickly to ensure that health and
safety of our employees, contractors,
customers and suppliers was the first
and overriding priority. We have worked
closely with key stakeholders to support
building sites remaining open in
Australia. This has enabled us to help
our customers continue working on the
many projects which started well before
COVID-19, while ensuring safety on site.
We also focused on retaining CSR’s
strong financial position and plan for the
longer-term resilience of our business.
CSR ended the year in a position of
financial strength and we have taken a
number of steps to maximise our near-
term liquidity.
2
$95m
Net cash of $95m with a strong
liquidity position
$75m
Completed $75m expansion
of Hebel Somersby operation
$69m
Total dividends
paid for YEM20
$69m
Returned to shareholders
through the share buyback
2030 targets
Sustainability targets
in place for 2030
Thank you to the CSR team
On behalf of the board, I want to thank
the 2,800 CSR employees for their
efforts this year. In the last two months,
you have managed a difficult
environment by focusing on what we can
control and supporting each other and
our customers.
This year CSR has achieved a significant
milestone as we reached our 165th year
in Australia. CSR has operated over this
extensive period as the company has
adapted to change and continues to grow
and evolve as the markets around us
keep changing. This will continue as we
manage the business during COVID-19
and ensuring we are strong and fitter in
the recovery.
A sincere thanks to all of the team at
CSR and to our shareholders for your
continued support during this
challenging time.
JOHN GILLAM
CHAIRMAN
12 MAY 2020
CSR LIMITED | CHAIRMAN’S MESSAGE
Completion of $75 million Hebel
expansion
A key milestone this year was the
completion of the $75 million new
Hebel factory at Somersby, NSW. This
project was a long time in the making.
CSR first began production of Hebel
almost 30 years ago and today remains
the only manufacturer of autoclaved
aerated concrete (AAC) in Australia and
New Zealand.
This is the most significant expansion
project undertaken by CSR for many
years. Planning for the new factory
began over four years ago to identify
areas where CSR could develop a world
class facility which minimises raw
materials and energy use, improves
safety and leverages our product
expertise.
An overriding objective was to focus on
the local economy and minimise our
carbon footprint by working with local
suppliers, manufacturers and products
sourced in the region where possible.
This factory is a strong endorsement of
the manufacturing skills we have here
in Australia.
Welcome to CSR’s new Managing
Director & CEO Julie Coates
Another major milestone this year was
the appointment of Julie Coates as
CSR’s new Managing Director & CEO.
Julie joined CSR on 2 September 2019
and brings extensive experience leading
large manufacturing companies with a
deep understanding of product branding,
marketing, digital transformation and
global sourcing.
These combined skills are invaluable as
we continue to adapt to change, innovate
and pursue growth. Since Julie joined
CSR, she has worked with the team to
align our strategic priorities with a focus
on productivity and cost discipline. This is
particularly important during the COVID-
19 pandemic where she has led the
team by focusing on two key principles –
the health and safety of all of our people
and ensuring the resilience of our
business over the long-term.
2.5
2.3
2.3
2.2
2.2
16
17
18
19
20
TRADING REVENUE
Year ended 31 March ($bn)
188.8
177.9
142.3
125.3
78.0
16
17
18
19
20
STATUTORY NET PROFIT AFTER
TAX
Year ended 31 March ($m)
70.9
94.8
50.0
(11.4)
(14.3)
16
17
18
19
20
NET CASH/(DEBT)
Year ended 31 March ($m)
3
CSR LIMITED | MANAGING DIRECTOR’S REVIEW
MANAGING DIRECTOR’S
REVIEW
Ensuring health and safety and business resilience.
Since I joined CSR in September 2019,
I have been very impressed by the
experience and passion of our team and
the trust that our customers have in our
leading brands.
It has also been great to see some strong
areas of innovation and diversity across
our business. Our reach and experience
has helped tap into new projects –
particularly in the commercial market
with great service and design support.
As I have visited our many
manufacturing, distribution, retail outlets
and design centres over the last eight
months, I have learned more about the
dedication and focus of our people.
Their ability to adapt to changes and act
decisively has been well demonstrated
during the last two months with COVID-
19. We have acted quickly to manage
the situation for our people and our
customers with one consistent approach
across all of CSR to the response and
ongoing communications. CSR
businesses quickly adapted to new
business processes to improve hygiene
and social distancing requirements with
a detailed approach to factory,
warehouse and retail outlet management
and work on building sites.
As an Australian manufacturer with a
supply chain with core raw materials
sourced locally, we have ensured our
sites remained fully operational and
minimised disruptions for our customers.
Sustainability
Sustainability is a core part of how we
operate and this is underpinned by
targets we have set across our key
areas of the environment, our people
and the community.
We set targets in 2010 to deliver a 20%
reduction per tonne of saleable product
in energy consumption, greenhouse gas
emissions, solid waste to landfill and
potable water usage. At the end of this
ten year period, we have reached our
target for waste to landfill with a
reduction of over 50% and achieved our
CO2e emissions target with a 24%
reduction. We also significantly reduced
water and energy usage during the
period.
The learnings from this process has led
to the development of new sustainability
targets to 2030 which cover key areas of
energy, emissions, procurement,
packaging, water, waste and biodiversity.
This year we also achieved an 8%
reduction in the rate of lost time injuries.
Safety is clearly a top priority for CSR and
me. While we are seeing improvement in
some key metrics, there remains more
work to do to improve performance.
Further details on our approach to
sustainability are included on page 11
and in the CSR Sustainability Report
which was published in December 2019.
Strategic priorities for long-term
Key actions
New sustainability
targets to 2030 have
been set with a
broader base of
measurement and
increased expectation
of improvement across
the business
3.3
3.0
2.4
2.4
2.2
16
17
18
19
20
LTIFR - 8% IMPROVEMENT IN
SAFETY IN YEM20
Safety measured as Lost Time Injury
Frequency Rate (per million work hours)
Customer solutions and
systems
Product development and diversification across residential and commercial markets
Assessing opportunities for changing customer requirements
Product and technical
support
Support customers with technical and installation advice on products and systems to
improve certification, fire and acoustic specifications
Maximise opportunity from further development of CSR’s products and systems
Optimise footprint
of overall management of costs
Ongoing review of scenarios to align product to demand
Optimise manufacturing footprint within the COVID-19 market environment as part
Supply chain efficiency
Identify delivery and transport (metro and regional) efficiencies
Warehouse management to improve flexibility across businesses and reduce costs
4
CSR LIMITED | MANAGING DIRECTOR’S REVIEW
Business performance
and outlook
The CSR Group delivered earnings before
interest and tax (EBIT before significant
items) of $216.8 million for YEM20,
which was down 18% on the previous
year.
In Building Products, we were planning
for the continued decline in residential
building activity we have seen over the
past year. The business performed
solidly in this environment with our
largest businesses of Gyprock and
Bradford maintaining stable earnings
during the period. This was offset by
lower earnings in PGH Bricks, Hebel and
AFS due to the slower market.
Since the year end, construction markets
in Australia remain active with projects
started well before COVID-19. Our sites in
New Zealand resumed operations in late
April following the full lock-down which
started in late March.
We have not seen a significant drop in
activity in the first six weeks of YEM21,
with revenue down 3% compared to the
previous corresponding period. However,
we anticipate there will be an impact on
key markets this year, but the timing and
extent is uncertain.
In Property, no material transactions
were completed during the year as
expected. In November 2019, we
announced the sale of 20 hectares of
industrial land at Horsley Park, NSW for
total sale proceeds of $142.5 million.
The first tranche of this transaction is on
track to record $80 million in proceeds
and $53 million in EBIT later this year
with additional earnings to be recorded
in YEM23. Despite the impact of
COVID-19 on the economy, demand for
industrial property in Western Sydney
remains strong.
In Aluminium, EBIT was up strongly as
input costs have stabilised with the
second half earnings benefitting from the
significant decline in Australian dollar.
This has also enabled a significant
increase in our forward hedging position.
A further update on current trading for
the CSR Group will be provided at the
company’s AGM on 24 June 2020.
Planning to ensure safety, manage
costs and capacity
Looking ahead, planning continues for
the various scenarios of potential impact
on the building market over the coming
months.
We have taken a prudent approach to
cost management: working hours have
been reduced throughout the
organisation where appropriate and non-
essential expenditure is now ceased or
deferred.
In addition, in recognition of challenging
times ahead, I have forfeited my YEM20
short-term incentive together with CSR’s
CFO and senior executives.
We have confirmed all operational levers
which are available to align production to
demand across all sites, businesses and
support roles. Ongoing monitoring of a
range of lead indicators is in place to
adjust production and our cost position
as early as possible.
Over the last six months, we identified a
number of areas to deliver the next
phase of growth. While our near-term
priorities have changed, we are also
focused on a number of strategic
priorities for the year ahead to optimise
our operations and support growth.
These will be managed within the current
environment to ensure CSR’s long-term
resilience and growth.
Thank you
I want to thank all of our team,
contractors, customers and suppliers for
their support. The CSR team has
ensured that as we work together and
look out for each other, we will sustain
this business for the long-term.
JULIE COATES
MANAGING DIRECTOR AND CEO
12 MAY 2020
214.1
206.5
202.8
167.6
170.5
16
17
18
19
20
BUILDING PRODUCTS EBIT
Year ended 31 March ($m)
47.8
38.8
23.3
15.0
(1.5)
16
17
18
19
20
PROPERTY EBIT
Year ended 31 March ($m)
104.1
93.1
79.5
59.6
36.6
16
17
18
19
20
ALUMINIUM EBIT
Year ended 31 March ($m)
5
CSR LIMITED | OPERATING AND FINANCIAL REVIEW
OPERATING AND
FINANCIAL REVIEW
Group EBIT down 18% reflecting lower Building Products
result and timing of Property transactions
Trading revenue1 of $2.2 billion for the year ended 31 March 2020 (YEM20), down 5% on the prior year.
Earnings before interest and tax (EBIT)1 of $216.8 million, down 18% included the following results:
Building Products - EBIT of $170.5 million, down 17% following the slowdown in residential construction during the last twelve
months. CSR’s largest businesses of Gyprock and Bradford delivered steady earnings benefitting from a more diversified revenue
base across residential and commercial construction.
Property - No significant Property sales were recognised during the year due to the timing of transactions. The earnings from the
transaction announced in November 2019 at Horsley Park, NSW are expected to be recorded in YEM21 and YEM23.
Aluminium - EBIT of $59.6 million, up 63% as input costs have stabilised and with the second half earnings benefitting from the
significant decline in Australian dollar.
Net profit after tax from continuing operations (before significant items)1 of $134.8 million, down 26%.
Statutory net profit after tax (including discontinued operations) of $125.3 million compared to $78.0 million in the prior year which
included impairment charges.
Earnings per share1 of 27.3 cents, down from 36.1 cents.
Total dividends for the year of 14 cps, comprising 10 cps interim dividend, 4 cps special dividend (both franked at 50%) reflecting
deferred settlements on Property transactions from previous years. No final dividend has been declared given the uncertain economic
environment.
A$m unless stated 1
Trading revenue from continuing operations
EBIT from continuing operations
Building Products
Property
Aluminium
Corporate (including restructure and provisions)
Group EBIT from continuing operations
Net finance (costs) income
Tax expense
Non-controlling interests
Net profit after tax from continuing operations 1
Significant items after tax from continuing operations
Statutory net profit after tax from continuing operations
Statutory net loss after tax from discontinued operations
Total statutory net profit after tax
20202
2,212.5
2019
2,322.8
170.5
(1.5)
59.6
(11.8)
216.8
(10.8)
(58.0)
(13.2)
134.8
(9.5)
125.3
-
125.3
206.5
38.8
36.6
(16.9)
265.0
0.1
(74.7)
(8.7)
181.7
(42.8)
138.9
(60.9)
78.0
Change
(5%)
(17%)
(104%)
63%
30%
(18%)
(26%)
(10%)
61%
1.
2.
All references are for continuing operations before significant items unless stated. They are non-IFRS measures and are used internally by management to assess the
performance of the business and have been extracted or derived from CSR’s financial statements for the year ended 31 March 2020 (YEM20). All comparisons are to
the year ended 31 March 2019 (YEM19) unless otherwise stated.
CSR adopted AASB 16 Leases effective 1 April 2019, resulting in an increase to EBIT of $7 million and decrease to net profit after tax of $2 million for YEM20. YEM19
has not been restated, refer to Note 14 in the financial report.
6
CSR LIMITED | OPERATING AND FINANCIAL REVIEW
CSR FINANCIAL PERFORMANCE
CSR reported a net profit after tax from continuing operations (before significant items) of $134.8 million for the year ended 31 March
2020 (YEM20), down 26%.
Statutory net profit after tax (including discontinued operations) of $125.3 million compared to $78.0 million in the prior year which
included impairment charges from the Viridian Glass business (sold on 31 January 2019).
Tax expense of $58.0 million (before significant items) was down from $74.7 million due to the lower pre-tax profits. CSR’s effective tax
rate for the year (before significant items) was 28.2% in line with the prior year.
Net cash of $94.8 million increased from the net cash position of $50.0 million as of 31 March 2019, included the final proceeds from
the sale of Viridian and receipt of deferred Property consideration. This has been further bolstered by additional credit facilities of $200
million which were finalised in May 2020.
Capital expenditure (excluding Property and acquisitions) was $100.2 million during the year. Of this total, $43.0 million was for stay-in-
business projects and $57.2 million was development related capital expenditure, including Hebel’s new factory completed in Somersby,
NSW. Bradford Martini’s leased factory site in Villawood, NSW was also purchased for $18 million when the property was listed for sale.
Property invested $42.2 million during the year as part of rehabilitation of key development sites.
Dividends –In December 2019, the company paid an interim dividend of 10 cps plus a special dividend of 4 cps (both franked at 50%)
reflecting deferred settlements on property transactions from previous years. Based on the uncertain economic environment, the board
has taken the prudent decision to not declare a final dividend for YEM20.
Share buyback – In March 2019, CSR launched a $100 million on-market share buyback. $69 million in shares have been purchased
to date. This on-market share buyback is currently paused as part of the company’s cash preservation focus in response to COVID-19.
Product liability – As at 31 March 2020, the asbestos provision fell to $246.9 million from $268.0 million as at 31 March 2019. This
provision included a prudential margin of $28.0 million. CSR paid asbestos related claims of $27.8 million (including legal costs)
compared to $29.1 million in the prior year.
BUILDING PRODUCTS PERFORMANCE
Construction market conditions by segment
Australia Residential (12m – 000s)
Detached1
Medium density1
High density1
Total Residential Commencements
Non-residential (A$B) 2
A&A (A$B) 2
NZ consents (12m - 000s) 3
2020
2019
change
107.2
33.8
40.3
181.3
45.9
8.9
36.5
121.9
43.3
65.4
230.6
44.5
9.4
32.5
(12%)
(22%)
(38%)
(21%)
3%
(4%)
12%
1. Source ABS data – (original basis two quarter lag – i.e. 12 months to September).
2. Source ABS, BIS Oxford Economic forecast (value of work done – 12 months to March).
3. Source Statistics New Zealand – (residential consents 2 quarter lag – 12 months to September).
The majority of CSR’s Building Products are utilised at the end of the construction process which results in product sales occurring on
average two quarters after the start of a residential housing commencement. While this can vary between detached and multi-
residential housing, CSR’s revenues for YEM20 are generally aligned to residential commencements for the 12 months to September
2019. Therefore, the market data above has not been impacted by the COVID-19 pandemic which began in Australia and New Zealand
in March 2020.
Australian residential housing commencements on a two quarter lag basis of 181,322 were down 21% compared to the prior year.
Detached housing on the east coast of Australia decreased by 12%, while Western Australia was down 15%. The medium and high
density market slowed significantly during the period, down 32%, as projects slowed following a period of very high activity over the last
few years.
The non-residential market was up 3% driven by growth in the commercial sector. The alterations and additions market has also slowed,
while the New Zealand market remained reasonably strong across all segments.
7
CSR LIMITED | OPERATING AND FINANCIAL REVIEW
Building Products Financial Results
A$m unless stated 1
Revenue
EBIT
Funds employed2
EBIT/revenue
Return on funds employed3
2020
1,591.3
170.5
945.8
10.7%
18.0%
change
(6%)
(17%)
‒
2019
1,695.9
206.5
947.4
12.2%
22.1%
1. Before significant items.
2. Excludes cash and tax balances and certain other non-trading assets and liabilities as at 31 March. A reconciliation of funds employed is included in Note 2 in the
financial report.
3. Based on EBIT (before significant items) for the 12 months to 31 March divided by average funds employed.
Trading revenue from Building Products was $1,591.3 million, down 6%. Building Products EBIT of $170.5 million was down 17% as the
slowdown in residential construction activity impacted performance during the year. This decline in activity has seen housing
commencements across the industry down on average 21%.
Despite the broader market slowdown, CSR’s largest businesses of Gyprock and Bradford delivered steady earnings as they benefitted
from a diversified revenue base across residential and commercial sectors. Hebel and AFS earnings, however, were lower as they have
significant exposure to the high density market which was down 38% during the period. PGH Bricks activity slowed during the year as
detached housing activity was down 12%. The high fixed cost nature of the business had a significant impact on PGH Bricks’ earnings.
EBIT margin of 10.7% was down from 12.2% due to lower volumes across the operating network with the opportunity for price increases
above inflation becoming more limited in some products and regions.
Building Products Business Performance
LIGHTWEIGHT
SYSTEMS
ENERGY AND ROOFING
SOLUTIONS
BRICKS
CONSTRUCTION
SYSTEMS
41%
30%
17%
12%
YEM20 revenue $660m
YEM20 revenue $474m
(1% below YEM19)
(3% below YEM19)
YEM20 revenue $265m
(14% below YEM19)
YEM20 revenue $192m
(17% below YEM19)
Performance benefitted
from diversified market base
Bradford and Martini
insulation EBIT steady
Gyprock EBIT steady
Monier roofing EBIT lower
due to slower detached
housing market
Volumes lower as detached
housing has fallen on east
coast
Volumes and pricing
impacted by sharp slowdown
in NSW high density market
EBIT down due to decline in
EBIT lower reflecting lower
activity
market activity
Darra closure completed in
July 2019 to improve cost
position
8
CSR LIMITED | OPERATING AND FINANCIAL REVIEW
COVID-19 RESPONSE
Health and safety first and overriding priority
CSR’s first and overriding priority is to protect the health and safety of all of our employees, contractors and customers. When the
COVID-19 pandemic was declared in Australia and New Zealand in March 2020, CSR acted quickly to implement a number of business
contingency plans, personal hygiene and social distancing measures at all sites in line with government guidelines.
CSR’s manufacturing sites in Australia, as well as the broader building and construction market, have largely remained fully operational
since the start of the COVID-19 pandemic. In New Zealand, CSR’s operations were in lock-down from 26 March 2020 to 28 April 2020
with operations resuming activity over the last two weeks.
Action plan to prepare for decline in market activity in YEM21
While the impact of COVID-19 has been minimal on the YEM20 results, market demand for CSR’s products is forecast to decline over the
balance of the YEM21 financial year due to the impact of COVID-19 on the broader economy. In response, CSR has taken a number of
steps to reduce expenditure and manage production levels. Extensive scenario planning has also been completed to maximise
productivity and align production with changes in market activity.
Building Products Outlook
Since the year end, construction markets in Australia remain active with projects started well before COVID-19. CSR’s sites in New
Zealand resumed operations in late April following the full lock-down which started in late March.
The company has not seen a significant drop in activity in the first six weeks of YEM21, with revenue down 3% compared to the previous
corresponding period. However, it is anticipated there will be an impact on key markets this year, but the timing and extent is uncertain.
PROPERTY
Progress on key development projects
A$m unless stated 1
EBIT
Funds employed2
Return on funds employed3
2020
(1.5)
167.8
(0.8%)
2019
38.8
224.5
18.9%
change
(104%)
(25%)
1. Before significant items.
2. Excludes cash and tax balances and certain other non-trading assets and liabilities as at 31 March. A reconciliation of funds employed is included in Note 2 in the
financial report.
3. Based on EBIT (before significant items) for the 12 months to 31 March divided by average funds employed.
CSR’s Property business continued to make good progress on key development projects. However, due to the timing of transactions, no
significant earnings were recorded during the year.
On 1 November 2019, CSR confirmed the sale of the second tranche of surplus land at Horsley Park, NSW for total sale proceeds of
$142.5 million to ESR Australia. The sale of the 20-hectare site is expected to generate Property EBIT of $94 million. These earnings
will be split into two stages which are expected to be recorded in the financial years 31 March 2021 and 2023 (YEM21 and YEM23).
Following completion of rehabilitation, roads and infrastructure, the first stage proceeds of $80 million and EBIT of $53 million is
expected to be recorded in the second half of YEM21. The sale received approval by the Foreign Investment Review Board in February
2020.
Other major projects under development
Schofields, NSW (Residential) – Full zoning approval of the 70ha site is expected to be completed by the second quarter of 2020,
producing approximately 1,525 lots. Timing of Stage 1 (28ha) will be based on market conditions within the next two years.
Warner, QLD (Residential) – Residential zoning application under review. Subject to zoning, the site could produce around 450
lots. Zoning expected to be completed in 2020.
Brendale, QLD (Industrial) – Contracts have been settled on 5ha delivering EBIT of $2 million in YEM20. A further 4ha are under
contract to be completed in YEM21, while marketing continues on the remaining 13ha at the site.
9
CSR LIMITED | OPERATING AND FINANCIAL REVIEW
ALUMINIUM
EBIT higher reflecting lower input costs and A$
A$m unless stated 1
Sales (tonnes)
A$ realised price2
Revenue
EBIT
Funds employed3
EBIT/revenue
Return on funds employed4
2020
209,905
2,960
621.2
59.6
141.0
9.6%
42.4%
2019
213,280
2,939
626.9
36.6
140.3
5.8%
28.2%
change
(2%)
1%
(1%)
63%
1. Before significant items.
2. Realised price in A$ per tonne (including hedging and premiums).
3. Excludes cash and tax balances and certain other non-trading assets and liabilities as at 31 March. A reconciliation of funds employed is included in Note 2 in the
financial report.
4. Based on EBIT (before significant items) for the 12 months to 31 March divided by average funds employed.
The realised aluminium price in Australian dollars (including hedging and premiums) was steady compared to the prior year increasing by
1% to A$2,960 per tonne.
Gove Aluminium Finance (GAF – 70% CSR) sales volumes of 209,905 tonnes were 2% below 213,280 in the prior year due to a
rebalancing of end of year inventory levels and slightly lower Tomago production. Trading revenue of $621.2 million was down slightly
due to lower volumes and LME aluminium prices, which were largely offset by currency fluctuation and hedging gains.
The Australian dollar averaged 68.2 US cents compared to 73.0 US cents in the prior year, while the average MJP ingot premium for the
year was US$98 per tonne, below the US$112 per tonne in the prior year (Platts Metals Week – Main Japanese Port ingot premium).
EBIT of $59.6 million was up 63% due to hedging gains and lower A$ alumina costs which are linked to the US$ LME aluminium
price. Other input costs including coke also declined as well as the overall cost of electricity due to a lower coal cost pass through
compared to the prior year.
GAF has secured 100% of alumina volumes for the 2020 calendar year which are linked to the US$ aluminium price. These new
contracts began in January 2020, which have staged end dates over three years. For calendar year 2021, 80% of alumina volumes have
been contracted.
Due to the COVID-19 pandemic in March 2020, the Australian dollar experienced a sharp decline which provided an opportunity to
significantly increase the forward hedge position. As of 30 April 2020, 63% of the net aluminium exposure for YEM21 is hedged (H1 is
74% hedged) which is up from 16% as of 31 October 2019.
GAF Aluminium Hedge Book position - significant increase in forward hedge position
As of 30 April 2020
Average price A$ per tonne (excludes premiums)
% of net aluminium exposure hedged
YEM21
YEM22
A$ 2,826
63%
A$ 2,846
42%
YEM23
A$2,913
36%
10
CSR LIMITED | SUSTAINABILITY AND PEOPLE
SUSTAINABILITY
AND PEOPLE
Sustainability is a core part of how we operate and this is underpinned by targets set
across key areas of the environment, our people and the community
At CSR, we care for and protect each other, our business, our
customers, the community and our environment with the aim of
building a sustainable, profitable and growing enterprise. The
workplace health and safety of our people and the preservation of
the environment in which we operate are core values at CSR.
Further details on CSR’s approach to sustainability over the past
year are included in the 2019 CSR Sustainability Report which
was published in December 2019.
Sustainability targets to 2030
Following on from the specific ten year targets to reduce
greenhouse gas emissions and waste production and the
consumption of energy and water used in production completed in
2019, CSR has broadened its approach for a new set of targets to
2030 to cover key areas of energy and emissions reduction,
procurement, packaging, minimising water use and waste and
preserving biodiversity.
ENVIRONMENT
Targets to 2030
CSR is committed to contributing to an overall positive impact on
the environment and reducing reliance on non-renewable
resources. CSR has an active program to reduce its impact on the
environment which is overseen by the Board and the WHSE
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, water usage and use of
resources and minimise waste
Continue the focus on improving the energy efficiency of our
operations
Outcome of 2020 goals
As part of mitigating the impacts of climate change from our
operations, in 2009 CSR set four intensity targets to deliver a 20%
reduction per tonne of saleable product in energy consumption,
greenhouse gas emissions, solid waste to landfill and potable
water usage using 2009/10 as the base year. At the time, CSR
was one of the first manufacturing companies in Australia to set
specific environmental targets.
At the end of this ten year period, we have reached our target for
waste to landfill with a reduction of over 50% since 2009. Our
CO2e emissions also achieved the target with a 24% reduction. We
also significantly reduced in water usage – down 17% and energy
consumption – down 16% during the 10 year period.
Although we were short of the 20% target for water and energy,
key learnings were gained throughout the last ten years which will
improve operational efficiency and our use of resources in future
years.
Renewable Energy in Manufacturing – 50% of electricity
generated by renewable energy
Advanced Energy Performance - 20% energy reduction (GJ)
per tonne of saleable product.
Towards a Circular Economy - Zero waste to landfill - CSR
packaging to be closed loop (either 100% reusable;
recyclable; compostable) with a 75% reduction in solid waste
to landfill.
Zero Water Waste - 30% reduction of potable water
consumed (ltr) per tonne of saleable product.
Transitioning to Carbon Positive - 30% reduction of
greenhouse gas emissions (CO2e) per tonne of saleable
product.
Preserving Biodiversity - Enhanced biodiversity outcomes on
all CSR sites and developments.
Building a Sustainable Society - 5% of indirect spend by
Procurement to be spent with social enterprises.
Over the coming year, each business unit will be reviewing their
road map to align their operations to these goals and these will be
regularly reviewed by senior management and the WHSE
committee.
Energy Improvement Fund
In 2018, CSR established a $20 million fund specifically targeting
energy saving reduction projects to reduce reliance on external
providers. The key aim of the fund is to bring forward projects that
may not have met the internal business benchmarks and payback
periods.
To date nine projects have been approved and four completed for
a total investment of $6.6 million including:
367kw Solar project at Bradford Insulation – Ingleburn, NSW
Heat exchange project at Monier Roofing – Darra, QLD
Upgraded raw material crushing system at Hebel – Somersby,
NSW
1MW solar project at PGH Bricks – Golden Grove, SA
11
CSR LIMITED | SUSTAINABILITY AND PEOPLE
Approach to climate risk and opportunities
As the world transitions to a low carbon future, we anticipate that
there will be economy-wide impacts from this transition, including
impacts that have the potential to affect CSR.
These impacts could vary depending on the future
decarbonisation pathway that Australia follows including how
advancements in technology influence that pathway.
The Paris Agreement, to which Australia is a signatory, creates a
global framework for country-level emission reductions. Yet the
policy environment in which this decarbonisation occurs remains
unclear, creating uncertainty for business around types and
magnitudes of climate-related transition risks and opportunities
that it will face.
Understanding the potential impacts of transition climate risks is
an important aspect of our overall understanding of climate risk
for the business. Transition risks could have the potential to affect
the costs that CSR faces, both directly from its own manufacturing
activities, and indirectly through the cost of goods and services on
which we rely.
Climate risk management
Climate risks are assessed as part of CSR’s risk framework which
is outlined on page 23. CSR supports the Task Force on Climate-
related Financial Disclosures (TCFD) framework to assess and
disclose climate-related risks and opportunities. We developed a
staged approach in 2018 to assess these risks and opportunities
and continue to integrate them into our risk management
approach across the business. As part of this staged approach, in
2019, we conducted a climate scenario analysis of CSR’s Gyprock
plasterboard from 2020 to 2030, under three modelled scenarios.
Gyprock is CSR’s largest business by revenue within the Building
Products portfolio. The scenario analysis focused on transition
(market, policy and regulatory) risks, complementing earlier work
undertaken on the physical (weather) risks impacting sites and
supply chain risks.
The transition risks that CSR Gyprock face are a product of the
interaction between potential Government intervention
accelerating progress towards meeting Australia’s Paris Target
commitment; economic changes related to climate change and
changes to CSR Gyprock’s own emissions profile.
The three modelled scenarios broadly align with:
1.5°C global average temperature rise (high ambition)
2°C global average temperature rise (Paris Agreement
ambition)
4°C global average temperature rise (low ambition)
The analysis under the three scenarios confirmed that while there
will not be a material impact on the business to 2030, there are a
number of implications from this analysis which will be important
for Gyprock’s continued approach to assessing and managing
climate risk:
Climate policy is the most significant driver of transition risk
Energy efficiency and renewable energy sourcing reduces
projected liabilities
Risk will be impacted by its position relative to its peers
Outcomes of this work will be included in CSR’s annual strategic,
capital and business planning. The next steps in CSR’s approach
will be to undertake further scenario analysis within another
business unit within the CSR Building Products portfolio.
Learnings from the CSR Gyprock project will help inform the scope
of this analysis.
Sustainable procurement
The sustainable procurement project is a risk based approach to
manage sustainability issues across the procurement process. We
have developed our overall procurement capabilities across CSR
while addressing supply chain sustainability risks which also
prepares us for Australia’s Modern Slavery Act.
A key part of the project is a Supplier Code of Conduct which
formalises CSR’s sustainable procurement policies, the minimum
requirements we expect and the aspirations we would like our
suppliers to achieve. It is a fundamental document to build CSR’s
sustainable procurement culture and an opportunity to engage
with suppliers, before and while we do business with them. A copy
of the Supplier Code of Conduct can be accessed from the CSR
website.
We take a risk-based approach to conducting audits with our
suppliers which is included in our Supplier Code of Conduct. CSR
is working through a process to identify any evidence of modern
slavery in its supply chain. One of the first priorities was to embed
explicit statements about human rights in our Supplier Code of
Conduct. New vendors will be required to acknowledge the
Supplier Code of Conduct as part of the onboarding process.
It will also be rolled out to existing vendors, prioritised by risk over
the next 12 months.
CSR is also reviewing its Supplier Assessment Platforms and
Supplier Risk Monitoring Bureaus to determine what data
analytics may be available to ensure that the information on which
we are making our decisions is accurate and up-to date. In
addition, additional staff training is underway with particular
regard to Human Rights with a pilot program under development
for CSR’s supply and fix operations.
12
CSR LIMITED | SUSTAINABILITY AND PEOPLE
OUR PEOPLE
CSR recognises that a sustainable workplace is one that provides a safe, rewarding and diverse environment for our employees.
COVID-19 Health and Safety
Our first and overriding priority is to protect the health and safety of all of our employees and contractors. As the COVID-19 pandemic
was declared in Australia and New Zealand in March 2020, CSR implemented a number of business contingency plans, personal
hygiene and social distancing measures at all sites in line with government and Safe Work Australia guidelines.
A majority of our operational sites such as manufacturing plants, distribution centres, trade centres and construction sites are already
low-density operations. This means that generally workers operate in distances greater than 1.5 metres on a frequent basis.
As many of our employees interact with different members of the public either through serving and working with customers, working side
by side with third party labour or receiving supply services from key contractors, we are taking steps to ensure we mitigate exposure
risks. There are several ways we are attempting to minimise risk.
Current controls we have in place include:
Practising good hygiene at all our sites and wherever our employees may go;
14-day self-isolation requirements for any employee returning from overseas travel, along with a suspension of work-related overseas
travel;
Appropriate medical clearance and testing for potential and actual cases of exposure to COVID-19
Providing regular updates and education to our employees as needed;
Implementing remote working solutions if needed, as well as continuity plans for our factories;
Constant monitoring of government and medical information sources; and
Protocols are in place that activate closures, disinfection and appropriate quarantine procedures based on recommendations by
government and health agencies.
CSR has implemented a number of procedures to improve good hygiene on sites including: removing all touch-based sign on glass
procedures, extra cleaning of sites and workstations, banning all visitors except specialist maintenance operators, working from home
where possible, creating gaps in operating shifts, self distancing marks at all sites, limited contact with customers on sites, hand
sanitisers in place for all employees and customers and customers encouraged to pre-place orders to reduce time on site.
CSR’s teams are encouraged to check with their teams and colleagues on a regular basis to support the mental wellness of each other
during this crisis. In addition, all employees can access free and confidential counselling through our Employee Assistance Program to
help manage any concerns or anxiety experienced during this period.
Leading safety at CSR
Recognising the scale and breadth of CSR’s activities in serving customers through our manufacturing, supply chain, building and
construction requires that we focus on simple, clear, consistent and well managed standards. Our approach to safety over the last few
years is based on four key pillars.
Theme
Approach
YEM20 areas of focus
Safety leadership
and behaviour
Building leadership capability
and performance measures
Leading Safety@CSR training program to help our leaders
perform at their best and develop safety leaders of the future
Healthy body
and mind
Plan and promote site
specific health initiatives in
the workplace
New initiatives include investment in mental health training with
pilot program completed with senior leader mental health first
aid awareness training
Risk
management
Eliminate or reduce risk with
a simple, common sense
approach
Focus on chain of responsibility from manufacturing, distribution
and delivery of our building products. Key areas of loading, new
site practices, exit vehicle checks and building trusted
partnerships with our carriers
Systems
performance
Investing in systems to
minimise risk and reduce
admin requirements
Ramped up adoption of WHSE Live system which is a 24/7
online tool to track and report hazards and incidents and
monitor proactive initiatives across CSR
13
CSR LIMITED | SUSTAINABILITY AND PEOPLE
Leadership development
Australian Business and Community Network
Over the past nine 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 our
employee value proposition.
We have 3 leadership development programs in our core suite:
CSR Leaders Program – for senior leaders
CSR Constructive Leaders Program – for middle/line managers
CSR Foundations of Leadership Program – for team leaders &
supervisors
In addition, additional training is provided across a wide range of
areas including: Strengthening your leadership, Diversity –
breaking bias, Finance, Compliance, Workplace health, safety and
environment and Technology.
Following the full-scale rollout of the performance management
system, ACHiEVE@CSR in YEM19, YEM20 leadership and
development was focused on:
Embedding the ACHiEVE@CSR principles throughout the
organisation
Designed and rolled out a condensed version of Achieve@CSR
for all new salaried employees to CSR
Reinvigorated our Leadership Development programs
Each year these programs are refreshed to ensure relevancy to
our business needs and the latest research and emerging trends
in leadership practices. In YEM20, $2.2 million was invested in
training and development programs with 23,340 hours of training
hours completed by CSR employees.
WORKING IN THE COMMUNITY
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.
Bushfire support
Following the devastating bushfires in Australia in the summer of
2020, CSR supported a number of initiatives to assist
communities impacted by the disaster and support the rebuild
process. CSR is in a unique position as it provides products and
technical expertise to the market to assist in building in bushfire
prone areas.
CSR and its employees donated a total of $50,000 to the
Salvation Army Bushfire Appeal in YEM20
CSR teams provided technical information to architects and
designers to assist with rebuild education campaigns in
regional communities impacted by the bushfire
CSR product donation program is assisting charities which are
supporting bushfire rebuild projects
CSR commenced working with the Australian Business and
Community Network (ABCN) in 2011. It is a partnership of highly
committed national business leaders and companies working on
mentoring and coaching programs in schools in high need areas.
In 2019, CSR volunteers donated 627 hours, providing mentoring
support to 197 students from disadvantaged schools in New
South Wales, Queensland and Victoria.
Community relations
CSR has a large and valuable property portfolio with a very strong
development capability across our team. A key part of the
development process involves working with the local community,
councils and government regarding zoning and rehabilitation of
our development projects. The project at the Warner quarry
located in Moreton Bay in southeast Queensland highlights how
CSR is working with the local community to facilitate feedback and
ensure all stakeholders are aware of future plans for the area and
the protection of local flora and fauna.
Warner quarry located in Moreton Bay in southeast Queensland is
a clay resource that is owned by CSR. The site has been operating
since the 1970s and supplies clay to the CSR PGH brick plant at
Oxley.
CSR is progressively rehabilitating the site with the potential for
future development that is in line with the surrounding area. A
residential development is proposed to replace the quarry, which
will be redeveloped with approximately 500 homes, new trees and
seven hectares of preserved habitat, roads, paths and bikeways. A
development application was lodged in 2018 with Moreton Bay
Regional Council. The application is impact assessable, so our
local community have a unique opportunity to provide feedback
during the statutory public notification period. This enables
everyone to formally submit their ideas to Council on density,
infrastructure and environmental management.
Key elements of the program include:
Warner Working Group – founded in 2018 to bring the
community together in a collective forum. Members are from
the district, schools, industry, government and CSR. By talking
together and working together, the community can contribute
to Warner’s future.
Communications program – includes dedicated website:
www.warnerquarry.com.au, Facebook page, letterbox drop to
local residents, dedicated 1800 number and email for queries.
Flora and fauna protection – CSR has invested $1.5m on
species protection and research in the district with ongoing
talks with stakeholders in government and community about
working together on the development of a fauna research and
management program.
The team is also working with scientists, residents and school kids
on species protection and a strategic approach to long-term
management. Veterinary scientists, who specialise in the koala,
work on CSR’s Moreton Bay developments, and they will be
engaged on any future development projects in this area.
14
CSR LIMITED | CORPORATE GOVERNANCE STATEMENT AND RISK MANAGEMENT
CORPORATE GOVERNANCE
STATEMENT
Corporate governance is the system by which CSR is directed and
managed. It is the framework of rules, relationships, systems and
processes that underpin the company’s values and behaviours,
the way it does business and how:
the CSR board of directors is accountable to shareholders for
the operations, financial performance and growth of the
company; and
business risks are identified and managed.
This Corporate Governance Statement is current as at 12 May
2020 and has been approved by the Board.
CSR actively reviews Australian and international developments in
corporate governance and considers the views of shareholders,
regulators and other stakeholders. The CSR board adopts those
arrangements which it considers are in the best interests of CSR
and its shareholders.
The directors of CSR are committed to ensuring that the company
maintains an effective system of corporate governance and that
good corporate governance is an integral part of the culture and
business practices of the CSR group.
Throughout the reporting period, being the year ended 31 March
2020, CSR complied with the recommendations contained in the
ASX Corporate Governance Council’s Corporate Governance
Principles and Recommendations (3rd edition) (ASX CGC
Principles), and early adopted recommendations from the 4th
edition where appropriate.
Charters and policies referred to in this corporate governance
statement are available on CSR’s website in the ‘Investor
Relations & News’ section under Corporate Governance.
THE BOARD
The board strives to build sustainable value for shareholders
whilst protecting the assets and reputation of the company.
CSR's Constitution sets out the provisions that govern the
management of the company and can only be amended by special
resolution of shareholders. Under the constitution, shareholders
elect directors, whose function is to represent shareholders and to
act in the best interests of the company.
Role of the board
The board has adopted a formal board charter, available on CSR’s
website on the Corporate Governance page which establishes
those matters reserved for the board and authority delegated to
management. The board’s functions, as summarised in the board
charter, include:
approving CSR strategies, budgets, plans and policies;
assessing performance against business plans to monitor both
the performance of management as well as the continuing
suitability of business strategies;
reviewing operating information to understand the current
status of the company;
considering management recommendations on proposed
acquisitions, divestments and significant capital expenditure;
considering management recommendations on capital
management, the issue or allotment of equity, borrowings and
other financing proposals, guarantees of non-group liabilities,
and restructures;
ensuring that the company operates an appropriate corporate
governance structure and culture, in particular ensuring that
CSR acts legally and responsibly on all matters and that the
highest ethical standards are maintained;
approving CSR’s risk tolerance, as well as CSR's risk
management strategy and frameworks and monitoring their
effectiveness;
considering the social, ethical and environmental impact of
CSR’s activities and monitoring compliance with CSR’s
sustainability policies and practices;
ensuring that the company’s governance processes, in
particular, the remuneration and other reward structures, align
with the company’s values and risk appetite;
maintaining a constructive and ongoing relationship with the
Australian Securities Exchange (ASX) and regulators, and
approving policies regarding disclosure and communications
with the market and shareholders; and
monitoring internal governance including delegated authorities,
and monitoring resources available to senior executives.
Appointment and election of directors
CSR undertakes a rigorous process when selecting new directors.
The company aims to have a board which, as a whole, has the
range of skills, knowledge, background and experience to govern
CSR, made up of individuals of high integrity, with sound
commercial judgement, inquiring minds and the ability to work
cohesively with other directors. When considering director
candidates, CSR seeks a combination of former chief executives
and individuals experienced in manufacturing, finance, the law
and, ideally, the industries in which CSR participates as well as
the areas in which it hopes to grow. CSR undertakes background
checks on prospective candidates, covering the candidate’s
character, experience, education, criminal record and bankruptcy
history.
External consultants are engaged, where appropriate, to advise on
potential appointees. The potential appointees must have a strong
reputation and high ethical standards. Prospective directors are
required to confirm that they will have sufficient time to meet their
obligations and that they will keep the company informed of their
other commitments.
Non-executive directors are subject to re-election by rotation at
least every three years. Newly appointed directors must seek
election at the first general meeting of shareholders following their
appointment. The relevant notice of meeting contains all material
information for shareholders in relation to the election or re-
election of a director.
15
CSR LIMITED | CORPORATE GOVERNANCE STATEMENT AND RISK MANAGEMENT
Directors’ independence
At all times throughout YEM20, the board comprised of a majority of independent directors. Each of the non-executive directors,
including the chairman, has been determined by the board to be independent of CSR and its management, having no business or other
relationships that could compromise his or her autonomy as a director.
The board’s framework for determining director independence is included in the board charter and operates in accordance with the
considerations set out in the ASX CGC Principles. Any past or present relationship with the company is examined carefully to assess the
likely impact on a director’s ability to be objective and exercise independent judgement. The length of tenure of each director is set out
below.
Table 1: CSR Limited director tenure
Director
John Gillam (chairman)
Julie Coates (managing director)
Christine Holman
Michael Ihlein
Matthew Quinn
Penny Winn
Date appointed
December 2017
September 2019
October 2016
July 2011
August 2013
November 2015
Date last re-elected
2018 Annual Meeting
To be ratified at 2020 AGM
2017 Annual Meeting
2017 Annual Meeting
2019 Annual Meeting
2018 Annual Meeting
The board charter states that non-executive directors will not seek re-election after serving for ten years.
Director letters of appointment
Letters of appointment are prepared for non-executive directors
covering duties, time commitments, induction, company policies
and corporate governance.
The managing director’s responsibilities and terms of
employment, including termination entitlements, are set out in a
formal executive service agreement. A summary of the main
elements and terms of the managing director service agreement
is set out in the remuneration report and is disclosed to the ASX
when the managing director is appointed.
Directors may obtain independent professional advice, at CSR’s
expense, on matters arising in the course of their board and
committee duties, after obtaining the chairman’s approval. The
board charter requires that all directors be provided with a copy of
such advice and be notified if the chairman’s approval is withheld.
The board appoints and removes the company secretary. All
directors have direct access to the company secretary who is
accountable to the managing director and, through the chairman,
to the board, on all governance matters.
On 2 September 2019 Ms Julie Coates commenced as Managing
Director. This followed the announcement in December 2018 that,
after eight years leading the business, Mr Rob Sindel would retire
in 2019. A summary of the material terms of Ms Coates’ service
agreement are on the CSR website and Ms Coates will stand for
ratification of her appointment at the 2020 Annual General
Meeting.
Directors’ induction, education and access to information
The board strives to ensure that directors and key executives have
the knowledge and information needed to operate effectively.
The chairman briefs new directors on their roles and
responsibilities. New directors receive a comprehensive
information pack as part of this induction, as well as special
briefings from management and visits to key operating sites to
assist them to rapidly understand CSR’s businesses and
associated risks.
Time is allocated at board and committee meetings for continuing
education on significant issues facing the company and changes
to the regulatory environment.
To help directors maintain their understanding of the businesses
and to assess the people managing them, directors are briefed
regularly by members of the senior management team. Directors
also have access to a wide range of employees at all levels during
inspections of operations and in other meetings.
Directors receive a comprehensive monthly business performance
report regardless of whether a board meeting is scheduled.
Directors have unrestricted access to company records and
information.
The work of directors
In addition to attending board and committee meetings, non-
executive directors allocate time for, amongst other things,
strategy and budget sessions, preparing for meetings and
inspecting operations.
The chairman commits additional time and meets regularly with
the managing director to review business and strategic issues and
to agree board meeting agendas. The directors usually meet with
no management present at the commencement of board
meetings and on other occasions as required. Non-executive
directors also meet without the managing director present where
it is appropriate to do so.
Except where the directors need to meet privately, the company
secretary and chief financial officer attend all board meetings.
Other members of management, such as business unit general
managers, or other functional managers also attend board
meetings by invitation, where appropriate.
The directors regularly visit the company’s operations to better
understand the issues facing each of the businesses and their
people. These visits are conducted either as a full board or with
one or two directors.
Every meeting of the Workplace Health, Safety & Environment
Committee is held at a CSR site.
In addition, directors may meet customers, business partners,
suppliers and other stakeholders of the company as requested by
management.
16
CSR LIMITED | CORPORATE GOVERNANCE STATEMENT AND RISK MANAGEMENT
Size, composition and skills of the board
The board comprises directors with an appropriate mix of skills,
experience and personal attributes that allow the directors
individually, and the board collectively, to:
discharge their responsibilities and duties under the law
effectively and efficiently;
understand the suite of CSR businesses and the external
environment in which CSR operates so as to be able to agree
with management the objectives, goals and strategic direction
to maximise shareholder value; and
assess the performance of management in meeting those
objectives and goals.
The board currently comprises five non-executive directors and
one executive director. Information about directors, including their
skills, experience, expertise and their period in office is set out on
pages 28 to 29 and is available on CSR’s website on the
Corporate Governance page.
Table 2: Summary of board skills and experience
Skills
Relevant experience
Leadership and Governance
The chairman is appointed by the board and provides leadership
to ensure that a high standard of values, processes and
constructive interaction is maintained by the board. The chairman
represents the views of the board to shareholders and canvasses
the views of stakeholders, including through the annual general
meeting.
In YEM20, changes to the board were as follows:
Rob Sindel retired as managing director on 2 September 2019,
with Julie Coates appointed as managing director on the same
date.
CSR has developed a matrix of required skills and experience of
the board. This matrix is developed by taking into account CSR’s
desire to ensure a diverse range of gender, background and
experience is maintained on the board at all times, and also
ensuring directors are appropriately qualified.
The table on this page sets out the skills and experience the board
considers essential for effective governance with the current
representation of those skills and experience on the board set out
on the following page.
Executive leadership
Sustainable success in business at a senior executive level.
Governance
Finance and Risk
Financial acumen
Strategy
Risk management
Capital projects
Operations and Technology
Operations
Experience with a major organisation that is subject to rigorous governance standards, and an ability
to assess the effectiveness of senior management.
Experience as a senior executive or equivalent experience in financial accounting and reporting,
corporate finance and internal financial controls, including an ability to probe the adequacies of
financial and risk controls.
Track record of developing and implementing a successful strategy, including appropriately
questioning and challenging management on the delivery of agreed strategic planning objectives.
Track record in developing a business portfolio over the long term that remains resilient to systemic
risk, including an ability to identify key business risks and mitigation strategies.
Experience working in an industry with projects involving large-scale capital outlays and long-term
investment horizons.
Experience having led or overseen the management of complex operating assets, with a focus on
business operations and the oversight of key processes.
Health, safety & environment
Experience related to workplace health and safety, environmental and social responsibility, including
implementing and monitoring systems to ensure safe working conditions.
Sustainability & climate
change
Experience or demonstrated understanding of key environmental impacts, including climate change
risks and community concerns, and the governance of these impacts.
Innovation & digital platforms
Proven success creating more effective processes, products and ideas, leading to new growth
platforms. For example, experience using digital platforms to improve the service offering,
performance and customer experience, or understanding how to align existing digital touch points to
improve performance and customer interfaces.
People
Human Resources &
Remuneration
Culture
Marketing
Board remuneration committee membership or management experience in relation to remuneration,
including incentive programs and relevant legislation and contractual framework governing
remuneration.
Experience and ability to develop succession plans, develop talent, monitor culture and improve
diversity.
Senior executive experience in marketing and a detailed understanding of the Group’s corporate
purpose to create value.
17
CSR LIMITED | CORPORATE GOVERNANCE STATEMENT AND RISK MANAGEMENT
Size, composition and skills of the board (continued)
The diagram on this page sets out the current representation of those skills and experience on the board.
Primary skillset
Secondary skillset
Diagram 1: Board skill matrix
)
e
v
o
b
a
l
e
b
a
t
e
h
t
n
i
d
e
l
i
a
t
e
d
s
a
(
s
l
l
i
k
S
y
e
K
Executive leadership
Governance
Financial acumen
Strategy
Risk management
Capital projects
Operations
Health, safety & environment
Sustainability & climate change
Innovation & digital platforms
Human Resources & Remuneration
Culture
Marketing
0
1
Number of Directors
2
3
4
5
6
The board keeps the balance of skills and experience of its members, as well as their independence, under review. The board strives to
achieve diversity in its composition.
Diagram 2: Board diversity
TERTIARY QUALIFICATIONS
INDUSTRY SECTOR EXPERIENCE
Commerce/Accounting 50%
Mathematics/Education 16%
Engineering/Science 17%
Business Administration &
Management 17%
Manufacturing operations 33%
Supply chain management 33%
Property development 17%
Technology & Digital 17%
TENURE
GENDER DIVERSITY
0 to 2 years 17%
2 to 5 years 50%
5 to 10 years 33%
Men 50%
Women 50%
18
CSR LIMITED | CORPORATE GOVERNANCE STATEMENT AND RISK MANAGEMENT
The specific responsibilities allocated to each committee are set
out below and on the following page.
Risk & Audit Committee
The Risk & Audit Committee is chaired by Mike Ihlein. The other
members of the committee are Christine Holman and Matthew
Quinn. Each of these directors is deemed to be independent and
their qualifications and experience are set out on pages 28 and
29 of the annual report, available on CSR’s website on the Annual
Reports page.
The external audit firm partner in charge of the CSR audit attends
all Risk & Audit Committee meetings by invitation, together with
relevant senior managers (also by invitation).
The committee advises the board on all aspects of internal and
external audit, the adequacy of accounting and risk management
procedures, systems, controls and financial reporting. A summary
of CSR’s material environmental, social and economic
sustainability risks is set out on pages 24 and 25 of this
statement.
The Risk & Audit Committee Charter sets out the committee’s
specific responsibilities, and include:
reviewing the scope of the annual audit plans of the external
auditor and internal auditor and oversight of the work
performed by the auditors throughout the year;
considering and recommending to the board significant
accounting policies and material estimates and judgements in
financial reports;
reviewing and monitoring internal controls and risk
management across the group;
reviewing and recommending to the board the adoption of the
company’s full-year and half-year financial statements; and
reviewing the performance and effectiveness of the internal
and external auditors.
The committee is a direct link for providing the views of internal
and external auditors to the board, when necessary,
independently of management influence. Time is allocated for
detailed questioning of the material presented and for separate
sessions with each of the external auditor, internal auditor and
chief financial officer.
Dealing with conflicts of interest
The board has a process in place to ensure that conflicts of
interest are managed appropriately. If a potential conflict of
interest arises, the director concerned is excluded from all
discussion and decision making on the matter. At all times,
directors are required to keep the company secretary informed of
all relevant interests and directors must advise the board
immediately of any interests that could potentially conflict with
those of CSR.
Performance evaluation of the board, its committees
and individual directors
The performance of the board is reviewed regularly. The board
undertakes a self-assessment of its collective performance and
that of individual directors and its committees and seeks specific
feedback from the senior management team on particular aspects
of its performance.
The board establishes procedures and oversees this performance
assessment program. The process may be assisted by an
independent third party facilitator. The results and any action
plans flowing from this assessment are documented, together
with specific performance goals that are agreed for the coming
year.
The performance of the managing director is reviewed, at least
annually, through a formal performance appraisal process
conducted by the board.
In YEM20, the CSR board and the Risk & Audit Committee were
reviewed. A review of the Remuneration & Human Resources
Committee will be undertaken in YEM21.
Board Committees
To increase its effectiveness, the board has three committees
consisting of the Risk & Audit Committee, Workplace Health,
Safety & Environment Committee and Remuneration & Human
Resources Committee. It is the policy of the board that a majority
of the members of each committee be independent directors, that
all Risk & Audit Committee members be independent directors
and that the Remuneration & Human Resources Committee and
the Workplace Health, Safety & Environment Committee be
chaired by an independent director.
Each committee has a charter which includes a more detailed
description of its duties, responsibilities and specific composition
requirements. The charters are available on CSR’s website on the
Corporate Governance page. The Risk & Audit Committee, the
Remuneration & Human Resources Committee and the Workplace
Health, Safety & Environment Committee each comprise at least
three non-executive directors and are chaired by a director who is
not the chairman of the board. All committees meet at least four
times per year.
Julie Coates, the managing director, attends meetings of board
committees by invitation. Other members of management also
attend committee meetings by invitation. All directors are
welcome to attend committee meetings even though they may not
be a member.
Committee papers are made available to all directors before the
meetings. Minutes of committee meetings are included in the
papers for the next board meeting and the chair of each
committee reports to the board on matters addressed by the
committee.
19
CSR LIMITED | CORPORATE GOVERNANCE STATEMENT AND RISK MANAGEMENT
Board Committees (continued)
Remuneration & Human Resources Committee
Nominations Committee
The company’s size is not considered sufficient to warrant a
separate nominations committee.
The board takes on the role of the nominations committee, which
includes the following functions:
determining the appropriate size and composition of the board
(in accordance with the company’s constitution);
determining the appropriate criteria (necessary and desirable
skills and experience) for the appointment of directors;
recommending the appointment and removal of directors;
defining the terms and conditions of appointment to and
retirement from the board;
overseeing induction and continuing education programs for
non-executive directors; and
evaluating the board’s performance.
Attendance at board and committee meetings during YEM20
Details of director attendance at board and board committee
meetings held during the reporting period are provided on page
32 of the Directors’ Report.
The Remuneration & Human Resources Committee is chaired by
Matthew Quinn. The other members of the committee are John
Gillam and Penny Winn. Each of these directors is considered to
be independent.
The committee’s specific responsibilities are set out in the
Remuneration & Human Resources Committee Charter, and
include:
advising the board on remuneration policies and practices;
assessment of culture within the company;
evaluating the performance of the managing director against
pre-agreed goals;
making recommendations to the board on remuneration for the
managing director and senior managers reporting to her; and
overseeing CSR’s human resources strategy, particularly
succession and development planning for senior managers.
The committee considers independent advice on policies and
practices to attract, motivate, reward and retain strong
performers.
Workplace Health, Safety and Environment Committee
An important part of CSR’s governance commitments includes
protection of its people’s workplace health and safety, and
protection of the environment (WHS&E). The board endorsed
WHS&E Policy details the company’s and individuals’ obligations
in respect of WHS&E.
The board’s Workplace Health, Safety & Environment Committee
oversees and reports to the board on the management of the
company’s WHS&E responsibilities. The Workplace Health, Safety
& Environment Committee is chaired by Penny Winn. The other
members of the committee are Christine Holman and Mike Ihlein.
Julie Coates and other members of management attend meetings
of the Workplace Health, Safety & Environment Committee by
invitation.
The committee’s specific responsibilities are set out in the
Workplace Health, Safety & Environment Committee Charter,
and include:
receiving regular performance reports from management;
overseeing the risk management of WHS&E matters;
reviewing the adequacy and effectiveness of CSR’s WHS&E
management systems and ensuring appropriate improvement
objectives and targets are set and monitored; and
monitoring potential liabilities, changes in legislation,
community expectations, research findings and technological
changes.
The committee conducts every meeting at a CSR site and such
meetings include a presentation from local management and a
site tour.
20
CSR LIMITED | CORPORATE GOVERNANCE STATEMENT AND RISK MANAGEMENT
Diversity at CSR
CSR has policies and practices designed to improve diversity
within the organisation. The company’s Fairness, Respect &
Diversity Policy is available on CSR’s website.
CSR places great importance on our people and remains
committed to promoting an inclusive workplace by applying
policies and practices designed to improve both gender equality
and diversity within our organisation. Having a diverse workplace
brings a range of benefits to our business, such as improved
business decision making, wider range of skills, fosters innovation
and ultimately better solutions for our customers.
Year on year we strive to improve our recruitment and retention
strategies and practices in order to further support gender
diversity and equity in our workplace. We have maintained
monthly reporting on attraction, selection and retention of female
employees by business unit tracking metrics on:
The number of women that have joined CSR in the last month;
Women who have left CSR in the last month and the reason for
leaving;
An overview of current vacant positions and the number of
women on the shortlist for each position; and
The gender participation ratio for CSR as well for each business
unit.
CSR workplace profile
The diversity of CSR's employees remains fundamental to its
success. 21% of employees in senior management positions are
women. CSR defines “senior management” as any role with a job
grade higher than 13. CSR uses the Korn Ferry Hay job grading
system to set job grades/levels, with job grades ranging from 1 to
19.
In accordance with the requirements of the Workplace Gender
Equality Act 2012 (Cth), CSR submits its Gender Equality
Indicators with the Workplace Gender Equality Agency. The Report
can be viewed at the website of the Workplace Gender Equality
Agency and also on CSR’s website. At the end of YEM20, the
percentage of women in the CSR workforce increased from 21% to
22%, with incremental increases reported since YEM16.
SENIOR MANAGEMENT
Delegations to management
Day-to-day management of the company’s affairs and the
implementation of strategy and policy initiatives are formally
delegated by the board to the managing director and senior
executives.
The company has a senior leadership team, comprised of the
managing director and her direct reports. The senior team meets
at least monthly and is responsible for:
implementing the strategic objectives as set by the board;
operating within the risk framework as approved by the board;
all other aspects of the day-to-day management of the
company; and
ensuring timely and accurate reporting to the board and board
committees.
Senior executive appointments and service agreements
CSR undertakes background checks on prospective senior
executives, covering the candidates’ character, experience,
education, criminal record and bankruptcy history.
Senior executives’ responsibilities and terms of employment,
including termination entitlements, are set out in a formal
executive service agreement. A summary of the main elements
and terms of the managing director’s and chief financial officer’s
service agreements is set out in the remuneration report.
Induction of senior executives
New executives undertake a structured induction program when
they join the company. This includes comprehensive briefings and
information on the company’s businesses, and its policies and
procedures. Additionally, the program includes site visits and
meetings with people in key internal and external roles in order to
build the relationships necessary to meet the requirements of
their roles.
As discussed further below, and in the remuneration report, key
performance indicators are agreed with each executive to ensure
goals and performance measures are fully and accurately
understood and disclosed.
Performance evaluation of senior executives
CSR’s performance management framework requires that a
balanced scorecard of annual key performance indicators
(including financial and non-financial measures) is set for each
senior executive. Every half year, each senior executive discusses
their performance with their manager.
At the end of the year, as part of a formal review process, each
senior executive’s performance is reviewed against the
performance indicators. Also, each individual’s performance and
behaviour are internally and externally benchmarked and
reviewed and adjusted if required. CSR conducted evaluations of
its senior executives in accordance with this process in October
2019, as well as in March and April 2020.
Further details of the process for evaluating the performance of
key management personnel and the remuneration policy for key
management personnel are provided in the remuneration report.
21
CSR LIMITED | CORPORATE GOVERNANCE STATEMENT AND RISK MANAGEMENT
Measurable objectives
Improving diversity requires cultural change driven by the leadership and commitment of the board and senior management. CSR has
structured its measurable objectives around this commitment. The achievements for YEM20 and the initiatives for YEM21, as approved
by the Remuneration & Human Resources Committee, are set out below:
Measurable objective
YEM20 achievements
Overview of YEM21 initiatives
Continue to provide opportunities for women to
develop and enhance their careers through
attending CSR leadership programs
Continue to leverage learnings from the detailed
review of female talent, with a focus on
development and career aspirations
Collect data relating to what diversity and inclusion
dimensions are important to our people in order to
develop a CSR Diversity and Inclusion Strategy
Continue the established bi-annual process to
ensure gender pay equity including reviews by the
executive team and CSR board
Complete Above the Line training that covers
Fairness, Respect, Diversity and Inclusion by
December 2020
Leadership
and culture
Policy & Governance
46% of participants in CSR’s senior leaders
program were female
Sponsorship of Women in Industry Awards,
specifically the Excellence in Manufacturing
Award. Four CSR employees were finalists with
two category winners: the Safety Advocacy
Award and Business Development Manager of
the Year
Finalised and deployed Experience Maps for all
key roles as a resource to promote career
planning through the development of skills,
behaviours and knowledge
Gender pay analysis indicates at a group level
most job grades are paid at or around the
median for both males and females
Completed a comprehensive rollout of the
Flex@CSR framework, with a number of
employees having elected to take up flexible
leave and to a lesser extent paid secondary
carers leave
CSR’s Reset on Respect training, refreshed
and rebadged as Achieving Above the Line,
covers Fairness, Respect, Diversity and
Inclusion training. All employees of a single
CSR business participated in this training
between July and September 2019 and
training was launched for all employees in
November 2019. 588 employees have
completed this training to date
Recruitment
and retention
Female voluntary terminations have reduced
from 73 in YEM19 to 52 in YEM20; a reduction
of 29% and account for 8.4% of total voluntary
terminations
Develop and implement a plan to improve gender
participation rates for females (22% as at March
2020) to be better than the industry standard of
27.1% (ABS as at November 2019)
Introduced a HR dashboard to manage data
Continue to report and track operational diversity
and provide insights into a range of HR metrics
that can be filtered by gender
metrics such as female applications, appointments
and turnover
REMUNERATION
CSR’s policy is to reward executives with a combination of fixed remuneration and short and long-term incentives structured to drive
improvements in shareholder value. Non-executive directors receive no incentive payments and there are no retirement benefit schemes
in place. Executives and directors may forgo a small part of their cash salary or, for non-executive directors, their directors’ fees, to
acquire shares in CSR. Further details are included on page 49 of the Remuneration Report. Employees cannot approve their own
remuneration, nor can they review that of their direct subordinates without their manager’s approval.
The Remuneration Report, commencing on page 34 of the annual report, includes further details on CSR’s remuneration policy and its
relationship to the company’s performance. It also includes details of the remuneration of directors and key management personnel for
YEM20 and clearly distinguishes between the structure of non-executive director remuneration from that of the executive director and
other key management personnel. Shareholders are invited to vote on the adoption of the remuneration report at the company’s annual
general meeting.
22
CSR LIMITED | CORPORATE GOVERNANCE STATEMENT AND RISK MANAGEMENT
RISK MANAGEMENT
There are many 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. CSR constantly
and deliberately assumes certain levels of risk in a calculated and
controlled manner. CSR has in place a range of policies and
procedures to monitor the risk in its activities as well as defined
limits of authority for all levels of management and these are
periodically reviewed by the board. CSR’s Risk Management
Policy sets out the framework for risk management, internal
compliance and control systems.
There are several layers that assist the board in ensuring the
appropriate focus is placed on the risk management framework:
Risk & Audit Committee – reviews and reports to the board in
relation to the company’s financial reporting, internal control
structure, risk management systems and the internal and
external audit functions;
Workplace Health, Safety & Environment Committee – reviews
and reports to the board on the management of the company’s
safety, health and environment liabilities and legal
responsibilities as well as the company’s involvement in the
communities in which it operates; and
Senior management team – manages and reports to the board
on business and financial risks and overall compliance.
Risk management is sponsored by the board and is a priority for
senior managers, starting with the managing director. The board
oversees the risk profile of CSR and ensures that business
developments are consistent with the goals of CSR. The board
receives periodic assurances that significant risks are managed
appropriately.
A risk management framework is in place covering business risk,
financial risk, financial integrity, legal compliance and
sustainability risk. The risk management framework requires risks
across the businesses to be identified, evaluated, monitored and
controlled. Risks are classified as either strategic, operational or
financial/compliance. The framework also includes evaluation of
mitigation strategies. The most recent review of the risk
management framework took place on 28 October 2019.
CSR’s Risk Appetite Statement, approved by the board, is core to
the Risk Management Policy and defines (within practical
boundaries) the amount of risk the organisation is willing to
accept in pursuing its strategic objectives. By expressly
articulating and documenting its Risk Appetite Statement, CSR
aims to ensure that:
risks can be measured, managed and monitored;
risk appetites can be consistently articulated and understood
by all relevant stakeholders; and
day-to-day operations are undertaken in alignment with CSR’s
tolerance for risk.
The board, through the Risk & Audit Committee, receives
recommendations in relation to the risk profile of CSR, breaches
of the policy framework and external developments which may
impact on the effectiveness of the risk management framework. It
also approves significant changes to the risk management
framework and related policies.
The Risk & Audit Committee has responsibility for monitoring
compliance with the risk management framework approved by the
board for internal control and compliance matters. In this role, the
Risk & Audit Committee monitors and reviews the effectiveness of
the internal audit and compliance functions.
CSR’s Corporate Governance and Disclosure Committee has
responsibility for any governance matters. Committees exist at the
executive management level to ensure the necessary elements of
expertise are focused on specific risk areas. Beneath this level,
other committees exist where senior specialists focus on specific
risks as appropriate.
Risk management accountability
As part of the process of approving the financial statements, at
each reporting date, the managing director and other responsible
senior executives provide statements in writing to the board on
the quality and effectiveness of the company’s risk management
and internal compliance and control systems. The Risk & Audit
Committee reviews the compliance framework annually to confirm
that the framework continues to be appropriate and effective. The
most recent assessment of the compliance framework took place
on 3 May 2019.
The board has also received statements from the managing
director and the chief financial officer certifying that, having made
all reasonable enquiries and to the best of their knowledge and
belief:
the statements made in relation to the financial integrity of the
CSR group financial reports are founded on a sound system of
effective and efficient risk management and internal
compliance and control;
the system of risk management in operation over YEM20 was
operating effectively; and
the systems relating to financial reporting were operating
effectively in all material respects.
In YEM20 the board received the relevant declarations required
under section 295A of the Corporations Act 2001 from the
managing director and chief financial officer as well as the
relevant reports and assurances that their opinions were formed
on the basis of a sound system of risk management and internal
controls which are operating effectively.
Financial report accountability
CSR’s managing director and chief financial officer, who are
present for board discussion of financial matters, declare to the
board, in writing, that the company’s financial statements are in
accordance with relevant accounting standards, give a true and
fair view in all material respects of the company’s and the group’s
financial condition and operational results and comply with the
Corporations Act 2001 and associated regulations.
The chief financial officer oversees a robust internal process,
where business unit financial managers regularly meet with
representatives from the corporate finance team to discuss the
financial aspects of each business. This includes a review of the
business unit profit and loss statement, balance sheet and all
other relevant matters.
Non-financial report accountability
For those periodic corporate reports that are not audited or
reviewed by the external auditor, a rigorous internal review
process is implemented. This process is led by the internal subject
matter experts with reviews undertaken by management and key
internal stakeholders. External advice is obtained as required.
Non-audited periodic reports include the annual Sustainability
Report and this corporate governance statement. These periodic
reports are approved by the board.
23
CSR LIMITED | CORPORATE GOVERNANCE STATEMENT AND RISK MANAGEMENT
Environmental, social and economic sustainability risks
CSR’s approach to manage and mitigate material risks is outlined in the 2019 Sustainability Report, which is published in December
each year. The matters below reflect CSR’s material economic, environmental and social sustainability risks.
Key areas of materiality Risks
Monitor and manage risk
Aluminium, currency
and debt markets
Australian construction
markets and
competitor activity
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 as well as
changes to the joint venture structure or
potential operational issues at the
Tomago smelter including electricity
curtailments.
CSR has a policy to hedge both US dollar sales and
foreign currency exposure when specific targets are met,
with the primary objective of reducing short-to-medium
term earnings volatility. This policy is monitored regularly
by CSR’s Finance Committee which includes CSR’s CEO,
CFO, Group Treasurer and the General Manager of Gove
Aluminium Finance.
CSR regularly monitors cash flow and the group financial
position as part of the Finance committee’s function.
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.
Approximately 75% of CSR’s total 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.
As a supplier to the construction market,
CSR is subject to a number of competitive
forces including other domestic and
international suppliers and new
technologies which could replace existing
building methods.
Reviews of market activity are factored into CSR’s
monthly reporting, quarterly forecasting and annual
budget and planning cycles, which in turn drive capacity
and capital planning. Furthermore, the nature of CSR’s
building products is that they are typically sold late in the
construction process, giving CSR some visibility of
changes in market conditions before specifically
impacting demand.
CSR is actively developing and acquiring new products,
services and distribution networks to improve its position
in the market and provide a comprehensive service
offering.
The release of future land supply for residential
development relies on the coordination of government
and regulatory bodies with builders and developers to
deliver infrastructure and services for new projects.
COVID-19 pandemic
The COVID-19 pandemic materially
changed the markets in which CSR
operates due to the overall impact of
government restrictions on the economy.
Market demand for CSR’s products is
forecast to worsen over the balance of
the YEM21 financial year.
Any significant increase in COVID-19
cases could result in additional
restrictions which limit operation of
CSR’s manufacturing sites and/or
building and construction sites for an
extended period.
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 network and data risks for cyber
security breaches.
In March 2020, the company acted quickly to bolster the
CSR’s strong financial position and ensure there was
sufficient liquidity to operate in the uncertain economic
environment for the medium-term.
This has included an immediate cash preservation focus,
ceasing all non-essential expenditure and limiting all
investments to safety and business critical projects.
Scenario planning is in place to prepare for further
declines in market activity which will include a range of
operational levers including reduced shifts and overtime,
production line changes, factory shutdowns and
production consolidation.
The liquidity position in place is sufficient to manage
current downside scenarios under review but will be
assessed with any changes to current market conditions.
Implemented regular user security awareness training.
A cyber security improvement plan launched with
accreditation in accordance with ISO27001.
Regular penetration testing and patching across
systems.
24
CSR LIMITED | CORPORATE GOVERNANCE STATEMENT AND RISK MANAGEMENT
Key areas of materiality Risks
Monitor and manage risk
Employee and
community
engagement
Energy and climate
change
An engaged and diverse workforce is
critical to CSR’s long term success.
This includes managing the transition to a
new CEO, 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 in place across all
business units and for the CEO.
Flex@CSR program supports 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
For 2030, CSR has set new 10 year targets which cover
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.
key areas of energy and emissions reduction,
procurement, packaging, minimising water use and
waste and preserving biodiversity.
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.
Transition risk assessment scenarios were completed for
Gyprock plasterboard, CSR’s largest business by
revenue. This analysis focused on transition (market,
policy & regulatory) risks, complementing earlier work
undertaken on the physical (weather) risks impacting
sites and supply chain risks.
Established a $20 million CSR Energy Improvement Fund
to deliver energy saving projects across its
manufacturing sites.
Product liability
Previous involvement in asbestos in
CSR meets all valid claims in both Australia and the
Australia and exporting asbestos to the
United States.
CSR ceased asbestos mining in 1966 and
divested remaining interests in 1977.
United States on an equitable basis.
The asbestos provision is impacted by movements in
claim numbers, settlement rates and values and
movements in AUD/US$ 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 requirements of
Australian Modern Slavery legislation.
Workplace health
and safety
CSR has a stated long-term objective of
achieving zero harm to CSR people across
all operations.
The board WHSE committee regularly reviews initiatives
targeting improved safety performance across CSR’s
businesses.
Note: Material Risks are listed alphabetically
25
CSR LIMITED | CORPORATE GOVERNANCE STATEMENT AND RISK MANAGEMENT
Role of the external auditor
The Risk & Audit Committee seeks to ensure the independence of
the external auditor. The policy on auditor independence applies
to services supplied by the external auditor and their related firms
to CSR. Under the policy on auditor independence:
The internal audit plan is formulated using a risk-based approach
to align assurance with CSR’s key risks. Internal audit activity and
outcomes are reported to the Risk and Audit Committee at least
bi-annually.
the external auditor is not to provide non-audit services under
which the auditor assumes the role of management, becomes
an advocate for the group, or audits its own professional
expertise;
significant permissible non-audit assignments awarded to the
external auditor must be approved in advance by the
committee or, between committee meetings by the chairman of
the committee;
the external audit engagement partner and review partner
must be rotated every five years;
procedures for selection and appointment of the external
auditor, and for the rotation of external audit engagement
partners, are set out in the committee charter; and
the external auditor confirms its independence within the
meaning of applicable legislation and professional standards at
each half-year and full-year.
The external auditor attends the company’s annual general
meeting so shareholders are given the opportunity to ask
questions relevant to:
the conduct of the audit;
the preparation and content of the auditor’s report;
the accounting policies adopted by the company in relation to
the preparation of the financial statements; and
the independence of the auditor in relation to the conduct of
the audit.
Role of the internal auditor
The Risk & Audit Committee recommends to the board the
appointment or dismissal of the internal auditor, who is
independent of the external auditor.
The internal audit function is led by the Company Secretary and
Risk Manager and provides objective assurance to Management
and the board on the effectiveness of CSR’s internal control, risk
management and governance systems and processes. The
function oversees the execution of the internal audit plan, as
approved by the Risk and Audit Committee. The risk and internal
audit manager has a reporting line to the chief financial officer as
well as to the Risk and Audit Committee.
The role of the internal auditor is to:
report to the board through the Risk & Audit Committee on
CSR’s compliance against its governance framework and
policies, including investigating, and advising on, any potential
or actual breaches;
oversee the implementation of CSR’s risk framework across
the organisation; and
recommend improvements to the company’s risk management
framework.
The function comprises a mix of qualified in-house professionals
and support from relevant external expertise. The internal audit
function has full access to all CSR businesses, records and
personnel. Noting the reporting line and the dual role of the
Company Secretary and Risk Manager, the board does not
consider the internal audit function to be completely independent
of management. In cases where this may impact the objectivity of
the function, then external auditors/investigators are retained.
ENGAGEMENT WITH INVESTORS
Continuous disclosure
CSR believes that shareholders, regulators, ratings agencies and
the investment community generally, should be informed of all
major business events and risks that influence CSR, in a factual,
timely and widely available manner. CSR has a long established
practice of providing relevant and timely information to
stakeholders, supported by its Share Market Disclosure Policy
which details comprehensive procedures to ensure compliance
with all legal obligations. Under this policy, any price sensitive
material for public announcement, including full-year and half-year
results announcements, release of financial reports,
presentations to investors and analysts and other prepared
investor briefings for CSR, will be:
lodged with the ASX as soon as practical and before external
disclosure elsewhere; and
posted on CSR’s website.
The policy limits external briefings in the periods between the end
of a full-year and half-year and the release to the ASX of the
relevant results.
The Board has responsibility for compliance with CSR’s
continuous disclosure obligations to keep the market fully
informed of information that may have a material effect on the
price or value of CSR’s securities. Internal procedures and
guidelines for continuous disclosure and communications have
been developed. These procedures sit together with CSR’s Share
Market Disclosure Policy to ensure the Board and the Corporate
Governance and Disclosure Committee is made aware of any
information that should be considered for release to the market.
CSR’s Corporate Governance and Disclosure Committee meets as
required, and often on very short notice, to ensure compliance
with disclosure requirements. Members of this committee are the
managing director, chief financial officer, company secretary and
general manager investor relations and corporate
communications.
The managing director approves all disclosures before they are
released. The board approves all disclosures that are significant.
All announcements include a statement identifying the title of the
body, or the name and title of the officer of the company, who
approved the disclosure. Directors receive a copy of all ASX
disclosures promptly following release.
The share market disclosure policy is reviewed regularly to ensure
compliance with the ASX listing rules and guidance on continuous
disclosure.
The company secretary is responsible for communications with
the ASX.
Commentary on financial results
CSR provides a review of operations and financial performance in
the full-year and half-year results, which also includes the
company’s financial report. Results announcements to the ASX,
analyst presentations and the full text of the chairman’s and
managing director’s addresses at the company’s annual general
meeting are made available on CSR's website.
26
CSR LIMITED | CORPORATE GOVERNANCE STATEMENT AND RISK MANAGEMENT
Shareholders
CSR strives to communicate effectively with shareholders about
the company’s performance, presenting the annual report and
other corporate information in clear language, supported by
descriptive graphics and tables. This approach is outlined in the
company’s Shareholder Communication Policy.
Where practicable, the company uses the latest widely available
electronic technology to communicate openly and continuously
with shareholders, and the share market in general.
Announcements to the ASX, significant briefings, presentations,
notices of meetings and speeches at annual general meetings are
promptly posted on the Investor Relations and News section of
CSR’s website.
Shareholders and other interested parties can register to receive
emails with links to major announcements and can lodge proxies
electronically for the annual general meeting. The annual general
meeting and results announcement briefings are available via a
live webcast from CSR’s website, for access by all interested
parties.
Shareholders are encouraged to submit questions ahead of the
company’s annual general meeting. Members of senior
management are present at the annual general meeting, along
with directors, to answer questions about the company’s
operations. All resolutions at the annual general meeting are
decided by a poll rather than on a show of hands.
Role of the investor relations function
CSR’s investor relations function is designed to ensure that the
market is kept informed of all aspects relevant to the company
and also to provide an opportunity for investors and other
stakeholders to express views on the company. The program
includes investor roadshows, conferences and other briefings with
all materials lodged with ASX prior to distribution.
CSR utilises the following activities to promote effective
communication with the market:
investor briefings, presentations, conferences and other
events;
encouraging questions via the company’s website and ahead of
the AGM via the Notice of Meeting; and
webcasting important company events.
CODE OF BUSINESS CONDUCT AND ETHICS
CSR has a Code of Business Conduct & Ethics (code) which
underpins its goals and values. The code sets the standards for
dealing with external stakeholders.
The underlying principle of CSR’s code is that ethical behaviour is
required of directors, executives and all other employees, as well
as advisers, consultants and contractors. The board has endorsed
the Code of Business Conduct and Ethics.
The code formalises the longstanding obligation of all CSR’s
employees (including directors) and contractors, to behave
ethically, act within the law, avoid conflicts of interest and act
honestly in all business activities.
The code articulates how employees are expected to operate in line
with CSR’s fundamental values. CSR's Values are set out both in
the code and separately on CSR’s website.
The code incorporates CSR’s anti-bribery and corruption policy,
CSR’s modern slavery statement as well as all relevant whistle-
blower protection laws.
The code reinforces the company’s commitment to giving proper
regard to the interests of people and organisations dealing with
the company. Each CSR employee and contractor is required to
respect and abide by the company’s obligations to employees,
shareholders, customers, suppliers and the communities in which
it operates.
CSR employees, directors and major contractors are required to
sign a certificate of compliance each year signifying that they have
read and complied with the code and are not aware of any
breaches of that code.
Further, CSR employees are encouraged to report potential
breaches in a number of ways including via a confidential
telephone service. The CSR policy on the reporting of misconduct
within the organisation provides that an employee will not be
subject to retaliation by CSR for reporting in good faith a possible
violation of the code of business conduct and ethics. The board is
advised of all material breaches of the code via the Risk & Audit
Committee.
SHARE TRADING POLICY
Under the company’s Share Trading Policy, directors and senior
managers may only buy or sell CSR shares, or give instructions to
the trustee of CSR’s employee share acquisition plan (ESAP),
during one month periods commencing 24 hours after the date of
the full-year and half-year results announcements and the annual
general meeting. Also, they are prohibited from dealing in any
financial products relating to CSR securities or entering into
hedging arrangements in respect of CSR securities they hold, or
which are held on their behalf. Under the policy, and as required
by law, all directors and employees are prohibited from buying or
selling CSR shares at any time if they are aware of any market
sensitive information that has not been made public. All CSR
share dealings by directors are notified to the ASX within the
required time. Additional trading restrictions apply to key
management personnel.
OTHER IMPORTANT POLICIES
In addition, the board has adopted specific internal policies in key
areas, including trade practices; workplace health, safety and the
environment; fairness, respect and diversity in employment;
capital investment; dealing with price sensitive and other
confidential information; privacy; indemnification of employees;
and requirements for authorising and entering into business
transactions on behalf of CSR.
DISCLOSURE
CSR considers that the above corporate governance practices
comply with the ASX CGC Principles and Recommendations (as
applied during the relevant reporting period).
The company’s corporate governance framework is kept under
review, with a report provided to the board by the company
secretary at least annually, recommending any improvements
necessary to respond to changes to the company’s business or
applicable legislation and standards.
27
CSR LIMITED | BOARD OF DIRECTORS
BOARD OF DIRECTORS
JOHN GILLAM
BCom, FAICD, FAIM.
JULIE COATES
BA, DipE.
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)
Appointed to the board as an executive
director and managing director on
2 September 2019, having joined
CSR on the same date.
Other CSR responsibilities
Attends committee meetings by
invitation.
Experience and expertise
Julie was formerly the managing director of
Goodman Fielder Australia and Goodman
Fielder New Zealand. Julie has also held
several senior roles at Woolworths Limited,
including managing director of Big W, chief
logistics officer and human resources
director, working closely on business
strategy and major transformational
change programs. Julie has proven
leadership skills, a strong understanding of
manufacturing, safety and operational
processes and deep experience in supply
chain efficiency, optimisation and
digitisation.
Other directorships/offices held
Previously a director of Coca-Cola
Amatil (until November 2019)
Previously a director of Spotless
Group Holdings Limited (until July
2017)
CHRISTINE HOLMAN
PGDipBA, MBA, GAICD.
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 Blackmores
Limited (2019 to current)
Non-executive director of Collins
Foods Limited (2019 to current)
Non-executive director of The
Moorebank Intermodal Company, a
Federal Government Business
Enterprise (2018 to current)
Non-executive director of The
Bradman Foundation (2016 to
current)
Non-executive director of the State
Library of NSW Foundation (2017 to
current)
Non-executive director of the T20
World Cup 2020 Cricket Board (2018
to current)
Previously a non-executive director of
Vocus Group Limited (August 2017 to
November 2017)
Previously a non-executive director of
HT&E Limited (November 2015 to
December 2018)
Previously a non-executive director of
WiseTech Global Limited (2018 to
October 2019)
28
CSR LIMITED | BOARD OF DIRECTORS
MIKE IHLEIN
BBUS (Accounting), FAICD, FCPA, FFIN,
MFEI.
Non-executive director since July 2011.
MATTHEW QUINN
BSc (HONS), ACA, ARCS.
Non-executive director since
August 2013.
Other CSR responsibilities
Chairman of the Risk & Audit Committee
and member of the Workplace Health,
Safety & Environment Committee.
Other CSR responsibilities
Chairman of the Remuneration & Human
Resources Committee and member of
the Risk & Audit 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 of Inghams
Group Limited (2020 to current)
Non-executive director of Kilfinan
Australia Limited (2016 to current)
Previously a non-executive director of
Snowy Hydro Limited (2012 to 2019)
Experience and expertise
Matthew was formerly managing director
of Stockland for 12 years until January
2013. Matthew has an extensive
background in commercial, retail,
industrial and residential property
investment, development and
environmental land rehabilitation.
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)
Non-executive director of Elders
Limited (2020 to current)
Member of the Australian Business
and Community Network Scholarship
Foundation
PENNY WINN
BCOM, MBA, GAICD.
Non-executive director since
November 2015.
Other CSR responsibilities
Chair 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, including
experience in workplace health & safety.
Other directorships/offices held
Non-executive director of Caltex
Australia Limited (2015 to current)
Non-executive director of Goodman
Limited and Goodman Funds
Management Limited (2018 to
current)
Non-executive director of Coca-Cola
Amatil (2019 to current)
Previously Chairman of Port Waratah
Coal Services Ltd (2015 to 2019)
29
CSR LIMITED | DIRECTORS’ REPORT
DIRECTORS’ REPORT
As at the date these financial statements are authorised for issue, the
directors of CSR Limited consider that the financial effects of any
potential changes cannot be reasonably estimated for future financial
periods. As the situation remains fluid due to evolving changes in
government policy and business and customer reactions thereto, the
directors consider that the general economic impacts arising from
COVID-19 and lower levels of forecast activity are likely to negatively
impact the financial results and position of the CSR group over the
near term, in particular, the year ending 31 March 2021. As a result,
there is a potential that the lower levels of forecast activity may
impact the future recoverability of the group's assets, including
debtors, inventory, property, plant and equipment and intangible
assets.
Dividends
No final dividend has been declared for the year ended 31 March
2020.
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 13.0 cents per ordinary share (50% franked at
the 30% corporate tax rate), with respect to the financial year
ended 31 March 2019, was paid on 2 July 2019; and
an interim ordinary dividend of 10.0 cents per ordinary share and
an interim special dividend of 4.0 cents per ordinary share (50%
franked at the 30% corporate tax rate) was paid on 10 December
2019 (as set out in note 19 to the financial statements on page
80).
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.
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 2020. The information appearing on
pages 30 to 55 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 2020 is set out on the inside front cover to page 27 and
pages 56 to 100 of the annual report and forms part of the directors’
report. This includes the summary of consolidated results as well as
an overview of the group’s strategy, material risks and future
prospects.
Significant changes
There have been no significant changes to the CSR group in the
financial year ended 31 March 2020.
Events after balance sheet date
Impact of COVID-19
The global COVID-19 pandemic and the subsequent restrictions
imposed by the Australian, New Zealand and other overseas
governments have caused disruption to businesses and economic
activity. The forecast economic decline is expected to result in lower
levels of construction activity in the near term, which would negatively
impact CSR’s trading revenue and operations.
The CSR group has managed, and continues to actively manage, the
risks arising from COVID-19. This includes a financial response plan
that incorporates scenario and contingency planning at various levels
of construction activity, stress testing of cash flow forecasts and
sensitivity analysis. In addition to a CSR group business continuity
plan (BCP), all CSR businesses have developed tailored BCPs, which
are specific to their business and contemplate the operational
responses at various levels of construction activity.
As at 31 March 2020, CSR had cash of $414.8 million, following the
drawdown of $320.0 million in borrowing facilities. This has been
further bolstered by additional credit facilities of $200.0 million which
have been finalised in May 2020. These additional facilities expire in
October 2021. This provides CSR with increased financial flexibility to
manage an uncertain business activity environment.
There have not been any significant adverse operational or financial
impacts as a result of the COVID-19 pandemic to date and any known
impacts to date have been reflected in the YEM20 financial
statements.
30
CSR LIMITED | DIRECTORS’ REPORT
Indemnities and insurance
Auditor independence
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 2020 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 2021. The insurance contracts insure
against certain liability (subject to exclusion) incurred by persons who
are or have been directors or officers of CSR and its controlled
entities.
In accordance with normal commercial practice, the insurance
contract prohibits disclosure of the nature of the liability covered by,
or the premium payable under, the contract of insurance. No claims
under the indemnities have been made against CSR during or since
the end of the year.
Performance in relation to environmental regulation
The board places a high priority on environmental issues and is
satisfied that adequate systems are in place for the management of
CSR’s compliance with applicable environmental regulations under
the laws of the Commonwealth, States and Territories of Australia and
of New Zealand. CSR is not aware of any pending prosecutions
relating to environmental issues, nor is CSR aware of any
environmental issues, not provided for, which would materially
affect the business as a whole.
Political donations
CSR attended a small number of events organised by political parties
such as conferences in the year ended 31 March 2020. 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 (2019: $nil) and as such disclosure to the
Australian Electoral Commission was not required.
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 2020, an officer of the CSR group. No auditor who
played a significant role in the CSR group audit for the year ended 31
March 2020 has done so for a period exceeding the extended audit
involvement period of five successive financial years. The auditor’s
independence declaration (made under section 307C of the
Corporations Act 2001) is set out on page 33.
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 33 to the financial statements on
page 98. 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 34 to 55 provides: a summary of
the board’s remuneration policy and practices during the past year as
they apply to directors and other KMP (as defined by the Accounting
Standard AASB 124 Related Party Disclosures); the relationship
between remuneration policy and the CSR group’s performance; and
the remuneration details for each director and other KMP.
Directors and company secretary
On 2 September 2019 Julie Coates succeeded Rob Sindel as CEO and
Managing Director, who retired from the board on the same date.
There were no other changes to the board in the year ended 31 March
2020.
The names of directors who held office at 12 May 2020, 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 28 and 29 and forms part of the directors’ report.
The qualifications and experience of the company secretary at 12 May
2020 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).
31
CSR LIMITED | DIRECTORS’ REPORT
Directors’ meetings and directors’ shareholdings
The number of meetings of the company’s board of directors and each board committee held during the year ended 31 March 2020, 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 53 and 55. 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.
Table 1: Meetings of directors
Year ended
31 March 2020
CSR Board
Risk & Audit
Committee
Workplace Health, Safety &
Environment Committee
Remuneration &
Human Resources Committee
Held1
Attended2
Held1
Attended2
Held1
Attended2
Held1
Attended2
John Gillam4, 5
Christine Holman3
Michael Ihlein3
Matthew Quinn4
Penny Winn5
Julie Coates6
Rob Sindel7
13
13
13
13
13
6
7
13
13
13
13
13
6
6
n/a
4
4
4
n/a
3
1
4
4
4
4
4
3
1
n/a
4
4
n/a
4
3
2
1
4
4
1
4
3
1
6
n/a
n/a
6
6
4
2
6
6
5
6
6
4
2
1 Meetings held while a member.
2 Meetings attended.
3 Director is not a member of the Remuneration & Human Resources Committee.
4 Director is not a member of the Workplace Health, Safety & Environment Committee.
5 Director is not a member of the Risk & Audit Committee.
6 Appointed as executive director from 2 September 2019.
7 Resigned as executive director from 2 September 2019.
John Gillam
Chairman
12 May 2020
Julie Coates
Managing Director and CEO
12 May 2020
32
CSR LIMITED | AUDITOR’S INDEPENDENCE DECLARATION TO THE DIRECTORS OF CSR LIMITED
The Directors
CSR Limited
Triniti 3
39 Delhi Road
North Ryde NSW 2113
12 May 2020
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 2020, 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 Asia Pacific Limited and the Deloitte Network
33
CSR LIMITED | REMUNERATION REPORT | OVERVIEW
REMUNERATION REPORT
Shareholder letter
Dear Shareholder
On behalf of the board, I am pleased to present CSR’s Remuneration Report for the year ended 31 March 2020 (YEM20).
One of our most important roles as a board is to implement a remuneration framework for our senior executives and employees that is fair and
reasonable and motivates them to work hard in the interests of shareholders. We meet regularly with major shareholders and their advisors to
discuss the framework and ensure it remains fit for purpose in a dynamic and rapidly changing business environment. This engagement has led
to us implementing several changes to the framework and our remuneration disclosures over the years as we strive for best practice.
Prior to YEM19, we received overwhelming support for our Remuneration Report. However, this changed last year when we received a “first strike”
with 34% of shareholders recording a “no” vote against the adoption of the report. This was a very disappointing outcome for us, and one that we
are intent on learning from to ensure we regain your support this year.
As a result of last year’s outcome, the board conducted a thorough review of published reports on CSR’s Remuneration Report issued by
shareholder advisors and met with several major shareholders to discuss how we can improve both remuneration policy and disclosure. Following
this, we have made several changes to our framework in YEM20 to address the concerns that were raised and enhanced disclosure in this
Remuneration Report, to provide you with greater clarity on both the remuneration framework and the assessments made by the board in
determining remuneration outcomes. These changes are summarised below, with more detail provided in section 1 and throughout the report.
Changes to the remuneration framework:
The minimum shareholding policy was formalised to require KMP (executive and directors) to accumulate a shareholding equivalent to 100%
of fixed annual remuneration over a reasonable period of time.
Relative TSR has been re-introduced as a performance measure for the YEM21 long term incentive grant, with a requirement for a positive
absolute TSR in order for any rights to vest.
From YEM21, the amount of deferred STI will be increased from 20% to 40%.
From YEM21, a one year “holding lock” will be applied on all LTI shares awarded under the Performance Rights Plan (PRP).
Enhanced disclosures in the CSR Remuneration Report:
More detail is provided on how we assess executive KMP and senior executive remuneration relative to both market benchmarks and
comparable roles in the industries in which CSR operates (refer to section 7).
Explained how we assess the treatment of significant items in relation to any incentives awarded (refer to section 8).
Provided greater clarity on the process for setting and assessing STI targets. This disclosure is particularly important as the industries in
which we operate (primarily building materials and aluminium) are cyclical in nature, and how executives perform at the low points of the
cycle can be just as important for positive shareholder outcomes as when the markets are buoyant. This is quite relevant to the remuneration
outcomes in YEM19 and YEM20 given lower levels of building activity in these years (refer to section 8).
YEM20 results and remuneration outcomes
In recognition of the uncertainty arising from the COVID-19 pandemic, the Managing Director, Chief Financial Officer and all senior executives have
forfeited any entitlement to a STI for YEM20. The overall STI awarded for YEM20 decreased by $11 million or 66% when compared to the prior
year and represented a payout ratio of 2.6% of YEM20 EBIT, which is the lowest payout ratio in a decade.
CSR group EBIT of $217 million for YEM20 was below the financial target set, with the shortfall in performance attributed to the timing of property
transactions and lower sales activity levels in the Building Products segment. Reflecting the valued contribution of employees during the year, STI
based on performance achieved has been awarded to front line managers where their business units did meet their financial targets, or where a
discretionary element of non-financial STI was warranted.
Managing Director and CEO transition
Another important role of the board is to ensure we have the right Managing Director and CEO to lead the company and there is a smooth
succession when there is a change of CEO. Rob Sindel was a very effective CEO of CSR and it was incumbent on the board to conduct an extensive
search and evaluation process to find his successor. The board was very pleased to identify Julie Coates and for her to accept the role. Ms Coates
has a tremendous track record in leading large and complex manufacturing companies, and has already made a very positive impact on the
business. We are confident that Ms Coates will lead CSR well through its next phase of growth and will be a great asset for the company.
The board conducted extensive research to decide the appropriate level of fixed remuneration and incentives for Ms Coates, mindful of
remuneration for comparable roles and remuneration in her previous role. Details are provided in sections 7 and 10.
In summary, following these changes, the board is confident that our remuneration framework is appropriate and will motivate our executives to
create value for our shareholders in the long term. We also anticipate that the improved disclosure will help you make a full and proper assessment
of the framework and remuneration outcomes, and we welcome any feedback on how we can further improve the report.
Matthew Quinn
Chairman
Remuneration and Human Resources Committee
34
CSR LIMITED | REMUNERATION REPORT | OVERVIEW
Overview
1
“First strike” on YEM19 Remuneration Report
At the YEM19 AGM, CSR recorded a no vote of 34% on the resolution to adopt the YEM19 Remuneration Report resulting in a “first strike”.
Feedback received from shareholders and their advisors indicated that some disclosures lacked transparency and some remuneration practices
may have been out of alignment with market practice and shareholder expectations. The board takes these concerns seriously and has
proactively sought to address shareholder concerns. The following table summarises the concerns raised and how CSR has addressed these.
Table 1: YEM19 Remuneration Report feedback and responses
Subject
Key concerns
Actions to address key concerns
Managing
director’s
remuneration
The peer group used for benchmarking the
managing director’s remuneration along with
other executive KMP is not adequately
disclosed, resulting in inconsistent assessment
of pay against the market and the company’s
policy.
Disclosure required on YEM20 STI measures
and outcomes for outgoing managing director
should be included in the YEM20 Remuneration
Report.
Treatment of
significant
items
Greater transparency on how the board has
determined which expenditure and income
should be classified as significant items and
their impact on STI and LTI outcomes.
Disclosure of
STI financial
targets
There is insufficient disclosure and
transparency on STI financial targets and the
assessment of outcomes.
This causes difficulty for shareholders to
determine whether targets are sufficiently
rigorous and aligned with shareholder
expectations.
Minimum
shareholding
requirements
Minimum shareholding requirements are lower
than market practice.
STI deferral
STI deferral of 20% for executive KMP and
senior executives is below market practice and
shareholder expectations.
Absolute TSR
as an LTI
performance
hurdle
Absolute TSR may inappropriately penalise or
reward the executive as a consequence of
market conditions, despite the positive or
negative contribution of the executive.
Enhanced the disclosure to improve shareholder understanding of
the actual peer group used, which is defined as;
“a custom peer group that falls within 50% to 200% of CSR’s
market capitalisation, revenue and EBIT. This ensures that
remuneration for KMP is based on roles of comparable size.
Reference is also made to CSR’s major competitors who compete
directly for the services of KMP and senior executives.”
The outgoing managing director did not receive an increase in fixed
remuneration in YEM20. Based on the benchmarking undertaken in
YEM19, Mr Sindel’s total target remuneration was in line with peers,
with a skew towards long term incentives. The benchmarking
revealed that fixed annual remuneration was in line with peers,
target short term incentives (STI) was lower and long term
incentives (LTI) was higher.
The outgoing managing director’s YEM20 remuneration
arrangements and outcomes are detailed in section 10.
CSR has reviewed market practice and updated the significant
items policy in YEM20. The threshold for income or expense to be
classified as a significant item has been increased to $5 million.
The board will continue to assess all significant items to determine
how these should impact any incentive payments. The board will
consider the extent to which the significant item is attributed to
current management control or decisions and make adjustments
accordingly.
More comprehensive disclosures have been included in section 8
explaining the key policy points and assessment decisions made,
including the use of board discretion, in determining incentive
outcomes.
As EBIT is the primary STI financial measure, CSR has elected not to
disclose the financial target due to commercial sensitivity.
From YEM20 we have included disclosure of the assessment of the
STI financial measures and outcome, including the matters
considered in setting the target such as expected building activity,
energy prices, aluminium price and exchange rates. Further detail is
contained in section 8.
In addition to the absolute EBIT result for the year, the board views
outperformance against competitors and other market metrics as a
sign of good executive performance, particularly at a low point in the
building cycle. This could result in executives earning STI based on a
lower EBIT than the prior year if such outperformance is
demonstrated. This is explained in section 8.
The minimum shareholding policy was amended in June 2019 to
require KMP to build a shareholding equivalent to 100% of fixed
annual remuneration over a reasonable time.
Further detail is included in section 14.
From YEM21, STI deferral in the form of shares will be increased to
40%.
The shares will be transferred to the participant in two equal
tranches, one and two years after the STI is granted.
Further detail is included in section 8.
While the YEM20 LTI grant for the incoming managing director
gained strong support at the AGM, the board acknowledged
shareholder concerns and has resolved to reintroduce relative TSR
for the YEM21 LTI grant, as disclosed in section 9. However,
absolute TSR will remain as a qualifying hurdle, and no performance
rights will vest for the TSR tranche if absolute TSR is negative.
From YEM21, a restriction on trading will be applied, through a 12
month holding lock for all shares awarded under the LTI.
35
CSR LIMITED | REMUNERATION REPORT | OVERVIEW
1
“First strike” on YEM19 Remuneration Report (continued)
Following the changes summarised above, the following figure illustrates the timing of how remuneration will be earned, subject to performance
measures being met for executive KMP and senior executives.
Figure 1: YEM21 short term and long term incentive plans
Year 1
Year 2
60% paid as cash
Year 3
Year 4
1 year performance period
20% shares restricted for 1 year
Vesting
20% shares restricted for 2 years
Vesting
3 year performance period
Holding lock
Vesting
Short Term
Incentive Plan
Long Term
Incentive Plan
2 Basis of preparation of the Remuneration Report
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 2020 (YEM20) and the remuneration framework. The
report also details proposed changes for the financial year ended 31 March 2021 (YEM21).
Consistent with prior years, actual remuneration of executive KMP has been included in the Remuneration Report in section 4. In the interests of
transparency, year-on-year analysis is also provided on aggregate remuneration for senior executives (as defined in section 3).
3 Key management personnel (KMP) and senior executives
KMP for YEM20 are detailed in the table below. KMP are as defined by the Accounting Standard AASB 124 Related Party Disclosures (AASB
124).
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, consistent with prior years.
Table 2: Key management personnel
Name
Non-executive directors (NEDs)
John Gillam
Christine Holman
Michael Ihlein
Matthew Quinn
Penny Winn
Position
Chairman
Director
Director
Director
Director
Term as KMP
Full year
Full year
Full year
Full year
Full year
Executive KMP
Julie Coates1
Rob Sindel1
David Fallu
Managing Director and CEO
Managing Director and CEO
Chief Financial Officer
From 2 September 2019
Up to 2 September 2019
Full year
1 On 14 December 2018, Rob Sindel announced his intention to retire from CSR and it was announced on 16 May 2019 that Julie Coates would be appointed as CEO and
Managing Director following Mr Sindel’s retirement. Mr Sindel ceased to be a KMP from 2 September 2019 and remained employed until 13 September 2019 to ensure a
seamless transition to Ms Coates. Further detail is included in section 10.
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 3: Senior executives
Name
Ian Hardiman
Luke Murphy
Andrew Mackenzie
Nick Pezet
Andrea Pidcock
Anthony Tannous1
Mark White
Position
Executive General Manager – New Business, Innovation &
Technology
Executive General Manager – Human Resources
General Manager – Property
Executive General Manager – PGH Bricks
Executive General Manager – Lightweight Systems
Executive General Manager – Energy & Roofing Solutions
General Manager – Aluminium
Term as senior executive
Full year
To 31 January 2020
Full year
Full year
Full year
Full year
Full year
1 Mr Tannous assumed responsibility for the Energy & Roofing Solutions business (which includes the Bradford business) in April 2019.
36
CSR LIMITED | REMUNERATION REPORT | REMUNERATION AND PERFORMANCE OUTCOMES
Remuneration and performance outcomes
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 YEM20. 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 section 11,
with a summary of the differences detailed in the table below.
Table 4: Comparison of actual and statutory remuneration disclosures
Fixed annual
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
YEM20, 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 2020
Statutory
remuneration
disclosures
As above
STI award for
YEM20, 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 YEM20 relates to YEM18 to
YEM20 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
Performance Rights Plan
(PRP) rights are granted
as part of contractual
obligations. These are
expensed over the vesting
period
Executive KMP actual remuneration
Actual remuneration received by executive KMP is set out in the table below. Mr Sindel’s fixed remuneration was not increased during the year
while Mr Fallu received a 2.5% increase. The remuneration disclosure is prepared on the basis summarised in table 4. There were no
termination benefits paid to executive KMP during the year.
Table 5: Actual remuneration received by executive KMP
Year ended 31
March
$
Julie Coates
Rob Sindel3
David Fallu
Total
Fixed
remuneration
Short term
incentive1
Long term
incentive
Other
benefits2
670,833
678,254
631,625
–
–
522,000
683,048
–
–
1,980,712
522,000
683,048
–
–
1,563
1,563
YEM20 Total
YEM19 Total
670,833
1,883,302
633,188
–
4,207,931
1,045,047
3,187,323
5,252,978
1 An STI was not awarded to KMP for YEM20, except for the special incentive paid to Mr Sindel (note 3).
2 Other benefits included USOP and travel expenditure, all of which related directly to company business.
3 As disclosed in the YEM19 Remuneration Report, given the transition to a new managing director, Mr Sindel’s fixed remuneration includes an allowance recognising the
service provided beyond the notice period. The STI paid to Mr Sindel of $522,000 is a specific incentive based on goals set by the board and determined for services up to
31 August 2019. Additional information on the variations to Mr Sindel’s employment terms and short term incentive performance outcomes is included in section 10.
Senior executive actual remuneration
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 4. The analysis excludes the executive KMP.
Table 6: Senior executive remuneration
Year ended
31 March
$
2020
2019
Fixed annual
remuneration
3,731,054
3,888,575
Fixed annual
remuneration
change1
4.4%
3.6%
Short term
incentive
Long term
incentive
Other benefits2
Total3
Change
in total
–
693,887
5,876
4,430,817
(45.1%)
2,034,160
2,133,142
16,302
8,072,179
(0.2%)
1 The ‘fixed annual remuneration change’ has been adjusted for the departure of Mr Murphy. The total fixed remuneration change (including Mr Murphy) is a decrease of
4.1%.
2 Other benefits include USOP and travel expenditure related to company business or contractual obligations.
3 Total remuneration includes remuneration paid to Mr Murphy while a senior executive. Total remuneration does not include a termination amount of $500,000 paid to Mr
Murphy consistent with his contractual obligations. At the discretion of the board, and consistent with the PRP and STI deferral rules, Mr Murphy was approved as a good
leaver. As a result, 76,988 performance rights remain on foot for the YEM18 to YEM20 PRP plans. This represents the pro-rata of the outstanding performance rights based
on the percentage of the performance period served for each plan. Deferred STI shares of 26,774 relating to the YEM18 and YEM19 STI plans vested at Mr Murphy’s
termination date.
37
CSR LIMITED | REMUNERATION REPORT | REMUNERATION AND PERFORMANCE OUTCOMES
5
Performance outcomes
Table 7: Summary of performance outcomes for YEM20
Remuneration
Performance outcome
Total
remuneration
Short term
incentive (STI)
Total remuneration expense decreased significantly for executive KMP and senior executives due to a decrease in the
STI awarded and fewer LTI’s vested in YEM20 compared to YEM19.
Given the cyclical nature of the building industry, it is not appropriate to set financial targets based on year-on-year
linear growth. Instead, at the start of each year, the board sets challenging financial targets taking into account
forecast building activity, as well as considering investor requirements for a certain level of sustainable returns.
YEM20 CSR group EBIT of $217 million fell short of the financial target set due to the:
o
timing of property transactions, with the sale of Horsley Park Stage 2 announced in YEM20, but the profit will not
be recognised for accounting purposes until subsequent financial years; and
o Building Products segment, due to lower sales activity from businesses exposed to the detached and multi-
residential building sectors. Further detail is included in section 8.
The STI awarded for YEM20 decreased by $11 million or 66% compared to the prior year for the following reasons:
o The CSR group and a number of businesses were not awarded a financial component, as the financial targets for
the year were not met.
o Only a proportion of the customer metric was awarded based on an assessment of the performance achieved
during YEM20.
In recognition of the uncertainty arising from the COVID-19 pandemic, the Managing Director, Chief Financial
Officer and all senior executives forfeited their entitlement to a STI for YEM20.
o
Long term
incentive (LTI)
The board performed an assessment of the group’s performance for YEM20, and in consideration of the valued
contribution of CSR’s employees, has decided to award a discretionary STI for eligible employees (excluding the
Managing Director, Chief Financial Officer and senior executives).
The STI awarded amounted to a payout ratio of 2.6% of EBIT, which is the lowest payout ratio in a decade.
During the year the YEM17 LTI performance hurdles were partially met resulting in 45.3% of the YEM17 PRP grant
vesting with the components assessed as follows:
o Earnings per share (EPS) target: 33.6% vested out of 40% potential
o Strategic measures: 11.7% vested out of 30% potential
o Total shareholder return (TSR) target: nil% vested out of 30% potential
The value of LTI that vested in YEM20 decreased compared to YEM19 due to a lower number of rights vesting and a
decrease in the CSR share price used to value them.
Further detail is contained in section 9.
Overall financial performance and variable remuneration
The following table summarises the clear link between company performance and incentives awarded to executive KMP, senior executives and
other eligible employees:
Table 8: Summary of financial performance and STIs and LTIs awarded
Financial performance6
STI
LTI
EBIT
($ million)1
TSR
(%)2
EPS
(cents)1
ROFE
(%)3
Share
price ($)4
Executive
KMP
($ million)
Senior
executives
($ million)
All eligible
employees
STI as a %
of EBIT
Vested value
– Executive
KMP
($ million)5
Vested value
– Senior
executives
($ million)5
YEM20
216.8
1.5
27.3
17.8
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
3.17
3.32
5.18
4.51
3.30
0.57
–7
2.6%8
1.4
1.2
0.9
1.2
2.0
2.2
2.0
2.2
6.3%
5.4%
5.5%
6.7%
0.7
2.0
1.8
2.8
3.6
0.7
2.1
1.8
2.2
3.4
1 EBIT and EPS are calculated before significant items. For YEM18 to YEM20, 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 19 along with the LTI vesting outcomes.
3 Return on Funds Employed (ROFE) defined in note 2 to the CSR group financial statements. ROFE for YEM18 to YEM20 is from continuing operations.
4 Closing share price at 31 March.
5 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.
6 Dividends paid for the last five years are disclosed on page 1.
7 An STI was not awarded to executive KMP or senior executives for YEM20, except for the special incentive paid to Mr Sindel.
8 Total STI awarded for YEM20 represents 42% of the target STI opportunity. Further detail on the STI awarded is outlined in table 7.
Further detail on the assessment of each of the performance measures for short and long term incentives is set out in sections 8 and 9
respectively.
38
CSR LIMITED | REMUNERATION REPORT | REMUNERATION GOVERNANCE
Remuneration Governance
6 Remuneration governance
CSR’s remuneration governance framework is set out below. While 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 2: 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 and non-executive remuneration
within aggregate approved by shareholders.
Overseeing induction of new non-executive directors and
evaluation of board performance.
The remuneration of the executive KMP 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 of management.
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 | COMPONENTS OF REMUNERATION
Components of remuneration
7
Summary of the fixed and ‘at risk’ components of remuneration
The core elements of CSR’s remuneration strategy for the executive KMP and senior executives are outlined below.
Figure 3: CSR’s remuneration strategy and structure
Performance driven
Alignment with shareholder interests
Market competitive remuneration
opportunities
Total target remuneration
Fixed
At risk
Fixed annual remuneration
Short term incentive
Long term incentive
Fixed annual remuneration for KMP is
targeted at the median of a custom
peer group that falls within 50% to
200% of CSR’s market capitalisation,
revenue and EBIT. Reference is also
made to CSR’s major competitors who
compete directly for the services of
KMP. For senior executives the Korn
Ferry Hay Group industrial and services
database as well as internal relativities
are considered
CSR’s executives participate in an STI
plan. The STI plan is weighted 60% to
financial metrics, 30% to individual
performance metrics and 10% to
customer objectives
Refer to section 8 for further detail
LTIs are provided through the
Performance Rights Plan (PRP) and are
linked to:
Total shareholder return
Growth in CSR’s EPS
Delivery of strategic objectives
(YEM17 only)
Refer to section 9 for further detail
Base salary
Superannuation
Other eligible salary sacrifice benefits
Reviewed annually or on promotion,
with no guaranteed increases
included in any executives’ contracts
80% cash and 20% shares
Shares are deferred for two years
Deferred equity remains at risk
until vesting
From YEM21, 40% will be deferred
(50% for one year and 50% for two
years)
Equity with performance assessed
over three years
From YEM21, a restriction on trading
will be applied, through a 12 month
holding lock for all shares awarded
under the LTI
The key principles on which CSR’s executive remuneration policy is based are outlined below.
Table 9: 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 annual remuneration, target STI and the maximum value of the LTI granted during the year
for the executive KMP. There is no change to the managing director’s remuneration mix following a change of
incumbent.
Chief financial officer
Managing director
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Fixed
STI
LTI
40
CSR LIMITED | REMUNERATION REPORT | COMPONENTS OF REMUNERATION
7
Summary of the fixed and ‘at risk’ components of remuneration (continued)
Table 9: Key principles of CSR’s executive remuneration policy (continued)
Objective
Explanation
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 against a custom peer group of between 15 to 20 companies that falls within 50% to
200% of CSR’s market capitalisation, revenue and EBIT. This ensures that remuneration for KMP is based on roles of
comparable size.
In setting executive remuneration, reference is also made to CSR’s major competitors, the Korn Ferry Hay Group industrial
and services database as well as internal relativities.
Variable remuneration (through STI and LTI) provides the opportunity to earn total remuneration (fixed annual
remuneration plus variable remuneration) that reaches the top quartile of the market for superior performance.
Alignment
with
shareholder
interests
Executive 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.
KMP and senior executives are required to hold, or make progress towards holding, a minimum CSR shareholding. From
YEM21, the requirement will increase to 100% of their fixed annual remuneration for KMP, acquired over a reasonable
timeframe. Further detail on this policy is set out in section 14.
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) and the ability to forgo part of fixed
remuneration to acquire shares annually through the Employee Share Acquisition Plan (ESAP).
8
(i)
At risk remuneration - short term incentive
Table 10: 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.
Performance
measures
The performance measures for the STI are based on a combination of financial and non-financial measures:
Performance component
Corporate roles
Business unit roles
CSR group EBIT
Business unit EBIT
Individual objectives
Customer objectives
Total
60%
–
30%
10%
100%
30%
30%
30%
10%
100%
Financial measures are based on the board approved EBIT budget. Given the cyclical nature of the building industry, it is not
appropriate to set financial targets based on year-on-year linear growth. Instead, at the start of each year, the board sets
challenging financial targets, taking into account the forecast building activity, as well as considering investor requirements
for a certain level of sustainable returns.
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, especially given the cyclical nature of the industry and the impact this has
on performance.
The maximum STI payable is 200% of a participant’s target STI opportunity, except for the managing director who is capped
at 143% of target STI opportunity, equivalent to 100% of fixed annual remuneration. Detail on the actual performance for
YEM20 compared to the targets set is summarised later in this section.
Minimum
financial
performance
requirements
A minimum financial performance threshold is based on 95% of the board approved EBIT budget, below which no financial
component will be paid. Target financial performance equates to the approved EBIT budget while stretch performance is
110% of the approved EBIT budget. The target and stretch budgets are set at a challenging level, with stretch achievement
only in the event of exceptional performance. The STI accrues on a straight-line basis for financial performance between
threshold and target and between target and stretch. These parameters apply at both the CSR and business unit level.
Performance component
Threshold2
Percentage of EBIT target achieved
Percentage of target STI payable1
95%
0%
Target
100%
100%
Stretch
110%
200%
1 Managing director’s STI is capped at 143% of target STI opportunity, equivalent to 100% of fixed annual remuneration.
2
For the purpose of calculating the 95% financial threshold, the EBIT target is increased by the amount of STI payable if the budget is achieved.
Under the plan rules, if the financial threshold is not met the individual and customer objectives are discounted by 50%.
Should both CSR and the applicable business unit not reach the financial threshold, then any payment will be at the
discretion of the board. In addition, under the plan rules, the board has discretion to reduce, remove or increase any STI
payable after considering overall business performance.
41
CSR LIMITED | REMUNERATION REPORT | COMPONENTS OF REMUNERATION
8
(i)
At risk remuneration - short term incentive (continued)
Table 10: Details of the short term incentive plan (continued)
Individual
objectives
The individual objectives set for each participant at the beginning of the financial year, in consultation with their direct
manager, are aligned to the business plan and behaviours which are in line with CSR’s values. These objectives
include safety, health and environment, meeting customer needs, 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.
These objectives are documented in CSR’s performance management system ACHiEVE@CSR and performance is
assessed during the year, with a final assessment to coincide with year-end.
Customer objectives Customer objectives are set at a group level and business unit level. The objectives are focussed on improvements in
the customer experience through specific targets that measure customer feedback and are set at the start of the
year.
In addition, as part of the participant’s individual objectives, specific customer relevant objectives must also be
included within ACHiEVE@CSR. Examples could include objectives focussed on 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.
Assessment of
performance
against measures
At the end of the financial year, each participant’s performance is assessed based on financial results for CSR and the
relevant business. A review by the participant’s manager is undertaken to determine performance against the relevant
individual objectives.
Individual objective assessments and recommendations are made by the participant’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, human resources and the managing director.
The Remuneration & Human Resources Committee approves executive KMP and senior executive STIs as well as the
overall STI pool in aggregate.
Board discretion
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, including consideration of any material amounts recorded outside of EBIT (e.g.
Service condition
Equity deferral
‘significant items’);
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;
other special circumstances (e.g. acquisitions and divestments); and
any breach of CSR’s Business Code of Conduct and Ethics policy.
New starters or people promoted into eligible roles may 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 participants 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 are 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 apply and shares fully vest to the participant 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,
during the restriction period participants 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 allow the board to withhold some
or all of the deferred equity whether vested or not in the event of fraudulent or dishonest acts including financial
errors, misstatements or misrepresentations.
42
CSR LIMITED | REMUNERATION REPORT | COMPONENTS OF REMUNERATION
8
At risk remuneration - short term incentive (continued)
(ii) Changes from YEM21 – short term incentive plan
From YEM21, the percentage of total STI required to be deferred for two years has been increased from 20% to 40%, with half released to
participants at the end of year one and the balance released at the end of year two. This is subject to the participant remaining employed at the
end of each period and the clawback provisions described above. This change in policy will improve alignment to shareholder interests and
market practice, as well as assist with executive KMP and senior executive retention.
The following chart highlights the impact of the YEM21 changes to deferred STI on the ratio of cash to equity (deferred STI and PRP).
Managing Director remuneration mix
Chief Financial Officer remuneration mix
YEM20
54
46
YEM20
67
YEM21
49
51
YEM21
62
33
38
0%
20%
40%
Cash
60%
Equity
80%
100%
0%
20%
40%
Cash
60%
80%
100%
Equity
(iii) Assessment of YEM20 short term incentive performance
STI financial measures
As noted earlier in this section, given the cyclical nature of the building industry, it is not appropriate to set financial targets based on year-on-
year linear growth. Instead, at the start of each year, the board sets challenging financial targets, taking into account the forecast building
activity at the time, as well as considering investor requirements for a certain level of sustainable returns. An assessment of the YEM20
performance for the CSR group and the individual segments is summarised in the table below.
Table 11: Assessment of YEM20 performance compared to financial targets set
Business
Comment on target and performance
CSR group
Building Products
Property
Aluminium
For YEM20 the target was set in an environment of declining building activity and risk in relation to the timing of
property transactions, which are often dependent on external approvals and the completion of remediation and
infrastructure works. As a result, the group EBIT target set for STI purposes was lower than YEM19.
The YEM20 actual group EBIT before significant items of $217 million was below the financial targets set. Further
explanation of the performance for each business is set out below.
The targets were established having regard to the forecast material reduction in new housing activity. Given the
expected shortfall in building activity, the YEM20 financial targets for the Building Products businesses were set
below the YEM19 result.
The actual level of building activity in YEM20 was lower than forecast and a number of businesses did not
achieve their financial targets. In particular, businesses with concentrated levels of exposure to residential
building activity (the Bricks and Roofing businesses) or concentrated exposure to high-rise (the Construction
Systems businesses) experienced a more pronounced impact compared to businesses with higher levels of
commercial and renovations exposure (such as Insulation and Lightweight Systems).
Despite this, in the context of a challenging operating environment, Building Products continues to perform
strongly across most segments and revenue (impacted by pricing, volume and portfolio changes) has
outperformed a weighted market activity index.
A challenging target was set for the Property business in YEM20. Despite announcing the sale of Horsley Park
Stage 2 during the year (proceeds of $142.5 million and expected EBIT of $94 million), the timing of the
transaction will mean that the profits on sale will be recognised in YEM21 and YEM23 in accordance with
accounting standards. As a result, the Property business EBIT was a loss of $1.5 million which did not meet the
financial targets set for YEM20.
The development of the Property portfolio continues, with significant progress made in relation to finalising the
rezoning outcomes for Schofields and Warner and inclusion of Badgerys Creek in the industrial precincts of the
Western Sydney Aerotropolis.
The aluminium business was set a financial target of higher EBIT compared to YEM19.
This reflected the hedged position at the start of the year and operating efficiencies at the Tomago plant.
The financial target was achieved and the business unit component of the STI was awarded.
43
CSR LIMITED | REMUNERATION REPORT | COMPONENTS OF REMUNERATION
8
At risk remuneration - short term incentive (continued)
(iii) Assessment of YEM20 short term incentive performance (continued)
Consideration of significant items recorded in YEM20
The STI financial targets are set based on EBIT before significant items. The board reviews all ‘significant items’ at the end of each performance
period and considers whether it is appropriate to adjust for their impact on incentive outcomes. In forming its views, the board will have
consideration as to whether the item was due to current management control or decisions.
After assessing the significant items reported in YEM20, the board has determined that incentive outcomes should be adjusted for the following
reasons.
Table 12: Assessment of significant items for remuneration purposes
Item
Description
Product liability
provision
Legal settlement
benefit
Impairment of
building product
assets
STI non-financial measures
The product liability provision expenses recorded in YEM20 of $4.3m after tax pre-dates current management
and the board has consistently treated these amounts as significant items.
Accordingly, it was determined that incentive outcomes should not be adjusted for this item.
The legal settlement benefit of $2.5m after tax did not relate to current year trading and it was determined that
the incentive outcomes should not be adjusted for this item.
An impairment charge of $7.6 million after tax was recorded against two business units within Building Products
after a decision was made to suspend operations as a result of the economic uncertainty due to COVID-19 and a
focus on cash preservation.
Given that decision was a recommendation of management and the operations of these businesses are within
management’s control, it was determined that the incentive outcomes for both short-term and long-term
incentives would be adjusted, and EBIT and EPS used for YEM20 STI and LTI calculations would be downgraded
by the impairment charge.
For the businesses that met their business unit financial target half of their non-financial STI component was awarded, in accordance with the
STI plan (as detailed in table 10).
Given the CSR group and a number of businesses did not meet the STI financial targets (discussed in table 7 and table 11) a discretionary
element of the non-financial STI component was also awarded based on the CSR board’s consideration of the valued contribution of CSR’s
employees during the year.
As previously noted the Managing Director, Chief Financial Officer and all senior executives have forfeited their entitlement to a STI for YEM20,
including a non-financial STI component.
44
CSR LIMITED | REMUNERATION REPORT | COMPONENTS OF REMUNERATION
9 At risk remuneration - long term incentive
(i)
Purpose of the long term incentive (LTI) plan
CSR’s long term incentive 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.
(ii) Details of the LTI plan
The long term incentive plan is delivered through the CSR Performance Rights Plan (PRP). The following plan details apply to PRP grants from
YEM17 to YEM20. Changes to the YEM21 LTI plan are disclosed later in this section.
Table 13: Features of the long term incentive plan
Participation
Managing director, senior executives 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, calculated using a face value of shares and convert to
shares subject to performance vesting criteria. If performance conditions are met, CSR shares will be purchased on
market and transferred to participants. Refer to section 9(iii) for more detail.
Vesting and
performance
period
Treatment of
capital
return
Awards are subject to a three year vesting period. Immediately following completion of the vesting period, the
performance conditions 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).
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.
At vesting
For all PRP grants, rights are eligible for one CSR Limited share per one performance right on vesting.
Sales restrictions
post vesting
Shares transferred to participants on the vesting of performance rights are subject to the CSR share trading policy.
Dividends
There is no entitlement to dividends on performance rights during the performance period.
Treatment on
cessation of
employment
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 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 2020, 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.
Board discretion
The board retains discretion to reduce or lapse performance rights (or recover the net proceeds where vested shares
have been sold) in several circumstances including, but not limited to, material financial misstatements, the
performance and conduct of the participant, the performance of the business unit the participant is employed in, CSR
group performance, fraudulent or dishonest acts, bringing CSR or any business unit into disrepute or breach of duties or
obligations to CSR (including acting in breach of the terms and conditions of their employment and/or CSR’s Code of
Business Conduct and Ethics).
45
CSR LIMITED | REMUNERATION REPORT | COMPONENTS OF REMUNERATION
9 At risk remuneration - long term incentive (continued)
(iii) PRP performance conditions
A summary of the performance hurdles for each PRP grant, along with further detail on how each hurdle is measured, is set out below.
Table 14: Performance hurdles for each PRP grant
Absolute TSR (Tranche A)
Relative TSR (Tranche A)
Earnings per share (Tranche B)
Strategic objectives (Tranche C)
1. Total shareholder return (TSR)
Note
YEM20
YEM19
YEM18
YEM17
1
1
2
3
50%
–
50%
–
–
50%
50%
–
–
50%
50%
–
–
30%
40%
30%
TSR is the percentage growth in shareholder value, which measures the changes in share price, taking into account dividends and capital
returns. For the purposes of the TSR calculation, the start and end share prices will be calculated based on 10 trading days VWAP.
Absolute TSR for YEM20
For the YEM20 PRP, a review of performance hurdles was conducted incorporating potential property transactions over the ensuing three
years. As a result, relative TSR was replaced with absolute TSR.
The board believes absolute TSR is an appropriate measure for the YEM20 PRP as it more directly aligns with shareholder interests and
provides transparency and focus of executives in driving both earnings and share price growth.
The targets are set out in table 15. In setting these targets consideration was given to the historical TSR performance of CSR, the cost of
capital and projected earnings through the performance period.
Table 15: Absolute TSR targets for the YEM20 PRP grant
Cumulative Average Growth Rate (CAGR) of TSR
Proportion of Tranche A to vest
Below TSR of 14%
TSR of 14%
0%
75%
Between TSR of 14% and 18%
Straight-line vesting between 75% and 100%
18% and above
Relative TSR prior to YEM20
100%
TSR performance is assessed against the constituents of the S&P/ASX 200 index (Peer Group) defined at the start of the performance period.
Table 16: Relative TSR vesting schedule
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%
75th percentile or greater
100%
46
CSR LIMITED | REMUNERATION REPORT | COMPONENTS OF REMUNERATION
9 At risk remuneration - long term incentive (continued)
(iii) PRP performance conditions (continued)
2. Earnings per share (EPS)
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 use of EPS as a long term performance measure is also consistent with market
practice. EPS is defined as net profit after tax per share before significant items. The board reviews all ‘significant items’ at the end of each
performance period and considers whether it is appropriate to adjust for the impact on incentive outcomes. A consistent treatment is applied for
both STI and LTI assessments, with the YEM20 outcome summarised in section 8 (iii) and table 12. In addition, the board may adjust EPS to
exclude the effects of material business acquisitions or divestments and for certain one-off costs.
EPS is measured on an averaged basis over the three year performance period rather than point to point to reflect the cyclical nature of the
business. 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 using the same methodology,
except the growth is compounded by 10% per annum.
Table 17: Performance hurdles for the YEM17 to YEM20 PRP grants
YEM20
YEM19
YEM18
YEM17
EPS performance hurdle
Target
Stretch
Target
Stretch
Target
Stretch
Target
Stretch
Cumulative EPS required over next
three years (cps)
Average EPS required over next three
years (cps)
119.5
131.4
140.0
154.0
120.8
132.9
108.9
119.8
39.8
43.8
46.7
51.3
40.3
44.3
36.3
39.9
The reduction in the EPS target for the YEM20 grant is due to a lower EPS in YEM19 compared to the prior two years.
Table 18: EPS PRP vesting schedule
CAGR of EPS
Below 5%
At 5%
Between 5% and 10%
10% and above
3. Strategic objectives (YEM17 only)
Proportion of Tranche B to vest
0%
50%
Straight-line vesting between 50% and 100%
100%
For the YEM17 grant, specific objectives were set in the areas of growth, portfolio and digital. Performance of this plan was assessed during
YEM20 and partially vested. Further detail on the assessment is detailed below.
(iv) Assessment of performance impacting YEM20 remuneration
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 EPS growth and TSR performance as measured through the movement in the share price and dividends paid. In
addition, the YEM17 PRP award also included performance against specific strategic objectives in the areas of growth, portfolio and digital.
In relation to the YEM17 PRP assessment, the EPS and TSR outcomes are described below in table 19. In addition, the specific strategic
objectives were assessed as follows:
Growth: the board set a target for growth in EBIT derived from 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.
47
CSR LIMITED | REMUNERATION REPORT | COMPONENTS OF REMUNERATION
9 At risk remuneration - long term incentive (continued)
(v) Details of the PRP awards outstanding
Table 19: Status and key dates of PRP awards
Grant
date
Valuation
per right1
Holding
period
Performance testing
period
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
Expiry date
(if hurdle
not met)
1 April 2019
25 July 2017
(YEM18)
Tranche A (TSR) $1.76
Tranche B (EPS) $3.37
25 July 2017 to
31 March 2020
1 April 2017 to
31 March 2020
1 April 2020
Performance
status2
Tranche A (TSR): Performance
condition not met in March 2019 and
all rights lapsed.
Tranche B (EPS): compound growth
performance condition met with 84%
of the allocation vesting and the
remaining unvested rights lapsed.
Tranche C (Strategic objectives): 39%
of the allocation vested and the
unvested rights lapsed.
Subsequent to 31 March 2020:
Tranche A (TSR): Performance
condition was met and 57.3% of
allocation vested and the remaining
unvested rights lapsed.
Tranche B (EPS): compound growth
performance condition was not met
and all rights lapsed.
25 July 2018
(YEM19)
Tranche A (TSR) $1.36
Tranche B (EPS) $3.60
25 July 2018 to
31 March 2021
1 April 2018 to
31 March 2021
1 April 2021
Performance testing not commenced.
19 July 2019
(YEM20)
Tranche A (TSR) $1.99
Tranche B (EPS) $3.72
19 July 2019 to
31 March 2022
1 April 2019 to 31
March 2022
1 April 2022
Performance testing not 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.
(vi) Long term incentive plan changes
The following changes to the LTI plan have been introduced for YEM21.
Table 20: Changes to the LTI plan from YEM21
Component
Description
Holding lock
A 12 month holding lock on shares awarded under the PRP has been introduced to aid senior executive retention and
supplement CSR’s clawback provisions.
During the holding lock participants are entitled to receive dividends and other distributions and have full voting
rights.
Performance
measures - total
shareholder
return
Relative TSR has been reintroduced as a performance measure (replaces absolute TSR) as it is an established
measure with greater alignment to market practice.
Absolute TSR will be retained but as a positive gateway to vesting to ensure that participants are only rewarded for
positive shareholder returns. If absolute TSR is negative over the performance period, no rights will vest in this
tranche.
The comparator peer group used to calculate relative TSR will be those companies comprising the S&P/ASX51 –
ASX150 defined at the start of each performance period. This peer group is sufficiently broad to measure relativity and
the market capitalisation has greater alignment to CSR than the S&P ASX200.
In measuring TSR, share prices will be calculated based on a 90 day VWAP at the start and end of the performance
period (compared to the current 10 day calculation) to address share price volatility.
48
CSR LIMITED | REMUNERATION REPORT | COMPONENTS OF REMUNERATION
9 At risk remuneration - long term incentive (continued)
(vii) Other equity incentive plans
Table 21: 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 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.
49
CSR LIMITED | REMUNERATION REPORT | REMUNERATION IN DETAIL
Remuneration in detail
10 Service agreements
Managing director – Executive service agreement
Julie Coates was appointed as managing director on 2 September 2019. Ms Coates contractual remuneration package is summarised below.
Table 22: Managing director’s remuneration package (Ms Coates from 2 September 2019)
Fixed annual
remuneration
Fixed annual remuneration of $1,150,000 inclusive of superannuation contributions. Fixed annual remuneration is
reviewed annually and increases are not guaranteed.
Notice period Under the Executive’s Service Agreement there is no fixed term and Ms Coates’ employment can be terminated by:
the company giving her 12 months’ notice of termination; or
Ms Coates giving six months’ notice of resignation.
STI
LTI
There is no guaranteed 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% to financial performance, 30% to individual performance and 10% to customer
experience metrics.
For YEM20, Ms Coates is entitled to a pro rata STI payment for the period served.
Under the STI deferral plan rules, 20% of the STI value will be deferred into CSR shares which vest in two years. From
YEM21 the amount subject to deferral will increase to 40%. Further details on the STI deferral plan is contained in table 10.
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 section 9(iii) for
details) and are subject to shareholder approval at the AGM.
Transition
benefits
To attract high calibre talent, it is customary market practice to compensate new employees for the loss of earned but
unpaid variable remuneration with their previous employer. As a result, Ms Coates was granted 100,745 rights with a face
value of $400,000 which will vest on 2 September 2022, subject to Ms Coates remaining employed on that date. No other
performance conditions apply.
Former managing director – Executive service agreement
Rob Sindel was appointed as managing director of CSR effective 1 January 2011. On 14 December 2018, the company announced Mr Sindel’s
intention to retire and Mr Sindel left the business on 13 September 2019.
Mr Sindel is well regarded professionally and a highly experienced managing director. During his tenure as managing director, Mr Sindel
delivered solid results.
As disclosed in the YEM19 Remuneration Report, the board determined that Mr Sindel would be treated as a good leaver for the purposes of his
entitlements on termination. Mr Sindel gave six months’ notice on 14 December 2018 in accordance with his employment contract and
envisaged a leaving date of 13 June 2019. Due to commitments to her previous employer Ms Coates was unable to commence until 2
September 2019 and an extension to 13 September 2019 was agreed with Mr Sindel to ensure a smooth transition.
While Mr Sindel was contractually entitled to participate in both STI and LTI schemes in YEM20, given his notice and the need to retain Mr Sindel
for a handover, the board agreed the following variations to his remuneration arrangements.
Table 23: Variations to the former managing director’s remuneration package
Fixed annual
remuneration
As disclosed in the YEM19 Remuneration Report, Mr Sindel’s fixed annual remuneration was not increased in YEM20.
Mr Sindel agreed to remain as managing director until Ms Coates could commence and was paid an allowance from the
end of his contractual notice period (commencing 14 June 2019) until he ceased employment to recognise the
importance of retaining his services for a successful transition.
Consistent with STI deferral rules and the good leaver policy, Mr Sindel retained all of his deferred STI shares. On 31
March 2020, YEM18 deferred STI shares of 34,563 met the service condition and were approved by the board to be
made available to Mr Sindel in May 2020. The remaining 57,341 deferred shares will vest on 31 March 2021.
Mr Sindel did not participate in the YEM20 STI plan but was eligible for a specific incentive up to $600,000. This
incentive focussed on retaining Mr Sindel for a successful handover and incentivising him during the notice period to
deliver a number of specific initiatives of benefit to the group. This included group targets up until 31 August in relation to
safety, profitability, returns on funds employed and a range of specific initiatives across each business segment (e.g. for
Building Products execution of cost saving initiatives and successful integration of the Roofing and Bradford businesses).
Following a detailed assessment of performance against the objectives for the period ended 31 August 2019, the board
determined that 87% of the specific incentive would be awarded and $522,000 was paid in November 2019. The STI
deferral did not apply to the specific incentive.
STI
50
CSR LIMITED | REMUNERATION REPORT | REMUNERATION IN DETAIL
10 Service agreements (continued)
Former managing director – Executive service agreement (continued)
Table 23: Variations to the former managing director’s remuneration package (continued)
LTI
Given the YEM20 PRP was granted after Mr Sindel announced his retirement, it was agreed that he would not participate
in the grant.
In relation to previous unvested grants, Mr Sindel retains a pro rata number of his PRP rights, calculated from each
respective grant date up to the date of his departure. These rights will remain on foot and be subject to the performance
conditions of each grant. In relation to the YEM18 PRP 79,508 rights met their performance condition and 198,010
failed to meet their performance condition and lapsed effective 31 March 2020. The remaining 142,718 YEM19 rights
will be tested on 31 March 2021.
Any vested rights will be paid in cash (net of tax), calculated using the five day volume weighted average price of CSR
shares leading up to (but excluding) the vesting date, multiplied by the number of rights that have vested.
Table 24: Former managing director’s remuneration package (before variations)
Fixed annual
remuneration
Fixed annual remuneration of $1,286,470 inclusive of superannuation contributions effective from 1 July 2018. Fixed
annual remuneration was reviewed annually, and increases were not guaranteed.
Notice period Under the Executive’s Service Agreement there was no fixed term and Mr Sindel’s employment could be terminated by:
the company giving him 12 months’ notice of termination; or
Mr Sindel giving six months’ notice of resignation.
STI
LTI
There was no guaranteed entitlement to an STI payment and the maximum STI opportunity was 100% of fixed annual
remuneration for exceptional performance. Achievement of target performance would result in 70% of the maximum STI
being paid. The STI was weighted 60% on financial performance, 30% on individual performance and 10% on customer
experience metrics.
Under the STI deferral plan rules, 20% of the STI value was deferred into CSR shares which vest in two years. Further detail
on the STI deferral plan is contained in table 10.
The value of any award of performance rights was 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.
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 25: Chief financial officer’s contractual remuneration package
Fixed annual
remuneration
Fixed annual remuneration of $635,500 inclusive of superannuation contributions effective from 1 July 2019. This
represented an increase of 2.5% compared to the prior year. Fixed annual remuneration is reviewed annually and
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.
STI
LTI
There is no guaranteed 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, 30% on individual performance and 10% on customer
experience metrics.
Under the STI deferral plan rules, 20% of the STI value will be deferred into CSR shares which vest in two years. From
YEM21 the amount subject to deferral will increase to 40%. Further detail on the STI deferral plan is contained in table 10.
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.
During YEM20, the board approved a one-off performance bonus for Mr Fallu of $200,000, based on his significant contribution to the sale of
the Viridian business. The bonus was awarded in the form of rights and 60,744 rights were issued with a grant date of 8 May 2019. These rights
will convert to CSR shares on the third anniversary of the grant date (being 8 May 2022) subject to Mr Fallu still being employed on that date.
51
CSR LIMITED | REMUNERATION REPORT | REMUNERATION IN DETAIL
10 Service agreements (continued)
Table 26: 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
apply (including deferred STI).
STI is forfeited unless board determines
otherwise.
Board discretion to award STI on a pro rata
basis (including deferred STI).
Change of control
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.
11 Statutory remuneration
Managing director’s and chief financial officer’s remuneration
The remuneration table below shows a decrease in total remuneration expensed for accounting purposes for executive KMP in YEM20 compared
with YEM19.
Table 27: 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 – Julie Coates
2020
2019
655,081
–
15,752
–
31,267
–
Former managing director – Rob Sindel
2020
2019
667,870
1,258,214
10,384
20,411
(8,403)
21,495
–
–
–
–
–
–
307,695
–
1,009,795
–
645,311
(618,839)
696,323
–
–
–
938,432
846,052
3,084,604
30%
Chief financial officer – David Fallu
2020
2019
610,740
585,183
20,885
20,411
24,504
30,122
1,563
1,547
49,288
399,613
74,522
117,384
781,502
1,154,260
6%
35%
30%
–
–
27%
10%
10%
1 Fixed annual 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 YEM20 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 19.
5 STI and LTI as a percentage of total remuneration.
12 Deferred shares
Table 28: STI deferred shares for executive KMP
Julie Coates
Rob Sindel
David Fallu
Number of STI deferred shares
Balance
1 April 2019
–
34,563
11,503
Granted1
Vested
Lapsed
Balance
31 March 20202
–
57,341
26,600
–
(34,563)
(11,503)
–
–
–
–
57,341
26,600
1 The value of deferred shares provided at grant date was $3.29 per share. These shares related to the YEM19 STI and were granted in May 2019 and will vest on 31 March
2021 consistent with the STI deferral plan.
2 The closing balance of deferred shares at 31 March 2020 represents unvested shares for YEM19 STI.
52
CSR LIMITED | REMUNERATION REPORT | REMUNERATION IN DETAIL
13 Performance rights
Table 29: Executive KMP performance rights
Julie Coates
Rob Sindel
David Fallu
Number of performance rights
Balance
1 April 2019
–
1,082,803
147,037
Granted1
460,986
Vested2
Lapsed
–
–
–
(203,288)
(459,279)
176,552
–
–
Balance
31 March 2020
460,986
420,236
323,589
1 The accounting value of Ms Coates and Mr Fallu’s rights granted were $1,428,489 and $530,632 respectively.
2 The following rights vested to ordinary shares during the year ended 31 March 2020:
Mr Sindel: YEM17 Tranche B rights vested of 150,783 and YEM17 Tranche C rights vested of 52,505. A total of 203,288 shares were issued on 17 May 2019, and the
value of each of these shares was $3.36, representing a total value to Mr Sindel of $683,048.
14 Shareholdings
Minimum shareholding requirements
The board has reviewed the minimum shareholding policy and determined that from YEM20 KMP will accumulate over time the equivalent of
100% of fixed annual remuneration in CSR shares. The value of the shares held by the KMP is calculated as the higher of the current market
price or the price the shares were acquired at. This change impacts the managing director, chief financial officer and CSR non-executive
directors. Non-executive directors are required to meet the minimum shareholding requirements within four years of appointment. Executive
KMP will be provided a reasonable timeframe in which to accumulate the minimum shareholding having regard to the business cycle and likely
variable incentive outcomes that may become available to count towards the requirements.
There is no change for senior executives who are required to hold 50% of fixed annual remuneration in CSR shares.
Table 30: Executive KMP shareholdings
Julie Coates
Rob Sindel3
David Fallu
Number of CSR shares1
Balance
1 April 2019
–
901,766
56,360
Acquired2
–
260,629
28,137
Sold or
transferred
–
–
Other3
–
(1,162,395)
Balance
31 March 2020
–
–
(20,000)
–
64,497
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 203,288 shares issued on vesting of PRPs and 57,341 shares acquired under the STI deferral plan. Mr Fallu’s acquired shares include 26,600 shares
acquired under the STI deferral plan, 1,069 shares acquired under ESAP and 468 shares acquired under USOP.
3 Effective from 2 September 2019 Mr Sindel retired from his role as Managing Director and CEO and ceased being a KMP on the same date. The ‘other’ change does not
represent a disposal of shares.
53
CSR LIMITED | REMUNERATION REPORT | NON-EXECUTIVE DIRECTORS AND OTHER
Non-executive directors and other
15 Arrangements
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 additional 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. The shareholder approved fee pool is currently $1,450,000 per annum including superannuation.
Following benchmarking in YEM19, the board determined not to increase NED fees for YEM20. However, the committee chairman fees totalling
$82,342 were evenly distributed between the three committee chairmen and each received $27,447 in YEM20 with no impact to aggregate
fees.
Table 31: Non-executive director (NED) arrangements
Role
Annual fee for YEM20 (including superannuation guarantee)
$395,264
Chairman base fees (including all committee memberships)
$158,106
Other NED base fees (including one committee membership)
An additional $27,447
Chairman of the Risk & Audit Committee
Chairman of the Remuneration & Human Resources Committee
An additional $27,447
Chairman of the Workplace Health, Safety & Environment Committee An additional $27,447
Additional committee memberships
An additional $11,764 per additional committee
(applies to NEDs other than the chairman)
The board determined not to increase NED fees for YEM21.
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 may 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 equivalent to 100% of their fixed annual remuneration. Further information is detailed in section 14.
16 Non-executive director fees
Table 32: 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
YEM20
YEM19
YEM20
YEM19
YEM20
YEM19
YEM20
YEM19
YEM20
YEM19
YEM20
YEM19
YEM20
YEM19
Directors’ fees
Termination
benefits
Superannuation
374,379
339,843
155,131
155,131
169,455
176,616
169,455
165,874
–
60,865
169,455
165,874
1,037,875
1,064,203
–
–
–
–
–
–
–
–
–
–
–
–
–
–
20,885
20,984
14,738
14,737
16,098
16,779
16,098
15,758
–
5,012
16,098
15,758
83,917
89,028
Total
395,264
360,827
169,869
169,868
185,553
193,395
185,553
181,632
–
65,877
185,553
181,632
1,121,792
1,153,231
1 Effective from 31 May 2018 John Gillam succeeded Jeremy Sutcliffe as Chairman who retired from the board on the same date.
54
CSR LIMITED | REMUNERATION REPORT | NON-EXECUTIVE DIRECTORS AND OTHER
17 Shareholdings
Table 33: Non-executive directors’ shareholdings
John Gillam (chairman)
Christine Holman
Michael Ihlein
Matthew Quinn
Penny Winn
Number of CSR shares1
Balance
1 April 2019
Included in
remuneration
Acquired
Other
Balance
31 March 2020
253,510
64,574
62,079
60,059
43,403
–
–
–
–
–
–
14,738
1,069
12,360
7,845
–
–
–
–
–
253,510
79,312
63,148
72,419
51,248
1 CSR shares in which the director has a beneficial interest, including shares held under the ESAP trust or via related parties.
18 Other transactions with KMP
The CSR group offers staff discounts on certain products which are also made available to KMP.
There were no other transactions, including loans between CSR and KMP (including their related parties), during YEM19 and YEM20.
55
62
62
63
63
65
66
66
67
67
68
69
70
71
71
72
75
76
78
79
80
80
80
80
81
82
87
87
87
90
90
91
92
93
93
97
97
98
98
98
99
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
57
58
59
60
61
62
100
101
104
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
15 Provisions
16 Product liability
Leases
Issued capital
Capital structure and risk management
17 Borrowings and credit facilities
18
19 Dividends and franking credits
20 Reserves
21
Financial risk management
Group structure
22 Subsidiaries
23 Deed of cross guarantee
24 Non-controlling interests
25
26 Equity accounting information
27 Parent entity disclosures
Interest in joint operations
Other
28 Employee benefits
29 Related party disclosures
30 Subsequent events
31 Commitments and contingencies
32 Other non-current assets
33
34 Other accounting policies
Auditor’s remuneration
56
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
2020
2019
2,5
5
26
12,26
7
7
8
9
24
4
4
4
4
2,212.5
(1,541.5)
671.0
17.7
(197.0)
(282.4)
13.9
(9.1)
(4.7)
209.4
3.3
(20.3)
192.4
(53.9)
138.5
–
138.5
13.2
125.3
138.5
25.4
25.4
25.4
25.4
2,322.8
(1,627.4)
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
1 Net profit from continuing operations before significant items attributable to shareholders of CSR Limited is $134.8 million (2019: $181.7 million). Refer to note 3 of the
financial statements.
The above statement of financial performance should be read in conjunction with the accompanying notes.
57
Note
2020
138.5
2019
86.6
20
9, 20
13
28
13
12.9
(10.5)
1.3
–
18.5
8.4
0.1
1.1
(0.7)
(8.1)
(13.9)
4.2
(6.7)
131.8
18.6
113.2
131.8
113.2
–
113.2
(1.6)
0.5
18.9
105.5
12.4
93.1
105.5
154.7
(61.6)
93.1
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 (profit) 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 (expense) income – net of tax
Total comprehensive income
Total comprehensive income attributable to:
Non-controlling interests
Shareholders of CSR Limited
Total comprehensive income
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.
58
CSR LIMITED | FINANCIAL REPORT
Statement of financial position
$million
Current assets
Cash and cash equivalents
Receivables
Inventories and development projects
Other financial assets
Income tax receivable
Prepayments and other current assets
Total current assets
Non-current assets
Receivables
Inventories and development projects
Investments accounted for using the equity method
Other financial assets
Property, plant and equipment
Right-of-use lease assets
Goodwill
Other intangible assets
Deferred income tax assets
Other non-current assets
Total non-current assets
Total assets
Current liabilities
Payables
Lease liabilities
Other financial liabilities
Tax payable
Provisions
Total current liabilities
Non-current liabilities
Payables
Borrowings
Lease liabilities
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.
Note
2020
2019
34
11
11
21
32
11
26
21
12
14
12
12
13
32
11
14
21
15
17
14
21
15
13
28
18
20
24
414.8
254.1
401.6
48.1
–
10.0
1,128.6
15.0
87.0
42.6
31.5
741.5
153.2
58.3
15.8
130.3
0.7
1,275.9
2,404.5
245.5
32.9
33.2
39.4
129.9
480.9
–
320.0
167.1
19.0
265.0
18.5
8.5
798.1
1,279.0
1,125.5
966.7
(45.7)
144.0
1,065.0
60.5
1,125.5
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
1,231.1
1,028.8
(38.4)
187.6
1,178.0
53.1
1,231.1
59
CSR LIMITED | FINANCIAL REPORT
Statement of changes in equity
$million
Balance at 1 April 2019
Adjustment on adoption of AASB 16 (net
of tax)
Restated balance at 1 April 2019
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
Balance at 31 March 2020
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
Balance at 31 March 2019
Note
14
19
18
20
10,20
20
19
18
20
20
Issued
capital
1,028.8
–
1,028.8
–
–
–
(62.1)
–
–
–
966.7
1,036.2
–
–
–
(7.4)
–
–
1,028.8
Reserves
(38.4)
–
Retained
profits
187.6
(25.5)
CSR
Limited
interest
1,178.0
(25.5)
Non-
controlling
interests
53.1
(0.4)
(38.4)
–
(2.4)
–
–
(0.1)
(6.3)
1.5
(45.7)
(53.2)
–
16.2
–
–
(2.6)
1.2
(38.4)
162.1
125.3
(9.7)
(133.7)
–
–
–
–
144.0
244.4
78.0
(1.1)
(133.7)
–
–
–
187.6
1,152.5
125.3
(12.1)
(133.7)
(62.1)
(0.1)
(6.3)
1.5
1,065.0
1,227.4
78.0
15.1
(133.7)
(7.4)
(2.6)
1.2
1,178.0
52.7
13.2
5.4
(6.8)
–
–
(4.0)
–
60.5
46.7
8.6
3.8
(6.0)
–
–
–
53.1
Total
equity
1,231.1
(25.9)
1,205.2
138.5
(6.7)
(140.5)
(62.1)
(0.1)
(10.3)
1.5
1,125.5
1,274.1
86.6
18.9
(139.7)
(7.4)
(2.6)
1.2
1,231.1
The above statement of changes in equity should be read in conjunction with the accompanying notes.
60
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 disposal of businesses
Loans and receivables repaid (advanced)
Net cash inflow from investing activities
Cash flows from financing activities
On-market share buy-back
Net drawdown (repayment) of borrowings
Dividends paid2
Acquisition of shares by CSR employee share trust
Lease payments3,4
Interest and other finance costs paid4
Net cash inflow (outflow) from financing activities
Net increase 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
Net change in product liability provision
Net change in other provisions
Net change in current and deferred tax balances
Net change in other assets and liabilities
Net cash from operating activities
Note
2020
2019
26
9
10
18
20
2
24
6
20
5
9
2,500.7
(2,252.1)
10.6
3.5
(16.6)
2,933.6
(2,731.6)
14.3
3.1
(12.1)
246.1
207.3
(142.4)
114.5
78.5
(16.8)
(0.7)
13.6
46.7
(62.1)
320.0
(140.5)
(0.1)
(33.9)
(11.6)
71.8
364.6
50.0
0.2
414.8
125.3
13.2
99.7
9.1
(3.3)
0.3
11.6
(3.5)
–
26.9
(10.6)
(11.6)
(21.1)
(26.5)
33.4
3.2
246.1
(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
1 Cash flow from discontinued operations is disclosed in note 9 to the financial statements.
2 During the year ended 31 March 2020, within the $140.5 million of dividends paid, dividends to CSR Limited shareholders were $133.7 million. Of the $133.7 million in
dividends, $11.2 million was used to purchase CSR shares on-market to satisfy obligations under the Dividend Reinvestment Plan (DRP), and the remaining $122.5 million
was paid in cash.
3 Lease payments were disclosed within Payments to suppliers and employees for the year ended 31 March 2019.
4
In accordance with AASB 16 Leases interest and other finance costs paid for the year ended 31 March 2020 includes finance costs relating to leases of $9.4m. Refer to
notes 7 and 14 for further details.
The above statement of cash flows should be read in conjunction with the accompanying notes.
61
New or revised accounting standards: The CSR group has adopted all
amendments to Australian Accounting Standards which became
applicable for the CSR group from 1 April 2019. Further information on
the impact of adopting AASB 16 Leases is contained in Note 14.
New standards not yet applicable: Standards not yet applicable are not
expected to have a material impact on the CSR group.
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
15
15
Asset impairment
Measurement of provisions for restoration and
environmental rehabilitation and legal claims
Provision for uninsured losses and future claims
15, 16
Product liability
25
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.
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 34.
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.
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.
62
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 costs; and
significant items.
Geographical information
The CSR group operates principally in Australia. For the year ended 31
March 2020, the CSR continuing group's trading revenue from
external customers in Australia amounted to $2,140.9 million (2019:
$2,255.2 million), with $71.6 million (2019: $67.6 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 $1,062.3 million at 31 March 2020
(2019: $900.0 million), with $9.2 million (2019: $2.2 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 a reportable
segment.
Building
Products
Property
Aluminium
Lightweight Systems (Gyprock plasterboard, Cemintel
fibre cement, Himmel Interior Systems and Rondo
rolled formed steel products joint venture),
Construction Systems (Hebel autoclaved aerated
concrete products, AFS walling systems and CSR
Inclose™), Energy and Roofing Solutions (Bradford and
Martini insulation, Bradford energy solutions, Edmonds
ventilation systems and Monier roofing) and Bricks
(PGH Bricks and Pavers and New Zealand Brick
Distributors joint venture).
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 was
classified as a discontinued operation in YEM19. The Glass business
included 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.
63
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | FINANCIAL PERFORMANCE OVERVIEW
2
Segment information (continued)
$million
Trading revenue1
EBITDA before
significant items2
Depreciation and
amortisation3
Earnings before
interest, tax and
significant items
Business segment
2020
2019
2020
2019
2020
2019
2020
2019
Building Products
Property
Aluminium
Corporate4
Restructuring and provisions5
1,591.3
1,695.9
–
621.2
–
–
–
626.9
–
–
254.9
(0.8)
71.5
(8.0)
(1.1)
258.9
39.0
48.3
(14.0)
(2.2)
Continuing operations
2,212.5
2,322.8
316.5
330.0
Glass discontinued operations
–
318.9
–
18.5
84.4
0.7
11.9
2.7
–
99.7
–
Total CSR group
2,212.5
2,641.7
316.5
348.5
99.7
Reconciliation of earnings before interest, tax and significant items to profit after tax
$million
Continuing operations earnings before interest, tax and significant items
Net finance (expense) income
Income tax expense
Profit after tax from continuing operations before significant items (before non-controlling interests)
Less: non-controlling interests
Profit after tax from continuing operations before significant items attributable to shareholders of CSR
Limited
Significant items after tax from continuing operations attributable to shareholders of CSR Limited
Profit after tax from continuing operations attributable to shareholders of CSR Limited
Loss from discontinued operations attributable to shareholders of CSR Limited
Profit after tax attributable to shareholders of CSR Limited
52.4
0.2
11.7
0.7
–
65.0
11.1
76.1
Note
7
3
9
170.5
(1.5)
59.6
(10.7)
(1.1)
206.5
38.8
36.6
(14.7)
(2.2)
216.8
265.0
–
7.4
216.8
272.4
2020
216.8
(10.8)
(58.0)
148.0
(13.2)
2019
265.0
0.1
(74.7)
190.4
(8.7)
134.8
181.7
(9.5)
(42.8)
125.3
138.9
–
(60.9)
125.3
78.0
Business segment
As at 31 March 2020
As at 31 March 2019
As at 31 March 2020
As at 31 March 2019
Funds employed ($million)6
Return on funds employed (%)7
Building Products
Property
Aluminium
Corporate
945.8
167.8
141.0
(65.6)
947.4
224.5
140.3
(63.2)
Total CSR group
1,189.0
1,249.0
18.0%
(0.8)%
42.4%
–
17.8%
22.1%
18.9%
28.2%
–
21.8%
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 Depreciation and amortisation for the year ended 31 March 2020 includes depreciation of $31.7 million in relation to leases (2019: $nil). Refer to note 14 for further
details.
4 Represents unallocated overhead expenditure and other revenues.
5 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).
6 Funds employed is net assets of the CSR group less certain non-trading assets and liabilities. Funds employed at 31 March 2020 is calculated as net assets of $1,125.5
million (2019: $1,231.1 million), excluding the following assets: cash of $414.8 million (2019: $50.0 million), net tax assets of $72.4 million (2019: $91.2 million), net
superannuation assets of $nil (2019: $8.2 million), net financial assets of $24.0 million (2019: $21.3 million), deferred consideration receivable of $nil (2019: $78.5
million) and interest receivable of $0.7 million (2019: $0.9 million). In addition, the following liabilities have been excluded from funds employed: borrowings of $320.0
million (2019: $nil), asbestos product liability provision of $246.9 million (2019: $268.0 million) and net superannuation liabilities of $8.5 million (2019: $nil).
7 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.
64
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | FINANCIAL PERFORMANCE OVERVIEW
3
Significant items
$million
Significant items from continuing operations:
Impairment of Building Products 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
Note
2020
2019
12
7
9
(10.9)
–
3.5
(7.4)
(6.2)
4.1
(9.5)
–
(9.5)
–
(32.8)
(11.6)
(4.0)
(48.4)
(8.0)
13.5
(42.9)
0.1
(42.8)
(65.3)
Significant items and discontinued operations loss attributable to shareholders of CSR Limited
(9.5)
(108.1)
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)
125.3
9.5
134.8
73.6
108.1
181.7
27.3
27.3
36.1
36.1
1 During the year ended 31 March 2020, the Building Products segment recorded a charge of $10.9 million to reduce the carrying value of Velocity and Inclose business assets
to their recoverable amount. The majority of this charge related to the impairment of plant, equipment and intangible assets. 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 for
restructuring costs to align the business cost base with current market conditions and secure ongoing efficiencies.
3 During the year ended 31 March 2020, the CSR group recorded income of $3.5 million as a result of the settlement of a legal dispute. 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 was
recorded in Other income and $5.6 million in Other expenses.
4 On 31 January 2019, the CSR group completed the sale of the Viridian glass segment. The Viridian Glass segment was classified as a discontinued operation and all non-
trading transactions were 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.
5 During the year ended 31 March 2019, net profit attributable to shareholders of CSR Limited excludes net profit after tax of $4.4 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. Further detail of discontinued operations is contained in note 9.
6 During the year ended 31 March 2019, net profit from continuing operations before significant items of $181.7 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 $186.1 million.
7 The basis of calculation is consistent with the earnings per share disclosure in the statement of financial performance. Refer to note 4.
Recognition and measurement
Significant items are those which by their size and nature or incidence are relevant in explaining the financial performance of the CSR group,
and as such are disclosed separately.
65
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | FINANCIAL PERFORMANCE OVERVIEW
4
Earnings per share
Weighted average number of ordinary shares used in the calculation of basic EPS (million)1
Weighted average number of ordinary shares used in the calculation of diluted EPS (million)2
Profit after tax from continuing operations attributable to shareholders of CSR Limited ($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)
2020
493.5
494.1
125.3
25.4
25.4
125.3
25.4
25.4
2019
503.2
503.8
138.9
27.6
27.6
78.0
15.5
15.5
1 Calculated by reducing the total weighted average number of shares on issue of 493.9 million (2019: 504.1 million) by the weighted average number of shares purchased
on market and held in trust to satisfy incentive plans as these plans vest of 423,278 (2019: 960,651).
2 Calculated by increasing the weighted average number of shares used in calculating basic EPS by outstanding performance rights of 642,017 (2019: 615,549).
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
2020
2019
2
3
9
2,212.5
2,322.8
3.5
3.5
10.7
–
44.3
1.6
8.9
318.9
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 is 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.
66
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | FINANCIAL PERFORMANCE OVERVIEW
6
Expenses
$million
Expenses from continuing operations
Significant items1
Employee benefits expense
Operating lease expense2
Depreciation
Amortisation
Expenses from discontinued operations
Significant items1
Employee benefits expense
Operating lease expense2
Depreciation
Amortisation
Note
2020
2019
3
14
12,14
12
3
12
12
10.9
415.1
12.6
92.5
7.2
–
–
–
–
–
50.0
464.6
51.6
57.7
7.3
88.4
120.0
18.4
10.8
0.3
Significant items are included within impairment expense and other expenses in the statement of financial performance.
1
2 Operating lease expense has been included for prior year comparative purposes. The CSR group adopted AASB 16 Leases on 1 April 2019 and for the year ended 31 March
2020 the expense relates to outgoings, short term and low value leases. Refer to note 14 for further details.
Nature of expense
Employee benefits expense: includes salaries and wages, share-based payments and other entitlements.
7 Net finance costs
$million
Net finance costs from continuing operations
Interest expense and funding costs
Finance cost - leases
Discount unwind and hedging relating to product liability provision
Discount unwind of other non-current liabilities
Foreign exchange loss (gain)
Finance costs
Interest income
Net finance costs
Finance costs included in significant items
Net finance costs (income) before significant items
Note
2020
2019
14
3
2.2
9.4
6.2
0.8
1.7
20.3
(3.3)
17.0
(6.2)
10.8
4.8
–
8.0
0.8
(2.1)
11.5
(3.6)
7.9
(8.0)
(0.1)
Net finance costs from discontinued operations
–
0.9
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.
67
Note
2020
192.4
–
192.4
57.7
(4.1)
0.1
0.4
(0.2)
–
53.9
57.5
(3.6)
53.9
53.9
–
53.9
2019
208.7
(81.9)
126.8
38.0
(4.0)
–
12.3
(0.6)
(5.5)
40.2
22.2
18.0
40.2
61.2
(21.0)
40.2
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:
$million
Profit before income tax from continuing operations
Loss before income tax from discontinued operations
Income tax expense calculated at 30%
(Decrease) increase in income tax expense due to:
Share of net profit of joint venture entities
Non-taxable profit on property disposals
Non-deductible impairment of goodwill and other assets
Income tax over provided in prior years
Other items1
Total income tax expense on profit
Comprising of:
Current tax expense
Deferred tax (credit) expense relating to movements in deferred tax balances
13
Total income tax expense on profit
Income tax expense (credit) is attributable to:
Profit from continuing operations
Loss from discontinued operations
Total income tax expense on profit
1
Primarily relates to discontinued operations in 2019.
Recognition and measurement
Current and deferred tax is recognised as an expense in the statement of financial performance except when it relates to items credited or
debited directly to equity, in which case the deferred tax is also recognised directly in equity, or where it arises from the initial accounting of
a business acquisition, in which case it is taken into account in the determination of goodwill.
Tax transparency report
The CSR group has prepared a voluntary tax transparency report which is available to view online or to download from the CSR website
(www.csr.com.au). The report sets out relevant tax information for CSR Limited and its controlled entities for the year ended 31 March 2020
and 31 March 2019.
Disclosure of company tax information
Under tax legislation the Australian Taxation Office will publish in 2020 the following data for the CSR Limited tax consolidated group and
Gove Aluminium Finance Limited in relation to the 2019 tax year:
Entity
CSR Limited (ABN: 90 000 001 276)
Gove Aluminium Finance Limited (ABN: 45 001 860 073)
Total revenue1
($million)
Taxable income
($million)
Tax payable
($million)
2,222.8
632.2
152.5
44.6
5.2
10.4
1 For financial reporting and taxation purposes, items may have been classified between revenue and expenses differently. Therefore, total revenue may not reconcile to
note 2 or note 24.
Income tax is payable on taxable income (not total revenue) after allowing for expenses and specific adjustments under the tax law. For CSR
Limited, tax payable for 2019 was $5.2 million because CSR was entitled to utilise franking credits on dividends received and R&D tax
offsets to reduce its tax payable.
The net amount of tax losses, capital losses and rebates carried forward at the end of the year is set out below:
Value of tax losses, capital losses and rebates
carried forward (net)
CSR Group
2020
($million)
193.02
2019
($million)
10.2
2 The gross value of unused tax losses for which no deferred tax asset has been recognised are $36.1 million (31 March 2019: $36.4 million). 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. The gross value of unused capital losses for which no deferred tax asset has been recognised are
$610.2 million (31 March 2019: $nil). Unused capital losses were generated from the sale of the Viridian Glass business and it is not considered likely that the capital
losses will be utilised in the foreseeable future. Unused capital losses can be carried forward indefinitely subject to meeting ownership continuity requirements.
68
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 prior 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.
$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
Loss from discontinued operations
Hedge profit
Exchange differences on translation
Recycling of reserves
Actuarial loss on superannuation defined benefit plan
Other comprehensive expense from discontinued
operations, net of tax
Net cash inflow from discontinued operations:
$million
Net cash from operating activities
Net cash from investment activities2
Net cash generated from discontinued
operations
2020
–
78.5
78.5
2019
318.9
(312.4)
6.5
(2.1)
4.4
(65.7)
6.7
(6.3)
(60.9)
0.6
(1.4)
1.1
(1.0)
(0.7)
2019
21.3
126.9
148.2
1
2
Transaction costs of $4.4 million were paid during the year ended 31 March
2019.
The deferred consideration of $78.5 million was received on 31 July 2019 in
accordance with the sale agreement and has been disclosed as proceeds from
sale of business in the statement of cash flows. 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
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 was received 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
82.3
128.4
22.7
283.7
30.7
32.3
63.0
220.7
69
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | FINANCIAL PERFORMANCE OVERVIEW
Building Products segment
During the year ended 31 March 2020, the Building Products
segment acquired the business assets of two entities for total
consideration of $4.0 million with goodwill of $1.8 million arising as a
result of these acquisitions. Cash consideration of $3.2 million has
been paid, with $0.8 million deferred.
The Building Products segment also invested in an entity for cash
consideration of $1.5 million.
ii) Prior year
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.
10 Business combinations
i)
Current year
CSR Martini Pty Limited
Background
On 20 December 2019, the CSR group acquired the 30% minority
interest in CSR Martini Pty Limited (Martini) for cash consideration of
$12.1 million.
Revenue and profit contribution
If the minority interest share of Martini was excluded from the CSR
group results for the year ended 31 March 2020, profit after tax
attributable to non-controlling interests would have been $1.1 million
lower and profit after tax attributable to shareholders of CSR Limited
would have been $1.1 million higher.
Acquisition accounting for the transaction
In accordance with AASB 10 Consolidated Financial Statements, as
the CSR group has a controlling interest in Martini, the acquisition is
treated as a transaction between shareholders. As a result, the
difference between the consideration paid by the CSR group to
purchase the minority interest in Martini and the non-controlling
interest has been recorded in the non-controlling interest reserve. Fair
value acquisition accounting is not required and the CSR group
continues to consolidate Martini. Effective 21 December 2019, the
CSR group has recognised 100% of the net profit after tax of Martini.
At the date of finalisation of this full year report, the necessary tax
consolidation calculations have not been finalised (refer note a).
Therefore, the accounting for this acquisition and the net impact of
this transaction on equity has been determined at 31 March 2020
based on the directors’ best estimates.
Details of the effect of changes in the ownership interest on the equity
attributable to owners of the CSR group is summarised as follows:
Carrying amount of non-controlling interest
at acquisition date
Consideration paid
Add: put option liability extinguished
Less: deferred tax impact arising from
Martini joining the CSR tax consolidation
group
Amount recognised in non-controlling
interest reserve
Note $million
4.0
(12.1)
3.3
(a)
(1.5)
(6.3)
a) Deferred tax impact arising from Martini joining the CSR tax
consolidation group
Martini automatically entered the CSR tax consolidation group at
acquisition date. Accordingly, the tax cost base of the net assets of
Martini needed to be reset, which has resulted in an adjustment to
the deferred tax balances. As the entry into the tax consolidation
group was a direct consequence of CSR’s acquisition of the non-
controlling interest, the estimated impact of revising the deferred tax
balances has been recorded in equity in the year ended 31 March
2020.
At 31 March 2020, calculations are being finalised to quantify the
deferred tax impact from Martini joining the tax consolidation group.
This will be finalised for the 30 September 2020 half year financial
report.
70
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | BALANCE SHEET ITEMS
Balance sheet items
11 Working capital
i)
Current receivables
ii)
Inventories and development projects
$million
2020
2019
$million
2020
2019
Trade receivables
Allowance for doubtful debts
Net trade receivables
Property receivable
Deferred consideration
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 disposed
Trade debts provided
Closing balance
Recognition and measurement
Current
Raw materials and stores
Work in progress
Finished goods
Development projects
Total current inventories and
development projects1
Non-current
Development projects
Total non-current inventories and
development projects
102.7
18.0
221.2
59.7
401.6
99.1
16.9
214.6
47.3
377.9
87.0
87.0
74.7
74.7
1 Write-down of inventories recognised as an expense within cost of sales for the
year ended 31 March 2020 totalled $13.6 million (2019: $12.7 million).
iii) Current payables
$million
Trade payables
Other payables
Total current payables
2020
217.4
28.1
245.5
2019
238.2
22.7
260.9
228.1
(8.6)
246.0
(7.2)
219.5
238.8
17.3
–
17.3
34.6
254.1
7.9
–
3.7
4.9
(7.2)
1.8
–
(3.2)
(8.6)
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)
Trade receivables: are recognised initially at fair value and are subsequently measured at amortised cost. The CSR group has adopted an
expected credit loss (‘ECL’) model under AASB 9 Financial Instruments. 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. 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 and forward looking information) 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. The recoverability of debtors at 31 March 2020 has been assessed to consider the impact of
the COVID-19 pandemic and no material recoverability issues have been identified.
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.
– Development projects: cost includes the cost of acquisition, development and holding costs during development. Costs incurred after
completion of development are expensed as incurred. Development projects not expected to be sold within 12 months are classified
as non-current assets.
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.
71
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
2020
2019
2020
2019
2020
2019
388.5
341.0
1,344.8
1,306.4
1,733.3
1,647.4
Accumulated depreciation and impairment
(96.4)
(88.3)
(895.4)
(849.5)
(991.8)
(937.8)
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 to intangible assets
292.1
252.7
25.7
–
–
(8.1)
–
–
–
–
–
–
252.7
270.6
23.9
–
(37.4)
(8.0)
(1.1)
–
(0.3)
–
–
–
449.4
456.9
74.5
(0.4)
–
(52.7)
–
(3.5)
–
–
1.5
(3.5)
9
6
6
10
12ii)
Transferred from (to) property plant and equipment,
inventories & other assets
21.8
5.0
(23.4)
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)
741.5
709.6
100.2
709.6
833.4
114.8
(0.4)
(1.9)
–
(128.4)
(60.8)
–
(3.5)
–
–
1.5
(3.5)
(1.6)
(57.7)
(10.8)
(6.2)
(26.7)
(0.3)
0.5
(7.8)
0.7
Balance at 31 March
292.1
252.7
449.4
456.9
741.5
709.6
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)
Goodwill
Software
Other
Total other intangible
assets
Note
2020
2019
2020
2019
2020
2019
2020
2019
58.3
57.2
–
–
87.3
(79.1)
87.8
30.0
46.1
117.3
133.9
(74.2)
(22.4)
(36.0)
(101.5)
(110.2)
58.3
57.2
57.2
98.1
–
–
–
–
(0.7)
–
–
1.8
–
–
–
–
–
(9.8)
(30.7)
(0.4)
–
–
8.2
13.6
0.1
–
(5.6)
–
(2.4)
–
–
–
2.5
8.2
13.6
17.1
0.3
(0.1)
(5.7)
(0.3)
(0.7)
(4.9)
0.1
–
7.8
13.6
7.6
10.1
–
–
(1.6)
–
10.1
27.4
–
–
(1.6)
–
15.8
23.7
0.1
–
(7.2)
–
23.7
44.5
0.3
(0.1)
(7.3)
(0.3)
(1.9)
(15.3)
(4.3)
(16.0)
–
–
–
1.0
7.6
(0.4)
–
–
–
10.1
–
–
–
3.5
15.8
(5.3)
0.1
–
7.8
23.7
Balance at 31 March
58.3
57.2
72
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | BALANCE SHEET ITEMS
12 Property, plant and equipment and intangible assets (continued)
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 2 to 40 years; and systems software and other intangible assets 2 to 8 years.
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 (2019: $1.6 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.
The carrying amount of goodwill and trade names with indefinite lives forms part of the Building Products segment: $58.3 million and $1.6
million respectively (31 March 2019: $57.2 million and $1.6 million respectively). The recoverable amounts of the cash generating units that
include goodwill are determined using discounted cash flow projections.
Cash flows are modelled over a five year period with a terminal value used from year six onwards. The first five years represent financial
plans forecast by management, based on the CSR group's view of the respective cycle, with the terminal year representing long term average
activity levels. The valuation is calculated using a post-tax annual discount rate of 10.0% for all segments other than Aluminium which uses
11.2% (2019: 10.0% for all segments other than Aluminium which was 11.2%). The terminal value annual growth rate was 2.5% in the year
ended 31 March 2020 (2019: 2.5%). Discounted cash flow projections over the period are deemed appropriate given the cyclical nature of
the markets in which the CSR group operates.
It is expected that the recent Australian and New Zealand Government restrictions, implemented in response to the global COVID-19
pandemic, will have an impact on construction activity levels in the near term. As a result, internal cash flow forecasts used for impairment
assessments have been moderated to reflect the lower levels of construction activity expected in the years ending 31 March 2021 and 31
March 2022. These estimates have been informed by a review of a sample of external forecasts available as at the date these financial
statements are authorised for issue. In addition, the cash flows for the Aluminium cash generating unit also reflect the most recent forecasts
for key assumptions such as the US$ London Metal Exchange (LME) price and USD:AUD exchange rate. Given the uncertainty as to the
extent and duration of restrictions and the overall impact on economic activity, actual experience may materially differ from internal
forecasts.
If the recoverable amount of a cash generating unit is estimated to be less than its carrying amount, the carrying amount of the cash
generating unit is reduced to its recoverable amount with any impairment recognised immediately in the statement of financial performance.
73
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | BALANCE SHEET ITEMS
12 Property, plant and equipment and intangible assets (continued)
Critical accounting estimate – carrying value assessment (continued)
Roofing cash generating unit
An impairment assessment was performed for the Roofing CGU at 31 March 2019 in accordance with AASB 136 Impairment of Assets.
Following a detailed value in use impairment review of future cash flow projections, an impairment charge of $32.8 million was recorded in
the statement of financial performance for 31 March 2019. This impairment charge was 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). This impairment
charge fully impaired all goodwill and indefinite life intangibles previously recognised for the Roofing CGU.
During the year ended 31 March 2020, the Roofing CGU experienced a shortfall in earnings when compared to internal forecasts, mainly
due to the exit of certain product lines. As a result, the Roofing CGU was assessed for impairment at 31 March 2020. Following a detailed
impairment review of future cash flow projections, the recoverable amount of the Roofing CGU is estimated to exceed the carrying amount.
The recoverable amount of the CGU would equal its carrying amount if any of the following key assumptions were to change:
Business cash contribution reduces by 9% for each year modelled.
Post tax discount rate increases from 10.0% to 11.0%.
Long term growth rate decreases from 2.5% to 1.2%.
The impact of reasonable possible changes in key assumptions have been considered. A decrease in cash contribution of 20% would result
in an impairment of $10 million. No other reasonable possible changes in key assumptions have been identified.
Aluminium cash generating unit
Whilst the Aluminium CGU experienced higher earnings before interest and tax when compared to internal forecasts for the year ended 31
March 2020, forecast cash flows for the year ending 31 March 2021 indicate a significant reduction in earnings before interest and tax.
This is primarily due to forecast lower Aluminium LME price and higher cost of raw materials.
Following a detailed impairment review of future cash flow projections, the recoverable amount of the Aluminium CGU is estimated to
exceed the carrying amount at 31 March 2020. In addition to the assumptions outlined above, key assumptions have been used in
preparing the Aluminium cash flow projections. The range used for the US$ Aluminium LME price assumption is an annual average of
between US$1,668 and US$2,020 per tonne, and the range used for the USD:AUD exchange rate assumption is an annual average of
between $0.62 and $0.71.
The recoverable amount of the CGU would equal its carrying amount if any of the following key assumptions were to change:
Post-tax discount rate increases from 11.2% to 12.6%.
Long term growth rate decreases from 2.5% to 0.5%.
The impact of reasonable possible changes in key assumptions have been considered:
A decrease of US$25 per tonne in the Aluminium LME price throughout the period modelled, would result in an impairment to the
Aluminium CGU assets of $9 million.
An increase of 1 cent in the USD:AUD exchange rate throughout the period modelled, would result in an impairment to the Aluminium
CGU assets of $8 million.
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
prior period as a discontinued operation. Refer to note 9.
74
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
2020
129.4
(18.5)
0.9
111.8
2019
104.3
(12.2)
–
92.1
1 For the year ended 31 March 2020, deferred income tax assets in the statement of financial position total $130.3 million (31 March 2019: $104.3 million).
Movement in deferred income tax assets
Opening
balance
Credited
(charged) to
profit or loss
Credited
(charged) to
equity
Other
(including
transfers)
Disposed1
Closing
balance
$million
2020
Property, plant and equipment
Right-of-use lease assets
Lease liabilities
Superannuation defined benefit plans
Product liability provision
Employee benefits provisions
Other provisions
Spares and stores
Fair value of hedges
Other individually insignificant balances
Tax losses
Total net deferred income tax assets
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
(17.4)
–
–
(2.6)
80.4
28.2
26.3
(11.9)
(6.1)
(4.8)
–
92.1
(9.5)
(3.4)
86.7
36.3
23.0
(11.8)
2.0
10.8
10.3
0.9
9.7
(10.2)
0.9
(6.3)
(3.8)
(0.6)
0.1
–
12.0
0.9
3.6
3.1
0.3
(6.3)
0.5
6.7
0.5
–
(12.5)
(10.3)
(18.0)
(0.6)
(51.2)
66.0
4.2
–
–
(3.4)
–
(0.7)
0.3
–
14.6
–
0.5
–
–
–
–
(8.1)
(2.1)
–
(9.7)
1.4
(4.4)
4.2
–
–
–
(1.0)
–
–
1.3
–
1.5
0.1
–
–
–
–
–
–
(2.0)
–
(1.9)
–
–
–
–
–
–
–
–
–
–
–
–
(11.1)
–
–
(8.6)
(3.4)
(0.6)
–
1.0
–
(22.7)
(15.7)
(45.9)
60.0
2.5
74.1
24.4
21.3
(11.8)
(6.8)
8.8
0.9
111.8
(17.4)
(2.6)
80.4
28.2
26.3
(11.9)
(6.1)
(4.8)
–
92.1
Total net deferred income tax assets
144.4
1 Relates to the disposal of Viridian Glass. Refer to note 9.
Recognition and measurement
Current tax: represents the amount expected to be paid in relation to taxable income for the financial year measured using tax rates and tax
laws that have been enacted or substantively enacted by the reporting date. Current tax for current and prior periods is recognised as a liability
(or asset) to the extent that it is unpaid (or refundable).
Deferred income tax: is provided in full, using the balance sheet liability method, on temporary differences arising between the carrying amounts
of assets and liabilities for financial reporting and tax purposes. Deferred tax assets and liabilities are measured at the tax rates that are
expected to apply to the period(s) when the asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that
have been enacted or substantively enacted by the reporting date.
Deferred tax assets are recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible
temporary differences or unused tax losses and tax offsets can be utilised.
Deferred tax assets and liabilities are not recognised for temporary differences between the carrying amount and tax bases of investments in
controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the
differences will not reverse in the foreseeable future. A deferred tax liability is not recognised in relation to taxable temporary differences arising
from goodwill.
Tax assets and liabilities are offset when there is a legally enforceable right to offset tax assets and liabilities, when the tax balances relate to
the same taxation authority and when the CSR group intends to settle the tax assets and liabilities on a net basis. No provision for withholding
tax has been made on undistributed earnings of overseas controlled entities where there is no intention to distribute those earnings.
75
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | BALANCE SHEET ITEMS
14 Leases
i)
Leasing activities and accounting policy
The CSR group leases various properties, equipment and cars. Property leases typically are for a period of 5 to 10 years and often have extension
options and equipment and car leases are typically for a period of 3 to 5 years. Lease terms are negotiated on an individual basis and contain a wide
range of different terms and conditions. The lease agreements do not impose any covenants, but leased assets may not be used as security for
borrowing purposes.
AASB 16 Leases 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 CSR group adopted AASB 16 on 1 April 2019.
Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the group.
Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the statement of financial performance over
the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset
is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially measured at present value. Lease liabilities include the net present value of the following lease
payments:
Fixed payments (including in-substance fixed payments), less any lease incentives receivable.
Variable lease payments that are based on an index or rate.
Amounts expected to be payable by the lessee under residual value guarantees.
The exercise price of a purchase option if the lessee is reasonably certain to exercise that option.
Payment of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.
The lease payments are discounted using the interest rate implicit in the lease, if that rate can be determined, or the CSR group’s incremental
borrowing rate. Residual value guarantees are only held in relation to certain equipment leases. These are not material to the CSR group.
Right-of-use assets are measured at cost comprising the following:
The amount of the initial measurement of lease liability.
Any lease payments made at or before the commencement date, less any lease incentives received.
Any initial direct costs.
An estimate of restoration or make good costs.
Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in the statement of
financial performance. Short-term leases are leases with a term of 12 months or less. Low-value assets comprise IT equipment and office equipment
such as photocopiers.
Critical accounting estimate – determining the lease term
Extension options are included in most property leases across the group. These terms are used to maximise operational flexibility in terms of
managing contracts. The extension options are held by the CSR group and not by the respective lessor. In determining the lease term,
management considers all facts and circumstances that create an economic incentive to exercise an extension term. Extension options are
only included in the lease term if the lease is reasonably certain to be extended. The assessment is reviewed if a significant event or change
in circumstance occurs which affects this assessment and that is within the control of the lessee. During the current financial year, the
financial effect of revising lease terms to reflect the effect of exercising extension options was immaterial.
ii)
Impact of adoption on 1 April 2019
On adoption of AASB 16, the CSR group recognised lease liabilities in relation to leases which had previously been classified as ‘operating leases’
under the principles of AASB 117 Leases. These liabilities were measured at the present value of the remaining lease payments, discounted using
the CSR group’s incremental borrowing rate as at 1 April 2019. The weighted average incremental borrowing rate applied to the lease liabilities on 1
April 2019 was 4.4%.
In applying AASB 16 for the first time, the CSR group has used the following practical expedients permitted by the standard:
The use of a single discount rate to a portfolio of leases with reasonably similar characteristics.
The accounting for operating leases with a remaining lease term of less than 12 months as at 1 April 2019 as short-term leases.
The exclusion of initial direct costs for the measurement of the right-to-use asset at the date of initial application.
Relying on previous assessments as to whether a lease is onerous.
The use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.
The CSR group has also elected not to apply AASB 16 to contracts that were not identified as containing a lease under AASB 117 and Interpretation
4 Determining whether an Arrangement contains a Lease. The recognition of the lease liability can be reconciled to the operating lease
commitments disclosed at 31 March 2019 as follows:
$million
Operating lease commitments disclosed at 31 March 2019
Discounted using the CSR group’s incremental borrowing rate of 4.4%
(Less): short term leases and low value leases recognised on a straight-line basis as an expense
Add: adjustments as a result of different treatment of extension and termination options
Lease liability recognised as at 1 April 2019
147.1
(13.1)
(9.7)
93.3
217.6
76
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | BALANCE SHEET ITEMS
14 Leases (continued)
ii)
Impact of adoption on 1 April 2019 (continued)
Certain right-of-use assets for property leases were measured on a retrospective basis as if the new rules had always been applied. All other right-of-
use assets were measured at the amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to
that lease recognised in the balance sheet at 31 March 2019. In accordance with AASB 16, the CSR group has not restated comparatives as
permitted under the specific transition provisions in the standard. Following implementation of the standard on 1 April 2019:
Property, plant and equipment increased by $168.4m to recognise the net right-of-use asset, after the impairment of onerous leases.
Lease liabilities increased by $217.6m.
Onerous lease provisions decreased by $18.8m.
Make good provisions increased by $5.6m.
Retained earnings was reduced by $25.9m.
Deferred tax assets increased by $11.4m.
Equity accounted investments decreased by $1.3m.
iii) Amounts recognised in the statement of financial position
The balance sheet shows the following amounts relating to leases:
$million
Right-of-use assets
Properties
Equipment
Vehicles
Total right-of-use assets
Lease liabilities
Current
Non-current
Total lease liabilities
Additions to the right-of-use assets during the year ended 31 March 2020 were $16.5 million.
iv) Amounts recognised in the statement of financial performance
The statement of financial performance contains the following amounts relating to leases:
$million
Depreciation charge for right-of-use assets
Properties
Equipment
Vehicles
Total depreciation charge for right-of-use assets
Interest expense (included in finance cost)
Expense relating to short term, low value leases and outgoings
The impact of AASB 16 on the CSR group consolidated statement of financial performance is set out below:
$million
Increase in earnings before interest, tax, depreciation and amortisation (EBITDA)
Increase in earnings before interest and tax (EBIT)
Decrease in net profit after tax
2020
2019
140.4
6.4
6.4
153.2
32.9
167.1
200.0
–
–
–
–
–
–
–
2020
2019
25.4
2.3
4.0
31.7
9.4
12.6
2020
38.4
6.7
(1.9)
–
–
–
–
–
–
2019
–
–
–
The statement of cash flows for 31 March 2020 includes cash outflows for lease payments of $33.9 million and lease interest of $9.4 million
within ‘cash flows from financing activities’. The cash flows for the year ended 31 March 2019 have not been restated, with the cash outflow
associated with lease payments included in ‘payments to suppliers and employees’ within ‘cash flows from operating activities’.
The segment disclosures for 31 March 2020, as detailed in note 2, incorporates the impact of AASB 16. This resulted in a net decrease to funds
employed (impact at 1 April 2019 on the CSR group was $37.3 million) and increase to EBIT of approximately $6.7m for the year ended 31
March 2020. The combination of these impacts has resulted in the return on funds employed for Building Products and the CSR group
increasing by approximately 1% for the year ended 31 March 2020.
77
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | BALANCE SHEET ITEMS
15 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
2019
87.9
16.3
30.0
2.3
5.4
14.3
156.2
5.8
238.0
2.3
23.7
27.4
297.2
Recognised/
remeasured
Settled/
transferred
Discount
unwind
46.0
–
27.8
–
–
5.5
79.3
–
(27.8)
11.3
–
(15.9)
(32.4)
(57.1)
(9.7)
(27.8)
(1.2)
(1.4)
(8.4)
(105.6)
(1.5)
–
(1.4)
(4.4)
–
(7.3)
–
–
–
–
–
–
–
–
6.7
–
0.7
0.1
7.5
2020
76.8
6.6
30.0
1.1
4.0
11.4
129.9
4.3
216.9
12.2
20.0
11.6
265.0
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 16 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 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.
78
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | BALANCE SHEET ITEMS
16 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 2020, CSR had resolved
approximately 4,885 claims in Australia and approximately 137,850
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;
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 2.50% and US liability
2.0%); and
the discount rate applied to future payments (Australian liability
2.25% and US liability 2.40%).
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 and any material uncertainties that may affect future
liabilities. 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 2020 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
334.5
312.4
289.0
268.0
246.9
500
400
300
200
100
0
2016
2017
Base case provision A$m
2018
2019
2020
Prudential margin A$m
$million
Base case estimate
Prudential margin
Prudential margin %
Total product liability provision
Year ended 31 March
2020
2019
218.9
28.0
12.8%
246.9
232.3
35.7
15.4%
268.0
79
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | CAPITAL STRUCTURE AND RISK MANAGEMENT
Capital structure and risk management
17 Borrowings and credit facilities
i) Borrowings
Non-current borrowings – unsecured
Recognition and measurement
2020
320.0
2019
–
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 $320.0 million (31 March 2019: $325.0 million) committed standby facilities with external financial institutions.
These facilities have fixed maturity dates as follows: $161.0 million in 2022, $134.0 million in 2023 and $25.0 million in 2024. As at 31 March
2020, $320.0 million of the standby facilities were drawn (2019: $325.0 million undrawn).
18
Issued capital
On issue 31 March 2019
On-market share buy-back – net of transaction costs
On issue 31 March 2020
Ordinary shares
fully paid1
Issued capital
$million
502,061,531
1,028.8
(16,678,755)
485,382,776
(62.1)
966.7
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 2020 and 31 March 2019 under employee share plans as shares in respect of the
plans were acquired on market. During the years ended 31 March 2020 and 31 March 2019, 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 2020 are $2.04 (2019: $2.19). Net tangible assets per share is calculated
as net assets attributable to CSR Limited shareholders of $1,065.0 million (2019: $1,178.0 million) less intangible assets of $74.1 million
(2019: $80.9 million) divided by the number of issued ordinary shares of 485.4 million (2019: 502.1 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.
19 Dividends and franking credits
i) Dividends
Dividend type
2018 Final
2019 Interim
2019 Final
2020 Interim ordinary
2020 Interim special
2020 Final1
Cents per
share
Franking
Total
amount
$million
Date
paid/payable
13.5
13.0
13.0
10.0
4.0
–
75%
100%
50%
50%
50%
–
68.1
3 July 2018
65.6 11 December 2018
64.9
2 July 2019
49.1 10 December 2019
19.7 10 December 2019
–
–
Graph 1: Dividends declared relating to each financial year
– cents per share
30.0
23.5
26.0
27.0
26.0
20.0
10.0
-
14.0
2016
2017
2018
2019
2020
1 The amounts disclosed as recognised in 2020 are the final dividend in respect of the financial year ended 31 March 2019 and the interim dividends in respect of the
financial year ended 31 March 2020.
ii) Franking credits
$million
Franking account balance on an accruals basis1
2020
39.8
2019
21.6
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.
80
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | CAPITAL STRUCTURE AND RISK MANAGEMENT
20 Reserves
$million
Balance at 1 April 2019
Hedge profit recognised in equity
Hedge profit 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
Acquisition of non-controlling interest
Balance at 31 March 2020
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
Nature and purpose of reserves
Hedge
reserve
13.0
3.8
(9.1)
–
1.6
–
–
–
–
9.3
(2.0)
16.3
5.2
–
–
(6.5)
–
–
–
13.0
Foreign
currency
translation
reserve
Employee
share
reserve
Share
based
payment
trust
reserve
(24.3)
–
–
–
–
–
–
(0.1)
–
Non-
controlling
interests
reserve
Other
Total
(59.1)
–
–
(3.3)
–
–
(38.4)
3.8
(9.1)
–
–
–
–
–
(9.6)
–
–
–
–
–
3.3
1.3
1.6
0.3
1.2
(0.1)
(6.3)
38.7
–
–
–
–
0.3
1.2
–
–
40.2
(24.4)
(68.7)
–
(45.7)
37.5
–
–
–
–
–
3.3
(2.1)
–
38.7
(21.7)
–
–
–
–
–
–
–
(2.6)
(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)
(3.4)
–
–
1.3
–
–
–
–
–
(2.1)
(4.6)
–
–
0.1
1.1
–
–
–
–
(3.4)
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 45 to 49 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 $3.40 (2019: $4.73) per share)
Issue of shares under executive incentive plans
Closing balance
2020
2019
683,663
25,000
(687,309)
1,155,256
550,000
(1,021,593)
21,354
683,663
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 were used to recognise the written put option the minority shareholders of the Martini business had to sell all
of their remaining interest to the group at an agreed price (based on the financial results of the business). The written put option was
extinguished as a result of the CSR group’s purchase of the remaining 30% of Martini. Refer to note 10 for further details.
81
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | CAPITAL STRUCTURE AND RISK MANAGEMENT
21 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. 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 2020 and 31 March 2019.
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 17.
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
2020
Current payables
Non-current other payables
Borrowings (including
interest)
Commodity financial
instruments1
Foreign currency financial
instruments1
245.5
–
3.4
–
–
297.9
– 245.5
–
–
25.1 326.4
8.4
9.6
1.0
19.0
18.8
8.4
–
27.2
Total
276.1
315.9
26.1 618.1
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
1
Settlement of commodity and foreign currency financial instruments will be
offset by revenue from the sale of commodities.
82
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | CAPITAL STRUCTURE AND RISK MANAGEMENT
21 Financial risk management (continued)
iii) Market risk
Nature of commodity price risk – aluminium
The CSR group has exposure to aluminium commodity prices which
arises from sales contracts that commit the CSR group to supply
aluminium in future years. Prices for product supplied under these
contracts are a function of the US dollar market price at the time of
delivery.
Commodity price risk management – aluminium
The CSR group has a policy of hedging its aluminium sales (net of any
linked exposure on inputs such as alumina), where acceptable pricing
is available, to reduce the volatility of its aluminium earnings when
exchanged into Australian dollars. Eligible hedging instruments used
for hedging commodity price risk include commodity forward contracts
and commodity options. Hedging is undertaken at declining levels for
up to four years.
The price of product supplied under sales contracts comprises two
components, the London Metal Exchange (LME) Primary Aluminium
cash price, and a physical premium. Over the year ended 31 March
2020, the average of the daily LME cash price was US$1,751 per
tonne and the average Platts mid-point physical premium was US$98
per tonne. The LME price component represented 95% of the sum of
the two. The CSR group designates the LME price component of sales
as the hedged item. Commodity forward and option contracts are also
priced against the LME Primary Aluminium cash price. There is an
established economic relationship between the physical sales of
aluminium and the commodity forward and option contracts as they
are both priced using the same reference price. As the underlying risk
of the aluminium price risk is identical to the hedged component, the
CSR group has established a hedge ratio of 1:1 for all its hedging
relationships over aluminium price risk.
The CSR group does not hedge its exposure to the variability in
physical metal premiums. In the CSR group’s view, there is currently
no viable hedge instrument for physical metal premiums and this
component of the metal sales price remains unhedged.
The table below provides information about the aluminium commodity
swaps entered into by the CSR group to manage its aluminium
commodity price exposure:
Notional value
Fair value
1 year
or less
1 to 3
years
3 to 5
years
Total Asset Liability
233.8
320.4
13.1
567.3 53.2
(0.1)
287.1
92.4
–
379.5 29.8
(0.2)
Commodity
price risk
($million)
2020
Aluminium
commodity
swaps1,2
2019
Aluminium
commodity
swaps1,2
1 The average price in US dollars per metric tonne at 31 March 2020 was
$1,789.0 (2019: $2,123.6). The average price for the individual periods does not
materially differ from the overall average price disclosed.
2 $53.1 million net of commodity contract gains (2019: $29.6 million net gains)
were deferred in 2020 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 2020 is one year or less: $34.2 million gain (2019: $20.9 million
gain); one to three years: $18.7 million gain (2019: $8.7 million gain); three to
five years: $0.2 million gain (2019: $nil).
Commodity price risk sensitivity – aluminium
At 31 March 2020, 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 $50.7 million
lower/$50.7 million higher (2019: $34.3 million lower/$34.3 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.
Commodity price risk sensitivity – alumina
At 31 March 2020, had the alumina 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 $7.0 million
lower/$7.0 million higher (2019: $nil lower/$nil higher) had the
alumina 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 $414.8 million (2019: net cash balance of
$50.0 million). The maturity profile for the cash balance of $414.8
million is less than 1 year. The average interest rate on debt for the
year was 1.1% (2019: 2.5%) and the average interest rate on cash
balances for the year was 1.07% (2019: 0.09%).
At 31 March 2020, 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 $0.6 million higher/lower (2019: $0.4 million higher/lower),
mainly as a result of higher/lower interest income on net cash
balances.
83
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | CAPITAL STRUCTURE AND RISK MANAGEMENT
21 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 2020, 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 $58.9 million higher/$72.0 million lower (2019: $20.2 million
higher/$24.7 million lower) had the Australian dollar strengthened/weakened by 10% against the respective foreign currencies arising mainly
from foreign forward exchange contracts designated as cash flow hedges.
The table below provides information about the CSR group’s significant exchange rate exposures in forward exchange rate agreements:
Foreign exchange risk1,2
($million)
Average
exchange rate2
Notional value
Fair value
1 year or less
1 to 3 years
Total
Asset
Liability
2020
US dollar – buy
US dollar – sell
NZ dollar – buy
NZ dollar – sell
Euro – buy
Euro – sell
Japanese yen – buy
Japanese yen – sell
Total
2019
US dollar – buy
US dollar – sell
NZ dollar – buy
NZ dollar – sell
Euro – buy
Euro – sell
Japanese yen – buy
Japanese yen – sell
Total
0.68
0.63
1.05
1.05
0.60
0.57
72.63
68.74
0.72
0.77
1.06
1.06
0.63
0.63
78.46
–
35.4
347.1
2.6
350.6
10.3
17.0
16.6
3.0
4.6
0.6
45.5
215.0
10.1
9.3
8.5
0.4
1.6
–
–
–
0.6
–
–
–
–
64.4
–
–
–
–
–
–
38.0
697.7
10.3
17.0
17.2
3.0
4.6
0.6
45.5
279.4
10.1
9.3
8.5
0.4
1.6
–
3.6
16.6
0.3
–
1.4
–
0.4
–
22.3
1.0
–
0.2
–
–
–
–
–
–
(26.6)
–
(0.4)
–
(0.1)
–
–
(27.1)
–
(20.4)
–
(0.2)
–
–
–
–
1.2
(20.6)
1 $5.7 million of net foreign exchange contract losses (2019: $19.4 million losses) 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 2020 is one year or less: $6.2 million loss (2019: $15.0 million loss); and one to
three years: $0.5 million gain (2019: $4.4 million loss).
2 Average rates for the individual periods do not materially differ from the overall average rates disclosed.
84
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | CAPITAL STRUCTURE AND RISK MANAGEMENT
21 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 18 and 20, retained
profits and debt. 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 – aluminium/alumina
Commodity swaps – oil and electricity
Forward exchange rate contracts
Other
Total
2020
Level 2
2019
Level 2
53.2
0.7
22.3
3.4
79.6
0.1
8.1
16.8
27.1
0.1
52.2
29.8
11.8
1.2
2.0
44.8
0.2
–
0.5
20.6
0.2
21.5
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 2020 and no transfers in either direction in 2020.
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.
85
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | CAPITAL STRUCTURE AND RISK MANAGEMENT
21 Financial risk management (continued)
vi) Cash flow hedging
The impact of hedging instruments designated in material hedging relationships as of 31 March 2020 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
Alumina/aluminium
commodity swaps
(forecast purchases)3
Forward currency
contracts (forecast
sales)4
Forward currency
contracts (forecast
purchases)5
2020
2019
2020
2019
2020
2019
2020
2019
195,675
tonnes
126,500
tonnes
158,350
tonnes
–
632.3
277.6
42.0
26.9
53.2
0.1
29.8
0.2
–
–
8.1
23.5
42.7
(8.1)
16.5
26.6
–
20.4
10.3
(24.8)
5.3
0.8
3.4
1.2
0.2
(1.3)
–
–
$million
Notional amount
Asset – carrying amount
Liability – carrying amount
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 $34.2 million (2019: $21.0 million) of the carrying amount of Aluminium commodity swaps are disclosed within current other financial assets and $19.0 million (2019: $8.8
million) within non-current other financial assets. $nil (2019: $0.2 million) of Aluminium commodity swaps are disclosed within current other financial liabilities and $0.1
million (2019: $nil) within non-current other financial liabilities.
3 $8.1 million (2019: $nil) of the carrying amount of alumina/Aluminium swaps are disclosed within current other financial liabilities. Under these contracts CSR receives the
floating alumina price and pays the floating aluminium price. The contractual equivalent aluminium under the contracts is 28,978 tonnes.
4 $7.8 million (2019: $nil) of the carrying amount of forward currency contracts are disclosed within current other financial assets and $8.7 million (2019: $nil) within non-
current other financial assets. $18.2 million (2019: $16.0 million) of the carrying amount of forward currency contracts are disclosed within current other financial liabilities
and $8.4 million (2019: $4.4 million) within non-current other financial liabilities.
5 $5.1 million (2019: $1.2 million) of the carrying amount of forward currency contracts are disclosed within current other financial assets and $0.2 million (2019: $nil) within
non-current other financial assets. $0.8 million (2019: $0.2 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 2020 on the statement of financial position of the CSR group is
as follows:
Commodity price risk
Foreign exchange risk
Aluminium commodity
swaps (forecast sales)
Alumina/aluminium
commodity swaps
(forecast purchases)
Forward currency
contracts (forecast
sales)
Forward currency
contracts (forecast
purchases)
$million
2020
2019
2020
2019
2020
2019
2020
2019
Changes in value of hedged item
used for calculating hedge
ineffectiveness – gain (loss)
Cash flow hedge reserve
(continuing hedges) – gain (loss)
(23.7)
(42.8)
7.9
53.1
29.6
(8.1)
–
–
(10.3)
24.8
(3.4)
1.3
(10.1)
(20.4)
4.5
1.0
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)
Alumina/aluminium
commodity swaps
(forecast purchases)
Forward currency
contracts (forecast
sales)
Forward currency
contracts (forecast
purchases)
2020
2019
44.4
28.0
2020
(8.1)
(20.9)
14.7
–
2019
2020
2019
2020
2019
–
–
(5.8)
(20.7)
4.5
1.0
16.0
(4.1)
(1.1)
(2.2)
Trading
revenue
Trading
revenue
Cost of
sales
Cost of
sales
Trading
revenue
Trading
revenue
Cost of
sales
Cost of
sales
$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
No hedge ineffectiveness was recognised in profit or loss during the year.
1 The hedge gain recognised in other comprehensive income totalling $35.0 million (2019: $8.3 million gain) together with the $22.1 million loss (2019: $10.2 million gain) on
oil and electricity swaps less non-controlling interests of $9.1 million (2019: $2.2 million) reconciles to the hedge gain transferred to equity in note 20.
2 The loss reclassified from other comprehensive income to profit or loss after tax totalling $6.0 million (2019: $8.4 million gain) together with the $4.5m loss (2019: $nil loss)
on oil and electricity swaps less non-controlling interests of $1.4 million loss (2019: $3.2 million gain) reconciles to the hedge loss transferred to the statement of financial
performance in note 20.
86
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | GROUP STRUCTURE
Group structure
22 Subsidiaries
Entity
2020
2019
Entity
% CSR
ownership
Incorporated in Australia
A-Jacks Hardwall Plaster Pty Ltd
A-Jacks Unit Trust
AFS Systems Pty Limited2
AFS Unit Trust
BI (Contracting) Pty Limited
Bradford Insulation Industries Pty Limited
Bradford Insulation (S.A.) 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 Limited2
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 Limited2, 3
CSR Share Plan Pty Limited
CSR Structural Systems Pty Limited2
CSR Subsidiary Finance Pty Limited2
CSR Subsidiary Holdings Limited2
CSR-ER Nominees Pty Limited
DMS Security Glass Pty Ltd4
Don Mathieson & Staff Glass Pty Ltd4
Gove Aluminium Finance Limited
High Road Capital Pty Limited
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
100
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 Ltd4
100 Seltsam Pty Limited
100 Softwood Holdings Limited1
100 Softwood Plantations Pty Limited1
100 Softwoods Queensland Pty Limited1
100 Thiess Bros Pty Limited
100 Thiess Holdings Pty Limited
100 Viridian Glass International Pty Limited4
100 Viridian Glass Investment Company Pty Limited4
100 Viridian Glass Limited4
100 Viridian Glass Operations Pty Limited4
100 Viridian Glass Properties Pty Limited4
100
100
100 CSR Building Products (NZ) Ltd5
100 CSR (New Zealand) Holdings Limited5
100 CSR Subsidiary (New Zealand) Limited5
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
– Viridian Glass Limited Partnership4
–
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)6
PT Prima Karya Plasterboard (Indonesia)
% CSR
ownership
2020
2019
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 The CSR group held a 70% interest in CSR Martini Pty Limited until 20 December 2019 when the remaining 30% interest was acquired. Refer to note 10 for further details.
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 On 8 April 2019 CSR Building Products (NZ) Limited, CSR (New Zealand) Holdings Limited and CSR Subsidiary (New Zealand) Limited were amalgamated, with CSR Building
Products (NZ) Limited continuing as the amalgamated company under Part XIII of the Companies Act 1993.
6 Deregistered 18 October 2019.
23 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, CSR Subsidiary Finance Pty Limited, CSR Subsidiary Holdings Limited, PGH Bricks & Pavers Pty
Limited, Rivarol Pty Limited and CSR Martini Pty Limited (joined during the year ended 31 March 2020) 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.
87
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | GROUP STRUCTURE
23 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 2020 and 31 March
2019 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 (expense) income, net of tax
Items that may be reclassified to profit or loss
Hedge (loss) profit recognised in equity
Hedge profit 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 benefit (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 (expense) income – net of tax
Total comprehensive income
iii) Summary of movements in consolidated retained profits
$million
Opening retained profits
Adjustment on adoption of AASB 16 (net of tax)
Profit for the year
Actuarial loss on superannuation defined benefit plans (net of tax)
Dividends provided for or paid
Closing retained profits
88
2020
2019
1,519.8
(952.5)
1,832.1
(1,145.8)
567.3
26.4
(170.0)
(262.3)
13.7
(9.1)
(4.6)
161.4
2.8
(18.8)
145.4
(36.7)
108.7
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
2020
108.7
2019
145.1
(17.3)
(5.7)
1.3
–
6.9
(13.9)
4.2
(24.5)
84.2
2020
216.2
(25.5)
108.7
(9.7)
(133.7)
156.0
11.2
(2.2)
0.1
1.1
(2.7)
(1.6)
0.5
6.4
151.5
2019
205.9
–
145.1
(1.1)
(133.7)
216.2
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | GROUP STRUCTURE
23 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
Right-of-use lease assets
Goodwill
Other intangible assets
Deferred income tax assets
Other non-current assets
Total non-current assets
Total assets
Current liabilities
Payables
Lease liabilities
Other financial liabilities
Tax payable
Provisions
Total current liabilities
Non-current liabilities
Payables
Lease 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
2020
2019
409.6
180.3
299.9
–
9.3
899.1
26.1
87.0
34.4
162.0
643.2
143.0
58.3
14.5
127.2
0.7
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
1,296.4
1,111.5
2,195.5
1,806.8
188.6
32.9
0.6
31.9
110.8
364.8
4.0
159.1
320.0
10.6
254.6
8.5
756.8
1,121.6
191.2
–
0.6
6.1
135.6
333.5
–
–
–
0.3
288.0
2.3
290.6
624.1
1,073.9
1,182.7
966.7
(48.8)
156.0
1,073.9
1,028.8
(62.3)
216.2
1,182.7
89
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | GROUP STRUCTURE
24 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 increase (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
2020
2019
212.2
140.4
114.0
38.1
621.2
40.5
18.0
58.5
58.2
(8.4)
(16.3)
33.5
12.1
4.5
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
1 Profit allocated to non-controlling interests for subsidiaries that are not material for disclosure was $1.1 million for the year ended 31 March 2020 (2019: $1.2 million).
2 During the year ended 31 March 2020, dividends declared to non-controlling interests included $4.5 million which was paid in cash. 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 $2.3 million (2019: $0.4 million).
25
Interest in joint operations
The CSR group’s interest in the Tomago aluminium smelter joint operation of 36.05% (2019: 36.05%) is held through a controlled entity in which
the CSR group has a 70% interest, resulting in an effective interest in the joint operation of 25.24% (2019: 25.24%).
Recognition and measurement
The shareholders of the joint operation are jointly and severally liable for the liabilities incurred by the operation and have rights to the assets.
This entity is therefore classified as a joint operation and the group recognises its direct right to the jointly held assets, liabilities, revenues
and expenses. Where the CSR group and the parties to the agreements only have rights to the net assets of each of the operations under the
arrangements, these entities will be classified as joint ventures of the CSR group and accounted for using the equity method. Refer to note
26.
Critical accounting estimate
Investments in joint arrangements are classified as either joint operations or joint ventures. The classification depends on the contractual
rights and obligations of each investor, rather than the legal structure of the joint arrangement, and therefore requires judgment in
determining the classification. The CSR group has both joint operations and joint ventures.
90
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | GROUP STRUCTURE
26 Equity accounting information
Carrying amount ($million)
Entity1
Building products
Rondo Building Services Pty Ltd2
Gypsum Resources Trust Australia2
New Zealand Brick Distributors3
Other2
Total investment
2020
Equity
accounted
investment
Long-term
loan
Net
investment
Long-term
loan
2019
Equity
accounted
investment
Net
investment
–
12.0
–
–
12.0
21.7
–
8.1
0.8
30.6
21.7
12.0
8.1
0.8
42.6
–
12.0
–
–
12.0
19.0
–
7.9
1.5
28.4
19.0
12.0
7.9
1.5
40.4
1 The CSR group’s interest in these entities is 50% (2019: 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
Impact of new leases standard
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 Building Services Pty Ltd
Other
2020
40.4
20.0
(6.1)
(10.6)
(0.6)
–
0.8
(1.3)
42.6
2019
43.6
19.7
(5.9)
(14.3)
(0.8)
(2.4)
0.5
–
40.4
2020
2019
98.6
77.1
53.1
56.8
103.8
24.9
61.9
2.7
293.1
293.4
13.8
0.1
14.0
(0.2)
iii) Balances and transactions with joint venture entities
$million
Note
2020
2019
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
32
0.8
7.7
7.0
35.3
2.2
3.5
14.1
5.3
31.8
6.6
91
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | GROUP STRUCTURE
27 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
2020
2019
725.1
1,779.6
(768.0)
(609.8)
350.8
1,743.5
(559.8)
(261.9)
1,126.9
1,272.6
966.7
9.8
150.4
1,028.8
8.3
235.5
1,126.9
1,272.6
48.8
48.6
189.0
189.6
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 $4.0 million
respectively (2019: $30.0 million and $5.4 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 $216.9 million and $20.0 million respectively (2019: $238.0 million and $23.7 million respectively). See notes 15 and 16
for further details.
ii) CSR Limited transactions with controlled entities
During the financial years ended 31 March 2020 and 2019, 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 parties2
Bank guarantees to Harwood Superannuation Fund1
Total contingent liabilities
Note
2020
2019
28
116.9
3.2
120.1
119.6
1.3
120.9
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 $80.4 million (2019:
$83.1 million) and guarantees provided to third parties outside of the CSR group of $36.5 million (2019: $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 2020 (2019: $nil).
92
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | OTHER
Other
28 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 2020 for the CSR group were $36.2 million (2019: $43.2 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 2020, contributions
totalled $32.3 million (2019: $37.1 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 2019. The funding requirements were
reviewed as at 30 June 2019. 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 had a funding position in excess of 107% and DBD Harwood
Pensioner had a funding position of 103%. Therefore, as at 31 March 2020, CSR Limited was required to provide bank guarantees of $3.2
million to the trustee of the fund to satisfy the balance of its commitments (2019: $1.3 million). The bank guarantees have been disclosed in
note 27.
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 2019
$nil from 1 April 2019
66.6
38.8
(68.5)
(40.3)
(1.9)
(1.5)
0.2
(2.2)
Pilkington (Australia)
Superannuation Scheme DBD2 14.6% of eligible salary 16.0 (21.1) (5.1) –
1 Actuarial liabilities are determined to be past service liabilities based on membership accrued up to 31 March 2020.
2 Funds contributed by CSR are for accumulation members.
93
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | OTHER
28 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
2020
2019
2.4
2.5
26.5
45.0
3.4
25.1
3.5
3.0
29.7
50.8
2.7
16.8
2020
2019
1.0
4.2
(4.4)
0.8
2.3
5.7
(5.7)
2.3
Actuarial loss incurred during the financial year and recognised in the statement of comprehensive income
(13.9)
(1.6)
Cumulative actuarial losses recognised in the statement of comprehensive income
(68.2)
(54.3)
1 Disclosed in selling, administration and other operating costs.
Impact of plans on the statement of financial position
$million
Net (liability) asset of superannuation defined benefit plans
Fair value of assets
Present value of liabilities
Net (liability) asset
Included in the statement of financial position
Non-current other assets (note 32)
Other non-current liabilities
Net (liability) asset
Movements in the fair value of the defined benefit plan assets
Assets at the beginning of the financial year
Interest income
Return on assets (in excess of interest income)
Contributions from the employer
Contributions from participants
Benefits paid
Assets at the end of the financial year
Movements in the present value of the defined benefit plan liabilities
Liabilities at the beginning of the financial year
Current service cost
Finance cost
Contributions from participants
Actuarial loss
Curtailments and settlements
Benefits paid
Liabilities at the end of the financial year
94
2020
2019
121.4
(129.9)
134.3
(126.1)
(8.5)
8.2
–
(8.5)
(8.5)
134.3
4.4
(6.5)
(2.0)
0.4
(9.2)
10.5
(2.3)
8.2
169.9
5.7
0.8
1.7
2.3
(46.1)
121.4
134.3
126.1
1.0
4.2
0.4
7.4
–
(9.2)
158.5
2.3
5.7
2.3
2.4
1.0
(46.1)
129.9
126.1
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | OTHER
28 Employee benefits (continued)
i)
Superannuation commitments (continued)
Net asset (liability) of superannuation defined benefit plans
200
150
100
50
0
176.1
167.1
172.8
158.3
169.9
158.5
134.3
126.1
129.9
121.4
(9.0)
14.5
11.4
8.2
(8.5)
2016
2017
2018
2019
2020
Present value of fund liabilities ($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 2020, 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
2020
3,004,974
1,609,588
(535,107)
(963,148)
2019
3,240,703
911,695
(904,017)
(243,407)
3,116,307
3,004,974
There were no vested and exercisable shares at 31 March 2020 (2019: 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 2020 is set out below:
Grant date
26 July 2016
25 July 2017
25 July 2018
19 July 2019
Expiry date
1 April 2019
1 April 2020
1 April 2021
1 April 2022
Total
Performance rights
2020
–
863,248
687,269
1,565,790
2019
1,181,270
927,434
896,270
–
3,116,307
3,004,974
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
19 July 2019
Absolute TSR
19 July 2019
EPS
Monte Carlo simulation Binominal Tree
1 April 2019
1 April 2019
31 March 2022 31 March 2022
2.7 years
$4.31
30%
5.4%
0.94%
$3.72
2.7 years
$4.31
30%
5.4%
0.94%
$1.99
Further details on the LTI plan and the terms of the grants during the year are detailed in the remuneration report on pages 45 to 49.
95
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | OTHER
28 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
2020
207,502
$3.29
2019
130,202
$5.24
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
2020
406,692
89,321
2019
618,943
110,117
1 Number of shares issued includes the number of purchased shares issued to employees under the plan. Each participant was issued with shares to a maximum value of $1,000
based on the weighted average market price of $4.27 (2019: $3.84).
For further details on the USOP and the ESAP, refer to page 49 of the remuneration report.
Expenses arising from share-based payment transactions
$
Long term incentive plan (PRP)
Deferred shares
Other plans
Total expense
2020
(351,685)
682,886
867,926
2019
2,705,539
566,440
1,275,194
1,199,127
4,547,173
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.
96
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | OTHER
29 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 2020 (2019: 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
2020
3,846,034
(236,622)
3,609,412
2019
4,428,659
963,436
5,392,095
Details of remuneration and the CSR Limited equity holdings of directors and other key management personnel are shown in the remuneration
report on pages 34 to 55.
iii) Other related parties
Other than transactions with joint venture entities disclosed in note 26, no material amounts were receivable from, or payable to, other related
parties as at 31 March 2020 (2019: 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 28.
30 Subsequent events
With the exception of the items disclosed below, there has not arisen in the interval between 31 March 2020 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.
Impact of COVID-19
The global COVID-19 pandemic and the subsequent restrictions imposed by the Australian, New Zealand and other overseas governments have
caused disruption to businesses and economic activity. The forecast economic decline is expected to result in lower levels of construction activity
in the near term, which would negatively impact CSR’s trading revenue and operations.
The CSR group has managed, and continues to actively manage, the risks arising from COVID-19. This includes a financial response plan that
incorporates scenario and contingency planning at various levels of construction activity, stress testing of cash flow forecasts and sensitivity
analysis. In addition to a CSR group business continuity plan (BCP), all CSR businesses have developed tailored BCPs, which are specific to their
business and contemplate the operational responses at various levels of construction activity.
As at 31 March 2020, CSR had cash of $414.8 million, following the drawdown of $320.0 million in borrowing facilities. This has been further
bolstered by additional credit facilities of $200.0 million which have been finalised in May 2020. These additional facilities expire in October
2021. This provides CSR with increased financial flexibility to manage an uncertain business activity environment.
There have not been any significant adverse operational or financial impacts as a result of the COVID-19 pandemic to date and any known
impacts to date have been reflected in the YEM20 financial statements.
As at the date these financial statements are authorised for issue, the directors of CSR Limited consider that the financial effects of any
potential changes cannot be reasonably estimated for future financial periods. As the situation remains fluid, due to evolving changes in
government policy and business and customer reactions thereto, the directors consider that the general economic impacts arising from COVID-
19 and lower levels of forecast activity are likely to negatively impact the financial results and position of the CSR group over the near term, in
particular, the year ending 31 March 2021. As a result, there is a potential that the lower levels of forecast activity may impact the future
recoverability of the group's assets, including debtors, inventory, property, plant and equipment and intangible assets.
Dividend
No final dividend has been declared for the year ended 31 March 2020.
97
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | OTHER
31 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
2020
2019
–
–
–
–
–
–
–
125.0
22.1
147.1
44.4
85.4
17.3
147.1
16.1
20.4
The total of minimum rentals to be received in the future under non-cancellable sub-leases as at 31 March 2020 is not material. Contingent
rentals for 2020 and 2019 financial years were not material.
From 1 April 2019, the CSR group has recognised right-of-use assets and lease liabilities for these leases, except for short term and low value
leases. See note 14 for further information. Operating lease expenditure for 2020 and 2019 is disclosed in note 6.
ii) Contingencies
Contingencies for CSR Limited are outlined in the parent entity note 27. There are no other contingencies in relation to controlled entities within
the CSR group.
32 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.
33 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
26
28
2020
7.7
7.3
15.0
0.7
–
0.7
2019
14.1
11.7
25.8
0.7
10.5
11.2
2020
2019
657,000
41,200
–
718,000
72,000
22,000
698,200
812,000
98
CSR LIMITED | NOTES TO THE FINANCIAL REPORT | OTHER
34 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 2020 included $299.8 million of cash at bank and on hand (2019: $50.0 million) and $115.0 million short-term
deposits (2019: $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.
99
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 2020; and
there are reasonable grounds to believe that CSR Limited and the group entities identified in note 23 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
12 May 2020
Julie Coates
Managing Director and CEO
12 May 2020
100
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 2020, 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 2020 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 16 Product Liability)
CSR has recognised a product liability provision of
$246.9 million as at 31 March 2020. 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 discount rates has a
significant impact on the estimate of provisions.
In conjunction with actuarial specialists, our procedures included, but were not
limited to:
assessing the objectivity, independence and competence 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;
enquiring 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 Notes to the
financial statements.
101
CSR LIMITED | INDEPENDENT AUDITOR’S REPORT
Key audit matter
Asset valuation
(Refer to Note 12 Property, plant and equipment and
intangible assets and Note 14 Leases)
At 31 March 2020 the Group’s consolidated
statement of financial position includes goodwill
amounting to $58.3 million, other intangible assets
amounting to $15.8 million, property, plant and
equipment amounting to $741.5 million and right-of-
use lease assets amounting to $153.2 million,
comprised of several cash generating units (CGUs).
The assessment of impairment of the company’s
goodwill 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,
including the impact of the COVID-19 pandemic.
Management prepare an impairment trigger analysis
to identify which CGUs should be considered further
for impairment analysis. Based on the analysis
performed, no impairments have been recognised.
The Roofing and Aluminium CGUs were identified by
management as CGUs requiring additional disclosure
due to their sensitivity to changes in specific
assumptions.
How the scope of our audit responded to the key audit matter
In conjunction with valuation specialists, our procedures included, but not limited
to:
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
- confirming that each CGU containing goodwill had been included in
management’s impairment testing;
evaluating the analysis performed by management and the conclusions
drawn in relation to the Roofing and Aluminium CGUs by:
- assessing the appropriateness of the impairment model methodology, key
inputs and assumptions used in the models using our knowledge of the
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, including the impact of the COVID-19 pandemic.
- testing on a sample basis, the mathematical accuracy of the cash flow
models;
- agreeing relevant data in the cash flow models to the latest Board
approved forecasts, including the impact of the COVID-19 pandemic;
- assessing the historical accuracy of forecasting of the CGUs;
- obtaining and reading the position papers prepared by management to
support the models for these CGUs;
- 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 Notes to
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 2020, but does not include the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and 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.
102
CSR LIMITED | INDEPENDENT AUDITOR’S REPORT
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism
throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit
procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The
risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made
by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to
continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report
to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based
on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease
to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial
report represents the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to
express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group’s audit. We
remain solely responsible for our audit opinion.
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 34 to 55 of the CSR Limited annual
report for the year ended 31 March 2020.
In our opinion, the Remuneration Report of CSR Limited for the year ended 31 March 2020, complies with section 300A of the Corporations Act
2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A
of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance
with Australian Auditing Standards.
DELOITTE TOUCHE TOHMATSU
J L Gorton
Partner
Chartered Accountants
Sydney, 12 May 2020
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte Network
103
CSR LIMITED | SHAREHOLDER INFORMATION
Shareholder Information
20 LARGEST HOLDERS OF ORDINARY SHARES
As at 30 April 2020
RANK
NAME
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
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
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
CS THIRD NOMINEES PTY LIMITED
PRUDENTIAL NOMINEES PTY LTD
AMP LIFE LIMITED
BNP PARIBAS NOMS PTY LTD
CITICORP NOMINEES PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - GSCO ECA
MR ALLAN ERNEST ORMES
NEWECONOMY COM AU NOMINEES PTY LIMITED
CSR SHARE PLAN PTY LIMITED
V M NOMINEES PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
LSND PTY LTD
MR BRIAN FREDERICK DITCHFIELD
Top 20 holders of issued capital
Remaining holders balance
SUBSTANTIAL SHAREHOLDERS OF CSR LIMITED
UNITS
% OF UNITS
143,684,601
83,862,629
73,123,130
19,562,494
8,827,257
6,283,887
3,523,649
2,723,727
2,500,000
2,240,654
1,750,043
1,329,844
1,115,475
1,066,667
949,113
630,369
550,000
544,796
527,450
500,000
355,295,785
130,086,991
29.6
17.3
15.1
4.0
1.8
1.3
0.7
0.6
0.5
0.5
0.4
0.3
0.2
0.2
0.2
0.1
0.1
0.1
0.1
0.1
73.2
26.8
The Blackrock Group and its subsidiaries advised that as of 5 December 2019, it and its associates had an interest in 35.7 million shares, which
represented 7.27% 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 31 March 2020, it and its associates had an interest in 29.2 million shares,
which represented 6.01% of CSR’s issued capital at that time.
Allan Gray Australia Pty Ltd and its subsidiaries advised that as of 27 April 2020, it and its associates had an interest in 25.7 million shares,
which represented 5.30% 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
104
Units
481,843,271
2,253,198
448,614
324,622
182,745
330,326
Units %
99.3
0.4
0.1
0.1
0.0
0.1
Holders
44,395
1,161
34
228
91
202
Holders %
96.3
2.5
0.1
0.5
0.2
0.4
485,382,776
100.0
46,111
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
22,690
18,204
3,175
1,968
74
46,111
Units
11,199,373
41,584,059
22,746,065
42,938,424
366,914,855
485,382,776
Minimum $ 500.00 parcel at $ 3.73 per unit
135
Minimum parcel size
Holders
1,811
RECENT CSR DIVIDENDS
Date paid
December 2014
July 2015
December 2015
July 2016
December 2016
July 2017
December 2017
July 2018
December 2018
July 2019
December 2019
December 2019
Type of dividend
Dividend per share
Franking
Interim
Final
Interim
Final
Interim
Final
Interim
Final
Interim
Final
Interim ordinary
Interim special
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
13.0 cents
10.0 cents
4.0 cents
0%
0%
0%
0%
0%
50%
50%
75%
100%
50%
50%
50%
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
Telephone
International
Facsimile
International
1800 676 061
+61 3 9415 4033
(03) 9473 2500
+61 3 9473 2500
www.investorcentre.com/contact
Investor relations and news
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
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 (02) 9235 8000
International +61 2 9235 8000
www.csr.com.au
% of issued capital
2.3
8.6
4.7
8.8
75.6
100.0
Units
94,433
Franked amount
per share at 30%
NA
NA
NA
NA
NA
6.5 cents
6.75 cents
10.125 cents
13.0 cents
6.5 cents
5.0 cents
2.0 cents
105