Centerspace Annual Report 2022

Plain-text annual report

Building solutions for a better future CSR LIMITED | ANNUAL REPORT 2022 B CSR LIMITED ANNUAL REPORT 2022Building solutions for a better future CSR is building solutions for a better future for our customers by investing in new building systems to reduce construction time and deliver better energy efficiency, comfort and design…and for our people and the environment by creating a safe, diverse and sustainable place to work and grow. Contents 2 CSR at a glance 4 Chair’s Message 6 Managing Director’s Review 8 8 Building Products Overview – Masonry & Insulation 10 – Interior Systems 12 – Construction Systems 14 Property 15 Aluminium 16 Sustainability at a glance 18 People and safety 20 Climate change 22 Environment 24 Community 25 Supply chain and modern slavery 26 Financial Overview 27 32 Operating and Financial Review Corporate Governance Statement and Risk 46 Board of Directors 48 Directors’ Report 51 Remuneration Report 71 Financial Report 112 Directors’ Declaration 113 Independent Auditor’s Report 116 Shareholder Information AGM Details CSR’s Annual General Meeting (AGM) will be held on 30 June 2022 at 10am (AEST). Details on arrangements for the AGM are included in the Notice of Meeting. Cover photo: Charlotte by Graya CSR Dwelling – the new hub for design inspiration During the year, CSR also launched Dwelling, a new content hub which provides inspiration, information and consultation to apply to renovations and new building projects. Dwelling combines products, insights and expert advice for CSR’s entire suite of brands. dwelling.csr.com.au 1 CSR at a glance 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. Business segment overview Construction market diversification 13% 15% YEM22 EBIT1 $291m 72% Building Products Property Aluminium 8% 8% 10% YEM22 Building Products Revenue $1.6bn 54% 20% Detached Non-residential Medium density High density Alterations and additions 1 Before significant items Building Products CSR’s leading range of building products and systems serve a broad range of construction segments backed by technical expertise across building technology, compliance, energy efficiency and architectural design. CSR continues to invest in new solutions to reduce construction time and improve the comfort and design of homes and buildings. Masonry & Insulation Masonry & Insulation brings together the key areas of PGH Bricks and Monier Roofing for a selection of external colours and design, integrating with Bradford’s insulation and ventilation systems for improved energy efficiency and home comfort. Interior Systems Interior Systems builds on Gyprock’s leading brand position in the plasterboard market with the extensive range of Martini, Himmel and Potter commercial fitout offerings. Construction Systems Construction Systems develops engineered walling and cladding systems across three leading brands of Hebel, AFS and Cemintel which bring speed of construction with versatile design applications. 2 CSR LIMITED ANNUAL REPORT 2022Strong financial position1 Operational excellence with a strong foundation 9% $2.3bn Revenue 22% $291m Earnings Before Interest and Tax (EBIT) 20% $193m Net profit after tax 20% 39.7c Earnings per share 18.0c Final dividend (fully franked) 31.5c Full year dividends (fully franked) 1 Before significant items, unless stated. 2,573 CSR employees 170+ Manufacturing and distribution sites across Australia and New Zealand 50+ Property sites owned across Australia 18,000+ Customers across Australia and New Zealand $178m Net cash $2.4bn Total assets Aluminium Through its 70% shareholding in Gove Aluminium Finance Limited, CSR holds an effective 25.2% interest in the Tomago Aluminium Smelter in New South Wales. Tomago Aluminium is a leading manufacturer of aluminium products, including extrusion billet, rolling slab, and aluminium ingot with annual capacity of around 600,000 tonnes of aluminium. Property CSR generates earnings from its Property business which focuses on maximising financial returns from surplus former manufacturing sites and industrial land. The Property team also provides the CSR businesses with strategic property advice on future impacts of urban expansion on key CSR sites as well as managing CSR’s extensive leased and owned property portfolio in excess of 170 sites across Australia and New Zealand. 3 Chair’s message JOHN GILLAM CHAIR An outstanding performance from CSR’s employees; supporting customers, maintaining supply and delivering a strong operational performance. I am pleased to report that CSR has continued its track record of strong operational and financial performance while improving the sustainability of the business. The CSR team deserve great credit for working through all manner of significant business-wide challenges during the year - including covid restrictions and lockdowns - to maintain a strong product flow to customers whilst well advancing the longer-term strategic agenda. CSR has increased its group earnings for the second consecutive year with net profit after tax (before significant items) of $193 million; up 20% when compared to last year’s net profit of $160 million. Note that final statutory net profit after tax of $271 million includes a significant item relating to the recognition of carry forward capital tax losses. The lift in net profit was driven by a 24% increase in Building Products earnings to a record $228 million, reflecting strong market activity driving higher volumes, improved factory performance and continued cost discipline. Property delivered earnings of $47 million following completion of several transactions. During the year, CSR secured the final sale of industrial land at the Horsley Park, NSW site. This is a great example of how CSR’s Property business plays a crucial role in our strategy to realise strong long-term shareholder value. This PGH Bricks site operated for over 50 years before becoming surplus to requirements. The Property team led a very complex rehabilitation program to regenerate the site for industrial use which will generate proceeds over $408 million over six years. Earnings from our investment in Aluminium were up 70% to $40 million following improved pricing, with hedging in place over the next five years to reduce volatility and provide greater visibility of future earnings. EBIT by business1 13% Building Products Property Aluminium 15% YEM22 EBIT $291m 72% 1 Before significant items Strong cash position supports dividends at top end of range CSR’s strong performance and financial position has enabled the company to pay fully franked dividends at the top end of our range of 60-80% of net profit after tax (before significant items). We have declared a final dividend of 18 cents per share (fully franked). This will bring the full year dividend to 31.5 cents per share (fully franked). This compares to total dividends of 36.5 cents (fully franked) in the previous year which included the payment of two special dividends. We ended the year with a very healthy financial position, which provides significant opportunity to invest in the business over the coming years. Progressing strategic initiatives across the business As mentioned above, this year’s record result in Building Products was delivered in a challenging environment. Julie and the team ensured we prioritised the health and safety of our employees and product flow to customers, which maximised the market opportunity from strong detached housing demand. The team have also progressed CSR’s strategy to drive market share growth in new segments as well as increased investment this year at key sites to improve productivity, workplace safety, sustainability and optimise operations. 4 CSR LIMITED ANNUAL REPORT 2022Capital management increasing returns for shareholders CSR’s strong financial performance is backed by our operational discipline, cost control and investment in growth which has provided the opportunity for the company to deliver consistent returns to shareholders both through dividends and capital management over the past five years. $153m In total dividends to be paid for YEM22 Capital management (dividends and share buy backs) $ million $137 $138 $131 $177 $153 1 7 136 131 66 111 153 62 20 49 YEM18 YEM19 YEM20 YEM21 YEM22 Dividends Special dividends Share buy backs JOHN GILLAM CHAIR Sustainability a core foundation of our strategy Thank you to the CSR team On behalf of the board, I want to commend the over 2,500 CSR employees across Australia and New Zealand for their endeavour and commitment across the year. The great progress we have made in our operational, strategic and financial results is a strong endorsement of the skills and resilience of the team. Thank you to all of our teams for your support for each other and our customers during the year. Finally, sincere thanks also to our shareholders for your ongoing support. JOHN GILLAM CHAIR Climate change is a key priority area for CSR in two distinct ways. Firstly, in how we operate our business and, secondly by our supply of products that reduce emissions in the built environment. During the year we have enhanced our design and technical support for energy efficient solutions across insulation, construction fabrics and ventilation with further investment in compliance across all of CSR’s systems, products and operations. This has set up the business well ahead of the 2022 National Construction Code. CSR is also making good progress with its 2030 sustainability targets. These cover a range of metrics to improve performance and reduce environmental impact which follows significant progress made over the decade to 2020 in improving our scope 1 and 2 emissions which are now 34% lower per tonne of saleable product. At this early stage in the pathway to 2030, we have made good progress with both energy use and emissions down 3% in the first year to 30 June 2021. We are also working through a detailed analysis of our current trajectory to the 2030 targets which include a reduction in emissions by another 30% per tonne of saleable product. In addition, we are extending our decarbonisation pathway with work on near-term emission reduction opportunities and a longer-term review of technology trends, innovations and pilots from partners for future integration into CSR’s operations. Further details on our approach to sustainability over the past year are included in the 2021 CSR Sustainability Report which was published in December 2021. “ We are increasing our position across more diverse construction segments and markets to drive improved performance through the housing cycle and scale for growth.” 5 Managing Director’s Review JULIE COATES MANAGING DIRECTOR AND CEO Strong financial and operating performance while continuing to drive strategy. All of CSR’s businesses have performed very well during the year. The team have achieved strong operational performance to deliver a great result – particularly with a strong pipeline of detached housing projects expected to continue in the year ahead. We have also made good progress on our strategy while minimising disruption to our current business and delivered for our customers. This was achieved while managing our businesses in a COVID safe environment with industry-wide supply chain constraints. Building Products earnings up 24% Record Building Products earnings of $228 million were up 24% reflecting operational efficiency and cost discipline across the network. We are also seeing the benefits of structural and organisational changes completed in the previous year, all of which has improved our EBIT margin to 14.1%. All of CSR’s business units delivered revenue growth this year with continued volume growth following strong detached market activity. Interior Systems which includes CSR’s largest business in Gyprock, increased earnings as it delivered volume growth while managing industry disruptions through the strength of its leading market position. This year Gyprock celebrates 75 years of innovation and performance in this market and is featured in the Australian Made and Owned Makers Series. Masonry & Insulation which includes PGH Bricks, Bradford Insulation and Monier Roofing also increased earnings reflecting strong detached market demand, domestic manufacturing capacity and increasing demand for energy efficient products. Our earnings in New Zealand also grew following market share gains and improved business performance following site consolidation completed last year. Construction Systems also performed well, particularly in the second half of the year as more multi-residential projects commenced. AFS, Cemintel and Hebel are all building diversification and share growth across new markets with further investment in our technical service offering. Investing in our People and Safety During the year we launched a three year Workplace Health, Safety and Environment (WHSE) strategy with three core principles: Hearts & Minds, Systems and Risk. These principles are interconnected and build on our significant investment in systems over the past few years. Last year we moved to a centralised (WHSE) team to drive a consistent approach across all of CSR supported by our executive leadership team and operational leaders. We have seen significant improvement this year with our total recordable injury frequency rate improving by 27% from 13.4 to 9.8 in March 2022 (per million work hours). Over 80% of our 143 sites achieved zero recordable injuries in the 12 months to 31 March 2022. To support our people and keep our workplaces and teams safe, we provided paid leave for COVID vaccinations for all employees. During the year, we also launched a new mental health and wellness program to support our employees and their families. This was particularly important during the lockdowns experienced across Australia and New Zealand in 2021. Outlook for the year ending 31 March 2023 (YEM23) The strong pipeline of detached housing projects is expected to continue in the year ahead as completion times lengthen with supply chain and trade capacity impacting the broader industry. Activity in the apartment and non-residential markets has improved after an extended slowdown in the last few years. Building Products is well positioned to continue to grow, with a clear strategy to drive improved performance from a strong portfolio of brands and customer solutions. In YEM23, the business expects to return to more normal levels of investment to support the delivery of its strategy. 6 CSR LIMITED ANNUAL REPORT 2022“ All of CSR’s businesses have performed very well during the year. The organisational change we have made streamlining the business over the last 18 months along with the initiatives aligned to our supply chain strategy have supported our ability to deliver for CSR’s customers against a challenging backdrop. “We will continue to support our strategy this year by increased investment at key sites to further improve productivity, workplace safety, sustainability and optimise operations.” In Property, EBIT for YEM23 is expected to be approximately $52 million which includes completion of the next tranche at Horsley Park as well as completion of the sale of the Warner, QLD site. In Aluminium, CSR has a significant hedge position for YEM23. At this early point in the year, an indicative earnings range for YEM23 of $33 million to $49 million is based on current pricing and cost scenarios. Significant aluminium price and cost volatility (in particular carbon based inputs) will impact the final result. A further update on current trading for the CSR Group will be provided at the company’s AGM on 30 June 2022. Thank you to the team for their dedication to CSR this year In closing, I want to echo John’s comments about the dedication of the CSR team this year in what has been a very busy and challenging year. Right across the business our teams have focused on continuous improvement from optimising manufacturing capability through to minimising disruptions to our customers to deliver a great result. We are continuing to maximise the opportunities in the current market and drive the growth and development of the business for the long-term. We look forward to sharing more with you on our strategy in the year ahead. JULIE COATES MANAGING DIRECTOR AND CEO Building solutions for a better future A key part of developing our strategy is establishing our purpose. This captures both what we are doing across the organisation with an eye on the future, with innovation and sustainability for all stakeholders. CSR’s purpose informs our decision making in our day-to-day activities, drives advocacy for ourselves and our customers and provides our platform for growth. CSR is building solutions for a better future for our customers by investing in new building systems to reduce construction time and deliver better energy efficiency, comfort and design and for our people and the environment by creating a safe, diverse and sustainable place to work and grow. Strong foundation – 2,500+ experienced team – Trusted brands with leading market positions – 18,000+ customers across Australia & New Zealand Supply chain excellence – 40+ manufacturing sites – operations excellence and innovation – Extensive network of 100+ CSR branded and distribution outlets (metro and regional reach) – Significant upside from supply chain integration across CSR Customer engagement – Highly credentialed CSR team to unlock value and deliver strategy – CSR’s leading range of building products and systems serve a broad range of construction segments – Sales, marketing and technical expertise in building technology, compliance, energy efficiency and architectural design Sustainable platform – Strong balance sheet – Strong Building Products Return on Funds Employed (ROFE) with track record of financial discipline – 50+ Property sites owned across Australia with significant EBIT locked in for the next three years 7 BUSINESS UNIT OVERVIEW | BUILDING PRODUCTS Masonry & Insulation PGH Bricks Style Guide – find your inspiration The PGH Style Guide, launched in 2021, is the ultimate trends forecast. It is designed to inspire, identify the best style, and help achieve an exterior colour scheme without the stress. The PGH guide has nine curated material colour palettes including Dark & Stormy, Grey All The Way, Hamptons at Home, Luxury Noir, Modern Industrial, Natural Habitat, Painted Whites and Warm Earth. These styles cover key exterior material finishes including roofing, bricks, fascia, gutter, render, cladding, timber trims and even garage door colours. pghbricks.com.au/inspiration/styles Monier Lookbook – the latest trends in home design & roofing The Monier Lookbook showcases the latest trends in Australian home design. The Lookbook contains eight stunning Australian façade design trends, all the way from the Hamptons to Designer and Scandi Style. Each look contains key roof tiles and colour selections required to create and achieve a great look, from the roof down. monier.com.au 8 CSR LIMITED ANNUAL REPORT 2022Bringing together established brands with leading market positions, backed by our manufacturing expertise and technical and engineering teams. CSR provides a unique depth of product offering, ranges, colours and textures to complete the look and feel of the home. YEM22 Building Products revenue by business $1.6bn Masonry & Insulation 43% $688m 3% Unique depth of product range and systems Our offering includes leading solutions in exterior design, home health and comfort and energy efficiency. As part of the path to establishing net-zero in the Australian National Construction Code (NCC), we are providing improvements in energy efficiency, condensation control and internal air quality in new homes through our suite of systems across insulation, construction fabrics and ventilation. Extensive distribution and selection centres The Masonry & Insulation businesses include an extensive range of selection centres and distribution networks that support our builder customers, approved resellers, retail hardware partners and a network of installers and tradespeople. Sustainability of operations Sustainability is core to our operations with Bradford glasswool insulation produced from up to 80% recycled glass. Monier is extending its use of waste by-product fly ash to incorporate 15-20% of its cement requirements, while PGH continues to assess biosolids as a feedstock for the kiln system to reduce gas consumption. Leading brands Manufacturing and supplying insulation materials to the Australian market for over 80 years, critical to a more comfortable, sustainable and energy-efficient building. With over 100 years experience Monier is the roofing expert manufacturing quality roofing products, underpinned by a commitment to innovation. PGH is a leading manufacturer and innovator of clay bricks, walling systems and façade solutions. CSR sponsor of The Block TV series The 2021 season of The Block saw the teams use CSR products to create their own unique styles and home designs. The Block showcased the versatility of PGH Bricks including a variety of design styles from Classic to Contemporary, Luxury to Hamptons and Federation- Style to Mid-Century Modern. Bradford also was used throughout every room in The Block, as insulation solutions are key to ensuring comfort and sustainability. 9 BUSINESS UNIT OVERVIEW | BUILDING PRODUCTS Interior Systems Gyprock – Australian Owned and Made for 75 Years This year, Gyprock celebrates 75 years of innovation and performance as the country’s leading plasterboard manufacturer. Throughout that time, our plasterboards, cornices and compounds have been Australian Owned and Made with Gyprock featuring in the Australian Made’s Makers Series. Gyprock is an Australian icon having led innovation in plasterboard and design including the Gyprock Red Book. The Gyprock Red Book is considered a construction industry bible across all performance, technical guidance, compliance, fire and acoustic ratings across CSR’s building systems. 10 Simple to Stunning with Gyprock Living Gyprock Living highlights that there is no limit on what can be done with walls and ceilings when you combine innovative design and superb craftmanship. Gyprock fills the need for both form and function with a variety of boards such as Superchek for acoustic and impact requirements as well as cornice for ornate feature work. These features are included in Gyprock Living’s second edition of Simple to Stunning launched for 2022. gyprockliving.com.au CSR LIMITED ANNUAL REPORT 2022Building on Gyprock’s leading brand position with the Interior Systems expertise of Martini, Himmel and Potter to provide a complete residential and commercial offering. YEM22 Building Products revenue by business $1.6bn 40% Interior Systems $645m 9% Gyprock – Australia’s leader in plasterboard For 75 years, CSR has led the innovation of plasterboard in the Australian market. The business is backed by four strong, low cost manufacturing sites in Brisbane, Sydney, Melbourne and Perth. A key channel to market is the 56 Gyprock Trade Centres and 38 aligned distributors and retail partners across Australia. Our customers have a strong connection to the Gyprock brand and have referred to themselves as Gyprockers for decades. Gyprock’s leading position is bolstered by a stronger presence in the commercial segment to provide complete interior lining systems for our customers. Martini manufactures a range of acoustic insulation products with thermally-bonded polyester fibres made from up to 80% recycled PET packaging. Himmel in Australia and Potter in New Zealand are leading interior systems businesses supplying ceiling tiles, aluminium partitions and architectural hardware across social, infrastructure and commercial projects. All of the businesses have extensive technical expertise which we use to work with architects and specifiers to deliver solutions for the unique challenges and specifications for their projects. Leading brands Gyprock is Australia’s leading manufacturer of gypsum based products including plasterboard, cornice and compounds. Designs and manufactures high quality thermal and acoustic polyester fibre products. Leading brands in aesthetic and acoustic interior solutions. Himmel’s acoustic functionality with design freedom Himmel’s Troldtekt design is featured at the upgrade of the T2 terminal at Sydney’s International Airport. The design specified significant acoustic requirements for the busy airport combined with a finished product to feature in the large open space. The superior acoustic properties of Troldtekt help to absorb reverberant airborne sound. The panels are mounted on the curved ceiling within the terminal walkway to pick up reflected sound and improve acoustics. Troldtekt is sourced from wood and cement making it a naturally strong product with an internationally recognised standard. himmel.com.au Martini featured with CSR products at the new Log Cabin Martini acoustic insulation boards dECO Quiet Boards and Soffit XHD75 Black were featured as part of a suite of CSR products in the new Log Cabin restaurant and function centre re-built on the Nepean River in Penrith, NSW. This project featured the exterior timber look of Cemintel Territory Woodlands as well as Gyprock’s new Rigitone ceiling tiles which provide acoustic insulation that complements the interior architecture. martini.com.au “ Martini is the ‘go-to’ solution because it always looks great and provides the sound insulation we need on our projects.” Jonathan Parker, Team2 Architects 11 BUSINESS UNIT OVERVIEW | BUILDING PRODUCTS Construction Systems AFS and Hebel – a powerful combination CSR worked with JMH Living Design to create a resort style home, featured above, which included a substantial basement. This project required consideration on how to manage the site with limited access. AFS Rediwall enabled a fast and simple construction process compared to blockwork, while Hebel was selected to provide a high-quality rendered finish with durability, thermal and acoustic properties. afsformwork.com.au | hebel.com.au “ By using Hebel and AFS on this award winning project, the designer estimated saving 6 or 7 months in terms of construction time.” John Hatch, JMH Living Design 12 Cemintel brings natural and contemporary look to Sydney high school Cemintel was a key design element in the new Integrated Studies Centre at Macarthur Anglican School in southwest Sydney. Cemintel Barestone and Surround were used on the internal and external elements to create a cohesive design with a modern look in touch with nature. With the school located in a bushfire zone, Barestone was chosen for its unique combination of being a beautiful, prefinished, non-combustible, low-maintenance cladding with the added benefits of being manufactured in Sydney. Other CSR products integrated into the build included Bradford insulation and Gyprock. cemintel.com.au CSR LIMITED ANNUAL REPORT 2022Construction systems is targeting a number of new markets in structural systems and facades and cladding. An unparalleled suite of products to deliver beautiful buildings, ease of installation and lower cost construction. YEM22 Building Products revenue by business 17% $1.6bn Construction Systems $281m 2% AFS is a leader in load bearing permanent formwork walling solutions with codemarked concrete walling and permanent PVC formwork systems. For over two decades, AFS has contributed to the swift construction of apartments, offices, warehouses and more. Utilising cutting edge technologies, AFS are constantly researching new opportunities for innovation for load-bearing, hand-erected walls. Cemintel provides the Australian market with an alternative fibre cement range of traditional and prefinished fibre cement products and systems. Through research, analysis of trends and customer feedback, Cemintel has delivered innovative fibre cement products to the market for external and internal applications. Its diversified range includes products that are suitable for facades and cladding, internal linings, ceilings, compressed flooring and decking products. Hebel is a strong, versatile, high performance building product made from Autoclaved Aerated Concrete (AAC). CSR has developed the expansion of Hebel across Australia and New Zealand over the past 30 years as an innovative product. Hebel systems are non-combustible, thermally efficient and have inherent acoustic performance properties. The systems are lightweight and easy to install. Leading brands Australia’s only manufacturer of Aerated Autoclaved Concrete (AAC) products commonly used in intertenancy, boundary wall and cladding solutions. A leader in load bearing permanent formwork walling solutions with concrete walling and permanent PVC formwork systems. Traditional and prefinished fibre cement solutions for facades and cladding, internal linings, ceilings and soffits, flooring and decking. Hebel PowerpanelXL and Cemintel Territory Performance Hebel is known for its versatility, thermal benefits and ease of installation. This made it the natural choice for this designer home on the Gold Coast in Queensland. The black rendered finish of Hebel with Cemintel’s timber Territory Woodlands product delivered an engaging contrast which will also be low maintenance for the homeowners. CSR brings integrated solutions to its projects to provide a seamless look that delivers across priorities of sustainability, acoustic, thermal and fire resistance with faster installation and lower ongoing maintenance. hebel.com.au 13 BUSINESS UNIT OVERVIEW | PROPERTY Property Property delivering strong returns Property has delivered over $180 million in earnings in the last five years bringing complex projects to the market. CSR has over 50 Property sites owned across Australia which is almost 1,400 hectares of freehold land, and over 1,000 hectares of that sits in urban areas. Property also manage a significant network of leased sites to support the operational businesses. The Property team works with the CSR business units to understand their requirements to grow and expand their operations. This team has extensive experience in managing large scale property projects including: site rezoning, remediation, biodiversity, civil earthworks, road construction and infrastructure and services. This team also leads CSR’s strategic property decisions to identify, plan and execute large-scale projects including: – Maximising value of operational footprint – Generating returns through various stages of the development cycle – Providing an opportunistic approach to the staged development process – Managing numerous projects through rehabilitation, zoning and planning consent 14 Final sale secured at Horsley Park, NSW industrial site In July 2021, CSR secured the final sale of land at its Horsley Park, NSW industrial site. CSR has now sold all available sites at Horsley Park generating proceeds of $408 million. The total of completed and contracted transactions, delivered over a six year period, is expected to generate EBIT in excess of $230 million from the 52 hectare site. Horsley Park is located in a very attractive area within the western Sydney industrial market strategically positioned relative to major transport, power and infrastructure links. CSR has rehabilitated this site over a number of years to prepare the land for industrial use with the final transactions to be completed over the next three years. CSR LIMITED ANNUAL REPORT 2022BUSINESS UNIT OVERVIEW | ALUMINIUM Aluminium Tomago signs agreement with Capral Aluminium to reuse scrap aluminium In March 2022, Tomago signed an agreement with Capral Aluminium that will see approximately 550 tonnes annually of manufacturing production scrap returned for remelting and reuse. Capral manufactures semi-fabricated aluminium products used in residential, commercial and industrial applications. This industry leading arrangement is the first of its kind within Australia, paving the way for the production of low carbon aluminium for Australian manufacturers. CSR is a joint venture participant to the Tomago Aluminium Smelter – one of Australasia’s largest aluminium smelters. Through its 70% shareholding in Gove Aluminium Finance Limited (GAF), CSR holds an effective 25.2% interest in the Tomago Aluminium Smelter, located near Newcastle, NSW. Tomago produces around 600,000 tonnes of aluminium each year. CSR was one of the founding partners in the smelter in 1983 which today employs approximately 1,000 people. Tomago is managed independently with joint venture partners Rio Tinto, GAF and Hydro Aluminium. tomago.com.au GAF aluminium hedge position In order to reduce volatility and lock-in profitable returns, GAF has a significant hedge book in place over the next few years. YEM23 YEM24 YEM25 YEM26 YEM27 A$3,061 A$3,032 A$3,149 A$3,365 A$3,938 95% 79% 70% 57% 4% AS OF 29 APRIL 2022 Average price A$ per tonne (excludes premiums) % of net aluminium exposure hedged 15 SUSTAINABILITY | AT A GLANCE Sustainabililty at a glance The work underway on our 2030 targets is part of developing our longer term strategy beyond 2030. This work includes detailed analysis of the current trajectory to the 2030 targets and extending this to CSR’s overall decarbonisation approach. This includes research of technology trends, innovations and pilots from partners and pathways for integration into CSR’s operations. We also continue to evolve our overarching sustainability strategy and framework with reference to best practice, industry and regulatory changes and ensuring we maintain a strong linkage to CSR’s broader corporate purpose and strategy. This work will be progressed during the year with further details to be included in the 2022 CSR Sustainability Report to be published in December 2022. “ CSR has set challenging targets to reduce emissions to 2030 and is extending its ambition to investigate how we may set a decarbonisation pathway” Sustainability is a core foundation of our strategy both in how we operate and how we will grow We continue to improve the sustainability of our operations across CSR. During the year, we launched many important initiatives across CSR and further integrated sustainability into how we operate and how we will grow. Further details on CSR’s approach to sustainability over the past year are included in the 2021 CSR Sustainability Report which was published in December 2021. Addressing the risks and opportunities of climate change Identifying, managing and reporting on climate change is a key part of CSR’s risk management and governance framework. CSR was one of the first manufacturing companies in Australia to set environmental targets back in 2010. We have now achieved a significant reduction in our use of energy, water and waste production with our Scope 1 and 2 emissions 34% lower per tonne of saleable product since 2010. For 2030, we have set challenging targets to transform our business and further reduce emissions by another 30% per tonne of saleable product. 16 CSR LIMITED ANNUAL REPORT 2022CSR’s sustainability focus areas People and safety Inspiring our people by creating a safe and diverse place to work and grow. 81% Safety performance improving: zero recordable injuries at 81% of CSR sites 24/7 Wellbeing@CSR program providing 24/7 support for employees and their families Supporting diversity and inclusion: updated parental leave options and flexible working arrangements Climate change Managing the risks and opportunities of climate change. 34% reduction in CSR’s Scope 1 and 2 emissions since 2010 (per tonne of saleable product) 30% Additional 30% emissions reduction target to 2030 (per tonne of saleable product) CSR products delivering energy efficient design including thermal and acoustic insulation, ventilation, wall wraps and roof sarking Environment Reducing the impact of our operations on the environment. 2030 Targets to 2030 to reduce emissions, energy, water and waste underway 9yrs of Business Clean- up Day to look after our sites and remove unwanted waste Solar PV systems installed across 14 sites including $1m in projects completed in the last six months Community Engaging and supporting our local communities. $16k donated by CSR and its employees to support 2022 flood rebuild programs $73k donated by CSR and its employees in YEM22 to three charities: Youth Off The Streets, Salvation Army and Assistance Dogs Continued to support charity projects with CSR product donations Student mentoring program has facilitated over 6,000 volunteer hours by CSR employees over the past 10 years Supply chain and modern slavery Creating an efficient and sustainable supply chain to enhance our customers’ experience. 1,200 tonnes of timber saved going to landfill with our timber pallet recovery program underway 5% 2030 target to spend 5% of indirect procurement with social enterprises including disability and indigenous suppliers Integrating logistics capability across all of our brands helping to reduce the environmental impact of our networks 17 SUSTAINABILITY | WORKPLACE HEALTH AND SAFETY People and safety Picture: Jay Town / Newspix Workplace health and safety is our first and overriding priority for all of our people During the year, CSR continued to work though the three year Workplace Health, Safety and Environment (WHSE) strategy established in 2020 with three core principles: Hearts & Minds, Systems and Risk. These three principles are interconnected and depend on each other for success. We are addressing these key areas concurrently and this builds on our significant investment in systems over the past few years to improve reporting and analysis. The second year of our plan continues to focus on ensuring that WHSE remains a top priority for CSR. We have made significant changes to the way that Senior Leadership engages with our people on WHSE and in particular their direct involvement with monitoring and discussing safety performance and high-risk WHSE events. In addition, we have prioritised embedding our Risk Reduction Plans across CSR and all of our sites. Each individual site is required to consider the CSR top risks and propose corrective actions that can be undertaken to reduce the potential risk to people or the environment that is within the site’s control. The execution of these plans is critical to eliminate or reduce high potential severity events within our business. 18 CSR has modified its systems and processes to reflect the focus on risk reduction by introducing an additional metric of Revised Risk Rating for all events which must be completed by a WHSE professional. This additional metric is intended to ensure that risks are rated with a high degree of consistency and accuracy as well as provide a coaching opportunity to improve our operational understanding of risk assessment. We have also implemented assurance activities targeting the quality and execution of our Risk Reduction Plans to ensure we are rigorously building this process into our ‘business as usual’ activities. Safety performance in YEM22 While progressing our risk reduction plans and providing clarity on our priorities, CSR has achieved a step change in our safety performance as measured by total recordable injury frequency rate (TRIFR) which improved from 13.4 in April 2021 to 9.8 in March 2022 (per million work hours). We are very proud of the 116 sites who achieved zero recordable injuries in the 12 months to 31 March 2022. 116 sites Zero recordable injuries at 116 sites at 31 March 2022 CSR LIMITED ANNUAL REPORT 2022Key highlights 81% 81% (116 sites) achieved zero recordable injuries in the 12 months to 31 March 2022 27% Significant improvement in safety in YEM22 with the total recordable injury frequency rate per million work hours improving by 27% to 9.8 Total recordable injury frequency rate per million TOTAL RECORDABLE INJURY FREQUENCY RATE work hours (Per million work hours) Safety performance (12 months to 31 March 2022) 14 12 10 8 6 4 2 0 13.4 11.5 9.8 13 14 116 Zero Recordable injuries at 116 sites 1 Recordable injury at 14 sites >1 Recordable injury at 13 sites YEM20 YEM21 YEM22 Note: YEM20 data restated from previous year. Workplace health and safety in COVID Throughout this year, we have operated within the COVID environment with the health and safety of our teams remaining our first priority. Following on from extensive planning completed in 2020, we continued to execute a number of business contingency plans, personal hygiene and social distancing measures at all sites in line with government guidelines. During YEM22, we continued to evolve our COVID-safe plans to manage the risk of transmission in the workplace and operate in an environment where COVID was widespread in the community. Paid leave for COVID vaccinations for all employees To support our employees and to keep our workplaces and teams safe, CSR encouraged all employees to get vaccinated and ensured employees could attend vaccination appointments during work hours without loss of pay. Mental Health and Wellness During YEM22, CSR launched a new Wellbeing@CSR program to help support our employees and their families. This was particularly important during the lockdowns experienced across Australia and New Zealand during the year. Wellbeing@CSR provides a number of tools and resources and provides 24/7 confidential, free assistance for any personal or work related issues that may impact our employees and their family’s health and wellbeing. Mental health awareness with R U OK? Day CSR continued its support for mental health awareness in 2021 which included company wide activities for R U OK? Day in September. R U OK? is a harm prevention charity that encourages people to stay connected and have conversations that can help others through difficult times. In September 2021, many of CSR’s employees were in lockdown so R U OK? Day provided a key opportunity to reach out to our teams. This included live town hall events which reached over 550 people and included guest speakers and Q&A sessions with television and radio host Gus Worland and psychologist Erin Hegerty. Gus Worland (pictured) led a live Q&A session with CSR teams focused on mental health. 19 SUSTAINABILITY | CLIMATE CHANGE Climate change CSR delivering energy efficient design to reduce emissions in the built environment We are continually reinvesting in our business to meet new opportunities and challenges in energy efficiency while leading in design, colour and product range. CSR’s unique product suite in energy efficient design will be a significant opportunity as we transition to a low carbon economy. CSR’s full suite of energy efficient systems alongside internal linings and external cladding products can make a significant impact on the sustainability of homes and buildings. We are investing in innovative digital tools and technical resources to make it easier for our customers to choose the best and most sustainable solution for their requirements whilst being fully compliant with changing construction codes to deliver better energy efficiency. Sarking and wall wraps Help contribute with reflective insulation benefits, reducing air leakage and adding a second skin of protection to homes. The increase in time working from home has shown that many people are finding their homes less comfortable and more expensive to run. A significant amount of household energy is used for heating and cooling an average Australian home to achieve thermal comfort. CSR brings a whole-of-home approach that will provide a more comfortable home and save energy from thermal and acoustic insulation to wall wraps and roof sarking, fire protection insulation and more. All of which will make a substantial difference to the comfort and energy efficiency of homes. Ventilation Ventilation complements insulation to provide a natural and temperate home. 20 Insulation Insulation for roofs, ceilings, walls and floors helps to reduce heat transfer with acoustic insulation reducing sound transfer within the home. CSR LIMITED ANNUAL REPORT 2022Managing the risks and opportunities of climate change Over the last ten years, CSR has progressed its approach to climate risk and opportunities covering many of the key recommendations of the Task Force on Climate Related Financial Disclosures (TCFD) framework to assess and disclose climate-related risks and opportunities. We have developed a staged approach to assess these risks and opportunities and integrate them into our risk assessment approach which covers key areas of Strategy, Governance, Risk Management and Metrics and Targets. CSR’s risk management framework is intended to provide the basis for a systematic approach to the identification and management of risks. CSR’s material economic, environmental and social sustainability risks are included in the Corporate Governance and Risk Statement commencing on page 42. CSR’s manufacturing operations use significant amounts of energy including electricity and gas. These energy costs are increasing which in turn impacts our cost competitiveness compared to other manufacturers. Where possible, CSR enters into long-term contracts to provide greater security of energy supply for its factories. CSR’s Finance Committee oversees risks related to electricity and gas pricing and management. The transition to a low carbon economy and mitigating the potential impacts of climate change, as well as government regulations and planning, may affect the availability and nature of energy supply as well as how CSR manages land assets and business processes. These risks are managed across a number of initiatives: Internal risk processes were updated in 2017 to capture specific questions on climate risks. Physical climate risk (weather related) assessments are progressively updated for CSR’s manufacturing sites. In 2020, CSR set 10 year targets to 2030, which cover key areas of energy and emissions reduction, procurement, packaging, minimising water use and waste and preserving biodiversity. Transition risk climate change scenario analysis has been completed for CSR’s three largest businesses: Gyprock plasterboard, Bradford insulation and PGH bricks. CSR developed a staged approach to assess and disclose climate-related risks and opportunities using the TCFD framework in 2018. In the last six months, CSR has invested over $1 million in Solar PV capacity at an additional 3 sites. This gives CSR a total of 14 sites with a solar PV at a total capacity of 2,600kWs. Monthly review of progress to 2030 targets and key projects is led by the Sustainability Steering Committee which includes the full executive team. This team is also developing detailed analysis of the current trajectory to the 2030 targets and extending this to CSR’s overall decarbonisation pathway. Progressing CSR’s decarbonisation pathway In March 2022, CSR launched a decarbonisation project with a climate and energy risk specialist. This project is targeting near-term emission reduction opportunities over the next five years as well as a longer-term review of technology trends, innovations and pilots from partners in Australia and internationally. A key part of CSR’s decarbonisation strategy is developing a roadmap for the potential integration of hydrogen, biogas and other primary fuels into CSR’s manufacturing processes. This review will be taking a longer-term view to identify the commercial availability and technical feasibility of future fuels including storage, transportation, supply chain and process integration. This work is critical to CSR understanding what changes we may need to make to the way we work in the longer term in order to advance our decarbonisation ambition. 21 SUSTAINABILITY | ENVIRONMENT Environment Reducing the impact of our operations on the environment CSR is progressing with its sustainability targets to 2030 which cover a range of metrics to improve performance and reduce environmental impact. These targets are aligned to the UN Sustainable Development Goals (SDG) that are most relevant to CSR and the areas where we can make the greatest impact. All our businesses have three- year action plans underway to achieve or exceed their 2030 targets. These plans include yearly reduction or improvement targets as well as a list of projects to assist in achieving those targets. Progress and projects are regularly reviewed by the Sustainability Steering Committee, with progress reported to the Board’s Safety & Sustainability Committee. At this early stage in the pathway to 2030, CSR has made good progress across a number of major projects to help meet the targets. Both energy and emissions are down by 3% over the period to 30 June 2021. This is due to numerous operational efficiency projects, the benefits of investment in renewable energy systems at some sites, in addition to production changes due to COVID. Potable water use is also down slightly over the past 12 months with a number of new water saving projects under review. Further detail across all of the targets will be included in the 2022 CSR Sustainability Report to be published in December 2022. Cemintel reducing energy use Compressed air systems use a lot of energy. In Australia, this accounts for nearly 10% of industrial electricity use. Significant amounts of energy are wasted due to issues like oversized compressors, outdated controls and air leaks. Like many industrial sites, the Cemintel Wetherill Park, NSW site relies on compressed air to drive its processes. With the support of the NSW Government Energy Saver scheme, CSR completed a major review and upgrade of their compressed air system. The review identified $83,000 in energy savings through leak repairs and improvements to controls. CSR has made many of these changes and repairs, and removed one compressor completely. The project has provided a reduction in energy use on site and is an important step in reaching Cemintel’s energy and emission reduction targets. 22 CSR LIMITED ANNUAL REPORT 2022Reducing greenhouse gas emissions CSR seeks to proactively reduce greenhouse gas emissions including improving energy efficiency across its network of manufacturing facilities and the roll-out of renewable energy solutions to its industrial sites. All metrics for energy and emissions have detailed project plans and are included in integrated performance dashboards. Progress to the targets is reviewed each month by the Sustainability Steering Committee which includes the full executive leadership team. This committee is chaired by CSR’s managing director with the scope of work including developing priorities and targets to achieve CSR’s sustainability ambitions and developing a company-wide sustainability roadmap. GHG EMISSIONS SINCE 2010 GHG emissions (scope 1 and 2) since 2010 per kg/tonne of (kg/tonne of saleable product) saleable product 350 300 250 200 150 100 50 0 . 8 5 2 3 . 0 1 0 3 . 4 5 1 3 . 3 3 1 3 . 3 8 0 3 . 3 5 8 2 . 9 1 6 2 . 4 1 6 2 . 2 8 5 2 . 5 6 4 2 . 6 2 2 2 . 1 6 1 2 0 1 0 2 1 1 0 2 2 1 0 2 3 1 0 2 4 1 0 2 5 1 0 2 6 1 0 2 7 1 0 2 8 1 0 2 9 1 0 2 0 2 0 2 1 2 0 2 34% decrease in CO2e emissions (per tonne of saleable product) since 2010 Note: 2020 data excludes Viridian Glass operations sold in January 2019. SDG Goals GOAL 7 Affordable and Clean Energy GOAL 11 Sustainable Cities and Communities GOAL 12 Responsible Consumption and Production GOAL 13 Climate Action GOAL 15 Life on Land 2030 Targets Initiatives to help reach targets – Establish and implement a CSR connected power network. – 50% of electricity generated by renewable energy. – 20% energy reduction (GJ) per tonne of saleable product. – 5% of indirect spend by Procurement to be spent with social enterprises. – Since 2015, Solar PV systems installed across 14 sites with total capacity of 2,600 kWs including $1million in Solar PV projects completed in the last six months. – Examples include: Replacing wastewater pumps with high efficiency pumps at Bradford Ingleburn, NSW and installation of a more efficient boiler at Cemintel Wetherill Park, NSW. – Develop tender/contract award procedures and evaluation. – Training and reporting to embed target across CSR. – Engaged with Social Traders and Givvable to identify and expand procurement with social enterprises. – CSR packaging to be closed loop (either 100% reusable; recyclable; compostable). – 75% reduction in solid waste to landfill. – Increase data analysis across all packaging to capture key opportunities. – Launched expanded timber pallet recycling program. – Waste, water and packaging reduction projects under review as part of the roadmap. – 30% reduction of potable water consumed (ltr) per tonne of saleable product. – An example is the redesign of water spray systems to reduce potable water use at Bradford ventilation at Sevens Hills, NSW. – 30% reduction of greenhouse gas emissions (CO2e) kg per tonne of saleable product. – Viable projects rolled into the CSR wide capital allocation process. – All projects are assessed against the CSR targets to understand pathway to achieving the 2030 ambition. – Enhance biodiversity outcomes on CSR – Key biodiversity outcomes underway at property sites sites and developments. including Warner, QLD and Horsley Park, NSW. 23 SUSTAINABILITY | COMMUNITY Community Engaging and supporting our local communities A key part of our sustainability strategy is based on proactively supporting our social license to work through greater interaction and positive impacts on the community. To achieve this aim, 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. Our community relations program covers four key areas: – Building Product donations: CSR supports a number of charities to build new facilities with product donations as well as technical support and installation expertise. – Site level Community Engagement: Engagement with the local communities and neighbours surrounding our sites. – Community Support Program: Launched in 2003, CSR matches employee contributions dollar for dollar to three charitable organisations. Over $3.5 million has been donated by CSR and its employees over the last 19 years. CSR also provides volunteer support for various activities and campaigns during the year. – Student Mentor Program: CSR commenced working with the Australian Business and Community Network (ABCN) in 2011 to provide mentoring and coaching programs in schools in high need areas. 24 Clean-up Business Day 2022 As part of CSR’s commitment as a signatory to the Australian Packaging Covenant (APC), various CSR sites across Australia participate in Business Clean-Up Day each year. The clean up in March 2022 was the ninth year CSR has participated with volunteers cleaning our sites and surrounding communities and is a great way to promote a clean and healthy work environment. CSR LIMITED ANNUAL REPORT 2022SUSTAINABILITY | SUPPLY CHAIN AND MODERN SLAVERY Supply chain and modern slavery Modern Slavery CSR’s Modern Slavery Statement for the year ended 31 March 2021 was published in September 2021. CSR lodged its first Modern Slavery Statement in September 2020. Since that time, CSR has progressed a number of initiatives to assess and address modern slavery risks including: – Engaged Fair Supply to analyse CSR’s supply chains beyond Tier 1 suppliers who provided a modern slavery risk profile for suppliers up to Tier 10 for each of CSR’s suppliers. This was mapped to country and industry ratings. – Conducted an external review of vendors to provide a detailed analysis of crimes, infringements and sanctions across 95% of CSR’s vendors (based on spend). – Implementation of comprehensive vendor on-boarding process. – Inclusion of key statistics regarding the number of screened vendors, number of incidents reviewed, number of staff trained and suppliers risk assessed during the year. Creating an efficient and sustainable supply chain to enhance our customers’ experience CSR has a significant investment in warehousing, transport and distribution. We have developed a supply chain model that integrates logistics activities across all of our brands. There are tangible benefits to customers, while increasing productivity of our distribution channels with better planning and collaboration across our sites and reduced environmental impacts from our transport networks. Supporting sustainable cities and communities We have developed a target to 2030 to apply 5% of our indirect procurement spend on social enterprises to align with this goal. CSR has now launched a program to track our social spending with existing suppliers. By working with our supplier network, we have identified key areas of social spending including: – Disability enterprises: mostly packaging services and packaging materials (e.g. pallets) – Indigenous owned businesses: largest spend with bulk materials haulage, but also other varied service providers CSR has engaged with adviser Social Traders who provide guidance on increasing engagement with social enterprises, including developing tender/contract award procedures, evaluation metrics, internal training and reporting outcomes of social enterprises. Social Traders also certify social enterprises to ensure compliance. 25 FINANCIAL OVERVIEW Financial Overview Net profit after tax (before significant items) of $193 million, up 20% which reflects strong operational performance and continued cost management FIVE YEAR PERFORMANCE SUMMARY 1 Year ended 31 March ($ million) unless stated Operating results Trading revenue Earnings before interest and tax (EBIT) Building Products Property Aluminium Segment total Corporate and restructuring and provisions2 CSR EBIT Net profit after tax (before significant items) Statutory net profit after tax (after discontinued operations) Financial position Total equity Total assets Net cash / (debt) Key data per share 2022 2021 2020 2019 2018 2,311.6 2,122.4 2,212.5 2,322.8 2,237.7 228.2 184.3 46.9 54.2 39.7 23.4 314.8 261.9 (23.4) (24.0) 291.4 237.9 192.6 160.4 270.6 146.1 170.5 (1.5) 59.6 228.6 (11.8) 216.8 134.8 125.3 206.5 38.8 36.6 281.9 (16.9) 265.0 181.7 78.0 214.1 47.8 79.5 341.4 (21.1) 320.3 210.6 188.8 949.4 1,157.8 2,447.0 2,176.8 177.7 250.8 1,125.5 2,404.5 94.8 1,231.1 1,991.1 50.0 1,274.1 2,136.0 (14.3) Earnings before significant items (cents) Earnings after significant items and discontinued operations (cents) Dividend ordinary (cents) Dividend special (cents) 39.7 33.1 55.8 30.1 31.5 – 23.0 13.5 Payout ratio on ordinary dividends (%) 79.4 69.5 Key measures Profit margin (EBIT/trading revenue) (%) Return on funds employed (ROFE) (%)3 Employees (number of people employed) 12.6 11.2 27.3 21.1 2,573 2,538 27.3 25.4 10.0 4.0 36.6 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 2,861 1 From continuing operations for 2018 and 2019 unless stated, which excludes the Viridian Glass business which was sold on 31 January 2019. 2 Represents unallocated overhead expenditure and other revenues. 3 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. A reconciliation of funds employed to net assets is contained in note 2 to the financial statements. 26 CSR LIMITED ANNUAL REPORT 2022 OPERATING AND FINANCIAL REVIEW Operating and Financial Review Group EBIT of $291.4 million, up 22% with improved earnings from Building Products and Aluminium Trading revenue of $2.3 billion for the year ended 31 March 2022 (YEM22), up 9% on the prior year. Earnings before interest and tax (EBIT before significant items) of $291.4 million, up 22% included the following results:  Building Products - Record EBIT of $228.2 million, up 24%, reflecting strong detached housing activity driving higher volumes, improved factory performance and operational execution and continued cost discipline across all businesses. Return on funds employed increased to 27.3% from 20.6%.  Property - EBIT of $46.9 million, down from $54.2 million, including the next stage at Horsley Park and the sale of 4.6 hectares of land at Badgerys Creek.  Aluminium - EBIT of $39.7 million, up from $23.4 million, reflecting higher aluminium pricing partly offset by higher production costs. Statutory net profit after tax of $270.6 million, up from $146.1 million which included a significant item relating to the recognition of $86.3 million in carry forward capital tax losses. Earnings per share (before significant items) of 39.7 cents, up 20%. Dividends - Final dividend of 18.0 cents per share (fully franked) declared, up from the previous final dividend of 14.5 cents per share (fully franked) and the previous final special dividend of 9.5 cents per share (fully franked). A$m unless stated1 Trading revenue EBIT Building Products Property Aluminium Corporate (including restructure and provisions) Group EBIT Net finance costs Tax expense Non-controlling interests Net profit after tax before significant items1 Significant items after tax Statutory net profit after tax 2022 2,311.6 2021 2,122.4 228.2 46.9 39.7 (23.4) 291.4 (9.5) (81.2) (8.1) 192.6 78.0 270.6 184.3 54.2 23.4 (24.0) 237.9 (6.1) (65.7) (5.7) 160.4 (14.3) 146.1 change 9% 24% (13%) 70% 3% 22% 20% 85% 1 All references are before significant items unless stated. These 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 2022 (YEM22). All comparisons are to the year ended 31 March 2021 (YEM21) unless otherwise stated. Net profit after tax (before significant items) of $192.6 million for the year ended 31 March 2022, up 20% following an increase in earnings from Building Products and Aluminium. Statutory net profit after tax of $270.6 million includes significant items of $78.0 million (after tax). This includes the recognition of deferred tax assets of $86.3 million in relation to carry forward capital tax losses, which arose primarily from the sale of the Viridian Glass business in 2019. This follows an assessment of the tax treatment of property sales which are expected to generate capital gains that will utilise these carry forward tax losses. Tax expense of $81.2 million (before significant items) was up from $65.7 million due to higher pre-tax profits. CSR’s effective tax rate for the year (before significant items) was 29% in line with the prior year. Cash flow from operating activities of $215.3 million was down from $253.0 million, with working capital initiatives realised in the prior year. Capital expenditure (excluding Property and acquisitions) was $40.0 million during the year. Of this total, $27.7 million was for stay-in-business projects and $12.3 million was development related capital expenditure. Capital expenditure (excluding Property and acquisitions) was down from $49.0 million in YEM21, which included the acquisition of the Bradford Brendale, QLD site for $16 million. Property invested $59.7 million during the year as part of rehabilitation of key sites. Net cash of $177.7 million decreased from the net cash position of $250.8 million as of 31 March 2021 following payment of prior year income tax and dividends during the year. Product liability – As at 31 March 2022, the asbestos provision fell to $213.3 million from $231.0 million as at 31 March 2021. This provision included a prudential margin of $38.5 million. CSR paid asbestos related claims of $22.9 million (including legal costs) compared to $20.6 million in the prior year. 27 OPERATING AND FINANCIAL REVIEW BUILDING PRODUCTS PERFORMANCE Construction market activity by segment Australia Residential (12 months – 000s) Detached1 Medium density1 High density1 Total Residential Commencements Non-residential (A$B)2 Alterations and additions (A$B)2 NZ consents (12 months - 000s)3 2022 2021 change 149.5 36.4 43.3 229.3 48.0 11.1 47.3 104.1 33.0 37.2 174.4 47.7 10.1 37.7 44% 10% 16% 31% 1% 10% 25% 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 two quarter lag – 12 months to September). The majority of CSR’s Building Products are utilised towards the end of the construction process which historically results in product sales occurring on average two quarters after the start of a residential housing commencement. However, given the combination of very strong demand and capacity levels within the building construction sector being adversely impacted, detached house build times have increased by around 50% to over 12 months according to HIA research. As a result, CSR’s revenues for YEM22 are more closely aligned to residential completions (up 6% for detached housing; down 11% for multi-residential for the year to December 2021). Australian residential housing commencements on a two quarter lag basis of 229,300 were up 31% compared to the prior year. Detached housing on the east coast of Australia increased by 37%, while Western Australia starts have doubled. The medium and high density market also grew during the period, up 10% and 16% respectively with medium density continuing to attract owner-occupiers and high density activity recovering following renewed investor activity in anticipation of recovering inwards migration. The non-residential market was up 1% with 4% growth in the social sector offset by a modestly weaker commercial sector. The alterations and additions market has performed strongly as larger renovation projects grew in the year. Trade retail was flat (in the year to February 2022) given the very strong activity in the early months of COVID lockdowns in mid 2020 but has since resumed a strong growth trend. The New Zealand market remained very strong as the sector emerged from COVID lockdowns. Like Australia, realisation of demand has been impacted by significant capacity constraints. Strong detached activity, cost control and operational efficiency lift earnings by 24% A$m unless stated1 Revenue EBITDA EBIT Funds employed2 EBIT/revenue Return on funds employed3 2022 1,614.1 302.4 228.2 830.0 14.1% 27.3% 2021 1,534.5 265.7 184.3 843.8 12.0% 20.6% change 5% 14% 24% (2%) 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 $1,614.1 million, up 5% with continued volume growth following strong detached market activity. Building Products earnings of $228.2 million were up 24% reflecting strong detached activity driving higher volumes, improving factory performance and continued cost discipline across all businesses. EBIT margin of 14.1% was up from 12.0% with benefits from operational efficiency and cost discipline across the network and organisational changes completed in the previous year. Return on funds employed of 27.3%, increased from 20.6%. 28 CSR LIMITED ANNUAL REPORT 2022 OPERATING AND FINANCIAL REVIEW Building Products Business Performance MASONRY & INSULATION INTERIOR SYSTEMS CONSTRUCTION SYSTEMS 43% 40% 17% YEM22 Performance  YEM22 revenue $688m (3% above YEM21) YEM22 Performance  YEM22 revenue $645m (9% above YEM21) YEM22 Performance  YEM22 revenue $281m (2% above YEM21)  Volume growth reflects strong detached market demand, domestic manufacturing capacity and growth in energy efficient products Improved factory performance from process improvements and capacity management   Continued revenue and volume growth in Gyprock reflected strong end markets, strength of market position and managing industry disruptions well  Leveraging strength of the Gyprock brand as it celebrates 75 years of innovation and performance in Australia  Margin improvement with disciplined pricing, cost control and manufacturing productivity improvements  Higher value product mix and improved pricing discipline contributed to margin improvement  Earnings improved in PGH and Bradford  Continuous operational improvement to reflecting strategy of optimising operations and factory performance to deliver for customers YEM23 Priorities  Manufacturing investment to improve productivity, sustainability and efficiency at existing sites ‒ Bradford Brendale, QLD automating processes and improving productivity and safety, increasing capacity by 10% and reducing environmental impact (80% reduction in potable water use) ‒ PGH Oxley, QLD investment to improve production speed and efficiency, will add 10 million units of bricks  Optimising product ranges to drive  incremental improvement in efficiency, capacity and customer service Integrated planning work continuing to provide improved visibility and order management, enhanced pricing discipline and better customer experience maintain low cost position  Higher EBIT reflects improved factory performance, increased volumes and cost discipline. Improvement in CSR’s commercial interiors EBIT despite impact of COVID lockdowns YEM23 Priorities  Incremental manufacturing investment at Gyprock Wetherill Park, NSW to improve productivity and lower energy consumption  Expanded presence in non-residential sector with dedicated technical and architectural teams  Consolidating leadership of Gyprock through ongoing range optimisation and improved customer experience ‒ New premium product range, ongoing innovation and product development with strategic management of product lines ‒ Gyprock Trade Network ongoing improvement of in-store experience driving strong connection to customers  Volumes higher in Cemintel and Hebel reflecting category growth across the year, especially in the second half  Cemintel established stronger position in cladding market with increased shifts and capacity to meet market demand  AFS performance improving with diversification strategy and customer service improvements mitigating impact of subdued activity in apartment market  Margin improvement largely driven by improved manufacturing performance  Higher EBIT in Hebel and Cemintel reflects share growth coupled with disciplined cost management YEM23 Priorities  Strategy to diversify sector and customer base gaining traction (medium density housing in VIC, civil applications in QLD) ‒ Improvements in dynamic planning have improved lead times, driving growth in repeat customers ‒ Energy reduction with increased waste recycling and solar panels at Hebel factory to reduce energy consumption by 20%  Build share across all markets, particularly amongst architects, key contractors and developers  Strengthen existing Hebel and AFS operations, optimise Cemintel operational capability and expand capacity from local and import supply chains  Ongoing execution of supply chain  Progressive technology adoption at new initiatives to deliver further benefits in service and efficiency Hebel plant to deliver product improvements and innovation (e.g. improved paintability) Building Products Outlook The strong pipeline of detached housing projects is expected to continue in the year ahead as completion times lengthen with supply chain and trade capacity impacting the broader industry. Activity in the apartment and non-residential markets has improved after an extended slowdown in the last few years. Building Products is well positioned to continue to grow, with a clear strategy to drive improved performance from a strong portfolio of brands and customer solutions. In YEM23, the business expects to return to more normal levels of investment to support the delivery of its strategy. 29 OPERATING AND FINANCIAL REVIEW PROPERTY Good progress on key development projects A$m unless stated1 EBIT Funds employed2 Return on funds employed3 2022 46.9 166.1 30.7% 2021 54.2 139.5 35.3% change (13%) 19% 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. Property delivered EBIT of $46.9 million compared to $54.2 million in the previous year. The result includes the completion of a number of transactions during the year including Stage 2.2a at Horsley Park, NSW and the sale of 4.6 hectares of land at the site at Badgerys Creek, NSW for $20.7 million which was announced in February 2022. Property Outlook CSR has now sold all available sites at Horsley Park generating proceeds of $408 million. The total of completed and contracted transactions, delivered over a six year period, is expected to generate EBIT in excess of $230 million from the 52 hectare site. Completed and contracted transactions at Horsley Park Tranche Stage 1 Stage 2.1 Stage 2.2a Stage 2.2b Stage 3a Stage 3b/c Total Size 10.1ha 11.7ha 4ha 5ha 8.6ha 12.4ha 52ha Proceeds $58m $80m $28m $34m $84m $124m $408m Project EBIT $32m $52m $18m $22m $48m $62m $234m Completion Completed Completed Completed YEM23 YEM24 YEM25 EBIT for YEM23 is expected to be approximately $52 million which includes completion of the next tranche at Horsley Park as well as completion of the sale of the Warner, QLD site. 30 CSR LIMITED ANNUAL REPORT 2022 OPERATING AND FINANCIAL REVIEW ALUMINIUM EBIT higher with increased A$ aluminium price A$m unless stated1 Sales (tonnes) A$ realised price2 Revenue EBITDA EBIT Funds employed3 EBIT/revenue Return on funds employed4 2022 211,374 2021 213,722 3,300 697.5 51.5 39.7 121.3 5.7% 30.9% 2,751 587.9 35.4 23.4 136.0 4.0% 16.9% change (1%) 20% 19% 45% 70% (11%) 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) of A$3,300 was up 20% following the sharp increase in the A$ aluminium price. Gove Aluminium Finance (GAF – 70% CSR) sales volumes of 211,374 tonnes were down 1% from the prior year due to the timing of shipments. Trading revenue of $697.5 million was up 19% due to higher LME aluminium prices. The Australian dollar averaged 74 US cents compared to 72 US cents in the prior year, while the average MJP ingot premium for the year was US$179 per tonne, compared to US$94 per tonne in the prior year (Platts Metals Week – Main Japanese Port ingot premium). EBIT of $39.7 million was up from $23.4 million due to higher A$ aluminium prices. This was partly offset by higher alumina costs due to the linkage to the higher LME aluminium price, along with an increase in other input costs including coke. The overall cost of electricity also increased due to a higher coal cost pass through. GAF has secured contracts for 100% of alumina requirements through to the end of calendar year 2024, all of which are effectively linked to the US$ LME aluminium price. GAF Aluminium Hedge Book position - increase in forward hedge position Given Tomago’s high energy cost (which is not correlated to LME aluminium prices), CSR’s approach is to take advantage of profitable pricing by hedging when possible. A significant hedge book is in place through to March 2027. As of 29 April 2022 YEM23 YEM24 YEM25 YEM26 YEM27 Average price A$ per tonne (excludes premiums) A$3,061 A$3,032 A$3,149 A$3,365 A$3,938 % of net aluminium exposure hedged 95% 79% 70% 57% 4% Aluminium Outlook YEM23 EBIT indicative scenario CSR has a significant hedge position for YEM23. At this early point in the year, an indicative earnings range for YEM23 of $33 million to $49 million is based on current pricing and cost scenarios. Significant aluminium price and cost volatility (in particular carbon based inputs) will impact the final result. As of 29 April 2022 YEM23 EBIT A$m Aluminium average spot price A$/t for YEM23 A$2,960 A$33m A$3,570 A$40m A$4,700 A$49m 31 CORPORATE GOVERNANCE STATEMENT AND RISK Corporate Governance Statement Corporate Governance is the framework of rules, relationships, systems and processes by which CSR is directed and managed. It underpins the company’s values and behaviours, the way we conduct business and provides clear guidance for effective decision making in all areas through:  the role of the board of directors and their accountability to shareholders for the operations, financial performance and growth of the company;  strategic and operational planning;  ethical business practices and high standards of personal conduct;  effective risk management and compliance; and  constructive engagement with stakeholders. This Corporate Governance Statement is current as at 11 May 2022 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 as it is an integral part of the culture and business practices of the CSR group. Throughout the reporting period, being 1 April 2021 through to 31 March 2022, CSR complied with the recommendations contained in the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (4th edition) (ASX CGC Principles). Charters and policies referred to in this corporate governance statement are available on CSR’s website in the ‘Investors and 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 framework and appetite, as well as CSR's risk management strategy and monitoring whether the company is operating within that framework and appetite;  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, supply chain, 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. 32 CSR LIMITED ANNUAL REPORT 2022 CORPORATE GOVERNANCE STATEMENT AND RISK Directors’ independence At all times throughout YEM22, the board comprised of a majority of independent directors. Each of the non-executive directors, including the chair, 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. Directors are required to disclose, on an ongoing basis, circumstances that may affect their ability to exercise independent judgement enabling the board to determine independence on a regular basis. The length of tenure of each director is set out below. Table 1: Director tenure Director John Gillam (chair of the board) Julie Coates (managing director) Nigel Garrard Christine Holman Matthew Quinn Penny Winn Date appointed December 2017 September 2019 December 2020 October 2016 August 2013 November 2015 Date last re-elected 2021 Annual Meeting 2020 Annual Meeting 2021 Annual Meeting 2020 Annual Meeting 2019 Annual Meeting 2021 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’ 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 chair briefs new directors on their roles and responsibilities. New directors receive a comprehensive information pack as part of this induction, as well as briefings from management and visits to key operating sites to assist them to rapidly understand CSR’s businesses, strategic direction and associated material 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. 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 chair’s approval. The board charter requires that all directors be provided with a copy of such advice and be notified if the chair’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 chair, to the board, on all governance matters. 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 chair 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 executive general managers, or other functional managers also attend board meetings by invitation, where appropriate. The board also invites external experts to present to it on key matters, where appropriate. The directors regularly visit the company’s operations, as COVID-19 travel restrictions allow, to better understand the issues facing each of the businesses and their people. These visits are conducted either as a full board, a board committee or with one or two directors. Every meeting of the Safety & Sustainability Committee is held at a CSR site, either physically or virtually when restrictions have not enabled physical site visits. In addition, directors may meet customers, business partners, suppliers and other stakeholders of the company as requested by management. 33 CORPORATE GOVERNANCE STATEMENT AND RISK 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 46 to 47 and is also available on CSR’s website on the Corporate Governance page. Figure 1: Board diversity The chair 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 chair represents the views of the board to shareholders and canvasses the views of stakeholders, including through the annual general meeting. In YEM22 one change to the composition of the board took place, with Mike Ihlein retiring from the board on 25 June 2021. 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 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 as evidenced by the charts below. The table on the following page sets out the skills and experience the board considers essential for effective governance, including the current representation of those skills and experience on the board. INDUSTRY SECTOR EXPERIENCE 33% Manufacturing operations 33% 50% Supply chain management 33% Property development 17% Technology & Digital 17% 17% 17% 33% 17% TENNURE 0 to 2 years 17% 2 to 5 years 33% 33% 5 to 10 years 50% GENDER DIVERSITY 50% 50% Men 50% Women 50% 17% 17% 50% TERTIARY QUALIFICATIONS Commerce/Accounting 50% Mathematics/Education 16% Engineering/Science 17% 33% 16% Business Administration & Management 17% 17% 50% AGE 50 - 55 17% 56 - 59 50% 60 - 65 33% 34 CSR LIMITED ANNUAL REPORT 2022 Directors with skill/experience CORPORATE GOVERNANCE STATEMENT AND RISK Size, composition and skills of the board (continued) Table 2: Summary of board skills and experience Skills Relevant experience Leadership and Governance Executive leadership Sustainable success in business at a senior executive level and a proven track record of leadership to create long-term shareholder value. Governance and Compliance Commitment to the highest standards of governance, including experience with a major organisation that is subject to rigorous corporate governance standards, and an ability to assess the effectiveness of senior management. Finance and Risk Financial acumen 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. Strategy Track record of developing and implementing a successful strategy, including appropriately questioning and challenging management on the delivery of agreed strategic planning objectives. Risk management 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 (both financial and non-financial) and mitigation strategies, as well as monitoring the effectiveness of risk management frameworks and controls. Capital projects Experience working in an industry with projects involving large-scale capital outlays and long-term investment horizons. Operations and Technology Operations and Supply chain Experience having led or overseen the management of complex operating assets, with a focus on business operations, end to end supply chain and the oversight of key processes. Health, safety and environment Experience related to workplace health and safety, environmental and social responsibility, including implementing and monitoring systems to ensure safe working conditions. Sustainability and climate change Experience or demonstrated understanding of key environmental impacts, including community concerns, climate change risks, and the governance of these impacts. Innovation and 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 and subsequent performance and customer experience; or understanding how to align existing digital touch points to improve performance and customer interfaces. People Human Resources and Remuneration Board remuneration committee membership or management experience in relation to remuneration, including incentive programs and relevant legislation and contractual frameworks governing remuneration. Culture and People Experience and ability to develop succession plans, develop talent, oversee people management, monitor culture and improve diversity. Marketing and Customers Senior executive experience in consumer and customer marketing and customer service delivery. 35 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 Penny Winn. Until 10 June 2021 the committee was chaired by Mike Ihlein and the other members of the committee were Nigel Garrard, Christine Holman, Matthew Quinn and Penny Winn. From 11 June 2021 the committee continued to be chaired by Mike Ihlein and the other members of the committee were Nigel Garrard, Christine Holman and Penny Winn. From 26 June 2021 the committee has been chaired by Penny Winn and the other members of the committee are Nigel Garrard and Christine Holman. Each of these directors is deemed to be independent and their qualifications and experience are set out on pages 46 and 47 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 42 and 43 of this statement. The Risk & Audit Committee Charter sets out the committee’s specific responsibilities, and includes:  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, including the risk management framework and risk appetite statements;  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 auditors, risk manager and chief financial officer. CORPORATE GOVERNANCE STATEMENT AND RISK 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 executive 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 non-executive directors. In YEM22, no formal board or committee reviews were undertaken however the directors and executive management continued to provide regular feedback to the chair in relation to the processes and operation of the board and its committees. An external review of the board and its committees was commenced in April 2022. Board Committees To increase its effectiveness, the board has three committees consisting of the Risk & Audit Committee, Safety & Sustainability 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 Safety & Sustainability 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 Safety & Sustainability Committee each comprise at least three non-executive directors and are chaired by a director who is not the chair of the board. All committees meet at least four times per year. 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. 36 CSR LIMITED ANNUAL REPORT 2022 CORPORATE GOVERNANCE STATEMENT AND RISK 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;  addressing board succession, including recommending the appointment and removal of directors;  assessing the independence of each non-executive director;  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 YEM22 Details of director attendance at board and board committee meetings held during the year are provided on page 49 of the Directors’ Report. The Remuneration & Human Resources Committee is chaired by Matthew Quinn. The other members of the committee are Nigel Garrard, 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 executive managers reporting to the managing director; and  overseeing CSR’s human resources strategy, particularly succession and development planning for executive managers. The committee considers independent advice on policies and practices to attract, motivate, reward and retain strong performers. Safety and Sustainability 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 Safety & Sustainability Committee, previously known as the Workplace Heath, Safety & Environment Committee, oversees and reports to the board on the management of the company’s WHS&E responsibilities. The Safety & Sustainability Committee is chaired by Christine Holman. Until 10 June 2021 the other members of the committee were John Gillam, Mike Ihlein and Penny Winn. From 11 June 2021 the other members of the committee were John Gillam, Mike Ihlein and Matthew Quinn, and from 26 June 2021 the other members of the committee have been John Gillam and Matthew Quinn. The managing director and other members of management attend meetings of the Safety & Sustainability Committee by invitation. The committee’s specific responsibilities are set out in the Safety & Sustainability Committee Charter, and include:  receiving regular performance reports from management on WHS&E matters;  monitoring the effectiveness of the WHS&E risk management framework and 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. During YEM22, two committee meetings were held virtually due to COVID-19 travel restrictions. 37 CORPORATE GOVERNANCE STATEMENT AND RISK 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 an executive leadership team, comprised of the managing director and direct reports. The executive team meets weekly 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; instilling and reinforcing values as set by the board; and  ensuring timely and accurate reporting to the board and board committees. During YEM22, steering committees were established across a number of key functional areas, bringing together the executive leadership team and subject matter experts, providing an opportunity for regular cadence to drive collaboration and initiatives, enabling successful project delivery, in accordance with the strategy set by the board. Senior executive appointments and service agreements CSR undertakes background checks on prospective senior executives, covering the candidate’s 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 are 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 assessed. CSR conducted evaluations of its senior executives in accordance with this process in October 2021, as well as in April 2022. 38 CSR LIMITED ANNUAL REPORT 2022 During YEM22, change management, capability and reward have continued to be key focus areas, with CSR’s reward strategy further reviewed to align and standardise remuneration, reward practices and incentives to drive a high-performance culture. 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. CODE OF BUSINESS CONDUCT, ETHICS AND CULTURE Code of business conduct and ethics CSR has a Code of Business Conduct and Ethics (the code) which underpins its goals and values as embedded within the company’s behaviours. The code sets the standards for dealing with external stakeholders. The underlying principle of CSR’s code is that lawful, ethical and responsible 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 and responsibly in all business activities. The code articulates how employees are expected to operate in line with CSR’s fundamental values. CSR's Values, as embedded within the company’s behaviors, are set out both in the code and separately on CSR’s website and guide the day-to-day interactions of employees and supports the delivery of CSR’s strategy. The code incorporates CSR’s anti-bribery and corruption policy 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 submit 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 company's Reporting Incidents Policy provides that an employee will not be subject to retaliation by CSR for reporting in good faith a possible violation of the code. The board is advised of all material breaches of the code and incidents reported under the policy via the Risk & Audit Committee. CSR is committed to conducting business honestly and fairly and in compliance with all laws and regulations. The company’s Supplier Code of Conduct sets out the expectations of CSR’s suppliers, and applies to all suppliers, including all organisations and sub-contractors providing goods and services to CSR, based in Australia, New Zealand and overseas. During YEM22, the company submitted a Modern Slavery Statement in accordance with the Commonwealth Modern Slavery Act 2018. The Statement addresses the company’s key modern slavery risks and how these risks have been identified and assessed, as well as information on the actions being taken to mitigate those risks and how the effectiveness of these mitigating actions is assessed. CORPORATE GOVERNANCE STATEMENT AND RISK Culture Throughout YEM22, CSR has continued to promote and develop the culture and behaviors required to align with our purpose – Building Solutions for a Better Future. Attracting diverse talent and motivating the right behaviours are key elements of CSR’s remuneration and reward framework, which is reviewed regularly. Diversity and Inclusion at CSR CSR has policies and practices designed to improve diversity and inclusion. The company’s Fairness, Respect & Diversity Policy is available on CSR’s website. CSR places great importance on the health, safety, wellbeing and engagement of our people and remains committed to increasing diversity and inclusion in the workplace by applying policies and practices designed to attract, retain and develop diverse talent. Teams that are diverse will provide new and different perspectives to foster innovation and ultimately better solutions for our customers. The building products manufacturing industry provides an opportunity for CSR to attract and develop female talent into underrepresented roles. CSR regularly reviews and monitors our attraction, retention and development frameworks, considering opportunities to attract diverse talent and in particular female talent into underrepresented roles. We have maintained regular reporting on attraction, selection and retention of female employees by tracking metrics on:  The number of women that have joined CSR;  Women who have left CSR and the reason for leaving;  The gender participation ratio for CSR and each business unit; and  Gender pay equity. CSR workplace profile CSR is committed to increasing female representation at all levels of management and across the organisation. 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 YEM22, the percentage of women in the CSR workforce was 20%. During YEM22, 27% of new hires were women. In YEM22, the proportion of CSR’s workforce currently represented by women in leadership roles is set out below: Figure 2: Women in leadership 1 In December 2020, the number of Directors increased from six to seven as a temporary measure to facilitate board transition. 39 CORPORATE GOVERNANCE STATEMENT AND RISK Measurable objectives Improving diversity and inclusion requires cultural change driven by leaders and commitment of the board and senior management. CSR has structured its measurable objectives around this commitment. The achievements for YEM22 and the initiatives for YEM23, as approved by the Remuneration & Human Resources Committee, are set out below: Table 3: Diversity measurable objectives Measurable objective YEM22 achievements Overview of YEM23 initiatives Leadership and culture   Implemented consistent behavioural standards Implementation of enhanced means of measuring culture to provide more meaningful real-time insights. Survey results indicated minimal difference in engagement by gender  Continue to monitor and reinforce CSR’s expected behavioural standards  Continue to measure culture and engagement ensuring that all line managers have an action plan to address areas of focus  Promoted diversity and inclusion through  Monitor culture and engagement results based on  recognition and celebration of International Women’s Day by showcasing female leaders in underrepresented leadership roles Improved accessibility to training and development by providing access to online learning, for individual and team development, as well as new career opportunities through strategic projects  Provided two “thank you” leave days to CSR employees for their efforts in YEM22  Membership and participation in the Champions of Change Coalition to support gender equality in the value chain and assist with improved diversity and inclusion at CSR  Gender pay is analysed and adjusted through the annual salary review cycle. In addition, ongoing bi- annual reviews of gender pay parity have resulted in significant progress to address gender pay disparity. Across the organisation female salaries have been reviewed and where necessary adjusted in line with market benchmarks  Launch of a Wellbeing program available to all employees, providing access to a holistic well resourced Wellbeing portal, including online health assessments  Attracted and promoted females into underrepresented roles including operations team members and leaders, logistics/warehouse management and engineering roles  Continued to appoint female talent to strategic on-job development opportunities gender participation and engagement, taking action as required  Recruit and promote leaders who role model inclusiveness to build diversity and inclusion  Aspire to achieve gender participation rate of 30% at all levels over time, exceeding the Australian Bureau of Statistics manufacturing industry average of 27%  Focusing on appointing females into underrepresented roles  Continued monitoring of gender pay parity and action to address where required  Further review of parental leave policy to be competitive with other employers  Update Supplier Code of Conduct that sets expectations relating to diversity and inclusion  Improve recruitment and selection processes to make operations roles more accessible for females  Build future female talent pipelines with tertiary institutions  Customise sourcing strategies to target female talent  Identify opportunities in operational environments to ensure that amenities, team culture and behaviours are welcoming for diverse new hires Policy & Governance Recruitment and retention 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 66 of the Remuneration Report. Employees cannot approve their own remuneration. Any adjustment to the remuneration of direct reports, must comply with CSR’s remuneration policies and approvals process. The Remuneration Report, commencing on page 51 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 YEM22 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. 40 CSR LIMITED ANNUAL REPORT 2022 CORPORATE GOVERNANCE STATEMENT AND RISK 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 including the risk framework and risk appetite statements and the internal and external audit functions;  Safety & Sustainability 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  Executive 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 monthly assurances from the management team that significant risks are being 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 current and emerging risks across the businesses to be identified, evaluated, monitored and controlled. Risks are classified as either strategic/commercial, operational, financial or compliance/conduct risks. The framework also includes evaluation of mitigation strategies. CSR’s Risk Appetite Statements, approved by the board, are core to the Risk Management Policy and define (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 Statements, 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, risk appetite statements 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 subject matter experts 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 risk management framework annually to confirm that the framework continues to be appropriate and effective. The most recent assessment of the risk management framework took place in September 2021. 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 throughout YEM22 was operating effectively; and  the systems relating to financial reporting were operating effectively in all material respects. In YEM22 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, the Modern Slavery Statement and this corporate governance statement. These periodic reports are approved by the board. 41 CORPORATE GOVERNANCE STATEMENT AND RISK Environmental, social and economic sustainability risks CSR’s risk management framework is intended to provide the basis for a systematic approach to the identification and management of risks. The matters below reflect CSR’s material economic, environmental and social sustainability risks. Table 4: 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 Digital and cyber security Product liability  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 managing director, chief financial officer, 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 70% of CSR’s total revenue is generated from products and services supplied into the 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.  Digital services are increasingly used by the  Regular user security awareness training is ongoing, including 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. simulated phishing campaigns and implementation of advanced threat protection.  Ongoing implementation of a cyber security improvement plan with accreditation in accordance with ISO27001.  Regular penetration testing and patching across systems.  Previous involvement in asbestos in Australia and exporting asbestos to the United States.  CSR ceased asbestos mining in 1966 and divested remaining interests in 1977.  CSR meets all valid claims in both Australia and the 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. Reputational risk associated with breach of social licence to operate  CSR operates a number of factories across  CSR’s code of business conduct sets out the behaviours Australia and New Zealand and employs over 2,500 employees. expected of all employees, suppliers and other contractors. Compliance with the code is measured annually.  CSR‘s activities can impact the community and environment in which it operates.  There is a dedicated, external confidential hotline available to employees and other stakeholders for reporting misconduct.  Central technical team established to maintain product governance. 42 CSR LIMITED ANNUAL REPORT 2022 CORPORATE GOVERNANCE STATEMENT AND RISK Environmental, social and economic sustainability risks (continued) Table 4: Material economic, environmental and social sustainability risks (continued) Key areas of materiality Risks Monitor and manage risk Supply Chain and product compliance Sustainability, climate change and energy  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.  Active implementation of CSR’s sustainable procurement strategy, including extensive raw material and product testing, compliance and certification. This process will also align CSR with the requirements of Australian Modern Slavery legislation.  The company’s Supplier Code of Conduct sets out the expectations of CSR’s suppliers, and applies to all suppliers, including all organisations and sub-contractors providing goods and services to CSR, based in Australia, New Zealand and overseas.  CSR has set targets out to 2030, to increase the quantity of products purchased from social enterprises (including indigenous and disability owned businesses).  CSR’s manufacturing operations use  For 2030, CSR has set 10 year sustainability targets which 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 CSR manages our land assets and business processes. cover key areas of energy and emissions reduction, procurement, packaging, minimising water use and waste and preserving biodiversity. Initial three year planning is underway as a pathway to achieve 2030 targets which is monitored and reviewed regularly by senior management and the board Safety & Sustainability Committee.  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 systems are installed at some sites in addition to site specific energy reduction initiatives.  Transition risk assessment scenarios have now been completed for each of Gyprock plasterboard, Bradford insulation and PGH Bricks, CSR’s largest businesses 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.  Sustainability Steering Committee was formed to provide focused oversight, with external advisors engaged as necessary to provide specialist sustainability advice. Workplace health and safety  CSR has a stated long-term objective of  The board Safety & Sustainability Committee regularly achieving zero harm to CSR people across all operations. Impact of disruption as a result of COVID-19 isolation requirements.  reviews initiatives targeting improved safety performance across CSR’s businesses.  Supported workforce to attend COVID vaccination appointments with paid leave. Note: Material Risks are listed alphabetically. 43 ENGAGEMENT WITH STAKEHOLDERS CSR has a number of stakeholders including shareholders, employees, customers, suppliers and local communities. The board identifies and prioritises CSR’s key stakeholders, develops a strategy for engagement with stakeholders and supports management to engage with key stakeholders to understand, consider and respond to issues. 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, chair of the Risk & Audit Committee, 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. CORPORATE GOVERNANCE STATEMENT AND RISK 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 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 chair 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 internal audit The Risk & Audit Committee recommends to the board the appointment or dismissal of the internal audit partner, who is independent of the external auditor. The internal audit function utilises external expertise to provide objective independent assurance to management and the board on the effectiveness of CSR’s internal control, risk management and governance systems and processes. The internal audit lead has direct access to the chair of the Risk & Audit Committee and oversees the execution of the internal audit plan, as approved by the Risk & Audit Committee. The role of internal audit 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;  provide objective assurance over the adequacy and effectiveness of controls;  oversee the implementation of CSR’s risk framework across the organisation; and  recommend improvements to the company’s risk management framework. Internal audit has full access to all CSR businesses, records and personnel. The annual 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 & Audit Committee at least bi-annually. 44 CSR LIMITED ANNUAL REPORT 2022 CORPORATE GOVERNANCE STATEMENT AND RISK Commentary on financial results Role of the investor relations function 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 chair’s and managing director’s addresses at the company’s annual general meeting are made available on CSR's website. Other engagement activities 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. The company encourages shareholders to provide email addresses so that company information can be provided to shareholders electronically. Announcements to the ASX, significant briefings, presentations, notices of meetings and speeches at annual general meetings are promptly posted on the Investors and News section of CSR’s website. Shareholders can register to receive shareholder information and can lodge proxies electronically for the annual general meeting. The annual general meeting, results announcements and other major briefings are available via a live webcast from CSR’s website, for access by all interested parties. Shareholders are encouraged to submit questions or comments ahead of, or during, 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. On occasions when the annual general meeting may be held as a hybrid meeting, an opportunity for shareholders to ask questions orally and in writing and to vote in real time will be made available. All resolutions at the annual general meeting are decided by a poll rather than on a show of hands. The company’s Sustainability Report provides information on CSR’s sustainability record across a number of priority areas including the environment, people and safety, community and supply chain. The company’s Supplier Code of Conduct sets out the expectations of CSR’s suppliers, and applies including all organisations and sub-contractors providing goods and services to CSR, based in Australia, New Zealand and overseas. to all suppliers, During YEM22, the company submitted a Modern Slavery Statement in accordance with the Commonwealth Modern Slavery Act 2018. The Statement addresses the company’s key modern slavery risks and how these risks have been identified and assessed, as well as information on the actions being taken to mitigate those risks and how the effectiveness of these mitigating actions is assessed. Details of the company’s engagement with the community are available in the Sustainability Report found on CSR’s website. 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 lodgement of information on the ASX platform, managing and updating the CSR website, investor roadshows, conferences and other briefings with all materials lodged with the ASX prior to distribution. CSR utilises the following activities to promote effective communication with the market:  comprehensive and up to date company website;  investor briefings, presentations, conferences and other events;  encouraging questions via the company’s website and ahead of the AGM as outlined in the Notice of Meeting; and  webcasting important company events. SHARE TRADING POLICY Under the company’s Share Trading Policy, directors, senior managers and identified designated employees may only buy or sell CSR shares, or give instructions to the trustee of CSR’s employee share acquisition plan (ESAP), or vary their participation in the dividend reinvestment plan (DRP) 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. Additional clearance requirements apply to directors of CSR Limited, the managing director, chief financial officer as well as senior executives who are eligible to participate in CSR’s long-term incentive plan. Each of these individuals must obtain clearance for any proposed dealing in CSR’s securities. Under the policy, and as required by law, all directors and employees are prohibited from buying or selling CSR securities 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 (4th edition). 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. 45 BOARD OF DIRECTORS Board of Directors The Board of Directors are responsible for and oversee the governance, culture and management of CSR. CSR’s shareholders approve the appointment of Directors and hold them accountable for the performance of the Company. JOHN GILLAM BCom, MAICD, FAIM. Chair of the board since 1 June 2018, non-executive director since December 2017. Other CSR responsibilities: Member of the Remuneration & Human Resources Committee and the Safety & Sustainability 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 Nufarm Limited (Director since July 2020 and Chair since September 2020 to current)  Chairman of BlueFit Pty Limited (2018 to current)  Director of Heartwell Foundation (2009 to current)  Director of Clontarf Foundation (2017 to current) JULIE COATES BA, DipE. 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 Limited (2018 to 2019) NIGEL GARRARD BEc, CA, MAICD. Non-executive director since December 2020. Other CSR responsibilities: Member of the Risk & Audit Committee and Remuneration & Human Resources Committee. Experience and expertise: Nigel was formerly managing director and CEO of leading packaging manufacturing company Orora Limited from 2013 to 2019. Nigel has also held a number of senior positions in a range of manufacturing industries including managing director/president of Amcor Australasia & Packaging Distribution, managing director Coca-Cola Amatil Food & Services Division and managing director of the then listed SPC Ardmona. Other directorships/offices held:  Non-executive director of Ansell Limited (2020 to current)  Chairman of McMahon Services Aust. Group advisory board (2019 to current)  Chairman of Flinders Port Holdings Limited (2021 to current)  Director of Hudson Institute Medical Research (2016 to current)  Director of Detmold Group advisory board (2020 to current)  Previously a director of Orora Limited (2013 to 2019) 46 CSR LIMITED ANNUAL REPORT 2022 BOARD OF DIRECTORS CHRISTINE HOLMAN PGDipBA, MBA, GAICD. Non-executive director since October 2016. Other CSR responsibilities: Chair of the Safety & Sustainability Committee and member of the 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 Metcash Limited (2020 to current)  Non-executive director of Collins Foods Limited (2019 to current)  Non-executive director of The National Intermodal Corporation, 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 (2017 to current)  Non-executive director of the McGrath Foundation (2020 to current)  Previously a director of WiseTech Global Limited (2018 to 2019)  Previously a director of Blackmores Limited (2019 to 2021) MATTHEW QUINN BSc (HONS), ACA, ARCS. Non-executive director since August 2013. Other CSR responsibilities: Chair of the Remuneration & Human Resources Committee and member of the Safety & Sustainability Committee. 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 TSA Management Group Holdings Pty Limited (2018 to current)  Non-executive director of Elders Limited (2020 to current)  Member of the Australian Business and Community Network Scholarship Foundation  Previously a non-executive director of Regis Healthcare Limited (2018 to 2021)  Previously a non-executive director of Class Limited (2015 to 2022) PENNY WINN BCOM, MBA, GAICD. Non-executive director since November 2015. Other CSR responsibilities: Chair of the Risk & Audit Committee and Member of the Remuneration & Human Resources Committee. Experience and expertise: Penny was formerly director Group Retail Services with Woolworths responsible for leading the Logistics and Information Technology divisions and the Customer Engagement teams, a position held until October 2015. Penny has over 30 years of experience in retail in senior management roles in Australia and overseas. Other directorships/offices held:  Non-executive director of Ampol Limited, previously Caltex Australia Limited (2015 to current)  Board member of the ANU Foundation (2020 to current)  Board member of the Amphora Group PLC (2021 to current)  Previously Chairman of Port Waratah Coal Services Limited (2015 to 2019)  Previously a non-executive director of Coca-Cola Amatil Limited (2019 to 2021)  Previously a non-executive director of Goodman Limited and Goodman Funds Management Limited (2018 to 2021) 47 DIRECTORS’ REPORT Directors’ Report The board of directors of CSR Limited (CSR) presents its report of the consolidated entity, being CSR and its controlled entities (CSR group), for the year ended 31 March 2022. The information appearing on pages 48 to 70 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 the CSR group operations and results for the year ended 31 March 2022 is set out on the inside front cover to page 45 and pages 71 to 112 of the annual report and forms part of the directors’ report. This includes the summary of consolidated results, 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 2022. Events after balance sheet date Dividends On 11 May 2022 the board resolved to pay a final dividend of 18.0 cents per share, fully franked at the 30% corporate tax rate. The final dividend for the financial year ended 31 March 2022 has not been recognised in this financial report. No other matters or circumstances have arisen since the end of the financial year that have significantly affected or may significantly affect the CSR group’s operations, the results of those operations or the CSR group’s state of affairs in future financial years. Dividends and distributions to shareholders Dividends through the year have been as follows:  a final ordinary dividend of 14.5 cents per ordinary share and a final special dividend of 9.5 cents per ordinary share (100% franked at the 30% corporate tax rate), with respect to the financial year ended 31 March 2021, was paid on 2 July 2021; and  an interim ordinary dividend of 13.5 cents per ordinary share (100% franked at the 30% corporate tax rate) was paid on 10 December 2021 (as set out in note 19 to the financial statements on page 93). No other distributions were paid during the year. Options over share capital Other than as disclosed in the Remuneration Report:  no CSR options were granted to executives or non-executive directors during the year;  there were no unissued shares or interests in CSR subject to options at the date of this report; and  no CSR shares or interests were issued pursuant to exercised options during or since the end of the year. Indemnities and insurance Under rule 101 of CSR’s constitution, CSR indemnifies every person who is or has been an officer of CSR, to the extent permitted by law and subject to the restrictions in sections 199A and 199B of the Corporations Act 2001 against:  liability incurred by that person as an officer of CSR (including liabilities incurred by the officer as a director of a subsidiary of CSR where CSR requested the officer to accept appointment as director); and  reasonable legal costs incurred in defending an action for a liability or an alleged liability incurred by that person as such an officer of CSR (including such legal costs incurred by the officer as a director of a subsidiary of CSR where CSR requested the officer to accept appointment as director). For the purposes of rule 101 of CSR’s constitution, ‘officer’ means a director, secretary and executive officer of CSR (as defined in the Corporations Act 2001). CSR has entered into a deed of indemnity, insurance and access with current and former directors of CSR and its subsidiaries. Under each director’s deed, CSR indemnifies the director against all costs, losses or liabilities, including without limitation, legal costs and expenses, on a full indemnity basis, incurred by the director in their capacity as a director of CSR or, in some cases as a director of a CSR subsidiary. The deeds also provides directors certain rights of access to board papers and require CSR to maintain insurance cover for directors. No director or officer of CSR has received benefits under an indemnity from CSR during or since the end of financial year. CSR’s external auditor is not indemnified under rule 101 of CSR’s constitution or any agreement. During the year, CSR paid premiums in respect of insurance contracts for the year ended 31 March 2022 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 2023. 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 2022. 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 (2021: $nil) and as such disclosure to the Australian Electoral Commission was not required. 48 CSR LIMITED ANNUAL REPORT 2022 DIRECTORS’ REPORT Auditor independence Directors and company secretary 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 2022, an officer of the CSR group. No auditor who played a significant role in the CSR group audit for the year ended 31 March 2022 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 50. 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 111. 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 51 to 70 provides: a summary of the board’s remuneration policy and practices during the past year as they apply to directors and other KMP (as defined by the Accounting Standard AASB 124 Related Party Disclosures); the relationship between remuneration policy and the CSR group’s performance; and the remuneration details for each director and other KMP. Table 1: Meetings of directors On 25 June 2021 Mr Mike Ihlein retired from the Board. There were no other changes to the board in the year ended 31 March 2022. The names of directors who held office at 11 May 2022, 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 46 and 47 and forms part of the directors’ report. The qualifications and experience of the company secretary at 11 May 2022 are as follows: Jill Hardiman AGIA Jill joined in CSR in 2002 and has worked within the Company Secretariat team since 2003, and as Assistant Company Secretary since May 2018. In November 2021 Jill was appointed Company Secretary and has broad secretariat and corporate governance experience. Jill holds a Graduate Diploma in Applied Corporate Governance and is an Associate of the Governance Institute of Australia. The number of meetings of the company’s board of directors and each board committee held during the year ended 31 March 2022, 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 69 and 70. Other than as disclosed elsewhere in this report, no director:  has any relevant interest in debentures of, or interests in a registered scheme made available by, CSR or a related body corporate;   has any rights or options over shares in, debentures of or interests in a registered scheme made available by, CSR or a related body corporate; or is a party to or entitled to a benefit under any contracts that confer a right to call for or deliver shares in, debentures of or interests in a registered scheme made available by, CSR or a related body corporate. Year ended 31 March 2022 CSR Board Risk & Audit Committee Safety & Sustainability Committee Remuneration & Human Resources Committee Held1 Attended2 Held1 Attended2 Held1 Attended2 Held1 Attended2 John Gillam Nigel Garrard3 Christine Holman4 Michael Ihlein5, 6 Matthew Quinn7 Penny Winn8 Julie Coates 8 8 8 2 8 8 8 8 8 8 2 8 8 8 n/a 4 4 1 1 4 4 3 4 4 1 2 4 4 4 n/a 4 1 4 n/a 4 4 – 4 1 4 – 4 4 4 n/a n/a 4 4 4 4 4 4 2 4 4 4 1 Meetings held while a member. 2 Meetings attended. 3 Director is not a member of the Safety & Sustainability Committee. 4 Director is not a member of the Remuneration & Human Resources Committee. 5 Director retired 25 June 2021. 6 Director was not a member of the Remuneration & Human Resources Committee. 7 Director was appointed a member of the Safety & Sustainability Committee from 11 June 2021 and ceased to be a member of the Risk & Audit Committee on the same date. 8 Director ceased to be a member of the Safety & Sustainability Committee from 11 June 2021. John Gillam Chair of the board 11 May 2022 Julie Coates Managing Director and CEO 11 May 2022 49 AUDITOR’S INDEPENDENCE DECLARATION The Directors CSR Limited Triniti 3 39 Delhi Road North Ryde NSW 2113 11 May 2022 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 2022, 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 organisation. 50 CSR LIMITED ANNUAL REPORT 2022 REMUNERATION REPORT 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 2022 (YEM22). One of our most important roles as a board is to implement a remuneration framework for our senior executives and employees that is fair, reasonable and motivates them to deliver strong performance. The key principle of our remuneration strategy is alignment of executive and shareholder outcomes. 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. YEM22 targets and performance In its response to the ongoing pandemic, management prioritised the health and safety of CSR’s employees, as well as business continuity. Challenges included evolving public health orders and external supply chain disruptions. Notwithstanding the business disruption related to the pandemic, management progressed with the business strategy which is enabled by the development of industry best practice supply chain and digitisation of systems and processes. The business is well positioned to drive the most competitive product and service solutions for the market and our customers. The Company has been well managed by the executive leadership team, delivering strong financial performance and positive outcomes for shareholders. The Building Products business segment produced a 30-year record EBIT and the share price hit a 10 year high in November 2021. Remuneration outcomes Challenging and motivating short-term incentive (STI) targets were set by the board at the start of the year to incentivise performance. We are pleased to report that CSR’s YEM22 EBIT exceeded the financial target, which accounts for 60% of total STI assessment. The board also reviewed significant items and determined that no adjustments were required to EBIT for STI assessment purposes. The STI payout reflects stretch performance and the management team and employees have been appropriately rewarded for their efforts and results. The board has not exercised any discretion in determining the STI award for YEM22. Looking forward YEM22 was a very good year for CSR, both in terms of financial performance and continued progress with strategic objectives. 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. Matthew Quinn Chair, Remuneration & Human Resources Committee 51 REMUNERATION REPORT | REMUNERATION REPORT OVERVIEW Overview 1 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 2022 (YEM22) and the remuneration framework. The report also details proposed changes for the financial year ended 31 March 2023 (YEM23). Consistent with prior years, actual remuneration of executive KMP has been included in the Remuneration Report in section 3. 2 Key management personnel (KMP) and senior executives KMP for YEM22 are detailed in the table below. KMP are as defined by the Accounting Standard AASB 124 Related Party Disclosures (AASB 124). Following a review of senior executives against the criteria for determining executive KMP, only the Managing Director and CEO and Chief Financial Officer and Executive General Manager, Property and Aluminium qualify as executive KMP, consistent with prior years. Table 1: Key management personnel Name Position Non-executive Directors (NEDs) John Gillam Nigel Garrard Christine Holman Michael Ihlein Matthew Quinn Penny Winn Executive KMP Julie Coates David Fallu Director and Chair of the board Director Director Director Director Director Term as KMP Full year Full year Full year To 25 June 2021 Full year Full year Managing Director and CEO Chief Financial Officer and Executive General Manager, Property and Aluminium Full year Full year The senior executives are detailed in the table below. These senior executives are not KMP as defined by AASB 124. In some cases, where aspects of remuneration apply to other senior roles within CSR, the term ‘executive’ is also used. Table 2: Senior executives Name Position Term as senior executive Current senior executives Amy Bentley Paul Dalton Catherine Flynn Heath Hopwood Andrew Mackenzie Gary May Andrew Rottinger Cameron Webb Mark White Former senior executives Executive General Manager, Logistics Executive General Manager, Interior Systems Executive General Manager, Human Resources Executive General Manager, Masonry & Insulation General Manager, Property Executive General Manager, Customer Solutions Executive General Manager, Construction Systems Full year Full year Full year From 5 July 2021 Full year Full year Full year Executive General Manager, Transformation, Technology & Digital Full year General Manager, Aluminium Full year Anthony Tannous Executive General Manager, Masonry & Insulation To 12 May 2021 52 CSR LIMITED ANNUAL REPORT 2022 REMUNERATION REPORT | REMUNERATION AND PERFORMANCE OUTCOMES Remuneration and performance outcomes 3 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 YEM22. 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 10, with a summary of the differences detailed in the table below. Table 3: Comparison of actual and statutory remuneration disclosures Fixed annual remuneration Short-term incentive (STI) Long-term incentive (LTI) Actual remuneration disclosures Cash salary, superannuation contributions and other eligible salary sacrifice benefits STI award for YEM22, inclusive of the 40% 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 2022 Statutory remuneration disclosures As above STI award for YEM22, 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 YEM22 relates to YEM20 to YEM22 LTI grants Leave accruals Not included Included Other benefits 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 table 4 below and is prepared on the basis summarised in table 3. Commentary on the key components of remuneration is set out in table 5 below. Table 4: Actual remuneration received by executive KMP Year ended $ 31 March 2022 Julie Coates David Fallu Total 31 March 2021 Julie Coates David Fallu Total Fixed remuneration Short-term incentive Long-term incentive Other benefits1 1,150,000 715,000 1,865,000 1,094,800 662,400 1,757,200 1,150,000 1,104,000 700,000 700,000 1,850,000 1,804,000 – 142,062 142,062 – 92,827 92,827 – 1,000 1,000 – 999 999 Total 2,244,800 1,520,462 3,765,262 2,254,000 1,493,826 3,747,826 1 Other benefits include USOP. Table 5: Commentary on actual remuneration received by executive KMP Area Explanation Fixed remuneration  Ms Coates’ fixed remuneration was not increased during the year.  Mr Fallu’s fixed remuneration was increased from 1 July 2021 from $700,000 to $720,000 per annum, through CSR's annual remuneration review. 53 REMUNERATION REPORT | REMUNERATION AND PERFORMANCE OUTCOMES 3 Actual remuneration (continued) Table 5: Commentary on actual remuneration received by executive KMP (continued) Area Explanation Short-term incentives (STI)  The board assessed Ms Coates’ performance against the objectives set and determined that Ms Coates would be awarded an STI at between target and stretch. The STI outcome recognises Ms Coates’ leadership of the business over the last year, including the significant efforts to deliver financial results above the target while continuing to manage complexities and disruption due to the COVID-19 pandemic. Strong momentum has been gained following the streamlining of the business in YEM21, with operational efficiencies and cost disciplines reflected in the financial results for the year. The CSR strategy to develop market leading customer solutions, industry best practice supply chain and digitisation of systems and processes is well-progressed. The STI award represents 95% of Ms Coates’ maximum STI opportunity for YEM22.  The board assessed Mr Fallu’s performance against the objectives set and determined that Mr Fallu would be awarded an STI at between target and stretch. The STI outcome recognises Mr Fallu’s role in the implementation of strategic initiatives and improvement of cost disciplines. The outcome also reflects Mr Fallu’s leadership of the Property and Aluminium businesses, both of which have delivered strong financial performances in YEM22. The STI award represents 92% of Mr Fallu’s maximum STI opportunity for YEM22.  Further detail on the STI outcomes is included in sections 4 and 7.  Long-term incentives represent the partial vesting of the YEM19 LTI for Mr Fallu. The LTI for YEM22 reflects a slightly higher vesting outcome of the TSR LTI tranche and a higher share price at the time of vesting. Long-term incentives (LTI) Other benefits  Other benefits included USOP.  Further detail is included in sections 4, 8 and 12. 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 3. The analysis excludes the executive KMP. The increase in total remuneration is due to higher STI outcomes in YEM22 due to the senior executive team being in place for the full year. Further explanation on STI outcomes is set out in section 4. The LTI outcomes in YEM22 were lower as several current senior executive team members were not participants in the YEM19 LTI grant. Table 6: Senior executive remuneration Year ended 31 March $ 20221 2021 Actual fixed remuneration received 4,389,472 4,094,123 Short-term incentive 3,645,468 2,586,859 Long-term incentive 308,574 446,211 Other benefits2 4,998 2,996 Total 8,348,512 7,130,189 1 Actual fixed remuneration received is based on the term as a senior executive and includes the former senior executive listed in table 2. 2 Other benefits include USOP. 54 CSR LIMITED ANNUAL REPORT 2022 REMUNERATION REPORT | REMUNERATION AND PERFORMANCE OUTCOMES 4 Performance outcomes Summary of performance outcomes for YEM22 A summary of the YEM22 short-term and long-term incentive outcomes are set out in tables 7 to 10 below, with further detail on the plans included in sections 7 and 8 respectively. i) Short-term incentive outcomes Table 7: YEM22 STI CSR group financial targets and assessment of performance outcomes Area Explanation YEM22 financial targets for STI purposes  At the start of each year, the board sets challenging financial targets taking into account the relevant factors for each business segment including forecasts for building activity, aluminium pricing and the property market, as well as considering investor requirements for a certain level of sustainable returns.  The financial targets for YEM22 were set by the board in March 2021, with earnings before interest and tax (EBIT) the primary STI financial measure. The board has elected not to disclose detailed financial and/or individual targets due to commercial sensitivities. Assessment of performance against targets  The CSR group and business segments YEM22 EBIT exceeded the financial targets set. Further detail on the business segment targets and performance is summarised in table 8.  The actual CSR group EBIT of $291 million represented an increase of $54 million or 22% compared to YEM21 and was significantly above the financial target set. As a result, the CSR group financial component of STI was awarded at stretch.  The CSR group financial performance for YEM22 reflected: ‒ Building Products 30-year record earnings, with strong operational performance, continued cost disciplines and realisation of benefits following the streamlining of the organisation in YEM21. ‒ Continued progress on the CSR strategy including building supply chain capability and creating customer driven integrated solutions to drive the most competitive product and service solutions for the market. ‒ Management of the uncertainty and business disruptions arising from COVID-19, including the impact of various public health restrictions in place during the year. ‒ The delivery of all targeted property sales and the sale of two additional sites. ‒ Higher Aluminium earnings, while also increasing the longer-term hedging portfolio.  An assessment of significant items was also completed by the board and did not result in a change in the actual EBIT result for STI purpose. Details of this assessment are set out in table 9.  The Board did not exercise any discretion in relation to STI outcomes.  The total STI awarded amounts to a payout ratio of 7.3% of YEM22 EBIT (YEM21: 7.5% of EBIT). STI awarded as a % of EBIT Table 8: YEM22 STI business financial targets and assessment of performance outcomes Business Explanation of STI financial targets Assessment of performance outcomes Outcome Building Products  The targets were established having regard to forecast construction activity for YEM22, including the expected capacity constraints of the construction industry. These forecasts are formulated with reference to external data sources and independent economic models.  The business was tasked to deliver earnings growth, while maintaining a continued focus on operational leverage and realising the benefits of business streamlining and cost disciplines embedded in YEM21.  The financial targets set for YEM22 also assumed that there would be minimal business disruption due to the COVID-19 pandemic.  Building Products sales revenue for YEM22 was slightly above the target set, with growth across all businesses.  Building Products EBIT of $228 million was up $44 million or 24% on YEM21. The significant earnings growth was driven by strong operational performance, realisation of benefits from organisational streamlining and continued cost disciplines.  The business also managed unplanned disruptions caused by the COVID-19 pandemic, including impacts of restrictions on worker movements and temporary construction site closures in Sydney and Melbourne.  Earnings significantly exceeded the financial target set and the financial STI component was awarded at stretch. Financial STI outcomes Stretch Between target and stretch At target Between threshold and target Below threshold 55 REMUNERATION REPORT | REMUNERATION AND PERFORMANCE OUTCOMES 4 Performance outcomes (continued) i) Short-term incentive outcomes (continued) Table 8: YEM22 STI business financial targets and assessment of performance outcomes (continued) Business Explanation of STI financial targets Assessment of performance outcomes Outcome Property  A challenging earnings target was set for the Property business in YEM22, which included: o the sale of Horsley Park stage 2.2a which required completion of rehabilitation works; o completion of the final stages of Chirnside Park residential project; and the sale of the Moss Vale site.  The earnings target for YEM22 was set below o YEM21 due to the significant Horsley Park sale transaction completed during YEM21. Aluminium  In the context of volatile Aluminium prices and higher production costs, the Aluminium business was set a target which would see earnings increase compared to YEM21.  The financial target reflected the hedging held at the time and forecast production costs.  The Property business generated earnings of $47 million. In addition to completing all of the targeted transactions during YEM22, the Property business also finalised the sale of 4.6 hectares of land at Badgerys Creek and the sale of the Thornton site.  The business also continued to strategically advance the long-term property portfolio, including quarry rehabilitation at Badgerys Creek and progressing rezoning of the Schofields site.  Overall, the YEM22 Property business earnings significantly exceeded the financial targets set and the financial STI component was awarded at stretch.  During the year the Tomago smelter has performed well and, with the US dollar Aluminium prices improving over the past year, CSR has taken the opportunity to secure an increase in the hedged position to provide a buffer against the elevated operating cost.  These actions resulted in a favourable earnings performance for YEM22, with the financial STI component awarded at stretch. Financial STI outcomes Stretch Between target and stretch At target Between threshold and target Below threshold Consideration of significant items recorded in YEM22 The STI financial targets are set based on EBIT before significant items. The CSR 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 YEM22, the board has determined that the reported CSR group EBIT of $291 million is appropriate for assessment of remuneration outcomes. Detail on the assessment of each of the significant items is outlined below, including the rationale for the treatment for remuneration purposes. Further detail on significant items reported for YEM22 is contained in note 3 to the financial statements on page 80. Table 9: Assessment of significant items for remuneration purposes Amount (pre-tax) $’million Remuneration outcomes adjusted 86.3 (6.9) No No Item Recognition of tax losses Software-as-a- Services implementation costs Product liability provision (5.0) No Rationale for treatment for remuneration purposes      This benefit relates to legacy carried forward capital tax losses which are now expected to be utilised against capital gains made on CSR property sales. These costs relate to the implementation of Software-as-a-Service arrangements which are now required to be expensed due to a change in international accounting guidance. These items have not been adjusted for remuneration purposes as the target earnings did not contemplate the change in accounting treatment (i.e. the accounting change occurred after the targets had been set). In addition, the amortisation charge that would have been recorded in EBIT under the previous accounting treatment was considered. No adjustment to STI was made as the amount was immaterial and did not impact the STI outcome. The product liability expenses relate to matters pre-dating current management and the board has consistently treated these amounts as significant items with no adjustment to STI. 56 CSR LIMITED ANNUAL REPORT 2022 REMUNERATION REPORT | REMUNERATION AND PERFORMANCE OUTCOMES 4 Performance outcomes (continued) ii) Short-term incentive outcomes (continued) STI non-financial measures The board did not exercise any discretion in determining the non-financial STI component awarded in YEM22, which is also assessed against targets set at the start of the year. The CSR group and businesses met their business unit financial target and as a result their non-financial STI component was awarded. This treatment is in accordance with the STI plan (as detailed in table 13). iii) Long-term incentive outcomes 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. Table 10: YEM22 long-term incentive outcomes LTI measure Explanation Overall  The YEM19 LTI performance hurdles were partially met resulting in 34% of the YEM19 PRP grant vesting in March 2021.  The value of LTI that vested in YEM21 increased compared to YEM20 due to a higher number of rights vesting.  Further detail is contained in section 8. TSR EPS  Total shareholder return (TSR) target: 34% vested out of 50% potential.  Earnings per share (EPS) target: nil% vested out of 50% potential. iv) 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 11: 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 YEM22 YEM21 YEM20 YEM19 YEM18 291.4 13.4 39.7 27.3 237.9 87.3 33.1 21.1 216.8 1.5 27.3 17.8 265.0 (32.9) 36.1 21.8 320.3 25.3 41.9 27.8 6.15 5.78 3.17 3.32 5.18 1.8 1.8 0.57 1.4 1.2 3.6 2.6 –7 2.0 2.2 7.3%8 7.5% 2.6% 6.3% 5.4% 0.1 0.1 0.7 2.0 1.8 0.3 0.4 0.7 2.1 1.8 1 EBIT and EPS are calculated before significant items. 2 TSR at 31 March sourced from Bloomberg. Relative TSR performance is disclosed in Table 20 along with the LTI vesting outcomes. 3 Return on Funds Employed (ROFE) defined in note 2 to the CSR group financial statements. 4 Closing share price at 31 March. 5 Represents the value of PRPs vested 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 26. 7 An STI was not awarded to executive KMP or senior executives for YEM20, except for the special incentive paid to the retiring CEO Mr Sindel based on goals set by the board and determined for services up to 31 August 2019. 8 Total STI awarded for YEM22 represents 152% of the target STI opportunity. Further detail on the STI awarded is outlined in tables 7 and 8. 57 REMUNERATION REPORT | REMUNERATION GOVERNANCE Remuneration Governance 5 Remuneration governance CSR’s remuneration governance framework is set out below. While the board retains ultimate responsibility, CSR’s remuneration policies and procedures are implemented through the Remuneration & Human Resources Committee. The composition and functions of the Remuneration & Human Resources Committee, which oversees remuneration issues and human resources matters, are set out in the charter available from the CSR website. The charter was reviewed and updated during the year. Figure 1: CSR’s remuneration governance framework CSR Board   Overall responsibility for the remuneration strategy and outcomes for executives and non-executive directors. Reviews and, as appropriate, approves recommendations from the CSR Remuneration & Human Resources Committee. Remuneration & Human Resources Committee Management and Board remuneration policy Human Resources, Talent Management and Culture Monitors, recommends and reports to the board on:  Remuneration guidelines and incentive policies for management, executives and KMP, aligned to long-term growth, shareholder value and CSR’s company behaviours.  Superannuation arrangements.  Employee share plans.  Recruitment, retention and termination policies and procedures for senior management.  Board remuneration including the terms and conditions of appointment, retirement and non-executive remuneration within aggregate total amounts approved by shareholders. Monitors, recommends and reports to the board on:  The quality of talent pools for senior management succession.  The effectiveness of CSR's diversity policies and initiatives, including an annual assessment against measurable objectives and proportion of women at all levels of management.  Leadership 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.  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 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) 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 recommendations received from external providers during the year in relation to remuneration policy changes. 58 CSR LIMITED ANNUAL REPORT 2022 REMUNERATION REPORT | COMPONENTS OF REMUNERATION Components of remuneration 6 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 2: CSR’s remuneration strategy and structure Performance driven Alignment with shareholder interests Market competitive remuneration 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 and 40% to individual performance metrics Refer to section 7 for further detail LTIs are provided through the Performance Rights Plan (PRP) and are linked to:  Total shareholder return  Growth in CSR’s EPS Refer to section 8 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  60% cash and 40% shares  50% shares are deferred for one year and 50% deferred for two years  Deferred equity remains at risk until vesting if the executive resigns or due to clawback for malus  Equity with performance assessed over three years  From the YEM21 LTI grant onwards, there is a 12 month holding lock for all shares awarded under the LTI The following figure illustrates the timing of how remuneration is earned, subject to performance measures being met for executive KMP and senior executives. Figure 3: YEM22 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 59 REMUNERATION REPORT | COMPONENTS OF REMUNERATION 6 Summary of the fixed and ‘at risk’ components of remuneration (continued) The key principles on which CSR’s executive remuneration is based on are outlined below. Table 12: Key principles of CSR’s executive remuneration Objective Explanation Performance driven and aligned with shareholder interests  Fixed remuneration should reward executives based on their seniority and experience. The ‘at risk’ 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 and are aligned with shareholder returns.  KMP and senior executives are required to hold, or make progress towards holding, a minimum CSR shareholding. The requirement for KMP is 100% of fixed annual remuneration, acquired over a reasonable timeframe. Further detail on this policy is set out in section 13.  Ownership of CSR shares is encouraged through the LTI plan, 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).  A significant proportion of executive remuneration is ‘at risk’. The following 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. Managing Director and CEO Chief Financial Officer and Executive General Manager, Property and Aluminium 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Fixed STI LTI Market competitive remuneration  Remuneration, including those elements which can be earned subject to business performance, are set at competitive levels that will retain, motivate and attract 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 and a group of industry peers. This ensures that remuneration for KMP is based on roles of comparable size.  At risk remuneration (through STI and LTI) provides the opportunity to earn reward that reaches the top quartile of the market for superior performance. 60 CSR LIMITED ANNUAL REPORT 2022 REMUNERATION REPORT | COMPONENTS OF REMUNERATION 7 (i) At risk remuneration – short-term incentive Table 13: Details of the short-term incentive plan Purpose Motivates and rewards individuals and teams to deliver the business strategy and financial performance to 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 following the release of CSR’s annual financial results. Performance measures The performance measures for the STI were updated in YEM22 to align with CSR’s business strategy. Performance measures are based on a combination of financial and non-financial measures: Performance component Corporate roles Business unit roles CSR group EBIT Business segment EBIT Individual objectives Total 60% – 40% 100% 30% 30% 40% 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 relevant factors for each business segment including forecasts for building activity, aluminium pricing and the property market, as well as considering investor requirements for sustainable returns. Return on Funds Employed (ROFE) is also assessed by the board to ensure the effectiveness with which capital is deployed, measured and rewarded. The maximum STI payable is 200% of a participant’s target STI opportunity (target STI opportunity varies based on seniority) except for the Managing Director and CEO who is capped at 143% of target STI opportunity, equivalent to 100% of fixed annual remuneration. The board reviews items classified as significant at the end of each financial year to determine the extent, if any, by which reported EBIT should be adjusted for STI purposes depending on whether the items were influenced by or within the control of management. STI financial performance targets are set out in the table below. Performance component Threshold2 Percentage of EBIT target achieved Percentage of target STI payable1 95% 0% Target 100% 100% Stretch 110% 200% 1 Managing director and CEO’s STI is capped at 143% of target STI opportunity, equivalent to 100% of fixed annual remuneration. 2 The financial threshold is calculated based on the financial target plus the amount of STI payable if the budget is achieved. The STI accrues on a straight-line basis for financial performance between threshold and target and between target and stretch. No STI is payable in relation to the financial component unless the threshold EBIT is exceeded. If either the CSR group or business segment financial threshold is not met the non-financial component is discounted by 50%. Should both CSR and the applicable business segment not reach the financial threshold, any payment will be at the discretion of the board. Individual objectives are documented in CSR’s performance management system ACHiEVE@CSR and performance is monitored during the year, with a final assessment at year end. The non-financial objectives are aligned to the business strategy and CSR’s defined culture and behaviours. These objectives include relevant KPI’s such as safety and sustainability, customer experience, leadership and development of people, operational improvement and growth and delivery of CSR’s strategic initiatives. For individuals whose behaviour is inconsistent with CSR’s culture and behavioural standards, the non-financial STI may be forfeited. Significant items Minimum financial performance requirements Non-financial objectives Assessment of performance against measures Individual performance assessments and recommendations are made by the participant’s immediate manager, based on the delivery of set objectives and behaviour in achieving these objectives. All recommendations are reviewed and approved by the business unit Executive General Manager and ultimately the CEO and Managing Director. The Remuneration & Human Resources Committee recommends to the board executive KMP and senior executive STIs and the overall STI pool in aggregate. 61 REMUNERATION REPORT | COMPONENTS OF REMUNERATION 7 (i) At risk remuneration – short-term incentive (continued) Table 13: Details of the short-term incentive plan (continued) Board discretion The Board’s philosophy is to minimise discretionary adjustments to the plan outcomes. However, the board and the Managing Director and CEO retain discretion in certain circumstances to alter payments having regard to:  CSR’s overall financial performance, including consideration of significant items;  occurrence of a fatality, regardless of fault;  maintenance and preservation of the company’s assets and reputation;  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. Service condition New starters or people promoted into eligible roles may participate in the STI scheme with pro rata entitlements. Employees must be employed at time of payment to be eligible for any reward. Equity deferral Under the STI deferral plan, 40% of any STI earned by executive KMP and senior executives is delivered in CSR shares with half released to participants at the end of year one and the balance released at the end of year two. These shares are held in trust subject to trading restrictions and are contingent on the participant remaining employed at the end of each period. 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. 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. 62 CSR LIMITED ANNUAL REPORT 2022 REMUNERATION REPORT | COMPONENTS OF REMUNERATION 8 At risk remuneration - long-term incentive (i) Purpose of the long-term incentive (LTI) plan CSR’s long-term incentive program aims to:  drive the delivery of strategic objectives that create long-term shareholder value;  enables executives to build their interests in CSR equity; and  retain, motivate and attract executive talent to deliver and sustain business performance and increase shareholder returns. (ii) Details of the LTI plan The long-term incentive plan is delivered through the CSR Performance Rights Plan (PRP). Details of the PRP grants from YEM19 to YEM22 are set out below. Table 14: 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, and performance vesting criteria. If performance conditions are met, CSR shares will be purchased on market and transferred to participants. Refer to section 8(iii) for more detail. Vesting and performance period Awards are subject to a three year vesting period and 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). At vesting For all PRP grants, rights are eligible for one CSR Limited share per one performance right on vesting. Holding lock From the YEM22 PRP grant onwards, a 12-month holding lock on shares awarded under the LTI has been introduced to aid senior executive retention and strengthen CSR’s clawback provisions. During the holding lock period, provided the participant remains employed by CSR, they have full voting rights and are entitled to receive dividends. 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. If the cessation of employment is the result of retirement, redundancy, total or permanent disablement, death or any other special circumstances, the treatment of the rights will be determined at the board’s discretion. 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 2022, 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). 63 REMUNERATION REPORT | COMPONENTS OF REMUNERATION 8 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 15: Performance hurdles for each PRP grant Note YEM22 YEM21 YEM20 YEM19 Relative TSR (Tranche A) Absolute TSR (Tranche A) Earnings per share (Tranche B) 1 2 3 50% – 50% 50% – 50% – 50% 50% 50% – 50% 1. Relative TSR for YEM21 and YEM22 PRPs TSR is the percentage growth in shareholder value, which measures the changes in share price, taking into account dividends and capital returns. The board believes relative TSR is an appropriate measure for the PRP as it directly aligns with shareholder interests and provides transparency and focus of eligible executives in driving dividends, capital management and share price growth. Relative TSR for the YEM21 and YEM22 PRPs  Relative TSR was adopted as a performance measure for the YEM21 and YEM22 PRP grants as it is an established measure with greater alignment to market practice.  Absolute TSR is a 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 is 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. The board may adjust the comparator group to take into account events including, but not limited to, takeovers, mergers or de-mergers that might occur during the performance period.  In measuring TSR, share prices are calculated based on a 90-day VWAP at the start and end of the performance period.  Assuming the absolute TSR gate is met, the proportion of the Tranche A performance rights that vest will be determined based on CSR’s relative TSR, in accordance with the vesting schedule in table 16 below. Relative TSR for the YEM19 PRP (vested on 31 March 2021)  TSR performance was assessed against the constituents of the S&P/ASX 200 index (Peer Group) defined at the start of the performance period.  For the purposes of the TSR calculation, the start and end share prices were calculated based on 10 trading days VWAP. Table 16: Vesting schedule for all Relative TSR PRP grants 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% 2. Absolute TSR for YEM20 PRP  For the YEM20 PRP, a review of performance hurdles was conducted incorporating potential major property transactions over the ensuing three years. As a result, relative TSR was replaced with absolute TSR.  The board considered that absolute TSR was a more appropriate measure for the YEM20 PRP as it more directly aligned with shareholder interests and provided transparency and focus of executives in driving both earnings and share price growth.  The targets are set out in table 17 below. 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 17: Vesting schedule for the Absolute TSR 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 100% 64 CSR LIMITED ANNUAL REPORT 2022 REMUNERATION REPORT | COMPONENTS OF REMUNERATION 8 At risk remuneration – long-term incentive (continued) (iii) PRP performance conditions (continued) 3. Earnings per share (EPS) Compound growth in EPS measures 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 YEM22 outcome summarised in section 4(i) and table 9. In addition, the board may adjust EPS to exclude the effects of material business acquisitions or divestments. 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 18: Performance hurdles for the YEM19 to YEM22 PRP grants EPS performance hurdle Target Stretch Target Stretch Target Stretch Target Stretch YEM22 YEM21 YEM20 YEM19 Cumulative EPS required over next three years (cents per share) Average EPS required over next three years (cents per share) Table 19: EPS PRP vesting schedule CAGR of EPS Below 5% At 5% Between 5% and 10% 10% and above 109.6 120.5 85.4 93.9 119.5 131.4 140.0 154.0 36.5 40.2 28.5 31.3 39.8 43.8 46.7 51.3 Proportion of Tranche B to vest 0% 50% Straight-line vesting between 50% and 100% 100% 65 REMUNERATION REPORT | COMPONENTS OF REMUNERATION 8 At risk remuneration – long-term incentive (continued) (iv) Details of the PRP awards outstanding Table 20: Status and key dates of PRP awards Grant date Valuation per right1 Holding period Performance testing period 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 Expiry date (if hurdle not met) 1 April 2021 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 status2 Tranche A (TSR): Performance condition was met and 68% of allocation vested and the remaining unvested rights lapsed. Tranche B (EPS): Actual average EPS of 31.3 cents compared to a target of 46.7 cents. Compound growth performance condition was not met and all rights lapsed. Total award was 34%. Subsequent to 31 March 2022: Tranche A (TSR): Actual absolute TSR was 29%. Performance condition was met, resulting in 100% vesting of the allocation grant. Tranche B (EPS): Actual average EPS of 32.5 cents compared to a target of 39.8 cents. Compound growth performance condition was not met and all rights lapsed. Total award was 50%. 21 July 2020 (YEM21) 21 July 2021 (YEM22) Tranche A (TSR) $1.06 Tranche B (EPS) $3.08 Tranche A (TSR) $2.32 Tranche B (EPS) $4.67 21 July 2020 to 31 March 2023 1 April 2020 to 31 March 2023 1 April 2023 Performance testing not commenced. 21 July 2021 to 31 March 2024 1 April 2021 to 31 March 2024 1 April 2024 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 relative TSR hurdles. (v) Long-term incentive framework changes No changes are proposed to the LTI framework for YEM23. (vi) Other equity incentive plans Table 21: Other equity incentive plans Universal Share Ownership Plan (USOP) Employee Share Acquisition Plan (ESAP) Participation 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. Form and quantum of award 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. 66 CSR LIMITED ANNUAL REPORT 2022 REMUNERATION REPORT | REMUNERATION IN DETAIL Remuneration in detail 9 Service agreements Managing Director and CEO – Executive service agreement Julie Coates was appointed as Managing Director and CEO effective 2 September 2019. Ms Coates’ contractual remuneration package is summarised below: Table 22: Managing Director and CEO’s remuneration package 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 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 and 40% to individual performance. Under the STI deferral plan rules, 40% of the STI value will be deferred into CSR shares which vest over two years (50% at the end of the first year and 50% at the end of the second year). Further details on the STI deferral plan is contained in table 13. The value of any award of performance rights is set at a maximum of 140% of fixed annual remuneration. Grants of performance rights are subject to performance hurdles and vesting criteria set by the board (refer to section 8(iii) for details) and are subject to shareholder approval at the AGM. Chief Financial Officer and Executive General Manager, Property and Aluminium – Executive service agreement David Fallu was appointed as Chief Financial Officer effective 2 February 2017. In April 2020 following the business reorganisation, Mr Fallu was appointed Chief Financial Officer and Executive General Manager, Property and Aluminium. Mr Fallu’s remuneration package is summarised below: Table 23: Chief Financial Officer and Executive General Manager, Property and Aluminium’s remuneration package Fixed annual remuneration Fixed annual remuneration of $720,000 inclusive of superannuation contributions effective from 1 July 2021. Fixed annual remuneration is reviewed annually and increases are not guaranteed. Notice period Under the Executive 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 for YEM22 is 100% of fixed annual remuneration for exceptional performance. Achievement of target performance would result in 50% of the maximum STI being paid. The STI is weighted 60% on financial performance and 40% on individual performance. Under the STI deferral plan rules, 40% of the STI value will be deferred into CSR shares which vest over two years (50% at the end of the first year and 50% at the end of the second year). Further details on the STI deferral plan is contained in table 13. The potential value of any award of performance rights is set at a maximum of 80% of fixed annual remuneration. Grants of performance rights are subject to performance hurdles and vesting criteria set by the board (refer to section 8(iii) for details). 67 REMUNERATION REPORT | REMUNERATION IN DETAIL 9 Service agreements (continued) Table 24: Treatment of the Managing Director and CEO’s and Chief Financial Officer and Executive General Manager, Property and Aluminium’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, 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. 10 Statutory remuneration Managing Director and CEO’s and Chief Financial Officer and Executive General Manager, Property and Aluminium’s remuneration The remuneration table below shows an increase in total remuneration expensed for accounting purposes for executive KMP in YEM22 compared with YEM21. Table 25: Executive KMP statutory remuneration Fixed Variable ‘At risk’ $ Year ended 31 March Cash salary Super- annuation Leave benefits Other benefits1 STI expense2 LTI expense3 Total STI4 LTI4 Managing Director and CEO – Julie Coates 23,100 1,126,900 2022 21,521 1,128,479 2021 55,880 20,845 – – 1,023,347 846,400 867,712 363,043 3,096,939 2,380,288 Chief Financial Officer and Executive General Manager, Property and Aluminium – David Fallu 2022 2021 691,900 678,479 624,507 565,860 42,766 37,809 23,100 21,521 1,000 999 304,010 145,935 1,687,283 1,450,603 33% 36% 37% 39% 28% 15% 18% 10% 1 Other benefits comprise USOP. 2 STI expense for YEM22 plus amortisation of STI deferrals relating to prior years’ grants. 3 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 20. 4 STI and LTI as a percentage of total remuneration. 11 Deferred shares Table 26: STI deferred shares for executive KMP Julie Coates David Fallu Number of STI deferred shares Balance 1 April 2021 – – Granted1 75,628 47,952 Vested1 (37,814) (23,976) Lapsed Balance 31 March 2022 – – 37,814 23,976 1 The value of deferred shares provided at grant date was $5.84 per share. These shares related to the YEM21 STI and were granted in May 2021. Half vested on 31 March 2022 and the remaining balance will vest on 31 March 2023 consistent with the STI deferral plan. Deferred STI in relation to the YEM22 STI award was issued subsequent to 31 March 2022 and will be disclosed in the YEM23 Remuneration Report. 68 CSR LIMITED ANNUAL REPORT 2022 REMUNERATION REPORT | REMUNERATION IN DETAIL 12 Performance rights Table 27: Executive KMP performance rights Julie Coates David Fallu Number of performance rights Balance 1 April 2021 913,192 385,164 Granted1 275,727 98,645 Vested2 Lapsed Balance 31 March 2022 – – 1,188,919 (24,135) (46,849) 412,825 1 The accounting value of Ms Coates and Mr Fallu’s rights granted were $963,667 and $344,765 respectively. 2 The following rights vested to ordinary shares during the year ended 31 March 2022: Mr Fallu: YEM19 Tranche A rights vested of 24,135. A total of 24,135 shares were issued on 4 June 2021, and the value of each of these shares was $5.89, representing a total value to Mr Fallu of $142,062. 13 Shareholdings Minimum shareholding requirements KMP are required to 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. 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. Senior executives are required to hold 50% of fixed annual remuneration in CSR shares. Table 28: Executive KMP shareholdings Julie Coates David Fallu Balance 1 April 2021 1,217 88,055 Number of CSR shares1 Acquired2 76,569 73,287 Sold or transferred – – Other – – Balance 31 March 2022 77,786 161,342 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. Ms Coates acquired shares include 834 shares acquired under ESAP, 75,628 shares acquired under the STI deferral plan and 107 shares acquired under the Dividend Reinvestment Plan. Mr Fallu’s acquired shares include 24,135 shares issued on vesting of PRPs, 47,952 shares acquired under the STI deferral plan, 834 shares acquired under ESAP and 366 shares acquired under USOP. 14 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 YEM21 and YEM22. 69 REMUNERATION REPORT | NON-EXECUTIVE DIRECTORS Non-executive directors 15 Arrangements Non-executive directors are paid a base fee for service to the board, with additional fees for service to each board committee. The fees are set with consideration to the fees paid by 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. Table 29: Non-executive Director (NED) arrangements Role Annual fee for YEM22 (including superannuation guarantee) Chair base fees (including all committee memberships) Other NED base fees Chair of the Risk & Audit Committee Chair of the Remuneration & Human Resources Committee Chair of the Workplace Health, Safety & Environment Committee Committee memberships $403,169 $149,269 $27,996 $27,996 $27,996 $11,999 per committee Following benchmarking undertaken in YEM22, an amendment to the structure of the NED base fee was made. Previously, the NED base fee included one committee membership, however this committee membership is now listed separately. There is no net change to the combined annual NED base fee and one committee fee membership as a result of this structural change. All non-executive directors are members of multiple committees and so receive additional committee membership or committee chair fees in addition to the NED base fee (excluding the chair of the board). 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 13. 16 Non-executive director fees and shareholdings Table 30: Non-executive directors’ fees Year ended 31 March John Gillam (chair of the board) Nigel Garrard1 Christine Holman Michael Ihlein2 Matthew Quinn Penny Winn Total non-executive directors 1 Appointed 1 December 2020. 2 Retired 25 June 2021. YEM22 YEM21 YEM22 YEM21 YEM22 YEM21 YEM22 YEM21 YEM22 YEM21 YEM22 YEM21 YEM22 YEM21 Table 31: Non-executive directors’ shareholdings Directors’ fees Termination benefits Superannuation 380,069 373,743 157,695 51,710 172,255 161,208 45,166 181,529 172,255 169,455 170,982 167,936 1,098,422 1,105,581 – – – – – – – – – – – – – – 23,100 21,521 15,571 4,913 17,009 15,315 – 4,024 17,009 16,098 16,889 15,954 89,578 77,825 Total 403,169 395,264 173,266 56,623 189,264 176,523 45,166 185,553 189,264 185,553 187,871 183,890 1,188,000 1,183,406 John Gillam (chair of the board) Nigel Garrard Christine Holman Michael Ihlein2 Matthew Quinn Penny Winn Balance 1 April 2021 253,510 60,000 81,360 64,345 75,507 51,248 Number of CSR shares1 Acquired Other3 Balance 31 March 2022 – – 5,169 405 5,662 – – – – (64,750) – – 253,510 60,000 86,529 – 81,169 51,248 1 CSR shares in which the director has a beneficial interest, including shares held under the ESAP trust or via related parties. 2 Retired 25 June 2021. 3 Following Mr Ihlein’s retirement on 25 June 2021, he is no longer a KMP. The ‘other’ change does not represent a disposal of shares. 70 CSR LIMITED ANNUAL REPORT 2022 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 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 (benefit) expense 8 Business combinations 9 72 73 74 75 76 77 112 113 116 Balance sheet items 10 Working capital 11 Property holdings 12 Property, plant and equipment and intangible assets 13 Net deferred income tax assets 14 15 Provisions 16 Product liability Leases Capital structure and risk management 17 Credit facilities 18 Issued capital 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 77 77 78 78 80 81 81 82 82 83 84 85 85 85 86 89 90 91 92 93 93 93 93 94 95 100 100 100 103 103 104 105 106 106 110 110 110 111 111 111 71 FINANCIAL REPORT Statement of financial performance $million 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 Interest income Finance costs Profit before income tax Income tax benefit (expense) Profit after tax Profit after tax attributable to: Non-controlling interests Shareholders of CSR Limited1 Profit after tax Earnings per share attributable to shareholders of CSR Limited Basic (cents per share) Diluted (cents per share) Note 2,5 5 26 12 7 7 8 24 4 4 2022 2021 2,311.6 (1,610.2) 701.4 63.9 (216.5) (266.6) 15.6 (7.0) (6.3) 284.5 0.5 (15.0) 270.0 8.7 278.7 8.1 270.6 278.7 55.8 55.5 2,122.4 (1,516.9) 605.5 72.9 (191.4) (251.1) 13.5 (9.3) (17.1) 223.0 1.5 (13.2) 211.3 (59.5) 151.8 5.7 146.1 151.8 30.1 30.0 1 Net profit before significant items attributable to shareholders of CSR Limited is $192.6 million (2021: $160.4 million). Refer to note 3 of the financial statements. The above statement of financial performance should be read in conjunction with the accompanying notes. 72 CSR LIMITED ANNUAL REPORT 2022 FINANCIAL REPORT 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 recognised in equity Hedge loss (profit) transferred to statement of financial performance Exchange differences arising on translation of foreign operations Income tax benefit relating to these items Items that will not be reclassified to profit or loss Actuarial gain on superannuation defined benefit plans Income tax expense relating to these items Other comprehensive expense – net of tax Total comprehensive (expense) income Total comprehensive (expense) income attributable to: Non-controlling interests Shareholders of CSR Limited Total comprehensive (expense) income Note 2022 278.7 2021 151.8 21 21 20 13 28 (571.2) 135.0 (0.1) 130.8 0.1 – (305.4) (26.7) (93.0) 66.3 (26.7) (67.0) (18.2) (3.2) 25.6 17.6 (5.3) (50.5) 101.3 (12.1) 113.4 101.3 The above statement of comprehensive income should be read in conjunction with the accompanying notes. 73 FINANCIAL REPORT Statement of financial position $million Current assets Cash and cash equivalents Receivables Inventories Property holdings Other financial assets Income tax receivable Prepayments and other current assets Total current assets Non-current assets Receivables Property holdings 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 Lease liabilities 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 CSR Limited Non-controlling interests Total equity Note 2022 20211 34 10 10 11 21 32 11 26 21 12 14 12 12 13 32 10 14 21 15 14 21 15 28 18 20 24 177.7 228.4 374.1 53.0 98.3 8.9 8.5 948.9 22.7 113.9 40.1 114.8 666.1 126.0 59.9 10.1 332.8 11.7 1,498.1 2,447.0 314.4 30.0 251.5 13.1 138.8 747.8 135.5 379.4 232.8 2.1 749.8 250.8 224.2 313.8 40.7 63.0 0.4 8.9 901.8 23.4 102.6 35.4 57.7 693.7 127.2 58.3 13.6 150.7 12.4 1,275.0 2,176.8 256.7 30.2 71.1 46.9 131.6 536.5 141.1 86.0 252.7 2.7 482.5 1,497.6 949.4 1,019.0 1,157.8 966.7 (293.7) 334.0 1,007.0 (57.6) 949.4 966.7 (89.6) 245.3 1,122.4 35.4 1,157.8 1 Balances have been restated to reflect the group’s change in accounting policy for capitalised costs relating to Software-as-a-Service (SaaS) arrangements (refer note 1) and a correction to deferred tax on property, plant and equipment (refer note 13). The above statement of financial position should be read in conjunction with the accompanying notes. 74 CSR LIMITED ANNUAL REPORT 2022 FINANCIAL REPORT Statement of changes in equity $million Balance at 1 April 2021 Profit for the year Other comprehensive income (expense) – net of tax Dividends paid Acquisition of shares by CSR employee share trust Share-based payments – inclusive of tax Balance at 31 March 2022 Balance at 1 April 2020 Change in accounting policy1 Deferred tax adjustment2 Restated balance at 1 April 2020 Profit for the year Other comprehensive income (expense) – net of tax Dividends paid Acquisition of shares by CSR employee share trust Acquisition of non-controlling interest Share-based payments – inclusive of tax Note 19 20 20 1 13 19,24 20 20 20 Issued capital 966.7 – – Reserves (89.6) – (204.4) Retained profits 245.3 270.6 0.1 CSR Limited interest 1,122.4 270.6 (204.3) Non- controlling interests 35.4 8.1 (101.1) – – – (6.0) (182.0) – (182.0) (6.0) – 966.7 6.3 (293.7) – 334.0 6.3 1,007.0 966.7 – – 966.7 – – – – – – (45.7) – – (45.7) – (45.0) – (1.0) (0.1) 2.2 144.0 (0.5) 4.1 147.6 146.1 12.3 (60.7) – – – 1,065.0 (0.5) 4.1 1,068.6 146.1 (32.7) (60.7) (1.0) (0.1) 2.2 – – – (57.6) 60.5 – 1.7 62.2 5.7 (17.8) (14.7) – – – Total equity 1,157.8 278.7 (305.4) (182.0) (6.0) 6.3 949.4 1,125.5 (0.5) 5.8 1,130.8 151.8 (50.5) (75.4) (1.0) (0.1) 2.2 Balance at 31 March 2021 966.7 (89.6) 245.3 1,122.4 35.4 1,157.8 1 Balances have been restated to reflect the group’s change in accounting policy for capitalised costs relating to Software-as-a-Service (SaaS) arrangements. Refer to note 1 for further details. 2 Balances have been restated to reflect a correction to deferred tax on property, plant and equipment. Refer note 13. The above statement of changes in equity should be read in conjunction with the accompanying notes. 75 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 Proceeds from sale of property holdings and other assets Purchase relating to property holdings Purchase of property, plant and equipment and other intangible assets Purchase of controlled entities and businesses, net of cash acquired Payments for financial assets Loans and receivables advanced Net cash (outflow) inflow from investing activities Cash flows from financing activities Net repayment of borrowings Dividends paid1 Acquisition of shares by CSR employee share trust Lease payments Interest and other finance costs paid2 Net cash outflow from financing activities Net decrease in cash held Net cash at the beginning of the financial year Effects of exchange rate changes Net cash at the end of the financial year Reconciliation of net profit attributable to shareholders of CSR Limited to net cash from operating activities Net profit attributable to shareholders of CSR Limited Net profit attributable to non-controlling interests Depreciation and amortisation Impairment of assets Share of profits of associates not received as dividends or distributions Share-based payments Finance cost net of discount unwind Net gain on disposal of property holdings 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 2022 2021 26 12 9 20 14 2 24 6 12 20 5 2,546.9 (2,261.9) 10.9 0.9 (81.5) 2,376.1 (2,081.6) 18.3 1.3 (61.1) 215.3 253.0 100.1 (59.7) (40.0) (2.9) (53.5) (2.3) (58.3) – (182.0) (6.0) (31.9) (10.1) (230.0) (73.0) 250.8 (0.1) 177.7 270.6 8.1 88.5 7.0 (4.7) 4.0 10.1 (60.3) (4.6) (60.1) 57.7 (17.7) 5.4 (91.3) 2.6 215.3 130.6 (29.8) (49.0) (0.7) (23.0) (0.7) 27.4 (320.0) (75.4) (1.0) (34.0) (13.8) (444.2) (163.8) 414.8 (0.2) 250.8 146.1 5.7 96.2 9.3 4.8 1.7 13.6 (57.2) 13.6 28.1 10.9 (15.9) 6.5 (5.3) (5.1) 253.0 1 During the year ended 31 March 2022, of the $182.0 million in dividends paid to CSR Limited shareholders, $11.9 million was used to purchase CSR shares on-market to 2 satisfy obligations under the Dividend Reinvestment Plan (DRP), and the remaining $170.1 million was paid in cash. In accordance with AASB 16 Leases, interest and other finance costs paid for the year ended 31 March 2022 includes finance costs relating to leases of $7.0 million (2021: $8.0 million). Refer to notes 7 and 14 for further details. The above statement of cash flows should be read in conjunction with the accompanying notes. 76 CSR LIMITED ANNUAL REPORT 2022 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 limited company incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange. is a 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. and customisation costs for cloud computing arrangements (commonly known as Software-as-a-Service). As a result, the CSR group has adopted a change in accounting policy for capitalisation of intangible assets. Under the revised accounting policy, costs that would have been previously capitalised as intangible assets are treated as operating expenditure where the group cannot demonstrate the ability to control the relevant software. In accordance with Australian Accounting Standards the change in accounting policy has been adopted retrospectively and prior comparative periods have been restated. For the year ended 31 March 2022, the change in accounting policy has resulted in a decrease in earnings before interest and tax of $6.9 million and decrease in net profit after tax of $4.8 million. These costs would have previously been capitalised as an intangible asset and amortised over the useful life of the intangible asset. This cost has also been recorded in ‘other expenses’ in the Statement of Financial Performance and disclosed as a significant item (refer note 3). The change in accounting policy has been retrospectively applied and impacted the prior year financial statements as follows: Basis of preparation: The financial report is based on historical cost, except for certain financial assets and liabilities which are at fair value.  a decrease in intangible assets at 1 April 2020 of $0.2 million.  a decrease in equity accounted investments at 1 April 2020 of $0.3 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. Impact of COVID-19 pandemic: The CSR group has managed, and continues to manage, the risks arising from the COVID-19 global pandemic, with any known impacts being included in the financial statements for the year ending 31 March 2022. As at the date these financial statements are authorised for issue, the directors of CSR Limited consider it appropriate that the group is able to continue as a going concern and pay its debts as and when they become due and payable. 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. 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 (ASIC) the Australian Securities and Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, dated 24 March 2016. Investments Commission Currency: Unless otherwise shown in the financial statements, amounts are in Australian dollars, which is the CSR group’s functional currency. New or revised accounting standards: The CSR group has adopted all amendments to Australian Accounting Standards which became applicable for the CSR group from 1 April 2021. Accounting policy change: In April 2021, the IFRS Interpretations Committee published an agenda decision relating to the configuration million.  a decrease in retained earnings at 1 April 2020 of $0.5 million.  the impact on the statement of financial performance for YEM21 and deferred tax balances at 1 April 2020 was not material. Where relevant, comparative information has been restated and changes have been footnoted throughout the financial statements. 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 8 12 15 Treatment of tax losses Asset impairment 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 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. 77 NOTES TO THE FINANCIAL REPORT | FINANCIAL PERFORMANCE OVERVIEW 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 The Building Products business unit comprises Interior Systems (Gyprock plasterboard, Martini, Himmel Interior Systems and Rondo rolled formed steel products joint venture), Construction Systems (Hebel autoclaved aerated concrete products, AFS walling systems and Cemintel fibre cement), and Masonry and Insulation (Bradford insulation, Bradford energy solutions, Edmonds ventilation systems, Monier roofing, 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. 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. Aluminium 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. 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 2022, the CSR group's trading revenue from external customers in Australia amounted to $2,242.1 million (2021: $2,065.6 million), with $69.5 million (2021: $56.8 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 $999.9 million at 31 March 2022 (2021: $1,023.9 million), with $10.5 million (2021: $7.3 million) related to other geographical areas. 78 CSR LIMITED ANNUAL REPORT 2022 NOTES TO THE FINANCIAL REPORT | FINANCIAL PERFORMANCE OVERVIEW 2 Segment information (continued) $million Trading revenue1 EBITDA before significant items2 Depreciation and amortisation Business segment 2022 2021 2022 2021 Building Products Property Aluminium Corporate3 Restructuring and provisions4 1,614.1 1,534.5 – 697.5 – – – 587.9 – – 302.4 46.9 51.5 (19.2) (1.7) 265.7 54.2 35.4 (16.6) (4.6) 2022 (74.2) – (11.8) (2.5) – 2021 (81.4) – (12.0) (2.8) – Earnings before interest, tax and significant items 2022 2021 228.2 46.9 39.7 (21.7) (1.7) 184.3 54.2 23.4 (19.4) (4.6) Total CSR group 2,311.6 2,122.4 379.9 334.1 (88.5) (96.2) 291.4 237.9 Reconciliation of earnings before interest, tax and significant items to profit after tax $million Earnings before interest, tax and significant items Net finance costs Income tax expense Profit after tax before significant items (before non-controlling interests) Less: non-controlling interests Note 7 2022 291.4 (9.5) (81.2) 200.7 (8.1) 2021 237.9 (6.1) (65.7) 166.1 (5.7) Profit after tax before significant items attributable to shareholders of CSR Limited 192.6 160.4 Significant items after tax attributable to shareholders of CSR Limited 3 78.0 (14.3) Profit after tax attributable to shareholders of CSR Limited 270.6 146.1 Business segment As at 31 March 2022 As at 31 March 20217 As at 31 March 2022 As at 31 March 2021 Funds employed ($million)5 Return on funds employed (%)6 Building Products Property Aluminium Corporate Total CSR group 830.0 166.1 121.3 (47.3) 843.8 139.5 136.0 (54.8) 1,070.1 1,064.5 27.3% 30.7% 30.9% – 27.3% 20.6% 35.3% 16.9% – 21.1% 1 Trading revenue excludes net gain on disposal of assets, interest income, dividend income from other entities, share of net profit of joint venture entities and other income. Inter-segment sales are negligible. 2 EBITDA before significant items is earnings before interest, tax, depreciation, amortisation and significant items. 3 Represents unallocated overhead expenditure and other revenues. 4 Represents restructuring and provisions. Includes legal and managerial costs associated with long-term product liabilities and minor product liability claims that arise from time to time, certain defined benefit superannuation liabilities and expenses, other payables, non-operating revenue and other costs (excluding those categorised as significant items). 5 Funds employed is net assets of the CSR group less certain non-trading assets and liabilities. Funds employed at 31 March 2022 is calculated as net assets of $949.4 million (2021: $1,157.8 million), excluding the following assets: cash of $177.7 million (2021: $250.8 million), net tax assets of $328.6 million (2021: $104.2 million), net superannuation assets of $8.3 million (2021: $8.4 million) and interest receivable of $0.1 million (2021: $0.7 million). In addition, the following liabilities have been excluded from funds employed: asbestos product liability provision of $213.3 million (2021: $231.0 million) and net financial liabilities of $422.1 million (2021: $39.8 million). 6 Return on funds employed (ROFE) is calculated based on EBIT before significant items for the 12 months to year end divided by average funds employed. ROFE is not a measure used for Corporate costs which are considered in the context of the CSR group result. Property ROFE varies due to timing of projects. 7 Balance has been restated to reflect the group’s change in accounting policy for capitalised costs relating to Software-as-a-Service (SaaS) arrangements. Refer to note 1 for further details. 79 NOTES TO THE FINANCIAL REPORT | FINANCIAL PERFORMANCE OVERVIEW 3 Significant items $million Software-as-a-Service (SaaS) implementation costs Impairment of Building Products assets Business streamlining restructure costs Site closure costs Previously recorded significant items, including lease adjustments Significant items before finance costs and income tax Discount unwind and hedging relating to product liability provision Recognition of capital tax losses Income tax benefit on significant items Significant items after tax Significant items attributable to non-controlling interests Significant items attributable to shareholders of CSR Limited Net profit after tax attributable to shareholders of CSR Limited Significant items after tax attributable to shareholders of CSR Limited Net profit after tax before significant items attributable to shareholders of CSR Limited Note 2022 (i) (ii) (iii) (iv) (v) 7 (vi) (6.9) – – – – (6.9) (5.0) 86.3 3.6 78.0 – 78.0 270.6 (78.0) 192.6 2021 – (8.3) (12.7) (5.2) 11.3 (14.9) (5.6) – 6.2 (14.3) – (14.3) 146.1 14.3 160.4 Earnings per share attributable to shareholders of CSR Limited before significant items1 Basic (cents per share) Diluted (cents per share) 39.7 39.5 33.1 32.9 1 The basis of calculation is consistent with the earnings per share disclosure in the statement of financial performance. Refer to note 4. Note Description Further explanation (i) (ii) (iii) Software-as-a- Service (SaaS) implementation costs Impairment of Building Products assets Business streamlining restructure costs (iv) Site closure costs (v) Previously recorded significant items During the year ended 31 March 2022, the Building Products segment incurred implementation costs of $6.9 million in relation to Software-as-a-Service arrangements which are now required to be expensed due to a change in international accounting guidance. Refer note 1 for further detail. During the year ended 31 March 2021, the Building Products segment recorded an impairment charge of $8.3 million to reduce the carrying value of assets to their recoverable amount. During the year ended 31 March 2021, the CSR group incurred employee related restructure costs of $12.7 million associated with the CSR strategy implementation. Costs incurred were associated with the re-organisation and streamlining of the operating model to drive efficiency of business performance. The sale of 8.6 hectares of the third tranche of land at Horsley Park was announced during the year ended 31 March 2021, with the sale expected to be recorded in the financial year ended 31 March 2024. To prepare the site for sale, the PGH Bricks Horsley Park manufacturing site was closed and costs of $5.2 million were incurred, including redundancies and inventory relocation costs. During the year ended 31 March 2021, the CSR group:  sub-let two leased sites where the leased assets had previously been impaired through significant items. A receivable for the sub-lease income was recorded, resulting in a gain of $9.3 million; and reassessed and re-measured provisions associated with prior significant items, resulting in a gain of $2.0 million.  (vi) Recognition of capital tax losses During the year ended 31 March 2022, the CSR group recognised a deferred tax asset of $86.3 million in relation to carry forward capital tax losses, which arose primarily from the sale of the Viridian Glass business in 2019. This follows an assessment of the tax treatment of property sales which are expected to generate capital gains that will utilise these carry forward tax losses. Recognition and measurement Significant items are those which by their size and nature or incidence are relevant in explaining the financial performance of the CSR group, and as such are disclosed separately. 80 CSR LIMITED ANNUAL REPORT 2022 NOTES TO THE FINANCIAL REPORT | FINANCIAL PERFORMANCE OVERVIEW 4 Earnings per share Weighted average number of ordinary shares used in the calculation of basic EPS (million)1 Weighted average number of ordinary shares used in the calculation of diluted EPS (million)2 Profit after tax attributable to shareholders of CSR Limited ($million) Basic EPS (cents per share) Diluted EPS (cents per share) 2022 484.7 487.4 270.6 55.8 55.5 2021 485.1 487.1 146.1 30.1 30.0 1 Calculated by reducing the total weighted average number of shares on issue of 485.4 million (2021: 485.4 million) by the weighted average number of shares purchased on market and held in trust to satisfy incentive plans as these plans vest of 666,479 (2021: 242,666). 2 Calculated by increasing the weighted average number of shares used in calculating basic EPS by outstanding performance rights of 2,700,156 (2021: 1,987,861). 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 Other income Net gain on disposal of property holdings Significant items Other Recognition and measurement Note 2022 2021 2 3 2,311.6 2,122.4 60.3 – 3.6 57.2 9.3 6.4  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.  Sale of property holdings: 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. Income 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. Profit realised on the sale of property holdings are disclosed within ‘net gain on disposal of property holdings’ and classified as 'other income’ on the statement of financial performance and is recognised in the Property segment.  Disposal of assets: the net gain (loss) is recognised in ‘other income (expense)’ when control of the asset passes to the purchaser. 81 NOTES TO THE FINANCIAL REPORT | FINANCIAL PERFORMANCE OVERVIEW 6 Expenses $million Expenses Significant items1 Employee benefits expense Depreciation Amortisation Note 2022 2021 3 12,14 12 6.9 444.1 85.1 3.4 24.2 419.4 91.0 5.2 1 Significant items are included within impairment expense and other expenses in the statement of financial performance. Nature of expense Employee benefits expense: includes salaries and wages, share-based payments and other entitlements. 7 Net finance costs $million 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 gain Finance costs Interest income Net finance costs Finance costs included in significant items Net finance costs before significant items Recognition and measurement Note 2022 2021 14 3 3.1 7.0 5.0 0.8 (0.9) 15.0 (0.5) 14.5 (5.0) 9.5 5.6 8.0 5.6 0.8 (6.8) 13.2 (1.5) 11.7 (5.6) 6.1 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. 82 CSR LIMITED ANNUAL REPORT 2022 NOTES TO THE FINANCIAL REPORT | FINANCIAL PERFORMANCE OVERVIEW 8 Income tax (benefit) expense Reconciliation of income tax (benefit) expense charged to the statement of financial performance: $million Profit before income tax Income tax expense calculated at 30% (Decrease) increase in income tax expense due to: Recognition of carried forward capital tax losses Share of net profit of joint venture entities Taxable profit on property disposals Income tax under provided in prior years Other items Total income tax (benefit) expense Comprising of: Current tax expense Deferred tax credit relating to movements in deferred tax balances Total income tax (benefit) expense Note 2022 270.0 81.0 3 (86.3) (4.4) 0.6 0.3 0.1 (8.7) 2021 211.3 63.4 – (3.9) 0.1 0.7 (0.8) 59.5 13 40.2 (48.9) 72.3 (12.8) (8.7) 59.5 Recognition and measurement Current and deferred tax is recognised as an expense in the statement of financial performance except when it relates to items credited or debited directly to equity, in which case the deferred tax is also recognised directly in equity, or where it arises from the initial accounting of a business acquisition, in which case it is taken into account in the determination of goodwill. Tax transparency report The CSR group has prepared a voluntary tax transparency report which is available to view online or to download from the CSR website (www.csr.com.au). The report sets out relevant tax information for CSR Limited and its controlled entities for the year ended 31 March 2022. Disclosure of company tax information Under tax legislation the Australian Taxation Office will publish in 2022 the following data for the CSR Limited tax consolidated group and Gove Aluminium Finance Limited in relation to the 2021 tax year: Entity CSR Limited (ABN: 90 000 001 276) Gove Aluminium Finance Limited (ABN: 45 001 860 073) Total revenue1 ($million) Taxable income ($million) Tax payable ($million) 1,835.0 596.2 196.1 33.7 32.9 7.2 1 For financial reporting and taxation purposes, items may have been classified between revenue and expenses differently. Therefore, total revenue may not reconcile to note 2 or note 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 2021 was $32.9 million because CSR was entitled to utilise franking credits on dividends received and R&D tax offsets to reduce its tax payable. 83 NOTES TO THE FINANCIAL REPORT | FINANCIAL PERFORMANCE OVERVIEW 8 Income tax (benefit) expense (continued) Significant judgement and critical accounting estimate – treatment of tax losses Carry forward tax losses or unused tax credits are recognised as a deferred tax asset to the extent that it is probable that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilised. During the year ending 31 March 2022, the CSR group has recognised a deferred tax asset of $86.3 million in relation to carry forward capital tax losses, which arose primarily from the sale of the Viridian Glass business in 2019. This follows an assessment of the tax treatment of property sales which are expected to generate capital gains that will utilise these carry forward tax losses. The net amount of tax losses, capital losses and rebates carried forward at the end of the year for which no deferred tax asset has been recognised is set out below: Value of tax losses, capital losses and rebates carried forward (net) CSR group 2022 ($million) 107.8 2021 ($million) 187.5 The gross value of unused tax losses for which no deferred tax asset has been recognised are $36.9 million (2021: $36.5 million). Unused tax losses were predominately generated by a New Zealand subsidiary and it is not considered probable that the unrecognised tax losses will be utilised 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 $325.0 million (2021: $590.9 million). These unrecognised capital losses were predominately generated from the sale of the Viridian Glass business, and it is not considered probable that the unrecognised capital losses will be utilised in the foreseeable future. Unused capital and tax losses can be carried forward indefinitely subject to meeting ownership continuity requirements. 9 Business combinations i) Current year Building Products segment During the year ended 31 March 2022, the Building Products segment acquired the business assets of an entity for total consideration of $2.0 million with goodwill arising of $1.6 million. The Building Products segment also invested in an entity for cash consideration of $0.9 million. ii) Prior year Building Products segment During the year ended 31 March 2021, deferred consideration of $0.7 million was paid in relation to an acquisition that occurred during the year ended 31 March 2020. 84 CSR LIMITED ANNUAL REPORT 2022 ii) Inventories 2021 $million 2022 2021 Current Raw materials and stores Work in progress Finished goods Total current inventories 138.7 25.2 210.2 374.1 112.2 16.8 184.8 313.8 1 Write-down of inventories recognised as an expense within cost of sales for the year ended 31 March 2022 totalled $14.1 million (2021: $14.4 million). iii) Current payables $million Trade payables Other payables Total current payables 2022 281.9 32.5 314.4 2021 229.1 27.6 256.7 NOTES TO THE FINANCIAL REPORT | BALANCE SHEET ITEMS Balance sheet items 10 Working capital i) Current receivables $million Trade receivables Allowance for doubtful debts 2022 216.0 (10.2) 216.1 (8.2) Net trade receivables 205.8 207.9 Other loans and receivables Total current receivables 22.6 228.4 16.3 224.2 Ageing Past due 0-60 days – not impaired Past due >60 days – not impaired Past due 0-60 days – impaired Past due >60 days – impaired Movement in allowance for doubtful debts Opening balance Trade debts written off Trade debts provided Closing balance 11 Property holdings $million Current Held for sale Total current property holdings Non-current Held for sale Property projects 1.0 – 7.6 2.6 (8.2) 0.4 (2.4) (10.2) 2.6 – 7.1 1.1 (8.6) 1.8 (1.4) (8.2) 2022 2021 53.0 53.0 39.1 74.8 40.7 40.7 16.4 86.2 Total non-current property holdings 113.9 102.6 Recognition and measurement  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 2022 has been assessed to consider the impact of the COVID-19 pandemic and no material recoverability issues have been identified.  Inventories: 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. 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.  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.  Property holdings: accounted for as Investment Properties in accordance with AASB 140 Investment Property. The carrying amount of property holdings includes the cost of acquisition and costs incurred in preparing the site for sale. Costs incurred after completion of the site are expensed as incurred. Property holdings are classified as either: ‒ Held for sale: if the carrying amount will be recovered principally through a sale transaction and a sale is considered highly probable. The assets are measured at the lower of their carrying amount and fair value less costs to sell. Held for sale property assets that are not expected to settle within 12 months but are subject to a sales agreement are classified as non-current assets. ‒ Property projects: property holdings are the investment properties which are not yet classified as ‘held for sale’. Property holdings not expected to be fully developed within 12 months are classified as non-current assets. 85 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 2022 2021 2022 2021 2022 2021 398.8 392.5 1,354.4 1,347.5 1,753.2 1,740.0 Accumulated depreciation and impairment (113.1) (104.5) (974.0) (941.8) (1,087.1) (1,046.3) Net carrying amount Net carrying amount at 1 April Capital expenditure Disposed Depreciation Impairments1 Exchange differences Acquisitions - business combinations Transferred to intangible assets 285.7 288.0 288.0 292.1 7.6 (2.7) (8.3) (0.5) – – – 0.7 (0.8) (8.2) (0.4) – – – 6 9 Transferred from/(to) property plant and equipment and property holdings 1.6 4.6 380.4 405.7 32.4 (0.4) (49.0) (6.5) – 0.2 (0.2) (1.8) 405.7 449.4 43.6 (0.4) 666.1 693.7 40.0 (3.1) 693.7 741.5 44.3 (1.2) (52.7) (57.3) (60.9) (7.5) (0.1) – – (26.6) (7.0) – 0.2 (0.2) (0.2) (7.9) (0.1) – – (22.0) Balance at 31 March 285.7 288.0 380.4 405.7 666.1 693.7 1 The impairment expense relates to a write down of plant and equipment at a former operating site and was recorded within the Property segment earnings before interest and tax. ii) Goodwill and other intangible assets $million Cost Accumulated amortisation and impairment Net carrying amount Net carrying amount at 1 April Capital expenditure Amortisation Impairments Exchange differences Goodwill Software Other Total other intangible assets Note 2022 2021 2022 20212 2022 2021 2022 2021 6 59.9 – 59.9 58.3 – – – – 1.6 – 58.3 – 58.3 58.3 – – – – – – 88.6 87.6 30.3 31.2 118.9 118.8 (85.6) (82.0) (23.2) (23.2) (108.8) (105.2) 3.0 5.6 – (2.8) – – – 0.2 3.0 5.6 8.0 3.5 (4.4) (1.4) (0.1) – – 7.1 8.0 – 8.0 7.6 1.2 10.1 13.6 – (0.6) (0.8) (3.4) – – – (0.3) – – – – – – – (0.1) 13.6 15.6 4.7 (5.2) (1.4) (0.1) – – 5.6 7.1 8.0 10.1 13.6 Acquisitions - business combinations 9 Transferred from/(to) property plant and equipment and property holdings Balance at 31 March 59.9 58.3 2 Balance has been restated to reflect the group’s change in accounting policy for capitalised costs relating to Software-as-a-Service (SaaS) arrangements. Refer to note 1 for further details. 86 CSR LIMITED ANNUAL REPORT 2022 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 accumulated 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.  Software-as-a-Service (SaaS) arrangements: during the year, the group revised its accounting policy in relation to upfront configuration and customisation costs incurred in implementing SaaS arrangements. Historical financial information has been restated to account for the impact of the change (refer note 1). SaaS arrangements are service contracts providing the Group with the right to access the cloud provider’s application software over the contract period. Costs incurred to configure or customise, and the ongoing fees to obtain access to the cloud provider's application software, are recognised as operating expenses when the services are received. Some of these costs incurred are for the development of software code that enhances or modifies, or creates additional capability to, existing on-premise systems and meets the definition of and recognition criteria for an intangible asset. These costs are recognised as intangible software assets and amortised over the useful life of the software on a straight-line basis.  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 (2021: $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 determined each reporting period using the CGU’s fair value which is calculated using the discounted cash flows expected to arise from the asset. Management judgment is required in these valuations to forecast future cash flows and to determine a suitable discount rate in order to calculate the present value of these future cash flows. Future cash flows take into consideration forecast changes in the building cycle, aluminium prices and exchange rates where appropriate. If the recoverable amount of a 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. The carrying amount of goodwill and trade names with indefinite lives forms part of the Building Products segment: $59.9 million and $1.6 million respectively (31 March 2021: $58.3 million and $1.6 million respectively). The recoverable amounts of the cash generating units that include goodwill are determined using discounted cash flow projections. Key assumptions used in the impairment assessments:  Cash flow forecasts: The cash flows are modelled over a five-year period with a terminal value used from year six onwards. The first five years represent financial plans forecast by management, based on the CSR group's view of the most recent outlook on building activity levels and the current climate-related regulations in place, with the terminal year representing long-term average activity levels. These estimates are informed by a review of a sample of external forecasts available as at the date of these financial statements. In addition, cash flows for the Aluminium cash generating unit reflect the most recent forecasts for key assumptions such as the US$ London Metal Exchange (LME) price and USD:AUD exchange rate.  Post-tax discount rate: The valuation is calculated using a post-tax annual discount rate of 9.0% for all CGUs other than Aluminium which uses 10.5% (2021: 9.0% for all CGUs other than Aluminium which was 10.5%).  Terminal value: The terminal value annual growth rate assumed is 2.0% (2021: 2.0%). 87 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 As at 31 March 2022, the carrying value of the Roofing CGU was $44 million, which does not include any goodwill or intangible assets. During the year ended 31 March 2022, the Roofing CGU experienced a shortfall in earnings when compared to internal forecasts, mainly due to the competitive market in which the business operates and cost pressures. As a result, the Roofing CGU was assessed for impairment at 31 March 2022 in accordance with AASB 136 Impairment of Assets. Key assumptions used in the impairment assessment are consistent with those outlined on page 87. In addition, the impairment assessment assumes that the Roofing CGU will maintain market share and deliver operational improvements. Following the detailed impairment review of future cash flow projections, the recoverable amount of the Roofing CGU is estimated to exceed the carrying amount of the CGU at 31 March 2022 by $1 million. The impact of reasonable possible changes in key assumptions has also been considered:  A 10% reduction in the volumes throughout the period modelled would result in an impairment of $18 million.  A 1% increase in the discount rate applied (from 9% to 10%) would result in an impairment of $3 million.  A 1% decrease in the terminal annual growth rate (from 2% to 1%) would result in an impairment of $2 million. No other reasonable possible changes in key assumptions have been identified. AFS cash generating unit AFS is a business within the Building Products segment and provides permanent formwork walling solutions for the construction industry. At 31 March 2022, the carrying value of the AFS CGU was $70 million, which included goodwill and other intangible assets of $38 million. During the year ended 31 March 2022, the business experienced a decrease in earnings following reductions in market activity for the New South Wales apartment segment. An operational improvement plan was implemented during the year which has yielded positive results, despite the disruptions of COVID-19 restrictions during the year. Given the business has indefinite life intangible assets and due to the limited headroom in the impairment model for the year ended 31 March 2021, an impairment assessment was performed for the AFS CGU at 31 March 2022 in accordance with AASB 136 Impairment of Assets. Key assumptions used in the impairment assessment are consistent with those outlined on page 87. In addition, the impairment assessment assumes that the operational improvement plan will continue to be delivered, including revenue growth across various segments and geographies. Following the detailed impairment review of future cash flow projections, the recoverable amount of the AFS CGU is estimated to exceed the carrying amount of the CGU at 31 March 2022 by $17 million. The impact of reasonable possible changes in key assumptions has also been considered:  A 10% reduction in the volumes throughout the period modelled would result in an impairment of $12 million.  A 1% increase in the discount rate applied (from 9% to 10%) would reduce the headroom to $5 million.  A 1% decrease in the terminal annual growth rate (from 2% to 1%) would reduce the headroom to $8 million. No other reasonable possible changes in key assumptions have been identified. 88 CSR LIMITED ANNUAL REPORT 2022 NOTES TO THE FINANCIAL REPORT | BALANCE SHEET ITEMS 13 Net deferred income tax assets $million Net deferred income tax assets arising on temporary differences Tax losses recorded as asset Capital tax losses recorded as asset Total net deferred income tax assets Movement in deferred income tax assets $million 2022 Property, plant and equipment Right-of-use lease assets Lease liabilities Product liability provision Employee benefits provisions Other provisions Fair value of hedges Accrued expenses Property sales on capital account Other individually insignificant balances Tax losses Capital tax losses Total net deferred income tax assets 2021 Property, plant and equipment1 Right-of-use lease assets Lease liabilities Product liability provision Employee benefits provisions Other provisions Spares and stores Fair value of hedges Accrued expenses Other individually insignificant balances Tax losses Total net deferred income tax assets 2022 288.3 0.6 43.9 332.8 2021 148.8 1.9 – 150.7 Opening balance Credited (charged) to profit or loss Credited (charged) to equity Other (including transfers) Closing balance (9.1) (38.1) 51.4 69.3 27.0 22.1 18.8 9.0 – (1.6) 1.9 – 150.7 (9.9) (45.9) 60.0 74.1 24.4 21.3 (11.8) (6.8) 6.4 4.9 0.9 117.6 (2.8) 8.3 (9.8) (5.3) 2.8 0.5 – 2.1 8.7 1.8 (1.3) 43.9 48.9 1.2 9.7 (10.5) (4.8) 2.6 0.8 11.8 – 2.6 (1.6) 1.0 12.8 – – – – – – 130.8 – – 2.3 – – – (8.0) 8.0 – – 0.1 – – – – – – 133.1 0.1 – – – – – – – 25.6 – (4.9) – 20.7 (0.4) (1.9) 1.9 – – – – – – – – (11.9) (37.8) 49.6 64.0 29.8 22.7 149.6 11.1 8.7 2.5 0.6 43.9 332.8 (9.1) (38.1) 51.4 69.3 27.0 22.1 – 18.8 9.0 (1.6) 1.9 (0.4) 150.7 1 Balance has been restated to reflect a correction to deferred tax on property, plant and equipment. 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. 89 NOTES TO THE FINANCIAL REPORT | BALANCE SHEET ITEMS 14 Leases i) The CSR group’s leasing activities The CSR group leases various properties, equipment and vehicles. Property leases typically are for a period of 4 to 10 years and often have extension options and equipment and vehicle leases are typically for a period of 3 to 6 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. 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. 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. ii) Amounts recognised in the financial statements The statement of financial position 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 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 and low-value leases The statement of cashflows contains the following amounts within ‘financing activities’ relating to leases: $million Lease payments Interest Total lease cash outflows included in ‘cash flows from financing activities’ 2022 2021 112.4 8.3 5.3 126.0 30.0 135.5 165.5 116.5 6.3 4.4 127.2 30.2 141.1 171.3 2022 2021 22.2 2.9 2.7 27.8 7.0 13.2 2022 31.9 7.0 38.9 24.1 2.5 3.5 30.1 8.0 11.5 2021 34.0 8.0 42.0 6 7 7 The table below analyses the undiscounted cash flows for the CSR group’s lease liabilities, into relevant maturity groupings based on the remaining lease term at the reporting date: $million 1 year or less 1 to 3 years 3 to 5 years Over 5 years Total undiscounted cash flows 90 CSR LIMITED ANNUAL REPORT 2022 2022 36.7 62.5 44.3 56.2 2021 37.1 61.8 45.9 62.3 199.7 207.1 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 Make-good for property leases Uninsured losses and future claims Other1 Total non-current provisions 2021 85.3 3.9 24.0 1.5 5.4 11.5 131.6 4.6 207.0 1.9 10.9 17.4 10.9 252.7 Recognised/ remeasured Settled/ transferred Discount unwind 60.7 – 22.9 – 6.9 3.1 93.6 – (22.9) 0.8 – (2.7) – (24.8) (51.4) (2.5) (22.9) (0.6) (4.4) (4.6) (86.4) 0.3 – – (0.7) – (0.7) (1.1) – – – – – – – – 5.2 – – 0.7 0.1 6.0 2022 94.6 1.4 24.0 0.9 7.9 10.0 138.8 4.9 189.3 2.7 10.2 15.4 10.3 232.8 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.  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 annually by independent experts. Other provisions  Employee benefits: 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.  Restoration and environmental rehabilitation: 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.  Make-good for property leases: provision has been recognised for the present value of the estimated expenditure to restore leased properties to their original condition at the end of the respective lease terms. These costs have been capitalised as part of the cost of the right-of-use leased asset and are amortised over the shorter of the term of the lease and the useful life of the assets. 91 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 2022, CSR had resolved approximately 5,300 claims in Australia and approximately 137,900 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 Gnarus Advisors, LLC as the independent expert to estimate the United States liabilities. The independent experts make their own determination of the methodology most appropriate for estimating CSR’s future liabilities. The assessments of those independent experts project CSR’s claims experience into the future using modelling techniques that take into account a range of possible outcomes. The present value of the liabilities is estimated by discounting the estimated cash flows using the pre-tax rate that reflects the current market assessment of the time value of money and risks specific to those liabilities. Many factors are relevant to the independent experts’ estimates of future asbestos liabilities, including:  numbers of claims received by disease and claimant type and expected future claims numbers, including expectations as to when claims experience will peak;  expected value of claims;  the presence of other defendants in litigation or claims involving CSR;  the impact of and developments in the litigation and settlement environment in each of Australia and the United States;  estimations of legal costs;  expected claims inflation (Australian liability 3.25% and US liability 2.30%); and  the discount rate applied to future payments (Australian liability 3.25% and US liability 1.90%). 92 CSR LIMITED ANNUAL REPORT 2022 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 2022 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 289.0 268.0 246.9 231.0 213.3 500 400 300 200 100 0 2018 2019 Base case provision A$m 2020 2021 2022 Prudential margin A$m $million Base case estimate Prudential margin Prudential margin % Total product liability provision Year ended 31 March 2022 2021 174.8 38.5 22.0% 213.3 196.1 34.9 17.8% 231.0 NOTES TO THE FINANCIAL REPORT | CAPITAL STRUCTURE AND RISK MANAGEMENT Capital structure and risk management 17 Credit facilities The CSR group has a total of $420.0 million (31 March 2021: $420.0 million) committed standby facilities with external financial institutions. These facilities have fixed maturity dates as follows: $109.0 million in 2023, $191.0 million in 2024, $75.0 million in 2025 and $45.0 million in 2026. As at 31 March 2022, $420.0 million of the standby facilities were undrawn (2021: $420.0 million undrawn). 18 Issued capital On issue 31 March 2021 On issue 31 March 2022 Ordinary shares fully paid1 Issued capital $million 485,382,776 485,382,776 966.7 966.7 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 2022 and 31 March 2021 under employee share plans as shares in respect of the plans were acquired on market. During the years ended 31 March 2022 and 31 March 2021, 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 2022 are $1.93 (2021: $2.16). Net tangible assets per share is calculated as net assets attributable to CSR Limited shareholders of $1,007.0 million (2021: $1,122.4 million) less intangible assets of $70.0 million (2021: $71.9 million) divided by the number of issued ordinary shares of 485.4 million (2021: 485.4 million). 19 Dividends and franking credits i) Dividends Dividend type 2020 Final 2021 Interim ordinary 2021 Interim special 2021 Final ordinary 2021 Final special 2022 Interim ordinary 2022 Final ordinary1 Cents per share Franking Total amount $million Date paid/payable – 8.5 4.0 14.5 9.5 13.5 18.0 – – – 100% 100% 100% 100% 100% 100% 41.3 8 December 2020 19.4 8 December 2020 70.4 2 July 2021 46.1 2 July 2021 65.5 10 December 2021 1 July 2022 87.4 Graph 1: Dividends declared relating to each financial year – cents per share 40.0 30.0 20.0 10.0 - 36.5 31.5 27.0 26.0 14.0 2018 2019 2020 2021 2022 1 The final dividend for the financial year ended 31 March 2022 has not been recognised in this financial report because it was resolved to be paid after 31 March 2022. The amounts disclosed as recognised in 2022 are the final dividends in respect of the financial year ended 31 March 2021 and the interim dividend in respect of the financial year ended 31 March 2022. ii) Franking credits $million Franking account balance on an accruals basis1 2022 43.4 2021 88.4 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. 93 NOTES TO THE FINANCIAL REPORT | CAPITAL STRUCTURE AND RISK MANAGEMENT 20 Reserves $million Balance at 1 April 2021 Hedge loss recognised in equity Hedge loss transferred to the statement of financial performance Translation of foreign operations Income tax related to other comprehensive income Share-based payments expense Income tax related to share-based payments expense Acquisition of shares by CSR employee share trust Balance at 31 March 2022 Balance at 1 April 2020 Hedge loss 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 shares by CSR employee share trust Acquisition of non-controlling interest Balance at 31 March 2021 Nature and purpose of reserves Hedge reserve (32.5) (384.6) 92.8 – 87.5 – – – (236.8) 9.3 (49.2) (10.6) – 18.0 – – – – (32.5) Foreign currency translation reserve Employee share reserve Share based payment trust reserve Non- controlling interests reserve (25.4) – – – – – – (6.0) (68.8) – – – – – – – Total (89.6) (384.6) 92.8 (0.1) 87.5 4.0 2.3 (6.0) (31.4) (68.8) (293.7) (24.4) – – – – – – (1.0) – (68.7) – – – – – – – (0.1) (45.7) (49.2) (10.6) (3.2) 18.0 1.7 0.5 (1.0) (0.1) 42.4 – – – – 4.0 2.3 – 48.7 40.2 – – – – 1.7 0.5 – – 42.4 (25.4) (68.8) (89.6) (5.3) – – (0.1) – – – – (5.4) (2.1) – – (3.2) – – – – – (5.3) 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 63 to 66 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 $5.81 (2021: $4.55) per share Issue of shares under executive incentive plans Closing balance 2022 2021 102,181 1,031,614 (382,983) 21,354 225,000 (144,173) 750,812 102,181 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. 94 CSR LIMITED ANNUAL REPORT 2022 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, including credit, liquidity and market risks. 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 market risk, specifically interest rate risk, foreign exchange risk and commodity risk (aluminium, alumina, oil, electricity and gas) 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 market 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 2022 and 31 March 2021. 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 sector 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. Credit 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 trade customers and accounts, ageing analysis and, where necessary, carries out a reassessment of credit 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 (refer to note 10). 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 in combination with continuously monitoring forecast and actual cash flows, to enable 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 obligations 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 2022 Current payables Commodity financial instruments Foreign currency financial instruments 314.4 248.9 – 284.8 – 61.4 314.4 595.1 2.5 6.5 1.9 10.9 Total 565.8 291.3 63.3 920.4 2021 Current payables Commodity financial instruments Foreign currency financial instruments 256.7 76.6 – 110.4 – 3.3 256.7 190.3 1.1 0.9 – 2.0 Total 334.4 111.3 3.3 449.0 95 NOTES TO THE FINANCIAL REPORT | CAPITAL STRUCTURE AND RISK MANAGEMENTCIAL REPORT | CAPITAL STRUCTURE AND RISK MANAGEMENT 21 Financial risk management (continued) iii) Market risk The table below provides information about commodity derivatives (to manage commodity price exposures) and significant exchange rate exposures in forward exchange rate contracts, entered into by the CSR group: $million Average price/ exchange rate 1,2 1 year or less 1 to 3 years 3 to 5 years Total Asset Liability Price/exchange rate strengthens by 10% Price/exchange rate weakens by 10% Notional value Fair value3,4 Change in equity before tax 2022 Commodity swaps – aluminium Commodity swaps – alumina/aluminium Commodity swaps – oil Commodity swaps & futures – electricity Forward exchange rate contracts (US dollars – sell)6 2021 Commodity swaps – aluminium Commodity swaps – alumina/aluminium Commodity swaps – oil Commodity swaps & futures – electricity Commodity swaps & options – gas Forward exchange rate contracts (US dollars – sell)6 2,239.7 –5 83.7 57.1 0.7 1,940.6 –5 83.7 61.2 6.4 0.7 344.1 113.2 13.8 10.1 307.4 292.7 69.9 13.8 11.8 20.2 302.5 669.1 207.7 10.0 11.9 538.6 456.4 203.1 25.1 18.9 – 421.2 296.2 87.2 – 0.2 1,309.4 408.1 23.8 22.2 235.0 1,081.0 108.0 – – 1.2 – 45.0 857.1 273.0 38.9 31.9 20.2 768.7 0.2 37.4 11.4 22.4 53.5 0.9 – – 0.3 0.1 92.4 (603.9) (9.9) – (0.1) (8.7) (129.3) (12.9) (3.3) (9.1) (0.5) (0.9) (185.5) 57.7 3.5 4.4 100.4 (97.7) 28.8 3.5 2.2 0.1 70.5 185.5 (57.7) (3.5) (4.4) (122.7) 97.7 (28.8) (3.5) (2.2) (0.1) (86.2) Exchange rate applicable to forward exchange rate contracts. Average deal price is in USD/metric tonne (aluminium), AUD/barrel (oil), AUD/MWh (electricity) and AUD/GJ (gas). 1 2 3 $542.4 million net of commodity contract losses (2021: $153.5 million net losses) were deferred in 2022 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 2022 is one year or less: $229.5 million loss (2021: $69.4 million loss); one to three years: $256.5 million loss (2021: $81.2 million loss); three to five years: $56.4 million loss (2021: $2.9 million loss). The fair value of $542.5 million (2021: $153.8 million) includes $0.1 million of losses (2021: $0.3 million of losses) recognised in profit or loss. 4 $44.8 million of net foreign exchange contract gains (2021: $91.5 million net gains) have been deferred as the gains relate to cash flow hedges of highly probable forecast transactions. The expected timing of recognition based on the fair values at 31 March 2022 is one year or less: $36.0 million gain (2021: $45.6 million gain); one to three years: $5.2 million gain (2021: $44.9 million gain) and three to five years $3.6 million gain (2021: $1.0 million gain). 5 Under the alumina/aluminium swaps entered into, the CSR group receives a floating alumina price and pays a floating aluminium price. 6 Sale of US dollars is the dominant foreign exchange hedge. In addition, the CSR group uses FX swaps to manage foreign currency cash positions and FX forwards to purchase foreign currency expended in manufacturing inputs. The fair value of these at 31 March 2022 is an asset value of $0.6 million (2021: $0.6 million) and liability value of $1.7 million (2021: $1.1 million). 9 6 C S R L I M I T E D A N N U A L R E P O R T 2 0 2 2 96 I I N O T E S T O T H E F N A N C A L R E P O R T | C A P I T A L S T R U C T U R E A N D R S K M A N A G E M E N T I NOTES TO THE FINANCIAL REPORT | CAPITAL STRUCTURE AND RISK MANAGEMENT 21 Financial risk management (continued) iii) Market risk (continued) The table below provides details on the nature, risk management and sensitivity in relation to interest rate and foreign exchange risk. Risk Nature of risk Risk management and sensitivity Interest rate Foreign exchange At the reporting date, CSR group’s interest rate exposure is limited to the net cash balance of $177.7 million (2021: net cash balance of $250.8 million). The maturity profile for the net cash balance of $177.7 million is less than 1 year. The average interest rate on debt for the year was 0% (2021: 1.1%) and the average interest rate on cash balances for the year was 0.15% (2021: 0.39%). The CSR group’s major foreign currency exposure relates to its US dollar aluminium sales revenue. A portion of revenue is unhedged to offset its US dollar expense requirements for raw materials and equipment. The group also has foreign currency exposure arising from payments for raw materials and capital equipment in its other businesses. This exposure is not material compared to aluminium sales revenue exposure. The CSR group has a policy of hedging interest rate risk to reduce the volatility of interest expense. At 31 March 2022 the group had no interest rate risk management measures in place because it had no material borrowings. If interest rates had increased/decreased by one percentage point per annum from the year end rate with all other variables held constant, the post-tax profit for the year would have been $0.9 million higher/lower (2021: $0.8 million higher/lower). This is mainly due to higher/lower interest income on net cash balances. The CSR group uses a variety of foreign exchange risk management instruments, including spot, forward and swap currency contracts and currency options, to hedge foreign currency denominated receipts resulting from revenue and payments for raw materials and capital equipment denominated in foreign currencies. The CSR group’s policy is to hedge its net US dollar aluminium exposure to reduce the volatility of aluminium earnings, when acceptable Australian dollar outcomes can be achieved. Forecast US dollar receipts are based on highly probable forecast monthly sales receipts of aluminium which ensures that the underlying foreign currency exchange risk is identical to the hedged risk component (i.e. the US dollar price). Hedging is undertaken at declining levels for up to four years. Sensitivity of fair values to changes in exchange rate is disclosed in the market risk table on page 96. The table below provides details on the nature and risk management in relation to commodity price risk. Sensitivity of fair values to changes in commodity prices is disclosed in the market risk table on page 96. Commodity Nature of commodity price risk Commodity price risk management Aluminium The CSR group has exposure to aluminium commodity prices which arises from sales contracts that commit the CSR group to supply aluminium in future years. Prices for product supplied under these contracts are a function of the US dollar market price at the time of delivery. Alumina The CSR group has exposure to alumina commodity prices through the consumption of alumina at the US$ denominated market price. Oil The CSR group has exposure to oil commodity prices through oil price linked gas purchasing contracts. The A$ gas purchase price is partially a function of the prevailing US$ oil price and A$/US$ exchange rate. Electricity The CSR group purchases electricity from the National Electricity Market which gives rise in exposure to the spot electricity price. Gas The CSR group has exposure to gas hub prices through purchases of gas from the Victorian Declared Wholesale Gas Market and New South Wales, South Australia and Queensland Short-Term Trading Markets. 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 CSR group has a policy of hedging its alumina purchases to reduce the volatility of its aluminium manufacturing costs. Eligible hedging instruments are commodity forward contracts and commodity futures contracts. The commodity forward contracts utilised are typically of the form where the CSR group receives a floating alumina price and pays a floating aluminium price. 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. Eligible hedging instruments are commodity forward contracts and commodity futures contracts. These contracts are either denominated in A$ or US$. If denominated in US$ the risk arising from movements in the A$/US$ exchange rate is managed through foreign exchange forward and option contracts. The CSR group has a policy of hedging the electricity spot price to reduce the volatility of its energy costs. Eligible hedging instruments are commodity forward contracts and options and commodity futures contracts and options. The CSR group has a policy of hedging its exposure to gas hub prices to reduce the volatility of its energy costs. Eligible hedging instruments are commodity forward contracts and options and commodity futures contracts and options. 97 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 meet their obligations as and when due, take advantage of business opportunities as they present, and continue as a going concern while maximising the return to shareholders in the context of business and financial market conditions. 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 repayment 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 at fair value. $million Current1 Non-current Total Current1 Non-current Total 2022 2021 Financial assets at fair value Commodity swaps – aluminium Commodity swaps – alumina/aluminium Commodity swaps – oil Commodity swaps – electricity Commodity swaps – gas Forward exchange rate contracts Payments in advance2 Other Total Financial liabilities at fair value Commodity swaps – aluminium Commodity swaps – alumina/aluminium Commodity swaps – oil Commodity swaps – electricity Commodity swaps – gas Forward exchange rate contracts Futures margin3 Total – – 7.4 10.3 – 37.6 42.8 0.2 98.3 237.5 9.9 – 0.1 – 2.5 1.5 251.5 0.2 37.4 4.0 12.1 – 16.5 40.3 4.3 0.2 37.4 11.4 22.4 – 54.1 83.1 4.5 114.8 213.1 366.4 – – – – 7.9 5.1 379.4 603.9 9.9 – 0.1 – 10.4 6.6 630.9 0.3 – – 0.2 0.1 46.3 16.1 – 63.0 59.6 5.8 0.6 3.5 0.5 1.1 – 71.1 0.6 – – 0.1 – 46.7 6.9 3.4 57.7 69.7 7.1 2.7 5.6 – 0.9 – 86.0 0.9 – – 0.3 0.1 93.0 23.0 3.4 120.7 129.3 12.9 3.3 9.1 0.5 2.0 – 157.1 1 Derivatives are presented as current assets or liabilities to the extent they are expected to be settled within 12 months after the end of the reporting period. 2 Payments in advance against unrealised losses on derivative instruments. 3 Futures margin as required for trading under futures account agreements. The CSR group’s financial instruments are Level 2, except for payments in advance assets and futures margin liabilities which are Level 1. The definitions of the fair value hierarchy levels are below. Level 1: fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities. 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 2022 and no transfers in either direction in 2022. 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 the 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. 98 CSR LIMITED ANNUAL REPORT 2022 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 2022 on the statement of financial position of the CSR group is as follows: Notional amount Asset carrying amount Liability carrying amount Changes in value of instrument used for calculating hedge ineffectiveness – gain (loss) Changes in value of hedged item used for calculating hedge ineffectiveness – gain (loss) Cash flow hedge reserve (continuing hedges) – gain (loss) 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 2022 Aluminium commodity swaps 439,350 tonnes 0.2 (603.9) Alumina/aluminium commodity swaps3 873,000 tonnes 37.4 (9.9) Oil commodity swaps 285,000 barrels Electricity commodity swaps 388,946 MWh Gas commodity swaps Forward currency contracts (sales) Forward currency contracts (purchases) – 1,080.0 51.0 11.4 22.5 – 53.5 0.6 – (0.1) – (8.7) (1.6) (475.3) 40.4 14.7 31.0 0.4 (46.6) (0.8) Environmental certificates 96,500 certificates 0.2 – 0.2 2021 Aluminium commodity swaps Alumina/aluminium commodity swaps3 335,550 tonnes 675,000 tonnes Oil commodity swaps 465,000 barrels Electricity commodity swaps Gas commodity swaps Forward currency contracts (sales) Forward currency contracts (purchases) 521,453 MWh 2,420,000 GJ 768.4 15.2 0.9 (129.3) (181.6) – – 0.5 0.1 92.4 1.2 (12.9) (3.3) (9.1) (0.5) (0.9) (1.4) (4.7) 6.2 (1.5) (0.5) 101.6 (4.9) 477.3 (43.1) (14.7) (31.0) 0.2 46.6 0.8 (0.2) 182.1 4.7 (6.2) 1.9 (0.2) (101.5) 4.9 (603.7) 27.5 11.4 22.4 – 44.8 (1.1) 0.2 (128.4) (12.9) (3.3) (8.6) (0.4) 91.5 (0.2) (621.8) 10.3 18.1 32.8 0.5 (10.7) (0.6) 0.2 (170.6) (16.6) 3.5 (5.6) (0.4) 127.8 (5.1) 146.5 Trading revenue 30.1 Cost of sales (3.4) (1.8) (0.1) Cost of sales Cost of sales Cost of sales (36.0) Trading revenue (0.3) Cost of sales – Cost of sales (11.0) 11.9 Trading revenue Cost of sales 2.7 4.1 0.1 Cost of sales Cost of sales Cost of sales (26.2) Trading revenue 0.2 Cost of sales 1 2 The net hedge loss recognised in other comprehensive income totalling $571.2 million (2021: $67.0 million) less non-controlling interests of $186.6 million (2021: $17.8 million) reconciles to the hedge loss transferred to equity in note 20. The net loss reclassified from other comprehensive income to profit or loss before tax totalling $135.0 million (2021: $18.2 million net gain) less non-controlling interests of $42.2 million (2021: $7.6 million) reconciles to the hedge loss transferred to the statement of financial performance in note 20. 3 Under the alumina/aluminium swaps entered into, the CSR group receives a floating alumina price and pays a floating aluminium price. Notional amount is tonnes of alumina. 9 9 99 I I N O T E S T O T H E F N A N C A L R E P O R T | C A P I T A L S T R U C T U R E A N D R S K M A N A G E M E N T I NOTES TO THE FINANCIAL REPORT | GROUP STRUCTURE Group structure 22 Subsidiaries Entity 2022 2021 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 Ltd2 CSR Industrial Property Trust CSR Industrial Property Nominees No. 1 Pty Limited CSR Industrial Property Nominees No. 2 Pty Limited CSR International Pty Ltd CSR Investments Pty Limited2 CSR Investments (Asia) Pty Limited CSR Investments (Indonesia) Pty Limited CSR Martini Pty Limited2 CSR Share Plan Pty Limited CSR Structural Systems Pty Limited2 CSR Subsidiary Finance Pty Limited2 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 Incorporated in Australia (continued) 100 CSR Subsidiary Holdings Limited2 100 CSR-ER Nominees Pty Limited 100 Gove Aluminium Finance Limited 100 High Road Capital Pty Limited 100 Midalco Pty Limited 100 Monier PGH Superannuation Pty Limited 100 PASS Pty Limited 100 PGH Bricks & Pavers Pty Limited2 100 Rediwall Unit Trust 100 Rivarol Pty Limited2 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 100 100 100 CSR Building Products (NZ) Ltd 100 100 100 CSR Guangdong Glasswool Co., Ltd (China) 100 CSR Insurance Pte Limited (Singapore) 100 PT Prima Karya Plasterboard (Indonesia) Incorporated in other countries Incorporated in New Zealand % CSR ownership 2022 2021 100 100 70 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 70 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 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. 23 Deed of cross guarantee CSR Limited, AFS Systems Pty Limited, Bricks Australia Services Pty Limited, CSR Building Products Limited, CSR Martini Pty Limited, CSR Finance Ltd, CSR Investments Pty Limited, CSR Structural Systems Pty Limited, CSR Subsidiary Finance Pty Limited, CSR Subsidiary Holdings Limited, PGH Bricks & Pavers Pty Limited and Rivarol Pty Limited are parties to a deed of cross guarantee (‘the Deed’) under which each company guarantees the debts of the others. By entering into the Deed, the wholly owned entities have been relieved from the requirement to prepare a financial report and directors’ report under ASIC Corporations (Wholly-owned Companies) Instrument 2016/785. The above companies represent a ‘closed group’ for the purposes of the Class Order, and as there are no other parties to the Deed that are controlled by CSR Limited, they also represent the ‘extended closed group’. Set out on the following page 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 2022 and 31 March 2021 of the closed group. 100 CSR LIMITED ANNUAL REPORT 2022 NOTES TO THE FINANCIAL REPORT | GROUP STRUCTURE 23 Deed of cross guarantee (continued) 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 benefit (expense) Profit after tax ii) Consolidated statement of comprehensive income $million Profit after tax Other comprehensive income, net of tax Items that may be reclassified to profit or loss Hedge profit recognised in equity Hedge profit transferred to statement of financial performance Exchange differences arising on translation of foreign operations Income tax (expense) benefit relating to these items Items that will not be reclassified to profit or loss Actuarial gain on superannuation defined benefit plans Income tax expense relating to these items Other comprehensive income, net of tax Total comprehensive income iii) Summary of movements in consolidated retained profits $million Opening retained profits Profit for the year Actuarial gain on superannuation defined benefit plans (net of tax) Dividends provided for or paid Closing retained profits 2022 2021 1,544.7 (934.2) 1,477.7 (935.8) 610.5 57.0 (182.2) (247.1) 14.7 (7.0) (5.2) 240.7 0.5 (14.8) 226.4 22.0 248.4 541.9 104.9 (163.9) (233.7) 12.9 (9.3) (16.5) 236.3 1.5 (18.1) 219.7 (51.9) 167.8 2022 248.4 2021 167.8 51.1 (5.6) (0.1) (13.7) 0.1 – 31.8 280.2 2022 274.9 248.4 0.1 (182.0) 341.4 2.0 (2.6) (3.2) 0.2 17.6 (5.3) 8.7 176.5 2021 155.5 167.8 12.3 (60.7) 274.9 101 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 Property holdings Other financial assets Income tax receivable Prepayments and other current assets Total current assets Non-current assets Receivables Property holdings 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 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 2022 20211 168.7 298.2 224.6 53.0 18.5 8.9 7.6 779.5 20.5 113.9 32.2 117.8 575.7 110.5 59.9 8.8 163.5 11.7 243.2 158.4 210.3 40.7 5.1 0.4 7.7 665.8 21.2 102.6 27.8 104.5 600.6 116.2 58.3 11.6 122.9 12.4 1,214.5 1,178.1 1,994.0 1,843.9 218.5 30.0 3.1 18.9 120.7 391.2 – 125.5 5.2 222.8 2.1 355.6 746.8 111.4 30.2 5.7 47.3 112.4 307.0 0.1 134.4 8.3 242.5 2.7 388.0 695.0 1,247.2 1,148.9 966.7 (60.9) 341.4 966.7 (92.7) 274.9 1,247.2 1,148.9 1 Balances have been restated to reflect the group’s change in accounting policy for capitalised costs relating to Software-as-a-Service (SaaS) arrangements (refer note 1). 102 CSR LIMITED ANNUAL REPORT 2022 NOTES TO THE FINANCIAL REPORT | GROUP STRUCTURE 24 Non-controlling interests Summarised financial information for each subsidiary that has non-controlling interests that are material to the CSR group is set out below. The amounts disclosed are before intercompany eliminations. $million Statement of financial position Current assets Non-current assets Current liabilities Non-current liabilities Statement of financial performance Revenue Profit after tax for the year Other comprehensive expense for the year Total comprehensive expense for the year Statement of cash flows Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Net decrease in cash held Transactions with non-controlling interests Profit allocated to non-controlling interests Dividends paid to non-controlling interests Gove Aluminium Finance Limited 2022 2021 245.2 370.9 424.4 385.2 697.5 26.8 (337.1) (310.3) 41.4 (74.3) 29.5 (3.4) 8.1 – 191.5 186.31 172.1 88.7 587.9 18.9 (59.3) (40.4) 12.4 (25.4) (37.5) (50.5) 5.7 14.7 1 Balance has been restated to reflect a correction to deferred tax on property, plant and equipment. Recognition and measurement 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. 25 Interest in joint operations The CSR group’s interest in the Tomago aluminium smelter joint operation of 36.05% (2021: 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% (2021: 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. 103 NOTES TO THE FINANCIAL REPORT | GROUP STRUCTURE 26 Equity accounting information Carrying amount ($million) Entity1 Building products Rondo Building Services Pty Ltd2,4 Gypsum Resources Trust Australia2 New Zealand Brick Distributors3 Other2 Total investment 2022 Equity accounted investment Long-term loan Net investment Long-term loan 2021 Equity accounted investment4 Net investment4 – 12.0 – – 12.0 20.0 – 7.8 0.3 28.1 20.0 12.0 7.8 0.3 40.1 – 12.0 – – 12.0 15.6 – 7.5 0.3 23.4 15.6 12.0 7.5 0.3 35.4 1 The CSR group’s interest in these entities is 50% (2021: 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 investment4 Share of net profit before income tax Share of income tax Dividends and distributions received Foreign currency translation and other Disposal of equity accounted investment Closing net investment ii) Summarised financial information of joint venture entities $million Statement of financial position Current assets Non-current assets4 Current liabilities Non-current liabilities Statement of financial performance Revenue Share of net profit after tax Rondo Building Services Pty Ltd Other 2022 35.4 22.2 (6.6) (10.9) – – 40.1 2021 42.3 19.3 (5.8) (18.3) (1.8) (0.3) 35.4 2022 2021 122.9 59.2 79.4 46.6 100.1 66.2 67.8 50.4 344.8 259.3 14.7 0.9 12.8 0.7 4 Balance has been restated to reflect the group’s change in accounting policy for capitalised costs relating to Software-as-a-Service (SaaS) arrangements. Refer to note 1 for further details. iii) Balances and transactions with joint venture entities $million 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 Note 2022 2021 32 0.5 10.6 9.8 48.1 3.9 0.4 8.4 7.5 33.6 4.2 104 CSR LIMITED ANNUAL REPORT 2022 NOTES TO THE FINANCIAL REPORT | GROUP STRUCTURE 27 Parent entity disclosures i) Summary financial information of CSR Limited $million Statement of financial position Current assets1 Non-current assets Current liabilities1, 2 Non-current liabilities2 Net assets Equity Issued capital Reserves Retained profits Total equity Statement of financial performance Profit after tax for the year Total comprehensive income 2022 2021 737.3 1,850.2 (1,203.7) (238.1) 684.2 1,787.9 (1,013.6) (265.6) 1,145.7 1,192.9 966.7 11.3 167.7 966.7 11.0 215.2 1,145.7 1,192.9 134.4 134.7 124.7 125.5 1 As at 31 March 2022 CSR Limited is in a net current liability position of $466.4 million (2021: $329.4 million). The net current liability position is due to intercompany payable balances held with controlled entities. CSR Limited, as the parent entity, determines when these balances will be settled and the subsidiaries cannot call upon these liabilities for settlement. Included within current liabilities are the current portion of the product liability provision and uninsured losses and future claims provision of $24.0 million and $7.9 million respectively (2021: $24.0 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 $189.3 million and $15.4 million respectively (2021: $207.0 million and $17.4 million respectively). See notes 15 and 16 for further details. 2 ii) CSR Limited transactions with controlled entities During the financial years ended 31 March 2022 and 2021, 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 parties1 Bank guarantees to Harwood Superannuation Fund2 Total contingent liabilities Note 2022 2021 28 120.1 2.2 122.3 123.4 3.2 126.6 1 Financial guarantees disclosed above relate to bank guarantees provided to third parties to guarantee CSR Limited’s performance of its liabilities of $77.3 million (2021: $80.6 million) and guarantees provided to third parties outside of the CSR group of $42.8 million (2021: $42.8 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. 2 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. iv) Capital commitments CSR Limited has committed $nil to the acquisition of any property, plant and equipment as at 31 March 2022 (2021: $nil). 105 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 2022 for the CSR group were $32.0 million (2021: $31.9 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 2022 contributions totalled $29.5 million (2021: $28.9 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 2021. The funding requirements were reviewed as at 30 June 2021. 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 104%. Therefore, as at 31 March 2022, CSR Limited was required to provide bank guarantees of $2.2 million to the trustee of the fund to satisfy the balance of its commitments (2021: $3.2 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 2021 $nil from 1 April 2021 63.4 32.1 (57.1) (28.0) 6.3 4.1 0.2 0.1 Pilkington (Australia) Superannuation Scheme DBD $nil from 1 April 2021 16.2 (18.3) (2.1) – 1 Actuarial liabilities are determined to be past service liabilities based on membership accrued up to 31 March 2022. 106 CSR LIMITED ANNUAL REPORT 2022 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 Actuarial gain incurred during the financial year and recognised in the statement of comprehensive income 2022 2021 3.6 2.5 27.4 53.0 6.1 13.5 2.8 2.5 28.1 47.0 2.7 22.2 2022 2021 0.7 3.0 (3.2) 0.5 0.1 0.9 2.9 (2.7) 1.1 17.6 Cumulative actuarial losses recognised in the statement of comprehensive income (50.5) (50.6) 1 Disclosed in selling, administration and other operating costs. Impact of plans on the statement of financial position $million Net asset of superannuation defined benefit plans Fair value of assets Present value of liabilities Net asset Included in the statement of financial position Other non-current assets (note 32) Other non-current liabilities Net asset Movements in the fair value of the defined benefit plan assets Assets at the beginning of the financial year Interest income Return on assets (in excess of interest income) Contributions from the employer Contributions from participants Benefits paid Assets at the end of the financial year Movements in the present value of the defined benefit plan liabilities Liabilities at the beginning of the financial year Current service cost Finance cost Contributions from participants Actuarial gain Benefits paid Liabilities at the end of the financial year 2022 2021 111.7 (103.4) 123.5 (115.1) 8.3 8.4 10.4 (2.1) 11.1 (2.7) 8.3 8.4 123.5 3.2 0.1 0.3 0.1 (15.5) 121.4 2.7 10.8 0.4 0.1 (11.9) 111.7 123.5 115.1 0.7 3.0 0.1 – (15.5) 129.9 0.9 2.9 0.1 (6.8) (11.9) 103.4 115.1 107 NOTES TO THE FINANCIAL REPORT | OTHER 28 Employee benefits (continued) i) Superannuation commitments (continued) Net asset (liability) of superannuation defined benefit plans 169.9 158.5 180 160 140 120 100 80 60 40 20 0 134.3 126.1 129.9 121.4 123.5 115.1 111.7 103.4 11.4 8.2 (8.5) 8.4 8.3 2018 2019 2020 2021 2022 Present value of fund liabilities ($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 2022, 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 2022 3,143,063 835,606 (186,398) (386,023) 2021 3,116,307 1,372,449 (247,314) (1,098,379) 3,406,248 3,143,063 There were no vested and exercisable shares at 31 March 2022 (2021: 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 2022 is set out below: Grant date 25 July 2018 19 July 2019 21 July 2020 21 July 2021 Total Expiry date 1 April 2021 1 April 2022 1 April 2023 1 April 2024 Performance rights 2022 – 1,235,549 1,335,093 835,606 2021 503,592 1,267,022 1,372,449 – 3.406,248 3,143,063 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 21 July 2021 Relative TSR with a positive absolute TSR requirement Monte-Carlo simulation 1 April 2021 21 July 2021 EPS growth Binominal tree 1 April 2021 31 March 2024 31 March 2024 2.7 years $5.30 32% 4.7% 0.14% $4.67 2.7 years $5.30 32% 4.7% 0.14% $2.32 Further details on the LTI plan and the terms of the grants during the year are detailed in the remuneration report on pages 63 to 66. 108 CSR LIMITED ANNUAL REPORT 2022 NOTES TO THE FINANCIAL REPORT | OTHER 28 Employee benefits (continued) ii) Share-based payments (continued) Deferred shares Under the STI deferral plan, 40% of any STI earned by senior executives is delivered in CSR shares. These shares must be held in trust subject to trading restrictions and 50% are deferred for one year and 50% are deferred for two years. 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 vest. 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 2022 272,319 $5.84 2021 – – 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 2022 348,406 78,185 2021 531,674 109,573 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 $5.46 (2021: $3.49). For further details on the USOP and the ESAP, refer to page 66 of the remuneration report. Expenses arising from share-based payment transactions $ Long-term incentive plan (PRP) Deferred shares Other plans Total expense 2022 2021 2,520,154 1,509,875 951,555 1,106,453 598,766 928,369 4,981,584 2,633,588 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. 109 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 2022 (2021: 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 2022 4,800,500 1,171,722 5,972,222 2021 4,505,319 508,978 5,014,297 Details of remuneration and the CSR Limited equity holdings of directors and other key management personnel are shown in the remuneration report on pages 51 to 70. 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 2022 (2021: 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 Except for the items disclosed below, there has not arisen in the interval between 31 March 2022 and the date of this report, any other matter or circumstance that has significantly affected or may significantly affect the operations of the CSR group, the results of those operations or the state of affairs of the CSR group in subsequent financial years. Dividends For dividends resolved to be paid after 31 March 2022, refer to note 19. 31 Commitments and contingencies i) Commitments $million Contracted capital expenditure comprises: Payable within one year Payable within one to five years Total contracted capital expenditure ii) Contingencies 2022 2021 27.9 1.9 29.8 8.6 – 8.6 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. 110 CSR LIMITED ANNUAL REPORT 2022 NOTES TO THE FINANCIAL REPORT | OTHER 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 and related network firms Audit or review of financial reports Other assurance and agreed-upon procedures under other legislation or contractual arrangements Total auditor’s remuneration 34 Other accounting policies Note 26 28 2022 10.6 12.1 22.7 1.3 10.4 11.7 2021 8.4 15.0 23.4 1.3 11.1 12.4 2022 2021 657,000 29,500 657,000 37,080 686,500 694,080 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 2022 included $177.7 million of cash at bank and on hand (2021: $95.8 million) and $nil short-term deposits (2021: $155.0 million). 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. 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. 111 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 2022; 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 Chair of the board 11 May 2022 Julie Coates Managing Director and CEO 11 May 2022 112 CSR LIMITED ANNUAL REPORT 2022 INDEPENDENT AUDITOR’S REPORT Independent Auditor’s Report to the Members of CSR Limited Report on the Audit of the Financial Report Opinion 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 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 2022, 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 2022 and of its financial performance for the year then ended; and complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of 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 (including Independence Standards) (the “Code”) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report for the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. 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 $213.3 million as at 31 March 2022. 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 assumption 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. Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte organisation. 113 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 2022 the Group’s consolidated statement of financial position includes goodwill amounting to $59.9 million, other intangible assets amounting to $10.1 million, property, plant and equipment amounting to $666.1 million and right-of- use lease assets amounting to $126.0 million, comprised of several cash generating units (CGUs). The assessment of impairment of the company’s goodwill, other intangible assets, property, plant and equipment and right-of-use lease 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. 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 AFS CGUs were identified by management as the 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 Group’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 AFS CGUs by: - assessing the appropriateness of the impairment model methodology, key inputs and assumptions used in the model 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. - testing on a sample basis, the mathematical accuracy of the cash flow model; - agreeing relevant data in the cash flow model to the latest Board approved forecasts; - assessing the historical accuracy of forecasting of the CGUs; - obtaining and reading the position papers prepared by management to support the models for the CGUs; - evaluating management’s process, including testing design and implementation of controls in respect of the preparation and review of impairment conclusions including forecasts and key assumptions; 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 2022, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. 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. 114 CSR LIMITED ANNUAL REPORT 2022 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, actions taken to eliminate threats or safeguards applied. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. 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 51 to 70 of the CSR Limited annual report for the year ended 31 March 2022. In our opinion, the Remuneration Report of CSR Limited for the year ended 31 March 2022, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. DELOITTE TOUCHE TOHMATSU J L Gorton Partner Chartered Accountants Sydney, 11 May 2022 115 SHAREHOLDER INFORMATION Shareholder information 20 LARGEST HOLDERS OF ORDINARY SHARES As at 29 April 2022 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 CITICORP NOMINEES PTY LIMITED J P MORGAN NOMINEES AUSTRALIA PTY LIMITED NATIONAL NOMINEES LIMITED BNP PARIBAS NOMS PTY LTD BNP PARIBAS NOMINEES PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED CITICORP NOMINEES PTY LIMITED PRUDENTIAL NOMINEES PTY LTD BNP PARIBAS NOMINEES PTY LTD SIX SIS LTD NAVIGATOR AUSTRALIA LTD MR ALLAN ERNEST ORMES CSR SHARE PLAN PTY LIMITED BNP PARIBAS NOMS (NZ) LTD BNP PARIBAS NOMS PTY LTD V M NOMINEES PTY LTD CSR SHARE PLAN PTY LIMITED BNP PARIBAS NOMINEES PTY LTD MR BRIAN FREDERICK DITCHFIELD NETWEALTH INVESTMENTS LIMITED Top 20 holders of issued capital Remaining holders balance SUBSTANTIAL SHAREHOLDERS OF CSR LIMITED UNITS % OF UNITS 150,703,076 63,751,635 61,873,388 31,831,314 11,497,333 4,915,908 3,918,782 3,423,667 2,500,000 1,620,977 1,075,351 1,066,667 819,211 812,149 763,592 550,000 547,321 500,000 500,000 488,079 343,158,450 142,224,326 31.0 13.1 12.7 6.6 2.4 1.0 0.8 0.7 0.5 0.4 0.2 0.2 0.2 0.2 0.2 0.1 0.1 0.1 0.1 0.1 70.7 29.3 State Street Corporation and its subsidiaries advised that as of 26 October 2021, it and its associates had an interest in 24.4 million shares, which represented 5.03% of CSR’s issued capital at that time. The Vanguard Group Inc. and its subsidiaries advised that as of 5 January 2022, it and its associates had an interest in 24.3 million shares, which represented 5.002% of CSR’s issued capital at that time. Blackrock Group and its subsidiaries advised that as of 19 April 2022, it and its associates had an interest in 24.3 million shares, which represented 5.01% of CSR’s issued capital at that time. SHAREHOLDINGS BY GEOGRAPHIC LOCATION Location AUSTRALIA NEW ZEALAND HONG KONG UNITED KINGDOM UNITED STATES OF AMERICA Other Total Units 481,838,732 2,181,795 431,446 350,888 164,940 414,975 Units % 99.3 0.4 0.1 0.1 0.0 0.1 Holders 47,093 1,047 30 220 92 197 Holders % 96.7 2.2 0.1 0.5 0.2 0.3 485,382,776 100.0 48,679 100.0 116 CSR LIMITED ANNUAL REPORT 2022 % of issued capital 2.4 9.3 5.3 9.6 73.4 100.0 Units 32,357 Franked amount per share at 30% NA 6.5 cents 6.75 cents 10.125 cents 13.0 cents 6.5 cents 5.0 cents 2.0 cents 8.5 cents 4.0 cents 14.5 cents 9.5 cents 13.5 cents SHAREHOLDER INFORMATION DISTRIBUTION OF SHAREHOLDINGS Range 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Total UNMARKETABLE PARCELS Holders 23,505 19,257 3,656 2,177 84 48,679 Units 11,459,948 44,975,924 26,388,961 46,454,562 356,103,381 485,382,776 Minimum $500.00 parcel at $6.08 per unit 83 Minimum parcel size Holders 1,306 RECENT CSR DIVIDENDS Date paid December 2016 July 2017 December 2017 July 2018 December 2018 July 2019 December 2019 December 2019 December 2020 December 2020 July 2021 July 2021 December 2021 Type of dividend Dividend per share Franking Interim Final Interim Final Interim Final Interim ordinary Interim special Interim ordinary Interim special Final ordinary Final special Interim ordinary 13.0 cents 13.0 cents 13.5 cents 13.5 cents 13.0 cents 13.0 cents 10.0 cents 4.0 cents 8.5 cents 4.0 cents 14.5 cents 9.5 cents 13.5 cents 0% 50% 50% 75% 100% 50% 50% 50% 100% 100% 100% 100% 100% 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 117

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